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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4
Issuer Tender Offer Statement
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
FRISCH'S RESTAURANTS, INC.
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(Name of Issuer and Person Filing Statement)
Common Stock, No Par Value
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(Title of Class of Securities)
358748 10 1
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(CUSIP Number of Class of Securities)
CRAIG F. MAIER
President and Chief Executive Officer
Frisch's Restaurants, Inc.
2800 Gilbert Avenue
Cincinnati, Ohio 45206
(513) 559-5104
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person Filing Statement)
Copy To:
JAMES R. CUMMINS, ESQ.
Brown, Cummins & Brown Co., L.P.A.
3500 Carew Tower, 441 Vine Street
Cincinnati, Ohio 45202
(513) 381-2121
July 14, 1997
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(Date Tender Offer First Published, Sent or Given to Security Holders)
Calculation of Filing Fee
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Transaction Valuation* Amount of Filing Fee
$17,000,000 $3,400
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* Assumes the purchase of 1,000,000 Shares at the maximum tender offer price
per Share of $17.00.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount Previously Paid: Not Applicable Filing Party: Not Applicable
Form of Registration No.: Not Applicable Date Filed: Not Applicable
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This Issuer Tender Offer Statement on Schedule 13e-4 (the "Statement")
relates to the tender offer by Frisch's Restaurants, Inc., an Ohio corporation
(the "Company"), to purchase up to 1,000,000 shares of common stock, no par
value ("Common Stock" or the "Shares"), of the Company at prices, net to the
seller in cash, not greater than $17.00 nor less than $15.00 per Share, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
July 14, 1997 (the "Offer to Purchase") and the related Letter of Transmittal
(which are herein collectively referred to as the "Offer"). Copies of such
documents are filed as Exhibits (a)(1) and (a)(2), respectively, to this
Statement.
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is Frisch's Restaurants, Inc., an
Ohio corporation. The address of its principal executive office is 2800 Gilbert
Avenue, Cincinnati, Ohio 45206.
(b) The information set forth in "Introduction," "Section 1.
Number of Shares; Proration" and "Section 8. Information as to Capital Stock;
Transactions and Arrangements Concerning the Shares" in the Offer to Purchase is
incorporated herein by reference. The Offer is being made to all holders of
Shares, including officers, directors and affiliates of the Company.
(c) The information set forth in "Introduction," and "Section
6. Price Range of Shares; Dividends" in the Offer to Purchase is incorporated
herein by reference.
(d) This Statement is being filed by the issuer.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in "Section 9. Source and
Amount of Funds" in the Offer to Purchase is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE
ISSUER OR AFFILIATE.
(a)-(j) The information set forth in "Introduction," "Section
7. Background and Purpose of the Offer; Certain Effects of the Offer," "Section
8. Information as to Capital Stock; Transactions and Arrangements Concerning the
Shares," "Section 9. Source and Amount of Funds" and "Section 11. Effects of the
Offer on the Market for Shares; Registration Under the Exchange Act" in the
Offer to Purchase is incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in "Section 8. Information as to
Capital Stock; Transactions and Arrangements Concerning the Shares" in the Offer
to Purchase is incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE ISSUER'S SECURITIES.
The information set forth in "Introduction," "Section 7.
Background and Purpose of the Offer; Certain Effects of the Offer" and "Section
8. Information as to Capital Stock; Transactions and Arrangements Concerning the
Shares" in the Offer to Purchase is incorporated herein by reference.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "Introduction," "Section 7.
Background and Purpose of the Offer; Certain Effects of the Offer," and "Section
15. Fees and Expenses" in the Offer to Purchase is incorporated herein by
reference.
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ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The information set forth in "Section 10. Certain
Information About the Company" in the Offer to Purchase is incorporated herein
by reference. The (i) information set forth as "Item 8. Financial Statements and
Supplementary Data" in Part II of the Company's Annual Report on Form 10-K for
the fiscal year ended June 2, 1996, filed as Exhibit (g)(1) hereto, (ii) the
Auditors' Report and Financial Statements for the fiscal year ended June 1,
1997, filed as Exhibit (g)(2) hereto, and (iii) Press Release issued by the
Company on July 8, 1997, filed as Exhibit (g)(3) hereto, is incorporated herein
by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Not Applicable.
(b) The information set forth in "Section 12. Certain Legal
Matters; Regulatory and Foreign Approvals" in the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in "Section 11. Effects of the
Offer on the Market for Shares; Registration Under the Exchange Act" in the
Offer to Purchase is incorporated herein by reference.
(d) Not Applicable.
(e) The information set forth in the Offer to Purchase and the
related Letter of Transmittal, copies of which are attached hereto as Exhibits
(a)(1) and (a)(2), respectively, is incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
99(a)(1) Form of Offer to Purchase dated July 14, 1997.
99(a)(2) Form of Letter of Transmittal.
99(a)(3) Form of Notice of Guaranteed Delivery.
99(a)(4) Form of Letter from the Company to
brokers, dealers, commercial banks,
trust companies and other nominees.
99(a)(5) Form of Letter to clients for use by brokers, dealers,
commercial banks, trust companies and other nominees.
99(a)(6) Form of Letter dated July 14, 1997
to shareholders from the Chairman of
the Board of Directors and the
President and Chief Executive
Officer of the Company.
99(a)(7) Form of Press Release issued by the Company dated
July 14, 1997.
99(a)(8) Form of Summary Advertisement dated July 14, 1997.
99(a)(9) Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
99(b) Loan Agreement dated as of July 9, 1997 between the
Company and Star Bank, N.A.
99(c) Not Applicable.
99(d) Not applicable.
99(e) Not applicable.
99(f) Not applicable.
99(g)(1) "Item 8. Financial Statements and Supplementary Data"
in Part II of the Company's Annual Report on Form 10-K
for the fiscal year ended June 2, 1996.
99(g)(2) Auditors' Report and Financial Statements for the
fiscal year ended June 1, 1997.
99(g)(3) Press Release issued by the Company dated July 8,
1997.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
FRISCH'S RESTAURANTS, INC.
By: /s/ CRAIG F. MAIER
---------------------------------
CRAIG F. MAIER
President and Chief Executive Officer
Dated: July 14, 1997
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INDEX TO EXHIBITS
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<CAPTION>
ITEM DESCRIPTION PAGE
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99(a)(1) Form of Offer to Purchase dated July 14, 1997............................................
99(a)(2) Form of Letter of Transmittal............................................................
99(a)(3) Form of Notice of Guaranteed Delivery....................................................
99(a)(4) Form of Letter from the Company to brokers, dealers, commercial banks,
trust companies and other nominees.......................................................
99(a)(5) Form of Letter to clients for use by brokers, dealers, commercial banks,
trust companies and other nominees.......................................................
99(a)(6) Form of Letter dated July 14, 1997 to shareholders from the Chairman of the
Board of Directors and the President and Chief Executive Officer of the Company..........
99(a)(7) Form of Press Release issued by the Company dated July 14, 1997..........................
99(a)(8) Form of Summary Advertisement dated July 14, 1997........................................
99(a)(9) Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.................................................................................
99(b) Loan Agreement dated as of July 9, 1997 between the Company and
Star Bank, N.A. .........................................................................
99(c) Not Applicable...........................................................................
99(d) Not applicable...........................................................................
99(e) Not applicable...........................................................................
99(f) Not applicable...........................................................................
99(g)(1) "Item 8. Financial Statements and Supplementary Data" in Part II of the Company's
Annual Report on Form 10-K for the fiscal year ended June 2, 1996........................
99(g)(2) Auditors' Report and Financial Statements for the fiscal year ended June 1, 1997.........
99(g)(3) Press Release issued by the Company dated July 8, 1997...................................
</TABLE>
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[FRISCH'S LOGO]
FRISCH'S RESTAURANTS, INC.
OFFER TO PURCHASE FOR CASH UP TO 1,000,000 SHARES OF ITS
COMMON STOCK AT A PURCHASE PRICE NOT GREATER
THAN $17.00 NOR LESS THAN $15.00 PER SHARE.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT EASTERN DAYLIGHT SAVINGS TIME, ON FRIDAY, AUGUST 8, 1997,
UNLESS THE OFFER IS EXTENDED.
Frisch's Restaurants, Inc., an Ohio corporation (the "Company"), invites
its shareholders to tender shares of its common stock, no par value (the
"Shares"), to the Company at a price not greater than $17.00 nor less than
$15.00 per Share in cash, as specified by tendering shareholders, upon the terms
and subject to the conditions set forth in this Offer to Purchase and the
related Letter of Transmittal (which together constitute the "Offer"). The
Company will determine the single per Share price (not greater than $17.00 nor
less than $15.00 per Share), net to the seller in cash (the "Purchase Price"),
that it will pay for Shares validly tendered and not withdrawn pursuant to the
Offer, taking into account the number of Shares so tendered and the prices
specified by tendering shareholders. The Company will select the lowest Purchase
Price that will allow it to buy 1,000,000 Shares (or such lesser number of
Shares as are validly tendered at prices not greater than $17.00 nor less than
$15.00 per Share). The Company will pay the Purchase Price for all Shares
validly tendered at prices at or below the Purchase Price and not withdrawn,
upon the terms and subject to the conditions of the Offer, including the
proration terms hereof, so that each shareholder receives the highest price paid
to any other shareholder pursuant to the Offer. See Section 1. The Company
reserves the right, in its sole discretion, to purchase more than 1,000,000
Shares pursuant to the Offer.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 5.
The Shares are listed and traded on the American Stock Exchange (the
"AMEX") under the symbol "FRS." On July 11, 1997, the last full trading day on
the AMEX prior to the announcement and commencement of the Offer, the closing
per Share sales price as reported on the AMEX was $16.50. Shareholders are urged
to obtain current market quotations for the Shares. See Section 6.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MAKING OF THE OFFER.
HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION
TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES.
SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO,
HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE
TENDERED. EXCEPT FOR DIRECTORS BARRY S. NUSSBAUM AND JERRY L. RUYAN, WHOSE
INTENTIONS ARE UNKNOWN (SEE SECTION 8), THE COMPANY HAS BEEN ADVISED THAT NONE
OF ITS DIRECTORS OR EXECUTIVE OFFICERS WILL TENDER ANY SHARES IN RESPONSE TO
THIS OFFER.
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares should either (i) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, mail or deliver it with any required signature guarantee and any
other required documents to Continental Stock Transfer & Trust Company (the
"Depositary"), and either mail or deliver the stock certificates for such Shares
to the Depositary (with all such other documents) or follow the
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procedure for book-entry delivery set forth in Section 2, or (ii) request a
broker, dealer, commercial bank, trust company or other nominee to effect the
tender for such shareholder. A holder of Shares registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
that person if the holder desires to tender such Shares. Shareholders who desire
to tender Shares and whose certificates for such Shares cannot be delivered to
the Depositary or who cannot comply with the procedure for book-entry transfer
on a timely basis or whose other required documentation cannot be delivered to
the Depositary by the expiration of the Offer must tender such Shares by
following the procedures for guaranteed delivery set forth in Section 2. TO
EFFECT A VALID TENDER OF SHARES, SHAREHOLDERS MUST ACCURATELY AND FULLY COMPLETE
THE LETTER OF TRANSMITTAL, INCLUDING THE SECTION RELATING TO THE PRICE AT WHICH
THEY ARE TENDERING SHARES.
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Information Agent at its address and telephone
number set forth below.
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH
THE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE RELATED LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY.
The Date of this Offer to Purchase is July 14, 1997.
THE INFORMATION AGENT FOR THE OFFER IS:
MCCORMICK & PRYOR LTD.
26 Broadway, Suite 1640
New York, New York 10004
Banks and Brokers Call Collect: (212) 968-9090
All Others Call Toll-Free: (800) 476-2508 PIN #3774
THE DEALER MANAGER FOR THE OFFER IS:
FURMAN SELZ LLC
230 Park Avenue
New York, New York 10169
(800) 939-9991
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SUMMARY
THIS GENERAL SUMMARY IS PROVIDED FOR THE CONVENIENCE OF THE COMPANY'S
SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT AND
MORE SPECIFIC DETAILS IN THIS OFFER TO PURCHASE.
NUMBER OF SHARES TO BE PURCHASED... 1,000,000 Shares (or such lesser number
of Shares as are validly tendered). The
Company reserves the right to purchase a
greater number of Shares. See Sections 1
and 14.
PURCHASE PRICE..................... The Company will determine a single per
Share net cash price, not greater than
$17.00 nor less than $15.00 per Share,
that it will pay for Shares validly
tendered. All Shares acquired in the
Offer will be acquired at the Purchase
Price even if tendered at or below the
Purchase Price, so that each shareholder
receives the highest price paid to any
other shareholder pursuant to the Offer.
Each shareholder desiring to tender
Shares must specify in the Letter of
Transmittal the minimum price (not
greater than $17.00 nor less than $15.00
per Share) at which such shareholder is
willing to have Shares purchased by the
Company.
HOW TO TENDER SHARES............... See Section 2. Call the Information Agent
or consult your broker for assistance.
BROKERAGE COMMISSIONS AND
STOCK TRANSFER TAX................. Tendering shareholders will not be
obligated to pay brokerage fees or
commissions to the Dealer Manager, the
Information Agent or the Depositary or,
except as set forth in Instruction 7 to
the Letter of Transmittal, transfer taxes
on the sale of Shares pursuant to the
Offer. A tendering shareholder who holds
securities with a broker may be required
by such broker to pay a service charge or
other fee.
EXPIRATION AND PRORATION DATES..... Friday, August 8, 1997, at 12:00
Midnight, Eastern Daylight Savings time,
unless extended by the Company.
PAYMENT DATE....................... As soon as practicable after the
Expiration Date.
POSITION OF THE COMPANY AND ITS
DIRECTORS.......................... Neither the Company nor its Board of
Directors makes any recommendation to any
shareholder as to whether to tender or
refrain from tendering Shares. The
Company has been advised that none of its
directors (other than possibly Mr. Ruyan
and Mr. Nussbaum) or its executive
officers intends to tender any Shares
pursuant to the Offer.
WITHDRAWAL RIGHTS.................. Tendered Shares may be withdrawn at any
time until 12:00 Midnight, Eastern
Daylight Savings time, on Friday, August
8, 1997, unless the Offer is extended by
the Company and, unless theretofore
accepted for payment by the Company as
provided in this Offer to Purchase, may
also be withdrawn after 12:00 Midnight,
Eastern Daylight time, on September 8,
1997. See Section 3.
FURTHER DEVELOPMENTS REGARDING THE
OFFER.............................. Call the Information Agent or consult
your broker.
3
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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SUMMARY................................................................................. 3
INTRODUCTION............................................................................ 5
THE OFFER............................................................................... 6
1. NUMBER OF SHARES; PRORATION.............................................. 6
2. PROCEDURE FOR TENDERING SHARES........................................... 7
3. WITHDRAWAL RIGHTS........................................................ 10
4. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE......................... 11
5. CERTAIN CONDITIONS OF THE OFFER.......................................... 12
6. PRICE RANGE OF SHARES; DIVIDENDS......................................... 13
7. BACKGROUND AND PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER........ 14
8. INFORMATION AS TO CAPITAL STOCK; TRANSACTIONS AND ARRANGEMENTS CONCERNING
THE SHARES............................................................... 15
9. SOURCE AND AMOUNT OF FUNDS............................................... 16
10. CERTAIN INFORMATION ABOUT THE COMPANY.................................... 17
11. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT............................................................. 19
12. CERTAIN LEGAL MATTERS; REGULATORY AND FOREIGN APPROVALS.................. 20
13. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES............................. 20
14. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS.......................... 23
15. FEES AND EXPENSES........................................................ 24
16. MISCELLANEOUS............................................................ 24
</TABLE>
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TO THE HOLDERS OF SHARES OF COMMON STOCK
OF FRISCH'S RESTAURANTS, INC.:
INTRODUCTION
Frisch's Restaurants, Inc., an Ohio corporation (the "Company"), invites
its shareholders to tender shares of its common stock, no par value (the
"Shares"), to the Company at prices not greater than $17.00 nor less than $15.00
per Share, as specified by tendering shareholders, upon the terms and subject to
the conditions set forth in this Offer to Purchase and the related Letter of
Transmittal (which together constitute the "Offer").
The Company will determine the single per Share price (not greater than
$17.00 nor less than $15.00 per Share), net to the seller in cash (the "Purchase
Price"), that it will pay for Shares validly tendered and not withdrawn pursuant
to the Offer, taking into account the number of Shares so tendered and the
prices specified by tendering shareholders. The Company will select the lowest
Purchase Price that will allow it to buy 1,000,000 Shares (or such lesser number
of Shares as are validly tendered). The Company will pay the Purchase Price for
all Shares validly tendered and not withdrawn prior to the Expiration Date (as
defined in Section 1) at prices at or below the Purchase Price, upon the terms
and subject to the conditions of the Offer, including the proration terms
described in Section 1 below, so that each shareholder receives the highest
price paid to any other shareholder pursuant to the Offer. The Company reserves
the right, in its sole discretion, to purchase more than 1,000,000 Shares
pursuant to the Offer. See Section 14.
THIS OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED, BUT IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 5.
If at the Expiration Date more than 1,000,000 Shares (or such greater
number of Shares as the Company may elect to purchase) are validly tendered at
or below the Purchase Price and not withdrawn, the Company will, upon the terms
and subject to the conditions of the Offer, purchase Shares on a pro rata basis
from all shareholders who validly tender Shares at prices at or below the
Purchase Price (and did not withdraw them prior to the Expiration Date). The
Company will return at its expense all Shares not purchased pursuant to the
Offer, including Shares not purchased because of proration. The Purchase Price
will be paid net to the tendering shareholders in cash for all Shares purchased.
Tendering shareholders will not be obligated to pay brokerage commissions,
solicitation fees or, subject to Instruction 7 of the Letter of Transmittal,
stock transfer taxes on the Company's purchase of Shares pursuant to the Offer.
However, any tendering shareholder or other payee who fails to complete, sign
and return to the Depositary (as defined below) the Substitute Form W-9 that is
included with the Letter of Transmittal may be subject to required backup
federal income tax withholding of 31% of the gross proceeds payable to such
shareholder or other payee pursuant to the Offer. See Section 13. A tendering
shareholder who holds Shares with a broker may be required by such broker to pay
a service charge or other fee. The Company will pay all fees and expenses of
Furman Selz LLC (the "Dealer Manager"), McCormick & Pryor Ltd. (the "Information
Agent") and Continental Stock Transfer & Trust Company (the "Depositary") in
connection with the Offer. See Section 15.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MAKING OF THE OFFER.
HOWEVER, SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES
AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES
SHOULD BE TENDERED. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING SHARES. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS
(EXCEPT POSSIBLY MR. RUYAN AND MR. NUSSBAUM) OR EXECUTIVE OFFICERS INTENDS TO
TENDER SHARES PURSUANT TO THE OFFER. SEE SECTION 8.
The Company's Board of Directors desires to enhance shareholder value, and
provide a liquidity opportunity to shareholders, and believes that Share
repurchases funded by borrowings under the Company's credit facility will
advance such objectives and be in the best interests of the Company and its
shareholders. The Company believes that the purchase of Shares is consistent
with its long-term goals and that, after the
5
<PAGE> 6
Offer is completed, the Company will have sufficient cash flow and access to
other sources of capital in order to fund its working capital needs and provide
for its current capital expenditure requirements. See Section 7.
The Offer provides shareholders who are considering a sale of all or a
portion of their Shares the opportunity to determine the price or prices (not in
excess of $17.00 nor less than $15.00 per Share) at which they are willing to
sell their Shares and, if any such Shares are purchased pursuant to the Offer,
to sell those Shares for cash without the usual transaction costs associated
with open market sales.
As of July 11, 1997, there were 7,148,334 Shares issued and outstanding and
259,835 Shares reserved for issuance upon exercise of outstanding and currently
exercisable stock options pursuant to the 1984 Stock Option Plan (the
"Options"). The foregoing amounts exclude all shares of Common Stock held as
treasury stock, the 58,492 shares reserved for issuance pursuant to the Frisch's
Executive Savings Plan and the 562,432 shares reserved for issuance under the
1993 Stock Option Plan (there are no options currently outstanding under this
Plan). See Section 8. The 1,000,000 Shares that the Company is offering to
purchase represent approximately 13.99% of the outstanding Shares (approximately
13.50% assuming the exercise of all outstanding Options). The Shares are listed
and traded on the American Stock Exchange ("AMEX") under the symbol "FRS." On
July 11, 1997, the last full trading day on the AMEX prior to the announcement
and commencement of the Offer, the closing per Share sales price as reported by
the AMEX was $16.50. THE COMPANY URGES SHAREHOLDERS TO OBTAIN CURRENT QUOTATIONS
ON THE MARKET PRICE OF THE SHARES.
THE OFFER
1. NUMBER OF SHARES; PRORATION
Upon the terms and subject to the conditions of the Offer, the Company will
purchase 1,000,000 Shares or such lesser number of Shares as are validly
tendered before the Expiration Date (and not withdrawn in accordance with
Section 3) at a net cash price (determined in the manner set forth below) not
greater than $17.00 nor less than $15.00 per Share. The term "Expiration Date"
means 12:00 Midnight, Eastern Daylight Savings time, on Friday, August 8, 1997,
unless and until the Company, in its sole discretion, shall have extended the
period of time during which the Offer will remain open, in which event the term
"Expiration Date" shall refer to the latest time and date at which the Offer, as
so extended by the Company, shall expire. See Section 14 for a description of
the Company's right to extend, delay, terminate or amend the Offer. The Company
reserves the right, in its sole discretion, to purchase more than 1,000,000
Shares pursuant to the Offer. In accordance with applicable regulations of the
Securities and Exchange Commission (the "Commission"), the Company may purchase
pursuant to the Offer an additional amount of Shares not to exceed 2% of the
outstanding Shares without amending or extending the Offer. See Section 14. If
the Offer is oversubscribed, Shares tendered at or below the Purchase Price
before the Expiration Date will be purchased pro rata. The proration period also
expires on the Expiration Date.
The Company will determine a single per Share Purchase Price that it will
pay for Shares validly tendered and not withdrawn pursuant to the Offer, taking
into account the number of Shares so tendered and the prices specified by
tendering shareholders. The Company will select the lowest Purchase Price that
will allow it to buy 1,000,000 Shares (or such lesser number as are validly
tendered at prices not greater than $17.00 nor less than $15.00 per Share)
validly tendered and not withdrawn pursuant to the Offer. If (i) the Company
increases or decreases the price to be paid for Shares, the Company increases
the number of Shares being sought and such increase in the number of Shares
being sought exceeds 2% of the outstanding Shares, or the Company decreases the
number of Shares being sought, and (ii) the Offer is scheduled to expire at any
time earlier than the expiration of a period ending on the tenth business day
from and including the date that notice of such increase or decrease is first
published, sent or given in the manner specified in Section 14, the Offer will
be extended until the expiration of such period of ten business days. For
purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or federal holiday and consists of the time period from 12:01 a.m.
through 12:00 Midnight, Eastern Daylight Savings time.
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THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED, BUT IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 5.
In accordance with Instruction 5 of the Letter of Transmittal, shareholders
desiring to tender Shares must specify the price (not greater than $17.00 nor
less than $15.00 per Share) at which they are willing to sell their Shares to
the Company. As promptly as practicable following the Expiration Date, the
Company will, in its sole discretion, determine the Purchase Price (not greater
than $17.00 nor less than $15.00 per Share) that it will pay for Shares validly
tendered and not withdrawn pursuant to the Offer, taking into account the number
of Shares tendered and the prices specified by tendering shareholders. The
Company will pay the Purchase Price, even if such Shares were tendered below the
Purchase Price, for all Shares validly tendered prior to the Expiration Date at
prices at or below the Purchase Price and not withdrawn, upon the terms and
subject to the conditions of the Offer, including proration, so that each
shareholder receives the highest price paid to any other shareholder pursuant to
the Offer. All Shares not purchased pursuant to the Offer, including Shares
tendered at prices greater than the Purchase Price and Shares not purchased
because of proration, will be returned to the tendering shareholders at the
Company's expense as promptly as practicable following the Expiration Date.
If the number of Shares validly tendered at or below the Purchase Price and
not withdrawn prior to the Expiration Date is less than or equal to 1,000,000
Shares (or such greater number of Shares as the Company may elect to purchase),
the Company will, upon the terms and subject to the conditions of the Offer,
purchase at the Purchase Price all Shares so tendered. In the event that at the
Expiration Date more than 1,000,000 Shares (or such greater number of Shares as
the Company may elect to purchase pursuant to the Offer) are validly tendered at
or below the Purchase Price and not withdrawn, the Company will purchase such
Shares on a pro rata basis (with adjustments to avoid purchases of fractional
Shares) as described below.
Proration. If proration of tendered Shares is required, the Company will
determine the final proration factor as promptly as practicable after the
Expiration Date. Proration for each shareholder tendering Shares shall be based
on the ratio of the number of Shares tendered by such shareholder at or below
the Purchase Price to the total number of Shares tendered by all shareholders at
or below the Purchase Price. This ratio will be applied to shareholders
tendering Shares to determine the number of Shares that will be purchased from
each such shareholder pursuant to the Offer. Although the Company does not
expect to be able to announce the final results of such proration until
approximately seven business days after the Expiration Date, it will announce
preliminary results of proration by press release as promptly as practicable
after the Expiration Date. Shareholders can obtain such preliminary information
from the Information Agent and may be able to obtain such information from their
brokers.
This Offer to Purchase and the related Letter of Transmittal will be mailed
to record holders of Shares as of July 11, 1997 and will be furnished, for
subsequent transmittal to beneficial owners of Shares, to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on the
Company's shareholders list or, if applicable, who are listed as participants in
a clearing agency's security position listing.
2. PROCEDURE FOR TENDERING SHARES
Proper Tender of Shares. For Shares to be validly tendered pursuant to the
Offer:
(i) The certificates for such Shares (or confirmation of receipt of
such Shares pursuant to the procedures for book-entry transfer set forth
below), together with a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof) with any required
signature guarantees, and any other documents required by the Letter of
Transmittal, must be received prior to 12:00 Midnight, Eastern Daylight
Savings time, on the Expiration Date by the Depositary at its address set
forth on the back cover of this Offer to Purchase; or
(ii) The tendering shareholder must comply with the guaranteed
delivery procedure set forth below.
AS SPECIFIED IN INSTRUCTION 5 OF THE LETTER OF TRANSMITTAL, EACH
SHAREHOLDER DESIRING TO TENDER SHARES PURSUANT TO THE OFFER MUST
7
<PAGE> 8
PROPERLY INDICATE IN THE SECTION CAPTIONED "PRICE (IN DOLLARS) PER SHARE AT
WHICH SHARES ARE BEING TENDERED" IN THE LETTER OF TRANSMITTAL THE PRICE (IN
MULTIPLES OF $.0625) AT WHICH THEIR SHARES ARE BEING TENDERED. Shareholders
desiring to tender Shares at more than one price must complete separate Letters
of Transmittal for each price at which Shares are being tendered, except that
the same Shares cannot be tendered (unless properly withdrawn previously in
accordance with the terms of the Offer) at more than one price. IN ORDER TO
VALIDLY TENDER SHARES, ONE AND ONLY ONE PRICE BOX MUST BE CHECKED IN THE
APPROPRIATE SECTION ON EACH LETTER OF TRANSMITTAL. THE COMPANY WILL NOT ACCEPT
ANY ALTERNATIVE, CONTINGENT OR CONDITIONAL TENDERS.
To prevent backup federal income tax withholding, and in the case of
certain foreign shareholders to prevent a 30% withholding tax, certain completed
forms should accompany the Letter of Transmittal. See Section 13.
Signature Guarantees and Method of Delivery. No signature guarantee is
required on the Letter of Transmittal if (i) the Letter of Transmittal is signed
by the registered holder of the Shares (which term, for purposes of this
Section, includes any participant in The Depository Trust Company or
Philadelphia Depository Trust Company (the "Book-Entry Transfer Facilities")
whose name appears on a security position listing as the holder of the Shares)
tendered therewith and payment and delivery is to be made directly to such
registered holder, or (ii) if Shares are tendered for the account of a firm or
entity that is a member in good standing of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company (not a savings bank or savings and loan
association) having an office, branch or agency in the United States which is a
participant in an approved Signature Guarantee Medallion Program pursuant to
Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (each such entity being hereinafter referred to as an
"Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of
the Letter of Transmittal. If a certificate for Shares is registered in the name
of a person other than the person executing a Letter of Transmittal, or if
payment is to be made, or Shares not purchased or tendered are to be issued, to
a person other than the registered holder, the certificate must be endorsed or
accompanied by an appropriate stock power, in either case signed exactly as the
name of the registered holder appears on the certificate, with the signature on
the certificate or stock power guaranteed by an Eligible Institution. See
Section 4 for information with respect to applicable stock transfer taxes.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of
certificates for such Shares (or a timely confirmation of a book-entry transfer
of such Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities as described above), a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof) and any other documents
required by the Letter of Transmittal. The method of delivery of all documents,
including share certificates, the Letter of Transmittal and any other required
documents, is at the election and risk of the tendering shareholder. If delivery
is by mail, registered mail with return receipt requested, properly insured, is
recommended.
Book-Entry Delivery. The Depositary will establish an account with respect
to the Shares at each of the Book-Entry Transfer Facilities for purposes of the
Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in a Book-Entry Transfer Facility's
system may make book-entry delivery of the Shares by causing such facility to
transfer such Shares into the Depositary's account in accordance with such
facility's procedure for such transfer. Even though delivery of Shares may be
effected through book-entry transfer into the Depositary's account at one of the
Book-Entry Transfer Facilities, either a properly completed and duly executed
Letter of Transmittal (or manually signed facsimile thereof), with any required
signature guarantees and other required documents must, in any case, be
transmitted to and received by the Depositary at its address set forth on the
back cover of this Offer to Purchase prior to the Expiration Date, or the
guaranteed delivery procedure set forth below must be followed. DELIVERY OF THE
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO ONE OF
8
<PAGE> 9
THE BOOK-ENTRY TRANSFER FACILITIES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share certificates cannot be delivered to the
Depositary prior to the Expiration Date (or the procedures for book-entry
transfer cannot be completed on a timely basis) or if time will not permit all
required documents to reach the Depositary before the Expiration Date, such
Shares may nevertheless be tendered provided that all of the following
conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) the Depositary receives (by hand, mail, overnight courier, or
facsimile transmission), on or prior to the Expiration Date, a properly
completed and duly executed Notice of Guaranteed Delivery in the form the
Company has provided with this Offer to Purchase (indicating the price at
which the Shares are being tendered), including (where required) a
signature guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or confirmation of book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities),
together with a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof) and any required signature
guarantees or other documents required by the Letter of Transmittal, are
received by the Depositary within three AMEX trading days after the date
the Depositary receives such Notice of Guaranteed Delivery.
Return of Unpurchased Shares. If any tendered Shares are not purchased, or
if less than all Shares evidenced by a shareholder's certificates are tendered,
certificates for unpurchased Shares will be returned as promptly as practicable
after the expiration or termination of the Offer or, in the case of Shares
tendered by book-entry transfer at a Book-Entry Transfer Facility, such Shares
will be credited to the appropriate account maintained by the tendering
shareholder at the appropriate Book-Entry Transfer Facility, in each case
without expense to such shareholder.
1984 Stock Option Plan. The Company is not offering, as part of the Offer,
to purchase any of the options (the "Options") outstanding under the Company's
1984 Stock Option Plan, and tenders of such Options will not be accepted.
Holders of Options who wish to participate in the Offer may either (a) comply
with the procedures for guaranteed delivery set forth under "Guaranteed
Delivery" above without having to exercise their Options until after the results
of the Offer are known (provided, however, that an Option holder will not be
required to make the requisite tender through an Eligible Institution and may
personally execute and deliver the Notice of Guaranteed Delivery), or (b)
exercise their Options and purchase Shares and then tender such Shares pursuant
to the Offer, provided that, in the case of either (a) or (b), any such exercise
of an Option and tender of Shares is in accordance with the terms of the 1984
Stock Option Plan and the Options. In no event are any Options to be delivered
to the Depositary in connection with a tender of Shares hereunder. An exercise
of an Option cannot be revoked even if Shares received upon the exercise thereof
and tendered in the Offer are not purchased in the Offer for any reason. All
holders of Options are executive officers or key employees of the Company and
all executive officers have indicated that they do not intend to tender any
Shares pursuant to the Offer.
Tendering Shareholder's Representation and Warranty; Company's Acceptance
Constitutes an Agreement. It is a violation of Rule 14e-4 promulgated by the
Commission under the Exchange Act for a person acting alone or in concert with
others, directly or indirectly, to tender Shares for such person's own account
unless at the time of tender and at the Expiration Date such person (i) has a
"net long position" equal to or greater than the amount tendered in (x) the
Shares, or (y) other securities immediately convertible into, exercisable for or
exchangeable into Shares ("Equivalent Securities") and, upon the acceptance of
such tender, will acquire such Shares by conversion, exchange or exercise of
such Equivalent Securities to the extent required by the terms of the Offer, and
(ii) will deliver or cause to be delivered such Shares so acquired for the
purpose of tender to the Company within the period specified in the Offer. Rule
14e-4 also provides a
9
<PAGE> 10
similar restriction applicable to the tender or guarantee of a tender on behalf
of another person. A tender of Shares made pursuant to any method of delivery
set forth herein will constitute the tendering shareholder's acceptance of the
terms and conditions of the Offer as well as the tendering shareholder's
representation and warranty to the Company that (i) such shareholder has a "net
long position" in Shares or Equivalent Securities being tendered within the
meaning of Rule 14e-4, and (ii) such tender of Shares complies with Rule 14e-4.
The Company's acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the tendering shareholder and the
Company upon the terms and conditions of the Offer.
Determinations of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the number of Shares
to be accepted, the price to be paid therefor and the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Company, in its sole discretion, and its determination
shall be final and binding on all parties. The Company reserves the absolute
right to reject any or all tenders it determines not to be in proper form or the
acceptance of or payment for which may be unlawful. The Company also reserves
the absolute right to waive any of the conditions of the Offer or any defect or
irregularity in the tender of any particular Shares or any particular
shareholder. No tender of Shares will be deemed to be properly made until all
defects or irregularities have been cured or waived. Neither the Company, the
Dealer Manager, the Depositary, the Information Agent or any other person is or
will be obligated to give notice of any defects or irregularities in tenders and
none of them will incur any liability for failure to give any such notice.
CERTIFICATES FOR SHARES, TOGETHER WITH A PROPERLY COMPLETED LETTER OF
TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL, MUST
BE DELIVERED TO THE DEPOSITARY AND NOT TO THE COMPANY. ANY SUCH DOCUMENTS
DELIVERED TO THE COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE
WILL NOT BE DEEMED TO BE VALIDLY TENDERED.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares pursuant
to the Offer are irrevocable. Shares tendered pursuant to the Offer may be
withdrawn at any time before the Expiration Date and, unless theretofore
accepted for payment by the Company as provided in this Offer to Purchase, may
also be withdrawn after 12:00 Midnight, Eastern Daylight Savings time, on
Monday, September 8, 1997.
For a withdrawal to be effective, the Depositary must receive (at its
address set forth on the back cover of this Offer to Purchase) a notice of
withdrawal in written or facsimile transmission form on a timely basis. Such
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares tendered, the number of Shares to be
withdrawn and the name of the registered holder, if different from that of the
person who tendered such Shares. If the certificates have been delivered or
otherwise identified to the Depositary, then, prior to the release of such
certificates, the tendering shareholder must also submit the serial numbers
shown on the particular certificates evidencing the Shares and the signature on
the notice of withdrawal must be guaranteed by an Eligible Institution (except
in the case of Shares tendered by an Eligible Institution). If Shares have been
tendered pursuant to the procedure for book-entry transfer set forth in Section
2, the notice of withdrawal must specify the name and the number of the account
at the applicable Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with the procedures of such facility. All questions
as to the form and validity, including time of receipt, of notices of withdrawal
will be determined by the Company, in its sole discretion, which determination
shall be final and binding on all parties. Neither the Company, the Dealer
Manager, the Depositary, the Information Agent or any other person shall be
obligated to give any notice of any defects or irregularities in any notice of
withdrawal, and none of them will incur any liability for failure to give any
such notice. Withdrawals may not be rescinded, and any Shares properly withdrawn
will thereafter be deemed not tendered for purposes of the Offer. However,
withdrawn Shares may be retendered before the Expiration Date by again following
any of the procedures described in Section 2.
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<PAGE> 11
If the Company extends the Offer, is delayed in its purchase of Shares or
is unable to purchase Shares pursuant to the Offer for any reason, then, without
prejudice to the Company's rights under the Offer, the Depositary may, subject
to applicable law, retain tendered Shares on behalf of the Company, and such
Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in this Section 3.
4. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE
The Company will, as soon as practicable after the Expiration Date and upon
the terms and subject to the conditions of the Offer, determine a single per
Share Purchase Price that it will pay for Shares validly tendered and not
withdrawn pursuant to the Offer, taking into account the number of Shares so
tendered and the prices specified by tendering shareholders, so that each
shareholder receives the highest price paid to any other shareholder pursuant to
the Offer. The Company will, as soon as practicable after the Expiration Date,
accept for payment and pay for (and thereby purchase) Shares validly tendered at
or below the Purchase Price and not withdrawn (subject to proration). For
purposes of the Offer, the Company will be deemed to have accepted for payment
(and therefore purchased), subject to proration, Shares that are validly
tendered at or below the Purchase Price and not withdrawn only when, as and if
it gives oral or written notice to the Depositary of its acceptance of such
Shares for payment pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer, the Company will
purchase and pay a single per Share Purchase Price for all of the Shares
accepted for payment pursuant to the Offer as soon as practicable after the
Expiration Date. In all cases, payment for Shares tendered and accepted for
payment pursuant to the Offer will be made promptly (subject to possible delay
in the event of proration), but only after timely receipt by the Depositary of
certificates for Shares (or of a timely confirmation of a book-entry transfer of
such Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities), a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) and any other required documents.
Payment for Shares purchased pursuant to the Offer will be made by
depositing the aggregate Purchase Price therefor with the Depositary, which will
act as agent for tendering shareholders for the purpose of receiving payment
from the Company and transmitting payment to the tendering shareholders. In the
event of proration, the Company will determine the proration factor and pay for
those tendered Shares accepted for payment as soon as practicable after the
Expiration Date. However, the Company does not expect to be able to announce the
final results of any such proration until approximately seven business days
after the Expiration Date. Certificates for all Shares not purchased, including
all Shares tendered at prices greater than the Purchase Price and Shares not
purchased due to proration, will be returned (or, in the case of Shares tendered
by book-entry transfer, such Shares will be credited to the account maintained
with one of the Book-Entry Transfer Facilities by the participant who so
delivered such Shares) as promptly as practicable following the Expiration Date
or termination of the Offer without expense to the tendering shareholders. Under
no circumstances will the Company pay interest on the Purchase Price including,
without limitation, by reason of any delay in making payment. In addition, if
certain events occur, the Company may not be obligated to purchase Shares
pursuant to the Offer. See Section 5.
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer; provided, however,
that if payment of the Purchase Price is to be made to, or (in the circumstances
permitted by the Offer) if unpurchased Shares are to be registered in the name
of, any person other than the registered holder, or if tendered certificates are
registered in the name of any person other than the person signing the Letter of
Transmittal, the amount of all stock transfer taxes, if any (whether imposed on
the registered holder or such other person), payable on account of the transfer
to such person will be deducted from the Purchase Price unless evidence
satisfactory to the Company of the payment of such taxes or exemption therefrom
is submitted. See Instruction 7 of the Letter of Transmittal.
ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY, SIGN
AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 INCLUDED WITH THE LETTER OF
TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACKUP
11
<PAGE> 12
FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAID TO SUCH
SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 13. ALSO SEE
SECTION 13 REGARDING FEDERAL INCOME TAX CONSEQUENCES FOR FOREIGN SHAREHOLDERS.
5. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment, purchase or pay for any Shares tendered, and may
terminate or amend the Offer or may postpone the acceptance for payment of, or
the purchase of and the payment for Shares tendered, subject to Rule 13e-4(f)
promulgated under the Exchange Act, if at any time on or after July 11, 1997 and
prior to the time of payment for any such Shares (whether any Shares have
theretofore been accepted for payment, purchased or paid for pursuant to the
Offer) any of the following events shall have occurred (or shall have been
determined by the Company to have occurred) that, in the Company's judgment in
any such case and regardless of the circumstances giving rise thereto (including
any action or omission to act by the Company), makes it inadvisable to proceed
with the Offer or with such acceptance for payment or payment:
(a) there shall have been threatened, instituted or be pending before
any court, agency, authority or other tribunal any action, suit or
proceeding by any government or governmental, regulatory or administrative
agency, authority or tribunal or by any other person, domestic or foreign,
or any judgment, order or injunction entered, enforced or deemed applicable
by any such court, authority, agency or tribunal, which (i) challenges or
seeks to make illegal, or to delay or otherwise directly or indirectly to
restrain, prohibit or otherwise affect the making of the Offer, the
acquisition of some or all of the Shares pursuant to the Offer or otherwise
relates in any manner to, or otherwise affects, the Offer; or (ii) could,
in the sole judgment of the Company, materially affect the business,
condition (financial or other), income, operations or prospects of the
Company, taken as a whole, or otherwise materially impair in any way the
contemplated future conduct of the business of the Company, taken as a
whole, or materially impair the Offer's contemplated benefits to the
Company; or
(b) there shall have been any action threatened, pending or taken, or
any approval withheld, or any statute, rule or regulation invoked,
proposed, sought, promulgated, enacted, entered, amended, enforced or
deemed to be applicable to the Offer or the Company, by any government or
governmental, regulatory or administrative authority or agency or tribunal
or court, domestic or foreign, which, in the sole judgment of the Company,
would or might directly or indirectly result in any of the consequences
referred to in clause (i) or (ii) of paragraph (a) above; or
(c) there shall have occurred (i) the declaration of any banking
moratorium or any suspension of payment in respect of banks in the United
States (whether or not mandatory); (ii) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market; (iii) the commencement of a
war, armed hostilities or any other national or international crisis
directly or indirectly involving the United States; (iv) any limitation
(whether or not mandatory) by any governmental, regulatory or
administrative agency or authority on, or any event which, in the sole
judgment of the Company, might affect the extension of credit by banks or
other lending institutions in the United States; (v) any significant
decrease in the market price of the Shares or in the market prices of
equity securities generally in the United States or any change in the
general political, market, economic or financial conditions or in the
commercial paper markets in the United States or abroad that could have, in
the sole judgment of the Company, a material adverse effect on the
business, condition (financial or otherwise), income, operations or
prospects of the Company, taken as a whole, or on the trading in the Shares
or on the proposed financing for the Offer or makes it inadvisable to
proceed with the Offer; (vi) in the case of any of the foregoing existing
at the time of the announcement of the Offer, a material acceleration or
worsening thereof; or (vii) any decline in either the Dow Jones Industrial
Average or the Standard & Poor's Composite 500 Stock Index by an amount in
excess of 10% measured from the close of business on July 11, 1997; or
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<PAGE> 13
(d) any change(s) shall occur or be threatened in the business,
condition (financial or other), income, assets, operations, prospects or
stock ownership of the Company, taken as a whole, which in the sole
judgment of the Company is or may be material to the Company; or
(e) a tender or exchange offer with respect to some or all of the
Shares (other than the Offer), or a merger or acquisition proposal for the
Company, shall have been proposed, announced or made by another person or
entity or shall have been publicly disclosed, or the Company shall have
learned that (i) any person, entity or "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to
acquire beneficial ownership of more than 5% of the outstanding Shares
(other than as disclosed in a Schedule 13D or 13G on file with the
Commission on July 11, 1997), (ii) any such person or group that on or
prior to July 11, 1997 had filed such a Schedule shall have acquired or
proposed to acquire beneficial ownership of additional Shares representing
2% or more of the outstanding Shares, or (iii) any new group shall have
been formed that beneficially owns more than 5% of the outstanding Shares;
or
(f) any person, entity or group shall have filed a Notification and
Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
or made a public announcement reflecting an intent to acquire the Company
or any of its Shares or assets.
The foregoing conditions are for the Company's sole benefit and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition (including any action or inaction by the Company) or may be waived by
the Company in whole or in part, at any time and from time to time in its sole
discretion. The Company's failure at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right, and each such right shall
be deemed an ongoing right that may be asserted at any time and from time to
time. Any determination by the Company concerning the events described above and
any related judgment or decisions by the Company regarding the inadvisability of
proceeding with the purchase of or payment for any Shares tendered will be final
and binding on all parties.
6. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are listed and traded on the AMEX. The high and low closing
sales prices per Share on the AMEX as compiled from published financial sources
and the quarterly cash dividends paid per Share for the periods indicated are
listed below:
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS*
---- ---- ----------
<S> <C> <C> <C>
FISCAL 1995
(Year Ended May 28, 1995)
1st Quarter.................................................. $14 7/8 $11 3/4 $.06
2nd Quarter.................................................. $13 1/4 $ 9 7/8 $.06
3rd Quarter.................................................. $10 5/8 $ 8 7/8 $.06
4th Quarter.................................................. $ 9 5/8 $ 8 1/4 $.06
FISCAL 1996
(Year Ended June 2, 1996)
1st Quarter.................................................. $10 1/4 $ 8 5/8 $.06
2nd Quarter.................................................. $10 3/4 $ 8 5/8 $.06
3rd Quarter.................................................. $10 1/8 $ 7 11/16 $.06
4th Quarter.................................................. $11 7/8 $ 8 1/4 $.06
FISCAL 1997
(Year Ended June 1, 1997)
1st Quarter.................................................. $15 $11 1/8 $.06
2nd Quarter.................................................. $15 1/4 $12 1/2 $.06
3rd Quarter.................................................. $16 $13 1/4 $.06
4th Quarter.................................................. $15 1/2 $13 5/8 $.06
</TABLE>
- ---------------
* In addition to the cash dividends above, a 4% stock dividend was paid in
fiscal years 1997, 1996 and 1995.
On July 11, 1997, the last full trading day on the AMEX prior to the
announcement and commencement of the Offer, the closing price per Share on the
AMEX was $16.50. THE COMPANY URGES
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<PAGE> 14
SHAREHOLDERS TO OBTAIN CURRENT QUOTATIONS OF THE MARKET PRICE OF THE SHARES.
7. BACKGROUND AND PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER
The Board of Directors, with the assistance of Furman Selz LLC, an
investment banking firm, studied and considered various strategic alternatives
for the Company. The Board of Directors believes that a repurchase of the
Company's Shares directly from shareholders is a strategic alternative that is
in the best interests of the Company and its shareholders, and therefore, the
Board of Directors authorized the repurchase of up to 1,000,000 Shares from the
Company's shareholders. The Board of Directors believes that Company repurchases
of Shares will provide a liquidity opportunity, due to the relatively thin
public trading market for the Shares, for those shareholders wishing to dispose
of their Shares and will enhance shareholder value for the remaining
shareholders. The Board of Directors believes that the purchase of Shares is
consistent with the Company's long-term goals and that, after the Offer is
completed, the Company will have sufficient cash flow and access to other
sources of capital in order to fund its working capital needs and provide for
its current capital expenditure requirements.
The Offer provides shareholders who are considering a sale of all or a
portion of their Shares the opportunity to determine the price or prices (not
greater than $17.00 nor less than $15.00 per Share) at which they are willing to
sell their Shares and, if any such Shares are purchased pursuant to the Offer,
to sell those Shares for cash to the Company without the usual transaction costs
associated with market sales. This opportunity to sell Shares without paying any
brokerage fee may be particularly valuable to smaller shareholders, for whom
such fees may be relatively high. Odd Lot Holders (shareholders owning less than
100 Shares) who tender into the Offer will realize additional transactional
savings by avoiding any applicable "odd lot" discount payable on a sale of
Shares. In addition, the Offer may give shareholders the opportunity to sell
Shares at prices greater than market prices prevailing prior to commencement of
the Offer. The Offer also allows shareholders to sell a portion of their Shares
while retaining a continuing equity interest in the Company. To the extent the
purchase of Shares in the Offer results in a reduction in the number of
shareholders of record, the costs to the Company for services to shareholders
will be reduced. Shareholders who determine not to accept the Offer will
increase their proportionate interest in the Company's equity, and thus in the
Company's future earnings and net assets, subject to the Company's right to
issue additional Shares and other equity securities in the future.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MAKING OF THE OFFER.
HOWEVER, SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES
AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES
SHOULD BE TENDERED. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO ANY SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING SHARES AND NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS HAS
AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION.
The Company may in the future purchase additional Shares on the open
market, in private transactions, through tender offers or otherwise. Any such
purchases may be on the same terms or on terms which are more or less favorable
to shareholders than the terms of the Offer. However, Rule 13e-4 under the
Exchange Act prohibits the Company and its affiliates from purchasing any
Shares, other than pursuant to the Offer, until at least ten business days after
the Expiration Date. Any possible future purchases by the Company will depend on
many factors, including the results of the Offer, the market price of the
Shares, the Company's business and financial position and general economic and
market conditions.
Shares the Company acquires pursuant to the Offer will be retained as
treasury stock by the Company (unless and until the Company determines to retire
such Shares) and will be available for the Company to issue without further
shareholder action (except as required by applicable law or, if retired, the
rules of any securities exchange on which Shares are listed) for purposes
including, but not limited to, the acquisition of other businesses, the raising
of additional capital for use in the Company's business and the satisfaction of
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<PAGE> 15
obligations under existing or future employee benefit plans or compensation
programs for directors and employees. The Company has no current plans for
issuance of the Shares repurchased pursuant to the Offer, except that the
Company is authorized to use the repurchased Shares from time to time in
connection with employee benefit or compensation programs or stock plans or
compensation programs for directors maintained by the Company.
8. INFORMATION AS TO CAPITAL STOCK; TRANSACTIONS AND ARRANGEMENTS CONCERNING
THE SHARES
As of July 11, 1997, there were 7,148,334 Shares of Common Stock
outstanding and 259,835 Shares reserved for issuance upon exercise of all
outstanding and currently exercisable options pursuant to the 1984 Stock Option
Plan. The foregoing amounts exclude all shares of Common Stock held as treasury
stock, the 58,492 Shares reserved for issuance pursuant to the Frisch's
Executive Savings Plan and the 562,432 Shares reserved for issuance under the
1993 Stock Option Plan (there are no options currently outstanding under this
Plan). The 1,000,000 Shares the Company is offering to purchase pursuant to the
Offer represent approximately 13.99% of the Shares outstanding (approximately
13.50% assuming the exercise of all outstanding Options).
As of July 11, 1997, the Company's directors and executive officers as a
group (11 persons) beneficially owned an aggregate of 2,482,896 Shares,
representing approximately 34.73% of the outstanding Shares. Each of the
Company's executive officers and directors has advised the Company that he or
she does not intend to tender any Shares pursuant to the Offer, except Board
members Barry S. Nussbaum and Jerry L. Ruyan, who have not advised the Board of
Directors as to whether they intend to tender Shares pursuant to the Offer. Mr.
Nussbaum and Mr. Ruyan did not participate in any Board discussions or decisions
with respect to this Offer. Since Mr. Nussbaum and Mr. Ruyan own in the
aggregate 624,232 Shares, if 1,000,000 Shares, including all Shares owned by Mr.
Nussbaum and Mr. Ruyan, are purchased pursuant to the Offer, after the
consummation of the Offer, the directors and executive officers as a group will
beneficially own an aggregate of 1,858,664 Shares, representing approximately
30.23% of the outstanding Shares. If 1,000,000 Shares, not including any Shares
owned by Mr. Nussbaum and Mr. Ruyan, are purchased pursuant to the Offer, after
consummation of the Offer, the directors and executive officers as a group will
beneficially own an aggregate of 2,482,896 Shares, representing approximately
40.38% of the outstanding Shares.
Based upon the Company's records and upon information provided to the
Company by its directors and executive officers, neither the Company nor, to the
best of the Company's knowledge, any of the directors or executive officers of
the Company, nor any associate or subsidiary of any of the foregoing, has
effected any transactions in the Shares during the 40 business days prior to the
date hereof.
The Company has an unfunded deferred compensation plan known as the
Frisch's Executive Savings Plan for certain key executive employees of the
Company. One of the investment options under the Plan is common stock of the
Company. A participant in the Plan is entitled to distribution upon the
participant's death, or after the later of the date on which the participant's
employment by the Company is terminated or the participant's 65th birthday. The
Compensation Committee, which administers the Plan, may elect to pay
distributions in cash instead of the investment option (including the Company's
Common Stock) chosen by the participant. As of July 11, 1997, no participants
were eligible for distributions pursuant to the Plan; however, 58,492 Shares
have been reserved by the Company for issuance pursuant to the Plan.
The Company received a letter dated June 6, 1997 from Pioneer Venture Fund
("PVF") which stated that PVF represents a group of shareholders consisting of
PVF, Union Communications Company, DBN Investment Company, Benjamin Nazarian,
Dr. Pejman Salimpour, Neil Kadisha and Nippon Tex Inc. Profit Sharing Plan dated
June 25, 1996 (the "Shareholder Group"), which as of the date thereof, owned an
aggregate of 618,295 of the Company's Shares, representing approximately 8.6% of
the issued and outstanding Shares of the Company. The purpose of the letter was
to (i) inform the Board of Directors that the Shareholder Group plans to acquire
more Shares, with the present intention of having beneficial ownership of over
10% of the Company's issued and outstanding Shares prior to the record date for
the Company's 1997 Annual Meeting of Shareholders; and (ii) to request the
Board's approval, for the purpose of Chapter 1704 of
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<PAGE> 16
the Ohio Revised Code, of such an acquisition of the Company's Shares by the
Shareholder Group prior to the Shareholder Group's "share acquisition date," as
defined under Section 1704.01(C)(10) of the Code, in order to permit the Company
to engage in "Chapter 1704. transactions," as defined under Section 1704.01(B)
of the Code, with the Shareholder Group. Pursuant to Chapter 1704, if the
Shareholder Group beneficially owns more than 10% of the outstanding Shares at
any time during the Offer and desires to tender Shares pursuant to the Offer,
the Shareholder Group may not have more than approximately $5,563,000 worth of
its Shares, or in any event no more than 5% of the Company's Shares, purchased
pursuant to this Offer. The Board of Directors denied PVF's request for approval
on July 8, 1997.
Except for outstanding options to purchase Shares granted from time to time
to certain employees (including executive officers) of the Company pursuant to
the Company's 1984 and 1993 Stock Option Plans, except for the Shares reserved
for issuance pursuant to the Frisch's Executive Savings Plan and except as
described herein, neither the Company nor any person controlling the Company
nor, to the Company's knowledge, any of its subsidiaries, affiliates, directors
or executive officers, is a party to any contract, arrangement, understanding or
relationship with any other person relating, directly or indirectly, to the
Offer with respect to any securities of the Company, including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any such securities, joint ventures, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against loss, or
the giving or withholding of proxies, consents or authorizations.
9. SOURCE AND AMOUNT OF FUNDS
Assuming that the Company purchases 1,000,000 Shares pursuant to the Offer
at a maximum Purchase Price of $17.00 per Share, the Company expects the maximum
aggregate cost, including all fees and expenses applicable to the Offer, to be
approximately $17,575,000. The Company estimates that substantially all of the
funds necessary to pay such amounts will come from borrowings pursuant to the
Company's Loan Agreement, dated as of July 9, 1997 (the "Loan Agreement"), with
Star Bank, N.A. The loan, in an aggregate amount of up to $18 million, matures
in two (2) years from the Expiration Date, and is secured by the property and
equipment owned by the Company at the fifteen restaurants in Indianapolis,
Louisville and central Ohio which the Company closed in June, 1997 and which the
Company is in the process of disposing, the Company's limited partnership
interest in the Cincinnati Reds and the Company's Cash Surrender Value of Life
Insurance which is approximately $3,600,000. The loan will, at the Company's
option, bear interest at (i) the interest rate announced from time to time by
Star Bank, N.A. as its prime rate, or (ii) the sum of the maximum
reserve-adjusted thirty or sixty day LIBOR plus the applicable margin (currently
150 basis points). At July 8, 1997, the Star Bank, N.A. prime rate was 8-1/2%
and the thirty and sixty day maximum reserve-adjusted LIBOR rates (after adding
150 basis points margin) were 7.1875% and 7.21875%, respectively. There are
currently no borrowings outstanding under this loan.
The Loan Agreement contains representations and warranties, affirmative and
negative covenants (including certain covenants which establish ratio
requirements related to the Company's debt, interest expense and cash flow),
events of default and other terms customary to similar financings. If the
Company reduces the principal balance of the loan to less than $7,500,000 within
twelve months from the Expiration Date, the margins charged by Star Bank, N.A.
(over each interest rate option) shall decrease by 25 basis points. If the loan
is not so reduced in the first twelve months, the margins charged by Star Bank,
N.A. (over each interest rate option) shall increase by 25 basis points.
Pursuant to the Loan Agreement, the Company must reduce the principal balance
outstanding by a minimum of $5,500,000 within twelve months from the date of
closing. The Company has committed to diligently pursue the sale of its
equipment and property in the fifteen restaurants it closed on June 10, 1997 and
its one-fifteenth limited partnership interest in the Cincinnati Reds to repay
borrowings under the Loan Agreement. Depending on business and market
conditions, the Company may also repay borrowings under the Loan Agreement
through other internally generated funds and through the possible sale of other
non-core business assets.
The Loan Agreement also requires the Company to reduce the availability of
funds under its existing Amended and Restated Loan Agreement with Star Bank,
N.A. effective as of August 29, 1996, as amended from time to time, from
$20,000,000 to $16,000,000 for so long as the Loan Agreement is in effect. Star
Bank,
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<PAGE> 17
N.A. has agreed that up to $1,000,000 of the existing revolving line of credit
can be used to pay expenses of the Offer. Star Bank, N.A. charged the Company a
fee of $25,000 for modifying such revolving line of credit.
10. CERTAIN INFORMATION ABOUT THE COMPANY
The Company was incorporated in 1947. The Company is engaged in the food
service business, including the operation of and licensing of others to operate
restaurants, and in the lodging business.
The Company operates principally in the food service and lodging
industries. Prior to 1997, operations in the food service industry constituted a
dominant segment in accordance with SFAS Statement Number 14, "Financial
Reporting Segments of a Business Enterprise." Operations in the food service
industry are vertically integrated, and include the manufacture and distribution
of food products and supplies to its restaurants and to franchisees for resale
to the general public. Fees are charged to franchisees for administrative and
advertising services based principally on percentage of sales. Intersegment
sales are immaterial.
The Company also operates two high-rise hotels located in greater
Cincinnati, under the name "Quality Hotel;" one containing 147 guest rooms,
banquet facilities for 400, a restaurant and cocktail lounge; the other having
236 guest rooms, banquet facilities for 700, and two restaurants with cocktail
lounges.
The Company operates or licenses others to operate family restaurants, most
of which have "drive-thru" service, located in Ohio, Kentucky and Indiana which
use the tradename "Big Boy." The Company also has the right to operate or
license others to operate Big Boy family restaurants in Florida, Texas,
Oklahoma, portions of Kansas, the unfranchised areas of Tennessee and Georgia
and, under certain circumstances, in prescribed areas of states adjacent to
Tennessee and Georgia. During the fiscal year ended June 1, 1997, the Company
decided to close the ten restaurants it operated in Indianapolis, one restaurant
in Kentucky and four restaurants in Central Ohio, and such restaurants were
closed on June 10, 1997. As of July 1, 1997, there were 88 Big Boy restaurants
operated by the Company and 39 operated by Company licensees.
Big Boy restaurants are family restaurants which the Company operates under
the name of "Frisch's." Some of the licensed Big Boy restaurants do not use the
name "Frisch's." Menus are generally standardized with a wide variety of items
at moderate prices, featuring the "Big Boy" double-deck hamburger sandwich and
other sandwiches, pasta, chicken and seafood dinners, desserts and other items.
In addition, a full breakfast menu is offered, and most of the restaurants also
contain breakfast bars, soup and salad bars and drive-thru service. Older
restaurants are located in suburban or urban neighborhoods which cater to local
trade rather than highway travel. Restaurants opened in recent years have
generally been located near expressways.
To service its owned and certain licensed restaurants, the Company operates
a commissary at Cincinnati, Ohio, where it prepares foods, and stocks foods,
forms, paper products and other supplies. Certain companies in the foodservice
industry operate commissaries, while others purchase from outside sources.
Sixteen of the licensed restaurants (41%) currently purchase items from the
commissary. Big Boy restaurants licensed in northern Indiana and northwestern
Ohio do not buy food and supplies from the Company.
The Company also provides bookkeeping and payroll services to its owned and
some of its licensed restaurants. Eight of the licensed restaurants (21%)
currently purchase these services from the Company.
Pursuant to an agreement with Elias Brothers Restaurants, Inc., the Company
has the right to use and sub-license others to use the registered trademark and
tradename "Big Boy" for a perpetually renewable term at no license fee in Ohio,
Kentucky, Indiana, Florida, Texas, Oklahoma, parts of Kansas, the unfranchised
areas of Tennessee and Georgia and, under certain circumstances, prescribed
areas of states adjacent to Tennessee and Georgia.
The Company also owns a 1/15th limited partnership interest in the
Cincinnati Reds professional baseball team. The Company has committed to Star
Bank, N.A. to actively try to sell this asset to repay borrowings under the Loan
Agreement. See Section 9.
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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following summary consolidated historical financial information for the
fiscal year ended June 2, 1996 was derived from the audited consolidated
financial statements contained in the Company's Annual Report on Form 10-K for
the fiscal year ended June 2, 1996, which is incorporated herein by reference.
This information should be read in conjunction with and is qualified in its
entirety by reference to such audited financial statements and the related notes
thereto. The summary consolidated historical financial information for the
fiscal year ended June 1, 1997 was derived from the audited consolidated
financial statements contained in the Auditors' Report and Financial Statements
for the fiscal year ended June 1, 1997, which was filed as Exhibit (g)(2) to the
Schedule 13E-4 filed by the Company on July 14, 1997 and which is incorporated
herein by reference, and should be read in conjunction with and is qualified in
its entirety by reference to such financial statements and the related notes
thereto. Copies of such reports may be inspected or obtained from the Commission
in the manner specified in "Additional Information" below.
In a press release issued July 8, 1997 (which was filed as Exhibit (g)(3)
to the Schedule 13E-4 filed by the Company on July 14, 1994 and which is
incorporated herein by reference), the Company disclosed that it had reported
net earnings of $1,186,647, or $.17 per share, for the fiscal year ended June 1,
1997, including an asset writedown of $4,600,000 ($3,040,000 net of tax) which
resulted from the Company's decision to close fifteen underperforming Big Boy
restaurants in the fourth quarter of fiscal 1997.
The following summary consolidated pro forma financial information gives
effect to the purchase of 1,000,000 Shares pursuant to the Offer, based upon
certain assumptions described in the Notes to Summary Historical and Pro Forma
Financial Information, and gives effect to such purchases as if they had
occurred, for purposes of the income statement data, on the first day of the
periods presented and, for purposes of the balance sheet data, on the applicable
balance sheet date. The summary pro forma financial information is not
necessarily indicative of the results of operations that would actually have
been obtained had the purchase of 1,000,000 Shares pursuant to the Offer been
completed at the dates indicated and is not necessarily indicative of the
results of operations for any future period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------------
PRO FORMA (UNAUDITED)
---------------------------------
ASSUMED ASSUMED
$15.00/SHARE $17.00/SHARE
JUNE 2, JUNE 1, PURCHASE PRICE PURCHASE PRICE
1996 1997 JUNE 1, 1997 JUNE 1, 1997
-------- ----------- -------------- --------------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE INFORMATION)
<S> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Total Revenue.......................... $166,945 $ 165,931 $165,931 $165,931
Income before taxes.................... 3,417 1,728 650 506
Net income............................. 2,310 1,187 446 348
Average number of shares outstanding... 7,157 7,151 6,111 6,111
Earnings per share....................... $ 0.32 $ 0.17 $ 0.07 $ 0.06
Ratio of earnings to fixed charges....... 2.2x 1.6x 1.2x 1.1x
BALANCE SHEET INFORMATION
(at end of period):
Working capital deficit................ ($ 9,894) ($ 8,817) ($ 8,817) ($ 8,817)
Total assets........................... 118,396 111,260 111,260 111,260
Total assets, less goodwill............ 117,635 110,503 110,503 110,503
Total indebtedness..................... 53,089 46,576 61,576 63,576
Shareholders' investment............... 65,307 64,684 49,684 47,684
Book value per common share............ $ 9.12 $ 9.05 $ 8.13 $ 7.80
</TABLE>
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NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following assumptions were made in presenting the summary historical
and pro forma financial information:
(a) The pro forma income statement information assumes 1,000,000
Shares are purchased at $15.00 per Share and $17.00 per Share, as
applicable, with the purchase being initially financed with borrowings
under the Loan Agreement. The borrowings under the Loan Agreement are
expected to be repaid using the proceeds from the disposal of closed
restaurant properties and the sale of the Company's limited partnership
interest in the Cincinnati Reds and other internally generated funds. The
income statement information assumes increased interest expense under the
Loan Agreement.
(b) The June 1, 1997 pro forma balance sheet information assumes
1,000,000 Shares are purchased at $15.00 per Share and $17.00 per Share as
applicable, with the purchase being financed with borrowings under the Loan
Agreement. The borrowings under the Loan Agreement are expected to be
repaid using the proceeds from the disposal of closed restaurant properties
and the sale of the Company's limited partnership interest in the
Cincinnati Reds and other internally generated funds.
(c) For the computation of the ratio of earnings to fixed charges,
"earnings" has been calculated by adding income before taxes, interest
expense and fixed charges. "Fixed charges" consist of interest expense and
the assumed fixed charges portion of operating leases.
(d) Book value per Share is calculated as total shareholders'
investment divided by the number of pro forma Shares outstanding at the end
of the period.
Additional Information. The Company is subject to the information
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports and other information with the Commission relating to its business,
financial condition and other matters. Information, as of particular dates,
concerning the Company's directors and officers, their remuneration, options
granted to them, the principal holders of the Company's securities and any
material interest of such persons in transactions with the Company is required
to be disclosed in proxy statements distributed to the Company's shareholders
and filed with the Commission. The Company has also filed an Issuer Tender Offer
Statement on Schedule 13E-4 with the Commission. Such reports, proxy statements
and other information can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington
D.C. 20549, and (except for the Issuer Tender Offer Statement) at its regional
offices located at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and 7 World Trade Center, New York, New York 10048. Copies of such
material may also be obtained by mail, upon payment of the Commission's
customary charges, from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549. The Commission
also maintains a Web site on the World Wide Web at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, including
the Company.
11. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and is likely to reduce the
number of shareholders. Nonetheless, the Company anticipates that there will
still be a sufficient number of Shares outstanding and publicly traded following
the consummation of the Offer to ensure a continued trading market in the
Shares. Based on the published guidelines of the AMEX, the Company does not
believe that its purchase of Shares pursuant to the Offer will cause its
remaining Shares to be delisted therefrom.
The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit to their customers using the Shares as collateral. The Company
believes that, following the purchase of Shares pursuant to the Offer, the
Shares will continue to be "margin securities" for purposes of the Federal
Reserve Board's margin regulations.
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<PAGE> 20
The Shares are registered under the Exchange Act, which requires, among
other things, that the Company furnish certain information to its shareholders
and to the Commission and comply with the Commission's proxy rules in connection
with meetings of the Company's shareholders. The Company believes that its
purchase of Shares pursuant to the Offer will not result in the Shares becoming
eligible for deregistration under the Exchange Act.
12. CERTAIN LEGAL MATTERS; REGULATORY AND FOREIGN APPROVALS
The Company is not aware of any license or regulatory permit that appears
to be material to its business that might be adversely affected by its
acquisition of Shares as contemplated in the Offer or of any approval or other
action by any government or governmental, administrative or regulatory authority
or agency, domestic or foreign, that would be required for the Company's
acquisition or ownership of Shares as contemplated by the Offer. Should any such
approval or other action be required, the Company currently contemplates that it
will seek such approval or other action. The Company cannot predict whether it
may determine that it is required to delay the acceptance for payment of, or
payment for, Shares tendered pursuant to the Offer pending the outcome of any
such matter. There can be no assurance that any such approval or other action,
if needed, would be obtained (or would be obtained without substantial
conditions) or that the failure to obtain any such approval or other action
would not result in adverse consequences to the Company's business. The
Company's obligations under the Offer to accept for payment and pay for Shares
are subject to certain conditions. See Section 5.
Pursuant to Ohio Revised Code Chapter 1704, if a shareholder (or group of
shareholders acting together) owns over 10% of the Company's Shares and did not
obtain the Company's approval to purchase over 10% of the Company's Shares at
the "acquisition date" as defined in Chapter 1704, the number of Shares of that
shareholder (or group of shareholders) which can be purchased by the Company
pursuant to the Offer is limited by the fact that the maximum purchase price
that can be paid to such shareholder by the Company is equal to 5% of the
Company's gross assets or $5,563,000, and is limited, in any case, to 5% of the
Company's Shares.
13. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences relevant to the Offer. The discussion contained in this summary is
based upon the current provisions of the Internal Revenue Code of 1986, as
amended to the date hereof (the "Code"), applicable United States Treasury
regulations promulgated thereunder, judicial decisions, and administrative
pronouncements, rulings and practice, changes to any of which could materially
affect the tax consequences described herein and could be made on a retroactive
basis. This summary does not apply to Shares reflecting interests in the
Frisch's Executive Savings Plan and may not apply to Shares acquired as
compensation (including Shares acquired upon the exercise of options or which
were or are subject to forfeiture restrictions). The summary also does not
address the state, local or foreign tax consequences of participating in the
Offer. This summary discusses only Shares held as capital assets, within the
meaning of Section 1221 of the Code, and does not address all of the tax
consequences that may be relevant to particular shareholders subject to special
treatment under the federal income tax laws (such as certain financial
institutions, broker-dealers in securities or commodities, insurance companies,
tax-exempt organizations or persons who hold Shares as a position in a
"straddle" or as a part of a "hedging" or "conversion" transaction for United
States federal income tax purposes). In particular, the discussion of the
consequences of an exchange of Shares for cash pursuant to the Offer applies
only to a United States Holder. For purposes of this summary, a "United States
Holder" is a holder of shares that is (i) a citizen or resident (within the
meaning of Section 7701(b)(1)(A) of the Code) of the United States, (ii) a
corporation, partnership or other business or investment entity created or
organized in or under the laws of the United States, any State or any political
subdivision thereof, or (iii) an estate or trust, the income of which is subject
to United States federal income taxation regardless of its source. This
discussion does not address the tax consequences to foreign shareholders who
will be subject to United States federal income tax on a net basis on the
proceeds of their exchange of Shares for cash pursuant to the Offer because such
income is effectively connected with the conduct of a trade or business within
the United States. Such shareholders
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<PAGE> 21
are generally taxed in a manner similar to United States Holders; however,
certain special rules apply. The federal income tax consequences to a
shareholder may vary depending upon the shareholder's particular facts and
circumstances. EACH SHAREHOLDER SHOULD CONSULT SUCH SHAREHOLDER'S OWN TAX
ADVISOR AS TO THE PARTICULAR CONSEQUENCES OF PARTICIPATION IN THE OFFER,
INCLUDING WITHOUT LIMITATION THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
FOREIGN TAX LAWS, AND ANY CHANGES IN APPLICABLE TAX LAWS.
United States Holders Who Sell Shares Pursuant to the Offer. The sale of
Shares pursuant to the Offer by a United States Holder will be a taxable
transaction for United States federal income tax purposes and may also be a
taxable transaction under applicable state, local, foreign or other tax laws. As
a consequence of participating in the Offer, a United States Holder will,
depending on such holder's particular circumstances, be treated either as having
sold such holder's Shares or as having received a dividend distribution from the
Company, with the tax consequences described below.
Under Section 302 of the Code, a United States Holder whose Shares are
exchanged for cash pursuant to the Offer will be treated as having sold such
holder's Shares, and thus will recognize gain or loss if the exchange (i) is
"not substantially equivalent to a dividend" with respect to the holder, (ii) is
"substantially disproportionate" with respect to such holder, or (iii) results
in a "complete termination" of such holder's equity interest in the Company,
each as discussed below. In applying these tests, a United States Holder will be
treated as owning Shares actually or constructively owned by certain related
individuals and entities.
If a United States Holder sells Shares to persons other than the Company at
or about the time such holder also sells Shares to the Company pursuant to the
Offer, and the various sales effected by the holder are part of an overall plan
to reduce or terminate such holder's proportionate interest in the Company, the
sales to persons other than the Company may, for United States federal income
tax purposes, be integrated with the holder's exchange of Shares pursuant to the
Offer and, if integrated, should be taken into account in determining whether
the holder satisfies any of the three tests described below.
A United States Holder will satisfy the "not essentially equivalent to a
dividend" test if the reduction in such holder's proportionate interest in the
Company constitutes a "meaningful reduction" under such holder's particular
facts and circumstances. Shareholders should consult their own tax advisors to
determine if they qualify under this test.
An exchange of Shares for cash will be "substantially disproportionate"
with respect to a United States Holder if the percentage of the then outstanding
Shares actually and constructively owned by such holder immediately after the
exchange is less than 80% of the percentage of the Shares actually or
constructively owned by such holder immediately before the exchange, and the
shareholder owns actually and constructively less than 50% of the total combined
voting power of all classes of stock entitled to vote immediately after the sale
of Shares.
A United States Holder that exchanges all Shares actually and
constructively owned by such holder for cash pursuant to the Offer will be
treated as having completely terminated such holder's equity interest in the
Company. Constructive ownership of a shareholder who disposes of all Shares of
the Company's capital stock actually owned by such shareholder may be waived
under certain circumstances described in Section 302(c) of the Code.
If a United States Holder is treated for federal income tax purposes as
having sold such holder's Shares under the tests described above, such holder
will recognize gain or loss equal to the difference between the amount of cash
received and such holder's tax basis in the Shares exchanged therefor. Any such
gain or loss will be capital gain or loss and will be long-term capital gain or
loss if the holding period of the purchased Shares exceeds one year as of the
date of the exchange. Shareholders should consult their own tax advisors
concerning the application of the above tests to determine the tax treatment of
participating in the Offer to their particular circumstances.
If a United States Holder who exchanges Shares pursuant to the Offer is not
treated under Section 302 of the Code as having sold such holder's Shares, the
entire amount of consideration received by such holder will
21
<PAGE> 22
be treated as a dividend to the extent of the Company's current earnings and
profits (which is approximately equal in the aggregate to the Company's net
income for fiscal 1996, less dividends previously paid during such fiscal year)
and accumulated earnings and profits, which the Company anticipates will be
sufficient to cover the amount of any such deemed dividend and will be included
in the holder's taxable gross income as ordinary income in its entirety, without
reduction for the tax basis of the Shares exchanged. No loss will be recognized.
The United States Holder's tax basis in the Shares exchanged generally will be
added to such holder's tax basis in such holder's remaining Shares. To the
extent that consideration received in exchange for Shares is treated as a
dividend to a corporate United States Holder, such holder will be (i) eligible
for a dividends-received deduction (subject to potential limitations, including
those set forth in Section 246(c) of the Code (relative to dividends received on
common stock held for 45 days or less) and Section 246A of the Code (relative to
debt -- financial portfolio stock)), and (ii) subject to the "extraordinary
dividend" provisions of Section 1059 of the Code (pursuant to which such holder
may be required to reduce its tax basis in its remaining Shares and recognize
gain to the extent that the non-taxed portion of the consideration received
exceeds the basis in the Shares owned by such corporation shareholder). To the
extent, if any, that the consideration received by a United States Holder
pursuant to the Offer exceeds the Company's current and accumulated earnings and
profits, it will be treated first as a tax-free return of such holder's tax
basis in the Shares and thereafter as capital gain.
The Company cannot predict whether or to what extent the Offer will be
oversubscribed. If the Offer is oversubscribed, proration of tenders pursuant to
the Offer will cause the Company to accept fewer Shares than are tendered. Even
if all the Shares actually and constructively owned by a United States Holder
are tendered pursuant to the Offer, it is possible that not all of the Shares
will be purchased by the Company, which in turn may affect the United States
Holder's ability to satisfy one of the tests under Section 302 of the Code
discussed above. Therefore, a United States Holder can be given no assurance
that a sufficient number of such United States Holder's Shares will be exchanged
pursuant to the Offer to ensure that such exchange will be treated as a sale,
rather than as a dividend, for United States federal income tax purposes.
Shareholders Who do not Participate in the Offer. Shareholders who do not
exchange or otherwise dispose of their Shares pursuant to, or in connection
with, the Offer will not recognize any taxable gain or loss or otherwise incur
any tax liability as a result of the consummation of the Offer.
Backup Federal Income Tax Withholding. To prevent federal income tax
backup withholding equal to 31% of the gross payments made to shareholders for
shares purchased pursuant to the Offer, each shareholder who does not establish
an exemption from such withholding must provide the Depositary with such
shareholder's correct taxpayer identification number (social security number or
employer identification number), certify under penalties of perjury that such
number is correct, and provide certain other information by signing the
Substitute From W-9 included as part of the Letter of Transmittal. Certain
shareholders (including, among others, all corporations and certain foreign
shareholders (in addition to foreign corporations)) are not subject to these
backup withholding and reporting requirements. In order for a foreign
shareholder to qualify as an exempt recipient, such a shareholder must submit an
IRS Form W-8 or a Substitute Form W-8, signed under penalties of perjury,
attesting to that shareholder's exempt status. Such forms can be obtained from
the Depositary. See Instructions 10 and 11 of the Letter of Transmittal.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING EQUAL TO 31% OF THE GROSS
PAYMENTS MADE TO SHAREHOLDERS FOR SHARES PURCHASED PURSUANT TO THE OFFER, EACH
SHAREHOLDER WHO DOES NOT OTHERWISE ESTABLISH AN EXEMPTION FROM SUCH WITHHOLDING
MUST PROVIDE THE DEPOSITARY WITH THE SHAREHOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY COMPLETING THE
SUBSTITUTE FORM W-9 INCLUDED WITH THE LETTER OF TRANSMITTAL.
Withholding for Foreign Shareholders. Even if a foreign shareholder has
provided the required certification to avoid backup withholding, the Depositary
will withhold United States federal income taxes equal to 30% of the gross
payments payable to a foreign shareholder or such shareholder's agent unless the
22
<PAGE> 23
Depositary determines that a reduced rate of withholding is available pursuant
to a tax treaty or that an exemption from withholding is applicable because such
gross proceeds are effectively connected with the conduct of a trade or business
within the United States. For this purpose, a foreign shareholder is any
shareholder that is not (i) a citizen or resident of the United States, (ii) a
corporation, partnership, or other entity created or organized in or under the
laws of the United States, any State or any political subdivision thereof, or
(iii) an estate or trust, the income of which is subject to United States
federal income taxation regardless of the source of such income. In order to
obtain a reduced rate of withholding pursuant to a tax treaty, a foreign
shareholder must deliver to the Depositary before the payment a properly
completed and executed IRS Form 1001. In order to obtain an exemption from
withholding on the grounds that the gross proceeds paid pursuant to the Offer
are effectively connected with the conduct of a trade or business within the
United States, a foreign shareholder must deliver to the Depositary a properly
completed and executed IRS Form 4224. The Depositary will determine a
shareholder's status as a foreign shareholder and eligibility for a reduced rate
of, or exemption from, withholding by reference to any outstanding certificates
or statements concerning eligibility for a reduced rate of, or exemption from,
withholding (e.g., IRS Form 1001 or IRS Form 4224) unless facts and
circumstances indicate that such reliance is not warranted. A foreign
shareholder may be eligible to obtain a refund of all or a portion of any tax
withheld if such shareholder meets the "complete redemption," "substantially
disproportionate" or "not essentially equivalent to a dividend" test described
herein or is otherwise able to establish that no tax or a reduced amount of tax
is due. Backup withholding generally will not apply to amounts subject to the
30% or a treaty-reduced rate of withholding. FOREIGN SHAREHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES TO SUCH
SHAREHOLDERS RELATED TO THE DISPOSITION OF SHARES PURSUANT TO THE OFFER AND THE
APPLICATION OF UNITED STATES FEDERAL INCOME TAX WITHHOLDING, INCLUDING
ELIGIBILITY FOR A WITHHOLDING TAX REDUCTION OR EXEMPTION, AND THE REFUND
PROCEDURE. See Instructions 10 and 11 of the Letter of Transmittal.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION
ONLY. EACH SHAREHOLDER IS URGED TO CONSULT SUCH SHAREHOLDER'S OWN TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH SHAREHOLDER OF THE OFFER,
INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
14. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS
The Company expressly reserves the right, in its sole discretion, at any
time and from time to time, and regardless of whether or not any of the events
set forth in Section 5 shall have occurred or shall be deemed by the Company to
have occurred, to extend the period of time during which the offer is open and
thereby delay acceptance for payment of, and payment for, any Shares by giving
oral or written notice of such extension to the Depositary and making a public
announcement thereof. The Company also expressly reserves the right, in its sole
discretion upon the occurrence of any of the conditions specified in Section 5
hereof, to terminate the Offer and not accept for payment or pay for any Shares
not theretofore accepted for payment or paid for or, subject to applicable law,
to postpone payment for Shares by giving oral or written notice of such
termination or postponement to the Depositary and making a public announcement
thereof. The Company's reservation of the right to delay payment for Shares
which it has accepted for payment is limited by Rule 13e-4(f)(5) promulgated
under the Exchange Act, which requires that the Company must pay the
consideration offered or return the Shares tendered promptly after termination
or withdrawal of a tender offer. The Company further reserves the right, in its
sole discretion, and regardless of whether any of the events set forth in
Section 5 shall have occurred or shall be deemed by the Company to have
occurred, to amend the Offer in any respect, including, without limitation, by
decreasing or increasing the consideration offered in the Offer to holders of
Shares or by decreasing or increasing the number of Shares being sought in the
Offer. Amendments to the Offer may be made at any time and from time to time
effected by public announcement thereof, and such announcement, in the case of
an extension, shall disclose the approximate number of Shares tendered to that
date and shall be issued no later than the earlier of (i) 9:00 a.m., Eastern
Daylight Savings time, on the next business day after the last previously
scheduled or announced Expiration Date or (ii) the first opening of the
23
<PAGE> 24
AMEX on the next business day after the last previously scheduled or announced
Expiration Date. Any public announcement made pursuant to the Offer will be
disseminated promptly to shareholders in a manner reasonably designed to inform
shareholders of such change. Without limiting the manner in which the Company
may choose to make any public announcement, except as provided by applicable law
(including Rule 13e-4(e)(2) promulgated under the Exchange Act), the Company
shall have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to the Dow Jones News
Service.
If the Company makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Company will extend the Offer to the extent required by Rules
13e-4(d)(2) and 13e-4(e)(2) promulgated under the Exchange Act, which, as
interpreted by the Commission, require that the minimum period during which an
offer must remain open following material changes in the terms of the offer or
information concerning the offer (other than a change in price or a change in
percentage of securities sought) depends upon the facts and circumstances,
including the relative materiality of such terms or information. If (i) the
Company increases or decreases the price to be paid for Shares, the Company
increases the number of Shares being sought and such increase in the number of
Shares being sought exceeds 2% of the outstanding Shares, or the Company
decreases the number of Shares being sought, and (ii) the Offer is scheduled to
expire at any time earlier than the expiration of a period ending on the tenth
business day from, and including, the date that notice of such increase or
decrease is first published, sent or given, the Offer will be extended until the
expiration of such period of ten business days.
15. FEES AND EXPENSES
The Company has retained Furman Selz LLC to act as Dealer Manager in
connection with the Offer. Furman Selz LLC will receive a total fee of $550,000
for its services as Dealer Manager in connection with the Offer and for its
financial and other advisory services provided to the Board of Directors. The
Company has also agreed to reimburse Furman Selz LLC for certain out-of-pocket
expenses incurred in connection with the Offer and to indemnify Furman Selz LLC
against certain liabilities in connection with the Offer, including liabilities
under the federal securities laws.
The Company has retained McCormick & Pryor Ltd. as Information Agent and
Continental Stock Transfer & Trust Company as Depositary in connection with the
Offer. The Information Agent and the Depositary will receive reasonable and
customary compensation for their respective services. The Company will also
reimburse the Information Agent and the Depositary for out-of-pocket expenses,
including reasonable attorneys' fees and will indemnify them against certain
liabilities in connection with the Offer, including certain liabilities under
the federal securities laws. The Information Agent may contact shareholders by
mail, telephone, telex, telegraph and personal interviews, and may request
brokers, dealers and other nominee shareholders to forward materials relating to
the Offer to beneficial owners. Neither the Information Agent nor the Depositary
has been retained to make solicitations or recommendations in connection with
the Offer.
The Company will not pay fees or commissions to any broker, dealer,
commercial bank, trust company or other person for soliciting any Shares
pursuant to the Offer. The Company will, however, on request, reimburse such
persons for customary handling and mailing expenses incurred in forwarding
materials in respect of the Offer to the beneficial owners for which they act as
nominees. No such broker, dealer, commercial bank or trust company has been
authorized to act as the Company's agent for purposes of this Offer. The Company
will pay (or cause to be paid) any stock transfer taxes on its purchase of
Shares, except as otherwise provided in Instruction 7 of the Letter of
Transmittal.
16. MISCELLANEOUS
The Company is not aware of any jurisdiction where the making of the Offer
is not in compliance with applicable law. If the Company becomes aware of any
jurisdiction where the making of the Offer is not in compliance with any valid
applicable law, the Company will make a good faith effort to comply with such
law. If, after such good faith effort, the Company cannot comply with such law,
the Offer will not be made to (nor will tenders be accepted from or on behalf
of) the holders of Shares residing in such jurisdiction.
24
<PAGE> 25
Pursuant to Rule 13e-4 promulgated under the Exchange Act, the Company has
filed with the Commission an Issuer Tender Offer Statement on Schedule 13E-4
(the "Schedule 13e-4") which contains additional information with respect to the
Offer. The Schedule 13E-4, including the exhibits and any amendments thereto,
may be examined, and copies may be obtained, at the same places and in the same
manner as is set forth in Section 10 with respect to information concerning the
Company.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY IN CONNECTION WITH THE OFFER OTHER THAN
THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
FRISCH'S RESTAURANTS, INC.
July 14, 1997
25
<PAGE> 26
Facsimile copies of the Letter of Transmittal will be accepted from
Eligible Institutions. The Letter of Transmittal and certificates for the Shares
and any other required documents should be sent or delivered by each shareholder
or his or her broker, dealer, commercial bank, trust company or other nominee to
the Depositary at its address set forth below:
THE DEPOSITARY FOR THE OFFER IS:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C>
BY MAIL, HAND OR BY OVERNIGHT COURIER: BY FACSIMILE TRANSMISSION:
2 Broadway, 19th Floor (FOR ELIGIBLE INSTITUTIONS ONLY)
New York, New York 10004 (212) 509-5150
</TABLE>
CONFIRM RECEIPT OF NOTICE OF GUARANTEED DELIVERY BY TELEPHONE:
(212) 509-4000, Ext. 535
Any questions or requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Information Agent, at the telephone number and
address below. Shareholders may also contact their broker, dealer, commercial
bank or trust company for assistance concerning the Offer. To confirm delivery
of Shares, shareholders are directed to contact the Depositary.
THE INFORMATION AGENT FOR THE OFFER IS:
MCCORMICK & PRYOR LTD.
26 Broadway, Suite 1640
New York, New York 10004
Banks and Brokers Call Collect: (212) 968-9090
All Others Call Toll-Free: (800) 476-2508 PIN #3774
THE DEALER MANAGER FOR THE OFFER IS:
FURMAN SELZ LLC
230 Park Avenue
New York, New York 10169
(800) 939-9991
July 14, 1997
26
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
FRISCH'S RESTAURANTS, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED JULY 14, 1997
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
EASTERN DAYLIGHT SAVINGS TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS THE OFFER IS
EXTENDED.
TO: CONTINENTAL STOCK TRANSFER & TRUST COMPANY, DEPOSITARY:
<TABLE>
<S> <C>
By Mail or By Overnight Courier: By Facsimile Transmission:
2 Broadway, 19th Floor (For Eligible Institutions Only)
New York, New York 10004 (212) 509-5150
</TABLE>
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
(212) 509-4000, Ext. 535
Delivery of this instrument and all other documents to an address, or
transmission of instructions to a facsimile, other than as set forth above, does
not constitute a valid delivery.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE ACCOMPANYING
INSTRUCTIONS, CAREFULLY BEFORE CHECKING ANY BOX BELOW
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
- ---------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY AS NAME(S) SHARES TENDERED
APPEAR(S) ON CERTIFICATE(S) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)(1) CERTIFICATE(S) TENDERED(2)
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
TOTAL SHARES
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Indicate in this box the order (by certificate number) in which Shares are to
be purchased in the event of proration.(3) (Attach additional signed list, if
necessary.) See Instruction 14.
<TABLE>
<S> <C> <C> <C>
1st: ______________ 2nd: ______________ 3rd: ______________ 4th: ____________
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Need not be completed by shareholders tendering Shares by book-entry
transfer.
(2) Unless otherwise indicated, it will be assumed that all Shares represented
by each Share certificate delivered to the Depositary are being tendered
hereby. See Instruction 4.
(3) If you do not designate an order, then in the event less than all Shares
tendered are purchased due to proration, Shares will be selected for
purchase by the Depositary. See Instruction 13.
- -------------------------------------------------------------------------------
<PAGE> 2
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ
ACCOMPANYING INSTRUCTIONS CAREFULLY.
This Letter of Transmittal is to be used only if certificates are to be
forwarded herewith or if delivery of Shares (as defined below) is to be made by
book-entry transfer to the Depositary's account at The Depository Trust Company
("DTC") or Philadelphia Depository Trust Company ("PDTC") (hereinafter
collectively referred to as the "Book-Entry Transfer Facilities") pursuant to
the procedures set forth in Section 2 of the Offer to Purchase (as defined
below).
Shareholders who cannot deliver their Share certificates and any other
required documents to the Depositary by the Expiration Date (as defined in the
Offer to Purchase) or who cannot complete the procedure for book-entry transfer
on a timely basis or who cannot deliver a Letter of Transmittal and all other
required documents to the Depositary prior to the Expiration Date must, in each
case, tender their Shares using the guaranteed delivery procedure set forth in
Section 2 of the Offer to Purchase. See Instruction 2. Delivery of documents to
one of the Book-Entry Transfer Facilities does not constitute delivery to the
Depositary.
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:__________________________________________
Check Box of Applicable Book-Entry Transfer Facility: [ ] DTC [ ] PDTC
Account No.:____________________________________________________________
Transaction Code No.:___________________________________________________
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s):________________________________________
Date of Execution of Notice of Guaranteed Delivery:_____________________
Name of Institution that Guaranteed Delivery:___________________________
If delivery is by book-entry transfer:
Name of Tendering Institution:__________________________________________
Account No.:_____________________ [ ] at DTC [ ] at PDTC
Transaction Code No.:___________________________________________________
<PAGE> 3
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Frisch's Restaurants, Inc., an Ohio
corporation (the "Company"), the above-described shares of its common stock, no
par value (the "Shares"), at the price per Share indicated in this Letter of
Transmittal, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Company's Offer to Purchase, dated July 14, 1997
(the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which together constitute the "Offer").
Subject to and effective upon acceptance for payment of and payment for the
Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to all the Shares that are being tendered hereby and
orders the registration of all such Shares, if tendered by book-entry transfer,
and hereby irrevocably constitutes and appoints the Depositary as the true and
lawful agent and attorney-in-fact of the undersigned (with full knowledge that
said Depositary also acts as the agent of the Company) with respect to such
Shares, with full power of substitution (such power of attorney being deemed to
be an irrevocable power coupled with an interest), to:
(i) deliver certificate(s) for such Shares or transfer ownership of
such Shares on the account books maintained by any of the Book-Entry
Transfer Facilities, together in either such case with all accompanying
evidences of transfer and authenticity, to, or upon the order of, the
Company upon receipt by the Depositary, as the undersigned's agent, of the
aggregate Purchase Price (as defined below) with respect to such Shares;
(ii) present certificate(s) for such Shares for cancellation and
transfer on the Company's books; and
(iii) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares subject to the next paragraph, all in
accordance with the terms of the Offer.
The undersigned hereby represents and warrants to the Company that:
(a) The undersigned has full power and authority to tender, sell, assign and
transfer the Shares tendered hereby and that, when and to the extent the same
are accepted for payment by the Company, the Company will acquire good,
marketable and unencumbered title thereto, free and clear of all security
interests, liens, restrictions, charges, encumbrances, conditional sales
agreements or other obligations relating to the sale or transfer thereof, and
the same will not be subject to any adverse claims;
(b) The undersigned will, upon request, execute and deliver any additional
documents deemed by the Depositary or the Company to be necessary or desirable
to complete the sale, assignment and transfer of the Shares tendered hereby;
(c) The undersigned understands that tenders of Shares pursuant to any one
of the procedures described in Section 2 of the Offer to Purchase and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer, including the undersigned's representation and
warranty to the Company that (i) the undersigned has a net long position in the
Shares or equivalent securities at least equal to the Shares being tendered
within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act
of 1934, as amended, and (ii) the tender of such Shares complies with Rule
14e-4; and
(d) The undersigned has read and agrees to all of the terms of the Offer.
All authority herein conferred or agreed to be conferred shall not be
affected by and shall survive the death or incapacity of the undersigned, and
any obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, executors, administrators, successors, assigns,
administrators and legal representatives of the undersigned. Except as stated in
the Offer, this tender is irrevocable.
The name(s) and address(es) of the registered holder(s) should be printed,
if they are not already printed above, exactly as they appear on the
certificates representing Shares tendered hereby. The certificate numbers, the
number of Shares represented by such certificates, the number of Shares that the
undersigned wishes to tender and the purchase price at which such Shares are
being tendered should be indicated in the appropriate boxes on this Letter of
Transmittal.
The undersigned understands that the Company will, upon the terms and
subject to the conditions of the Offer, determine a single per Share price (not
greater than $17.00 nor less than $15.00 per Share), net to the Seller in cash
(the "Purchase Price"), that it will pay for Shares validly tendered and not
withdrawn pursuant to the Offer, taking into account the number of Shares so
tendered and the prices specified by tendering shareholders. The undersigned
understands that the Company will select the lowest Purchase Price that will
allow it to purchase 1,000,000 Shares (or such lesser number of Shares as are
validly tendered at prices not greater than $17.00 nor less than $15.00 per
Share) validly tendered and not withdrawn pursuant to the Offer. The undersigned
understands that all Shares validly tendered at prices at or below the Purchase
Price and not withdrawn will be purchased at the Purchase Price, net to the
seller in cash, upon the terms and subject to the conditions of the Offer,
including its proration provisions, so that each shareholder receives the
highest price paid to any other shareholder pursuant to the Offer. The Company
will return all other Shares, including Shares tendered at prices greater than
the Purchase Price and not withdrawn and Shares not purchased because of
proration.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may
postpone the acceptance for payment of, or the payment for, Shares tendered or
may not be required to purchase any of the Shares tendered hereby or may accept
for payment fewer than all of the Shares tendered hereby. In any such event, the
undersigned understands the certificate(s) for any Shares delivered herewith but
not tendered or not purchased will be returned to
<PAGE> 4
the undersigned at the address indicated above, unless otherwise indicated under
"Special Payment Instructions" or "Special Delivery Instructions" below.
The undersigned recognizes that the Company has no obligation, pursuant to
the "Special Payment Instructions," to transfer any Shares from the name of its
registered holder(s), or to order the registration or transfer of Shares
tendered by book-entry transfer, if the Company does not accept for payment any
of the Shares so tendered.
The undersigned understands that acceptance of Shares by the Company for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
The check for the aggregate Purchase Price for such of the Shares tendered
hereby as are purchased will be issued to the order of the undersigned and
mailed to the address indicated above, unless otherwise indicated under the
Special Payment Instructions or the Special Delivery Instructions below.
<PAGE> 5
NOTE: SIGNATURES MUST BE PROVIDED BELOW:
- -------------------------------------------------------------------------------
PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED. IF SHARES
ARE BEING TENDERED AT MORE THAN ONE PRICE, A SEPARATE LETTER OF TRANSMITTAL
FOR EACH PRICE SPECIFIED MUST BE USED. (SEE INSTRUCTION 5)
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED
(EXCEPT AS PROVIDED IN THE INSTRUCTIONS BELOW) THERE IS NO VALID TENDER OF
SHARES.
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
[ ] $15.0000 [ ] $15.3750 [ ] $15.7500 [ ] $16.1250 [ ] $16.5000 [ ] $16.8750
[ ] $15.0625 [ ] $15.4375 [ ] $15.8125 [ ] $16.1875 [ ] $16.5625 [ ] $16.9375
[ ] $15.1250 [ ] $15.5000 [ ] $15.8750 [ ] $16.2500 [ ] $16.6250 [ ] $17.0000
[ ] $15.1875 [ ] $15.5625 [ ] $15.9375 [ ] $16.3125 [ ] $16.6875
[ ] $15.2500 [ ] $15.6250 [ ] $16.0000 [ ] $16.3750 [ ] $16.7500
[ ] $15.3125 [ ] $15.6875 [ ] $16.0625 [ ] $16.4375 [ ] $16.8125
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if the check for the aggregate Purchase Price of Shares
purchased and/or certificates for Shares not tendered or not purchased are to
be issued in the name of someone and sent to someone other than the
undersigned.
Issue: [ ] Check to: [ ] Certificate(s) to:
Name:
----------------------------------------------------------------
(Please Print)
Address:
-------------------------------------------------------------
----------------------------------------------------------------------
(Include Zip Code)
----------------------------------------------------------------------
(Taxpayer Identification or Social Security No.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6 AND 8)
To be completed ONLY if the check for the aggregate Purchase Price of Shares
purchased and/or certificates for Shares not tendered or not purchased, issued
in the name of the undersigned, are to be mailed to someone other than the
undersigned or to the undersigned at an address other than that shown below
the undersigned's signature(s).
Issue: [ ] Check to: [ ] Certificate(s) to:
Name:
----------------------------------------------------------------
(Please Print)
Address:
-------------------------------------------------------------
----------------------------------------------------------------------
(Include Zip Code)
- -------------------------------------------------------------------------------
<PAGE> 6
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL SHAREHOLDERS)
(PLEASE COMPLETE AND RETURN THE ENCLOSED SUBSTITUTE FORM W-9)
(Must be signed by the registered holder(s) exactly as the name(s) appear(s)
on Share certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in
a fiduciary or representative capacity, please set forth full title and see
Instruction 6.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Signature(s) of Owner(s)
Dated: ____________________________________ , 1997
Name(s):
---------------------------------------------------------------------
(Please Print)
Capacity (full title:)
-------------------------------------------------------
Address:
---------------------------------------------------------------------
(Include Zip Code)
Area Code(s) and Telephone Number(s):
----------------------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 6)
Name of Firm:
----------------------------------------------------------------
Authorized Signature:
--------------------------------------------------------
Name:
------------------------------------------------------------------------
(Please Print)
Title:
-----------------------------------------------------------------------
Address:
---------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
----------------------------------------------
Dated: ____________________________________ , 1997
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm that is a
participant in an Approved Signature Guarantee Medallion Program pursuant to
Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended
(an "Eligible Institution"), unless (i) this Letter of Transmittal is signed by
the registered holder(s) of the Shares (which term, for purposes of this
document, shall include any participant in a Book-Entry Transfer Facility whose
name appears on a security position listing as the owner of Shares) tendered
herewith and such holder(s) have not completed the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on this Letter
of Transmittal, or (ii) such Shares are tendered for the account of an Eligible
Institution. See Instruction 6.
2. Delivery of Letter of Transmittal and Share Certificates; Guaranteed
Delivery Procedures. This Letter of Transmittal is to be used either if Share
certificates are forwarded herewith (or such certificates will be delivered
pursuant to a Notice of Guaranteed Delivery previously sent to the Depositary)
or if a tender for Shares is to be made by book-entry transfer pursuant to the
procedures set forth in Section 2 of the Offer to Purchase. Certificates for all
physically delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at one of the Book-Entry Transfer Facilities of all Shares
delivered electronically, together in each case with a properly completed and
duly executed Letter of Transmittal (or manually signed facsimile thereof) and
any other documents required by this Letter of Transmittal, must be received by
the Depositary prior to the Expiration Date (as defined in the Offer to
Purchase). If certificates are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal must
accompany each such delivery. DELIVERY OF DOCUMENTS TO ONE OF THE BOOK-ENTRY
TRANSFER FACILITIES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Shareholders whose Share certificates are not immediately available or who
cannot deliver their Share certificates and all other required documents to the
Depositary or who cannot complete the procedure for delivery by book-entry
transfer prior to the Expiration Date must, in any such case, tender their
Shares pursuant to the guaranteed delivery procedure set forth in Section 2 of
the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made
by or through an Eligible Institution, (ii) a properly completed and duly
executed Notice of Guaranteed Delivery substantially in the form provided by the
Company (with any required signature guarantees) must be received by the
Depositary prior to the Expiration Date, and (iii) the certificates for all
physically delivered Shares in proper form for transfer by delivery, or a
confirmation of a book-entry transfer into the Depositary's account at one of
the Book-Entry Transfer Facilities of all Shares delivered electronically, in
each case together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and any other documents required by this
Letter of Transmittal, must be received by the Depositary within three American
Stock Exchange trading days after the date the Depositary receives such Notice
of Guaranteed Delivery, all as provided in Section 2 of the Offer to Purchase.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND
RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
The Company will not accept any alternative, contingent or conditional
tenders nor will it purchase any fractional Shares, except as expressly provided
in the Offer to Purchase. By executing this Letter of Transmittal (or facsimile
thereof), the tendering shareholder waives any right to receive any notice of
the acceptance of their tender.
3. Inadequate Space. If the space provided in the box captioned
"Description of Shares Tendered" is inadequate, the certificate numbers and/or
the number of Shares should be listed on a separate signed schedule and attached
to this Letter of Transmittal.
4. Partial Tenders and Unpurchased Shares (not applicable to shareholders
who tender by book-entry transfer). If fewer than all the Shares represented by
any certificate delivered to the Depositary are to be tendered, fill in the
number of Shares that are to be tendered in the column entitled "Number of
Shares Tendered" in the box captioned "Description of Shares Tendered." In such
case, if any tendered Shares are purchased, a new certificate for the remainder
of the Shares (including any Shares not purchased) represented by the old
certificate will be issued and sent to the person(s) signing this Letter of
Transmittal, unless otherwise specified in the "Special Payment Instructions" or
"Special Delivery Instructions" boxes on this Letter of Transmittal, as soon as
practicable following the expiration or termination of the Offer. All Shares
represented by certificates delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated.
5. Indication of Price at which Shares are being Tendered. For Shares to be
validly tendered, the shareholder must check the box indicating the price per
Share at which such shareholder is tendering Shares under "Price (In Dollars)
Per Share At Which Shares Are Being Tendered" in this Letter of Transmittal.
ONLY ONE BOX MAY BE CHECKED. IF MORE THAN ONE BOX IS
<PAGE> 8
CHECKED OR IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES. A
shareholder wishing to tender portions of such shareholder's Share holdings at
different prices must complete a separate Letter of Transmittal for each price
at which such shareholder wishes to tender each such portion of such
shareholder's Shares. The same Shares cannot be tendered (unless previously
validly withdrawn as provided in Section 3 of the Offer to Purchase) at more
than one price.
6. Signatures on Letter of Transmittal; Stock Powers and Endorsements.
(a) If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered hereby, the signature(s) must correspond exactly with the
name(s) as written on the face of the certificate(s) without alteration,
enlargement or any change whatsoever.
(b) If any of the Shares tendered hereby is held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
(c) If any of the Shares tendered hereby are registered in different names
on different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles thereof) as there are
different registrations of certificates.
(d) If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the Purchase Price is to be made to, or
Shares not tendered or not purchased are to be registered in the name of, any
person other than the registered holder(s), in which case the certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such certificates. Signatures in any such
certificates or stock powers must be guaranteed by an Eligible Institution. See
Instruction 1.
(e) If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, certificates evidencing the
Shares tendered hereby must be endorsed or accompanied by appropriate stock
powers, in either case, signed exactly as the name(s) of the registered
holder(s) appear(s) on such certificate(s). Signature(s) on any such
certificates or stock powers must be guaranteed by an Eligible Institution. See
Instruction 1.
(f) If this Letter of Transmittal or any certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Company of the authority of such person so to act must be
submitted.
7. Stock Transfer Taxes. The Company will pay or cause to be paid any stock
transfer taxes with respect to the sale and transfer of any Shares to it or its
order pursuant to the Offer. If, however, payment of the aggregate Purchase
Price for Shares tendered hereby and accepted for purchase is to be made to, or
Shares not tendered or not purchased are to be registered in the name of, any
person other than the registered holder(s), or if tendered Shares are registered
in the name of any person other than the person(s) signing this Letter of
Transmittal, the amount of any stock transfer taxes (whether imposed on the
registered holder(s), such other person or otherwise) payable on account of the
transfer to such person will be deducted by the Depositary from the Purchase
Price unless satisfactory evidence of the payment of such taxes, or exemption
therefrom, is submitted. Except as provided in this Instruction 7, it will not
be necessary to affix transfer tax stamps to the certificates representing
Shares tendered hereby.
8. Special Payment and Delivery Instructions. If a check for the Purchase
Price of any Shares tendered hereby is to be issued in the name of, and/or any
Shares not tendered or not purchased are to be returned to, a person other than
the person(s) signing this Letter of Transmittal, or if the check and/or any
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to an
address other than that shown above in the box captioned "Description of Shares
Tendered," then the boxes captioned "Special Payment Instructions" and/or
"Special Delivery Instructions" on this Letter of Transmittal should be
completed as applicable. Shareholders tendering Shares by book-entry transfer
will have any Shares not accepted for payment returned by crediting the account
maintained by such shareholder at the Book-Entry Transfer Facility from which
such transfer was made.
9. Substitute Form W-9 and Form W-8. To prevent United States federal
income tax backup withholding of 31% of the gross proceeds payable to a
shareholder or other payee pursuant to the Offer, the shareholder or other payee
must provide such person's taxpayer identification number (employer
identification number or social security number) to the Depositary and certify
that such number is correct. Therefore, each tendering shareholder should
complete and sign the Substitute Form W-9 included as part of the Letter of
Transmittal so as to provide the information and certification necessary to
avoid backup withholding, unless such shareholder otherwise establishes to the
satisfaction of the Depositary that it is not subject to backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign shareholders (in addition to foreign corporations)) are not subject to
these backup withholding and reporting requirements. In order for a foreign
<PAGE> 9
shareholder to qualify as an exempt recipient, that shareholder must submit an
IRS Form W-8 or a Substitute Form W-8, signed under penalties of perjury,
attesting to that shareholder's exempt status. Such statements may be obtained
from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for more instructions.
10. Withholding on Foreign Shareholders. Even if a foreign shareholder has
provided the required certification to avoid backup withholding, the Depositary
will withhold United States federal income taxes equal to 30% of the gross
payments payable to a foreign shareholder or such shareholder's agent unless the
Depositary determines that a reduced rate of withholding is available pursuant
to a tax treaty or that an exemption from withholding is applicable because such
gross proceeds are effectively connected with the conduct of a trade or business
in the United States. For this purpose, a foreign shareholder is any shareholder
that is not (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States, any State or any political subdivision thereof, or (iii) an
estate or trust, the income of which is subject to United States federal income
taxation regardless of the source of such income. In order to obtain a reduced
rate of withholding pursuant to a tax treaty, a foreign shareholder must deliver
to the Depositary a properly completed IRS Form 1001. In order to obtain an
exemption from withholding on the grounds that the gross proceeds paid pursuant
to the Offer are effectively connected with the conduct of a trade or business
within the United States, a foreign shareholder must deliver to the Depositary a
properly completed IRS Form 4224. The Depositary will determine a stockholder's
status as a foreign shareholder and eligibility for a reduced rate of, or an
exemption from, withholding by reference to outstanding certificates or
statements concerning eligibility for a reduced rate of, or exemption from,
withholding (e.g., IRS Form 1001 or IRS Form 4224) unless facts and
circumstances indicate that such reliance is not warranted. A foreign
shareholder may be eligible to obtain a refund of all or a portion of any tax
withheld if such shareholder meets the "complete redemption," "substantially
disproportionate" or "not essentially equivalent to a dividend" test described
in Section 13 of the Offer to Purchase or is otherwise able to establish that no
tax or a reduced amount of tax is due. Backup withholding generally will not
apply to amounts subject to the 30% or treaty-reduced rate of withholding.
Foreign shareholders are urged to consult their tax advisors regarding the
application of United States federal income tax withholding, including
eligibility for a withholding tax reduction or exemption and refund procedures.
11. Requests for Assistance or Additional Copies. Any questions or requests
for assistance may be directed to the Information Agent or the Dealer Manager at
their respective telephone numbers and addresses listed below. Requests for
additional copies of the Offer to Purchase, this Letter of Transmittal or other
tender offer materials may be directed to the Information Agent, and such copies
will be furnished promptly at the Company's expense. Shareholders may also
contact their local broker, dealer, commercial bank or trust company for
documents relating to, or assistance concerning, the Offer.
12. Irregularities. All questions as to the number of Shares to be
accepted, the price to be paid therefor and the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Company, in its sole discretion, which determination
shall be final and binding on all parties. The Company reserves the absolute
right to reject any or all tenders it determines not to be in proper form or the
acceptance of or payment for which may, in the opinion of the Company's counsel,
be unlawful. The Company also reserves the absolute right to waive any of the
conditions of the Offer and any defect or irregularity in the tender of any
particular Shares or any particular shareholder, and the Company's
interpretation of the terms of the Offer (including these instructions) will be
final and binding on all parties. No tender of Shares will be deemed to be
validly made until all defects or irregularities have been cured or waived. None
of the Company, the Dealer Manager, the Depositary, the Information Agent or any
other person is or will be obligated to give notice of any defects or
irregularities in tenders, and none of them will incur any liability for failure
to give any such notice.
13. Order of Purchase in Event of Proration. As described in Section 1 of
the Offer to Purchase, shareholders may designate the order in which their
Shares are to be purchased in the event of proration. The order of purchase may
have an effect on the United States federal income tax treatment of the Purchase
Price for the Shares purchased. See Sections 1 and 13 of the Offer to Purchase.
<PAGE> 10
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
SUBSTITUTE Part 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT Social Security Number OR
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. Employer Identification
Number
--------------------------
-----------------------------------------------------------------------------
DEPARTMENT OF THE Part 2 -- For Payees exempt from backup withholding (see the enclosed
TREASURY, INTERNAL Guidelines for Certification of Taxpayer Identification Number on Substitute
REVENUE SERVICE Form W-9 and complete as instructed therein).
-----------------------------------------------------------------------------
Part 3 -- Awaiting TIN [ ]
-----------------------------------------------------------------------------
CERTIFICATION -- Under penalties of perjury, I certify that:
PAYER'S REQUEST (i) the number shown on this form is my correct Taxpayer Identification
FOR Number (or I am waiting for a number to be issued to me), and
TAXPAYER
IDENTIFICATION (ii) I am not subject to backup withholding because: (a) I am exempt from
NO. backup withholding; or (b) I have not been notified by the Internal Revenue
Service (IRS) that I am subject to backup withholding as a result of a
failure to report all interest or dividends; or (c) the IRS has
notified me that I am no longer subject to backup withholding.
Certification instructions -- You must cross out Item (ii) above if you
have been notified by the IRS that you are currently subject to backup
withholding because you have failed to report all interest and
dividends on your tax return.
SIGNATURE ________________________________________________ DATE_________
NAME (Please Print)_____________________________________________________
ADDRESS (Include Zip Code)______________________________________________
- ---------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THIS OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me will be withheld;
but that such amounts will be refunded to me if I then provide a Taxpayer
Identification Number within sixty (60) days.
<TABLE>
<S> <C>
- ----------------------------------------------------------- -----------------------------------------------------------
Signature Date
</TABLE>
<PAGE> 11
THE INFORMATION AGENT FOR THE OFFER IS:
MCCORMICK & PRYOR LTD.
26 Broadway
Suite 1640
New York, New York 10004
Banks and Brokers Call Collect: (212) 968-9090
All Others Call Toll-Free: (800) 476-2508 PIN #3774
THE DEALER MANAGER FOR THE OFFER IS:
FURMAN SELZ LLC
230 Park Avenue
New York, New York 10169
(212) 309-8200
(800) 939-9991
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF) TOGETHER WITH
SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, PRIOR TO THE EXPIRATION DATE.
SHAREHOLDERS ARE ENCOURAGED TO RETURN A COMPLETED SUBSTITUTE FORM W-9 WITH THEIR
LETTERS OF TRANSMITTAL.
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY OF SHARES OF COMMON STOCK
OF
FRISCH'S RESTAURANTS, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED JULY 14, 1997
This form or a facsimile hereof must be used to accept the Offer (as
defined below) if certificates for the Shares of Common Stock of Frisch's
Restaurants, Inc., no par value, are not immediately available, if the procedure
for book-entry transfer cannot be completed on a timely basis, or if time will
not permit all other documents required by the Letter of Transmittal to be
delivered to the Depositary (as defined below) prior to the Expiration Date (as
defined in Section 1 of the Offer to Purchase). This form, properly completed
and duly executed, may be delivered by hand, or transmitted by mail, overnight
courier or by facsimile transmission to the Depositary. See Section 2 of the
Offer to Purchase. THE ELIGIBLE INSTITUTION COMPLETING THIS FORM MUST
COMMUNICATE THE GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE LETTER OF
TRANSMITTAL AND CERTIFICATES FOR SHARES TO THE DEPOSITARY WITHIN THE TIME SHOWN
HEREIN. FAILURE TO DO SO COULD RESULT IN A FINANCIAL LOSS TO SUCH ELIGIBLE
INSTITUTION.
TO: CONTINENTAL STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C>
By Hand, Mail or by Overnight Courier: By Facsimile Transmission:
2 Broadway, 19th Floor (For Eligible Institutions Only)
New York, New York 10004 (212) 509-5150
</TABLE>
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
(212) 509-4000, Ext. 535
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Frisch's Restaurants, Inc., an Ohio
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Offer to Purchase dated July 14, 1997 (the "Offer to Purchase"),
and the related Letter of Transmittal (which together constitute the "Offer"),
receipt of which is hereby acknowledged, the number of shares of common stock,
no par value (the "Shares"), of the Company listed below, pursuant to the
guaranteed delivery procedure set forth in Section 2 of the Offer to Purchase.
Number of Shares:
---------------------------------------------------------------
Certificate Nos.: (if available)
------------------------------------------
If Shares will be tendered by book-entry transfer:
Name of Tendering Institution:
-------------------------------------------
Account No.
------------------------------------- at (check one)
[ ] The Depositary Trust Company
[ ] Philadelphia Depository Trust Company
PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED. IF SHARES ARE
BEING TENDERED AT MORE THAN ONE PRICE, A SEPARATE NOTICE OF GUARANTEED DELIVERY
FOR EACH PRICE SPECIFIED MUST BE USED. CHECK ONLY ONE BOX. IF MORE THAN ONE BOX
IS CHECKED, OR IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
[ ] $15.0000 [ ] $15.3750 [ ] $15.7500 [ ] $16.1250 [ ] $16.5000 [ ] $16.8750
[ ] $15.0625 [ ] $15.4375 [ ] $15.8125 [ ] $16.1875 [ ] $16.5625 [ ] $16.9375
[ ] $15.1250 [ ] $15.5000 [ ] $15.8750 [ ] $16.2500 [ ] $16.6250 [ ] $17.0000
[ ] $15.1875 [ ] $15.5625 [ ] $15.9375 [ ] $16.3125 [ ] $16.6875
[ ] $15.2500 [ ] $15.6250 [ ] $16.0000 [ ] $16.3750 [ ] $16.7500
[ ] $15.3125 [ ] $15.6875 [ ] $16.0625 [ ] $16.4375 [ ] $16.8125
</TABLE>
SIGN HERE
- --------------------------------------------------------------------------------
Name(s) (Please Print)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
Area Code and Telephone Number
- --------------------------------------------------------------------------------
Signature(s)
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity that is a member in good standing
of a registered national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or trust company (not a savings
bank or savings and loan association) having an office, branch or agency in the
United States and a participant in an approved Signature Guarantee Medallion
Program pursuant to Rule 17Ad-15 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), hereby guarantees (i) that the
above-named person(s) "owns" (has a net long position) in the Shares being
tendered hereby within the meaning of Rule 14e-4 promulgated under the Exchange
Act (ii) that such tender of Shares complies with Rule 14e-4, and (ii) to
deliver to the Depositary at its address set forth above certificate(s) for the
Shares tendered hereby, in proper form for transfer, or a confirmation of the
book-entry transfer of the Shares tendered hereby into the Depositary's account
at The Depository Trust Company or Philadelphia Depository Trust Company, in
each case together with a properly completed and duly executed Letter(s) of
Transmittal (or facsimile(s) thereof), with any required signature guarantee(s)
and any other required documents, all within three American Stock Exchange
trading days after the date the Depositary receives this Notice of Guaranteed
Delivery.
- --------------------------------------------------------------------------------
Name of Firm
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City, State, Zip Code
- --------------------------------------------------------------------------------
Authorized Signature
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Title
- --------------------------------------------------------------------------------
Area Code and Telephone Number
Dated:
--------------------------------------- , 1997
DO NOT SEND SHARE CERTIFICATES WITH THIS FORM.
YOUR SHARE CERTIFICATES MUST BE SENT WITH
THE LETTER OF TRANSMITTAL.
3
<PAGE> 1
FRISCH'S RESTAURANTS, INC.
OFFER TO PURCHASE FOR CASH
UP TO 1,000,000 SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE NOT GREATER
THAN $17.00 NOR LESS THAN $15.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
EASTERN DAYLIGHT SAVINGS TIME, ON FRIDAY, AUGUST 8, 1997,
UNLESS THE OFFER IS EXTENDED.
July 14, 1997
TO: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We are enclosing the material listed below relating to the offer of
Frisch's Restaurants, Inc., an Ohio corporation (the "Company"), to purchase for
cash up to 1,000,000 shares of its common stock, no par value (the "Shares"), at
prices not greater than $17.00 nor less than $15.00 per Share, as specified by
tendering shareholders, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated July 14, 1997 (the "Offer to Purchase"), and in
the related Letter of Transmittal (which together constitute the "Offer").
The Company will determine a single per Share price (not greater than
$17.00 nor less than $15.00 per Share), net to the seller in cash, that it will
pay for Shares validly tendered and not withdrawn pursuant to the Offer (the
"Purchase Price"), taking into account the number of Shares so tendered and the
prices specified by tendering shareholders, so that each shareholder receives
the highest price paid to any other shareholder pursuant to the Offer. The
Company will select the lowest Purchase Price that will allow it to purchase
1,000,000 Shares (or such lesser number of Shares as are validly tendered at
prices not greater than $17.00 nor less than $15.00 per Share) validly tendered
and not withdrawn pursuant to the Offer. All Shares acquired in the Offer will
be acquired at the Purchase Price. The Company will purchase for cash, net to
the seller, all Shares validly tendered at prices at or below the Purchase Price
and not withdrawn, upon the terms and subject to the conditions of the Offer,
including the proration terms described in the Offer to Purchase. Shares
tendered at prices in excess of the Purchase Price and Shares not purchased
because of proration will be returned. The Company reserves the right, in its
sole discretion, to purchase more than 1,000,000 Shares pursuant to the Offer.
See Sections 1 and 14 of the Offer to Purchase.
As described in the Offer to Purchase, if more than 1,000,000 Shares (or
such greater number of Shares as the Company may elect to purchase) have been
validly tendered at or below the Purchase Price and not withdrawn prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase), the Company
will purchase such Shares validly tendered at or below the Purchase Price and
not withdrawn prior to the Expiration Date on a pro rata basis with adjustments
to avoid purchases of fractional shares.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 5 OF THE OFFER TO PURCHASE.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. The Offer to Purchase.
2. The Letter of Transmittal for your use and for the information of
your clients.
3. A letter to shareholders of the Company from Jack C. Maier,
Chairman of the Board of Directors, and Craig F. Maier, President and Chief
Executive Officer of the Company.
<PAGE> 2
4. The Notice of Guaranteed Delivery to be used to accept the Offer if
the Share certificate(s) and all other required documents cannot be
delivered to the Depositary by the Expiration Date or if the procedure for
book-entry transfer cannot be completed on a timely basis (each as defined
in the Offer to Purchase).
5. A letter that may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with
space for obtaining such clients' instructions with regard to the Offer.
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 providing information relating to backup federal income
tax withholding.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
EASTERN DAYLIGHT SAVINGS TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS THE OFFER IS
EXTENDED.
The Company will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of Shares pursuant to the Offer other than
fees paid to the Dealer Manager, the Information Agent or the Depositary as
described in the Offer to Purchase. The Company will however, upon request,
reimburse you for reasonable and customary handling and mailing expenses
incurred by you in forwarding the enclosed materials relating to the Offer to
the beneficial owners of Shares held by you as a nominee or in a fiduciary
capacity. The Company will pay or cause to be paid any stock transfer taxes
applicable to its purchase of Shares pursuant to the Offer, except as otherwise
provided in Instruction 7 of the Letter of Transmittal and the Offer to
Purchase.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal and other required documents should be sent to
the Depositary with either certificate(s) representing the tendered Shares or
confirmation of their book-entry transfer, all in accordance with the
instructions set forth in the Letter of Transmittal and the Offer to Purchase.
Shareholders whose certificate(s) for Shares cannot be delivered to the
Depositary or who cannot comply with the procedure for book-entry transfer on a
timely basis or whose other required documentation cannot be delivered to the
Depositary by the Expiration Date must tender Shares by following the procedures
for guaranteed delivery set forth in Section 2 of the Offer to Purchase.
Any questions or requests for assistance or additional copies of the
enclosed materials may be directed to the Dealer Manager or the Information
Agent at their respective addresses and telephone numbers set forth on the back
cover of the enclosed Offer to Purchase.
Very truly yours,
FRISCH'S RESTAURANTS, INC.
Enclosures
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF THE COMPANY OR ANY OF ITS AFFILIATES, THE DEALER
MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN
CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE
STATEMENTS CONTAINED THEREIN.
<PAGE> 1
FRISCH'S RESTAURANTS, INC.
OFFER TO PURCHASE FOR CASH
UP TO 1,000,000 SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE NOT GREATER
THAN $17.00 NOR LESS THAN $15.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
EASTERN DAYLIGHT SAVINGS TIME, ON FRIDAY, AUGUST 8, 1997,
UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated July 14,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") in connection with the Offer by Frisch's
Restaurants, Inc., an Ohio corporation (the "Company"), to purchase up to
1,000,000 shares of its common stock, no par value (the "Shares"), at prices not
greater than $17.00 nor less than $15.00 per Share, specified by tendering
shareholders, upon the terms and subject to the conditions of the Offer. Also
enclosed herewith is certain other material related to the Offer, including a
letter to shareholders from Jack C. Maier, Chairman of the Board of Directors
and Craig F. Maier, President and Chief Executive Officer of the Company.
The Company will determine a single per Share price (not greater than
$17.00 nor less than $15.00 per share) (the "Purchase Price") that it will pay
for Shares validly tendered pursuant to the Offer and not withdrawn, taking into
account the number of Shares so tendered and the prices specified by tendering
shareholders. The Company will select the lowest Purchase Price that will allow
it to purchase 1,000,000 Shares (or such lesser number of Shares as are validly
tendered at prices not greater than $17.00 nor less than $15.00 per Share)
validly tendered and not withdrawn pursuant to the Offer. All Shares acquired in
the Offer will be acquired at the Purchase Price. The Company will purchase all
Shares validly tendered at prices at or below the Purchase Price and not
withdrawn, upon the terms and subject to the conditions of the Offer, including
the provisions thereof relating to proration. Shares tendered at prices in
excess of the Purchase Price and Shares not purchased because of proration will
be returned. The Company reserves the right, in its sole discretion, to purchase
more than 1,000,000 Shares pursuant to the Offer. See Section 1 of the Offer to
Purchase.
WE ARE THE HOLDER OF RECORD OF SHARES HELD FOR YOUR ACCOUNT. AS SUCH, A
TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND THEN
ONLY PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO
YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY
US FOR YOUR ACCOUNT.
Please instruct us as to whether you wish us to tender any or all of the
Shares we hold for your account, upon the terms and subject to the conditions
set forth in the Offer to Purchase and the Letter of Transmittal.
Your attention is invited to the following:
1. You may tender Shares at a price (in multiples of $.0625), which
cannot be greater than $17.00 nor less than $15.00 per Share, as indicated
in the attached Instruction Form, net to you in cash.
2. The Offer is for up to 1,000,000 Shares, constituting approximately
13.99% of the total Shares outstanding as of July 11, 1997. The Offer is
not conditioned on any minimum number of Shares being tendered. The Offer
is, however, subject to certain other conditions set forth in the Offer to
Purchase.
<PAGE> 2
3. The Offer, proration period and withdrawal rights will expire at
12:00 Midnight, Eastern Daylight Savings time, on Friday, August 8, 1997
(the "Expiration Date"), unless the Offer is extended. Your instructions
should be forwarded to us in ample time to permit us to submit a tender on
your behalf.
4. As described in the Offer to Purchase, if more than 1,000,000
Shares have been validly tendered at or below the Purchase Price and not
withdrawn prior to the Expiration Date, the Company will purchase Shares
validly tendered at or below the Purchase Price and not withdrawn prior to
the Expiration Date on a pro rata basis. You may designate the priority in
which your Shares shall be purchased in the event of proration. See Section
1 of the Offer to Purchase for a discussion of proration.
5. Tendering shareholders will not be obligated to pay any brokerage
commissions or solicitation fees on the Company's purchase of Shares in the
Offer. Any stock transfer taxes applicable to the purchase of Shares by the
Company pursuant to the Offer will be paid by the Company, except as
otherwise provided in Instruction 7 of the Letter of Transmittal.
6. If you wish to tender portions of your Shares at different prices,
you must complete a separate Instruction Form for each price at which you
wish to tender each portion of your Shares. We must submit separate Letters
of Transmittal on your behalf for each price you will accept.
If you wish to have us tender any or all of your Shares held by us for your
account, please so instruct us by completing, executing and returning to us the
attached Instruction Form. An envelope to return your Instruction Form to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise specified on the Instruction Form.
YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO
SUBMIT A TENDER ON YOUR BEHALF BY THE EXPIRATION DATE OF THE OFFER.
The Offer is being made to all holders of Shares. The Company is not aware
of any jurisdiction where the making of the Offer is not in compliance with
applicable law. If the Company becomes aware of any jurisdiction where the
making of the Offer is not in compliance with any valid applicable law, the
Company will make a good faith effort to comply with such law. If, after such
good faith effort, the Company cannot comply with such law, the Offer will not
be made to, nor will tenders be accepted from or on behalf of, the holders of
Shares residing in such jurisdiction.
2
<PAGE> 3
INSTRUCTION FORM
INSTRUCTIONS FOR TENDER OF SHARES OF COMMON STOCK OF
FRISCH'S RESTAURANTS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated July 14, 1997, and the related Letter of Transmittal
(which together constitute the "Offer") in connection with the Offer by Frisch's
Restaurants, Inc. (the "Company") to purchase up to 1,000,000 shares of its
common stock, no par value (the "Shares"), at prices not greater than $17.00 nor
less than $15.00 per Share, net to the undersigned in cash, as specified by the
undersigned, upon the terms and subject to the terms and conditions of the
Offer.
This will instruct you to tender to the Company the number of Shares
indicated below (or, if no number is indicated below, all Shares) which are
beneficially owned by the undersigned and registered in your name for the
account of the undersigned, at the price per Share indicated below, upon the
terms and subject to the conditions of the Offer.
SHARES TENDERED*
Number of Shares to be tendered:___________________________ Shares.
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED. IF SHARES ARE
BEING TENDERED AT MORE THAN ONE PRICE, A SEPARATE INSTRUCTION FORM FOR EACH
PRICE SPECIFIED MUST BE USED. CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS
CHECKED, OR IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
[ ] $15.0000 [ ] $15.3750 [ ] $15.7500 [ ] $16.1250 [ ] $16.5000 [ ] $16.8750
[ ] $15.0625 [ ] $15.4375 [ ] $15.8125 [ ] $16.1875 [ ] $16.5625 [ ] $16.9375
[ ] $15.1250 [ ] $15.5000 [ ] $15.8750 [ ] $16.2500 [ ] $16.6250 [ ] $17.0000
[ ] $15.1875 [ ] $15.5625 [ ] $15.9375 [ ] $16.3125 [ ] $16.6875
[ ] $15.2500 [ ] $15.6250 [ ] $16.0000 [ ] $16.3750 [ ] $16.7500
[ ] $15.3125 [ ] $15.6875 [ ] $16.0625 [ ] $16.4375 [ ] $16.8125
</TABLE>
THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE
TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL, WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MAKING OF THE OFFER.
HOWEVER, SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES
AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES
SHOULD BE TENDERED. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING SHARES.
3
<PAGE> 4
- --------------------------------------------------------------------------------
Signature(s)
- --------------------------------------------------------------------------------
Name (Please Print)
- --------------------------------------------------------------------------------
Address (Including Zip Code)
- --------------------------------------------------------------------------------
Area Code and Telephone Number
- ------------------------------------ -----------------------------------------
Social Security or Taxpayer ID No. Date
4
<PAGE> 1
[FRISCH'S LETTERHEAD]
July 14, 1997
Dear Shareholders:
We are pleased to inform you that the Board of Directors of Frisch's
Restaurants, Inc. (the "Company") has approved an offer to purchase up to
1,000,000 shares of its common stock, no par value (the "Shares"), at a price
not greater than $17.00 nor less than $15.00 per Share. The Company is
conducting the tender offer through a procedure commonly referred to as a
modified "Dutch Auction." This procedure allows you to select the price or
prices within the specified price range at which you are willing to sell all or
a portion of your Shares to the Company. The Company will determine the lowest
single per Share purchase price (the "Purchase Price") within that range that
will enable it to buy 1,000,000 Shares, or such lesser number of Shares as have
been properly tendered. All Shares purchased in the Offer will be acquired at
the Purchase Price so that each shareholder receives the highest price paid to
any other shareholder. If the offer is oversubscribed, Shares validly tendered
at or below the purchase price will be purchased on a pro-rata basis. Any Shares
tendered by you which the Company does not purchase will be returned.
The Company's Board of Directors desires to enhance shareholder value and
provide a liquidity opportunity to shareholders. The Board of Directors believes
that Share repurchases funded by borrowings under the Company's credit facility
will advance such objectives and be in the best interests of the Company and its
shareholders. Any shareholder whose Shares are purchased in the offer will
receive the total purchase price in cash and will not incur the usual
transaction costs associated with open market sales. This opportunity to sell
Shares without paying any brokerage fee may be particularly valuable to smaller
shareholders, for whom such fees may be relatively high. In addition, the Offer
may give shareholders the opportunity to sell Shares at greater than market
prices prevailing prior to commencement of the Offer. The Offer also allows
Shareholders to sell a portion of their Shares while retaining a continuing
equity interest in the Company. To the extent the purchase of Shares in the
Offer results in a reduction in the number of shareholders of record, the costs
to the Company for services to shareholders will be reduced.
The offer is explained in detail in the Offer to Purchase and Letter of
Transmittal. We encourage you to read these materials carefully before making
any decision with respect to the offer. If you wish to tender your Shares,
instructions on how to tender Shares are provided in the accompanying materials.
Neither the Company nor its Board of Directors makes any recommendation to
any shareholder as to whether to tender or refrain from tendering Shares. Each
shareholder must make their own decision whether to tender Shares and, if so,
how many Shares and at what price or prices should be tendered. Except for
directors Barry S. Nussbaum and Jerry L. Ruyan, whose intentions are unknown,
the Company has been advised that none of its directors or executive officers
intends to tender any Shares pursuant to the offer.
Questions regarding the offer should be directed to the Furman Selz LLC,
the Dealer Manager, at (800) 939-9991 or McCormick & Pryor Ltd., the Information
Agent, at (800) 476-2508 PIN #3774.
Sincerely,
JACK C. MAIER,
Chairman of the Board of Directors
CRAIG F. MAIER,
President and Chief Executive Officer
<PAGE> 1
Exhibit 99(a)(7)
FRISCH'S RESTAURANTS, INC.
ANNOUNCES SELF TENDER OFFER
PRESS RELEASE
Cincinnati, OH. July 14, 1997 -- Frisch's Restaurants, Inc. announced today that
its Board of Directors has authorized a modified "Dutch Auction" self-tender
offer to purchase for cash up to 1,000,000 shares of its outstanding Common
Stock. The offer will commence on Monday, July 14, 1997, and will expire, unless
extended, at 12:00 Midnight, on Friday, August 8, 1997. Terms of the tender
offer, which are described more fully in the Offer to Purchase and Letter of
Transmittal pursuant to which the offer is being made, include a purchase price
not greater than $17.00 nor less than $15.00 per share, net to the
seller in cash.
In a modified Dutch Auction, the Company sets a price range and shareholders are
given an opportunity to specify prices within that range at which they are
willing to sell shares. After the expiration of the tender offer, the Company
will determine a single per share price that will enable it to purchase the
stated amount of shares, or such lesser number of shares as have been properly
tendered. If the tender offer is oversubscribed, shares validly tendered at or
below the purchase price will be purchased pro-rata. The tender offer is not
conditioned on any minimum number of shares being tendered.
The Company's Board of Directors desires to enhance shareholder value and
provide a liquidity opportunity to shareholders. The Board of Directors believes
that Share repurchases funded by borrowings under the Company's credit facility
will advance such objectives and be in the best interests of the Company and its
shareholders. Any shareholder whose Shares are purchased in the offer will
receive the total purchase price in cash and will not incur the usual
transaction costs associated with open market sales. This opportunity to sell
Shares without paying any brokerage fee may be particularly valuable to smaller
shareholders, for whom such fees may be relatively high. In addition, the Offer
may give shareholders the opportunity to sell Shares at greater than market
prices prevailing prior to commencement of the Offer. The Offer also allows
Shareholders to sell a portion of their Shares while retaining a continuing
equity interest in the Company. To the extent the purchase of Shares in the
Offer results in a reduction in the number of shareholders of record, the costs
to the Company for services to shareholders will be reduced.
Neither the Company nor its Board of Directors is making any recommendation to
shareholders as to whether to tender or refrain from tendering their shares. The
Offer to Purchase, Letter of Transmittal and related documents will be mailed to
shareholders of record of its Common Stock and will also be made available for
distribution to beneficial owners of Common Stock.
On July 11, 1997, the last full trading day on the American Stock Exchange
("AMEX") prior to the announcement and commencement of the tender offer, the
closing price of the Common Stock as reported on the AMEX was $16.50 per share.
As of July 11, 1997, the Company had 7,148,334 shares of Common Stock
outstanding.
Furman Selz LLC is serving as the Dealer Manager for the tender offer, McCormick
& Pryor is serving as the Information Agent, and Continental Stock Transfer &
Trust Company is serving as the Depositary.
Frisch's Restaurants, Inc., headquartered in Cincinnati, Ohio, operates and
licenses family restaurants, some with drive-thru service, under the name
Frisch's Big Boy. Additionally, the Company operates two Quality Hotels with
restaurants in metropolitan Cincinnati.
<PAGE> 1
Exhibit 99(a)(8)
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE DATED
JULY 14, 1997 AND THE RELATED LETTER OF TRANSMITTAL. CAPITALIZED TERMS NOT
DEFINED IN THIS ANNOUNCEMENT HAVE THE RESPECTIVE MEANINGS ASCRIBED TO SUCH
TERMS IN THE OFFER TO PURCHASE. THE OFFER IS NOT BEING MADE TO, NOR WILL
THE COMPANY ACCEPT TENDERS FROM, HOLDERS OF SHARES IN ANY
JURISDICTION IN WHICH THE OFFER OR ITS ACCEPTANCE WOULD
VIOLATE THAT JURISDICTION'S LAWS. THE COMPANY IS NOT
AWARE OF ANY JURISDICTION IN WHICH THE MAKING OF
THE OFFER OR THE TENDER OF SHARES WOULD NOT BE
IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
NOTICE OF OFFER TO PURCHASE FOR CASH BY
FRISCH'S RESTAURANTS, INC.
--------------------------
UP TO 1,000,000 SHARES OF ITS COMMON STOCK AT
A PURCHASE PRICE NOT GREATER THAN $17.00
NOR LESS THAN $15.00 PER SHARE
FRISCH'S RESTAURANTS, INC., an Ohio corporation (the "Company"), is
offering to purchase for cash up to 1,000,000 shares of its common stock, no par
value (the "Shares"), upon the terms and subject to the conditions set forth in
the Offer to Purchase dated July 14, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which together constitute the "Offer"). The
Company is inviting its shareholders to tender their Shares at prices not
greater than $17.00 nor less than $15.00 per Share, as specified by tendering
shareholders. The Offer is not conditioned on any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions set forth
in the Offer.
The Company will, upon the terms and subject to the conditions of the
Offer, determine a single per Share price (not greater than $17.00 nor less than
$15.00 per Share), net to the seller in cash (the "Purchase Price"), that it
will pay for Shares validly tendered and not withdrawn pursuant to the Offer,
taking into account the number of Shares so tendered and the prices specified by
tendering shareholders. The Company will select the lowest Purchase Price that
will enable it to buy 1,000,000 Shares (or such lesser number of Shares as are
validly tendered at prices not greater than $17.00 nor less than $15.00 per
Share), pursuant to the Offer. All Shares validly tendered at prices at or below
the Purchase Price and not withdrawn prior to the Expiration Date (as defined
below), will be purchased at the Purchase Price, subject to the terms and
conditions of the Offer, including the proration terms described therein. Shares
tendered at prices in excess of the Purchase Price and Shares not purchased
because of proration will be returned. The Company reserves the right, in its
sole discretion, to purchase more than 1,000,000 Shares pursuant to the Offer.
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
EASTERN DAYLIGHT SAVINGS TIME, ON FRIDAY, AUGUST 8, 1997,
UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MAKING OF THE
OFFER. HOWEVER, SHAREHOLDERS MUST MAKE THEIR OWN DECISION WHETHER TO TENDER
SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH
SHARES SHOULD BE TENDERED. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES
ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING SHARES.
In the event that more than 1,000,000 Shares (or such greater number of
Shares as the Company may elect to purchase pursuant to the Offer) are validly
tendered at or below the Purchase Price and not withdrawn prior to the
Expiration Date, the Company will purchase such validly tendered Shares at or
below the Purchase Price on a pro rata basis (with adjustments to avoid
purchases of fractional shares), upon the terms and subject to the conditions of
the Offer.
The term "Expiration Date" means 12:00 Midnight, Eastern Daylight Savings
time, on Friday, August 8, 1997, unless and until the Company, in its sole
discretion, shall have extended the period of time during which the Offer is
open, in which event the term "Expiration Date" shall refer to the latest time
and date at which the Offer, as so extended by the Company, shall expire. For
purposes of the Offer, the Company will be deemed to have accepted for payment
(and therefore purchased), subject to proration, Shares that are validly
tendered at or below the Purchase Price and not withdrawn when, as and if it
gives oral or written notice to Continental Stock Transfer & Trust Company (the
"Depositary") of its acceptance of such Shares for payment pursuant to the
Offer. In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made promptly (subject to possible delay in the
event of proration), but only after timely receipt by the Depositary of
certificates for such Shares (or a timely confirmation of a book-entry transfer
of such shares into the Depositary's account at one of the Book-Entry Transfer
Facilities), a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) and any other required documents.
The Company expressly reserves the right, in its sole discretion, at
any time and from time to time, to extend the period of time during which the
Offer is open and thereby delay acceptance for payment of, and payment for, any
Shares by giving oral or written notice of such extension to the Depositary and
making a public announcement thereof. The
<PAGE> 2
Company also expressly reserves the right, in its sole discretion, to terminate
the Offer and not accept for payment or pay for any Shares not theretofore
accepted for payment or paid for or, subject to applicable law, to postpone
payment for Shares upon the occurrence of any of the conditions specified in
Section 5 of the Offer to Purchase by giving oral or written notice of such
termination or postponement to the Depositary and making a public announcement
thereof.
Shares tendered pursuant to the Offer may be withdrawn at any time
before the Expiration Date and, unless accepted for payment by the Company as
provided in the Offer to Purchase, may also be withdrawn after 12:00 Midnight,
Eastern Daylight Savings Time, on Monday, September 8, 1997. For a withdrawal to
be effective, the Depositary must receive (at its address set forth on the back
cover of the Offer to Purchase) a notice of withdrawal in written or facsimile
transmission form on a timely basis. Such notice of withdrawal must specify the
name of the person who tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name of the registered holder, if different from that of
the person who tendered such Shares. If the certificates have been delivered or
otherwise identified to the Depositary, then, prior to the release of such
certificates, the tendering shareholder must also submit the serial numbers
shown on the particular certificates evidencing the Shares and the signature on
the notice of withdrawal must be guaranteed by an Eligible Institution (except
in the case of Shares tendered by an Eligible Institution). If Shares have been
tendered pursuant to the procedure for book-entry transfer, the notice of
withdrawal must specify the name and the number of the account at the applicable
Book-Entry Transfer Facility to be credited with the withdrawn Shares and
otherwise comply with the procedures of such facility.
The Company is making the Offer in order to provide a liquidity
opportunity for shareholders who wish to dispose of their Shares without the
usual transaction costs associated with open market sales and to enhance
shareholder value for the remaining shareholders. This opportunity to sell
Shares without paying any brokerage fee may be particularly valuable to smaller
shareholders, for whom such fees may be relatively high. If a shareholder is
considering the sale of all or a portion of his or her Shares, the Offer also
gives him or her the opportunity to determine the minimum price at which he or
she is willing to sell his or her Shares. The Offer may also give the
shareholder the opportunity to sell Shares at prices greater than the market
price of the Shares prevailing before the Company announced the Offer. The
Company believes that the purchase of Shares is consistent with its long-term
goals and that, after the Offer is completed, the Company will have sufficient
cash flow and access to other sources of capital to fund its working capital
needs and provide for its current capital expenditure requirements.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE SHAREHOLDERS DECIDE WHETHER TO
ACCEPT OR REJECT THE OFFER AND, IF ACCEPTED, AT WHICH PRICE OR PRICES TO TENDER
THEIR SHARES. These materials are being mailed to record holders of Shares as of
July 11, 1997 and are being furnished to brokers, banks and similar persons
whose names, or the names of whose nominees, appear on the Company's shareholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing for transmittal to beneficial owners of Shares. The
information required to be disclosed by Rule 13e-4(d)(1) under the Securities
Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is
incorporated by reference herein. Copies of the Offer to Purchase and the Letter
of Transmittal may be obtained from the Information Agent at the address and
telephone number set forth below and will be furnished promptly at the Company's
expense. Questions and requests for assistance may be directed to the Dealer
Manager or the Information Agent at their respective addresses and telephone
numbers set forth below.
- 2 -
<PAGE> 3
THE INFORMATION AGENT FOR THE OFFER IS:
MCCORMICK & PRYOR LTD.
26 Broadway, Suite 1640
New York, New York 10004
Banks and Brokers call collect: (212) 968-9090
CALL TOLL FREE: (800) 476-2508 PIN #3774
THE DEALER MANAGER FOR THE OFFER IS:
FURMAN SELZ LLC
230 Park Avenue
New York, New York 10169
(212) 309-8200
(800) 939-9991
July 14, 1997
- 3 -
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer -- Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- --------------------------------------------------
FOR THIS TYPE OF GIVE THE SOCIAL
ACCOUNT: SECURITY NUMBER OF:
- ---------------------------------------------------
<S> <C> <C>
1. Individual The individual
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, any
one of the
individuals(1)
3. Husband and wife The actual owner of
(joint account) the account or, if
joint funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee incompetent person(3)
for a designated ward,
minor, or incompetent
person
7. a. The usual revocable The grantor-trustee(1)
savings trust
account (grantor is
also trustee)
b. So-called trust The actual owner(1)
account that is not
a legal or valid
trust under State
law
8. Sole proprietorship The owner(4)
account
- --------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF IDENTIFICATION NUMBER
ACCOUNT: OF:
- --------------------------------------------------
<S> <C> <C>
9. Sole proprietorship The owner(4)
account
10. A valid trust, estate, Legal entity(5)
or pension trust
11. Corporate The corporation
12. Association, club, The organization
religious, charitable,
educational or other
tax-exempt
organization
13. Partnership The partnership
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
State or local
government school
district, or prison)
that receives
agricultural program
payments
- --------------------------------------------------
</TABLE>
(1) List all names first and circle the name of the person whose number you
furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Provide the name of the owner. You may also enter your business or "doing
business as" name. You may use either your Social Security Number or
Taxpayer Identification Number (if you have one).
(5) List all names first and circle the name of the legal trust, estate, or
pension trust. (Do not furnish the identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title).
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under Section 501(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), or an individual retirement plan.
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
- - An international organization or any agency, or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under Section 584(a) of the Code.
- - An exempt charitable remainder trust, or a non-exempt trust described in
Section 4947(a)(1) of the Code.
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- - Payments to nonresident aliens subject to withholding under Section 1441 of
the Code.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt interest dividends under
Section 852).
- - Payments described in Section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under Section 1451.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9 TO
AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THE SUBSTITUTE FORM W-9 WITH
THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE
FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST,
DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under Sections 6041, 6041A(a),
6045, and 6050A of the Code.
PRIVACY ACT NOTICE--Section 6109 of the Code requires most recipients of
dividends, interest, or other payments to give correct taxpayer identification
numbers to payers who must report the payments to IRS. IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to file
tax returns. Payers may be required to withhold 31% of taxable interest,
dividends and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER -- If you fail to furnish
your correct taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING -- If you
make a false statement with no reasonable basis which results in no backup
withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
(4) MISUSE OF TINS -- If the requester discloses or uses taxpayer identification
numbers in violation of Federal law, the requester may be subject to civil and
criminal penalties.
FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
Exhibit (b)
LOAN AGREEMENT
--------------
THIS LOAN AGREEMENT (this "Agreement") is made and entered
into as of this 9th day of July, 1997 by and between (i) FRISCH'S RESTAURANTS,
INC., an Ohio corporation (the "Borrower"), and (ii) STAR BANK, NATIONAL
ASSOCIATION, a national banking association (the "Bank").
1. REPRESENTATIONS AND WARRANTIES. To induce the Bank to enter
into this Agreement and to agree to make the Loan described in SECTION 4 hereof,
the Borrower makes the following representations and warranties:
(a) EXISTENCE. The Borrower is duly organized, validly
existing and in good standing as a corporation under the laws of the State of
Ohio, and each Subsidiary (as hereinafter defined) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization. The Borrower and each Subsidiary is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction in which
the failure to be so qualified by the Borrower or the Subsidiary would have a
material adverse effect on its business, prospects or financial condition.
"Subsidiary" for purposes hereof means any corporation or other entity the
majority of the voting stock of which is owned, directly or indirectly,
beneficially or of record, by the Borrower or any Subsidiary, or which is
otherwise controlled, directly or indirectly, by the Borrower or any Subsidiary.
(b) AUTHORITY. The Borrower and each Subsidiary has full power
and authority to own its properties and to conduct its business as such business
is now being conducted, and the Borrower has full power and authority to
execute, deliver and perform under this Agreement, the Note (as hereinafter
defined), the Mortgages (as hereinafter defined), the Security Agreements (as
hereinafter defined), the Financing Statements (as hereinafter defined), the
Life Insurance Assignments (as hereinafter defined) and all other documents and
instruments executed in connection with or otherwise relating to this Agreement
or the Loan (collectively, the "Loan Documents").
(c) BORROWING AUTHORIZATION. The execution, delivery and
performance by the Borrower of this Agreement and the other Loan Documents: (i)
have been duly authorized by all requisite corporate action; (ii) do not and
will not violate (A) any provision of any law, statute, rule or regulation, (B)
any order, judgment or decree of any court, arbitrator or other agency of
government, (C) the Articles of Incorporation or Code of Regulations or other
organizational or governing documents of the Borrower, or (D) any provision of
any agreement (including, without limitation, any agreement with stockholders)
to which the Borrower or any Subsidiary is a party or subject, or by which it or
any of
<PAGE> 2
its properties or assets are bound; (iii) do not and will not result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Borrower or any
Subsidiary, except in favor of the Bank as provided herein; and (iv) do not and
will not require any consent, approval or other action by or any notice to or
filing with any court or administrative or governmental body. This Agreement and
the other Loan Documents have been duly executed and delivered on behalf of the
Borrower and constitute the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their respective
terms.
(d) FINANCIAL INFORMATION AND REPORTS. EXHIBIT A to this
Agreement is a complete list of the financial statements and projected financial
statements furnished by the Borrower to the Bank in connection with the
borrowings to be made hereunder. Each such historical financial statement fairly
presents in accordance with generally accepted accounting principles the
financial condition of the Borrower and its Subsidiaries and the results of
their operations as of the date (or with respect to the period) noted in such
financial statements. Other than any liability incident to any actions described
in EXHIBIT B to this Agreement, neither the Borrower nor any Subsidiary has any
material contingent liabilities required to be disclosed under generally
accepted accounting principles which are not provided for or disclosed in such
financial statements. Each such statement (including any related schedule and/or
notes) is true, correct and complete in all material respects (subject, as to
interim statements, to changes resulting from audits and year-end adjustments)
and has been prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods involved. No such
statement omits to state a material fact necessary to make such statement not
misleading in light of the circumstances under which it was made. Other than the
impairment loss previously disclosed to the Bank resulting from the closing of
fifteen (15) restaurant locations, at this time in the amount of approximately
Four Million Six Hundred Thousand Dollars ($4,600,000), there has been no
material adverse change in the business, operations or condition (financial or
otherwise) of the Borrower or any Subsidiary since the date of the most recent
of such financial statements.
(e) INDEBTEDNESS. Neither the Borrower nor any Subsidiary has
any Indebtedness (as hereinafter defined) other than Permitted Indebtedness (as
hereinafter defined), or has guaranteed the obligations of any other person
(except by endorsement of negotiable instruments payable on sight for deposit or
collection or similar banking transactions in the usual course of business), and
to the best of the Borrower's knowledge after diligent investigation, there
exists no default under the provisions of any instrument evidencing any
Indebtedness of the Borrower or any Subsidiary or of any agreement relating
thereto. "Indebtedness" as
- 2 -
<PAGE> 3
used herein means all indebtedness for borrowed money which in accordance with
generally accepted accounting principles would be considered as a liability, all
rental obligations under leases required to be capitalized under generally
accepted accounting principles, all guarantees and other contingent obligations
in respect of, or obligations to purchase or otherwise acquire, Indebtedness of
others, and Indebtedness of others secured by any lien on property owned by the
Borrower or any Subsidiary, whether or not the Borrower or such Subsidiary has
assumed such Indebtedness.
(f) ACTIONS. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Borrower, threatened against or
affecting the Borrower or any Subsidiary before any court, arbitrator or
administrative or governmental agency except for those described in EXHIBIT B to
this Agreement, none of which might result in any material adverse change in the
business, operations or condition (financial or otherwise) of the Borrower or
any Subsidiary, nor, to the best of the Borrower's knowledge after diligent
investigation, is there any basis for any such action which might result in such
a material adverse change.
(g) TITLE TO PROPERTY. The Borrower and each Subsidiary has
good and marketable title to its real properties (other than properties which it
leases as lessee) and good title to all of its other properties and assets,
including the properties and assets reflected in the most recent balance sheet
described in EXHIBIT A hereto (other than properties and assets disposed of in
the ordinary course of business since the date thereof), free and clear of all
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, including any agreement to give any of the foregoing, any conditional sale
or other title retention agreement or any lease in the nature thereof (each, a
"Lien"), other than the following (each, a "Permitted Lien"): (i) Liens
described on EXHIBIT C hereto, (ii) leases required under generally accepted
accounting principles to be capitalized on the Borrower's or such Subsidiary's
books ("Capitalized Leases") which are permitted under SECTION 2(M) BELOW, and
(iii) Liens in favor of the Bank as provided herein. The Borrower and each
Subsidiary is in undisturbed possession under all leases necessary in any
material respect for the operation of its business, and no such leases contain
any unusual or burdensome provisions which might materially affect or impair the
Borrower's or the Subsidiary's operations thereunder. All such leases are valid
and in full force and effect.
(h) EMPLOYEE BENEFIT PLANS. To the best of the Borrower's
knowledge after diligent investigation, no "reportable event" or "prohibited
transaction," as defined by the Employee Retirement Income Security Act of 1974
("ERISA") has occurred or is continuing, as to any plan of the Borrower or any
of its affiliates which poses a threat of taxes or penalties against or
termination
- 3 -
<PAGE> 4
of such plans (or trusts related thereto). Neither the Borrower nor any of its
affiliates has violated in any material respect the requirements of any
"qualified pension benefit plan," as defined by ERISA and the Internal Revenue
Code of 1986, or done anything to create any material liability under the
Multi-Employee Pension Plan Amendment Act. Neither the Borrower nor any of its
affiliates has incurred any material liability to the Pension Benefit Guarantee
Corporation (the "PBGC") in connection with such plans, including, but not
limited to, any "funding deficiency" (as defined by ERISA).
(i) PURPOSE OF LOAN. Proceeds of the Loan shall be used only
for the purpose of purchasing, prior to September 1, 1997, shares of the
Borrower's common stock pursuant to an issuer tender offer for an aggregate
purchase price not to exceed Eighteen Million Dollars ($18,000,000) (the "Stock
Purchase"). The Loan is not and shall not be secured, directly or indirectly, by
any stock for the purpose of purchasing or carrying any margin stock or for any
purpose which would violate either Regulation U, 12 C.F.R. Part 221, or
Regulation X, 12 C.F.R. Part 224, promulgated by the Board of Governors of the
Federal Reserve System.
(j) COMPLIANCE. The Borrower and each Subsidiary is in
compliance in all material respects with all laws, statutes, ordinances, rules,
regulations and orders of any governmental entity (including, but not by way of
limitation, any such laws, statutes, ordinances, rules, regulations and orders
related to ecology, human health and the environment) applicable to it.
(k) ADVERSE CONTRACTS AND CONDITIONS. Neither the Borrower nor
any Subsidiary is a party to any contract or agreement, or subject to any
charge, restriction, judgment, decree or order, materially and adversely
affecting its business, property, assets, operations or condition, financial or
otherwise, nor a party to any labor dispute. There are no restrictions
applicable to any Subsidiary which might limit its ability to pay dividends or
make loans to the Borrower.
(l) TAXES. The Borrower and each Subsidiary has filed all
federal, state and local tax returns and other reports which it is required by
law to file, has paid all taxes, assessments and other similar charges that are
due and payable, other than taxes, if any, being contested by the Borrower or a
Subsidiary in good faith and as to which adequate reserves have been established
in accordance with generally accepted accounting principles, and has withheld
all employee and similar taxes which it is required by law to withhold. Federal
income tax returns of the Borrower and each Subsidiary have been examined by the
taxing authorities or closed by applicable statutes and satisfied for all fiscal
years prior to and including the fiscal year ended May 30, 1993.
2. BORROWER'S COVENANTS. The Borrower agrees that,
from the date of this Agreement and until the Loan is paid in full
- 4 -
<PAGE> 5
and all obligations under this Agreement are fully performed, and the commitment
of the Bank to make the Loan hereunder has terminated:
(a) FINANCIAL COVENANTS. The Borrower shall comply with each
of the financial covenants set forth in EXHIBIT D to this Agreement
(collectively, the "Financial Covenants").
(b) FINANCIAL STATEMENTS; PERIODIC REPORTS. The Borrower shall
furnish to the Bank: (i) as soon as practicable and in any event within ninety
(90) days after the last day of each fiscal year of the Borrower, a copy of the
annual audit report of the Borrower, prepared in accordance with generally
accepted accounting principles applied on a basis consistent with that of the
preceding fiscal year, and consisting of a consolidated balance sheet as at the
end of such fiscal year and consolidated statements of earnings, stockholders'
equity and cash flows of the Borrower and its Subsidiaries for such fiscal year,
setting forth in each case in comparative consolidated form corresponding
consolidated figures from the preceding annual audit, certified by a
nationally-recognized firm of independent certified public accountants, whose
certificate shall be in scope and substance reasonably satisfactory to the Bank
and shall include, without limitation, a certification that in auditing the
Borrower, such accountant has obtained no knowledge of an Event of Default
hereunder, or if any Event of Default exists, specifying the nature and period
of existence thereof, and accompanied by such accountant's management letter
with respect thereto; (ii) as soon as practicable and in any event within
forty-five (45) days after the last day of each of the Borrower's first three
fiscal quarters and by August 10 after the end of each of the Borrower's fourth
fiscal quarters, a copy of the Borrower's unaudited financial statements,
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with that of the preceding fiscal quarter, and consisting of
a consolidated balance sheet as at the end of such fiscal quarter and
consolidated statements of earnings, stockholders' equity and cash flows of the
Borrower and its Subsidiaries for the period from the beginning of the
then-current fiscal year through the end of such fiscal quarter, setting forth
in each case in comparative form figures for the corresponding period in the
preceding fiscal year, and certified by an authorized financial officer of the
Borrower, subject to changes resulting from year-end adjustments; (iii) promptly
upon transmission thereof, copies of all such financial statements, proxy
statements, notices and reports as the Borrower shall send to its stockholders
and copies of all registration statements (without exhibits) and all regulatory
and periodic reports which the Borrower files with the Securities and Exchange
Commission (the "SEC") or any governmental body or agency succeeding to the
functions of the SEC; and (iv) with reasonable promptness, such other financial
data in such form as the Bank may
- 5 -
<PAGE> 6
reasonably request, provided that the Bank shall keep such data confidential to
the extent required by applicable securities laws.
Together with each delivery of financial statements required
under clauses (i) and (ii) above, the Borrower shall deliver a certificate of
its Chief Financial Officer (A) setting forth the aggregate amount of rental
payments made during such fiscal period by the Borrower or any Subsidiary which
were of the kinds subject to restriction under SECTION 2(M) below, (B) setting
forth the aggregate amount of interest accrued during such fiscal period on
Indebtedness of the Borrower or any Subsidiary and (C) stating that, to the best
of such Chief Financial Officer's knowledge after diligent investigation, no
Event of Default hereunder then exists, or if such an Event of Default hereunder
does then exist, specifying the nature thereof, the period of existence thereof,
and the action the Borrower proposes to take with respect thereto. The Borrower
further agrees that promptly upon the President or Chief Financial Officer of
the Borrower obtaining knowledge of an event that constitutes an Event of
Default hereunder, the Borrower shall deliver to the Bank a certificate
specifying the nature thereof, the period of existence thereof, and the action
the Borrower proposes to take with respect thereto. The Bank is authorized to
deliver a copy of any financial statement or other communication or document
delivered to it pursuant to this SECTION 2(B) to any regulatory body having
jurisdiction over it if such delivery is required by such regulatory body. The
Borrower and each Subsidiary shall permit the Bank and its agents and
representatives, at the expense of the Bank, to inspect its real and personal
property and to verify accounts and inspect and make copies of or extracts from
its books, records and files, and to discuss its affairs, finances and accounts
with its principal officers, all at such reasonable times and as often as the
Bank may reasonably request.
(c) INSURANCE. The Borrower shall, and shall cause each
Subsidiary to, maintain with responsible carriers All Risk coverage for the full
replacement value of all of its real and personal property, except that the
Borrower and each Subsidiary may self-insure risks to its real and personal
property in an amount not to exceed Five Hundred Thousand Dollars ($500,000),
and maintain with responsible carriers general public liability insurance
coverage including Excess liability coverage in an amount not less than
Twenty-Five Million Dollars ($25,000,000), except that the Borrower and each
Subsidiary may self-insure general public liability risks in an amount not to
exceed Five Hundred Thousand Dollars ($500,000) per occurrence during the term
of this Agreement. The Borrower shall deliver to the Bank, together with
delivery of the financial statements required under SECTION 2(B)(I) above, a
certificate specifying the details of all such insurance in effect. The Borrower
shall pay all premiums on the Life Insurance Policies (as hereinafter defined)
on or before the date due and otherwise maintain the Life Insurance Policies in
full
- 6 -
<PAGE> 7
force and effect, and except for any existing loans as shown on EXHIBIT E
hereto, the Borrower shall not obtain any loans against the Life Insurance
Policies. The Borrower shall promptly notify the Bank as soon as the Borrower is
no longer prohibited by regulatory authorities from assigning to the Bank
policies 0574-5222 and 5743-891 now issued by Confederation Life Insurance
Company, and shall thereupon execute and deliver (or cause to be executed and
delivered) to the Bank Life Insurance Assignments (as hereinafter defined) with
respect thereto. Upon the death of any insured under the Life Insurance
Policies, whether or not an Event of Default hereunder then exists, the Bank
shall have the right to require application of the portion of the insurance
proceeds payable under such Life Insurance Policy which represents the cash
surrender value thereof to the repayment of the Loan.
(d) TAXES. The Borrower shall, and shall cause each Subsidiary
to, file all federal, state and local tax returns and other reports it is
required by law to file, and shall pay when due all taxes, assessments and other
liabilities, except that the Borrower and any Subsidiary shall not be obligated
to pay any taxes or assessments which it is contesting in good faith, provided
that adequate reserves therefor are established in accordance with generally
accepted accounting principles, that such contests will not materially adversely
affect the Borrower's or any Subsidiary's operations or financial condition, and
that such taxes and assessments are promptly paid when the dispute is finally
determined.
(e) EXISTENCE AND STATUS. The Borrower shall, and shall cause
each Subsidiary to, maintain its existence in good standing under the laws of
each jurisdiction described in SECTION 1(A) of this Agreement, provided that the
Borrower or any Subsidiary may change its jurisdiction of incorporation if it
shall remain in good standing under the laws thereof.
(f) MAINTENANCE OF PROPERTY. The Borrower shall, and shall
cause each Subsidiary to, maintain to the extent consistent with good business
practices all of its real and personal property in good condition and repair,
not commit or permit any waste thereof, and not, except in the ordinary course
of business, remove or permit the removal of any improvement, accession or
fixture therefrom that may in any way materially impair the value of said
property.
(g) COMPLIANCE WITH LAW. The Borrower shall, and shall cause
each Subsidiary to, comply at all times with all laws, statutes, ordinances,
rules, regulations and orders of any governmental entity (including, but not by
way of limitation, such laws, statutes, ordinances, rules, regulations and
orders relating to ecology, human health and the environment) having
jurisdiction over it or any part of its assets, where such failure to comply
would have a material adverse effect on the Borrower's or any
- 7 -
<PAGE> 8
Subsidiary's operations or financial condition or the ability of the Borrower to
perform its obligations hereunder. The Borrower and each Subsidiary shall obtain
and maintain all permits, licenses, approvals and other similar documents
required by any such laws, statutes, ordinances, rules, regulations or orders.
(h) NOTICE. The Borrower shall notify the Bank in writing,
promptly upon the Borrower's learning thereof, of: (i) any litigation, suit or
administrative proceeding which may materially affect the operations, financial
condition or business of the Borrower or any Subsidiary, whether or not the
claim is considered by the Borrower to be covered by insurance, unless the
applicable insurer has agreed to defend any such claim and cover the liability
therefor; (ii) the occurrence of any material event described in Section 4043 of
ERISA or any anticipated termination, partial termination or merger of a "Plan"
(as defined in ERISA) or a transfer of the assets of a Plan; (iii) any labor
dispute to which the Borrower or any Subsidiary may become a party; (iv) any
default by the Borrower or any Subsidiary under any note, indenture, loan
agreement, mortgage, lease or other similar agreement to which the Borrower or
any Subsidiary is a party or by which the Borrower or any Subsidiary or its
assets are bound; and (v) any default by any obligor under any material note or
other evidence of debt payable to the Borrower or any Subsidiary.
(i) LIENS. The Borrower shall not, and shall not permit any
Subsidiary to, create, assume or permit to exist any Lien with respect to any of
its assets, whether now owned or hereafter acquired, except Permitted Liens.
(j) INDEBTEDNESS. The Borrower shall not, and shall not permit
any Subsidiary to, create, incur, assume or permit to exist any Indebtedness,
except the following (each, "Permitted Indebtedness"): (i) Indebtedness incurred
under this Agreement and other Indebtedness to the Bank; (ii) outstanding
Indebtedness reflected in the historical financial statements listed in EXHIBIT
A attached hereto (but not any refinancing or refunding of such Indebtedness);
(iii) Indebtedness described in EXHIBIT E attached hereto; and (iv) Indebtedness
incurred in connection with Capitalized Leases permitted under SECTION 2(M)
below.
(k) LOANS; INVESTMENTS. The Borrower shall not, and shall not
permit any Subsidiary to, make or permit to remain outstanding any loan or
advance to, or own or acquire any stock, obligations or securities of, or any
other interest in, or make any capital contribution to, any person or entity,
except that the Borrower or any Subsidiary may: (i) make or permit to remain
outstanding loans or advances to any Subsidiary or the Borrower; (ii) own or
acquire stock, obligations or securities of a Subsidiary or of a corporation
which immediately after such acquisition will be a Subsidiary; (iii) own or
acquire prime commercial paper and certificates of deposit in United States
- 8 -
<PAGE> 9
commercial banks having capital resources in excess of Fifty Million Dollars
($50,000,000), in each case due within one (1) year from the date of purchase
and payable in United States dollars, obligations of the United States
Government or any agency thereof, and obligations guaranteed by the United
States Government, and repurchase agreements with such banks for terms of less
than one (1) year in respect of the foregoing certificates and obligations; (iv)
make travel advances in the ordinary course of business to officers and
employees or other advances in the ordinary course of business to officers and
employees (excluding advances to employees for relocation purposes) not to
exceed One Hundred Twenty-Five Thousand Dollars ($125,000) in the aggregate at
any time outstanding for the Borrower and all Subsidiaries; (v) make advances to
employees for relocation purposes not to exceed One Hundred Fifty Thousand
Dollars ($150,000) in the aggregate at any time outstanding for the Borrower and
all Subsidiaries; (vi) own or acquire money-market preferred stock in an amount
not to exceed Seven Hundred Fifty Thousand Dollars ($750,000); and (vii) make or
permit to remain outstanding loans or advances to, or own or acquire stock,
obligations or securities of, any other person or entity, provided that the
aggregate principal amount of such loans and advances (excluding loans which are
fully secured by real estate consisting of former restaurant locations), plus
the aggregate amount of the investment (at original cost) in such stock,
obligations and securities, shall not exceed Five Hundred Thousand Dollars
($500,000) at any time outstanding for the Borrower and all Subsidiaries. In
addition, the Borrower shall be permitted to engage in the Stock Purchase.
(l) MERGER AND SALE OF ASSETS. Without the prior written
consent of the Bank, the Borrower shall not, and shall not permit any Subsidiary
to, merge or consolidate with any other corporation, or sell, lease or transfer
or otherwise dispose of any of its assets, including, without limitation, the
stock of any Subsidiary, or sell with recourse or discount or otherwise sell for
less than the face value thereof any of its notes or accounts receivable, except
that without the prior written consent of the Bank: (i) any Subsidiary may merge
or consolidate with the Borrower (provided that the Borrower shall be the
continuing or surviving corporation) or with any one or more other Subsidiaries;
(ii) any Subsidiary may sell, lease, transfer or otherwise dispose of any of its
assets to the Borrower or another Subsidiary; and (iii) the Borrower or any
Subsidiary may otherwise sell, lease, transfer or otherwise dispose of any
inventory in the ordinary course of business and any of its other assets having
a book value of less than Twenty Thousand Dollars ($20,000) provided that the
aggregate book value of all such assets so sold, leased, transferred or
otherwise disposed of by the Borrower and its Subsidiaries during any fiscal
year shall not exceed One Hundred Thousand Dollars ($100,000). The Bank may
condition any required consent to the sale, lease, transfer or other disposition
of assets of the Borrower and its Subsidiaries on the agreement of the Borrower
to
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<PAGE> 10
apply, or cause the application of, all net after-tax proceeds therefrom to
prepayment of the principal balance of the Loan. The Borrower agrees to
diligently pursue the sale of all assets, including the real estate,
improvements, fixtures and equipment, associated with the restaurants located on
the properties described on EXHIBIT F attached hereto (collectively, the
"Designated Properties"), as well as the sale of the Borrower's interest as a
limited partner in the Cincinnati Reds, and to apply, or cause the application
of, all net after-tax proceeds thereof to prepayment of the principal balance of
the Loan, and the Bank agrees that it will not unreasonably withhold its consent
to any such sale.
(m) LEASE/RENTALS. The Borrower shall not, and shall not
permit any Subsidiary to, enter into, or permit to remain in effect, any
agreements to rent or lease (as lessee): (i) any real or personal property
(excluding data processing and office equipment, vehicles, commissary production
equipment and real property used for restaurant facilities) for initial terms
(including options to renew or extend any term, whether or not exercised)
exceeding three (3) years if after giving effect thereto the aggregate amount of
all payments in any fiscal year payable by the Borrower and its Subsidiaries to
lessors under all such leases would exceed Five Hundred Thousand Dollars
($500,000); or (ii) any real property for restaurant facilities if after giving
effect thereto (A) the aggregate amount of all payments, including those
payments which constitute Capitalized Lease obligations or long-term debt, in
any fiscal year payable by the Borrower and its Subsidiaries to lessors under
all such leases would exceed a sum equal to four percent (4%) of the aggregate
sales made by the Borrower and its Subsidiaries from restaurants during the
preceding fiscal year or (B) the aggregate amount of all payments, excluding
those payments which constitute Capitalized Lease obligations or long-term debt,
in any fiscal year payable by the Borrower and its Subsidiaries to lessors under
all such leases would exceed a sum equal to two percent (2%) of the aggregate
sales made by the Borrower and its Subsidiaries from restaurants during the
preceding fiscal year.
(n) RESTRICTIONS ON TRANSACTIONS WITH STOCKHOLDERS AND OTHER
AFFILIATES. Except as otherwise expressly permitted under this Agreement, the
Borrower shall not, and shall not permit any Subsidiary to, enter into or be a
party to any transaction reportable under Item 404(a) of Regulation S-K of the
SEC except in the ordinary course of business, pursuant to the reasonable
requirements of its business, and upon fair and reasonable terms which are fully
disclosed to the Bank and are no less favorable to the Borrower or such
Subsidiary than the Borrower or such Subsidiary could obtain in a comparable
arm's length transaction with an unrelated third party.
(o) BOOKS AND RECORDS. The Borrower shall, and shall cause
each Subsidiary to, keep and maintain complete books of
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<PAGE> 11
accounts, records and files with respect to its business in accordance with
generally accepted accounting principles consistently applied in accordance with
past practices and shall accurately and completely record all transactions
therein.
(p) BUSINESS ACTIVITIES. The Borrower shall, and shall cause
each Subsidiary to, continue to engage in the types of business activities in
which it is currently engaged or other activities involving food service and
wholesaling food and related products, and shall not, and shall not permit any
Subsidiary to, be engaged in any business activities other than the types in
which it is currently engaged or other activities involving food service,
lodging and wholesaling food and related products.
(q) ENVIRONMENTAL MATTERS. The Borrower represents, warrants
and covenants with the Bank that: (i) neither the Borrower nor any of its
Subsidiaries nor, to the best of the Borrower's knowledge, after due
investigation, any other person or entity, has used or permitted any Hazardous
Substances (as hereinafter defined) to be placed, held, stored or disposed of on
any of the Designated Properties, in violation of any Environmental Laws (as
hereinafter defined); (ii) none of the Designated Properties now contains any
Hazardous Substance in violation of any Environmental Laws; (iii) there have
been no complaints, citations, claims, notices, information requests, orders
(including but not limited to clean-up orders) or directives on environmental
grounds made or delivered to, pending or served on, or anticipated by the
Borrower or any of its Subsidiaries, or of which the Borrower, after due
investigation, including consideration of the previous uses of the Designated
Properties and meeting the standard under 42 U.S.C. Section 9601(35)(B)(1986),
is aware or should be aware (A) issued by a governmental department or agency
having jurisdiction over any of the Designated Properties, or (B) issued or
claimed by any persons, agencies or organizations or affecting any of the
Designated Properties; and (iv) neither the Borrower nor any of its
Subsidiaries, so long as any of the Indebtedness under this Agreement remains
unpaid, shall allow any Hazardous Substances to be placed, held, stored or
disposed on any of the Designated Properties or incorporated into any
improvements on any of the Designated Properties in violation of any
Environmental Laws. The term "Hazardous Substance" shall mean any solid,
hazardous, toxic or dangerous waste, substance or material defined as such in or
for the purpose of the Comprehensive Environmental Response, Compensation and
Liability Act, any so-called "Superfund" or "Super-Lien" law, or any other
federal, state or local statute, law, ordinance, code, rule, regulation, order
or decree relating to, or imposing liability or standards of conduct concerning,
any Hazardous Substance (the "Environmental Laws", as now or at any time
hereafter in effect).
The Borrower agrees to indemnify and hold the Bank harmless
from and against any and all losses, liabilities, damages,
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<PAGE> 12
injuries, costs, expenses and claims of any and every kind whatsoever, paid,
incurred or suffered by, or asserted against the Bank for, with respect to, or
as a direct or indirect result of, any of the following: (i) the presence on or
under or the escape, seepage, leakage, spillage, discharge, emission,
discharging or release from any of the Designated Properties of any Hazardous
Substance (including, without limitation, any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any of the
Environmental Laws); or (ii) any liens against any of the Designated Properties
or any interest or estate in any of the Designated Properties, created,
permitted or imposed by the Environmental Laws, or any actual or asserted
liability of or obligations of the Borrower or any of its Subsidiaries under the
Environmental Laws.
The Borrower shall immediately notify the Bank should the
Borrower become aware of any Hazardous Substance on any of the Designated
Properties in violation of any Environmental Laws or any claim that any of the
Designated Properties may be contaminated by any Hazardous Substance in
violation of any Environmental Laws. The Borrower shall, at its own cost and
expense, be responsible for the cleanup of any Hazardous Substance caused, or
knowingly permitted, by the Borrower or any of its Subsidiaries to be on any of
the Designated Properties which is in violation of any Environmental Laws
including any removal, containment and remedial actions in accordance with all
applicable Environmental Laws. The Borrower's obligations hereunder shall not be
subject to any limitation of liability provided herein or in any of the other
Loan Documents and the Borrower acknowledges that its obligations hereunder are
not conditional and shall continue in effect so long as a valid claim may
lawfully be asserted against the Bank or for so long as this Agreement, any of
the other Loan Documents or any renewal, amendment, extension or modification
thereto remain in effect, whichever extends for a greater period of time.
(r) WAIVER. Any variance from the covenants of the Borrower
pursuant to this SECTION 2 shall be permitted only with the prior written
consent and/or waiver of the Bank. Any such variance by consent and/or waiver
shall relate solely to the variance addressed in such consent and/or waiver, and
shall not operate as the Bank's consent and/or waiver to any other variance of
the same covenant or other covenants, nor shall it preclude the exercise by the
Bank of any power or right under this Agreement, other than with respect to such
variance.
3. CLOSING CONDITIONS. The obligation of the Bank to make the
Loan is subject to the satisfaction of each of the following conditions
precedent:
(a) DEFAULT. Before and after giving effect to the Loan, no
Event of Default (as defined in SECTION 5 of this Agreement) or any event which,
with the passage of time or the
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<PAGE> 13
giving of notice, might mature into an Event of Default, shall have occurred and
be continuing.
(b) WARRANTIES. Before and after giving effect to the Loan,
the representations and warranties in SECTION 1 hereof shall be true and correct
as though made on the date of the Loan.
(c) CERTIFICATION. The Borrower shall have delivered to the
Bank a certificate of the President or Chief Financial Officer of the Borrower
dated as of the date of disbursement of the Loan: (i) as to the matters set
forth in SECTIONS 3(A) AND 3(B) above; (ii) to the effect that the resolutions
described in SECTION 3(D) below have not been amended or rescinded and remain in
full force and effect; (iii) as to the incumbency of the individuals authorized
to sign this Agreement and the other Loan Documents (with specimen signatures
attached); and (iv) to the effect that the Articles of Incorporation and Code of
Regulations of the Borrower are in full force and effect in the form delivered
to the Bank.
(d) RESOLUTIONS. The Borrower shall have delivered to the Bank
copies of the resolutions of the Borrower's Board of Directors authorizing the
borrowing hereunder and the execution and delivery of this Agreement and the
other Loan Documents.
(e) ARTICLES AND REGULATIONS. The Borrower shall have
delivered to the Bank true and correct copies of its Articles of Incorporation
and Code of Regulations.
(f) NOTE. The Borrower shall have delivered the Note to the
Bank with all blanks appropriately completed and duly executed on behalf of the
Borrower.
(g) MORTGAGES. There shall have been delivered to the Bank a
mortgage covering each of the Designated Properties in substantially the form of
EXHIBIT G attached hereto, duly executed and with all blanks and exhibits
appropriately completed and in recordable form under the laws of the
jurisdiction in which such Designated Property is located (collectively, the
"Mortgages"), and the Bank shall have received title reports on each Designated
Property evidencing only such encumbrances and restrictions on title as are
acceptable to the Bank in its discretion (collectively, the "Title Reports")
and, at the option of the Bank, surveys of each Designated Property.
(h) SECURITY AGREEMENT. There shall have been delivered to the
Bank Security Agreements covering the fixtures and equipment located at each of
the Designated Properties, as well as the proceeds of sale of all assets
associated with the Designated Properties and of sale of the Borrower's interest
as a limited partner in the Cincinnati Reds, in substantially the form of
EXHIBIT H attached hereto, duly executed and with all blanks and
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<PAGE> 14
exhibits appropriately completed (collectively, the "Security Agreements"),
together with UCC-1 financing statements covering such property, duly executed
and in appropriate form for filing in all jurisdictions in which a financing
statement is required to be filed in order to perfect the security interest in
such property (collectively, the "Financing Statements"), and the Bank shall
have received UCC Search Reports from all jurisdictions in which a financing
statement is required to be filed in order to perfect a security interest in
such property which evidence no security interests in such property which could
have priority over the security interest of the Bank (collectively, the "UCC
Search Reports").
(i) LIFE INSURANCE POLICY. There shall have been delivered to
the Bank Assignments of Life Insurance Policy as Collateral in substantially the
form of EXHIBIT I attached hereto covering the life insurance policies described
on EXHIBIT I-A attached hereto (the "Life Insurance Policies"), other than
policies 0574-5222 and 5743-891 issued by Confederation Life Insurance Company,
duly executed and with all blanks appropriately completed (collectively, the
"Life Insurance Assignments"), together with the originals of such life
insurance policies (the "Life Insurance Policies").
(j) OPINION. The Borrower shall have delivered to the Bank the
opinion of Cohen, Todd, Kite & Stanford, dated as of the date of disbursement of
the Loan, to the effect that: (i) the Borrower is duly organized, validly
existing and in good standing as a corporation under the laws of the State of
Ohio; (ii) the Borrower has full power and authority to execute and deliver this
Agreement and the other Loan Documents and to perform its obligations
thereunder; (iii) the execution and delivery by the Borrower of this Agreement
and the other Loan Documents, and the performance by the Borrower of its
obligations thereunder, have been duly authorized by all necessary corporate
action, and are not in conflict with any provision of law or of the Articles of
Incorporation or Code of Regulations of the Borrower, nor in conflict with any
agreement, order or decree binding upon the Borrower of which such counsel has
knowledge; (iv) this Agreement and the other Loan Documents are the legal, valid
and binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms, except as the same may be affected by
bankruptcy, insolvency, moratorium or similar laws now or hereafter in effect,
or by legal or equitable principles relating to or limiting creditors' rights
generally, or other rules of law or equity limiting the availability of specific
performance or injunctive relief; (v) each of the Mortgages is sufficient to
create a valid lien in favor of the Bank on the interest of the grantor in the
real property covered thereby and is in recordable form under the laws of the
jurisdiction in which such real property is located; and (vi) upon the filing of
the Financing Statements in the respective offices noted thereon, the Bank will
have a
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<PAGE> 15
perfected security interest in such of the property of the debtors thereunder in
which a security interest may be perfected by the filing of financing
statements.
(k) STOCK PURCHASE. The Bank shall have received satisfactory
evidence that the Stock Purchase will be accomplished and of the manner in which
it will be accomplished, together with a written disbursement request in form
and substance satisfactory to the Bank detailing the number of shares of the
Borrower's common stock that will be purchased pursuant thereto and the purchase
price thereof.
(l) 1996 AGREEMENT AMENDMENT. The Amended and Restated Loan
Agreement between the Borrower and the Bank dated as of August 29, 1996 (the
"1996 Agreement") shall have been amended in a manner consistent with the terms
of this Agreement and the letter dated as of June 25, 1997 executed by the
Borrower and the Bank with respect to the matters contemplated hereunder.
4. LOAN.
(a) LOAN. Subject to the terms and conditions of this
Agreement, and subject to there being no Event of Default (or event which might,
with the giving of notice or the passage of time, mature into an Event of
Default) by the Borrower hereunder, the Bank agrees to lend to the Borrower, on
any date that is prior to September 1, 1997 (the "Disbursement Date"), a
principal sum of up to Eighteen Million Dollars ($18,000,000) hereunder (the
"Loan"). The Loan shall be evidenced by a Promissory Note given by the Borrower
to the Bank in substantially the form of EXHIBIT J attached hereto (the "Note").
The Loan shall mature and be payable in full on the date that is two (2) years
from the Disbursement Date (the "Maturity Date"), unless accelerated as
described herein and subject to required principal and interest payments as
provided herein.
(b) INTEREST. Subject to the terms hereof, the Borrower shall
from time to time have the option of designating that portions of the principal
balance of the Loan bear interest at a rate per annum equal to (i) the One-Month
LIBOR-Based Rate (as hereinafter defined) for a one (1) month period (the
"One-Month LIBOR-Based Rate Period") and (ii) the Two-Month LIBOR-Based Rate (as
hereinafter defined) for a two (2) month period (the "Two-Month LIBOR-Based Rate
Period"). Any portion of the Loan with respect to which a One-Month LIBOR-Based
Rate or a Two-Month LIBOR-Based Rate is not in effect shall bear interest at a
rate per annum equal to the Prime-Based Rate (as hereinafter defined), with such
rate to be adjusted on the effective date of any change in the Prime Rate (as
hereinafter defined) by the Bank.
The "One-Month LIBOR-Based Rate" shall mean the sum of (i) the
annual rate, determined solely by the Bank, as the British
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<PAGE> 16
Banking Association 11:00 a.m. Fix offered rate obtained from Telerate Systems
Incorporated, Bloomberg Financial Systems or any other electronic media deemed
appropriate by the Bank (rounded upwards, if necessary, to the nearest 1/10000
of one percent), for deposits in immediately available Dollars in the London
Interbank Market (as hereinafter defined) at or about 11:00 a.m., London time,
for the applicable One-Month LIBOR-Based Rate Period on the day two (2) London
Business Days (as hereinafter defined) preceding the first day of such One-Month
LIBOR-Based Rate Period, PLUS (ii) the LIBOR-Based Rate Spread (as hereinafter
defined), and adjusted for Reserve Percentages (as hereinafter defined) and any
other regulatory and/or governmental costs incurred by the Bank from
eurocurrency liabilities. The "Two-Month LIBOR-Based Rate" shall mean the sum of
(i) the annual rate, determined solely by the Bank, as the British Banking
Association 11:00 a.m. Fix offered rate obtained from Telerate Systems
Incorporated, Bloomberg Financial Systems or any other electronic media deemed
appropriate by the Bank (rounded upwards, if necessary, to the nearest 1/10000
of one percent), for deposits in immediately available Dollars in the London
Interbank Market at or about 11:00 a.m., London time, for the applicable
Two-Month LIBOR-Based Rate Period on the day two (2) London Business Days
preceding the first day of such Two-Month LIBOR-Based Rate Period, PLUS (ii) the
LIBOR-Based Rate Spread, and adjusted for Reserve Percentages and any other
regulatory and/or governmental costs incurred by the Bank from eurocurrency
liabilities. In the event that Telerate Systems Incorporated, Bloomberg
Financial Systems or any other electronic media selected by the Bank ceases to
quote such rates, the Bank shall, in its discretion, select an alternative rate
source. The One-Month LIBOR-Based Rate and the Two-Month LIBOR-Based Rate are
each sometimes referred to herein as a "LIBOR-Based Rate," and the One- Month
LIBOR-Based Rate Period and the Two-Month LIBOR-Based Rate Period are each
sometimes referred to herein as a "LIBOR-Based Rate Period."
The "LIBOR-Based Rate Spread" shall initially be one hundred
fifty (150) basis points, and shall be adjusted as follows: If on or before the
date that is one (1) year after the Disbursement Date (the "Disbursement
Anniversary Date"), the outstanding principal balance of the Loan shall have
been reduced to less than Seven Million Five Hundred Thousand Dollars
($7,500,000) (the "Designated Level"), the LIBOR-Based Rate Spread shall,
commencing on the date of such reduction, be one hundred twenty-five (125) basis
points, and if by the Disbursement Anniversary Date the outstanding principal
balance of the Loan shall not have been reduced to the Designated Level, the
LIBOR- Based Rate Spread shall, commencing on the Disbursement Anniversary Date,
be one hundred seventy-five (175) basis points.
"London Interbank Market" shall mean the London eurodollar
interbank market where rates are offered to the Bank by prime banks for deposits
of immediately available Dollars. "London
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<PAGE> 17
Business Day" shall mean any day other than a Saturday, Sunday or holiday on
which banks in London, England are authorized by law to close.
"Reserve Percentages" shall mean the total maximum reserve
percentages for determining the reserves to be maintained by member banks of the
Federal Reserve System for eurocurrency liabilities, as defined in Federal
Reserve Board Regulation D, rounded upward to the nearest 1/100 of one percent,
and includes, but is not limited to, marginal, emergency, supplemental, special
and other reserve percentages. The amount of the adjustment for Reserve
Percentages and regulatory and/or governmental costs shall be based upon the
assumption that the Bank funded one hundred percent (100%) of the Loan or
portion thereof bearing interest at a LIBOR-Based Rate in the London Interbank
Market.
The "Prime Rate" shall mean that rate announced by the Bank as
its prime rate, which rate is determined solely by the Bank pursuant to market
factors and its own operating needs and is not necessarily the Bank's best or
most favorable rate for commercial or other loans. The "Prime-Based Rate" shall
initially be the Prime Rate, and shall be adjusted as follows: If on or before
the Disbursement Anniversary Date the outstanding principal balance of the Loan
shall have been reduced to the Designated Level, the Prime-Based Rate shall,
commencing on the date of such reduction, be the Prime Rate MINUS twenty-five
(25) basis points, and if on or before the Disbursement Anniversary Date the
outstanding principal balance of the Loan shall not have been reduced to the
Designated Level, the Prime-Based Rate shall, commencing on the Disbursement
Anniversary Date, be the Prime Rate PLUS twenty-five (25) basis points.
Interest on any portion of the Loan bearing interest at the
Prime-Based Rate shall be payable monthly, in arrears, commencing on the last
day of the calendar month in which the Loan is disbursed and on the last day of
each calendar month thereafter, and when the Loan is due (whether by reason of
acceleration or otherwise). Interest on any portion of the Loan bearing interest
at a LIBOR-Based Rate shall be payable, in arrears, on the last day of the
LIBOR-Based Rate Period applicable thereto, and when the Loan is due (whether by
reason of acceleration or otherwise). Interest on the Loan shall be computed on
the basis of a year consisting of three hundred sixty (360) days but applied to
the actual number of days elapsed. At the option of the Bank, (a) prior to
acceleration of the Loan, in the event that any interest on or principal of the
Loan remains unpaid past thirty (30) days of the date due, and/or (b) upon the
occurrence of any other Event of Default hereunder or upon the acceleration of
the Loan, interest (computed and adjusted in the same manner, and with the same
effect, as interest on the Loan prior to maturity) on the outstanding balance of
the Loan shall be payable on demand at the Prime Rate PLUS an additional three
percent (3%) per annum up to
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<PAGE> 18
any maximum rate permitted by law, in all cases until paid and whether before or
after the entry of any judgment thereon. In addition, in the event that the
Borrower should fail to make any payment hereunder within ten (10) days of the
date due, the Borrower shall pay the Bank a fee in an amount of up to five
percent (5%) of the amount of such payment, but in no event less than fifty
dollars ($50.00), which fee shall be immediately due and payable without notice
or demand.
In electing computation of interest on the Loan or any portion
thereof at a LIBOR-Based Rate, the Borrower shall provide the Bank with not less
than three (3) Business Days (by not later than 10:00 a.m., Cincinnati, Ohio
time) prior notice of such election (which notice may be given by telephone but
shall be promptly followed by written confirmation from the Borrower to the
Bank), which notice and confirmation shall include (i) the type of LIBOR-Based
Rate so elected, (ii) the amount of the principal balance of the Loan to which
such LIBOR-Based Rate shall be applied (which shall be a minimum amount of Two
Million Dollars ($2,000,000) and in increments of One Million Dollars
($1,000,000) thereafter), (iii) the starting date for such LIBOR-Based Rate
(which date must be a London Business Day) and (iv) the irrevocable commitment
of the Borrower to accept and be bound by its election of such LIBOR-Based Rate
for the applicable LIBOR-Based Period. Anything to the contrary contained herein
notwithstanding, in no event may the Borrower elect computation of interest on
the Loan or any portion thereof at a LIBOR-Based Rate which has a LIBOR-Based
Rate Period extending past the Maturity Date. Upon the expiration of any
LIBOR-Based Rate Period, the Loan or portion thereof subject to a LIBOR-Based
Rate shall bear interest at the Prime-Based Rate, unless the Borrower has made
another election in the manner provided hereunder for interest thereon at a
LIBOR-Based Rate.
(c) PRINCIPAL PAYMENTS. The Borrower shall prepay the
outstanding principal balance of the Loan in an amount equal to the net
after-tax proceeds from the sale of any assets of the Borrower or any of its
Subsidiaries (other than sales of any assets as described in SECTION 2(L)(II) or
SECTION 2(L)(III) above) on the date of receipt of such proceeds (provided that
if prepayment on such date would cause the Borrower to be subject to a charge
pursuant to SECTION 4(F) below because of repayment of a portion of the Loan
bearing interest at a LIBOR-Based Rate prior to the expiration of the
LIBOR-Based Rate Period applicable hereto, then, at the option of the Borrower,
such proceeds shall not be applied to the prepayment of the Loan on such date,
but instead shall be deposited into a non-interest bearing account at the Bank
under the sole control of the Bank and shall be applied to prepayment of the
Loan at the expiration of such LIBOR-Based Rate Period), and the Borrower shall
prepay the outstanding principal balance of the Loan by at least Five Million
Five Hundred Thousand Dollars ($5,500,000), whether from the proceeds of asset
sales or otherwise, on or before the Disbursement Anniversary Date. Unless
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<PAGE> 19
sooner due and payable as provided hereunder, the entire outstanding principal
balance of the Loan shall be due and payable in full on the Maturity Date.
(d) RECORDING. The Bank will not record or file the Mortgages
or the Financing Statements if the outstanding principal balance of the Loan has
been reduced to the Designated Level on or before the Disbursement Anniversary
Date and so long as no Event of Default hereunder shall have occurred. If the
outstanding principal balance of the Loan has not been reduced to the Designated
Level on or before the Disbursement Anniversary Date, or if an Event of Default
hereunder shall have occurred, the Bank shall at any time thereafter have the
right, at its option, to record and file the Mortgages and the Financing
Statements, or any of them, at the expense of the Borrower, in the appropriate
recording and filing offices, and upon request by the Bank, the Borrower shall
promptly provide the Bank, at the expense of the Borrower, with title insurance
policies insuring the lien of any such recorded Mortgages which reflect no
encumbrances or restrictions on title other than as may be reflected in the
Title Reports, together with any endorsements thereto as may be deemed
appropriate by the Bank.
(e) CHANGES IN LAWS AND CIRCUMSTANCES; ILLEGALITY.
(i) In the event of (A) any change in the reserve
requirements and/or the assessment rates of the FDIC which are applicable to the
Bank in making the Loan or any portion thereof at a LIBOR-Based Rate or (B) any
change in circumstances affecting the interbank market, and the result of any
such event described in clause (A) or (B) above is to increase the cost to the
Bank of making the Loan, the Borrower shall promptly pay the Bank any additional
amounts, upon demand accompanied by a reasonably detailed statement as to such
additional amounts (which statement shall be conclusive in the absence of
manifest error), which will reasonably compensate the Bank for such costs.
(ii) If by reason of circumstances affecting the
interbank market adequate and reasonable means do not exist in the reasonable
judgment of the Bank for ascertaining a LIBOR-Based Rate at any time, the Bank
shall forthwith give notice thereof to the Borrower. Unless and until such
notice has been withdrawn by the Bank, the Borrower may not thereafter elect to
have any portion of the Loan bear interest at a LIBOR-Based Rate.
(iii) If any law, rule, regulation, treaty,
guideline, order or directive or any change therein or in the interpretation or
application thereof shall make it unlawful for the Loan to bear interest at a
LIBOR-Based Rate, the Bank shall notify the Borrower thereof and no portion of
the Loan may thereafter bear interest at a LIBOR-Based Rate. If required by law,
any portion of the Loan then bearing interest at a LIBOR-Based
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<PAGE> 20
Rate shall cease to bear interest at the LIBOR-Based Rate and shall bear
interest at the Prime-Based Rate.
(f) PREPAYMENTS. The Borrower may, at its option, from time to
time repay or prepay part or all of the outstanding principal balance of the
Loan bearing interest at the Prime-Based Rate without premium. The Loan or any
portion thereof bearing interest at a LIBOR-Based Rate may only be repaid
without charge at the expiration of the LIBOR-Based Rate Period applicable
thereto, and any repayment of the Loan or any portion thereof bearing interest
at a LIBOR-Based Rate at any time prior to the expiration of the LIBOR-Based
Rate Period applicable thereto shall be subject to a charge in an amount
determined by the Bank in its reasonable discretion, such charge to compensate
the Bank for loss of bargain with respect to the Loan or portion thereof being
so paid, and not as a penalty, payable upon demand accompanied by a reasonably
detailed statement as to such charge (which statement shall be conclusive in the
absence of manifest error).
(g) PAYMENTS. All payments of principal and interest hereunder
shall be made in immediately available funds to the Bank at 425 Walnut Street,
Location 9150, Cincinnati, Ohio 45202, or at such other place as may be
designated by the Bank to the Borrower in writing. The Bank is authorized by the
Borrower to enter from time to time the balance of the Loan and all payments and
prepayments thereon on the reverse of the Note or in the Bank's regularly
maintained data processing records, and the aggregate unpaid amount of the Loan
set forth thereon or therein shall be presumptive evidence of the amount owing
to the Bank and unpaid thereon.
5. EVENTS OF DEFAULT. If any of the following events (each, an
"Event of Default") shall occur, then the Bank may, without further notice or
demand, accelerate the Loan and declare it to be, and thereupon the Loan shall
become, immediately due and payable (except that the Loan shall become
automatically due and payable upon the occurrence of an event described in
SECTIONS 5(J), (K) AND (L) below), AND, to the extent the Loan has not yet been
drawn by the Borrower, terminate the Borrower's ability to do so, AND the Bank
shall have all rights provided herein or in any of the other Loan Documents or
otherwise provided by law to realize on any collateral or security for the Loan:
(a) The Borrower does not pay the Bank any interest on the
Loan within ten (10) days after the date due, whether by reason of acceleration
or otherwise, or does not pay or repay to the Bank any principal of the Loan or
any other obligation hereunder when due, whether by reason of acceleration or
otherwise; or
(b) The Borrower defaults in the performance or observance of
any agreement contained in SECTION 2(B), 2(C), 2(D), 2(E), 2(F), 2(G), 2(H) OR
2(O) hereof and such default has not been
- 20 -
<PAGE> 21
cured by the Borrower within ten (10) days after the occurrence thereof, or the
Borrower defaults in the performance or observance of any other agreement
contained in SECTION 2 hereof; or
(c) There shall have occurred any other violation or breach of
any covenant, agreement or condition contained herein or in any other Loan
Document which has not been cured by the Borrower within thirty (30) days after
the earlier to occur of the date the Borrower has knowledge thereof and the date
the Bank gives the Borrower notice thereof; or
(d) The Borrower does not pay when due or prior to the
expiration of the applicable cure period, if any, any principal or interest on
any other Indebtedness in excess of One Hundred Thousand Dollars ($100,000), or
the Borrower defaults in the performance or observance of any other term or
condition contained in any agreement or instrument under which such Indebtedness
is created, and the holder of such other Indebtedness declares, or may declare,
such Indebtedness due prior to its stated maturity because of the Borrower's
default thereunder; or
(e) There shall have occurred any violation or breach of any
covenant, agreement or condition contained in any other agreement between the
Borrower and the Bank which has not been cured by the Borrower prior to the
expiration of the applicable cure period, if any, including, without limitation,
the 1996 Agreement and the Loan Agreement between the Borrower and the Bank
dated as of December 31, 1992; or
(f) The Borrower does not perform its obligations under any
agreement material to its business, and the other party to such agreement
declares, or may declare, such agreement in default; or
(g) Any representation or warranty made herein or in any other
Loan Document or writing furnished in connection with this Agreement shall be
false or misleading in any material respect when made; or
(h) The Borrower is generally not paying its debts as they
become due; or
(i) With respect to the plans referred to in SECTION 1(H)
above, or any other similar plan, a "reportable event" or "prohibited
transaction" pursuant to ERISA has occurred which results in the imposition of
material taxes or penalties against the Borrower or the termination of such
plans (or trusts related thereto), or the Borrower incurs any material liability
to the PBGC in connection with such plans; or
(j) The Borrower makes an assignment of a material part of its
assets for the benefit of creditors; or
- 21 -
<PAGE> 22
(k) The Borrower applies for the appointment of a trustee or
receiver for a material part of its assets or commences any proceedings relating
to the Borrower under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or other liquidation law of any jurisdiction;
or any such application is filed, or any such proceedings are commenced, against
the Borrower, and the Borrower indicates its approval, consent or acquiescence
thereto; or an order is entered appointing such trustee or receiver, or
adjudicating the Borrower bankrupt or insolvent, or approving the petition in
any such proceedings, and such order remains in effect for sixty (60) days; or
(l) Any order is entered in any proceedings against the
Borrower decreeing the dissolution of the Borrower; or
(m) Any material part of the Borrower's operations shall
cease, other than temporary or seasonal cessations which are experienced by
other companies in the same line of business and which would not have a material
adverse effect on the Borrower's operations or financial condition or its
ability to perform its obligations hereunder; or
(n) Any final non-appealable judgment which, together with
other outstanding judgments against the Borrower, causes the aggregate of such
judgments in excess of confirmed insurance coverage satisfactory to the Bank to
exceed Seven Hundred Fifty Thousand Dollars ($750,000), shall be rendered
against the Borrower; or
(o) Jack C. Maier, Blanche F. Maier and Craig F. Maier and
members of their families shall fail to beneficially own, in the aggregate, at
least thirty percent (30%) of the outstanding common stock of the Borrower, with
full voting rights.
The above recitation of Events of Default shall be interpreted
in all respects in favor of the Bank. To the extent any cure-of-default period
is provided above and the Loan has not yet been drawn by the Borrower, the Bank
may nevertheless, at its option pending completion of such cure, suspend its
obligation to consider disbursement of the Loan.
6. GENERAL.
(a) REASONABLE ACTIONS. The Bank agrees that in taking any
action which it is permitted or empowered to take under this Agreement, it will
act reasonably under what it believes are the facts and circumstances existing
at such time.
(b) DELAY. No delay, omission or forbearance on the part of
the Bank in the exercise of any power or right shall operate as a waiver
thereof, nor shall any single or partial delay, omission or forbearance in the
exercise of any other power or
- 22 -
<PAGE> 23
right. The rights and/or remedies of the Bank herein provided are cumulative,
shall be interpreted in all respects in favor of the Bank and are not exclusive
of any other rights and/or remedies provided by law.
(c) NOTICE. Except as otherwise expressly provided in this
Agreement, any notice hereunder shall be in writing and shall be deemed to be
given when personally delivered or when sent by certified mail, postage prepaid,
and addressed to the parties at their addresses set forth below:
Bank: Star Bank, National Association
425 Walnut Street
Cincinnati, Ohio 45202
Attention: Andrew T. Hawking
Senior Vice President
With a copy to: Elizabeth A. Galloway, Esq.
Taft, Stettinius & Hollister
1800 Star Bank Center
425 Walnut Street
Cincinnati, Ohio 45202
Borrower: Frisch's Restaurants, Inc.
2800 Gilbert Avenue
Cincinnati, Ohio 45206
Attention: Mr. Donald H. Walker
Vice President-Finance
With copies to: Craig F. Maier, President
Frisch's Restaurants, Inc.
2800 Gilbert Avenue
Cincinnati, Ohio 45206
and
W. Gary King, Esq.
Frisch's Restaurants, Inc.
2800 Gilbert Avenue
Cincinnati, Ohio 45206
The Borrower or the Bank may, by written notice to the other as provided herein,
designate another address for purposes hereunder.
(d) EXPENSES; INDEMNITY. The Borrower agrees to pay all
reasonable out-of-pocket expenses of the Bank and its employees (including
attorney's fees and legal expenses, but excluding the salaries of the Bank's own
employees, as well as all search, filing and recording fees, and title report
and insurance fees) incurred by the Bank in entering into and closing this
Agreement and preparing the documentation in connection herewith, administering
- 23 -
<PAGE> 24
the obligations of the Borrower hereunder or under any of the other Loan
Documents, and enforcing the obligations of the Borrower hereunder or under any
of the other Loan Documents, and the Borrower agrees to pay the Bank upon demand
for the same. The Borrower agrees to defend, indemnify and hold the Bank
harmless from any liability, obligation, cost, damage or expense (including
reasonable attorney's fees and legal expenses) for taxes (other than income
taxes), fees or third party claims which may arise or be related to the
execution, delivery or performance of this Agreement or any of the other Loan
Documents, except in the case of negligence or wilful misconduct on the part of
the Bank. The Borrower further agrees to indemnify and hold harmless the Bank
from any loss or expense which the Bank may sustain or incur as a consequence of
default by the Borrower in payment of any principal of or interest on the Loan,
including, without limitation, any such loss or expense arising from interest or
fees payable by the Bank to lenders of funds obtained by it in order to maintain
interest rates on the Loan or any portion thereof at a LIBOR-Based Rate.
(e) SURVIVAL. All covenants and agreements of the Borrower
made herein or otherwise in connection with the transactions contemplated hereby
shall survive the execution and delivery of this Agreement and the other Loan
Documents, and shall remain in effect so long as any obligations of the Borrower
are outstanding hereunder or under any of the other Loan Documents.
(f) SEVERABILITY. Any provision of this Agreement or any of
the other Loan Documents which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition of enforceability without invalidating the remaining portions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.
(g) LAW. IMPORTANT: The Loan shall be deemed made in Ohio and
this Agreement and all other Loan Documents, and all of the rights and
obligations of the Borrower and the Bank hereunder and thereunder, shall in all
respects be governed by and construed in accordance with the laws of the State
of Ohio, including all matters of construction, validity and performance.
Without limitation on the ability of the Bank to initiate and prosecute any
action or proceeding in any applicable jurisdiction related to loan repayment,
the Borrower and the Bank agree that any action or proceeding commenced by or on
behalf of the parties arising out of or relating to the Loan and/or this
Agreement and/or any of the other Loan Documents shall be commenced and
maintained exclusively in the District Court of the United States for the
Southern District of Ohio, or any other court of applicable jurisdiction located
in Cincinnati, Ohio. The Borrower and the Bank also agree that a summons and
complaint commencing an action or proceeding in any such Ohio courts by or on
behalf of such parties shall be properly served and shall confer personal
jurisdiction on a party
- 24 -
<PAGE> 25
to which said party consents, if (i) served personally or by certified mail to
the other party at any of its addresses noted herein, or (ii) as otherwise
provided under the laws of the State of Ohio. The interest rates and all other
terms of the Loan negotiated with the Borrower are, in part, related to the
aforesaid provisions on jurisdiction, which the Bank deems a vital part of this
loan arrangement.
(h) SUCCESSORS. This Agreement shall be binding upon and inure
to the benefit of the Borrower and the Bank and their respective successors and
assigns. The Borrower shall not assign its rights or delegate its duties
hereunder without the prior written consent of the Bank.
(i) AMENDMENT. Except as otherwise expressly provided herein,
this Agreement may not be modified or amended except in writing signed by
authorized officers of the Bank and the Borrower.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto as of the
date first set forth above.
STAR BANK, NATIONAL FRISCH'S RESTAURANTS, INC.
ASSOCIATION
By: /s/ Andrew T. Hawking By: /s/ Donald H. Walker
------------------------ -------------------------
Andrew T. Hawking Donald H. Walker
Senior Vice President Vice President-Finance
- 25 -
<PAGE> 26
LIST OF EXHIBITS
----------------
A - Financial Information and Reports
B - Actions
C - Permitted Liens
D - Financial Covenants
E - Permitted Indebtedness
F - Designated Properties
G - Form of Mortgage
H - Form of Security Agreement
I - Form of Life Insurance Assignment
I-A - Life Insurance Policies
J - Form of Note
- 26 -
<PAGE> 27
EXHIBIT A
---------
FINANCIAL INFORMATION AND REPORTS
---------------------------------
1. Annual Report for the year ended June 2, 1996
2. Form 10-Q for the period ended March 9, 1997
<PAGE> 28
EXHIBIT B
---------
ACTIONS
-------
1. FRISCH'S, ET. AL. VS. HARTFORD, ET. AL. (CLASS ACTION TO RECOVER
OVERCHARGES OF WORKERS COMPENSATION PREMIUMS IN TEXAS). No new developments.
2. TINA STEPHENS VS. FRISCH'S (#41 WALNUT HILLS - RACE AND SEX
DISCRIMINATION).
We are awaiting the Court's scheduling order.
3. KOPIES, INC. VS. EASTMAN KODAK COMPANY (CLASS ACTION FOR ANTITRUST
VIOLATIONS IN SALES AND RENTALS OF COPIERS).
No new developments.
4. CAROLYN LONGEST AND LANA CORDER VS. FRISCH'S (#85 ROCKVILLE - SEXUAL
HARASSMENT SUIT).
Discovery has been completed. Dispositive motions are due July
15th.
5. JESSIE BYARS VS. FRISCH'S (#5 HARTWELL - RACE AND SEX
DISCRIMINATION).
We are awaiting the decision of the Sixth Circuit.
6. GLEN DEVINE VS. FRISCH'S, ET. AL. (#192 BLANKENBAKER - EMPLOYMENT
DISCRIMINATION UNDER THE ADA).
No new developments.
7. DEBORAH MAY VS. FRISCH'S (#72 RICHMOND #2 - ADMINISTRATIVE COMPLAINT
FILED WITH INDIANA CIVIL RIGHTS COMMISSION FOR "RETALIATION" TERMINATION IN
1992, BASED ON 1991 INCIDENT OF ALLEGED DISABILITY DISCRIMINATION).
We are awaiting the decision of the Administrative
Law Judge of the Indiana Civil Rights Commission.
8. WILLIS DOBBS VS. FRISCH'S (#49 SPRING GROVE - DISCRIMINATION SUIT).
Discovery is continuing.
9. VICKI BELTZ AND TARA MCINTOSH VS. FRISCH'S, ET. AL. (#173 TOWNE MALL
- - SEXUAL HARASSMENT SUIT).
Discovery is continuing.
<PAGE> 29
EXHIBIT C
---------
PERMITTED LIENS
---------------
Balance
Lien July 8, 1997
- --------------------------------------------------------------------------------
Industrial Revenue Bonds: $200,000
State of Ohio Economic Development Revenue
Bonds (Security: Commissary and General
Office leaseholds and equipment)
Other secured obligations: 11,985
Timothy and Colleen Tsai Note dated July
21, 1994 (Security: Sharon Road Big Boy
real estate)
Loans against cash surrender values of life insurance policies:
Company Policy No. Amount
- ------- ---------- ------
Great West Life Assurance 1231-348 74,865
Great West Life Assurance 1511-228 23,608
Great West Life Assurance 1629-356 105,417
Great West Life Assurance 1724-573 96,928
The Hartford R559-474L 100,000
Lincoln National Life 64-1471679 75,648
Lincoln National Life 66-1099177 6,535
Lincoln National Life 66-1154063 16,376
Lincoln National Life 66-1183154 21,212
Lincoln National Life 64-1592945 6,891
Lincoln National Life 64-1273454 50,944
Lincoln National Life 64-1351694 24,369 602,793
--------- ----------
$814,778
==========
And any liens on property which is described above that replace any liens
described above, provided that the obligations secured by such liens do not
exceed the amounts described above.
<PAGE> 30
EXHIBIT D
---------
FINANCIAL COVENANTS
-------------------
The Borrower agrees that it shall:
(a) TANGIBLE NET WORTH. Not permit the Borrower's tangible net worth,
on a consolidated basis, to be less than the following amounts (each, a "Base
Tangible Net Worth") at any time during any of the following periods (each, a
"TNW Year"):
TNW YEAR BASE TANGIBLE NET WORTH
- -------- -----------------------
the period commencing with the $45,000,000
last day of the fiscal year ended
June 1, 1997, through the next to
last day of the next fiscal year
("FY 98")
any period commencing with the the Base Tangible Net
last day of a fiscal year, Worth for the
beginning with the period immediately
commencing on the last day preceding TNW Year
of FY 98, through the next plus $1,500,000
to last day of the next
fiscal year
"Tangible net worth" for purposes hereof shall mean the total of book net worth
less any assets, except capitalized leases, considered intangible under
generally accepted accounting principles.
(b) INTEREST COVERAGE RATIO. Not permit the Borrower's Interest
Coverage Ratio to be less than 1.5 to 1 for any period commencing on the first
day of the then-current fiscal year of the Borrower and ending on the last day
of the most recent of the Borrower's fiscal quarters during such year. "Interest
Coverage Ratio" for purposes hereof shall mean the Borrower's ratio, on a
consolidated basis, of (i) its earnings before total interest expense (as
required to be reflected in audited financial statements prepared in accordance
with generally accepted accounting principles) and current and deferred taxes,
to (ii) its total interest expense (as required to be reflected in audited
financial statements prepared in accordance with generally accepted accounting
principles).
<PAGE> 31
EXHIBIT E
---------
PERMITTED INDEBTEDNESS
----------------------
Balance
JULY 8, 1997
------------
Loan Agreement dated December 31, 1992 (as amended)
payable to Star Bank, N.A. $ 8,250,000
Loan Agreement dated August 30, 1993 (as amended)
payable to Star Bank, N.A. and KeyBank N.A. 12,000,000
-----------
$20,250,000
===========
Contingent liability as assignor/guarantor of the following leases:
Remaining
Location Assignee Lease Term
-------- -------- ----------
Dayton, OH (HS Needmore) S & L Fast Foods, Inc. 9/30/98
Silver Springs, FL Ferguson Foods, Inc. 1/31/00
Ocala, FL Ferguson Foods, Inc. 8/1/00
Blue Ash, OH (HS Blue Ash) S & L Fast Foods, Inc. 9/30/00
Florence, KY (P & W) Olive Garden 12/31/01
Houston, TX (Westheimer) Pappas Companies 10/31/03
Orlando, FL (Pershing) Angel's Diner of America 3/31/06
Lease liability for closed restaurants & other non-operating property
(lease not presently assigned)
Remaining Rent Per
Location Lease Term Month
- -------- ---------- -----
Frankfort, KY 10/31/97 $1,650
Indianapolis, IN (Ky. Ave.) 6/4/00 (ground lease) $3,000
Muncie, IN 10/1/01 (ground lease) $3,125
Indianapolis office space 1/31/00 $2,240
Plus indebtedness secured by permitted liens as described on Exhibit C and
indebtedness replacing the indebtedness secured by the permitted liens as
described on Exhibit C, provided that no such replacement indebtedness shall
exceed the amount being replaced as shown on Exhibit C.
<PAGE> 32
EXHIBIT F
---------
DESIGNATED PROPERTIES
---------------------
(See attached)
<PAGE> 33
EXHIBIT F
---------
Store # Street Address County
- ------- -------------- ------
16 2490 Post Drive, Indianapolis , IN 46219 Marion
21 6102 Cambridge Way, Plainfield, IN 46168 Hendricks
55 3512 S. Keystone Ave., Indianapolis, IN 46227 Marion
56 91 Byrd Way, Greenwood, IN 46143 Johnson
59 225 Lafayette St., London, OH 43140 Madison
85 5791 Rockville Rd., Indianapolis, IN 46214 Marion
93 7690 East 96th St., Fishers, IN 46058 Hamilton
96 1475 Wagner Ave., Greenville, OH 45331 Darke
113 23401 U.S. Rt. 23, Circleville, OH 43113 Pickaway
137 1524 West South St., Lebanon, IN 46052 Boone
189 250 Noble Creek Drive, Noblesville, IN 46060 Hamilton
190 4795 Kentucky Ave., Indianapolis, IN 46221 Marion
191 900 N. Morton St., Franklin, IN 46131 Johnson
192 1610 Kentucky Mills Dr., Jeffersontown, KY 40299 Jefferson
193 2201 South Main St., Bellefontaine, OH 43311 Logan
<PAGE> 34
EXHIBIT G
---------
[To be appropriately modified for
Companies other than Frisch's
Restaurants, Inc. which own
Designated Properties and for
state recording requirements]
OPEN-END MORTGAGE
-----------------
MAXIMUM PRINCIPAL AMOUNT $______________
----------------------------------------
WHEREAS, STAR BANK, NATIONAL ASSOCIATION, a national banking
association having an address of 425 Walnut Street, Cincinnati, Hamilton County,
Ohio 45202 ("Mortgagee"), pursuant to that certain Loan Agreement (as defined
below), anticipates making a certain loan to FRISCH'S RESTAURANTS, INC., an Ohio
corporation, having an address of 2800 Gilbert Avenue, Cincinnati, Ohio 45206
("Mortgagor"), the principal amount of which loan shall not exceed at any given
time $_____________ (the "Loan") subject to certain conditions, one of which is
that this instrument shall have been duly executed and delivered; and
WHEREAS, the Loan is or shall be evidenced by and made pursuant to that
certain Loan Agreement dated as of July 9, 1997 between Mortgagor and Mortgagee
(as amended, modified, extended or renewed from time to time, the "Loan
Agreement"), that certain Promissory Note in the principal amount of
$_______________ dated as of _____ __, 1997 executed by Mortgagor in favor of
Mortgagee (as amended, modified, extended or renewed from time to time, the
"Note"), and the other Loan Documents, as defined in the Loan Agreement (all of
the indebtedness and other obligations of Mortgagor to Mortgagee under the Loan
Agreement, the Note and the other Loan Documents being referred to collectively
as the "Obligations");
NOW, THEREFORE, Mortgagor, for good and valuable consideration, grants,
bargains, sells and conveys unto Mortgagee, having its tax-mailing address at
______________________________________________________________________________,
_______________ its successors and assigns:
All of the estate, right, title and interest of Mortgagor in and to the
real property situate in _______________ County, ____________ and described in
EXHIBIT A attached hereto and made a part of this instrument (the "Property");
TOGETHER with all buildings, structures and other improvements now or
hereafter located on the Property; all the easements and appurtenances thereto,
whether now owned or hereafter acquired, including all rights of ingress and
egress to and from adjoining property; all machinery, fittings, fixtures and
personal property
<PAGE> 35
attached to the Property or used in the operation or maintenance thereof,
together with all additions and accessions thereto and replacements thereof;
Mortgagor's interest as lessor or lessee in and to all leases of or relating to
the Property, or any part thereof, heretofore or hereafter made, intending that
in case of a foreclosure sale, the interest of Mortgagor in any such leases then
in force shall pass to the purchaser at such sale as part of the Property,
subject to election by such purchaser to terminate or enforce any of such leases
hereafter made; all awards as a result of the exercise of the right of eminent
domain, the alteration of the grade of any street, or any other injury to,
taking of, or decrease in the value of any of the Property; and all proceeds
under insurance policies and proceeds thereof on or with respect to the
Property, to the extent of the Obligations.
All the foregoing encumbered by this Mortgage are collectively referred
to herein as the "Premises".
TO HAVE AND TO HOLD the Premises unto Mortgagee, its successors and
assigns, forever.
Mortgagor covenants with Mortgagee (l) that Mortgagor is lawfully
seized of the Premises in fee simple, (2) that Mortgagor has full power, right
and authority to convey and mortgage the same, (3) that, except for those
matters (the "Permitted Exceptions") listed in EXHIBIT B attached hereto and
incorporated herein, upon filing for recording with the Recorder of the county
in which the Premises are located, the lien of this Mortgage shall constitute a
first and best lien on the Premises, (4) that the Property and the Premises are
free and clear of all encumbrances and any interest of any other person
whatsoever, except for the Permitted Exceptions, and (5) that it does warrant
and will defend the title to the same against the claims of all persons
whomsoever except those claiming by, through or under the Permitted Exceptions.
MORTGAGOR FURTHER COVENANTS AND AGREES:
l. SUM SECURED; REPAYMENT. This Mortgage is given by Mortgagor to
secure the Obligations, including indebtedness in the principal amount
outstanding from time to time under the Note, not to exceed the principal amount
of _____________________ DOLLARS ($____________) at any particular time,
together with interest thereon, amounts advanced by Mortgagee to pay taxes on
the Premises, for insurance on the Premises and for the protection of the
Premises, amounts Mortgagee is permitted to advance under this Mortgage and all
other sums which may be advanced or otherwise become due to Mortgagee under the
Loan Documents, or any extension, renewal, or modification thereof. The
Obligations include all indebtedness of Mortgagor in connection with the Loan
Agreement to Mortgagee, its successors and assigns, whether Mortgagee is acting
for its own account, as agent or trustee, or a combination of the foregoing. The
Loan Documents may be renewed, restated, extended, supplemented, amended or
modified and new Loan Documents may be executed (except for an increase in the
maximum principal amount) without in any way affecting this Mortgage or the
<PAGE> 36
Obligations. Mortgagor agrees to perform and keep free from default all other
agreements affecting the Premises, if any, and to perform or cause to be
performed when due all of the Obligations. All payments received by Mortgagee
shall be applied by Mortgagee first to charges and other sums (except principal
and interest) due under or in connection with the Loan Documents, then to
interest payable on the Loan and then to the unpaid principal amount of the
Loan, and otherwise in whatever order Mortgagee, exercising its sole discretion,
may elect. The Obligations currently have a final maturity date of
__________________, 1999.
2. CONDITION OF THE PREMISES. Mortgagor shall keep the Premises in good
condition and repair, and shall not commit or permit anything which may in any
way impair the value of the Premises; neither shall Mortgagor remove, alter or
permit the removal from the Premises or alteration of, any building, improvement
or fixture included in the Premises. If the Premises shall be damaged in whole
or in part by casualty, Mortgagor shall promptly restore the Premises to their
original condition, or if the Premises shall be damaged by condemnation of a
part thereof, Mortgagor shall restore the same to a condition satisfactory to
Mortgagee. Mortgagor shall cause the Premises to comply continuously with all
laws, regulations, environmental controls, permits and other requirements of any
governmental authority having jurisdiction relating to the Premises. Mortgagor
further covenants that there shall be no construction on the Property or on any
adjoining land now or in the future owned or controlled by Mortgagor or any
entity controlling, controlled by or under common control with Mortgagor unless
the plans and specifications for such construction shall have been first
submitted to and approved by Mortgagee.
3. TAXES, ASSESSMENTS, LIENS AND JUDGMENTS. Mortgagor shall pay, on or
before the date that they become due and payable without penalty, all taxes,
liens, judgments or assessments which may accrue, be levied or assessed upon the
Premises, or any part thereof, or which may be or become a lien upon the
Premises, and Mortgagor, upon ten (10) days notice, will deliver to Mortgagee,
at its request, the official receipt or receipts evidencing such payment;
provided, however, that if Mortgagor shall in good faith, and by proper legal
action, contest any such taxes, liens, judgments or assessments or other
charges, or the validity thereof, and shall have furnished to Mortgagee, at
Mortgagee's option, a bond satisfactory to Mortgagee issued by a surety
satisfactory to Mortgagee to secure the payment thereof and any interest and
penalties thereon, in such amount as Mortgagee may require, and, at the option
of Mortgagee, shall have taken such other actions as Mortgagee in its sole
discretion shall deem appropriate to protect the Premises and the priority of
the lien of this Mortgage, then Mortgagor shall not be required to pay the same
as long as such contest operates to prevent collection and foreclosing of any
such lien or judgment, and is maintained and prosecuted with diligence, and
shall not have been terminated or discontinued adversely to Mortgagor.
4. INSURANCE. Mortgagor shall keep the Premises insured against
casualty with an all risk policy of casualty insurance and with such
<PAGE> 37
other policies against such other hazards as are commonly maintained by
companies similarly situated to Mortgagor and as may be required by Mortgagee,
from time to time, for its replacement cost, and if this Mortgage is assigned by
Mortgagee, against such other hazards as such assignee may from time to time
require; and, at Mortgagee's option, shall deliver to Mortgagee policies for
such insurance in form and amount, and written by companies satisfactory to
Mortgagee and first payable in case of loss to Mortgagee, full power being
hereby given to Mortgagee as Mortgagor's attorney-in-fact, coupled with an
interest, to settle and comPromise claims or bring suit to recover thereunder,
to apply the net proceeds therefrom, after deducting all costs of collection,
including attorney fees, in reduction of the indebtedness hereby secured,
whether or not the same is then due and payable, or, at its option, toward the
repair, reconstruction or restoration of the Premises, and in the event of
foreclosure to assign each such policy to the transferee of the Premises. Such
policies of insurance shall be issued by insurers chosen by Mortgagor and
acceptable to Mortgagee, and at Mortgagee's option, such policies shall contain
a standard mortgagee endorsement and shall provide that the policy may not be
cancelled without 30 days prior written notice to Mortgagee, whether as a result
of nonpayment by Mortgagor or any other fault of Mortgagor. Mortgagor shall also
obtain and maintain a policy of general public liability insurance covering all
liabilities incident to the ownership, possession, occupancy and operation of
the Property as required under the Loan Agreement, and at Mortgagee's option,
naming Mortgagee as an additional insured thereunder. Except as otherwise
provided herein, all premiums for such insurance policies shall be paid by
Mortgagor making payment, on or before the due date thereof, directly to the
insurance carrier. In the event of loss, Mortgagor shall give prompt notice to
the insurance carrier and Mortgagee, and Mortgagee may make proof of loss if not
made promptly by Mortgagor. Each insurance company concerned is hereby
authorized and directed to make payments for such loss (up to the amounts
secured hereby) directly to Mortgagee, instead of to Mortgagor and Mortgagee
jointly.
5. ESCROW. At the option of Mortgagee, if an Event of Default should
occur and be continuing hereunder, Mortgagor shall deposit monthly with
Mortgagee an amount, as estimated by Mortgagee, which, when added to such other
deposits, will be sufficient to pay when due all ground rents, if any, taxes,
assessments, insurance premiums and similar charges relating to the Premises
which next become due with respect to the Premises and to pay such additional
amount as may be necessary to make up any deficiency in the funds available to
pay the same on or before thirty (30) days before the date when such ground
rents, taxes, assessments, premiums and charges become due and payable. All such
deposits shall be held by Mortgagee without interest and free of any lien or
claim of Mortgagor's creditors, to be used by Mortgagee to pay such ground
rents, taxes, assessments, premiums and other charges as the same become due and
payable. Any excess in such deposits shall be credited on subsequent deposits to
be made hereunder. Monthly accruals of real estate taxes shall be based upon
one-twelfth (l/12th) of the estimated annual real estate taxes on the Premises.
If at any time the deposits held by Mortgagee are insufficient to pay any ground
rents, taxes, assessments,
<PAGE> 38
insurance premiums or other charges, Mortgagor, upon receipt of notice thereof,
shall deposit with Mortgagee such additional funds as may be necessary, in the
judgment of Mortgagee, to remove such deficiency. Mortgagee shall not be liable
for any unintentional delay or error in paying any ground rents, taxes,
assessments, insurance premiums or other charges.
6. OTHER ENCUMBRANCES. Mortgagor shall pay any debt, claim or other
charge for repairs or improvements that may have been made or may hereafter be
made on, and which may become a lien against, the Premises or any part thereof,
and shall not permit any lien or encumbrance of any kind or claim thereof,
whether prior or subordinate to this Mortgage, except the Permitted Exceptions,
to accrue or remain on or affect the Premises or any part thereof. If Mortgagor,
without the prior written approval of Mortgagee, shall further encumber the
Premises or permit the Premises to be further encumbered by another mortgage,
lien, lease or other encumbrance, or permit any claim of mechanic's lien to
remain of record more than thirty (30) days after its filing, Mortgagee, at its
option, without limiting its other rights and remedies, may declare the entire
indebtedness secured hereby immediately due and payable.
7. EMINENT DOMAIN. In the event that the Premises, or any portion
thereof, are taken or damaged by eminent domain, or conveyed in lieu thereof,
the proceeds of any condemnation award shall, at the option of Mortgagee, (i) be
applied to the reduction of the indebtedness secured by this Mortgage, whether
or not such indebtedness is then due, or (ii) be disbursed by Mortgagee to pay
for the costs of restoration of the portion of the Premises not taken, if any.
No such condemnation award shall be applied to the reduction of the indebtedness
secured hereby if, in the sole opinion of Mortgagee, the taking does not
adversely and materially affect the operation of the Premises as previously
conducted or Mortgagee's security (hereunder or otherwise).
8. RENTS, ISSUES AND PROFITS. The rents, issues and profits of the
Premises are hereby pledged as additional security for the Obligations, and
Mortgagee shall have the right, at any time after an Event of Default in the
payment or in the performance of any of the Obligations, without regard to the
adequacy of any security for the Obligations and with or without the appointment
of a receiver, to enter upon and take possession of the Premises and to collect
such rents, issues and profits, and apply the same less the cost of curing such
default and less the cost of operation, maintenance and repair, and reasonable
collection, management and attorney fees, in reduction of the Obligations.
9. LEASES OF PREMISES. Upon Mortgagee's request, from time to time,
Mortgagor shall furnish Mortgagee with a statement, in affidavit form and in
such reasonable detail as Mortgagee may require, of all leases (for a period of
more than two weeks) of the Premises, if any, and, on demand, furnish Mortgagee
with executed counterparts of any and all such leases. Mortgagor shall, as
requested by Mortgagee, assign to Mortgagee by specific assignment any leases,
now or hereafter executed with respect to the Premises, in which Mortgagor,
<PAGE> 39
its successors or assigns are lessor, and Mortgagee may give written notice of
such assignments to the lessees therein named.
10. INSPECTIONS. Mortgagee shall have the right, at reasonable times,
to inspect the books and records relating to the operation of the Premises and
make copies thereof, which books and records shall be kept at the Premises or at
2800 Gilbert Avenue, Cincinnati, Ohio. Mortgagee shall also have the right, at
any time, to inspect the Premises.
11. CHANGE IN LAW. In the event of the enactment after this date of any
law of the state or the locality in which the Premises are located deducting
from the value of the land for the purpose of taxation the amount of any lien
thereon, or imposing upon Mortgagee the payment of the whole or any part of the
taxes or assessments or charges or liens herein required to be paid by
Mortgagor, or changing in any way the laws relating to the taxation of mortgages
or debts secured by mortgages or Mortgagor's interest in the property, or the
manner or collection of taxes, so as to affect this Mortgage or any other Loan
Documents, then, and in any such event, Mortgagor upon demand by Mortgagee,
shall pay such taxes or assessments, or reimburse Mortgagee therefor; provided,
however, that if in the opinion of counsel for Mortgagee such payment might
result in the imposition of interest beyond the maximum amount permitted by law,
then and in such event, Mortgagee may elect, by notice in writing given to
Mortgagor, to declare all of the indebtedness secured hereby to become due and
payable sixty (60) days from the giving of such notice.
12. RIGHT TO CURE DEFAULT; PROTECTION OF SECURITY. Upon failure of
Mortgagor to comply with any of the provisions hereof or any of the provisions
of the other Loan Documents, Mortgagee may enter upon the Premises (but without
any obligation so to do) and make repairs, procure insurance, pay taxes and
assessments and pay any debt, claim or other charge which Mortgagor should have
made, procured or paid (the receipt of the creditor or proper tax official being
conclusive evidence of the amount, validity and the fact of payment thereof), or
cure any default under any Loan Document. In addition, if any action or
proceeding is threatened or commenced which may or does materially and adversely
affect Mortgagor's or Mortgagee's interest in the Premises, including, but not
limited to, eminent domain, insolvency or arrangements or proceedings involving
a bankrupt, then Mortgagee, at its option, may make such appearances, disburse
such sums and take such action as Mortgagee considers necessary to protect its
interest, including, but not limited to, disbursement of reasonable attorney's
fees and entry upon the Premises to make repairs. All sums so paid or expenses
incurred by Mortgagee in exercising its rights under this paragraph 12 shall be
immediately due and payable by Mortgagor, shall bear interest at the highest
rate permitted to be charged on delinquent installments of principal and
interest under the Loan Documents, and shall be hereby secured. Nothing
contained in this paragraph 12 shall (i) require Mortgagee to incur any expense
or do any act hereunder or (ii) limit any other rights or remedies Mortgagee may
have under this Mortgage or otherwise.
<PAGE> 40
13. CHANGE OF OWNERSHIP. If the Premises or any part thereof are sold,
transferred, conveyed, encumbered, leased or assigned or placed under contract
to do any of the foregoing, without the prior written consent of Mortgagee or
except to the extent permitted pursuant to the Loan Agreement, Mortgagee, at its
option, may declare the entire indebtedness secured hereby immediately due and
payable and may exercise any other rights it may have under this Mortgage or at
law or in equity.
14. EXPENSES OF MORTGAGEE. Mortgagor shall indemnify Mortgagee against,
hold Mortgagee harmless from and pay all sums, including costs and attorney
fees, which Mortgagee may incur in any proceedings to defend the title or
possession of the Premises or to prevent the commission of waste or to establish
or preserve the lien of this Mortgage or its priority, or in connection with any
suit to enforce this Mortgage or any of the Loan Documents or recover the
indebtedness hereby secured. All such sums shall be immediately due and payable
by Mortgagor, shall bear interest at the highest rate permitted to be charged on
delinquent installments of principal and interest under the Loan Documents and
shall be secured hereby.
15. OBLIGATIONS AS TO LEASES. Mortgagor covenants that it will not
hereafter lease or enter into any agreement to lease any portion of the
Premises or enter into or agree to any alteration, modification, amendment,
extension, assignment, sub-leasing or termination of any existing lease (for a
term of more than two weeks) relating to the Premises, without first submitting
such lease or agreement to lease or such alteration, modification, amendment,
extension, assignment, sub-leasing or termination to Mortgagee and obtaining its
written consent thereto. Mortgagor will perform all of its obligations as lessor
under all leases and any sub-lease of the Premises, will not consent to any
subletting or assignment without Mortgagee's consent, or do or fail to do any
act which might create in any lessee the right to cease payment of rent or
terminate its lease, and agrees that approval by Mortgagee of any lease,
amendment to lease, assignment or subletting shall not relieve Mortgagor from
the obligations of these covenants. Mortgagor will comply with each and every
obligation imposed upon it by any lease of the Premises.
16. DEFAULT. The occurrence of an Event of Default under the Loan
Agreement shall constitute an Event of Default hereunder. Upon the occurrence of
an Event of Default, at the option of Mortgagee (or automatically under the
circumstances described in the Loan Agreement), the entire indebtedness secured
by this instrument shall immediately become due and payable and shall bear
interest at the highest default rate permitted to be charged under the Loan
Agreement, and this Mortgage shall become absolute and the rights, title and
interest of Mortgagor in, to and under the Premises shall become subject to
foreclosure; and Mortgagee, in addition to all other remedies available under
the Loan Documents or at law or in equity, shall have the right and power to do
any one or more of the following: (l) sell the Premises if permitted by law, (2)
institute judicial proceedings to foreclose the interest of Mortgagor in the
Premises, (3) apply without notice, the same being hereby waived, for the
appointment of a receiver for the Premises and the rents and profits
<PAGE> 41
thereof or (4) enter upon and take possession of the Premises and let the
Premises and receive the rents, issues and profits thereof, make repairs and
apply said rentals and profits thereto, and apply said rentals and profits,
after payment of all necessary or proper charges and expenses, on account of the
amount hereby secured. At Mortgagee's option, Mortgagor, immediately after any
Event of Default, will vacate the Premises within three (3) days after written
demand has been made therefor by Mortgagee by delivering such demand at the
Premises, and upon Mortgagor's failure so to do Mortgagee shall forthwith be
entitled to recover possession of the Premises by action of forcible entry and
detainer, or otherwise. Upon proceedings being commenced for the foreclosure of
the interest of Mortgagor in the Premises, Mortgagee shall be at liberty to
apply for the appointment of a receiver as a matter of right without
consideration of the value of the Premises as security for the amount due
Mortgagee or the solvency of any person or persons liable for the payment of
such amount.
17. ENVIRONMENTAL CONDITION OF PREMISES. Mortgagor hereby confirms
those representations, warranties, covenants and indemnities set forth in the
Loan Agreement with respect to the Premises hereunder.
18. NON-WAIVER. The delay or the failure of Mortgagee to exercise any
of its options to accelerate the indebtedness secured hereby, or to exercise its
other rights or remedies in connection with any violation of the conditions,
agreements or covenants of this Mortgage or the other Loan Documents shall not
constitute a waiver of the right to exercise such rights because of any
subsequent violation, and in determining whether a default has occurred, time
shall be considered to be of the essence of this agreement.
19. COSTS OF COLLECTING OR SECURING THE INDEBTEDNESS. All costs of
collecting, securing or attempting to collect or secure the Obligations,
including attorneys fees if permitted by law to be included, shall be deemed a
part of the indebtedness secured hereby. The validity of the provisions in the
Loan Documents relating to the collection of attorney fees, and other expenses
incident to collecting or securing the indebtedness hereby, or enforcing or
protecting the security for such indebtedness, shall be enforceable to the
fullest extent permitted by law, any law or decision to the contrary being
hereby waived by Mortgagor to the extent permitted by law.
20. EXTENSION. Extension of the time for payment or modification of the
required amortization of the sums secured by this Mortgage granted by Mortgagee
to Mortgagor or to any successor in interest shall not operate to release, in
any manner, the liability of the original mortgagor hereunder for the
indebtedness secured hereby.
21. CUMULATIVE EFFECT. All remedies provided in this Mortgage are
distinct and cumulative to any other rights or remedies provided in the other
Loan Documents, or afforded by law or equity, and may be exercised concurrently,
independently or successively with such other rights or remedies. Mortgagor
acknowledges that Mortgagee has acquired, and may in the future acquire,
security interests in other
<PAGE> 42
real and personal property as security for the Obligations. Acquisition,
modification, compromise or release of other security shall not release or
impair in any way this Mortgage or any of Mortgagor's obligations hereunder. In
the event of default, Mortgagee may exercise any available remedy in such order,
successively or concurrently, as Mortgagee may determine in its absolute
discretion, any marshalling of liens or other principle of law which might limit
the time or manner in which Mortgagee exercises its remedies being hereby waived
by Mortgagor.
22. BINDING EFFECT AND CAPTIONS. The covenants and agreements herein
contained shall bind, and the rights hereunder shall inure to, the respective
successors and assigns of Mortgagor and Mortgagee; provided that the terms of
this paragraph 22 shall not be deemed to limit, in any way, the provisions of
paragraph 13 hereof. The captions and headings of the paragraphs of this
Mortgage are for convenience only and are not to be used to interpret or define
the provisions hereof.
23. NOTICES. Any notice, demand or other communication provided for in
this Mortgage shall be in writing and shall be deemed to be given when
personally delivered or when sent by certified mail, postage prepaid, and
addressed to the parties at their addresses set forth below:
If To Mortgagee:
----------------
Star Bank, National Association
425 Walnut Street
Cincinnati, Ohio 45202
Attention: Andrew T. Hawking
Senior Vice President
with a copy to:
Elizabeth A. Galloway, Esq.
Taft, Stettinius & Hollister
1800 Star Bank Center
425 Walnut Street
Cincinnati, Ohio 45202-3957
If to Mortgagor:
---------------
Frisch's Restaurants, Inc.
2800 Gilbert Avenue
Cincinnati, Ohio 45206
Attention: Mr. Donald H. Walker
Vice President-Finance
with copies to:
Craig F. Maier, President
Frisch's Restaurants, Inc.
2800 Gilbert Avenue
Cincinnati, Ohio 45206
<PAGE> 43
and
W. Gary King, Esq.
Frisch's Restaurants, Inc.
2800 Gilbert Avenue
Cincinnati, Ohio 45206
Mortgagor and Mortgagee may, by written notice to the other as provided
hereunder, designate another address for purposes hereunder.
24. SEVERABILITY. In the event that any provision or clause of this
Mortgage or the other Loan Documents conflicts with applicable law, such
conflict shall not affect other provisions of this Mortgage or the other Loan
Documents which can be given effect without the conflicting provision, and to
this end the provisions of this Mortgage and the other Loan Documents are
declared to be severable.
25. SECURITY INTEREST. If any of the property herein mortgaged is of a
nature such that a security interest therein can be perfected under the Uniform
Commercial Code, this instrument shall also constitute the grant of a security
interest therein to Mortgagee and serve as a Security Agreement, and Mortgagor
agrees to execute any Financing Statements and to execute any other instruments
that may be required for the further specification, perfection or renewal of
such security interest.
PROVIDED, ALWAYS, that if the Obligations shall be fully kept and
performed, then these presents and the estate hereby granted shall cease,
determine and be void.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage effective as
of this ____ day of ____________, 1997.
Signed and acknowledged in FRISCH'S RESTAURANTS, INC.
the presence of: an Ohio corporation
By:
- -------------------------- -------------------------------
Printed Name:
Printed name: ---------------------
------------- Title:
----------------------------
- --------------------------
Printed name:
-------------
<PAGE> 44
STATE OF )
----------------------------) ss:
COUNTY OF )
---------------------------
The foregoing instrument was acknowledged before me this ____ day of
____________, 1997, by __________________, the __________________ of Frisch's
Restaurants, Inc., a corporation organized and existing under the laws of the
State of Ohio, on behalf of the corporation.
----------------------------------------
Notary Public
My Commission expires: _____________
This instrument prepared by:
Daniel E. Fausz, Esq.
Taft, Stettinius & Hollister
1800 Star Bank Center
425 Walnut Street
Cincinnati, OH 45202-3957
(513) 381-2838
<PAGE> 45
EXHIBIT A
Legal Description
<PAGE> 46
EXHIBIT B
Permitted Exceptions
1. The lien of nondelinquent real property taxes and installments of
assessments.
2. [List other exceptions as may be permitted by Mortgagee, in its sole
discretion.]
<PAGE> 47
EXHIBIT H
---------
[To be appropriately modified for
Companies other than Frisch's
Restaurants, Inc. which
own Designated Properties]
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT (this "Agreement") is made and entered into as
of this _____ day of ______________, 1997, by and between STAR BANK, NATIONAL
ASSOCIATION, a national banking association with an address at 425 Walnut
Street, Cincinnati, Ohio 45202 ("Bank"), and FRISCH'S RESTAURANTS, INC., an Ohio
corporation whose address is 2800 Gilbert Avenue, Cincinnati, Ohio 45206
("Company"), and is as follows:
1. DEFINITIONS. Whenever the following terms are used herein, they
shall be defined as follows:
(A) Any capitalized term not defined herein shall have the
meaning ascribed thereto in the Loan Agreement dated as of July 9, 1997 between
Company and Bank (as the same may be amended, modified, renewed or extended from
time to time, the "Loan Agreement"), unless the context requires otherwise.
(B) "Collateral" shall mean all of the following, whether now
owned or existing or hereafter arising or acquired: (i) all of Company's now
owned and hereafter acquired equipment and fixtures, including without
limitation furniture, machinery, vehicles, computers and associated hardware and
equipment and trade fixtures, now or hereafter located at or used in connection
with the Company's restaurant operations at the locations described on EXHIBIT A
attached hereto (the "Designated Properties"), together with any and all
attachments, accessions, parts and appurtenances thereto, substitutions therefor
and replacements thereof (the "Equipment"); (ii) all proceeds of sale of any of
the Equipment or any of Company's other assets associated with the Designated
Properties and all proceeds of sale of Company's interest as a limited partner
in the Cincinnati Reds; (iii) all of Company's books and records related to the
foregoing; and (iv) all proceeds, including without limitation insurance
proceeds, of any and all of the foregoing.
(C) "Event of Default" shall have the meaning set forth in
Paragraph 9 hereof.
(D) Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given them in
accordance with generally accepted accounting principles. All other terms
contained in this Agreement shall, unless the context indicates otherwise, have
the meanings provided for by the Uniform
<PAGE> 48
Commercial Code (the "Code") as adopted in the jurisdiction in which any of the
Collateral is located to the extent the same are defined therein.
2. GRANT OF SECURITY. As security for all obligations of Company to
Bank under the Loan Agreement, the Promissory Note dated as of ____________,
1997 given by Company to Bank (as the same may be amended, modified, renewed or
extended from time to time, the "Note") and the other Loan Documents, as defined
in the Loan Agreement (collectively, the "Obligations"), Company hereby grants
to Bank a security interest in all of the Collateral.
3. PERFECTION AND PROTECTION OF SECURITY INTEREST; DUTY OF CARE.
(A) Until all Obligations have been fully satisfied and the
Loan Agreement has been terminated, this Agreement and Bank's security interest
in the Collateral, and all proceeds thereof, shall continue in full force and
effect. Company shall not permit any lien, claim or encumbrance (other than
Permitted Liens, as provided in the Loan Agreement) to remain against any of the
Collateral and Company shall perform any and all steps requested by Bank to
perfect, maintain and protect Bank's security interest in the Collateral,
including, without limitation, executing and filing financing and continuation
statements in form and substance satisfactory to Bank. Bank may file one or more
financing statements disclosing Bank's security interest under this Agreement
without Company's signature appearing thereon, and Company shall pay the costs
of, or incidental to, any recording or filing of any financing statements
concerning the Collateral. Company agrees that a carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing statement
is sufficient as a financing statement. Company shall pay or cause to be paid
all taxes, assessments and governmental charges levied or assessed or imposed
upon or with respect to the Collateral or any part thereof. If Company fails to
pay such taxes, assessments and governmental charges, Bank may (but shall not be
required to) pay the same and charge the cost to Company's account as part of
the Obligations payable on demand and secured by the Collateral. In order to
protect or perfect the security interest which Bank is granted hereunder, Bank
may, in its sole discretion, discharge any lien or encumbrance or bond the same,
pay any insurance, maintain guards, pay any service bureau and obtain any record
and charge the same to Company's account as an advance hereunder and part of the
Obligations, payable on demand and secured by the Collateral.
(B) Bank shall have no duty of care with respect to the
Collateral except that Bank shall exercise reasonable care with respect to the
Collateral in Bank's custody, but shall be deemed to have exercised reasonable
care if such property is accorded treatment substantially equal to that which
Bank accords its own property, or if Bank takes such action with respect to the
Collateral as Company shall request in writing, but no failure to comply with
any such request nor any omission to do any such act requested by Company shall
be deemed a failure to exercise reasonable care, nor shall Bank's failure to
take steps to preserve rights against any parties or
<PAGE> 49
property be deemed to be failure to exercise reasonable care with respect to the
Collateral in Bank's custody.
4. BANK AS COMPANY'S ATTORNEY. Company hereby appoints Bank, or any
other person whom Bank may designate, as Company's attorney, with power to do
all things necessary to perfect Bank's security interest in the Collateral, to
preserve and protect the Collateral and to otherwise carry out this Agreement,
all at the cost of Company, and Company hereby ratifies and approves all acts of
such attorney. Provided Bank acts in a commercially reasonable manner, neither
Bank nor the attorney will be liable for any acts or omissions or error of
judgment or mistake of fact or law. This power, being coupled with an interest,
is irrevocable until the Obligations have been fully satisfied and this
Agreement terminated, whichever shall later occur. Company agrees to execute and
deliver promptly to Bank all instruments necessary or appropriate, as determined
in Bank's discretion, to further Bank's exercise of the rights and powers
granted in this Paragraph 4.
5. EXAMINATION OF COLLATERAL AND RECORDS. Bank shall at all times have
access to and the right to examine and inspect the Collateral and all of
Company's books and records relating thereto.
6. WARRANTIES AND REPRESENTATIONS. Company warrants and represents
that: (A) (i) The principal place of business of Company and the office where
its chief executive officers and accounting offices are located is set forth on
EXHIBIT B attached hereto, (ii) the offices where Company keeps its records
concerning the Collateral are at the locations set forth on EXHIBIT C attached
hereto, (iii) Company's registered office is at the location set forth on
EXHIBIT D attached hereto, and (iv) all of the Equipment is at the locations set
forth on EXHIBIT E attached hereto; (B) Company has executed UCC financing
statements, containing sufficient descriptions of the Collateral and otherwise
in form and substance sufficient for filing in every governmental, municipal or
other office in every jurisdiction necessary to perfect Bank's security interest
in the Collateral, and Company hereby irrevocably authorizes Bank to file the
same; and (C) Company has good, indefeasible and merchantable title to and
ownership of the Collateral, free and clear of all liens, claims, security
interests and encumbrances whatsoever, except Permitted Liens.
7. COVENANTS. Until the Obligations are fully paid, performed and
satisfied and this Agreement is terminated, Company covenants that it shall: (A)
Defend in good faith the Collateral against the claims and demands of all
persons; (B) Advise Bank in writing, at least thirty (30) days prior thereto, of
any change in Company's principal place of business or registered office, or any
change in Company's name, or any change in location of the Equipment, and, in
such event, Company shall promptly execute and deliver to Bank (and Company
agrees that Bank may execute and deliver the same as Company's irrevocable
attorney-in-fact) new UCC financing statements describing the Collateral
specified herein and otherwise in form and substance sufficient for recordation
wherever necessary or appropriate, as determined in Bank's sole discretion, to
perfect or continue perfected Bank's security interest in the Collateral based
upon such change, and
<PAGE> 50
Company shall pay all filing and recording fees and taxes in connection with the
filing or recordation of such financing statements and shall immediately
reimburse Bank therefor if Bank pays the same; (C) Immediately notify Bank in
writing of any information which Company has or may receive with respect to the
Collateral which might in any manner materially and adversely affect the value
thereof or the rights of Bank with respect thereto; (D) Maintain the Equipment
in good operating condition and repair, make all necessary replacements thereof
so that the value and operating efficiency thereof shall at all times be
maintained and preserved, promptly inform Bank of any additions to or deletions
from the Equipment and immediately upon demand therefor by Bank, deliver to Bank
any and all evidences of ownership of the Equipment; and if Company fails to
keep and maintain the Equipment in good operating condition and repair or to
make necessary replacements thereof, Bank may (but shall not be required to) so
maintain, repair or replace all or any part of the Equipment and charge the cost
thereof to Company's account as part of the Obligations payable on demand and
secured by the Collateral; (E) Insure the Collateral against loss or damage by
fire, theft, burglary, pilferage, loss in transit and such other hazards as Bank
may specify in amounts and under policies by insurers acceptable to Bank, and
all premiums thereon shall be paid by Company and the policies or a certificate
thereof signed by the insurer shall, at Bank's option, be delivered to Bank upon
the issuance of the policies to Company and at least fifteen (15) days prior to
the expiration date thereof; at Bank's option, each such policy shall name Bank
(and no other party) as a named insured, shall contain a lender's loss payable
clause acceptable to Bank and shall provide that such policy may not be amended
or cancelled without thirty (30) days prior written notice to Bank; and if
Company fails to do so, Bank may (but shall not be required to) procure such
insurance and charge the cost to Company's account as part of the Obligations
payable on demand and secured by the Collateral; (F) Not permit any part of the
Collateral or any of the records concerning the same to be removed from the
locations referred to in Paragraph 6(A) above or any other location at which any
of the same may hereafter be located and shall not move or change its principal
place of business or registered office, without notification to Bank as provided
in Paragraph 7(B) above; (G) Not permit any of the Equipment to become a fixture
to real property not mortgaged to Bank or an accession to other personal
property not constituting part of the Collateral; and (H) Not, except as
otherwise provided herein or in the Loan Agreement, encumber, pledge, mortgage,
grant a security interest in, assign, sell, lease or otherwise dispose of or
transfer, whether by sale, merger, consolidation, liquidation, dissolution or
otherwise, any of the Collateral, the Designated Properties or Company's
interest in the Cincinnati Reds.
8. TERM. This Agreement shall terminate on the later to occur of (i)
the full performance, payment and satisfaction of the Obligations and (ii) the
termination of the Loan Agreement.
9. EVENTS OF DEFAULT. The occurrence of any Event of Default under the
Loan Agreement shall constitute an Event of Default hereunder.
<PAGE> 51
10. BANK'S RIGHTS AND REMEDIES.
(A) If any Event of Default shall occur, Bank shall have, in
addition to all other rights provided herein, in the Loan Agreement and the
other Loan Documents and available at law and in equity, the rights and remedies
of a secured party under the Code, and further, Bank may, without notice, demand
or legal process of any kind (except as may be required by law), all of which
Company waives, at any time or times, take physical possession of the Collateral
and maintain such possession on Company's premises at no cost to Bank, or remove
the Collateral, or any part thereof, to such other place(s) as Bank may desire,
or Company shall, upon Bank's demand, at Company's own cost and expense,
assemble the Collateral and make it available to Bank, at a place reasonably
convenient to Company and Bank, and Bank may sell and deliver any or all
Collateral held by or for Bank at public or private sale(s), for cash, upon
credit or otherwise, at such prices and upon such terms as Bank deems advisable,
at Bank's sole discretion, and may, if Bank deems it reasonable, postpone or
adjourn any sale of the Collateral from time to time by an announcement at the
time and place of sale or by announcement at the time and place of such
postponed or adjourned sale, without being required to give a new notice of
sale. Company agrees that Bank has no obligation to preserve rights to the
Collateral against prior parties. Company acknowledges that portions of the
Collateral could be difficult to preserve and dispose of and further subject to
complex maintenance and management. Accordingly, Bank shall have the widest
possible latitude to preserve and protect the Collateral and Bank's security
interest therein, and Bank, at its option, shall have the unqualified right to
appoint a receiver, without notice or hearing, for the preservation, possession,
protection and disposition of all or part of the Collateral and the collection
and protection for Bank of any proceeds of use or disposition of the Collateral
and to do any other thing and exercise any other right or remedy which Bank may,
with or without judicial process, do or exercise. Any requirement of reasonable
notice shall be met if such notice is mailed postage prepaid to Company at least
five (5) days before the time of sale or other disposition. The proceeds of sale
shall be applied first to all costs and expenses of sale, including attorneys'
fees, and second to the payment (in whatever order Bank elects) of the
Obligations. Bank will return any excess to Company or such other party as may
be legally entitled thereto and Company shall remain liable to Bank for any
deficiency. Bank's rights and remedies under this Agreement shall be cumulative
and not exclusive of any other right or remedy which Bank may have.
(B) Company shall pay to Bank, on demand and as part of the
Obligations, all costs and expenses, including court costs, attorneys' fees and
costs of sale, incurred by Bank in exercising any of its rights or remedies
hereunder.
11. WAIVER; AMENDMENTS; SUCCESSORS AND ASSIGNS.
(A) Any and all of Bank's rights with respect to the
Collateral and the security interest granted hereunder shall continue
unimpaired, notwithstanding the release or substitution of any Collateral at any
time(s), or of any rights or interests therein, or
<PAGE> 52
any delay, extension of time, renewal, compromise or other indulgence granted by
Bank in reference to any Obligations, and Company hereby waives all notice of
any such delay, extension, release, substitution, renewal, compromise or other
indulgence.
(B) Failure by Bank to exercise any right, remedy or option
under this Agreement or any present or future supplement hereto or in any other
agreement between Company and Bank or delay by Bank in exercising the same will
not operate as a waiver by Bank of its right to exercise any such right, remedy
or option. No waiver by Bank will be effective unless it is in writing and then
only to the extent specifically stated.
(C) This Agreement cannot be changed or terminated orally.
(D) Company may not assign, transfer or otherwise dispose of
any of its rights or obligations hereunder, by operation of law or otherwise.
All of the rights, privileges, remedies and options given to Bank hereunder
shall inure to the benefit of Bank's successors and assigns, and all the terms,
conditions, covenants, provisions and warranties of this Agreement shall inure
to the benefit of and shall bind the representatives, successors and assigns of
Company and Bank, respectively.
12. MISCELLANEOUS.
(A) Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
(B) This Agreement shall be interpreted and the rights and
liabilities of the parties hereto determined in accordance with the laws of the
State of Ohio and all other laws of mandatory application, including without
limitation the laws of any state in which any of the Collateral may be located.
(C) All of the Obligations shall constitute one loan secured
by Bank's security interest in the Collateral and by all other security
interests, mortgages, liens, claims and encumbrances now and from time to time
hereafter granted by Company to Bank. Bank may, in its sole discretion, (i)
exchange, enforce, waive or release any such security or portion thereof, (ii)
apply such security and direct the order or manner of sale thereof as Bank may,
from time to time, determine, and (iii) settle, compromise, collect or otherwise
liquidate any such security in any manner following the occurrence of any Event
of Default without affecting or impairing its right to take any other further
action with respect to any security or any part thereof.
(D) Any notice or notification required, permitted or
contemplated hereunder shall be in writing and shall be deemed to be given when
personally delivered or when sent by certified mail, postage prepaid, and
addressed to the parties at their addresses set forth below:
<PAGE> 53
Bank: Star Bank, National Association
425 Walnut Street
Cincinnati, Ohio 45202
Attention: Andrew T. Hawking
Senior Vice President
with copy to: Elizabeth A. Galloway
Taft, Stettinius & Hollister
1800 Star Bank Center
425 Walnut Street
Cincinnati, Ohio 45202-3957
Company: Frisch's Restaurants, Inc.
2800 Gilbert Avenue
Cincinnati, Ohio 45206
Attention: Mr. Donald H. Walker
Vice President-Finance
with copies to: Craig F. Maier, President
Frisch's Restaurants, Inc.
2800 Gilbert Avenue
Cincinnati, Ohio 45206
and
W. Gary King, Esq.
Frisch's Restaurants, Inc.
2800 Gilbert Avenue
Cincinnati, Ohio 45206
Company or Bank may, by written notice to the other as provided herein,
designate another address for purposes hereunder.
IN WITNESS WHEREOF, this Agreement has been duly executed by Company as
of the _____ day of ____________, 1997.
FRISCH'S RESTAURANTS, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Accepted as of _________________, 1997:
STAR BANK, NATIONAL ASSOCIATION
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
<PAGE> 54
EXHIBIT I
---------
LIFE INSURANCE ASSIGNMENT
-------------------------
(See attached)
<PAGE> 55
FORM APPROVED BY
BANK MANAGEMENT COMMISSION
AMERICAN BANKERS ASSOCIATION
EXHIBIT I
---------
ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL
A. FOR VALUE RECEIVED the undersigned hereby assign, transfer and set over
to STAR BANK, NATIONAL ASSOCIATION of 425 WALNUT STREET, CINCINNATI,
OHIO 45202 its successors and assigns, (herein called the "Assignee")
Policy No. _____________________________ issued by the ________________
______________________________________________ (herein called the
"Insurer") and any supplementary contracts issued in connection
therewith (said policy and contracts being herein called the "Policy"),
upon the life of __________________ _________________________ of
_____________________________ and all claims, options, privileges,
rights, title and interest therein and thereunder (except as provided
in Paragraph C hereof), subject to all the terms and conditions of the
Policy and to all superior liens if any, which the Insurer may have
against the Policy. The undersigned by this instrument jointly and
severally agree and the Assignee by the acceptance of this assignment
agrees to the conditions and provisions herein set forth.
B. It is expressly agreed that, without detracting from the generality of
the foregoing, the following specific rights are included in assignment
and pass by virtue hereof:
1. The sole right to collect from the Insurer the net proceeds of
the Policy when it becomes a claim by death or maturity;
2. The sole right to surrender the Policy and receive the
surrender value thereof at any time provided by the terms of
the Policy and at such other times as the Insurer may allow;
3. The sole right to obtain one or more loans or advances on the
Policy, either from the Insurer or, at any time, from other
persons, and to pledge or assign the Policy as security for
such loans or advances;
4. The sole right to collect and receive all distributions or
shares of surplus, dividend deposits or additions to the
Policy now or hereafter made or apportioned thereto, and to
exercise any and all options contained in the Policy with
respect thereto; provided, that unless and until the Assignee
shall notify the Insurer in writing to the contrary, the
distributions or shares of surplus, dividend deposits and
additions shall continue on the plan in force at the time of
this assignment; and
5. The sole right to exercise all nonforfeiture rights permitted
by the terms of the Policy or allowed by the Insurer and to
receive benefits and advantages derived therefrom.
C. It is expressly agreed that the following specific rights, so long as
the Policy has not been surrendered, are reserved and excluded from
this assignment and do not pass by virtue hereof:
1. The right to collect from the Insurer any disability benefit
payable in cash that does not reduce the amount of insurance;
2. The right to designate and change the beneficiary;
3. The right to elect any optional mode of settlement permitted
by the Policy or allowed by the Insurer; but the reservation
of these rights shall in no way impair the right of the
Assignee to surrender the Policy completely with all its
incidents or impair any other right of the Assignee hereunder,
and any designation or change of beneficiary or election of a
mode of settlement shall be made subject to this assignment
and to the rights of the Assignee hereunder.
D. This assignment is made and the Policy is to be held as collateral
security for any and all liabilities of the undersigned, or any of
them, to the Assignee, either now existing or that may hereafter arise
in the ordinary course of business between any of the undersigned and
the Assignees (all of which liabilities secured or to become secured
are herein called "Liabilities").
E. The Assignee covenants and agrees with the undersigned as follows:
1. That any balance of sums received hereunder from the Insurer
remaining after payment of the then existing Liabilities,
matured or unmatured, shall be paid by the Assignee to the
persons entitled thereto under the terms of the Policy had
this assignment been executed;
2. That the Assignee will not exercise either the right to
surrender the Policy or (except for the purpose of paying
premiums) the right to obtain policy loans from the Insurer,
until there has been default in any of the Liabilities or a
failure to pay any premium when due, nor until twenty days
after the Assignee shall have mailed, by first-class mail, to
the undersigned at the addresses last supplied in writing to
the Assignee specifically referring to this assignment,
notice of intention to exercise such right; and
3. That the Assignee will upon request forward without
unreasonable delay to the Insurer the Policy for endorsement
of any designation or change of beneficiary or any election of
an optional mode of settlement.
<PAGE> 56
F. The Insurer is hereby authorized to recognize the Assignee's claims to
rights hereunder without investigation the reason for any action taken
by the Assignee, or the validity or the amount of the Liabilities or
the existence of any default therein, or the giving of any notice under
Paragraph E (2) above or otherwise, or the application to be made by
the Assignee of any amounts to be paid to the Assignee. The sole
signature of the Assignee shall be sufficient for the exercise of any
rights under the Policy assigned hereby and the sole receipt of the
Assignee for any sums received shall be a full discharge and release
therefor to the Insurer. Checks for all or any part of the sums payable
under the Policy and assigned herein, shall be drawn to the exclusive
order of the Assignee if, when, and in such amounts as may be,
requested by the Assignee.
G. The Assignee shall be under no obligation to pay any premium, or the
principal of or interest on any loans or advances on the Policy whether
or not obtained by the Assignee, or any other charges on the Policy,
but any such amounts so paid by the Assignee from its own funds, shall
become a part of the Liabilities hereby secured, shall be due
immediately, and shall draw interest at a rate fixed by the Assignee
from time to time not exceeding 6% per annum.
H. The exercise of any right, option, privilege or power given herein to
the Assignee shall be at the option of the Assignee, but (except as
restricted by Paragraph E (2) above) the Assignee may exercise any such
right, option, privilege or power without notice to, or assent by, or
affecting the liability of, or releasing any interest hereby assigned
by the undersigned, or any of them.
I. The Assignee may take or release other security, may release any party
primarily or secondarily liable for any of the of Liabilities, may
grant extensions, renewals or indulgences with respect to the
Liabilities, or may apply to the Liabilities in such order as the
Assignee may determine, the proceeds of the Policy hereby assigned or
any amount received on account of the Policy by the exercise of any
right permitted under this assignment, without resorting or regard to
other security.
J. In the event of any conflict between the provisions of this assignment
and provisions of the note or other evidence of any Liability, with
respect to the Policy or rights of collateral security therein, the
provisions of this assignment shall prevail.
K. Each of the undersigned declares that no proceedings in bankruptcy are
pending against him and that his property is not subject to assignment
for the benefit of creditors.
Signed and sealed this day of , 1997
--------- -----------
- ---------------------------------- -------------------------------(L.S.)
Witness Insured or Owner
- ---------------------------------- -------------------------------
Address
- ---------------------------------- -------------------------------(L.S.)
Witness Beneficiary
- --------------------------------- -------------------------------
Address
<PAGE> 57
INDIVIDUAL ACKNOWLEDGMENT
STATE OF _____________}
}SS:
COUNTY OF ____________}
On the ______________ day of _______________ 1997, before me personally
came _________________, to me known to be the individual _____________________
described in and who executed the assignment on the reverse side hereof and
acknowledged to me that ______________ be ____________ executed the same.
--------------------------------
Notary Public
My commission expires ________________
CORPORATE ACKNOWLEDGMENT
STATE OF _____________}
}SS:
COUNTY OF ____________}
On the ______________ day of _______________ 1997, before me personally
came ____________________________________________, who being by me duly sworn,
did depose and say that he resides in __________________________________________
that he is the ____________________ of ___________________________________, the
corporation described in and which executed the assignment on the reverse side
hereof; that he knows the seal of said corporation; that the seal affixed to
said assignment is such corporate seal; that it was so affixed by order of the
Board of Directors of said corporation, and that he signed his name thereto by
like order.
--------------------------------
Notary Public
My commission expires ________________
----------
Duplicate received and filed at the home office of the Insurer in _____________,
this ___________ day of ___________ 1997
-------------------------------------------
By:
----------------------------------
Authorized Officer
- ----------
NOTE: When received by a corporation, the corporate seal should be affixed and
there should be attached to the assignment a certified copy of the resolutions
of the Board of Directors authorized the signing officer to execute and deliver
the assignment in the name and on behalf of the corporations.
RELEASE OF ASSIGNMENT
The debt which this assignment was given to secure having been paid in
full, we hereby release all our right, title and interest in and to the policy
thereby assigned to us.
This ______ day of ________, 1997
By:
-------------------------------
By:
-------------------------------
STATE OF _____________}
}SS:
COUNTY OF ____________}
I, _______________________________________, Notary Public in and for
said county and state, do hereby certify that __________________________________
and _________________________________ ,the persons whose names have been signed
to the foregoing instrument, appeared before me this day in person and
acknowledged that having read the said instrument, they signed, sealed and
delivered the same as their free and voluntary act and as the deed and pursuant
to authority conferred upon them by _________________________________________ .
Given under my hand and notarial seal this _____ day of ________, 1997.
My commission expires _______________ --------------------------- (Seal)
Notary Public
<PAGE> 58
EXHIBIT I-A
-----------
LIFE INSURANCE POLICIES
-----------------------
(See attached)
<PAGE> 59
EXHIBIT I-A
-----------
FRISCH'S RESTAURANTS, INC.
LIFE INSURANCE POLICIES
INSURED INSURANCE POLICY
------- COMPANY NUMBER
------- ------
MARVIN G. FIELDS GREAT WEST 1950802
MARVIN G. FIELDS GREAT WEST 4107-093
MARVIN G. FIELDS PROVIDENT 727-065
RICHARD T. MALLON GREAT WEST 4107-090
RICHARD T. MALLON SECURITY LIFE 989044
H. CLIFTON FISCHER GREAT WEST 4107-087
H. CLIFTON FISCHER PROVIDENT G3507-865
DONALD H. WALKER GREAT WEST 4107-092
DONALD H. WALKER PROVIDENT G3507-901
CRAIG F. MAIER GREAT WEST 4107-094
CRAIG F. MAIER PROVIDENT G3508-877
W. GARY KING SECURITY LIFE 989047
KAREN F. MAIER PROVIDENT 1179583
JOSEPH L. YOWELL PROVIDENT 1184544
JOSEPH L. YOWELL PROVIDENT G3507-866
RONALD E. HEINEMAN SECURITY LIFE 989043
JACK C. MAIER CONNECTICUT NAT'L 2A-7010852
JACK C. MAIER GREAT WEST LIFE 1231 - 348
JACK C. MAIER GREAT WEST LIFE 1511 - 228
JACK C. MAIER GREAT WEST LIFE 1629 - 356
JACK C. MAIER GREAT WEST LIFE 1724 - 573
JACK C. MAIER GREAT WEST LIFE 1996 - 512
JACK C. MAIER GREAT WEST LIFE 1801 - 750
JACK C. MAIER CONFEDERATION LIFE 5743 - 891
JACK C. MAIER HARTFORD LRO559 - 474
JACK C. MAIER LINCOLN NATIONAL 64-1471 - 679
JACK C. MAIER LINCOLN NATIONAL 66-1099 - 177
JACK C. MAIER LINCOLN NATIONAL 66-1154 - 063
JACK C. MAIER LINCOLN NATIONAL 66-1183 - 154
JACK C. MAIER LINCOLN NATIONAL 64-1592 - 945
JACK C. MAIER LINCOLN NATIONAL 64-1273 - 454
JACK C. MAIER LINCOLN NATIONAL 64-1351 - 694
JACK C. MAIER PRUDENTIAL LIFE 14-690 - 257
CRAIG C. MAIER PROVIDENT LIFE G3508 - 287
CRAIG C. MAIER CONFEDERATION LIFE 0574 - 5222
CRAIG C. MAIER PACIFIC MUTUAL 1A-222 - 57820
JACK C. MAIER GREAT WEST 4831 - 065
<PAGE> 60
EXHIBIT J
---------
PROMISSORY NOTE
---------------
$___________________ Cincinnati, Ohio
__________, 1997
FRISCH'S RESTAURANTS, INC., an Ohio corporation (the "Borrower"), for
value received, hereby promises to pay to the order of STAR BANK, NATIONAL
ASSOCIATION, a national banking association (the "Bank"), or it successors or
assigns, on or before ____________, 1999, the principal sum of _________________
($____________), together with interest thereon as hereinafter provided.
This Note evidences the loan (the "Loan") made under the Loan Agreement
dated as of July 9, 1997 between the Borrower and the Bank, as amended from time
to time (the "Loan Agreement"), and is subject to the terms and conditions
thereof, including, without limitation, the terms thereof providing for
acceleration of maturity of the Loan. If any term or condition of this Note
conflicts with the express terms or conditions of the Loan Agreement, the terms
and conditions of the Loan Agreement shall control. Terms used herein shall have
the same meanings as in the Loan Agreement.
Subject to the terms of the Loan Agreement, the Borrower shall from
time to time have the option of designating that portions of the principal
balance of the Loan bear interest at a rate per annum equal to (i) the One-Month
LIBOR-Based Rate (as hereinafter defined) for a one (1) month period (the
"One-Month LIBOR-Based Rate Period") and (ii) the Two-Month LIBOR-Based Rate (as
hereinafter defined) for a two (2) month period (the "Two-Month LIBOR-Based Rate
Period"). Any portion of the Loan with respect to which a One-Month LIBOR-Based
Rate or a Two-Month LIBOR-Based Rate is not in effect shall bear interest at a
rate per annum equal to the Prime-Based Rate (as hereinafter defined), with such
rate to be adjusted on the effective date of any change in the Prime Rate (as
hereinafter defined) by the Bank.
The "One-Month LIBOR-Based Rate" shall mean the sum of (i) the annual
rate, determined solely by the Bank, as the British Banking Association 11:00
a.m. Fix offered rate obtained from Telerate Systems Incorporated, Bloomberg
Financial Systems or any other electronic media deemed appropriate by the Bank
(rounded upwards, if necessary, to the nearest 1/10000 of one percent), for
deposits in immediately available Dollars in the London Interbank Market (as
hereinafter defined) at or about 11:00 a.m., London time, for the applicable
One-Month LIBOR-Based Rate Period on the day two (2) London Business Days (as
hereinafter defined) preceding the first day of such One-Month LIBOR-Based Rate
Period, PLUS (ii) the LIBOR-Based Rate Spread (as hereinafter defined), and
adjusted for Reserve Percentages (as hereinafter defined) and any other
<PAGE> 61
regulatory and/or governmental costs incurred by the Bank from eurocurrency
liabilities. The "Two-Month LIBOR-Based Rate" shall mean the sum of (i) the
annual rate, determined solely by the Bank, as the British Banking Association
11:00 a.m. Fix offered rate obtained from Telerate Systems Incorporated,
Bloomberg Financial Systems or any other electronic media deemed appropriate by
the Bank (rounded upwards, if necessary, to the nearest 1/10000 of one percent),
for deposits in immediately available Dollars in the London Interbank Market at
or about 11:00 a.m., London time, for the applicable Two-Month LIBOR-Based Rate
Period on the day two (2) London Business Days preceding the first day of such
Two-Month LIBOR-Based Rate Period, PLUS (ii) the LIBOR-Based Rate Spread, and
adjusted for Reserve Percentages and any other regulatory and/or governmental
costs incurred by the Bank from eurocurrency liabilities. In the event that
Telerate Systems Incorporated, Bloomberg Financial Systems or any other
electronic media selected by the Bank ceases to quote such rates, the Bank
shall, in its discretion, select an alternative rate source. The One-Month
LIBOR-Based Rate and the Two-Month LIBOR-Based Rate are each sometimes referred
to herein as a "LIBOR-Based Rate," and the One-Month LIBOR-Based Rate Period
and the Two-Month LIBOR-Based Rate Period are each sometimes referred to herein
as a "LIBOR-Based Rate Period."
The "LIBOR-Based Rate Spread" shall initially be one hundred fifty
(150) basis points, and shall be adjusted as follows: If on or before the date
that is one (1) year after the date hereof (the "Disbursement Anniversary
Date"), the outstanding principal balance of the Loan shall have been reduced to
less than Seven Million Five Hundred Thousand Dollars ($7,500,000) (the
"Designated Level"), the LIBOR-Based Rate Spread shall, commencing on the date
of such reduction, be one hundred twenty-five (125) basis points, and if by the
Disbursement Anniversary Date the outstanding principal balance of the Loan
shall not have been reduced to the Designated Level, the LIBOR-Based Rate Spread
shall, commencing on the Disbursement Anniversary Date, be one hundred
seventy-five (175) basis points.
"London Interbank Market" shall mean the London eurodollar interbank
market where rates are offered to the Bank by prime banks for deposits of
immediately available Dollars. "London Business Day" shall mean any day other
than a Saturday, Sunday or holiday on which banks in London, England are
authorized by law to close.
"Reserve Percentages" shall mean the total maximum reserve percentages
for determining the reserves to be maintained by member banks of the Federal
Reserve System for eurocurrency liabilities, as defined in Federal Reserve Board
Regulation D, rounded upward to the nearest 1/100 of one percent, and includes,
but is not limited to, marginal, emergency, supplemental, special and other
reserve percentages. The amount of the adjustment for Reserve Percentages and
regulatory and/or governmental costs shall be based upon the assumption that the
Bank funded one hundred percent (100%) of the Loan or portion thereof bearing
interest at a LIBOR-Based Rate in the London Interbank Market.
<PAGE> 62
The "Prime Rate" shall mean that rate announced by the Bank as its
prime rate, which rate is determined solely by the Bank pursuant to market
factors and its own operating needs and is not necessarily the Bank's best or
most favorable rate for commercial or other loans. The "Prime-Based Rate" shall
initially be the Prime Rate, and shall be adjusted as follows: If on or before
the Disbursement Anniversary Date the outstanding principal balance of the Loan
shall have been reduced to the Designated Level, the Prime-Based Rate shall,
commencing on the date of such reduction, be the Prime Rate MINUS twenty-five
(25) basis points, and if on or before the Disbursement Anniversary Date the
outstanding principal balance of the Loan shall not have been reduced to the
Designated Level, the Prime-Based Rate shall, commencing on the Disbursement
Anniversary Date, be the Prime Rate PLUS twenty-five (25) basis points.
Interest on any portion of the Loan bearing interest at the Prime-Based
Rate shall be payable monthly, in arrears, commencing on _________________,
1997, and on the last day of each calendar month thereafter, and when this Note
is due (whether by reason of acceleration or otherwise). Interest on any portion
of the Loan bearing interest at a LIBOR-Based Rate shall be payable, in arrears,
on the last day of the LIBOR-Based Rate Period applicable thereto, and when this
Note is due (whether by reason of acceleration or otherwise). Interest on this
Note shall be computed on the basis of a year consisting of three hundred sixty
(360) days but applied to the actual number of days elapsed. At the option of
the Bank, (a) prior to acceleration of this Note, in the event that any interest
on or principal of this Note remains unpaid past thirty (30) days of the date
due, and/or (b) upon the occurrence of any other Event of Default under the Loan
Agreement or upon the acceleration of this Note, interest (computed and adjusted
in the same manner, and with the same effect, as interest on this Note prior to
maturity) on the outstanding balance of this Note shall be payable on demand at
the Prime Rate PLUS an additional three percent (3%) per annum up to any maximum
rate permitted by law, in all cases until paid and whether before or after the
entry of any judgment thereon. In addition, in the event that the Borrower
should fail to make any payment hereunder within ten (10) days of the date due,
the Borrower shall pay the Bank a fee in an amount of up to five percent (5%) of
the amount of such payment, but in no event less than fifty dollars ($50.00),
which fee shall be immediately due and payable without notice or demand.
The Borrower shall prepay the outstanding principal balance of the Loan
in an amount equal to the net after-tax proceeds from the sale of any assets of
the Borrower or any of its Subsidiaries (other than sales of any assets as
described in SECTION 2(L)(II) or SECTION 2(L)(III) of the Loan Agreement) on the
date of receipt of such proceeds (provided that if prepayment on such date would
cause the Borrower to be subject to a charge hereunder because of repayment of a
portion of the Loan bearing interest at a LIBOR-Based Rate prior to the
expiration of the LIBOR-Based Rate Period applicable hereto, then, at the option
of the Borrower, such proceeds shall not be applied to the prepayment of the
Loan on such
<PAGE> 63
date, but instead shall be deposited into a non-interest bearing account at the
Bank under the sole control of the Bank and shall be applied to prepayment of
the Loan at the expiration of such LIBOR-Based Rate Period), and the Borrower
shall prepay the outstanding principal balance of the Loan by at least Five
Million Five Hundred Thousand Dollars ($5,500,000), whether from the proceeds of
asset sales or otherwise, on or before the Disbursement Anniversary Date. Unless
sooner due and payable as provided hereunder, the entire outstanding principal
balance of this Note shall be due and payable in full on ______________, 1999.
All payments of principal and interest hereunder shall be made in
immediately available funds to the Bank at 425 Walnut Street, Location 9150,
Cincinnati, Ohio 45202, or at such other place as may be designated by the Bank
to the Borrower in writing. The Bank is authorized by the Borrower to enter from
time to time the balance of this Note and all payments and prepayments thereon
on the reverse of this Note or in the Bank's regularly maintained data
processing records, and the aggregate unpaid amount set forth thereon or therein
shall be presumptive evidence of the amount owing to the Bank and unpaid on this
Note.
The Borrower may, at its option, from time to time repay or prepay part
or all of the outstanding principal balance of the Loan bearing interest at the
Prime-Based Rate without premium. The Loan or any portion thereof bearing
interest at a LIBOR-Based Rate may only be repaid without charge at the
expiration of the LIBOR-Based Rate Period applicable thereto, and any repayment
of the Loan or any portion thereof bearing interest at a LIBOR-Based Rate at any
time prior to the expiration of the LIBOR-Based Rate Period applicable thereto
shall be subject to a charge in an amount determined by the Bank in its
reasonable discretion, such charge to compensate the Bank for loss of bargain
with respect to the Loan or portion thereof being so paid, and not as a penalty,
payable upon demand accompanied by a reasonably detailed statement as to such
charge (which statement shall be conclusive in the absence of manifest error).
IMPORTANT: This Note shall be deemed made in Ohio and shall in all
respects be governed by and construed in accordance with the laws of the State
of Ohio, including all matters of construction, validity and performance.
Without limitation on the ability of the Bank to initiate and prosecute any
action or proceeding in any applicable jurisdiction related to loan repayment,
the Borrower and the Bank agree that any action or proceeding commenced by or on
behalf of the parties arising out of or relating to this Note shall be commenced
and maintained exclusively in the District Court of the United States for the
Southern District of Ohio, or any other court of applicable jurisdiction located
in Cincinnati, Ohio. The Borrower and the Bank also agree that a summons and
complaint commencing an action or proceeding in any such Ohio courts by or on
behalf of such parties shall be properly served and shall confer personal
jurisdiction on a party to which said party consents, if (a) served personally
or by certified mail to the other party at any of its addresses noted herein, or
(b) as otherwise provided under the laws of the State of Ohio. The interest
rates and all
<PAGE> 64
other terms of this Note negotiated with the Borrower are, in part, related to
the aforesaid provisions on jurisdiction, which the Bank deems a vital part of
this loan arrangement.
Presentment for payment, notice of dishonor, protest and notice of
protest are hereby waived.
FRISCH'S RESTAURANTS, INC.
By:
--------------------------------------
Title:
-----------------------------------
Address: 2800 Gilbert Avenue
Cincinnati, Ohio 45206
<PAGE> 1
Exhibit 99(g)(1)
<TABLE>
<CAPTION>
Item 8. - Financial Statements and Supplementary Data Page
<S> <C>
Index to Consolidated Financial Statements
Auditors' Report 11
Consolidated Balance Sheet - June 2, 1996 and May 28, 1995 12-13
Consolidated Statement of Earnings - Three years ended June 2, 1996 14
Consolidated Statement of Cash Flows - Three years ended June 2, 1996 15
Consolidated Statement of Shareholders' Equity - Three years ended June 2, 1996 16
Notes to Consolidated Financial Statements - Three years ended June 2, 1996 17-23
Quarterly Results (Unaudited) 23
</TABLE>
AUDITORS' REPORT
Shareholders
Frisch's Restaurants, Inc.
We have audited the accompanying consolidated balance sheet of Frisch's
Restaurants, Inc. (an Ohio corporation) and Subsidiaries as of June 2, 1996 and
May 28, 1995 and the related consolidated statements of earnings, cash flows,
and shareholders' equity for each of the three years in the period ended June 2,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Frisch's
Restaurants, Inc. and Subsidiaries as of June 2, 1996 and May 28, 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 2, 1996, in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Cincinnati, Ohio
July 10, 1996
1
<PAGE> 2
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 2, 1996 and May 28, 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current Assets
Cash $ 134,944 $ 219,650
Receivables
Trade 1,107,394 986,360
Other 963,347 560,122
Inventories 3,725,755 3,945,660
Prepaid expenses and sundry deposits 1,280,006 1,705,463
Prepaid and deferred income taxes 1,352,315 723,523
------------ ------------
Total current assets 8,563,761 8,140,778
Property and Equipment - At Cost
Land and improvements 24,712,017 23,623,581
Buildings 54,871,830 53,292,215
Equipment and fixtures 53,876,413 53,466,613
Leasehold improvements and buildings on leased land 24,640,369 24,404,208
Capitalized leases 9,632,186 9,640,938
Construction in progress 2,393,653 3,226,921
------------ ------------
170,126,468 167,654,476
Less accumulated depreciation and amortization 70,886,768 69,596,486
------------ ------------
Net property and equipment 99,239,700 98,057,990
Other Assets
Intangible assets 761,017 765,092
Investments in land - at cost 2,001,135 641,764
Property held for sale 1,766,068 1,966,681
Net cash surrender value-life insurance policies 3,447,360 3,162,902
Deferred income taxes 551,072 409,643
Other 2,065,728 2,403,243
------------ ------------
Total other assets 10,592,380 9,349,325
------------ ------------
$118,395,841 $115,548,093
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 3
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 2, 1996 and May 28, 1995
LIABILITIES
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current Liabilities
Long-term obligations due within one year
Long-term debt $ 2,162,860 $ 2,206,048
Obligations under capitalized leases 467,706 466,035
Self insurance 1,862,957 1,221,460
Accounts payable 8,109,024 8,572,166
Accrued expenses 5,805,262 5,758,656
Income taxes 50,161 -
------------ ------------
Total current liabilities 18,457,970 18,224,365
Long-Term Obligations
Long-term debt 20,098,890 18,437,837
Obligations under capitalized leases 6,229,351 6,409,216
Self insurance 5,879,111 5,641,927
Other 2,423,485 2,207,356
------------ ------------
Total long term obligations 34,630,837 32,696,336
Commitments - -
Shareholders' Equity
Capital stock
Preferred stock - authorized, 3,000,000 shares
without par value; none issued - -
Common stock - authorized, 12,000,000 shares
without par value; issued, 7,080,195 and 6,808,939
shares - stated value - $1 7,080,195 6,808,939
Additional contributed capital 56,794,272 54,624,224
------------ ------------
63,874,467 61,433,163
Retained earnings 4,860,713 6,622,375
------------ ------------
68,735,180 68,055,538
Less cost of treasury stock (197,586 and 189,987 shares) 3,428,146 3,428,146
------------ ------------
Total shareholders' equity 65,307,034 64,627,392
------------ ------------
$118,395,841 $115,548,093
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Three years ended June 2, 1996
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Revenue
Sales $165,425,731 $161,429,199 $157,995,557
Other 1,519,025 1,629,985 2,069,787
------------- ------------- -------------
Total revenue 166,944,756 163,059,184 160,065,344
Costs and expenses
Cost of sales
Food and paper 53,123,133 52,298,714 51,070,559
Payroll and related 58,571,618 56,334,783 52,827,393
Other operating costs 41,650,300 40,781,489 37,792,524
------------- ------------- -------------
153,345,051 149,414,986 141,690,476
General and administrative 3,745,047 4,581,541 5,030,018
Advertising 4,025,872 4,008,237 3,872,710
Interest 2,411,313 1,961,084 1,554,168
------------- ------------- -------------
Total costs and expenses 163,527,283 159,965,848 152,147,372
------------- ------------- -------------
Earnings before income taxes 3,417,473 3,093,336 7,917,972
Income taxes
Current
Federal 1,366,294 1,169,007 3,403,354
Less tax credits (290,884) (436,358) (551,624)
State and municipal 362,549 110,246 701,878
Deferred (330,225) (107,930) (711,210)
------------- ------------- -------------
1,107,734 734,965 2,842,398
------------- ------------- -------------
NET EARNINGS $ 2,309,739 $ 2,358,371 $ 5,075,574
============= ============= =============
Primary and fully diluted net earnings per share $.34 $.34 $.74
============= ============= =============
Weighted average number of primary and fully
diluted common shares and equivalents
assumed outstanding during the year 6,882,609 6,882,391 6,885,993
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three years ended June 2, 1996
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $ 2,309,739 $ 2,358,371 $ 5,075,574
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 10,350,326 9,821,080 9,289,290
(Gain) loss on disposition of assets (829,854) (345,380) 30,044
Write off Texas goodwill - - 886,447
Changes in assets and liabilities:
(Increase) decrease in receivables (524,259) 858,036 (282,222)
Decrease (increase) in inventories 219,905 (8,621) (348,890)
Decrease in prepaid expenses and sundry deposits 425,457 83,465 462,468
Increase in prepaid and deferred income taxes (770,221) (509,494) (1,001,096)
(Decrease) increase in accounts payable (463,142) 162,257 (119,749)
Increase in accrued expenses 46,606 128,095 165,976
Increase (decrease) in accrued income taxes 50,161 (36,102) (68,819)
Decrease (increase) in other assets 111,697 321,374 (14,041)
Increase in self insured obligations 878,681 1,077,583 314,735
Increase (decrease) in other liabilities 216,129 336,239 (84,221)
------------ ------------ ------------
Net cash provided by operating activities 12,021,225 14,246,903 14,305,496
Cash flows provided by (used in) investing activities:
Additions to property (15,362,001) (23,283,499) (18,312,487)
Proceeds from disposition of property 3,941,466 2,245,680 2,654,072
Increase in other assets (104,970) (524,789) (486,200)
------------ ------------ ------------
Net cash (used in) investing activities (11,525,505) (21,562,608) (16,144,615)
Cash flows provided by (used in) financing activities:
Proceeds from borrowings 8,000,000 10,385,000 4,000,000
Payment of long-term debt and capital lease obligations (6,950,329) (1,489,525) (961,863)
Cash dividends paid (1,630,097) (1,570,418) (1,518,263)
Treasury share transactions - 9,398 (26,532)
------------ ------------ ------------
Net cash (used in) provided by financing activities (580,426) 7,334,455 1,493,342
------------ ------------ ------------
Net (decrease) increase in cash and equivalents (84,706) 18,750 (345,777)
Cash and equivalents at beginning of year 219,650 200,900 546,677
------------ ------------ ------------
Cash and equivalents at end of year $ 134,944 $ 219,650 $ 200,900
============ ============ =============
Supplemental disclosures:
Stock dividends issued $ 2,441,304 $ 2,706,460 $ 3,855,228
Interest paid 2,549,352 1,872,183 1,548,826
Income taxes paid 2,319,962 1,419,798 3,914,978
Income tax refunds received 492,168 139,237 2,665
Lease transactions capitalized 390,000 - 179,640
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three years ended June 2, 1996
<TABLE>
<CAPTION>
Common stock
at $1 per share - Additional
Shares and contributed Retained Treasury
amount capital earnings shares Total
------ ------- -------- ------ -----
<S> <C> <C> <C> <C> <C>
Balance at May 30, 1993 $6,297,536 $48,591,962 $8,838,799 ($3,429,035) $60,299,262
Net earnings for the year - - 5,075,574 - 5,075,574
Treasury shares reissued - (8,413) - 52,973 44,560
Treasury shares acquired - - - (71,092) (71,092)
Dividends
Cash - $.24 per share - - (1,518,263) - (1,518,263)
Stock - 4% 250,665 3,604,563 (3,855,228) - -
---------- ----------- ---------- ----------- -----------
Balance at May 29, 1994 6,548,201 52,188,112 8,540,882 (3,447,154) 63,830,041
Net earnings for the year - - 2,358,371 - 2,358,371
Treasury shares reissued - (9,610) - 23,771 14,161
Treasury shares acquired - - - (4,763) (4,763)
Dividends
Cash - $.24 per share - - (1,570,418) - (1,570,418)
Stock - 4% 260,738 2,445,722 (2,706,460) - -
---------- ----------- ---------- ----------- -----------
Balance at May 28, 1995 6,808,939 54,624,224 6,622,375 (3,428,146) 64,627,392
Net earnings for the year - - 2,309,739 - 2,309,739
Dividends
Cash - $.24 per share - - (1,630,097) - (1,630,097)
Stock - 4% 271,256 2,170,048 (2,441,304) - -
---------- ----------- ---------- ----------- -----------
Balance at June 2, 1996 $7,080,195 $56,794,272 $4,860,713 ($3,428,146) $65,307,034
========== =========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended June 2, 1996
NOTE A - ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial statements
follows:
Consolidation Practices
The consolidated financial statements include the accounts of Frisch's
Restaurants, Inc. and all of its subsidiaries.
Cash and Cash Equivalents
Highly liquid investments with original maturities of three months or less are
considered to be cash equivalents. Outstanding checks in the amount of $690,462
were included in accounts payable at May 28, 1995.
Receivables
The Company values its trade notes and accounts receivable on the reserve
method. The reserve balance was immaterial for the years ended June 2, 1996 and
May 28, 1995.
Inventories
Inventories, comprised principally of food items, are valued at the lower of
cost, determined by the first-in, first-out method, or market.
Income Taxes
Taxes are provided on all items included in the statement of earnings regardless
of when such items are reported for tax purposes.
Property and Equipment
Depreciation is provided principally on the straight-line method over the
estimated service lives of the assets.
Intangible and Other Assets
The excess of cost over equity in net assets of subsidiaries acquired prior to
November 1, 1970, is not currently being amortized because, in the opinion of
management, the value has not decreased.
Due to changed business conditions, plans for the development of Company
operated or franchised Big Boy restaurants in the state of Texas ceased during
the year ended May 29, 1994. Accordingly, the remaining goodwill of $886,447
ascribed to the acquisition of Big Boy licensing rights for Texas was charged
against earnings during the year ended May 29, 1994.
Net cash surrender value of life insurance policies includes the cash values of
two policies written by a life insurance company that is under regulatory
supervision pursuant to an Order of Rehabilitation on August 12, 1994. There are
restraints which restrict policy surrenders, loans and reductions in face
amount. This company's mortgage portfolio has been sold, significantly improving
the liquidity of its estate, thus facilitating the anticipated transfer of
policy liabilities to creditworthy carriers. Although adjustments may
7
<PAGE> 8
become necessary to values in existence prior to August 12, 1994, the
rehabilitator has concluded that policyholders' account values should be fully
preserved.
Advertising Costs
Advertising costs are charged to expense as incurred. There are no significant
advertising costs on the balance sheet for the years ended June 2, 1996 and May
28, 1995.
New Store Opening Costs
New store opening costs are capitalized and amortized over a one year period
from the date each new store opened. Items capitalized include new employee
training costs, the cost of an employee team to coordinate the opening and the
cost of certain replacement items such as uniforms and china.
Benefit Plans
The Company has two defined benefit pension plans covering substantially all of
its employees. The benefits are based on years-of-service and other factors. The
Company's funding policy is to contribute annually the maximum amount that can
be deducted for federal income tax purposes. Contributions are intended to
provide not only for benefits attributed to service-to-date, but also for those
expected to be earned in the future. The Company also has a non-qualified
supplemental retirement plan for certain key employees.
Self Insurance
The Company self-insures its casualty and a portion of its employee medical
coverages. Self insurance costs are accrued based on management's estimate for
future claims. There is insurance in place which provides for catastrophic
losses.
Revenue Recognition
Franchise fees, based on sales of franchisees, are recorded on the accrual
method as earned. There was no significant income from initial fees during the
last three years.
Fair Value of Financial Instruments
The carrying value of the Company's financial instruments approximates fair
value.
Investment in Sports Franchise
The Company's limited partnership investment in the Cincinnati Reds is carried
at cost. An income distribution of $254,500 was recorded in earnings in 1994. No
distributions were received in 1996 or 1995.
Fiscal Year
The Company's fiscal year ends on the Sunday nearest to the last day of May.
Fiscal year 1996 was comprised of 53 weeks compared with 52 weeks for fiscal
years 1995 and 1994.
Business Segments
The Company operates principally in the food service industry and additionally
operates two hotels. During the last three years, restaurant operations have
constituted a dominant segment in accordance with SFAS statement No. 14,
"Financial Reporting for Segments of a Business Enterprise."
8
<PAGE> 9
Use of Estimates
The preparation of financial statements requires management to use estimates and
assumptions in certain areas that affect the amounts reported. These judgments
are based on knowledge and experience about past and current events, and
assumptions about future events. Although management believes its estimates are
reasonable and adequate, future events affecting them may differ markedly from
current judgment.
Some of the more significant areas requiring the use of estimates include self
insurance liabilities, deferred store closing costs, value of goodwill, real
estate held for sale, and deferred executive compensation.
New Accounting Standards
The Company is required to adopt Financial Accounting Standard Number 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long Lived
Assets to be Disposed of" and SFAS 123 "Accounting for Stock Based Compensation"
in fiscal year 1997.
SFAS 121 requires impairment losses to be recognized on long-lived assets,
whether used in the operation of the business or held for disposal, when events
or changes in circumstances indicate that the assets' carrying amount may not be
fully recoverable. The Company considers a history of cash flow losses in
established areas to be its primary indicator of potential impairment. Based on
current information, the Company does not believe the effect upon adoption will
be material.
SFAS 123 establishes new accounting and reporting standards for stock based
compensation plans. Companies may elect to adopt this standard using a
fair-value based method or continue using the intrinsic value method of
measuring compensation expense prescribed under the current guidance of
Accounting Principles Board Opinion Number 25 (APB 25).
Since the Company will elect to continue using the intrinsic value method, SFAS
123 will not affect the Company's statement of earnings or financial position.
SFAS 123 requires companies electing to continue using the rules of APB 25 to
make pro forma disclosures of net income and earnings per share as though the
fair value method had been elected. Pro forma disclosures of future options
granted and stock issued will be reflected in the footnotes of the Company's
consolidated financial statements when required.
NOTE B - LONG-TERM DEBT
<TABLE>
<CAPTION>
1996 1995
--------------------------- ---------------------------
Payable Payable Payable Payable
within after within after
one year one year one year one year
(in thousands)
<S> <C> <C> <C> <C>
Revolving credit loan $ - $11,500 $ - $ 8,000
Term loan 1,625 8,375 1,625 9,875
Other 538 224 581 563
-------- ------- --------- ---------
$ 2,163 $20,099 $ 2,206 $ 18,438
========= ======= ========= =========
</TABLE>
The portion payable after one year matures as follows:
<TABLE>
<CAPTION>
1996 1995
(in thousands)
<S> <C> <C>
Period ending in 1997 $ - $ 1,839
1998 1,724 1,724
1999 1,500 9,500
2000 13,000 1,500
2001 1,500 1,500
Subsequent to 2001 2,375 2,375
--------- --------
$ 20,099 $ 18,438
========= =========
</TABLE>
9
<PAGE> 10
The revolving credit loan is a $20,000,000 line of credit, $11,500,000 of which
is outstanding at June 2, 1996. This credit loan matures on September 1, 1999,
unless extended. Interest is payable quarterly determined by various indices,
currently 6.26%. The term loan, converted from a revolving credit loan during
the year ended May 28, 1995, is payable in monthly installments of $125,000
through December 31, 2002. Interest is also payable monthly at a rate equal to
the prime rate up to a maximum of 7.5% through December 31, 1997. The rate for
the final five years shall also be equal to the prime rate, not to exceed 8.5%.
These agreements contain covenants relating to net worth, interest expense, debt
and capitalization changes, investments, leases, and restrictions on pledging
certain restaurant operating assets.
The Company also has a $2,494,000 outstanding letter of credit in support of its
self insurance.
Other debt includes industrial revenue bonds that were issued in 1978, payable
in annual installments of $200,000 through 1998 and bear interest at 7.4%.
Property and equipment having a book value at June 2, 1996 of $3,150,000 is
pledged as collateral for the bonds.
NOTE C - LEASED PROPERTY
The Company has capitalized the leased property of 50% of its non-owned
restaurant locations. The majority of the leases are for fifteen or twenty years
and contain renewal options for ten to fifteen years. Delivery equipment is held
under capitalized leases expiring during periods to 2001. The Company also
occupies office space under an operating lease which expires during 2003.
An analysis of the leased property follows:
<TABLE>
<CAPTION>
Asset balances at
1996 1995
--------------------------
(in thousands)
<S> <C> <C>
Restaurant facilities $ 8,762 $ 9,161
Equipment 870 480
--------- --------
9,632 9,641
Less accumulated amortization (5,154) (5,057)
--------- --------
$ 4,478 $ 4,584
========= ========
</TABLE>
Total rental expense of operating leases was approximately $1,575,000 in 1996,
$1,675,000 in 1995 and $1,828,000 in 1994.
Future minimum lease payments under capitalized leases and operating leases
having an initial or remaining term of one year or more follow:
<TABLE>
<CAPTION>
Capitalized Operating
Year ending in: leases leases
----------- ---------
(in thousands)
<S> <C> <C> <C>
1997 $ 1,181 $ 1,283
1998 1,098 1,242
1999 1,036 1,075
2000 981 966
2001 878 855
2002 to 2020 7,028 4,135
--------- -------
Total 12,202 $ 9,556
=======
Amount representing interest (5,505)
----------
Present value of obligations 6,697
Portion due within one year (468)
----------
Long-term obligations $ 6,229
==========
</TABLE>
10
<PAGE> 11
NOTE D - INCOME TAXES
The variations between the statutory Federal rate and the effective rates are
summarized as follows:
<TABLE>
<CAPTION>
Percent of pretax earnings
----------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. Federal income tax 34.0 34.0 34.0
Tax credits (8.5) (14.1) (7.0)
State and municipal income taxes
(net of Federal tax benefit) 7.0 2.4 5.8
Non-deductible write off of goodwill - - 3.9
Other (.1) 1.5 (.8)
-------- -------- -----
Effective Rate 32.4 23.8 35.9
======== ======== ======
</TABLE>
The components of the deferred tax asset (liability) were as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ------
<S> <C> <C>
Deferred compensation $ 623 $ 593
Partnership interest - 266
Compensated absences 563 546
Self insurance 2,442 2,231
Other 160 131
--------- -------
Total deferred tax assets 3,788 3,767
New store opening cost (118) (275)
Investment in tax benefits (731) (846)
Depreciation (1,545) (1,481)
Other (384) (554)
--------- -------
Total deferred tax liabilities (2,778) (3,156)
--------- -------
Net deferred tax asset $ 1,010 $ 611
========= =======
</TABLE>
NOTE E - CAPITAL STOCK
Shareholders approved the 1993 Stock Option Plan on October 4, 1993. The plan
authorizes the grant of stock options for up to 540,800 shares of the Common
Stock of the Company for a ten year period beginning May 9, 1994. Shares may be
optioned at not less than seventy-five percent of the fair market value on the
date granted and may include stock appreciation rights. No options have been
granted under the 1993 plan.
The 1984 Stock Option Plan expired on May 8, 1994. Outstanding options are
exercisable within ten years from the date of grant. The exercise price is the
fair market value as of the date granted.
The outstanding stock options for the 1984 plan follow:
<TABLE>
<CAPTION>
Option Price
------------------------------------------
Shares Per Share Total
------------------- -------------------- -------------------
<S> <C> <C> <C>
Chairman 82,110 $17.48 $1,435,283
President 97,975 $14.95-$21.66 1,956,804
Other key employees 79,338 $17.48 1,386,828
</TABLE>
11
<PAGE> 12
The Company also has reserved 56,243 shares for issuance under the Frisch's
Executive Savings Plan. Shares reserved under these plans have been adjusted for
stock dividends. There are no other outstanding options, warrants or rights.
NOTE F - PENSION PLANS
Net pension expense included the following components (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- -------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 1,022 $ 1,008 $ 1,039
Interest cost on projected benefit obligations 939 978 988
Investment gain on plan assets (3,032) (2,001) (1,288)
Net amortization and deferral 1,439 359 (418)
--------- --------- ---------
Net periodic pension cost $ 368 $ 344 $ 321
========= ========= ========
</TABLE>
The following table sets forth the plans' funded status and amounts recognized
in the Company's balance sheet at June 2, 1996 and May 28, 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Plan assets at fair market value, primarily marketable securities and insurance funds $18,597 $16,451
------- -------
Actuarial present value of benefit obligations:
Vested benefits 9,895 8,300
Non vested benefits 802 823
------- -------
Accumulated benefit obligations 10,697 9,123
Effect of projected future salary increases 2,997 3,201
------- -------
Projected benefit obligations 13,694 12,324
------- -------
Plan assets in excess of projected benefit obligations (including approximately
$369 at 1996 and $360 at 1995 withdrawable by participants upon demand) 4,903 4,127
Unrecognized net gains (4,349) (3,259)
Unrecognized prior service cost 641 599
Unrecognized net transition (assets) (1,421) (1,658)
------- --------
Net accrued pension cost included in the balance sheet $ (226) $ (191)
======= =======
</TABLE>
Assumptions used to develop net periodic pension cost and the actuarial present
value of projected benefit obligations:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- ------
<S> <C> <C> <C>
Expected long-term rate of return on plan assets 8.50% 8.50% 8.50%
Weighted average discount rate 7.25 7.25 7.25
Rate of increase in compensation levels 5.50 5.50 5.50
</TABLE>
12
<PAGE> 13
NOTE G - EARNINGS PER SHARE
Earnings per common share are based on the weighted average number of common
shares outstanding during the year (6,882,609 in 1996, 6,882,391 in 1995 and
6,885,993 in 1994). Stock options outstanding during the three years did not
have a material dilutive effect on earnings per share.
QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended June 2, 1996 Year Ended May 28, 1995
------------------------------------------- -------------------------------------------
(In Thousands) (In Thousands)
------------------------------- -------------------------------
Net Earnings Net Earnings
Operating earnings (loss) Operating earnings (loss)
Revenue profit (loss) per share Revenue profit (loss) per share
------- ------ ------ --------- ------- ------ ------ ---------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1st Quarter $ 52,666 $ 4,409 $ 883 $.13 $ 50,836 $ 4,820 $1,203 $.17
2nd Quarter 39,205 3,070 788 .11 38,873 3,626 1,108 .16
3rd Quarter 33,996 1,055 (444) (.06) 34,670 791 (752) (.11)
4th Quarter 41,078 3,547 1,083 .16 38,680 2,777 799 .12
-------- ------- ------ ---- -------- ------- ------ ----
Year's Total $166,945 $12,081 $2,310 $.34 $163,059 $12,014 $2,358 $.34
======== ======= ====== ==== ======== ======= ====== ====
</TABLE>
The first quarter of each year contained sixteen weeks. The second and third
quarters of each year contained twelve weeks. The fourth quarter of fiscal 1996
contained thirteen weeks compared to twelve weeks in fiscal 1995.
Net earnings for the first quarters of 1996 and 1995 and the fourth quarter of
1996 included favorable adjustments of $220,000, $440,000, and $330,000
respectively, resulting from lower than anticipated claims in the Company's self
insured casualty insurance program.
The fourth quarter of 1995 included a $160,000 favorable adjustment of income
tax expense to reflect the actual effective rate for the year.
13
<PAGE> 1
Exhibit 99(g)(2)
AUDITORS' REPORT
Shareholders
Frisch's Restaurants, Inc.
We have audited the accompanying consolidated balance sheet of Frisch's
Restaurants, Inc. (an Ohio corporation) and Subsidiaries as of June 1, 1997 and
June 2, 1996 and the related consolidated statements of earnings, cash flows,
and shareholders' equity for each of the three years in the period ended June 1,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Frisch's
Restaurants, Inc. and Subsidiaries as of June 1, 1997 and June 2, 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 1, 1997, in conformity with generally
accepted accounting principles.
As discussed in Note A to the consolidated financial statements, in 1997
the Company adopted the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of."
GRANT THORNTON LLP
Cincinnati, Ohio
July 8, 1997
<PAGE> 2
<TABLE>
<CAPTION>
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 1, 1997 and June 2, 1996
ASSETS
1997 1996
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 231,453 $ 134,944
Receivables
Trade 1,037,001 1,107,394
Other 190,312 963,347
Inventories 3,657,844 3,725,755
Prepaid expenses and sundry deposits 957,311 1,280,006
Prepaid and deferred income taxes 808,198 1,352,315
------------ ------------
Total current assets 6,882,119 8,563,761
PROPERTY AND EQUIPMENT - AT COST
Land and improvements 19,788,269 24,712,017
Buildings 48,319,998 54,871,830
Equipment and fixtures 51,021,079 53,876,413
Leasehold improvements and buildings on leased land 24,913,657 24,640,369
Capitalized leases 9,096,008 9,632,186
Construction in progress -- 2,393,653
------------ ------------
153,139,011 170,126,468
Less accumulated depreciation and amortization 72,374,953 70,886,768
------------ ------------
Net property and equipment 80,764,058 99,239,700
OTHER ASSETS
Intangible assets 756,943 761,017
Investments in land - at cost 1,953,130 2,001,135
Property held for sale 13,628,457 1,766,068
Net cash surrender value-life insurance policies 3,613,878 3,447,360
Deferred income taxes 1,530,868 551,072
Other 2,130,512 2,065,728
------------ ------------
Total other assets 23,613,788 10,592,380
------------ ------------
$111,259,965 $118,395,841
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 3
<TABLE>
<CAPTION>
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 1, 1997 and June 2, 1996
LIABILITIES
1997 1996
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Long-term obligations due within one year
Long-term debt $ 1,723,890 $ 2,162,860
Obligations under capitalized leases 470,497 467,706
Self insurance 1,095,993 1,862,957
Accounts payable 6,357,177 8,109,024
Accrued expenses 6,051,004 5,805,262
Income taxes -- 50,161
------------ ------------
Total current liabilities 15,698,561 18,457,970
LONG-TERM OBLIGATIONS
Long-term debt 17,875,000 20,098,890
Obligations under capitalized leases 6,055,682 6,229,351
Self insurance 4,151,229 5,879,111
Other 2,795,689 2,423,485
------------ ------------
Total long term obligations 30,877,600 34,630,837
COMMITMENTS
SHAREHOLDERS' EQUITY -- --
Capital stock
Preferred stock - authorized, 3,000,000 shares
without par value; none issued -- --
Common stock - authorized, 12,000,000 shares
without par value; issued, 7,362,279
and 7,080,195 shares - stated value - $1 7,362,279 7,080,195
Additional contributed capital 60,427,514 56,794,272
------------ ------------
67,789,793 63,874,467
Retained earnings 432,732 4,860,713
------------ ------------
68,222,525 68,735,180
Less cost of treasury stock (213,945 and
197,586 shares) 3,538,721 3,428,146
------------ ------------
Total shareholders' equity 64,683,804 65,307,034
------------ ------------
$111,259,965 $118,395,841
============ ============
</TABLE>
<PAGE> 4
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Three years ended June 1, 1997
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
REVENUE
Sales $ 164,521,025 $ 165,425,731 $ 161,429,199
Other 1,410,384 1,519,025 1,629,985
------------- ------------- -------------
Total revenue 165,931,409 166,944,756 163,059,184
COSTS AND EXPENSES
Cost of sales
Food and paper 52,032,873 53,123,133 52,298,714
Payroll and related 55,478,791 58,571,618 56,334,783
Other operating costs 41,086,258 41,650,300 40,781,489
------------- ------------- -------------
148,597,922 153,345,051 149,414,986
General and administrative 4,625,243 3,745,047 4,581,541
Advertising 4,007,381 4,025,872 4,008,237
Impairment of long-lived assets 4,600,000 -- --
Interest 2,373,313 2,411,313 1,961,084
------------- ------------- -------------
Total costs and expenses 164,203,859 163,527,283 159,965,848
------------- ------------- -------------
Earnings before income taxes 1,727,550 3,417,473 3,093,336
INCOME TAXES
Current
Federal 1,732,149 1,366,294 1,169,007
Less tax credits (233,396) (290,884) (436,358)
State and municipal 56,228 362,549 110,246
Deferred (1,014,078) (330,225) (107,930)
------------- ------------- -------------
540,903 1,107,734 734,965
------------- ------------- -------------
NET EARNINGS $ 1,186,647 $ 2,309,739 $ 2,358,371
============= ============= =============
Primary and fully divided net earnings per share $ .17 $ .32 $ .33
============= ============= =============
Weighted average number of primary and fully
diluted common shares and equivalents
assumed outstanding during the year 7,151,145 7,156,789 7,156,562
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 5
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three years ended June 1, 1997
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $ 1,186,647 $ 2,309,739 $ 2,358,371
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 10,486,163 10,350,326 9,821,080
Gain on disposition of assets (561,918) (829,854) (345,380)
Impairment of long-lived assets 4,600,000 -- --
Changes in assets and liabilities:
Decrease (increase) in receivables 843,428 (524,259) 858,036
Decrease (increase) in inventories 67,911 219,905 (8,621)
Decrease in prepaid expenses and sundry deposits 322,695 425,457 83,465
Increase in prepaid and deferred income taxes (435,679) (770,221) (509,494)
(Decrease) increase in accounts payable (1,751,847) (463,142) 162,257
Increase in accrued expenses 245,742 46,606 128,095
(Decrease) increase in accrued income taxes (50,161) 50,161 (36,102)
(Increase) decrease in other assets (80,346) 111,697 321,374
(Decrease) increase in self insured obligations (2,494,846) 878,681 1,077,583
Increase in other liabilities 372,204 216,129 336,239
------------ ------------ ------------
Net cash provided by operating activities 12,749,993 12,021,225 14,246,903
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Additions to property (10,221,353) (15,362,001) (23,283,499)
Proceeds from disposition of property 2,696,741 3,941,466 2,245,680
Increase in other assets (156,845) (104,970) (524,789)
------------ ------------ ------------
Net cash (used in) investing activities (7,681,457) (11,525,505) (21,562,608)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from borrowings 3,000,000 8,000,000 10,385,000
Payment of long-term debt and capital lease obligations (6,162,150) (6,950,329) (1,489,525)
Cash dividends paid (1,699,302) (1,630,097) (1,570,418)
Treasury share transactions (110,575) -- 9,398
------------ ------------ ------------
Net cash (used in) provided by financing activities (4,972,027) (580,426) 7,334,455
------------ ------------ ------------
Net increase (decrease) in cash and equivalents 96,509 (84,706) 18,750
Cash and equivalents at beginning of year 134,944 219,650 200,900
------------ ------------ ------------
Cash and equivalents at end of year $ 231,453 $ 134,944 $ 219,650
============ ============ ============
Supplemental disclosures:
Stock dividends issued $ 3,915,326 $ 2,441,304 $ 2,706,460
Interest paid 2,474,985 2,549,352 1,872,183
Income taxes paid 1,919,485 2,319,962 1,419,798
Income tax refunds received 892,742 492,168 139,237
Lease transactions capitalized 407,247 390,000 --
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 6
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three years ended June 1, 1997
<TABLE>
<CAPTION>
Common stock
at $1 per share - Additional
Shares and contributed Retained Treasury
amount capital earnings shares Total
----------------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Balance at May 29, 1994 $ 6,548,201 $ 52,188,112 $ 8,540,882 (3,447,154) $ 63,830,041
Net earnings for the year -- -- 2,358,371 -- 2,358,371
Treasury shares reissued -- (9,610) -- 23,771 14,161
Treasury shares acquired -- -- -- (4,763) (4,763)
Dividends
Cash - $.24 per share -- -- (1,570,418) -- (1,570,418)
Stock - 4% 260,738 2,445,722 (2,706,460) -- --
------------ ------------ ------------ ----------- ------------
Balance at May 28, 1995 6,808,939 54,624,224 6,622,375 (3,428,146) 64,627,392
Net earnings for the year -- -- 2,309,739 -- 2,309,739
Dividends
Cash - $.24 per share -- -- (1,630,097) -- (1,630,097)
Stock - 4% 271,256 2,170,048 (2,441,304) -- --
------------ ------------ ------------ ----------- -----------
Balance at June 2, 1996 7,080,195 56,794,272 4,860,713 (3,428,146) 65,307,034
Net earnings for the year -- -- 1,186,647 -- 1,186,647
Treasury shares acquired -- -- -- (110,575) (110,575)
Dividends
Cash - $.24 per share -- -- (1,699,302) -- (1,699,302)
Stock - 4% 282,084 3,633,242 (3,915,326) -- --
------------ ------------ ------------ ----------- ------------
Balance at June 1, 1997 $ 7,362,279 $ 60,427,514 $ 432,732 ($ 3,538,721) $ 64,683,804
============ ============ ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 7
FRISCH'S RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended June 1, 1997
NOTE A - ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial statements
follows:
Description of the Business
- ---------------------------
Frisch's Restaurants, Inc., operates and licenses family restaurants with
drive-thru service under the name Frisch's Big Boy. These operations are located
in Ohio, Indiana and Kentucky. Additionally, the Company operates two hotels
with restaurants in metropolitan Cincinnati, where it is headquartered.
Trademarks which the Company has the right to use include "Frisch's," "Big Boy,"
and "Quality Hotel."
Consolidation Practices
- -----------------------
The consolidated financial statements include the accounts of Frisch's
Restaurants, Inc. and all of its subsidiaries. Significant inter-company
accounts and transactions are eliminated in consolidation.
Use of Estimates
- ----------------
The preparation of financial statements requires management to use estimates and
assumptions in certain areas that affect the amounts reported. These judgments
are based on knowledge and experience about past and current events, and
assumptions about future events. Although management believes its estimates are
reasonable and adequate, future events affecting them may differ markedly from
current judgment.
Some of the more significant areas requiring the use of estimates include self
insurance liabilities, deferred store closing costs, value of goodwill, net
realizable value of property held for sale, and deferred executive compensation.
Cash and Cash Equivalents
- -------------------------
Highly liquid investments with original maturities of three months or less are
considered to be cash equivalents.
Receivables
- -----------
The Company values its trade notes and accounts receivable on the reserve
method. The reserve balance was immaterial for the years ended June 1, 1997 and
June 2, 1996.
Inventories
- -----------
Inventories, comprised principally of food items, are valued at the lower of
cost, determined by the first-in, first-out method, or market.
Income Taxes
- ------------
Taxes are provided on all items included in the statement of earnings regardless
of when such items are reported for tax purposes.
Property and Equipment
- ----------------------
Depreciation is provided principally on the straight-line method over the
estimated service lives of the assets.
<PAGE> 8
Intangible and Other Assets
- ---------------------------
The excess of cost over equity in net assets of subsidiaries acquired prior to
November 1, 1970, is not currently being amortized because, in the opinion of
management, the value has not decreased.
Net cash surrender value of life insurance policies includes the cash values of
two policies written by a life insurance company that has been under an order of
rehabilitation since August, 1994. As had been expected, an assumption
reinsurance agreement has been reached with a creditworthy carrier that fully
preserves cash values and which contains rights and benefits comparable with the
original policies. Restraints on policy loans, surrenders and reductions in face
amounts, which were imposed by the order of rehabilitation, will remain in
effect until the agreement is closed. The closing, which is subject to court and
regulatory approval, is anticipated during the fourth quarter of calendar 1997.
Advertising Costs
- -----------------
Advertising costs are charged to expense as incurred. There are no significant
advertising costs on the balance sheet for the years ended June 1, 1997 and June
2, 1996.
New Store Opening Costs
- -----------------------
New store opening costs are capitalized and amortized over a one year period
from the date each new store opened. Items capitalized include new employee
training costs, the cost of an employee team to coordinate the opening and the
cost of certain replacement items such as uniforms and china. Opening expense
was $584,000 in 1997, $1,271,000 in 1996, and $1,671,000 in 1995.
Benefit Plans
- -------------
The Company has two defined benefit pension plans covering substantially all of
its employees. The benefits are based on years-of-service and other factors. The
Company's funding policy is to contribute annually the maximum amount that can
be deducted for federal income tax purposes. Contributions are intended to
provide not only for benefits attributed to service-to-date, but also for those
expected to be earned in the future. The Company also has a non-qualified
supplemental retirement plan for certain key employees.
Self Insurance
- --------------
The Company self-insures portions of its casualty insurance coverages. Self
insurance costs are accrued based on management's estimate for future claims.
There is insurance in place which provides for catastrophic self insured losses.
Revenue Recognition
- -------------------
Franchise fees, based on sales of franchisees, are recorded on the accrual
method as earned. There was no significant income from initial fees during the
last three years.
Fair Value of Financial Instruments
- -----------------------------------
The carrying value of the Company's financial instruments approximates fair
value.
Investment in Sports Franchise
- ------------------------------
The Company's limited partnership investment in the Cincinnati Reds is carried
at cost. No distributions have been received during the last three years.
Fiscal Year
- -----------
<PAGE> 9
The Company's fiscal year ends on the Sunday nearest to the last day of May.
Fiscal years 1997 and 1995 were comprised of 52 weeks. Fiscal 1996 was comprised
of 53 weeks.
Impairment Loss
- ---------------
Effective June 3, 1996 the Company adopted Statement of Financial Accounting
Standards No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." SFAS 121 requires
impairment losses to be recognized on long-lived assets, whether used in the
operation of the business or held for disposal, when events or changes in
circumstances indicate that the assets' carrying amount may not be fully
recoverable. The Company considers a history of cash flow losses in established
areas to be its primary indicator of potential impairment. The immediate effect
upon adoption was immaterial.
During the fourth quarter, the Company made a further review of operations in
those markets in which losses occurred and determined that all restaurants in
the Indianapolis market should be closed. Additionally, five other restaurants
in three other areas were identified for closing. The restaurants chosen for
closing had a combined pre-tax operating loss of approximately $2,200,000 in
fiscal 1997. A non-cash pre-tax charge of $4,600,000 was recorded as an
impairment loss to reduce the carrying costs of the properties to net realizable
value as determined by the Company's experience in disposing of other
underperforming properties and estimates provided by real estate brokers. All
fifteen properties are listed for sale with a broker, and are carried at a net
realizable value of approximately $12,140,000 on the Company's balance sheet as
a component of the caption "Property held for sale." The Company expects to
dispose of the majority of these restaurant properties within the next twelve to
eighteen months. The components of the SFAS 121 charge were as follows:
Reduction of carrying costs of assets
to be disposed of to net present value $ 3,925,000
Disposal costs, including broker commissions 675,000
-----------
Total $ 4,600,000
===========
NOTE B - LONG-TERM DEBT
<TABLE>
<CAPTION>
1997 1996
---------------------- -------------------------
Payable Payable Payable Payable
within after within after
one year one year one year one year
-------- ----------- -------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Revolving credit loan $ - $ 11,000 $ - $ 11,500
Term loan 1,500 6,875 1,625 8,375
Other 224 - 538 224
--------- ---------- --------- ---------
$ 1,724 $ 17,875 $ 2,163 $ 20,099
======== ========== ======== =========
</TABLE>
The portion payable after one year matures as follows:
<TABLE>
<CAPTION>
1997 1996
---------- --------
(in thousands)
<S> <C> <C>
Period ending in 1998 $ - $ 1,724
1999 1,500 1,500
2000 12,500 13,000
2001 1,500 1,500
2002 1,500 1,500
Subsequent to 2002 875 875
---------- --------
$ 17,875 $ 20,099
========== ========
</TABLE>
<PAGE> 10
The revolving credit loan is a $16,000,000 line of credit (see note J),
$11,000,000 of which is outstanding at June 1, 1997. This credit loan matures on
September 1, 1999, unless extended. Interest is payable quarterly determined by
various indices, currently 6.41%. The term loan is payable in monthly
installments of $125,000 through December 31, 2002. Interest is also payable
monthly at a rate equal to the prime rate up to a maximum of 7.5% through
December 31, 1997. The rate for the final five years shall also be equal to the
prime rate, not to exceed 8.5%.
These agreements contain covenants relating to net worth, interest expense, debt
and capitalization changes, asset dispositions, investments, leases, and
restrictions on pledging certain restaurant operating assets.
The Company also has a $1,978,000 outstanding letter of credit in support of its
self insurance.
Other debt includes industrial revenue bonds that were issued in 1978, payable
in annual installments of $200,000 through 1998 and bear interest at 7.4%.
Property and equipment having a book value at June 1, 1997 of $3,332,000 is
pledged as collateral for the bonds.
<PAGE> 11
NOTE C - LEASED PROPERTY
The Company has capitalized the leased property of 53% of its non-owned
restaurant locations. The majority of the leases are for fifteen or twenty years
and contain renewal options for ten to fifteen years. Delivery equipment is held
under capitalized leases expiring during periods to 2004. The Company also
occupies office space under an operating lease which expires during 2003, with a
renewal option available through 2013.
An analysis of the leased property follows:
<TABLE>
<CAPTION>
Asset balances at
--------------------------
1997 1996
---------- --------
(in thousands)
<S> <C> <C>
Restaurant facilities $ 8,119 $ 8,762
Equipment 977 870
--------- --------
9,096 9,632
Less accumulated amortization (4,924) (5,154)
--------- --------
$ 4,172 $ 4,478
========= ========
</TABLE>
Total rental expense of operating leases was approximately $1,438,000 in 1997,
$1,575,000 in 1996 and $1,675,000 in 1995.
Future minimum lease payments under capitalized leases and operating leases
having an initial or remaining term of one year or more follow:
<TABLE>
<CAPTION>
Capitalized Operating
Year ending in: leases leases
--------------- ----------- ---------
(in thousands)
<S> <C> <C>
1998 $ 1,147 $ 1,243
1999 1,085 1,204
2000 1,030 1,110
2001 927 994
2002 885 754
2003 to 2020 6,279 4,090
--------- -------
Total 11,353 $ 9,395
=======
Amount representing interest (4,827)
--------
Present value of obligations 6,526
Portion due within one year (470)
--------
Long-term obligations $ 6,056
=======
</TABLE>
NOTE D - INCOME TAXES
The variations between the statutory Federal rate and the effective rates are
summarized as follows:
<TABLE>
<CAPTION>
Percent of pretax earnings
------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. Federal income tax 34.0 34.0 34.0
Tax credits (13.5) (8.5) (14.1)
State and municipal income taxes
(net of Federal tax benefit) 2.1 7.0 2.4
Other 8.7 (.1) 1.5
-------- ------- -------
Effective Rate 31.3 32.4 23.8
======== ======== =======
</TABLE>
<PAGE> 12
The components of the deferred tax asset (liability) were as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred compensation $ 648 $ 623
Compensated absences 607 563
Self insurance 1,640 2,442
Impairment of assets 1,564 -
Other 290 160
--------- -------
Total deferred tax assets 4,749 3,788
New store opening cost (12) (118)
Partnership interest (174) (20)
Investment in tax benefits (594) (731)
Depreciation (1,384) (1,545)
Other (561) (364)
--------- -------
Total deferred tax liabilities (2,725) (2,778)
--------- -------
Net deferred tax asset $ 2,024 $ 1,010
========= =======
</TABLE>
The Company is currently being examined by the Internal Revenue Service for the
year 1994. The Company believes that it will prevail on most of the issues that
have been raised and that, in any event, the ultimate liability for these issues
will have no material impact on the Company's statement of earnings.
NOTE E - CAPITAL STOCK
Shareholders approved the 1993 Stock Option Plan on October 4, 1993. The plan
authorizes the grant of stock options for up to 562,432 shares of the Common
Stock of the Company for a ten year period beginning May 9, 1994. Shares may be
optioned at not less than seventy-five percent of fair market value on the date
granted and may include stock appreciation rights. No options have been granted
under the 1993 plan.
The 1984 Stock Option Plan expired on May 8, 1994. Outstanding options are
exercisable within ten years from the date of grant, the majority of which will
expire in less than one year. The exercise price is the fair market value as of
the date granted, subsequently adjusted for a 4% stock dividend in 1997 and 1996
in accordance with the anti-dilution provisions of the plan. Transactions
involving the 1984 plan are summarized below:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------- ------------------------- --------------------------
No. of Option No. of Option No. Of Option
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding and
exercisable at
beginning of year 259,423 $14.95 to $21.66 262,604 $15.55 to $22.53 256,933 $16.17 to $23.43
Granted during the year 0 0 0
Exercised during the year 0 0 0
Expired during the year (9,765) $16.81 to $17.48 (13,156) $18.18 (4,603) $18.18
Increase for 4% stock
dividend 10,177 $14.38 to $20.83 9,975 $14.95 to $21.66 10,274 $15.55 to $22.53
------- -------- --------
Outstanding and
exercisable at
end of year 259,835 $14.38 to $20.83 259,423 $14.95 to $21.66 262,604 $15.55 to $22.53
======= ======= =======
</TABLE>
The Company also has reserved 58,492 shares for issuance under the Frisch
Executive Savings Plan. Shares reserved under these plans have been adjusted for
stock dividends. There are no other outstanding options, warrants or rights.
<PAGE> 13
Effective June 3, 1996 the Company adopted Statement of Financial Accounting
Standards No. 123 (SFAS 123), "Accounting for Stock Based Compensation." SFAS
123 establishes new accounting and reporting standards for stock based
compensation plans. Companies may elect to adopt this standard using a
fair-value based method or continue using the intrinsic value method of
measuring compensation expense prescribed under the current guidance of
Accounting Principles Board Opinion Number 25 (APB 25).
Since the Company elected to continue using the intrinsic value method, SFAS 123
has not affected the Company's statement of earnings or financial position. SFAS
123 requires companies electing to continue using the rules of APB 25 to make
pro forma disclosures of net income and earnings per share as though the fair
value method had been elected. Pro forma disclosures of future options granted
and stock issued will be reflected in the footnotes of the Company's
consolidated financial statements when required.
NOTE F - PENSION PLANS
Net pension expense included the following components (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 1,128 $ 1,022 $ 1,008
Interest cost on projected benefit obligations 1,020 939 978
Investment gain on plan assets (2,736) (3,032) (2,001)
Net amortization and deferral 940 1,439 359
------- ------- -------
Net periodic pension cost $ 352 $ 368 $ 344
======= ======= =======
</TABLE>
The following table sets forth the plans' funded status and amounts recognized
in the Company's balance sheet at June 1, 1997 and June 2, 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Plan assets at fair market value, primarily marketable securities and insurance funds $ 19,242 $ 18,597
-------- --------
Actuarial present value of benefit obligations:
Vested benefits 9,217 9,895
Non vested benefits 1,033 802
-------- --------
Accumulated benefit obligations 10,250 10,697
Effect of projected future salary increases 3,542 2,997
-------- --------
Projected benefit obligations 13,792 13,694
-------- --------
Plan assets in excess of projected benefit obligations (including approximately
$361 at 1997 and $369 at 1996 withdrawable by participants upon demand) 5,450 4,903
Unrecognized net gains (5,284) (4,349)
Unrecognized prior service cost 739 641
Unrecognized net transition (assets) (1,185) (1,421)
-------- --------
Net accrued pension cost included in the balance sheet $ (280) $ (226)
======== ========
</TABLE>
Assumptions used to develop net periodic pension cost and the actuarial present
value of projected benefit obligations:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Expected long-term rate of return on plan assets 8.50% 8.50% 8.50%
Weighted average discount rate 7.25 7.25 7.25
Rate of increase in compensation levels 5.50 5.50 5.50
</TABLE>
<PAGE> 14
NOTE G - EARNINGS PER SHARE
Earnings per common share are based on the weighted average number of common
shares outstanding during the year (7,151,145 in 1997, 7,156,789 in 1996 and
7,156,562 in 1995). Stock options outstanding during the three years did not
have a dilutive effect on earnings per share.
The Company is required to adopt Statement of Financial Accounting Standards No.
128 (SFAS 128), "Earnings Per Share" in fiscal year 1998. SFAS 128 simplifies
current standards by requiring a presentation of basic EPS, and if applicable,
diluted EPS, instead of primary and fully diluted EPS. There is expected to be
no material effect on restatement of prior period EPS data.
NOTE H - INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT INDUSTRIES
The Company operates principally in the food service and lodging industries.
Prior to 1997, operations in the food service industry constituted a dominant
segment in accordance with Statement of Financial Accounting Standards No. 14
(SFAS 14), "Financial Reporting Segments of a Business Enterprise." Operations
in the food service industry are vertically integrated, and include the
manufacture and distribution of food products and supplies to its restaurants
and to franchisees for resale to the general public. Fees are charged to
franchisees for administrative and advertising services based principally on
percentage of sales. Intersegment sales are immaterial.
<TABLE>
<CAPTION>
(In thousands)
--------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenue
Food service $ 153,981 $ 155,283 $ 151,996
Lodging 11,950 11,662 11,063
------------ ----------- ---------
$ 165,931 $ 166,945 $ 163,059
=========== ========== =========
Operating profit
Food service $ 6,848 $ 7,482 $ 7,435
Lodging 468 573 571
------------ ----------- ---------
$ 7,316 $ 8,055 $ 8,006
=========== ========== =========
Identifiable assets
Food service $ 99,383 $ 108,978 $ 108,870
Lodging 11,877 9,418 6,678
------------ ----------- ---------
$ 111,260 $ 118,396 $ 115,548
=========== ========== =========
Depreciation and amortization
Food service $ 9,301 $ 9,533 $ 8,995
Lodging 1,185 817 826
------------ ----------- ---------
$ 10,486 $ 10,350 $ 9,821
=========== ========== =========
Capital expenditures
Food service $ 6,554 $ 11,644 $ 21,437
Lodging 3,667 3,718 1,846
------------ ----------- ---------
$ 10,221 $ 15,362 $ 23,283
=========== ========== =========
</TABLE>
<PAGE> 15
NOTE I - UNAUDITED QUARTERLY DATA
<TABLE>
<CAPTION>
Year Ended June 1, 1997 Year Ended June 2, 1996
-------------------------------------------- ------------------------------------------------
(In Thousands) (In Thousands)
------------------------------ ------------------------------------
Net Earnings Net Earnings
Gross earnings (loss) Gross earnings (loss)
Revenue profit (loss) per share Revenue profit (loss) per share
------- ------ -------- --------- ------- ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1st Quarter $ 51,730 $ 5,553 $ 1,427 $ .20 $ 52,666 $ 4,409 $ 883 $ .12
2nd Quarter 39,607 4,023 937 .13 39,205 3,070 788 .11
3rd Quarter 35,927 2,682 203 .03 33,996 1,055 (444) (.06)
4th Quarter 38,667 3,665 (1,380) (.19) 41,078 3,547 1,083 .15
------- ------- ------- ------- -------- ------- ------- --------
Year's Total $165,931 $15,923 $ 1,187 $ .17 $166,945 $12,081 $ 2,310 $ .32
======== ======= ======= ======= ======== ======= ======= ========
</TABLE>
The first quarter of each year contained sixteen weeks. The second and third
quarters of each year contained twelve weeks. The fourth quarter of fiscal 1997
contained twelve weeks compared to thirteen weeks in fiscal 1996.
Net earnings for the first quarters of 1997 and 1996 and the fourth quarter of
1996 included favorable adjustments of $1,200,000, $220,000 and $330,000
respectively, resulting from lower than anticipated claims in the Company's self
insured casualty insurance program.
The fourth quarter of fiscal 1997 included an impairment loss of $3,040,000, net
of tax, resulting from the closing of fifteen underperforming restaurants and a
$170,000 favorable adjustment of income tax expense to reflect the actual
effective rate for the year.
NOTE J - SUBSEQUENT EVENT
On July 8, 1997, the Board of Directors approved the repurchase of up to
1,000,000 shares of the Company's common stock from existing shareholders
subject to the terms of a tender offer. The tender offer provides for the
payment of a net cash price not greater than $17.00 nor less than $15.00 per
share. The Company has arranged to borrow up to $18,000,000 under a loan
agreement maturing in two years. The loan will bear interest at the lender's
prime rate or a LIBOR-adjusted rate. As of July 8, 1997 the prime rate was 8.5%
and the LIBOR-adjusted rate was approximately 7.2%. The loan is collateralized
by the property and equipment owned by the Company at the fifteen restaurant
locations recently closed, security interests in the cash value of all life
insurance policies owned by the Company, and a security interest in the after
tax proceeds from the possible sale of the Company's limited partnership
investment in the Cincinnati Reds professional baseball team. The Company
expects to repay borrowings under the loan agreement through the sale of these
assets (excluding the life insurance policies) and other internally generated
funds, and is required by the loan agreement to immediately apply the after tax
sale proceeds against the outstanding indebtedness. As long as this credit
facility remains in place, the credit availability under the Company's existing
$20,000,000 revolving line of credit is reduced to $16,000,000.
<PAGE> 1
Ex. 99(g)(3)
[Frisch's Logo]
Summary: Significantly improved annual operating
earnings of Frisch's Restaurants, Inc.
reduced by fourth quarter charge
for closing fifteen restaurants.
Company Contact:
Donald H. Walker
Vice President-Finance and CFO
(513) 559-5202
FOR IMMEDIATE RELEASE
Cincinnati, Ohio. July 8, 1997...........................
Frisch's Restaurants, Inc. (American Stock Exchange, Inc.) has reported
net earnings of $1,186,647, or $.17 per share, for the fiscal year ended June 1,
1997, compared to fiscal 1996 net earnings of $2,309,739, or $.32 per share.
"Without the impact of an asset writedown, 1997 net earnings would have
exceeded 1996 net earnings by more than 80 percent," said Craig F. Maier,
President and Chief Executive Officer. During the fourth quarter of fiscal 1997,
the Company decided to close fifteen underperforming Big Boy restaurants. The
asset writedown of $4,600,000 ($3,040,000, net of tax) arose from this decision.
Without the writedown, net earnings of $.23 per share would have been reported
in the fourth quarter compared to $.15 per share in 1996. Due to the asset
impairment charge, a net loss of $1,379,721, or ($.19) per share, was reported.
<PAGE> 2
Mr. Maier reported that total revenue for the year on a comparable
52-week basis, increased 1.3 percent. Because fiscal 1996 consisted of 53 weeks,
total revenue for fiscal 1997 declined 0.6 percent to $165,931,409 from
$166,944,756 last year. Total revenue for the quarter, on a comparable 12-week
basis, rose 2.1 percent. Because the 1996 fourth quarter contained 13 weeks,
total revenue for the 1997 fourth quarter decreased 5.9 percent to $38,667,504
from $41,078,022 last year.
Mr. Maier stated, "Operating earnings improvements and same store sales
gains present throughout the first three quarters of fiscal 1997 continued in
the fourth quarter." He noted that long-term strategic actions taken by the
Company over the past few years have resulted in improved restaurant level
earnings throughout all of fiscal 1997.
During today's Board of Director's meeting, the Board declined a
request from Benjamin Nazarian of the Pioneer Venture Fund to approve its
acquisition of more than 10 percent of the Company's stock under Ohio Revised
Code Chapter 1704. Under that law, shareholders who do not receive Board
approval prior to acquiring more than 10 percent of Company stock are restricted
for three years in their transactions with the Company. On behalf of the Board,
Mr. Maier said the Board's decision was made to preserve the business
combination protection provided by Ohio law. "The Board concluded that granting
Mr. Nazarian special status was not in the best interests of the Company," he
stated.
<PAGE> 3
Statements contained in this press release which are not historical
facts are forward looking statements as that item is defined in the Private
Securities Litigation Act of 1995. Such forward looking statements are subject
to risks and uncertainties which could cause actual results to differ materially
from estimated results. Such risks and uncertainties are detailed in the
Company's filings with the Securities and Exchange Commission.
# # # #
<PAGE> 4
<TABLE>
<CAPTION>
Frisch's Restaurants, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS
Fifty-two Fifty-three
Weeks Ended Weeks Ended
June 1, 1997 June 2, 1996
------------ ------------
<S> <C> <C>
Revenue
Sales $164,521,025 $165,425,731
Other 1,410,384 1,519,025
------------ ------------
Total revenue 165,931,409 166,944,756
Costs and expenses
Cost of sales
Food and paper 52,032,873 53,123,133
Payroll and related 55,478,791 58,571,618
Other operating costs 41,086,258 41,650,300
------------ ------------
148,597,922 153,345,051
General and administrative 4,625,243 3,745,047
Advertising 4,007,381 4,025,872
Impairment of long-lived assets 4,600,000 --
Interest 2,373,313 2,411,313
------------ ------------
Total costs and expenses 164,203,859 163,527,283
------------ ------------
Earnings before income taxes 1,727,550 3,417,473
Income taxes 540,903 1,107,734
------------ ------------
NET EARNINGS $ 1,186,647 $ 2,309,739
============ ============
Net earnings per share $ .17 $ .32
============ ============
Depreciation included above $ 10,486,163 $ 10,350,326
============ ============
Opening expenses included above $ 584,041 $ 1,270,856
============ ============
Weighted average shares outstanding 7,151,145 7,156,789
============ ============
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Frisch's Restaurants, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS
Twelve Thirteen
Weeks Ended Weeks Ended
June 1, 1997 June 2, 1996
------------ ------------
<S> <C> <C>
Revenue
Sales $ 38,374,021 $ 40,630,507
Other 293,483 447,515
------------ ------------
Total revenue 38,667,504 41,078,022
Costs and expenses
Cost of sales
Food and paper 12,008,138 13,129,176
Payroll and related 13,090,255 14,212,260
Other operating costs 9 610,943 9,742,203
------------ ------------
34,709,336 37,083,639
General and administrative 123,105 820,852
Advertising 945,095 936,472
Impairment of long-lived assets 4,600,000 --
Interest 540,786 571,140
------------ ------------
Total costs and expenses 40,918,322 39,412,103
------------ ------------
Earnings (loss) before income taxes (2,250,818) 1,665,919
Income taxes (871,097) 582,734
------------ ------------
NET EARNINGS (LOSS) ($ 1,379,721) $ 1,083,185
============ ============
Net earnings (loss) per share ($ 0.19) $ .15
============ ============
Depreciation included above $ 2,377,400 $ 2,382,553
============ ============
Opening expenses included above $ 117,892 $ 225,798
============ ============
Weighted average shares outstanding 7,148,334 7,156,789
============ ============
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Frisch's Restaurants, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
June 1, June 2,
1997 1996
------------ ------------
<S> <C> <C>
Assets
Current assets
Cash and equivalents $ 231,453 $ 134,944
Receivables 1,227,313 2,070,741
Inventories 3,657,844 3,725,755
Other current assets 1,765,509 2,632,321
------------ ------------
6,882,119 8,563,761
Property and equipment-at cost 80,764,058 99,239,700
Other assets
Intangible assets 756,943 761,017
Land and property held for sale 15,581,587 3,767,203
Other 7,275,258 6,064,160
------------ ------------
23,613,788 10,592,380
------------ ------------
$111,259,965 $118,395,841
============ ============
Liabilities
Current liabilities $ 15,698,561 $ 18,457,970
Long-term obligations
Long-term debt 17,875,000 20,098,890
Other deferred obligations 13,002,600 14,531,947
------------ ------------
30,877,600 34,630,837
Shareholders' equity 64,683,804 65,307,034
------------ ------------
$111,259,965 $118,395,841
============ ============
</TABLE>
