SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment No. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE MARCUS CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
Common Stock, $1 par value, of The Marcus Corporation; and Class
B Common Stock, $1 par value, of The Marcus Corporation.
2) Aggregate number of securities to which transaction applies:
425,959 shares of Common Stock and 299,547 shares of Class B
Common Stock. See Exhibit A attached hereto.
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined): See Exhibit A attached hereto.
4) Proposed maximum aggregate value of transaction: $18,319,026.50
5) Total fee paid: ______________
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
<PAGE>
THE MARCUS CORPORATION
[LOGO]
250 East Wisconsin Avenue, Suite 1700
Milwaukee, Wisconsin 53202-4220
______________________________________
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
To Be Held September 29, 1997
_____________________________________
To the Shareholders of
THE MARCUS CORPORATION:
NOTICE IS HEREBY GIVEN THAT the 1997 Annual Meeting of
Shareholders of THE MARCUS CORPORATION ("Company") will be held on Monday,
September 29, 1997 at 10:00 A.M., local time, at The Pfister Hotel, 424
East Wisconsin Avenue, Milwaukee, Wisconsin, for the following purposes:
1. To elect eight directors for the ensuing year.
2. To consider and act upon a proposal to approve and ratify the
Agreement and Plan of Reorganization dated June 30, 1997,
between The Marcus Corporation and Guest House Inn, Inc.
("GHI"), which provides for the issuance of (a) approximately
425,959 shares of Common Stock to GHI (based on the closing sale
price of the Company's Common Stock on the New York Stock
Exchange on May 29, 1997 and subject to adjustment), in exchange
for all of the real estate and operating assets owned by GHI
(net of the book value of GHI's assumed stated liabilities) and
(b) 299,547 new shares of Class B Common Stock to GHI in
exchange for and cancellation of the existing 299,547 shares of
Class B Common Stock owned by GHI, and to amend the Company's
Articles of Incorporation to permit the one-time issuance of
299,547 new shares of Class B Common Stock in exchange for and
cancellation of the 299,547 existing shares of Class B Common
Stock owned by GHI.
3. To consider and act upon a proposal to amend the Company's
Articles of Incorporation to increase the number of authorized
shares of Common Stock from 30,000,000 to 50,000,000 and the
number of authorized shares of Class B Common Stock from
20,000,000 to 33,000,000.
4. To consider and act upon any other business which may be
properly brought before the meeting or any adjournment thereof.
Only holders of record of the Common Stock and Class B Common
Stock as of the close of business on August 8, 1997 will be entitled to
notice of, and to vote at, the meeting and any adjournment thereof.
Shareholders may vote in person or by proxy. The holders of Common Stock
will be entitled to one vote per share and the holders of Class B Common
Stock will be entitled to ten votes per share on each matter submitted for
shareholder consideration.
Shareholders are cordially invited to attend the meeting in
person. Even if you expect to attend the meeting in person, to help
ensure your vote is represented at the meeting please complete, sign, date
and return in the enclosed postage paid return envelope the accompanying
proxy which is being solicited by the Board of Directors. You may revoke
your proxy at any time before it is actually voted by notice in writing to
the undersigned or by voting in person at the meeting.
Accompanying this Notice of 1997 Annual Meeting of Shareholders
is a form of proxy and Proxy Statement.
On Behalf of the Board of Directors
Thomas F. Kissinger
General Counsel and Secretary
Milwaukee, Wisconsin
August 22, 1997
<PAGE>
THE MARCUS CORPORATION
[LOGO]
__________________________
PROXY STATEMENT
__________________________
For
1997 Annual Meeting of Shareholders
To be Held September 29, 1997
This Proxy Statement and accompanying form of proxy are being
furnished to the shareholders of THE MARCUS CORPORATION ("Company")
beginning on or about August 22, 1997 in connection with the solicitation
of proxies by the Board of Directors of the Company ("Board") for use at
the Company's 1997 Annual Meeting of Shareholders to be held on Monday,
September 29, 1997 at 10:00 A.M., local time, at the Pfister Hotel, 424
East Wisconsin Avenue, Milwaukee, Wisconsin, and at any adjournment
thereof (collectively, "Meeting"), for the purposes set forth in the
attached Notice of 1997 Annual Meeting of Shareholders and as described
herein.
Execution of a proxy given in response to this solicitation will
not affect a shareholder's right to attend the Meeting and to vote in
person. Presence at the Meeting of a shareholder who has signed a proxy
does not in itself revoke a proxy. Any shareholder giving a proxy may
revoke it at any time before it is exercised by giving notice thereof to
the Company's Secretary in writing, by notifying the appropriate personnel
at the Meeting in writing or by voting in person at the Meeting. Unless
so revoked, the shares represented by proxies received by the Board will
be voted at the Meeting in accordance with the instructions thereon. If
no instructions are specified on the proxy, the votes represented thereby
will be voted (i) FOR the Board's eight director nominees set forth below;
(ii) FOR the approval of the Agreement and Plan of Reorganization dated
June 30, 1997 between the Company and Guest House Inn, Inc. and the
associated amendment to the Company's Articles of Incorporation permitting
the one-time issuance of 299,547 new shares of Class B Common Stock in
exchange for and cancellation of the 299,547 existing shares of Class B
Common Stock owned by GHI; (iii) FOR the amendment to the Company's
Articles of Incorporation increasing the number of authorized shares of
Common Stock and Class B Common Stock; and (iv) on such other shareholder
matters which may properly come before the Meeting in accordance with the
best judgment of the persons named as proxies.
Only holders of record of shares of Common Stock ("Common
Shares") and Class B Common Stock ("Class B Shares") as of the close of
business on August 8, 1997 ("Record Date") are entitled to vote at the
Meeting. As of the Record Date, the Company had outstanding and entitled
to vote 11,240,376 Common Shares and 8,504,252 Class B Shares. The record
holder of each outstanding Common Share on the Record Date is entitled to
one vote per share and the record holder of each outstanding Class B Share
on the Record Date is entitled to ten votes per share on each matter
submitted for shareholder consideration at the Meeting. The holders of
Common Shares and the holders of Class B Shares will vote together as a
single class on the election of directors at the Meeting, but will vote
both as separate classes and together as one class on approval of the
proposed transaction between the Company and Guest House Inn, Inc. and the
associated amendment to the Company's Articles of Incorporation, as well
as on the proposal to amend the Company's Articles of Incorporation to
increase the number of authorized Common Shares and Class B Shares. The
total number of votes represented by outstanding Common Shares and Class B
Shares as of the Record Date was 96,282,896, consisting of 11,240,376
votes represented by outstanding Common Shares and 85,042,520 votes
represented by outstanding Class B Shares.
__________
* Note to Printer: This is Page 1 (but do not mark as such).
<PAGE>
ELECTION OF DIRECTORS
At the Meeting, the Company's shareholders will elect eight
directors of the Company, constituting the entire Board, to hold office
until the Company's 1998 annual meeting of shareholders and until their
successors are duly qualified and elected. If, prior to the Meeting, any
of the Board's nominees should for any reason become unable to serve as a
director, the votes represented by proxies granting authority to vote for
all of the nominees named below, or which do not contain any instructions,
will be voted for another replacement nominee selected by the Board.
Under Wisconsin law, directors are elected by a plurality of the votes
cast by the shares entitled to vote in the election, assuming a quorum is
present. For this purpose, "plurality" means that the individuals
receiving the largest number of votes are elected as directors, up to the
maximum number of directors to be chosen at the election. Therefore, any
shares which are not voted on this matter at the Meeting, whether by
abstention, broker nonvote or otherwise, will have no effect on the
election of directors at the Meeting.
All of the nominees are shareholder-elected directors of the
Company and have served continuously as directors since the indicated date
of their election, except for Ulice Payne, Jr. and Philip L. Milstein, who
were appointed as directors of the Company by the Board on December 18,
1996. The names of the nominees, together with certain information about
each of them as of the Record Date, are set forth below.
The Company's By-laws provide that a non-employee director may
not stand for re-election if he or she has then attained the age of 70.
As a result, George R. Slater, Lee Sherman Dreyfus and John L. Murray will
not stand for re-election to, and will retire from, the Board at the
Meeting. The Company expresses its most sincere thanks and appreciation
to Messrs. Slater, Dreyfus and Murray for their many years of service to
the Company and for their valued advice and guidance.
<TABLE>
<CAPTION>
Director
Name Current Principal Occupation Age Since
<s? <C> <C> <C>
[*] Stephen H. Marcus Chairman of the Board, President and Chief 62 1969
Executive Officer of the Company (1)(2)(3)
[*] Diane Marcus Gershowitz Real estate management and investments 58 1985
(1)(3)
[*] Daniel F. McKeithan, Jr. President and Chief Executive Officer of 61 1985
Tamarack Petroleum (operator of oil and gas
wells) and President and Chief Executive
Officer of Active Investor Management, Inc.
(operator of oil and gas wells)(4)
[*] Allan H. Selig President and Chief Executive Officer of 62 1995
the Milwaukee Brewers Baseball Club
(professional baseball team), Acting
Commissioner of Major League Baseball and
President and Chief Executive Officer of
Selig Executive Leasing Co., Inc.
(automobile leasing agency) (5)
[*] Timothy E. Hoeksema President of Midwest Express Airlines, Inc. 50 1995
(commercial airline carrier)
[*] Bruce J. Olson Group Vice President of the Company (2) 47 1996
[*] Ulice Payne, Jr. Shareholder of Reinhart, Boerner, Van 41 1996
Dueren, Norris & Rieselbach, S.C. (law
firm)
[*] Philip L. Milstein President and Chief Executive Officer of 47 1996
Emigrant Savings Bank (savings bank) and
President and Executive Vice President of
Milford Management Corp. (real estate
development and management)
_________________
(1) Stephen H. Marcus and Diane Marcus Gershowitz are brother and sister.
(2) Since the Company operates as a holding company through subsidiary
corporations, Stephen H. Marcus and Bruce J. Olson are also officers
of certain of the Company's principal operating subsidiaries.
(3) As a result of their beneficial ownership of Common Shares and Class
B Shares, Stephen H. Marcus and/or Diane Marcus Gershowitz may be
deemed to control, or share in the control of, the Company. See
"Stock Ownership of Management and Others."
(4) Daniel F. McKeithan, Jr. is a director of Firstar Corporation,
Wisconsin Gas Company and WICOR, Inc. and is a trustee of The
Northwestern Mutual Life Insurance Company ("NML"). NML is also one
of the Company's principal lenders.
(5) Allan H. Selig is a director of Oil-Dri Corporation of America and
Robert W. Baird & Co., Incorporated.
</TABLE>
The Board has an Audit Committee whose principal function is
to recommend annually a firm of independent certified public accountants
to serve as the Company's auditor, to meet with and review reports of the
Company's auditor and to recommend to the Board such actions within the
scope of its authority as it deems appropriate. The Audit Committee
consists entirely of independent directors. During fiscal 1997, the Audit
Committee consisted of Daniel F. McKeithan, Jr. (Chairman), Timothy E.
Hoeksema and Lee Sherman Dreyfus. The Audit Committee met one time in
fiscal 1997.
The Board has a Compensation and Nominating Committee whose
principal function is to recommend for approval to the Board the
compensation, bonuses and benefits of officers and other key employees of
the Company and its subsidiaries and to administer the Company's 1995
Equity Incentive Plan. See "Executive Compensation -- Stock Options."
The Compensation and Nominating Committee is also vested with authority to
consider and nominate future directors of the Company. Shareholders
entitled to vote at the Meeting who wish to propose director nominees for
consideration at the Meeting may do so under the Company's By-laws only by
giving written notice of an intent to make such a nomination to the
Secretary of the Company not less than 15 days in advance of the Meeting.
Such notice must specify, among other things, the nominee's name,
biographical data and qualifications. The Compensation and Nominating
Committee consists of entirely independent directors. During fiscal 1997,
the Compensation and Nominating Committee consisted of John L. Murray
(Chairman), Daniel F. McKeithan, Jr. and Allan H. Selig. The Compensation
and Nominating Committee met two times in fiscal 1997. See "Executive
Compensation -- Report on Executive Compensation."
During the Company's 1997 fiscal year, four meetings of the
Board were held. No director attended fewer than 75% of the meetings of
the Board and committees thereof on which he or she served held during
fiscal 1997.
STOCK OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth information as of the Record Date
as to the Common Shares and Class B Shares beneficially owned by (i) each
continuing director of the Company; (ii) each executive officer named in
the Summary Compensation Table set forth below under "Executive
Compensation -- Summary Compensation;" (iii) all continuing directors and
named executive officers of the Company as a group; and (iv) all other
persons or entities known by the Company to be the beneficial owner of
more than 5% of either class of the Company's outstanding capital stock.
A row for Class B Share ownership is not included for individuals or
entities who do not beneficially own any Class B Shares.
<TABLE>
<CAPTION>
Total Share Ownership Percentage of
Sole Voting Shared Voting and and Percentage of Aggregate
Name of Individual or and Investment Investment Power(1) Class(1) Voting
Group/Class of Stock Power(1) Power(1)
Continuing Directors and Named Executive Officers
<S> <C> <C> <C> <C>
Stephen H. Marcus(2)
Common Shares 1,857(3) 149,516 151,373(3)
(1.3%) 32.4%
Class B Shares 1,770,316 1,335,010 3,105,326
(36.5%)
Diane Marcus Gershowitz(2)
Common Shares 3,250(4) 100 3,350(4)
* 23.4%
Class B Shares 1,320,612 936,686 2,257,298
(26.5%)
Daniel F. McKeithan, Jr.
Common Shares 4,750(4) -0- 4,750(4)
* *
Allan H. Selig
Common Shares 3,400(4) -0- 3,400(4)
* *
Timothy E. Hoeksema
Common Shares 3,250(4) -0- 3,250(4)
* *
Bruce J. Olson
Common Shares 54,161(3)(5) 21,840 76,001(3)(5)
* *
Ulice Payne, Jr.
Common Shares 1,500(4) -0- 1,500(4)
* *
Philip L. Milstein
Common Shares 32,077(4)(7) -0- 32,077(4)(7)
* *
Class B Shares 26,401 41,370 67,771
*
H. Fred Delmenhorst
Common Shares 19,444(3)(5) 3,363 22,807(3)(5)
* *
Thomas F. Kissinger
Common Shares 8,177(3)(5)(6) -0- 8,177(6)
* *
Douglas A. Neis
Common Shares 13,397(3)(5) 4,278 17,675(3)(5)
* *
All continuing directors and
named executive officers as a
group (11 persons)(8)
Common Shares(9) 145,263(3) 179,097 324,360(3)
(2.9%) 49.2%
Class B Shares 3,117,329 1,590,333 4,707,662
(55.4%)
Other Five Percent Shareholders
Ben Marcus(2)
Common Shares 910 -0- 910
* 33.8%
Class B Shares -0- 3,252,332 3,252,332
(38.2%)
Bamco, Inc.(10)
Common Shares(11) 574,900 -0- 574,900 *
(5.1%)
Vanguard Explorer Fund,
Inc.(12)
Common Shares(13) 600,000 -0- 600,000 *
(5.3%)
__________________
* Less than 1%.
(1) There are included in some cases shares over which a person has or shares voting power and/or investment power, as to
which beneficial ownership may be disclaimed. The number of Class B Shares (included in the beneficial ownership figures
detailed above) set forth after each of the following individuals has also been included in the beneficial ownership of
at least one other director: Stephen H. Marcus (722,733), Diane Marcus Gershowitz (722,733) and Ben Marcus (299,547).
The outstanding Class B Shares are convertible on a share-for-share basis into Common Shares at any time at the
discretion of each holder. As a result, a holder of Class B Shares is deemed to beneficially own an equal number of
Common Shares. However, in order to avoid overstatement of the aggregate beneficial ownership of both classes of the
Company's outstanding capital stock, the Common Shares listed in the table do not include Common Shares which may be
acquired upon the conversion of outstanding Class B Shares. Similarly, the percentage of outstanding Common Shares
beneficially owned is determined with respect to the total number of outstanding Common Shares, excluding Common Shares
which may be issued upon conversion of outstanding Class B Shares. Additionally, the number of Common Shares listed does
not include Common Shares issuable in connection with the proposed transaction between the Company and Guest House Inn,
Inc. If such transaction is approved by shareholders at the Meeting, based on the closing sale price of $24.50 of the
Common Shares at May 29, 1997, the following number of additional Common Shares set forth after the name of each of the
following individuals would be issued to or for the beneficial account of Stephen H. Marcus (106,490), Diane Marcus
Gershowitz (53,245), and Ben Marcus (212,979). The actual number of shares issuable will be based on the average closing
sales price of the Common Shares on the New York Stock Exchange over the 30 trading days ending five days before the
closing date of the transaction and the net asset value of Guest House Inn, Inc. on the closing date. Beneficial
ownership of Class B Shares will not be effected by the Guest House Inn transaction. See "Approval of Guest House Inn
Transaction."
(2) The address of Stephen H. Marcus, Diane Marcus Gershowitz and Ben Marcus is c/o 250 East Wisconsin Avenue, Suite 1700,
Milwaukee, Wisconsin 53202-4220.
(3) Includes 1,707, 1,527, 887, 210 and 572 Common Shares held for the respective accounts of Stephen H. Marcus, Bruce J.
Olson, H. Fred Delmenhorst, Thomas F. Kissinger and Douglas A. Neis and all continuing directors and named executive
officers as a group in the Company's Pension Plus Plan as of May 29, 1997, the latest practicable date for which such
data is available. See "Executive Compensation -- Summary Compensation Information."
(4) Includes 3,250 Common Shares subject to acquisition by each of Diane Marcus Gershowitz, Daniel F. McKeithan, Jr., Allan
H. Selig and Timothy E. Hoeksema and 1,500 Common Shares subject to acquisition by each of Ulice Payne, Jr. and Philip L.
Milstein pursuant to the exercise of vested stock options held on the Record Date pursuant to the 1994 Nonemployee
Director Stock Option Plan. See "Director Compensation."
(5) Includes 29,250, 12,825, 7,800 and 12,825 Common Shares subject to acquisition by Bruce J. Olson, H. Fred Delmenhorst,
Thomas F. Kissinger and Douglas A. Neis, respectively, pursuant to the exercise of vested stock options held on the
Record Date pursuant to the 1987 Stock Option Plan and 1995 Equity Incentive Plan. See "Executive Compensation -- Stock
Options."
(6) Includes 17 Common Shares held in the Company's Dividend Reinvestment and Associate Stock Purchase Plan.
(7) Total does not include 3,750 Common Shares in the AB Elbaum Trust in which Mr. Milstein is co-trustee and 5,400 Common
Shares held by Mr. Milstein's children, as to which Mr. Milstein disclaims beneficial ownership.
(8) In determining the aggregate beneficial ownership of Common Shares and Class B Shares for all continuing directors and
named executive officers as a group, shares which are beneficially owned by more than one director or officer have been
counted only once to avoid overstatement. Additionally, such aggregate beneficial ownership does not include additional
Common Shares issuable in connection with the proposed transaction between the Company and Guest House Inn, Inc. The
issuance of such additional shares will not materially increase the relative beneficial ownership or voting control of
the Company held by Stephen H. Marcus, Ben Marcus or Diane Marcus Gershowitz. See footnote (1).
(9) Includes 78,700 Common Shares subject to acquisition pursuant to the exercise of vested stock options held by named
executive officers and continuing nonemployee directors of the Company on the Record Date pursuant to the 1987 Stock
Option Plan, 1995 Equity Incentive Plan and the 1994 Nonemployee Director Stock Option Plan. See "Executive
Compensation--Stock Options."
(10) The address of Bamco, Inc. ("Bamco") is 767 Fifth Avenue, 24th Floor, New York, New York 10153.
(11) Other than share ownership percentage information, the information set forth is as of February 7, 1997, as reported by
Bamco in its Schedule 13G filed with the SEC and the Company. According to such Schedule 13G, Bamco owns 525,000 Common
Shares and Baron Capital Management, Inc. ("BCM") owns 49,000 Common Shares. Bamco and BCM filed the Schedule 13G as a
group.
(12) The address of Vanguard Explorer Fund, Inc. ("Vanguard") is P.O. Box 2600, Valley Forge, Pennsylvania 19482-2600.
(13) Other than share ownership percentage information, the information set forth is as of February 10, 1997, as reported by
Vanguard in its Schedule 13G filed with the SEC and the Company.
</TABLE>
EXECUTIVE COMPENSATION\
Report on Executive Compensation
The Company strives to provide fair and competitive compensation
which rewards corporate and individual performance and helps attract,
retain and motivate highly qualified individuals who contribute to the
Company's long-term growth and success. One of the Company's guiding
philosophies is to encourage its executives and other employees to take
appropriate market responsive risk-taking actions which facilitate the
growth and success of the Company. The Company's compensation policies
attempt to encourage the continuation of this entrepreneurial spirit.
The Compensation and Nominating Committee of the Board
("Committee") is responsible for evaluating and determining the
compensation of the Company's executive officers, including the Company's
Chief Executive Officer Stephen H. Marcus, in accordance with the
foregoing philosophies and policies. The Committee is composed entirely
of independent, nonemployee directors. Executive officer compensation
consists of base salary, annual bonus payments, stock option grants and
other benefits under the Company's several employee benefit plans.
Each executive officer's base salary has been established based
on the level of responsibilities delegated to the executive and the
relationship of such responsibilities to those of other Company executive
officers. In evaluating and adjusting base salaries of executives (other
than Mr. Marcus) from year-to-year, the Committee acts on the
recommendations of Mr. Marcus, who in making his recommendations takes
into account (i) the financial performance of the Company as a whole and
on a divisional basis, when appropriate, for the fiscal year then ended,
compared to its respective historical and anticipated performance; (ii)
general economic conditions (including inflationary factors) and the
impact such conditions had on the industry segments in which the Company
operates; (iii) each executive officer's past, and anticipated future,
contributions to the Company's performance; (iv) each executive officer's
existing base salary compared to the range of the base salaries of
similarly situated executives at both the national and local level; (v)
any new responsibilities delegated, or to be delegated, to such officer;
and (vi) the extent of participation of the executive in any significant
corporate achievements over the prior fiscal year. In evaluating and
adjusting Mr. Marcus' base salary, the Committee subjectively considers
the same factors cited above, as well as the comparative salaries and
total compensation packages of other chief executive officers, with
particular reference to local market circumstances. In determining the
adjustment to Mr. Marcus' base salary for fiscal 1998, the Committee
specifically took into account the Company's revenue and earnings
performance for fiscal 1997 and the Company's long-term record of
financial success.
Bonus awards attributable to each fiscal year are granted by the
Committee to the named executive officers, including Mr. Marcus,
subsequent to the fiscal year-end. Fiscal 1997 bonus awards for the named
executive officers who have no direct operational responsibilities were
based on the recommendations of Mr. Marcus, who made his recommendations
based on the Company's overall financial performance for the year then
ended and such officer's individual contributions and achievements over
fiscal 1997, particularly as such contributions and achievements related
to advancing the Company's entrepreneurial philosophy. Specific corporate
performance factors considered in making fiscal 1997 bonus determinations
for such executives were the contribution that each executive made to his
specific functional area and overall Company performance, the Company's
15.7% increase in revenues and 12.3% increase in comparable earnings and
earnings per share in fiscal 1997, all compared to fiscal 1996. The
fiscal 1997 bonus award for Bruce J. Olson, who has direct managerial
responsibilities for two operating divisions of the Company, was
determined based on the financial and operating performance of those
divisions, together with the over-all financial performance of the Company
in fiscal 1997. Mr. Marcus received a fiscal 1997 bonus payment based on
a pre-established formula which provides for his receipt of a performance
bonus equal to three-fourths of one percent of the Company's pre-tax
earnings for the fiscal year.
Stock options are granted each year by the Committee to selected
executive officers as part of such officers' compensation package.
Options granted by the Committee have a per share exercise price equal to
100% of the fair market value of the Common Shares on the date of grant.
Therefore, since the economic value of each option is directly dependent
upon future increases in the value of the Common Shares, the Committee
believes option grants help to better align the interests of option
recipients with the economic interests of the Company's shareholders. The
Committee believes stock option grants provide a long-term incentive for
option recipients to improve the Company's financial performance and, in
turn, its stock price. The Committee has the flexibility to grant other
types of equity-based incentive awards (including stock appreciation
rights, restricted stock and performance shares) in addition to stock
options in accordance with the 1995 Equity Incentive Plan. Mr. Marcus is
not eligible to receive option grants or other awards under the Company's
1987 Stock Option Plan or the 1995 Equity Incentive Plan. Since Mr.
Marcus and his family own approximately 39.2% of the outstanding Common
Shares and Class B Shares, his economic interests are directly linked to
the price performance of the Company's Common Shares. Therefore, at the
time the Company's 1987 Stock Option Plan and 1995 Equity Incentive Plan
was adopted, it was determined unnecessary to provide Mr. Marcus with the
opportunity to receive stock option grants.
Consistent with the Company's philosophy of encouraging
entrepreneurism throughout the organization, the Committee grants options
annually to a broad number of key employees. Option grants in fiscal 1997
to key employees other than the named executive officers constituted 84.5%
of all non-Board option grants. The size of option grants to the named
executive officers is based on (i) each officer's length of service and
relative responsibilities and contributions to the Company's performance
over the past year; (ii) the officer's anticipated future contributions to
the success of the Company; (iii) historical levels of option grants to,
and the level of existing stock ownership of, such officer and other
executive officers; and (iv) the relative levels of option grants then
being made to all employees and other executive officers.
The Committee also attempts to provide other competitive
compensatory benefits to the Company's executive officers, including
participation in the Company's Pension Plus Plan, nonqualified retirement
income plan, employee stock purchase plan, nonqualified deferred
compensation plan, health insurance, life and disability insurance and
other benefits.
The Company's cash compensation program for its managers is
designed to reward an entrepreneurial orientation on the part of such
managers. In addition to the need for such reinforcement, the Company
also recognizes that long-term service and loyalty are of strategic value
to the continued continuity of management which is necessary for the
growth of the Company. For this reason, the Company has introduced an
incentive stock option program for unit and multi-unit managers based on
length of service.
As a result of current executive compensation levels, the
Committee does not intend currently to take any action to conform its
compensation plans to comply with the regulations proposed under Internal
Revenue Code Section 162(m) relating to the $1 million cap on executive
compensation deductibility imposed by the Omnibus Revenue Reconciliation
Act of 1993.
By the Compensation and Nominating Committee:
John L. Murray, Chairman
Timothy E. Hoeksema
Allan H. Selig
Summary Compensation Information
The following table sets forth certain information concerning
compensation paid by the Company for the last three fiscal years to the
Company's Chief Executive Officer and the other executive officers of the
Company who earned over $100,000 in salary and bonuses in fiscal 1997.
The persons named in the table below are hereinafter sometimes referred to
as the "named executive officers."
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation
Stock Option
Name and Principal Fiscal Grants(4) All Other
Positions Year Salary(1) Bonus(2) Other(3) (shares) Compensation(5)
<S> <C> <C> <C> <C> <C> <C>
Stephen H. Marcus 1997 $378,461 $398,868 $ -- N/A $6,912(6)
Chairman of the Board, 1996 $341,538 $545,568 $ -- N/A $8,934(6)
President and Chief 1995 $296,154 $313,391 $ 500 N/A $4,856(6)
Executive Officer (3)
Bruce J. Olson 1997 $218,462 $256,046 $ -- 5,000 $5,091
Group Vice President 1996 $205,962 $258,335 $ -- 7,500 $3,732
1995 $183,269 $ 97,923 $ -- 7,500 $3,260
H. Fred Delmenhorst 1997 $124,231 $ 18,500 $ -- 2,500 $4,289
Vice President-Human 1996 $118,500 $ 16,000 $ -- 3,000 $2,612
Resources 1995 $106,192 $ 14,000 $ -- 3,000 $2,608
Thomas F. Kissinger 1997 $123,231 $ 30,000 $ -- 2,500 $1,820
General Counsel and 1996 $104,538 $ 25,000 $ -- 3,000 $ 949
Secretary 1995 $ 90,346 $ 15,000 $ -- 3,000 $ 66
Douglas A. Neis 1997 $ 99,308 $ 17,500 $ -- 2,000 $2,034
Chief Financial Officer 1996 $ 93,808 $ 45,000 $ -- 3,000 $1,480
and Treasurer 1995 $ 84,420 $ 10,000 $ -- 3,000 $1,115
_________________
(1) Includes amounts deferred by the Company at the election of the
named executive officer under Section 401(k) of the Internal
Revenue Code and the Company's Deferred Compensation Plan. The
Company's Deferred Compensation Plan is a defined contribution
program whereby an eligible employee may voluntarily make an
irrevocable election to defer receipt of up to 100% of the
employee's annual compensation on a pre-tax basis. The
irrevocable election must be made prior to the start of any
calendar year to which it applies and must specify both a
benefit payment commencement date beyond the end of the last
such calendar year and the form of payment (i.e., lump sum,
periodic installments or monthly annuity). During the period of
deferral, the Company quarterly applies to the deferred amount
an earnings credit equal to the average prime interest rate of a
designated Milwaukee bank. The benefits payable under the
Deferred Compensation Plan (i.e., the employee's deferred
amounts plus his earnings credits) will be paid out of the
Company's general corporate assets as benefit payments become
due after the employee's specified commencement date.
(2) The bonus amounts listed for fiscal 1996 for Messrs. Olson and
Neis include a special bonus of $135,000 and $30,000,
respectively, in each case as a result of such officer's
integral involvement in consummation of the successful sale of
the Company's Applebee's restaurants and related rights. Bonus
amounts listed relate to the fiscal year to which such bonuses
are attributable.
(3) Includes for Mr. Marcus the amount of directors' fees he earned
in fiscal 1995. Mr. Marcus, as an executive officer of the
Company, is no longer entitled to receive director fees. See
"Director and Director Emeritus Compensation" below. The value
of all perquisites and other personal benefits provided to each
named executive officer by or on behalf of the Company is
significantly less than the required Securities and Exchange
Commission reporting thresholds of the lesser of $50,000 or 10%
of the annual salary and bonus reported for each respective
named executive officer.
(4) Fiscal 1995, 1996 and 1997 options were granted at 100% of fair
market value on the date of grant under the Company's 1987 Stock
Option Plan and the 1995 Equity Incentive Plan. See footnote
(1) to the table set forth under "Stock Options -- Option Grants
in 1997 Fiscal Year" below for additional information.
(5) Includes the Company's contributions on behalf of each named
executive officer to its defined contribution Pension Plus Plan
and the dollar value of imputed life insurance premiums paid by,
or on behalf of, the Company during the fiscal year with respect
to term life insurance for the benefit of the named executive
officer. The Pension Plus Plan is a profit sharing plan with
Internal Revenue Code Section 401(k) features and covers all
eligible employees of the Company and its subsidiaries,
including the named executive officers, and uses a participating
employee's aggregate direct compensation as the basis for
determining the employee and employer contributions that are
allocated to the employee's account under the Pension Plus Plan.
A participating employee may elect to make pre-tax deposits of
up to 14% of the employee's annual compensation. The Pension
Plus Plan also provides for three types of employer
contributions: (i) a basic contribution equal to 1% of a
participating employee's annual compensation; (ii) a matching
contribution equal to one-fourth of the employee's pre-tax
deposits not exceeding 6% of such annual compensation; and (iii)
a discretionary profit performance contribution determined by
the Board each year. For purposes of the profit performance
contribution, the Company and its subsidiaries have been divided
into eight profit sharing groups, and the profit performance
contribution for the participating employees employed by a
particular profit sharing group is dependent upon the Company's
overall operations meeting profitability targets, the Company
having achieved a positive return on shareholders' equity and
that profit sharing group's operating performance having been
profitable. A participating employee's share of the annual
profit performance contribution, if any, for the employee's
profit sharing group is determined by multiplying the
contribution amount by the ratio of the participating employee's
annual compensation to the aggregate annual compensation of all
participating employees in that profit sharing group. The
employee's pre-tax savings deposits and the employer basic
contributions allocated to a participating employee's account
are fully vested upon deposit, and the employer matching and
profit performance contribution are subject to a graduated
vesting schedule resulting in full vesting after seven years of
service. The participating employee has the right to direct the
investment of the pre-tax savings deposits and employer matching
contributions allocated to the employee's account in one or more
of several available investment funds. The allocated employer
basic contributions are generally expected to be invested in
Common Shares but, at the direction of the Pension Plus Plan's
administrative committee, may be invested in a different manner.
The allocated employer profit performance contributions are
invested in the manner selected by the Pension Plus Plan's
administrative committee, which may also include investment in
Common Shares. The vested portion of a participating employee's
account balance becomes distributable in a lump sum payment only
after the employee's termination of employment, although the
employee has the right while employed to borrow a portion of
such vested portion or make a withdrawal of pre-tax savings
deposits for certain hardship reasons which are prescribed by
applicable federal law. The Company also provides all named
executive officers with long-term disability protection.
(6) In each of fiscal 1997, 1996 and 1995, the Company paid
approximately $368,000 of premiums on three split-dollar
insurance policies on the life of Mr. Marcus. The foregoing
data is excluded from the table above because, upon surrender of
these policies to the Company or the death of Mr. Marcus, these
premium payments will be reimbursed in full to the Company.
Based on an assumed retirement age of 65, the present value of
the excess cash surrender value of all of such policies over the
premium payments is estimated to be approximately $156,000.
</TABLE>
Stock Options
The Company has a 1987 Stock Option Plan ("1987 Plan") pursuant
to which options to acquire Common Shares could have been granted by the
Committee prior to June 1997 to officers and other key employees of the
Company and its subsidiaries, including executive officers. However, Ben
Marcus, Stephen H. Marcus, Diane Marcus Gershowitz and any other person
who owned, directly or indirectly, 5% or more of the Company's voting
power were not eligible to receive options under the 1987 Plan. No new
options may be granted under the 1987 Plan, although outstanding options
previously granted under the 1987 Plan are still outstanding and may be
exercised pursuant to their terms.
The Company also has a 1995 Equity Incentive Plan ("1995 Plan")
pursuant to which options to acquire Common Shares may be granted by the
Committee until June 2005 to officers and other key employees of the
Company and its subsidiaries, including executive officers. However, Ben
Marcus, Stephen H. Marcus, Diane Marcus Gershowitz and any other person
who owns, directly or indirectly, 5% or more of the Company's voting power
cannot receive options under the 1995 Plan.
The following table sets forth information concerning the grant
of stock options under the 1995 Plan during fiscal 1997 to the named
executive officers.
<TABLE>
Option Grants in 1997 Fiscal Year
<CAPTION>
Common Percentage of
Shares Total Options Potential Realizable Value at
Underlying Granted to All Exercise Assumed Annual Rates of Stock Price
Options Employees in 1997 Price(2) Expiration Appreciation for Option Term(3)
Name Granted(1) Fiscal Year (per share) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Stephen H. Marcus . . N/A N/A N/A N/A N/A N/A
Bruce J. Olson . . . 5,000 6.5% $25.125 6/25/06 $79,005 $200,214
H. Fred Delmenhorst . 2,500 3.2% $25.125 6/25/06 $39,502 $100,107
Thomas F. Kissinger . 2,500 3.2% $25.125 6/25/06 $39,502 $100,107
Douglas A. Neis . . . 2,000 2.6% $25.125 6/25/06 $31,602 $80,086
__________________
(1) Options granted under the 1995 Plan may be designed to qualify as
either "incentive stock options" within the meaning of Section 422A
of the Internal Revenue Code or as "nonstatutory stock options." The
options reflected in the table are incentive stock options under the
Internal Revenue Code and were granted on June 26, 1996. The
exercise price of each option granted was equal to 100% of the fair
market value of the Common Shares on the date of grant, as determined
by the Committee. The foregoing options granted vest and are
exercisable with respect to 40% of the subject shares after two years
from the grant date, 60% after three years, 80% after four years and
100% after five years, but may not be exercised after the ten-year
option period. Also not reflected in this table are 12,000 Common
Shares subject to incentive stock options which were granted to the
named executive officers after the Company's fiscal 1997 year-end
(Olson-5,000, Delmenhorst-2,500, Kissinger-2,500 and Neis-2,000) at
an exercise price of $24.75 per share.
(2) The exercise price of options may be paid in cash, by delivering
previously issued Common Shares or any combination thereof.
(3) The potential realizable values set forth under the columns represent
the difference between the stated option exercise price and the
market value of the Common Shares based on certain assumed rates of
stock price appreciation and assuming that the options are exercised
on their stated expiration date; the potential realizable values set
forth do not take into account applicable tax and expense payments
which may be associated with such option exercises. Actual
realizable value, if any, will be dependent on the future stock price
of the Common Shares on the actual date of exercise, which may be
earlier than the stated expiration date. The 5% and 10% assumed
rates of stock price appreciation over the ten-year exercise period
of the options used in the table above are mandated by the rules of
the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future price of the Common
Shares on any date. There can be no assurances that the stock price
appreciation rates for the Common Shares assumed for purposes of this
table will actually be achieved.
</TABLE>
The following table sets forth certain information with respect
to the named executive officers concerning their unexercised stock options
held as of the end of the Company's fiscal 1997. No options were
exercised by any of the named executive officers during the Company's
fiscal 1997.
<TABLE>
Fiscal 1997 Year-End Value Table
<CAPTION>
Number of Common Shares Underlying
Unexercised Options at Value of Unexercised
End of Fiscal 1997(1) In-the-Money Options at End of Fiscal 1997(3)
Name Exercisable(2)/Unexercisable(2) Exercisable / Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Stephen H. Marcus . N/A N/A
Bruce J. Olson . . 23,250 / 23,000 $255,375 / $115,875
H. Fred Delmenhorst 10,425 / 9,700 $118,463 / $ 46,350
Thomas F. Kissinger 5,250 / 10,000 $ 43,808 / $ 50,955
Douglas A. Neis . . 10,425 / 9,200 $118,463 / $ 46,350
________________
(1) See vesting schedule of stock options set forth in footnote (1) under the "Option Grants in 1997 Fiscal Year" table
above.
(2) Not reflected herein are 13,050 Common Shares subject to stock options which have vested and become exercisable after the
Company's 1997 fiscal year-end (Olson-6,000, Delmenhorst-2,400, Kissinger-2,250 and Neis-2,400). Also not reflected in
this table are 12,000 Common Shares subject to stock options which were granted to the named executive officers after the
Company's fiscal 1997 year-end (Olson-5,000, Delmenhorst-2,500, Kissinger-2,500 and Neis-2,000) at an exercise price of
$24.75 per share.
(3) The dollar values were calculated by determining the difference between the fair market value of the underlying Common
Shares and the various applicable exercise prices of the named executive officers' outstanding options at the end of
fiscal 1997. The closing sale price of the Common Shares on the New York Stock Exchange on May 29, 1997 was $24.50 per
share.
</TABLE>
Pension Plan
The Company has a nonqualified defined benefit pension plan
("Supplemental Plan") for the eligible employees of the Company and its
subsidiaries with annual compensation in excess of a specified level
(e.g., $66,000 in 1996 and $80,000 in 1997), including named executive
officers of the Company. The Supplemental Plan is a defined benefit
retirement income program which provides benefits based upon the
employee's final five-year average compensation. The amounts accrued for
named executive officers under the Supplemental Plan cannot be readily
ascertained and are, therefore, not included in the "Summary Compensation
Table" above. In calculating employee compensation for purposes of
determining its contribution to the Supplemental Plan, the Company uses a
participating employee's total direct compensation in determining its
annual benefits (which, for the named executive officers, would be
comprised of the salary and bonus amounts listed in the "Summary
Compensation Table" above), calculated on a straight life annuity basis
assuming benefits commence at age 65. In addition to a reduction equal to
50% of Social Security benefits, the Supplemental Plan also reduces its
benefits by the benefits attributable to employer contributions which the
participating employee received under other Company-sponsored plans, such
as the Pension Plus Plan and the Company's former qualified pension plans.
An employee participating in the Supplemental Plan will be entitled to
receive annual benefits substantially in accordance with the table set
forth below, except that the amounts shown in the table do not reflect the
applicable reductions for Social Security benefits and benefits funded by
employer contributions which are payable under other Company-sponsored
plans. For an employee entitled to the highest level of Social Security
benefits who retires at age 65 during calendar year 1997, the reduction in
annual Supplemental Plan benefits would be approximately $9,280.
<TABLE>
<CAPTION>
Estimated Annual Pension Plan Benefits
for Representative Years of Service
Final Five-Year
Average Compensation 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 60,000 $ 15,000 $ 20,000 $ 25,000 $ 30,000 $ 30,000
120,000 30,000 40,000 50,000 60,000 60,000
180,000 45,000 60,000 75,000 90,000 90,000
240,000 60,000 80,000 100,000 120,000 120,000
400,000 100,000 133,000 167,000 200,000 200,000
600,000 150,000 200,000 250,000 300,000 300,000
800,000 200,000 267,000 333,000 400,000 400,000
</TABLE>
A participating employee is entitled to benefits under the
Supplemental Plan upon normal retirement on or after age 65, early
retirement after age 60 with at least five years of service, disability
retirement after at least five years of service and other termination of
employment after at least five years of service. A graduated vesting
schedule, which provides for 50% vesting after five years of service and
an additional 10% for each year of service thereafter, applies in the case
of termination of employment before completing 10 years of service or
qualifying for normal, early or disability retirement. Benefits payable
under the Supplemental Plan will be paid out of the Company's general
corporate assets as benefit payments become due after retirement or other
termination. At the end of fiscal 1997, Stephen H. Marcus, Bruce J.
Olson, H. Fred Delmenhorst, Thomas F. Kissinger and Douglas A. Neis had
36, 23, 12, 4 and 11 years, respectively, of credited years of service
under the Supplemental Plan.
Director and Director Emeritus Compensation
Under the Company's standard director compensation policy, each
nonemployee director receives an annual retainer fee of $10,000, together
with $1,750 for each meeting of the Board and $350 for each committee
meeting thereof (or $500 per committee meeting, if that person serves as
the committee's chairman), which he or she attends. In addition, under
the Company's 1994 Nonemployee Director Stock Option Plan ("Director
Plan"), each nonemployee director automatically is granted stock options
to purchase 1,000 Common Shares upon his or her initial appointment or
election to the Board and also receives an automatic annual grant of an
option for 500 Common Shares at the end of each fiscal year of the
Company. Exercise prices of options granted under the Director Plan are
equal to 100% of the fair market value of the Common Shares on the date of
grant. Upon their initial appointment to the Board in December 1996, each
of Messrs. Payne and Milstein were automatically granted stock options to
purchase 1,000 Common Shares at an exercise price of $21.50 per share
under the Director Plan. Under the Director Plan, on May 29, 1997 each
nonemployee director received his or her annual automatic option grant to
purchase 500 shares of Common Stock at an exercise price of $24.50 per
share. The options have a term of ten years and were fully vested and
exercisable immediately after grant.
Ben Marcus, the founder of the Company in 1935, retired from his
position as the Company's Chairman of the Board in December 1991. In
December 1995, Ben Marcus retired from the Board and was appointed a
director emeritus. Mr. Marcus also continues to serve the Company as a
nonofficer employee. The Committee has adopted a compensation policy
applicable to Ben Marcus that attempts to recompense him for his many
years of service and dedication to the founding, development and growth of
the Company. To help ensure Ben Marcus' continued availability to consult
with officers and employees of the Company, and to recognize his
contributions to the founding and success of the Company, Mr. Marcus is
entitled to receive for the remainder of his life (and thereafter his wife
will be entitled to receive for the remainder of her life) a consulting
fee partially linked to a percentage of the Company's pre-tax and pre-
corporate bonus earnings. Mr. Marcus is also entitled to receive
continued salary payments as an employee of the Company. In fiscal 1997,
Ben Marcus earned total cash compensation of $431,855 from the Company.
STOCK PERFORMANCE INFORMATION
Set forth below is a line graph comparing the annual percentage
change during the Company's last five fiscal years in the Company's
cumulative total shareholder return (stock price appreciation on a
dividend reinvested basis) on the Common Shares, compared to the
cumulative total return of companies included within the S&P 500 Composite
Index and to a composite peer group index selected in good faith by the
Company. The composite peer group index is comprised of the Standard &
Poor's Hotel/Motel Index (weighted 64%), Standard & Poor's Restaurants
Index (weighted 9%) and a Company-selected theatre index (weighted 27%)
which includes Carmike Cinemas, Inc., Cineplex Odeon Corp. and AMC
Entertainment, Inc. The indices within the composite industry peer group
index have been weighted to approximate the relative revenue contributions
of each of the Company's respective business segments (counting the motel
and hotel/resort segments as one segment) to the Company's total revenues
in fiscal 1997. The shareholder returns of the companies included in the
theatre index have been weighted based on each such company's relative
market capitalization as of the beginning of the presented periods.
<TABLE>
Comparison of Five-Year Total Returns
(on a dividend reinvested basis)
SEE PERFORMANCE GRAPH
<CAPTION>
5/31/92 5/31/93 5/31/94 5/31/95 5/31/96 5/31/97
<S> <C> <C> <C> <C> <C> <C>
The Marcus Corporation $100 $200 $234 $250 $346 $330
S&P 500 Composite Index $100 $145 $183 $203 $264 $272
Composite Peer Group Index $100 $112 $116 $140 $180 $232
</TABLE>
APPROVAL OF GUEST HOUSE INN TRANSACTION
General
The Agreement and Plan of Reorganization dated June 30, 1997
(the "Plan") between the Company and Guest House Inn, Inc. ("GHI"), a copy
of which is attached as Exhibit A hereto, provides that, subject to the
approval of the Plan by the Company's shareholders and the satisfaction of
certain other conditions set forth in the Plan, the Company will issue to
GHI (i) approximately 425,959 Common Shares (based on the $24.50 closing
sale price of the Common Shares on the New York Stock Exchange on May 29,
1997, subject to adjustment based on the average closing sale price of the
Common Shares on the New York Stock Exchange over the 30 trading days
ending five days before the closing date of the transaction and the final
net asset value of GHI on the closing date of the transaction) in exchange
for all of the real estate and other operating assets (net of the book
value of GHI's stated liabilities) owned by GHI on the closing date of the
transaction ("Net Operating Assets") and (ii) 299,547 new Class B Shares
in exchange for and cancellation of the existing 299,547 Class B Shares
owned by GHI (the "GHI Transaction"). GHI is owned and controlled by
Stephen H. Marcus, Diane Marcus Gershowitz and Ben Marcus, who are
officers, directors and/or principal shareholders of the Company, Ida Lowe
(the sister of Ben Marcus), and certain trusts for the benefit of their
families. See "Stock Ownership of Management and Others." The Company's
Articles of Incorporation prohibit the issuance of additional Class B
Shares other than in connection with stock dividends or splits and,
therefore, the one-time issuance of the new 299,547 Class B Shares in
exchange for and cancellation of the existing 299,547 Class B Shares owned
by GHI will require an amendment to the Company's Articles of
Incorporation to allow such one-time issuance. The GHI Transaction will
not result in any additional outstanding Class B Shares.
Background of the GHI Transaction
The Company is involved in the lodging, movie theatre and
restaurant businesses. GHI's principal operating assets include certain
real estate, buildings and furniture and fixtures in the Appleton,
Wisconsin area which are leased to operating subsidiaries of the Company
in the Company's operation of movie theatres, a family fun center and a
Budgetel Inn motel. The Company also leases an Annie's restaurant from
GHI, which it subleases to an unaffiliated third party. GHI also
independently owns and operates a bowling center in the Appleton area on
property adjacent to the properties leased to the Company. See
"Information about GHI." The terms and conditions of the leases between
the Company and GHI are believed to be no less favorable to the Company
than could have been obtained from independent third parties. See
"Certain Transactions." In addition to its Net Operating Assets, GHI owns
299,547 Class B Shares.
Over the past two years, from time to time, the executive
officers of the Company and GHI have discussed the interrelated operations
and relationships of and between each of the two companies, and the manner
in which the GHI Transaction could be accomplished for the reasons
described below under "Reasons for the GHI Transaction." The parties came
to a preliminary understanding that at the closing of the GHI Transaction
the Company would issue to GHI such number of Common Shares as are equal
to the fair market value of the Net Operating Assets. The parties agreed
that, given the potential conflicts of interest inherent in the GHI
Transaction, it was in the best interests of both parties to have the fair
market value of the Net Operating Assets determined by an independent
appraisal of the real estate related assets and leases, plus the book
value of GHI's other assets, less the book value of all stated liabilities
of GHI on the closing date of the transaction ("Net Asset Value"). The
parties also agreed that the Company would simply exchange 299,547 new
Class B Shares for the exact same number of existing Class B Shares owned
by GHI. The existing Class B Shares owned by GHI will be cancelled in the
exchange, resulting in no net increase in the number of outstanding Class
B Shares.
The terms and conditions of the Plan were negotiated by the
parties during the period from May to June 1997. On June 26, 1997,
Property Counselors, Inc. delivered to the Company its appraisal of the
fair market value of the real estate related assets constituting the Net
Operating Assets. On June 26, 1997, the Board considered and approved the
GHI Transaction and authorized the Company's executive officers to execute
the Plan, all subject to approval of the Plan by the Company's
shareholders at the Meeting.
Reasons for the GHI Transaction
The Board and the management of the Company believe that the GHI
Transaction is in the best interests of and will benefit the Company and
its shareholders.
Although the Company believes that the business relationship
between the Company and GHI has always been evidenced by arms-length, fair
market rate contractual provisions, nonetheless there exist inherent
potential conflicts of interest between the Company and GHI because of the
overlap between the officers, directors and principal shareholders of the
Company and GHI. Members of the Marcus family, including Stephen H.
Marcus, Diane Marcus Gershowitz, Ben Marcus and the sister of Ben Marcus,
own or control a controlling or significant ownership and voting interest
in GHI, as well as in the Company. See "Stock Ownership of Management and
Others." The Company believes that as it continues to expand its
operations on the properties leased from GHI, these potential conflicts of
interest are becoming more pronounced and the business relationships are
becoming more difficult to maintain at arms-length. The Company believes
the GHI Transaction will eliminate such potential conflicts of interest.
In addition to eliminating potential conflicts of interest, the
Company believes the GHI Transaction will help create long-term savings
for the Company by eliminating the Company's rent expenses for the
properties leased from GHI. The Company estimates that such pre-tax cost
savings will amount to approximately $440,000 annually.
Finally, the Company believes that the issuance of Common Shares
and Class B Shares in the GHI Transaction will not be materially dilutive
to existing shareholders from either an ownership or voting perspective
and will not materially increase the relative percentage of beneficial
ownership or voting control of the Company by the Marcus family. There
will be no net increase in the number of issued Class B Shares because,
after the GHI Transaction, the existing Class B Shares owned by GHI will
be cancelled in exchange for the new Class B Shares. Collectively,
Stephen H. Marcus, Diane Marcus Gershowitz and Ben Marcus beneficially own
1.4% of the outstanding Common Shares of the Company. After the GHI
Transaction, collectively, Stephen H. Marcus, Diane Marcus Gershowitz and
Ben Marcus will beneficially own 5.0% of the Common Shares of the Company.
This increase in the number of Common Shares beneficially owned by Stephen
H. Marcus, Diane Marcus Gershowitz and Ben Marcus will result in only a
very slight increase in the aggregate voting power of such individuals,
from 79.0% to 79.1%. In addition, the combined ownership of the
outstanding Common Shares of Class B Shares of such individuals will only
increase from 39.2% to 40.5%.
Recommendation of the Board
GHI is owned and controlled by Stephen H. Marcus, Diane Marcus
Gershowitz and Ben Marcus, who are officers, directors and/or principal
shareholders of the Company, Ida Lowe (the sister of Ben Marcus), and
certain trusts for the benefit of members of their families. See "The GHI
Transaction -- Interest of the Company's Management; Potential Conflicts
of Interest" below. In recognition of the potential conflicts of interest
resulting from these relationships, the interests of Stephen H. Marcus and
Diane Marcus Gershowitz in the GHI Transaction were fully disclosed to the
Board and Stephen H. Marcus abstained from the Board's vote to approve the
Plan. Diane Marcus Gershowitz was absent from the meeting at which the
Board considered the Plan. Only the members of the Board who are not
directors or shareholders of GHI and who do not directly or indirectly
have any interest in GHI voted on the Plan at the Board's June 26, 1997
meeting. Stephen H. Marcus, Diane Marcus Gershowitz and Ben Marcus have
advised the Company that they intend to vote their Common Shares and Class
B Shares in favor of the Plan. The Marcus family's vote in favor of the
Plan does not ensure that the Plan will be approved by the Company's
shareholders at the Meeting. See "Vote Required" below.
In reviewing the GHI Transaction and approving the Plan, subject
to shareholder approval, the Board determined that the GHI Transaction and
the Plan are in the best interests of the Company and its shareholders.
The Board therefore recommends that the Company's shareholders vote FOR
the approval of the Plan at the Meeting.
In reaching its conclusion regarding approval of the GHI
Transaction, the Board considered, among other factors, the following: (i)
that the fair market value of the real estate related assets and leases
comprising the Net Operating Assets was appraised by a qualified
independent appraiser; (ii) the compatibility of the respective businesses
of the Company and GHI; (iii) the GHI Transaction would eliminate any
future potential conflicts of interest between the Company and GHI (other
than any potential indemnification claims by the Company against GHI under
the Plan); (iv) the expectation that the GHI Transaction would result in
long-term cost savings for the Company; and (v) the GHI Transaction would
not be materially dilutive to existing shareholders or materially increase
the Marcus family's relative ownership or voting control of the Company.
The Board did not attach a relative weight to the various factors it
considered in determining that the GHI Transaction was in the best
interest of the Company and its shareholders. In determining the number
of Common Shares to be issued to GHI in the GHI Transaction, the Board
determined that the average last sale price for the Common Shares for the
30 trading days ending five days before the closing of the GHI Transaction
was a reasonable and fair method for calculating the fair market value of
the Common Shares to be issued in the GHI Transaction in exchange for the
Net Operating Assets. This valuation was considered fair despite the fact
that the Common Shares to be issued will not be registered under the
Securities Act of 1933 or applicable state securities laws and, therefore,
such Common Shares will not be eligible for public resale for at least one
year from the closing of the GHI Transaction.
Appraisal
To assist the Board in its review of the GHI Transaction, the
Company engaged Property Counselors, Inc. (the "Appraiser") as an
independent appraiser on June 2, 1997 to perform an appraisal of the fair
market value of GHI's real estate related assets and leases comprising the
Net Operating Assets. The Appraiser delivered to the Company on June 26,
1997 a written appraisal stating that the current fair market value of the
GHI's real estate related assets, leases, buildings and furniture and
fixtures comprising the Net Operating Assets was $7,940,000 (the
"Appraisal").
Although the Appraiser acted as an appraiser, participated in
certain discussions and provided certain analyses to the Company, the
Appraiser was not requested to and did not make any recommendation to the
Board or the Company as to the form or amount of the consideration to be
exchanged by the Company in the GHI Transaction, which was determined
through negotiations between the executive officers of the Company and
GHI. The Appraisal is directed to the Company and does not constitute a
recommendation to any shareholder of the Company as to how such
shareholder should vote at the Meeting. The Appraiser was not requested
to opine as to, and the Appraisal did not address, the fairness of the GHI
Transaction to the Company or its shareholders or the Company's underlying
business decision to proceed with or effect the GHI Transaction.
The Appraisal was prepared in accordance with the appraisal
guidelines established by Title XI of the Financial Institutions, Reform,
Recovery and Enforcement Act of 1989 (FIRREA), and conforms to the Uniform
Standards of Professional Appraisal Practice (USPAP).
For purposes of the Appraisal, the Appraiser relied upon and
assumed the accuracy, completeness and fairness of the financial and other
information made available to it by GHI and the Company and did not
attempt to independently verify such information. The Appraiser relied
upon the assurances of GHI management that the information provided by GHI
had a reasonable basis and, with respect to financial planning data and
other business outlook information, reflected the best available
estimates, and that they were not aware of any information or fact that
would make the information provided to the Appraiser incomplete or
misleading. In performing the Appraisal, the Appraiser was not furnished
any appraisal or valuation of specific assets or liabilities of GHI and
expressed no opinion regarding the value of GHI, the fair market value of
Class B Shares owned by GHI or the fairness of the GHI Transaction. Other
than as described above, no limitations were imposed by the Board or the
Company on the scope of the Appraiser's investigation or the procedures to
be followed in performing the Appraisal. The Appraisal was based upon
information available to the Appraiser and the facts and circumstances as
they existed and were subject to evaluation on the date of the Appraisal.
Events occurring after such dates could materially affect the assumptions
used in preparing the Appraisal.
The Appraiser is headed by Jules H. Marling, Jr. MAI, CRE. Mr.
Marling has advised the Company that he has been involved in the real
estate industry since 1968, and has personally prepared or supervised over
3,000 appraisals and consulting reports involving properties in over 40
states and several foreign countries. Mr. Marling is a member of the
National Appraisal Institute (MAI) and the American Society of Real Estate
Counselors (CRE) and the Chicago Board of Realtors. Additionally, he
advised the Company that he is also a qualified expert witness on real
estate analysis. In selecting the Appraiser, the Company's management
first identified a number of potential appraisers. Two appraisers were
invited to submit bids for the project. After reviewing the bids
submitted, the Company selected the Appraiser. The Appraiser was selected
by the Company's management based on the Appraiser's qualifications,
expertise and reputation, the price of its services, its familiarity with
the types of assets appraised, and its availability to provide a report in
the time requested by the Company.
For acting as appraiser for the Company in connection with the
GHI Transaction, the Company has paid the Appraiser fees aggregating
$12,000. The Company has also agreed to pay the reasonable out-of-pocket
expenses of the Appraiser and to indemnify the Appraiser against certain
liabilities incurred in connection with the engagement of the Appraiser by
the Company. The fees payable to the Appraiser were not contingent upon
consummation of the GHI Transaction.
In performing the Appraisal, the Appraiser prepared and
delivered to the Company certain written materials containing various
analyses and other information relevant to the Appraisal. The following
is a summary of these materials:
General
The Appraiser determined that the fair market value for GHI's
real estate assets was $7,940,000. The procedures the Appraiser used for
determining the fair market value of the properties varied based on the
type of property. The Appraiser identified three different types of
properties owned by GHI: (i) improved properties in which GHI owns the
leased fee interest in the property; (ii) improved properties which GHI
owns in fee simple; and (iii) unimproved vacant land which GHI owns in fee
simple.
Leased Fee Interest Properties
The first class of properties consisted of GHI's Budgetel Inn,
Annie's restaurant, Funset Boulevard, Hollywood Cinema and Big Boy
restaurant. In evaluating the leased fee interest in these properties,
the Appraiser relied exclusively on an income capitalization approach.
All of the properties are leased to operating subsidiaries of the Company.
The Appraiser prepared a discounted cash flow ("DCF") analysis based on
the terms of the land leases for the properties. The Appraiser used lease
information to arrive at a projected annual cash flow over a holding
period of 12 years (at which time three of the five land leases expire).
The Appraiser assumed a residual sale at the end of the holding period by
capitalizing the year 12 income and then discounted the entire cash flow
stream to arrive at a market valuation.
To determine the discount rate used in its DCF analysis, the
Appraiser examined the creditworthiness of the Company (as the lessee),
and compared such creditworthiness to the current applicable rates in the
public credit markets. The Appraiser then examined the properties
themselves to determine the proper rate. In arriving at its conclusion,
the Appraiser considered that the land leases are not subordinated to any
mortgages and are secured by the value of the existing improvements (the
value of which is greater than the value of the leased land). In
addition, the Appraiser consulted an outside investment firm that
specializes in net leases to determine an appropriate discount rate for
the income streams produced by the properties. Based on the foregoing
information, the Appraiser determined that 8.75% was an appropriate
discount rate for all of the properties, except for the Big Boy
restaurant. The Big Boy restaurant cash flow was discounted at 9.25% due
to the low value of the improvements of such restaurant.
In connection with its analysis, the Appraiser also determined
the terminal capitalization rate (the rate applied to the year 12 cash
flows to determine the value of the reversion). The Appraiser's research
indicated that terminal capitalization rates for commercial properties
such as the ones owned by GHI range from 7.5% to 13%. The Appraiser
believed that, due to the uncertainty about the state of the improvements
at reversion, the appropriate terminal capitalization for the properties
should be towards the upper end of such range. The Appraiser determined
that 12% would be an appropriate terminal capitalization rate for its
analysis.
Based on the foregoing, the Appraiser estimated the aggregate
fair market value of the five leased fee properties in this class to be
$5,990,000.
Fee Simple Properties
The second class of properties consisted of the SuperBowl
bowling center, which includes a substantial real estate component as well
as a "going concern" component. The Appraiser relied on a sales
comparison and an income capitalization approach to arrive at two separate
fair market value estimates. These estimates were then reconciled to
arrive at a final estimate of value.
In the sales comparison approach, the Appraiser used the sales
of comparable bowling centers located throughout Wisconsin and northern
Illinois as a basis for determining a fair market value estimate. Using
the sales comparison approach, the Appraiser examined both square feet
costs for sales of comparable centers, as well as costs per lane for
comparable centers. The review of comparable sales led to an estimate of
$40 per square foot for the building and $38,500 per lane. Based on this
approach, the Appraiser estimated the fair market value of the SuperBowl
to be $1,850,000.
In the income capitalization approach, the Appraiser analyzed
the recent operating history of the SuperBowl business and arrived at a
stabilized annual cash flow estimate, which was capitalized into a value
estimate, using both a gross income multiplier and an overall
capitalization rate. The Appraiser first estimated stabilized operating
results for the business by analyzing the recent historical operating
statements, as well as 1997 year-to-date performance. The Appraiser then
applied two separate analyses (gross income multiplier and capitalized
income) to the stabilized income statement. The Appraiser's research
indicated that gross revenue is often the primary consideration of a
bowling operator in a decision to purchase a bowling facility. As a "rule
of thumb," the bowling center operators interviewed by the Appraiser
suggested the purchase price for a bowling operation would be
approximately two times the gross income yielded by the "going concern."
Income data was available for two of the bowling center sales used in the
sales comparison approach and indicated gross income multipliers of 2.14
and 2.37. It was the Appraiser's opinion that these multipliers
substantiated the "rule of thumb." Applying a gross income multiplier of
2.00 to the bowling center's stabilized gross income, the Appraiser
arrived at a value of $1,820,000. When using the capitalized income
approach, the Appraiser applied an overall capitalization rate to
stabilized operating cash flow. In determining the rate, the Appraiser
reviewed the location, quality and overall condition of the property, as
well as factoring in the market rate for this type of center. It was the
Appraiser's opinion that a capitalization rate for this type of property
would be within a range of 12%-13%. The Appraiser used an overall rate of
12.5% to arrive at a value indication of $1,750,000.
In reconciling the value indicated by the sales comparison
approach with the value indicated by the income capitalization approach,
the Appraiser gave the greatest weight to the income capitalization
approach because this would presumably be weighted most heavily by
prospective purchasers and because, in considering the sales comparison
approach, the Appraiser recognized that no two properties are ever exactly
alike. All factors considered, the Appraiser estimated the market value
of the SuperBowl bowling center to be $1,790,000.
Vacant Fee Simple Properties
The third class of properties consisted of approximately one
acre of vacant land. The Appraiser relied exclusively on a sales
comparison approach, using the sales of comparable land parcels as the
basis for arriving at a market value estimate of the vacant land. Based
on the analysis of similar sized parcels in the vicinity of this property,
the Appraiser determined the value of this vacant land to be $160,000.
Interest of the Company's Management; Potential Conflicts of Interest
In considering the recommendations of the Board with respect to
the GHI Transaction, shareholders should be aware that certain members of
the Board and the Marcus family have certain interests in the GHI
Transaction that are in addition to the interests of shareholders of the
Company generally. Ben Marcus, Stephen H. Marcus and Diane Marcus
Gershowitz, who are officers, directors and/or principal shareholders of
the Company, Ida Lowe (the sister of Ben Marcus), and certain trusts for
the benefit of members of their families, own and control GHI. Ben Marcus
is the founder of the Company and continues to serve as a director
emeritus and nonofficer employee. Stephen H. Marcus is the Chairman of
the Board, President and Chief Executive Officer of the Company. Diane
Marcus Gershowitz is a director of the Company. The other members of the
Board have no ownership or economic interest in GHI. As a result of their
beneficial ownership of Common Shares and Class B Shares, Stephen H.
Marcus, Diane Marcus Gershowitz and Ben Marcus may be deemed to control,
or share in the control, of the Company. See "Election of Directors" and
"Stock Ownership of Management and Others."
The GHI Transaction involves an inherent potential conflict of
interest between the interests of the Company and the interests of the
members of the Marcus family described above. Although steps were taken
to mitigate the potential conflict, including the retention by the Company
of the Appraiser, the full disclosure to the Board (and to the Company's
shareholders in this proxy statement) of the interests of the members of
the Marcus family and the abstention from voting as directors on the
approval of the Plan by Stephen H. Marcus (Diane Marcus Gershowitz was
absent from the Board meeting at which the Board considered the Plan), the
relationship of the Marcus family with the Company and the influence which
they have by virtue of stock ownership and positions as officers and
directors of the Company means that the GHI Transaction may present a
potential conflict of interest. See "Stock Ownership of Management and
Others."
Stephen H. Marcus, Diane Marcus Gershowitz and Ben Marcus as a
group beneficially own 1.4% and 89.3%, respectively, of the outstanding
Common Shares and Class B Shares. After giving effect to the GHI
Transaction, they will beneficially own 5.0% and 89.3%, respectively, of
the outstanding Common Shares and Class B Shares. Stephen H. Marcus,
Diane Marcus Gershowitz and Ben Marcus collectively control 79.0% of the
combined aggregate voting power of the Common Shares and Class B Shares
and after giving effect to the GHI Transaction, they will control 79.1% of
the combined aggregate voting power of the Common Shares and Class B
Shares. In addition, the combined ownership of the outstanding Common
Shares and Class B Shares of such individuals will only increase from
39.2% to 40.5%.
Terms of the Plan
The following description of certain terms of the Plan is only a
summary and does not purport to be a complete statement of the terms and
conditions of the GHI Transaction. This discussion is qualified in its
entirety by reference to the Plan, which is set forth in Exhibit A and
incorporated herein by reference.
The Plan provides that, subject to the approval of the Plan by
the Company's shareholders at the Meeting and the satisfaction or waiver
of certain other conditions, the Company will issue to GHI (i) the number
of Common Shares as have a value equal to the fair market value of the Net
Operating Assets as of the closing date of the GHI Transaction in exchange
for the Net Operating Assets owned by GHI and (ii) 299,547 new Class B
Shares in exchange for and cancellation of the 299,547 existing Class B
Shares owned by GHI. In the GHI Transaction, the Common Shares and Class
B Shares received by GHI in exchange for all of its assets (net of
liabilities) will be distributed in a tax-free liquidation of GHI to GHI's
shareholders pro rata with their GHI share ownership.
The closing of the GHI Transaction (the "Closing") is expected
to occur on or about October 1, 1997 (the "Closing Date"). Based on the
closing sale price of $24.50 per share of the Common Shares on May 29,
1997, the Appraisal and the net book value of the other Net Operating
Assets as of June 5, 1997, a total of 425,959 Common Shares would be
issued in the GHI Transaction to GHI in exchange for the Net Operating
Assets owned by GHI. The number of Common Shares actually issuable in the
GHI Transaction will be based on the average closing sale price of the
Common Shares on the New York Stock Exchange over the 30 trading days
ending five days before the Closing Date and the final Net Asset Value of
GHI on the Closing Date. Additionally, 299,547 new Class B Shares will be
issued in the GHI Transaction in exchange for and cancellation of the
existing 299,547 Class B Shares owned by GHI.
The obligations of the Company and GHI to consummate the GHI
Transaction are subject to the approval of the Plan and the GHI
Transaction, including the amendment to the Company's Articles of
Incorporation described below, by the Company's shareholders at the
Meeting and by GHI's shareholders. The Plan may be terminated at any time
prior to the Closing, whether before or after approval of the GHI
Transaction by the Company's shareholders, by either the Company or GHI.
GHI has agreed to pay all of its fees and expenses incurred in
connection with the GHI Transaction. The Company has agreed to pay all of
its fees and expenses incurred in connection with the GHI Transaction.
The Company estimates that its total out-of-pocket fees and expenses
directly attributable to the GHI Transaction will be approximately
$58,000, including $12,000 for the Appraisal, $3,663 for Securities and
Exchange Commission filing fees, $7,500 for the proxy solicitor and
$35,000 for legal fees and other expenses.
Plans for Business Following the GHI Transaction
Following the consummation of the GHI Transaction, the Company
intends to continue its present business and operations, although the
Company may consider selling the bowling center operation. The Company
will likely contribute the acquired Net Operating Assets of GHI to the
most appropriate operating subsidiaries.
Accounting Treatment
For financial reporting purposes, the assets acquired from GHI
will be recorded at the historical book value of GHI rather than fair
value because GHI and the Company are controlled by the same shareholders.
The Common Shares issued to complete the GHI Transaction will be recorded
at their fair value and the excess of this fair value over the historical
book value of the assets will be recorded as a distribution. The GHI
Transaction and the Company's acquisition of the Net Operating Assets will
not have any material effect on the Company's consolidated financial
condition or its results of operations.
Tax Treatment
The Company believes that (i) the transaction will qualify as a
valid tax-free reorganization under Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the "Code"); (ii) the Company and GHI
will each be a "party to the reorganization" within the meaning of Section
368(b) of the Code; (iii) no income, gain or loss will be recognized by
the Company or GHI for federal and state income (and franchise) tax
purposes; and (iv) the tax basis of the assets of GHI in the hands of the
Company will be the same as the basis of such assets in the hands of GHI
immediately prior to the GHI Transaction. Shareholders of the Company who
are not shareholders of GHI are not exchanging stock in the Company.
Therefore, such shareholders of the Company will have no direct income tax
consequences due to the GHI Transaction.
Regulatory Approvals
The Company is not aware of any federal, state or other
governmental or regulatory approval that is required to consummate the GHI
Transaction.
Restrictions on Resale of Common Shares and Class B Shares to Be Issued in
the GHI Transaction
The Common Shares and Class B Shares to be issued pursuant to
the Plan will not be registered under the Securities Act of 1933, as
amended (the "1933 Act"), and, accordingly, may be resold by GHI or GHI
shareholders, as the case may be, only in a transaction that is either
registered pursuant to the 1933 Act or is exempted from such registration.
The Plan does not grant to GHI or GHI shareholders, as the case may be,
any right to demand, or to participate in, any future registration under
the 1933 Act of Common Shares or Class B Shares. Under the Company's
Articles of Incorporation, no holder of Class B Shares may transfer Class
B Shares without causing the Class B Shares to be converted into an equal
number of Common Shares, except to a spouse, parent or lineal descendant
thereof, a trust for the benefit of such holder or other entity controlled
by such holder. Each Class B Share may be converted into one Common Share
at any time at the option of the holder of Class B Shares.
Section 16(b) Exemption
If the shareholders approve the GHI Transaction at the Meeting,
the issuance of the Common Shares to Stephen H. Marcus and Diane Marcus
Gershowitz in the GHI Transaction will not subject them to potential
"short swing" profit liability under Section 16(b) of the Securities
Exchange Act of 1934 by reason of the application of an exemption
therefrom under Rule 16b-3(d) under the Securities Exchange Act. The
Company also believes this exemption applies by reason of the Board's
specific advance approval of the GHI Transaction, including the issuance
of Common Shares to Stephen H. Marcus and Diane Marcus Gershowitz.
No Dissenters' Rights
Dissenters' rights will not be available to the Company's
shareholders under Wisconsin law with respect to the GHI Transaction.
One-Time Stock Issuance Amendment to Articles of Incorporation
The Company's Articles of Incorporation only allow additional
issuances of Class B Shares as part of a stock split or stock dividend in
conjunction with and in the same ratio as a stock split or stock dividend
on the Common Shares and only to the holders of then outstanding Class B
Shares. The Board has approved, and recommends that the Company's
shareholders adopt at the Meeting, an amendment to Article 2 of the
Company's Articles of Incorporation which would permit the one-time
issuance by the Company of 299,547 new Class B Shares in connection with
the GHI Transaction in exchange for and cancellation of the existing
299,547 Class B Shares owned by GHI ("Stock Issuance Amendment").
The Stock Issuance Amendment also clarifies that the
shareholders of GHI as of June 30, 1997 shall be deemed "Permitted
Transferees" of the Class B Shares issued in the GHI Transaction so that
any transfer or distribution of such Class B Shares by GHI to such
shareholders upon the liquidation of GHI or otherwise shall not result in
such shares being converted into an equal number of Common Shares. While
the Company does not believe that the existing language of the Company's
Articles of Incorporation would have required such a result, nonetheless
the Company believes adoption of the clarification is advisable.
The provisions of Article 2 of the Company's Articles of
Incorporation, as proposed to be amended by the Stock Issuance Amendment,
are set forth in Exhibit B to this Proxy Statement. The Stock Issuance
Amendment will not result in any net increase in the number of outstanding
Class B Shares because the 299,547 existing Class B Shares owned by GHI
will be cancelled in the GHI Transaction.
Vote Required
In order for the GHI Transaction and the Stock Issuance
Amendment to be approved by the Company's shareholders at the Meeting, the
following votes must be obtained: (i) the affirmative vote of a majority
of the votes entitled to be cast at the Meeting by the holders of the
Common Shares as of the Record Date, voting separately as a class; (ii)
the affirmative vote of a majority of the votes entitled to be cast at the
Meeting by the holders of the Class B Shares as of the Record Date, voting
separately as a class; and (iii) the affirmative vote of a majority of the
votes entitled to be cast at the Meeting by the holders of both the Common
Shares and the Class B Shares as of the Record Date, voting together as a
single class. Any votes represented by Common Shares and the Class B
Shares not cast at the Meeting (whether by broker nonvotes, abstentions or
otherwise) will be treated as votes against the GHI Transaction and the
Stock Issuance Amendment. As of the Record Date, Ben Marcus, Stephen H.
Marcus and Diane Marcus Gershowitz, beneficially owned approximately 1.4%
of the voting power of the Common Shares, 89.3% of the voting power of
Class B Shares and 79.0% of the combined voting power of the Common Shares
and Class B Shares. See "Stock Ownership of the Management and Others."
Since it is expected that such individuals will vote in favor of approving
the GHI Transaction and the Stock Issuance Amendment, sufficient votes for
an affirmative vote of the majority of both the Class B Shares, voting
separately as a class, and the Common Shares and the Class B Shares,
voting together as a single class, are assured. However, there is no
assurance that an affirmative vote of a majority of the votes entitled to
be cast by the Common Shares, voting separately as a class, will be
obtained at the Meeting for the GHI Transaction and the Stock Issuance
Amendment.
Common Shares and Class B Shares represented by executed but
unmarked proxies will be voted "FOR" the GHI Transaction and the Stock
Issuance Amendment, unless a vote against the GHI Transaction and the
Stock Issuance Amendment or to abstain from voting is specifically
indicated on the proxy. A vote "FOR" the GHI Transaction also constitutes
a vote to approve the issuance of Common Shares to Stephen H. Marcus and
Diane Marcus Gershowitz pro rata with their GHI share ownership for
purposes of Rule 16b-3(d) under the Securities Exchange Act.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE
GHI TRANSACTION AND THE STOCK ISSUANCE AMENDMENT.
Information about GHI
General
GHI was incorporated under the laws of the State of Wisconsin on
August 6, 1959. GHI's principal office is located at 250 East Wisconsin
Avenue, Suite 1700, Milwaukee, Wisconsin 53202; telephone: (414) 272-6020.
Business
GHI's principal operating assets include certain real estate,
buildings and furniture and fixtures in the Appleton, Wisconsin area. GHI
leases, under long-term operating leases, real estate to operating
subsidiaries of the Company in the operation of the movie theatre,
Hollywood Cinema, the family entertainment center, Funset Boulevard, and a
Budgetel Inn motel. The Company leases the property for an Annie's
Restaurant from GHI, which it in turn leases to an unaffiliated third
party. The terms and conditions of the leases between the Company and GHI
are believed to be no less favorable to the Company than could have been
obtained from independent third parties. See "Certain Transactions." GHI
also owns certain vacant property in the Appleton area. In addition, GHI
owns and operates the SuperBowl bowling center on property adjacent to the
properties leased to the Company. As of June 5, 1997, GHI had accounts
and notes receivable from certain of its shareholders and other related
parties aggregating $2,218,000. It is the intention of the shareholders
of GHI to repay in cash all outstanding related party receivables prior to
the closing of the GHI Transaction.
Financial Statements
The financial statements of GHI for the fiscal years 1996, 1995
and 1994, and for the 36 weeks ended June 5, 1997, and the accompanying
notes, are set forth in Exhibit D to this Proxy Statement.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following table sets forth certain selected financial data
of GHI for the periods presented derived from the unaudited financial
statements of GHI.
<TABLE>
Selected Financial Data
(In Thousands)
<CAPTION>
Thirty-Six
Year Ended
Weeks Ended
June 5, September 26, September 28, September 29, September 30,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Statement of Earnings Data:
Revenues $1,112 $1,384 $1,723 $1,926 $1,794
Costs and expenses 649 1,091 1,410 1,525 1,508
Operating income 463 293 313 401 286
Other income (expense) 126 (213) 111 78 60
Net earnings 589 78 401 478 346
<CAPTION>
June 5, September 26, September 28,
1997 1996 1995
<S> <C> <C> <C>
Balance Sheet Data:
Total assets $3,245 $2,623 $2,759
Total current liabilities 105 72 136
Total shareholders' equity 3,140 2,551 2,623
</TABLE>
Results of Operations
General
GHI owns certain real estate, buildings and improvements, and
furniture and fixtures in the Appleton, Wisconsin area which it leases to
subsidiaries of the Company. In addition, GHI owns and operates a bowling
center in Appleton. GHI previously owned and operated a second bowling
center in Appleton until early in fiscal 1996, at which time the center
was closed and the real estate was subsequently leased to the Company.
GHI reports its results of operations on either a 52-or 53-week fiscal
year. Fiscal 1993 was a 53-week year for GHI.
Revenues
Revenues for the 36 weeks ended June 5, 1997 were $1,112,000,
down $23,000, or 2.0%, from the same prior year period. This decrease was
due to the loss of $225,000 in revenues from the bowling center that was
closed in fiscal 1996, offset by increased rental income from the Company.
Revenues for the fiscal year ended September 26, 1996 were $1,384,000,
down $339,000, or 19.7%, from the prior year. Reduced bowling center
revenues of $356,000 as a result of the closure of the bowling center
accounted for the entire decrease.
Revenues for fiscal 1995 decreased $203,000, or 10.5%, versus
the previous year. Fiscal 1994 revenues, however, were up $132,000, or
7.4%. The decrease in fiscal 1995 revenues and increase in fiscal 1994
revenues was the result of increased food and beverage sales at the two
bowling centers in fiscal 1994 due to increased guests attending a major
tournament held at these facilities.
Operating Income
Operating income for the 36 weeks ended June 5, 1997 was
$463,000, an increase of $181,000, or 64.2%, over the same period the
previous year. GHI's decision to close one of its bowling centers in
fiscal 1996 and consolidate its business into the remaining facility
resulted in increased operating income from bowling operations of $44,000
versus the previous year, with the remaining increase in operating income
coming from increased rental income.
Operating income for fiscal 1996 totaled $293,000, down $20,000,
or 6.4%, from the previous year. The entire decrease was the result of
closing the bowling center earlier in the year prior to the commencement
of rental income from leasing the real estate to the Company.
Fiscal 1995 operating income decreased $88,000, or 21.9%, from
the previous year. Fiscal 1994 operating income, however, was up
$115,000, or 40.2%, over fiscal 1993. As discussed previously, fiscal
1994 results were significantly enhanced by a major tournament held at
GHI's bowling centers.
Other Income (Expense)
Other income for GHI consists primarily of interest income on
GHI's accounts and notes receivables, along with dividend income earned on
GHI's cash equivalents and 299,547 Class B Shares. Total interest and
dividend income totaled $126,000 for the 36 weeks ended June 5, 1997,
compared to $110,000, $110,000, $85,000 and $82,000 for the same items in
fiscal years 1996, 1995, 1994 and 1993, respectively.
In fiscal 1996, GHI incurred a loss on the disposition of
property and equipment totaling $323,000 as a result of closing one of its
bowling centers.
Net Earnings
Net earnings for the 36 weeks ended June 5, 1997 were $589,000,
an increase of $551,000 versus the same period prior year. The increase
consisted of $228,000 in operating income and interest/dividend income
increases, combined with the fiscal 1996 loss on disposition of property
and equipment of $323,000. Net earnings for fiscal 1996 were $78,000,
down $323,000, or 80.5%, due to that same loss on disposition.
Net earnings for fiscal 1995 were down $77,000 or 16.1%,
compared to an increase in net earnings in fiscal 1994 versus fiscal 1993
of $132,000, or 38.2%. As discussed earlier, a major bowling tournament
significantly improved fiscal 1994 operating results.
Financial Condition
GHI has entered into various noncancellable long-term leases of
real estate and buildings with the operating subsidiaries of the Company.
GHI believes that this provides a consistent and predictable cash source
that should be adequate to support the ongoing operational liquidity needs
of GHI's businesses.
Net cash provided by operating activities totaled $701,000 for
the 36 weeks ended June 5, 1997, an increase of $169,000 versus the full
fiscal year 1996. The $532,000 of net cash provided by operating
activities in fiscal 1996 represented a $46,000, or 9.5%, increase from
the $486,000 of net cash provided by operating activities in fiscal 1995.
The increase in both years was primarily the result of increased earnings
and increases in current assets.
Net cash used in investing activities during the 36 weeks ended
June 5, 1997 totaled $873,000. Net cash used in investing activities
totaled $604,000 in fiscal 1996. Increases in related party receivables
accounted for the majority of the net cash used in investing activities
during these two periods. Fiscal 1996 net cash used was partially offset
by $147,000 of proceeds received from disposals of property and equipment
from its closed bowling center. Capital expenditures totaled $25,000,
$16,000 and $66,000 in fiscal years 1996, 1995 and 1994, respectively.
Future annual capital expenditures are not expected to exceed fiscal 1996
expenditures and are expected to be funded by cash generated from
operations. GHI has not used cash in any financing activities during the
36 weeks ended June 5, 1997. GHI distributed $150,000, $150,000 and
$200,000 to shareholders during fiscal years 1996, 1995 and 1994,
respectively. GHI paid off its remaining long-term debt in fiscal 1994
and has no outstanding long-term debt currently.
Information about the Company
Business
Information about the business of the Company is contained in
the 1997 Annual Report to Shareholders of the Company which accompanies
this Proxy Statement. Such information, which appears on pages 4 through
13 of the Company's 1997 Annual Report to Shareholders, is incorporated
herein by reference.
Financial Statements
Information about the results of operations of the Company is
contained in the 1997 Annual Report to Shareholders of the Company which
accompanies this Proxy Statement. The consolidated financial statements
of Company for its fiscal years 1997 and 1996, are presented at pages 20
through 29 in the Company's 1997 Annual Report to Shareholders and are
incorporated herein by reference.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Information about the results of operations of the Company is
contained in the 1997 Annual Report to Shareholders of the Company which
accompanies this Proxy Statement. Such information, which appears on
pages 14 through 19 of the 1997 Company's Annual Report to Shareholders,
is incorporated herein by reference.
Financial Condition
Information about the financial condition of the Company is
contained in the 1997 Annual Report to Shareholders of the Company which
accompanies this Proxy Statement. Such information, which appears on page
19 of the 1997 Annual Report to Shareholders, is incorporated herein by
reference.
AUTHORIZED STOCK AMENDMENT
General
The Board has unanimously approved, and unanimously recommends
that the Company's shareholders adopt at the Meeting, an amendment to
Article 2 of the Company's Articles of Incorporation which would increase
the number of authorized Common Shares from 30,000,000 to 50,000,000 and
the number of authorized Class B Shares from 20,000,000 to 33,000,000
("Authorized Stock Amendment"). The Authorized Stock Amendment will not
increase or otherwise affect the number of authorized shares of preferred
stock which may be issued by the Company. The provisions of Article 2 of
the Company's Articles of Incorporation, as proposed to be amended by the
Authorized Stock Amendment, are set forth in Exhibit C to this Proxy
Statement.
As of the Record Date, in addition to the 11,240,376 Common
Shares issued and outstanding, 100,568 Common Shares were reserved for
issuance under the 1987 Stock Option Plan, 672,900 Common Shares were
reserved for issuance under the 1995 Plan, 49,250 Common Shares were
reserved for issuance under the Director Plan, 8,504,252 Common Shares
were reserved for issuance upon any potential conversions of the Class B
Shares, 491,437 Common Shares were reserved for issuance under the
Company's Dividend Reinvestment and Associate Stock Purchase Plan, and
approximately 425,959 Common Shares are issuable in the GHI Transaction
(subject to adjustment), if approved by the Company's shareholders at the
Meeting. As of the Record Date, 8,504,252 Class B Shares were issued and
outstanding, with no further Class B Shares reserved for subsequent
issuance, other than in connection with the GHI Transaction. There will
be no net increase in the number of issued Class B Shares as a result of
the GHI Transaction because, after the GHI Transaction, the existing Class
B Shares owned by GHI will be cancelled in exchange for the new Class B
Shares to be issued. Therefore, as of the Record Date (assuming approval
of the GHI Transaction), there were a total of 21,484,742 Common Shares
either issued and outstanding or reserved for issuance out of a total of
30,000,000 authorized Common Shares, leaving a total of 8,515,258 Common
Shares remaining available for subsequent issuance or reservation.
Similarly, as of the Record Date, a total of 11,495,748 Class B Shares
remain available for subsequent issuance. The Company's Articles of
Incorporation only allow additional issuances of Class B Shares as part of
a stock split or dividend in conjunction with and in the same ratio as a
stock split or dividend on the Common Shares and only to the holders of
then outstanding Class B Shares.
The Board believes that the increased number of authorized
Common Shares contemplated by the proposed Authorized Stock Amendment is
desirable to make additional unreserved Common Shares available for
issuance or reservation without further shareholder authorization, except
as may be required by law or by the rules of the New York Stock Exchange.
Authorizing the Company to issue more shares than currently authorized by
the Articles of Incorporation will not affect materially any substantive
rights, powers or privileges of holders of Common Shares or the Class B
Shares. There are currently no shares of preferred stock outstanding.
The Company does not have any current plans or intentions to issue any of
the additionally authorized Common Shares or Class B Shares, or any
preferred stock, other than in connection with the GHI Transaction.
However, the Board believes that having such additional shares authorized
and available for issuance or reservation will allow the Company to have
greater flexibility in considering potential future actions involving the
issuance of stock, including stock dividends or splits or acquisitions of
businesses using stock as consideration. The Board has no current plans
to effect any such potential actions. Other than with respect to the
reservation of Common Shares in connection with (i) the 1987 Plan; (ii)
the 1995 Plan; (iii) the Director Plan; (iv) the conversion of Class B
Shares into Common Shares; (v) the Dividend Reinvestment and Associate
Stock Purchase Plan; and (vi) the GHI Transaction, the Company has no
other plans or other existing or proposed agreements or understandings to
issue, or reserve for future issuance, any of the additional Common Shares
or Class B Shares which would be authorized by the Authorized Stock
Amendment.
As a result of their beneficial ownership of approximately 79.0%
of the combined voting power of the Common Shares and Class B Shares, Ben
Marcus, Stephen H. Marcus and Diane Marcus Gershowitz may already be
deemed to control, or share in control, of the Company. Therefore, the
Company does not view the Authorized Stock Amendment as part of an "anti-
takeover" strategy. The Authorized Stock Amendment is not being advanced
as a result of any known effort by any part to accumulate Common Shares or
to obtain control of the Company. See "Stock Ownership of Management and
Others."
Vote Required
In order for the Authorized Stock Amendment to be approved by
the Company's shareholders at the Meeting, the following votes must be
obtained from shareholders at the Meeting: (i) the affirmative vote of a
majority of the votes entitled to be cast at the Meeting by the holders of
the Common Shares as of the Record Date, voting separately as a class;
(ii) the affirmative vote of a majority of the votes entitled to be cast
at the Meeting by the holders of the Class B Shares as of the Record Date,
voting separately as a class; and (iii) the affirmative vote of a majority
of the votes entitled to be cast at the Meeting by the holders of both the
Common Shares and the Class B Shares as of the Record Date, voting
together as a single class. Any votes represented by Common Shares and
Class B Shares not cast at the Meeting (whether by broker nonvotes,
abstentions or otherwise) will be treated as votes against the Authorized
Stock Amendment. As of the Record Date, Ben Marcus, Stephen H. Marcus and
Diane Marcus Gershowitz, beneficially owned approximately 1.4% of the
voting power of Common Shares, 89.3% of the voting power of Class B Shares
and 79.0% of the combined voting power of the Common Shares and Class B
Shares. See "Stock Ownership of the Management and Others." Since it is
expected that such individuals will vote in favor of approving the
Authorized Stock Amendment, sufficient votes for an affirmative vote of
the majority of both the Class B Shares, voting separately as a class, and
the Common Shares and the Class B Shares, voting together as a single
class, are assured. However, there is no assurance that an affirmative
vote of a majority of the votes entitled to be cast by the Common Shares,
voting separately as a class, will be obtained at the Meeting for the
Authorized Stock Amendment.
Common Shares and Class B Shares represented by executed but
unmarked proxies will be voted "FOR" the Authorized Stock Amendment,
unless a vote against the Authorized Stock Amendment or to abstain from
voting is specifically indicated on the proxy.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE AUTHORIZED STOCK AMENDMENT.
CERTAIN TRANSACTIONS
The Company leases, under long-term leases, real estate occupied
by five of the Company's facilities from GHI, an entity wholly-owned by
Ben Marcus, Stephen H. Marcus, Diane Marcus Gershowitz, Ida Lowe and
certain trusts for the benefit of members of their families ("Affiliated
Parties") for an aggregate annual rental of approximately $440,000 and
from Stephen H. Marcus and Diane Marcus Gershowitz for an aggregate annual
rental of approximately $44,000. The Company has renewal options for all
of these leases which, if fully exercised, would result in these leases
expiring at various times between 2005 and 2030. Ida Lowe is the sister
of Ben Marcus. See "Approval of Guest House Inn Transaction."
During the 1997 fiscal year, the Company paid approximately
$201,000 of interest to certain entities owned by certain of the
Affiliated Parties on nine debts of the Company owed to such entities.
These debts are due on demand and bear interest at the prime rate (8.50%
at May 29, 1997). The largest aggregate amount outstanding on the above
debts during the Company's 1997 fiscal year was $2,577,000. As of the end
of the 1997 fiscal year, the amount outstanding on the nine debts was
$2,001,000. Payment of both principal and interest on these debts is
current.
As has been the case in prior years, during the 1997 fiscal
year, the Company leased automobiles from Selig Executive Leasing Co.,
Inc. Aggregate lease payments were $351,000 in fiscal 1997. Allan H.
Selig, a director of the Company, is the President, Chief Executive
Officer and sole shareholder of Selig Executive Leasing Co., Inc.
The Company believes that all of the above transactions were
consummated on terms at least as favorable as could have been obtained
from non-affiliated third parties.
OTHER MATTERS
Representatives from Ernst & Young LLP are expected to be
present at the Meeting and will have an opportunity to make a statement if
they so desire and will be available to respond to appropriate shareholder
questions.
The Board does not intend to present at the Meeting any matters
for shareholder action other than the matters described in the Notice of
Annual Meeting. The Board knows of no other matters to be brought before
the Meeting which will require the vote of shareholders. For other
business to be properly brought before the Meeting by a shareholder, such
shareholder must give written notice of such proposed business complying
with the Company's By-laws to the Secretary of the Company not less than
15 days in advance of the Meeting. If any other business or matters
should properly come before the Meeting, the proxies named in the
accompanying proxy will vote on such business or matters in accordance
with their best judgment.
The Company has filed an Annual Report on Form 10-K with the
Securities and Exchange Commission for its 1997 fiscal year which ended on
May 29, 1997. The Company will provide a copy of such Form 10-K
(excluding exhibits) without charge to each person who is a record or
beneficial owner of Common Shares or Class B Shares on the Record Date and
who submits a written request therefor. Exhibits to the Form 10-K will be
furnished upon payment of the fee described in the list of exhibits
accompanying the copy of Form 10-K. Requests for copies of the Form 10-K
and any exhibits thereto should be addressed to Thomas F. Kissinger,
General Counsel and Secretary, The Marcus Corporation, 250 East Wisconsin
Avenue, Suite 1700, Milwaukee, Wisconsin 53202-4220.
The cost of soliciting proxies will be paid by the Company. The
Company expects to solicit proxies primarily by mail. Proxies may also be
solicited personally and by telephone by certain officers and regular
employees of the Company. The Company will reimburse brokers and other
holders of record for their expenses in communicating with the persons for
whom they hold Common Shares or Class B Shares. The Company has retained
D.F. King & Co., Inc. to aid in the solicitation at an estimated cost of
approximately $4,000, plus $3.00 per telephone inquiry of shareholders and
certain other out-of-pocket expenses.
A shareholder wishing to include a proposal in the Company's
proxy statement for its 1998 Annual Meeting of Shareholders must forward
the proposal to the Company by May 1, 1998.
On Behalf of the Board of Directors
Thomas F. Kissinger
Milwaukee, Wisconsin General Counsel and Secretary
August 22, 1997
<PAGE>
Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), dated
as of June 30, 1997, by and among THE MARCUS CORPORATION, a Wisconsin
corporation ("Buyer"); GUEST HOUSE INN, INC., a Wisconsin corporation
("Company"); and the shareholders of the Company as set forth on the
signature page of this Agreement (individually a "Shareholder" and
together "Shareholders").
W I T N E S S E T H :
A. WHEREAS, Company is engaged in the business of owning,
operating and leasing certain real estate in the Appleton, Wisconsin area,
certain of which properties are leased by Company to Buyer (the
"Business").
B. WHEREAS, in addition to its operating assets, Company owns
299,547 existing shares of Buyer's Class B Common Stock, $1 par value per
share ("Existing Class B Common Stock").
C. WHEREAS, Buyer desires to purchase and assume from Company,
Company desires to transfer to Buyer, and Shareholders desire to cause
Company to transfer to Buyer, all of the assets and stated liabilities of
Company, including particularly, but without limitation, all of the
Existing Class B Common Stock.
D. WHEREAS, the parties hereto intend that the transactions
contemplated by this Agreement shall qualify as a "reorganization" within
the meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986,
as amended ("Code"), it being contemplated by the parties that, as an
integral part of these transactions, after the Closing Date (as
hereinafter defined) Company will distribute the shares of the Buyer's
Common Stock, $1 par value per share ("Common Stock"), and the New Class B
Common Stock (as hereinafter defined), received pursuant to Section 3.2
hereof to Shareholders in complete liquidation and dissolution of Company.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and
conditions hereinafter set forth, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. PURCHASE AND SALE OF ASSETS
1.1. Assets to be Transferred. Subject to the terms and
conditions of this Agreement, on the Closing Date, Company shall, and
Shareholders shall cause Company to, sell, transfer, convey, assign, and
deliver to Buyer, and Buyer shall purchase and accept all the following
assets or rights of Company (collectively, the "Purchased Assets"):
1.1.(a) Class B Common Stock. All of the Existing Class B
Common Stock.
1.1.(b) Owned Real Property and Buildings. All of the owned
real properties of Company, including the buildings and other
improvements situated thereon (collectively, the "Owned Real
Property and Buildings").
1.1.(c) Furniture and Fixtures. All furniture, fixtures,
equipment, apparatus, tools, supplies, spare parts and all other
personal property owned, utilized or held for use by Company on the
Closing Date wherever located (collectively, the "Furniture and
Fixtures").
1.1.(d) Inventory. All inventories of Company on the
Closing Date.
1.1.(e) Contracts. All Company contracts, including all
leases and subleases of Owned Real Property and Buildings for which
Company is lessor or sublessor ("Leases"), contractual rights,
commitments, agreements, purchase orders and sales and service
orders.
1.1.(f) Computer Software and Hardware. All computer
databases, source codes, programs and other computer software and
hardware owned or utilized by Company.
1.1.(g) Literature. All sales literature, promotional
literature, catalogs and similar materials of Company relating to
the Business.
1.1.(h) Records and Files. All records, files, invoices,
blueprints, specifications, designs, drawings, accounting records,
customer lists, business records, operating data, research and
library materials, documents and files and other data of Company
relating to the Business.
1.1.(i) Notes and Accounts Receivable. All notes, drafts
and accounts receivable of Company.
1.1.(j) Licenses; Permits and Registrations. All licenses,
permits, registrations and approvals of Company relating to the
Business.
1.1.(k) Cash and Bank Accounts. All cash, bank
accounts, money market funds and other cash equivalents or
short-term securities of Company.
1.1.(l) Other Assets and Goodwill. All prepaid
expenses and items and all of Company's causes of action,
claims, demands and rights against third parties relating to
the Business, and other intangible rights and assets,
including all goodwill associated with the Business and the
Purchased Assets.
1.2. Excluded Assets. The provisions of Section 1.1
notwithstanding, on the Closing Date, Company will not sell, transfer,
assign, convey or deliver to Buyer, and Buyer will not purchase or accept,
the following, and only the following, assets of Company (collectively,
"Excluded Assets"):
1.2.(a) Consideration. The consideration delivered to
Company by Buyer pursuant to this Agreement.
1.2.(b) Corporate Franchise. Company's franchise to be a
corporation, its articles of incorporation, corporate seal, stock
books, minute books and other corporate records having exclusively
to do with the corporate organization and capitalization of
Company.
1.2.(c) Tax Records. Company's income and franchise tax
returns and tax records.
2. ASSUMPTION OF LIABILITIES
2.1. Assumed Liabilities. Subject to the terms and conditions of
this Agreement, on the Closing Date, Buyer shall assume and agree to
perform and discharge all stated liabilities of Company as set forth on
the Closing Balance Sheet (as hereinafter defined), including all stated
accounts payable, all taxes payable and all accrued liabilities and all
obligations under Company contracts and Leases (collectively, "Assumed
Liabilities").
3. PURCHASE PRICE - PAYMENT
3.1. Purchase Price. The purchase price ("Purchase Price") for
the Purchased Assets shall be (i) the assumption of the Assumed
Liabilities; (ii) subject to adjustment under Section 3.3, the issuance of
425,959 shares of Common Stock, based on the Net Asset Value (as
hereinafter defined) as of June 5, 1997, divided by the $24.50 closing
sale price per share of Common Stock on the New York Stock Exchange
("NYSE") on May 29, 1997 ("Preliminary Net Asset Value Purchase Price"),
in exchange for the Purchased Assets, other than Existing Class B Common
Stock; and (iii) the issuance of 299,547 new shares of Buyer's Class B
Common Stock, $1 par value per share ("New Class B Common Stock"), in
exchange for and cancellation of Existing Class B Common Stock. "Net
Asset Value," as used herein, shall mean (a) the fair market value of the
Owned Real Property and Buildings, the Furniture and Fixtures and Leases,
as determined by Buyer's qualified independent appraiser, Property
Counselors, Inc. (the "Appraiser"); plus (b) the book value of all other
Purchased Assets as set forth on the balance sheet of the Company; less
(c) the book value of all stated liabilities of Company as set forth on
the balance sheet of the Company.
3.2. Payment of Purchase Price. Subject to adjustment under
Section 3.3, the Purchase Price shall be paid by or on behalf of Buyer as
follows:
3.2.(a) Assumption of Liabilities. At the Closing, Buyer
shall deliver to Company the Certificate of Assumed Liabilities in
the form of Exhibit 2 hereto.
3.2.(b) Common Stock to Company. At the Closing, Buyer
shall deliver to Company certificates representing the shares of
Common Stock issuable under Section 3.1.
3.2.(c) New Class B Common Stock to Company. At the
Closing, Buyer shall deliver to Company certificates representing the
shares of New Class B Common Stock issuable under Section 3.1.
3.3. Adjustment of Net Asset Value Purchase Price. Within 30
days following the Closing, Company shall prepare, or cause to be
prepared, and deliver to Buyer a balance sheet of Company as of the
Closing Date (the "Closing Balance Sheet"). The final Net Asset Value
Purchase Price ("Final Net Asset Value Purchase Price") shall be the
number of whole shares (with any fractional shares otherwise issuable
rounded to the next closest whole number) of Common Stock, based on the
Net Asset Value as of the Closing Date, divided by the average closing
sale price of Common Stock on the NYSE over the 30 trading days ending
five days before the Closing Date ("Closing Sale Price"). In the event
the Final Net Asset Value Purchase Price is greater than the Preliminary
Net Asset Value Purchase Price, Buyer shall issue to Company within five
days after the delivery of the Closing Balance Sheet the number of shares
of Common Stock that is equal to the difference between the Final Net
Asset Value Purchase Price and the Preliminary Net Asset Value Purchase
Price, with the value and number of shares of Common Stock to be
determined based upon the Closing Sale Price. In the event the
Preliminary Net Asset Value Purchase Price is greater than the Final Net
Asset Value Purchase Price, Company shall return to Buyer within five days
after the delivery of the Closing Balance Sheet the number of shares of
Common Stock that is equal to the difference between the Preliminary Net
Asset Value Purchase Price and the Final Net Asset Value Purchase Price,
with the value and number of shares of Common Stock to be determined based
upon the Closing Sale Price.
3.4. Allocation of Purchase Price. The aggregate Purchase Price
(including the assumption by Buyer of the Assumed Liabilities) shall be
allocated among the Purchased Assets for tax purposes as mutually agreed
between Company and Buyer. Company, Shareholders and Buyer will follow
and use such allocation in all income, sales registration and other tax
returns, filings or other related reports made by them to any governmental
agencies. To the extent that disclosures of this allocation are required
to be made by the parties to the Internal Revenue Service ("IRS") under
the provisions of Section 1060 of the Code or any regulations thereunder,
the parties will disclose such reports to the other parties prior to
filing with the IRS.
4. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF COMPANY AND
SHAREHOLDERS
Company and Shareholders, jointly and severally, make the following
representations and warranties to Buyer, each of which is true and correct
on the date hereof, shall remain true and correct to and including the
Closing Date, shall be unaffected by any investigation heretofore or
hereafter made by Buyer, or any knowledge of Buyer, and shall survive the
Closing of the transactions provided for herein:
4.1. Corporate. Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Wisconsin.
Company has all requisite corporate power and authority to own, operate
and lease its properties, to carry on the Business as and where such is
now being conducted, and to enter into this Agreement and the other
documents and instruments to be executed and delivered by Company pursuant
hereto (such other documents and instruments being hereinafter called the
"Ancillary Instruments") and to carry out the transactions contemplated
hereby and thereby.
4.2. Authority.
4.2.(a) Corporate. The execution and delivery of this
Agreement and the Ancillary Instruments and the consummation of the
transactions contemplated hereby (including the liquidation and
dissolution of Company as contemplated herein) and thereby have
been duly authorized by the Board of Directors and shareholders of
Company. No other or further corporate act or proceeding on the
part of Company is necessary to authorize this Agreement or the
Ancillary Instruments or the consummation of the transactions
contemplated hereby (including the liquidation and dissolution of
Company as contemplated herein) and thereby. This Agreement
constitutes, and when executed and delivered, the Ancillary
Instruments will constitute, valid binding agreements of Company,
enforceable against it in accordance with their respective terms,
except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally,
and by general equitable principles.
4.2.(b) Shareholders. Each Shareholder has full power,
legal right and capacity and authority to enter into, execute and
deliver this Agreement and the Ancillary Instruments (which term
when used with respect to Shareholders shall include all other
documents and instruments to be executed and delivered by
Shareholders pursuant hereto) to be executed and delivered by each
Shareholder pursuant hereto, and to carry out and perform the
transactions contemplated hereby and thereby. This Agreement
constitutes, and when executed and delivered, the other Ancillary
Instruments to be executed and delivered by Shareholders pursuant
hereto will constitute, valid binding agreements of Shareholders,
enforceable against each of them in accordance with their
respective terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors'
rights generally, and by general equitable principles.
4.3. No Violation. Neither the execution and delivery of this
Agreement or the Ancillary Instruments, nor the consummation by Company or
Shareholders of the transactions contemplated hereby and thereby (a) will,
to the knowledge of Company and Shareholders, violate any statute or law
or any rule, regulation, order, writ, injunction or decree of any court or
governmental authority; (b) will, to the knowledge of Company and
Shareholders, require any authorization, consent, approval, exemption or
other action by or notice to any court, administrative or governmental
agency, instrumentality, commission, authority, board or body; or (c)
subject to obtaining necessary consents, will violate or conflict with, or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or will result in the termination
of, or accelerate the performance required by, or result in the creation
of any Lien (as hereinafter defined) upon any of the Purchased Assets
under, any term or provision of (i) the Articles of Incorporation or
By-laws of Company or (ii) of any contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which
Company or Shareholders is a party or by which Company or Shareholders or
any of their assets or properties may be bound or affected, other than
contracts, commitments, understandings, arrangements, agreements and the
like which, if violated or breached, would not have a material adverse
effect on Company.
4.4. Absence of Undisclosed Liabilities. Except as and to the
extent specifically disclosed on the Final Closing Balance Sheet, to the
knowledge of Company and Shareholders, Company does not have any
liabilities, commitments or obligations (known or unknown, secured or
unsecured, and whether accrued, absolute, contingent, direct, indirect or
otherwise), other than commercial liabilities and obligations incurred in
the ordinary course of business and consistent in amount and nature with
past practice and none of which has or will have a material adverse effect
on the business, financial condition or results of operations of Company.
4.5. Compliance With Laws.
4.5.(a) Compliance. Company is in compliance with all
applicable federal, state and local laws, ordinances, orders, rules
and regulations (collectively, "Laws"), other than Laws which, if
violated by Company, would not have a material adverse effect on
Company.
4.5.(b) Licenses, Permits and Registrations. Company has all
licenses, permits, registrations, approvals, authorizations and
consents of all governmental and regulatory authorities and all
certification organizations required for the conduct of the
Business and the operation of Company's facilities ("Permits"),
other than those Permits which, if not obtained by Company, would
not have a material adverse effect on Company. All such Permits
are in full force and effect and are assignable to Buyer without
restriction in accordance with the terms hereof, subject to
obtaining any necessary consents. Company is and has been in
compliance with all such Permits.
4.5.(c) Environmental Matters. To the knowledge of Company
and Shareholders, Company is in full compliance with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in
the Environmental Laws or contained in any regulations, code, plan,
order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder
("Regulations").
4.6. Title to and Condition of Properties.
4.6.(a) Marketable Title. Company has good and marketable
title to all the Purchased Assets, free and clear of all mortgages,
liens (statutory or otherwise), security interests, claims, choses
in action, pledges, licenses, equities, conditional sales
contracts, assessments, levies, easements, covenants, reservations,
restrictions or encumbrances of any nature whatsoever
(collectively, "Liens"), except for those Liens which do not
materially adversely effect the Business or Purchased Assets, and,
in the case of Owned Real Property and Buildings, Liens for taxes
not yet due or which are being contested in good faith by
appropriate proceedings, municipal and zoning ordinances and
easements for public utilities, none of which interfere with the
use of the property as currently utilized ("Permitted Real Property
Liens"). Company has complete and unrestricted power and right to
sell, assign, convey and deliver the Purchased Assets to Buyer as
contemplated hereby. At Closing, Buyer will receive good and
marketable title to all the Purchased Assets, free and clear of all
Liens, other than Permitted Real Property Liens or those which do
not materially adversely effect the Business or the Purchased
Assets.
4.6.(b) Condition. All tangible Purchased Assets and all
tangible property and assets of Company (real and personal) are in
good operating condition and repair, free from any defects (except
such minor defects as do not interfere with the continued use
thereof in the conduct of the normal operations of Company), have
been maintained consistent with the standards generally followed in
Company's industry and are sufficient to carry on the Business as
conducted during the preceding 12 months. All buildings,
facilities and other structures utilized by Company are in good
condition and repair (except such minor defects as do not interfere
with the continued use thereof in the conduct of the normal
operations of Company) and have no structural defects.
4.7. Shareholders. There are no holders of issued and outstanding
capital stock of Company on the date hereof other than the Shareholders
listed on Schedule 4.7 hereto, with such list including the number of
shares of Company Common Stock each holder owns and each holder's
percentage of voting control of Company Common Stock.
4.8. Certain Securities Law Matters. Shareholders have sufficient
knowledge and experience in financial and business matters that they are
capable of evaluating the economic risks of an investment in the Common
Stock and New Class B Common Stock to be received. The financial
condition of each Shareholder is currently adequate to bear the economic
risks of an investment in the Common Stock and New Class B Common Stock.
Each Shareholder acknowledges that he, she or it is an "accredited
investor" for purposes of Regulation D promulgated under the Securities
Act of 1933. Each Shareholder acknowledges that the Common Stock and New
Class B Common Stock to be received by them upon liquidation of the
Company as contemplated by this Agreement will be acquired for investment
purposes only for himself and not for any other person or with a view
toward resale, disposition or distribution, that such securities have not
been registered under the Securities Act of 1933 or any applicable state
securities (or "blue sky") laws or regulations and, therefore, cannot be
resold unless so registered or exempted therefrom. Each Shareholder
understands that certificates representing such securities will bear an
appropriate legend reflecting the foregoing restrictions on transfer.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Company
and Shareholders, each of which is true and correct on the date hereof,
shall remain true and correct to and including the Closing Date, shall be
unaffected by any investigation heretofore or hereafter made by Company or
Shareholders or any notice to Company or Shareholders, and shall survive
the Closing of the transactions provided for herein:
5.1. Corporate. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Wisconsin.
Buyer has all requisite corporate power to enter into this Agreement and
the Ancillary Instruments to be executed and delivered hereunder by Buyer
and to carry out the transactions contemplated hereby and thereby.
5.2. Authority. The execution and delivery of this Agreement and
the Ancillary Instruments and the consummation of the transactions
contemplated hereby and thereby shall have been duly authorized by the
Board of Directors of Buyer. No other further corporate act or proceeding
on the part of Buyer will be necessary to authorize this Agreement or the
Ancillary Instruments or the consummation of the transactions contemplated
hereby and thereby (other than the approval of the shareholders of Buyer,
which will be required to consummate the transactions contemplated hereby
and thereby). This Agreement constitutes, and when executed and
delivered, the Ancillary Instruments will constitute, valid and binding
agreements of Buyer, enforceable against it in accordance with their
respective terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally, and by
general equitable principles.
5.3. Buyer Stock. At the Closing, the shares of Common Stock and
Class B Common Stock to be issued to Company on the Closing Date pursuant
to Section 3.2 hereof will be duly authorized for issuance and, upon such
issuance by Buyer, will be validly issued, fully paid and nonassessable
(except for any statutory liabilities for unpaid wage claims and other
liabilities of employees under Wisconsin Statutes Section 180.0622(2)(b)).
6. OTHER MATTERS
6.1. NYSE Listing. Buyer shall use its best efforts to cause the
shares of Common Stock issued hereunder to be approved for listing on the
NYSE as soon as practicable after the Closing Date, subject to official
notice of issuance.
6.2. Access to Information and Records. During the period prior
to the Closing Date, Company and Shareholders shall give Buyer, its
counsel, accountants and other representatives access during normal
business hours to all of the properties, books, records, contracts and
documents of Company, and Company and Shareholders shall furnish or cause
to be furnished to Buyer and its representatives all information with
respect to the business and affairs of Company as Buyer may request.
During the period prior to the Closing Date, Company and Shareholders
shall give Buyer, its counsel, accountants and other representatives
access to Company employees, agents and representatives for the purposes
of such meetings and communications as Buyer desires.
6.3. Liquidation and Dissolution. From and after the Closing
Date, Company will not engage in any business or active operations (other
than satisfying its existing debts and obligations which are not Assumed
Liabilities and winding up its affairs), will liquidate and dissolve as a
corporation, and will distribute the Common Stock and New Class B Common
Stock received pursuant to Section 3.2 hereof to Shareholders in complete
cancellation and redemption of their shares of Company Common Stock.
6.4. Securities Law Matters. Buyer shall file a Form D with the
Securities and Exchange Commission ("SEC") pursuant to the Securities Act
of 1933 and the regulations promulgated thereunder. Shareholders shall
amend any Schedule 13Gs or Form 4s that have been filed with the SEC by
such Shareholders to reflect the consummation of the transactions
contemplated hereby.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing
Date shall be subject to the satisfaction prior to or at the Closing of
each of the following conditions:
7.1. Representations and Warranties True on the Closing Date.
Each of the representations and warranties made by Company and
Shareholders in this Agreement or in any instrument, list, certificate or
writing delivered by Company or Shareholders pursuant to this Agreement,
shall be true and correct when made and shall be true and correct at and
as of the Closing Date as though such representations and warranties were
made or given on and as of the Closing Date, except for any changes
permitted by the terms of this Agreement or consented to in writing by
Buyer.
7.2. Compliance With Agreement. Company and Shareholders shall
have performed and complied with all of their agreements and obligations
under this Agreement which are to be performed or complied with by them
prior to or on the Closing Date, including the delivery of the closing
documents specified in Section 10.1.
7.3. Absence of Suit. No action, suit or proceeding before any
court or any governmental authority shall have been commenced or
threatened, and no investigation by any governmental or regulating
authority shall have been commenced, against Buyer, Shareholders, Company,
or any of their respective affiliates, officers or directors (in such
capacity) seeking to restrain, prevent or change the transactions
contemplated hereby, or questioning the validity or legality of any such
transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions.
7.4. Securities Law Matters. All appropriate registrations,
consents or filings, if any, required with respect to the issuance
hereunder of Common Stock and New Class B Common Stock shall have been
obtained or made prior to the Closing Date.
7.5. Shareholder Approval. Buyer shall have received the
approval of Buyer's shareholders at Buyer's annual meeting of shareholders
to be held on September 29, 1997 with respect to this Agreement, the
transactions contemplated hereby and an amendment to Buyer's Articles of
Incorporation to permit the issuance of the New Class B Common Stock.
8. CONDITIONS PRECEDENT TO COMPANY'S AND SHAREHOLDERS' OBLIGATIONS
Each and every obligation of Company and Shareholders to be
performed on the Closing Date shall be subject to the satisfaction prior
to or at the Closing of the following conditions:
8.1. Representations and Warranties True on the Closing Date.
Each of the representations and warranties made by Buyer in this Agreement
shall be true and correct when made and shall be true and correct at and
as of the Closing Date as though such representations and warranties were
made or given on and as of the Closing Date.
8.2. Compliance With Agreement. Buyer shall have performed and
complied with all of its agreements and obligations under this Agreement
which are to be performed or complied with thereby prior to or on the
Closing Date, including the delivery of the closing documents specified in
Section 10.2.
8.3. Absence of Suit. No action, suit or proceeding before any
court or any governmental authority shall have been commenced or
threatened, and no investigation by any governmental or regulating
authority shall have been commenced, against Buyer, Shareholders, Company,
or any of their respective affiliates, officers or directors (in such
capacity) seeking to restrain, prevent or change the transactions
contemplated hereby, or questioning the validity or legality of any such
transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions.
9. INDEMNIFICATION
9.1. By Company and Shareholders. Subject to the terms and
conditions of this Article 9, Company and each Shareholder, jointly and
severally, hereby agree to indemnify, defend and hold harmless Buyer and
its directors, officers, employees and controlled and controlling persons
(collectively, "Buyer's affiliates"), from and against all Claims asserted
against, resulting to, imposed upon, or incurred by Buyer, Buyer's
affiliates or the Business, Purchased Assets or Assumed Liabilities
transferred to Buyer pursuant to this Agreement, directly or indirectly,
by reason of, arising out of or resulting from (a) the inaccuracy or
breach of any representation or warranty of Company or any Shareholder
contained in or made pursuant to this Agreement; (b) the breach of any
covenant of Company or any Shareholder contained in this Agreement; or (c)
any Claim of or against Buyer, the Purchased Assets or the Business not
specifically assumed as an Assumed Liability by Buyer pursuant hereto. As
used in this Article 9, the term "Claim" shall include (i) all debts,
liabilities and obligations; (ii) all losses, damages (including, without
limitation, consequential damages), costs and expenses (including, without
limitation, interest (including prejudgment interest in any litigated
matter), penalties, court costs and attorneys fees and expenses); and
(iii) all demands, claims, actions, costs of investigation, causes of
action, proceedings, arbitrations, judgments, settlements and assessments,
whether or not ultimately determined to be valid.
9.2. By Buyer. Subject to the terms and conditions of this
Article 9, Buyer, hereby agrees to indemnify, defend and hold harmless
Company, its directors, officers, employees and controlling persons, and
each Shareholder from and against all Claims asserted against, resulting
to, imposed upon or incurred by any such person, directly or indirectly,
by reason of or resulting from (a) the inaccuracy or breach of any
representation or warranty of Buyer contained in or made pursuant to this
Agreement; (b) the breach of any covenant of Buyer contained in this
Agreement; or (c) all Claims of or against Company specifically assumed by
Buyer pursuant hereto.
9.3. Indemnification of Third Party Claims. The obligations and
liabilities of any party to indemnify any other party under this Article 9
with respect to Claims relating to or arising from third parties (a "Third
Party Claim") shall be subject to the following terms and conditions:
9.3.(a) Notice and Defense. The party or parties to be
indemnified (whether one or more, the "Indemnified Party") will
give the other party or parties (whether one or more, the
"Indemnifying Party") written notice of any such Third Party Claim,
and the Indemnifying Party may undertake the defense thereof by
representatives chosen by it upon written notice to the Indemnified
Party. Failure of the Indemnified Party to give such notice shall
not affect the Indemnifying Party's duty or obligations under this
Article 9, except to the extent the Indemnifying Party is
prejudiced thereby. If the Indemnifying Party undertakes the
defense of such Third Party Claim, then the Indemnifying Party
shall be deemed to accept that it has an indemnification obligation
to the Indemnified Party under this Article 9 with respect to such
Claim. So long as the Indemnifying Party is defending any such
Claim actively and in good faith, the Indemnified Party shall not
settle such Claim. The Indemnified Party shall make available to
the Indemnifying Party or its representatives all records and other
materials required by them and in the possession or under the
control of the Indemnified Party, for the use of the Indemnifying
Party and its representatives in defending any such Claim, and
shall in other respects give reasonable cooperation in such
defense.
9.3.(b) Failure to Defend. If the Indemnifying Party, within
20 days after notice of any such Third Party Claim (or sooner if
the nature of the Claim so requires), fails to defend such Claim
actively and in good faith, then the Indemnified Party will (upon
further notice) have the right to undertake the defense, compromise
or settlement of such Claim, or consent to the entry of a judgment
with respect thereto, on behalf of and for the account and risk of
the Indemnifying Party and the Indemnifying Party shall thereafter
have no right to challenge the Indemnified Party's defense,
compromise or settlement thereof.
9.3.(c) Indemnified Party's Rights. Anything in this Article
9 to the contrary notwithstanding, (i) if there is a reasonable
probability that a Third Party Claim may adversely affect the
Indemnified Party other than as a result of money damages or other
money payments, the Indemnified Party shall have the right to
defend, compromise or settle such Claim, and (ii) the Indemnifying
Party shall not, without the written consent of the Indemnified
Party, settle or compromise any Claim or consent to the entry of
any judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the
Indemnified Party of an unconditional release from all liability in
respect of such Claim.
9.4. Payment. The Indemnifying Party shall promptly pay the
Indemnified Party any Claim amount due under this Article 9, which payment
may be accomplished in whole or in part, at the option of the Indemnified
Party, by the Indemnified Party setting off any Claim amount owed to the
Indemnifying Party by the Indemnified Party; provided, however, that
before any such right to set-off is exercised, the Indemnified Party shall
provide the Indemnifying Party with at least 15 days advance notice of
such intention to exercise such set-off rights. Such notice shall include
a description of the Claim, including the amount thereof, and the method
by which the Indemnified Party intends to exercise such set-off rights.
If, during such 15 day period, the Indemnifying Party objects to the
exercise of such set-off rights, the Indemnifying Party shall notify the
Indemnified Party of such objection in writing, and shall describe the
basis for such objection and the amount of the Claim as to which the
Indemnifying Party does not believe should be subject to such set-off
rights. Upon receipt of such notice of objection, both the Indemnified
Party and the Indemnifying Party shall use all reasonable efforts to
cooperate and arrive at a mutually acceptable resolution of such dispute
within the next 30 days. If a mutually acceptable resolution cannot be
reached between the Indemnified Party and the Indemnifying Party within
such 30-day period, either party may submit the dispute for resolution by
a panel of three arbitrators selected from the panels of arbitrators of
the American Arbitration Association in Milwaukee, Wisconsin; provided,
that (i) one arbitrator shall be selected by the Indemnified Party, the
second arbitrator shall be selected by the Indemnifying Party, and the
third arbitrator shall be selected by the two previously selected
arbitrators and (ii) in all respects, such panel shall be governed by the
American Arbitration Association's then existing Commercial Arbitration
Rules. During the pendency of any dispute under this Section 9.4, the
Claim amounts owed to the Indemnifying Party by the Indemnified Party
which are the subject of the disputed set-off shall be withheld from
payment until the dispute is finally resolved. If it is finally
determined that all or a portion of such withheld amount was not owed to
the Indemnified Party, the Indemnified Party shall promptly pay the
Indemnifying Party such amount not owed. The right of set-off under this
Section 9.4 shall not be exclusive of any other rights or remedies at law
or equity which the Indemnified Party may have against the Indemnifying
Party.
9.5. Limitations on Indemnification. Except for any willful or
knowing breach or misrepresentation, as to which Claims may be brought
without limitation as to time or amount:
9.5.(a) Time Limitation. No Claim or action shall be
brought under this Article 9 for breach of a representation or
warranty after the lapse of two (2) years following the Closing.
Regardless of the foregoing, however, or any other provision of
this Agreement:
(i) There shall be no time limitation on Claims on
actions brought for (A) Claims of or against Buyer or the
Purchased Assets not specifically assumed by Buyer pursuant
hereto or (B) breach of any representation or warranty made by
Shareholders or Company in or pursuant to Section 4.5(c), and
Shareholders hereby waive all applicable statutory limitation
periods with respect thereto.
(ii) Any Claim made by a party hereunder prior to
the termination of the survival period for such Claim shall be
preserved despite the subsequent termination of such survival
period.
(iii) If any act, omission, disclosure or failure to
disclose shall form the basis for a Claim for breach of more
than one representation or warranty, and such Claims have
different periods of survival hereunder, the termination of
the survival period of one Claim shall not affect a party's
right to make a Claim based on the breach of representation or
warranty still surviving.
10. CLOSING
The closing of this transaction ("Closing") shall take place at the
offices of Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, at 9:00 a.m. on October 1, 1997, or at such other time
and place as the parties hereto shall agree upon. Such date is referred
to in this Agreement as the "Closing Date."
10.1. Documents to be Delivered by or on Behalf of Company and
Shareholders. At the Closing, Company and Shareholders shall deliver, or
cause to be delivered, to Buyer the following documents, in each case duly
executed or otherwise in proper form:
10.1.(a) Stock Certificates. Stock certificates representing
the Existing Class B Common Stock.
10.1.(b) Deeds, Bill of Sale. Deeds to Owned Real Property
and Buildings and Bill of Sale to other Purchased Assets in the
form of Exhibit 1 hereto.
10.1.(c) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of Company and Shareholders
authorizing and approving this Agreement and the consummation of
the transactions contemplated by this Agreement (including the
subsequent liquidation and dissolution of the Company).
10.1.(d) Other Documents. All other documents, instruments
or writings required to be delivered to Buyer at or prior to the
Closing pursuant to this Agreement and such other certificates of
authority and documents as Buyer may reasonably request.
10.2. Documents to be Delivered by Buyer. At the Closing, Buyer
shall deliver, or cause to be delivered, to Company and Shareholders the
following documents, in each case duly executed or otherwise in proper
form:
10.2.(a) Stock Certificates. Stock certificates (in such
denominations as mutually agreed upon) representing the number of
shares of Common Stock and New Class B Common Stock required to be
issued and delivered by Section 3.2 hereof.
10.2.(b) Assumption of Liabilities. Certificate of Assumed
Liabilities in the form of Exhibit 2 hereto.
10.2.(c) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of Buyer authorizing and
approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
10.2.(d) Other Documents. All other documents, instruments
or writings required to be delivered to Company at or prior to the
Closing pursuant to this Agreement and such other certificates of
authority and documents as Company may reasonably request.
11. TERMINATION
11.1. Right of Termination Without Breach. This Agreement may be
terminated without further liability of any party at any time prior to the
Closing by either Buyer or Company.
12. MISCELLANEOUS
12.1. Disclosure Schedule. Information set forth in the
Disclosure Schedule specifically refers to the article and section of this
Agreement to which such information is responsive and such information
shall not be deemed to have been disclosed with respect to any other
article or section of this Agreement or for any other purpose. The
Disclosure Schedule shall not vary, change or alter the language of the
representations and warranties contained in this Agreement and, to the
extent the language in the Disclosure Schedule does not conform in every
substantive respect to the language of such representations and
warranties, such language shall be disregarded and be of no force or
effect.
12.2. Further Assurance. From time to time, at Buyer's request
and without further consideration, Company and Shareholders will execute
and deliver to Buyer such documents and take such other action as Buyer
may reasonably request in order to consummate more effectively the
transactions contemplated hereby and to vest in Buyer good, valid and
marketable title to the Purchased Assets being transferred hereunder.
12.3. Public Announcements. Public announcements concerning the
transactions provided for in this Agreement by any party hereto shall be
subject to the approval of the other parties in all essential respects,
except that Company's and Shareholders' approval shall not be required as
to any statements and other information which Buyer may make pursuant to
offers or sales of securities to employees or others, disclosures
necessary in the ordinary course of business, disclosures by Buyer deemed
necessary or advisable as a result of Securities and Exchange Commission
or NYSE requirements, or as otherwise required by law.
12.4. Assignment; Parties in Interest. Except as expressly
provided herein, the rights and obligations of a party hereunder may not
be assigned, transferred or encumbered without the prior written consent
of the other parties; provided, however, that Buyer may assign and
transfer its rights and obligations hereunder to any "affiliate" thereof
(as such term is defined under the Securities Exchange Act of 1934, as
amended), without the prior written consent of any other party. This
Agreement shall be binding upon, inure to the benefit of, and be
enforceable by the respective successors and permitted assigns of the
parties hereto. Nothing contained herein shall be deemed to confer upon
any other person any right or remedy under or by reason of this Agreement.
12.5. Law Governing Agreement. This Agreement may not be modified
or terminated orally, and shall be construed and interpreted according to
the internal laws of the State of Wisconsin, excluding any choice of law
rules that may direct the application of the laws of another jurisdiction.
12.6. Amendment and Modification. Buyer, Company and Shareholders
may amend, modify and supplement this Agreement in such manner as may be
agreed upon by them in writing; provided, however, that upon liquidation
of Company, its written agreement to any such amendment, modification or
supplement shall no longer be required.
12.7. Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated, Company and Shareholders, jointly and
severally, shall pay, and shall indemnify, defend and hold harmless Buyer
from and against any sales, use, excise, transfer or other similar tax
imposed with respect to the transactions provided for in this Agreement,
and any interest or penalties related thereto. Buyer shall pay all fees
and expenses of the Appraiser with respect to the appraisal of the Owned
Real Property and Buildings, the Furniture and Fixtures and Leases.
Except as otherwise provided herein, each of the parties shall bear its
own expenses and the expenses of its counsel and other agents in
connection with the transactions contemplated hereby. The parties agree
that the prevailing party in any action or arbitration brought with
respect to or to enforce any right or remedy under this Agreement shall be
entitled to recover from the other party or parties all reasonable costs
and expenses of any nature whatsoever incurred by the prevailing party in
connection with such action or arbitration, including without limitation
attorneys' fees and prejudgment interest.
12.8. Entire Agreement. This Agreement, along with the Ancillary
Instruments, embody the entire agreement between the parties hereto with
respect to the transactions contemplated herein, and there have been and
are no agreements, representations or warranties between the parties other
than those set forth or provided for herein.
12.9. Counterparts. This Agreement may be executed in one or more
written counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument and which
shall be effective as of the date and year written above.
12.10. Further Documents. Buyer, Company and Shareholders each
agree to execute all other documents and to take such other action or
corporate proceedings as may be necessary or desirable to carry out the
terms hereof.
12.11. Tax Covenant. Buyer will not take any action, prior to or
following the Closing, that will cause the transactions contemplated by
this Agreement to fail to qualify as a "reorganization" within the meaning
of Section 368(a)(1)(C) of the Code. This covenant shall survive the
Closing.
12.12. IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date and year first above written.
THE MARCUS CORPORATION GUEST HOUSE INN, INC.
By: By:
Stephen H. Marcus, Stephen H. Marcus,
President
President and Chief
Executive Officer
SHAREHOLDERS:
Stephen H. Marcus, personally Ida Lowe, personally
Ben and Celia Marcus 1992
Revocable Trust
Diane Marcus Gershowitz,
personally
By:
Ida Lowe S Corporation Trust Ben Marcus, as Trustee
(Charles and David)
Ida Lowe S Corporation Trust
(Charles and Susan)
By:
Stephen H. Marcus, as
Trustee
By:
Stephen H. Marcus, as
Exemption Trust under the Will Trustee
of Charles Lowe
By:
Ida Lowe, as Trustee
<PAGE>
Exhibit B
PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION
The proposed amendment to Section (B)(5) of Article 2 of the
Company's Articles of Incorporation that would be effected if the Stock
Issuance Amendment is approved by shareholders at the Meeting is
underlined.
(5) Issuance of the Class B Common Stock.
(a) Initial Issuance. One share of Class B Common
Stock shall be initially issued for each outstanding share
of Class B Common Stock, par value one dollar ($1) per
share, of The Marcus Corporation, a Delaware corporation,
pursuant to the Agreement and Plan of Merger, dated August
13, 1992, by and between the Corporation and The Marcus
Corporation.
(b) Subsequent Issuance. Following the initial
issuance, the Board of Directors may only issue shares of
the Class B Common Stock in the form of a distribution or
distributions pursuant to a stock dividend on or split-up of
the shares of the Class B Common Stock and only to the then
holders of the outstanding shares of the Class B Common
Stock in conjunction with and in the same ratio as a stock
dividend on or split-up of the shares of the Common Stock.
Except as provided in this subparagraph (b), the Corporation
shall not issue additional shares of Class B Common Stock
after the initial issuance of Class B Common Stock, as
described in Paragraph (B)(5)(a) of this Article, and all
shares of Class B Common Stock surrendered for conversion
shall be retired, unless otherwise approved by the
affirmative vote of the holders of a majority of the
outstanding shares of the Common Stock and Class B Common
Stock entitled to vote, voting together as a single class,
as provided in Paragraph (B)(1) of this Article.
NOTWITHSTANDING THE FOREGOING, THE BOARD OF DIRECTORS AND
THE CORPORATION SHALL BE PERMITTED TO MAKE A ONE-TIME
ISSUANCE OF 299,547 SHARES OF CLASS B COMMON STOCK TO GUEST
HOUSE INN, INC. ("GHI") IN CONNECTION WITH THE AGREEMENT AND
PLAN OF REORGANIZATION DATED JUNE 30, 1997, BY AND AMONG THE
CORPORATION, GHI AND THE SHAREHOLDERS OF GHI, IN EXCHANGE
FOR AND CANCELLATION OF 299,547 SHARES OF CLASS B COMMON
STOCK OWNED BY GHI AND, NOTWITHSTANDING ANY OTHER PROVISION
OF THESE ARTICLES OF INCORPORATION (INCLUDING PARTICULARLY
SECTION (B)(3) OF THIS ARTICLE 2), THE SHAREHOLDERS OF GHI
ON JUNE 30, 1997 SHALL BE "PERMITTED TRANSFEREES" OF THE
SHARES OF CLASS B COMMON STOCK ISSUED TO GHI.
<PAGE>
Exhibit C
PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION
The proposed amendments to the first sentence of Article 2 of
the Company's Articles of Incorporation that would be effected if the
Authorized Stock Amendment is approved by shareholders at the Meeting are
underlined and the proposed deletions have been indicated by overstriking.
ARTICLE 2
Authorized Shares
The total number of shares of all classes of capital stock
which the Corporation shall be authorized to issue is <#> fifty-one</#>
EIGHTY-FOUR million <#> (51,000,000) </#>(84,000,000) shares, consisting
of (i) <#> thirty </#> FIFTY million <#> (30,000,000) </#> (50,000,000)
shares of a class designated "Common Stock", with a par value of one
dollar ($1) per share; <#> twenty </#> THIRTY-THREE million <#>
(20,000,000) </#> (33,000,000) shares of a class designated "Class B
Common Stock", with a par value of one dollar ($1) per share; and one
million (1,000,000) shares of a class designated "Preferred Stock", with a
par value of one dollar ($1) per share.
<PAGE>
Exhibit D
<TABLE>
GUEST HOUSE INN, INC.
BALANCE SHEETS - UNAUDITED
(In Thousands)
<CAPTION>
June 5, September 26, September 28,
1997 1996 1995
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 309 $ 481 $ 703
Accounts and notes receivable 2,241 1,370 670
Inventories 13 15 23
Prepaid assets 38 55 148
------ _____ ______
Total current assets 2,601 1,921 1,544
PROPERTY AND EQUIPMENT
Land 270 270 270
Buildings and improvements 1,972 1,972 2,377
Furniture, fixtures and equipment 758 758 1,242
______ _____ _____
Total property and equipment 3,000 3,000 3,889
Less accumulated depreciation 2,364 2,306 2,682
______ _____ _____
Net property and equipment 636 694 1,207
OTHER ASSETS 8 8 8
------ ------ ------
Total assets $3,245 $2,623 $2,759
====== ====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 56 $ 6 $ 44
Taxes other than income taxes 46 63 87
Accrued liabilities 3 3 5
------ ------ -------
Total current liabilities 105 72 136
SHAREHOLDERS' EQUITY
Common stock, no par value, authorized 5 5 5
1,000 shares, issued and
outstanding 50.0 shares
Retained earnings 3,135 2,546 2,618
------ ------ -------
Total shareholders' equity 3,140 2,551 2,623
------ ------ -------
Total liabilities and shareholders' equity $3,245 $2,623 $2,759
====== ====== =======
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
GUEST HOUSE INN, INC.
STATEMENTS OF EARNINGS - UNAUDITED
(In Thousands)
<CAPTION>
For the
Thirty-Six Weeks
Ended For the Year Ended
June 5, September 26, September 28, September 29,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
REVENUES
Food and beverage $ 310 $ 451 $ 625 $ 792
Bowling 483 650 832 883
Rental income 319 283 266 251
------- ------ ------ ------
Total revenues 1,112 1,384 1,723 1,926
COSTS AND EXPENSES
Food and beverage 90 141 203 242
Advertising and marketing 33 46 84 62
Administrative 6 8 8 18
Other operating expenses 431 714 875 950
Depreciation 58 121 135 155
Property taxes 31 61 105 98
------- ------ ------ ------
Total costs and expenses 649 1,091 1,410 1,525
------- ------ ------ ------
OPERATING INCOME 463 293 313 401
OTHER INCOME (EXPENSE):
Interest income 55 53 27 23
Dividend income 71 57 83 62
Interest expense -- -- -- (7)
Gain (loss) on disposition of property -- (323) 1 --
and equipment
------ ------ ------ -------
126 (213) 111 78
------ ------ ------ -------
EARNINGS BEFORE INCOME TAXES 589 80 424 479
State income tax -- 2 23 1
------ ------ ------ -------
NET EARNINGS $ 589 $ 78 $ 401 $ 478
====== ====== ====== =======
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
GUEST HOUSE INN, INC.
STATEMENTS OF CASH FLOWS - UNAUDITED
(In Thousands)
<CAPTION>
For the
Thirty-Six
Weeks Ended For the Year Ended
September 26, September 28, September 29,
June 5,
1996 1995 1994
1997
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 589 $ 78 $ 401 $ 478
Adjustments to reconcile net earnings to net cash
provided by operating activities:
(Gain) loss on disposition of property -- 323 (1) --
and equipment and other assets
Depreciation 58 121 135 155
Changes in assets and liabilities:
Accounts and notes receivable 2 26 (18) 18
Inventories 2 8 -- (3)
Prepaid expenses 17 40 7 (11)
Accounts payable 50 (38) (42) 21
Taxes other than income taxes (17) (24) 3 (18)
Other accrued liabilities -- (2) 1 1
------ ------- ------ -------
Total adjustments 112 454 85 163
------ ------- ------ -------
Net cash provided by operating activities 701 532 486 641
INVESTING ACTIVITIES
Capital expenditures -- (25) (16) (66)
Net proceeds from disposals of property and -- 147 -- --
equipment
Change in related party receivables (1,283) (535) (30) 28
Change in due from First American Finance Corp. 410 (191) (221) --
------ ------- ------ -------
Net cash used in investing activities (873) (604) (267) (38)
FINANCING ACTIVITIES
Debt transactions:
Principal payments on long-term debt -- -- -- (209)
Equity transactions:
Distributions to shareholders -- (150) (150) (200)
------ ------ ------- -------
Net cash used in financing activities -- (150) (150) (409)
------ ------ ------- -------
Net increase (decrease) in cash and cash equivalents (172) (222) 69 194
Cash and cash equivalents at beginning of year 481 703 634 440
------- ------ ------ --------
Cash and cash equivalents at end of year $ 309 $ 481 $ 703 $ 634
====== ====== ====== ========
See accompanying notes.
</TABLE>
<PAGE>
GUEST HOUSE INN, INC.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
June 5, 1997
1. Description of Business and Summary of Significant Accounting
Policies
Description of Business
The principal operating assets of GHI include certain real estate,
buildings and furniture and fixtures in the Appleton, Wisconsin area. GHI
leases, under long-term operating leases, real estate to subsidiaries of
the Company. GHI also owns certain vacant properties and owns and
operates a bowling center in the Appleton area.
Fiscal Year
GHI reports on a 52/53-week year ending the last Thursday of
September. All annual periods presented consist of 52 weeks.
Cash Equivalents
GHI considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents. Cash equivalents
are carried at cost, which approximates market.
Inventories
Inventories, consisting principally of food and beverages, are stated
at average cost.
Depreciation
Depreciation of property and equipment is provided using the
straight-line method over the following estimated useful lives:
Years
Building and improvements 7 - 31
Furniture, fixtures and equipment 5 - 10
Advertising and Marketing Costs
GHI expenses all advertising and marketing costs as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
Unaudited Financial Data
These financial statements are unaudited, however, in the opinion of
management, all adjustments (consisting only of adjustments of a normal
and recurring nature) considered necessary for a fair presentation of the
financial position and results of operations have been included.
Operating results for the thirty-six weeks ended June 5, 1997, are not
necessarily indicative of the results that might be expected for the year
ending September 25, 1997.
Other Assets
Other noncurrent assets consist of 299,547 Class B Shares of The
Marcus Corporation, recorded at historical cost. Holders of Class B
Shares are substantially restricted in their ability to transfer their
Class B Shares. Holders of Class B Shares are entitled to ten votes per
share while holders of Common Shares are entitled to one vote per share on
any matters brought before the shareholders of the Company. The
shareholders of GHI also have voting control of the Company.
Income Tax Status
GHI has elected to be taxed as an S Corporation under the applicable
provisions of the Internal Revenue Code and the tax laws of Wisconsin.
The liability for federal and state income taxes under S Corporation
provisions is the responsibility of the shareholders individually.
Accordingly, GHI's financial statements do not reflect any provision or
liability for current or deferred federal or state income taxes except for
minor surcharge or recycling taxes. Assuming the acquisition by the
Company is approved, income taxes would generally be provided at the
Company's effective tax rate of 40%.
2. Accounts and Notes Receivable
The composition of accounts and notes receivable is as follows (in
thousands):
June 5, September 26, September 28,
1997 1996 1995
Related party receivables $2,216 $933 $398
Due from First American
Finance Corporation 2 412 221
Interest and other 23 25 51
receivables
------ ------ ------
$2,241 $1,370 $670
====== ====== ======
3. Leases
The GHI's leasing operations consist of leasing property and
equipment under operating leases expiring in various years through 2016.
Income for such leases from related parties amounted to $319,000 for the
thirty-six weeks ended June 5, 1997, and $283,000, $266,000 and $251,000
in 1996, 1995 and 1994, respectively.
Following is a summary of property on or held for lease at June 5,
1997 (in thousands):
Land $ 241
Buildings and improvements 1,112
Furniture, fixtures and
equipment 193
-------
1,546
Less: Accumulated depreciation 1,304
-------
$ 242
=======
Minimum future rentals to be received on non-cancelable related party
operating leases as of June 5, 1997 for each of the next 5 fiscal years
and in the aggregate are (in thousands):
1998 $ 449
1999 449
2000 449
2001 456
2002 482
Subsequent to 2002 5,038
-------
Total minimum future
rentals $7,323
========
4. Related-Party Transactions
In addition to the leasing activities disclosed above, GHI also
transfers excess cash to and obtains operating advances from First
American Finance Corporation ("First American"), a subsidiary of the
Company. Interest is paid to First American based on the prime rate, or
interest is paid to GHI based on 90-day certificate of deposit rates.
Operating advances are available to GHI on an as needed basis.
Interest income earned by GHI on advances to First American was $9,000 for
the thirty-six weeks ended June 5, 1997, and $25,000 and $11,000 in 1996
and 1995, respectively. No interest income was earned on advances to
First American in 1994.
GHI has various accounts and notes receivable from shareholders and
other related parties (see Note 2). Interest income earned by GHI on
these related party receivables was $46,000 for the thirty-six weeks ended
June 5, 1997, and $28,000, $13,000 and $23,000 in 1996, 1995 and 1994,
respectively. It is the intention of the shareholders of GHI to pay all
outstanding related party receivables prior to closing on the proposed
transaction between GHI and the Company.
<PAGE>
[WHITE]
THE MARCUS CORPORATION
PROXY FOR HOLDERS OF COMMON STOCK
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE 1997 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
ON SEPTEMBER 29, 1997
The undersigned hereby constitutes and appoints STEPHEN H. MARCUS and
THOMAS F. KISSINGER, and each of them, with the power of substitution, as
proxies of the undersigned, to vote any and all shares of Common Stock of
THE MARCUS CORPORATION which the undersigned is entitled to vote at the
1997 Annual Meeting of Shareholders to be held at 10:00 A.M., local time,
September 29, 1997, at the Pfister Hotel, Milwaukee, Wisconsin, and at any
adjournment thereof, upon such business as may properly come before the
meeting, including the items set forth below as more completely described
in the Proxy Statement for the meeting.
The undersigned acknowledges receipt of the Notice of the Annual Meeting,
the Proxy Statement and the 1997 Annual Report to Shareholders and hereby
revokes any other proxy heretofore executed by the undersigned for such
meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this
proxy will be voted FOR all nominees for director, FOR approval of the
Guest House Inn, Inc. transaction and the associated amendment to the
Articles of Incorporation to permit the one-time issuance of shares of
Class B Common Stock in exchange for and cancellation of an equal number
of existing shares of Class B Common Stock, FOR approval of the amendment
to the Articles of Incorporation to increase the number of authorized
shares of Common Stock and Class B Common Stock, and on such other matters
as may properly come before the meeting or any adjournment thereof in
accordance with the best judgment of the proxies named herein.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
__________________________________________________________________________
THE MARCUS CORPORATION 1997 ANNUAL MEETING
1. 1 - Diane Marcus Gershowitz [_] FOR all [_] WITHHOLD
ELECTION 2 - Timothy E. Hoeksema nominees AUTHORITY
OF 3 - Stephen H. Marcus 4 - listed to to vote
DIRECTORS: Daniel F. McKeithan, Jr. the left for all
5 - Bruce J. Olson 6 - (except nominees
Allan H. Selig 7 - Ulice as listed to
Payne, Jr. specified the left.
8 - Philip L. Milstein below).
(Instructions: To withhold authority to ------
vote for any indicated nominee, write the ------
number(s) of the nominee(s) in the box
provided to the right.)
2. Approval of the Guest House Inn, Inc. [_] [_] [_]
transaction and associated amendment to the FOR AGAINST ABSTAIN
Articles of Incorporation to permit the one-
time issuance of shares of Class B Common Stock
in exchange for and cancellation of an equal
number of existing shares of Class B Common
Stock.
3. Approval of an amendment to the Articles of [_] [_] [_]
Incorporation to increase the number of FOR AGAINST ABSTAIN
authorized shares of Common Stock and Class B
Common Stock.
4. Upon such other business as may properly come before the annual meeting
or any adjournment thereof in accordance with the best judgment of such
proxies.
Address Change? Date:______________________ N0. OF SHARES
Mark Box [_]
Indicate changes below:
Signature(s) in Box
Please sign exactly as
your name appears on
your stock certificate.
Joint owners should each
sign personally. A
corporation should sign
in full corporate name
by a duly authorized
officer. When signing
as attorney, executor,
administrator, trustee
or guardian, give full
title as such.
<PAGE>
[BLUE]
THE MARCUS CORPORATION
PROXY FOR HOLDERS OF CLASS B COMMON STOCK
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE 1997 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
SEPTEMBER 29, 1997
The undersigned hereby constitutes and appoints STEPHEN H. MARCUS and
THOMAS F. KISSINGER, and each of them, with the power of substitution, as
proxies of the undersigned, to vote any and all shares of Class B Common
Stock of THE MARCUS CORPORATION which the undersigned is entitled to vote
at the 1997 Annual Meeting of Shareholders to be held at 10:00 A.M., local
time, September 29, 1997, at the Pfister Hotel, Milwaukee, Wisconsin, and
at any adjournment thereof, upon such business as may properly come before
the meeting, including the items set forth below as more completely
described in the Proxy Statement for the meeting.
The undersigned acknowledges receipt of the Notice of the Annual Meeting,
the Proxy Statement and the 1997 Annual Report to Shareholders and hereby
revokes any other proxy heretofore executed by the undersigned for such
meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this
proxy will be voted FOR all nominees for director, FOR approval of the
Guest House Inn, Inc. transaction and the associated amendment to the
Articles of Incorporation to permit the one-time issuance of shares of
Class B Common Stock in exchange for and cancellation of an equal number
of existing shares of Class B Common Stock, FOR approval of the amendment
to the Articles of Incorporation to increase the number of authorized
shares of Common Stock and Class B Common Stock, and on such other matters
as may properly come before the meeting or any adjournment thereof in
accordance with the best judgment of the proxies named herein.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
__________________________________________________________________________
THE MARCUS CORPORATION 1997 ANNUAL MEETING
1. 1 - Diane Marcus [_] FOR all [_] WITHHOLD
ELECTION Gershowitz 2 - Timothy nominees AUTHORITY
OF E. Hoeksema listed to to vote
DIRECTORS: 3 - Stephen H. Marcus 4 - the left for all
Daniel F. McKeithan, Jr. (except as nominees
5 - Bruce J. Olson 6 - specified listed to
Allan H. Selig 7 - Ulice below). the left.
Payne, Jr.
8 - Philip L. Milstein
(Instructions: To withhold authority to ------
vote for any indicated nominee, write the ------
number(s) of the nominee(s) in the box
provided to the right.)
2. Approval of the Guest House Inn, Inc. [_] [_] [_]
transaction and associated amendment to the FOR AGAINST ABSTAIN
Articles of Incorporation to permit the one-
time issuance of shares of Class B Common Stock
in exchange for and cancellation of an equal
number of existing shares of Class B Common
Stock.
3. Approval of an amendment to the Articles of [_] [_] [_]
Incorporation to increase the number of FOR AGAINST ABSTAIN
authorized shares of Common Stock and Class B
Common Stock.
4. Upon such other business as may properly come before the annual meeting
or any adjournment thereof in accordance with the best judgment of such
proxies.
Address Change? Date:______________________ N0. OF SHARES
Mark Box [_]
Indicate changes below:
Signature(s) in Box
Please sign exactly as
your name appears on
your stock certificate.
Joint owners should each
sign personally. A
corporation should sign
in full corporate name
by a duly authorized
officer. When signing
as attorney, executor,
administrator, trustee
or guardian, give full
title as such.
