Free Motion for Partial Summary Judgment - District Court of Colorado - Colorado

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OFFERTOPURCWEFORCMH

A U OUTSTANDING SEARE8 OF lT8 COMMON S M C E AT A PURCHASE PRICE OF $8.00 NET PPllZ SHARE
THE OFFER ANB WlTHDRAWAL RIOHIS WlLt EXPIRE AT 12:OO MIDNIOHT, NEW YORK CrrY TIME,ON DECEMBER If. 2000, UNLESS THE OFFER I EXTENDED. S The Quirno's Capotation. Coldo caporatim (the 'Company"). invitesits st0cWolder-st tender, o shares of comman stock. 5.001 par value per share (the "Sharesw),t $8.00 pa Share (the " b h a s ePrice"). a nu to the sdla in cash. wilhwt interm thereon.upon the t a m s and abject to the conditions set forth in this Offa to RPchasc and in the related letter of TMlwmittal (which togaha with this O f f a to RYchase constitutes the "Offa"). Although the Ofer is being made to all hoidas d Sham Richard E. Schaden. the Chainnan of the Bocvd of Dircuurs. Resident and Chief Executive Ofti- of the Company,Richard F. Schaden. Vice President. Secretary and rr director of the Company. and Frederick H Schaden. a director of the Company ( o l c i e y the 'Schadm S~ockhddas').have adnsed us that they do n u intend t tender any cletvl. o Shares pursuant r the Offer. Whenever this O f r t Purchase refers to rights "we" have. actions "weh may o fe o take or similv matters. it is referring l rights and actions of the Company. o
The Offer is conditioned on. among other things. there W i g validly tendered and not withdrawn prior to the Expiration Date (as defined below) nor less Lhan 5 1 1 of the currently outstanding S a e .other hrs Lhon Shares beneficially owned by the Schadm Stockholders (the "Minimum Condition"). We reserve the right r waive the Minimum Condition and all other conditims to the Offer. All Shares properly tendwed and o not withdrawn will be purchased at the Purchase Price. on the terms and subject to the conditiaw of the Offer.
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OUR BOARD OF DIRECTORS HAS APPROVED OFFER HOWEVER. NONE OF THE COMPANY.OUR BOARD OF DIRECTORS OR 7 l E DEALER MANAGEFt MAKES ANY RECOMMENDATION TO YOU AS TO WHETHER TO TENDER OR REFRAIN FROM TENDWUNG YOUR SHARES. YOU MUST MAKE THE DECISION WHETHER TO TENDER YOUR SHARES AND. F SO. HOW MANY SHARES TO TENDER.
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The Shares rue tmdad on the Smallcap Market of The Nasdaq Stock Market. h c . ("Nsdaq")under the ticker symbol "QUIZ."On Novanbcr 9 . 2 0 . rhe last day the Shares were traded ar Nasdaq befae the printing of this Offer to Purchase. the lrrJt reputed sales price of the Shares on Nasdaq was 16.75 per Share.

THIS W S A C l ' l O N HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITlES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON THE FAIRNESS OR MERfTS OF SUCH 'IRANSACI1ON OR TIiE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAlNED I 7HIS DOCUMENT. ANY REPRESENTATION N TO THE C O Y IS UNtAWRIL.
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The Dealer Manager for rhr Offtr 1s: TUCKER AmHONY CAPITAL MARKETS. o Divism of Tucker Anthony Incorporated
T h p /n/r~rmorron Agent for fhc Offer IS

MACKENZJE PARTNERS.INC.
November 1 3.2000

Trial Exh. E l
Sandstone Group

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CONTENTS
SUMMARY TERM SHEET ....................................................................................................... 1

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SPECIAL FACTORS............................................................................................................. 11 Background and Purpose of the Offer; Certain Effects of the Offer; 1. Plans of the Company After the Offer ...............................................................11 Rights of Stockholders in the Event of the Second-Step Transaction .................. 18 2. Position of Our Board; Fairness of the Offer .....................................................18 3. Opinion of Tucker Anthony ............................................................................. 20 4. Interests of Certain Persons in the Offer and the Second-Step 5. Transaction ...................................................................................................... 25 Beneficial Ownership of Shares.........................................................................27 6. Fees and Expenses ............................................................................................ 29 7.

THE TENDER OFFER .............................................................................................................30 1. Terms of the Offer; Expiration Date .................................................................. 30 2. Acceptance for Payment and Payment for Shares ..............................................31 3. Procedures for Accepting the Offer and Tendering Shares ................................. 32 4. Withdrawal Rights ............................................................................................ 36 5. Certain Federal Income Tax Consequences........................................................ 37 6. Price Range of Shares; Dividends; Stock Repurchases.......................................40 7. Certain Information Concerning the Company ................................................ 41 8. Financing of the Offer................................................................................... 51 9. Dividends and Distributions ..............................................................................52 Effect of the Offer on the Market for the Shares; Nasdaq Listing and 10. Exchange Act Registration................................................................................ 52 Certain Conditions of the Offer ......................................................................... 54 1 1. Certain Legal Matters and Regulatory Approvals ..............................................55 12. Fees and Expenses ............................................................................................ 56 13. 14. Misdaneous ...................................................................................................56
SCHEDULE I Directors and Executive Officers of the Company SCHEDULE I1 Opinions of Tucker Anthony SCHEDULE 111 Summary of Stockholder Dissenters Rights and Text of Article 113 of the Colorado Business Corporation Act

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SUMMARY TERM SHEET
We are offering to purchase all the outstanding shares of our common stock at a price, net to the seller in cash, of $8.00 per share. Through a question and answer format, this Summary Term Sheet will explain to you, the common stockholders of The Quizno's Corporation, the important terms of the proposed transaction. This explanation will assist you in deciding whether to tender your shares to The Quizno's Corporation. This Summary Term Sheet serves only as an introduction, and we urge you to carefully read the remainder of this Offer to Purchase and the accompanying Letter of Transmittal in order to fully educate yourself on the details of the proposed tender offer. Crossreferenced text refers to sections within this Offer to Purchase. WHO IS OFFERING TO B W THE COMMON STOCK OF THE QUIZNO'S CORPORATION? The Quiz,nols Corporation, a Colorado corporation, is offering to buy back its own common stock in a self-tender offer.
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER? HOW MUCH IS THE QUIZNO'S CORPORATION OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?

We are offering to purchase all the issued and outstanding shares of common stock of The Quizno's Corporation for $8.00 per share, net to you, in cash The Offer is being made to all holders of common stock. We have been advised that Richard E. Schaden, the Chairman of the Board of Directors, President and Chief Executwe Officer of The Quizno's Corporation, Richard F. Schaden, Vice President, Secretary and a director of The Quizno's Corporation, and Frederick H. Schaden, a director of The Quizno's Corporation, who as a group own approximately 5 1.6% of the outstanding shares of common stock, do not intend to tender any of their shares pursuant to the Offer. See "Introduction" and "The Tender Offer--Terms of the Offer; Expiration Date."
WHAT IS THE PURPOSE OF THE TENDER OFFER?

We believe that the public trading marke! for the shares has been and will continue to be characterized by low pnces and low trading volume. The overall purpose of the Offer is to increase stockholder value. More specifically, we are making the Offer, among other reasons, because we believethat
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the Offer will provide you with an opportunity to achieve liquidity in cash upon the mummation of the Offer; and

the Offer will provide you with a premium above recent trading prices.

Depending on the numbers of shares purchased in the Offer, the Offer could have the effect of taking us private. If fewer than all the shares owned by the public stockholders are tendered pursuant to the Offer, then our Board of Directors could take other actions that would result m a second-step transaction m which all the remaining public stockholders would receive cash for their shares. However, our Board of Directors has not made any decision to take the company private or as to

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whether, or when, a second-step transaction such as a merger or a reverse stock split would be completed. A second-step transaction would require approval by our Board of Directors and may require approval by our stockholders, depending on the nature of the second-step transaction The members of the Schaden family owning shares would be able to control the outcome of any stockholder vote on a second-step transaction Other purposes for the tender offer are set forth in "Introduction" and "Special Factors-Background and Purpose of the Offer; Certain Effects of the Offer, Plans of the Company After the Offer." WILL I BE CHARGED ANY TRANSFER TAXES, FEES OR COIVfMlSSIONS WHEN I TENDER MY SHARES? We will pay all stock transfer taxes payable on the transfer of shares pursuant to the tender offer. However, if we are going to make payment of the purchase price to any person other than the registered holder or if any tendered shares are registered in t e name of any person other than the h person signing the Letter of Transmittal,then we will deduct from the purchase price the amount of any stock transfer taxes payable on account of the transfer, unless we receive satisfactory evidence that such taxes have been paid or there is an adequate exemption If you are the record owner of your shares and you tender shares to us, you will not have to pay any brokerage fees or commissions. If you own your shares through a broker or other nominee, and your broker tenders your shares on your behalf, then your broker or nominee may charge you a fee or commission for doing so. You should contact your broker or nominee to determine whether you will be charged a fee. See "The Tender Offer--Acceptancefor Payment and Payment for Shares" and Instruction 6 of the Letter of Transmittal. WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER? UNDER WHAT CONDITIONS CAN THE QUIZNO'S CORPORATION TERMINATE THE TENDER OFFER? We are not obligated to purchase any shares that are validly tendered unless that number of shares validly tendered and not withdrawn prior to the expiration date represents more than 5 1% of the currently outstanding shares (other than shares held by Richard E. Schaden, Richard F. Schaden and Frederick H. Schadenj. We can terminate the tender offer, in our sole discretion, if, among other things: any action by any governmental agency or other person is instituted that challenges or otherwise adversely affects our ability to make or complete the tender offer or could, in our sole judgment. materially affect our business; the board of directors conclude that the exercise of their fiduciary duties requires that we terminate the offer, or we no longer continue to have sufficient financing to enable us to consummate the Offer. We reserve the right to waive any of the above conditions. Other conditions are set forth in "The Tender Offer--Certain Conditions of the Offer."

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HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER MY SHARES IN THE OFFER? CAN THE QUIZNO'S CORPORATION EXTEND THE OFFER PAST THE INITIAL EXPIRATION DATE? The Offer to purchase your shares expires at 1290 midnight, New York City time, on Monday, December 11,2000.

Yes,we can extend the Offer past this scheduled expiration date in our sole discretion. If we choose to do so, you will be able to tender your shares until the end of the day selected as the new expiration date. See "The Tender Offer--Terms of the Offer, Expiration Date."
CAN THE QUIZNO'S CORPORATION AMEND THE TERMS OF THE TENDER OFFER? We reserve the right in our sole discretion to amend the tender offer in any respect. See "The Tender Offer-Terms of the Offer; Expiration Date." HOW DO I FIND OUT I THE QUIZNO'S CORPORATION AMENDS THE TERMS OF THE F TENDER OFFER? We will announce any amendment to the tender offer by making a public announcement of the amendment. We will announce any extension no later than 9:00 a.m., New York City time, on the next business day after the last previously scheduled or announced expiration date. Ln the event of a termination or postponement of the tender offer, we will also give written or oral notice to the Depositary. We will disseminate any pubhc announcement promptly to you in a manner reasonably designed to inform you of the amendment. Without limiting the manner in which we may choose to make any public announcement. we wiU have no obligation to publish, advertise or otherwise communicate any public announcement other than by making a release to the Dow Jones News Service or other national business wire service. See 'TheTender Offer--Acceptance for Payment and Payment for Shares." HOW DO I GET PAID FOR MY TENDERED SHARES? We will pay for the shares accepted for payment by depositing the aggregate purchase price with the Depositary as soon as practicable after the expiration date of the tender offer. The Depositary will act as your agent and will transmit to you the payment for all shares accepted for payment. See "The Tender Offer--Acceptance for Payment and Payment for Shares." HOW DO I TENDER MY SHARES? To tender your shares, you rnusl &liver your share certificates, together with a completed lener of transmittal. to the D e p ~ t a r y or prior to the expiration date. If your shares are held m on street name, you can tender the shares by your nominee through the Depositary. For a more detailed explanation of the tendemg procedures, see "The Tender Offer--Acceptance for Payment and Payment for Shares."

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UNTIL WHEN CAN I W1THDRAW MY PREVIOUSLY TENDERED SHARES?
You can withdraw your tendered shares at any time on or prior to the expiration date. After the Offer expires, the tender is irrevocable unless we have not accepted for payment your shares by 12:00 micinight, New York City time, on Wednesday, January 10,2001. See "The Tender Offer--WithdrawalRights." HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES? To withdraw your shares, you must deliver a written, telegraphic or facsimile transmission of hrs notice of withdrawal to the Depositary that specifies your name, the number of s a e being withdrawn and the name of the registered holder of the shares, if different from the person who tendered the shares. If you have tendered pursuant to the procedure for book-enuy transfer, the notice of withdrawal must also specify the name and the number of the account at the book-enUy transfer facility to be credited with the withdrawn shares. See "The Tender Offer--Withdrawal Rights."
WHAT ARE THE TAX CONSEQUENCES OF THE SALE OF SHARES TO THE Q W O ' S CORPORATION?

T e sale of shares to us is a taxable transaction for federal, and most likely for state and h foreign, income tax purposes as well. We encourage you to consult with your own tax advisor about the particular effect the tender will have on you. See "The Tender Offer--Certain Federal Income Tax Consequences."
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?

On November 9. 2000. the last full trading day before the printing of this Offer to Purchase, the closing price per share of the common stock on the Nasdaq Smallcap Market was $6.75. We encourage you to obtain a current market quotation for your shares before deciding whether to tender your shares. See "The Tender Offer--Price Range of Shares; Dividends; Stock Repurchases."
WHAT DOES THE BOARD OF DIRECTORS OF THE QUIZNO'S CORPORATION THINK OF

THE TENDER OFFER?
Our Board of Directors, other than Richard E. Schaden, Richard F. Schaden, Frederick H. Schaden and J. Eric Lawrence, all of whom refrained from voting, adopted resolutions approving the tender offer. However, neither we nor our Board of Directors makes any recommendation to you as to whether to tender or refrain from tendering shares, and neither we nor our Board of Directors has authorized any person to make any such recommendation. We encourage you to make your own decision whether to tender shares and. if so, how many shares to tender. See "Special Factors--Background and Purpose of the Offer, Certain Effects of the Offer; Plans of the Company After the Offer" and "--1nterests of Certain Persons in the Offer and the SecondStep Transaction."

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DID THE BOARD OF DIRECTORS RECEIVE ANY OPINIONS, APPRAISALS OR REPORTS REGARDING THE FAIRNESS OF THE OFFER? Yes. Our Board of Directors received a written opinion, dated November 12, 2000. from Tucker Anthony Capital Markets, a division of Tucker Anthony Incorporated, to the effect that, as of that date and based on and subject to the assumptions and limitations contained in the opinion, the purchase price per share of $8.00 to be received in the Offer was fair, from a financial point of view, to all of the holders of shares of The Quizno's Corporation's common stock (other than Richard E. Schaden, Richard F. Schaden and Frederick H. Schaden). DO ANY DIRECTORS OR EXECUTIVE OFFICERS OF THE QUIZNO'S CORPORATION INTEND TO TENDER SHARES PURSUANT TO THE TENDER OFFER? We have been advised that Richard E. Schaden, the Chairman of the Board of Directors, President and Chief Executive OKcer of The Quizno's Corporation, Richard F. Schaden, Vice h President, Secretary and a director of T e Quizno's Corporation, and Frederick H. Schaden, a director of The Quiulo's Corporation, who as a group own approximately 51.6% of the outstanding shares of common stock, do not intend to tender any of their shares pursuant to the Offer. All other directors and officers have advised us that they have not decided whether to tender their shares.

See "Introduction," "Special Factors--Background and Purpose of the Offer; Certain Effects of the Offer; Plans of the Company After the Offer" and "--Interests of Certain Persons in the Offer and the Second-Step Transaction"
WHAT IS THE TOTAL AMOUNT OF FUNDS THAT THE QUIZNO'S CORPORATION WILL REQUIRE TO CONSUMMATE THE TENDER OFFER? Assuming we purchase 1,456,248 shares in the tender offer at a purchase price of $8.00 per share, all vested stock options (other than those held by the Schaden Stockholders) exercisable at a price below the offer price are exercised and tendered. all preferred shares are converted into common stock and tendered and we purchase the warrants held by Retail & Restaurant Growth Capital, L.P., we expect the maximum aggregate cost, including all fees and expenses applicable to the tender offer, to be approximately $18,2OO,OOO. See 'The Tender Offer--Financing of the Offer." HOW WILL THE QUIZNO'S CORPORATION OBTAIN THE FUNDS TO MAKE PAYMENT? We will obtain all necessary funds from a new subordinated credit facility with Levine Leichtrnan Capital Partners and from available cash The maximum amount available to us under this ilo credit facility is $12 million and we have $6.2 m l i n in available cash. In connection with the subordinated cred~t facihty, we agreed to lssue a warrant to Levine Leichtman Capital Parmers to purchase up to 14% of our common stock and each series of preferred stock as of nine months following the closing of the Offer. See 'The Tender Offer--Financing of the Offer" and "The Tender Offer--Certain Information About the Company--Recent Transactions."

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WIU THE COMPANY CONTINUE AS A PUBLIC COMPANY? WHAT EFFECT WILL THE TENDER OFFER HAVE ON MY SHARES THAT ARE NOT PURCHASED IN THE OFFER, OR THAT I DO NOT TENDER?
Our purchase of the shares in the Offer will reduce the number of shares that might otherwise trade publicly and wiU likely reduce the number of stockholders. Depending on the number of shares purchased in the Offer, the Offer could have the effect of taking us private. If fewer than all the shares owned by the public stockholders are tendered pursuant to the Offer, we may decide, in our sole discretion, to enter into a merger or other form of corporate transaction such that any shares not tendered by the stockholders (other than shares held by Richard F. Schaden, Richard E. Schaden and Frederick H. Schaden) will be converted into only the right to receive the offer price in cash In such an event (or if the number of shares purchased in the Offer results in our being a private company), we will seek to delist our common stock from trading on the Nasdaq SmdCap Market and terminate the registration of the shares under the Securities Exchange Act of 1934, as amended. We currently have a very small stockholder base for an exchange-traded public company as indicated by our approximately 150 stockholders of record, a number substantially below the minimum at which a publicly traded company may terminate its obligation to file periodic financial reports and other information pursuant to the Securities and Exchange Act. Even if we do not complete the Offer or enter into a second-step transaction following the Offer, we may seek to terminate our registration under the Securities Exchange Act and delist our securities from the Nasdaq SmallCap Market. See "introduction" and "Special Factors--Background and Purpose of the Offer; Certain Effects of the Offer; Plans of the Company After the Offer."

IF I OBJECT TO THE PRICE BEING OFFERED. WILL I HAVE DISSENTERS' RIGHTS?
You will not have dissenters' rights in the Offer. In the event we enter into a merger or other form of corporate transaction such that any shares not tendered by the public stockholders will be converted into the right to receive the offer price in cash you may have dissenters' rights and be able to have the "fair value" of your shares paid to you in cash provided that you comply with the applicable provisions of the Colorado Business Corporation Act. See "Special Factors--Rights of Stockholders in the Event of a Second-Step Transaction" A copy of the Colorado dissenters' rights statute is attached as Schedule 111. WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?

You can call MacKenzie Partners, Inc.. the Information Agent for the Offer, toll-free at
(800) 322-2885.

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IMPORTANT
Any stockholder desiring to tender al or any portion of such stockholders shares should either l (1) complete and sign the Letter of Transmittal (or a copy thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver it and any other required documents to the Depositary and either deliver the certificate(s) evidencing the tendered shares to the Depositary along with the Letter of Transmittal or deliver such shares pursuant to the procedure for book-entry transfer set forth in "The Tender Offer-Procedures for Accepting the Offer and Tendering Shares" or (2) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such stockholder. Any stockholder whose shares 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 stockholder desires to tender such shares. Any stockholder who desires to tender shares and whose certificates evidencing such shares are not immediately available, or who cannot comply with the procedure for book-entry transfer on a timely basis, may tender such shares by following the procedure for Guaranteed Delivery set forth in "The Tender Offer--Procedures for Accepting the Offer and Tendering Shares." TO PROPERLY TENDER SHARES, STOCKHOLDERS MUST VALIDLY COMPLETE THE LETTER OF TRANSMITTAL. Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Lener of Transmittal and the Notice of Guaranteed Delivery may also be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL. IF MADE OR GIVEN. SUCH RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE QUIZNO'S CORPORATION.

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To the Stockholders of The Quizno's Co~poration:

INTRODUCTION
We invite the stockholders of The Quino's Corporation, a Colorado corporation (the "Company"), to tender to the Company shares of our common stock, $.001 par value per share (the "Shares"), at $8.00 per Share (the 'Furchase Price"), net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Offer to Purchase (this "Offer to Purchase") and in the related Letter of Transmittal (which together with this Offer to Purchase constitutes the "Offer"). Although the Offer is being made to all holders of Shares, Richard E. Schaden, the Chairman of the Board of Directors, President and Chief Executive Officer of the Company, Richard F. Schaden, Vice President, Secretary and a director of the Company and Frederick H. Schaden, a director of the Company (collectively, the "Schaden Stockholders"), have advised us that they do not intend to tender any Shares pursuant to the Offer. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on December I 1,2000, unless the Offer is extended. See "The Tender Offer--Terms of the Offer; Expiration Date."
All Shares properly tendered and not withdrawn will be acquired in the Offer at the Purchase Price, upon the terms and subject to the conditions of the Offer.

The Offer is conditioned on,among other things, there being validly tendered and not withdrawn prior to the Expiration Date (as defined below) not less than 5 1% of the currently outstanding Shares, other than Shares beneficially owned by the Schaden Stockholders (the ' h b l i c Shares"), or 742,686 Public Shares (the "Minimum Condition"). We reserve the right to waive the M n m m Condition and the iiu other conditions to the Offer. See "The Tender Offer--Certain Conditions of the Offer."
Pursuant to the Offer, we seek to acquire all the issued and outstanding Public Shares, including any Shares that are issued prior to the Expiration Date pursuant to conversion or exercise of outstanding preferred stock, options and warrants. At October 13,2000, there were (a) 3,007,921 Shares issued and outstanding and (b) approximately 650,000 Shares reserved for future issuance pursuant to outstanding employee, director and consultant stock options. In addition, approximately 887,536 Shares are issuable upon conversion of outstanding preferred stock or upon the exercise of outstanding warrants. The holders of preferred stock and warrants may tender the Shares they receive upon conversion or exercise in the Offer. Prior to the amowlcement of the Offer, there were approximately 150 holders of record of the issued and outstanding Shares. The Schaden Stockholders, who beneficially own in the aggregate 1,782,647 Shares, or approximately 5 1.6% of the isskd and outstanding Shares, have informed us that they do not intend to tender any of their Shares pursuant to the Offer. We believe that the public trading market for the Shares has been and will continue to be characterized by low prices and low trading volume. The overall purpose of the Offer is to increase stockholder value. More specifically. we are making the Offer, among other reasons, because we believe that

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the Offer will provide you with an opportunity to achieve liquidity in cash upon consummation of the Offer, and the Offer will provide you with a premium above recent trading prices. Depending on the number of Shares purchased in the Offer, the Offer could have the effect of taking us private. If fewer than all the Shares owned by the stockholders other than the Schaden Stockholders (the "Public Stockholders") are tendered pursuant to the Offer, then our Board of Directors could take other actions, such as a merger or a reverse stock split that would result in all the remaining Public Stockholders receiving cash for their shares ("Second-Step Transaction"). However, our Board of Directors has not made any decision to take the Company private or as to whether, or when, a SecondStep Transaction of this nature would be completed. A Second-Step Transaction would require approval by our Board of Directors and may require approval by our stockholders, depending on the nature of the Second-Step Transaction The Schaden Stockholders would likely be able to control the outcome of any stockholder vote on a Second-Step Transaction Stockholders would have the right to exercise dissenters' rights in CO~ection with a Second-Step Transaction A copy of the Colorado dissenters' rights statute is attached as Schedule 111. It is contemplated that the consideration payable to the Public Stockholders in any S m d - S t e p Transaction, if one is initiated would be cash in an amount equal to the Purchase Price.
As part of the Offer, individuals holding stock options, other than the Schaden Stockholders, will be glven the opportunity to surrender such options in exchange for payment from us (subject to any

apphcable withholding taxes) in cash equal to the product of (x) the total number of Shares subject to any such stock option and (y) the excess of the Purchase Price over the exercise price per Share subject to such stock option without any interest thereon. None of the Schaden Stockholders will be surrendering stock opt~ons owned by them in connection with the Offer. With respect to executive officers (other than executive officers who are also Schaden Stockholders). unvested options are expected to be exchanged for rights in a stock appreciation plan to be implemented by us after the Offer is complete.

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The Company has directed the trustee of the Company's 401(k) plan to accept the Offer and the trustee will tender all Shares held by the 40 1(k) plan. Approximately 15,000 Shares are currently held by the Company's 401(k) plan.

In connection with the Offer, the Company has agreed to repurchase warrants held by a Retail Restaurant Growth Capital. L.P. See 'The Tender Offer--Certain Information About the Company--Recent Transactions."
In determining whether to proceed with the Offer. our Board of Directors considered several factors. several of which are listed below (see "Special Factors--Position of Our Board; Fairness of the Offer"):
We currently have a very small stockholder base for an exchange-traded public company as indicated by our approximately 150 stockholders of record, a number substantially below the 300 mirumurn at which a publicly traded company may terminate its obligation to file p e n d c financial reports and other informat~on pursuant to the Securities Exchange Act of 1934. as amended (the "Exchange Act").

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a

The market for our common stock provides limited liquidity for stockholders to liquidate or add to their investments and has made it difficult for us to attract institutional investors or research coverage. Additionally, because of the limited liquidity available, we have been unable to utilize the public equity capital markets effectively as a source of financing.

In determining whether the Purchase Price to be paid to you was fair, our Board of Directors relied in part on an opinion dated November 12,2000, rendered by Tucker Anthony-Capital Markets, a division of Tucker Anthony Incorporated ("Tucker Anthony" or the "Dealer Manager"), the Company's financial advisor, to the effect that, and subject t the limitations contained therein, the $8.00 Purchase o Price offered to all of the stockholders in the Offer is fair, from a financial point of view, to the stockholders (other than the Schaden Stockholders). See Schedule I. I You will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Lener of Transmittal, stock transfer taxes with respect to our purchase of the Shares pursuant to the Offer. We will pay all charges and expenses of Hri Trust Company of New ars York (the "Depositary"), Tucker Anthony and MacKenzie Partners,Inc. (the "Information Agent") incurred in connection with the Offer. The Offer provides those of you who are considering a sale of all or a portion of your Shares to sell those Shares for cash a the Purchase Price without, where Shares are t tendered by the registered owner thereof directly to the Depositary, the usual transaction costs associated with open market sales. See "Special Factors-Fees and Expenses" and "The Tender Offer--Fees and Expenses." OUR BOARD OF DIRECTORS HAS APPROVED THE OFFER. HOWEVER, NONE OF THE COMPANY, OUR BOARD OF DIRECTORS OR TKE DEALER MANAGER MAKES ANY RECOMMENDATION TO YOU AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING YOUR SHARES. YOU MUST MAKE THE DECISION WHETHER TO TENDER YOUR SHARES AND. IF SO, HOW MANY SHARES TO TENDER. WE HAVE BEEN ADVISED THAT THE SCHADEN STOCKHOLDERS DO NOT INTEND TO TENDER ANY SHARES PURSUANT TO THE OFFER. The term "Expiration Date" means 12:00 midnight, New York City time, on December 11,2000, unless and until we, in our sole discretion extend the period during which the Offer is open, in which event the tern "Expiration Date" means the latest time and date at which the Offer, as so extended by us, expires. See "The Tender Offer--Terms of the Offer, Expiration Date." The Purchase Pnce will be paid net to the tendering stockholder in cash, without interest thereon, for all Shares purchased Tendering stockholders who hold Shares in their own name and who tender their Shares directly to the Depositary will not be obligated to pay brokerage commissions. solicitation fees or, subject to Instruction 6 of the Letter of Tranmittal, stock transfer taxes on the purchase of Shares by the Company pursuant to the Offer. Those of you holding Shares through brokers or banks are urged to consult your brokers or banks to determine whether transaction costs are applicable if you tender Shares through the brokers or banks and not drectly to the Depositary. HOWEVER, ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FALLS TO COMPLETE, SIGN AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 THAT IS INCLUDED AS PART OF THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED UNITED STATES FEDERAL INCOME TAX BACK-UP WITHHOLDING OF 31% OF THE GROSS PROCEEDS

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PAYABLE TO THE TENDERING STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. See "The Tender Offer--Certain Federal Income Tax Consequences." On November 9, 2000, the last day the Shares were traded before the printing of this Offer to mrchase, the last reported sales price of the Shares on Nasdaq was $6.75 per Share. See "The Tender Offer--Price Range of Shares; Dividends; Stock Repurchases."

THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.

SPECIAL FACTORS
I.

Background and Purpose of the Offer; Certain Effectsof the Offer; Plans of the Company After the Offer

BACKGROUND OF THE OFFER. We believe that since February 1994, when we completed our initial public offering, the public market has not responded to the positive growth of the Company, including our profitability in recent years. and the Shares have remained very thinly traded and have provided little liquidity for our stockholders, particularly those stockholders with larger equity positions in the Company. In addition, because of t e low trading volume and illiquidity of the Shares, we have been h unable to utilize the Shares effectively as a source of financing. For those reasons, we have been unable to realize the principal benefits of public ownership and we expect no change in the situation regarding the Shares for the foreseeable future.
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On December 29, 1998, Richard E.Schaden and Richard F. Schaden offered to buy all the outstanding shares of the Company not owned by them for between $7.84 and $8.20 per share. Our Board of Directors, at a meeting held that same day, formed a special committee of independent directors to evaluate the proposal and to make a recommendation to our full Board of Directors regarding the acceptance or rejection of the proposal. The Schadens subsequently formed The Schaden Acquisition Company and, through that company, amended thcii offer on June 23, 1999 with a revised purchase price of $8.00 per share. The Schadens and the special committee discussed and negotiated the proposal throughout the summer. but on August 9, 1999, the special committee reported to our Board of Directors that the Schadens had withdrawn their proposal, based largely on the inability of the special committee and the Schadens to reach a mutually agreeable price per share. At a special meeting of our Board of Directors on October 1, 1999, management expressed its belief that the low trading volume of the Shares on the Nasdaq limited liquidity for stockholders wishing to sell their Shares. Management believed that thc Company's repurchase of Shares would provide better liquidity for stockholders and recommended that our Board consider either an open market share repurchase program or a self tender for the Shares. Our Board considered management's recommendation and discussed the possibility of a self tudcr offer for some or all of the outstanding shares as well as a more l h t e d share repurchase program pursuant to Rule lob- 18 under the Exchange Act. Our Board authorized repurchase of up to 200,000 Sham under Rule lob-18. We repurchased 144,055 Shares in the open market until September 30. 2000. when we ceased the share repurchase program in order to avoid reducing our net tangible assets below the threshold required for contmued Listing on Nasdaq.

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At our Board of Directors meeting held on May 18,2000, management once again addressed the continued low trading volume of the Shares as well as concerns over the average share price, which had declined since we had ceased the share repurchase program in December 1999. Management reported that it would reinstate the share repurchase program as a good use of capital and in order to afford added liquidity to stockholders. Management also expressed its concern regarding the lack of recognition that Wall Street and investment professionals, including analysts, were giving to s a l and micro-cap ml companies like ours, and in general the fact that whiIe the share price appeared to be in line with some of our peers, it did not appear that the share price adequately reflected our recent financial performance or the strong growth we had experienced. Management largely felt that the low trading volume of the Shares coupled with our extremely low market capitalization (or "market cap") of approximately $20 to $25 million made it unlikely that the share price would increase appreciably in the foreseeable future. Over the next two months. management considered possible alternatives to propose to our Board of Directors and in the course of those considerations solicited the advice of Cypress Consulting Group ("Cypress"), which had provided consulting services to the Company on various projects over the last few years, and Tucker Anthony. At management's request. Tucker Anthony analyzed our current situation with respect to share price and trading volumes and discussed possible alternatives with management. Ultimately, in July 2000, Tucker Anthony suggested that we consider a self tender for outstanding Shares as the alternative most likely to afford liquidity for stockholders wishing to sell theii Shares. Based on that recommendation, management introduced Tucker Anthony to our Board at a meeting held on August 8.2000. Management also introduced Mr. John J. Todd the Senior Vice President and Chief F i c i a l Officer for Gateway, Inc.. maker of Gateway computers, to our Board. Mr. Todd had formerly heen an executive with PepsiCo and had apned to advise our Board concerning the strategic alternatives suggested by management and Tucker Anthony.

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During that meeting, Tucker Anthony made a presentation to our Board concerning the current share situation and its thoughts on a possible share repurchase or recapitalization transaction Tucker Anthony noted that our historical and projected sales and earnings growth had been and were expected to remain strong, but that despite that growth and strong operating performance over the previous six months. the Company's stock had continued to trade between $6.00 and $6.50 per share. and between $6.00 and $7.25 over the last 12 months. Tucker Anthony noted that while the Shares had performed in line with certain of their peer proups, thcy had lagged the Russell 2000 index and did not seem to be credited with the Company's s t m g historical growth and continued growth potential. Tucker Anthony attributed that lack of recognition by the market to the Company's extremely low market cap, which in turn made it highly unlikely that the Company would attract institutional investon or investment analysts. Tucker Anthony pointed out that currently the Company had no research coverage and no institutional investors. other than Retail & Restaurant Growth Capital, L.P. ("RRGC"). It then djscussed alternatives to Increase the market cap, and raise the trading volume. Since the Schaden Stockholders were not interested in selling their sham to a third party. a sale of the Company was not, in Tucker Anthony's opinion, a viahle option, nor was an equity offering to raise the market cap. The Company could not offer equity sufficient to reach even tfie lower range of market cap for small cap companies, estimated to be approximately $1 billion Even an equity offering sufficient to raise the Company's market cap to $400 to $500 million (the median market cap for our peer group) would, in Tucker Anthony's opinion, be too dilutlve to existing stockholders

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Tucker Anthony concluded its presentation by suggesting that a self tender transaction was the most viable way to improve stockholder value by providing stockholders with a premium over the Company's recent stock price, and providing stockholders with liquidity in an illiquid stock After a lengthy discussion with Tucker Anthony and management, our Board authorized management to more fully evaluate the possibility of a self tender offer and to seek proposals from potential lenders regarding the financing of such an offer, as well as to formally engage Tucker Anthony to assist our Board in evaluating such an offer and particularly the price or prices that would be re to establish the fairness of the Offer. a r Board also directed management to retain lawyers and other professionals as might be necessary to prepare a presentation for our Board if management determined to seek approval of a self tender transaction. Richard E. Schaden, Richard F. Schaden and J. Eric Lawrence abstained from voting on the resolution On August 15.2000, we formally engaged Tucker Anthony to advise the Company on the proposed tender offer. Tucker Anthony and Cypress prepared an initial evaluation of the Company's value for use in seeking lenders and preparing the next presentation for our Board During the next several weeks management, with the assistance of Cypress, solicited financing for a self tender transaction Tucker Anthony also began updating its analysis of our value for purposes of assessing the fair range of value per share should we proceed forward with the self tender. Richard E. Schaden and Dean Zucwello of Cypress contacted various potential lenders including Levine Leichtman Capital Partners ("Levine Leichtman"). After several discussions with Levine Leichtman, Mr. Schaden advised certain of our executive officers that he had received a verbal indication of interest from Levine Leichtman to finance the self tender transaction using subordinated debt and that he expected to received a written term sheet and proposed letter agreement shortly. On September 8,2000, we received a draft letter agreement from Levine Leichtman outlining the basic terms of a subordinated loan to finance the self tender and addressing Levine Leichtman's proposed due diligence investigation of the Company as well as exclusivity and confidentiality proposals. We negotiated and entered into the letter agreement on September 21, 2000, and called a special telephonic meeting of our Board of Directors for September 26,2000. At the September 26.2000. Board meeting, Mr. Todd was nominated and appointed as a new member of our Board of Directors. Management noted that the addition of another independent director with significant financial expertise would help the directors evaluate the proposed self tender transaction a d associated financing. Management and Tucker Anthony. as well as Cypress, then advised our Board n concerning the proposed Levine Leichtman financing. Management reported that it had signed a letter agreement with Levine Leichtman that would allow Levine Le~chtman begin its due diligence to investigation of the Company.

On October 9,2000, a special meeting of our Board was held In addition to a l l of the directors, representatives of management, Tucker Anthony and outside legal counsel to the Company participated in this meeting. At the meeting, outside legal counsel advised our Board regarding their fiduciary duties and applicable legal standards in the context of a self tender offer, and also reviewed with our Board the regulatory process and documentation of a self tender offer. Outside legal counsel also discussed with our Board the requirements under Section 7- 106401 of the Colorado Business Corporation Act ("CBCA) regarding distributions to stockholders. Tucker Anthony indicated that it would provide an opinion to the effect that the Company's total assets would exceed its total liabilities plus preferred stock liquidation preferences as of the close of the self tender in satisfaction of Section 7-1 06401 of the CBCA

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Management reported on the progress of the negotiations with Levine Leichtman for a loan of $12 million, with an interest rate of 13.25% per annum, through the issuance of secured senior subordinated notes by the Company and w r a t to purchase 14% of the Company's outstanding arns common stock on a fully diluted basis. Tucker Anthony then presented its analysis of a specific issuer tender offer proposal at a purchase price of $8.00 per share, and went through materials regarding that analysis that had previously been provided to our Board Tucker Anthony, based on its analysis, would give a fairness opinion that the Purchase Price of $8.00 a share was fair, from a financial point of view, to all of our stockholders(othkr than the Schaden Stockholde~~) the time the Offer is made. at

T e independent members of our Board then discussed the possibiity of retaining independent h counsel to advise them on the procedural aspects of our Board approval process. Our Board then voted to approve continued negotiation of definitive loan agreements with Levine Leichtman on substantially the same terms as had been presented to our Board. Richard E. Schaden, Richard F. Schaden and Frederick H. Schaden refrained from voting to ensure procedural fairness of the transaction evaluation. Mr. Lawrence also refrained f o voting based on independent advice concerning his possible conflict of rm interest as a representative and principal of RRGC which held warrants to purchase 411,177 Shares. Our ni Board agreed to defer taking other actions relating to the proposed self tender offer u t l the independent members of our Board had the opportunity to consult with their counsel on procedural issues.
On October 11, 2000, our Board met again to consider proceeding with the Offer. Representatives of management, Tucker Anthony and outside legal counsel to the Company attended this meeting. Mark Bromberg, a director of the Company, advised our Board that, after consulting with counsel for the independent directors. he was comfortable with the procedure adopted by the Company with respect to the self tender transacaon assuming that Tucker Anthony could address faimess of the . Purchase Price offered to all stockholders (other than the Schaden Stockholders) in its fairness opinion After some discussion concerning the pro&=, the independent directors voted unanimously to authorize management to prepare the filings and associated documents, and to retain necessary professional advisors, to commence a self tender transaction offering $8.00 per Share for all outstanding Shares of the Company's common stock, subject to review and approval by the independent directors of (1) the definitive loan documents between the Company and Levine Leichtman; (2) the finaI offer to purchase and other filings and documents related to the self tender transaction; (3) the f n l fairness opinion prepared by ia Tucker Anthony; and (4) an opinion prepared by Tucker Anthony supporting our Board's determination under Section 7- 106-401 of the CBCA. On November 12, 2000. our Board met to review the various tender-related materials. including the final opinion. a detailed summary of the terms of the loan between the Company and Levine Leichanan and the offer to purchase as well as the related tender offer materials (all of which had been sent to the directors on November 3.2000). Management also provided the directors with the expected timing of finalizing loan documents with Levine Leichtman and the time line for the self tender. Management recommended that our Board authorize the Company to enter into the definitive loan documents, and to commence the self tudcr on Novanber 13.
Tucker Anthony presented its final rtpon and analysis of the self tender transaction and stated it was prepared to issue to our Board its written oplnion that the $8.00 per Share being offered to all of the stockholders was fair to such stockhdders (other than the Schaden Stockholders) from a financial point of view. Tucker Anthony also reported that it was prepared to issue its written opinion that, based on the assumptions and qualifications set forth therem, the Company would meet the asset-liability test set forth

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i Section 7-106-401 of the CBCA following the closing of the Offer. Our Board and management n discussed the final terms of the Levine Leichtman loan. After discussion, our Board (with Richard E. Schaden. Richard F. Schaden, Frederick H. Schaden refraining from voting and recusing themselves from the meeting at the time the vote was taken and J. Eric Lawrence refraining from voting) detennined that the proposed self tender transaction and the underlying Levine Leichtman loan were advisable and fair to and in the best interests of the Company's stockholders, and approved the self tender transaction and the Levine Leichtman loan. Our Board determined that it may in the future consider initiating a Second-Step Transaction depending on the success of the self tender transaction.

On November 13, 2000, we issued a press release regarding the proposed Offer. No limitations were imposed by our Board of Directors or our management on Tucker Anthony with respect to the investigation made, or the procedures followed in rendering its advice with respect to the opinion as to the fairness of the consideration, from a financial point of view, provided to you. Tucker Anthony's assignment did not include investigating or pursuing any other pames interested in acquiring control of the Company, and Tucker Anthony did not solicit any offers for the acquisition of the Company because our Board instructed Tucker Anthony that the Schaden Stockholders were unwilling to consider a sale of their interest in the Company. Because of the engagement of Tucker Anthony to advise us and to render an opinion as to the fairness of the consideration, from a financial point of view, with respect to the consideration to be received by you in the Offer, and the decision by the interested directors @chard E. Schaden, Richard F. Schaden, Frederick H. Schaden and J. Eric Lawrence) to refrain from voting on the Offer at our Board meetings at which it was approved our Board did not consider it necessary to form an independent or "special" committee of our Board composed of directors who are not employees of the Company or to retain any other unaffiliated representatives to act solely on behalf of the public stockholders for the purpose of negotiating the terms or structure of the self tender offer.

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During the period between the engagement of Tucker Anthony and the presentation of its final report to our Board of Directors on November 12. 2000.we provided extensive information to representatives of Tucker Anthony regarding the Company and its prospects including, without limitation, the Company's historical financial results, projected financial results, expansion plans. and sales and marketing plans. In addition. rcprcsmtatives of Tucker Anthony met with members of our senior management to discuss the projections and underlying assumptions thereto provided to, and relied on by, Tucker Anthony m preparing its analyses. PURPOSE OF THE OFFER. We believe the repurchase of our common stock is consistent with our long-term goal of increasing stockholder value. In October 1999, our Board of Directors approved a share repurchase program based on the view that our Shares were undervalued. Under such program, we repurchased 144.055 Shares. We are now making the Offer because we believe that
the Offer will provide an oppommity to achieve liquidity in cash by allowing you to sell a (a) substantial portion of your stock at a substantial premium over the Nasdaq trading price at the time of announcement without the payment of brokerage commissions;

the Shares are undcrvalucrl in the public market in relation to our historical growth and (b) long-term growth prospects;

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for those of you who hold Shares after the Offer is completed the Offer has the potential (c) to increase returns on equity capital by reducing the number of Shares outstanding and to improve our overall weighted cost of capital; after the Offer is completed, we expect to have sufficient cash flow and access to funding (dj to meet our cash needs for normal operations and anticipated capital expenditures for the foreseeable future and meet our debt obligations; and after considering alternatives, investing in our Shares is an attractive use to capital and (e) an efficient means to provide value t our stockholders. o Following the Offer and regardless of whether the Offer is consummated, the Schaden Stockholders will retain a controlling equity interest in the Company. Our Board of Directors may determine to pursue a Second-Step Transaction through which the Company would acquire any remaining equity interest in the Company not then owned by the Schaden Stockholders.

CERTAIN EFFECTS OF THE OFFER; PLANS OF THE COMPANY AFTER THE OFFER. Consummation of the Offer and, if deemed desirable by us, the Second-Step Transaction will permit the Schaden Stockholders to receive the benefits that result from ownership of all, or a sigdicant amount, of the equity interest in the Company, Such benefits include management and investment discretion with regard to the future conduct of the business of the Company, the benefits of the profits generated by operations and any increase in the Company's value. Similarly, the Schaden Stockholders wiU also bear the risk of any decrease in the value of the Company.
after If the Offer and, if deemed desirable by us, the Second-Step Transaction are co~lsummated, giving effect to the Offer and the Second-Step Transaction, the Schaden Stockholders will have close to a 86% interest in the pro forma net book value and net earnings of the Company ($(14.2) million and $56,000, respectively, based on the unaudited financial statements of the Company for the nine-month period ended June 30,2000). Currently, the Schaden Stockholders have an approximately 51.6% interest in the net book value and net earnings of the Company ($2.6 million and $824,000, respectively, based on the unaudited financial statements of the Company as of June 30, 2000).
Consummation of the Offer and if deemed desirable by us, the Second-Step Transaction will also allow the Schaden Stockholders to recapitalize the Company by increasing its debt-to-equity ratio, thereby leveraging their equity mvestment. Such high leveraging may entail high risk to equity investors. Furthermore, high leveraging and associated high debt service costs may have an adverse effect on earnings and the value of the Company.

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Under the CBCA and our Charter, the approval of our Board and the affirmative vote of a majority of the outstanding Shares are required to approve the Second-Step Transaction at a meeting of the stockholders. The Schaden Stockholders, who currently own approximately 51.6% of the issued and outstanding Shares, intend to vote all of their Shares in favor of the Second-Step Transaction if a stockholder vote is required. Accordingly, regardless of whether any Shares are purchased pursuant to , the Offer, the Schaden Stockholders have sufficient voting power to cause the approval and adoption of the Second-Step Transaction immediately after the Offer, without the affirmative vote of any other stockholders of the Company. If a Second-Step Transaction is effected, it is contemplated that the consideration payable to t e Public Stockholders will be cash in an amount equal to the Purchase Price. h Under the CBCA,an entity that owns 90%or more of the outstanding shares of another entity may effect a merger with such other entity without submitting the merger to a vote of stockholders of the other entity (a "short-form merger"). Accordingly, if the Schaden Stockholders own 90% or more of the Shares that remain outstanding after completion of the Offer, the Second-Step Transaction may be effected as a shortform merger, without a vote of the Company's stockholders. If, however, the percentage of ownership of the Schaden Stockholders after completion of the Offer is less than 90% of the Shares then outstanding, a vote of the Company's stockholders will be required under the applicable laws, and a longer period of time may be required to effect the Second-Step Transaction. See "Special Factors--Rights of Stockholders in the Event of the Second-Step Transaction." After the Second-Step Transaction. if it is initiated, there will be few, if any, Public Stockholders of the Company. See "The Tender Offer--Effect of the Offer on the Market for the Shares, Nasdaq Listing and Exchange Act Registration"

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AU Shares purchased in the Offer will return to the status of authorized but unissued shares of capital stock of the Company and may be reissued from time to time as determined by our Board of Directors. However, we have no current plans for the issuance of Shares repurchased pursuant to the Offer.
The Schaden Stockholders have informed our Board of Directors that, assuming the completion of the Offer and, if deemed desirable by us. the Second-Step Transaction they have no present intention to cause the Company to change its fundamental business. sell or otherwise dispose of the Company or all or any material part of its business. merge, liquidate or otherwise wind- up its business. Nevertheless, the Schaden Stockholders may initiate a review of the Company and its assets, corporate structure, capitalization, operations, properties and personnel to determine what changes, if any, would be desirable following the Offer to enhance the operations of the Company.
The Company does not anticipate that foilowing t e consummation of the Offer, the Schaden h Stockholders will consider causing the Company to change the composition of our Board of Directors. The persons who are presently officers of the Company will continue in their same positions following consummation of the Offer. Pursuant to our financing agreement with Levine Leichtman, Levine Leichtman will have the right to appoint a representatwe of Levine Leichtman to our Board as a director. As a result of the borrowing incurred in connection with the financing of the Offer and. if deemed desirable by the Company. the Second-Step Transaction, our consolidated indebtedness will be substantially greater. See 'The Tender Offer--Financing of the Offer."

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2.

Rights of Stockholders in the EPent of the Second-Step
.- Transaction

No dissenters' rights are available in connection with the Offer. Holders of Shares may be entitled to dissenters' rights in connection with the Second-Step Transaction if such transaction is structured as a merger or a reverse stock split. A copy of the Colorado dissenters' rights statute and a discussion of that statute is attached as Schedule III. Such rights, if the statutory procedures were complied with, could lead to a judicial determination of the fair value (excluding any element of value arising from the accomplishment or expectation of the Second-Step Transaction) required to be paid in cash to such dissenting holders for their Shares. Any such judicial determination of the fair value of Shares could be based on considerations other than, or in addition to, the Purchase Price paid in the Offer and the market value of the Shares, including asset values and the investment value of the Shares. The value so determined could be more or less than the Purchase Price per Share pursuant to the Offer or the consideration per Share to be paid in the Second-Step Transaction

THE FOREGOING SUMMARY OF THE RIGHTS OF OBJECTING STOCKHOLDERS DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. THE PRESERVATION AND EXERClSE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLEPROVISIONS OF THE CBCA SEE SCHEDULE rn ATTACHED HERETO FOR A DISCUSSION OF DISSENTERS' RIGHTS THAT MAY BE AVAILABLE. 3.

Position of Our Board; Fairness of the Offer

POSITION OF OUR BOARD OF DIRECTORS. On November 12,2000, the independent members of our Board of Directors approved the Offer. Richard E. Schaden, Richard F. Schaden, Fredenck M. Scbaden and J. Eric Lawrence refrained from voting. Our Board determined that the Offer is fair to you, and in the Company's best mtcrest. However, our Board does not make any recommendation to you as to whether to tender or refrain from tendering your Shares. You must make the decision whether to tender your Shares and if so. how many Shares to tender. The Offer is being made to all holders of Shares, includmg the Schaden Stockholders. However, none of the Schaden Stockholders Intend to tender any Shares pursuant to the Offer. FAIRNESS OF THE OFFER. In reaching its determinations referred to immediately above. our Board of Directors relied on its knowlcdgc of our business as well as advice of its financial advisors and legal counsel. In reaching its decisim, our Board considered a number of factors, including the following factors, each of which. in the view of our Board supported such determination:
the historical market pnces and trading actlvity of the Shares, in