Exhibit (a)(1)(A)
Offer To Purchase
JERRY'S FAMOUS DELI, INC.
OFFER TO PURCHASE FOR CASH
UP TO 600,000 SHARES
OF COMMON STOCK
AT $5.30 NET PER SHARE
The offer and withdrawal rights will expire at 5:00 p.m., California time,
on June 29, 2001, unless the offer is extended.
Jerry's Famous Deli, Inc., a California corporation (the "Company"),
invites its shareholders to tender shares of its common stock, no par value per
share ("Common Stock"), to the Company at a price of $5.30 per share, in cash,
upon the terms and conditions set forth in this Offer to Purchase, the related
Letter of Transmittal and certain relevant documents (which together constitute
the "Offer"). The Company will pay $5.30 per share, net to the seller in cash,
for up to 600,000 shares validly tendered and not withdrawn, upon the terms and
subject to the conditions of the Offer. The Company reserves the right to amend
or waive any one or more terms or conditions of the Offer including amending the
number of shares to be purchased and the offer price.
The Offer is not conditioned on any minimum number of shares being tendered.
The Offer is subject, however, to certain conditions.
The Common Stock is quoted on the Nasdaq SmallCap Market ("Market")
under the symbol "DELI." On April 2, 2001, the last full trading day on the
Nasdaq prior to the announcement by the Company of its intention to make the
Offer, the closing price per share was $3.75. Shareholders are urged to obtain
current market quotations for the Common Stock.
An independent committee of the Board of Directors of the Company has
approved the Offer. However, shareholders must make their own decisions whether
to tender their shares of Common Stock and, if so, how many shares to tender.
Neither the Company nor its Board of Directors makes any recommendation to any
shareholder as to whether to tender or refrain from tendering shares of Common
Stock.
The Date of this Offer to Purchase is April 27, 2001
SUMMARY TERM SHEET
This summary term sheet is provided for your convenience. The
information contained in this summary term sheet is qualified in its entirety by
the more detailed descriptions and explanations contained in this Offer to
Purchase and the related Letter of Transmittal. We urge you to carefully read
the entire Offer to Purchase and related Letter of Transmittal prior to making
any decision regarding whether to tender your shares.
Who is offering to purchase my shares of Common Stock of the Company?
Jerry's Famous Deli, Inc. is offering to repurchase your shares of Common Stock.
See the INTRODUCTION and "THE TENDER OFFER--Certain Information Concerning the
Company."
How many shares is the Company seeking to purchase, at what price, and do I have
to pay any brokerage or similar fees to tender?
The Company is offering to purchase up to 600,000 shares of Jerry's Famous Deli,
Inc. Common Stock at a price of $5.30 per share, net to the seller, in cash,
without interest. As of April 2, 2001, the last trading day prior to the
announcement of the Company's intention to commence the offer, the closing price
of a share of Common Stock of Jerry's Famous Deli, Inc. on the Nasdaq SmallCap
Market was $3.75. If you are the record owner of your shares and you tender
shares in the offer, you will not have to pay any brokerage or similar fees.
However, if you own your shares through a broker or other nominee, and your
broker tenders your shares on your behalf, your broker or nominee may charge you
a fee for doing so. You should consult your broker or nominee to determine
whether any charges will apply. See the "INTRODUCTION" and "THE TENDER
OFFER--Price Range of the Shares."
How can I make sure how many shares I own?
The number of shares held by each shareholder of record is determined by the
records maintained by U.S. Stock Transfer Corporation, the Company's transfer
agent. On February 9, 2000, the Company effected a one-for-three reverse stock
split for the purpose of qualifying the Company's stock for listing on the
Nasdaq SmallCap Market. Shareholders were required at that time to tender their
original stock certificates in order to receive new stock certificates
reflecting the correct number of shares held by each shareholder as a result of
the reverse stock split. Any shareholder who did not tender a stock certificate
issued prior to February 9, 2000 for a new stock certificate will show a number
of shares on the old stock certificate which does not reflect the reverse stock
split. Each shareholder who receives this Offer can review the number of shares
printed on the shareholder name label which appears on the Letter of Transmittal
which accompanies this Offer, which is the number of shares shown on the records
of U.S. Stock Transfer Corporation as owned of record as of April 6, 2001 by the
shareholder.
Why is the Company making this offer?
The Company is making this offer to provide value and liquidity to the public
shareholders of the Company at a purchase price higher than the market price for
the Common Stock prior to the announcement of the Offer, and as a step towards
taking the Company private. If the offer is completed and the affiliates of the
Company thereby increase their percentage ownership of the total outstanding
Common Stock of the Company to at least 90% of the outstanding Common Stock,
some or all of the affiliates of the Company may, but are not obligated to,
consummate a "short-form" merger of a newly formed entity owned solely by such
affiliates with the Company, which would not require the approval of the
Company's non-affiliated shareholders. In that event, the affiliates would
acquire beneficial ownership of all of the shares of the Company and all shares
of the Company that are not purchased in this offer would be exchanged for an
amount in cash per share of Common Stock equal to the highest price per share
paid pursuant to this offer. If this offer is completed and the affiliates of
the Company do not own at least 90% of the Company's shares, the affiliates may,
but are not obligated to, seek to complete a "long-form" merger of the Company
with an entity owned solely by the affiliates, which would require a fairness
hearing under California law. In a long-form merger, the amount and form of
consideration paid for shares that are not purchased in the offer would be
negotiated with an independent committee of the board of directors of the
Company. The consideration could be an amount in cash per share equal to the
highest price per share paid pursuant to this offer, or a different form or
amount of consideration including cash, common or preferred stock, promissory
notes, or other securities. See the "INTRODUCTION" and "SPECIAL
FACTORS--Purposes of the Offer; Plans for the Company."
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Is this a first step in a going-private transaction?
The Company's current affiliates, including the three largest shareholder groups
controlled by: (a) Isaac Starkman and his family, (b) Jonathan Mitchell, acting
on behalf of the Edward D. and Anna Mitchell Family Foundation and Mitchell
Hospitality Investments, and (c) Kenneth Abdalla and his affiliates, will
increase their ownership interest in the Company if the offer is completed. If a
sufficient number of shareholders of the Company tender their shares, the Common
Stock will no longer be quoted on the Nasdaq SmallCap Market and the Company
intends to terminate the registration of the Common Stock under the Securities
Exchange Act of 1934, as amended. If a sufficient number of non-affiliated
shareholders of the Company do not tender their shares, the affiliates of the
Company may, but are not obligated to, seek to effect a merger whereby the
Company will become a privately-held company and its Common Stock will no longer
be quoted on the Nasdaq SmallCap Market or registered under the Securities
Exchange Act of 1934, as amended. If the offer is completed, in connection with
any subsequent merger or other business combination, the current affiliates of
the Company intend to continue to participate in the ownership of the Company.
See the "INTRODUCTION," "SPECIAL FACTORS-- Purposes of the Offer; Plans for the
Company" and "THE TENDER OFFER-- Effect of the Offer on the Market for the
Shares; Nasdaq Stock Market Listing; Exchange Act Registration; Margin
Regulations."
Is the Company's financial condition relevant to my decision on whether to
tender into the Offer?
Yes. As a California corporation, the Company is required to have retained
earnings sufficient to fund the repurchase of it's common stock. As of December
31, 2000, the Company had retained earnings of approximately $2.9 million, and
as of March 31, 2001, the Company expects to report retained earnings of
approximately $3.6 million, which is sufficient to support the repurchase of the
maximum 600,000 shares sought in this tender offer. If, for any reason, the
Company does not have sufficient retained earnings to repurchase all of the
shares that are tendered, up to 600,000 shares, the Company may not complete the
repurchase, or may reduce the number of shares that are repurchased, on a pro
rata basis among all shareholders who have tendered their shares, to an amount
that may be purchased by the Company based on the amount of its retained
earnings on the date of repurchase.
What are the most important conditions to the Offer?
The most important conditions to the offer are the following:
The Company must have sufficient retained earnings to repurchase all shares
repurchased in the Offer as of the date the shares are repurchased. The Company
anticipates that it will have sufficient proceeds based upon the earnings it
reported for the year ended December 31, 2000 and the earnings it expects to
report for the quarter ended March 31, 2001. If, for any reason, the Company
does not have sufficient retained earnings to repurchase all of the shares that
are tendered up to 600,000 shares, the Company may not complete the repurchase,
or may reduce the number of shares that are repurchased, on a pro rata basis
among all shareholders who have tendered their shares, to an amount that may be
purchased by the Company based on the amount of its retained earnings on the
date of repurchase.
No person, government or governmental authority shall threaten or institute an
action or proceeding which challenges or seeks to make illegal, delay, restrain
or prohibit the Company from making the offer for or purchasing the Company's
shares or seeks to obtain damages as a result thereof.
No change or prospective change shall have occurred or been threatened in the
properties, assets, condition, operations or other elements of the business of
the Company which, in the sole judgment of the Board of Directors of the
Company, is or may be materially adverse to the value of the Company.
A more detailed discussion of the conditions to consummation of the offer may be
found in the "INTRODUCTION" and "THE TENDER OFFER--Certain Conditions to the
Offer."
Does the Company have the financial resources to pay for the shares?
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Yes. The Company has retained cash flow from operations and an existing line of
credit which are sufficient to provide all financial resources necessary to
repurchase the shares sought in this Offer. See the "INTRODUCTION" and "THE
TENDER OFFER--Source and Amount of Funds."
How long do I have to decide whether to tender into the Offer?
You have until the expiration date of the offer to tender. The offer currently
is scheduled to expire at 5:00 p.m., California time, on June 29, 2001. If the
offer is extended, the Company will issue a press release announcing the
extension on or before 9:00 a.m. California time on the first business day
following the date the offer was scheduled to expire. See "THE TENDER
OFFER--Terms of the Offer; Expiration Date." The Company does not currently
intend to extend the offering period, although the Company reserves the right to
do so for up to thirty (30) days. See "THE TENDER OFFER--Terms of the Offer;
Expiration Date."
How do I accept the Offer and tender my shares?
To tender your shares, you must completely fill out the enclosed Letter of
Transmittal and deliver it, along with your share certificates and any other
documents required by the Letter of Transmittal, to U.S. Stock Transfer
Corporation, the depositary, prior to the expiration of the offer. If your
shares are held in street name (i.e., through a broker, dealer or other
nominee), they can be tendered by your nominee through The Depository Trust
Company. If you cannot deliver all necessary documents to the depositary in
time, you may be able to complete and deliver to the depositary, in lieu of the
missing documents, the enclosed Notice of Guaranteed Delivery, provided you are
able to comply fully with its terms. See "THE TENDER OFFER--Procedures for
Accepting the Offer and Tendering Shares."
If I accept the Offer, when will I get paid?
If the conditions to the offer are satisfied and the Company consummates the
offer and accepts your shares for payment, you will receive payment for the
shares you tendered as promptly as practicable following the expiration of the
offer. See "THE TENDER OFFER--Acceptance for Payment and Payment."
Can I withdraw my previously tendered shares?
You may withdraw a portion of or all your tendered shares by delivering written,
telegraphic or facsimile notice to the depositary at any time prior to the
expiration of the offer. Further, if the Company has not agreed to accept your
shares for payment within 40 business days of the commencement of the offer, you
can withdraw them at any time after that 40-business day period until the
Company does accept your shares for payment. Once shares are accepted for
payment, they cannot be withdrawn. See "THE TENDER OFFER--Withdrawal Rights."
What does the Board of Directors of the Company think of this Offer?
An independent committee of the Company's Board of Directors has approved this
offer and determined the price offered for the shares in this Offer. The Mentor
Group, an independent valuation firm engaged by the Independent Committee, has
issued a fairness opinion concluding that the price offered by the Company is
fair from a financial point of view to the shareholders. See "SPECIAL
FACTORS--Fairness of the Offer."
If I do not tender but the Offer is successful, what will happen to my shares?
As indicated above, if the offer is completed, the Company's shares may no
longer be eligible to be traded on the Nasdaq SmallCap Market or any other
securities exchange, and the Company may cease making filings with the SEC or
otherwise cease being required to comply with the SEC's rules relating to
publicly held companies. In any event, the number of shareholders and the number
of shares of Common Stock that are still in the hands of the public may be so
small that there may be no active public trading market (or, possibly, any
public trading market) for the shares. Also, upon completion of the offer, if
the Company's affiliates own at least 90% of the outstanding shares of Common
Stock, the Company may, but is not obligated to, consummate a short-form merger
transaction in which all shares of the Company that were not purchased in this
offer will be exchanged for an amount in cash per share equal to the highest
price per share paid pursuant to the offer. If the short-form merger takes
place,
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shareholders who do not tender in the offer will receive the same amount
of cash per share that they would have received had they tendered their shares
in the offer, subject to their right to pursue dissenters' rights, under
California law. Therefore, if a short-form merger takes place and you do not
perfect your appraisal rights, the only difference to you between tendering your
shares and not tendering your shares is that you will be paid earlier if you
tender your shares. Alternatively, upon completion of the offer, if the
Company's affiliates do not own at least 90% of the outstanding Common Stock,
the Company may, but is not obligated to, consummate a long-form merger
transaction in which all shares of Common Stock that were not purchased in this
offer will be exchanged for an amount and form of consideration to be negotiated
with the Independent Committee of the Board of Directors of the Company. The
consideration could be an amount in cash per share equal to the highest price
per share paid pursuant to the offer or a different form or amount of
consideration. See "SPECIAL FACTORS--Purposes of the Offer; Plans for the
Company" and "THE TENDER OFFER--Effect of the Offer on the Market for the
Shares; Nasdaq Stock Market; Exchange Act Registration; Margin Regulations."
Are appraisal rights available in the Offer?
Appraisal rights are not available in the offer. Following the offer, if any
merger occurs, appraisal rights most likely will be available to those
shareholders who comply with the applicable provisions of California law. See
"SPECIAL FACTORS--Rights of Shareholders in the Offer and any Merger."
What are the federal income tax consequences of the proposed transactions?
The receipt of cash in the offer in exchange for shares of Common Stock of the
Company will be a taxable transaction for U.S. federal income tax purposes and
may also be a taxable transaction under applicable state, local or foreign
income or other tax laws. The receipt of cash in any subsequent merger likewise
will be a taxable transaction. You should consult your tax advisor about the
particular effect the proposed transactions will have on your shares. See the
"INTRODUCTION" and "SPECIAL FACTORS--Certain United States Federal Income Tax
Consequences."
What is the market value of my shares as of a recent date?
On April 2, 2001, the last trading day before the announcement of the intention
to commence the offer, the shares of Common Stock closed on the Nasdaq SmallCap
Market at $3.75 per share. Please obtain a recent quotation for your shares
prior to deciding whether or not to tender. See "THE TENDER OFFER--Price Range
of the Shares."
Whom can I call with questions?
You can call D. F. King & Co., Inc., at (800) 848-3094 (toll-free) or (212)
269-5550 (collect) with any questions you may have. D. F. King & Co., Inc. is
acting as the information agent for the offer. See the back cover of this Offer
to Purchase.
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TABLE OF CONTENTS
INTRODUCTION 2
SPECIAL FACTORS 5
1. Background of the Offer; Contacts with the Company................ 5
2. Fairness of the Offer............................................. 7
3. Purpose and Structure of the Offer; Plans for the Company......... 8
4. Rights of Shareholders in the Offer and Any Merger................ 10
5. Transactions, Negotiations and Agreements......................... 12
6. Interest in Securities of the Company............................. 13
7. Certain United States Federal Income Tax Consequences............. 14
THE TENDER OFFER 16
1. Terms of the Offer; Expiration Date............................... 16
2. Acceptance for Payment and Payment................................ 17
3. Procedures for Accepting the Offer and Tendering Shares........... 18
4. Withdrawal Rights................................................. 21
5. Certain Information Concerning the Company........................ 21
6. Price Range of the Shares......................................... 22
7. Certain Information Concerning the Company........................ 22
8. Source and Amount of Funds........................................ 24
9. Effect of the Offer on the Market for the Shares; Nasdaq Stock
Market Listing; Exchange Act Registration; Margin Regulations..... 24
10. Certain Conditions to the Offer................................... 25
11. Certain Legal Matters; Litigation; Required Regulatory Approvals.. 27
12. Certain Fees and Expenses......................................... 28
13. Miscellaneous..................................................... 28
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IMPORTANT INFORMATION
Any shareholder desiring to tender all or any portion of their shares
of Common Stock of the Company should either:
(i) complete and sign the Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions in the Letter of Transmittal, have
the shareholder's signature thereon guaranteed if required by instruction 1 to
the Letter of Transmittal, mail or deliver the Letter of Transmittal (or such
facsimile), or, in the case of a transfer effected pursuant to the book-entry
transfer procedures set forth in "THE TENDER OFFER--Procedures for Accepting the
Offer and Tendering Shares," transmit an Agent's Message (as defined herein),
and any other required documents to the Depositary and either deliver the
certificates for the shares along with the Letter of Transmittal (or such
facsimile) or deliver the shares pursuant to the book-entry transfer procedures
set forth in "THE TENDER OFFER--Procedures for Accepting the Offer and Tendering
Shares;" or
(2) request the shareholder's broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for the shareholder. A
shareholder whose shares of Common Stock of the Company are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact its broker, dealer, commercial bank, trust company or other nominee if
the shareholder desires to tender its shares.
A shareholder who desires to tender its shares of Common Stock of the
Company and whose certificates representing its shares are not immediately
available or who cannot comply with the procedures for book-entry transfer on a
timely basis may be eligible to tender its shares by following the procedures
for guaranteed delivery set forth in "THE TENDER OFFER--Procedures for Accepting
the Offer and Tendering Shares."
Questions and requests for assistance may be directed to the
Information Agent at its address and telephone number set forth on the back
cover of this Offer to Purchase. Additional copies of this Offer to Purchase,
the Letter of Transmittal, the Notice of Guaranteed Delivery and other related
materials may be obtained from the Information Agent.
1
To: All Holders of Shares of Common Stock of Jerry's Famous Deli, Inc.
INTRODUCTION
Jerry's Famous Deli, Inc. (the "Company"), a California corporation,
hereby offers to purchase up to 600,000 of the shares of its Common Stock, no
par value (the "Shares"). The Company will purchase all shares tendered in this
Offer at a price of $5.30 per Share, net to the seller in cash, without interest
(the "Offer Price"), upon the terms and subject to the conditions set forth in
this Offer to Purchase and in the related Letter of Transmittal (which, together
with any amendments or supplements thereto, constitute the "Offer").
Tendering shareholders whose Shares are registered in their own name
who tender directly to the Depositary (as defined herein) will not be obligated
to pay brokerage fees or commissions or, except as set forth in Instruction 6 of
the Letter of Transmittal, transfer taxes on the purchase of Shares by the
Company pursuant to the Offer. Shareholders who hold their Shares through a bank
or broker should check with such institution as to whether it will charge any
service fees. However, any tendering shareholder or other payee who fails to
complete and sign the Substitute Form W-9 included in the Letter of Transmittal
may be subject to a required backup federal income tax withholding of 31% of the
gross proceeds payable to such shareholder or other payee pursuant to the Offer.
The Company will pay all fees and expenses of U.S. Stock Transfer Corporation,
as Depositary (the "Depositary"), and D. F. King & Co., Inc., as Information
Agent (the "Information Agent"), incurred in connection with the Offer. See "THE
TENDER OFFER--Certain Fees and Expenses."
The purpose of the Offer is to provide value and liquidity to the
public shareholders (as used herein, the term "Public Shareholders" refers to
shareholders other than the "Control Shareholders," as defined below) at a share
repurchase price substantially above the market price immediately prior to the
public announcement of the Company's intention to conduct a tender offer, and to
provide a means for the Company's controlling shareholders to take the Company
private, if they determine to do so. The controlling shareholders have been
negotiating regarding the privatization of the Company, but there are at present
significant differences of opinion among them as to the future strategy and
operations of the Company which could delay or prevent an agreement among them
to complete a going private transaction. Nonetheless, if a sufficient number of
the Company shareholders tender their Shares in the Offer, the Shares will no
longer be quoted on the Nasdaq SmallCap Market and the Company intends to
terminate the registration of the Shares under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). It should be noted that the Company
currently has only 132 shareholders of record, and is therefore currently
eligible to deregister the Shares under the Exchange Act.
The control shareholders of the Company (sometimes referred to herein
as "Control Shareholders") are Isaac Starkman, his family trust and the members
of his immediate family, including Guy Starkman and Jason Starkman; Jonathan
Mitchell acting on behalf of Mitchell Hospitality Investments, LLC, a Delaware
limited liability company, and the Edward D. and Anna Mitchell Family Foundation
(the "Mitchell Group"); and Kenneth Abdalla and Ronald Burkle and entities which
they control.
If the Offer is completed and the Control Shareholders of the Company
own at least 90% of the outstanding shares of the Company, the Control
Shareholders may seek to have the Company consummate a short-form merger with a
new entity wholly owned by the Control Shareholders (the "Short-Form Merger"),
which would not require the approval of the Company's board of directors (the
"Company Board"), whereby the Control Shareholders would own all of the shares
of the Company and each then outstanding Share (other than Shares held by the
Control Shareholders) would be converted into the right to receive an amount in
cash equal to the highest price per Share paid in the Offer. Alternatively, if
the Offer is completed and the Control Shareholders do not own at least 90% of
the outstanding shares of the Company, the Control Shareholders may, but are not
obligated to, seek to have the Company consummate a "long-form" merger or
similar business combination with a new entity wholly owned by the Control
Shareholders (the "Long-Form Merger"), which would require the approval of the
Company Board, whereby the Control Shareholders would own all of the shares of
the Company. In a Long-Form Merger, the amount and form of consideration for
Shares that are not purchased in the Offer would be negotiated with the
Independent Committee of the Board of Directors. Each then outstanding Share
(other than Shares held by the Company) may be converted into the right to
receive an amount in cash equal to the highest price per Share paid in the Offer
or a different form or amount of consideration including cash, common or
preferred stock, promissory notes, or other securities. Upon the consummation of
any merger, the Company will be a privately held company.
2
The timing of consummation of a merger will depend on a variety of
factors and legal requirements, the actions of the Company Board, the number of
Shares (if any) acquired by the Company pursuant to the Offer and whether the
conditions to the Offer set forth in "THE TENDER OFFER--Certain Conditions to
the Offer" have been satisfied or waived. There can be no assurance that if the
Offer is consummated, the Company will seek to effectuate any Short-Form Merger
or Long-Form Merger.
THE COMPANY RESERVES THE RIGHT TO AMEND OR WAIVE ANY ONE OR MORE TERMS OR
CONDITIONS OF THE OFFER INCLUDING AMENDING THE NUMBER OF SHARES TO BE PURCHASED
AND THE OFFER PRICE.
The Offer is subject to the fulfillment of certain conditions, including the
following:
The Company must have sufficient retained earnings to repurchase all
shares tendered in the Offer, up to 600,000 shares, as of the date the shares
are repurchased. The Company anticipates that it will have sufficient proceeds
based upon the earnings it reported for the year ended December 31, 2000 and the
earnings it expects to report for the quarter ended March 31, 2001. If, for any
reason, the Company does not have sufficient retained earnings to repurchase all
of the shares that are tendered, up to 600,000 shares, the Company may not
complete the repurchase, or may reduce the number of shares that are
repurchased, on a pro rata basis among all shareholders who have tendered their
shares, to an amount that may be purchased by the Company based on the amount of
its retained earnings on the date of repurchase.
The Company must be satisfied that no change (or condition, event or
development involving a prospective change) has occurred or been threatened in
the business, properties, assets, liabilities, capitalization, shareholders'
equity, condition (financial or otherwise), operations, licenses, franchises,
permits, permit applications, results of operations or prospects of the Company
or any of its subsidiaries which, in the sole judgment of the Company, is or may
be materially adverse, and that the Company has not become aware of any fact
which, in the sole judgment of the Company, has or may have material adverse
significance with respect to either the value of the Company or any of its
subsidiaries or the value of the Shares to the Company.
The Company must be satisfied that there is no threatened, instituted
or pending action or proceeding by any government or governmental authority or
agency, domestic or foreign, or by any other person, domestic or foreign, (1)(A)
challenging or seeking to make illegal, to delay or otherwise directly or
indirectly to restrain or prohibit the making of the Offer, the acceptance for
payment of, or payment for, some or all the Shares by the Company or the
consummation by the Company of a merger with an affiliate of the Control
Shareholders, (B) seeking to obtain damages in connection therewith or (C)
otherwise directly or indirectly relating to the transactions contemplated by
the Offer or any such merger or business combination, (2) seeking to prohibit
the ownership or operation by the Company or any affiliate of the Control
Shareholders of all or any portion of the business or assets of the Company and
its subsidiaries, or to compel the Company or any affiliate of the Control
Shareholders to dispose of or hold separately all or any portion of the business
or assets of the Company or any of its subsidiaries or seeking to impose any
limitation on the ability the Company or any affiliate of the Control
Shareholders to conduct their respective businesses or own such assets, (3)
seeking to require divestiture by the Company of any Shares, (4) seeking any
material diminution in the benefits expected to be derived by the Company or the
Control Shareholders as a result of the transactions contemplated by the Offer
or any other business combination with the Company, (5) which otherwise, in the
sole judgment of the Company, might materially adversely affect the Company or
the value of the Shares or (6) in the sole judgment of the Company, materially
adversely affecting the business, properties, assets, liabilities,
capitalization, shareholders' equity, condition (financial or otherwise),
operations, licenses or franchises, results of operations or prospects of the
Company or its subsidiaries.
The conditions are for the sole benefit of the Company and may be
asserted by the Company, in its sole discretion, regardless of the circumstances
(including any action or omission by the Company) giving rise to any such
conditions or may be waived by the Company, in its sole discretion, in whole or
in part, at any time and from time to time.
Certain other conditions to the consummation of the Offer are described
in "THE TENDER OFFER--Certain Conditions to the Offer." The Company reserves the
right (subject to the applicable rules
3
and regulations of the Securities and Exchange Commission (the "Commission")) to
amend or waive any one or more of the terms or conditions of the Offer. See "THE
TENDER OFFER--Terms of the Offer; Expiration Date" and "THE TENDER
OFFER--Certain Conditions to the Offer."
Certain U.S. federal income tax consequences of the sale of shares
pursuant to the Offer and the conversion of shares pursuant to any merger are
described in "SPECIAL FACTORS--Certain United States Income Tax Consequences."
This Offer to Purchase and the related Letter of Transmittal contain important
information, which should be read carefully before any decision is made with
respect to the Offer.
4
SPECIAL FACTORS
1. Background of the Offer; Contacts with the Company.
The Company conducted its initial public offering in 1996 seeking to
raise capital for an aggressive expansion of its business through the opening of
new restaurants and the acquisition of existing deli-style restaurants and
markets. The Company's strategy was to realize capital appreciation through the
growth in earnings resulting from its expansion.
Over the past five years, the Company has executed its growth strategy
by doubling the number of its restaurants and acquiring a gourmet market. As a
result, the Company reported record earnings of $.31 per share for the year
ended December 31, 2000, a 63% increase from the $.19 earnings per share
reported for the year ended December 31, 1999. Despite these accomplishments,
however, the Company's shareholders have not realized an appreciation in value
of their shares. In fact, the Company's share price has declined over the past
five years. In November 1999, the Company's share price dropped to a level below
the maintenance standards for continued listing on the Nasdaq National Market.
The Company was able, by completing a one-for-three reverse stock split in
January 2000, to retain a listing on the Nasdaq SmallCap Market. However, the
Company's share price continued to decline in 2000.
In an effort to seek other means of increasing shareholder value, the
Board of Directors began seeking strategic alternatives over three years ago. At
the end of 1997, the Company engaged NationsBanc Montgomery Securities (the name
of which was subsequently changed to Banc of America Securities, and referred to
herein as "BofA Securities") to assist the Company in considering all possible
strategic alternatives, including sale of the Company.
After over eighteen months of working with the Company and contacting
several potential acquirors, BofA Securities met with the Board of Directors in
July 1999 and presented two preliminary proposals to the Company for
consideration. One proposal, a stock-for-stock exchange offer, was from a
company which had recently been delisted from the Nasdaq Stock Market, was then
traded on the OTC Bulletin Board, and was heavily in debt. The Company at that
time was listed on the Nasdaq National Market and had a relatively strong
balance sheet. Based on these facts, the Board of Directors determined that this
proposed acquisition would not benefit shareholders of the Company, and did not
pursue this offer. The Company notes that company which made this proposal has
subsequently reported two years of substantial and growing net losses and had a
share trading price of less than $.03 per share as of April 3, 2001. That
company also announced on April 2, 2001 that it was unable to meet payments on
its existing debt of over $200 million and might have to file a bankruptcy
petition.
The Company also received in July 1999 through BofA Securities an
indication of interest from a leveraged buy-out firm proposing to buy out the
public shareholders at a price that would have resulted in the Company
undertaking substantial additional debt and retaining existing management. At
the time of that proposal, Mitchell Hospitality Investments and its affiliates
had not acquired an interest in the Company, and over 25% of the Company's stock
was held by public shareholders. The market price for the Company's stock during
the second quarter of 1999 ranged from a high of $4.50 to a low of $2.63 per
share, while the Company's retained earnings as of June 30, 1999 were less than
$1 million. Based on those facts, the Company could not have completed a
leveraged buyout without additional equity financing. Under these circumstances,
the Board of Directors and management determined that the Company's operations
could not support the level of debt necessary for this proposal, and determined
not to pursue a leveraged buy-out.
Also during 1998, the Board received an indication of interest from a
client of Arthur Andersen regarding a possible all-cash acquisition of the
Company. The client was a private investment partnership with some prior history
of acquisitions. However, after preliminary discussions with the partnership, no
formal offer was ever presented to the Company by the partnership.
Also during 1998, in a further attempt to increase the Company's share
price, the Board of Directors authorized a stock repurchase program. The initial
program for $300,000 of shares was approved in September 1998, and subsequently
increased in November 1998 to a maximum of $2,000,000 of shares. Under that
repurchase program, the Company repurchased a total of 365,154 shares at market
prices ranging from $2.81 to $4.50 per share.
5
During 1999, the Company received notification from Nasdaq that its per
share trading price was below the minimum of $1 per share, and that the
Company's shares would be delisted from the Nasdaq National Market. The Board of
Directors authorized a one-for-three reverse stock split to increase the per
share trading price that allowed the Company to obtain a listing on the Nasdaq
SmallCap Market. On February 3, 2000, the Company's common stock began trading
on the Nasdaq SmallCap Market. (All share amounts and price per share
information contained in this Offer to Purchase reflect the Company's three for
one reverse split of its Common Stock effective as of February 9, 2001)
In May 1999, affiliates of Jonathan Mitchell, a consultant to the
Company in connection with restaurant acquisitions, began acquiring shares of
the Company's common stock through open market purchases. In May 2000, Mitchell
Equity Investments and the Edward D. and Anna Mitchell Family Foundation first
reported on a Schedule 13D that they collectively had acquired approximately 5%
of the Company's common stock, and that they desired to seek privatization of
the Company. Mitchell Equity Investments and its wholly-owned subsidiary,
Mitchell Hospitality Investments continued to acquire stock in open market and
privately negotiated transactions through the second half of 2000 and the first
quarter of 2001. As of February 7, 2001, it was reported in an amended Schedule
13D that Mitchell Equity Investments had transferred its holdings of the
Company's common stock to Mitchell Hospitality Investments, that Mitchell
Hospitality Investments and the Edward D. and Anna Mitchell Family Foundation
collectively owned an aggregate of 1,052,311 shares, representing approximately
22.5% of the total outstanding shares of the Company, and that the Mitchell
Group desired to seek privatization of the Company.
In March 2000, the Board of Directors discussed at length possible
strategic alternatives for the Company. One possible alternative discussed was a
going private transaction, in which a tender offer could be made by either the
Company or certain of its principal shareholders to acquire all or substantially
all of the shares held by non-affiliates. No definitive proposals were made at
that time.
In May 2000, representatives of the Company met with Fleet Boston
Financial ("FBF") in New York regarding the possible retention of FBF to assist
in reviewing strategic alternatives. In addition, representatives of the Company
met with Fleet National Bank concerning a possible financing of a tender offer
by the Company. Although Fleet National Bank, an affiliate of FBF, has become
the Company's primary lender, FBF has not made any proposals regarding a
transaction involving the Company. Fleet National Bank indicated in its meeting
with Company representatives that it would permit the Company to use a portion
of its line of credit to repurchase shares of its common stock should the
Company determine to conduct a tender offer for its shares.
Also in May 2000, the Board of Directors appointed an Independent
Committee of the Board of Directors to consider and respond to any proposals
that might be received from shareholder groups to take the Company private, or
from outside third parties where members of management would have conflicts of
interest.
In the second half of 2000 and the first quarter of 2001, the Control
Shareholders held several informal meetings to discuss the privatization of the
Company, but there are at present significant differences of opinion among them
as to the future strategy and operations of the Company which could delay or
prevent an agreement among them to complete a going private transaction.
In January 2001, the Board of Directors authorized the Independent
Committee to hire an outside valuation firm to report on a fair price for the
Company's shares of common stock in a self tender offer, and to negotiate,
finalize, approve and take all actions they deemed necessary on behalf of the
Board of Directors in regard to the Company engaging in a tender offer, a going
private transaction, or negotiating with, or responding to, any group
contemplating such a transaction. The Independent Committee soon thereafter
engaged The Mentor Group to provide its report to the Independent Committee
concerning a fair price for the Company's common stock in any possible tender
offer or going private transaction.
On March 30, 2001, The Mentor Group presented its preliminary report to
the Independent Committee. The Independent Committee, after considering the
preliminary findings of The Mentor Group, approved a self tender offer by the
Company on March 30, 2001 at a repurchase price of $5.30 per share. The Company
issued a press release on April 3, 2001 publicly announcing the proposed tender
offer.
6
2. Fairness of the Offer.
Because the Shares owned directly by the Control Shareholders represent
about 87.5% of the total outstanding shares of Common Stock of the Company, and
the Control Shareholders (except the Mitchell Group) have four affiliates on the
Company Board, the Board of Directors determined that a majority of the
directors had conflicts of interest in determining whether to approve a self
tender offer or any other transaction that could eventually result in the
Control Shareholders acquiring ownership of all of the Company's outstanding
shares. Therefore, in May 2000, the Board of Directors appointed an Independent
Committee consisting of Paul Gray and Stanley Schneider, the two independent
directors, to consider and take action on any proposals made by the Control
Shareholders or any other third parties to acquire the Company. In January 2001,
the Independent Committee was authorized to negotiate, finalize and approve a
tender offer and/or a going private transaction and negotiate and respond to any
group contemplating such a transaction. The Independent Committee, in connection
with its decision to approve the self tender offer by the Company, considered
the fairness of the Offer to the unaffiliated security holders of the Company
(collectively, the "Public Shareholders").
The Independent Committee believes that the Offer is fair to the Public
Shareholders of the Company. In reaching their determination that the Offer is
fair to the Public Shareholders of the Company, the Independent Committee
considered the following factors:
o The premium reflected in the Offer price of $5.30 per Share. The
Independent Committee considered the current and historical trading
prices of the Shares prior to the Offer. The Offer price represents a
premium of over 41% over the $3.75 closing price on April 2, 2001, the
day prior to the public announcement of the contemplated offer. The
Offer price also represents a premium of 3% over the 52 week high
trading price of $5.12 as of April 2, 2001.
o The Offer price of $5.30 per Share represents a price to earnings
multiple of 17.1 based on the Company's reported earnings of $.31 per
share for the year ended December 31, 2000, and a multiple of 3.54
times the Company's earnings before interest, income taxes,
depreciation and amortization ("EBIDTA") for the year ended December
31, 2000.
o The Offer price of $5.30 per Share is higher than the preliminary
valuation of the Shares provided by The Mentor Group in its initial
valuation of the Company.
o The Offer price of $5.30 per Share is higher than the price paid by
Mitchell Equity Investments for 125,135 shares sold by Jason Starkman
at $4.50 per Share in August 2000, for 13,938 shares sold by Guy
Starkman at $4.50 per share in December 2000 and for 202,509 shares
sold by a partner of one of the investment partnerships controlled by
Kenneth Abdalla at $4.50 per share in July, 2000.
o The purchase of the Shares by the Company would eliminate the exposure
of the Public Shareholders of the Company to any future decline in the
price of the Shares.
o The relative lack of liquidity for the Shares and the liquidity that
would be realized by the Public Shareholders of the Company from the
all-cash Offer. The Independent Committee directors believe that the
liquidity that would result from the Offer would be beneficial to the
Public Shareholders because the Control Shareholders' significant
ownership of Shares (1) results in a relatively small public float that
necessarily limits the amount of trading in the Shares and (2)
decreases the likelihood that a proposal to acquire the Shares would be
made by an independent entity without the consent of the Control
Shareholders.
o The Offer would shift the risk of the future financial performance of
the Company from the Public Shareholders of the Company to the Company
and the Control Shareholders.
o The Offer price is attractive based on current negative stock market
conditions. Since the stock market peak in March 2000, the Standard &
Poors 500 index, the Dow Jones Industrial Average and the Nasdaq have
all declined substantially, and the Nasdaq in particular has declined
over 60%. This is the first
7
persistent down market experienced for the securities market in general
in over ten years, and it cannot be predicted when the market will
begin to improve. Under these conditions, the value of the Company's
stock could continue to decline, even if the Company continues to
report increased earnings.
o Shareholders who accept the Offer will receive cash at the premium
price of $5.30, which would be difficult for all shareholders to
receive in open market sale transactions, especially in light of the
relatively low trading volume in the Shares.
The Independent Committee also believes that the Offer and Merger are
procedurally fair to the shareholders of the Company in light of the following
factors:
o To avoid any potential conflict of interest of the Board of Directors
by virtue of the Control Shareholders' substantial ownership interest
in the Company, the Company Board established an Independent Committee
consisting of directors of the Company who are not officers of the
Company or affiliates of the Control Shareholders. The Independent
Committee has been given the sole and exclusive authority to set the
terms of the Offer. To assist it in performing its duties, the Special
Committee has retained an independent financial advisor and independent
legal counsel.
o Each Public Stockholder of the Company can determine individually
whether to tender Shares in the Offer.
o The Offer provides the opportunity for the Public Shareholders of the
Company to sell their Shares without incurring brokerage and other
costs typically associated with market sales.
o The Public Shareholders of the Company who believe that the terms of
the Offer and the Short-Form Merger or Long-Form Merger are not fair
can pursue appraisal rights in respect of the Short-Form Merger or
Long-Form Merger under the California Corporation Law.
o The Independent Committee obtained an independent valuation firm to
review the terms of the Offer based on the valuation firm's independent
valuation of the Company.
The Independent Committee also considered the following factors, which it
considered to be negative from the perspective of the Public Shareholders of the
Company, in its consideration of the fairness of the terms of the Offer:
o Following the successful completion of the Offer, the Public
Shareholders of the Company who accept the Offer would cease to
participate in the future earnings or growth, if any, of the Company or
benefit from increases, if any, in the value of their holdings in the
Company.
o Historically, there has been relatively low trading volume of the
publicly traded shares of the Company. As a result of the tender by
Public Shareholders of their Shares, the trading volume may decrease
further. Those Public Shareholders who do not tender their Shares may
suffer increased illiquidity and decreased market value, particularly
if the Shares will no longer be quoted on the Nasdaq SmallCap Market
and the Company seeks to terminate the registration of the Shares under
the Exchange Act.
In determining that the Offer is fair to the Public Shareholders of the Company,
the Independent Committee considered the above factors as a whole and did not
assign specific or relative weights to them.
3. Purpose and Structure of the Offer; Plans for the Company.
General.
The purpose of the Offer is to provide value and liquidity for the
Public Shareholders and for the Control Shareholders to substantially increase
their ownership interest in the Company. If a sufficient number of shareholders
tender their Shares in the Offer, the Shares will no longer be quoted on the
Nasdaq SmallCap Market and the Company intends to terminate the registration of
the Shares under the Exchange Act. If the Offer is completed and the Control
Shareholders own at least 90% of the outstanding shares of the Company, the
Control
8
Shareholders may seek to have the Company consummate a Short-Form Merger, which
would not require the approval of the Company Board, whereby the Control
Shareholders (and/or one or more affiliates of the Control Shareholders) will
own all of the shares of the Company and each then outstanding Share (other than
Shares held by the Control Shareholders) would be converted into the right to
receive an amount in cash equal to the highest price per Share paid in the
Offer. Alternatively, if the Offer is completed and the Control Shareholders and
their respective affiliates do not own at least 90% of the outstanding shares of
the Company, the Control Shareholders may, but are not obligated to, seek to
have the Company consummate a Long-Form Merger, which would require a fairness
hearing before the California Department of Corporations as well as the approval
of the Company Board. In a Long-Form Merger, the amount and form of
consideration for Shares that are not purchased in the Offer would be negotiated
between the Control Shareholders and the Independent Committee. Each then
outstanding Share (other than Shares held by the Control Shareholders) may be
converted into the right to receive an amount in cash equal to the highest price
per Share paid in the Offer or a different form or amount of consideration
including cash, common or preferred stock, promissory notes, or other
securities. Any merger would be subject to compliance with the terms of the
Company's debt instruments.
The timing of consummation of the Offer will depend on a variety of
factors and legal requirements, the actions of the Independent Committee, the
number of Shares (if any) acquired by the Company pursuant to the Offer and
whether the conditions to the Offer have been satisfied or waived.
Alternative Structures Considered by the Company.
The Company considered alternative structures to effect the purchase of
additional Shares including a merger, without a tender offer, and the purchase
of Shares in the open market. In determining to proceed with the tender offer,
the Company noted that a tender offer was the most expeditious and efficient way
to acquire additional Shares and provide cash value to the Public Shareholders.
In addition, in a tender offer, each Public Stockholder will be able to
determine individually whether to accept the price in the Offer or alternatively
not to tender their Shares.
Other Possible Purchases of Shares.
Whether or not the Offer is successfully completed, the Company may
acquire additional Shares in the open market or in privately negotiated
transactions. Such open market or privately negotiated purchases would be made
at market prices or privately negotiated prices at the time of purchase, which
may be higher or lower than the Offer Price.
Effects of the Offer.
If the Offer is consummated and all of the 600,000 Shares sought to be
repurchased are repurchased by the Company from the Public Shareholders, the
interest of the Control Shareholders in the book value and net earnings of the
Company will increase proportionally by the increase in their ownership of
Shares of the Company.
If the Offer is completed and a sufficient number of the Company
shareholders tender their Shares, it is likely that the Shares will no longer be
eligible to be traded on the Nasdaq SmallCap Market or any other securities
exchange, and the Company may cease making filings with the Commission or
otherwise cease being required to comply with the Commission's rules relating to
publicly held companies. It should be noted that the Company currently has only
132 shareholders of record, and is therefore currently eligible to deregister
the Shares from reporting under the Exchange Act. In any event, the number of
shareholders and the number of Shares that are still in the hands of the public
may be so small that there may no longer be an active public trading market (or,
possibly, any public trading market) for the Shares. Also, the Company may seek
to consummate a Short-Form Merger or Long-Form Merger and, immediately following
any merger, the Control Shareholders will own collectively all the equity
interests of the Company and will be entitled to all benefits resulting from
such interests, including all income generated by the Company's operations and
any future increase in the Company's value. Similarly, such parties will bear
the risk of losses generated by the Company's operations and any future decrease
in the value of the Company after any merger. After such a merger, the Public
Shareholders will cease to have an equity interest in the Company, will not have
the opportunity to participate in the earnings and growth of the Company and
will not face the risk of losses generated by the Company's operations or
decline in the value of the Company.
9
Possible Effect of the Offer and Open Market Purchases on the Market for Shares.
Following the completion of the Offer, the purchase of Shares by the
Company pursuant to the Offer or any subsequent open market or privately
negotiated purchases would reduce the number of Shares that might otherwise
trade publicly and may reduce the number of holders of Shares. This could
adversely affect the liquidity and market value of the remaining Shares held by
the public.
Plans for the Company After the Offer.
Upon consummation of the Offer, the Company does not anticipate making
any changes to the current Company Board or to the current management of the
Company.
The Shares are currently listed for quotation on the Nasdaq SmallCap
Market. Following the closing of the Offer, depending upon the aggregate market
value and the number of Shares not purchased pursuant to the Offer or any
subsequent open market or privately negotiated purchases, as well as the number
of Public Shareholders who are not affiliated with the Company or the Control
Shareholders, the Shares may no longer meet the quantitative requirements for
continued listing on the Nasdaq SmallCap Market and may result in the Shares
becoming eligible for deregistration under the Exchange Act. As a result, the
Shares will no longer be quoted on the Nasdaq and the Company intends to
terminate the registration of the Shares under the Exchange Act. It should be
noted that the Company currently has only 132 shareholders of record, and is
therefore currently eligible to deregister the Shares under the Exchange Act.
Upon deregistration of the Shares, the Company will no longer be legally
required to file periodic reports with the Commission, under the Act (although
it may continue to do so if contractually required under any agreements
governing its indebtedness or indebtedness of its subsidiaries), and will no
longer be required to comply with the proxy rules of Regulation 14A under
Section 14 under the Exchange Act. In addition, the Company's officers,
directors and shareholders who beneficially own 10% or more of the Shares will
be relieved of the reporting requirements and restrictions on "short-swing"
trading contained in Section 16 of the Exchange Act with respect to the Shares.
If the Company consummates a Short-Form Merger or Long-Form Merger, the
Company will become a privately held corporation owned entirely by the Control
Shareholders (and/or one or more affiliates of the Control Shareholders) and
there will be no public market for the Shares. Accordingly, after the
consummation of any merger, the Public Shareholders will not have the
opportunity to participate in the earnings and growth of the Company and will
not have any right to vote on corporate matters. In addition, the Public
Shareholders will not be entitled to share in any premium which might be payable
by an unrelated third-party acquiror of all of the Shares in a sale transaction,
if any, occurring after the consummation of a merger. No such transactions are
contemplated at this time. However, after the consummation of any merger, such
Public Shareholders will not face the risk of losses generated by the Company's
operations or any decrease in the value of the Company.
4. Rights of Shareholders in the Offer and Any Merger.
No appraisal rights are available to shareholders who tender their
Shares in the Offer. If the Short-Form Merger or Long-Form Merger is
consummated, however, record shareholders who have not validly tendered their
Shares, nor voted in favor of the merger in the case of a Long-Form Merger, will
have certain rights under the California General Corporation Law ("CGCL") to an
appraisal of, and to receive payment in cash of the fair value of, their Shares
(the "Appraisal Shares"). Shareholders who perfect appraisal rights by complying
with the procedures set forth in Chapter 13 of the CGCL ("Chapter 13"), a copy
of which is attached as Schedule A to this Offer to Purchase, will have the fair
value of their Appraisal Shares (exclusive of any element of value arising from
the accomplishment or expectation of the Merger) determined by the California
Superior Court and will be entitled to receive a cash payment equal to such fair
value from the surviving corporation in the merger. A judicial determination of
the fair value of Appraisal Shares could be based upon any valuation method or
combination of methods the court deems appropriate. The value so determined
could be more than, equal to, or less than the price per Share offered pursuant
to the Offer or proposed to be paid in the Long-Form Merger or Short-Form
Merger. In addition, such shareholders may be entitled to receive payment of a
fair rate of interest on the amount determined to
10
be the fair value of their Appraisal Shares from the effective time of the
Long-Form Merger or Short-Form Merger until the date of payment.
Under the CGCL, the Company must, not less than 20 days prior to the
meeting held or other shareholder action taken for the purpose of obtaining
shareholder approval of a Short-Form or Long-Form Merger, notify each of the
shareholders entitled to appraisal rights that such rights are available. A
holder of Appraisal Shares wishing to exercise appraisal rights will be required
to deliver to the Company not later than the date of the shareholder meeting
taking of the vote on the Long-Form Merger or not later than 30 days after the
date on which the notice of the approval by the outstanding shares was mailed to
the shareholder, a written demand for appraisal of such holder's Appraisal
Shares. A holder of Appraisal Shares wishing to exercise such holder's appraisal
rights must be the record holder of such Appraisal Shares on the date the
written demand for appraisal is made and must continue to hold of record such
Appraisal Shares through the date of submission of the shares to the Company for
endorsement with a statement that the shares are dissenting shares. Accordingly,
a holder of Appraisal Shares who is the record holder of Appraisal Shares on the
date the written demand for appraisal is made, but who thereafter transfers such
Appraisal Shares prior to the date the Appraisal Shares are submitted for
endorsement will lose any right to appraisal in respect of such Appraisal
Shares.
A demand for appraisal must be executed by or on behalf of the
shareholder of record and must reasonably inform the Company of the identity of
the shareholder of record and that such shareholder intends thereby to demand an
appraisal of such Appraisal Shares.
A person having a beneficial interest in Appraisal Shares that are held
of record in the name of another person, such as a broker, fiduciary, depository
or other nominee, will have to act to cause the execution of the demand for
appraisal to be made by or for the record holder and to follow the requisite
steps properly and in a timely manner to perfect appraisal rights. If Appraisal
Shares are owned of record by more than one person, as in joint tenancy or
tenancy in common, the demand will have to be executed by or for all joint
owners. An authorized agent, including an agent for two or more joint owners,
may execute a demand for appraisal for a shareholder of record, provided that
the agent identifies the record owner and expressly discloses, when the demand
is made, that the agent is acting as agent for the record owner. If a
shareholder owns Appraisal Shares through a broker who in turn holds the
Appraisal Shares through a central securities depository nominee such as CEDE &
Co., a demand for appraisal of such Appraisal Shares will have to be made by or
on behalf of the depository nominee and must identify the depository nominee as
the record holder of Appraisal Shares. A record holder, such as a broker,
fiduciary, depository or other nominee, who holds Appraisal Shares as a nominee
for others, will be able to exercise appraisal rights with respect to the
Appraisal Shares held for all or less than all of the beneficial owners of those
Appraisal Shares as to which such person is the record owner. In such case, the
written demand must set forth the number of Shares covered by the demand. Where
the number of Shares is not expressly stated, the demand will be presumed to
cover all Appraisal Shares standing in the name of such record owner.
Within six months after the date on which notice of the approval by the
outstanding shares of the Long-Form Merger or Short-Form Merger, but not
thereafter, the Company or any shareholder who has complied with the statutory
requirements of Chapter 13 summarized above and who is otherwise entitled to
appraisal rights may file a petition in the California Superior Court demanding
a determination of the fair value of such holder's Appraisal Shares. It will be
the obligation of any shareholder seeking appraisal rights to initiate all
necessary action to perfect any appraisal rights within the time prescribed in
Chapter 13.
If a petition for appraisal is timely filed, and after a hearing on
such petition, the California Superior Court will determine the shareholders
entitled to appraisal rights and will appraise the fair value of their Appraisal
Shares, exclusive of any element of value arising from the accomplishment or
expectation of the merger, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value of the Appraisal Shares
from the effective time of the Merger.
The costs of the proceeding may be determined by the California
Superior Court and taxed upon the parties as the court deems equitable under the
circumstances. If the appraisal exceeds the price offered by the corporation by
more than 125%, the corporation shall pay the costs (including, in the
discretion of the court, attorneys' fees and the fees and expenses of experts,
and interest at the legal rate on judgments from the date of compliance with the
requirements of Chapter 13).
11
A shareholder who has submitted shares for endorsement as Appraisal
Shares may withdraw such holder's demand for appraisal only with the consent of
the Company. If any shareholder who properly demands appraisal of such holder's
Appraisal Shares under Chapter 13 fails to perfect, or effectively withdraws or
loses such holder's right to appraisal as provided in the CGCL, the Appraisal
Shares of such shareholder will be converted into the right to receive the
proposed merger consideration. A shareholder will fail to perfect, or
effectively lose or withdraw, such shareholder's right to appraisal if, among
other things, no petition for appraisal is filed within six months after the
effective time.
Except as otherwise disclosed in the Offer to Purchase, the Company has
made no provision in connection with the Offer or, if applicable, the Long-Form
Merger or Short-Form Merger, to obtain counsel or appraisal services for
unaffiliated security holders at the expense of the Company.
The foregoing summary of the rights of dissenting shareholders does not
purport to be a complete statement of the procedures to be followed by
shareholders desiring to exercise their appraisal rights, if any. The
preservation and exercise of appraisal rights are conditioned on strict
adherence to the applicable provisions of the CGCL.
5. Transactions, Negotiations and Agreements.
The Company is a party to various employment, option and
indemnification agreements with certain of the Company's executive officers who
are also Control Shareholders, as described in the Company's Proxy Statement
dated April 13, 2001 under the heading "Executive Compensation and Other Matters
- -- Employment Agreements." In addition, the Company recently purchased two
parking lots from a Control Shareholder, and currently leases other parking lot
facilities from a Control Shareholder, as described in the Company's Proxy
Statement dated April 13, 2001 under the heading "Certain Relationships and
Related Transactions."
Although the Control Shareholders have discussed the possibility of a
going private transaction since March 2000, as described above under the heading
"Background of Offer; Contacts with the Company," the Control Shareholders have
not previously entered into any negotiations, transactions or material contacts
during the past two years with the Company concerning any merger, consolidation,
acquisition, tender offer or sale or other transfer of a material amount of
assets of the Company.
12
6. Interest in Securities of the Company.
Securities Ownership.
The following table sets forth certain information regarding ownership
of the Common Stock as of April 6, 2001 by (i) each person known by the Company
to be the beneficial owner of more than 5% of the outstanding shares of Common
Stock, (ii) each director of the Company, and (iii) each executive officer of
the Company.
Shares Beneficially Owned (1)
-----------------------------
Name(s) and Address (2) Number of Shares Percentage of Class (3)
- ----------------------- ---------------- -----------------------
Isaac and Carolyn Starkman 2,036,666(4) 42.45%
Guy Starkman 179,062(5) 3.80%
Jason Starkman 16,667(6) *
Paul Gray 4,000(7) *
Stanley Schneider 4,000(8) *
Kenneth J. Abdalla 538,388(9) 11.52%
Christina Sterling 19,333(10) *
Ami Saffron 16,667(11) *
Ronald W. Burkle Foundation 448,317(12) 9.59%
Mitchell Hospitality Investments 1,052,311(13) 22.52%
- ----------
* Less than 1%
(1) The persons named in the table, to the Company's knowledge, have sole
voting and sole investment power with respect to all shares of Common
Stock shown as beneficially owned by them, subject to community
property laws where applicable and the information contained in the
footnotes hereunder. Shares of Common Stock which a person has the
right to acquire within 60 days are deemed beneficially owned by that
person.
(2) The shareholders' address is at the Company's principal executive
offices at 12711 Ventura Boulevard, Suite 400, Studio City, California
91604.
(3) Shares of Common Stock which a person had the right to acquire within
60 days are deemed outstanding in calculating the percentage ownership
of the person, but not deemed outstanding as to any other person.
(4) Consists of 1,911,666 shares which are held of record in The Starkman
Family Trust, a revocable trust of which Isaac Starkman and his wife,
Carolyn Starkman, are the Trustees, and currently exercisable stock
options for 125,000 shares. Guy and Jason Starkman are potential
beneficiaries under this trust.
(5) Consists of 137,395 shares of Common Stock and currently exercisable
stock options for 41,667 shares of Common Stock.
(6) Consists of currently exercisable stock options for 16,667 shares of
Common Stock.
(7) Consists of currently exercisable stock options for 4,000 shares of
Common Stock.
(8) Consists of currently exercisable stock options for 4,000 shares of
Common Stock.
13
(9) Consists of 66,667 shares of Common Stock held of record by Kenneth
Abdalla, 35,899 shares of Common Stock held by Yucaipa Waterton Deli
Investors, LLC ("Yucaipa"), 435,822 shares of Common Stock held by
Jerry's Investors, LLC ("JILLC"). As a result of Waterton's status as
the manager of Yucaipa and JILLC, and Mr. Abdalla's status as the
manager of Waterton, Mr. Abdalla may be deemed to have shared
dispositive and voting power with respect to the shares held by
Yucaipa, JILLC and Waterton. However, Mr. Abdalla disclaims beneficial
ownership of such shares.
(10) Consists of currently exercisable stock options for 19,333 shares of
Common Stock.
(11) Consists of currently exercisable stock options for 16,667 shares of
Common Stock.
(12) As reported on a Schedule 13D filed by the Ronald W. Burkle Foundation
on March 25, 1998. According to such Schedule 13D, the Ronald W. Burkle
Foundation has sole voting power and sole dispositive power with
respect to all of these shares. Mr. Abdalla, President and Director of
the Company, is a Director of the Ronald W. Burkle Foundation.
(13) Includes 968,978 shares owned by Mitchell Hospitality Investments and
83,333 shares owned by the Edward D. and Anna Mitchell Family
Foundation.
The Company has been advised by The Starkman Family Trust, Isaac
Starkman, Guy Starkman, Jason Starkman that they do not intend to tender any of
their shares in the Offer. The Company has been advised by Mitchell Hospitality
Investments that it does not intend to tender any of its shares, and by the
Edward D. and Anna Mitchell Family Foundation that it intends to donate not more
than 1700 shares to a charitable institution that will likely tender those
shares in the Offer. To the best knowledge of the Company, after making
reasonable inquiry, no other Control Shareholder has determined whether or not
to tender all or any of their Shares in response to the Offer.
7. Certain United States Federal Income Tax Consequences.
The receipt of cash pursuant to the Offer will be a taxable transaction
for U.S. federal income tax purposes under the Internal Revenue Code of 1986, as
amended (the "Code"), and may also be a taxable transaction under applicable
state, local or foreign income tax laws.
Generally, for U.S. federal income tax purposes, a tendering
shareholder who tenders all of his or her Shares will recognize gain or loss
equal to the difference between the amount of cash received by the shareholder
pursuant to the Offer and the aggregate adjusted tax basis in the Shares
tendered by the shareholder and purchased pursuant to the Offer. Gain or loss
will be calculated separately for each block of Shares tendered and purchased
pursuant to the Offer. If tendered Shares are held by a tendering shareholder as
capital assets, gain or loss recognized by such shareholder will be capital gain
or loss, which will be long-term capital gain or loss if such shareholder's
holding period for the Shares exceeds one year. In the case of a tendering
non-corporate shareholder, any long-term capital gain will generally be subject
to U.S. federal income tax at a maximum rate of 20%. For both corporate and
non-corporate taxpayers, the deductibility of capital losses is subject to
limitations.
Notwithstanding the general rule, under certain circumstances the
tender will be treated as a dividend distribution by the Company. In particular,
if a shareholder (which includes for this purpose Shares owned by family members
and others whose ownership is attributed to the shareholder under the tax laws)
tenders only a portion of his or her Shares and as a result, the tendering
shareholder's percentage ownership interest in the Company decreases by less
than 20% (measured as of the end of the tender offer), dividend treatment may
apply. In that event, proceeds received by the shareholder from the tender offer
will be taxed as ordinary income to the extent of the shareholder's ratable
portion of the Company's earnings and profits, and the shareholder's tax basis
in the shares tendered will be reallocated among the shareholder's remaining
Shares.
The tax treatment of Shares converted into cash pursuant to any
Short-Form Merger or Long-Form Merger, if consummated, would be the same as the
tax treatment of Shares tendered in the Offer as discussed above.
14
The foregoing discussion may not be applicable with respect to certain
members of management who continue to participate in the ownership of the
Company; with respect to Shares received pursuant to the exercise of employee
stock options or otherwise as compensation; or with respect to holders of Shares
who are subject to special tax treatment under the Code such as non- U.S.
persons, life insurance companies, tax-exempt organizations and financial
institutions and may not apply to a holder of Shares in light of individual
circumstances, such as holding Shares as a hedge or as part of a straddle or a
hedging, constructive sale, integrated or other risk-reduction transaction.
Shareholders of the Company should consult their own tax advisors
regarding the specific tax consequences to them of the Offer, including the
applicability and effect of U.S. federal, state, local and foreign income and
other tax laws in their particular circumstances.
Appraisal Rights.
A shareholder that exchanges all of its Shares for cash in connection
with appraisal rights under the CGCL will generally recognize capital gain or
loss in an amount equal to the difference between (a) the amount of cash
received and (b) such shareholder's adjusted tax basis in the Shares
surrendered. The capital gain or loss will be long-term capital gain or loss if
the shareholder's holding period for such Shares is more than one year. Any
long-term capital gain recognized by a non-corporate shareholder generally will
be subject to U.S. federal income tax at a maximum rate of 20%. For both
corporate and non-corporate taxpayers, the deductibility of capital losses is
subject to limitations.
Backup Withholding.
Certain non-corporate shareholders of the Company may be subject to
backup withholding at a 31% rate on cash payments received in connection with
the Offer or any Short-Form Merger or Long-Form Merger (including cash paid in
respect of the exercise of appraisal rights). Backup withholding will not apply,
however, to a shareholder who (1) furnishes a correct taxpayer identification
number and certifies that such shareholder is not subject to backup withholding
on the Substitute Internal Revenue Service Form W-9 or successor form included
in the Letter of Transmittal, (2) provides a certification of foreign status on
Internal Revenue Service Form W-8 or successor form or (3) is otherwise exempt
from backup withholding.
If a shareholder does not provide a correct taxpayer identification
number, such shareholder may be subject to penalties imposed by the Internal
Revenue Service. Any amount paid as backup withholding does not constitute an
additional tax and will be creditable against a shareholder's U.S. federal
income tax liability provided the required information is given to the Internal
Revenue Service. If backup withholding results in an overpayment of tax, a
refund can be obtained by the shareholder by filing a U.S. federal income tax
return. Shareholders of the Company should consult their own tax advisors as to
their qualification for exemption from withholding and the procedure for
obtaining the exemption.
15
THE TENDER OFFER
1. Terms of the Offer; Expiration Date.
Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of any such
extension or amendment), the Company will accept for payment and pay for up to
600,000 Shares validly tendered and not withdrawn in accordance with the
procedures set forth in "--Withdrawal Rights" on or prior to the Expiration
Date. The term "Expiration Date" means 5:00 p.m., California time, on Friday,
June 29, 2001, unless and until the Company, in its sole discretion, extends the
period of time for which the Offer is open, in which event the term "Expiration
Date" means the time and date at which the Offer, as so extended by the Company,
will expire.
The Offer is conditioned upon satisfaction of all the conditions set
forth in "--Certain Conditions to the Offer." The Company reserves the right
(but will not be obligated), subject to the applicable rules and regulations of
the Commission, to amend or waive any condition of the Offer. If any of the
conditions set forth in "--Certain Conditions to the Offer" has not been
satisfied by 5:00 p.m., California time, on Friday, June 29, 2001 (or any other
time then set as the Expiration Date), the Company may elect to:
(1) extend the Offer and, subject to applicable withdrawal rights,
retain all tendered Shares until the expiration of the Offer,
as extended;
(2) subject to complying with applicable rules and regulations of
the Commission, waive all of the unsatisfied conditions and
accept for payment and pay for all Shares tendered and not
withdrawn prior to the Expiration Date; or
(3) terminate the Offer and not accept for payment or pay for any
Shares and return all tendered Shares to tendering
shareholders. The Company expressly reserves the right (but
will not be obligated), in its sole discretion, at any time
and from time to time, to extend the period during which the
Offer is open for any reason by giving oral or written notice
of the extension to the Depositary and by making a public
announcement of the extension. During any extension, all
Shares previously tendered and not withdrawn will remain
subject to the Offer and subject to the right of a tendering
shareholder to withdraw Shares.
Subject to any applicable rules and regulations of the Commission, the Company
expressly reserves the right to:
(1) terminate or amend the Offer if any of the conditions referred
to in "--Certain Conditions to the Offer" has not been
satisfied; or
(2) waive any condition or otherwise amend the Offer in any
respect,
in each case, by giving oral or written notice of such termination, waiver or
amendment to the Depositary and by making a public announcement thereof, as
described below.
The Company acknowledges that Rule 14e-1(c) under the Exchange Act
requires the Company to pay the consideration offered or return the Shares
tendered promptly after the termination or withdrawal of the Offer.
If the Company extends the Offer or if the Company is delayed in its
acceptance for payment of or payment (whether before or after its acceptance for
payment of Shares) for Shares or it is unable to pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Company's rights under the
Offer, the Depositary may retain tendered Shares on behalf of the Company,
except to the extent that tendering shareholders exercise their right to
withdraw shares as described herein under "-- Withdrawal Rights." Any extension,
delay, termination, waiver or amendment of the Offer will be followed as
promptly as practicable by public announcement thereof, and such announcement in
the case of an extension will be made no later than 9:00 a.m., California time,
on the next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Company may choose to make any public
announcement, subject to applicable law (including Rule 13e-4 under the Exchange
Act, which
16
require that material changes be promptly disseminated to holders of Shares in a
manner reasonably designed to inform such holders of such change), the Company
currently intends to make announcements regarding the Offer by issuing a press
release to the Business Newswire.
If the Company makes a material change in the terms of the Offer, or if
it waives a material condition to the Offer, the Company will extend the Offer
and disseminate additional tender offer materials to the extent required by Rule
13e-4 under the Exchange Act. The minimum period during which an Offer must
remain open following material changes in the terms of the Offer, other than a
change in price or a change in the percentage of securities sought or a change
in any dealer's soliciting fee, will depend upon the facts and circumstances,
including the materiality, of the changes. With respect to a change in price or,
subject to certain limitations, a change in the percentage of securities sought
or a change in any dealer's soliciting fee, a minimum 10-business day period
from the date of such change is generally required to allow for adequate
dissemination to shareholders. For purposes of the Offer, a "business day" means
any day other than a Saturday, Sunday or a federal holiday, and consists of the
time period from 12:01 a.m. through 5:00 p.m., California time.
If the Company decides, in its sole discretion, to increase the
consideration offered in the Offer to holders of Shares and if, at the time that
notice of the increase is first published, sent or given to holders of Shares,
the Offer is scheduled to expire at any time earlier than the expiration of a
period ending on the tenth business day from, and including, the date that such
notice is first so published, sent or given, then the Offer will be extended
until at least the expiration of 10 business days from the date the notice of
the increase is first published, sent or given to holders of Shares. If, prior
to the Expiration Date, the Company increases the consideration being paid for
shares accepted for payment pursuant to the Offer, such increased consideration
will be paid to all shareholders whose shares are purchased pursuant to the
Offer, whether or not such shares were tendered prior to the announcement of the
increase in consideration.
If more than 600,000 Shares are tendered for purchase pursuant to the
Offer, unless the Company amends the Offer to increase the number of Shares to
be purchased, the Company will accept on a pro rata basis Shares tendered by
every shareholder according to the number of Shares tendered by each shareholder
during the Offering period. This provision shall not prohibit the Company from:
(i) accepting all Shares tendered by persons who own, beneficially or of record,
an aggregate of not more than 99 shares and who tender all their Shares, before
prorating Shares held by others; or (ii) accepting by lot Shares tendered by
holders who tender all Shares held by them and who, when tendering their Shares,
elect to have either all or none or at least a minimum amount or none accepted,
if the Company first accepts all Shares tendered by shareholders who do not so
elect.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates representing the Shares (the "Share Certificates")
are submitted representing more Shares than are tendered, certificates
representing unpurchased or untendered Shares will be returned, without expense
to the tendering shareholder (or, in the case of Shares delivered pursuant to
the book-entry transfer procedures set forth in "--Procedures for Accepting the
Offer and Tendering Shares," such Shares will be credited to an account
maintained within the Book-Entry Transfer Facility), as promptly as practicable
following the expiration, termination or withdrawal of the Offer.
The Company reserves the right to transfer or assign to one or more of
the Company's affiliates, in whole or from time to time in part, the right to
purchase all or any portion of the Shares tendered pursuant to the Offer, but
any such transfer or assignment will not relieve the Company of its obligations
under the Offer or prejudice the rights of tendering shareholders to receive
payment for Shares validly tendered and accepted for payment pursuant to the
Offer.
2. Acceptance for Payment and Payment.
Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of the Offer as so
extended or amended), the Company will purchase, by accepting for payment, and
will pay for all Shares validly tendered and not withdrawn prior to the
Expiration Date as soon as practicable after the Expiration Date. Any
determination concerning the satisfaction of the terms and conditions of the
Offer shall be within the sole discretion of the Company. See "--Certain
Conditions to the Offer." The Company expressly reserves the right, in its sole
discretion but subject to the applicable rules of the Commission, to delay
17
acceptance for payment of, and thereby delay payment for, Shares if any of the
conditions referred to in "--Certain Conditions to the Offer" has not been
satisfied or upon the occurrence of any of the events specified in "-- Certain
Conditions to the Offer."
In all cases, payment for Shares purchased pursuant to the Offer will
be made only after timely receipt by the Depositary of:
(1) the Share Certificates representing such Shares or timely
confirmation (a "Book-Entry Confirmation") of the book-entry
transfer of such Shares into the Depositary's account at The
Depository Trust Company (the "Book-Entry Transfer Facility"),
pursuant to the procedures set forth in "--Procedures for
Accepting the Offer and Tendering Shares";
(2) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature
guarantees, or an Agent's Message (as defined below) in
connection with a book-entry transfer; and
(3) any other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by the
Book-Entry Transfer Facility to, and received by, the Depositary and forming a
part of a Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgment from the participant in the
Book-Entry Transfer Facility tendering the Shares which are the subject of such
Book-Entry Confirmation, that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that the Company may enforce
such agreement against such participant. For purposes of the Offer, the Company
will be deemed to have accepted for payment, and thereby purchased, Shares
validly tendered and not withdrawn as, if and when the Company gives oral or
written notice to the Depositary of the Company's acceptance of such Shares for
payment pursuant to the Offer. In all cases, upon the terms and subject to the
conditions of the Offer, payment for Shares purchased pursuant to the Offer will
be made by deposit of the purchase price therefor with the Depositary, which
will act as agent for tendering shareholders for the purpose of receiving
payment from the Company and transmitting payment to validly tendering
shareholders. Upon the deposit of funds with the Depositary for the purpose of
making payments to tendering shareholders, the Company's obligation to make such
payment shall be satisfied and tendering shareholders must thereafter look
solely to the Depositary for payment of amounts owed to them by reason of the
acceptance for payment of Shares pursuant to the Offer.
Under no circumstances will interest on the purchase price for shares
be paid by the Company regardless of any extension of the Offer or by reason of
any delay in making such payment. The Company will pay any stock transfer taxes
incident to the transfer to it of validly tendered Shares, except as otherwise
provided in Instruction 6 of the Letter of Transmittal, as well as any charges
and expenses of the Depositary and the Information Agent.
3. Procedures for Accepting the Offer and Tendering Shares.
Valid Tender of Shares.
Except as set forth below, in order for Shares to be validly tendered
pursuant to the Offer, either (1) on or prior to the Expiration Date, (a) Share
Certificates representing tendered Shares must be received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase, or
such Shares must be tendered pursuant to the book-entry transfer procedures set
forth below and a Book-Entry Confirmation must be received by the Depositary,
(b) the Letter of Transmittal (or a facsimile thereof), properly completed and
duly executed, together with any required signature guarantees, or an Agent's
Message in connection with a book-entry transfer of Shares, must be received by
the Depositary at one of such addresses and (c) any other documents required by
the Letter of Transmittal must be received by the Depositary at one of such
addresses or (2) the guaranteed delivery procedures set forth below must be
followed.
18
The method of delivery of shares, the Letter of Transmittal and all
other required documents, including delivery through the book-entry transfer
facility, is at the election and sole risk of the tendering shareholder, and the
delivery will be deemed made only when actually received by the Depositary. If
delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases, sufficient time should be allowed to
ensure timely delivery.
Book-Entry Transfer.
The Depositary will make a request to establish accounts with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of the Book-Entry Transfer
Facility may make book-entry delivery of Shares by causing the Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at the
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message, and any other required documents must, in any
case, be transmitted to and received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase on or prior to the
Expiration Date, or the guaranteed delivery procedures set forth below must be
complied with. Required documents must be transmitted to and received by the
Depositary at one of its addresses set forth on the back cover page of this
Offer to Purchase. Delivery of documents to the Book-Entry Transfer Facility in
accordance with the Book-Entry Transfer Facility's procedures does not
constitute delivery to the Depositary.
Signature Guarantees.
No signature guarantee is required on the Letter of Transmittal (1) if
the Letter of Transmittal is signed by the registered holder(s) (which term, for
purposes of this section, includes any participant in the Book-Entry Transfer
Facility's system whose name appears on a security position listing as the owner
of the Shares) of Shares tendered therewith and such registered holder has not
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" on the Letter of Transmittal or (2) if
such Shares are tendered for the account of a financial institution (including
most commercial banks, savings and loan associations and brokerage houses) that
is a participant in the Security Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (each, an "Eligible Institution" and, collectively, "Eligible
Institutions"). In all other cases, all signatures on Letters of Transmittal
must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the
Letter of Transmittal. If the Share Certificates are registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made, or Share Certificates not tendered or not accepted for payment are to
be returned, to a person other than the registered holder of the certificates
surrendered, then the tendered Share Certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered holders or owners appear on the certificates,
with the signatures on the certificates or stock powers guaranteed as aforesaid.
See Instructions 1 and 5 to the Letter of Transmittal. If the Share Certificates
are forwarded separately to the Depositary, a Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, together with any
required signature guarantees, must accompany each such delivery.
Guaranteed Delivery.
If a shareholder desires to tender Shares pursuant to the Offer and
such shareholder's Share Certificates are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis or time
will not permit all required documents to reach the Depositary prior to the
Expiration Date, such shareholder's tender may be effected if all the following
conditions are met:
(1) such tender is made by or through an Eligible Institution;
(2) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Company,
is received by the Depositary, as provided below, prior to the
Expiration Date; and
19
(3) within three trading days after the date of execution of such
Notice of Guaranteed Delivery (i) Share Certificates
representing tendered Shares are received by the Depositary at
one of its addresses set forth on the back cover of this Offer
to Purchase, or such Shares are tendered pursuant to the
book-entry transfer procedures and a Book-Entry Confirmation
is received by the Depositary, (ii) the Letter of Transmittal
(or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or
an Agent's Message in connection with a book-entry transfer of
Shares, is received by the Depositary at one of such addresses
and (iii) any other documents required by the Letter of
Transmittal are received by the Depositary at one of such
addresses. The Notice of Guaranteed Delivery may be delivered
by hand to the Depositary or transmitted by telegram,
facsimile transmission or mailed to the Depositary and must
include a guarantee by an Eligible Institution in the form set
forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted
for payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (1) Share Certificates representing tendered Shares
or a Book-Entry Confirmation, (2) a Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, together with any required
signature guarantees, or an Agent's Message in connection with a book entry
transfer of Shares and any other documents required by the Letter of
Transmittal. Accordingly, payment might not be made to all tendering
shareholders at the same time, and will depend upon when Share Certificates
representing, or Book-Entry Confirmations of, such Shares are received into the
Depositary's account at the Book-Entry Transfer Facility.
Backup U.S. Federal Income Tax Withholding.
Under the U.S. federal income tax laws, payments in connection with the
Offer (and a Short-Form Merger or Long-Form Merger, if consummated) may be
subject to "backup withholding" at a rate of 31% unless a shareholder that holds
Shares (1) provides a correct taxpayer identification number (which, for an
individual shareholder, is the shareholder's social security number) and any
other required information, or (2) is a corporation or comes within certain
other exempt categories and, when required, demonstrates this fact, and
otherwise complies with applicable requirements of the backup withholding rules.
A shareholder that does not provide a correct taxpayer identification number may
also be subject to penalties imposed by the Internal Revenue Service. To prevent
backup U.S. federal income tax withholding on payments with respect to the
purchase price of Shares purchased pursuant to the Offer (or converted into cash
in a Short-Form Merger or Long-Form Merger, if consummated), each shareholder
should provide the Depositary with his or her correct taxpayer identification
number by completing the Substitute Internal Revenue Service Form W-9 included
in the Letter of Transmittal. Non-corporate foreign shareholders should complete
and sign an applicable Internal Revenue Service Form W-8, Certificate of Foreign
Status (e.g., W-8BEN or W-8ECI), a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 of the
Letter of Transmittal.
Determination of Validity.
All questions as to the form of documents and validity, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Company, in its sole discretion, whose determination
will be final and binding on all parties. The Company reserves the absolute
right to reject any or all tenders determined by it not to be in proper form or
the acceptance of or payment for which may, in the opinion of the Company's
counsel, be unlawful. The Company also reserves the absolute right to waive any
defect or irregularity in any tender of Shares of any particular shareholder
whether or not similar defects or irregularities are waived in the case of other
shareholders without any effect on the rights of such other shareholders.
The Company's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. No tender of Shares will be deemed to have been validly made until
all defects and irregularities with respect to such tender have been cured or
waived. None of the Company, the Depositary, the Information Agent or any other
person will be under any duty to give any notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
20
Other Requirements.
The Company's acceptance for payment of Shares tendered pursuant to any
of the procedures described above will constitute a binding agreement between
the tendering shareholder and the Company upon the terms and subject to the
conditions of the Offer.
4. Withdrawal Rights.
Except as otherwise provided in this section, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time on or prior to the Expiration Date and, unless
theretofore accepted for payment as provided herein, may also be withdrawn at
any time after 40 business days following the commencement of the Offer. To be
effective, a notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of the Shares to be withdrawn, if different from the name of
the person who tendered the Shares. If Share Certificates evidencing Shares to
be withdrawn have been delivered or otherwise identified to the Depositary,
then, prior to the physical release of such certificates, the serial numbers
shown on such certificates must be submitted to the Depositary and, unless such
Shares have been tendered by an Eligible Institution, the signatures on the
notice of withdrawal must be guaranteed by an Eligible Institution. If Shares
have been delivered pursuant to the book-entry transfer procedures as set forth
in "--Procedures for Accepting the Offer and Tendering Shares," any notice of
withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares and
otherwise comply with the Book- Entry Transfer Facility's procedures.
Withdrawals of Shares may not be rescinded. Any Shares properly
withdrawn will be deemed not validly tendered for purposes of the Offer, but may
be retendered at any subsequent time prior to the Expiration Date by following
any of the procedures described in "--Procedures for Accepting the Offer and
Tendering Shares."
All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by the Company, in its sole
discretion, whose determination will be final and binding. None of the Company,
the Depositary, the Information Agent or any other person will be under any duty
to give any notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
5. Certain Information Concerning the Company.
The Company was incorporated in the State of California in 1978. The
Company became publicly held in October 1995. The principal executive offices of
the Company are located at 12711 Ventura Boulevard, Suite 400, Studio City,
California 91406 and its telephone number is (818) 766-8311. The Company is an
operator of New York deli-style restaurants and a gourmet market. The Company
currently operates 10 restaurants, including seven in Southern California
operating under the name "Jerry's Famous Deli," one in Southern California
operating under the name "Solley's" and two in Southern Florida operating under
the name "Wolfie Cohen's Rascal House." The Company also operates The Epicure
Market, a specialty gourmet market located in Miami Beach, Florida.
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Such reports, proxy statements
and other information can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's regional offices located at
Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Information regarding the public reference facilities may be obtained from the
Commission by telephoning 1-800-SEC-0330. The Company's filings are also
available to the public on the Commission's Internet site (http://www.sec.gov).
Copies of such materials also may be obtained by mail from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates.
21
6. Price Range of the Shares.
From October 22, 1995 and until February 2, 2000, the Company's Common
Stock was traded on the Nasdaq National Market. Commencing February 3, 2000, the
Company's Common Stock has been traded on the Nasdaq SmallCap Market. The high
and low sales prices for the Common Stock during the eight most recent quarters
are as follows:
High Low
---- ---
March 31, 1999 $6.19 $2.63
June 30, 1999 $4.78 $3.00
September 30, 1999 $4.50 $2.63
December 31, 1999 $3.19 $1.69
March 31, 2000 $6.66 $1.88
June 30, 2000 $4.00 $1.69
September 30, 2000 $4.88 $3.50
December 31, 2000 $4.63 $1.16
The share prices reported above and elsewhere herein are as adjusted
for the one-for three reverse stock split completed in February 2000. On April
2, 2001, the closing sale price for the Common Stock reported on the Nasdaq
SmallCap Market was $3.75 per share. The Company's Common Stock is traded on the
Nasdaq SmallCap Market under the symbol "DELI." As of April 2, 2001, there were
132 shareholders of record of the Common Stock.
The Company has not paid any dividends since it became a public company
and will likely not pay any cash dividends in respect of the Common Stock in the
future, although all strategic issues are under review. In addition, the
Company's line of credit with Fleet National Bank requires the bank's consent
before the payment of any dividends, which consent may not be unreasonably
withheld. The Bank has agreed to permit the Company to use a portion of its
existing line of credit to fund the repurchase of Shares in this Offer.
7. Certain Information Concerning the Company.
This Offer is made by the Company. The principal executive offices of
the Company are located at 12711 Ventura Boulevard, Suite 400, Studio City,
California 91406 and its telephone number is (818) 766-8311.
The executive officers and directors of the Company, the identities of
the Control Shareholders and the executive officers and directors of the Control
Shareholders who are not natural persons are listed below, along with a brief
statement of the business and background of each person and entity:
Name and Address Nature of Affiliation Business and Background
- ---------------- --------------------- -----------------------
Isaac Starkman Chairman and Chief Executive Chairman and Chief Executive
12711 Ventura Boulevard Officer of the Company Officer of the Company since
Suite 400 1979
Studio City, California 91604
Guy Starkman President of the Company Director of Operations 1989-
12711 Ventura Boulevard 1995; Vice President 1995-2001;
Suite 400 President January 1, 2001 to
Studio City, California 91604 present
22
Jason Starkman Director of Management Director of Management
12711 Ventura Boulevard Information Systems of the Information Systems since 1992;
Suite 400 Company Vice President 1995 to present
Studio City, California 91604
Christina Sterling Chief Financial Officer of the Chief Financial Officer since
12711 Ventura Boulevard Company 1978
Suite 400
Studio City, California 91604
Ami Saffron Director of Development and Restaurant food service
12711 Ventura Boulevard Vice President of the Company supervisor since 1991; Vice
Suite 400 President and Director of
Studio City, California 91604 Development since 1995
Kenneth Abdalla Director Director of the Company since
9130 West Sunset Boulevard 1996; President of the Company
Los Angeles, CA 90069 from 1997 until 2000; founder
and managing member of
Waterton Management, LLC, a
private investment firm
established in 1995.
Paul Gray Director Director of the Company since
12711 Ventura Boulevard 1995; founder, President and tax
Suite 400 partner of Brenner, Gray and
Studio City, California 91604 Associates since 1988
Stanley Schneider Director Director of the Company since
12711 Ventura Boulevard 1995; founder and managing
Suite 400 partner of Gursey, Schneider &
Studio City, California 91604 Co. LLP since 1964
Jonathan Mitchell Control Shareholder General Partner, Mitchell Equity
11601 Wilshire Boulevard, Suite Investments and President of the
2460 Edward D. and Anna Mitchell
Los Angeles, California 90025 Family Foundation
The Starkman Family Trust Control Shareholder California Family Trust of Isaac
12711 Ventura Boulevard and Carolyn Starkman
Suite 400
Studio City, California 91604
Mitchell Equity Investments Control Shareholder California limited partnership
11601 Wilshire Boulevard, Suite controlled by Jonathan Mitchell
2460 and his affiliates
Los Angeles, California 90025
Mitchell Hospitality Investments Control Shareholder Delaware limited liability
11601 Wilshire Boulevard, Suite company wholly owned by
2460 Mitchell Equity Investments
Los Angeles, California 90025
Edward D. & Anna Mitchell Family Control Shareholder Delaware non-profit corporation
Foundation controlled by Jonathan Mitchell
23
11601 Wilshire Boulevard, Suite 2460 and other Mitchell family members
Los Angeles, California 90025
Jerry's Investors, LLC Control Shareholder private Delaware investment
9130 West Sunset Boulevard limited liability company
Los Angeles, CA 90069 controlled by Kenneth Abdalla
Yucaipa Waterton Deli Investors, Control Shareholder private Delaware investment
LLC limited liability company
9130 West Sunset Boulevard controlled by Kenneth Abdalla
Los Angeles, CA 90069
Waterton Management, LLC Control Shareholder private Delaware investment
9130 West Sunset Boulevard limited liability company
Los Angeles, CA 90069 controlled by Kenneth Abdalla
Ronald W. Burkle Foundation Control Shareholder California family foundation of
which Kenneth Abdalla is a
Director
8. Source and Amount of Funds.
The total amount of funds required for the Company to purchase all of
the outstanding Shares (other than the Shares owned by the Company) pursuant to
the Offer and, if consummated, a Short-Form Merger or Long-Form-Merger, and to
pay fees and expenses related thereto is estimated to be approximately
$3,300,000. The Company plans to obtain all funds needed for the Offer from an
existing line of credit and cash flow from operations.
9. Effect of the Offer on the Market for the Shares; Nasdaq Stock Market
Listing; Exchange Act Registration; Margin Regulations.
Nasdaq Stock Market Listing.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and could reduce the number of
holders of Shares, which could adversely affect the liquidity and market value
of the remaining Shares held by the public. According to the Nasdaq's published
guidelines, the Nasdaq would consider delisting the Shares if, among other
things, (1) the number of publicly held Shares (exclusive of holdings of
officers, directors and their families and other concentrated holdings of 10% or
more ("Nasdaq Excluded Holdings")) fell below 500,000, (2) the market value of
publicly held Shares is less than $1,000,000; or (3) the total number of
shareholders is less than 300. If, as result of the purchase of Shares pursuant
to the Offer or otherwise, the Shares no longer meet the requirements of the
Nasdaq for continued listing and the listing of the Shares is discontinued, the
market for the Shares could be adversely affected. If the Nasdaq were to delist
the Shares, it is possible that the Shares would continue to trade in the
over-the-counter market and that price or other quotations would be reported
through the Nasdaq Stock Market or other sources. The extent of the public
market therefor and the availability of such quotations would depend, however,
upon such factors as the number of shareholders and/or the aggregate market
value of such securities remaining at such time, the interest in maintaining a
market in the Shares on the part of securities firms, the possible termination
of registration under the Exchange Act as described below and other factors.
Margin Regulations.
The Shares are currently "margin securities" under the regulations of
the Federal Reserve Board, which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Depending upon factors
similar to those described above regarding listing and market quotations,
following the Offer, it is possible
24
that the Shares might no longer constitute "margin securities" for purposes of
the margin regulations of the Federal Reserve Board, in which event the Shares
could no longer be used as collateral for loans made by brokers.
Exchange Act Registration.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the Commission
if the Shares are not listed on a national securities exchange or quoted on the
Nasdaq Stock Market and there are fewer than 300 record holders of the Shares.
It should be noted that the Company currently has 132 shareholders of record,
such that it is currently eligible to deregister the Shares under the Exchange
Act, regardless of whether the Offer is completed. The termination of
registration of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to holders of Shares and to
the Commission and would make certain provisions of the Exchange Act, such as
the short-swing profit recovery provisions of Section 16(b) of the Exchange Act,
the requirement to furnish a proxy statement in connection with shareholders'
meetings pursuant to Section 14(a) of the Exchange Act, and the requirements of
Rule 13e-3 under the Exchange Act with respect to "going-private" transactions,
no longer applicable to the Company. See "SPECIAL FACTORS-- Purposes of the
Offer; Plans for the Company." In addition, "affiliates" of the Company and
persons holding "restricted securities" of the Company may be deprived of the
ability to dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended. If registration of the Shares under the
Exchange Act were terminated, the Shares would no longer be "margin securities"
or be eligible for listing on the Nasdaq.
Other Possible Purchases of Shares.
Whether or not the Offer is successfully completed, the Company may
acquire additional Shares in the open market or in privately negotiated
transactions. Such open market or privately negotiated purchases would be made
at market prices or privately negotiated prices at the time of purchase, which
may be higher or lower than the Offer Price. The purchase of Shares by the
Company pursuant to any open market or privately negotiated purchases would
reduce the number of Shares that might otherwise trade publicly and may reduce
the number of holders of Shares. This could adversely affect the liquidity and
market value of the remaining Shares held by the public. Depending upon the
aggregate market value and the number of Shares not purchased pursuant to the
Offer or any subsequent open market or privately negotiated purchases, as well
as the number of public shareholders who are not affiliated with the Company,
the Shares may no longer meet the quantitative requirements for continued
listing on the Nasdaq. Moreover, the purchase of Shares pursuant to open market
or privately negotiated purchases following consummation of the Offer may result
in the Shares becoming eligible for deregistration under the Exchange Act.
10. Certain Conditions to the Offer.
Notwithstanding any other provisions of the Offer, and in addition to
(and not in limitation of) the Company's rights to extend and amend the Offer at
any time, in its sole discretion, the Company shall not be required to accept
for payment or, subject to any applicable rules and regulations of the
Commission, including Rule 13e-4(f) under the Exchange Act (relating to the
Company's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of and accordingly the payment for, any tendered Shares, and may
terminate the Offer, if, in the sole judgment of the Company, at any time on or
after Expiration Date and before the time of payment for any such Shares, any of
the following events shall occur or shall be determined by the Company to have
occurred:
(a) a deficiency in the amount of retained earnings available to
repurchase all shares tendered for repurchase in the Offer as of the date the
shares are repurchased, in which event the Company may either: (i) not complete
the repurchase, or (ii) reduce the number of shares that are repurchased, on a
pro rata basis among all shareholders who have tendered their shares, to an
amount that may be purchased by the Company based on the amount of its retained
earnings on the date of repurchase.
(b) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, capitalization, shareholders' equity, condition
(financial or otherwise), operations, licenses, franchises, permits, permit
applications, results of operations
25
or prospects of the Company or any of its subsidiaries which, in the sole
judgment of the Company, is or may be materially adverse, or the Company shall
have become aware of any fact which, in the sole judgment of the Company, has or
may have material adverse significance with respect to either the value of the
Company or any of its subsidiaries or the value of the Shares to the Company;
(c) there shall be threatened, instituted or pending any action or
proceeding by any government or governmental authority or agency, domestic or
foreign, or by any other person, domestic or foreign, (1)(A) challenging or
seeking to make illegal, to delay or otherwise directly or indirectly to
restrain or prohibit the making of the Offer, the acceptance for payment of, or
payment for, some or all the Shares by the Company or the consummation by the
Company of a merger or other business combination with any affiliate of the
Control Shareholders, (B) seeking to obtain damages in connection therewith or
(C) otherwise directly or indirectly relating to the transactions contemplated
by the Offer or any such merger or business combination, (2) seeking to prohibit
the ownership or operation by the Company or any affiliate of the Control
Shareholders of all or any portion of the business or assets of the Company and
its subsidiaries or of the Company, or to compel the Company or any other
affiliate of the Control Shareholders to dispose of or hold separately all or
any portion of the business or assets of the Company or seeking to impose any
limitation on the ability the Company or any affiliate of the Control
Shareholders to conduct their respective businesses or own such assets, (3)
seeking to impose or confirm limitations on the ability of the Company or any
affiliate of the Control Shareholders effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote any
Shares acquired by any such person on all matters properly presented to the
Company's shareholders, (4) seeking to require divestiture by the Company, or
any affiliate of the Control Shareholders of any Shares, (5) seeking any
material diminution in the benefits expected to be derived by the Company as a
result of the transactions contemplated by the Offer or any other business
combination with the Company, (6) which otherwise, in the sole judgment of the
Company, might materially adversely affect the Company or the value of the
Shares or (7) in the sole judgment of the Company, materially adversely
affecting the business, properties, assets, liabilities, capitalization,
shareholders' equity, condition (financial or otherwise), operations, licenses
or franchises, results of operations or prospects of the Company or any of its
subsidiaries, joint ventures or partnerships;
(d) there shall be any action taken or any statute, rule, regulation,
interpretation, judgment, order or injunction proposed, enacted, enforced,
promulgated, amended, issued or deemed applicable (1) to the Company or any
Control Shareholders or (2) to the Offer or other merger or business combination
by the Company or any affiliate of the Control Shareholders with the Company, by
any court, government or governmental, administrative or regulatory authority or
agency, domestic or foreign, which, in the sole judgment of the Company, might
directly or indirectly result in any of the consequences referred to in clauses
(1) through (7) of paragraph (b) above;
(e) there shall have occurred (1) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange or
in the over-the-counter market in the United States, for a period in excess of
three hours (excluding suspensions or limitations resulting solely from physical
damage or interference with any such exchange or market not related to market
conditions), (2) a declaration of a banking moratorium or any suspension of
payments in respect of banks by federal or state authorities in the United
States, (3) any limitation (whether or not mandatory) by any governmental
authority or agency on, or other event which, in the sole judgment of the
Company, might materially adversely affect the extension of credit by banks or
other lending institutions, (4) commencement of a war, armed hostilities or
other national or international calamity directly or indirectly involving the
United States, (5) a material change in United States dollar or any other
currency exchange rates or a suspension of, or limitation on, the markets
therefor, (6) any change in the general political, market, economic or financial
conditions in the United States or other jurisdictions in which the Company does
business that could, in the sole judgment of the Company, have a material
adverse effect on the business, properties, assets, liabilities, capitalization,
shareholders' equity, condition (financial or otherwise), operations, licenses
or franchises, results of operations or prospects of the Company or any of its
subsidiaries, joint ventures or partnerships or the trading in, or value of, the
Shares, or (7) in the case of any of the foregoing existing on the commencement
date of the Offer, a material acceleration or worsening thereof;
(f) a tender or exchange offer for any Shares shall be made or publicly
proposed to be made by any other person or it shall be publicly disclosed or the
Company shall otherwise learn that (1) any person, entity or "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) shall have acquired or proposed
to acquire beneficial ownership of more than 5% of any class or series of
capital stock of the Company (including the Shares),
26
through the acquisition of stock, the formation of a group or otherwise, or
shall have been granted any right, option or warrant, conditional or otherwise,
to acquire beneficial ownership of more than 5% of any class or series of
capital stock of the Company (including the Shares) other than acquisitions for
bona fide arbitrage purposes only and except as disclosed in a Schedule 13D or
Schedule 13G on file with the Commission on the date of this Offer to Purchase,
(2) any such person, entity or group, which before the date of this Offer to
Purchase, had filed such a Schedule with the Commission has acquired or proposes
to acquire, through the acquisition of stock, the formation of a group or
otherwise, beneficial ownership of an additional 1% or more of any class or
series of capital stock of the Company (including the Shares), or shall have
been granted any right, option or warrant, conditional or otherwise, to acquire
beneficial ownership of an additional 1% or more of any class or series of
capital stock of the Company (including the Shares), (3) any person or group
shall enter into a definitive agreement or an agreement in principle or make a
proposal with respect to a tender offer or exchange offer or a merger,
consolidation or other business combination with or involving the Company, or
(4) any person shall file a Notification and Report Form under the HSR Act, or
make a public announcement reflecting an intent to acquire the Company or any
assets or securities of the Company;
(g) the Company shall have entered into a definitive agreement or
announced an agreement in principle with a third party providing for a merger or
other business combination with the Company or the purchase of stock or assets
of the Company which does not contemplate the Offer; or
(h) (1) any material contractual right of the Company or any of its
subsidiaries or affiliates shall be impaired or otherwise adversely affected or
any material amount of indebtedness of the Company or any of its subsidiaries,
joint ventures or partnerships shall be the subject of a default or accelerated
or otherwise become due before its stated due date (whether due to a mandatory
"offer to purchase" or otherwise), in either case, with or without notice or the
lapse of time or both, whether or not as a result of the transactions
contemplated by the Offer or (2) any covenant, term or condition in any of the
Company's or any of its subsidiaries', joint ventures' or partnerships'
instruments or agreements, in the sole judgment of the Company, may have a
material adverse effect on (A) the business, properties, assets, liabilities,
capitalization, shareholders' equity, condition (financial or otherwise),
operations, licenses or franchises, results of operations or prospects of the
Company or any of its subsidiaries, joint ventures or partnerships or (B) the
value of the Shares in the hands of the Company (including, but not limited to,
any event of default that may ensue as a result of the consummation of the
Offer).
The foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company, in its sole discretion, regardless of the
circumstances (including any action or omission by the Company) giving rise to
any such conditions or may be waived by the Company, in its sole discretion, in
whole or in part, at any time and from time to time. The failure by the Company
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time. Any determination by the Company
concerning any condition or event described in this section shall be final and
binding upon all parties.
11. Certain Legal Matters; Litigation; Required Regulatory Approvals.
General.
Except as set forth in this Offer to Purchase, based on its review of
publicly available filings by the Company with the Commission and other publicly
available information regarding the Company, the Company is not aware of any
licenses or regulatory permits that would be material to the business of the
Company and its subsidiaries, taken as a whole, and that might be adversely
affected by the Company's acquisition of Shares (and the indirect acquisition of
the stock of the Company's subsidiaries) as contemplated herein, or, except to
the extent required by any foreign regulatory authorities, any filings,
approvals or other actions by or with any domestic, foreign or supranational
governmental authority or administrative or regulatory agency that would be
required prior to the acquisition of Shares (or the indirect acquisition of the
stock of the Company's subsidiaries) by the Company pursuant to the Offer as
contemplated herein. Should any such approval or other action be required, there
can be no assurance that any such additional approval or action, if needed,
would be obtained without substantial conditions or that adverse consequences
might not result to the Company's business, or that certain parts of the
Company's business might not have to be disposed of or held separate or other
substantial conditions complied with in order to
27
obtain such approval or action or in the event that such approvals were not
obtained or such actions were not taken. The Company's obligation to purchase
and pay for Shares is subject to certain conditions which may be applicable
under such circumstances. See the "INTRODUCTION" and "--Certain Conditions to
the Offer."
Pending Litigation.
There is no pending litigation in connection with the Offer. The
Company is named as a party from time to time in litigation in the ordinary
course of its business, but no pending litigation would have any impact on the
Company's ability to complete the Offer.
12. Certain Fees and Expenses.
D. F. King & Co., Inc. has been retained by the Company as Information
Agent in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, telex, telegraph and personal interview and may
request brokers, dealers and other nominee shareholders to forward material
relating to the Offer to beneficial owners. Customary compensation will be paid
for all such services in addition to reimbursement of reasonable out-of-pocket
expenses. The Company has agreed to indemnify the Information Agent against
certain liabilities and expenses, including liabilities under the federal
securities laws.
In addition, U.S. Stock Transfer Corporation has been retained by the
Company as the Depositary. The Depositary has not been retained to make
solicitations or recommendations in its role as Depositary. The Depositary will
receive reasonable and customary compensation for its services in connection
with the Offer, will be reimbursed for its reasonable out-of-pocket expenses,
and will be indemnified against certain liabilities and expenses in connection
therewith.
The following table presents the estimated fees and expenses to be
incurred by the Company in connection with the Offer:
Legal Fees and Expenses .................... $ 80,000
Printing and Mailing ....................... $ 20,000
Filing Fee ................................. $ 1,000
Depositary Fees ............................ $ 8,500
Information Agent .......................... $ 20,000
Miscellaneous .............................. $ 20,000
--------
Total ...................................... $149,500
Except as set forth above, the Company will not pay any fees or
commissions to any broker, dealer or other person (other than the Information
Agent) for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers,
commercial banks and trust companies and other nominees will, upon request, be
reimbursed by the Company for customary clerical and mailing expenses incurred
by them in forwarding materials to their customers.
13. Miscellaneous.
The Company is not aware of any jurisdiction where the making of the
Offer is prohibited by any administrative or judicial action pursuant to any
valid state statute. If the Company becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of the Shares pursuant
thereto, the Company will make a good faith effort to comply with such state
statute. If, after such good faith effort the Company cannot comply with any
such state statute, the Offer will not be made to (nor will tenders be accepted
from or on behalf of) the holders of Shares in such state. In any jurisdiction
where the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of the
Company by one or more registered brokers or dealers which are licensed under
the laws of such jurisdiction.
28
No person has been authorized to give any information or make any
representation on behalf of the Company not contained in this Offer to Purchase
or in the Letter of Transmittal, and if given or made, such information or
representation must not be relied upon as having been authorized.
The Company has filed with the Commission a Tender Offer Statement on
Schedule TO, together with exhibits, pursuant to Rule 13e-4 of the General Rules
and Regulations under the Exchange Act, furnishing certain additional
information with respect to the Offer, and may file amendments thereto. Such
Schedule TO and any amendments thereto, including exhibits, may be examined and
copies may be obtained from the offices of the Commission in the same manner as
described in "THE TENDER OFFER--Certain Information Concerning the Company" with
respect to information concerning the Company, except that they will not be
available at the regional offices of the Commission.
April 27, 2001 JERRY'S FAMOUS DELI, INC.
29
SCHEDULE A
CHAPTER 13 OF THE GENERAL CORPORATION LAW
OF THE STATE OF CALIFORNIA
ss 1300. Shareholder in short-form merger; Purchase at fair market value;
"Dissenting shares"; "Dissenting shareholder"
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) or (f) of Section 1201, each shareholder of the corporation
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which
come within all of the following descriptions: (1) Which were not immediately
prior to the reorganization or short-form merger either (A) listed on any
national securities exchange certified by the Commissioner of Corporations under
subdivision (o) of Section 25100 or (B) listed on the National Market System of
the NASDAQ Stock Market, and the notice of meeting of shareholders to act upon
the reorganization summarizes this section and Sections 1301, 1302, 1303 and
1304; provided, however, that this provision does not apply to any shares with
respect to which there exists any restriction on transfer imposed by the
corporation or by any law or regulation; and provided, further, that this
provision does not apply to any class of shares described in subparagraph (A) or
(B) if demands for payment are filed with respect to 5 percent or more of the
outstanding shares of that class. (2) Which were outstanding on the date for the
determination of shareholders entitled to vote on the reorganization and (A)
were not voted in favor of the reorganization or, (B) if described in
subparagraph (A) or (B) of paragraph (1)(without regard to the provisos in that
paragraph), were voted against the reorganization, or which were held of record
on the effective date of a short-form merger; provided, however, that
subparagraph (A) rather than subparagraph (B) of this paragraph applies in any
case where the approval required by Section 1201 is sought by written consent
rather than at a meeting. (3) Which the dissenting shareholder has demanded that
the corporation purchase at their fair market value, in accordance with Section
1301. (4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
ss 1301. Notice to holder of dissenting shares of reorganization approval;
Demand for purchase of shares; Contents of demand
(a) If, in the case of a reorganization, any shareholders of a
corporation have a right under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to
purchase their shares for cash, such corporation shall mail to each such
shareholder a notice of the approval of the reorganization by its outstanding
shares (Section 152) within 10 days after the date of such approval, accompanied
by a copy of Sections 1300, 1302, 1303, 1304 and this section, a statement of
the price determined by the corporation to represent the fair market value of
the dissenting shares, and a brief description of the procedure to be followed
if the shareholder desires to exercise the shareholder's right under such
sections. The statement of price constitutes an offer by the corporation to
purchase at the price stated any dissenting shares as defined in subdivision (b)
of Section 1300, unless they lose their status as dissenting shares under
Section 1309.
(b) Any shareholder who has a right to require the corporation to
purchase the shareholder's shares for cash under Section 1300, subject to
compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who
desires the corporation to purchase such shares shall make written demand upon
the corporation for the purchase of such shares and payment to the shareholder
in cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i)
A-1
or (ii) of paragraph (1) of subdivision (b) of Section 1300 (without regard to
the provisos in that paragraph), not later than the date of the shareholders'
meeting to vote upon the reorganization, or (2) in any other case within 30 days
after the date on which the notice of the approval by the outstanding shares
pursuant to subdivision (a) or the notice pursuant to subdivision (i) of Section
1110 was mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
ss 1302. Stamping or endorsing dissenting shares
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
ss 1303. Dissenting shareholder entitled to agreed price with interest
thereon; When price to be paid
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair
market value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement.
ss 1304. Action by dissenters to determine whether shares are dissenting shares
or fair market value of dissenting shares or both; Joinder of
shareholders; Consolidation of actions; Determination of issues;
Appointment of appraisers
(a) If the corporation denies that the shares are dissenting shares, or
the corporation and the shareholder fail to agree upon the fair market value of
the shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be
joined as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues.
If the status of the shares as dissenting shares is in issue, the court shall
first determine that issue. If the fair market value of the dissenting shares is
in issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
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ss 1305. Duty and report of appraisers; Court's confirmation of report;
Determination of fair market value by court; Judgment, and payment;
Appeal; Costs of action
(a) If the court appoints an appraiser or appraisers, they shall
proceed forthwith to determine the fair market value per share. Within the time
fixed by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of any
party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be
rendered against the corporation for payment of an amount equal to the fair
market value of each dissenting share multiplied by the number of dissenting
shares which any dissenting shareholder who is a party, or who has intervened,
is entitled to require the corporation to purchase, with interest thereon at the
legal rate from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
ss 1306. Prevention of payment to holders of dissenting shares of fair
market value; Effect
To the extent that the provisions of Chapter 5 prevent the payment to
any holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
ss 1307. Disposition of dividends upon dissenting shares
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
ss 1308. Rights and privileges of dissenting shares; Withdrawal of demand for
payment
Except as expressly limited in this chapter, holders of dissenting
shares continue to have all the rights and privileges incident to their shares,
until the fair market value of their shares is agreed upon or determined. A
dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto.
ss 1309. When dissenting shares lose their status
Dissenting shares lose their status as dissenting shares and the
holders thereof cease to be dissenting shareholders and cease to be entitled to
require the corporation to purchase their shares upon the happening of any of
the following:
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(a) The corporation abandons the reorganization. Upon abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for conversion
into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon
the status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
ss 1310. Suspension of proceedings for compensation or valuation pending
litigation
If litigation is instituted to test the sufficiency or regularity of
the votes of the shareholders in authorizing a reorganization, any proceedings
under Sections 1304 and 1305 shall be suspended until final determination of
such litigation.
ss 1311. Shares to which chapter inapplicable
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
ss 1312. Attack on validity of reorganization or short-form merger; Rights of
shareholders; Burden of proof
(a) No shareholder of a corporation who has a right under this chapter
to demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders
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of the controlled party, and (2) a person who controls two or more parties to a
reorganization shall have the burden of proving that the transaction is just and
reasonable as to the shareholders of any party so controlled.
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Facsimile copies of the Letter of Transmittal, properly completed and
duly executed, will be accepted. The Letter of Transmittal, certificates for
Shares and any other required documents should be sent or delivered by each
shareholder of the Company or his broker, dealer, commercial bank, trust company
or other nominee to the Depositary at one of its addresses set forth below:
The Depositary for the Offer is:
U.S. STOCK TRANSFER CORPORATION
By Mail: By Hand: By Overnight Delivery:
U.S. Stock Transfer Corp. U.S. Stock Transfer Corp. U.S. Stock Transfer Corp.
1745 Gardena Avenue 1745 Gardena Avenue 1745 Gardena Avenue
Suite 200 Suite 200 Suite 200
Glendale, CA 91204 Glendale, CA 91204 Glendale, CA 91204
Attn: Transfer Department Attn: Transfer Department Attn: Transfer Department
If by Facsimile Transmission:
(For Eligible Institutions Only)
(818) 502-0674
Confirmation Receipt Of Facsimile By Telephone Only:
(818) 502-1404
Questions and requests for assistance may be directed to the
Information Agent at the address and telephone numbers listed below. Additional
copies of this Offer to Purchase, the Letter of Transmittal and other tender
offer materials may be obtained from the Information Agent, and will be
furnished promptly at the Company's expense. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
D. F. KING & CO., INC.
77 Water Street, 20th Floor
New York, New York 10005
Banks and brokers call collect: (212) 269-5550
All others please call toll free: (800) 848-3094