GROUND ROUND RESTAURANTS INC, DEF 14A, 1995-12-21

GROUND ROUND RESTAURANTS INC
DEF 14A, 1995-12-21
EATING PLACES

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<PAGE> 1
GROUND ROUND RESTAURANTS, INC.

SPECIAL MEETING IN LIEU OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 23, 1996

The Special Meeting in Lieu of the Annual Meeting of Shareholders of
Ground Round Restaurants, Inc. (the "Company") will be held on Tuesday, January
23, 1996, at 10:00 a.m., Eastern Standard Time at the Ground Round Restaurant,
located at Prudential Ct., 800 Boylston Street, Boston, Massachusetts or any
adjournment or postponement thereof (the "Special Meeting") for the following
purposes:

1. To elect seven (7) directors.

2. To consider and act upon a proposal to approve the Amended and
Restated 1989 Stock Option Plan.

Only holders of record of Common Stock of the Company at the close of
business on December 18, 1995 will be entitled to notice of and to vote at the
Special Meeting. Please sign, date and mail the enclosed form of proxy so that
your shares may be represented at the Special Meeting if you are unable to
attend and vote in person.

By Order of the Board of Directors

Robin L. Moroz
Secretary

Braintree, Massachusetts
December 20, 1995
<PAGE> 2
GROUND ROUND RESTAURANTS, INC.

PROXY STATEMENT

SPECIAL MEETING IN LIEU OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 23, 1996

This Proxy Statement and the enclosed form of proxy (the "Proxy Card")
are being furnished in connection with the solicitation by and on behalf of the
Board of Directors of Ground Round Restaurants, Inc. (the "Company") of proxies
for use at the Special Meeting in Lieu of the Annual Meeting of Shareholders of
the Company to be held, pursuant to the accompanying Notice of Special Meeting,
on Tuesday, January 23, 1996, and at any adjournments or postponements thereof
(the "Special Meeting").

At the Special Meeting, holders of shares of Common Stock (the "Common
Stock") of the Company (the "Shareholders") will be asked:

1. To elect seven (7) directors.

2. To consider and act upon a proposal to approve the Amended and
Restated 1989 Stock Option Plan.

Shareholders are requested to complete, sign, date and promptly return
the Proxy Card in the enclosed envelope. Common Stock represented by properly
executed proxies received by the Company and not revoked will be voted at the
Special Meeting in accordance with instructions contained therein. If the Proxy
Card is signed and returned without instructions, the shares will be voted FOR
election of each nominee for director named herein (Proposal No. 1) and FOR
approval of the Company's Amended and Restated 1989 Stock Option Plan (Proposal
No. 2). A Shareholder who so desires may revoke his/her proxy at any time before
it is voted at the Special Meeting by delivering written notice to the Company
(Attention: Secretary), by duly executing a proxy bearing a later date
or by casting a ballot at the Special Meeting. Attendance at the Special Meeting
will not in and of itself constitute a revocation of a proxy.

The Company's principal executive offices are located at 35 Braintree
Hill Office Park, Braintree, Massachusetts 02184-9078. This Proxy Statement and
the Proxy Card are first being sent to shareholders on or about December 21,
1995.

THE SPECIAL MEETING

DATE, TIME AND PLACE

The Special Meeting will be held on January 23, 1996, at 10:00 a.m.,
Eastern Standard Time, at the Ground Round Restaurant located at Plaza 19 -
Prudential Ct., 800 Boylston Street, Boston, Massachusetts.

RECORD DATE, SHARES OUTSTANDING AND ENTITLED TO VOTE

The Board of Directors has fixed the close of business on December 18,
1995 as the record date (the "Record Date") for determining Shareholders
entitled to notice of and to vote at the Special Meeting. Each such Shareholder
will be entitled to one vote for each share of Common Stock held on all matters
to come before the Special Meeting and may vote in person or by proxy authorized
in writing. As of the Record Date, there were approximately 11,173,427 shares of
Common Stock outstanding and entitled to vote, with each share entitled to one
vote.
<PAGE> 3
REQUIRED VOTES

A plurality of the votes cast by the holders of the shares of Common
Stock present in person or represented by proxy at the Special Meeting is
required for the election of a nominee for director. Only shares of Common Stock
that are voted in favor of a nominee will be counted toward that nominee's
achievement of a plurality. Shares of Common Stock held by Shareholders present
in person at the Special Meeting that are not voted for a nominee or shares by
Shareholders represented at the Special Meeting by proxy from which authority to
vote for a nominee has been properly withheld (including broker non-votes) will
not be counted toward that nominee's achievement of a plurality.

The affirmative vote of the holders of a majority of the shares of
Common Stock present in person or represented by proxy at the Special Meeting is
required for approval of the Amended and Restated 1989 Stock Option Plan. With
respect to a broker non-vote on this matter, the shares will not be considered
present at the Special Meeting for this particular matter and (since it will not
be counted in respect of the matter) the broker non-vote will have the practical
effect of reducing the number of affirmative votes required to achieve a
majority vote for the matter by reducing the total number of shares from which
the majority is calculated. Shares represented by proxies which are marked
"abstain" for this matter will have the same effect as a vote against such
matter.

VOTING AND REVOCATION OF PROXIES

Any Proxy Card signed and returned by a Shareholder may be revoked at
any time before it is voted at the Special Meeting by delivering written notice
to the Company (Attention: Secretary), by duly executing a proxy bearing
a later date or by casting a ballot at the Special Meeting. Attendance at the
Meeting will not in and of itself constitute revocation of a proxy.

PROPOSAL NO. 1

ELECTION OF DIRECTORS

The Company's By-laws provide that the number of directors that shall
constitute the Board of Directors shall be determined by the Board of Directors
from time to time, but in no event shall the number of directors be less than
three. The Company's Board of Directors has currently set the number of
directors at seven.

It is the intention of the persons named as proxies in the
accompanying Proxy Card (unless authority to vote therefor is specifically
withheld) to vote for the election of the persons named in the following table,
all of whom are now directors of the Company, except for Fred H. Beaumont, Jr.
and Allan D. Weingarten, to serve for the ensuing year and until their
successors are elected and qualified. In the event that any of the nominees
becomes unavailable (which is not now anticipated by the Company), the persons
named as proxies have authority to vote for such substitute nominees as the
Board of Directors of the Company may propose. The Board of Directors has no
reason to believe that any of

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<PAGE> 4
said persons will be unwilling or unable to serve if elected. See "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" for information regarding
the beneficial ownership of Common Stock of each of the nominees for director.

<TABLE>
<CAPTION>
Director
Name Age Since
---- --- --------
<S> <C> <C>
Daniel R. Scoggin 58 1991

John A. Mistretta (1) 49 1995

Christian R. Guntner (1) 41 1995

Joseph Schollenberger 69 1995

James R. Olson 54 1995

Fred H. Beaumont, Jr. 58 --

Allan D. Weingarten 58 --
</TABLE>
______________
(1) Messrs. Mistretta and Guntner have been nominated to serve as
directors by the Company under the terms of a Stockholder Agreement
dated August 1, 1991 between the Company and JUSI Holdings, Inc. See
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".

MR. SCOGGIN has been the Chairman of the Board, President and Chief
Executive Officer of the Company since July 21, 1995 and prior thereto was
interim Chairman of the Board, President and Chief Executive Officer of the
Company from April 1, 1995. He was the founder and former President and Chief
Executive Officer of TGI Friday's, Inc. until November 1986 and prior to joining
the Company served as a consultant for several restaurant concepts and founded
Bison Group, a developer of foodservice and entertainment concepts. Mr. Scoggin
is a director of Roasters Corp.

MR. MISTRETTA has been Group Vice President of U.S. Industries, Inc.
since May 1995. He was Chairman and Chief Executive Officer of Marine Harvest
International, Inc. from October 1992 through April 1995 and Chairman of the
Recreation/Leisure Group of Hanson Industries from March 1989 to October 1992.

MR. GUNTNER has been Senior Vice President of Corporate Development of
U.S. Industries, Inc. since May 1995. He was Executive Vice President and Chief
Operating Officer of Publicker Industries, Inc. from July 1990 through March
1995, Vice President of Vornado, Inc. from February 1990 to July 1990.

MR. SCHOLLENBERGER has been Vice President of GSB Holdings, Inc. and
GSB, Inc. and Executive Vice President and Chief Operating Officer of its parent
company, Great South Beach Improvement Co., since January 1994. From 1980 to
1994, he was associated with Able Fab Co. in various executive capacities.

MR. OLSON was President of the Transportation Sector from December 1992
to July 1995 and President of the Van Group from March 1987 to December 1992 of
Schneider National, Inc. and has been a private investor since July of 1995. Mr.
Olson is a director of Schneider National, Inc.

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<PAGE> 5
MR. BEAUMONT, JR. has been the President, Director and sole stockholder
of Fritz Beaumont, CPA firm, from September 1971 to the present and became a
principal of Balukoff, Lindstrom & Co., P.A. in July 1995.

MR. WEINGARTEN was a Partner of Ernst & Young, LLP in New Jersey from
1972 through September of 1995 and since that time has been a business
consultant and private investor.

The Board of Directors recommends that the Shareholders vote FOR the
election of each nominee for director named above.

PROPOSAL NO. 2

APPROVAL OF 1989 AMENDED AND RESTATED STOCK OPTION PLAN

At the Meeting, Shareholders will be asked to consider and act upon a
proposal to amend and restate the Company's 1989 Stock Option Plan (the "Prior
Plan"). The Prior Plan provided for the issuance of the Company's Common Stock
through grants of incentive stock options or non-qualified stock options to
officers and other key employees of the Company.

On October 11, 1995 the Company's Compensation Committee adopted and
the Board of Directors approved an amended and restated version of the Prior
Plan (the "Amended 1989 Plan"). The purpose of the amendments are to conform the
Prior Plan to that of the Company's 1992 Equity Incentive Plan (the "1992 Plan")
so that such plans contain substantially the same provisions. The Amended 1989
Plan is subject to Shareholder approval. If approval of the Amended 1989 Plan is
obtained, the provisions of the Amended 1989 Plan will supersede the provisions
of the Prior Plan, except for those options previously granted under the Prior
Plan. If Shareholder approval of the Amended 1989 Plan is not obtained, the
Prior Plan will remain in full force and effect and awards will continue to be
made under the Prior Plan, in accordance with its terms.

As of December 12, 1995, a total of 369,513 stock options have been
granted under the Prior Plan. There are options currently outstanding that have
exercise prices which range from $2.1875 per share to $7.00 per share. There
have been 161,546 shares issued pursuant to the exercise of such options. The
closing market price of the shares of Common Stock underlying the options as of
December 12, 1995, was $2.3125 per share. The number of stock options that will
be awarded to the Company's Chief Executive Officer, the other named executive
officers or any other eligible person pursuant to the Amended 1989 Plan are not
currently determinable.

Like the Prior Plan which it will supersede, the primary purpose of the
Amended 1989 Plan is to enable the Company to attract, retain and motivate its
officers and other key employees and to enable them to participate in the
long-term growth of the Company by providing for or increasing their proprietary
interests in the Company and to help the Company achieve its long-range goals by
aligning the interests of the Company's key employees with its shareholders. The
following description of the Amended 1989 Plan is not intended to be complete
and is qualified in its entirety by the complete text of the Amended 1989 Plan
set forth in Appendix A to this Proxy Statement.

DESCRIPTION OF THE AMENDED 1989 PLAN

The principal affect of the Amended 1989 Plan on the Prior Plan is to
conform the Prior Plan to the 1992 Plan so that both plans contain substantially
the same provisions. Certain material provisions of the Amended 1989 Plan are as
follows:

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<PAGE> 6
A. The Amended 1989 Plan will make available shares of the
Company's Common Stock issuable pursuant to stock appreciation
rights, performance stock units or awards of restricted shares
of the Company's Common Stock granted pursuant to the Plan in
addition to stock options (collectively, an "Award" or
"Awards").

B. An aggregate of 575,000 shares (less any shares that are issued
or issuable upon the exercise of options granted under the
Company's 1982 Stock Option Plan or the Company's 1987 Stock
Option Plan), shall be authorized under the Amended 1989 Plan.
Appropriate equitable adjustments in the number and kind of
shares subject to outstanding and future Awards will be made by
the Compensation Committee to reflect stock dividends,
recapitalization, reorganizations, mergers, acquisitions, etc.,
as more fully described below and in the Amended 1989 Plan. If
any Award in respect of shares of Common Stock under the
Amended 1989 Plan (or any option granted under the Company's
1982 Stock Option Plan or the Company's 1987 Stock Option Plan)
expires or is terminated before exercise or is forfeited for
any reason, without a payment in the form of stock being made
to the Participant (as defined in the Amended 1989 Plan), the
shares of Common Stock subject to such Award, to the extent of
such expiration, termination or forfeiture, shall again be
available for award under the Amended 1989 Plan.

C. A Committee of the Board of Directors (the "Committee") shall
administer the Amended 1989 Plan. The Committee has the
authority, subject to the terms of the Amended 1989 Plan, to
determine the individuals to whom and the time or times at
which awards may be granted and to determine the terms and
conditions of any Award granted thereunder, including the
price, expiration dates and other material conditions upon
which Awards may be made. Subject to certain provisions of
Amended 1989 Plan, the Committee shall have authority to adopt,
alter and repeal such administrative rules, guidelines and
practices governing the operation of the Amended 1989 Plan as
its shall from time to time consider advisable, to interpret
the provisions of the Amended 1989 Plan and any Award, and to
decide all disputes arising in connection with the Amended 1989
Plan.

D. The Committee shall consist of not less than two "disinterested
persons," as defined under Rule 16(b)-3 of the Securities
Exchange Act of 1934, as amended (the "Act").

E. The Committee may amend, suspend or terminate the Plan or any
portion thereof at any time, provided that no amendment shall
be made without Shareholder approval if such approval is
necessary to comply with any applicable tax or regulatory
requirement, including any requirements for exemptive relief
under Section 16(b) of the Act, or any successor provision.

F. In the event that the Committee determines in its sole
discretion that any stock dividend, extraordinary cash
dividend, creation of a class of equity securities,
recapitalization, reclassification, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of
shares, warrants or rights offering to purchase Common Stock at
a price substantially below fair market value, or similar
transaction affects the Common Stock such that an adjustment is
required in order to preserve the benefits or potential
benefits intended to be made available under the Amended 1989
Plan to Participants, the Committee shall have the right to
adjust equitably any or all of (i) the number and kind of
shares of stock or securities in respect of which Awards may be
made under the Amended 1989 Plan to Participants, (ii) the
number and kind of shares subject to

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<PAGE> 7
outstanding Awards held by Participants, and (iii) the award,
exercise or conversion price with respect to any of the
foregoing held by Participants, and if considered appropriate,
the Committee may make provision for a cash payment with
respect to an outstanding Award held by a Participant, provided
that the number of shares subject to any Award shall always be
a whole number.

G. All employees of the Company, including any director who is an
employee of the Company, shall be eligible to participate in
the Amended 1989 Plan.

H. In the event of a change in control, (as defined in the Amended
1989 Plan of the Company), the Committee, in its discretion
may, at the time an Award is made or at any time thereafter,
take one or more of the following actions with respect to any
such change of control: (i) provide for the acceleration of any
time period relating to the exercise or realization of the
Award, (ii) provide for the purchase of the Award upon the
Participant's request for an amount of cash or other property
that could have been received upon the exercise or realization
of the Award had the Award been currently exercisable or
payable, (iii) adjust the terms of the Award in a manner
determined by the Committee, (iv) cause the Award to be
assumed, or new rights substituted therefor, by another entity,
or (v) make such other provisions as the Committee may consider
equitable and in the best interests of the Company.

I. The Committee may amend, modify or terminate any outstanding
Award held by a Participant, including substituting therefor
another Award of the same or a different type, changing the
date of exercise or realization, converting an Incentive Stock
Option to a Non-Qualified Stock Option, and modifying or
waiving the restrictions with respect to any Restricted Stock,
provided that the Participant's consent to such action shall be
required unless the Committee determines that the action,
taking into account any related action, would not materially
and adversely affect the Participant.

J. Unless sooner terminated by the Board, the Amended 1989 Plan
will terminate on November 26, 1999. No Awards may be made
after termination of the Amended 1989 Plan, but then
outstanding Awards may extend beyond such termination date.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the Federal income tax consequences to
Participants in the Amended 1989 Plan and to the Company, based upon current
provisions of the Code and regulations and rulings thereunder, and does not
address the consequences under any other applicable tax laws.

INCENTIVE STOCK OPTIONS. Some of the options granted under the Amended
1989 Plan may constitute "Incentive Stock Options ("ISOs") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). Under
present federal tax regulations, there will be no Federal income tax
consequences to either the Company or an optionee upon the grant of an ISO, nor
will an optionee's exercise of an ISO result in Federal income tax consequences
to the Company. Although an optionee will not realize ordinary income upon his
exercise of an ISO, the excess of the fair market value of the Common Stock
acquired at the time of exercise over the option price may constitute an
adjustment in computing alternative minimum taxable income under Section 56 of
the Code, and, thus, may result in the imposition of the "alternative minimum
tax" pursuant to Section 55 of the Code on the optionee. If an optionee does not
dispose of Common Stock acquired through an ISO within the longer of two years
from the date of grant or one year of the ISO's date of exercise ("Required
Holding Period"), any gain

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<PAGE> 8
realized upon a subsequent disposition of Common Stock will constitute long-term
capital gain to the optionee. If an optionee disposes of Common Stock before the
end of the Required Holding Period, an amount equal to the lesser of (i) the
excess of the fair market value of the Common Stock on the date of exercise over
the option price or (ii) the actual gain realized upon such disposition will
constitute ordinary income to the optionee in the year of the disposition. If
the amount realized upon such disposition of the stock exceeds the fair market
value of the stock on the date of exercise, the excess will be treated as
short-term or long-term capital gain, depending on the applicable holding period
or the disposition date (provided that such stock was held by the employee as a
capital asset at such time). The Company will receive a deduction in an amount
equal to the amount constituting ordinary income to an optionee.

NON-QUALIFYING STOCK OPTIONS. Certain stock options which do not
constitute ISOs ("Non-Qualifying Options") may be granted under the Amended 1989
Plan. Under present Federal income tax regulations, there will be no Federal
income tax consequences to either the Company or the optionee upon the grant of
a Non-Qualifying Option. However, the optionee will realize ordinary income upon
the exercise of a Non-Qualifying Option in an amount equal to the excess of the
fair market value of the Common Stock acquired upon the exercise of such option
over the option price, and the Company will receive a corresponding deduction.
The gain, if any, realized upon a subsequent disposition of such Common Stock
will constitute short-term or long-term capital gain, depending on the
optionee's holding period.

RESTRICTED STOCK. Unless an election is made by a Participant under
Section 83(b) of the Internal Revenue Code within 30 days after the date of an
award of Restricted Stock, a Participant who receives an award of Restricted
Stock will recognize taxable income as of the date on which the restrictions of
the Restricted Stock lapse in the amount of the fair market value of the stock
at that time. A Participant may elect under Section 83(b) of the Code within 30
days after the date of an award of Restricted Stock to report as taxable income
in the year the Restricted Stock is awarded an amount of ordinary income equal
to the Restricted Stock's fair market value at that time. If such an election is
made, the electing Participant is not required thereafter to report any further
compensation income upon lapse of the restrictions on the Restricted Stock
covered by the election.

Subject to the provisions of Section 162(m) of the Internal Revenue
Code of 1986, the Company will be entitled to a tax deduction to the extent and
in the year that ordinary income is recognized by the Participant. Dividends
paid on Common Stock awarded under the Amended 1989 Plan are generally treated
as additional compensation before the restrictions lapse, but are treated as
true dividends after the restrictions lapse (or after a Section 83(b) election
is timely made). Dividends are not deductible by the Company.

If a Participant forfeits an award of Restricted Stock and no Section
83(b) election has been made, a Participant will not recognize any income or
loss. If a Participant forfeits Common Stock for which a Section 83(b) election
has been made, no loss or deduction is allowed with respect to the amount
previously included in income as a result of the Section 83(b) election.

Participant will recognize gain or loss upon the disposition of their
stock equal to the difference between (1) the amount realized on such
disposition and (2) the ordinary income recognized with respect to their stock
under the principles set forth above. That gain or loss will be recognized as
long or short-term capital gain or loss depending on whether the Restricted
Stock was held for more than one year.

RECOMMENDATION

The Board of Directors recommends that the Shareholders vote FOR the
approval of the 1989 Amended and Restated Stock Option Plan described above.

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<PAGE> 9
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS

The Board of Directors currently has formed the following committees:

(a) Compensation Committee, consisting of David J.P. Meachin, John A.
Mistretta and James R. Olson. The function of the Compensation Committee is to
review compensation paid to the Company's officers and employees and administer
the Company's stock option and equity incentive plans.

(b) New Restaurant Committee, consisting of J. Eric Hanson, Daniel R.
Scoggin and Joseph Schollenberger, whose function is to review, and approve
where appropriate, commitments for new Company-operated restaurants and sales of
divestiture locations.

(c) Audit Committee, consisting of John A. Mistretta, David J.P.
Meachin and James R. Olson. The function of the Audit Committee is to provide
assistance to the Company's directors in fulfilling their responsibility to the
Company's shareholders, potential shareholders and the investment community
relating to corporate accounting, audit procedures, reporting practices of the
Company and the quality and integrity of the Company's financial reports, and to
facilitate the maintenance of free and open means of communication between the
Company's directors, independent auditors, internal auditors and financial
management.

(d) Nominating Committee, consisting of Daniel R. Scoggin, J. Eric
Hanson and Christian R. Guntner, whose function is to nominate candidates for
election to the Board of Directors. In carrying out its responsibilities, the
Nominating Committee will consider only candidates nominated in accordance with
the procedures set forth in Article II, Section 9 of the Company's By-laws.
Nominations of persons to serve on the Company's Board of Directors may be made
at the Special Meeting by or at the direction of the Board of Directors or by
any shareholder of record as of the date such shareholder gives a Nomination
Notice (as hereinafter defined) to the Company who is entitled to vote in the
election of directors and who complies with the notice procedures contained in
Article II, Section 9 of the Company's By-laws. Nominations by a shareholder
must be in writing (a "Nomination Notice") and delivered to or mailed and
received by the Company's Secretary not less than 60 and not more than 90 days
prior to the Special Meeting if at least 70 days' notice or prior public
disclosure of the date of the Special Meeting is given or made to the Company's
shareholders, or not later than the close of business on the tenth day following
the day on which such notice or disclosure was given or made if less than 70
days' notice or disclosure was provided. Any Nomination Notice must provide the
information concerning the nominee or nominees and the shareholder required by
the By-laws. A shareholder may obtain a copy of the Company's By-laws by making
a written request to the Company's Secretary, 35 Braintree Hill Office Park,
Braintree, MA 02184-9078.

During fiscal 1995, the Board of Directors of the Company met ten
times, the Compensation Committee met one time, the New Restaurant Committee met
four times, the Audit Committee met four times and the Nominating Committee did
not meet. Each of the directors attended at least 75 percent of the meetings of
the Board of Directors held during the period that he served during fiscal 1995,
except for Thomas J. Russo (former Director), Joseph Schollenberger and John A.
Mistretta who had attendance averages of 71%, 67% and 60%, respectively. Each of
the directors attended at least 75 percent of the meetings of all committees on
which he served that were held in fiscal 1995 during the period that he served.

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COMPENSATION OF DIRECTORS

Each of the directors of the Company, other than directors who are
officers or employees of the Company or The Ground Round, Inc. ("Ground Round")
or of U.S. Industries, Inc. ("USI") or its affiliates, receives an annual fee of
$12,000 for serving as a director. In addition, under the Company's 1992 Equity
Incentive Plan, each director of the Company, excepting any officer or employee
of the Company or Ground Round and any director who is an officer or an employee
of USI, receives an option to purchase 2,000 shares of Common Stock of the
Company when he is first elected a director of the Company and an option to
purchase 1,000 shares of Common Stock of the Company as of the date of each
meeting of shareholders at which the director is re-elected. These options are
immediately exercisable at a purchase price equal to the closing price of a
share of the Company's Common Stock on the NASDAQ/NMS on the date the option is
granted and have a five-year term. During fiscal year 1995, during the time that
each was a director, Messrs. Meachin, Moss and Scoggin each received an option
to purchase 1,000 shares of Common Stock at an exercise price of $5.50 per share
upon the date of re-election as a director. Mr. Scoggin also received an option
to purchase 175,000 shares of common stock at a purchase price of $4.00 per
share upon his election as Chairman of the Board, President and Chief Executive
Officer on July 21, 1995. Mr. Schollenberger received an option to purchase
2,000 shares of Common Stock at an exercise price of $4.00 per share upon his
election to the Board on July 18, 1995. Mr. Olson received an option to purchase
2,000 shares of Common Stock at an exercise price of $3.75 per share upon his
election to the Board on September 7, 1995.

In August 1991, Ground Round entered into an agreement with J. Eric
Hanson, a director of the Company and its former Chief Executive Officer and
Vice Chairman, pursuant to which he will be employed by the Company and Ground
Round on a part-time basis for a period of five years through September 26,
1996, currently to provide advice in connection with the Company's ongoing
commercial banking relationships. In consideration for his services, Mr. Hanson
received $12,000 in fiscal 1995 and continues to be eligible to participate in
the Company's stock option and equity incentive plans but is not entitled to
receive directors' fees.

EXECUTIVE OFFICERS

Set forth below is certain information as of the date of this Proxy
Statement concerning the executive officers of the Company who have been elected
to hold office for such terms as may be prescribed by the Board, and unless
sooner removed under the Bylaws of the Company, or until their successors are
duly elected and qualified. The executive officers of the Company are as
follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- - ---- --- --------
<S> <C> <C>
Daniel R. Scoggin 58 Chairman of the Board, President and
Chief Executive Officer

Michael R. Jorgensen 43 Sr. Vice President, Chief Financial
Officer and Treasurer

William C. Schoener 44 Sr. Vice President - Division Operations

Warren C. Hutchins 51 Vice President - Purchasing & Distribution

Robin L. Moroz 39 Vice President - General Counsel
</TABLE>

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Daniel R. Scoggin's current positions with the Company are described
above. For further information concerning Mr. Scoggin, see "ELECTION OF
DIRECTORS".

Michael R. Jorgensen has served as Vice President, Chief Financial
Officer and Treasurer of the Company and Ground Round since June 1993 and was
appointed Senior Vice President in September 1993. He was Vice President,
Finance - Middle East of Alghanim Industries, the largest consumer products
distributor in Kuwait, from March 1992 to April 1993. Prior to that, Mr.
Jorgensen was Vice President and Chief Financial Officer of the Company (then
known as International Proteins) from May 1988 to September 1991.

William C. Schoener has served as Senior Vice President of Division
Operations of the Company since September 1993. He was Divisional Vice President
of the Company and Ground Round since September 1991 and January 1989,
respectively. He was a Director of Operations of Ground Round from June 1986
through December 1988.

Warren C. Hutchins has served as Vice President, Purchasing and
Distribution of the Company and Ground Round since September 1991 and August
1986, respectively. He was Secretary of Ground Round from March 1990 through
February 1991.

Robin L. Moroz has served as Vice President, General Counsel and
Secretary of the Company since December 1994. She was Corporate Attorney to
Ground Round from August 1989 and since October 1991 has served as Assistant
General Counsel of the Company.

EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS

SUMMARY COMPENSATION TABLE

The following Table sets forth all compensation paid to, deferred or
accrued for the benefit of the Company's Chief Executive Officers during fiscal
year 1995 and of all other executive officers of the Company (the "named
executive officers") who earned total annual salary and compensation for fiscal
year 1995 exceeding $100,000. Except as disclosed below, no executive officer of
the Company had a total annual salary and bonus for fiscal year 1995 exceeding
$100,000.

<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------- ----------------------------
Securities
Under-
Restricted Lying
Stock Options/ All Other
Fiscal Salary Bonus Award(s) SARs Compensation
Year ($) ($) ($) ($) ($)
------ ----------- -------- ---------- ---------- ------------

<S> <C> <C> <C> <C> <C> <C>
Daniel R. Scoggin 1995 $152,083(1) $ 0 $ 0 176,000(6) $ 0
Chairman of the Board, President 1994 0 0 0 0 0
and Chief Executive Officer 1993 0 0 0 0 0

Michael P. O'Donnell 1995 137,500(2) 0 0 0 722,599(8)
Chairman of the Board, President 1994 275,000 137,500 0 0 11,775(7)
and Chief Executive Officer 1993 235,000 117,500 273,600(5) 103,700 10,575(7)

Peter J. Beaudrault 1995 138,100(4) 0 0 0 5,959(7)
Executive Vice President 1994 130,000 69,033 0 0 18,255(7)
1993 92,500(3) 23,125 0 23,610 15,000(9)

Michael R. Jorgensen 1995 130,000 0 0 0 5,716(7)
Senior Vice President, Chief 1994 130,000 69,033 0 4,642(7)
Financial Officer and President 1993 37,902(3) 16,250 0 47,500 1,167(7)

William C. Schoener 1995 120,000 0 0 0 5,304(7)
Senior Vice President of 1994 120,000 65,283 0 0 5,000(7)
Division Operations 1993 92,500 38,192 0 23,610 3,921(7)
</TABLE>

10
<PAGE> 12
____________
(1) Includes compensation received by Mr. Scoggin from April 1, 1995 through
July 20, 1995 as interim Chairman, President and Chief Executive Officer.
Commencing July 21, 1995, Mr. Scoggin was elected to serve as Chairman,
President and Chief Executive Officer of the Company and received
compensation pursuant to the terms of his employment agreement with the
Company. See "Employment Agreements".
(2) Mr. O'Donnell resigned as Chairman, President and Chief Executive Officer
and as an employee of the Company effective March 31, 1995.
(3) Messrs. Beaudrault and Jorgensen were employed by the Company commencing
in April 1992 and June 1993, respectively.
(4) Mr. Beaudrault resigned as Executive Vice President of the Company and as
an employee of the Company effective September 1, 1995.
(5) In February 1993, Mr. O'Donnell was granted 30,000 shares of restricted
stock, the value of which on the date of grant is shown in the table. The
shares were originally scheduled to vest equally over a three-year period.
However, per Mr. O'Donnell's Separation Agreement, the entire grant became
automatically vested upon his termination of employment. The value of the
30,000 shares as of October 1, 1995 was $110,625 based on the fair market
value of the Company's Common Stock which was $3.6875 per share (the last
reported sale price for a share on the NASDAQ National Market System on
September 29, 1995). Such value has not been discounted to account for any
required holding period.
(6) Includes 175,000 options Mr. Scoggin received pursuant to the terms of his
employment agreement with the Company and 1,000 options received on March
31, 1995 for regular service as a director, prior to becoming Chairman of
the Board, President and Chief Executive Officer. See "Employment
Agreements".
(7) Represents the amount of the Company's contributions to the non-qualified
Deferred Compensation Plan made on behalf of the named executive officers.
(8) Represents the amount of the Company's contributions to the non-qualified
Deferred Compensation Plan of $8,250 plus $714,349 pursuant to Mr.
O'Donnell's Separation Agreement. The Separation Agreement provided for
$550,000 representing two years of salary, $10,577 unused vacation pay,
$22,917 accrued salary through April, $130,280 representing the in-
the-money value of Mr. O'Donnell's 110,852 vested stock options and $575
representing a portion of April's car allowance. See "Separation
Agreement."
(9) The Company agreed to pay Mr. Beaudrault $30,000 when he joined the
Company, one-half of which was paid in fiscal 1993 and one-half of which
was paid in fiscal 1994. The remaining $3,255 received by Mr. Beaudrault
in fiscal 1994 represents the amount of the Company's contribution to the
Deferred Compensation Plan made on his behalf.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS

EMPLOYMENT AGREEMENTS. The Company has entered into an employment
agreement (the "agreement") with Daniel R. Scoggin, effective July 21, 1995 and
amended effective August 18, 1995 under which Mr. Scoggin has agreed to serve
the Company as Chairman of the Board, President and Chief Executive Officer for
a term commencing upon July 21, 1995 and extending until July 20, 1998. The
agreement will be automatically renewed on each July 21 thereafter for an
additional year, unless, not later than 90 days prior to each July 21, either
party gives notice to the other that it or he wishes to terminate the agreement.

Under the agreement, Mr. Scoggin is entitled to compensation consisting of
(i) a base salary of $350,000 per annum, and (ii) an annual bonus commencing in
the Company's 1996 fiscal year. For fiscal 1995, the 1995 Corporate Employee
Incentive Plan (the "Incentive Plan") was in place for Mr. Scoggin. See
:Compensation Committee Report on Executive Compensation - Bonus Plan". For the
time

11
<PAGE> 13
period from April 1, 1995 through July 20, 1995, during which Mr. Scoggin was
interim Chairman, President and Chief Executive Officer, his monthly salary was
$22,917. Mr. Scoggin was granted on July 21, 1995 stock options to purchase
175,000 shares of common stock of the Company in accordance with the terms of
the Company's 1992 Equity Incentive Plan. Mr. Scoggin is also entitled to
receive certain benefits, including but not limited to, insurance, participation
in the Company's deferred compensation plan and retirement plan, and stock
option and equity incentive plans, use of a Company car or a car allowance, and
payment of an annual country club membership fee. The Company may terminate the
agreement at any time whether for "cause" or for "disability" (as defined in the
agreement). Mr. Scoggin may terminate the agreement at any time if the Company
is in breach of any of its obligations to him under the agreement; if he is not
re-elected to serve as both Chairman and Chief Executive Officer or is removed
from any of such positions, in each case other than for cause; if the Company
assigns him duties which are inconsistent with his position or if the Company
requires him to relocate more than 50 miles away from the current corporate
office. In the event Mr. Scoggin's employment is terminated by him pursuant to
the terms of the agreement or by the Company (other than for "cause", death or
"disability"), Mr. Scoggin will be entitled to receive a lump sum payment equal
to 2.99 times his highest annual base salary at any time in effect. In the event
Mr. Scoggin's employment terminates because of death, disability or expiration
of his agreement without renewal, he will receive his base salary through the
end of the calendar month of such termination or non renewal. For fiscal year
1996 and future years under the agreement, Mr. Scoggin shall be entitled to a
bonus comprised of two components based on audited figures. The first component
of the bonus ranges from 0% to 80% of Mr. Scoggin's base salary for the
preceding fiscal year and is based on earnings before interest and taxes,
excluding any profit or loss from the sale of restaurants or non-recurring items
("EBIT") as part of the budget process of the Company. The second component of
the bonus ranges from 0% to 20% of Mr. Scoggin's base salary for the preceding
fiscal year and is based on a range of cash flow as part of the budget process
of the Company. In the event Mr. Scoggin's employment terminates because of
death, disability, terminated without cause, or by expiration of his agreement
without renewal, he will receive his bonus pro-rated based upon the number of
days during the fiscal year he was employed. If his employment is terminated for
cause or Mr. Scoggin resigns, he shall not receive any bonus for that year.

SEVERANCE AGREEMENTS. The Company currently has severance agreements (the
"Severance Agreements") with Daniel R. Scoggin, Chairman, Chief Executive
Officer and President, Michael R. Jorgensen, Senior Vice President and Chief
Financial Officer, William C. Schoener, Senior Vice President, and Robin L.
Moroz, Vice President and General Counsel. The Severance Agreements provide
benefits in the event of a "change in control" of the Company as defined
therein.

Mr. Scoggin's Severance Agreement is contained within his Employment
Agreement, as amended, and provides that he will receive a lump sum payment in
the event that within 24 months after a change of control (i) Mr. Scoggin
terminates employment with the Company for Good Reason (as defined in the
Severance Agreement) within 90 days after the event which constitutes Good
Reason or (ii) Mr. Scoggin's employment with the Company is terminated by the
Company for any reason other than "cause", death or "disability" (such quoted
words as defined in his Employment Agreement). The lump sum payment will be
equal to 2.99 times Mr. Scoggin's highest annual base salary at any time in
effect and the Company shall pay any bonus due Mr. Scoggin in accordance with
his Employment Agreement. In addition, for a period of two years after the
termination date resulting from a change of control, Mr. Scoggin will be
entitled to the benefit of all employee welfare benefit plans and arrangements
in which he is entitled to participate immediately prior to the change of
control (including, without limitation, medical and dental insurance plans,
disability and life insurance plans, and car allowance programs).

12
<PAGE> 14
The Severance Agreements for Messrs. Jorgensen, Schoener and Ms. Moroz
provide that each will receive a bonus (a "Bonus Payment") within five days
after the expiration of a period of 120 days after a change of control of the
Company has occurred (the "Stay Period"), if (i) during the Stay Period his/her
employment is terminated by the Company for any reason other than cause or (ii)
he/she does not voluntarily terminate his/her employment during the Stay Period
other than for Good Reason (as defined in the Severance Agreements). The Bonus
Payment will be equal to one-half of the employee's highest annual base salary
at any time on or after the date of the Severance Agreement. The Severance
Agreement for each of Messrs. Jorgensen, Schoener and Ms. Moroz also provides
that such employee will receive an additional payment (each a "Severance
Payment"), if (i) within 24 months after a change in control of the Company, the
employee terminates his/her employment with the Company for Good Reason within
90 days after the event which constitutes Good Reason or (ii) within such
24-month period, the Company terminates his/her employment for any reason other
than cause. The Severance Payment will be equal to two times the sum of (i) the
employee's highest annual base salary at any time on or after the date of the
Severance Agreement and (ii) the employee's highest targeted bonus under the
Company's incentive bonus plan at any time on or after the date of the Severance
Agreement. In August 1995, Mr. Jorgensen's Severance Agreement was amended to
also include one additional year of the employee's highest annual base salary at
any time in effect, if he uses best efforts to cooperate and assist with any
transition resulting from a change of control. In addition, each of Messrs.
Jorgensen, Schoener and Ms. Moroz will be entitled for a period of 24 months
after the date of termination of employment to the benefit of all employee
welfare benefit plans and arrangements in which he/she is entitled to
participate immediately prior to the change of control (including, without
limitation, medical and dental insurance plans, disability and life insurance
plans, and car allowance programs).

Each Severance Agreement provides that all outstanding Company Options (as
defined below) shall vest immediately upon a change of control.

SEPARATION AGREEMENT. The Company has entered into a Separation Agreement
(the "Separation Agreement") with Michael P. O'Donnell dated as of April 3, 1995
pursuant to which Mr. O'Donnell resigned as Chairman, a member of the Board of
Directors, President and Chief Executive Officer of the Company as of March 31,
1995 (the "Separation Date"). In consideration thereof, among other things, the
Company agreed to pay Mr. O'Donnell (i) a lump sum payment of $550,000,
representing an amount equal to two years of base salary; (ii) salary through
April 14, 1995; (iii) any compensation creditable to Mr. O'Donnell pursuant to
the Company's deferred compensation plan; and (iv) all accrued vacation pay.
Pursuant to the Separation Agreement, the Company also agreed to provide Mr.
O'Donnell until March 31, 1997 with life, disability, accident, dental, health
and other benefits, substantially similar to those which he was receiving as of
the Separation Date and for a period of six months following the Separation
Date, together with the car allowance program.

In addition, the Separation Agreement provided that in exchange for the
cancellation of all vested stock options held by Mr. O'Donnell, the Company
would pay to Mr. O'Donnell an amount equal to $130,280 representing the
difference between $5.50 per share (the closing price of the Company's Common
Stock on the Separation Date) and the applicable exercise price of Mr.
O'Donnell's vested options and delivered to Mr. O'Donnell 30,000 shares of
common stock of the Company free of restrictions pursuant to a certain
restricted stock agreement effective February 2, 1993.

In exchange, Mr. O'Donnell agreed that (i) his employment agreement dated
June 10, 1991, as amended, with the Company and the change of control severance
agreement dated July 26, 1994 were terminated; (ii) he will keep certain Company
information confidential; and (iii) he will not directly or to indirectly
solicit or induce any employee of the Company to leave the employ of the Company
for any

13
<PAGE> 15
reason. For further information relating to the separation agreement, See
"COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION -- Chief Executive
Officer, Compensation and Changes".

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

The following table provides information on options granted to the named
executive officers during fiscal 1995. No stock appreciation rights were granted
in fiscal 1995.

<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Rates of Stock
Price Appreciation
# of Shares % of Total Exercise for Option Term
Underlying Options Granted or Base Price Expiration ---------------
Name Options Granted to Employees Per Share Date 5%($) 10% ($)
- - ---- --------------- ------------ --------- ---- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Daniel R. Scoggin 175,000(1) 100% $4.00 7/20/05 $440,300 $1,115,625
1,000 (2) $5.50 3/30/00 $ 7,020 $ 8,858
</TABLE>

- - ------------------
(1) The per share option exercise price for the grant is the fair market value
of the Common Stock on the date of grant. All options are exercisable in
equal installments over a three year period and have a ten year term.

(2) Amount represents options received by Mr. Scoggin for service on the Board
of Directors, prior to being named Chairman of the Board, President and
Chief Executive Officer. Options were granted at the fair market value at
the time of grant, vest immediately and have a five-year term.

AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES

The following table shows certain information as of October 1, 1995
concerning unexercised stock options held by the named executive officers that
were granted under the Company's 1989 Stock Option Plan and 1992 Equity
Incentive Plan. The Company has not granted any SARs. No options were granted to
the named executive officers in fiscal 1995, other than to Daniel R. Scoggin
(See --"Options/SAR Grants In Last Fiscal Year"), and none of the named
executive officers exercised any stock options during fiscal 1995.

<TABLE>
<CAPTION>
Number of
Securities Underlying Value of
Unexercised Unexercised
Options at in-the-Money Options at
FY-end (#) FY-end ($)
--------------------- -----------------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable (1)
---- ------------- -----------------
<S> <C> <C>
Daniel R. Scoggin 5,000/175,000 0/0

Michael R. Jorgensen 45,000/ 2,500 0/0

William C. Schoener 54,895/ 13,240 1,553/0
</TABLE>

- - ------------------
(1) Valuation is based on the fair market value of the Company's common
stock on October 1, 1995 (the last day of the 1995 fiscal year) which
was $3.6875 per share based upon the last reported sale price for a
share on the NASDAQ National Market System on September 29, 1995.

14
<PAGE> 16
DEFINED BENEFIT PLAN TABLE

The following is a pension plan table showing estimated annual benefits
(exclusive of reductions of Social Security benefits) payable upon normal
retirement to persons in specified compensation and years of service
classifications under the Company's unfunded, non-qualified retirement plan (the
"Retirement Plan"), based on Final Average Salary for various years of service,
assuming the employee would retire at age 65 in 1995. Officers of the Company
who hold the title of President, Senior Vice President, Vice President or
General Counsel are entitled to participate in the Retirement Plan. The Company
pays the full cost of the Plan.

<TABLE>
<CAPTION>
Final Years of Service
Average ----------------------------------------------
Salary 10 15 20 25
--------- ------ ------ ------- -------
<S> <C> <C> <C> <C>
$ 100,000 20,000 20,000 35,000 50,000
120,000 24,000 24,000 42,000 60,000
140,000 28,000 28,000 49,000 70,000
160,000 32,000 32,000 56,000 80,000

200,000 40,000 40,000 70,000 100,000
250,000 50,000 50,000 87,500 125,000
300,000 60,000 60,000 105,000 150,000
350,000 70,000 70,000 122,500 175,000
400,000 80,000 80,000 140,000 200,000
450,000 90,000 90,000 157,500 225,000
</TABLE>

The compensation covered by the Retirement Plan is the base salary of
individual participants as shown in the Summary Compensation Table. Final
Average Salary is the highest five-year average of consecutive years' Salary
(from the Summary Compensation Table) over an employee's career with the
Company. Participants in the Retirement Plan are entitled to a monthly benefit
upon retirement after attaining the age of 65 equal to 50% of final average
compensation, reduced by 1/2 of 1% of final average compensation for each month
(not in excess of 120 months) by which the participants's credited service with
the Company is less than 300 months, less the amount of the participant's
primary Social Security benefit. Early retirement benefits are also available
for participants who are 55 and have completed 15 years of service equal to the
participant's normal retirement benefit reduced for early commencement by 5/9 of
1% for each of the first 60 months plus 5/18 of 1% for each month in excess of
60 months by which the benefit commencement date precedes a participant's normal
retirement date, and increased by 1/48 of 1% of the participant's final average
compensation times months of projected credited service over 25 years, not to
exceed 120 months, less the amount of the participant's primary social security
benefit. Projected credited service indicates that period of time which
commences on the participant's date of hire and ends on the participant's normal
retirement date. Benefits are payable for the life of the retiree only, and
would be reduced on an actuarial basis if survivor options were chosen. In
addition, benefits are subject to a 100% deduction for Social Security amounts.

The years of service at October 1, 1995, under the Plan for the named
executive officers were as follows: Mr. Scoggin, 0 years, 3 months; Mr.
Schoener, 22 years, 7 months; and Mr. Jorgensen, 2 years, 3 months.

15
<PAGE> 17
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION

During fiscal 1995 each of the following directors served as a member
of the Compensation Committee of the Board of Directors: Messrs. Meachin,
Mistretta, Olson, Moss and Scoggin. Mr. Stanley J. Moss is a former director of
the Company. None of these individuals has served as an officer or employee of
the Company or any of its subsidiaries, except for Mr. Scoggin, who from April
1, 1995 through July 20, 1995 served as interim Chairman, President and Chief
Executive Officer of the Company and is currently serving as Chairman, President
and Chief Executive Officer. Mr. Scoggin served on the Compensation Committee
until July 17, 1995 and did not participate in the approval of his Employment
Agreement with the Company. Mr. Mistretta, who is an executive officer of U.S.
Industries, Inc., is one of the directors of the Company designated by JUSI
Holdings, Inc. pursuant to the terms of the 1991 Stockholder Agreement
(hereinafter defined). See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors is comprised of
three non-employee directors. The Committee is responsible for administering,
reviewing and making recommendations to the Board of Directors with respect to
executive compensation, which includes base salaries, annual incentives and
long-term equity incentive plans as well as any executive benefits and/or
perquisites. In addition, the Compensation Committee is responsible for the
granting of awards and administration of the 1989 Stock Option Plan and the 1992
Equity Incentive Plan (collectively, the "Plans"). The Committee ensures that
executive compensation is at a level such that the Company can attract, retain,
motivate and reward its executives for contributing toward the Company's short-
and long-term financial and non-financial goals, and places the most emphasis on
long-term incentives. By emphasizing long-term incentive compensation, the
Committee creates a link between the Company's executives and the shareholders'
interests.

On March 31, 1995, Mr. Michael P. O'Donnell resigned as Chairman,
President and Chief Executive Officer of the Company. In July 1995, Mr. Daniel
R. Scoggin, formerly a member of the Board of Directors of the Company, was
named Chairman, President and Chief Executive Officer. Specific discussion of
the Compensation Committee's actions with respect to both these events is
included in this report.

COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)

Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to publicly held companies for annual compensation in excess of one
million dollars earned by the Chief Executive Officer or any of the four highest
compensated officers. The deduction limit does not apply, however, to
performance-based compensation that satisfies certain requirements. Although no
named executives in the Company have or are expected to earn annual compensation
in excess of one million dollars, the Committee will continue to monitor and
review the implication of Section 162(m) with respect to the Company's executive
compensation policies.

BASE SALARIES

The Compensation Committee believes that a substantial portion of the
Chief Executive Officer's and all other executives' compensation should be tied
to the performance of the Company and therefore at risk. This is accomplished by
a compensation plan that includes a base salary, and increasing bonus

16
<PAGE> 18
opportunities through an annual incentive plan. Should the Company meet its
financial goals, the executives combined base salary and bonus is intended to
meet competitive market levels and if the Company exceeds those goals, total
compensation will exceed competitive market levels.

The Committee periodically reviews the base salary of the executives
and makes pay increase recommendations to the Board of Directors in accordance
with the above philosophy. These recommendations are predicated upon external
market data, changes in the duties and responsibilities assigned to each
position and/or each executive's individual performance. In making salary
determinations, the Committee reviews various industry sources, including the
current year's Chain Restaurant Compensation Association Survey of over 60
restaurant companies prepared by Towers Perrin, a compensation consultant. In
addition, the Committee periodically retains the services of Towers Perrin to
conduct various compensation studies on the Chief Executive Officer and other
selected executive positions of the Company.

None of the named executive officers other than Mr. Daniel R. Scoggin
received a salary increase in fiscal 1995.

BONUS PLAN

The Company had in effect in fiscal 1995, the 1995 Corporate Employee
Incentive Plan (the "Incentive Plan") under which the Company's Chief Executive
Officer, executive officers and all other full-time corporate employees were
eligible to receive cash bonuses based upon the Company's earnings per share for
the period from October 3, 1994 through October 1, 1995.

The objective of the Incentive Plan was to ensure the Company met or
exceeded the Board of Director's expected earnings growth rate by motivating and
rewarding the Incentive Plan participants for achieving or exceeding these
expectations. Using 1992 as a base year ( $.42 earnings per share), a targeted
earnings per share growth rate of 15% per year or for fiscal 1995 $.64 per share
was established as the level at which 50% of a participant's maximum bonus would
be paid out; at an earnings per share growth rate of 25% or $.82 per share, 100%
of the maximum bonus would be paid out to the Incentive Plan participants. For
performance between these points, awards are determined by interpolation. If
performance is above 25%, the maximum bonus potential cannot be exceeded. For
performance below 15%, the bonus opportunity is correspondingly reduced. No
award is paid when earnings per share is at or below the prior year's targeted
earnings per share goal.

The maximum amount of any bonus opportunity under the Incentive Plan
varies from 10% to 100% of a participant's annualized base salary. The Chief
Executive Officer's maximum bonus potential is 100% of his annualized base
salary.

The Company lost $.51 per share in fiscal 1995 and therefore did not
pay the Chief Executive Officer or any of the other Incentive Plan participants
a bonus.

STOCK OPTION AND EQUITY INCENTIVE PLANS

The Company has in effect two Plans, the 1989 Stock Option Plan and the
1992 Equity Incentive Plan (the "Plans"), which authorize the Compensation
Committee to grant: options to purchase shares of Common Stock including both
Incentive Stock Options and Non-Qualified Stock Options. The 1992 Equity
Incentive Plan also makes available stock appreciation rights, performance stock
units and restricted stock to qualified officers and key employees of the
Company.

17
<PAGE> 19
The purpose of these Plans is to enable the Company to attract, retain
and motivate its executives and other key employees and to enable them to
participate in the long-term growth of the Company by providing for or
increasing their proprietary interests in the Company and to help the Company
achieve its long-range goals by aligning the interests of the Company's
executives and the other key employees with its shareholders.

The Compensation Committee determines the individuals who participate
in the Plans, the price and terms upon which awards shall be made including the
number of shares or units subject to each award, all subject to the terms and
conditions of the Plans.

No stock options were awarded to the other named executive officers
below the Chief Executive Officer.

CHIEF EXECUTIVE OFFICER, COMPENSATION AND CHANGES

Effective March 31, 1995, Mr. Michael P. O'Donnell's employment as
Chairman of the Board of Directors, President and Chief Executive Officer was
concluded under a Separation Agreement executed on April 3, 1995. Upon his
resignation from the Company, Mr. O'Donnell received a cash payment of $714,349
in accordance with the provisions of the Separation Agreement, which included
$550,000 representing two years of salary at current levels, $10,577 for unused
vacation pay, $22,917 represented accrued salary through April, $130,280
representing the in-the-money value of Mr. O'Donnell's 110,852 vested stock
options, and $575 representing a portion of April's car allowance. In addition,
and again under the terms of the Agreement, the remaining 10,000 unvested shares
resulting from a February 1993 grant of 30,000 restricted shares became vested
upon Mr. O'Donnell's resignation. Originally, the remaining 10,000 shares were
due to vest in February 1996. The Compensation Committee took these actions as
they were generally consistent with the Employment Agreement with Mr. O'Donnell
and in the interests of the Company to protect its economic interests by
precluding Mr. O'Donnell's employment with a geographic competitor.

Mr. Scoggin, who previously held a position on the Board of Directors
with the Company, and served as interim Chairman, President and Chief Executive
Officer from April 1, 1995 through July 20, 1995, became Chairman, President and
Chief Executive Officer of the Company as of July 21, 1995, at an annual salary
of $350,000. In addition, Mr. Scoggin is entitled to participate in the
Corporate Employee Incentive Plan (described above) as well as participation in
the Stock Option and Equity Incentive Plans. The Compensation Committee approved
a base salary for Mr. Scoggin of $350,000 per year and a grant of 175,000 shares
of stock at $4.00 (the then fair market value). These options vest over a three
year term. In addition, Mr. Scoggin is provided with a contract for a term of
three years covering terms and conditions of employment, including the benefit
for termination without cause or in the event of a change of control equal to
2.99 times annual compensation as defined by the contract.

It was the Committee's combined judgment that this compensation package
was appropriate and necessary to attract an executive of Mr. Scoggin's caliber
in a timely and efficient manner. The base salary level is intended to reflect
the Board's estimate of a salary level Mr. Scoggin would receive from other
organizations. Likewise, the grant of stock options is intended to provide Mr.
Scoggin with a significant and immediate link with shareholders on a long-term
basis.

OTHER COMPENSATION

The Company provides certain other benefits such as health, dental and
long-term disability insurance to the Chief Executive Officer and other
executive officers that are generally available to Company employees. The Chief
Executive Officer along with the other key management employees who earn more
than $66,000 participate in the Company's non-qualified deferred compensation
plan, however

18
<PAGE> 20
the Chief Executive Officer did not participate in the Plan in fiscal 1995. In
addition, executive officers of the Company are eligible to receive an
automobile allowance or Company leased automobile. For the fiscal year ended
October 1, 1995, the amount of additional benefits to each of the named
executive officers of the Company did not exceed 10% of the total annual salary
and bonus for each named executive officer.

Respectfully submitted,

David J.P. Meachin, Chairman

John A. Mistretta

James R. Olson

19
<PAGE> 21
GROUND ROUND RESTAURANTS, INC.
COMPARISON OF CUMULATIVE TOTAL RETURN VS.
S&P 500 AND VALUE LINE RESTAURANT INDUSTRY GROUP

(INSERT GRAPH)

The graph assumes that $100 was invested on December 31, 1989 in Common
Stock of the Company, the S&P 500 and the Value Line Restaurant Group. Total
return assumes quarterly reinvestment of dividends and includes reinvestment of
the cash equivalent of the special dividend made by the Company to all of its
stockholders of record on September 11, 1991, of one share of MariFarms, Inc.
for each share of Common Stock of the Company.
<TABLE>
<CAPTION>
Base 12/31/90 9/30/91 9/28/92 10/4/93 10/3/94
Period to to to to to
Company/Index 12/31/90 9/30/91 9/28/92 10/4/93 10/3/94 10/2/95
------------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Ground Round Restaurants, Inc. ... 290.91 322.53 354.14 423.70 177.07
Peer Group ....................... 126.39 155.85 187.35 183.51 236.34
S&P 500 .......................... 120.38 133.97 152.62 156.90 202.73
</TABLE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ASSIGNMENT OF THE 1991 STOCKHOLDER AGREEMENT WITH HM HOLDINGS. Pursuant
to the terms of an Agreement dated June 5, 1995, between HM Holdings, Inc., a
Delaware corporation ("HM Holdings") and JUSI Holdings, Inc., a Delaware
corporation and an indirect wholly-owned subsidiary of U.S. Industries, Inc.
("JUSI"), HM Holdings assigned and JUSI assumed all of HM Holdings' rights and
obligations under a stockholder agreement, dated as of August 1, 1991 between HM
Holdings and the Company (the "1991 Stockholder Agreement"). As assignee of HM
Holdings, JUSI obtained certain rights but is subject to certain restrictions
under the 1991 Stockholder Agreement with respect to the ownership of shares of
Common Stock of the Company.

20
<PAGE> 22
1991 STOCKHOLDER AGREEMENT. The 1991 Stockholder Agreement provides for
certain rights and restrictions with respect to JUSI's ownership of the Common
Stock of the Company. In the 1991 Agreement, the Company agreed that, upon
JUSI's request, the Company will use its best efforts to nominate and cause to
be elected to the Company's Board of Directors two persons designated by JUSI as
long as JUSI and its corporate affiliates beneficially own 20% or more of the
outstanding shares of Common Stock, and one person designated by JUSI as long as
JUSI and its corporate affiliates beneficially own less than 20% but more than
10% of the outstanding shares of Common Stock. Messrs. Mistretta and Guntner are
the current nominees of JUSI serving on the Board of Directors. JUSI has the
right to propose for election and/or to solicit proxies in favor of the election
of any number of directors of the Company, but has advised the Company that it
has no present intention to seek to have additional designees elected to the
Board.

In the 1991 Stockholder Agreement, JUSI agreed that neither JUSI nor any
of its corporate affiliates will acquire, directly or indirectly, such number of
additional shares of Common Stock as would result in JUSI and such affiliates
beneficially owning 50% or more of the outstanding shares of Common Stock
unless, in such acquisition, JUSI and/or such affiliates offer to acquire all
outstanding shares of Common Stock not held by them upon substantially the same
terms and conditions. In addition, JUSI has agreed that, except in certain
limited circumstances, if JUSI or its affiliates own 20% or more of the
outstanding shares of Common Stock, so long as JUSI or any such affiliates seek
to sell or otherwise dispose of all or substantially all of the shares of Common
Stock owned by it to a third party, except as may be otherwise approved by a
majority of the members of the Board of Directors not designated by JUSI, JUSI
or such affiliate will use its best efforts to cause such third party to offer
to purchase all other outstanding shares of Common Stock upon substantially the
same terms and conditions. JUSI also agreed that, if such third party fails to
make such offer, JUSI or such affiliate will not so sell or otherwise dispose of
such shares unless such third party agrees to be subject to the same limitation
on its ability to sell and to the requirements applicable to JUSI with respect
to the acquisition of 50% or more of the outstanding shares of the Common Stock.

In addition, in the 1991 Stockholder Agreement the Company agreed that,
if at any time when JUSI or its affiliates own 25% or more of the outstanding
shares of Common Stock, the Company shall propose to sell any shares of Common
Stock or any warrants or rights therefor or securities convertible into or
exchangeable therefor, to any person or entity other than JUSI or its
affiliates, it shall give JUSI the opportunity to purchase such number of shares
or other securities as will permit JUSI and its corporate affiliates to retain
their percentage of the Company's voting power.

The Company also agreed that, so long as JUSI owns 5% or more of the
outstanding shares of Common Stock, upon JUSI's request, the Company will cause
up to four registration statements to be filed with the Commission in order to
permit JUSI or a corporate affiliate to sell all or a portion of its shares of
Common Stock. In addition the Company agreed, if requested, to include some or
all shares of Common Stock owned by JUSI or an affiliate in any registration
statement it otherwise files (other than registration statements relating to
employee stock options). The Company and JUSI also agreed to indemnify each
other for certain liabilities that may arise in connection with any such
registration statements.

It is an event of default under the Company's principal credit facility
if JUSI does not beneficially own at least 25% of the Company's outstanding
Common Stock or the Company's Board of Directors does not include two designees
of JUSI, but if the Company were to raise $10 million of additional common
equity capital after October 1993, the 25% ownership requirement would be
reduced to 0% and no JUSI nominees would be required. JUSI has agreed that, as
long as the principal credit facility is outstanding, it will not take any
action to cause its beneficial ownership to fall below such percentage and has
agreed to nominate two individuals for election as directors of the Company. The
Company does not have an agreement with JUSI or its affiliates requiring them to
provide financial support in connection

21
<PAGE> 23
with the principal credit facility.

1991 REGISTRATION RIGHTS AGREEMENT WITH GSB HOLDINGS. GSB Holdings and
the Company are parties to a Registration Rights Agreement, dated as of August
20, 1991, which allows GSB Holdings certain registration rights with respect to
the shares of Common Stock owned by it. The Company agreed, if requested, to
include no less than 50,000 shares of Common Stock owned by GSB Holdings in any
registration statement it otherwise files (other than registration statements
relating to employee stock options). GSB Holdings agreed to observe the same
lock-ups with regard to the sale of the shares of Common Stock owned by it as
the Company agrees to, if any, in connection with such registration statement if
so requested by the managing underwriter. The Company and GSB Holdings also
agreed to indemnify each other for certain liabilities that may arise in
connection with any such registration statement.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table sets forth to the knowledge of the Company certain
information as of December 12, 1995 with respect to (i) each person known to the
Company to be the beneficial owner of more than five percent of the outstanding
shares of Common Stock; (ii) each director and nominee for director of the
Company, (iii) each of the named executive officers of the Company, and (iv) all
executive officers and directors as a group. This information has been furnished
by the persons listed in the table. Unless otherwise indicated, each person
holds sole voting and investment power with respect to shares shown opposite
their name.

<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership(1) of Class
------------------- ----------------------- --------
<S> <C> <C>
U.S. Industries, Inc. 3,680,000 (2)(3) 32.36
101 Wood Avenue South
Iselin, NJ 08830

GSB Holdings, Inc. 640,000 (2)(4) 5.63
One Bethany Road at Rt. 35
Building 6, Suite 94
Hazlet, NJ 07730

Dimensional Fund Advisors Inc. 578,200 (5) 5.08
1299 Ocean Avenue
Santa Monica, CA 90401

Daniel R. Scoggin 5,000 *

John A. Mistretta 0 (2) *

Christian R. Guntner 0 (2) *

Joseph Schollenberger 2,000 (2)(6) *

James R. Olson 2,000 *

Fred H. Beaumont, Jr. 0 *
</TABLE>

22
<PAGE> 24
<TABLE>
<S> <C> <C>
Allan D. Weingarten 0 *

J. Eric Hanson 111,734 *

David J. P. Meachin 6,000 *

Michael R. Jorgensen 45,000 *

William C. Schoener 63,265 *

Peter J. Beaudrault 0 *

Michael P. O'Donnell 40,000 *

All Executive officers and directors
as a group (16 persons) 301,421 2.65%
</TABLE>

- - ------------------
* Less than 1%.

(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of an individual to acquire them within 60 days upon the exercise of
an option are treated as outstanding for purposes of determining
beneficial ownership and the percent beneficially owned by such person.

(2) JUSI Holdings, Inc. ("JUSI"), which is the record holder of 3,680,000
shares of Company Common Stock is engaged principally in the business of
holding investments and is an indirect, wholly-owned subsidiary of U.S.
Industries, Inc. ("USI"). GSB Holdings, Inc. ("GSB Holdings"), which is
the record holder of 640,000 shares of Company Common Stock, is engaged
principally in the business of holding investments and is a wholly-owned
subsidiary of Great South Beach Improvement Co. ("GSB Improvement"), a
corporation principally engaged in real estate development. David H.
Clarke, who is the Chairman of the Board and Chief Executive Officer of
USI, is a director and officer of GSB Holdings and a director, officer and
controlling shareholder of GSB Holdings' parent corporation, GSB
Improvement. On August 25, 1995, JUSI and GSB Holdings entered into an
agreement (the "Shareholder Agreement") pursuant to which GSB Holdings
agreed that (i) GSB Holdings shall vote all shares of Common Stock
beneficially owned by it in the same manner as JUSI shall vote with
respect to such matter, as JUSI shall specify after consultation by JUSI
with GSB Holdings, and (ii) GSB Holdings shall not sell, transfer or
otherwise dispose of any shares of Common Stock to an unaffiliated third
party except in the following circumstance: if JUSI enters into an
agreement with an unaffiliated third party (a "Third Party") to sell,
transfer or otherwise dispose of any shares of Common Stock, then at the
direction of JUSI, GSB Holdings shall enter into an agreement with the
Third Party on the same terms and conditions to sell the same percentage
of the total number of shares of Common Stock owned by GSB Holdings as the
percentage of shares of Common Stock owned by JUSI to be sold to the Third
Party. In addition, in the Shareholder Agreement, JUSI agreed, among other
things, that it shall not sell, transfer or otherwise dispose of any
shares of Common Stock to a Third Party unless it shall have arranged for
GSB Holdings to sell the same percentage of its shares of Common Stock to
the Third Party on the same terms and conditions. By virtue of the
agreements set forth in the Shareholder Agreement, JUSI may be deemed to

23
<PAGE> 25
have shared power to vote or to direct the vote and shared power to
dispose or direct the disposition of, and accordingly may be deemed to
beneficially own, all 640,000 shares of Common Stock beneficially owned by
GSB Holdings.

Pursuant to the 1991 Stockholder Agreement (the "1991 Stockholder
Agreement"), JUSI has two nominees serving on the Company's Board of
Directors, John A. Mistretta and Christian R. Guntner. For information
concerning Mr. Mistretta and Mr. Guntner, see "ELECTION OF DIRECTORS". GSB
Holdings is not entitled to nominate any directors of the Company.
However, Mr. Schollenberger, who is a director and nominee for director,
is a Vice President of GSB Holdings. To the Company's knowledge, other
than as described above and under "EXECUTIVE COMPENSATION AND OTHER
TRANSACTIONS" and "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS",
neither JUSI nor GSB Holdings has any affiliation with the Company or its
management.

(3) These shares are owned of record by JUSI Holdings, Inc. ("JUSI"), which is
an indirect wholly-owned subsidiary of U.S. Industries, Inc. ("USI"). The
address of JUSI and USI is 101 Wood Avenue South, Iselin, NJ 08830. These
shares are subject to certain restrictions contained in the 1991
Stockholder Agreement by and between the Company and JUSI (as assignee
from HM Holdings, Inc.). Pursuant to the 1991 Stockholder Agreement, JUSI
has agreed that, as long as the Company's principal credit facility is
outstanding, it will not take any action to cause its beneficial ownership
to fall below 25% of the Company's outstanding Common Stock. Excludes
640,000 shares of Common Stock owned directly by GSB Holdings. Also
excludes any other shares of Common Stock that may be beneficially owned
by directors, executive officers and/or employees of USI and its
subsidiaries, directly or through individual employee savings plan
accounts. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".

(4) Mr. Clarke is a director and officer of GSB Holdings and a director,
officer and controlling shareholder of GSB Improvement and may, therefore,
be deemed to own beneficially the shares of Common Stock owned by GSB
Holdings. Excludes all shares beneficially owned by USI and any shares
that may be beneficially owned by directors, executive officers and/or
employees of USI and its subsidiaries, directly or through individual
employee savings plan accounts, as to which Mr. Clarke and GSB Holdings
and GSB Improvement disclaim beneficial ownership. Also excludes 2,000
shares of the Company Common Stock beneficially owned by Mr.
Schollenberger, who is a Vice President of GSB Holdings, as to which
beneficial ownership is disclaimed. See "ELECTION OF DIRECTORS".

(5) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 578,200 shares of
Company Common Stock as of September 30, 1995, all of which shares are
held in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company (the "Fund"), or in series of the DFA
Investment Trust Company, a Delaware business trust (the "Trust"), or the
DFA Group Trust and DFA Participation Group Trust, investment vehicles for
qualified employee benefit plans, all of which Dimensional serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares.

<TABLE>
<S> <C>
Sole Voting Power = 425,650 Shares*
Shared Voting Power = 0
Sole Dispositive Power = 578,200
Shared Dispositive Power = 0
</TABLE>

24
<PAGE> 26
* Persons who are officers of Dimensional also serve as officers of the
Fund and the Trust, each an open-end management investment company
registered under the Investment Company Act of 1940. In their capacity as
officers of the Fund and the Trust, these persons vote 84,650 additional
shares which are owned by the Fund and 67,900 shares which are owned by
the Trust (both included in Sole Dispositive Power above).

(6) Excludes 640,000 shares of Common Stock owned directly by GSB Holdings, as
to which beneficial ownership is disclaimed.

INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors has selected Ernst & Young, certified public
accountants, as independent auditors to audit the accounts of the Company for
the current fiscal year. The Company has been advised that representatives of
Ernst & Young, the Company's independent auditors for fiscal year ended October
1, 1995, are planning to attend the Special Meeting, will have an opportunity to
make a statement if they desire to do so and will be available to respond to
appropriate questions.

COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities to file reports of ownership and changes in
ownership in respect of the Company's securities with the Securities and
Exchange Commission (the "SEC"). Such persons are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.

Based solely on the Company's review of the copies of such forms it has
received and written representations of certain of its officers and directors,
the Company believes that during fiscal year 1995 all persons subject to the
reporting requirements of Section 16(a) filed the required reports on a timely
basis.

ANNUAL REPORT

A copy of the Company's 1995 Annual Report on Form 10-K for the fiscal
year ended October 1, 1995, including financial statements and the report of
Ernst & Young thereon, accompanies this Proxy Statement. Any Shareholder who has
not received a copy of the 1995 Annual Report to Shareholders and wishes to do
so should contact the Company Secretary, by mail, at the address set forth on
the notice of annual meeting or by telephone at (617) 380-3100.

THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH SHAREHOLDER AS OF THE
RECORD DATE, ON THE WRITTEN REQUEST OF THE SHAREHOLDER, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED OCTOBER 1, 1995, INCLUDING THE
FINANCIAL STATEMENTS, AS FILED WITH THE SEC. SHAREHOLDERS SHOULD DIRECT THE
WRITTEN REQUEST TO THE COMPANY'S SECRETARY AT GROUND ROUND RESTAURANTS, INC., 35
BRAINTREE HILL OFFICE PARK, P.O. BOX 9078, BRAINTREE, MASSACHUSETTS 02184-9078.

25
<PAGE> 27
PROPOSALS TO SHAREHOLDERS

Proposals to Shareholders intended to be presented at the next annual
meeting of shareholders must be received by the Company at its principal
executive offices no later than November 9, 1996 for inclusion in the proxy
statement and form of proxy relating to that meeting. Proposals must comply with
the applicable requirements of the federal securities laws, including Rule 14a-8
of the Exchange Act.

OTHER MATTERS

Pursuant to a contract of insurance dated May 20, 1995 with Chubb
Insurance Company, the Company maintains a $10,000,000 indemnification insurance
policy covering all directors and officers of the Company and its subsidiaries.
The annual premium for such insurance is $171,250. As of December 12, 1995, no
payments have been made under this insurance contract.

The Board of Directors knows of no business which will be presented for
consideration at the Special Meeting other than that shown above.

The cost of preparing, assembling and mailing this Proxy material will
be borne by the Company. The Company may solicit Proxies otherwise than by use
of the mail, in that certain officers and regular employees of the Company,
without additional compensation, may use their personal efforts, by telephone or
otherwise, to obtain Proxies. Such assistance may take the form of personal,
telephonic or written solicitation or any combination thereof. All costs of
solicitation will be borne by the Company. The Company will also request
persons, firms and corporations holding shares in their names, or in the names
of their nominees, which shares are beneficially owned by others, to send this
proxy material to and obtain Proxies from such beneficial owners and will
reimburse such holders for their reasonable expenses in doing so.

By order of the Board of Directors

Robin L. Moroz, Secretary

December 20, 1995

26
<PAGE> 28
APPENDIX A

GROUND ROUND RESTAURANTS, INC

AMENDED AND RESTATED
1989 STOCK OPTION PLAN

SECTION 1. PURPOSE

The purpose of the 1989 Stock Option Plan (the "Plan") of Ground
Round Restaurants, Inc. is to enable Ground Round Restaurants, Inc. and its
subsidiaries to attract, retain and motivate their employees and to enable
employees to participate in the long-term growth of the Company by providing for
or increasing the proprietary interests of such persons in the Company, thereby
assisting the Company to achieve its long-range goals.

SECTION 2. DEFINITIONS

As used in the Plan:

"Act" means the Securities Exchange Act of 1934, as amended.

"Award" means any Option, Stock Appreciation Right, Performance Stock
Unit or Restricted Stock awarded under the Plan.

"Code" means the Internal Revenue Code of 1986, as amended from time to
time.

"Board" means the Board of Directors of the Company.

"Closing Price" means the closing price of a share of Common Stock on
the American Stock Exchange or, if not listed on such exchange, on any other
national exchange on which the Common Stock is listed or on NASDAQ.

"Committee" means the Stock Option Committee of the Board or such other
Committee of the Board performing similar functions, such as the Compensation
Committee, which shall consist of two or more directors, each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3(c) under the Act, or any
successor provision.

"Company" means Ground Round Restaurants, Inc., and any present or
future parent or subsidiary corporations (as defined in Section 424 of the Code)
or any successor to such corporations.

"Common Stock" or "Stock" means the Common Stock, $.16-2/3 par value,
of the Company.

A-1
<PAGE> 29
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value as determined by the Committee in good faith or
in the manner established by the Committee from time to time.

"Incentive Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under the Plan which is intended to meet the
requirements of Section 422 of the Code or any successor provision.

"Non-Qualified Stock Option" means an option to purchase shares of
Common Stock awarded to a Participant under the Plan which is not intended to be
an Incentive Stock Option.

"Option" means an Incentive Stock Option or a Non-Qualified Stock
Option.

"Participant" means a person selected by the Committee to receive an
Award under the Plan.

"Performance Cycle" or "Cycle" means the period of time selected by the
Committee during which performance is measured for the purpose of determining
the extent to which an award of Performance Shares has been earned.

"Performance Stock Unit" means shares of Common Stock awarded to a
Participant under Section 8.

"Restricted Period" means the period of time selected by the Committee
during which an award of Restricted Stock may be forfeited to the Company.

"Restricted Stock" means shares of Common Stock awarded to a
Participant under Section 9 which are subject to forfeiture.

"Stock Appreciation Right" or "SAR" means a right awarded to a
Participant under Section 7.

SECTION 3. ADMINISTRATION

(a) The Plan shall be administered by the Committee. Among other
things, the Committee shall have authority, subject to the terms of the Plan, to
grant Awards, to determine the individuals to whom and the time or times at
which Awards may be granted and to determine the terms and conditions of any
Award granted hereunder.

(b) Subject to the provisions of Section 10(a), the Committee shall
have authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing the operation of the Plan as it shall from time to time
consider advisable, to interpret the provisions of the Plan and any Award, and
to decide all disputes arising in connection with the Plan. The Committee's
decisions and interpretations shall be final and binding. Any action of the
Committee with respect to the administration of the Plan shall be taken pursuant
to a majority vote or by the unanimous written consent of its members.

A-2
<PAGE> 30
SECTION 4. ELIGIBILITY

All employees of the Company, including any director who is an employee
of the Company, shall be eligible to participate in the Plan.

SECTION 5. STOCK AVAILABLE FOR AWARDS

(a) Awards may be made under the Plan for up to 575,000 shares of
Common Stock (less any shares that are issued or issuable upon the exercise of
options granted under the Ground Round Restaurants, Inc. 1982 Stock Option Plan
or the Ground Round Restaurants, Inc. 1987 Stock Option Plan). If any Award in
respect of shares of Common Stock (or any option granted under the Ground Round
Restaurants, Inc. 1982 Stock Option Plan or the Ground Round Restaurants, Inc.
1987 Stock Option Plan) expires or is terminated before exercise or is forfeited
for any reason, without a payment in the form of Stock being made to the
Participant, the shares of Common Stock subject to such Award, to the extent of
such expiration, termination or forfeiture, shall again be available for award
under the Plan. Shares of Common Stock issued under the Plan may consist in
whole or in part of authorized but unissued shares or treasury shares.

(b) In the event that the Committee determines in its sole discretion
that any stock dividend, extraordinary cash dividend, creation of a class of
equity securities, recapitalization, reclassification, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares, warrants or
rights offering to purchase Common Stock at a price substantially below fair
market value, or other similar transaction affects the Common Stock such that an
adjustment is required in order to preserve the benefits or potential benefits
intended to be made available under the Plan to Participants, the Committee
shall have the right to adjust equitably any or all of (i) the number and kind
of shares of stock or securities in respect of which Awards may be made under
the Plan to Participants, (ii) the number and kind of shares subject to
outstanding Awards held by Participants, and (iii) the award, exercise or
conversion price with respect to any of the foregoing held by Participants, and
if considered appropriate, the Committee may make provision for a cash payment
with respect to an outstanding Award held by a Participant, provided that the
number of shares subject to any Award shall always be a whole number.

SECTION 6. OPTIONS

(a) Subject to the provisions of the Plan, the Committee may award
Incentive Stock Options and Non-Qualified Stock Options and determine the number
of shares to be covered by each Option, the option price therefor, the term of
the Option, and the other conditions and limitations applicable to the exercise
of the Option. The terms and conditions of Incentive Stock Options shall be
subject to and comply with Section 422 of the Code, or any successor provision,
and any regulations thereunder. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted to the Committee under the Plan be so exercised, so as to disqualify the
Plan or, without the consent of the optionee, any Incentive Stock Option granted
under the Plan, under Section 422 of the Code.

A-3
<PAGE> 31
(b) The option price per share of Common Stock purchasable under an
Option shall not be less than 100% of the Fair Market Value of the Common Stock
on the date of award with respect to Incentive Stock Options and shall be the
price determined by the Committee, which may be less than, equal to or greater
than the Fair Market Value of the Common Stock on the date of award but in no
event less than the par value of the Common Stock, with respect to Non-Qualified
Stock Options. If the Participant owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more than 10% of
the combined voting power of all classes of stock of the Company or any
subsidiary or parent corporation of the Company and an Incentive Stock Option is
granted to such Participant, the option price shall be not less than 110% of
Fair Market Value of the Common Stock on the date of award.

(c) No Option shall be exercisable more than ten years after the date
the option is awarded. If a Participant owns or is deemed to own (by reason of
the attribution rules of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or any subsidiary
or parent corporation of the Company and an Incentive Stock Option is awarded to
such Participant, such Option shall not be exercisable after the expiration of
five years from the date of award.

(d) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be made in whole or in part in cash or by certified or bank
check or, to the extent permitted by the Committee at or after the award of the
Option, by delivery of a note or shares of Common Stock owned by the
Participant, including Restricted Stock, valued at their Fair Market Value on
the date of delivery, or such other lawful consideration as the Committee may
determine.

(e) No Option shall be transferable by the Participant otherwise than
by will or by the laws of descent and distribution, and all Options shall be
exercisable during the Participant's lifetime only by the Participant or the
Participant's duly appointed guardian or personal representative. A Participant
shall notify the Committee in the event that he or she disposes of Common Stock
acquired upon exercise of an Incentive Stock Option within the two-year period
following the date the Incentive Stock Option was granted or within the one-year
period following the date he or she received Common Stock upon the exercise of
an Incentive Stock Option.

(f) The Committee may at any time accelerate the exercisability of all
or any portion of any Option.

SECTION 7. STOCK APPRECIATION RIGHTS

(a) A Stock Appreciation Right ("SAR") is an Award entitling the
Participant to receive an amount in cash or shares of Common Stock or a
combination thereof having a value equal to (or if the Committee shall so
determine at time of grant, less than) the excess of the Fair Market Value of a
share of Common Stock on the date of exercise over the Fair Market Value of a
share of Common Stock on the date of grant (or over the option exercise price,
if the Stock Appreciation Right was granted in tandem with an Option) multiplied
by the number of shares with respect to which the Stock Appreciation Right shall
have been exercised.

A-4
<PAGE> 32
(b) Subject to the provisions of the Plan, the Committee may award SARs
in tandem with an Option (at or after the award of the Option), or alone and
unrelated to an Option, and determine in its sole discretion the terms and
conditions applicable thereto, including the form of payment. SARs granted in
tandem with an Option shall terminate to the extent that the related Option is
exercised, and the related Option shall terminate to the extent that the tandem
SARs are exercised. Subject to this Section 7(b) and to such rules as the
Committee may, in its discretion and for any reason whatsoever, impose, an SAR
granted in connection with an Option will be exercisable at such time or times,
and only to the extent that a related Option is exercisable, and shall not be
transferable except to the extent that such related Option may be transferable.

(c) The Committee may impose such additional conditions or limitations
on the exercise of an SAR as it may deem necessary or desirable to secure for
Participants the benefits of Rule 16b-3 promulgated under Section 16(b) of the
Act, or any successor provision in effect at the time of grant or exercise of an
SAR.

(d) An SAR related to an Option which can be exercised only during
limited periods following a change in control of the Company may entitle the
Participant to receive an amount based upon the highest price paid or offered
for Common Stock in any transaction relating to the change in control or paid
during the thirty-day period immediately preceding the occurrence of the change
in control in any transaction reported in the stock market in which the Common
Stock is normally traded.

(e) Notwithstanding that an Option at the time of exercise shall not be
accompanied by a related Stock Appreciation Right, if the market price of the
shares subject to such Option exceeds the exercise price of such Option at the
time of its exercise, the Committee may, in its discretion, cancel such Option,
in which event the Company shall pay to the person exercising such Option an
amount equal to the difference between the Fair Market Value of the Common Stock
to have been purchased pursuant to such exercise of such Option (determined on
the date the Option is cancelled) and the aggregate consideration to have been
paid by such person upon such exercise. Such payment shall be by check, bank
draft or in Common Stock having a Fair Market Value (determined on the date the
payment is to be made) equal to the amount of such payments or any combination
thereof, as determined by the Committee. The Committee may exercise its
discretion under the first sentence of this paragraph (e) only in the event of a
written request of the person exercising the option, which request shall not be
binding on the Committee.

SECTION 8. PERFORMANCE STOCK UNITS

(a) A Performance Stock Unit is an Award entitling the Participant to
acquire shares of Common Stock upon the attainment of specified performance
goals. Subject to the provisions of the Plan, the Committee may award
Performance Stock Units and determine the performance goals applicable to each
such Award, the number of such shares for each Performance Cycle, the duration
of each Performance Cycle and all other limitations and conditions applicable to
the awarded Performance Stock Units. There may be more than one Performance
Cycle in existence at any one time, and the duration of performance cycles may
differ from each other. The

A-5
<PAGE> 33
payment value of each Performance Stock Unit shall be equal to the Fair Market
Value of one share of Common Stock on the date the Performance Stock Unit is
earned or, in the discretion of the Committee, on the date the Committee
determines that the Performance Stock Unit has been earned.

(b) During any Performance Cycle, the Committee may adjust the
performance goals for such Performance Cycle as it deems equitable in
recognition of unusual or non-recurring events affecting the Company, changes in
applicable tax laws or accounting principles, or such other factors as the
Committee may determine.

(c) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Stock Units which have been
earned by the Participant on the basis of performance in relation to the
established performance goals. The payment values of earned Performance Stock
Units shall be distributed to the Participant as soon as practicable thereafter.
The Committee shall determine, at or after the time of award, whether payment
values will be settled in whole or in part in cash or other property, including
Common Stock or Awards.

SECTION 9. RESTRICTED STOCK

(a) A Restricted Stock Award is an award entitling the Participant to
acquire shares of Common Stock for a purchase price equal to or greater than
their par value, subject to such conditions and restrictions, including, without
limitation, a Company right during a specified period or periods to repurchase
such shares at their original purchase price (or to require forfeiture of such
shares) upon the Participant's termination of employment, as the Committee shall
determine.

(b) Subject to the provisions of the Plan, the Committee may award
shares of Restricted Stock and determine the purchase price (if any) therefor,
the duration of the Restricted Period during which, and the conditions under
which, the shares may be forfeited to or repurchased by the Company and the
other terms and conditions of such Awards. Shares of Restricted Stock may be
issued for no cash consideration or such minimum consideration as may be
required by applicable law.

(c) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Committee, during
the Restricted Period. Shares of Restricted Stock shall be evidenced in such
manner as the Committee may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and, unless otherwise determined by the Committee, deposited by the Participant,
together with a stock power endorsed in blank, with the Company. At the
expiration of the Restricted Period, the Company shall deliver such certificates
to the Participant.

(d) A Participant shall have all the rights of a shareholder with
respect to the Restricted Stock including voting and dividend rights, subject to
restrictions on transferability and Company repurchase or forfeiture rights
described in this Section and subject to any other conditions, determined by the
Committee and contained in the Award.

A-6
<PAGE> 34
SECTION 10. GENERAL PROVISIONS APPLICABLE TO AWARDS

(a) Notwithstanding any other provision of the Plan, in order to
qualify for the exemption provided by Rule 16b-3 under the Act, and any
successor provision, (i) any Common Stock or other equity security offered under
the Plan to the Participant subject to Section 16 of the Act (a "Section 16
Participant") may not be sold for six months after acquisition; any Common Stock
or other equity security acquired by a Section 16 Participant upon exercise of
an Option may not be sold for six months after the date of grant of the Option;
and any SAR granted to a Section 16 Participant may not be exercised for six
months after the date of grant; and (ii) any Option, SAR or other similar right
related to an equity security issued under the Plan shall not be transferable
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder. The Committee
shall have no authority to take any action if the authority to take such action,
or the taking of such action, would disqualify the Plan from the exemption
provided by Rule 16b-3 under the Act, and any successor provision.

(b) Each Award under the Plan shall be evidenced by a writing delivered
to the Participant specifying the terms and conditions thereof and containing
such other terms and conditions not inconsistent with the provisions of the Plan
as the Committee considers necessary or advisable to achieve the purposes of the
Plan or comply with applicable tax and regulatory laws and accounting
principles.

(c) Each Award may be made alone, in addition to or in relation to any
other Award. The terms of each Award need not be identical, and the Committee
need not treat Participants uniformly. Except as otherwise provided by the Plan
or a particular Award, any determination with respect to an Award may be made by
the Committee at the time of award or at any time thereafter.

(d) The Committee shall determine whether Awards to Participants are
settled in whole or in part in cash, Common Stock, other securities of the
Company, Awards or other property. The Committee may permit a Participant to
deter all or any portion of a payment under the Plan, including the crediting of
interest on deferred amounts denominated in cash and dividend equivalents on
amounts denominated in Common Stock.

(e) In the discretion of the Committee, any Award to a Participant
under the Plan may provide the Participant with (i) dividends or dividend
equivalents payable currently or deferred with or without interest and (ii) cash
payments in lieu of or in addition to an Award.

(f) The Committee shall determine the effect on an award of the
disability, death, retirement or other termination of employment of a
Participant and the extent to which and the period during which, the
Participant's legal representative, guardian or designated beneficiary may
receive payment of an Award or exercise rights thereunder.

A-7
<PAGE> 35
(g) In order to preserve the rights of a Participant under an Award in
the event of a change in control of the Company, the Committee in its discretion
may, at the time an Award is made or at any time thereafter, take one or more of
the following actions with respect to any such change of control: (i) provide
for the acceleration of any time period relating to the exercise or realization
of the Award, (ii) provide for the purchase of the Award upon the Participant's
request for an amount of cash or other property that could have been received
upon the exercise or realization of the Award had the Award been currently
exercisable or payable, (iii) adjust the terms of the Award in a manner
determined by the Committee, (iv) cause the Award to be assumed, or new rights
substituted therefor, by another entity, or (v) make such other provision as the
Committee may consider equitable and in the best interests of the Company.

(h) The Participant shall pay to the Company, or make provision
satisfactory to the Committee for payment of, any taxes required by law to be
withheld in respect of Awards under the Plan no later than the date of the event
creating the tax liability. In the Committee's discretion, such tax obligations
may be paid, in whole or in part, in shares of Common Stock, including shares
retained from the Award creating the tax obligation, valued at their Fair Market
Value on the date of delivery, provided, however, that with respect to any
Participant subject to Section 16(a) of the Act, any such retention of Shares
shall be made in compliance with any applicable requirements of Rule 16b-3(e) or
any successor Rule under the Act. The Company may, to the extent permitted by
law, deduct any such tax obligations from any payment of any kind otherwise due
to the Participant.

(i) For purposes of the Plan, the following events shall not be deemed
a termination of employment of a Participant:

(i) a transfer to the employment of the Company from a
subsidiary or from the Company to a subsidiary, or from one subsidiary
to another, or

(ii) an approved leave of absence for military service or
sickness, or for any other purpose approved by the Company, if the
Participant's right to reemployment is guaranteed either by a statute
or by contract or under the policy pursuant to which the leave of
absence was granted or if the Committee otherwise so provides in
writing.

For purposes of the Plan, employees of a subsidiary of the Company
shall be deemed to have terminated their employment on the date on which such
subsidiary ceases to be a subsidiary of the Company.

(j) The Committee may amend, modify or terminate any outstanding Award
held by a Participant, including substituting therefor another Award of the same
or a different type, changing the date of exercise or realization, converting an
Incentive Stock Option to a Non-Qualified Stock Option, and modifying or waiving
the restrictions with respect to any Restricted Stock, provided that the
Participant's consent to such action shall be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.

A-8
<PAGE> 36
SECTION 11. MISCELLANEOUS

(a) No person shall have any claim or right to be granted an Award, and
the grant of an Award shall not be construed as giving a Participant the right
to continued employment. The Company expressly reserves the right at any time to
dismiss a Participant free from any liability or claim under the Plan, except as
expressly provided in the applicable Award.

(b) Nothing contained in the Plan shall prevent the Company from
adopting other or additional compensation arrangements for its employees.

(c) Subject to the provisions of the applicable Award, no Participant
shall have any rights as a shareholder with respect to any shares of Common
Stock to be distributed under the Plan until he or she becomes the holder
thereof. A Participant to whom shares of Common Stock are awarded shall be
considered the holder of the Shares at the time of the Award except as otherwise
provided in the applicable Award.

(d) Subject to the approval of the shareholders of the Company, the
Amended and Restated 1989 Stock Option Plan shall be effective on November 27,
1989.

(e) The Board may amend, suspend or terminate the Plan or any portion
thereof at any time, provided that no amendment shall be made without
shareholder approval if such approval is necessary to comply with any applicable
tax or regulatory requirement, including any requirements for exemptive relief
under Section 16(b) of the Act, or any successor provision.

(f) Awards may not be made under the Plan after November 26, 1999, but
then outstanding Awards may extend beyond such date.

A-9
<PAGE> 37
[ ]

[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSALS.

<TABLE>
<S> <C> <C> <C>
1. Election of Directors FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
listed below. [X] for all nominees listed below. [X] [X]

</TABLE>

Nominees: Daniel R. Scoggin, John A. Mistretta, Christian R. Guntner, Joseph
Schollenberger, James R. Olson, Fred H. Beaumont, Jr., and Allan D. Weingarten
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided
below.)

*Exceptions
---------------------------------------------------------------------

2. Approval of the Amended and Restated 1989 Stock Option Plan.

<TABLE>
<S> <C> <C> <C>
FOR [X] AGAINST [X] ABSTAIN [X] Change of Address and
or Comments Mark Here [X]

NOTE: Please sign exactly as name or names appear
to the left. When signing as Attorney, Executor,
Trustee, Guarantor or Officer of a corporation,
please give title as such. For joint accounts, all
named holders should sign.

Dated: , 199
------------------------------------- -

-------------------------------------------------
Signature

-------------------------------------------------
Signature (if held jointly)
</TABLE>

PLEASE SIGN, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.

GROUND ROUND RESTAURANTS, INC.
SPECIAL MEETING IN LIEU OF THE ANNUAL MEETING OF SHAREHOLDERS--JANUARY 23, 1996
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned shareholder hereby appoints Michael R. Jorgensen and
Robin L. Moroz, and each of them individually, the true and lawful proxies of
the undersigned, with full power of substitution and re-substitution, to
represent the undersigned and to vote all shares of common stock of GROUND
ROUND RESTAURANTS, INC. (the "Company") that the undersigned is entitled to
vote at the Special Meeting in Lieu of the Annual Meeting of Shareholders of
the Company to be held on Tuesday, January 23, 1996 at 10:00 a.m., and at any
and all postponements and adjournments thereof (the "Meeting"). as indicated
on the reverse side.

The shares represented by this proxy will be voted as directed herein,
but if no direction is given, this proxy will be voted FOR the election of all
of the nominees for Director listed on the reverse side and FOR approval of the
Amended and Restated 1989 Stock Option Plan, all as more fully described in the
accompanying Proxy Statement.

YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES (SEE REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE
IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.

(Continued and to be signed on the reverse side)

GROUND ROUND RESTAURANTS, INC.
P.O. BOX 11164
NEW YORK, N.Y. 10203-0154