<PAGE> 1
FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For Fiscal Year Ended September 29, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___ to ___
Commission File Number: 1-6192
GROUND ROUND RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
New York 13-5637682
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
35 Braintree Hill Office Park, Braintree, Massachusetts 02184
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (617) 380-3100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each Exchange on which registered
- ------------------- -----------------------------------------
Common Stock, $ .1667 par value NASDAQ National Market System
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to the
Form 10-K. [ ]
On December 16, 1996, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $2.3 million, based upon the
last reported sale price for a share of the Registrant's Common Stock on the
NASDAQ National Market System.
Number of shares of Common Stock outstanding as of December 16, 1996 was
11,173,319.
<PAGE> 2
FORM 10-K/A
PART III
Item 10 Directors and Executive Officers of the Registrant................. 1
Item 11 Executive Compensation............................................. 4
Item 12 Security Ownership of Certain Beneficial Owners and Management..... 9
Item 13 Certain Relationships and Related Transactions..................... 12
<PAGE> 3
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS OF THE COMPANY
Certain information is set forth below concerning the Directors of the Company
who have been elected to hold office for fiscal year 1996 and until their
successors are duly elected and qualified. The Directors of the Company are as
follows:
Director
Name Age Since
---- --- --------
Daniel R. Scoggin 59 1991
John A. Mistretta (1) 50 1995
Christian R. Guntner (1) 42 1995
Joseph Schollenberger 70 1995
James R. Olson 55 1995
Fred H. Beaumont, Jr. 60 1996
Allan D. Weingarten 59 1996
- -------------------
(1) Messrs. Mistretta and Guntner have been nominated to serve as Directors
by the Company under the terms of a Stockholder Agreement dated August
1, 1991, as amended, between the Company and JUSI Holdings, Inc. See
"Security Ownership of Certain Beneficial Owners and Management" and
"Certain Relationships and Related Transactions."
MR. SCOGGIN has been the Chairman of the Board, President and Chief
Executive Officer of the Company since July 21, 1995 and prior thereto was
interim Chairman of the Board, President and Chief Executive Officer of the
Company from April 1, 1995. He was the founder and former President and Chief
Executive Officer of TGI Friday's, Inc., a multi-unit restaurant Company, until
November 1986 and prior to joining the Company, served as a consultant for
several restaurant concepts and founded Bison Group, a developer of foodservice
and entertainment concepts. Mr. Scoggin is a director of Roasters Corp.
MR. MISTRETTA has been Group Vice President of U.S. Industries, Inc., a
company engaged in the manufacture and distribution of consumer, building and
industrial products, since May 1995. He was Chairman and Chief Executive Officer
of Marine Harvest International, Inc. from October 1992 through April 1995 and
Chairman of the Recreation/Leisure Group of Hanson Industries from March 1989 to
October 1992.
MR. GUNTNER has been Senior Vice President of Corporate Development of U.S.
Industries, Inc., a company engaged in the manufacture and distribution of
consumer, building and industrial products, since May 1995. He was Executive
Vice President and Chief Operating Officer of Publicker Industries, Inc. from
July 1990 through March 1995 and Vice President of Vornado, Inc. from February
1990 to July 1990.
<PAGE> 4
MR. SCHOLLENBERGER has been Vice President of each of GSB Holdings, Inc.
and GSB, Inc. and Executive Vice President and Chief Operating Officer of their
parent company, Great South Beach Improvement Co., a corporation principally
engaged in real estate development, since January 1994. From 1980 to 1994, he
was associated with Able Fab Co. in various executive capacities.
MR. OLSON has been President of PDQ Car Wash, Inc. since March of 1996. He
was President of the Transportation sector from December 1992 to July 1995 and
President of the Van Group from March 1987 to December 1992 of Schneider
National, Inc.
MR. BEAUMONT, JR. became a principal of Balukoff, Lindstrom & Co., P.A. in
July 1995 and was the President, Director and sole stockholder of Fritz
Beaumont, CPA firm, from September 1971 to July 1995.
MR. WEINGARTEN was a Partner of Ernst & Young, LLP in New Jersey from 1972
through September of 1995 and since that time has been a business consultant and
private investor.
EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information is set forth below concerning the executive officers of
the Company who have been elected to hold office for such terms as may be
prescribed by the Board, and unless sooner removed in accordance with the Bylaws
of the Company, or until their successors are duly elected and qualified. The
executive officers of the Company are as follows:
NAME AGE POSITION
- ---- --- --------
Daniel R. Scoggin 59 Chairman of the Board, President and Chief
Executive Officer
Stephen J. Kiel 44 Senior Vice President, Chief Financial
Officer and Treasurer
Anthony E. Bezsylko 48 Senior Vice President - Operations
David L. Dobbs 45 Senior Vice President - Business Development
Warren C. Hutchins 52 Vice President - Purchasing & Distribution
Robin L. Moroz 40 Vice President - General Counsel
A. Gerald Leneweaver 50 Vice President - Human Resources
Daniel R. Scoggin's business experience and current position with the
Company are described above. See " Directors of the Company".
2
<PAGE> 5
Stephen J. Kiel has served as Sr. Vice President, Chief Financial Officer
and Treasurer of the Company and the Company's wholly-owned subsidiary The
Ground Round, Inc. ("Ground Round") since September 1996. He was President of
the Hudson Consulting Group, an Ohio based financial consulting group, from
September 1993 to August of 1996. Prior to that, Mr. Kiel was a Partner with
Lakewest, L.P. from June 1992 to September 1993. Prior thereto, he was President
of Craft 'N Flower, L.P. from June 1990 to June 1992 and a partner with Deloitte
& Touche from 1987 to 1990.
Anthony E. Bezsylko has served as Sr. Vice President of Operations for the
Company and Ground Round since February of 1996. Mr. Bezsylko was Director of
Operations for the Company and Ground Round since May of 1995. Before joining
Ground Round, Mr. Bezsylko was the Group General Manager for Knotsberry Farms
Restaurants out of California from 1994 to 1995. Prior thereto, he was a
Regional Manager for C.A. Muer from June 1991 to June 1994.
David L. Dobbs has served as Sr. Vice President of Business Development of
the Company and Ground Round since September 3, 1996. Prior thereto, he was a
business consultant from April 1995 to September 1996 and from August 1976
through April 1995 held positions in accounting, operations, franchising and
purchasing at Shoney's, Inc., a multi-concept restaurant company based in
Nashville, TN.
Warren C. Hutchins has served as Vice President, Purchasing and
Distribution of the Company and Ground Round since September 1991 and August
1986, respectively. He was Secretary of Ground Round from March 1990 through
February 1991.
Robin L. Moroz has served as Vice President, General Counsel and Secretary
of the Company since December 1994. Prior thereto, Ms. Moroz served as a
corporate attorney to Ground Round from August 1989 and since October 1991 as
Assistant General Counsel of the Company.
A. Gerald Leneweaver has served as the Vice President of Human Resources of
the Company and Ground Round since January 1996. From August 1991 to January
1996, Mr. Leneweaver was the Executive Vice President and Founder of Travis,
Wolff Consulting, Inc., a Human Resource consulting practice located in Dallas,
Texas.
There is no family relationship among any of the Officers and Directors of
the Company.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities to file reports of ownership and changes in
ownership in respect of the Company's securities with the Securities and
Exchange Commission (the "SEC"). Such persons are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations of certain of its officers and directors,
the Company believes that during fiscal year 1996 all persons subject to the
reporting requirements of Section 16(a) filed the required reports on a timely
basis.
3
<PAGE> 6
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
The following Table sets forth all compensation paid to, deferred or accrued for the benefit of the Company's Chief Executive
Officer during fiscal year 1996 and of all other executive officers of the Company (the "named executive officers") who earned
total annual salary and compensation for fiscal 1996 exceeding $100,000, as well as named executive officers who had a salary above
$100,000 but received less than such due to employment at the Company for less than the full fiscal year of 1996. Except as
disclosed below, no executive officer of the Company earned a total annual salary and bonus for fiscal year 1996 exceeding $100,000.
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------- -----------------------------------
SECURITIES
RESTRICTED UNDERLYING ALL OTHER
NAME AND FISCAL SALARY BONUS STOCK AWARDS OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- ----------------------------------- ---------- -------------- ------------ ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Daniel R. Scoggin 1996 $350,000 $ 0 $0 0 $ 0
Chairman of the Board, President 1995 152,083 (1) 0 0 176,000 (5) 0
and Chief Executive Officer 1994 0 0 0 1,000 (5) 0
Stephen J. Kiel 1996 14,583 (2) 0 0 50,000 0
Senior Vice-President, Chief 1995 0 0 0 0 0
Financial Officer and Treasurer 1994 0 0 0 0 0
Anthony Bezsylko 1996 109,167 (2) 0 0 20,000 3,275 (6)
Senior Vice-President, 1995 38,335 (3) 0 0 0 950 (6)
Operations 1994 0 0 0 0 0
Gerry Leneweaver 1996 93,750 (2) 0 0 20,000 2,830 (6)
Vice-President, 1995 0 0 0 0 0
Human Resources 1994 0 0 0 0 0
David Dobbs 1996 11,667 (2) 0 0 30,000 350 (6)
Senior Vice-President, 1995 0 0 0 0 0
Business Development 1994 0 0 0 0 0
Michael R. Jorgensen 1996 124,167 (4) 0 0 0 43,575 (7)
Senior Vice-President, Chief 1995 130,000 0 0 0 5,716 (6)
Financial Officer 1994 130,000 69,033 0 0 4,642 (6)
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
Notes:
(1) Includes compensation received by Mr. Scoggin from April 1, 1995 through July 20, 1995 as interim Chairman, President and Chief
Executive Officer. Commencing July 21, 1995, Mr. Scoggin was elected to serve as Chairman, President and Chief Executive Officer
of the Company and received compensation pursuant to the terms of his employment agreement with the Company. See "Employment
Agreements."
(2) Messrs. Kiel, Bezsylko, Leneweaver and Dobbs were employed or promoted by the Company commencing in September 1996, February
1996, January 1996 and September 1996, respectively.
(3) Mr. Bezsylko was hired by the Company commencing April 10, 1995.
(4) Mr. Jorgensen resigned as Senior Vice President, Chief Financial Officer and as an employee of the Company effective August 26,
1996. Mr Jorgensen was employed by the Company commencing in June 1993.
(5) Includes 175,000 options Mr. Scoggin received pursuant to the terms of his employment agreement with the Company and 1,000
shares of stock options received on March 31, 1995 for regular service as a director, prior to becoming Chairman, President and
Chief Executive Officer. See "Employment Agreements."
(6) Represents the amount of the Company's contributions to the non-qualified Deferred Compensation Plan made on behalf of the named
executive officers.
(7) Represents the amount of the Company's contributions to the non-qualified Deferred Compensation Plan of $3,575 plus $40,000 in
severance compensation. See "Severance Agreements."
</TABLE>
4
<PAGE> 7
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
The Following table provides information on options granted to the named executive officers during fiscal year
1996. No stock appreciation rights were granted in fiscal year 1996.
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED RATES OF STOCK
PRICE APPRECIATION
# OF SHARES % OF TOTAL EXERCISE FOR OPTION TERM
UNDERLYING OPTIONS GRANTED OR BASE PRICE EXPIRATION --------------------------
NAME OPTIONS GRANTED TO EMPLOYEES PER SHARE DATE 5% ($) 10% ($)
- --------------------- ------------------- ------------------ --------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stephen J. Kiel 15,500 (1) 4.1% $2.50 8/29/06 $24,370 $61,758
34,500 (1) 9.2% $2.50 8/29/06 $29,333 $66,547
Anthony E. Bezsylko 6,200 (1) 1.6% $3.1875 10/10/05 $12,429 $31,496
13,800 (2) 3.7% $3.1875 10/10/01 $14,960 $33,939
A. Gerald Leneweaver 5,600 (1) 1.5% $2.1875 12/10/05 $ 7,704 $19,523
14,400 (2) 3.8% $2.1875 12/10/01 $10,713 $24,304
David L. Dobbs 9,300 (1) 2.5% $2.50 8/29/06 $14,622 $37,055
20,700 (1) 5.5% $2.50 8/29/06 $17,600 $39,928
Michael J. Jorgensen 10,850 (1) 2.9% $3.1875 10/10/05 $21,750 $55,119
24,150 (2) 6.4% $3.1875 10/10/01 $26,180 $59,393
- -------------------------------------------------------------------------------------------------------------------
<FN>
Notes:
(1) The per share option exercise price for the grant is the per share fair market value of the Common Stock on the
date of grant. All options are exercisable in equal installments over a three year period and have a ten year
term.
(2) The per share option exercise price for the grant is the per share fair market value of the Common Stock on the
date of grant. All options are exercisable in equal installments over a three year period and have a six year
term.
</TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
<TABLE>
The following table shows certain information as of September 29, 1996 concerning unexercised stock
options held by the named executive officers that were granted under the Company's Amended and Restated
1989 Stock Option Plan and 1992 Equity Incentive Plan. The Company has not granted any SARs. None of the named
executive officers exercised any stock options during fiscal 1996.
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR END (#) OPTIONS AT FISCAL YEAR END ($)
--------------------------------------- -----------------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
- -------------------------- --------------------------------------- -----------------------------------
<S> <C> <C>
Daniel R. Scoggin 63,333/116,667 0/0
Stephen J. Kiel 0/50,000 0/0
Anthony E. Bezsylko 0/20,000 0/0
A. Gerald Leneweaver 0/20,000 0/2,500
David L. Dobbs 0/30,000 0/0
Michael J. Jorgensen 47,500/35,000 (2) 0/0
- --------------------------------------------------------------------------------------------------------
<FN>
Notes:
(1) Valuation is based on fair market value of the Company's common stock on September 29, 1996 (the last
day of the 1996 fiscal year) which was $2.3125 per share based upon the last reported sale price for a
share on the NASDAQ National Market System on September 27, 1996.
(2) Options expired on November 24, 1996 due to resignation of employment.
</TABLE>
5
<PAGE> 8
DEFINED BENEFIT PLAN TABLE
<TABLE>
The following is a pension plan table showing estimated annual benefits (exclusive of Social Security
benefits) payable upon normal retirement to persons in specified compensation and years of service
classifications under the Company's unfunded, non-qualified retirement plan (the "Retirement Plan"), based
on final average salary for various years of service, assuming the employee would retire at age 65 in 1996.
Officers of the Company who hold the title of President, Senior Vice President, Vice President or General
Counsel are entitled to participation in the Retirement Plan. The Company pays the full cost of the Plan.
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------------------------------
FINAL AVERAGE SALARY 10 15 20 25
- ------------------------- ----------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
$100,000 $20,000 $20,000 $35,000 $50,000
120,000 24,000 24,000 42,000 60,000
140,000 28,000 28,000 49,000 70,000
160,000 32,000 32,000 56,000 80,000
200,000 40,000 40,000 70,000 100,000
250,000 50,000 50,000 87,500 125,000
300,000 60,000 60,000 105,000 150,000
350,000 70,000 70,000 122,500 175,000
400,000 80,000 80,000 140,000 200,000
450,000 90,000 90,000 157,500 225,000
</TABLE>
The compensation covered by the Retirement Plan is the base salary of
individual participants as shown in the Summary Compensation Table. Final
average salary is the highest five-year average of consecutive years' salary
over an employee's career with the Company. Participants in the Retirement Plan
are entitled to monthly benefit upon retirement after attaining the age of 65
equal to 50% of final average compensation, reduced by 1/2 of 1% of final
average compensation for each month (not in excess of 120 months) by which the
participant's credited service with the Company is less than 300 months, less
the amount of the participant's primary Social Security benefit. Early
retirement benefits are also available for participants who are 55 and have
completed 15 years of service. The benefit is equal to the participant's normal
retirement benefit reduced for early commencement by 5/9 of 1% for each of the
first 60 months plus 5/18 of 1% for each month in excess of 60 months by which
the benefit commencement date precedes a participant's normal retirement date,
and increased by 1/48 of 1% of the participants final average compensation times
months of projected credit service over 25 years, not to exceed 120 months, less
the amount of the participant's primary Social Security benefit. Projected
credit service indicates that period of time which commences on the
participant's date of hire and ends on the participant's normal retirement date.
Benefits are payable for the life of the retiree only, and would be reduced on
an actuarial basis if survivor options were chosen. In addition, benefits are
subject to a 100% deduction for Social Security amounts.
The years of service at October 1, 1996, under the Plan for the named
executive officers were as follows: Mr. Scoggin, 1 year, 3 months; Mr. Kiel, 0
years, 1 month; Mr. Dobbs, 0 years, 1 month; Mr. Bezsylko, 1 year, 6 months; Mr.
Leneweaver, 0 years, 9 months.
COMPENSATION OF DIRECTORS
Each of the directors of the Company, other than directors who are officers
or employees of the Company or The Ground Round, Inc. ("Ground Round") or of
U.S. Industries, Inc. ("USI") or its affiliates, receives an annual fee of
$12,000 for serving as a director. In addition, under the Company's 1992 Equity
Incentive Plan, each director of the Company, excepting any officer or employee
of the Company or Ground Round and any director who is an officer or an employee
of USI or its affiliates, receives an option to purchase 2,000 shares of common
stock of the Company when he is first elected a director of the Company and an
option to purchase 1,000 shares of common stock of the Company as of the date of
each meeting of shareholders at which the director is re-elected. These options
are immediately exercisable at a purchase price equal to the closing price of a
share of the Company's common stock on the NASDAQ/NMS on the date the option is
granted and have a five-year term. During fiscal year 1996, during the time that
each was a director, Messrs. Olson and Schollenberger each received an option to
purchase 1,000 shares of common stock at an exercise price of $3.50 per share
upon the date of re-election as a director and, Messrs. Beaumont and Weingarten,
each received an option to purchase 2,000 shares of common stock at an exercise
price of $3.50 per share upon their election to the Board of Directors on
January 23, 1996.
6
<PAGE> 9
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
EMPLOYMENT AGREEMENTS. The Company has entered into an employment agreement
(the "agreement") with Daniel R. Scoggin, effective July 21, 1995 and amended
effective August 18, 1995 under which Mr. Scoggin has agreed to serve the
Company as Chairman of the Board, President and Chief Executive Officer for a
term commencing on July 21, 1995 and extending until July 20, 1998. The
agreement is automatically renewable on each July 21 thereafter for an
additional year, unless, not later than 90 days prior to each July 21, either
party gives notice to the other to terminate the agreement.
Under the agreement, Mr. Scoggin is entitled to compensation consisting of
(i) a base salary of $350,000 per annum, and (ii) an annual bonus commencing in
the Company's 1996 fiscal year. Mr. Scoggin was granted on July 21, 1995 stock
options to purchase 175,000 shares of common stock of the Company in accordance
with the terms of the Company's 1992 Equity Incentive Plan. Mr. Scoggin is also
entitled to receive certain benefits, including but not limited to, insurance,
participation in the Company's deferred compensation plan and retirement plan,
and stock option and equity incentive plans, use of a Company car or a car
allowance, and payment of an annual country club membership fee. The Company may
terminate the agreement at any time whether for "cause" or for "disability" (as
defined in the agreement). Mr. Scoggin may terminate the agreement at any time
if the Company is in breach of any of its obligations to him under the
agreement; if he is not re-elected to serve as both Chairman and Chief Executive
Officer or is removed from any of such positions, in each case other than for
cause; if the Company assigns him duties which are inconsistent with his
position or if the Company requires him to relocate more than 50 miles away from
the current corporate office. In the event Mr. Scoggin's employment is
terminated by him pursuant to the terms of the agreement or by the Company
(other than for "cause", death or "disability"), Mr. Scoggin will be entitled to
receive a lump sum payment equal to 2.99 times his highest annual base salary at
any time in effect. In the event Mr. Scoggin's employment terminates because of
death, disability or expiration of his agreement without renewal, he will
receive his base salary through the end of the calendar month of such
termination or non renewal. For fiscal year 1996 and future years under the
agreement, Mr. Scoggin shall be entitled to a bonus comprised of two components
based on audited figures. The first component of the bonus ranges from 0% to 80%
of Mr. Scoggin's base salary for the preceding fiscal year and is based on
earnings before interest and taxes, excluding any profit or loss from the sale
of restaurants or non-recurring items ("EBIT") as part of the budget process of
the Company. The second component of the bonus ranges from 0% to 20% of Mr.
Scoggin's base salary for the preceding fiscal year and is based on a range of
cash flow as part of the budget process of the Company. For fiscal year 1996,
Mr. Scoggin did not receive a bonus. In the event Mr. Scoggin's employment
terminates because of death, disability, terminated without cause, or by
expiration of his agreement without renewal, he will receive his bonus pro-rated
based upon the number of days during the fiscal year he was employed. If his
employment is terminated for cause or Mr. Scoggin resigns, he shall not receive
any bonus for that year.
The Company has entered into an employment agreement (the "employment
agreement") with Stephen J. Kiel, effective September 1, 1996, under which Mr.
Kiel has agreed to serve the Company as Senior Vice President, Chief Financial
Officer and Treasurer for a term commencing upon September 1, 1996, which term
shall automatically extend for successive one-year terms, until September 30,
1999, unless at least ninety (90) days prior to the expiration of the original
or extended term, either party gives notice to terminate the employment
agreement as of the end of the original or then extended term. Under the
agreement, Mr. Kiel is entitled to compensation consisting of (i) a base salary
of $175,000 per annum,
7
<PAGE> 10
and (ii) an annual bonus commencing in the Company's 1996 fiscal year, which, if
earned in accordance with the Company's Corporate Office Incentive Plan, shall
be paid within thirty (30) days of the annual audit of the Company. For fiscal
1996, Mr. Kiel is eligible to receive a pro rata share of any bonus earned to
reflect the number of days worked by him in such year. For fiscal year 1996, Mr.
Kiel did not receive a bonus. Pursuant to such employment agreement, for fiscal
1997 only, if the applicable Corporate Office Incentive Plan does not compensate
Mr. Kiel with at least $75,000 (the "1997 guaranteed minimum bonus"), the
Company agreed to pay Mr. Kiel an additional amount in order that the total
bonus received by him is not less than the 1997 guaranteed minimum bonus. Mr.
Kiel was granted on September 1, 1996 stock options to purchase 50,000 shares of
common stock of the Company. The option shall become exercisable in equal
installments over a three-year period, with the first installment being
exercisable on August 29, 1997. Mr. Kiel is also entitled to receive certain
benefits, including but not limited to medical and dental insurance plans,
disability and life insurance plans, a Company car or a car allowance and
participation in the Company's deferred compensation plan, retirement plan and
stock option and equity incentive plans.
SEVERANCE AGREEMENTS. The Company currently has severance agreements (the
"Severance Agreements") with Daniel R. Scoggin, Chairman, Chief Executive
Officer and President, and Robin L. Moroz, Vice President and General Counsel.
The Severance Agreements provide benefits in the event of a "change in control"
of the Company as defined therein.
Mr. Scoggin's Severance Agreement is contained within his Employment
Agreement, as amended, and provides that he will receive a lump sum payment in
the event that within 24 months after a change of control (i) Mr. Scoggin
terminates employment with the Company for Good Reason (as defined in the
Severance Agreement) within 90 days after the event which constitutes Good
Reason or (ii) Mr. Scoggin's employment with the Company is terminated by the
Company for any reason other than "cause", death or "disability" (such quoted
words as defined in his Employment Agreement). The lump sum payment will be
equal to 2.99 times Mr. Scoggin's highest annual base salary at any time in
effect and the Company shall pay any bonus due Mr. Scoggin in accordance with
his Employment Agreement. In addition, for a period of two years after the
termination date resulting from a change of control, Mr. Scoggin will be
entitled to the benefit of all employee welfare benefit plans and arrangements
in which he is entitled to participate immediately prior to the change of
control (including, without limitation, medical and dental insurance plans,
disability and life insurance plans, and car allowance programs).
The Severance Agreement for Ms. Moroz provides for a bonus (a "Bonus
Payment") to be received within five days after the expiration of a period of
120 days after a change of control of the Company has occurred (the "Stay
Period"), if (i) during the Stay Period her employment is terminated by the
Company for any reason other than cause or (ii) she does not voluntarily
terminate her employment during the Stay Period other than for Good Reason (as
defined in the Severance Agreements). The Bonus Payment will be equal to
one-half of the employee's highest annual base salary at any time on or after
the date of the Severance Agreement. Such Severance Agreement also provides for
an additional payment (a "Severance Payment") to be received, if (i) within 24
months after a change in control of the Company, the employee terminates her
employment with the Company for Good Reason within 90 days after the event which
constitutes Good Reason or (ii) within such 24-month period, the Company
terminates her
8
<PAGE> 11
employment for any reason other than cause. The Severance Payment will be equal
to two times the sum of (i) the employee's highest annual base salary at any
time on or after the date of the Severance Agreement and (ii) the employee's
highest targeted bonus under the Company's incentive bonus plan at any time on
or after the date of the Severance Agreement. In addition, Ms. Moroz will be
entitled for a period of 24 months after the date of termination of employment
to the benefit of all employee welfare benefit plans and arrangements in which
she is entitled to participate immediately prior to the change of control
(including, without limitation, medical and dental insurance plans, disability
and life insurance plans, and car allowance programs).
Each Severance Agreement provides that all outstanding Company Options (as
defined below) shall vest immediately upon a change of control.
Michael R. Jorgensen, former Chief Financial Officer, also had a Severance
Agreement identical to the Severance Agreement for Ms. Moroz. In addition, the
terms of his Severance Agreement were amended in August 1995 to also include one
additional year of his highest annual base salary at any time in effect, if he
used his best efforts to cooperate and assist with any transaction resulting
from a change of control. Michael Jorgensen's agreement became null and void
when he resigned from the Company on August 26, 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1996 each of the following directors served as a member of
the Compensation Committee of the Board of Directors: Messrs. Meachin,
Mistretta, Olson and Beaumont. None of these individuals has served as an
officer or employee of the Company or any of its subsidiaries. Mr. Mistretta,
who is an executive officer of U.S. Industries, Inc., is one of the directors of
the Company designated by JUSI Holdings, Inc. pursuant to the terms of the 1991
Stockholder Agreement (hereinafter defined). See "Certain Relationships and
Related Transactions".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth to the knowledge of the Company certain
information as of December 16, 1996 (unless otherwise noted) with respect to (i)
each person known to the Company to be the beneficial owner of more than five
percent of the outstanding shares of Common Stock; (ii) each director and
nominee for director of the Company, (iii) each of the named executive officers
of the Company, and (iv) all executive officers and directors as a group.
Substantially all of the information set forth in the following table has been
furnished by the persons listed in the table. Unless otherwise indicated, each
person holds sole voting and investment power with respect to shares shown
opposite their name.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership(1) of Class
- -------------------- ----------------------- --------
JUSI Holdings, Inc. 3,632,100 (2) 32.5%
101 Wood Avenue South
Iselin, NJ 08830
9
<PAGE> 12
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership(1) of Class
- -------------------- ----------------------- --------
Wellington Management Company, LLP 905,300 (3) 8.1%
75 State Street
Boston, MA 02109
Dimensional Fund Advisors, Inc. 620,900 (4) 5.6%
1299 Ocean Ave.
Santa Monica, CA 90401
GSB Holdings, Inc. 503,300 (5) 4.5%
One Bethany Road at Rt. 35
Building 6, Suite 94
Hazlet, NJ 07730
Daniel R. Scoggin 63,333 *
John A. Mistretta 16,000 (2) *
Christian R. Guntner 10,000 (2) *
Joseph Schollenberger 3,000 (5) (6) *
James R. Olson 3,000 *
Fred H. Beaumont, Jr. 2,000 *
Allan D. Weingarten 3,000 *
Stephen J. Kiel 0 *
Anthony E. Bezsylko 6,667 *
A. Gerald Leneweaver 6,667 *
David L. Dobbs 0 *
Michael R. Jorgensen 0 *
All executive officers and directors
as a group (14 persons) 149,234 1.3%
- ----------------------------
* Less than 1%
10
<PAGE> 13
(1) Shares not outstanding but deemed beneficially owned by virtue of the right
of an individual to acquire them within 60 days upon the exercise of an
option are treated as outstanding for purposes of determining beneficial
ownership and the percent beneficially owned by such person.
(2) These shares are owned of record by JUSI Holdings, Inc. ("JUSI"), which is
an indirect, wholly-owned subsidiary of U.S. Industries, Inc. ("USI") and
USI may therefore be deemed to own beneficially the shares of common stock
owned by JUSI. The address of JUSI and USI is 101 Wood Avenue South, Iselin,
NJ 08830. These shares are subject to certain restrictions contained in the
Amended 1991 Stockholder Agreement by and between the Company and JUSI (as
assignee from HM Holdings, Inc.) Excludes 503,300 shares of common stock
owned directly by GSB Holdings. See Footnote 5 below. Also excludes any
other shares of common stock that may be beneficially owned by directors,
executive officers and/or employees of USI and its subsidiaries, directly or
through individual employee savings plan accounts. Pursuant to the Amended
1991 Stockholder Agreement, JUSI has two nominees serving on the Company's
Board of Directors, John A. Mistretta and Christian R. Guntner. See "Certain
Relationships and Related Transactions."
(3) Wellington Management Company, LLC, ("WMC") is an investment advisor
registered with the Securities and Exchange Commission under the Investment
Advisers Act of 1940, as amended. As of December 3, 1996 WMC, in its
capacity as investment adviser, may be deemed to have beneficial ownership
of 905,300 shares of Company common stock that are owned by numerous
investment advisory clients, none of which is known to have such interest
with respect to more than five percent of the class. As of December 3, 1996,
WMC had voting power and dispositive power as follows:
Sole Voting Power = 0 Shares
Shared Voting Power = 163,300 Shares
Sole Dispositive Power = 0 Shares
Shared Dispositive Power = 905,300 Shares
(4) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 620,900 shares of Company
common stock as of September 29, 1996, all of which shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company (the "Fund"), or in series of the DFA Investment Trust
Company, a Delaware business trust (the "Trust"), or the DFA Group Trust and
DFA Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
Sole Voting Power = 448,750 Shares*
Shared Voting Power = 0
Sole Dispositive Power = 620,900
Shared Dispositive Power = 0
* Persons who are officers of Dimensional also serve as officers of the Fund
and the Trust, each an open-end management investment company registered
under the Investment Company
11
<PAGE> 14
Act of 1940. In their capacity as officers of the Fund and the Trust, these
persons vote 87,950 additional shares which are owned by the Fund and 84,200
shares which are owned by the Trust (both included in Sole Dispositive Power
above).
(5) GSB Holdings, Inc. ("GSB Holdings"), which is the record holder of 503,300
shares of Company common stock, is engaged principally in the business of
holding investments and is a wholly-owned subsidiary of Great South Beach
Improvement Co. ("GSB Improvement"), a corporation principally engaged in
real estate development. The address of GSB Holdings is One Bethany Road at
Route 15, Building 6, Suite 94, Hazlet, New Jersey 07730. Mr. Clarke is a
director and officer of GSB Holdings and a director, officer and controlling
shareholder of GSB Improvement and may, therefore, be deemed to own
beneficially the shares of common stock owned by GSB Holdings. David H.
Clarke, who is the Chairman of the Board and Chief Executive Officer of USI,
is a director and officer of GSB Holdings and a director, officer and
controlling shareholder of GSB Holdings' parent corporation, GSB
Improvement. Excludes all shares beneficially owned by USI and any shares
that may be beneficially owned by directors, executive officers and/or
employees of USI and its subsidiaries, directly or through individual
employee savings plan accounts, as to which Mr. Clarke and GSB Holdings and
GSB Improvement disclaim beneficial ownership. Also excludes 3,000 shares of
the Company common stock subject to options granted to Mr. Schollenberger, a
director of the Company, who is a Vice President of GSB Holdings, as to
which beneficial ownership is disclaimed.
(6) Excludes 503,300 shares of common stock owned directly by GSB Holdings, as
to which beneficial ownership is disclaimed.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
JUSI AND THE AMENDED CREDIT AGREEMENT. The Amended Credit Agreement
provided that upon delivery by JUSI, to the Company's Lenders of an aggregate of
100,000 shares of the Company's common stock, it shall no longer constitute an
event of default under the Amended Credit Agreement if USI and its affiliates
(i) cease to be the legal and beneficial owners of at least 25% of the
outstanding shares of capital stock of the Company, or (ii) shall fail to have
two nominees serving on the Company's board of directors while USI owns 20% or
more of the capital stock of the Company, and one nominee serving on the
Company's board of directors so long as USI owns 10% or more but less than 20%
of the outstanding capital stock of the Company (the events listed in clauses
(i) and (ii) being hereinafter referred to as the "Prohibited Actions"). On
October 1, 1996, JUSI transferred 100,000 shares of common stock to the Lenders,
whereupon the Prohibited Actions ceased to constitute events of default under
the Amended Credit Agreement.
1991 STOCKHOLDER AGREEMENT. Pursuant to the terms of an Agreement dated
June 5, 1995, between HM Holdings, Inc., a Delaware corporation ("HM Holdings")
and JUSI, HM Holdings assigned and JUSI assumed all of HM Holdings' rights and
obligations under a stockholder agreement, dated as of August 1, 1991 between HM
Holdings and the Company (the "1991 Stockholder Agreement").
12
<PAGE> 15
The 1991 Stockholder Agreement provides for certain rights and restrictions
with respect to JUSI's ownership of the common stock of the Company. Under the
1991 Stockholder Agreement, the Company has agreed that, upon JUSI's request,
the Company will use its best efforts to nominate and cause to be elected to the
Company's Board of Directors two persons designated by JUSI as long as JUSI and
its corporate affiliates beneficially own 20% or more of the outstanding shares
of common stock, and one person designated by JUSI as long as JUSI and its
corporate affiliates beneficially own less than 20% but more than 10% of the
outstanding shares of common stock. Messrs. Mistretta and Guntner are the
current nominees of JUSI serving on the Board of Directors. JUSI has the right
to propose for election and/or to solicit proxies in favor of the election of
any number of directors of the Company, but has advised the Company that it has
no present intention to seek to have additional designees elected to the Board.
The 1991 Stockholder Agreement provides that neither JUSI nor any of its
corporate affiliates will acquire, directly or indirectly, such number of
additional shares of common stock as would result in JUSI and such affiliates
beneficially owning 50% or more of the outstanding shares of common stock
unless, in such acquisition, JUSI and/or such affiliates offer to acquire all
outstanding shares of common stock not held by them upon substantially the same
terms and conditions.
In its original form, the 1991 Stockholder Agreement provided that, except
in certain limited circumstances, so long as JUSI or its affiliates own 20% or
more of the outstanding shares of common stock, so long as JUSI or any such
affiliates seek to sell or otherwise dispose of all or substantially all of the
shares of common stock owned by it to a third party, except as may be otherwise
approved by a majority of the members of the Board of Directors not designated
by JUSI, JUSI or such affiliate would use it best efforts to cause such third
party to offer to purchase all other outstanding shares of common stock upon
substantially the same terms and conditions. The 1991 Stockholder Agreement
provided that, if such third party fails to make such offer, JUSI or such
affiliates would not so sell or otherwise dispose of such shares unless such
third party agrees to be subject to the same limitation on its ability to sell
and to the requirements applicable to JUSI with respect to the acquisition of
50% or more of the outstanding shares of common stock. In addition, in the 1991
Stockholders Agreement the Company agreed that, if at any time when JUSI or its
affiliates own 25% or more of the outstanding shares of common stock, the
Company shall propose to sell any shares of common stock or any warrants or
rights therefor or securities convertible into or exchangeable therefor, to any
person or entity other than JUSI or its affiliates, it shall give JUSI the
opportunity to purchase such number of shares or other securities as will permit
JUSI and its corporate affiliates to retain their percentage of the Company's
voting power. All of the restrictions placed on JUSI which are set forth above
in this paragraph, were eliminated in connection with the execution of the
Amended 1991 Stockholders Agreement (described below).
Pursuant to the 1991 Stockholder Agreement, the Company also agreed that,
so long as JUSI owns 5% or more of the outstanding shares of common stock, upon
JUSI's request, the Company will cause up to four registration statements to be
filed with the Commission in order to permit JUSI or a corporate affiliate to
sell all or a portion of its shares of common stock. In addition the Company
agreed, if requested, to include some or all shares of common stock owned by
JUSI or an affiliate in any registration statement it otherwise files (other
than registration statements relating to employee stock options). The Company
and JUSI also agreed to indemnify each other for certain liabilities that may
arise in connection with any such registration statement. On September 30, 1996,
JUSI exercised one of its demand registration rights by giving written
13
<PAGE> 16
notice to the Company to register its Shares. The Company intends to register
the shares of common stock beneficially owned by JUSI, GSB Holdings and the
Lenders.
AMENDMENT OF 1991 STOCKHOLDER AGREEMENT. In connection with the execution
of the Amended Credit Agreement, the Company and JUSI entered into an Amendment,
dated as of September 12, 1996, to the 1991 Stockholder Agreement (the "Amended
1991 Stockholder Agreement), providing, among other things, that upon delivery
by JUSI to the Lenders of the 100,000 shares of common stock of the Company
described above, (x) JUSI would no longer be restricted from engaging in any of
the Prohibited Actions, (y) the restrictions relating to the sale, transfer or
disposal of the shares of common stock held by JUSI, and certain of its
affiliates described above, would lapse, and (z) JUSI consented to the Company
entering into the Lenders Registration Rights Agreement with the Lenders and
agreed that the number of shares that JUSI would otherwise be entitled to sell
pursuant to its demand registration rights may be reduced, in certain
circumstances, if any of the Lenders exercised their "piggy-back" registration
rights.
1991 REGISTRATION RIGHTS AGREEMENT WITH GSB HOLDINGS. GSB Holdings, Inc.
("GSB Holdings") and the Company are parties to a Registration Rights Agreement,
dated as of August 20, 1991 (the "GSB Registration Rights Agreement"), which
allows GSB Holdings certain "piggyback" registration rights with respect to its
shares of common stock. The Company agreed, if requested, to include no less
than 50,000 shares of common stock owned by GSB Holdings in any registration
statement it otherwise files (other than registration statements relating to
employee stock options). On November 11, 1996, GSB exercised its piggy back
registration rights by delivering written notice to the Company to register its
shares. GSB Holdings agreed to observe the same lock-ups with regard to the sale
of the shares of common stock owned by it as the Company agrees to, if any, in
connection with such registration statement if so requested by the managing
underwriter. The Company and GSB Holdings also agreed to indemnify each other
for certain liabilities that may arise in connection with any such registration
statement.
14
<PAGE> 17
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Amendment
to Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 24th day of January, 1997.
GROUND ROUND RESTAURANTS, INC.
(Registrant)
By: /s/ Stephen J. Kiel
--------------------------------------
Stephen J. Kiel
Senior Vice President, Chief Financial
Officer and Treasurer
(Principal Financial and Accounting Officer)
<TABLE>
Pursuant to the requirement of the Securities Exchange Act of 1934, as amended, this report has
been signed below by the following persons on behalf of the Registrant in the capacities and on the
dates indicated.
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Daniel R. Scoggin Chairman of the Board, President, January 24, 1997
- -------------------------------- and Chief Executive Officer
Daniel R. Scoggin
/s/ Stephen J. Kiel Senior Vice President, Chief Financial January 24, 1997
- -------------------------------- Officer and Treasurer
Stephen J. Kiel (Principal Financial and
Accounting Officer)
/s/ Christian R. Guntner Director January 24, 1997
- --------------------------------
Christian R. Guntner
/s/ John A. Mistretta Director January 24, 1997
- --------------------------------
John A. Mistretta
/s/ James R. Olson Director January 24, 1997
- --------------------------------
James R. Olson
/s/ Joseph Schollenberger Director January 24, 1997
- --------------------------------
Joseph Schollenberger
/s/ Fred H. Beaumont, Jr. Director January 24, 1997
- --------------------------------
Fred H. Beaumont, Jr.
/s/ Allan D. Weingarten Director January 24, 1997
- --------------------------------
Allan D. Weingarten
</TABLE>
15
