GRIL definitive proxy filed. SH vote MArch 17. 1-35 R/S cash out fractional shares @ $1.50
QUESTIONS AND ANSWERS ABOUT THE
TRANSACTION AND THE SPECIAL MEETING
Following are some commonly asked questions that may be raised by our stockholders and answers to each of those questions.
Where and when is the Special Meeting?
The Special Meeting will be held at our principal executive offices, 6300 Canoga Avenue, Suite 1700, Woodland Hills, California 91367 at 10:00 a.m. (local time) on March 17, 2009.
What am I being asked to vote on at the Special Meeting?
Our stockholders will consider and vote upon proposals to amend our certificate of incorporation to effect a 1-for-35 reverse stock split of our shares of common stock, followed immediately by a 35-for-1 forward stock split of our shares of common stock. Stockholders whose shares are converted into less than one share of our common stock as a result of the Reverse Stock Split (meaning they own fewer than 35 shares of our common stock at the effective time of the Transaction—which is the time that the certificate of amendment to our certificate of incorporation to effect the Reverse Stock Split is filed with the Secretary of State of the State of Delaware) will receive $1.50 in cash, without interest, for each share of our common stock held immediately before the Reverse Stock Split. Stockholders who own 35 or more shares of our common stock at the effective time of the Transaction will continue to own the same number of shares of our common stock after the completion of the Transaction. Although the Reverse Stock Split and the Forward Stock Split will be voted on separately, the Company will not effect either the Reverse Stock Split or the Forward Stock Split unless both proposals are approved by the stockholders of the Company.
What is the purpose of the Transaction?
The Transaction will enable us to cease the registration of our common stock under the Exchange Act if, after the Transaction, there are fewer than 300 record holders of our common stock and we terminate our obligations to file annual and periodic reports and make other filings with the SEC. The purposes of the proposals include:
• eliminating significant ongoing costs and management time and effort of compliance with the Sarbanes-Oxley Act and related regulations;
• eliminating significant ongoing costs and management time and effort associated with filing documents under the Exchange Act with the SEC;
• allowing our management to focus on long-term growth and enhancing the long-term value of shares of common stock; and
• enabling our small stockholders (those holding fewer than 35), who represent a large number of our record holders, to liquidate their holdings in us and receive a premium over market prices prevailing at the time of the Special Committee’s recommendation, and the Board of Directors’ approval, of the Transaction, without incurring brokerage commissions.
What does the deregistration of our common stock mean?
Following the Transaction, we expect to have fewer than 300 stockholders of record, which will enable us to take action to cease registration of our common stock under the Exchange Act. Effective on and following the termination of the registration of our common stock under the Exchange Act, we will no longer have to file annual, quarterly and other reports with the SEC, and our executive officers, directors and 10% stockholders will no longer be required to file reports relating to their transactions in our common stock. In addition, we will take action to delist our common stock from the Nasdaq Capital Market and we will no longer be subject to its rules. Any trading in our common stock will continue only in privately negotiated sales or in the pink sheets.
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What are the Pink Sheets?
The pink sheets is a listing service that offers financial and other information about issuers of securities, like our common stock, and collects and publishes quotes of market makers for over-the-counter securities through its website at www.pinksheets.com.
What will I receive in the Transaction?
If you own fewer than 35 shares of our common stock at the effective time of the Transaction, you will receive $1.50 in cash, without interest, from us for each pre-Reverse Stock Split share that you own. If you own 35 shares or more of our common stock at the effective time of the Transaction, you will not receive any cash payment for your shares in connection with the Transaction and will continue to hold the same number of shares of our common stock as you did before the Transaction.
Who are the Filing Persons?
For the purposes of this Proxy Statement, Filing Persons are those individuals and entities required to provide certain disclosures to our shareholders in order for the Company to effect the Transaction. In addition to the Company, the Filing Persons are as follows:
Board of Directors
Philip Gay
Michael Weinstock
Robert Spivak
Glenn Golenberg
Stephen Ross
Bruce Schwartz
Rudolph Borneo
Executive Officers
Philip Gay – President and Chief Executive Officer
Michael Weinstock – Co-Chairman of the Board and Executive Vice President
Robert Spivak – Co-Chairman of the Board
Wayne Lipschitz – Vice President and Chief Financial Officer
John Sola – Senior Vice President, Culinary
Louis Feinstein – Senior Vice President, Operations
What potential conflicts of interest are posed by the Transaction?
Our directors and executive officers may have interests in the Transaction that are different from your interests as a stockholder, and have relationships that may present conflicts of interest. On November 28, 2008, 1,020,587 shares, or approximately 10.1%, of the issued and outstanding shares of our eligible voting stock, were held by our directors and executive officers each of whom has indicated that he intends to vote “FOR” the Transaction, as have the 10% shareholders.
Upon the effectiveness of the Transaction, the aggregate number of shares of our common stock owned by our directors and executive officers will remain the same and the ownership percentage of the shares of our voting stock held by our directors and executive officers will increase modestly as a result of the reduction of the number of shares of our common stock outstanding. In addition, each member of the Board of Directors, and each of our executive officers, holds options to purchase shares of our common stock. The Transaction will not affect these stock options and they will remain outstanding after the Transaction.
Why is the Company proposing to carry out a forward stock split following the reverse stock split?
The Forward Stock Split is not necessary for us to reduce the number of holders of record of our shares of common stock and to deregister our shares of common stock under the Exchange Act. However, we have decided that it is in the best interests of our stockholders to effect the Forward Stock Split to avoid an unusually high stock price after the Transaction, to facilitate trading of the shares of Continuing Stockholders either in private transactions or on the pink sheets, to mitigate any loss of liquidity in our shares of common stock that may result from the Reverse Stock Split portion of the Transaction and to avoid the administrative burden of having fractional shares outstanding.
What if I hold fewer than 35 shares of common stock and hold all of my shares in “street name”?
If you hold fewer than 35 shares of our common stock in street name your broker, bank or other nominee is considered the stockholder of record with respect to those shares and not you. It is possible that the bank, broker or other nominee also holds shares for other beneficial owners of our common stock and that it may hold 35 or more total shares. Therefore, depending upon their procedures, they may not be obligated to treat the Transaction as affecting beneficial holders’ shares. It is our desire to treat stockholders holding fewer than 35 shares of our common stock in street name through a nominee (such as a bank or broker) in the same manner as stockholders whose shares are registered in their name. However, we or our transfer agent, Securities Transfer Corp., may not have the necessary information to compare your record holdings with any shares that you may hold in street name in a brokerage account and these banks, brokers and other nominees may have different procedures for processing the Transaction. Accordingly, if you hold your shares of our common stock in “street name,” we encourage you to contact your bank, broker or other nominee.
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What happens if I own a total of 35 or more shares of common stock beneficially, but I hold fewer than 35 shares of record in my name and fewer than 35 shares of with my broker in street name?
We may not have the information to compare your holdings in two or more different brokerage firms. As a result, if you hold more than the minimum number of shares, you may nevertheless have your shares cashed out if you hold them in a combination of accounts in several brokerage firms. If you are in this situation and desire to remain a stockholder of the Company after the Transaction, we recommend that you combine your holdings in one brokerage account or become a record holder prior to the effective time of the Transaction. You should be able to determine whether your shares will be cashed out by examining your brokerage account statements to see if you hold more than the minimum number of shares in any one account. To determine the Transaction’s effect on any shares you hold in street name (and possible payment of the cash consideration), you should contact your broker, bank or other nominee.
If I own fewer than 35 shares of common stock, is there any way I can continue to be a stockholder of the Company after the Transaction?
If you own fewer than 35 shares of our common stock before the Transaction, the only way you can continue to be a stockholder of the Company after the Transaction is to purchase, prior to the effective time of the Transaction, sufficient additional shares to cause you to own a minimum of 35 shares at the effective time of the Transaction. However, given the historically limited liquidity in our stock, we cannot assure you that any shares will be available for purchase and thus there is a risk that you may not be able to purchase sufficient shares to exceed the required 35 shares. In this instance, you would no longer remain a shareholder after the effective time of the Transaction.
Is there anything I can do if I own 35 or more shares of common stock, but would like to take advantage of the opportunity to receive cash for my shares as a result of the Transaction?
If you own 35 or more shares of our common stock before the Transaction, you can only receive cash for all of your shares if, prior to the effective time of the Transaction, you reduce your stock ownership to fewer than 35 shares by selling or otherwise transferring shares. However, we cannot assure you that any purchaser for your shares will be available.
Who is entitled to vote at the Special Meeting?
Only holders of record of our common stock and Series C Convertible Preferred Stock as of the close of business on February 18, 2009, which is the Record Date for the Special Meeting, are entitled to notice of, and to vote at, the Special Meeting.
How many shares were outstanding on the Record Date?
At the close of business on November 28, 2008 there were 10,057,730 shares eligible to vote on the Transaction, consisting of 8,807,730 outstanding shares of our common stock and shares of Series C Convertible Preferred Stock convertible into 1,250,000 shares of common stock. At the Special Meeting, each of those shares of common stock will be entitled to one vote and each share of Series C Convertible Preferred Stock will be entitled to one vote for each share of common stock into which that preferred stock is convertible.
What is a “quorum” for purposes of the Special Meeting?
In order to conduct business at the Special Meeting, a quorum must be present. A “quorum” is a majority of the issued and outstanding shares entitled to vote which, for purposes of the Special Meeting, includes both our common stock and shares of common stock issuable on conversion of our Series C Convertible Preferred Stock. The shares may be present in person or represented by proxy at the Special Meeting. Both abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum.
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What vote is required to approve the proposals?
Once a quorum has been established, for the Transaction to be approved, holders of a majority of shares entitled to vote at the meeting must vote “FOR” each of the Reverse Stock Split proposal and the Forward Stock Split proposal. The shares entitled to vote (including shares of common stock issuable on conversion of our Series C Convertible Preferred Stock) are considered as a single class for purposes of voting on the Transaction.
At the close of business on November 28, 2008, 1,020,587 of our outstanding shares of common stock (approximately 10.1% of eligible votes) were held by directors and executive officers and 3,350,710 of our shares of common stock outstanding or issuable on conversion of our Series C Convertible Preferred Stock (approximately 33.3% of eligible votes) were held by 10% or greater shareholders. As we noted above, the directors and executive officers have each indicated that they intend to vote “FOR” the Transaction, as have the 10% or greater shareholders.
What will happen if the Transaction is approved by the Company’s stockholders?
Assuming that we have fewer than 300 record holders of our common stock after the Transaction, we will file applicable forms with the SEC to deregister our shares of common stock under the federal securities laws and to delist our shares from the Nasdaq Capital Market. Upon the effectiveness of those filings, the Company would no longer be subject to the reporting and related requirements under the federal securities laws that are applicable to public companies and Nasdaq Capital Market rules applicable to listed companies. We will also no longer be subject to the provisions of the Sarbanes-Oxley Act. In addition, Cashed Out Stockholders will no longer have a continuing interest as stockholders of the Company and will not share in any future increase in the value of the Company. Also, any trading in our common stock will occur in privately negotiated sales or on the pink sheets.
What will happen if the Transaction is not approved?
If the Transaction is not approved by our stockholders, we will continue to operate our business, and we will continue to incur the costs involved of being a public company. We also may decide to evaluate and explore available alternatives, although the Board of Directors has not yet made a determination that any of those alternatives are feasible or advisable.
If the Transaction is approved by the stockholders can the Board of Directors or the Special Committee determine not to proceed with the Transaction?
If the Transaction is approved by the stockholders, either the Board of Directors or the Special Committee may determine not to proceed with the Transaction if they believe that proceeding with the Transaction is not in the best interests of the stockholders. If either the Board of Directors or the Special Committee determines not to proceed with the Transaction we will continue to operate our business as presently conducted.
What are the federal income tax consequences of the Transaction to me?
If you are not subject to any special rules that may be applicable to you under federal tax laws, then generally, a Cashed Out Stockholder that receives cash for a fractional share as a result of the Transaction will recognize capital gain or loss for United States federal income tax purposes. A Continuing Stockholder who does not receive cash for a fractional share as a result of the Transaction will not recognize any gain or loss for United States federal income tax purposes. We urge you to consult with your personal tax advisor with regard to the tax consequences to you of the Transaction.
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Should I send in my certificates now?
No. After the Transaction is completed, we will send instructions on how to receive any cash payments to which you may be entitled.
What is the total cost of the Transaction to the Company?
Since we do not know how many record and beneficial holders of our common stock will be Cashed Out Stockholders, we do not know the exact cost of the Transaction. However, based on information that we have received as of November 28, 2008 from our transfer agent, Securities Transfer Corp., and from Broadridge Corporate Issuer Services, a division of Broadridge Financial Solutions, Inc., with regard to the size of holdings of those of you who may hold shares in “street name,” as well our estimates of other Transaction expenses, we believe that the total cash requirement of the Transaction to the Company will be approximately $425,000. This amount includes approximately $25,000 needed to cash out fractional shares, and approximately $400,000 of legal, accounting, and financial advisory fees and other costs to effect the Transaction. This total amount could be larger or smaller depending on, among other things, the number of fractional shares that will be outstanding after the Transaction as a result of purchases, sales and other transfers of our shares of common stock by our stockholders.
Am I entitled to appraisal rights in connection with the Transaction?
No. Under Delaware law, our certificate of incorporation and our bylaws, no appraisal or dissenters’ rights are available to our stockholders who vote against the Transaction.
How do I vote?
Sign and date each proxy card you receive and return it in the enclosed envelope prior to the Special Meeting or attend the meeting and vote in person.
Can I change my vote?
Yes. You may change your proxy instructions at any time before your proxy is voted at the Special Meeting. Proxies may be revoked by taking any of the following actions:
• filing a written notice with our corporate secretary of revocation of any prior delivered proxy, or a duly executed proxy bearing a later date, with our corporate secretary at our principal executive office (6300 Canoga Avenue, Suite 1700, Woodland Hills, California 93167); or
• attending the Special Meeting, filing a written notice of revocation of your proxy with our corporate secretary, and voting in person (although attendance at the meeting will not, by itself, revoke a proxy).
What does it mean if I get more than one proxy card?
If your shares are registered differently and are in more than one account, you will receive more than one proxy card. Sign and return all proxy cards to ensure that all your shares are voted.
How does the board of directors recommend that I vote on the proposals?
Following a recommendation from the Special Committee, the Board of Directors unanimously recommends that you vote “FOR” the proposals to approve the Transaction. |
