<PAGE> 1
================================================================================
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
GROUND ROUND RESTAURANTS, INC.
(NAME OF SUBJECT COMPANY)
------------------------
GRR MERGER CORP.
GRR HOLDINGS, LLC
(BIDDERS)
COMMON STOCK, PAR VALUE $.16 2/3 PER SHARE
(TITLE OF CLASS OF SECURITIES)
399427 10 3
(CUSIP NUMBER OF CLASS OF SECURITIES)
BARBARA M. GINADER
GRR MERGER CORP.
21 CUSTOM HOUSE STREET
BOSTON, MA 02110
(617) 737-3700
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPY TO:
ERICA H. STEINBERGER, ESQ.
LATHAM & WATKINS
885 THIRD AVENUE
NEW YORK, NY 10022
(212) 906-1200
------------------------
<TABLE>
<S> <C>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
- ---------------------------------------------------------------------------------------------
$17,520,559.65 $3,505.00
- ---------------------------------------------------------------------------------------------
</TABLE>
* For purposes of calculating the filing fee only. This calculation assumes the
purchase of 10,618,521 shares of Common Stock (11,173,421 outstanding shares,
less 554,900 shares owned by GRR Holdings, LLC) at a price per share of
$1.65.
** 1/50 of 1% of Transaction Valuation.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: Form or Registration No.:
Filing Party: Date Filed:
</TABLE>
================================================================================
<PAGE> 2
SCHEDULE 14D-1
CUSIP NO. 399427 10 3
<TABLE>
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------
NAMES OF REPORTING PERSONS:
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
1
GRR MERGER CORP. 04-3383946
-----------------------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(A) [
]
2 (B) [ ]
-----------------------------------------------------------------------------------------------
SEC USE ONLY
3
-----------------------------------------------------------------------------------------------
SOURCES OF FUNDS
4
AF
-----------------------------------------------------------------------------------------------
[ ] CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(E) OR 2(F)
-----------------------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
NEW YORK
-----------------------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7
0
-----------------------------------------------------------------------------------------------
[ ] CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
8 CERTAIN SHARES
-----------------------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
9 0
-----------------------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
10 CO
-----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
SCHEDULE 14D-1
CUSIP NO. 399427 10 3
<TABLE>
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------
NAMES OF REPORTING PERSONS:
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
1
GRR HOLDINGS, LLC 04-3383947
-----------------------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(A) [
]
2 (B) [ ]
-----------------------------------------------------------------------------------------------
SEC USE ONLY
3
-----------------------------------------------------------------------------------------------
SOURCES OF FUNDS
4
OO
-----------------------------------------------------------------------------------------------
[ ] CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(E) OR 2(F)
-----------------------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
DELAWARE
-----------------------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7
554,900
-----------------------------------------------------------------------------------------------
[ ] CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
8 CERTAIN SHARES
-----------------------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
9 4.9%
-----------------------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
10 HC
-----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
This Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1")
relates to a tender offer by GRR Merger Corp., a New York corporation
("Purchaser") and a wholly owned subsidiary of GRR Holdings, LLC, a Delaware
limited liability company ("Parent"), to purchase all outstanding shares of
Common Stock, par value $.16 2/3 per share, of Ground Round Restaurants, Inc., a
New York corporation (the "Company"), for a purchase price of $1.65 per share,
net to the seller in cash, without interest thereon, upon the terms and subject
to the conditions set forth in the Offer to Purchase dated September 8, 1997
(the "Offer to Purchase") and in the related Letter of Transmittal (the "Letter
of Transmittal" and together with the Offer to Purchase, as the same may be
amended or supplemented from time to time, the "Offer"), and is intended to
satisfy the reporting requirements of Section 14(d) of the Securities Exchange
Act of 1934, as amended. Copies of the Offer to Purchase and the related Letter
of Transmittal are filed with this Schedule 14D-1 as Exhibits (a)(1) and (a)(2)
hereto, respectively.
ITEM 1. SECURITIES AND SUBJECT COMPANY.
(a) The name of the subject company is Ground Round Restaurants, Inc., a
New York corporation, which has its principal executive offices at 35 Braintree
Hill Office Park, Braintree, Massachusetts 02184-9078.
(b) The title of the securities which are the subject of the Offer is the
Company's Common Stock, par value $.16 2/3 per share (the "Shares"), and the
Offer is for all outstanding Shares at a price of $1.65 per Share, net to the
seller in cash, without interest thereon. The information set forth in the
"Introduction" to the Offer to Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Schedule 14D-1 is being filed jointly by the Purchaser
and Parent. The information set forth in the "Introduction" to the Offer to
Purchase, in Section 9 of the Offer to Purchase and in Schedule I to the Offer
to Purchase is incorporated herein by reference.
(e) and (f) None.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the "Introduction" to the Offer to
Purchase and in Sections 9, 11, and 13 of the Offer to Purchase is incorporated
herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in Section 10 of the Offer to Purchase is
incorporated herein by reference.
(b)-(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the "Introduction" to the Offer to
Purchase and in Sections 9 and 12 of the Offer to Purchase is incorporated
herein by reference.
(f) and (g) The information set forth in Sections 7 and 12 of the Offer to
Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the "Introduction" to the Offer to
Purchase, and in Sections 9 and 11 of the Offer to Purchase is incorporated
herein by reference.
<PAGE> 5
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE
SUBJECT COMPANY'S SECURITIES.
The information set forth in the "Introduction" to the Offer to Purchase
and in Sections 9, 11 and 13 of the Offer to Purchase is incorporated herein by
reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 17 of the Offer to Purchase is
incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable.
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b) and (c) The information set forth in Section 16 of the Offer to
Purchase is incorporated herein by reference.
(d) Not applicable.
(e) Not applicable.
(f) The information set forth in the Offer to Purchase, the Letter of
Transmittal, the Press Releases dated September 2, 1997 and September 8, 1997
and the Agreement and Plan of Merger dated as of August 29, 1997, among Parent,
the Purchaser and the Company, copies of which are attached hereto as Exhibits
(a)(1), (a)(2), (a)(7), (a)(8) and (c)(1), respectively, is incorporated herein
by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other
Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Banks, Trust
Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Text of Press Release dated September 2, 1997.
(a)(8) Text of Press Release dated September 8, 1997.
(a)(9) Summary Advertisement dated September 8, 1997.
(b) None.
(c)(1) Agreement and Plan of Merger dated as of August 29, 1997, among
Parent, the Purchaser and the Company.
(c)(2) Shareholder Agreement dated as of August 29, 1997, among Parent, the
Purchaser, Christian R. Guntner and David T. DiPasquale.
(d) None.
(e) Not applicable
(f) None.
<PAGE> 6
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
September 8, 1997
GRR HOLDINGS, LLC
By: Boston Ventures Limited
Partnership V,
its Managing Member
By: Boston Ventures Company V, L.L.C.,
its General Partner
By: /s/ BARBARA M. GINADER
------------------------------------
Name: Barbara M. Ginader
Title: Managing Director
GRR MERGER CORP.
By: /s/ BARBARA M. GINADER
------------------------------------
Name: Barbara M. Ginader
Title: President
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
------ ------------------------------------------------------------------- ------------
<C> <S> <C>
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other
Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Banks, Trust
Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Text of Press Release dated September 2, 1997.
(a)(8) Text of Press Release dated September 8, 1997.
(a)(9) Summary Advertisement dated September 8, 1997.
(b) None.
(c)(1) Agreement and Plan of Merger dated as of August 29, 1997, among
Parent, the Purchaser and the Company.
(c)(2) Shareholder Agreement dated as of August 29, 1997, among Parent,
the Purchaser, Christian R. Guntner and David T. DiPasquale.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
GROUND ROUND RESTAURANTS, INC.
AT
$1.65 NET PER SHARE
BY
GRR MERGER CORP.
A WHOLLY-OWNED SUBSIDIARY OF
GRR HOLDINGS, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY OCTOBER 3, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER BY AND
AMONG GRR HOLDINGS, LLC ("PARENT"), GRR MERGER CORP. (THE "PURCHASER") AND
GROUND ROUND RESTAURANTS, INC. (THE "COMPANY"). THE BOARD OF DIRECTORS OF THE
COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER, HAS DETERMINED THAT
THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY
AND ITS SHAREHOLDERS AND RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS ACCEPT THE
OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON (1) THERE HAVING BEEN VALIDLY TENDERED
PURSUANT TO THE OFFER, AND NOT PROPERLY WITHDRAWN, THAT NUMBER OF SHARES OF
COMMON STOCK OF THE COMPANY (THE "SHARES") WHICH, WHEN AGGREGATED WITH THE
SHARES OWNED BY PARENT, REPRESENT AT LEAST 90% OF THE OUTSTANDING SHARES, (2)
THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIODS UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, (3) THE
RECEIPT OF CERTAIN REGULATORY APPROVALS OF TRANSFERS OF LIQUOR LICENSES HELD BY
THE COMPANY OR ITS SUBSIDIARIES AND OF SATISFACTORY ASSURANCES OF EXEMPTION FROM
CERTAIN TIED-HOUSE STATUTES, AS SET FORTH IN PARAGRAPH (IX) OF SECTION 15, AND
(4) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTIONS 15 AND
16. AS OF THE DATE HEREOF, PARENT OWNS APPROXIMATELY 4.9% OF THE OUTSTANDING
SHARES. SEE SECTION 13.
CERTAIN SHAREHOLDERS OF THE COMPANY, OWNING IN THE AGGREGATE APPROXIMATELY
28% OF THE OUTSTANDING SHARES, HAVE ENTERED INTO AN AGREEMENT WITH PARENT AND
THE PURCHASER, PURSUANT TO WHICH SUCH SHAREHOLDERS HAVE AGREED TO TENDER AND
SELL ALL OF THEIR SHARES TO THE PURCHASER PURSUANT TO THE OFFER.
IMPORTANT
Any shareholder desiring to tender all or a portion of such shareholder's
Shares should either (i) complete and sign the Letter of Transmittal or a
facsimile thereof in accordance with the instructions in the Letter of
Transmittal, have such shareholder's signature thereon guaranteed if required by
Instruction 1 to the Letter of Transmittal, and mail or deliver the Letter of
Transmittal together with the certificate(s) representing tendered Shares and
all other required documents to the Depository, or tender such Shares pursuant
to the procedure for book-entry transfer set forth in Section 3 or (ii) request
such shareholder's broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for such shareholder. Shareholders having
Shares registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact such person if they desire to tender their
Shares. Any shareholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, may tender such
Shares pursuant to the guaranteed delivery procedure set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone numbers set forth on the back cover.
Additional copies of this Offer to Purchase, the Letter of Transmittal, the
Notice of Guaranteed Delivery and other related materials may be obtained from
the Information Agent or from brokers, dealers, commercial banks and trust
companies.
The Information Agent for the Offer is:
[Mackenzie Parners, Inc. Logo]
September 8, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
INTRODUCTION........................................................................... 1
1. Terms of the Offer............................................................... 2
2. Acceptance for Payment and Payment for Shares.................................... 4
3. Procedure for Tendering Shares................................................... 5
4. Withdrawal Rights................................................................ 7
5. Certain United States Federal Income Tax Consequences............................ 8
6. Price Range of Shares............................................................ 9
7. Effect of the Offer on the Market for the Shares, Inclusion in the Nasdaq 10
National Market and Exchange Act Registration....................................
8. Certain Information Concerning the Company....................................... 11
9. Certain Information Concerning Parent and the Purchaser.......................... 12
10. Source and Amount of Funds....................................................... 13
11. Background of the Offer; Past Contacts, Transactions or Negotiations with the 15
Company..........................................................................
12. Purpose of the Offer and the Merger; Plans for the Company; Appraisal Rights..... 17
13. Merger Agreement and Shareholder Agreement....................................... 19
14. Dividends and Distributions...................................................... 27
15. Certain Conditions of the Offer.................................................. 28
16. Certain Regulatory and Legal Matters............................................. 30
17. Fees and Expenses................................................................ 33
18. Miscellaneous.................................................................... 33
SCHEDULE I -- Directors, Executive Officers and Managing Directors..................... I-1
SCHEDULE II -- Additional Information Required by the New York Security Takeover
Disclosure Act.................................................... II-1
</TABLE>
<PAGE> 3
TO THE HOLDERS OF COMMON STOCK OF GROUND ROUND RESTAURANTS, INC.:
INTRODUCTION
GRR Merger Corp., a New York corporation (the "Purchaser") and a
wholly-owned subsidiary of GRR Holdings, LLC, a Delaware limited liability
company ("Parent"), hereby offers to purchase all outstanding shares of Common
Stock, par value $.16 2/3 per share (the "Shares"), of Ground Round Restaurants,
Inc., a New York corporation ("Ground Round" or the "Company"), at a purchase
price of $1.65 per Share, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in this Offer to Purchase
and in the related Letter of Transmittal (which together, as the same may be
amended or supplemented from time to time, constitute the "Offer"). Parent and
the Purchaser were organized by Boston Ventures, a private investment
partnership which focuses its investments in the service sector of the economy
to effect the transactions described herein. See Section 9.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "GROUND ROUND BOARD") HAS
UNANIMOUSLY APPROVED THE OFFER AND THE MERGER (AS HEREINAFTER DEFINED), HAS
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS
OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON (I) THERE HAVING BEEN VALIDLY TENDERED
PURSUANT TO THE OFFER, AND NOT PROPERLY WITHDRAWN, THAT NUMBER OF SHARES WHICH,
WHEN AGGREGATED WITH THE SHARES OWNED BY PARENT, REPRESENT AT LEAST 90% OF THE
OUTSTANDING SHARES (THE "MINIMUM CONDITION"), (II) THE EXPIRATION OR TERMINATION
OF ANY APPLICABLE WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT") (III) THE RECEIPT OF
CERTAIN REGULATORY APPROVALS OF TRANSFERS OF LIQUOR LICENSES HELD BY THE COMPANY
OR ITS SUBSIDIARIES ("LIQUOR LICENSES") AND OF SATISFACTORY ASSURANCES OF
EXEMPTION FROM CERTAIN TIED-HOUSE STATUTES, AS SET FORTH IN PARAGRAPH (IX) OF
SECTION 15, AND (IV) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE
SECTION 15 AND 16. AS OF THE DATE HEREOF, PARENT OWNS 554,900, OR APPROXIMATELY
4.9%, OF THE OUTSTANDING SHARES.
SIMULTANEOUSLY WITH ENTERING INTO THE MERGER AGREEMENT, SHAREHOLDERS OF THE
COMPANY (THE "SELLING SHAREHOLDERS"), OWNING IN THE AGGREGATE 3,102,100 SHARES,
OR APPROXIMATELY 28% OF THE OUTSTANDING SHARES, ENTERED INTO A SHAREHOLDER
AGREEMENT, DATED AS OF AUGUST 29, 1997 (THE "SHAREHOLDER AGREEMENT"), WITH
PARENT AND THE PURCHASER PURSUANT TO WHICH THE SELLING SHAREHOLDERS HAVE AGREED
TO TENDER AND SELL ALL OF THEIR SHARES TO THE PURCHASER PURSUANT TO THE OFFER.
SEE SECTION 13.
Rothschild Inc. ("Rothschild"), has delivered to the Ground Round Board its
written opinion dated August 29, 1997, that, as of such date, the consideration
to be received by the shareholders of the Company pursuant to the Offer and the
Merger is fair from a financial point of view, to such shareholders. A copy of
Rothschild's opinion is contained in the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Company's Schedule 14D-9") which is being
distributed to the Company's shareholders. Shareholders are urged to read the
opinion in its entirety and the discussion thereof in the Company's Schedule
14D-9, which sets forth the procedures followed, assumptions and qualifications
made, matters considered and limitations of the review undertaken by Rothschild
in connection with its opinion.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of August 29, 1997 (the "Merger Agreement"), by and among Parent, the
Purchaser and the Company. The Merger Agreement provides, among other things,
that as soon as practicable after the purchase of Shares pursuant to the Offer
and the satisfaction of other conditions set forth in the Merger Agreement, and
in accordance with the relevant provisions of the Business Corporation Law of
the State of New York (the "NYBCL"), the Purchaser will be merged with and into
the Company (the "Merger"). See Section 13. Following consummation of the
Merger, the Company will continue as the surviving corporation (the "Surviving
Corporation") and will be a wholly-owned subsidiary of Parent. At the effective
time of the Merger (the "Effective Time"), by virtue of the Merger and without
any action on the part of the holders thereof, each Share issued and outstanding
immediately prior to the Effective Time (other than Shares owned by Parent, the
Purchaser or any other wholly-owned subsidiary of Parent, Dissenting Shares (as
defined in the Merger
1
<PAGE> 4
Agreement) and any Shares held in the treasury of the Company or by any
subsidiary of the Company) shall be converted into and represent the right to
receive an amount in cash equal to the greater of $1.65 or any greater amount
per Share paid pursuant to the Offer as it may be amended, without interest (the
"Merger Consideration"), upon surrender of the certificate that, immediately
prior to the Effective Time, represented such issued and outstanding Share. The
Merger Agreement is more fully described in Section 13. Certain United States
federal income tax consequences of the sale of Shares pursuant to the Offer and
the Merger, as the case may be, are described in Section 5.
The Company has advised Parent and the Purchaser that, as of August 29,
1997, there were 11,173,421 Shares issued and outstanding. As of that date
Parent owned 554,900 Shares. As a result, as of such date, the Minimum Condition
would be satisfied if at least 9,501,179 Shares were validly tendered (and not
withdrawn) pursuant to the Offer. The Selling Shareholders have agreed to tender
3,102,100 Shares in the Offer. Upon the satisfaction of the Minimum Condition,
the Purchaser would be able to effect the Merger pursuant to the "short-form"
merger provisions of the NYBCL, without prior notice to, or any action by, any
other shareholder of the Company. See Section 12. Under the terms of the Merger
Agreement, Parent and the Purchaser may reduce the Minimum Condition to that
number of Shares which, together with the Shares owned by Parent or the
Purchaser, would constitute a majority of the outstanding Shares. Parent and the
Purchaser currently do not intend to reduce the Minimum Condition but reserve
the right to do so, subject to the terms of the Merger Agreement and the
applicable rules and regulations of the Securities and Exchange Commission (the
"Commission").
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4. The term "Expiration Date" means 12:00 Midnight, New
York City time, on Friday, October 3, 1997, unless the Purchaser shall have
extended the period of time for which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire. UNDER NO CIRCUMSTANCES WILL ANY
INTEREST BE PAID ON THE PURCHASE PRICE FOR TENDERED SHARES, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, the Purchaser expressly reserves the right, in
its sole discretion, at any time and from time to time, and regardless of
whether or not any of the events set forth in Section 15 shall have occurred or
shall have been determined by the Purchaser to have occurred, to (i) extend the
period of time during which the Offer is open, and thereby delay acceptance for
payment of and the payment for any Shares, by giving oral or written notice of
such extension to the Depositary and (ii) amend, modify or make any changes in
any terms and conditions of the Offer by giving oral or written notice to the
Depositary. The Merger Agreement provides that the Purchaser may not, without
the written consent of the Company, make any change in the Offer which decreases
the purchase price for tendered Shares below $1.65, changes the form of
consideration payable in the Offer, imposes conditions to the Offer in addition
to the conditions described in Section 15, increases the Minimum Condition,
extends the Expiration Date (except as set forth in the next paragraph), or
waives the Minimum Condition if such waiver would result in the purchase
pursuant to the Offer of less than that number of Shares which, together with
Shares owned by Parent, would constitute less than 50.1% of the outstanding
Shares.
In the Merger Agreement, the Purchaser has agreed to accept for payment and
pay for all Shares that have been validly tendered and not withdrawn pursuant to
the Offer at the earliest time following expiration of the Offer that all
conditions to the Offer set forth in Section 15 shall have been satisfied or
waived by the Purchaser. The Merger Agreement provides that the Purchaser may,
without the consent of the Company,
2
<PAGE> 5
extend the Offer (i) from time to time but not beyond 12:00 midnight, New York
City time, on October 22, 1997, if, at the scheduled expiration date of the
Offer, any of the conditions to the Purchaser's obligation to purchase Shares
are not satisfied or waived, until such time as such conditions are satisfied,
or (ii) if the Purchaser shall have waived the Minimum Condition as provided in
Section 9.03(a) of the Merger Agreement. See "Fees and Expenses" in Section 13.
The Purchaser has agreed, pursuant to the Merger Agreement, that, in the event
that the Minimum Condition is not satisfied or waived at the initial expiration
date of the Offer, the Purchaser will, upon written request of the Company,
extend the Offer for a period of up to ten further Business Days. For the
purposes of the Offer, "Business Day" means any day other than a Saturday,
Sunday or Federal holiday and consists of the time period from 12:01 a.m.
through 12:00 midnight, New York City time.
If by 12:00 Midnight, New York City time, on Friday, October 3, 1997 (or
any other time then set as the Expiration Date), any or all of the conditions to
the Offer have not been satisfied or waived, the Purchaser reserves the right
(but shall not be obligated), subject to the terms and conditions contained in
the Merger Agreement (including the limitations described above) and to the
applicable rules and regulations of the Commission, (i) to terminate the Offer
and not accept for payment or pay for any Shares and return all tendered Shares,
(ii) to waive all the unsatisfied conditions and accept for payment and pay for
all Shares validly tendered prior to the Expiration Date and not theretofore
properly withdrawn, (iii) to extend the Offer and, subject to the right of
shareholders to withdraw Shares until the Expiration Date, retain the Shares
that have been tendered during the period or periods for which the Offer is
extended or (iv) to amend the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer.
Subject to the applicable rules and regulations of the Commission and
subject to the limitations set forth in the Merger Agreement, the Purchaser also
expressly reserves the right, at any time and from time to time, in its sole
discretion, to delay payment for any Shares regardless of whether such Shares
were theretofore accepted for payment or to terminate the Offer and not to
accept for payment or pay for any Shares not theretofore accepted for payment or
paid for, upon the occurrence of any of the conditions set forth in Section 15,
by giving oral or written notice of such delay or termination to the Depositary.
The Purchaser's right to delay payment for any Shares or not to pay for any
Shares theretofore accepted for payment is subject to the applicable rules and
regulations of the Commission, including Rule 14e-1(c) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), relating to the
Purchaser's obligation to pay for or return tendered Shares promptly after the
termination or withdrawal of the Offer.
Any extension of the period during which the Offer is open, delay in
acceptance for payment or payment, termination or amendment of the Offer will be
followed, as promptly as practicable, by public announcement thereof, such
announcement, in the case of an extension, to be issued not later than 9:00
a.m., New York City time, on the next Business Day after the previously
scheduled Expiration Date in accordance with the public announcement
requirements of Rules 14d-4(c) and 14e-1(d) under the Exchange Act. Without
limiting the obligation of the Purchaser under such rules or the manner in which
the Purchaser may choose to make any public announcement, the Purchaser
currently intends to make announcements by issuing a press release to the Dow
Jones News Service and making any appropriate filing with the Commission.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Purchaser will disseminate additional tender offer materials and
extend the Offer if and to the extent required by Rules 14d-4(c), 14d-6(d) and
14e-1 under the Exchange Act. The minimum period during which a tender offer
must remain open following material changes in the terms of the Offer or
information concerning the Offer, other than a change in price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the relative materiality of the changed terms or information. With
respect to a change in price or a change in percentage of securities sought, a
minimum ten Business Day period is generally required to allow for adequate
dissemination to shareholders and investor response.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition, the expiration or termination of all waiting periods imposed by the
HSR Act, the receipt of certain regulatory approvals of transfers of Liquor
Licenses held by the Company or its subsidiaries and of satisfactory assurances
of
3
<PAGE> 6
exemption from certain tied-house statutes, as set forth in paragraph (ix) of
Section 15, and the satisfaction of the other conditions set forth in Section 15
below. The Purchaser reserves the right (but shall not be obligated) to waive
any or all such conditions. However, if the Purchaser waives the Minimum
Condition during the last five Business Days during which the Offer is open, the
Purchaser will be required to extend the Expiration Date so the Offer will
remain open for at least five Business Days after the announcement of such
waiver or amendment is first published, sent or given to holders of Shares.
The Company has provided the Purchaser with the Company's shareholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed to record holders of Shares whose names
appear on the shareholder list and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the shareholder list or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment, and will pay for, all
Shares validly tendered prior to the Expiration Date and not theretofore
withdrawn in accordance with Section 4 promptly after the later to occur of (a)
the Expiration Date and (b) the satisfaction or waiver of the conditions set
forth in Section 15. Subject to compliance with Rule 14e-1(c) under the Exchange
Act and any other applicable rules and regulations of the Commission and the
terms of the Merger Agreement, the Purchaser expressly reserves the right to
delay payment for Shares in order to comply in whole or in part with any
applicable law, including the HSR Act and applicable laws and regulations
relating to alcoholic beverage regulation. See Section 16. In all cases, payment
for Shares accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of (i) certificates for such Shares or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depositary Trust Company or the
Philadelphia Depositary Trust Company (collectively, the "Book-Entry Transfer
Facilities"), pursuant to the procedures set forth in Section 3, (ii) a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), with all required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message and (iii) any other documents required
by the Letter of Transmittal. The term "Agent's Message" means a message
transmitted by a Book-Entry Transfer Facility to, and received by, the
Depositary and forming a part of a Book-Entry Confirmation, which states that
such Book-Entry Transfer Facility has received an express acknowledgment from
the participant in such Book-Entry Transfer Facility tendering the Shares that
are the subject of the Book-Entry Confirmation that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Purchaser may enforce such agreement against the participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance of such Shares for payment. In all
cases, payment for Shares purchased pursuant to the Offer will be made by
deposit of the purchase price with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payment from the Purchaser
and transmitting such payment to tendering shareholders. Upon the deposit of
funds with the Depositary for the purpose of making payments to tendering
shareholders, the Purchaser's obligation to make such payment shall be
satisfied, and tendering shareholders must thereafter look solely to the
Depositary for payment of amounts owed to them by reason of the acceptance for
payment of Shares pursuant to the Offer. If, for any reason whatsoever,
acceptance for payment of any Shares tendered pursuant to the Offer is delayed,
or the Purchaser is unable to accept for payment Shares tendered pursuant to the
Offer, then, without prejudice to the Purchaser's rights under this Offer to
Purchase, the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and, subject to compliance with the applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act,
such Shares may not be withdrawn, except to the extent that the tendering
shareholders are entitled to withdrawal rights as described in Section 4.
4
<PAGE> 7
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE FOR THE
SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted
representing more Shares than are tendered, certificates representing such
unpurchased or untendered Shares will be returned, without expense to the
tendering shareholder (or, in the case of Shares delivered by book-entry
transfer to a Book-Entry Transfer Facility, such Shares will be credited to an
account maintained within such Book-Entry Transfer Facility), as promptly as
practicable after the expiration, termination or withdrawal of the Offer.
If, prior to the Expiration Date, the Purchaser increases the price being
paid for Shares accepted for payment pursuant to the Offer, such increased
consideration will be paid to all shareholders whose Shares are purchased
pursuant to the Offer, whether or not such Shares were tendered prior to such
increase in consideration.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its affiliates the right to purchase
Shares tendered pursuant to the Offer, but any such transfer or assignment will
not relieve the Purchaser of its obligations under the Offer or prejudice the
rights of tendering shareholders to receive payment for Shares validly tendered
and accepted for payment.
3. PROCEDURE FOR TENDERING SHARES
Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and any other required documents, must
be received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase prior to the Expiration Date and either (i)
certificates representing such Shares must be received by the Depositary along
with the Letter of Transmittal or such Shares must be tendered pursuant to the
procedure for book-entry transfer set forth below, and a Book-Entry Confirmation
must be received by the Depositary, in each case prior to the Expiration Date or
(ii) the guaranteed delivery procedure set forth below must be complied with. No
alternative, conditional or contingent tenders will be accepted.
Book-Entry Transfer. The Depositary will make a request to establish an
account with respect to the Shares at each Book-Entry Transfer Facility for
purposes of the Offer within two Business Days after the date of this Offer to
Purchase. Any financial institution that is a participant in a Book-Entry
Transfer Facility's system may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. Although delivery of Shares may be
effected through book-entry at a Book-Entry Transfer Facility prior to the
Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
any other required documents, must, in any case, be transmitted to and received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase prior to the Expiration Date or (ii) the guaranteed delivery
procedures described below must be complied with. DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantee. Signatures on the Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, or by any other bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Exchange Act (each of the
foregoing being referred to as an "Eligible Institution" and, collectively, as
"Eligible Institutions"), unless the Shares tendered thereby are tendered (i) by
a registered holder of Shares who has not completed either the box labeled
"Special Delivery Instructions" or the box labeled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of any
Eligible Institution. If the certificates evidencing Shares are registered in
the name of a person or persons other than the signer of the Letter of
Transmittal, or if payment is to be made or delivered to, or certificates for
unpurchased Shares are to be issued or returned to, a person other than the
registered owner or owners, then
5
<PAGE> 8
the tendered certificates must be endorsed or accompanied by duly executed stock
powers, in either case signed exactly as the name or names of the registered
owner or owners appear on the certificates, with the signatures on the
certificates or stock powers guaranteed by an Eligible Institution as provided
in the Letter of Transmittal. See Instructions 1 and 5 to the Letter of
Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all of
the following guaranteed delivery procedures are duly complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof), and any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and any other documents required
by the Letter of Transmittal are received by the Depositary within three
trading days after the date of execution of such Notice of Guaranteed
Delivery. A "trading day" is any day on which The Nasdaq National Market
System (the "NASDAQ National Market") operated by the National Association
of Security Dealers, Inc. (the "NASD"), is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE SHAREHOLDER TENDERING SUCH SHARES. IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book-Entry
Confirmation, (ii) a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with all required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message and
(iii) any other documents required by the Letter of Transmittal.
Backup Federal Income Tax Withholding. To prevent backup federal income
tax withholding with respect to payment for the Shares purchased pursuant to the
Offer, each tendering shareholder must provide the Depositary with his or her
correct taxpayer identification number ("TIN") and certify that such shareholder
is not subject to backup federal income tax withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal. See Section 5 and
Instruction 8 of the Letter of Transmittal. If the shareholder is a nonresident
alien or foreign entity not subject to back-up withholding, the shareholder must
give the Depositary a completed Form W-8 Certificate of Foreign Status prior to
receipt of any payments.
Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by the Purchaser, in its sole
discretion, and its determination will be final and binding on all parties. The
Purchaser reserves the absolute right to reject any or all tenders of any Shares
that are determined by it not to be in proper form or the acceptance of or
payment for which may, in the opinion of the Purchaser, be unlawful. The
Purchaser also reserves the absolute right to waive any of the conditions of the
Offer subject to the limitations
6
<PAGE> 9
set forth in the Merger Agreement, or any defect or irregularity in the tender
of any Shares. The Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and the Instructions to the Letter of
Transmittal) will be final and binding on all parties. No tender of Shares will
be deemed to have been validly made until all defects and irregularities have
been cured or waived. None of the Purchaser, Parent, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification.
Proxy. By executing the Letter of Transmittal as set forth above
(including through delivery of an Agent's Message), a tendering shareholder
irrevocably appoints designees of the Purchaser as such shareholder's
attorneys-in-fact and proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
shareholder's right with respect to the Shares tendered by such shareholder and
accepted for payment by the Purchaser (and any and all other Shares or other
securities or rights issued or issuable in respect of such Shares on or after
August 29, 1997). All such powers of attorney and proxies shall be considered
coupled with an interest in the tendered Shares. This appointment is effective
upon the acceptance for payment of the Shares by the Purchaser. Upon acceptance
for payment, all prior powers of attorney and proxies given by the shareholder
with respect to such Shares or other securities or rights will, without further
action, be revoked and no subsequent proxies may be given or written consent
executed (and, if given or executed, will not be deemed effective). The
designees of the Purchaser will, with respect to the Shares and other securities
or rights, be empowered to exercise all voting and other rights of such
shareholder as they in their sole judgment deem proper in respect of any annual
or special meeting of the Company's shareholders, any adjournment or
postponement thereof, actions by written consent in lieu of such meeting or
otherwise. The Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon the Purchaser's acceptance for
payment of such Shares, the Purchaser must be able to exercise full voting,
consent and other rights with respect to such Shares and the other securities or
rights issued or issuable in respect of such Shares, including voting at any
meeting of shareholders (whether annual or special or whether or not adjourned)
or acting by written consent without a meeting in respect of such Shares.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering shareholder's acceptance of the terms and
conditions of the Offer, as well as the tendering shareholder's representation
and warranty that (i) such shareholder has the full power and authority to
tender, sell, assign and transfer the tendered Shares (and any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after August 29, 1997), and (ii) when the same are accepted for payment by the
Purchaser, the Purchaser will acquire good and unencumbered title thereto, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claims. The Purchaser's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the tendering
shareholder and the Purchaser upon the terms and subject to the conditions of
the Offer.
4. WITHDRAWAL RIGHTS
Except as otherwise provided in this section, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by the Purchaser pursuant to the Offer, may also be
withdrawn at any time after November 6, 1997. If purchase of or payment for
Shares is delayed for any reason or if the Purchaser is unable to purchase or
pay for Shares for any reason, then, without prejudice to the Purchaser's rights
under the Offer, tendered Shares may be retained by the Depositary on behalf of
the Purchaser and may not be withdrawn except to the extent that tendering
shareholders are entitled to withdrawal rights as set forth in this section,
subject to Rule 14e-1(c) under the Exchange Act, which provides that no person
who makes a tender offer shall fail to pay the consideration offered or return
the securities deposited by or on behalf of security holders promptly after the
termination or withdrawal of the tender offer.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to
7
<PAGE> 10
be withdrawn, the number of Shares to be withdrawn and the name in which the
certificates representing such Shares are registered, if different from that of
the person who tendered the Shares. If certificates for Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such Shares have
been tendered for the account of an Eligible Institution, the signatures on the
notice of withdrawal must be guaranteed by an Eligible Institution. If Shares
have been tendered pursuant to the procedure for book-entry transfer set forth
in Section 3, any notice of withdrawal must also specify the name and number of
the account at the applicable Book-Entry Transfer Facility to be credited with
the withdrawn Shares and must otherwise comply with such Book-Entry Transfer
Facility's procedures. All questions as to the form and validity (including the
time of receipt) of any notice of withdrawal will be determined by the
Purchaser, in its sole discretion, whose determination will be final and binding
on all parties. None of the Purchaser, Parent, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be retendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3.
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income
tax consequences of the Offer and the Merger to holders whose Shares are
purchased pursuant to the Offer or whose Shares are converted to cash in the
Merger (including pursuant to the exercise of appraisal rights). This summary
does not, however, purport to be a complete analysis of all the potential tax
effects of the Offer and the Merger. This summary is based on current provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), currently
applicable Treasury regulations and judicial and administrative decisions and
rulings. There can be no assurance that the Internal Revenue Service ("IRS")
will not take a contrary view, and no ruling from the IRS has been or will be
sought. Legislative, judicial or administrative changes may be forthcoming that
could alter or modify the statements and conclusions set forth herein. Any such
changes or interpretations could be retroactive and could affect the tax
consequences to holders whose Shares are purchased pursuant to the Offer. The
discussion does not purport to deal with all aspects of United States federal
income taxation that may affect any particular holder in light of such holder's
individual investment circumstances, and is not intended for certain types of
holders subject to special treatment under the United States federal income tax
law (e.g., holders of Shares in whose hands Shares are not capital assets,
holders who received their Shares pursuant to the exercise of employee stock
options or otherwise as compensation, financial institutions, brokerdealers,
insurance companies, tax-exempt organizations, non United States persons or
persons who hold their Shares as part of a hedge, straddle, or conversion
transaction).
EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO
DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH HOLDER AND THE
PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION
AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER INCOME TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger
(including pursuant to the exercise of appraisal rights) will be a taxable
transaction for federal income tax purposes under the Code, and also may be a
taxable transaction under applicable state, local, foreign and other income tax
laws. In general, for federal income tax purposes, a holder of Shares will
recognize gain or loss equal to the difference between his or her adjusted tax
basis in the Shares sold pursuant to the Offer or converted to cash in the
Merger and the amount of cash received therefor. Gain or loss must be determined
separately for each block of Shares (i.e., Shares acquired at the same cost in a
single transaction) sold pursuant to the Offer or converted to cash in the
Merger, although, under proposed legislation not yet effective, gain or loss
would be determined based on the average tax basis of all Shares held by the
holder of the Shares. Such gain or loss generally will be capital gain or loss
provided the Shares are a capital asset in the hands of the shareholders and
will be long-term capital
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<PAGE> 11
gain or loss if, on the date of sale (or, if applicable, the date of the
Merger), the Shares were held for more than one year. If a holder exercises such
holder's appraisal rights and receives an amount treated as interest for federal
income tax purposes, such amount will be taxed as ordinary income.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%. Backup withholding generally applies if
the holder (a) fails to furnish such holder's social security number or tax
payer identification number ("TIN"), (b) furnishes an incorrect TIN, (c) is
subject to backup withholding due to previous failures to file a federal income
tax return including reportable interest or dividend payments, or (d) under
certain circumstances, fails to provide a certified statement, signed under
penalties of perjury, that such holder is not subject to backup withholding due
to previous failures to file a federal income tax return including reportable
interest or dividend payments. Backup withholding is not an additional tax, but
rather it is an advance tax payment that is subject to refund if and to the
extent that it results in an overpayment of tax. Certain taxpayers are generally
exempt from backup withholding, including corporations and financial
institutions. Certain penalties apply for failure to furnish correct information
and for failure to include reportable payments in income. Each holder of Shares
should consult with his or her own tax advisor as to his or her qualification
for exemption from backup withholding and the procedure for obtaining such
exemption. Tendering holders of Shares may be able to prevent backup withholding
by completing the Substitute Form W-9 included in the Letter of Transmittal. See
Section 3.
6. PRICE RANGE OF SHARES
According to the Company's Annual Report on Form 10-KA, filed with the
Commission on March 18, 1997 (the "Company 10-K"), the Shares are included in
the Nasdaq National Market under the symbol "GRXR." Prior to June 24, 1993, the
Shares were traded on the American Stock Exchange. The following table sets
forth for the periods indicated, the reported high and low closing sales prices
per Share on the Nasdaq National Market as reported in the Company 10-K with
respect to the fiscal years ended October 1, 1995 and September 29, 1996, and as
reported by published financial sources with respect to periods after September
29, 1996.
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
Fiscal 1995:
First Quarter.............................................. $8.63 $6.00
Second Quarter............................................. 7.13 5.00
Third Quarter.............................................. 5.50 2.75
Fourth Quarter............................................. 6.56 3.13
Fiscal 1996:
First Quarter.............................................. 3.69 2.56
Second Quarter............................................. 3.88 2.56
Third Quarter.............................................. 5.06 2.81
Fourth Quarter............................................. 3.13 2.06
Fiscal 1997:
First Quarter.............................................. 2.69 1.50
Second Quarter............................................. 2.50 1.38
Third Quarter.............................................. 1.63 1.25
Fourth Quarter (through August 29, 1997)................... 2.25 1.31
</TABLE>
On August 29, 1997, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, the closing sale price
per Share on the Nasdaq National Market as reported by published financial
sources was $1.50. On September 5, 1997, the last full day of trading prior to
the commencement of the Offer, the last reported sales price per Share was
$1.69. HOLDERS OF SHARES ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
SHARES.
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<PAGE> 12
The Company has not paid, and has publicly stated it does not intend to
pay, any cash dividends on the Shares. See Section 14.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, INCLUSION IN THE NASDAQ
NATIONAL MARKET AND EXCHANGE ACT REGISTRATION
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and the number of holders of Shares,
and could adversely affect the liquidity and market value of the remaining
Shares held by shareholders other than the Purchaser.
The Shares are currently included in the Nasdaq National Market. Depending
upon the number of Shares purchased pursuant to the Offer, the Shares may no
longer meet the requirements of the NASD for continued inclusion in the Nasdaq
National Market, which require that an issuer have at least 200,000 publicly
held shares, held by at least 400 shareholders or 300 shareholders of round
lots, with a market value of at least $51,000,000 and have net tangible assets
of at least $1,000,000, $2,000,000 or $4,000,000, depending on profitability
levels during the issuer's four most recent fiscal years. If these standards are
not met, the Shares might nevertheless continue to be included in the NASD's
Nasdaq Stock Market with quotations published in the Nasdaq "additional list" or
in one of the "local lists," but if the number of holders of the Shares were to
fall below 300, or if the number of publicly held Shares were to fall below
100,000 or there were not at least two registered and active market makers for
the Shares, the NASD's rules provide that the Shares would no longer be
"qualified" for Nasdaq Stock Market reporting and the Nasdaq Stock Market would
cease to provide any quotations. Shares held directly or indirectly by
directors, officers or beneficial owner of more than 10% of the Shares are not
considered as being publicly held for this purpose. The Company has advised
Parent and the Purchaser that, as of September 3, 1997, there were approximately
840 holders of record of Shares and there were 11,173,421 Shares outstanding.
If, as a result of the purchase of Shares pursuant to the Offer or otherwise,
the Shares no longer meet the requirements of the NASD for continued inclusion
in the Nasdaq National Market or in any other tier of the Nasdaq Stock Market
and Shares are no longer included in the Nasdaq National Market or in any other
tier of the Nasdaq Stock Market, as the case may be, the market for Shares could
be adversely affected.
In the event that the Shares will no longer be listed or traded on the
Nasdaq National Market or meet the requirements of the NASD for continued
inclusion in any tier of the Nasdaq Stock Market, it is possible that the Shares
would continue inclusion in any tier of the Nasdaq Stock Market, it is would be
reported by other sources. The extent of the public market for the Shares and
the availability of such quotations would, however, depend upon the number of
holders of Shares remaining, at such time, the interests in maintaining a market
in Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act, as described below, and other
factors.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if there are fewer than 300 record holders of such Shares. It is the intention
of the Purchaser to seek to cause an application for such termination to be made
as soon after consummation of the Offer as the requirements for termination of
registration of such Shares are met. If such registration were terminated, the
Company would no longer legally be required to disclose publicly in proxy
materials distributed to shareholders the information which it now must provide
under the Exchange Act or to make public disclosure of financial and other
information in annual, quarterly and other reports required to be filed with the
Commission under the Exchange Act; the Company would no longer be subject to
Rule 13e-3 under the Exchange Act relating to "going private" transactions; and
the officers, directors and 10% shareholders of the company would no longer be
subject to the "short swing" insider trading reporting and profit recovery
provisions of the Exchange Act. Furthermore, if such registration were
terminated, persons holding "restricted securities" of the Company may be
deprived of their ability to dispose of such securities under Rule 144 or Rule
144A promulgated under the Securities Act of 1933, as amended.
If registration of the Shares is not terminated prior to the Merger, the
Shares will no longer be included in any tier of the Nasdaq Stock Market, and
the registration of the Shares under the Exchange Act will be terminated,
following the consummation of the Merger.
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<PAGE> 13
The Shares are currently "margin securities" under the regulation of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of such Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers. If
registration of Shares under the Exchange Act were terminated, such Shares would
no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase, including financial information,
has been furnished by the Company or has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources. Although neither the Purchaser nor Parent has any knowledge that would
indicate that statements contained herein based upon such documents are untrue,
neither the Purchaser nor Parent assumes any responsibility for the accuracy or
completeness of the information concerning the Company furnished by the company
or contained in such documents and records or for any failure by the Company to
disclose events which may have occurred or may affect the significance or
accuracy of any such information but which are unknown to the Purchaser or
Parent.
The Company is a New York corporation with its principal executive offices
located at 35 Braintree Hill Office Park, Braintree, Massachusetts 02184. The
Company is a holding company with principal subsidiaries that operate 121 and
franchise 41 family-oriented, full-service, casual dining restaurants in 23
states in the Northeast, Mid-Atlantic and Midwest regions of the United States
and franchises one restaurant in Canada. Ground Round restaurants offer a broad
selection of high quality, moderately priced menu items, including a choice of
appetizers, entree salads, specialty sandwiches, the one-half pound THE GROUND
ROUNDER(R) hamburger and entrees featuring seafood, baby back ribs, steak,
chicken and pasta, as well as full liquor service.
Set forth below is certain summary consolidated financial data with respect
to the Company excerpted or derived in part from financial information contained
in the Company 10-K, and the Company's Annual Report on Form 10-K for the fiscal
year (52 weeks) ended October 1, 1995 and the Company's Quarterly Reports on
Form 10-Q for the fiscal quarters (13 weeks) ended June 29, 1997 and June 30,
1996. More comprehensive financial information is included in such reports and
other documents filed by the Company with the Commission, and the following
summary is qualified in its entirety by reference to such reports and such other
documents and all the financial information (including any related notes)
contained therein. Such reports and other documents should be available for
inspection and copies thereof should be obtainable in the manner set forth
below.
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<PAGE> 14
GROUND ROUND RESTAURANTS, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
(39 WEEKS) ENDED YEAR (52 WEEKS) ENDED
------------------- ---------------------------------------
JUNE 29, JUNE 30, SEPTEMBER 29, OCTOBER 1, OCTOBER 2,
1997 1996 1996 1995 1994
-------- -------- ------------- ---------- ----------
UNAUDITED
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUE................................. $142,086 $165,462 $ 218,833 $ 230,406 $ 243,971
Costs and expenses...................... 146,389 178,370 246,154 238,022 234,785
Operating income (loss) from continuing
operations............................ (22,506) (2,659) 13,277
Net income (loss)....................... (4,303) (9,681) (22,947) (5,710) 6,246
Net income (loss) per common share...... (.39) (.87) (2.05) (0.51) 0.56
BALANCE SHEET DATA:
Total current assets.................... $ 7,834 $ 6,841 $ 21,957 $ 9,739 $ 7,794
Total assets............................ 99,335 132,177 121,238 145,356 156,772
Total current liabilities............... 56,444 21,445 35,131 25,400 23,110
Long-term debt and capital lease
obligations........................... 1,780 52,445 39,947 50,303 57,868
Shareholders' equity.................... 32,433 50,004 36,737 59,684 65,036
</TABLE>
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith, files periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. The Company is required to disclose in such proxy
statements certain information, as of particular dates, concerning the Company's
directors and officers, their remuneration, stock options granted to them, the
principal holders of the Company's securities and any material interests of such
persons in transactions with the Company. Such reports, proxy statements and
other information may be inspected at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, New York 10048, and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60601. Copies of such
material also may be obtained at prescribed rates from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a World Wide Web site on the internet at
http://www.sec.gov that contains reports and other information regarding
registrants that file electronically with the Commission.
9. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER
Parent, a Delaware limited liability company formed on August 6, 1997, and
the Purchaser, a New York corporation formed on August 8, 1997, were each formed
by Boston Ventures for the purpose of acquiring the Company and have not
conducted any unrelated activities since their formation. All of the outstanding
common stock of the Purchaser is owned by Parent.
Boston Ventures Limited Partnership V ("Boston Ventures LP V"), the holder
of a majority of Parent's outstanding membership interests, is a private
investment limited partnership formed in Delaware and managed by its General
Partner, Boston Ventures Company V, L.L.C., a Delaware limited liability company
("Boston Ventures Company V"). Boston Ventures Company V, as general partner,
retains Boston Ventures Management, Inc. ("Boston Ventures") to advise and
assist in investment decisions and to provide other management services to the
partnership.
Boston Ventures is a private investment management firm concentrating on
expansion capital, leveraged acquisitions, corporate partnering,
recapitalization and strategic investments. Since its inception in 1983, Boston
Ventures has raised investment capital in five funds, whose investments are
focused in the service
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<PAGE> 15
sector of the economy, with a strong emphasis on the communications, media and
leisure time markets, including Continental Cablevision (now Media One),
Metromedia, American Media, Billboard Communications, NewsCorp., River City
Broadcasting and Motown Records.
The business address of each of Parent, the Purchaser, Boston Ventures LP V
and Boston Ventures Company V is 21 Custom House Street, Boston, Massachusetts
02110. Schedule I to this Offer to Purchase contains information with respect to
the executive officers and directors of the Purchaser and the managing directors
of Boston Ventures Company V.
As otherwise set forth in this Offer to Purchase, none of Parent or the
Purchaser, nor, to the best knowledge of Parent and the Purchaser, any of the
persons listed in Schedule I hereto owns or has any right to acquire any Shares,
and none of them has effected any transaction in the Shares during the past 60
days.
Except as set forth in this Offer to Purchase, neither Parent nor the
Purchaser, nor, to the best knowledge of Parent and the Purchaser, any of the
persons listed in Schedule I hereto has any contract, arrangement, understanding
or relationship with any other person with respect to any securities of the
Company, including, without limitation, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any securities of the
Company, joint ventures, loan or option arrangements, puts or calls, guaranties
of loans, guaranties against loss or the giving or withholding of proxies.
Except as set forth in this Offer to Purchase, none of Parent or the Purchaser,
nor, to the best knowledge of Parent and the Purchaser, any of the persons
listed in Schedule I hereto has had any transactions with the Company or any of
its executive officers, directors or affiliates that would require reporting
under the rules of the Commission.
Except as set forth in this Offer to Purchase, there have been no contacts,
negotiations or transactions between any of Parent or the Purchaser, or their
respective subsidiaries, or, to the best knowledge of Parent and the Purchaser,
any of the persons listed in Schedule I hereto, on the one hand, and the Company
or its executive officers, directors or affiliates, on the other hand,
concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, election of directors, or a sale or other transfer of
a material amount of assets.
10. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by the Purchaser to purchase all of the
Shares pursuant to the Offer and the Merger is approximately $17.5 million. The
Purchaser plans to obtain all such funds, together with approximately $7.5
million of additional funds currently contemplated to be contributed to the
Company as set forth in the Bank Letter of Intent (see below) to pay related
fees and expenses of the Offer and for working capital and other purposes
following consummation of the Offer, through capital contributions from Parent.
Parent plans to obtains such funds from committed capital of Boston Ventures LP
V. The Offer is not subject to any financing condition.
The Company currently is a guarantor under an Amended and Restated Credit
Agreement (as amended, the "Existing Credit Agreement"), dated as of September
12, 1996, among its direct and indirect subsidiaries The Ground Round, Inc.
("GRI"), and GR of Minn., Inc. (together with GRI, the "Borrowers"), each of the
financial institutions party thereto (the "Lenders"), The Bank of New York, as
agent for the Lenders (the "Agent"), and The Chase Manhattan Bank, as co-agent
for the Lenders.
The Bank Standstill Agreement. In connection with and as a condition to
Parent and the Purchaser's execution of the Merger Agreement, the Lenders have
agreed, pursuant to a letter agreement, dated as of August 29, 1997 (the "Bank
Standstill Agreement"), among the parties to the Existing Credit Agreement, to
waive the Borrowers' and their subsidiary guarantors' compliance with the EBITDA
maintenance covenant contained in the Existing Credit Agreement for the fiscal
months ended July, August and September 1997. Pursuant to the Bank Standstill
Agreement, the Borrowers (i) have deposited into an interest-bearing account
(the "Account") (a) $235,000, representing accrued and unpaid interest on the
term loans under the Existing Credit Agreement and (b) $50,000, representing the
net cash proceeds from the sale of one of the Borrowers' Liquor Licenses and
(ii) will deposit into the Account (a) the Insurance Proceeds (as defined below)
and (b) an amount equal to interest on the term loans under the Existing Credit
Agreement which will become
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<PAGE> 16
due and payable on August 23, 1997 and September 30, 1997. The Borrowers will be
permitted to withdraw such funds from the Account, so long as, among other
things (i) on the date of each withdrawal (a) the Borrowers shall have
demonstrated to the Agent that a cash deficiency exists in their business and
that such funds will be used in the ordinary course of their business and (b) no
default or event of default under the Existing Credit Agreement shall have
occurred and be continuing (other than events of default occurring prior to the
date of the Bank Standstill Agreement and disclosed in writing to the Agent),
and (ii) neither the Purchaser nor the Company shall have announced that the
Offer has been terminated. In consideration for executing the Bank Standstill
Agreement, the Borrowers have agreed that, so long as the Bank Standstill
Agreement is in effect, (x) each Eurodollar Rate Loan (as defined in the
Existing Credit Agreement) will convert automatically, on the last day of the
then-existing interest period therefor, into an Alternate Base Rate Loan (as
defined in the Existing Credit Agreement) and (y) the obligation of the Lenders
to make, or convert term loans into, Eurodollar Rate Loans, shall be suspended.
The Bank Standstill Agreement will terminate upon the earlier to occur of (i)
the announcement by the Purchaser or the Company that the Offer has been
terminated, (ii) October 22, 1997, (iii) the closing of the New Credit Agreement
(as defined below) or (iv) the occurrence and continuance of a default or event
of default under the Existing Credit Agreement (other than events of default
occurring prior to the date of the Bank Standstill Agreement and disclosed in
writing to the Agent); provided that the Agent and the Lenders have agreed to
act in a commercially reasonable manner in considering any request by the
Borrowers to waive any default or event of default under the Existing Credit
Agreement occurring after the date of the Bank Standstill Agreement.
The Bank Letter of Intent. The consummation of the Offer would constitute
an event of default under the Existing Credit Agreement. Pursuant to a letter of
intent, dated August 29, 1997 (the "Bank Letter of Intent"), among the parties
to the Existing Credit Agreement, in connection with the execution of the Merger
Agreement, each of the parties to the Existing Credit Agreement has agreed,
subject to certain conditions as set forth below, to proceed in good faith to
amend the Existing Credit Agreement (as amended, the "New Credit Agreement")
upon consummation of the Offer and the Merger.
The term of the New Credit Agreement will be extended to October 7, 2000,
and the total commitments under the New Credit Agreement initially will be
$41,828,778.64 (the "Total Commitment"), of which $37,138,360.22 (the "Revolving
Credit Facility Commitment") will take the form of a revolving credit facility
(the "Revolving Credit Facility") and $4,690,418.42 (the "Letter of Credit
Commitment") will be available for letters of credits ("Letters of Credit").
Borrowings under the Revolving Credit Facility will bear interest at either (i)
the Alternate Base Rate (as defined in the Existing Credit Agreement) plus 0.75%
or (ii) the Eurodollar Rate (as defined in the Existing Credit Agreement) plus
2.65%. The Borrowers will also pay to the Lenders the following fees in
connection with the New Credit Agreement: (i) a commitment fee equal to 0.50% of
the unused Total Commitment less the face amount of all outstanding Letters of
Credit; (ii) a fee equal to 1.0% of the average daily amount available to be
drawn under any outstanding Letters of Credit; and (iii) an amendment fee equal
to 1.0% of the Total Commitment.
The Revolving Credit Facility Commitment will be permanently reduced by (i)
$500,000 at the end of each of the third and fourth fiscal quarters of 1998;
(ii) $1,000,000 at the end of each fiscal quarter of fiscal year 1999; and (iii)
$1,250,000 at the end of each fiscal quarter of fiscal year 2000. In addition,
100% of the proceeds of asset sales and from tax refunds must be used to repay
obligations under the Revolving Credit Facility and to reduce the Revolving
Credit Facility Commitment and 50% of excess cash flow shall be applied to
reduce the Total Commitment until such amount reaches $26,000,000 (after giving
effect to all other reductions of the Total Commitments). Letters of Credit that
have expired and have been returned undrawn or have been reduced will result in
a permanent reduction of the Letter of Credit Commitment by the amount of such
expired or returned Letter of Credit or the amount of such reduction, as
applicable.
The New Credit Agreement will contain covenants similar to those in the
Existing Credit Agreement, with certain changes including: (i) a requirement
that GRI use its commercially reasonable efforts to transact a sale/leaseback
for at least 18 fee properties on terms and conditions reasonably acceptable to
GRI and the Lenders (the "Sale/Leaseback Transaction"; a description of the
material terms of a commitment letter being negotiated by the Company with CNL
Fund Advisors, Inc. for the Sale/Leaseback Transaction is set forth in the
Company's Schedule 14D-9); (ii) requirements regarding maintenance of certain
levels of EBITDA,
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<PAGE> 17
Profit After Controllables (as defined in the Existing Credit Agreement) and net
worth (all subject to adjustment for the Borrowers' benefit during the first six
months of the New Credit Agreement); (iii) limitations on capital expenditures;
and (iv) application of certain insurance proceeds received by the Borrowers
after the closing of the New Credit Agreement with respect to its two
fire-damaged properties (the "Fire Damaged Properties") to rebuild such
properties. In addition, the Borrowers will be required to have at all times
cash on hand or availability under the New Credit Facility of at least
$4,000,000.
The Bank Letter of Intent provides that closing conditions for the New
Credit Agreement will include, among others: (i) receipt by GRI of an equity
infusion for working capital purposes of not less than $7,500,000; (ii) payment
of all accrued and unpaid interest and fees under the Existing Credit Agreement;
(iii) payment of approximately $1,300,000 to the Lenders in satisfaction of
certain convertible notes; (iv) receipt by the Lenders of any insurance proceeds
paid to the Borrowers prior to the closing of the New Credit Agreement with
respect to the Fire Damaged Properties (the "Insurance Proceeds"); and (v)
reasonable satisfaction of the Lenders with the capital structure of the Company
(including consummation by the Purchaser of the Offer for not less than 90% of
the outstanding capital stock of the Company (or such lesser percentage as the
Purchaser notifies the Agent will satisfy the requirements of the Merger
Agreement).
11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH
THE COMPANY
At the end of March 1997, Thomas J. Russo contacted the Chief Executive
Officer of U.S. Industries, Inc. ("USI"), which indirectly held approximately
33% of the outstanding Shares, to determine USI's intentions with respect to its
investment in the Company, as a result of which discussions took place between
Mr. Russo and USI's Chief Executive Officer during April and May with respect to
a purchase of USI's Shares. Mr. Russo had served as President of Howard
Johnson's Restaurants and Motor Lodge Group, including the Ground Round
restaurants, and as a director of the Company from 1991 until 1995. At the time
of such discussions, Mr. Russo was a director of John Harvard's Brewhouse
L.L.C., controlled by another investment partnership organized by Boston
Ventures. In May 1997, Mr. Russo alerted Boston Ventures to the availability of
a substantial equity interest in the Company.
As a result of the discussions between USI and Mr. Russo, representatives
of Boston Ventures wrote to the Ground Round Board on May 27, 1997 expressing
its interest in exploring a potential acquisition transaction whereby an entity
to be organized by it would ultimately acquire all of the outstanding Shares.
The letter indicated that, as requested by USI, Boston Ventures was prepared to
purchase 549,000 Shares from USI upon the condition that the Company enter into
a confidentiality agreement providing for a three week exclusive period for
Boston Ventures to conduct due diligence on the Company. The confidentiality
agreement, containing customary confidentiality and standstill provisions and
providing for such three week exclusive due diligence period, was negotiated
between the parties and signed on June 3, 1997. Concurrently with execution of
the confidentiality agreement, an affiliate of Boston Ventures purchased 277,450
Shares, and Mr. Russo purchased 262,550 Shares, from USI for a price of $1.25
per Share, in trades on the Nasdaq National Market (which Shares, together with
an additional 14,900 Shares previously purchased by Mr. Russo's spouse, were
subsequently transferred to Parent as capital contributions).
Thereafter, Boston Ventures, with Mr. Russo, commenced a detailed review
of, and met with the Company's management to discuss, the Company's business and
financial condition. On June 26, 1997, the Company and Boston Ventures amended
the confidentiality agreement to extend the exclusivity period to July 1, 1997.
On July 1, 1997, a representative of Boston Ventures met with the Company's
Chairman, Chief Executive Officer and President (the "Company CEO"), and
thereafter sent a letter to the Company, confirming Boston Ventures' interest in
an acquisition of all of the outstanding Shares, at a price representing a
premium for the Shares to the then market price of approximately $1.50 per
Share, subject to, among other things, negotiation of a definitive agreement and
plan of merger containing customary representations, warranties and covenants,
receipt of all necessary third party consents and approvals, and negotiation by
the
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<PAGE> 18
Company of an agreement with its Lenders to amend the Existing Credit Agreement
(see Section 10) and an amendment to the Company CEO's employment agreement to
clarify the non-compete provision following a change in control of the Company.
On July 2, 1997, the Company wrote to Boston Ventures stating that the Ground
Round Board had concluded that Boston Ventures' failure to make a firm financial
offer and the numerous conditions to which any such offer would be subject were
unacceptable, but that representatives of the Company would be willing to meet
with representatives of Boston Ventures after the July 4th holiday, on a
non-exclusive basis, to continue discussions with respect to a possible
transaction.
On July 9, 1997, USI sold its remaining 3,092,100 Shares to two USI
executives, Christian R. Guntner and David T. DiPasquale, who resigned their
positions with USI. Mr. Guntner, who had previously been a designee of USI on
the Ground Round Board, remained a director, and Mr. DiPasquale was elected a
director on July 10, 1997. Upon learning of these developments on July 10th,
Boston Ventures again wrote to the Ground Round Board expressing disappointment
over the Board's action on July 2, 1997 and the sale by USI of its Shares and
confirming that Boston Ventures was still interested in pursuing an acquisition
of all the Shares at a price of approximately $1.65 per Share, subject to
certain of the conditions set forth in its July 1, 1997 letter, including those
described above. Boston Ventures also indicated a willingness to make an
additional equity investment in the Company following such acquisition, and also
stated that, if the Ground Round Board was not interested in a sale of the
Company at that time, Boston Ventures would be prepared to negotiate the
purchase of newly issued equity, alone or in combination with a purchase of the
Shares owned by Messrs. Guntner and DiPasquale, in a transaction resulting in
Boston Ventures obtaining voting control of the Company.
In response, Mr. Guntner, as chairman of a special committee designated by
the Ground Round Board to make a recommendation to the full Board with respect
to any potential acquisition transaction involving the Company, and Mr.
DiPasquale met with representatives of Boston Ventures on July 11, 1997. At that
meeting, both a possible sale by Messrs. Guntner and DiPasquale of their Shares
in the Company, together with an investment by an entity to be formed by Boston
Ventures in a new issue of convertible preferred stock of the Company, as well
as a possible acquisition by such entity of all of the outstanding Shares, was
discussed. In addition, Messrs. Guntner and DiPasquale requested that Boston
Ventures provide working capital to the Company as might be required pending
consummation of a transaction, and Boston Ventures indicated that it was only
prepared to provide such capital upon obtaining control of the Company through
consummation of a transaction. The Agent thereafter made such request of Boston
Ventures, which again declined, and then of Mr. Guntner (which request was
supported by Boston Ventures), who declined to provide additional working
capital on July 22, 1997. During the week of July 14th, the Company indicated
its interest, subject to negotiation of satisfactory terms, in the sale of the
entire Company. The Company also advised Boston Ventures that it had retained
Rothschild to advise the Ground Round Board with respect to the fairness of any
acquisition proposal which might be made. In response, counsel to Boston
Ventures prepared, and delivered to the Company and its counsel on July 23,
1997, a draft merger agreement, and respective counsel for the parties met on
July 25 and 29, 1997 to discuss points of principle on the draft, after which a
revised draft was circulated. Also on July 25th, Mr. Russo and representatives
of Boston Ventures met with representatives of the Lenders to discuss the
Company's liquidity and cash needs. (Earlier discussions had taken place in June
and July between representatives of Boston Ventures and a representative of the
Agent on such matters and the possible terms of an amendment of the Existing
Credit Agreement.) The Company had earlier sold certain properties to pay down
its existing bank debt, repayment of the balance of which was originally due in
May but had been extended by the Lenders until December 31, 1997. At the July
25th meeting, the Lenders indicated their desire that the Company's bank debt be
significantly reduced and that a repayment plan for the balance be developed.
The Company's need for additional working capital was also discussed. The
Lenders indicated that they would be prepared to facilitate an acquisition which
would provide additional capital of at least $7.5 million to the Company,
through an amendment of the Existing Credit Agreement and a standstill agreement
pending such acquisition, and Boston Ventures indicated a willingness to provide
additional capital of at least such amount following an acquisition of the
Company, subject to satisfactory negotiation of such amendment and standstill.
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<PAGE> 19
During the week of August 3, 1997, the special committee of the Ground
Round Board (now comprised of directors Fred H. (Fritz) Beaumont, Jr., Mr.
DiPasquale and Alan D. Weingarten), Boston Ventures, on behalf of Parent and the
Purchaser, and their respective counsel negotiated the terms of the merger
agreement, and counsel for Boston Ventures discussed with Messrs. Guntner and
DiPasquale and their counsel the proposed terms of a shareholders' agreement.
Also during such period, representatives of Boston Ventures negotiated with the
Lenders the terms of the Bank Letter of Intent, and representatives of the
Company negotiated the terms of the Bank Standstill Letter (originally to expire
on September 30, 1997), execution of each of which was subject to completion of
the negotiation and execution of a definitive merger agreement. In addition,
representatives of Boston Ventures commenced negotiations with the Company CEO,
and his counsel, with respect to clarifying, through additional detail, the
non-compete provision of his employment agreement following a change of control
of the Company (the "Non-Compete Amendment"), execution of which by the Company
and such executive, on terms reasonably satisfactory to Parent and the
Purchaser, was a condition to Parent and the Purchaser proceeding with a
transaction. Boston Ventures and its counsel also continued to do due diligence
on matters raised by the Company's draft disclosure letter to be delivered in
connection with a definitive merger agreement, including an investigation by
special regulatory counsel of the Liquor License Approvals required in
connection with the acquisition by Parent of control of the Company. As a result
of such investigation, on August 8, 1997, Boston Ventures advised the Company
and its counsel that it was not prepared to proceed with a transaction until
certain matters could be resolved with respect to certain of such Liquor License
Approvals and the possible applicability of certain "tied-house" statutes to the
transaction. (See Section 16.)
During the remainder of August, representatives of Boston Ventures and its
regulatory counsel met with certain regulatory authorities and otherwise sought
to obtain reasonable assurances that transfers of the Company's Liquor Licenses
resulting from an acquisition by Parent of the Company would be approved by the
applicable authorities, keeping the Company apprised of such efforts. The
parties and their counsel also continued to negotiate certain terms of the
merger agreement, Boston Ventures, the Company CEO and their respective counsel
continued negotiation of the Non-Compete Amendment (the final form of which, as
executed by the Company and the executive, is described in Annex I of the
Company's Schedule 14D-9 and filed as an exhibit thereto), and the Company
discussed with its Lenders an extension of the term of the Bank Standstill
Letter to October 22, 1997. On August 29, 1997, Boston Ventures notified the
Company and its counsel that it was prepared to enter into the Merger Agreement,
as negotiated, subject to Ground Round Board approval and recommendation.
Certain remaining issues with respect thereto were negotiated by the parties,
and the Ground Round Board met and approved the Merger Agreement and the Merger.
Following such action, the Merger Agreement, the Shareholder Agreement, the Bank
Letter of Intent and the Bank Standstill Letter (as so extended) were executed
and delivered by the parties thereto.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; APPRAISAL
RIGHTS
Purpose. The Offer is being made pursuant to the Merger Agreement. The
purpose of the Offer, the Merger and the Merger Agreement is to enable Parent to
acquire control of, and to own the entire equity interest in, the Company.
Upon the Purchaser's acceptance for payment of and payment for Shares
tendered pursuant to the Offer in accordance with the Offer, the Purchaser is
entitled, pursuant to the terms of the Merger Agreement, to designate such
number of directors, rounded up to the next whole number, equal to that number
of directors which equals the product of the total number of directors on the
Ground Round Board (giving effect to the directors elected by the Purchaser)
multiplied by the percentage that such number of Shares owned in the aggregate
by the Purchaser or Parent bears to the number of Shares then outstanding,
provided that, until the Effective Time of the Merger, there shall be at least
three directors who were directors of the Company as of August 29, 1997
("Continuing Directors"), who shall include each member of the Special Committee
of the Ground Round Board formed to consider the Merger (see Section 11) for so
long as he wishes to serve. It is the present intention of Parent, the Purchaser
and the Company to have a board of seven directors following consummation of the
Offer and prior to the Effective Time, consisting of four designees of the
Purchaser
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(Martha H.W. Crowninshield, Barbara M. Ginader, Thomas J. Russo and Neil A.
Wallack, see Section 11 and Schedule I) and three Continuing Directors. The
Merger Agreement provides that the Company shall, upon the written request of
the Purchaser, use its best efforts to cause the resignation of such current
directors of the Company as necessary, and the election of the Purchaser's
designees, to result in such seven member board. No prior notice of such action
to shareholders of the Company, or the consent of any shareholder other than the
Purchaser, will be required to take such action. See "Board of Directors;
Officers" in Section 13.
If the Minimum Condition is met, the Company, Parent and the Purchaser have
agreed to take such actions, subject to the terms and conditions of the Merger
Agreement, as are necessary to consummate the Merger pursuant to the
"short-form" merger provisions of Section 905 of the NYBCL, in which case no
further action by the shareholders of the Company will be required to complete
the Merger. If the Minimum Condition is waived by the Purchaser, and the
Purchaser does not otherwise acquire sufficient Shares to consummate a
"short-form" merger, then, under the NYBCL and the Company's Certificate of
Incorporation, consummation of the Merger will require approval by the
affirmative vote of the holders of 66 2/3% of the outstanding Shares. If the
Minimum Condition is waived and the Purchaser purchases a number of Shares
pursuant to the Offer which, when aggregated with Shares owned by Parent, equal
at least 66 2/3% of the outstanding Shares, Parent and the Purchaser will have
the ability to approve the Merger without the affirmative vote of any other
shareholder of the Company.
After completion or termination of the Offer, the Purchaser reserves the
right, but has no current intention, to acquire or sell Shares in open market or
negotiated transactions. There can be no assurance that the Purchaser will
acquire any additional Shares in such circumstances or over what period of time
such additional Shares, if any, might be acquired. As a consequence, unless the
Minimum Condition is satisfied, no assurance can be given as to when the Merger
will be consummated, and similarly no assurance can be given as to when the
Merger Consideration will be paid to shareholders who do not tender their Shares
in the Offer.
Pursuant to the Merger Agreement, the officers of the Company immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation, and the directors of the Purchaser immediately prior to the
Effective Time shall be the directors of the Surviving Corporation. Following
the Merger, Parent intends to elect Thomas Russo Chairman, Chief Executive
Officer and President of the Surviving Corporation (defined below).
Upon consummation of the Merger, the Company (as the "Surviving
Corporation") will become a wholly-owned subsidiary of Parent, which intends to
manage and operate the Surviving Corporation as an independent operating unit.
It is expected that the business and operations of the Company will, except as
set forth in this Offer to Purchase, be continued by the Company substantially
as they are currently being conducted. Following consummation of the Offer, and
thereafter following the Merger, Parent will continue to evaluate the Company
and its assets, business, operations, properties, policies (including dividend
policies), corporate structure, capitalization, capital expenditures, liquidity
and management and will make such changes as it deems desirable in light of the
circumstances that then exist.
Once the Offer is consummated, if permitted by the NASD and the Exchange
Act, and in any event upon consummation of the Merger, it is the intention of
the Purchaser and Parent to cause the Company to file applications to withdraw
the Shares from listing and trading on the Nasdaq National Market and to
terminate the registration of the Shares under the Exchange Act. See Section 7.
Except as otherwise described in this Offer to Purchase, the Purchaser has
no current plans or proposals which relate to or would result in: (a) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company or any of its subsidiaries; (b) a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries outside the ordinary course of business, other than pursuant to the
Sale/Leaseback Transaction; (c) any change in the Ground Round Board or
management of the Company; (d) any material change in present capitalization or
the dividend policy of the Company, other than the infusion of at least $7.5
million of additional equity capital following consummation of the Merger; (e)
any other material change in the Company's corporate structure or business; (f)
a class of the Company's securities to be delisted from a national securities
exchange or to cease to be authorized to be quoted in an inter dealer quotation
system of any registered national securities association.
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Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, shareholders of the Company may
have certain rights under the NYBCL to dissent and demand appraisal of, and
payment in cash for the fair value of, the Shares. Such rights, if the statutory
procedures are complied with, could lead to a judicial determination of fair
value (excluding any element of value arising from accomplishment or expectation
of the Merger) required to be paid in cash to such dissenting holders for their
Shares. Any such judicial determination of the fair value of Shares could be
based upon considerations other than or in addition to the price paid in the
Offer and the market value of the Shares, including asset values and the
investment value of the Shares. The value so determined could be more or less
than the purchase price per Share pursuant to the Offer or the consideration per
Share to be paid in the Merger.
13. MERGER AGREEMENT AND SHAREHOLDER AGREEMENT
The following is a summary of the material terms of the Merger Agreement
and the Shareholder Agreement. Such summary is not a complete description of
these agreements and is qualified in its entirety by reference to the complete
texts of the agreements, copies of which are filed as exhibits to the Tender
Offer Statement on Schedule 14D-1 filed jointly with the Commission by Parent
and the Purchaser, and are incorporated by reference herein. Capitalized terms
not otherwise defined herein have the meanings set forth in the agreements.
The Merger Agreement
THE OFFER. The Merger Agreement provides for the making of the Offer by
the Purchaser. The obligation of the Purchaser to accept for payment and pay for
Shares tendered pursuant to the Offer is subject to the satisfaction of the
Minimum Condition and the other conditions described in Section 15. The
Purchaser has expressly reserved the right to waive any condition to the Offer,
to increase the purchase price payable pursuant to the Offer or make any other
changes in the terms and conditions of the Offer; provided, however, that unless
previously approved by the Company in writing, no change may be made that
decreases the price per Share payable in the Offer, changes the form of
consideration to be paid in the Offer, imposes additional conditions to the
Offer, increases the minimum number of Shares that must be tendered as a
condition to the Purchaser's obligation to payment, waives the Minimum Condition
if such waiver would result in the purchase in the Offer of that number of
Shares which, together with the Shares owned by Parent, would constitute less
than 50.1% of the outstanding Shares, or extends the Offer; provided, however,
that the Purchaser may, without the consent of the Company, extend the Offer (a)
from time to time (but not beyond October 22, 1997) if, at the scheduled
expiration date of the Offer, any of the conditions to the Purchaser's
obligation to purchase Shares are not satisfied or waived until such time as
such conditions are satisfied or (b) in certain circumstances following another
Acquisition Proposal (as defined below). The Purchaser has agreed, if requested
by the Company, to extend the Offer for a period of up to ten further Business
Days, in the event that the Minimum Condition is not satisfied or waived at the
initial expiration date of the Offer. Subject to the above described
limitations, the conditions described in Section 15 of the Offer to Purchase are
for the sole benefit of Parent and the Purchaser and may be asserted by Parent
or the Purchaser regardless of the circumstances giving rise to any such
condition or may be waived by Parent or the Purchaser, in whole or in part at
any time and from time to time, in their sole discretion.
RECOMMENDATION. The Company represents and warrants in the Merger
Agreement that the Company approves of and consents to the Offer and further
warrants and represents, among other things, that (i) the Ground Round Board, at
a meeting duly called and held on August 29, 1997 has unanimously (a) determined
that the Merger Agreement and the transactions contemplated thereby, including
each of the Offer and the Merger, are fair to, and in the best interests of, the
shareholders of the Company, (b) approved and adopted the Merger Agreement and
the transactions contemplated thereby, including the Offer and the Merger and
the transactions contemplated thereby, in all respects and that such approval
constitutes approval of the Offer, the Merger Agreement and the Merger and the
transactions contemplated thereby, for purposes of Sections 902 and 912 of the
NYBCL, (c) recommended that the Shareholders of the Company accept the Offer,
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tender their Shares thereunder to the Purchaser and approve and adopt the Merger
Agreement and the Merger and (d) provided for the cancellation of all Options
(as described below).
THE MERGER. By virtue of the Merger, at the Effective Time, each Share
issued and outstanding immediately prior to the Effective Time, (other than
Shares owned by Parent, the Purchaser or any other wholly-owned subsidiary of
Parent, Dissenting Shares (as defined in the Merger Agreement) and any Shares
held in the treasury of the Company or by any subsidiary of the Company) shall
be converted into the right to receive an amount in cash equal to the greater of
$1.65 or any amount per Share paid pursuant to the Offer as it may be amended,
without interest (the "Merger Consideration") upon surrender of a stock
certificate that, immediately prior to the Effective Time, represented an issued
and outstanding Share. Each Share issued and outstanding immediately prior to
the Effective Time and owned by Parent, the Purchaser or any other wholly-owned
subsidiary of Parent or held in the Company's treasury or by any subsidiary of
the Company, shall be canceled without payment of any consideration therefor.
Each share of Common Stock, $.01 par value, of the Purchaser issued and
outstanding immediately prior to the Effective Time shall be converted into and
become that number of fully-paid and non-assessable shares of Common Stock, par
value $.16 2/3 per share, of the Surviving Corporation as shall equal the
quotient of the number of Shares issued and outstanding at the Effective Time
divided by 1,000.
The Merger Agreement provides that if required by applicable law in order
to consummate the Merger following expiration of the Offer and acceptance for
payment and purchase of Shares by the Purchaser pursuant to the terms of the
Offer, the Company shall (and Parent and the Purchaser shall use all reasonable
efforts to cause the Company to) take all action to the extent necessary to
consummate the Merger in accordance with applicable law, its Certificate of
Incorporation and By-Laws, including (i) duly call, give notice of, convene and
hold a special meeting of its shareholders (the "Shareholders Meeting") as soon
as practicable, for the purpose of approving the Merger Agreement, the Merger
and the transactions contemplated thereby; (ii) include in a proxy statement the
"Proxy Statement") the recommendation of the Board that shareholders of the
Company vote in favor of the approval and adoption of the Merger Agreement and
the Merger and the other transactions contemplated thereby and the determination
of the Board that the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, are fair to, and in the best
interests of, the shareholders of the Company; and (iii) prepare and file a
preliminary Proxy Statement with the Commission and, after consultation with
Parent and the Purchaser, respond promptly to any comments made by the
Commission with respect to the Proxy Statement and any preliminary version
thereof and cause the Proxy Statement to be mailed to its shareholders at the
earliest practicable time after responding to all such comments to the
satisfaction of the staff of the Commission and to obtain the necessary
approvals by its shareholders of the Merger Agreement. At the Shareholders'
Meeting, Parent, the Purchaser, their affiliates and Permitted Assigns have
agreed to vote all Shares owned by them in favor of approval and adoption of the
Merger Agreement, the Merger, and the transactions contemplated thereby. In the
event that the Purchaser or any Permitted Assigns acquires at least 90 percent
of the outstanding Shares pursuant to the Offer or otherwise, the parties have
agreed, at the request of the Purchaser, to take all necessary and appropriate
action to cause the Merger to become effective, in accordance with Section 905
of the NYBCL, as soon as reasonably practicable after such acquisition and the
satisfaction or waiver of the conditions of the Merger Agreement, without a
meeting of the shareholders of the Company.
The Company, Parent and the Purchaser, as the case may be, have agreed to
make the required filings under the HSR Act (see Section 16) and to promptly
prepare and file any other filings required under the Exchange Act or any other
Federal or state securities or corporate laws relating to the Merger and the
transactions contemplated thereby.
CANCELLATION OF OPTIONS. Pursuant to the Merger Agreement, the Company has
agreed that at or immediately prior to the Effective Time, each outstanding
option (an "Option") to purchase shares of Common Stock of the Company pursuant
to the Company's 1989 Amended and Restated Stock Option Plan (the "Stock Option
Plan"), the Company's 1992 Equity Incentive Plan (the "Equity Incentive Plan")
or otherwise (collectively, the "Stock Plans"), whether or not then exercisable,
shall be canceled by the Company, and each holder of a canceled Option shall
have the right to receive at the Effective Time from the Company, in
consideration for the cancellation of such Option (i) in the case of Options
that are "in the
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money," an amount in cash equal to the product of (A) the number of Shares
previously subject to such Option and (B) the excess, if any, of the Merger
Consideration over the exercise price per Share previously subject to such
Option and (ii) in the case of Options that are not "in the money," an amount of
cash set forth on a Schedule of Option Payments authorized and approved by the
Compensation Committee of the Board. All Stock Plans shall terminate as of the
Effective Time, and the Company shall ensure that following the Effective Time
no holder of an Option or any participant in any Stock Plans shall have any
right thereunder to acquire any capital stock of the Company, Parent or the
Surviving Corporation.
CONDUCT OF BUSINESS PENDING THE MERGER. In the Merger Agreement, the
Company has covenanted and agreed that it shall, and shall cause each of its
subsidiaries to, use its reasonable efforts in light of the Company's present
financial condition to preserve intact the business organization of the Company
and each of its subsidiaries, to keep available, consistent with the Merger
Agreement, the services of their respective operating personnel and to preserve
the goodwill of the Company and its subsidiaries with respect to third parties
with whom they have a business relationship, including, without limitation,
suppliers. Except as contemplated by the Merger Agreement, during the period
from the date of the Merger Agreement to the Effective Time, the Company and
each of its subsidiaries will conduct their respective businesses and operations
only in the ordinary and usual course of business consistent with past practice.
Without limiting the generality of the provisions described in the
preceding paragraph, the Merger Agreement provides that prior to the Effective
Time, without the written Consent of Parent, the Company will not and will cause
each of its subsidiaries not to (a) amend its certificate of incorporation or
by-laws or similar governing documents; (b) create, incur or assume any
indebtedness for borrowed money, (including obligations in respect of capital
leases other than obligations of not more than $50,000, individually or in the
aggregate, created or incurred in the ordinary course of business), except
indebtedness for borrowed money incurred under the Existing Credit Agreement or
pursuant to the New Credit Agreement or the Bank Standstill Agreement, or
assume, guarantee, endorse or otherwise become liable or responsible for the
obligations of any other person other than any subsidiaries of the Company; (c)
declare, set aside or pay any dividend or other distribution in respect of its
capital stock; (d) issue, sell, grant purchase or redeem any shares of its
capital stock or securities convertible into or exercisable for, or options with
respect to, or warrants to purchase or rights to subscribe to or otherwise
purchase, or subdivide or in any way reclassify, any shares of its capital
stock, except for the issuance of Shares issuable upon conversion of the
convertible loan notes held by the Lenders in accordance with their terms or the
exercise of Options outstanding on the date of the Merger Agreement; (e) except
for certain regularly scheduled or approved raises scheduled to occur prior to
the date of the Merger Agreement, increase the aggregate amount of compensation
payable or to become payable to any of its directors, officers or certain
employees of the Company, whether by salary, bonus or otherwise; (f) enter into
any agreement, commitment or transaction, which, if entered into prior to the
date of the Merger Agreement, would have been required to be disclosed to the
Purchaser; (g) sell, transfer, mortgage, pledge, grant any security interest in,
or permit the imposition of any lien or other encumbrance on, any asset other
than in the ordinary course of business consistent with past practice, with
certain exceptions related to the Credit Agreement and the Sale Leaseback Letter
of Intent; (h) waive any material right under any material agreement contract;
(i) other than as required by any change in GAAP, make any material change in
its accounting methods or practices or make any material change in depreciation
or amortization policies or rates adopted by it for accounting purposes or,
other than normal writedowns or writeoffs consistent with past practice, make
any writeoffs of notes or accounts receivable; (j) make any loan or advance to
any person (including directors, officers and employees of the Company), with
certain exceptions, other than any subsidiary of the Company, otherwise than in
the ordinary course of business consistent with past practice; (k) terminate or
fail to renew or replace on substantially similar or more favorable terms, any
contract or other agreement, other than in the ordinary course of business,
which termination or failure to renew is legally avoidable by the Company and
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect; (l) fail to maintain all Insurance Policies in full
force and effect or fail to renew or replace with equivalent coverage any
Insurance Policy which has expired; (m) take any action which constitutes a
violation of any Liquor License which violation, individually or in the
aggregate, would, in the reasonable judgment of the Company, be likely to result
in the termination of any one or more Liquor Licenses covering restaurant
operations generating, individually or in the aggregate, for the three months
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ended June 30, 1997, average weekly gross food and beverage revenues in excess
of $300,000; (n) fail to operate, maintain, repair or otherwise preserve the
Real Property substantially in accordance with current practice in light of the
Company's present financial condition and not to exceed the capital expenditure
budget of the Company previously disclosed to Parent; (o) fail to comply with
all applicable filings, payment and withholding obligations under all applicable
federal, state, local and foreign tax laws except where such failure to comply
would not have a Material Adverse Effect; (p) breach, terminate or amend the
Bank Standstill Agreement or terminate or amend either the Bank Letter of Intent
or the Sale and Leaseback Letter of Intent or take any action not otherwise
permitted or required pursuant to such agreements that directly results in the
counterparty to the Bank Letter of Intent or the Sale and Leaseback Letter of
Intent terminating or stating an intention to terminate the same; or (q) agree
in writing to, or otherwise take or authorize, any of the foregoing actions.
For purposes of the Merger Agreement, "Material Adverse Effect" means a
material adverse effect on the business, assets, financial condition, cash flow
or results of operation of the Company and its subsidiaries, considered on a
consolidated basis, or a material adverse effect on the ability of the Company,
on one hand, or Parent and the Purchaser on the other, to consummate the
transactions contemplated by the Merger Agreement.
NO SOLICITATION. The Company has agreed that it will not, and will not
permit any of its officers, directors, advisors, agents or representatives to,
directly or indirectly, solicit or encourage the initiation or submission of any
inquiries, proposals or offers regarding any acquisition, merger, tender offer,
exchange offer, recapitalization (involving an equity investment other than
solely from existing shareholders) or similar transaction involving sale of all
or a substantial portion of the assets of, or sale of shares of capital stock or
securities convertible into capital stock, (other than a sale only to existing
lenders in connection with a refinancing of debt) of the Company, whether or not
in writing and whether or not delivered to the shareholders of the Company, or
similar transactions involving the Company (any of the foregoing inquires,
proposals or offers being referred to herein as an "Acquisition Proposal");
provided however, that nothing contained in the Merger Agreement shall prevent
the Company's Board from (i) referring any third party to this provision, (ii)
considering negotiating or participating in discussions regarding an unsolicited
bona fide written Acquisition Proposal or (iii) complying with Rule 14e-2(a) or
Rule 14d-9 promulgated under the Exchange Act, if applicable, with regard to an
Acquisition Proposal made in the form of a tender offer by a third party. If the
Board of the Company after duly considering advice, written or otherwise, of the
Company's outside counsel and financial advisor, determines in good faith that
it would be consistent with its fiduciary responsibilities to approve or
recommend a Superior Proposal (as defined below), then (A) the Company shall not
enter into any agreement with respect to the Superior Proposal and (B) any other
obligation of the Company under the Merger Agreement shall not be affected
unless the Merger Agreement is terminated and fees and/or expenses of Parent and
the Purchaser are paid in accordance with the terms of the Merger Agreement. As
used in the Merger Agreement, the term "Superior Proposal" means a bona fide
proposal made by a third party to acquire the Company pursuant to a tender or
exchange offer, a merger, a sale of all or substantially all of its assets or
otherwise that the Board determines in its good faith judgment to be more
favorable to the Company's shareholders than the Offer and the Merger (after
considering the advice, written or otherwise, of its outside counsel and
financial advisor).
BOARD OF DIRECTORS; OFFICERS. The Merger Agreement provides that, promptly
upon the acceptance for payment of, and payment by the Purchaser in accordance
with the Offer for, Shares pursuant to the Offer, provided the Purchaser shall
have purchased not less than 50.1% of the outstanding Shares, the Purchaser
shall be entitled to designate a majority of the Ground Round Board, as further
described in Section 12.
After the time that the Purchaser's designees constitute at least a
majority of the Board and until the Effective Time, any amendment or termination
of the Merger Agreement or the Certificate of Incorporation or By-laws of the
Company and any extension for the performance or waiver of the obligations or
other acts of Parent or the Purchaser or waiver of the Company's rights
hereunder shall also require the approval of a majority of Continuing Directors
except to the extent that applicable law requires that such action be acted upon
by the full Board, in which case such action will require the concurrence of a
majority of the Board, which majority shall include each of the Continuing
Directors. If the number of Continuing Directors prior to
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the Effective Time is reduced below three for any reason, the remaining
Continuing Directors or Director shall be entitled to designate persons to fill
such vacancies who shall be deemed Continuing Directors for all purposes of the
Merger Agreement. The Board shall not delegate any matter set forth in this
paragraph to any committee of the Board.
Under the Merger Agreement, the directors of the Purchaser immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, and the officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified.
ACCESS TO INFORMATION. Pursuant to the Merger Agreement, from the date of
the Merger Agreement to the Effective Time, subject to appropriate provisions
regarding confidentiality, the Company shall, during ordinary business hours and
upon reasonable advance notice, (i) give Parent and Parent's authorized
representatives all access Parent shall reasonably request to all of its and
each of its subsidiaries' books, records, contracts, commitments, restaurants,
offices and other facilities and properties, and its and each of its
subsidiaries' personnel, representatives, accountants and agents, (ii) permit
Parent to make such inspections thereof, except as limited by the Merger
Agreement with respect to environmental investigations, as it may reasonably
request during normal business hours and (iii) cause its and each of its
subsidiaries' officers and advisors to furnish to Parent its financial and
operating data and such other existing information with respect to its business,
properties, assets, liabilities and personnel, as Parent may from time to time
reasonably request; provided, however, that any such investigation shall be
conducted in such a manner as not to interfere unreasonably with the operation
of the business of the Company.
EMPLOYEE BENEFITS MATTERS. Under the Merger Agreement from and after the
date of purchase of Shares pursuant to the Offer, the Company or the Surviving
Corporation will, and Parent will cause the Company or the Surviving Corporation
to (i) honor, in accordance with their terms, all individual employment,
severance and change of control agreements between the Company and any officer,
director or employee of the Company including, without limitation, bonuses,
incentive or deferred compensation in existence on the date of the Merger
Agreement and disclosed to Parent by the Company, (ii) provide or pay when due
to employees and former employees of the Company all benefits and compensation
pursuant to the Company Benefit Plans, policies and arrangements in effect on
the date of the Merger Agreement and disclosed to Parent by the Company, (other
than stock and stock based plans, benefits or awards), earned or accrued
through, and to which such individuals are entitled as of, the Effective Time
(or such later time as such Company Benefit Plans as in effect at the Effective
Time or terminated or canceled by the Surviving Corporation in the manner and
subject to the conditions of the Merger Agreement); and (iii) provide to Company
employees and former employees benefits under all Company Benefit Plans,
programs and arrangements that provide benefits which are no less favorable in
the aggregate to such persons than those provided to such persons under the
Company Benefit Plans, programs and arrangements of the Company in effect on the
date hereof and disclosed to Parent (other than with respect to the agreements
subject to (i) and other than with respect to stock and stock-based plans,
benefits or awards), for a period ending two (2) years after the Effective Time.
Nothing in the Merger Agreement shall require the continued employment of any
person, and except as expressly set forth in the Merger Agreement no provision
therein shall prevent Parent or Surviving Corporation from amending or
terminating any Company Benefit Plan.
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Merger
Agreement provides that the Certificate of Incorporation of the Surviving
Corporation shall, for a period of six years from the Effective Time, contain
provisions no less favorable with respect to indemnification than are set forth
in such Certificate of Incorporation of the Company, as amended as set forth in
Exhibit A to the Merger Agreement to provide that officers and directors shall
be indemnified to the fullest extent permitted under New York law, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at any time prior to the Effective Time
were directors, officers, agents or employees of the Company, unless such
modification shall be required by law.
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Under the Merger Agreement, the Company shall, regardless of whether the
Merger becomes effective, and, after the Effective Time the Surviving
Corporation shall, in each case to the fullest extent permitted under New York
law, indemnify and hold harmless, each present and former director and officer
of the Company and each of its Subsidiaries (collectively, the "Indemnified
Parties") against judgments, fines, reasonable amounts paid in settlement and
reasonable expenses (including attorneys' fees, costs and charges) incurred as a
result of any action or proceeding (whether arising before or after the
Effective Time), or any appeal therefrom whether civil or criminal, arising out
of or pertaining to any action or omission in their capacity as an officer or
director, prior to or at the Effective Time, for a period of six years after the
Effective Time (or with respect to claims arising from service as an officer or
director prior to the Effective Time and asserted or made prior to such sixth
anniversary which have not been resolved prior to such sixth anniversary, until
the time such matters are finally resolved). In the event of any such action or
proceeding (i) the Company or the Surviving Corporation, as the case may be,
shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably satisfactory to the
Company or the Surviving Corporation, promptly after statements therefor are
received provided that an agreement has been entered into by such Indemnified
Party agreeing to repay such amounts to the Company if the Indemnified Party is
ultimately found not to be entitled to indemnification, by a final judgment (not
subject to further appeal) of a court of competent jurisdiction, or to the
extent such amount exceeds the indemnification to which such Indemnified Party
is entitled under New York law and (ii) the Company and the Surviving
Corporation shall cooperate and provide access to all documents necessary or
beneficial to the defense of any such matter; provided, however, that neither
the Company nor the Surviving Corporation shall be liable for any settlement
effected without its written consent (which consent shall not be unreasonably
withheld, delayed or conditioned); and provided further that neither the Company
nor the Surviving Corporation shall be obligated to pay the fees and expenses of
more than one counsel for all Indemnified Parties in any single action except to
the extent that two or more of such Indemnified Parties shall have conflicting
interests in the outcome of such action.
Under the Merger Agreement, the Surviving Corporation has agreed to use its
best efforts to maintain in effect for six years from the Effective Time, if
available, the current directors' and officers' liability insurance policies
maintained by the Company (provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are not materially less favorable) with respect to matters
occurring prior to the Effective Time; provided, however, that the Surviving
Corporation shall not be required to maintain such insurance to the extent that
the annual premiums therefor exceed 120% of the annual premiums currently paid
by the company in respect of the current policy or policies (the "Maximum
Amount"), but in such case shall purchase as much comparable coverage as
available for the Maximum Amount.
The Merger Agreement further provides that in the event the Company or the
Surviving Corporation or any of their respective successors (i) is consolidated
with or merges into another person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person in a single
transaction or a series of transactions, then, and in each such case, Parent
shall make or cause to be made proper provision so that the successors or
transferees of the Company or the Surviving Corporation, as the case may be,
shall comply in all material respects with such indemnification and insurance
provisions.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains customary
representations and warranties with respect to the Company, including, but not
limited to, (i) the Company's organization and capitalization, (ii) that the
Board of Directors of the Company has approved the Merger Agreement and the
transactions contemplated thereby (including the Offer and the Merger) so as to
render the prohibitions of Section 912 of the NYBCL to be inapplicable to the
Merger Agreement and the transactions contemplated thereby, (iii) relating to
required consents, approvals and governmental filings (iv) the accuracy of the
Company's documents and reports filed with the Commission, the Company's
financial statements and financial condition, (v) the absence of certain changes
or events which, in the reasonable opinion of the Company, are likely,
individually or in the aggregate, to have a Material Adverse Effect or adversely
affect the ability of the Company to consummate the transactions contemplated by
the Merger Agreement, (vi) the
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absence of certain litigation, (vii) the Company's employee benefit plans, (vii)
real property matters, (viii) tax matters, (ix) environmental matters and (x)
intellectual property matters.
In the Merger Agreement, Parent and the Purchaser have made customary
representations and warranties, including, without limitation, relating to their
respective corporate organization, authority to execute, deliver and perform the
Merger Agreement, and that Parent has or will have and will make available to
the Purchaser or the Paying Agent, as applicable, sufficient funds in sufficient
time to consummate the Offer and the Merger in accordance with the terms of the
Merger Agreement.
CONDITIONS TO THE MERGER. The respective obligations of each party to the
Merger Agreement to effect the Merger are subject to the satisfaction at or
prior to the Effective Time of the following conditions: (a) the Purchaser shall
have accepted for payment, and paid for, Shares validly tendered and not
withdrawn pursuant to the Offer representing (together with Shares otherwise
owned by Parent or the Purchaser) not less than 50.1% of the then outstanding
Shares; (b) the Merger Agreement and the Merger shall have been approved and
adopted by the requisite vote or consent, if any, of the shareholders of the
Company required by the NYBCL; and (c) no order, statute, rule, regulation,
execution order, stay, decree, judgment or injunction shall have been enacted,
entered, issued, promulgated or enforced by any court or governmental authority
which prohibits or restricts the consummation of the Merger. The Merger
Agreement provides that the obligations of Parent and the Purchaser to effect
the Merger shall be further subject to satisfaction of the condition, unless
waived by Parent, that all outstanding Options shall have been surrendered prior
to or simultaneously with the Effective Time.
TERMINATION. The Merger Agreement may be terminated and the Offer and the
Merger may be abandoned at any time prior to the Effective Time, whether prior
to or after approval of the Merger by the Shareholders of the Company, if
required, (a) by mutual written consent of Parent, the Purchaser and the
Company; (b) by the Company if (i) the Purchaser shall fail to commence the
Offer within five Business Days of the public announcement thereof unless the
failure to commence the Offer shall be due to (A) the failure of the Company (or
any of its subsidiaries) to perform in any material respect any of its
obligations under the Merger Agreement then required to be performed or (B) any
occurrence or circumstance which would result in the failure of any condition to
the Offer set forth in the Merger Agreement; (ii) the Purchaser shall have (A)
terminated the Offer, (B) allowed the Offer to expire without the purchase of
any Shares thereunder in accordance with the terms of the Merger Agreement or
(C) failed to accept Shares for payment pursuant to the Offer on or prior to
October 22, 1997 unless (I) such termination or expiration or failure shall be
due to the failure of any condition set forth in (1) paragraphs (iv), (vii),
(viii) or (ix) of Section 15 (with respect to any consent or approval required
to be obtained by the Company) or paragraph (ii) of Section 15 (otherwise than
in circumstances that would entitle the Company to terminate this Agreement set
forth in (d) below) or (2) paragraph (i) of Section 15 unless the Purchaser
shall have failed to accept Shares for payment on or prior to October 31, 1997
or such earlier date as the Bank Standstill Letter expires or (II) the terms of
the proviso set forth under "Fees and Expenses" below are applicable, unless the
Purchaser shall have failed to accept Shares for payment on or prior to October
31, 1997; (iii) prior to the purchase of Shares pursuant to the Offer, the
Purchaser shall have breached or failed to perform in any material respect any
of its obligations under the Merger Agreement which is required to be performed
at such time and such breach or failure materially delays consummation of the
Offer, or materially and adversely affects the ability of the Purchaser and
Parent to consummate the Offer and the Merger on substantially the terms set
forth in the Merger Agreement; (iv) if the representations and warranties of the
Purchaser set forth in the Merger Agreement are not true and correct in all
material respects at any time prior to the expiration of termination of the
Offer (except as to those representations and warranties which are made as of a
specified date, which shall be true and correct as of such date) and such
failure materially delays consummation of the Offer, or materially and adversely
affects the ability of the Purchaser and Parent to consummate the Offer and the
Merger on substantially the terms set forth in the Merger Agreement; (v) prior
to the purchase of Shares pursuant to the Offer, a Person shall have made a
Superior Proposal and the Board, after duly considering advice written or
otherwise of the Company's outside counsel and financial advisors, determines in
good faith that it would be consistent with its fiduciary responsibilities to
approve or recommend such Superior Proposal provided that such termination shall
not be effective until payment of the Termination Fee (as defined below)
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<PAGE> 28
and Expenses in the manner required by the Merger Agreement; or (vi) the Minimum
Condition is not satisfied or waived as permitted by the Merger Agreement upon
final expiration of the Offer; (c) by Parent and the Purchaser if (i) due to any
occurrence or circumstances which would result in a failure to satisfy any of
the conditions set forth in Section 15, the Purchaser shall have failed to
commence the Offer within five Business Days of the public announcement thereof;
(ii) as a result of a failure to satisfy any of the conditions set forth in
Section 15, the Purchaser shall have (A) terminated the Offer or (B) failed to
accept Shares for payment pursuant to the Offer on or prior to October 22, 1997;
(iii) the Effective Time shall not have occurred on or prior to November 30,
1997, due to a failure of any of the conditions to the Merger described under
"Conditions to the Merger" above (other than in clause (a) thereof) otherwise
than as a result of a breach or default by Parent or the Purchaser hereunder;
(iv) the Company shall have breached its obligations described under "No
Solicitation" above; or (v) the Board shall have withdrawn or modified, in a
manner adverse to the Purchaser, its approval or recommendation of the Offer,
the Merger Agreement or the Merger or shall have recommended or approved another
tender or exchange offer or Acquisition Proposal, or shall have adopted any
resolution to effect any of the foregoing; or (d) by Parent and the Purchaser or
the Company if any court of competent jurisdiction in the United States or other
United States governmental body shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
Merger or the acceptance for payment and payment for the Shares in the Offer and
such order, decree, ruling or other action is or shall have become
nonappealable.
In the event of the termination of the Merger Agreement and the abandonment
of the Offer and the Merger pursuant to the terms of the Merger Agreement, the
Merger Agreement shall, except as set forth therein, become void and have no
effect, without any liability on the part of any party hereto or its affiliates,
directors, officers or shareholders; provided, however that no such termination
shall relieve any of the Company, Parent or the Purchaser, as the case may be,
from liability for damages arising (a) from any willful or intentional breach of
the Merger Agreement or (b) from any obligations regarding fees and expenses.
FEES AND EXPENSES. In accordance with the terms of the Merger Agreement,
in the event that: (i) the Company terminates the Merger Agreement due to the
acceptance by the Board of a Superior Proposal, pursuant to Section 9.01(b)(v)
of the Merger Agreement or (ii) prior to the Expiration Date, (A) an Acquisition
Proposal, or interest in or intention to pursue an Acquisition Proposal has been
publicly announced or publicly confirmed by any person (other than Parent or the
Purchaser) (whether by press release, Exchange Act filing or otherwise), and (B)
on or prior to the 180th day following the initial expiration date of the Offer
(I) the Company enters into any agreement with respect to any Acquisition
Proposal or (II) any Acquisition Proposal is commenced by way of tender offer or
exchange offer: then, in either such event, the Company shall pay to Parent a
fee in the amount of $1,100,000 (the "Termination Fee"), plus Expenses.
Notwithstanding the foregoing, no Termination Fee will be payable in the case of
clause (ii) above if the Purchaser has not, prior to the Expiration Date, waived
the Minimum Condition so as to provide that the minimum number of Shares that
must be validly tendered as a condition to the Purchaser's acceptance for
payment of Shares pursuant to the Offer, together with the Contributed Shares,
shall be no greater than 66 2/3% of the outstanding Shares; provided, however,
that in the event of such reduction in the Minimum Condition, the Purchaser
shall be entitled to extend the Offer from time to time, but in no event beyond
October 31, 1997, until Shares validly tendered (and not withdrawn) in the
Offer, together with the shares owned by Parent, represent at least 90% of the
outstanding Shares.
If (i) or (ii) the Merger Agreement is terminated by the Purchaser and
Parent pursuant to Section 9.01(c)(i) or (ii) of the Merger Agreement (described
in clauses (c)(i) and (ii) under "Termination" above) or as a result of the
Company's failure to satisfy the condition set forth in paragraph (iv) of
Section 15 and (ii) the Company's breach of any of its representations and
warranties under the Merger Agreement and/or its failure to perform its material
obligations, covenants or agreements under the Merger Agreement resulting in the
failure to satisfy such condition set forth in paragraph (iv) of Section 15,
individually or in the aggregate, has had or is reasonably likely to have a
Material Adverse Effect, the Company shall reimburse Parent and Purchaser for
all Expenses.
AMENDMENTS. The Merger Agreement may be amended, modified or supplemented
only by written agreement of Parent (for itself and the Purchaser) and the
Company at any time prior to the Effective Time
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with respect to any of the terms contained herein executed by duly authorized
officers of the respective parties, except that after the earlier of (a) the
purchase by the Purchaser of a majority of the Shares on a fully diluted basis,
and (b) the meeting of shareholders to approve the Merger contemplated by the
Merger Agreement, the price per Share to be paid pursuant to the Merger
Agreement to the holders of Shares shall in no event be decreased and the form
of consideration to be received by the holders of such Shares in the Merger
shall in no event be altered without the approval of such holders.
CONDITIONS TO THE OFFER. The Merger Agreement provides for the Minimum
Condition and the other conditions to the Offer set forth in Section 15.
The Shareholder Agreement. Pursuant to the Shareholder Agreement, the
Selling Shareholders have each agreed to validly tender all of the shares
beneficially owned by them or which may subsequently be acquired by them after
the date of the Shareholder Agreement and prior to the termination of the Offer.
In addition, each Selling Shareholder has agreed that, while the
Shareholder Agreement is in effect, (a) at any meeting of the shareholders of
the Company, he shall (i) vote his Shares in favor of the Merger, (ii) vote his
Shares against any action or agreement that would result in a breach or any
material respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement and (iii) vote
his shares against any action or agreement that would impede, interfere with,
delay, postpone or attempt to discourage the Merger or the Offer, and (b) except
as contemplated thereby, he shall not (i) sell, transfer, pledge, encumber,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer, pledge,
encumbrance, assignment or other disposition of any shares of capital stock of
the Company into a voting trust or enter into a voting agreement with respect to
any such shares or (ii) take any action that would make any representation or
warranty of such Selling Shareholder contained in the Shareholders Agreement
untrue or incorrect or have the effect of preventing or disabling such Selling
Shareholder from performing his obligations under the Shareholder Agreement.
The Shareholder Agreement and the obligation of each of the Selling
Shareholders to tender his Shares shall terminate on the earlier of the
consummation of the purchase of such Shares and the termination of the Merger
Agreement in accordance with its terms.
14. DIVIDENDS AND DISTRIBUTIONS
If on or after August 29, 1997, the Company should (a) split, combine or
otherwise change the Shares or its capitalization, (b) acquire currently
outstanding securities or otherwise cause a reduction in the number of
outstanding Securities or (c) issue or sell additional securities, shares of any
other class of capital stock, other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, then subject to the provisions of Section 15
below, the Purchaser, in its sole discretion, may make such adjustments as it
deems appropriate in the Offer Price and other terms of the Offer, including,
without limitation, the number or type of securities offered to be purchased.
If, on or after the date of the Merger Agreement, the Company should
declare or pay any cash dividend on the Shares or other distribution on the
Shares, or issue with respect to the Shares any additional Shares, shares of any
other class of capital stock, other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, payable or distributable to shareholders of
record on a date prior to the transfer of the Shares purchased pursuant to the
Offer to the Purchaser or its nominee or transferee on the Company's stock
transfer records, then, subject to the provisions of Section 14 below, (a) the
amount per Share paid pursuant to the Offer may, in the sole discretion of the
Purchaser, be reduced by the amount of any such cash dividend or cash
distribution and (b) the whole of any such noncash dividend, distribution or
issuance to be received by the tendering shareholders will (i) be received and
held by the tendering shareholders for the account of the Purchaser and will be
required to be promptly remitted and transferred by each tendering shareholder
to the Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer, or (ii) at the direction of the Purchaser, be
exercised for the benefit of the Purchaser, in which case the proceeds of such
exercise will promptly be remitted to the Purchaser. Pending such remittance and
subject to applicable law, the Purchaser will be
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entitled to all rights and privileges as owner of any such noncash dividend,
distribution, issuance or proceeds and may withhold the entire Offer Price or
deduct from the amount per Share paid pursuant to the Offer the amount or value
thereof, as determined by the Purchaser in its sole discretion.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the two preceding paragraphs, and
nothing herein shall constitute a waiver by the Purchaser or Parent of any of
its rights under the Merger Agreement or a limitation of remedies available to
the Purchaser or Parent for any breach of the Merger Agreement, including
termination thereof.
15. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any provision of the Merger Agreement or the Offer, the
Purchaser shall not be required to accept for payment, purchase or pay for any
Shares tendered pursuant to the Offer, may postpone the acceptance for payment
of and payment for any tendered Shares and may terminate or, subject to the
terms of the Merger Agreement, amend the Offer if (a) the Minimum Condition
shall not have been satisfied; or (b) on or after the date of the Merger
Agreement and at or before the time of acceptance for payment of any such Shares
(whether or not any Shares have theretofore been accepted for payment or paid
for pursuant to the Offer) any of the following shall occur (each of paragraphs
(i) through (ix) providing a separate and independent condition to the
Purchaser's obligation pursuant to the Offer):
(i) any waiting period applicable to the Offer and the Merger pursuant
to the HSR Act shall not have expired or been terminated; or
(ii) there shall have been instituted or be pending any action,
proceeding, application, claim or counterclaim by any government or
governmental authority or agency, domestic or foreign, before any court or
governmental regulatory or administrative agency, authority or tribunal,
domestic or foreign (a "Claim"), challenging the acquisition by Parent or
the Purchaser of the Shares, restraining or prohibiting the making or
consummation of the Offer or the Merger or seeking to obtain from Parent or
the Purchaser any damages that would result in a Material Adverse Effect
(as defined in the Merger Agreement; see Section 13) if such were assessed
against the Company, restraining or prohibiting, or limiting in any
material respect, the ownership or operation by Parent or the Purchaser of
any material portion of the business or assets of the Company or any of its
subsidiaries or seeking to compel Parent or the Purchaser to dispose of or
forfeit material incidents of control of all or any material portion of the
business or assets of the Company or any of its subsidiaries or imposing
limitations on the ability of Parent or the Purchaser effectively to
exercise full rights of ownership of the Shares, including, without
limitation, the right to vote any Shares acquired or owned by Parent or the
Purchaser on all matters properly presented to the Company's shareholders,
or seeking to require divestiture by Parent or the Purchaser of any Shares;
or
(iii) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, promulgated, entered, enforced or deemed applicable to
the Offer, the Merger or the Merger Agreement, or any other action shall
have been taken by any government, governmental authority or court,
domestic or foreign, other than the routine application to the Offer or the
Merger of waiting periods under the HSR Act, and other than relating to the
Liquor License Approvals, which are addressed in paragraph (ix) below, that
has, or has a substantial likelihood of resulting in, any of the
consequences referred to in paragraph (ii) above; or
(iv) the Company shall have breached or failed to perform in any
material respect any of its material obligations, covenants or agreements
contained in the Merger Agreement, or any of the representations and
warranties of the Company set forth in the Merger Agreement shall not have
been true and correct in any material respect when made or, except for any
representations and warranties made as of a specific date, shall have
ceased to be true and correct in any material respect (or, in the case of
representations and warranties that are specifically qualified as to
materiality, shall not have been true and correct when made or shall have
ceased to be true and correct) and if curable, the Company shall have
failed to cure such breach within three (3) Business Days after written
notice from the Purchaser of such failure; or
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(v) there shall have occurred (A) (1) any general suspension of
trading in, or limitation on prices for, securities on the New York Stock
Exchange, Inc., any other national securities exchange or NASDAQ, (2) the
declaration of a banking moratorium or any mandatory suspension of payments
in respect of banks in the United States (3) the commencement of or
escalation of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, (4) in the
case of any of the foregoing existing on August 29, 1997, a material
acceleration or worsening thereof, and (B) such occurrence has a Material
Adverse Effect; or
(vi) the Merger Agreement shall have been terminated in accordance
with its terms; or
(vii) the Company's Board of Directors shall have withdrawn or
modified (including by amendment of the Schedule 14D-9) its approval or
recommendation of the Offer, the Merger Agreement or the Merger or shall
have approved or recommended any other tender or exchange offer or other
Acquisition Proposal, which, in the sole judgment of Parent in any such
case, and regardless of the circumstances (including any action or omission
by Parent) giving rise to such condition, makes it inadvisable to proceed
with such acceptance for payment, except where as a result of the Company's
receipt of an unsolicited Acquisition Proposal from, or commencement of an
unsolicited tender or exchange offer by, a third party (A) the Company
issues to its shareholders a communication that contains only the
statements permitted by Rule 14d-9(e) under the Exchange Act (and does not
otherwise withdraw, modify or amend its approval or recommendation of the
Offer, the Merger or the Merger Agreement) and (B) within five Business
Days of issuing such communication the Company publicly reconfirms its
approval and recommendation of the Offer, the Merger and the Merger
Agreement; or
(viii) either (A) any change or development, outside of the ordinary
course of business consistent with past practice of the Company, not
disclosed in the Company Disclosure Letter shall have occurred in the
financial condition, assets, capitalization, prospects, shareholders'
equity, licenses, permits, business or results of operations of the Company
and its subsidiaries which in the reasonable judgment of the Purchaser is
or is likely, individually or in the aggregate, to be materially adverse to
the Company or any of its subsidiaries taken as a whole, or the Purchaser
shall become aware of any fact (including, but not limited to, any such
change or development) which is likely to have materially adverse
significance with respect to the Company and its subsidiaries taken as a
whole; provided, however, that no change, development or fact shall be
deemed to be materially adverse for the purpose of this clause (A) unless,
individually or when combined with all other changes, developments or
facts, it is, in the reasonable judgment of the Purchaser, likely to result
in losses (after taking into account any amounts recovered or insurance
proceeds receivable by the Company in compensation for such losses) in
excess of $4,500,000, or (B) the average gross sales of the Company as
reported by the Company in any 21 day period after the date of the Merger
Agreement shall be less than $3,000,000 per week; or
(ix) (A) the Company and/or the Purchaser shall not have obtained (1)
any Liquor License Approval (see Section 16) required to be obtained prior
to Parent's and the Purchaser's obtaining control of the Company through
the Purchaser's acceptance for payment of Shares pursuant to the Offer (or
Parent and the Purchaser shall not have made arrangements reasonably
satisfactory to them to allow any Liquor License subject to any such Liquor
License Approval to continue in full force and effect following
consummation of the Offer and the Merger pending receipt of such Liquor
License Approval), other than any Liquor License Approvals with respect to
Liquor Licenses that, individually or in the aggregate, cover restaurant
operations (I) generating, individually or in the aggregate, for the three
months ended June 30, 1997, average weekly gross food and beverage revenues
of less than $300,000 and (II) with average profit after controllables in
any 21 day period after the date of the Merger Agreement which, when
deducted from the average profit after controllables of the Company in the
same 21 day period, would not result in such average profit after
controllables of the Company totaling less than $540,000 per week, or (2)
any consent or approval which is legally required to be obtained prior to
consummation of the Offer and the Merger and was not disclosed in the
Company Disclosure Letter which, if not obtained, would, individually or in
the aggregate, have a Material Adverse Effect, or (B) Parent and the
Purchaser shall not have obtained continuing assurances from the
appropriate authority in any of the Commonwealth of Massachusetts, State of
New York or State of Ohio, or otherwise made arrangements with such
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<PAGE> 32
authority, satisfactory to Parent and the Purchaser in their sole
discretion, that there is no legal impediment to their obtaining control of
the Company under such Commonwealth's or State's tied-house statute (see
Section 16).
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances (including any
action or inaction by Parent or the Purchaser) giving rise to any such condition
and may be waived by the Purchaser, in whole or in part in its sole discretion.
The failure by the Purchaser at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right, the waiver of such right with
respect to any particular facts or circumstances shall not be deemed a waiver
with respect to any other facts or circumstances, and each such right will be
deemed an ongoing right which may be asserted at any time and from time to time.
16. CERTAIN REGULATORY AND LEGAL MATTERS
Except as set forth in this Section 16, Parent and the Purchaser are not
aware of any approval or other action by any governmental or administrative
agency which would be required for the acquisition or ownership of Shares by the
Purchaser as contemplated herein. Should any such approval or other action be
required, it will be sought, but the Purchaser has no current intention to delay
the purchase of Shares tendered pursuant to the Offer pending the outcome of any
such matter, subject, however, to the Purchaser's right to decline to purchase
Shares if any of the conditions specified in Section 15 shall have occurred.
There can be no assurance that any such approval or other action, if needed,
would be obtained or would be obtained without substantial conditions, or that
adverse consequences might not result to the Company's business or that certain
parts of the Company's business might not have to be disposed of if any such
approvals were not obtained or other action taken. If certain types of adverse
action are taken with respect to the matters discussed below, or certain
approvals, consents, licenses or permits identified below are not obtained, the
Purchaser could decline to accept for payment or pay for any Shares tendered.
See Section 15.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, shareholders, executive offices or places of business in such states. In
Edgar v. MITE Corp., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS Corp.
v. Dynamics Corp. of America, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, and in particular,
those laws concerning corporate governance, constitutionally disqualify a
potential acquirer form voting on the affairs of a target corporation without
approval of the remaining shareholders, provided that such laws were applicable
only under certain conditions.
The Company is incorporated in New York. Section 912 of the NYBCL generally
prohibits such a New York corporation from engaging in certain "business
combinations" (defined to include mergers and consolidations) with an
"interested shareholder" (defined generally as any person that beneficially owns
20% or more of the outstanding voting securities of the corporation) for a
period of five years after the date the person became an interested shareholder
unless, before such date, the board of directors of the corporations approved
either the business combination or the purchase of more than 20% of the
corporation's voting securities by the interested shareholder or certain other
statutory conditions have been met. On August 29, 1997, the Ground Round Board
approved the purchase of Shares contemplated by the Offer, the Merger, the
Merger Agreement and the Shareholder Agreement for purposes of Section 912.
Accordingly, Section 912 is inapplicable to, and will not prevent consummation
of, the Merger.
New York has also adopted the New York Security Takeover Disclosure Act, as
amended (the "NYSTDA"), which purports to apply to any tender offer to purchase
any equity security of a "target company" (which is defined to mean a
corporation organized under the laws of the State of New York which has its
principal executive offices or significant business operations located within
the State of New York) if, after the tender offer, the offer would be a
beneficial owner of more than 5% of any class of the issued and outstanding
equity securities of such target company. If applicable, the NYSTDA requires an
offer to file with
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the Attorney General of the State of New York and deliver to the target company
a registration statement as soon as practicable on the date of commencement of
the tender offer. The NYSTDA also permits among other things, an investigation
and public hearing to review the adequacy of the required disclosure. Parent and
the Purchaser have filed a registration statement with the Attorney General of
the State of New York, and have included in Schedule II to this Offer to
Purchase certain additional information required to be disclosed by the NYSTDA.
Based on information supplied by the Company, the Purchaser does not
believe that any other state takeover statutes purport to apply to the Offer or
the Merger. Neither the Purchaser not Parent has currently complied with any
other state takeover statute or regulation. The Purchaser reserves the right to
challenge the applicability or validity of any state law purportedly applicable
to the Offer or the Merger, and nothing in this Offer to Purchase or any action
taken in connection with the Offer or the Merger is intended as a waiver of such
right. If it is asserted that any other state takeover statute is applicable to
the Offer or the Merger and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer or the Merger, the Purchaser
might be required to file certain information with, or to receiver approvals
from, the relevant state authorities, and the Purchaser might be unable to
accept for payment or pay for Securities tendered pursuant to the Offer, or be
delayed in consummating the Offer or the Merger. In such case, the Purchaser may
not be obligated to accept for payment or pay for any Securities tendered
pursuant to the Offer.
Antitrust. Under the provisions of the HSR Act applicable to the Offer,
the acquisition of Shares under the Offer may be consummated only following the
expiration or early termination of the applicable waiting period under the HSR
Act.
Under the provisions of the HSR Act applicable to the purchase of Shares
pursuant to the Offer, such purchase may not be made until the expiration of a
15-calendar day waiting period following the required filing of a Notification
and Report Form under the HSR Act by Boston Ventures LP V, as the "ultimate
parent entity" of the Purchaser under the HSR Act. The Merger Agreement requires
that such form be filed no later than September 19, 1997 and that early
termination of the applicable waiting period be requested. Accordingly, if the
Notification and Report Form is filed on September 19, 1997, the waiting period
under the HSR Act would expire at 11:59 P.M., New York City time, on October 1,
1997, unless early termination of the waiting period is granted by the Federal
Trade Commission ("FTC") and the Department of Justice, Antitrust Division (the
"Antitrust Division") or a request for additional information or documentary
material is received prior thereto. If either the FTC or the Antitrust Division
issues a request for additional information or documentary material from Boston
Ventures LP V prior to the expiration of the 15-day waiting period, the waiting
period will be extended and will expire at 11:59 P.M., New York City time, on
the tenth calendar day after the date of substantial compliance by Boston
Ventures LP V with such request unless terminated earlier by the FTC and the
Antitrust Division. If such a request is issued, the purchase of and payment for
Shares pursuant to the Offer will be deferred until the additional waiting
period expires or is terminated. Only one extension of such waiting period
pursuant to a request for additional information or documentary material is
authorized by the rules promulgated under the HSR Act. Thereafter, the waiting
period can be extended only by court order or by consent of Boston Ventures LP
V. Although the Company is required to file certain information and documentary
material with the Antitrust Division and the FTC in connection with the Offer,
neither the Company's failure to make such filings nor a request to the Company
from the Antitrust Division or the FTC for additional information or documentary
material will extend the waiting period.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed acquisition
of the Company. At any time before or after the Purchaser's purchase of Shares
pursuant to the Offer, the Antitrust Division or the FTC could take such action
under the antitrust laws as either deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the Merger or seeking the divestiture of Shares
acquired by the Purchaser or the divestiture of substantial assets of the
Company or its subsidiaries or Parent or its subsidiaries. Private parties and
states Attorneys General may also bring legal action under the antitrust laws
under certain circumstances. If the Antitrust Division, the FTC, a state or a
private party raises antitrust concerns in connection with a proposed
transaction, the parties frequently engage in negotiations with the relevant
governmental agency concerning possible means of addressing these issues
31
<PAGE> 34
and may delay consummation of the Offer or the Merger while such discussions are
ongoing. There can be no assurance that a challenge to the Offer on antitrust
grounds will not be made, or, if such a challenge is made, of the result
thereof. See Section 15.
Alcoholic Beverages Regulation. The Company is required to operate in
compliance with the licensing and operational requirements of states and
municipalities where its restaurants are located. Failure to comply with such
requirements could cause the Company's licenses to be revoked or suspended for
cause at any time. In connection with the proposed transaction, some states
and/or municipalities require that new licenses, permits or approvals be applied
for and obtained in the event of a change in the ownership, management or
operation of the licensee or permittee, while others merely require notice of
any material change in the ownership, management or operation of the licensee or
permittee. The loss or revocation of any existing licenses, permits or
approvals, the failure to obtain any additional or new licenses, permits or
approvals or the failure to obtain approval for the transfer of any existing
licenses or permits could have a material adverse effect on the ability of the
Company to conduct its business.
Based upon the information provided by the Company, pertaining to the
Liquor Licenses, certain approvals, consents, registrations, licenses or permits
are required to be obtained prior to the consummation of the Offer, from the
alcoholic beverage authorities of the states of Connecticut, Kentucky,
Massachusetts and Missouri and from the local alcoholic beverage authorities in
Kentucky, Massachusetts and Missouri where the Company holds Liquor Licenses
(collectively, "Liquor License Approvals"). The alcoholic beverage authorities
of the states of Illinois, Indiana, New Hampshire and Rhode Island, and the
alcoholic beverage authorities of the municipalities in Maryland and Minnesota,
where the Company holds Liquor Licenses, advised Parent and the Purchaser that,
until the identity of the parties to the Offer and the Merger was disclosed,
they were unable to advise Parent and the Purchaser of the license filing
requirements applicable to the Offer and the Merger. Such authorities have now
been advised of the identity of the Company, and Parent and the Purchaser are
awaiting further advice from such authorities. With respect to the other states
and municipalities in which the Company holds Liquor Licenses, the relevant
alcoholic beverage authorities require either (i) notice of the change in stock
control, or (ii) the filing of a license application, either prior to or after
consummation of the Offer. For purposes of the Merger Agreement and the
conditions to the Offer contained in paragraph (ix) of Section 15, the Liquor
License Approvals required to be obtained prior to Parent's and the Purchaser's
obtaining control of the Company includes all consents, approvals, registration,
licenses and permits of all applicable authorities in Connecticut, Illinois,
Indiana, Kentucky, Maryland, Massachusetts, Minnesota, Missouri, and New
Hampshire and Rhode Island, unless and until Parent and the Purchaser are
advised that such prior approval is not required, but does not include such
consents, approvals, registrations, licenses or permits of any applicable
authority in Rhode Island.
In five of the states in which the Company conducts restaurant operations
(Connecticut, Massachusetts, New York, Pennsylvania and Rhode Island), another
investment partnership organized by Boston Ventures operates, through various
subsidiaries, restaurant/breweries under the name "John Harvard's Brew House" or
"Union Station Brewery," and have applied, or will shortly apply, in two other
states (Delaware and Ohio), for licenses to operate a "John Harvard's Brew
House". Each of the restaurant/breweries brews beer for consumption on the
restaurant/brewery premises. Each of these seven states has what is known as a
"tied-house" statute which, by its terms, may be construed as prohibiting a
brewery (which is part of a restaurant/brewery) from, directly or indirectly,
owning or having a "financial" interest in the license, premise or business of a
retailer of alcoholic beverages, such as a restaurant. A restaurant/brewery is
an express exemption from the tied-house prohibition. Parent and the Purchaser
have had discussions and written communications with the alcoholic beverage
authority of each of the seven states for the purpose of resolving any issue
that may exist under each such state's tied-house statute. In that connection, a
legislative exemption to Connecticut's tied-house statute, which will remove the
tied-house prohibition that currently exists with respect to the Offer and the
Merger, has been enacted into law and will become effective October 1, 1997.
Parent and the Purchaser have been advised by their counsel in Delaware and by
counsel to the relevant authorities in New York, Ohio and Pennsylvania, that the
transaction will not present any issue under such states' tied-house statutes.
In Massachusetts, a legislative bill, which is needed to resolve the tied-house
issue, has been submitted to the legislature for approval. It is a condition to
the Offer that Parent and the Purchaser
32
<PAGE> 35
shall have obtained continuing assurances from the appropriate authorities in
Massachusetts, New York and Ohio, or otherwise made arrangements, satisfactory
to Parent and the Purchaser in their sole discretion, that there is no legal
impediment to their obtaining control of the Company under such states'
tied-house statutes. Parent's and the Purchaser's Rhode Island counsel has had
written and oral communications with the legal division of the Rhode Island
Department of Business Regulation and has been advised that the transaction may
violate the Rhode Island tied-house statute. If a response permitting the
transaction under the statute, or any required prior approval, as noted above,
is not received prior to the Expiration Date, Parent is prepared, upon
consummation of the Offer, to cause the Company to surrender the Liquor Licenses
covering the Company's premises in Rhode Island, which will remove any
tied-house impediment.
17. FEES AND EXPENSES
Parent and the Purchaser have retained MacKenzie Partners, Inc. to act as
the Information Agent and State Street Bank and Trust Company to act as the
Depositary in connection with the Offer. The Information Agent and the
Depositary will each receive reasonable and customary compensation for their
services hereunder, be reimbursed for their reasonable out-of-pocket expenses
and be indemnified against certain liabilities and expenses in connection with
the Offer including certain liabilities under the securities laws.
Neither Parent nor the Purchaser, nor any officer, director, shareholder,
agent or other representative of Parent or the Purchaser, will pay any fees or
commissions to any broker, dealer or other person (other than the Information
Agent) for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers,
commercial banks and trust companies and other nominees will, upon request, be
reimbursed by the Purchaser for customary mailing and handling expenses incurred
by them in forwarding materials to their customers.
18. MISCELLANEOUS
The Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with such state statute. If,
after such good faith effort, the Purchaser cannot comply with such state
statute, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of Shares in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT OTHER THAN AS CONTAINED IN
THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND, IF ANY SUCH
INFORMATION OR REPRESENTATION IS GIVEN OR MADE, IT SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE PURCHASER OR PARENT.
The Purchaser and Parent have jointly filed a Tender Offer Statement on
Schedule 14D-1 with the Commission, pursuant to Rule 14d-1 of the Exchange Act,
together with exhibits furnishing certain information with respect to the Offer.
Such Schedule 14D-1 and any amendments thereto, including all exhibits, may be
examined and copies may be obtained at the same places and in the same manner as
set forth with respect to the Company in Section 8 (except that they may not be
available at the regional offices of the Commission).
GRR MERGER CORP.
33
<PAGE> 36
SCHEDULE I
CERTAIN INFORMATION CONCERNING DIRECTORS, EXECUTIVE
OFFICERS AND MANAGING DIRECTORS
The following table sets forth the name, business address and present
principal occupation or employment, and material occupations, offices or
employments for the past five years of each director and executive officer of
the Purchaser and the Managing Directors of Boston Ventures Company V, the
General Partner of Boston Ventures LP V. Boston Ventures LP V is the managing
member of Parent and the holder of a majority of Parent's outstanding membership
interests. Except as otherwise noted, the business address of each such person
is 21 Custom House Street, Boston, MA 02110. In addition, except as otherwise
noted, each person listed below has been employed by Boston Ventures in the
positions listed below during the last five years and is a United States
citizen.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME TITLE AND FIVE YEAR EMPLOYMENT HISTORY
- --------------------------- --------------------- ----------------------------------------------
<S> <C> <C>
I. EXECUTIVE OFFICERS AND DIRECTORS OF THE PURCHASER
Martha H.W. Crowninshield.. Director Director, Boston Ventures
Barbara M. Ginader......... Director, President 1993 -- present, Director, Boston Ventures;
and Secretary prior thereto, Managing Director, Bear,
Stearns & Co. Inc.
Neil A. Wallack............ Vice President and 1996 -- present Associate Director, Boston
Treasurer Ventures; 1993 -- 1996, Associate, Boston
Ventures; 1991 -- 1993, Harvard Graduate
School of Business Administration
II. MANAGING DIRECTORS OF BOSTON VENTURES COMPANY V
Anthony J. Bolland*........ Director, Boston Ventures
Roy F. Coppedge III........ Director, Boston Ventures
Martha H.W. Crowninshield.. Director, Boston Ventures
Barbara M. Ginader......... 1993 -- present, Director, Boston Ventures;
prior thereto, Managing Director, Bear,
Stearns & Co. Inc.
Richard C. Wallace......... Director, Boston Ventures
James M. Wilson*........... Director, Boston Ventures
</TABLE>
- ---------------
* Citizen of the United Kingdom.
I-1
<PAGE> 37
SCHEDULE II
ADDITIONAL INFORMATION REQUIRED BY THE
NEW YORK SECURITY TAKEOVER DISCLOSURE ACT
The Purchaser was incorporated on August 8, 1997, and Parent was organized
on August 6, 1997. Neither has engaged in any business since its incorporation
or organization other than that incident to its incorporation or organization
and in connection with the Offer and the Merger. Accordingly, neither the
Purchaser nor Parent has engaged in any significant community activities, nor
has the Purchaser or Parent made any significant charitable, cultural,
educational or civic contributions.
Except for the directors and executive officers of the Purchaser set forth
in Schedule I, the Purchaser has no employees. Accordingly, the Purchaser has no
existing pension plans, profit-sharing plans, savings plans, has not provided
any educational opportunities or relocation adjustments to its employees, and
has had no labor or employment related claims or disputes.
Neither Parent nor the Purchaser has any present plans or proposals
relating to material changes in the Company's business, corporate structure,
management, personnel or activities, which would have a substantial impact on
residents of the State of New York. As provided in the Merger Agreement, Parent
has agreed that, from and after the date of purchase of Shares pursuant to the
Offer, the Company or the Surviving Corporation, as applicable, will, and Parent
will cause the Company, the Surviving Corporation or the Company benefit plans
to, provide or pay when due to employees and former employees of the Company all
benefits and compensation pursuant to the Company benefit plans, policies and
arrangements in effect on August 29, 1997 and disclosed to Parent (other than
with respect to stock and stock-based plans, benefits or awards) earned or
accrued through, and to which such individuals are entitled as of, the Effective
Time (or such later time as such Company benefit plans as in effect at the
Effective Time are terminated or canceled by the Surviving Corporation subject
to compliance with the provisions of the Merger Agreement, and for a period of
not less than two years following the Merger, that the Surviving Corporation
will provide benefits to employees and former employees of the Company that are
no less favorable in the aggregate to such persons than those currently provided
by the Company and disclosed to Parent (other than with respect to stock and
stock based plans, benefits or awards).
Except as set forth in this Schedule II, all information regarding the
Purchaser, Parent and the Company and the Offer required to be disclosed
pursuant to the NYSTDA is set forth in this Offer to Purchase and is
incorporated by reference in the Registration Statement filed pursuant to the
NYSTDA.
II-1
<PAGE> 38
The Depositary for the Offer is:
STATE STREET BANK AND TRUST COMPANY
Facsimile Copy Number:
(781) 794-6333
Confirm by Telephone:
(781) 794-6388
For Information Call:
(800) 426-5523
<TABLE>
<S> <C> <C>
By First Class Mail or By Express Mail By Hand:
Express Mail: or Overnight Courier:
State Street Bank State Street Bank Securities Transfer and
and Trust Company and Trust Company Reporting Services, Inc.
Corporate Reorganization Corporate Reorganization c/o Boston Equiserve
P.O. Box 9572 70 Campanelli Drive Corporate Reorganization
Boston, MA 02205-9572 Braintree, MA 02184 55 Broadway, 3rd Floor
New York, NY 10006
</TABLE>
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the related Letter of Transmittal, and other tender offer
materials, may be directed to the Information Agent at its telephone numbers and
address listed below. Shareholders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Offer.
The Information Agent for the Offer is:
[Mackenzie Parners, Inc. Logo]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll Free: (800) 322-2885
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
GROUND ROUND RESTAURANTS, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED SEPTEMBER 8, 1997
OF
GRR MERGER CORP.
A WHOLLY-OWNED SUBSIDIARY OF
GRR HOLDINGS, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, OCTOBER 3, 1997, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
STATE STREET BANK AND TRUST COMPANY
Facsimile Copy Number:
(781) 794-6333
Confirm by Telephone:
(781) 794-6388
For Information Call:
(800) 426-5523
<TABLE>
<S> <C> <C>
By First Class Mail or By Express Mail By Hand:
Express Mail: or Overnight Courier:
State Street Bank and Trust State Street Bank and Trust Securities Transfer and
Company Company Reporting Services, Inc.
Corporate Reorganization Corporate Reorganization c/o Boston Equiserve
P.O. Box 9572 70 Campanelli Drive Corporate Reorganization
Boston, MA 02205-9572 Braintree, MA 02184 55 Broadway, 3rd Floor
New York, NY 10006
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER
OTHER THAN AS LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE
INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY
BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by shareholders of Ground
Round Restaurants, Inc. (the "Company"), if certificates representing Shares (as
defined below) ("Share Certificates") are to be forwarded herewith or, unless an
Agent's Message (as defined in the Offer to Purchase, as defined below) is
utilized, if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depositary Trust Company ("DTC") or the Philadelphia
Depositary Trust Company ("PDTC") (hereinafter collectively referred to as the
"Book-Entry Transfer Facilities") pursuant to the procedures set forth in
Section 3 of the Offer to Purchase.
Shareholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other documents required hereby
to the Depositary prior to the Expiration Date (as defined in the Offer to
Purchase), or who cannot comply with the book-entry transfer procedures on a
timely
<PAGE> 2
basis, may nevertheless tender their Shares pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2.
Delivery of documents to a Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures does not constitute delivery to the
Depositary.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN BLANK EXACTLY AS NAME(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
SHARE EVIDENCED BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S) TENDERED**
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Total Shares
------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by shareholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by
each Share Certificate delivered to the Depositary are being tendered
hereby. See Instruction 4.
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:
------------------------------------------------------------------------------
Check Box of Applicable Book-Entry Transfer Facility:
(check one)
[ ] DTC
[ ] PDTC
Account Number:
------------------------------------------------------------------------------
Transaction Code Number:
------------------------------------------------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
-------------------------------------------------------------------------------
Window Ticket No. (if any):
-----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
----------------------------------------------------------------
Name of Institution which Guaranteed Delivery:
--------------------------------------------------------------------
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to GRR Merger Corp., a New York corporation
(the "Purchaser") and a wholly-owned subsidiary of GRR Holdings, Inc., a
Delaware limited liability company ("Parent"), the above-described shares of
Common Stock, par value $.16 2/3 per share (the "Shares"), of GROUND ROUND
RESTAURANTS, Inc., a New York corporation (the "Company"), pursuant to the
Purchaser's offer to purchase all outstanding Shares at a purchase price of
$1.65 per Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
September 8, 1997 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which, together with the Offer
to Purchase, as each may be amended and supplemented from time to time,
constitute the "Offer").
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, the undersigned hereby sells, assigns and transfers to or
upon the order of the Purchaser all right, title and interest in and to all the
Shares that are being tendered hereby and any and all other Shares or other
securities issued or issuable in respect thereof on or after August 29, 1997
(each a "Distribution") and appoints the Depositary the true and lawful agent
and attorney-in-fact of the undersigned with respect to such Shares (and any
Distributions), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
Share Certificates (and any Distributions), or transfer ownership of such Shares
(and any Distributions) on the account books maintained by any of the Book-Entry
Transfer Facilities, together, in any such case, with all accompanying evidences
of transfer and authenticity, to or upon the order of the Purchaser, (b) present
such Shares (and any Distributions) for transfer on the books of the Company and
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares (and any Distributions), all in accordance with the
terms and subject to the conditions of the Offer.
The undersigned hereby irrevocably appoints designees of the Purchaser as
the attorneys and proxies of the undersigned, each with full power of
substitution, to exercise all voting and other rights of the undersigned in such
manner as each such attorney and proxy or his substitute shall in his sole
judgment deem proper, with respect to all of the Shares tendered hereby and any
Distribution which have been accepted for payment by the Purchaser prior to the
time of any vote or other action at any meeting of shareholders of the Company
(whether annual or special and whether or not an adjourned meeting) or
otherwise. This power of attorney and proxy are irrevocable, are coupled with an
interest in the Shares tendered hereby and any Distribution, and are granted in
consideration of, and effective upon, the acceptance for payment of such Shares
by Purchaser in accordance with the terms of the Offer. Such acceptance for
payment shall revoke any other proxy or written consent granted by the
undersigned at any time with respect to such Shares (and any Distributions), and
no subsequent proxies will be given or written consents executed by the
undersigned (and if given or executed, will not be deemed effective).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any Distributions) and that when the same are accepted for
payment by the Purchaser, the Purchaser will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claims. The undersigned will, upon request, execute
and deliver any additional documents deemed by the Depositary or the Purchaser
to be necessary or desirable to complete the sale, assignment and transfer of
the Shares tendered hereby (and any Distributions). All authority herein
conferred or agreed to be conferred shall survive the death or incapacity of the
undersigned, and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as stated in the Offer, this tender is irrevocable.
The undersigned understands that the tender of Shares pursuant to any one
of the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and the
Purchaser upon the terms and subject to the conditions of the Offer. The
undersigned
<PAGE> 4
acknowledges that no interest will be paid on the purchase price for tendered
Shares regardless of any extension of the Offer or any delay in making such
payment.
Unless otherwise indicated in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of any Shares
purchased, and return any Share Certificates evidencing any Shares not tendered
or not purchased, in the name(s) of the undersigned (and, in the case of Shares
tendered by book-entry transfer, by credit to the account at the Book-Entry
Transfer Facility designated above). Similarly, unless otherwise indicated in
the box entitled "Special Delivery Instructions," please mail the check for the
purchase price of any Shares purchased and return any Share Certificates
evidencing any Shares not tendered or not purchased (and accompanying documents,
as appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that the boxes entitled "Special Payment
Instructions" and "Special Delivery Instructions" are both completed, please
issue the check for the purchase price of any Shares purchased and return any
Share Certificates evidencing any Shares not tendered or not purchased in the
name(s) of, and mail said check and Share Certificates to, the person(s) so
indicated. The undersigned acknowledges that the Purchaser has no obligation,
pursuant to the "Special Payment Instructions," to transfer any Shares from the
name of the registered holder(s) thereof if the Purchaser does not accept for
payment any of the Shares so tendered.
<PAGE> 5
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not
purchased are to be issued in the name of someone other than the
undersigned, or if Shares tendered hereby and delivered by book-entry
transfer which are not purchased are to be returned by credit to an
account at one of the Book-Entry Transfer Facilities other than that
designated above.
Issue: [ ] Check [ ] Share Certificate(s) to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
[ ] Credit Shares delivered by book-entry transfer and not purchased to
the account set forth below:
Check appropriate Box:
[ ] DTC [ ] PDTC
------------------------------------------------------------
(ACCOUNT NUMBER)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not
purchased are to be mailed to someone other than the undersigned, or to
the undersigned at an address other than that shown under the
undersigned's signature.
Mail: [ ] Check [ ] Share Certificate(s) to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
------------------------------------------------------------
<PAGE> 6
IMPORTANT
SHAREHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Dated:
- --------------------------- , 1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, please provide the following information and see
Instruction 5.)
Name(s):------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
----------------------------------------------------------------
Address:
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.:
--------------------------------------------------------
Taxpayer Identification or Social Security No.:
---------------------------------------------
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
----------------------------------------------------------------
Name: --------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Title:
---------------------------------------------------------------------------
Name of Firm:
---------------------------------------------------------------------
Address:
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Code and Telephone No.:
--------------------------------------------------------
Dated:
- --------------------------- , 1997
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below,
signatures on this Letter of Transmittal must be guaranteed by a firm that is a
bank, broker, dealer, credit union, savings association or other entity which is
a member in good standing of the Securities Transfer Agents Medallion Program or
by any other bank, broker, dealer, credit union, savings association or other
entity which is an "eligible guarantor institution," as such term is defined in
Rule 17Ad15 under the Securities Exchange Act of 1934, as amended (each of the
foregoing constituting an "Eligible Institution"), unless the Shares tendered
thereby are tendered (i) by the registered holder(s) of such Shares who has not
completed either the box labeled "Special Payment Instructions" or the box
labeled "Special Delivery Instructions" on this Letter of Transmittal or (ii)
for the account of an Eligible Institution. See Instruction 5. If Share
Certificates are registered in the name of a person or persons other than the
signer of this Letter of Transmittal, or if payment is to be made or delivered
to, or certificates evidencing unpurchased Shares are to be issued or returned
to, a person other than the registered owner or owners, then the tendered Share
Certificates must be endorsed or accompanied by duly executed stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appear on the Share Certificates, with the signatures on the Share
Certificates or stock powers guaranteed by an Eligible Institution as provided
herein. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter
of Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is
utilized, if the delivery of Shares is to be made by book-entry transfer
pursuant to the procedures set forth in Section 3 of the Offer to Purchase.
Certificates for all physically delivered Shares, or a confirmation of a
book-entry transfer into the Depositary's account at one of the Book-Entry
Transfer Facilities of all Shares delivered electronically, as well as a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), or an Agent's Message in the case of a book-entry transfer,
and any other documents required by this Letter of Transmittal must be received
by the Depositary at one of its addresses set forth on the front page of this
Letter of Transmittal by the Expiration Date (as defined in the Offer to
Purchase). Shareholders who cannot deliver their Share Certificates and all
other required documents to the Depositary by the Expiration Date must tender
their Shares pursuant to the guaranteed delivery procedure set forth in Section
3 of the Offer to Purchase. Pursuant to such procedure: (a) such tender must be
made by or through an Eligible Institution; (b) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
Purchaser, must be received by the Depositary prior to the Expiration Date; and
(c) the Share Certificates for all tendered Shares, in proper form for tender,
or a confirmation of a book-entry transfer into the Depositary's account at one
of the Book-Entry Transfer Facilities of all Shares delivered electronically, as
well as a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof), or an Agent's Message in the case of a
book-entry transfer, and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three (3) trading days
(as defined in Section 3 of the Offer to Purchase) after the date of execution
of such Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer
to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted. By
execution of this Letter of Transmittal (or a manually signed facsimile
thereof), all tendering shareholders waive any right to receive any notice of
the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
Share Certificate numbers and/or the number of Shares should be listed on a
separate schedule attached hereto.
<PAGE> 8
4. PARTIAL TENDERS (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY
BOOK-ENTRY TRANSFER). If fewer than all the Shares represented by any Share
Certificate delivered to the Depositary are to be tendered, fill in the number
of Shares which are to be tendered in the box entitled "Number of Shares
Tendered." In such case, a new Share Certificate for the remainder of the Shares
represented by the old Share Certificate will be sent to the person(s) signing
this Letter of Transmittal, unless otherwise provided in the box entitled
"Special Payment Instructions" or "Special Delivery Instructions," as promptly
as practicable following the expiration or termination of the Offer. All Shares
represented by Share Certificates delivered to the Depositary will be deemed to
have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates without alteration, enlargement or any other
change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different Share Certificates, it will be necessary to complete, sign and submit
as many separate Letters of Transmittal as there are different registrations of
Share Certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificate(s) or separate
stock powers are required, unless payment of the purchase price is to be made
to, or Share Certificate(s) evidencing Shares not tendered or not purchased are
to be returned to or issued in the name of, any person other than the registered
holder(s). Signatures on any such Share Certificates or stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signature(s) on any
such Share Certificate(s) or stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing and proper evidence
satisfactory to the Purchaser of the authority of such person so to act must be
submitted.
6. STOCK TRANSFER TAXES. The Purchaser will pay any stock transfer taxes
with respect to the sale and transfer of any Shares to it or its order pursuant
to the Offer. If, however, payment of the purchase price is to be made to, or
Share Certificates evidencing Shares not tendered or not purchased are to be
returned to, or issued in the name of, any person other than the registered
holder(s) of such Shares, then the amount of any stock transfer taxes (whether
imposed on the registered holder(s), such other person or otherwise) payable on
account of the transfer to such person will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes, or exemption
therefrom, is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT
BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATE(S)
LISTED IN THIS LETTER OF TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
purchase price of any Shares purchased is to be issued, or any Share
Certificates evidencing Shares not tendered or not purchased are to be returned,
in the name of a person other than the person(s) signing this Letter of
Transmittal or if the check or any Share Certificates evidencing Shares not
tendered or not purchased are to be mailed to someone other than the person(s)
signing this Letter of Transmittal or to the person(s) signing this Letter of
Transmittal at an address other than that shown above, the appropriate boxes on
this Letter of Transmittal should be completed. Shareholders tendering Shares by
book-entry transfer may request that Shares not purchased be credited to such
account at any of the Book-Entry Transfer Facilities as such shareholder may
designate in the
<PAGE> 9
box entitled "Special Payment Instructions." If no such instructions are given,
any such Shares not purchased will be returned by crediting the account at the
Book-Entry Transfer Facilities designated above.
8. SUBSTITUTE FORM W-9. The tendering holder of Shares is required to
provide the Depositary with such holder's correct taxpayer identification number
("TIN") on Substitute Form W-9, which is provided below, unless an exemption
applies. In the case of such a holder who has completed the box entitled
"Special Payment Instructions," however, the correct TIN on Substitute Form W-9
should be provided for the recipient of the payment pursuant to such
instructions. Failure to provide the information on the Substitute Form W-9 may
subject the tendering holder of Shares to a $50 penalty and to 31% federal
income tax backup withholding on the payment of the purchase price for the
Shares.
9. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent at its
address and telephone numbers set forth on the back cover of the Offer to
Purchase. Additional copies of the Offer to Purchase, the Letter of Transmittal,
the Notice of Guaranteed Delivery and other related materials may be obtained
from the Information Agent or from brokers, dealers, commercial banks and trust
companies.
THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE COPY HEREOF), OR
AN AGENT'S MESSAGE IN THE CASE OF A BOOK-ENTRY TRANSFER, TOGETHER WITH SHARE
CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS, OR NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY
ON OR PRIOR TO THE EXPIRATION DATE.
<PAGE> 10
IMPORTANT TAX INFORMATION
Under the federal income tax law, a holder of Shares whose tendered Shares
are accepted for payment is required by law to provide the Depositary (as payer)
with such holder's correct TIN on Substitute Form W-9 below. The holder of
Shares must also state that (i) such holder has not been notified by the
Internal Revenue Service that such holder is subject to backup withholding as a
result of a failure to report all interest or dividends or (ii) the Internal
Revenue Service has notified such holder that such holder is no longer subject
to backup withholding. If the Depositary is not provided with the correct TIN,
the holder of Shares may be subject to a $50 penalty imposed by the Internal
Revenue Service and payments made to such holder may be subject to backup
withholding.
Certain holders of Shares (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, such individual must submit a statement, signed under
penalties of perjury, attesting to such individual's exempt status. Forms of
such statements can be obtained from the Depositary. See the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the holder of Shares. Backup withholding is not an
additional tax. Rather, the tax withheld pursuant to backup withholding rules
will be available as a credit against such holder's tax liabilities. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
WHAT NUMBER TO GIVE THE DEPOSITARY
If the holder of Shares is an individual, the correct TIN is his or her
social security number. In other cases, the correct TIN may be the employer
identification number of the record holder of the Shares tendered hereby. If the
Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance on which number to report.
If the tendering holder of Shares has not been issued a TIN and has applied for
a number or intends to apply for a number in the near future, the holder should
write "Applied For" in the space provided for the TIN in Part I of the
Substitute Form W-9, and sign and date the Substitute Form W-9. If "Applied For"
is written in Part I of the Substitute Form W-9 and the Depositary is not
provided with a TIN within thirty (30) days, the Depositary may withhold 31% of
all payments of the purchase price to such holder until a TIN is provided to the
Depositary.
<PAGE> 11
<TABLE>
<C> <S> <C>
- -------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: STATE STREET BANK AND TRUST COMPANY
===================================================================================================================
SUBSTITUTE PART I -- Taxpayer Identification Number -- PART III -- Social Security Number OR
FORM W-9 For all accounts, enter taxpayer Employer Identification Number
identification number in the box at right.
DEPARTMENT OF THE TREASURY (For most individuals, this is your social --------------------------------------
INTERNAL REVENUE SERVICE security number. If you do not have a (If awaiting TIN write "Applied For")
number, see OBTAINING A NUMBER in the
enclosed Guidelines.) Certify by signing
and dating below.
NOTE: If the account is in more than one
name, see chart in the enclosed Guidelines
to determine which number to give the
payer.
------------------------------------------------------------------------------------
PART II -- For Payees exempt from backup withholding, see the enclosed Guidelines
and complete as instructed therein.
------------------------------------------------------------------------------------
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or
I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding either because (a) I have not been
notified by the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all interest or dividends, or
(b) the IRS has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if, after being
notified by the IRS that you were subject to backup withholding, you received
another notification from the IRS that you were no longer subject to backup
withholding, do not cross out item (2). (Also see instructions in the enclosed
Guidelines.) SIGNATURE DATE
------------------------------------------------- -------------------
NAME
---------------------------------------------------------------------------------
ADDRESS
-----------------------------------------------------------------------------
CITY-STATE-ZIP---------------------------------------------------------------------
PAYOR'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER ("TIN")
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER TO PURCHASE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING (OR WILL
SOON APPLY FOR) A TAXPAYER IDENTIFICATION NUMBER.
<PAGE> 12
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand
that, notwithstanding the information I provided in Part III of the Substitute
Form W-9 (and the fact that I have completed this Certificate of Awaiting
Taxpayer Identification Number), if I do not provide a correct TIN to the
Depositary within thirty (30) days, 31% of all reportable payments made to me
pursuant to the Offer may be withheld.
- ---------------------------------------------------------
---------------------------------------------------------
Signature Date
If you have any questions regarding the Offer, please contact the
Information Agent.
The Information Agent for the Offer is:
[Mackenzie Parners, Inc. Logo]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL FREE (800) 322-2885
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY FOR
TENDER OF SHARES OF COMMON STOCK
OF
GROUND ROUND RESTAURANTS, INC.
TO
GRR MERGER CORP.
A WHOLLY-OWNED SUBSIDIARY OF
GRR HOLDINGS, LLC
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) if certificates
evidencing shares of Common Stock, par value $.16 2/3 per share (the "Shares"),
of Ground Round Restaurants, Inc., a New York corporation (the "Company"), are
not immediately available, or if the procedure for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach the Depositary on or prior to the Expiration Date (as defined in the Offer
to Purchase, dated September 8, 1997 (the "Offer to Purchase")). Such form may
be delivered by hand or facsimile transmission or mail to the Depositary. See
Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
STATE STREET BANK AND TRUST COMPANY
Facsimile Copy Number:
(781) 794-6333
Confirm by Telephone:
(781) 794-6388
For Information Call:
(800) 426-5523
<TABLE>
<S> <C> <C>
By First Class Mail or By Express Mail By Hand:
Express Mail: or Overnight Courier:
State Street Bank and Trust State Street Bank and Trust Securities Transfer and
Company Company Reporting Services, Inc.
Corporate Reorganization Corporate Reorganization c/o Boston Equiserve
P.O. Box 9572 70 Campanelli Drive Corporate Reorganization
Boston, MA 02205-9572 Braintree, MA 02184 55 Broadway, 3rd Floor
New York, NY 10006
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to GRR Merger Corp., a New York corporation
and a wholly-owned subsidiary of GRR Holdings, LLC, a Delaware limited liability
company, upon the terms and subject to the conditions set forth in the Offer to
Purchase and the related Letter of Transmittal (which together, as the same may
be amended as supplemented from time to time, constitute the "Offer"), receipt
of which is hereby acknowledged, the number of Shares specified below pursuant
to the guaranteed delivery procedures described in Section 3 of the Offer to
Purchase.
Number of Shares:
- --------------------------------------------------------------------------------
Certificate Nos. (If Available):
- --------------------------------------------------------------------------------
Check ONE box if Shares will be delivered by book-entry transfer:
[ ] The Depositary Trust Company
[ ] Philadelphia Depositary Trust Company
Account Number:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated:
- ------------------------------------, 1997
Name(s) of Holder(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE TYPE OR PRINT
- --------------------------------------------------------------------------------
ADDRESS
- --------------------------------------------------------------------------------
ZIP CODE
- --------------------------------------------------------------------------------
AREA CODE AND TELEPHONE NO.
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other equity which is a member in good standing of the Securities Transfer
Agents Medallion Program or a bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934,
as amended (each of the foregoing constituting an "Eligible Institution"),
guarantees the delivery to the Depositary of the Shares tendered hereby,
together with a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof) and any other required documents, or an
Agent's Message (as defined in the Offer to Purchase) in the case of a
book-entry transfer of Shares, all within three trading days (as defined in
Section 3 of the Offer to Purchase) of the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates representing Shares to the Depositary within the time period set
forth herein. Failure to do so could result in a financial loss to such Eligible
Institution.
- --------------------------------------------------------------------------------
NAME OF FIRM
- --------------------------------------------------------------------------------
ADDRESS
- --------------------------------------------------------------------------------
ZIP CODE
- --------------------------------------------------------------------------------
AREA CODE AND TELEPHONE NO.
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE
- --------------------------------------------------------------------------------
TITLE
Name:
- --------------------------------------------------------------------------------
PLEASE TYPE OR PRINT
Dated:
- ------------------------------------, 1997
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
GROUND ROUND RESTAURANTS, INC.
AT
$1.65 NET PER SHARE
BY
GRR MERGER CORP.
A WHOLLY-OWNED SUBSIDIARY OF
GRR HOLDINGS, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, OCTOBER 3, 1997, UNLESS THE OFFER IS EXTENDED.
September 8, 1997
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
GRR Merger Corporation, a New York corporation (the "Purchaser") and a
wholly-owned subsidiary of GRR Holdings, LLP, a Delaware limited liability
company ("Parent"), is offering to purchase all outstanding shares of Common
Stock, par value $.16 2/3 per share (the "Shares"), of Ground Round Restaurants,
Inc., a New York corporation (the "Company"), at a purchase price of $1.65 per
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated September 8,
1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which
together, as the same may be amended or supplemented from time to time,
constitute the "Offer") enclosed herewith. All capitalized terms used but not
defined herein shall have the meaning ascribed to them in the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares in your name or in the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase dated September 8, 1997.
2. The Letter of Transmittal to tender Shares for your use and for
the information of your clients. Facsimile copies of the Letter of
Transmittal (with manual signatures) may be used to tender Shares.
3. A letter to shareholders of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9, filed with the
Securities and Exchange Commission by the Company and mailed to the
shareholders of the Company recommending that the Company's shareholders
accept the Offer and tender their Shares.
4. The Notice of Guaranteed Delivery to be used to tender Shares
pursuant to the Offer if none of the procedures for tendering Shares set
forth in the Offer to Purchase can be completed on a timely basis.
5. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name, with space provided
for obtaining such clients' instructions with regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
<PAGE> 2
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, OCTOBER 3, 1997, UNLESS THE OFFER
IS EXTENDED.
Please note the following:
1. The tender price is $1.65 per Share, net to the seller in cash,
without interest thereon.
2. The Offer is being made for all of the outstanding Shares.
3. The Offer is being made pursuant to an Agreement and Plan of
Merger, dated as of August 29, 1997, by and among the Parent, the Purchaser
and the Company (the "Merger Agreement"). The Board of Directors of the
Company has unanimously approved the Offer and the Merger, has determined
that the Offer and the Merger are fair to and in the best interests of the
Company and its shareholders and recommends that the Company's shareholders
accept the Offer and tender their Shares pursuant to the Offer.
4. The Offer is conditioned upon (i) there having been validly
tendered, and not properly withdrawn, that number of Shares which, when
aggregated with the Shares owned by Parent, represent at least 90% of all
outstanding Shares, (ii) the expiration or termination of any waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, applicable to the purchase of Shares pursuant to the Offer, (iii)
the receipt of certain regulatory approvals of transfers of liquor licenses
held by the Company or its subsidiaries and of satisfactory assurances of
exemption from certain tied-house statutes as set forth in the Offer to
Purchase and (iv) the satisfaction of certain other terms and conditions
set forth in the Offer to Purchase.
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in the Letter of Transmittal, stock transfer
taxes on the transfer of Shares pursuant to the Offer.
In order to take advantage of the Offer (i) a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile thereof) and any
required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message, and any other required documents should be sent to the
Depositary and (ii) certificates representing the tendered Shares (the "Share
Certificates") or a timely Book-Entry Confirmation should be delivered to the
Depositary in accordance with the instructions set forth in the Offer to
Purchase.
Holders of Shares whose Share Certificates are not immediately available or
who cannot deliver their Share Certificates and all other required documents to
the Depositary or complete the procedures for book-entry transfer prior to the
Expiration Date must tender their Shares according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
None of the Purchaser, Parent nor any officer, director, stockholder, agent
or other representative of the Purchaser will pay any fees or commissions to any
broker, dealer or other person (other than the Information Agent as described in
the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer.
The Purchaser will, however, upon request, reimburse you for customary mailing
and handling expenses incurred by you in forwarding any of the enclosed
materials to your clients. The Purchaser will pay or cause to be paid any
transfer taxes payable on the transfer of Shares to it, except as otherwise
provided in the Letter of Transmittal.
2
<PAGE> 3
Any inquiries you may have with respect to the Offer, and requests for
copies of the enclosed materials, should be directed to MacKenzie Partners,
Inc., the Information Agent, 156 Fifth Avenue, New York, New York, (212)
929-5500 or (800) 322-2885.
Very truly yours,
------------------------------------------------------------------------------
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF PARENT, THE PURCHASER, THE DEPOSITARY, THE
INFORMATION AGENT OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN
CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS
CONTAINED THEREIN.
3
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
GROUND ROUND RESTAURANTS, INC.
AT
$1.65 NET PER SHARE
BY
GRR MERGER CORP.
A WHOLLY-OWNED SUBSIDIARY OF
GRR HOLDINGS, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, OCTOBER 3, 1997, UNLESS THE OFFER IS EXTENDED.
September 8, 1997
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated September
8, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together, as the same may be amended or supplemented from time to time,
constitute the "Offer") relating to an offer by GRR Merger Corp., a New York
corporation (the "Purchaser") and a wholly-owned subsidiary of GRR Holdings,
LLC, a Delaware limited liability company ("Parent"), to purchase all
outstanding shares of Common Stock, par value $.16 2/3 per share (the "Shares"),
of Ground Round Restaurants, Inc., a New York corporation (the "Company"), at a
purchase price of $1.65 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer.
This material is being forwarded to you as the beneficial owner of Shares
carried by us in your account but not registered in your name.
A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR
YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR
YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender any
or all of the Shares held by us for your account, upon the terms and subject to
the conditions set forth in the Offer.
Please note the following:
1. The tender price is $1.65 per Share, net to the seller in cash,
without interest thereon.
2. The Offer is being made for all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Friday, October 3, 1997, unless the Offer is extended.
4. The Offer is conditioned upon (i) there having been validly
tendered, and not properly withdrawn, pursuant to the Offer that number of
Shares which, when aggregated with the Shares owned by Parent, represent at
least 90% of all outstanding Shares, (ii) the expiration or termination of
any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, applicable to the purchase of Shares pursuant to the
Offer, (iii) the receipt of certain regulatory approvals of transfers of
liquor licenses held by the Company or its subsidiaries and of satisfactory
assurances of
<PAGE> 2
exemption from certain tied-house statutes as set forth in the Offer to
Purchase and (iv) the satisfaction of certain other terms and conditions
set forth in the Offer to Purchase.
5. The Board of Directors of the Company has unanimously approved the
Offer and the Merger, has determined that the Offer and the Merger are fair
to and in the best interests of the Company and its shareholders and
recommends that the Company's shareholders accept the Offer and tender
their Shares pursuant to the Offer.
6. Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in the Letter of Transmittal, stock
transfer taxes on the transfer of Shares pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction form
contained in this letter. An envelope to return your instruction to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise indicated in such instruction form. PLEASE FORWARD
YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER
YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely pursuant to the Offer to Purchase and the related
Letter of Transmittal and any supplements or amendments thereto. The Purchaser
is not aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If the
Purchaser becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of Shares pursuant thereto, the Purchaser will make a
good faith effort to comply with such state statute. If, after such good faith
effort, the Purchaser cannot comply with such state statute, the Offer will not
be made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Purchaser by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
GROUND ROUND RESTAURANTS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated September 8, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which together, as the same may be amended or
supplemented, constitute the "Offer") in connection with the offer by GRR Merger
Corp., a New York corporation (the "Purchaser") and a wholly-owned subsidiary of
GRR Holdings, LLC, a Delaware limited liability company, to purchase all
outstanding shares of Common Stock, par value $.16 2/3 per share (the "Shares"),
of Ground Round Restaurants, Inc., a New York corporation.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
Date:
- ------------------------------, 1997
NUMBER OF SHARES OF COMMON STOCK TO BE TENDERED:*
Account Number:
SIGN HERE
- --------------------------------------------------------------------------------
(SIGNATURE(S))
- --------------------------------------------------------------------------------
(PRINT NAME(S))
- --------------------------------------------------------------------------------
(PRINT ADDRESS(ES))
- --------------------------------------------------------------------------------
(AREA CODE AND TELEPHONE NUMBER(S))
- --------------------------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
- ---------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
3
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
<TABLE>
<CAPTION>
------------------------------------------------------------
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF -
------------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, either
person(1)
4. Custodian account of a minor (Uniform The minor(2)
Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the
minor is the only
contributor, the
minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent person(3)
minor, or incompetent person
7. a. The usual revocable savings trust The grantor-
account (grantor is also trustee) trustee(1)
b. So-called trust account that is not The actual owner(1)
a legal or valid trust under State
law
8. Sole proprietorship account The owner(4)
<CAPTION>
------------------------------------------------------------
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF -
------------------------------------------------------------
<S> <C>
9. A valid trust, estate or pension trust The Legal entity (Do
not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational The organization
organization account
12. Partnership account held in the name The partnership
of the business
13. Association, club, or other tax-exempt The organization
organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
</TABLE>
============================================================
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file a tax return. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will generally be treated as
being due to negligence and will be subject to a penalty of 20% on any portion
of an underpayment attributable to that failure.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- if you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE> 1
PRESS RELEASE
Boston, Mass., September 2, 1997 -- GRR Holdings, LLC ("Holdings"), a
limited liability company formed by Boston Ventures, and Ground Round
Restaurants, Inc. ("Ground Round") (Nasdaq NMS: GRXR) today announced that they
have signed a definitive merger agreement for Holdings to acquire all
outstanding shares of Ground Round common stock for $1.65 net per share in cash.
Under the terms of the agreement, which has been approved by the board
of directors of Ground Round, GRR Merger Corp., a subsidiary of Holdings, will
begin a tender offer no later than September 8, 1997 for all outstanding shares
of Ground Round common stock at $1.65 net per share in cash.
The tender offer will be conditioned upon, among other things, there
being validly tendered and (not withdrawn) prior to the expiration date of the
offer, shares of Ground Round common stock representing, together with shares
currently owned by Holdings, not less than 90% of the outstanding shares,
termination or expiration of all applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and the
receipt of certain regulatory approvals of transfers of liquor licenses held by
the company or its subsidiaries and of exemptions from certain tied-house
statutes. Holdings currently owns 554,900 shares of Ground Round common stock,
or approximately 4.9% of the outstanding shares. In addition, certain
shareholders of Ground Round have agreed to tender their shares, representing
approximately 28% of the outstanding Ground Round common stock, in the offer.
Following the consummation of the tender offer, any shares not purchased in the
tender offer will be acquired in a merger at the same $1.65 net per share in
cash.
In anticipation of the acquisition, Ground Round's existing lenders
have agreed, subject to certain conditions, to permit the company to use
certain insurance and sale proceeds, as well as certain funds that would
otherwise be required to pay amounts due under the existing credit agreement,
to satisfy Ground Round's ordinary course working capital needs until October
22, 1997. Ground Round's lenders have also made certain other concessions to
help the company consummate the merger.
In addition, Ground Round's lenders have agreed to work with the
company and Boston Ventures to amend and extend Ground Round's existing credit
agreement to provide for more operating flexibility upon consummation of the
merger.
Boston Ventures is a private investment partnership which focuses its
investments in the service sector of the economy with an emphasis on the
communications, media and leisure time markets.
Ground Round operates 121 company and franchises 41 full-service,
casual dining restaurants in the Northeast, Mid-Atlantic and Midwest regions of
the United States.
<PAGE> 1
PRESS RELEASE
Boston, Mass., September 8, 1997 -- GRR Holdings, LLC
("Holdings"), a limited liability company formed by Boston Ventures, announced
that it has commenced its tender offer for all outstanding shares of Ground
Round Restaurants, Inc. ("Ground Round") (Nasdaq NMS: GRXR) for $1.65 net per
share in cash.
The tender offer is being made pursuant to a merger agreement
with Ground Round which was announced on September 2nd. The tender offer will
expire, and withdrawal rights under the offer will terminate, at 12:00 midnight,
New York City time, on Friday, October 3, 1997, unless the offer is extended,
subject to the terms of the merger agreement.
The tender offer is conditioned upon, among other things,
there being validly tendered and (not withdrawn) prior to the expiration date of
the offer, shares of Ground Round common stock representing, together with
shares currently owned by Holdings, not less than 90% of the outstanding shares,
termination or expiration of all applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and the receipt
of certain regulatory approvals of transfers of liquor licenses held by the
company or its subsidiaries and of satisfactory assurances of exemption from
certain tied-house statutes as set forth in the Offer to Purchase. Holdings
currently owns 554,900 shares of Ground Round common stock, or approximately
4.9% of the outstanding shares. In addition, certain shareholders of Ground
Round have agreed to tender their shares, representing approximately 28% of the
outstanding Ground Round common stock, in the offer.
The Board of Directors of Ground Round has approved the tender
offer and the merger and determined that the terms of the offer and the merger
are fair to, and in the best interests of, Ground Round and its shareholders .
The Ground Round Board recommends that shareholders accept the offer and tender
their shares.
Following the consummation of the tender offer, any shares not
purchased in the tender offer will be acquired in a merger at the same $1.65 net
per share in cash, to be consummated as soon as practicable following completion
of the tender offer.
The Information Agent for the tender offer is MacKenzie
Partners, Inc.
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated
September 8, 1997 and the related Letter of Transmittal, and is being made to
all holders of Shares. The Purchaser is not aware of any state where the making
of the Offer is prohibited by administrative or judicial action pursuant to any
valid state statute. If the Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, the Purchaser will make a good faith effort to comply with such state
statute. If, after such good faith effort, the Purchaser cannot comply with such
state statute, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Shares in such state. In any jurisdiction where
the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
GROUND ROUND RESTAURANTS, INC.
AT
$1.65 NET PER SHARE
BY
GRR MERGER CORP.
A WHOLLY-OWNED SUBSIDIARY OF
GRR HOLDINGS, LLC
GRR Merger Corp., a New York corporation (the "Purchaser") and a wholly-owned
subsidiary of GRR Holdings, LLC, a Delaware limited liability company
("Parent"), is offering to purchase all outstanding shares of Common Stock, par
value $.16-2/3 per share (the "Shares"), of Ground Round Restaurants, Inc., a
New York corporation (the "Company"), at a price of $1.65 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated September 8, 1997 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which together,
as the same may be amended or supplemented from time to time, constitute the
"Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, OCTOBER 3, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON (I) THERE HAVING BEEN VALIDLY TENDERED PURSUANT TO
THE OFFER, AND NOT PROPERLY WITHDRAWN, THAT NUMBER OF SHARES WHICH, WHEN
AGGREGATED WITH THE SHARES OWNED BY PARENT, REPRESENT AT LEAST 90% OF THE
OUTSTANDING SHARES, (II) THE EXPIRATION OR TERMINATION OF ANY WAITING PERIOD
UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED,
APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER, (III) THE RECEIPT OF
CERTAIN REGULATORY APPROVALS OF TRANSFERS OF LIQUOR LICENSES HELD BY THE COMPANY
OR ITS SUBSIDIARIES AND OF SATISFACTORY ASSURANCES OF EXEMPTION FROM CERTAIN
TIED-HOUSE STATUTES AS SET FORTH IN THE OFFER TO PURCHASE AND (IV) THE
SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS SET FORTH IN THE OFFER TO
PURCHASE. AS OF THE DATE HEREOF, PARENT OWNS APPROXIMATELY 4.9% OF THE
OUTSTANDING SHARES.
CERTAIN SHAREHOLDERS OF THE COMPANY, OWNING IN THE AGGREGATE APPROXIMATELY 28%
OF THE OUTSTANDING SHARES, HAVE ENTERED INTO A SHAREHOLDER AGREEMENT, DATED AS
OF AUGUST 29, 1997, WITH PARENT AND THE PURCHASER PURSUANT TO WHICH SUCH
SHAREHOLDERS HAVE AGREED TO TENDER AND SELL ALL OF THEIR SHARES TO THE PURCHASER
PURSUANT TO THE OFFER.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of
August 29, 1997 (the "Merger Agreement"), by and among Parent, the Purchaser and
the Company. The Merger Agreement provides, among other things, that as soon as
practicable after the purchase of the Shares pursuant to the Offer and the
satisfaction of other conditions set forth in the Merger Agreement, the
Purchaser will be merged with and into the Company (the "Merger"). Following
consummation of the Merger, the Company will continue as the surviving
corporation and will be a wholly-owned subsidiary of Parent. At the effective
time of the Merger, each issued and outstanding Share (other than Shares owned
by Parent, the Purchaser or any other wholly-owned subsidiary of Parent, Shares
with respect to which appraisal rights are properly exercised under New York law
and Shares held in the treasury of the Company or by any subsidiary of the
Company) shall be converted into and represent the right to receive an amount in
cash equal to the greater of $1.65, or any greater amount per Share paid
pursuant to the Offer as it may be amended, without interest.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND THE
MERGER, HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to State
Street Bank and Trust Company (the "Depositary") of the Purchaser's acceptance
of such Shares for payment. Upon the terms and subject to the conditions of the
Offer, payment for Shares purchased pursuant to the Offer will be made by
deposit of the purchase price with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payment from the Purchaser
and transmitting such payment to tendering shareholders. UNDER NO CIRCUMSTANCES
WILL INTEREST BE PAID ON THE PURCHASE PRICE FOR THE SHARES, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. In all cases,
payment for Shares accepted for payment pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) the certificates for such Shares
(the "Share Certificates") or timely confirmation (a "Book-Entry Confirmation")
of a book-entry transfer of such Shares into the Depositary's account at one of
the Book-Entry Transfer Facilities (as defined in the Offer to Purchase)
pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (ii)
a properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof), with all required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message (as defined below) and (iii)
any other documents required by the Letter of Transmittal. The term "Agent's
Message" means a message transmitted by a Book-Entry Transfer Facility to, and
received by, the Depositary and forming a part of a Book-Entry Confirmation,
which states that such Book-Entry Transfer Facility has received an express
acknowledgment from the participant in such Book-Entry Transfer Facility
tendering the Shares that are the subject of the Book-Entry Confirmation that
such participant has received and agrees to be bound by the terms of the Letter
of Transmittal and that the Purchaser may enforce such agreement against the
participant.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, the Purchaser expressly reserves the right, in
its sole discretion, at any time and from time to time, and regardless of
whether or not any of the events set forth in Section 15 of the Offer to
Purchase shall have occurred or shall have been determined by the Purchaser to
have occurred, to (i) extend the period of time during which the Offer is open,
and thereby delay acceptance for payment of and the payment for any Shares, by
giving oral or written notice of such extension to the Depositary and (ii)
amend, modify or make any changes in any terms and conditions of the Offer by
giving oral or written notice to the Depositary. Any such extension will be
followed as promptly as practicable by public announcement thereof, such
announcement to be made not later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date of the Offer.
During any such extension, all Shares previously tendered and not withdrawn will
remain subject to the Offer and to the rights of a tendering shareholder to
withdraw such shareholder's Shares.
Tenders of Shares made pursuant to the Offer are irrevocable, except that such
Shares may be withdrawn at any time prior to 12:00 Midnight, New York City time,
on Friday, October 3, 1997 (or the latest time and date at which the Offer, if
extended by the Purchaser, shall expire) and, unless theretofore accepted for
payment by the Purchaser pursuant to the Offer, may also be withdrawn at any
time after November 6, 1997. For a withdrawal to be effective, a written,
telegraphic, telex or facsimile transmission notice of withdrawal must be timely
received by the Depositary at its address set forth on the back cover page of
the Offer to Purchase. Any notice of withdrawal must specify the name of the
person who tendered the Shares to be withdrawn, the number of Shares to be
withdrawn and the name in which the Share Certificates evidencing such Shares
are registered, if different from that of the person who tendered the Shares. If
Share Certificates evidencing Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such Share Certificates, the serial numbers shown on such Share Certificates
must be submitted to the Depositary and the signature(s) on the notice of
withdrawal must be guaranteed by an Eligible Institution (as defined in the
Offer to Purchase), unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer set forth in Section 3 of the Offer to Purchase, any notice
of withdrawal must also specify the name and number of the account at the
applicable Book-Entry Transfer Facility to be credited with the withdrawn Shares
and must otherwise comply with such Book-Entry Transfer Facility's procedures.
All questions as to the form and validity (including the time of receipt) of any
notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding on all parties.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended, is
contained in the Offer to Purchase and is incorporated herein by reference.
The Company has provided the Purchaser with the Company's shareholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
shareholder list and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE
OFFER.
Questions and requests for assistance or for copies of the Offer to Purchase and
the related Letter of Transmittal, and other tender offer materials, may be
directed to the Information Agent as set forth below, and copies will be
furnished promptly at the Purchaser's expense. No fees or commissions will be
paid to brokers, dealers or other persons (other than the Information Agent) for
soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
OR
CALL TOLL-FREE (800) 322-2885
September 8, 1997
<PAGE> 1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
By and among
GRR HOLDINGS, LLC,
GRR MERGER CORP.
and
GROUND ROUND RESTAURANTS, INC.
Dated as of August 29, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I THE TENDER OFFER .............................................. 2
1.01 THE OFFER ........................................................... 2
1.02 COMPANY ACTION ...................................................... 3
1.03 COMPOSITION OF THE BOARD OF DIRECTORS ............................... 5
ARTICLE II THE MERGER ................................................... 6
2.01 THE MERGER .......................................................... 6
2.02 EFFECTIVE TIME ...................................................... 6
2.03 CERTIFICATE OF INCORPORATION ........................................ 6
2.04 BY-LAWS ............................................................. 6
2.05 DIRECTORS AND OFFICERS .............................................. 7
2.06 FURTHER ASSURANCES .................................................. 7
2.07 SHAREHOLDERS' MEETING ............................................... 7
ARTICLE III CONVERSION OR CANCELLATION OF SHARES; STOCK RIGHTS .......... 9
3.01 CONVERSION OR CANCELLATION OF SHARES ................................ 9
3.02 EXCHANGE OF CERTIFICATES; PAYING AGENT .............................. 9
3.03 DISSENTERS' RIGHTS .................................................. 11
3.04 TRANSFER OF SHARES AFTER THE EFFECTIVE TIME ......................... 11
3.05 COMPANY STOCK RIGHTS ................................................ 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................ 12
4.01 ORGANIZATION, QUALIFICATION ......................................... 12
4.02 COMPANY SUBSIDIARIES ................................................ 12
4.03 THE COMPANY'S CAPITALIZATION ........................................ 13
4.04 AUTHORITY ........................................................... 14
4.05 CONSENTS, APPROVALS AND GOVERNMENTAL FILINGS; NO VIOLATIONS ......... 15
4.06 SEC REPORTS; FINANCIAL STATEMENTS ................................... 16
4.07 PROXY STATEMENT; OFFER DOCUMENTS .................................... 17
4.08 ABSENCE OF CERTAIN CHANGES OR EVENTS ................................ 17
4.09 TITLE, ETC .......................................................... 17
4.10 PATENTS, TRADEMARKS, ETC ............................................ 19
4.11 INSURANCE ........................................................... 19
4.12 EMPLOYEE BENEFIT PLANS .............................................. 19
4.13 LEGAL PROCEEDINGS, ETC .............................................. 21
4.14 TAXES ............................................................... 22
4.15 MATERIAL AGREEMENTS ................................................. 23
4.16 COMPLIANCE WITH LAW ................................................. 24
4.17 INSIDER INTERESTS ................................................... 24
4.18 ENVIRONMENTAL MATTERS ............................................... 24
4.19 LABOR MATTERS ....................................................... 26
4.20 CERTAIN UNDISCLOSED VIOLATIONS ...................................... 26
4.21 BROKERS AND FINDERS ................................................. 26
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER .... 27
5.01 CORPORATION ORGANIZATION ............................................ 27
5.02 AUTHORIZED CAPITAL .................................................. 27
5.03 AUTHORITY ........................................................... 27
</TABLE>
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<TABLE>
<CAPTION>
Page
----
<S> <C>
5.04 NO PRIOR ACTIVITIES ................................................... 28
5.05 NO FINANCING CONTINGENCY .............................................. 28
5.06 GOVERNMENTAL FILINGS; NO VIOLATIONS ................................... 28
5.07 BROKERS AND FINDERS ................................................... 29
5.08 INFORMATION ........................................................... 29
5.09 LEGAL PROCEEDINGS, ETC ................................................ 29
5.10 OWNERSHIP OF SHARES ................................................... 30
ARTICLE VI COVENANTS OF THE PARTIES ....................................... 30
6.01 CONDUCT OF BUSINESS OF THE COMPANY .................................... 30
6.02 NOTIFICATION OF CERTAIN MATTERS ....................................... 33
6.03 ACCESS TO INFORMATION ................................................. 33
6.04 FURTHER INFORMATION ................................................... 34
6.05 REASONABLE BEST EFFORTS ............................................... 34
6.06 HSR FILINGS ........................................................... 35
6.07 PUBLIC ANNOUNCEMENTS .................................................. 35
6.08 NO SOLICITATION ....................................................... 35
6.09 INDEMNITY; D&O INSURANCE .............................................. 36
6.10 EMPLOYEE BENEFITS MATTERS ............................................. 38
6.11 PAYMENT OF BONUSES .................................................... 38
ARTICLE VII CONDITIONS TO THE MERGER ...................................... 39
7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER ............ 39
7.02 CONDITIONS TO THE OBLIGATIONS OF PARENT AND THE PURCHASER TO EFFECT THE
MERGER ..................................................................... 39
ARTICLE VIII CLOSING ...................................................... 39
8.01 TIME AND PLACE ........................................................ 39
8.02 FILINGS AT THE CLOSING ................................................ 40
ARTICLE IX TERMINATION; AMENDMENT; WAIVER ................................. 40
9.01 TERMINATION ........................................................... 40
9.02 EFFECT OF TERMINATION ................................................. 42
9.03 FEES AND EXPENSES ..................................................... 42
ARTICLE X MISCELLANEOUS ................................................... 44
10.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS .... 44
10.02 AMENDMENT AND MODIFICATION ........................................... 44
10.03 WAIVER OF COMPLIANCE; CONSENTS ....................................... 44
10.04 COUNTERPARTS ......................................................... 45
10.05 GOVERNING LAW; SUBMISSION TO JURISDICTION ............................ 45
10.06 NOTICES .............................................................. 45
10.07 ENTIRE AGREEMENT, ASSIGNMENT ETC ..................................... 46
10.08 VALIDITY ............................................................. 46
10.09 HEADINGS; CERTAIN DEFINITIONS ........................................ 47
10.10 PARTIES IN INTEREST .................................................. 47
ANNEX A .................................................................... 47
</TABLE>
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<PAGE> 4
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
dated as of August 29, 1997, among Ground Round Restaurants, Inc., a New York
corporation (the "Company"),GRR Merger Corp., a New York corporation (the
"Purchaser"), and GRR Holdings, LLC, a Delaware limited liability company
("Parent").
WHEREAS, the respective Boards of Directors of the Purchaser and the
Company have determined that it is advisable and in the best interests of their
respective shareholders, and the managing member of Parent has determined that
it is advisable and in the best interests of Parent's members, for the Purchaser
to acquire the Company upon the terms and subject to the conditions set forth
herein;
WHEREAS, the Company, Parent and the Purchaser desire to make
certain representations, warranties, covenants and agreements in connection with
this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes to
cause the Purchaser to make the Offer (as defined in Section 1.01) to purchase
all of the issued and outstanding shares of common stock of the Company, par
value $.16 2/3 per share (the "Common Stock"), upon the terms and subject to the
conditions of this Agreement, and the Board of Directors of the Company has
approved the Offer and determined to recommend that the Company's shareholders
accept the Offer; and
WHEREAS in furtherance of such acquisition, Christian R. Gunther and
David T. DiPasquale (the "Significant Shareholders") have agreed to tender an
aggregate of 3,102,100 shares of Common Stock into the Offer upon the terms and
subject to the conditions of a Shareholder Agreement dated as of August 29, 1997
by and among Parent, the Purchaser and the Significant Shareholders.
WHEREAS, to complete such acquisition, the respective Boards of
Directors of the Purchaser and the Company, the managing member of Parent and
Parent acting as the sole stockholder of the Purchaser, have approved the Offer
and the Merger (as defined in section 2.01) of the Purchaser with and into the
Company upon the terms and subject to the conditions of this Agreement; and
NOW, THEREFORE, in consideration of the representations, warranties
and agreements herein contained, and subject to the terms and conditions herein
contained, the parties hereto hereby agree as follows:
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<PAGE> 5
ARTICLE I
THE TENDER OFFER
1.01 The Offer. (a) Provided that this Agreement shall not have been
terminated in accordance with Article IX and none of the events or conditions
set forth in Annex A shall have occurred and be existing, then, not later than
the first Business Day (as defined in Rule 14d-1(c)(6) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), after execution of this
Agreement, Parent and the Company shall issue a public announcement of the
execution of this Agreement, and within five Business Days of the date of the
public announcement of the execution of this Agreement the Purchaser shall,
subject to the provisions of this Agreement, commence (within the meaning of
Rule 14d-2(a) of the Exchange Act) a tender offer (the "Offer") for all of the
outstanding shares of Common Stock (the "Shares") at a price of $1.65 per Share,
net to the seller in cash. The Purchaser shall accept for payment and pay for
all Shares that have been validly tendered and not withdrawn pursuant to the
Offer at the earliest time following expiration of the Offer that all conditions
to the Offer set forth in Annex A hereto shall have been satisfied or waived by
the Purchaser. The obligation of the Purchaser to accept for payment, purchase
and pay for Shares tendered pursuant to the Offer shall be subject to the
conditions set forth in Annex A hereto, including the condition that a number of
Shares which, when aggregated with the 554,900 Shares owned by Parent to be
contributed to the Purchaser ("the Contributed Shares"), represents at least 90%
of the outstanding Shares shall have been validly tendered (and not withdrawn)
prior to the expiration date of the Offer (the "Minimum Condition"). The
Purchaser expressly reserves the right to increase the price per Share payable
in the Offer or to make any other changes in the terms and conditions of the
Offer; provided, however, that, unless previously approved by the Company in
writing, no change may be made that (i) decreases the price per Share payable in
the Offer, (ii) changes the form of consideration to be paid in the Offer, (iii)
imposes conditions to the Offer in addition to those set forth in Annex A
hereto, (iv) increases the minimum number of Shares that must be tendered as a
condition to the acceptance for payment and payment for Shares in the Offer, (v)
waives the Minimum Condition if such waiver would result in the purchase
pursuant to the Offer of less than that number of Shares which, together with
the Contributed Shares, would constitute less than 50.1% of the outstanding
Shares, or (vi) extends the Offer, provided, however, that the Purchaser may,
without the consent of the Company, extend the Offer (A) from time to time, but
not beyond 12 midnight, New York City time, on October 22, 1997, if, at the
scheduled expiration date of the Offer, any of the conditions to the Purchaser's
obligation to purchase Shares are not satisfied or waived, until such time as
such conditions are satisfied, or (B) as provided in Section 9.03(a). The
Purchaser hereby agrees that, in the event that the Minimum Condition is not
satisfied or waived at the initial expiration date of the Offer, the Purchaser
will, upon written request of the Company, extend the Offer for a period of up
to ten further Business Days. It is agreed that the conditions set forth in
Annex A are for the sole benefit of Parent and the Purchaser and may be asserted
by Parent or the Purchaser regardless of the circumstances giving rise to any
such condition or may be waived by Parent or the Purchaser,
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<PAGE> 6
in whole or in part, in its sole discretion. The failure by Parent or the
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time. The Purchaser agrees to comply with
provisions of the Exchange Act, and the rules and regulations promulgated
thereunder, applicable to the Offer.
(b) On the commencement date of the Offer, Parent and the Purchaser
shall file with the Securities and Exchange Commission (the "SEC") a Tender
Offer Statement on Schedule 14D-1 with respect to the Offer, which shall contain
an offer to purchase and related letter of transmittal and summary advertisement
(such Schedule 14D-1 and the documents therein pursuant to which the Offer will
be made, together with any supplements or amendments thereto, the "Offer
Documents"). The Offer Documents shall comply as to form in all material
respects with the requirements of the Exchange Act, and the rules and
regulations promulgated thereunder and, on the date filed with the SEC and on
the date first published, sent or given to the holders of Shares, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by Parent or the Purchaser
with respect to information supplied by the Company in writing specifically for
inclusion in the Offer Documents. Each of Parent, the Purchaser and the Company
agrees promptly to correct any information supplied by it specifically for
inclusion in the Offer Documents if and to the extent that such information
shall have become false or misleading in any material respect, and each of
Parent and the Purchaser further agrees to take all steps necessary to cause the
Offer Documents as so corrected to be filed with the SEC and to be disseminated
to holders of Shares, in each case as and to the extent required by applicable
federal securities laws. Parent and the Purchaser agree to provide the Company
and its counsel in writing with any comments Parent, the Purchaser or their
counsel may receive from the SEC or its Staff, including, but not limited to,
comments with respect to the Offer Documents, promptly after the receipt of such
comments. The Company and its counsel shall be given a reasonable opportunity to
review and comment upon the Offer Documents and all amendments and supplements
thereto prior to their filing with the SEC or dissemination to the shareholders
of the Company.
1.02 Company Action. (a) The Company hereby approves of and consents
to the Offer and represents and warrants that the Board of Directors of the
Company (the "Board"), at a meeting duly called and held, has adopted
resolutions (i) determining that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger (as defined in Section
2.01), are fair to, and in the best interests of, the shareholders of the
Company, (ii) approving and adopting this Agreement and the transactions
contemplated hereby, including the Offer and the Merger and the transactions
contemplated thereby, in all respects and that such approval constitutes
approval of the Offer, this Agreement and the Merger and the transactions
contemplated hereby and thereby, for purposes of Sections 902 and 912 of the New
York Business Corporation Law (the "NYBCL"), and similar provisions of any other
similar state statutes applicable to the transactions contemplated hereby, (iii)
recommending that the shareholders of the Company accept the Offer, tender their
Shares
3
<PAGE> 7
thereunder to the Purchaser and approve and adopt this Agreement and the Merger,
subject to the provisions of Section 6.08, and (iv) providing for the
cancellation of all Options (as defined in Section 3.05) as provided in Section
3.05.
(b) The Company has been advised by each of its executive officers
and each of its Directors, that such person intends to tender pursuant to the
Offer all Shares owned or controlled by such person. The Company represents that
the Board has received the written opinion of Rothschild, Inc. ("Rothschild")
that the consideration to be received by holders of Shares pursuant to the Offer
and the Merger is fair to such holders from a financial point of view, and the
Company has provided a copy of such opinion to Parent.
(c) The Company shall file with the SEC a Solicitation/
Recommendation Statement on Schedule 14D-9 with respect to the Offer (such
Schedule 14D-9, as amended from time to time, the "Schedule 14D-9") on the date
the Offer Documents are filed with the SEC and the Offer is commenced,
containing the recommendation described in Section 1.02(a) and shall mail the
Schedule 14D-9 to the shareholders of the Company. The Schedule 14D-9 shall
comply in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder on the date filed with the SEC
and on the date first published, sent or given to the Company's shareholders,
and shall not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except that no representation is made by the Company with
respect to information supplied in writing by Parent or the Purchaser
specifically for inclusion or incorporation by reference in the Schedule 14D-9.
Each of the Company, Parent and the Purchaser agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that such information shall have become false or misleading in any material
respect, and the Company further agrees to take all steps necessary to amend or
supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or
supplemented to be filed with the SEC and disseminated to the Company's
shareholders, in each case as and to the extent required by applicable federal
securities laws. Parent and its counsel shall be given a reasonable opportunity
to review and comment upon the Schedule 14D-9 and all amendments and supplements
thereto prior to their filing with the SEC or dissemination to shareholders of
the Company.
(d) In connection with the Offer, the Company will, and will cause
its transfer agent (the "Transfer Agent") to, furnish promptly to Parent and the
Purchaser mailing labels containing the names and addresses of all record
holders of Shares as of the most recent practicable date and of those persons
becoming record holders after such date, together with copies of all lists of
shareholders and security position listing and computer files and all other
information in the Company's possession and control regarding the beneficial
ownership of Shares. The Company shall promptly furnish to Parent and the
Purchaser such additional information (including, but not limited to, updated
lists of holders of Shares and their addresses, mailing labels and security
position listings and computer files) and such other assistance as Parent and
the Purchaser or their agents may reasonably request in
4
<PAGE> 8
communicating the Offer to the record and beneficial holders of Shares. Subject
to the requirements of law, and except for such steps as are necessary or
advisable to disseminate the Offer and any other documents necessary to
consummate the Merger and to solicit tenders of Shares and the approval of the
Merger, Parent and the Purchaser and each of their affiliates shall hold in
confidence the information contained in any of such labels, lists and additional
information, shall use such information in connection with the Offer and the
Merger, and, if this Agreement shall be terminated, shall deliver to the Company
all copies of such information then in their possession or under their control.
1.03 Composition of the Board of Directors. (a) Promptly upon the
acceptance for payment of, and payment by the Purchaser in accordance with the
Offer for, Shares pursuant to the Offer, provided the Purchaser shall have
purchased not less than 50.1% of the outstanding Shares, the Purchaser shall be
entitled to designate such number of directors, rounded up to the next whole
number, equal to that number of directors which equals the product of the total
number of directors on the Board (giving effect to the directors elected
pursuant to this sentence) multiplied by the percentage that such number of
Shares owned in the aggregate by the Purchaser or Parent, upon such acceptance
for payment, bears to the number of Shares outstanding; provided, however, that
until the Effective Time (as defined in Section 2.02) there shall be at least
three Continuing Directors (as defined in Section 1.03(c)). The Company, shall
upon the written request of the Purchaser, use its best efforts to cause the
Purchaser's designees to be so elected. Notwithstanding the foregoing, it is the
parties present intention to have a Board of seven directors following
consummation of the Offer and prior to the Effective Time, the Board to consist
of four designees of the Purchaser and three Continuing Directors, and the
Company shall, upon the written request of the Purchaser, use its best efforts
to cause the resignation of such current directors as necessary, and the
election of the Purchaser's designees, to result in such seven member Board.
(b) The Company's obligations to cause designees of the Purchaser to
be elected or appointed to the Board of Directors of the Company shall be
subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. The Company shall promptly take all actions required pursuant to
Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this
Section 1.03, and shall include in the Schedule 14D-9 such information with
respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-1. Parent and the Purchaser will supply to the
Company any information with respect to any of them and their nominees,
officers, directors and affiliates required by Section 14(f) and Rule 14f-1 and
such other rules and regulations as are applicable.
(c) After the time that the Purchaser's designees constitute at
least a majority of the Board and until the Effective Time, any amendment or
termination of this Agreement or the Restated Certificate of Incorporation (the
"Certificate of Incorporation") or By-laws of the Company and any extension for
the performance or waiver of the obligations or other acts of Parent or the
Purchaser or waiver of the Company's rights hereunder shall also
5
<PAGE> 9
require the approval of a majority of the then serving directors, if any, who
are directors as of the date hereof (the "Continuing Directors", who shall
include each member of the Special Committee of the Board formed to consider the
Merger for so long as he wishes to serve) except to the extent that applicable
law requires that such action be acted upon by the full Board, in which case
such action will require the concurrence of a majority of the Board, which
majority shall include each of the Continuing Directors. If the number of
Continuing Directors prior to the Effective Time is reduced below three for any
reason, the remaining Continuing Directors or Director shall be entitled to
designate persons to fill such vacancies who shall be deemed Continuing
Directors for all purposes of this Agreement. The Board shall not delegate any
matter set forth in this Section 1.03(c) to any committee of the Board.
ARTICLE II
THE MERGER
2.01 The Merger. Subject to the terms and conditions of this
Agreement, and in accordance with New York law, at the Effective Time (as
defined in Section 2.02), Parent shall cause the Purchaser to merge (the
"Merger") with and into the Company and as a result thereof the separate
corporate existence of the Purchaser shall thereupon cease. The Company shall
continue as the surviving corporation (the "Surviving Corporation") of the
Merger (the Purchaser and the Company are sometimes hereinafter referred to as
the "Constituent Corporations") and shall, following the Merger, continue to be
governed by the laws of the State of New York, and the separate corporate
existence of the Company, with all its rights, privileges, immunities, powers
and franchises, of a public as well as of a private nature, shall continue
unaffected by the Merger. From and after the Effective Time, the Merger shall
have the effects specified in the NYBCL including, without limitation, Section
906 thereof.
2.02 Effective Time. At the Closing contemplated in Section 8.01,
the Company and Parent will cause a Certificate of Merger to be filed with the
state of New York ( the "Certificate of Merger") to be executed and filed by the
Company and the Purchaser with the New York Department of State, as provided in
and in accordance with the NYBCL. The Merger shall become effective as of the
date and at the time the Certificate of Merger has been duly filed with the
Department of State of the State of New York or such later time as is agreed
upon by the parties and specified in the Certificate of Merger, and such time is
hereinafter referred to as the "Effective Time."
2.03 Certificate of Incorporation. The Certificate of Incorporation
of the Company, as amended at the Effective Time to read as set forth in Exhibit
A hereto, shall be the certificate of incorporation of the Surviving Corporation
until duly amended in accordance with the terms thereof and the NYBCL.
2.04 By-laws. The By-laws of the Company as in effect on the date
hereof, except as amended as set forth in Exhibit B hereto, shall be the By-laws
of the Surviving Corporation, until duly amended in accordance with the terms
thereof and the NYBCL.
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<PAGE> 10
Promptly following the Effective Time, Parent shall approve such amendment to
the By-laws as the sole shareholder of the Surviving Corporation.
2.05 Directors and Officers. At the Effective Time, the directors of
the Purchaser immediately prior to the Effective Time shall be the directors of
the Surviving Corporation, each of such directors to hold office, subject to the
applicable provisions of the Certificate of Incorporation and By-Laws of the
Surviving Corporation, until their respective successors shall be duly elected
or appointed and qualified. The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
2.06 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper: (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (b) otherwise to carry out the purposes of this
Agreement, the proper officers and directors of the Surviving Corporation are
hereby authorized on behalf of the respective Constituent Corporations to
execute and deliver, in the name and on behalf of the respective Constituent
Corporations, all such deeds, bills of sale, assignments and assurances and do,
in the name and on behalf of the Constituent Corporations, all such other acts
and things necessary, desirable or proper to vest, perfect or confirm its right,
title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of the Constituent Corporations and otherwise
to carry out the purposes of this Agreement.
2.07 Shareholders' Meeting. (a) If required by applicable law in
order to consummate the Merger following expiration of the Offer and acceptance
for payment and purchase of Shares by the Purchaser pursuant to the terms of the
Offer, the Company shall (and Parent and the Purchaser shall use all reasonable
efforts to cause the Company to) take all action to the extent necessary to
consummate the Merger in accordance with applicable law, its Certificate of
Incorporation and By-Laws, including:
(i) duly call, give notice of, convene and hold an annual or special
meeting of its shareholders (the "Shareholders' Meeting"), to be held as soon as
practicable, for the purpose of approving this Agreement, the Merger and the
transactions contemplated hereby and thereby;
(ii) include in the Proxy Statement (as defined in Section 4.07) the
recommendation of the Board that shareholders of the Company vote in favor of
the approval and adoption of this Agreement and the Merger and the other
transactions contemplated hereby and thereby and the determination of the Board
that this Agreement and the transactions contemplated hereby, including the
Offer and the Merger, are fair to, and in the best interests of, the
shareholders of the Company; and
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<PAGE> 11
(iii) as soon as practicable after Parent's request, prepare and
file a preliminary Proxy Statement with the SEC and, after consultation with
Parent and the Purchaser, respond promptly to any comments made by the SEC with
respect to the Proxy Statement and any preliminary version thereof and cause the
Proxy Statement to be mailed to its shareholders at the earliest practicable
time after responding to all such comments to the satisfaction of the Staff of
the SEC and to obtain the necessary approvals by its shareholders of this
Agreement. Without limiting the generality of the foregoing, the Company agrees
that its obligations pursuant to this Section 2.07(a) shall not be affected by
either the commencement, public proposal, public disclosure or other
communication to the Company by any third party of any offer to acquire some or
all of the Shares or all or any substantial portion of the assets of the Company
or any change in the recommendation of the Board.
(b) The Company, Parent and the Purchaser, as the case may be, shall
promptly prepare and file any other filings required under the Exchange Act or
any other Federal or state securities or corporate laws relating to the Merger
and the transactions contemplated herein (the "Other Filings"). Each of the
parties hereto shall notify the other parties hereto promptly of the receipt by
it of any comments from the SEC or its Staff and of any request of the SEC for
amendments or supplements to the Proxy Statement or by the SEC or any other
governmental officials with respect to any Other Filings or for additional
information and will supply the other parties hereto with copies of all
correspondence between it and its representatives, on the one hand, and the SEC
or the members of its Staff or any other governmental officials, on the other
hand, with respect to the Proxy Statement, any Other Filings or the Merger. The
Company, Parent and the Purchaser each shall use all reasonable efforts to
obtain and furnish the information required to be included in the Proxy
Statement, any Other Filings or the Merger. If at any time prior to the time of
approval of this Agreement by the Company's shareholders there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company shall promptly prepare and mail to its shareholders such
amendment or supplement. The Company shall not mail the Proxy Statement or,
except as required by the Exchange Act or the rules and regulations promulgated
thereunder, any amendment or supplement thereto, to the Company's shareholders
unless the Company has first obtained the consent of Parent to such mailing.
(c) At the Shareholders' Meeting, Parent, the Purchaser, their
affiliates and Permitted Assigns (as defined in Section 10.07) will vote all
Shares owned by them in favor of approval and adoption of this Agreement, the
Merger, and the transactions contemplated hereby and thereby.
(d) Notwithstanding the foregoing, in the event that the Purchaser
or any Permitted Assigns shall acquire at least 90% of the outstanding Shares
pursuant to the Offer or otherwise, the parties hereto agree, at the request of
the Purchaser, to take all necessary and appropriate action to cause the Merger
to become effective, in accordance with Section 905 of the NYBCL, as soon as
reasonably practicable after such acquisition and the satisfaction or waiver of
the conditions of Article VII, without a meeting of the shareholders of the
Company.
8
<PAGE> 12
ARTICLE III
CONVERSION OR CANCELLATION OF SHARES; STOCK RIGHTS
3.01 Conversion or Cancellation of Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares owned by Parent, the Purchaser or any other
wholly-owned subsidiary of Parent, Dissenting Shares (as defined in Section
3.03) and any Shares held in the treasury of the Company or by any subsidiary of
the Company) shall be converted into and represent the right to receive an
amount in cash equal to the greater of $1.65 or any greater amount per Share
paid pursuant to the Offer as it may be amended, without interest (the "Merger
Consideration"), upon surrender of the certificate that, immediately prior to
the Effective Time, represented such issued and outstanding Share (a
"Certificate"). As of the Effective Time, all such Shares shall no longer be
outstanding, shall be automatically canceled and shall cease to exist, and each
holder of a Certificate which formerly represented any such Shares shall
thereafter cease to have any rights with respect to such Shares, except the
right to receive the Merger Consideration without interest for such Shares upon
the surrender of such Certificate or Certificates in accordance with Section
3.02.
(b) Each Share issued and outstanding immediately prior to the
Effective Time and owned by Parent, the Purchaser or any other wholly owned
subsidiary of Parent or held in the Company's treasury or by any subsidiary of
the Company, shall be canceled without payment of any consideration therefor and
shall cease to exist, and each holder of a Certificate representing any such
Shares shall thereafter cease to have any rights with respect to such Shares.
(c) Each share of Common Stock, $0.01 par value, of the Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into and become that number of fully-paid and non-assessable shares of
Common Stock, par value $.16-2/3 per share, of the Surviving Corporation as
shall equal the quotient of (i) the number of Shares issued and outstanding at
the Effective Time divided by (ii) 1,000.
3.02 Exchange of Certificates; Paying Agent. (a) Prior to the
Effective Time, Parent shall select a bank or trust company to act as paying
agent (the "Paying Agent") for the payment of the cash consideration specified
in Section 3.01 upon surrender of Certificates for Shares converted into the
right to receive the Merger Consideration pursuant to the Merger. Immediately
prior to the Effective Time, Parent shall make available, or cause the Purchaser
or the Surviving Corporation to make available, to the Paying Agent immediately
available funds in amounts and at times necessary for the payment of the Merger
Consideration (the "Funds") upon surrender of Certificates pursuant to Section
3.01, it being
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understood that any and all interest earned on the Funds shall be paid over by
the Paying Agent as Parent shall direct.
(b) Promptly after the Effective Time, the Paying Agent shall mail
to each person who was, at the Effective Time, a holder of record of a
Certificate or Certificates, other than the Parent, Company or any of their
respective subsidiaries, a letter of transmittal and instructions for use in
effecting the surrender, in exchange for payment in cash therefor, of the
Certificates. The letter of transmittal shall (i) specify that delivery shall be
effected, and risk of loss and title shall pass, only upon proper delivery to
and receipt of such Certificates by the Paying Agent and shall be in such form
and have such provisions as Parent and the Company shall reasonably specify and
(ii) include instructions for use in effecting the surrender of the Certificates
in exchange for payment of the Merger Consideration. Upon surrender to the
Paying Agent of such Certificates, together with the letter of transmittal, duly
executed and completed in accordance with the instructions thereto and such
other documents as may be reasonably required by the Paying Agent, the Paying
Agent shall promptly pay to the persons entitled thereto, out of the Funds, a
check in the amount to which such persons are entitled pursuant to Section
3.01(a), after giving effect to any required tax withholdings, and such
Certificate shall forthwith be canceled. No interest will accrue or be paid on
the amount payable upon the surrender of any such Certificates. If payment is to
be made to a person other than the registered holder of any Certificate
surrendered, it shall be a condition of such payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the Certificate surrendered or establish to the satisfaction of the
Surviving Corporation or the Paying Agent that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 3.02, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the amount of cash, without
interest, into which the Shares theretofore represented by such Certificate
shall have been converted pursuant to Section 3.01(a).
(c) One hundred eighty days following the Effective Time, the
Surviving Corporation shall be entitled to cause the Paying Agent to deliver to
it any Funds (including any interest, dividends, earnings or distributions
received with respect thereto which shall be paid as directed by Parent) made
available to the Paying Agent by Parent which have not been disbursed, and
thereafter holders of Certificates who have not theretofore complied with the
instructions for exchanging their Certificates shall be entitled to look only to
the Surviving Corporation (subject to abandoned property, escheat or other
similar laws) for payment as general creditors thereof with respect to the cash
in the amount of the Merger Consideration payable upon due surrender of their
Certificates.
(d) Notwithstanding anything to the contrary in this Section 3.02,
none of the Paying Agent, Parent, the Company, the Surviving Corporation or the
Purchaser shall be liable to any holder of a Certificate formerly representing
Shares for any amount properly
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delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
3.03 Dissenters' Rights. Notwithstanding the provisions of Section
3.01 or any other provision of this Agreement to the contrary, Shares that have
not been voted in favor of the approval and adoption of the Merger and with
respect to which dissenters' rights shall have been demanded and perfected in
accordance with Sections 623 and 910 of the NYBCL (the "Dissenting Shares") and
not withdrawn shall not be converted into the right to receive cash at or after
the Effective Time, but such Shares shall become the right to receive such
consideration as may be determined to be due to holders of Dissenting Shares
pursuant to the laws of the State of New York unless and until the holder of
such Dissenting Shares withdraws his or her demand for such appraisal or becomes
ineligible for such appraisal. If a holder of Dissenting Shares shall withdraw
his or her demand for such appraisal or shall become ineligible for such
appraisal under applicable law (through failure to perfect or otherwise), then,
as of the Effective Time or the occurrence of such event, whichever last occurs,
such holder's Dissenting Shares shall automatically be converted into and
represent the right to receive the Merger Consideration, without interest, as
provided in Section 3.01(a) and in accordance with the NYBCL. The Company shall
give Parent (i) prompt notice of any demands for appraisal of Shares received by
the Company and (ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such demands. The Company shall
not, without the prior written consent of Parent, make any payment with respect
to, or settle, offer to settle or otherwise negotiate, any such demands.
3.04 Transfer of Shares After the Effective Time. No transfers of
Shares shall be made in the stock transfer books of the Surviving Corporation at
or after the Effective Time. If, after the Effective Time, Certificates formerly
representing Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for the amount of cash, without interest, into which the
Shares theretofore represented by such Certificates shall have been converted
pursuant to Section 3.01(a), subject to the provisions of Section 3.01(b).
3.05 Company Stock Rights. (a) At or immediately prior to the
Effective Time, each outstanding option (an "Option") to purchase shares of
Common Stock of the Company pursuant to the Company's 1989 Amended and Restated
Stock Option Plan (the "Stock Option Plan"), the Company's 1992 Equity Incentive
Plan (the "Equity Incentive Plan") or otherwise (collectively, the "Stock
Plans"), as set forth on Schedule 4.03 of the disclosure letter delivered to
Parent as of the date of this Agreement (the "Company Disclosure Letter"),
whether or not then exercisable, shall be canceled by the Company, and each
holder of a canceled Option shall have the right to receive at the Effective
Time from the Company, in consideration for the cancellation of such Option (i)
in the case of Options that are "in the money", an amount in cash equal to the
product of (A) the number of Shares previously subject to such Option and (B)
the excess, if any, of the Merger Consideration over the exercise price per
Share previously subject to such Option and (ii) in the case of Options that are
not "in the money", an amount of cash set forth on the Schedule of Option
Payments authorized and approved by the Compensation Committee of the Board as
set forth in the
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minutes of a meeting thereof, a copy of which has been delivered to the
Purchaser. The Company shall upon the payment of the consideration described in
the preceding sentence withhold from such payments any applicable federal,
state, local or foreign taxes.
(b) All Stock Plans shall terminate as of the Effective Time and the
provisions in any other Company Benefit Plan (as defined in Section 4.12)
providing for the issuance, transfer or grant of any capital stock of the
Company or any interest in respect of any capital stock of the Company shall be
amended as of the Effective Time to provide no continuing rights to acquire,
hold, transfer or grant any capital stock of the Company or any interest in
capital stock of the Company (other than an interest in any cash payments in
respect of Shares pursuant to Section 3.01(a) or as contemplated in Section
3.05(a)), and the Company shall ensure that following the Effective Time no
holder of an Option or any participant in any Stock Plans shall have any right
thereunder to acquire any capital stock of the Company, Parent or the Surviving
Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and the
Purchaser that:
4.01 Organization, Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, and the Company has all requisite corporate power and authority to
own, lease and operate its properties and carry on its business as now being
conducted. The Company is duly qualified to do business and is in good standing
in each jurisdiction in which the nature of the Company's business or the
location of its properties makes such qualification necessary, except as set
forth on Schedule 4.01 of the Company Disclosure Letter. The Company has
heretofore made available to Parent and has filed with the SEC pursuant to the
Exchange Act, complete and correct copies of the Certificate of Incorporation
and By-Laws of the Company, as currently in effect. Schedule 4.01 of the Company
Disclosure Letter lists each jurisdiction in which the Company is, or is
required to be, duly qualified.
4.02 Company Subsidiaries. (a) Schedule 4.02 of the Company
Disclosure Letter lists all subsidiaries of the Company. Except as indicated
therein, all of the outstanding shares of capital stock of each such subsidiary
are owned by the Company either directly or indirectly through another of its
subsidiaries. Except as set forth in Schedule 4.02 of the Company Disclosure
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Letter, there are no contracts, commitments, understandings or arrangements by
which any subsidiary of the Company is bound to issue (other than to the
Company) additional shares of its capital stock or securities convertible into
or exchangeable for shares of its capital stock or subscriptions, options,
warrants or rights to purchase or acquire any additional shares of its capital
stock or securities convertible into or exchangeable for shares of its capital
stock. Except as set forth in Schedule 4.02 of the Company Disclosure Letter,
there are no contracts, commitments, understandings or arrangements by which the
Company or any of its subsidiaries is or may be obligated to transfer any shares
of the capital stock of any subsidiary of the Company. Except as set forth in
Schedule 4.02 of the Company Disclosure Letter, all of the shares of capital
stock of each subsidiary of the Company held by the Company or any subsidiary of
the Company are fully paid and nonassessable and are owned by the Company or
such subsidiary of the Company free and clear of any claim, lien or encumbrance
other than restrictions on transferability under federal and any applicable
state securities laws. Each subsidiary of the Company is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, has the corporate power and authority necessary for
it to own or lease its properties and assets and to carry on its business as it
is now being conducted, and is duly qualified to do business and in good
standing in the states of the United States in which the ownership of its
property or the conduct of its business requires it to be so qualified, except
as set forth on Schedule 4.02 of the Company Disclosure Letter. As used in this
Agreement, the term "subsidiary" of a specified person means (i) any corporation
of which equity securities possessing a majority of the ordinary voting power in
electing the board of directors are, at the time as of which such determination
being made, owned or controlled by such specified person either directly or
indirectly or in combination with one or more subsidiaries of such specified
person or (ii) any person (other than a corporation) in which such specified
person either directly or indirectly through or in combination with one or more
subsidiaries, at the time as of which such determination is being made, (x) is a
general partner, or (y) owns or controls more than a 50% ownership interest and
has the right to elect a majority of the members of the governing authority of
such specified person.
(b) Except for interests in the Company's subsidiaries and except as
set forth in Schedule 4.02 of the Company Disclosure Letter, neither the Company
nor any of the Company's subsidiaries owns, directly or indirectly, any interest
or investment (whether equity or debt) in any corporation, company, partnership,
joint venture, business, trust or entity, other than investments in marketable
securities acquired in the ordinary course of business, nor has the Company or
any of its subsidiaries made any loan or advance to any other entity.
4.03 The Company's Capitalization. The authorized capital stock of
the Company consists of (i) 35,000,000 Shares and (ii) 30,000 shares of
Preferred Stock, $.01 par value ("Preferred Stock"). As of the close of business
on August 7, 1997, there were (i) 11,173,421 Shares issued and outstanding and
no Shares held in the Company's treasury or by any of its subsidiaries, and (ii)
no shares of Preferred Stock issued and outstanding. All outstanding Shares have
been duly authorized and validly issued, are fully paid and nonassessable and
were issued free of preemptive rights. There are not now, except for the
Options, approximately $1.36 million principal amount of amended and restated
convertible loan notes of the Company (the "Convertible Loan Notes"),
convertible into up to 501,500 Shares, subject to adjustment as provided
therein, and as set forth in Schedule 4.03 of the Company Disclosure Letter, and
at the Effective Time there will not be, (i) any options, warrants, calls,
subscriptions, convertible securities or other rights (including preemptive
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rights), agreements, understandings, arrangements or commitments of any
character obligating the Company now or at any time in the future to issue or
sell any of its capital stock or other equity interest in the Company or any of
its subsidiaries, (ii) any obligations, contingent or otherwise, of the Company
or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock or other equity interests of the Company or any of its
subsidiaries, (iii) any outstanding bonds, debentures, notes or other
obligations of the Company or any of its subsidiaries, the holders of which have
the right to vote (or which are convertible into or exercisable for securities
having the right to vote) with the holders of Shares on any matter, (iv) any
obligations, contingent or otherwise, guaranteeing the value of any of the Share
or the capital stock of any of its subsidiaries either not or at any time in the
future, or (v) any voting trusts, proxies or other agreements or understandings
to which the Company is a party or is bound with respect to the voting of any
capital stock or other equity interest of the Company or any other securities
convertible into or exchangeable for Shares or any other equity interests of the
Company, or options to acquire Shares or securities convertible into Share or
equity interests of the Company are held by any of the Company's subsidiaries.
4.04 Authority. The Company has full corporate power and authority
to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
approved by the Board, and the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
including, without limitation, the Sale and Leaseback Letter of Intent (as
defined in Section 6.01) and the transactions contemplated thereby, the Bank
Letter of Intent (as defined in Section 6.01) and Bank Standstill Agreement and
the transactions contemplated thereby, and the other actions required to be
performed by the Company hereunder, including without limitation the Exchange
Act filings, the holding of the Shareholders' Meeting, if required, the HSR
Filing, and the cancellation of Options contemplated by Section 3.05, have been
duly and validly authorized by the Board and, except for any approval of the
Merger by the holders of the Shares required by the NYBCL, no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby, including the acquisition
of Shares pursuant to the Offer and the Merger. The Company has taken all
actions necessary to render the prohibitions of Section 912 of the NYBCL to be
inapplicable to the execution and delivery of this Agreement and the
transactions contemplated hereby, including the entry of Parent, the Purchaser
and the Significant Shareholders into the Shareholder Agreement and the
acquisition of the Shares pursuant to the Offer and the Merger. This Agreement
has been duly and validly executed and delivered by the Company and, assuming
due authorization, execution and delivery by Parent and the Purchaser,
constitutes the valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
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4.05 Consents, Approvals and Governmental Filings; No Violations.
(a) No notices, reports or other filings are required to be made by the Company
with, nor are any consents, registrations, approvals, permits or authorizations
required to be obtained by the Company from, any public, governmental, or
regulatory body, agency, department, commission, board, bureau or other
authority or instrumentality of the United States, any state thereof or any
foreign jurisdiction (each a "Governmental Authority") in connection with the
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby, the failure to make or
obtain any or all of which could prevent, delay or burden the transactions
contemplated by this Agreement, except (A) in connection with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (B) in connection with the Exchange Act, (C) in connection with Article
16 of the NYBCL and (D) such consents, approvals, registrations, licenses and
permits with respect to Liquor Licenses listed in Exhibit 4.05B to Schedule 4.05
of the Company Disclosure Letter (together with the consents and approvals with
respect to Liquor Licenses listed on the Purchaser Disclosure Letter (as defined
in Section 5.06) the "Liquor License Approvals").
(b) Except as set forth on Schedule 4.05 of the Company Disclosure
Letter, and except for any required approval of the Merger by the shareholders
of the Company and the filing of the Certificate of Merger in accordance with
the NYBCL, neither the execution, delivery and performance of this Agreement by
the Company nor the consummation by it of the transactions contemplated hereby
will (i) violate, conflict with or result in any breach of any provision of the
Certificate of Incorporation or By-Laws of the Company; (ii) require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except (A) in connection with the HSR Act, (B)
in connection with the Exchange Act or (C) in connection with Article 16 of the
NYBCL; (iii) constitute a violation or breach of, or result (with or without due
notice or lapse of time or both) in a default or loss of any material benefit
under, or give rise to any right of termination, amendment, cancellation or
acceleration under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, franchise agreement, lease, license, contract,
agreement or other instrument or obligation of any kind to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries or any of its or their respective assets may be bound, except as
any such breach, default or right as to which requisite waivers or consents have
been obtained, (iv) require the creation or imposition of any lien upon or with
respect to any properties of the Company or any of its subsidiaries or (v)
assuming compliance with the NYBCL, the Exchange Act, and the HSR Act, violate
any order, writ, injunction, judgment, decree, law, statute, rule, regulation or
governmental permit or license applicable to the Company or any of its
subsidiaries or any of its or their respective assets.
4.06 SEC Reports; Financial Statements. The Company has filed all
required forms, reports and documents with the SEC since October 1, 1993
(collectively, together with all forms, reports and documents to be filed with
the SEC on or after the date hereof, the "SEC Reports"), each of which, as
amended, has complied or will comply in all material respects with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, each as in effect on the dates so
filed. None of such
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forms, reports or documents, including, without limitation, any financial
statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company has
heretofore made available complete and correct copies of the SEC Reports, and
any amendments to any SEC Report, filed to date, and promptly will make
available to Parent a complete and correct copy of any SEC Report filed
hereafter and any amendment to any SEC Report. The consolidated financial
statements of the Company and its subsidiaries included in such reports complied
as of the respective dates thereof as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC and with respect thereto, were prepared in accordance with United
States generally accepted accounting principles ("GAAP") as in effect on their
respective dates applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited interim financial statements, as permitted by Form 10-Q of the SEC)
and fairly presented (subject, in the case of the unaudited interim financial
statements, to normal, year-end audit adjustments) the consolidated financial
position of the Company and its subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended. Since September 29, 1996, neither the Company nor any of its subsidiaries
has incurred any liabilities or obligations (whether absolute, accrued, fixed,
contingent, liquidated, unliquidated or otherwise and whether due or to become
due) of any nature, which would be required by GAAP, as of the date hereof, to
be set forth on a consolidated balance sheet of the Company and its subsidiaries
or in the notes thereto except liabilities, obligations or contingencies (a)
which are disclosed reflected or reserved for on the unaudited balance sheet of
the Company and its subsidiaries as of June 30, 1997 (including the notes
thereto) or in this Agreement or in Schedule 4.06 of the Company Disclosure
Letter or (b) which (i) were incurred in the ordinary course of business after
September 29, 1996 and consistent with past practices or (ii) are disclosed or
reflected or reserved for in the Company SEC Reports filed after September 29,
1996 and prior to the date hereof, or (c) which were incurred as a result of
actions taken or refrained from being taken (i) in furtherance of the
transactions contemplated by this Agreement, or (ii) at the request of Parent
and the Purchaser. Since September 29, 1996, there has been no change in any of
the significant accounting (including tax accounting) policies, practices or
procedures of the Company or any of its subsidiaries except as required by GAAP
or applicable law.
4.07 Proxy Statement; Offer Documents. Any proxy statement or
similar materials distributed to the Company's shareholders in connection with
the Merger, including any amendments or supplements thereto (the "Proxy
Statement"), will comply in all material respects with applicable federal
securities laws and will not contain any untrue statements of a material fact
required to be stated therein or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or the Purchaser in writing for inclusion in the Proxy Statement. None of
the information supplied by the
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Company in writing for inclusion in the Offer Documents or provided by the
Company in the Schedule 14D-9 will, at the respective times that the Offer
Documents and the Schedule 14D-9 or any amendments or supplements thereto are
filed with the SEC and are first published or sent or given to holders of
Shares, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
4.08 Absence of Certain Changes or Events. Except as set forth in
the SEC Reports filed prior to the date hereof or in Schedule 4.08 of the
Company Disclosure Letter, since September 29, 1996 (i) the business of the
Company and its subsidiaries has been conducted in the ordinary course
consistent with past practice (except as otherwise contemplated by this
Agreement); (ii) no events have occurred which, in the reasonable opinion of the
Company, are likely, individually or in the aggregate, to have a Material
Adverse Effect (as defined in Section 9.03(d)) or adversely affect the ability
of the Company to consummate the transactions contemplated by this Agreement;
(iii) neither the Company nor any of its subsidiaries has incurred or will incur
any material liabilities (direct, contingent or otherwise) or engaged in any
material transaction or entered into any material agreement outside the ordinary
course of business; (iv) there has been no declaration, setting aside or payment
of any dividend or other distribution with respect to any capital stock of the
Company and (v) neither the Company nor any of its subsidiaries has taken any
action described in Section 6.01.
4.09 Title, Etc.. (a) Schedule 4.09 of the Company Disclosure Letter
sets forth a list of all of the land, which includes the buildings, structures
and other improvements located thereon (the "Real Property"), which is owned in
fee by the Company or any of its subsidiaries. The Company or such subsidiary,
as the case may be, has, with respect to personal property, good, and, with
respect to real property, good, marketable and insurable, title to all of the
properties and assets which it purports to own and which are material to the
business, operation or financial condition of the Company or such subsidiary
free and clear of all mortgages, security interests, liens, claims, charges or
other encumbrances of any nature whatsoever, except for (i) any liens,
encumbrances or defects reflected in the most recent financial statements
included in the SEC Reports filed prior to the date hereof or disclosed in the
notes thereto; (ii) any liens, encumbrances or defects which do not materially
detract from the fair market value (free of such liens, encumbrances or defects)
of the property or assets subject thereto or materially interfere with the
current use by the Company and its subsidiaries of the property or assets
subject thereto or affected thereby; (iii) any liens or encumbrances for taxes
not delinquent or which are being contested in good faith, provided that
adequate reserves for the same have been established on the most recent
financial statements included in the SEC Reports to the extent required by GAAP
applied on a consistent basis; (iv) any liens or encumbrances for current taxes
and assessments not yet past due; (v) any inchoate mechanic's and materialmen's
liens and encumbrances for construction in progress; (vi) any workmen's,
repairmen's, warehousemen's and carriers' liens and encumbrances arising in the
ordinary course of business, so long as such liens have not been filed; and
(vii) any liens of
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the type referred to in (vi) above that have been filed, so long as such liens
do not aggregate in excess of $50,000;
(b) Schedule 4.09 of the Company Disclosure Letter sets forth a list
of all of the leases and subleases (the "Real Property Leases") under which, as
of the date hereof, the Company or any of its subsidiaries has the right to
occupy space. The summary of the Real Property Leases, including all amendments
thereto, attached to such Schedule, together with the spreadsheets attached to
such Schedule, are correct and complete in all material respects. Except as set
forth in Schedule 4.09, all Real Property Leases and material leases pursuant to
which the Company or any of its subsidiaries leases personal property from
others are, in all material respects, valid, binding and enforceable in
accordance with their terms and the Company, or the applicable subsidiary of the
Company, has good and valid leasehold title to all property leased pursuant to
each of the Real Property Leases; neither the Company nor any of its
subsidiaries has received notice of any default by the Company or any of its
subsidiaries under any Real Property Lease; there are no existing defaults, or
any condition or event known to the Company or any subsidiary which with the
giving of notice or lapse of time would constitute a default, by the Company or
any of its subsidiaries thereunder and, with respect to the Company's or any of
its subsidiaries' obligations thereunder without qualification and with respect
to the obligations of all other parties thereto, to the knowledge of the
Company, no uncured default or event or condition on the part of any landlord
exists under any Real Property Lease which with the giving of notice or the
lapse of time would constitute a default thereunder. Except as set forth in
Schedule 4.09 of the Company Disclosure Letter, the Company has not suspended
any Real Property Leases nor is the Company in any negotiations with any lessors
regarding any Real Property Leases.
(c) All of the land, buildings, structures and other improvements
occupied by the Company and its subsidiaries in the conduct of its business are
included in the Real Property or the Real Property Leases.
(d) Except as set forth in Schedule 4.09 of the Company Disclosure
Letter, neither the Company nor any subsidiary owns or holds, nor is obligated
under or a party to, any option, right of first refusal or other contractual
right to purchase, acquire, sell lease or dispose of any Real Property or any
Real Property Leases or any portion thereof or interest therein.
4.10 Patents, Trademarks, Etc.. Schedule 4.10 of the Company
Disclosure Letter identifies all registered trademarks, copyrights and patents
owned or licensed by the Company and its subsidiaries as of the date hereof. The
Company and its subsidiaries own, or are licensed or otherwise have adequate
right to use, all patents, patent rights, trademarks, trademark rights, service
marks, service mark rights, trade names, trade name rights, copyrights,
know-how, technology, trade secrets and other proprietary information which are
material to the conduct of the business of the Company and its subsidiaries
(collectively, the "Intellectual Property"). Except as set forth in Schedule
4.10 of the Company Disclosure Letter, no claims have been asserted by any
person, and neither the Company nor any of its
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subsidiaries has asserted a claim against any person, with respect to any of the
Intellectual Property owned or used by the Company or any of its subsidiaries or
challenging or questioning the validity or effectiveness of any license or
agreement relating thereto to which the Company or any of its subsidiaries is a
party, nor, to the Company's knowledge, are any such claims threatened.
4.11 Insurance. Schedule 4.11 of the Company Disclosure Letter
identifies all property, general liability and casualty insurance policies which
currently insure the Company or any of its subsidiaries ("Insurance Policies").
4.12 Employee Benefit Plans. (a) For purposes of this Section 4.12,
"Company Benefit Plans" means all employee benefit plans, agreements and
arrangements described in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), maintained by the Company or any of
its subsidiaries to which the Company or any of its subsidiaries has contributed
or been required to contribute, or with respect to which the Company or any
subsidiary of the Company has a liability, whether direct or indirect, actual or
contingent, and all employment, bonus, deferred compensation, severance,
incentive, stock option, change of control and similar plans, policies or
arrangements (whether written or oral) maintained by the Company or any of its
subsidiaries (including descriptions of the number and level of employees
covered thereby).
(b) Schedule 4.12 of the Company Disclosure Letter sets forth a list
of all Company Benefit Plans. The Company has delivered or made available to
Parent accurate and complete copies of (i) all Company Benefit Plan documents
currently in effect and all amendments thereto, and all summary plan
descriptions thereof which have been distributed to employees of the Company or
any subsidiary, (ii) the most recent determination or opinion letter issued by
the Internal Revenue Service with respect to each Company Benefit Plan, (iii)
for the three most recent plan years, Annual Reports on Form 5500 Series filed
with any governmental agency for each Company Benefit Plan and (iv) a
description setting forth the amount of any material liability of the Company as
of the Closing Date for payments more than thirty (30) calendar days past due
with respect to each "employee welfare benefit plan" as defined in ERISA section
3(1) which covers or has covered employees of the Company or any subsidiary.
(c) Except as set forth in Schedule 4.12 of the Company Disclosure
Letter with respect to each Company Benefit Plan: (i) each Company Benefit Plan
has been administered and enforced in all material respects in accordance with
its terms and, both as to form and in operation, with the requirements
prescribed by ERISA, the Internal Revenue Code of 1986, as amended (the "Code"),
and all other applicable statutes, orders, rules and regulations; (ii) to the
knowledge of the Company, no breach of fiduciary duty or non-exempt prohibited
transaction has occurred; (iii) no actions, suits, claims or disputes are
pending or, to the knowledge of the Company, threatened, other than routine
claims for benefits; (iv) all contributions and premiums due have been made on a
timely basis; and (v) such Company Benefit Plan is not a multiemployer plan (as
defined in ERISA section 3(37)), a multiple
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employer plan within the meaning of the Code or ERISA, a defined benefit plan
within the meaning of ERISA section 3(35), a plan subject to section 302 of
ERISA or section 412 of the Code or Title IV of ERISA, or funded through a
"welfare benefit fund" (as defined in section 419(e) of the Code).
(d) Except as set forth in Schedule 4.12 of the Company Disclosure
Letter or as specifically provided in Section 3.05, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any individual
to severance pay, or (ii) accelerate the time of payment or vesting, or increase
the amount, of compensation due to any individual.
(e) Neither the Company nor any of its subsidiaries has any unfunded
liability with respect to retiree medical or retiree life insurance benefits or
other post-termination welfare benefits under the Company Benefit Plans or
otherwise, not reserved for in the Company's financial statements included in
the SEC Reports filed prior to the date hereof.
(f) Each Company Benefit Plan intended to be qualified under section
401(a) of the Code is so qualified, and each trust or other funding vehicle
related thereto is exempt from federal income tax under section 501(a) of the
Code.
(g) Except as set forth on Exhibit 4.06A to Schedule 4.06 of the
Company Disclosure Letter, with respect to any insurance policy providing
funding for benefits under any Company Benefit Plan, (i) there is no material
liability of the Company or any subsidiary of the Company in the nature of a
retroactive or retrospective rate adjustment, loss sharing arrangement, or other
actual or contingent liability, nor would there be any such material liability
if such insurance policy were terminated, and (ii) to the knowledge of the
Company, no insurance company issuing any such policy is in receivership,
conservatorship, liquidation or similar proceeding, and no such proceeding with
respect to any insurer is imminent.
(h) Schedule 4.12 of the Company Disclosure Letter sets forth the
name and current rates of salary, bonuses, benefits (including, but not limited
to, all employee welfare benefits) and any other form of employment compensation
(collectively "Compensation") of each officer, director or employee of the
Company and its subsidiaries whose current annual rate of Compensation from the
Company exceeds $60,000 and each Regional Director not otherwise included.
(i) Each "employee welfare benefit plan" as defined by ERISA section
3(1) which covers employees or former employees of the Company or any subsidiary
and which is a "group health plan," as defined in section 607(1) of ERISA, has
been operated in compliance with provisions of Part 6 of Title I, Subtitle B of
ERISA and section 4980B of the Code at all times except where any failure,
individually or in the aggregate, would not be reasonably expected to result in
material liability.
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(j) The Company has not announced generally any plan, nor does it
have any legally binding commitment, to create any additional Company Benefit
Plans which are intended to cover employees or former employees of the Company
or any subsidiary (with respect to their relationship with such entities) or to
amend or modify any existing Company Benefit Plan which covers or has covered
employees or former employees of the Company or any subsidiary (with respect to
their relationship with such entities).
(k) Except as set forth in Schedule 4.12 of the Company Disclosure
Letter, and except as provided by law, the employment of all persons employed or
retained by the Company or any of its subsidiaries is terminable at will. Except
as set forth in Schedule 4.12 of the Company Disclosure Letter, there is no
contract, agreement, plan or arrangement covering any employee that,
individually or collectively, provides for the payment of any amount (i) that is
not deductible under section 162(a)(l) or 404 of the Code or (ii) that is an
"excess parachute payment" pursuant to section 280G of the Code.
(l) To the knowledge of the Company, neither the Company, nor any of
its subsidiaries, nor any Company Benefit Plan, directly or indirectly, is, or
is reasonably likely to be, subject to any material unfunded liability (except
as reserved for in the Company's financial statements included in the SEC
Reports filed prior to the date hereof) (i) with respect to any employee benefit
plan, program, policy, agreement or arrangement (whether or not terminated) that
is or was maintained or contributed to by any entity during the past six years
that is (or at any relevant time was) a member of a "controlled group of
corporations" with, under "common control" with or otherwise required to be
aggregated with the Company or any of its subsidiaries, as set forth in sections
414(b), (c) and (o) of the Code, (ii) pursuant to the penalty, excise or joint
and several liability provisions of ERISA or the Code as they relate to employee
benefit plans or (iii) pursuant to any obligation of the Company or any
subsidiary to indemnify any person against any liability referred to in (i) or
(ii) above.
4.13 Legal Proceedings, Etc.. Except as set forth in Schedule 4.13
of the Company Disclosure Letter, (i) there is no material claim, action,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or relating to the Company or any subsidiary before any court
or tribunal in any jurisdiction (domestic or foreign) or any Governmental
Authority, and (ii) neither the Company nor any subsidiary is subject to any
outstanding order, writ, judgment, injunction or decree of any court or
Governmental Authority or body.
4.14 Taxes.
(a) Filing of Tax Returns. The Company (which term shall include,
for purposes of this Section 4.14, each of its subsidiaries from time to time)
has timely filed with the appropriate taxing or other Governmental Authorities
all returns (including, without limitation, information returns and other
Tax-related information) in respect of Taxes (as such term is defined in Section
4.14(f)) required to be filed through the date hereof. Such returns and
information filed are complete, correct and accurate in all material respects.
The
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Company has made available to Parent copies of the Company's federal Tax
returns filed for its taxable years ended October 1, 1995 and September 29, 1996
and selected state and local Tax returns and will make available to Parent
copies of all the Company federal, state and local Tax returns filed for its
taxable years ended December 1990 and September 1991, 1992, 1993, 1994, 1995 and
1996, to the extent not previously provided, as requested by Parent.
(b) Payment of Taxes. Except as set forth in Schedule 4.14(b), all
Taxes required to be paid by the Company for any period or portion thereof
ending on or before the Closing Date, have been paid, or an adequate reserve (in
conformity with GAAP applied on a consistent basis and with the Company's past
custom and practice) has been established therefor, and the Company has no
material liability for Taxes in excess of the amounts so paid or reserves so
established. All material Taxes that the Company has been required to collect or
withhold have been duly collected or withheld and, to the extent required when
due, including extensions, have been or will be duly paid to the proper taxing
or Governmental Authority.
(c) Audit History. Except as set forth in Schedule 4.14(c) of
the Company Disclosure Letter:
(i) No deficiencies for Taxes of the Company or, to the
knowledge of the Company, of any other person with respect to which the Company
would be liable to make a payment under a tax sharing agreement have been
claimed, proposed or assessed by any taxing or Governmental Authority.
(ii) No extension of a statute of limitations relating to
Taxes is in effect with respect to the Company.
(d) Additional Tax Representations. Except as set forth in Schedule
4.14(d) of the Company Disclosure Letter:
(i) There are no material elections with respect to Taxes
affecting the Company.
(ii) The Company is not a party to or bound by any binding tax
sharing, tax indemnity or tax allocation agreement or other similar arrangement
with any other person or entity.
(iii) There are no liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of the Company.
(iv) The Company has never been a member of an affiliated
group of corporations within the meaning of Section 1504 of the Code (an
"affiliated group"), nor has the Company or any present or former subsidiary, or
any predecessor or affiliate of any of them, become liable (whether by contract,
as transferee or successor, by law or otherwise) for
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the Taxes of any other person or entity under Treasury Regulation Section
1.1502-6 or any similar provision of state, local or foreign law other than the
group of which the Company is the parent, except for the affiliated group of
which HM Holdings, Inc. was the parent (the "HMH group") as disclosed in
Schedule 4.14(d). The Company (A) has no knowledge of any liens for Taxes, any
Tax deficiency assessment against, or any audit or claimed or proposed Tax
deficiency assessment by any taxing authority against it or any member or former
member of the HMH group with respect to the Company's period of affiliation with
the HMH group, (B) is not liable to any member or former member of the HMH group
for Taxes (or any indemnity payments, make whole payments or like amounts)
attributable to such period under a tax sharing, tax indemnity, tax allocation
or similar agreement, and (C) has no knowledge of any member or former member of
the HMH group entering into any waivers or extensions of a statute of
limitations on assessment or collection of Taxes attributable to such period..
(e) Definition of Taxes. For purposes of this Agreement, the term
"Taxes" shall mean all federal, state, local, foreign and other taxes,
assessments or other government charges, including, without limitation, income,
estimated income, gross receipts, profits, occupation, franchise, capital stock,
real or personal property, sales, use, value added, transfer, license,
commercial rent, payroll, employment or unemployment, social security,
disability, withholding, alternative or add-on minimum, customs, excise, stamp
or environmental taxes, and further including all interest, penalties and
additions in connection therewith for which the Company or any of its
subsidiaries may be liable.
4.15 Material Agreements. Except as set forth in Schedule 4.15 of
the Company Disclosure Letter and except for agreements made for the purpose of
completing the transactions contemplated by this Agreement, neither the Company
nor any of its subsidiaries is a party to, or bound by, any material agreement
of any kind to be performed in whole or in part after the Effective Time. Solely
for the purpose of this Section 4.15, the term "material agreement" shall mean
any agreement which (i) is outside of the ordinary course of business of the
Company or its subsidiaries, (ii) involves the payment or receipt by the Company
or any of its subsidiaries, subsequent to the date of this Agreement and for so
long as such contract is in effect, of more than $50,000 (or $100,000 if the
agreement is for the purchase or sale of food or beverage items included in the
current menu at the Company's restaurants) or (iii), is not terminable without
penalty by the Company or the subsidiary party thereto on 60 days notice. Except
as set forth in Schedule 4.15 of the Company Disclosure Letter, to the best
knowledge of the Company, there is no breach or default and there are no facts
which with notice or the passage of time would constitute a breach or default
under, or give rise to any right of termination, amendment, cancellation or
acceleration under, whether as a result of the consummation of the transactions
contemplated hereby or otherwise, any obligation to be performed by any party to
a material agreement to which the Company or any subsidiary is a party.
4.16 Compliance with Law. Except as set forth in Schedule 4.16 of
the Company Disclosure Letter, the business of the Company and its subsidiaries
is being conducted and the properties and assets of the Company and its
subsidiaries are currently
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owned and operated in substantial compliance with all applicable laws,
ordinances, regulations, orders, judgments, injunctions, awards and decrees of
any Governmental Authority or court, tribunal or arbitrator.
4.17 Insider Interests. Except as set forth in the SEC Reports filed
prior to the date hereof or in Schedule 4.12 of the Company Disclosure Letter,
Schedule 4.17 of the Company Disclosure Letter sets forth all material
contracts, agreements of the Company with and other obligations of the Company
to any officer or director of the Company or any of its subsidiaries. Except as
set forth in Schedule 4.17 of the Company Disclosure Letter, no officer or
director of the Company or any of its subsidiaries and, to the knowledge of the
Company, no entity controlled by any such officer or director and no relative or
spouse who resides with any such officer or director (i) owns, directly or
indirectly, any material interest in any person that is, or is engaged in
business as, a competitor, lessor, lessee, customer or supplier of the Company
or any of its subsidiaries or (ii) owns, in whole or in part, any tangible or
intangible property that the Company or any of its subsidiaries uses in the
conduct of the business of the Company or any such subsidiary.
4.18 Environmental Matters.
The following definitions shall apply to this section:
A. "Environmental Claims" shall mean all notices of violation,
liens, claims, demands, suits, or causes of action for any damage, including,
without limitation, personal injury, property damage, lost use of property or
consequential damages, arising directly or indirectly out of Environmental
Conditions or Environmental Laws. By way of example only, Environmental Claims
include (i) violations of or obligations under any contract related to
Environmental Laws or Environmental Conditions, (ii) actual or threatened
damages to natural resources, (iii) claims for nuisance or its statutory
equivalent, (iv) claims for the recovery of response costs, or administrative or
judicial orders directing the performance of investigations, responses or
remedial actions under any Environmental Laws, (v) requirements to implement
"corrective action" pursuant to any order or permit issued pursuant to
Environmental Laws, (vi) fines, penalties or liens of any kind against property
related to Environmental Laws or Environmental Conditions, and (vii) with regard
to any present or former employees, claims relating to exposure to or injury
from Environmental Conditions.
B. "Environmental Conditions" shall mean the state of the
environment, including natural resources, soil, surface water, ground water, or
ambient air, relating to or arising out of the use, storage, treatment,
transportation, release, disposal, dumping or threatened release of Hazardous
Substances.
C. "Environmental Laws" shall mean all applicable federal, state,
district, local and foreign laws, all rules or regulations promulgated
thereunder, and all orders, consent orders, judgments, notices, permits or
demand letters issued to or entered into by the Company or any of its
subsidiaries pursuant thereto, relating to pollution or protection of the
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environment (e.g., ambient air, surface water, ground water, or soil).
Environmental Laws shall include, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Toxic Substances Control Act, as amended, the Hazardous Materials Transportation
Act, as amended, the Resource Conservation and Recovery Act, as amended, the
Clean Water Act, as amended, the Safe Drinking Water Act, as amended, the Clean
Air Act, as amended, the Atomic Energy Act of 1954, as amended, the Occupational
Safety and Health Act, as amended, and all analogous laws promulgated or issued
by any state or other Governmental Authority.
D. "Environmental Reports" shall mean any and all written analyses,
audits, assessments, summaries or explanations, in the possession or control of
the Company or any subsidiary, of (a) any Environmental Conditions in, on or
about the Properties (defined below) of, or any property or facility formerly
owned, leased or operated by, the Company or any of its subsidiaries or (b) the
Company's or any such subsidiary's compliance with Environmental Laws.
E. "Hazardous Substances" shall mean all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive,
toxic or otherwise hazardous substances or materials subject to regulation,
control or remediation under Environmental Laws, including but not limited to
petroleum, urea formaldehyde, flammable, explosive and radioactive materials,
PCBs, pesticides, herbicides, asbestos, sludge, slag, acids, metals, and
solvents.
Except as set forth in Schedule 4.18 the Company Disclosure Letter, (i) the
Company and each of its subsidiaries are currently in material compliance with
all applicable Environmental Laws, including without limitation all permits or
licenses required thereunder; (ii) neither the Company nor any of its
subsidiaries has received any written notice that the Company or any such
subsidiary is not in compliance with, or is in material violation of, any such
Environmental Laws; (iii) there are no Environmental Claims pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries; (iv) no underground storage tank for Hazardous Substances, no
PCBs, and, to the knowledge of the Company, no asbestos containing material is
currently located at or on any of the properties or facilities owned, leased or
operated by the Company or any of its subsidiaries (the "Properties"); and (v)
to the best knowledge of the Company and each of its subsidiaries, there have
been no releases of Hazardous Substances in quantities exceeding the reportable
quantities as defined under Environmental Laws on, upon or into the Properties
other than those authorized by Environmental Laws. In addition, true and correct
copies of the Environmental Reports have been made available to Purchaser, and a
list of all such Environmental Reports is set forth in Schedule 4.18 of the
Company Disclosure Letter.
4.19 Labor Matters. None of the employees of the Company or any of
its subsidiaries are covered by a collective bargaining agreement. Neither the
Company nor any of its subsidiaries knows of any activity or proceedings of any
labor union (or representatives thereof) to organize any unorganized employees
employed by the Company or any of its subsidiaries, nor of any strikes,
slowdowns, work stoppages, lockouts or threats thereof, by or
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with respect to any of the employees of the Company or any of its subsidiaries.
Except as set forth in Schedule 4.19 of the Company Disclosure Letter, neither
the Company nor any of its subsidiaries has received any notice of any claim, or
has knowledge of any facts which, in the reasonable judgment of the Company, are
likely to give rise to any claim, that it has not complied in any material
respect with any laws relating to the employment of labor, including, without
limitation, any provisions thereof relating to wages, hours, collective
bargaining, the payment of social security and similar taxes, equal employment
opportunity, employment discrimination or employment safety.
4.20 Certain Undisclosed Violations. Except as set forth in Schedule
4.20 of the Company Disclosure Letter, neither the Company nor any of its
subsidiaries is in violation, or has received notice or claim with respect to
such a violation, of any sale/lease back agreement, credit agreement or
franchise agreement ("Franchise Agreement") to which the Company or any of its
subsidiaries is a party. All liquor licenses held by the Company or any of its
subsidiaries (each a "Liquor License" and collectively the "Liquor Licenses")
are valid and in force, and neither the Company nor any of its subsidiaries has
(after reasonable inquiry) knowledge of any violation of any obligations set
forth under any Liquor License or of any facts which constitute any such
violation or has received any notice or claim with respect to any such
violation, which violation, individually or in the aggregate, would be likely to
result in the termination of any one or more Liquor Licenses covering restaurant
operations generating, individually or in the aggregate, for the three months
ended June 30, 1997, average weekly gross food and beverage revenues in excess
of $300,000.
4.21 Brokers and Finders. Neither the Company nor any of its
subsidiaries nor any of their respective officers, directors or employees has
employed any broker, finder or investment banker or incurred any liability for
any brokerage fees, commissions, finders' fees or banking fees in connection
with the transactions contemplated herein, except that the Company has employed,
and will pay the fees and expenses of Rothschild pursuant to a letter agreement
dated as of July 14, 1997, and Jones, Lang, Wootton USA as broker in connection
with solicitation of a sale and leaseback transaction as contemplated in the
Sale and Leaseback Letter of Intent pursuant to a letter agreement dated April
14, 1997, copies of which have been delivered to Parent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
PARENT AND THE PURCHASER
5.01 Corporation Organization. Parent is a limited liability company
duly organized and validly existing and in good standing under the laws of the
State of Delaware, and the Purchaser is a corporation duly organized and validly
existing and in good standing under the laws of the State of New York. Parent
and the Purchaser each has all requisite
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corporate power and authority to own its assets and carry on its business as now
being conducted or proposed to be conducted.
5.02 Authorized Capital. The authorized capital stock of the
Purchaser consists of 1,000 shares of Common Stock, $0.01 par value, of which
1,000 shares are outstanding and are owned, beneficially and of record, by
Parent. All of the issued and outstanding shares of capital stock of the
Purchaser are validly issued, fully paid and nonassessable and free of
preemptive rights and all liens.
5.03 Authority. Parent has the necessary limited liability company
power and authority, and the Purchaser has the necessary corporate power and
authority, to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement by each of Parent and
the Purchaser, the performance by Parent and the Purchaser of their respective
obligations hereunder and the consummation by Parent and the Purchaser of the
transactions contemplated hereby have been duly authorized by the managing
member of Parent and the board of directors of the Purchaser and approved by
Parent as sole stockholder of the Purchaser, and no other limited liability
company or corporate proceeding on the part of Parent or the Purchaser is
necessary for the execution and delivery of this Agreement by Parent and the
Purchaser and the performance by Parent and the Purchaser of their respective
obligations hereunder and the consummation by Parent and the Purchaser of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and the Purchaser and, assuming the due
authorization, execution and delivery hereof by the Company, is a legal, valid
and binding obligation of Parent and the Purchaser, enforceable against each of
Parent and the Purchaser in accordance with its terms, except to the extent that
its enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable principles, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
5.04 No Prior Activities. Neither Parent nor the Purchaser has
incurred, directly or indirectly, any liabilities or obligations, except those
incurred in connection with its incorporation or with the negotiation of this
Agreement, the Bank Standstill Agreement, the Bank Letter of Intent, the
performance of its obligations hereunder and the consummation of the
transactions contemplated hereby and thereby. Neither Parent nor the Purchaser
has engaged, directly or indirectly, in any business or activity of any type or
kind, or entered into any agreement or arrangement with any person or entity,
and is not subject to or bound by any obligation or undertaking, that is not
contemplated by or in connection with this Agreement, the Offer Documents and
the transactions contemplated hereby and thereby.
5.05 No Financing Contingency. Parent has or will have and will make
available to the Purchaser or the Paying Agent, as applicable, sufficient funds
in sufficient time to consummate the Offer and the Merger in accordance with the
terms of this Agreement.
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5.06 Governmental Filings; No Violations. (a) Provided that the
Company's representations in Sections 4.04 and 4.05 hereof are true and correct,
except as set forth in the disclosure letter delivered to the Company as of the
date of this Agreement (the "Purchaser Disclosure Letter") no notices, reports
or other filings are required to be made by Parent or the Purchaser with, nor
are any consents, registrations, approvals, permits or authorizations required
to be obtained by Parent or the Purchaser from, any governmental or regulatory
authorities of the United States, the several States or any foreign
jurisdictions in connection with the execution and delivery of this Agreement by
Parent and the Purchaser and the consummation by Parent and the Purchaser of the
transaction contemplated hereby, the failure to make or obtain any or all of
which would adversely affect the ability of the Parent or the Purchaser to
consummate the transactions contemplated by this Agreement, except (A) in
connection with the HSR Act, (B) in connection with the Exchange Act, (C) in
connection with Article 16 of the NYBCL and (D) the Liquor License Approvals.
(b) Provided that the Company's representations in Sections 4.04 and
4.05 hereof are true and correct, except as set forth in the Purchaser
Disclosure Letter neither the execution and delivery of this Agreement by Parent
and the Purchaser nor the consummation by Parent and the Purchaser of the
transactions contemplated hereby nor compliance by Parent and the Purchaser with
any of the provisions hereof will: (i) violate, conflict with or result in any
breach of any provision of the Certificate of Incorporation or By-Laws of Parent
or the Purchaser; (ii) require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority, except (A) in
connection with HSR, (B) in connection with the Exchange Act, (C) in connection
with Article 16 of the NYBCL or (D) the Liquor License Approvals; (iii)
constitute a violation or breach of, or result (with or without due notice or
lapse of time or both) in a default or loss of any material benefit under, or
give rise to any right of termination, amendment, cancellation or acceleration
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, franchise agreement, lease, license, contract, agreement or other
instrument or obligation of any kind to which Parent or the Purchaser is a party
or by which Parent or the Purchaser or their respective assets may be bound,
except as any such breach, default or right as to which requisite waivers or
consents have been obtained, (iv) require the creation or imposition of any lien
upon or with respect to any properties of the Parent and the Purchaser or (v)
assuming compliance with the NYBCL and the HSR Act, violate any order, writ,
injunction, judgment, decree, law, statute, rule, regulation or governmental
permit or license applicable to Parent and the Purchaser or any of its or their
respective assets, with such exceptions with respect to the matters referred to
in clauses (ii) through (vi) as would not, individually or in the aggregate,
adversely affect the ability of the Parent or the Purchaser to consummate the
transactions contemplated by this Agreement.
5.07 Brokers and Finders. Neither Parent, the Purchaser nor any of
its officers, directors or employees has employed any broker, finder or
investment banker or incurred any liability for any brokerage fees, commissions,
finders fees or banking fees in connection with the transactions contemplated
herein.
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5.08 Information. All information supplied in writing by Parent or
the Purchaser specifically for inclusion in the Proxy Statement or the Schedule
14D-9 or provided by Parent or the Purchaser in the Schedule 14D-1 or the Offer
Documents will, at the respective times that such documents or any amendments or
supplements thereto are filed with the SEC and are first published, sent or
given to holders of shares, comply in all material respects with applicable
federal securities laws and will not contain any untrue statements of a material
fact required to be stated therein or omit to state, with respect to information
supplied by Parent and the Purchaser, any material fact required to be stated
therein or necessary in order to make the statements supplied by Parent and the
Purchaser, in light of the circumstances under which they were made, not
misleading, except that no representation is made by Parent or the Purchaser
with respect to information supplied by the Company.
5.09 Legal Proceedings, Etc.. There is no claim, action, proceeding
or investigation pending or, to the knowledge of Parent or the Purchaser,
threatened against or relating to Parent or the Purchaser before any court or
tribunal in any jurisdiction (domestic or foreign) or any Governmental Authority
which could individually or in the aggregate adversely affect the ability of the
Parent or the Purchaser to consummate the transactions contemplated by this
Agreement and neither Parent nor the Purchaser is subject to any outstanding
order, writ, judgment, injunction or decree of any court or Governmental
Authority or body that could, individually or in the aggregate, materially
effect Parent's or the Purchaser's ability to consummate the transactions
contemplated by this Agreement.
5.10 Ownership of Shares. Parent beneficially owns 554,900 Shares,
which it will contribute to the Purchaser prior to the Merger, and has the sole
right to receive net proceeds of any sale of such Shares.
ARTICLE VI
COVENANTS OF THE PARTIES
6.01 Conduct of Business of the Company. The Company shall, and
shall cause each of its subsidiaries to, use its reasonable efforts in light of
the Company's present financial condition to preserve intact the business
organization of the Company and each of its subsidiaries, to keep available,
consistent with this Agreement, the services of their respective operating
personnel and to preserve the goodwill of those having a business relationship
with each of them, including, without limitation, suppliers. Except as
contemplated by this Agreement, during the period from the date of this
Agreement to the Effective Time, the Company and each of its subsidiaries will
conduct their respective businesses and operations only in the ordinary and
usual course of business consistent with past practice. Without limiting the
generality of the foregoing, and except as a result of entering into this
Agreement or as contemplated by this Agreement or as set forth in Schedule 6.01
of the Company Disclosure Letter, during the period from the date of this
Agreement to the Effective Time, without the advance written consent of Parent,
the Company will not and will cause each of its subsidiaries not to:
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(a) amend its certificate of incorporation or by-laws or
similar governing documents;
(b) (i) create, incur or assume any indebtedness for borrowed money
(including obligations in respect of capital leases, other than obligations of
not more than $50,000, individually or in the aggregate, created or incurred in
the ordinary course of business), except indebtedness for borrowed money
incurred under the Credit Agreement (as defined in Section 6.01(g)) or pursuant
to a new credit agreement refinancing such borrowing in conformity with the
terms of that certain letter of intent dated August 29, 1997, by and among the
Company and the Lenders (as defined therein) (the "Bank Letter of Intent"), or
the letter agreement dated August 29, 1997, by and among the Company and the
Lenders (the "Bank Standstill Agreement"), or (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person other than any subsidiary of
the Company set forth in Schedule 4.02 of the Company Disclosure Letter;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock other than on capital stock of subsidiaries set forth in
Schedule 4.02 of the Company Disclosure Letter.
(d) issue, sell, grant, purchase or redeem, whether by dividend or
otherwise, any shares of its capital stock or securities convertible into or
exercisable for, or options with respect to, or warrants to purchase or rights
to subscribe to or otherwise purchase, or subdivide or in any way reclassify,
any shares of its capital stock, except for the issuance of Shares issuable upon
conversion of the Convertible Loan Notes in accordance with their terms or the
exercise of Options outstanding on the date hereof;
(e) except in respect of regularly scheduled raises or raises which
have been approved by the compensation committee of the Board prior to the date
hereof in the ordinary course of business consistent with past practice, or as
disclosed in Schedule 6.01 of the Company Disclosure Letter, (i) increase the
aggregate amount of compensation payable or to become payable to any of its
directors, officers or employees whose compensation required to be disclosed on
Schedule 4.12 of the Company Disclosure Letter, whether by salary or bonus, (ii)
increase the rate or term of, or otherwise alter, amend or nullify any, or enter
into any new, employment agreement, bonus, insurance, pension, severance or
other Company Benefit Plan, payment or arrangement made to, for or with any such
directors, officers or employees;
(f) enter into any agreement, commitment or transaction which, if
entered into prior to the date hereof, would have been required to be disclosed
on Schedule 4.15 of the Company Disclosure Letter, except as required or
permitted by subsection (k) or (l) of this Section 6.01, provided, however, that
nothing herein shall prohibit the Company or any
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subsidiary from purchasing food and beverage items and restaurant supplies from
its vendors as of the date hereof in the ordinary course and in quantities
consistent with past practice;
(g) sell, transfer, mortgage, pledge, grant any security interest
in, or permit the imposition of any lien or other encumbrance on, any asset
other than in the ordinary course of business consistent with past practice and
except (i) pursuant to the Credit Agreement, as amended, dated as of September
12, 1996 between the Company and Bank of America Illinois, NBD Bank, N.A.,
Credit Lyonnais New York Branch and The Bank of New York, as Agent, and The
Chase Manhattan Bank, as Co-Agent (the "Credit Agreement"), or (ii) pursuant to
the refinancing of borrowings under the Credit Agreement pursuant to a new
credit agreement in conformity with the terms set forth in the Bank Letter of
Intent or (iii) pursuant to that certain letter of intent between the Company
and CNL Fund Advisers, Inc. pursuant to which the Company intends to enter into
a sale and leaseback transaction in respect of all or substantially all of the
Real Property owned in fee by the Company (the "Sale and Leaseback Letter of
Intent");
(h) waive any material right under any contract or other
agreement identified in Schedule 4.15 of the Company Disclosure Letter;
(i) other than as required by any change in GAAP, make any material
change in its accounting methods or practices or make any material change in
depreciation or amortization policies or rates adopted by it for accounting
purposes or, other than normal writedowns or writeoffs consistent with past
practice, make any writeoffs of notes or accounts receivable;
(j) make any loan or advance to any of its shareholders, officers,
directors or employees (other than vacation advances, relocation advances and
travel advances, in each case in the ordinary course of business consistent with
past practice, and other advances up to $10,000 in the aggregate) or make any
other loan or advance to any other person (other than any subsidiary of the
Company set forth in Schedule 4.02 of the Company Disclosure Letter) or group
otherwise than in the ordinary course of business consistent with past practice;
(k) terminate or fail to renew, where such renewal is at the
Company's or a subsidiary's option, or fail to replace on substantially similar
or more favorable terms, any contract or other agreement other than in the
ordinary course of business, which termination or failure to renew or so
replace, individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect;
(l) fail to maintain all Insurance Policies in full force and effect
or fail to renew or replace with equivalent coverage any Insurance Policy which
has expired;
(m) take any action which constitutes a violation of any Liquor
License which violation, individually or in the aggregate, would, in the
reasonable judgment of the Restaurant Company, be likely to result in the
termination of any one or more Liquor Licenses
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covering restaurant operations generating, individually or in the aggregate, for
the three months ended June 30,1997, average weekly gross food and beverage
revenues in excess of $300,000;
(n) fail to operate, maintain, repair or otherwise preserve the Real
Property substantially in accordance with current practice in light of the
Company's present financial condition and not to exceed the capital expenditure
budget of the Company previously disclosed to Parent ;
(o) fail to comply with all applicable filing, payment and
withholding obligations under all applicable federal, state, local and foreign
Tax laws except where such failure to comply would not have a Material Adverse
Effect;
(p) breach, terminate or amend the Bank Standstill Agreement or
terminate or amend either the Bank Letter of Intent or the Sale and Leaseback
Letter of Intent or take any action not otherwise permitted or required pursuant
to such agreements that directly results in any counterparty to the Bank Letter
of Intent or the Sale and Leaseback Letter of Intent terminating or stating an
intention to terminate the same; or
(q) agree in writing to, or otherwise take or authorize, any of
the foregoing actions.
6.02 Notification of Certain Matters. (a) The Company shall
promptly notify Parent of any:
(i) notice or other communication from any Person (as defined in
Section 9.01) alleging that the consent of such Person is or may be
required in connection with the transactions contemplated by this
Agreement;
(ii) notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement;
(iii) action, suit, claim, investigation or proceeding commenced or,
to the best of the Company's knowledge threatened against, relating to or
involving or otherwise affecting the Company or any of its subsidiaries
which, if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to Article IV or which relate to the
consummation of the transactions contemplated by this Agreement; and
(iv) change or event (A) having or which could reasonably be
expected to have a Material Adverse Effect; or (B) impairing the ability
of the Company to consummate the transactions contemplated hereby.
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(b) Between the date of this Agreement and the Effective Time, the
Company shall give prompt notice to Parent of: (i) the initiation of any audit
or other review by the Internal Revenue Service (the "IRS") or any other state,
local or foreign taxing or governmental authority with respect to any Tax return
or that may result in any additional liability for Taxes, and (ii) any proposed
settlement or similar agreement ("Settlement") with the IRS or any other state,
local or foreign taxing or governmental authority and shall not enter into any
Settlement with respect to Taxes without the prior written consent of Parent,
which consent shall not be unreasonably withheld.
6.03 Access to Information. (a) Between the date of this Agreement
and the Effective Time, the Company will during ordinary business hours and upon
reasonable advance notice, (i) give Parent and Parent's authorized
representatives all access Parent shall reasonably request to all of its and
each of its subsidiaries' books, records (including, without limitation, the
workpapers of the Company's outside accountants), contracts, commitments,
restaurants, offices and other facilities and properties, and its and each of
its subsidiaries' personnel, representatives, accountants and agents; (ii)
permit Parent to make such inspections thereof, except as set forth herein below
as it may reasonably request during normal business hours, and (iii) cause its
and each of its subsidiaries' officers and advisors to furnish to Parent its
financial and operating data and such other existing information with respect to
its business, properties, assets, liabilities and personnel (including, without
limitation, title insurance reports, real property surveys and Environmental
Reports, if any), as Parent may from time to time reasonably request, provided,
however, that any such investigation shall be conducted in such a manner as not
to interfere unreasonably with the operation of the business of the Company. The
Parent and Purchaser agree not to undertake or take any actions involving
exploration, drillings, borings or other independent subsurface environmental
testings or other "Phase II" environmental investigations including obtaining
subsurface environmental surveys or tests, relating to Environmental Conditions
at any Property.
(b) Any information provided pursuant to this Agreement shall be
held by Parent in accordance with and shall be subject to the terms of the
Confidentiality Agreement dated June 3, 1997 between the Company and Parent (the
"Confidentiality Agreement"). Notwithstanding anything herein or in the
Confidentiality Agreement to the contrary, Parent, the Purchaser or the Company
may disclose any information required to be disclosed pursuant to the Exchange
Act, or otherwise required or requested to be disclosed by the SEC after
consultation of the parties and upon advice of counsel or as otherwise permitted
by the Confidentiality Agreement.
6.04 Further Information. The Company and Parent shall give prompt
written notice to the other of (i) any representation or warranty made by the
Company or the Purchaser, respectively, contained in this Agreement becoming
untrue or inaccurate in any material respect or (ii) the failure by the Company
or the Purchaser, respectively, to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied
under this Agreement and shall use reasonable efforts to notify the other
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promptly upon becoming aware of any event or circumstance which it believes is
reasonably likely to give rise to a failure of any condition to the Offer set
forth in Annex A; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
6.05 Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement, the Company, Parent and the Purchaser shall use their respective
reasonable best efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, subject to the terms of this Agreement, and
shall use their respective reasonable best efforts to satisfy the conditions to
the transactions contemplated hereby, to obtain all waivers, permits, consents
and approvals and to effect all registrations, filings and notices with or to
third parties or governmental or public bodies or authorities which are
necessary or desirable in connection with the transactions contemplated by this
Agreement, including, but not limited to, filings to the extent required under
the Exchange Act, the HSR Act and Article 16 of the NYBCL, filings and consents
with respect to Liquor Licenses (including without limitation the Liquor License
Approvals) and submissions of information requested by Governmental Authorities
and to defend against any lawsuit or proceeding, whether judicial or
administrative, challenging this Agreement or the consummation of any of the
transactions contemplated hereby. If at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers or directors of each of the parties hereto shall
take such action. Parent as the sole shareholder of the Purchaser, and the
Purchaser as a shareholder of the Company, will consent and/or vote in favor of
the transactions contemplated hereunder.
6.06 HSR Filings. The Company and Parent will file, or cause to be
filed, as promptly as possible and in no event later than ten Business Days
after the date hereof, with the United States Federal Trade Commission (the
"FTC") and the Antitrust Division of the United States Department of Justice
(the "Department of Justice") pursuant to the HSR Act the notification required
by the HSR Act, including all requisite documents, materials and information
therefor, and request early termination of the waiting period under the HSR Act.
Each of the Company and Parent shall furnish to the other such necessary
information and reasonable assistance as the other may request in connection
with its preparation of any filing or submission which is necessary under the
HSR Act. The Company and Parent shall each keep the other apprised of the status
of any inquiries or requests for additional information made by any governmental
authority and shall comply promptly with any such inquiry or request.
6.07 Public Announcements. The initial press release with respect to
the transactions contemplated hereby shall be a joint press release,
substantially in the form of Exhibit C hereto, and thereafter the Company and
Parent shall consult with each other before issuing any press release or
otherwise making any public statements with respect to the
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transactions contemplated hereby and shall not issue any such press release or
make any such public statement prior to such consultation.
6.08 No Solicitation. (a) The Company will not, and will not permit
any of its officers, directors, advisors, agents or representatives to, directly
or indirectly, solicit or encourage the initiation or submission of any
inquiries, proposals or offers regarding any acquisition, merger, tender offer,
exchange offer, recapitalization (involving an equity investment other than
solely from existing shareholders) or similar transaction involving, sale of all
or a substantial portion of the assets of, or sale of shares of capital stock or
securities convertible into capital stock, (other than a sale only to existing
lenders in connection with a refinancing of debt) of the Company, whether or not
in writing and whether or not delivered to the shareholders of the Company, or
similar transactions involving the Company (any of the foregoing inquiries,
proposals or offers being referred to herein as an "Acquisition Proposal");
provided, however, that nothing contained in this Section 6.08 shall prevent the
Company's Board from (i) referring any third party to this provision, (ii)
considering, negotiating or participating in discussions regarding an
unsolicited bona fide written Acquisition Proposal or (iii) complying with Rule
14e-2(a) or Rule 14d-9 promulgated under the Exchange Act, if applicable, with
regard to an Acquisition Proposal made in the form of a tender offer by a third
party. If the Board of the Company after duly considering advice, written or
otherwise, of the Company's outside counsel and financial advisor, determines in
good faith that it would be consistent with its fiduciary responsibilities to
approve or recommend a Superior Proposal (as defined below), then (A) the
Company shall not enter into any agreement with respect to the Superior Proposal
and (B) any other obligation of the Company under this Agreement shall not be
affected unless this Agreement is terminated pursuant to Section 9.01(b)(v) and
all amounts payable pursuant to Section 9.03(a) are paid to Parent prior to or
concurrently with such termination. As used herein the term "Superior Proposal"
means a bona fide proposal made by a third party to acquire the Company pursuant
to a tender or exchange offer, a merger, a sale of all or substantially all of
its assets or otherwise that the Board determines in its good faith judgment to
be more favorable to the Company's shareholders than the Offer and the Merger
(after considering the advice, written or otherwise, of its outside counsel and
financial advisor).
(b) The Company shall promptly notify Parent after receipt of any
Acquisition Proposal or any request for nonpublic information relating to the
Company by any third party in connection with an Acquisition Proposal or for
access to the properties, books or records of the Company that informs the Board
of Directors that such third party is considering making, or has made, an
Acquisition Proposal. Such notice to Parent shall be made orally and in writing
and shall indicate in reasonable detail the terms and conditions of such
proposal, inquiry or contact and, unless precluded by the terms of a
confidentiality agreement, the identity of the offeror.
(c) If the Company's Board of Directors receives a request for
material nonpublic information by a third party who makes or who states in
writing that it intends,
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subject to satisfactory review of such nonpublic information, to make a bona
fide Acquisition Proposal, the Company may, subject to the execution of a
confidentiality agreement substantially similar to that then in effect between
the Company and Parent but allowing for disclosure to Parent as required in
paragraph (b) of this Section 6.08, provide such third party with access to such
information.
6.09 Indemnity; D&O Insurance.
(a) The certificate of incorporation of the Surviving Corporation
shall, for a period of six years from the Effective Time, contain provisions no
less favorable with respect to indemnification than are set forth in the
Certificate of Incorporation, as amended as set forth in Exhibit A hereto, which
provisions shall not be amended, repealed or otherwise modified for such period
in any manner that would affect adversely the rights thereunder of individuals
who at any time prior to the Effective Time were directors, officers, employees
or agents of the Company, unless such modification shall be required by law.
(b) The Company shall, to the fullest extent permitted under New
York law and regardless of whether the Merger becomes effective, indemnify and
hold harmless, and after the Effective Time the Surviving Corporation shall, to
the fullest extent permitted under New York law, indemnify and hold harmless,
each present and former director and officer of the Company and each of its
subsidiaries (collectively, the "Indemnified Parties") against judgments, fines,
reasonable amounts paid in settlement and reasonable expenses, including
attorneys' fees, costs and charges incurred as a result of any action or
proceeding (whether arising before or after the Effective Time), or any appeal
therefrom, whether civil or criminal, arising out of or pertaining to any action
or omission in their capacity as an officer or director prior to or at the
Effective Time, for a period of six years after the Effective Time (or with
respect to claims arising from service as an officer or director prior to the
Effective Time and asserted or made prior to such sixth anniversary which have
not been resolved prior to such sixth anniversary, until the time such matters
are finally resolved). In the event of any such action or proceeding (i) the
Company or the Surviving Corporation, as the case may be, shall pay the
reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to the Company or the Surviving
Corporation, promptly after statements therefor are received, provided that an
agreement has been entered into by such Indemnified Party agreeing to repay such
amounts to the Company if the Indemnified Party is ultimately found by a final
judgment (not subject to further appeal) of a court of competent jurisdiction
not to be entitled to indemnification, or to the extent such amount exceeds the
indemnification to which such Indemnified Party is entitled, under New York law,
and (ii) the Company and the Surviving Corporation shall cooperate and provide
access to all documents necessary beneficial to the defense of any such matter;
provided, however, that neither the Company nor the Surviving Corporation shall
be liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld, delayed or conditioned); and provided,
further that neither the Company nor the Surviving Corporation shall be
obligated pursuant to this Section 6.10(b) above to pay the fees
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and expenses of more than one counsel for all Indemnified Parties in any single
action except to the extent that two or more of such Indemnified Parties shall
have conflicting interests in the outcome of such action.
(c) The Surviving Corporation shall use its best efforts to maintain
in effect for six years from the Effective Time, if available, the current
directors' and officers' liability insurance policies maintained by the Company
(provided that the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms and conditions which are not materially
less favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that the Surviving Corporation shall not be required to
maintain such insurance to the extent the annual premium therefor exceeds 120%
of the annual premiums currently paid by the Company in respect of the current
policy or policies (the "Maximum Amount") but in such case shall purchase as
much comparable coverage as available for the Maximum Amount.
(d) In the event the Company or the Surviving Corporation or any of
their respective successors (i) is consolidated with or merges into another
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any other person in a single transaction or a series of
related transactions, then in each such case the Parent shall make or cause to
be made proper provision so that the successor or transferee of the Company or
the Surviving Corporation, as the case may be, shall comply in all material
respects with the terms of this Section 6.09.
6.10 Employee Benefits Matters.
(a) From and after the date of purchase of Shares pursuant to the
Offer, the Company or the Surviving Corporation, as applicable, will, and Parent
will cause the Company or the Surviving Corporation to, honor, in accordance
with their terms, all individual employment, severance and change of control
agreements between the Company and any officer, director or employee of the
Company including, without limitation, bonuses, incentive or deferred
compensation in existence on the date hereof and disclosed to Parent in Schedule
4.12 of the Company Disclosure Letter.
(b) From and after the date of purchase of Shares pursuant to the
Offer, the Company or the Surviving Corporation, as applicable, will, and Parent
will cause the Company, the Surviving Corporation or the Company Benefit Plans
to, provide or pay when due to employees and former employees of the Company all
benefits and compensation pursuant to the Company Benefit Plans, policies and
arrangements in effect on the date hereof and disclosed to Parent in Section
4.12 of the Company Disclosure Letter (other than with respect to stock and
stock-based plans or programs, including stock grants, options to purchase
stock, stock investment alternatives, or other stock-based benefits or awards)
earned or accrued through, and to which such individuals are entitled as of, the
Effective Time (or such
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later time as such Company Benefit Plans as in effect at the Effective Time are
terminated or canceled by the Surviving Corporation subject to compliance with
this Section 6.10).
(c) For a period ending two (2) years after the Effective Time, the
Company or the Surviving Corporation, as applicable, will, and Parent, will
cause the Company or the Surviving Corporation to, provide to Company employees
and former employees benefits under all Company Benefit Plans, programs and
arrangements that provide benefits which are no less favorable in the aggregate
to such persons than those provided to such persons under the Company Benefit
Plans, programs and arrangements of the Company in effect on the date hereof and
disclosed to Parent in Schedule 4.12 of the Company Disclosure Letter (other
than with respect to the agreements subject to Section 6.10 (a) above and other
than with respect to stock and stock-based plans or programs, including stock
grants, options to purchase stock, stock investment alternatives, or other
stock-based benefits or awards).
(d) Nothing in this Agreement shall require the continued employment
of any person, and except as expressly set forth in this Section 6.10, no
provision of this Agreement shall prevent Parent or Surviving Corporation from
amending or terminating any Company Benefit Plan.
6.11 Payment of Bonuses. Parent shall cause the Company to pay, in
accordance with their respective terms, all bonuses, payments of incentive
compensation pursuant to the Company's incentive compensation plans, severance
payments and other payments as disclosed on Schedule 4.12 of the Company
Disclosure Letter in accordance with the terms hereof.
ARTICLE VII
CONDITIONS TO THE MERGER
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to this Agreement to consummate the Merger
shall be subject to the following conditions, unless waived by all parties at or
prior to the Closing:
(a) the Purchaser shall have accepted for payment, and paid for,
Shares validly tendered and not withdrawn pursuant to the Offer representing
(together with Shares otherwise owned by Parent or the Purchaser) not less than
50.1% of the then outstanding Shares;
(b) this Agreement and the Merger shall have been approved and
adopted by the requisite vote or consent, if any, of the shareholders of the
Company required by the NYBCL; and
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(c) no order, statute, rule, regulation, execution order, stay,
decree, judgment, or injunction shall have been enacted, entered, issued,
promulgated or enforced by any court or governmental authority which prohibits
or restricts the consummation of the Merger.
7.02 Conditions to the Obligations of Parent and the Purchaser to
Effect the Merger. The obligations of Parent and the Purchaser to effect the
Merger shall be further subject to satisfaction of the condition, unless waived
by Parent, that all outstanding Options shall have been surrendered and canceled
prior to or simultaneously with the Effective Time.
ARTICLE VIII
CLOSING
8.01 Time and Place. The closing of the Merger (the "Closing") shall
take place at the offices of Latham & Watkins, 885 Third Avenue, New York, New
York, at 10 a.m. local time on a date to be specified by the parties which shall
be no later than the third Business Day after the date that all of the closing
conditions set forth in Article VII have been satisfied or waived (if waivable)
unless another time, date or place is agreed upon in writing by the parties
hereto. The date on which the Closing actually occurs is herein referred to as
the "Closing Date."
8.02 Filings at the Closing. At the Closing Date, the Purchaser
shall cause the Certificate of Merger to be filed and recorded with the
Secretary of State of the State of New York, in accordance with the provisions
of Section 904 or Section 905, as applicable, of the NYBCL and shall take any
and all other lawful actions and do any and all other lawful things necessary to
cause the Merger to become effective.
ARTICLE IX
TERMINATION; AMENDMENT; WAIVER
9.01 Termination. This Agreement may be terminated and the Offer (if
the Purchaser has not accepted Shares for payment) and the Merger may be
abandoned at any time prior to the Effective Time, whether prior to or after
approval of the Merger by the shareholders of the Company, if required:
(a) by mutual written consent of Parent, the Purchaser and the
Company;
(b) by the Company if:
(i) the Purchaser shall have failed to commence (within the meaning
of Rule 14d-2(a) of the Exchange Act) the Offer within five Business Days of the
public announcement
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thereof unless the failure to commence the Offer shall be due to (A) the failure
of the Company (or any of its subsidiaries) to perform in any material respect
any of its obligations under this Agreement then required to be performed or (B)
any occurrence or circumstance which would result in the failure of any
condition to the Offer set forth in Annex A hereto;
(ii) the Purchaser shall have (A) terminated the Offer, (B) allowed
the Offer to expire without the purchase of any Shares thereunder in accordance
with the terms of this Agreement or (C) failed to accept Shares for payment
pursuant to the Offer on or prior to October 22, 1997 unless (I) such
termination or expiration or failure shall be due to the failure of any
condition set forth in (1) paragraph (iv), (vii), (viii) or (ix) (with respect
to any consent or approval required to be obtained by the Company as provided in
Annex A) of Annex A or paragraph (ii) of Annex A (otherwise than in
circumstances that would entitle the Company to terminate this Agreement
pursuant to Section 9.01(d)) or (2) paragraph (i) of Annex A unless the
Purchaser shall have failed to accept Shares for payment on or prior to October
31, 1997 or (II) the provisions of the proviso in Section 9.03(a) are
applicable, unless the Purchaser shall have failed to accept Shares for payment
on or prior to October 31, 1997;
(iii) prior to the purchase of Shares pursuant to the Offer, the
Purchaser shall have breached or failed to perform in any material respect any
of its obligations under this Agreement which obligation is required to be
performed at such time and such breach or failure materially delays consummation
of the Offer, or materially and adversely affects the ability of the Purchaser
and Parent to consummate the Offer and the Merger on substantially the terms set
forth in the Agreement;
(iv) if the representations and warranties of the Purchaser set
forth in this Agreement are not true and correct in all material respects at any
time prior to the expiration or termination of the Offer (except as to those
representations and warranties which are made as of a specified date, which
shall be true and correct as of such date) and such failure materially delays
consummation of the Offer, or materially and adversely affects the ability of
the Purchaser and Parent to consummate the Offer and the Merger on substantially
the terms set forth in this Agreement;
(v) prior to the purchase of Shares pursuant to the Offer, a
corporation, partnership, person or other entity or group (each a "Person")
shall have made a Superior Proposal and the Board, after duly considering advice
written or otherwise of the Company's outside counsel and financial advisors,
determines in good faith that it would be consistent with its fiduciary
responsibilities to approve or recommend such Superior Proposal, provided that
such termination under this clause (v) shall not be effective until payment of
the Termination Fee and Expenses in the manner required by Section 9.03 (a); or
(vi) the Minimum Condition is not satisfied or waived as
permitted by this Agreement upon final expiration of the Offer;
(c) by Parent and the Purchaser if:
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(i) due to any occurrence or circumstance which would result in a
failure to satisfy any of the conditions set forth in Annex A hereto, the
Purchaser shall have failed to commence (within the meaning of Rule 14d-2(a) of
the Exchange Act) the Offer within five Business Days of the public announcement
thereof;
(ii) as a result any of the conditions set forth in Annex A hereto
not having been satisfied, the Purchaser shall have (A) terminated the Offer, or
(B) failed to accept Shares for payment pursuant to the Offer on or prior to
October 22, 1997;
(iii) the Effective Time shall not have occurred on or prior to
November 30, 1997, due to a failure of any of the conditions to the obligations
of the Purchaser to effect the Merger set forth in Sections 7.01(b), 7.01(c) or
7.02 otherwise than as a result of a breach or default by Parent or the
Purchaser hereunder;
(iv) the Company shall have breached its obligations under
Section 6.08; or
(v) the Board shall have withdrawn or modified (including by
amendment of the Schedule 14D-9), in a manner adverse to the Purchaser, its
approval or recommendation of the Offer, this Agreement or the Merger or shall
have recommended or approved another tender or exchange offer or other
Acquisition Proposal (whether or not a Superior Proposal), or shall have adopted
any resolution to effect any of the foregoing.
(d) by Parent and the Purchaser or the Company if any court of
competent jurisdiction in the United States or other United States governmental
body shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger or the acceptance for
payment and payment for the Shares in the Offer and such order, decree, ruling
or other action is or shall have become nonappealable.
9.02 Effect of Termination. In the event of the termination of this
Agreement and the abandonment of the Offer and the Merger pursuant to Section
9.01, this Agreement shall forthwith become void and have no effect, without any
liability on the part of any party hereto or its affiliates, directors, officers
or shareholders, provided that no such termination shall relieve any of the
Company, Parent or the Purchaser, as the case may be, from liability for damages
arising (a) from any willful or intentional breach of this Agreement or (b) from
their obligations under Sections 4.21, 5.07, 6.03(b), this Section 9.02, Section
9.03 and Article X. If this Agreement is terminated as provided herein, each
party (the "Redelivering Party") upon request therefor shall redeliver all
documents, work papers and other materials obtained (whether before or after
execution of this Agreement) by the Redelivering Party from the requesting party
in connection with the transaction contemplated hereby, together with all copies
thereof in the possession of the Redelivering Party.
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9.03 Fees and Expenses. In recognition of the significant time
and expense necessarily expended and to be expended by Parent and the
Purchaser in negotiation of this Agreement and furtherance of the
transactions contemplated hereby,
(a) in the event that:
(i) the Company terminates this Agreement pursuant to Section
9.01(b)(v); or
(ii) prior to the final expiration date ("Expiration Date") of the
Offer, (A) an Acquisition Proposal, or interest in or intention to pursue an
Acquisition Proposal, has been publicly announced or publicly confirmed by any
person (other than Parent or the Purchaser) (whether by press release or
Exchange Act filing or otherwise), and (B) on or prior to the 180th day
following the initial expiration date of the Offer (I) the Company enters into
any agreement with respect to any Acquisition Proposal or (II) any Acquisition
Proposal is commenced by way of tender offer or exchange offer;
then, in either such event, the Company shall pay to Parent a fee in the amount
of $1,100,000 (the "Termination Fee"), plus Expenses (as defined below), at the
time and manner hereinafter set forth. Notwithstanding the foregoing, no
Termination Fee will be payable in the case of clause (ii) above if the
Purchaser has not, prior to the Expiration Date, waived the Minimum Condition so
as to provide that the minimum number of Shares that must be validly tendered as
a condition to the Purchaser's acceptance for payment of Shares pursuant to the
Offer, together with the Contributed Shares, shall be no greater than 66-2/3% of
the outstanding Shares; provided, however, that in the event of such reduction
in the Minimum Condition, the Purchaser shall be entitled to extend the Offer
from time to time, for so long as the Bank Standstill Letter remains in effect,
but in no event beyond October 31, 1997, until Shares validly tendered (and not
withdrawn) in the Offer, together with the Contributed Shares, represent at
least 90% of the outstanding Shares. The Termination Fee and Expenses shall be
paid in immediately available funds concurrently with any termination described
only in clause (i) above. Expenses and the Termination Fee, if payable, shall be
paid only in the event of, and concurrently with, the consummation of any such
Acquisition Proposal in the case of clause (ii) above immediately in available
funds.
(b) if (i) this Agreement is terminated by the Purchaser and Parent
pursuant to Section 9.01(c)(i) or (ii) as a result of the Company's failure to
satisfy the condition set forth in paragraph (iv) of Annex A hereto and (ii) the
Company's breach of any of its representations and warranties under the
Agreement and/or its failure to perform its material obligations, covenants or
agreements under this Agreement resulting in the failure to satisfy such
condition set forth in paragraph (iv) of Annex A, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect,
the Company shall reimburse Parent and Purchaser for all Expenses. Expenses
payable pursuant to this Section 9.03(b)
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shall be paid in immediately available funds within one Business Day following
such termination.
(c) Upon the occurrence of any Event under clause (a) or (b) of this
Section 9.03 entitling Purchaser and Parent to payment of their Expenses,
Purchaser and Parent shall promptly provide the Company with invoices or other
reasonable evidence of the Expenses upon request, and Parent shall forthwith
return any portion of Expenses reimbursed by the Company as to which such
invoices or other evidence are not received.
(d) For purposes of this Agreement (i) "Material Adverse Effect"
means a material adverse effect on the business, assets, financial condition,
cash flow or results of operation of the Company and its subsidiaries,
considered on a consolidated basis, or a material adverse affect on the ability
of the Company, on the one hand, or Parent and Purchaser, on the other, to
consummate the transactions contemplated by this Agreement, provided, however,
that the Company's breach of its representation under Article IV that no more
than fifteen Real Property Leases require consents which have not been obtained
shall not be deemed to have such a Material Adverse Effect; and (ii) "Expenses"
shall mean out-of-pocket expenses incurred by Parent or the Purchaser or on
their behalf in connection with the Offer and the Merger and the consummation of
the transactions contemplated by this Agreement, (including, without limitation,
reasonable attorneys' fees and disbursements and other charges, solicitation
agent and depository fees and expenses, fees payable to the Lenders not paid by
the Company and accountants and filing fees and printing costs) up to a maximum
amount of $900,000.
ARTICLE X
MISCELLANEOUS
10.01 Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties and agreements of the parties
contained in Sections 2.06, 3.01, 3.02 (but only to the extent that such Section
expressly relates to actions to be taken after the Effective Time), 3.03, 3.04,
3.05, 4.21, 6.05, 6.08, 6.09, 6.10, 6.11 and Article X hereof, shall survive the
consummation of the Offer and the Merger. The agreements of the parties
contained in Sections 4.21, 5.07, 6.03(b), 9.02, 9.03 and Article X shall
survive any termination of this Agreement. If this Agreement shall terminate
after acceptance for payment by the Purchaser of Shares pursuant to the Offer,
but prior to the Effective Time, the agreement of the parties contained in
Sections 6.09, 6.10 and 6.11 shall also survive the termination of this
Agreement, and Parent shall, or shall cause the Purchaser to, cause Article
NINTH of the Certificate of Incorporation and Article VII of the Company's
By-laws to be amended as provided in Exhibit A and Exhibit B, respectively. All
other representations, warranties, agreements and covenants in this Agreement
shall not survive the consummation of the Offer and the Merger or the
termination of this Agreement.
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10.02 Amendment and Modification. Subject to Section 1.03(c), if
applicable, and subject to applicable law, this Agreement may be amended,
modified or supplemented only by written agreement of Parent (for itself and the
Purchaser) and the Company at any time prior to the Effective Time with respect
to any of the terms contained herein executed by duly authorized officers of the
respective parties, except that after the earlier of (a) the purchase by the
Purchaser of a majority of the Shares on a fully diluted basis, and (b) the
meeting of shareholders to approve the Merger contemplated by this Agreement,
the price per Share to be paid pursuant to this Agreement to the holders of
Shares shall in no event be decreased and the form of consideration to be
received by the holders of such Shares in the Merger shall in no event be
altered without the approval of such holders.
10.03 Waiver of Compliance; Consents. At any time prior to the
Effective Time, subject to Section 1.03(c) if applicable, the parties hereto may
extend the time for performance of any of the obligations or other acts or waive
any inaccuracies in the representations and warranties contained herein or in
the documents delivered pursuant hereto. Any failure of Parent (for itself and
the Purchaser), on the one hand, or the Company, on the other hand, to comply
with any obligation, covenant, agreement or condition herein may be waived in
writing by Parent (for itself and the Purchaser) or the Company, respectively,
but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of or
estoppel with respect to any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto or any
extensions, such consent or extension shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in this
Section 10.03.
10.04 Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original but all of which together
shall constitute one and the same instrument.
10.05 Governing Law; Submission to Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of New York
without regard to its conflicts of laws rules. Each party hereto hereby (i)
irrevocably and unconditionally submits in any legal action or proceeding
relating to this Agreement, or for recognition and enforcement of any judgment
in respect thereof, to the general jurisdiction of the state and federal courts
in the state of New York, and appellate courts thereof and (ii) consents that
any action or proceeding may be brought in such courts and waives any objection
that it may now or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same.
10.06 Notices. All notices and other communications hereunder shall
be in writing (except as otherwise specified in Section 6.08(b)) and shall be
deemed given if delivered personally, or mailed by registered or certified mail
(return receipt requested) or by
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overnight courier service or transmitted by facsimile (effective upon
confirmation of transmission) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) If to the Company, to:
Ground Round Restaurants, Inc.
35 Braintree Hill Office Park
P.O. Box 9078
Braintree MA 02184-9078
Attention: President
Fax: (617) 380-3100
with copies to:
Kane Kessler, P.C.
1350 Avenue of the Americas
26th Floor
New York, New York 10019
Attention: Jeffrey S. Tullman, Esq.
Fax: (212) 245-3009
(b) if to Parent or the Purchaser, to:
GRR Holdings, LLC
c/o Boston Ventures Management, Inc.
21 Custom House Street
Boston, MA 02110
Attention: Barbara M. Ginader
Fax: (617) 737-3709
with copies to:
Latham & Watkins
885 Third Avenue
New York, NY 10022
Attention: Erica H. Steinberger, Esq.
Fax: (212) 751-4864
10.07 Entire Agreement, Assignment Etc.. This Agreement, which
hereby incorporates the Company Disclosure Letter, and the Confidentiality
Agreement embodies the entire agreement and understanding of the parties hereto
in respect of the subject matter
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hereof. This Agreement supersedes all prior agreements and understanding of the
parties with respect to the subject matter hereof other than the Confidentiality
Agreement. This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and Permitted Assigns, but neither this Agreement nor any of the rights,
interest or obligations hereunder shall be assigned by any party hereto, except
that Parent shall have the right to assign the rights of the Purchaser to any
other (directly or indirectly) wholly-owned subsidiary of Parent (the "Permitted
Assigns").
10.08 Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
10.09 Headings; Certain Definitions. The Articles and Section
headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the parties and shall not affect in any way the
meaning or interpretation of this Agreement.
10.10 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Sections 2.03, 2.04, 6.09, 6.10 and 6.11 (each of which is
intended to be for the benefit of the persons covered thereby and may be
enforced by such persons).
[Signatures on the following page]
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first above written.
GRR HOLDINGS, LLC
By: Boston Ventures Limited Partnership V,
its Managing Member
By: Boston Ventures Company V, L.L.C.,
its General Partner
By: /s/Barbara M. Ginader
-----------------------------------
Name: Barbara M. Ginader
Title: Managing Director
GRR MERGER CORP.
By: /s/Barbara M. Ginader
-----------------------------------
Name: Barbara M. Ginader
Title: President
GROUND ROUND RESTAURANTS, INC.
By: /s/Daniel R. Scoggin
-----------------------------------
Name: Daniel R. Scoggin
Title: Chairman, President
and Chief Executive Officer
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ANNEX A
The capitalized terms used herein have the meanings set forth in the
Agreement and Plan of Merger to which this Annex A is attached.
Notwithstanding any other provision of the Agreement and Plan of
Merger to which this Annex A is attached (the "Merger Agreement") or the Offer,
the Purchaser shall not be required to accept for payment, purchase or pay for
any Shares tendered pursuant to the Offer, may postpone the acceptance for
payment of and payment for any tendered Shares and may terminate or, subject to
the terms of the Merger Agreement, amend the Offer if (a) there shall not have
been validly tendered to the Purchaser (and not withdrawn) that number of Shares
which, when aggregated with the Contributed Shares, represents at least 90% of
the Shares outstanding (the "Minimum Condition"); or (b) on or after the date of
the Merger Agreement and at or before the time of acceptance for payment of any
such Shares (whether or not any Shares have theretofore been accepted for
payment or paid for pursuant to the Offer) any of the following shall occur
(each of paragraphs (i) through (ix) providing a separate and independent
condition to the Purchaser's obligation pursuant to the Offer):
(i) any waiting period applicable to the Offer and the
Merger pursuant to the HSR Act shall not have expired or been
terminated; or
(ii) there shall have been instituted or be pending any
action, proceeding, application, claim or counterclaim by any
government or governmental authority or agency, domestic or foreign,
before any court or governmental regulatory or administrative
agency, authority or tribunal, domestic or foreign (a "Claim"),
challenging the acquisition by Parent or the Purchaser of the
Shares, restraining or prohibiting the making or consummation of the
Offer or the Merger or seeking to obtain from Parent or the
Purchaser any damages that would result in a Material Adverse Effect
if such were assessed against the Company, restraining or
prohibiting, or limiting in any material respect, the ownership or
operation by Parent or the Purchaser of any material portion of the
business or assets of the Company or any of its subsidiaries or
seeking to compel Parent or the Purchaser to dispose of or forfeit
material incidents of control of all or any material portion of the
business or assets of the Company or any of its subsidiaries or
imposing limitations on the ability of Parent or the Purchaser of
effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares acquired
or owned by Parent or the Purchaser on all matters properly
presented to the Company's shareholders; or seeking to require
divestiture by Parent or the Purchaser of any Shares; or
(iii) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, promulgated, entered, enforced or
deemed applicable to the Offer, the Merger or the Merger Agreement,
or any other action shall have been taken by any government,
governmental authority or court, domestic or foreign,
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other than the routine application to the Offer or the Merger of
waiting periods under the HSR Act, and other than relating to the
Liquor License Approvals, which are addressed in paragraph (ix)
below, that has, or has a substantial likelihood of resulting in,
any of the consequences referred to in paragraph (ii) above; or
(iv) the Company shall have breached or failed to perform in
any material respect any of its material obligations, covenants or
agreements contained in the Merger Agreement, or any of the
representations and warranties of the Company set forth in the
Merger Agreement shall not have been true and correct in any
material respect when made or, except for any representations and
warranties made as of a specific date, shall have ceased to be true
and correct in any material respect (or, in the case of
representations and warranties that are specifically qualified as to
materiality, shall not have been true and correct when made or shall
have ceased to be true and correct) and if curable, the Company
shall have failed to cure such breach within three (3) Business Days
after written notice from Purchaser of such failure; or
(v) there shall have occurred (A) (1) any general suspension
of trading in, or limitation on prices for, securities on the New
York Stock Exchange, Inc., any other national securities exchange or
NASDAQ, (2) the declaration of a banking moratorium or any mandatory
suspension of payments in respect of banks in the United States (3)
the commencement of or escalation of a war, armed hostilities or
other international or national calamity directly or indirectly
involving the United States, (4) in the case of any of the foregoing
existing on August 29, 1997, a material acceleration or worsening
thereof, and (B) such occurrence has a Material Adverse Effect; or
(vi) the Merger Agreement shall have been terminated in
accordance with its terms; or
(vii) the Company's Board of Directors shall have withdrawn or
modified (including by amendment of the Schedule 14D-9) its approval
or recommendation of the Offer, the Merger Agreement or the Merger
or shall have approved or recommended any other tender or exchange
offer or other Acquisition Proposal, which, in the sole judgment of
Parent in any such case, and regardless of the circumstances
(including any action or omission by Parent) giving rise to such
condition, makes it inadvisable to proceed with such acceptance for
payment, except where as a result of the Company's receipt of an
unsolicited Acquisition Proposal from, or commencement of an
unsolicited tender or exchange offer by, a third party (A) the
Company issues to its shareholders a communication that contains
only the statements permitted by Rule 14d-9(e) under the Exchange
Act (and does not otherwise withdraw, modify or amend its approval
or recommendation of the Offer, the Merger or the Merger Agreement)
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<PAGE> 53
and (B) within five Business Days of issuing such communication the
Company publicly reconfirms its approval and recommendation of the
Offer, the Merger and the Merger Agreement; or
(viii) either (A) any change or development, outside of the
ordinary course of business consistent with past practice of the
Company, not disclosed in the Company Disclosure Letter shall have
occurred in the financial condition, assets, capitalization,
prospects, shareholders' equity, licenses, permits, business or
results of operations of the Company and its subsidiaries which in
the reasonable judgment of the Purchaser is or is likely,
individually or in the aggregate, to be materially adverse to the
Company or any of its subsidiaries taken as a whole, or the
Purchaser shall become aware of any fact (including, but not limited
to, any such change or development) which is likely to have
materially adverse significance with respect to the Company and its
subsidiaries taken as a whole; provided, however, that no change,
development or fact shall be deemed to be materially adverse for the
purpose of this clause (A) unless, individually or when combined
with all other changes, developments or facts, it is, in the
reasonable judgment of the Purchaser, likely to result in losses
(after taking into account any amounts recovered or insurance
proceeds receivable by the Company in compensation for such losses)
in excess of $4,500,000, or (B) the average gross sales of the
Company as reported by the Company in any 21 day period after the
date of the Merger Agreement shall be less than $3,000,000 per week;
or
(ix) (A) the Company and/or the Purchaser shall not have
obtained (1) any Liquor License Approval required to be obtained
prior to Parent's and the Purchaser's obtaining control of the
Company through the Purchaser's acceptance for payment of Shares
pursuant to the Offer (or Parent and the Purchaser shall not have
made arrangements reasonably satisfactory to them to allow any
Liquor License subject to any such Liquor License Approval to
continue in full force and effect following consummation of the
Offer and the Merger pending receipt of such Liquor License
Approval), other than any Liquor License Approvals with respect to
Liquor Licenses that, individually or in the aggregate, cover
restaurant operations (I) generating, individually or in the
aggregate, for the three months ended June 30, 1997, average weekly
gross food and beverage revenues of less than $300,000 and (II) with
average profit after controllables in any 21 day period after the
date of the Merger Agreement which, when deducted from the average
profit after controllables of the Company in the same 21 day period,
would not result in such average profit after controllables of the
Company totaling less than $540,000 per week, or (2) any consent or
approval which is legally required to be obtained prior to
consummation of the Offer and the Merger and was not disclosed in
the Company Disclosure Letter which, if not obtained, would,
individually or in the aggregate, have a Material Adverse Effect, or
(B) Parent and the Purchaser shall not have obtained continuing
assurances from the
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<PAGE> 54
appropriate authority in any of the Commonwealth of Massachusetts,
State of New York or State of Ohio, or otherwise made arrangements
with such authority, satisfactory to Parent and the Purchaser in
their sole discretion, that there is no legal impediment to their
obtaining control of the Company under such Commonwealth's or
State's tied-house statute (see Section 16 of the Offer to
Purchase).
The foregoing conditions are for the sole benefit of the Purchaser
and may be asserted by the Purchaser regardless of the circumstances (including
any action or inaction by Parent or the Purchaser) giving rise to any such
condition and may be waived by the Purchaser, in whole or in part in its sole
discretion. The failure by the Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
such right with respect to any particular facts or circumstances shall not be
deemed a waiver with respect to any other facts or circumstances, and each such
right will be deemed an ongoing right which may be asserted at any time and from
time to time.
51
<PAGE> 1
Execution Copy
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this "Agreement"), dated as of August 29,
1997, by and between GRR Holdings, LLC, a Delaware limited liability company
("Parent"), GRR Merger Corp. ("Sub"), a New York corporation and a wholly owned
subsidiary of Parent, and Christian R. Guntner and David T. DiPasquale (each a
"Seller" and collectively, the "Sellers").
WHEREAS, concurrently herewith, Parent, Sub and Ground Round
Restaurants, Inc. (the "Company"), a New York corporation, are entering into an
Agreement and Plan of Merger of even date herewith (the "Merger Agreement";
capitalized terms used but not defined herein shall have the meanings set forth
in the Merger Agreement), pursuant to which Sub agrees to make a tender offer
(the "Offer") for all outstanding shares of common stock, par value $.16 2/3 per
share (the "Shares"), of the Company, at $1.65 per share, net to the seller in
cash, to be followed by a merger (the "Merger") of Sub with and into the
Company;
WHEREAS, as of the date hereof, the Sellers beneficially own an
aggregate of 3,102,100 Shares (the "Owned Shares"); and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement and to make the Offer, Parent and Sub have required that
Sellers agree, and Sellers have agreed, to tender pursuant to the Offer all of
the Owned Shares, together with any Shares acquired after the date hereof and
prior to the termination of the Offer, whether upon the exercise of options,
conversion of convertible securities or otherwise (collectively, the "Tender
Shares"), on the terms and subject to the conditions provided for in this
Agreement;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Agreement to Tender and Vote.
1.1 Tender. Each Seller hereby agrees to validly
tender his respective Tender Shares no later than 5 business days prior to the
initial expiration of the Offer by physical delivery of the certificates for
such Tender Shares to the depositary for the Offer.
1.2 Voting. Each Seller hereby agrees that, during
the time this Agreement is in effect, at any meeting of the shareholders of the
Company, however called, he shall (a) vote his respective Tender Shares in favor
of the Merger; (b) vote his respective
<PAGE> 2
Tender Shares against any action or agreement that would result in a breach in
any material respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement; and (c) vote
his respective Tender Shares against any action or agreement (other than the
Merger Agreement or the transactions contemplated thereby) that would impede,
interfere with, delay, postpone or attempt to discourage the Merger or the
Offer, including, but not limited to: (i) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company; (ii) a sale or transfer of a material amount of assets of
the Company or any of its subsidiaries or a reorganization, recapitalization or
liquidation of the Company or any of its subsidiaries; (iii) any change in the
management or board of directors of the Company, except as otherwise agreed to
in writing by Parent and Sub; (iv) any material change in the present
capitalization or dividend policy of the Company; or (v) any other material
change in the Company's corporate structure or business.
2. Expiration. This Agreement and each Seller's obligation to
tender his respective Tender Shares provided herein shall terminate on the
earlier of (a) the consummation of the purchase of such Tender Shares and (b)
the termination of the Merger Agreement in accordance with its terms.
3. Representations and Warranties.
3.1 Representations and Warranties of Parent and
Sub. Parent and Sub hereby represent and warrant to Sellers as follows:
(a) Organization; Due Authorization. Parent is a
limited liability company duly organized, validly existing and
in good standing under the laws of Delaware. Parent has full
limited liability company power and authority to execute and
deliver this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by
the Managing Member of Parent, and no other limited liability
company proceedings on the part of Parent are necessary to
authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and constitutes a valid and
binding agreement of Parent, enforceable against Parent in
accordance with its terms.
(b) Organization; Due Authorization. Sub is a
corporation duly organized, validly existing and in good
standing under the laws of New York. Sub has full corporate
power and authority to execute and deliver this Agreement. The
execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Sub, and no
2
<PAGE> 3
other corporate proceedings on the part of Sub are necessary
to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by Sub and constitutes a valid and
binding agreement of Sub, enforceable against Sub in
accordance with its terms.
3.2 Representations and Warranties of Sellers.
Each Seller hereby represents and warrants to Parent as follows with respect to
himself:
(a) Title. Such Seller has good and valid title to
the Owned Shares owned by him, free and clear of any lien,
charge, encumbrance or claim of whatever nature and, upon the
purchase of the Tender Shares by Sub, such Seller will deliver
good and valid title to the Tender Shares owned by him, free
and clear of any lien, charge, encumbrance or claim of
whatever nature.
(b) Ownership of Shares. On the date hereof, such
Seller owns, of record or beneficially, the number of Shares
set forth next to such Seller's name on the signature page of
this Agreement. Such Seller has sole voting power and sole
power of disposition with respect to his respective Owned
Shares, with no restrictions, subject to applicable federal
securities laws, on his rights of disposition pertaining
thereto.
(c) Power; Binding Agreement. Such Seller has the
legal capacity, power and authority to enter into and perform
all of his obligations under this Agreement. The execution,
delivery and performance of this Agreement by such Seller will
not violate any other agreement to which such Seller is a
party including, without limitation, any voting agreement,
stockholders agreement or voting trust. This Agreement has
been duly and validly executed and delivered by such Seller
and constitutes a valid and binding agreement of such Seller,
enforceable against such Seller in accordance with its terms.
(d) No Conflicts. Other than in connection with or
in compliance with the provisions of the NYBCL with respect to
the transactions contemplated hereby, the Exchange Act, the
securities laws of the various states and the HSR Act, no
authorization, consent or approval of, or filing with, any
court or any public body or authority is necessary for the
consummation by such Seller of the transactions contemplated
by this Agreement. The execution, delivery and performance of
this Agreement by such Seller will not constitute a breach,
violation or default (or any event which, with notice or lapse
of time or both, would constitute a default) under or, result
in the
3
<PAGE> 4
termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or
result in the creation of any lien or encumbrance upon any of
the properties or assets of such Seller under, any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement
or other instrument to which such Seller is a party or by
which his respective properties or assets are bound, other
than breaches, violations, defaults, terminations,
accelerations or creation of liens and encumbrances which, in
the aggregate, would not materially impair the ability of such
Seller to perform his obligations hereunder.
4. Certain Covenants of Sellers. Each Seller hereby covenants
and agrees as follows:
4.1 Restriction on Transfer, Proxies and
Non-Interference. Such Seller hereby agrees, while this Agreement is in effect,
and except as contemplated hereby, not to (i) sell, transfer, pledge, encumber,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer, pledge,
encumbrance, assignment or other disposition of, any of his respective Owned
Shares or Tender Shares (ii) grant any proxies, deposit any shares of capital
stock of the Company into a voting trust or enter into a voting agreement with
respect to any such shares or (iii) take any action that would make any
representation or warranty of such Seller contained herein untrue or incorrect
or have the effect of preventing or disabling such Seller from performing his
obligations under this Agreement.
4.2 Additional Shares. Such Seller hereby agrees,
while this Agreement is in effect, to promptly notify Parent and Sub of the
number of new Shares acquired by such Seller, if any, after the date hereof.
5. Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further action as may be
necessary or desirable to consummate and make effective the transactions
contemplated by Section 1 of this Agreement.
6. Stop Transfer Order. In furtherance of this Agreement,
concurrently herewith, each Seller shall and hereby does authorize the Company's
counsel to notify the Company's transfer agent that there is a stop transfer
order with respect to all of his respective Owned Shares and Tender Shares (and
that this Agreement places limits on the voting and transfer of such Shares),
other than transfers of Tender Shares to Sub in the Offer.
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7. Miscellaneous.
7.1 Non-Survival. The respective representations
and warranties made herein shall terminate upon the respective Seller's sale of
his Tender Shares to Sub in the Offer, other than each Seller's representation
and warranty in Section 3.2(a) which shall survive the sale of the Tender Shares
and the termination of this Agreement following such sale.
7.2 Entire Agreement; Assignment. This Agreement
(i) constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (ii) shall not be assigned by operation of law or
otherwise, provided that Parent or Sub may assign its rights and obligations
hereunder to any direct or indirect wholly owned subsidiary of Parent, but no
such assignment shall relieve Parent or Sub of its obligations hereunder if such
assignee does not perform such obligations.
7.3 Notices. All notices, requests, claims,
demands and other communications hereunder shall be in writing and shall be
given (and shall be deemed to have been duly received if so given) by hand
delivery, telegram, telex or telecopy, by mail (registered or certified mail,
postage prepaid, return receipt requested) or by any courier service, such as
Federal Express, providing proof of delivery. All communications hereunder shall
be delivered to the respective parties at the following addresses:
To each seller as follows:
Mr. Christean R. Guntner
37 Valley Lane
Chappaque, NY 10515
Fax: 914-238-0243
Mr. David T. DiPasquale
456 Green Street
North Boro, MA 01532
Fax: 508-393-1987
copy to:
Daniel L. Rabinowitz, Esq.
The Law Offices of Daniel L. Rabinowitz
546 Fifth Avenue
New York, NY 10036-5003
Fax: 212-768-7664
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Kane Kessler, P.C.
1350 Avenue of the Americas
New York, NY 10019-4896
Attention: Jeffrey S. Tullman, Esq.
Fax: (212) 245-3009
To Parent or Sub:
c/o Boston Ventures Management, Inc.
21 Custom Street
Boston, MA 02110
Attention: Barbara M. Ginader
Fax: (617) 737-3709
copy to:
Latham & Watkins
885 Third Avenue
New York, NY 10022
Attention: Erica H. Steinberger, Esq.
Fax: (212) 751-4864
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
7.5 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
7.6 Specific Performance. Each of the parties
hereto recognizes and acknowledges that a breach by it of any covenants or
agreements contained in this Agreement will cause the other party to sustain
damages for which it would not have an adequate remedy at law for money damages,
and therefore each of the parties hereby agrees that in the event of any such
breach the aggrieved party shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
7.7 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same Agreement.
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7.8 Descriptive Headings. This descriptive
headings used hereby are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
7.8 Severability. Whenever possible, each
provision or portion of any provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law but if any
provision or portion of any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will no affect any
other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.
[Signatures on the following page]
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IN WITNESS WHEREOF, Parent, Sub and Sellers have caused this
Agreement to be duly executed as of the day and year first above written.
GRR HOLDINGS, LLC
By: Boston Ventures Limited Partnership V,
its Managing Member
By: Boston Ventures Company V, L.L.C.,
its General Partner
By: /s/Barbara M. Ginader
-----------------------------------
Name: Barbara M. Ginader
Title: Managing Director
GRR MERGER CORP.
By: /s/Barbara M. Ginader
-----------------------------------
Name: Barbara M. Ginader
Title: President
SELLERS
/s/Christian R. Guntner
-----------------------------------
Christian R. Guntner
Shares Owned: 1,902,100
/s/David T. DiPasquale
-----------------------------------
David T. DiPasquale
Shares Owned: 1,200,000
8
