PRELIMINARY DRAFT
SCHEDULE 14A
(RULE 14A-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only (as permitted by Rule
14a-6(a)(2))
[ ] Definitive Proxy Statement [ ] Definitive additional materials
[ ] Soliciting material pursuant to ss.240.14a-11(c) or ss.240.14a-12
AMBASSADOR FOOD SERVICES CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing. SEC File No. 1-08460
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing party:
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4) Date filed:
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PRELIMINARY DRAFT
[Logo and Name] 5-30 54th Avenue
Long Island City, NY 11101
(718) 361-2512
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
_______ __, 2004
The annual meeting of the stockholders of Ambassador Food Services Corporation,
a Delaware corporation (the "Annual Meeting"), will be held at 5-30 54th Avenue,
Long Island City, New York 11101, on ______________, 2004, 11:00 a.m., Eastern
time, for the following purposes:
1. To consider and act upon a proposal to amend the corporation's
Certificate of Incorporation to effect a 1 for 30 reverse stock split
followed immediately by a 30 for 1 forward stock split of the
corporation's outstanding common stock (the "Transaction"). As a result of
the Transaction, (a) each share of the corporation's common stock held by
a stockholder owning fewer than 30 shares immediately before the effective
time of the reverse stock split will be converted into the right to
receive from the corporation Thirty-five Cents ($0.35) in cash, without
interest, and (b) each share of common stock held by a stockholder owning
30 or more shares will continue to represent one share of the
corporation's common stock after completion of the Transaction. A copy of
the proposed amendment to the corporation's Certificate of Incorporation
is attached as Appendix A to the accompanying Proxy Statement.
2. To consider and act upon a proposal to elect four directors of the
corporation as set forth in the accompanying Proxy Statement.
3. To consider and transact such other business as may properly come
before the Annual Meeting.
Stockholders of record at the close of business on _____________, 2004 are
entitled to vote at the Annual Meeting.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE TRANSACTION, PASSED UPON THE
MERITS OR FAIRNESS OF THE TRANSACTION, OR PASSED UPON THE ACCURACY OR ADEQUACY
OF THE DISCLOSURES CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
TO INSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE URGED TO
DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE AS SOON AS
POSSIBLE. Sending in your Proxy now will not interfere with your rights to
attend the Annual Meeting or to vote your shares personally at the Annual
Meeting if you wish to do so.
You are cordially invited to attend the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Robert A. Laudicina
President
DATE:
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Long Island City, NY
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PLEASE FILL IN, SIGN AND RETURN THE ENCLOSED PROXY CARD. THE ENCLOSED ENVELOPE
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. PLEASE DO NOT RETURN ANY
STOCK CERTIFICATES AT THIS TIME. AFTER THE EFFECTIVE DATE OF THE TRANSACTION
YOU WILL RECEIVE INSTRUCTIONS FOR EXCHANGING YOUR CERTIFICATES.
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TABLE OF CONTENTS
Page
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PROXY STATEMENT..............................................................1
VOTING AND PROXIES...........................................................1
SUMMARY TERM SHEET...........................................................2
PROPOSAL 1 AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO EFFECT
A 1 FOR 30 REVERSE STOCK SPLIT AND A 30 FOR 1 FORWARD STOCK SPLIT
OF OUR COMMON STOCK..........................................................5
General....................................................................5
SPECIAL FACTORS..............................................................6
Background of the Transaction..............................................6
Purpose and Reasons for the Transaction....................................7
Fairness of the Transaction................................................8
Effects of the Transaction................................................13
Material U.S. Federal Income Tax Consequences.............................15
Conduct of Business After the Transaction.................................16
Past Business Combination Discussions.....................................17
Appraisal Rights..........................................................17
EXCHANGE OF FRACTIONAL SHARE CERTIFICATES FOR CASH..........................17
ESCHEAT LAWS................................................................18
COSTS AND FINANCING OF THE TRANSACTION......................................19
FINANCIAL INFORMATION.......................................................19
BOARD OF DIRECTORS DISCRETION...............................................20
MARKET FOR COMMON STOCK, DIVIDENDS AND STOCK PURCHASES......................20
Market for Common Stock...................................................20
Dividends ...............................................................20
Stock Repurchases by Ambassador ..........................................20
VOTE REQUIRED...............................................................20
RECOMMENDATION OF THE BOARD OF DIRECTORS....................................20
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS..................21
PROPOSAL 2 ELECTION OF DIRECTORS...........................................22
Nominees for Election as Directors........................................22
Meetings of the Board of Directors........................................22
Section 16(a) Beneficial Ownership Reporting Compliance...................23
INDEPENDENT AUDITORS........................................................23
Audit Fees ...............................................................23
All Other Fees............................................................24
BOARD OF DIRECTORS AUDIT REPORT.............................................24
EXECUTIVE OFFICERS OF THE COMPANY...........................................25
EXECUTIVE COMPENSATION......................................................25
Officer Compensation......................................................25
Director Compensation.....................................................25
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..............26
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................27
FUTURE STOCKHOLDER PROPOSALS................................................27
GENERAL.....................................................................27
Solicitation of Proxies...................................................27
ADDITIONAL INFORMATION......................................................27
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................28
ANNEXES.....................................................................28
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APPENDIX A...................................................................1
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AMBASSADOR FOOD SERVICES CORPORATION
5-30 54th Avenue
Long Island City, New York 11101
(718) 361-2512
______________ , 2004
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Ambassador Food Services Corporation
("Ambassador", "we", "us", "our"), for the annual meeting of stockholders to be
held on ___________, 2004 at 11:00 a.m. Eastern time, at 5-30 54th Avenue, Long
Island City, New York, or any postponements or adjournments thereof (the "Annual
Meeting"). These proxy solicitation materials were mailed on or about
__________, 2004 to all stockholders entitled to vote at the Annual Meeting.
Copies of our annual report to stockholders for the fiscal year ended May
29, 2003 ("Annual Report") and our Quarterly Reports on Form 10-QSB for the
fiscal quarters ended August 28, 2003 and ended November 27, 2003 (collectively,
"Quarterly Reports") are enclosed herewith. Such reports are not incorporated in
this Proxy Statement and are not to be deemed a part of the proxy soliciting
material, except as expressly provided herein.
VOTING AND PROXIES
Only stockholders of record at the close of business on __________, 2004
are entitled to receive notice of and to vote at the Annual Meeting. The
outstanding voting securities of Ambassador as of such date consisted of 734,656
shares of common stock, $1.00 par value ("Common Stock"). The principal
executive offices of Ambassador are located at 5-30 54th Avenue, Long Island
City, New York 11101.
If the accompanying Proxy is signed and returned, the shares represented
by the Proxy will be voted in accordance with the specifications thereon. If the
manner of voting such shares is not indicated on the Proxy, they will be voted
for (a) approval of the amendment of Ambassador's Certificate of Incorporation
to effect a 1-for-30 reverse stock split followed immediately by a 30-for-1
forward stock split of Ambassador's outstanding Common Stock; and (b) the
nominees for directors named herein.
Stockholders are entitled to one vote per share on all matters. Directors
are elected by a plurality of votes. A stockholder may instruct the proxy
holders not to vote for one or more of the nominees by lining through the
name(s) of such nominee or nominees on the Proxy. If the Proxy is not marked
with respect to the election of directors, authority will be granted to the
persons named in the Proxy to allocate votes among the nominees in such a manner
as they determine is necessary in order to elect all or as many of the nominees
as possible.
A stockholder may revoke his or her Proxy at any time before it is voted
by giving to our Secretary written notice of revocation bearing a later date
than the Proxy, by submission of a later-dated Proxy, or by revoking the Proxy
and voting in person at the Annual Meeting. Attendance at the Annual Meeting
will not in and of itself constitute a revocation of a Proxy. Any written notice
revoking a Proxy should be sent to John A. Makula, Corporate Secretary,
Ambassador Food Services Corporation, 5-30 54th Avenue, Long Island City, New
York 11101.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock will constitute a quorum for the transaction
of business at the Annual Meeting.
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Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. A broker
non-vote occurs when a stockholder fails to provide voting instructions to the
stockholder's broker for shares held in "street name." Under those
circumstances, the broker may be authorized to vote the shares on some routine
items but is prohibited from voting on other items. Those items for which a
stockholder's broker cannot vote result in broker non-votes.
In tabulating the votes cast on proposals other than the election of
directors, abstentions are counted and broker non-votes are not counted for
purposes of determining whether a proposal has been approved. Approval of the
amendment to the Certificate of Incorporation requires the affirmative vote of a
majority of the shares of Common Stock outstanding and entitled to vote thereon.
If a stockholder votes to "abstain" on this proposal, it will have the same
effect as if the stockholder voted against the proposal. Brokers are prohibited
from voting shares held in street name on behalf of a stockholder on this
proposal absent voting instructions from the stockholder. Consequently, if a
stockholder fails to provide voting instructions to the stockholder's broker to
vote shares held in street name in favor of the proposal, it will have the same
effect as if the stockholder voted against the proposal. In tabulating the votes
cast on the election of directors, votes withheld and broker non-votes are not
counted for purposes of determining the directors who have been elected.
SUMMARY TERM SHEET
This summary term sheet highlights selected information from the Proxy
Statement about the proposed Transaction. This summary term sheet may not
contain all of the information that is important to you. For a more complete
description of the Transaction, you should carefully read this Proxy Statement
(including Appendix A) and all of its annexes before you vote. For your
convenience, we have directed your attention in parentheses to the location in
this Proxy Statement where you can find a more complete discussion of each item
listed below.
As used in this Proxy Statement, "Transaction" refers to the proposed
reverse stock split and forward stock split, together with the related cash
payments to stockholders holding fewer than 30 shares. The term "affiliated
stockholder" means any stockholder who is a director or executive officer of
Ambassador. The term "unaffiliated stockholder" means any stockholder other than
an affiliated stockholder.
What is the proposed Transaction? (Page 5) The proposed Transaction is a 1
for 30 reverse stock split of the Common Stock of Ambassador followed by a 30
for 1 forward stock split of the Common Stock of Ambassador. If the Transaction
is approved and completed:
o Ambassador stockholders holding fewer than 30 shares of Common Stock
immediately prior to the reverse stock split ("Fractional Holders")
will receive a cash payment from Ambassador of Thirty-five Cents
($0.35) per share, without interest, for each share of Common Stock
held immediately prior to the reverse stock split, and will no longer
be stockholders of Ambassador;
o Ambassador stockholders holding 30 or more shares immediately prior to
the effective time of the reverse stock split will continue to hold
the same number of shares of Common Stock after completion of the
Transaction and will not receive any cash payment.
For a description of the provisions regarding the treatment of shares held
in street name, please see "Exchange of Fractional Share Certificates for Cash"
on page 17 of this Proxy Statement.
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What is the purpose of the Transaction? (Page 7) The purpose of the
Transaction, which is described in more detail in the Proxy Statement under
"Special Factors-Purpose and Reasons for the Transaction," is to:
o relieve Ambassador of the administrative burden and costs associated
with filing reports and otherwise complying with the requirements of
registration under the Securities Exchange Act of 1934 (the "Exchange
Act"), by reducing the number of stockholders from approximately 532
to approximately 358 and de-registering our Common Stock under the
Exchange Act;
o eliminate the expense and burden of dealing with a large number of
stockholders holding small positions in Ambassador's stock;
o give stockholders who own fewer than 30 shares of Common Stock
immediately prior to the reverse stock split the opportunity to
liquidate their shares of Common Stock at a fair price; and
o cause minimal disruption to stockholders owning 30 or more shares of
Common Stock.
What is the reason for the two-step structure of the Transaction? (Page 7)
The reason for the reverse stock split is to reduce the number of stockholders
below 500. The reason for the forward stock split is to avoid the disruption
which would otherwise be caused by only the reverse stock split to the
stockholders of record who own 30 or more shares of Common Stock prior to the
Transaction. Following the reverse stock split with a forward stock split would
limit stockholder disruption by avoiding the requirement if only the reverse
stock split were effected that stockholders owning 30 or more shares forward
their stock certificates to Ambassador in exchange for (a) cash for fractional
shares of Common Stock and (b) replacement stock certificates for whole shares
of Common Stock. As a result of the two-step structure, the share holdings of
holders of 30 or more shares would not be affected in the transaction.
Conducting the Transaction in this manner minimizes the costs of the Transaction
while achieving the goals outlined in this Proxy Statement. See "Special
Factors--Purpose and Reasons for the Transaction".
Why are we proposing the Transaction at this time? (Pages 7 and 17) We are
proposing the Transaction at this time to reduce expenses as well as the
distractions from our business caused by our public reporting obligations. See
"Special Factors--Purpose and Reasons for the Transaction", "Special
Factors--Fairness of the Transaction".
Is the Transaction fair? (Page 9) Based on the reasons detailed under
"Proposal 1-Special Factors-Fairness of the Transaction", the board of directors
of Ambassador believes that the proposed Transaction, including the price per
share of Common Stock to be paid to Fractional Holders, is fair to Ambassador
and its stockholders, including unaffiliated stockholders. The transaction was
unanimously approved by all of the members of board of directors of Ambassador,
including members who are not employees of Ambassador. Ambassador did not:
o obtain an independent fairness opinion in connection with the proposed
Transaction,
o structure the Transaction to require the approval of at least a
majority of the shares held by unaffiliated stockholders, or
o establish a committee of independent directors to represent the
interests of unaffiliated stockholders.
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What are the effects of the Transaction? (Page 13) We believe that the
Transaction would have the following effects:
o the number of our stockholders of record would be reduced from
approximately 532 to approximately 358, and the number of outstanding
shares of Common Stock would decrease by approximately .2% from
734,656 shares to approximately 732,998 shares at a cost to us
(including expenses) of approximately $25,280;
o Ambassador would no longer be required to comply with the public
company reporting requirements of the Exchange Act, and certain
provisions of the Exchange Act would no longer apply to executive
officers and directors of Ambassador;
o the Common Stock would no longer be eligible to be traded on the OTC
Bulletin Board and any trading in our Common Stock after the
Transaction would be limited to the "pink sheets" or privately
negotiated sales;
o stockholders who own fewer than 30 shares immediately prior to the
effective time of the reverse stock split would no longer have an
interest in or be stockholders of Ambassador and would not be able to
participate in any future earnings or growth of Ambassador;
o Ambassador estimates that it would save approximately $25,000 per year
in legal, accounting and other expenses, in addition to management
time and attention, as a result of no longer being subject to the
public company reporting requirements of the Exchange Act;
o less information regarding Ambassador would be publicly available
because Ambassador will no longer be subject to the public company
reporting requirements of the Exchange Act;
o the percentage of ownership of Common Stock beneficially owned by the
current executive officers and directors of Ambassador as a group
would increase from approximately 30.9% to approximately 31%.
What are the U.S. Federal Income Tax Consequences? (Page 15) The following
discussion summarizing certain federal income tax consequences is based on
current law and is included for general information only. Tax matters are very
complicated, and the tax consequences to you of the Transaction will depend on
your own situation. stockholders should consult their own tax advisors as to the
federal, state, local and foreign tax effects of the Transaction in light of
their individual circumstances.
We believe that the Transaction would have the following federal income
tax consequences:
o The Transaction should result in no material federal income tax
consequences to Ambassador.
o The receipt of cash in the Transaction by Fractional Holders would be
taxable for Federal income tax purposes.
o stockholders who own 30 or more shares of our Common Stock immediately
prior to the reverse stock split would not recognize any gain or loss
in connection with the Transaction.
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What are the costs of the Transaction? (Page 19) We estimate that the
total funds required to complete the Transaction would be approximately $25,280
including the funds needed to:
o pay cash to the Fractional Holders for their fractional shares;
o cover costs of exchanging the fractional shares for cash; and
o pay fees and expenses relating to the Transaction.
How would we pay for the Transaction? (Page 19) We plan to pay amounts due
to the Fractional Holders and fees and expenses incurred in connection with the
Transaction from our working capital.
Are there appraisal rights available to the stockholders? (Page 17) Under
Delaware law, you are not entitled to dissent from the Transaction and receive
the "fair value" of your shares.
What is the vote required to approve the Transaction? (Page 21) Approval
of the Transaction requires the approval of the holders of at least a majority
of the outstanding shares of Common Stock entitled to vote on the proposed
Transaction at the Annual Meeting.
What is the recommendation of the board of directors? (Page 21) The board
of directors unanimously recommends that stockholders of Ambassador vote "FOR"
the approval of the Transaction.
PROPOSAL 1
AMENDMENT TO OUR CERTIFICATE OF INCORPORATION
TO EFFECT A 1 FOR 30 REVERSE STOCK SPLIT AND A 30 FOR 1
FORWARD STOCK SPLIT OF OUR COMMON STOCK
General
Our board of directors is proposing 1 for 30 reverse stock split followed
immediately by a 30 for 1 forward stock split of our Common Stock (collectively,
the "Transaction"). In connection with the Transaction our board of directors
has unanimously adopted a resolution approving, declaring advisable and
recommending to stockholders for approval, an amendment to our certificate of
incorporation to effect the proposed Transaction. The form of amendment is
attached hereto as Appendix A.
The purpose for the reverse stock split is to decrease the number of
outstanding stockholders to below 500 so that Ambassador may terminate its
registration under the Exchange Act. Ambassador would immediately follow the
reverse stock split with a forward stock split to (a) avoid the disruption to
the holders of 30 or more shares of Common Stock who are not being cashed out in
the Transaction and (b) reduce the costs of the Transaction by avoiding costs
which would be associated with cashing out the fractional shares of the holders
of 30 or more shares of stock and reissuing stock certificates to such
stockholders. See "--Special Factors--Fairness of the Transaction--Factors
Considered in Determining Whether to Terminate Registration as a Reporting
Company".
The proposed amendment would not change the number of authorized shares of
Common Stock or the par value of the shares of Common Stock.
No fractions of shares would be issued to Fractional Holders in connection
with the Transaction and, after the Transaction, no Fractional Holder would have
any further interest as a stockholder of
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Ambassador. Fractional Holders would be entitled to receive Thirty-five Cents
($0.35) per share of Common Stock held immediately prior to the reverse stock
split.
If approved by the stockholders, the Transaction will be accomplished by
the filing of a Certificate of Amendment to Ambassador's Certificate of
Incorporation with the Delaware Secretary of State. We plan to file the
Certificate of Amendment as soon as practicable after the proposed amendment is
approved by stockholders at the Annual Meeting. Under the Delaware General
Corporation Law, the amendment to the Certificate of Incorporation will become
effective on the date of filing, unless we specify otherwise. The board of
directors reserves the right not to file the Certificate of Amendment until such
time as the board of directors determines that filing is in the best interests
of Ambassador and the stockholders. Our board of directors also reserves the
right to abandon the Transaction before or after the Annual Meeting and prior to
the effectiveness of the Transaction if for any reason the board of directors
deems it advisable to do so.
Any Fractional Holder who desires to retain an equity interest in
Ambassador after the Transaction may do so by purchasing, prior to the effective
time of the reverse stock split, a sufficient number of shares of Common Stock
so that the stockholder holds 30 or more shares of our Common Stock. Due to the
limited trading market for our Common Stock, it may be difficult for a
Fractional Holder to purchase enough shares to retain an equity interest in
Ambassador.
SPECIAL FACTORS
Background of the Transaction
From time to time since September, 1998, members of management and the
board of directors have informally discussed the relative costs and benefits of
remaining a public company. Ambassador has historically been a very small
company, with a relatively large number of small stockholders and very
infrequent trading in its Common Stock. In recent years, Ambassador's costs
relating to its public company status have increased, as a result of the
requirement that Ambassador's quarterly financial statements be reviewed by
Ambassador's independent auditors and as a result of the enactment of the
Sarbanes-Oxley Act of 2002. In addition, Ambassador has suffered losses in
recent years. For these reasons, in September, 2003, the President raised in
informal discussions with the full board whether Ambassador should formally
consider a going private transaction. Based on the informal discussions, the
President proposed a meeting date to consider the going private transaction and
requested that management prepare an analysis of a going private transaction. As
a result of these developments, the board of directors formally considered
various alternatives to reduce Ambassador's expenses at a meeting held on
February 5, 2004. See "--Fairness of the Transaction", "--Factors Considered in
Determining Form of Transaction".
At its February 5, 2004 meeting, the board of directors determined that it
is in the best interests of Ambassador and its stockholders to reduce the number
of stockholders of record of Ambassador and terminate Ambassador's status as a
reporting company under the Exchange Act. After consideration of the
alternatives described below (see "--Fairness of the Transaction"), the board of
directors decided to accomplish this objective through:
o a 1 for 30 reverse stock split, followed by a 30 for 1 forward stock
split for stockholders holding 30 or more shares of Common Stock
immediately prior to the reverse stock split, and
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o a cash payment to each stockholder holding fewer than 30 shares of
Common Stock immediately prior to the reverse stock split in exchange
for such holder's fractional shares.
After further consideration at the meeting, the board of directors determined
that the amount of the cash payment to each Fractional Holder would be
Thirty-five Cents ($0.35) per share of Common Stock held immediately prior to
the reverse stock split. The board then adopted the proposed amendment to the
Certificate of Incorporation to effect the Transaction and directed that the
proposed amendment be submitted to the stockholders for approval at the Annual
Meeting.
Purpose and Reasons for the Transaction
The board of directors decided to propose the Transaction in order to (a)
reduce administrative costs incurred by Ambassador in connection with the
continued registration of Ambassador's Common Stock under the Exchange Act, (b)
reduce administrative costs incurred by Ambassador in connection with the
maintenance of small stockholder accounts, (c) allow small stockholders to
liquidate their shares easily, (d) avoid disruption to the holders of 30 or more
shares of Common Stock, who would not be cashed out in the Transaction and (e)
limit the costs of the Transaction by avoiding costs associated with cashing out
the fractional shares of the holders of 30 or more shares of Common Stock and
reissuing stock certificates to such stockholders. See "--Special
Factors--Fairness of the Transaction--Factors Considered in Determining Whether
to Terminate Registration as a Reporting Company". Ambassador is undertaking the
Transaction at this time in order to obtain the benefits of the Transaction at
the earliest possible date and to avoid potential increased costs in complying
with new federal securities regulations adopted under the Sarbanes-Oxley Act of
2002.
Exchange Act Reporting. As a public company, Ambassador is required to
prepare and file with the SEC, among other items, the following Exchange Act
reports:
o Quarterly Reports on Form 10-QSB;
o Annual Reports on Form 10-KSB;
o Proxy statements and annual reports to stockholders as required under
the Exchange Act; and
o Current Reports on Form 8-K.
The legal and accounting costs associated with these reports and other
filing obligations comprise a significant overhead expense. These costs include
professional fees for our auditors and corporate counsel, printing and mailing
costs, internal compliance costs, and transfer agent costs. These Exchange Act
reports and related costs and expenses have been increasing over the years. We
believe that they will continue to increase, particularly as a result of the
additional reporting and disclosure obligations imposed on public companies by
the recently enacted Sarbanes-Oxley Act of 2002.
In addition to out-of-pocket costs, Ambassador also incurs indirect costs
associated with its public company status, including executive time spent to
prepare and review SEC filings. Because Ambassador has relatively few executive
personnel, these indirect costs can be substantial. The savings in out-of-pocket
costs that would result from the Transaction are estimated to be as follows:
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Approximate
Item Amount
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Independent Auditors Fees $23,000
SEC Counsel Fees $1,000
Printing and Mailing Costs $500
Newswire Expense $400
Proxy Forwarding Expenses $100
TOTAL $25,000
Administrative Expenses to Maintain Small stockholder Accounts. As of the
date of the Proxy Statement, Ambassador had approximately 532 stockholders of
record. On that date, approximately 174 stockholders of record owned fewer than
30 shares each. Although holders of fewer than 30 shares constitute 33% of the
stockholders of record of Ambassador, such stockholders own only .2% of the
outstanding shares of Common Stock. The cost of administering each registered
stockholder's account is the same regardless of the number of shares held in
that account. Therefore, our costs to maintain such small accounts are
disproportionately high when compared to the total number of shares involved and
the value of each share.
Liquidity for Small Stockholders. We believe that holders of fewer than 30
shares may be deterred from selling their shares because of the lack of an
active trading market and because of disproportionately high brokerage costs.
The trading volume in our stock has been, and continues to be, very limited and
very sporadic. The last reported trades over the counter were in October, 2003,
and for only a few days in the past year have any over the counter trades been
reported.
As described below, the board of directors believes that the value per
share of Common Stock is no more than Thirty-five Cents ($0.35). Based upon this
valuation, each holder of fewer than 30 shares of Common Stock owns stock valued
in the aggregate of $10.15, or less. One- hundred seventy four (174)
stockholders of Ambassador own of record 30 or fewer shares. The board of
directors believes that the Transaction would give Fractional Holders an
opportunity to receive cash for their shares without having to pay
disproportionately high brokerage commissions.
Fairness of the Transaction
The board of directors believes that
o the Transaction is fair to, and in the best interests of, Ambassador
and its stockholders, including unaffiliated stockholders who are
cashed out and those who are not cashed out; and
o the process by which the Transaction is to be approved is fair to
Ambassador and its stockholders, including unaffiliated stockholders
who are cashed out and those who are not cashed out.
In deciding upon the fairness of the Transaction, the board of directors
gave consideration to numerous factors, including those described below and the
reasons for the Transaction set forth in "Purpose and Reasons for the
Transaction" above. In reaching its conclusion, the board did not assign any
relative or specific weights to the various factors considered, except as
specifically described below. Individual directors may have given differing
weights to different factors.
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Factors Considered in Determining Whether to Terminate Registration as a
Reporting Company. At its meeting on February 5, 2004, the board first
considered whether it was in the best interests of Ambassador and its
stockholders to engage in a transaction to reduce the number of stockholders in
order to terminate Ambassador's status as a reporting company under the Exchange
Act. The board considered the following positive factors in determining that it
was in the best interests of Ambassador and its stockholders to engage in such a
transaction:
o Ambassador and its stockholders receive little benefit from Ambassador
being a public company because of Ambassador's very small size, the
lack of analyst coverage and the very limited trading in Ambassador's
stock.
o Terminating Ambassador's registration under the Exchange Act and
reducing the number of stockholders would reduce Ambassador's annual
out-of-pocket expenses by approximately $25,000 and save management
considerable time and effort that is currently being expended to
comply with Exchange Act provisions.
o The costs of remaining a public company appear to be increasing as a
result of the enactment of the Sarbanes-Oxley Act of 2002.
o Small stockholders would receive cash for their interests in any such
transaction without payment of disproportionately high brokerage
costs.
o The two-step structure of the Transaction would avoid disruption to
the holders of 30 or more shares of Common Stock who are not being
cashed out in the Transaction by avoiding the requirement that such
stockholders forward their stock certificates to Ambassador in
exchange for (a) cash for fractional shares of Common Stock and (b)
replacement stock certificates for whole shares of Common Stock.
The board considered the following negative factors in determining whether it is
in the best interests of Ambassador and its stockholders to terminate the
registration of Ambassador's Common Stock under the Exchange Act:
o Information regarding Ambassador that would be available to its
stockholders would be reduced as a result of the termination.
o The ability of stockholders of Ambassador to engage in transactions in
Ambassador stock in public markets might be reduced. However, based on
the historically low trading volume, this factor would have a limited
impact on the stockholders.
o stockholders would lose certain protections currently provided under
the Exchange Act, such as limitations on short-swing transactions by
executive officers and directors under Section 16 of the Exchange Act.
o Ambassador would incur costs in engaging in any such transaction.
After consideration of these factors, the board of directors determined
that the benefits of terminating Ambassador's registration under the Exchange
Act outweigh the detriments to Ambassador and its stockholders, including
unaffiliated stockholders that are not cashed out in the Transaction.
9
Factors Considered in Determining Form of Transaction. After considering
different forms of transactions at its meeting on February 5, 2004, the board
determined to conduct a reverse stock split followed by a forward stock split in
order to ensure that the Ambassador would have fewer than 500 stockholders of
record, which is necessary to terminate the registration Ambassador's Common
Stock under the Exchange Act, and to avoid disruption to stockholders not being
cashed out. The board considered the fact that small stockholders would not have
a choice as to whether to sell their shares in this form of transaction, but
also took into account that the economic interests represented by their shares
were very small and that the such holders could remain stockholders if they so
desired by increasing their share ownership to 30 shares.
The board selected 30 shares as the ownership minimum because it would
ensure that, after completion of the Transaction, the number of record
stockholders would be fewer than the 500 stockholder threshold necessary to
terminate registration with the SEC, it would substantially reduce the number of
stockholders of record of Ambassador and it would require the repurchase of a
relatively small number of shares (approximately 1,658 shares, or .16% of
Ambassador's outstanding shares).
The board considered different types of transactions to accomplish the
reduction in the number of stockholders. The following were the alternative
transactions considered but rejected:
o Odd-lot Tender Offer. The board believed that this alternative might
not result in shares being tendered by a sufficient number of record
stockholders to reduce the number of stockholders below 500. The board
found it unlikely that many holders of small numbers of shares would
make the effort to tender their shares given the limited value of the
shares and the relative inconvenience associated with a tender.
o Tender Offer to all Unaffiliated stockholders. The board of directors
determined that Ambassador did not have the funds to effect this
transaction and would have to incur an unacceptably high amount of
additional debt, if available, in order to effect this transaction and
there might not be a sufficient number of record stockholders
tendering their shares to reduce the number below 500.
o Reverse Stock Split Only. Although this alternative would accomplish
the objective of reducing the number of record stockholders below the
500 stockholder threshold, Ambassador would be required to cash-out
fractional share interests held by each stockholder, not just
Fractional Holders. The board rejected this alternative due to the
disruption which would be caused to holders of 30 or more shares of
Common Stock, who would not be cashed out in the proposed Transaction.
o Business Combination. The board did not consider a business
combination as a means of reducing the number of shareholders.
Ambassador only considered transactions that could be accomplished
unilaterally by Ambassador and its stockholders.
Factors Considered in Determining Cash-out Price of Fractional Shares. In
considering the price to be paid to stockholders otherwise entitled to
fractional shares of Common Stock in the Transaction, the board reviewed and
discussed with management certain of the materials which management had prepared
and previously distributed to the board regarding the valuation of shares of
Common Stock. The following materials were prepared or obtained by management
and distributed to the board:
10
o Ambassador's audited financial statements for the fiscal year ended
May 29, 2003 ("fiscal 2003"),
o Ambassador's quarterly report on Form 10-QSB for the third quarter of
the fiscal year ended November 27, 2003,
o a listing of bid prices for the Common Stock for the last six months
of 2003, and
o a schedule of the book value of the Common Stock from May, 2001 to
November, 2003.
The board considered the net value of the assets of Ambassador, and the
recent losses suffered by Ambassador and its limited liquidity in determining
the cash-out price for the fractional shares. The board noted that the book
value of the assets of Ambassador that had been $.11 per share as of May, 2003
had decreased to $.02 per share as of November, 2003. The board determined that
book value per share was a fair approximation of the net value of the assets of
Ambassador. The board also discussed that the liquidation value of Ambassador
would probably be less than the net value of the assets on a going-concern basis
because of the costs of liquidation. In its discussion of liquidation value, the
board assumed that Ambassador would be able to sell its assets for no more than
net value and would incur costs in doing so. The board considered the
substantial losses incurred by Ambassador in recent years and its decreasing
liquidity. In making its determination, the board also discussed the following
potential measures of value:
o Current Market Prices; Recent Historical Market Prices. The board of
directors considered recent historical market prices and current
market prices of Common Stock.
o Prices Paid In Recent Stock Repurchases By Ambassador. The board
considered recent repurchases made by Ambassador and determined that
there had been none within the past two years, other than a repurchase
of 20 shares at the request of an unaffiliated stockholder at the
price of $.35 per share which was approved by the Board at its
February 5, 2004 meeting and took place on February 6, 2004.
o Net Book Value. As of November, 2003, the net book value per share was
$.02. The board noted that book value is an accounting concept rather
than a true measure of value, but the board did determine that net
book value in this case was a fair approximation of net asset value.
The board took into account that net book value had further declined
since May, 2003. The board noted that the cash-out price exceeded the
net book value and net asset value per share of Ambassador.
o Going Concern Value. The board did not determine a specific going
concern value for Ambassador. The board did review Ambassador's net
asset value, recent operating losses and limited liquidity and
concluded that its going concern value would not exceed the cash-out
price. The board reviewed the results of operations of Ambassador for
the previous three years and for the first two quarters of fiscal year
2004. For fiscal years 2001, 2002 and 2003, Ambassador reported net
income (losses) of $(18,637), $8,431 and $703,090, respectively. The
results for 2003 included a one-time gain on settlement of debt of
$790,992. For the quarter ended November 27, 2003, Ambassador reported
a net loss of $65,159. At November 27, 2003, Ambassador had a working
capital deficit of $32,091 and a ratio of current assets to current
liabilities of .97.
11
o Liquidation Value. The board reviewed liquidation value as the price
received for all of the assets of Ambassador in a commercially
reasonable sale. The board concluded that liquidation value would be
less than net book value given the costs of liquidation.
All of the factors considered by the board in determining the fairness of
the cash-out price have been discussed in this section.
Additional Factors Considered in Determining Fairness of Transaction. The
board of directors considered the following additional factors in determining
that the proposed Transaction would be fair to Ambassador and its stockholders,
including unaffiliated stockholders:
o The Transaction was unanimously approved by the board of directors of
Ambassador, including the directors who are not employees of
Ambassador.
o The Transaction is not structured so that approval of at least a
majority of unaffiliated stockholders is required. The board
determined that any such voting requirement would usurp the power of
the holders of a majority of Ambassador's outstanding shares to
consider and approve the proposed amendment as provided under Delaware
law and Ambassador's charter documents.
o No independent committee of the board has reviewed the fairness of the
Transaction proposal.
o No unaffiliated representative acting solely on behalf of the
stockholders for the purpose of negotiating the terms of the
Transaction proposal or preparing a report covering the fairness of
the Transaction proposal was retained by Ambassador or by a majority
of directors who are not employees of Ambassador. Ambassador did not
obtain any report, opinion or appraisal that is materially related to
the Transaction. The board of directors did not believe that it would
be cost-effective to obtain a fairness opinion, because the aggregate
value of the fractional shares to be purchased is approximately $580.
o No provision was made by Ambassador to grant unaffiliated stockholders
access to the corporate files of Ambassador or to obtain counsel or
appraisal services at the expense of Ambassador.
Based upon all of the factors described above and the reasons for the
Transaction set forth in "Purpose and Reasons for the Transaction" above, the
board of directors believes that the transaction is fair to, and in the best
interests of, Ambassador and its stockholders, including unaffiliated
stockholders, and the board of directors believes that the process by which the
Transaction is to be approved is fair to Ambassador and its stockholders,
including unaffiliated stockholders.
Fairness to Remaining stockholders Who Owned 30 or More Shares Prior to
the Transaction. The board of directors considered several factors in
determining that the proposed Transaction is fair to those stockholders who will
remain after the Transaction because they owned 30 or more shares prior to the
Transaction. While the Transaction will result in the loss of the protections of
the Exchange Act for these stockholders and the loss of the ability to trade the
Common Stock on the OTC Bulletin Board, the Board determined the Transaction was
fair to such stockholders for the following reasons:
o Historical data indicates that the Common Stock trades publicly on a
very infrequent basis. In addition, Ambassador and its stockholders
currently receive little benefit from
12
Ambassador being a public company because of Ambassador's very small
size, the lack of analyst coverage and the very limited trading in
Ambassador's stock. In addition, such stockholders may continue to
attempt to trade in Common Stock on the "pink sheets" or in privately
negotiated transactions. Therefore, the loss of the ability to trade
on the OTC Bulletin Board should have a limited impact on remaining
stockholders' ability to trade in the Common Stock. See "--Effect on
Market for Shares".
o Terminating Ambassador's registration under the Exchange Act and
reducing the number of stockholders would reduce Ambassador's annual
out-of-pocket expenses by approximately $25,000 and save management
considerable time and effort that is currently being expended to
comply with Exchange Act provisions. Remaining stockholders would be
able to share in the benefits of the reduced costs to Ambassador.
o As previously indicated the two-step structure of the Transaction
would avoid disruption to the holders of 30 or more shares of Common
Stock, who would not be cashed out in the Transaction. See "--Special
Factors--Fairness of the Transaction--Factors Considered in
Determining Whether to Terminate Registration as a Reporting Company".
Effects of the Transaction
Reduction in Number of stockholders. Ambassador expects that as a result
of the Transaction, the number of stockholders of record of Ambassador would be
reduced from approximately 532 stockholders to approximately 358 stockholders,
depending upon the number of holders of fewer than 30 shares on the Effective
Date.
Termination of Exchange Act Registration and Reporting. Shares of Common
Stock are currently registered under the Exchange Act. Such registration may be
terminated upon application by Ambassador to the Securities and Exchange
Commission if there are fewer than 300 holders of record of our Common Stock or
if the number of holders of Common Stock falls below 500 and Ambassador's total
assets have been no more than $10 million at the end of each of its last three
fiscal years. If, after termination of registration, on the first date of any of
Ambassador's subsequent fiscal years, the number of stockholders of Ambassador
exceeds (a) 300 and Ambassador has total assets of more than $10 million or (b)
500, then Ambassador's reporting obligations under the Exchange Act will be
reinstated. In such case, Ambassador must file an annual report on Form 10-KSB
for its preceding fiscal year within 120 days of the end of such fiscal year.
The board of directors intends to terminate the registration of the Common
Stock under the Exchange Act as soon as practicable after the Transaction, if
approved, is effected. Termination of registration of shares of our Common Stock
would substantially reduce the information required to be furnished by
Ambassador to its stockholders and to the SEC and would make certain provisions
of the Exchange Act no longer applicable to Ambassador. These provisions
include:
o the beneficial ownership reporting and short-swing profit recovery
provisions of Section 16,
o the requirement to file and furnish proxy material in connection with
stockholders' meetings pursuant to Section 14,
o the requirement to file periodic and current reports pursuant to
Section 13, and
13
o the requirements of Rule 13e-3 with respect to "going private"
transactions.
Furthermore, affiliates of Ambassador may be deprived of the ability to
dispose of shares of Common Stock pursuant to Rule 144, as amended.
Effects on Market for Shares. Currently, there is little, if any, public
trading of Common Stock. The Common Stock is currently eligible to be traded in
the over-the-counter market, both on the OTC Bulletin Board and in the "pink
sheets". We believe that the Common Stock trades publicly on a very infrequent
basis. Ambassador's Common Stock will cease to be traded on the OTC Bulletin
Board and any trading in our Common Stock after the Transaction may occur only
in the "pink sheets" or in privately negotiated sales. There can be no assurance
that any trading will occur after Ambassador terminates the registration of our
Common Stock.
Effects on Ambassador. Ambassador estimates that the Transaction would
reduce the number of shares of Common Stock of Ambassador by up to 1,658 shares
(approximately .2% of outstanding shares) at a cost to Ambassador (including
expenses) of approximately $25,280. See "Costs and Financing of the
Transaction." The repurchased fractional shares would be retired. The
Transaction would also reduce the number of stockholders of Ambassador. See
"Effects of the Transaction-Reduction in Number of stockholders." Termination of
registration of shares of our Common Stock would substantially reduce the
information required to be furnished by Ambassador to its stockholders and to
the SEC and would make certain provisions of the Exchange Act no longer
applicable to Ambassador. See "Effects of the Transaction-Termination of
Exchange Act Registration and Reporting." The liquidity and market value of the
shares of Common Stock might be adversely affected by the Transaction and by
termination of the registration of Common Stock under the Exchange Act. See
"Effects of the Transaction-Effects on Market for Shares." Ambassador estimates
that termination of the registration of our Common Stock under the Exchange Act
will save Ambassador approximately $25,000 per year in legal, accounting and
other expenses.
Effects on Holders of Fewer than 30 Shares of Common Stock. Following the
Transaction, holders of fewer than 30 shares of Common Stock would receive
payment of Thirty-five Cents ($0.35) per share for their shares and would cease
to be stockholders. They would have no further interest in Ambassador with
respect to any cashed-out shares and would only have a right to receive cash for
these shares. We would send Fractional Holders a letter of transmittal as soon
as practicable after the Transaction with instructions on how to surrender
existing certificate(s) in exchange for cash payment.
Ambassador intends to permit stockholders holding Common Stock in street
name through a nominee (such as a bank or broker) to be treated in the
Transaction in the same manner as stockholders whose shares are registered in
their names and wold instruct nominees to effect the Transaction for their
beneficial holders. However, nominees may have different procedures and
stockholders holding Common Stock in street name should contact their nominees
to (a) determine whether or not they are eligible to be cashed out in the
Transaction and (b) instruct the nominee as to how the beneficial stockholder
wishes to proceed. The Transaction structure will focus on the number of shares
held by record holders. Thus, beneficial owners of fewer than 30 shares of
Common Stock holding these shares in "street name" will not be required to cash
in their shares if the record holder of such shares owns 30 or more shares prior
to the Transaction.
Effects on Unaffiliated Stockholders Who Own 30 or More Shares. With
respect to unaffiliated stockholders who own 30 or more shares of Common Stock,
termination of registration of shares of our Common Stock would substantially
reduce the information required to be furnished by Ambassador to its
stockholders and to the SEC and would make certain provisions of the Exchange
Act no longer applicable to Ambassador, which may adversely affect unaffiliated
stockholders. See "Effects of the Transaction-
14
Termination of Exchange Act Registration." The liquidity and market value of the
shares of our Common Stock held by unaffiliated stockholders may be adversely
affected by the Transaction and by termination of the registration of our Common
Stock under the Exchange Act. See "Effects of the Transaction-Effect on Market
for Shares."
Effects on Affiliated Stockholders. The Transaction would have various
effects on stockholders who are affiliates of Ambassador. We expect that our
executive officers and directors would continue to beneficially own the same
number of shares immediately after the Transaction and the percentage of
ownership of our Common Stock held by executive officers and directors of
Ambassador, as a group, would increase by no more than [00.1%] of outstanding
shares. As described under "Effects of the Transaction-Termination of Exchange
Act Registration," if the registration of the our Common Stock is terminated
under the Exchange Act:
o executive officers, directors and other affiliates would no longer be
subject to any of the reporting requirements and restrictions of the
Exchange Act, including the short-swing profit provisions of the
Section 16, and
o executive officers, directors and other affiliates of Ambassador might
be deprived of the ability to dispose of shares of Common Stock
pursuant to Rule 144, as amended.
Material U.S. Federal Income Tax Consequences
The following summarizes certain material federal income tax consequences
to Ambassador and its stockholders that would result from the Transaction. This
discussion is included for general information only. No opinion of counsel or
ruling from the Internal Revenue Service has been sought or obtained with
respect to the tax consequences of the Transaction. This summary is based on
existing U.S. federal income tax law, which may change, even retroactively. This
summary does not discuss all aspects of federal income taxation that may be
important to you in light of your individual circumstances. In addition, this
summary does not discuss any state, local, foreign, or other tax considerations.
This summary also assumes that you have held and will continue to hold your
shares as capital assets for investment purposes under the Internal Revenue Code
of 1986, as amended. stockholders are encouraged to consult their own tax
advisor as to the particular federal, state, local, foreign, and other tax
consequences, in light of their individual circumstances.
Federal Income Tax Consequences to Ambassador. We believe that the
Transaction would be treated as a tax-free "recapitalization" for federal income
tax purposes. This should result in no material federal income tax consequences
to Ambassador.
Federal Income Tax Consequences to stockholders Owning 30 or More Shares.
If you (1) continue to hold our Common Stock immediately after the Transaction,
and (2) you receive no cash as a result of the Transaction, you will not
recognize any gain or loss in the Transaction and you will have the same
adjusted tax basis and holding period in your Common Stock as you had in such
stock immediately prior to the Transaction.
Federal Income Tax Consequences to Fractional Holders. If you receive cash
as a result of the Transaction but do not continue to hold our Common Stock
immediately after the Transaction, your tax consequences will depend on whether,
in addition to receiving cash, a person or entity related to you (as determined
by the Internal Revenue Code) continues to hold our Common Stock immediately
after the Transaction, as explained below.
15
If you (1) receive cash in exchange for our Common Stock as a result of
the Transaction but do not continue to hold our Common Stock immediately after
the Transaction, and (2) you are not related to any person or entity which holds
our Common Stock immediately after the Transaction, you will recognize capital
gain or loss. The amount of capital gain or loss you recognize will equal the
difference between the cash you receive for your cashed-out stock and your
aggregate adjusted tax basis in such stock.
If you are related to a person or entity who continues to hold our Common
Stock immediately after the Transaction (as determined by the Internal Revenue
Code) you will be treated as owning shares actually or constructively owned by
such individuals or entities which may cause your receipt of cash in exchange
for our Common Stock to be treated first as ordinary dividend income to the
extent of your ratable share of Ambassador's undistributed earnings and profits,
then as a tax-free return of capital to the extent of your aggregate adjusted
tax basis in your shares, and any remaining amount will be treated as capital
gain. If you are related to a person or entity who continues to hold our Common
Stock immediately after the Transaction, you are urged to consult your tax
advisor as to the particular federal, state, local, foreign, and other tax
consequences of the Transaction, in light of your specific circumstances.
Capital Gain And Loss. For individuals, net capital gain (defined
generally as your total capital gains in excess of capital losses for the year)
recognized upon the sale of capital assets that have been held for more than 12
months generally will be subject to tax at a rate not to exceed 15%. Net capital
gain recognized from the sale of capital assets that have been held for 12
months or less will continue to be subject to tax at ordinary income tax rates.
In addition, capital gain recognized by a corporate taxpayer will continue to be
subject to tax at the ordinary income tax rates applicable to corporations.
There are limitations on the deductibility of capital losses.
Backup Withholding. Stockholders who own fewer than 30 shares of Common
Stock would be required to provide their social security or other taxpayer
identification numbers (or, in some instances, additional information) in
connection with the Transaction to avoid backup withholding requirements that
might otherwise apply. The letter of transmittal would require each such
stockholder to deliver such information when the Common Stock certificates are
surrendered following the effective time of the Transaction. Failure to provide
such information may result in backup withholding.
Consult Tax Advisor. As explained above, the amounts paid to you as a
result of the Transaction may result in dividend income, capital gain income, or
some combination of dividend and capital gain income to you depending on your
individual circumstances. The U.S. Federal income tax discussion set forth above
is based upon present law, which is subject to change possibly with retroactive
effect. You should consult your tax advisor as to the particular federal, state,
local, foreign, and other tax consequences of the Transaction, in light of your
specific circumstances.
Conduct of Business After the Transaction
We expect our business and operations to continue as they are currently
being conducted and the Transaction is not anticipated to have any effect upon
the conduct of such business. Upon termination of the registration of our Common
Stock under the Exchange Act, we will cease the filing of periodic reports,
proxy statements and other reports and documents otherwise required to be filed
with the SEC.
Other than as described in this Proxy Statement, neither Ambassador nor
its management has any current plans or proposals to effect any extraordinary
corporate Transaction, such as a merger, reorganization or liquidation; to sell
or transfer any material amount of its assets; to change its board of
16
directors or management; to materially change its dividend policy or
indebtedness or capitalization; or otherwise to effect any material change in
its corporate structure or business.
Past Business Combination Discussions
During the third calendar quarter of 2003, Ambassador was approached by a
prospective acquirer and engaged in conceptual discussions about a possible
sale. The discussion ended with no monetary offer being made. There have been no
other recent substantive discussions between Ambassador or its management and
any other party regarding a business combination.
Appraisal Rights
No appraisal rights are available under the Delaware General Corporation
Law to any stockholder who dissents from the proposal to approve the
Transaction.
EXCHANGE OF FRACTIONAL SHARE CERTIFICATES FOR CASH
Promptly after the Transaction, Ambassador would mail to each holder of a
certificate or certificates which immediately prior to the effective time of the
Transaction evidenced outstanding shares that appear, based on information
available to Ambassador, to have been converted into the right to receive a cash
payment ("Certificates"), a letter of transmittal. The letter of transmittal
would:
o contain a certification for the Fractional Holder to sign stating the
number of shares held by the Fractional Holder;
o request any other information we need;
o specify that the risk of loss and title to the Certificates shall pass
to Ambassador only when the Certificate is delivered to Ambassador;
and
o provide instructions to the Fractional Holder as to how to surrender
the Certificates in exchange for the cash payment payable with respect
to such Certificates.
Upon surrender of a Certificate for cancellation to Ambassador, together
with a fully completed and signed letter of transmittal containing the
certification that the Fractional Holder holds fewer than 30 shares of our
Common Stock and any other customary documents required pursuant to such
instructions, the Fractional Holder will be entitled to receive a cash payment
payable with respect to the shares formerly represented by the surrendered
Certificate or Certificates. When a Certificate is surrendered, we will cancel
it.
Ambassador intends to permit stockholders holding Common Stock in street
name through a nominee (such as a bank or broker) to be treated in the
Transaction in the same manner as stockholders whose shares are registered in
their names and will instruct nominees to effect the Transaction for their
beneficial holders. However, nominees may have different procedures and
stockholders holding Common Stock in street name should contact their nominees.
Beneficial owners of fewer than 30 shares of Common Stock in "street name" will
not be required to cash in their shares (assuming the record holder holds 30 or
more shares).
Ambassador (along with any other person or entity to which it may delegate
or assign any responsibility or task with respect thereto) shall have full
discretion and exclusive authority (subject to its right and power to so
delegate or assign such authority) to:
17
o make inquiries of any stockholder or other person as it may deem
appropriate for purposes of effecting the Transaction; and
o resolve and determine, in its sole discretion, all ambiguities,
questions of fact and interpretation and other matters relating to the
Transaction or any letter of transmittal, including, without
limitation, any questions as to the number of shares held by any
holder immediately prior to the effective time of the reverse stock
split. All such determinations by Ambassador shall be final and
binding on all parties.
For purposes of effecting the Transaction, Ambassador may in its sole
discretion, but shall not have any obligation to do so,
o presume that any shares of Common Stock held in a discrete account
(whether record or beneficial) are held by a person distinct from any
other person, notwithstanding that the registered or beneficial holder
of a separate discrete account has the same or a similar name as the
holder of a separate discrete account; and
o aggregate the shares held (whether of record or beneficially) by any
person or persons that Ambassador determines to constitute a single
holder for purposes of determining the number of shares held by such
holder.
YOU SHOULD NOT SEND YOUR STOCK CERTIFICATES NOW. YOU SHOULD SEND THEM ONLY
AFTER YOU RECEIVE A LETTER OF TRANSMITTAL FROM AMBASSADOR. LETTERS OF
TRANSMITTAL WOULD BE MAILED SOON AFTER THE TRANSACTION IS COMPLETED.
ESCHEAT LAWS
The unclaimed property and escheat laws of each state provide that under
circumstances defined in that state's statutes, holders of unclaimed or
abandoned property must surrender that property to the state. Fractional Holders
whose shares are eliminated and whose addresses are unknown to Ambassador, or
who do not return their stock certificates and request payment, generally will
have a limited period of time after the Transaction in which to claim the cash
payment.
For example, with respect to Fractional Holders whose last known addresses
are in Delaware, as shown by our records, the period is five (5) years.
Following the expiration of that five-year period, Delaware law would likely
cause the cash payments to escheat to the State of Delaware. As to Stockholders
that reside in Missouri, as shown by our records, the period is also five (5)
years. Following the expiration of that five-year period, the Uniform
Disposition of Unclaimed Property Act of Missouri would likely cause the cash
payments to escheat to the State of Missouri.
For stockholders who reside in other states or whose last known addresses,
as shown by our records, are in states other than Delaware or Missouri, such
states may have abandoned property laws which call for either (i) such state to
obtain custodial possession of property that has been unclaimed until the owner
reclaims it; or (ii) escheat of such property to the state. Under the laws of
such other jurisdictions, the "holding period" or the time period which must
elapse before the property is deemed to be abandoned may be shorter or longer
than as set forth under Missouri or Delaware law.
18
COSTS AND FINANCING OF THE TRANSACTION
The costs to Ambassador related to this Transaction are estimated to be as
follows:
Approximate
Item Amount
---- ------
Legal Fees $20,000
Independent Auditors Fees 2,000
Transfer Agent Fees 500
Printing and Mailing Costs 1,500
Proxy Forwarding Expenses 200
Newswire Expense 500
Cash-Out of Fractional Shares 580
TOTAL $25,280
In connection with our Annual Meeting, some of these fees and expenses
would have been incurred regardless of the Transaction. However, we estimate
that the Transaction will result in additional costs of approximately $23,580.
The consideration to stockholders and the fees and expenses incurred in
connection with the Transaction will be paid from Ambassador's working capital.
FINANCIAL INFORMATION
Ambassador hereby incorporates by reference (a) the financial statements
and the notes thereto contained on pages F1 through F14 of Ambassador's Annual
Report included as an Annex to this Proxy Statement, (b) the report of
independent certified public accountants thereon contained on page F1 of the
Annual Report, (c) Management's Discussion and Analysis or Plan of Operation
contained on pages 6 through 11 of the Annual Report, (d) the Financial
Statements and notes thereto contained on pages 3 through 9 of Ambassador's
Quarterly Reports included as an Annex to this Proxy Statement and (e)
Management's Discussion and Analysis or Plan of Operation contained on pages 9
through 12 of the Quarterly Reports.
In addition, the following sets forth certain financial information for
Ambassador and its subsidiaries for and as of the following periods and dates:
- ---------------------- --------------------------------------- -----------------------------
Three Months Ended Year Ended
- ---------------------- --------------------------------------- -----------------------------
November 27, 2003 November 27, 2002 May 29, 2003 May 29, 2002
- ---------------------- ------------------- ------------------- -------------- --------------
Ratio of Earnings to -- -- -- --
Fixed Charges(1)
- ---------------------- ------------------- ------------------- -------------- --------------
(1) Ambassador did not have earnings for any of the respective periods.
- ---------------------- ------------------- ----------------- ----------------
November 27, 2003 August 28, 2003 May 29, 2003
- ---------------------- ------------------- ----------------- ----------------
Book Value Per Share $.02 $.09 $.11
- ---------------------- ------------------- ----------------- ----------------
19
BOARD OF DIRECTORS DISCRETION
Although the board requests stockholder approval of the proposed amendment
to Article IV of Ambassador's Certificate of Incorporation, the board reserves
the authority to decide, in its discretion, to withdraw the proposed amendment
from the agenda of the Annual Meeting prior to any stockholder vote thereon or
to abandon the Transaction after such vote and before the effectiveness of the
Transaction. Although the board presently believes that the proposed amendment
is in the best interests of Ambassador and its stockholders, and thus has
recommended a vote for the proposed amendment, the board nonetheless believes
that it is prudent to recognize that, while unlikely, between the date of this
Proxy Statement and the effective time of the Transaction, factual
circumstances, could possibly change such that it might not be appropriate or
desirable to effect the Transaction at this time. If the board decides to
withdraw the proposed amendment from the agenda of the Annual Meeting, the board
will notify the stockholders of such decision by announcement at the meeting.
MARKET FOR COMMON STOCK, DIVIDENDS AND STOCK PURCHASES
Market for Common Stock
Currently, there is little, if any, public trading of our Common Stock.
Ambassador believes that the Common Stock is currently eligible to be traded in
the over the counter market, both on the OTC Bulletin Board and in the "pink
sheets". Ambassador believes that the Common Stock trades publicly on a very
infrequent basis.
Dividends
No cash dividends were declared during fiscal years 2002 and 2003 or
during the first two quarters of fiscal year 2004. Ambassador does not currently
expect to pay cash dividends in the immediate future.
Stock Repurchases by Ambassador
At the request of an unaffiliated stockholder, Ambassador repurchased 20
shares of common stock at $0.35 per share on February 6, 2004. No other
repurchases by Ambassador have occurred within the past year.
VOTE REQUIRED
The proposed Transaction must be approved by the holders of a majority of
the outstanding shares of our Common Stock entitled to vote thereon. Any
abstention or broker non-vote will have the effect of a vote against the
proposed Transaction.
As of the record date, the executive officers and directors of Ambassador
beneficially owned a total of approximately 31% of the outstanding Common Stock
entitled to vote at the Annual Meeting. Each executive officer and director of
Ambassador has advised Ambassador that he or she intends to vote his or her
shares in favor of the Transaction.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" PROPOSAL 1 CONCERNING AN AMENDMENT TO OUR
20
CERTIFICATE OF INCORPORATION TO EFFECT A 1 FOR 30 REVERSE STOCK SPLIT AND A
30-FOR-1 FORWARD STOCK SPLIT OF OUR COMMON STOCK.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Proxy Statement that are not
statements of historical fact may constitute "forward-looking statements". These
statements are subject to risks and uncertainties, as described below.
Examples of forward-looking statements include, but are not limited to:
(i) projections of revenues, income or loss, earnings or loss per share, capital
expenditures, the payment or non-payment of dividends, capital structure and
other financial items, (ii) statements of plans and objectives of our management
or board, including plans or objectives relating to our products or services,
(iii) statements of future economic performance, and (iv) statements of
assumptions underlying the statements described in (i), (ii) and (iii).
Forward-looking statements can often be identified by the use of forward-looking
terminology, such as "believes," "expects," "may," "will," "should," "could,"
"intends," "plans," "estimates" or "anticipates," variations thereof or similar
expressions.
Forward-looking statements are not guarantees of future performance or
results. They involve risks, uncertainties and assumptions. Our future results
of operations, financial condition and business operations may differ materially
from those expressed in these forward-looking statements. Investors are
cautioned not to put undue reliance on any forward-looking statement.
There are a number of factors that could cause actual results to differ
materially from those discussed in the forward-looking statements, including
those factors described below. Other factors not identified herein could also
have such an effect. Among the factors that could cause actual results to differ
materially from those discussed in the forward-looking statements are the
following:
o competition;
o our ability to retain senior management and other key personnel;
o changes in general economic conditions.
21
PROPOSAL 2
ELECTION OF DIRECTORS
The board presently consists of four (4) directors, whose terms of office
will expire upon the election of their successors at the Annual Meeting. The
board has nominated each of the current directors of Ambassador for re-election
at the Annual Meeting. The stockholders will be asked to elect each of the
nominees listed below as a director for a term of one year and until his or her
successor is elected and qualified, or until his or her earlier resignation or
removal. Management expects all of such nominees to be available for election,
but in the event that any of them should become unavailable, the persons named
in the accompanying Proxy Statement will vote for a substitute nominee or
nominees if so designated by the board. The four (4) nominees receiving the
greatest number of votes will be elected directors at the Annual Meeting.
Nominees for Election as Directors
A Director of
Name Age Ambassador Principal Occupation(1)
Since
Robert A. Laudicina 62 1986 President, Treasurer
Arthur D. Stevens 78 1963 Consultant
Ann W. Stevens 61 1996 Real Estate Broker
John A. Makula 54 2000 Vice President, Secretary(2)
- --------------
(1) Unless otherwise indicated, each director has had the same principal
occupation during the last five years. Robert A. Laudicina and John A. Makula
have been full-time employees of Ambassador for more than five years.
(2) Prior to being elected Secretary in May, 2000, Mr. Makula was Assistant
Secretary of Ambassador.
(3) Arthur D. Stevens, Chairman, and Ann M. Stevens, Director, are husband
and wife. No other family relationship exists between any of the executive
officers and directors listed above.
Meetings of the Board of Directors
There were two meetings of the board during the last fiscal year and one
meeting to date during the current Fiscal Year. Each director attended all
meetings of the board during the last fiscal year and current Fiscal Year.
Ambassador does not have standing audit, compensation or nominating committees,
or committees performing similar functions.
Stockholder Nomination Policy
The board of directors performs the functions of a nominating committee
and selects all nominees for election at shareholder meetings. The board of
directors does not believe a separate nominating committee is necessary as the
Company is not currently required to have a separate committee and the full
board of directors desires to participate in the discussions regarding the
structure, qualifications and needs of the board. The members of the board of
directors who participate in the nomination process are Robert A. Laudicina,
Arthur D. Stevens, Ann W. Stevens and John A. Makula. Applying the definition of
the term "independent director" under Rule 4200(a)(15) of the National
Association of Securities Dealers'
22
listing standards as permitted under the requirements of paragraph (d)(3)(iv) of
Item 7 of Schedule 14A, all of the directors are not independent.
The board has not established specific minimum qualifications for
recommended nominees, but as a best practice it does evaluate recommended
nominees for directors based on their character, judgment, independence,
financial or business acumen, diversity of experience, ability to represent and
act on behalf of all stockholders, as well as the needs of the board of
directors. The board of directors does not have a policy of considering
stockholder nominations for inclusion in the Company's proxy statement sent to
stockholders in connection with the election of directors. The board of
directors does not believe such a policy is necessary at this time as it has not
received requests from stockholders to submit nominations to the board of
directors. The board of directors will continue to monitor this and evaluate
whether such a policy is desirable.
Communications with Directors
The board of directors does not have a formal process by which
shareholders may send communications to the full board of directors or
individual directors, but stockholders can mail communications to the board or
individual members at the Company's offices at 5-30 54th Avenue, Long Island
City, NY 11101, attention Secretary. The Secretary will forward such
communications to the board or the specific director. Stockholders are also
permitted to communicate with the board of directors at the Company's annual
meeting of stockholders. The board is of the view that this process is
sufficient for allowing stockholders to communicate with the board.
The Company does not currently have a formal policy regarding directors'
attendance at the annual meeting of stockholders, but historically all members
of the board have attended such meetings. All members of the board attended the
2003 annual meeting of stockholders.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires Ambassador's directors,
executive officers and persons who beneficially own more than ten percent of our
Common Stock to file reports of beneficial ownership and reports of changes in
beneficial ownership with the SEC and to provide us copies. Based solely upon a
review of the copies of such reports provided to us and written representations
from directors and executive officers, we believe that all applicable Section
16(a) filing requirements for the fiscal year ended May 29, 2003 have been met.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE NOMINEES FOR
DIRECTOR PRESENTED IN PROPOSAL 2.
INDEPENDENT AUDITORS
Representatives of Withum, Smith & Brown are expected to be present at the
Annual Meeting to make any statement they may desire and to respond to
appropriate questions concerning the audit report.
Audit Fees [describe aggregate fees billed in each of the last two fiscal years
for financial statements and review of financial statements included in 10-QSB]
23
Audit-Related Fees
The aggregate audit-related fees billed by Withum, Smith & Brown for
services rendered to the Company for fiscal years ended May 31, 2002 and May 29,
2003 were approximately $25,425 and $32, 704 respectively.
Tax Fees
The aggregate tax fees billed by Withum, Smith & Brown for services
rendered to the Company for each of the fiscal years ended May 31, 2002 and May
29, 2003 were $6,500 and $3,300 (this amount may increase as the tax returns
have not been completed for 2003) respectively.
All Other Fees
The aggregate fees billed by Withum, Smith & Brown for services rendered to
us other than the services described above under "Audit Fees" for the fiscal
year ended May 29, 2003 were $3,300 which included partial preparation of tax
returns for the fiscal year ended May 29, 2003, and miscellaneous clerical
expenses. There were no fees incurred for financial information systems design
and implementation.
The board of directors has considered whether the provision of non-audit
services is compatible with maintaining the independence of Withum, Smith &
Brown. See "BOARD OF DIRECTORS AUDIT REPORT".
BOARD OF DIRECTORS AUDIT REPORT
Ambassador does not have a separate audit committee. In fulfilling its
responsibilities, the board of directors reviewed and discussed Ambassador's
audited financial statements for the fiscal year ended May 29, 2003 with our
management and independent auditors. The board also discussed with Withum, Smith
& Brown, our independent auditors, the matters required to be discussed by
Statement on Auditing Standards No. 61, "Communication with Audit Committees."
In addition, the board received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," and discussed with the
independent auditors their independence in relation to us and our management.
The board of directors also considered the non-audit services provided to us by
the independent auditors and concluded that such services were compatible with
maintaining their independence.
Based upon the reviews and discussions referred to above, the board of
directors recommended that the audited financial statements be included in our
Annual Report on Form 10-KSB for the fiscal year ended May 29, 2003 filed with
the SEC.
Submitted by the Board of Directors
Robert A. Laudicina
Arthur D. Stevens
Ann W. Stevens
John A. Makula
24
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of Ambassador are as follows:
Name Age Position(1)
---- --- --------
Robert A. Laudicina 62 President, Treasurer
John A. Makula (2) 54 Vice President, Secretary
(1) Executive officers serve at the pleasure of the board. Unless otherwise
indicated, each executive officer has had the same principal occupation during
the last five years. The business address and phone number of each executive
officer is Ambassador Food Services Corporation, 5-30 54th Avenue, Long Island
City, NY 11101, and the telephone number is (718) 361-2512.
(2) Mr. Makula was elected Assistant Secretary on April 12, 2000 and
elected Vice President, Secretary and Director in May 2000. Prior to April 12,
2000, Mr. Makula was Assistant Secretary of Ambassador, a position he still
holds.
EXECUTIVE COMPENSATION
Officer Compensation
The following table sets forth certain summary information concerning the
compensation paid and awarded for the years indicated to Ambassador's chief
executive officer and to each executive officer of Ambassador who received
compensation in excess of $100,000 for services rendered in all capacities to
Ambassador and its subsidiaries during Ambassador's fiscal year ended May 29,
2003.
Summary Compensation Table
Long-Term
Annual Compensation Compensation
Name and Restricted Stock All Other
Principal Position Year Salary($) Bonus($)(1) Award ($)(2) Compensation($)
- ------------------ ---- --------- ----------- ------------ ---------------
Robert A. Laudicina 2002 127,302
2003 148,936
(1) Includes bonuses received in the reported year. The payment of bonuses
is at the discretion of the board.
Director Compensation
Ambassador currently does not pay each non-employee director any fee for
each board meeting attended in person or for each board meeting attended by
telephone. Directors are reimbursed for certain reasonable expenses incurred in
attending meetings. Officers of Ambassador do not receive any additional
compensation for serving as members of the board.
25
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of May 29, 2003
with respect to the beneficial ownership of the Common Stock by (a) each
beneficial owner of more than 5% of the outstanding shares thereof, (b) each
director and each nominee to become a director, (c) each executive officer named
in the Summary Compensation Table and (d) all executive officers, directors and
nominees to become directors of Ambassador as a group.
Number of Percent of Common
Shares Beneficially Stock
Name of Beneficial Owner Owned(1) Outstanding(2)
- ------------------------ ------------------- -----------------
Arthur D. Stevens 191,444(3) 26.1%
1901 West 69th Street
Shawnee Mission, KS 66208
Thomas G. Berlin 235,409 32.0%
c/o Berlin Financial Ltd.
2311 Chagrin Blvd., Suite 275
Beachwood, OH 44122
George T. Terris 54,000 7.3%
7014 Willow Street, Apt. 9
Sarasota, FL 34243
George F. Crawford 51,761 7.0%
10110 Fontana Lane
Overland Park, KS 66207
Robert A. Laudicina 26,265 3.6%
c/o Ambassador Food Services Co.
5-30 54th Avenue
Long Island City, NY 11101
John A. Makula 9,750 1.3%
c/o Ambassador Food Services Co.
5-30 54th Avenue
Long Island City, NY 11101
Ann W. Stevens 1,000 0.1%
1901 West 69th Street
Shawnee Mission, KS 66208
(1) Unless otherwise moderated, each holder has sole noting and disposition
power with respect to the shares listed.
(2) Percentages are determined in accordance with Rule 13d-3 under the
Exchange Act.
(3) Does not include 91,400 shares beneficially owner by Mr. Steven's adult
children, in which shares he disclaims any beneficial interest.
26
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into a consulting agreement with Arthur D. Stevens, a
stockholder and former chief executive officer. The agreement, originally
requiring payments of $100,482 per annum, was informally amended to a total per
annum consulting fee of $91,000. The consulting agreement terminates in May,
2009. The expense relating to that agreement at May 29, 2003, and May 30, 2002,
was $91,000 and $102,000, respectively.
In connection with the settlement of debt, the Company signed promissory
notes with stockholders and management of the Company for loans in the aggregate
amount of $95,000. These notes are payable $30,000 on demand after October, 2003
and $65,000 on demand after April, 2007 and are subordinated to Ambassador's
principal lender. Interest accrues on the notes at a rate of ten percent (10%)
per year, which is payable in semiannual installments. The loans were from
Thomas G. Berlin ($65,000), Anthony Zaccario ($15,000), Robert L. Laudicina
($10,000) and John Makula ($5,000).
FUTURE STOCKHOLDER PROPOSALS
We currently anticipate that for our 2004 annual meeting of stockholders
("2004 Annual Meeting") will be held on November 29, 2004. Any appropriate
stockholder proposal to be presented for action at the 2004 Annual Meeting must
be received by Ambassador by August 1, 2004 for inclusion in the proxy material
relating to such meeting.
GENERAL
Solicitation of Proxies
In addition to the solicitation of proxies from stockholders by use of the
mails, it is expected that a limited number of employees of Ambassador, without
additional compensation, may solicit proxies from stockholders by telephone,
telegraph and personal visits. It is expected that banks, brokerage houses and
others will be requested to forward the soliciting material to their principals
and obtain authorization for the execution of proxies. All costs of
solicitation, including the costs of preparing, assembling and mailing this
Proxy Statement and all papers which now accompany or may hereafter supplement
the same, as well as the reasonable out-of-pocket expenses incurred by the
above-mentioned banks, brokerage houses and others, will be borne by Ambassador.
ADDITIONAL INFORMATION
Ambassador is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports and other information with the
SEC. Ambassador has filed a Schedule 13E-3 with the SEC in connection with the
proposed Transaction. As permitted by the rules and regulations of the SEC, this
Proxy Statement does not contain all of the information set forth in the
Schedule 13E-3. The Schedule 13E-3, including exhibits and other filings made by
Ambassador as described above, may be inspected without charge, and copies may
be obtained at prescribed rates, at the public reference facility maintained by
the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Copies of such materials can also be obtained upon payment of the SEC's
prescribed rates from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the SEC's public reference rooms by calling the SEC at
1-800-SEC-0330. The SEC maintains a web site, which contains reports, proxy and
information statements and other information regarding registrants that, like
Ambassador, file electronically with the SEC, at the following address:
http://www.sec.gov.
27
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superceded
for purposes of this Proxy Statement to the extent that a statement contained in
this Proxy Statement or in any subsequently filed document that also is deemed
to be incorporated by reference herein modifies or supercedes such statement.
Any such statement so modified or superceded shall not be deemed, except as so
modified or superceded, to constitute a part of this Proxy Statement.
The following documents filed with the SEC by Ambassador have been
incorporated into this Proxy Statement by reference:
Ambassador hereby incorporates by reference (a) the financial statements
and the notes thereto contained on pages F1 through F14 of Ambassador's Annual
Report included as an Annex to this Proxy Statement, (b) the report of
independent certified public accountants thereon contained on page F1 of the
Annual Report, (c) Management's Discussion and Analysis or Plan of Operation
contained on pages 6 through 11 of the Annual Report, (d) the Financial
Statements and notes thereto contained on pages 3 through 9 of Ambassador's
Quarterly Reports included as an Annex to this Proxy Statement and (e)
Management's Discussion and Analysis or Plan of Operation contained on pages 9
through 12 of the Quarterly Reports.
ANNEXES
The following documents are being delivered to Ambassador's stockholders
together with this Proxy Statement.
Annual Report to stockholders for the fiscal year ended May 29, 2003.
Quarterly Report on Form 10-QSB for the quarter ended August 28, 2003.
Quarterly Report on Form 10-QSB for the quarter ended November 27, 2003.
BY ORDER OF THE BOARD OF DIRECTORS
----------------------------------
President
and Chief Executive Officer
DATE:
------------------------
28
APPENDIX A
PROPOSED AMENDMENT TO ARTICLE IV OF
THE COMPANY'S CERTIFICATE OF INCORPORATION
TO EFFECT THE PROPOSED REVERSE STOCK SPLIT
AND FORWARD STOCK SPLIT
RESOLVED, that Article IV of the Company's Certificate of Incorporation is
hereby amended by adding at the end of Article IV the following provisions:
Reverse Stock Split
and Forward Stock Split
At 8:00 p.m. (Central time) on the effective date of the amendment adding
these paragraphs to Article IV ("Effective Date"), each share of the
Corporation's Common Stock, $1.00 par value ("Common Stock"), held of record as
of 8:00 p.m. (Central time) on the Effective Date shall be and hereby is
automatically reclassified and converted, without further action, into
one-thirtieth (1/30) of a share of the Corporation's Common Stock. No fractions
of shares shall be issued to any Fractional Holder (as defined below), and from
and after 8:00 p.m. (Central time) on the Effective Date, each Fractional Holder
shall have no further interest as a stockholder in respect of such fractions of
shares, and in lieu of receiving such fractions of shares shall be entitled to
receive, upon surrender of the certificate or certificates representing shares
of Common Stock held of record by such Fractional Holder, an amount equal to the
fair value of such fractional share as determined by the Board of Directors of
the Corporation. A "Fractional Holder" is defined as a holder of record of fewer
than 30 shares of Common Stock as of 8:00 p.m. (Central time) on the Effective
Date, who would be entitled to less than one whole share of Common Stock in
respect of such shares as a result of such reclassification and conversion.
At 8:01 p.m. (Central time) on the Effective Date, each share of the
Corporation's Common Stock and any fraction thereof held by a holder of record
of one or more shares of Common Stock as of 8:01 p.m. (Central time) on the
Effective Date shall be and hereby is automatically reclassified and converted,
without further action, into the Corporation's Common Stock, on the basis of
thirty (30) new shares of Common Stock for each whole share of Common Stock.
A-1
Please Complete, Sign, Date and Return this Proxy in the Enclosed Envelope.
PROXY
Ambassador Food Services Corporation
5-30 54th Avenue
Long Island, New York 11101
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert A. Laudicina and John A. Makula, and
each of them, jointly and severally, with full power of substitution, as proxies
for the undersigned at the Annual Meeting of Stockholders of Ambassador Food
Services Corporation, to be held at 5-30 54th Avenue, Long Island, New York, on
____________, 2004, at 11:00 a.m. Eastern time, and at any adjournment, to vote
the shares of common stock the undersigned would be entitled to vote, if
personally present, upon the election of directors, the proposal stated on this
Proxy and any other matter properly brought before the meeting, all as set forth
in the _____________________, 2004 Proxy Statement.
Unless otherwise marked, this Proxy will be deemed marked "For" on Proposal
1 and marked "Granted" on Proposal 2, and voted accordingly.
----- -----
[Place shareholder label here]
----- -----
[X] Please mark your
votes as in this
example.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" ON PROPOSAL 1 AND "GRANTED" ON PROPOSAL 2
FOR AGAINST ABSTAIN
1. Approval of the proposed amendment to the |_| |_| |_|
Certificate of Incorporation to effect a
1-for-30 reverse stock split of the
outstanding common stock followed by a
30-for-1 forward stock split.
2. Authority granted to or withheld from the Authority Authority
proxies to vote for the following
nominees as Directors (or substitute GRANTED to vote WITHHELD to
nominee(s) designated by the Board of for all nominees Vote for all
Directors if any of them becomes nominees
unavailable): Robert A. Laudicina,
Arthur D. Stevens, Ann W. Stevens and |_| |_|
John A. Makula.
(INSTRUCTIONS: To withhold authority to
vote for any individual nominee, line
through that nominee's name in the list
above.
This Proxy confers discretionary authority to vote upon certain matters, as
described in the accompanying Proxy Statement.
SIGNATURE_______________ DATE:____, 2004 SIGNATURE_____________ DATE:____, 2004
(Note: Please sign exactly as name appears on this Proxy. Executors,
administrators, trustees, etc., should so indicate when signing,
giving their full title as such. If a signer is a corporation or other
entity, execute in full corporation or entity name by authorized
officer. If shares are held in the name of two or more persons, all
should sign.)