<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
RULE 13e-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
(Amendment No. 1)
PERKINS FAMILY RESTAURANTS, L.P.
(Name of the Issuer)
PERKINS MANAGEMENT COMPANY, INC.
PERKINS RESTAURANTS, INC.
THE RESTAURANT COMPANY and
PERKINS ACQUISITION CORP.
(Name of Person(s) Filing Statement)
Depositary Units Representing Limited
Partnership Interests in the Issuer
(Title of Class of Securities)
714063104
(CUSIP Number of Class of Securities)
Donald F. Wiseman, Esq.
Perkins Management Company, Inc.
6075 Poplar Avenue, Suite 800
Memphis, TN 38119
(901) 766-6400
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Persons Filing Statement)
WITH COPIES TO:
Scott J. Davis, Esq.
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
(312) 782-0600
This statement is filed in connection with (check the appropriate box):
a. /x/ The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under
the Securities Act of 1934.
b. / / The filing of a registration statement under the Securities Act
of 1933.
c. / / A tender offer.
d. / / None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: /X/
CALCULATION OF FILING FEE
===============================================================================
TRANSACTION AMOUNT OF
VALUATION* FILING FEE
----------- ----------
$76,222,930 ................................................ $15,245.00
===============================================================================
* FOR PURPOSES OF CALCULATING THE FILING FEE ONLY. THIS AMOUNT ASSUMES THAT
5,444,495 UNITS OF LIMITED PARTNERSHIP INTERESTS ("UNITS") WILL BE
CONVERTED IN THE MERGER INTO THE RIGHT TO RECEIVE $14.00 PER UNIT IN CASH.
THE AMOUNT OF THE FILING FEE EQUALS 1/50TH OF ONE PERCENT OF THE AGGREGATE
CASH CONSIDERATION TO BE PAID PURSUANT TO THE MERGER.
/x/ CHECK BOX IF ANY PART OF THE FEE IS OFFSET BY RULE 0-11(a)(2) AND IDENTIFY
THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID. PROXY
STATEMENT ON SCHEDULE 14A, FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON OCTOBER 1, 1997, BY PERKINS MANAGEMENT COMPANY, INC.
AMOUNT PREVIOUSLY PAID: $15,245.00
FORM OR REGISTRATION NO.: NOT APPLICABLE
FILING PARTY: PERKINS FAMILY RESTAURANTS, L.P.
DATE FILED: OCTOBER 1, 1997
<PAGE>
INTRODUCTION
This Rule 13e-3 Transaction Statement (the "Statement") is being filed by
Perkins Management Company, Inc. ("PMC"), Perkins Restaurants, Inc. ("PRI"),
The Restaurant Company ("TRC") and Perkins Acquisition Corp. ("MergerCo.").
PMC is a wholly owned subsidiary of PRI and the general partner of Perkins
Family Restaurants, L.P. (the "Issuer"). PRI, a wholly owned subsidiary of
TRC, holds approximately 48.1% of the outstanding Units representing limited
partnership interests in the Issuer ("Units"). This Statement relates to a
proposed merger (the "Merger") in which Perkins Acquisition Corp.
("MergerCo."), a Delaware corporation and a wholly owned subsidiary of PMC,
would merge with and into the Issuer and the Units, other than those Units
held by TRC and its direct and indirect subsidiaries would be converted into
the right to receive $14 per Unit in cash.
The following cross reference sheet is being supplied pursuant to General
Instruction F to the Statement and shows the location in the Proxy Statement on
Schedule 14A (the "Proxy Statement") filed by PFR with the Securities and
Exchange Commission on the date hereof, of the information required to be
included in response to the items of this Statement. The information set forth
in the Proxy Statement, which is attached hereto as Exhibit (g)(1), is hereby
expressly incorporated herein by reference and the responses to each item are
qualified in their entirety by the provisions of the Proxy Statement.
<PAGE>
CROSS REFERENCE SHEET
ITEM IN
SCHEDULE 13E-3 WHERE LOCATED IN SCHEDULE 14A
Item 1(a) . . . . . . . . . . . . . . . *
Item 1(b) . . . . . . . . . . . . . . . SUMMARY -- Record Date;Units Entitled
to Vote; Quorum
Item 1(c) . . . . . . . . . . . . . . . MARKET FOR PARTNERSHIP'S UNITS;
DISTRIBUTIONS
Item 1(d) . . . . . . . . . . . . . . . MARKET FOR PARTNERSHIP'S UNITS;
DISTRIBUTIONS
Item 1(e) . . . . . . . . . . . . . . . *
Item 1(f) . . . . . . . . . . . . . . . *
Item 2. . . . . . . . . . . . . . . . . SUMMARY -- Purpose of the Special
Meeting
Item 2(a) . . . . . . . . . . . . . . . SUMMARY -- Certain Relationships;
Interests of Certain Persons in the
Merger; SCHEDULE I
Item 2(b) . . . . . . . . . . . . . . . SUMMARY -- Purpose of the Special
Meeting; SCHEDULE I
Item 2(c) . . . . . . . . . . . . . . . SUMMARY -- Purpose of the Special
Meeting; Certain Relationships;
Interests of Certain Persons in the
Merger; SCHEDULE I
Item 2(d) . . . . . . . . . . . . . . . SUMMARY -- Purpose of the Special
Meeting; Certain Relationships;
Interests of Certain Persons in the
Merger; SCHEDULE I
Item 2(e) . . . . . . . . . . . . . . . *
Item 2(f) . . . . . . . . . . . . . . . *
Item 2(g) . . . . . . . . . . . . . . . *
Item 3(a)(1). . . . . . . . . . . . . . THE MERGER -- Background of and
Reasons for the Merger; Interests of
Certain Persons in the Merger;
Conflicts of Interest; Relationships
Between the Parties
Item 3(a)(2). . . . . . . . . . . . . . THE MERGER -- Background of and
Reasons for the Merger
Item 3(b) . . . . . . . . . . . . . . . THE MERGER -- Background of and
Reasons for the Merger
Item 4(a) . . . . . . . . . . . . . . . THE MERGER -- Structure of the Merger
Item 4(b) . . . . . . . . . . . . . . . THE MERGER --Structure of the Merger;
Interests of Certain Persons in the
Merger; Conflicts of Interest;
Relationships Between the Parties
Item 5. . . . . . . . . . . . . . . . . THE MERGER -- Plans for the
Partnership After the Merger
Item 6(a) . . . . . . . . . . . . . . . THE MERGER AGREEMENT -- Financing of
the Merger
Item 6(b) . . . . . . . . . . . . . . . THE MERGER -- Expenses of the Merger
Item 6(c) . . . . . . . . . . . . . . . THE MERGER AGREEMENT -- Financing of
the Merger
<PAGE>
Item 6(d) . . . . . . . . . . . . . . . THE MERGER AGREEMENT -- Financing of
the Merger
Item 7(a) . . . . . . . . . . . . . . . THE MERGER -- Background of and
Reasons for the Merger
Item 7(b) . . . . . . . . . . . . . . . THE MERGER -- Background of and
Reasons for the Merger
Item 7(c) . . . . . . . . . . . . . . . THE MERGER -- Background of and
Reasons for the Merger
Item 7(d) . . . . . . . . . . . . . . . THE MERGER -- Certain Effects of the
Merger; Federal Income Tax
Consequences
Item 8. . . . . . . . . . . . . . . . . SUMMARY -- Fairness of the
Transaction; Recommendations; Vote
Required; THE MERGER -- Fairness
Opinion
Item 9. . . . . . . . . . . . . . . . . SUMMARY -- Fairness Opinion;
THE MERGER -- Background of and
Reasons for the Merger; Fairness
Opinion
Item 10 . . . . . . . . . . . . . . . . THE MERGER -- Interests of Certain
Persons in the Merger; Conflicts of
Interest; Relationships Between the
Parties
Item 11 . . . . . . . . . . . . . . . . THE MERGER -- Interests of Certain
Persons in the Merger; Conflicts of
Interest; Relationships Between the
Parties
Item 12(a). . . . . . . . . . . . . . . THE MERGER -- Structure of the Merger
Item 12(b). . . . . . . . . . . . . . . SUMMARY -- Fairness of the
Transaction; Recommendation
Item 13 . . . . . . . . . . . . . . . . SUMMARY -- No Appraisal Rights
Item 14 . . . . . . . . . . . . . . . . SUMMARY FINANCIAL DATA
Item 15(a). . . . . . . . . . . . . . . THE PROXY SOLICITATION
Item 15(b). . . . . . . . . . . . . . . THE PROXY SOLICITATION
Item 16 . . . . . . . . . . . . . . . . THE PROXY STATEMENT
Item 17 . . . . . . . . . . . . . . . . *
* This information is provided only in this Schedule 13E-3.
<PAGE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The name of the issuer of the class of equity security which is the
subject of the Rule 13e-3 transaction is Perkins Family Restaurants, L.P., a
Delaware limited partnership (the "Issuer"), and the address of its principal
executive offices is 6075 Poplar Avenue, Suite 800, Memphis, TN 38119.
(b) The information set forth in the Proxy Statement under "SUMMARY -
Record Date; Units Entitled to Vote; Quorum" is incorporated herein by
reference.
(c) The information set forth in the Proxy Statement under "MARKET FOR
PARTNERSHIP'S UNITS; DISTRIBUTIONS" is incorporated herein by reference.
(d) The information set forth in the Proxy Statement under "MARKET FOR
PARTNERSHIP'S UNITS; DISTRIBUTIONS" is incorporated herein by reference.
(e) Not Applicable.
(f) Not Applicable.
ITEM 2. IDENTITY AND BACKGROUND.
(a)--(d) and (g) This Statement is being filed by PMC, PRI, TRC and
MergerCo. The information set forth in the Proxy Statement under "SUMMARY --
Purpose of the Special Meeting," "SUMMARY -- Certain Relationships," "SUMMARY
- -- Interests of Certain Persons in the Merger," "THE MERGER -- Structure of
the Merger," "THE MERGER -- Interests of Certain Persons in the Merger;
Conflicts of Interest," "THE MERGER -- Relationships Between the Parties" and
in "SCHEDULE I" to the Proxy Statement is incorporated herein by reference.
Unless otherwise indicated, all of the natural persons identified in such
portions of the Proxy Statement are citizens of the United States of America.
(e)--(f) During the last five years, neither any of PMC, PRI or TRC nor,
to the best of their knowledge, any of the executive officers or directors of
PMC, PRI or TRC (i) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors), or (ii) was party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining further violations of, or prohibiting activities
subject to, federal or state securities laws of finding any violation of such
laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)--(b) The information set forth in the Proxy Statement under "THE
MERGER -- Background of and Reasons for the Merger," "THE MERGER -- Interests of
Certain Persons in the Merger; Conflicts of Interest," and "THE MERGER --
Relationships Between the Parties" is incorporated herein by reference.
-1-
<PAGE>
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the Proxy Statement under "THE MERGER --
Structure of the Merger" is incorporated herein by reference.
(b) The information set forth in the Proxy Statement under "THE MERGER --
Structure of the Merger," "THE MERGER -- Interests of Certain Persons in the
Merger; Conflicts of Interest," and "THE MERGER -- Relationships Between the
Parties" is incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)--(g) The information set forth in the Proxy Statement under "THE
MERGER -- Plans for the Partnership After the Merger" is incorporated herein by
reference.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the Proxy Statement under "THE MERGER
AGREEMENT -- Financing of the Merger" is incorporated herein by reference.
(b) The information set forth in the Proxy Statement under "THE MERGER
AGREEMENT -- Expenses of the Merger" is incorporated herein by reference.
(c) The information set forth in the Proxy Statement under "THE MERGER
AGREEMENT -- Financing of the Merger" is incorporated herein by reference.
(d) The information set forth in the Proxy Statement under "THE MERGER
AGREEMENT -- Financing of the Merger" is incorporated herein by reference.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a)--(d) The information set forth in the Proxy Statement under "THE
MERGER -- Background of and Reasons for the Merger," "THE MERGER -- Certain
Effects of the Merger," and "THE MERGER -- Federal Income Tax Consequences" is
incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)--(e) The information set forth in the Proxy Statement under
"SUMMARY -- Fairness of the Transaction; Recommendations," "SUMMARY -- Vote
Required," and "THE MERGER -- Fairness Opinion" is incorporated
herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)- (b) The information set forth in the Proxy Statement under
"SUMMARY -- Fairness Opinion," "THE MERGER -- Background of and
Reasons for the Merger," and "THE MERGER -- Fairness Opinion" is
incorporated herein by reference.
(c) The information set forth in the Proxy Statement under "AVAILABLE
INFORMATION" is incorporated herein by reference.
-2-
<PAGE>
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a)--(b) The information set forth in the Proxy Statement under "THE
MERGER -- Interests of Certain Persons in the Merger; Conflicts of Interest,"
and "THE MERGER -- Relationships Between the Parties" is incorporated herein by
reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth in the Proxy Statement under "THE MERGER --
Interests of Certain Persons in the Merger; Conflicts of Interest," and "THE
MERGER -- Relationships Between the Parties" is incorporated herein by
reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) The information set forth in the Proxy Statement under "THE MERGER --
Structure of the Merger" is incorporated herein by reference.
(b) The information set forth in the Proxy Statement under "SUMMARY --
Fairness of the Transaction; Recommendation" is incorporated herein by
reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
The information set forth in the Proxy Statement under "SUMMARY - No
Appraisal Rights" is incorporated herein by reference.
ITEM 14. FINANCIAL INFORMATION.
The information set forth in the Proxy Statement under "SUMMARY FINANCIAL
DATA," the Company's Annual Report on Form 10-K for the year ended December
31, 1996 (File No.1-9214), the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997, the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997 and the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997 is incorporated herein by
reference.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in the Proxy Statement under "THE PROXY
SOLICITATION" is incorporated herein by reference.
(b) The information set forth in the Proxy Statement under "THE PROXY
SOLICITATION" is incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
Additional information concerning the Transaction is set forth in the Proxy
Statement and the entirety of the Proxy Statement is incorporated herein by
reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) . . . . . . . .
(b) . . . . . . . . Exhibit (b)(1) Morgan Keegan & Company, Inc. Opinion
Exhibit (b)(2) Morgan Keegan & Company, Inc. Report
Exhibit (b)(3) Smith Barney Inc. Report
(c) . . . . . . . . Exhibit (c)(1). Amended and Restated Agreement and
Plan of Merger dated as of
September 11, 1997
-3-
<PAGE>
(d) . . . . . . . . Exhibit (d)(1). Preliminary Proxy Statement on
Schedule 14A, filed with the
Securites and Exchange Commission
on October 30, 1997
(e) . . . . . . . . Not applicable.
(f) . . . . . . . . Not applicable.
-4-
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and belief, each of
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: October 30, 1997 PERKINS MANAGEMENT COMPANY, INC.
By /s/ Steven R. McClellan
------------------------------------
Name: Steven R. McClellan
Title: Executive Vice President and
Chief Financial Officer
THE RESTAURANT COMPANY
By /s/ Michael P. Donahoe
------------------------------------
Name: Michael P. Donahoe
Title: Vice President
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
- ----------- ----------- ------------
Exhibit (a)(1)
Exhibit (b)(1) Morgan Keegan & Company, Inc. Opinion
(attached as Annex B to Exhibit (d)(1))
Exhibit 99.(b)(2) Morgan Keegan & Company, Inc. Report
Exhibit 99.(b)(3) Smith Barney Inc. Report
Exhibit (c)(1). Amended and Restated Agreement and Plan of Merger dated
as of September 11, 1997 (attached as Annex A to
Exhibit (d)(1))
Exhibit 99.(d)(1). Preliminary Proxy Statement on Schedule 14A, filed with the
Securites and Exchange Commission on October 30, 1997
<PAGE>
[LOGO]
PRESENTATION TO THE BOARD OF DIRECTORS OF
PERKINS MANAGEMENT COMPANY, INC.
SEPTEMBER 11, 1997
Morgan Keegan & Company, Inc.
Investment Banking
50 North Front Street
20th Floor
Memphis, TN 38103
(901) 524-4100
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
TRANSACTION SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . .TAB A
METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .TAB B
FINANCIAL REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . .TAB C
1. HISTORICAL FINANCIAL PERFORMANCE
2. PROJECTED FINANCIAL PERFORMANCE
3. HISTORICAL AND PROJECTED FINANCIAL PERFORMANCE COMPARISON
QUALITATIVE FACTORS OF THE TRANSACTION. . . . . . . . . . . . . . . . . .TAB D
VALUATION METHODS . . . . . . . . . . . . . . . . . . . . . . . . . . . .TAB E
1. COMPARABLE COMPANY ANALYSIS
2. PREMIUM ANALYSIS
3. DISCOUNTED CASH FLOW ANALYSIS
4. SUMMARY OF INDICATED RANGES OF VALUATION
EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .TAB F
1. MERGERS AND ACQUISITIONS TRANSACTIONS ANALYSIS
2. LEVERAGED BUYOUT ANALYSIS
3. STOCK TRADING ANALYSIS
<PAGE>
TRANSACTION SUMMARY
- --------------------------------------------------------------------------------
On August 4, 1997, Perkins Family Restaurants, L.P. (the "Partnership") received
an offer from The Restaurant Company ("TRC"), the general partner of the
Partnership, to acquire through a merger all of the outstanding units of limited
partnership not currently owned by public investors for $13.00 per unit in cash.
The proposed transaction is subject to the receipt of an opinion from an
investment banking firm that the transaction is fair from a financial point of
view, the affirmative vote of a majority of the units held by public unitholders
casting votes and the obtaining of financing.
On August 14, 1997, unitholders filed suit in Chancery Court in Wilmington,
Delaware to stop the proposed transaction (the "Litigation"). We understand
that while no definitive agreement has been reached, there have been substantive
discussions between the parties with respect to a potential settlement of the
Litigation that would include TRC raising its offer from $13.00 to $13.50 to
$14.00 per unit.
<PAGE>
METHODOLOGY
- --------------------------------------------------------------------------------
IN DETERMINING OUR PRELIMINARY TRANSACTION ANALYSIS, MORGAN KEEGAN:
- - Reviewed background information concerning the Partnership as provided by
management on behalf of the Partnership.
- - Reviewed and analyzed historical and projected financial information of the
Partnership (projected financial information presented in this report was
provided by management of the Partnership and was represented as the
Partnership's opinion of its future performance on a stand-alone basis, and
includes conversion to C Corporation status as of January 1, 1998).
- - Analyzed qualitative factors associated with the transaction.
- - Analyzed the Partnership's financial performance compared to certain publicly
traded restaurant companies.
- - Analyzed the premiums paid in certain types of transactions.
- - Analyzed the Partnership based on a discounted cash flow analysis.
- - Analyzed recent mergers and acquisitions involving restaurant companies.
- - Analyzed a potential leveraged buyout of the Partnership by an unrelated
third party.
- - Analyzed the stock trading history of the Partnership.
- - Discussed with management of the Partnership the outlook for future operating
results and other matters we considered relevant to our inquiry.
<PAGE>
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
HISTORICAL FINANCIAL PERFORMANCE
- - Historical financial information is from the Partnership's publicly available
financial statements.
BALANCE SHEET FACTORS
- - Net debt of $59.9 million as of June 30, 1997.
- - Net property and equipment of $113.1 million as of June 30, 1997.
- - Tangible partners' capital of $35.8 million as of June 30, 1997.
INCOME STATEMENT FACTORS
- - Latest twelve months ending June 30, 1997 ("LTM") total revenue of $257.4
million. Revenue increased from $212.6 million for the year ended December
31, 1993 to $252.8 million for the year ended December 31, 1996, at a
compound annual growth rate of 5.9%.
- - LTM franchise revenue of $19.0 million. Franchise revenue increased from
$15.5 million in 1993 to $18.6 million in 1996, at a 6.2% compound annual
growth rate.
- - LTM earnings before interest, taxes, depreciation and amortization ("EBITDA")
of $34.9 million. EBITDA increased from $27.2 million for the year ended
December 31, 1993 to $34.3 million for the year ended December 31, 1996, at a
compound annual growth rate of 8.0%. Excluding 1993 provision for disposition
of assets of $4.3 million, EBITDA grew at a 2.8% compound annual growth rate
from 1993 to 1996. Excluding $650,000 asset write-down, LTM EBITDA margin of
13.8%. EBITDA margin increased from 12.8% in 1993 to 13.6% in 1996.
<PAGE>
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
- - LTM earnings before interest and taxes ("EBIT") of $19.0 million. EBIT
increased from $15.4 million for the year ended December 31, 1993 to $18.6
million for the year ended December 31, 1996, at a compound annual growth
rate of 6.5%. Excluding $4.3 million provision for disposition of assets,
EBIT decreased from $19.7 million in 1993 to $18.6 million in 1996. LTM EBIT
margin of 7.4%. Excluding $650,000 asset write-down, LTM EBIT margin of
7.6%. Excluding $4.3 million provision for disposition of assets in 1993,
EBIT margin decreased from 9.3% in 1993 to 7.4% in 1996.
- - Net income increased from $12.6 million for the year ended December 31, 1993
to $13.5 million for the year ended December 31, 1996, at a compound annual
growth rate of 2.4%. Net income margin decreased from 5.9% in 1993 to 5.3%
in 1996.
<PAGE>
<TABLE>
<CAPTION>
PROJECT FRENCH TOAST
HISTORICAL BALANCE SHEETS As of
----------------------------------------
12/31/95 12/31/96 6/30/97
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,825 $ 2,737 $ 170
Receivables, less allowance for
doubtful accounts 8,683 6,285 6,532
Inventories, at the lower of FIFO or market 4,318 4,234 4,235
Prepaid expenses and other current assets 1,505 1,551 2,115
---------- ---------- ----------
TOTAL CURRENT ASSETS 16,331 14,807 13,052
PROPERTY AND EQUIPMENT, at cost, net of
accumulated deprec. and amortization 117,435 115,086 113,140
NOTES RECEIVABLE, less allowance for
doubtful accounts 1,883 805 611
INTANGIBLE AND OTHER ASSETS, net of
accumulated amortization 26,180 24,958 25,398
---------- ---------- ----------
TOTAL ASSETS $ 161,829 $ 155,656 $ 152,201
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt 3,575 4,356 3,868
Current maturities of capital lease obligations 1,984 1,683 1,480
Accounts payable 7,525 8,878 7,605
Accrued expenses 13,099 14,235 15,026
Distributions payable 3,475 3,479 3,475
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 29,658 32,631 31,454
CAPITAL LEASE OBLIGATIONS, less
current maturities 8,810 8,573 7,775
LONG-TERM DEBT, less current maturities 57,850 48,244 46,932
OTHER LIABILITIES 4,415 4,651 4,826
---------- ---------- ----------
TOTAL LIABILITIES 100,733 94,099 90,987
PARTNERS' CAPITAL:
General partner 611 615 612
Limited partners 63,373 63,220 62,372
Deferred compensation related to restricted units (2,888) (2,278) (1,770)
---------- ---------- ----------
TOTAL PARTNERS' CAPITAL 61,096 61,557 61,214
---------- ---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 161,829 $ 155,656 $ 152,201
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT FRENCH TOAST
Historical Income Statements
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------
1993 1994
------------------------- -------------------------
AMOUNT % AMOUNT %
<S> <C> <C> <C> <C>
REVENUES
Food sales $ 197,090 92.7% $ 205,675 92.7%
Franchise revenues 15,544 7.3 16,227 7.3
------------------------- -------------------------
Total Revenues 212,634 100.0 221,902 100.0
COSTS AND EXPENSES
Cost of Sales:
Food cost 54,931 25.8 57,975 26.1
Labor and benefits 67,211 31.6 71,113 32.0
Operating expenses 41,148 19.4 42,615 19.2
General and administrative 18,337 8.6 21,779 9.8
Depreciation and amortization 11,851 5.6 12,107 5.5
Interest, net 2,777 1.3 3,266 1.5
Provision for (benefit from) - - 1,079 0.5
litigation costs
Provision for disposition 4,338 2.0 800 0.4
of assets
Asset write-down - - - -
Other, net (561) (0.3) (840) (0.4)
------------------------- -------------------------
Total Costs and Expenses 200,032 94.1 209,894 94.6
------------------------- -------------------------
Net Income $ 12,602 5.9% $ 12,008 5.4%
------------------------- -------------------------
------------------------- -------------------------
EBIT $ 15,379 7.2% $ 15,274 6.9%
Depreciation & Amortization $ 11,851 5.6% $ 12,107 5.5%
EBITDA $ 27,230 12.8% $ 27,381 12.3%
<CAPTION>
Historical Income Statements LATEST TWELVE MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDING
------------------------------------------------------- -------------------------
1995 1996 6/30/97
------------------------ ------------------------- -------------------------
AMOUNT % AMOUNT % AMOUNT %
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Food sales $ 228,259 92.9% $ 234,164 92.6% $ 238,371 92.6%
Franchise revenues 17,492 7.1 18,629 7.4 19,002 7.4
------------------------ ------------------------- -------------------------
Total Revenues 245,751 100.0 252,793 100.0 257,373 100.0
COSTS AND EXPENSES
Cost of Sales:
Food cost 66,204 26.9 68,456 27.1 69,204 26.9
Labor and benefits 78,916 32.1 78,970 31.2 80,138 31.1
Operating expenses 47,678 19.4 48,284 19.1 48,536 18.9
General and administrative 22,251 9.1 23,741 9.4 24,830 9.6
Depreciation and amortization 14,401 5.9 15,748 6.2 15,920 6.2
Interest, net 4,826 2.0 5,066 2.0 4,927 1.9
Provision for (benefit from)
litigation costs (190) (0.1) - - - -
Provision for disposition 609 0.2 - - - -
of assets
Asset write-down 1,900 0.8 - - 650 0.3
Other, net (640) (0.3) (994) (0.4) (916) (0.4)
------------------------ ------------------------- -------------------------
Total Costs and Expenses 235,955 96.0 239,271 94.7 243,289 94.5
------------------------ ------------------------- -------------------------
Net Income $ 9,796 4.0% $ 13,522 5.3% $ 14,084 5.5%
------------------------ ------------------------- -------------------------
------------------------ ------------------------- -------------------------
EBIT $ 14,622 5.9% $ 18,588 7.4% $ 19,01 17.4%
Depreciation & Amortization $ 14,401 5.9% $ 15,748 6.2% $ 15,920 6.2%
EBITDA $ 29,023 11.8% $ 34,336 13.6% $ 34,931 13.6%
</TABLE>
<PAGE>
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
PROJECTED FINANCIAL PERFORMANCE
- - Projections for the years ended December 31, 1997, 1998, 1999 and 2000 were
provided to Morgan Keegan by management of the Partnership.
BALANCE SHEET FACTORS
- - Receivables, inventory and other current assets remain constant from 1997
through 2000.
- - Accounts payable and accrued expenses remain constant from 1997 through 2000.
INCOME STATEMENT FACTORS
- - Revenue increases from $268.5 million for the year ended December 31, 1997 to
$341.3 million for the year ended December 31, 2000, at a compound annual
growth rate of 8.3%.
- - Franchise revenue increases from $20.4 million for the year ended December
31, 1997 to $28.3 million for the year ended December 31, 2000, at a compound
annual growth rate of 11.6%.
- - EBITDA increases from $35.1 million for the year ended December 31, 1997 to
$51.6 million for the year ended December 31, 2000, at a compound annual
growth rate of 13.7%. EBITDA margin increases from 13.1% in 1997 to 15.1% in
2000.
- - EBIT increases from $18.8 million for the year ended December 31, 1997 to
$32.8 million for the year ended December 31, 2000, at a compound annual
growth rate of 20.4%. EBIT margin increases from 7.0% in 1997 to 9.6% in
2000.
<PAGE>
PROJECT FRENCH TOAST
Projected Income Statements(1)
Management Projections
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
1997 1998 1999 2000
-------------------- -------------------- -------------------- --------------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Food sales $248,097 92.4% $264,222 92.2% $286,878 92.0% $312,982 91.7%
Franchise revenues 20,354 7.6 22,370 7.8 25,112 8.0 28,293 8.3
-------------------- -------------------- -------------------- --------------------
Total Revenues 268,451 100.0 286,592 100.0 311,990 100.0 341,275 100.0
COSTS AND EXPENSES
Food cost 72,894 27.2 77,939 27.2 85,043 27.3 93,253 27.3
Labor and benefits(2) 83,597 31.1 89,326 31.2 96,701 31.0 105,165 30.8
Operating expenses 93,189 34.7 97,225 33.9 103,266 33.1 110,060 32.2
-------------------- -------------------- -------------------- --------------------
Total Operating Expenses 249,680 93.0 264,489 92.3 285,010 91.4 308,478 90.4
EBIT 18,771 7.0 22,103 7.7 26,980 8.6 32,797 9.6
Interest, net 4,839 1.8 4,644 1.6 3,959 1.3 3,083 0.9
-------------------- -------------------- -------------------- --------------------
Total Costs and Expenses 254,519 94.8 269,133 93.9 288,969 92.6 311,561 91.3
-------------------- -------------------- -------------------- --------------------
Earnings Before Tax 13,932 5.2 17,459 6.1 23,021 7.4 29,714 8.7
-------------------- -------------------- -------------------- --------------------
Taxes(3) 5,573 2.1 6,983 2.4 9,209 3.0 11,886 3.5
-------------------- -------------------- -------------------- --------------------
Net Income $ 8,359 3.1% $ 10,475 3.7% $ 13,813 4.4% $ 17,829 5.2%
-------------------- -------------------- -------------------- --------------------
-------------------- -------------------- -------------------- --------------------
Depreciation and amortization $ 16,296 6.1% $ 18,063 6.3% $ 18,736 6.0% $ 18,782 5.5%
EBITDA $ 35,067 13.1% $ 40,166 14.0% $ 45,716 14.7% $ 51,179 15.1%
</TABLE>
(1) Projections were provided to Morgan Keegan by management of the Partnership
(2) Pro-forma in 1991-2000 for the increase in the Minnesota minimum wage for
servers @$28,800 per unit located in Minnesota
(3) Assumes 40% tax rate for C Corporation status.
<PAGE>
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
HISTORICAL AND PROJECTED PERFORMANCE COMPARISON
GENERAL
- - Revenue increased at a 5.9% compound annual growth rate from 1993 to 1996.
- - Revenue is projected to increase at an 8.3% compound annual growth rate from
1997 to 2000.
- - EBITDA increased at an 8.0% compound annual growth rate from 1993 to 1996
(2.8% excluding 1993 provision for disposition of assets).
- - EBITDA is projected to increase at a 13.7% compound annual growth rate from
1997 to 2000.
- - EBITDA is projected to increase 2.1% from 1996 to 1997.
- - EBIT increased at a 6.5% compound annual growth rate from 1993 to 1996 (EBIT
decreased from 1993 to 1996 excluding 1993 provision for disposition of
assets).
- - EBIT is projected to increase at a 20.4% compound annual growth rate from
1997 to 2000.
- - EBIT is projected to increase 1.0% from 1996 to 1997.
RESTAURANT GROWTH
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997E(1) 1998E 1999E 2000E
-------- -------- -------- -------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
New Restaurants
Company 7 12 10 3 3 6 7 8
Franchised 13 7 21 19 30 30 35 40
</TABLE>
(1)Year-to-date through August, 1997: 8 new units, 9 under construction and 2
executed commitment agreements.
<PAGE>
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
HISTORICAL AND PROJECTED PERFORMANCE COMPARISON
Franchise Store Performance
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997E 1998E 1999E 2000E
-------- -------- -------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
New 13 7 21 19 30 30 35 40
Closed 5 6 5 12 5 5 5 5
Ending(1) 298 300 317 327 352 377 407 442
</TABLE>
- - Number of franchised units grew at a 3.1% compound annual growth rate from
1993 to 1996.
- - Number of franchised units is projected to grow at a 7.9% compound annual
growth rate from 1997 to 2000.
- - Year-to-date through August 1997: 8 new franchised units, 9 under
construction and 2 executed commitment agreements.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Royalties $15,110 $15,976 $16,811 $17,907 $19,172 $21,470 $24,062 $27,093
Net Franchise Income $13,484 $14,271 $14,753 $15,743 $17,183 $19,114 $21,625 $24,569
</TABLE>
- - Total royalties grew at a 5.8% compound annual growth rate from 1993 to 1996.
- - Total royalties are projected to grow at a 12.2% compound annual growth rate
from 1997 to 2000.
- - Net franchise income grew at a 5.3% compound annual growth rate from 1993 to
1996.
- - Net franchise income is projected to grow at a 12.7% compound annual growth
rate from 1997 to 2000.
(1)Includes 1 refranchised unit in 1994, 1 refranchised unit in 1995 and 3
refranchised units in 1996.
<PAGE>
QUALITATIVE FACTORS OF THE TRANSACTION
- --------------------------------------------------------------------------------
- - Since the transaction was publicly announced, there have been no additional
bona fide offers made for the Partnership.
- - The Partnership has extremely limited analyst coverage, historically little
institutional ownership and is thinly traded.
- - Control position of the General Partner.
- - Riskiness of achieving projections.
<PAGE>
VALUATION METHODS
- --------------------------------------------------------------------------------
COMPARABLE COMPANY ANALYSIS
OVERVIEW
- - Analyzed two groups of publicly traded restaurant companies that are
comparable to the Partnership based on a variety of criteria. The first
group consists of six companies that were considered most comparable to the
Partnership (the "Peer Group"). The second group, in addition to the Peer
Group, contains seven additional companies that have similar customer
profiles to the Partnership (the "Family Dining Group").
- - Compared the Partnership's financial performance with the performance of the
two groups of comparables.
- - Derived industry multiples by analyzing the specific comparable company
multiples.
- - Applied the industry multiples to the Partnership's latest twelve month
results ending June 30, 1997 to derive an implied range of equity value and
price per unit.
<PAGE>
VALUATION METHODS
- --------------------------------------------------------------------------------
COMPARABLE COMPANY DESCRIPTIONS
PEER GROUP
BOB EVANS FARMS, INC. owns and operates approximately 400 full-service, family
restaurants in 19 states. The Company operates under the Bob Evans Restaurants,
Bob Evans Restaurant & General Stores and Owens Family Restaurants names. Under
the Bob Evans and Owens brand names, the Company also produces a variety of pork
sausage products. Other operations include Mrs. Giles Country Kitchens and
Hickory Specialties.
DENAMERICA CORP. operates approximately 324 family-oriented, full-service
restaurants. The Company runs 188 Denny's restaurants located in 31 states in
the West, Midwest and Southeast. DenAmerica also operates other family-style
restaurants throughout the United States, including Black-Eyed Pea Restaurants
(acquired in July 1996).
FRISCH'S RESTAURANTS, INC. operates and franchises fast food and coffee shop
restaurants. The Company's restaurants operate under the names Big Boy and
Hardee's. Frisch's operates or franchises approximately 145 restaurants in
Ohio, Kentucky, Indiana, Texas, Kansas, Oklahoma and Florida. In August 1997,
Frisch's purchased 1.1 million shares from its shareholders at $15.00 per share
in accordance with the terms of its "Dutch Auction" tender offer.
IHOP CORPORATION develops, franchises and operates the International House of
Pancakes ("IHOP") restaurants. The restaurants serve a variety of pancakes and
waffles and moderately-priced lunch and dinner items, including sandwiches,
hamburgers, seafood, chicken and steak. IHOP has approximately 746 restaurants
in its system in 36 states, Canada and Japan. Approximately 534 of the
Company's restaurants are franchised.
<PAGE>
VALUATION METHODS
- --------------------------------------------------------------------------------
SHONEY'S, INC. owns and operates approximately 1,476 company-owned and
franchised restaurants in 34 states. The Company's restaurants include
Shoney's, Captain D's, Pargo's and BarbWire's.
VICORP RESTAURANTS, INC. operates and franchises approximately 360 mid-scale
family-style restaurants primarily under the Bakers Square and Village Inn
names. The Company's restaurants are located in the Rocky Mountain region,
upper Midwest, California, Arizona and Florida. Approximately 108 of the
Company's units are franchised.
<PAGE>
PROJECT FRENCH TOAST MORGAN KEEGAN & COMPANY, INC.
COMPARABLE COMPANY ANALYSIS INVESTMENT BANKING DEPARTMENT
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARE YEAR ADJUSTED
COMPANY/ PRICE ---------------- SHARES MARKET NET MARKET
LATEST FINANCIALS TICKER 9/9/97 HIGH LOW OUTST.(1) VALUE DEBT(2) VALUE(3)
- ----------------------------------- ------ ------- ------- ------ -------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bob Evans Farms, Inc. BOBE 18 7/16 18 1/2 12 1/8 42,953 $791,937 $49,732 $841,669
7/25/97
DenAmerica Corp. DEN 2 1/16 5 1/4 1 5/8 13,438 $ 27,715 $101,800 $129,515
7/2/97
Frisch's Restaurants, Inc. FRS 13 15/16 17 3/8 12 17/64 6,005 $ 83,700 $ 25,894 $109,593
6/1/97
IHOP Corp. IHOP 36 3/4 37 3/8 19 1/4 10,096 $371,015 $144,790 $515,805
6/30/97
Shoney's, Inc. SHN 5 9/16 9 7/8 4 3/8 48,568 $270,160 $493,483 $763,643
5/11/97
VICORP Restaurants VRES 15 1/4 16 3/4 11 9,120 $139,077 $ 21,166 $160,243
4/30/97
- --------------------------------------------------------------------------------------------------------------------
PERKINS FAMILY RESTAURANTS, L.P. (6) PFR 12 15/16 14 7/8 10 3/16 $10,487 $135,682 $ 59,885 $195,567
6/30/97
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
LATEST TWELVE MONTHS(4) E.P.S.
--------------------------------------------------- ---------------------------------
TANGIBLE
NET BOOK 1997 CAL 1998 CAL
REVENUE EBITDA EBIT INCOME VALUE LTM EST.(5) EST.(5)
---------- ------- ------- ------- --------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bob Evans Farms, Inc. $ 831,140 $90,927 $60,686 $37,536 $418,732 $0.90 $0.99 $1.19
7/25/97
DenAmerica Corp. $ 314,606 $22,042 $12,779 $656 ($50,419) $0.07 $0.25 $0.20
7/2/97
Frisch's Restaurants, Inc. $ 165,931 $19,187 $ 8,701 $ 4,227 $ 63,927 $0.59 NA NA
6/1/97
IHOP Corp. $ 203,354 $ 55,176 $45,854 $19,761 $127,870 $2.06 $2.26 $2.63
6/30/9
Shoney's, Inc. $1,200,552 $129,850 $76,135 $20,715 ($ 65,440) $0.47 $0.44 $0.62
5/11/97
VICORP Restaurants $ 331,092 $33,768 $13,489 $7,039 $126,057 $0.77 $0.80 $0.95
4/30/97
- ----------------------------------------------------------------------------------------------------------------------
PERKINS FAMILY RESTAURANTS, L.P. (6) $ 257,373 $35,581 $19,661 $8,840 $35,816 $0.86 $0.81 $0.95
6/30/97
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Shares outstanding includes in-the-money options using the treasury stock
method.
(2) Short-term debt, long-term debt (including capitalized lease obligations),
and preferred stock minus cash and marketable securities.
(3) Market value of equity plus net debt.
(4) Income statement data excludes extraordinary and nonrecurring items.
(5) Mean estimates obtained from First Call. Perkins 1997 estimate from
internal projections and 1998 estimate from Value Line (pro forma for C
Corporation income tax). Flagstar estimates from IBES. DenAmerica 1998
estimate from Fahnestock & Company. VICORP 1998 estimate from Value Line.
(6) Pro forma for corporate income taxes at 40%.
<PAGE>
PROJECT FRENCH TOAST MORGAN KEEGAN & COMPANY, INC.
COMPARABLE COMPANY ANALYSIS INVESTMENT BANKING DEPARTMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS
-------------------------------------------------------------------
NET RETURN ON NET DEBT
COMPANY EBITDA EBIT INCOME LATEST TO TOTAL
NAME MARGIN MARGIN MARGIN EQUITY CAPITAL
- -------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Bob Evans Farms, Inc. 10.9% 7.3% 4.5% 8.7% 10.4%
DenAmerica Corp. 7.0% 4.1% 0.2% NM 82.7%
Frisch's Restaurants, Inc. 11.6% 5.2% 2.5% 6.5% 28.6%
IHOP Corp. 27.1% 22.5% 9.7% 14.1% 50.7%
Shoney's, Inc. 10.8% 6.3% 1.7% NM NM
VICORP Restaurants 10.2% 4.1% 2.1% 5.6% 14.4%
- -------------------------
COMBINED:
- ---------------------------------------------------------------------------------------------------------------
Low 7.0% 4.1% 0.2% 5.6% 10.4%
Mean 12.9% 8.3% 3.5% 8.7% 37.4%
High 27.1% 22.5% 9.7% 14.1% 82.7%
MEDIAN 10.9% 5.8% 2.3% 7.6% 28.6%
- ---------------------------------------------------------------------------------------------------------------
PERKINS FAMILY RESTAURANTS, L.P. 13.8% 7.6% 3.4% 11.5% 49.5%
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
GROWTH MULTIPLE OF ADJ. MARKET VALUE
--------------------------------------------------------------------
REVENUE NET INCOME
4 - YEAR 4 - YEAR
CAGR CAGR REVENUE EBITDA EBIT
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Bob Evans Farms, Inc. 5.9% -4.3% 1.01 x 9.3 x 13.9 x
DenAmerica Corp. 71.8% NM 0.41 x 5.9 x 10.1 x
Frisch's Restaurants, Inc. 2.7% -5.9% 0.66 x 5.7 x 12.6 x
IHOP Corp. 12.6% 10.9% 2.54 x 9.3 x 11.2 x
Shoney's, Inc. 2.8% NM 0.64 x 5.9 x 10.0 x
VICORP Restaurants -4.8% -35.4% 0.48 x 4.7 x 12.0 x
- -------------------------
COMBINED:
- ---------------------------------------------------------------------------------------------------------------
Low -4.8% -35.4% 0.41 x 4.7 x 10.0 x
Mean 15.2% -8.7% 0.96 6.8 11.6
High 71.8% 10.9% 2.54 9.3 13.9
MEDIAN 4.4% -5.1% 0.65 5.9 11.6
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
PERKINS FAMILY RESTAURANTS, L.P. 5.9% 2.4% 0.76 X 5.5 X 9.9 X
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
MULTIPLE OF MARKET VALUE
-------------------------------------------------------------------
TANGIBLE
NET LTM 1997 CAL 1998 CAL BOOK
INCOME EPS EPS EPS VALUE
-------- -------- -------- -------- --------
Bob Evans Farms, Inc. 21.1 x 20.5 x 18.6 x 15.5 x 1.9 x
DenAmerica Corp. 42.2 x 31.6 x 8.3 x 10.3 x NM x
Frisch's Restaurants, Inc. 19.8 x 23.6 x NA x NA x 1.3 x
IHOP Corp. 18.8 x 17.8 x 16.3 x 14.0 x 2.9 x
Shoney's, Inc. 13.0 x 11.8 x 12.7 x 8.9 x NM x
VICORP Restaurants 19.8 x 19.8 x 19.0 x 16.1 x 1.1 x
- -------------------------
COMBINED:
- ---------------------------------------------------------------------------------------------------------------
Low 13.0 x 11.? x 8.3 x 8.9 x 1.1 x
Mean 22.5 20.8 15.0 13.0 1.8
High 42.2 31.6 19.0 16.1 2.9
MEDIAN 19.8 20.1 16.3 14.0 1.6
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
PERKINS FAMILY RESTAURANTS, L.P. 15.3 X 15.1 X 16.0 X 13.6 X 3.8 x
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROJECT FRENCH TOAST MORGAN KEEGAN & COMPANY, INC.
COMPARABLE COMPANY ANALYSIS INVESTMENT BANKING DEPARTMENT
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MULTIPLES Multiple of Adjusted Market Value
-----------------------------------------------------
High Low Mean Median
-----------------------------------------------------
<S> <C> <C> <C> <C>
Revenue 2.54 0.41 0.96 0.65
EBITDA 9.3 4.7 6.8 5.9
EBIT 13.9 10.0 11.6 11.6
Net Income(1) 42.2 13.0 22.5 19.8
Tangible Book Value(1) 2.9 1.1 1.8 1.6
PROJECTED
1997 Net Income(1) 19.0 8.3 15.0 16.3
1998 Net Income(1) 16.1 8.9 13.0 14.0
</TABLE>
<TABLE>
<CAPTION>
VALUATION
Indicative Equity Value/Price Per Unit of The Partnership(3)
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------
LTM The Partnership High Low Mean Median
--------------- ------------- -------- --------- ---------
Revenue $257,373 $592,938 $46,069 $186,394 $106,964
Price Per Unit $ 55.41 $ 4.31 $ 17.42 $ 10.00
EBITDA $35,581 $272,739 $108,961 $182,178 $149,275
Price Per Unit $ 25.49 $ 10.18 $ 17.03 $ 13.95
EBIT $19,661 $212,798 $137,318 $168,702 $167,478
Price Per Unit $ 19.89 $ 12.83 $ 15.77 $ 15.65
Net Income(1) $8,840 $373,499 $115,295 $198,504 $174,867
Price Per Unit $ 34.91 $ 10.77 $ 18.55 $ 16.34
Tangible Book Value(1) $35,816 $103,920 $ 39,515 $ 64,517 $ 57,316
Price Per Unit $ 9.71 $ 3.69 $ 6.03 $ 5.36
PROJECTED(4)
1997 Net Income(1) $8,359 $158,686 $68,963 $125,044 $135,929
Price Per Unit $14.83 $6.44 $11.69 $12.70
1998 Net Income(1) $10,475 $168,153 $93,478 $135,756 $146,373
Price Per Unit $15.71 $8.74 $12.69 $13.68
NET DEBT(2) $59,885
</TABLE>
(1)Multiples of Market Value.
(2)Short Term Debt and Long Term Debt (including capitalized lease obligations
and minority interest minus cash and cash equivalents).
(3)Implied price per unit after giving effect to General Partner ownership
interest.
(4)Projected net income provided by management of the Partnership.
<PAGE>
VALUATION METHODS
- --------------------------------------------------------------------------------
FAMILY DINING GROUP
BUFFETS, INC. develops, owns, franchises and operates buffet restaurants. The
restaurants offer a variety of fare, including soups, salads, entrees,
vegetables, nonalcoholic beverages and desserts for a fixed price. The Company
operates approximately 355 restaurants in approximately 24 states under the
names Old Country Buffet, Hometown Buffet and Roadhouse Grill and franchises 24
restaurants in 10 states.
CRACKER BARREL OLD COUNTRY STORE, INC. owns and operates approximately 298
country store restaurants located throughout the United States. The restaurants
are located along interstate highways and serve breakfast, lunch and dinner,
featuring home style country cooking. In 1996, 22.2% of revenues were generated
by the Company's retail operations.
FLAGSTAR COMPANIES, INC. owns and operates approximately 1,600 Denny's, 241 El
Pollo Loco, 466 Coco's, 160 Carrows and 199 Quincy's Family Steakhouse brands
and is a franchisee of 580 Hardee's units. In July 1997, Flagstar filed for
Chapter 11 bankruptcy protection.
LUBY'S CAFETERIAS, INC. owns and operates approximately 229 cafeterias in Texas,
Arizona, Oklahoma, Tennessee, Florida, New Mexico, Arkansas, Missouri,
Louisiana, Mississippi and Kansas. The restaurants, located primarily in
shopping malls, are open for lunch and dinner and cater to shoppers, office
workers and families.
MORRISON RESTAURANTS, INC., formerly Morrison Fresh Cooking, Inc., owns and
operates cafeterias, buffets and mall food court locations in the Southeastern
and mid-Atlantic regions of the United States. As of June 1, 1996, the Company
operated approximately
<PAGE>
VALUATION METHODS
- --------------------------------------------------------------------------------
155 units, consisting of approximately 133 traditional cafeterias, 9 small
cafeterias, 10 mall food court units and 3 buffets located in 13 states.
PICCADILLY CAFETERIAS, INC. operates a chain of approximately 130 cafeterias in
17 states. As of June 1996, 58 were located in suburban malls, 22 were located
in suburban strip centers and 50 were located in free-standing suburban
locations. The Company also operates seven Ralph & Kacoo's seafood restaurants
in Alabama, Louisiana and Mississippi.
RYAN'S FAMILY STEAK HOUSES, INC. owns and operates approximately 258 and
franchises 26 Ryan's restaurants. The Company's restaurants feature "Steaks,
Buffet & Bakery" and provide family-style dining at affordable prices.
<PAGE>
PROJECT FRENCH TOAST MORGAN KEEGAN & COMPANY, INC.
COMPARABLE COMPANY ANALYSIS INVESTMENT BANKING DEPARTMENT
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARE YEAR ADJUSTED
COMPANY / PRICE ------------------ SHARES MARKET NET MARKET
LATEST FINANCIALS TICKER 9/9/97 HIGH LOW OUTST.(1) VALUE DEBT(2) VALUE(3) REVENUE
- ----------------------- ------- ---------- -------- -------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bob Evans Farms, Inc. BOBE 18 7/16 18 1/2 12 1/8 42,953 $791,937 $49,732 $841,669 $831,140
7/25/97
Buffets, Inc. BOCB 11 5/8 15 3/4 6 3/8 45,350 $527,190 $18,163 $545,353 $781,993
7/16/97
Cracker Barrel Old
Country Store, Inc. CBRL 33 33 1/8 19 5/8 63,883 $2,108,125 $32,784 $2,140,909 $1,084,031
5/2/97
DenAmerica Corp. DEN 2 1/16 5 1/4 1 5/8 13,438 $27,715 $101,800 $129,515 $314,606
7/2/97
Flagstar Companies FLST 13/32 2 3/4 1/4 42,435 $17,239 $684,010 $701,249 $2,700,510
7/2/97
Frisch's Restaurants,
Inc. FRS 13 15/16 17 3/8 12 17/64 6,005 $83,700 $25,894 $109,593 $165,931
6/1/97
IHOP Corp. IHOP 36 3/4 37 3/8 19 1/4 10,096 $371,015 $144,790 $515,805 $203,354
6/30/97
Luby's Cafeterias,
Inc. LUB 19 3/4 24 3/8 17 5/8 23,284 $459,862 $83,234 $543,096 $484,571
5/31/97
Morrison Restaurants,
Inc. MRN 4 3/8 6 4 1/16 9,249 $40,463 $5,287 $45,750 $249,637
5/31/97
Piccadilly Cafeterias,
Inc. PIC 13 3/4 14 1/4 8 1/8 10,581 $145,487 $31,740 $177,227 $304,838
6/30/97
Ryan's Family Steak
Houses, Inc. RYAN 9 1/16 9 9/16 6 5/8 47,898 $434,072 $132,548 $566,620 $590,847
7/2/97
Shoney's, Inc. SHN 5 9/16 9 7/8 4 3/8 48,568 $270,160 $493,483 $763,643 $1,200,552
5/11/97
VICORP Restaurants VRES 15 1/4 16 3/4 11 9,120 $139,077 $21,166 $160,243 $331,092
4/30/97
PERKINS FAMILY
RESTAURANTS, L.P. (6) PFR 12 15/16 14 7/8 10 3/16 $10,487 $135,662 $59,885 $195,567 $257,373
<CAPTION>
LATEST TWELVE MONTHS(4) E.P.S.
------------------------------------------------------- ---------------------------------
TANGIBLE
COMPANY / NET BOOK 1997 CAL 1998 CAL
LATEST FINANCIALS EBITDA EBIT INCOME VALUE LTM EST.(5) EST.(5)
- ----------------------- --------- -------- -------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Bob Evans Farms, Inc. $90,927 $60,686 $37,536 $418,732 $0.90 $0.99 $1.19
7/25/97
Buffets, Inc. $75,548 $36,449 $17,625 $246,213 $0.40 $0.67 $0.82
7/16/97
Cracker Barrel Old
Country Store, Inc. $166,671 $131,049 $81,951 $626,117 $1.33 $1.51 $1.74
5/2/97
DenAmerica Corp. $22,042 $12,779 $656 ($50,419) $0.07 $0.25 $0.20
7/2/97
Flagstar Companies $293,411 $147,605 ($117,433) ($1,550,099) ($3.10) ($2.30) ($2.15)
7/2/97
Frisch's Restaurants,
Inc. $19,187 $8,701 $4,227 $63,927 $0.59 NA NA
6/1/97
IHOP Corp. $55,176 $45,854 $19,761 $127,870 $2.06 $2.26 $2.63
6/30/97
Luby's Cafeterias,
Inc. $79,114 $59,715 $36,510 $221,199 $1.55 $1.54 NA
5/31/97
Morrison Restaurants,
Inc. $14,439 $4,489 $2,732 $39,944 $0.30 $0.34 $0.38
5/31/97
Piccadilly Cafeterias,
Inc. $29,975 $17,859 $9,390 $77,604 $0.89 $0.89 $1.11
6/30/97
Ryan's Family Steak
Houses, Inc. $94,850 $67,524 $39,194 $302,008 $0.80 $0.83 $0.94
7/2/97
Shoney's, Inc. $129,850 $76,135 $20,715 ($65,440) $0.47 $0.44 $0.62
5/11/97
VICORP Restaurants $33,768 $13,489 $7,039 $126,057 $0.77 $0.80 $0.95
4/30/97
PERKINS FAMILY
RESTAURANTS, L.P. (6) $35,581 $19,661 $8,840 $35,816 $0.86 $0.81 $0.95
6/30/97
</TABLE>
(1) Shares outstanding includes in-the-money options using the treasury stock
method.
(2) Short-term debt, long-term debt (including capitalized lease obligations),
and preferred stock minus cash and marketable securities.
(3) Market value of equity plus net debt.
(4) Income statement data excludes extraordinary and nonrecurring items.
(5) Mean estimates obtained from First Call. Perkins 1997 estimate from
internal projections and 1998 estimate from Value Line (pro forma for C
Corporation income tax). Flagstar estimates from IBES. DenAmerica 1998
estimate from Fahnestock & Company. VICORP 1998 estimate from Value Line.
Morrison estimates from BT Alex. Brown.
(6) Pro forma for corporate income taxes at 40%.
<PAGE>
PROJECT FRENCH TOAST MORGAN KEEGAN & COMPANY, INC.
COMPARABLE COMPANY ANALYSIS INVESTMENT BANKING DEPARTMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS GROWTH
--------------------------------------------------------- ----------------------
NET RETURN ON NET DEBT REVENUE NET INCOME
COMPANY EBITDA EBIT INCOME LATEST TO TOTAL 4 - YEAR 4 - YEAR
NAME MARGIN MARGIN MARGIN EQUITY CAPITAL CAGR CAGR
- -------------------------------------- ------ ------ ------ -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Bob Evans Farms, Inc. 10.9% 7.3% 4.5% 8.7% 10.4% 5.9% -4.3%
Buffets, Inc. 9.7% 4.7% 2.3% 7.0% 6.7% 30.2% 9.5%
Cracker Barrel Old Country Store, Inc. 15.4% 12.1% 7.6% 13.1% 5.0% 21.3% 12.6%
DenAmerica Corp. 7.0% 4.1% 0.2% NM 82.7% 71.8% NM
Flagstar Companies 10.9% 5.5% NM NM NM 1.0% NM
Frisch's Restaurants, Inc. 11.6% 5.2% 2.5% 6.5% 28.6% 2.7% -5.9%
IHOP Corp. 27.1% 22.5% 9.7% 14.1% 50.7% 12.6% 10.9%
Luby's Cafeterias, Inc. 16.3% 12.3% 7.5% 16.5% 27.3% 6.8% 4.7%
Morrison Restaurants, Inc. 5.8% 1.8% 1.1% 6.8% 11.7% -3.8% -24.1%
Piccadilly Cafeterias, Inc. 9.8% 5.9% 3.1% 12.1% 29.0% 2.9% 18.1%
Ryan's Family Steak Houses, Inc. 16.1% 11.4% 6.6% 13.0% 30.5% 12.8% 6.7%
Shoney's, Inc. 10.8% 6.3% 1.7% NM NM 2.8% NM
VICORP Restaurants 10.2% 4.1% 2.1% 5.6% 14.4% -4.8% -35.4%
- -----------------------------------
COMBINED:
- -------------------------------------------------------------------------------------------------------------------------------
Low 5.8% 1.8% 0.2% 5.6% 5.0% -4.8% -35.4%
Mean 12.4% 7.9% 4.1% 10.3% 27.0% 12.5% -0.7%
High 27.1% 22.5% 9.7% 16.5% 82.7% 71.8% 18.1%
Median 10.9% 5.9% 2.8% 10.4% 27.3% 5.9% 5.7%
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
PERKINS FAMILY RESTAURANTS, L.P. 13.8% 7.6% 3.4% 11.5% 49.5% 5.9% 2.4%
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MULTIPLE OF ADJ. MARKET VALUE MULTIPLE OF MARKET VALUE
------------------------------- -----------------------------------------------------
TANGIBLE
COMPANY NET LTM 1997 CAL 1998 CAL BOOK
NAME REVENUE EBITDA EBIT INCOME EPS EPS EPS VALUE
- -------------------------------------- -------- ------- ------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bob Evans Farms, Inc. 1.01 x 9.3 x 13.9 x 21.1 x 20.5 x 18.6 x 15.5 x 1.9 x
Buffets, Inc. 0.70 x 7.2 x 15.0 x 29.9 x 29.1 x 17.4 x 14.2 x 2.1 x
Cracker Barrel Old Country Store, Inc. 1.97 x 12.8 x 16.3 x 25.7 x 24.8 x 21.8 x 19.0 x 3.4 x
DenAmerica Corp. 0.41 x 5.9 x 10.1 x 42.2 x 31.6 x 8.3 x 10.3 x NM x
Flagstar Companies 0.26 x 2.4 x 4.8 x NM x NM x NM x NM x NM x
Frisch's Restaurants, Inc. 0.66 x 5.7 x 12.6 x 19.8 x 23.6 x NA x NA x 1.3 x
IHOP Corp. 2.54 x 9.3 x 11.2 x 18.8 x 17.8 x 16.3 x 14.0 x 2.9 x
Luby's Cafeterias, Inc. 1.12 x 6.9 x 9.1 x 12.6 x 12.7 x 12.8 x NA x 2.1 x
Morrison Restaurants, Inc. 0.18 x 3.2 x 10.2 x 14.8 x 14.6 x 12.9 x 11.5 x 1.0 x
Piccadilly Cafeterias, Inc. 0.58 x 5.9 x 9.9 x 15.5 x 15.4 x 15.4 x 12.4 x 1.9 x
Ryan's Family Steak Houses, Inc. 0.96 x 6.0 x 8.4 x 11.1 x 11.4 x 10.9 x 9.6 x 1.4 x
Shoney's, Inc. 0.64 x 5.9 x 10.0 x 13.0 x 11.8 x 12.7 x 8.9 x NM x
VICORP Restaurants 0.48 x 4.7 x 11.9 x 19.8 x 19.8 x 19.0 x 16.1 x 1.1 x
- -----------------------------------
COMBINED:
- ------------------------------------------------------------------------------------------------------------------------------------
Low 0.18 x 2.4 x 4.8 x 11.1 x 11.4 x 8.3 x 8.9 x 1.1 x
Mean 0.89 6.6 11.0 20.4 19.4 15.1 13.2 1.9
High 2.54 12.8 16.3 42.2 31.6 21.8 19.0 3.4
Median 0.66 5.9 10.2 19.3 18.8 15.4 13.2 1.9
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PERKINS FAMILY RESTAURANTS, L.P. 0.76 x 5.5 x 9.9 x 15.3 x 15.1 x 16.0 x 13.6 x 3.8 x
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NA - Not Available
NM - Not Meaningful
<PAGE>
PROJECT FRENCH TOAST MORGAN KEEGAN & COMPANY, INC.
COMPARABLE COMPANY ANALYSIS INVESTMENT BANKING DEPARTMENT
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MULTIPLES Multiple of Adjusted Market Value
----------------------------------------------
High Low Mean Median
----------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue 2.54 0.18 0.89 0.66
EBITDA 12.8 2.4 6.6 5.9
EBIT 16.3 4.8 11.0 10.2
Net Income(1) 42.2 11.1 20.4 19.3
Tangible Book Value(1) 3.4 1.0 1.9 1.9
PROJECTED
1997 Net Income(1) 21.8 8.3 15.1 15.4
1998 Net Income(1) 19.1 8.9 13.2 13.2
</TABLE>
<TABLE>
<CAPTION>
VALUATION
Indicative Equity Value/Price
Per Unit of The Partnership(3)
--------------- ----------------------------------------------
LTM The Partnership High Low Mean Median
--------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $257,373 $592,938 ($12,717) $168,143 $110,103
Price Per Unit $55.41 ($1.19) $15.71 $10.29
EBITDA $35,581 $397,157 $25,153 $173,286 $150,487
Price Per Unit $37.12 $2.35 $16.19 $14.06
EBIT $19,661 $261,311 $33,521 $157,005 $140,492
Price Per Unit $24.42 $3.13 $14.67 $13.13
Net Income(1) $8,840 $373,499 $97,907 $180,002 $170,324
Price Per Unit $34.91 $9.15 $16.82 $15.92
Tangible Book Value(1) $35,816 $120,592 $36,281 $68,471 $67,442
Price Per Unit $11.27 $3.39 $6.40 $6.30
PROJECTED(4)
1997 Net Income(1) $8,359 $182,282 $68,963 $126,136 $129,145
Price Per Unit $17.04 $6.44 $11.79 $12,07
1998 Net Income(1) $10,475 $199,047 $93,478 $137,768 $138,066
Price Per Unit $18.60 $8.74 $12.88 $12.90
NET DEBT(2) $59,885
</TABLE>
(1) Multiples of Market Value.
(2) Short Term Debt and Long Term Debt (including capitalized lease obligations
and minority interest minus cash and cash equivalents).
(3) Implied price per unit after giving effect to General Partner ownership
interest.
(4) Projected net income provided by management of the Partnership.
<PAGE>
VALUATION METHODS
- --------------------------------------------------------------------------------
COMPARABLE COMPANY ANALYSIS
CONCLUSION
- - Morgan Keegan determined the market value and the adjusted market value of
each comparable company and calculated trading multiples based on revenue,
EBITDA, EBIT, net income and tangible book value.
- - No comparable company was deemed identical to the Partnership. Therefore,
the trading multiples of the respective groups were deemed more meaningful
than the multiples of any particular company.
- - Excluding tangible book value multiples, implied range of $10.00 to $16.34 per
unit based on the Peer Group.
- - Excluding tangible book value multiples, implied range of $10.29 to $15.96 per
unit based on the Family Dining Group.
<PAGE>
VALUATION METHODS
- --------------------------------------------------------------------------------
PREMIUM ANALYSIS
OVERVIEW
- - Analyzed the premiums paid by controlling persons in acquisitions of
noncontrol positions.
- - Analyzed the premiums paid for mergers and acquisitions of publicly traded
companies with transaction values between $50 and $200 million.
- - Analyzed the premiums paid over the target's stock price one day, one week
and one month prior to the announcement date.
- - Compared these premiums to the premium offered pursuant to the transaction.
- - Derived an implied price per unit based on the median premiums paid in these
transactions.
<PAGE>
PREMIUM ANALYSIS
PROJECT FRENCH TOAST
Valuation Matrix
PREMIUM OVER CLOSING PRICE
ORIGINAL TRANSACTION ($13.00 PER UNIT) 1 DAY 1 WEEK 1 MONTH
--------------------------------
19.5% 17.5% 22.4%
Partnership Closing Stock Price $ 10.88 $ 11.06 $ 10.63
PREMIUM OVER CLOSING PRICE
PROPOSED TRANSACTION ($13.50 PER UNIT) 1 DAY 1 WEEK 1 MONTH
--------------------------------
24.1% 22.0% 27.1%
Partnership Closing Stock Price $ 10.88 $ 11.06 $ 10.63
PREMIUM OVER CLOSING PRICE
PROPOSED TRANSACTION ($14.00 PER UNIT) 1 DAY 1 WEEK 1 MONTH
--------------------------------
28.7% 26.6% 31.8%
Partnership Closing Stock Price $ 10.88 $ 11.06 $ 10.63
ALL ACQUISITIONS BY CONTROLLING PERSONS OF NONCONTROL POSITIONS SINCE 1/1/92
MEDIAN 17.3% 19.1% 21.0%
Implied Price per Unit $ 12.76 $ 13.18 $ 12.85
ALL COMPLETED TRANSACTIONS BETWEEN $50 AND $200 MILLION SINCE 1/1/96
MEDIAN 23.1% 29.9% 31.9%
Implied Price per Unit $ 13.38 $ 14.37 $ 14.02
ALL COMPLETED TRANSACTIONS SINCE 1/1/96 (CASH CONSIDERATION)
MEDIAN 26.1% 31.8% 31.8%
Implied Price per Unit $ 13.71 $ 14.58 $ 14.01
- ------------------------------------------------------------------------------
MORGAN KEEGAN & COMPANY, INC.
<PAGE>
PROJECT FRENCH TOAST
PREMIUM ANALYSIS OF ALL ACQUISITIONS BY CONTROLLING PERSONS OF NONCONTROL
POSITIONS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DATE OFFER
ANNOUNCED ACQUIROR NAME TARGET NAME DEAL VALUE (MIL)1 PRICE/SHARE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
09/05/97 Investor Group DavCo Restaurants, Inc. $148.0 $20.00
09/04/97 Investor Group Cinergi Pictures Entertainment 14.8 2.30
08/29/97 Rexel SA(Pinault-Printemps) Rexel Inc 250.8 19.50
07/09/97 Investor Group Seaman Furniture Co 31.6 25.05
06/26/97 Rhone-Poulenc SA(France) Rhone-Poulenc Rorer Inc 4,464.1 97.00
06/20/97 Waste Management Inc Wheelabrator Technologies Inc 774.7 15.00
06/13/97 Hilton Hotels Corp Bally's Grand Inc 42.6 52.75
06/02/97 Anthem Inc Acordia Inc(Anthem Inc) 172.7 40.00
05/22/97 Texas Industries Inc Chaparral Steel Co 72.8 15.50
05/14/97 Enron Corp Enron Global Power & Pipelines 443.5 35.00
05/05/97 St Joe Paper Co Florida East Coast Inds Inc 428.4 102.00
04/16/97 Harcourt General Inc Steck-Vaughn Publishing Corp 37.9 14.00
02/25/97 Petrofina SA Fina Inc 257.0 60.00
02/04/97 Abaco Grupo Finaciero Rodman & Renshaw Capital Group 0.6 0.30
01/28/97 Monsanto Co Calgene Inc(Monsanto Co) 242.6 8.00
01/21/97 Mafco Holdings Inc Mafco Consolidated Grp(Mafco) 116.8 33.50
01/13/97 Zurich Versicherungs GmbH Zurich Reinsurance Centre 319.0 36.00
01/06/97 Investor Group Flagstar Cos Inc 0.2 0.05
12/18/96 Regal Hotel Management Inc Aircoa Hotel Partners LP 5.9 20.00
12/06/96 Sears Roebuck & Co MaxServ Inc(Sears Roebuck) 46.0 7.75
11/27/96 JW Childs Equity Partners LP Central Tractor Farm & Country 56.7 14.25
11/20/96 Andrews Group Inc Toy Biz Inc 208.2 22.50
11/06/96 Ansaldo Transporti SpA Union Switch & Signal Inc 27.1 7.25
10/10/96 Renco Group Inc WCI Steel Inc(Renco Group Inc) 56.5 10.00
10/03/96 Electromagnetic Sciences Inc LXE 14.8 13.13
09/26/96 National Patent Development General Physics Corp 26.1 5.10
09/09/96 Highwoods Properties Inc Crocker Realty Trust Inc 76.1 11.88
08/26/96 Conseco Inc Bankers Life Holding(Conseco) 120.8 25.00
08/08/96 Chemed Corp Roto-Rooter Inc(Chemed Corp) 93.6 41.00
07/26/96 John Wood Group PLC ERC Industries Inc(John Wood) 1.5 1.30
07/03/96 Gold Kist Inc Golden Poultry Co Inc 52.1 14.25
06/21/96 Seaboard Acquisition Partners Seaboard Oil Co 4.2 9.75
06/03/96 Investor Sequa Corp 2.5 42.00
05/27/96 Novartis AG SyStemix Inc(Novartis AG) 107.6 19.50
03/29/96 Equity Holdings Great American Mgmt & Invt Inc 63.3 50.00
03/29/96 Hollywood Casino Corp Pratt Hotel Corp 3.3 3.25
02/05/96 Advanced NMR Systems Advanced Mammography Systems 7.1 2.76
02/05/96 CUS Acquisition Inc Customedix Corp 3.6 2.38
01/11/96 Investor Group Zurich Reinsurance Centre 62.3 30.50
12/28/95 Investor Sportmart 1.9 3.47
12/15/95 V'Power Corp Vector Aeromotive Corp 4.5 0.45
11/09/95 GH Wood & Wyant Inc Hosposable Products Inc 0.2 8.00
11/08/95 Harcourt General Inc Neiman-Marcus Group Inc 15.6 18.75
11/06/95 Investor Group NPC International Inc 82.1 9.00
<CAPTION>
PREMIUM
------------------------------------------
1 DAY 1 WEEK 4 WEEKS
DATE PRIOR TO PRIOR TO PRIOR TO
ANNOUNCED ACQUIROR NAME TARGET NAME ANN. DATE ANN. DATE ANN. DATE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
09/05/97 Investor Group DavCo Restaurants, Inc. 49.5 % 49.5 % 53.8 %
09/04/97 Investor Group Cinergi Pictures Entertainment 26.9 24.7 56.6
08/29/97 Rexel SA(Pinault-Printemps) Rexel Inc 3.3 9.5 5.4
07/09/97 Investor Group Seaman Furniture Co 21.5 25.3 21.5
06/26/97 Rhone-Poulenc SA(France) Rhone-Poulenc Rorer Inc 22.1 22.8 29.3
06/20/97 Waste Management Inc Wheelabrator Technologies Inc 15.4 16.5 18.8
06/13/97 Hilton Hotels Corp Bally's Grand Inc 27.9 29.8 31.1
06/02/97 Anthem Inc Acordia Inc(Anthem Inc) 12.7 11.5 26.0
05/22/97 Texas Industries Inc Chaparral Steel Co 20.4 25.3 29.2
05/14/97 Enron Corp Enron Global Power & Pipelines 15.7 17.6 23.9
05/05/97 St Joe Paper Co Florida East Coast Inds Inc 14.9 16.6 9.7
04/16/97 Harcourt General Inc Steck-Vaughn Publishing Corp 24.4 24.4 15.5
02/25/97 Petrofina SA Fina Inc 19.7 18.5 21.5
02/04/97 Abaco Grupo Finaciero Rodman & Renshaw Capital Group (76.0) (73.3) (73.3)
01/28/97 Monsanto Co Calgene Inc(Monsanto Co) 62.0 60.0 60.0
01/21/97 Mafco Holdings Inc Mafco Consolidated Grp(Mafco) 23.5 23.5 27.6
01/13/97 Zurich Versicherungs GmbH Zurich Reinsurance Centre 17.1 18.5 11.6
01/06/97 Investor Group Flagstar Cos Inc (95.7) (95.0) (95.9)
12/18/96 Regal Hotel Management Inc Aircoa Hotel Partners LP 1233.3 1233.3 1233.3
12/06/96 Sears Roebuck & Co MaxServ Inc(Sears Roebuck) 19.2 67.6 55.0
11/27/96 JW Childs Equity Partners LP Central Tractor Farm & Country 17.5 17.5 18.8
11/20/96 Andrews Group Inc Toy Biz Inc 29.5 25.9 20.0
11/06/96 Ansaldo Transporti SpA Union Switch & Signal Inc 3.6 3.6 0.0
10/10/96 Renco Group Inc WCI Steel Inc(Renco Group Inc) 17.6 29.0 77.8
10/03/96 Electromagnetic Sciences Inc LXE 22.1 14.1 19.3
09/26/96 National Patent Development General Physics Corp 16.6 31.6 36.0
09/09/96 Highwoods Properties Inc Crocker Realty Trust Inc 18.8 20.3 21.8
08/26/96 Conseco Inc Bankers Life Holding(Conseco) 14.9 10.5 11.7
08/08/96 Chemed Corp Roto-Rooter Inc(Chemed Corp) 12.3 12.3 11.2
07/26/96 John Wood Group PLC ERC Industries Inc(John Wood) 30.0 0.2 43.4
07/03/96 Gold Kist Inc Golden Poultry Co Inc 52.0 50.0 39.0
06/21/96 Seaboard Acquisition Partners Seaboard Oil Co 11.4 11.4 39.3
06/03/96 Investor Sequa Corp 2.8 14.3 18.3
05/27/96 Novartis AG SyStemix Inc(Novartis AG) 4.7 69.6 59.2
03/29/96 Equity Holdings Great American Mgmt & Invt Inc 2.6 4.2 3.6
03/29/96 Hollywood Casino Corp Pratt Hotel Corp 36.8 36.8 23.8
02/05/96 Advanced NMR Systems Advanced Mammography Systems 5.1 63.6 47.2
02/05/96 CUS Acquisition Inc Customedix Corp 22.6 26.7 5.6
01/11/96 Investor Group Zurich Reinsurance Centre 1.2 0.8 4.3
12/28/95 Investor Sportmart 6.8 (4.3) (29.7)
12/15/95 V'Power Corp Vector Aeromotive Corp (52.0) (48.6) (44.6)
11/09/95 GH Wood & Wyant Inc Hosposable Products Inc (8.6) (8.6) 0.0
11/08/95 Harcourt General Inc Neiman-Marcus Group Inc 0.0 7.1 1.4
11/06/95 Investor Group NPC International Inc 44.0 44.0 33.3
<PAGE>
<CAPTION>
DATE OFFER
ANNOUNCED ACQUIROR NAME TARGET NAME DEAL VALUE (MIL)1 PRICE/SHARE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10/25/95 Pubco Corp Bobbie Brooks Inc(Pubco Corp) $0.5 $0.96
09/26/95 SCOR SCOR US Corp(SCOR SA) 55.4 15.25
09/25/95 Forum Group Inc Forum Retirement Partners LP 7.4 2.83
08/30/95 Investor Group Syms Corp 27.9 8.75
08/25/95 Berkshire Hathaway Inc GEICO Corp(Berkshire Hathaway) 2,347.0 70.00
07/14/95 COBE Laboratories(Gambro AB) REN Corp-USA(COBE Labs Inc) 177.7 20.00
07/06/95 Grand Casinos Inc Grand Gaming Corp 36.5 5.06
05/26/95 Conseco Inc Bankers Life Holding(Conseco) 198.0 20.63
05/19/95 BIC SA Bic Corp(BIC SA) 212.6 40.50
05/16/95 Danaher Corp Total Containment(Group Treco) 21.4 10.50
04/10/95 Investor Group Continental Mtg & Equity Trust 0.1 14.50
04/07/95 McCaw Cellular Commun(AT&T) LIN Bdcstg(McCaw Cellular) 3,323.4 129.90
04/05/95 Club Mediterranee SA Club Med Inc 153.4 32.00
03/27/95 Terra Industries Inc Terra Nitrogen Co LP 229.1 30.00
03/15/95 LinPac Mouldings Ltd Ropak Corp 23.4 11.00
02/27/95 Conseco Inc Bankers Life Holding(Conseco) 458.5 22.00
02/15/95 Genzyme Corp IG Laboratories Inc 21.4 7.00
02/07/95 WMX Technologies Inc Rust International Inc 50.5 16.35
01/31/95 Sandoz AG SyStemix Inc(Sandoz AG) 80.0 69.54
01/17/95 LinPac Mouldings Ltd Ropak Corp 3.1 11.00
01/10/95 Investor Group Forum Group Inc 9.4 7.13
12/28/94 Fleet Financial Group Inc,MA Fleet Mortgage Group Inc 188.1 20.00
11/02/94 PacifiCorp Pacific Telecom(PacifiCorp) 159.0 30.00
10/31/94 Sears Roebuck & Co MaxServ Inc(Sears Roebuck) 4.5 4.50
10/18/94 Investor Group Katy Industries Inc 2.4 24.00
09/13/94 Investor Group LDB Corp 4.3 7.50
09/08/94 GTE Corp Contel Cellular Inc(Contel) 254.3 25.50
08/24/94 Dole Food Co Inc Castle & Cooke Homes Inc 81.5 15.75
07/28/94 WMX Technologies Inc Chemical Waste Management Inc 397.4 8.85
07/22/94 Agri International Inc Golden Poultry Co Inc 3.3 6.50
06/30/94 Parkway Co EB Inc(Parkway Co) 12.5 17.66
06/09/94 Investor Group S & M Co 0.9 1.43
06/06/94 Ogden Corp Ogden Projects Inc(Ogden Corp) 110.3 18.38
05/05/94 Wassall PLC General Cable(Cie Gen de Eaux) 35.9 6.00
04/28/94 Investor Group Enquirer/Star Group Inc 315.0 17.50
04/26/94 Burlington Resources Inc Diamond Shamrock Offshore 42.6 4.48
04/08/94 Gruma Corp(Gruma SA de CV) Candy's Tortilla Factory 3.9 3.68
04/08/94 Investor Group Data Transmission Network Corp 0.9 26.50
04/01/94 Intertape Polymer Group Inc International Container Sys 1.1 2.64
03/25/94 Investor Group Sandata Inc 0.8 2.52
03/23/94 Adia SA Adia Services Inc(Adia SA) 35.8 15.00
01/07/94 Holderbank Financiere Glarus Holnam Inc(Holdernam Inc) 51.7 7.65
01/06/94 Healthdyne Inc Home Nutritional Services Inc 12.0 5.60
12/17/93 Fine Fragrances Distn Inc Alfin Inc(Fine Fragrances Dst) 1.3 1.15
<CAPTION>
PREMIUM
--------------------------------------------
1 DAY 1 WEEK 4 WEEKS
DATE PRIOR TO PRIOR TO PRIOR TO
ANNOUNCED ACQUIROR NAME TARGET NAME ANN. DATE ANN. DATE ANN. DATE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/25/95 Pubco Corp Bobbie Brooks Inc(Pubco Corp) (14.7) % (14.7) % (26.9) %
09/26/95 SCOR SCOR US Corp(SCOR SA) 37.1 35.6 38.6
09/25/95 Forum Group Inc Forum Retirement Partners LP 41.5 50.9 41.5
08/30/95 Investor Group Syms Corp 11.1 9.4 25.0
08/25/95 Berkshire Hathaway Inc GEICO Corp(Berkshire Hathaway) 25.6 23.1 25.3
07/14/95 COBE Laboratories(Gambro AB) REN Corp-USA(COBE Labs Inc) 27.0 20.3 26.0
07/06/95 Grand Casinos Inc Grand Gaming Corp 34.9 34.9 55.7
05/26/95 Conseco Inc Bankers Life Holding(Conseco) 11.5 13.8 (0.6)
05/19/95 BIC SA Bic Corp(BIC SA) 13.3 12.5 28.6
05/16/95 Danaher Corp Total Containment(Group Treco) 52.7 55.6 50.0
04/10/95 Investor Group Continental Mtg & Equity Trust (3.3) (3.3) (3.3)
04/07/95 McCaw Cellular Commun(AT&T) LIN Bdcstg(McCaw Cellular) 18.2 19.7 19.7
04/05/95 Club Mediterranee SA Club Med Inc 41.4 39.9 44.6
03/27/95 Terra Industries Inc Terra Nitrogen Co LP 9.1 11.1 8.6
03/15/95 LinPac Mouldings Ltd Ropak Corp 4.8 6.0 4.8
02/27/95 Conseco Inc Bankers Life Holding(Conseco) 18.9 21.4 6.0
02/15/95 Genzyme Corp IG Laboratories Inc 43.6 86.7 143.5
02/07/95 WMX Technologies Inc Rust International Inc 27.0 39.1 39.1
01/31/95 Sandoz AG SyStemix Inc(Sandoz AG) 334.6 315.1 303.1
01/17/95 LinPac Mouldings Ltd Ropak Corp 4.8 3.5 3.5
01/10/95 Investor Group Forum Group Inc (12.3) (13.6) 1.8
12/28/94 Fleet Financial Group Inc,MA Fleet Mortgage Group Inc 19.4 18.5 18.5
11/02/94 PacifiCorp Pacific Telecom(PacifiCorp) 23.7 23.7 23.7
10/31/94 Sears Roebuck & Co MaxServ Inc(Sears Roebuck) (5.3) 0.0 (12.2)
10/18/94 Investor Group Katy Industries Inc 146.2 146.1 140.0
09/13/94 Investor Group LDB Corp 42.9 42.9 42.9
09/08/94 GTE Corp Contel Cellular Inc(Contel) 43.7 37.8 36.0
08/24/94 Dole Food Co Inc Castle & Cooke Homes Inc 35.5 41.6 55.6
07/28/94 WMX Technologies Inc Chemical Waste Management Inc 10.6 8.9 1.1
07/22/94 Agri International Inc Golden Poultry Co Inc 0.0 15.6 8.3
06/30/94 Parkway Co EB Inc(Parkway Co) 23.9 26.1 53.6
06/09/94 Investor Group S & M Co (4.7) (4.7) 14.4
06/06/94 Ogden Corp Ogden Projects Inc(Ogden Corp) 5.8 17.6 20.5
05/05/94 Wassall PLC General Cable(Cie Gen de Eaux) 17.1 21.5 11.6
04/28/94 Investor Group Enquirer/Star Group Inc 20.7 20.7 7.7
04/26/94 Burlington Resources Inc Diamond Shamrock Offshore (3.1) (0.4) 5.4
04/08/94 Gruma Corp(Gruma SA de CV) Candy's Tortilla Factory 78.4 84.0 73.2
04/08/94 Investor Group Data Transmission Network Corp 8.7 26.2 1.9
04/01/94 Intertape Polymer Group Inc International Container Sys 17.1 (8.3) (12.2)
03/25/94 Investor Group Sandata Inc 55.1 96.7 55.1
03/23/94 Adia SA Adia Services Inc(Adia SA) (43.4) (42.3) (37.5)
01/07/94 Holderbank Financiere Glarus Holnam Inc(Holdernam Inc) 13.3 15.5 7.4
01/06/94 Healthdyne Inc Home Nutritional Services Inc 28.0 35.8 17.9
12/17/93 Fine Fragrances Distn Inc Alfin Inc(Fine Fragrances Dst) 67.3 67.3 41.5
<PAGE>
<CAPTION>
DATE OFFER
ANNOUNCED ACQUIROR NAME TARGET NAME DEAL VALUE (MIL)1 PRICE/SHARE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11/22/93 Mergerco Inc Pettibone Corp(Mergerco Inc) $5.2 $3.50
11/02/93 Euronote Intl Mgmt Ltd Dev-Tech Corp 1.2 0.69
10/22/93 Manville Corp Riverwood International Corp 50.0 14.70
10/13/93 Medco Containment Services Inc Medical Marketing Group Inc 122.5 27.75
09/20/93 Valley Fashions Corp West Point-Pepperell Inc 66.3 46.00
07/27/93 Investor Group Forum Group Inc 23.0 3.62
07/01/93 Quartex Corp CMS/DATA Corp(Quartex Corp) 26.7 7.00
07/01/93 Blockbuster Entertainment Corp Spelling Entertainment Group 36.3 7.41
06/23/93 Comcast Corp Comcast Cablevision of Phila 14.3 95.00
06/17/93 Apache Corp Hadson Energy Resources Corp 39.3 15.00
05/24/93 USTrails Inc Thousand Trails Inc 7.1 1.55
05/19/93 Standard Industries Inc Wellington Leisure Prod Inc 3.5 7.63
03/22/93 New Marvel Holdings Inc Marvel Entertainment Group Inc 300.0 30.00
02/19/93 National Mutual Insurance Co Celina Financial Corp 4.1 5.80
02/18/93 Sahara Resorts Sahara Casino Partners LP 19.4 2.76
01/15/93 Investor Group Atek Metals Center Inc 5.0 3.00
01/12/93 EW Scripps(Edward Scripps Tr) Scripps Howard Broadcasting Co 28.3 49.00
01/04/93 Investor Group United Medical Corp 11.8 9.50
12/17/92 Investor Group Ambulatory Medical Care Inc 2.3 5.50
11/13/92 Rust International Inc Brand Cos Inc 185.0 18.75
10/09/92 Dundee Bancorp International Avalon Corp(Corona Corp) 7.8 3.75
08/25/92 Union Planters Corp Bank of East Tennessee 9.6 13.00
08/17/92 Leucadia National Corp PHLCORP Inc 139.9 25.78
07/29/92 Investor Group Fretter Inc 14.2 4.00
07/24/92 Reliance Group Holdings Inc Frank B Hall & Co 39.4 2.97
07/02/92 Preferred Equities Corp Vacation Spa Resorts Inc 1.2 0.33
06/25/92 Katy Holdings Katy Industries Inc 111.8 25.75
06/02/92 Investor Newport Electronics Inc 1.3 4.00
05/12/92 Valhi Inc NL Industries Inc 10.2 8.75
04/24/92 USTrails Inc Thousand Trails Inc 3.1 1.10
03/20/92 BLV Acquisition Corp Belvedere Corp 16.9 6.30
03/02/92 WR Grace & Co Grace Energy Corp 77.3 19.00
02/24/92 Unocal Corp Unocal Exploration Corp 117.5 11.68
02/14/92 Nycal Corp Sunlite Inc(Nycal Corp) 4.3 3.75
02/06/92 Charter Co(American Financial) Spelling Entertainment Inc 43.0 7.25
01/16/92 Genzyme Corp IG Laboratories Inc 5.0 6.76
<CAPTION>
PREMIUM
-----------------------------------------
1 DAY 1 WEEK 4 WEEKS
DATE PRIOR TO PRIOR TO PRIOR TO
ANNOUNCED ACQUIROR NAME TARGET NAME ANN. DATE ANN. DATE ANN. DATE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11/22/93 Mergerco Inc Pettibone Corp(Mergerco Inc) 3.7 % (6.7) % 0.0 %
11/02/93 Euronote Intl Mgmt Ltd Dev-Tech Corp (54.0) (57.5) (60.6)
10/22/93 Manville Corp Riverwood International Corp 15.3 12.0 8.9
10/13/93 Medco Containment Services Inc Medical Marketing Group Inc (17.8) (6.3) (5.9)
09/20/93 Valley Fashions Corp West Point-Pepperell Inc (20.5) (19.8) (19.8)
07/27/93 Investor Group Forum Group Inc 106.9 70.4 106.9
07/01/93 Quartex Corp CMS/DATA Corp(Quartex Corp) 460.0 330.8 314.8
07/01/93 Blockbuster Entertainment Corp Spelling Entertainment Group 14.0 23.5 37.9
06/23/93 Comcast Corp Comcast Cablevision of Phila 35.7 15.9 15.9
06/17/93 Apache Corp Hadson Energy Resources Corp 26.3 27.7 25.0
05/24/93 USTrails Inc Thousand Trails Inc 45.9 65.3 106.7
05/19/93 Standard Industries Inc Wellington Leisure Prod Inc 1.7 1.7 1.7
03/22/93 New Marvel Holdings Inc Marvel Entertainment Group Inc 53.8 42.9 58.9
02/19/93 National Mutual Insurance Co Celina Financial Corp 16.0 36.5 36.5
02/18/93 Sahara Resorts Sahara Casino Partners LP (4.0) (8.0) 5.1
01/15/93 Investor Group Atek Metals Center Inc 14.3 14.3 26.3
01/12/93 EW Scripps(Edward Scripps Tr) Scripps Howard Broadcasting Co (3.9) 0.0 0.0
01/04/93 Investor Group United Medical Corp 49.0 52.0 49.0
12/17/92 Investor Group Ambulatory Medical Care Inc (12.0) (12.0) (8.3)
11/13/92 Rust International Inc Brand Cos Inc 4.9 13.6 4.9
10/09/92 Dundee Bancorp International Avalon Corp(Corona Corp) 42.9 42.9 50.0
08/25/92 Union Planters Corp Bank of East Tennessee 20.9 20.9 36.8
08/17/92 Leucadia National Corp PHLCORP Inc 12.1 15.2 28.9
07/29/92 Investor Group Fretter Inc 77.8 100.0 52.4
07/24/92 Reliance Group Holdings Inc Frank B Hall & Co (34.0) (25.8) (18.1)
07/02/92 Preferred Equities Corp Vacation Spa Resorts Inc (34.0) (34.0) (34.0)
06/25/92 Katy Holdings Katy Industries Inc 53.7 51.5 46.1
06/02/92 Investor Newport Electronics Inc (5.9) (5.9) (5.9)
05/12/92 Valhi Inc NL Industries Inc 2.9 9.4 2.9
04/24/92 USTrails Inc Thousand Trails Inc 120.0 95.6 60.0
03/20/92 BLV Acquisition Corp Belvedere Corp 44.0 57.5 40.0
03/02/92 WR Grace & Co Grace Energy Corp 24.6 21.6 7.8
02/24/92 Unocal Corp Unocal Exploration Corp 18.3 18.3 22.9
02/14/92 Nycal Corp Sunlite Inc(Nycal Corp) 7.1 7.1 0.0
02/06/92 Charter Co(American Financial) Spelling Entertainment Inc 52.6 45.0 45.0
01/16/92 Genzyme Corp IG Laboratories Inc (52.6) (55.7) (47.0)
</TABLE>
(*)Source: Securities Data Corporation
(1)Deal Value represents value of portion of target acquired.
<PAGE>
Project French Toast
Premium Analysis of All Completed Transactions Since 1/1/96 Between $50 million
and $200 million
<TABLE>
<CAPTION>
DATE OFFER
ANNOUNCED ACQUIROR NAME TARGET NAME DEAL VALUE (MIL)1 PRICE/SHARE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
06/17/97 CCL Industries Inc Seda Specialty Packaging Corp $182.6 $29.00
06/05/97 Intermedia Communications Inc DIGEX Inc 171.6 13.00
06/04/97 Electronic Arts Inc Maxis Inc 127.5 11.25
05/27/97 Columbia Natural Resources Inc Alamco Inc 102.8 15.75
04/17/97 Baker Hughes Inc Drilex International Inc 120.1 17.58
04/09/97 Public Storage Inc Public Storage Properties XVI 84.2 20.01
04/09/97 Public Storage Inc Public Storage Ppties XVIII 78.6 19.55
04/08/97 Jacor Communications Inc Premiere Radio Networks Inc 208.9 18.78
03/31/97 Moore Corp Ltd Peak Technologies Group Inc 169.8 18.00
03/26/97 Deposit Guaranty CitiSave Finl 20.3 20.50
03/25/97 IDX Systems Corp Phamis Inc 142.8 22.45
03/21/97 Olicom A/S CrossComm Corp 84.6 8.93
03/19/97 Snyder Communications Inc American List Corp 117.1 26.25
03/13/97 Fifth Third Bancorp Suburban Bancorporation 32.9 21.42
03/07/97 Henry Schein Inc Micro Bio-Medics Inc 136.1 17.67
03/06/97 Fireman's Fund Insurance Co Crop Growers Corp 82.1 10.25
03/03/97 Pinnacle Financial Svcs Inc CB Bancorp 43.1 35.00
02/19/97 United Bankshares Inc First Patriot Bankshares 35.4 17.00
02/13/97 British Aerospace Holdings Reflectone Inc 41.1 24.00
02/11/97 HBO & Co AMISYS Managed Care Systems 170.6 22.00
02/11/97 MetaTools Inc Fractal Design Corp 140.2 11.24
02/11/97 Johnson & Johnson Innotech Inc 135.6 13.75
02/07/97 Search Financial Services Inc MS Financial(MS Diversified) 17.2 1.65
01/17/97 AMF Bowling Centers American Recreation Centers 70.7 8.50
01/07/97 VTEL Corp Compression Labs Inc 74.3 4.66
12/16/96 Millipore Corp Tylan General Inc 147.7 16.00
12/10/96 Autodesk Inc Softdesk Inc 91.7 14.80
12/09/96 Central Parking Corp Square Industries Inc 69.3 31.00
12/06/96 Sears Roebuck & Co MaxServ Inc(Sears Roebuck) 46.0 7.75
12/05/96 Centex Corp Cavco Industries Inc 76.2 26.75
12/05/96 Public Storage Inc Public Storage Properties XIV 82.4 26.00
12/02/96 Woolworth Corp Eastbay Inc 146.0 24.00
11/29/96 CityFront Center LLC Chicago Dock and Canal Trust 177.9 25.00
11/29/96 Tyco International Ltd ElectroStar Inc 111.0 14.00
11/27/96 JW Childs Equity Partners LP Central Tractor Farm & Country 81.0 14.00
11/27/96 Bell Industries Inc Milgray Electronics Inc 100.0 14.77
11/26/96 Keystone Finl First Finl Corp of Wstn MD 77.0 34.35
11/25/96 PCA International Inc American Studios Inc 66.3 2.50
11/25/96 Applied Materials Inc Opal Inc 189.6 18.50
11/18/96 Intermet Corp Sudbury Inc 155.4 12.50
11/15/96 FNB Corporation West Coast Bancorp Inc. 30.6 19.06
11/13/96 IBM Corp Edmark Corp 123.8 15.50
11/13/96 FCY Inc Medex Inc 150.6 23.50
<CAPTION>
PREMIUM
---------------------------------------
1 DAY 1 WEEK 4 WEEKS
DATE PRIOR TO PRIOR TO PRIOR TO
ANNOUNCED ACQUIROR NAME TARGET NAME ANN. DATE ANN. DATE ANN. DATE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
06/17/97 CCL Industries Inc Seda Specialty Packaging Corp 31.8 % 36.5 % 52.6 %
06/05/97 Intermedia Communications Inc DIGEX Inc 19.5 35.9 31.6
06/04/97 Electronic Arts Inc Maxis Inc 2.3 2.3 40.6
05/27/97 Columbia Natural Resources Inc Alamco Inc 7.7 11.5 16.7
04/17/97 Baker Hughes Inc Drilex International Inc 31.4 37.9 59.8
04/09/97 Public Storage Inc Public Storage Properties XVI 6.0 5.3 2.6
04/09/97 Public Storage Inc Public Storage Ppties XVIII 5.0 7.1 2.9
04/08/97 Jacor Communications Inc Premiere Radio Networks Inc 17.4 19.2 19.2
03/31/97 Moore Corp Ltd Peak Technologies Group Inc 108.7 97.3 65.5
03/26/97 Deposit Guaranty CitiSave Finl 46.4 50.5 46.4
03/25/97 IDX Systems Corp Phamis Inc 18.9 23.0 26.5
03/21/97 Olicom A/S CrossComm Corp 74.3 70.2 70.2
03/19/97 Snyder Communications Inc American List Corp 17.3 28.0 8.8
03/13/97 Fifth Third Bancorp Suburban Bancorporation 26.0 24.2 31.8
03/07/97 Henry Schein Inc Micro Bio-Medics Inc 12.2 12.2 10.4
03/06/97 Fireman's Fund Insurance Co Crop Growers Corp 20.6 15.5 41.4
03/03/97 Pinnacle Financial Svcs Inc CB Bancorp 22.3 22.3 29.6
02/19/97 United Bankshares Inc First Patriot Bankshares 15.3 9.7 4.6
02/13/97 British Aerospace Holdings Reflectone Inc 20.0 18.5 25.5
02/11/97 HBO & Co AMISYS Managed Care Systems 38.6 44.3 43.1
02/11/97 MetaTools Inc Fractal Design Corp 45.0 40.4 1.0
02/11/97 Johnson & Johnson Innotech Inc 54.9 64.2 54.9
02/07/97 Search Financial Services Inc MS Financial(MS Diversified) 20.0 46.7 10.0
01/17/97 AMF Bowling Centers American Recreation Centers 15.3 33.3 70.0
01/07/97 VTEL Corp Compression Labs Inc 9.6 22.2 9.2
12/16/96 Millipore Corp Tylan General Inc 39.1 26.7 26.7
12/10/96 Autodesk Inc Softdesk Inc 60.0 66.8 146.7
12/09/96 Central Parking Corp Square Industries Inc 9.7 0.0 12.7
12/06/96 Sears Roebuck & Co MaxServ Inc(Sears Roebuck) 19.2 67.6 55.0
12/05/96 Centex Corp Cavco Industries Inc 13.2 20.2 30.5
12/05/96 Public Storage Inc Public Storage Properties XIV 29.2 30.8 31.6
12/02/96 Woolworth Corp Eastbay Inc 26.3 28.0 23.1
11/29/96 CityFront Center LLC Chicago Dock and Canal Trust 22.3 22.7 22.7
11/29/96 Tyco International Ltd ElectroStar Inc 7.7 27.3 16.7
11/27/96 JW Childs Equity Partners LP Central Tractor Farm & Country 15.5 15.5 16.7
11/27/96 Bell Industries Inc Milgray Electronics Inc 8.4 17.0 20.6
11/26/96 Keystone Finl First Finl Corp of Wstn MD 40.2 50.1 59.8
11/25/96 PCA International Inc American Studios Inc 90.0 110.5 166.7
11/25/96 Applied Materials Inc Opal Inc 52.6 64.4 105.6
11/18/96 Intermet Corp Sudbury Inc 19.0 25.0 9.9
11/15/96 FNB Corporation West Coast Bancorp Inc. 19.1 20.1 17.3
11/13/96 IBM Corp Edmark Corp 35.5 63.2 31.9
11/13/96 FCY Inc Medex Inc 54.1 58.0 66.7
<PAGE>
<CAPTION>
DATE OFFER
ANNOUNCED ACQUIROR NAME TARGET NAME DEAL VALUE (MIL)1 PRICE/SHARE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11/12/96 Investor Group Leslie's Poolmart 112.8 14.5
11/11/96 FPA Medical Management Inc AHI Healthcare Systems Inc 117.0 8.04
11/06/96 Progressive Corp Midland Financial Group Inc 47.2 9.00
10/31/96 Patriot American Hospitality California Jockey Club/Bay 199.7 33.00
10/30/96 Horizon/CMS Healthcare Corp Pacific Rehab & Sports Med 72.7 6.50
10/04/96 Petco Animal Supplies Inc Pet Food Warehouse Inc 60.7 6.30
10/03/96 Electromagnetic Sciences Inc LXE 14.8 13.13
09/26/96 National Patent Development General Physics Corp 26.1 5.10
09/24/96 Oracle Corp Datalogix International 80.0 8.00
09/16/96 Schnitzer Steel Industries Inc Proler International Corp 42.5 9.00
09/16/96 PennFirst Bancorp Troy Hill Bancorp,Pennsylvania 22.4 21.15
09/11/96 HealthSouth Corp ReadiCare Inc 73.9 8.55
09/10/96 Nellcor Puritan-Bennett Aequitron Medical Inc 56.6 10.33
08/22/96 Avant! Corp Meta Software Inc 139.3 12.69
08/14/96 OSI Holdings Corp Payco American Corp 161.9 14.00
08/02/96 US Order Inc Colonial Data Technologies 186.5 12.00
07/23/96 Capstar Broadcasting Partners Osborn Communications Corp 89.9 15.38
07/22/96 Cisco Systems Inc Telebit Corp 196.3 13.35
07/19/96 Hologic Designs FluoroScan Imaging Systems 59.1 17.01
07/12/96 Astor Chemicals ADCO Technologies Inc 53.8 10.25
07/12/96 Regis Corp Supercuts Inc 175.1 13.20
06/27/96 Northwest Svgs Bk Bridgeville Savings Bank 18.3 16.00
06/24/96 First Banks America Inc Sunrise Bancorp 18.7 4.00
06/18/96 Osicom Technologies Inc Builders Warehouse Assn Inc 69.3 16.45
06/17/96 Bay Networks Inc Penril DataComm Networks Inc 138.2 10.75
06/14/96 Varlen Corp Brenco Inc 161.4 16.13
06/14/96 Longhorn Steaks Inc Bugaboo Creek Steak House Inc 48.5 9.28
06/10/96 Vemco Acquisition Corp Bailey Corp 47.8 8.75
06/10/96 DII Group Inc Orbit Semiconductor Inc 118.3 13.95
06/06/96 Lacy Distribution Inc FinishMaster Inc(Maxco Inc) 62.6 15.65
05/31/96 Maxim Group Inc Image Industries 105.1 14.63
05/24/96 Joint Energy Development Clinton Gas Systems Inc 38.4 6.75
05/20/96 Finova Group Inc Financing for Science Intl Inc 39.2 6.40
05/16/96 HealthSouth Corp Professional Sports Care Mngmt 64.8 8.39
05/15/96 United States Filter Corp Davis Water & Waste Industries 100.8 29.62
05/13/96 Getinge Industrier AB MDT Corp 70.3 5.50
05/10/96 HF Bancorp Inc Palm Springs Savings Bank 17.3 14.38
05/10/96 PXRE Corp Transnational Re Corp 133.1 24.32
05/07/96 Medical Resources Inc NMR of America Inc 40.4 6.19
04/29/96 Hubco Inc. Hometown Bancorporation Inc 31.9 17.75
04/23/96 Security Banc Corp. Third Financial Corp. 43.9 33.41
04/22/96 F&M National Allegiance Banc 27.9 15.00
04/22/96 El Paso Field Svcs(El Paso) Cornerstone Natural Gas Co 96.6 6.00
<CAPTION>
PREMIUM
---------------------------------------
1 DAY 1 WEEK 4 WEEKS
DATE PRIOR TO PRIOR TO PRIOR TO
ANNOUNCED ACQUIROR NAME TARGET NAME ANN. DATE ANN. DATE ANN. DATE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11/12/96 Investor Group Leslie's Poolmart 26.1 % 31.8 % 31.8 %
11/11/96 FPA Medical Management Inc AHI Healthcare Systems Inc 10.9 34.0 23.7
11/06/96 Progressive Corp Midland Financial Group Inc 30.9 24.1 0.0
10/31/96 Patriot American Hospitality California Jockey Club/Bay 87.2 88.6 103.1
10/30/96 Horizon/CMS Healthcare Corp Pacific Rehab & Sports Med 67.7 62.5 48.6
10/04/96 Petco Animal Supplies Inc Pet Food Warehouse Inc 22.9 26.0 48.2
10/03/96 Electromagnetic Sciences Inc LXE 22.1 14.1 19.3
09/26/96 National Patent Development General Physics Corp 16.6 31.6 36.0
09/24/96 Oracle Corp Datalogix International 28.0 42.2 56.1
09/16/96 Schnitzer Steel Industries Inc Proler International Corp 132.3 125.0 148.3
09/16/96 PennFirst Bancorp Troy Hill Bancorp,Pennsylvania 20.9 55.2 52.4
09/11/96 HealthSouth Corp ReadiCare Inc 66.8 55.4 55.4
09/10/96 Nellcor Puritan-Bennett Aequitron Medical Inc 18.1 21.5 40.1
08/22/96 Avant! Corp Meta Software Inc 18.0 0.5 1.5
08/14/96 OSI Holdings Corp Payco American Corp 19.1 17.9 60.0
08/02/96 US Order Inc Colonial Data Technologies 20.0 33.3 (6.8)
07/23/96 Capstar Broadcasting Partners Osborn Communications Corp 28.1 50.0 38.2
07/22/96 Cisco Systems Inc Telebit Corp 22.8 22.8 4.7
07/19/96 Hologic Designs FluoroScan Imaging Systems 116.0 109.4 70.1
07/12/96 Astor Chemicals ADCO Technologies Inc 28.1 51.9 57.7
07/12/96 Regis Corp Supercuts Inc 55.3 53.0 60.0
06/27/96 Northwest Svgs Bk Bridgeville Savings Bank 10.3 10.3 8.5
06/24/96 First Banks America Inc Sunrise Bancorp 39.1 52.4 45.5
06/18/96 Osicom Technologies Inc Builders Warehouse Assn Inc 9.7 15.9 35.3
06/17/96 Bay Networks Inc Penril DataComm Networks Inc 7.5 3.0 6.2
06/14/96 Varlen Corp Brenco Inc 31.0 30.3 20.6
06/14/96 Longhorn Steaks Inc Bugaboo Creek Steak House Inc 9.2 16.0 10.8
06/10/96 Vemco Acquisition Corp Bailey Corp 5.5 6.1 11.1
06/10/96 DII Group Inc Orbit Semiconductor Inc 37.8 36.1 57.2
06/06/96 Lacy Distribution Inc FinishMaster Inc(Maxco Inc) 30.4 27.8 42.3
05/31/96 Maxim Group Inc Image Industries 17.0 15.8 23.2
05/24/96 Joint Energy Development Clinton Gas Systems Inc 3.8 14.9 31.7
05/20/96 Finova Group Inc Financing for Science Intl Inc 4.5 6.7 12.5
05/16/96 HealthSouth Corp Professional Sports Care Mngmt 13.7 29.0 34.2
05/15/96 United States Filter Corp Davis Water & Waste Industries 36.2 59.0 62.3
05/13/96 Getinge Industrier AB MDT Corp 12.8 22.2 4.8
05/10/96 HF Bancorp Inc Palm Springs Savings Bank 36.9 43.8 43.8
05/10/96 PXRE Corp Transnational Re Corp 12.5 16.5 8.7
05/07/96 Medical Resources Inc NMR of America Inc 41.4 86.8 90.4
04/29/96 Hubco Inc. Hometown Bancorporation Inc 20.3 29.1 29.1
04/23/96 Security Banc Corp. Third Financial Corp. 11.4 13.7 14.2
04/22/96 F&M National Allegiance Banc 33.3 46.3 46.3
04/22/96 El Paso Field Svcs(El Paso) Cornerstone Natural Gas Co 28.0 29.7 100.0
<PAGE>
<CAPTION>
DATE OFFER
ANNOUNCED ACQUIROR NAME TARGET NAME DEAL VALUE (MIL)1 PRICE/SHARE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
04/17/96 Sandy Spring Bancorp Inc. Annapolis Bancshares Inc. 20.1 22.92
04/16/96 National Data Corp CIS Technologies Inc 99.3 3.01
04/15/96 SFX Broadcasting Inc Multi-Market Radio Inc 104.4 12.50
04/09/96 Roosevelt Finl Group Mutual Bancompany Inc. 7.7 23.00
04/02/96 F&M Bancorp Home Federal 29.9 11.76
03/26/96 Camco Financial Corp First Ashland Financial Corp 29.0 20.58
03/18/96 Isolyser Co Inc Microtek Medical Inc 108.6 15.47
03/13/96 Eaton Corp CAPCO Automotive Products Corp 128.9 12.50
03/11/96 Nellcor Puritan-Bennett Infrasonics Inc 61.0 5.73
03/07/96 Danaher Corp Acme-Cleveland Corp 204.4 30.00
02/29/96 TBC Corp Big O Tires Inc 56.6 16.50
02/27/96 Interim Services Inc Brandon Systems Corp 165.2 35.20
02/26/96 Maxxim Medical Inc Sterile Concepts Inc 140.2 20.00
02/26/96 HS Resources Inc Tide West Oil Co 201.3 15.91
02/15/96 Genstar Capital Partners II LP Andros Inc 92.6 18.00
02/13/96 LBO Enterprises S-K-I Ltd 135.3 18.00
02/06/96 Hubco Inc. Lafayette American Bancorp Inc 132.3 13.23
02/05/96 Bay View Capital CTL Credit Inc 65.0 18.00
02/05/96 Harte-Hanks Communications Inc DiMark Inc 151.8 15.00
01/26/96 First Chicago NBD Corp Barrington Bancorp 15.5 22.38
01/24/96 Cisco Systems Inc TGV Software Inc 92.4 15.57
01/16/96 Multicare Cos Inc Concord Health Group 126.9 7.35
01/11/96 National Golf Properties Inc Golf Enterprises Inc 82.9 12.00
01/10/96 REA Gold Corp American Resource Corp 77.5 5.56
01/08/96 Illinois Tool Works Inc Medalist Industries Inc 55.4 14.20
01/05/96 Investor Group Finl Institutions Ins Grp Ltd 53.0 16.00
01/03/96 Recoton Corp International Jensen Inc 109.1 11.00
Median
08/04/97 The Restaurant Company Perkins Family Restaurants, L.P. $13.00
$13.50
*Source: Securities Data Corporation $14.00
1Deal Value represents value of portion of target acquired.
<CAPTION>
PREMIUM
---------------------------------------
1 DAY 1 WEEK 4 WEEKS
DATE PRIOR TO PRIOR TO PRIOR TO
ANNOUNCED ACQUIROR NAME TARGET NAME ANN. DATE ANN. DATE ANN. DATE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
04/17/96 Sandy Spring Bancorp Inc. Annapolis Bancshares Inc. 13.2% 11.8% 19.1%
04/16/96 National Data Corp CIS Technologies Inc 50.5 30.2 30.2
04/15/96 SFX Broadcasting Inc Multi-Market Radio Inc 11.1 29.9 19.0
04/09/96 Roosevelt Finl Group Mutual Bancompany Inc. 27.8 37.3 27.8
04/02/96 F&M Bancorp Home Federal 42.5 51.7 38.4
03/26/96 Camco Financial Corp First Ashland Financial Corp 24.7 28.6 34.9
03/18/96 Isolyser Co Inc Microtek Medical Inc 37.5 40.6 43.9
03/13/96 Eaton Corp CAPCO Automotive Products Corp 66.7 72.4 78.6
03/11/96 Nellcor Puritan-Bennett Infrasonics Inc 4.2 (4.5) 3.0
03/07/96 Danaher Corp Acme-Cleveland Corp 50.0 55.8 56.9
02/29/96 TBC Corp Big O Tires Inc 5.6 7.3 12.8
02/27/96 Interim Services Inc Brandon Systems Corp 32.2 39.4 29.8
02/26/96 Maxxim Medical Inc Sterile Concepts Inc 53.8 60.0 55.3
02/26/96 HS Resources Inc Tide West Oil Co 44.6 44.6 51.5
02/15/96 Genstar Capital Partners II LP Andros Inc 16.1 24.1 35.8
02/13/96 LBO Enterprises S-K-I Ltd 44.0 44.0 39.8
02/06/96 Hubco Inc. Lafayette American Bancorp Inc 23.1 29.1 39.3
02/05/96 Bay View Capital CTL Credit Inc 53.2 82.3 69.4
02/05/96 Harte-Hanks Communications Inc DiMark Inc 1.7 1.7 0.8
01/26/96 First Chicago NBD Corp Barrington Bancorp 14.8 14.8 19.4
01/24/96 Cisco Systems Inc TGV Software Inc 41.5 70.6 73.0
01/16/96 Multicare Cos Inc Concord Health Group 25.1 43.4 58.9
01/11/96 National Golf Properties Inc Golf Enterprises Inc 37.1 45.5 45.5
01/10/96 REA Gold Corp American Resource Corp 30.8 23.5 27.0
01/08/96 Illinois Tool Works Inc Medalist Industries Inc 127.2 136.7 110.4
01/05/96 Investor Group Finl Institutions Ins Grp Ltd 9.4 (1.5) (4.1)
01/03/96 Recoton Corp International Jensen Inc 29.4 57.1 49.2
23.1 % 29.9 % 31.9 %
08/04/97 The Restaurant Company Perkins Family Restaurants, L.P. 19.5 % 17.5 % 22.4 %
24.1 % 22.0 % 27.1 %
*Source: Securities Data Corporation 28.7 % 26.6 % 31.8 %
1Deal Value represents value of portion of target acquired.
</TABLE>
<PAGE>
PROJECT FRENCH TOAST
PREMIUM ANALYSIS OF ALL COMPLETED TRANSACTIONS SINCE 1/1/96 BETWEEN $50
MILLION AND $200 MILLION
(ALL CASH CONSIDERATION)
<TABLE>
<CAPTION>
DATE
ANNOUNCED ACQUIROR NAME TARGET NAME DEAL VALUE (MIL)(1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
06/17/97 CCL Industries Inc Seda Specialty Packaging Corp $182.6
02/13/97 Michael Foods Inc North Star Universal Inc 69.6
02/11/97 Johnson & Johnson Innotech Inc 135.6
02/07/97 Search Financial Services Inc MS Financial(MS Diversified) 17.2
12/16/96 Millipore Corp Tylan General Inc 147.7
12/09/96 Central Parking Corp Square Industries Inc 69.3
11/27/96 Bell Industries Inc Milgray Electronics Inc 100.0
11/25/96 PCA International Inc American Studios Inc 66.3
11/25/96 Applied Materials Inc Opal Inc 189.6
11/18/96 Intermet Corp Sudbury Inc 155.4
11/13/96 FCY Inc Medex Inc 150.6
11/12/96 Investor Group Leslie's Poolmart 112.8
06/17/96 Graham-Field Health Products Everest & Jennings Intl 113.2
06/14/96 Varlen Corp Brenco Inc 161.4
06/10/96 Vemco Acquisition Corp Bailey Corp 47.8
05/13/96 Getinge Industrier AB MDT Corp 70.3
03/13/96 Eaton Corp CAPCO Automotive Products Corp 128.9
03/07/96 Danaher Corp Acme-Cleveland Corp 204.4
02/26/96 HS Resources Inc Tide West Oil Co 201.3
01/18/96 Pfizer Inc Corvita Corp 78.5
01/16/96 Multicare Cos Inc Concord Health Group 126.9
08/04/97 The Restaurant Company Perkins Family Restaurants, L.P.
<CAPTION>
PREMIUM
--------------------------------------------
1 DAY 1 WEEK 4 WEEKS
DATE OFFER PRIOR TO PRIOR TO PRIOR TO
ANNOUNCED PRICE/SHARE ANN. DATE ANN. DATE ANN. DATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
06/17/97 $29.0 31.8 % 36.5 % 52.6 %
02/13/97 7.0 (19.7) (18.6) (12.2)
02/11/97 13.8 54.9 64.2 54.9
02/07/97 1.7 20.0 46.7 10.0
12/16/96 16.0 39.1 26.7 26.7
12/09/96 31.0 9.7 0.0 12.7
11/27/96 14.8 8.4 17.0 20.6
11/25/96 2.5 90.5 110.5 166.7
11/25/96 18.5 52.6 64.4 105.6
11/18/96 12.5 19.0 25.0 9.9
11/13/96 23.5 54.1 58.0 66.7
11/12/96 14.5 26.1 31.8 31.8
06/17/96 2.8 (42.6) (41.1) 540.0
06/14/96 16.1 31.0 30.3 20.6
06/10/96 8.8 5.5 6.1 11.1
05/13/96 5.5 12.8 22.2 4.8
03/13/96 12.5 66.7 72.4 78.6
03/07/96 30.0 50.0 55.8 56.9
02/26/96 15.9 44.6 44.6 51.5
01/18/96 10.3 (2.4) 2.5 (2.4)
01/16/96 7.4 25.1 43.4 58.9
MEDIAN 26.1 % 31.8 % 31.8 %
08/04/97 $13.00 19.5 % 17.5 % 22.4 %
$13.50 24.1 % 22.0 % 27.1 %
$14.00 28.7 % 26.6 % 31.8 %
</TABLE>
*Source: Securities Data Corporation
(1)Deal Value represents value of portion of target acquired.
<PAGE>
VALUATION METHODS
- --------------------------------------------------------------------------------
PREMIUM ANALYSIS
CONCLUSION
- - The original offer price of $13.00 per unit, results in a premium to the
public unitholders of 19.5% one day prior to the announcement date, 17.5% one
week prior to the announcement date and 22.4% four weeks prior to the
announcement date.
- - An offer price of $13.50 per unit, results in a premium to the public
unitholders of 24.1% one day prior to the announcement date, 22.0% one week
prior to the announcement date and 27.1% four weeks prior to the announcement
date.
- - An offer price of $14.00 per unit, results in a premium to the public
unitholders of 28.7% one day prior to the announcement date, 26.6% one week
prior to the announcement date and 31.8% four weeks prior to the announcement
date.
- - Implied price per unit of $12.76, $13.18 and $12.85 based on the premiums
paid in the control transactions, which we believe to be the most relevant
premium analysis.
- - Implied price per unit of $13.38, $14.37 and $14.02 based on the premiums
paid in all completed transactions.
- - Implied price per unit of $13.71, $14.58 and $14.01 based on the premiums
paid in the all cash transactions.
<PAGE>
VALUATION METHODS
- --------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS
OVERVIEW
- - Relies on projections of future cash flows provided by the Partnership.
- - Terminal value is calculated by applying a terminal multiple to EBITDA.
- - Annual cash flows and the terminal value are discounted at an appropriate
discount rate.
- - Considers a range of terminal multiples and discount rates.
<PAGE>
PROJECT FRENCH TOAST
DISCOUNTED CASH FLOW ANALYSIS
Management Projections
(Dollars in Thousands)
<TABLE>
<CAPTION>
ACTUAL PROJECTED (3)
------------------------- -------------------------------------------------------
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 245,751 $ 252,793 $ 268,451 $ 286,592 $ 311,990 $ 341,275
Cost of sales 66,204 68,456 72,894 77,939 85,043 93,253
------------------------- -------------------------------------------------------
Gross Profit 179,547 184,337 195,557 208,653 226,947 248,022
Total Operating Expenses (1) 162,606 165,749 176,786 186,551 199,967 215,225
------------------------- -------------------------------------------------------
EBIT 16,941 18,588 18,771 22,103 26,980 32,797
Income Taxes @ 40.0% (2) 6,776 7,435 7,509 8,841 10,792 13,119
------------------------- -------------------------------------------------------
UNLEVERED NET INCOME $10,165 $11,153 $11,263 $13,262 $16,188 19,678
------------------------- -------------------------------------------------------
------------------------- -------------------------------------------------------
Plus: Depreciation & Amortization 14,401 15,748 16,296 18,063 18,736 18,782
Less: Capital Expenditures 28,931 11,858 18,640 20,452 21,906 24,340
Less: Incremental Working Cap. Needs NA (3,793) 751 - - -
------------------------- -------------------------------------------------------
UNLEVERED FREE CASH FLOW NA $18,836 $8,168 $10,873 $13,018 14,120
------------------------- -------------------------------------------------------
------------------------- -------------------------------------------------------
OPERATING ASSUMPTIONS:
Net Sales Growth NA 2.9% 6.2% 6.8% 8.9% 9.4%
Operating Expenses as % of Sales 66.2% 65.6% 65.9% 65.1% 64.1% 63.1%
EBIT Margin 6.9% 7.4% 7.0% 7.7% 8.6% 9.6%
</TABLE>
(1) Pro-forma in 1998-2000 for the increase in the Minnesota minimum wage for
servers @ $28,800 per company owned unit in Minnesota.
(2) Pro forma tax calculated at a 40.0% effective tax rate.
(3) Analysis discounts to September 30, 1997 and uses 1997 fourth quarter
projections supplied by the Partnership's management.
<PAGE>
PROJECT FRENCH TOAST
DISCOUNTED CASH FLOW ANALYSIS
Management Projections
(Dollars in Thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------
DISCOUNT RATES 5.5 x 6.0 x 6.5 x 7.0 x
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
17.0% $28,575 $28,575 $28,575 $28,575 Present Value of Cash Flows
$170,307 $185,789 $201,271 $216,754 Present Value of Terminal Residual Value
($59,885) ($59,885) ($59,885) ($59,885) Less: Debt Outstanding (less excess cash)
--------- --------- --------- ---------
$138,996 $154,479 $169,961 $185,443 TOTAL PRESENT VALUE OF EQUITY
$12.99 $14.44 $15.88 $17.33 Implied Price per Unit (1)
19.0% $27,160 $27,160 $27,160 $27,160 Present Value of Cash Flows
$161,179 $175,831 $190,484 $205,137 Present Value of Terminal Residual Value
($59,885) ($59,885) ($59,885) ($59,885) Less: Debt Outstanding (less excess cash)
--------- --------- --------- ---------
$128,453 $143,106 $157,759 $172,411 TOTAL PRESENT VALUE OF EQUITY
$12.00 $13.37 $14.74 $16.11 Implied Price per Unit (1)
21.0% $25,841 $25,841 $25,841 $25,841 Present Value of Cash Flows
$152,680 $166,560 $180,440 $194,320 Present Value of Terminal Residual Value
($59,885) ($59,885) ($59,885) ($59,885) Less: Debt Outstanding (less excess cash)
--------- --------- --------- ---------
$118,637 $132,517 $146,397 $160,277 TOTAL PRESENT VALUE OF EQUITY
$11.09 $12.38 $13.68 $14.98 Implied Price per Unit (1)
23.0% $24,611 $24,611 $24,611 $24,611 Present Value of Cash Flows
$144,758 $157,918 $171,078 $184,238 Present Value of Terminal Residual Value
($59,885) ($59,885) ($59,885) ($59,885) Less: Debt Outstanding (less excess cash)
--------- --------- --------- ---------
$109,485 $122,645 $135,805 $148,964 TOTAL PRESENT VALUE OF EQUITY
$10.23 $11.46 $12.69 $13.92 Implied Price per Unit (1)
25.0% $23,463 $23,463 $23,463 $23,463 Present Value of Cash Flows
$137,366 $149,853 $162,341 $174,829 Present Value of Terminal Residual Value
($59,885) ($59,885) ($59,885) ($59,885) Less: Debt Outstanding (less excess cash)
--------- --------- --------- ---------
$100,943 $113,431 $125,919 $138,407 TOTAL PRESENT VALUE OF EQUITY
$9.43 $10.60 $11.77 $12.93 Implied Price per Unit (1)
</TABLE>
(1) Implied price per unit after giving effect to the General Partner's
interest.
<PAGE>
PROJECT FRENCH TOAST
DISCOUNTED CASH FLOW ANALYSIS
Management Projections
(Dollars in Thousands)
<TABLE>
<CAPTION>
Schedule 1
Working Capital Analysis
ACTUAL PROJECTED
------------------ --------------------------------------
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accounts Receivable - Trade $8,683 $6,285 $6,285 $6,285 $6,285 $6,285
Days of Sales 12.9 9.1 8.5 8.0 7.4 6.7
Increase (Decrease) NA ($2,398) $0 $0 $0 $0
Inventory $4,318 $4,234 $4,234 $4,234 $4,234 $4,234
Days of COGS 23.8 22.6 21.2 19.8 18.2 16.6
Increase (Decrease) NA ($84) $0 $0 $0 $0
Prepaid & Other $1,505 $1,551 $1,552 $1,552 $1,552 $1,552
As a % of Sales 0.6% 0.6% 0.6% 0.5% 0.5% 0.5%
Increase (Decrease) NA 46 1 $0 $0 $0
Accounts Payable $7,525 $8,878 $8,128 $8,128 $8,128 $8,128
Days of COGS 41.5 47.3 40.7 38.1 34.9 31.8
Increase (Decrease) NA $1,353 ($750) $0 $0 $0
Accrued Liabilities $13,099 $14,235 $13,520 $13,520 $13,520 $13,520
As a % of Sales 5.3% 5.6% 5.0% 4.7% 4.3% 4.0%
Increase (Decrease) NA $0 $0 $0 $0 $0
Other $3,475 $3,479 $3,479 $3,479 $3,479 $3,479
As a % of Sales 1.4% 1.4% 1.3% 1.2% 1.1% 1.0%
Increase (Decrease) NA $4 $0 $0 $0 $0
------------------ --------------------------------------
Total Incremental Working Capital Needs NA ($3,793) $751 $0 $0 $0
------------------ --------------------------------------
------------------ --------------------------------------
</TABLE>
<PAGE>
VALUATION METHODS
- --------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS
CONCLUSION
- - The DCF valuation is dependent on a number of factors:
- Validity of management's projections.
- Terminal multiple.
- Discount rate.
- - Qualitative factors affect the discount rate.
- - Implied price per unit of $9.43 to $17.33.
<PAGE>
VALUATION METHODS
- --------------------------------------------------------------------------------
SUMMARY OF INDICATED RANGES OF VALUATION
VALUATION METHOD IMPLIED PRICE PER UNIT RANGE
- ---------------- ----------------------------
Comparable Company Analysis $10.00 - $16.34
Premium Analysis $12.76 - $13.18
Discounted Cash Flow Analysis $9.43 - $17.33
<PAGE>
MERGERS AND ACQUISITIONS TRANSACTIONS ANALYSIS
- --------------------------------------------------------------------------------
OVERVIEW
- - Database and news articles search for acquisitions of restaurant companies.
- - Selected those transactions with available financial information.
- - Derived valuation multiples by comparing the prices paid in these
transactions to the target's operating performance.
- - Applied multiples to the Partnership's latest twelve months ending June 30,
1997 to derive an implied range of the Partnership's equity value and price
per unit.
<PAGE>
SELECTED MERGERS & ACQUISITIONS - RESTAURANT INDUSTRY
VALUATION MATRIX
<TABLE>
<CAPTION>
Adjusted Trailing 12 Month Financials of Acquired (in $ MM)
--------------------------------------------------
Date Acquiror Market LT Debt Market Net Book
Effective Target Value Assumed Value Revenues EBITDA EBIT Income Value
- --------- --------- ------ ------- ------ -------- ------ ---- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pending Restaurant Co $136.3 $59.9 $196.2 $257.4 $35.6 $19.7 $8.8 $35.8
Perkins Family Restaurant LP
Pending Investor Group $128.6 $79.0 $207.5 $215.2 $16.7 $9.5 $3.3 $47.1
DavCo Restaurants Inc
Pending Benihana Inc $17.6 $1.8 $19.4 $10.6 $0.9 $0.5 ($0.2) $1.0
Rudy's Restaurant Group (Bright
Star Holding)
Pending Port Royal Holdings, Inc. $108.4 $8.5 $116.9 $245.8 $16.2 $5.0 ($1.7) $44.5
The Krystal Company
Pending RTM Restaurant Group NA NA $71.0 NA NA NA NA NA
Triarc Cos. (355 Arby's Company
Owned Units)
Jul-97 Apple South $36.0 $6.0 $42.0 NA NA NA NA NA
Canyon Cafes Inc.
Jul-97 Compass Group PLC $83.5 $119.1 $202.6 $403.0 $13.7 ($7.9) ($11.9) $75.8
Daka International
Jul-97 CKE Restaurants NA NA $327.0 $2,980.0 NA NA NA NA
Hardee's Food Systems, Inc.
Jun-97 Chase Capital Partners NA NA $50.4 NA NA NA NA NA
C.A. Muer (Charley's Grabs)
Jun-97 Castle Harlan Partners III NA NA $50.4 NA NA NA NA NA
Charlie Brown's Inc.
Jun-97 NPC International NA NA $29.9 NA NA NA NA NA
Pizza Hut Inc. (51 units)
May-97 NPC International NA NA $57.0 $59.8 NA NA NA NA
Pizza Hut Inc. (100 units)
Mar-97 NPC International NA NA $53.5 $71.0 NA NA NA NA
Pizza Hut Inc. (122 units)
Feb-97 Apple South $31.5 $22.5 $54.0 $42.0 $4.8 $2.9 $0.7 $2.8
Hops Grill & Bar
Feb-97 Apple South $52.0 $16.0 $67.0 $65.0 $6.8 NA NA NA
McCormick & Schmick's
Nov-96 Meritage Hospitality Group Inc $8.7 $0.0 $8.7 $25.4 NA NA NA NA
Wendy's of West Michigan LP
Nov-96 Wendy's International $28.0 NA NA NA NA NA NA NA
Volunteer Capital Corp.
(58 Wendy's Stores)
Sep-96 Buffets Inc. $138.1 $57.8 $195.9 $133.9 $17.5 $8.6 $5.9 $70.4
Hometown Buffet Inc.
Sep-96 Astoria Capital Partners LP $22.6 $2.1 $24.7 $51.6 $1.6 $0.0 $0.1 $8.9
Eateries Inc
<CAPTION>
Adjusted Market Value as a Market Value as a
Multiple of: Multiple of:
--------------------------- -------------------
Date Acquiror Net Book
Effective Target Revenues EBITDA EBIT Income Value
- --------- --------- --------- ------ ------ -------- ------
Pending Restaurant Co 0.76 x 5.5 x 10.0 x 15.4 x 3.8 x
Perkins Family Restaurant LP
Pending Investor Group 0.96 x 12.4 x 21.8 x 39.0 x 2.7 x
DavCo Restaurants Inc
Pending Benihana Inc 1.83 x 21.6 x 38.8 x NM 17.6 x
Rudy's Restaurant Group (Bright
Star Holding)
Pending Port Royal Holdings, Inc. 0.48 x 7.2 x 23.4 x NM 2.4 x
The Krystal Company
Pending RTM Restaurant Group NA NA NA NA NA
Triarc Cos. (355 Arby's Company
Owned Units)
Jul-97 Apple South NA NA NA NA NA
Canyon Cafes Inc.
Jul-97 Compass Group PLC 0.50 x 14.8 x NM NM 1.1 x
Daka International
Jul-97 CKE Restaurants 0.11 x NA NA NA NA
Hardee's Food Systems, Inc.
Jun-97 Chase Capital Partners NA NA NA NA NA
C.A. Muer (Charley's Grabs)
Jun-97 Castle Harlan Partners III NA NA NA NA NA
Charlie Brown's Inc.
Jun-97 NPC International NA NA NA NA NA
Pizza Hut Inc. (51 units)
May-97 NPC International 0.95 x NA NA NA NA
Pizza Hut Inc. (100 units)
Mar-97 NPC International 0.75 x NA NA NA NA
Pizza Hut Inc. (122 units)
Feb-97 Apple South 1.29 x 11.3 x 18.6 x 45.0 x 11.3 x
Hops Grill & Bar
Feb-97 Apple South 1.03 x 9.9 x NA NA NA
McCormick & Schmick's
Nov-96 Meritage Hospitality Group Inc 0.34 x NA NA NA NA
Wendy's of West Michigan LP
Nov-96 Wendy's International NA NA NA NA NA
Volunteer Capital Corp.
(58 Wendy's Stores)
Sep-96 Buffets Inc. 1.46 x 11.2 x 22.8 x 23.4 x 2.0 x
Hometown Buffet Inc.
Sep-96 Astoria Capital Partners LP 0.48 x NM NM NM 2.5 x
Eateries Inc
</TABLE>
<PAGE>
SELECTED MERGERS & ACQUISITIONS - RESTAURANT INDUSTRY
VALUATION MATRIX
<TABLE>
<CAPTION>
Trailing 12 Month Financials of Acquired (in $ MM)
--------------------------------------------------
Adjusted
Date Acquiror Market LT Debt Market Net Book
Effective Target Value Assumed Value Revenues EBITDA EBIT Income Value
- --------- --------- ------ ------- ------ -------- ------ ---- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sep-96 Shoney's Inc $94.5 $101.8 $196.3 $280.4 $21.3 $2.9 ($7.2) $65.6
TPI Enterprises Inc
Jul-96 CKE Restaurants Inc $25.8 $13.4 $39.2 $120.9 $1.5 ($4.8) ($4.0) $41.8
Summit Family Restaurant
Jul-96 DenAmerica $65.0 NA NA $145.0 NA $3.1 $1.1 NA
Black-eyed Pea
Jul-96 Longhorn Steaks, Inc. $52.9 $2.7 $55.6 $40.1 $4.7 $3.1 $2.1 $24.0
Bugaboo Creek Steak House
Jun-96 Quality Dining 111.6 $8.3 $119.9 $25.4 $0.0 ($1.8) ($5.5) ($6.4)
Bruegger's Corp.
Apr-96 American Family Restaurants, Inc. $50.3 NA NA $47.3 NA NA NA NA
DenWest Restaurant Corp.
Apr-96 Boston Chicken $79.0 NA NA NA NA NA NA NA
Mid-Atlantic Restaurant
Apr-96 Landry's Seafood Restaurants $45.4 $14.7 $60.0 $53.7 $4.0 $2.6 $1.5 $22.6
Bayport Restaurant Group
(12 stores)
Feb-96 Daka International, Inc. $52.3 $2.4 $54.7 $16.4 $1.5 $0.3 $0.10 $9.2
Champps Entertainment, Inc.
Jan-96 Progressive Bagel Concepts, Inc. 100.0 NA NA NA NA NA NA NA
Noah's New York Bagels Inc.
(37 stores)
Jan-96 Manhattan Bagel Company, Inc. $1.4 NA NA NA NA NA NA NA
Bay Area Bagel, Inc. (8 stores)
<CAPTION>
Adjusted Market Value as a Market Value as a
Multiple of: Multiple of:
--------------------------- --------------------
Date Acquiror Net Book
Effective Target Revenues EBITDA EBIT Income Value
- --------- --------- -------- ------ ----- ------- ------
Sep-96 Shoney's Inc 0.70 x 9.2 x 67.7 x NM 1.4 x
TPI Enterprises Inc
Jul-96 CKE Restaurants Inc 0.32 x NM NM NM 0.6 x
Summit Family Restaurant
Jul-96 DenAmerica NM NA NM NM NA
Black-eyed Pea
Jul-96 Longhorn Steaks, Inc. 1.39 x 11.8 x 17.9 x 25.2 x 2.2 x
Bugaboo Creek Steak House
Jun-96 Quality Dining 4.72 x NM NM NM NM
Bruegger's Corp.
Apr-96 American Family Restaurants, Inc. NM NA NA NA NA
DenWest Restaurant Corp.
Apr-96 Boston Chicken NA NA NA NA NA
Mid-Atlantic Restaurant
Apr-96 Landry's Seafood Restaurants 1.12 x 15.0 x 23.3 x 31.1 x 2.0 x
Bayport Restaurant Group
(12 stores)
Feb-96 Daka International, Inc. 3.34 x NM NM NM 5.7 x
Champps Entertainment, Inc.
Jan-96 Progressive Bagel Concepts, Inc. NA NA NA NA NA
Noah's New York Bagels Inc.
(37 stores)
Jan-96 Manhattan Bagel Company, Inc. NA NA NA NA NA
Bay Area Bagel, Inc. (8 stores)
1996-YTD Multiples
-----------------------------------------------------------------------------------
High: 4.72 x 21.6 x 67.7 x 45.0 x 17.6 x
Low: 0.11 x 5.5 x 10.0 x 15.4 x 0.6 x
Mean: 1.19 x 11.8 x 27.2 x 29.8 x 4.3 x
Median: 0.95 x 11.3 x 22.8 x 28.1 x 2.4 x
-----------------------------------------------------------------------------------
</TABLE>
<PAGE>
MERGERS AND ACQUISITIONS TRANSACTIONS ANALYSIS
- --------------------------------------------------------------------------------
CONCLUSION
- - Transaction multiples vary for the following reasons:
- Differences in pre-transaction operating performance.
- Other hidden or intangible assets not apparent in historical operating
performance.
- Other deal specific factors.
- - Due to the lack of comparability between the transaction and these
acquisitions, we did not rely on this method in valuing the Partnership.
<PAGE>
LEVERAGED BUYOUT ANALYSIS
- --------------------------------------------------------------------------------
OVERVIEW
- - Analyzed a potential leveraged buyout of the Partnership by an unrelated
third party.
- - Management's projections provide the explicit income statement forecasts in
the first three years and we have extrapolated years four and five.
<PAGE>
PROJECT FRENCH TOAST MORGAN KEEGAN INVESTMENT BANKING
CASE: LEVERAGED BUYOUT ANALYSIS, PURCHASE OF
STOCK (@ $13.50 PER UNIT)
($000s) Page 1 of 1
- ---------------------------------------------------------------------
SUMMARY
- --------------------
PURCHASE ASSUMPTIONS:
Purchase Price of Equity $ 141,581
Transaction Costs 7,500
Repayment of Existing Debt and Preferred 60,055
Non-Compete Agreement -
Dividend -
Plus: Required Cash (Excess) -
Less: Asset Sales -
----------
Financing Requirements $ 209,136
Purchase Multiples:
AMV as a Multiple of 1997(E) EBITDA 5.7x
AMV as a Multiple of 1997(E) EBIT 10.7x
AMV as a Multiple of 1998 EBITDA 5.0x
AMV as a Multiple of 1998 EBIT 14.0x
CAPITALIZATION: % Common
Amount % Total Equity
------ ------- ------
Senior Debt $ 94,111 45.0% 0.0%
Revolver 5,000 2.4% 0.0%
Tranche A Debt - 0.0% 0.0%
Tranche B Debt - 0.0% 0.0%
---------------------------------------
Total Senior Debt 99,111 47.4% 0.0%
Senior Subord. Debt 47,284 22.6% 12.5%
Other Subord. Debt - 0.0% 0.0%
---------------------------------------
Total Debt 146,395 70.0% 12.5%
Preferred Stock - 0.0% 0.0%
Equity - Sponsor 62,741 30.0% 87.5%
Equity - Other - 0.0% 0.0%
Equity - Management - 0.0% 0.0%
---------------------------------------
Total Equity 62,741 30.0% 87.5%
TOTAL CAPITALIZATION 209,136 100.0% 100.0%
---------------------------------------
---------------------------------------
CALCULATION OF INTANGIBLES:
Purchase Price $ 141,581
Less: Tangible Book Value 35,816
Less: Asset Write-Up -
----------
Goodwill $ 105,765
Years of Amortization 15
----------
Annual Goodwill Expense $ 7,051
Non-Compete Agreement $ -
Years of Amortization 5
----------
Annual Non-Compete Expense $ -
Transaction Costs $ 7,500
Years of Amortization 15
----------
Annual Transaction Expense $ 500
Total Amort. of Intang. per Year $ 7,551
RETURNS TO INVESTORS:
Multiple of EBITDA
-------------------------------------------------
5.0x 5.5x 6.0x 6.5x 7.0x
-------------------------------------------------
Net Terminal Value $226,946 $258,828 $290,710 $322,592 $354,474
Senior Subord. Debt 19.6% 20.6% 21.5% 22.4% 23.3%
Other Subord. Debt NA NA NA NA NA
Preferred Stock NA NA NA NA NA
Equity - Sponsor 25.9% 29.3% 32.3% 35.1% 37.7%
INVESTORS BLENDED RETURN 23.6% 26.2% 28.5% 30.7% 32.8%
Equity - Other NA NA NA NA NA
Equity - Management NA NA NA NA NA
COVERAGE RATIOS: Pro Forma (1)
1997 1998
-------------------
EBIT/Senior Interest 2.30x 1.76x
EBIT/Total Interest 1.38x 1.06x
EBIT/(Total Interest + Principal) .69x .53x
EBITDA/Senior Interest 4.29x 4.91x
EBITDA/Total Interest 2.58x 2.95x
EBITDA/(Total Interest + Principal) 1.30x 1.48x
(EBITDA - CAPEX)/Senior Interest 2.01x 2.41x
(EBITDA - CAPEX)/Total Interest 1.21x 1.45x
(EBITDA - CAPEX)/(Senior Interest + Senior Principal) .76x .91x
(EBITDA - CAPEX)/(Total Interest + Principal) .61x .73x
Senior Debt/(EBITDA - CAPEX) 5.82x 4.85x
Subordinated Debt/(EBITDA - CAPEX) 2.88x 2.40x
Total Debt/(EBITDA - CAPEX) 8.69x 7.24x
(1) Pro Forma assuming capital structure for the year 1998 was in place in
1997.
<PAGE>
STOCK TRADING ANALYSIS
- --------------------------------------------------------------------------------
OVERVIEW
- - Analyzed the Partnership's stock trading history and analyzed it against
various indices.
Perkins Family Restaurants, L.P. Vs. Market Indices
Latest Twelve Months
[Graphical material appears here in the original in the form of a line graph
showing the trading performance of Perkins Family Restaurants, L.P. units
versus the S&P Industrials index, the S&P Restaurants index, the NASDAQ
index, a Peer Group index and a Family Dining group index from September 13,
1996 to September 5, 1997.]
Peer group index includes BOBE, DEN, FRS, IHOP, SHN, VRES. Family dining
group index includes BOCB, CBRL, FLST, LUB, MRN, PIC, RYAN.
Morgan Keegan Investment Banking
[Graphical material appears here in the original in the form of a series of
13 line graphs showing the daily stock price vs. volume from 1/1/96 to 9/8/97
for Bob Evans Farms, Inc., Buffets, Inc., Cracker Barrel Old Country Store,
Inc., DenAmerica Corp., Flagstar Companies, Inc., Frisch's Restaurants, Inc.,
IHOP Corporation, Luby's Cafeterias, Inc., Morrison Restaurants, Inc.,
Piccadilly Cafeterias, Inc., Ryan's Family Steak Houses, Inc., Shoney's, Inc.
and VICORP Restaurants, Inc.]
Morgan Keegan Investment Banking
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A PRESENTATION TO THE BOARD OF DIRECTORS OF THE RESTAURANT COMPANY
REGARDING:
PROJECT HEARTH
September 8, 1997
CONFIDENTIAL
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SMITH BARNEY INC.
<PAGE>
- --------------------------------------------------------------------------------
PROJECT HEARTH
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
- --------------------------------------------------------------------------------
COMPARISON OF ALTERNATIVES................................... 1
RETURNS ANALYSIS - PROPOSED BUYOUT OF PUBLIC UNITS........... 2
CAPITALIZATION SUMMARY....................................... 4
PFR UNIT TRADING DATA........................................ 5
PFR COMPARABLE COMPANY TRADING ANALYSIS...................... 8
RECENT STOCK PRICE PERFORMANCE FOR COMPARABLE COMPANIES...... 12
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF ALTERNATIVES
(AMOUNTS IN MILLIONS, EXCEPT PER UNIT INFORMATION)
<TABLE>
<CAPTION>
SCENARIO 1: CONVERT/EXCHANGE (1)
- --------------------------------
<S> <C> <C> <C>
Enterprise Value $205.0 $215.0 $225.0
-------- -------- --------
Share Price $12.97 $13.92 $14.88
Total Units (including G.P.) 10.5 10.5 10.5
-------- -------- --------
Total Equity Value 136.2 146.2 156.2
-------- -------- --------
Total Debt (2) 68.8 68.8 68.8
-------- -------- --------
Enterprise Value $205.0 $215.0 $225.0
-------- -------- --------
-------- -------- --------
TRC Pro-Forma Ownership (3) 42.5% 42.5% 42.5%
Value to TRC Shareholders (4) $57.9 $62.1 $66.4
- ----------------------------------------------------------------------------------------
1997E EBITDA Multiple (5) 5.8x 6.1x 6.4x
- ----------------------------------------------------------------------------------------
SCENARIO 2: LBO
- ---------------
<CAPTION>
-----------------------------------------------------------------------------------------------
Assumed Enterprise Value
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$205.0 $215.0 $225.0
----------------------------- ----------------------------- ------------------------------
UNIT PURCHASE PRICE....... $13.00 $15.00 $17.00 $13.00 $15.00 $17.00 $13.00 $15.00 $17.00
-------- -------- ------- ------- ------- ------- ------- ------- -------
TOTAL DEBT (6) $139.0 $149.8 $160.6 $139.0 $149.8 $160.6 $139.0 $149.8 $160.6
VALUE TO TRC 66.0 55.2 44.4 76.0 65.2 54.4 86.0 75.2 64.4
SHAREHOLDERS
</TABLE>
- ---------------------------------------------------
(1) No value (positive or negative) attributed to the other assets and
liabilities of TRC.
(2) Reflects 1997E Total Debt of $68.8 MM.
(3) TRC ownership percentage based upon a 40%-45% range.
(4) Reflects the equity interest to be received by the TRC shareholders in the
exchange.
(5) Assumes 1997E EBITDA of $35.2 MM, based on internal company projections.
(6) Reflects the sum of 1997E Total Debt of $68.8 MM and the additional debt
needed to purchase the 5.4 MM public units at the various unit prices.
Page 1
<PAGE>
CONFIDENTIAL
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RETURNS ANALYSIS - PROPOSED BUYOUT OF PUBLIC UNITS
ASSUMES $14.00/UNIT BASIS IN TRC ROLLOVER EQUITY
IRR BASED ON A MULTIPLE OF 2001 EBITDA
<TABLE>
<CAPTION>
Exit Value - 2001 EBITDA Multiple
Purchase Price --------------------------------------------------------------------
of Public Units 6.0x 6.5x 7.0x 7.5x 8.0x
--------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$13.00 23.0% 28.2% 32.8% 37.0% 40.9%
$14.00 20.7% 26.2% 31.0% 35.4% 39.4%
$15.00 18.3% 24.1% 29.2% 33.7% 37.8%
$16.00 15.7% 21.9% 27.2% 31.9% 36.2%
$17.00 12.9% 19.5% 25.1% 30.1% 34.6%
<CAPTION>
IRR BASED ON A MULTIPLE OF 2002 NET INCOME WITH EXIT IN 2001
Exit Value - 2002 Exit NI Multiple in 2001
Purchase Price --------------------------------------------------------------------
of Public Units 11.0x 12.0x 13.0x 14.0x 15.0x
--------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$13.00 27.8% 31.0% 34.1% 36.9% 39.6%
$14.00 26.5% 29.9% 33.0% 35.9% 38.6%
$15.00 25.2% 28.6% 31.8% 34.8% 37.6%
$16.00 23.8% 27.4% 30.7% 33.8% 36.6%
$17.00 22.4% 26.1% 29.5% 32.6% 35.6%
</TABLE>
Page 2
<PAGE>
CONFIDENTIAL
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RETURNS ANALYSIS - PROPOSED BUYOUT OF PUBLIC UNITS
ASSUMES PER UNIT PURCHASE PRICE BASIS IN TRC ROLLOVER EQUITY
<TABLE>
<CAPTION>
IRR BASED ON A MULTIPLE OF 2001 EBITDA
Exit Value - 2001 EBITDA Multiple
Purchase Price --------------------------------------------------------------------
of Public Units 6.0x 6.5x 7.0x 7.5x 8.0x
--------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$13.00 25.3% 30.6% 35.3% 39.6% 43.5%
$14.00 20.7% 26.2% 31.0% 35.4% 39.4%
$15.00 16.3% 22.0% 26.9% 31.4% 35.5%
$16.00 11.9% 17.8% 23.0% 27.6% 31.7%
$17.00 7.6% 13.8% 19.2% 23.9% 28.2%
<CAPTION>
IRR BASED ON A MULTIPLE OF 2002 NET INCOME WITH EXIT IN 2001
Exit Value - 2002 Exit NI Multiple in 2001
Purchase Price --------------------------------------------------------------------
of Public Units 11.0x 12.0x 13.0x 14.0x 15.0x
--------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$13.00 30.1% 33.5% 36.6% 39.5% 42.2%
$14.00 26.5% 29.9% 33.0% 35.9% 38.6%
$15.00 23.0% 26.4% 29.6% 32.5% 35.3%
$16.00 19.8% 23.2% 26.4% 29.4% 32.1%
$17.00 16.6% 20.1% 23.4% 26.4% 29.1%
</TABLE>
Page 3
<PAGE>
CONFIDENTIAL
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CAPITALIZATION SUMMARY
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Purchase Price
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
USE OF FUNDS $13.00 $14.00 $15.00 $16.00 $17.00
---------- ---------- ---------- ---------- ----------
Equity Purchase Price $137.0 $147.6 $158.1 $168.7 $179.2
Refinance Existing Debt 68.8 68.8 68.8 68.8 68.8
Transaction Expenses 2.0 2.0 2.0 2.0 2.0
Financing Expenses 4.0 4.1 4.2 4.3 4.4
---------- ---------- ---------- ---------- ----------
Total $211.8 $222.4 $233.1 $243.7 $254.4
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
SOURCE OF FUNDS
Decrease (Increase) in Cash(1) ($3.5) ($3.5) ($3.5) ($3.5) ($3.5)
Revolving Credit 0.0 0.0 0.0 0.0 0.0
Bank Debt 48.9 54.5 60.0 65.6 71.1
High Yield 100.0 100.0 100.0 100.0 100.0
Preferred Stock 0.0 0.0 0.0 0.0 0.0
Rollover of Equity(2) 66.3 71.4 76.5 81.6 86.7
Common Equity 0.0 0.0 0.0 0.0 0.0
---------- ---------- ---------- ---------- ----------
Total $211.8 $222.4 $233.1 $243.7 $254.4
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
COVERAGES
Debt/EBITDA
1997PF 4.2x 4.4x 4.5x 4.7x 4.9x
1998 3.4x 3.6x 3.7x 3.8x 4.0x
1999 2.9x 3.1x 3.2x 3.3x 3.4x
EBITDA/Interest Expense
1997PF 2.5x 2.4x 2.3x 2.2x 2.2x
1998 2.9x 2.8x 2.8x 2.7x 2.6x
1999 3.4x 3.3x 3.2x 3.1x 3.0x
(EBITDA-Capex)/Interest Expense
1997PF 1.1x 1.1x 1.1x 1.0x 1.0x
1998 1.5x 1.5x 1.4x 1.4x 1.4x
1999 1.8x 1.8x 1.7x 1.7x 1.6x
</TABLE>
- -----------------------------------------------------
(1) Cash increases to provide a minimum $5.0 MM cash balance.
(2) Assumes roll-over equity valued at buyout price.
Page 4
<PAGE>
- -------------------------------------------------------------------------------
PROJECT HEARTH
- -------------------------------------------------------------------------------
Perkins Family Restaurant
Percent of Total Volume Traded at Specified Prices
September 5, 1996 to September 5, 1997
[Graphical material appears here in the original in the form of two line graphs
showing price and volume information for Perkins Family Restaurant, L.P.
units from September 5, 1996 to September 5, 1997.]
Average Daily Trading Volume (LTM before announcement)= 16,889
Average Daily Trading Volume (Since buyout announcement)= 55,752
Average Daily Trading Volume (August 7-September 5)= 29,481
Page 5
<PAGE>
- -------------------------------------------------------------------------------
PROJECT HEARTH
- -------------------------------------------------------------------------------
Perkins Family Restaurant
Percent of Total Volume Traded at Specified Prices
September 5, 1996 to September 5, 1997
[Graphical material appears here in the original in the form of a bar graph
showing that of the Perkins Family Restaurants, L.P. units traded between
September 5, 1996 and September 5, 1997, 15.95% traded between $10 and $11,
19.66% traded between $11 and $12, 24.51% traded between $12 and $13, 33.83%
traded between $13 and $14 and 6.06% traded between $14 and $15.]
Graph shows 5,298,000 cumulative shares, 51% of the 10,326,000 shares
outstanding as reported on 9/04/97.
Page 6
<PAGE>
- -------------------------------------------------------------------------------
PROJECT HEARTH
- -------------------------------------------------------------------------------
Perkins Family Restaurant
Percent of Total Volume Traded at Specified Prices
August 4, 1997 to September 4, 1997
[Graphical material appears here in the original in the form of a bar graph
showing that of the Perkins Family Restaurants, L.P. units traded between
August 4, 1997 and September 4, 1997, 7.81% traded between $12.85 and $12.90,
14.43% traded between $12.90 and $12.95, 22.99% traded between $12.95 and
$13.00, 0.00% traded between $13.00 and $13.05, 4.83% traded between $13.05
and $13.10, 3.74% traded between $13.10 and $13.15 and 46.19% traded between
$13.15 and $13.20.]
Graph shows 1,336,400 cumulative shares, 13% of the 10,326,000 shares
outstanding as reported on 9/04/97.
Page 7
<PAGE>
- -------------------------------------------------------------------------------
PROJECT HEARTH
- -------------------------------------------------------------------------------
COMPARABLE COMPANY ANALYSIS
PUBLIC TRADING MULTIPLES(1)
- -------------------------------------------------------------------------------
<TABLE>
-------------------------------- -----------------------------------------------------------
Latest Four Quarters Multiples Cal.1997 Cal.1998 Proj.5 Yr. Cal.'97 P/E Cal.'98 P/E
-------------------------------- Forward Forward EPS Growth to Total to Total
Sales EBITDA EBIT P/E P/E(2) P/E(2) Rate(2) Return(3) Return(3)
----- ------- ---- --- --------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FAMILY DINING COMPANIES
- -----------------------
Bob Evans Farms, Inc. 0.99x 9.4x 14.0x 21.0x 18.3x 15.5x 10.0% 1.6x 1.3x
IHOP Corporation 2.43 8.9 10.8 17.5 16.1 13.7 17.5% 0.9 0.8
Shoney's, Inc. 0.64 5.9 10.1 12.5 13.5 9.2 12.0% 1.1 0.8
VICORP Restaurants, Inc. 0.49 4.8 12.0 20.2 NA NA NA NA NA
---------------------------------------------------------------------------------------------------------------------
Mean 1.13x 7.3x 11.7x 17.8x 16.0x 12.8x 13.2% 1.2x 1.0x
Median 0.81 7.4 11.4 18.9 16.1 13.7 12.0% 1.1 0.8
---------------------------------------------------------------------------------------------------------------------
OTHER FAMILY ORIENTED CONCEPTS
- ------------------------------
Buffets, Inc. 0.69 6.8 13.3 21.8 17.3 13.6 16.0% 1.1 0.9
Luby's Cafeterias, Inc. 1.11 6.8 9.0 12.7 12.3 10.8 10.0% 0.9 0.8
Morrison Fresh Cooking, Inc. 0.19 3.3 10.6 15.2 13.9 12.4 12.0% 0.7 0.6
Piccadilly Cafeterias, Inc. 0.59 6.1 10.4 18.5 14.3 12.3 15.0% 0.8 0.7
Ryan's Family Steak Houses, Inc. 0.99 6.5 9.1 12.2 11.0 10.2 12.0% 0.9 0.8
---------------------------------------------------------------------------------------------------------------------
Mean 0.71x 5.9x 10.5x 16.1x 13.7x 11.9x 13.0% 0.9x 0.8x
Median 0.69 6.5 10.4 15.2 13.9 12.3 12.0% 0.9 0.8
---------------------------------------------------------------------------------------------------------------------
CASUAL DINING
- -------------
Applebee's International, Inc. 1.81x 9.1x 11.7x 17.9x 16.4x 13.6x 25.0% 0.6x 0.5x
Apple South, Inc. 1.57 11.3 15.9 21.8 17.4 13.8 25.0% 0.7 0.5
Brinker International, Inc. 1.03 8.1 14.9 18.9 15.6 13.5 15.0% 1.0 0.9
Darden Restaurants, Inc. 0.60 6.1 10.9 15.9 16.0 13.7 12.0% 1.2 1.0
Lone Star Steakhouse & Saloon 1.11 4.1 5.2 10.1 10.4 9.0 25.0% 0.4 0.4
O'Charley's Inc. 0.98 7.8 12.9 17.5 15.6 13.1 21.0% 0.7 0.6
Outback Steakhouse, Inc. 1.17 6.6 9.1 16.1 15.1 12.4 20.0% 0.8 0.6
Rock Bottom Restaurants, Inc. 0.70 5.6 14.0 14.6 14.5 11.4 27.0% 0.5 0.4
---------------------------------------------------------------------------------------------------------------------
Mean 1.12x 7.4x 11.8x 16.6x 15.1x 12.6x 21.3% 0.7x 0.6x
Median 1.07 7.2 12.3 16.8 15.6 13.3 23.0% 0.7 0.6
---------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------
(1) Stock prices as of September 5, 1997.
(2) Source: I/B/E/S.
(3) Based on I/B/E/S EPS estimates and 5 yr. EPS growth rates.
(4) Total Return equals the five-year projected EPS growth rate plus the
dividend yield.
NA=Not available
Page 8
<PAGE>
- -------------------------------------------------------------------------------
PROJECT HEARTH
- -------------------------------------------------------------------------------
COMPARABLE COMPANY ANALYSIS
SELECTED OPERATING STATISTICS(1)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Debt to Cap.
--------------------------- ---------------- Mkt. Val.
EBITDA EBIT Net Int. Market Book to Date
------ ---- -------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
FAMILY DINING COMPANIES
- -----------------------
Bob Evans Farms, Inc. 10.5% 7.0% 4.4% 8.7% 14.3% 1.78x
IHOP Corporation 27.1% 22.5% 9.7% 30.7% 51.9% 2.48
Shoney's, Inc. 10.8% 6.3% 1.7% 65.8% 101.5% NM
VOCPRP Restaurants, Inc. 10.2% 4.1% 2.1% 14.8% 15.9% 1.11
-------------------------------------------------------------------------------------------
Mean 14.7% 10.0% 4.5% 30.0% 45.9% 1.8x
Median 10.7% 6.7% 3.3% 22.7% 33.9% 1.8
-------------------------------------------------------------------------------------------
OTHER FAMILY ORIENTED CONCEPTS
- ------------------------------
Buffets, Inc. 10.2% 5.2% 3.1% 8.8% 15.9% 2.08
Luby's Cafeterias, Inc. 16.3% 12.3% 7.5% 16.7% 28.9% 2.06
Morrison Fresh Cooking, Inc. 5.8% 1.8% 1.1% 17.3% 17.1% 1.06
Picadilly Cafeterias, Inc. 9.6% 5.6% 2.6% 19.2% 31.0% 1.88
Ryan's Family Steak Houses, Inc. 15.2% 10.9% 6.6% 23.4% 30.6% 1.45
-------------------------------------------------------------------------------------------
Mean 11.4% 7.2% 4.2% 17.1% 24.7% 1.7x
Median 10.2% 5.6% 3.1% 17.3% 28.9% 1.9
-------------------------------------------------------------------------------------------
CASUAL DINING
- -------------
Applebee's International, Inc. 19.8% 15.4% 9.9% 3.5% 9.8% 3.04x
Apple South, Inc. 13.9% 9.9% 4.5% 38.9% 66.3% 3.12
Brinker International, Inc. 12.8% 7.0% 5.2% 21.8% 35.0% 2.03
Darden Restaurants, Inc. 9.8% 5.5% 3.1% 20.5% 24.6% 1.29
Lone Star Steakhouse & Saloon 26.8% 21.5% 13.9% 0.0% 0.0% 1.39
O'Charley's Inc. 12.5% 7.6% 3.9% 31.2% 50.0% 2.23
Outback Steakhouse, Inc. 17.6% 12.8% 7.0% 7.0% 18.8% 3.12
Rock Bottom Restaurants, Inc. 12.6% 5.0% 3.4% 31.6% 29.9% 0.95
-------------------------------------------------------------------------------------------
Mean 15.7% 10.6% 6.4% 19.3% 29.3% 2.1x
Median 13.3% 8.7% 4.9% 21.2% 27.3% 2.1
-------------------------------------------------------------------------------------------
</TABLE>
(1) Stock prices as of September 5, 1997.
NA = Not available
Page 9
<PAGE>
- -------------------------------------------------------------------------------
PROJECT HEARTH
- -------------------------------------------------------------------------------
COMPARABLE COMPANY ANALYSIS
MARKET CAPITALIZATION(1)
- -------------------------------------------------------------------------------
(Dollars in millions, except per share data, shares in millions)
<TABLE>
<CAPTION>
Stock Shares Mkt. Val. Book Val. Total
10-K Date 10-Q Date Ticker Price Out of Equity of Equity Debt
--------- --------- ------ ------- ------ --------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FAMILY DINING COMPANIES
- -----------------------
Bob Evans Farms, Inc. 04/25/97 04/25/97 BOBE $18.094 41.579 752.3 422.8 70.5
IHOP Corporation 12/31/96 06/30/97 IHOP 36.313 9.610 349.0 140.6 151.5
Shoney's, Inc. 10/27/96 05/11/97 SHN 5.625 48.568 273.2 (7.5) 504.4
VICORP Restaurants, Inc. 10/31/96 04/30/97 VRES 15.375 9.120 140.2 126.1 23.8
OTHER FAMILY ORIENTED CONCEPTS
- ------------------------------
Buffets, Inc. 01/01/97 07/16/97 BOCB 11.563 45.227 522.9 252.0 47.5
Luby's Cafeterias, Inc. 08/31/96 05/31/97 LUB 19.563 23.266 455.1 221.2 90.0
Morrison Fresh Cooking, Inc. 05/31/97 05/31/97 MFC 4.563 9.249 42.2 39.9 8.2
Picadilly Cafeterias, Inc. 06/30/96 03/31/97 PIC 13.688 10.503 143.8 76.3 34.3
Ryan's Family Steak Houses, Inc. 01/01/97 07/02/97 RYAN 9.250 47.290 437.4 302.0 133.3
CASUAL DINING
- -------------
Applebee's International, Inc. 12/31/96 06/30/97 APPB 26.063 31.422 818.9 269.6 29.9
Apple South, Inc. 12/31/96 06/30/97 APSO 16.563 38.356 635.3 203.6 286.1
Brinker International, Inc. 06/26/96 03/26/97 EAT 16.000 67.471 1,079.5 530.7 285.3
Darden Restaurants, Inc. 05/28/96 02/23/97 DRI 10.125 152.980 1,548.9 1,202.2 393.1
Lone Star Steakhouse & Saloon 12/31/96 06/17/97 STAR 18.250 41.018 748.6 537.7 0.0
O'Charley's Inc. 12/29/96 04/20/97 CHUX 15.250 7.798 118.9 53.2 53.3
Outback Steakhouse, Inc. 12/31/96 06/30/97 OSSI 24.125 47.442 1,144.5 366.4 85.0
Rock Bottom Restaurants, Inc. 12/29/96 06/30/97 BREW 8.000 8.007 64.1 67.4 28.8
<CAPTION>
Preferred Cash & Net Total
Stock Equiv. Debt Mkt. Cap.
--------- ------- ----- ---------
<S> <C> <C> <C> <C>
FAMILY DINING COMPANIES
- -----------------------
Bob Evans Farms, Inc. 0.0 12.3 58.2 810.5
IHOP Corporation 0.0 6.7 144.8 493.8
Shoney's, Inc. 0.0 11.0 493.5 766.7
VICORP Restaurants, Inc. 0.0 2.7 21.2 161.4
OTHER FAMILY ORIENTED CONCEPTS
- ------------------------------
Buffets, Inc. 0.0 29.4 18.1 541.1
Luby's Cafeterias, Inc. 0.0 6.8 83.2 538.4
Morrison Fresh Cooking, Inc. 0.0 2.9 5.3 47.5
Picadilly Cafeterias, Inc. 0.0 0.0 34.3 178.0
Ryan's Family Steak Houses, Inc. 0.0 0.8 132.5 570.0
CASUAL DINING
- -------------
Applebee's International, Inc. 0.0 16.9 12.3 831.2
Apple South, Inc. 115.0 4.9 396.3 1,031.5
Brinker International, Inc. 0.0 57.6 227.7 1,307.2
Darden Restaurants, Inc. 0.0 28.8 364.3 1,913.2
Lone Star Steakhouse & Saloon 0.0 148.5 (148.5) 600.1
O'Charley's Inc. 0.0 1.6 51.7 170.6
Outback Steakhouse, Inc. 0.0 9.7 75.2 1,219.8
Rock Bottom Restaurants, Inc. 0.0 1.7 37.0 91.1
</TABLE>
(1) Stock prices as of September 5, 1997.
Page 10
<PAGE>
- -------------------------------------------------------------------------------
PROJECT HEARTH
- -------------------------------------------------------------------------------
COMPARABLE COMPANY ANALYSIS
INCOME STATEMENT DATA
- -------------------------------------------------------------------------------
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
--------------------------------------------------
LATEST FOUR QUARTERS CALENDAR CALENDAR PROJECTED
-------------------------------------------------- 1997 1998 5 YR. EPS DIVIDEND
SALES EBIT EBITDA D&A NET INCOME EPS EPS EPS GROWTH RATE YIELD
----- ---- ------ --- ---------- ------ -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FAMILY DINING COMPANIES
- -----------------------
Bob Evans Farms, Inc. 822.2 57.8 86.3 28.5 36.1 0.86 0.99 1.17 10.0% 1.8%
IHOP Corporation 203.4 45.9 55.2 9.3 19.8 2.07 2.25 2.65 17.5% 0.0%
Shoney's, Inc. 1,200.6 76.1 129.9 53.7 20.7 0.45 0.42 0.61 12.0% 0.0%
VICORP Restaurants, Inc. 331.1 13.5 33.8 20.3 7.1 0.76 NA NA NA 0.0%
OTHER FAMILY ORIENTED CONCEPTS
- ------------------------------
Buffets, Inc. 782.0 40.8 79.9 39.1 23.9 0.53 0.67 0.85 16.0% 0.0%
Luby's Cafeterias, Inc. 484.6 59.7 79.1 19.4 36.5 1.55 1.59 1.81 10.0% 4.1%
Morrison Fresh Cooking, Inc. 249.6 4.5 14.4 10.0 2.7 0.30 0.33 0.37 12.0% 7.9%
Piccadilly Cafeterias, Inc. 303.6 17.1 29.2 12.1 7.8 0.74 0.96 1.11 15.0% 3.5%
Ryan's Family Steak Houses, Inc. 576.7 62.8 87.8 25.1 37.9 0.76 0.84 0.91 12.0% 0.0%
CASUAL DINING
- -------------
Applebee's International, Inc. 460.4 70.9 91.3 20.4 45.5 1.45 1.59 1.92 25.0% 1.1%
Apple South, Inc. 657.1 65.0 91.4 26.3 29.7 0.76 0.95 1.20 25.0% 0.2%
Brinker International, Inc. 1,264.7 88.0 161.7 73.7 66.3 0.85 1.03 1.18 15.0% 0.0%
Darden Restaurants, Inc. 3,197.5 175.3 313.3 138.0 99.0 0.64 0.63 0.74 12.0% 1.6%
Lone Star Steakhouse & Saloon 541.2 116.2 145.0 28.8 75.2 1.81 1.75 2.03 25.0% 0.0%
O'Charley's Inc. 174.1 13.2 21.8 8.6 6.8 0.87 0.98 1.16 21.0% 0.0%
Outback Steakhouse, Inc. 1,043.6 133.7 183.6 49.9 73.0 1.50 1.60 1.95 20.0% 0.0%
Rock Bottom Restaurants, Inc. 129.4 6.5 16.3 9.8 4.4 0.55 0.55 0.70 27.0% 0.0%
</TABLE>
Page 11
<PAGE>
- --------------------------------------------------------------------------------
PROJECT HEARTH
- --------------------------------------------------------------------------------
RECENT PRICE CHANGES FOR COMPARABLE COMPANIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STOCK PRICE STOCK PRICE
DAY OFFER MADE MOST RECENT
TICKER 8/4/97 9/5/97 % CHANGE
------ ------ ------ --------
<S> <C> <C> <C> <C>
FAMILY DINING COMPANIES
- -----------------------
Bob Evans Farms, Inc. BOBE $ 16.75 $ 18.09 8.0%
IHOP Corporation IHOP $ 32.00 $ 36.31 13.5%
Shoney's, Inc. SHN $ 6.13 $ 5.63 (8.2%)
VICORP Restaurants, Inc. VRES $ 14.00 $ 15.38 9.8%
-------------------------------------------------------------------
Mean $ 17.22 $ 18.85 5.8%
Median $ 15.38 $ 16.73 8.9%
-------------------------------------------------------------------
OTHER FAMILY ORIENTED CONCEPTS
- ------------------------------
Buffets, Inc. BOCB $ 9.81 $ 11.56 17.8%
Luby's Cafeterias, Inc. LUB $ 19.69 $ 19.56 (0.6%)
Morrison Fresh Cooking, Inc. MPC $ 4.56 $ 4.56 0.0%
Piccadilly Cafeterias, Inc. PIC $ 13.25 $ 13.69 3.3%
Ryan's Family Steak Houses, Inc. RYAN $ 9.00 $ 9.25 2.8%
-------------------------------------------------------------------
Mean $ 11.26 $ 11.73 4.7%
Median $ 9.81 $ 11.56 2.8%
-------------------------------------------------------------------
CASUAL DINING
- -------------
Applebee's International, Inc. APPB $ 29.38 $ 26.06 (11.3%)
Apple South, Inc. APSO $ 16.38 $ 16.56 1.1%
Brinker International, Inc. EAT $ 15.88 $ 16.00 0.8%
Darden Restaurants, Inc. DRI $ 9.94 $ 10.13 1.9%
Loan Star Steakhouse & Saloon STAR $ 22.00 $ 18.25 (17.0%)
O'Charley's Inc. CHUX $ 17.25 $ 15.25 (11.6%)
Outback Steakhouse, Inc. OSSI $ 25.88 $ 24.13 (6.8%)
Rock Bottom Restaurants, Inc. BREW $ 8.25 $ 8.00 (3.0%)
-------------------------------------------------------------------
Mean $ 18.12 $ 16.80 -5.7%
Median $ 16.81 $ 16.28 -4.9%
-------------------------------------------------------------------
</TABLE>
Page 12
<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14-11(c) or Section
240.14a-12
PERKINS FAMILY RESTAURANTS, L.P.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
PERKINS MANAGEMENT COMPANY, INC.
- --------------------------------------------------------------------------------
(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:
Depositary Units Representing Limited Partnership Interests in the
Registrant
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
5,444,495
-----------------------------------------------------------------------
(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):
$14.00 Per Unit (Amount of cash to be received for each Unit in the
merger)
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$76,222,930.00
-----------------------------------------------------------------------
(5) Total fee paid:
$15,245.00
-----------------------------------------------------------------------
/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>
PERKINS FAMILY RESTAURANTS, L.P.
SPECIAL MEETING OF UNITHOLDERS
MERGER PROPOSED - YOUR
VOTE IS VERY IMPORTANT
You are cordially invited to attend a Special Meeting of the holders of Units of
limited partner interests of Perkins Family Restaurants, L.P. (referred to as
the Partnership) at which you will be asked to vote upon a proposed Merger which
would result in you having the right to receive $14.00 in cash for each of your
Units. The Restaurant Company (referred to as TRC) holds approximately 48.1% of
the outstanding Units and is the parent corporation of the Partnership's general
partner. As a result of the Merger, TRC would indirectly own all of the
outstanding equity interests in the Partnership and your entire investment in
the Partnership would be acquired for $14.00 per Unit in cash.
Because the Board of Directors of the Partnership's general partner has
concluded that the Merger is fair to, and in the best interests of, the holders
of Units other than TRC, its subsidiaries and their officers, directors and key
employees, the Board has unanimously approved the Merger. In reaching these
conclusions, the Board considered the opinion of Morgan Keegan & Company, Inc.
that the consideration in the Merger is fair to the Unitholders other than TRC
and its subsidiaries from a financial point of view. THE BOARD RECOMMENDS THAT
YOU VOTE "FOR" APPROVAL OF THE MERGER AND THE RELATED MERGER AGREEMENT.
If the Merger is completed, holders of Units other than TRC and its subsidiaries
will be entitled to receive $14.00 per Unit in cash and the Partnership's final
quarterly distribution to Unitholders will be the $0.325 per Unit cash
distribution for the third quarter of the Partnership's fiscal year paid to
Unitholders of record on September 30, 1997.
At the Special Meeting, you will be asked to approve the Merger and the related
Merger Agreement. No special independent committee of the General Partner's
Board of Directors was formed for the purposes of representing the interests of
public Unitholders in this transaction. However, the Merger must be approved by
the affirmative vote of the holders of a majority of the Units that are held by
persons other than TRC, its subsidiaries and their officers, directors and key
employees and that are voted at the Special Meeting. THE MERGER CANNOT BE
COMPLETED UNLESS PUBLIC UNITHOLDERS APPROVE IT.
The date, time and place of the Special Meeting is:
December 5, 1997
10:00 a.m.
[Address]
Memphis, Tennessee
This Proxy Statement provides you with detailed information about the proposed
Merger. In addition, you may obtain information about the Partnership from
documents filed with the Securities and Exchange Commission. The action to be
taken at the Special Meeting is of great importance and I urge you to read this
entire document carefully.
Whether or not you plan to attend the Special Meeting in person and regardless
of the number of Units you own, please complete, sign and date the enclosed
proxy card and mail it as soon as possible in the envelope provided.
If you have any questions or need assistance in voting your Units, please call
our proxy solicitors D.F. King & Co., Inc. toll-free at (800) 207-2014.
Very truly yours,
DONALD N. SMITH
Chairman of the Board and Chief Executive Officer
Perkins Management Company, Inc.
General Partner
This transaction has not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the fairness or merits of
this transaction nor upon the accuracy or adequacy of the information contained
in this Proxy Statement. Any representation to the contrary is unlawful.
PROXY STATEMENT DATED NOVEMBER , 1997, AND FIRST MAILED TO UNITHOLDERS ON
NOVEMBER , 1997.
<PAGE>
PERKINS MANAGEMENT COMPANY, INC.
GENERAL PARTNER OF PERKINS FAMILY RESTAURANTS, L.P.
6075 POPLAR AVENUE, SUITE 800
MEMPHIS, TN 38119-4709
(888) 279-4542
NOTICE OF SPECIAL MEETING OF UNITHOLDERS
TO BE HELD ON DECEMBER 5, 1997
To: The Holders of Units Representing Limited Partner
Interests of Perkins Family Restaurants, L.P.
Notice is hereby given that a special meeting of the holders ("Unitholders")
of units representing limited partner interests ("Units") of Perkins Family
Restaurants, L.P. (the "Partnership") will be held at 10:00 a.m. (Central
Standard Time) on December 5, 1997 at (the "Special
Meeting"), to consider and approve an Amended and Restated Agreement and Plan of
Merger by and among the Partnership, The Restaurant Company ("TRC") and Perkins
Acquisition Corp. ("MergerCo.") dated as of September 11, 1997 (The "Merger
Agreement") and the merger contemplated thereby (the "Merger") pursuant to which
MergerCo. will be merged with and into the Partnership. MergerCo., which was
formed solely for the purpose of engaging in the Merger, is wholly owned by
Perkins Management Company, Inc. ("PMC"), an indirect wholly owned subsidiary of
TRC. As a result of the Merger, all of the equity interests in the Partnership
will become wholly owned by TRC and its direct and indirect subsidiaries, and
the Units held by persons other than TRC or its direct and indirect subsidiaries
will be converted into the right to receive $14.00 per Unit in cash.
By order of the Board of Directors (the "Board") of PMC, the sole general
partner of the Partnership, the close of business on October 28, 1997, has been
fixed as the record date for determination of Unitholders entitled to notice of,
and to vote at, the Special Meeting or any adjournments or postponements
thereof.
Information regarding the matters to be acted upon at the Special Meeting is
contained in the accompanying Proxy Statement. The Merger Agreement contains the
full terms and conditions of the Merger and is set forth as Annex A to the Proxy
Statement. The Board unanimously recommends that Unitholders vote "FOR" approval
of the Merger, the Merger Agreement and the transactions contemplated thereby.
Whether or not you plan to attend the Special Meeting in person and
regardless of the number of Units you own, you are urged to sign and date the
enclosed proxy card and mail it as soon as possible in the postage-paid return
envelope provided, so that your Units will be represented and voted at the
Special Meeting.
By order of the Board of Directors of
Perkins Management Company, Inc.
General Partner
Donald F. Wiseman
Secretary
November , 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER..................................................................... 1
SUMMARY.................................................................................................... 3
The Parties Involved..................................................................................... 3
Reasons for the Merger................................................................................... 3
The Special Meeting...................................................................................... 4
Recommendation to Unitholders............................................................................ 4
Record Date; Units Entitled to Vote; Quorum.............................................................. 4
Vote Required............................................................................................ 4
The Merger............................................................................................... 4
What Unitholders Will Receive in the Merger.............................................................. 4
Ownership of the Partnership after the Merger............................................................ 4
Certain Relationships.................................................................................... 5
Interests of Certain Persons in the Merger............................................................... 5
Fairness of the Transaction; Recommendations............................................................. 6
Fairness Opinion......................................................................................... 6
Terms of the Merger...................................................................................... 7
Conditions of the Merger................................................................................. 7
Effective Time........................................................................................... 7
Sources of Funds; Financing of the Merger................................................................ 8
Market Prices of the Units............................................................................... 8
No Appraisal Rights...................................................................................... 8
Summary of Federal Income Tax Consequences of the Merger................................................. 8
Accounting Treatment of the Merger....................................................................... 9
Litigation Relating to the Merger........................................................................ 9
THE MERGER................................................................................................. 10
Background of and Reasons for the Merger................................................................. 10
Litigation Relating to the Merger........................................................................ 14
Fairness of the Merger; Recommendation of the Board of Directors of the General Partner.................. 15
Fairness Opinion......................................................................................... 16
Report of Smith Barney................................................................................... 21
Certain Projections of the Partnership................................................................... 23
Structure of the Merger.................................................................................. 26
Interests of Certain Persons in the Merger; Conflicts of Interest........................................ 27
Relationships Between the Parties........................................................................ 28
Plans for the Partnership After the Merger............................................................... 28
Certain Effects of the Merger............................................................................ 29
Federal Income Tax Consequences.......................................................................... 29
Accounting Treatment of the Merger....................................................................... 30
Regulatory Approvals and Filings......................................................................... 30
Expenses of the Merger................................................................................... 31
THE PROXY SOLICITATION..................................................................................... 31
Voting and Proxy Procedures.............................................................................. 31
Solicitation of Proxies.................................................................................. 32
No Appraisal Rights...................................................................................... 32
Conduct of the Special Meeting........................................................................... 32
THE MERGER AGREEMENT....................................................................................... 33
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
General.................................................................................................. 33
Effective Time........................................................................................... 33
Financing of the Merger.................................................................................. 33
Conditions to the Merger................................................................................. 34
Termination.............................................................................................. 35
Payment for Units........................................................................................ 35
Issuance of Units to TRC and its Affiliates and Payment of Expenses by TRC Prior to Effective Time....... 35
Operating Partnership Merger............................................................................. 36
BUSINESS................................................................................................... 37
Properties............................................................................................... 44
Beneficial Ownership of Units and Transactions In Units By Certain Persons............................... 46
SUMMARY FINANCIAL DATA..................................................................................... 47
MARKET FOR PARTNERSHIP'S UNITS; DISTRIBUTIONS.............................................................. 50
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 50
SCHEDULE I................................................................................................. S-1
ANNEX A--THE MERGER AGREEMENT.............................................................................. A-1
ANNEX B--OPINION OF MORGAN KEEGAN & COMPANY, INC........................................................... B-1
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY IS TRC PROPOSING THE MERGER?
A: Under federal tax laws, if the Partnership remains a publicly-traded
partnership it will become taxable as a corporation or have to pay a 3.5% tax on
its gross income beginning in 1998. Because of the adverse tax consequences of
being taxed as a corporation or paying a 3.5% tax on gross income, it is
unlikely that the Partnership would continue paying distributions at its
historic levels, even though many of the Public Unitholders made their
investment with a view toward receiving substantial distributions. The Merger,
if approved, gives Public Unitholders the opportunity to dispose of their
investment in the Partnership at a premium to recent market trading prices.
Also, the Merger is expected to eliminate the expenses associated with the
Partnership's being a publicly traded partnership, as well as the possible
conflicts of interest between the Partnership and TRC.
To review the background and reasons for the Merger in greater detail, see
page 10.
Q: WHEN IS THE SPECIAL MEETING?
A: The Special Meeting will take place at 10:00 a.m. (Central Standard Time) on
December 5, 1997. At the meeting, Unitholders will be asked to approve the
Merger and the related Merger Agreement dated as of September 11, 1997.
Q: WHERE IS THE SPECIAL MEETING BEING HELD?
A: The Special Meeting will be held at . Although you may attend the
meeting in person, your Units may be voted at the meeting even if you do not
attend in person if you return a signed proxy card as instructed.
Q: WHAT DO I NEED TO DO NOW?
A: Please mail your signed proxy card in the enclosed return envelope as soon
as possible, so that your Units may be represented at the Special Meeting. In
addition, you may attend the Special Meeting in person and vote.
Q: IF TRC OWNS MORE THAN 48% OF THE OUTSTANDING UNITS, WHY DOES MY VOTE MAKE A
DIFFERENCE?
A: Your vote is very important. TRC has agreed that the Merger will not be
effected unless at least a majority of the Units voting that are not held by TRC
or its subsidiaries, or their officers, directors or key employees, are voted in
favor of the Merger.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: Just send in a later-dated, signed proxy card before the Special Meeting or
attend the meeting in person and vote.
Q: IF MY UNITS ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
UNITS FOR ME?
A: Your broker will vote your Units only if you provide instructions on how to
vote. You should instruct your broker to vote your Units, following the
directions provided by your broker. Without instructions, your Units will not be
voted.
Q: SHOULD I SEND IN MY UNITS NOW?
A: No. If the Merger is completed, we will send Unitholders written
instructions for exchanging their Units. You should wait until you receive those
written instructions. For the time being, you should just mail your signed proxy
card in the enclosed return envelope.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If the Merger is completed, each Unitholder will be entitled to receive
$14.00 in cash for each of his or her Units.
1
<PAGE>
Q: WILL I OWE ANY FEDERAL INCOME TAX AS A RESULT OF THE MERGER?
A: The Merger will be a taxable transaction to holders of Units who receive
cash in the Merger and are not otherwise exempt from tax. Each Unitholder
generally will recognize capital gain or loss equal to the difference between
his or her adjusted tax basis in his or her Units and the cash received in the
Merger. However, any such capital gain will be reduced or any such capital loss
will be increased by ordinary income Unitholders will be required to recognize
from the recapture of certain tax benefits (for example, depreciation recapture)
they received while they held their Units. Depending on when they acquired their
Units, Unitholders will recognize up to $1.25 of ordinary income per Unit as a
result of such recapture. Certain Unitholders may realize both ordinary income
and capital loss as a result of the Merger. The use of any such capital loss for
federal income tax purposes is subject to certain limitations.
For further information regarding the federal income tax consequences of the
Merger, see pages 29-30.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the Merger as quickly as possible. We hope
to complete the Merger before the end of calendar year 1997, but we cannot be
sure we will do so.
Q: WILL THERE BE ANY FURTHER PARTNERSHIP DISTRIBUTIONS TO UNITHOLDERS?
A: If the Merger occurs, the Partnership's final quarterly distribution to
Public Unitholders will be the $0.325 per Unit cash distribution for the third
quarter of 1997 paid to persons who were Unitholders of record on September 30,
1997. If the Merger is not consummated, no decision has been made as to whether
the Partnership would pay a distribution for the fourth quarter of 1997. For
periods beginning after December 31, 1997, further distributions by the
Partnership will be reduced and possibly eliminated if the Merger is not
consummated.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: If you have any questions or need assistance in voting your Units, please
call our proxy solicitors, D.F. King & Co., Inc., toll free at (800) 207-2014.
2
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY STATEMENT AND
MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND
THE MERGER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE
MERGER, YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE DOCUMENTS TO
WHICH WE HAVE REFERRED YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE
50. WE HAVE INCLUDED PAGE REFERENCES IN PARENTHESES TO DIRECT YOU TO A MORE
COMPLETE DESCRIPTION OF THE TOPICS PRESENTED IN THIS SUMMARY.
THE PARTIES INVOLVED
PERKINS FAMILY RESTAURANTS, L.P.
6075 Poplar Avenue
Suite 800
Memphis, TN 38119-4709
Perkins Family Restaurants, L.P. is a Delaware limited partnership and is
referred to as the Partnership. The Partnership is a leading operator and
franchisor of full-service mid-scale restaurants which operate under the names
"Perkins Family Restaurant"-Registered Trademark- and "Perkins Family Restaurant
and Bakery."-Registered Trademark- Units of limited partnership interests of the
Partnership are traded on the New York Stock Exchange under the symbol "PFR."
PERKINS MANAGEMENT COMPANY, INC.
6075 Poplar Avenue
Suite 800
Memphis, TN 38119-4709
Perkins Management Company, Inc. is sometimes called PMC and sometimes called
the General Partner. The General Partner is a Delaware corporation, and its only
business is to serve as the sole general partner of the Partnership with a 1%
general partnership interest and as the sole general partner of the
Partnership's operating subsidiary, Perkins Restaurants Operating Company, L.P.
THE RESTAURANT COMPANY
1 Pierce Place
Suite 100 E
Itasca, IL 60143
The Restaurant Company is a Delaware corporation and is referred to as TRC.
TRC's principal businesses are to provide management services to its affiliates
and the management of its indirect interests in the Partnership and the General
Partner. The General Partner is indirectly wholly-owned by TRC. Through its
subsidiaries, TRC is the holder of approximately 48.1% of the outstanding Units.
PERKINS RESTAURANTS, INC.
1 Pierce Place
Suite 100 E
Itasca, IL 60143
Perkins Restaurants, Inc. is a Minnesota corporation and is referred to as PRI.
The General Partner is a wholly-owned subsidiary of PRI, and PRI is itself a
wholly-owned subsidiary of TRC. PRI's principal business is the holding of its
interest in the General Partner and its interest in the Partnership.
PERKINS ACQUISITION CORP.
6075 Poplar Avenue
Suite 800
Memphis, TN 38119-4709
Perkins Acquisition Corp. is a wholly-owned subsidiary of the General Partner
and is sometimes referred to as MergerCo. MergerCo. has been formed as a
Delaware corporation solely for the purpose of being merged into the Partnership
in the Merger, after which the Partnership will be the surviving entity and
MergerCo. will cease to exist.
REASONS FOR THE MERGER
TRC is the party initiating, supporting and structuring the terms of the Merger.
TRC has proposed the Merger because if the Partnership remains a publicly-traded
partnership, it will become a taxable entity for federal tax purposes or will
have to pay a tax equal to 3.5% of its gross income beginning January 1, 1998.
Either choice of tax treatment would subject the Partnership to federal taxes
where it presently has no liability. This would make it very unlikely that the
Partnership would continue paying distributions at its historic level. TRC
believes
3
<PAGE>
that many Unitholders made their investment with a view toward receiving
substantial distributions and would appreciate the opportunity to receive cash
for their Units at a premium to recent market trading prices if those
distributions will no longer be paid. In addition, TRC believes that the
expense, both in terms of actual costs and time and attention required of
management to maintain the Partnership as a publicly traded partnership can be
eliminated through the Merger. TRC also believes that potential conflict of
interest situations between the Partnership and TRC and parties related to TRC
can be eliminated through the Merger.
To review the reasons for the Merger in greater detail, see page 10.
THE SPECIAL MEETING
The Special Meeting will be held at 10:00 a.m. on December 5, 1997. At the
Special Meeting, Unitholders will be asked to approve the Merger and the related
Merger Agreement. The Special Meeting will be held at .
RECOMMENDATION TO UNITHOLDERS
THE BOARD OF DIRECTORS OF THE GENERAL PARTNER UNANIMOUSLY RECOMMENDS THAT
UNITHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
RECORD DATE; UNITS ENTITLED TO VOTE; QUORUM
You are entitled to vote at the Special Meeting if you owned Units as of the
close of business on October 28, 1997, the Record Date.
On the Record Date, there were 10,487,495 Units entitled to vote at the Special
Meeting. Unitholders will have one vote at the Special Meeting for each Unit
they owned on the Record Date.
The presence in person or by proxy of the General Partner and the holders of a
majority of all outstanding Units, including those owned by TRC, is necessary to
constitute a quorum at the Special Meeting.
VOTE REQUIRED
There are two separate voting requirements which must be met for the Merger to
be effected:
- - Approval of the Merger Agreement will require the favorable vote of a majority
of the total voting interests in the Partnership. This is sometimes called the
Majority Vote Requirement. Including PMC's general partner interest, TRC and
its subsidiaries hold approximately 48.6% of the total voting interests in the
Partnership.
- - Though not required under the Partnership's Amended and Restated Partnership
Agreement, approval of the Merger Agreement also has been conditioned upon the
favorable vote of a majority of the Units held by persons (sometimes called
the Public Unitholders) other than TRC, its subsidiaries and their officers,
directors and key employees, that are voted at the Special Meeting. The votes
of TRC, its subsidiaries and their, officers, directors and key employees will
not count toward satisfaction of this latter voting condition, which is
sometimes called the Public Unitholder Approval Requirement.
THE MERGER
THE MERGER AGREEMENT (ANNEX A) IS ATTACHED AT THE BACK OF THIS PROXY STATEMENT.
WE ENCOURAGE YOU TO READ THE MERGER AGREEMENT AS IT IS THE PRIMARY LEGAL
DOCUMENT THAT GOVERNS THE MERGER.
WHAT UNITHOLDERS WILL RECEIVE IN THE MERGER (SEE PAGE 26)
If the Merger is approved, Unitholders (other than TRC and its direct and
indirect subsidiaries) will have the right to receive $14.00 in cash for each
Unit they own and the Partnership's final quarterly distribution to such
Unitholders will be the $0.325 per Unit cash distribution for the third quarter
of the Partnership's fiscal year paid to Unitholders of record on September 30,
1997.
4
<PAGE>
OWNERSHIP OF THE PARTNERSHIP AFTER THE MERGER
Following the Merger, the Partnership will be indirectly wholly-owned by TRC.
CERTAIN RELATIONSHIPS
Various management personnel are common to PMC, PRI and TRC. Each of the
directors and officers of PRI serves in the same capacity for PMC, and three of
the directors and three of the officers of PMC serve as directors and officers
of TRC and PRI. Donald N. Smith serves as Chairman of the Board and Chief
Executive Officer of PMC, PRI and TRC and owns 33.2% of the outstanding common
stock of TRC. Michael P. Donahoe serves as Vice President and Controller of each
of PMC, PRI and TRC and Donald F. Wiseman serves as Secretary of PMC, PRI and
TRC. Steven L. Ezzes and Charles L. Atwood serve as directors of PMC, PRI and
TRC. Mr. Atwood serves on the Boards of each of PMC, PRI and TRC as the
representative of Harrah's Entertainment, Inc., which indirectly owns 33.2% of
the outstanding common stock of TRC.
The other directors of PMC, although they are not officers or directors of TRC
or its subsidiaries, have certain other relationships with TRC and its
affiliates that may give rise to actual or perceived conflicts of interest. Lee
N. Abrams is a director of PMC and is a senior partner of a law firm that has
represented and is representing TRC and certain parties related to TRC in
connection with the Merger and in other matters. D. Michael Meeks is a director
of PMC and receives compensation from PMC through a consulting arrangement with
the Partnership. Mr. Meeks is also a former employee of, and a substantial part
his net worth is invested in, Harrah's. Charles A. Ledsinger is the former Chief
Financial Officer of Harrah's and a substantial part of his net worth is
invested in Harrah's.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of September 30, 1997, 154,605 (or approximately 1.5%) of the Units were
beneficially owned by officers and directors of TRC or PMC exclusive of Donald
N. Smith. See page 46. If the Merger is consummated, the Units owned by these
persons will be converted into the right to receive cash in the amount of $14.00
per Unit. To the knowledge of TRC and the General Partner, these persons intend
to vote their Units "FOR" approval of the Merger. The votes of these persons
will not be counted toward satisfaction of the Public Unitholder Approval
Requirement.
As of September 30 , 1997, 5,043,000 (or approximately 48.1%) of the Units were
beneficially owned by TRC, through its wholly owned subsidiary PRI. See page 46.
TRC is interested in the outcome of the Merger because, following the Merger,
TRC and its direct and indirect subsidiaries will be the sole owners of the
Partnership. As sole owners, TRC and its subsidiaries will bear the total risk
of the Partnership's operations but will also receive the entire benefit, if
any, arising from pursuit of the various opportunities described under "--
Reasons for the Merger" on page 10. TRC and any of its related parties also
would be able to engage in transactions with the Partnership and to enjoy the
benefits of those transactions without raising issues with respect to potential
conflicts of interest. If ownership interests in the Partnership or its assets
were sold to an unrelated third party following the Merger, TRC and its
subsidiaries would receive the exclusive benefits of such a sale. By contrast,
if the current ownership structure were maintained, TRC and its subsidiaries
would share any such benefits with the Public Unitholders.
In proposing and structuring the terms of the Merger, TRC primarily considered
its own interests and not those of the Public Unitholders. No person was
retained to represent the interests of the Public Unitholders with respect to
the Merger or the Merger Agreement, and no committee or member of the Board
attempted to represent those interests. Neither TRC nor the General Partner
approached any unaffiliated persons or entities about acquiring the Partnership
or any of its assets. See page 10.
Mr. Smith, who is Chairman and CEO of both PMC and TRC and who has been involved
in structuring the Merger, owns 33.2% of the outstanding stock of TRC. D.
Michael Meeks
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and Charles A. Ledsinger, who are directors of PMC, and who have been involved
in structuring the Merger, each has a substantial investment in Harrah's, which
is in turn the indirect owner of approximately 33.2% of the outstanding stock of
TRC. To the extent that the Merger were to ultimately prove beneficial to TRC
and to positively affect the value of TRC stock, Mr. Smith and Harrah's, as well
as all other TRC stockholders, would benefit from the Merger. Mr. Meeks and Mr.
Ledsinger, as stockholders in Harrah's, would also benefit indirectly from the
Merger to the extent that any such positive effect on the stock of TRC might in
turn have a positive effect on the stock of Harrah's.
The General Partner and the senior management of the Partnership also have
certain other interests that may present them with actual or potential conflicts
of interest. Among these are that:
- - the General Partner is indirectly wholly owned by TRC,
- - the General Partner is expected to remain in its current role subsequent to
the Merger, and
- - the current members of the senior management of the General Partner are
expected to remain in their positions following the Merger.
Under the Partnership Agreement, whenever there is a conflict of interest
between the General Partner or anyone related to it, on the one hand, and the
Partnership, any limited partner or any Unitholder, on the other hand, the
General Partner may respond in the manner it deems appropriate considering, in
each case, the relative interests of each party to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such
interests, any customary or accepted industry practices and any applicable
generally accepted accounting practices or principles. The Partnership Agreement
provides that, in the absence of bad faith by the General Partner, the actions
of the General Partner will not constitute a breach of the Partnership Agreement
or any other agreement contemplated by the Partnership Agreement. See page 27.
FAIRNESS OF THE TRANSACTION; RECOMMENDATIONS
TRC, the General Partner and the members of the Board have interests in the
proposed Merger which conflict, or may be perceived to conflict, with the
interests of the Public Unitholders. See page 27. In part to deal with these
conflicts, the Board hired Morgan Keegan & Company, Inc. which had no prior
relationship with TRC or any of its affiliates, including the Partnership, to
give the Board an opinion as to the fairness to the Public Unitholders of the
consideration to be received by the Public Unitholders from a financial point of
view. See page 16. The Board also required, in light of these conflicts of
interest, that the Merger be approved by the holders of a majority of the Units
held by Public Unitholders that are voted at the Special Meeting, even though
such approval is not required under Delaware law or the Partnership Agreement.
The Board of Directors of the General Partner concluded that the transactions
contemplated by the Merger Agreement are fair to, and in the best interests of,
the Public Unitholders, and has approved the Agreement and Plan of Merger, dated
as of September 11, 1997 by and among the Partnership, TRC and MergerCo. In
arriving at its conclusion, the Board considered and gave significant weight to
the opinion of Morgan Keegan discussed below. The Boards of Directors of TRC,
PRI and MergerCo. have also concluded that the transactions contemplated by the
Merger Agreement are fair to, and in the best interests of, the Public
Unitholders.
FAIRNESS OPINION
Morgan Keegan, an investment banking firm with experience in the food and
restaurant industry, delivered an oral opinion (which was subsequently confirmed
in writing) to the Board on September 11, 1997, to the effect that, based upon
the considerations and subject to the assumptions and limitations set forth in
that opinion, the consideration to be received by the Public Unitholders in the
Merger is fair to the Public Unitholders from a financial point of view. The
full text of the Morgan Keegan opinion, updated as of the date of this Proxy
Statement, is attached as Annex B to this Proxy
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Statement. We urge you to read the Morgan Keegan opinion carefully and in its
entirety for the assumptions made, the matters considered and the limits of the
review of Morgan Keegan. See page 16.
TERMS OF THE MERGER
The Merger will be effected pursuant to the terms of the Merger Agreement. We
urge you to read the text of the Merger Agreement, a copy of which is attached
as Annex A to this Proxy Statement. When the Merger is effective;
- - each issued and outstanding Unit, other than those held by TRC or its direct
and indirect subsidiaries, will be converted into the right to receive $14.00
in cash, without interest;
- - each general or limited partnership interest which is owned by TRC or its
subsidiaries will remain a general or limited partnership interest of the
Partnership and no payment will be made for those interests;
- - each share of common stock of MergerCo. will be converted into one Unit in the
Partnership; and
- - MergerCo. will cease to exist.
As a result of the Merger, the Partnership will become wholly owned by TRC and
its direct or indirect subsidiaries, and the Public Unitholders will cease to be
limited partners of the Partnership. Because no Units will be publicly held
after the Merger, the Units will no longer trade on the New York Stock Exchange.
If the Merger is consummated, the Partnership's final quarterly distribution to
Unitholders will be the $0.325 per Unit cash distribution for the third quarter
of the Partnership's fiscal year paid to persons who were Unitholders of record
on September 30, 1997.
CONDITIONS TO THE MERGER
Closing of the Merger is subject to, among other things:
- - satisfaction of the Majority Vote Requirement and the Public Unitholder
Approval Requirement discussed above;
- - Morgan Keegan having provided and not withdrawn its fairness opinion, updated
as of the date of this Proxy Statement;
- - unless TRC waives this requirement, no event having occurred or being
reasonably expected to occur which is, or is reasonably expected to be,
materially adverse to the business, operations, properties, condition
(financial or otherwise), assets or liabilities (including, without
limitation, contingent liabilities), results of operations or prospects of the
Partnership;
- - unless TRC waives this requirement, no actions or proceedings by any person
being pending or threatened against the Partnership, TRC, the General Partner,
MergerCo., or any of their subsidiaries, directors, officers or employees
challenging or in any way seeking to obtain damages against any person as a
result of the Merger;
- - no law, rule, regulation, executive order, decree, injunction or other order
having been made or enforced by any court or governmental authority which
affects the consummation of the Merger; and
- - financing for sufficient funds being available to satisfy the obligations of
TRC, PMC, the Partnership and MergerCo., including the obligation to pay the
amount to which the Public Unitholders will become entitled and to pay all
related fees and expenses in connection with the Merger and other related
transactions. See page 34.
EFFECTIVE TIME
Under the Merger Agreement, the Merger will become effective at the time that a
Certificate of Merger is filed pursuant to Delaware law. We expect that this
will occur on or prior to December 31, 1997, although there can be no assurance
in this regard. The transfer books for the Units will be closed as of the close
of business on the date on which this occurs and no transfer of record can be
made of certificates representing the Units after that time other than
registrations of transfer reflecting transfers occurring before the close of
business on the date the Merger becomes effective. If the
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Merger cannot be concluded by February 28, 1998 (see page 35), the parties to
the Merger Agreement may consider whether or not to extend the time for
consummation of the Merger.
SOURCES OF FUNDS; FINANCING OF THE MERGER
Under the Merger Agreement, TRC's obligation to consummate the Merger is subject
to the availability of sufficient funds to satisfy the obligations of TRC, the
General Partner, the Partnership and MergerCo., including the obligation to pay
the amount to which the Public Unitholders will become entitled and to pay all
related fees and expenses in connection with the Merger and other related
transactions. The Merger Agreement requires TRC and the Partnership to use their
reasonable best efforts to obtain such financing.
Approximately $88 million will be required to consummate the Merger and to pay
related fees and expenses. On September 30, 1997, TRC entered into a commitment
agreement with a bank to provide the Partnership with a combination of term loan
facilities and a new $50,000,000 revolving line of credit facility which are
intended to finance the acquisition of Units in the Merger and refinance the
Partnership's existing credit facilities.
Although these facilities are available to finance the Merger, the Partnership
plans to raise a significant portion of the required financing through a private
placement of debt securities. TRC and the Partnership currently plan to complete
the closings of these facilities and the private placement at the same time as
the consummation of the Merger. See page 33.
MARKET PRICES OF THE UNITS
The Units have been traded on the New York Stock Exchange since 1986. As
reported by the New York Stock Exchange, during the second quarter of 1997, the
closing prices of the Units on the New York Stock Exchange ranged from $13.625
to $10.375 per Unit, and the average trading volume during that period was
approximately 16,600 Units per day. On August 4, 1997, the date of announcement
of TRC's merger proposal, daily trading volume in the Units was approximately
75,000 Units and the closing price per Unit on the New York Stock Exchange
increased from $10.875 on August 1, 1997 to a closing price of $13.00 on August
4, 1997. On September 10, 1997, immediately preceding the announcement of the
execution of the Merger Agreement, the high and low sales prices of the Units on
the New York Stock Exchange were $13.00 and $12.875, respectively, and the
closing price was $12.875. On September 11, 1997, the day the execution of the
Original Merger Agreement was announced (after the market had closed), daily
trading volume in the Units was 11,900 Units and the closing price per Unit on
the New York Stock Exchange was $12.875. See page 50.
If the Merger is not consummated, no decision has been made as to whether the
Partnership would pay a distribution for the fourth quarter of the Partnership's
1997 fiscal year. For periods beginning after December 31, 1997, further
distributions by the Partnership will be reduced and possibly eliminated if the
Merger is not consummated. See page 50.
NO APPRAISAL RIGHTS
Holders of Units will not be entitled to appraisal rights under Delaware law or
the Partnership Agreement in connection with the Merger.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The Merger will be a taxable transaction to holders of Units who receive cash in
the Merger and are not otherwise exempt from tax. Each Unitholder generally will
recognize capital gain or loss equal to the difference between the Unitholder's
adjusted tax basis in his or her Units and the cash received in the Merger.
However, any such capital gain will be reduced or any such capital loss will be
increased by ordinary income Unitholders will be required to recognize from the
recapture of certain tax benefits (for example, depreciation recapture) they
received while they held their Units. Depending on when they acquired their
Units, Unitholders will recognize up to $1.25 of ordinary income per Unit as a
result of such recapture. Certain Unitholders may realize both
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ordinary income and capital loss as a result of the Merger. The use of any such
capital loss for federal income tax purposes is subject to certain limitations.
For a more extensive discussion of the federal income tax consequences of the
Merger, see page 29.
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for as an acquisition of minority ownership
interests of a subsidiary in accordance with the purchase method of accounting.
Representatives of Arthur Andersen LLP, the independent auditors for the
Partnership, are expected to be present at the Special Meeting and will be
available to respond to appropriate questions.
LITIGATION RELATING TO THE MERGER
Two class-action lawsuits, purportedly on behalf of Unitholders, were filed on
August 5, 1997 in the Delaware Chancery Court in Wilmington, Delaware relating
to TRC's initial proposal regarding a possible transaction. A memorandum of
understanding regarding a proposed settlement of these lawsuits has been entered
into which is subject to court approval. For more information about the
lawsuits, see page 14.
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THE MERGER
BACKGROUND OF AND REASONS FOR THE MERGER
RELATIONSHIP BETWEEN TRC AND THE PARTNERSHIP. The Partnership was formed in
1986 to succeed to and conduct the business and operations of PRI, a wholly
owned subsidiary of TRC. PRI owned and operated 102 family style restaurants and
was the franchisor of an additional 222 restaurants in 1986. Simultaneously with
an initial public offering of 5,043,000 Units to the public at a price of $13.00
per Unit in October 1986, PRI sold property and equipment to the Partnership and
contributed to the Partnership substantially all of its other assets and
business (including its franchise rights and all rights of PRI in the trademarks
used in connection with the operation of the restaurants), subject to certain
liabilities, in exchange for (i) 5,043,000 Units, (ii) cash in an amount equal
to the net tangible book value of its property and equipment, and (iii) the
general partner interests of PMC. After the initial public offering, PRI owned
50% of the Units and the General Partner owned a 1% general partner interest in
the Partnership.
COSTS OF MAINTAINING THE PARTNERSHIP AS A PUBLIC PARTNERSHIP. Under federal
law, the Partnership, if it remains a publicly-traded partnership, will be taxed
as a corporation beginning January 1, 1998, unless the Partnership elects to
retain its status as a partnership for tax purposes under the Taxpayer Relief
Act of 1997 (the "Taxpayer Relief Act"). If the Partnership were taxed as a
corporation, the Partnership would itself pay taxes on its income, and cash
distributions, if any, would be taxed in the year in which received by the
Unitholder. For example, had the Partnership been taxed as a corporation in
1996, it would have paid federal and state corporate income taxes of
approximately $5.5 million and each Unitholder receiving a distribution would
have been liable for taxes in an amount equal to his individual marginal tax
rate times the total distribution received.
The Taxpayer Relief Act includes a grandfather extension for a
publicly-traded partnership to retain its status as a partnership for federal
income tax purposes provided an election to pay 3.5% tax on its gross income is
made. This gross income tax would not be deductible by either the partnership or
its partners, nor would it be reduced by any income tax credits. In addition,
the partners would still be taxed on their share of partnership income. PMC
management's analysis indicates that had this election been in effect in 1996,
the Partnership's federal tax liability would have been approximately $6.5
million, rendering the alternative of making an election under the Taxpayer
Relief Act less favorable than being taxed as a corporation for this period. PMC
management believes that an election under the Taxpayer Relief Act would
probably also be less attractive than being taxed as a corporation in 1998.
Being taxed as a corporation or paying the new tax under the Taxpayer Relief
Act would reduce the amount of cash available to the Partnership by the amount
of the taxes it would be required to pay and, in the absence of increased
borrowings, would reduce by such amount the cash available to the Partnership
for capital expenditures, prepayment of outstanding indebtedness, cash
distributions or other purposes. This change in the Partnership's tax liability
and reduction in the cash available to it would make it very unlikely that the
Partnership would continue paying distributions at its historic level. TRC
believes that many of the Public Unitholders made their investment with a view
toward receiving substantial distributions and would appreciate the opportunity
to receive cash for their Units at a premium to recent market trading prices if
those distributions will no longer be forthcoming.
In addition, TRC believes that the expenses both in terms of actual costs
and time and attention required of management with respect to maintaining the
Partnership as a publicly traded partnership, as well as potential conflict of
interest situations between the Partnership and TRC and its affiliates, can be
eliminated through the Merger.
ALTERNATIVE TRANSACTIONS. In addition to the proposed transaction, TRC and
the General Partner considered the possibility of converting the Partnership to
a corporation. At a special meeting of the board of directors of PMC (the
"Board" or the "PMC Board") on March 1, 1996, the directors of PMC met with
representatives from an investment bank (the "First Investment Banker") to
receive a presentation on the advisability of converting the Partnership from
its current form of organization to a corporate form of
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organization on or before January 1, 1998, the date on which, absent an election
under the Taxpayer Relief Act, the Partnership would begin to be taxed as a
corporation regardless of whether it remained organized as a partnership for
state law purposes. The First Investment Banker's representatives discussed the
process by which the conversion could be effected, possible structures for the
transaction and the effect of a conversion on returns to investors assuming
various levels of growth for the Partnership.
Management continued to consider the alternatives available to the
Partnership over the next several months and invited representatives of the
First Investment Banker to the regular meeting of the Board on November 20, 1996
to make a second presentation to determine whether PMC would engage the First
Investment Banker to study the alternatives available to the Partnership. The
directors unanimously resolved to engage the First Investment Banker as the
Board's advisor for the purpose of assessing the Partnership's current position,
recommending alternatives and presenting the results of its analysis and
recommendations to the Board at a later meeting.
The First Investment Banker reported the results of its analysis to the
Board at a special meeting of the Board on December 18, 1996. Among the
transactions analyzed in its report were (i) a simple conversion to corporate
form (the "Simple Conversion Transaction"), (ii) a conversion to corporate form
followed by a merger with TRC, PRI and PMC (the "Single Company Transaction"),
(iii) an exchange transaction, whereby shareholders of TRC and holders of Units
other than TRC, its direct and indirect subsidiaries and their respective
officers, directors and key employees ("Public Unitholders") would exchange
their shares of TRC common stock and their Units of the Partnership,
respectively, for shares of stock in a newly formed corporation and TRC would
become a subsidiary of that corporation (the "Exchange Transaction"); (iv)
strategic options, including acquisitions or a sale to a strategic buyer, (v) a
leveraged buyout, (vi) a recapitalization and (vii) real estate financing
alternatives. The First Investment Banker's representatives concluded that the
most appropriate alternative for increasing Unitholder value would be a
conversion to corporate form through one of the methods outlined in the report.
Of the conversion alternatives proposed by the First Investment Banker, the
Exchange Transaction was considered to be the best alternative by TRC and the
Board. TRC favored a transaction that would allow TRC's shareholders to improve
the liquidity of their investment by immediately exchanging their shares in TRC
on a tax-free basis for a publicly-traded security. Neither the Simple
Conversion Transaction nor the Single Company Transaction would have achieved
these goals.
The Board continued to study the Exchange Transaction alternative and, on
February 4, 1997, again met with representatives of the First Investment Banker,
who stated that, in order to be fair and successful, a transaction should result
in no ownership or earnings dilution to the Public Unitholders. Over the next
several months, management and the First Investment Banker worked to determine
whether an appropriate Exchange Transaction could be accomplished. During
February 1997, TRC also began to consider a buyout of the publicly held Units
and continued to consider other alternatives to the Exchange Transaction.
On March 31, 1997, PMC's management contacted the Securities and Exchange
Commission (the "SEC") to discuss the accounting treatment of the proposed
transaction and to urge that "pooling of interests" accounting treatment would
be appropriate. In a letter dated April 14, 1997, the SEC responded that
"purchase accounting" would be required for the transaction. The impact of the
use of purchase accounting for the transaction would be the creation of
incremental goodwill amortization and depreciation expense for the Partnership,
resulting in a reduction in earnings per share. On May 15, 1997, the First
Investment Banker's representatives met with TRC and the Board to explain that
the use of purchase accounting would result in earnings per share dilution to
the Partnership, which would require a reduction in the exchange ratio for the
TRC shares in order for the public to maintain a fair level of consideration.
TRC determined that the reduction in the exchange ratio and the dilution to the
TRC shareholders was unacceptable and decided to consider possible alternatives
to the Exchange Transaction.
From May 15 through July, 1997, TRC and PMC considered alternatives to the
Exchange Transaction, including the desirability and feasibility of, and the
availability of financing for, a buyout of the outstanding Units not owned
directly or indirectly by TRC. In July 1997, the First Investment Banker
indicated that it
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would not be willing to provide bridge financing for such a transaction, and PMC
and the First Investment Banker mutually agreed that The First Investment
Banker's engagement would be terminated. On July 21, 1997, the Board of
Directors of TRC (the "TRC Board") received presentations from representatives
of two investment banking firms, including Smith Barney Inc. ("Smith Barney"),
to discuss the qualifications of their firms to act as financial advisor to TRC
in structuring and financing such a transaction.
On July 28, 1997, the TRC Board met to discuss the possibility of TRC making
an offer to PMC to acquire through a merger all of the outstanding Units not
owned indirectly by TRC for $13.00 per Unit. At the meeting, the TRC Board
discussed the procedural steps that might be employed to ensure that the Public
Unitholders were given the benefit of a fair price and a fair process. Counsel
discussed the advisability of requiring the merger to be approved or disapproved
by a majority of the Public Unitholders voting at the Special Meeting. Counsel
also discussed the possibility of recommending to PMC that it establish a
committee of its directors who were not also affiliated with TRC to negotiate
the terms of the merger on behalf of the Public Unitholders. Counsel advised the
directors that Donald N. Smith, Charles L. Atwood and Steven L. Ezzes would be
disqualified because of their affiliation with TRC or ownership of TRC stock and
that Lee N. Abrams would be disqualified because of the representation by his
law firm of TRC and its affiliates. As to the two remaining directors of PMC,
Mr. Smith stated his concern that because of a consulting arrangement between D.
Michael Meeks and PMC, Charles Ledsinger's recent executive employment with
Harrah's (which owns 33.2% of TRC) and the significant portion of each of Mr.
Meeks' and Mr. Ledsinger's net worth that is invested in Harrah's, it might not
be possible for Mr. Meeks and Mr. Ledsinger to represent the Public Unitholders
without creating an appearance of impropriety. The TRC Board decided that the
decision whether to appoint an independent committee should be further discussed
with the PMC Board and the TRC Board also resolved to retain Smith Barney as
TRC's lead financial advisor if an offer were made.
A special meeting of the PMC Board was held later on July 28 to discuss a
possible buyout proposal by TRC and whether it would be advisable to establish
an independent committee consisting of Mr. Meeks and Mr. Ledsinger to negotiate
on behalf of the Public Unitholders. Because Mr. Meeks and Mr. Ledsinger
expressed doubt that they would be considered independent, it was agreed that no
further action would be taken until Mr. Meeks and Mr. Ledsinger could consult
with legal counsel of their choosing concerning their qualifications to serve on
an independent committee.
TRC INITIAL PROPOSAL. Shortly before a PMC Board Meeting on August 4, 1997,
Mr. Smith talked with Mr. Meeks and Mr. Ledsinger, who advised Mr. Smith that
they had consulted with legal counsel and did not believe that it was
appropriate for them to serve on an independent committee. On August 4, TRC made
an offer to PMC that proposed the acquisition through a merger of all of the
Units not directly or indirectly owned by TRC for $13.00 per Unit, subject to
(i) receipt by the Board of a fairness opinion that the merger is fair to the
Public Unitholders from a financial point of view; (ii) the approval of a
majority of the Public Units voting on the Merger, and (iii) the obtaining of
adequate financing (the "Initial Proposal"). The Initial Proposal did not
address whether the Partnership's recent historical quarterly distributions of
$0.325 per Unit would continue to be paid for the third and fourth quarters of
1997.
Later on August 4, the PMC Board met to review the Initial Proposal. Mr.
Smith informed the PMC Board that he had been advised by Mr. Meeks and Mr.
Ledsinger that they had consulted with legal counsel and did not believe that it
was appropriate for them to serve on an independent committee, and that for this
reason TRC's proposal did not contemplate an independent committee. After
consulting with legal counsel, the Board decided not to appoint an independent
committee and authorized Steven R. McClellan, the Executive Vice President and
Chief Financial Officer of PMC, Mr. Smith, and Richard K. Arras, the President
and Chief Operating Officer of PMC, to retain on the Board's behalf an
investment banking firm having no prior relationship to TRC, PMC, the
Partnership or their affiliates to render an opinion as to the fairness from a
financial point of view of TRC's proposal. Later that day the Partnership issued
a press release describing the Initial Proposal.
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On August 6, 1997, TRC formally retained Smith Barney to act as TRC's
financial advisor with respect to, and to assist in the financing of, a buyout
of the Units not already owned directly or indirectly by TRC.
CONSIDERATION AND NEGOTIATION OF TERMS OF THE MERGER. Messrs. McClellan,
Smith and Arras received proposals from five separate investment banking firms
to provide an opinion as to whether the proposed merger was fair from a
financial point of view to the Public Unitholders, and investigated several
other potential candidates. They reduced the number of candidates to two, and
each made presentations with respect to its capabilities and experience with the
restaurant industry, as well as with respect to the scope and methodology of its
proposed services. Messrs. McClellan, Smith and Arras then decided to retain
Morgan Keegan to provide to the Board its opinion as to the fairness to the
Company's Public Unitholders, from a financial point of view, of the
consideration to be paid to them in connection with any proposed acquisition by
TRC of all of the Units that it did not already indirectly own. An engagement
letter with Morgan Keegan was executed on August 21, 1997. The Board selected
Morgan Keegan for several reasons, including primarily its independence from
TRC, PMC or any of their respective affiliates, the reputation of the firm and
its experience with the restaurant industry.
Morgan Keegan began its review of the financial aspects of the Initial
Proposal shortly after it was retained. On September 5, 1997, Morgan Keegan
orally advised Mr. McClellan that based on work completed through that date, its
preliminary conclusion was that the price contemplated by the Initial Proposal
was at the low end of the range of fairness. While Morgan Keegan advised Mr.
McClellan that, as of that date, it could issue an opinion that the price was
fair from a financial point of view to the Public Unitholders, it also noted
that it might be unable to issue an updated opinion if market conditions
affecting the equity securities of the Partnership and other restaurant
companies changed even slightly.
On September 8, 1997, Mr. Smith and Mr. Atwood, two of the three TRC
directors, met by telephone with Mr. McClellan and representatives of Smith
Barney and were informed by Mr. McClellan of Morgan Keegan's preliminary
conclusions. The Smith Barney representatives advised Mr. Smith and Mr. Atwood
that, given the facts that the Partnership's stock price since August 4 had
frequently been higher than $13.00 per Unit and that restaurant stocks were
trading at a higher multiple of earnings than they had been in early August, TRC
should consider raising its offer to increase the chances of obtaining approval
of a merger by the holders of a majority of the Public Units voting, to increase
the chances of obtaining an updated fairness opinion and to increase the
likelihood that the Delaware Litigation (as defined below) would be resolved
favorably. Mr. Smith and Mr. Atwood also discussed with counsel and the Smith
Barney representatives the desirability of settling the Delaware Litigation. Mr.
Smith and Mr. Atwood authorized counsel to explore whether the Delaware
Litigation could be settled by an increase in the price offered. Later in the
day, Mr. Ezzes, the third TRC director, approved the actions proposed by the
other members of the TRC Board.
Between September 8 and September 10, 1997, counsel for plaintiffs and
counsel for defendants negotiated about a possible settlement. After several
proposals and counterproposals were made and rejected, on September 10, 1997,
counsel for defendants proposed, subject to approval by the TRC and PMC Boards,
to settle the Delaware Litigation by increasing the price offered to Unitholders
to $14.00 per Unit with the understanding that, if the Merger were consummated,
the Partnership's final distribution to Public Unitholders would be $0.325 per
Unit in cash for the third quarter of 1997 (the "Revised Proposal"). Counsel for
plaintiffs agreed to settle the Delaware Litigation on the basis of the Revised
Proposal, subject to confirmatory discovery, court approval and the consummation
of the Merger (the "Litigation Settlement").
On September 11, 1997, the TRC Board approved the Revised Proposal, the
entry by TRC into the original Merger Agreement dated as of September 11, 1997
(the "Original Merger Agreement") by and among the Partnership, TRC and Merger
Co., and the Litigation Settlement.
Later that same day, the PMC Board met to discuss the Revised Proposal, the
Original Merger Agreement and the Litigation Settlement. Morgan Keegan was
present at the meeting and presented its
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analysis of the $14.00 per Unit price. The Board decided to adjourn the meeting
and reconvene later that evening to give the Board members additional time to
consider the Revised Proposal and Morgan Keegan additional time to consider the
terms of the Original Merger Agreement. Later that evening, the Board
reconvened. Morgan Keegan gave the Board its oral opinion (subsequently
confirmed in writing) that, based upon the considerations and subject to the
assumptions and limitations set forth in its opinion, the consideration to be
received by the Public Unitholders in the Merger is fair to the Public
Unitholders from a financial point of view. The Board then unanimously approved
the Original Merger Agreement and the Litigation Settlement.
Later on September 11, the Partnership issued a press release announcing the
terms of the Revised Proposal.
On October 1, 1997, the Original Merger Agreement was amended and restated
in its entirety (as so amended, the "First Amended Merger Agreement") to provide
for an amendment of the Partnership Agreement beginning on the date the Merger
is consummated. This amendment was needed to effectuate a provision in the
Original Merger Agreement that would give TRC the tax benefit for funding the
payment for certain expenses connected with the Merger. See "The Merger
Agreement--Issuance of Units to TRC and its Affiliates and Payment of Expenses
by TRC Prior to the Effective Time."
On October , 1997, the First Amended Merger Agreement was amended and
restated in its entirety again (as so amended, the "Merger Agreement") to
provide that, prior to the Effective Time, Perkins Restaurants Operating
Company, L.P., a Delaware limited partnership (the "Operating Partnership")
would be merged with and into the Partnership. The Partnership currently
conducts its business through the Operating Partnership and this amendment was
deemed desirable to eliminate the unnecessary complexity and potential financing
and tax inefficiencies of continuing to maintain this multiple layered
structure.
LITIGATION RELATING TO THE MERGER
Two lawsuits were filed on August 5, 1997 in the Delaware Chancery Court in
Wilmington, Delaware in response to the announcement of the Initial Proposal.
The suits, which were consolidated into a single proceeding entitled IN RE
PERKINS FAMILY RESTAURANTS, L.P. SHAREHOLDERS LITIGATION, consolidated Civil
Action No. 15853 (the "Delaware Litigation"), requested the court to certify the
litigation as a class action. The plaintiffs sought to enjoin the proposed
merger, alleging that the Partnership, TRC and PMC, and the individual
defendants, as officers and directors of PMC, violated their fiduciary duties to
the Public Unitholders by agreeing to such a merger. In the alternative, the
plaintiffs sought rescission of the merger and rescissory and compensatory
damages, together with costs and expenses, including attorneys' and experts'
fees.
On September 3, 1997, counsel for the plaintiffs, along with their financial
expert, met with counsel for defendants, presented an analysis prepared by the
financial expert and stated that, based on the publicly-available information
that they had received, they believed that the price for the publicly-held Units
should be in excess of $13.00 per Unit. Between September 8 and September 10,
1997, counsel for plaintiffs and counsel for defendants negotiated about a
possible settlement. During the course of the negotiations, plaintiffs were
furnished with additional information concerning the Partnership, including
projections. See "--Certain Projections of the Partnership." On September 10,
1997, counsel for defendants proposed, subject to approval by the TRC and PMC
Boards, to settle the Delaware Litigation by increasing the price offered to
Unitholders to $14.00 per Unit with the understanding that if the Merger were
consummated the cash distribution of $0.325 per Unit paid for the third quarter
of 1997 would be the final distribution paid to Public Unitholders. Attorneys
for the plaintiffs agreed to settle the litigation on this basis, subject to
confirmatory discovery, court approval and the consummation of the Merger, and
on September 11, 1997 executed a memorandum of understanding with the defendants
to that effect (the
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"Memorandum of Understanding"). In connection with the Memorandum of
Understanding, the defendants have agreed to pay attorneys' fees of no more than
$1,350,000 and expenses of no more than $85,000 if awarded by the Chancery
Court, although the defendants intend to contest the amount of such fees and
expenses. Such fees and expenses will not be deducted from the consideration to
be paid to the Public Unitholders in the Merger. Under the Merger Agreement,
TRC's and MergerCo.'s obligation to consummate the Merger is conditioned on
there being no pending or threatened actions or proceedings by any person
against the Partnership, TRC, the General Partner, MergerCo., or any of their
subsidiaries or any, director, officer or employee thereof challenging the
Merger in any way or seeking to obtain any damages against any person as a
result of the Merger. It is expected that a hearing to finally approve the
proposed settlement will occur in the Delaware Chancery Court in early December,
1997.
FAIRNESS OF THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE GENERAL
PARTNER
As noted above, on September 11, 1997, the Board determined that the Merger
Agreement was fair to and in the best interests of the Public Unitholders,
approved the Merger Agreement and recommended that the Public Unitholders
approve the Merger Agreement. The Board placed significant weight on Morgan
Keegan's opinion, delivered to the Board on September 11, 1997, that the
consideration to be received by the Public Unitholders in connection with the
Merger is fair from a financial point of view to such holders (the "Fairness
Opinion"). The Board also placed significant weight on the related written and
oral presentations made by Morgan Keegan to the Board in connection with its
consideration of the Initial Proposal and the Revised Proposal. A copy of the
Fairness Opinion updated as of the date of this Proxy Statement is attached to
this Proxy Statement as Annex B. The Public Unitholders are urged to read the
Fairness Opinion in its entirety. See "--Fairness Opinion." TRC, PRI and
MergerCo. also believe that the Merger is fair to and in the best interests of
the Public Unitholders.
In reaching the conclusion that the Revised Proposal is fair to and in the
best interests of the Public Unitholders, the Board and TRC considered the
following factors (some of which were discussed prior to September 11, 1997),
which they deemed to be material:
PROCEDURAL FAIRNESS. The Board and TRC recognized that the Merger is
subject to satisfaction of the Public Unitholder Approval Requirement, which
assures that the Merger cannot be consummated against the wishes of the holders
of a majority of the Public Units voted. The Board and TRC also recognized that
because of the conflicting interests, or what might be perceived as conflicting
interests, of all of the directors of the General Partner, it would have been
problematic for the Board to appoint a committee of independent directors to
negotiate the terms of the Merger solely on behalf of the Public Unitholders.
The Board and TRC believe that the Public Unitholder Approval Requirement
provides adequate procedural fairness in connection with the Merger.
ANALYSIS OF MORGAN KEEGAN. The Board reviewed the valuation methods used by
Morgan Keegan in rendering the Fairness Opinion and in valuing the Partnership,
including analyses based on comparable companies, premiums and discounted cash
flows. In addition, the Board reviewed the substantive factors considered by
Morgan Keegan in rendering its opinion, including, among others, the prior
trading history of the Units, the historical financial condition and performance
of the Partnership, the projected financial expectations of the Partnership, and
the performance and condition of public companies which are comparable to the
Partnership.
PREMIUM TO MARKET. The Board and TRC recognized that the price of $14.00
per Unit represented a substantial premium to recent market trading prices for
the Units.
ADVANTAGES TO TRC. The Board recognized that the Merger would be
advantageous to TRC and its affiliates, which would collectively own all of the
Units following the Merger. TRC probably will be able to achieve significant
benefits as a result of the Merger, including realizing all of the benefits of
improvements in the Partnership's business or increases in the Partnership's
value, eliminating the need to
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recognize fiduciary obligations to the Public Unitholders and eliminating the
costs of maintaining the Partnership's status as a publicly traded partnership
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Merger may also have the effect of preventing, following the effectiveness of
the Merger, any Public Unitholders from having standing to sue the Partnership
for damages based on a derivative claim of a breach of fiduciary duty.
OTHER FACTORS. In addition to the factors listed above, the Board and TRC
considered the following factors in their evaluation of the Merger:
(i) the fact that the tax treatment of the Partnership under federal tax
laws makes it very unlikely that the Partnership will continue to pay
substantial distributions to Unitholders;
(ii) the Partnership's existing equity capital structure;
(iii) the all-cash nature of the $14.00 per Unit cash consideration to be
received by Public Unitholders in the Merger (the "Merger Consideration");
(iv) the intense and increasing competition in the restaurant industry;
(v) the opportunity for Unitholders to sell Units without the cost and
commissions normally associated with a sale;
(vi) the terms and conditions of the Merger Agreement, taken as a whole;
and
(vii) the lawsuits with respect to the Initial Proposal, the allegations
contained therein, discussions between defendants' counsel and plaintiffs'
counsel and the agreement of such counsel that they would recommend that the
Delaware Chancery Court approve a settlement based upon the Revised
Proposal.
WEIGHING OF FACTORS. In view of the variety of factors considered in its
evaluation of the Merger, neither the Board nor TRC found it practicable to, and
did not, quantify or otherwise assign precise relative weights to the individual
items described above. Among the most important factors considered by the Board
and TRC were the Fairness Opinion and presentations, the fact that the Merger is
subject to the Public Unitholder Approval Requirement through which TRC has
neutralized its vote and the fact that plaintiffs' counsel in the lawsuits
involving TRC's Initial Proposal have recommended that the Delaware Chancery
Court approve a settlement based upon the Revised Proposal.
In reaching the conclusion that the Merger is fair to and in the best
interests of the Public Unitholders, the Boards of Directors of PRI and
MergerCo. took note of and relied upon the factors considered and conclusions
reached by the Board and TRC.
FAIRNESS OPINION
On August 21, 1997, the Board of Directors of PMC retained Morgan Keegan &
Company, Inc. ("Morgan Keegan") to render an opinion to the Board of Directors
concerning the fairness, from a financial point of view, to the Public
Unitholders, of the consideration to be paid pursuant to the Merger Agreement.
Morgan Keegan was retained by PMC on the basis of, among other things, its
experience and expertise and familiarity with the restaurant industry. As part
of its investment banking business, Morgan Keegan is customarily engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and estate planning purposes.
Morgan Keegan's engagement was limited to rendering the opinion described
herein to the Board. Morgan Keegan did not provide any services to any other
party to the proposed Merger.
Representatives of Morgan Keegan attended both September 11, 1997 meetings
of the Board at which the Directors considered the proposed merger and approved
the Original Merger Agreement. At such
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meetings, representatives of Morgan Keegan made presentations and reviewed
various aspects of the Merger, including the financial terms and conditions of
the Merger.
At the second September 11, 1997 meeting of the Board, Morgan Keegan
rendered its oral opinion to the Board to the effect that, as of that date, the
consideration to be paid in connection with the Merger was fair, from a
financial point of view, to the Public Unitholders. That opinion was
subsequently confirmed in writing. Morgan Keegan provided the Board with an
updated opinion on , 1997. The full text of Morgan Keegan's
, 1997 opinion is attached as Annex B to this Proxy Statement and is
incorporated herein by reference. The description of the opinion set forth
herein is qualified in its entirety by reference to Annex B. Holders of the
Units are urged to read the opinion in its entirety for a description of the
procedures followed, qualifications made, matters considered, and limitations
undertaken by Morgan Keegan. The assumptions that Morgan Keegan made for
purposes of conducting its analysis are described below.
MORGAN KEEGAN'S OPINION IS DIRECTED TO THE BOARD AND ADDRESSES ONLY THE
FAIRNESS, FROM A FINANCIAL POINT OF VIEW, TO THE PARTNERSHIP'S PUBLIC
UNITHOLDERS OF THE CONSIDERATION TO BE PAID PURSUANT TO THE MERGER AGREEMENT.
THE OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY UNITHOLDER AS TO HOW
SUCH UNITHOLDER SHOULD VOTE AT THE SPECIAL MEETING.
In connection with rendering its opinion, Morgan Keegan: (i) held
discussions with various members of management and representatives of PMC and
the Partnership concerning the Partnership's historical and current operations,
financial condition and prospects; (ii) reviewed historical consolidated
financial and operating data that was publicly-available or furnished to Morgan
Keegan by PMC and the Partnership; (iii) reviewed internal financial analyses,
financial and operating forecasts, reports and other information prepared by
officers and representatives of PMC and the Partnership; (iv) reviewed certain
publicly-available information concerning the trading of, and the trading
markets for, the Units; (v) reviewed certain other companies that it believed to
be comparable to the Partnership and the trading markets for certain of such
other companies' securities; (vi) reviewed certain publicly-available
information concerning the nature and terms of certain other transactions that
Morgan Keegan deemed relevant to its inquiry; (vii) reviewed a September 9, 1997
draft of the Original Merger Agreement; and (viii) conducted such other
financial studies, analyses and investigations as it deemed appropriate for
purposes of its opinion.
Morgan Keegan assumed and relied upon the accuracy and completeness of all
of the financial and other information provided to it for purposes of its
opinion and assumed and relied upon the accuracy and completeness of the
representations and warranties contained in the Merger Agreement. Morgan Keegan
was not engaged to, and did not independently attempt to, verify any of such
information. With respect to the financial and operational forecasts made
available to Morgan Keegan by the management of PMC and the Partnership and used
in its analysis, Morgan Keegan assumed that such financial and operational
forecasts, including those relating to new store economics, new store
development and new franchised store plans were reasonably prepared on bases
reflecting the best currently available estimates and judgments of management as
to the matters covered thereby. Morgan Keegan was not engaged to assess the
achievability of such projections or the assumptions on which they were based
and expressed no view as to such projections or assumptions. Morgan Keegan did
not conduct an independent evaluation or appraisal of the assets and liabilities
of the Partnership, nor was it furnished with any such evaluation or appraisal.
Morgan Keegan also assumed that the conditions to the Merger as set forth in the
Merger Agreement would be satisfied and that the Merger would be consummated on
a timely basis in the manner contemplated by the Merger Agreement.
Morgan Keegan assumed, for purposes of its analysis, that the Partnership's
historical quarterly distribution would not be paid with respect to the quarter
ending December 31, 1997, and considered this fact in evaluating the fairness,
from a financial point of view, of the Merger Consideration of $14.00 per Unit
to be received by the Public Unitholders.
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In its analyses, Morgan Keegan used closing stock prices as of September 9,
1997. In rendering its fairness opinion at the second PMC Board meeting on
September 11, 1997, however, Morgan Keegan took account of closing stock prices
on September 11.
The following is a summary of analyses presented by Morgan Keegan to the
Board of Directors on September 11, 1997 (the "Morgan Keegan Report") in
connection with its opinion.
COMPARABLE COMPANY ANALYSIS. Morgan Keegan compared selected historical and
projected market value multiples of two groups of publicly-traded restaurant
companies that it deemed to be comparable to the Partnership. The first group
included six restaurant companies that Morgan Keegan considered most comparable
to the Partnership in terms of operational characteristics (the "Peer Group").
This group consisted of Bob Evans Farms, Inc., DenAmerica Corp., Frisch's
Restaurants, Inc., IHOP Corp., Shoney's, Inc. and VICORP Restaurants, Inc. The
second group included the companies in the Peer Group, as well as seven
additional restaurant companies serving the family dining segment (the "Family
Dining Group"). The additional companies included in the Family Dining Group
were Buffets, Inc., Cracker Barrel Old Country Store, Inc., Flagstar Companies,
Inc., Luby's Cafeterias, Inc., Morrison Restaurants Inc., Piccadilly Cafeterias,
Inc. and Ryan's Family Steak Houses, Inc. No company used in Morgan Keegan's
analysis was identical to the Partnership. Accordingly, Morgan Keegan considered
the market multiples for the composite of comparable companies to be more
relevant than the market multiples of any single company.
Morgan Keegan calculated a range of implied values based upon the market
multiples of companies in the Peer Group and applied them to the historical and
projected results of the Partnership in order to determine a range of implied
values for the Partnership's Units. Morgan Keegan calculated the multiples of
adjusted market value (i.e., equity market capitalization plus debt less cash)
to latest twelve months ("LTM") revenues, Earnings Before Interest, Taxes,
Depreciation and Amortization ("EBITDA"), Earnings Before Interest and Taxes
("EBIT") and multiples of market value (equity market capitalization) to net
income and projected net income (based on published third party estimates) for
calendar 1997 and 1998 for each of the companies in the Peer Group. Morgan
Keegan applied the multiples of the Peer Group companies to the Partnership's
LTM revenues, EBITDA, EBIT and net income (pro forma at an assumed 40% tax
rate), and to management's projected calendar 1997 and 1998 net income (assuming
a 40% tax rate). The companies in the Peer Group had multiples ranging from
0.41x to 2.54x LTM revenues, 4.7x to 9.3x LTM EBITDA, 10.0x to 13.9x LTM EBIT,
and 13.0x to 42.2x LTM net income, with median multiples of 0.65x LTM revenue,
5.9x LTM EBITDA, 11.6x LTM EBIT and 19.8x LTM net income. Morgan Keegan
conducted an identical analysis with respect to the companies included in the
Family Dining Group. The companies in the Family Dining Group had market values
ranging from 0.18x to 2.54x LTM revenues, 2.4x to 12.8x LTM EBITDA, 4.8x to
16.3x LTM EBIT, and 11.1x to 42.2x LTM net income, with median multiples of
0.66x LTM revenues, 5.9x LTM EBITDA, 10.2x LTM EBIT and 19.3x LTM net income.
While less meaningful because of the Partnership's entity status, Morgan Keegan
also examined market value multiples of tangible book value for the companies in
the Peer Group and the Family Dining Group. Those multiples ranged from 1.1x to
2.9x for the Peer Group and 1.0x to 3.4x for the Family Dining Group, with
median multiples of 1.6x and 1.9x, respectively.
Application of the median Peer Group multiples to the Partnership resulted
in an implied price per Unit of $10.00 based on LTM revenues, $13.95 based on
LTM EBITDA, $15.65 based on LTM EBIT, $16.34 based on LTM net income, $12.70
based on projected 1997 net income, $13.68 based on projected 1998 net income
and $5.36 based on tangible book value. Application of the median Family Dining
Group multiples to the Partnership resulted in an implied price per Unit of
$10.29 based on LTM revenues, $14.06 based on LTM EBITDA, $13.13 based on LTM
EBIT, $15.92 based on LTM net income $12.07 based on projected 1997 net income,
$12.90 based on projected 1998 net income and $6.30 based on tangible book
value.
PREMIUM ANALYSIS. Morgan Keegan reviewed publicly-available information
concerning premiums paid in various categories of acquisition transactions and
derived an implied price per Unit based on the
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median premiums paid in these transactions. Morgan Keegan reviewed the premiums
paid by controlling persons to acquire non-control positions in 124 transactions
completed since January 1, 1992 or currently pending. Morgan Keegan then
calculated the median premiums represented by the offer price in those
transactions over the market price of the securities four weeks, one week and
one day prior to the public announcement of the proposed transaction. The median
premiums represented by the purchase prices paid in the acquisitions of
non-controlling positions reviewed by Morgan Keegan were 21.0% (four weeks prior
to announcement), 19.1% (one week prior to announcement) and 17.3% (one day
prior to announcement). The implied price resulting from the application of
these median premiums to the Partnership ranged from $12.76 to $13.18 per Unit,
as compared to the Merger Consideration of $14.00 per Unit.
Because of TRC's ownership interest in the Partnership and the General
Partner's authority under the Partnership Agreement, Morgan Keegan believed that
the analysis of the premiums paid to acquire non-controlling interests was the
most relevant premium analysis in the context of the proposed Merger. However,
Morgan Keegan also reviewed publicly-available information concerning premiums
paid in 113 acquisition transactions completed since January 1, 1996 involving a
purchase price of between $50 million and $200 million. The median premiums over
market prices paid in these transactions were 31.9% (four weeks prior to
announcement), 29.9% (one week prior to announcement) and 23.1% (one day prior
to announcement). In addition, Morgan Keegan examined 21 of these transactions
in which all cash consideration was paid, and determined that the median
premiums over market paid in all-cash transactions involving a purchase price of
between $50 million and $200 million were 31.8% (four weeks prior to
announcement), 31.8% (one week prior to announcement) and 26.1% (one day prior
to announcement). Morgan Keegan's analysis of the median premiums paid in all of
the acquisition transactions involving a purchase price of between $50 million
and $200 million indicated an implied value for the Partnership ranging from
$13.38 to $14.37 per Unit. Its analysis of the transactions involving all-cash
consideration indicated an implied value for the Partnership ranging from $13.71
to $14.58 per Unit.
DISCOUNTED CASH FLOW ANALYSIS. Morgan Keegan performed a discounted cash
flow analysis to calculate the Partnership's implied price per Unit based on
management's projections through December 31, 2000. Using this information,
Morgan Keegan calculated the net present value of free cash flows the
Partnership could generate through December 31, 2000 using discount rates
ranging from 17.0% to 25.0%. Morgan Keegan also calculated the terminal value of
the Partnership in the year 2000 based on multiples ranging from 5.5x to 7.0x
EBITDA and discounted these terminal values using discount rates ranging from
17.0% to 25.0%. Morgan Keegan's judgment concerning the risks associated with
the cash flows was a key factor in its determination of an appropriate discount
rate to use in its analysis. Among the
factors contributing to Morgan Keegan's conclusions about an appropriate
discount rate were the anticipated improvement in new store economics and the
increased growth in new store and new franchised store development reflected in
management's projections. The sum of the present value of the free cash flows
and terminal values less outstanding debt (net of cash) yielded an implied price
per Unit ranging from $9.43 to $17.33.
Inherent in any discounted cash flow valuation are the use of a number of
assumptions, including the accuracy of management's projections, and the
subjective determination of an appropriate terminal value and discount rate to
apply to the projected cash flows of the entity under examination. Variations in
any of these assumptions or judgments could significantly alter the results of a
discounted cash flow analysis.
OTHER ANALYSES. In rendering its opinion, Morgan Keegan considered certain
other factors and conducted certain other analyses. These analyses, which are
described below, did not directly focus on the Merger Consideration, but were
undertaken to provide contextual data and comparative market data to assist in
assessing the Merger and the market's valuation of the Partnership's Units. In
order to assess market pricing for restaurant acquisitions, Morgan Keegan
identified 30 acquisition transactions in the restaurant industry completed
since January 1, 1996 or currently pending. Morgan Keegan analyzed the range of
revenue, EBITDA, EBIT, net income and book value multiples represented by the
purchase price
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paid in the restaurant transactions it reviewed. This analysis revealed dramatic
variations in transaction multiples. Due to the wide variation in transaction
multiples resulting from, among other things, differences in pre-transaction
operating performance, intangible or other assets associated with a target's
business and not reflected in historical operating performance and/or other
transaction specific factors (such as the strategic nature of particular
acquisitions), Morgan Keegan did not rely on the restaurant acquisition
transactions analysis set forth above in rendering its opinion. Morgan Keegan
reviewed the historical trading prices and volumes for the Units and the
relationship between movements in the price of the Units and movements in the
stock prices for various broad based market indices and for the companies
included in the Peer Group and the Family Dining Group. Morgan Keegan also
performed a Leveraged Buyout Analysis, which evaluated the purchase price to be
paid and hypothetical financing arrangements for the proposed transaction from
the perspective of an unaffiliated financial buyer. Morgan Keegan also
considered the ownership interest of TRC and its affiliates in the Partnership
and the rights provided to PMC as general partner under the terms of the
Partnership Agreement.
No company or transaction used in the above analyses for comparative
purposes is identical to the Partnership. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors. Mathematical analysis (such as determining the
average or median) is not, in itself, a meaningful method of using comparable
company or transaction data.
The summary of the Morgan Keegan Report set forth above does not purport to
be a complete description of the presentation by Morgan Keegan of the Morgan
Keegan Report to the Board or of the analyses performed by Morgan Keegan. A copy
of the Morgan Keegan Report has been filed as an exhibit to the Schedule 13E-3
filed with the Securities and Exchange Commission (the "Commission") with
respect to the Merger, and may be inspected and copied by mail from the
Commission as set forth in "Where You Can Find More Information." The
preparation of a fairness opinion is not necessarily susceptible to partial
analysis or summary description. Morgan Keegan believes that its analyses and
the summary set forth above must be considered as a whole and that selecting
portions of its analyses, without considering all analyses, or the above
summary, without considering all factors and analyses, would create an
incomplete view of the process underlying the analyses set forth in the Morgan
Keegan Report and the Fairness Opinion. In addition, Morgan Keegan may have
deemed various assumptions more or less probable than other assumptions, so that
the ranges of valuations resulting from any particular analysis described above
should not be taken to represent the actual value of the Partnership.
In performing its analyses, Morgan Keegan made numerous assumptions with
respect to industry performance and general business and economic conditions.
Morgan Keegan assumed that long-term growth rates in the restaurant industry and
in the family dining segment of that industry would not deviate significantly
from historic levels, that industry practices with respect to pricing
adjustments relating to changes in the minimum wage, food prices and other costs
would remain consistent with historic practices, that the United States economy
would continue to experience a moderate rate of growth over the long-term, that
any recession would not be more severe or of longer duration than that
experienced in 1991-1992, and that inflation and interest rates would remain
within the ranges experienced over the past five years. Many of these factors
are beyond the control of the Partnership. The analyses performed by Morgan
Keegan are not necessarily indicative of actual values or actual future results,
which may be significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as part of Morgan Keegan's analysis
of the fairness of the consideration to be paid pursuant to the Merger and were
provided to the Board in connection with the delivery of the Fairness Opinion.
The analyses do not purport to be appraisals or to reflect the prices at which a
company might actually be sold or the prices at which any securities may trade
at the present time or at any time in the future. In addition, as described
above, the Fairness Opinion and presentation to the Board was one of many
factors taken into consideration by the Board in making its determination to
approve the Merger Agreement.
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Morgan Keegan has expressed no opinion as to the prices at which Units may
trade following the date of its opinion.
PMC has agreed to pay Morgan Keegan a fee of $200,000 for its services
pursuant to an engagement letter between PMC and Morgan Keegan. An aggregate of
$50,000 was paid upon execution of the engagement letter. An additional $100,000
was payable upon the delivery of the Fairness Opinion. The balance of the fee
became payable when Morgan Keegan updated the Fairness Opinion. No portion of
Morgan Keegan's fee is contingent upon the closing of the transaction or whether
Morgan Keegan gave a favorable opinion with respect to a proposed transaction.
PMC also has agreed to reimburse Morgan Keegan for its reasonable out-of-pocket
expenses and to indemnify Morgan Keegan against certain liabilities, including
liabilities under the federal securities laws.
REPORT OF SMITH BARNEY
TRC engaged Smith Barney to act as TRC's financial advisor in connection
with the Merger. Smith Barney was retained by TRC to act solely as TRC's
financial advisor (and not as the advisor to the Partnership or the Board) to
assist TRC in evaluating financial and strategic alternatives and to advise TRC
with respect to, and if requested by TRC, to assist in negotiating the terms of,
the proposed Merger. Smith Barney was not retained to, and was not expected to,
render any advice or opinion as to the fairness, from a financial point of view,
of the consideration to be received by the Public Unitholders in the Merger.
In connection with its engagement as TRC's financial advisor, Smith Barney:
(i) reviewed certain publicly available business and historical financial
information relating to the Partnership; (ii) reviewed certain financial
forecasts provided to Smith Barney by the Partnership; (iii) conducted
discussions with members of senior management of the Partnership with respect
to, among other things, the business and prospects of the Partnership; (iv)
reviewed the historical market trading prices and volumes of the Units; (v)
reviewed publicly available financial and stock market data with respect to
certain other restaurant companies that Smith Barney believed were comparable to
the Partnership; and (vi) considered such other factors as it deemed
appropriate.
On September 8, 1997, Smith Barney furnished the TRC Board with a written
report summarizing the types of analysis performed by Smith Barney (the "Smith
Barney Report") and met with the TRC Board by telephone to discuss the capital
market implications of the Merger. The data contained in the Smith Barney Report
was intended solely to provide additional market information to the TRC Board in
connection with its formulation of the Revised Merger Proposal and was not
intended to provide a recommendation or opinion. A copy of the Smith Barney
Report has been filed as an exhibit to the Schedule 13E-3 filed with the
Commission with respect to the Merger and may be inspected and copied by mail
from the Commission as set forth in "Where You Can Find More Information."
The following is a summary of the various types of market information
furnished to the TRC Board in the Smith Barney Report:
COMPARISON OF ALTERNATIVES. Smith Barney compared the value to be received
by the TRC unitholders in an Exchange Transaction (as previously defined) and a
leverage buyout scenario whereby all public units would be purchased by TRC. In
performing both scenarios, Smith Barney assumed enterprise values of $205.0
million, $215.0 million and $225.0 million. In the Exchange Transaction, Smith
Barney assumed a TRC ownership interest in the newly formed corporation of
42.5%, the middle of an assumed range of 40% to 45%. In performing the leveraged
buyout analysis, Smith Barney assumed unit purchase prices of $13.00, $15.00 and
$17.00.
RETURNS ANALYSIS AND CAPITALIZATION SUMMARY. Smith Barney calculated the
compounded annual return to TRC for the purchase of the Units held by persons
other than TRC assuming purchase prices in the range of $13 to $17 per Unit. The
returns to TRC were calculated using two different methods to determine TRC's
beginning basis in its investment in the Partnership: (i) a fixed basis equal to
$14 per Unit
21
<PAGE>
and (ii) a basis which corresponds to the per Unit purchase prices shown in the
analysis. For each method, Smith Barney analyzed returns through the year 2001
based on exit multiples of 6.0x to 8.0x projected EBITDA in 2001 and 11.0x to
15.0x projected net income in 2002.
Smith Barney also provided the TRC Board with an analysis of various
financial ratios concerning the Partnership assuming Unit purchase prices in the
range of $13.00 to $17.00. These ratios include debt to EBITDA, EBITDA to
interest expense and EBITDA minus capital expenditures to interest expense.
Smith Barney's analyses of potential returns and financial ratios was solely
intended to provide the TRC Board with additional information concerning the
impact on TRC and the Partnership of the proposed Merger under various scenarios
and was not intended as a recommendation of any particular price to the TRC
Board.
UNIT TRADING HISTORY. Smith Barney reviewed the historical trading volume
and market prices for the Units and analyzed the percentage of outstanding Units
traded within various price ranges. For the one-year period between September 5,
1996 and September 4, 1997, the highest percentage of Units (33.83%) were traded
in the price range of $13.00 to $14.00 per Unit, with the second highest
percentage of Units (24.51%) traded in the price range of $12.00 to $13.00 per
Unit. For the one-month period between August 4, 1997, the date on which TRC
issued a press release announcing its proposal to acquire the outstanding Units
not already owned by TRC and its direct and indirect subsidiaries for $13.00 per
Unit, and September 4, 1997, the highest percentage of Units (46.19%) traded in
the price range of $13.15 to $13.20 per Unit, with the second highest percentage
of Units traded in the price range of $12.95 to $13.00 per Unit.
COMPARABLE COMPANY ANALYSIS. Smith Barney reviewed certain
publicly-available historical financial information for three groups of
restaurant companies considered by Smith Barney to be reasonably comparable to
the Partnership. The first group included four family dining companies: Bob
Evans Farms, Inc., IHOP Corporation, Shoney's, Inc. and VICORP Restaurants, Inc.
(the "Family Dining Companies"). The second group included five other
family-oriented restaurant companies: Buffets, Inc., Luby's Cafeterias, Inc.,
Morrison Restaurants Inc., Piccadilly Cafeterias, Inc. and Ryan's Family Steak
Houses, Inc. (the "Family Oriented Companies"). The third group consisted of
other casual dining companies: Applebee's International, Inc., Apple South,
Inc., Brinker International, Inc., Darden Restaurants, Inc., Lone Star
Steakhouse & Saloon, Inc., O'Charley's Inc., Outback Steakhouse, Inc. and Rock
Bottom Restaurants, Inc. (the "Casual Dining Companies"). Although the companies
in the three groups were comparable to the Partnership based on certain
characteristics of their businesses, none of these companies possessed
characteristics identical to those of the Partnership. Smith Barney noted that
the companies in the three groups varied significantly in several areas,
including but not limited to, (i) status as franchisor, franchisee and operator
of an owned restaurant concept, and combinations thereof, (ii) mix of owned
versus leased restaurants, (iii) status as a single or multi-concept restaurant
operator and (iv) inclusion of non-restaurant businesses within the company. No
adjustments were made to the comparable company analysis to reflect any of these
factors.
For each of the three groups, Smith Barney calculated, among other things,
the multiples of sales, EBITDA and EBIT, as well as price/earnings ("P/E")
multiples for the latest four quarters, calendar 1997 and calendar 1998 net
income. For the lastest four quarters, the companies in the Family Dining Group
had median multiples of 0.81x sales, 7.4x EBITDA, 11.4x EBIT and P/E multiples
of 18.9x, 16.1x and 13.7x for the latest four quarters, calendar 1997 and
calendar 1998 net income, respectively. The Family Oriented Group had median
multiples of 0.69x sales, 6.5x EBITDA, 10.4x EBIT and P/E multiples of 15.2x,
13.9x and 12.3x for the lastest four quarters, calendar 1997 and calendar 1998
net income, respectively. The Casual Dining Group had median multiples of 1.07x
sales, 7.2x EBITDA, 12.3x EBIT and P/E multiples of 16.8x, 15.6x and 13.3x for
the latest four quarters, calendar 1997 and calendar 1998 net income,
respectively. Smith Barney also provided the TRC Board with selected operating
statistics, market capitalization, income statement data and recent price
changes for each of the comparable companies.
The foregoing summary does not purport to be a complete description of the
Smith Barney Report which is filed as an exhibit to the Schedule 13E-3, Smith
Barney believes that its analysis and the summary
22
<PAGE>
set forth above must be considered as a whole and that selecting portions of its
analysis, without considering all factors and analyses, could create an
incomplete view of the process underlying the analyses set forth in the Smith
Barney Report. The Smith Barney Report was prepared solely for the purposes
discussed above and does not purport to be an appraisal or necessarily reflect
the prices at which businesses or securities actually may be sold. Analyses
based upon projected future results are not necessarily indicative of actual
future results, which may be significantly more or less favorable than suggested
by such analyses. Because such analyses are inherently subject to uncertainty,
as they are based upon numerous factors or events beyond the control of the
parties or their respective advisors, none of TRC, the Partnership or the
General Partner or any other person assumes responsibility if the future results
are materially different from those projected.
Smith Barney's engagement was formalized in an engagement letter with TRC
dated August 6, 1997. Pursuant to such engagement letter, Smith Barney will be
entitled to a fee of $1,250,000 for its services upon the consummation of the
Merger and to reimbursement for its reasonable expenses, including the fees and
expenses of its legal counsel. If a private placement of debt securities to
refinance the debt to be incurred under the Facilities in connection with the
Partnership's purchase of the Public Units and a refinancing of the
Partnership's existing credit facilities is successfully consummated, the
$1,250,000 fee payable to Smith Barney will be reduced by $500,000. Smith Barney
will also be entitled to certain additional fees if it is engaged as lead
manager in connection with any public offering or private placement of debt
securities in the high yield market for purposes of effecting the Merger. In
addition, TRC has agreed to indemnify Smith Barney against certain liabilities.
CERTAIN PROJECTIONS OF THE PARTNERSHIP
The Partnership provided TRC, Smith Barney and Morgan Keegan with certain
projected financial data for the years 1997 through 2000. The projected
financial data were not prepared with a view to public disclosure or compliance
with published guidelines of the Commission or the guidelines established by the
American Institute of Certified Public Accountants regarding projections and are
included in this Proxy Statement only because they were made available to TRC,
Smith Barney and Morgan Keegan. These projections were prepared as of June 16,
1997 and were based upon management's expectations regarding new store openings
as of that date. The projected financial data included in this proxy has not
been modified to reflect new information regarding store openings. None of
Morgan Keegan, Smith Barney, TRC, MergerCo., the General Partner nor the
Partnership's independent auditors, Arthur Andersen LLP, examined, compiled or
applied any procedures with respect to the projected financial data or expressed
any opinion or provided any kind of assurance thereon. None of Morgan Keegan,
Smith Barney, TRC, the Partnership, the General Partner, MergerCo. nor any of
their respective affiliates or advisors assumes any responsibility for the
reasonableness or completeness of the projected financial data. While presented
with numerical specificity, the projected financial data are based on a variety
of assumptions relating to the business of the Partnership that, although
considered appropriate by the Partnership at the time, may not be realized.
Moreover, the projected financial data, and the assumptions upon which they are
based, are subject to significant uncertainties and contingencies, many of which
are beyond the control of the Partnership. Consequently, the projected financial
data and the underlying assumptions are necessarily speculative in nature and
inherently imprecise, and there can be no assurance that projected financial
results will be realized. It is expected that there will be differences between
actual and projected results and actual results are likely to vary materially
from those shown, and such variance will likely increase over time. None of
Morgan Keegan, Smith Barney, TRC, the Partnership, the General Partner,
MergerCo. nor any of their respective affiliates or advisors intends to update
or otherwise revise the projected financial data. The inclusion of the projected
financial data herein should not be regarded as an indication that Morgan
Keegan, Smith Barney, TRC, the Partnership, the General Partner, MergerCo. or
any of their respective affiliates or advisors considers it an accurate
prediction of future results. Unitholders are cautioned not to place undue
reliance on the projections, which should be read together with the information
relating to the business, assets and financial condition of the Partnership
included herein. See "Business" and "Summary Financial Data."
23
<PAGE>
The projections presented below are based on numerous assumptions, including
the following material assumptions. The projections presented below assume that
the Partnership will open three new Partnership-operated restaurants in 1997,
six new Partnership-operated restaurants in 1998, seven new Partnership-operated
restaurants in 1999 and eight new Partnership-operated restaurants in 2000. The
projections also assume that the Partnership will open 30 new franchised
restaurants in 1997, 30 new franchised restaurants in 1998, 35 new franchised
restaurants in 1999 and 40 new franchised restaurants in 2000. The projections
assume that Partnership-operated restaurants opened in 1994 or before will
realize average sales increases of 4.7%, 3.7%, 3.9% and 3.9% in the years ending
December 31, 1997, 1998, 1999 and 2000, respectively, and that franchised
restaurants opened in 1994 or before will realize average sales increases of
1.2%, 2.5%, 2.5% and 2.5% in the years ending December 31, 1997, 1998, 1999 and
2000, respectively. The projections do not assume any effects of the Merger.
These projections contain forward-looking information based on the
Partnership's current expectations and are subject to a number of risks
including those described below and elsewhere in this Proxy Statement. These
risks could cause actual results in the future to differ significantly from
results expressed or implied in any projections made by the Partnership.
A number of factors could affect whether the Partnership will in fact
realize the results assumed in the projections. The Partnership's business is
subject to intense competition from local as well as national competitors. See
"Business--Competition." Changes in customer preferences and the effects of
aggressive competition could have a material adverse effect on the Partnership's
ability to realize the revenue results assumed in the projections. The
Partnership's business is also subject to fluctuations in the general economy
and, since the Partnership's locations are concentrated in the Midwest, Florida
and the Northeast, a downturn in the general economy or these regional economies
could have a negative impact on customers' decisions to dine out at the
Partnership's restaurants. In addition, many of the Partnership's restaurants
are dependent upon leisure travelers whose travel and dining plans may be more
sensitive to any downturn in the economy. Bad weather, especially major weather
events such as hurricanes or floods, could also have a negative impact on the
Partnership's ability to realize the results assumed in the projections. The
projections include assumptions regarding new restaurant openings. The success
of new locations can vary depending on a number of factors including the quality
of the site on which they are located. See "Business--Development of
Restaurants." The ability of the Partnership to find qualified franchisees could
have a negative impact on its ability to open new franchised locations. The
financial and operational performance of existing franchisees can also have a
negative impact on the Partnership's results. At September 30, 1997, the
Partnership's largest franchisee was delinquent in its royalty obligations to
the Partnership. See "Business--Franchise Operations." The Partnership's
business is sensitive to fluctuations in food costs. The Partnership's results
of operations are particularly sensitive to coffee prices which are subject to
substantial fluctuations. Fluctuations in the price of dairy products, meats and
produce can also have a material adverse effect on the Partnership's results of
operations. Labor costs have a significant impact on the Partnership's results.
The Partnership's labor costs are affected by increases in minimum wage laws,
including state minimum wage laws. See "Business--Regulation." For example,
Minnesota minimum wage laws have resulted in significantly higher labor costs
for the Partnership's restaurants which are located in that state. The
availability of labor can also have a negative impact on the Partnership's
operations as scarce labor and/or competitive markets result in higher wages.
These factors and others affecting the Partnership's business should be
considered in evaluating the projections presented below. For a general
discussion of factors affecting the Partnership's business, see "Business"
below.
Set forth below is a summary of the projected financial data prepared by the
Partnership and provided to TRC and Morgan Keegan. There can be no assurance
that actual results for the periods covered by the projections will not be
materially less favorable than the projections contemplate.
24
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
PROJECTED INCOME STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(PROJECTED)
(IN THOUSANDS)
----------------------------------------------
<S> <C> <C> <C> <C>
1997 1998 1999 2000
---------- ---------- ---------- ----------
REVENUES
Food Sales..................................................... $ 248,097 $ 264,222 $ 286,878 $ 312,982
Franchise revenues............................................. 20,354 22,370 25,112 28,293
---------- ---------- ---------- ----------
Total Revenues................................................... 268,451 286,592 311,990 341,275
COSTS AND EXPENSES
Cost of Sales
Food cost...................................................... 72,894 77,939 85,043 93,253
Labor and benefits............................................. 83,632 88,215 95,566 104,008
Operating expenses............................................. 51,503 54,960 59,254 63,983
General and administrative....................................... 26,595 25,529 26,350 27,202
Depreciation and amortization.................................... 16,296 18,063 18,736 18,782
Interest, net.................................................... 4,839 5,477 4,649 3,646
Other............................................................ (1,240) (2,202) (1,810) (523)
---------- ---------- ---------- ----------
Total Costs and Expenses......................................... 254,519 267,981 287,788 310,351
---------- ---------- ---------- ----------
Earnings before Income Taxes..................................... 13,932 18,611 24,202 30,924
Income Taxes..................................................... 0 7,400 9,631 12,317
---------- ---------- ---------- ----------
Net Income....................................................... 13,932 11,211 14,571 18,607
Interest, net.................................................... 4,839 5,477 4,649 3,646
Income Taxes..................................................... 0 7,400 9,631 12,317
---------- ---------- ---------- ----------
EBIT............................................................. 18,771 24,088 28,851 34,570
Depreciation and Amortization.................................... 16,296 18,063 18,736 18,782
---------- ---------- ---------- ----------
EBITDA........................................................... $ 35,067 $ 42,151 $ 47,587 $ 53,352
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
25
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
PROJECTED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
(PROJECTED)
(IN THOUSANDS)
----------------------------------------------
<S> <C> <C> <C> <C>
1997 1998 1999 2000
---------- ---------- ---------- ----------
ASSETS
CURRENT ASSETS
Cash & cash equivalents.......................................... $ 1,540 $ 995 $ 963 $ 1,765
Receivables, net of allowances................................... 6,285 6,285 6,285 6,285
Inventories...................................................... 4,234 4,234 4,234 4,234
Prepaid expenses and other....................................... 1,552 1,552 1,552 1,552
---------- ---------- ---------- ----------
Total current assets............................................. 13,611 13,066 13,034 13,836
PROPERTY & EQUIPMENT, NET........................................ 118,564 122,064 126,328 132,904
NOTES RECEIVABLE, NET............................................ 705 605 505 405
INTANGIBLE AND OTHER ASSETS...................................... 23,823 22,712 21,618 20,599
---------- ---------- ---------- ----------
$ 156,703 $ 158,447 $ 161,485 $ 167,744
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Current maturities of long-term debt............................. $ 4,674 $ 4,824 $ 5,049 $ 5,199
Current maturities of capital lease obligations.................. 1,408 1,299 1,037 1,066
Accounts Payable................................................. 8,128 8,128 8,128 8,128
Accrued Expenses................................................. 13,520 13,520 13,520 13,520
Distributions payable............................................ 0 0 0 0
---------- ---------- ---------- ----------
Total current liabilities........................................ 27,730 27,771 27,734 27,913
CAPITAL LEASE OBLIGATIONS........................................ 7,152 5,853 4,816 3,750
LONG-TERM DEBT................................................... 55,570 48,746 39,697 29,498
OTHER LIABILITIES................................................ 4,629 3,244 1,834 571
PARTNERS' CAPITAL................................................ 61,622 72,833 87,404 106,012
---------- ---------- ---------- ----------
$ 156,703 $ 158,447 $ 161,485 $ 167,744
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
STRUCTURE OF THE MERGER
At the Effective Time, (i) each issued and outstanding Unit, other than
those held by TRC or its direct or indirect subsidiaries, will be canceled,
extinguished and retired and will be converted into the right to receive $14.00
in cash, without interest; (ii) each Unit held in the treasury of the
Partnership will be canceled, extinguished and retired and no payment shall be
made with respect thereto; (iii) each general or limited partnership interest
which is owned by TRC or its direct and indirect subsidiaries will be and remain
a general or limited partnership interest of the Partnership and no payment
shall be made with respect thereto; (iv) each share of common stock, par value
$0.01 per share, of MergerCo. will be converted into and exchanged for a
corresponding limited partner interest in the Partnership; and (v) MergerCo.
will cease to exist. As a result of the Merger, the Partnership will become
wholly owned by TRC and its affiliates and the Public Unitholders will cease to
be limited partners of the Partnership. Because no Units will be publicly held
after the Merger, the Units will be delisted and will no longer trade on the New
York Stock Exchange. The Partnership has been informed by TRC that, following
the Merger, it intends to retain the Partnership's current management and
continue to manage the Partnership as an ongoing business in the same general
manner as it is now being conducted.
Immediately after the Effective Time, the Partnership will redeem, for
$14.00 per Unit, all Units received by PMC in connection with the conversion of
MergerCo.'s common stock in the Merger.
26
<PAGE>
If the Merger is consummated, the Partnership's final distribution to Public
Unitholders will have been the $0.325 per Unit cash distribution for the third
quarter of the Partnership's fiscal year paid to persons who were Unitholders of
record on September 30, 1997.
Closing of the Merger is subject, among other things, to: (i) satisfaction
of the Majority Vote Requirement and the Public Unitholder Approval Requirement;
(ii) Morgan Keegan's fairness opinion not being withdrawn; (iii) no event having
occurred or being reasonably expected to occur which is, or is reasonably
expected to be, materially adverse to the business, operations, properties,
condition (financial or otherwise), assets or liabilities (including, without
limitation, contingent liabilities), results of operations or prospects of
Perkins; (iv) no actions or proceedings by any person being pending or
threatened against the Partnership, TRC, the General Partner, MergerCo., or any
of their subsidiaries or any director, officer or employee thereof challenging
or in any way seeking to obtain damages against any person as a result of the
Merger; (v) no law, rule, regulation, executive order, decree, injunction or
other order having been enacted, issued, promulgated, enforced or entered by any
court or governmental authority which prohibits, restrains, enjoins or restricts
the consummation of the Merger; and (vi) financing for sufficient aggregate
funds being available to satisfy the obligations of TRC, PMC, the Partnership
and MergerCo., including, without limitation, the obligation to pay the Merger
Consideration and to pay all related fees and expenses payable by TRC, PMC, the
Partnership and MergerCo. in connection with the Merger and other related
transactions. See "The Merger Agreement."
INTERESTS OF CERTAIN PERSONS IN THE MERGER; CONFLICTS OF INTEREST
Unitholders should be aware that management and certain persons associated
with the General Partner have certain interests which may present them with
actual or potential conflicts of interest in connection with the Merger.
As of September 30, 1997, 5,043,000 (48.1%) of the Units were beneficially
owned by TRC, through its wholly owned subsidiary PRI. See "The
Partnership--Beneficial Ownership of Units and Transactions in Units By Certain
Persons." TRC is interested in the outcome of the Merger in that, following the
Merger, TRC and its direct and indirect subsidiaries would be the sole owners of
the Partnership. As sole owners, TRC and its direct and indirect subsidiaries
would bear the total risk of the Partnership's operations but would also receive
the entire benefit, if any, arising from pursuit of the various opportunities
described under "--Background and Reasons for the Merger." If ownership
interests in the Partnership or its assets were sold to an unrelated third
party, TRC would obtain exclusively the benefits of such a sale while, if the
current ownership structure were maintained, TRC would share any such benefits
with the Public Unitholders.
Various management personnel are common to PMC, PRI and TRC. Each of the
directors and officers of PRI serves in the same capacity for PMC, and three of
the directors and three of the officers of PMC serve as directors and officers
of TRC. Donald N. Smith serves as Chairman of the Board and Chief Executive
Officer of PMC, PRI and TRC and owns 33.2% of the outstanding common stock of
TRC. Michael P. Donahoe serves as Vice President and Controller of each of PMC,
PRI and TRC and Donald F. Wiseman serves as Secretary of PMC, PRI and TRC.
Steven L. Ezzes and Charles L. Atwood serve as directors of PMC, PRI and TRC.
Mr. Ezzes serves on the Boards of each of PMC, PRI and TRC. Mr. Atwood serves on
the Boards of each of PMC, PRI and TRC as the representative of Harrah's, which
indirectly owns 33.2% of the outstanding common stock of TRC.
The other directors of PMC, although they are not officers or directors of
TRC or its subsidiaries, have certain other relationships with TRC and its
affiliates that may give rise to actual or perceived conflicts of interest. Lee
N. Abrams is a director of PMC and is a senior partner of a law firm that has
represented and is representing TRC and certain of its affiliates in connection
with the Merger and other matters. D. Michael Meeks is a director of PMC and
under a consulting arrangement, Mr. Meeks assists Perkins in identifying and
negotiating franchise agreements with potential franchisees in the hotel
industry. Mr. Meeks' compensation consists of a per diem of $1,000 (with a
maximum of $3,000 per potential
27
<PAGE>
franchisee), a commission of $15,000 for each new franchised restaurant opened
and the reimbursement of reasonable out-of-pocket travel expenses. Mr. Meeks is
also a former employee of, and a significant portion of his net worth is
invested in, Harrah's, which indirectly owns approximately 33.2% of the
outstanding stock of TRC. Charles A. Ledsinger is the former Chief Financial
Officer of Harrah's and a significant portion of his net worth is invested in
Harrah's. To the extent that the Merger were to ultimately prove beneficial to
TRC and to positively affect the value of TRC stock, Mr. Smith and Harrah's, as
well as all other TRC stockholders, would benefit from the Merger. Mr. Meeks and
Mr. Ledsinger, as stockholders of Harrah's, would also benefit indirectly from
the Merger to the extent that any such positive effect on the stock of TRC might
in turn have a positive effect on the stock of Harrah's.
The General Partner and the senior management of the Partnership have
certain other interests that may present them with actual or potential conflicts
of interest. Among these are that (i) the General Partner is controlled by TRC,
(ii) the current General Partner is expected to remain in its current role
subsequent to the Merger, and (iii) the current members of the senior management
of the Partnership and the General Partner are expected to remain in their
positions following the Merger. Under the Partnership Agreement, whenever a
conflict of interest exists or arises between the General Partner or any of its
affiliates, on the one hand, and the Partnership, any limited partner or any
Unitholder, on the other hand, the General Partner may resolve such conflict of
interest, take such action or provide such terms considering, in each case, the
relative interests of each party to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests any customary
or accepted industry practices and any applicable generally accepted accounting
practices or principles. The Partnership Agreement provides that, in the absence
of bad faith by the General Partner, the actions of the General Partner shall
not constitute a breach of the Partnership Agreement or any other agreement
contemplated therein.
RELATIONSHIPS BETWEEN THE PARTIES
Except as set forth in this Proxy Statement, there are no past, present or
proposed material contracts, arrangements, understandings, relationships,
negotiations or transactions between the Partnership, on the one hand, and TRC
and its affiliates, on the other hand, concerning a merger, consolidation or
acquisition, a tender offer or other acquisition of securities, or sale or other
transfer of a material amount of assets of the Partnership. However, in the
future, the Partnership's management may review additional information about the
Partnership and, upon completion of any such review, may propose or develop
additional or new plans or proposals or may propose the acquisition, disposition
or refinancing of assets or other changes in the Partnership's business,
structure, capitalization, management or distribution policy which they consider
to be in the best interests of the Partnership and its owners.
PLANS FOR THE PARTNERSHIP AFTER THE MERGER
The Partnership has been informed by TRC that, following the Merger, TRC
intends to cause the business and operations of the Partnership to continue to
be conducted by the Partnership substantially as they are currently being
conducted. TRC will, however, continue to evaluate the business and operations
of the Partnership after the consummation of the Merger and will continue to
take such actions as are deemed appropriate by TRC and its affiliates, under the
circumstances then existing, to maximize the profitability of the Partnership.
Except for the Merger and as otherwise described in this Proxy Statement,
none of TRC, the General Partner or their affiliates has any present plans or
proposals which relate to or would result in an extraordinary transaction, such
as a merger, reorganization, liquidation, relocation of any operations of the
Partnership or sale or transfer of a material amount of assets involving the
Partnership or any other change in the Partnership's structure or business or
the composition of its management. However, in the future TRC, its affiliates
and the Partnership's management will continually review additional information
about the Partnership and, upon completion of any such review, may propose or
develop additional or new plans
28
<PAGE>
or proposals or may propose the acquisition, disposition or refinancing of
assets, including, without limitation, general or limited partnership interests
in one or more partnership subsidiaries of the Partnership, real estate assets
held by one or more of such partnership subsidiaries and property management or
asset management and related contracts in respect of properties controlled by
the Partnership, one of its partnership subsidiaries or an affiliate of the
Partnership (the "Properties"), the repositioning of certain of the Properties
or other changes in the Partnership's business, structure, capitalization,
management or distribution policy which they consider to be in the best
interests of the Partnership and its surviving partners.
CERTAIN EFFECTS OF THE MERGER
In the Merger, all of the Units outstanding immediately prior to the
Effective Time (other than Units held by TRC and its direct and indirect
subsidiaries) will be converted into the right to receive $14.00 in cash per
Unit and the Public Unitholders will cease to have any interest in the
Partnership and will therefore not share in future earnings and growth of the
Partnership, if any. As a result of the Merger, TRC and its affiliates will hold
the entire equity interest in the Partnership, including the entire interest in
the Partnership's net earnings and book value.
The Units are currently registered under the Exchange Act. Registration of
the Units under the Exchange Act may be terminated upon application of the
Partnership to the Commission if the Units are neither listed on a national
securities exchange nor held by more than 300 holders of record. Termination of
registration of the Units under the Exchange Act would substantially reduce the
information required to be furnished by the Partnership to Unitholders and to
the Commission and would make certain provisions of the Exchange Act, such as
the short-swing profit recovery provisions of Section 16(b) and the requirement
of forwarding an annual report to Unitholders, no longer applicable to the
Partnership. Furthermore, the ability of "affiliates" of the Partnership and
persons holding "restricted securities" of the Partnership to dispose of such
securities pursuant to Rule 144 under the Securities Act may be impaired or
eliminated. TRC presently intends to cause the Partnership to apply for
termination of registration of the Units under the Exchange Act as soon as the
requirements for such termination are met and to take all permitted actions to
make the Partnership eligible for such termination.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the material federal income tax rules
applicable to the Merger. The summary does not discuss all of the federal income
tax consequences that may be relevant to a particular Unitholder or to certain
Unitholders subject to special treatment under the federal income tax laws (for
example, foreign persons, tax-exempt entities, life insurance companies or S
corporations). The discussion also assumes that the Units are held as capital
assets. The discussion set forth below is based upon the Internal Revenue Code,
regulations and announcements promulgated thereunder and published rulings and
court decisions, all as in effect on the date hereof. All of the foregoing are
subject to change, possibly with retroactive effect. DUE TO THE INDIVIDUAL
NATURE OF TAX CONSEQUENCES, EACH UNITHOLDER IS URGED TO CONSULT HIS OR HER OWN
TAX ADVISOR TO DETERMINE THE SPECIFIC FEDERAL INCOME TAX CONSEQUENCES OF
RECEIVING CASH IN THE MERGER IN EXCHANGE FOR UNITS, AS WELL AS THE EFFECTS OF
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
GAIN OR LOSS. A Unitholder who receives cash in the Merger in exchange for
Units will be treated as though his or her Units were redeemed by the
Partnership for cash and generally will recognize capital gain or loss to the
extent of the difference between the amount of cash received and his or her
adjusted tax basis in the Units exchanged (as explained below). In addition,
certain Unitholders will recognize ordinary income related to the recapture of
certain tax benefits pursuant to section 751(b) of the Internal Revenue Code
(e.g., depreciation recapture). Depending on when the Unitholders acquired their
Units, the ordinary income component is expected to be no more than $1.25 per
Unit. Any ordinary income
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recognized pursuant to section 751(b) will reduce the capital gain or increase
the capital loss otherwise recognized on the exchange of the Units. Any
remaining capital gain or loss will be long term capital gain or loss if the
Unitholder's holding period in the Units is more than 18 months on the date of
the Merger and will be taxed as "mid-term" gain if the Unitholder's holding
period in the Units is more than 12 months and up to 18 months. Capital losses
generally are deductible only to the extent of capital gains plus, in the case
of non-corporate Unitholders, up to $3,000 of ordinary income. Capital losses
realized upon the sale of Units may be utilized to offset capital gains from
other sources and may be carried forward, subject to applicable limitations.
Under the recently enacted Taxpayer Relief Act, non-corporate taxpayers are
taxed at a maximum rate of 20% for long term capital gains and a maximum rate of
28% for mid-term gains. The Taxpayer Relief Act gives the Internal Revenue
Service ("IRS") the authority to apply the Taxpayer Relief Act's new rules on
taxation of capital gains to sales of interests in pass-through entities,
including partnerships. It is possible that the regulations could provide that
the type of capital gain could be determined by looking through the partnership.
Thus, for example, the long term rate could only apply to the extent the gain is
attributable to assets held by the Partnership for more than 18 months. No
guidance has been issued by the IRS regarding how these rules might be applied.
Such guidance, if and when issued, could have retroactive effect.
Generally, the adjusted tax basis of a Unitholder's Units will be equal to
the cost of the Units to such Unitholder, increased by the Unitholder's share of
Partnership income (including any income for the year of the Merger) and
decreased by the Unitholder's share of Partnership distributions, credits and
losses (including any losses for the year of the Merger).
PARTNERSHIP INCOME OR LOSS FOR YEAR OF MERGER. Unitholders will be required
to include in income their allocated share of Partnership items listed in
section 702(a) of the Internal Revenue Code for the taxable year in which the
Merger occurs. Certain expenses connected with the Merger that are funded by TRC
and its affiliates will be specially allocated to the entity funding those
expenses. See "The Merger Agreement-- Issuance of Units to TRC and its
Affiliates and Payment of Expenses by TRC Prior to Effective Time."
ACCOUNTING TREATMENT OF THE MERGER
The acquisition by TRC of the Units will be accounted for as an acquisition
of minority ownership interests of a subsidiary in accordance with the purchase
method of accounting.
REGULATORY APPROVALS AND FILINGS
Certain regulatory requirements must be complied with before the Merger is
consummated. The Partnership and TRC are not aware of any other governmental
consents or approvals that are required prior to the consummation of the Merger
other than those described below. It is presently contemplated that if such
additional governmental consents and approvals are required, such consents and
approvals will be sought. There can be no assurance, however, that any such
additional consents or approvals will be obtained.
HSR ACT. The Merger is subject to the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the rules
and regulations thereunder, which provide that certain acquisition transactions
may not be consummated until certain information has been furnished to the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
the Federal Trade Commission (the "FTC") and until certain waiting periods have
been terminated or have expired. On October 14, 1997, the Notification and
Report Forms for the Merger required pursuant to the HSR Act were filed by the
Partnership and TRC. The FTC granted early termination of the waiting period
under the HSR Act on October 28, 1997.
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SCHEDULE 13E-3. TRC, PRI, PMC and MergerCo. have filed with the Commission
a Schedule 13E-3 pursuant to the Exchange Act, furnishing certain information
with respect to the Merger in addition to the information contained in this
Proxy Statement, and they may file amendments to the Schedule 13E-3. As
permitted by the rules and regulations of the Commission, this Proxy Statement
omits certain information contained in the Schedule 13E-3. For further
information pertaining to the Partnership, reference is made to the Schedule
13E-3 and the exhibits and amendments thereto. See "Available Information."
EXPENSES OF THE MERGER
The Merger Agreement provides that all fees, costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
will be paid by the party incurring such fees, costs and expenses. No such fees,
costs or expenses will affect the Merger Consideration of $14.00 per Unit or the
final distribution of $0.325 per Unit paid for Unitholders of record on
September 30, 1997 for the third quarter of the Partnership's 1997 fiscal year.
It is estimated that, if the Merger is consummated, the fees, costs and expenses
incurred in connection with the Merger will be approximately as set forth below:
<TABLE>
<CAPTION>
THE
TRC PARTNERSHIP
------------- ------------
<S> <C> <C>
Investment banking fees and expenses............................. $ 850,000 $ 225,000(1)
Financing/Refinancing Fees and Expenses.......................... 7,640,000 0
Legal fees and expenses (2)...................................... 1,835,000 0
Accounting fees and expenses..................................... 110,000 0
Filing fees...................................................... 90,000 0
Solicitation, printing and mailing fees.......................... 130,000 0
Miscellaneous (3)................................................ 465,000 0
------------- ------------
Total............................................................ $ 11,120,000 $ 225,000
------------- ------------
------------- ------------
</TABLE>
- ------------------------
(1) Includes the fees and estimated expenses of Morgan Keegan (see "The
Merger--Fairness Opinion").
(2) Includes the estimated fees and estimated expenses of counsel to TRC,
MergerCo. and PMC and $1,435,000, the maximum in fees and expenses payable
to the plaintiffs' lawyers in the Delaware Litigation. Defendants in the
Delaware Litigation intend to contest the amount of such fees and expenses.
(3) Includes paying agent fees for processing transmittals and payments to
holders of Units.
THE PROXY SOLICITATION
VOTING AND PROXY PROCEDURES
A proxy enables a Unitholder to be represented at a meeting or any
adjournments, postponements or reschedulings thereof at which he would otherwise
be unable to participate. The proxy card accompanying this Proxy Statement is
solicited because each Unitholder is entitled, as a limited partner of the
Partnership, to vote on matters scheduled to come before the Special Meeting.
Units eligible to be voted and for which a proxy card in the accompanying
form is properly signed, dated and returned in sufficient time to permit the
necessary examination and tabulation of the proxy before a vote is taken will be
voted in accordance with any choice specified. The proxy card permits a
specification of approval, disapproval or abstention as to the proposal
described in this Proxy Statement. Unitholders are urged to specify their choice
by marking an (x) or other mark in the appropriate box on the proxy card, but
where no choice is specified, eligible Units will be voted for approval of the
Merger Agreement and the Merger.
If any matters not specified in this Proxy Statement come before the Special
Meeting or any adjournments, postponements or reschedulings thereof, eligible
Units will be voted in accordance with the best judgment of the persons named
therein as proxies. At the time this Proxy Statement was printed,
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management of the General Partner was not aware of any other matters to be voted
upon. Only procedural matters may come before the Special Meeting since the only
substantive matters which may be considered are those with respect to which
prior notice is given.
The proxy may be revoked at any time before it is exercised by submitting a
written revocation or a later-dated proxy or proxy card, attention Secretary, to
Perkins Family Restaurants, L.P., 6075 Poplar Avenue, Suite 800, Memphis, TN
38119-4709, or by attending the Special Meeting in person and so notifying the
meeting inspectors.
The presence in person, or by properly executed proxy, of the holders of
more than 50% of the aggregate Percentage Interests (as hereinafter defined) of
all partners is necessary to constitute a quorum at the Special Meeting.
"Percentage Interest" means (a) as to the General Partner, 1%, and (b) as to any
Unitholder, the product of (i) 99% multiplied by (ii) the number of Units held
by such Unitholder, divided by the total of all Units outstanding. Each holder
of record of Units on the Record Date is entitled to cast one vote per Unit on
each proposal properly submitted for the vote of the holders of the Units.
Pursuant to the Partnership Agreement, approval of the Merger Agreement will
require the affirmative vote of a majority of the aggregate Percentage Interests
of all partners entitled to vote thereon, including Units held by TRC and its
direct and indirect subsidiaries (the "Majority Vote Requirement").
Additionally, although not required by the Partnership Agreement, approval of
the Merger Agreement has been conditioned upon the affirmative vote of a
majority of the Units held by Public Unitholders that are voted at the Special
Meeting (the "Public Unitholder Approval Requirement"). The votes of TRC, its
direct and indirect subsidiaries and their respective officers, directors and
key employees will not count toward satisfaction of the Public Unitholder
Approval Requirement. Therefore, the Merger will not be consummated without the
approval of the holders of a majority of the Units held by Public Unitholders
and voted at the Special Meeting.
Abstentions and any unvoted positions in brokerage accounts will be counted
toward the calculation of a quorum, but are not treated as either a vote for or
against the proposal. Abstentions and unvoted Units will be treated as unvoted
Units in determining whether the Public Unitholder Approval Requirement has been
satisfied. TRC has informed the General Partner that it intends to vote its
interest in the Partnership (which includes the General Partner's interest as
well as the Units over which it has voting control), representing approximately
48.6% of the Percentage Interests, "FOR" approval of the Merger if the Public
Unitholder Approval Requirement is satisfied. Thus, if the Public Unitholder
Approval Requirement is satisfied, the Majority Vote Requirement is very likely
to be satisfied as well.
SOLICITATION OF PROXIES
Solicitation of proxies from the Unitholders will be made by the General
Partner and will be undertaken principally by use of the United States Postal
Service. The cost of any such solicitation, including the cost of preparing and
mailing proxy materials, returning the proxies and reimbursing brokerage houses
and nominees for forwarding proxy materials to beneficial owners, will be borne
by the Partnership. D.F. King & Co., Inc. will assist in the solicitation of
proxies by the General Partner for an aggregate anticipated fee of $5,000 plus
reasonable out-of-pocket expenses.
NO APPRAISAL RIGHTS
Under the Delaware Revised Uniform Limited Partnership Act, the only
appraisal rights available to Unitholders are those accorded by contract.
Neither the Partnership Agreement nor the Merger Agreement provide such
appraisal rights to the Public Unitholders in connection with the Merger.
CONDUCT OF THE SPECIAL MEETING
An agenda will be distributed at the Special Meeting, and the meeting will
be conducted in accordance with the agenda. The presiding officer's rules will
govern the meeting.
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THE MERGER AGREEMENT
The following is a summary of the material provisions of the Merger
Agreement, which is attached as Annex A to this Proxy Statement. Such summary is
qualified in its entirety by reference to the Merger Agreement.
GENERAL
The Merger Agreement provides that, at the Effective Time and subject to the
satisfaction of certain other conditions, MergerCo. will be merged with and into
the Partnership. Following the Merger, the Partnership will continue as the
surviving partnership and the separate existence of MergerCo. will cease. In the
Merger, (i) each issued and outstanding Unit (including restricted Units held by
participants in the Partnership's Restricted Limited Partnership Unit Plan of
October 2, 1987), other than those held by TRC or its direct or indirect
subsidiaries, will be canceled, extinguished and retired and will be converted
into the right to receive $14.00 in cash, without interest; (ii) each Unit held
in the treasury of the Partnership will be canceled, extinguished and retired
and no payment shall be made with respect thereto; (iii) each general or limited
partnership interest which is owned by TRC or its direct or indirect
subsidiaries will be and remain a general or limited partnership interest, as
applicable, of the Partnership and no payment will be made with respect thereto;
(iv) each share of common stock, par value $0.01 per share, of MergerCo. will be
converted into and exchanged for a corresponding limited partner interest in the
Partnership; and (v) MergerCo. will cease to exist.
The Merger Agreement also provides that, if the Merger is consummated, the
Partnership's final quarterly distribution to Public Unitholders will be the
$0.325 per Unit cash distribution for the third quarter of the Partnership's
fiscal year to persons who were Unitholders of record on September 30, 1997.
EFFECTIVE TIME
The Merger will become effective at the time of the filing by the
Partnership with the Secretary of State of the State of Delaware of a
certificate of merger in accordance with the Delaware Revised Uniform Limited
Partnership Act and the Delaware General Corporation Law. It is presently
anticipated that such filing will be made on or before December 31, 1997,
although there can be no assurance in this regard. Such filing will be made,
however, only upon satisfaction or waiver, where permissible, of the conditions
set forth in the Merger Agreement. See "--Conditions to the Merger."
FINANCING OF THE MERGER
Under the Merger Agreement, TRC's obligation to consummate the Merger is
subject to the availability of sufficient funds to satisfy the obligations of
TRC, the General Partner, the Partnership and MergerCo., including the
obligation to pay the amount to which the Unitholders, other than TRC and its
direct and indirect subsidiaries, will become entitled at the Effective Time
upon surrender of their Units and to pay all related fees and expenses payable
by TRC, PMC, the Partnership and MergerCo. in connection with the Merger and
other related transactions (the "Financing"). The Merger Agreement requires TRC
and the Partnership to use their reasonable best efforts to obtain the
Financing.
Approximately $88 million will be required to consummate the Merger and to
pay related fees and expenses. On September 30, 1997, TRC entered into a
commitment agreement with a bank to provide the Partnership with a combination
of term loan facilities (the "Term Loans") and a new $50,000,000 revolving line
of credit facility (the "Line") (together, the "Facilities") which are intended
to finance the acquisition of the Public Units and refinance the Partnership's
existing credit facilities. The Term Loans consist of two separate facilities in
the amounts of $50,000,000 ("Term Loan A") and $80,000,000 ("Term Loan B").
Term Loan A matures five years from the date of closing and is to be repaid
in eighteen consecutive quarterly installments, commencing in the third quarter
after the closing date. Term Loan B matures eight
33
<PAGE>
years from the date of closing and is to be repaid in thirty consecutive
quarterly installments, also commencing in the third quarter after the closing
date. The Line matures five years from the date of closing and contains a
$5,000,000 sublimit for letters of credit.
Although the Facilities are available to finance the Merger, the Partnership
plans to raise a significant portion of the required financing through a private
placement of debt securities. As currently contemplated, Term Loan B would be
eliminated and the combined amounts of Term Loan A and the Line would be reduced
by the net amount of funds raised through a private placement. TRC and the
Partnership plan to complete the closings of the Facilities and the private
placement concurrently with the consummation of the Merger.
CONDITIONS TO THE MERGER
The respective obligations of the Partnership, TRC and MergerCo. to effect
the Merger are subject to the satisfaction at or prior to the Effective Time of
the following conditions: (i) the satisfaction of the Majority Vote Requirement
and the Public Unitholder Approval Requirement; (ii) no law, rule, regulation,
executive order, decree injunction or other order having been enacted, issued,
promulgated, enforced or entered by any court or governmental authority which
prohibits, restrains, enjoins or restricts the consummation of the Merger; (iii)
any waiting period applicable to the consummation of the Merger under the HSR
Act having expired or been terminated and (iv) Morgan Keegan having provided and
not withdrawn the Fairness Opinion, updated as of the date of this Proxy
Statement.
The obligations of TRC and MergerCo. to effect the Merger are further
subject to the satisfaction or waiver by TRC and MergerCo. of the following
conditions: (i) the representations and warranties of the Partnership contained
in the Merger Agreement being true and correct in all material respects when
made and on and as of the Effective Time, except for changes contemplated by the
Merger Agreement, with the same force and effect as if made on and as of the
Effective Time, except for any representation or warranty made or given as of a
specified time, which shall have been true and correct in all material respects
as of such time; (ii) the Partnership having performed or complied in all
material respects with all agreements and covenants required by the Merger
Agreement to be performed or complied with by the Partnership on or prior to the
Effective Time; (iii) no event having occurred or being reasonably expected to
occur which is, or is reasonably expected to be, materially adverse to the
business, operations, properties, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities), results of
operations or prospects of Perkins; (iv) no actions or proceedings having been
pending or threatened by any person against the Partnership, TRC, the General
Partner, MergerCo. or any of their subsidiaries or any director, officer or
employee thereof challenging or in any way or in any manner seeking to restrict
or prohibit the Merger or any other Transaction or seeking to obtain any damages
against any person as a result of the Merger or any other Transaction; and (v)
financing for sufficient aggregate funds being available to satisfy the
obligations of TRC, PMC, the Partnership and MergerCo., including, without
limitation, the obligation to pay the Merger Consideration and to pay all
related fees and expenses payable by TRC, PMC, the Partnership and MergerCo. in
connection with the Merger and other related transactions.
In addition, the obligations of the Partnership to effect the Merger are
further subject to the satisfaction or waiver of the following conditions: (i)
the representations and warranties of TRC and MergerCo. contained in the Merger
Agreement being true and correct in all material respects when made and on and
as of the Effective Time, except for changes contemplated by the Merger
Agreement, with the same force and effect as if made on and as of the Effective
Time, except for any representation or warranty made or given as of a specified
time, which shall have been true and correct in all material respects as of such
time; and (ii) TRC and MergerCo. having performed or complied in all material
respects with all agreements and covenants required by the Merger Agreement to
be performed or complied with by them on or prior to the Effective Time.
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TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned
notwithstanding approval of the Merger by the Public Unitholders or the General
Partner, at any time prior to the Effective Time, by mutual written consent of
the Boards of Directors of MergerCo., TRC and the General Partner. The Merger
Agreement may also be terminated by either TRC or the Partnership in the event
that (i) the Effective Time has not occurred on or before February 28, 1998
(except that the right to so terminate the Merger Agreement will not be
available to any party whose failure to fulfill any obligation under the Merger
Agreement caused or resulted in the failure of the Effective Time to occur on or
before such date) or (ii) any court of competent jurisdiction or other
governmental authority has issued an order, decree or ruling or taken any action
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action has become final and nonappealable. Further, the
Merger Agreement may be terminated by the Partnership if the Board determines
that it has a fiduciary duty to withdraw its approval or recommendation of the
Merger Agreement or the Merger and by TRC if the Board has withdrawn or modified
in a manner adverse to TRC its approval or recommendation of the Merger
Agreement or the Merger.
PAYMENT FOR UNITS
Prior to the Effective Time, TRC will designate a bank or trust company to
act as agent (the "Paying Agent") for the holders of Units to receive the Merger
Consideration. Promptly after the Effective Time, the Partnership will cause to
be mailed to each person who was, at the Effective Time, a holder of record of
Units entitled to receive the Merger Consideration, a form of letter of
transmittal and instructions for surrendering depositary receipts representing
the Units ("Receipts") pursuant to such letter of transmittal. Upon surrender to
the Paying Agent of a Receipt, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, and
such other documents as may be required pursuant to such instructions, the
holder of such Receipt will be entitled to receive $14.00 in cash per Unit,
without interest. All Units so surrendered will then be canceled. When and as
needed, TRC or MergerCo. will deposit, or cause to be deposited, in trust with
the Paying Agent the cash to which the holders of Units will be entitled at the
Effective Time.
At any time following the sixth month after the Effective Time, the
Partnership will be entitled to require the Paying Agent to deliver to it any
funds which had been made available to the Paying Agent and not disbursed to
holders of Units (including, without limitation, all interest and other income
received by the Paying Agent in respect of all funds made available to it), and
thereafter such holders may look to the Partnership (subject to abandoned
property, escheat and other similar laws) only as general creditors thereof for
amounts payable upon due surrender of the Receipts held by them.
ISSUANCE OF UNITS TO TRC AND ITS AFFILIATES AND PAYMENT OF EXPENSES BY TRC PRIOR
TO EFFECTIVE TIME
In order to prevent a termination of the Partnership for federal income tax
purposes, the Merger Agreement provides that TRC and its affiliates will
contribute cash in the amount of $4,410,000 to acquire newly issued Units of the
Partnership prior to the Effective Time. If the Merger is not consummated for
any reason, TRC or the affiliate making such contribution, as applicable, may
withdraw such capital contribution and the Partnership will promptly repay such
capital contribution upon notice from TRC or such affiliate.
The Merger Agreement also provides that TRC and its affiliates will be
entitled to contribute any amount necessary to pay any costs incurred by Perkins
in connection with the repayment of Perkins' existing indebtedness or in
connection with any other transaction connected with the Merger and that payment
of such expenses will be specially allocated to the party paying such expense in
order to satisfy the "substantial economic effect" requirement of section 704(b)
of the Internal Revenue Code. In order to effectuate the provision in the
Original Merger Agreement that would give TRC the tax benefit for funding
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such expenses, the Original Merger Agreement was amended on October 1, 1997 (as
so amended, the "Amended Merger Agreement") to provide for an amendment of the
Partnership Agreement beginning on the Effective Date. As amended by the Amended
Merger Agreement, the Partnership Agreement provides that if any amount is
contributed or deemed to be contributed to the Partnership or its affiliates to
pay expenses incurred by the Partnership or its affiliates in connection with
the repayment of debt or any other transaction connected with the Merger, such
expenses shall be specially allocated to the partner making such contribution or
deemed contribution in accordance with section 704(b) of the Internal Revenue
Code. Prior to such amendment, the tax benefit of some of these expenses might
have been allocated to all of the partners of the Partnership, including the
Public Unitholders. The Public Unitholders therefore will not receive any tax
benefit as a result of the contribution by TRC and its affiliates to the
Partnership of amounts for payment of expenses in connection with the Merger.
OPERATING PARTNERSHIP MERGER
The Amended Merger Agreement was amended and restated in its entirety again
on October , 1997 to provide that, prior to the Effective Time, the Operating
Partnership would be merged with and into the Partnership with the Partnership
being the surviving partnership in that merger. The Partnership currently
conducts its business through the Operating Partnership and this amendment was
deemed desirable to eliminate the unnecessary complexity and potential financing
and tax inefficiencies of continuing to maintain this multiple layered
structure.
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BUSINESS
The Partnership is a leading operator and franchisor of full-service,
mid-scale restaurants located primarily in the Midwest, Pennsylvania, upstate
New York and central Florida. The Partnership's restaurants operate under the
names Perkins Family Restaurant-Registered Trademark- and Perkins Family
Restaurant and Bakery-Registered Trademark-. Perkins restaurants offer a full
menu assortment of breakfast, lunch, dinner, snack and dessert items and many
are open 24 hours a day. The business of Perkins was founded in 1958 and since
then Perkins has continued to adapt its menus, product offerings, building
designs and decor to meet changing consumer preferences. A substantial majority
of Partnership-operated restaurants and franchised restaurants have added
in-store bakeries which offer a premium line of freshly prepared baked goods
including muffins, cookies and pies. As of September 30, 1997, the Partnership
operated 135 full-service restaurants and franchised 333 full-service
restaurants located in 32 states and four provinces of Canada. For the twelve
months ended September 30, 1997, system-wide revenues (including franchised
restaurants), Partnership revenues and Partnership earnings before interest,
taxes, depreciation and amortization ("EBITDA") were $701,433,000, $262,759,000
and $35,472,000, respectively. Partnership-operated restaurants have achieved
comparable store sales increases in each of the last 25 quarters.
Perkins restaurants are primarily located in free-standing buildings with
approximately 90 to 250 seats. Recently, the Partnership and its franchisees
have begun to test the Perkins concept in various non-traditional locations
including travel plazas, malls, hotels and airports. The Partnership and its
franchisees operate three alternative formats, including limited menu
restaurants and a stand-alone bakery, in addition to full-service stand-alone
restaurants. These alternative formats are operated under the names Perkins Cafe
and Bakery-Registered Trademark-, Perkins Bakery-Registered Trademark- and
Perkins Express-Registered Trademark-.
In addition to operating and franchising Perkins restaurants, the
Partnership operates Foxtail Foods ("Foxtail") and is a partner in a joint
venture for the development of Jack Astor's Bar and Grill-Registered Trademark-.
Foxtail is a food manufacturing division which provides cookie dough, muffin
batter, pancake mixes, pies and other bakery products to Partnership-operated
restaurants, franchisees, third-party bakers and food distributors. During 1996,
Foxtail accounted for 8.5% of Partnership revenues. During 1997, the Partnership
entered into a joint venture with a Canadian casual dining operator for the
development of a minimum of three Jack Astor's Bar and Grill-Registered
Trademark- restaurants. Jack Astor's Bar and Grill is a theme casual dining
concept with a high-energy fun atmosphere offering chicken, pasta, hamburgers
and alcoholic beverages. The first restaurant opened in Greensboro, North
Carolina on October 6, 1997.
COMPETITIVE STRENGTHS
ESTABLISHED, HIGH-VALUE RESTAURANT BRAND. Perkins is a highly recognized
brand in the geographic areas it serves as well as in locations connected to
existing markets by travel routes. Perkins offers its guests a wide variety of
over 140 reasonably priced menu items, including fresh bakery products served in
a warm and comfortable dining environment with the convenience of extended
operating hours. As of September 30, 1997, entrees served in
Partnership-operated restaurants ranged in price from $2.99 to $8.99 for
breakfast, $4.29 to $8.99 for lunch and $5.99 to $8.99 for dinner. The
Partnership operates a 3,000 square foot test kitchen in Memphis, Tennessee
which develops and tests new menu items. Menus are updated at least three times
per year and supplemented with special menus for holiday and promotional events.
UPDATED, MODERN RESTAURANTS. The Partnership employs an on-going system of
prototype development, testing and remodeling to maintain operationally
efficient, cost-effective and unique interior and exterior facility design and
decor. An accelerated program to upgrade existing Partnership-operated
restaurants began in 1995 and continues today. The current remodel package
features a modern, distinctive interior and exterior layout that enhances
operating efficiencies and guest appeal. As of September 30, 1997, approximately
86% of Partnership-operated restaurants had either been remodeled or initially
constructed since January 1, 1994.
To promote a consistent and current image throughout the Perkins system, the
Partnership is encouraging its franchise operators to remodel their restaurants
by providing financial incentives and third-party capital programs. Twenty-two
franchise restaurants were remodeled in 1996 and approximately
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35 additional restaurants are expected to be remodeled in 1997, of which 11 were
completed by September 30, 1997.
MANAGEMENT EXPERTISE. The Partnership has a talented management team with
extensive restaurant experience. Management's average tenure with the
Partnership is over seven years and management averages 20 years of restaurant
experience.
EFFICIENT OPERATIONS. The Partnership uses a combination of current
technology, on-going operational analyses, hourly employee performance programs
and the operating experience of both its own field management and that of its
franchisees to continuously improve the quality, efficiency and execution of its
operating systems. For example, the Partnership-operated restaurants recently
implemented programs to improve labor efficiency, lower food cost and improve
facility utilization during peak periods.
DAYPART BALANCE. Perkins has successfully evolved over the last 39 years
from its origins as a breakfast-oriented pancake house by developing significant
lunch, dinner and late night product offerings. The flexibility of Perkins'
multi-daypart offerings allows each location to meet the needs of its trading
area. During 1996, the revenue breakdown by daypart for Partnership-operated
restaurants was 25% breakfast, 29% lunch, 32% dinner and 14% late night (10:00
p.m. to 6:00 a.m.), although the Partnership believes that breakfast items
(which are served around the clock) continue to account for a majority of its
revenues.
COMMITMENT TO GUEST SATISFACTION. The Partnership is focused on continually
improving guest satisfaction. The Partnership regularly surveys customers to
determine their overall satisfaction with their dining experience, conducts
extensive service quality training programs and operates a toll free number to
monitor guest dining experience.
MANAGEMENT INFORMATION SYSTEMS. The Partnership's information systems not
only provide detailed monthly financial statements for each restaurant but daily
operating statistics such as sales, labor, guest check and average table turns.
The system also generates weekly restaurant profit and loss statements and food
and labor variance analysis. This information is available to management for
analysis on a daily basis.
The Partnership has also developed a labor scheduling system which
calculates the amount of labor necessary to provide optimal guest service. This
system utilizes historical guest counts in 15 minute increments.
The Partnership's systems are year 2000 compliant.
PURCHASING LEVERAGE. The Partnership aggregates the purchasing requirements
of all of its Partnership-operated restaurants and over 90% of its franchised
restaurants to obtain purchasing economies of scale for food items, cleaning
supplies, equipment, maintenance services, and regional distribution agreements.
In addition, the Partnership utilizes outside consultants for information
regarding purchases of commodity items and supports significant purchases of
commodity products, such as sirloin steak or shrimp, which provide the basis for
several product-driven marketing programs throughout the year.
BUSINESS STRATEGY
INCREASE FRANCHISE REVENUES. The Partnership plans to continue to add
franchised units in existing and new geographic markets. In addition, management
will continue to encourage franchisees to remodel and renovate restaurants where
appropriate. Management believes its franchisees will open approximately 17 new
restaurants in 1997, of which ten had been opened as of September 30 and seven
were under construction. Management believes its franchisees will open 43 new
franchised restaurants during 1998. During 1996, ten franchised restaurants
closed, and in 1997 six franchised restaurants had been closed as of September
30.
SELECTIVELY DEVELOP NEW PARTNERSHIP-OPERATED RESTAURANTS. The Partnership
will continue to develop and operate new restaurants based upon its current
prototype. Management believes the development of successful
Partnership-operated restaurants supports the continued development of the
Perkins franchise system. The Partnership currently plans to add three to five
new Partnership-operated restaurants in 1997,
38
<PAGE>
of which one was open as of September 30 and two were under construction. The
Partnership plans to add six new Partnership-operated restaurants in 1998.
EXPAND NON-TRADITIONAL LOCATIONS AND ALTERNATIVE FORMATS. The Partnership
and its franchisees have built, on a limited test basis, restaurants within
non-traditional sites including hotels, airports, travel plazas and strip
shopping centers. Within these non-traditional locations, the Partnership has
recently opened restaurants with alternative formats such as limited menu
restaurants and a stand-alone bakery, in addition to full-service, stand-alone
restaurants. The Partnership intends to continue testing non-traditional
locations and further develop alternative formats in conjunction with its
franchisees, in cases where appropriate for the Perkins brand and where
financial returns are acceptable.
PURSUE COMPLEMENTARY ACQUISITIONS. The Partnership continually evaluates
potential acquisition opportunities of existing franchised Perkins restaurants
and other restaurant chains. The Partnership does not currently have any
agreements or understanding to make any acquisitions.
CONCEPT
The Perkins concept is designed to serve a variety of demographically and
geographically diverse customers for a wide range of dining occasions which are
appropriate for the entire family. The Perkins concept appeals to a wide range
of markets and customer tastes with its large comfortable dining rooms, flexible
kitchens, broad menu, moderate pricing, extended operating hours, table service
and bakery specialties.
MENU. Each Perkins restaurant offers a diverse menu of high quality,
moderately priced food and beverage items consisting of traditional favorites
and seasonal specialties. Each Perkins restaurant offers guests a core menu
consisting of certain required menu items that each Partnership-operated and
franchised restaurant must offer, providing the consistency necessary to support
the Perkins brand. Additional items are offered to meet regional and local
tastes. All menu items served in franchised restaurants must be approved by the
Partnership's research and development department. Menu offerings continually
evolve to meet changing consumer tastes.
The core menu currently features over 140 items comprised of a broad
selection of breakfast, lunch, dinner and bakery products. Signature breakfast
items include premium omelettes, buttermilk pancakes and traditional egg dishes.
Breakfast entrees generally range in price from $2.99 to $8.99. Signature lunch
items include bread bowl salads, melt sandwiches and specialty burgers generally
ranging in price from $4.29 to $8.99. Signature dinner items include chicken
puff pastry pie, country fried steak, New York Strip steak and
Butterball-Registered Trademark- turkey and dressing. Price points for dinner
entrees generally range from $5.99 to $8.99. Entree selections are complemented
by appetizers and dessert products. Coffee, iced tea and soft drinks are served
as "Bottomless Beverages"-TM- with free refills. Perkins restaurants do not
generally serve alcoholic beverages.
Most Perkins restaurants have an in-store bakery, with bakery products
offered both for in-house consumption and for carry-out. Bakery breakfast
products include freshly baked Mammoth Muffins-Registered Trademark-, cinnamon
rolls and sticky buns. Bakery desserts include freshly prepared cookies,
brownies, eclairs and pies.
RESTAURANT DESIGN. In 1993, the Partnership began testing a major prototype
redesign which features a series of expandable and differentiated dining rooms
set around a central kitchen and pantry area. This design reduces the distance
servers travel from food pick-up to guest tables. The interior decor package,
which was introduced in 1995, with related but distinct decor for each dining
area, can be utilized in traditional rectangular buildings and other building
designs. Management believes the new prototype and related decor packages add
significantly to the value perceptions of its guests. In addition, the
Partnership has developed an exterior design which updates its restaurants while
maintaining an identifiable Perkins look. By selectively modifying key concept
identifiers, such as entry construction, roof lines and window treatments, the
Partnership can upgrade older restaurants, convert existing buildings used for
other
39
<PAGE>
purposes into Perkins restaurants, and modify non-traditional locations such as
shopping center locations, into easily recognizable, modern Perkins restaurants.
RESTAURANT OPERATIONS AND TRAINING. All restaurants are operated in
accordance with uniform operating standards and specifications relating to the
quality and preparation of menu items, selection of menu items, maintenance and
cleanliness of facilities and employee conduct. The Partnership's operating
standards are based upon the Perkins Promise-Registered Trademark-, a guarantee
of 100% guest satisfaction. This operating and training system utilizes employee
empowerment and feedback to ensure the delivery of a satisfactory dining
experience to all guests. All standards and specifications are developed by the
Partnership, with input from franchisees, and applied on a system-wide basis.
The Partnership has an extensive eight to twelve week Management Development
Program for general managers, kitchen managers and other salaried restaurant
managers. This 44-module program consists of in-store task-oriented training and
formal administrative, customer service and financial training. Upon completion
of this program, management candidates attend Perkins Leadership Institute, a
two-week in-store internship where they can practice skills in a certified
training restaurant. Certified trainers conduct hands-on training for all hourly
restaurant employees using the Foundations Training Program. This
state-of-the-art program utilizes both printed material and video and is
designed to improve the confidence, productivity and skill level of new
employees. The Partnership provides on-going training for its restaurant
employees on new products and other important topics such as food sanitation and
customer and employee relations.
ADVERTISING. The Partnership focuses its advertising and marketing efforts
on six to eight food-specific promotions each year. Each promotion features a
specific theme or product. Several commodity buys each year enable the
Partnership to offer attractive price points on popular products such as steak
and eggs or fried shrimp. Two of the Partnership's most popular recent
promotions have been the Summer Menu featuring eight new entrees and a new line
of "Dill Melt" sandwiches. The Partnership advertises on a regional and local
basis, utilizing primarily television, radio and print media. In 1996, the
Partnership spent approximately 4.0% of Partnership-operated restaurants' net
revenues on advertising, of which 3.1% was contributed to the system advertising
fund which develops and funds the specific system-wide promotions. Substantially
all franchisees are also required to contribute 3.0% of their gross revenues to
the advertising fund. The remainder of the Partnership's advertising
expenditures were focused on local advertising in areas with
Partnership-operated restaurants.
AVERAGE CHECK. For the nine months ended September 30, 1997, the average
guest check for Partnership-operated restaurants was $5.58.
UNIT ECONOMICS. Since January 1, 1996, the Partnership has opened six
full-service Perkins restaurants, each of which is based upon the Partnership's
current prototype building design. The average investment, excluding land and
pre-opening expenses, was approximately $1.1 million. The Partnership purchased
the sites for each of these six restaurants at an average cost of approximately
$417,000. Management believes the average investment for new
Partnership-operated units scheduled to be built during the remainder of 1997
and 1998 will range from $1.1 to $1.3 million and land cost will range from
$300,000 to $450,000 in cases in which the Partnership purchases the site.
Pre-opening expenses consist principally of non-recurring costs such as hourly
employee recruiting and training, meals, lodging and travel. Pre-opening costs
are amortized over twelve months beginning in the month the restaurant opens.
Average annual revenues for 1996 for all Partnership-operated restaurants were
approximately $1.6 million.
FRANCHISE OPERATIONS
As of September 30, 1997, the Partnership had 336 franchised restaurants
(including alternative formats) operated by 111 franchisees. The Partnership
actively seeks experienced multi-unit restaurant operators as franchisees and
requires each franchisee to satisfactorily complete the Partnership's extensive
training program. Seven of the 111 franchisees operate a total of 143
full-service Perkins restaurants. The remaining franchisees each currently
operate ten or fewer units.
40
<PAGE>
As of September 30, 1997, the Partnership's three largest franchisees
operated a total of 96 restaurants. The respective distribution of restaurants
operated by such franchisees was: 41 restaurants primarily in upstate New York;
31 restaurants in Pennsylvania, Ohio and New York; and 21 restaurants in Ohio
and Kentucky. During 1996, the Partnership received net royalties and license
fees of approximately $1,505,000, $1,955,000 and $1,033,000, respectively, from
these franchisees.
DEFAULTS BY LARGEST FRANCHISEE. The Partnership's largest franchisee
operates 41 restaurants, 37 of which are leased from unaffiliated lessors,
pursuant to a temporary license agreement expiring December 31, 1997. The
temporary agreement was entered into as a result of negotiations following the
franchisee's defaults in its payments and certain other obligations under its
prior agreements with the Partnership and in order to give the franchisee an
opportunity to seek permanent financing in an amount sufficient to permit it to
refinance its existing obligations to its creditors, including the Partnership,
and to remodel its restaurants. Although the franchisee has represented to the
Partnership that it is confident that it can obtain such financing, the
Partnership believes that if the franchisee is ultimately unsuccessful and loses
control of its properties, a majority of the restaurants can continue to be
operated as Perkins Family Restaurants pursuant to arrangements between the
Partnership and the owners of the properties. During 1996, the franchisee's net
royalty payments to the Partnership were approximately $1.5 million and at
September 30, 1997, the franchisee was delinquent in its royalty obligations in
the amount of approximately $545,000.
FRANCHISE ARRANGEMENTS. Franchised restaurants operate pursuant to license
agreements generally having an initial term of 20 years, and pursuant to which
each franchisee pays the Partnership a royalty fee (usually 4.0% of gross sales)
and an advertising contribution (typically 3.0% of gross sales). New franchisees
currently pay a non-refundable license fee of $35,000 per restaurant.
Franchisees opening their third and subsequent restaurants pay a non-refundable
license fee of $25,000 per restaurant. Beginning in 1998, these fees will be
increased to $40,000 and $30,000, respectively. License agreements are typically
terminable by franchisees on 12 to 15 months prior notice and upon payment of
specified liquidated damages. Franchisees do not typically have express renewal
rights, although franchisees typically apply for and receive new license
agreements at the end of existing contract terms.
DEVELOPMENT OF RESTAURANTS. The Partnership makes available to franchisees
prototype plans and specifications for a typical restaurant which the franchisee
and its architect adapt to each site. The Partnership retains the right to
approve all final plans and specifications. Each franchisee, with assistance
from the Partnership, is responsible for selecting the site for each restaurant
within its territory, subject to Partnership approval. The Partnership conducts
a physical inspection, reviews any proposed lease or purchase agreements and
makes available demographic studies. A Partnership real estate representative
assists franchisees in identifying possible sites and trade areas, managing
broker relationships and preparing site packages for submission to the
Partnership for approval.
DESIGN AND CONSTRUCTION. The Perkins Construction Management Program is
available for a fee to assist franchisees in coordinating the design,
construction and equipping of their restaurants. In conjunction with this
program, the Partnership provides advice on critical design and contracting
decisions and oversees day-to-day construction work, providing comprehensive
support during all phases of construction.
FINANCING. The Partnership currently sponsors financing programs on
competitive terms designed to provide its franchisees with access to financing
options to support the remodeling of existing restaurants. The financing is
provided by two financial services companies with extensive experience in
franchise and cash flow based lending. These programs were designed to allow
each franchisee's request for financing to be evaluated solely on the basis of
the financial performance of the franchisee without support from the
Partnership. However, under both programs, the Partnership has the option to
extend differing levels of support in its sole discretion, if it determines that
such support will have a positive strategic impact on the future growth of the
Partnership. Although not specifically part of the current programs, both
financial services companies are also offering competitive financing options to
both new and existing franchisees for equipment and real estate financing
outside of the current remodel initiative.
41
<PAGE>
In the past, the Partnership has sponsored financing programs offered by
certain lending institutions to help its franchisees obtain funds for the
construction of new franchised restaurants and to purchase and install in-store
bakeries. The Partnership provided a limited guaranty of the funds borrowed for
such purposes. As of September 30, 1997, there were approximately $3,739,000 in
borrowings outstanding under these programs. The Partnership has guaranteed
$1,246,000 of these borrowings. No additional borrowings are available under
these programs.
RESTAURANT OPENING. Thirteen-member New Store Opening Teams ("NSOT") assist
franchisees in opening their first two stores. Team members train staff, help
operate the restaurant during the first six weeks and help franchisees establish
control over labor and food costs. The NSOT arrives prior to a restaurant
opening to help ensure a successful opening. The only expense to franchisees for
the NSOT services for their first two restaurants is the cost of travel, lodging
and local transportation for the team members during their days on site. For
each additional restaurant opening in which the franchisee utilizes the services
of the NSOT, the franchisee is required to pay $10,000.
TRAINING. Central to the Perkins system is a comprehensive and continually
evolving training system. All aspects of the program incorporate
state-of-the-art, easy-to-use materials designed to facilitate self teaching
whenever possible and to gain maximum guest impact from time spent on training.
Training is provided for all restaurant positions.
FRANCHISE ADVISORY COUNCIL. The Franchise Advisory Council (the "Council")
consists of representatives of 15 franchisees who represent a broad cross
section of the franchise organization from both a size and geographic
perspective. The Council meets three times per year along with the Partnership's
senior management to review and discuss numerous issues that affect the
franchise system. The Council advises the Partnership with respect to matters
such as menu development, restaurant design and product and equipment
purchasing.
REPORTING AND ROYALTY COLLECTIONS. Franchisees are required to report
monthly sales and other operating information, including monthly profit and loss
statements to the Partnership. Franchisees make monthly royalty payments based
on sales for the previous month. Payments for royalties are typically received
at the Partnership's corporate headquarters while the advertising fees are paid
directly to a lockbox account.
ACCOUNTING. The Partnership provides optional accounting services to
franchisees for a monthly fee. These services include the processing of payroll
and accounts payable and the preparation of monthly financial statements.
QUALITY CONTROL
The Partnership maintains a high level of quality standards and emphasizes
the importance of these standards in all aspects of its purchasing, training and
management development systems. These systems are promoted not only within
Partnership-operated restaurants but also throughout the franchise system. The
quality standards of the restaurants as well as Foxtail Foods are monitored by
the Partnership's research and development and quality assurance staffs. The
system standards are detailed in The Confidential Management and Operating
Systems Manual maintained in all Partnership-operated and franchised restaurants
and are reinforced through on-going training programs at both the salaried and
hourly employee levels.
The Partnership utilizes several systems to ensure that its quality
standards are being upheld in the restaurants. All Partnership and franchised
restaurants are reviewed periodically throughout the year in quality assurance
audits conducted by multi-unit management level personnel. Additionally, guest
and employee comments are collected through toll-free telephone lines
specifically dedicated to employee and guest feedback. Outside providers also
conduct guest service surveys in each Partnership restaurant and a separate
formal quarterly consumer tracking study covering both Partnership and franchise
operated restaurants is monitored closely by management. Aspects of each of
these programs are utilized in performance evaluation and incentive compensation
determination for all levels of field management personnel.
42
<PAGE>
OTHER FINANCIAL ARRANGEMENTS
The Partnership's predecessors entered into agreements under which specified
payments are to be made by the Partnership based on a percentage of gross sales
from certain restaurants and for new restaurants opened within certain
geographic regions. During 1996, the Partnership paid an aggregate of $3,177,000
under such agreements. In 1997, the Partnership terminated two such agreements.
Had such agreements been terminated at the beginning of 1996, payments by the
Partnership during 1996 would have been $1,841,000.
PURCHASING
The Partnership negotiates directly with suppliers for food and beverage
products and raw materials to ensure consistent quality and freshness of
products and to obtain competitive prices. Essential restaurant supplies and
products are available from several sources and the Partnership is not dependent
upon any one source for its supplies and products. The Partnership has not
experienced any significant delays in receiving restaurant products, supplies
and equipment. The Partnership allows its franchisees to benefit from the
purchasing economies it receives by providing and administering purchasing
programs and passing through purchasing rebates to franchisees. All of the
Partnership-operated restaurants are supplied through two national distributors.
PATENTS, TRADEMARKS AND OTHER INTELLECTUAL PROPERTY
The Partnership believes that its trademarks and service marks, especially
the mark "Perkins," are of substantial economic importance to its business.
These include signs, logos and marks relating to specific menu offerings in
addition to marks relating to the Perkins name. Certain of these marks are
registered in the U.S. Patent and Trademark Office and in Canada. Common law
rights are claimed with respect to other menu offerings and certain promotions
and slogans. The Partnership has copyrighted architectural drawings for Perkins
restaurants and claims copyright protection for most of its manuals, menus,
advertising and promotional materials. Perkins does not have any patents.
COMPETITION
The Partnership's business and the restaurant industry in general are highly
competitive and are often affected by changes in consumer tastes and eating
habits, by local and national economic conditions and by population and traffic
patterns. The Partnership competes directly or indirectly with all restaurants,
from national and regional chains to local establishments. Some of its
competitors are corporations that are much larger than Perkins and have
substantially greater capital resources at their disposal.
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<PAGE>
PROPERTIES
The following table lists the location of each of the Partnership-operated
and franchised restaurants and bakeries as of September 30, 1997 (excluding
alternative formats):
<TABLE>
<CAPTION>
PARTNERSHIP
OPERATED FRANCHISED TOTAL
--------------- ------------- -----
<S> <C> <C> <C>
Arizona................................................ -- 8 8
Arkansas............................................... -- 4 4
Colorado............................................... -- 16 16
Delaware............................................... -- 1 1
Florida................................................ 20 21 41
Idaho.................................................. -- 8 8
Illinois............................................... 8 -- 8
Indiana................................................ -- 5 5
Iowa................................................... 16 1 17
Kansas................................................. 4 3 7
Kentucky............................................... -- 4 4
Maryland............................................... -- 2 2
Michigan............................................... 5 1 6
Minnesota.............................................. 40 30 70
Mississippi............................................ -- 1 1
Missouri............................................... 11 1 12
Montana................................................ -- 7 7
Nebraska............................................... 5 2 7
New Jersey............................................. -- 7 7
New York............................................... -- 45 45
North Carolina......................................... -- 4 4
North Dakota........................................... 3 5 8
Ohio................................................... -- 55 55
Oklahoma............................................... 3 -- 3
Pennsylvania........................................... 6 42 48
South Carolina......................................... -- 1 1
South Dakota........................................... -- 10 10
Tennessee.............................................. 1 11 12
Virginia............................................... -- 1 1
Washington............................................. -- 7 7
Wisconsin.............................................. 13 14 27
Wyoming................................................ -- 4 4
Canada................................................. -- 12 12
--- --- ---
Total.................................................. 135 333 468
--- --- ---
--- --- ---
</TABLE>
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<PAGE>
The following table sets forth certain information regarding
Partnership-operated restaurants and other properties, as of September 30, 1997:
<TABLE>
<CAPTION>
NUMBER OF
PROPERTIES(1),(4)
------------------------
USE OWNED LEASED TOTAL
- --------------------------------------------------------------- ----------- ----------- -----
<S> <C> <C> <C>
Offices and Manufacturing Facilities(2)........................ 1 8 9
Restaurants(3)................................................. 55 80 135
</TABLE>
- ------------------------
(1) In addition, the Partnership leases 24 properties, 22 of which are subleased
to others, one of which is vacant, and one of which is held for future
development. The Partnership also owns 15 properties, 13 of which are leased
to others and two of which are held for future development.
(2) The Partnership's principal office is located in Memphis, TN, and currently
comprises 53,340 square feet of floor area under a lease expiring on May 31,
2003, subject to renewal by the Partnership for a maximum of 60 months. In
addition, the Partnership owns a 25,149 square-foot manufacturing facility
in Cincinnati, OH and leases two other properties in Cincinnati, OH,
consisting of 36,000 square feet and 60,000 square feet for use as
manufacturing facilities.
(3) The average term of the remaining leases is six years, excluding renewal
options. The longest lease term will mature in 44 years and the shortest
lease term will mature in approximately four years, assuming the exercise of
all renewal options.
(4) The Partnership currently leases space in three malls which is used to
operate Perkins Cafe and Bakeries. These leases are not included in the
totals shown.
EMPLOYEES
As of September 30, 1997 the Partnership employed approximately 9,500
persons, of whom approximately 310 were administrative and manufacturing
personnel and the balance were restaurant personnel. Approximately 70% of the
restaurant personnel are part-time employees. The Partnership competes in the
job market for qualified restaurant management and operational employees. The
Partnership maintains ongoing restaurant management training programs and has on
its staff full-time restaurant training managers and a training director. The
Partnership believes that its restaurant management compensation and benefits
package compares favorably with those offered by its competitors. Management
believes its employee relations are good. None of Partnership's employees are
represented by a union.
GOVERNMENT REGULATION
The Partnership is subject to various federal, state and local laws
affecting its business. Restaurants generally are required to comply with a
variety of regulatory provisions relating to zoning of restaurant sites,
sanitation, health and safety and employment. No material amounts have been or
are expected to be expensed to comply with environmental protection regulations.
The Partnership is subject to a number of state laws regulating franchise
operations and sales. Those laws impose registration and disclosure requirements
on franchisors in the offer and sale of franchises and, in certain cases, also
apply substantive standards to the relationship between franchisor and
franchisee. The Partnership must also adhere to Federal Trade Commission
regulations governing disclosures in the sale of franchises.
The wage rates of the Partnership's hourly employees are affected by federal
and state minimum wage rate laws. Future increases in these rates could
materially affect the Partnership's cost of labor.
LEGAL PROCEEDINGS
The Partnership is a party to various legal proceedings in the ordinary
course of business. Management does not believe that these proceedings, either
individually or in the aggregate, are likely to have a material adverse effect
on the Partnership's financial position or results of operations.
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<PAGE>
BENEFICIAL OWNERSHIP OF UNITS AND TRANSACTIONS IN UNITS BY CERTAIN PERSONS
The following table sets forth information as of September 30, 1997 with
respect to persons who are known to the Partnership (based on statements filed
with the Commission pursuant to Section 13(d) or 13(g) of the Exchange Act) to
be the beneficial owner of more than five percent of any class of the
Partnership's voting securities.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS
- ---------------------------------------------- ---------------------------------- ------------------ -------------
<S> <C> <C> <C>
Depositary Units Representing Limited Perkins Restaurants, Inc. 5,043,000) 48.1%
Partnership Interests in the Partnership 1 Pierce Place (direct
Suite 100 E
Itasca, IL 60143
</TABLE>
The General Partner is wholly owned by PRI, which is in turn wholly owned by
TRC. TRC is principally owned by Harrah's (33.2%), Donald N. Smith (33.2%) and
Equitable (28.1%). Pursuant to the terms of a certain Stockholders Agreement
dated November 21, 1985 (the "Stockholders Agreement") among TRC's stockholders,
the voting and disposition of the shares of TRC are subject to numerous
restrictions. Significant stockholder and director actions (including certain
transactions in TRC's assets and the disposition of TRC's indirect investment in
Perkins), as defined in the By-Laws of TRC, PRI and PMC, must be approved by a
unanimous vote of the Board of Directors of the company proposing to take any
such action.
The following table sets forth the number of Units beneficially owned either
directly or indirectly on September 30, 1997 by certain directors and the
executive officers of the Partnership, including all directors and officers as a
group:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL OF BENEFICIAL CLASS
TITLE OF CLASS OWNER (2) OWNERSHIP(1) (* LESS THAN 1%)
- -------------------------------------------- ------------------------------ ------------------ -------------------
<S> <C> <C> <C>
Depositary Units Representing Limited Lee N. Abrams 10,900 *
Partnership Interests in the Partnership
" Richard K. Arras 34,560 *
" Charles L. Atwood 0 *
" Steven L. Ezzes 500 *
" Michael D. Kelly 12,040 *
" Charles A. Ledsinger 500 *
" Steven R. McClellan 10,000 *
" D. Michael Meeks 1,000 *
" Donald N. Smith 1,674,276 15.9%
" Jack W. Willingham 10,840 *
" Donald F. Wiseman 8,580 *
" All Directors and Officers as 1,828,881 17.4%
a group
</TABLE>
- ------------------------
(1) Mr. Smith's Units are owned indirectly through Mr. Smith's 33.2% ownership
of TRC, the sole shareholder of PRI. All other Units are owned directly.
(2) The business address of each of these persons is c/o Perkins Family
Restaurants, L.P., 6075 Poplar Avenue, Suite 800, Memphis, TN 38119-4709.
None of PMC, PRI or TRC or their respective affiliates has purchased,
transferred or sold any Units within the past 60 days.
For certain information concerning the directors and executive officers of
PMC, PRI and TRC, see Schedule I to this Proxy Statement.
46
<PAGE>
SUMMARY FINANCIAL DATA
Set forth below is a summary of certain financial and operating data with
respect to the Partnership. More comprehensive financial information is included
in the Partnership's Form 10-K for the year ended December 31, 1996, the
Partnership's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997, and September 30, 1997 and other documents filed by the
Partnership with the Commission. The following summary is qualified in its
entirety by reference to such reports and other documents and all of the
financial information (including any related notes) contained therein. The
Partnership's audited financial statements included in its 1996 Form 10-K as
filed with the Commission are incorporated herein by reference. The
Partnership's 1996 Form 10-K and other documents should be available for
inspection or copying as discussed above under "Where You Can Find More
Information."
47
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER UNIT DATA AND RATIO OF EARNINGS TO FIXED CHARGES)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED FOR THE YEAR ENDED DECEMBER 31,
SEPTEMBER 30, 1997 ----------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INCOME DATA:
Revenues.................................. $ 199,672 $ 252,793 $ 245,751 $ 221,902 $ 212,634 $ 195,151
Net Income (a)............................ $ 11,770 $ 13,522 $ 9,796 $ 12,008 $ 12,602 $ 15,353
Net Income Per Unit (a)................... $ 1.13 $ 1.30 $ 0.94 $ 1.16 $ 1.21 $ 1.48
Weighted Average Equivalent Units
Outstanding............................. 10,338 10,289 10,269 10,275 10,274 10,258
Cash Distribution Declared Per Unit....... $ 0.975 $ 1.30 $ 1.30 $ 1.30 $ 1.30 $ 1.30
Book Value Per Unit (Unaudited)........... $ 6.06 $ 5.87 $ 5.83 $ 6.24 $ 6.37 $ 6.45
Ratio of Earnings to Fixed Charges
(Unaudited) (b)......................... 3.16x 2.79x 2.32x 2.94x 3.22x 4.15x
BALANCE SHEET DATA:
Total Assets.............................. $ 156,204 $ 155,656 $ 161,829 $ 150,407 $ 131,709 $ 125,972
Long-Term Debt............................ $ 43,026 $ 48,244 $ 57,850 $ 39,875 $ 22,600 $ 17,875
Capital Leases............................ $ 7,434 $ 8,573 $ 8,810 $ 10,862 $ 13,194 $ 15,321
</TABLE>
- ------------------------
(a) Excluding non-recurring items, net income for 1995 and 1994 would have been
$12,092,000 or $1.17 per unit and $13,868,000 or $1.34 per unit,
respectively.
(b) The ratio of earnings to fixed charges is computed by dividing (i) the sum
of pre-tax income (equivalent to net income as the Partnership is not
subject to federal income taxes), minority interest, amortization of
previously capitalized interest and fixed charges (excluding capitalized
interest) by (ii) fixed charges. Fixed charges consist of total interest
incurred, amortization of debt financing costs and the portion of rental
expense on operating leases considered to represent interest cost.
48
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
BALANCE SHEETS
(IN THOUSANDS EXCEPT UNIT AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
------------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................... $ 2,054 $ 2,737
Receivables, less allowance for doubtful accounts of $604
and $430.................................................. 7,446 6,285
Inventories, at the lower of first-in, first-out cost or
market.................................................... 4,150 4,234
Prepaid expenses and other current assets................... 1,886 1,551
-------- ------------
Total current assets........................................ 15,336 14,807
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation and amortization............................. 114,312 115,086
NOTES RECEIVABLE, less allowance for doubtful accounts of $6
and $10................................................... 558 805
INTANGIBLE AND OTHER ASSETS, net of accumulated amortization
of $27,324 and $26,451.................................... 25,798 24,958
-------- ------------
$ 156,204 $ 155,656
-------- ------------
-------- ------------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt........................ $ 4,624 $ 4,356
Current maturities of capital lease obligations............. 1,430 1,683
Accounts payable............................................ 12,546 8,878
Accrued expenses............................................ 14,932 14,235
Distributions payable....................................... 3,478 3,479
-------- ------------
Total current liabilities................................... 37,010 32,631
CAPITAL LEASE OBLIGATIONS, less current maturities.......... 7,434 8,573
LONG-TERM DEBT, less current maturities..................... 43,026 48,244
OTHER LIABILITIES........................................... 5,192 4,651
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
General partner............................................. 636 615
Limited partners (10,487,495 and 10,492,930 Units issued and
outstanding).............................................. 64,556 63,220
Deferred compensation related to restricted units........... (1,650) (2,278)
-------- ------------
Total Partners' Capital..................................... 63,542 61,557
-------- ------------
$ 156,204 $ 155,656
-------- ------------
-------- ------------
</TABLE>
49
<PAGE>
MARKET FOR PARTNERSHIP'S UNITS; DISTRIBUTIONS
Units of the Partnership are traded on the New York Stock Exchange under the
symbol PFR.
The following table sets forth the range of high and low closing prices of
Units for each full quarterly period for the two most recent years, as reported
by the New York Stock Exchange.
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED HIGH LOW
- ------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
March 31, 1995................................................................. 13 1/2 10 1/4
June 30, 1995.................................................................. 13 11
September 30, 1995............................................................. 12 3/4 11 1/2
December 31, 1995.............................................................. 12 3/8 11
March 31, 1996................................................................. 13 1/8 11 3/8
June 30, 1996.................................................................. 12 3/4 11 7/8
September 30, 1996............................................................. 12 7/8 11 3/4
December 31, 1996.............................................................. 13 1/2 12 1/8
March 31, 1997................................................................. 14 7/8 12 5/8
June 30, 1997.................................................................. 13 5/8 10 3/8
September 30, 1997............................................................. 13 7/8 10 1/4
</TABLE>
As of September 30, 1997, the Partnership had approximately 10,487,495 Units
and as of September 30, 1997, approximately 1,436 Unitholders of record.
In the past two years, the Partnership has paid regular quarterly
distributions to Unitholders of $0.325 per Unit. If the Merger is consummated,
the Partnership's final quarterly distribution to Public Unitholders will be the
$0.325 per Unit cash distribution for the third quarter of the Partnership's
fiscal year paid to persons who were Unitholders of record on September 30,
1997. If the Merger is not consummated, no decision has been made as to whether
the Partnership would pay a distribution respecting the fourth quarter of the
Partnership's 1997 fiscal year. For periods beginning after December 31, 1997,
further distributions by the Partnership will be reduced and may be eliminated
if the Merger is not consummated.
WHERE YOU CAN FIND MORE INFORMATION
The Partnership files annual, quarterly and special reports and other
information with the SEC. You may read and copy any reports, statements or other
information we file at the SEC's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at "http:// www.sec.gov."
TRC and its related entities filed a "Rule 13e-3 Transaction Statement" on
Schedule 13E-3 with the SEC in connection with the Merger. As allowed by SEC
rules, this Proxy Statement does not contain all the information you can find in
the Schedule 13E-3 or its exhibits.
The SEC allows us to "incorporate by reference" information into this Proxy
Statement, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this Proxy Statement, except
for any information superseded by information in this Proxy Statement. This
Proxy Statement incorporates by reference the documents set forth below that we
have previously filed with the SEC.
1. Schedule 13E-3 Transaction Statement dated October 1, 1997, as amended.
2. Annual Report on Form 10-K for the year ended December 31, 1996.
50
<PAGE>
3. Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
4. Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
5. Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.
We are also incorporating by reference additional documents that we filed
with the SEC between the date of this Proxy Statement and the date of the
Special Meeting.
If you are a Unitholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC.
Documents incorporated by reference are available from us without charge,
excluding all exhibits, unless we have expressly incorporated by reference an
exhibit in this Proxy Statement. Unitholders may obtain documents incorporated
by reference in this Proxy Statement by requesting them in writing or by
telephone from Perkins Family Restaurants, L.P., 6075 Poplar Avenue, Suite 800,
Memphis, TN 38119-4709, Attn.: Investor Relations, telephone (888) 279-4542.
If you would like to request documents from us, please do so by November 15,
1997 to receive them before the Special Meeting.
You should rely only on the information contained or incorporated by
reference in this Proxy Statement to vote on the Merger Agreement and the
Merger. We have not authorized anyone to provide you with information that is
different from what is contained in this Proxy Statement. You should not assume
that the information contained in the Proxy Statement is accurate as of any date
other than the date of this Proxy Statement and nothing should create any
implication to the contrary.
51
<PAGE>
SCHEDULE I
THE PARTNERSHIP AND THE GENERAL PARTNER.
Set forth below is the name, citizenship, current business address,
principal occupation and employment history for at least the past five years of
each director and executive officer of the General Partner of the Partnership.
Except where otherwise indicated, the business address of each of the following
persons is c/o the Partnership, 6075 Poplar Avenue, Suite 800, Memphis, TN
38119-4709 and each of the following persons is a citizen of the United States.
DONALD N. SMITH
Donald N. Smith has been the Chairman of the Board and Chief Executive
Officer of PMC, PRI and TRC since 1986. He has been the Chairman of the Board
and Chief Executive Officer of Friendly Ice Cream Corporation ("FICC") since
1988. He is also a member of Perkins Restricted Limited Partnership Unit Plan
Committee.
LEE N. ABRAMS
Lee N. Abrams was elected a Director of PMC in September 1986 and appointed
Chairman of the Audit Committee for PMC in October 1986. He is a senior partner
in the Chicago, Illinois law firm of Mayer, Brown & Platt. He has been
associated with that firm since his graduation from the University of Michigan
Law School in 1957. He specializes in franchise and antitrust law. He is also a
Certified Public Accountant. Mr. Abrams' business address is Mayer, Brown &
Platt, 190 South LaSalle Street, Chicago, IL 60603-3441
STEVEN L. EZZES
Steven L. Ezzes was elected a Director of PMC, PRI, TRC and FICC and became
a member of Perkins Restricted Limited Partnership Unit Plan Committee in
February 1996. Since October 1996, Mr. Ezzes has been a Managing Director of
Scotia Capital Markets (U.S.A.), Inc. From January 1995 to October 1996, Mr.
Ezzes was a private investor and from May 1992 to January 1995, Mr. Ezzes was a
Managing Director of Lehman Brothers, Inc. Mr. Ezzes previously served as a
Director of PMC, PRI, TRC and FICC from January 1991 to May 1992. Mr. Ezzes is a
director of OzEmail, a company that provides internet telephony in Australia and
New Zealand.
CHARLES A. LEDSINGER, JR.
Charles A. Ledsinger, Jr. was elected a Director of PMC in October 1991. He
is also a member of Perkins Restricted Limited Partnership Unit Plan Committee.
Since May 1997, Mr. Ledsinger has served as Senior Vice President and Chief
Financial Officer of St. Joe Corporation. From June 1995 until May 1997, Mr.
Ledsinger was Senior Vice President and Chief Financial Officer of Harrah's
Entertainment, Inc. and from August 1996 to October 1996, Mr. Ledsinger served
as Treasurer of Harrah's Entertainment, Inc. For more than three years prior,
Mr. Ledsinger served as Senior Vice President and Chief Financial Officer of The
Promus Companies Incorporated, Harrah's former parent. Mr. Ledsinger is also a
director of TBC Corporation, a company specializing in the production and sale
of tires and batteries.
D. MICHAEL MEEKS
D. Michael Meeks was elected a Director of PMC and became a member of the
Audit Committee for PMC in August 1996. Mr. Meeks has been a private investor
for more than the past five years. Mr. Meeks previously served as a director of
PMC, PRI, TRC and FICC from December 1987 to October 1991.
S-1
<PAGE>
RICHARD K. ARRAS
Richard K. Arras has been President and Chief Operating Officer of PMC since
November 1988 and has held varying positions with Perkins since 1979.
CHARLES L. ATWOOD
Charles L. Atwood was elected a Director of PMC, PRI and TRC in July 1997.
He has been employed by Harrah's and its predecessors as Vice President and
Treasurer and in various other financial related positions for more than the
past five years. Mr. Atwood also serves on the board of directors of Interactive
Entertainment, Ltd.
WILLIAM S. FORGIONE
William S. Forgione was elected Vice President, Human Resources of PMC
effective August 11, 1997. From 1994 to August 1997, he was Vice President,
Human Resources of UT Medical Group, Inc. and from 1992 to 1994, Worldwide
Program Manager for Digital Equipment Corporation.
MICHAEL D. KELLY
Michael D. Kelly was elected Executive Vice President, Marketing, of PMC in
March 1993. From January 1991 to February 1993, Mr. Kelly was Vice President,
Marketing, for FICC.
STEVEN R. MCCLELLAN
Steven R. McClellan has served as Executive Vice President and Chief
Financial Officer of PMC since September 1996. From June 1994 to September 1996
Mr. McClellan was Executive Vice President and General Banking Group Head of
First Union National Bank of South Carolina, a subsidiary of First Union
Corporation. For more than two years prior, he was Senior Vice President of
NationsBank.
JACK W. WILLINGHAM
Jack W. Willingham was elected Executive Vice President, Restaurant
Development of PMC in April 1994. From July 1991 to April 1994, Mr. Willingham
served as Vice President, Corporate Development, of PMC.
JAMES F. BARRASSO
James F. Barrasso has been Vice President, Foodservice Development of PMC
since February 1994. For more than two years prior, he served as Vice President,
Operations Administration of PMC.
MICHAEL P. DONAHOE
Michael P. Donahoe has been Vice President, Controller of PMC since October
1993. He has also been Vice President, Controller and Treasurer of TRC and PRI
since January 1986 and November 1988, respectively. From May 1989 to October
1993, he was Vice President, Chief Financial Officer and Treasurer of PMC. He is
a Certified Public Accountant.
CLYDE J. HARRINGTON
Clyde J. Harrington was elected Vice President, Operations Services of PMC
in September 1996. From August 1995 to September 1996 he was Director, Systems
Operations of the Partnership and from March 1995 to August 1995 he served as
Director in Training for the Operating Partnership. From November 1992 to March
1995 Mr. Harrington served as Director, Operations for the Restaurant Division
S-2
<PAGE>
of PepsiCo., Inc. and from March 1992 to November 1992 he served as Director of
Delivery Development for Pizza Hut, Inc.
PATRICK W. ORTT
Patrick W. Ortt was elected Vice President, Operations--Eastern Division of
PMC in September 1996. From March 1993 to September 1996, Mr. Ortt served as
Director, Systems Operations of the Operating Partnership. For more than two
years prior, he was Vice President, Operations of Pasta Lovers Trattoria, Inc.
STEVEN J. PAHL
Steven J. Pahl was elected Vice President, Operations--Western Division of
PMC in September 1996. From November 1988 to September 1996, Mr. Pahl served as
Director, System Operations of the Operating Partnership.
ANTHONY C. SETA
Anthony C. Seta was elected Vice President, Research and Development of PMC
in April 1994. From August 1992 to April 1994, he served as Vice President, Food
and Beverage for Blackeyed Pea Restaurants, Inc. For more than a year prior, he
was the owner and chef of an independent restaurant. Mr. Seta also acted as a
consultant to Kenny Rogers Roasters from January 1992 to August 1992.
ROBERT J. WINTERS
Robert J. Winters was elected Vice President, Franchise Development of PMC
in October 1996. From March 1993 to October 1996, he served as Senior Director,
Franchise Development of PMC. For more than a year prior, he was Director,
Training and Development of PMC.
DONALD F. WISEMAN
Donald F. Wiseman has been Vice President, General Counsel and Secretary of
PMC since December 1991 and the Secretary of TRC and PRI since September 1997.
Members of PMC's Board of Directors serve until such time as their
successors are elected and qualified. Officers serve at the pleasure of the
Board of Directors.
PERKINS RESTAURANTS, INC. AND THE RESTAURANT COMPANY
Set forth below is the name, citizenship, principal occupation and
employment history for at least the past five years of each director and officer
of PRI and TRC. The principal executive offices of PRI and TRC are located at
One Pierce Place, Suite 100 East, Itasca, IL 60143-2615 and each of the
following persons is a citizen of the United States.
DONALD N. SMITH
Donald N. Smith has been the Chairman of the Board and Chief Executive
Officer of PMC, PRI and TRC, as well as FICC for more than the past 5 years. He
is also a member of Perkins Restricted Limited Partnership Unit Plan Committee.
STEVEN L. EZZES
Steven L. Ezzes was elected a Director of PMC, PRI, TRC and FICC and became
a member of Perkins Restricted Limited Partnership Unit Plan Committee in
February 1996. Since October 1996, Mr. Ezzes has been a Managing Director of
Scotia Capital Markets (U.S.A.), Inc. From January 1995 to
S-3
<PAGE>
October 1996, Mr. Ezzes was a private investor and from May 1992 to January
1995, Mr. Ezzes was a Managing Director of Lehman Brothers, Inc. Mr. Ezzes
previously served as a Director of PMC, PRI, TRC and FICC from January 1991 to
May 1992. Mr. Ezzes is a director of OzEmail, a company that provides internet
telephony in Australia and New Zealand.
CHARLES L. ATWOOD
Charles L. Atwood was elected a Director of PMC, PRI and TRC in July, 1997.
He has been employed by Harrah's and its predecessors as Vice President and
Treasurer and in various other financial related positions for more than the
past five years. Mr. Atwood also serves on the board of directors of Interactive
Entertainment, Ltd.
LARRY W. BROWNE
Larry W. Browne has served as Executive Vice President, Corporate Finance,
General Counsel and Secretary of TRC and PRI since November 1985. From 1988
until December 1996, Mr. Browne served as Senior Vice President, Corporate
Finance of the Partnership. Since October 1988, Mr. Browne has served as
Executive Vice President, Corporate Finance, General Counsel and Clerk of FICC.
MICHAEL P. DONAHOE
Michael P. Donahoe has been Vice President, Controller of PMC since October
1993. He has also been Vice President, Controller and Treasurer of TRC and PRI
since January 1986 and November 1988, respectively. From May 1989 to October
1993, he was Vice President, Chief Financial Officer and Treasurer of PMC. He is
a Certified Public Accountant.
DONALD F. WISEMAN
Donald F. Wiseman has been Vice President, General Counsel and Secretary of
PMC since December 1991 and the Secretary of TRC and PRI since September 1997.
S-4
<PAGE>
ANNEX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
THE RESTAURANT COMPANY,
PERKINS ACQUISITION CORP.
AND
PERKINS FAMILY RESTAURANTS, L.P.
DATED AS OF SEPTEMBER 11, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER
<TABLE>
<S> <C>
SECTION 1.01 The Merger.............................................................. A-3
SECTION 1.02 Effective Time; Closing................................................. A-3
SECTION 1.03 Effect of the Merger.................................................... A-3
SECTION 1.04 Agreement of Limited Partnership........................................ A-4
SECTION 1.05 Conversion of Securities; Merger Consideration.......................... A-4
SECTION 1.06 Surrender of Units...................................................... A-4
SECTION 1.07 Restricted Limited Partnership Unit Plan................................ A-5
SECTION 1.08 Redemption.............................................................. A-5
SECTION 1.09 PROC Merger............................................................. A-5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PERKINS
SECTION 2.01 Organization and Qualification.......................................... A-5
SECTION 2.02 Capitalization.......................................................... A-6
SECTION 2.03 Authority Relative to this Agreement.................................... A-6
SECTION 2.04 No Conflict; Required Filings and Consents.............................. A-6
SECTION 2.05 Compliance.............................................................. A-7
SECTION 2.06 Litigation.............................................................. A-7
SECTION 2.07 SEC Filings; Financial Statements....................................... A-7
SECTION 2.08 Proxy Statement......................................................... A-7
SECTION 2.09 Brokers................................................................. A-8
SECTION 2.10 Fairness Opinion........................................................ A-8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MERGERCO. AND TRC
SECTION 3.01 Corporate Organization.................................................. A-8
SECTION 3.02 Authority Relative to this Agreement.................................... A-8
SECTION 3.03 No Conflict; Required Filings and Consents.............................. A-8
SECTION 3.04 Proxy Statement......................................................... A-9
SECTION 3.05 Brokers................................................................. A-9
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.01 Meeting of Unitholders.................................................. A-9
SECTION 4.02 Proxy Statement and Schedule 13E-3...................................... A-9
SECTION 4.03 Further Action; Reasonable Best Efforts................................. A-10
SECTION 4.04 Public Announcements.................................................... A-10
SECTION 4.05 Financing............................................................... A-10
SECTION 4.06 Updated Fairness Opinion................................................ A-10
SECTION 4.07 Distributions........................................................... A-10
SECTION 4.08 Capital Contributions................................................... A-10
ARTICLE V
CONDITIONS TO THE MERGER
SECTION 5.01 Conditions to Each Party's Obligation to Effect the Merger.............. A-11
SECTION 5.02 Additional Conditions to Obligations of TRC and MergerCo. to Effect the
Merger.............................................................................. A-11
SECTION 5.03 Additional Conditions to Obligation of Perkins to effect the Merger..... A-11
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01 Termination............................................................. A-12
SECTION 6.02 Effect of Termination................................................... A-12
SECTION 6.03 Fees and Expenses....................................................... A-12
SECTION 6.04 Amendment............................................................... A-12
SECTION 6.05 Waiver.................................................................. A-12
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01 Non-Survival of Representations, Warranties and Agreements.............. A-12
SECTION 7.02 Notices................................................................. A-13
SECTION 7.03 Certain Definitions..................................................... A-13
SECTION 7.04 Severability............................................................ A-14
SECTION 7.05 Entire Agreement; Assignment............................................ A-14
SECTION 7.06 Parties in Interest..................................................... A-14
SECTION 7.07 Specific Performance.................................................... A-14
SECTION 7.08 Governing Law........................................................... A-14
SECTION 7.09 Headings................................................................ A-14
SECTION 7.10 Counterparts............................................................ A-14
</TABLE>
A-2
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of September 11,
1997 (this "AGREEMENT") among The Restaurant Company, a Delaware corporation
("TRC"), Perkins Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Perkins Management Company, Inc. ("MERGERCO."), and Perkins Family
Restaurants, L.P., a Delaware limited partnership ("PERKINS").
WHEREAS, the Board of Directors (the "BOARD") of Perkins Management Company,
Inc. ("PMC" or in its capacity as the sole general partner of Perkins, the
"GENERAL PARTNER"), at a meeting duly called and held on September 11, 1997, has
(A) determined that this Agreement and the transactions contemplated hereby (the
"TRANSACTIONS") are fair to and in the best interests of holders (other than
TRC, its affiliates and the officers, directors and key employees of TRC and its
affiliates) of depositary units ("UNITS") representing limited partners'
interests in Perkins (the "PUBLIC UNITHOLDERS"), (B) approved and adopted this
Agreement and the Transactions, including the merger of MergerCo. with and into
Perkins (the "MERGER") in accordance with the Delaware General Corporation Law
(the "DGCL") and the Delaware Revised Uniform Limited Partnership Act ("DRULPA")
and upon the terms and subject to the conditions set forth herein, and (C)
recommended that the Public Unitholders approve and adopt this Agreement and the
Transactions; and
WHEREAS, Morgan Keegan & Company, Inc. ("MORGAN KEEGAN") has delivered to
the Board a written opinion that the consideration to be received by the Public
Unitholders pursuant to the Merger is fair to the Public Unitholders from a
financial point of view (the "MORGAN KEEGAN OPINION"); and
WHEREAS, the Boards of Directors of MergerCo. and TRC have each determined
that this Agreement and the Transactions, including the Merger, are in the best
interests of the stockholders of MergerCo. and TRC; and
WHEREAS, in order to protect the interests of the Public Unitholders, the
Board has determined that the Merger and this Agreement require the affirmative
vote of the holders of a majority of the Units that are held by the Public
Unitholders (the "PUBLIC UNITS") actually voting on the Merger ("PUBLIC
UNITHOLDER APPROVAL");
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, TRC,
MergerCo. and the General Partner, on behalf of Perkins, hereby agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER. Upon the terms and subject to the conditions set
forth in ARTICLE V, and in accordance with Section 263 of the DGCL and Section
17-211 of the DRULPA, at the Effective Time (as hereinafter defined) MergerCo.
shall be merged with and into Perkins. As a result of the Merger, the separate
corporate existence of MergerCo. shall cease and Perkins shall continue as the
surviving partnership after the Merger (the "SURVIVING PARTNERSHIP").
SECTION 1.02 EFFECTIVE TIME; CLOSING. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in ARTICLE
V, the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger with the Secretary of State of the State of Delaware (the
"CERTIFICATE OF MERGER"), in such form as is required by, and executed in
accordance with the relevant provisions of, the DGCL and the DRULPA (the date
and time of such filing being the "EFFECTIVE TIME"). Prior to such filing, a
closing shall be held at the offices of Mayer, Brown & Platt, 190 South LaSalle
Street, Chicago, Illinois, 60603, or such other place as the parties shall
agree, for the purpose of confirming the satisfaction or waiver, as the case may
be, of the conditions set forth in ARTICLE V (the "CLOSING").
SECTION 1.03 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the DGCL and
DRULPA. Without limiting the generality of the
A-3
<PAGE>
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of MergerCo. and Perkins shall vest in the
Surviving Partnership, and all debts, liabilities, obligations, restrictions,
disabilities and duties of MergerCo. and Perkins shall become the debts,
liabilities, obligations, restrictions, disabilities and duties of the Surviving
Partnership.
SECTION 1.04 AGREEMENT OF LIMITED PARTNERSHIP. The Agreement of Limited
Partnership of Perkins Family Restaurants, L.P. (the "PARTNERSHIP AGREEMENT")
shall be the Agreement of Limited Partnership of the Surviving Partnership and
thereafter may be amended as provided in the Partnership Agreement or by law.
This Agreement shall effect no amendment or other change whatsoever to the
Partnership Agreement except that the Partnership Agreement shall be amended as
provided in EXHIBIT 1.04.
SECTION 1.05 CONVERSION OF SECURITIES; MERGER CONSIDERATION. At the
Effective Time, by virtue of the Merger and without any action on the part of
TRC, MergerCo. or the holders of any of the following securities:
(a) Each Public Unit and each Unit held by any person other than TRC or
its direct or indirect subsidiaries, including any Units that are then
outstanding but subject to restriction and held by participants in the Unit
Plan (as hereinafter defined), shall, upon surrender in the manner provided
in SECTION 1.06 of the depositary receipt that formerly evidenced such Unit
(each a "RECEIPT"), be canceled and shall be converted automatically into
the right to receive an amount equal to $14 per Unit in cash (the "MERGER
CONSIDERATION") payable, without interest, to the holder of such Unit;
(b) Each general or limited partnership interest of Perkins owned by TRC
or any direct or indirect subsidiary of TRC immediately prior to the
Effective Time shall remain a general or limited partnership interest of the
Surviving Partnership and no payment or distribution shall be made with
respect thereto;
(c) Each Unit held in the treasury of Perkins immediately prior to the
Effective Time shall be canceled and retired and no payment shall be made
with respect thereto; and
(d) Each share of Common Stock, par value $.01 per share, of MergerCo.
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one Unit in the Surviving Partnership.
SECTION 1.06 SURRENDER OF UNITS. (a) Prior to the Effective Time, TRC
shall designate a bank or trust company to act as agent (the "PAYING AGENT") for
the holders of Units to receive the funds to which they shall become entitled
pursuant to SECTION 1.05(A). Promptly after the Effective Time, the Surviving
Partnership shall cause to be mailed to each person who was, at the Effective
Time, a holder of record of Units entitled to receive the Merger Consideration
pursuant to SECTION 1.05(A) a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Receipts
shall pass, only upon proper delivery of the Receipts to the Paying Agent) and
instructions for use in effecting the surrender of the Receipts pursuant to such
letter of transmittal. Upon surrender to the Paying Agent of a Receipt, together
with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
required pursuant to such instructions, the holder of such Receipt shall be
entitled to receive in exchange therefor the Merger Consideration for each Unit
formerly evidenced by such Receipt, and such Receipt shall then be canceled. No
interest shall accrue or be paid on the Merger Consideration payable upon the
surrender of any Receipt for the benefit of the holder of such Receipt. If
payment of the Merger Consideration is to be made to a person other than the
person in whose name the surrendered Receipt is registered on the books of the
depositary, it shall be a condition of payment that the Receipt so surrendered
shall be endorsed properly or otherwise be in proper form for transfer and that
the person requesting such payment shall have paid all transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered
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holder of the Receipt surrendered or shall have established to the satisfaction
of the Surviving Partnership that such taxes either have been paid or are not
applicable.
(b) When and as needed, TRC, MergerCo. or Perkins shall deposit, or
cause to be deposited, in trust with the Paying Agent the Merger
Consideration to which the holders of Units shall be entitled at the
Effective Time pursuant to SECTION 1.05(A) hereof.
(c) The Merger Consideration shall be invested by the Paying Agent;
PROVIDED, that such investments shall be limited to direct obligations of
the United States of America, obligations for which the full faith and
credit of the United States of America is pledged to provide for the payment
of principal and interest, commercial paper rated of the highest quality by
Moody's Investors Services, Inc. or Standard & Poor's, or certificates of
deposit issued by a commercial bank having at least $1,000,000,000 in
assets; and PROVIDED, FURTHER, that no loss on investment made pursuant to
this SECTION 1.06(C) shall relieve TRC or MergerCo. of its obligation to pay
the Merger Consideration pursuant to SECTION 1.05(A).
(d) At any time following the sixth month after the Effective Time, the
Surviving Partnership shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent
and not disbursed to holders of Units (including, without limitation, all
interest and other income received by the Paying Agent in respect of all
funds made available to it), and thereafter such holders shall be entitled
to look to the Surviving Partnership (subject to abandoned property, escheat
and other similar laws) only as general creditors thereof with respect to
any Merger Consideration that may be payable upon due surrender of the
Receipts held by them. Notwithstanding the foregoing, neither the Surviving
Partnership nor the Paying Agent shall be liable to any holder of a Unit for
any Merger Consideration delivered in respect of such Unit to a public
official pursuant to any abandoned property, escheat or other similar law.
(e) After the close of business on the day of the Effective Time, there
shall be no further registration of transfers of Units on the records of the
depositary for the Units. From and after the Effective Time, the holders of
Units outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such Units except as otherwise provided
herein or by applicable law.
SECTION 1.07 RESTRICTED LIMITED PARTNERSHIP UNIT PLAN. After the date of
this Agreement, Perkins shall not issue any Units pursuant to its Restricted
Limited Partnership Unit Plan of October 22, 1987 (the "UNIT PLAN") and shall
terminate the Unit Plan, effective as of the Effective Date.
SECTION 1.08 REDEMPTION. Immediately after the Effective Time, the
Surviving Partnership shall redeem, for $14 per Unit, all Units received by PMC
in connection with the conversion of MergerCo.'s common stock in the Merger.
SECTION 1.09 PROC MERGER. Prior to the Effective Time, Perkins will, and
TRC will cause PMC to, cause Perkins Restaurants Operating Company, L.P.
("PROC") to be merged with and into Perkins with Perkins being the surviving
partnership in such merger, on such terms as Perkins, TRC and PMC may determine.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PERKINS
Perkins hereby represents and warrants to MergerCo. and TRC that:
SECTION 2.01 ORGANIZATION AND QUALIFICATION. Perkins and each partnership
controlling, controlled by or under common control with Perkins (an "AFFILIATED
PARTNERSHIP"), including, without limitation, PROC, is a partnership duly
organized, validly existing and in good standing under Delaware law and has the
requisite power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so
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organized, existing or in good standing or to have such power, authority and
governmental approvals would not, individually or in the aggregate, have a
Material Adverse Effect (as defined below). Each of Perkins and its Affiliated
Partnerships is duly qualified to do business, is in good standing and has
obtained all necessary licenses and approvals in all jurisdictions where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have a Material Adverse Effect. When used in
connection with Perkins or any Affiliated Partnership, the term "MATERIAL
ADVERSE EFFECT" means any change or effect that is or is reasonably likely to be
materially adverse to the business, operations, properties, condition (financial
or otherwise), assets or liabilities (including, without limitation, contingent
liabilities), results of operations or prospects of Perkins and its Affiliated
Partnerships taken as a whole. A true and complete list of all Affiliated
Partnerships, together with the jurisdiction of organization of each Affiliated
Partnership and the percentage of ownership in each Affiliated Partnership owned
by Perkins, is set forth in SECTION 2.01 of the Disclosure Schedule to this
Agreement previously delivered by Perkins to TRC (the "DISCLOSURE SCHEDULE").
Except as disclosed in such SECTION 2.01, Perkins does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
SECTION 2.02 CAPITALIZATION. As of the date hereof, (i) 10,487,495 Units
are issued and outstanding, (ii) 5,043,000 Units are held by Perkins
Restaurants, Inc., a wholly owned subsidiary of TRC, (iii) 5,268,410 Units are
held by the Public Unitholders and (iv) 176,085 Units are held by employees of
TRC and its affiliates. Perkins owns a 99% limited partner's interest in PROC,
the entity through which the operations of Perkins are conducted. PMC, a wholly
owned subsidiary of Perkins Restaurants, Inc., a wholly owned subsidiary of TRC,
is the sole general partner of Perkins and PROC. PMC owns a 1% general partner's
interest in each partnership. Except as set forth in SECTION 4.08, there are no
options, warrants or rights, agreements, arrangements or commitments of any
character relating to the issued or unissued Units of Perkins or any Affiliated
Partnership or obligating Perkins or any Affiliated Partnership to issue or sell
any Units, or other partnership interests in, Perkins or any Affiliated
Partnership. Except as set forth in SECTION 1.08, there are no outstanding
contractual obligations of Perkins or any Affiliated Partnership to repurchase,
redeem or otherwise acquire any Units or any partnership interests of any
Affiliated Partnership.
SECTION 2.03 AUTHORITY RELATIVE TO THIS AGREEMENT. The General Partner has
all necessary partnership power and authority to execute and deliver this
Agreement on behalf of Perkins. The execution and delivery of this Agreement by
the General Partner, on behalf of Perkins, and the consummation by Perkins and
the General Partner of the Transactions have been duly and validly authorized by
all necessary partnership action and no other partnership proceedings on the
part of Perkins or the General Partner are necessary to authorize this Agreement
or to consummate the Transactions (other than, with respect to the Merger, (i)
the approval and adoption of this Agreement by a Majority Interest (as defined
in the Partnership Agreement), (ii) Public Unitholder Approval as required by
the terms of this Agreement, and (iii) the filing and recordation of appropriate
merger documents as required by the DGCL and DRULPA). This Agreement has been
duly and validly executed and delivered by the General Partner, on behalf of
Perkins, and, assuming the due authorization, execution and delivery by
MergerCo. and TRC, constitutes a legal, valid and binding obligation of Perkins,
enforceable against Perkins in accordance with its terms.
SECTION 2.04 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution
and delivery of this Agreement by the General Partner, on behalf of Perkins, do
not, and the performance of this Agreement by Perkins will not, (i) conflict
with or violate the organizational documents of Perkins or any Affiliated
Partnership, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Perkins or any Affiliated Partnership or by
which any property or asset of Perkins or any Affiliated Partnership is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any right of
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termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Perkins or
any Affiliated Partnership pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Perkins or any Affiliated Partnership is a party or by which
Perkins or any Affiliated Partnership or any of their respective properties is
bound or affected except, in the case of this clause (iii), for breaches,
defaults, rights, liens and encumbrances which would not individually or in the
aggregate have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by the General Partner, on
behalf of Perkins, do not, and the performance of this Agreement by Perkins will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, domestic or
foreign, except (i) for applicable requirements, if any, of the Securities and
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), state securities
or "blue sky" laws ("BLUE SKY LAWS") and state takeover laws, and filing and
recordation of appropriate merger documents as required by the DGCL and the
DRULPA and (ii) where failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not prevent or delay
consummation of the Merger, or otherwise prevent Perkins from performing its
obligations under this Agreement, and would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 2.05 COMPLIANCE. Neither Perkins nor any Affiliated Partnership is
in conflict with, or in default or violation of, (i) any law, rule, regulation,
order, judgment or decree applicable to Perkins or any Affiliated Partnership or
by which any property or asset of Perkins or any Affiliated Partnership is bound
or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Perkins or any Affiliated Partnership is a party or by which Perkins or any
Affiliated Partnership or any property or asset of Perkins or any Affiliated
Partnership is bound or affected, except for any such conflicts, defaults or
violations that would not, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 2.06 LITIGATION. Except as set forth in the SEC Filings (as
hereinafter defined) or SECTION 2.06 of the Disclosure Schedule, there are no
actions, suits, claims, investigations or proceedings pending or threatened
against, relating to, involving or otherwise affecting Perkins or any Affiliated
Partnership or any of their respective properties or assets before any court,
governmental agency, commission, or administrative or regulatory authority
which, if adversely decided, in the aggregate, would have a Material Adverse
Effect or would affect the consummation of the Transactions.
SECTION 2.07 SEC FILINGS; FINANCIAL STATEMENTS. As of their respective
dates, none of the reports, statements and registration statements filed by
Perkins with the SEC since January 1, 1994 (including, without limitation,
Perkins' (i) Annual Report on Form 10-K for the year ended December 31, 1996,
and (ii) Quarterly Reports on Form 10-Q for the three months ended March 31,
1997 and the six months ended June 30, 1997 (the "SEC FILINGS") contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Perkins included in the SEC Filings
present fairly the financial position and the results of operations and cash
flows of Perkins as of the dates or for the periods indicated therein in
conformity with generally accepted accounting principles applied on a consistent
basis (except as otherwise indicated in such financial statements or the notes
thereto), subject, in the case of unaudited interim consolidated financial
statements, to normal recurring year-end adjustments.
SECTION 2.08 PROXY STATEMENT. The proxy statement to be sent to the
holders of Units (such proxy statement, as amended or supplemented, being
referred to herein as the "PROXY STATEMENT"), shall not, at the date the Proxy
Statement (or any amendment or supplement thereto) is first mailed to the
holders of Units, at the time of the Unitholders' Meeting (as hereinafter
defined) and at the Effective
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Time, be false or misleading with respect to any material fact, or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in the light of the circumstances under which they
are made, not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Unitholders'
Meeting which shall have become false or misleading. The Proxy Statement shall
comply in all material respects as to form with the requirements of the Exchange
Act and the rules and regulations thereunder.
SECTION 2.09 BROKERS. No broker, finder or investment banker (other than
Morgan Keegan) is entitled to any brokage, finder's or other fee or commission
in connection with the Transactions based upon arrangements made by or on behalf
of Perkins. Perkins has heretofore furnished to TRC a complete and correct copy
of all agreements between Perkins and Morgan Keegan pursuant to which such firm
would be entitled to any payment relating to the Transactions.
SECTION 2.10 FAIRNESS OPINION. The Board has received from Morgan Keegan
the Morgan Keegan Opinion.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MERGERCO. AND TRC
MergerCo. and TRC hereby, jointly and severally, represent and warrant to
Perkins that:
SECTION 3.01 CORPORATE ORGANIZATION. Each of MergerCo. and TRC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power, authority
and governmental approvals would not, individually or in the aggregate, have a
TRC Material Adverse Effect (as defined below). When used in connection with
MergerCo. or TRC, the term "TRC MATERIAL ADVERSE EFFECT" means any change or
effect that is reasonably likely to be materially adverse to the business,
operations, properties, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities), results of
operations or prospects of MergerCo. or TRC and their respective subsidiaries
taken as a whole.
SECTION 3.02 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of MergerCo. and
TRC has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by MergerCo. and TRC
and the consummation by MergerCo. and TRC of the Transactions have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of MergerCo. or TRC are necessary to authorize this
Agreement or to consummate the Transactions (other than, with respect to the
Merger, the filing and recordation of appropriate merger documents as required
by the DGCL and DRULPA). This Agreement has been duly and validly executed and
delivered by MergerCo. and TRC and, assuming the due authorization, execution
and delivery by Perkins, constitutes a legal, valid and binding obligation of
each of MergerCo. and TRC enforceable against each of MergerCo. and TRC in
accordance with its terms.
SECTION 3.03 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution
and delivery of this Agreement by MergerCo. and TRC do not, and the performance
of this Agreement by MergerCo. and TRC will not, (i) conflict with or violate
the articles of incorporation or by-laws or similar organizational documents of
either MergerCo. or TRC, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to MergerCo. or TRC or by which
any property or asset of either of them is bound or affected, or (iii) result in
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of MergerCo. or
TRC pursuant to, any note, bond, mortgage, indenture, contract,
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agreement, lease, license, permit, franchise or other instrument or obligation
to which MergerCo. or TRC is a party or by which MergerCo. or TRC or any
property or asset of either of them is bound or affected, except for any such
breaches, defaults or other occurrences which would not, individually or in the
aggregate, have a TRC Material Adverse Effect.
(b) The execution and delivery of this Agreement by MergerCo. and TRC do not,
and the performance of this Agreement by MergerCo. and TRC will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Exchange Act, the HSR Act, Blue Sky
Laws and state takeover laws and filing and recordation of appropriate merger
documents as required by the DGCL and the DRULPA and (ii) where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay consummation of the Merger,
or otherwise prevent MergerCo. or TRC from performing their respective
obligations under this Agreement.
SECTION 3.04 PROXY STATEMENT. The information supplied by TRC for
inclusion in the Proxy Statement will not, on the date the Proxy Statement (or
any amendment or supplement thereto) is first mailed to the holders of Units, at
the time of the Unitholders' meeting and at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which it
is made, is false or misleading with respect to any material fact, or omits to
state any material fact required to be stated therein or necessary in order to
make the statements therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies in connection with the Unitholders' Meeting which shall have become
false or misleading. Notwithstanding the foregoing, MergerCo. and TRC make no
representation or warranty with respect to any information supplied by Perkins
or any of its representatives which is contained in any of the foregoing
documents.
SECTION 3.05 BROKERS. No broker, finder or investment banker (other than
Smith Barney, Inc.) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of MergerCo. or TRC.
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.01 MEETING OF UNITHOLDERS. (a) The General Partner shall, in
accordance with applicable law and the Partnership Agreement, (i) duly call,
give notice of, convene and hold a meeting of the holders of Units as soon as
practicable following the date hereof for the purpose of considering and taking
action on this Agreement and the Transactions (the "UNITHOLDERS' MEETING") and
(ii) subject to its fiduciary duties under applicable law, (A) include in the
Proxy Statement the recommendation of the General Partner that the Public
Unitholders approve and adopt this Agreement and the Transactions and (B) use
its reasonable best efforts to obtain such approval and adoption. At the
Unitholders' Meeting, TRC shall, if Public Unitholder Approval is obtained,
cause all Units and general partners' interests then owned by it and its direct
and indirect wholly owned subsidiaries to be voted in favor of the approval and
adoption of this Agreement and the Transactions.
SECTION 4.02 PROXY STATEMENT AND SCHEDULE 13E-3. (a) Perkins shall file
the Proxy Statement with the SEC under the Exchange Act, and shall use its
reasonable best efforts to have the Proxy Statement cleared by the SEC. TRC and
Perkins shall cooperate with each other in the preparation of the Proxy
Statement, and each of Perkins, TRC and MergerCo. agrees to use its reasonable
best efforts, after consultation with the other parties hereto, to respond
promptly to all comments of and requests by the SEC and to cause the Proxy
Statement and all required amendments and supplements thereto to be mailed to
the holders of Units at the earliest practicable time.
(b) TRC and Perkins shall together prepare and file with the SEC a Transaction
Statement on Schedule 13E-3 (the "SCHEDULE 13E-3") under the Exchange Act at the
time of filings made in connection with the
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Proxy Statement, and shall file with the SEC appropriate amendments to the
Schedule 13E-3. The Schedule 13E-3 will comply as to form in all material
respects with the Exchange Act and the rules and regulations promulgated
thereunder.
SECTION 4.03 FURTHER ACTION; REASONABLE BEST EFFORTS. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
Transactions, including, without limitation, making and facilitating a prompt
filing under the HSR Act and using its reasonable best efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with Perkins and its
Affiliated Partnerships as are necessary for the consummation of the
Transactions and to fulfill the conditions to the Merger. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each
party to this Agreement shall use their reasonable best efforts to take all such
action.
SECTION 4.04 PUBLIC ANNOUNCEMENTS. TRC and Perkins shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to this Agreement or any Transaction and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by law.
SECTION 4.05 FINANCING. TRC shall use its reasonable best efforts to
obtain financing for aggregate funds sufficient to satisfy the obligations of
TRC, PMC, Perkins and MergerCo. hereunder, including, without limitation, the
obligation to pay the Merger Consideration pursuant to SECTION 1.05(A) and to
pay all related fees and expenses payable by TRC, PMC, Perkins and MergerCo. in
connection with the Merger and the other Transactions (the "FINANCING"). Perkins
shall use its reasonable best efforts to facilitate the Financing and at the
Closing shall be the borrower thereunder at TRC's request.
SECTION 4.06 UPDATED FAIRNESS OPINION. The Parties shall use their
reasonable best efforts to obtain from Morgan Keegan a written fairness opinion,
dated as of the date of the Proxy Statement, and otherwise substantially the
same as the Morgan Keegan Opinion (the "UPDATED MORGAN KEEGAN OPINION").
SECTION 4.07 DISTRIBUTIONS. Perkins shall make a final cash distribution
of $0.325 per Unit to Unitholders of record, as of September 30, 1997, for the
third quarter of Perkins' fiscal year, payable on or before November 20, 1997,
and between the date of such distribution and the Effective Time shall cease
making distributions.
SECTION 4.08 CAPITAL CONTRIBUTIONS. In order to prevent a "termination" of
the partnership for federal income tax purposes, TRC or one of its affiliates
agrees to contribute cash to Perkins in the amount of $4.410 million to acquire
newly issued Units of Perkins prior to the Effective Time and shall be entitled
to contribute any amount necessary to pay any costs incurred by Perkins or the
Affiliated Partnerships in connection with the repayment of their existing
indebtedness or any other transaction connected with the Merger; PROVIDED,
HOWEVER, that if the Merger is for any reason not consummated, such capital
contribution may be withdrawn and shall be repaid by Perkins promptly upon
notice from TRC or such affiliate. Any expense paid by TRC or its affiliates
pursuant to this SECTION 4.08 shall be specially allocated to the party paying
such expense in order to satisfy the "substantial economic effect" requirement
of Section 704(b) of the Internal Revenue Code of 1986, as amended.
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ARTICLE V
CONDITIONS TO THE MERGER
SECTION 5.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) This Agreement and the Transactions, including the Merger, shall
have been approved and adopted by a Majority Interest (as defined in the
Partnership Agreement) and by the affirmative vote of a majority of the
Public Units actually voting on the Merger;
(b) No governmental authority or other agency or commission or court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is then in
effect and has the effect of making the acquisition of Units by MergerCo. or
TRC or any affiliate of either of them illegal or otherwise restricting,
preventing or prohibiting consummation of the Transactions;
(c) Any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated; and
(d) Morgan Keegan shall have provided and not withdrawn the Updated
Morgan Keegan Opinion.
SECTION 5.02 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TRC AND MERGERCO. TO
EFFECT THE MERGER. The obligations of TRC and MergerCo. to effect the Merger
are further subject to the satisfaction or waiver of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Perkins contained in this Agreement shall be true and correct in all
material respects when made and on and as of the Effective Time, except for
changes contemplated by this Agreement, with the same force and effect as if
made on and as of the Effective Time, except for any representation or
warranty made or given as of a specified time, which shall have been true
and correct in all material respects as of such time;
(b) AGREEMENTS AND COVENANTS. Perkins shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Effective Time;
(c) NO MATERIAL ADVERSE EFFECT. Since the date of this Agreement, no
event shall have occurred or shall be reasonably expected to occur which
has, or is reasonably expected to have, a Material Adverse Effect;
(d) LITIGATION, ETC. There shall be no pending or threatened actions or
proceedings by any person against Perkins or its Affiliated Partnerships,
TRC, the General Partner, MergerCo., or any of their subsidiaries or any
director, officer or employee thereof challenging or in any way or in any
manner seeking to restrict or prohibit the Merger or any other Transaction
or seeking to obtain any damages against any person as a result of the
Merger or any other Transaction; and
(e) FINANCING. The Financing shall be available on terms satisfactory to
TRC.
SECTION 5.03 ADDITIONAL CONDITIONS TO OBLIGATION OF PERKINS TO EFFECT THE
MERGER. The obligation of Perkins to effect the Merger is further subject to
the satisfaction or waiver of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of TRC and MergerCo. contained in this Agreement shall be true and correct
in all material respects when made and on and as of the Effective Time,
except for changes contemplated by this Agreement, with the same force and
effect as if made on and as of the Effective Time, except for any
representation or warranty made or
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given as of a specified time, which shall have been true and correct in all
material respects as of such time; and
(b) AGREEMENTS AND COVENANTS. TRC and MergerCo. shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by them on or prior to
the Effective Time.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01 TERMINATION. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective
Time, notwithstanding any requisite approval and adoption of this Agreement and
the Transactions by the Public Unitholders:
(a) By mutual written consent duly authorized by the Boards of Directors
of MergerCo., TRC and the General Partner; or
(b) By either TRC or Perkins if (i) the Effective Time shall not have
occurred on or before February 28, 1998; PROVIDED, HOWEVER, that the right
to terminate this Agreement under this SECTION 6.01(B) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date or (ii) any court of
competent jurisdiction or other governmental authority shall have issued an
order, decree or ruling or taken any action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; or
(c) By Perkins if the Board shall have determined that it has a
fiduciary duty to withdraw its approval or recommendation of this Agreement,
the Merger or any other Transaction.
(d) By TRC if the Board shall have withdrawn or modified in a manner
adverse to TRC its approval or recommendation of this Agreement or the
Merger.
SECTION 6.02 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to SECTION 6.01, this Agreement shall forthwith become
void, and there shall be no liability on the part of any party hereto except as
set forth in SECTIONS 6.03 and 7.01; PROVIDED, HOWEVER, that neither anything
herein nor the termination of this Agreement shall relieve any party from
liability for any breach hereof.
SECTION 6.03 FEES AND EXPENSES. All fees, costs and expenses incurred in
connection with this Agreement and the Transactions shall be paid by the party
bearing such cost.
SECTION 6.04 AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of the Boards of Directors of TRC,
MergerCo. and the General Partner at any time prior to the Effective Time;
PROVIDED, HOWEVER, that after the approval and adoption of this Agreement and
the Transactions by the Public Unitholders, no amendment may be made which would
reduce the amount or change the type of consideration to which each Public
Unitholder shall be entitled upon consummation of the Merger. This Agreement may
not be amended except by an instrument in writing signed by the parties hereto.
SECTION 6.05 WAIVER. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any obligation or other
act of any other party hereto, (ii) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
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ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to SECTION 6.01, as the case may be, except that the agreements set
forth in Article I and SECTION 4.08 shall survive the Effective Time
indefinitely and those set forth in SECTION 6.02 and SECTION 6.03 shall survive
termination indefinitely.
SECTION 7.02 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this SECTION 7.02):
if to TRC or MergerCo.:
Michael P. Donahoe
The Restaurant Company
One Pierce Place
Suite 100E
Itasca, IL 60143
Facsimile: (630) 250-0382
if to Perkins:
Steven R. McClellan
Perkins Family Restaurants, L.P.
6075 Poplar Avenue
Memphis, TN 38119
Facsimile: (901) 766-6482
SECTION 7.03 CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "AFFILIATE" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or
is under common control with, such specified person;
(b) "BENEFICIAL OWNER" with respect to any Units means a person who
shall be deemed to be the beneficial owner of such Units (i) which such
person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its affiliates or associates
has, directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, warrants or options, or otherwise, or
(B) the right to vote pursuant to any agreement, arrangement or
understanding or (iii) which are beneficially owned, directly or indirectly,
by any other persons with whom such person or any of its affiliates or
associates or person with whom such person or any of its affiliates or
associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any Units;
(c) "BUSINESS DAY" means any day on which the principal offices of the
SEC in Washington D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of New York;
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(d) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting
securities, as trustee or executor, by contract or credit arrangement or
otherwise;
(e) "PERSON" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person" as
defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of a
government; and
(f) "SUBSIDIARY" or "SUBSIDIARIES' of Perkins, MergerCo., TRC, the
Surviving Partnership or any other person means an affiliate controlled by
such person, directly or indirectly, through one or more intermediaries.
SECTION 7.04 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 7.05 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned by operation of law or otherwise, except that
TRC and MergerCo. may assign all or any of their rights and obligations
hereunder to any affiliate of TRC provided that no such assignment shall relieve
the assigning party of its obligations hereunder if such assignee does not
perform such obligations.
SECTION 7.06 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Article I (which, solely from and after the Effective
Time, is intended to be for the benefit of the Public Unitholders).
SECTION 7.07 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 7.08 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State.
SECTION 7.09 HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 7.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, TRC, MergerCo. and Perkins have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
<TABLE>
<S> <C> <C>
THE RESTAURANT COMPANY
By: /s/ MICHAEL P. DONAHOE
------------------------------------------
Title: Vice President
PERKINS ACQUISITION CORP.
By: /s/ STEVEN R. MCCLELLAN
------------------------------------------
Title: President
PERKINS FAMILY RESTAURANTS, L.P.
By: PERKINS MANAGEMENT COMPANY, INC.
its General Partner
By: /s/ DONALD F. WISEMAN
------------------------------------------
Title: Vice President
</TABLE>
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