Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Related Preferred Stock Purchase Rights)
of
Quality Dining, Inc.
at
$5.00 Net Per Share
by
QDI Acquisition LLC
a wholly-owned subsidiary of
NBO, LLC
--------------------------------------------------------------------------------
The Offer and withdrawal rights will expire at 12:00
midnight, New York City time, on Monday, June 5,
2000, unless the Offer is extended. The Offer
is subject to certain conditions.
--------------------------------------------------------------------------------
A summary of the principal terms of the Offer appears on pages
(ii) through (v). You should read this entire document carefully before deciding
whether to tender your shares.
----------------
TABLE OF CONTENTS
Page
SUMMARY TERM SHEET...........................................................ii
INTRODUCTION..................................................................2
Merger And Plans..............................................................2
Certain Conditions To The Offer...............................................3
THE OFFER.....................................................................7
1. Terms of the Offer; Expiration Date..................................7
2. Acceptance for Payment and Payment...................................9
3. Procedures for Accepting the Offer and Tendering Shares.............10
4. Withdrawal Rights...................................................13
5. Certain Federal Income Tax Consequences.............................14
6. Price Range of the Shares...........................................14
7. Effect of the Offer on the Market for the Shares; Stock
Exchange Listing; Exchange Act Registration; Margin
Regulations.........................................................15
8. Certain Information Concerning the Company..........................16
9. Certain Information Concerning Purchaser and Parent.................17
10. Background of the Offer; Contacts with the Company..................18
11. Purpose of the Offer and the Proposed Merger; Plans
for the Company.....................................................21
12. Source and Amount of Funds..........................................30
13. Dividends and Distributions.........................................31
14. Certain Conditions of the Offer.....................................32
15. Certain Legal Matters; Required Regulatory Approvals................33
16. Certain Fees and Expenses...........................................34
17. Miscellaneous.......................................................34
Schedule I
MEMBERS OF PARENT
i
SUMMARY TERM SHEET
This summary term sheet is a brief summary of the material provisions
of the Offer being made by QDI Acquisition LLC, and is meant to help you
understand the Offer. This summary term sheet is not meant to be a substitute
for the information contained in the remainder of this Offer to Purchase, and
the information contained in this summary is qualified in its entirety by the
▇▇▇▇▇▇ descriptions and explanations contained in the later pages of this Offer
to Purchase. You are urged to carefully read the entire Offer to Purchase and
related Letter of Transmittal prior to making any decision regarding whether to
tender your shares.
Q. Who is offering to purchase my shares of common stock of Quality
Dining, Inc.?
A. QDI Acquisition LLC, a Delaware limited liability company formed
solely to make the Offer, is offering to purchase your Quality Dining shares.
QDI Acquisition LLC is a wholly-owned subsidiary of NBO, LLC, a Michigan limited
liability company that is a holding company in the business of investing in the
securities of Quality Dining. See "Introduction" and Section 9.
Q. What is QDI Acquisition seeking to purchase, at what price, and do I
have to pay any brokerage or similar fees to tender?
A. QDI Acquisition is offering to purchase all of the outstanding
shares of common stock of Quality Dining, at a price of $5.00 per share to the
seller in cash without interest. If you are the record owner of your shares, you
will not have to pay any brokerage or similar fees. However, if you own your
shares through a broker or other nominee, your broker or nominee may charge you
a fee to tender. You should consult your broker or nominee to determine whether
any charges will apply. See "Introduction" and Section 9.
Q. Why is QDI Acquisition making this Offer?
▇. ▇▇▇ Acquisition is making this Offer because NBO wants to acquire
control of Quality Dining. See "Introduction" and Section 11.
Q. How long do I have to decide whether to tender into the Offer?
A. You have until 12:00 midnight, New York City time, on June 5, 2000.
Under certain circumstances, the Offer may be extended. If the Offer is
extended, we will issue a press release announcing the extension on or before
the first business morning following the date the Offer was scheduled to expire.
See Section 1.
Q. What are the most important conditions to the Offer?
A. The most important conditions to the Offer are the following:
o that Quality Dining shareholders validly tender and do not withdraw
before the expiration of the Offer enough shares of common stock of
Quality Dining that, when added to the shares already owned by QDI
Acquisition and NBO, QDI Acquisition and NBO will own at least a
majority of the outstanding shares of Quality Dining on a fully
diluted basis.
o that Quality Dining's Board of Directors redeem the preferred stock
purchase rights or make them inapplicable to QDI Acquisition's
Offer.
ii
o that Quality Dining's Board of Directors approve the acquisition of
shares by QDI Acquisition in the Offer pursuant to Chapter 43 of
the Indiana Business Corporation Law, so that QDI Acquisition can
consummate a proposed second step merger as soon as practicable
following consummation of the Offer, in which all remaining
shareholders of Quality Dining would receive $5.00 for each of
their Quality Dining shares.
o that Quality Dining's Board of Directors approve an amendment to
Quality Dining's by-laws or take other action to ensure that QDI
Acquisition will be able to vote the shares acquired in the Offer
without restriction or limitation under Chapter 42 of the Indiana
Business Corporation Law.
o that QDI Acquisition, in its sole discretion, is satisfied that the
proposed second step merger can be consummated without the need for
a supermajority vote of Quality Dining's shareholders pursuant to
Article VIII of Quality Dining's Restated Articles of
Incorporation.
o that Quality Dining's Board of Directors agree to cause a majority
of the Board of Directors to be comprised of representatives of QDI
Acquisition and/or NBO, LLC immediately following the consummation
of the Offer.
o that QDI Acquisition, in its sole discretion, is satisfied that
Quality Dining will not be in default under the terms of its
outstanding indebtedness upon consummation of the Offer and the
proposed merger.
A ▇▇▇▇▇▇ discussion of the conditions to consummation of the Offer may
be found in the Introduction and Section 14.
Q. Does QDI Acquisition have the financial resources to make the
payment?
A. NBO, LLC has received from a bank its commitment to lend, subject to
the conditions set forth in the commitment letter, up to $55 million to NBO LLC
or its wholly-owned subsidiary for the purpose of purchasing shares of Quality
Dining common stock pursuant to the Offer. If the conditions to funding under
such bank commitment are not satisfied, the bank otherwise fails to fund under
its commitment or the amount funded under the bank commitment is insufficient to
pay for all shares tendered pursuant to the Offer, members of NBO, LLC intend to
make capital contributions in amounts sufficient to allow QDI Acquisition to pay
for the purchase of all shares tendered pursuant to the Offer. See Section 12.
Q. Is your financial condition relevant to my decision to tender in the
Offer?
▇. ▇▇▇ Acquisition does not think its financial condition is relevant
to your decision whether to tender shares and accept the Offer because there is
a commitment from a bank as discussed above, the Offer is being made for all
outstanding shares solely for cash, the Offer is not conditioned on any
financing arrangements and, upon consummation of the Offer, QDI Acquisition
expects to acquire all shares that are not tendered for the same $5.00 cash
(without interest) price in the proposed merger. See "Introduction" and Sections
1, 11 and 12.
Q. How do I accept the Offer and tender my shares?
A. To tender your shares, you must completely fill out the enclosed
Letter of Transmittal and deliver it, along with your share certificates, to the
depositary identified in the Letter 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 Depository Trust
Company in time, you might 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 fully comply with its terms. See Section 3.
iii
Q. If I accept the Offer, when will I get paid?
A. Provided the conditions to the Offer are satisfied and QDI
Acquisition consummates the Offer and accepts your shares for payment, you will
receive a check equal to the number of shares you tendered multiplied by $5.00
as promptly as practicable following the expiration of the Offer. QDI
Acquisition expects that checks will be mailed out promptly following expiration
of the Offer. See Section 2.
Q. Can I withdraw my previously tendered shares?
A. You may withdraw a portion or all of your tendered shares by
delivering written, telegraphic or facsimile notice to the depositary prior to
the expiration of the Offer. Further, if QDI Acquisition has not agreed to
accept your shares for payment within 60 days of the commencement of the Offer,
you can withdraw them at any time after that 60-day period until QDI Acquisition
does accept your shares for payment. Once shares are accepted for payment, they
cannot be withdrawn. See Section 4.
Q. What does the Board of Directors of Quality Dining think of this
Offer?
A. Quality Dining's Board of Directors rejected an earlier proposal by
NBO to acquire all of the outstanding shares of Quality Dining through a merger
for $5.00 per share. We believe that Quality Dining's Board rejected our earlier
proposal without having obtained any independent third party analysis of such
proposal. Quality Dining's Board has not approved this Offer or otherwise
commented on it as of the date of mailing of this Offer to Purchase. Within ten
business days after the date of this Offer, Quality Dining is required by law to
publish, send or give to you (and file with the Securities and Exchange
Commission) a statement as to whether it recommends acceptance or rejection of
this Offer, that it has no opinion with respect to this Offer or that it is
unable to take a position with respect to this Offer.
Q. What will happen to Quality Dining?
A. If the Offer is consummated, QDI Acquisition intends to conclude a
proposed second step merger with Quality Dining in which Quality Dining would
become a wholly owned subsidiary of NBO and all shareholders of Quality Dining
who did not tender their shares would receive $5.00 in cash for each share. See
Section 11.
You should also be aware that, if the Offer is consummated, the number
of shareholders of Quality Dining may be so small that Quality Dining shares may
not be eligible for trading on the Nasdaq or any other national securities
exchange. Also, depending on the remaining number of shareholders, Quality
Dining may cease to comply with SEC rules governing publicly-held companies. See
Section 7.
Q. If I do not tender but the tender Offer is successful, what will
happen to my shares?
A. As indicated above, if the tender Offer is successful, QDI
Acquisition expects to conclude a merger transaction in which all remaining
shareholders of Quality Dining at the time of the proposed merger, other than
those that properly assert dissenter's rights (discussed immediately below and
in Section 11 below), will receive $5.00 per share in cash for each share of
Quality Dining common stock, without interest.
Q. Are dissenter's rights available in either the Offer or the proposed
merger?
A. Dissenter's rights are not available in the Offer. However, if you
choose not to tender and the Offer is consummated, dissenter's rights may be
available in the proposed Merger of QDI Acquisition and Quality Dining. If
dissenter's rights are available, you choose to exercise your dissenter's rights
and you comply with the applicable legal requirements, you will be entitled to
the fair value of your shares. The fair value may be more or less than $5.00 per
share.
iv
Dissenter's rights will not be available to shareholders in connection
with the proposed Merger if, at the date fixed to determine the shareholders
entitled to notice of and to vote on the proposed Merger, the Common Stock is
registered on a national securities exchange or traded on the Nasdaq National
Market System. See Section 11.
Q. What are the federal income tax consequences of the transaction?
A. The receipt of cash by you in exchange for your shares pursuant to
the Offer or the subsequent merger proposed by QDI Acquisition (or upon exercise
of dissenter's rights) is a taxable transaction for federal income tax purposes
and may also be a taxable transaction under applicable state, local or foreign
tax laws. In general, you will recognize capital gain or loss equal to the
difference between your adjusted tax basis in the shares you tender and the
amount of cash you receive for those shares. You should consult your tax advisor
about the particular effect tendering will have on your shares. See Section 5.
Q. What is the market value of my shares as of a recent date?
A. On May 8, 2000, the last trading day before the commencement of the
Offer, the shares of Quality Dining closed on the Nasdaq National Market System
at $2.875. Please obtain a recent quotation for your shares prior to deciding
whether or not to tender. See Section 6.
Q. Who can I call with questions?
A. You can call MacKenzie Partners, Inc., QDI Acquisition's Information
Agent, at (▇▇▇) ▇▇▇-▇▇▇▇ (collect) or (▇▇▇) ▇▇▇-▇▇▇▇ (toll-free) with any
questions you may have.
v
IMPORTANT
THE PARENT (AS DEFINED UNDER "INTRODUCTION" BELOW) INTENDS TO
SEEK TO NEGOTIATE WITH QUALITY DINING WITH RESPECT TO THE ACQUISITION OF THE
COMPANY BY THE PARENT OR THE PURCHASER (AS ALSO DEFINED BELOW). THERE CAN BE NO
ASSURANCE, HOWEVER, THAT QUALITY DINING WILL ENGAGE IN SUCH NEGOTIATIONS OR THAT
THE PARENT'S EFFORTS WILL RESULT IN AN AGREEMENT WITH QUALITY DINING. THE
PURCHASER AND THE PARENT RESERVE THE RIGHT TO AMEND THE OFFER, INCLUDING, BUT
NOT LIMITED TO, UPON ENTERING INTO A MERGER AGREEMENT WITH QUALITY DINING.
ACCORDINGLY, SUCH NEGOTIATIONS COULD RESULT IN, AMONG OTHER THINGS, TERMINATION
OF THE OFFER AND SUBMISSION OF A DIFFERENT ACQUISITION PROPOSAL TO QUALITY
DINING'S SHAREHOLDERS FOR THEIR APPROVAL.
Any shareholder desiring to tender all or any portion of such
shareholder's shares of common stock of Quality Dining and the associated Rights
(as defined under "Introduction" below) should either (a) complete and sign the
Letter of Transmittal (or a facsimile thereof) in accordance with the
instructions in the Letter of Transmittal, have such 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 book-entry transfer effected pursuant to the procedure set forth in Section
3, an Agent's Message (as defined herein), and any other required documents to
the Depositary and either deliver the certificates for such shares and, if
separate, the certificate(s) representing the associated Rights to the
Depositary along with the Letter of Transmittal (or facsimile thereof) or
deliver such shares (and Rights, if applicable) pursuant to the procedure for
book-entry transfer set forth in Section 3, or (b) request such shareholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such shareholder. A shareholder whose shares of common stock of
Quality Dining and, if applicable, Rights are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if such
shareholder desires to tender such shares and, if applicable, Rights. If a
Distribution Date (as defined in "Introduction--Conditions to the Offer--Rights
Condition") occurs, shareholders will be required to tender one Right for each
share tendered in order to effect a valid tender of such share.
A shareholder who desires to tender such shareholder's shares
of common stock of Quality Dining (and Rights, if applicable) and whose
certificates representing such shares (and Rights, if applicable) are not
immediately available or who cannot comply with the procedures for book-entry
transfer on a timely basis may tender such shares (and Rights, if applicable) by
following the procedures for guaranteed delivery set forth in Section 3.
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.
May 9, 2000
1
To: All Holders of Shares of Common Stock (Including the Related
Preferred Stock Purchase Rights) of Quality Dining, Inc.
INTRODUCTION
QDI Acquisition LLC ("Purchaser"), a Delaware limited
liability company and a wholly-owned subsidiary of NBO, LLC ("Parent"), a
Michigan limited liability company, hereby offers to purchase all outstanding
shares of common stock, without par value (the "Common Stock"), of Quality
Dining, Inc. (the "Company"), an Indiana corporation, and the related rights to
purchase shares of the Series B Participating Cumulative Preferred Stock of the
Company (the "Rights" and, together with the Common Stock, the "Shares") issued
pursuant to the Rights Agreement, dated as of March 27, 1997 by and between the
Company and KeyCorp Shareholder Services, Inc., as Rights Agent (as amended, the
"Rights Agreement"), at a price of $5.00 per Share, net to the seller in cash,
without interest thereon (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").
The members of the Parent are ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (collectively, the
"Schostaks"). The Purchaser, the Parent and the Schostaks are sometimes
collectively referred to herein as the "Acquirors".
Tendering shareholders will not be obligated to pay brokerage
fees or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by Purchaser
pursuant to the Offer. Shareholders who hold their Shares through a bank or
broker should check with such institution as to whether they will charge any
service fees. Purchaser will pay all charges and expenses of Wilmington Trust
Company, as Depositary (the "Depositary") and MacKenzie Partners, Inc. as
Information Agent (the "Information Agent"), incurred in connection with the
Offer. See Section 16.
Merger And Plans
The purpose of the Offer is for the Acquirors to acquire
control of, and ultimately the entire equity interest in, the Company. The
Offer, as the first step in the acquisition of the Company, is intended to
facilitate the acquisition of all outstanding Shares. The Parent currently
intends, promptly following consummation of the Offer, to seek to have the
Company consummate a merger or similar business combination with the Purchaser
or another direct or indirect wholly-owned subsidiary of the Parent (the
"Merger"), pursuant to which each then outstanding Share (other than Shares held
by the Purchaser, the Parent or any of their respective wholly-owned
subsidiaries, treasury shares and Shares held by shareholders who properly
exercise dissenter's rights available to them under Chapter 44 of the Indiana
Business Corporation Law (the "IBCL")) would be converted into the right to
receive in cash the price per Share paid by the Purchaser pursuant to the Offer
without interest. If the Purchaser and the Parent collectively own at least 90%
of the outstanding Shares following the consummation of the Offer or otherwise,
the Purchaser intends to attempt to effect the proposed Merger pursuant to the
"short-form merger" provisions of Section 23-1-40-4 of the IBCL immediately
following the purchase of Shares in the Offer.
Although the Purchaser will seek to have the Company
consummate the proposed Merger promptly after consummation of the Offer, if the
Board of Directors of the Company (the "Company Board") opposes the Offer and
the proposed Merger, certain terms of the Rights, and certain provisions of the
IBCL and the Company's Restated Articles of Incorporation (as amended, the
"Charter") and by-laws (as amended, the "By-Laws"), may affect the ability of
the Purchaser to obtain control of the Company and to effect the proposed
Merger. Accordingly, the timing and details of the proposed Merger will depend
on a variety of factors and legal requirements, actions of the Company Board,
the number of Shares (if any) acquired by the Purchaser pursuant to the Offer,
and whether the Minimum Condition, the Rights Condition, the Supermajority
Condition, the Business Combination Condition, the Control Share Condition, the
Director Majority Condition and the QDI Indebtedness Condition (each as defined
below),
2
and any other conditions set forth in Section 14 are satisfied or waived. There
can be no assurance that the Purchaser will be able to consummate the Offer or,
if the Offer is consummated, the Acquirors will be able to effectuate the
proposed Merger. See below and see Sections 11 and 14.
The Parent intends to seek to negotiate with the Company with
respect to the acquisition of the Company by the Parent or the Purchaser. There
can be no assurance, however, that the Parent's efforts will result in an
agreement with the Company. The Purchaser and the Parent reserve the right to
amend the Offer, including, but not limited to, upon entering into a merger
agreement with the Company. Accordingly, such negotiations could result in,
among other things, termination of the Offer and submission of a different
acquisition proposal to the Company's shareholders for their approval. See
Section 1 and Section 14. In addition, the Purchaser reserves the right to
acquire additional Shares after consummation of the Offer in open market
purchases, through a tender offer, in privately negotiated transactions or
otherwise, in order to obtain a sufficient number of Shares to effect a "short
form" merger without a vote of shareholders as described above, or otherwise to
assure approval of the transactions contemplated hereby.
Certain Conditions To The Offer
The Offer is subject to the fulfillment of certain conditions,
including the following:
Minimum Condition. Consummation of the Offer is conditioned
upon there being validly tendered and not withdrawn prior to the Expiration Date
(as defined in Section 1) that number of Shares (the "Minimum Number of Shares")
that, when added to the 1,200,000 Shares already beneficially owned by the
Purchaser and the Parent, would represent at least a majority of all outstanding
Shares on a fully diluted basis on the date of the purchase of Shares pursuant
to the Offer (the "Minimum Condition"). SUBJECT TO THE APPLICABLE RULES AND
REGULATIONS OF THE COMMISSION, THE PURCHASER RESERVES THE RIGHT, WHICH IT
PRESENTLY HAS NO INTENTION OF EXERCISING, TO WAIVE OR REDUCE THE MINIMUM
CONDITION AND TO ELECT TO PURCHASE, PURSUANT TO THE OFFER, FEWER THAN THE
MINIMUM NUMBER OF SHARES. SEE SECTION 1.
Upon the terms and subject to the conditions of the Offer, if
more than the Minimum Number of Shares are validly tendered on or prior to the
Expiration Date and not withdrawn in accordance with Section 4 of this Offer to
Purchase, the Purchaser will accept for payment and pay for all such Shares.
According to the Company's Form 10-Q for the quarterly period
ended February 20, 2000 (the "February 2000 Form 10-Q"), there were 12,285,103
Shares issued and outstanding as of March 20, 2000. According to the Company's
1999 Annual Report, there were exercisable options to purchase 330,843 Shares on
October 31, 1999. Based on the foregoing, there would be 12,615,946 Shares
outstanding on the date of purchase on a fully-diluted basis and the Minimum
Number of Shares would be 5,107,974 (after taking into account the 1,200,000
Shares that are beneficially owned by the Parent). However, the actual Minimum
Number of Shares will depend on the facts as they exist on the date of purchase.
Rights Condition. Consummation of the Offer is conditioned
upon the Rights having been redeemed by the Company Board, or the Purchaser
being satisfied, in its sole discretion, that the Rights have been invalidated
or are otherwise inapplicable to the Offer and to the proposed Merger (the
"Rights Condition"). The Rights are described in the Company's Registration
Statement on Form 8-A dated April 1, 1997 (the "Company 8-A"). The Rights
Agreement is appended as an exhibit thereto. See Section 11 for a more detailed
discussion of the Rights Agreement.
According to the Company 8-A, at any time prior to the earlier
of (i) such time as a person or group of affiliated persons has become an
"Acquiring Person" (as defined below), or (ii) the expiration of the Rights, the
Company may redeem the then outstanding Rights in whole, but not in part, at a
price of $.01 per Right.
3
Also according to the Company 8-A, until the earliest to occur
of (i) such time as the Company learns that a person or group (including any
affiliate or associate of such person or group) has acquired, or has obtained
the right to acquire, beneficial ownership of more than 15% of the outstanding
shares of Common Stock or that a person or group currently owning more than 15%
of the outstanding shares of Common Stock acquires more shares of Common Stock
without prior approval of the Company Board (such person or group being an
"Acquiring Person"), unless certain provisions exempting certain persons from
the definition of Acquiring Person apply, and (ii) the close of business on such
date, if any, as may be designated by the Company Board following the
commencement of, or first public disclosure of an intent to commence, a tender
or exchange offer for more than 15% of the outstanding shares of Common Stock
(the earliest of such dates being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the certificates representing Shares
(the "Share Certificates") outstanding as of the Record Date (as defined in
Section 11), by such Share Certificate. From and after the Distribution Date,
the Rights will separate from the Shares and the Shares Certificates.
Based on publicly available information, the Purchaser
believes that certificates representing the Rights (the "Rights Certificates")
have not been issued and the Rights are evidenced by the Share Certificates. The
Purchaser believes that as a result of the commencement of the Offer, the
Company Board will cause a Distribution Date to occur following such
commencement, or announcement, of the Offer, unless prior to the Distribution
Date the Company Board redeems the Rights or takes action to delay the
Distribution Date. See Section 11.
IF A DISTRIBUTION DATE OCCURS, SHAREHOLDERS WILL BE REQUIRED
TO TENDER ONE RIGHT FOR EACH SHARE TENDERED IN ORDER TO EFFECT A VALID TENDER OF
SHARES IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN SECTION 3. UNLESS THE
DISTRIBUTION DATE OCCURS, A TENDER OF SHARES WILL ALSO CONSTITUTE A TENDER OF
RIGHTS.
The Purchaser and the Parent believe that under the
circumstances of the Offer in light of the Company's performance for
shareholders, the Company Board should redeem the Rights (or amend the Rights
Agreement to make the Rights inapplicable to the Offer and the proposed Merger),
so that each shareholder can determine whether to accept or reject the Offer.
The Purchaser and the Parent have and are hereby again requesting that the
Company Board take such action. However, there can be no assurance that the
Company Board will redeem the Rights (or amend the Rights Agreement) which, as
noted, is a condition to the consummation of the Offer.
Supermajority Condition. Consummation of the Offer is
conditioned upon the Purchaser being satisfied, in its sole discretion, that the
proposed Merger can be consummated without the need for a supermajority vote of
the Company's shareholders pursuant to Article VIII of the Company's Charter
(the "Supermajority Condition").
Article VIII of the Charter provides that the affirmative vote
of the holders of at least two-thirds of the voting shares of Common Stock
entitled to vote on such matter and a majority of the voting shares of Common
Stock held by shareholders other than a "Related Person" (as defined in Section
11 below) are required for the approval or authorization of a "Business
Combination," which includes a merger involving the Company, between the Company
and any Related Person (the "Supermajority Voting Requirement"). However, the
Supermajority Voting Requirement does not apply under the following
circumstances: (i) if the proposed business combination is expressly approved by
at least two-thirds of the "Continuing Directors" (as defined in Section 11
below) or (ii) if certain "Fair Price" provisions (as discussed and defined in
Section 11) are satisfied. The Purchaser believes that it and the Parent
collectively will be deemed to be a Related Person for purposes of Article VIII
of the Charter upon consummation of the Offer. The Purchaser hereby requests
that the Company Board approve the proposed Merger by the requisite vote such
that the Supermajority Condition will be satisfied.
4
The foregoing summary of Article VIII of the Charter is
qualified by reference to the text thereof as filed by the Company with the
Securities and Exchange Commission (the "Commission") and which can be examined
or copies thereof obtained as set forth in Section 8 (except that copies thereof
may not be available at the regional offices of the Commission).
Business Combination Condition. Consummation of the Offer is
conditioned upon the acquisition of Shares pursuant to the Offer having been
approved by the Company Board pursuant to Chapter 43 of the IBCL (the "Business
Combination Statute") or the Purchaser being satisfied, in its sole discretion,
that the Business Combination Statute is invalid or otherwise inapplicable to
the Offer and the proposed Merger (the "Business Combination Condition").
The Proposed Merger is subject to the provisions of the IBCL,
including the Business Combination Statute. In general, the Business Combination
Statute prohibits public Indiana corporations from engaging in a "Business
Combination" (defined to include a variety of transactions, including mergers)
with an "Interested Shareholder" (defined generally as a person owning shares
entitled to cast at least 10% of the voting power of a corporation) for a period
of five years following the date the person became an Interested Shareholder,
unless before the person became an Interested Shareholder, the board of
directors of the corporation approved either the Business Combination or the
transaction in which the Interested Shareholder became an Interested
Shareholder. See Section 11 for a more detailed description of the Business
Combination Statute.
The Purchaser and the Parent are hereby requesting that the
Company Board adopt a resolution approving the Offer and the proposed Merger for
purposes of the Business Combination Statute. However, there can be no assurance
that the Company Board will do so.
Control Share Condition. Consummation of the Offer is
conditioned upon the Purchaser being able to vote the Shares acquired by it
pursuant to the Offer without restriction or limitation under Chapter 42 (the
"Control Share Acquisition Statute") of the IBCL (the "Control Share
Condition").
In general, the Control Share Acquisition Statute relates to
the acquisition by any person of voting power over voting shares of an "issuing
public corporation" (which term includes the Company) that would entitle such
person, after the acquisition of voting shares, to vote for the first time at
least 20%, 33-1/3% or 50% of the voting shares entitled to vote in an election
for directors of the corporation. Shares subject to a control share acquisition
are "control shares" and the person acquiring the control shares is an
"acquiring person." An Indiana Corporation my provide in its by-laws that it
will not be subject to the Control Share Acquisition Statute.
The language of the Control Share Acquisition Statute provides
that an acquiring person may not vote control shares unless, by separate vote, a
majority of both (i) all voting shares and (ii) all voting shares, excluding
control shares, permit the acquiring person to vote its control shares. Unless
the Purchaser has been accorded the right to vote the Shares acquired by it
pursuant to the Offer, the Shares acquired pursuant to the Offer will not have
voting rights and the Company may redeem the Shares at a price that could result
in a loss to the Purchaser. The Purchaser hereby requests that the Company Board
amend the By-laws or take such other action such that the Company is no longer
subject to the Control Share Acquisition Statute. For a more complete
description of the Control Share Acquisition Statute, see Section 11.
Director Majority Condition. Consummation of the Offer is
conditioned upon the Purchaser being satisfied, in its sole discretion, that
immediately following the consummation of the Offer, representatives of the
Purchaser and/or Parent will constitute a majority of the Company Board (the
"Director Majority Condition").
The Charter and the By-laws each provide for a classified
board of directors consisting of three classes of directors. In addition, the
Charter provides that directors may not be removed from office except for good
cause and then only with the affirmative vote of two-thirds of all outstanding
shares of Common Stock entitled to vote in the election of directors. The effect
of these provisions is to preclude the
5
Purchaser from gaining representation on the Company Board after consummation of
the Offer through the normal electoral process until the next annual meeting of
shareholders at the earliest. Furthermore, even with a majority of the
outstanding Common Stock, the Parent would be unable to gain a majority of the
Company Board until the 2002 annual meeting of shareholders due to the
classified board provisions in the Charter.
The Purchaser and the Parent are hereby requesting, and have
conditioned the Offer, upon the Company Board taking all actions necessary to
appoint representatives of the Purchaser to a majority of the directorships on
the Company Board as of the consummation of the Offer. However, there can be no
assurance that the Company Board will take such actions necessary to satisfy the
Director Majority Condition.
QDI Indebtedness Condition. Consummation of the Offer is
conditioned upon the Purchaser being satisfied, in its sole discretion, that,
upon consummation of the Offer and the proposed Merger, the Company will not be
in default under any instrument evidencing the Company's then outstanding
indebtedness (the "QDI Indebtedness Condition").
According to publicly available information regarding the
Company, a change of control resulting from consummation of the Offer would
result in a default under the Company's Third Amended Revolving Credit
Agreement, dated as of May 11, 1999 by and between the Company and GAGHC, Inc.
as Borrowers, Chase Bank of Texas, National Association, as Administrative
Agent, NBD Bank, N.A. as Documentation Agent, NationsBank, N.A. (South) as
Co-Agent, and the other "Banks" identified therein, as amended (the "Revolving
Credit Agreement"), unless consent to such change of control is obtained from
the lenders. Approximately $60,656,000 was outstanding under the Revolving
Credit Agreement as of October 31, 1999. In addition, according to publicly
available information regarding the Company, the proposed Merger would result in
a default under a mortgage facility with 34 spearate mortgage notes ( the
"Mortgage Facility") unless consent to such ▇▇▇▇▇▇ is obtained from the lenders.
Approximately $49,066,000 was outstanding under the Mortgage Facility as of
August 3, 1999. It is also possible that consummation of the offer could result
in a default under other indebtedness of the Company.
The Parent and the Purchaser will request the Company to
obtain or otherwise seek to obtain the requisite consents of lenders under
instruments evidencing the Company's indebtedness prior to the Expiration Date.
In the event that such consents are not obtained, the Parent may seek additional
financing so that, upon obtaining control of the Company, the Parent will be
able to cause the Company to refinance or redeem such indebtedness. Parent has
not made any determination to seek such additional financing and there can be no
assurance that it will do so. There can be no assurance that any such consents
or refinancing will be obtained.
CERTAIN OTHER CONDITIONS TO THE CONSUMMATION OF THE OFFER ARE
DESCRIBED IN SECTION 14.
THE OFFER IS NOT CONDITIONED ON PURCHASER OBTAINING FINANCING.
SEE SECTION 12.
OFFEROR RESERVES THE RIGHT (SUBJECT TO THE APPLICABLE RULES
AND REGULATIONS OF THE COMMISSION) TO AMEND OR WAIVE THE MINIMUM CONDITION, THE
RIGHTS CONDITION, THE BUSINESS COMBINATION CONDITION, THE CONTROL SHARE
CONDITION, THE SUPERMAJORITY CONDITION, THE DIRECTOR MAJORITY CONDITION, THE QDI
INDEBTEDNESS CONDITION AND ANY OTHER TERMS AND CONDITIONS OF THE OFFER. SEE
SECTIONS 1 AND 14.
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.
6
THE 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), Purchaser will accept for payment and thereby
purchase all Shares validly tendered and not withdrawn in accordance with the
procedures set forth in Section 4 on or prior to the Expiration Date (as
hereinafter defined). The term "Expiration Date" means 12:00 midnight, New York
City time, on Monday, June 5, 2000, unless and until Purchaser, in accordance
with the terms of the Offer, 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 once or more than once by Purchaser, will expire.
The Offer is conditioned upon satisfaction of the Minimum
Condition, the Rights Condition, the Supermajority Condition, the Business
Combination Condition, the Control Share Condition, the Director Majority
Condition, the QDI Indebtedness Condition and any other terms and conditions set
forth in Section 14.
The Purchaser reserves the right (but will not be obligated),
in accordance with applicable rules and regulations of the Commission, to amend
or waive the Minimum Condition or any other condition of the Offer. If the
Minimum Condition or any of the other conditions set forth in Section 14 have
not been satisfied by 12:00 midnight, New York City time, on Monday, June 5,
2000 (or any other time then set as the Expiration Date), the Purchaser may
elect to: (i) extend the Offer and, subject to applicable withdrawal rights,
retain all tendered Shares until the expiration of the Offer, as extended; (ii)
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 (iii)
terminate the Offer and not accept for payment or pay for any Shares and return
all tendered Shares to tendering shareholders.
If the Purchaser 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 in the manner specified below, 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. 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 12:00 midnight, New York City time. IF,
PRIOR TO THE EXPIRATION DATE, THE PURCHASER INCREASES THE CONSIDERATION BEING
PAID FOR SHARES ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER, THIS INCREASED
CONSIDERATION WILL BE PAID TO ALL SHAREHOLDERS WHOSE SHARES ARE PURCHASED
PURSUANT TO THE OFFER WHETHER OR NOT THE SHARES WERE TENDERED PRIOR TO THE
ANNOUNCEMENT OF THE INCREASE IN CONSIDERATION.
The Purchaser 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. There can be no assurance that the Purchaser will
exercise its right to extend the Offer. 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 the Shares.
Subject to any applicable rules and regulations of the
Commission, including Rule 14e-1(c) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") described below, Purchaser expressly reserves
the right to (a) delay acceptance for payment of or, payment for, any tendered
Shares (whether or not Purchaser has previously accepted any Shares for
payment), pending receipt of any regulatory or governmental approvals specified
in Section 15, (b) terminate or amend the Offer as to any
7
Shares not then paid for whether or not any Shares have theretofore been
accepted for payment if any of the conditions referred to in Section 14 has not
been satisfied or upon the occurrence of any of the events specified in Section
14 and which events continue in effect immediately prior to the expiration of
the Offer, or (c) waive any condition or otherwise amend the Offer in any
respect, in each case, by giving oral or written notice of such delay,
termination, waiver or amendment to the Depositary and other than in the case of
a waiver, by making a public announcement thereof. Purchaser acknowledges (i)
that Rule 14e-1(c) under the Exchange Act requires Purchaser to pay the
consideration offered or return the Shares tendered promptly after the
termination or withdrawal of the Offer and (ii) that Purchaser may not delay
acceptance for payment of, or payment for, any Shares (except as provided in
clause (a) of the preceding sentence) upon the occurrence of any of the
conditions specified in Section 14 without extending the period of time during
which the Offer is open.
If Purchaser extends the Offer or if Purchaser 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 Purchaser's rights under
the Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and
such Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described herein under Section 4. However, the
ability of Purchaser to delay the payment for Shares that Purchaser has accepted
for payment is limited by Rule 14e-1(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities deposited
by or on behalf of shareholders promptly after the termination or withdrawal of
such bidder's offer, unless such bidder elects to offer a subsequent offering
period (a "Subsequent Offering Period") under Rule 14d-11 under the Exchange Act
and pays for Shares tendered during the Offer and the Subsequent Offering Period
in accordance with Rule 14d-11.
Any such extension, delay, termination, waiver or amendment
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., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which Purchaser may
choose to make any public announcement, subject to applicable law (including
Rules 14d-4(d) and 14e-1(e) under the Exchange Act, which require that material
changes be promptly disseminated to holders of Shares in a manner reasonably
designed to inform such holders of such change), Purchaser currently intends to
make announcements by issuing a press release to Business Wire.
If Purchaser makes a material change in the terms of the
Offer, or if it waives a material condition to the Offer, Purchaser will extend
the Offer and disseminate additional tender offer materials to the extent
required by Rules 14d-4(d) and 14e-1 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 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 ten business day period from the date of such change is generally
required to allow for adequate dissemination to shareholders.
Pursuant to Rule 14d-11 under the Exchange Act, Purchaser may,
subject to certain conditions, include a Subsequent Offering Period following
the expiration of the Offer on the Expiration Date. Rule 14d-11 provides that
Purchaser may include a Subsequent Offering Period so long as, among other
things, (1) the Offer remained open for a minimum of 20 business days and has
expired, (2) the Offer was for all outstanding Shares, (3) Purchaser accepts and
promptly pays for all Shares tendered during the Offer, (4) Purchaser announces
the results of the Offer, including the approximate number and percentage of
Shares deposited, no later than 9:00 a.m., New York City time, on the next
business day after the Expiration Date and immediately begins the Subsequent
Offering Period, (5) Purchaser immediately accepts and promptly pays for Shares
as they are tendered during the Subsequent Offering Period and (6) Purchaser
pays the Offer Price for all Shares tendered in the Subsequent Offering Period.
Purchaser will be able to include a Subsequent Offering Period if it satisfies
the conditions above. In a public release, the Commission expressed the view
that the inclusion of a Subsequent Offering Period would constitute a material
change to the terms of the Offer requiring Purchaser to disseminate new
information to
8
shareholders in a manner reasonably calculated to inform them of such change
sufficiently in advance of the Expiration Date (generally five business days).
In the event Purchaser elects to include a Subsequent Offering Period, it will
notify shareholders of the Company consistent with the requirements of the
Commission.
A Subsequent Offering Period, if one is included, is not an
extension of the Offer. A Subsequent Offering Period would be an additional
period of time, following the expiration of the Offer, in which shareholders may
tender Shares not tendered during the Offer. Purchaser does not currently intend
to include a Subsequent Offering Period in the Offer, although it reserves the
right to do so in its sole discretion.
Pursuant to Rule 14d-7 under the Exchange Act, no withdrawal
rights will apply to Shares tendered in a Subsequent Offering Period and no
withdrawal rights apply during the Subsequent Offering Period with respect to
Shares tendered in the Offer and accepted for payment. The same consideration,
the Offer Price, will be paid to shareholders tendering Shares in the Offer or
in a Subsequent Offering Period, if one is included.
A request is being made to the Company pursuant to Rule 14d-5
of the Exchange Act and under Indiana law for the use of the Company's
shareholder lists and security position listings for the purpose of
disseminating the Offer to shareholders. Upon compliance by the Company with
this request, this Offer to Purchase, the Letter of Transmittal and all other
relevant materials will be mailed to record holders of Shares and will be
furnished to brokers, dealers, banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on shareholders lists, or, if
applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Shares
following receipt of these lists or listings from the Company or by the Company
if it so elects.
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), Purchaser will purchase, by accepting for
payment, and will pay for all Shares validly tendered and not withdrawn prior to
the Expiration Date (as permitted by Section 4) promptly after the later to
occur of (i) the Expiration Date and (ii) subject to compliance with the
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act, the satisfaction or waiver of the conditions to the
Offer set forth in Section 14.
In all cases, payment for Shares purchased pursuant to the
Offer will be made only after timely receipt by the Depositary of (i)
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 Section 3, (ii) 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 (iii) any other documents required by
the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a
Book-Entry Transfer Facility to, and received by, the Depositary and forming a
part of a Book-Entry Confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgment from the participant in such
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 Purchaser may enforce
such agreement against such participant.
For purposes of the Offer, Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares validly tendered and not
withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser'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
9
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 Purchaser and transmitting payment to validly
tendering shareholders. If, for any reason whatsoever, acceptance for payment of
any Shares tendered pursuant to the Offer is delayed, or the Purchaser is unable
to accept for payment Shares tendered pursuant to the Offer, then, without
prejudice to the Purchaser's rights under Section 1, the Depositary may,
nevertheless, on behalf of the Purchaser, retain tendered Shares, and the Shares
may not be withdrawn, except to the extent that the tendering shareholders are
entitled to withdrawal rights as described in Section 4 below and as otherwise
required by Rule 14e-1(c) under the Exchange Act. Under no circumstances will
interest on the purchase price for Shares be paid by Purchaser regardless of any
extension of the Offer or by reason of any delay in making such payment.
If any tendered Shares are not purchased pursuant to the Offer
for any reason, or if certificates representing Shares 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 by book-entry
transfer into the Depositary's account at the Book-Entry Transfer Facility
pursuant to the procedures set forth in Section 3, such Shares will be credited
to an account maintained within such Book-Entry Transfer Facility), as promptly
as practicable following the expiration, termination or withdrawal of the Offer.
If, prior to the Expiration Date, Purchaser announces an
increase in the consideration offered to holders of Shares pursuant to the
Offer, such increased consideration will be paid to all holders of Shares that
are purchased pursuant to the Offer, whether or not such Shares were tendered
prior to such announcement of an increase in consideration.
Purchaser reserves the right to transfer or assign to one or
more of Purchaser's subsidiaries or 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 Purchaser 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.
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, 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
delivery of Shares, and any other documents required by the Letter of
Transmittal, must be 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 and either (i) certificates representing tendered Shares must be received
by the Depositary, or such Shares must be tendered pursuant to the procedure for
book-entry transfer set forth below and a Book-Entry Confirmation must be
received by the Depositary, in each case on or prior to the Expiration Date, or
(ii) the guaranteed delivery procedures set forth below must be complied with.
The method of delivery of certificates representing tendered
Shares, the Letter of Transmittal and all other required documents is at the
option 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
10
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 such Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account at such Book-Entry Transfer Facility in accordance with
such 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 a Book-Entry Transfer Facility, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message in connection with a
book-entry transfer, 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 procedure set forth below must be complied with.
Delivery of documents to a Book-Entry Transfer Facility in
accordance with such 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 (i) 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 systems 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 (ii) 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 certificates for Shares 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
certificates for Shares 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 certificates for such Shares 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 Instruction 5 to the Letter of Transmittal.
Guaranteed Delivery
If a shareholder desires to tender Shares pursuant to the
Offer and such shareholder's certificates for Shares 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:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by Purchaser,
is received by the Depositary, as provided below, prior to the
Expiration Date; and
(iii) the certificates for (or a Book-Entry Confirmation with
respect to) such Shares, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or, in the case of a book-entry
transfer, an Agent's Message, and any other required documents, are
received by the Depositary within three (3) trading days after the date
of execution of such Notice of Guaranteed Delivery. A "trading day" is
any day on which the NASDAQ Stock Exchange is open for business.
11
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 certificates for, or of Book-Entry
Confirmation with respect to, such Shares, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message), 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 certificates representing, or Book-Entry
Confirmations of, such Shares are received into the Depositary's account at a
Book-Entry Transfer Facility.
Backup Federal Tax Withholding
Under the federal income tax laws, payments in connection with
the Offer and the proposed Merger may be subject to "backup withholding" at a
rate of 31% unless a shareholder that holds Shares (i) provides a correct
taxpayer identification number (which, for an individual shareholder, is the
shareholder's social security number) and any other required information, or
(ii) 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 be subject to penalties
imposed by the Internal Revenue Service. To prevent backup federal income tax
withholding on payments with respect to the purchase price of Shares purchased
pursuant to the Offer, each shareholder should provide the Depositary with his
correct taxpayer identification number and certify that he is not subject to
backup federal income tax withholding by completing the Substitute Form W-9
included in the Letter of Transmittal. See Instruction 10 of the Letter of
Transmittal.
Appointment as Proxy
By executing the Letter of Transmittal, a tendering
shareholder irrevocably appoints designees of Purchaser, and each of them, as
such shareholder's attorneys-in-fact and proxies, with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment and paid for by Purchaser and with respect
to any and all other Shares and other securities or rights issued or issuable in
respect of such Shares on or after the date of this Offer to Purchase. All such
powers of attorney and proxies will be considered coupled with an interest in
the tendered Shares. Such appointment will be effective when, and only to the
extent that, Purchaser pays for such Shares by depositing the purchase price
therefor with the Depositary. Upon such payment, all prior powers of attorney
and proxies given by such shareholder with respect to such Shares, and such
other securities or rights granted prior to such payment will be revoked,
without further action, and no subsequent powers of attorney and proxies may be
given by such shareholder (and, if given, will not be deemed effective). The
designees of Purchaser will, with respect to the Shares for which such
appointment is effective, be empowered to exercise all voting and other rights
of such shareholder as they in their sole discretion may deem proper at any
annual or special meeting of the Company's shareholders, or any adjournment or
postponement thereof. Purchaser requires that, in order for Shares to be deemed
validly tendered, immediately upon the payment for such Shares, Purchaser or its
designee must be able to exercise full voting rights with respect to such Shares
and other securities, including voting at any meeting of shareholders.
Distribution of Rights
Holders of Shares will be required to tender one Right for
each Share tendered to effect a valid tender of a Share. Unless and until the
Distribution Date occurs, the Rights are represented by and transferred with the
Shares. Accordingly, if the Distribution Date does not occur prior to the
Expiration Date of the Offer, a tender of Shares will constitute a tender of the
associated Rights. If a Distribution Date has occurred, certificates
representing a number of Rights equal to the number of Shares being tendered
12
must be delivered to the Depositary in order for the Shares to be validly
tendered in accordance with the procedures described in this Section 3. If a
Distribution Date has occurred, a tender of Shares without Rights constitutes an
agreement by the tendering shareholder to deliver certificates representing a
number of Rights equal to the number of Shares tendered pursuant to the Offer to
the Depositary within three trading days after the date the certificates are
distributed. The Purchaser reserves the right to require that it receive these
certificates prior to accepting Shares for payment. Payment for Shares tendered
and purchased pursuant to the Offer will be made only after timely receipt by
the Depositary of the certificates representing the Rights, if such certificates
have been distributed to holders of Shares. The Purchaser will not pay any
additional consideration for the Rights tendered pursuant to the Offer.
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 Purchaser, in its sole discretion, whose
determination will be final and binding on all parties. Purchaser 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
Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right to
waive any of the conditions of the Offer or 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 impact
on the rights of such other shareholders.
Purchaser'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 Purchaser, Parent or any of their affiliates or assigns, if
any, 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.
Purchaser'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 Purchaser upon the terms and subject to
the conditions of the Offer.
4. Withdrawal Rights.
Except as otherwise provided in this Section 4, 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 July 7, 2000 (or such later date as may apply in
case the Offer is extended). A withdrawal of a share of Common Stock will also
constitute a withdrawal of the related Right. Rights may not be withdrawn unless
the related shares of Common Stock are also withdrawn.
If, for any reason whatsoever, acceptance for payment of any
Shares tendered pursuant to the Offer is delayed, or Purchaser is unable to
accept for payment or pay for Shares tendered pursuant to the Offer, then,
without prejudice to Purchaser's rights set forth herein, the Depositary may,
nevertheless, on behalf of Purchaser, retain tendered Shares and such Shares may
not be withdrawn except to the extent that the tendering shareholder is entitled
to and duly exercises withdrawal rights as described in this Section 4. Any such
delay will be by an extension of the Offer to the extent required by law.
To be effective, a written, telegraphic or facsimile
transmission 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 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
13
notice of withdrawal must be guaranteed by an Eligible Institution. If Shares
have been delivered pursuant to the procedures for book-entry transfer as set
forth in Section 3, 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 such 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 Section 3.
No withdrawal rights will apply to Shares tendered during any
Subsequent Offering Period (if there is one) and no withdrawal rights apply
during any such Subsequent Offering Period with respect to Shares tendered in
the Offer and accepted for payment.
All questions as to the form and validity (including time of
receipt) of notices of withdrawal will be determined by Purchaser, in its sole
discretion, whose determination will be final and binding. None of Purchaser,
Parent or any of their affiliates or assigns, if any, 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 Federal Income Tax Consequences.
The receipt of cash in exchange for Shares pursuant to the
Offer, the proposed Merger or upon the exercise of dissenter's rights will be
taxable for federal income tax purposes and may also be taxable under applicable
state, local or foreign tax laws. A shareholder who receives cash will generally
recognize gain or loss for federal income tax purposes in an amount equal to the
difference, if any, between the amount of cash received by the shareholder and
the shareholder's adjusted tax basis in the Shares exchanged therefor. Gain or
loss must be determined separately for each block of Shares exchanged (for
example, Shares acquired at the same cost in a single transaction). Such gain or
loss will be capital gain or loss (provided that the Shares are held as capital
assets) and any such capital gain or loss will be long term if, as of the date
of the exchange, the Shares were held for more than one year.
The foregoing discussion may not be applicable to certain
types of shareholders or Shares, including shareholders who acquired Shares
pursuant to the exercise of options or otherwise as compensation, individuals
who are not citizens or residents of the United States, and foreign
corporations, Shares held as part of a straddle, hedge, conversion transaction,
synthetic security or other integrated investment, or entities that are
otherwise subject to special tax treatment under the Internal Revenue Code of
1986, as amended (such as dealers in securities or foreign currency, insurance
companies, regulated investment companies, tax-exempt entities, financial
institutions, and investors in pass-through entities).
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY. EACH SHAREHOLDER IS URGED TO CONSULT SUCH
SHAREHOLDER'S TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO
SUCH SHAREHOLDER OF THE OFFER AND THE PROPOSED MERGER, INCLUDING FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES.
6. Price Range of the Shares.
According to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1999 (the "1999 Annual Report"), the Shares are
listed and traded principally on the Nasdaq Stock Market's National Market (the
"Nasdaq National Market") under the symbol "QDIN." The following table sets
forth, for the periods indicated, the reported high and low sales prices for the
Shares on the Nasdaq National Market, all as reported in published financial
sources.
14
Fiscal Year Ending October 31, 2000 High Low
----------------------------------- ---- ---
Second Quarter (through May 8, 2000) $3.781 $2.031
First Quarter 2.938 2.000
Fiscal Year Ending October 31, 1999 High Low
----------------------------------- ---- ---
Fourth Quarter $3.000 $1.875
Third Quarter 3.000 2.375
Second Quarter 4.188 2.500
First Quarter 4.219 2.500
Fiscal Year Ending October 31, 1998 High Low
----------------------------------- ---- ---
Fourth Quarter $5.094 $1.938
Third Quarter 4.000 2.625
Second Quarter 5.500 3.625
First Quarter 6.094 3.625
On April 18, 2000, the last full trading day prior to the
public announcement of the Parent's intention to commence this Offer, the
reported closing price on the Nasdaq National Market for the Shares was $2.031
per Share. Shareholders are urged to obtain a current market quotation for the
Shares.
The Purchaser believes, based upon publicly available
information, that as of the date of this Offer to Purchase, the Rights are
listed on the Nasdaq National Market, are attached to the Shares and are not
traded separately. As a result, the sale prices per Share set forth above are
also the high and low sale prices per Share and associated Right during such
periods. Upon the occurrence of the Distribution Date, the Rights are to detach,
and may trade separately, from the Shares. See Section 11. If the Distribution
Date occurs and the Rights begin to trade separately from the Shares,
shareholders are also urged to obtain a current market quotation for the Rights.
7. Effect of the Offer on the Market for the Shares; Stock
Exchange Listing; Exchange Act Registration; Margin Regulations.
Effect of the Offer on the Market for the Shares
The purchase of Shares pursuant to the Offer will reduce the
number of Shares that trade publicly and, depending upon the number of Shares so
purchased, could adversely affect the liquidity and market value of the
remaining Shares held by the public. Purchaser cannot predict whether the
reduction in the number of Shares that might otherwise trade publicly would have
an adverse or beneficial effect on the market price for, or marketability of,
the Shares or whether such reduction would cause future market prices to be
greater or less than the per Share amount being offered in this Offer.
Stock Quotation
Depending upon the number of Shares purchased pursuant to the
Offer, the Shares may no longer meet the standards for continued inclusion on
the Nasdaq National Market. If, as a result of the purchase of Shares pursuant
to the Offer, the Shares no longer meet the criteria for continued inclusion in
the Nasdaq National Market, the market for the Shares could be adversely
affected. According to the Nasdaq National Market's published guidelines, the
Shares would not be eligible for continued listing if, among other things, the
number of Shares publicly held fall below 750,000, the number of beneficial
holders of Shares falls below 400 (round lot holders) or the aggregate market
value of such publicly-held Shares does not exceed $5 million. If the Shares
were no longer eligible for inclusion in the Nasdaq National Market, they might
nevertheless continue to be included in the Nasdaq's SmallCap Market unless,
15
among other things, the "public float" is less than 500,000 shares or there are
fewer than 300 shareholders (round lot holders) in total, or the market value of
the public float is less than $1 million.
Exchange Act Registration
The Shares are currently registered under the Exchange Act.
The purchase of the Shares pursuant to the Offer may result in the Shares
becoming eligible for deregistration under the Exchange Act. Registration of the
Shares may be terminated upon application by the Company to the Commission if
the Shares are not listed on a "national securities exchange" and there are
fewer than 300 record holders of Shares. Termination of registration of the
Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to its shareholders and the Commission
and would make certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b) and the requirements of furnishing a
proxy statement in connection with shareholders' meetings pursuant to Section
14(a), no longer applicable to the Company. If the Shares are no longer
registered under the Exchange Act, the requirements of Rule 13e-3 under the
Exchange Act with respect to "going private" transactions would no longer be
applicable to the Company. Furthermore, the ability of "affiliates" of the
Company and persons holding "restricted securities" of the Company to dispose of
such securities pursuant to Rule 144 promulgated under the Securities Act of
1933, as amended, may be impaired or eliminated.
If registration of the Shares under the Exchange Act were
terminated, the Shares would no longer be eligible for trading on the Nasdaq
National Market. If the Nasdaq National Market listing and the Exchange Act
registration of Shares are not terminated prior to the proposed Merger, then it
is anticipated that the Shares will be delisted from the Nasdaq National Market
and the registration of the Shares under the Exchange Act will be terminated
following the consummation of the proposed Merger. See Section 11.
Margin Regulations
The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which have the effect, among other things, of allowing
brokers to extend credit on the collateral of such Shares for the purpose of
buying, carrying or trading in securities ("Purpose Loans"). Depending upon
factors such as the number of record holders of the Shares and the number and
market value of publicly held Shares, following the purchase of Shares pursuant
to the Offer the Shares might no longer constitute "margin securities" for
purposes of the Federal Reserve Board's margin regulations and, therefore, could
no longer be used as collateral for Purpose Loans made by brokers. In addition,
if registration of the Shares under the Exchange Act were terminated, the Shares
would no longer constitute "margin securities."
8. Certain Information Concerning the Company.
The information concerning the Company contained in this Offer
to Purchase has been taken from or based upon publicly available documents and
records on file with the Commission and other public sources and is qualified in
its entirety by reference thereto. None of Parent, Purchaser, the Information
Agent or the Depositary can take responsibility for the accuracy or completeness
of the information contained in such documents and records, or for any failure
by the Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to
Parent, Purchaser, the Information Agent or the Depositary.
According to its 1999 Annual Report, the Company is an
indirect successor to a corporation that was incorporated in the State of
Indiana in 1981. The Company became publicly held on March 8, 1994. The
principal executive offices of the Company are located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and its telephone number is (▇▇▇) ▇▇▇-▇▇▇▇.
16
According to the Company's February 2000 Form 10-Q, the
Company operates four distinct restaurant concepts: (1) ▇▇▇▇▇'▇ American Grill;
(2) two Italian dining concepts under the names Spageddies Italian Kitchen
("Spageddies") and Papa ▇▇▇▇'s Italian Kitchen ("Papa Vino's"), (3) Burger King
restaurants as a franchisee of Burger King Corporation; and (4) Chili's Grill
and Bar ("Chili's) as a franchisee of ▇▇▇▇▇▇▇ International, Inc. As of February
20, 2000, the Company operated 143 restaurants, including 71 Burger King
restaurants, 28 Chili's, 36 ▇▇▇▇▇'▇ American Grill restaurants, three Spageddies
and five Papa Vino's.
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 ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇.▇., ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, and at the Commission's
regional offices located at Seven World Trade Center, Suite 1300, New York, New
York 10048 and Citicorp Center, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇. 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
(▇▇▇▇://▇▇▇.▇▇▇.▇▇▇). Copies of such materials may also be obtained by mail from
the Public Reference Section of the Commission at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.,
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇ at prescribed rates.
9. Certain Information Concerning Purchaser and Parent.
Parent was organized in December 1998 under the laws of the
State of Michigan for the purpose of investing in securities of the Company.
Parent has not, and is not expected to, engage in any business other than in
connection with its organization, such investment, the Offer and the proposed
Merger. Its principal executive offices and telephone number are: ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; (▇▇▇) ▇▇▇-▇▇▇▇.
Purchaser was organized in May 2000 under the laws of the
State of Delaware for the purpose of acquiring the Company. Purchaser is a
wholly owned subsidiary of Parent. Purchaser has not, and is not expected to,
engage in any business other than in connection with its organization, the Offer
and the proposed Merger. Its principal executive offices and telephone number
are the same as those of Parent.
Neither Parent nor Purchaser is subject to the informational
filing requirements of the Exchange Act, and, accordingly, they do not file
reports or other information with the Commission relating to their business,
financial condition and other matters.
Because the consideration offered consists solely of cash, the
Offer is not subject to any financing condition, and the offer is for all of the
outstanding Shares, Purchaser believes the financial condition of Parent,
Purchaser and their affiliates is not material to a decision by a holder of
Shares whether to sell, tender or hold Shares pursuant to the Offer.
The name, business address and telephone number, citizenship,
present principal occupation and employment history of each of the directors and
executive officers of Parent and Purchaser are set forth in Schedule I of this
Offer to Purchase.
Except as set forth elsewhere in this Offer to Purchase, (i)
neither Parent, Purchaser nor, to the best knowledge of Parent and Purchaser,
any of the persons listed in Schedule I hereto or any associate or
majority-owned subsidiary of Parent or any of the persons so listed,
beneficially owns or has a right to acquire any Shares or any other equity
securities of the Company and (ii) neither Parent, Purchaser nor, to the
knowledge of either Parent or Purchaser, any of the persons or entities referred
to in clause (i) above or any of their executive officers, directors or
subsidiaries has effected any transaction in the Shares or any other equity
securities of the Company during the past 60 days.
17
Except as set forth in this Offer to Purchase, none of Parent,
Purchaser nor, to the best knowledge of Parent and Purchaser, any of the persons
listed on Schedule I hereto, has had any business relationship or transaction
with the Company or any of its executive officers, directors or affiliates that
is required to be reported under the rules and regulations of the Commission
applicable to the Offer. Except as set forth in this Offer to Purchase, there
have been no contracts, negotiations or transactions between Parent or any of
its subsidiaries or, to the best knowledge of Parent, any of the persons listed
in Schedule I to this Offer to Purchase, on the one hand, and the Company or its
affiliates, on the other hand, concerning a merger, consolidation or
acquisition, tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets. None of
the persons listed in Schedule I has, during the past five years, been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors).
None of the persons listed in Schedule I has, during the past five years, been a
party to any judicial or administrative proceeding (except for matters that were
dismissed without sanction or settlement) that resulted in a judgment, decree or
final order enjoining the person from future violations of, or prohibiting
activities subject to, federal or state securities laws, or a finding of any
violation of federal or state securities laws.
10. Background of the Offer; Contacts with the Company.
The Parent first acquired Shares on August 11, 1998. On March
22, 1999, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, members of Parent, met with
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Chairman, President and Chief Executive Officer of the
Company (the "CEO"), and ▇▇▇▇ ▇. ▇▇▇▇▇, Executive Vice President, General
Counsel and Secretary of the Company, to discuss the Company's businesses and
operations (the "March 22 Meeting"). Messrs. ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ left that
meeting concerned as to whether the Company was taking all steps possible to
increase shareholder value. On March 26, 1999, ▇▇▇▇▇▇ and the Schostaks filed a
Schedule 13D with respect to their shares of Common Stock and voiced in that
filing their displeasure with the results of their meeting with ▇▇. ▇▇▇▇▇▇▇▇▇▇▇
and ▇▇. ▇▇▇▇▇ as well as the poor financial performance of the Company.
In June 1999, the Company took the following actions: it
entered into Noncompete Agreements with four members of management under which
such persons are entitled to receive substantial lump sum payments upon a change
in control of the Company (including an aggregate of $875,625 payable to ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, the CEO's brothers, based upon their
level of compensation in 1999 as reported by the Company); it repurchased from
eight Company officers stock options with exercise prices in excess of the then
current market prices for Quality Dining shares and granted such persons new
stock options at lower exercise prices; and it granted to certain executive
officers 150,405 restricted shares that vest immediately upon a change in
control of the Company. In December 1999, the Company granted to executive
officers an additional 102,360 restricted shares (with similar vesting
provisions).
On August 24, 1999, the Company entered into an employment
agreement with ▇▇▇▇ ▇. ▇▇▇▇▇, its Executive Vice President and General Counsel.
This agreement provides, among other things, that if ▇▇. ▇▇▇▇▇, at his election,
terminates his employment at any time within one year of a change in control, he
is entitled to a lump sum payment equal to four times his base salary (or
$720,000 on the date of the employment agreement). Each of such actions has the
effect of increasing the cost of an acquisition of the Company by a potential
acquiror.
Subsequent to the March 22 Meeting, representatives of Parent
made several requests in discussions with executives of the Company for a
meeting with the Company Board to discuss the future of the Company and possible
strategic alternatives. Representatives of Parent made one such request during a
meeting with the CEO in August 1999 and they also asked that the Company
consider engineering a strategic transaction with Parent or an affiliated party.
Notwithstanding the Company's continued poor performance and Parent's status as
its largest independent shareholder, each and every request for a meeting
between Parent and the Company Board was either ignored or promptly rebuffed.
18
In response to the Company Board's continuing refusal to meet
with representatives of Parent, on October 1, 1999, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, on behalf
of Parent, sent a letter expressing its view that the Company did not have
meaningful prospects for enhancing shareholder value as a public company and
formally requested a meeting with the Company Board to discuss a possible
acquisition of the Company by Parent or its affiliates. Parent indicated its
belief that it could conclude such an acquisition at a price substantially in
excess of the then current market trading prices of the Shares. Parent also
indicated its wish to work with the Board in developing a plan that would
benefit all shareholders and that such a result could best be achieved by mutual
cooperation and the exchange of ideas. Parent reserved the right, however, to
make an acquisition proposal directly to the Company's shareholders, initiate
shareholder proposals in favor of a sale or other disposition of the Company or
its assets, and/or nominate a slate of directors who would pursue such
alternatives.
In a letter dated October 13, 1999, from ▇▇▇▇ ▇. ▇▇▇▇▇, the
Company's Executive Vice President and General Counsel, to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
the Company stated that the meeting requested by ▇▇▇▇▇▇ would not be productive
in that the "Board believes that our existing strategic plan . . . represents
the best opportunity to maximize long-term shareholder value."
On October 20, 1999, three weeks after Parent proposed that
the Company Board consider an acquisition of the Company by Parent - and Parent
reserved its right to make a related shareholder proposal - the Company Board
approved several amendments to the Company's By-laws. These amendments imposed
an advance written notice requirement for any shareholder proposals (including
proposals for the election of directors) and increased, from 25% to 80%, the
number of shares of Common Stock required to call a special meeting of
shareholders (at which shareholders can act to exercise their voting rights).
According to the Company's Proxy Statement for the 2000 Annual Meeting, ▇▇▇▇▇▇,
▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ together beneficially own more than 20% of the
Common Stock and, consequently, no special meeting can be called by shareholders
unless they join in such request.
On January 13, 2000, Parent filed with the Commission a
preliminary proxy statement expressing its intention to: (i) nominate ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ for election as directors at
the Company's 2000 annual meeting of shareholders (which occurred on March 7,
2000), and (ii) put forth a shareholder proposal for consideration at such
meeting recommending that the Company terminate its "poison pill" Rights
Agreement and not adopt another rights plan without the approval of the holders
of a majority of the outstanding shares of the Company. The preliminary proxy
statement indicated that Parent sought to influence the Company to conduct an
auction to effect a negotiated sale, merger or other disposition of the Company
(or all or substantially all of its assets) to the highest bidder, and that
Parent (or one of its affiliates) expected to be a bidder in any such auction or
other sales process. On January 24, 2000, Parent withdrew its nomination of ▇▇.
▇▇▇▇▇ after the Company Board appointed its own nominee to fill the then vacant
seat on the board and eliminated the shareholders' right to fill such vacancy
(and similar future vacancies).
On February 22, 2000, ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, on behalf of
Parent, sent a letter to the Company's Board of Directors proposing, subject to
satisfactory completion of due diligence entry into customary merger
documentation, and financing, a cash merger transaction of the Company with an
entity formed by Parent in which a price of $5.00 per share would be paid to all
shareholders (other than Parent) for all of their Common Stock. The letter
indicated that Parent, depending upon the results of its due diligence, might be
prepared to increase its offer.
By letter to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, dated February 23, 2000, ▇▇▇▇
▇. ▇▇▇▇▇ stated, among other things, that the Company Board would not consider
Parent's cash merger proposal until after the Company's annual meeting of
shareholders on March 7, 2000, and sought evidence of Parent's ability to fund
the cash merger proposal.
By letter dated February 28, 2000, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, on
behalf of Parent, informed the Company Board that its $5.00 per share cash
merger proposal would no longer be subject to a financing condition and that
Parent had the financial wherewithal to consummate the proposed merger. The
letter also indicated that ▇▇▇▇▇▇ believed that the present Company Board was
under a fiduciary duty to consider
19
its cash merger proposal immediately and urged the Company Board to embrace the
auction process, invite other bidders to participate, and offer Parent and other
bona fide bidders the opportunity to conduct due diligence.
On March 7, 2000, at the Company's 2000 annual meeting of
shareholders, ▇▇▇▇▇▇'s nominees and proposals were defeated. After adjusting for
more than 3.7 million shares voted by officers, directors or paid consultants of
the Company, such nominees and proposals, however, received the affirmative vote
of a majority of Shares held by what Parent viewed as "independent" shareholders
(including Parent).
On March 13, 2000, the Company Board announced that it had
rejected Parent's $5.00 per share cash merger proposal, stating that Parent had
not provided evidence satisfactory to the Company of its ability to finance the
transaction and that the transaction was subject to Parent's due diligence of
the Company.
On April 4, 2000, the Company announced that its Board of
Directors had authorized the CEO and any of his affiliates and associates to
purchase up to 1,000,000 additional shares of Common Stock without triggering
the Company's "poison pill" Rights Plan (described below under "Purpose of the
Offer and the Proposed Merger; Plans for the Company - Rights"). The
announcement indicated that the CEO and other members of management might
purchase shares of Common Stock on the open market or in privately negotiated
transactions and that the officers and directors of the Company would time their
purchases so as not to compete with purchases by the Company under its share
repurchase program. According to the CEO's Form 4 filed with the Commission, the
CEO purchased an aggregate of 65,000 Shares, at an average price of $2.27 per
Share, between April 6 and April 14, 2000.
By letter to the Company's Board of Directors, dated April 6,
2000, and incorporated by reference in Amendment No. 7 to Parent's Schedule 13D
with respect to the Company, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, on behalf of Parent, criticized
the Board's actions in authorizing the Share purchases by the CEO and others
referred to in the Company's April 4, 2000 press release without triggering the
"poison pill" Rights Plan. He stated that, after rejecting Parent's acquisition
proposal at a substantial premium to market prices for the Shares, the Board had
taken action that would allow the CEO and other insiders to solidify control
over the Company without paying any control premium. He also indicated that the
Company's repurchase of shares through its buyback program compounded the
problem by further increasing management's percentage ownership. He urged the
Board to reconsider its actions and indicated that, if the Company proceeded
with its present course of action, Parent would consider all alternatives,
including litigation, to stop what it believed was a breach of the Board's
fiduciary duties to the Company's shareholders. ▇▇. ▇▇▇▇▇▇▇▇ also questioned
whether conflicts of interest arising in connection with the coordination of
purchases as between management and the Company could be satisfactorily resolved
and raised concerns regarding possible securities laws violations in connection
with such purchases.
On April 14, 2000, the Company issued a press release stating
that Parent had misinterpreted the Company's April 4, 2000 announcement and
indicating that, among other things, an independent committee of the Company's
Board of Directors had been appointed and that such committee had reconfirmed
the Board's actions, the Company did not view additional share ownership by the
CEO as a threat to the Company or a precursor to a change of control, the CEO
would only purchase Common Stock in the market when the Company advises him that
it is not in the market to repurchase Common Stock and that neither the CEO nor
the Company would coordinate their purchases with any other person.
On April 18, 2000, Parent announced its intention to commence
a tender offer to purchase all Shares at a price of $5.00 per Share. The
announcement indicated that, following completion of the tender offer, Parent
intended to effect a merger in which all remaining shareholders of the Company
would receive the same cash price paid in the tender offer in exchange for their
Shares.
Also, on April 18, 2000, ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, on behalf of
▇▇▇▇▇▇, sent a letter to the Company Board urging the Board to give the
Company's shareholders the right to decide whether to accept ▇▇▇▇▇▇'s $5.00 per
Share offer before permitting the CEO and management to acquire effective
control at
20
no premium to market prices. The letter further urged the Board to protect all
shareholders by not permitting the CEO to buy any additional shares at a price
below Parent's offer price and requiring him to offer the same price for all
outstanding shares.
On April 19, 2000, ▇▇▇▇▇▇ filed a Verified Complaint For
Injunctive And Declaratory Relief in the United States District Court for the
Northern District of Indiana, South Bend Division, naming as defendants the
Company, the CEO, certain other directors of the Company, certain unidentified
associates and affiliates of the CEO and certain other unidentified members of
management. The Complaint alleges, among other things, that the director
defendants' decision to authorize the CEO and/or his associates and affiliates
and/or other members of management to acquire 1,000,000 additional shares or
more of the Company's Common Stock without triggering the Company's "poison
pill" shareholder rights plan would give management effective control of the
Company without the payment of a control premium, was not made in good faith
after a reasonable investigation of the consequences, and was in breach of the
director defendants' fiduciary duties. The Complaint also alleges violations of
the federal securities laws. The Complaint seeks injunctive and Declaratory
relief.
On April 24, 2000, the Company and the CEO entered into an
agreement with Parent pursuant to which (a) the CEO agreed that he will not, and
will cause his affiliates and associates not to, purchase or otherwise acquire
any additional shares of Common Stock until June 15, 2000, (b) the Company
agreed that it will not, and will cause each of its executive officers and
directors not to, purchase or otherwise acquire any shares of Common Stock until
June 15, 2000, and (c) Parent agreed not to seek a temporary restraining order
or preliminary injunction in the above noted lawsuit against such purchases that
would take effect prior to June 15, 2000. Notwithstanding the foregoing, the
agreement does not restrain Parent from requesting, and the Parent has
requested, that the court in the above noted lawsuit schedule a preliminary
injunction hearing prior to June 15, 2000, and order expedited discovery.
11. Purpose of the Offer and the Proposed Merger; Plans for
the Company.
The Proposed Merger
The purpose of the Offer is to enable Parent and Purchaser to
acquire control of, and ultimately the entire equity interest in, the Company.
The Parent currently intends, following completion of the Offer, to seek to
consummate the proposed Merger. The Parent intends that in the proposed Merger,
each then outstanding Share (other than Shares owned by Parent, Purchaser or any
of their wholly owned subsidiaries, Shares held in the treasury of the Company,
and, if shareholder dissenter's rights are available with respect to Shares,
Shares held by shareholders who perfect any available dissenter's rights under
the IBCL) would be converted into the right to receive in cash the same price
per Share paid by the Purchaser pursuant to the Offer.
In general, pursuant to the IBCL, the approval of both the
shareholders and the board of directors of a corporation is required to effect a
proposed merger of that corporation with or into another corporation except that
no shareholder approval is required in the case of a corporation merging with a
parent that owns 90% or more of the corporation pursuant to the provisions of
Section 23-1-40-4 of the IBCL. A merger effected pursuant to such provision is
referred to herein as a "short-form merger." If the Offer is consummated and
Purchaser acquires 90% or more of the outstanding Shares pursuant to the Offer
(and subsequent purchases, if any), it will seek to effect the proposed Merger
as a short-form merger promptly thereafter. As described above, if the Offer is
consummated and Purchaser acquires less than 90% of the outstanding shares
pursuant to the Offer (and subsequent purchases, if any), the Merger can only be
effected with the approval of the Company's Board of Directors and shareholders.
If the Director Majority Condition is satisfied, the Purchaser's director
nominees will constitute a majority of the Company's Board and should be able to
cause the Company Board to approve the Merger. If the Minimum Condition and the
other conditions to the Offer are satisfied, Purchaser will own a majority of
the outstanding Shares following consummation of the Offer and the voting power
necessary to assure approval of the proposed Merger by the Company's
shareholders.
21
Certain terms of the Charter, the By-laws, certain of the
Company's contractual obligations (including the Rights and the terms of its
outstanding indebtedness) and Chapters 42 and 43 of the IBCL may affect the
ability of the Parent to obtain control of the Company and to cause the
Purchaser to consummate the proposed Merger. The Purchaser believes that, if the
Minimum Condition, the Rights Condition, the Supermajority Condition, the
Business Combination Condition, the Control Share Condition, the Director
Majority Condition and the QDI Indebtedness Condition are satisfied, it should
be able to implement the proposed Merger. Nevertheless, the Parent can give no
assurance that the proposed Merger will be consummated or as to the timing of
the proposed Merger if it is consummated.
Classified Board
Unless the proposed Merger is consummated pursuant to a
short-form merger, approval by the Company Board will be required under the IBCL
to effect the proposed Merger. If the Director Majority Condition was not
satisfied and the Company Board in office at the time of the consummation of the
Offer were to refuse to approve the proposed Merger (or any transaction or
corporate action proposed by the Purchaser that required the approval of the
Company Board), the Purchaser, in order to consummate such transaction or cause
the Company to take such action, would have to replace at least a majority of
the Company Board with its own designees. Certain provisions of the Charter and
By-laws could prevent the Purchaser from replacing or electing a majority of the
Board of Directors for up to two years. Pursuant to Section 2.1 of the By-laws,
the Company Board is divided into three classes with each class elected for a
term of three years and one class elected at the Company's annual meeting of
shareholders each year (the "Classified Board Provision"). Pursuant to Section
6.6 of the Charter, directors can be removed from the Company Board only for
cause and only by the affirmative vote holders representing two-thirds or more
of all the shares of Common Stock entitled to vote for the election of directors
(the "Director Removal Provision"). As a result of these provisions, at least
two annual meetings of the Company's shareholders, absent the directors' removal
in accordance with the Director Removal Provision or their resignations, would
be required to elect new directors comprising a majority of the Company Board
who could approve the proposed Merger (or any similar transaction requiring the
approval of the Company Board). Under the IBCL, a company's by-laws may be
amended only by the board of directors, unless such company's articles of
incorporation provide otherwise. The Charter does not provide that shareholders
may amend the By-laws.
Shareholder Meetings
In the event that a special meeting of shareholders is
necessary to effect the proposed Merger, and the Director Majority Condition was
not satisfied, certain By-law provisions relating thereto could further impede
Acquirors' ability to call such a meeting. Section 1.2 of the By-laws provides
that special meetings of shareholders can be called only by the Chairman of the
Board, by vote of the Company Board, or at the request of 80% of all the votes
entitled to be cast on any issue proposed to be considered at the proposed
special meeting. The Purchaser will seek to have either the Chairman of the
Board or the Company Board call a special meeting if it becomes necessary to
effect the proposed Merger. There can be no assurance, however, that such a
meeting will be so called.
The Offer does not constitute a solicitation of proxies for
any meeting of the Company's shareholders. Any such solicitation which the
Acquirors might make would be made only pursuant to separate proxy materials
complying with the requirements of Section 14(a) of the Exchange Act.
Supermajority and "Fair Price" Clauses
Article VIII of the Charter requires the approval of the
holders of two-thirds of the outstanding voting stock of the Company and not
less than a majority of the outstanding voting shares of Common Stock held by
shareholders other than a "Related Person" (as defined below) to a approve a
"Business Combination" (as defined below) with a Related Person (together, the
"Supermajority Voting Requirement"), unless: (i) the "Continuing Directors" (as
defined below) of the Company, by at least a two-thirds vote of such Continuing
Directors, have expressly approved such Business Combination prior to
22
such Related Person's having become a Related Person or otherwise approved the
Business Combination or (ii) certain fair price and other provisions of the
Charter are met. Amending the Supermajority Voting Requirement requires the
affirmative vote of two-thirds of all outstanding shares of Common Stock and
approval by the holders of a majority of the combined voting power of the
outstanding voting shares held by shareholders other than any Related Person.
The Purchaser believes that if the Supermajority Condition is
satisfied, Article VIII of the Charter will not be an impediment to consummating
the proposed Merger. If such condition was not satisfied, the Supermajority
Voting Requirement contained in Article VIII of the Charter would still not be
applicable to a Business Combination where all of the following "fair price" and
other conditions are satisfied: (a) the consideration per share to be paid to
the Company's shareholders in the Business Combination is not less than the
higher of: (1) the highest price paid by the Related Person (including
commissions and solicitation fees) within the two years preceding the
announcement of the Business Combination, plus interest calculated from the time
such person became a Related Person, less dividends paid (up to the amount of
interest accrued) and (2) the fair market value of the Shares during the 30 days
preceding such announcement; (b) the consideration shall be in the same form as
paid by the Related Person in acquiring a majority of its Shares; (c) the
Related Person, after becoming such but before consummation of the Business
Combination (1) shall take steps to ensure that the Company Board shall be
comprised of Continuing Directors at least in proportion to the fraction of
voting Common Stock owned by persons other than Related Persons; (2) shall not
acquire any Common Stock from the Company; (3) shall not acquire any voting
Common Stock or equivalents; and (4) except as approved by a majority of
Continuing Directors, shall not have received financial assistance from the
Company or made any major changes in the Company's business or equity capital
structure or entered into any contract or understanding with the Company; and
(d) shall mail a proxy or information statement satisfying the Exchange Act and
Rules thereunder to all holders of Common Stock.
The term "Business Combination" means (1) the sale, exchange,
lease, transfer, or other disposition to or with a Related Person or any
Affiliate or Associate of such Related Person by the Company or any of its
subsidiaries of all or substantially all, or any Substantial Part, of its or
their assets or businesses (including, without limitation, securities issued by
a Subsidiary, if any); (2) the purchase, exchange, lease, or other acquisition
by the Company or any of its subsidiaries of all or substantially all, or any
Substantial Part, of the assets or business of a Related Person or any Affiliate
or Associate of such Related Person; (3) any merger or consolidation of the
Company or any subsidiary thereof into or with a Related Person or any Affiliate
or Associate of such Related Person or into or with another Person which, after
such merger or consolidation, would be an Affiliate or an Associate of a Related
Person, in each case irrespective of which Person is the surviving entity in
such merger or consolidation; (4) any reclassification of securities,
recapitalization, or other transaction (other than a redemption in accordance
with the terms of the security redeemed) which has the effect, directly or
indirectly, of increasing the proportionate amount of shares of Common Stock of
the Company or any subsidiary thereof which are Beneficially Owned by a Related
Person, or any partial or complete liquidation, spinoff, splitoff, or splitup of
the Company or any subsidiary thereof; or (5) the acquisition upon the issuance
thereof of Beneficial Ownership by a Related Person of shares of voting stock or
securities convertible into shares of voting stock or any voting securities or
securities convertible into voting securities of any subsidiary of the Company,
or the acquisition upon the issuance thereof of Beneficial Ownership by a
Related Person of any rights, warrants, or options to acquire any of the
foregoing or any combination of the foregoing shares of voting stock or voting
securities of a subsidiary, if any.
The term "Related Person" means any person (other than the
Company or any subsidiary of the Company or the Continuing Directors, singly or
as a group) who or that: (1) is the Beneficial Owner, directly or indirectly, of
more than ten percent (10%) of the voting power of the outstanding shares of
voting stock and who has not been the Beneficial Owner, directly or indirectly,
of more than ten percent (10%) of the voting power of the outstanding shares of
voting stock for a continuous period of two years prior to the date in question;
(2) is an Affiliate of the Corporation and at any time within the two-year
period immediately prior to the date in question (but not continuously during
such two-year period) was the Beneficial Owner, directly or indirectly, of ten
percent (10%) or more of the voting power of the then outstanding shares of
voting stock; or (3) is an assignee of or has otherwise succeeded to any shares
of the
23
voting stock which were at any time within the two-year period immediately prior
to the date in question beneficially owned by any Related Person, if such
assignment or succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the meaning of the
Securities Act of 1933, as amended.
A Related Person shall be deemed to have acquired a share of
the Company at the time when such Related Person became the Beneficial Owner
thereof. For the purposes of determining whether a person is the Beneficial
Owner of ten percent (10%) or more of the voting power of the then outstanding
voting stock, the outstanding voting stock shall be deemed to include any voting
stock that may be issuable to such person pursuant to a right to acquire such
voting stock and that is therefore deemed to be Beneficially Owned by such
person. A person who is a Related Person at (1) the time any definitive
agreement relating to a Business Combination is entered into, (2) the record
date for the determination of the shareholders entitled to notice of and to vote
on a Business Combination, or (3) the time immediately prior to the consummation
of a Business Combination shall be deemed a Related Person.
A Related Person shall not include the Company Board acting as
a group. In addition, a Related Person shall not include any person who
possesses more than ten percent (10%) of the voting power of the outstanding
shares of voting stock of the Company at the time of filing the Charter.
The term "Substantial Part" means an amount equal to 10% or
more of the fair market value, as determined by at least a majority of the
Continuing Directors, of the total consolidated assets of the Company and its
subsidiaries as of the end of its most recent fiscal year prior to the time the
determination is being made.
The term "Beneficial Owner" means any person, together with
such person's Affiliates and Associates, who beneficially owns any voting stock
of the Company within the meaning ascribed in Rule 13d-3 under the Exchange Act
or who has the right to acquire or vote any such beneficial ownership (whether
or not such right is exercisable immediately) pursuant to any agreement,
contract, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise.
The term "Continuing Director" means any member of the Company
Board who is not associated with the Related Person and was a member of the
Company Board prior to the time that the Related Person became a Related Person,
and any successor of a Continuing Director who is not associated with the
Related Person and is recommended to succeed a Continuing Director by not less
than two-thirds of the Continuing Directors then on the Company Board.
The term "Affiliate" has the same meaning as in Rule 12b-2
under the Exchange Act.
The term "Associate" with respect to any person means (1) any
corporation or organization (other than the Company or a majority-owned
subsidiary of the Company) of which such person is an officer or partner or is,
directly or indirectly, the Beneficial Owner of five percent (5%) or more of any
class of equity securities (2) any trust or other estate in which such person
has a substantial beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity, (3) any relative or spouse of such
person, or any relative of such spouse, who has the same home as such person, or
(4) any investment company registered under the Investment Company Act of 1940,
as amended, for which such person or any Affiliate of such person serves as
investment advisor.
The term "fair market value" means, with respect to any period
of time, means (i) the highest closing sale price during such period if such
stock is listed on a securities exchange registered under the Securities
Exchange Act of 1934 or, (ii) if such stock is not listed on any such exchange,
the highest closing bid quotation with respect to such stock during such period
on the National Association of Securities Dealers, Inc. Automated Quotation
System or any similar system then in use or, (iii) if no such quotations are
available, the fair market value of such stock on the last day of the period as
determined by the Continuing Directors in good faith.
24
The Purchaser believes that it and the Parent collectively
will be deemed to be a Related Person for purposes of Article VIII the Charter
upon consummation of the Offer.
The foregoing summary of certain provisions of the Charter and
the By-laws are qualified by reference to the text thereof as filed by the
Company with the Commission and which can be examined or copies obtained as set
forth in Section 8.
Business Combination Statute
Chapter 43 of the IBCL establishes a five-year period
beginning with the acquisition of 10% of the voting power of the outstanding
voting shares of a "resident domestic corporation" (which definition includes
the Company) during which certain business transactions involving the acquiring
shareholder are prohibited unless, prior to the acquisition of such interest,
the board of directors of the resident domestic corporation approves the
acquisition of such interest or the proposed business combination. After the
five-year period expires, a business combination involving the acquiring
shareholder may take place only upon approval by a majority of the disinterested
shares, or if the other shareholders receive a formula price based on the higher
of the highest price paid by the acquiring shareholder or the market value at
the time of the announcement of the proposed transaction, whichever is higher.
The minimum price for shares other than common shares is to be determined under
criteria similar to that for common shares, except the minimum price as defined
cannot be less than the highest preferential amount to which the shares are
entitled in the event of any liquidation, dissolution or winding up of the
corporation.
The Purchaser believes that, if the Business Combination
Condition is satisfied, Chapter 43 of the IBCL will not be an impediment to
consummating the proposed Merger.
A resident domestic corporation may elect not to be covered by
Chapter 43 only by the adoption of an amendment to its articles of
incorporation. The amendment must be approved by a majority vote of the holders
of all of the outstanding shares other than those shares held by the acquiring
shareholder, and the acquiring shareholder is not entitled to vote. The
amendment, once adopted, is not effective until 18 months following the
shareholder vote, and does not apply to any business combination with an
acquiring shareholder who acquired his shares before the effective date of the
amendment.
Control Share Statute
Under Chapter 42 of the IBCL, with certain exceptions, a
person proposing to acquire or acquiring voting shares of an "issuing public
corporation" (which definition includes only corporations having at least 100
shareholders, principal place of business, office or substantial assets within
Indiana, and in which more than 10% of its shareholders are Indiana residents,
more than 10% of its shares are owned by Indiana residents, or which have 10,000
or more shareholders who are Indiana residents, which definition includes the
Company) sufficient to entitle that person to exercise voting power within any
of the ranges of one-fifth to one-third of all voting power, more than one-third
but less than one-half of all voting power, or a majority or more of all voting
power (a "control share acquisition") may give a notice of such fact to the
corporation containing certain specified data. The acquiring person may request
that the directors call a special meeting of shareholders for the purpose of
considering the voting rights to be accorded the shares so acquired ("control
shares"), and the control shares have voting rights only to the extent granted
by a resolution approved by the shareholders. The resolution must be approved by
a majority of the votes entitled to be cast by each voting group entitled to
vote separately on the proposal, excluding shares held by the acquiring person
and shares held by management. Control shares as to which the required notice
has not been filed and any control shares not accorded full voting rights by the
shareholders may be redeemed at fair market value by the corporation if it is
authorized to do so by its articles of incorporation or bylaws before a control
share acquisition has occurred (the Company is authorized to make such a
redemption). Shareholders are entitled to dissenter's rights with respect to the
control share acquisition in the event that the control shares are accorded full
voting rights and the acquiring person has acquired control shares with a
majority of all voting power. The Company Board can "opt out" of the Control
Share Statute through an amendment to the By-laws.
25
The Purchaser believes that, if the Control Share Condition is
satisfied, Chapter 42 of the IBCL will not be an impediment to consummating the
proposed Merger.
Indiana Takeover Statute
As described in Section 3, above, a number of states
(including Indiana, where the Company is incorporated) have adopted takeover
laws and regulations that purport to be applicable to attempts to acquire
securities of corporations that are incorporated in those states or that have
substantial assets, stockholders, principal executive offices or principal
places of business in those states. To the extent that these state takeover
statutes purport to apply to the Offer or the proposed Merger, Acquirors believe
that those laws conflict with U.S. federal law and are an unconstitutional
burden on interstate commerce. In 1982, the Supreme Court of the United States,
in ▇▇▇▇▇ ▇. Mite Corp., invalidated on constitutional grounds the Illinois
Business Takeovers Statute, which, as a matter of state securities law, made
takeovers of corporations meeting certain requirements more difficult. The
reasoning in that decision is likely to apply to certain other state takeover
statutes. In 1987, however, in CTS Corp. v. Dynamics Corp. of America, the
Supreme Court of the United States held that the State of Indiana could as a
matter of corporate law and, in particular, those aspects of corporate law
concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without the prior
approval of the remaining stockholders, as long as those laws were applicable
only under certain conditions. Subsequently, in TLX Acquisition Corp. v. Telex
Corp., a federal district court in Oklahoma ruled that the Oklahoma statutes
were unconstitutional insofar as they apply to corporations incorporated outside
Oklahoma, because they would subject those corporations to inconsistent
regulations. Similarly in Tyson Foods, Inc. ▇. ▇▇▇▇▇▇▇▇▇▇, a federal district
court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee. This
decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a federal district court in Florida held, in Grand
Metropolitan PLC ▇. ▇▇▇▇▇▇▇▇▇▇▇, that the provisions of the Florida Affiliated
Transactions Act and Florida Control Share Acquisition Act were unconstitutional
as applied to corporations incorporated outside of Florida.
Acquirors have not attempted to comply with any state takeover
statutes in connection with the Offer or the proposed Merger. Acquirors reserve
the right to challenge the validity or applicability of any state law allegedly
applicable to the Offer or the proposed Merger, and nothing in this Offer to
Purchase nor any action that Acquirors take in connection with the Offer is
intended as a waiver of that right. In the event that it is asserted that one or
more takeover statutes apply to the Offer or the proposed Merger, and it is not
determined by an appropriate court that the statutes in question do not apply or
are invalid as applied to Offer or the proposed Merger, as applicable, Acquirors
may be required to file certain documents with, or receive approvals from, the
relevant state authorities, and Acquirors might be unable to accept for payment
or purchase Shares tendered in the Offer or be delayed in continuing or
consummating the Offer. In that case, Acquirors may not be obligated to accept
for purchase, or pay for, any Shares tendered. See Section 14.
Rights Plan
On March 27, 1997, the Company adopted the Rights Agreement.
Under the Rights Agreement, holders of the Common Stock outstanding on April 11,
1997 received one Right for each share of Common Stock that they hold.
Initially, each Right represents the right to purchase one one-hundredth
(1/100th) of a share of the Company's Series B Participating Cumulative
Preferred Stock ("Series B Preferred Stock") at an exercise price of $75.00. The
Rights will not be exercisable or separately transferable until the earlier of
the time: (i) an acquirer becomes the beneficial owner of more than 15% of the
Company's outstanding Common Stock; or (ii) such date, if any, as the Board of
Directors may designate after a person commences or discloses an intent to
commence an offer for more than 15% or more, of such shares.
Any person or group that beneficially owned 15% or more of the
Common Stock at the time the Rights Plan was adopted will not be deemed an
"acquirer" as to shares of Common Stock held as of the effective date of the
Plan; however, any additional acquisition of shares (other than from the
26
Company or by gift or operation of law) without the prior approval of the Board
will make the person or group an acquirer.
If an acquirer becomes the beneficial owner of 15% or more of
the Company's Common Stock, or a 15% beneficial owner acquires additional shares
without approval, each Right not owned by such person or related parties will
entitle its holder to purchase at the Right's then-current exercise price shares
of the Series B Preferred Stock having a value of twice the Right's exercise
price. Similarly, if after the Rights become exercisable and transferable, an
acquirer consummates one of a variety of business combinations with the Company,
each Right will entitle its holder to purchase, at the Right's then-current
exercise price, shares of the company surviving the business combination that
have a book or market value of twice the Right's exercise price.
The Company may redeem the Rights for $0.01 in cash or
securities at any time prior to the Rights becoming exercisable or the
expiration of the Rights on March 27, 2007.
The Series B Participating Cumulative Preferred Stock will be
entitled to all the rights and privileges set forth in the Articles of
Incorporation of the Company and, in addition, will have the following features:
1. Dividends. The holders of Series B Preferred Stock will be
entitled to receive (a) quarterly cumulative dividends payable in cash in an
amount per share equal to $0.01 per share less the amount of cash dividends
received pursuant to the following clause (b) (but not less than zero) and (b)
cash and in-kind dividends on each payment date for similar dividends on the
Common Stock, in an amount per whole share of Series B Preferred Stock equal to
100 (which number is subject to adjustment to reflect stock dividends,
subdivisions or combinations of the outstanding Common Stock) times the per
share amount of all cash dividends then to be paid on each share of Common
Stock.
2. Voting Rights. The holders of Series B Preferred Stock will
be entitled to vote on each matter on which holders of Common Stock are entitled
to vote and will have 100 votes (subject to adjustment as described above) for
each whole share of Series B Preferred Stock held. Holders of any fraction of a
share of Series B Preferred Stock that is not smaller than 1/100th of a share
will be entitled to vote such fraction. Holders of Series B Preferred Stock have
certain special voting rights in the election of directors when the equivalent
of six quarterly dividends are in default.
3. Certain Restrictions. Whenever quarterly dividends or
distributions on the Series B Preferred Stock are in arrears, the Company's
right to declare or pay dividends or other distributions on, redeem, or
purchase, any shares of stock ranging junior to, or on parity with, the Series B
Preferred Stock will be subject to certain restrictions.
4. Liquidation Rights. Upon any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the holders of any
shares of Series B Preferred Stock will be entitled to receive, before any
distribution is made to holders of shares of stock ranking junior to the Series
B Preferred Stock or any distribution (other than a ratable distribution )is
made to the holders of stock ranking on a parity with the Series B Preferred
Stock, an amount equal to the accrued dividends thereon plus the greater of (a)
$0.01 per share or (b) an amount per share equal to 100 (subject to adjustment
as described above) times the amount per share to be distributed to holders of
the Common Stock; provided that in no event will the amount or amounts, if any,
exceed $100 per share plus accrued dividends in the case of involuntary
liquidation, dissolution or winding up of the surviving company.
5. Redemption. The shares of Series B Preferred Stock will not
be redeemable. The Company may, however, purchase shares of Series B Preferred
Stock in the open market or pursuant to an offer to a particular holder or
holders.
27
6. Consolidation, ▇▇▇▇▇▇ and Other Transactions. In the event
of a consolidation, merger or other transaction in which the shares of Common
Stock are exchanged for, or converted into, other securities, cash or any other
property, the shares of Series B Preferred Stock will be similarly exchanged or
converted.
7. Fractional Shares. Shares of the Series B Preferred Stock
will be issuable in whole shares or in any fraction of a share that is not
smaller than 1/100th of a share or any integral multiple of such fraction,
subject to certain adjustments. In lieu of issuing fractional shares, the
Company may issue certificates or depository receipts evidencing such authorized
fraction of shares or, in the case of fractions other than 1/100th and integral
multiples thereof, pay registered holders cash equal to the same fraction of the
current market value of a share of Series B Preferred Stock (if any are
outstanding) or the equivalent number of shares of Common Stock.
The Purchaser believes that if the Rights Condition is
satisfied, the Rights Agreement will not be an impediment to consummating either
the Offer or the proposed Merger.
Dissenter's Rights
Chapter 44 of the IBCL sets forth certain procedures that must
be followed by any shareholder who opposes a corporation's merger and does not
accept the cash payment for the shareholder's shares provided for in the merger
agreement. By following those procedures, a shareholder may obtain a court
determination of the fair value such shares. No dissenter's rights would be
available to shareholders of the Company unless the Offer is consummated and the
Parent then seeks to consummate the proposed Merger. Even if the Parent seeks to
consummate the Proposed ▇▇▇▇▇▇, dissenter's rights would not be available if the
Common Stock is registered on a national securities exchange or traded on Nasdaq
National Market System at the date fixed to determine shareholders entitled to
notice of, and to vote on the proposed Merger.
In order to assert dissenter's rights, the shareholder must
give written notice to the corporation indicating that the shareholder intends
to demand payment for the shareholder's shares if the proposed action is taken.
This notice must be delivered before the vote is taken on the proposed Merger,
and the shareholder must not vote in favor of the proposed Merger.
Following the shareholders' meeting at which a vote is taken
on the proposed Merger, the corporation must deliver a written dissenter's
notice to each shareholder who notified the corporation that he or she intends
to demand payment for such shares and who did not vote in favor of the proposed
Merger. This dissenter's notice must be sent no later than 10 days after
shareholder approval of the proposed Merger is received and must (i) state where
the payment demand must be sent and where and when share certificates must be
deposited, (ii) supply a form for demanding payment for the shares that includes
the date of the first announcement to the news media or to shareholders of the
terms of the proposed Merger and that requires the shareholder asserting
dissenter's rights to certify whether or not the beneficial ownership of the
shares was acquired before that date; (iii) set a date by which the corporation
must receive the payment demand, which must be between 30 and 60 days after the
dissenter's notice is delivered; and (iv) be accompanied by a copy of Chapter 44
of the IBCL. A dissenting shareholder must demand payment, certify whether
beneficial ownership of the shares was acquired before the date set forth in the
dissenter's notice and deposit the shareholder's share certificates in
accordance with the terms of the dissenter's notice, to retain all other rights
as a shareholder until those rights are canceled or modified by the effect of
the proposed Merger. A shareholder who fails to demand payment or to deposit
share certificates as required by the dissenter's notice by the respective dates
set forth therein is not entitled to receive payment for the shareholder's
shares and is considered to have voted in favor of the proposed Merger.
If a dissenting shareholder was the beneficial owner of shares
on or before the date of the first announcement to the news media or to
shareholders of the terms of a proposed merger (a "Pre-Announcement
Shareholder"), the IBCL requires the corporation to pay that shareholder the
amount that the corporation estimates to be the fair value of the shareholder's
shares. Payment is to be made as soon as
28
the merger is consummated and must be accompanied by the corporation's most
recent year-end and interim financial statements, a statement of the
corporation's estimate of the fair value of the shares and a statement of the
dissenting shareholder's right to demand payment under the IBCL.
If a dissenting shareholder was not the beneficial owner of
shares before the date of the first announcement to news media or to
shareholders of the terms of the proposed merger (a "Post-Announcement
Shareholder"), the corporation may elect to withhold payment of the fair value
of the dissenting shareholder's shares. To the extent that payment is withheld,
the corporation is required to estimate the fair value of the dissenting
shareholder's shares and to offer to pay this amount to each Post-Announcement
Shareholder who agrees to accept it in full satisfaction of the dissenter's
demand. The offer must be accompanied by a statement of the corporation's
estimate of the fair value of the shares and a statement of the dissenting
shareholder's right to demand payment under the IBCL.
The IBCL provides that a dissenting shareholder may notify the
corporation in writing of the dissenter's own estimate of the fair value of such
shares and demand payment of the amount of that estimate (less any payment
already made by the corporation), or reject the offer (if a Post-Announcement
Shareholder) and demand payment of the fair value of the shares if (i) the
dissenter believes the amount paid or offered is less than the fair value of the
shares, (ii) the corporation fails to pay Pre-Announcement Shareholders within
60 days after the date set for demanding payment, or (iii) if the merger is not
consummated, the corporation fails to return the deposited share certificates
within 60 days after the date set for demanding payment. In order to exercise
the rights granted by the IBCL, a dissenter must notify the corporation in
writing within 30 days after the corporation made or offered payment of the
dissenter's shares.
If a demand for payment by a dissenting shareholder remains
unsettled within 60 days after receipt by the corporation of the payment demand,
the corporation must commence a proceeding in the circuit or superior court of
the county where its principal office is located and petition the court to
determine the fair value of the subject shares. If such a proceeding is not
commenced within the 60-day period, the corporation must pay each dissenting
shareholder whose demand remains unsettled the amount demanded. All dissenting
shareholders whose demands remain unsettled must be made parties to the
proceeding and must be served with a copy of the petition. The court may appoint
one or more persons as appraisers to receive evidence and recommend a decision
on the question of fair value. In any such proceeding, each dissenting
shareholder made a party is entitled to a judgment in the amount of the
difference if any between the fair value found by the court and the amount
determined by the corporation, plus interest on that difference, in the case of
a Pre-Announcement Shareholder; or the fair value, plus accrued interest, of the
dissenting shareholder's shares for which the corporation elected to withhold
payment, in the case of a Post-Announcement Shareholder. The court in an
appraisal proceeding has the authority to determine and assess the costs of the
proceeding, including the compensation and expenses of court-appointed
appraisers, in those amounts and against those parties it deems equitable. The
court also may assess fees and expenses of counsel and experts for the parties
against the corporation if the court finds that the corporation did not
substantially comply with the requirements of the IBCL, or against any party if
the court finds that the party acted arbitrarily, vexatiously or not in good
faith. The IBCL also provides for compensation of counsel for any dissenting
shareholder whose services benefitted other dissenting shareholders similarly
situated, to be paid out of the amounts awarded the dissenting shareholders who
were benefitted, if not assessed against the corporation.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS
UNDER THE IBCL DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO
BE FOLLOWED BY SHAREHOLDERS DESIRING TO EXERCISE ANY DISSENTER'S RIGHTS
AVAILABLE UNDER THE IBCL. THE PRESERVATION AND EXERCISE OF DISSENTER'S RIGHTS
REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE IBCL.
29
Rule 13e-3
The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the proposed Merger or another business
combination following the purchase of Shares pursuant to the Offer in which
Purchaser seeks to acquire the remaining Shares not held by it. ▇▇▇▇▇▇▇▇▇
believes, however, that Rule 13e-3 will not be applicable to the proposed Merger
because it is anticipated that the proposed Merger would be effected within one
(1) year following consummation of the Offer and in the proposed Merger
shareholders would receive the same price per Share as paid in the Offer. If
Rule 13e-3 were applicable to the proposed Merger, it would require, among other
things, that certain financial information concerning the Company, and certain
information relating to the fairness of the proposed transaction and the
consideration offered to minority shareholders in such a transaction, be filed
with the Commission and disclosed to minority shareholders prior to consummation
of the transaction.
Additional Plans for the Company
As indicated above, if the Offer is completed, Parent intends
to seek to consummate the proposed Merger. In connection with the Offer and the
proposed Merger, ▇▇▇▇▇▇ has made a preliminary review of, and will continue to
review on the basis of available information, various possible business
strategies for the Company. If Parent acquires control of the Company and the
Company Board as described above, Parent intends to conduct a detailed review of
the Company, its assets, corporate structure, dividend policy, capitalization,
operations and management and consider what, if any, changes would be desirable
based upon such review. Such changes could include, among other things, a sale
or other disposition of certain Company assets, changes in the Company's
business, corporate structure, capitalization or management, delisting of the
Common Stock from the Nasdaq National Market System and termination of
registration of the Common Stock under the Exchange Act. As described above,
however, ▇▇▇▇▇▇'s ability to effect any changes or transactions, and the timing
thereof, will depend in part on Parent's ability to gain control of the Company
Board, as well as the provisions of the Charter, the By-laws and IBCL Chapter
43.
12. Source and Amount of Funds.
The total amount of funds required by Purchaser and Parent to
consummate the Offer (assuming all Shares not owned by Parent are tendered) for
all Shares and to pay related fees and expenses is estimated to be approximately
$57.5 million.
Purchaser has received from Comerica Bank, subject to the
conditions set forth in the commitment letter, its commitment to lend up to $55
million for purposes of consummation of the offer. The members of the Parent
intend to make such capital contributions as may be required to consummate the
Offer and pay related fees and expenses in excess of $55 million. In the event
that the conditions to funding under such bank commitment are not satisfied or
the bank otherwise fails to fund under commitment, members of the Parent intend
to make capital contributions in amounts sufficient to allow the Purchaser to
make payments necessary to consummate the offer.
Parent has received a financing commitment, dated May 8, 2000
(the "Commitment Letter"), from Comerica Bank (the "Lender") to provide a line
of credit to Parent or a wholly-owned subsidiary of Parent ("Borrower") in the
amount of $55 million (the "Line of Credit") for the purpose of acquiring a
controlling interest in the Company. Subject to the conditions of the Commitment
Letter, the commitment will remain outstanding until May 1, 2001.
The terms of the definitive credit agreement between NBO and
the Lender have not been finalized. The following is a summary of the
anticipated principal terms of the Line of Credit based upon the Commitment
Letter. This summary is qualified in its entirety by reference to the Commitment
Letter, a copy of which is filed with the Commission as an exhibit to the
Schedule TO to which this Offer to Purchase is also an exhibit.
30
Under the Line of Credit and subject to the terms and
conditions thereof, the Lender will provide to the Borrower a non-revolving line
of credit in the amount of $55 million. Amounts drawn under the Line of Credit
will mature on May 1, 2001, at which time all principal and accrued interest
will be due and payable. Up to three advances, each in an amount of no less than
one million dollars, may be drawn under the line of credit.
Interest will accrue on outstanding principal balances under
the Line of Credit at a rate per annum equal to 4% plus the eurodollar interbank
offering rate for the applicable interest period selected by Borrower of one,
two, three or six months. Upon execution of the Commitment Letter, Parent paid
the Lender a fee of $150,000. A fee of $50,000 will also be payable upon each of
the dates that are 30 and 60 days following acceptance of the Commitment Letter.
Borrower will pay an additional fee equal to 1.5% of amounts advanced under the
Line of Credit. Upon Borrower obtaining a controlling interest in QDI, a fee of
$550,000 is payable by Borrower to the Lender.
The Line of Credit will be secured by (i) a first perfected
security interest in collateral that currently secures and will continue to
secure a separate credit facility of London to SF Financial L.L.C., (ii) a first
perfected security interest in the ownership interests of the Schostaks in the
Parent; and (iii) personal guarantees by the Schostaks.
The Credit Agreement will contain representations and
warranties, covenants (including financial covenants), indemnities, events of
default and other provisions customary for such financings.
Closing the Line of Credit is conditioned upon, among other
things, an absence of material adverse change in the business condition
(financial or otherwise), operations, performance, properties or prospects of
Parent or any of the Schostaks.
The Credit Agreement will also provide that, in the event a
controlling interest in the Company is obtained by Parent, Borrower will not
permit the Company to make distributions to any of the Schostaks until the Line
of Credit is fully repaid, and in the event that the Company becomes a wholly
owned subsidiary of Parent, Parent will apply any proceeds of any refinancing or
sale of assets of the Company to reduce the outstanding principal balance under
the Line of Credit.
Neither Parent nor Purchaser has any definitive plans or
arrangements to repay amounts advanced under the Line of Credit. Parent and
Purchaser anticipate that the Line of Credit will be repaid through a
refinancing effected in connection with the proposed Merger and that funds
generated internally by the Company and its subsidiaries and from other sources,
which may include proceeds of sales of Company assets, will be available for the
payment of any indebtedness incurred in connection with the proposed Merger.
THE OFFER IS NOT CONDITIONED ON THE PURCHASER OBTAINING
FINANCING.
13. Dividends and Distributions.
If, on or after May 9, 2000, the Company (i) splits, combines
or otherwise changes the Shares or its capitalization, (ii) acquires Shares or
otherwise causes a reduction in the number of Shares, (iii) issues or sells
additional Shares, or any shares of any other class of capital stock, other
voting securities or any securities convertible into or exchangeable for, or
rights, warrants or options, conditional or otherwise, to acquire, any of the
foregoing, or (iv) discloses that it has taken such action, then, without
prejudice to the Purchaser's rights under Section 14, the Purchaser, in its sole
discretion, may make such adjustments in the purchase price and other terms of
the Offer and the proposed Merger as it deems appropriate to reflect such split,
combination or other change including, without limitation, the number or type of
securities offered to be purchased.
31
If, on or after May 9, 2000, the Company should declare or pay
any cash dividend on the Shares or other distribution on the Shares, or issue
with respect to the Shares any additional Shares, shares of any other class of
capital stock, other than voting securities or any securities convertible into,
or rights, warrants or options, conditional or otherwise, to acquire, any of the
foregoing, payable or distributable to shareholders of record on a date prior to
the transfer of the Shares purchased pursuant to the Offer to the Purchaser or
its nominee or transferee on the Company's stock transfer records, then, subject
to the provisions of Section 14, (a) the Offer Price may, in the sole discretion
of the Purchaser, be reduced by the amount of any such cash dividends or cash
distributions and (b) the whole of any such noncash dividend, distribution or
issuance to be received by the tendering shareholders will (i) be received and
held by the tendering shareholders for the account of the Purchaser and will be
required to be promptly remitted and transferred by each tendering shareholder
to the Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer, or (ii) at the direction of the Purchaser, be
exercised for the benefit of the Purchaser, in which case the proceeds of such
exercise will promptly be remitted to the Purchaser. Pending such remittance and
subject to applicable law, the Purchaser will be entitled to all rights and
privileges as owner of any such noncash dividend, distribution, issuance or
proceeds and may withhold the entire Offer Price or deduct from the Offer Price
the amount or value thereof, as determined by the Purchaser in its sole
discretion.
14. Certain Conditions of the Offer.
Notwithstanding any other provisions of the Offer, Purchaser
will not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Purchaser'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 or, subject to the restriction referred to above,
the payment for, any tendered Shares, and may terminate or amend the Offer as to
any Shares not then paid for, unless (1) the Minimum Condition, the Rights
Condition, the Supermajority Condition, the Business Combination Condition, the
Control Share Condition, the Director Majority Condition, and the QDI
Indebtedness Condition are satisfied, and (2) approvals required by law to be
obtained prior to the consummation of the Offer under any antitrust or
competition laws shall have been obtained. (Based upon the nature of Purchaser
and the contemplated structure of the proposed transactions, ▇▇▇▇▇▇▇▇▇ believes
that filings under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 will
not be required. See Section 15.) Furthermore, notwithstanding any other term of
the Offer, Purchaser shall not be required to accept for payment or to pay for
any Shares not theretofore accepted for payment or paid for, and may terminate
or amend the Offer if at any time prior to the expiration of the Offer, any of
the following additional conditions exist or shall occur and remain in effect:
(i) (a) A court of competent jurisdiction or other
governmental entity shall have issued an order, judgment, decree or ruling which
(1) restrains or prohibits the acquisition by the Purchaser or the Parent of
Shares pursuant to the Offer, or the making or consummation of the Offer or the
proposed Merger, (2) makes the purchase of or payment for some or all of the
Shares pursuant to the Offer or the proposed Merger illegal, (3) imposes
material limitations on the ability of the Parent (or any of its affiliates) to
acquire or hold, or which requires the Parent or any of its affiliates or
subsidiaries to dispose of or hold separate any material portion of the assets
or the business of the Parent and its affiliates taken as a whole or the Company
and its subsidiaries taken as a whole, or (4) imposes material limitations on
the ability of the Purchaser or the Parent (or its affiliates) to exercise full
rights of ownership of the Shares purchased by it, including, without
limitation, the right to vote the Shares purchased by it on all matters properly
presented to the shareholders of the Company, or (b) there shall have been
instituted and pending any action or proceeding by any governmental entity
which, in the opinion of the Parent's counsel (assuming, for purposes of such
opinion only, the validity of the allegations) has a reasonable likelihood of
success on the merits, and which (1) seeks to challenge the acquisition by the
Purchaser or the Parent of the Shares pursuant to the Offer, restrain, prohibit
or delay the making or consummation of the Offer or the proposed Merger, or
obtain any material damages in connection therewith, (2) seeks to make the
purchase of or payment for some or all of Shares pursuant to the Offer or the
proposed Merger illegal, (3) seeks to impose material limitations on the ability
of the Purchaser or the Parent (or any of its affiliates) effectively to acquire
or hold, or to dispose of any material portion of the assets or the business of
Parent and its affiliates taken as a whole or the Company and its subsidiaries
taken as a whole, (4) seeks to require Parent or the Company or any of their
respective affiliates or subsidiaries to dispose of or hold separate any
material portion of the assets or the business of Parent and its
32
affiliates taken as a whole or the Company and its affiliates taken as a whole,
or (5) seeks to impose material limitations on the ability of Purchaser or
Parent (or its affiliates) to exercise full rights of ownership of the Shares
purchased by them, including, without limitation, the right to vote Shares on
all matters properly presented to the shareholders of the Company; or
(ii) There shall have occurred (a) any general suspension of
trading in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (b) the
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States, (c) the commencement of a war, armed hostilities or
other international or national calamity directly or indirectly involving the
United States, or (d) any limitation (whether or not mandatory) by any
governmental or regulatory authority on, or any other event which has a material
adverse effect on, the extension of credit by banks or other lending
institutions in the United States; or
(iii) There shall have been promulgated, enacted, entered,
enforced or deemed applicable to the Offer or the proposed Merger, by any
governmental entity, any law or there shall have been issued any injunction
resulting in any of the consequences referred to in subsection (i) above.
The foregoing conditions (i) through (iii) are for the sole
benefit of Parent and the Purchaser and may be asserted by Parent or Purchaser
regardless of the circumstances giving rise to any such condition and may be
waived by Parent, in whole or in part, at any time and from time to time, in the
sole discretion of Parent. The failure by the Purchaser and the Parent at any
time to exercise any of the foregoing rights will not be deemed a waiver of any
right, the waiver of any such rights with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances, and each right will be deemed an ongoing right which may be
asserted at any time and from time to time.
Should the Offer be terminated pursuant to the foregoing
provisions, all tendered Shares not theretofore accepted for payment shall
forthwith be returned by the Depositary to the tendering shareholders.
15. Certain Legal Matters; Required Regulatory Approvals.
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, Purchaser 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 Purchaser'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 Purchaser 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 or Purchaser's business might not have to be disposed of or
held separate or other substantial conditions complied with in order to obtain
such approval or action or in the event that such approvals were not obtained or
such actions were not taken. Purchaser's obligation to purchase and pay for
Shares is subject to certain conditions which may be applicable under such
circumstances. See the Introduction and Section 14 for a description of certain
conditions to the Offer.
Antitrust. Under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and the rules and regulations that have
been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated until certain
33
information and documentary material has been furnished for review by the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
the FTC and certain waiting period requirements have been satisfied. Based upon
the contemplated structure of the proposed transactions, the Purchaser believes
that the acquisition of Shares pursuant to the Offer and the Merger is not
subject to review under the HSR Act.
The Antitrust Division and the FTC frequently scrutinize the
legality under the antitrust laws of transactions such as the acquisition of
Shares by the Purchaser pursuant to the Offer and the Merger. At any time before
or after the Purchaser's purchase of Shares, the Antitrust Division or the FTC
could take such action under the antitrust laws as either deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer, the divestiture of Shares purchased pursuant to
the Offer or the divestiture of substantial assets of the Acquirors. Private
parties as well as state attorneys general may also bring legal actions under
the antitrust laws under certain circumstances. The Acquirors believe that the
Purchaser's acquisition of Shares would not violate the antitrust laws. There
can be no assurance, however, that a challenge to the Offer on antitrust grounds
will not be made or that, if such a challenge is made, the Purchaser will
prevail. See Section 14.
State Takeover Laws. A number of states (including Indiana,
where the Company is incorporated) have adopted takeover laws and regulations
which purport, to varying degrees, to be applicable to attempts to acquire
securities of corporations which are incorporated in such states or which have
substantial assets, security holders, principal executive offices or principal
places of business therein. See Section 11.
16. Certain Fees and Expenses.
MacKenzie Partners, Inc. has been retained by Purchaser 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. ▇▇▇▇▇▇▇▇▇ has agreed to indemnify the
Information Agent against certain liabilities and expenses, including
liabilities under the federal securities laws.
In addition, Wilmington Trust Company has been retained 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.
Except as set forth above, Purchaser 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 Purchaser for customary clerical and mailing expenses incurred by
them in forwarding materials to their customers.
17. Miscellaneous.
The Offer is not being made to (nor will tenders be accepted
from or on behalf of) holders of Shares residing in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in compliance
with the securities, blue sky or other laws of such jurisdiction. However,
Purchaser may, in its discretion, take such action as it may deem necessary to
make the Offer in any jurisdiction and extend the Offer to holders of Shares in
such jurisdiction.
Purchaser has filed with the Commission the Schedule TO,
together with exhibits, pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain
34
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 Section 8 with respect to information concerning the
Company, except that they will not be available at the regional offices of the
Commission.
No person has been authorized to give any information or to
make any representation on behalf of Purchaser not contained in this Offer to
Purchase or in the Letter of Transmittal and, if given or made, any such
information or representation must not be relied upon as having been authorized.
Neither the delivery of the Offer to Purchase nor any purchase pursuant to the
Offer will, under any circumstances, create any implication that there has been
no change in the affairs of Purchaser or the Company since the date as of which
information is furnished or the date of this Offer to Purchase.
QDI ACQUISITION LLC
May 9, 2000
35
Schedule I
MEMBERS OF PARENT
Parent does not have any Directors or Executive Officers. The
following table sets forth the name, present principal occupation or employment,
and material occupations, positions, offices or employments for the past five
years, of each Member of Parent. The business address and telephone number of
each such person is c/o NBO, LLC, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (▇▇▇) ▇▇▇-▇▇▇▇. Each person listed below is a
citizen of the United States.
Present Principal Occupation or Employment;
Name Material Positions Held During the Past Five Years
---- --------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇........................ Chairman of the Board and Chief Executive Officer and a
Member Director of Schostak Brothers and Company, Inc. (a full service real
estate development and management company) for more than the past five
years; Member of Parent since its formation in December 1998; Chairman of
the Board, Vice President and a Director of King Venture Inc. (a
franchisee, owner and operator of Burger King restaurants) for more than
the past five years.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇......................... Co-President, Secretary and a Director of Schostak Brothers &
Member Company, Inc. for more than the past five years; Member of Parent since
its formation in December 1998; Vice President, Secretary and a Director
of King Venture, Inc. for more than the past five years.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇........................ Co-President and a Director of Schostak Brothers and Company,
Member Inc. for more than the past five years; Member of Parent since its
formation in December 1998; Vice President, Treasurer and a Director of
King Venture Inc. for more than the past five years.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.......................... President, Chief Executive Officer and a Director of King
Member Venture, Inc. for more than the past five years; Member of Parent since
its formation in December 1998; Senior Vice President and a Director of
Schostak Brothers & Company, Inc. for more than the past five years.
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:
Wilmington Trust Company
By Mail: By Facsimile: By Hand/Overnight Courier:
Attn: Corporate Trust Operations (▇▇▇) ▇▇▇-▇▇▇▇ Wilmington Trust Company
Wilmington Trust Company ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Confirm Facsimile By Telephone: Wilmington, DE 19801
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇ Attn: Corporate Trust
Wilmington, DE 19890-0001 Operations
(registered or certified mail
recommended)
Questions and requests for assistance may be directed to the Information Agent
at its 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 as set forth below, and will be
furnished promptly at Purchaser'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:
MACKENZIE
PARTNERS, INC.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (Bankers and Brokers call collect)
or
CALL TOLL FREE (▇▇▇) ▇▇▇-▇▇▇▇