<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------------------------
--------------------------------------------------------
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE
SECURITIES EXCHANGE ACT OF 1934)
--------------------------------------------------------
--------------------------------------------------------
BERTUCCI'S, INC.
(NAME OF THE ISSUER)
BERTUCCI'S, INC.
TEN IDEAS, INC.
TEN IDEAS ACQUISITION CORP.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.005 per share
(TITLE OF CLASS OF SECURITIES)
0-19315
---------------------
(CUSIP NUMBER OF CLASS OF SECURITIES)
JAMES WESTRA, ESQ. DONALD H. SIEGEL, P.C.
HUTCHINS, WHEELER & DITTMAR POSTERNAK, BLANKSTEIN & LUND, L.L.P.
A PROFESSIONAL CORPORATION 100 CHARLES RIVER PLAZA
101 FEDERAL STREET BOSTON, MASSACHUSETTS 02114
BOSTON, MASSACHUSETTS 02110 (617) 973-6100
(617) 951-6600
(NAME, ADDRESS AND TELEPHONE NUMBERS OF PERSONS AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
--------------------------------------------------------
--------------------------------------------------------
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 Exchange 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/
<PAGE>
CALCULATION OF FILING FEE
TRANSACTION VALUATION (1) AMOUNT OF FILING FEE (2)
$56,760,088 $11,352.02
----------- ----------
(1) For purposes of calculation of the filing fee only. Assumes the purchase,
at a purchase price of $8.00 per share of Common Stock, of 7,095,011
shares of Common Stock of the Issuer, representing all of such Common
Stock outstanding (assuming the exercise of options to acquire 364,100
shares of Common Stock and excluding shares of Common Stock to be
transferred to Ten Ideas, Inc.).
(2) The amount of the filing fee equals 1/50th of 1% of the transaction value.
/x/ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
AMOUNT PREVIOUSLY PAID: $11,352.02
FORM OR REGISTRATION NO.: PRELIMINARY PROXY STATEMENT ON SCHEDULE 14A
DATE FILED: MARCH 19, 1998
FILING PARTY: BERTUCCI'S, INC.
INTRODUCTION
This Rule 13E-3 Transaction Statement on Schedule 13E-3 is being filed
with the Securities and Exchange Commission (the "Commission") on behalf of
Bertucci's, Inc., a Massachusetts corporation (the "Company"), Ten Ideas, Inc.,
a Delaware corporation ("Ten Ideas"), and Ten Ideas Acquisition Corp., a
Massachusetts corporation ("Acquisition"), with respect to a proposed merger
pursuant to which Acquisition will be merged with and into the Company (the
"Merger") and the Company, as the surviving corporation in the Merger, will
become a wholly-owned subsidiary of Ten Ideas. Joseph Crugnale is the
founder, President, Chief Executive Officer, and Chairman of the Board of the
Company, and is the President and sole director of Ten Ideas and Acquisition.
The following cross-reference sheet is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location of the information
required by Schedule 13E-3 in the preliminary Proxy Statement of the Company
attached hereto as Exhibit (d)(3) and filed with the Commission concurrently
herewith. The information set forth in the preliminary Proxy Statement,
including all annexes, schedules, and exhibits thereto, is hereby expressly
incorporated by reference as set forth in the following cross-reference sheet
and in the responses to each item of this Schedule 13E-3, and such responses
are qualified in their entirety by the provisions of the preliminary Proxy
Statement. The cross-reference sheet indicates the caption in the preliminary
Proxy Statement under which the responses are incorporated herein by reference.
If any such item is inapplicable or the answer thereto is in the negative and
is omitted from the preliminary Proxy Statement, it is so indicated in the
cross-reference sheet.
2
<PAGE>
CROSS-REFERENCE SHEET
Pursuant to General Instruction F to Schedule 13E-3
ALL REFERENCES ARE TO PORTIONS OF THE
SCHEDULE 13E-E ITEM PROXY STATEMENT WHICH ARE
NUMBER AND CAPTION INCORPORATED HEREIN BY REFERENCE
------------------- --------------------------------------
------------------- --------------------------------------
1. Issuer and Class of Security
Subject to the Transaction
(a) . . . . . . . . . . . . . Outside Front Cover Page; "INTRODUCTION."
(b) . . . . . . . . . . . . . Outside Front Cover Page; "SUMMARY--Record
Date;" "INTRODUCTION--Voting at the Special
Meeting."
(c) . . . . . . . . . . . . . "MARKET PRICES AND DIVIDENDS ON THE SHARES."
(d. . . . . . . . . . . . . . "MARKET PRICES AND DIVIDENDS ON THE SHARES."
(e) . . . . . . . . . . . . . Not applicable.
(f) . . . . . . . . . . . . . "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT"
2. Identity and Background
(a)-(d) . . . . . . . . . . . "SUMMARY -- Ten Ideas and Acquisition"
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT;" "SPECIAL FACTORS --
Interest of Certain Persons in Merger;
Conflicts of Interest."
(e)-(f) . . . . . . . . . . . None.
3
<PAGE>
(g) . . . . . . . . . . . . . "SPECIAL FACTORS--Interest of Certain
Persons in Merger; Conflicts of Interest;"
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT."
3. Past Contacts, Transactions or
Negotiations
(a) (1) . . . . . . . . . . . "SUMMARY--The Merger;" "SPECIAL FACTORS--
Interests of Certain Persons in the
Merger; Conflicts of Interest;" "CERTAIN
PROVISIONS OF THE MERGER AGREEMENT--
Indemnification and Insurance;" "SUMMARY--
Ten Ideas and Acquisitions."
(a) (2) . . . . . . . . . . . "SUMMARY--The Merger;" "--Interests of
Certain Persons in the Merger;" "--Merger
Financing;" "SPECIAL FACTORS--Background of
the Merger;" "--Fairness of the Merger;
Recommendation of the Board of Directors;"
"--Purpose of the Merger;" "--Interests of
Certain Persons in the Merger; Conflicts
of Interest;" "--Certain Effects of the
Merger;" "THE MERGER--Merger Financing."
(b) . . . . . . . . . . . . . "SUMMARY--The Merger;" "--Interests of
Certain Persons in the Merger;"
"--Conditions to the Merger;" "--Merger
Financing;" "SPECIAL FACTORS--Background
of the Merger;" "--Fairness of the Merger;
Recommendation of the Board of Directors;"
"--Purpose of the Merger;" "--Interests of
Certain Persons in the Merger; Conflicts
of Interest;" "--Certain Effects of the
Merger;" "THE MERGER--Merger Financing."
4. Terms of the Transaction
(a)-(b) . . . . . . . . . . . "SUMMARY;" "INTRODUCTION;" "SPECIAL FACTORS
--Fairness of the Merger; Recommendation of
the Board of Directors;" "--Purpose of the
Merger;" "--Interests of Certain Persons in
the Merger; Conflicts of Interest;"
"--Certain Effects of the Merger;" "--Risk
that the Merger Will Not be Consummated;"
"--Certain Risks in the Event of
Bankruptcy;" "THE MERGER--Merger Financing;"
"APPRAISAL RIGHTS."
5. Plans or Proposals of the
Issuer or Affiliate
(a)-(b) . . . . . . . . . . . "SPECIAL FACTORS--Background of the Merger;"
"--Fairness of the Merger; Recommendation of
the Board of Directors;" "--Certain
Effects of the Merger;" "--Plans for the
Company After the Merger;" "THE
MERGER--Merger Financing."
4
<PAGE>
(c) . . . . . . . . . . . . . "SUMMARY--Interests of Certain Persons in
the Merger;" "SPECIAL FACTORS--Interests of
Certain Persons in the Merger; Conflicts of
Interest;" "--Certain Effects of the
Merger;" "THE MERGER--Effective Time;"
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT."
(d)-(e) . . . . . . . . . . . "SUMMARY--Interests of Certain Persons in
the Merger;" "--Merger Financing;" "SPECIAL
FACTORS--Purpose of the Merger;"
"--Interests of Certain Persons in the
Merger; Conflicts of Interest;" "--Certain
Effects of the Merger;" "--Plans for the
Company After the Merger;" "--Certain Risks
in the Event of Bankruptcy;" "THE MERGER--
Merger Financing;" "MARKET PRICES AND
DIVIDENDS ON THE SHARES;" "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT."
(f)-(g) . . . . . . . . . . . "SPECIAL FACTORS--Certain Effects of the
Merger;" "AVAILABLE INFORMATION."
6. Source and Amounts of Funds or
Other Considerations
(a) . . . . . . . . . . . . . "SUMMARY--Merger Financing;" "THE MERGER--
Merger Financing."
(b) . . . . . . . . . . . . . "THE MERGER--Fees and Expenses;" "THE
MERGER--Merger Financing."
(c) . . . . . . . . . . . . . "SUMMARY--Merger Financing;" "THE MERGER--
Merger Financing."
(d) . . . . . . . . . . . . . Not applicable.
7. Purpose(s), Alternatives,
Reasons and Effects
(a)-(c) . . . . . . . . . . . "SUMMARY-Ten Ideas and Acquisition;"
"SPECIAL FACTORS--Background of the Merger;"
"--Fairness of the Merger; Recommendation of
the Board of Directors; "--Purpose of the
Merger;" "--Interests of Certain Persons in
the Merger; Conflicts of Interest;"
"--Certain Effects of the Merger."
5
<PAGE>
(d) . . . . . . . . . . . . . "SUMMARY;" "INTRODUCTION--Voting at the
Special Meeting;" "--Proxies;" "--Ten Ideas
and Acquisition;" "SPECIAL FACTORS--Fairness
of the Merger; Recommendation of the Board
of Directors;" "--Opinion of Financial
Advisor;" "--Purpose of the Merger;"
"--Interests of Certain Persons in the
Merger; Conflicts of Interest;" "--Certain
Effects of the Merger;" "--Plans for the
Company After the Merger;" "THE MERGER--
Merger Financing;" "--Federal Income Tax
Consequences;" "APPRAISAL RIGHTS."
8. Fairness of the Transaction
(a)-(b) . . . . . . . . . . . "SUMMARY--Recommendation of the Board of
Directors;" "--Opinion of Financial
Advisor;" "SPECIAL FACTORS--Background of
the Merger;" "--Fairness of the Merger;
Recommendation of the Board of Directors;"
"--Opinion of Financial Advisor;"
"--Interests of Certain Persons in the
Merger; Conflicts of Interest."
(c) . . . . . . . . . . . . . "SUMMARY--Required Votes;" "INTRODUCTION
--Voting at the Special Meeting;"
"--Proxies;" "SPECIAL FACTORS--Fairness of
the Merger; Recommendation of the Board of
Directors;" "THE MERGER-Conditions to
Consummation of the Merger."
(d) . . . . . . . . . . . . . "SPECIAL FACTORS--Fairness of the Merger;
Recommendation of the Board of Directors."
(e) . . . . . . . . . . . . . "SUMMARY--Interests of Certain Persons in
the Merger;" "SPECIAL FACTORS--Background of
the Merger;" "--Fairness of the Merger;
Recommendation of the Board of Directors;"
"--Interests of Certain Persons in the
Merger; Conflicts of Interest."
(f) . . . . . . . . . . . . . "SPECIAL FACTORS--Background of the Merger;"
"--Fairness of the Merger; Recommendation of
the Board of Directors."
9. Reports, Opinions, Appraisals
and Certain Negotiations
(a)-(c) . . . . . . . . . . . "SUMMARY--Opinion of Financial Advisor;"
"SPECIAL FACTORS--Background of the
Merger;" "--Fairness of the Merger;
Recommendation of the Board of Directors;"
"Opinion of Financial Advisor;" "AVAILABLE
INFORMATION;" ANNEX II to the Proxy
Statement.
6
<PAGE>
10. Interest in Securities of the
Issuer
(a)-(b) . . . . . . . . . . . "SUMMARY--Interests of Certain Persons in
the Merger;" "--Ten Ideas and Acquisitions;"
"INTRODUCTION--Voting at the Special
Meeting;" "SPECIAL FACTORS--Purpose of the
Merger;" "--Interests of Certain Persons in
the Merger; Conflicts of Interest;" "CERTAIN
TRANSACTIONS IN THE COMMON STOCK;" "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT."
11. Contracts, Arrangements or
Understandings with
Respect to the Issuer's
Securities . . . . . . . . . "SUMMARY--Ten Ideas and Acquisition;"
"SPECIAL FACTORS--Background of the
Merger;" "--Purpose of the Merger;"
"--Interests of Certain Persons in the
Merger; Conflicts of Interest;"
"--Certain Effects of the Merger;"
"THE MERGER-Merger Financing;" "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT."
12. Present Intention and
Recommendation of Certain
Persons with Regard to the
Transaction
(a)-(b) . . . . . . . . . . . "INTRODUCTION--Voting at the Special
Meeting--Proxies;" "SPECIAL FACTORS--
Fairness of the Merger; Recommendation of
the Board of Directors;" "--Purpose of the
Merger."
13. Other Provisions of the
Transaction
(a) . . . . . . . . . . . . . "SUMMARY--Dissenting Stockholders Appraisal
Rights;" "APPRAISAL RIGHTS;" ANNEX III to
the Proxy Statement.
(b) . . . . . . . . . . . . . Not applicable.
(c) . . . . . . . . . . . . . Not applicable.
14. Financial Information
(a)-(b) . . . . . . . . . . . "SELECTED FINANCIAL DATA OF THE COMPANY."
7
<PAGE>
15. Persons and Assets Employed,
Retained or Utilized
(a) . . . . . . . . . . . . . "SUMMARY--Interests of Certain Persons in
the Merger;" "--Ten Ideas and Acquisition;"
"--Merger Financing;" "INTRODUCTION--Voting
at the Special Meeting;" "--Proxies;"
"SPECIAL FACTORS--Background of the Merger;"
"--Opinion of Financial Advisor;"
"--Interests of Certain Persons in the
Merger; Conflicts of Interest;" "THE
MERGER--Merger Financing."
(b) . . . . . . . . . . . . . "INTRODUCTION--Voting at the Special
Meeting--Proxies."
16. Additional Information. . . . Proxy Statement.
17. Materials to be Filed as
Exhibits
(a)-(f) . . . . . . . . . . . Not applicable.
8
<PAGE>
Item 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The information concerning the Issuer and its principal
executive office set forth on the cover page to the Proxy Statement and in the
section entitled "INTRODUCTION," is incorporated herein by reference.
(b) The information concerning the shares of Common Stock, par value
$.005 per share, of the Issuer (the "Shares") set forth on the cover page to
the Proxy Statement and in the sections entitled "SUMMARY--Record Date;"
"Required Votes;" and "INTRODUCTION--Voting at the Special Meeting" is
incorporated herein by reference.
(c) The information concerning the principal market in which the
Shares are traded set forth in the sections entitled "SUMMARY--Market
Information" and "MARKET PRICES AND DIVIDENDS ON THE SHARES" is incorporated
herein by reference.
(d) The information set forth in the section entitled "MARKET PRICES
AND DIVIDENDS ON THE SHARES" is incorporated herein by reference.
(e) Not applicable.
(f) The information concerning purchases of Shares of the Company
set forth in the section entitled "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT" is incorporated herein by reference.
Item 2. IDENTITY AND BACKGROUND
(a), (b), (e) and (f) The persons filing this Statement are
Bertucci's, Inc. (the issuer of the class of equity securities that is the
subject of the Rule 13e-3 transaction), Ten Ideas, Inc., a Delaware
corporation ("Ten Ideas"), and Ten Ideas Acquisition Corp., a Massachusetts
corporation and a wholly owned subsidiary of Ten Ideas ("Acquisition"). Ten
Ideas and Acquisition are newly formed corporations organized by Joseph
Crugnale for the purpose of effecting the Rule 13E-3 transaction described
herein. None of the Company, Ten Ideas, Acquisition, Mr. Crugnale and any
executive officer, director or person controlling Ten Ideas or Acquisition
(i) during the last five years, has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors), or (ii) during the
last five years, was a 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 or finding any violation of such laws.
(c), (d) and (g) The information concerning Ten Ideas,
Acquisition and Mr. Crugnale set forth in the sections entitled "THE
SUMMARY--Ten Ideas and Acquisition" and "SPECIAL FACTORS--Interests of
Certain Persons in the Merger; Conflicts of Interest" is incorporated
herein by reference. Mr. Crugnale is a United States citizen.
9
<PAGE>
Item 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) (1) The information set forth in the sections entitled
"SUMMARY--Ten Ideas and Acquisition," "SPECIAL FACTORS--Interests of Certain
Persons in the Merger; Conflicts of Interest," "THE MERGER--Indemnification and
Insurance" is incorporated herein by reference.
(a) (2) The information set forth in the sections entitled
"SUMMARY--Interests of Certain Persons in the Merger," "--Conditions to the
Merger," "--Merger Financing," "SPECIAL FACTORS--Background of the Merger,"
"--Fairness of the Merger; Recommendation of the Board of Directors,"
"--Purpose of the Merger," "--Interests of Certain Persons in the Merger;
Conflicts of Interest," "--Certain Effects of the Merger," "THE
MERGER--Merger Financing" is incorporated herein by reference.
(b) The information set forth in the sections entitled
"SUMMARY--Interests of Certain Persons in the Merger," "--Conditions to the
Merger," "--Merger Financing," "SPECIAL FACTORS--Background of the Merger,"
"--Fairness of the Merger; Recommendation of the Board of Directors,"
"--Purpose of the Merger," "--Interests of Certain Persons in the Merger;
Conflicts of Interest," "--Certain Effects of the Merger," "THE
MERGER--Merger Financing" is incorporated herein by reference.
Item 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the sections entitled "SUMMARY,"
"INTRODUCTION," "SPECIAL FACTORS--Fairness of the Merger; Recommendation of
the Board of Directors," "--Purpose of the Merger," "--Interests of Certain
Persons in the Merger; Conflicts of Interest," "--Certain Effects of the
Merger," "--Risk that the Merger will not be Consummated," "--Certain Risks
in the Event of Bankruptcy," "THE MERGER--Merger Financing" AND "APPRAISAL
RIGHTS" is incorporated herein by reference.
(b) The information set forth in the sections entitled "SUMMARY,"
"INTRODUCTION," "SPECIAL FACTORS--Purpose of the Merger," "--Interests of
Certain Persons in the Merger; Conflicts of Interest," "--Certain Effects of
the Merger," "THE MERGER-Federal Income Tax Considerations" is incorporated
herein by reference.
Item 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(b) The information set forth in the sections entitled "SPECIAL
FACTORS--Background of the Merger," "--Fairness of the Merger; Recommendation
of the Board of Directors," "--Certain Effects of the Merger," "--Plans for the
Company After the Merger," "THE MERGER-Merger Financing" is incorporated herein
by reference.
(c) The information set forth in the sections entitled
"SUMMARY--Interests of Certain Persons in the Merger" "--Ten Ideas and
Acquisition," "SPECIAL FACTORS--Interests of Certain Persons in the Merger,"
"--Certain Effects of the Merger," "THE MERGER--Effective Time," is
incorporated herein by reference.
10
<PAGE>
(d)-(e) The information set forth in the sections
"SUMMARY--Interests of Certain Persons in the Merger," "--Merger Financing,"
"SPECIAL FACTORS--Purpose of the Merger," "--Interests of Certain Persons in
the Merger," "--Certain Effects of the Merger," "--Plans for the Company After
the Merger," "--Certain Risks in the Event of Bankruptcy," "THE MERGER-Merger
Financing," "MARKET PRICES AND DIVIDENDS ON THE SHARES" and "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" is incorporated herein
by reference.
(f)-(g) The information set forth in the sections "SPECIAL
FACTORS--Certain Effects of the Merger" and "AVAILABLE INFORMATION" is
incorporated herein by reference.
Item 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the sections entitled
"SUMMARY--Merger Financing" and "THE MERGER-Merger Financing" is incorporated
herein by reference.
(b) The information set forth in the sections entitled "THE
MERGER--Fees and Expenses" and "--Merger Financing" is incorporated herein by
reference.
(c) The information set forth in the sections entitled
"SUMMARY--Merger Financing" and "THE MERGER--Merger Financing" is incorporated
herein by reference.
(d) Not applicable.
Item 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a)-(c) The information set forth in the sections entitled
"SUMMARY--Ten Ideas and Acquisition," "SPECIAL FACTORS--Background of the
Merger," "Fairness of the Merger; Recommendation of the Board of Directors,"
"Opinion of Financial Advisor," "--Purpose of the Merger," "--Interests of
Certain Persons in the Merger; Conflicts of Interest," "--Certain Effects of
the Merger," "--Plans for the Company After the Merger," "--Litigation
Challenging the Merger," "THE MERGER--Merger Financing," "--Federal Income
Tax Consequences," and "APPRAISAL RIGHTS" is incorporated herein by reference.
(d) The information set forth in the sections entitled "SUMMARY,"
"INTRODUCTION--Voting at the Special Meeting," "--Proxies," "SPECIAL
FACTORS--Fairness of the Merger; Recommendation of the Board of Directors,"
"--Opinion of Financial Advisor," "--Purpose of the Merger," "--Interests of
Certain Persons in the Merger; Conflicts of Interest," "--Certain Effects of
the Merger," "--Plans for the Company After the Merger," "--Certain
Litigation Challenging the Merger," "THE MERGER--Merger Financing,"
"--Federal Income Tax Considerations," and "APPRAISAL RIGHTS" is incorporated
herein by reference.
11
<PAGE>
Item 8. FAIRNESS OF THE TRANSACTION.
(a) - (b) The information set forth in the sections entitled
"SUMMARY--Recommendation of the Board of Directors," "--Opinion of Financial
Advisor," "SPECIAL FACTORS--Background of the Merger," "--Fairness of the
Merger; Recommendation of the Board of Directors," "--Opinion of Financial
Advisor," and "--Interests of Certain Persons in the Merger; Conflicts of
Interest," is incorporated herein by reference.
(c) The information set forth in the sections entitled
"SUMMARY--Required Votes" "INTRODUCTION--Voting at the Special
Meeting--Proxies," "SPECIAL FACTORS--Fairness of the Merger; Recommendation
of the Board of Directors," "THE MERGER" "--Conditions to Consummation of the
Merger" is incorporation herein by reference.
(d) The information set forth in the sections entitled "SPECIAL
FACTORS--Fairness of the Merger; Recommendation of the Board of Directors" is
incorporated herein by reference.
(e) The information set forth in the sections entitled
"SUMMARY--Interests of Certain Persons in the Merger," "SPECIAL
FACTORS---Background of the Merger," and "--Fairness of the Merger;
Recommendation of the Board of Directors" is incorporated herein by reference.
(f) The information set forth in the sections entitled
"SUMMARY--Ten Ideas and Acquisition," "SPECIAL FACTORS---Background of the
Merger," and "--Fairness of the Merger; Recommendation of the Board of
Directors;" is incorporated herein by reference.
Item 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) - (c) The information set forth in the sections entitled
"SUMMARY--Opinion of Financial Advisor," "SPECIAL FACTORS--Background of
the Merger," "--Fairness of the Merger; Recommendation of the Board of
Directors," "--Opinion of Financial Advisor," "AVAILABLE INFORMATION" and
in ANNEX II to the Proxy Statement is incorporated herein by reference.
Item 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) - (b) The information set forth in the sections entitled
"SUMMARY--Interests of Certain Persons in the Merger," "--Ten Ideas and
Acquisition," "INTRODUCTION--Voting at the Special Meeting," "SPECIAL
FACTORS--Purpose of the Merger," "--Interests of Certain Persons in the
Merger; Conflicts of Interest," "CERTAIN TRANSACTIONS IN THE COMMON STOCK"
and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" is
incorporated herein by reference.
Item 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE
ISSUER'S SECURITIES.
The information set forth in the sections entitled "SUMMARY--Ten
Ideas and Acquisition," "SPECIAL FACTORS--Background of the Merger," "--Purpose
of the Merger, "--Interests of Certain
12
<PAGE>
Persons in the Merger; Conflicts of Interest," "--Certain Effects of the
Merger," "THE MERGER--Merger Financing," "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT" is incorporated herein by reference.
Item 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD
TO THE TRANSACTION.
(a) - (b) The information set forth in the sections entitled
"INTRODUCTION--Voting at the Special Meeting--Proxies," "SPECIAL
FACTORS--Fairness of the Merger; Recommendation of the Board of Directors," and
"--Purpose of the Merger" is incorporated herein by reference.
Item 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the sections entitled
"SUMMARY--Dissenting Stockholders Appraisal Rights," "APPRAISAL RIGHTS" and
ANNEX III to the Proxy Statement is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
Item 14. FINANCIAL INFORMATION
(a) - (b) The information set forth in the section entitled
"SELECTED FINANCIAL DATA OF THE COMPANY" and the Consolidated Financial
Statements set forth in the Company's Annual Report on Form 10-K for the
fiscal year ended December 27, 1997 incorporated in the Proxy Statement is
incorporated herein by reference.
Item 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in the sections entitled
"SUMMARY--Interests of Certain Persons in the Merger," "--Ten Ideas and
Acquisition," "--Merger Financing," "INTRODUCTION--Voting at the Special
Meeting ," "--Proxies," "SPECIAL FACTORS--Background of the Merger,"
"--Opinion of Financial Advisor," "--Interests of Certain Persons in the
Merger; Conflicts of Interest," "THE MERGER-Merger Financing" is
incorporated herein by reference.
(b) The information set forth in the sections entitled
"INTRODUCTION--Voting at the Special Meeting ," and "--Proxies," is
incorporated herein by reference.
Item 16. ADDITIONAL INFORMATION
The entirety of the Proxy Statement is incorporated herein by
reference.
13
<PAGE>
Item 17. MATERIAL TO BE FILED AS EXHIBITS
(a)(1) Not applicable.
(b)(1) Opinion of NationsBanc Montgomery Securities dated
February 12, 1998.
(b)(2) Report of NationsBanc Montgomery Securities presented to
the Board of Directors of Bertucci's, Inc. on February
12, 1998.
(c)(1) Agreement and Plan of Merger dated as of February 13, 1998,
among the Issuer, Ten Ideas and Acquisition.
(d)(1) Preliminary copy of Letter to Stockholders.
(d)(2) Preliminary copy of Notice of Special Meeting of
Stockholders.
(d)(3) Preliminary Proxy Statement.
(d)(4) Form of Proxy.
(d)(5) Press Release by Bertucci's, Inc., dated as of February 13,
1998.
(e) Sections 86 through 98 of Chapter 156B of the Massachusetts
General Laws (included as Annex III to the preliminary Proxy
Statement, which is filed herewith as Exhibit (d)(3)).
(f) Not applicable.
14
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
BERTUCCI'S, INC.
By: /S/ Norman S. Mallett
--------------------------------
Norman S. Mallett
Vice President-Finance,
Treasurer and Chief
Financial Officer
Dated: March 18, 1998
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
TEN IDEAS, INC.
By: /S/ Joseph Crugnale
--------------------------------
Joseph Crugnale, President
Dated: March 18, 1998
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
TEN IDEAS ACQUISITION CORP.
By: /S/ Joseph Crugnale
--------------------------------
Joseph Crugnale, President
Dated: March 18, 1998
15
<PAGE>
EXHIBIT (b)(1)
[LETTERHEAD OF NATIONSBANC MONTGOMERY SECURITIES LLC]
February 12, 1998
Special Committee of the Board of Directors
Bertucci's, Inc.
14 Audubon Road
Wakefield, MA 01880
Gentlemen:
We understand that Ten Ideas, Inc. a Delaware corporation, ("Parent"), Ten
Ideas Acquisition Corporation, a Massachusetts corporation and a wholly-owned
subsidiary of Parent ("Buyer"), and Bertucci's, Inc. ("Seller"), a Massachusetts
corporation, propose to enter into an Agreement and Plan of Merger (the "Merger
Agreement"), a draft of which has been provided to us by management of Seller,
pursuant to which Buyer will be merged with and into Seller, which will be the
surviving entity (the "Merger"). Pursuant to the Merger, as more fully described
in the Merger Agreement, we understand that each outstanding share of the common
stock, $0.005 par value per share ("Seller Common Stock"), of Seller will be
converted into the right to receive $8.00 in cash (the "Consideration"). The
terms and conditions of the Merger are set forth in more detail in the Merger
Agreement.
You have asked for our opinion as investment bankers as to whether the
Consideration to be received by the shareholders of Seller pursuant to the
Merger is fair to such shareholders from a financial point of view, as of the
date hereof.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to Seller,
including the consolidated financial statements for recent years and interim
periods through December 27, 1997, and certain other relevant financial and
operating data relating to Seller made available to us from published sources
and from the internal records of Seller; (ii) reviewed the financial terms and
conditions of the draft Merger Agreement; (iii) reviewed certain publicly
available information concerning the trading of, and the trading market for,
Seller Common Stock; (iv) compared Seller from a financial point of view with
certain other companies in the restaurant industry which we deemed to be
relevant; (v) considered the financial terms, to the extent publicly available,
of selected recent business combinations of companies in the restaurant industry
which we deemed to be comparable, in whole or in part, to the Merger; (vi)
reviewed and discussed with representatives of the management of Seller certain
information of a business and financial nature regarding Seller, furnished to us
by management of Seller, including financial forecasts and related assumptions
of Seller; (vii) made inquiries regarding and discussed the Merger and the draft
Merger Agreement and other matters related thereto with Seller's counsel; (viii)
made inquiries of selected third parties identified by us in consultation with
Seller on a confidential basis regarding an investment in or acquisition of
Seller; and (ix) performed such other analyses and examinations as we have
deemed appropriate. We have also assumed that the Buyer will be provided with
the funds necessary to consummate the Merger.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With
II-1
<PAGE>
respect to the financial forecasts for Seller provided to us by management of
Seller, upon your advice and with your consent we have assumed for purposes of
our opinion that the forecasts have been reasonably prepared on bases reflecting
the best available estimates and judgments of management of Seller at the time
they were provided to us as to the future financial performance of Seller and
that they provide a reasonable basis upon which we can form our opinion. We have
also assumed that there have been no material changes in Seller's assets,
financial condition, results of operations, business or prospects since the
respective dates of its last financial statements made available to us. We have
relied on advice of the counsel and the independent accountants to Seller as to
all legal and financial reporting matters with respect to Seller, the Merger and
the draft Merger Agreement. We have assumed that the Merger will be consummated
in a manner that complies in all respects with the applicable provisions of the
Securities Exchange Act of 1934 and all other applicable federal and state
statutes, rules and regulations. In addition, we have not assumed responsibility
for making an independent evaluation, appraisal or physical inspection of any of
the assets or liabilities (contingent or otherwise) of Seller, nor have we been
furnished with any such appraisals. Finally, our opinion is based on economic,
monetary and market and other conditions as in effect on, and the information
made available to us as of, the date hereof.
We have further assumed with your consent that the Merger will be
consummated in accordance with the terms described in the draft Merger
Agreement, without any further amendments thereto, and without wavier by Seller
of any of the conditions to its obligations thereunder.
We have acted as a financial advisor to Seller in connection with the Merger
and will receive a fee for our services, including rendering this opinion, a
significant portion of which is contingent upon the consummation of the Merger.
In the ordinary course of our business, we trade the equity securities of Seller
for our own account and for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities. We have also acted as
an underwriter in connection with offerings of securities of Seller.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the shareholders of
Seller pursuant to the Merger is fair to such shareholders from a financial
point of view, as of the date hereof.
This opinion is directed to the Special Committee of the Board of Directors
of Seller in its consideration of the Merger and is not a recommendation to any
shareholder as to how such shareholder should vote with respect to the Merger.
Further, this opinion addresses only the financial fairness of the Consideration
to the shareholders and does not address any other aspect of the Merger
including, without limitation, the relative merits of the Merger, any
alternatives to the Merger or Seller's underlying decision to proceed with or
effect the Merger. This opinion may not be used or referred to by Seller, or
quoted or disclosed to any person in any manner, without our prior written
consent, which consent is hereby given to the inclusion of this opinion in any
proxy statement and Schedule 13E-3 filed with the Securities and Exchange
Commission in connection with the Merger.
Very truly yours,
/s/ NationsBanc Montgomery Securities
LLC
NationsBanc Montgomery
Securities LLC
II-2
<PAGE>
Exhibit (b)(2)
NationsBanc Montgomery Securities
[LOGO]
A Presentation to the Board of Directors
February 12, 1998
<PAGE>
Table of Contents
Description of Ferrari I
Transaction Overview II
- Summary Term Sheet
- Rationale for the Acquisition
- Transaction Risks
- Recent Restaurant Buyout Offers
Valuation Analysis of Ferrari III
- Multiples Analysis
- Summary Valuation Analysis
- Analysis of Premiums Paid
- Analysis of Comparable Public Companies
- Analysis of Comparable M&A Transactions
- Discounted Cash Flow Analysis
Summary IV
<PAGE>
Description of Ferrari
<PAGE>
Overview of Ferrari
History
- - Ferrari (the "Company") was founded in Massachusetts in 1981 by the
Company's Founder, President and Chief Executive Officer Joseph Crugnale.
As of December 1997, the Company operated 85 restaurants located in the
Northeastern and Mid-Atlantic regions under the name of "Bertucci's Brick
Oven Pizzeria."
- - The Company is one of the originators of the wood-burning, brick-oven
gourmet pizza restaurant concept. The Company operates full-service,
relaxed family-style restaurants committed to offering affordable priced,
high quality cuisine.
General Business Overview
- - Ferrari seeks to distinguish itself from its competitors in the family and
adult casual-dining segments through offering a contemporary European style
design, centered around a large-display area with brick oven and a
moderately-priced menu that features fresh, natural ingredients with an
emphasis on baked pizzas and creative pasta dishes.
- - The restaurants are open daily for lunch and dinner. The average check per
customer is approximately $8.00 to $10.00. Alcohol accounts for less than
10% of total net sales.
- - The Company's restaurants seat approximately 160 people with an average
unit size of approximately 5,700 square feet. The average cost of opening a
typical restaurant has been approximately $1.4 million. The company
operates all its restaurants and currently has no plans to develop a
franchise program.
Selected Management Profiles
- - Joseph Crugnale, 46, has been the President of the Corporation since its
founding in 1984. Mr. Crugnale is the former owner of Steve's Ice Cream. At
the time he acquired Steve's in 1977, it was a one store ice cream shop.
When Mr. Crugnale sold Steve's in 1983, the company had grown to a 26-store
operation.
- - Norman Mallett, 51, has been the Vice President - Finance, the Treasurer,
and the Chief Financial Officer of the Company since 1991. Mr. Mallett
served as the Director of Finance of the Company from 1987 to 1991. Prior
to joining the Company, Mr. Mallett had been employed for 15 years by
Shoney's South, Inc.
<PAGE>
Recent Issues
Lack of Market Visibility
- - Small Market Capitalization - approximately $55.5 million ($6.125 share
price 2/10; 8.9 million shares outstanding)
- - Low average weekly trading volume - 43,000 shares (last twelve months of
trading).
- - Stagnant stock price - $6.16 per share average stock price (last twelve
months).
Lowest Multiples Among Comparable Companies with Recent Performance Issues
- - 4.5x EBITDA multiple versus 6.2x average comparable company EBITDA
multiple.
- - 10.6x EBIT multiple versus 10.7x average comparable company EBIT multiple.
- - 0.5x Revenue multiple versus 1.3x average comparable company Revenue
multiple.
Lack of Visibility with Research
- - Latest research issued by Schroder Wertheim in March 1997.
- - NMS issued last research report on February 16, 1996.
History of Earnings Shortfalls
- - Recently announced Q4 1997 earnings shortfall of $0.07 per share.
- - Missed earnings expectations for several quarters including Q2 1994, Q4
1993, Q1 1993, and Q4 1992.
- - Actually exceeded Q4 1996 earnings estimates by 100% yet had no price
movement.
Geographic Concentration and Competitive Market Segment
- - Operations concentrated in the Northeast.
- - Italian and Pizzeria concept markets are saturated.
- - Limited success with growth outside the Northeast.
<PAGE>
Historical Income Statement
- --------------------------------------------------------
Dollars in millions, except per share data
<TABLE>
<CAPTION>
Historical
------------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Net Sales $120.3 $128.0 $136.7
Cost of Sales 31.1 32.5 34.1
------ ------ ------
Gross Profit 89.2 95.6 102.6
Operating Expenses (1) 75.2 (2) 80.3 87.5
Net Operating Income 14.0 15.2 15.1
Depreciation 9.1 8.8 8.6
------ ------ ------
EBIT 4.9 6.4 6.5
Depreciation 9.1 8.8 8.6
------ ------ ------
EBITDA 14.0 15.2 15.1
Interest Income 0.0 0.0 0.0
Interest Expense 1.3 1.3 1.0
------ ------ ------
Pre-tax Income 3.7 5.2 5.5
Income Taxes 1.4 1.9 2.0
------ ------ ------
Net Income $ 2.3 $ 3.2 $ 3.5
------ ------ ------
------ ------ ------
Earnings Per Share $ 0.27 $ 0.36 $ 0.39
Shares Outstanding 8.7 8.9 8.9
Margins:
- ---------------------------------------------------------------------------------
Sales Growth 6.5% 6.8%
Cost of Sales (% of sales) 25.8% 25.4% 24.9%
Operating Expenses (% of Sales) 62.5% 62.7% 64.0%
Depreciation (% of Sales) 7.6% 6.9% 6.3%
Tax Rate 37.5% 37.5% 36.4%
EBIT Margin 4.1% 5.0% 4.8%
EBITDA Margin 11.7% 11.9% 11.1%
Pre-Tax Margin 3.1% 4.0% 4.0%
Net Margin 1.9% 2.5% 2.6%
</TABLE>
- ----------------
(1) Operating Expenses includes G&A and Taxes other than Income Taxes.
<PAGE>
Historical and Projected Balance Sheet
- ---------------------------------------
Dollars in millions
<TABLE>
<CAPTION>
Actual
FY Ended December 31,
-----------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 1.4 $ 4.3 $ 6.1
Accounts Receivable 0.2 0.2 0.2
Inventories 1.0 1.0 1.2
Other Current Assets 2.0 2.1 2.0
------ ------ ------
TOTAL CURRENT ASSETS $ 4.5 $ 7.6 $ 9.5
PROPERTY, PLANT & EQUIPMENT (NET) 89.9 91.9 91.5
OTHER ASSETS 4.6 3.1 3.1
GOODWILL AND INTANGIBLE ASSETS -- -- --
TOTAL ASSETS $ 98.9 $102.5 $104.2
------ ------ ------
------ ------ ------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable $ 4.2 4.2 $ 6.0
Accrued Expenses 0.5 1.0 1.7
Accrued Payroll 2.4 3.3 3.7
Other Liabilities 2.6 1.9 1.3
------ ------ ------
TOTAL CURRENT LIABILITIES 9.7 10.4 12.7
Deferred Rent 5.6 6.1 6.6
Notes Payable 0.1 0.1 0.0
Total Bank Debt 19.5 18.5 13.5
Senior Sub Debt -- -- --
Stockholders' Equity 64.1 67.5 71.4
Total Liabilities and Stockholders' Equity $ 98.9 $102.5 $104.2
------ ------ ------
------ ------ ------
1995 1996 1997
------ ------ ------
RATIOS:
Receivable Days 0.5 0.5 0.6
Payable Days 49.9 47.0 64.0
Inventory Turns 32.7 31.0 27.9
Other Current Assets (% of Revenue) 1.7% 1.5% 1.5%
Other Assets (% of Sales) 3.8% 2.4% 2.3%
Accrued Expenses (% of Revenues) 0.4% 0.8% 1.2%
Accrued Payroll (% of Revenues) 2.0% 2.6% 2.7%
Other Liabilities (% of Total Sales) 2.1% 1.5% 0.9%
Capex (% of Sales) 23.0% 8.4% 6.5%
Capex 27.6 10.8 8.9
Depreciation & Amortization 9.1 8.8 8.6
Deferred Rent 5.6 6.1 6.6
</TABLE>
<PAGE>
Shareholder Profile
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Directors and
Executive Officers Holdings % of Total Institutions Holdings % of Total
- -------------------------- ----------- ---------- ---------------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Joseph Crugnale 2,177,710 24.7% TCW GROUP INC. 388,700 4.4%
E. Bulkeley Griswold 7,000 * PRUDENTIAL INS CO/AMER 235,400 2.7%
Robert L. Lestina, Jr. 3,000 * MASSACHUSETTS FINL SVCS 185,000 2.1%
James Westra 4,499 * VANGUARD GROUP INC. 129,000 1.5%
Allan J. Steinmetz 0 * SPEAR LEEDS & KELLOGG 128,566 1.5%
Theodore R. Barber 1,000 * RYBACK MANAGEMENT CORP 126,800 1.4%
Norman S. Mallett 53,000 * BARCLAYS BANK PLC 123,899 1.4%
------------ ----- ROSENBERG INST. EQ. MGMT 103,900 1.2%
TOTAL INSIDERS 2,246,209 25.4% KENNEDY CAPITAL MGMT 65,000 *
Other 855,391 9.7%
5% Institutional Holders Holdings % of Total ----------- -------
- -------------------------- ----------- ---------- Total Institutions 1,952,956 22.1%
FIDELITY MGMT & RES CORP/ 722,400 8.2%
DIMENSIONAL FUND ADVS. 502,600 5.7% Retail Float 2,956,801 33.5%
FRANKLIN RESOURCE INC. 448,000 5.1%
----------- ---------- Total Shares Outstanding 8,828,966 100.0%
Total 5% Holders 1,673,000 18.9%
</TABLE>
- ----------------------------
Source: Latest Proxy (excluding 61,400 options held by the
Directors and Executive Officers as a group), 10-K and Spectrum Holdings.
*indicates less than 1% of shares outstanding.
<PAGE>
Historical Price and Volume -- IPO to 2/10/98
- --------------------------------------------------------------------------
[GRAPH]
<PAGE>
Cumulative Distribution of Shares at Various Prices
- --------------------------------------------------------------------------------
2/5/97 - 2/10/98
[Graph Omitted]
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Price Range Shares Traded % Cum. %
- ------------- ------------- ----------- -------------
$5.00 - $5.50 363,500 3.4% 3.4%
$5.50 - $6.00 1,910,500 17.7% 21.1%
$6.00 - $6.50 6,355,500 58.9% 79.9%
$6.50 - $7.00 2,165,300 20.1% 100.0%
- ------------- ------------- -----------
Total Volume Traded 10,794,800 100.0%
</TABLE>
Source: Stock price and volume traded figures from FactSet Research Systems
<PAGE>
Transaction Overview
<PAGE>
Summary Term Sheet
Form of Transaction: Cash for stock merger. A newly formed company, Ten
Ideas, Inc. ("Buyer") will purchase shares of Ferrari
Common Stock. A "going-private," reverse triangular cash
merger of a wholly-owned subsidiary of the Buyer with
and into the Company, resulting in the cash-out of the
public shareholders and the Company becoming a
wholly-owned subsidiary of the Buyer.
Consideration: Each share of Ferrari common stock issued and
outstanding (approximately 8,948,324 shares
fully-diluted) will be purchased for $8.00 per share
which represents a premium of approximately 31.0%
($6.125 as of 2/10/98).
Accounting
Treatment: Purchase accounting
Tax Treatment: The transaction will be a taxable event for the
shareholders of Ferrari.
Financing: The transaction will be financed by a combination of
senior term and revolving debt, subordinated debt or
other equity interests in the Buyer based on a fully
financed commitment letter to be received from
BancBoston Securities prior to executing the merger
agreement.
Equity: Joseph Crugnale and certain other members of management
will roll-over 100% of their existing equity in the
Company into the Buyer, and afford management
participation in ownership of Buyer post-closing.
<PAGE>
Summary Term Sheet (continued)
Options Treatment: Holders of outstanding options of Ferrari (representing
approximately 297,550 shares) will be included in the
merger.
Representations
and Warranties: Standard Buyer and Seller Representations and
Warranties.
No Shop: No Shop provision with a restriction on solicitation of
competing offers provided, however, that there are no
restrictions on responding to unsolicited offers or
inquiries.
Conditions to Closing: - Approval of Special Committee and Board of Directors
- Approval of Ferrari's shareholders
- Receipt of a Fairness Opinion
- Absence of litigation
- Satisfactory bring down of Representations of
Warranties
- No material adverse change in the business of Ferrari
- No governmental prohibition
Timing: - Announce to market on Friday, February 13, 1998
- File proxy/prospectus with SEC
- Close immediately following Ferrari's shareholder
approval
Termination: - Customary termination events
<PAGE>
Rationale for Acquisition
Public Scrutiny: The pressure of public markets to show continuous growth
in stores and quarterly earnings has become
counterproductive and conflicts with management's view
that more controlled, localized growth is in the best
long term interest of the business.
Immediate Liquidity: The proposed merger would maximize shareholder value
more effectively than a recapitalization or
extraordinary cash dividend to shareholders, which would
not resolve the underlying causes of the Company's
under-performance in the market's view, and would likely
be tax inefficient to the stockholders.
Growth Potential: At a more measured growth pace, the Company's cash flow
is adequate to support the debt necessary to consummate
a transaction such as the proposed merger, but likely is
not adequate to support the type of growth needed to
significantly enhance stock value, even to the level
represented by the terms of the proposal.
Maximize
Shareholder Value: Ferrari has a market capitalization of approximately $55
million dollars, an average weekly trading volume of
43,000 over the past twelve months and an inactive share
price. Ferrari shareholders would gain liquidity as well
as a premium of approximately 31% based on the 2/10/98
price of $6.125.
<PAGE>
Transaction Risks
Conflicts of Interest: The transaction involves Management taking the company
private and therefore presents an appearance of
conflicts of interest. In order to avoid these concerns,
the Company has created a Special Committee of
Independent Directors to negotiate and evaluate
management's proposal.
Shareholder
Lawsuits: Historically, transactions involving management have
given rise to shareholder lawsuits which attempt to
increase the purchase price and may inhibit the ultimate
consummation of the transaction.
Super-Majority
Shareholder Vote: Under Massachusetts Corporate Law, approval of the
merger requires a two-thirds super-majority vote of
shareholders as opposed to a simple 51% majority vote.
<PAGE>
Recent Restaurant Buyout Offers
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price Prior Offer Implied
to Ann. Price Premium Result
----------- ------- --------- -----------------------------------
<S> <C> <C> <C> <C>
Sbarro* $26.63 $28.50 7.0% Pending. Announced 1/20/98;
shareholder lawsuit filed 1/27/98.
Davco $13.38 $18.00 34.6% Pending. Announced 10/97;
Shareholder lawsuit filed.
Ground Round $1.50 $1.65 10.0% Completed. Announced 9/2/97;
closed 12/2/97.
Perkins $10.88 $13.00 19.5% Completed. Announced 8/4/97;
shareholder lawsuit filed;
settlement reached: $14 per share
and co. agreed to pay $0.32
dividend.
NPC Intl. $6.25 $9.00 44.0% Withdrawn. Announced
11/6/95; shareholder lawsuit filed;
withdrawn 12/11/95.
</TABLE>
* Company announced weaker than expected Q4 earnings and warned of weak
future earnings simultaneously with the buyout offer.
<PAGE>
- -------------------------------------------------------------------------------
Valuation Analysis of Ferrari
<PAGE>
---------------------------------
MULTIPLES ANALYSIS
---------------------------------
<PAGE>
Analysis at Various Prices
- -------------------------------------------------------------------------------
(dollars in millions)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Ferrari Current Stock Price (1) $ 6.125 $ 7.00 $ 7.50 $ 8.00 $ 8.50 $ 9.00
Premium 0.0% 14.3% 22.4% 30.6% 38.8% 46.9%
Ferrari Current Fully Diluted S/O (2): 8.9 8.9 8.9 8.9 8.9 8.9
- ---------------------------------------------------------------------------------------------------------------------------
Fully Diluted Equity Value: $ 54.8 $ 62.6 $ 67.0 $ 71.5 $ 76.0 $ 80.5
- ---------------------------------------------------------------------------------------------------------------------------
1997 Net Debt (3) $ 14.1 $ 14.1 $ 14.1 $ 14.1 $ 14.1 $ 14.1
- ---------------------------------------------------------------------------------------------------------------------------
Aggregate Value: $ 68.8 $ 76.7 $ 81.1 $ 85.6 $ 90.1 $ 94.5
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Value/:
----------
Revenues (4)
1997 $ 136.7 0.5x 0.6x 0.6x 0.6x 0.7x 0.7x
1996 $ 128.0 0.5x 0.6x 0.6x 0.7x 0.7x 0.7x
EBITDA (4)
1997 $ 15.1 4.5x 5.1x 5.4x 5.7x 5.9x 6.2x
1996 $ 15.2 4.5x 5.0x 5.3x 5.6x 5.9x 6.2x
EBIT (4)
1997 $ 6.5 10.6x 11.8x 12.4x 13.1x 13.8x 14.5x
1996 $ 6.4 10.7x 11.9x 12.6x 13.3x 14.0x 14.7x
Total Ferrari Restaurants (5)
85 $ 0.8 $ 0.9 $ 1.0 $ 1.0 $ 1.1 $ 1.1
Equity Value/:
Net Income (4)
1997 $ 3.5 15.6x 17.8x 19.1x 20.4x 21.7x 22.9x
1996 $ 3.2 17.0x 19.4x 20.8x 22.2x 23.6x 24.9x
----------
</TABLE>
- ------------------------
(1) Current stock price as of 2/10/98.
(2) Fully diluted shares outstanding assumes the treasury method for the 297,550
options exercisable as of 2/10/98.
(3) Net debt as of 12/27/97. Calculated as debt plus deferred liabilities minus
cash.
(4) LTM for the period ended 12/27/97.
(5) Ferrari Restaurants includes 84 existing restaurants as of 12/27/97 and 1
Sal & Vinnie's Steakhouse.
<PAGE>
- --------------------------------------------------------------------
- --------------------------------------------------------------------
SUMMARY VALUATION ANALYSIS
- --------------------------------------------------------------------
- --------------------------------------------------------------------
<PAGE>
Ferrari Valuation Summary
- -----------------------------------------------------------------------
Valuation Methodologies
<TABLE>
<CAPTION>
Equity Value Range
Per Share
------------------
Methodology 1: Premiums Paid Analysis Low High
- -------------- ------------------------------------------------ ----- -----
<S> <C> <C> <C> <C>
The difference between the acquisition cost and Selected Transactions: $7.37 - $8.05
the market capitalization is the control premium. Recent Restaurant Buyouts: $7.32 - $7.53
This analysis determines the average premiums
that have been paid to purchase companies of
similar size to Ferrari.
Methodology 2: Comparable Public Company Methodology
- -------------- ------------------------------------------------
A selected number of publicly traded companies Growth Restaurants with
which are deemed to be the most comparable to Performance Issues: $6.00 - $10.00
the company are analyzed with respect to both Selected Comparable Restaurants: $5.99 - $ 8.56
operating performance and valuation data,
resulting in an implied public market valuation.
Methodology 3: Comparable M&A Transaction Methodology
- -------------- ------------------------------------------------
Selected pending and completed M&A transactions Selected Restaurant Transactions: $6.94 - $ 8.15
are analyzed in a similar fashion to method 1. Comparable LBO Transactions: $7.00 - $11.00
This analysis focuses on multiples paid in the
most comparable change of control transactions,
therefore reflecting theoretical values which
could be paid for the company.
Methodology 4: Discounted Cash Flow Methodology
- -------------- ------------------------------------------------
The company's long-term earnings potential is analyzed $7.01 - $9.37
by looking at its ability to generate free cash flow
to the investor. The cash flow generated by the
company and the potential terminal value of the
company five years out is discounted back to reflect
the net present value of those returns.
-----------------
Indicated Valuation Range | $7.00 - $9.00 |
-----------------
</TABLE>
<PAGE>
Ferrari Valuation Summary
- --------------------------------------------------------------------
[Graph Omitted]
<PAGE>
Methodology 1
- --------------------------------------------------------------------
- --------------------------------------------------------------------
ANALYSIS OF PREMIUMS PAID
- --------------------------------------------------------------------
- --------------------------------------------------------------------
<PAGE>
Summary Analysis of Premiums Paid Over Pre-Announcement Price(1)
- --------------------------------------------------------------------
1/1/97 to 1/29/98
<TABLE>
<CAPTION>
ONE DAY ONE WEEK 30 DAYS
------- -------- -------
<S> <C> <C> <C>
Median Premium 20.3% 26.5% 31.4%
Implied Value based on Price of $6.125 $7.37 $7.75 $8.05
</TABLE>
<TABLE>
<C> <S> <C> <C>
$8.00 Offer Premium Over Price: Current 1 Week Ago 1 Month Ago
$6.125 $6.19 $6.44
30.6% 29.3% 24.3%
3 Months Ago 6 Months Ago 1 Year Ago
$6.38 $5.63 $5.56
25.5% 42.2% 43.8%
</TABLE>
- ------------------------
(1) Based on acquisitions between $50 million and $200 million, excluding
technology and biotech deals.
Source: Securities Data Company
<PAGE>
Selected Acquisitions Premiums Paid Analysis - $50 to $200 million (1)
- --------------------------------------------------------------------------------
1/1/97 to 1/29/98
<TABLE>
<CAPTION>
Market Price Market Premium
Acquisition Prior to Announcement Prior to Announcement
Ann. Price ------------------------ ------------------------
Target Acquiror Date Per Share One Day One Week 30 Days One Day One Week 30 Days
- -------------------------------- ------------------------------- ------ --------- ------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ambassador Bk of Commonwealth Fulton Finl Corp,Lancaster,PA 01/26/98 $34.72 $27.50 $27.00 $27.25 26.3% 28.6% 27.4%
TransAmerican Waste Industries USA Waste Services Inc 01/27/98 1.57 1.44 1.59 1.22 9.2% (1.5)% 28.8%
BT Office Products Intl Inc Koninklijke KNP BT NV 01/23/98 10.50 10.38 7.69 7.69 1.2% 36.6% 36.6%
Buttrey Food and Drug Stores Albertson's Inc 01/21/98 15.50 10.75 10.75 10.50 44.2% 44.2% 47.6%
Casino Magic Corp Grand Casinos Inc 01/21/98 1.77 2.03 1.53 1.22 (12.9)% 15.6% 45.2%
Meridian Point Realty Trust EastGroup Properties 01/15/98 6.75 6.13 5.13 4.50 10.2% 31.7% 50.0%
Schult Homes Corp Oakwood Homes Corp 01/07/98 22.50 22.25 20.38 18.88 1.1% 10.4% 19.2%
National Media Corp ValueVision International Inc 01/06/98 3.26 3.44 2.75 3.81 NA 18.5% (14.5)%
FP Bancorp,Escondidio,CA Zions Bancorp,Utah 12/30/97 27.27 23.50 21.50 21.50 16.0% 26.8% 26.8%
Holmes Protection Group Inc Tyco International Ltd 12/30/97 17.00 18.00 18.00 19.75 (5.6)% (5.6)%(13.9)%
United Fed Svgs Bk,Rocky Mount Triangle Bancorp,Raleigh,NC 12/27/97 22.05 17.00 12.50 11.75 29.7% 76.4% 87.7%
Union Corp Outsourcing Solutions Inc 12/24/97 31.50 27.50 27.75 25.50 14.5% 13.5% 23.5%
Essex County Gas Eastern Enterprises 12/23/97 49.36 39.00 31.75 30.63 26.6% 55.5% 61.2%
First Home Bancorp Inc,NJ Sovereign Bancorp,PA 12/20/97 31.25 30.00 28.75 23.75 4.2% 8.7% 31.6%
Network Long Distance Inc IXC Communications Inc 12/20/97 9.29 7.88 7.75 8.13 18.0% 19.9% 14.3%
Southwest Bancshares Inc,IL Alliance Bancorp,Chicago,IL 12/18/97 32.35 28.00 25.00 25.50 15.5% 29.4% 26.9%
Suburban Ostomy Supply Co Inc Invacare Corp 12/18/97 11.75 10.88 10.38 10.38 8.0% 13.3% 13.3%
Franklin Bancorp,Washington,DC BB&T Corp,Winston-Salem,NC 12/17/97 22.45 18.50 17.00 14.50 21.4% 32.1% 54.8%
Progressive Bank,Pawling,NY Hudson Chartered Bancorp,NY 12/17/97 41.86 36.63 36.00 33.00 14.3% 16.3% 26.8%
Carnegie Bancorp,Princeton,NJ Sovereign Bancorp,PA 12/16/97 35.50 32.00 31.25 25.63 10.9% 13.6% 38.5%
Christiana Cos Inc EVI Inc(Camac Holdings Inc) 12/16/97 33.39 40.75 41.63 40.88 (18.1)% (19.8)%(18.3)%
MSB Bancorp Inc,Goshen,NY Hubco Inc,Mahwah,New Jersey 12/16/97 36.02 27.63 27.38 26.38 30.4% 31.6% 36.6%
Perpetual Midwest Finl Inc Commercial Federal,Omaha,NE 12/16/97 30.67 27.75 28.50 26.00 10.5% 7.6% 18.0%
First State Corp,Albany,Ga Regions Finl,Birmingham,AL 12/12/97 23.38 19.75 18.88 20.00 18.4% 23.9% 16.9%
Somerset Savings Bank,MA UST Corp,Boston,MA 12/11/97 5.63 4.88 4.88 5.00 15.5% 15.5% 12.6%
Deflecta-Shield Corp Lund International Holdings 11/29/97 16.00 12.00 12.00 9.00 33.3% 33.3% 77.8%
RedFed Bancorp Inc,Redlands,CA Golden State Bancorp Inc 11/29/97 20.75 20.38 20.38 19.38 1.8% 1.8% 7.1%
Universal Hospital Services Investor Group 11/27/97 15.50 12.00 12.00 12.38 29.2% 29.2% 25.3%
New Jersey Steel(Von Roll) Co-Steel Inc 11/22/97 23.00 8.75 8.50 8.63 162.9% 170.6% 166.7%
Meritrust Fed Svgs Bk,LA Whitney Holding Corp,Louisiana 11/21/97 73.00 51.22 51.50 49.75 42.5% 41.7% 46.7%
BCB Financial Services Corp,PA Heritage Bancorp,Pottsville,PA 11/20/97 29.85 22.00 21.88 23.00 35.7% 36.5% 29.8%
Charter Financial Inc,Illinois Magna Group Inc, St. Louis,MO 11/20/97 22.89 21.06 21.50 21.00 8.7% 6.5% 9.0%
Century Finl Corp,Rochester,PA Citizens Bancshares Inc,OH 11/18/97 26.56 19.00 18.75 16.50 39.8% 41.7% 61.0%
Granite Financial Inc Fidelity National Financial 11/18/97 17.00 10.75 10.75 10.88 58.1% 58.1% 56.3%
CoBancorp Inc FirstMerit Corp,Akron,OH 11/04/97 44.50 40.25 34.00 29.25 10.6% 30.9% 52.1%
ILC Technology Inc BEC Group Inc 11/01/97 24.53 11.75 11.81 11.75 108.8% 107.7% 108.8%
</TABLE>
<PAGE>
Selected Acquisitions Premiums Paid Analysis - $50 to $200 million (1)
- --------------------------------------------------------------------------------
1/1/97 to 1/29/98
<TABLE>
<CAPTION>
Market Price Market Premium
Acquisition Prior to Announcement Prior to Announcement
Ann. Price ------------------------ ------------------------
Target Acquiror Date Per Share One Day One Week 30 Days One Day One Week 30 Days
- -------------------------------- ------------------------------- ------ --------- ------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Emerald Isle Bancorp,Quincy,MA Eastern Bank Corp,Lynn,MA 10/24/97 33.00 25.50 25.63 24.75 29.4% 28.8% 33.3%
Poughkeepsie Financial Corp Hubco Inc,Mahwah,New Jersey 10/24/97 10.61 10.50 10.31 9.06 1.0% 2.9% 17.1%
Shelter Components Corp Kevco Inc 10/22/97 17.50 14.50 13.94 15.38 20.7% 25.6% 13.8%
Cruise America Inc Budget Group Inc 10/21/97 9.88 8.38 8.69 7.06 18.0% 13.7% 39.9%
Sybron Chemicals Inc Investor Group 10/21/97 34.50 26.25 26.25 24.88 31.4% 31.4% 38.7%
Computational Systems Inc Emerson Electric Co 10/18/97 29.65 20.44 20.00 18.25 45.1% 48.3% 62.5%
Starrett Corp Startt Acquisition LLC 10/18/97 12.25 11.00 10.88 9.88 11.4% 12.6% 24.1%
Tranzonic Cos Linsalata Capital Partners II 10/18/97 29.00 29.44 29.88 27.75 (1.5)% (2.9)% 4.5%
Omni Insurance Group Inc Hartford Financial Services 10/17/97 31.75 17.75 18.06 13.75 78.9% 75.8% 130.9%
Thompson PBE Inc FinishMaster Inc(Lacey Distn) 10/16/97 8.00 6.38 6.00 5.63 25.5% 33.3% 42.2%
Melamine Chemicals Inc Borden Chemical Inc(Borden) 10/10/97 20.50 12.00 11.88 12.00 70.8% 72.6% 70.8%
Game Financial Corp Travelers Express Co(Viad) 09/25/97 10.75 10.25 10.25 10.25 4.9% 4.9% 4.9%
Vectra Banking Corp,Denver,CO Zions Bancorp,Utah 09/25/97 28.17 23.63 23.75 19.13 19.2% 18.6% 47.3%
First United Bancorp,SC Regions Finl,Birmingham,AL 09/24/97 20.24 16.75 17.50 25.25 20.8% 15.7% (19.8)%
PALFED Inc Regions Finl,Birmingham,AL 09/24/97 27.39 21.50 18.00 16.50 27.4% 52.2% 66.0)%
Tescorp Inc Supercanal Holding SA 09/18/97 4.50 4.19 3.38 3.25 7.5% 33.3% 38.5%
Coml Bancshares,Parkersburg,WV WesBanco Inc,Wheeling,WV 09/13/97 78.38 53.00 53.38 47.00 47.9% 46.8% 66.8%
Data Documents Inc Corporate Express Inc 09/11/97 16.08 14.50 14.00 12.75 10.9% 14.9% 26.1%
Offshore Energy Development Titan Exploration Inc 09/10/97 8.51 4.38 9.00 9.25 94.5% (5.4)% (8.0)%
DavCo Restaurants Inc Investor Group 09/06/97 20.00 13.38 13.38 13.00 49.5% 49.5% 53.8%
Mid-Continent Bancshares,KS Commercial Federal,Omaha,NE 09/03/97 38.25 29.75 30.00 30.75 28.6% 27.5% 24.4%
Value Property Trust Wellsford Real Properties Inc 08/29/97 16.17 12.94 13.38 13.63 25.0% 20.9% 18.7%
Versa Technologies Inc Applied Power Inc 08/29/97 24.63 18.00 18.50 18.75 36.8% 33.1% 31.4%
ACC Consumer Finance Corp Household International Inc 08/26/97 21.39 15.75 15.88 16.50 35.8% 34.7% 29.6%
Allied Capital Corp Allied Capital Lending Corp 08/15/97 17.39 16.13 16.13 15.94 7.8% 7.8% 9.1%
Talbert Medical Management MedPartners Inc 08/15/97 63.00 57.00 53.00 46.00 10.5% 18.9% 37.0%
Uniforce Services Inc Comforce Corp 08/15/97 32.24 23.44 23.44 21.13 37.6% 37.6% 52.6%
Isomedix Inc Steris Corp 08/13/97 20.50 19.38 17.75 18.00 5.8% 15.5% 13.9%
National Sanitary Supply Co Unisource Worldwide Inc 08/12/97 21.00 22.50 17.50 14.25 (6.7)% 20.0% 47.4%
Vacation Break USA Inc Fairfield Communities Inc 08/12/97 19.82 14.00 14.25 10.13 41.6% 39.1% 95.8%
1st United Bancorp,FL Wachovia Corp,Winston-Salem,NC 08/08/97 20.88 19.75 18.00 16.38 5.7% 16.0% 27.5%
Covenant Bancorp,New Jersey First Union Corp,Charlotte,NC 08/06/97 18.87 21.00 19.25 17.75 (10.1)% (2.0)% 6.3%
Belmont Homes Inc Cavalier Homes Inc 08/05/97 7.80 9.50 7.75 7.13 (17.9)% 0.6% 9.5%
Perkins Family Restaurant LP Restaurant Co 08/05/97 14.00 10.88 11.06 10.63 28.7% 26.6% 31.8%
Community Care of America Inc Integrated Health Services Inc 08/02/97 4.00 3.25 3.38 2.13 23.1% 18.5% 88.2%
Bucyrus International Inc American Industrial Partners 08/01/97 18.00 13.50 12.25 10.50 33.3% 46.9% 71.4%
</TABLE>
<PAGE>
Selected Acquisitions Premiums Paid Analysis - $50 to $200 million (1)
- --------------------------------------------------------------------------------
1/1/97 to 1/29/98
<TABLE>
<CAPTION>
Market Price Market Premium
Acquisition Prior to Announcement Prior to Announcement
Ann. Price ------------------------ ------------------------
Target Acquiror Date Per Share One Day One Week 30 Days One Day One Week 30 Days
- -------------------------------- ------------------------------- ------ --------- ------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Santa Monica Bank Western Bancorp,California 08/01/97 28.00 24.50 23.81 21.75 14.3% 17.6% 28.7%
Homegate Hospitality Inc Prime Hospitality Corp 07/26/97 12.37 9.50 9.25 9.63 30.2% 33.7% 28.5%
Imo Industries Inc Constellation Capital Partners 07/26/97 7.05 5.94 5.88 5.75 18.7% 20.0% 22.6%
Astrotech International Corp ITEQ Inc 07/25/97 10.93 7.50 6.69 6.13 45.7% 63.4% 78.4%
ArgentBank,Thibodaux,Louisiana Hibernia Corp,New Orleans,LA 07/17/97 29.20 22.50 22.25 21.00 29.8% 31.2% 39.0%
Airways Corp ValuJet Inc 07/11/97 6.81 5.38 5.25 5.13 26.7% 29.7% 32.9%
Upper Peninsula Energy Corp WPS Resources Corp 07/11/97 24.64 18.50 19.00 18.25 33.2% 29.7% 35.0%
Krystal Co Port Royal Holdings Inc 07/04/97 14.50 6.25 5.38 5.25 132.0% 169.8% 176.2%
American Filtrona Corp Bunzl PLC 07/03/97 46.52 42.75 45.50 45.00 8.8% 2.2% 3.4%
First Southeast Finl Corp,SC Carolina First Corp,SC 07/02/97 16.09 10.00 10.38 10.63 60.9% 55.1% 51.4%
SMT Health Services Inc Three Rivers Holding Corp 06/25/97 11.75 11.25 11.50 10.88 4.4% 2.2% 8.0%
American National Bancorp,MD Crestar Finl Corp,Richmond,VA 06/24/97 20.32 16.13 15.25 14.88 26.0% 33.2% 36.6%
SHO-ME Finl,Mount Vernon,MO Union Planters Corp,Memphis,TN 06/24/97 40.10 40.25 37.13 33.63 (0.4)% 8.0% 19.3%
Convest Energy Corp Forcenergy Inc 06/21/97 9.44 8.50 8.50 7.94 11.1% 11.1% 18.9%
Edisto Resources Corp Forcenergy Inc 06/21/97 10.27 11.00 11.00 10.31 (6.6)% (6.6)% (0.4)%
Hechinger Co Leonard Green & Partners LP 06/18/97 3.00 3.50 3.25 3.38 (14.3)% (7.7)% (11.1)%
McFarland Energy Inc Monterey Resources Inc 06/18/97 18.55 16.63 13.13 12.81 11.6% 41.3% 44.8%
Seda Specialty Packaging Corp CCL Industries Inc 06/18/97 29.00 22.00 21.25 19.00 31.8% 36.5% 52.6%
Frederick's of Hollywood, Inc. Investor Group 06/17/97 7.75 4.13 4.25 4.88 87.9% 82.4% 59.0%
Amrion Inc Whole Foods Market Inc 06/10/97 27.57 25.50 23.13 18.75 8.1% 19.2% 47.0%
Peoples Bank,Catawba,NC Carolina First Bancshares,NC 06/10/97 31.00 30.00 28.00 27.00 3.3% 10.7% 14.8%
Integrated Living Communities Whitehall Street Real Estate 05/31/97 11.50 9.06 9.50 7.63 26.9% 21.1% 50.8%
National Picture and Frame Co Colonnade Capital LLC 05/31/97 12.00 9.13 9.38 9.38 31.5% 28.0% 28.0%
DAKA International Inc Compass Group PLC 05/29/97 7.50 11.25 11.63 8.13 (33.3)% (35.5)% (7.7)%
Alamco Inc Columbia Natural Resources Inc 05/28/97 15.75 14.63 14.13 13.50 7.7% 11.5% 16.7%
Varsity Spirit Riddell Sports Inc 05/07/97 18.90 14.50 14.75 15.25 30.3% 28.1% 23.9%
Virginia First Finl Corp,VA BB&T Corp,Winston-Salem,NC 05/07/97 24.38 13.75 13.75 14.00 77.3% 77.3% 74.1%
Cardinal Bancshares,Kentucky Area Bancshares Corp,Kentucky 05/02/97 60.26 47.50 45.00 46.00 26.9% 33.9% 31.0%
SC Bancorp,Anaheim,California Western Bancorp,California 04/30/97 14.25 11.88 10.88 10.38 20.0% 31.0% 37.3%
Haverfield Corp,Lakewood,Ohio Charter One Finl,Cleveland,OH 04/24/97 29.22 23.50 21.63 22.44 24.3% 35.1% 30.2%
LIVE Entertainment Inc Investor Group 04/19/97 6.00 5.63 5.63 4.00 6.7% 6.7% 50.0%
Drilex International Inc Baker Hughes Inc 04/18/97 17.58 13.38 12.75 11.00 31.4% 37.9% 59.8%
Kurzweil Applied Intelligence Lernout & Hauspie Speech 04/16/97 5.52 3.00 3.25 3.31 84.0% 69.8% 66.6%
Public Storage Properties XVI Public Storage Inc 04/10/97 20.01 18.88 19.00 19.50 6.0% 5.3% 2.6%
Public Storage Properties XVII Public Storage Inc 04/10/97 18.62 18.75 18.63 19.13 (0.7)% 0.0% (2.6)%
Public Storage Ppties XVIII Public Storage Inc 04/10/97 19.55 18.63 18.25 19.00 5.0% 7.1% 2.9%
</TABLE>
<PAGE>
Selected Acquisitions Premiums Paid Analysis - $50 to $200 million (1)
- --------------------------------------------------------------------------------
1/1/97 to 1/29/98
<TABLE>
<CAPTION>
Market Price Market Premium
Acquisition Prior to Announcement Prior to Announcement
Ann. Price ------------------------ ------------------------
Target Acquiror Date Per Share One Day One Week 30 Days One Day One Week 30 Days
- -------------------------------- ------------------------------- ------ --------- ------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Public Storage Properties XIX Public Storage Inc 04/10/97 16.52 15.75 16.00 16.00 4.9% 3.3% 3.3%
BNH Bancshares,New Haven,CT Citizens Financial Group,RI 04/09/97 15.50 13.50 12.25 13.00 14.8% 26.5% 19.2%
People's Savings Finl,CT Webster Finl Corp,Waterbury,CT 04/05/97 34.00 32.00 32.88 31.25 6.3% 3.4% 8.8%
Peak Technologies Group Inc Moore Corp Ltd 04/01/97 18.00 8.63 9.13 10.88 108.7% 97.3% 65.5%
Community Bankshares,NH CFX Corp,Keene,New Hampshire 03/25/97 40.41 24.75 24.63 26.13 63.3% 64.1% 54.7%
American List Corp Snyder Communications Inc 03/20/97 26.25 22.38 20.50 24.13 17.3% 28.0% 8.8%
American Bancorp of Nevada,NV First Security Bk of Nevada,NV 03/18/97 24.73 20.50 19.75 19.00 20.6% 25.2% 30.2%
Bank Corp of Georgia,Macon,GA Century South Banks Inc,GA 03/18/97 24.94 20.00 20.50 18.75 24.7% 21.7% 33.0%
First Citizens Financial,MD Provident Bankshares,Maryland 03/12/97 31.30 24.75 22.00 21.25 26.5% 42.3% 47.3%
Crop Growers Corp Fireman's Fund Insurance Co 03/07/97 10.25 8.50 8.88 7.25 20.6% 15.5% 41.4%
CU Bancorp,Encino,California Pacific Century Financial Corp 02/26/97 15.34 13.25 13.00 12.25 15.8% 18.0% 25.2%
Zapata Corp Investor 02/18/97 5.50 4.50 4.38 4.38 22.2% 25.7% 25.7%
New Iberia Bancorp,Louisiana Regions Finl,Birmingham,AL 02/15/97 20.70 21.00 20.75 19.75 (1.4)% (0.2)% 4.8%
North Star Universal Inc Michael Foods Inc 02/14/97 7.03 8.75 8.63 8.00 (19.7)% (18.5)% (12.1)%
Portsmouth Bank Shares,NH CFX Corp,Keene,New Hampshire 02/14/97 17.81 13.38 12.88 12.88 33.2% 38.3% 38.3%
Serv-Tech Inc Philip Environmental Inc 02/12/97 6.60 5.00 4.13 3.50 32.0% 60.0% 88.6%
ESELCO Inc Wisconsin Energy Corp 01/24/97 44.50 29.50 29.75 26.25 50.8% 49.6% 69.5%
American Recreation Centers AMF Bowling Centers(AMF Group) 01/18/97 8.50 7.38 6.38 5.00 15.3% 33.3% 70.0%
Central & Southern Holding,GA Premier BancShares,Atlanta,GA 01/16/97 13.54 11.75 11.75 9.75 15.2% 15.2% 38.9%
----------------------------------------------------
Mean 24.7% 28.5% 36.2%
Median 20.3% 26.5% 31.4%
----------------------------------------------------
</TABLE>
- -------------------------------
(1) Based on acquisitions between $50 million and $200 million, excluding
technology and biotech deals.
<PAGE>
SUMMARY ANALYSIS OF PREMIUMS PAID ON RECENT BUYOUT OFFERS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANN. PRICE PRIOR OFFER IMPLIED
DATE TO ANN. PRICE PREMIUM
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sbarro Inc. (1) Jan-98 $ 26.63 $ 28.50 7.0%
Davco Restaurants Inc. Oct-97 $ 13.38 $ 18.00 34.5%
Ground Round Restaurants Sep-97 $ 1.50 $ 1.65 10.0%
Perkins Family Restaurants Aug-97 $ 10.88 $ 13.00 19.5%
NPC International Nov-96 $ 6.25 $ 9.00 44.0%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE MEDIAN
------------- --------------
<S> <C> <C>
23.0% 19.5%
Implied Value based on Price of $6.125 $ 7.53 $ 7.32
</TABLE>
- ------------------------
Source: Securities Data Company
(1) Transaction is still pending.
<PAGE>
Methodology 2
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
ANALYSIS OF COMPARABLE PUBLIC COMPANIES
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
Summary Analysis of Selected Growth Restaurants with Recent Performance Issues
- --------------------------------------------------------------------------------
($ in millions, except per share data)
<TABLE>
<CAPTION>
COMP. COMPANY IMPLIED FERRARI IMPLIED FERRARI VALUE
MULTIPLES (1) EQUITY VALUATION (2) PER FULLY DILUTED SHARE (4)
---------------------- --------------------- ---------------------------
MEAN MEDIAN FERRARI MEAN MEDIAN MEAN MEAN
--------- ----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
1997 1.3x 0.9x $ 136.7 $ 158.6 $ 105.4 $ 17.74 $ 11.79
EBITDA
1997 6.3x 6.3x $ 15.1 $ 81.0 $ 81.3 $ 9.06 $ 9.10
EBIT
1997 10.8x 10.0x $ 6.5 $ 56.2 $ 51.4 $ 6.29 $ 5.75
EPS
1997 17.1x 13.8x $ 0.39 59.4 48.2 $ 6.65 $ 5.39
1998E (3) 13.3x 11.7x $ 0.55 65.3 57.5 $ 7.30 $ 6.43
Realistic Valuation Range $ 6.00 - $ 10.00
- ------------------------
</TABLE>
(1) Includes Growth Restaurants with Recent Performance Issues.
(2) Net debt of $14.1 million is used to adjust from Aggregate Value to Equity
Value. Net Debt calculated as Debt plus deferred liabilities plus minus
cash.
(3) Estimates based on equity research from NationsBanc Montgomery and other
investment banks.
(4) Assumes 8.9 million fully diluted shares outstanding as of 12/27/97.
<PAGE>
Valuation Analysis of Selected Comparable Publicly Traded Restaurant Companies
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Chng from 12 Month
LTM (1) Ticker Stock Price Twelve Month --------------------
Company Ended Symbol 2/10/98 Price Range Low High
--------------------------- ------- ------ ---------- ---------------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Cheesecake Factory 9/28/97 CAKE $30.88 $17.50 -- $34.00 76.4% (9.2%)
Growth CKE Restaurants, Inc. 11/3/97 CKR 43.75 16.70 -- 46.25 161.9% (5.4%)
Restaurants Dave & Buster's 11/2/97 DANB 22.88 12.67 -- 27.63 80.5% (17.2%)
Il Fornaio 9/28/97 ILFO 15.06 11.00 -- 17.00 36.9% (11.4%)
Landry's Seafood Rest 9/30/97 LDRY 27.75 12.88 -- 34.38 115.5% (19.3%)
Papa John's Int'l 9/28/97 PZZA 36.38 22.63 -- 39.50 60.8% (7.9%)
PJ America 9/28/97 PJAM 17.75 12.13 -- 18.88 46.4% (6.0%)
Starbucks Corp. 9/28/97 SBUX 36.81 26.13 -- 44.75 40.9% (17.7%)
Total Entertainment 9/9/97 TENT 7.50 4.38 -- 11.50 71.4% (34.8%)
------ -------
Average 76.8% (14.3%)
Median 71.4% (11.4%)
High Growth Apple South 9/28/97 APSO $13.19 $10.50 -- $20.00 25.6% (34.1%)
Restaurants Logan's Roadhouse 10/5/97 RDHS 19.38 13.75 -- 28.13 40.9% (31.1%)
With Performance Lone Star Steakhouse 9/9/97 STAR 20.13 16.13 -- 29.63 24.8% (32.1%)
Issues Outback Steakhouse 9/30/97 OSSI 33.50 17.88 -- 33.50 87.4% 0.0%
Planet Hollywood 9/28/97 PHL 8.75 6.75 -- 27.25 29.6% (67.9%)
Rainforest Cafe 9/28/97 RAIN 13.03 10.75 -- 25.42 21.2% (48.7%)
------ -------
Average 38.3% (35.6%)
Median 27.6% (33.1%)%
Growth Brinker Int'l 9/24/97 EAT $18.94 $10.75 -- $18.56 76.2% 2.0%
Restaurants Consolidated Products 9/24/97 COP 16.88 11.19 -- 17.75 50.8% (4.9%)
Cracker Barrel 10/31/97 CBRL 36.44 23.75 -- 36.75 53.4% (0.9%)
Foodmaker 9/28/97 FM 17.63 9.00 -- 21.00 95.8% (16.1%)
Friendly Ice Cream Corp. 9/28/97 FRND 17.25 11.00 -- 18.25 56.8% (5.5%)
Host Marriott Services Corp. 9/12/97 HMS 14.06 8.75 -- 15.88 60.7% (11.4%)
IHOP Corp. 9/30/97 IHOP 34.50 23.63 -- 37.38 46.0% (7.7%)
McDonald's Corp. 9/30/97 MCD 50.00 42.13 -- 54.88 18.7% (8.9%)
Morton's Rest. Group 9/28/97 MRG 21.38 15.00 -- 25.06 42.5% (14.7%)
O'Charley's, Inc. 10/5/97 CHUX 17.88 12.00 -- 19.38 49.0% (7.7%)
Showbiz Pizza Time 9/26/97 SHBZ 26.00 16.50 -- 27.38 57.6% (5.0%)
Sonic 11/30/97 SONC 29.38 12.63 -- 30.50 132.7% (3.7%)
Tricon Global Restaurants 9/6/97 YUM 28.44 25.06 -- 36.25 13.5% (21.6%)
Wendy's Int'l 9/28/97 WEN 21.06 19.63 -- 27.94 7.3% (24.6%)
------ -------
Average 52.7% (10.2%)
Median 50.8% (7.7%)
Growth Applebee's 9/28/97 APPB $19.63 $16.13 -- $30.38 21.7% (35.4%)
Restaurants Au Bon Pain 10/4/97 ABPCA 7.88 5.88 -- 10.25 34.0% (23.2%)
With Bertucci's 12/31/97 BERT 6.13 5.13 -- 7.06 19.5% (13.3%)
Recent Boston Chicken, Inc. 10/5/97 BOST 7.03 6.00 -- 35.25 17.2% (80.1%)
Performance Buffets, Inc. 10/8/97 BOCB 9.63 6.38 -- 11.88 51.0% (18.9%)
Issues Cooker Restaurant Corp. 9/28/97 CGR 9.25 8.19 -- 12.25 13.0% (24.5%)
Darden Restaurants 11/23/97 DRI 13.13 6.75 -- 13.31 94.4% (1.4%)
Einstein/Noah Bagel Corp. 10/5/97 ENBX 5.06 5.00 -- 29.00 1.3% (82.5%)
NPC International 9/23/97 NPCI 9.88 9.00 -- 15.50 9.7% (36.3%)
Pollo Tropical, Inc. 9/28/97 POYO 9.13 3.63 -- 9.50 151.7% (3.9%)
Rock Bottom Restaurants 9/28/97 BREW 5.88 5.38 -- 12.00 9.3% (51.0%)
Ryan's Family Stkhouse 10/1/97 RYAN 8.44 7.19 -- 9.56 17.4% (11.8%)
Sbarro, Inc. 10/5/97 SBA 29.31 25.13 -- 30.00 16.7% (2.3%)
Taco Cabana 9/28/97 TACO 5.56 3.75 -- 6.00 48.3% (7.3%)
Uno Restaurant Corp. 9/28/97 UNO 6.31 5.81 -- 7.50 8.6% (15.8%)
------ -------
Average 34.3% (27.2%)
Median 17.4% (18.9%)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Calendar EPS (2) Calendar P/E Multiples
----------------------- Secular ----------------------- 97 PE% of 98 PE% of
Company 1996A 1997E 1998E Grth. Rate 1996A 1997E 1998E Grth. Rate Grth. Rate
----------------------- ------ ----- ----- ---------- ------- ------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth Cheesecake Factory $0.53 $0.87 $1.10 28% 58.3 x 35.5 x 28.1 x 129.0% 102.1%
Restaurants CKE Restaurants, Inc. 0.66 1.04 1.50 31% 65.9 x 42.1 x 29.2 x 136.2% 94.5%
Dave & Buster's 0.58 0.75 1.03 30% 39.4 x 30.5 x 22.3 x 101.7% 74.4%
Il Fornaio 0.32 0.44 0.55 25% 47.1 x 34.2 x 27.4 x 136.9% 109.5%
Landry's Seafood Rest 0.76 1.02 1.30 30% 36.5 x 27.2 x 21.3 x 90.7% 71.2%
Papa John's Int'l 0.66 0.93 1.20 30% 55.1 x 39.1 x 30.3 x 130.4% 101.0%
PJ America 0.57 0.70 0.82 25% 31.1 x 25.4 x 21.6 x 101.4% 86.6%
Starbucks Corp. 0.52 0.77 1.04 40% 70.8 x 47.8 x 35.4 x 119.5% 88.5%
Total Entertainment 0.10 0.12 0.29 60% 75.0 x 62.5 x 25.9 x 104.2% 43.1%
------ ------ ------ ------ ------ -------
Average 33% 53.3 x 38.3 x 26.8 x 116.7% 85.6%
Median 30% 55.1 x 35.5 x 27.4 x 119.5% 88.5%
High Growth
Restaurants Apple South $0.75 $0.79 $0.89 27% 17.6 x 16.7 x 14.8 x 62.7% 55.7%
With Performance Logan's Roadhouse 0.71 0.99 1.27 28% 27.3 x 19.6 x 15.3 x 71.2% 55.5%
Issues Lone Star Steakhouse 1.63 1.65 1.70 25% 12.3 x 12.2 x 11.8 x 48.8% 47.4%
Outback Steakhouse 1.45 1.61 1.93 22% 23.1 x 20.8 x 17.4 x 93.0% 77.6%
Planet Hollywood 0.47 0.48 0.43 15% 18.6 x 18.2 x 20.3 x 121.5% 135.7%
Rainforest Cafe 0.27 0.51 0.77 40% 47.7 x 25.4 x 17.0 x 63.5% 42.5%
------ ------ ------ ------ ------ -------
Average 26% 24.4 x 18.8 x 16.1 x 76.8% 69.0%
Median 26% 20.9 x 18.9 x 16.1 x 67.3% 55.6%
Growth
Restaurants Brinker Int'l $0.77 $0.90 $1.11 18% 24.6 x 21.0 x 17.1 x 116.9% 94.8%
Consolidated Products 0.70 0.83 0.98 20% 24.2 x 20.3 x 17.2 x 101.4% 86.1%
Cracker Barrel 1.23 1.52 1.82 18% 29.6 x 24.0 x 20.0 x 133.2% 111.2%
Foodmaker 0.54 0.92 1.07 20% 32.6 x 19.2 x 16.5 x 95.8% 82.4%
Friendly Ice Cream Corp. (3.07) (1.13) 1.24 35% NM NM 13.9 x NM 39.7%
Host Marriott Services Corp. 0.40 0.58 0.69 25% 35.2 x 24.2 x 20.4 x 97.0% 81.5%
IHOP Corp. 1.95 2.16 2.51 16% 17.7 x 16.0 x 13.7 x 99.8% 85.9%
McDonald's Corp. 2.21 2.35 2.55 12% 22.6 x 21.3 x 19.6 x 177.3% 163.4%
Morton's Rest. Group 0.97 1.25 1.50 20% 22.0 x 17.1 x 14.3 x 85.5% 71.3%
O'Charley's, Inc. 0.75 0.97 1.11 20% 23.8 x 18.4 x 16.1 x 92.1% 80.5%
Showbiz Pizza Time 0.70 1.31 1.61 21% 37.1 x 19.8 x 16.1 x 96.6% 78.6%
Sonic 1.28 1.47 1.71 18% 22.9 x 20.0 x 17.2 x 111.0% 95.4%
Tricon Global Restaurants 0.85 (0.54) 2.05 13% 33.5 x NM 13.9 x NM 111.0%
Wendy's Int'l 1.19 1.30 1.45 14% 17.7 x 16.2 x 14.5 x 115.7% 103.8%
------ ------ ------ ------ ------ -------
Average 19% 26.6 x 19.7 x 16.4 x 109.6% 91.6%
Median 20% 24.0 x 19.8 x 16.1 x 99.8% 85.9%
Growth
Restaurants Applebee's $1.27 $1.42 $1.75 22% 15.5 x 13.8 x 11.2 x 62.9% 51.0%
With Au Bon Pain (0.05) 0.19 0.34 18% NM 41.4 x 23.2 x 236.8% 132.4%
Recent Bertucci's 0.36 0.39 0.55 15% 17.0 x 15.7 x 11.1 x 104.7% 74.2%
Performance Boston Chicken, Inc. 1.01 0.85 (0.82) 18% 7.0 x 8.3 x NM 46.0% NM
Issues Buffets, Inc. 0.56 0.63 0.77 17% 17.2 x 15.3 x 12.5 x 90.9% 74.4%
Cooker Restaurant Corp. 0.72 0.74 0.89 20% 12.8 x 12.5 x 10.4 x 62.5% 52.0%
Darden Restaurants 0.50 0.50 0.70 12% 26.3 x 26.3 x 18.8 x 222.8% 159.2%
Einstein/Noah Bagel Corp. 0.25 0.50 (0.34) 31% 20.3 x 10.1 x NM 33.1% NM
NPC International 0.72 0.73 0.94 20% 13.7 x 13.5 x 10.5 x 69.4% 53.9%
Pollo Tropical, Inc. 0.24 0.64 0.75 18% 38.0 x 14.3 x 12.2 x 81.5% 69.5%
Rock Bottom Restaurants 0.52 0.56 0.65 18% 11.3 x 10.5 x 9.0 x 59.9% 51.6%
Ryan's Family Stkhouse 0.71 0.82 0.89 12% 11.9 x 10.3 x 9.5 x 83.5% 76.9%
Sbarro, Inc. 1.84 1.90 2.08 13% 15.9 x 15.4 x 14.1 x 123.4% 113.0%
Taco Cabana 0.30 0.16 0.33 18% 18.5 x 34.8 x 16.9 x 195.9% 95.0%
Uno Restaurant Corp. 0.19 0.46 N/A 15% 33.2 x 13.6 x NM 90.8% NM
------ ------ ------ ------ ------ -------
Average 18% 18.5 x 17.1 x 13.3 x 104.3% 83.6%
Median 18% 16.5 x 13.8 x 11.7 x 83.5% 74.3%
- --------------------------------------------------------------------------------------------------------------------------------
Overall Average 22.6 x 17.8 x 104.7% 84.7%
Overall Median 19.7 x 16.9 x 98.4% 81.5%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Calculation Analysis of Selected Comparable Publicly
Traded Restaurant Companies
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGREGATE
VALUE/LTM
SHARES O/S MKT. CAP AGGREGATE BOOK VALUE PRICE TO DEBT / -----------------
COMPANY (MM) ($MM) VALUE PER SHARE BOOK CAPITAL REVENUES EBIT
------------------------- ---------- -------- --------- ---------- -------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Cheesecake Factory 13.0 $ 400.2 $ 351.0 $ 10.96 2.8x 0.0% 1.8x 30.4x
Growth CKE Restaurants, Inc. 46.2 2,020.9 2,178.2 10.21 4.3x 29.3% 2.2x 30.4x
Restaurants Dave & Buster's 13.0 297.8 280.2 9.97 2.3x 12.2% 2.4x 21.7x
Il Fornaio 5.8 87.5 74.4 5.88 2.6x 0.0% 1.1x 18.0x
Landry's Seafood Rest. 25.9 718.4 712.0 11.15 2.5x 5.1% 2.5x 18.4x
Papa John's Int'l 29.0 1,056.2 980.8 7.00 5.2x 0.7% 2.1x 27.6x
PJ America 5.8 102.6 95.3 6.17 2.9x 0.0% 2.7x 25.8x
Starbucks Corp. 86.3 3,175.6 3,214.8 6.17 6.0x 26.6% 3.3x 36.4x
Total Entertainment (2) 10.4 78.1 69.6 2.01 3.7x 0.0% 4.1x 37.3x
----- -----
Average 3.6x 8.2% 2.5x 27.3x
Median 2.9x 0 7% 2.4x 27.6x
High Growth Apple South (3) 38.8 $ 511.2 $ 975.7 $ 5.66 2.3x 68.0% 1.3x 12.7x
Restaurants Logan's Roadhouse 7.1 138.3 110.7 9.77 2.0x 0.0% 1.8x 12.6x
With Lone Star Steakhouse 41.1 827.0 676.3 13.47 1.5x 0.0% 1.2x 5.9x
Performance Outback Steakhouse 47.8 1,602.1 1,671.2 8.12 4.1x 18.3% 1.5x 12.1x
Issues Planet Hollywood 108.8 951.8 984.4 3.54 2.5x 11.7% 2.1x 9.8x
Rainforest Cafe 26.2 341.0 212.2 8.27 1.6x 0.0% 2.3x 21.1x
----- -----
Average 2.3x 16.3% 1.7x 12.4x
Median 2.2x 5.9% 1.7x 12.4x
Growth Brinker Int'l 65.4 1,238.6 1,473.9 8.27 2.3x 33.0% 1.1x 14.7x
Restaurants Consolidated Products 20.8 $ 350.2 $ 384.3 $ 4.48 3.8x 28.3% 1.4x 13.2x
Cracker Barrel 61.5 2,240.8 2,239.8 11.27 3.2x 8.8% 1.9x 15.4x
Foodmaker 39.1 689.9 1,009.0 2.25 7.9x 79.8% 0.9x 11.8x
Friendly Ice Cream Corp.
(2) 7.1 123.0 417.5 NM NM NM 0.6x 10.4x
Host Marriott Services
Corp. 34.6 486.6 812.7 NM NM NM 0.6x 12.1x
IHOP Corp. 9.7 333.7 477.2 15.36 2.2x 52.1% 2.3x 7.5x
McDonald's Corp. 688.8 34,438.9 40,219.2 13.31 3.8x 39.9% 3.6x 14.7x
Morton's Rest. Group 6.5 139.8 164.8 4.02 5.3x 50.9% 0.9x 12.8x
O'Charley's, Inc. 10.2 181.9 207.7 9.12 2.0x 22.9% 1.1x 13.2x
Showbiz Pizza Time 18.7 485.5 494.7 8.74 3.0x 15.6% 1.5x 12.6x
Sonic 12.8 374.8 417.2 9.70 3.0x 27.3% 2.2x 12.4x
Tricon Global Restaurants 151.8 4,316.1 8,940.1 NM NM NM 1.0x 12.7x
Wendy's Int'l 132.2 2,783.7 3,007.6 9.11 2.3x 27.4% 1.5x 10.2x
----- -----
Average 3.6x 35.3% 1.5x 12.2x
Median 3.1x 27.9% 1.4x 12.6x
Growth Applebee's 31.5 $617.7 $ 635.0 $ 8.99 2.2x 9.3% 1.3x 9.1x
Restaurants Au Bon Pain 11.8 92.9 170.0 7.76 1.0x 46.9% 0.7x 10.2x
With Bertucci's 8.9 54.7 68.8 7.99 0.8x 22.0% 0.5x 10.6x
Recent Boston Chicken, Inc. 71.4 501.9 1,124.1 15.05 0.5x 40.6% 2.7x 8.6x
Performance Buffets, Inc. 45.4 436.7 444.6 5.75 1.7x 15.3% 0.6x 10.0x
Issues Cooker Restaurant Corp. 10.0 92.7 128.2 8.64 1.1x 30.4% 1.0x 9.7x
Darden Restaurants 148.6 1,949.9 2,301.5 7.17 1.8x 26.0% 0.7x 16.2x
Einstein/Noah Bagel Corp. 33.2 168.2 262.7 10.33 0.5x 26.7% 4.8x 8.9x
NPC International 24.7 244.1 456.3 4.32 2.3x 66.9% 1.2x 11.6x
Pollo Tropical, Inc. 8.2 74.6 77.8 3.44 2.7x 12.0% 1.2x 10.0x
Rock Bottom Restaurants 8.1 47.7 76.9 8.04 0.7x 31.3% 0.5x 11.3x
Ryan's Family Stkhouse 47.2 398.5 521.9 6.58 1.3x 28.5% 0.9x 9.5x
Sbarro, Inc. 20.4 599.2 496.9 10.45 2.8x 0.0% 1.5x 8.3x
Taco Cabana 14.8 82.5 100.8 7.52 0.7x 14.2% 0.8x 17.1x
Uno Restaurant Corp. 11.0 69.2 114.2 6.46 1.0x 39.6% 0.6x 10.5x
----- -----
Average 1.4x 27.3% 1.3x 10.8x
Median 1.1x 26.7% 0.9x 10.0x
---------------- ----- ------- ------ ----- ---- ----- ----- -----
Overall Average 1.6x 14.9x
Overall Median 1.4x 12.5x
---------------- ----- ------- ------ ----- ---- ----- ----- -----
<CAPTION>
LTM MARGINS NUMBER OF UNITS (1) % UNIT GROWTH
-------------------- -------------------- -----------------
EBITDA EBIT PRETAX NET 1996 1997E 1998E '96-'97 '97-'98
------ ----- ------ ---- ---- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High 15.1x 6.0% 6.0% 3.9% 17 23 30 35.3% 30.4%
Growth 19.0x 7.2% 6.8% 4.1% 661 673 698 1.8% 3.7%
Restaurants 11.9x 11.1% 10.5% 6.4% 9 13 18 44.4% 38.5%
9.4x 6.0% 6.3% 3.8% 12 15 17 25.0% 13.3%
13.2x 13.4% 14.1% 9.1% 76 111 151 46.1% 36.0%
18.1x 7.6% 8.4% 5.3% 1,156 1,491 1,836 29.0% 23.1%
20.3x 10.3% 12.1% 8.9% 46 61 93 32.6% 52.5%
22.0x 9.1% 9.7% 5.9% 1,006 1,364 1,643 35.6% 20.5%
23.0x 11.0% 7.0% 4.4% 11 16 36 45.5% 125.0%
----- ----- ----- ---- ----- ----- ----- ----- ------
16.9x 9.1% 9.0% 5.7% 333 419 502 32.8% 38.1%
18.1x 9.1% 8.4% 5.3% 46 61 93 35.3% 30.4%
High Growth 8.7x 10.5% 7.1% 4.7% 340 395 494 16.2% 25.1%
Restaurants 9.2x 14.4% 15.5% 10.1% 17 27 43 58.8% 59.3%
With 4.7x 20.3% 21.0% 13.7% 232 308 387 32.8% 25.6%
Performance 9.2x 12.6% 13.2% 6.9% 421 518 628 23.0% 21.2%
Issues 7.4x 21.2% 22.3% 14.0% 58 88 108 51.7% 22.7%
10.5x 10.7% 20.3% 13.0% 6 16 30 166.7% 87.5%
----- ----- ----- ---- ----- ----- ----- ----- ------
8.3x 15.0% 16.6% 10.4% 179 225 282 58.2% 40.2%
9.0x 13.5% 17.9% 11.5% 145 198 248 42.2% 25.4%
Growth 8.1x 7.2% 6.5% 4.3% 468 557 623 19.0% 11.8%
Restaurants 8.9x 10.9% 9.5% 6.0% 219 261 311 19.2% 19.2%
12.3x 12.3% 12.3% 7.8% 257 307 362 19.5% 17.9%
8.2x 8.0% 4.2% 3.3% 1,270 1,289 1,389 1.5% 7.8%
5.8x 6.0% 1.2% 0.7% 707 696 727 (1.6%) 4.5%
6.6x 5.2% 2.4% 1.6% N/A N/A N/A N/A N/A
6.5x 30.8% 15.9% 9.7% 729 N/A N/A N/A N/A
11.6x 24.2% 20.8% 14.6% 21,022 23,622 26,370 12.4% 11.6%
8.2x 7.3% 5.9% 3.9% 67 47 57 (29.9%) 21.3%
8.2x 8.3% 6.5% 3.9% 69 82 97 18.8% 18.3%
7.6x 11.8% 11.3% 6.7% 314 N/A N/A N/A N/A
8.9x 17.4% 16.4% 10.3% 1,587 1,689 N/A 6.4% N/A
7.0x 7.5% 4.0% 2.2% 29,096 N/A N/A N/A N/A
7.7x 14.6% 14.1% 8.7% 4,933 5,247 5,767 6.4% 9.9%
----- ----- ----- ---- ----- ----- ----- ----- ------
8.3x 12.6% 9.6% 6.1% 5,023 3,693 4,385 5.9% 13.8%
8.2x 10.9% 9.5% 6.0% 718 696 545 6.4% 14.8%
Growth 6.9x 14.3% 14.6% 9.1% 853 1,058 1,228 24.0% 16.1%
Restaurants 5.0x 6.7% 0.1% NM 291 356 N/A 22.3% N/A
With 4.5x 4.8% 4.0% 2.6% 90 85 N/A (5.6%) N/A
Recent 6.6x 31.0% 32.8% 17.5% 1,087 1,400 1,400 28.8% 0.0%
Performance 5.3x 5.6% 5.3% 3.3% 278 318 N/A 14.4% N/A
Issues 6.6x 10.3% 9.4% 6.1% 47 59 71 25.5% 20.3%
8.3x 4.5% 3.5% 2.1% 1,217 N/A N/A N/A N/A
7.4x 53.7% 50.0% 37.3% 314 635 835 102.2% 31.5%
7.3x 10.6% 8.0% 5.1% 547 599 636 9.5% 6.2%
8.2x 11.9% 10.9% 6.9% 43 53 N/A 23.3% N/A
4.3x 4.8% 4.2% 3.1% 49 63 69 28.6% 9.5%
6.3x 9.2% 8.3% 5.3% 250 269 271 7.6% 0.7%
5.9x 17.6% 18.2% 11.3% 816 862 947 5.6% 9.9%
6.3x 4.5% 3.7% 2.5% 126 143 N/A 13.5% N/A
4.9x 6.1% 4.5% 3.0% 158 176 N/A 11.4% N/A
----- ----- ----- ---- ----- ----- ----- ----- ------
6.3x 13.0% 11.8% 8.2% 411 434 682 22.2% 11.8%
6.3x 9.2% 8.0% 5.2% 278 294 736 18.4% 9.7%
----- ----- ----- ---- ----- ----- ----- ----- ------
Overall
Average 9.3x 26.3% 25.0%
Overall
Median 8.1x 22.3% 19.7%
----- ----- ----- ---- ----- ----- ----- ----- ------
</TABLE>
- ------------------------
All data excludes restructuring charges, effects of changes in accounting
principles and other non-recurring charges.
(1) Includes Company and Franchised Restaurants.
(2) All data is pro forma for the IPO.
(3) Units for APSO exclude Tomato Rumba's and Hardee's.
<PAGE>
Summary Analysis of Selected Comparable Companies
- ------------------------------------------------------------------------------
($ in millions, except per share data)
<TABLE>
<CAPTION>
IMPLIED FERRARI
VALUE
COMP. COMPANY IMPLIED FERRARI PER FULLY DILUTED
MULTIPLES EQUITY VALUATION (1) SHARE (2)
---------------------- ---------------------- --------------------
MEAN MEDIAN FERRARI MEAN MEDIAN MEAN MEDIAN
--------- ----------- ----------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
1997 0.8x 0.7x $136.7 $99.6 $76.5 $11.15 $8.56
EBITDA
1997 5.0x 5.0x $15.1 $62.3 $61.0 $6.97 $6.82
EBIT
1997 10.1x 10.4x $6.5 $51.7 $53.5 $5.78 $5.99
EPS
1997 20.2x 14.5x $0.39 $70.6 $50.6 $7.90 $5.66
1998E (3) 15.4x 14.1x $0.55 $75.9 $69.5 $8.49 $7.77
------------------------------------------------------------------
Realistic Valuation Range $5.99 - $8.56
------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Selected Comparable Companies Include:
Au Bon Pain -Geographically concentrated in the
Northeast; Recent performance problems.
Rock Bottom Restaurants -Old Chicago Pizzeria represents similar
casual-dining segment.
Sbarro, Inc. -Italian segment; Recently announced a
"going-private" transaction.
Uno Restaurant Corp. -Similar casual-dining pizzeria concept;
Limited growth potential.
</TABLE>
- ------------------------
(1) Net debt of $14.1 million is used to adjust from Aggregate Value to Equity
Value. Net debt calculated as debt plus deferred liabilities minus cash.
(2) Assumes 8.9 million fully diluted shares outstanding as of 12/27/97.
(3) Estimates based on equity research from NationsBanc Montgomery and other
investment banks.
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STOCK CHNG FROM 12 MONTH CALENDAR EPS (2)
LTM (1) TICKER PRICE TWELVE MONTH ------------------ -------------------------
COMPANY ENDED SYMBOL 2/10/98 PRICE RANGE LOW HIGH 1996A 1997E 1998E
- ------------------------- ------- ------- ------- ------------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Au Bon Pain 10/4/97 ABPCA 7.88 5.88--10.25 34.0% (23.2%) (0.05) 0.19 0.34
Rock Bottom Restaurants 9/28/97 BREW 5.88 5.38--12.00 9.3% (51.0%) 0.52 0.56 0.65
Sbarro, Inc. 10/5/97 SBA 29.31 25.13--30.00 16.7% (2.3%) 1.84 1.90 2.08
Uno Restaurant Corp. 9/28/97 UNO 6.31 5.81--7.50 8.6% (15.8%) 0.19 0.46 N/ A
------ -------
Average 17.2% (23.1%)
Median 13.0% (19.5%)
SECULAR CALENDAR P/E MULTIPLES
GRTH. ------------------------ 97 PE % OF 98 PE % OF
COMPANY RATE 1996A 1997E 1998E GRTH. RATE GRTH. RATE
- --------------------------- ------- ------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Au Bon Pain 18% NM 41.4x 23.2x 236.8% 132.4%
Rock Bottom Restaurants 18% 11.3x 10.5x 9.0x 59.9% 51.6%
Sbarro, Inc. 13% 15.9x 15.4x 14.1x 123.4% 113.0%
Uno Restaurant Corp. 15% 33.2x 13.6x NM 90.8% NM
--- ----- ----- ----- ------- -----
Average 16% 20.2x 20.2x 15.4x 127.8% 99.0%
Median 16% 15.9x 14.5x 14.1x 107.1% 113.0%
</TABLE>
<TABLE>
<CAPTION>
BOOK PRICE AGGREGATE VALUE/LTM
SHARES O/S MKT. CAP AGGREGATE VALUE TO DEBT / ------------------------
COMPANY (MM) ($MM) VALUE PER SHARE BOOK CAPITAL REVENUES EBIT EBITDA
- ------------------------- ---------- --------- --------- --------- ------ --------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Au Bon Pain 11.8 92.9 170.0 7.76 1.0x 46.9% 0.7x 10.2x 5.0x
Rock Bottom Restaurants 8.1 47.7 76.9 8.04 0.7x 31.3% 0.5x 11.3x 4.3x
Sbarro, Inc. 20.4 599.2 496.9 10.45 2.8x 0.0% 1.5x 8.3x 5.9x
Uno Restaurant Corp. 11.0 69.2 114.2 6.46 1.0x 39.6% 0.6x 10.5x 4.9x
----- ----- ----
Average 1.4x 29.5% 0.8x 10.1x 5.0x
Median 1.0x 35.5% 0.7x 10.4x 5.0x
LTM MARGINS NUMBER OF UNITS(3) % UNIT GROWTH
------------------------ ---------------------- --------------------
COMPANY EBIT PRETAX NET 1996 1997E 1998E '96-'97 '97-'98
- ------------------------ ----- -------- ------ ------ ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Au Bon Pain 6.7% 0.1% NM 291 356 N/A 22.3% N/A
Rock Bottom Restaurants 4.8% 4.2% 3.1% 49 63 69 28.6% 9.5%
Sbarro, Inc. 17.6% 18.2% 11.3% 816 862 947 5.6% 9.9%
Uno Restaurant Corp. 6.1% 4.5% 3.0% 158 176 N/A 11.4% N/A
------ ----- ----- --- --- --- ----- -----
Average 8.8% 6.7% 5.8% 329 364 508 17.0% 9.7%
Median 6.4% 4.4% 3.1% 225 266 508 16.9% 9.7%
</TABLE>
- ------------------------
All data excludes restructuring charges, effects of changes in accounting
principles and other non-recurring charges.
(1) All balance sheet and margin information applies to the period ended as of
these dates.
(2) Earnings estimates are from NationsBanc Montgomery Research, First Call and
other sources.
(3) Includes Company and Franchised Restaurants.
<PAGE>
Methodology 3
- -------------------------------------------------------------------------------
ANALYSIS OF COMPARABLE M&A TRANSACTIONS
- -------------------------------------------------------------------------------
<PAGE>
Selected Restaurant Merger & Acquisition Transactions
($ in millions, except per share data)
<TABLE>
<CAPTION>
IMPLIED
FERRARI
EQUITY
TRANSACTION MULTIPLES IMPLIED FERRARI VALUE PER
EQUITY VALUATION SHARE (2)
------------------------ ---------------------- ---------------------
MEAN MEDIAN FERRARI MEAN MEDIAN MEAN MEDIAN
--------- ------------- ----------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Value to:
1997 Revenues (1) 0.6x -- 0.6x $136.7 $72.3 $72.5 $8.09 -- $8.11
1997 EBITDA (1) 5.1x -- 5.7x $15.1 $63.0 $72.8 $7.05 -- $8.15
Equity Value to:
1997 Net Income 19.5x -- 17.7x $3.5 $68.4 $62.1 $7.65 -- $6.94
--------------------------------------------------
Indicated Valuation Range $6.94 -- $8.15
--------------------------------------------------
</TABLE>
- ------------------------
Source: Securites Data Company and public filings.
(1) Net debt of $14.1 million is used to adjust from Aggregate Value to
Equity Value. Net debt calculated as debt plus deferred liabilities minus
cash.
(2) Assumes 8.9 million fully diluted shares outstanding as of 12/27/97.
<PAGE>
<TABLE>
Selected Restaurant Merger & Acquisition Transactions
- --------------------------------------------------------------------------------
($ in millions)
<CAPTION>
Equity/
Ann. Aggregate LTM Target Information
---------------------------------------
Date Target/Acquiror Value (1) Revs EBITDA Net Inc Bk Val
- ------------ ------------------------------------ ---------------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Dec-97 Apple South Inc./ $93.4 $733.0 $111.8 $34.7 $219.4
Applebee's International Inc. $93.4
Dec-97 Timber Lodge Steakhouse Inc./ $30.4 $24.3 $2.9 $1.0 $10.8
GB Foods Corp. $31.0
Oct-97 International Dairy Queen/ $585.0 $421.1 $59.7 $38.1 $195.3
Berkshire Hathaway, Inc. $585.0
Sep-97 Sagebrush Inc./ $38.4 $47.5 $6.1 $2.6 $18.7
WSMP Inc. $40.4
Sep-97 El Chico Restaurants Inc./ $49.0 $104.6 $10.3 $2.8 $29.2
Cracken Harkey & Co. $59.1
Sep-97 Checkers Drive-In Restaurants/ $22.3 $155.8 ($39.5) ($54.9) $53.1
Rally's Hamburgers Inc. $22.3
Sep-97 DavCo Restaurants Inc./ $133.6 $215.2 $16.7 $3.3 $47.1
Investor Group $212.5
Sep-97 Quality Dining Inc./ $49.0 $57.1 ($205.1) ($211.5) $30.5
Bruegger's Corp. $59.0
Sep-97 Ground Round Restaurants/ $14.5 $195.5 ($3.1) ($17.6) $36.7
GRR Holdings LLC (Boston Ventures) $14.5
Aug-97 Perkins Family Restaurant LP/ $76.3 $257.4 $34.0 $14.1 $61.2
Restaurant Co. $144.6
May-97 DAKA International Inc./ $189.6 $403.0 $13.7 ($11.9) $82.9
Compass Group PLC $194.0
Apr-97 Hardee's Food Systems Inc./ $222.9 $786.4 $19.5 ($30.2) $315.0
CKE Restaurants Inc. $327.0
Apr-97 Planet Hollywood International/ $200.0 $349.2 $87.7 $36.1 $375.9
Investor $200.0
Mar-97 Rally's Hamburgers Inc./ $111.8 $174.7 ($9.6) ($28.3) $119.6
Checkers Drive-In Restaurants $182.0
<CAPTION>
Aggregate Value as Equity Value as
Ann. a Multiple of : a Multiple of :
----------------------------- ---------------
Date Target/Acquiror Revs EBITDA Net Inc
- ------------ ---------------------------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Dec-97 Apple South Inc./ 0.1x 0.8x 2.7x
Applebee's International Inc.
Dec-97 Timber Lodge Steakhouse Inc./ 1.3x 10.6x 29.5x
GB Foods Corp.
Oct-97 International Dairy Queen/ 1.4x 9.8x 15.3x
Berkshire Hathaway, Inc.
Sep-97 Sagebrush Inc./ 0.9x 6.6x 14.8x
WSMP Inc.
Aggregate Value as Equity Value as
Ann. a Multiple of : a Multiple of :
----------------------------- ---------------
Date Target/Acquiror Revs EBITDA Net Inc
- ------------ ---------------------------------- ------------- ------------- ---------------
Sep-97 El Chico Restaurants Inc./ 0.6x 5.7x 17.5x
Cracken Harkey & Co.
Sep-97 Checkers Drive-In Restaurants/ 0.1x N/A N/A
Rally's Hamburgers Inc.
Sep-97 DavCo Restaurants Inc./ 0.9x 11.7x 33.4x
Investor Group
Sep-97 Quality Dining Inc./ 1.0x NA NA
Bruegger's Corp.
Sep-97 Ground Round Restaurants/ 0.3x N/A N/A
GRR Holdings LLC (Boston Ventures)
Aug-97 Perkins Family Restaurant LP/ 0.6x 4.3x 5.4x
Restaurant Co.
May-97 DAKA International Inc./ 0.5x 14.2x N/M
Compass Group PLC
Apr-97 Hardee's Food Systems Inc./ 0.4x 16.7x N/A
CKE Restaurants Inc.
Apr-97 Planet Hollywood International/ 0.6x 2.3x 5.5x
Investor
Mar-97 Rally's Hamburgers Inc./ 1.0x N/A N/A
Checkers Drive-In Restaurants
</TABLE>
<PAGE>
<TABLE>
Selected Restaurant Merger & Acquisition Transactions
- --------------------------------------------------------------------------------
($ in millions)
<CAPTION>
Equity/
Ann. Aggregate LTM Target Information
---------------------------------------
Date Target/Acquiror Value (1) Revs EBITDA Net Inc Bk Val
- ------------ ------------------------------------ ---------------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Feb-97 Hops Grill & Bar/ $57.0 $45.0 $5.0 N/A N/A
Apple South, Inc. $57.0
Feb-97 McCormick & Schmick's/ $52.0 $67.2 $6.8 N/A N/A
Apple South, Inc. $67.0
Jan-97 Checkers-Drive-In Restaurants/ N/A $160.7 ($31.9) ($51.3) $115.4
CKE Restaurants, Inc.
Aug-96 Casa Bonita Inc./ $42.0 $81.4 $10.3 $2.3 $14.1
CKE Restaurants Inc. $42.0
Jun-96 Bugaboo Creek Steakhouse/ $48.5 $46.3 $6.0 $2.0 $24.5
Longhorn Steaks, Inc. $56.6
Jun-96 HomeTown Buffet/ $175.2 $246.2 $35.3 $6.9 $74.0
Buffets, Inc. $216.7
Apr-96 Bayport Restaurant Group/ $45.0 $53.6 $4.8 N/A $22.9
Landry's $75.0
Feb-96 Bruegger's Bagel Bakery/ $112.9 N/A ($2.2) N/A ($8.1)
Quality Dining $112.9
Dec-95 Summit Family Restaurants/ $34.5 $121.1 $1.5 ($6.1) ($5.1)
CKE Restaurants Inc. $42.5
Oct-95 Champps Entertainment, Inc./ $65.9 $12.5 $1.2 $0.4 N/A
DAKA International $64.1
Oct-95 Brinker Intl. (Grady's and Spaggedies)/ $70.0 $91.6 $10.6 $3.5 $58.2
Quality Dining, Inc. $70.0
Sep-95 TPI Enterprises/ $106.0 $280.4 $17.6 ($6.2) $65.6
Shoney's $160.1
Aug-95 DF&R Restaurants/ $208.0 $91.6 $15.1 $6.7 $58.4
Apple South $196.6
May-95 Marcus Corp. (Applebee's Division)/ $48.0 $35.6 $4.1 N/A N/A
<CAPTION>
Aggregate Value as Equity Value as
Ann. a Multiple of : a Multiple of :
----------------------------- ---------------
Date Target/Acquiror Revs EBITDA Net Inc
- ------------ ---------------------------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Feb-97 Hops Grill & Bar/ N/A 11.4x N/A
Apple South, Inc.
Feb-97 McCormick & Schmick's/ N/A 9.9x N/A
Apple South, Inc.
Jan-97 Checkers-Drive-In Restaurants/ N/A N/A N/A
CKE Restaurants, Inc.
Aug-96 Casa Bonita Inc./ 0.5x 4.1x N/A
CKE Restaurants Inc.
Jun-96 Bugaboo Creek Steakhouse/ 1.2x 9.4x 24.4x
Longhorn Steaks, Inc.
Aggregate Value as Equity Value as
Ann. a Multiple of : a Multiple of :
----------------------------- ---------------
Date Target/Acquiror Revs EBITDA Net Inc
- ------------ ---------------------------------- ------------- ------------- ---------------
Jun-96 HomeTown Buffet/ 0.9x 6.1x 25.3x
Buffets, Inc.
Apr-96 Bayport Restaurant Group/ 1.4x 15.5x N/A
Landry's
Feb-96 Bruegger's Bagel Bakery/ N/A N/A N/A
Quality Dining
Dec-95 Summit Family Restaurants/ 0.4x 27.8x NM
CKE Restaurants Inc.
Oct-95 Champps Entertainment, Inc./ 5.1x N/A N/M
DAKA International
Oct-95 Brinker Intl. (Grady's and Spaggedies)/ 0.8x 6.6x 20.1x
Quality Dining, Inc.
Sep-95 TPI Enterprises/ 0.6x 9.1x -17.1x
Shoney's
Aug-95 DF&R Restaurants/ 2.1x 13.0x 31.2x
Apple South
May-95 Marcus Corp. (Applebee's Division)/ 1.3x 11.8x N/A
</TABLE>
<PAGE>
<TABLE>
Selected Restaurant Merger & Acquisition Transactions
- --------------------------------------------------------------------------------
($ in millions)
<CAPTION>
Equity/
Ann. Aggregate LTM Target Information
---------------------------------------
Date Target/Acquiror Value (1) Revs EBITDA Net Inc Bk Val
- ------------ ------------------------------------ ---------------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Apple South $48.0
Oct-94 Innovative Restaurant Concepts/ $53.2 $51.9 N/A $2.0 $10.6
Applebee's $65.2
Sep-94 Pub Ventures of New England/ $57.8 $32.0 $6.5 $2.4 $4.7
Applebee's $61.2
Jan-94 On The Border Cafes/ $30.4 $27.6 $2.4 $0.8 $6.9
Brinker International $32.1
Nov-93 St. Louis Bread Co./ $24.0 $17.8 $1.8 $1.3 N/A
Au Bon Pain Co., Inc. $27.5
May-93 Chevy's/ $130.0 $84.0 $5.6 $2.0 $12.5
PepsiCo, Inc. $126.0
May-93 NRH Corp (Tony Roma's)/ $20.0 $46.3 $5.5 $1.1 $6.5
National Pizza Co. $27.3
May-93 Foodmaker Inc. (Chi Chi's)/ $270.0 $359.9 $45.0 $10.8 N/A
Investor Group $270.0
Feb-93 Minnesota Franchisee/ $20.9 $24.4 $2.5 $1.1 $6.0
Applebee's $23.4
Jan-93 Two Pesos-Mexican Restaurant/ $21.4 $41.6 $0.1 ($3.2) $4.8
Taco Cabana, Inc. $23.6
Nov-92 TW Holdings/ $635.0(2) $3,685.4 $471.1 ($53.8) $177.7
KKR $2,852.7
<CAPTION>
Aggregate Value as Equity Value as
Ann. a Multiple of : a Multiple of :
----------------------------- ---------------
Date Target/Acquiror Revs EBITDA Net Inc
- ------------ ---------------------------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Apple South
Oct-94 Innovative Restaurant Concepts/ 1.3x N/A 27.1x
Applebee's
Sep-94 Pub Ventures of New England/ 1.9x 9.4x 24.4x
Applebee's
Jan-94 On The Border Cafes/ 1.2x 13.4x 38.0x
Brinker International
Nov-93 St. Louis Bread Co./ 1.5x 15.3x 18.5x
Au Bon Pain Co., Inc.
May-93 Chevy's/ 1.5x 22.5x 65.0x
PepsiCo, Inc.
May-93 NRH Corp (Tony Roma's)/ 0.6x 5.0x 17.7x
National Pizza Co.
May-93 Foodmaker Inc. (Chi Chi's)/ 0.8x 6.0x 25.0x
Investor Group
Feb-93 Minnesota Franchisee/ 1.0x 9.4x 18.7x
Applebee's
Jan-93 Two Pesos-Mexican Restaurant/ 0.6x N/A N/M
Taco Cabana, Inc.
Nov-92 TW Holdings/ 0.8x 6.1x N/M
KKR
</TABLE>
<PAGE>
<TABLE>
Selected Restaurant Merger & Acquisition Transactions
- --------------------------------------------------------------------------------
($ in millions)
<CAPTION>
Equity/
Ann. Aggregate LTM Target Information
---------------------------------------
Date Target/Acquiror Value (1) Revs EBITDA Net Inc Bk Val
- ------------ ------------------------------------ ---------------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
May-92 TaCasita & Sombrero Rosa/ $13.7 $20.5 $1.3 ($0.2) N/A
Taco Cabana $13.7
May-92 California Pizza Kitchen, Inc./ $143.2 $60.0 N/A N/A N/A
PepsiCo, Inc. $143.2
Mar-92 Zipps Drive Thru Inc./ $12.0 $19.5 $3.3 $1.1 N/A
Rally's, Inc. $12.0
Feb-92 Bayport Restaurant Group/ N/A $23.0 $0.9 $0.3 $1.9
Acquisition Group
Sep-90 Kentucky Fried Chicken (Franchises)/ $162.0 $140.0 $18.0 $6.0 N/A
PepsiCo, Inc. $162.0
Sep-90 Sizzler Restaurants/ $304.9 $357.4 $51.2 $19.7 $172.7
Collins $302.5
Jan-90 Restaurant Associates/ $110.0 $240.0 N/A N/A N/A
Kyotaru Co. Ltd. $110.0
Jan-90 Roy Rogers/ $365.0 $390.0 N/A N/A N/A
Hardee's Food Systems $365.0
Dec-89 Dunkin' Donuts/ $333.2 $120.1 N/A $13.8 $11.2
Allied-Lyons PLC $332.2
Oct-89 Skipper's, Inc./ $31.3 $83.0 $4.7 $0.2 $18.3
National Pizza $42.3
Aug-89 Jerrico/ $472.9 $663.7 $70.1 $25.3 $245.8
Investor Group $566.5
Jun-89 Ground Round (Hanson's)/ $85.5 $203.0 $21.0 $7.4 $49.1
International Proteins $99.5
<CAPTION>
Aggregate Value as Equity Value as
Ann. a Multiple of : a Multiple of :
----------------------------- ---------------
Date Target/Acquiror Revs EBITDA Net Inc
- ------------ ---------------------------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
May-92 TaCasita & Sombrero Rosa/ 0.7x 10.1x N/M
Taco Cabana
May-92 California Pizza Kitchen, Inc./ 2.4x N/A N/A
PepsiCo, Inc.
Mar-92 Zipps Drive Thru Inc./ 0.6x 3.6x 10.9x
Rally's, Inc.
Feb-92 Bayport Restaurant Group/ N/A N/A N/A
Acquisition Group
Sep-90 Kentucky Fried Chicken (Franchises)/ 1.2x 9.0x 27.0x
PepsiCo, Inc.
Sep-90 Sizzler Restaurants/ 0.8x 5.9x 15.5x
Collins
Jan-90 Restaurant Associates/ 0.5x N/A N/A
Kyotaru Co. Ltd.
Jan-90 Roy Rogers/ 0.9x N/A N/A
Hardee's Food Systems
Dec-89 Dunkin' Donuts/ 2.8x N/A 24.1x
Allied-Lyons PLC
Oct-89 Skipper's, Inc./ 0.5x 9.0x N/M
National Pizza
Aug-89 Jerrico/ 0.9x 8.1x 18.7x
Investor Group
Jun-89 Ground Round (Hanson's)/ 0.5x 4.7x 11.6x
International Proteins
</TABLE>
<PAGE>
<TABLE>
Selected Restaurant Merger & Acquisition Transactions
- --------------------------------------------------------------------------------
($ in millions)
<CAPTION>
Equity/
Ann. Aggregate LTM Target Information
---------------------------------------
Date Target/Acquiror Value (1) Revs EBITDA Net Inc Bk Val
- ------------ ------------------------------------ ---------------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Jun-89 TW Services/ $1,662.6 $3,627.9 $362.6 $54.9 $510.5
Coniston $2,709.7
Jun-89 Winchell's Donut House/ $26.1 $144.2 ($3.1) ($75.1) N/A
Shato Holdings Ltd. $41.9
May-89 TGI Fridays/ $258.1 $403.0 $30.1 $12.9 $121.0
Carlson $213.1
Mar-89 S&A Restaurants/ $431.0 $716.1 $85.7 $7.3 $175.5
Investor Group $522.4
Dec-88 Franchise Enterprises/ $46.0 $103.1 $14.0 $0.5 $3.4
Investor Group $99.5
Oct-88 Church's Fried Chicken/ $395.7 $410.6 $41.3 $4.6 $243.5
Copeland $413.0
Aug-88 Foodmaker, Inc./ $244.2 $727.1 $98.5 $7.7 $116.6
Gibbons, Green, van Amerongen $769.9
Jul-88 Restaurant Management Svc./ $45.6 $44.8 $6.3 $2.3 $21.6
Golder,Thoma & Cressey $50.1
Mar-88 Shoney's South/ $131.5 $211.2 $33.1 $3.1 $81.0
TPI Enterprises $152.9
Jan-88 International King's Table/ $58.6 $91.4 $10.4 $1.9 $22.3
Horn & Hardart Co. $67.8
Dec-87 Hamburger Hamlets/ $29.2 $48.0 $6.7 $0.6 $13.9
Weatherly Restaurant Group $45.0
Nov-87 Calny's/ $53.0 $81.4 $15.0 $1.6 $40.0
PespsiCo. $94.3
<CAPTION>
Aggregate Value as Equity Value as
Ann. a Multiple of : a Multiple of :
----------------------------- ---------------
Date Target/Acquiror Revs EBITDA Net Inc
- ------------ ---------------------------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Jun-89 TW Services/ 0.7x 7.5x 30.3x
Coniston
Jun-89 Winchell's Donut House/ 0.3x N/M N/M
Shato Holdings Ltd.
May-89 TGI Fridays/ 0.5x 7.1x 20.0x
Carlson
Mar-89 S&A Restaurants/ 0.7x 6.1x 59.0x
Investor Group
Dec-88 Franchise Enterprises/ 1.0x 7.1x N/M
Investor Group
Oct-88 Church's Fried Chicken/ 1.0x 10.0x N/M
Copeland
Aug-88 Foodmaker, Inc./ 1.1x 7.8x 31.7x
Gibbons, Green, van Amerongen
Jul-88 Restaurant Management Svc./ 1.1x 8.0x 19.8x
Golder,Thoma & Cressey
Mar-88 Shoney's South/ 0.7x 4.6x 42.4x
TPI Enterprises
Jan-88 International King's Table/ 0.7x 6.5x 30.8x
Horn & Hardart Co.
Dec-87 Hamburger Hamlets/ 0.9x 6.7x 48.7x
Weatherly Restaurant Group
Nov-87 Calny's/ 1.2x 6.3x 33.1x
PespsiCo.
</TABLE>
<PAGE>
<TABLE>
Selected Restaurant Merger & Acquisition Transactions
- --------------------------------------------------------------------------------
($ in millions)
<CAPTION>
Equity/ LTM Target Information
Ann. Aggregate ---------------------------------------
Date Target/Acquiror Value (1) Revs EBITDA Net Inc Bk Val
- ------------ ------------------------------------ ---------------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Oct-87 Restaurant Assoc. Industry/ $77.6 $230.5 $24.5 $4.3 $40.0
Management $125.5
Jun-87 Rusty Pelican/ $25.4 $59.4 $5.0 $0.5 $21.3
Paragon Restaurant Group $42.4
May-87 Denny's/ $218.0 $1,202.2 $123.7 ($17.1) $39.3
TW Services $782.5
Feb-87 Pizza Inn/ $51.8 $205.9 $16.2 ($0.9) $25.4
Pantera Corp. $82.0
<CAPTION>
Aggregate Value as Equity Value as
Ann. a Multiple of : a Multiple of :
----------------------------- ---------------
Date Target/Acquiror Revs EBITDA Net Inc
- ------------ ---------------------------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Oct-87 Restaurant Assoc. Industry/ 0.5x 5.1x 18.0x
Management
Jun-87 Rusty Pelican/ 0.7x 8.5x 50.8x
Paragon Restaurant Group
May-87 Denny's/ 0.7x 6.3x N/M
TW Services
Feb-87 Pizza Inn/ 0.4x 5.1x N/M
Pantera Corp.
Relevant Average 0.6x 5.1x 19.5x
Relevant Median 0.6x 5.7x 17.7x
</TABLE>
- --------------------------------------------------------------------------------
Note: Average and Medians based on transactions in bold for companies with
performance issues.
(1) Aggregate value is assumed to be equal to equity value where liability data
is unavailable.
(2) KKR purchased a 47.2% interest in TW Holdings for $300 million, which
implies an equity consideration of $635 million for 100% of the company.
<PAGE>
Comparable Management Buyout Offers
- ------------------------------------------------------------------------------
($ in millions, except per share data)
<TABLE>
<CAPTION>
IMPLIED FERRARI
IMPLIED FERRARI EQUITY
TRANSACTION MULTIPLES EQUITY VALUATION VALUE PER SHARE (2)
-------------------------- -------------------- --------------------
MEAN MEDIAN FERRARI MEAN MEDIAN MEAN MEDIAN
------------- ----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Value to:
1997 Revenues (1) 0.8x -- 0.9x $ 136.7 $ 100.0 $ 112.6 $ 11.19 -- $ 12.60
1997 EBITDA (1) 7.1x -- 6.2x $ 15.1 $ 93.5 $ 80.6 $ 10.46 -- $ 9.01
Equity Value to:
1997 Net Income 18.0x -- 15.2x $ 3.5 $ 63.2 $ 53.5 $ 7.07 -- $ 5.98
-------------------------------------------------
Indicated Valuation Range $ 7.00 -- $ 11.00
-------------------------------------------------
</TABLE>
- ------------------------
Source: Securites Data Company and public filings.
(1) Net debt of $14.1 million is used to adjust from Aggregate Value to Equity
Value. Net Debt calculated as debt plus deferred liabilities minus cash.
(2) Assumes 8.9 million fully diluted shares outstanding as of 12/27/97.
<PAGE>
COMPARABLE MANAGEMENT BUYOUT OFFERS
- --------------------------------------------------------------------------------
($ in millions)
<TABLE>
<CAPTION>
DATE AGGREGATE EQUITY
ANNOUNCED TARGET NAME ACQUIROR NAME VALUE VALUE
- --------- --------------------------- -------------------------- ----------- -----------
<C> <S> <C> <C> <C>
01/20/98 Sbarro Inc Management Led Investor Group $490.5 $ 585.3
09/05/97 DavCo Restaurants Inc Management Led Investor Group 205.2 133.6
09/02/97 Ground Round Restuarants GRR Holdings LLC 56.9 18.4
08/04/97 Perkins Family Restaurant LP Restaurant Co 215.0 146.7
11/06/95 NPC International Inc Management Led Investor Group 306.0 228.4
<CAPTION>
AGGREGATE VALUE
LAST TWELVE MONTHS TO:
DATE ---------------------------------------------------- ------------------ EQUITY VALUE TO:
ANNOUNCED REVENUE EBITDA NET INCOME BOOK VALUE REVENUE EBITDA NET INCOME
- --------- ---------- ---------- ---------- ---------- ------- ------ ----------------
<C> <C> <C> <C> <C> <C> <C> <C>
01/20/98 $ 345.2 $ 85.6 $ 38.4 $ 213.6 1.4 x 5.7 x 15.2 x
09/05/97 221.4 17.6 4.0 28.5 0.9 x 11.7 x 33.4 x
09/02/97 195.5 -0.2 (17.6) 23.8 0.3 x NM NM
08/04/97 382.7 50.6 27.1 117.7 0.6 x 4.3 x 5.4 x
11/06/95 314.5 45.2 (15.2) 21.8 1.0 x 6.8 x NM
-----------------------------------------------------------
Average 0.8 x 7.1 x 18.0 x
Median 0.9 x 6.2 x 15.2 x
-----------------------------------------------------------
</TABLE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
- -----------------------------------------------------------------------------
($ in millions)
<TABLE>
<CAPTION>
PROJECTED
-----------------------------------------------------
1998 1999 2000 2001 2002
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Income................................................ $ 3.9 $ 4.6 $ 5.3 $ 5.9 $ 6.6
Net Interest Expense...................................... 0.8 0.1 (0.5) (0.9) (1.4)
Income Tax................................................ 2.2 2.7 3.0 3.4 3.8
--- --- --- --------- ---------
EBIAT..................................................... 6.9 7.4 7.9 8.4 8.9
Depreciation & Amortization............................... 9.2 9.8 10.4 11.1 11.8
Capital Expenditures...................................... (8.9) (8.9) (8.9) (8.9) (8.9)
Estimated Changes in Net Working Capital.................. (0.4) 0.3 0.3 0.3 0.3
--- --- --- --------- ---------
Free Cash Flow............................................ $ 6.8 $ 8.6 $ 9.7 $ 10.9 $ 12.2
</TABLE>
<TABLE>
<S> <C>
PV of FCFs Discounted at 10.8%....................... $ 35.4
Year 2002 EBITDA..................................... 12.2
EBITDA Exit Multiple................................. 6.0x
Year 2002 Exit Value................................. 73.2
PV of Exit Value..................................... $ 44.6
Total Aggregate Value of Firm........................ $ 80.0
Less: Net Debt (1)................................... 14.1
---------
Total Equity Value of Firm........................... $ 66.0
Total Fully Diluted Shares Outstanding............... 8.9
Equity Price per Fully Diluted Share................. $ 7.38
Equity Price per Share
</TABLE>
<TABLE>
<CAPTION>
EBITDA EXIT MULTIPLE/DISCOUNT
RATE
-------------------------------
<S> <C> <C> <C>
6.0X 7.0 X 8.0 X
--------- --------- ---------
10.0%.... 7.64 8.51 9.37
11.0%.... 7.32 8.14 8.97
12.0%.... 7.01 7.80 8.59
</TABLE>
Note: Free Cash Flow discounted to end of February, 1998.
(1) Net Debt is calculated as debt plus deferred liabilities plus transaction
fees minus cash.
<PAGE>
Discounted Cash Flow Analysis--Calculation of Weighted Average Cost of Capital
- -------------------------------------------------------------------------------
($ in millions)
<TABLE>
<S> <C> <C>
Median Debt / Market Cap. = 27.9%
Risk Free Rate (1) = 5.5%
Average Unlevered Beta = 0.74
Relevered Beta = 0.88
Market Premium (2) = 8.4%
Cost of Public Equity = 12.9%
Pre-Tax Cost of Debt = 8.4%
Tax Rate = 36.4%
- ----------------------------------------------------
WACC 10.8%
- ----------------------------------------------------
</TABLE>
RELEVANT DATA:
<TABLE>
<CAPTION>
TOTAL MKT. NET DEBT/ UNLEV.
COMPARABLE COMPANIES CAP. CAP. DEBT TOTAL CAP. BETA (3) BETA
- ---------------------------------------- --------- --------- --------- ------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Applebee's $ 585.8 $ 568.5 $ 17.3 2.9% 1.08 1.06
Au Bon Pain 170.0 92.9 77.1 45.4% 0.75 0.58
Boston Chicken, Inc. 1,186.6 564.4 622.2 52.4% 1.74 1.30
Buffets, Inc. 428.3 420.4 7.9 1.9% 0.78 0.77
Cooker Restaurant Corp. 127.6 92.1 35.5 27.9% 0.68 0.58
Darden Restaurants 2,301.5 1,949.9 351.7 15.3% 0.88 0.80
Einstein/Noah Bagel Corp. 275.2 180.7 94.5 34.3% 1.45 1.19
NPC International 457.9 245.6 212.2 46.4% 0.73 0.56
Pollo Tropical, Inc. 77.8 74.6 3.2 4.1% 0.91 0.89
Rock Bottom Restaurants 75.9 46.7 29.2 38.5% 0.57 0.46
Ryan's Family Stkhouse 507.2 383.7 123.5 24.3% 0.71 0.61
Sbarro, Inc. 499.4 601.8 (102.4) NM 0.56 0.64
Taco Cabana 101.7 83.4 18.3 18.0% 0.69 0.62
Uno Restaurant Corp. 114.9 69.9 45.0 39.2% 0.45 0.36
----------------------------------------------------------------
Average 27.0% 0.74
Median 27.9% 0.63
----------------------------------------------------------------
</TABLE>
- ------------------------
(1) 30 Year Treasury Rate as of 2/6/98.
(2) Market Premium according to Ibbotson, data from 1923--1986.
(3) Predicted Betas taken from Barra Beta Service.
<PAGE>
Income Statement
- ---------------------------------------------------------------------
($ in millions, except EPS data)
<TABLE>
<CAPTION>
HISTORICAL PROJECTED
-------------------------- ------------------------------------------------------
1995 1996 1997 1998 P 1999 P 2000 P 2001 P 2002 P
------ ------ ------ ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $120.3 $128.0 $136.7 $145.6 $155.1 $165.2 $175.9 $187.3
Cost of Sales 31.1 32.5 34.1 36.3 38.7 41.2 43.9 46.7
------ ------ ------ ------ ------ ------ ------ ------
Gross Profit 89.2 95.6 102.6 109.3 116.4 124.0 132.0 140.6
Operating Expenses(1) 75.2 80.3 87.5 93.2 99.2 105.7 112.5 119.8
Net Operating Income 14.0 15.2 15.1 16.1 17.2 18.3 19.5 20.8
Depreciation 9.1 8.8 8.6 9.2 9.8 10.4 11.1 11.8
------ ------ ------ ------ ------ ------ ------ ------
EBIT 4.9 6.4 6.5 6.9 7.4 7.9 8.4 8.9
Depreciation 9.1 8.8 8.6 9.2 9.8 10.4 11.1 11.8
------ ------ ------ ------ ------ ------ ------ ------
EBITDA 14.0 15.2 15.1 16.1 17.2 18.3 19.5 20.8
Interest Income 0.0 0.0 0.0 0.0 0.1 0.5 0.9 1.4
Interest Expense 1.3 1.3 1.0 0.9 0.2 0.0 0.0 0.0
------ ------ ------ ------ ------ ------ ------ ------
Pre-tax Income 3.7 5.2 5.5 6.1 7.3 8.3 9.3 10.3
Income Taxes 1.4 1.9 2.0 2.2 2.7 3.0 3.4 3.8
------ ------ ------ ------ ------ ------ ------ ------
Net Income $ 2.3 $ 3.2 $ 3.5 $ 3.9 $ 4.6 $ 5.3 $ 5.9 $ 6.6
Earnings Per Share $ 0.27 $ 0.36 $ 0.39 $ 0.44 $ 0.52 $ 0.60 $ 0.66 $ 0.74
Shares Outstanding 8.7 8.9 8.9 8.9 8.9 8.9 8.9 8.9
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Margins: Margin Assumptions:
- --------------------------------------------------------- ----------------------------------------------------------------
Sales Growth 6.5% 6.8% 6.5% 6.5% 6.5% 6.5% 6.5%
Cost of Sales (% of Sales) 25.8% 25.4% 24.9% 24.9% 24.9% 24.9% 24.9% 24.9%
Operating Expenses (% of Sales) 62.5% 62.7% 64.0% 64.0% 64.0% 64.0% 64.0% 64.0%
Depreciation (% of Sales) 7.6% 6.9% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3%
Tax Rate 37.5% 37.5% 36.4% 36.4% 36.4% 36.4% 36.4% 36.4%
EBIT Margin 4.1% 5.0% 4.8% 4.8% 4.8% 4.8% 4.8% 4.8%
EBITDA Margin 11.7% 11.9% 11.1% 11.1% 11.1% 11.1% 11.1% 11.1%
Pre-Tax Margin 3.1% 4.0% 4.0% 4.2% 4.7% 5.1% 5.3% 5.5%
Net Margin 1.9% 2.5% 2.6% 2.7% 3.0% 3.2% 3.4% 3.5%
</TABLE>
------------------------
(1) Operating Expenses includes G&A and Taxes other than Income Taxes.
<PAGE>
BALANCE SHEET
- --------------------------------------------------------------------------------
($ in millions)
<TABLE>
<CAPTION>
ACTUAL PROJECTED
FY ENDED DECEMBER FY ENDED DECEMBER
------------------------------- -----------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Current Assets
Cash $ 1.4 $ 4.3 $ 6.1 $ 0.5 $ 2.1 $ 9.3 $ 17.7 $ 27.5
Accounts Receivable 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3
Inventories 1.0 1.0 1.2 1.3 1.4 1.5 1.6 1.7
Other Current Assets 2.0 2.1 2.0 2.2 2.3 2.5 2.6 2.8
--------- --------- --------- --------- --------- --------- --------- ---------
Total Current Assets $ 4.5 $ 7.6 $ 9.5 4.2 6.1 13.5 22.2 32.3
Property, Plant & Equipment (net) 89.9 91.9 91.5 91.2 90.4 88.8 86.6 83.7
Other Assets 4.6 3.1 3.1 3.3 3.6 3.8 4.0 4.3
Goodwill and Intangible Assets -- -- -- -- -- -- -- --
Total Assets $ 98.9 $ 102.5 $ 104.2 $ 98.8 $ 100.0 $ 106.1 $ 112.9 $ 120.3
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Liabilities and Shareholders' Equity
Accounts Payable $ 4.2 $ 4.2 $ 6.0 $ 6.4 $ 6.8 $ 7.2 $ 7.7 $ 8.2
Accrued Expenses 0.5 1.0 1.7 1.2 1.2 1.3 1.4 1.5
Accrued Payroll 2.4 3.3 3.7 3.9 4.2 4.5 4.7 5.1
Other Liabilities 2.6 1.9 1.3 1.3 1.3 1.3 1.3 1.3
--------- --------- --------- --------- --------- --------- --------- ---------
Total Current Liabilities 9.7 10.4 12.7 12.8 13.5 14.3 15.1 16.0
Deferred Rent 5.6 6.1 6.6 6.6 6.6 6.6 6.6 6.6
Notes Payable 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0
Total Bank Debt 19.5 18.5 13.5 4.2 0.0 0.0 0.0 0.0
Senior Sub Debt -- -- -- -- -- -- -- --
Stockholders' Equity 64.1 67.5 71.4 75.3 79.9 85.2 91.1 97.7
Total Liabilities and Stockholders'
Equity $ 98.9 $ 102.5 $ 104.2 $ 98.8 $ 100.0 $ 106.1 $ 112.9 $ 120.3
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
ACTUAL PROJECTED
------------------------------- -----------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RATIOS:
Receivable Days 0.5 0.5 0.6 0.6 0.6 0.6 0.6 0.6
Payable Days 49.9 47.0 64.0 64.0 64.0 64.0 64.0 64.0
Inventory Turns 32.7 31.0 27.9 27.9 27.9 27.9 27.9 27.9
Other Current Assets (% of Revenue) 1.7% 1.6% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
Other Assets (% of Sales) 3.8% 2.4% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3%
Accrued Expenses (% of Revenues) 0.4% 0.8% 1.2% 0.8% 0.8% 0.8% 0.8% 0.8%
Accrued Payroll (% of Revenues) 2.0% 2.6% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7%
Other Liabilities (% of Total Sales) 2.1% 1.5% 0.9% 0.9% 0.9% 0.9% 0.9% 0.9%
Capex (% of Sales) 23.0% 8.4% 6.5% 6.1% 5.7% 5.4% 5.1% 4.8%
Capex 27.6 10.8 8.9 8.9 8.9 8.9 8.9 8.9
Depreciation & Amortization 9.1 8.8 8.6 9.2 9.8 10.4 11.1 11.8
Deferred Rent 5.6 6.1 6.6 6.6 6.6 6.6 6.6 6.6
</TABLE>
<PAGE>
STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
($ in millions)
<TABLE>
<CAPTION>
PROJECTED DECEMBER 31,
-------------------------------------------------------
1998 1999 2000 2001 2002
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET INCOME 3.9 4.6 5.3 5.9 6.6
Depreciation and Amortization 9.2 9.8 10.4 11.1 11.8
(Incr.)/Decr. in AR 0.0 (0.0) (0.0) (0.0) (0.0)
(Incr.)/Decr. in Inventories (0.1) (0.1) (0.1) (0.1) (0.1)
(Incr.)/Decr. in Other Current Assets (0.2) (0.1) (0.2) (0.2) (0.2)
(Incr.)/Decr. in Other Assets (0.2) (0.2) (0.2) (0.2) (0.3)
Incr./(Decr.) in AP 0.4 0.4 0.4 0.5 0.5
Incr./(Decr.) Accrued Expenses (0.5) 0.1 0.1 0.1 0.1
Incr./(Decr.) Accrued Payroll 0.2 0.3 0.3 0.3 0.3
Incr./(Decr.) Other Liabilities 0.0 0.0 0.0 0.0 0.0
NET CASH PROVIDED BY OPERATING ACTIVITIES 12.7 14.7 16.0 17.3 18.7
CASH FLOWS FROM INVESTING ACTIVITIES
CAPEX (8.9) (8.9) (8.9) (8.9) (8.9)
Other 0.0 0.0 0.0 0.0 0.0
Company Recapitalization 0.0 0.0 0.0 0.0 0.0
--- --- --- --- ---
NET CASH PROVIDED BY INVESTING ACTIVITIES (8.9) (8.9) (8.9) (8.9) (8.9)
CASH FLOW FROM FINANCING ACTIVITIES
Deferred Rent 0.0 0.0 0.0 0.0 0.0
Notes Payable and Capitalized Lease 0.0 0.0 0.0 0.0 0.0
Bank Debt (9.3) (4.2) 0.0 0.0 0.0
Senior Sub Debt 0.0 0.0 0.0 0.0 0.0
--- --- --- --- ---
NET CASH PROVIDED BY FINANCING ACTIVITIES (9.3) (4.2) 0.0 0.0 0.0
NET CASH INCREASE/(DECREASE) (5.6) 1.6 7.1 8.4 9.8
CASH BEGINNING OF PERIOD 6.1 0.5 2.1 9.3 17.7
CASH END OF PERIOD 0.5 2.1 9.3 17.7 27.5
MINIMUM CASH BALANCE 0.5 0.5 0.5 0.5 0.5
</TABLE>
<PAGE>
EXHIBIT (c)(1)
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 13, 1998
AMONG
BERTUCCI'S, INC.,
TEN IDEAS, INC.,
AND
TEN IDEAS ACQUISITION CORP.
<PAGE>
<TABLE>
<S> <C>
ARTICLE I
THE MERGER......................................................................... 1
SECTION 1.1. THE MERGER........................................................ 1
SECTION 1.2. CLOSING........................................................... 2
SECTION 1.3. EFFECTIVE TIME.................................................... 2
SECTION 1.4. EFFECTS OF THE MERGER............................................. 2
SECTION 1.5. CERTIFICATE OF INCORPORATION; BY-LAWS............................. 2
SECTION 1.6. DIRECTORS......................................................... 3
SECTION 1.7. OFFICERS.......................................................... 3
SECTION 1.8. TRANSFER OF SHARES TO PARENT...................................... 3
ARTICLE II............................................................................. 3
EFFECT OF THE MERGER ON THE SECURITIES OF THE CONSTITUENT CORPORATIONS............. 3
SECTION 2.1. EFFECT ON CAPITAL STOCK........................................... 3
SECTION 2.2. STOCK OPTIONS..................................................... 4
SECTION 2.3. EXCHANGE OF CERTIFICATES.......................................... 6
ARTICLE III............................................................................ 8
REPRESENTATIONS AND WARRANTIES..................................................... 8
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................... 8
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.................. 14
ARTICLE IV............................................................................. 17
COVENANTS RELATING TO CONDUCT OF BUSINESS.......................................... 17
SECTION 4.1. CONDUCT OF BUSINESS OF THE COMPANY................................ 17
SECTION 4.2. OTHER ACTIONS..................................................... 19
ARTICLE V.............................................................................. 19
ADDITIONAL AGREEMENTS.............................................................. 19
SECTION 5.1. MEETING OF STOCKHOLDERS........................................... 19
SECTION 5.2. PROXY STATEMENT; SCHEDULE 13E-3................................... 19
SECTION 5.3. ACCESS TO INFORMATION; CONFIDENTIALITY............................ 21
SECTION 5.4. COMMERCIALLY REASONABLE EFFORTS................................... 21
SECTION 5.5. FINANCING......................................................... 21
SECTION 5.6. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE............... 22
SECTION 5.7. PUBLIC ANNOUNCEMENTS.............................................. 23
SECTION 5.8. ACQUISITION PROPOSALS............................................. 24
SECTION 5.9. STOCKHOLDER LITIGATION............................................ 25
SECTION 5.10. BOARD ACTION RELATING TO STOCK OPTION PLANS...................... 25
SECTION 5.11. CONSENTS AND APPROVALS........................................... 25
SECTION 5.12. FINANCIAL STATEMENTS............................................. 26
SECTION 5.13. REPAYMENT OF INDEBTEDNESS........................................ 26
ARTICLE VI............................................................................. 26
CONDITIONS PRECEDENT............................................................... 26
SECTION 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER........ 26
SECTION 6.2. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB....................... 27
SECTION 6.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY.......................... 28
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII............................................................................ 29
TERMINATION, AMENDMENT AND WAIVER.................................................. 29
SECTION 7.1. TERMINATION....................................................... 29
SECTION 7.2. EFFECT OF TERMINATION............................................. 30
SECTION 7.3. AMENDMENT......................................................... 33
SECTION 7.4. EXTENSION; WAIVER................................................. 33
SECTION 7.5. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER......... 33
ARTICLE VIII........................................................................... 33
GENERAL PROVISIONS................................................................. 33
SECTION 8.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES..................... 33
SECTION 8.2. FEES AND EXPENSES................................................. 34
SECTION 8.3. DEFINITIONS....................................................... 34
SECTION 8.4. NOTICES........................................................... 34
SECTION 8.5. INTERPRETATION.................................................... 35
SECTION 8.6. COUNTERPARTS...................................................... 35
SECTION 8.7. ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES....................... 35
SECTION 8.8. GOVERNING LAW..................................................... 35
SECTION 8.9. ASSIGNMENT........................................................ 35
SECTION 8.10. ENFORCEMENT...................................................... 36
SECTION 8.11. SEVERABILITY..................................................... 36
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 13, 1998
AMONG
BERTUCCI'S, INC.,
A MASSACHUSETTS CORPORATION (THE "COMPANY"),
TEN IDEAS, INC.,
A DELAWARE CORPORATION ("PARENT"),
AND
TEN IDEAS ACQUISITION CORP.,
A MASSACHUSETTS CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF
PARENT ("SUB")
WITNESSETH:
WHEREAS, the Board of Directors of each of the Company, Parent and Sub has
adopted resolutions approving Parent's acquisition of the Company upon the terms
set forth in this Agreement and Plan of Merger (the "Agreement");
WHEREAS, pursuant to this Agreement, Sub shall be merged with and into the
Company and the Company shall thereby become a wholly-owned direct subsidiary of
Parent (the "Merger");
WHEREAS, the Company, Parent and Sub desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger;
WHEREAS, in accordance with applicable law, the Company's Restated Articles
of Organization and the terms of this Agreement, the affirmative vote of the
holders of at least two-thirds of the outstanding common stock of the Company is
required to consummate the Merger;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Massachusetts Business
Corporation Law (the "MBCL"), Sub shall be merged with and into the Company at
the Effective Time (as hereinafter defined). Upon the Effective Time, the
separate existence of Sub shall cease, and the Company shall continue as the
surviving corporation (the "Surviving Corporation").
SECTION 1.2. CLOSING. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 7.1, and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the closing of the Merger (the "Closing") will take place
at 10:00 a.m. Boston time not later than the second business day following the
date on which the last to be fulfilled or waived of the conditions set forth in
Article VI shall be fulfilled or waived in accordance with this Agreement (the
"Closing Date"), at the offices of Posternak, Blankstein & Lund, L.L.P., 100
Charles River Plaza, Boston, Massachusetts, unless another date, time or place
is agreed to in writing by the parties hereto.
I-1
<PAGE>
SECTION 1.3. EFFECTIVE TIME. The parties hereto will file with the Secretary
of State of the Commonwealth of Massachusetts (the "Massachusetts Secretary of
State") on the date of the Closing (or on such other date as Parent and the
Company may agree) articles of merger or other appropriate documents, executed
in accordance with the relevant provisions of the MBCL, and make all other
filings or recordings required under the MBCL in connection with the Merger. The
Merger shall become effective upon the filing of the articles of merger with the
Massachusetts Secretary of State, or at such later time as is specified in the
articles of merger (the "Effective Time").
SECTION 1.4. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 80 of the MBCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.5. ARTICLES OF ORGANIZATION; BY-LAWS.
(a) The Company's Restated Articles of Organization, as in effect at the
Effective Time, shall be, from and after the Effective Time, the Articles of
Organization of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
(b) The Company's Restated By-laws, as in effect at the Effective Time,
shall be, from and after the Effective Time, the By-laws of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
SECTION 1.6. DIRECTORS. The directors of Sub at the Effective Time shall
become, from and after the Effective Time, the directors of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 1.7. OFFICERS. The officers of Sub at the Effective Time shall
become, from and after the Effective Time, the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 1.8. TRANSFER OF SHARES TO PARENT. At or prior to the Effective
Time, Joseph Crugnale and the trusts established for the benefit of Mr.
Crugnale's children (collectively, the "Crugnale Group") shall transfer to
Parent all of the shares of capital stock of the Company held by them. Any
transferees of shares of capital stock held by the Crugnale Group on the date of
this Agreement shall agree to be bound by the provisions of this Section 1.8.
ARTICLE II
EFFECT OF THE MERGER ON THE SECURITIES OF THE
CONSTITUENT CORPORATIONS
SECTION 2.1. EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of
the Merger and without any action on the part of any holder:
(a) COMMON STOCK OF SUB. Each share of the capital stock of Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one validly issued, fully paid and nonassessable share of Common Stock,
par value $.005 per share, of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each share of the
capital stock of the Company issued or outstanding immediately prior to the
Effective Time that is owned by the Company or
I-2
<PAGE>
by Parent or Sub shall be canceled automatically and shall cease to exist, and
no cash or other consideration shall be delivered or deliverable in exchange
therefor.
(c) CONVERSION OF COMPANY SHARES. At the Effective Time, each share of the
Common Stock, par value $.005 per share, of the Company (the "Common Stock")
that is then issued and outstanding (all such shares of Common Stock being
hereinafter referred to collectively as the "Company Shares"), other than (i)
shares to be canceled pursuant to subsection 2.1(b) above and (ii) shares held
by Dissenting Shareholders (as hereinafter defined) (which shares, in the case
of clauses (i) and (ii) above, will not constitute "Company Shares" hereunder),
shall be converted into and become the right to receive, upon surrender of the
certificate representing such Company Share in accordance with Section 2.3, a
payment of $8.00 in cash, without interest thereon (the "Merger Consideration").
(d) DISSENTING SHARES. Notwithstanding anything in this Agreement to the
contrary, shares of Common Stock issued and outstanding immediately prior to the
Effective Time and held by a holder (a "Dissenting Shareholder"), if any, who
has the right to demand, and who properly demands, an appraisal of such shares
in accordance with Section 85 of the MBCL or any successor provision
("Dissenting Shares") shall not be converted into a right to receive the Merger
Consideration unless such Dissenting Shareholder fails to perfect or otherwise
loses or withdraws such Dissenting Shareholder's right to such appraisal, if
any. Provided the holder of any Dissenting Shares complies with the provisions
of the MBCL, such holder shall have with respect thereto solely the rights
provided under Sections 86 through 98, inclusive, of the MBCL. If, after the
Effective Time, such Dissenting Shareholder fails to perfect or otherwise loses
or withdraws any such right to appraisal, each such share of such Dissenting
Shareholder shall be treated as a share that had been converted as of the
Effective Time into the right to receive the Merger Consideration in accordance
with this Section 2.1. The Company shall give prompt notice to Parent of any
demands received by the Company for appraisal of any Dissenting Shares, and
Parent shall have the right to participate in and direct all negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of Parent, which consent shall not be unreasonably
withheld, make any payment with respect to, or settle or offer to settle, any
such demands.
(e) CANCELLATION AND RETIREMENT OF COMMON STOCK. As of the Effective Time,
all certificates representing shares of Common Stock, other than certificates
representing shares to be canceled in accordance with Section 2.1(b) or
Dissenting Shares, issued and outstanding immediately prior to the Effective
Time, shall no longer be outstanding and shall automatically be canceled and
shall cease to exist, and each holder of a certificate representing any such
shares of Common Stock shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration upon surrender of such
certificate in accordance with Section 2.3.
SECTION 2.2. STOCK OPTIONS.
(a) As of the Effective Time, each outstanding, unexercised stock option to
purchase shares of Common Stock (a "Company Stock Option") issued under the
Company's Amended and Restated 1987 Stock Option Plan (the "1987 Plan"), the
1989 Time Accelerated Restricted Stock Option Plan (the "TARSOP"), the 1993
Stock Option Plan for Non-Employee Directors (the "Director Plan") and the 1997
Stock Option Plan (the "1997 Plan") (collectively, the "Company Stock Option
Plans") shall terminate and be canceled and each holder of a Company Stock
Option shall be entitled to receive, in consideration therefor, a cash payment
from the Company (which payment shall be made as soon as practicable after the
Effective Time) equal to the product of (a) the excess, if any, of (x) the
Merger Consideration over (y) the per share exercise price of such Company Stock
Option, times (b) the number of Eligible Shares (as defined below) subject to
such Company Stock Option. Such cash payment shall be net of any required
I-3
<PAGE>
withholding taxes. The term "Eligible Shares" shall mean, (i) with respect to
any Company Stock Option granted under the 1987 Plan, the number of shares
subject to such option as to which such option shall then be vested and
exercisable as of the Effective Date, and (ii) with respect to any Company Stock
Option granted under the TARSOP, the Director Plan or the 1997 Plan, the
aggregate number of shares that shall then be subject to such option. The
Company's obligation to make any such cash payment (1) shall be subject to the
obtaining of any necessary consents of optionees to the cancellation of such
Company Stock Options, in form and substance satisfactory to Parent, and (2)
shall not require any action which violates any of the Company Stock Option
Plans. As of the Effective Time, each of the Company Stock Option Plans and the
Company's 1992 Employee Stock Purchase Plan (the "ESPP") shall terminate and be
of no further force or effect, and the Company shall take such action as shall
be necessary to ensure, to Parent's reasonable satisfaction, that no holder of a
Company Stock Option or participant in the ESPP will have any right to acquire
any interest in the Surviving Corporation under the Company Stock Option Plans
or the ESPP.
(b) Notwithstanding the provisions of Section 2.2(a), at Parent's option, in
lieu of canceling the unvested portion of any Company Stock Option granted under
the 1987 Plan, Parent may offer to assume such unvested portion or to grant as
of the Effective Time a substitute or replacement option to purchase shares of
the capital stock of Parent.
(c) The Company's obligation to make the cash payments specified in Section
2.2(a) with respect to any Company Stock Option shall be reduced to the extent
that Parent and the holder of such Company Stock Option shall have mutually
agreed, at or prior to the Effective Time, to the assumption of such Company
Stock Option by Parent or the grant by Parent of a substitute or replacement
stock option, shares of capital stock, stock purchase right or other equity
interest issued by Parent.
SECTION 2.3. EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. As of the Effective Time, Sub (or the Company, as the
Surviving Corporation) shall deposit, or shall cause to be deposited, with or
for the account of a bank, trust company or other agent designated by Sub, which
shall be reasonably satisfactory to the Company (the "Paying Agent"), for the
benefit of the holders of shares of Common Stock, cash in an aggregate amount
equal to the product of (x) the number of Company Shares, times (y) the Merger
Consideration (such amount being hereinafter referred to as the "Payment Fund").
The Paying Agent shall invest the Payment Fund as directed by the Surviving
Corporation.
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective Time,
each holder of an outstanding certificate or certificates which prior thereto
represented Company Shares shall, upon surrender to the Paying Agent of such
certificate or certificates and acceptance thereof by the Paying Agent, be
entitled to the amount of cash which the aggregate number of Company Shares
previously represented by such certificate or certificates surrendered shall
have been converted into the right to receive pursuant to subsection 2.1(c). The
Paying Agent shall accept such certificates upon compliance with such reasonable
terms and conditions as the Paying Agent may impose to effect an orderly
exchange thereof in accordance with normal exchange practices. If the
consideration to be paid in the Merger (or any portion thereof) is to be
delivered to any person other than the person in whose name the certificate
representing Company Shares surrendered in exchange therefor is registered, it
shall be a condition to such exchange that the certificate so surrendered shall
be properly endorsed with the signature guaranteed or otherwise be in proper
form for transfer and that the person requesting such exchange shall pay to the
Paying Agent any transfer or other tax required by reason of the payment of such
consideration to a person other than the registered holder of the certificate
surrendered, or shall establish to the satisfaction of the Paying Agent
I-4
<PAGE>
that such tax has been paid or is not applicable. After the Effective Time,
there shall be no further transfer on the records of the Company or its transfer
agent of certificates representing Common Stock, and if such certificates are
presented to the Company for transfer, they shall be canceled against delivery
of the Merger Consideration as hereinabove provided. Until surrendered as
contemplated by this subsection 2.3(b), each certificate representing Company
Shares shall be deemed at any time after the Effective Time to represent only
the right to receive upon such surrender the Merger Consideration, without any
interest thereon, as contemplated by Section 2.1. No interest will be paid or
will accrue on any cash payable as Merger Consideration to any holder of Company
Shares.
(c) LETTER OF TRANSMITTAL. Promptly after the Effective Time (but in no
event more than five business days thereafter), the Surviving Corporation shall
require the Paying Agent to mail to each record holder of certificates that
immediately prior to the Effective Time represented Company Shares which have
been converted pursuant to Section 2.1, a form of letter of transmittal and
instructions for use in surrendering such certificates and receiving the
consideration to which such holder shall be entitled therefor pursuant to
Section 2.1.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMMON STOCK. The Merger Consideration
paid upon the surrender for exchange of certificates representing Company Shares
in accordance with the terms of this Article II shall be deemed to have been
issued and paid in full satisfaction of all rights pertaining to the Company
Shares theretofore represented by such certificates, and no holder of Company
Shares shall thereby have any equity interest in the Surviving Corporation.
(e) TERMINATION OF PAYMENT FUND. Any portion of the Payment Fund which
remains undistributed to the holders of the certificates representing Company
Shares for one year after the Effective Time shall be delivered to the Surviving
Corporation, upon demand, and any holders of Company Shares who have not
theretofore complied with this Article II shall thereafter look only to the
Surviving Corporation and only as general creditors thereof for payment of their
claim for the Merger Consideration.
(f) NO LIABILITY. None of Parent, Sub, the Surviving Corporation or the
Paying Agent shall be liable to any person in respect of any cash, shares,
dividends or distributions payable from the Payment Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any certificates representing Company Shares shall not have been surrendered
prior to five years after the Effective Time (or immediately prior to such
earlier date on which the Merger Consideration in respect of such certificate
would otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 3.1(c)), any such cash, shares, dividends or distributions
payable in respect of such certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
(g) WITHHOLDING RIGHTS. The Surviving Corporation, Parent or Sub shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Company Shares such amounts as the
Surviving Corporation, Parent or Sub is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of state,
local or foreign tax law, including, without limitation, withholdings required
in connection with payments with respect to Company Stock Options. To the extent
that amounts are so withheld by the Surviving Corporation, Parent or Sub, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder in respect of which such deduction and withholding was
made.
I-5
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Parent and Sub as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. The Company is a corporation
duly organized, validly existing and in corporate good standing under the laws
of the Commonwealth of Massachusetts and has the requisite corporate power and
authority and any necessary governmental authority to carry on its business as
now being conducted and to own, operate and lease its properties. The Company is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse effect upon
(i) the business, assets, properties, condition (financial or otherwise) or
results of operations of the Company and the Subsidiaries (as defined in
subsection 3.1(b) hereof) taken as a whole, or (ii) the transactions
contemplated hereby or the legality or validity of this Agreement (a "Material
Adverse Effect"). The Company has delivered to Parent complete and correct
copies of its Restated Articles of Organization and Restated By-laws, as amended
to the date of this Agreement.
(b) SUBSIDIARIES. Section 3.1(b) of the disclosure schedule attached hereto
(the "Disclosure Schedule") sets forth the name, jurisdiction of incorporation,
capitalization and number of shares of outstanding capital stock of each
corporation of which the Company owns, directly or indirectly, a majority of the
outstanding capital stock (individually, a "Subsidiary" and, collectively, the
"Subsidiaries"). All the issued and outstanding shares of capital stock of each
Subsidiary are validly issued, fully paid and nonassessable and are owned,
directly or indirectly, by the Company, beneficially and of record, free and
clear of all liens, pledges, encumbrances or restrictions of any kind. No
Subsidiary has outstanding any securities convertible into or exchangeable or
exercisable for any shares of its capital stock, there are no outstanding
options, warrants or other rights to purchase or acquire any capital stock of
any Subsidiary, there are no irrevocable proxies with respect to such shares,
and there are no contracts, commitments, understandings, arrangements or
restrictions by which any Subsidiary or the Company is bound to issue additional
shares of the capital stock of a Subsidiary. Except for the Subsidiaries, and as
otherwise disclosed in Section 3.1(b) of the Disclosure Schedule, the Company
does not own, directly or indirectly, any capital stock or other equity
securities of any corporation or have any direct or indirect equity interest in
any business. Each Subsidiary (a) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation; (b) has all requisite corporate power and authority and any
necessary governmental authority to carry on its business as it is now being
conducted and to own, operate and lease its properties, except where the failure
to have such governmental authority would not have a Material Adverse Effect;
and (c) is qualified or licensed to do business as a foreign corporation and is
in good standing in each of the jurisdictions in which (i) the ownership or
leasing of real property or the conduct of its business requires such
qualification or licensing and (ii) the failure to be so qualified or licensed,
either singly or in the aggregate, would have a Material Adverse Effect. The
Company has delivered to Parent complete and correct copies of the Articles of
Organization or other charter documents and By-laws of each Subsidiary, each as
amended to date.
I-6
<PAGE>
(c) CAPITALIZATION. As of the date hereof, the authorized capital stock of
the Company consists of 200,000 shares of Preferred Stock, $.01 par value per
share ("Preferred Stock"), and 15,000,000 shares of Common Stock. As of the date
hereof, there are no shares of Preferred Stock issued or outstanding. As of the
date hereof, 8,905,121 shares of Common Stock are issued and outstanding,
566,550 shares of Common Stock are reserved for issuance pursuant to outstanding
Company Stock Options, and no shares of Common Stock are held by the Company in
its treasury. Except as set forth above, no shares of capital stock or other
equity securities of the Company are issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of the Company are, and all
shares which may be issued pursuant to the Company Stock Option Plans will be,
when issued, duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. Section 3.1(c) of the Disclosure Schedule
accurately sets forth the number of Company Shares issuable upon exercise of
each outstanding Company Stock Option, the vesting schedule thereof, and the
applicable exercise price with respect to each such Company Stock Option. Except
as set forth in Section 3.1(c) of the Disclosure Schedule, the Company has no
outstanding option, warrant, subscription or other right, agreement or
commitment which either (i) obligates the Company to issue, sell or transfer,
repurchase, redeem or otherwise acquire or vote any shares of the capital stock
of the Company or (ii) restricts the transfer of Common Stock. Except as set
forth in Section 3.1(c) of the Disclosure Schedule, the Company has no
outstanding stock appreciation rights, phantom stock or stock equivalents.
(d) AUTHORITY; ENFORCEABILITY; NONCONTRAVENTION. The Company has the
requisite corporate power and authority to enter into this Agreement and,
subject to the approval of its stockholders as set forth in Section 6.1(a) with
respect to the consummation of the Merger, to consummate the Merger and the
other transactions contemplated by this Agreement. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to the approval of its
stockholders as set forth in Section 6.1(a). This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that the enforceability hereof may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated by this Agreement
and compliance with the provisions hereof will not, (i) violate any of the
provisions of the Restated Articles of Organization or Restated By-laws of the
Company, or (ii) subject to the governmental filings and other matters referred
to in the following sentence, contravene any law, rule or regulation of any
state or of the United States or any political subdivision thereof or therein,
including any licensing board or agency, or any order, writ, judgment,
injunction, decree, determination or award currently in effect, which, in the
case of clause (ii) above, singly or in the aggregate, would have a Material
Adverse Effect or prevent consummation of the transactions contemplated hereby.
No consent, approval or authorization of, or declaration or filing with, or
notice to, any governmental agency, board or regulatory authority (a
"Governmental Entity"), which has not been received or made, is required by or
with respect to the Company or any Subsidiary in connection with the execution
and delivery of this Agreement by the Company or the consummation by the Company
of the transactions contemplated hereby, except for (i) the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii) the
filing of articles of merger with the Massachusetts Secretary of State and
appropriate documents with the relevant authorities of other states
I-7
<PAGE>
in which the Company is qualified to do business, and (iii) such other consents,
approvals, authorizations, filings or notices as are set forth in Section 3.1(d)
of the Disclosure Schedule.
(e) FINANCIAL STATEMENTS; SEC REPORTS. The Company has previously furnished
Parent and Sub with true and complete copies of (i) its Annual Report on Form
10-K for the fiscal year ended December 28, 1996 (the "Annual Report") filed by
the Company with the Securities and Exchange Commission (the "SEC"), (ii) its
Quarterly Reports on Form 10-Q for the quarters ended April 19, July 12 and
October 4, 1997 (collectively, the "Quarterly Reports" and, together with the
Annual Report, the "Reports") filed by the Company with the SEC, (iii) proxy
statements relating to all of the Company's meetings of shareholders (whether
annual or special) held or scheduled to be held since December 28, 1996 and (iv)
each other registration statement, proxy or information statement or current
report on Form 8-K filed since December 28, 1996 by the Company with the SEC.
Since December 24, 1992, the Company has complied in all material respects with
its SEC filing obligations under the Exchange Act and the Securities Act of
1933, as amended (the "Securities Act"). The financial statements and related
schedules and notes thereto of the Company contained in the Reports (or
incorporated therein by reference) were prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited quarterly
financial statements, as permitted by Form 10-Q) applied on a consistent basis
except as noted therein, and fairly present in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended, subject (in the case of interim unaudited
financial statements) to normal year-end audit adjustments, and such financial
statements complied as to form as of their respective dates in all material
respects with applicable rules and regulations of the SEC. Each such
registration statement, proxy statement and Report was prepared in accordance
with the requirements of the Securities Act or the Exchange Act and did not, on
the date of effectiveness in the case of such registration statements, on the
date of mailing in the case of such proxy statements and on the date of filing
in the case of such Reports, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as may be disclosed in the
Reports or as otherwise disclosed in Section 3.1(f) of the Disclosure Schedule,
since October 4, 1997 there has not been (1) any declaration, setting aside or
payment of any dividend or other distribution in respect of the capital stock of
the Company or any redemption or other acquisition by the Company of any of its
capital stock; (2) any issuance by the Company, or agreement or commitment of
the Company to issue, any shares of its Common Stock or securities convertible
into or exchangeable for shares of its Common Stock, except for stock options
and stock purchase rights set forth in Section 3.1(c) of the Disclosure
Schedule; (3) any change by the Company in accounting methods, principles or
practices except as required by generally accepted accounting principles; or (4)
any agreement or commitment, whether in writing or otherwise, to take any action
described in this subsection 3.1(f). Since October 4, 1997, the Company and the
Subsidiaries have conducted their respective businesses in all material respects
only in the ordinary course, consistent with past custom and practice, except as
contemplated by this Agreement.
(g) 1997 FINANCIAL INFORMATION. The financial and other information relating
to the Company's 1997 fiscal year and fourth fiscal quarter ended December 27,
1997 set forth in Section 3.1(g) of the Disclosure Schedule was prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with the financial information set forth in the Reports, and fairly
presents in all material respects
I-8
<PAGE>
the consolidated financial position of the Company and its consolidated
Subsidiaries as of December 27, 1997 and the consolidated results of their
operations for the fiscal year and fiscal quarter then ended.
(h) NO UNDISCLOSED LIABILITIES. Except as set forth in the Reports or on
Section 3.1(g) of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries has any liabilities (absolute, accrued, contingent or otherwise),
except liabilities (1) in the aggregate adequately provided for in the Company's
audited balance sheet (including any related notes thereto) for the fiscal year
ended December 28, 1996 included in the Annual Report (the "1996 Balance
Sheet"), (2) incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected on the 1996 Balance
Sheet, (3) incurred since December 28, 1996 in the ordinary course of business
consistent with past practice, (4) incurred in connection with this Agreement or
(5) which could not reasonably be expected to have a Material Adverse Effect.
(i) COMPLIANCE WITH LAWS. The business of the Company and each of the
Subsidiaries has been operated at all times in material compliance with all
applicable statutes, laws, rules, regulations, permits, licenses, orders,
injunctions and judgments (collectively, "Laws"), including, without limitation,
any applicable Laws regulating environmental matters, immigration, wages and
hours, working conditions or health and safety, except for such violations or
failures to comply that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect nor have a material adverse effect
on the Financing (as defined herein).
(j) LITIGATION. Except as disclosed in the Reports, there is no suit, action
or proceeding pending or, to the knowledge of the Company, threatened against
the Company or any of the Subsidiaries which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity
outstanding against the Company or any of its Subsidiaries which, individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect.
(k) COMPANY SCHEDULE 13E-3 AND PROXY MATERIALS. All of the information
supplied by the Company for inclusion in the Rule 13e-3 Transaction Statement on
Schedule 13E-3 (the "Schedule 13E-3") referred to in Section 5.2 hereof will
not, on the date the Schedule 13E-3 is first filed with the SEC, and all of the
information supplied by the Company for inclusion in the definitive proxy
statement (the "Definitive Proxy Statement") referred to in Section 5.2 hereof
will not, on the date when the Definitive Proxy Statement is first mailed to the
Company's shareholders, and the Schedule 13E-3 and the Definitive Proxy
Statement, as then amended or supplemented, will not, on the date of the
Company's stockholders' meeting referred to in Section 5.1 hereof or on the
Closing Date, contain any untrue statement of any material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Notwithstanding the foregoing, the Company makes no
representation or warranty regarding information furnished by Parent or Sub for
inclusion in the Schedule 13E-3 or the Definitive Proxy Statement (or any
amendment or supplement thereto). The Schedule 13E-3 and the Definitive Proxy
Statement will comply as to form and, with respect to information supplied or to
be supplied in writing by or on behalf of the Company for inclusion in the
Definitive Proxy Statement, substance in all material respects with the
requirements of the Exchange Act and the applicable rules and regulations of the
SEC thereunder.
(l) BOARD RECOMMENDATION. The Company's Board of Directors has (i)
recommended that the stockholders of the Company vote for approval and adoption
of this Agreement and the Merger, and (ii) taken such other action as shall be
necessary to exempt this Agreement and the transactions
I-9
<PAGE>
contemplated hereby from the provisions set forth in (x) Article 6 of the
Company's Restated Articles of Organization under the captions "Vote Required
for Certain Business Combinations" and "Redemption of Shares" and (y) Article 11
of the Company's Restated By-laws.
(m) FAIRNESS OPINION. The Company's Board of Directors has received from its
financial advisor, NationsBanc Montgomery Securities, Inc. (the "Financial
Advisor"), a written opinion, or a verbal opinion to be confirmed in writing
prior to the filing with the SEC of the Preliminary Proxy Statement (as defined
herein), addressed to it for inclusion in the Schedule 13E-3 and the Definitive
Proxy Statement to the effect that the consideration to be received by the
stockholders of the Company pursuant to the Merger is fair to such stockholders
from a financial point of view.
(n) BROKERS. No broker, investment banker, financial advisor or other
person, the fees and expenses of which will be paid by the Company, is entitled
to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement,
other than pursuant to an engagement letter with the Financial Advisor, the
terms of which have been disclosed to Parent.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Parent and
Sub represent and warrant to the Company as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Parent is a corporation duly
organized, validly existing and in corporate good standing under the laws of the
State of Delaware. Sub is a corporation duly organized, validly existing and in
corporate good standing under the laws of the Commonwealth of Massachusetts.
Each of Parent and Sub has the requisite corporate power and authority to carry
on its business as now being conducted. Each of Parent and Sub is duly qualified
or licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not have a Material Adverse Effect.
(b) CAPITALIZATION. As of the date of this Agreement, the authorized capital
stock of Parent consists of 1,000,000 shares of Common Stock, par value $.01 per
share, 100 shares of which are presently issued and outstanding, and 1,000,000
shares of Preferred Stock, par value $.01 per share, no shares of which are
presently issued and outstanding. As of the date of this Agreement, the
authorized capital stock of Sub consists of 200,000 shares of Common Stock, par
value $.01 per share, 1,000 shares of which are presently issued and
outstanding, which constitutes all of the issued and outstanding capital stock
of Sub. All of the issued and outstanding shares of capital stock of Parent and
Sub are validly issued, fully paid and nonassessable.
(c) AUTHORITY; ENFORCEABILITY; NONCONTRAVENTION. Parent and Sub have all
requisite corporate power and authority to enter into this Agreement and to
consummate the Merger and the other transactions contemplated by this Agreement.
The execution and delivery of this Agreement by Parent and Sub and the
consummation by Parent and Sub of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of Parent and Sub. This Agreement has been duly executed and delivered by
and constitutes a valid and binding obligation of each of Parent and Sub,
enforceable against such party in accordance with its terms, except that the
enforceability hereof may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court
I-10
<PAGE>
before which any proceeding therefor may be brought. The execution and delivery
of this Agreement do not, and the consummation of the transactions contemplated
by this Agreement and compliance with the provisions of this Agreement will not
(i) violate any of the provisions of the charter documents or By-laws of Parent
or Sub, or (ii) subject to the governmental filings and other matters referred
to in the following sentence, contravene any law, rule or regulation of any
state or of the United States or any political subdivision thereof or therein,
or any order, writ, judgment, injunction, decree, determination or award
currently in effect, which, in the case of clause (ii) above, singly or in the
aggregate, would have a material adverse effect on the business, financial
condition or results of operations of Parent and Sub taken as a whole or prevent
consummation of the transactions contemplated hereby. No consent, approval or
authorization of, or declaration or filing with, or notice to, any Governmental
Entity which has not been received or made is required by or with respect to
Parent or Sub in connection with the execution and delivery of this Agreement by
Parent or Sub or the consummation by Parent or Sub, as the case may be, of any
of the transactions contemplated by this Agreement, except for (i) the
requirements of the Exchange Act, (ii) the filing of the articles of merger with
the Massachusetts Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
and (iii) such other consents, approvals, authorizations, filings or notices as
are set forth in Section 3.1(d) of the Disclosure Schedule.
(d) FINANCING. Parent and Sub have received and accepted a written
commitment or commitments (the "Commitments") from BankBoston, N.A., Fleet
National Bank and BancBoston Securities Inc. dated as of February 13, 1998, to
provide financing for the transactions contemplated hereby, on or prior to the
Closing Date, in an aggregate amount of not less than $77,500,000 (the
"Financing"), which Financing is sufficient to consummate the transactions
currently contemplated by Section 6.2(c). True and correct copies of the
Commitments have been provided to the Company prior to the date hereof.
(e) SCHEDULE 13E-3 AND PROXY MATERIALS. All of the information to be
furnished by Parent or Sub for inclusion in the Schedule 13E-3 and the
Definitive Proxy Statement (or any amendment or supplement thereto) will not, in
the case of the Schedule 13E-3, on the date it is first filed, and in the case
of the Definitive Proxy Statement, on the date it is first mailed to the
Company's shareholders, and in the case of the Schedule 13E-3 and the Definitive
Proxy Statement, as then amended or supplemented, on the date of the Company's
stockholders' meeting referred to in Section 5.1 hereof or on the Closing Date,
contain any statement which is 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 therein, in light of the circumstances
under which they were made, not misleading. Notwithstanding the foregoing,
Parent and Sub make no representation or warranty regarding information
furnished by the Company for inclusion in the Schedule 13E-3 or the Definitive
Proxy Statement (or any amendment or supplement thereto). The Schedule 13E-3
will comply as to form and, with respect to information supplied or to be
supplied in writing by or on behalf of Parent or Sub for inclusion in the
Schedule 13E-3, substance in all material respects with the requirements of the
Exchange Act and the applicable rules and regulations of the SEC thereunder.
(f) BROKERS. No broker, investment banker, financial advisor or other
person, the fees and expenses of which will be paid by Parent or Sub, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement,
except for fees and expenses payable to BancBoston Securities Inc.
I-11
<PAGE>
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
PRIOR TO MERGER
SECTION 4.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by
this Agreement, during the period from the date of this Agreement to the
Effective Time, the Company shall operate, and shall cause each Subsidiary to
operate, its business in the ordinary course of business. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time, except as expressly contemplated by this Agreement, the
Company and the Subsidiaries shall not, without the prior written consent of
Parent:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of the
Company's outstanding capital stock, (y) split, combine or reclassify any of its
outstanding capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
outstanding capital stock, or (z) purchase, redeem or otherwise acquire any
shares of outstanding capital stock or any rights, warrants or options to
acquire any such shares;
(ii) issue, sell, grant, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities, including under the ESPP, except for the
issuance of shares of Common Stock upon exercise of Company Stock Options
outstanding prior to the date of this Agreement and disclosed in Section 3.1(c),
or take any action that would make the Company's representations and warranties
set forth in Section 3.1(c) not true and correct in all material respects;
(iii) amend its Restated Articles of Organization or Restated By-laws or the
comparable charter or organizational documents of any Subsidiary;
(iv) acquire any business or any corporation, partnership, joint venture,
association or other business organization or division thereof (or any interest
therein), or form any subsidiaries;
(v) sell or otherwise dispose of any of its substantial assets, except in
the ordinary course of business;
(vi) make any capital expenditures, enter into leases or agreements for new
locations, or make other commitments with respect thereto, except capital
expenditures, leases, agreements or commitments (i) set forth on Section 4.1(vi)
of the Disclosure Schedule, or (ii) not exceeding $100,000 in the aggregate as
the Company may, in its discretion, deem appropriate;
(vii) (x) incur any indebtedness for borrowed money or guaranty any such
indebtedness of another person, other than (A) borrowings in the ordinary course
under existing lines of credit (or under any refinancing of such existing
lines), (B) indebtedness owing to, or guaranties of indebtedness owing to, the
Company or (C) in connection with the Financing, or (y) make any loans or
advances to any other person, other than routine advances to employees;
(viii) grant or agree to grant to any employee any increase in wages or
bonus, severance, profit sharing, retirement, deferred compensation, insurance
or other compensation or benefits, or establish any new compensation or benefit
plans or arrangements, or amend or agree to amend any existing Company Plans,
except as may be required under existing agreements or in the ordinary course of
business consistent with past practices;
I-12
<PAGE>
(ix) merge, amalgamate or consolidate with any other person or entity in any
transaction, sell all or substantially all of its business or assets, or acquire
all or substantially all of the business or assets of any other person or
entity;
(x) enter into or amend any employment, consulting, severance or similar
agreement with any person;
(xi) change its accounting policies in any material respect, except as
required by generally accepted accounting principles; or
(xii) commit or agree to take any of the foregoing actions.
SECTION 4.2. OTHER ACTIONS. The Company, Parent and Sub shall not take any
action that would, or that could reasonably be expected to, result in (i) any of
the representations and warranties of such party set forth in this Agreement
that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) any of the conditions of the Merger set forth in
Article VI not being satisfied.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. MEETING OF STOCKHOLDERS. The Company will promptly take all
action necessary in accordance with applicable law and its Restated Articles of
Organization and Restated By-laws to duly call, give notice of, and convene a
meeting of its stockholders (the "Stockholders' Meeting") to consider and vote
upon the adoption and approval of this Agreement and the Merger and all actions
contemplated hereby which require approval and adoption by the Company's
stockholders; provided, however, that the obligations contained herein shall be
subject to the provisions of Section 5.8. Joseph Crugnale shall agree to cause
all of the shares of capital stock of the Company held by the Crugnale Group to
be voted, either in person or by proxy, in favor of the adoption and approval of
this Agreement and the Merger at the Stockholders' Meeting.
SECTION 5.2. PROXY STATEMENT; SCHEDULE 13E-3.
(a) The Company will promptly (but in any event within 15 business days from
the date of this Agreement or 5 business days from the Company's receipt of its
independent auditor's report on the Company's fiscal 1997 financial statements,
whichever is later) prepare and file, and the Company will cooperate with Parent
in the preparation and filing of, the Schedule 13E-3 with the SEC with respect
to the transactions contemplated by this Agreement. In connection with the
Stockholders' Meeting contemplated hereby, the Company will promptly (but in any
event within 15 business days from the date of this Agreement or 5 business days
from the Company's receipt of its independent auditor's report on the Company's
fiscal 1997 financial statements, whichever is later) prepare and file, and
Parent will cooperate with the Company in the preparation and filing of, a
preliminary Proxy Statement relating to the transactions contemplated by this
Agreement (the "Preliminary Proxy Statement") with the SEC and will use its
commercially reasonable best efforts to respond to the comments of the SEC
concerning the Schedule 13E-3 and the Preliminary Proxy Statement and to cause
the Definitive Proxy Statement to be mailed to the Company's stockholders, in
each case as soon as reasonably practicable. The Company shall pay the filing
fees for the Schedule 13E-3 and the Preliminary Proxy Statement. Each party to
this Agreement will notify the other parties promptly of the receipt of the
comments of the SEC, if any, and of any request by the SEC for amendments or
supplements to the Schedule 13E-3, the Preliminary Proxy Statement or the
Definitive Proxy Statement or for additional information, and will supply the
other
I-13
<PAGE>
parties with copies of all correspondence between such party or its
representatives, on the one hand, and the SEC or members of its staff, on the
other hand, with respect to the Schedule 13E-3, the Preliminary Proxy Statement,
the Definitive Proxy Statement or the Merger.
(b) If at any time prior to the Stockholders' Meeting, any event should
occur relating to the Company or any of the Subsidiaries which should be set
forth in an amendment of, or a supplement to, the Schedule 13E-3 or the
Definitive Proxy Statement, the Company will promptly inform Parent. If at any
time prior to the Stockholders' Meeting, any event should occur relating to
Parent or Sub or any of their respective Associates or Affiliates, or relating
to the plans of any such persons for the Surviving Corporation after the
Effective Time of the Merger, or relating to the Financing, that should be set
forth in an amendment of, or a supplement to, the Schedule 13E-3 or the
Definitive Proxy Statement, the Company, with the cooperation of Parent, will,
upon learning of such event, promptly prepare, file and, if required, mail such
amendment or supplement to the Company's stockholders; provided that, prior to
such filing or mailing, the Company shall consult with Parent with respect to
such amendment or supplement and shall afford Parent reasonable opportunity to
comment thereon.
(c) Parent will furnish to the Company the information relating to Parent
and Sub, their respective Associates and Affiliates and the plans of such
persons for the Surviving Corporation after the Effective Time of the Merger,
and relating to the Financing, which is required to be set forth in the Schedule
13E-3, the Preliminary Proxy Statement or the Definitive Proxy Statement under
the Exchange Act and the rules and regulations of the SEC thereunder. The
Company shall cause to be included, (i) as an exhibit to the Preliminary Proxy
Statement and the Definitive Proxy Statement, the fairness opinion of the
Financial Advisor referred to in Section 3.1(m), and (ii) as an exhibit to the
Schedule 13E-3, any materials delivered to the Company's Board of Directors by
the Financial Advisor in connection with the delivery of such fairness opinion
which are required under Schedule 13E-3 to be filed as exhibits.
SECTION 5.3. ACCESS TO INFORMATION; CONFIDENTIALITY. From and after the date
hereof, the Company will provide to Parent complete access to the Company's
facilities, books and records and shall cause the directors, employees,
accountants, attorneys, financial advisors, lenders and other agents and
representatives (collectively, "Representatives") of the Company to cooperate
fully with Parent and Parent's Representatives in connection with such persons'
due diligence investigation of the Company and the Company's assets, contracts,
liabilities, operations, records and other aspects of its business (including
any environmental investigation of the Company's facilities). Parent shall, and
shall cause Parent's Representatives to, keep all information supplied or made
available to Parent hereunder in confidence and shall not disclose the same to
any party other than its Representatives on a "need to know" basis and only for
purposes of evaluating the Merger and the Financing. Parent will not use such
information except for evaluating the Merger and in connection with procurement
of the Financing. If the Merger is not consummated and this Agreement is
terminated in accordance with its terms, Parent shall return any information
provided hereunder.
SECTION 5.4. COMMERCIALLY REASONABLE EFFORTS. Upon the terms and subject to
the conditions and other agreements set forth in this Agreement, each of the
parties agrees to use commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement, including the
satisfaction of the respective conditions set forth in Article VI.
I-14
<PAGE>
SECTION 5.5. FINANCING. Each of Parent and Sub shall use commercially
reasonable best efforts to close the Financing on terms consistent with the
Commitments or such other terms as shall be satisfactory to them and to execute
and deliver definitive agreements with respect to the Financing (the "Definitive
Financing Agreements") on or before the Closing Date. Parent and Sub shall use
commercially reasonable best efforts to satisfy on or before the Closing Date
all requirements of the Definitive Financing Agreements which are conditions to
closing the transactions constituting the Financing and to drawing the cash
proceeds thereunder. The obligations contained herein are not intended, nor
shall they be construed, to benefit or confer any rights upon any person, firm
or entity other than the Company.
SECTION 5.6. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to indemnify and hold harmless each person who is now, at any time
has been or who becomes prior to the Effective Time a "Director/officer" of the
Company (as defined in Article 7 of the Company's Restated By-laws ("Article
7")), and their heirs and personal representatives (the "Indemnified Parties"),
against any and all "Expenses" (as defined in Article 7) incurred in connection
with any "Proceeding" (as defined in Article 7) arising out of or pertaining to
any action or omission occurring prior to the Effective Time (including, without
limitation, any Proceeding which arises out of or relates to the transactions
contemplated by this Agreement), to the full extent permitted under
Massachusetts law and the Surviving Corporation's Restated By-laws in effect as
of the Effective Date or under any indemnification agreement in effect as of the
date of this Agreement.
(b) The Surviving Corporation shall control the defense of any such
Proceeding with counsel selected by the Surviving Corporation, which counsel
shall be reasonably acceptable to the Indemnified Party, provided that the
Indemnified Party shall be permitted to participate in the defense of such
Proceeding at its own expense; except that the Surviving Corporation shall pay
as incurred the reasonable fees and expenses of counsel retained by an
Indemnified Party in the event that (i) the Surviving Corporation and the
Indemnified Party shall have mutually agreed on the retention of such counsel or
(ii) the named parties to any Proceeding include both the Surviving Corporation
and the Indemnified Party and representation of both parties by the same counsel
would be inappropriate, in the reasonable opinion of counsel to the Indemnified
Party, due to actual or potential differing interests between them; and
provided, further, that if any D&O Insurance (as defined in paragraph (c) of
this Section 5.6) in effect at the time shall require the insurance company to
control such defense in order to obtain the full benefits of such insurance and
such provision is consistent with the provisions of the Company's D&O Insurance
existing as of the date of this Agreement, then the provisions of such policy
shall govern. Neither Parent nor the Surviving Corporation shall in any event be
liable for any settlement effected without its written consent, which consent
shall not be withheld unreasonably.
(c) For a period of not less than six years after the Effective Time, Parent
or the Surviving Corporation shall maintain officers' and directors' liability
insurance ("D&O Insurance") covering each Indemnified Party who is presently
covered by the Company's officers' and directors' liability insurance or will be
so covered at the Effective Time with respect to actions or omissions occurring
prior to the Effective Time, on terms no less favorable than such insurance
maintained in effect by the Company as of the date hereof in terms of coverage
and amounts, provided that Parent and the Surviving Corporation shall not be
required to pay in the aggregate an annual premium for D&O Insurance in excess
of 125% of the last annual premium paid prior to the date hereof, but in such
case shall purchase as much coverage as may be obtained for such amount.
I-15
<PAGE>
(d) The Restated Articles of Organization and Restated By-laws of the
Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the Restated Articles of Organization and Restated
By-laws of the Surviving Corporation as of the Effective Date, which provisions
shall not be amended, repealed or otherwise modified after the Effective Time in
any manner that would adversely affect the rights thereunder of the Indemnified
Parties in respect of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement), unless such modification is required by law. Parent, Sub and
the Company agree that all rights existing in favor of any Indemnified Party
under any indemnification agreement in effect as of the date hereof shall
survive the Merger and shall continue in full force and effect, without any
amendment thereto.
(e) The provisions of this Section 5.6 are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, his or her
heirs and his or her personal representatives and shall be binding on all
successors and assigns of Parent, Sub, the Company and the Surviving
Corporation.
SECTION 5.7. PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one hand, and the
Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other public statements with respect to the existence of and transactions
contemplated by this Agreement, and shall not issue any such press release or
make any such public statement without the consent of the other party following
such consultation, except as may be required by applicable law, regulation or
judicial process, and in such case only after reasonable notice to the other
party.
SECTION 5.8. ACQUISITION PROPOSALS. The Company shall not, nor shall it
authorize or permit any of its Representatives to, directly or indirectly, (i)
solicit, initiate or knowingly encourage the submission of any Acquisition
Proposal (as hereinafter defined) or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any non-public information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; provided, however, that the foregoing shall not prohibit
the Board of Directors of the Company (or, if applicable, the duly appointed
Special Committee thereof) from: (i) furnishing information to, or entering into
discussions or negotiations with, any person in connection with an unsolicited
bona fide Acquisition Proposal by such person if, and to the extent that, the
Board of Directors of the Company (or the Special Committee), after consultation
with independent legal counsel (who may be the Company's regularly engaged
independent counsel), determines in good faith that such action is required for
the Board of Directors of the Company to comply with its fiduciary obligations
to stockholders under applicable law; (ii) withdrawing or modifying its
recommendation referred to in Section 3.1(l) following receipt of a bona fide
unsolicited Acquisition Proposal if the Board of Directors of the Company (or
the Special Committee), after consultation with independent legal counsel (who
may be the Company's regularly engaged independent counsel), determines in good
faith that such action is necessary for the Board of Directors of the Company to
comply with its fiduciary duties to stockholders under applicable law; or (iii)
making to the Company's stockholders any recommendation and related filing with
the SEC as required by Rule 14e-2 and 14d-9 under the Exchange Act, with respect
to any tender offer, or taking any other legally required action (including,
without limitation, the making of public disclosures as may be necessary or
advisable under applicable securities laws); and provided further, however,
that, in the event of an exercise of the Company's or its Board of Director's
(or the Special Committee's) rights under clause (i), (ii) or (iii) above,
notwithstanding anything contained in this Agreement to the contrary, such
failure shall not constitute a breach of this Agreement by the Company. The
Company shall provide immediate written notice to Parent of the receipt of any
such Acquisition
I-16
<PAGE>
Proposal and of the Company's intention to furnish information to, or enter into
discussions or negotiations with, such person or entity. For purposes of this
Agreement, "Acquisition Proposal" means any proposal with respect to a merger,
consolidation, share exchange, tender offer or similar transaction involving the
Company, or any purchase or other acquisition of all or any significant portion
of the assets of the Company, or any equity interest in the Company, other than
the transactions contemplated hereby.
SECTION 5.9. STOCKHOLDER LITIGATION. The Company shall give Parent the
opportunity to participate, at the expense of Parent, in the defense or
settlement of any stockholder litigation against the Company and its
Representatives relating to the transactions contemplated by this Agreement;
provided, however, that no such settlement shall be agreed to without Parent's
consent, which consent shall not be unreasonably withheld.
SECTION 5.10. BOARD ACTION RELATING TO STOCK OPTION PLANS. As soon as
practicable following the date of this Agreement, the Board of Directors of the
Company (or, if appropriate, any committee administering a Company Stock Option
Plan) shall adopt such resolutions or take such actions as may be required to
adjust the terms of all outstanding Company Stock Options in accordance with
Section 2.2 and shall make such other changes to the Company Stock Option Plans
and the ESPP as Parent deems appropriate to give effect to the Merger, and to
terminate such plans as of the Effective Time. Promptly following the
termination of the ESPP, the Company or the Surviving Corporation, as the case
may be, shall refund to each participant in the ESPP in cash the amount of
payroll deductions, if any, then credited to such participant's account under
the ESPP in accordance with the provisions of Section 19 of the ESPP.
SECTION 5.11. CONSENTS AND APPROVALS. As soon as practicable following the
date of this Agreement, the Company and Parent shall make all filings required
to be made with and seek all consents, approvals, permits and authorizations
required to be obtained from, any third parties or Governmental Entities in
connection with this Agreement and the transactions contemplated hereby,
including, without limitation, the filing of any required notification under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "H-S-R
Act"), the consent of any licensing board or agency governing the sale of
alcoholic beverages, the consent of any landlord (or of any other person) at any
location leased by the Company or any Subsidiary and any other filing, consent
or approval listed on Section 3.1(d) of the Disclosure Schedule. The Company
shall pay any required filing fees or other expense in connection therewith;
provided that the Company and Parent shall each pay one-half of any filing fees
under the H-S-R Act; provided, further, that Parent shall reimburse the Company
for such payment in the event that this Agreement is terminated pursuant to
Section 7.1 hereof in any manner which does not entitle Parent to reimbursement
from the Company for Expenses as defined in Section 7.2(b)(i).
SECTION 5.12. 1997 FINANCIAL STATEMENTS. As soon as practicable after the
date hereof, and in any event on or prior to February 23, 1998, the Company
shall deliver to Parent a draft of the Company's consolidated financial
statements, with footnotes, for its fiscal year ended December 27, 1997. As soon
as practicable after the date hereof, and in any event on or prior to March 2,
1998, the Company shall deliver to Parent a final copy of the Company's audited
consolidated financial statements for such fiscal year, together with the report
of Arthur Andersen LLP thereon, prepared in accordance with generally accepted
accounting principles applied on a basis consistent with the financial
statements set forth in the Reports, and fairly presenting in all material
respects the consolidated financial position of the Company as of December 27,
1997, and the consolidated results of the Company's operations and cash flows
for such fiscal year. Parent shall be entitled, subject to the confidentiality
obligations of Section 5.3 hereof, to provide such draft and final financial
statements to its Representatives, including any potential financing sources and
their agents and representatives.
I-17
<PAGE>
SECTION 5.13. REPAYMENT OF INDEBTEDNESS. Parent shall utilize a portion of
the net proceeds of the Financing to repay, satisfy or otherwise discharge, in
full, all of the Company's indebtedness to BankBoston, N.A. existing on the
Closing Date.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been
adopted and approved by the affirmative vote of the holders of two-thirds of the
outstanding shares of Common Stock as required under the laws of the
Commonwealth of Massachusetts.
(b) THIRD-PARTY AND GOVERNMENTAL CONSENTS. All filings required to be made
prior to the Effective Time with, and all consents, approvals, permits and
authorizations required to be obtained prior to the Effective Time from, any
third party or any Governmental Entities, including, without limitation, those
set forth in Section 3.1(d) of the Disclosure Schedule, in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by the Company, Parent and Sub, and which,
either individually or in the aggregate, if not obtained would have a Material
Adverse Effect or would prevent consummation of the Merger, shall have been made
or obtained (as the case may be).
(c) NO INJUNCTIONS, RESTRAINTS OR LITIGATION. No temporary restraining
order, judgment, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; provided, however,
that the parties invoking this condition shall use their best efforts to have
any such order or injunction vacated.
SECTION 6.2. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The obligations of
Parent and Sub to effect the Merger are further subject to the satisfaction, or
waiver by Parent, on or prior to the Closing Date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company set forth in Section 3.1 that are qualified by materiality shall be
true and correct and such representations and warranties of the Company set
forth in Section 3.1 that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, except to the extent
such representations and warranties speak as of an earlier date and except for
changes permitted or contemplated by this Agreement, and Parent shall have
received an officers' certificate signed on behalf of the Company to the effect
set forth in this paragraph.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received an officers' certificate signed on behalf of the Company to such
effect.
(c) FINANCING. On or prior to the Effective Time, Parent and/or Sub shall
have received the cash proceeds of the Financing in amounts sufficient to
consummate the transactions contemplated hereby pursuant to the terms of the
Commitments or such other terms as Parent and the Company shall reasonably agree
or as are not materially more onerous than as set forth in the Commitments.
I-18
<PAGE>
(d) DISSENTING SHARES. Parent shall have received evidence, in form and
substance reasonably satisfactory to it, that the number of Dissenting Shares
shall constitute no greater than 10% of the total number of shares of Common
Stock outstanding immediately prior to the Effective Time, on a fully diluted
basis.
(e) CONSENTS AND APPROVALS. On or prior to the Effective Date, Parent and/or
Sub shall have received all of the necessary consents or approvals of
Governmental Entities and all third parties in connection with the execution and
delivery of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby, unless the failure to obtain such consent or
approval would not have a Material Adverse Effect nor have a material adverse
effect on the Financing.
(f) BOARD RECOMMENDATION; FAIRNESS OPINION. At or prior to the Effective
Time, the Company's Board of Directors shall not have withdrawn or modified, in
a manner adverse to Parent or Sub, its recommendation pursuant to Section
3.1(l), and the Financial Advisor shall not have withdrawn or modified, in a
manner adverse to Parent or Sub, its fairness opinion referred to in Section
3.1(m).
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. From and after the date of this
Agreement, no event, occurrence, fact, condition, change, damage, destruction,
loss or other development shall have occurred that has constituted or resulted
in, or would reasonably be expected to constitute or result in, a Material
Adverse Effect.
(h) ABSENCE OF CERTAIN LITIGATION. There shall not be threatened, instituted
or pending any action, proceeding, application or counterclaim by any
Governmental Entity or third party before any court or governmental regulatory
or administrative agency, authority or tribunal (i) which if adversely
determined would have a material adverse effect on the Surviving Corporation or
the ability of Parent or Sub to perform their obligations hereunder or in
connection with the Financing, or (ii) which challenges or seeks to challenge,
restrain or prohibit the consummation of the Merger.
SECTION 6.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of
the Company to effect the Merger are further subject to the satisfaction, or
waiver by the Company, on or prior to the Closing Date, of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Parent and Sub set forth in Section 3.2 that are qualified by materiality shall
be true and correct and such representations and warranties of Parent and Sub
set forth in Section 3.2 that are not so qualified shall be true and correct in
all material respects, in each case as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date, except to the
extent such representations and warranties speak as of an earlier date and
except for changes permitted or contemplated by this Agreement, and the Company
shall have received an officers' certificate signed on behalf of Parent to the
effect set forth in this paragraph.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Parent and Sub shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, and the Company shall
have received an officers' certificate signed on behalf of Parent to such
effect.
(c) ABSENCE OF CERTAIN LITIGATION. There shall not be threatened, instituted
or pending any action, proceeding, application or counterclaim by any
Governmental Entity before any court or governmental regulatory or
administrative agency, authority or tribunal (i) which if adversely determined
would have a material adverse effect on the ability of the Company to perform
its obligations hereunder, or (ii) which challenges or seeks to challenge,
restrain or prohibit the consummation of the Merger.
I-19
<PAGE>
(d) FAIRNESS OPINION. At or prior to the Effective Time, the Financial
Advisor shall not have withdrawn its fairness opinion referred to in Section
3.1(m)
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. TERMINATION. This Agreement may be terminated and abandoned at
any time prior to the Effective Time, whether before or after approval of the
Merger by the stockholders of the Company: (a) by mutual written consent of
Parent and the Company; or (b) by either Parent or the Company: (i) if, upon a
vote at the Stockholders Meeting, or any adjournment thereof, the adoption and
approval of this Agreement and the Merger by the stockholders of the Company
required by Massachusetts law, the Company's Restated Articles of Organization
or the terms of this Agreement shall not have been obtained; or (ii) if the
Merger shall not have been consummated on or before July 31, 1998, provided that
the failure to consummate the Merger is not attributable to the failure of the
terminating party to fulfill its obligations pursuant to this Agreement; or
(iii) if any Governmental Entity shall have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and nonappealable; or (c) by the Company, if the Board of Directors
of the Company shall have approved an Acquisition Proposal after determining,
after consultation with independent legal counsel (who may be the Company's
regularly engaged independent counsel), that such approval is necessary in the
exercise of its fiduciary obligations under applicable law; or (d) by Parent, if
the Board of Directors of the Company shall have approved an Acquisition
Proposal or withdrawn or modified, in a manner adverse to Parent or Sub, the
Board of Director's recommendation pursuant to Section 3.1(l); or (e) by Parent,
if any of the conditions set forth in Section 6.2 shall have become incapable of
fulfillment, and shall not have been waived by Parent, or if the Company shall
breach in any material respect any of its representations, warranties or
obligations hereunder and such breach shall not have been cured in all material
respects or waived and the Company shall not have provided reasonable assurance
that such breach will be cured in all material respects on or before the Closing
Date, but only if such breach, singly or together with all other such breaches,
constitutes a failure of the conditions contained in Section 6.2 as of the date
of such termination; or (f) by the Company, if any of the conditions set forth
in Section 6.3 shall have become incapable of fulfillment, and shall not have
been waived by the Company, or if Parent or Sub shall breach in any material
respect any of their respective representations, warranties or obligations
hereunder and such breach shall not have been cured in all material respects or
waived and Parent or Sub, as the case may be, shall not have provided reasonable
assurance that such breach will be cured in all material respects on or before
the Closing Date, but only if such breach, singly or together with all other
such breaches, constitutes a failure of the conditions contained in Section 6.3
as of the date of such termination; provided, however, that the party seeking
termination pursuant to clause (e) or (f) hereof is not in breach of any of its
material representations, warranties, covenants or agreements contained in this
Agreement.
SECTION 7.2. EFFECT OF TERMINATION.
(a) AGREEMENT VOID. In the event of the termination and abandonment of this
Agreement pursuant to Section 7.1 hereof, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party hereto
or its affiliates, directors, officers or stockholders and all rights and
obligations of any party hereto shall cease except for agreements contained in
Sections 5.3, 7.2 and 8.2; provided, however, that nothing contained in this
Section 7.2 shall relieve any party from liability for any breach of this
Agreement or shall relieve the Company from any liability under this Article 7.
I-20
<PAGE>
(b) TERMINATION FEE.
(i) If this Agreement is terminated pursuant to Section 7.1(c) or
7.1(d), pursuant to Section 7.1(e) as a result of a willful breach by the
Company, or pursuant to Section 7.1(e) or 7.1(f) as a result of the
withdrawal or modification of the Financial Advisor's fairness opinion
referred to in Section 3.1(m), then the Company shall (provided that neither
Parent nor Sub is then in material breach of its obligations under this
Agreement) promptly pay to the Parent in cash an amount equal to the
aggregate out-of-pocket costs and reasonable expenses of Parent and Sub in
connection with this Agreement and the transactions contemplated hereby, up
to an aggregate amount not to exceed $750,000, including, without
limitation, commitment, appraisal and other fees relating to the Financing
and the reasonable fees and disbursements of accountants, attorneys and
investment bankers, whether retained by Parent or by any other person
(collectively, "Expenses").
(ii) In addition to any required payment of Expenses, if this Agreement
is terminated pursuant to Section 7.1(c) or 7.1(d), or pursuant to Section
7.1(e) as a result of a willful breach by the Company, then the Company
shall (provided that neither Parent nor Sub is then in material breach of
its obligations under this Agreement) promptly pay to Parent the sum of
$1,500,000 in cash (the "Termination Fee").
(iii) The sum of the Expenses and the Termination Fee, if any, shall be
referred to herein as the "Termination Amount." The rights of Parent to
receive the Termination Amount shall be in lieu of any damages remedy or
claim by Parent or Sub against the Company for termination of this Agreement
pursuant to Section 7.1(c) or 7.1(d), Section 7.1(e) in the event of a
willful breach by the Company or pursuant to Section 7.1(f) as a result of
the Company's reliance on the condition set forth in Section 6.3(d).
(iv) Notwithstanding the provisions of Section 7.2(b)(ii) above, if this
Agreement is terminated pursuant to Section 7.1(f) as a result of the
Company's reliance on the condition set forth in Section 6.3(d) at a time
when Parent is ready, willing and able (other than as a result of an
inability to consummate the Financing solely because of the withdrawal of
the Financial Advisor's fairness opinion referred to in Section 3.1(m)) to
proceed with the transactions contemplated hereby but for the withdrawal of
such fairness opinion, and within one year after such termination, the
Company enters into an agreement relating to an Acquisition Proposal with a
person other than Parent or Sub or their Affiliates and Associates, or the
Company's Board of Directors recommends or resolves to recommend to the
Company's stockholders approval and acceptance of such an Acquisition
Proposal, then, upon the entry into such agreement or the making of such
recommendation or resolution, the Company shall pay to Parent the
Termination Fee.
(c) ACQUISITION PROPOSAL FOLLOWING TERMINATION. At no time prior to or
within one year after termination of this Agreement shall the Company enter into
any agreement relating to an Acquisition Proposal with a person other than
Parent or Sub or their Affiliates and Associates unless such agreement provides
that such person shall, upon the execution of such agreement, pay any
Termination Amount due Parent under this Section 7.2 which at that time remains
unpaid.
(d) REASONABLE INDUCEMENT. The parties acknowledge and agree that the
provisions for payment of the Termination Amount are included herein in order to
reasonably induce Parent to enter into this Agreement and to reimburse Parent
for incurring the costs and expenses related to entering into this Agreement,
obtaining the Commitments and the Financing, and consummating the transactions
contemplated by this Agreement.
I-21
<PAGE>
(e) AUTHORITY TO ACT. Notwithstanding the provisions of this Section 7.2,
the Termination Amount shall not be payable as a result of the termination of
this Agreement pursuant to the provisions of Section 7.1(e) if the Company's
breach giving rise to such right of termination resulted from the actions of
Joseph Crugnale taken in his capacity as an officer or director of the Company
other than in the ordinary course of business and not at the direction of or
with the authorization or approval of the Company's Board of Directors or the
Special Committee.
(f) COSTS OF ENFORCEMENT. Notwithstanding anything to the contrary set forth
in this Agreement, in the event Parent and/or Sub is required to file suit to
seek all or a portion of the Termination Amount, it shall be entitled, in
addition to payment of the Expenses, to payment by the Company of all additional
expenses, including reasonable attorneys' fees and expenses, which it incurs in
enforcing its rights hereunder.
SECTION 7.3. AMENDMENT. Subject to the applicable provisions of the MBCL, at
any time prior to the Effective Time, the parties hereto may modify or amend
this Agreement, by written agreement executed and delivered by duly authorized
officers of the respective parties; provided, however, that after approval of
the Merger by the stockholders of the Company, no amendment shall be made which
reduces the consideration payable in the Merger or adversely affects the rights
of the Company's stockholders hereunder without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing' signed on behalf of each of the parties.
SECTION 7.4. EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to
Section 7.2, waive compliance with any of the agreements or conditions of the
other parties contained in this Agreement. Any agreement on the part of a party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
SECTION 7.5. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3, an extension or waiver pursuant to Section
7.4, or any other approval or consent required or permitted to be given pursuant
to this Agreement shall, in order to be effective and in addition to
requirements of applicable law, require, in the case of Parent, Sub or the
Company, action by its Board of Directors, a duly authorized committee thereof
(including, in the case of the Company, the Special Committee), or the duly
authorized designee of such Board of Directors or such committee thereof.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties set forth in Article III of this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.1 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time, including,
without limitation, Section 5.7.
SECTION 8.2. FEES AND EXPENSES. Except as provided otherwise in this
Agreement, including, without limitation, in Sections 5.2, 5.11 and 7.2, whether
or not the Merger shall be consummated, each party
I-22
<PAGE>
hereto shall pay its own expenses incident to preparing for, entering into and
carrying out this Agreement and the consummation of the transactions
contemplated hereby.
SECTION 8.3. DEFINITIONS. For purposes of this Agreement:
(a) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act;
(b) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(c) a "subsidiary" of any person means another person 50% of the equity
securities of which are owned directly or indirectly by such first person.
SECTION 8.4. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given when delivered personally or sent by overnight courier (providing proof of
delivery) or telecopy to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
<TABLE>
<S> <C>
(a) if to Parent or Sub, to: Ten Ideas, Inc.
14 Audubon Road
Wakefield, Massachusetts 01880
Attn: Joseph Crugnale, President
with a copy to: Posternak, Blankstein & Lund, L.L.P.
100 Charles River Plaza
Boston, Massachusetts 02114
Attn: Donald H. Siegel, P.C.
(b) if to the Company, to: Bertucci's, Inc.
14 Audubon Road
Wakefield, Massachusetts 01880
Attn: Board of Directors
with a copy to: Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Attn: James Westra, Esq.
</TABLE>
SECTION 8.5. INTERPRETATION. When a reference is made in this Agreement to a
Section or Schedule, such reference shall be to a Section of, or a Schedule to,
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
SECTION 8.6. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.7. ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This Agreement and
the other agreements referred to herein constitute the entire agreement, and
supersede all prior agreements and understandings,
I-23
<PAGE>
both written and oral, among the parties with respect to the subject matter of
this Agreement. This Agreement is not intended to confer upon any person, other
than the parties hereto and the third party beneficiaries referred to in the
following sentence, any rights or remedies. The parties hereto expressly intend
the provisions of Section 5.6 to confer a benefit upon and be enforceable by, as
third party beneficiaries of this Agreement, the third persons referred to in,
or intended to be benefited by, such provisions.
SECTION 8.8. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
SECTION 8.9. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, and any such assignment that is not
consented to shall be null and void, except that Parent may assign this
Agreement (i) to any wholly owned subsidiary of Parent or (ii) together with all
of the outstanding capital stock of Sub, to an entity organized under the
corporate or limited liability laws of a jurisdiction of one of the United
States of America, the ownership interests of which entity are substantially
identical to the ownership interests of Parent immediately prior to such
assignment and which entity specifically and expressly assumes by written
agreement the obligations of Parent under this Agreement; in either case without
Parent being released from liability hereunder. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 8.10. ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
(without requirement to post a bond) the terms and provisions of this Agreement,
this being in addition to any other remedy to which they are entitled at law or
in equity.
SECTION 8.11. SEVERABILITY. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
[Remainder of Page Intentionally Left Blank.]
I-24
<PAGE>
IN WITNESS WHEREOF, the Company, Parent and Sub have caused this Agreement
to be executed as an agreement under seal by their respective officers thereunto
duly authorized, all as of the date first written above.
<TABLE>
<S> <C>
BERTUCCI'S, INC.
By: /s/ NORMAN S. MALLETT
-----------------------------------------
Norman S. Mallett
Vice President-Finance, Treasurer and
Chief Financial Officer
TEN IDEAS, INC.
By: /s/ JOSEPH CRUGNALE
-----------------------------------------
Joseph Crugnale
President and Treasurer
TEN IDEAS ACQUISITION CORP.
By: /s/ JOSEPH CRUGNALE
-----------------------------------------
Joseph Crugnale
President and Treasurer
Agreed to solely as to the provisions of
Sections 1.8 and 5.1 hereof applicable to
the
undersigned:
/s/ JOSEPH CRUGNALE
-----------------------------------------
Joseph Crugnale
</TABLE>
I-25
<PAGE>
EXHIBIT (d)(1)
BERTUCCI'S, INC.
14 AUDUBON ROAD
WAKEFIELD, MA 01880
, 1998
DEAR FELLOW STOCKHOLDERS:
You are invited to attend a Special Meeting of Stockholders of Bertucci's,
Inc. ("Bertucci's") to vote on the proposed merger (the "Merger") of Bertucci's
with Ten Ideas Acquisition Corp., a corporation that has been organized by
Joseph Crugnale, Bertucci's founder, President and Chief Executive Officer.
Details of the Merger are discussed in the enclosed Bertucci's, Inc. Proxy
Statement (the "Proxy Statement"), the forepart of which includes a summary of
the terms of the Merger and certain other information relating to the proposed
transaction.
At the special meeting, Bertucci's stockholders will be asked to approve and
adopt the Agreement and Plan of Merger, dated as of February 13, 1998 (the
"Merger Agreement") and the transactions contemplated thereby, including the
Merger. A copy of the Merger Agreement is attached as ANNEX I to the enclosed
Proxy Statement.
At its meeting on February 12, 1998, Bertucci's Board of Directors, by
unanimous vote of all of the directors, determined, among other things, that the
transactions contemplated by the Merger Agreement, including the Merger, taken
together, are fair and in the best interests of Bertucci's and its stockholders;
and the Board recommends that holders of Bertucci's Common Stock vote FOR the
approval and adoption of the Merger Agreement and the transactions contemplated
thereby, including the Merger. In reaching its decision, the Board of Directors
considered, among other things, the oral opinion of NationsBanc Montgomery
Securities LLC delivered to the Special Committee of the Board of Directors of
Bertucci's, subsequently confirmed in writing as of the same date, to the effect
that the cash consideration to be received in the Merger by holders of
Bertucci's Common Stock is fair to the holders of Bertucci's Common Stock from a
financial point of view.
Holders of Bertucci's Common Stock will be entitled to appraisal rights
under applicable Massachusetts law in connection with the Merger as described in
the accompanying Proxy Statement.
The special meeting will be held at Bertucci's corporate headquarters, 14
Audubon Road, Wakefield, Massachusetts 01880, on , 1998, beginning at
9:00 a.m., Eastern Time.
IT IS VERY IMPORTANT TO US THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL
MEETING, WHETHER OR NOT YOU PLAN TO ATTEND PERSONALLY. THEREFORE, YOU SHOULD
COMPLETE AND SIGN THE ENCLOSED WHITE PROXY CARD AND RETURN IT AS SOON AS
POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THIS WILL ENSURE THAT YOUR
SHARES ARE REPRESENTED AT THE SPECIAL MEETING.
VERY TRULY YOURS,
/s/ E. Bulkeley Griswold
E. BULKELEY GRISWOLD
FOR THE SPECIAL COMMITTEE OF
THE BOARD OF DIRECTORS
<PAGE>
EXHIBIT (d)(2)
BERTUCCI'S, INC.
14 AUDUBON ROAD
WAKEFIELD, MA 01880
(781) 246-6700
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1998
------------------------
To the Stockholders of
Bertucci's, Inc.
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (including any
adjournments or postponements thereof, the "Special Meeting") of Bertucci's,
Inc., a Massachusetts corporation ("Bertucci's"), will be held at Bertucci's
corporate headquarters located at 14 Audubon Road, Wakefield, Massachusetts
01880, on , 1998, beginning at 9:00 a.m., Eastern Time for the
following purposes, which are more fully described in the accompanying Proxy
Statement (the "Proxy Statement"):
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of February 13, 1998 (the "Merger
Agreement"), among Bertucci's, Ten Ideas, Inc., a Delaware corporation
("Ten Ideas"), and Ten Ideas Acquisition Corp., a Massachusetts
corporation ("Acquisition"). Ten Ideas and Acquisition were organized by
Joseph Crugnale, Bertucci's founder, President and Chief Executive
Officer. Pursuant to the Merger, each share of Bertucci's Common Stock,
$0.005 par value per share ("Bertucci's Common Stock" or the "Shares")
(other than (i) shares of Bertucci's Common Stock held by Bertucci's or
any wholly-owned subsidiary thereof, which will be canceled and retired,
(ii) 2,177,710 shares of Bertucci's Common Stock which will be
contributed to Ten Ideas by Joseph Crugnale and a trust for the benefit
of his minor children, and (iii) shares of Bertucci's Common Stock owned
by any stockholder who has duly perfected his or her appraisal rights),
will be converted into the right to receive $8.00 in cash. A copy of the
Merger Agreement is attached as ANNEX I to the accompanying Proxy
Statement.
2. To transact such other and further business as may properly come before
the Special Meeting or any adjournments or postponements thereof.
The affirmative vote of two-thirds in interest of the outstanding shares of
Bertucci's Common Stock is required to approve and adopt the Merger Agreement
and the transactions contemplated thereby, including the Merger.
The record date for the determination of stockholders entitled to notice of,
and to vote at, the Special Meeting, and any adjournments or postponements
thereof, is , 1998 (the "Record Date"). Only holders of record of
shares of Bertucci's Common Stock at the close of business on the Record Date
are entitled to notice of, and to vote at, the Special Meeting.
If the Merger Agreement is approved and the Merger becomes effective, any
stockholder of the Company who (i) files with Bertucci's, before the taking of
the vote on the approval of the Merger Agreement, written objection to the
proposed Merger stating that he or she intends to demand payment
<PAGE>
for his or her Shares if the Merger Agreement is approved, and (ii) does not
vote his or her Shares in favor of the Merger Agreement, has or may have the
right to demand in writing from the Company, within twenty (20) days after the
date of mailing to him or her of notice in writing that the Merger has become
effective, payment for his or her Shares and an appraisal of the value thereof.
The Company and any such stockholder shall in such cases have the rights and
duties and shall follow the procedure set forth in Sections 86 through 98 of
Chapter 156B of the Massachusetts General Laws. See "APPRAISAL RIGHTS" and ANNEX
III to the accompanying Proxy Statement.
YOUR VOTE IS VERY IMPORTANT REGARDLESS OF HOW MANY SHARES OF BERTUCCI'S
COMMON STOCK YOU OWN. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU
ARE REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED WHITE PROXY CARD WITHOUT
DELAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY
TIME PRIOR TO ITS EXERCISE. IF YOU ARE PRESENT AT THE SPECIAL MEETING OR ANY
ADJOURNMENTS OR POSTPONEMENTS THEREOF, YOU MAY REVOKE YOUR PROXY AND VOTE
PERSONALLY ON THE MATTERS PROPERLY BROUGHT BEFORE THE SPECIAL MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ JAMES WESTRA
JAMES WESTRA
CLERK
<PAGE>
EXHIBIT (d)(3)
BERTUCCI'S INC.
PROXY STATEMENT
This Proxy Statement (the "Proxy Statement") is being furnished to the
stockholders of Bertucci's, Inc., a Massachusetts corporation ("Bertucci's" or
the "Company"), in connection with the solicitation of Bertucci's proxies by the
Board of Directors of the Company for use at the Special Meeting of Stockholders
of the Company, including any adjournments or postponements thereof, scheduled
to be held on , 1998 at 9:00 a.m., at the Company's corporate
headquarters located at 14 Audubon Road, Wakefield, Massachusetts 01880 (the
"Special Meeting"). This Proxy Statement relates to the proposed merger (the
"Merger") of Ten Ideas Acquisition Corp., a Massachusetts corporation
("Acquisition") that has been formed by Joseph Crugnale, Bertucci's founder,
President and Chief Executive Officer, with and into the Company pursuant to the
Agreement and Plan of Merger, dated as of February 13, 1998 (the "Merger
Agreement"), by and among Ten Ideas, Inc., a Delaware corporation and the sole
stockholder of Acquisition ("Ten Ideas"), the Company and Acquisition.
Pursuant to the Merger, each share of Bertucci's Common Stock, par value
$0.005 per share ("Bertucci's Common Stock" or the "Shares"), issued and
outstanding immediately prior to the effective time of the Merger (the
"Effective Time") (other than (i) shares of Bertucci's Common Stock held by
Bertucci's or any wholly owned subsidiary thereof, (ii) 2,177,710 shares of
Bertucci's Common Stock which will be contributed to Ten Ideas by Joseph
Crugnale and a trust for the benefit of his minor children and (iii) shares of
Bertucci's Common Stock owned by stockholders who have duly perfected their
appraisal rights) will be converted into the right to receive $8.00 per share in
cash.
The Merger requires the approval at the Special Meeting of the holders of
not less than two-thirds in interest of the shares of Bertucci's Common Stock
entitled to vote thereon. Holders of Bertucci's Common Stock who dissent from
the Merger in compliance with the Massachusetts General Laws will be entitled to
appraisal rights under Sections 86 through 98 of Chapter 156B of the
Massachusetts General Laws ("MGL") in connection with the Merger as described
herein. See "APPRAISAL RIGHTS" and ANNEX III attached hereto.
At its meeting on February 12, 1998, the Board of Directors of Bertucci's
(the "Board"), by unanimous vote of all of the directors, other than Mr.
Crugnale, approved the Merger and determined, among other things, that the
Merger Agreement and the transactions contemplated thereby, including the
Merger, taken together, are fair and in the best interests of Bertucci's and its
stockholders and resolved to recommend that holders of Bertucci's Common Stock
approve the Merger Agreement, including the Merger and the other transactions
contemplated by the Merger Agreement.
Bertucci's Common Stock is listed for trading on the Nasdaq National Market
("Nasdaq") under the symbol "BERT." On , 1998, the last reported
sale price of Bertucci's Common Stock was $ per share. On February 13,
1998, the last trading day before public announcement of the execution of the
Merger Agreement, the last reported sale price of Bertucci's Common Stock was
$6.00 per share. If the Merger is approved, the Company will seek to have
Bertucci's Common Stock delisted from Nasdaq.
This Proxy Statement, the accompanying form of Proxy card (the "Proxy") and
the other enclosed documents are first being mailed to stockholders of the
Company on or about , 1998.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION. THE COMMISSION HAS NOT PASSED UPON THE FAIRNESS
OR MERITS OF THIS TRANSACTION NOR UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 5
FORWARD-LOOKING STATEMENTS 5
SUMMARY 6
INTRODUCTION 14
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING 14
VOTING AT THE SPECIAL MEETING 15
Proxies 15
Record Date; Stock Entitled to Vote; Quorum 16
Solicitation of Proxies 16
SPECIAL FACTORS 17
Background of the Merger 17
Fairness of the Merger; Recommendation of the Board of Directors 19
Opinion of Financial Advisor 21
- Analysis of Premiums Paid 22
- Comparable Company Analysis 23
- Comparable Transactions Analysis 23
- Discounted Cash Flow Analysis 23
Interests of Certain Persons in the Merger; Conflicts of Interest 24
Purpose of the Merger 25
Certain Effects of the Merger 26
Plans for the Company After the Merger 26
Risk That the Merger Will Not Be Consummated 26
Certain Risks in the Event of Bankruptcy 27
Litigation Challenging the Merger 27
THE COMPANY 29
General 29
Restaurant Locations and Expansion Plans 30
Marketing 31
Restaurant Operations and Management 31
Purchasing Operations 32
Competition 32
Government Regulation 32
Service Marks 33
Employees 33
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Properties 33
Legal Proceedings 34
THE MERGER 35
Background of the Merger 35
Merger Consideration 35
Effective Time 35
Conversion of Acquisition Stock 35
Conversion of Bertucci's Common Stock; Procedures for Exchange of Certificates 36
Conduct of Business Pending the Merger 36
Conditions to the Consummation of the Merger 36
Federal Income Tax Considerations 37
Anticipated Accounting Treatment 37
Effect on Stock Options and Employee Benefit Matters 37
Nasdaq Delisting 38
Merger Financing 38
Fees and Expenses 39
Bertucci's Capital Stock 39
- Bertucci's Common Stock 39
- Bertucci's Preferred Stock 40
CERTAIN PROVISIONS OF THE MERGER AGREEMENT 40
The Merger 40
Representations and Warranties 40
Certain Pre-Closing Covenants 41
No Solicitation of Alternative Transactions 42
Articles of Organization and Bylaws 42
Board of Directors and Officers of the Company Following the Merger 42
Stock Options and Employee Benefit Plans 43
Access to Information and Confidentiality 43
Commercially Reasonable Efforts 43
Indemnification and Insurance 43
Conditions to the Consummation of the Merger 43
Termination 45
Amendment and Waiver 46
Expenses and Certain Required Payments 46
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 48
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY 49
MARKET PRICES AND DIVIDENDS ON THE SHARES 50
CERTAIN TRANSACTIONS IN THE COMMON STOCK 51
APPRAISAL RIGHTS 51
EXPERTS 51
OTHER INFORMATION AND STOCKHOLDER PROPOSALS 52
</TABLE>
3
<PAGE>
AVAILABLE INFORMATION
No person is authorized to give any information or to make any
representations, other than as contained in this Proxy Statement, in connection
with the Merger, and, if given or made, such information or representations may
not be relied upon as having been authorized by Bertucci's, Ten Ideas or
Acquisition. The delivery of this Proxy Statement shall not, under any
circumstances, create any implication that there has been no change in the
information set forth herein or in the affairs of the Company since the date
hereof.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or at
its regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission at http://www.sec.gov. Bertucci's Common
Stock is listed on Nasdaq and certain reports, proxy statements and other
information concerning the Company may be inspected and copied at the offices of
The Nasdaq Stock Market, Inc., 1735 K Street, Washington, D.C. 20006.
4
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement incorporates by reference documents which are not
presented herein or delivered herewith. Copies of any such documents relating to
the Company, other than exhibits to such documents (unless such exhibits
specifically are incorporated by reference in such documents), are available
without charge, upon written or oral request, from Bertucci's, Inc., 14 Audubon
Road, Wakefield, MA 01880, Attention: Norman S. Mallett, Treasurer, Vice
President -- Finance and Chief Financial Officer, telephone: (781) 246-6700. In
order to ensure timely delivery of the documents requested, any such request
should be made by , 1998.
The following documents previously filed by the Company (File No. 0-19315)
with the Commission are incorporated in this Proxy Statement by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 27, 1997.
(2) The Company's Proxy Statement, dated April 16, 1997, which was mailed to
the Company's stockholders in connection with the Annual Meeting of
Stockholders held on May 13, 1997.
(3) The description of Bertucci's Common Stock set forth in the Company's
Registration Statement on Form 8-A, filed on May 29, 1991.
(4) The Company's Current Report on Form 8-K, dated February 13, 1998.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13 (a), 13 (c), 14 and 15 (d) of the Exchange Act prior to the date
of the Special Meeting shall be deemed to be incorporated by reference herein
and to be part hereof from the date of the filing of such reports and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein, or in any other subsequently filed document incorporated by reference
herein, modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute part of this Proxy Statement.
FORWARD-LOOKING STATEMENTS
Cautionary statement for purposes of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995: Certain statements contained
in this Proxy Statement, including statements regarding the opening of new
restaurants, are forward-looking and represent the Company's expectations or
beliefs concerning future events. The Company cautions that these and similar
statements involve risks, uncertainties, and assumptions relating to the
operations and results of operations of the Company, competitive factors and
pricing pressures, shifts in consumer demand, the costs of products and
services, general economic conditions, and the acts of third parties, as well as
other factors which are detailed, from time to time, in the Company's periodic
reports filed with the Commission.
5
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT. REFERENCE IS MADE TO THE MORE DETAILED INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT AND THE ANNEXES
HERETO. STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THIS PROXY STATEMENT AND
THE ANNEXES HERETO IN THEIR ENTIRETY.
THE SPECIAL MEETING
<TABLE>
<S> <C>
Time and Place; Record Date......... A Special Meeting of Stockholders of Bertucci's will
be held on , 1998, at 9:00 a.m. Eastern Time at
Bertucci's, Inc. corporate headquarters, 14 Audubon
Road, Wakefield, MA 01880. Stockholders of record at
the close of business on , 1998 (the
"Record Date") will be entitled to notice of, and to
vote at, the Special Meeting. At the close of business
on the Record Date, there were outstanding and
entitled to vote 8,908,621 shares of Bertucci's Common
Stock.
Matters to be Considered............ The purpose of the Special Meeting is to approve and
adopt the Merger Agreement and the transactions
contemplated thereby, including the Merger, pursuant
to which (a) Acquisition will merge with and into
Bertucci's with Bertucci's being the surviving
corporation (the "Surviving Corporation"), (b) the
stockholders of Bertucci's will receive the cash
consideration described below in the Summary under
"THE MERGER--Effect of the Merger" and (c) Bertucci's
will thereby become a wholly-owned subsidiary of Ten
Ideas, all the stock of which will be owned
immediately prior to the Effective Time by Joseph
Crugnale, the Company's founder, President and Chief
Executive Officer.
Required Votes...................... Approval of the Merger Agreement requires the
affirmative vote of stockholders holding two-thirds in
interest of the shares of Bertucci's Common Stock
entitled to vote thereon. Joseph Crugnale, who
beneficially owns approximately 24.4% of the issued
and outstanding shares of Bertucci's Common Stock,
intends to vote such shares in favor of the resolution
to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the
Merger. See "THE SPECIAL MEETING--Required Votes" and
"THE MERGER--Interests of Certain Persons in the
Merger."
Voting of Proxies................... Shares of Bertucci's Common Stock represented by a
properly executed Proxy received in time for the
Special Meeting will be voted in the manner specified
in the Proxy. Properly executed Proxies that do not
contain any instruction to vote for or against or to
abstain from voting on a particular matter
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
will be voted in favor of such matter. See
"INTRODUCTION--Voting at The Special Meeting--
Proxies." It is not expected that any matter other
than the proposal to approve and adopt the Merger
Agreement will be brought before the stockholders at
the Special Meeting. If, however, other matters are
properly presented, the persons named as proxies will
vote in accordance with their best judgment with
respect to such matters.
Adjournments; Revocability of If the Special Meeting is adjourned or postponed, for
Proxies............................. whatever reason, the approval of the Merger Agreement
shall be considered and voted upon by stockholders of
the Company at the subsequent, reconvened meeting, if
any. You may revoke your Proxy at any time prior to
its exercise by (i) attending the Special Meeting and
voting in person (although attendance at the Special
Meeting will not in and of itself constitute
revocation of a Proxy), (ii) giving notice of
revocation of your Proxy at the Special Meeting, or
(iii) delivering (a) a written notice of revocation of
your Proxy, or (b) a duly executed Proxy relating to
the matters to be considered at the Special Meeting,
bearing a date later than the Proxy previously
executed, to the Clerk of Bertucci's, c/o Bertucci's,
Inc., 14 Audubon Road, Wakefield, Massachusetts 01880.
Unless revoked in one of the manners set forth above,
Proxies in the form enclosed will be voted at the
Special Meeting in accordance with your instructions.
Solicitation of Proxies............. The cost of soliciting Proxies will be borne by the
Company. The Company may solicit Proxies and the
Company's directors, officers and employees may also
solicit Proxies by telephone, facsimile telegram or
personal interview. These persons will receive no
additional compensation for their services.
Arrangements will be made to furnish copies of Proxy
materials to fiduciaries, custodians and brokerage
houses for forwarding to beneficial owners of
Bertucci's Common Stock. Such persons will be
reimbursed for their reasonable out-of pocket
expenses. Morrow & Co., Inc. will assist in the
solicitation of Proxies by the Company for a fee of
$8,000, plus reasonable out-of-pocket expenses and a
reasonable fee for each telephone solicitation.
HOLDERS OF BERTUCCI'S COMMON STOCK SHOULD NOT SEND
STOCK CERTIFICATES WITH THEIR PROXY CARDS. IF THE
MERGER IS CONSUMMATED, A LETTER OF TRANSMITTAL WILL BE
MAILED TO STOCKHOLDERS TO EXCHANGE THEIR STOCK
CERTIFICATES FOR THE CASH PRICE.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
THE MERGER
Effect of the Merger................ At the Effective Time, Acquisition will be merged with
and into Bertucci's, and Bertucci's will continue as
the surviving corporation in the Merger and as a
wholly-owned subsidiary of Ten Ideas. Subject to
certain provisions as described herein with respect to
shares owned by Bertucci's or any wholly owned
subsidiary of Bertucci's, and with respect to
Dissenting Shares (as defined under "APPRAISAL RIGHTS"
below), each issued and outstanding share of
Bertucci's Common Stock will be converted into the
right to receive in cash from Bertucci's following the
Merger an amount equal to $8.00 (the "Cash Price").
Each stockholder of Bertucci's (other than Ten Ideas)
shall receive the Cash Price with respect to all of
such stockholder's shares of Bertucci's Common Stock.
Following the Merger, the Company's existing
stockholders (other than Mr. Crugnale, through his
ownership of Ten Ideas), will have no continuing
ownership interest in the Company and will no longer
participate in the future earnings and potential
growth of the Company.
Recommendation of the Board of At its February 12, 1998 meeting, the Board of
Directors........................... Directors of the Company, by unanimous vote, (i)
determined that the Merger Agreement and the
transactions contemplated thereby, including the
Merger, taken together, are fair and in the best
interests of the Company and its stockholders, and
(ii) resolved to recommend that the holders of
Bertucci's Common Stock approve the Merger Agreement
and the transactions contemplated thereby, including
the Merger. See "SPECIAL FACTORS--Fairness of the
Merger; Recommendation of the Board of Directors" and
"THE MERGER--Background of the Merger," "--Opinion of
Financial Advisor," and "--Reasons for the Merger."
Opinion of Financial Advisor........ On February 12, 1998, NationsBanc Montgomery
Securities LLC ("NMS") delivered its oral opinion,
which was subsequently confirmed in writing as of the
same date, to the Special Committee of the Company's
Board of Directors to the effect that, as of such
date, the cash consideration to be received in the
Merger by the stockholders of the Company is fair to
such stockholders from a financial point of view. In
arriving at its opinion, NMS, among other things,
reviewed certain information and conducted certain
analyses with respect to Bertucci's Common Stock and
the Merger. For information on the assumptions made,
matters considered and limits of the review by NMS,
see "SPECIAL FACTORS--Opinion of Financial Advisor."
Holders of
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Bertucci's Common Stock are urged to read in its
entirety the opinion of NMS, dated February 12, 1998,
a copy of which appears as ANNEX II to this Proxy
Statement.
Conditions to the Merger............ The obligations of Bertucci's, Ten Ideas and
Acquisition to consummate the Merger are subject to
various conditions, including, without limitation, the
approval of the Merger Agreement and the transactions
contemplated thereby by the holders of the requisite
number of shares of Bertucci's Common Stock, the
obtaining of any other material third party or
governmental consents, and the absence of any
injunction or other legal restraint or prohibition
preventing the consummation of the Merger. Ten Ideas
and the Company have been advised by the Federal Trade
Commission that the Merger is not a reportable
transaction under Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
The obligations of Ten Ideas and Acquisition to effect
the Merger are further subject to, among other things,
(i) the continuing material accuracy of the Company's
representations and warranties made in the Merger
Agreement, (ii) the performance of all material
obligations of the Company under the Merger Agreement,
(iii) no material adverse change to the Company's
business, assets, condition (financial or otherwise)
or results of operations, (iv) no more than 10% of the
Company's stockholders exercising their appraisal
rights, (v) the absence of pending or threatened
material litigation intended to prevent the Merger,
(vi) the receipt of all necessary consents or
approvals of governmental entities and all third
parties in connection with the execution of the Merger
Agreement and the transactions contemplated therein
and (vii) the receipt of financing proceeds, on terms
set forth in commitment letters executed at the time
of the Merger Agreement or on such other terms as the
Company and Ten Ideas may reasonably agree or are not
materially more onerous, in an amount sufficient to
consummate the transactions contemplated by the
Merger, including an amount sufficient to pay the Cash
Price. See "THE MERGER--Merger Financing."
The Company's obligations to effect the Merger are
further subject to, among other things, (i) the
continuing material accuracy of the representations
and warranties of Ten Ideas and Acquisition made in
the Merger Agreement, (ii) the performance of all
material obligations of Ten Ideas and Acquisition
under the Merger Agreement, and (iii) the
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
absence of certain governmental proceedings intended
to prevent the Merger.
The conditions to each party's obligation to
consummate the Merger may be waived by such party in
its discretion. See "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT--Conditions to the Consummation of the
Merger" and "--Expenses and Certain Required
Payments."
Litigation Challenging the Merger... After the announcement of the Merger, three purported
class action lawsuits were filed in February, 1998 in
Massachusetts Superior Court, by the same counsel,
against the Company and its Board of Directors in
connection with the Merger. Plaintiffs claim that the
Merger is, or consummation thereof would be, wrongful,
unfair and in breach of the individual defendants'
fiduciary duties. The plaintiffs allege that the Cash
Price is grossly inadequate, the Merger would be
consummated without an auction of the Company or other
market check, and that the defendants possess
non-public information concerning the condition and
prospects of the Company. The plaintiffs in these
purported class actions seek preliminary and permanent
injunctive relief against the Merger, unspecified
monetary damages and other relief. Defendants
vigorously contest these claims and believe that they
are without merit. To date, the plaintiffs have not
filed a motion for a preliminary injunction or other
preliminary relief.
Merger Financing.................... At the Effective Time, Bertucci's is expected to enter
into debt financing arrangements aggregating
approximately $77.5 million, which will consist of
both debt securities (the "Debt Securities") and a
senior term and revolving credit facility (the "Credit
Facilities"). It is anticipated that the full proceeds
of the Debt Securities and a portion of the proceeds
available pursuant to the Credit Facilities would be
used to finance the conversion into cash of the shares
of Bertucci's Common Stock and stock options currently
outstanding. In addition, the Credit Facilities would
be used to provide for Bertucci's working capital
requirements at the time of and following the Merger.
Acquisition has entered into commitment letters with
financing sources to provide such financing. See "THE
MERGER--Merger Financing."
Certain Federal Income Tax The receipt of cash by a stockholder pursuant to the
Consequences........................ Merger will generally be treated as a sale of stock
generating capital gain equal to the cash received
less the stockholder's basis in the stock sold.
Bertucci's may, in certain circumstances, be
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
required to withhold tax from cash paid to
stockholders. See "THE MERGER--Federal Income Tax
Considerations."
Treatment of Company Stock At the Effective Time: (x) each Company Stock Option
Options............................. granted under the 1989, 1993 and 1997 Stock Option
Plans (as defined under "THE MERGER--Effect on Stock
Options and Employee Benefit Matters") outstanding
immediately prior to the Effective Time, to the extent
not already vested, will vest in full in accordance
with the terms of such plans as a consequence of the
Merger and will be canceled in exchange for a cash
payment from the Company (subject to any applicable
withholding taxes) equal to the product of (1) the
total number of shares of Bertucci's Common Stock
subject to such Company Stock Option and (2) the
excess of $8.00 over the exercise price per share of
Bertucci's Common Stock subject to such Company Stock
Option; and (y) each Company Stock Option granted
under the 1987 Stock Option Plan (as defined under
"THE MERGER--Effect on Stock Options and Employee
Benefit Matters") outstanding immediately prior to the
Effective Time shall, to the extent then exercisable,
be canceled in accordance with the terms of such plan
in exchange for a cash payment from the Company
(subject to any applicable withholding taxes) equal to
the product of (1) the total number of vested shares
of Bertucci's Common Stock subject to such Company
Stock Option and (2) the excess, if any, of $8.00 over
the exercise price per share of Bertucci's Common
Stock subject to such Company Stock Option. The
Company's stock option plans will terminate as of the
Effective Time, and following the Effective Time no
holder of a Company Stock Option or participant in any
Company stock option plan will have any right
thereunder to acquire equity securities of the Company
following the Merger.
Interests of Certain Persons in the Certain directors and officers of the Company,
Merger.............................. including Mr. Crugnale have interests, described
herein, that may present them with potential conflicts
of interest in connection with the Merger. The Board
of Directors is aware of the conflicts and considered
them in addition to the other matters described or
referred to under "SPECIAL FACTORS--Fairness of the
Merger; Recommendation of the Board of Directors."
"--Interests of Certain Persons in the Merger;
Conflicts of Interest" and "--Purpose of the Merger."
Termination of the Merger The Merger Agreement may be terminated at any time
Agreement........................... prior to the Effective Time by mutual written consent
of Bertucci's and Ten Ideas. The Merger Agreement may
also be
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
terminated by either Bertucci's or Ten Ideas in
certain circumstances, including, but not limited to,
the following: (i) if upon a vote at the Special
Meeting, or any adjournment thereof, the requisite
approval of the stockholders of Bertucci's shall not
have been obtained; (ii) if the Merger shall not have
been consummated on or before July 31, 1998 (provided
that the failure to consummate the Merger is not
attributable to the failure of the terminating party
to fulfill its obligations pursuant to the Merger
Agreement); or (iii) if any court of competent
jurisdiction or other governmental authority has
issued an order, decree or ruling or taken any action
restraining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have
become final and nonappealable. In addition, the
Merger Agreement may be terminated unilaterally by
either Bertucci's or Ten Ideas under certain
circumstances described herein, including if the Board
of Directors of the Company shall have approved an
alternative acquisition proposal after determining
that such approval is necessary in the exercise of its
fiduciary obligations under applicable law. See
"CERTAIN PROVISIONS OF THE MERGER AGREEMENT--
Termination."
Termination Fee and Expenses........ Under certain circumstances described herein,
termination of the Merger Agreement prior to the
Effective Time will result in the payment by the
Company to Ten Ideas of a termination fee of $1.5
million and reimbursement of expenses aggregating up
to $750,000. See "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT--Termination" and "--Expenses and Certain
Required Payments."
Ten Ideas and Acquisition........... Ten Ideas and Acquisition were incorporated in
connection with the Merger by Joseph Crugnale and have
not carried on any activities to date other than those
incident to their formation and the transactions
contemplated by the Merger Agreement. The principal
offices of Ten Ideas and Acquisition are located at 14
Audubon Road, Wakefield, Massachusetts 01880;
telephone number (781) 246-6700.
Dissenting Stockholders' Appraisal Under Sections 86 through 98, inclusive, of Chapter
Rights.............................. 156B of the Massachusetts General Laws (the "MGL"), a
stockholder of the Company may dissent from the
Merger, demand appraisal of, and obtain payment for,
the fair value of such holder's shares of Bertucci's
Common Stock. In order to dissent, a Stockholder must
(i) not vote for the adoption of the Merger Agreement,
(ii) deliver a written objection to the merger and a
demand for appraisal to the Company prior to
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
the taking of a vote on the Merger Agreement at the
Special Meeting, or any postponements or adjournments
thereof, and (iii) otherwise comply with the
requirements of Section 86 through 98, inclusive, of
the MGL, a copy of which is included in this Proxy
Statement as ANNEX III. See "APPRAISAL RIGHTS" for a
summary of the rights of Stockholders to demand
appraisal and a description of the procedure required
to be followed to exercise such rights.
Selected Financial Data............. Set forth herein are certain selected historical
financial and other data relating to Bertucci's. The
selected historical data should be read in conjunction
with Bertucci's historical financial statements,
including the notes thereto, incorporated by reference
in this Proxy Statement.
Market Information.................. Bertucci's Common Stock is traded on the Nasdaq
National Market under the symbol "BERT." On February
13, 1998, the last trading day before the public
announcement of the proposal, the reported closing
price per Share was $6.00. On , 1998, the
last full trading day prior to the date of this Proxy
Statement, the reported closing price per Share was
$ .
Security Ownership of Management.... As of March 15, 1998, directors and executive officers
of the Company and their affiliates were beneficial
owners of an aggregate of 2,331,987 shares of
Bertucci's Common Stock (approximately 26.2% of the
outstanding shares), including 2,177,710 Shares of
Bertucci's Common Stock (approximately 24.4% of the
outstanding Shares) beneficially owned by Mr.
Crugnale.
</TABLE>
13
<PAGE>
INTRODUCTION
This Proxy Statement is being furnished to holders of Bertucci's Common
Stock in connection with the solicitation of proxies by the Board of Directors
of Bertucci's for use at the Special Meeting of Stockholders of Bertucci's, Inc.
to be held at Bertucci's corporate headquarters located at 14 Audubon Road,
Wakefield, Massachusetts 01880 on , 1998, beginning at 9:00
a.m. Eastern Time, and at any adjournments or postponements thereof. This Proxy
Statement is accompanied by a form of Proxy for use at the Special Meeting. At
the Special Meeting, Bertucci's stockholders will be asked to approve a Merger
Agreement, pursuant to which Acquisition will merge with and into Bertucci's,
resulting in Bertucci's being a wholly-owned subsidiary of Ten Ideas.
This Proxy Statement and the accompanying form of Proxy are being mailed to
stockholders of the Company on or about , 1998.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the stockholders of the Company will be asked to
consider and vote upon a proposal to adopt the Merger Agreement. If the
requisite votes in favor of the proposal are obtained and certain other
conditions are satisfied or, where permissible, waived, the terms of the Merger
Agreement provide, among other things, that: (i) Acquisition will be merged with
and into Bertucci's with Bertucci's being the surviving corporation (the
"Surviving Corporation") and (ii) each share of Bertucci's Common Stock issued
and outstanding immediately prior to the Effective Time (other than Shares held
at the Effective Time in Bertucci's treasury, by any subsidiary of Bertucci's,
by Ten Ideas or by Acquisition, which will be canceled without payment, and
other than Shares in respect of which appraisal rights have been perfected
properly under the applicable sections of the MGL) will be converted into the
right to receive $8.00 in cash, without interest. It is currently anticipated
that the Merger will occur as promptly as practicable after adoption of the
Merger Agreement by the Stockholders at the Special Meeting and the satisfaction
or, where permissible, waiver of the other conditions to the consummation of the
Merger. There can be no assurance that, even if the requisite Stockholder
approval is obtained, the other conditions to the Merger will be satisfied or
waived, or that the Merger will be consummated. See "SPECIAL FACTORS--Risk that
the Merger Will Not Be Consummated." A copy of the Merger Agreement is attached
to this Proxy Statement as ANNEX I. For additional information concerning the
terms and conditions of the Merger, see "THE MERGER."
Ten Ideas and Acquisition are newly incorporated entities organized by
Joseph Crugnale, the Company's founder, President and Chief Executive Officer,
for the purpose of effecting the transactions described in this Proxy Statement.
Upon consummation of the Merger, Bertucci's will become a wholly-owned
subsidiary of Ten Ideas. Prior to the Effective Time of the Merger, Ten Ideas is
expected to be owned entirely by Mr. Crugnale and his affiliates.
The Board of Directors unanimously approved the Merger Agreement and has
determined that the Merger is fair to, and in the best interests of, all of the
stockholders of the Company and has recommended that the stockholders of the
Company vote in favor of adoption of the Merger Agreement and approval of the
Merger. For a discussion of the factors considered by the Board of Directors in
reaching it conclusions, see "SPECIAL FACTORS--Fairness of the Merger;
Recommendation of the Board of Directors." For a description of certain
interests of certain of Bertucci's directors and officers that may have
presented them
14
<PAGE>
with actual or potential conflicts of interest in connection with the Merger,
see "SPECIAL FACTORS--Background of the Merger," "--Purpose of the Merger" and
"--Interests of Certain Persons in the Merger; Conflicts of Interest."
VOTING AT THE SPECIAL MEETING
The Board of Directors has fixed the close of business on , 1998
as the "Record Date" for determining the Stockholders entitled to notice of and
to vote at the Special Meeting. Accordingly, only holders of record of Shares as
of the Record Date will be entitled to notice of and to vote at the Special
Meeting. On the Record Date, there were 8,908,621 Shares, held by approximately
700 holders of record, outstanding and entitled to vote. The Company is unaware
of any fractional shares outstanding. Stockholders may cast one vote per Share,
either in person or by properly executed Proxy, on each matter to be voted on at
the Special Meeting.
Votes cast in person or by Proxy at the Special Meeting will be tabulated by
Boston EquiServe, L.P. (the "Transfer Agent"). The Transfer Agent will treat
abstentions as Shares that are present and entitled to vote. In addition, if a
broker submits a Proxy indicating that it does not have discretionary authority
as to certain Shares to vote on a particular matter, those Shares will be
treated as present and entitled to vote.
THE MERGER CONSTITUTES A MATTER OF GREAT IMPORTANCE TO STOCKHOLDERS OF THE
COMPANY. IF THE MERGER AGREEMENT IS ADOPTED AND THE MERGER IS CONSUMMATED, THE
OWNERSHIP INTERESTS OF THE STOCKHOLDERS IN THE COMPANY (OTHER THAN THE ONGOING
INTEREST OF TEN IDEAS) WILL CEASE IN EXCHANGE FOR THE RIGHT TO RECEIVE A CASH
PAYMENT OF $8.00 PER SHARE OR TO PURSUE APPRAISAL RIGHTS. ACCORDINGLY,
STOCKHOLDERS ARE URGED TO READ AND CONSIDER CAREFULLY THE INFORMATION PRESENTED
IN THIS PROXY STATEMENT.
Because the vote on the Merger Agreement and the transactions contemplated
thereby, including the Merger, requires the approval of holders of two-thirds in
interest of the votes entitled to be cast by the holders of all outstanding
shares of Bertucci's Common Stock, abstentions and broker non-votes will have
the same effect as a vote against this proposal.
PROXIES
All Shares represented at the Special Meeting by properly executed Proxies
received prior to or at the Special Meeting, and not revoked before their use,
will be voted in accordance with the instructions thereon. If no instructions
are given, properly executed Proxies will be voted FOR adoption of the Merger
Agreement. If any other matters are properly presented to the Special Meeting or
any adjournments or postponements thereof, the persons named in the enclosed
form of Proxy as acting thereunder will have discretion to vote on such matters
in accordance with their best judgment. The Company does not know of any matters
other than the adoption of the Merger Agreement that will be presented at the
Special Meeting.
A stockholder who has given a Proxy may revoke it at any time before it is
voted at the Special Meeting, or any postponements or adjournments thereof, by
filing with the Clerk of the Company, at the address of the Company set forth
herein, a written revocation bearing a later date than the Proxy being revoked,
or by submission of a validly executed Proxy bearing a later date than the Proxy
being revoked, or by attending the Special Meeting, or any postponements or
adjournments thereof, and voting in person
15
<PAGE>
(although attendance at the Special Meeting, or any postponements or
adjournments thereof, will not in and of itself constitute revocation of a
Proxy).
Proxies are being solicited by and on behalf of the Board of Directors. The
Company will bear the cost of the Special Meeting and the cost of soliciting
proxies therefor, including the cost of printing and mailing the Proxy material.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only holders of Bertucci's Common Stock at the close of business on
, 1998 will be entitled to receive notice of and to vote at the
Special Meeting. At the close of business on the Record Date, the Company had
outstanding and entitled to vote 8,908,621 shares of Bertucci's Common Stock.
Shares of Bertucci's Common Stock represented by properly executed Proxies which
are marked "abstain" or which are not marked as to any particular matter will be
counted as Shares present for purposes of determining the presence of a quorum
on all matters. Proxies relating to "street name" shares that are voted by
brokers will be counted as Shares present for purposes of determining the
presence of a quorum on all matters, but will not be treated as shares having
voted at the Special Meeting as to any proposal as to which authority to vote is
withheld by the broker.
The presence, in person or by Proxy, at the Special Meeting of the holders
of at least 4,454,311 shares of Bertucci's Common Stock, I.E., a majority in
interest of the shares of Bertucci's Common Stock outstanding on the record
date, is necessary to constitute a quorum for the transaction of business. The
affirmative vote of the holders of 5,939,081 shares of Bertucci's Common Stock,
I.E., two-thirds interest of the votes entitled to be cast by the holders of all
outstanding shares of Bertucci's Common Stock, is necessary to approve the
Merger Agreement and the transactions contemplated thereby, including the
Merger. Under applicable Massachusetts law, the transaction does not require the
approval of a majority of holders of Bertucci's Common Stock unaffiliated with
Ten Ideas. Abstentions will be counted as present for the purposes of
determining whether a quorum is present, but will not be counted as votes cast
in favor of the Merger Agreement.
Because the vote on the Merger Agreement and the transactions contemplated
thereby, including the Merger, requires the approval of holders of two-thirds in
interest of the votes entitled to be cast by the holders of all outstanding
shares of Bertucci's Common Stock, abstentions and broker non-votes will have
the same effect as a vote against this proposal.
SOLICITATION OF PROXIES
The Company will bear the cost of the solicitation of Proxies. In addition
to solicitation by mail, the directors, officers and employees of the Company
may solicit Proxies from stockholders of the Company by telephone, facsimile or
in person. Such directors, officers and employees will not be additionally
compensated for any such solicitation but may be reimbursed for out-of-pocket
expenses in connection therewith. Arrangements will also be made with brokerage
houses and other custodians, nominees and fiduciaries for their forwarding of
solicitation material to the beneficial owners of shares held of record by such
persons and Company will reimburse such custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses in connection therewith.
Morrow & Co., Inc. will assist in the solicitation of Proxies by the Company
for a fee of $8,000, plus reasonable out-of-pocket expenses and a reasonable fee
for each telephone solicitation.
HOLDERS OF BERTUCCI'S COMMON STOCK SHOULD NOT SEND STOCK CERTIFICATES WITH
THEIR PROXY CARDS.
16
<PAGE>
SPECIAL FACTORS
BACKGROUND OF THE MERGER
Bertucci's completed its initial public offering of Shares in June, 1991 at
an offering price (adjusted for a stock split in March, 1992) of $8.67 per
Share. As the Company expanded during its early years of operation as a public
company, the market price of the Shares generally appreciated in value. However,
as the Company expanded into locations increasingly remote from its original
base in the metropolitan Boston area and competition within the restaurant
industry intensified, a number of the newly-opened restaurants failed to perform
up to expectations, and the financial performance of the Company declined.
Commencing in 1994, results of operations of the Company consistently fell short
of securities analysts' expectations, resulting in a steady decline in the
trading price of the Company's stock. The Company recorded a charge of $5.3
million in fiscal 1995 in connection with three locations closed in February,
1996. The market price of the Shares fell below $10.00 in January, 1995 and has
never recovered to that level thereafter. The Shares traded within a range of
$4.25 to $7.25 during fiscal 1996 and from $5.00 to $7.063 during fiscal 1997.
The last reported sales price for the Shares prior to the announcement of the
Merger was $6.00 per Share.
Throughout this period, Bertucci's Board of Directors discussed its concern
over the Company's operating results and the concommitant decline in the trading
price of the Company's Shares. At the initiation of the Board of Directors
several changes in management were made, without any discernable effect on the
results of operations. During 1995, the Board of Directors engaged an investment
banking firm to consider various strategic alternatives for the Company,
including a potential sale of the Company. However, the investment banking firm
was not able to present to the Board of Directors a transaction which the Board
of Directors felt would be in the best interest of the Company's stockholders.
By November of 1997, the Board of Directors had grown increasingly concerned
about the future prospects of the Company. At the invitation of the Board of
Directors, representatives of NMS addressed the Board of Directors and discussed
conditions prevailing within the restaurant industry generally, as well as the
challenges facing the Company. After considering the presentation made by the
representatives of NMS, the Board of Directors convened a special meeting on
December 4, 1997 at which representatives of NMS were invited to make a full
presentation to the Board of Directors as to the strategic alternatives
available to the Company. At the December 4, 1997 meeting, the representatives
of NMS again reviewed with the Board of Directors the conditions prevailing in
the restaurant industry generally, as well as the strengths and weaknesses of
the Company. The representatives of NMS then discussed with the Company the full
range of strategic alternatives available to the Company, including an
acquisition by the Company of another restaurant entity or concept, the
extension by the Company of its brand equity through other means, a sale of the
Company to a strategic or financial buyer, which could include participation by
management, the payment by the Company of a cash dividend or the repurchase by
the Company of a portion of its shares, and the continuation by the Company of
its current operations without pursuit of a strategic transaction. After
reviewing the presentation by the representatives of NMS, and taking into
account the continuing challenges facing the Company, the Board of Directors
determined that it was in the best interest of the stockholders of the Company
to consider a sale of the Company. Mr. Crugnale indicated that if the Company
were to be sold, he would likely have an interest in structuring, or
participating in, a purchase of the Company. Accordingly, a special committee of
independent non-employee directors (the "Special Committee"), consisting of E.
Bulkeley Griswold, Robert L. Lestina, Jr. and Allan J. Steinmetz, was formed to
consider potential strategic alternatives. The Special Committee thereafter
engaged NMS to serve as its financial advisor and Hutchins, Wheeler & Dittmar, A
Professional
17
<PAGE>
Corporation, as its special counsel. Mr. Crugnale was advised to engage separate
counsel to assist him in considering whether to prepare an offer to acquire the
Company. Mr. Crugnale did not participate in any of the meetings of the Special
Committee.
At the request of the Special Committee, NMS began a review of publicly and
privately available information concerning the Company, as well as a review of
publicly available information concerning certain other restaurant companies and
recent business combinations in the restaurant industry. NMS was also directed
to approach selected potential strategic acquirors in the restaurant industry
and potential financial acquirors to determine whether they had an interest in
acquiring the Company and, if so, at what price. The Special Committee
determined that it was not in the best interest of the stockholders of the
Company to conduct a public auction for the Company, because they concluded that
such a process would likely result in the loss of a significant number of the
Company's managers, and would be extremely disruptive to the operations of the
Company's restaurants. During the months of December and January,
representatives of NMS approached potential strategic and financial acquirors,
and reported the results of these conversations to representatives of the
Special Committee. The representatives of NMS reported that given the Company's
disappointing results of operations, it was not viewed as a potential growth
concept by the strategic acquirors, and therefore was not an attractive
acquisition candidate. The representatives of NMS reported that several of the
financial acquirors and investors whom they approached expressed an interest in
investing in or acquiring the Company, but only at a relatively modest premium
to the trading value of the Company's shares, and only if management of the
Company were prepared to participate in such a transaction.
In late December, 1997 and early January, 1998, Mr. Crugnale engaged
BancBoston Securities Inc. as his financial advisor and engaged his own legal
and accounting advisors. During January, 1998, Mr. Crugnale held discussions
with potential sources of financing for the proposed acquisition. In addition,
Mr. Crugnale incorporated Ten Ideas, of which he is the sole shareholder and
director.
On February 3, 1998, Ten Ideas submitted a written proposal to the Special
Committee to acquire the outstanding publicly-held Shares at a price of $7.50
per Share, to be effected through a cash merger of Acquisition, a subsidiary of
Ten Ideas, with and into Bertucci's. Such a merger would be subject, pursuant to
Massachusetts law, to the approval of two-thirds in interest of the holders of
the Shares.
The Special Committee, together with NMS and the Company's legal counsel,
considered the proposal and informed Mr. Crugnale that it believed that the
price offered was inadequate. The Special Committee also insisted that it would
not approve of an acquisition transaction without firm financing commitments.
Representatives of the Special Committee continued to discuss with Mr. Crugnale
and his advisors the offer made by Ten Ideas. On February 7, 1998, Mr.
Crugnale's legal and financial advisors informed representatives of the Special
Committee that they were prepared to increase their offer to $7.75 per share,
and that such offer would be accompanied by firm financing commitments, subject
to only usual and customary conditions. The Special Committee convened a meeting
on February 8, 1998 with its financial and legal advisors. The members of the
Special Committee reviewed at length the strategic alternatives available to the
Company, and concluded that it would recommend acceptance of an offer from Ten
Ideas but only at a price of $8.00 per share, if appropriate terms of a Merger
Agreement could be negotiated. The position of the Special Committee was
communicated to the financial and legal advisors of Ten Ideas, and following
further negotiations, Ten Ideas agreed to increase its offer to $8.00 per Share
and agreed to obtain firm written financing commitments.
18
<PAGE>
On February 9, 1998, counsel for Ten Ideas presented to counsel for the
Company a proposed form of the Merger Agreement, who distributed it among the
members of the Special Committee and discussed it with them. The parties
negotiated the terms of the proposed Merger Agreement throughout the week of
February 9, 1998. During this week, management also contacted the members of
the Board by telephone to give them a preliminary indication of the Company's
fiscal 1997 financial results as they were being finalized.
On the evening of February 12, 1998, the Special Committee met with its
financial and legal advisors to consider the proposed transaction. At this
meeting, NMS presented orally its opinion as investment bankers that, as of such
date, the aggregate consideration to be received by the stockholders pursuant to
the proposed Merger was fair to such stockholders from a financial point of
view. The representatives of NMS also reported that they had conducted a further
pre-market check of potential strategic and financial buyers, and that on the
basis of those efforts they felt it was unlikely that a third party would offer
more than the price offered by Ten Ideas. The Special Committee's legal advisors
reported to the members of the Special Committee on the proposed terms of the
Merger Agreement. In particular, they noted that the terms of the Merger
Agreement permit the Board of Directors, if required in the exercise of the
Board's fiduciary duties, to withdraw its recommendation of the Merger and to
accept an acquisition proposal which is more favorable to the stockholders of
the Company upon payment of a break up fee and expense reimbursement. The
Special Committee also reviewed the recent results of operations of the Company,
and discussed the likely effect of the disappointing results for the fourth
quarter of fiscal 1997 on the trading value of the Shares. Following its
discussion, the Special Committee resolved to recommend to the Board of
Directors that the offer of Ten Ideas at $8.00 per Share be accepted.
The Board then invited Mr. Crugnale to join the meeting and discussed
further with him his proposed financing arrangements and his plans for the
Company and its employees following the proposed Merger. Thereafter, by
unanimous vote of all of the directors, the Board determined the Merger to be
fair and in the best interests of Bertucci's and its stockholders, approved the
Merger Agreement and the transactions contemplated thereby, including the
Merger, and recommended that the stockholders vote in favor of approval and
adoption of the Merger Agreement and the transactions contemplated thereby. The
Board's approval was given subject to the execution and delivery of the final
form of the Merger Agreement and the delivery by Acquisition of written
commitments for the necessary financing to consummate the transaction.
At approximately 6:00 p.m. on the following day, February 13, 1998,
Acquisition received from its prospective financing sources executed commitment
letters for financing to consummate the Merger, and Ten Ideas and Acquisition
delivered to the Company's counsel an executed counterpart of the Merger
Agreement and the written financing commitments, whereupon the Company issued a
press release announcing the Merger and a simultaneous release announcing its
financial results for the fourth quarter of fiscal 1997 and the full fiscal
year.
FAIRNESS OF THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS.
The Board of Directors by unanimous vote of all of the directors, has
approved the Merger Agreement and the transactions contemplated thereby and
determined that the Merger is fair to, and in the best interests of, the
stockholders of the Company. The Board of Directors recommends that all holders
of Shares vote their Shares in favor of the Merger.
19
<PAGE>
The Board of Directors has reviewed the Company's position within the
restaurant industry, the near and longer term prospects for that industry, and
the strategic alternatives available to the Company, all with a view to
maximizing stockholder value. In conducting its review, the Board considered the
Company's results of operations, including those for the fourth quarter of
fiscal 1997, which fell considerably short of securities analysts' expectations.
In light of the Board's review of the Company's competitive position and recent
operating results, anticipated trends in the industry, and the prospects for the
Company, the Board determined that it would be in the best interest of the
Company's stockholders for the Board to approve the Merger Agreement. In
approving the Merger Agreement and the transactions contemplated thereby, and
recommending that all holders Shares vote their Shares in favor of the Merger
Agreement, the Board of Directors considered the following material factors:
(i) The terms of the Merger Agreement and the fact that they were the
product of arms-length negotiations among the parties;
(ii) The trading price of shares of the Company since its initial public
offering, including recent trends;
(iii) The Company's projected financial performance, competitive position
and current trends in the restaurant industry;
(iv) The results of the process undertaken by NMS to identify and solicit
indications of interest from selected potential purchasers with respect
to the purchase of the Company;
(v) The presentation by NMS at the December 4, 1997 and February 12, 1998
meetings of the Board of Directors, and the oral opinion of NMS delivered
to the Board at the February 12, 1998 meeting (which was subsequently
confirmed in writing) to the effect that, as of such date and based upon
the assumptions and the other matters to be set forth in its written
opinion, the $8.00 per Share consideration to be received by the holders
of Shares in the Merger is fair to such holders from a financial point of
view. A copy of the opinion of NMS, which sets forth the assumptions
made, the matters considered and the limitations of the review undertaken
by NMS, is attached hereto as ANNEX II. Stockholders are urged to read
the opinion of NMS carefully in its entirety;
(vi) The fact that the terms of the Merger Agreement permit the Board of
Directors, if required by the Board's fiduciary duties, to withdraw its
recommendation of the Merger to accept an acquisition proposal which is
more favorable to the Bertucci's stockholders upon payment of a
reasonable break up fee and reimbursement of expenses;
(vii) The fact that an affirmative vote of the holders of two-thirds in
interest of the outstanding shares of Bertucci's Common Stock is required
to approve and adopt the Merger Agreement.
(viii) The fact that the offer made by Ten Ideas was for cash and
accompanied by financing commitments, subject to customary conditions;
and
(ix) The availability of dissenters' rights of appraisal in the Merger.
The Board of Directors did not assign relative weights to the above factors
or determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendations as being based on the totality
of the information presented to and considered by it.
20
<PAGE>
OPINION OF FINANCIAL ADVISOR
Pursuant to an engagement letter dated December 5, 1997 (the "Engagement
Letter"), the Special Committee of the Board of Directors (the "Special
Committee") engaged NMS to act as its exclusive financial advisor in connection
with the consideration by the Company of various strategic and financial
alternatives available to it to maximize stockholder value. NMS is a nationally
recognized firm and, as part of its investment banking activities, is regularly
engaged in the valuation of businesses and their securities in connection with
merger transactions and other types of acquisitions, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. The Special Committee selected
NMS as its financial advisor on the basis of its experience and expertise in
transactions similar to the Merger and its reputation and experience in the
restaurant and investment communities and its historical investment banking
relationship with the Company.
In connection with the consideration by the Special Committee of the merits
of the Merger, NMS was asked under the terms of the Engagement Letter to perform
various financial analyses and deliver to the Special Committee its opinion
based on such analyses. At the February 12, 1998 meeting of the Special
Committee, NMS delivered its oral opinion, and subsequently confirmed in writing
as of such date, that the consideration to be received by the stockholders of
the Company in the Merger is fair to Bertucci's stockholders from a financial
point of view (the "NMS Opinion"). No limitations were imposed by the Special
Committee upon NMS with respect to the investigations made or the procedures
followed by it in rendering its opinion except that NMS was not authorized to,
and did not, solicit any indications of interest from any potential third party,
either financial or strategic, to acquire all or any part of the Company other
than a group of potential strategic and financial buyers selected by the Company
in consultation with NMS.
THE FULL TEXT OF NMS' WRITTEN OPINION TO THE COMPANY'S BOARD OF DIRECTORS,
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS OF
REVIEW BY NMS, IS ATTACHED HERETO AS ANNEX II AND IS INCORPORATED HEREIN BY
REFERENCE AND SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY IN CONNECTION WITH
THIS PROXY STATEMENT. THE FOLLOWING SUMMARY OF NMS' OPINION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION. NMS' OPINION IS ADDRESSED
TO THE SPECIAL COMMITTEE ONLY AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
STOCKHOLDER OF THE COMPANY AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE SPECIAL
MEETING.
In connection with its opinion, NMS has among other things: (i) reviewed
certain publicly available financial and other data with respect to the Company,
including the consolidated financial statements for recent years and interim
periods to December 27, 1997 and certain other relevant financial and operating
data relating to the Company made available to NMS from published sources and
from the internal records of the Company; (ii) reviewed the financial terms and
conditions of the draft Merger Agreement; (iii) reviewed certain publicly
available information concerning the trading of, and the trading market for, the
Company's common stock; (iv) compared the Company from a financial point of view
with certain other companies in the restaurant industry that NMS deemed to be
relevant; (v) considered the financial terms, to the extent publicly available,
of selected recent business combinations of companies in the restaurant industry
which NMS deemed to be comparable, in whole or in part, to the Merger; (vi)
reviewed and discussed with representatives of the management of the Company
certain information of a business and financial nature regarding the Company;
(vii) made inquiries regarding and discussed the Merger and the draft Merger
Agreement and other matters related thereto with the Company's counsel; (viii)
made inquiries of selected third parties on a confidential basis regarding an
investment in or acquisition of the Company; and (ix) performed such other
analyses and examinations as NMS deemed appropriate.
21
<PAGE>
Based upon the foregoing, but subject to the limitations set forth below and
in reliance upon the assumptions set forth below, NMS provided the Special
Committee with its opinion as investment bankers that, as of the date of the NMS
Opinion, the consideration to be received by the stockholders of the Company
pursuant to the Merger was fair to the holders of such Shares from a financial
point of view. The terms of the Merger and the amount of the consideration to be
received by stockholders of the Company thereunder were determined pursuant to
negotiations between the Company and Ten Ideas and not pursuant to
recommendations of NMS.
In connection with its review, NMS did not independently verify the
foregoing information and relied on such information being accurate and complete
in all material respects. With respect to the financial forecasts for the
Company, NMS assumed for purposes of its opinion that the forecasts were
reasonably prepared on bases reflecting the best available estimates at the time
of preparation as to the future financial performance of the Company and that
the forecasts provided a reasonable basis upon which NMS could form its opinion.
NMS also assumed that there were no material changes in the Company's assets,
financial condition, results of operations, business or prospects since the date
of the last financial statements made available to NMS. NMS relied on advice of
counsel and the independent accountants to the Company as to all legal and
financial reporting matters, respectively, with respect to the Company, the
Merger and the draft Merger Agreement. NMS has assumed that the Merger will be
consummated in a manner that complies in all respects with the applicable
provisions of the Exchange Act and all other applicable federal and state
statutes, rules and regulations. In addition, NMS did not assume responsibility
for making an independent evaluation, appraisal or physical inspection of the
assets or liabilities (contingent or otherwise) of the Company and was not
furnished with any such appraisals. Finally, NMS' opinion was based on economic,
monetary, market and other conditions as in effect on, and the information made
available to NMS as of February 12, 1998.
NMS also assumed with the Company's consent that the Merger Agreement will
be consummated in accordance with the terms described in the Merger Agreement,
without any amendments thereto, and without waiver by the Company of any of the
conditions to its obligations thereunder.
Set forth below is a brief summary of selected analyses presented by NMS to
the Special Committee on February 12, 1998 in connection with the NMS Opinion.
ANALYSIS OF PREMIUMS PAID
NMS reviewed the acquisition premiums paid for two comparable groups of
selected public companies for certain periods prior to announcing a transaction
(premiums paid one day, one week and four weeks prior). For the first group,
consisting of 127 transactions valued at between $50 million and $200 million,
the mean and median premiums paid in the transaction as compared to one day
prior to the announcement of the transaction were 24.7% and 20.3%, respectively,
as compared to a premium of approximately 33.0% to be paid for Bertucci's in the
Merger. A valuation based on an analysis of premiums paid on this comparable
group yields a price range for the Company of $7.37 to $8.05 per share versus
the Cash Price of $8.00 per share. The average and median acquisition premium on
comparable restaurant buyout offers, the second group reviewed, yielded a mean
and median premium of 23.0% and 19.5%, respectively. A valuation based on an
analysis of such premiums paid yielded an implied per share valuation of $7.32
to $7.53 versus the Cash Price of $8.00 per share.
22
<PAGE>
COMPARABLE COMPANY ANALYSIS
NMS analyzed a group of fourteen comparable public companies that included
selected restaurant companies. As a multiple of last twelve months' ("LTM")
revenue, earnings before interest, taxes, depreciation and amortization
("EBITDA") and EBIT, the restaurant comparable companies trade at a median of
0.9x, 6.3x and 10.0x, respectively, indicating a realistic valuation range for
the Company of between $6.00 and $10.00 per share. From this analysis, NMS also
determined that the Cash Price of $8.00 per share, representing a 20.5x price to
1997 earnings ratio, represents a fair offer when compared to the prevailing
price to LTM earnings ratios for other comparable restaurant companies
(mean: 17.1x; median: 13.8x). NMS also analyzed a subgroup of four restaurant
companies within the group of selected restaurant companies which it believed to
be particularly comparable to the Company (including Au Bon Pain, Sbarro, Inc.,
Uno Restaurant Corp. and Rock Bottom Restaurants (Old Chicago Pizzeria)). Based
on LTM EBITDA for this group, NMS arrived at a realistic valuation range for the
Company of $6.82 to $6.97 per share, compared to the Cash Price of $8.00.
COMPARABLE TRANSACTIONS ANALYSIS
NMS developed a list of sixteen comparable merger and acquisition
transactions involving selected restaurant companies to determine comparable
transaction multiples of revenue, EBITDA and net income. From this analysis, NMS
determined that the $8.00 Cash Price, representing a multiple of approximately
5.7x LTM EBITDA, compares favorably to the multiples paid for other comparable
restaurant companies (mean: 5.1x; median: 5.7x). Additionally, the median
comparable transaction multiple of equity value to net income was 17.7x,
indicating a per share valuation for the Company of $6.94 versus the Cash Price
of $8.00 per share.
No other company or transaction used in the above analysis as a comparison
is identical to the Company or the Merger. Accordingly, an analysis of the
results of the foregoing involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading value of the
companies to which the Company and the Merger are being compared. Mathematical
analysis (such as determining average or median) is not, in itself, a meaningful
method of using comparable transaction data.
DISCOUNTED CASH FLOW ANALYSIS
NMS applied a discounted cash flow analysis to the financial cash flow
forecasts for the Company for calendar years 1998 to 2002. Using this
information, NMS calculated the net present value of free cash flows the Company
could generate through 2002 using discount rates of 10%, 11% and 12%. NMS'
estimate of the appropriate discount rate was based on the weighted average cost
of capital of comparable restaurant companies. NMS also calculated the terminal
value of the Company in the year 2002 based on exit multiples of 2002 EBITDA
ranging from 6.0x to 8.0x and discounted these terminal values using discount
rates of 10%, 11% and 12%. This analysis indicated the Company's computed per
share price is $7.01 to $9.37.
Inherent in any discounted cash flow valuation are the use of a number of
assumptions, including the accuracy of 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 judgements could significantly alter the results of a discounted
cash flow analysis.
23
<PAGE>
The summary set forth above does not purport to be a complete description of
the presentation by NMS to the Special Committee or the analyses performed by
NMS. The preparation of a fairness opinion necessarily is not susceptible to
partial analysis or summary description. NMS believes that such analyses and the
summary set forth above must be considered as a whole and that selecting
portions of its analyses and of the factors considered, without considering all
such analyses and factors, would create an incomplete view of the analyses set
forth in its presentation to the Special Committee. In addition, NMS may have
given various analyses more or less weight than other analyses, and 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 be NMS' view of the actual value of the Company.
In performing its analyses, NMS made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of the Company. The analyses
performed by NMS 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 NMS' analysis of
the fairness of the Merger to the Company stockholders and were provided to the
Special Committee in connection with the delivery of the NMS 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. NMS used in its analyses
various projections of future performance prepared by the management of the
Company. The projections are based on numerous variables and assumptions which
are inherently unpredictable and must be considered not certain of occurrence as
projected. Accordingly, actual results could vary significantly from those set
forth in such projections.
As described above, the NMS Opinion and presentation to the Special
Committee were among the many factors taken into consideration by the Company's
Board of Directors in making its determination to approve, and to recommend that
its stockholders approve, the Merger.
Pursuant the Engagement Letter, the Company paid NMS (i) a retainer fee of
$50,000 on December 5, 1997, and (ii) an additional fee of $250,000 on February
12, 1998 following the delivery of the NMS Opinion, both of which will be
credited against any fee payable to NMS upon consummation of the Merger. Upon
consummation of the Merger, the Company will become obligated to pay NMS a fee
of approximately $1.25 million. The Company has also agreed to reimburse NMS for
its reasonable out-of-pocket expenses. Pursuant to a separate letter agreement,
the Company has agreed to indemnify NMS, its affiliates, and their respective
partners, directors, officers, agents, consultants, employees and controlling
persons against certain liabilities, including liabilities under the federal
securities laws.
In the past, NMS has provided financial advisory and investment banking
services to the Company and has received customary fees for the rendering of
such services. In the ordinary course of its business, NMS actively trades
securities of the Company for its own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER; CONFLICTS OF INTEREST
In considering the recommendation of the Board of Directors with respect to
the Merger, stockholders should be aware that certain members of Bertucci's
Board of Directors have certain interests that present them with actual or
potential conflicts of interest in connection with the Merger. The Board of
Directors was aware of these conflicts and considered them among the other
matters described under
24
<PAGE>
"SPECIAL FACTORS--Fairness of the Merger; Recommendation of the Board of
Directors," "THE MERGER--Effect on Stock Options and Employee Benefit Matters,"
and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
In particular, Mr. Crugnale, the Company's founder, President and Chief
Executive Officer and a member of the Board of Directors, may benefit from the
Merger as described under "--Purpose of the Merger." In addition, the other
members of the Board of Directors and officers of the Company beneficially own
Shares and options to purchase Shares for which they would receive the same cash
payments as other stockholders upon the closing of the Merger (less the exercise
price, in the case of options).
The compensation levels and employee benefit plans and programs for
directors, officers and employees of Bertucci's after the Merger are expected to
be substantially the same as those currently provided by Bertucci's, except that
the Company's existing stock option plans and Employee Stock Purchase Plan will
be terminated. Ten Ideas will consider the implementation of a new
profit-sharing plan following the Merger. No director or officer of the Company
will receive any payment under any employment or severance agreement as a result
of the Merger.
PURPOSE OF THE MERGER
The Company has entered into the Merger Agreement because the Board of
Directors concluded that the Merger was fair to, and in the best interests of,
the Company's stockholders. In particular, the Board concluded that it was
unlikely at the time that the Company could be sold in a transaction, or any
transaction could be consummated, other than the Merger, in which the
stockholders would have an opportunity to obtain a premium to current market
prices, and that the $8.00 per Share price payable in the Merger represented an
attractive alternative to the potential for future market appreciation of the
Bertucci's Common Stock.
The purpose of the Merger for Ten Ideas and Mr. Crugnale is to enable Mr.
Crugnale to own and operate the business which he founded, and to control the
business and affairs of Bertucci's to a greater extent than he is currently
able. Ten Ideas regards the acquisition of the Shares in the Merger as an
attractive investment opportunity because it believes that Bertucci's future
business prospects are favorable, although undervalued by the public equity
markets. By rolling over all of Mr. Crugnale's existing equity interest in
Bertucci's into Ten Ideas, and by leveraging that investment value, Ten Ideas
will be able to provide the unaffiliated stockholders of the Company with an
opportunity to realize now on the fair value of their shares. Although the
effect of the Merger will be to substantially increase the Company's leverage,
and hence its investment risk, Ten Ideas believes that Bertucci's operations
will provide adequate cash flow to service the debt incurred to fund the Merger,
and over time will increase stockholder value. In addition, operating as a
private company should allow Bertucci's increased flexibility to slow down
growth and close under-performing restaurants when appropriate, and to take such
other actions as needed to manage and operate its business. These actions are
often not well received by the public equity markets due to such markets' focus
on short-term increases in reported quarterly earnings.
In order to provide a prompt and orderly transfer of ownership of Bertucci's
from the public stockholders to Ten Ideas, in light of relevant financial,
legal, tax and other considerations, and to facilitate the required financing
for the transaction, the acquisition has been structured as a merger pursuant to
which, if the Merger Agreement is adopted by the requisite vote of the
stockholders, Acquisition will be
25
<PAGE>
merged with and into Bertucci's. Following the Merger, the Bertucci's Common
Stock currently outstanding will no longer represent an equity interest in
Bertucci's.
CERTAIN EFFECTS OF THE MERGER
Upon consummation of the Merger, the stockholders of the Company will be
entitled to receive a payment in cash of $8.00 per Share, without interest, or
to exercise appraisal rights pursuant to the MGL if properly demanded prior to
the vote on the Merger at the Special Meeting. The existing stockholders (other
than Mr. Crugnale through his ownership of Ten Ideas), as of the Effective Time,
will have no continuing ownership interest in the Company and will no longer
participate in the future earnings and potential growth of the Company.
As a result of the Merger, the Company will become a privately held,
wholly-owned subsidiary of Ten Ideas. From the Effective Time, the Shares will
no longer be traded on Nasdaq, and price quotations with respect to sales of
Shares in the public market will no longer be available. The registration of the
Shares under the Exchange Act will terminate and this termination will eliminate
the Company's obligation to file periodic financial and other information with
the Commission and will make certain of the provisions of the Exchange Act, such
as the short-swing profit recovery provisions of Section 16(b) and the
requirement, under the proxy rules of Regulation 14A, of furnishing a proxy or
information statement in connection with stockholders meetings no longer
applicable to the Company.
Pursuant to the terms of the Merger Agreement, the Board of Directors of
Acquisition shall become, upon consummation of the Merger, the Board of
Directors of the Surviving Corporation. Mr. Crugnale is the sole current
director of Acquisition and is expected to be the only director of the Surviving
Corporation.
PLANS FOR THE COMPANY AFTER THE MERGER
It is expected that following the Merger the business and operations of the
Company will, except as set forth in this Proxy Statement, be conducted by
Surviving Corporation substantially as they are currently conducted.
Except as described in this Proxy Statement, neither Mr. Crugnale, Ten
Ideas, nor Acquisition has any present plans or proposals that relate to or
would result in an extraordinary corporate transaction involving the Company's
corporate structure, business or management, such as a merger, reorganization,
liquidation, relocation of any operations of the Company or sale or transfer of
a material amount of assets. However, Ten Ideas will continue to evaluate the
business and operations of the Surviving Corporation following the Merger and
may propose or develop new plans and proposals which it considers to be in the
best interests of the Surviving Corporation and its stockholders. Specifically,
Ten Ideas currently intends to continue the Company's current strategy of
slower, more controlled growth at a rate of four to six new restaurants per
year, rather than eight to ten stores as in some recent years, although the
Company intends to proceed with the opening of each of the seven restaurants
currently under development. See "THE COMPANY-- Restaurant Locations and
Expansion Plans."
RISK THAT THE MERGER WILL NOT BE CONSUMMATED
Consummation of the Merger is subject to several conditions, including
receipt of the required stockholder approval, the absence of an injunction or
other order restraining consummation of the transactions contemplated by the
Merger Agreement, receipt by Ten Ideas and/or Acquisition of the
26
<PAGE>
required financing to complete the Merger and to pay related fees and expenses
and holders of not more than 10% of the outstanding Shares electing to demand
appraisal rights. See "THE MERGER--Conditions to the Consummation of the Merger"
and "APPRAISAL RIGHTS." Although, as described in "THE MERGER--Merger
Financing," Ten Ideas has obtained commitments for the required financing, these
commitments contain numerous conditions. Therefore, even if the requisite
stockholder approval is obtained, there can be no assurance that the Merger will
be consummated.
The Merger Agreement provides that Ten Ideas is entitled to payment from
Bertucci's of a $1.5 million termination fee and reimbursement from Bertucci's
for its expenses incurred in connection with the Merger Agreement and
consummation of the transactions contemplated thereby in the event that the
Merger Agreement is terminated by Bertucci's because of the exercise by the
Board of Directors of its right under the Merger Agreement to accept another
acquisition proposal pursuant to its fiduciary obligations to stockholders under
applicable law, or if the Merger Agreement is terminated by Ten Ideas following
the Board of Directors of Bertucci's (i) withdrawal or modification of, in a
manner adverse to Ten Ideas, its approval or recommendation of the Merger or
(ii) approval of another acquisition proposal; provided that such reimbursement
for expenses shall not exceed an aggregate of $750,000. In addition, the Merger
Agreement provides for certain other circumstances in which such expenses must
be reimbursed. See "CERTAIN PROVISIONS OF THE MERGER AGREEMENT-- Expenses and
Certain Required Payments" and "--Conditions to the Consummation of the Merger."
It is expected that if the Merger Agreement is not adopted by the
stockholders, or if the Merger is not consummated for any other reason, the
Company's current management, under the direction of the Board of Directors,
will continue to manage the Company as an on-going business. No other
transaction is currently being considered by the Company as an alternative to
the Merger.
CERTAIN RISKS IN THE EVENT OF BANKRUPTCY
If the Company is insolvent at the Effective Time or becomes insolvent as a
result of the Merger, the transfer of funds representing the $8.00 per Share
price payable to stockholders of the Company upon consummation of the Merger may
be deemed to be a "fraudulent conveyance" under applicable law, and therefore
may be subject to claims of certain creditors of the Company. If such a claim is
asserted by the creditors of the Company after the Merger, there is a risk that
persons who were stockholders of the Company at the Effective Time will be
ordered by a court to turn over to the Company's trustee in bankruptcy all or a
portion of the $8.00 per Share in cash they received upon the consummation of
the Merger.
Based upon the projected capitalization of the Company at the time of the
Merger and projected results of operations and cash flow after the Merger,
management of the Company has no reason to believe that the Company and its
subsidiaries, on a consolidated basis, will be insolvent immediately after
giving effect to the Merger.
LITIGATION CHALLENGING THE MERGER
After the announcement of the Merger, three purported class action lawsuits
were filed in February, 1998 in Massachusetts Superior Court, by the same
counsel, against the Company and its Board of Directors in connection with the
Merger. Plaintiffs claim that the Merger is, or consummation thereof would be,
wrongful, unfair and in breach of the individual defendant's fiduciary duties.
The plaintiffs allege that the Cash Price is grossly inadequate, the Merger
would be consummated without an auction of the
27
<PAGE>
Company or other market check, and the defendants allegedly possess non-public
information concerning the condition and prospects of the Company. The
plaintiffs in these purported class actions seek preliminary and permanent
injunctive relief against the Merger, unspecified monetary damages and other
relief. Defendants vigorously contest these claims and believe that they are
without merit. To date, the plaintiffs have not filed a motion for a preliminary
injunction or other preliminary relief.
28
<PAGE>
THE COMPANY
GENERAL
As of the fiscal year ended December 27, 1997, the Company operated a chain
of eighty-four full-service, Italian restaurants under the "Bertucci's Brick
Oven Pizzeria" name in the Northeastern and Mid-Atlantic regions, and the
Chicago, Illinois, and Atlanta, Georgia, metropolitan areas. The restaurants'
menu features original-recipe gourmet pizza, prepared in brick ovens, and other
high-quality, moderately-priced Italian food. In addition, the Company also
operates Sal and Vinnie's Sicilian Steakhouse, which was opened in the first
quarter of 1997 in Norwood, Massachusetts.
Bertucci's seeks to distinguish itself from its competitors in the family
and adult casual-dining market segments through offering:
- a distinctive, yet moderately-priced menu that features fresh, natural
ingredients and includes brick-oven baked gourmet pizzas and bread, a wide
variety of pasta items, appetizers, and desserts;
- a contemporary European-style design, centered around a large-display
cooking area with brick ovens, customized for each particular restaurant's
location, with no two restaurants looking alike; and
- a relaxed, family atmosphere, as evidenced by moderate sales of alcoholic
beverages which, during fiscal year 1997 accounted for only 8.7% of net
sales.
The Bertucci's concept features lower-cost food items and a restaurant
design with a lower capital investment (averaging $1.2 million) than many
competitors that offer a broader menu. Accordingly, the restaurants are able to
offer customers excellent value while permitting the Company to maintain
relatively high restaurant-unit operating margins.
The first Bertucci's Brick Oven Pizzeria was opened in Somerville,
Massachusetts in 1981 by the Company's founder, President and Chief Executive
Officer, Joseph Crugnale. In 1985, the Company began expanding and as of
December 27, 1997, operated eighty-four Bertucci's restaurants, of which
thirty-one were located in Massachusetts, two each were located in Rhode Island
and Washington, DC, three were located in New Jersey and New Hampshire, four
each were located in New York and Pennsylvania, six each were located in Georgia
and Maryland, nine were located in Connecticut, and seven were located in
Illinois and Virginia. In addition, the Company operates one Sal and Vinnie's
restaurant in Massachusetts. During the 1996 fiscal year, two locations in
Florida and one location in New Jersey were closed. Four Bertucci's restaurants
and one Sal and Vinnie's restaurant were opened in 1997, and the Company expects
to open five to six restaurants in 1998. The Company's strategy is to pursue
controlled expansion in contiguous areas that can support multiple locations,
with an emphasis on future expansion into existing markets.
Average sales per restaurant open for the full period were $1,673,000,
$1,671,000, and $1,712,000 in 1995, 1996, and 1997, respectively.
The Company's restaurants are full-service, casual-dining restaurants that
feature gourmet Italian food with an emphasis on brick-oven baked pizzas and
creative pasta dishes. During fiscal year 1997, sales of pizza accounted for
approximately 40% of net sales. Through development of a distinctive menu and a
contemporary European-style design, the Company strives to offer a unique dining
experience with excellent value for the price. The Company's restaurants appeal
to a diverse target market. In addition to adult-dining, family-dining is
encouraged, and a special menu is provided for children. All of the
29
<PAGE>
Company's restaurants are open for lunch and dinner, seven days a week. Most
items on the menu may be purchased for take-out service or delivery, which,
during fiscal year 1997, accounted for approximately 27% of net sales.
The Company's signature product, gourmet pizza, is offered with a wide
variety of cheese, vegetable, and meat toppings, and is prepared in brick ovens.
By baking its pizzas in brick ovens at an unusually high temperature, but for a
relatively short period of time, the Company is able to produce a light crust
while preserving the flavor and moisture of the toppings. Management believes
that the Company's original recipes and brick-oven baking techniques combine to
produce a superior pizza that is difficult to duplicate. In addition to pizzas,
the Company's menu features a variety of pasta items, appetizers, soups, salads,
calzones, and desserts that are prepared fresh daily according to Bertucci's
special recipes. Natural, fresh ingredients are a cornerstone of the Bertucci's
concept. In order to ensure the uniform high-quality and freshness of its menu
offerings, the Company makes all of its own dough, sauces, mixes, and desserts.
For the fiscal year ended December 27, 1997, the average check per customer
at the Company's restaurants, including beverages, was approximately $7.40 for
lunch and approximately $9.95 for dinner. Full bar-service is available at most
of the Company's restaurants, and beer and wine are available at all locations.
In keeping with its emphasis on offering distinctive menu selections, the
Company offers Bertucci's Lite beer, a private-label beer brewed according to
the Company's proprietary specifications. Limited seating is available in the
bar areas to accommodate those waiting to be seated. The Company does not
believe that changes in public attitude toward alcoholic-beverage consumption
and stricter governmental regulation of establishments serving alcoholic
beverages will have a material adverse effect on its business.
Management believes that the unique interior decor of the Company's
restaurants contributes to the distinctive dining experience enjoyed by its
customers. Each of the Company's restaurants features a contemporary,
European-style, open-kitchen design centered around brick ovens. Ingredients are
displayed and food is prepared on polished granite counters located in front of
the brick ovens, in plain view of diners. Bocce-ball courts and outdoor patios
have been included at selected sites, further enhancing the distinctive decor.
The interior-decor theme is artistically adapted to each site, and therefore no
two restaurants are alike. The floor plan of the Company's restaurants is
flexible, permitting tables to be easily rearranged to accommodate large groups
or parties.
RESTAURANT LOCATIONS AND EXPANSION PLANS
As of December 27, 1997, the Company operated eighty-five restaurants in
Connecticut, Georgia, Illinois, Maryland, Massachusetts, New Hampshire, New
Jersey, New York, Pennsylvania, Rhode Island, Virginia, and Washington, D.C.
Through the course of the Company's expansion, management has determined
that the optimal size for the Company's restaurants is approximately 5,700
square feet, with seating for approximately 160 customers. The average cost of
opening a typical restaurant during 1997 was approximately $1.2 million, of
which $650,000 is attributable to leasehold improvements, $450,000 is
attributable to furniture, fixtures, and equipment, and $100,000 is attributable
to preopening expenses.
The Company intends to continue its strategy of adding restaurants through
controlled growth in contiguous areas that can support multiple locations, with
an emphasis on future expansion into selected Massachusetts and Pennsylvania
markets. During fiscal year 1998, the Company anticipates opening five to
30
<PAGE>
six restaurants. So far in 1998, the Company has six Bertucci's restaurants and
one Sal and Vinnie's restaurant under development.
Expansion during fiscal year 1999 is expected to be at the level of four to
five restaurants. The Company's expansion plans are based primarily on
management's evaluation of market potential. The Company has not commissioned
any independent, third-party evaluation of its expansion plans.
All of the Bertucci's restaurants are operated by the Company, and the
Company currently has no plans to develop a franchise program.
MARKETING
The Company focuses on the family and adult casual-dining market segments.
To reach these segments, it targets its restaurant locations for areas with a
median to high family income. Management believes that the Company's commitment
to customer service and price value is the most effective approach to attracting
customers. Accordingly, the Company historically has focused its resources on
providing its customers with superior service and value, and has relied
primarily on word-of-mouth to attract new and repeat customers. Management
believes that its strategy of locating multiple restaurants within a defined
geographic area will enable newer restaurants to benefit from the
name-recognition and reputation for quality developed by existing restaurants.
The Company employs print and direct mail advertising, and conducts local
restaurant promotions. During fiscal year 1997, the Company's expenditures for
advertising and marketing were approximately 3.3% of its revenues. The Company
plans to increase its advertising expenditures in 1998 by utilizing a
combination of local media vehicles such as television, radio, outdoor
billboards, and direct mail in most of its major markets.
RESTAURANT OPERATIONS AND MANAGEMENT
The Company strives to maintain quality and consistency in its restaurants
through the careful training and supervision of personnel and the establishment
of standards relating to food and beverage preparation, maintenance of
facilities, and conduct of personnel. The Company maintains financial and
accounting controls for each of its restaurants through use of centralized
accounting and management information systems. Sales information is collected
daily from each restaurant, and restaurant managers are provided with weekly
operating statements for their locations. Cash is controlled through daily
deposits of sales proceeds in local operating accounts, the balances of which
are wire-transferred daily to the Company's principal operating account.
Each new restaurant employee of the Company participates in a ten day
training program during which he or she works under the close supervision of a
restaurant manager. Management strives to instill enthusiasm and dedication in
its employees. Management regularly solicits employee suggestions concerning
restaurant operations, and strives to be responsive to employee concerns. A
toll-free number is available for use by any employee who has a suggestion,
comment, or complaint, and management meets regularly with employees at each of
the restaurants.
Restaurant managers, many of whom are drawn from the Company's restaurant
personnel, complete an eight-to-ten-week training program during which they are
instructed in areas including food quality and preparation, customer service,
alcoholic beverage service, liquor liability avoidance, and employee relations.
Restaurant managers are provided with operations manuals relating to food and
beverage preparation, and operation of restaurants.
31
<PAGE>
Management has made a conscious commitment to ensure customer service of the
highest standards. Employees work toward the goal of 100% customer satisfaction,
and are empowered to address customers' needs with immediate attention and
action. A toll-free Customer Comment Line is available to all customers, with a
guaranteed response in twenty-four hours.
Operations at the Company's restaurants are managed by eleven region
managers, each of whom is responsible for supervising the operations of six to
twelve restaurants. The region managers report directly to the Vice
President-Operations. Region managers meet at least once a week with restaurant
management to review operations and to resolve issues. Working with region and
restaurant managers, the Company's executive management defines operations and
performance objectives for each restaurant. An incentive plan has been
established in which region and restaurant managers participate. Awards under
the incentive plan are tied to achievement of specified operating targets.
The staff for a typical Bertucci's restaurant consists of one general
manager, two managers, and approximately forty to sixty hourly employees, most
of whom are part-time personnel. The Company holds regular meetings of its
restaurant managers that cover new products, continuing training, and aspects of
business management.
PURCHASING OPERATIONS
Management believes in maintaining as much on-site preparation of food
products at the restaurants as possible in order to ensure freshness and
quality, and to enhance the dining experience through the visual display of
fresh ingredients. The Company negotiates directly with manufacturers,
importers, brokers, and wholesale suppliers of primary food ingredients and
beverage products to ensure consistent quality and freshness of products in its
restaurants, and to obtain competitive pricing. Management believes that all
essential food and beverage products are available from alternative, qualified
suppliers.
COMPETITION
The restaurant business is highly competitive and is affected by many
factors, including general economic conditions, changes in consumer taste and
spending habits, and population and traffic patterns. The Company competes with
a number of restaurants within its markets, both locally owned and units of
regional or national chains. Many of the Company's competitors have greater
financial resources and longer operating histories than the Company. The Company
believes that its ability to compete effectively will continue to depend upon
its ability to offer high-quality, moderately-priced food in a full-service,
distinctive dining environment.
GOVERNMENT REGULATION
The Company's restaurants are subject to numerous federal, state, and local
laws affecting health, sanitation, and safety standards, as well as to state and
local licensing regulation of the sale of alcoholic beverages. Each restaurant
has appropriate licenses from regulatory authorities allowing it to sell liquor,
and/or beer and wine, and each restaurant has food service licenses from local
health authorities. The Company's licenses to sell alcoholic beverages must be
renewed annually and may be suspended or revoked at any time for cause,
including violation by the Company or its employees of any law or regulation
pertaining to alcoholic beverage control, such as those regulating the minimum
age of patrons or employees, advertising, wholesale purchasing, inventory
control, handling, and storage. The failure of a restaurant to obtain or retain
liquor or food service licenses could adversely affect operations. However,
32
<PAGE>
each restaurant is operated in accordance with standardized procedures designed
to ensure compliance with all applicable codes and regulations.
In some states, the Company is subject to "dram-shop" statutes which
generally provide that a person who is injured by an intoxicated person may
attempt to recover damages from an establishment that served alcoholic beverages
to the person who caused injury. While the Company carries liquor-liability
coverage as part of its existing comprehensive general liability insurance, a
judgment against the Company under a dram-shop statute in excess of the
Company's liability coverage could have a material adverse effect on the
Company.
The development and construction of additional restaurants will be subject
to compliance with applicable zoning, land use, and environmental regulations.
The Company is also subject to federal and state employment laws concerning such
items as minimum wages, working conditions, overtime, tip credits,
discrimination, harassment, and immigration. The Company believes that it is in
material compliance with each such law and that continued compliance will not
significantly affect its restaurant operating costs.
SERVICE MARKS
The Company has registered the names "Bertucci's," "Bertucci's Brick Oven
Pizzeria," and "Sal and Vinnie's Sicilian Steakhouse," as service marks and
trademarks with the United States Patent and Trademark Office. The Company is
aware of names similar to that of the Company used by third parties in certain
limited geographical areas. Such third-party use may prevent the Company from
licensing the use of its mark for restaurants in such areas. Except for these
areas, the Company is not aware of any infringing uses that could materially
affect its business. The Company has filed applications with the United States
Patent and Trademark Office to register "Food Does Not Lie" as a service mark,
and its olive design as a trademark and service mark. The Company intends to
protect its service marks and trademarks by appropriate legal action whenever
necessary.
EMPLOYEES
As of February 13, 1998, the Company employed 4,685 persons, fifty-eight of
whom were corporate personnel, 307 of whom were region, restaurant, or trainee
managers, and 4,320 of whom were restaurant personnel.
The Company considers its employee relations to be good. None of the
Company's employees are covered by a collective-bargaining agreement.
PROPERTIES
At the end of fiscal year 1997, all of the Company's restaurants, except its
locations in Westport, Connecticut, Columbia, Maryland, Peabody and Marlboro,
Massachusetts, and Wayne, Pennsylvania, were established in leased space. The
Sal and Vinnie's restaurant located in Norwood, Massachusetts, is leased from
the Company's President. Initial restaurant lease terms range from two years to
forty years. The majority of the leases provide for an option to renew for
additional terms ranging from five years to twenty years. All of the Company's
leases provide for a specified annual rental, and most leases call for
additional rents based on sales volumes exceeding specified levels. Generally,
the leases are net leases that require the Company to pay all taxes, insurance,
and maintenance costs.
33
<PAGE>
In September 1993, the Company moved into its corporate headquarters in
Wakefield, Massachusetts. The Company acquired a 60,000-square-foot office
building in December 1992, and after renovations were completed, approximately
20,000 square feet of office and administrative space were created. Another
40,000 square feet of storage space is available and can be utilized as
additional office space when needed.
LEGAL PROCEEDINGS
From time to time, lawsuits are filed against the Company in the ordinary
course of business. Except as set forth below, the Company is not a party to any
litigation that, in the judgment of management after consultation with counsel,
is likely to have a material adverse effect on the Company or its business, and
the Company is not aware that any such litigation is threatened. These separate
lawsuits, each purporting to be a class actions were filed in February, 1998 by
the same counsel against the Company and its Board of Directors in connection
with the Merger. Plaintiffs in these actions charge that the Merger is, or
consummation thereof would be, wrongful, unfair and in breach of the individual
defendants' fiduciary duties. See "SPECIAL FACTORS--Litigation Challenging the
Merger."
34
<PAGE>
THE MERGER
BACKGROUND OF THE MERGER
As described above, the decision of the Board to approve, and recommend
adoption and approval by Bertucci's stockholders of, the Merger Agreement and
the transactions contemplated thereby, including the Merger, followed extensive
negotiations between the Special Committee and Ten Ideas regarding the terms of
the Merger. The Board's deliberations included a detailed review of Bertucci's
business, results of operations and prospects, including the likelihood of
effecting an alternative transaction and the ranges of values to Bertucci's
stockholders that might be achievable in an alternative transaction and the
financial and other terms of the proposed Merger. For a statement of the
material factors considered by the Board in connection with its approval and
recommendation, See "SPECIAL FACTORS--Purpose of the Merger; Recommendation of
the Board."
THE BOARD RECOMMENDS THAT BERTUCCI'S STOCKHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTION CONTEMPLATED THEREBY,
INCLUDING THE MERGER.
Four of the five members of the Board who voted to approve the Merger
Agreement and the transactions contemplated thereby, including the Merger, are
non-employees of the Company and its subsidiaries. The fifth voting member is
Joseph Crugnale, the Company's founder, President and Chief
Executive Officer.
MERGER CONSIDERATION
Subject to certain provisions as described herein, other than with respect
to shares of Bertucci's Common Stock owned by Ten Ideas, the Company or any
wholly owned subsidiary of the Company, and with respect to dissenting shares,
each issued and outstanding share of Bertucci's Common Stock (other than
Electing Shares as defined below) will be entitled to receive in cash from the
Company following the Merger an amount equal to $8.00.
Any shares of Bertucci's Common Stock owned by the Company or by any wholly
owned subsidiary of the Company, will automatically be canceled at the Effective
Time and will cease to exist.
EFFECTIVE TIME
The Merger will become effective upon the filing of the Articles of Merger
with the Secretary of State of the Commonwealth of Massachusetts or upon such
other date as is specified in such Articles of Merger in accordance with the MGL
and as Ten Ideas and the Company shall agree (the "Effective Time"). Subject to
certain limitations, the Merger Agreement may be terminated by either party if,
among other reasons, the Merger has not been consummated on or before July 31,
1998. See "CERTAIN PROVISIONS OF THE MERGER AGREEMENT--Conditions to the
Consummation of the Merger" and "--Termination."
CONVERSION OF ACQUISITION STOCK
In the Merger, the shares of stock of Acquisition issued and outstanding
immediately prior to the Effective Time will become the shares of the Surviving
Corporation.
35
<PAGE>
CONVERSION OF BERTUCCI'S COMMON STOCK; PROCEDURES FOR EXCHANGE OF CERTIFICATES
At the Effective Time, shares of Bertucci's Common Stock (other than shares
as to which appraisal rights are properly exercised) will be converted into the
right to receive the Cash Price.
As soon as practicable following the Effective Time, the Exchange Agent will
send a letter of transmittal to each holder of Bertucci's Common Stock. The
letter of transmittal will contain instructions with respect to the surrender of
certificates representing shares of Bertucci's Common Stock or fractions thereof
in exchange for cash.
STOCKHOLDERS OF THE COMPANY SHOULD NOT FORWARD STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED THE LETTER OF TRANSMITTAL.
As soon as practicable after the Effective Time, each holder of an
outstanding certificate or certificates at such time which prior thereto
represented shares of Bertucci's Common Stock shall, upon surrender to the
Exchange Agent of such certificate or certificates and acceptance thereof by the
Exchange Agent, be entitled to the amount of cash, into which the number of
shares of Bertucci's Common Stock previously represented by such certificate or
certificates surrendered shall have been converted pursuant to the Merger
Agreement. The Exchange Agent will accept such certificates upon compliance with
such reasonable terms and conditions as the Exchange Agent may impose to effect
an orderly exchange thereof in accordance with normal exchange practices. After
the Effective Time, there will be no further transfer on the records of the
Company or its transfer agent of certificates representing shares of Bertucci's
Common Stock which have been converted, in whole or in part, pursuant to the
Merger Agreement into the right to receive cash, and if such certificates are
presented to the Company for transfer, they will be canceled against delivery of
cash. Until surrendered as contemplated by the Merger Agreement, each
certificate for shares of Bertucci's Common Stock will be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the consideration contemplated by the Merger Agreement. No interest
will be paid or will accrue on any cash payable as consideration in the Merger.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, the Company has agreed to carry on its
business and that of its subsidiaries prior to the Effective Time in the usual,
regular and ordinary course of business consistent with past practice. See
"CERTAIN PROVISIONS OF THE MERGER AGREEMENT--Certain Pre-Closing Covenants."
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The obligation of the Company and Ten Ideas to consummate the Merger are
subject to various conditions, including, without limitation, obtaining
requisite stockholder approval, the termination or expiration of the relevant
waiting period under the HSR Act and the absence of any injunction or other
legal restraint or prohibition preventing the consummation of the Merger. The
Federal Trade Commission has advised the Company and Ten Ideas that the Merger
is not a reportable event under the HSR Act. See "CERTAIN PROVISIONS OF THE
MERGER AGREEMENT--Conditions to the Consummation of the Merger."
36
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
The receipt of cash by a Stockholder pursuant to the Merger will be treated
as a sale of stock generating capital gain equal to the cash received less the
stockholder's basis in the stock sold. Bertucci's may, in certain circumstances,
be required to withhold tax from cash paid to stockholders.
THOUGH THE FOREGOING ARE THE MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
GENERALLY APPLICABLE TO THE MERGER, THE DISCUSSION DOES NOT ADDRESS EVERY
FEDERAL INCOME TAX CONCERN THAT MAY BE APPLICABLE TO A PARTICULAR STOCKHOLDER.
EACH STOCKHOLDER IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISOR TO
DETERMINE THE TAX CONSEQUENCES TO SUCH STOCKHOLDER, IN THE LIGHT OF SUCH
STOCKHOLDER'S PARTICULAR CIRCUMSTANCES, OF THE DISPOSITION OF BERTUCCI'S COMMON
STOCK PURSUANT TO THE MERGER.
ANTICIPATED ACCOUNTING TREATMENT
The Company intends that the Merger will be treated as a leveraged purchase
transaction. Accordingly, the continuing investors in the Company will account
for their investment at its historical cost basis.
EFFECT ON STOCK OPTIONS AND EMPLOYEE BENEFIT MATTERS
At the Effective Time (x) each stock option to purchase shares of Bertucci's
Common Stock ("Company Stock Options") granted under the Company's 1989
Time-Accelerated Restricted Stock Option Plan, the 1993 Stock Option Plan for
Non-Employee Directors and 1997 Stock Option Plan (collectively, the "1989, 1993
and 1997 Stock Option Plans") outstanding immediately prior to the Effective
Time will vest, in accordance with the terms of such plans, as a consequence of
the Merger and (y) each such Company Stock Option will be canceled in exchange
for a payment from the Company (subject to any applicable withholding taxes) of
an amount equal to the product of (1) the total number of shares of Bertucci's
Common Stock subject to such Company Stock Option and (2) the excess of $8.00
over the exercise price per share of Bertucci's Common Stock subject to such
Company Stock Option, payable in cash immediately following the Effective Time.
At the Effective Time, each unexercised and outstanding Company Stock Option
granted under the Company's 1987 Stock Option Plan (the "1987 Stock Option Plan"
and, together with the 1986 and 1993 Stock Option Plans, the "Stock Option
Plans") shall, to the extent exercisable, be canceled, in accordance with the
terms of such plan, in exchange for a payment from the Company after the Merger
(subject to any applicable withholding taxes) equal to the product of (1) the
total number of vested shares of Bertucci's Common Stock subject to such Company
Stock Option and (2) the excess of $8.00 over the exercise price per share of
Bertucci's Common Stock subject to such Company Stock Option, payable in cash
immediately following the Effective Time.
The aggregate cash payment to be made on account of the cancellation of
Company Stock Options as set forth above is approximately $1.0 million.
The Stock Option Plans and the Company's Employee Stock Purchase Plan will
terminate as of the Effective Time, and following the Effective Time no holder
of a Company Stock Option nor any participant in any Stock Option Plan will have
any right thereunder to acquire equity securities of the Company following the
Merger.
37
<PAGE>
NASDAQ DELISTING
Following the consummation of the Merger, the Company will seek to have the
Bertucci's Common Stock, which is currently traded on Nasdaq, delisted.
MERGER FINANCING
At the Effective Time, the Company, Ten Ideas and Acquisition are expected
to have entered into financing arrangements aggregating approximately $77.5
million, which will consist of both debt securities (the "Debt Securities") and
senior term and revolving credit facilities (collectively, the "Credit
Facilities"). It is anticipated that the full proceeds of the Debt Securities
and a portion of the proceeds available pursuant to the Credit Facilities would
be used to finance the conversion into cash of the shares of Bertucci's Common
Stock and stock options currently outstanding, and to refinance Bertucci's
outstanding indebtedness. In addition, the Credit Facilities would be used to
provide for Bertucci's working capital requirements at the time of and following
the Merger. On February 13, 1998, Acquisition received commitment letters to
provide such financing. The commitments are subject to customary conditions,
including the negotiation, execution and delivery of definitive documentation
with respect to the financings contemplated by the commitments.
Under the Credit Facility, BankBoston, N.A., Fleet National Bank and a
syndicate of other banks will provide the Company with $57.5 million senior
secured term and revolving credit facilities. Borrowings under the Credit
Facilities would bear interest at a margin over BankBoston, N.A.'s base rate or
the Eurodollar rate.
The Credit Facilities would mature in June, 2003, except for a $15 million
term loan that would mature in June, 2004. The obligations of the Company under
the Credit Facilities would be secured by substantially all of the Company's
assets and the stock of the Company's subsidiaries and the proceeds of the
foregoing.
The Company plans to issue $20 million original principal amount of Debt
Securities, with an interest rate of 11.0% per annum. The Debt Securities will
have a maturity of seven years from the date of issue. The Debt Securities will
be general unsecured obligations of the Company, ranking senior to all existing
and future subordinated indebtedness of the Company and pari passu in right of
payment with all other existing and future unsubordinated indebtedness of the
Company, but junior in right of payment to the Credit Facilities. The purchasers
of the Debt Securities are also expected to receive certain warrants to acquire
common stock of Ten Ideas.
The definitive agreements for the financing to be provided under the
commitment letters have not been reached. Accordingly, not all of the terms of
the financing have been finalized, and the provisions described herein may
change materially as a result of the negotiation of definitive agreements. It is
a condition to the financing that definitive agreements be entered into. In
addition, it is anticipated that the obligation of the lenders to provide
financing will be subject to the satisfaction of certain other conditions,
including among others, the satisfaction of all conditions precedent to the
Merger.
The definitive agreements for the financing are also expected to contain
numerous restrictive covenants, including covenants related to capital
expenditures, mergers and asset sales or purchases, incurrence of debt
obligations, liens and contingent obligations, termination, name changes,
transactions with affiliates, distributions and dividends and use of proceeds.
The definitive agreements also are expected to contain standard event of default
provisions, including, among other things, payment defaults,
38
<PAGE>
misrepresentations, covenant defaults, and other material contracts,
cross-defaults into other material indebtedness, failure to have perfected liens
of purported priority, bankruptcy events, adverse judgments, and changes of
control.
FEES AND EXPENSES
The aggregate fees and expenses paid and estimated to be paid by Ten Ideas
and Bertucci's in connection with the Merger, the Financing and related
transactions are as follows:
<TABLE>
<S> <C>
Financing Fees $2,450,000
Investment Banking and Financial Advisory $1,665,000
Legal and Accounting $ 500,000
Printing and Distribution $ 100,000
SEC Filings $ 12,000
Miscellaneous $ 73,000
---------
TOTAL $4,800,000
---------
</TABLE>
To the extent not paid prior to the Effective time by Ten Ideas or
Bertucci's, all such fees and expenses will be paid by the company surviving the
Merger if the Merger is consummated. If the Merger is not consummated, each
party will bear its respective fees and expenses, except as provided in the
Merger Agreement, See "THE MERGER--Fees and Expenses."
BERTUCCI'S CAPITAL STOCK
Bertucci's is authorized by its Restated Articles of Organization to issue
an aggregate of 15,000,000 shares of Common Stock, par value $.005 per share and
200,000 shares of Preferred Stock, par value $.01 per share. The following is a
summary of certain of the rights and privileges pertaining to Bertucci's capital
stock. For a full description of Bertucci's capital stock, reference is made to
the Company's Restated Articles of Organization, a copy of which is on file with
the Commission.
BERTUCCI'S COMMON STOCK
The holders of Bertucci's Common Stock are entitled to one vote per share on
all matters submitted for action by the stockholders. Stockholders holding in
excess of two-thirds in interest of the shares of Bertucci's Common Stock can,
if they elect to do so, approve the Merger. There is no provision for cumulative
voting with respect to the election of directors. Accordingly, the holders of
more than 50% of the shares of Bertucci's Common Stock can, if they choose to do
so, elect all of the directors. In such event, the holders of the remaining
shares will not be able to elect any directors.
Subject to the rights of any holders of outstanding Preferred Stock, all
shares of Bertucci's Common Stock are entitled to share in such dividends as the
Board of Directors may from time to time declare from sources legally available
therefor.
Subject to the rights of any holders of outstanding Preferred Stock, upon
liquidation or dissolution of the Company, whether voluntary or involuntary, all
shares of Bertucci's Common Stock are entitled to share equally in the assets
available for distribution to stockholders after payment of all prior
obligations of the Company.
39
<PAGE>
BERTUCCI'S PREFERRED STOCK
The Board of Directors is also empowered under the Company's Restated
Articles of Organization and without further stockholder action to divide any
and all shares of the Preferred Stock into series and to fix and determine the
relative fights and preferences of the shares of any series so established. The
issuance of Preferred Stock by the Board of Directors could affect the rights of
holders of shares of Common Stock. For example, issuance of the Preferred Stock
could result in a class of securities outstanding that will have certain
preferences with respect to dividends and in liquidation over the Common Stock,
and may enjoy certain voting rights, contingent or otherwise, in addition to
that of the Common Stock, and could result in the dilution of the voting rights,
net income per share and net book value of the Common Stock.
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement which appears as ANNEX I to this Proxy Statement and is incorporated
herein by reference. Such summary is qualified in its entirety by reference to
the Merger Agreement.
THE MERGER
The Merger Agreement provides that, following the approval of the Merger and
the adoption of the Merger Agreement by the affirmative vote of the holders of
two-thirds of the outstanding shares of Bertucci's Common Stock entitled to vote
thereon and the satisfaction or waiver of the other conditions to the Merger,
Acquisition will be merged with and into the Company, and the Company will
continue as the surviving corporation in the Merger.
If the conditions to the Merger are satisfied or waived, the parties will
file with the Secretary of State of The Commonwealth of Massachusetts a duly
executed Articles of Merger, and the Merger will become effective upon the
filing and acceptance thereof or at such other time as is provided in the
Certificate of Merger in accordance with the MGL and as Ten Ideas and the
Company agree.
Each share of Bertucci's Common Stock outstanding at the Effective Time
(other than shares of Bertucci's Common Stock held by Bertucci's or any wholly
owned subsidiary thereof and Dissenting Shares) will be entitled to the Cash
Price as more fully described under "THE MERGER--Merger Consideration."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties of
the Company relating, with respect to the Company and its subsidiaries, to,
among other things, (a) organization, standing and similar corporate matters;
(b) subsidiaries; (c) the Company's capital structure; (d) the authorization,
execution, delivery, performance and enforceability of the Merger Agreement and
related matters; (e) documents filed by the Company with the Commission, the
accuracy of information contained therein; (f) the absence of undisclosed
liabilities; (g) the accuracy of information supplied by the Company in
connection with this Proxy Statement; (h) the absence of certain changes or
events since the date of the most recent financial statements filed with the
Commission, including material adverse changes with respect to the Company; (i)
the absence of pending or threatened material litigation; (j) brokers's fees and
expenses; (k) the receipt of an oral opinion, confirmed in writing, of NMS; (l)
the recommendation of the Board of Directors of the Company with respect to the
Merger Agreement, the Merger and related
40
<PAGE>
transactions; and (m) the lack of any provisions in the Company's organizational
documents restricting the Company from entering into the Merger Agreement and
the transactions contemplated thereunder.
The Merger Agreement contains customary representations and warranties of
Ten Ideas and Acquisition relating to among other things, (a) organization,
standing and similar corporate matters; (b) Ten Ideas's and Acquisition's
capital structure; (c) the authorization, execution, delivery, performance and
enforceability of the Merger Agreement and related matters; (d) broker's fees
and expenses; (e) financing; and (f) the accuracy of information supplied by Ten
Ideas and Acquisition in connection with this Proxy Statement.
CERTAIN PRE-CLOSING COVENANTS
Pursuant to the Merger Agreement, the Company has agreed, until the
Effective Time (except as otherwise specifically required by the terms of the
Merger Agreement), that it will, and will cause each subsidiary, to operate its
business in the ordinary course of business. Without limiting the generality of
the foregoing, until the Effective Time, the Company has agreed that it will
not, and will not permit any of its subsidiaries, without the prior consent of
Ten Ideas to, (i) (x) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property) in respect of, any of
the Company's outstanding capital stock, (y) split, combine or reclassify any of
its outstanding capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
outstanding capital stock, or (z) purchase, redeem or otherwise acquire any
shares of outstanding capital stock or any rights, warrants or options to
acquire any such shares; (ii) issue, sell, grant, pledge or otherwise encumber
any shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities, except for the issuance of
shares of Common Stock upon exercise of Company Stock Options outstanding prior
to the date of the Merger Agreement, or take any action that would make the
Company's representations and warranties set forth in the Merger Agreement not
true and correct in all material respects; (iii) amend its Restated Articles of
Organization or Restated By-laws or the comparable charter or organizational
documents of any Subsidiary; (iv) acquire any business or any corporation,
partnership, joint venture, association or other business organization or
division thereof (or any interest therein), or form any subsidiaries; (v) sell
or otherwise dispose of any of its substantial assets, except in the ordinary
course of business; (vi) make any capital expenditures, enter into leases or
agreements for new locations, or make other commitments with respect thereto,
except capital expenditures, leases, agreements or commitments (A) disclosed in
the Merger Agreement, or (B) not exceeding $100,000 in the aggregate as the
Company may, in its discretion, deem appropriate; (vii) (x) incur any
indebtedness for borrowed money or guaranty any such indebtedness of another
person, other than (A) borrowings in the ordinary course under existing lines of
credit (or under any refinancing of such existing lines), (B) indebtedness owing
to, or guaranties of indebtedness owing to, the Company or (C) in connection
with the financing of the Merger, or (y) make any loans or advances to any other
person, other than routine advances to employees; (viii) grant or agree to grant
to any employee any increase in wages or bonus, severance, profit sharing,
retirement, deferred compensation, insurance or other compensation or benefits,
or establish any new compensation or benefit plans or arrangements, or amend or
agree to amend any existing Company employee benefit plans, except as may be
required under existing agreements or in the ordinary course of business
consistent with past practices; (ix) merge, amalgamate or consolidate with any
other person or entity in any transaction, sell all or substantially all of its
business or assets, or acquire all or substantially all of the business or
assets of any other person or entity; (x) enter into or amend any employment,
consulting, severance or similar agreement with any person; (xi) change its
accounting policies in any
41
<PAGE>
material respect, except as required by generally accepted accounting
principles; or (xii) commit or agree to take any of the foregoing actions.
NO SOLICITATION OF ALTERNATIVE TRANSACTIONS
The Merger Agreement provides that neither the Company nor any of its
subsidiaries (nor any of their respective officers, directors, employees,
representatives, agents or other affiliates), will directly or indirectly, (i)
solicit, initiate or knowingly encourage the submission of any Acquisition
Proposal (as defined below) or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any non-public information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; PROVIDED, HOWEVER, that the foregoing shall not prohibit
the Board of Directors of the Company (or, if applicable, the duly appointed
Special Committee thereof) from: (A) furnishing information to, or entering into
discussions or negotiations with, any person in connection with an unsolicited
bona fide Acquisition Proposal by such person if, and to the extent that, the
Board of Directors of the Company (or the Special Committee thereof), after
consultation with independent legal counsel (who may be the Company's regularly
engaged independent counsel), determines in good faith that such action is
required for the Board of Directors of the Company to comply with its fiduciary
obligations to stockholders under applicable law; (B) withdrawing or modifying
its recommendation referred to in the Merger Agreement following receipt of a
bona fide unsolicited Acquisition Proposal if the Board of Directors of the
Company (or the Special Committee), after consultation with independent legal
counsel (who may be the Company's regularly engaged independent counsel),
determines in good faith that such action is necessary for the Board of
Directors of the Company to comply with its fiduciary duties to stockholders
under applicable law; or (C) making to the Company's stockholders any
recommendation and related filing with the Commission as required by Rule 14e-2
and 14d-9 under the Exchange Act, with respect to any tender offer, or taking
any other legally required action (including, without limitation, the making of
public disclosures as may be necessary or advisable under applicable securities
laws); and provided further, however, that, in the event of an exercise of the
Company's or its Board of Director's (or the Special Committee's) rights under
clause (i), (ii) or (iii) above, notwithstanding anything contained in the
Merger Agreement to the contrary, such failure shall not constitute a breach of
the Merger Agreement by the Company. The Company has agreed to provide immediate
written notice to Ten Ideas of the receipt of any such Acquisition Proposal and
of the Company's intention to furnish information to, or enter into discussions
or negotiations with, such person or entity. As used in the Merger Agreement,
the term "Acquisition Proposal" means any proposal with respect to a merger,
consolidation, share exchange, tender offer or similar transaction involving the
Company, or any purchase or other acquisition of all or any significant portion
of the assets of the Company, or any equity interest in the Company, other than
the transactions contemplated hereby.
ARTICLES OF ORGANIZATION AND BYLAWS
The Company's Restated Articles of Organization and Amended and Restated
Bylaws shall be the Articles of Organization and Bylaws of the Surviving
Corporation.
BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY FOLLOWING THE MERGER
The Merger Agreement also provides that the directors and officers of
Acquisition at the Effective Time will be directors and officers of the Company
following the Merger, until the earlier of their
42
<PAGE>
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS
The treatment in the Merger of outstanding Company Stock Options and of the
Company's employee benefit plans will be as described in "THE MERGER--Effect on
Stock Options and Employee Benefit Matters."
ACCESS TO INFORMATION AND CONFIDENTIALITY
Subject to applicable provisions regarding confidentiality, the Company has
agreed in the Merger Agreement to provide to Ten Ideas complete access to the
Company's facilities, books and records and to cause its representatives to
cooperate fully with Ten Ideas and its representatives in connection with the
due diligence investigation of the Company and its business.
COMMERCIALLY REASONABLE EFFORTS
Pursuant to the Merger Agreement and subject to certain conditions and
limitations described therein, the parties have agreed to use commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective in
the most expeditious manner practicable, the Merger and the transactions
contemplated by the Merger Agreement.
INDEMNIFICATION AND INSURANCE
Under the Merger Agreement, the Company will indemnify each person who at
any time has been or becomes a director or officer prior to the Effective Time,
and his heirs and personal representatives, against any and all expenses
incurred in connection with any proceeding arising out of or pertaining to any
action or omission occurring prior to the Effective Time to the full extent
permitted under Massachusetts law and the Surviving Corporation's Restated
By-laws in effect as of the Effective Time or under any indemnification
agreement in effect as of the date of the Merger Agreement. Ten Ideas or the
Surviving Corporation will, for a period of not less than six years following
the Effective Time, maintain directors' and officers' liability insurance
covering each person presently covered by the Company's officers' and directors'
liability insurance or who will be so covered at the Effective Time with respect
to actions or omissions occurring prior to the Effective Time, on terms no less
favorable than such insurance maintained in effect by the Company as of the date
of the Merger Agreement in terms of coverage and amounts; provided, that the
Surviving Corporation will not be required to pay in the aggregate an annual
premium for directors' and officers' insurance in excess of 125% of the last
annual premium paid prior to the date of the Merger Agreement; provided that the
Surviving Corporation shall be obligated to provide as much coverage as may be
obtained for such amount.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The obligations of Ten Ideas and Acquisition to effect the Merger are
subject to various conditions which include, in addition to certain other
customary closing conditions, the following: (i) the Merger shall have been
adopted and approved by the affirmative vote of the holders of two-thirds of the
outstanding shares of Bertucci's Common Stock; (ii) all filings required to be
made prior to the Effective Time with,
43
<PAGE>
and all consents, approvals, permits and authorizations required to be obtained
prior to the Effective Time from, any third party or any governmental entities,
which, either individually or in the aggregate, if not obtained would have a
material adverse effect on the Company or would prevent consummation of the
Merger, shall have been made or obtained (as the case may be); (iii) no
temporary restraining order, judgment, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect; provided, however, the parties invoking this condition shall use their
best efforts to have any such order or injunction vacated; (iv) the
representations and warranties of the Company set forth in the Merger Agreement
that are qualified by materiality shall be true and correct and such
representations and warranties that are not so qualified shall be true and
correct in all material respect in each case as of the date of the Merger
Agreement and as of the closing date as though made on and as of the closing
date; (v) the Company shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement at or
prior to the closing date; (vi) on or prior to the Effective Time, Ten Ideas
and/or Acquisition shall have received the cash proceeds of the financing
contemplated by the Merger Agreement in amounts sufficient to consummate the
Merger; (vii) the number of shares of the Company common stock having exercised
appraisal rights shall constitute no greater than 10% of the total number of
shares of the Bertucci's Common Stock outstanding immediately prior to the
Effective Time, on a fully diluted basis; (viii) at or prior to the Effective
Time, Ten Ideas and/or Acquisition shall have received all of the necessary
consents and/or approvals of governmental entities and all third parties in
connection with the execution and delivery of the Merger Agreement and the
consummation of the Merger and the other transactions contemplated thereby,
unless the failure to obtain such consent and/or approval would not have a
material adverse effect on the Company or the financing; (ix) at or prior to the
Effective Time, the Company's Board of Directors shall not have withdrawn or
modified, in a manner adverse to Ten Ideas or Acquisition, its recommendation
pursuant to the Merger Agreement, and NMS shall not have withdrawn or modified,
in a manner adverse to Ten Ideas or Acquisition, its fairness opinion with
respect to the Merger; (x) there shall have occurred no event, occurrence, fact,
condition, change, damage, destruction, loss or other development that has
constituted or resulted in, or would reasonably be expected to constitute or
result in, a material adverse effect on the Company; and (xi) there shall not be
threatened, instituted or pending any action, proceeding, application or
counterclaim by any governmental entity or third party before any court or
governmental regulatory or administrative agency, authority or tribunal (A)
which if adversely determined would have a material adverse effect on the
Company after the Merger or the ability of Ten Ideas or Acquisition to perform
their obligations hereunder or in connection with the financing, or (B) which
challenges or seeks to challenge, restrain or prohibit the consummation of the
Merger.
The obligations of the Company to effect the Merger are subject to various
conditions including (i) the Merger shall have been adopted and approved by the
affirmative vote of the holders of two-thirds of the outstanding shares of
Bertucci's Common Stock; (ii) all filings required to be made prior to the
Effective Time with, and all consents, approvals, permits and authorizations
required to be obtained prior to the Effective Time from, any third party or any
governmental entities, which, either individually or in the aggregate, if not
obtained would have a material adverse effect on the Company or would prevent
consummation of the Merger, shall have been made or obtained (as the case may
be); (iii) no temporary restraining order, judgment, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger shall
be in effect; provided, however, the parties invoking this condition shall use
their best efforts to have any such order or injunction vacated; (iv) the
representations and warranties of Ten Ideas and Acquisition
44
<PAGE>
set forth in the Merger Agreement that are qualified by materiallity shall be
true and correct and such representations and warranties of Ten Ideas and
Acquisition that are not so qualified shall be true and correct in all material
respects in each case as of the date of the Merger Agreement and as of the
closing date as though made on and as of the closing date; (v) Ten Ideas and
Acquisition shall have performed in all material respects all obligations
required to be performed by them under the Merger Agreement at or prior to the
Closing Date; (vi) there shall not be threatened, instituted or pending any
action, proceeding, application or counterclaim by any governmental entity or
third party before any court or governmental regulatory or administrative
agency, authority or tribunal (A) which if adversely determined would have a
material adverse effect on the ability of the Company to perform its obligations
under the Merger Agreement or (B) which challenges or seeks to challenge,
restrain or prohibit the consummation of the Merger. and (vii) at or prior to
the Effective Time, NMS shall not have withdrawn its fairness opinion.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the Merger by the stockholders: (a) by
mutual written consent of Ten Ideas and the Company; or (b) by either Ten Ideas
or the Company: (i) if, upon a vote at the Special Meeting, or any adjournment
thereof, the adoption and approval of the Merger Agreement and the Merger by the
stockholders of the Company required by Massachusetts law, the Company's
Restated Articles of Organization or the terms of the Merger Agreement shall not
have been obtained; or (ii) if the Merger shall not have been consummated on or
before July 31, 1998, provided that the failure to consummate the Merger is not
attributable to the failure of the terminating party to fulfill its obligations
pursuant to the Merger Agreement; or (iii) if any governmental entity shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable; or (c)
by the Company, if the Board of Directors of the Company shall have approved an
Acquisition Proposal after determining, after consultation with independent
legal counsel (who may be the Company's regularly engaged independent counsel),
that such approval is necessary in the exercise of its fiduciary obligations
under applicable law; or (d) by Ten Ideas, if the Board of Directors of the
Company shall have approved an Acquisition Proposal or withdrawn or modified, in
a manner adverse to Ten Ideas or Acquisition, the Board of Director's
recommendation pursuant to the Merger Agreement; or (e) by Ten Ideas, if any of
the specified conditions set forth in the Merger Agreement shall have become
incapable of fulfillment, and shall not have been waived by Ten Ideas, or if the
Company shall breach in any material respect any of its representations,
warranties or obligations hereunder and such breach shall not have been cured in
all material respects or waived and the Company shall not have provided
reasonable assurance that such breach will be cured in all material respects on
or before the Closing Date, but only if such breach, singly or together with all
other such breaches, constitutes a failure of the specified conditions contained
in the Merger Agreement as of the date of such termination; or (f) by the
Company, if any of the specified conditions set forth in the Merger Agreement
shall have become incapable of fulfillment, and shall not have been waived by
the Company, or if Ten Ideas or Acquisition shall breach in any material respect
any of their respective representations, warranties or obligations hereunder and
such breach shall not have been cured in all material respects or waived and Ten
Ideas or Acquisition, as the case may be, shall not have provided reasonable
assurance that such breach will be cured in all material respects on or before
the Closing Date, but only if such breach, singly or together with all other
such breaches, constitutes a failure of the specified conditions contained in
the Merger Agreement as of the date of such termination; provided, however, that
45
<PAGE>
the party seeking termination pursuant to the Merger Agreement is not in breach
of any of its material representations, warranties, covenants or agreements
contained in the Merger Agreement.
In the event of termination of the Merger Agreement, the Merger Agreement
will become void and will have no effect, without any liability or obligation on
the part of the Company, Ten Ideas or Acquisition, other than under certain
specified provisions of the Merger Agreement relating to payment of fees and
expenses, as described in more detail below, fees and expenses, confidentiality
agreements and the effect of termination of the Merger Agreement.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties at any time before or
after any required approval of matters presented in connection with the Merger
by the stockholders of the Company; provided, that after any such approval,
there shall be made no amendment which reduces the consideration payable in the
Merger or adversely affects the rights of the Company's stockholders without the
approval by such stockholders. Consent of the Company to such amendment or
waiver must include consent of the Special Committee. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the parties, (b) waive any inaccuracies in
the representations and warranties in the Merger Agreement or any document
delivered pursuant thereto, or (c) subject to the approval of stockholders
required by law, waive compliance with any of the agreements or conditions of
the other parties contained in the Merger Agreement. The failure of the Company
or Ten Ideas to assert any of its rights under the Merger Agreement will not
constitute a waiver of such rights.
EXPENSES AND CERTAIN REQUIRED PAYMENTS
In the event of a termination of the Merger Agreement, (a) by the Company,
if the Board of Directors of the Company shall have approved an Acquisition
Proposal after determining, after consultation with independent legal counsel
(who may be the Company's regularly engaged independent counsel), that such
approval is necessary in the exercise of its fiduciary obligations under
applicable law; or (b) by Ten Ideas, if the Board of Directors of the Company
shall have approved an acquisition proposal or withdrawn or modified, in a
manner adverse to Ten Ideas or Acquisition, the Board of Director's
recommendation pursuant to the Merger Agreement; or (c) by Ten Ideas, if as a
result of a willful breach by the Company any of the conditions set forth in the
Merger Agreement shall have become incapable of fulfillment, and shall not have
been waived by Ten Ideas, or if the Company shall breach in any material respect
any of its representations, warranties or obligations under the Merger Agreement
and such breach shall not have been cured in all material respects or waived and
the Company shall not have provided reasonable assurance that such breach will
be cured in all material respects on or before the Closing Date, but only if
such breach, singly or together with all other such breaches, constitutes a
failure of the conditions contained in the Merger Agreement as of the date of
such termination; or (d) by the Company as a result of the withdrawal or
modification of the fairness opinion of NMS, the Company shall promptly after
such event pay to the Ten Ideas in cash an amount equal to the aggregate
out-of-pocket costs and reasonable expenses of Ten Ideas in connection with the
Merger up to an aggregate amount not to exceed $750,000, including, without
limitation, commitment, appraisal and other fees relating to the financing and
the reasonable fees and disbursements of accountants, attorneys and investment
bankers, whether retained by Parent or by any other person. Furthermore, if the
Merger Agreement is terminated pursuant to clauses (a) and (b) above, pursuant
to clause (c) above in the event of a willful breach by the Company or pursuant
46
<PAGE>
to clauses (c) or (d) above as a result of the withdrawal or modification of the
fairness opinion of NMS, the Company shall also pay to Ten Ideas a termination
fee of $1,500,000.
Except as otherwise provided above, all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such expenses, except the parties will bear
equally, the costs of any applicable HSR filing fee and that the Company will
pay all costs and expenses (x) in connection with printing and mailing the Proxy
Statement, as well as all SEC filing fees relating to the transactions
contemplated therein and (y) of obtaining any consents of any third party.
47
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the beneficial
ownership of Bertucci's Common Stock (i) by each stockholder who is known by the
Company to own beneficially in excess of 5% of the outstanding Common Stock,
(ii) by each director, and (iii) by all officers and directors as a group, as of
March 15, 1998. Except as otherwise indicated, all persons listed below have (i)
sole voting power and investment power with respect to their shares of Common
Stock, except to the extent that authority is shared by spouses under applicable
law, and (ii) record and beneficial ownership with respect to their shares of
Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNER** OF BENEFICIAL PERCENT OF
AND NAME OF DIRECTOR TITLE OF CLASS OWNERSHIP CLASS
- ---------------------------------------------------------------- ----------------- ------------------ -----------
<S> <C> <C> <C>
Joseph Crugnale................................................. Common Stock 2,177,710(1) 24.4%
E. Bulkeley Griswold............................................ Common Stock 15,000(2) *
Robert L. Lestina, Jr........................................... Common Stock 11,000(3) *
James Westra.................................................... Common Stock 12,499(4) *
Allan J. Steinmetz.............................................. Common Stock 8,000(5) *
Theodore R. Barber.............................................. Common Stock 10,600(6) *
Norman S. Mallett............................................... Common Stock 80,500(7) *
All Directors and officers as a group (9 persons)............... Common Stock 2,331,987(8) 26.2%
</TABLE>
- ------------------------
* Less than 1.0%
** Unless otherwise specified, the beneficial owner's address is c/o
Bertucci's.
(1) Of such shares, 2,938 shares are held in trusts for the benefit of Mr.
Crugnale's minor children.
(2) Of such shares, 8,000 are purchasable by Mr. Griswold under options
presently exercisable or exercisable within sixty days of March 15, 1998,
and 7,000 are held by Mr. Griswold's 401(k) plan.
(3) Of such shares, 8,000 are purchasable by Mr. Lestina under options presently
exercisable or exercisable within sixty days of March 15, 1998. In addition,
Mr. Lestina holds 3,000 of such shares jointly with his wife.
(4) Of such shares, 2,600 shares are held in the Hutchins, Wheeler & Dittmar
Profit Sharing Trust, in which Mr. Westra has a beneficial interest, 8,000
are purchasable by Mr. Westra under options presently exercisable or
exercisable within sixty days of March 15, 1998, and 1,899 shares are held
by Mr. Westra's wife. Mr. Westra disclaims beneficial ownership of the
shares held by his wife.
(5) All of these shares are purchasable under options presently exercisable or
exercisable within sixty days of March 15, 1998.
(6) Of such shares, 9,600 are purchasable under options presently exercisable or
exercisable within sixty days of March 15, 1998.
(7) Of such shares, 27,500 shares are purchasable by Mr. Mallett under options
presently exercisable.
(8) Included in this figure are 85,100 shares purchasable by certain officers
and Directors under options presently exercisable or exercisable with sixty
days of March 15, 1998.
48
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The data for fiscal years ended 1993 through 1997 are derived from audited
financial statements of the Company. Selected consolidated financial data should
be read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Consolidated Financial Statements
and the Notes thereto included the Company's Form 10-K and incorporated by
reference in this Proxy Statement. Historical results are not necessarily
indicative of results to be expected in the future.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------------------------------------------
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
25, 27, 30, 28, 27,
1993 1994 1995 1996 1997
(52 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS)
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales....................... $ 74,625 $ 102,797 $ 120,260 $ 128,044 $ 136,720
Cost and expenses:
Cost of sales................. 19,368 26,039 31,060 32,484 34,102
Operating expenses............ 33,778 48,804 60,673 65,986 71,652
General and administrative
expenses.................... 4,918 6,566 8,239 7,720 8,828
Depreciation and
amortization................ 4,840 7,327 9,083 8,781 8,626
Taxes other than income....... 3,530 5,106 6,268 6,633 6,990
Restaurant closing expense.... -- -- 5,336 -- --
----------- ----------- ----------- ----------- -----------
Total costs and expenses.... 66,434 93,842 120,659 121,604 130,198
----------- ----------- ----------- ----------- -----------
Operating income (loss)..... 8,191 8,955 (399) 6,440 6,522
Interest expense, net........... 82 155 1,253 1,297 1,037
Interest income................. 657 33 21 15 32
----------- ----------- ----------- ----------- -----------
Income (loss) before income
tax expense (benefit)....... 8,766 8,833 (1,631) 5,158 5,517
Income tax expense (benefit).... 3,127 3,223 (745) 1,933 2,009
----------- ----------- ----------- ----------- -----------
Net income (loss)............. $ 5,639 $ 5,610 $ (886) $ 3,225 $ 3,508
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Earnings (loss) per common
share--basic.................. $ 0.66 $ 0.64 $ (0.10) $ 0.37 $ 0.40
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Earnings (loss) per common
share--diluted................ $ 0.63 $ 0.63 $ (0.10) $ 0.36 $ 0.39
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
BALANCE SHEET DATA:
Working capital (deficit)....... $ (3,973) $ (5,738) $ (5,258) $ (2,857) $ (3,740)
Total assets.................... 70,181 93,114 98,938 102,528 105,516
Long-term debt, including
current portion............... -- 14,000 19,438 18,438 13,500
Shareholders' equity............ 58,804 64,846 64,092 67,538 71,371
</TABLE>
49
<PAGE>
MARKET PRICES AND DIVIDENDS ON THE SHARES
Bertucci's Common Stock commenced trading on the Nasdaq National Market
(ticker symbol BERT) on June 28, 1991. Prior to June 28, 1991, there was no
market for Bertucci's Common Stock. On February 13, 1998, the last trading day
before the public announcement of the proposal, the reported closing price per
Share was $6.00. On , 1998, the last full trading day prior to the date of
this Proxy Statement, the reported closing sale price per Share was $ .
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT PRICE QUOTATION FOR THE COMMON STOCK.
The Company has not paid any cash dividends on its Common Stock and does not
intend to pay cash dividends on its Common Stock for the foreseeable future. The
Company intends to retain future earnings to finance further development.
The following table sets forth, for the fiscal quarters indicated, the high
and low closing sales prices per Share, as quoted on the Nasdaq National Market
before .
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED HIGH LOW
---------------------- --------- ---------
<S> <C> <C> <C>
1996
First Quarter.................... April 20, 1996 $ 6.000 $ 4.500
Second Quarter................... July 13, 1996 $ 7.250 $ 4.875
Third Quarter.................... October 5, 1996 $ 5.375 $ 4.250
Fourth Quarter................... December 28, 1996 $ 6.125 $ 4.500
1997
First Quarter.................... April 19, 1997 $ 6.625 $ 5.000
Second Quarter................... July 19, 1997 $ 7.063 $ 5.125
Third Quarter.................... October 4, 1997 $ 7.000 $ 5.375
Fourth Quarter................... December 27, 1997 $ 6.813 $ 5.750
1998 through March 15, 1998...... $ 7.938 $ 6.000
</TABLE>
50
<PAGE>
CERTAIN TRANSACTIONS IN THE COMMON STOCK
Except as set forth above, there were no transactions in the Shares that
were effected during the past 60 days by (i) the Company, (ii) any director or
executive officer of the Company, (iii) any persons controlling the Company or
(iv) any director or executive officer of the persons ultimately in control of
the Company, Ten Ideas or Acquisition.
APPRAISAL RIGHTS
Under the MGL, Stockholders of the Company will have certain dissenters'
rights of appraisal. If the Merger is approved by the stockholders at the
Meeting and the Merger is effected, any stockholder (i) who files with the
Company before the taking of the vote on the Merger, written objection to the
proposed action stating that such stockholder intends to demand payment for such
stockholder's shares if the action is taken and (ii) whose shares are not voted
in favor of such action has or may have the right to demand in writing from the
Company, within twenty days after the date of mailing to such stockholder of
notice in writing that the corporate action has become effective, payment for
such stockholder's shares and an appraisal of the value thereof, the Company and
any such stockholder shall in such case have the rights and duties and shall
follow the procedure set forth in sections 86 to 98, inclusive, of the MGL.
Failure to vote against the Merger will constitute a waiver of the rights set
forth in ANNEX III filed herewith. Except as set forth herein, stockholders of
the Company will not be entitled to appraisal rights in connection with the
Merger.
EXPERTS
Representatives of Arthur Andersen LLP are expected to be present at the
Special Meeting, where they will have the opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions.
51
<PAGE>
OTHER INFORMATION AND STOCKHOLDER PROPOSALS
Management of the Company knows of no other matters that may properly be, or
which are likely to be, brought before the Special Meeting. However, if any
other matters are properly brought before such Special Meeting, the persons
named in the enclosed Proxy or their substitutes will vote the Proxies in
accordance with their judgment with respect to such matters.
By Order of the Board of Directors
/S/ JAMES WESTRA
James Westra, Clerk
52
<PAGE>
Exhibit (d)(4)
BERTUCCI'S, INC.
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS ON _____________, 1998
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, having received the Notice of Special Meeting of
Stockholders and Proxy Statement of Bertucci's, Inc. (the "Company"), hereby
appoint(s) _________________ and ___________________, or either of them,
proxies for the undersigned, with full power of substitution in each of them,
to represent the undersigned at the Special Meeting of Stockholders of the
Company to be held at the Company's corporate headquarters located at 14
Audubon Road, Wakefield, Massachusetts at 9:00 a.m. on ______________, 1998,
and at any adjournment or postponement thereof, and thereat to vote and act
in regard to all matters which may properly come before said meeting (except
those matters as to which authority is hereinafter withheld) upon and in
respect of all shares of Common Stock of the Company upon or in respect of
which the undersigned would be entitled to vote or act and with all powers
the undersigned would possess, if personally present, and especially (but
without limiting the general authorization and power hereby given) to vote
and act as indicated on the reverse.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER. IF NO INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1.
The undersigned hereby confer(s) upon said proxies, and each of them,
discretionary authority to vote upon any other matters or proposals not
known at the time of solicitation of this proxy which may properly come
before the meeting.
Attendance of the undersigned at said meeting or at any adjournment or
postponement thereof will not be deemed to revoke this proxy unless the
undersigned shall affirmatively indicate thereat his or her intention to vote
said shares in person. If a fiduciary capacity is attributed to the
undersigned hereon, this proxy will be deemed signed by the undersigned in
that capacity.
PLEASE VOTE, DATE, SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------ --------------------------
- ------------------------ --------------------------
- ------------------------ --------------------------
<PAGE>
<TABLE>
<S> <C>
/X/ PLEASE MARK VOTES 1. To consider and vote upon a proposal to approve and For Against Abstain
AS IN THIS EXAMPLE adopt the Agreement and Plan of Merger, dated as of [ ] [ ] [ ]
February 13, 1998, among Bertucci's, Ten Ideas, Inc.,
a Delaware corporation ("Ten Ideas"), and Ten Ideas
- ---------------------- Acquisition Corp., a Massachusetts corporation ("Acquisition"),
pursuant to which each share of Bertucci's Common Stock,
BERTUCCI'S, INC. $0.005 par value per share ("Bertucci's Common Stock") (other
than (i) shares of Bertucci's Common Stock held by Bertucci's or
- ---------------------- any wholly-owned subsidiary thereof, which will be canceled and
retired, (ii) shares of Bertucci's Common Stock which will be
RECORD DATE SHARES: contributed to Ten Ideas by Joseph Crugnale, and (iii) shares
of Bertucci's Common Stock owned by any stockholder who has
duly perfected his or her appraisal rights pursuant to applicable
Massachusetts law), will be converted into the right to receive
$8.00 in cash. A copy of the Merger Agreement is attached as ANNEX
I to the accompanying Proxy Statement.
2. To transact such other and further business as may properly
come before the Special Meeting or any adjournments or
postponements thereof.
Please be sure to sign and date this Proxy. Date
-----------------------------------------------------------
Shareholder sign here Co-owner sign here
------------------------------------------------------------
Mark the box at right if an address change or comment has been / /
noted on the reverse side of this card.
</TABLE>
<PAGE>
Exhibit (d)(5)
BERTUCCI'S INC. ENTERS INTO MERGER AGREEMENT
WAKEFIELD, Mass.--Feb. 13, 1998--Bertucci's, Inc. (NASDAQ:BERT) announced
today that the company has entered into a definitive merger agreement with a
group led by Bertucci's Founder, President, and Chief Executive Officer,
Joseph Crugnale. Pursuant to the transaction, the group will acquire all of
the outstanding shares of Bertucci's common stock (other than stock currently
owned by Mr. Crugnale) for a purchase price of $8.00 per share in cash, a
premium of approximately 30% over the current stock price. The company said
the group has obtained financing commitments from BancBoston Securities Inc.,
BankBoston, N.A. and Fleet National Bank to finance the acquisition.
The company formed a Special Committee of independent directors to
evaluate and consider the offer. The Special Committee engaged NationsBanc
Montgomery Securities LLC as its financial advisor in connection with the
transaction. The proposed merger is subject to approval by the stockholders
of Berutcci's and other necessary regulatory authorities and customary
closing conditions.
In making the announcement, the Special Committee stated that the
transaction provides an opportunity to enhance shareholder value without
disruption to Bertucci's operations, especially with Joey Crugnale's
continued interest in and commitment to the company. In announcing the
proposed merger, Mr. Crugnale stated, "We are pleased that the proposed
merger will afford our stockholders an opportunity to realize a substantial
premium over the current price." Mr. Crugnale also informed the Special
Committee that he has no current intention to sell his interest in the
company.
Under separate cover today, Bertucci's also announced its results of
operations for the fourth quarter and full fiscal year ended December 27,
1997.
Bertucci's, Inc. operates a chain of 85 full-service casual dining
Italian restaurants under the name "Bertucci's Brick-Oven Pizzeria" featuring
original gourmet pizza, prepared in brick ovens, and other high-quality
Italian food.
CONTACT: Bertucci's Inc.
Norman S. Mallett, 781/246-6700
<PAGE>
EXHIBIT (e)
SECTIONS 86 TO 98 OF MASSACHUSETTS BUSINESS CORPORATION LAW
86 RIGHT OF APPRAISAL. If a corporation proposes to take a corporate action
as to which any section of this chapter provides that a stockholder who objects
to such action shall have the right to demand payment for his shares and an
appraisal thereof, sections eighty-seven to ninety-eight, inclusive, shall apply
except as otherwise specifically provided in any section of this chapter. Except
as provided in sections eighty-two and eighty-three, no stockholder shall have
such right unless (1) he files with the corporation before the taking of the
vote of the shareholders on such corporate action, written objection to the
proposed action stating that he intends to demand payment for his shares if the
action is taken and (2) his shares are not voted in favor of the proposed
action.
87 NOTICE OF STOCKHOLDERS MEETING TO CONTAIN STATEMENT AS TO APPRAISAL
RIGHTS. The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the
meeting and effected by the corporation, any stockholder (1) who
files with the corporation before the taking of the vote on the
approval of such action, written objection to the proposed action
stating that he intends to demand payment for his shares if the
action is taken and (2) whose shares are not voted in favor of
such action has or may have the right to demand in writing from
the corporation (or, in the case of a consolidation or merger, the
name of the resulting or surviving corporation shall be inserted),
within twenty days after the date of mailing to him of notice in
writing that the corporate action has become effective, payment
for his shares and an appraisal of the value thereof. Such
corporation and any such stockholder shall in such cases have the
rights and duties and shall follow the procedure set forth in
sections 88 to 98, inclusive, of chapter 156B of the General Laws
of Massachusetts."
88 NOTICE TO OBJECTING STOCKHOLDER THAT CORPORATE ACTION HAS BECOME
EFFECTIVE. The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action approved at the meeting of the corporation of which he
is a stockholder has become effective. The giving of such notice shall not be
deemed to create any rights in any stockholder receiving the same to demand
payment for his stock. The notice shall be sent by registered or certified mail,
addressed to the stockholder at his last known address as it appears in the
records of the corporation.
89 DEMAND FOR PAYMENT BY OBJECTING STOCKHOLDER. If within twenty days after
the date of mailing a notice under subsection (e) of section eighty-two,
subsection (f) of section eighty-three, or section eighty-
III-1
<PAGE>
eight any stockholder to whom the corporation was required to give such notice
shall demand in writing from the corporation taking such action, or in the case
of a consolidation or merger from the resulting or surviving corporation,
payment for his stock, the corporation upon which such demand is made shall pay
to him the fair value of his stock within thirty days after the expiration of
the period during which such demand may be made.
90 DETERMINATION OF VALUE OF STOCK BY SUPERIOR COURT. If during the period
of thirty days provided for in section eighty-nine the corporation upon which
such demand is made and any such objecting stockholder fail to agree as to the
value of such stock, such corporation or any such stockholder may within four
months after the expiration of such thirty-day period demand a determination of
the value of the stock of all such objecting stockholders by a bill in equity
filed in the superior court in the county where the corporation in which such
objecting stockholder held stock had or has its principal office in the
commonwealth.
91 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS ON
FAILURE TO AGREE ON VALUE THEREOF, ETC.; PARTIES TO BILL ETC.; SERVICE OF BILL
ON CORPORATION; NOTICE TO STOCKHOLDER PARTIES, ETC. If the bill is filed by the
corporation, it shall name as parties respondent all stockholders who have
demanded payment for their shares and with whom the corporation has not reached
agreement as to the value thereof. If the bill is filed by a stockholder, he
shall bring the bill in his own behalf and in behalf of all other stockholders
who have demanded payment for their shares and with whom the corporation has not
reached agreement as to the value thereof, and service of the bill shall be made
upon the corporation by subpoena with a copy of the bill annexed. The
corporation shall file with its answer a duly verified list of all such other
stockholders, and such stockholders shall thereupon be deemed to have been added
as parties to the bill. The corporation shall give notice in such form and
returnable on such date as the court shall order to each stockholder party to
the bill by registered or certified mail, addressed to the last known address of
such stockholder as shown in the record of the corporation, and the court may
order such additional notice by publication or otherwise as it deems advisable.
Each stockholder who makes demand as provided in section eighty-nine shall be
deemed to have consented to the provisions of this section relating to notice,
and the giving of notice by the corporation to any such stockholder in
compliance with relating to notice, and the giving of notice by the corporation
to any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
92 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS ON
FAILURE TO AGREE ON VALUE THEREOF, ETC.; ENTRY OF DECREE DETERMINING VALUE OF
STOCK; DATE ON WHICH VALUE IS TO BE DETERMINED. After hearing the court shall
enter a decree determining the fair value of the stock of those stockholders who
have become entitled to the valuation of and payment for their shares, and shall
order the corporation who have become entitled to the valuation of and payment
for their shares, and shall order the corporation to make payment of such value,
together with interest, if any, as hereinafter provided, to the stockholders
entitled thereto upon the transfer by them to the corporation of the
certificates representing such stock if certificated or if uncertificated, upon
receipt of an instruction transferring such stock to the corporation. For this
purpose, the value of the shares shall be determined as of the day preceding the
date of the vote approving the proposed corporate action and shall be exclusive
of any element of value arising from the expectation or accomplishment of the
proposed corporate action.
III-2
<PAGE>
93 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS ON
FAILURE TO AGREE ON VALUE THEREOF, ETC.; COURT MAY REFER BILL, ETC., TO SPECIAL
MASTER TO HEAR PARTIES, ETC. The court in its discretion may refer the bill or
any question arising thereunder to a special master to hear the parties, make
findings and report the same to the court, all in accordance with the usual
practice in suits in equity in the superior court.
94 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS ON
FAILURE TO AGREE ON VALUE THEREOF, ETC.; STOCKHOLDER PARTIES MAY BE REQUIRED TO
SUBMIT THEIR STOCK CERTIFICATES FOR NOTATION THEREON ON PENDENCY OF BILL,
ETC. On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for notation thereon of the
pendency of the bill, and may order the corporation to note such pendency in its
records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
95 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS ON
FAILURE TO AGREE ON VALUE THEREOF, ETC.; TAXATION OF COSTS, ETC.; INTEREST ON
AWARD, ETC. The costs of the bill, including the reasonable compensation and
expenses of any master appointed by the court, but exclusive of fees of counsel
or of experts retained by any party, shall be determined by the court and taxed
upon the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
96 STOCKHOLDER DEMANDING PAYMENT FOR STOCK NOT ENTITLED TO NOTICE OF
STOCKHOLDERS' MEETINGS OR TO VOTE STOCK OR TO RECEIVE DIVIDENDS, ETC.;
EXCEPTIONS. Any stockholder who has demanded payment for his stock as provided
in this chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the corporation, or
in the case of a consolidation or merger, the resulting or surviving
corporation, deliver to it a written withdrawal of his objections to and
an acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
97 CERTAIN SHARES PAID FOR BY CORPORATION TO HAVE STATUS OF TREASURY STOCK,
ETC. The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock or in the
case of a consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities.
III-3
<PAGE>
98 ENFORCEMENT BY STOCKHOLDER OF RIGHT TO RECEIVE PAYMENT FOR HIS SHARES TO
BE EXCLUSIVE REMEDY; EXCEPTION. The enforcement by stockholder of his right to
receive payment for his shares in the manner provided in this chapter shall be
an exclusive remedy except that this chapter shall not exclude the right of such
stockholder to bring or maintain an appropriate proceeding to obtain relief on
the ground that such corporate action will be or is illegal or fraudulent as to
him.
III-4
