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the typical costs for similar IPOs. That brought her up against the
isting shareholders were selling part of their holdings. Perhaps
question of underpricing. When she had raised the matter with
the issue price would not matter if they had not planned to sell.
the underwriters that morning, they had dismissed the notion that
the initial day™s return on an IPO should be considered part of the
issue costs. One of the members of the underwriting team had
How Corporations Issue Securities 539



Appendix: Hotch Pot™s New Issue Prospectus12
PROSPECTUS
800,000 Shares
Hotch Pot, Inc.
Common Stock ($.01 par value)

Of the 800,000 shares of Common Stock offered hereby, 500,000 shares are being sold
by the Company and 300,000 shares are being sold by the Selling Stockholders. See
“Principal and Selling Stockholders.” The Company will not receive any of the pro-
ceeds from the sale of shares by the Selling Stockholders.

Before this offering there has been no public market for the Common Stock. These se-
curities involve a high degree of risk. See “Certain Factors.”

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMI-
NAL OFFENSE.
Underwriting Proceeds to Proceeds to Selling
Company1
Price to Public Discount Shareholders
Per share $12.00 $1.30 $10.70 $10.70
Total $9,600,000 $1,040,000 $5,350,000 $3,210,000
1 Before deducting expenses payable by the Company estimated at $400,000, of which $250,000 will be
paid by the Company and $150,000 by the Selling Stockholders.

The Common Stock is offered, subject to prior sale, when, as, and if delivered to and
accepted by the Underwriters and subject to approval of certain legal matters by their
counsel and by counsel for the Company and the Selling Shareholders. The Underwrit-
ers reserve the right to withdraw, cancel, or modify such offer and reject orders in whole
or in part.

Silverman Pinch Inc. April 1, 2000

No person has been authorized to give any information or to make any representations,
other than as contained therein, in connection with the offer contained in this Prospec-
tus, and, if given or made, such information or representations must not be relied upon.
This Prospectus does not constitute an offer of any securities other than the registered
securities to which it relates or an offer to any person in any jurisdiction where such an
offer would be unlawful. The delivery of this Prospectus at any time does not imply that
information herein is correct as of any time subsequent to its date.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY
OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR

12 Most prospectuses have content similar to that of the Hotch Pot prospectus but go into considerably more
detail. Also, we have omitted from the Hotch Pot prospectus the company™s financial statements.
How Corporations Issue Securities
540 SECTION FIVE 540


MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE
COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.



Prospectus Summary
The following summary information is qualified in its entirety by the detailed informa-
tion and financial statements appearing elsewhere in this Prospectus.

The Company: Hotch Pot, Inc. operates a chain of 140 fast-food outlets in the United
States offering unusual combinations of dishes.

The Offering: Common Stock offered by the Company 500,000 shares;
Common Stock offered by the Selling Stockholders 300,000 shares;
Common Stock to be outstanding after this offering 3,500,000 shares.

Use of Proceeds: For the construction of new restaurants and to provide working
capital.


THE COMPANY
Hotch Pot, Inc. operates a chain of 140 fast-food outlets in Illinois, Pennsylvania, and
Ohio. These restaurants specialize in offering an unusual combination of foreign dishes.

The Company was organized in Delaware in 1990.


USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of 500,000 shares of Com-
mon Stock offered hereby, estimated at approximately $5 million, to open new outlets
in midwest states and to provide additional working capital. It has no immediate plans
to use any of the net proceeds of the offering for any other specific investment.


DIVIDEND POLICY
The company has not paid cash dividends on its Common Stock and does not anticipate
that dividends will be paid on the Common Stock in the foreseeable future.


CERTAIN FACTORS
Investment in the Common Stock involves a high degree of risk. The following factors
should be carefully considered in evaluating the Company:

Substantial Capital Needs. The Company will require additional financing to
continue its expansion policy. The Company believes that its relations with its lenders
are good, but there can be no assurance that additional financing will be available in the
future.
How Corporations Issue Securities 541


Competition. The Company is in competition with a number of restaurant chains
supplying fast food. Many of these companies are substantially larger and better capi-
talized than the Company.


CAPITALIZATION
The following table sets forth the capitalization of the Company as of December 31,
1999, and as adjusted to reflect the sale of 500,000 shares of Common Stock by the
Company.
Actual As Adjusted
(in thousands)
Long-term debt $ ” $ ”
Stockholders™ equity 30 35
Common stock “$.01 par value, 3,000,000 shares outstanding,
3,500,000 shares outstanding, as adjusted
Paid-in capital 1,970 7,315
Retained earnings 3,200 3,200
Total stockholders™ equity 5,200 10,550
Total capitalization $5,200 $10,550



SELECTED FINANCIAL DATA
[The Prospectus typically includes a summary income statement and balance sheet.]


MANAGEMENT™S ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Revenue growth for the year ended December 31, 1999, resulted from the opening of
ten new restaurants in the Company™s existing geographic area and from sales of a new
range of desserts, notably crepe suzette with custard. Sales per customer increased by
20% and this contributed to the improvement in margins.

During the year the Company borrowed $600,000 from its banks at an interest rate of
2% above the prime rate.


BUSINESS
Hotch Pot, Inc. operates a chain of 140 fast-food outlets in Illinois, Pennsylvania, and
Ohio. These restaurants specialize in offering an unusual combination of foreign dishes.
50% of company™s revenues derived from sales of two dishes, sushi and sauerkraut and
curry bolognese. All dishes are prepared in three regional centers and then frozen and
distributed to the individual restaurants.


MANAGEMENT
The following table sets forth information regarding the Company™s directors, executive
officers, and key employees:
542 SECTION FIVE


Name Age Position
Emma Lucullus 28 President, Chief Executive Officer, & Director
Ed Lucullus 33 Treasurer & Director


Emma Lucullus Emma Lucullus established the Company in 1990 and has been its
Chief Executive Officer since that date.

Ed Lucullus Ed Lucullus has been employed by the Company since 1990.


EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid for services rendered for the
year 1999 by the executive officers:
Name Capacity Cash Compensation
Emma Lucullus President and Chief Executive Officer $130,000
Ed Lucullus Treasurer $ 95,000


CERTAIN TRANSACTIONS
At various times between 1990 and 1999 First Cookham Venture Partners invested a
total of $1.5 million in the Company. In connection with this investment, First Cookham
Venture Partners was granted certain rights to registration under the Securities Act of
1933, including the right to have their shares of Common Stock registered at the Com-
pany™s expense with the Securities and Exchange Commission.


PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial ownership of
the Company™s voting Common Stock as of the date of this prospectus by (i) each per-
son known by the Company to be the beneficial owner of more than 5% of its voting
Common Stock, and (ii) each director of the Company who beneficially owns voting
Common Stock. Unless otherwise indicated, each owner has sole voting and dispositive
power over his shares.
Shares Beneficially Shares Beneficially
Owned prior to Offering Owned after Offering
Name of Shares
Beneficial Owner Number Percent to Be Sold Number Percent
Emma Lucullus 400,000 13.3 25,000 375,000 12.9
Ed Lucullus 400,000 13.3 25,000 375,000 12.9
First Cookham
Venture Partners 1,700,000 66.7 250,000 1,450,000 50.0
Hermione Kraft 200,000 6.7 ” 200,000 6.9


DESCRIPTION OF CAPITAL STOCK
The Company™s authorized capital stock consists of 10,000,000 shares of voting Com-
mon Stock.
How Corporations Issue Securities 543


As of the date of this Prospectus, there are 4 holders of record of the Common Stock.

Under the terms of one of the Company™s loan agreements, the Company may not pay
cash dividends on Common Stock except from net profits without the written consent
of the lender.


UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement, the Un-
derwriter, Silverman Pinch Inc., has agreed to purchase from the Company and the Sell-
ing Stockholders 800,000 shares of Common Stock.

There is no public market for the Common Stock. The price to the public for the Com-
mon Stock was determined by negotiation between the Company and the Underwriter
and was based on, among other things, the Company™s financial and operating history
and condition, its prospects, and the prospects for its industry in general, the manage-
ment of the Company, and the market prices of securities for companies in businesses
similar to that of the Company.

LEGAL MATTERS
The validity of the shares of Common Stock offered by the Prospectus is being passed
on for the Company by Blair, Kohl, and Chirac and for the Underwriter by Chretien
Howard.


LEGAL PROCEEDINGS
Hotch Pot was served in January 2000 with a summons and complaint in an action
commenced by a customer who alleges that consumption of the Company™s products
caused severe nausea and loss of feeling in both feet. The Company believes that the
complaint is without foundation.

EXPERTS
The consolidated financial statements of the Company have been so included in re-
liance on the reports of Hooper Firebrand, independent accountants, given on the au-
thority of that firm as experts in auditing and accounting.


FINANCIAL STATEMENTS
[Text and tables omitted.]
Appendix B
Leasing

Leverage and Capital Structure
LEASING




547
548 APPENDIX B


LEASING VERSUS BUYING

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