<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the transition period from to
-------- ---------
Commission File Number: 1-6192
GROUND ROUND RESTAURANTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
New York 13-5637682
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
35 Braintree Hill Office Park, Braintree, Massachusetts 02184
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (617) 380-3100
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Number of shares of Common Stock, $ .16 2/3 par value outstanding as of August
12, 1996: 11,173,421
<PAGE> 2
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GROUND ROUND RESTAURANTS, INC.
<TABLE>
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND OCTOBER 1, 1995
(Dollars in thousands, except per share amounts)
<CAPTION>
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 1,814 $ 2,425
Receivables, net of allowances for uncollectible
accounts of $1,059 and $797 in 1996 and 1995, respectively 1,375 1,147
Income tax refunds receivable 1,541
Inventories 2,061 2,511
Prepaid expenses and other current assets 1,591 2,115
-------- --------
Total current assets 6,841 9,739
Property and equipment:
Land 9,832 10,240
Buildings and leasehold improvements 118,093 119,749
Machinery and equipment 39,970 40,399
-------- --------
167,895 170,388
Accumulated depreciation and amortization 60,619 53,484
-------- --------
Property and equipment, net 107,276 116,904
Other assets 18,060 18,713
-------- --------
Total Assets $132,177 $145,356
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 7,545 $ 5,933
Accrued expenses 13,087 11,190
Current portion of long-term debt and capital lease obligations 813 8,277
-------- --------
Total current liabilities 21,445 25,400
Long-term debt and capital lease obligations 52,445 50,303
Deferred income taxes 1,120
Other long-term liabilities 8,283 8,849
STOCKHOLDERS' EQUITY:
Preferred Stock, undesignated, par value $100 per share;
authorized 30,000 shares; none issued
Common Stock, par value $.16 2/3 per share: authorized 35,000,000
shares in 1996 and 1995; issued 11,174,000 in 1996 and 1995 1,862 1,862
Additional paid-in capital 57,883 57,883
Accumulated deficit (9,741) (61)
-------- --------
Total stockholders' equity 50,004 59,684
-------- --------
Total Liabilities and Stockholders' Equity $132,177 $145,356
======== ========
</TABLE>
See notes to consolidated financial statements.
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GROUND ROUND RESTAURANTS, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
13 WEEKS ENDED 39 WEEKS ENDED
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE $55,779 $56,145 $165,462 $175,480
------- ------- -------- --------
COSTS AND EXPENSES:
Cost of products sold 51,148 48,914 152,556 149,792
Selling, general and administrative 4,336 3,412 12,619 12,099
Depreciation and amortization 2,893 3,652 9,064 11,098
Interest expense, net 1,183 1,284 3,633 3,762
Other (income) expense 373 (32) 498 1,597
------- ------- -------- --------
59,933 57,230 178,370 178,348
------- ------- -------- --------
Loss before taxes (4,154) (1,085) (12,908) (2,868)
Income tax benefit (1,038) (347) (3,227) (918)
------- ------- -------- --------
NET LOSS $(3,116) $ (738) $ (9,681) $ (1,950)
======= ======= ======== ========
Weighted average common shares 11,174 11,159 11,174 11,129
outstanding
PER SHARE DATA:
Net loss per common share $ (.28) $ (.07) $ (.87) $ (.18)
======= ======= ======== ========
</TABLE>
See notes to consolidated financial statements.
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GROUND ROUND RESTAURANTS, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
39 Weeks Ended 39 Weeks Ended
June 30, 1996 July 2, 1995
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(9,680) (1,950)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 9,378 11,370
Deferred taxes (3,015) (1,734)
Other, net 96
Change in operating assets and liabilities:
Accounts receivable (228) 397
Income tax refunds receivable 1,541
Inventories and prepaid expenses 1,280 47
Accounts payable and other liabilities 4,039 (1,895)
------- --------
Net cash provided by operating activities 3,315 6,331
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,471) (9,259)
Proceeds on sale of property & equipment 3,034 4,053
Sale of liquor license 293 176
Deposits received 176
Pre-opening costs (386)
------- --------
Net cash provided by (used in) investing activities 1,856 (5,240)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 44,800
Payments of long-term borrowings (5,322) (46,033)
Proceeds from issuance of common stock 216
Payments of deferred debt costs (460) (241)
------- --------
Net cash used in financing activities (5,782) (1,258)
------- --------
NET DECREASE IN CASH (611) (167)
Cash and cash equivalents at beginning of period 2,425 1,457
------- --------
Cash and cash equivalents at end of period $ 1,814 $ 1,290
======= ========
</TABLE>
See notes to consolidated financial statements.
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GROUND ROUND RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED JUNE 30, 1996 AND JULY 2, 1995
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments, which are of a normal
recurring nature, necessary to present fairly Ground Round Restaurants,
Inc.'s (the "Company") financial position as of June 30, 1996 and the
results of operations for the 13-week and 39-week periods ended June 30,
1996 and July 2, 1995. These financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such regulations, although the Company believes the disclosures provided
are adequate to prevent the information presented from being misleading. It
is suggested that these financial statements be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended October 1, 1995 and
Form 10-Q for the quarterly period ended March 31, 1996.
Certain items in specific captions in the accompanying consolidated
financial statements have been reclassified for comparative purposes.
<TABLE>
2. COST OF PRODUCTS SOLD
Cost of products sold comprises the following:
<CAPTION>
Three Months Ended Nine Months Ended
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Food and beverage costs $19,525 $18,164 $57,694 $ 55,760
Labor Costs 19,482 18,586 58,175 57,601
Other Costs 12,141 12,164 36,687 36,431
------- ------- ------- --------
$51,148 $48,914 $52,556 $149,792
======= ======= ======= ========
</TABLE>
3. LITIGATION
The Company has been named in a number of separate claims brought by former
employees alleging that the Company engaged in discriminatory practices
including those based on age or sex. Plaintiffs bringing claims of
employment discrimination, such as those being brought against the Company,
generally are entitled to have their claims tried by a jury and such claims
may result in punitive damage awards. Most of the proceedings against the
Company are still in the discovery phase. Management believes that the
discrimination claims against the Company are without merit and the Company
is actively defending the claims. Management does not expect that the
resolution of these matters will have a material adverse effect on the
consolidated financial position of the Company.
4
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4. SUBSEQUENT EVENTS
As of June 28, 1996, the Company agreed to sell up to 16 restaurants to
Lone Star Steakhouse & Saloon, Inc. ("Purchaser") for up to $16 million in
cash. Closing of the sale of the restaurants is subject to the satisfaction
of certain conditions, including the issuance or regulatory approval of the
assignment of liquor licenses to the Purchaser, obtaining of consent of
lessors to the assignment of leases where required, the right of the
Purchaser to renegotiate leases with the lessors with respect to seven
restaurants, and the conveyance of good title to each restaurant by the
Company. Any restaurant as to which the closing conditions cannot be timely
satisfied may be rejected by the Purchaser, in which case the purchase
price shall be reduced by a specified amount agreed by the parties;
provided, however, in no event shall the Purchaser purchase less than
eleven restaurants.
The closing of the transaction shall occur five business days after the
issuance of regulatory approval of the assignment of the liquor licenses to
the Purchaser, but in no event later than November 30, 1996. In the event
not all of the liquor licenses or regulatory approvals of the assignments
is obtained prior to the scheduled closing date, the parties may close with
respect to a minimum of eleven restaurants for which such closing
conditions have been satisfied, with the closing on the balance of the
restaurants within five business days after all closing conditions have
been satisfied.
On July 23, 1996, the Company announced that it had agreed to the terms of
a restructured credit facility subject to entering into a definitive
amended credit agreement. The restructured credit facility provides for
continuation of the total amount of the credit facility available to the
Company through May 31, 1997, subject to automatic extension to December
31, 1997 if the principal amount of the facility is reduced by $12 million
prior to May 30, 1997. The restructured credit facility also permits the
Company to retain $5 million out of the first $11 million in asset sale
proceeds received by the Company subsequent to April 30, 1996.In addition,
the restructured credit facility reschedules payment of a prior amendment
fee to commence on September 1, 1996.
Interest on the restructured facility is LIBOR plus 2.625% on the Company's
LIBOR loans and Alternate Base Rate ("ABR") plus .75% on the Company's ABR-
based loans.. The Company has agreed to a restructuring fee equal to 5% of
the amount of the restructured facility, subject to reduction to 2.5% upon
payment of approximately $12.5 million of the principal amount of the
restructured facility prior to March 16, 1997. At the option of the banks,
the amount of such restructuring fee, initially due on May 30, 1997, is
convertible into common stock of the Company after May 1, 1997 at the price
of $2.71 per share.
Pursuant to the terms of the restructured credit facility, if the
transaction with the Purchaser is consummated, the Company will use
approximately 75% of the sale proceeds to reduce bank debt and retain the
remainder for general corporate purposes.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
The Company operated 146 and franchised 45 family-oriented, full service casual
dining restaurants at June 30, 1996.
For purposes of this discussion and analysis, the 39-week periods ended June 30,
1996 and July 2, 1995 are referred to as the nine months ended 1996 and 1995,
respectively. The 13-week periods ended June 30, 1996 and July 2, 1995 are
referred to as the third quarter of 1996 and 1995, respectively.
COMPARATIVE RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
JUNE 30, 1996 AND JULY 2, 1995
<TABLE>
The following table sets forth the percentages which the items in the Company's
Consolidated Statements of Operations bear to total revenue or restaurant
revenue, as indicated:
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Restaurant revenue 99.2% 98.8% 99.2% 99.0%
Franchise revenue .8 1.2 .8 1.0
----- ----- ----- -----
Total Revenue 100.0 100.0 100.0 100.0
Cost of products sold (1) 92.5 88.2 93.0 86.2
Selling, general & administrative 7.8 6.1 7.6 6.9
Depreciation and amortization 5.2 6.5 5.5 6.3
Interest expense, net 2.1 2.3 2.2 2.1
Other (income) expense .7 (.1) .3 .9
Loss before taxes (7.4)% (1.9)% (7.8)% (1.6)%
Income tax benefit (1.9) (.6) (1.9) (.5)
Net loss (5.5)% (1.3)% (5.9)% (1.1)%
<FN>
(1) As a percentage of restaurant revenue.
</TABLE>
RESTAURANT REVENUE: Restaurant revenue totaled $55.3 million for the third
quarter and $164.1 million for the nine months ended June 30, 1996, versus $55.5
million and $173.8 million for the third quarter and nine months ended July 2,
1995, respectively. Restaurant revenue is comprised of comparable restaurant
revenue (revenue generated from restaurants open during all of both fiscal
years) and non-comparable restaurant revenue.
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<PAGE> 8
Comparable restaurant revenue increased 3.7% and decreased by 1.8% for the third
quarter and nine months of 1996, respectively. Management believes that the
decline in comparable store sales of 8.3% during the first quarter of fiscal
1996 was largely attributable to the menu introduced by the Company in November
1994, which reduced the number of menu items offered to approximately 50. In
December 1995, the Company introduced an expanded, newly designed menu featuring
more than 150 items. Management believes that largely as a consequence of the
new menu, comparable restaurant revenue increased over the respective prior
periods during the months of February, March and the third quarter of 1996,
after a decline in January as a result of severe winter weather in markets where
the Company operates.
Non-comparable restaurant revenue declined $2.1 million in the third quarter and
decreased $6.8 million for the nine months ended June 30, 1996, respectively,
over the same periods ended July 2, 1995. The decline for the third quarter was
the result of the sale or closing of four restaurants during the last three
months of fiscal 1995 and the sale or closing of six restaurants during the nine
months ended June 30, 1996, offset by the opening of four new restaurants during
fiscal 1995 which are currently classified as non-comparable. The decrease for
the nine months ended June 30, 1996 is attributable to the sale or closing of 16
restaurants during fiscal 1995 and the sale or closing of six restaurants during
the nine months ended June 30, 1996, offset by the opening of four new
restaurants during fiscal 1995 which are currently classified as non-comparable.
FRANCHISE REVENUE: The Company's franchise base consisted of 45 restaurants
during the third quarter of 1996 and 47 restaurants in the third quarter of
1995. Net revenue from franchise restaurants (consisting of royalties and
initial franchise fees) was approximately $472,000 for the third quarter and
$1,374,000 for the nine months ended June 30, 1996, respectively, versus
approximately $663,000 and $1,690,000 for the third quarter and nine months
ended July 2, 1995, respectively. One initial franchise fee of $10,000 was
recognized in the third quarter and nine months ended June 30, 1996. Initial
franchise fees totaling $115,000 and $150,000 were recognized in the third
quarter and nine months ended July 2, 1995, respectively.
COST OF PRODUCTS SOLD: Cost of products sold consists of both food and beverage
costs and restaurant operating expenses. Food and beverage costs totaled 35.3%
and 35.2% of Company-operated restaurant revenue in the third quarter and nine
months ended June 30, 1996, respectively, versus 32.7% and 32.1% for the third
quarter and nine months ended July 2, 1995, respectively. Restaurant operating
expenses were 57.2% and 57.8% of Company-operated restaurant revenue in the
third quarter and nine months ended June 30, 1996, respectively, versus 55.5%
and 54.1% for the third quarter and nine months ended July 2, 1995.
Food and beverage costs as a percentage of Company-operated restaurant revenue
increased by 2.6% and 3.1% for the third quarter and nine months ended June 30,
1996, respectively, as the Company implemented a substantially re-designed menu
during the first week of December 1995. The increase can be attributed to higher
product costs associated with new menu items, including increases in portion
sizes on various menu items.
Restaurant operating expenses as a percentage of Company-operated restaurant
revenue increased 1.7% and 3.7% for the third quarter and nine months ended June
30, 1996, respectively. The increases have primarily resulted from increases in
labor costs of 1.7% for the third quarter and 2.4% for the nine months ended
June 30, 1996. This increase was directly attributable to increased kitchen
staffing during the implementation of the new menu, as the number of menu items
increased from approximately 50 items to over 150 items. Moreover, increases in
management labor base pay have been enacted in order to remain competitive
within the industry. Other costs increased .1% for the third quarter and 1.3%
for the nine months ended June 30, 1996, mainly as a result of costs associated
with the implementation of the new menu, including increases in menu design and
printing, plateware and supplies. These increases were partially offset by
decreases in local
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promotion expenses and in percentage (contingent) rent expense. Most other costs
remained at a constant dollar level due to the fixed nature of certain costs
associated with operating a restaurant.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses were 7.8% and 7.6% of total revenue for the third
quarter and nine months ended June 30, 1996 as compared with 6.1% and 6.9% for
the same periods in 1995. Selling expenses, comprised of advertising and
development and production costs for point of purchase materials were .5% and
.6% of total revenue in the third quarter and nine months ended June 30, 1996,
respectively, versus .4% and 1.0% for the third quarter and nine months ended
July 2, 1995. The decrease in selling expense is primarily due to the Company's
suspension of radio and media-based advertising. Radio and media-based
advertising totaled approximately $1.7 million during the nine months ended July
2, 1995.
General and administrative costs, comprised of restaurant manager training
expenses, regional overhead and corporate administrative costs were 7.5% and
7.3% of total revenue in the third quarter and nine months ended June 30, 1996,
respectively, versus 5.7% and 5.9% for the same periods in 1995. The increase
represents additional training expenses incurred in order to properly staff the
restaurants at the management level, coupled with the addition of three regional
directors and two divisional vice presidents in order to reduce spans of control
(by reducing the number of locations that each regional director is responsible
for).
DEPRECIATION AND AMORTIZATION: Depreciation and amortization expenses were 5.2%
and 5.5% of total revenue in the third quarter and nine months ended June 30,
1996, respectively, versus 6.5% and 6.3% for the third quarter and nine months
ended July 2, 1995. The decrease is the direct result of the sale or closing of
16 restaurants during fiscal 1995 and six restaurants during the first nine
months of 1996.
OTHER EXPENSE: The third quarter and nine months ended June 30, 1996 reflects
charges of $374,000 and $499,000, respectively, as a result of consulting
expenses incurred by the Company in connection with the Company's bank
restructuring (see "Liquidity and Capital Resources" section below). The nine
months ended July 2, 1995 reflects $.8 million in expenses related to the
resignation of the Company's President, Chief Executive Officer and Chairman of
the Board, and $.8 million in expenses related to the termination of the Merger
Agreement among the Company, GRR Acquisition Corp. and GRR, Inc., which the
parties entered into on August 23, 1994 and was terminated on January 13, 1995.
INTEREST EXPENSE: Interest expense decreased by $101,000 and $129,000 for the
third quarter and nine months ended June 30, 1996 as a result of a reduction in
total debt outstanding (see "Liquidity and Capital Resources" section below).
The Company's weighted average borrowing rates were 8.1% and 8.0% for third
quarter and nine months ended June 30, 1996, respectively, versus 8.1% and 7.6%
for the same periods in 1995, respectively.
INCOME TAXES: The Company's effective income tax rates was 25% for the third
quarter and nine months ended June 30, 1996 and 32% for the third quarter and
nine months July 2, 1995.
NET LOSS: As a result of the above, the Company reported a net loss of $3.1
million and $9.7 million, or $.28 per share and $.87 per share in the third
quarter and nine months ended June 30, 1996, respectively, compared to a net
loss of $.7 million and $1.9 million, or $.07 per share and $.18 per share in
the third quarter and nine months ended July 2, 1995, respectively.
8
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
A significant amount of the Company's restaurant sales are for cash, with the
remainder made with credit cards that are generally realized in cash within a
few days. Because the Company does not have significant accounts receivable or
inventories and pays its expenses within normal terms, the Company operates with
working capital deficits as is typical in the restaurant industry. The Company
had working capital deficits of $14.6 million and $15.7 million as of June 30,
1996 and October 1, 1995, respectively.
Net cash provided by operating activities totaled $3.3 million in the first nine
months of 1996 as compared with $6.3 million in the first nine months of 1995.
The decrease is attributed to the Company's net loss of $9.7 million for the
nine months ended June 30, 1996 compared to the net loss of $1.9 million for the
nine months ended July 2, 1995. The decrease was partially offset by the receipt
of an income tax refund and by an increase in accounts payable as a result of
obtaining more favorable payment terms negotiated with the Company's vendors.
The Company incurred capital expenditures totaling $1.5 million for restaurant
capital maintenance during the first nine months of 1996, and $9.3 million for
restaurant capital maintenance, remodeling and new restaurant construction
during the first nine months of 1995. Available cash, net cash provided by
operations and proceeds from sales of restaurant locations of approximately $3.0
million funded 1996 capital expenditures and provided for the repayment of $5.3
million in borrowings under the Company's current credit facility with its banks
(the "Credit Facility"). On June 30, 1996 and October 1, 1995, the Company's
borrowings under its Credit Facility were $49.6 million and $54.1 million,
respectively. The Company currently has fully utilized the revolving portion of
its credit facility.
The credit facility obligates the Company to hedge its interest rate risk on
approximately 50% of its total term borrowings. The Company has entered into
interest rate cap agreements solely to hedge its interest rate risk as required
by the credit facility. In 1996 and 1995, the Company entered into interest rate
cap agreements under which the maximum base interest rate of its LIBOR-based
payments would have been 12.0% and 7.0%, respectively. The interest rate cap
agreements had an immaterial effect on the Company's interest expense during the
first nine months of 1996 and 1995.
The credit facility contains certain restrictions on the conduct of the
Company's business including a prohibition on the payment of dividends. In
addition, the Company is required to comply with certain financial covenants,
including maintenance of minimum net worth and earnings before interest, taxes,
depreciation and amortization, and limitations on capital expenditures.
As of July 23, 1996, the Company announced that it had agreed to the terms of a
restructured credit facility subject to entering into a definitive amended
credit agreement. The restructured credit facility provides for continuation of
the total amount of the credit facility available to the Company through May 31,
1997, subject to automatic extension to December 31, 1997 if the principal
amount of the facility is reduced by $12 million prior to May 30, 1997. The
restructured credit facility also permits the Company to retain $5 million out
of the first $11 million in asset sale proceeds received by the Company
subsequent to April 30, 1996. In addition, the restructured credit facility
reschedules payment of a prior amendment fee to commence on September 1, 1996,
and converts amount outstanding under the revolving portion of the credit
facility to a term loan.
Interest on the restructured facility is LIBOR plus 2.625% on the Company's
LIBOR loans and ABR plus .75% on the Company's ABR- based loans. The Company has
agreed to a restructuring fee equal to 5% of the amount of the restructured
facility, subject to reduction to 2.5% upon payment of approximately $12.5
million of the principal amount of the restructured facility prior to March 16,
1997. At the option of the banks, the amount of such restructuring fee,
initially due on May 30, 1997, is convertible into common stock
9
<PAGE> 11
of the Company after May 1, 1997 at the price of $2.71 per share.
On June 28, 1996, the Company agreed to sell up to 16 restaurants to Lone Star
Steakhouse & Saloon, Inc. ("Purchaser") for up to $16 million in cash (see Note
4, "Subsequent Events").
Pursuant to the terms of the restructured credit facility, if the transaction
with the Purchaser is consummated, the Company will use approximately 75% of the
sale proceeds to reduce bank debt and retain the remainder for general corporate
purposes.
The Company expects to incur approximately $2.5 million in capital expenditures
during fiscal 1996. Management believes that existing cash, net cash provided by
operating activities, and proceeds from the sale of restaurant locations will be
sufficient to meet operating needs, fund anticipated capital expenditures and
service debt requirements, assuming that the Credit Facility is restructured,
during fiscal 1996.
The effect of inflation has not been a factor upon either the operations or
financial condition of the Company. The Company's business is not significantly
seasonal in nature.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Title
-------- -----
10.22 Seventh Amendment, Waiver and Deferral, dated as of May 30,
1996, to the Credit Agreement.
10.23 Eighth Amendment, Waiver and Deferral, dated as of June 27,
1996, to the Credit Agreement.
10.24 Contract of Sale, dated as of June 28, 1996, between Lone Star
Steakhouse & Saloon, Inc. and the Ground Round, Inc.
10.25 Ninth Amendment and Deferral, dated as of July 29, 1996, to the
Credit Agreement.
(b) The Company filed a report on Form 8-K dated July 11, 1996 to
report under Item 2, "Disposition of Assets", an agreement
with Lone Star Steakhouse & Saloon, Inc. to sell up to 16
restaurants for up to $16 million in cash. The Company also
filed under Item 5, "Other Events", an amended Credit Facility
which deferred certain principal payments and a restructuring
fee, and permitted the Company to retain a percentage of the
proceeds from the sale of restaurants subject to the Company
and its banks reaching final agreement on a definitive term
sheet restructuring its Credit Facility.
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GROUND ROUND RESTAURANTS, INC.
Date: August 13, 1996 By: /s/ Michael R. Jorgensen
------------------------
Michael R. Jorgensen
Senior Vice President, Chief Financial
Officer and Treasurer
duly authorized
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EXHIBIT 10.22
SEVENTH AMENDMENT, WAIVER AND DEFERRAL TO
AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------
SEVENTH AMENDMENT, WAIVER AND DEFERRAL (this "AMENDMENT"), dated as of May
30, 1996, to the Amended and Restated Credit Agreement, dated as of October 8,
1993, as amended by a First Amendment, dated as of January 20, 1994, a Second
Amendment, dated as of February 10, 1995, a Third Amendment, dated as of May 10,
1995, a Fourth Amendment, dated as of November 22, 1995, a Fifth Amendment,
dated as of February 12, 1996 and a Sixth Amendment, Waiver and Deferral dated
as of April 12, 1996 (as so amended, the "CREDIT AGREEMENT"), among The Ground
Round, Inc. (the "FIRST BORROWER"), a Delaware corporation, GR of Minn., Inc., a
Delaware corporation (the "SECOND BORROWER", and together with the First
Borrower, the "BORROWERS"), the banks named therein (the "BANKS"), The Bank of
New York, as Agent (the "AGENT") and Chemical Bank, as Co-Agent.
PRELIMINARY STATEMENTS:
A. The Credit Agreement amended and restated the Amended and Restated
Credit Agreement, dated as of April 26, 1992, among the Borrowers, the banks
named therein and Citibank, N.A., as original agent.
B. The Borrowers have requested that the Agent and the Lenders waive,
through June 30, 1996, certain reporting requirements set forth in Section
5.01(t).
C. The Borrowers desire to amend the Credit Agreement to (i) permit the
Borrowers to further defer payment of the principal of the Tranche A Term
Advances (which was originally due and payable on April 15, 1996 and which was
previously deferred to May 31, 1996 pursuant to the Sixth Amendment) to June 30,
1996, (ii) permit the Borrowers to further defer the payment of certain net
proceeds of sale from certain restaurants as described herein to June 30, 1996,
(iii) permit the Borrowers to defer the payment of a certain fee payable
pursuant to the terms of Section 2.07(e) of the Credit Agreement to June 30,
1996; (iv) permit the Borrowers to defer the payment of certain net proceeds of
sale from certain restaurants as described herein to June 30, 1996 in the event
that the Borrowers, the Guarantors, USI, the Lenders and the Co-Agents shall
have executed a mutually acceptable term sheet regarding the obligations of the
Borrowers and the Guarantors under the Credit Agreement and (v) prohibit
Eurodollar Rate Advances maturing after June 30, 1996.
<PAGE> 2
D. The Lenders and the Agent are willing to grant the waiver and to amend
the Credit Agreement with respect to the foregoing subject to the terms and
conditions contained herein.
E. Unless otherwise defined herein, all terms defined in the Credit
Agreement shall be used herein as therein defined.
In consideration of the covenants, conditions and agreements hereinafter
set forth, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
SECTION 1. Deferrals.
---------
Subject to the satisfaction of the conditions set forth in Section 5 hereof
and so long as no Event of Default shall have occurred and be continuing under
the Credit Agreement, the Co-Agents and the Lenders hereby agree to permit the
Borrowers (a) to defer to June 30, 1996 the payment of the principal of the
Tranche A Term Advances that is due and payable on May 31, 1996, (b) to defer to
June 30, 1996 the payment of 75% of Net Cash Proceeds of the sale of the two
restaurants located at Madeira, Ohio and Worcester, Massachusetts, respectively,
that is due and payable on May 31, 1996, which payment shall be applied in
accordance with the terms of Section 2.05(b)(ii) of the Credit Agreement and (c)
to defer to June 30, 1996 the payment of the restructuring fee that is due and
payable on May 31, 1996 pursuant to the terms of Section 2.07(e) of the Credit
Agreement.
SECTION 2. Waiver.
------
Subject to the satisfaction of the conditions precedent set forth in
Section 5 below, the Agent and the Lenders hereby waive, through June 30, 1996,
the Borrowers' compliance with the reporting requirements set forth in Section
5.01(t)(xvii) of the Credit Agreement.
SECTION 3. Agreement Regarding Certain Store Dispositions.
----------------------------------------------
If, on or before June 30, 1996, the Borrowers, the Guarantors the Lenders,
the Co-Agents and USI shall have executed a term sheet in respect of a one year
restructuring of the Borrowers' and the Guarantors' obligations under the Credit
Agreement and the Loan
2
<PAGE> 3
Documents on terms satisfactory to the Lenders, the Borrowers, the Guarantors
and USI in the exercise of their respective sole discretion, the Co-Agents and
the Lenders agree to permit the Borrowers to defer to June 30, 1996 the payment
of not in excess of $1,000,000 of the Net Cash Proceeds from the sale of the
three restaurants located in Yonkers, New York, Greenbrook, New Jersey and
Newark, Delaware and to use such deferred amounts until June 30, 1996, for
working capital purposes.
SECTION 4. Amendments to Credit Agreement.
------------------------------
The Credit Agreement is, effective as of the date hereof, subject to the
satisfaction of the conditions precedent set forth in Section 5 below, hereby
amended as follows:
(a) Section 1.01 is hereby amended by inserting the following new
definition:
"`Seventh Amendment': means the Seventh Amendment, Waiver and
Deferral, dated as of May 30, 1996, to this Agreement".
(b) Section 1.01 is hereby amended by deleting subsection (e) at the end of
the definition of "Interest Period" and inserting in lieu thereof the following
new subsection (e):
"(e) notwithstanding anything to the contrary above, neither Borrower
may select any Interest Period that ends after June 30, 1996."
SECTION 5. Conditions of Effectiveness.
---------------------------
This Amendment shall become effective as of the date hereof, PROVIDED, that
the Agent shall have received counterparts of (i) this Amendment executed by the
Borrowers, the Lenders and the Agent, (ii) the Consent appended hereto (the
"CONSENT") executed by each of the Guarantors, and (iii) such other documents as
the Agent shall reasonably request.
SECTION 6. Representations and Warranties.
------------------------------
3
<PAGE> 4
The Borrowers hereby (a) reaffirm and admit the validity and enforceability
of the Loan Documents and all of their obligations thereunder, (b) agree and
admit that they have no defenses to or offsets against any of their obligations
to the Agent or any Lender under the Loan Documents, and (c) represent and
warrant that there exists no Default or Event of Default and that the
representations and warranties contained in the Credit Agreement are true and
correct on and as of the date hereof.
SECTION 7. Reference to and Effect on the Loan Documents.
---------------------------------------------
(a) Upon the effectiveness of this Amendment, on and after the date hereof,
each reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein", or words of like import, and each reference in the other
Loan Documents to the Credit Agreement, shall mean and be a reference to the
Credit Agreement as amended hereby;
(b) Except as specifically amended or waived above, the Credit Agreement
and the Notes, and all other Loan Documents, shall remain in full force and
effect and are hereby ratified and confirmed. Without limiting the generality of
the foregoing, the Collateral Documents and all Collateral described therein
shall continue to secure the payment of the obligations of the Borrowers
thereunder, under the Credit Agreement, as amended hereby, and under the Notes
and other Loan Documents; and
(c) The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of any Lender or the Agent under any of the Loan Documents, nor, except
as provided herein, constitute a waiver of any provision of any of the Loan
Documents.
SECTION 8. Costs and Expenses.
------------------
The Borrowers agree to pay on demand all reasonable costs and expenses of
the Agent in connection with the arranging, preparation, reproduction, execution
and delivery of this Amendment and the other instruments and documents to be
delivered hereunder, including the reasonable fees and expenses of Zalkin, Rodin
& Goodman, LLP, special counsel for the Agent, with respect thereto,
4
<PAGE> 5
and of local counsel, if any, who may be retained by said special counsel with
respect thereto.
SECTION 9. Counterparts.
------------
This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be an
original and all of which together shall constitute but one and the same
document.
SECTION 10. Governing Law.
-------------
This Amendment is intended to be performed in the State of New York and
shall be construed and is enforceable in accordance with, and shall be governed
by, the internal laws of the State of New York without regard to principles of
conflict of laws.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
THE GROUND ROUND, INC.
By:
--------------------------
Name:
Title:
GR OF MINN., INC.
By:
---------------------------
Name:
Title:
5
<PAGE> 6
THE BANK OF NEW YORK,
Individually and as Agent
By:
---------------------------------
Name:
Title:
CHEMICAL BANK, Individually and as
Co-Agent
By:
---------------------------------
Name:
Title:
BANK OF AMERICA ILLINOIS
By:
---------------------------------
Name:
Title:
NBD BANK
By:
---------------------------------
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:
---------------------------------
Name:
Title:
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By:
---------------------------------
Name:
Title:
6
<PAGE> 7
CONSENT OF GUARANTORS
DATED AS OF MAY 30, 1996
The undersigned, as the Guarantors referred to in the foregoing Seventh
Amendment, Waiver and Deferral, dated as of May 30, 1996, to the Amended and
Restated Credit Agreement, dated as of October 8, 1993, as amended by a First
Amendment, dated as of January 20, 1994, a Second Amendment, dated as of
February 10, 1995, a Third Amendment dated as of May 10, 1995, a Fourth
Amendment dated as of November 22, 1995 and a Fifth Amendment, dated as of
February 12, 1996 and a Sixth Amendment, Waiver and Deferral, dated as of April
12, 1996 among The Ground Round, Inc., GR of Minn., Inc., the banks named
therein, The Bank of New York, as Agent, and Chemical Bank as Co-Agent, each
hereby consents to the foregoing Amendment and hereby confirms and agrees that,
notwithstanding the effectiveness of said Amendment, (i) the Guarantors have no
defenses to or offsets against any of their obligations to the Agent or any
Lender under any Loan Document and the Guaranty and each Collateral Document in
effect on the date hereof to which it is a party are, and shall continue to be,
in full force and effect and are hereby confirmed and ratified in all respects,
except that, upon the effectiveness of, and after the date of, said Amendment,
all references in the Guaranty and each such Collateral Document to the Credit
Agreement shall mean the Credit Agreement as amended by said Amendment and (ii)
such Collateral Documents consisting of security agreements and all collateral
described therein do, and shall continue to, secure the payments by the
Borrowers referred to in said Amendment of their obligations under the Credit
Agreement, as amended by said Amendment, and under the Notes.
GRH OF NJ, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
GROUND ROUND HOLDINGS, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
<PAGE> 8
GROUND ROUND RESTAURANTS, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
G.R. GLENDLOC, INCORPORATED
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
GROUND ROUND OF BALTIMORE, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
GRXR OF BEL AIR, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
GRXR OF FREDERICK, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
8
<PAGE> 9
GRXR OF HAGERSTOWN, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
9
<PAGE> 1
EXHIBIT 10.23
EIGHTH AMENDMENT, WAIVER AND DEFERRAL TO
AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------
EIGHTH AMENDMENT, WAIVER AND DEFERRAL (this "AMENDMENT"), dated as of June
27, 1996, to the Amended and Restated Credit Agreement, dated as of October 8,
1993, as amended by a First Amendment, dated as of January 20, 1994, a Second
Amendment, dated as of February 10, 1995, a Third Amendment, dated as of May 10,
1995, a Fourth Amendment, dated as of November 22, 1995, a Fifth Amendment,
dated as of February 12, 1996, a Sixth Amendment, Waiver and Deferral dated as
of April 12, 1996 and a Seventh Amendment, Waiver and Deferral, dated as of May
30, 1996 (as so amended, the "CREDIT AGREEMENT"), among The Ground Round, Inc.
(the "FIRST BORROWER"), a Delaware corporation, GR of Minn., Inc., a Delaware
corporation (the "SECOND BORROWER", and together with the First Borrower, the
"BORROWERS"), the banks named therein (the "BANKS"), The Bank of New York, as
Agent (the "AGENT") and Chemical Bank, as Co-Agent.
PRELIMINARY STATEMENTS:
A. The Credit Agreement amended and restated the Amended and Restated
Credit Agreement, dated as of April 26, 1992, among the Borrowers, the banks
named therein and Citibank, N.A., as original agent.
B. The Borrowers have requested that the Agent and the Lenders waive (i)
the Consolidated Net Worth Covenant for the third quarter of fiscal year 1996,
(ii) the EBITDA covenant for the third quarter of fiscal year 1996 and (iii)
through July 31, 1996, certain reporting requirements set forth in Section
5.01(t).
C. The Borrowers desire to amend the Credit Agreement to (i) permit the
Borrowers to further defer payment of the principal of the Tranche A Term
Advances (which was originally due and payable on April 15, 1996 and which was
previously deferred to May 31, 1996 pursuant to the Sixth Amendment and to June
30, 1996 pursuant to the Seventh Amendment) to July 31, 1996, (ii) permit the
Borrowers to further defer the payment of certain net proceeds of sale from
certain restaurants as described in Section 1 herein to July 31, 1996, (iii)
permit the Borrowers to defer the payment of a certain fee payable pursuant to
the terms of Section 2.07(e) of the Credit Agreement to July 31, 1996; (iv)
permit the Borrowers to defer the
<PAGE> 2
payment of certain net proceeds of sale from certain restaurants as described
herein to July 31, 1996 in the event that the Borrowers, the Guarantors, the
Lenders and the Co-Agents shall have executed a mutually acceptable term sheet
regarding a restructuring of the obligations of the Borrowers and the Guarantors
under the Credit Agreement (the "RESTRUCTURING TERM SHEET") and (v) prohibit
Eurodollar Rate Advances maturing after July 31, 1996.
D. The Lenders and the Agent are willing to grant the waiver and to amend
the Credit Agreement with respect to the foregoing subject to the terms and
conditions contained herein.
E. Unless otherwise defined herein, all terms defined in the Credit
Agreement shall be used herein as therein defined.
In consideration of the covenants, conditions and agreements hereinafter
set forth, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
SECTION 1. Deferrals.
---------
Subject to the satisfaction of the conditions set forth in Section 5 hereof
and so long as no Event of Default shall have occurred and be continuing under
the Credit Agreement, the Co-Agents and the Lenders hereby agree to permit the
Borrowers (a) to defer to July 31, 1996 the payment of the principal of the
Tranche A Term Advances that is due and payable on June 30, 1996, (b) to defer
to July 31, 1996 the payment of 75% of Net Cash Proceeds of the sale of the two
restaurants located at Madeira, Ohio and Worcester, Massachusetts, respectively,
that is due and payable on June 30, 1996, which payment shall be applied in
accordance with the terms of Section 2.05(b)(ii) of the Credit Agreement and (c)
to defer to July 31, 1996 the payment of the restructuring fee that is due and
payable on June 30, 1996 pursuant to the terms of Section 2.07(e) of the Credit
Agreement.
SECTION 2. Waiver.
------
Subject to the satisfaction of the conditions precedent set forth in
Section 5 below, the Agent and the Lenders hereby waive (i) the Borrowers'
compliance with the Consolidated Net Worth covenant in Section 5.01(n) of the
Credit Agreement for the third
2
<PAGE> 3
fiscal quarter of 1996, PROVIDED that Consolidated Net Worth for such fiscal
quarter shall not be less than $47,700,000, (ii) the Borrowers' compliance with
the EBITDA covenant in Section 5.01(v) of the Credit Agreement for the third
fiscal quarter of 1996 provided that EBITDA for such fiscal quarter shall not be
less than ($500,000) and (iii) through July 31, 1996, the Borrowers' compliance
with the reporting requirements set forth in Section 5.01(t)(xvii) of the Credit
Agreement. For purposes of this Waiver, the determination of EBITDA and
Consolidated Net Worth for the third fiscal quarter of 1996 shall be deemed to
be exclusive of any accounting treatment of any fees and expenses payable by the
Borrowers in respect of the transactions contemplated by the Restructuring Term
Sheet.
SECTION 3. Agreement Regarding Store Dispositions.
--------------------------------------
From and after the Effective Date of this Eighth Amendment, and
notwithstanding the provisions of Section 2.05(b) of the Credit Agreement, 100%
of the Net Cash Proceeds resulting from the sale of any of the Borrowers'
restaurant locations shall be deposited into the Prepayment Account. If on or
before July 31, 1996, the Borrowers, the Guarantors and the Lenders shall have
executed the Restructuring Term Sheet, the Agent shall be permitted to release
to the Borrowers an amount not in excess of $1,000,000 from the Prepayment
Account for the Borrowers' working capital purposes. On July 31, 1996 (i) all
funds on deposit in the Prepayment Account shall be applied in accordance with
the terms of Section 2.05(b)(ii) of the Credit Agreement and (ii) the Borrowers
shall prepay the Advances in an amount equal to the amount, if any, released to
the Borrowers provided for above, for application in accordance with the terms
of Section 2.05(b)(ii) of the Credit Agreement.
SECTION 4. Amendments to Credit Agreement.
------------------------------
The Credit Agreement is, effective as of the date hereof, subject to the
satisfaction of the conditions precedent set forth in Section 5 below, hereby
amended as follows:
3
<PAGE> 4
(a) Section 1.01 is hereby amended by inserting the following new
definition:
"`EIGHTH AMENDMENT': means the Eighth Amendment, Waiver and Deferral, dated
as of June 27, 1996, to this Agreement".
(b) Section 1.01 is hereby amended by deleting subsection (e) at the end of
the definition of "INTEREST PERIOD" and inserting in lieu thereof the following
new subsection (e):
"(e) notwithstanding anything to the contrary above, neither Borrower may
select any Interest Period that ends after July 31, 1996."
SECTION 5. Conditions of Effectiveness.
---------------------------
This Amendment shall become effective as of the date hereof, PROVIDED, that
the Agent shall have received counterparts of (i) this Amendment executed by the
Borrowers, the Lenders and the Agent, (ii) the Consent appended hereto (the
"CONSENT") executed by each of the Guarantors, and (iii) such other documents as
the Agent shall reasonably request.
SECTION 6. Representations and Warranties.
------------------------------
The Borrowers hereby (a) reaffirm and admit the validity and enforceability
of the Loan Documents and all of their obligations thereunder, (b) agree and
admit that they have no defenses to or offsets against any of their obligations
to the Agent or any Lender under the Loan Documents, and (c) represent and
warrant that there exists no Default or Event of Default and that the
representations and warranties contained in the Credit Agreement are true and
correct on and as of the date hereof.
SECTION 7. Reference to and Effect on the Loan Documents.
---------------------------------------------
(a) Upon the effectiveness of this Amendment, on and after the date hereof,
each reference in the Credit Agreement to "this
4
<PAGE> 5
Agreement", "hereunder", "hereof", "herein", or words of like import, and each
reference in the other Loan Documents to the Credit Agreement, shall mean and be
a reference to the Credit Agreement as amended hereby;
(b) Except as specifically amended or waived above, the Credit Agreement
and the Notes, and all other Loan Documents, shall remain in full force and
effect and are hereby ratified and confirmed. Without limiting the generality of
the foregoing, the Collateral Documents and all Collateral described therein
shall continue to secure the payment of the obligations of the Borrowers
thereunder, under the Credit Agreement, as amended hereby, and under the Notes
and other Loan Documents; and
(c) The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of any Lender or the Agent under any of the Loan Documents, nor, except
as provided herein, constitute a waiver of any provision of any of the Loan
Documents.
SECTION 8. Costs and Expenses.
------------------
The Borrowers agree to pay on demand all reasonable costs and expenses of
the Agent in connection with the arranging, preparation, reproduction, execution
and delivery of this Amendment and the other instruments and documents to be
delivered hereunder, including the reasonable fees and expenses of Zalkin, Rodin
& Goodman, LLP, special counsel for the Agent, with respect thereto, and of
local counsel, if any, who may be retained by said special counsel with respect
thereto.
SECTION 9. Counterparts.
------------
This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be an
original and all of which together shall constitute but one and the same
document.
SECTION 10. Governing Law.
-------------
This Amendment is intended to be performed in the State of New York and
shall be construed and is enforceable in accordance with,
5
<PAGE> 6
and shall be governed by, the internal laws of the State of New York without
regard to principles of conflict of laws.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
THE GROUND ROUND, INC.
By:
--------------------------------
Name:
Title:
GR OF MINN., INC.
By:
--------------------------------
Name:
Title:
THE BANK OF NEW YORK,
Individually and as Agent
By:
--------------------------------
Name:
Title:
CHEMICAL BANK, Individually and as
Co-Agent
By:
--------------------------------
Name:
Title:
BANK OF AMERICA ILLINOIS
By:
--------------------------------
Name:
Title:
NBD BANK
By:
--------------------------------
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
7
<PAGE> 8
By:
--------------------------------
Name:
Title:
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By:
--------------------------------
Name:
Title:
8
<PAGE> 9
CONSENT OF GUARANTORS
DATED AS OF JUNE 27, 1996
The undersigned, as the Guarantors referred to in the foregoing Eighth
Amendment, Waiver and Deferral, dated as of June 27, 1996, to the Amended and
Restated Credit Agreement, dated as of October 8, 1993, as amended by a First
Amendment, dated as of January 20, 1994, a Second Amendment, dated as of
February 10, 1995, a Third Amendment dated as of May 10, 1995, a Fourth
Amendment dated as of November 22, 1995 and a Fifth Amendment, dated as of
February 12, 1996, a Sixth Amendment, Waiver and Deferral, dated as of April 12,
1996 and a Seventh Amendment, Waiver and Deferral, dated as of May 30, 1996
among The Ground Round, Inc., GR of Minn., Inc., the banks named therein, The
Bank of New York, as Agent, and Chemical Bank as Co-Agent, each hereby consents
to the foregoing Amendment and hereby confirms and agrees that, notwithstanding
the effectiveness of said Amendment, (i) the Guarantors have no defenses to or
offsets against any of their obligations to the Agent or any Lender under any
Loan Document and the Guaranty and each Collateral Document in effect on the
date hereof to which it is a party are, and shall continue to be, in full force
and effect and are hereby confirmed and ratified in all respects, except that,
upon the effectiveness of, and after the date of, said Amendment, all references
in the Guaranty and each such Collateral Document to the Credit Agreement shall
mean the Credit Agreement as amended by said Amendment and (ii) such Collateral
Documents consisting of security agreements and all collateral described therein
do, and shall continue to, secure the payments by the Borrowers referred to in
said Amendment of their obligations under the Credit Agreement, as amended by
said Amendment, and under the Notes.
GRH OF NJ, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
GROUND ROUND HOLDINGS, INC.
By:
---------------------------------
Name:
---------------------------------
<PAGE> 10
Title:
---------------------------------
GROUND ROUND RESTAURANTS, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
G.R. GLENDLOC, INCORPORATED
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
GROUND ROUND OF BALTIMORE, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
GRXR OF BEL AIR, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
GRXR OF FREDERICK, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
GRXR OF HAGERSTOWN, INC.
<PAGE> 11
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
11
<PAGE> 1
EXHIBIT 10.24
CONTRACT OF SALE
<PAGE> 2
CONTRACT OF SALE
TABLE OF CONTENTS
-----------------
SECTION 1 REAL AND PERSONAL PROPERTY BEING SOLD........................... 1
1.1 Land............................................................ 1
1.2 Improvements.................................................... 1
1.3 Leaseholds...................................................... 1
1.4 Personal Property............................................... 1
SECTION 2 BUSINESS ASSETS BEING SOLD...................................... 2
2.1 Governmental Permits............................................ 2
2.2 Operating Contracts............................................. 2
2.3 Other Miscellaneous and Intangible Personal Property............ 2
2.4 Leaseholds...................................................... 3
SECTION 3 CLOSING......................................................... 3
SECTION 4 PURCHASE PRICE.................................................. 4
4.1 General Terms................................................... 4
4.2 Allocation of Purchase Price.................................... 4
SECTION 5 DEFAULT......................................................... 4
5.1 Default......................................................... 4
SECTION 6 DUE DILIGENCE................................................... 4
6.1 Physical Inspections............................................ 4
6.2 Examine Records................................................. 5
SECTION 7 TERMS OF LEASEHOLDS............................................. 5
SECTION 8 TITLE COMMITMENT AND SURVEY..................................... 5
8.1 Title........................................................... 5
8.1.1 Title to the Properties.................................. 5
8.1.2 Title to Personal Property............................... 6
8.1.3 Contract Rights.......................................... 6
8.1.4 Defects of Title and Cure................................ 6
8.1.5 Defects of Title - Termination........................... 6
8.2 UCC Search...................................................... 7
8.3 Surveys......................................................... 7
8.4 Non-Disturbance Agreements...................................... 7
SECTION 9 SELLER'S DELIVERIES............................................. 7
9.1 Plans........................................................... 7
9.2 Taxes........................................................... 8
9.3 Contracts....................................................... 8
9.4 Licenses........................................................ 8
9.5 Utility Deposits................................................ 8
9.6 Historical Capital Expenditure Budgets.......................... 8
9.7 Leasehold Items................................................. 8
9.8 Miscellaneous Restaurant Assets................................. 9
9.9 Landlords' Estoppels............................................ 9
9.10 Payroll Summary................................................. 9
9.11 Title Report.................................................... 9
<PAGE> 3
9.12 Casualty Insurance.............................................. 9
9.13 Miscellaneous Leasehold Items................................... 9
SECTION 10 SELLER'S REPRESENTATIONS, WARRANTIES, AND COVENANTS............ 9
10.1 General Terms................................................... 9
10.2 Due Authorization............................................... 10
10.3 Authority and Capacity.......................................... 10
10.4 Foreign Entity Status........................................... 10
10.5 No Conflicts by Consummation of Agreement....................... 10
10.6 No Undisclosed Interest......................................... 11
10.7 No Untrue Statement............................................. 11
10.8 Further Assurances.............................................. 11
10.9 No Further Entrance Into Binding Agreements..................... 11
10.10 Continued Operation............................................. 11
10.10.1 Repairs and Maintenance................................ 12
10.10.2 Personal Property...................................... 12
10.10.3 Taxes.................................................. 12
10.10.4 Insurance.............................................. 12
10.11 Licenses and Permits............................................ 12
10.11.1 ....................................................... 12
10.11.2 ....................................................... 13
10.11.3 ....................................................... 13
10.12 Contracts....................................................... 13
10.13 Leases.......................................................... 13
10.13.1 ....................................................... 13
10.13.2 ....................................................... 14
10.13.3 ....................................................... 14
10.14 Subleases and Tenancies......................................... 14
10.15 Employee-Related Representations................................ 15
10.15.1 ....................................................... 15
10.15.2 ....................................................... 15
10.16 No Outstanding Litigation or Outstanding Conflicts.............. 15
10.17 Eminent Domain/Condemnation Actions............................. 15
10.18 Title Matters................................................... 15
10.19 Mortgages and Bankruptcy........................................ 16
10.20 Zoning.......................................................... 16
10.21 Environmental Conditions........................................ 16
10.22 Violations...................................................... 17
10.23 Limitations on Seller's Representations, Warranties, and
Covenants..................................................... 17
10.24 Survival of Contract............................................ 17
10.25 Non-Competition................................................. 18
10.26 Ownership of Decatur Restaurant ................................ 18
SECTION 11 REPRESENTATIONS AND WARRANTIES OF PURCHASER.................... 19
11.1 General Terms................................................... 19
11.2 Due Organization................................................ 19
11.3 No Conflict..................................................... 19
11.4 No Pending Litigation........................................... 19
11.5 Alteration Plans................................................ 20
SECTION 12 PRORATIONS AND ADJUSTMENTS..................................... 20
12.1 Accounts Payable................................................ 20
12.2 Liabilities Not Assumed......................................... 20
12.3 Rents........................................................... 20
<PAGE> 4
12.4 Utilities....................................................... 21
12.5 Real Estate and Personal Property Taxes......................... 21
12.6 Sales Taxes..................................................... 21
12.7 Payroll......................................................... 22
12.8 Telephone Charges............................................... 22
12.9 Lease Security Deposits......................................... 22
12.10 Prepaid Deposits................................................ 22
12.11 Vending Machines................................................ 23
12.12 Purchaser's Waiver and Termination Right........................ 23
SECTION 13 CLOSING DOCUMENTS AND PROCEDURE................................ 23
13.1 Title Deed...................................................... 23
13.2 Lease Assignments............................................... 24
13.3 Bill of Sale.................................................... 24
13.4 Assignment of Permits........................................... 24
13.4.1 Liquor Permits.......................................... 24
13.5 Assignment of Intangible Personal Property...................... 24
13.6 Assignment of Operating Contracts............................... 25
13.7 Original Documents.............................................. 25
13.8 Keys............................................................ 25
13.9 Title Policy.................................................... 25
13.10 Resolutions and Certificates.................................... 25
13.11 Closing Statement............................................... 25
13.12 Records......................................................... 26
13.13 Certificate of Non-Foreign Status............................... 26
13.14 Affidavits and Indemnities...................................... 26
13.14.1 Affidavit of Title..................................... 26
13.15 Sub-Tenant Estoppel and Consent................................. 26
13.16 Warranty Assignment............................................. 26
13.17 Landlord's Consents............................................. 26
13.18 Non-Disturbance Agreements...................................... 27
13.19 Transfer Tax Returns ........................................... 27
13.20 Other Documents................................................. 27
13.21 Purchase Price.................................................. 27
13.22 Assumption of Leases............................................ 27
13.23 Closing Statement............................................... 28
13.24 Assumption of Operating Contracts............................... 28
13.25 Resolutions..................................................... 28
13.26 Affidavits...................................................... 28
13.27 Other Documents................................................. 28
SECTION 14 CLOSING EXPENSES............................................... 28
14.1 Closing Expenses................................................ 28
14.2 Brokerage Fees.................................................. 28
SECTION 15 EMINENT DOMAIN AND RISK OF LOSS................................ 29
15.1 Eminent Domain.................................................. 29
15.2 Risk of Loss.................................................... 29
SECTION 16 ASSIGNMENT, SUCCESSORS, AND HEIRS.............................. 29
SECTION 17 GENERAL CLAUSES................................................ 30
17.1 Benefit......................................................... 30
17.2 Binding Agreement............................................... 30
17.3 Business Day.................................................... 30
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17.4 Controlling Law................................................. 30
17.5 Entire Agreement................................................ 30
17.5.1 ....................................................... 30
17.5.2 ....................................................... 31
17.5.3 Waiver.................................................. 31
17.6 Hold Harmless and Indemnity..................................... 31
17.7 Notices......................................................... 31
17.7.1 Notice Deemed Served.................................... 32
17.7.2 ....................................................... 32
SECTION 18 PUBLICITY...................................................... 32
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CONTRACT OF SALE
Contract of Sale (sometimes hereinafter referred to as "Contract" or
"Agreement") dated June 28, 1996 between The Ground Round, Inc. ("Seller") as
seller and Lone Star Steakhouse & Saloon, Inc. ("Purchaser") as purchaser of the
"Ground Round" restaurants described on Schedule A hereto and related assets.
SECTION 1 REAL AND PERSONAL PROPERTY BEING SOLD
Seller agrees to sell and convey the Restaurants (as such term is defined
in Section 1.4 below) to Purchaser and Purchaser agrees to purchase the
Restaurants from Seller, for the purchase price and upon the terms and
conditions herein set forth, which Restaurants consist of the following
property:
1.1 LAND
With respect to the three (3) Restaurants identified as "fee" properties on
Schedule A, the tracts of land described in Schedules 1.1(a) through 1.1(c)
attached hereto and made a part hereof together with all rights, easements, and
interests appurtenant thereto, including, but not limited to, any streets or
other public ways adjacent to said real property and any water or mineral rights
owned by or leased to Seller (all of such property being hereinafter referred to
as the "Land").
1.2 IMPROVEMENTS
All improvements located on the Land, including the buildings, together
with the number of parking spaces set forth on Schedule 1.2 and any and all
amenities and other improvements located on the Land (all such improvements
being hereinafter referred to as the "Improvements"). The Improvements shall
also include any buildings owned by Seller on the Leaseholds (as such term is
defined in Section 1.3 below). The Land and the Improvements are collectively
referred to as the "Real Properties".
1.3 LEASEHOLDS
The tenant's interest in the leaseholds for the thirteen (13) Restaurants
identified as "leaseholds" on Schedule A together with all rights, easements and
interests appurtenant thereto (all of such leasehold interests being hereinafter
referred to as the "Leaseholds").
1.4 PERSONAL PROPERTY
All personal property, fixtures and equipment presently owned by Seller
which are located on or in the Real Properties or
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Leaseholds or used in connection with the operation and maintenance of the
Restaurants, including, without limitation, all HVAC systems, refrigerators and
refrigeration systems; china, glassware, and silverware; engineering,
maintenance and housekeeping supplies, including soap and cleaning materials;
draperies, material, and carpeting; and other supplies of all kinds including
such resupplies as shall occur and be made in a normal course of business, but
excluding food, liquor, smaller items in existence on the Contract Date consumed
in the ordinary course of business, uniforms, stationary and printing and
"Ground Round" signage. All items included in the sale and marked with Seller's
tradenames shall be modified by Purchaser to remove or paint over the
tradenames. All items of personal property and fixtures and equipment referred
to above which are included in the sale are the "Personal Property" and the Real
Properties, Leaseholds and Personal Property are collectively the "Properties"
or the "Restaurants".
SECTION 2 BUSINESS ASSETS BEING SOLD
In recognition of the fact that the value of the businesses as specified
herein is dependent upon the use of each of the Properties as a restaurant,
Seller hereby agrees to transfer to Purchaser at the Closing (as such term is
defined in Section 3 below) the following items:
2.1 GOVERNMENTAL PERMITS
All rights of Seller and all governmental licenses and permits used in
connection with the conduct of any business on the Properties to the extent
assignable (collectively, "Government Permits"), including but without
limitation, the license or licenses to sell alcoholic beverages in the
Restaurants.
2.2 OPERATING CONTRACTS
All operating leases, executory contracts, service contracts, and repair
agreements (collectively, "Operating Contracts") with respect to the Properties
but only (i) if assignment is permitted by the terms thereof and (ii) to the
extent Purchaser elects to assume one or more of the Operating Contracts.
2.3 OTHER MISCELLANEOUS AND INTANGIBLE PERSONAL PROPERTY
(a) All customer lists and records owned or possessed by Seller pertaining
to the transaction of business at the Restaurants, together with the
architectural plans provided that Seller may keep any original documents
required by law in
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connection with the filing of Seller's tax returns or other governmental
filings.
(b) All other intangible property not described above owned by Seller or GR
of Minn Inc. and used or useful in connection with the ownership and operation
of the Restaurants, including, without limitation, contract rights, guarantees,
warranties, and goodwill, but only to the extent that such are assignable by
their own terms or under law but specifically excluding any rights to the
trademark "Ground Round" (collectively the "Intangible Property").
(c) All current sales records and information with respect to the
Restaurants provided that Seller may keep any original documents required by law
in connection with the filing of Seller's tax returns or other governmental
filings.
2.4 LEASEHOLDS
The Leaseholds shall be assigned by Seller to Purchaser effective as of the
Closing Date in form attached as Schedule 2.4 or the form required by the
landlord provided such form is substantially similar to Schedule 2.4; provided
that Seller shall proceed in good faith to comply with its obligations with
respect to the Leaseholds under the terms of this Contract.
SECTION 3 CLOSING
The closing (the "Closing") of title hereunder in respect to the
Restaurants and payment of the consideration thereof shall occur on or before
the later of (i) forty-five (45) days after the Contract Date or (ii) five (5)
business days after the issuance or approved assignments of the liquor permits
as required under Section 13.4.1, subject only to the provisions relating to the
extension of time to close. If not all of the liquor permits are obtained prior
to the scheduled Closing Date, Purchaser agrees to close in two (2) separate
groups of Restaurants as follows: the first eleven (11) Restaurants for which
Purchaser obtains the liquor permits and all other conditions of this Contract
are satisfied shall comprise the first group which shall close on the scheduled
Closing Date or as soon as practicable thereafter; the second group shall
consist of the balance of the Restaurants to be purchased hereunder which shall
close within five (5) business days after the satisfaction of all closing
conditions as to such Restaurants. If no Closing occurs on or before November
30, 1996 for any Restaurant or Restaurants because of a failure of condition
hereunder after compliance by each of the parties with their respective
obligations hereunder, this Contract may be terminated by either party as to the
Restaurant or Restaurants which have not closed (or in its entirety if the first
group of Restaurants has not closed) by that date upon written notice to the
other given at any time
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after November 30, 1996 and thereafter neither party shall have any further
liability for the Restaurants not purchased. For purposes of this Contract, each
of the dates on which the two groups of Restaurants close shall be referred to
as a "Closing" or "Closing Date". The Closing shall occur at the offices of
Olshan Grundman Frome & Rosenzweig LLP, 505 Park Avenue, New York, New York. The
date on which Purchaser receives a fully executed copy of this Contract shall be
the "Contract Date".
At Closing, the Purchase Price as defined in Section 4 shall be delivered
to Seller in the manner provided and title to each of the Real Properties and
assignments of each of the Leaseholds, to the extent Purchaser has elected to
purchase each of such Real Properties and Leaseholds pursuant to the terms
hereof, together with all other documents to be delivered by Seller to
Purchaser, shall be delivered and conveyed to Purchaser. Legal possession and
physical occupancy of the Properties shall be given to Purchaser at 12:01 P.M.
on the Closing Date.
SECTION 4 PURCHASE PRICE
4.1 GENERAL TERMS
The purchase price ("Purchase Price") for the Restaurants shall be Sixteen
Million Dollars ($16,000,000.00), subject to the adjustments as expressly
provided in this Contract and shall be payable in the manner set forth herein.
4.2 ALLOCATION OF PURCHASE PRICE
The Purchase Price shall be allocated among the assets acquired by
Purchaser as set forth on Schedule 4.2.
SECTION 5 DEFAULT
5.1 DEFAULT
If the Closing fails to occur due to the default of either party, the
non-defaulting party may have such remedies as provided in law or equity.
SECTION 6 DUE DILIGENCE
6.1 PHYSICAL INSPECTIONS. Purchaser may enter upon any of the Properties,
on at least 24 hours' notice to Seller's resident manager of the Restaurant to
be inspected, to perform such inspections and tests of the Restaurant,
including, without limitation, all leased areas and structural and mechanical
systems within the Improvements and the environmental condition of the land
underlying the Improvements (provided Purchaser shall not drill test holes
without Seller's prior written consent), as
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Purchaser shall, in its sole discretion, deem appropriate. Purchaser shall
minimize interference with Seller's business.
6.2 EXAMINE RECORDS. Purchaser and Purchaser's accountants may examine and
copy any and all books and records maintained by Seller or its agents relating
to the ownership and operation of the Restaurants (the "Records") for the three
(3) most recent full calendar years and the current calendar year.
SECTION 7 TERMS OF LEASEHOLDS
Purchaser shall be entitled to contact the landlords of the Leaseholds
identified on Schedule 7 (the "Renegotiated Leaseholds") in order to obtain a
written amendment modifying the terms of such Leaseholds as of the Closing Date
so as to have terms acceptable to Purchaser.
To the extent Purchaser is unable to obtain such modifications, Purchaser
may either accept the Renegotiated Leaseholds "as is" or, notwithstanding
Section 12.12, elect to terminate this Contract as to not more than two (2) of
the Renegotiated Leaseholds for which Purchaser is unable to obtain
modifications and receive a credit against the Purchase Price in an amount equal
to the portion of the Purchase Price allocated in Schedule 4.2 to the
Renegotiated Leaseholds not being assumed by Purchaser provided that Purchaser
may not terminate this Contract with respect to both the Poughkeepsie, NY and
Rochester (Greece), NY Restaurants, i.e., Purchaser may terminate as to either
of such locations but not both.
Seller shall execute all assignment and modification documents ("Assignment
Documents") reasonably requested by the landlords to confirm the transfer of the
Leaseholds and the modification of the Renegotiated Leaseholds.
SECTION 8 TITLE COMMITMENT AND SURVEY
8.1 TITLE
8.1.1 TITLE TO THE PROPERTIES. Purchaser shall arrange for the delivery to
Purchaser, at Purchaser's sole cost and expense, of title commitments, dated on
or after the Contract Date (the "Title Commitments"), issued by a title company
of Purchaser's choice (the "Title Company") (a) committing to issue to Purchaser
an American Land Title Association ("ALTA") (or local equivalent) owner's policy
of title insurance in the amount of the allocated Purchase Price for the Real
Properties and an ALTA leasehold policy of title insurance in the amount of the
allocated Purchase Price for the Leaseholds, showing fee simple title to each of
the Real Properties and leasehold title to each of the Leaseholds, in Seller,
and such endorsements and affirmative insurance requested by Purchaser to
deliver good and
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marketable title in accordance with the terms of this Contract and (b)
containing true and correct copies of all documents, whether recorded or
unrecorded referred to in the Title Commitments. Purchaser shall order the Title
Commitments within five (5) business days of receipt of evidence of Seller's
lenders' consent to this transaction.
8.1.2 TITLE TO PERSONAL PROPERTY. At Closing, Seller shall warrant that
Seller has good title to the Personal Property.
8.1.3 CONTRACT RIGHTS. At Closing, Seller shall warrant to Purchaser that
Seller has good title to the Operating Contracts to be assumed by Purchaser and
the Intangible Properties that Seller has no knowledge of any material defect or
unmerchantable title thereto, and that Seller has not created or suffered any
lien, encumbrances, attachment, security interest, or other outstanding interest
or right that would diminish, affect, or reduce title thereto.
8.1.4 DEFECTS OF TITLE AND CURE. In the event the Title Commitments
disclose any matters which render title unmarketable or which do (or could in
the future) materially interfere with the current use or operation of any of the
Restaurants, Purchaser shall notify Seller promptly of any such items. Seller
then shall have the right for a period of thirty (30) days to take all
reasonable steps to cure or remove such matters of record that have been
objected to by Purchaser, provided, however, that Seller shall have no
obligation to commence litigation or spend in excess of $100,000 per Property or
$500,000 in the aggregate to cure such matters except that Seller shall cure and
the Purchase Price may be used at Closing to satisfy all monetary liens created
or suffered by Seller. Any items not objected to by Purchaser are the "Permitted
Exceptions". The failure to record the Leasehold Documentation for a Leasehold
because of an express provision in the lease prohibiting recordation or
landlord's refusal to execute the Leasehold Documentation in recordable form
shall not be a defect provided Seller requests that the landlord so execute.
8.1.5 DEFECTS OF TITLE - TERMINATION. If, at the expiration of said thirty
(30) day period, Seller shall then be unable to convey good or marketable title
free and clear of all such encumbrances and defects or obtain affirmative
insurance that Purchaser shall not suffer loss or damage because of the
encumbrance or defect, Purchaser, nevertheless, may (i) elect to accept such
title as Seller may be able to convey, with a credit against the monies payable
at the Closing equal to the reasonably estimated costs to cure the same up to
$100,000 per Property or $500,000 in the aggregate, but without any other credit
or liability on the part of Seller, (ii) terminate this Contract as to the
non-complying Property or Properties and receive a credit
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against the Purchase Price for the amount allocated to that Restaurant or
Restaurants on Schedule 4.2, or (iii) if Seller is unable to convey title to
three (3) or more Properties in accordance with the terms hereof, then Purchaser
may terminate this Contract in its entirety.
8.2 UCC SEARCH
Seller at Seller's sole expense, shall be responsible for obtaining a UCC
search of the records of the local and state offices pertaining to Seller and
Properties. Seller warrants to discharge any liens or encumbrances at Closing.
8.3 SURVEYS
No later than twenty (20) days after the Contract Date, Seller will deliver
to Purchaser, at Seller's sole cost and expense, a print of an as-built survey
of each of the Restaurants (the "Surveys"). Prior to Closing, the Surveys will
be updated, will be certified by the surveyor to have been prepared in
accordance with minimum detail requirements of the ALTA land survey standards
(or local equivalent), and will be recertified to the Title Company, Purchaser
and Purchaser's lender(s), if any. In the event the Surveys show any
encroachment over a lot line, a prohibited encroachment over any easement, or
any other matter that, renders title unmarketable or does (or could, in the
future) materially interfere with the current use or operation of the particular
Property or render the fee or leasehold title thereto unmarketable, such matter
shall be considered a defect of title hereunder unless the Title Company will
affirmatively insure that Purchaser shall suffer no loss or damage as a result
of the matter in question.
8.4 NON-DISTURBANCE AGREEMENTS
After receipt by Purchaser of the Title Commitments for the Leaseholds,
Purchaser shall notify Seller to the extent it requires Seller to request
non-disturbance agreements for any Leasehold.
SECTION 9 SELLER'S DELIVERIES
Seller shall deliver the following within ten (10) business days of the
Contract Date (unless a different time period is expressly referred to with
respect to a specific item):
9.1 PLANS
Copies of all environmental condition reports, engineering and
architectural plans and specifications, drawings, soil reports, studies,
certificates of occupancy, and surveys
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relating to the construction of each of the Restaurants in Seller's possession
or control.
9.2 TAXES
Copies of the bills issued for the three (3) most recent years for which
bills have been issued for all real estate taxes and personal property taxes and
with copies of any and all notices pertaining to real estate taxes or
assessments applicable to each of the Restaurants.
9.3 CONTRACTS
Copies of all leasing, maintenance, repair service, pest control, and
supply contracts (including without limitation janitorial, elevator, scavenger,
laundry, and landscaping agreements) and any other contracts or agreements
relating to or affecting the Restaurants that will be binding upon the
Restaurants or Purchaser subsequent to Closing, all as amended. Purchaser shall
notify Seller within ten (10) business days of receipt of the Operating
Contracts delivered pursuant to this Contract if it elects to assume any of such
Contracts. If no notice is given by Purchaser, the Operating Contracts shall not
be assumed.
9.4 LICENSES
All licenses of Seller for the benefit of the Restaurants or of third
parties burdening the Restaurants other than Ground Round trademarks.
9.5 UTILITY DEPOSITS
A list of deposits held by the providers of utilities to the Restaurants.
9.6 HISTORICAL CAPITAL EXPENDITURE BUDGETS
A summary of all capital expenditures made by Seller during last three (3)
years.
9.7 LEASEHOLD ITEMS
Copies of all inspection reports, deficiency letters, improvement
requirements, default notices and similar communications received or sent by
Seller in connection with the Leaseholds during the past twenty-four (24)
calendar months and shall promptly deliver to Purchaser such communications
received by Seller on or after the Contract Date.
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9.8 MISCELLANEOUS RESTAURANT ASSETS
A complete listing of all miscellaneous Restaurant assets having a value of
$1,000 or more on or before the Closing.
9.9 LANDLORDS' ESTOPPELS
Seller shall provide Purchaser with estoppel letters from all landlords
under the Leaseholds or Personal Property and from the fee owner at the
Wilmington, Delaware Restaurant, to be furnished not less than fifteen (15) days
prior to Closing. The Leasehold estoppels shall be in the form attached as
Schedule 9.9 or in the landlord's or fee owner's form provided such form is
substantially similar to Schedule 9.9.
9.10 PAYROLL SUMMARY
A list of all employees presently employed by Seller or by the managers of
the Restaurants with respect to the Properties, except those employees being
retained by Seller for other business, indicating, in each case, the name of
each such employee, the position occupied by such employee, such employee's rate
of compensation and any agreement relating to any increase thereof or bonus to
be paid to such employee, term of employment, contract agreement, if any, and
any other relevant information with respect to such employee.
9.11 TITLE REPORT
A copy of the most recent title report in Seller's possession for each of
the Properties.
9.12 CASUALTY INSURANCE
A schedule of casualty insurance in place with respect to each of the
Properties.
9.13 MISCELLANEOUS LEASEHOLD ITEMS
Copies of all correspondence, non-disturbance agreements, prior estoppels
and other miscellaneous documents with respect to the Leaseholds and contained
in Seller's files.
SECTION 10 SELLER'S REPRESENTATIONS, WARRANTIES, AND COVENANTS
10.1 GENERAL TERMS
In order to induce Purchaser to purchase the Restaurants and to consummate
the other transactions contemplated herein, Seller hereby represents and
warrants to Purchaser that the following are true statements as of the date
hereof and
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agrees that the following shall be true statements as of the Closing.
10.2 DUE AUTHORIZATION
The performance of this Contract and the transactions contemplated
hereunder by Seller and each officer of Seller have been duly authorized by all
necessary action on the part of Seller and by its shareholders and board of
directors, and this Agreement is binding on and enforceable against Seller in
accordance with its terms. Seller shall simultaneously with the execution of
this Contract and immediately prior to the Closing Date, furnish Purchaser with
certified resolutions evidencing that Seller's officers have been duly
authorized to enter into and perform this Contract on behalf of Seller and the
transactions contemplated hereunder. Except as set forth in the side letter
dated the date hereof, no further consent of any shareholder, subtenant,
creditor, investor, judicial or administrative bonds, governmental authority, or
other party to such execution, delivery, and performance is required.
10.3 AUTHORITY AND CAPACITY
Seller warrants that Seller is the sole owner of the Real Properties in fee
simple and the sole owner of the Leaseholds and has the right and power to enter
into this Contract and to carry out the terms hereof. All persons signing as
Seller agree to execute Seller's deeds and assignments required hereunder.
10.4 FOREIGN ENTITY STATUS
At the Closing, Seller shall deliver to Purchaser such documents as may be
required by the Internal Revenue Service pursuant to Section 1445 of the
Internal Revenue Code of 1986, as amended, or the regulations issued pursuant
thereto certifying as to the non-foreign status of Seller.
10.5 NO CONFLICTS BY CONSUMMATION OF AGREEMENT
Seller represents that neither the execution of this Contract nor the
consummation of the transactions contemplated hereby will (a) result in a breach
of, default under, acceleration of, or imposition of any lien or encumbrance
against the Restaurants under any agreement to which Seller is a party or by
which Seller or the Properties (or any portion thereof) are bound or (b) violate
any restriction, court order, judgment, law, regulation, charter, bylaw,
instrument, or agreement to which Seller or the Properties (or any portion
thereof) are subject.
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10.6 NO UNDISCLOSED INTEREST
To the extent any of the Real Properties are comprised of more than one
parcel, such parcels are contiguous with respect to the respective Restaurant.
Seller neither owns nor leases nor has any other interest in any real property
adjoining, adjacent, or otherwise connected with the operation of the
Properties.
10.7 NO UNTRUE STATEMENT
The representations and warranties of Seller contained herein, in the
Schedules and the other deliveries made simultaneously herewith were true in all
material respects when made and are, or as to deliveries to be made after the
Contract Date, will be true in all material respects at the Closing or such
later date and Seller shall deliver to Purchaser a certificate dated the Closing
Date signed by the President of Seller to that effect and indicating any
material changes.
Seller shall notify Purchaser promptly if Seller becomes aware of any
transaction or occurrence prior to the Closing Date which would make any of the
covenants, representations, and warranties of Seller contained herein not true
in any material respect with the same force and effect as if made on and as of
the date on which Seller becomes aware of such transaction or occurrence.
10.8 FURTHER ASSURANCES
The parties hereto agree to execute, acknowledge, deliver, and record such
certificates, amendments, instruments, and documents and to take such other
action as may be necessary to carry out the intent and purposes of this
Agreement.
10.9 NO FURTHER ENTRANCE INTO BINDING AGREEMENTS
Seller will not enter into any new Operating Contracts or agreements of any
kind (whether written or oral) affecting any Properties or cancel, modify, or
renew any existing Operating Contracts without Purchaser's prior written consent
unless such Operating Contract shall be terminable on or before the Closing.
10.10 CONTINUED OPERATION
Seller shall continue to operate and manage the Restaurants, maintaining
present services (including pest control), shall maintain the Restaurants in
good repair and working order; shall keep on hand sufficient materials,
supplies, equipment, and other personal property for the operation and
management of the Restaurants; and shall maintain in full force and effect and
make all payments, and perform, when due, all of Seller's obligations under the
Operating Contracts to be assumed
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by Purchaser, the Governmental Permits, and all mortgages, restrictions, and
other agreements affecting or relating to the Restaurants and otherwise in
accordance with applicable laws, ordinances, rules, and regulations affecting or
relating to the Restaurants. Seller shall deliver the Restaurants at Closing in
substantially the same condition as on the Contract Date, reasonable wear and
tear excepted. Except as otherwise provided herein, Seller shall terminate, as
of the Closing Date, those of the Operating Contracts that by their terms are
not assignable or those which Purchaser has elected not to assume. None of the
Personal Property or fixtures shall be removed from the Properties unless
replaced by personal property or fixtures of equal or greater utility value.
10.10.1 REPAIRS AND MAINTENANCE. All repairs and replacements necessary to
maintain the Properties in their current condition will be made in the regular
course of business up to the Closing Date at the expense of Seller.
10.10.2 PERSONAL PROPERTY. Each Restaurant has and will at Closing have in
place HVAC and refrigeration systems as well as all other equipment and fixtures
in good working order sufficient to maintain and operate a full service
restaurant, said HVAC and refrigeration systems and other equipment and fixtures
to be maintained in accordance with all applicable laws and regulations,
including, without limitation, local health code regulations with respect to
proper temperature maintenance of said equipment. To the knowledge of Seller,
there are no major structural, electrical or mechanical defects with respect to
any of the Restaurants.
10.10.3 TAXES. Seller is current in the payment of all taxes affecting the
Properties or operation thereof and Seller shall continue to make timely
payments of all such taxes when due.
10.10.4 INSURANCE. Seller carries insurance upon or in connection with the
Properties of the kind customarily maintained and in the amounts as required by
any mortgagee, and said insurance is in full force and effect on the date hereof
and no notices of cancellation or suspension have been received with respect
thereto.
10.11 LICENSES AND PERMITS
10.11.1 Seller owns and holds all licenses, permits, certificates,
concessions, franchises, rights, approvals, and other authorizations
(collectively the "Permits"), all unencumbered and subject to no challenge or
revocation, as are required to carry out and conduct the business carried out
and conducted at the Restaurants and each and every aspect thereof and to own,
use, and operate the business thereon carried on and
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conducted; and all such Permits will pass to Purchaser at Closing without
creating the right of termination or revocation on the part of any third party
granting such Permit. With respect to the Properties and their use and
operation, Seller is not obligated or under any liability to make any payments
by way of royalties or fees or otherwise pursuant to any license, royalty,
franchise, or other agreement to any owner of, licensor of, or claimant to a
patent, trademark, trade name, copyright, or other intangible asset with respect
to the use thereof or in connection with the conduct of its business or
otherwise and except for payments under the Leasehold Documentation (as such
term is defined in Section 10.13.1). All such Permits are listed on Schedule
10.11.1.
10.11.2. Seller will execute and, where necessary, Purchaser will join in
the execution of all applications and instruments required in connection with
the transfer of the Permits in order to transfer the benefits of the Permits to
Purchaser on the Closing Date to the extent a Permit is transferable. Seller
shall preserve in force all existing Permits and shall timely file proper
applications for renewal of any Permit expiring prior to the Closing Date. If
any such Permit shall be suspended or revoked, Seller shall promptly so notify
Purchaser and shall take all measures necessary to cause the reinstatement of
such Permit without any additional limitation or condition.
10.11.3 Seller holds valid licenses under local law permitting the sale of
alcoholic beverages and all permits as are required in order for Seller to sell
alcoholic beverages on the Properties in the places and in the manner in which
Seller has heretofore sold such alcoholic beverages.
10.12 CONTRACTS
Other than the Leasehold Documentation, there are no service contracts,
maintenance contracts, or any other contracts, or any other contracts or
agreements in connection with the operation of the Real Properties or Personal
Property which shall survive Closing, and there are no actions pending or, to
Seller's knowledge, threatened between Seller, as landlord, and any tenant on
the Real Properties, to reduce any of their rentals.
10.13 LEASES
10.13.1 Annexed hereto as Schedule 10.13.1 is a list of all of the
documentation constituting the Leaseholds including without limitation, the
lease, amendments and agreements relating thereto, and all assignments thereof
(the "Leasehold Documentation"), true and complete copies of which Documentation
have been delivered to Purchaser prior to execution of this Contract. The
Documentation (i) has not been modified, amended, supplemented or
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changed in any manner, (ii) and the Leaseholds are valid, binding, and in full
force and effect. No written notice of any default has been given by any of the
landlords under the Leaseholds which default remains uncured and no non-monetary
defaults on the part of Seller or any other party thereto the cure for which
will cost more than $10,000 exist under the Leaseholds; all rent and additional
rent and other payments under the Leaseholds, including, without limitation,
fixed payments and percentage payments, have been paid to date. There are no
other modifications or agreements relating to the Leaseholds not heretofore
delivered to Purchaser. Except for the Friendly's Sublease at the Philadelphia
(Red Lion) Restaurant (see Section 10.14), there are no subleases or tenancies.
Seller shall deliver to Purchaser at the Closing and thereafter all reports,
statements, and financial information necessary or appropriate to enable Seller
to calculate rent, additional rent and other sums payable to the landlords, and
otherwise to file required financial and other statements pursuant to the
Leasehold Documentation. The security deposits listed on Schedule 10.13.1 are
true and correct and have not been used by the landlords under the Leaseholds to
cure any defaults by Seller.
10.13.2 To the extent required by the Leasehold Documentation, Seller shall
diligently use all reasonable efforts to obtain the approval from the landlords
thereunder for the assumption of the existing Leaseholds or the issuance of a
new lease agreement directly with Purchaser provided any such new lease shall be
on terms substantially similar to the present terms.
10.13.3 There are no outstanding requirements or recommendations by any
insurance company issuing a policy with respect to the Properties or by any
board of fire underwriters or by any other bodies exercising similar functions
requiring or recommending any repair or ameliorative work to be done in, at, or
about the Restaurants.
10.14 SUBLEASES AND TENANCIES. There are no subleases or tenancies
(collectively "Tenancies") under the Leaseholds except for the sublease for a
Friendly's Restaurant ("Friendly's") at the Philadelphia (Red Lion), PA location
granted by that certain Sublease Agreement dated September 9, 1981 (the
"Friendly's Sublease"):
10.14.1 The Friendly's Sublease is in full force and effect and has not
been modified, amended, or extended.
10.14.2 No renewal or extension options have been granted to Friendly's
except as set forth in the Friendly's Sublease.
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10.14.3 There are no other agreements with Friendly's which will be binding
on Purchaser.
10.14.4 The rent under the Friendly's Sublease is being collected on a
current basis and there are no arrearages in excess of ten (10) days.
10.14.5 Friendly's is not entitled to rental concessions or abatements for
any period subsequent to the scheduled date of closing.
10.14.6 There are no material defaults by either party under the Friendly's
Sublease.
10.14.7 There are no security deposits for the Friendly's Sublease other
than those set forth in such Sublease.
10.15 EMPLOYEE-RELATED REPRESENTATIONS
10.15.1 There are no labor disputes pending or threatened, and Seller has
no knowledge or reason to believe such disputes are threatened.
10.15.2 There are no collective bargaining agreements covering persons
employed at the Restaurants.
10.16 NO OUTSTANDING LITIGATION OR OUTSTANDING CONFLICTS
Seller represents and warrants that there are no suits, arbitration
proceedings, other proceedings, or governmental investigations pending against
it or, to the knowledge of Seller, threatened that adversely and materially
affect its right or ability to enter into this Contract or to consummate the
sale of the Restaurants in accordance with the terms of this Contract, or that
materially affect the Restaurants except as set forth on Schedule 10.16.
10.17 EMINENT DOMAIN/CONDEMNATION ACTIONS
Seller represents and warrants that, there are no pending condemnation
actions of any nature with respect to the Restaurants that would materially
impair the economic viability of any of the Restaurants, and Seller has not
received any notice of any such threatened or contemplated condemnation actions.
10.18 TITLE MATTERS
Seller has good and marketable title to the Personal Property and all
Personal Property has been fully paid for.
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10.19 MORTGAGES AND BANKRUPTCY
All mortgages encumbering the Real Properties are in good standing, and
Seller shall keep all such mortgages in good standing through the Closing Date.
There are no other liens, attachments, executions, assignments for the
benefit of creditors, or voluntary or involuntary proceedings in bankruptcy
pending against Seller or contemplated by Seller, and to the knowledge of Seller
no such action has been threatened against it.
10.20 ZONING
The Properties and the current operation of the Restaurants comply in all
material respects with all zoning and use laws and regulations.
Except as required by law, Seller shall not seek or consent to any
amendment to any Permit or Government Permit that would alter the existing
permissible uses of the Restaurants or any part thereof.
Seller has not made nor shall Seller make any applications before any
zoning board or commission seeking to modify or change the present zoning of the
Real Properties.
10.21 ENVIRONMENTAL CONDITIONS
Except as disclosed in Schedule 10.21: (i) to the knowledge of Seller, no
Hazardous Substances (as hereinafter defined) have been released, treated,
stored or disposed of, or otherwise deposited in or on, or migrated to, any of
the Properties, including without limiting the generality of the foregoing, the
surface waters and subsurface waters of the Properties; (ii) to the knowledge of
Seller there are no substances or conditions (including asbestos or
asbestos-containing materials) in or on the Properties or any other parcels
which may materially adversely affect the Properties or use thereof or which
would be reasonably likely to support a claim or cause of action under any
existing federal, state or local environmental statute, regulation, ordinance or
other environmental regulatory requirement (hereinafter collectively called
"Applicable Environmental Laws"), including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
as amended 42 U.S.C. ss.ss.6901 et seq. and the Resource Conservation and
Recovery Act ("RCRA"), as amended, 42 U.S.C. [Sections]6901 et seq., which terms
shall also include, whether or not included in the definitions contained in
Applicable Environmental Laws, petroleum, solvents, or polychlorinated
biphenyls; (iii) there are no underground tanks at the Properties and no part of
any of the Properties
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constitutes "wetlands"; (iv) there are no liens under Applicable Environmental
Laws affecting the Properties and no government actions have been taken or, to
the knowledge of Seller, are in process, which could subject any portion of the
Properties to such liens. As used herein, "Hazardous Substances" shall mean any
hazardous materials, hazardous waste, hazardous and toxic substances, pollutants
and contaminants, as those terms are defined by any Applicable Environmental
Laws. For purposes of this Section 10.21, Hazardous Substances shall not include
(x) substances properly used by Seller in the ordinary maintenance of the
Properties, and (z) petroleum released in de minimis amounts and typically
associated with the use of portions of the Properties for driving and parking
motor vehicles. For the purposes of this subsection, only the knowledge of
Seller's officers and regional managers shall be imputed to Seller. Any suit or
action by Purchaser against Seller with regard to a breach of the
representations in this Section 10.21 must be commenced within three (3) years
after the Closing Date.
10.22 VIOLATIONS
Seller shall cure all violations of record of any governmental agency
having jurisdiction including any violations issued under the Americans with
Disabilities Act and shall deliver the Restaurants free of all violations of
record provided that if Purchaser files alteration plans with the local
municipality for any Restaurant which filing causes the municipality to inspect
the Restaurant for which the plans were filed prior to Closing and such
inspection results in the filing of a violation prior to Closing, then Seller
shall not be required to cure the violation if the filed plans that provide
Purchaser will be replacing, repairing or otherwise curing the item cited.
10.23 LIMITATIONS ON SELLER'S REPRESENTATIONS, WARRANTIES, AND COVENANTS
Purchaser acknowledges that except as otherwise expressly set forth in this
Contract, Purchaser is acquiring the Restaurants "as is".
10.24 SURVIVAL OF CONTRACT
All warranties, representations and covenants of Seller made in this
Contract shall survive the Closing provided that, except as provided in Section
10.21, any action or suit must be commenced by Purchaser within eighteen (18)
months after the Closing Date.
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10.25 NON-COMPETITION
Seller covenants and warrants that it and its affiliates, and their
successors and assigns, shall not, in any capacity, including, without
limitation, as owner, shareholder, director, agent, employee, consultant,
advisor, investor, or partner, operate, in any capacity, either directly or
indirectly, including, without limitation, as owner, lessor, lessee, manager,
franchisor, or franchisee any type of restaurant, bar or saloon within five (5)
miles from any of the purchased Restaurants, for a period of five (5) years from
the Closing Date.
Seller and Purchaser believe that the restrictions contained in this
Section are reasonable. However, in case any one or more of the provisions of
this Section shall be invalid, illegal or unenforceable in any respect, any such
provision shall be ineffective to the extent of such invalidity, illegality or
unenforceability and the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected thereby.
Seller recognizes that Purchaser will suffer irreparable damage if the
terms of this restriction are violated and that it will be difficult, if not
impossible, to compute Purchaser's actual damages resulting from such violation.
Therefore, in addition to any other rights and remedies which Purchaser may have
under this Contract or otherwise, Purchaser and any Successor (as hereinafter
defined) shall have the right to have the provisions of this Section
specifically enforced by a court having equity jurisdiction and the right to
require Seller to account for and pay over to Purchaser all profits and payments
derived or received by Seller as a result of Seller's breach of this Section.
For purposes of this Section, "Successor" means any direct or indirect assignee
or transferee of Purchaser to this Contract, any successor to Purchaser
including, without limitation, any successor by merger or consolidation or by
acquisition of all or substantially all of the assets, property, or business of
Purchaser.
10.26 OWNERSHIP OF DECATUR RESTAURANT
Seller represents that Ground Round Holdings Inc. owns title to the
Decatur, IL Restaurant, and that such title holder is a wholly owned subsidiary
of Seller. By its signature below, such subsidiary joins in all warranties,
representations and covenants of Seller and shall be deemed a party to this
Contract for all purposes relating to the Decatur Restaurant. Seller
unconditionally guarantees all of such subsidiary's obligations under this
Contract.
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SECTION 11 REPRESENTATIONS AND WARRANTIES OF PURCHASER
11.1 GENERAL TERMS
In order to induce Seller to sell the Restaurants and to consummate the
other transactions contemplated herein, Purchaser hereby represents and warrants
to Seller that the following are true statements as of the date hereof and
agrees that the following shall be true statements as of the Closing. The
representations, warranties and covenants of Purchaser herein shall survive the
Closing but any action or suit must be commenced by Seller within eighteen (18)
months after the Closing Date.
11.2 DUE ORGANIZATION
Purchaser is duly organized, validly existing, and in good standing under
the laws of the state of its formation, and has all requisite power and
authority to execute this Contract and the documents referred to herein to be
executed by Purchaser. Prior to the closing, Purchaser shall have taken all
actions required for the consummation of the transaction contemplated by this
Contract or any document delivered or to be delivered in connection with this
Contract.
At Closing, if this Contract is assigned to a subsidiary corporation or
limited liability company, the assignee will be duly organized, validly
existing, in good standing under the laws of a State chosen by Purchaser and
authorized to enter into the transactions contemplated by this Contract.
11.3 NO CONFLICT
Neither the execution, delivery, and performance of this Contract or any
other agreement contemplated hereunder nor the carrying out by Purchaser of the
transactions contemplated hereby or thereby will conflict with, result in a
breach of, constitute a default under, or accelerate the maturity of (a) any
applicable provisions of Purchaser's charter or by-laws or other governing
instrument, (b) any applicable legal requirements, or (c) any other agreement,
indenture, or instrument to which Purchaser is a party or by which Purchaser is
or may be bound or affected. No consent of any third party is required in order
for Purchaser to enter into this Contract or any other agreement contemplated
hereunder or for Purchaser to carry out the transactions contemplated hereby or
thereby.
11.4 NO PENDING LITIGATION
The individuals and the entity comprised by Purchaser represent and warrant
that as of the Contract Date, there are no suits, arbitration proceedings, other
proceedings, or
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governmental investigations that are pending against them or to their knowledge
threatened that adversely and materially affect their right or ability to enter
into this Contract or to consummate the purchase of the Restaurants in
accordance with the terms of this Contract.
11.5 ALTERATION PLANS
Purchaser may file alteration plans for the Restaurants with any municipal
office prior to the Closing Date but shall not cause a permit to be issued until
after the Closing. Purchaser shall deliver a copy of all filed plans to Seller.
SECTION 12 PRORATIONS AND ADJUSTMENTS
12.1 ACCOUNTS PAYABLE
All accounts receivable arising out of the operation of the Restaurants
from and after the date of Closing shall belong to Purchaser. Purchaser assumes
no responsibility or liability for any accounts payable, obligations, or
indebtedness of Seller or the Restaurants, except those obligations assumed by
Purchaser hereunder, and Seller shall hold Purchaser harmless and indemnify
Purchaser from any claim by any party relating to any accounts payable,
obligation, or indebtedness of any nature that was incurred prior to the Closing
except those obligations assumed by Purchaser.
12.2 LIABILITIES NOT ASSUMED
The purchase and sale of the Restaurants shall be a transfer of assets
only, and no liabilities or obligations of Seller, whether incurred prior to or
after the date hereof, shall be assigned by Seller or assumed by Purchaser, with
the exception of the following: any liability under the Leaseholds and Operating
Contracts actually assumed by Purchaser, relating to obligations arising from
and after the Closing Date. Except as specifically provided herein, Purchaser
shall not be responsible for any liabilities arising from acts or omissions of
Seller prior to the Closing Date, even though the claim with respect thereto may
be brought after the Closing Date.
12.3 RENTS
Base Rents, additional rents and other charges payable under the Leaseholds
shall be prorated as of midnight of the day prior to the Closing Date. To the
extent any percentage rent or other additional rent or charges are payable in
arrears, then Seller shall deliver satisfactory documentary evidence of the
calculation of such additional rent, the parties shall apportion such amount
based on the amounts due as of midnight of the date prior to the Closing Date
and Seller shall deliver to Purchaser
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all documentation and affidavits required under the terms of the Leasehold
Documentation or reasonably required by Purchaser in connection therewith.
12.4 UTILITIES
Seller shall be responsible for all water, sewer, and all other utility
charges through the date prior to Closing hereunder, and Seller will use its
best efforts to have meters for such utility services read on the Closing Date
and thereafter Purchaser shall be responsible for such utility services in its
own name commencing with the Closing Date and thereafter. Seller agrees not to
terminate utility services. All deposits ("Utility Deposits") held by utility
providers, including the provider of telephone service, shall not be adjusted,
but shall become the property of Purchaser because the amounts of the Utility
Deposits are included in the Purchase Price provided however any charges for
utilities which are prepaid shall be adjusted. If any of the Utility Deposits
are refunded to Seller, then the amount of said deposit shall be credited or
paid to Purchaser.
12.5 REAL ESTATE AND PERSONAL PROPERTY TAXES
Real estate taxes, personal property taxes, and assessments shall be
prorated to the date of Closing, using the last available tax bill. Accrued
general real estate, personal property, and ad valorem taxes for the current
year shall be prorated on the basis of actual bills therefor, if available prior
to closing. If such bills are not available, then such taxes shall be prorated
on the basis of one hundred three percent (103%) of the most currently available
information for the Real Properties and promptly reprorated upon the issuance of
final bills therefor (and any amounts due from one party by reason of such
reproration to the other shall be paid in cash at that time). Prior to or at
Closing, Seller shall pay or have paid all such bills that are due and payable
prior to or on the Closing Date and shall furnish evidence of such payment to
Purchaser and the Title Company.
12.6 SALES TAXES
There shall be no apportionment with respect to sales tax charged to
customers of the Restaurants subject to such taxes. After the Closing, Seller
shall file final sales and occupancy tax returns with the appropriate taxing
authority and pay to the appropriate taxing authority sales charged to customers
and others during the period of time prior to the Closing Date.
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12.7 PAYROLL
Seller will pay all employees for all services performed through 12:01 A.M.
of the date of Closing, together with all contributions to welfare, pension,
fringe benefit, and other such programs required to be made on their behalf, and
the employer's share of payroll taxes, social security, unemployment
compensation taxes, and disability insurance incident to such salaries, wages,
or other benefits. Seller shall terminate all employees of the Restaurants on or
prior to Closing and shall be solely responsible for all payments and claims
incurred in connection therewith. Purchaser shall have the right but not the
obligation to hire those of Seller's employees who are not retained by Seller in
other businesses.
12.8 TELEPHONE CHARGES
Purchaser and Seller shall obtain and determine all telephone charges
applicable to the telephone system in use at the Restaurants, and Seller shall
execute any and all forms required in order to transfer the existing telephone
numbers, and any and all rights thereto, to Purchaser.
12.9 LEASE SECURITY DEPOSITS
All security deposits on Schedule 10.13.1 shall not be adjusted but shall
become the property of Purchaser, subject to the terms of the Leaseholds,
because the amount of such deposits are included in the Purchase Price.
12.10 PREPAID DEPOSITS
All prepaid amounts under Operating Contracts actually assumed by Purchaser
shall be adjusted.
Three (3) business days before the Closing Date, Seller shall provide
Purchaser with a complete schedule (the "Reservation Schedule") of post-closing
customer reservations, which Reservation Schedule shall list (a) the party for
whose benefit the reservation was made and the date and time therefor; (b) the
amount of any other deposits made for advance banquets and/or future services to
be provided after the Closing Date. Purchaser may elect to receive a credit for
such deposits and arrange with the depositor for the banquets or other service.
If Purchaser does not so elect, Seller shall refund such deposits and pay all
claims or damages related thereto. Seller shall accept no reservations or
deposits for services to be rendered after the Closing Date.
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12.11 VENDING MACHINES
All revenues from vending machines and commissions, if any, payable by the
telephone company in respect of public telephones in the Properties and long
distance telephone calls made from the Properties shall accrue to the benefit of
Purchaser for periods after the Closing and to Seller for the periods prior to
the Closing.
12.12 PURCHASER'S WAIVER AND TERMINATION RIGHT
Purchaser may waive any failure of a particular Restaurant to comply with
the terms of this Contract only in writing. In addition to any right of
Purchaser to terminate this Contract in its entirety (including, without
limitation, the right arising because of the inability of Seller to obtain the
consents and estoppels of the landlords under the Leaseholds or the failure to
obtain liquor permits), Purchaser may also terminate this Contract with respect
to a certain Restaurant or Restaurants only, if such Restaurant does not comply
with the terms of this Contract or Purchaser otherwise is entitled to terminate
this Contract and Purchaser shall receive a credit against the Purchase Price
for the amount allocated on Schedule 4.2 to the terminated Restaurant or
Restaurants provided that Purchaser may not terminate this Contract as to more
than five (5) Restaurants in the aggregate because of the failure to obtain
either liquor permits or landlord consents and estoppels. If either the liquor
permits or the landlord consents and estoppels are not obtained for more than
five (5) Restaurants, Purchaser may (i) only terminate as to five (5) of such
Restaurants of its choice and waive the failure of the balance to comply or (ii)
terminate this Contract in its entirety.
SECTION 13 CLOSING DOCUMENTS AND PROCEDURE
Not later than twenty (20) days prior to the Closing, the parties shall
deliver copies of certain documents, set forth below, to the other parties as
specified; the original of said documents shall be executed and delivered at the
Closing together with such other documents as are contemplated by this Contract.
13.1 TITLE DEED
Special warranty deeds for all of the Real Properties (except for the New
York Restaurant which shall be a bargain and sale deed with covenant) in
recordable form, executed by Seller, conveying the Real Properties to Purchaser
free and clear of all claims, liens, and encumbrances except for the Permitted
Exceptions and items approved by Purchaser. Any action or suit on any covenant
contained in the deed must be commenced within eighteen (18) months after the
Closing Date.
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13.2 LEASE ASSIGNMENTS
Warranty assignments in the form required under Section 2.4 executed by
Seller, assigning the Leaseholds to Purchaser free and clear of all claims,
liens and encumbrances except for the Permitted Exceptions.
13.3 BILL OF SALE
A warranty assignment and bill of sale, executed by Seller, assigning,
conveying, and warranting to Purchaser title to the Personal Property, free and
clear of all encumbrances, other than items approved by Purchaser in writing.
13.4 ASSIGNMENT OF PERMITS
To the extent any Governmental Permits or Permits are assignable, an
assignment, executed by Seller, to Purchaser of all of Seller's right, title and
interest in and to the Governmental Permits or Permits, together with executed
copies, applications, forms, and other documents as may be necessary to fully
effectuate the transfer of the same to Purchaser as herein contemplated and
provided that Purchaser shall have all permits and licenses required to operate
the Restaurants.
13.4.1 LIQUOR PERMITS. Among the permits and licenses to be assigned and
transferred with respect to the operation of the Properties and the conduct of
Seller's business are the liquor permits issued to Seller by the local liquor
authorities. At the Closing, Seller shall cause to be executed and delivered to
Purchaser or Purchaser's nominee an instrument in form reasonably satisfactory
to Purchaser that issues, assigns, conveys, or transfers to Purchaser all of
Seller's rights and interests in, under, and to each of the liquor permits and
such written authorization or consent from any governmental agency having
jurisdiction recognizing and approving such transfer. If liquor permits for all
of the Properties are not lawfully transferred or issued to Purchaser on or
prior to Closing, Purchaser shall have the rights set forth in Section 12.12.
Purchaser shall proceed promptly and diligently and use reasonable efforts to
obtain approval of the transfer of the existing liquor permits or issuance of
new permits in accordance with law and Purchaser's past practices. Purchaser
shall deliver a copy of all liquor permit filings to Seller.
13.5 ASSIGNMENT OF INTANGIBLE PERSONAL PROPERTY
An assignment executed by Seller, to Purchaser of all right, title, and
interest of Seller and its agents in and to the Intangible Properties executed
by Seller.
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13.6 ASSIGNMENT OF OPERATING CONTRACTS
An Assignment executed by Seller to Purchaser of those of the Operating
Contracts that are to be assumed by Purchaser, in which Seller agrees to
indemnify, protect, defend, and hold Purchaser harmless from and against any and
all claims, damages, losses, costs, and expenses (including attorney fees) that
arise in connection with the Operating Contracts and relate to the time period
prior to Closing.
13.7 ORIGINAL DOCUMENTS
To the extent not previously delivered to Purchaser, original copies of the
Operating Contracts, Governmental Permits and Permits.
13.8 KEYS
All keys used in connection with the Properties, tagged for identification.
13.9 TITLE POLICY
The title policy (or a "marked-up" Title Commitment) issued by the Title
Company, dated as of the Closing Date, in such amounts and containing
non-imputation, creditor's rights exception, zoning and such other endorsements
as may be reasonably requested by Purchaser in order to obtain the benefits of
the title insurance, ownership, current use and occupancy of the Properties.
13.10 RESOLUTIONS AND CERTIFICATES
A certified resolution authorizing Seller to enter into and perform this
Agreement and to perform Seller's obligations hereunder.
At Closing, a certificate of Seller signed by a senior officer, dated the
Closing Date, certifying that all of the representations and warranties of
Seller contained in this Agreement are true and correct on and as of the Closing
Date with the same force and effect as if made on and as of the Closing Date.
13.11 CLOSING STATEMENT
A counterpart, executed by Seller, of a closing statement conforming to the
proration and other relevant provisions of this Agreement.
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13.12 RECORDS
To the extent not previously delivered to Purchaser, original copies of all
Records (including, without limitation, all ledgers) pertaining to the
Restaurants.
13.13 CERTIFICATE OF NON-FOREIGN STATUS
Seller shall deliver a Certificate of Non-Foreign Status in form
satisfactory to Purchaser's counsel.
13.14 AFFIDAVITS AND INDEMNITIES
Affidavits and indemnities reasonably required by Purchaser or the Title
Company to establish the authority and capacity of Seller to consummate the
transaction described herein and to cause the Title Company to issue the
policies including endorsements.
13.14.1 AFFIDAVIT OF TITLE. By Seller to Purchaser, Seller's affidavit of
title in form and content as customary in the county in which the Properties is
located.
13.15 SUB-TENANT ESTOPPEL AND CONSENT.
By Seller to Purchaser, an estoppel from Friendly's in the form of Schedule
9.9. with the following additional paragraph: "Friendly's has no right to
consent to the assignment to Lone Star nor to any further assignment of the
lease."
13.16 WARRANTY ASSIGNMENT
By Seller to Purchaser, a general assignment to Purchaser of all warranties
that exist as to equipment, Personal Property, or structural components of the
building that have not expired by lapse of time.
13.17 LANDLORD'S CONSENTS
By Seller to Purchaser, a consent signed and delivered by each of the
landlords for the Leaseholds, or if in Purchaser's judgment such consent is not
required by the terms of the lease, then a copy of a written notice to such
landlord signed and sent by Seller given within the time requirements of the
lease but not less than thirty (30) days prior to Closing and such other
evidence reasonably requested by Purchaser to comply with the terms of each of
the Leaseholds governing assignments. If all of the landlord consents are not
obtained prior to Closing, Purchaser shall have the rights set forth in Section
12.12. Purchaser's assignee shall represent to each landlord that the assignee
(i) shall spend at least $750,000 in improving and
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renovating the Restaurant located on such landlord's premises and (ii) shall
have a minimum net worth of $1,000,000 at closing.
13.18 NON-DISTURBANCE AGREEMENTS
By Seller to Purchaser, a written agreement executed by each of the
landlords of the Leaseholds and any holder of a mortgage on the real property
demised under the Leaseholds for which Purchaser directs Seller to request such
an agreement from the landlord, in which such mortgagee agrees not to disturb
Purchaser's tenancy in the event of foreclosure in form and on terms
satisfactory to Purchaser provided that to the extent any existing
non-disturbance agreement is satisfactory to Purchaser and is assignable by its
terms, then a new agreement shall not be required and further provided that it
shall not be a condition to Closing to obtain such non-disturbance agreements
and Seller shall be required to deliver such agreements only to the extent the
landlord complies with the request.
13.19 TRANSFER TAX RETURNS
Each party shall execute and deliver such transfer tax returns as may be
required for the transfer of the Real Properties or the Leaseholds. The parties
agree that the allocations to the real property portion of the Purchase Price on
Schedule 4.2 approximates the fair market value of the interest in realty
transferred.
13.20 OTHER DOCUMENTS
Such other documents and instruments as are contemplated hereunder or as
may reasonably be required by Purchaser, its counsel, or the Title Company and
necessary to consummate this transaction and to otherwise effect the agreements
of the parties hereto.
PURCHASER'S RESPONSIBILITIES
At Closing, Purchaser shall deliver to Seller:
13.21 PURCHASE PRICE
The full Purchase Price, plus or minus prorations and other adjustments
hereunder, in the amount provided in this agreement by certified check or wire
transfer.
13.22 ASSUMPTION OF LEASES
By Purchaser to Seller, an assumption of the lessee's interest under the
Leaseholds in the form attached as Schedule 2.4.
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<PAGE> 33
13.23 CLOSING STATEMENT
A counterpart, executed by Purchaser, of a closing statement conforming to
the proration and other relevant provisions of this Agreement.
13.24 ASSUMPTION OF OPERATING CONTRACTS
An assumption executed by Purchaser in which Purchaser agrees to assume the
Operating Contracts to be assumed by it, subject to the agreement of Seller to
indemnify, protect, defend, and hold Seller harmless from and against any and
all claims, damages, losses, costs and expenses (including attorney fees) that
arise in connection with the assigned Operating Contracts and relate to the time
period before the Closing.
13.25 RESOLUTIONS
Certified resolution authorizing Purchaser to enter into and perform this
Agreement and to perform Purchaser's obligations hereunder.
13.26 AFFIDAVITS
Affidavits reasonably required by the Title Company to establish the
authority or capacity of Purchaser to consummate the transaction described
herein.
13.27 OTHER DOCUMENTS
Such other documents and instruments as are contemplated hereunder or as
may reasonably be required by Seller, its counsel, or the Title Company and
necessary to consummate this transaction and to otherwise effect the agreements
of the parties hereto.
SECTION 14 CLOSING EXPENSES
14.1 CLOSING EXPENSES
Seller shall pay the survey costs, recording fees, all escrow fees, any
transfer, stamp or documentary taxes and fees to the landlords of the Leaseholds
except for the reasonable fees charged by the landlords of the Renegotiated
Leaseholds. Purchaser shall pay the cost of the sales tax on the Personal
Property, title policy, and the reasonable fees charged by the landlords of the
Renegotiated Leaseholds.
14.2 BROKERAGE FEES
Seller and Purchaser each warrant to the other that each has dealt with no
broker, salesman, finder, or consultant
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<PAGE> 34
with respect to this Contract or the sale contemplated herein. Each party shall
be responsible for the costs of their respective financial advisors. Except as
provided above, each shall indemnify, protect, defend, and hold the other
harmless from and against all claims, losses, costs, expenses, and damages
(including attorney fees) resulting from a breach of the foregoing warranty.
SECTION 15 EMINENT DOMAIN AND RISK OF LOSS
15.1 EMINENT DOMAIN
In the event of the institution of any proceedings, judicial,
administrative, or otherwise, relating to the taking of a portion of any of the
Properties by eminent domain, or condemnation, prior to closing, which taking
materially interferes with the current use or operation of the Property,
Purchaser shall have the right (a) to terminate this Contract, which right shall
be exercised within fifteen (15) days after notice of condemnation or proposed
taking is received by Purchaser, whereupon the parties shall be released from
any further obligations hereunder, or (b) elect to close this transaction, in
which event there shall be no reduction in the Purchase Price, except that
Purchaser shall be entitled to receive the award as a result of such taking.
15.2 RISK OF LOSS
If any of the Properties or any part thereof shall be damaged or destroyed
by fire or other casualty prior to the Closing, and such damage shall not have
been repaired or reconstructed prior to Closing in a good and workmanlike manner
to the reasonable satisfaction of Purchaser, and the cost of repair of such
damage exceeds $75,000, Purchaser may, at its option, (a) receive the proceeds
of any insurance payable in connection therewith, under Seller's insurance
policy or policies, and thereupon remain obligated to perform this Agreement, or
(b) terminate this Contract, which option shall be exercised within fifteen (15)
days after notice of the fire or other casualty is received by Purchaser,
whereupon the parties shall be released from any further obligations hereunder.
Seller agrees to advise Purchaser of the present insurance coverage upon each of
the Properties, to keep said policy or policies in full force and effect through
the Closing Date, and to advise Purchaser promptly of any damage to any of the
Properties by any loss or casualty.
SECTION 16 ASSIGNMENT, SUCCESSORS, AND HEIRS
This Contract may not be assigned prior to the Closing Date by either party
without the prior written consent of the other, except that Purchaser shall have
the right to assign its
-29-
<PAGE> 35
interest in this Contract to one or more corporations or limited liability
companies organized by Purchaser or Purchaser's affiliates. Such assignments by
Purchaser shall not relieve Purchaser of its obligations hereunder. Purchaser
specifically agrees that notwithstanding any assignment, Purchaser shall
indemnify Seller from any default under the Leaseholds arising from and after
the Closing Date and shall guaranty the assignee's obligations under the
assumption agreement to be executed and delivered by the assignee. Subject to
the foregoing provisions, this Contract shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
SECTION 17 GENERAL CLAUSES
17.1 BENEFIT
This Agreement is for the benefit only of the parties hereto or their
nominees, successors, beneficiaries, and assigns, and no other person or entity
shall be entitled to rely hereon, receive any benefit herefrom, or enforce
against any party hereto any provision hereof.
17.2 BINDING AGREEMENT
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, personal representatives, successors,
and assigns, and shall constitute the entire agreement among the parties.
17.3 BUSINESS DAY
If any date herein set forth for the performance of any obligations by
Seller or Purchaser or for the delivery of any instrument or notice as herein
provided should be on a Saturday, Sunday, or legal holiday, the compliance with
such obligations or delivery shall be deemed acceptable on the next business day
following such Saturday, Sunday, or legal holiday. As used herein, the term
"legal holiday" means any state or federal holiday for which financial
institutions or post offices are generally closed in the States of Texas or New
York.
17.4 CONTROLLING LAW
This Contract shall be interpreted in accordance with the laws of the State
of New York. New York law shall govern the marketability standard referred in
Section 8.1.5.
17.5 ENTIRE AGREEMENT
17.5.1 This Contract constitutes the entire understanding between the
parties with respect to the transaction contemplated herein, and all prior or
contemporaneous oral
-30-
<PAGE> 36
agreements, understandings, representations, and statements are merged into this
Agreement. Neither this Contract nor any provisions hereof may be waived,
modified, amended, discharged, or terminated except by an instrument in writing
signed by the party against which the enforcement of such waiver, modification,
amendment, discharge, or termination is sought, and then only to the extent set
forth in such instrument.
17.5.2 This Contract may be executed in one or more counterparts, and all
so executed shall constitute one contract, binding on all the parties hereto,
notwithstanding that all of the parties are not signatory to the same
counterpart.
17.5.3 WAIVER. No modification or amendment of this Contract shall be of
any force or effect unless it is in writing and executed by both Seller and
Purchaser.
17.6 HOLD HARMLESS AND INDEMNITY
Seller agrees to indemnify and hold harmless Purchaser from and against all
claims, damages, losses, and expenses, including reasonable legal fees and other
costs, arising from any and all liability, loss, or damage Purchaser may suffer
as a result of claims, demands, costs, or judgments against it arising from or
in any way connected with any accident, action, or incident of whatever nature
occurring during the period of Seller's ownership of the Properties or from a
breach of a representation, warranty or covenant by Seller contained herein; and
Purchaser agrees to indemnify and hold harmless Seller from and against all
claims, damages, losses, and expenses, including reasonable legal fees and other
costs, arising from any and all liability, loss, or damage Seller may suffer as
a result of claims, demands, costs, or judgments against it arising from or in
any way connected with any accident, action, or incident of whatever nature
during the period of Purchaser's ownership of the Properties or from a breach of
a representation, warranty or covenant by Purchaser contained herein.
17.7 NOTICES
Any notice or election that may be or is required to be given pursuant to
the provisions of this Agreement shall be sufficiently served if sent by
certified or registered U.S. Mails, postage prepaid, return receipt requested
and addressed as follows:
As to Purchaser: Lone Star Steakhouse & Saloon, Inc.
224 East Douglas, Suite 700
Wichita, Kansas 67202
Attn: Gerald Aaron
Vice President and General Counsel
-31-
<PAGE> 37
with a copy to:
Olshan Grundman Frome
& Rosenzweig LLP
505 Park Avenue
New York, NY 10022
Attn: Steven Wolosky, Esq.
As to Seller: The Ground Round, Inc.
35 Braintree Hill Office Park
Braintree, Massachusetts 02184-9078
Attn: Michael Jorgensen or
Robin L. Moroz, Esq.
With a copy to: Kane Kessler P.C.
1350 Avenue of the Americas
New York, New York 10019
Attn: Jeffrey S. Tullman, Esq.
17.7.1 NOTICE DEEMED SERVED. Any properly mailed notice shall be deemed to
have been served as of its posting for purposes of establishing that the sending
party complied with this Contract's applicable time limitations.
17.7.2 The attorney for a party may send notices on behalf of such party.
SECTION 18 PUBLICITY
Simultaneously with the execution of this Contract the parties have
approved the text of a press release to be issued by each of the parties.
Thereafter each party may issue press releases as may be required by law. Copies
of all press releases shall be given to the other party promptly after issuance.
GROUND ROUND HOLDINGS, INC.
By:
------------------------------
THE GROUND ROUND, INC. LONE STAR STEAKHOUSE &
SALOON, INC.
By: By:
------------------------------ ------------------------------
-32-
<PAGE> 38
SCHEDULE A - THE RESTAURANTS
LOCATION STORE NO. FEE OR LEASEHOLD
Decatur, IL 21782 Fee
Danvers, MA 99768 Fee
Rochester 99796 Fee
(Henrietta), NY
Saugus, MA 36771 Leasehold
Voorhees, NJ 86745 Leasehold
West Chester, PA 99831 Leasehold
Wilmington, DE 99838 Leasehold
Mentor, OH 99856 Leasehold
Erie, PA 99877 Leasehold
Philadelphia (Red 99889 Leasehold
Lion), PA
Bel Air, MD 35753 Leasehold
Natick, MA 86754 Leasehold
(Framingham-Speen)
Albany-Colonie, NY 99765 Leasehold
(Wolf Road)
Latham, NY 99808 Leasehold
Poughkeepsie, NY 99871 Leasehold
Rochester (Greece), 99874 Leasehold
NY
<PAGE> 39
SCHEDULE 1.1(A)
(LEGAL DESCRIPTION - DECATUR RESTAURANT)
Lot Two (2) of the Resurvey of Lots 2, 3, 4 and 5 of North Point
Addition, as per Plat recorded in Book 1832, Page 186 of the Records in the
Recorder's Office of Macon County, Illinois.
<PAGE> 40
SCHEDULE 1.2 - NUMBER OF PARKING SPACES
LOCATION STORE NO. NO. OF PARKING SPACES
Decatur, IL 21782 92
Danvers, MA 99768 95
Rochester 99796 91
(Henrietta), NY
Saugus, MA 36771 93
Voorhees, NJ 86745 113
West Chester, PA 99831 110
Wilmington, DE 99838 119
Mentor, OH 99856 103
Erie, PA 99877 131
Philadelphia (Red 99889 181
Lion), PA
Bel Air, MD 35753 Mall
Natick, MA 86754 118
(Framingham-Speen)
Albany-Colonie, NY 99765 50
Latham, NY 99808 69
Poughkeepsie, NY 99871 90
Rochester (Greece), 99874 44
NY
<PAGE> 41
SCHEDULE 2.4 - FORM OF ASSIGNMENT AND ASSUMPTION OF LEASE
ASSIGNMENT and ASSUMPTION OF LEASE made and dated as of _________ ___, 1996
between The Ground Round, Inc., a [__________] corporation having its principal
place of business at [_______________________________,] Massachusetts [_____]
("Ground Round") and [Lone Star assignee], a ________________ ___________ having
its principal place of business at ______________________, ________________,
______________ ("Lone Star").
W I T N E S S E T H:
--------------------
WHEREAS, Ground Round leases the building commonly known as
[__________________], [________], [___________] (the "Building") and is the sole
owner of the leasehold improvements therein (collectively the "Premises")
pursuant to a lease (the "Lease") described in Schedule A attached hereto;
WHEREAS, pursuant to a Contract of Sale (the "Contract of Sale") by and
among Ground Round, Lone Star (as assignee of Lone Star Steakhouse & Saloon,
Inc.) dated June __, 1996, Lone Star is purchasing from Ground Round certain
assets of Ground Round, including Ground Round's interest as tenant under the
Lease;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties hereto agree as follows:
1. Effective as of [_______] ___, 1996 (the "Effective Date"), Ground Round
assigns, sets over and transfers to Lone Star all right, title and interest of
Ground Round in, to and under the Lease and Lone Star assumes and agrees to
perform any and all of the obligations to be performed by the tenant under the
Lease (as if Lone Star executed the Lease originally as tenant thereunder)
accruing from and after the Effective Date.
2. Ground Round and its successors and assigns do each hereby agree to
indemnify and hold and defend Lone Star free and harmless from and against any
and all claims, actions, suits, proceedings, demands, assessments, judgments,
liabilities, costs, fees and/or expenses arising out of or in connection with
any and all claims of any kind whatsoever under the Lease arising prior to the
Effective Date and Lone Star does hereby agree to indemnify and hold and defend
Ground Round free and harmless from and against any and all claims, actions,
suits, proceedings, demands, assessments, judgments, liabilities, costs, fees
and/or expenses arising out of or in connection with any and all claims under
the Leases in respect of any obligation assumed hereunder and arising from and
after the Effective Date.
<PAGE> 42
3. Ground Round and Lone Star each represents to the other that it has
dealt with no broker in connection with this transaction. Ground Round and Lone
Star each agree to indemnify and hold the other harmless for and from any claim
or damage arising out of the breach of the above representation.
4. This Assignment may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which, taken together, shall
constitute but one and the same instrument.
5. This Assignment and the obligations of the parties hereunder shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, shall be governed and construed in accordance with the
laws of the State of New York, without regard to conflict of law rules and may
not be modified or amended in any manner other than by a written agreement
signed by the party to be charged.
IN WITNESS WHEREOF, Ground Round and Lone Star have caused this Assignment
to be executed as of the date and year first above set forth.
THE Ground Round, INC.
By:
--------------------------------
Name:
Title:
[Assignee]
By:
--------------------------------
Name:
Title:
<PAGE> 43
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of _________, 1996, before me personally came
________________, to me known, who, being by me duly sworn, did depose and say
that he resides at _____________________________________, that he is the
_________ of The Ground Round, Inc., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the Board of Directors of said corporation.
----------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of _________, 1996, before me personally came
_______________, to me known, who, being by me duly sworn, did depose and say
that he resides at __________________________, that he is the _________ of
[assignee], the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the Board of
Directors of said Corporation.
----------------------------
Notary Public
<PAGE> 44
<TABLE>
SCHEDULE 4.2 - ALLOCATION OF PURCHASE PRICE AMONG ASSETS ACQUIRED
<CAPTION>
FEE/ PERSONAL
LOCATION STORE NO. LEASEHOLD PROPERTY TOTAL
<S> <C> <C> <C> <C>
Decatur, IL 21782 641,306 $113,694 $ 755,000
Danvers, MA 99768 1,713,170 82,830 1,796,000
Rochester 99796 1,504,922 72,078 1,577,000
(Henrietta), NY
Saugus, MA 36771 845,755 209,245 1,055,000
Voorhees, NJ 86745 1,307,882 240,118 1,548,000
West Chester, PA 99831 1,318,168 127,832 1,446,000
Wilmington, DE 99838 854,515 149,485 1,004,000
Mentor, OH 99856 1,010,562 92,438 1,103,000
Erie, PA 99877 334,938 73,062 408,000
Philadelphia (Red 99889 1,004,223 98,777 1,103,000
Lion), PA
Bel Air, MD 35753 597,768 218,232 816,000
Natick, MA 86754 756,544 95,456 852,000
(Framingham-Speen)
Albany-Colonie, NY 99765 441,504 130,496 572,000
Latham, NY 99808 663,698 79,302 743,000
Poughkeepsie, NY 99871 563,999 94,001 658,000
Rochester (Greece), 99874 501,231 62,769 564,000
----------- ---------- -----------
NY
$14,060,185 $1,939,815 $16,000,000
</TABLE>
<PAGE> 45
SCHEDULE 7 - LEASEHOLDS NEEDING RENEGOTIATION
LOCATION STORE NO.
West Chester, PA 99831
Bel Air, MD 35753
Natick, MA 86754
(Framingham-Speen)
Albany-Colonie, NY 99765
Latham, NY 99808
Poughkeepsie, NY 99871
Rochester (Greece), 99874
NY
<PAGE> 46
SCHEDULE 9.9
LANDLORD'S ESTOPPEL CERTIFICATE
, 1996
----
Re: Lease Dated:
Commencement Date:
Termination Date:
Tenant:
("Tenant")
Premises: Approximately _______ sq. feet
located at ___________________
______________ (the "Premises")
Ladies and Gentlemen:
The undersigned, the Landlord under the above-described lease (the
"Lease"), hereby confirms to [insert name of Lone Star assignee], a Delaware
corporation ("Purchaser"), as of the date hereof, the following:
1. Any improvements and space required to be furnished by the undersigned
pursuant to the terms of the Lease have been completed.
2. The Lease is in full force and effect and is a binding obligation of the
undersigned; and there are no existing or claimed defaults on the part of
Tenant or the undersigned under the terms thereof.
3. Subsequent to the date of the Lease, the Lease has not been amended,
modified or supplemented or superseded, except as follows:
______________________ (if none, so state). A fully executed copy of the
Lease, as amended, is attached hereto as Exhibit A (if none, so state).
<PAGE> 47
4. No security, rental, cleaning or other deposits have been made by Tenant
that are presently held by Landlord, except as follows:
____________________________ (if none, so state).
5. The undersigned has received no notice of prior sale, transfer, assignment,
hypothecation or pledge of the Lease, except to Purchaser; and the
undersigned has not assigned, sublet, hypothecated or otherwise transferred
all or any portion of its interest under the Lease.
6. The rents provided in the Lease commenced to accrue on the ____ day of
______________, 19___, the expiration date of the lease is _____________,
19__ and the amount of the monthly basic rent is currently $__________.
7. The undersigned has no first right of refusal with respect to the Premises,
except as follows: _________________________ (if none, so state).
8. The undersigned acknowledges that:
(a) Purchaser is purchasing from Tenant, certain assets of, including
Tenant's interest in the Premises and, in connection with the
purchase, will be receiving an assignment of Tenant's interest under
the Lease; and
(b) The undersigned consents to the assignment of Tenant's interest in the
Lease to Purchaser.
9. The above statements are made with the understanding that Purchaser will
rely on them in connection with the above-mentioned purchase of certain
assets of the Tenant. This letter shall not be deemed to alter or to modify
any of the terms, covenants or obligations of the Lease, except to the
extent, if any, specifically set forth herein.
By:
Its:
<PAGE> 48
SCHEDULE 10.11.1 - LICENSES AND PERMITS
LOCATION TYPE OF LICENSE LICENSE NUMBER
Decatur, IL (21782) State Liquor 96-1A-0016435
City Liquor 900-A
Danvers, MA (99768) Common Victualer 026400006
& All Alcoholic
Rochester (Henrietta), NY On-Premises Monroe
(99796) Liquor 97-3-MONRO-
OP-01560-252
Saugus, MA (36771) Common Victualer 107800016
& All Alcoholic
Voorhees, NJ (86745) Plenary Retail 0434-36-016-
Consumption 016-022
West Chester, PA (99831) Restaurant R-19520
Liquor
Wilmington, DE (99838) All Alcoholic No License #
Mentor, OH (99856) Full Alcoholic 3408450-0065
Erie, PA (99877) Restaurant R-19189
Liquor Amusement
Permit
Philadelphia (Red Lion), PA Restaurant R-9068
(99889) Liquor
Amusement Permit
Bel Air, MD (35753) Beer, Wine, 505
Liquor
Natick, MA (Framingham- Common Victualer 042800036
Speen) (86754) & All Alcoholic
Albany-Colonie, NY (99765) On-Premises Albany 97-2-ALBA-
Liquor OP-01056-252
Latham, NY (99808) On-Premises Albany
Liquor 97-2-ALBA
OP-01054-252
Poughkeepsie, NY (99871) On-Premises Dutchess
Liquor 97-2-DUTC-
OP-00624-252
Rochester (Greece), NY On-Premises Monroe
(99874) Liquor 97-3-MONRO-
OP-01558-252
<PAGE> 49
SCHEDULE 10.13.1 - LEASEHOLD DOCUMENTATION
Location and Document Type Parties Date
Store Number
(if any)
Saugus, MA Ground Lease Wal-Mart 7/9/93
# 36771 Stores/ Ground
Round
Voorhees, NJ Ground Lease White Horse 2/5/93
#86745 Agreement Associates/
Ground
Declaration of Voorhees Hotel 5/26/93
Reciprocal Associates/
Access and Ground Round/
Parking White Horse
Easement
Letter US Industries/ 5/21/96
Montgomery
Securities
West Chester, Lease Byblos/Howard 6/9/77
PA Johnson
# 99831
Addendum * 6/9/77
Assignment and Ground 11/13/85
Assumption of Round/Howard
Lease Johnson
Wilmington, DE Ground Lease Woodlawn 4/30/92
# 99838 Trustee/High-
Field
Partnership
Land Sublease HighField 12/3/92
Partnership/
Ground Round
Letter HighField 12/4/92
Partnership/
Ground Round
- - - --------
* If Parties are left blank, Parties are the same as those from the first
document listed for each location.
99236.13
<PAGE> 50
Mentor,OH Indenture of Ryska/ Howard 10/15/80
# 99856 Lease Johnson
Declaration of Ryska/Howard 10/15/80
Lease Johnson
Assignment and Ground Round/ 11/13/85
Assumption of Howard Johnson
Lease
Erie, PA Lease Dewart 11/30/78
#99877 Agreement Development/
Howard Johnson
Amended 11/30/78
Declaration of
Lease
License P & J Mack's/ 2/7/79
Agreement Howard Johnson
Indenture Tops/ Family 3/30/79
Restaurant
Enterprises
Declaration of 5/2/79
Lease
Amendment to 5/2/79
Lease
Second 6/19/79
Amendment to
Lease
Amended 6/19/79
Declaration of
Lease
Assignment and Ground Round/ 11/13/85
Assumption of Howard Johnson
Lease
Philadelphia Lease City of 2/27/81
(Red Lion), PA Agreement Philadelphia/
# 99889 PAID
Agreement of PAID/ Howard 2/27/81
Sublease Johnson
Declaration of PAID/ Howard 2/27/81
Lease Johnson
Sublease Howard 9/9/81
Agreement Johnson/
Friendly Ice
Cream
<PAGE> 51
Guaranty Howard 10/13/81
Johnson/
Hershey Foods
Memorandum of Howard 1/15/82
Sublease Johnson/
Friendly Ice
Cream
Consent to Howard 9/13/85
Assignment Johnson/
Ground Round
Assignment and Howard 11/13/85
Assumption of Johnson/
Lease Ground Round
Bel Air, MD Lease Bel Air South/ 7/22/93
# 35753 Agreement/ Ground Round
Addendum
Natick SubLease Mr. Hamburg, 3/12/73
(Framingham - Incorporated/
Speen), MA Howard Johnson
# 86754
Albany- Lease Lester 4/25/73
Colonie, NY Agreement Kommit/Wolf
# 99765 Road
Restaurant
Corp.
Assignment and Wolf Road 12/31/74
Assumption Restaurant
Agreement Corp./Howard
Johnson
Assignment and Lester Kommit/ 5/19/75
Assumption Wolf Road
Agreement Restaurant
Corp./Howard
Johnson
Amendment to Lester Kommit/ 5/19/75
Lease Howard Johnson
Assignment and Ground 11/13/85
Assumption of Round/Howard
Lease Johnson
Second Kommit 8/24/95
Amendment to Partners/
Lease Ground Round
<PAGE> 52
Latham, NY Indenture Latham 10/5/56
# 99808 Enterprises/
Howard Johnson
Lease Plaza at 3/8/76
Latham
Associates/
Howard Johnson
Amendment to 8/31/76
Lease
Agreement
Assignment and Ground Round/ 11/13/85
Assumption of Howard Johnson
Lease
Amendment to Plaza at 7/6/95
Lease Latham
Associates/
Ground Round
Poughkeepsie, Indenture Charleon 4/19/56
NY Estates/
# 99871 Howard Johnson
Amendment of 6/6/57
Lease
Loan Agreement Brooklyn 6/9/57
Savings Bank/
Howard Johnson
Assignment of Brooklyn 6/27/57
Lease Savings Bank/
Howard Johnson
Amendment of 11/21/60
Lease
Amendment of 5/31/61
Lease
Agreement (re: 12/6/63
Travelers
Insurance
Company)
Indenture 2/?/66
Amendment to Po'Keepsie 4/15/66
Lease Motor Hotel
Inc/ Howard
Johnson
Agreement (re: Poughkeepsie 2/19/71
Amendment to Associates/
Lease) Howard Johnson
<PAGE> 53
Memorandum of Poughkeepsie 2/19/71
Modification Associates/
Lease Howard Johnson
Assignment of Po'keepsie 9/8/77
Lease Associates/
Bradmar Motel
Sixth Bradmar Motel/ 10/24/78
Amendment To Howard Johnson
Lease
Consent to Ground Round/ 9/13/85
Assignment Howard Johnson
Assignment and Ground Round/ 11/13/85
Assumption of Howard Johnson
Lease
Rochester Lease Ralph 10/2/78
(Greece), NY DeStephano/
# 99874 Howard Johnson
Amendment to 7/12/79
Lease
Amendment to 11/4/83
Lease
Assignment and Ground Round/ 11/13/85
Assumption of Howard Johnson
Lease
<PAGE> 54
SCHEDULE 10.16 - OUTSTANDING LITIGATION
LOCATION STORE NO. SUITS OR OTHER PROCEEDINGS PENDING OR
THREATENED THAT ADVERSELY AFFECT
RESTAURANTS OR SELLER'S RIGHT TO
CONSUMMATE SALE
Decatur, IL 21782 None
Danvers, MA 99768 None
Rochester 99796 None
(Henrietta), NY
Saugus, MA 36771 None
Voorhees, NJ 86745 None
West Chester, PA 99831 Sexual Harassment Suit
Wilmington, DE 99838 None
Mentor, OH 99856 None
Erie, PA 99877 None
Philadelphia (Red 99889 None
Lion), PA
Bel Air, MD 35753 None
Natick, MA 86754 None
(Framingham-Speen)
Albany-Colonie, NY 99765 None
Latham, NY 99808 None
Poughkeepsie, NY 99871 None
Rochester (Greece), 99874 None
NY
<PAGE> 55
SCHEDULE 10.21 - ENVIRONMENTAL CONDITIONS
LOCATION STORE NO. DESCRIPTION
Decatur, IL 21782 NONE
Danvers, MA 99768 NONE
Rochester (Henrietta), NY 99796 NONE
Saugus, MA 36771 NONE
Voorhees, NJ 86745 NONE
West Chester, PA 99831 NONE
Wilmington, DE 99838 NOTE 1
Mentor, OH 99856 NONE
Erie, PA 99877 NONE
Philadelphia (Red Lion), PA 99889 NONE
Bel Air, MD 35753 NONE
Natick, MA (Framingham- 86754 NONE
Speen)
Albany-Colonie, NY 99765 NONE
Latham, NY 99808 NOTE 2
Poughkeepsie, NY 99871 NONE
Rochester (Greece), NY 99874 NONE
Note 1: There is an existing violation for grease in the sewer system.
Seller at its expense shall cure violation and have violation removed
of record prior to Closing. Seller shall indemnify Purchaser from
liability accruing prior to the Closing.
Note 2: Seller suspects that water heater may be insulated with
asbestos. Seller shall remove such insulation prior to Closing in
accordance with law.
<PAGE> 1
EXHIBIT 10.25
NINTH AMENDMENT AND DEFERRAL TO
AMENDED AND RESTATED CREDIT AGREEMENT
NINTH AMENDMENT AND DEFERRAL (this "AMENDMENT"), dated as of July, 29,
1996, to the Amended and Restated Credit Agreement, dated as of October 8, 1993,
as amended by a First Amendment, dated as of January 20, 1994, a Second
Amendment, dated as of February 10, 1995, a Third Amendment, dated as of May 10,
1995, a Fourth Amendment, dated as of November 22, 1995, a Fifth Amendment,
dated as of February 12, 1996, a Sixth Amendment, Waiver and Deferral dated as
of April 12, 1996, a Seventh Amendment, Waiver and Deferral, dated as of May 30,
1996 and an Eighth Amendment, Waiver and Deferral, dated as of June 27, 1996 (as
so amended, the "CREDIT AGREEMENT"), among The Ground Round, Inc. (the "FIRST
BORROWER"), a Delaware corporation, GR of Minn., Inc., a Delaware corporation
(the "SECOND BORROWER", and together with the First Borrower, the "BORROWERS"),
the banks named therein (the "BANKS"), The Bank of New York, as Agent (the
"AGENT") and The Chase Manhattan Bank (formerly known as Chemical Bank), as
Co-Agent.
PRELIMINARY STATEMENTS:
A. The Credit Agreement amended and restated the Amended and Restated
Credit Agreement, dated as of April 26, 1992, among the Borrowers, the banks
named therein and Citibank, N.A., as original agent.
B. The Borrowers desire to amend the Credit Agreement to (i) permit the
Borrowers to further defer payment of the principal of the Tranche A Term
Advances (which was originally due and payable on April 15, 1996 and which was
previously deferred to July 31, 1996 pursuant to the Eighth Amendment) to
September 13, 1996, (ii) permit the Borrowers to further defer the payment of
certain net proceeds of sale from certain restaurants as described in Section 1
herein to September 13, 1996, (iii) permit the Borrowers to defer the payment of
a certain fee payable pursuant to the terms of Section 2.07(e) of the Credit
Agreement to September 13, 1996, and (iv) prohibit Eurodollar Rate Advances
maturing after September 13, 1996.
C. The Lenders and the Agent are willing to amend the Credit Agreement with
respect to the foregoing subject to the terms and conditions contained herein.
<PAGE> 2
D. Unless otherwise defined herein, all terms defined in the Credit
Agreement shall be used herein as therein defined.
In consideration of the covenants, conditions and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. Deferrals.
---------
Subject to the satisfaction of the conditions set forth in Section 3 hereof
and so long as no Event of Default shall have occurred and be continuing under
the Credit Agreement, the Agent and the Lenders hereby agree to permit the
Borrowers (a) to defer to September 13, 1996 the payment of the principal of the
Tranche A Term Advances that is due and payable on July 31, 1996, (b) to defer
to September 13, 1996 the payment of 75% of Net Cash Proceeds of the sale of the
two restaurants located at Madeira, Ohio and Worcester, Massachusetts,
respectively, that is due and payable on July 31, 1996, which payment shall be
applied in accordance with the terms of Section 2.05(b)(ii) of the Credit
Agreement (c) to defer to September 13, 1996 the payment of $1,000,000 of the
Net Cash Proceeds of certain asset sales permitted to be retained by the
Borrowers pursuant to Section 3 of the Eighth Amendment and (d) to defer to
September 13, 1996 the payment of the restructuring fee that is due and payable
on July 31, 1996 pursuant to the terms of Section 2.07(e) of the Credit
Agreement.
SECTION 2. Amendments to Credit Agreement.
------------------------------
The Credit Agreement is, effective as of the date hereof, subject to the
satisfaction of the conditions precedent set forth in Section 3 below, hereby
amended as follows:
(a) Section 1.01 is hereby amended by inserting the following new
definition:
"`NINTH AMENDMENT': means the Ninth Amendment and Deferral, dated as of
July 29, 1996, to this Agreement".
2
<PAGE> 3
(b) Section 1.01 is hereby amended by deleting subsection (e) at the end of
the definition of "INTEREST PERIOD" and inserting in lieu thereof the following
new subsection (e):
"(e) notwithstanding anything to the contrary above, neither Borrower may
select any Interest Period that ends after September 13, 1996."
SECTION 3. Conditions of Effectiveness.
---------------------------
This Amendment shall become effective as of the date hereof, PROVIDED, that
the Agent shall have received counterparts of (i) this Amendment executed by the
Borrowers, the Lenders and the Agent, (ii) the Consent appended hereto (the
"CONSENT") executed by each of the Guarantors, and (iii) such other documents as
the Agent shall reasonably request.
SECTION 4. Representations and Warranties.
------------------------------
The Borrowers hereby (a) reaffirm and admit the validity and enforceability
of the Loan Documents and all of their obligations thereunder, (b) agree and
admit that they have no defenses to or offsets against any of their obligations
to the Agent or any Lender under the Loan Documents, and (c) represent and
warrant that there exists no Default or Event of Default and that the
representations and warranties contained in the Credit Agreement are true and
correct on and as of the date hereof.
SECTION 5. Reference to and Effect on the Loan Documents.
---------------------------------------------
(a) Upon the effectiveness of this Amendment, on and after the date hereof,
each reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein", or words of like import, and each reference in the other
Loan Documents to the Credit Agreement, shall mean and be a reference to the
Credit Agreement as amended hereby;
(b) Except as specifically amended or waived above, the Credit Agreement
and the Notes, and all other Loan Documents, shall remain in full force and
effect and are hereby ratified and confirmed. Without limiting the generality of
the foregoing, the Collateral Documents and all Collateral described therein
shall
3
<PAGE> 4
continue to secure the payment of the obligations of the Borrowers thereunder,
under the Credit Agreement, as amended hereby, and under the Notes and other
Loan Documents; and
(c) The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of any Lender or the Agent under any of the Loan Documents, nor, except
as provided herein, constitute a waiver of any provision of any of the Loan
Documents.
SECTION 6. Costs and Expenses.
------------------
The Borrowers agree to pay on demand all reasonable costs and expenses of
the Agent in connection with the arranging, preparation, reproduction, execution
and delivery of this Amendment and the other instruments and documents to be
delivered hereunder, including the reasonable fees and expenses of Zalkin, Rodin
& Goodman, LLP, special counsel for the Agent, with respect thereto, and of
local counsel, if any, who may be retained by said special counsel with respect
thereto.
4
<PAGE> 5
SECTION 7. Counterparts.
------------
This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be an
original and all of which together shall constitute but one and the same
document.
SECTION 8. Governing Law.
-------------
This Amendment is intended to be performed in the State of New York and
shall be construed and is enforceable in accordance with, and shall be governed
by, the internal laws of the State of New York without regard to principles of
conflict of laws.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
THE GROUND ROUND, INC.
By:
----------------------------------
Name:
Title:
GR OF MINN., INC.
By:
----------------------------------
Name:
Title:
THE BANK OF NEW YORK,
Individually and as Agent
By:
----------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, Individually and
as Co-Agent
By:
----------------------------------
Name:
Title:
BANK OF AMERICA ILLINOIS
By:
----------------------------------
Name:
Title:
NBD BANK
By:
----------------------------------
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
6
<PAGE> 7
By:
----------------------------------
Name:
Title:
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By:
----------------------------------
Name:
Title:
7
<PAGE> 8
CONSENT OF GUARANTORS
DATED AS OF JULY 29, 1996
The undersigned, as the Guarantors referred to in the foregoing Ninth
Amendment and Deferral, dated as of July 29, 1996, to the Amended and Restated
Credit Agreement, dated as of October 8, 1993, as amended by a First Amendment,
dated as of January 20, 1994, a Second Amendment, dated as of February 10, 1995,
a Third Amendment dated as of May 10, 1995, a Fourth Amendment dated as of
November 22, 1995, a Fifth Amendment, dated as of February 12, 1996, a Sixth
Amendment, Waiver and Deferral, dated as of April 12, 1996, a Seventh Amendment,
Waiver and Deferral, dated as of May 30, 1996 and an Eighth Amendment, Waiver
and Deferral dated as of June 27, 1996 among The Ground Round, Inc., GR of
Minn., Inc., the banks named therein, The Bank of New York, as Agent, and
Chemical Bank as Co-Agent, each hereby consents to the foregoing Amendment and
hereby confirms and agrees that, notwithstanding the effectiveness of said
Amendment, (i) the Guarantors have no defenses to or offsets against any of
their obligations to the Agent or any Lender under any Loan Document and the
Guaranty and each Collateral Document in effect on the date hereof to which it
is a party are, and shall continue to be, in full force and effect and are
hereby confirmed and ratified in all respects, except that, upon the
effectiveness of, and after the date of, said Amendment, all references in the
Guaranty and each such Collateral Document to the Credit Agreement shall mean
the Credit Agreement as amended by said Amendment and (ii) such Collateral
Documents consisting of security agreements and all collateral described therein
do, and shall continue to, secure the payments by the Borrowers referred to in
said Amendment of their obligations under the Credit Agreement, as amended by
said Amendment, and under the Notes.
GRH OF NJ, INC.
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
GROUND ROUND HOLDINGS, INC.
By:
----------------------------
Name:
----------------------------
<PAGE> 9
Title:
----------------------------
GROUND ROUND RESTAURANTS, INC.
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
G.R. GLENDLOC, INCORPORATED
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
GROUND ROUND OF BALTIMORE, INC.
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
GRXR OF BEL AIR, INC.
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
GRXR OF FREDERICK, INC.
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
GRXR OF HAGERSTOWN, INC.
<PAGE> 10
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-01-1995
<PERIOD-START> OCT-02-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,814
<SECURITIES> 0
<RECEIVABLES> 2,434
<ALLOWANCES> 1,059
<INVENTORY> 2,061
<CURRENT-ASSETS> 6,841
<PP&E> 167,895
<DEPRECIATION> 60,619
<TOTAL-ASSETS> 132,177
<CURRENT-LIABILITIES> 21,445
<BONDS> 52,445
<COMMON> 1,862
0
0
<OTHER-SE> 48,142
<TOTAL-LIABILITY-AND-EQUITY> 50,004
<SALES> 164,088
<TOTAL-REVENUES> 165,462
<CGS> 152,556
<TOTAL-COSTS> 178,370
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,633
<INCOME-PRETAX> (12,908)
<INCOME-TAX> (3,227)
<INCOME-CONTINUING> (9,681)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,681)
<EPS-PRIMARY> (.87)
<EPS-DILUTED> (.87)
</TABLE>
