<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 12, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
LONGHORN STEAKS, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
GEORGIA 58-1498312
(State or other (I.R.S. Employer
jurisdiction of Identification
incorporation) No.)
</TABLE>
BUILDING 200
8215 ROSWELL ROAD
ATLANTA, GEORGIA 30350
(770) 399-9595
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
RICHARD E. RIVERA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
LONGHORN STEAKS, INC.
BUILDING 200
8215 ROSWELL ROAD
ATLANTA, GEORGIA 30350
(770) 399-9595
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES TO:
<TABLE>
<S> <C>
WILLIAM H. AVERY MARGARET D. FARRELL
MARK F. MCELREATH HINCKLEY, ALLEN & SNYDER
ALSTON & BIRD 1500 FLEET CENTER
ONE ATLANTIC CENTER PROVIDENCE, RHODE ISLAND 02903
1201 WEST PEACHTREE STREET (401) 274-2000
ATLANTA, GEORGIA 30309-3424
(404) 881-7000
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE(2)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock......................... 2,393,683 shares $8.66 $45,225,500 $15,595
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the estimated maximum number of shares of Common Stock, no par
value per share ("LSI Common Stock"), issuable by the Registrant upon
consummation of the merger of a subsidiary of Registrant with and into
Bugaboo Creek Steak House, Inc. ("BCS"), assuming exercise of all rights to
purchase common stock, par value $.01 per share, of BCS ("BCS Common
Stock") as well as the estimated maximum number of shares of LSI Common
Stock issuable by the Registrant to parties related to BCS pursuant to the
WPC Agreements (as hereinafter defined).
(2) Pursuant to Rules 457(f)(1) and 457(c), the registration fee was computed on
the basis of the average of the high and low prices of BCS Common Stock as
reported on The Nasdaq Stock Market's National Market on June 10, 1996
($8.54), and pursuant to Rule 457(f)(2) and 457(c) on the basis of the
aggregate book value of the shares and/or interests to be acquired pursuant
to the WPC Agreements, and based on the estimated maximum number of shares
of BCS Common Stock (5,225,000) that may be exchanged for the LSI Common
Stock being registered.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
LONGHORN STEAKS, INC.
PART I
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION CAPTION OF LOCATION IN PROSPECTUS
- ------------------------------------------------ -------------------------------------------
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus... Outside front cover page; facing page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Available Information; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Summary
4. Terms of the Transaction................... Summary; General Information; The Merger;
Certain Differences in the Rights of LSI
Shareholders and BCS Stockholders; Annex
A; Annex B; Annex C
5. Pro Forma Financial Information............ Summary; Pro Forma Combined Financial
Information
6. Material Contacts with Company Being
Acquired................................. Summary; The Merger
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... Not applicable
8. Interests of Named Experts and Counsel..... Not applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants.............................. Available Information; Summary; Certain
Differences in the Rights of LSI
Shareholders and BCS Stockholders
11. Incorporation of Certain Information by
Reference................................ Incorporation of Certain Information by
Reference
12. Information with Respect to S-3 or S-2
Registrants.............................. Not applicable
13. Incorporation of Certain Information by
Reference................................ Not applicable
14. Information with Respect to Registrants
Other than S-2 or S-3 Registrants........ Not applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3
Companies................................ Not applicable
16. Information with Respect to S-2 or S-3
Companies................................ Not applicable
17. Information with Respect to Companies Other
than S-2 or S-3 Companies................ Summary; Bugaboo Creek Steak House, Inc.
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION CAPTION OF LOCATION IN PROSPECTUS
- ------------------------------------------------ -------------------------------------------
<C> <S> <C>
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited....... Incorporation of Certain Information by
Reference; Summary; General Information;
Bugaboo Creek Steak House, Inc.; The
Merger; Other Matters
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or
in an Exchange Offer..................... Not applicable
</TABLE>
<PAGE> 4
LONGHORN STEAKS, INC.
BUILDING 200, 8215 ROSWELL ROAD
ATLANTA, GEORGIA 30350
, 1996
Dear Shareholder:
You are cordially invited to attend the special meeting of shareholders
("Special Meeting") of Longhorn Steaks, Inc. ("LSI") to be held at at
, local time, on , 1996.
At this important meeting, you will be asked to consider and vote upon the
approval of the issuance of shares of LSI common stock in connection with
several agreements and plans of merger, as well as a purchase agreement, all
dated as of June 14, 1996, which provide for: (i) the merger of a wholly-owned
subsidiary of LSI with and into Bugaboo Creek Steak House, Inc. ("BCS"); (ii)
the merger of several related corporations with and into a wholly-owned
subsidiary of LSI; and (iii) the purchase by a wholly-owned subsidiary of LSI of
a certain parcel of real estate from parties related to BCS (the agreements and
plans of merger and the purchase agreement are hereinafter referred to as the
"Merger Agreements" and the transactions contemplated thereby are referred to as
the "Merger").
If the Merger is consummated each outstanding share of BCS common stock,
each outstanding share of capital stock or membership interest of the related
corporations and the interest in the real estate, will be converted into or
exchanged for the right to receive shares of LSI common stock on the basis set
forth in the Merger Agreements and described in the enclosed Joint Proxy
Statement/Prospectus. Approval of the issuance of LSI common stock in connection
with the Merger requires the affirmative vote of the holders of a majority of
the shares of LSI common stock present and voting at the Special Meeting.
Enclosed are the: (i) Notice of Special Meeting, (ii) Joint Proxy
Statement/Prospectus and (iii) Proxy for the Special Meeting. The Joint Proxy
Statement/Prospectus describes in more detail the Merger Agreements and the
Merger, including a description of the conditions to consummation of the Merger,
and contains financial and other information about BCS. Please give this
information your careful attention.
The Board of Directors has unanimously approved and adopted the Merger
Agreements and consummation of the transactions contemplated therein, and
unanimously recommends that you vote FOR approval of the issuance of LSI common
stock in connection with the Merger.
In view of the importance of the action to be taken, we urge you to
complete, sign, and date the enclosed Proxy and to return it promptly in the
enclosed envelope, whether or not you plan to attend the Special Meeting. If you
attend the Special Meeting, you may vote in person, even if you previously
returned your Proxy.
We look forward to seeing you at the Special Meeting.
Sincerely,
Richard E. Rivera
President and Chief Executive Officer
<PAGE> 5
LONGHORN STEAKS, INC.
BUILDING 200
8215 ROSWELL ROAD
ATLANTA, GEORGIA 30350
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AT ON , 1996
, 1996
To the Shareholders of Longhorn Steaks, Inc.:
NOTICE IS HEREBY GIVEN that the special meeting of shareholders ("Special
Meeting") of Longhorn Steaks, Inc. ("LSI") will be held at , at ,
local time, on , 1996, for the following purposes:
1. THE MERGER. To consider and vote upon a proposal to approve the
issuance of shares of the no par value common stock of LSI ("LSI Common Stock")
pursuant to: (i) the Agreement and Plan of Merger, dated as of June 14, 1996,
(the "BCS Merger Agreement"), among Bugaboo Creek Steak House, Inc. ("BCS"), LSI
and Whip Merger Corporation, a wholly-owned subsidiary of LSI ("WMC"), pursuant
to which, among other matters, WMC will merge with and into BCS (the "BCS
Merger"), with BCS becoming a wholly-owned subsidiary of LSI and each share of
BCS common stock being converted into the right to receive shares of LSI Common
Stock; (ii) the Agreements and Plans of Merger, each dated as of June 14, 1996,
(each a "WPC Merger Agreement"), among LSI, Whip Pooling Corporation, a
wholly-owned subsidiary of LSI ("WPC") and each of Bentley's Restaurant, Inc.,
Hemenway Sea Foods, Inc., Old Grist Mill Tavern, Inc. and GOS Properties Limited
Liability Company (each a "WPC Merger Party"), pursuant to which, among other
matters, each of the WPC Merger Parties will merge with and into WPC (the "WPC
Mergers"), and each share of capital stock or membership interest in each WPC
Merger Party will be converted into the right to receive shares of LSI Common
Stock; and (iii) the Purchase and Sale Agreement, dated as of June 14, 1996, by
and among Edward P. Grace, III, Samuel J. Orr, Jr. (each a "WPC Purchase Party,"
and together with the WPC Merger parties, the "WPC Parties") and WPC (the "WPC
Purchase Agreement," and together with WPC Merger Agreements, the "WPC
Agreements"), pursuant to which, among other matters, WPC will purchase (the
"WPC Purchase") from Messrs. Grace and Orr, all of their interest in a certain
partial of real estate in Seekonk, Massachusetts (the "WPC Property") in
exchange for the right to receive shares of LSI Common Stock. (The BCS Merger
Agreement and the WPC Agreements are hereinafter referred to as the "Merger
Agreements" and the transactions contemplated thereby are referred to as the
"Merger").
2. OTHER BUSINESS. To transact such other business as may properly come
before the Special Meeting or any adjournments or postponements thereof.
Only shareholders of record at the close of business on , 1996,
are entitled to receive notice of and to vote at the Special Meeting or any
adjournments or postponements thereof. Approval of the issuance of shares of LSI
Common Stock in the Merger requires the affirmative vote of the holders of a
majority of the shares of LSI Common Stock present and voting at the Special
Meeting.
THE BOARD OF DIRECTORS OF LSI UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" APPROVAL OF THE ISSUANCE OF SHARES OF LSI COMMON STOCK IN THE MERGER.
BY ORDER OF THE BOARD OF DIRECTORS
Anne D. Huemme
Secretary
<PAGE> 6
BUGABOO CREEK STEAK HOUSE, INC.
1275 WAMPANOAG TRAIL
EAST PROVIDENCE, RHODE ISLAND 02915
, 1996
Dear Stockholder:
You are cordially invited to attend the special meeting of stockholders
("Special Meeting") of Bugaboo Creek Steak House, Inc. ("BCS") to be held at
at , local time, on , 1996.
At this important meeting, you will be asked to consider and vote upon the
adoption of an Agreement and Plan of Merger, dated as of June 14, 1996 (the "BCS
Merger Agreement"), which provides for the merger (the "BCS Merger") of a
wholly-owned subsidiary of Longhorn Steaks, Inc. ("LSI") with and into BCS. If
the BCS Merger is consummated, BCS will become a wholly-owned subsidiary of LSI
and each outstanding share of BCS common stock will be converted into the right
to receive shares of LSI common stock on the basis set forth in the BCS Merger
Agreement and described in the enclosed Joint Proxy Statement/ Prospectus.
Adoption of the BCS Merger Agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of BCS common stock.
Enclosed are the: (i) Notice of Special Meeting, (ii) Joint Proxy
Statement/Prospectus and (iii) Proxy for the Special Meeting. The Joint Proxy
Statement/Prospectus describes in more detail the BCS Merger Agreement and the
BCS Merger, including a description of the conditions to consummation of the BCS
Merger and the effects of the BCS Merger on the rights of BCS stockholders, and
contains financial and other information about BCS and LSI. Please give this
information your careful attention.
The Board of Directors has unanimously approved and adopted the BCS Merger
Agreement and consummation of the transactions contemplated therein, and
unanimously recommends that you vote FOR adoption of the BCS Merger Agreement.
In view of the importance of the action to be taken, we urge you to
complete, sign, and date the enclosed Proxy and to return it promptly in the
enclosed envelope, whether or not you plan to attend the Special Meeting. If you
attend the Special Meeting, you may vote in person, even if you previously
returned your Proxy.
We look forward to seeing you at the Special Meeting.
Sincerely,
Edward P. Grace, III
Chairman of the Board, President and
Chief Executive Officer
<PAGE> 7
BUGABOO CREEK STEAK HOUSE, INC.
1275 WAMPANOAG TRAIL
EAST PROVIDENCE, RHODE ISLAND 02915
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AT ON , 1996
---------------------
, 1996
To the Stockholders of Bugaboo Creek Steak House, Inc.:
NOTICE IS HEREBY GIVEN that the special meeting of stockholders ("Special
Meeting") of Bugaboo Creek Steak House, Inc. ("BCS") will be held at
at , local time, on , 1996, for the following purposes:
1. THE MERGER. To consider and vote upon a proposal to adopt the Agreement
and Plan of Merger, dated as of June 14, 1996 (the "BCS Merger Agreement"), by
and among BCS, Longhorn Steaks, Inc. ("LSI") and Whip Merger Corporation
("WMC"), pursuant to which, among other matters, WMC will merge with and into
BCS (the "BCS Merger"), with BCS becoming a wholly-owned subsidiary of LSI and
each share of BCS common stock being converted into the right to receive shares
of common stock of LSI, all as more fully described in the accompanying Joint
Proxy Statement/Prospectus. A copy of the BCS Merger Agreement is set forth in
Annex A to the accompanying Joint Proxy Statement/Prospectus and is hereby
incorporated by reference herein.
2. OTHER BUSINESS. To transact such other business as may properly come
before the Special Meeting or any adjournments or postponements thereof.
Only stockholders of record at the close of business on , 1996,
are entitled to receive notice of and to vote at the Special Meeting or any
adjournments or postponements thereof. Adoption of the BCS Merger Agreement
requires the affirmative vote of the holders of a majority of the outstanding
shares of BCS common stock.
THE BOARD OF DIRECTORS OF BCS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" ADOPTION OF THE BCS MERGER AGREEMENT.
BY ORDER OF THE BOARD OF DIRECTORS
Corinne A. Sylvia
Secretary
<PAGE> 8
<TABLE>
<S> <C>
PROXY STATEMENT PROXY STATEMENT
LONGHORN STEAKS, INC. BUGABOO CREEK STEAK HOUSE, INC.
SPECIAL MEETING OF SHAREHOLDERS SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1996 TO BE HELD ON , 1996
</TABLE>
PROSPECTUS
LONGHORN STEAKS, INC.
COMMON STOCK
(NO VALUE PER SHARE)
---------------------
This Joint Proxy Statement/Prospectus is being furnished to holders of
common stock, $.01 par value ("BCS Common Stock"), of Bugaboo Creek Steak House,
Inc., a Delaware corporation ("BCS"), in connection with the solicitation of
proxies by the BCS Board of Directors for use at the special meeting of
stockholders to be held at , local time, on , 1996, at
, and at any adjournment or postponements thereof (the "BCS
Meeting"). The purpose of the BCS Meeting is to consider and vote upon, among
other things, a proposal to adopt an Agreement and Plan of Merger, dated as of
June 14, 1996 (the "BCS Merger Agreement"), by and among BCS, Longhorn Steaks,
Inc., a Georgia corporation ("LSI"), and Whip Merger Corporation ("WMC"), which
provides for, among other things, the merger of WMC with and into BCS (the "BCS
Merger"), with BCS becoming a wholly-owned subsidiary of LSI. See "Summary,"
"The Merger" and Annex A to this Joint Proxy Statement/Prospectus.
This Joint Proxy Statement/Prospectus is being furnished to the holders of
common stock, no par value ("LSI Common Stock"), of LSI, in connection with the
solicitation of proxies by the LSI Board of Directors for use at the special
meeting of shareholders to be held at local time on , 1996,
at , Atlanta, Georgia , and at any adjournment or
postponements thereof (the "LSI Meeting"). The purpose of the LSI Meeting is to
consider and vote upon, among other things, a proposal to approve the issuance
of shares of LSI Common Stock pursuant to (i) the BCS Merger Agreement, pursuant
to which, among other matters, WMC will merge with and into BCS with BCS
becoming a wholly-owned subsidiary of LSI and each share of BCS Common Stock
being converted into the right to receive shares of LSI Common Stock; (ii) the
Agreements and Plans of Merger, each dated as of June 14, 1996, (each a "WPC
Merger Agreement"), among LSI, Whip Pooling Corporation, a wholly-owned
subsidiary of LSI ("WPC") and each of Bentley's Restaurant, Inc., Hemenway Sea
Foods, Inc., Old Grist Mill Tavern, Inc. and GOS Properties Limited Liability
Company (each a "WPC Merger Party") pursuant to which, among other matters, each
of the WPC Merger Parties will merge with and into WPC (the "WPC Mergers") and
each share of capital stock or membership interest in each WPC Merger Party will
be converted into the right to receive shares of LSI Common Stock; and (iii) the
Purchase and Sale Agreement, dated as of June 14, 1996, by and among Edward P.
Grace, III, Samuel J. Orr, Jr. (each a "WPC Purchase Party," and together with
the WPC Merger Parties, the "WPC Parties") and WPC (the "WPC Purchase
Agreement," and together with the WPC Merger Agreements, the "WPC Agreements"),
pursuant to which, among other matters, WPC will purchase (the "WPC Purchase")
from Messrs. Grace and Orr, all of their interest in a certain parcel of real
estate in Seekonk, Massachusetts (the "WPC Property") in exchange for the right
to receive shares of LSI Common Stock (the BCS Merger Agreement and the WPC
Agreements are hereinafter referred to as the "Merger Agreements" and the
transactions contemplated thereby are referred to as the "Merger").
Upon consummation of the Merger: (i) each outstanding share of BCS Common
Stock (excluding shares held by BCS or any of its subsidiaries or by LSI or any
of its subsidiaries) shall cease to be outstanding and shall be converted into
and exchanged for the right to receive that fraction of a share of LSI Common
Stock (the "BCS Exchange Ratio") obtained by dividing $10.25 by the average of
the daily last sale prices for the shares of LSI Common Stock for the twenty
consecutive trading days on which such shares are actually traded as
over-the-counter securities and quoted on The Nasdaq Stock Market's National
Market (the "Nasdaq National Market") ending at the close of trading on the
fifth trading day immediately preceding the closing date of the Merger and
rounded to the third decimal place (the "Base Period Trading Price"); (ii) each
outstanding share of the common stock of Bentley's Restaurant, Inc. ("BRI Common
Stock") issued and outstanding shall cease to be outstanding and shall be
converted into and exchanged for the right to receive that multiple of a share
of LSI Common Stock (the "BRI Exchange Ratio") obtained by dividing (a) the
(continued on next page)
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus is , 1996,
and it is first being mailed or otherwise
delivered to LSI shareholders and BCS stockholders on or about ,
1996.
<PAGE> 9
quotient of $40 divided by 1,000 shares of BRI Common Stock outstanding, by (b)
the Base Period Trading Price; (iii) each outstanding share of the common stock
of Hemenway Sea Foods, Inc. ("HSF Common Stock") issued and outstanding shall
cease to be outstanding and shall be converted into and exchanged for the right
to receive that multiple of a share of LSI Common Stock (the "HSF Exchange
Ratio") obtained by dividing (a) the quotient of $1,893,288 divided by 1,000
shares of HSF Common Stock outstanding, by (b) the Base Period Trading Price;
(iv) each outstanding share of the common stock of Old Grist Mill Tavern, Inc.
("OGM Common Stock") issued and outstanding shall cease to be outstanding and
shall be converted into and exchanged for the right to receive that multiple of
a share of LSI Common Stock (the "OGM Exchange Ratio") obtained by dividing (a)
the quotient of $1,506,672 divided by 100 shares of OGM Common Stock
outstanding, by (b) the Base Period Trading Price; (v) each percentage
membership interest of GOS Properties Limited Liability Company issued and
outstanding shall cease to be outstanding and shall be converted into and
exchanged for the right to receive that multiple of a share of LSI Common Stock
(the "GOS Exchange Ratio") obtained by dividing (a) the quotient of $1,000,000,
less any mortgage indebtedness of GOS Properties Limited Liability Company,
divided by 100 (the total percentage interest of the members of GOS Properties
Limited Liability Company) by (b) the Base Period Trading Price; and (vi) the
purchase price for the WPC Property of $1,000,000 shall be paid by WPC through
the assumption of the mortgage indebtedness on the WPC Property and the transfer
to Messrs. Grace and Orr of that number of shares of LSI Common Stock (rounded
up to the nearest whole share) obtained by dividing the difference between the
purchase price and the mortgage indebtedness assumed by WPC, by the Base Period
Trading Price.
This Joint Proxy Statement/Prospectus also constitutes a prospectus of LSI
relating to the estimated maximum 2,393,683 shares of LSI Common Stock issuable
in the Merger. See "Certain Differences in the Rights of LSI Shareholders and
BCS Stockholders."
2
<PAGE> 10
AVAILABLE INFORMATION
LSI and BCS are each subject to the reporting and informational
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (the "Exchange Act"), and, in accordance therewith,
file reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy and information
statements, and other information filed by LSI and BCS with the Commission may
be inspected and copied at the principal office of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and should be
available at the Commission's Regional Offices at 7 World Trade Center, New
York, New York 10048, and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material may also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Commission maintains a site on the World Wide Web at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
This Joint Proxy Statement/Prospectus constitutes a part of a Registration
Statement on Form S-4 (together with any amendments thereto, the "Registration
Statement"), which has been filed by LSI with the Commission under the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act"). This Joint Proxy Statement/Prospectus omits certain
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement and to the exhibits thereto for further
information with respect to LSI and BCS and the securities to which this Joint
Proxy Statement/Prospectus relates. Statements contained in this Joint Proxy
Statement/Prospectus concerning the provisions of certain documents filed as
exhibits to the Registration Statement are necessarily brief descriptions
thereof, and are not necessarily complete, and each such statement is qualified
in its entirety by reference to the full text of such document.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE
AVAILABLE WITHOUT CHARGE UPON REQUEST FROM: LONGHORN STEAKS, INC., BUILDING 200,
8215 ROSWELL ROAD, ATLANTA, GEORGIA 30350, ATTN: CORPORATE SECRETARY, (770)
399-9595. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUESTS
SHOULD BE MADE AT LEAST FIVE BUSINESS DAYS PRIOR TO THE LSI MEETING.
All information contained herein with respect to LSI and its subsidiaries
has been supplied by LSI, all information with respect to BCS and its
subsidiaries has been supplied by BCS and all information with respect to the
WPC Merger Parties and the WPC Property has been supplied by the WPC Parties.
No person has been authorized to give any information or to make any
representation other than those contained in this Joint Proxy
Statement/Prospectus and, if given or made, such information or representation
should not be relied upon as having been authorized by LSI, BCS or the WPC
Parties. Neither the delivery of this Joint Proxy Statement/Prospectus nor any
distribution of the securities to which this Joint Proxy Statement/Prospectus
relates shall, under any circumstances, create any implication that there has
been no change in the affairs of LSI, BCS, any of their respective subsidiaries,
any of the WPC Merger Parties or the WPC Party since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
This Joint Proxy Statement/Prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, any securities other than the securities
to which it relates or an offer to sell or a solicitation of an offer to
purchase the securities offered by this Joint Proxy Statement/Prospectus in any
jurisdiction in which such an offer or solicitation is not lawful.
3
<PAGE> 11
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by LSI with the Commission (LSI File No.
0-19924) under Section 13(a) or 15(d) of the Exchange Act are hereby
incorporated by reference in this Joint Proxy Statement/ Prospectus:
(i) LSI's Annual Report on Form 10-K for the year ended December 31,
1995;
(ii) LSI's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996; and
(iii) the description of LSI Common Stock and LSI Rights set forth in
LSI's Registration Statements filed pursuant to Section 12 of the Exchange
Act, and any amendment or report filed for the purpose of updating any such
description.
All documents filed by LSI pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Joint Proxy
Statement/Prospectus and prior to the date of the LSI Meeting are hereby
incorporated by reference in this Joint Proxy Statement/Prospectus and shall be
deemed a part hereof from the date of filing of such document.
Any statement contained herein, in any amendment or supplement hereto or in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of the Registration
Statement and this Joint Proxy Statement/Prospectus to the extent that a
statement contained herein, in any amendment or supplement hereto or in any
other subsequently filed document which also is or is deemed to be 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 a part of the Registration Statement, this Joint Proxy
Statement/Prospectus, or any amendment or supplement hereto.
4
<PAGE> 12
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................................................................. 3
Incorporation of Certain Information by Reference..................................... 4
Summary............................................................................... 6
General Information................................................................... 19
Bugaboo Creek Steak House, Inc........................................................ 23
The Merger............................................................................ 40
Pro Forma Combined Financial Information.............................................. 66
Notes to Pro Forma Combined Financial Information..................................... 72
Certain Differences in the Rights of LSI and BCS Stockholders......................... 74
Experts............................................................................... 82
Legal Matters......................................................................... 82
Other Matters......................................................................... 82
ANNEXES:
ANNEX A -- Agreement and Plan of Merger, dated as of June 14, 1996, by and among
LSI, WMC and BCS......................................................... A-1
ANNEX B -- Opinion of The Robinson-Humphrey Company, Inc............................ B-1
ANNEX C -- Opinion of Tucker Anthony Incorporated................................... C-1
ANNEX D -- Consolidated (Combined) Financial Statements of Bugaboo Creek Steak
House, Inc............................................................... D-1
</TABLE>
5
<PAGE> 13
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/Prospectus. This summary is not intended to be a
complete description of the matters covered in this Joint Proxy
Statement/Prospectus and is subject to and qualified in its entirety by
reference to the more detailed information contained elsewhere in this Joint
Proxy Statement/Prospectus, including the Annexes hereto, and in the documents
incorporated by reference in this Joint Proxy Statement/Prospectus. The BCS
Merger Agreement is set forth in Annex A to this Joint Proxy
Statement/Prospectus and reference is made thereto for a complete description of
the terms of the BCS Merger. LSI shareholders and BCS stockholders are urged to
read carefully the entire Joint Proxy Statement/Prospectus, including the
Annexes. As used in this Joint Proxy Statement/Prospectus, the terms "LSI" and
"BCS" refer to such corporations, respectively, and where the context requires,
such corporations and their respective subsidiaries.
PARTIES TO THE MERGER
Longhorn Steaks, Inc.
As of July 15, 1996, LSI operated and franchised 80 restaurants, including
77 Longhorn Steakhouses in the southeastern and midwestern United States.
Longhorn Steakhouse restaurants are casual dining, full-service restaurants that
serve lunch and dinner, offer full liquor service and feature a menu consisting
of fresh cut, carefully aged steaks, as well as salmon, shrimp, chicken, ribs,
pork chops and prime rib.
For the year ended December 31, 1995, and for the three months ended March
31, 1996, LSI reported total revenues of $109.3 million and $33.6 million
respectively, and net income of $4.1 million and $1.4 million, respectively. As
of March 31, 1996, LSI had total consolidated assets of $75.1 million and
consolidated shareholders' equity of $55.2 million.
LSI's principal executive offices are located at Building 200, 8215 Roswell
Road, Atlanta, Georgia 30350, and its telephone number is (770) 399-9595. For
additional information regarding LSI and its business, see "Available
Information," "Incorporation of Certain Information by Reference," and
"-- Selected Financial Data."
Bugaboo Creek Steak House, Inc.
BCS owns and operates restaurants featuring two distinctive
concepts -- Bugaboo Creek Steak House(R) and The Capital Grille(R). Bugaboo
Creek Steak House, a casual dining restaurant, serving entrees of seasoned
steaks, classic prime rib, spit-roasted half chickens, smoked baby back ribs,
grilled salmon, a variety of freshwater fish, hamburgers, salads and sandwiches,
creates an entertaining experience for families and couples alike in the setting
of a lively Canadian Rocky Mountain lodge. The Capital Grille is a traditional
fine dining restaurant which appeals to affluent guests and business executives.
The Capital Grille menu offerings include appetizers such as chilled baby
lobster and beluga caviar and entrees of dry-aged steaks, lamb and veal chops,
lobster, grilled salmon and chicken. As of July 15, 1996, BCS owned and operated
18 restaurants (14 Bugaboo Creek Steak House restaurants and four The Capital
Grille restaurants). In addition, BCS manages three dinnerhouse restaurants
under management contracts, which restaurants will be acquired by LSI in the WPC
Mergers.
For the year ended June 25, 1995, and the forty weeks ended March 31, 1996,
BCS reported net restaurant sales of $29.9 million and $37.9 million,
respectively, and net income of $2.2 million and $1.5 million, respectively. As
of March 31, 1996, BCS had total consolidated assets of $39.6 million and
stockholders' equity of $24.5 million.
BCS's principal executive offices are located at 1275 Wampanoag Trail, East
Providence, Rhode Island 02915, and its telephone number is (401) 433-5500. For
additional information regarding BCS and its business, see "Bugaboo Creek Steak
House, Inc."
6
<PAGE> 14
Bentley's Restaurant, Inc.
Bentley's Restaurant, Inc. ("BRI") owns and operates "Monterey," a
dinnerhouse restaurant specializing in steaks, prime rib and seafood featuring a
salad bar, that has been operating since 1984. BRI is 100% owned by Mr. Edward
P. Grace, III. See "The Merger -- Interests of Certain Persons in the Merger."
Hemenway Sea Foods, Inc.
Hemenway Sea Foods, Inc. ("HSF") owns and operates "Hemenway's Sea Food and
Oyster Bar," a fine dining seafood restaurant featuring fresh fin fish and
shellfish from around the world. The restaurant opened in 1985 in downtown
Providence, Rhode Island. HSF is owned equally by Mr. Edward P. Grace, III and
Mr. Samuel J. Orr, Jr. See "The Merger -- Interests of Certain Persons in the
Merger."
Old Grist Mill Tavern, Inc.
Old Grist Mill Tavern, Inc. ("OGM") owns and operates the "Old Grist Mill
Tavern," a dinner restaurant which specializes in steaks, prime rib and seafood.
The restaurant, which is situated on the site of an historical mill in Seekonk,
Massachusetts, adjacent to a mill pond and waterfall, has been operating since
1976. OGM is owned equally by Mr. Edward P. Grace, III and Mr. Samuel J. Orr,
Jr. See "The Merger -- Interests of Certain Persons in the Merger."
GOS Properties Limited Liability Company
GOS Properties Limited Liability Company ("GOS") has as its sole asset the
land and building leased to BCS for the Bugaboo Creek Steak House located in
Springfield, Virginia. GOS is owned equally by Mr. Edward P. Grace, III, Mr.
Samuel J. Orr, Jr. and Mr. Guy B. Snowden. See "The Merger -- Interests of
Certain Persons in the Merger."
WPC Property
The WPC Property consists of a parcel of real estate located in Seekonk,
Massachusetts, which is the site of the Old Grist Mill Tavern. The WPC Property
is owned equally by Mr. Edward P. Grace, III and Mr. Samuel J. Orr, Jr. See "The
Merger -- Interests of Certain Persons in the Merger."
THE MEETINGS
LSI Meeting; Record Date
The LSI Meeting will be held at , local time on , 1996, at
. At the LSI Meeting, LSI's shareholders will consider and vote upon
approval of the issuance of LSI Common Stock in connection with the Merger, and
transact such other business as may properly come before the LSI Meeting. LSI's
Board of Directors has fixed the close of business on , 1996, as the
record date for determining the LSI shareholders entitled to receive notice of
and to vote at the LSI Meeting (the "LSI Record Date"). As of the LSI Record
Date, there were shares of LSI Common Stock issued and outstanding and
entitled to be voted at the LSI Meeting. For additional information with respect
to the LSI Meeting, including the LSI Record Date and votes required for
approval, see "General Information."
Approval of the issuance of shares of LSI Common Stock in the Merger
requires the affirmative vote of the holders of the majority of the shares of
LSI Common Stock present and voting at the LSI Meeting. As of the LSI Record
Date, LSI's directors and executive officers, and their affiliates, held
approximately 17.2% of the outstanding shares of LSI Common Stock entitled to
vote at the LSI Meeting. See "General Information -- Votes Required." As of the
Record Date, BCS, its directors and executive officers, and their affiliates,
held no shares of LSI Common Stock.
7
<PAGE> 15
BCS Meeting; Record Date
The BCS Meeting will be held at , local time on ,
1996, at . At the BCS Meeting, BCS's stockholders
will consider and vote upon adoption of the BCS Merger Agreement and the
consummation of the transactions contemplated therein, and transact such other
business as may properly come before the BCS Meeting. BCS's Board of Directors
has fixed the close of business on , 1996, as the record date for
determining the BCS stockholders entitled to receive notice of and to vote at
the BCS Meeting (the "BCS Record Date"). As of the BCS Record Date, there were
shares of BCS Common Stock issued and outstanding entitled to be voted at
the BCS Meeting. For additional information with respect to the BCS Meeting,
including the BCS Record Date and votes required for adoption, see "General
Information."
Adoption of the BCS Merger Agreement and consummation of the transactions
contemplated therein requires the affirmative vote of the holders of a majority
of the outstanding shares of BCS Common Stock entitled to vote at the BCS
Meeting. As of the BCS Record Date, BCS's directors and executive officers, and
their affiliates, held approximately 64.0% of the outstanding shares of BCS
Common Stock entitled to vote at the BCS Meeting. See "The Merger -- Voting
Agreement." Pursuant to the Voting Agreement (as defined herein), Edward P.
Grace, III the holder of 2,415,000 shares, 46.2% of the outstanding shares, of
BCS Common Stock has agreed to vote all of such shares in favor of adoption of
the BCS Merger Agreement and has granted LSI and certain of its executive
officers a proxy to vote those shares in favor of adoption of the BCS Merger
Agreement. See "General Information -- Votes Required." As of the BCS Record
Date, LSI, its directors and executive officers, and their affiliates, held no
shares of BCS Common Stock.
THE MERGER
The BCS Merger Agreement provides that WMC shall merge with and into BCS,
which shall be the surviving corporation of the BCS Merger and, as a result
thereof, become a wholly-owned subsidiary of LSI. At the time the BCS Merger
becomes effective, each outstanding share of BCS Common Stock (excluding shares
held by BCS or any of its subsidiaries or by LSI or any of its subsidiaries)
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive shares of LSI Common Stock. The WPC Merger Agreements provide
that each of the WPC Merger Parties shall merge with and into WPC, a wholly-
owned subsidiary of LSI, which shall be the surviving corporation of the WPC
Mergers. At the time the WPC Mergers become effective, each outstanding share of
capital stock or membership interest in each WPC Merger Party shall cease to be
outstanding and shall be converted into and exchanged for the right to receive
shares of LSI Common Stock. The WPC Purchase Agreement provides that WPC will
purchase from Messrs. Grace and Orr, all of their interest in the WPC Property
in exchange for the right to receive shares of LSI Common Stock. If the issuance
of LSI Common Stock pursuant to the Merger Agreements is approved at the LSI
Meeting, the BCS Merger Agreement is adopted at the BCS Meeting, all required
governmental and other consents and approvals are obtained, and all of the other
conditions to the obligations of the parties to consummate the Merger are either
satisfied or waived (as permitted), the Merger will be consummated. A copy of
the BCS Merger Agreement is set forth in Annex A to this Joint Proxy
Statement/Prospectus. See "The Merger."
The Merger Agreements provide that, at the effective time of the Merger:
(i) each outstanding share of BCS Common Stock (excluding shares held by BCS or
any of its subsidiaries or by LSI or any of its subsidiaries) shall cease to be
outstanding and shall be converted into and exchanged for the right to receive
that fraction of a share of LSI Common Stock (the "BCS Exchange Ratio") obtained
by dividing $10.25 by the average of the daily last sale prices for the shares
of LSI Common Stock for the twenty consecutive trading days on which such shares
are actually traded as over-the-counter securities and quoted on the Nasdaq
National Market ending at the close of trading on the fifth trading day
immediately preceding the closing date of the Merger and rounded to the third
decimal place (the "Base Period Trading Price"); (ii) each outstanding share of
BRI Common Stock issued and outstanding shall cease to be outstanding and shall
be converted into and exchanged for the right to receive that multiple of a
share of LSI Common Stock (the "BRI Exchange Ratio") obtained by dividing (a)
the quotient of $40 divided by 1,000 shares of BRI Common Stock outstanding, by
(b) the Base Period Trading Price; (iii) each outstanding share of the HSF
8
<PAGE> 16
Common Stock issued and outstanding shall cease to be outstanding and shall be
converted into and exchanged for the right to receive that multiple of a share
of LSI Common Stock (the "HSF Exchange Ratio") obtained by dividing (a) the
quotient of $1,893,288 divided by 1,000 shares of HSF Common Stock outstanding,
by (b) the Base Period Trading Price; (iv) each outstanding share of the OGM
Common Stock issued and outstanding shall cease to be outstanding and shall be
converted into and exchanged for the right to receive that multiple of a share
of LSI Common Stock (the "OGM Exchange Ratio") obtained by dividing (a) the
quotient of $1,506,672 divided by 100 shares of OGM Common Stock outstanding, by
(b) the Base Period Trading Price; (v) each percentage membership interest of
GOS shall cease to be outstanding and shall be converted into and exchanged for
the right to receive that multiple of a share of LSI Common Stock (the "GOS
Exchange Ratio") obtained by dividing (a) the quotient of $1,000,000 less any
mortgage indebtedness of GOS, divided by 100 (the total percentage interest of
the members of GOS), by (b) the Base Period Trading Price; and (vi) the purchase
price for the WPC Property, $1,000,000, shall be paid by WPC through the
assumption of the mortgage indebtedness on the WPC Property and the transfer to
Messrs. Grace and Orr of that number of shares of LSI Common Stock (rounded up
to the nearest whole share) obtained by dividing the difference between the
purchase price and the mortgage indebtedness assumed by WPC, by the Base Period
Trading Price. (The exchange ratios described in (i) through (vi) above are
hereinafter referred to as the "Exchange Ratios.")
For the purposes of calculating the Exchange Ratios described above, the
Merger Agreements provide that the Base Period Trading Price shall be deemed to
equal (i) $27.25 in the event the Base Period Trading Price is greater than
$27.25 or (ii) $24.00 in the event that the Base Period Trading Price is less
than $24.00.
RECOMMENDATION OF THE BOARDS OF DIRECTORS
The Board of Directors of LSI believes that the Merger is in the best
interest of LSI and its shareholders and has unanimously approved the issuance
of LSI Common Stock pursuant to the Merger Agreements and the consummation of
the transactions contemplated therein. The LSI Board of Directors unanimously
recommends that the LSI shareholders vote FOR approval of the issuance of shares
of LSI Common Stock pursuant to the Merger Agreements. In deciding to approve
the issuance of LSI Common Stock pursuant to the Merger Agreements and the
consummation of the transactions contemplated therein, LSI's Board of Directors
considered a number of factors, including the terms of the Merger, the
compatibility of the operations of BCS, LSI, the WPC Merger Parties and the WPC
Property, and the financial condition, results of operations, and future
prospects of BCS, LSI, the WPC Merger Parties and the WPC Property. See "The
Merger -- Reasons for the Merger."
The Board of Directors of BCS believes that the BCS Merger is in the best
interests of BCS and its stockholders and has unanimously approved the BCS
Merger Agreement and the consummation of the transactions contemplated therein.
The BCS Board of Directors unanimously recommends that the BCS stockholders vote
FOR adoption of the BCS Merger Agreement and the consummation of the
transactions contemplated therein. In deciding to approve the BCS Merger
Agreement and the consummation of the transactions contemplated therein, BCS's
Board of Directors considered a number of factors, including the terms of the
BCS Merger, the compatibility of the operations of BCS and LSI, and the
financial condition, results of operations, and future prospects of BCS and LSI.
See "The Merger -- Reasons for the Merger."
OPINION OF FINANCIAL ADVISORS
The Robinson-Humphrey Company, Inc. ("Robinson-Humphrey"), the financial
advisor to LSI, delivered its opinion, dated June 14, 1996, and the date of this
Joint Proxy Statement/Prospectus (the "Robinson-Humphrey Opinion"), that, as of
such dates, the Exchange Ratios in the Merger are fair to LSI and its
shareholders from a financial point of view. Tucker Anthony Incorporated
("Tucker Anthony"), the financial advisor to BCS, delivered an opinion on June
14, 1996, and delivered a written opinion dated the date of this Joint Proxy
Statement/Prospectus (the "Tucker Anthony Opinion"), that as of such dates, the
consideration to be received by BCS stockholders other than the principal
stockholder and affiliates (the "BCS Stockholders") in connection with the BCS
Merger is fair, from a financial point of view, to the BCS Stockholders. The
full text of the Robinson-Humphrey Opinion and the Tucker Anthony Opinion dated
as the
9
<PAGE> 17
date of this Joint Proxy Statement/Prospectus, which describe the procedures
followed, assumptions made, limitations on the review taken and other matters in
connection with rendering such opinions, are set forth in Annex B and Annex C,
respectively, to this Joint Proxy Statement/Prospectus and should be read in
their entirety by the LSI shareholders and the BCS stockholders, respectively.
For additional information regarding the opinions of Robinson-Humphrey and
Tucker Anthony a discussion of the qualifications of each financial advisor, see
"The Merger -- Opinion of Financial Advisors."
EFFECTIVE TIME
If the issuance of LSI Common Stock pursuant to the Merger Agreements is
approved by the requisite vote of the LSI shareholders and the BCS Merger
Agreement is adopted by the requisite vote of the BCS stockholders, all required
governmental and other consents and approvals are obtained, and the other
conditions to the obligations of the parties to consummate the Merger are either
satisfied or waived (as permitted), the Merger will be consummated and will
become effective on the date and at the time that certificates and/or articles
of merger reflecting the Merger become effective with the authorities of the
relevant jurisdictions where LSI, BCS and the WPC Parties are organized (the
"Effective Time"). Assuming satisfaction of all conditions to consummation, the
Merger is expected to become effective during the third calendar quarter of
1996. LSI and BCS each has the right, acting unilaterally, to terminate the BCS
Merger Agreement and LSI has the right, acting unilaterally, to terminate the
WPC Agreements, should the BCS Merger not be consummated by December 31, 1996.
See "The Merger -- Effective Time" and "-- Amendment, Waiver, and Termination."
DELIVERY OF LSI CERTIFICATES
Promptly after the Effective Time, each record holder of shares of BCS
Common Stock outstanding at the Effective Time and each record holder of shares
of capital stock of or interest in a WPC Merger Party or the WPC Property
outstanding at the Effective Time will be mailed a transmittal letter (with
instructions) to use in effecting the surrender and cancellation of certificates
or other documents evidencing such stock or interest in exchange for LSI Common
Stock. LSI shall not be obligated to deliver the consideration to which any
former holder of such stock or interest is entitled until such holder surrenders
such holder's certificate or certificates or other documents representing such
holder's shares or interests for exchange. The certificate or certificates or
other documents so surrendered shall be duly endorsed as the exchange agent may
require. See "The Merger -- Distribution of LSI Certificates."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The BCS Merger and the mergers of Bentley's Restaurant, Inc., Hemenway Sea
Foods, Inc. and Old Grist Mill Tavern, Inc. with and into WPC (together the
"Tax-Free Mergers") are intended to be tax-free reorganizations within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). Generally, no gain or loss will be recognized for federal income tax
purposes by LSI, BCS, WMC, WPC, BRI, HSF and OGM (collectively, the "Tax-Free
Parties") as a result of the Tax-Free Mergers, except that gain or loss may be
recognized (i) with respect to cash received, and (ii) for amounts resulting
from any required change in accounting methods and any income and deferred gain
recognized pursuant to Treasury regulations issued under Section 1502 of the
Code. A condition to consummation of the Tax-Free Mergers is the receipt by each
of LSI, BCS and the relevant WPC Merger Parties of an opinion of Alston & Bird,
counsel to LSI, as to the qualification of the Tax-Free Mergers as tax-free
reorganizations and certain other federal income tax consequences of the
Tax-Free Mergers and related transactions.
The Merger of GOS with and into WPC and the purchase of the WPC Property by
LSI pursuant to the WPC Purchase Agreement, will not qualify as a tax-free
reorganization within the meaning of the Code, and, as a result, a gain or loss
could be recognized for federal income purposes by the members of GOS and the
WPC Purchase Parties. See "The Merger -- Certain Federal Income Tax
Consequences."
10
<PAGE> 18
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH PERSON AND OTHER FACTORS, EACH HOLDER OF BCS
COMMON STOCK OR CAPITAL STOCK OF OR INTERESTS IN A WPC PARTY OR THE WPC PROPERTY
IS URGED TO CONSULT SUCH PERSON'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR
TAX CONSEQUENCES TO SUCH PERSON OF THE MERGER (INCLUDING THE APPLICATION AND
EFFECT OF FOREIGN, STATE AND LOCAL INCOME AND OTHER TAX LAWS).
CONVERSION OF STOCK OPTIONS, WARRANTS AND CONVERTIBLE NOTES
Upon consummation of the BCS Merger all rights with respect to BCS Common
Stock pursuant to stock options ("BCS Options") granted by BCS under its
existing stock option plans (the "BCS Stock Plans"), which are outstanding at
the Effective Time, whether or not exercisable, shall be converted into and
become rights with respect to LSI Common Stock, and LSI shall assume each BCS
Option, in accordance with the terms of the BCS Stock Plan and stock option
agreement by which it is evidenced, after giving effect to the BCS Exchange
Ratio. See "The Merger -- Conversion of Stock Options."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of BCS's management and Board of Directors have interests
in the Merger in addition to their interests as stockholders of BCS generally.
These include, among other things, provisions in the BCS Merger Agreement
relating to indemnification and eligibility for certain LSI employee benefits.
In addition, Mr. Edward P. Grace III, President, Chief Executive Officer and
Chairman of the Board of Directors of BCS, and Messrs. Samuel J. Orr, Jr. and
Guy B. Snowden, each a director of BCS, own interests in one or more of the WPC
Parties, Mr. Grace will be elected to the LSI Board of Directors and will
receive certain limited registration rights with regard to the shares of LSI
Common Stock he receives in the Merger. As of June 14, 1996, the directors and
officers of BCS held no shares of LSI Common Stock. See "The Merger --
Management and Operations After the Merger" and " -- Interests of Certain
Persons in the Merger."
CONDITIONS TO CONSUMMATION
Consummation of the Merger is subject to various conditions, including
among other matters: (i) approval of the issuance of LSI Common Stock pursuant
to the Merger Agreements by the requisite vote of LSI shareholders; (ii)
adoption of the BCS Merger Agreement by the requisite vote of BCS stockholders;
(iii) receipt of all governmental and other consents and approvals necessary to
permit consummation of the Merger, including expiration or termination of the
statutory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 ("HSR Act"); (iv) receipt by LSI of letters from LSI's independent
auditors to the effect that the Merger will qualify for pooling-of-interests
accounting treatment and letters from BCS's independent auditors to the effect
that such auditors are not aware of any matters relating to BCS or any of the
WPC Parties which would preclude the Merger from qualifying for
pooling-of-interests accounting treatment; and (v) satisfaction of certain other
usual conditions, including the receipt of the tax opinion discussed above. In
addition, consummation of the BCS Merger is subject to the performance by the
WPC Parties of the agreements and covenants contemplated by the WPC Agreements
prior to or substantially simultaneously with the Effective Time for the BCS
Merger. The foregoing are the material conditions to the consummation of the
Merger. See "The Merger -- Conditions to Consummation" and " -- Amendment,
Waiver, and Termination."
REGULATORY APPROVALS
The consummation of the Merger is subject to the expiration or termination
of the statutory waiting period under the HSR Act and various approvals of local
liquor licensing authorities. See "The Merger -- Regulatory Approvals."
11
<PAGE> 19
CONDUCT OF BUSINESS PENDING THE MERGER
BCS and the WPC Parties have agreed in the Merger Agreements to, among
other things, operate their business only in the ordinary course and to take no
action that would adversely affect their ability to perform their covenants and
agreements under the Merger Agreements. In addition, BCS has agreed not to take
certain actions relating to the operation of BCS pending consummation of the BCS
Merger without the prior written consent of LSI, except as otherwise permitted
by the BCS Merger Agreement, including, among other things: (i) becoming
responsible for any obligation for borrowed money in excess of an aggregate of
$50,000, except in the ordinary course of business in accordance with past
practices; (ii) repurchasing, redeeming or otherwise acquiring any shares of BCS
capital stock; (iii) subject to certain exceptions, issuing any additional
shares of its capital stock or giving any person the right to acquire any such
shares, or issuing any long-term debt; (iv) subject to certain exceptions,
granting any increase in compensation or benefits, or paying any bonus, to any
of its directors, officers or employees; or (v) modifying or adopting any
employee benefit plans, including any employment contract. See "The
Merger -- Conduct of Business Pending the Merger."
TERMINATION
BCS Merger
The BCS Merger Agreement may be terminated, and the BCS Merger abandoned,
at any time prior to the Effective Time by mutual consent of the Boards of
Directors of BCS and LSI. In addition, the BCS Merger Agreement may be
terminated, and the BCS Merger abandoned, prior to the Effective Time by either
LSI or BCS if (i) the other party breaches and does not timely cure any
representation, warranty, covenant or other agreement contained in the BCS
Merger Agreement and such breach, individually or in the aggregate, has a
Material Adverse Effect, as defined in the BCS Merger Agreement, on the
non-breaching party, (ii) any consent or approval of certain regulatory
authorities is denied by final nonappealable action of such authority or if any
action taken by such authority is not appealed within the time limit for appeal,
(iii) the LSI shareholders fail to approve the issuance of LSI Common Stock
pursuant to the Merger Agreements at the LSI Meeting, (iv) the BCS stockholders
fail to adopt the BCS Merger Agreement and the transactions contemplated thereby
at the BCS Meeting, (iv) any of the conditions precedent to the obligations of
the terminating party to consummate the BCS Merger cannot be satisfied or
fulfilled by December 31, 1996, (v) the BCS Merger has not been consummated by
December 31, 1996, and (vi) for a period of any five consecutive trading days
prior to the Effective Time of the BCS Merger, the last sale price of the LSI
Common Stock on the Nasdaq National Market shall be less than $21.00 per share.
In addition, LSI may unilaterally terminate the BCS Merger Agreement in the
event that BCS shall have notified LSI of the receipt of a tender offer or
exchange offer or any proposal for a merger, acquisition of all of the stock or
assets of, or other business combination involving BCS or any of its
subsidiaries or the acquisition of a substantial equity interest in, or a
substantial portion of the assets of, BCS or substantial equity interests in, or
all or substantially all of the assets of, any of BCS's subsidiaries (each an
"Acquisition Proposal"), and notified LSI of the determination of the Board of
Directors of BCS to cause any of BCS or its subsidiaries to furnish non-public
information to the person making such Acquisition Proposal and, within thirty
days following BCS's receipt of such Acquisition Proposal, the Board of
Directors of BCS shall have failed to reaffirm its approval of the BCS Merger
and the transactions contemplated by the BCS Merger Agreement, or shall have
resolved not to reaffirm the BCS Merger, or shall have affirmed, recommended or
authorized entry into any other Acquisition Proposal or other transaction
involving a merger, share exchange, consolidation or transfer of substantially
all of the assets of BCS. BCS may unilaterally terminate the BCS Merger
Agreement if prior to approval by the stockholders of BCS of the BCS Merger
Agreement, the Board of Directors of BCS shall have recommended to the
stockholders of BCS any other Acquisition Proposal or resolved to do so if the
Board of Directors of BCS, after consulting with and considering the advice of
outside counsel, reasonably determines in good faith that such actions would be
required to comply with its fiduciary duties to BCS stockholders under
applicable law and after having consulted with and considered the advice of
outside counsel and BCS's financial advisor, the Board of Directors of BCS
reasonably determines in good faith that the potential acquiror is highly
qualified. (The events described in this paragraph which would provide for the
unilateral termination of the BCS Merger Agreement by LSI or BCS are hereinafter
referred to as
12
<PAGE> 20
"Termination Events") See "The Merger -- Amendment, Waiver, and Termination" and
"-- Expenses and Fees."
The WPC Mergers
The WPC Merger Agreements may be terminated, and the WPC Mergers abandoned,
at any time prior to the Effective Time by the mutual consent of the Boards of
Directors of LSI and the WPC Merger Parties. In addition, the WPC Merger
Agreements may be terminated and the WPC Mergers abandoned prior to the
Effective Time by either LSI or the WPC parties if (i) any approval of any
regulatory authority required for consummation of the WPC Mergers and other
transactions contemplated by the WPC Merger Agreements has been denied by final
non-appealable action, or if any action taken by such authority is not appealed
within the time limit for appeal or (ii) LSI or BCS shall have terminated the
BCS Merger Agreement for any reason. The WPC Merger Agreements may also be
unilaterally terminated by LSI in the event that the BCS Merger shall not have
been consummated by December 31, 1996, if the failure to consummate the BCS
Merger is not caused by a breach of the BCS Merger Agreement by LSI.
WPC Purchase Agreement
Pursuant to WPC Purchase Agreement, WPC may, at its option, terminate the
WPC Purchase Agreement if: (i) the sellers do not deliver the documents and
materials necessary to close the purchase; (ii) the transactions contemplated by
the BCS Merger Agreement are not closed; or (iii) the lender under the loan
secured by the WPC Property does not consent to the transfer of the WPC Property
and the assumption of its loan by WPC. The sellers may, at their option,
terminate the WPC Purchase Agreement if: (i) WPC does not deliver the documents
and materials necessary to close the purchase; (ii) WPC does not deliver the LSI
Common Stock required to be paid as consideration for the purchase; (iii) WPC
does not assume all of seller's obligations under the loan; (iv) the BCS Merger
is not closed; or (v) the lender does not consent to the transfer of the WPC
Property and the assumption of the loan by WPC.
In addition, the WPC Purchase Agreement provides that WPC may, at its
option, terminate the WPC Purchase Agreement if all or any material part of the
WPC Property is (i) subject to a bona fide threat of condemnation or taken
thereby, or (ii) damaged or destroyed, and if such condemnation would, or would
be reasonably likely to, give LSI right to elect not to consummate the BCS
Merger. The WPC Purchase Agreement may be amended only by an amendment in
writing duly executed by each of the parties affected thereby.
FAILURE TO EXERCISE TERMINATION RIGHT
Among other termination rights of the parties, the BCS Merger Agreement may
be terminated by either LSI or BCS in its sole discretion if the last sale price
of the LSI Common Stock on the Nasdaq National Market is less than $21.00 per
share for any period of five consecutive trading days prior to the Effective
Time. In determining whether to elect to terminate the BCS Merger Agreement in
these circumstances, the LSI and/or BCS Board of Directors will take into
account, consistent with its fiduciary duties, all relevant facts and
circumstances existing at the time, including, without limitation, the market
for restaurant industry stocks in general, the relative value of the LSI Common
Stock in the market, the value of BCS, and the advice of its financial advisors
and legal counsel. By approving the BCS Merger Agreement, the LSI shareholders
and the BCS stockholders would be permitting their Boards of Directors to
determine, in the exercise of their fiduciary duties, to proceed with the BCS
Merger even if the market price of the LSI Common Stock declines substantially
from its price on the date the BCS Merger Agreement was executed and delivered.
EXPENSES AND FEES
The Merger Agreements provide that each party shall be responsible for its
own costs and expenses incurred in connection with the negotiation and
consummation of the transactions contemplated by the Merger Agreements, except
that each of LSI and BCS shall pay one-half of the filing fees payable in
connection with the Registration Statement and this Joint Proxy
Statement/Prospectus and printing costs
13
<PAGE> 21
incurred in connection with the Registration Statement and this Joint Proxy
Statement/Prospectus. If the BCS Merger Agreement is terminated by LSI or by BCS
as the result of a Termination Event, then BCS has agreed to pay LSI's
out-of-pocket costs and expenses, including cost of counsel, investment bankers,
actuaries and accountants up to, but not exceeding, $750,000.
If, within ten months following the termination of the BCS Merger Agreement
by LSI or BCS upon the occurrence of a Termination Event, any third party
acquires, merges with, combines with, or purchases a significant amount of the
assets of, or purchases 20% or more of the voting securities of, BCS or enters
into a binding agreement to do the foregoing, then such third party (or BCS in
the event that such third party fails to pay) will be required, prior to the
earlier of consummation of such transaction or execution of any letter of intent
or definitive agreement relating to such transaction, to pay LSI $2,000,000,
less any amounts previously paid by BCS to LSI as a result of the termination of
the BCS Merger Agreement.
ACCOUNTING TREATMENT
It is anticipated that the Merger will qualify as a "pooling-of-interests"
transaction for accounting and financial reporting purposes. See "The
Merger -- Accounting Treatment."
RESALE OF LSI COMMON STOCK
The LSI Common Stock issued in connection with the Merger will be freely
transferable by the holders of such shares, except for those holders who may be
deemed to be "affiliates" (generally including directors, certain executive
officers, and 10% or more stockholders) of BCS, LSI or the WPC Merger Parties
under applicable federal securities laws. In addition, BCS and the WPC Merger
Parties have agreed to use their reasonable efforts to cause each person or
entity that is an "affiliate" to enter into a written agreement in substantially
the form attached to the Merger Agreements relating to such restrictions on sale
or other transfer. See "The Merger -- Resale of LSI Common Stock."
VOTING AGREEMENT
LSI, BCS and Mr. Edward P. Grace, III (the "Stockholder") have entered into
a voting agreement (the "Voting Agreement"). The Voting Agreement provides that
the Stockholder will vote the Stockholder's shares of BCS Common Stock,
2,415,000 shares or 46.2% of the shares outstanding as of June 14, 1996, in
favor of the BCS Merger, the execution and delivery by BCS of the BCS Merger
Agreement and the approval of the terms thereof and each of the other
transactions contemplated by the BCS Merger Agreement; provided that the BCS
Merger Agreement has not been amended so as to reduce the consideration payable
in the BCS Merger to a lesser amount of LSI Common Stock. The Voting Agreement
also provides that the Stockholder will vote the Stockholder's shares of BCS
Common Stock against any of the following (each a "Competing Transaction"): any
merger agreement or merger (other than the BCS Merger Agreement and the BCS
Merger), consolidation, combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by BCS or any
amendment of BCS's Certificate of Incorporation or Bylaws or other proposal or
transaction that would in any manner impede, frustrate, prevent or nullify the
BCS Merger, the BCS Merger Agreement or any of the other transactions
contemplated by the BCS Merger Agreement. The Stockholder has also agreed not
to, and not to permit any, of his representatives to, directly or indirectly,
solicit, initiate or encourage the submission of, any takeover proposal or
participate in any discussions or negotiations regarding, or furnish to any
person any 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 takeover proposal.
The Voting Agreement will terminate upon the earlier of the Effective Time
or the date upon which the BCS Merger Agreement is terminated in accordance with
its terms. See "The Merger -- Voting Agreement."
MARKET PRICES AND DIVIDENDS
LSI Common Stock is traded on the Nasdaq National Market under the symbol
"LOHO" and BCS Common Stock is traded on the Nasdaq National Market under the
symbol "RARE." The following table
14
<PAGE> 22
sets forth the high and low sale prices per share of LSI Common Stock and BCS
Common Stock on the Nasdaq National Market with respect to each quarterly period
since January 1, 1994. The tables show quarterly periods according to LSI's
fiscal year, which ends on December 31 of each year. LSI has not declared or
paid any cash dividends or distributions on its capital stock since its initial
public offering in 1992. BSC has not declared or paid any cash dividends or
distributions on its capital stock since its initial public offering in 1994.
Neither LSI nor BCS intends to pay any cash dividends on its common stock in the
foreseeable future because the present policy of each of their Boards of
Directors is to retain all earnings to support operations and finance the
expansion of the respective businesses.
<TABLE>
<CAPTION>
SALES PRICES SALES PRICES
PER SHARE OF PER SHARE OF
LSI COMMON BCS COMMON
STOCK STOCK
------------ ------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
FISCAL 1994
Quarter ended March 31, 1994................................ $12 1/2 $ 7 3/4 -- --
Quarter ended June 30, 1994................................. 12 8 1/4 $16 1/4 $ 9 /16
Quarter ended September 30, 1994............................ 10 1/2 8 13 1/2 8 3/4
Quarter ended December 31, 1994............................. 10 1/8 7 7/8 13 1/4 9 1/2
FISCAL 1995
Quarter ended March 31, 1995................................ 11 8 1/2 14 9 1/2
Quarter ended June 30, 1995................................. 14 1/2 10 1/2 14 9 1/2
Quarter ended September 30, 1995............................ 18 3/4 13 3/4 10 3/4 6 1/2
Quarter ended December 31, 1995............................. 18 1/4 14 1/2 10 1/8 7 3/4
1996
Quarter ended March 31, 1996................................ 24 3/4 15 1/2 10 1/4 6 /16
Quarter ended June 30, 1996................................. 29 1/2 21 3/4 9 3/4 7 1/2
Quarter ended September 30, 1996 (through July 10, 1996).... 25 1/2 22 8 7/8 8 1/2
</TABLE>
On June 14, 1996, the last trading day prior to public announcement that
LSI and BCS had executed the BCS Merger Agreement, the last reported sale prices
per share of LSI Common Stock and BCS Common Stock on the Nasdaq National Market
were $22 and $8 3/4, respectively. On July 10, 1996, the last reported sale
prices per share of LSI Common Stock and BCS Common Stock on the Nasdaq National
Market were $23 and $8 1/2, respectively. BCS STOCKHOLDERS SHOULD OBTAIN CURRENT
MARKET QUOTATIONS FOR THE LSI COMMON STOCK AND BCS COMMON STOCK.
As of the BCS Record Date, there were approximately record
holders of BCS Common Stock.
The Merger Agreements provide for the filing of a listing application with
the Nasdaq National Market covering the shares of LSI Common Stock issuable
pursuant to the Merger. It is a condition to consummation of the Merger that
such shares of LSI Common Stock be authorized for listing on the Nasdaq National
Market effective upon official notice of issuance. See "The Merger -- Conditions
to Consummation."
SELECTED FINANCIAL DATA
Set forth below is certain unaudited historical consolidated selected
financial data relating to LSI. This information should be read in conjunction
with the historical financial statements of LSI, including the respective notes
thereto, incorporated by reference herein. See "Available Information" and
"Incorporation of Certain Information by Reference." For certain unaudited
historical consolidated (combined) selected financial data relating to BCS, see
"Bugaboo Creek Steak House, Inc. -- Selected Consolidated Financial Data." See
also Annex D -- Consolidated (Combined) Financial Statements of Bugaboo Creek
Steak House, Inc.
15
<PAGE> 23
SELECTED FINANCIAL DATA OF LSI (HISTORICAL)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected historical financial data of LSI
and has been derived from and should be read in conjunction with LSI's Annual
Report on Form 10-K and Quarterly Report on Form 10-Q, which are incorporated by
reference herein. See "Available Information" and "Incorporation of Certain
Information by Reference." Interim unaudited historical data reflect, in the
opinion of management of LSI, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such data, and
unaudited results of operations for the three months ended March 31, 1996, are
not necessarily indicative of results which may be expected for any other
interim period or for the fiscal year as a whole.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, FISCAL YEARS ENDED DECEMBER 31,
----------------- ------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- -------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues..................... $33,645 $23,219 $109,289 $86,514 $70,386 $49,868 $39,007
Operating income............. 2,242 904 5,693 1,252 4,626 4,658 1,605
Net income................... 1,440 700 4,137 1,514 3,355 3,436 1,398
PER SHARE DATA:
Net income................... $ 0.20 $ 0.11 $ 0.61 $ 0.23 $ 0.53
Book value................... 8.31 -- 8.09 -- --
Weighted average common
shares outstanding........ 7,141 6,523 6,776 6,522 6,289
PRO FORMA EARNINGS DATA(1):
Earnings before income taxes as
reported..................... $ 4,819 $ 1,398
Income tax provision........... 1,743 522
------- -------
Pro forma net
earnings........... $ 3,076 $ 876
======= =======
Pro forma net earnings per
share........................ $ .62
=======
BALANCE SHEET DATA (AT PERIOD
END):
Total assets................. 75,082 $ 67,919 $54,393 $51,288 $25,518 $ 7,723
Long-term obligations,
excluding current
installments.............. 9,500 5,000 -- -- -- 1,208
Total stockholders' equity... 55,233 53,589 48,109 46,584 21,951 444
</TABLE>
- ---------------
(1) For the year ended December 31, 1991 and through March 30, 1992, LSI elected
S Corporation status and therefore was not subject to corporate income
taxes. Pro forma net earnings and pro forma net earnings per share give
effect for income taxes as if LSI had been a C Corporation during these
periods.
16
<PAGE> 24
PRO FORMA FINANCIAL DATA
The pro forma pooled information presented below provides financial
information giving effect to the Merger on a pooling-of-interests basis for the
periods presented. The pro forma pooled financial information of BCS, the WPC
Merger Parties and the WPC Property has been adjusted to conform reporting
periods, presentation format, and accounting policies to those of LSI. The
weighted average common and common equivalent shares outstanding and related per
share data of BCS, the WPC Merger Parties and the WPC Property, combined, have
been adjusted to reflect the maximum number of shares assumed to be issued
pursuant to the Exchange Ratios. The pro forma pooled information is provided
for informational purposes only and is not necessarily indicative of actual
results that would have been achieved had the Merger been consummated at the
beginning of the periods presented or of future results. The pro forma pooled
information is derived from the Pro Forma Combined Financial Information
appearing elsewhere herein and should be read in conjunction with those
statements.
LSI, BCS, THE WPC MERGER PARTIES AND THE WPC PROPERTY -- PRO FORMA POOLED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
THREE MONTHS ENDED ------------------------------
MARCH 31, 1996 1995 1994 1993
------------------ -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Income statement data:
Revenues..................................... $ 52,187 $156,380 $115,029 $ 89,692
Operating income............................. 3,346 9,344 4,034 7,177
Net earnings................................. 2,044 6,474 3,531 4,764
Earnings per common and common equivalent
share..................................... .21 .71 .40 .62
Weighted average common and common equivalent
shares outstanding........................ 9,532,173 9,167,614 8,773,056 7,737,773
Balance sheet data:
Total assets................................. 117,685 108,173 N/A N/A
Long-term obligations, excluding current
installments.............................. 20,908 14,006 N/A N/A
Total shareholders' equity................... 80,353 78,153 N/A N/A
Book value per share......................... 8.79 8.67 N/A N/A
</TABLE>
BCS, THE WPC MERGER PARTIES AND THE WPC PROPERTY EQUIVALENT -- PRO FORMA
POOLED(1)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
THREE MONTHS ENDED ------------------------------
MARCH 31, 1996 1995 1994 1993
------------------ -------- -------- --------
<S> <C> <C> <C> <C>
Earnings per common and common equivalent
share........................................ $ .09 $ .30 $ .17 $ .26
Book value per share........................... 3.75 3.70 N/A N/A
</TABLE>
- ---------------
(1) These amounts are calculated by multiplying the "LSI, BCS, WPC Merger
Parties and the WPC Property -- Pro Forma Pooled" data by the Exchange
Ratios.
17
<PAGE> 25
The pro forma combined information presented below provides financial
information giving effect to the Merger on a pooling-of-interests basis and the
acquisition by LSI of Lone Star Steaks, Inc., and two franchise restaurants, one
each in Greensboro and High Point, North Carolina, and the formation of a joint
venture in North Carolina and South Carolina, all on a purchase accounting
basis, as if all such transactions had occurred at the beginning of the
respective periods presented. The pro forma combined financial information is
provided for informational purposes only and is not necessarily indicative of
actual results that would have been achieved had the Merger or the acquisitions
and the joint venture occurred as described above, nor is it necessarily
indicative of the results of operations of future periods or future combined
financial position. The pro forma combined financial information is derived from
the Pro Forma Combined Financial Information appearing elsewhere herein and
should be read in conjunction with those statements.
LSI, BCS, THE WPC MERGER PARTIES AND THE WPC PROPERTY -- PRO FORMA COMBINED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
(UNAUDITED)
<S> <C> <C>
Income statement data:
Revenues...................................................... $ 53,330 $ 164,006
Operating income.............................................. 3,382 9,554
Net income.................................................... 2,008 6,151
Earnings per common and common equivalent share............... .21 .67
Weighted average common and common equivalent shares
outstanding................................................ 9,532,173 9,214,719
Balance sheet data:
Total assets.................................................. 119,808 110,670
Long-term obligations, excluding current installments......... 21,184 14,006
Total shareholders' equity.................................... 80,353 78,153
Book value per share.......................................... 8.70 8.58
</TABLE>
BCS, THE WPC MERGER PARTIES AND THE WPC PROPERTY EQUIVALENT -- PRO FORMA
COMBINED(1)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
<S> <C> <C>
Earnings per common and common equivalent share................. $ .09 $ .29
Book value per share............................................ 3.72 3.66
</TABLE>
- ---------------
(1) These amounts are calculated by multiplying the "LSI, BCS, the WPC Merger
Parties and the WPC Property -- Pro Forma Combined" information by the
Exchange Ratios.
18
<PAGE> 26
GENERAL INFORMATION
THE MEETINGS
LSI Meeting
This Joint Proxy Statement/Prospectus is being furnished by LSI to its
shareholders in connection with the solicitation of proxies by the Board of
Directors of LSI from holders of the outstanding shares of LSI Common Stock for
use at the Special Meeting of the shareholders of LSI to be held
at , local time, on , 1996, at
, and at any adjournments and
postponements thereof (the "LSI Meeting"), to consider and vote upon a proposal
to approve the issuance of LSI Common Stock pursuant to the Merger Agreements,
and to transact such other business as may properly come before the LSI Meeting.
The Merger Agreements provide for transactions whereby (i) a wholly-owned
subsidiary of LSI will merge with and into BCS, (ii) several related
corporations, the WPC Merger Parties, will merge with and into WPC, a
wholly-owned subsidiary of LSI, and (iii) WPC will purchase a certain parcel of
real estate from the WPC Purchase Parties. At the Effective Time of the Merger
Agreements, each share of BCS Common Stock, each outstanding share of capital
stock or membership interest of the WPC Merger Parties, and the interest of WPC
Purchase Parties in the WPC Property, will be converted into or exchanged for
the right to receive shares of LSI Common Stock on the basis set forth in the
Merger Agreements and described below. See "The Merger -- Exchange Ratios."
BCS Meeting
This Joint Proxy Statement/Prospectus is being furnished by BCS to its
stockholders in connection with the solicitation of proxies by the Board of
Directors of BCS from holders of the outstanding shares of BCS Common Stock for
use at the Special Meeting of the stockholders of BCS to be held at ,
local time, on , 1996, at
, and at any adjournments and
postponements thereof (the "BCS Meeting"), to consider and vote upon a proposal
to adopt the BCS Merger Agreement and consummation of the transactions
contemplated therein, and to transact such other business as may properly come
before the BCS Meeting.
The BCS Merger Agreement provides for a transaction whereby a wholly-owned
subsidiary of LSI will merge with and into BCS, with BCS as the surviving
corporation of the BCS Merger becoming a wholly-owned subsidiary of LSI. At the
Effective Time, each share of issued and outstanding BCS Common Stock (excluding
shares held by BCS or any of its subsidiaries or by LSI or any of its
subsidiaries) shall cease to be outstanding and shall be converted into and
exchanged for the right to receive a fraction of a share of LSI Common Stock.
See "The Merger -- Exchange Ratios."
RECORD DATE, SOLICITATION, AND REVOCABILITY OF PROXIES
LSI
The LSI Board of Directors has fixed the close of business on ,
1996, as the record date for determining the LSI shareholders entitled to
receive notice of and vote at the LSI Meeting (the "LSI Record Date"). Only
holders of record of LSI Common Stock as of the LSI Record Date are entitled to
notice of and vote at the LSI Meeting. As of the LSI Record Date there were
shares of LSI Common Stock issued and outstanding held by
holders of record. Holders of LSI Common Stock are entitled to
one vote on each matter considered and voted on at the LSI Meeting for each
share of LSI Common Stock held of record at the close of business on the LSI
Record Date. The presence, in person, or by properly executed proxy, of the
holders of the majority of the outstanding shares of LSI Common Stock entitled
to vote at the LSI Meeting is necessary to constitute a quorum of the holders of
the LSI Common Stock at the LSI Meeting. Abstentions and "broker non-votes"
(which occur when shares held by brokers or nominees for beneficial owners are
voted on some matters but not on others) will be counted as shares present for
purposes of determining the presence of a quorum. Broker non-votes will not be
counted as votes cast for purposes of determining whether a proposal has
received sufficient votes for adoption, and as a result will have no effect on
19
<PAGE> 27
the outcome of the vote to issue LSI Common Stock pursuant to the Merger
Agreements. For purposes of determining whether a proposal has received
sufficient votes for adoption, abstentions will be counted as votes cast and, as
a result, abstentions will have the effect of a vote against the issuance of LSI
Common Stock pursuant to the Merger Agreements.
Proxies in the form enclosed are solicited by LSI's Board of Directors.
Shares of LSI Common Stock represented by properly executed proxies, if such
proxies are received in time and are not revoked, will be voted in accordance
with the instructions indicated on the proxies. If no instructions are
indicated, such proxies will be voted FOR approval of the issuance of LSI Common
Stock pursuant to the Merger Agreements, and as determined by a majority of the
members of the LSI Board of Directors as to any other matter that may come
before the LSI Meeting. Any holder of LSI Common Stock who returns the signed
proxy but fails to provide instructions as to the matter in which such holder's
shares are to be voted will be deemed to have voted FOR the approval of the
issuance of LSI Common Stock pursuant to the Merger Agreements.
An LSI shareholder who has given a proxy may revoke it at any time prior to
its exercise at the LSI Meeting or prior to the receipt by LSI of proxies voting
in favor of the issuance of LSI Common Stock pursuant to the Merger Agreements
by all shareholders, by (i) giving written notice of revocation to the Secretary
of LSI, (ii) properly submitting to LSI a duly executed proxy bearing a later
date, or (iii) voting in person at the LSI Meeting. All written notices of
revocation and other communications with respect to revocation of proxies should
be addressed to LSI as follows: Longhorn Steaks, Inc., Building 200, 8215
Roswell Road, Atlanta, Georgia 30350, Attn: Corporate Secretary. A proxy
appointment will not be revoked by death or supervening incapacity of the
shareholder executing the proxy unless, before the shares are voted, notice of
such death or incapacity is filed with LSI's Corporate Secretary or other person
responsible for tabulating votes on behalf of LSI.
The expense of soliciting proxies for the LSI Meeting will be paid by LSI,
although BCS has paid one-half of the cost of filing fees and printing and
mailing this Joint Proxy Statement/Prospectus. In addition to the solicitation
of shareholders of record by mail, telephone or personal contact, LSI will be
contacting brokers, dealers, banks or voting trustees or their nominees who can
be identified as record holders of LSI Common Stock. Such holders, after inquiry
by LSI, will provide information concerning the quantity of proxy and other
materials needed to supply such materials to beneficial owners, and LSI will
reimburse them for the expense of mailing the proxy materials to such persons.
BCS
The BCS Board of Directors has fixed the close of business on ,
1996, as the record date for determining the BCS stockholders entitled to
receive notice of and to vote at the BCS Meeting (the "BCS Record Date"). Only
holders of record of BCS Common Stock as of the BCS Record Date are entitled to
notice of and to vote at the BCS Meeting. As of the Record Date, there were
5,225,000 shares of BCS Common Stock issued and outstanding and held by
holders of record. Holders of BCS Common Stock are entitled to one
vote on each matter considered and voted on at the BCS Meeting for each share of
BCS Common Stock held of record at the close of business on the BCS Record Date.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of BCS Common Stock entitled to vote at the
BCS Meeting is necessary to constitute a quorum of the holders of BCS Common
Stock at the BCS Meeting. Abstentions and broker non-votes will be counted as
shares present for purposes of determining the presence of a quorum. Broker
non-votes will not be counted as votes cast for purposes of determining whether
a proposal has received sufficient votes for adoption, however, because the
proposal to approve the BCS Merger will require the affirmative vote of a
majority of the outstanding shares of BCS Common Stock, broker non-votes will
have the effect of a vote against the BCS Merger. For purposes of determining
whether a proposal has received sufficient votes for adoption, abstentions will
be counted as votes cast and, as a result, abstentions will have the effect of a
vote against the BCS Merger.
Proxies in the form enclosed are solicited by BCS's Board of Directors.
Shares of BCS Common Stock represented by properly executed proxies, if such
proxies are received in time and are not revoked, will be
20
<PAGE> 28
voted in accordance with the instructions indicated on the proxies. If no
instructions are indicated, such proxies will be voted FOR adoption of the BCS
Merger Agreement and consummation of the transactions contemplated therein, and
as determined by a majority of the members of the BCS Board of Directors as to
any other matter that may come before the BCS Meeting. Any holder of BCS Common
Stock who returns a signed proxy but fails to provide instructions as to the
manner in which such holder's shares are to be voted will be deemed to have
voted FOR the adoption of the BCS Merger Agreement and consummation of the
transactions contemplated therein.
A BCS stockholder who has given a proxy may revoke it at any time prior to
its exercise at the BCS Meeting or prior to the receipt by BCS of proxies voting
in favor of the BCS Merger by all stockholders, by (i) giving written notice of
revocation to the Secretary of BCS, (ii) properly submitting to BCS a duly
executed proxy bearing a later date, or (iii) voting in person at the BCS
Meeting. All written notices of revocation and other communications with respect
to revocation of proxies should be addressed to BCS as follows: Bugaboo Creek
Steak House, Inc., 1275 Wampanoag Trail, East Providence, Rhode Island 02915,
Attention: Corporate Secretary. A proxy appointment will not be revoked by death
or supervening incapacity of the stockholder executing the proxy statement
unless, before the shares are voted, notice of such death or incapacity is filed
with BCS's Corporate Secretary or other person responsible for tabulating votes
on behalf of BCS.
The expense of soliciting proxies for the BCS Meeting will be paid by BCS,
although LSI has paid one-half of the cost of filing fees and printing and
mailing this Joint Proxy Statement/Prospectus. In addition to the solicitation
of stockholders of record by mail, telephone or personal contact, BCS will be
contacting brokers, dealers, banks or voting trustees or their nominees who can
be identified as record holders of BCS Common Stock. Such holders, after inquiry
by BCS, will provide information concerning the quantity of proxy and other
materials needed to supply such materials to beneficial owners, and BCS will
reimburse them for the expense of mailing the proxy materials to such persons.
VOTES REQUIRED
LSI
Approval of the issuance of LSI Common Stock pursuant to the Merger
Agreements requires the presence of a quorum and the affirmative vote of the
holders of a majority of the shares of LSI Common Stock present and voting at
the LSI Meeting. Broker non-votes will have no effect on the outcome of the vote
to issue LSI Common Stock pursuant to the Merger Agreements, however abstentions
will have the effect of a vote against the issuance of LSI Common Stock pursuant
to the Merger Agreements.
As of the LSI Record Date, LSI directors and executive officers, and their
affiliates, beneficially owned approximately 17.2% of the outstanding shares of
LSI Common Stock entitled to vote at the LSI Meeting. As of the LSI Record Date,
BCS and its directors and executive officers, and their affiliates, held no
shares of LSI Common Stock.
BCS
Adoption of the BCS Merger Agreement and consummation of the transactions
contemplated therein requires the presence of a quorum and the affirmative vote
of the holders of a majority of the outstanding shares of BCS Common Stock
entitled to vote thereon at the BCS Meeting. Both broker non-votes and
abstentions will have the effect of a vote against the BCS Merger. The
Stockholder, who holds 2,415,000 shares, or 46.2% of the outstanding shares, of
BCS Common Stock, has agreed to vote all of such shares in favor of the adoption
of the BCS Merger Agreement. See "The Merger -- Voting Agreement."
As of the Record Date, BCS directors and executive officers, and their
affiliates, beneficially owned approximately 64.0% of the outstanding shares of
BCS Common Stock entitled to vote at the BCS Meeting. As of the BCS Record Date,
LSI and its directors and executive officers, and their affiliates, held no
shares of BCS Common Stock, but pursuant to the Voting Agreement, had the power
to vote 46.2% of the outstanding
21
<PAGE> 29
shares of BCS Common Stock in favor of adoption of the BCS Merger Agreement. See
"The Merger -- Voting Agreement."
RECOMMENDATION OF BOARD OF DIRECTORS
LSI
For the reasons described below, the Board of Directors of LSI has
unanimously approved the issuance of LSI Common Stock pursuant to the Merger
Agreements, has unanimously adopted the Merger Agreements, and believes the
Merger is the best interest of LSI and its shareholders, and unanimously
recommends that shareholders of LSI vote FOR approval of the issuance of the LSI
Common Stock pursuant to Merger Agreements. See "The Merger -- Reasons for the
Merger."
BCS
For the reasons described below, the Board of Directors of BCS has
unanimously adopted the BCS Merger Agreement, believes the BCS Merger is in the
best interests of BCS and its stockholders, and unanimously recommends that
stockholders of BCS vote FOR adoption of the BCS Merger Agreement and the
consummation of the transactions contemplated therein. See "The
Merger -- Reasons for the Merger."
22
<PAGE> 30
BUGABOO CREEK STEAK HOUSE, INC.
BUSINESS
Overview
BCS is a Delaware corporation organized in 1993 which owns and operates
restaurants through separate subsidiaries organized for each restaurant. BCS
became a public company on April 6, 1994. BCS's executive offices are located at
1275 Wampanoag Trail, East Providence, Rhode Island 02915.
BCS has two distinctive restaurant concepts: Bugaboo Creek Steak House and
The Capital Grille. In both concepts, BCS operates on the premise that a
restaurant must not only provide high quality food and attentive service, but
must also create a stimulating and entertaining environment. Bugaboo Creek Steak
House restaurants are currently located in eight states in the northeast and
mid-Atlantic regions of the United States. The Capital Grille restaurants are
currently located in Providence, Rhode Island; Boston and Chestnut Hill,
Massachusetts; and the District of Columbia. Two The Capital Grille restaurants
are currently under construction and will be opened by December 31, 1996. See
"Expansion Strategy" below.
Restaurant Style; Menus and Markets Served
Bugaboo Creek Restaurants. The Bugaboo Creek Steak House concept appeals
to the casual dining guest by creating an entertaining restaurant experience for
families and couples alike in the setting of a lively Canadian Rocky Mountain
lodge. Knotty pine walls and exposed beams generously outfitted with snow shoes,
skis, fly fishing and other sporting equipment, wildlife photos, hunting
trophies and other artifacts of the Canadian Rockies surround the guest with the
invigorating atmosphere of the outdoors. Perched on the walls, beams and
fieldstone fireplaces, Moxie the Moose(TM), Bill the Buffalo(TM) and other
electronically animated wildlife characters come to life unexpectedly to engage
guests with tales of the Bugaboos, a dazzling glacier-formed mountain range.
While waiting for a table, guests may also encounter Timber the Tree(TM), poised
between the dining room and the Trading Post, where Bugaboo Creek Steak House
sportswear and souvenirs are sold. The servers complete the setting, assuming
names and characters in keeping with the Canadian Rockies theme and guiding
their guests through the menu offerings, which range from appetizers, such as
the Bunyan Onion(R) and Whitewater Bugs(R), to entrees of seasoned steaks,
classic prime rib, spit-roasted half chickens, smoked baby back ribs, grilled
salmon, a variety of freshwater fish, hamburgers, salads and sandwiches. A
complete children's menu is also available. All full dinners include fresh baked
honey wheat mountain loaf, salad and potatoes or a fresh vegetable at no
additional cost. Prices range from $4.50 to $8.95 for appetizers and from $8.95
to $19.95 for dinner entrees, with lower prices on the children's menu. The
average check per guest at Bugaboo Creek Steak House restaurants was
approximately $16.00 during the fiscal year ended June 30, 1996. Beverages,
including alcohol and soft drinks, account for approximately 20% of the net
restaurant sales of the Bugaboo Creek Steak House restaurants.
BCS currently operates fourteen Bugaboo Creek Steak House restaurants,
which range from 7,800 to 11,000 square feet in total area, and seat between 260
to 335 guests. See "Properties," below. BCS believes that future Bugaboo Creek
Steak House units typically will be approximately 7,200 square feet and seat 265
guests. See "Restaurant Operations -- Site Selection" and "Expansion Strategy"
below, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The Capital Grille Restaurants. The Capital Grille concept uses
traditional architectural details and decorative finishes designed to appeal to
affluent dining guests and business executives. From the coffered ceilings,
mahogany millwork and custom lighting fixtures to oriental rugs, marble and
hardwood floors, polished brass hardware and beveled glass details, every aspect
of the ambiance invites The Capital Grille guests to indulge themselves and, for
the duration of their meal, to enter the realm of luxury and prestige reserved,
in days gone by, for the members of exclusive clubs. BCS accents the traditional
fine dining ambiance of The Capital Grille with a contemporary display kitchen,
providing open sight lines from most tables to the chef's working area.
23
<PAGE> 31
The Capital Grille menu offerings include appetizers such as chilled baby
lobster and beluga caviar and entrees of dry-aged steaks, lamb and veal steak,
lobster, grilled salmon and chicken. Guests at The Capital Grille may also
choose from over 300 selections on its award-winning wine list. Traditional rich
desserts such as creme brulee and white chocolate mousse complete the dining
experience. Appetizer prices range from $7.95 to $36.95 at lunch and dinner.
Entree prices range from $6.95 to $20.95 at lunch and from $14.95 to $26.95 at
dinner (not including seafood priced at market). The average check per guest at
The Capital Grille was approximately $53.00 during the fiscal year ended June
30, 1996. Due to the popularity of its extensive wine list, beverages, including
alcohol and soft drinks, account for approximately 37% of the net restaurant
sales at The Capital Grille restaurants.
The Capital Grille restaurants operate in renovated locations ranging in
size from 6,500 to 8,500 square feet providing seating for approximately 175 to
275 guests. See "Properties," below. BCS anticipates that most new The Capital
Grille restaurants will also operate in renovated locations of comparable sizes.
See "Restaurant Operations -- Site Selection" and "Expansion Strategy" below,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Restaurant Operations
Management and Employees. BCS seeks to attract and retain high caliber
restaurant managers by providing them with an appropriate balance of autonomy
and direction and with an attractive salary and financial incentive package. To
provide those incentives, BCS has developed a management performance
compensation program, under which General Managers work with senior management
to prepare annual budgets and performance plans for their restaurants. All
General Managers are eligible to receive cash bonuses of up to approximately 50%
of base salary in accordance with BCS's performance compensation policy as well
as stock options upon appointment to General Manager. More experienced General
Managers, who have demonstrated the ability to achieve planned objectives, may
be promoted to the Managing Partner level, enabling them to increase their
performance compensation potential.
Each of BCS's restaurants has one General Manager or Managing Partner, one
Kitchen Manager and two or three assistant managers. The General Manager or
Managing Partner of each restaurant carries primary responsibility for the
day-to-day operations of the entire restaurant and is responsible for
maintaining the standards of quality and performance, as well as the policies,
established by BCS.
To assure that its employees properly implement BCS's commitment to
consistently high quality food and attentive service, BCS has developed manuals
regarding its policies and procedures for all aspects of restaurant operation,
including food handling and preparation and dining room and beverage service
operations. New employees are trained by experienced employees who have
demonstrated their familiarity with and ability to consistently implement BCS
policies. BCS believes that by requiring its employees to adhere to these
policies and using experienced employees to train new ones, it provides the
consistently high quality of food and service its guests desire. BCS also
believes that the affiliation of Bugaboo Creek Steak House with The Capital
Grille raises the quality of food and service at Bugaboo Creek Steak House,
because the same managerial philosophy is applied in both the fine dining and
the casual dining operations in activities such as purchasing, staffing and
training.
BCS policy strongly encourages the promotion of existing managers to
General Managers and existing non-management employees into management
positions. Management trainees must demonstrate their competence in every job in
a restaurant during an 8 to 10 week training period before being considered for
promotion. BCS considers its relations with its managers to be very good.
The Bugaboo Creek Steak House restaurants have approximately 85 staff
members, while The Capital Grille units employ approximately 60 staff members.
Since most of the BCS's restaurants are, at this time, open primarily for
dinner, BCS believes it has an advantage in attracting and retaining servers and
managers who find the shorter hours an attractive lifestyle alternative to
restaurants serving both lunch and dinner. In addition, BCS policy is generally
to assign each server tables with seating for no more than twelve to fourteen
guests, which enables the server to provide
24
<PAGE> 32
attentive service. BCS believes it provides a supportive work environment which,
combined with the volume of guests in its restaurants, attracts experienced
servers.
Management of Growth. A number of BCS's officers and significant employees
have been associated with Edward P. Grace, III, the founder of BCS, for several
years, working together in a variety of restaurant operation and management
capacities. Prior to 1994, those individuals and Mr. Grace developed BCS's
restaurant concepts, original recipes and operating policies and procedures,
establishing benchmarks for quality in food and service and a team approach to
the operation and management of the BCS restaurants. Since BSC's initial public
offering in April 1994, in order to implement its expansion strategy, BCS has
augmented its senior management team with the addition of five individuals with
extensive experience in growth oriented, multi-unit dinnerhouse organizations.
Site Selection. The site selection process is fundamental to the success
of an individual restaurant, and senior management devotes significant time and
resources to analyzing each prospective site. Local market demographics,
population density, average household income levels and site specific
characteristics such as visibility, accessibility and traffic volume, are
considered. Factors which favor a Bugaboo Creek Steak House restaurant include
proximity to retail, office and entertainment centers, and other generators of a
high volume of middle-market traffic. For The Capital Grille restaurants, BCS
gives particular importance to factors that support its sophisticated image,
such as proximity to metropolitan retail, business and cultural centers. As a
result, identification of locations suitable for The Capital Grille units
normally takes longer than for Bugaboo Creek Steak House sites. For both
restaurants, BCS also considers existing local competition and, to the extent
such information is available, the sales of other comparably priced restaurants
operating in the area.
Centralized Purchasing. Centralized purchasing is intended to provide
consistently high quality ingredients in sufficient quantities and at
competitive prices. Most food, including meat, canned and dry goods and other
supplies are shipped directly to the restaurants and invoices, upon approval by
restaurant management, are processed for payment by the central office. In order
to assure consistent beef costs, BCS has entered into a contract to purchase
specified quantities of beef at fixed prices through the end of calendar 1996.
The quantities purchased under the contract are based on what management
believes to be conservative estimates of actual requirements for such period. To
obtain the highest quality ingredients available at the lowest possible cost, in
New England BCS purchases fresh produce and seafood at wholesale markets and
directly distributes these goods to restaurants. The savings obtained by
purchasing directly, rather than through distributors, more than offsets the
costs of internal distribution and provides increased quality control at lower
prices. Outside New England, BCS uses local vendor distribution because of the
smaller number of BCS restaurants in a given area.
Seasonality. Although individual restaurants have seasonal patterns of
performance that depend on local factors, aggregate sales by BCS's restaurants
have not displayed pronounced seasonality, other than higher sales during the
Christmas holidays which fall into BCS's third fiscal quarter. Extreme weather,
especially during the winter months, may also adversely affect sales.
Expansion Strategy
BCS's expansion strategy is based upon three principles which build on its
commitment to provide consistently high quality food and attentive service:
Invest in Architectural, Decorative and Entertainment Features to
Create Stimulating and Entertaining Environments. BCS has made, and
intends to continue to make, substantial investments in architectural,
decorative and entertainment features in its restaurants because it
believes that guests are drawn not only by high quality food and attentive
service, but also by the sense of superior value and satisfaction they
obtain in the Bugaboo Creek Steak House and The Capital Grille settings. At
Bugaboo Creek Steak House, BCS creates a festive mountain lodge atmosphere
by combining the wholesome appeal of the outdoors with the entertainment
value of novel Canadian Rocky Mountain artifacts and electronically
animated wildlife characters. At The Capital Grille, BCS creates an
ambiance of luxury, prestige and tradition with sophisticated architectural
details and decorative finishes. BCS believes that its investment in
creating these environments produces an enhanced dining experience.
25
<PAGE> 33
Build A Broad Customer Base. The wholesome appeal of Bugaboo Creek
Steak House targets a broader customer base than many other casual dining
restaurants, which rely heavily on young, unmarried adults and couples. The
festive lodge atmosphere and entertainment features of Bugaboo Creek Steak
House seek to appeal to entire families as well as couples. The
sophisticated image of The Capital Grille attracts affluent guests and
business executives. By targeting the full spectrum of casual and fine
dining guests, BCS seeks to build a broad customer base.
Clustered Expansion. Whenever possible, BCS intends to cluster
Bugaboo Creek Steak House restaurants principally in the suburbs of medium
sized and larger cities to achieve advertising, management and operational
efficiencies. The clustering approach may, at times, result in the
reduction of average store sales within a market. The Capital Grille units
will be located primarily in the downtown, or similar demographic areas, of
major cities. BCS intends to continue to focus its development of Bugaboo
Creek Steak House restaurants in the northeastern and mid-Atlantic United
States and will consider any major U.S. city for additional The Capital
Grille restaurants.
In calendar 1996, BCS has opened three Bugaboo Creek Steak House
restaurants and one The Capital Grille restaurant and plans to open two
additional The Capital Grille restaurants. Several additional restaurant sites
are also currently under review.
BCS has no immediate plans to franchise. However, BCS believes that
franchising may be appropriate outside its near-term expansion territory and if
potential franchisees with the necessary dinnerhouse experience, stature and
financing express interest, BCS may pursue appropriate franchising
opportunities.
Competition
The restaurant industry is intensely competitive. Bugaboo Creek Steak House
restaurants compete with other casual dining restaurants on the basis of the
price-value relationship, location, service and atmosphere. The Capital Grille
restaurants compete with other fine dining restaurants primarily on the basis of
quality, service and ambiance. Many competitors for both of BCS's concepts are
well established and have substantially greater financial and other resources
than BCS.
One of BCS's strategic principles is to make substantial investments in
architectural, decorative and entertainment features designed to provide a
stimulating and entertaining environment in an effort to develop consumer
loyalty to its restaurant concepts. Although BCS makes this investment in order
to create what it believes will be a sustainable competitive advantage, by
committing more capital to each restaurant than its competitors, BCS may have
less financial flexibility than its competitors to respond to changing consumer
trends.
The restaurant industry generally is affected by changes in consumer
tastes, national, regional or local economic conditions, demographic trends,
traffic patterns and the type, number and location of competing restaurants. In
addition, factors such as inflation, increased food, labor and benefits costs
(including government mandated health insurance and minimum wage increases) and
the lack of experienced management and hourly employees may adversely affect the
restaurant industry in general and BCS's restaurants in particular.
BCS believes its ability to compete effectively will continue to depend
upon its ability to offer high quality menu items with superior service in
distinctive dining environments.
Employees
As of July 15, 1996, BCS had approximately 1,500 employees, of whom 8 are
executive officers, 80 are restaurant management personnel and the remainder are
office staff and hourly restaurant personnel. Many of BCS's hourly restaurant
employees work part-time. None of BCS's employees are covered by a collective
bargaining agreement. BCS considers its employee relations to be good.
26
<PAGE> 34
Trademarks
BCS has registered the Bugaboo Creek Steak House(R) name and associated
design and The Capital Grille(R) name as service marks with the United States
Patent and Trademark Office and has United States service mark or trademark
registration for: "The Flavor of the Canadian Rockies(R)", "Bunyan Onion(R)",
"Whitewater Bugs(R)", "Campfire Chicken and Worms(R)" and "Whine(R)".
BCS regards its trade dress and many of its registered and unregistered
trademarks and service marks as having significant value and as being important
factors in the marketing of its restaurants. Some of BCS's more significant
marks, which appear in its advertisements, menus and elsewhere, are widely
recognized in its markets. BCS's policy is to pursue registration of marks it
considers most significant, to oppose vigorously any infringement of its marks
and to protect its trade dress aggressively. To date BCS has been successful in
enforcing its rights in its trade dress, and is vigorously defending a claim
that BCS infringes the trade dress and certain named menu items of a Minneapolis
based restaurant company.
Government Regulation
BCS is subject to a variety of federal, state and local laws. Each of BCS's
restaurants is subject to licensing and regulation by a number of government
authorities, including alcoholic beverage control, health, safety, sanitation,
building and fire agencies in the state or municipality in which the restaurant
is located. Difficulties in obtaining or failure to obtain required licenses or
approvals could delay or prevent the development of a new restaurant in a
particular area.
A substantial portion of BCS's revenues is attributable to the sale of
alcoholic beverages. Approximately 20% of net restaurant sales at Bugaboo Creek
Steak House restaurants and approximately 37% of net restaurant sales at The
Capital Grille restaurants are currently derived from the sale of beverages,
including alcohol. Alcoholic beverage control regulations require each of BCS's
restaurants to apply to a state authority and, in certain locations, county or
municipal authorities for a license or permit to sell alcoholic beverages on the
premises. Typically, licenses must be renewed annually and may be revoked or
suspended for cause at any time. Alcoholic beverage control regulations relate
to numerous aspects of restaurant operations, including minimum age of patrons
and employees, hours of operation, advertising, wholesale purchasing, inventory
control and handling, storage and dispensing of alcoholic beverages.
The failure of a restaurant to obtain or retain liquor or food service
licenses would severely adversely affect the restaurant's operations. To reduce
this risk, each BCS restaurant is operated in accordance with procedures
intended to assure compliance with applicable codes and regulations.
BCS is subject in certain states to "dram shop" statutes, which generally
provide a person injured by an intoxicated person the right to recover damages
from an establishment that wrongfully served alcoholic beverages to the
intoxicated person. BCS presently carries liquor liability coverage as part of
its existing $1,000,000 comprehensive general liability insurance, as well as
excess liability coverage of $10,000,000 per occurrence, with a $10,000
deductible. BCS has never been named as a defendant in a lawsuit involving "dram
shop" liability.
BCS's restaurant operations are also subject to federal and state laws
governing such matters as the minimum hourly wage, unemployment tax rates, sales
tax and similar matters. Significant numbers of BCS's service, food preparation
and other personnel are paid at rates related to the federal or state minimum
wages, and increases in the minimum wage would increase BCS's labor costs.
The development and construction of additional restaurants will be subject
to compliance with applicable zoning, land use and environmental laws and
regulations.
PROPERTIES
All of BCS's existing restaurants, except for the Bugaboo Creek Steak House
in Henrietta, New York which is owned, are located in either leased space and/or
in owned buildings on leased land. Initial lease periods range from five to 20
years, with all of the leases providing for options to renew which would extend
all
27
<PAGE> 35
leases to at least 15 year terms. All of BCS's leases provide for a minimum
annual rent, and most call for additional rent based on sales volume (generally
3% to 5%) at the particular location when sales exceed specified minimum levels.
Generally, the leases are net leases which require BCS to pay the cost of
insurance, taxes and a portion of the lessors' operating costs. The following
table sets forth BCS's current operating restaurants and their respective
opening dates:
<TABLE>
<CAPTION>
OPENING DATE LOCATION
- ------------------------- -------------------
<S> <C>
BUGABOO CREEK STEAK HOUSE
October 1992............. Warwick, RI
July 1993................ Seekonk, MA
February 1994............ Springfield, VA
April 1994............... Peabody, MA
October 1994............. Watertown, MA
February 1995............ Manchester, CT
May 1995................. Albany, NY
June 1995................ Gaithersburg, MD
July 1995................ Franklin Mills, PA
September 1995........... Henrietta, NY
November 1995............ Portland, ME
January 1996............. Framingham, MA
March 1996............... Poughkeepsie, NY
June 1996................ Braintree, MA
<CAPTION>
OPENING DATE LOCATION
- ------------------------- -------------------
<S> <C>
THE CAPITAL GRILLE
July 1990................ Providence, RI
October 1991............. Boston, MA
November 1994............ Washington, DC
July 1996................ Chestnut Hill, MA
</TABLE>
The Bugaboo Creek Steak House restaurant in Springfield, Virginia is leased
from GOS Properties Limited Liability Company, an affiliated company.
BCS's executive offices are located in approximately 6,500 square feet of
leased space in East Providence, Rhode Island, under a lease expiring in
December 1998.
28
<PAGE> 36
SELECTED CONSOLIDATED FINANCIAL DATA
The following statement of income and balance sheet data were derived from
the audited consolidated (combined) financial statements of BCS. The financial
data for the 40 weeks ended March 31, 1996, was derived from unaudited financial
statements. The unaudited consolidated financial statements include all
adjustments, consisting of normal recurring accruals, which BCS considers
necessary for a fair presentation of the financial position and the results of
operations for this period. The following financial data should be read in
conjunction with the Consolidated (Combined) Financial Statements and Notes
thereto included as Annex D to this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FORTY WEEKS ENDED FISCAL YEARS ENDED
------------------------- ------------------------------
MARCH 31, APRIL 2, JUNE 25, JUNE 26, JUNE 27,
1996 1995 1995 1994 1993
----------- ----------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND RESTAURANT OPERATING
(UNAUDITED) DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net restaurant sales...................... $ 37,921 $ 21,522 $ 29,940 $ 17,124 $ 10,013
Restaurant costs and operating expenses:
Food and beverage costs................. 14,042 7,861 11,048 6,183 3,660
Restaurant operating expenses........... 16,305 8,594 12,003 6,683 4,004
Depreciation and amortization........... 2,468 1,079 1,540 693 408
----------- ----------- -------- -------- --------
Total restaurant costs and
operating expenses............ 32,814 17,534 24,591 13,559 8,072
----------- ----------- -------- -------- --------
Earnings from restaurant operations....... 5,107 3,988 5,349 3,565 1,941
Other (income) expense:
General and administrative expense...... 2,665 1,792 2,528 2,151 1,598
Other (income) expense, net............. (33) (71) (72) (215) (69)
Interest and dividend income............ (76) (363) (386) (147) --
Interest expense........................ 188 -- -- 128 92
----------- ----------- -------- -------- --------
Earnings before taxes..................... 2,362 2,629 3,279 1,648 320
Provision for income taxes................ 827 910 1,108 495 3
----------- ----------- -------- -------- --------
Net income...................... $ 1,536 $ 1,719 $ 2,171 $ 1,153 $ 317
========== ========== ======= ======= =======
Weighted average shares outstanding....... 5,225 5,226 5,227 3,779 2,486
Earnings per share........................ $ 0.29 $ 0.33 $ 0.42
Supplemental pro forma net income......... $ 1,504 $ 636
Supplemental pro forma earnings per
share................................... $ 0.42 $ 0.27
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 966 $ 797 $ 728 $ 734 $ 676
Net working capital....................... 838 4,457 869 12,219 (710)
Total assets.............................. 39,627 27,286 29,492 23,225 6,547
Long-term debt and debt to stockholders,
excluding current portion............... 9,600 -- 787 -- 2,701
Stockholders' equity...................... 24,527 22,422 22,997 20,697 1,320
</TABLE>
29
<PAGE> 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following table sets forth, for the periods indicated, the percentages
which the items in BCS's Consolidated (Combined) Statements of Income bear to
total revenues:
<TABLE>
<CAPTION>
FORTY WEEKS ENDED FISCAL YEARS ENDED
-------------------- ------------------------------
MARCH 31, APRIL 2, JUNE 25, JUNE 26, JUNE 27,
1996 1995 1995 1994 1993
--------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net restaurant sales........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Restaurant costs and operating expenses:
Food and beverage costs................... 37.0 36.5 36.9 36.1 36.5
Restaurant operating expenses............. 43.0 40.0 40.1 39.0 40.0
Depreciation and amortization............. 6.5 5.0 5.1 4.1 4.1
--------- -------- -------- -------- --------
Total restaurant costs and
operating expenses.............. 86.5 81.5 82.1 79.2 80.6
--------- -------- -------- -------- --------
Earnings from restaurant operations......... 13.5 18.5 17.9 20.8 19.4
Other (income) expense:
General and administrative expense........ 7.0 8.3 8.4 12.6 15.9
Other (income) expense, net............... (0.1) (0.3) (0.2) (1.3) (0.6)
Interest and dividend income.............. (0.2) (1.7) (1.3) (0.9) 0.0
Interest expense.......................... 0.5 -- 0.0 0.8 0.9
--------- -------- -------- -------- --------
Earnings before taxes....................... 6.3 12.2 11.0 9.6 3.2
Provision for income taxes.................. 2.2 4.2 3.7 2.9 0.0
--------- -------- -------- -------- --------
Net income.................................. 4.1% 8.0% 7.3% 6.7% 3.2%
--------- -------- -------- -------- --------
</TABLE>
Supplemental Pro Forma Net Income: Prior to January 1, 1994 all of the
consolidated subsidiaries were S corporations with common ownership, and paid no
income taxes other than minimal state tax amounts. Supplemental pro forma net
income has been determined by applying actual federal and state tax rates as
though BCS were taxed as a consolidated C corporation for the years ended June
26, 1994 and June 27, 1993, and by further adjusting after tax net income for
the reduction in compensation paid to stockholders to the extent such amounts
exceeded the maximum compensation payable to such individuals under current
compensation agreements.
Forty Weeks Ended March 31, 1996 Compared to Forty Weeks Ended April 2, 1995.
Restaurants in Operation: During the forty weeks ended March 31, 1996, BCS
opened five new Bugaboo Creek Steak House restaurants. As of March 31, 1996, BCS
owned and operated sixteen restaurants (thirteen Bugaboo Creek Steak House
restaurants and three The Capital Grille restaurants). In addition, BCS manages
three dinnerhouse restaurants under management contracts. As of April 2, 1995
there were six Bugaboo Creek Steak House units and three The Capital Grille
units in operation.
Certain operating expenses were affected by the relative youth of units
that have been open for less than one year (see Restaurant Costs and Operating
Expenses, below). At March 31, 1996, a total of seven of BCS's units had been
open for less than one year, and thus were incurring amortization charges for
pre-opening costs.
Two Bugaboo Creek Steak House restaurants and one The Capital Grille
restaurant were opened in the same period for the prior year. At April 2, 1995,
a total of four units had been open for less than one year, and thus were
incurring amortization charges for pre-opening costs.
A new, smaller Bugaboo Creek Steak House prototype is currently under
development. This 7,200 square foot building, which is 2,000 square feet smaller
in size than BCS's previous prototype, will have 265 dining seats configured to
increase seating efficiency. Management is pleased with the initial sales
results at the recently opened Poughkeepsie unit, which has 260 seats, and
anticipates that the new prototype design will
30
<PAGE> 38
enable BCS to generate strong returns on lower sales volumes, thereby opening
many smaller markets for Bugaboo Creek Steak House development.
Net Restaurant Sales: For the forty week period ending March 31, 1996, net
restaurant sales were $37,920,859, an increase of 76.0% over net restaurant
sales of $21,522,184 for the forty week period ended April 2, 1995. The increase
reflects the addition of 247 restaurant-weeks, 85% over the previous year,
resulting primarily from seven new Bugaboo Creek Steak House restaurants. (A
"restaurant-week" is one week during which a single restaurant is open, so that
two restaurants open during the same week constitutes two restaurant-weeks.)
Average weekly sales for the forty weeks were $70,354, a 4.5% decrease versus
the same period last year. Net restaurant sales were severely impacted by record
setting winter storms in the northeast and mid-Atlantic United States, as well
as the federal government shut down and the lobbyist gift ban.
Restaurant Costs and Operating Expenses: Year-to-date food and beverage
costs of $14,041,662 and $7,860,743 for fiscal years 1996 and 1995,
respectively, were 37.0% and 36.5% as a percentage of net restaurant sales. The
increase as a percentage of net restaurant sales in fiscal 1996 was the result
of higher beef costs experienced early in the fiscal year.
Operating expenses for the forty week period ending March 31, 1996,
increased to $16,304,724 versus $8,594,411 in the prior year and as a percentage
of net restaurant sales increased 3.0 percentage points versus the prior year to
43.0%. The increase was due primarily to higher advertising expenditures,
operating inefficiencies in the newer units, snow removal and repair expenses
and the impact of lower average weekly sales in Bugaboo Creek Steak House units
versus the prior year.
Year-to-date depreciation and amortization expenses were $2,467,545 and
$1,078,663 in fiscal years 1996 and 1995, respectively, or 6.5% and 5.0% of
respective net restaurant sales. The increase in fiscal 1996 was due principally
to increased amortization of new unit pre-opening costs and lower average unit
sales. Pre-opening costs of new units are amortized over the first year of a
restaurant's operation.
Earnings from Restaurant Operations: As a result of the above factors,
earnings from restaurant operations for the forty weeks grew 28.0% to $5,106,658
from $3,988,367 in the prior year. Restaurant operating profit margins were
13.5% and 18.5% of net restaurant sales for fiscal years 1996 and 1995,
respectively. The decline in operating profit margins was largely due to the
weather impact on total sales as well as an increase in Bugaboo Creek weeks as a
percentage of total restaurant weeks.
General and Administrative Expense: General and administrative expense of
$2,664,750 and $1,792,340 for the forty weeks ended March 31, 1996 and April 2,
1995, respectively, declined as a percentage of respective net restaurant sales
to 7.0% from 8.3%. General and administrative expense for the current fiscal
year, which are now being spread over a larger sales base, have been affected by
investments BCS has made in systems and staff in order to achieve the 85%
expansion in year-to-date restaurant-weeks and to prepare for further expansion.
Other (Income) Expense, Net: Other income consists primarily of management
fees, net of allocated overhead expenses, collected from the three non-BCS
restaurants under management contracts, as well as miscellaneous receipts from
vending machines and recycling collections. Year-to-date other income, net, was
$32,789 and $70,755, for fiscal 1996 and 1995, respectively. The reduced income
in the current year resulted primarily from lower sales in the managed
restaurants, and a corresponding reduction in management fees received.
Interest and Dividend Income and Expense: Interest and dividend income is
derived from investments in marketable securities and the short term investment
of excess cash balances. The marketable securities, purchased with the proceeds
of the initial public stock offering in April 1994, have been substantially
liquidated to fund the development of new restaurants. Thus, in the forty week
periods ending March 31, 1996, and April 2, 1995, BCS had interest and dividend
income of $75,756 and $362,640, respectively. Of the total interest costs of
$353,436, paid and accrued, during the forty weeks ended March 31, 1996,
$165,433 related solely to the construction of new units and has been
capitalized as part of construction in progress.
31
<PAGE> 39
Fiscal Year 1995 Compared to Fiscal Year 1994
Net Restaurant Sales: Fiscal 1995 net restaurant sales were $29,939,836,
an increase of 75% from $17,123,747 in fiscal 1994. The increase reflects the
addition of five units, four Bugaboo Creek Steak House restaurants and one The
Capital Grille restaurant, as well as the full year sales of the three units
opened in fiscal 1994. Restaurant weeks increased by 74% to 405 weeks in 1995
versus 233 weeks in the prior year. Comparable restaurant sales increased by
5.1% due primarily to increased guest traffic and to a lesser extent, the
partial year impact of a menu price increase of approximately 1% in January
1995. ("Comparable restaurant sales" growth is the percentage increase in
current year sales over the same period in the prior year. A restaurant is
included in "comparable restaurant sales" commencing with the first quarter
following the week in which it has been open for 18 months. This excludes the
first six months of operations during which a new unit typically benefits from a
high level of initial customer trial.) Average weekly sales of $73,926, a 0.6%
increase from 1994, reflect the increased proportion of Bugaboo Creek Steak
House restaurant weeks to total restaurant weeks versus the prior year.
Restaurant Costs and Operating Expenses: Total restaurant costs and
expenses for fiscal 1995 increased due to the significant increase in restaurant
weeks and the expected short-term operational inefficiencies which occur in new
units. Food and beverage costs for the year averaged 36.9% of net restaurant
sales, an increase of 0.8 percentage points from fiscal year 1994. The increase
resulted primarily from higher beef prices during the last quarter of the year
and from the impact of new units. Restaurant operating expenses of $12,003,275
increased from $6,683,244 in the previous year primarily due to the increase in
restaurant weeks. Restaurant operating expenses increased 1.1 percentage points
to 40.1% of net restaurant sales in fiscal 1995 reflecting the higher labor
expense of new units and the increased proportion of Bugaboo Creek Steak House
restaurant weeks to total weeks. Labor costs for Bugaboo Creek Steak House
restaurants are higher as a percentage of net restaurant sales than The Capital
Grille units. Depreciation and amortization increased to $1,539,611 in fiscal
1995 from $692,942 in fiscal 1994 as a result of the additional units. As a
percentage of net restaurant sales, depreciation and amortization increased by
1.0 percentage point to 5.1% in fiscal 1995. A majority of this increase is due
to higher pre-opening cost amortization. Pre-opening costs of $1,013,681 were
capitalized in fiscal 1995, and will be amortized over the first year of
operation of each restaurant.
General and Administrative Expense: General and administrative expense,
which includes all out-of-restaurant supervisory staff, accounting and
administrative functions, grew to $2,527,866, an increase of $376,647 from the
prior year. The increase is attributable to the salaries, benefits and travel
expenses associated with a fully staffed executive management team as well as an
increase in the general expenses to support an expanding organization. As a
percentage of net restaurant sales, general and administrative expense was 8.4%,
down from 12.6% in 1994, which included stockholder bonuses of $887,500.
Other (Income) Expense, Net: Other income of $71,728 in fiscal 1995 was
generated by BCS primarily from the management of three non-BCS owned
restaurants under management contracts. Beginning April 4, 1994, BCS charged the
managed restaurants a flat fee of 6% of gross revenues for such services, plus
fees to offset the cost of providing laundry and distribution services. This fee
revenue is offset by overhead costs allocated to restaurant management
activities. Prior to April 4, 1994, each restaurant was billed for its pro rata
share (based on sales) of the actual overhead of Phelps Grace Co. Inc. (PGCI),
who provided the management services. Net fees for management activities for
fiscal years 1995 and 1994 were $61,226 and $172,150, respectively.
Interest and Dividend Income: Interest and dividend income increased
significantly to $385,949 in fiscal 1995 from $147,197 in fiscal 1994 and was
derived from marketable securities purchased with the proceeds from the initial
public stock offering in fiscal 1994. The marketable securities were
substantially liquidated during the 1995 fiscal year and the proceeds of sales
were used primarily to fund the new unit expansion in fiscal 1995.
Interest Expense: Interest expense of $5,000 incurred in fiscal 1995 has
been capitalized as a cost of new unit construction. Interest expense in fiscal
1994 of $128,217 was from debt to banks and stockholders prior to the initial
public offering.
32
<PAGE> 40
Fiscal Year 1994 Compared to Fiscal Year 1993
Net Restaurant Sales: Net restaurant sales in fiscal 1994 were
$17,123,747, an increase of 71% over fiscal 1993. The increase reflects the
addition of 91 restaurant weeks, 64% over previous year, resulting from three
new Bugaboo Creek Steak House restaurants and a full 52 weeks of operation for
the first Bugaboo Creek Steak House restaurant opened in Warwick, Rhode Island
during fiscal 1993, as well as an increase in comparable restaurant sales of
3.3%. The increase in comparable restaurant sales represents primarily increases
in guest traffic, but also the partial year impact of an increase in menu prices
of approximately 2% in January 1994.
Restaurant Costs and Operating Expenses: Food and beverage costs declined
to 36.1% of net restaurant sales, or 0.4 percentage points lower than fiscal
1993. The decline results primarily from lower beef prices during the last half
of the year and from improved operating efficiencies. Operating expenses
decreased to 39.0% of net restaurant sales, or 1.0 percentage point lower than
fiscal 1993. The improvement results from improved labor scheduling and the
impact of comparable restaurant sales growth upon these semi-fixed costs.
Approximately one-half of operating expenses do not vary significantly with
sales volume. Depreciation and amortization remained constant as a percentage of
net restaurant sales in fiscal 1994 versus fiscal 1993, but increased from
$408,346 to $692,942. The increase results from new restaurants opened during
the year.
General and Administrative Expense: General and administrative expense
also includes stockholder bonuses paid based on stock ownership during the
period when BCS operated as a group of S corporations with common ownership.
These bonuses totaled $887,500 for fiscal 1994 and $992,500 for fiscal 1993.
General and administrative expense decreased as a percentage of net restaurant
sales to 12.6% in fiscal 1994 from 15.9% in fiscal 1993.
Other (Income) Expense, Net: Other income of $215,288 and $68,703 in
fiscal years 1994 and 1993, respectively, was generated by BCS primarily from
the management of three non-BCS restaurants under management contracts.
Beginning April 4, 1994, BCS charged the managed restaurants a flat fee of 6% of
gross revenues for such services, plus fees to offset the cost of providing
laundry and distribution services. This fee revenue is offset by overhead costs
allocated to restaurant management activities. Prior to April 4, 1994, each
restaurant was billed for its pro rata share (based on sales) of the overhead of
PGCI. Net fees for management activities for fiscal years 1994 and 1993 were
$172,150 and $30,560, respectively.
Liquidity and Capital Resources
In fiscal 1996, cash used in investing activities was applied almost
entirely to the construction of new restaurants. The investing activities during
the period were financed substantially from bank debt and operating cash flows.
Cash used in investing activities in fiscal 1995 includes the proceeds from
the sale of $11,875,340 in marketable securities which were purchased from the
proceeds of the initial public offering in April 1994. Purchases of property and
equipment, primarily for new restaurants, totaled $15,791,091 during fiscal
1995. In addition to the five new Bugaboo Creek Steak House restaurants noted
earlier, there were three Bugaboo Creek Steak House restaurants in various
stages of development at fiscal 1995 year end. Accounts payable and accrued
expenses as of June 25, 1995, increased by $2,735,046 due in large part to the
increased development activity.
On January 26, 1996, BCS obtained a $20,000,000 unsecured revolving line of
credit from Citizens Bank and Fleet Bank to fund future expansion. Cash provided
from financing activities in fiscal 1996 consists primarily of $8,800,000 of net
cash borrowings against this credit line. The outstanding advances are subject
to interest, at BCS's option, at either the Citizen's Bank's prime lending rate,
or 200 basis points over the London Interbank Offered Rate.
Impact of Inflation: Inflation has not been a significant factor in BCS's
costs. However, generally menu prices have been adjusted for increases in food
and other costs when possible. When practicable, BCS contracts for future food
purchases at specified prices to ensure product availability at predictable
costs. A large portion of BCS's work force is paid at rates tied to the minimum
wage. Any increases in the minimum
33
<PAGE> 41
wage would increase BCS's labor cost. There are no assurances that inflation
will not have a material impact on future operations.
Seasonality: Although individual restaurants have seasonal patterns of
performance that depend on local factors, aggregate sales by BCS's restaurants
have not displayed pronounced seasonality, other than higher sales during the
Christmas holidays which fall into BCS's third fiscal quarter. Extreme weather,
especially during the winter months, may also adversely affect sales.
Other Information: SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, became effective
for fiscal years beginning after December 15, 1995. SFAS 121 provides guidance
for recognition of impairment losses related to long-lived assets (for example,
property, plant and equipment), and certain intangibles and related goodwill for
(1) assets to be held and used and (2) assets to be disposed of. Specifically,
any impairment loss to be recognized must be recorded in continuing operations.
BCS must adopt SFAS No. 121 in fiscal 1997. BCS does not expect any material
impact from implementation of this statement.
BCS Executive Officers and Directors
Edward P. Grace, III, age 45, Chairman of the Board, Chief Executive
Officer and President, has served in such capacities since the founding of BCS.
Since 1989, he has been primarily engaged in developing BCS's restaurants, while
providing executive services to three additional restaurants which he owns alone
or with Samuel J. Orr, Jr., a director of BCS and Mr. Grace's stepfather. From
1974 to 1989, Mr. Grace developed and operated several successful restaurant
concepts. Mr. Grace is currently a director of the National Restaurant
Association, a trustee of Johnson & Wales University and a trustee of Roger
Williams University.
Mark A. Peterson, age 45, Senior Vice President and Chief Financial
Officer, joined BCS in April 1995. Mr. Peterson has served in several executive
capacities with the restaurant subsidiary of General Mills, Inc. (1983-1994),
including: Senior Vice President, Financial Operations for Red Lobster, Vice
President, Controller for The Olive Garden and Vice President, Information
Systems. Most recently, Mr. Peterson held the position of Vice President,
Controller for Walden Book Company, a subsidiary of K-Mart. Prior experience
includes various financial positions with International Multifoods, Inc. and as
an auditor for Arthur Andersen & Co.
James P. Barrasso, age 36, Vice President of Operations for The Capital
Grille, joined BCS in April 1996. Mr. Barrasso was most recently the Director of
Operations for Morton's of Chicago, which he joined in 1991 as a General
Manager. From 1981 to 1991, Mr. Barrasso worked for the Barnsider Management
Corporation where he served in various management capacities, including menu
development, purchasing and operations supervisor. Mr. Barrasso also holds a
degree in Culinary Arts from Johnson & Wales University.
Ellen C. Moore, age 36, Vice President of Training, joined BCS in January
1996. Previously, Ms. Moore was Director of Training of Levy Restaurants since
1994. Ms. Moore was also the Director of Education for the National Restaurant
Association's Educational Foundation from 1988 to 1994.
Orlando M. Saraiva, age 39, Vice President of Purchasing and Kitchen
Administration since 1986, has been associated with Mr. Grace since 1977 and has
served in various capacities in Mr. Grace's restaurant operations. Mr. Saraiva's
current responsibilities include coordination of purchasing and kitchen
administration for all BCS restaurants.
Corinne A. Sylvia, age 44, Vice President of Administration and Secretary
since 1986, has been associated with Mr. Grace since 1983 and is currently
responsible for all administrative and human resources matters. Ms. Sylvia was
previously employed at Flagstaff Foodservice Distributor (1972-1982), a regional
wholesale food distribution company.
Charles T. Francis, age 53, a Director of BCS since April 1994, has served
as President of Ryan, Elliott & Co. of Rhode Island, Inc. (commercial,
industrial and office real estate) since 1978.
Ronald K. Machtley, age 48, a Director of BCS since April 1995, is
currently President of Bryant College in Smithfield, Rhode Island. From 1995 to
May 1996 he was a partner in the Washington, D.C. law firm,
34
<PAGE> 42
Wilkinson, Barker, Knauer & Quinn. From January 1989 to January 1995, he served
as the Rhode Island First Congressional District's representative to the U.S.
House of Representatives. Prior thereto, he was a partner of a private law firm.
Samuel J. Orr, Jr., age 77, a Director of BCS since December 1993, was an
attorney and, until his retirement from the bench, served as a Probate Judge in
the State of Connecticut from 1969 until 1982. Mr. Orr is the stepfather of Mr.
Grace.
Guy B. Snowden, age 50, a Director of BCS since December 1993, is currently
the Co-Chairman, President and Chief Executive Officer of GTECH Holdings
Corporation (lottery products and services). Mr. Snowden was a co-founder of
GTECH Corporation, the principal operating subsidiary of GTECH Holdings
Corporation, and has been Chief Executive Officer of GTECH Corporation since its
inception in 1980. He also served as its Chairman from 1987 to 1990 and has been
its President since 1989.
John A. Yena, age 55, a Director of BCS since October 1995, has served as
President of Johnson & Wales University since 1989. Prior thereto he served as
Executive Vice President and Dean of the College.
Executive Compensation
The following table summarizes the compensation paid or accrued by BCS to
its chief executive and each executive officer (the "named executive officers")
who earned more than $100,000 in salary and bonus for the fiscal year ended June
30, 1996 ("fiscal 1996"), for services rendered in all capacities to BCS during
fiscal 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION(A) SECURITIES
-------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(B) OPTIONS/SARS COMPENSATION
----------------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Edward P. Grace, III............... 1996 $150,000 $ 17,500 0 0
(Chairman, CEO and President) 1995 150,000 23,750 0 0
1994 72,116 562,387 20,000 0
Mark A. Peterson................... 1996 130,000 14,000 15,000 $ 50,000(d)
(Senior Vice President and 1995 27,000 0 20,000 0
CFO)(c) 1994 N/A N/A N/A N/A
Clifford G. Cartwright............. 1996 96,463 14,000 10,000 0
(Vice President of Operations)(e) 1995 93,029 17,750 5,000 0
1994 88,270 19,000 12,500 0
</TABLE>
- ---------------
(a) Any perquisites or other personal benefits received from BCS by any of the
named executives were substantially less than the reporting thresholds
established by the Commission (the lesser of $50,000 or 10% of the
individual's cash compensation).
(b) All compensation paid to Mr. Grace during the first six months of fiscal
1994 was paid as bonuses by BCS's operating subsidiaries, based upon their
respective interests in earnings.
(c) Mr. Peterson joined BCS in April 1995.
(d) Represents $38,986 for relocation expense reimbursement and $11,014 for tax
gross-up payments.
(e) Mr. Cartwright's employment terminated in July 1996.
Employment Arrangements and Other Transactions
BCS and Mr. Grace have entered into an employment agreement effective
January 1, 1994 which provided for a term of three years at an initial annual
compensation of $150,000, subject to adjustment in the discretion of the
Compensation Committee after the first year, plus a cash bonus under BCS's cash
bonus policy up to a maximum of 30% of his then base salary. The employment
agreement also provides Mr. Grace
35
<PAGE> 43
with insurance and other benefits and an automobile allowance. Mr. Grace's
employment agreement also contains non-competition provisions that prohibit him
from acquiring, in addition to his current interests, any new interests in any
restaurant business. The period covered by the non-competition provision ends
upon the later of the scheduled expiration of the term of employment or one year
after Mr. Grace's resignation or termination. To activate this non-competition
provision BCS must notify Mr. Grace and continue his salary and benefits during
the covered period.
Option Plans. The following table sets forth, for the named executive
officers, information regarding stock options granted during fiscal 1996
pursuant to BCS's 1994 Stock Plan. There were no stock appreciation rights
granted during such year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
NUMBER % OF TOTAL RATES
OF OPTIONS/SARS OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM(A)
OPTIONS/SARS IN FISCAL PRICE EXPIRATION ------------------
NAME GRANTED YEAR ($/SH) DATE 5%($) 10%($)
- -------------------------------- ------------ ------------ -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Edward P. Grace, III............ -0- -0- -- -- -- --
Mark A. Peterson................ 15,000(b) 7.5% 12.00 1/5/2006 $18,460 $100,470
Clifford G. Cartwright.......... 10,000(b) 5.0% 12.00 1/5/2006 $27,690 $150,702
</TABLE>
- ---------------
(a) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. They are
calculated by multiplying the number of options granted by the difference
between a future hypothetical stock price and the option exercise price and
are shown pursuant to rules of the Commission. They assume the value of BCS
Common Stock appreciates 5% or 10% each year, compounded annually, for the
ten-year option term. They are not intended to forecast possible future
appreciation, if any, of such stock price or to establish a present value
for the options.
(b) These incentive stock options, which were granted under the 1994 Stock Plan
are exercisable in three equal annual installments, subject to acceleration
on a change of control, and have a term of ten years. The options terminate
three months after termination of employment, other than for death,
disability or retirement at age 55. The purchase price for the shares on
exercise of options may be paid in cash or in shares of BCS Common Stock
already owned by the option holder, or by a combination thereof.
The following table sets forth certain information regarding currently
outstanding stock options held by the named executive officers as of the end of
fiscal 1996. No options were exercised during fiscal 1996.
AGGREGATED YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS/SARS AT VALUE OF UNEXERCISED IN-THE
FISCAL YEAR END 1995 MONEY OPTIONS/SARS($)(A)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------------------------------- ------------------------- ---------------------------
<S> <C> <C>
Edward P. Grace, III.............................. 13,334/ 6,666 0/0
Mark A. Peterson.................................. 6,667/28,333 0/0
Clifford G. Cartwright............................ 10,000/17,500 0/0
</TABLE>
- ---------------
(a) Based on the closing price of BCS Common Stock on June 28, 1996 ($8.50),
less the exercise price.
Compensation of BCS Directors
Those directors who are not also officers and employees of BCS receive
options to purchase BCS Common Stock under BCS's Non-Employee Director Stock
Plan (the "Director Plan") as compensation for
36
<PAGE> 44
their services to BCS, and are also reimbursed for reasonable out-of-pocket
expenses incurred in attending Board and Committee meetings. Under the Director
Plan, each incumbent non-employee director received an initial non-qualified
option to purchase 5,000 shares of BCS Common Stock on April 6, 1994, the date
of BCS's initial public offering. Non-employee directors elected after April 6,
1994, receive an initial non-qualified option to purchase 5,000 shares of BCS
Common Stock on the date of the director's initial election to the Board of
Directors. Beginning in 1995, each non-employee director (other than a director
first elected at or within six months of the annual stockholders meeting)
receives an annual nonqualified option to purchase 5,000 shares of BCS Common
Stock as of the first Board meeting after each annual stockholders meeting. All
options have an exercise price equal to the market price of BCS Common Stock on
the date of the grant and are exercisable for a term of ten years. Options vest
over a three year period with 25% vesting six months after the grant date and
the balance in three annual installments commencing on the first anniversary of
the grant date, unless automatically accelerated in the event of death,
disability or a change of control. A total of 100,000 shares have been reserved
for issuance under the Director Plan.
Directors who are also officers and employees of BCS are not entitled to
receive any compensation in addition to their compensation for services as
officers or employees.
Security Ownership of Directors, Officers and Principal Stockholders of BCS
The following table sets forth certain information with respect to the
beneficial ownership of BCS Common Stock as of August , 1996 by each of
BCS's directors, the executive officers named in the Compensation Table
appearing under "-- Executive Compensation," all current directors and executive
officers of BCS as a group and each person believed to be a beneficial owner of
more than 5% of BCS Common Stock.
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OF
DIRECTORS AND OFFICERS AND 5% SHAREHOLDERS OWNED(A) CLASS
- ----------------------------------------------------------------------- ------------ -------
<S> <C> <C>
Edward P. Grace, III(b)................................................ 2,428,332(c) 46.4%
Charles T. Francis..................................................... 7,350(d) *
Ronald K. Machtley..................................................... 3,000(e) *
Samuel J. Orr, Jr.(f).................................................. 648,450(g) 12.4
Guy B. Snowden......................................................... 190,250(h) 3.6
John A. Yena........................................................... 15,000(i) *
Clifford G. Cartwright................................................. 52,500(j) 1.2
Mark A. Peterson....................................................... 10,167(k) *
FMR Corp.(l)........................................................... 478,000 9.15
All current directors and executive officers as a group (10 persons)... 3,401,381(m) 64.9
</TABLE>
- ---------------
* Less than 1%.
(a) Except as otherwise noted, each person or entity named in the table has sole
voting and investment power with respect to all shares of BCS Common Stock
listed as owned by such person or entity. All information with respect to
beneficial ownership has been furnished by the respective directors,
officers and 5% owners. Except as set forth above, management knows of no
person who, as of August , 1996, owned beneficially more than 5% of the
outstanding BCS Common Stock. Includes, where applicable, shares issuable
upon exercise of stock options granted under the Bugaboo Creek Steak House,
Inc. Non-Employee Director Stock Plan (the "Director Plan") or the Bugaboo
Creek Steak House, Inc. 1994 Stock Plan (the "1994 Stock Plan"), which
options are presently or will be exercisable within 60 days of the date of
this Joint Proxy Statement/Prospectus.
(b) Mr. Grace's business address is 1275 Wampanoag Trail, East Providence, Rhode
Island 02915.
(c) Includes 13,332 shares of BCS Common Stock issuable upon exercise of options
granted under the 1994 Stock Plan which are presently or will become
exercisable within 60 days.
(d) Includes 6,250 shares of BCS Common Stock issuable upon exercise of options
granted under the Director Plan which are presently or will become
exercisable within 60 days; 1,000 shares of BCS
37
<PAGE> 45
Common Stock owned jointly by Mr. Francis and his wife; and 100 shares owned
by Mr. Francis' son as to which Mr. Francis disclaims beneficial ownership.
(e) Includes 2,500 shares of BCS Common Stock issuable upon exercise of options
granted under the Director Plan which are presently or will become
exercisable within 60 days.
(f) Mr. Orr's residence address is 136 N. Collier Boulevard, Marco Island,
Florida.
(g) Includes 6,250 shares of BCS Common Stock issuable upon exercise of options
granted under the Director Plan which are presently or will become
exercisable within 60 days; 2,200 shares of BCS Common Stock owned by Mr.
Orr's wife; and 630,000 shares held by the Samuel J. Orr, Jr., Grantor
Retained Annuity Trust dated January 31, 1994, of which Mr. Orr is the
Trustee and beneficiary.
(h) Includes 6,250 shares of BCS Common Stock issuable upon exercise of options
granted under the Director Plan which are presently or will become
exercisable within 60 days; and 22,000 shares held by trusts for the benefit
of Mr. Snowden's children of which Mr. Snowden's wife is a trustee or
co-trustee.
(i) Includes 12,500 shares of BCS Common Stock owned of record by Johnson &
Wales University. Mr. Yena is an officer of Johnson & Wales University and,
for purposes of disclosure of beneficial ownership under Section 13(d) of
the Securities Exchange Act of 1934, as amended, Mr. Yena may be deemed to
be a beneficial owner of the 12,500 shares owned by the University. Includes
2,500 shares of BCS Common Stock issuable upon exercise of options granted
under the Director Plan which are presently or will become exercisable
within 60 days.
(j) Includes 10,000 shares of BCS Common Stock issuable upon exercise of options
granted under the 1994 Stock Plan which are presently or will become
exercisable within 60 days.
(k) Includes 6,667 shares of BCS Common Stock issuable upon exercise of options
granted under the 1994 Stock Plan which are presently or will become
exercisable within 60 days.
(l) The following information is based upon a Schedule 13G dated February 14,
1996, filed by FMR Corp. with the Commission. As disclosed in the Schedule
13G, FMR Corp.'s beneficial ownership is based on the following: Fidelity
Management & Research Company ("Fidelity"), a wholly-owned subsidiary of FMR
Corp. and registered investment adviser, is the beneficial owner of 478,000
shares as a result of acting as investment adviser to Fidelity Retirement
Growth Fund (the "Retirement Fund") which owns 478,000 shares. Edward C.
Johnson 3d, FMR Corp., through its control of Fidelity, and the Retirement
Fund each has sole power to dispose of the 478,000 shares owned by the
Retirement Fund. Neither FMR Corp. nor Edward C. Johnson 3d has the sole
power to vote or direct the voting of shares owned directly by the
Retirement Fund, which power resides with the Retirement Fund's Board of
Trustees. Members of the Edward C. Johnson 3d family and trusts for their
benefit are the predominant owners of the Class B shares of FMR Corp.,
representing approximately 49% of the voting power of FMR Corp. Edward C.
Johnson 3d and Abigail P. Johnson own 24.5% of the outstanding voting common
stock of FMR Corp. Mr. Johnson is Chairman of FMR Corp. and Abigail P.
Johnson is a director of FMR Corp. The Johnson family group and all other
Class B shareholders have entered into a shareholder's voting agreement
under which all Class B shares will be voted in accordance with the majority
vote of Class B shares. Accordingly through their ownership of voting common
stock and the execution of the shareholder's voting agreement, members of
the Johnson family may be deemed to form a controlling group with respect to
FMR Corp. The business address of FMR Corp., Fidelity, the Retirement Fund
and Mr. Johnson is 82 Devonshire Street, Boston, Massachusetts.
(m) Includes 55,081 shares of BCS Common Stock issuable upon exercise of options
granted under the Director Plan or the 1994 Stock Plan which are presently
or will become exercisable within 60 days.
Certain Relationships and Related Transactions
Management Services Agreements. BCS has entered into management services
agreements with BRI, HSF and OGM, pursuant to which BCS provides to these
non-BCS restaurants operating supervision, marketing support, centralized
purchasing, distribution of fresh seafood, produce and certain meats, routine
maintenance and repairs, laundry, accounting, bookkeeping and other management
and administrative services. BCS charges these non-BCS restaurants a fee for
these services in an amount equal to the total of: (i) 6% of their respective
gross revenues; plus (ii) a pro rata share, based on relative sales of all
restaurants receiving distribution services from BCS, of the total costs and
expenses of providing such services, restaurant
38
<PAGE> 46
supplies, insurance, advertising and other costs incurred for the direct benefit
of a non-BCS restaurant and not as ordinary overhead of BCS are reimbursed by
the non-BCS restaurants on a weekly basis. During fiscal 1995, total fees for
management of these non-BCS restaurants aggregated $396,777.
Lease of Springfield, Virginia Site. Messrs. Grace, Orr and Snowden are
the owners of GOS, a Virginia limited liability company which holds title to the
site of the Bugaboo Creek Steak House restaurant located in Springfield,
Virginia. Before GOS acquired the site, BCS had negotiated a lease with an
independent third party which had the right to acquire the site. When the third
party failed to acquire the site, Messrs. Grace, Orr and Snowden formed GOS to
acquire it. BCS now leases the site from GOS on the same terms which were
negotiated with the independent third party. The lease provides a term of 20
years (assuming exercise of both renewal options) with annual rent as follows:
$130,000 in the initial 10 year term; $156,000 in the first five year renewal
term; and $171,600 in the second five year renewal term. The lease also requires
additional rent equal to 5% of the amount by which annual gross restaurant
revenues exceed: $2,600,000 in the initial 10 year term; $3,120,000 in the first
five year renewal term; and $3,432,000 in the second five year renewal term.
During fiscal 1993 and 1994, BCS advanced to GOS amounts necessary to pay
the purchase deposit, mortgage installments and property taxes for the site,
which indebtedness was repaid by GOS as rent payments were received under the
Virginia lease. As of March 31, 1996, this amount had been paid in full.
39
<PAGE> 47
THE MERGER
The following information provides certain information pertaining to the
Merger. This description does not purport to be complete and is qualified in its
entirety by reference to the Annexes hereto, including the BCS Merger Agreement,
a copy of which is set forth in Annex A to this Joint Proxy Statement/Prospectus
and is incorporated herein by reference, and including the WPC Merger Agreements
and the WPC Purchase Agreement filed as exhibits to the Registration Statement
on Form S-4 of which this Joint Proxy Statement/Prospectus is a part. All LSI
shareholders and BCS stockholders are urged to read the Annexes in their
entirety.
GENERAL
The Merger Agreements provide for (i) the merger of a wholly-owned
subsidiary of LSI with and into BCS, which shall be the surviving corporation
and, as a result thereof, become a wholly-owned subsidiary of LSI, (ii) the
merger of several related corporations, the WPC Merger Parties, with and into
WPC, a wholly-owned subsidiary of LSI, which shall be the surviving corporation,
and (iii) the purchase by WPC of a certain parcel of real estate from parties
related to BCS, the WPC Purchase Parties. At the time the Merger becomes
effective, each outstanding share of BCS Common Stock, each outstanding share of
the capital stock or membership interest of the WPC Merger Parties and the
interest of the WPC Purchase Parties in the real estate, will be converted into
the right to receive shares of LSI Common Stock. If the issuance of LSI Common
Stock pursuant to the Merger Agreements is approved at the LSI Meeting, the BCS
Merger Agreement is adopted at the BCS Meeting, all required governmental and
other consents and approval are obtained, and all other conditions of the
obligations of the parties to consummate the Merger are either satisfied or
waived (as permitted), the Merger will be consummated.
BACKGROUND OF THE MERGER
LSI
In January 1996, while they were both attending a meeting of the National
Restaurant Association Board of Directors, Richard E. Rivera, President and
Chief Executive Officer of LSI, and Edward P. Grace, III, President and Chief
Executive Officer of BCS, discussed, in general terms, their respective
companies' concepts, operations and expansion plans. In late February 1996,
Messrs. Rivera and Grace again met at which time Mr. Grace described BCS's plans
for growth and discussed the potential benefits which might result from
combining BCS with a larger restaurant company. Mr. Rivera advised Mr. Grace
that LSI was not then in a position to consider a transaction with BCS, but that
he would contact Mr. Grace if LSI were in such a position in the future.
In mid-April 1996, Mr. Rivera called Mr. Grace and indicated that LSI would
be interested in exploring a potential transaction with BCS. On April 17, 1996,
both companies entered into a mutual confidentiality agreement and the companies
subsequently exchanged certain non-public information. On April 24, 1996
representatives of LSI and BCS and their respective financial advisors met to
discuss the possible acquisition of BCS by LSI and terms for such an
acquisition. Discussions between the companies continued and in late May 1996
management of LSI proposed that the parties attempt to negotiate a definitive
merger agreement between them on the basic economic terms reflected in the BCS
Merger Agreement. Both companies and their financial advisors and legal counsel
met again on May 30 and 31 and June 3, 1996 to discuss the terms of an agreement
and to continue with their investigations of each other.
On Wednesday, June 5, the LSI Board of Directors met to consider the
substance of a proposal for the merger of BCS with LSI on the exchange ratio
included in the BCS Merger Agreement. At this meeting, Robinson-Humphrey
reviewed with the LSI directors its financial analysis of BCS and BCS combined
with LSI on a pro-forma basis. The LSI directors considered BCS and its two
restaurant concepts and how they would fit with LSI's current concepts. The LSI
directors discussed an analysis of BCS's current operations and the actions that
LSI management felt should be taken to improve the profitability of existing and
future Bugaboo Creek Steak House and The Capital Grille restaurants. The LSI
directors considered the attractiveness of these two concepts, their positions
in their current geographical areas and expansion opportunities,
40
<PAGE> 48
potential administrative and operational synergies from combining the two
operations, as well as the challenges to LSI management in improving the
operations and financial performance of the BCS restaurants without diverting
attention from continued improvements in LSI operations. Following this
discussion, the LSI directors authorized continued negotiations with BCS.
The LSI Board of Directors met by conference telephone on June 6, 1996 for
a report on progress and again authorized continued negotiations with BCS.
In connection with LSI's continuing investigation of BCS, LSI was advised
by its accountants that LSI would be required to acquire the WPC Merger Parties
and the WPC Property to be assured of accounting for the BCS Merger on a
pooling-of-interests basis. In addition to its continuing investigation of and
negotiation with BCS, LSI investigated the assets and operations of the WPC
Merger Parties and the WPC Property and negotiated acquisition agreements with
their owners who are also major stockholders and directors of BCS.
On June 14, 1996, LSI's Board of Directors met to review the Merger
Agreements that had been negotiated with BCS. The LSI directors reviewed with
LSI's legal counsel the terms of the proposed Merger Agreements.
Robinson-Humphrey reviewed with the LSI directors its financial summary of BCS's
operations and the operations of the WPC Merger Parties and the combination of
BCS, the WPC Merger Parties and the WPC Property with LSI on a proforma basis.
The LSI directors discussed the fact that LSI's accountants had advised that in
order to account for the acquisition of BCS on a pooling-of-interests basis, it
would be necessary for LSI to also acquire the WPC Merger Parties and the WPC
Property, which are related business assets and are owned by major stockholders
of BCS. The LSI directors discussed the proposed method of valuing the WPC
Merger Parties and the WPC Property for purposes of this acquisition and the
fact that these three restaurants are currently being managed by BCS under
management contracts and that the land is occupied by one Bugaboo Creek Steak
House and one of the three other restaurants being acquired. The LSI directors
considered the issues with respect to the proposed acquisition that had been
considered at their June 5 and June 6, 1996, meetings and discussed these in
light of management's continued investigation and evaluation of BCS, the WPC
Merger Parties and the WPC Property and the terms of the definitive Merger
Agreements. At this meeting, Robinson-Humphrey delivered to the LSI Board of
Directors their opinion that the consideration to be paid by LSI as reflected in
the Merger Agreements was fair, from a financial point of view, to the
shareholders of LSI. Following this discussion, the LSI Board of Directors
unanimously approved the issuance of LSI Common Stock pursuant to the Merger
Agreements and authorized LSI to enter into those agreements.
BCS
During the latter half of 1995 and early 1996, BCS received several general
indications of potential interest in a transaction with BCS. This, combined with
a concern of BCS management as to capital availability to continue its new
restaurant expansion plan prompted BCS to retain Tucker Anthony on January 30,
1996, to act as BCS's exclusive financial advisor with respect to preliminarily
exploring the range of values that might be obtained in a possible merger or
sale of all or a substantial portion of its stock or assets.
In January 1996, Richard E. Rivera, the President and CEO of LSI, and
Edward P. Grace, III, Chairman, President and CEO of BCS, while both were
attending a National Restaurant Association Board of Directors meeting,
discussed in general terms, their companies' respective concepts, operations and
expansion plans. Messrs. Grace and Rivera have known each other for several
years and have a high level of mutual respect. In early February 1996, Messrs.
Grace and Rivera met again, at which time Mr. Grace described BCS's plans for
growth and discussed the potential benefits which might result from combining
BCS with a larger restaurant company. Mr. Rivera advised that LSI was not then
in a position to consider a transaction with BCS, but that he would contact Mr.
Grace if LSI were in such a position in the future. All conversations between
BCS and LSI ceased at this time.
On March 1, 1996, LSI filed a registration statement contemplating the
issuance of LSI Common Stock. On March 26, 1996, LSI offered 2,156,250 shares of
LSI Common Stock to the public at an offering price of $22.50 per share.
In mid-April 1996, Mr. Grace received a telephone call from Mr. Rivera who
indicated that LSI would be interested in exploring a potential transaction with
BCS. On April 17, 1996, both companies entered into a
41
<PAGE> 49
mutual confidentiality agreement and the companies subsequently provided each
other with certain non-public information.
On April 24, 1996, management of the two companies, together with their
respective financial advisors, met in Boston, Massachusetts to review the
current and future financial and operating performance of BCS and the basis on
which a transaction might be structured. At its regularly scheduled meeting on
April 25, 1996, the BCS Board of Directors reviewed the status of these
discussions and authorized BCS management to continue to explore a possible
transaction with LSI. There followed a series of discussions among BCS, LSI and
their respective financial advisors which culminated on May 29, 1996, with a
preliminary proposal by the management of LSI for the acquisition of BCS by
means of a merger in which each BCS stockholder would receive LSI Common Stock
with a value equal to $10.25 per share, based on the then current market value
of the LSI Common Stock of $27.25 per share. Under the terms of the proposal
(which were ultimately reflected as the exchange ratio in the BCS Merger
Agreement), the exchange ratio would be adjusted if the value of the LSI Common
Stock declined prior to closing so as to maintain the $10.25 per share valuation
down to a value for LSI Common Stock of $24.00 per share, with both parties
having the right to withdraw from the transaction if the trading price of the
LSI Common Stock fell below $21.00 per share for five consecutive days prior to
consummation of the transaction. LSI's proposal contemplated that the merger
would be accorded pooling-of-interests treatment for accounting purposes and
that Mr. Grace, the owner of 46.2% of the BCS Common Stock, would agree to vote
his shares of BCS Common Stock in favor of the merger with LSI.
On May 30 and 31, management of the two companies, together with their
respective financial and legal advisors, met in Atlanta, Georgia to review LSI's
financial and operating performance and projections and to continue the review
of BCS's performance and projections. These discussions were continued in
Providence, Rhode Island on June 3rd. Later the same day, the Board of Directors
of BCS met to consider LSI's proposal. At the meeting, representatives of Tucker
Anthony reviewed the background of the transaction and the terms of the
proposal, and discussed their financial analysis with respect thereto. The BCS
Board considered LSI's steak house concept and how BCS would fit within the LSI
organization, LSI's historical and recent operating performance, competitive
position and prospects, and how the proposed transaction would assist BCS in
furthering its expansion plans and reviewed other strategic alternatives
available to BCS. Based upon the Board's review of LSI's proposal and the
preliminary analysis of Tucker Anthony referenced above, the Board members
authorized management to continue negotiations with LSI.
During the next ten days, BCS and its financial and legal advisors
negotiated the terms of the BCS Merger Agreement with LSI and continued their
review of LSI's financial and operating performance and projections. During this
period, both companies were advised by KPMG Peat Marwick LLP, accountants for
both BCS and LSI, that in order to assure pooling-of-interests treatment for the
transaction, LSI should also acquire three restaurants owned and operated by
entities owned by Mr. Grace alone or jointly by Mr. Grace and Samuel J. Orr, a
director of BCS -- Bentley's Restaurant, Inc., Hemenway Sea Foods, Inc. and Old
Grist Mill Tavern, Inc. -- as well as GOS Properties Limited Liability Company,
which is owned by Mr. Grace, Mr. Orr and Guy B. Snowden, also a director of BCS,
and owns the real property on which the Bugaboo Creek Steak House restaurant in
Springfield, Virginia is located, and real property located in Seekonk,
Massachusetts owned by Mr. Grace and Mr. Orr, which is leased to Old Grist Mill
Tavern, Inc. The terms of these agreements were negotiated separately by LSI and
Mr. Grace in his capacity as sole or joint owner of these restaurants and real
estate.
On June 14, 1996, the Board of Directors of BCS met to consider the
proposed BCS Merger Agreement. At the meeting, senior management and BCS's legal
advisors summarized the terms of the proposed BCS Merger Agreement and related
documents. Representatives of Tucker Anthony reviewed the terms of the proposed
BCS Merger, discussed their financial analysis with respect thereto, and orally
advised the Board that, as of such date, in their opinion, the consideration to
be received by the holders of BCS Common Stock other than the principal
stockholder and affiliates ("BCS Stockholders") pursuant to the BCS Merger
Agreement was fair to such holders. Based upon the Board's review and
consideration of the terms of the proposed BCS Merger Agreement, and, among
other things, the oral opinion of Tucker Anthony referenced above, the Board
members who were present unanimously determined that the BCS Merger was fair to,
and in the best interests of, BCS and the BCS Stockholders, approved the BCS
Merger Agreement and recommended that the BCS stockholders approve and adopt the
BCS Merger Agreement.
42
<PAGE> 50
The BCS Merger Agreement was executed later the same day and a joint press
release was issued announcing the BCS Merger Agreement.
REASONS FOR THE MERGER
LSI
The LSI Board of Directors, after consideration of relevant business,
financial, legal and market factors, approved the issuance of LSI Common Stock
pursuant to the Merger Agreements, and the Merger Agreements and the
transactions contemplated therein. LSI's Board of Directors did not assign any
relative or specific weight to the factors considered.
The Bugaboo Creek Steak House concept is a well defined, attractive concept
that has gained acceptance in its current market in the northeastern United
States. This concept appears to have a broad appeal and may be more attractive
in some geographical areas than the company's Longhorn Steakhouse concept and,
for that reason, may be a better vehicle for expansion by LSI in some
geographical areas. The Capital Grille concept will expand LSI's operations into
the fine dining segment of the market with a concept that still involves LSI's
principal business of serving steaks. The existing geographical concentration of
Bugaboo Creek Steak House restaurants primarily in the northeastern United
States will give LSI an immediate presence in this important geographical area
that would otherwise present LSI additional challenges in expansion. LSI
believes that the availability of two casual dining steak concepts will give it
greater flexibility in developing new geographical areas with the ability to
develop which ever concept LSI believes will do best in a particular
geographical area. Although management of the additional restaurants being
acquired in the Merger and the development of the BCS concept will place
additional demands on LSI senior management and administrative functions, LSI
believes that synergies can be obtained in administrative and support areas for
the combined businesses that will increase their profitability. LSI currently
expects that operations for the three concepts will remain separate.
THE BOARD OF DIRECTORS OF LSI UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE ISSUANCE OF LSI COMMON STOCK PURSUANT TO THE MERGER AGREEMENTS.
BCS
At special meetings of the BCS Board held on June 3 and June 14, 1996,
BCS's management and representatives of Tucker Anthony made presentations
concerning the business and prospects of BCS. At the special meeting of the BCS
Board held on June 14, BCS's management and representatives of Tucker Anthony
and BCS's legal advisors also made a presentation concerning the proposed
acquisition of BCS by LSI, including a review of the terms of the BCS Merger
Agreement and the Voting Agreement. At such meeting, the Board (with Mr. Orr
absent) unanimously determined that the BCS Merger is fair to, and in the best
interests of, BCS and the BCS Stockholders, approved the BCS Merger Agreement
and recommended that the BCS stockholders approve and adopt the BCS Merger
Agreement.
In reaching its determination, the BCS Board consulted with BCS's
management, as well as its financial and legal advisors, and considered a number
of factors, including, without limitation, the following:
(i) the arms-length negotiations with LSI, which resulted in the
agreement by LSI to acquire all outstanding BCS Common Stock in exchange
for the LSI Common Stock which represented approximately a 20.6% premium
(assuming a .390 exchange ratio) over the closing price for the BCS Common
Stock immediately prior to the announcement of the signing of the BCS
Merger Agreement and approximately a 32.3% premium over the closing price
for the BCS Common Stock four weeks prior to the announcement of the BCS
Merger (assuming the same exchange ratio noted earlier);
(ii) the businesses, assets, liabilities, management, strategic
objectives, competitive position and prospects as well as the historical
and current financial conditions and results of operations of BCS and LSI
both before and after giving effect to the BCS Merger (see "Opinion of
Financial Advisors -- Tucker Anthony");
43
<PAGE> 51
(iii) current market conditions, historical market prices, and trading
information for both the BCS Common Stock and the LSI Common Stock (see
"Summary -- Market Prices and Dividends");
(iv) the structure of the BCS Merger, which provides that BCS
stockholders will receive an equity interest in a larger restaurant
company, with a stronger balance sheet and cash flow and with greater depth
of management personnel and training resources;
(v) the expectation that the BCS Merger will afford the BCS
stockholders the opportunity to receive LSI Common Stock in a tax-free
transaction;
(vi) the expectation that the BCS Merger will be beneficial to the
employees of BCS;
(vii) the presentation of Tucker Anthony made to the BCS Board on June
14, 1996, including the opinion of Tucker Anthony that, as of such date,
subject to the average trading price of LSI Common Stock being greater than
or equal to $21.00, the consideration to be received by the BCS
Stockholders in the BCS Merger was fair, from a financial point of view, to
the BCS Stockholders; see "Opinion of Financial Advisors -- Tucker
Anthony";
(viii) the expectation that the complementary businesses of BCS and
LSI, including their respective operating philosophies and diverse
concepts, will provide significant growth opportunities after consummation
of the BCS Merger;
(ix) the belief that LSI's experienced and loyal management team,
reputation in the restaurant industry and investment community, and history
of profitable operations while maintaining a high growth rate will be
beneficial to the continued growth of BCS;
(x) the review of other strategic alternatives including continuing as
an independent company; based upon their review of other strategic
alternatives, as well as the terms of the BCS Merger, the BCS Board did not
believe that pursuing another strategic alternative could reasonably be
expected to provide BCS Stockholders with higher stockholder value than
that reflected in LSI's proposal;
(xii) the BCS Board was informed at its June 14, meeting that Mr.
Grace (who owns 46.2% of the outstanding shares of BCS Common Stock) was
prepared to enter into the Voting Agreement with LSI and that the Voting
Agreement terminated upon termination of the BCS Merger Agreement;
(xiii) the terms of the BCS Merger Agreement that permit BCS or LSI to
terminate the BCS Merger Agreement if the last sale price of LSI Common
Stock is less than $21.00 per share for five consecutive trading days prior
to the effective date of the BCS Merger; and
(xiv) the terms of the BCS Merger Agreement that (a) permit the BCS
Board to enter into negotiations with a third party that made an
unsolicited bona fide proposal to acquire BCS if the BCS Board determined
in good faith that such action was required for the BCS Board to comply
with its fiduciary duties to stockholders imposed by Delaware corporate law
and, after having consulted with and considered the advice of outside
counsel and BCS's financial advisor, BCS's Board reasonably determines in
good faith that the potential acquirer is highly qualified, (b) permit BCS
to unilaterally terminate the BCS Merger Agreement if the BCS Board
recommended any other business combination involving BCS, (c) require BCS
to pay LSI out-of-pocket expenses incurred in connection with the BCS
Merger Agreement up to a maximum of $750,000 in the event that the BCS
Merger Agreement was so terminated, (d) require that if within ten months
following such termination BCS entered into such a competing transaction,
the third party to such transaction pay to LSI the amount of $2,000,000
less any expenses previously paid by BCS to LSI, and (e) contained no other
provision that would materially impede the BCS Board from considering and
pursuing a better unsolicited offer to acquire BCS that might be made by a
third party.
44
<PAGE> 52
The foregoing discussion of information and factors considered and given
weight by the BCS Board is not intended to be exhaustive. In view of the wide
variety of factors considered in connection with its evaluation of the terms of
the BCS Merger, the BCS Board did not find it practicable to, and did not,
quantify or otherwise attempt to assign relative weight to the specific factors
considered in reaching its determinations. In addition, individual members of
the BCS Board may have given different weight to different factors.
THE BOARD OF DIRECTORS OF BCS UNANIMOUSLY RECOMMENDS THAT THE BCS
STOCKHOLDERS VOTE "FOR" ADOPTION OF THE BCS MERGER AGREEMENT AND CONSUMMATION OF
THE TRANSACTIONS CONTEMPLATED THEREIN.
OPINION OF FINANCIAL ADVISORS
Robinson-Humphrey
The Board of Directors of LSI retained Robinson-Humphrey to advise it with
respect to the fairness to the shareholders of LSI, from a financial point of
view, of the Merger. Robinson-Humphrey is an internationally recognized
investment banking firm and was selected by the LSI Board based on Robinson-
Humphrey's experience and expertise. As part of its investment banking business,
Robinson-Humphrey is regularly engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes.
At the June 14, 1996 meeting of the LSI Board of Directors,
Robinson-Humphrey delivered its oral and written opinion that, based upon and
subject to various considerations set forth in such opinion, as of June 14,
1996, the consideration agreed to be paid by LSI in the Merger was fair to the
LSI shareholders from a financial point of view. No limitations were imposed by
the LSI Board of Directors upon Robinson-Humphrey with respect to the
investigations made or the procedures followed by Robinson-Humphrey in rendering
its opinion. All references below to Robinson-Humphrey's opinion refer to
Robinson-Humphrey's opinion dated June 14, 1996 and as of the date of this Joint
Proxy Statement/Prospectus, unless otherwise indicated.
The full text of the opinion of Robinson-Humphrey which sets forth the
assumptions made, matters considered and limits on the review undertaken, is
attached as Annex B, to this Joint Proxy Statement/ Prospectus and is
incorporated herein by reference. LSI shareholders are urged to read such
opinion carefully in its entirety. Robinson-Humphrey's opinion is directed only
to the fairness of the proposed transaction from a financial point of view and
does not constitute a recommendation to any LSI shareholder or BCS stockholder
as to how such shareholder or stockholder should vote. Summaries of the opinion
of Robinson-Humphrey set forth in the Joint Proxy Statement/Prospectus are
qualified in its entirety by references to the full text of such opinion. In
furnishing its opinion, Robinson-Humphrey did not admit that it is an expert
within the meaning of the term "expert" as used in the Securities Act and the
rules and regulations promulgated thereunder.
In arriving at its opinion, Robinson-Humphrey reviewed and analyzed (i) the
Merger Agreements, (ii) publicly available information concerning LSI and BCS
which Robinson-Humphrey believed to be relevant to its inquiry, (iii) financial
and operating information with respect to the business operations and prospects
of LSI and BCS furnished to Robinson-Humphrey by LSI and BCS, (iv) trading
histories of LSI Common Stock and BCS Common Stock, (v) a comparison of the
historical financial results and present financial condition of LSI and BCS with
those of other companies which Robinson-Humphrey deemed relevant, (vi) unaudited
financial information provided by the WPC Parties consisting of summary lease
terms and summary profit and loss information for each restaurant, (vii) a
comparison of the financial terms of the proposed transaction with the financial
terms of certain other transactions which Robinson-Humphrey deemed relevant, and
(viii) certain historical data relating to percentage premiums paid in
acquisitions of publicly traded companies. In addition, Robinson-Humphrey held
discussions with the management of LSI and BCS concerning their businesses and
operations, assets, present conditions and future prospects and undertook such
other studies, analyses and investigations as Robinson-Humphrey deemed
appropriate.
In connection with its review, Robinson-Humphrey relied upon the accuracy
and completeness of the financial and other information provided to it by LSI,
BCS, the WPC Merger Parties and Messrs. Grace and
45
<PAGE> 53
Orr, and did not assume any responsibility for any independent valuation or
appraisal of any of the assets or liabilities of LSI, BCS, the WPC Merger
Parties or the WPC Property, nor was Robinson-Humphrey provided with any such
appraisal. With respect to financial forecasts, Robinson-Humphrey assumed that
such financial forecasts were reasonably prepared on bases reflecting the best
currently available estimates and judgments of management of LSI and BCS as to
the future financial performance of LSI and BCS, respectively. Robinson-Humphrey
assumed no responsibility for and expressed no view as to such forecasts or the
assumptions on which they were based.
Robinson-Humphrey's opinion was necessarily based on economic, monetary,
market and other conditions as in effect on, and the information made available
to it as of, the date of its opinion. The opinion did not address the underlying
business decision of LSI to effect the Merger. Robinson-Humphrey assumed that
the Merger would be consummated on the terms described in the Merger Agreements,
without any waiver of any material terms or conditions by LSI.
Summary of Analyses. The following is a summary of certain analyses
performed by Robinson-Humphrey in connection with rendering its opinion.
Robinson-Humphrey presented the analyses discussed below at a meeting of the
Board of Directors of LSI on June 14, 1996.
COMPARABLE PUBLIC COMPANY ANALYSIS. Robinson-Humphrey compared certain
publicly available financial, operating and market valuation data for selected
public companies in the casual dining restaurant industry to the corresponding
data for the proposed Merger. The public companies used by Robinson-Humphrey for
purposes of this analysis were Apple South, Inc., Applebee's International,
Inc., The Cheesecake Factory Inc., Cracker Barrel Old Country Store, Inc.,
Landry's Seafood Restaurants, Inc., Logan's Roadhouse, Inc., Lone Star
Steakhouse & Saloon, Inc., O'Charley's Inc., Outback Steakhouse, Inc., and Rock
Bottom Restaurants, Inc. Robinson-Humphrey evaluated, among other things
multiples of stock prices as of June 13, 1996 to calendar 1996 estimated
earnings (which ranged from 14.3x to 32.6x with an average of 25.5x); multiples
of stock prices as of June 13, 1996 to calendar 1997 estimated earnings (which
ranged from 11.0x to 25.0x with an average of 19.5x); multiples of total firm
value (defined as equity market capitalization plus net debt) to latest twelve
months' revenues (which ranged from 0.85x to 4.41x with an average of 2.51x);
and multiples of total firm value to latest twelve months' earnings before
interest, taxes, depreciation and amortization ("EBITDA") (which ranged from
7.2x to 29.9x with an average of 14.9x). Robinson-Humphrey then compared these
multiples to the ratio of the proposed purchase price to BCS's estimated
calendar 1996 earnings (21.2x) and estimated calendar 1997 earnings (13.4x).
Both of these multiples represent significant discounts to the comparable
company averages of 25.5x and 19.5x calendar 1996 and 1997, respectively. The
ratio of the proposed total firm value to last twelve months' revenues (1.22x)
and last twelve months' EBITDA (9.7x) also represent significant discounts to
the comparable company averages of 2.51x and 14.9x last twelve months' revenues
and EBITDA, respectively.
ANALYSIS OF SELECTED MERGERS AND ACQUISITIONS. Robinson-Humphrey evaluated
the financial terms of selected mergers and the acquisitions in the restaurant
industry from September 1, 1994 through June 4, 1996. This analysis included 11
such transactions, of which 10 had financial terms and transaction multiples
that Robinson-Humphrey could identify from publicly available information. These
acquirer/acquiree transactions were as follows: Buffets, Inc./HomeTown Buffet,
Inc. (1996); Zapata Corp./Houlihan's Restaurant Group, Inc. (1996); Landry's
Seafood Restaurants, Inc./Bayport Restaurant Group, Inc. (1996); Quality Dining,
Inc./Brueggers Corp. (1996); Quality Dining, Inc./Grady's American (1995); DAKA
International, Inc./ Champps Entertainment, Inc. (1995); Lone Star Steakhouse &
Saloon/Del Frisco's Double Eagle (1995); Apple South/DF&R Restaurants (1995);
Applebee's International Inc./Innovative Restaurant Concepts (1995); and
Applebee's International Inc./Pub Venture of New England (1994). The analysis
considered, among other things, the multiples of transaction firm value (defined
as equity value plus debt assumed minus cash) to latest twelve months' revenues
(which ranged from 0.57x to 5.00x with an average of 1.45x), to latest twelve
months' EBITDA (which ranged from 5.0x to 25.0x with an average of 9.8x), and to
latest twelve months' EBIT (which ranged from 7.7x to 24.1x with an average of
16.2x). This analysis resulted in an implied average equity value for BCS Common
Stock and the equity of the WPC Merger Parties and the WPC Property of $56.0
million compared to the transaction equity value of $58.1 million assuming that
the
46
<PAGE> 54
price of LSI Common Stock is within the range of $24.00 to $27.25 or $53.8
million based upon the price of LSI Common Stock on June 14, 1996.
ACQUISITION PREMIUMS ANALYSIS. Robinson-Humphrey analyzed the premiums
paid for recent mergers and acquisitions of publicly traded companies with
transaction values in the range of $50-100 million. Robinson-Humphrey evaluated
transactions that were accounted for using the pooling of interests method, and
that took place between January 1, 1991 and June 3, 1996. The median premiums
paid over the target's stock price four weeks prior to the announcement date,
one week prior to the announcement date and one day prior to the announcement
date were 41.9%, 29.7% and 28.8%, respectively. This analysis resulted in an
implied equity value for BCS Common Stock of $11.25 per share compared to the
implied price under the proposed terms of $10.25 assuming that the price of LSI
Common Stock is within the range of $24.00 and $27.25 or $9.50 based upon the
price of LSI Common Stock on June 14, 1996. Robinson-Humphrey observed that the
particular circumstances and conditions surrounding any individual transaction
are unique. Accordingly, Robinson-Humphrey would tend to view the application of
average or median acquisition premiums as a less reliable indicator of value
than other methodologies.
PRO FORMA MERGER ANALYSIS. Robinson-Humphrey reviewed certain pro forma
financial effects on LSI resulting from the Merger for the projected calendar
years 1996, 1997 and 1998. The analysis was based upon certain assumptions,
including that the projections provided to Robinson-Humphrey by LSI and BCS
management were accurate. Robinson-Humphrey did not assume any pre-tax synergies
resulting from the Merger. In each of the years analyzed, the Merger would be
additive to LSI's projected earnings per share, excluding merger expenses. In
addition, Robinson-Humphrey assumed that the Merger would be accounted for under
the pooling-of-interests method of accounting.
In arriving at its opinion, Robinson-Humphrey performed a variety of
financial analyses, the material portions of which are summarized above. The
summary set forth above does not purport to be a complete description of the
analyses performed by Robinson-Humphrey. In addition, Robinson-Humphrey believes
that its analyses must be considered as an integrated whole, and that selecting
portions of such analyses and the factors considered by it, without considering
all of such analyses and factors, could create a misleading or an incomplete
view of the process underlying its analyses set forth in the opinion.
The preparation of a business opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. With regard
to the comparable transaction and the comparable public company analyses
summarized above, Robinson-Humphrey selected comparable public companies on the
basis of various factors, including the size of the public company and
similarity of the line of business; however, no public company utilized as a
comparison is identical to LSI or BCS.
In performing its analyses, Robinson-Humphrey made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond LSI's or BCS's control. Any
estimates contained in such analyses are not necessarily indicative of actual
past or future results or values, which may be significantly more or less than
such estimates. Estimates of values of companies or parts of companies do not
purport to be appraisals or necessarily to reflect the price at which such
companies or parts may actually be sold, and such estimates are inherently
subject to uncertainty.
In the ordinary course of its business, Robinson-Humphrey and its
affiliates actively trade in LSI Common Stock for their own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities. Robinson-Humphrey has served as managing
underwriter for three public offerings of LSI Common Stock and has provided
other investment banking services for LSI in the past, receiving customary fees
for such services.
LSI agreed to pay Robinson-Humphrey an advisory fee of $100,000 upon
execution of the Merger Agreements, $100,000 upon the delivery of the
Robinson-Humphrey opinion and an additional $175,000 upon the closing of the
Merger. LSI has also agreed to reimburse Robinson-Humphrey for its reasonable
out-of-pocket expenses, including fees and disbursements of legal counsel.
Pursuant to the engagement, LSI has agreed to indemnify Robinson-Humphrey, its
controlling persons, affiliates, and their respective partners, directors,
officers, agents, consultants, and employees against certain liabilities,
including liabilities under the federal securities laws.
47
<PAGE> 55
Tucker Anthony
As part of its retention by BCS to provide investment banking services,
Tucker Anthony agreed to render an opinion to the Board of Directors of BCS as
to the fairness, from a financial point of view, of the consideration proposed
in the BCS Merger. On June 14, 1996, Tucker Anthony delivered its oral opinion
to the BCS Board that, as of the date of such opinion, the consideration to be
received by the BCS Stockholders pursuant to the BCS Merger Agreement is fair to
such holders. Such oral opinion was subsequently confirmed in writing. The full
text of the opinion of Tucker Anthony dated as of the date of this Joint Proxy
Statement/ Prospectus, which sets forth the assumptions made, matters considered
and limitations of the review undertaken, is attached as Annex C to this Joint
Proxy Statement/Prospectus and is incorporated herein by reference. The summary
discussion of the opinion of Tucker Anthony set forth in this Joint Proxy
Statement/ Prospectus is qualified in its entirety by reference to the full text
of such opinion. BCS Stockholders are urged to read the opinion in its entirety.
Tucker Anthony's opinion is directed only to the fairness, from a financial
point of view, as the date of such opinion, of the consideration to be received
by the BCS Stockholders pursuant to the BCS Merger Agreement. Tucker Anthony's
opinion is directed to the BCS Board only and does not constitute a
recommendation to any stockholder as to how such stockholder should vote at the
Special Meeting.
In arriving at its opinion, Tucker Anthony, among other things; (a)
reviewed the BCS Merger Agreement, including the exhibits thereto; (b) reviewed
BCS's Annual Reports on Form 10-K and related publicly available financial
information of BCS for the two most recent fiscal years ended June 25, 1995,
BCS's Quarterly Reports on Form 10-Q for the periods ended March 31, 1996,
December 10, 1995, and September 17, 1995, and BCS's Proxy Statement dated
September 22, 1995, (c) reviewed the Annual Reports on Form 10-K and related
publicly available information of LSI for the three fiscal years ended December
31, 1995, the Quarterly Report on Form 10-Q of LSI for the three months ended
March 31, 1996, LSI's Proxy Statement dated April 11, 1996, and LSI's Prospectus
dated March 26, 1996; (d) reviewed certain other information, including publicly
available information relating to the business, earnings, cash flow, assets and
prospects of BCS and LSI, respectively; (e) reviewed the income statement,
balance sheet, and cash flow forecasts of BCS for the fiscal years ending June
25, 2000, and for calendar years 1996 and 1997 as furnished to Tucker Anthony by
BCS (the "BCS Management Projections"); (f) reviewed income statement, balance
sheet and cash flow forecasts of LSI for the remaining portion of the 1996
fiscal year and for fiscal years 1997 and 1998 as furnished to Tucker Anthony by
LSI; (g) conducted discussions with members of senior management of BCS and LSI,
respectively, concerning the past and current business, operations, assets, and
financial condition, as well as the future prospects, of BCS and LSI,
respectively, (h) reviewed the historical trading activity and ownership data
for BCS Common Stock and LSI Common Stock; (i) analyzed certain financial
information, operating statistics and market trading information of publicly
traded companies that Tucker Anthony deemed comparable or otherwise relevant to
its inquiry, and compared BCS from a financial point of view with these
companies; (j) analyzed certain financial information and operating statistics
of publicly traded companies that Tucker Anthony deemed comparable or otherwise
relevant to its inquiry, and compared LSI from a financial point of view with
these companies; (k) compared the proposed financial terms of the BCS Merger
with certain financial terms, to the extent publicly available, of selected
financial studies and analyses and performed such other investigations and took
into account such other matters as Tucker Anthony deemed necessary, including
general economic and business conditions and certain industry trends and related
matters.
In preparing its opinion, Tucker Anthony assumed and relied upon the
accuracy and completeness of all financial and other information supplied to it
by BCS and LSI or that was publicly available, and did not independently verify
such information. Tucker Anthony has also relied upon the managements of BCS and
LSI, respectively, as to the reasonableness and achievability of the financial
forecasts of BCS and LSI (and the assumptions furnished to it), and with BCS's
consent has assumed that such forecasts have been reasonably prepared on the
basis reflecting the best currently available estimates and judgments of such
respective managements as to the future operating performance of BCS and LSI,
respectively. Furthermore, Tucker Anthony assumed that the BCS Merger would
qualify (a) for pooling-of-interests accounting treatment, and (b) as a
reorganization within the meaning of Section 368(a) of the Code. Tucker Anthony
was not requested to make, and Tucker Anthony has not made, an independent
appraisal or evaluation of
48
<PAGE> 56
assets, properties, facilities, or liabilities of BCS or LSI and it was not
furnished with any such appraisal or evaluation.
Tucker Anthony's opinion was necessarily based upon prevailing market
conditions (including market prices for the BCS Common Stock and the LSI Common
Stock) and other circumstances and conditions as they existed and could be
evaluated as of the date of this opinion, and did not represent Tucker Anthony's
opinion as to what the actual value of the BCS Common Stock or the LSI Common
Stock would be after the date thereof. Tucker Anthony was not authorized by BCS
or the BCS Board to solicit, nor did Tucker Anthony solicit, third-party
indications of interest for an acquisition of all or part of BCS.
In connection with advising the BCS Board of its opinion on June 14, 1996,
and in preparing its written and oral presentations to the BCS Board, Tucker
Anthony performed a variety of financial and comparative analyses including
those described below. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial and
comparative analyses, including those described below, and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Furthermore, in arriving at its
fairness opinion, Tucker Anthony did not attribute any particular weight to any
particular analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Accordingly, Tucker Anthony believes that its analysis must be considered as a
whole and that considering any portion of such analysis and the factors
considered, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying the opinion.
In its analysis, Tucker Anthony made numerous assumptions with respect to
industry performance, general business and economic conditions, and other
matters, many of which are beyond the control of BCS or LSI. Any estimates
contained in Tucker Anthony's analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than as set forth therein. In addition, analyses relating
to the value of businesses do not purport to be appraisals or to reflect the
prices at which businesses actually may be sold.
For the purpose of the analyses described below, Tucker Anthony assumed an
implied equity value per share for BCS of $10.25 based on .390 times the average
closing sale price per share for LSI or $26.25 for the twenty trading days
ending of the fifth day prior to the announcement of the Merger. The actual
equity value per share of BCS will be determined based on the exchange ratio
described above and the average closing sale price per share for LSI for the
twenty trading days ending on the fifth day prior to closing. Tucker Anthony's
opinion assumes that, and is contingent upon, such average trading of LSI Common
Stock being at least $21.00 per share.
The following is a summary of certain analyses performed by Tucker Anthony
in connection with its fairness opinion.
Analysis of Selected Comparable Publicly Traded Companies. Using public
available information, Tucker Anthony compared selected quantitative data
(including revenues, earnings before interest, taxes, depreciation, and
amortization ("EBITDA"), earnings before interest and taxes ("EBIT"), net
income, and earnings per share ("EPS"), and qualitative information (including
competitive position, management, stage of concept development, and stage of
capital funding) regarding BCS, to similar data of selected publicly-traded
restaurant companies competing in the casual dining business segment (the
"Casual Dining Companies") and engaged in business considered by Tucker Anthony
to be comparable to BCS. Specifically, Tucker Anthony included in its review a
group of 13 Casual Dining Companies (excluding BCS, but including LSI)
consisting of Applebee's International, Inc., Brinker International, Inc., Chart
House Enterprises, Inc., Cooker Restaurant Group, Cracker Barrel Country Stores,
Inc., Darden Restaurants, Inc., Lone Star Steakhouse & Saloon, Inc., LSI,
Morton's Restaurant Group, Inc., Outback Steakhouse, Inc., Pollo Tropical, Inc.,
Ryan's Family Steakhouse, Inc. and Sagebrush, Inc.
The analysis focused primarily on trading multiples and qualitative factors
associated with the Casual Dining Companies, as they were deemed by Tucker
Anthony to be the most comparable companies to BCS due to their similar business
focus. Such ratios included Aggregate Value (market value of equity plus total
49
<PAGE> 57
net debt) as a multiple of latest twelve months ("LTM") revenue, EBITDA, and
EBIT, as well as price per share/EPS ("P/E") ratios based on projected calendar
year 1996 and 1997 EPS. (Such projected EPS figures for the Casual Dining
Companies, other than BCS and LSI which are company-produced, are based upon the
means of publicly available information provided by Bloomberg and First Call
Corporation).
The valuation multiples for BCS based on an assumed price of $10.25 per
share compare as follows with the adjusted range (excluding the high and low
values), the adjusted mean (excluding the high and low values) and the median of
the Casual Dining Companies for: Aggregate Value to LTM revenues, 1.3 times for
BCS versus an adjusted range of 0.7 to 2.5 times, an adjusted mean of 1.4 times
and a median of 1.4 times; Aggregate Value to LTM EBITDA, 10.2 times for BCS
versus an adjusted range of 6.4 to 14.7 times, an adjusted mean of 10.7 times,
and a median of 11.5 times; Aggregate Value to LTM EBIT, 19.6 times for BCS
versus an adjusted range of 10.9 to 23.7 times; an adjusted mean of 16.1 times,
and a median of 14.8 times; P/E on calendar 1996 projected EPS, 24.4 times for
BCS versus an adjusted range of 14.2 to 24.6 times, an adjusted mean of 19.6
times, and a median of 19.3 times; P/E on calendar year 1997 projected EPS, 18.6
times for BCS versus an adjusted range of 12.7 to 19.4 times, an adjusted mean
of 15.7 times, and a median of 15.2 times.
Because of the inherent differences between the restaurant concepts,
operations, and other characteristics of BCS and the selected public companies
comprising the Casual Dining Companies, Tucker Anthony believes that an
appropriate use of comparable company analysis also involves qualitative
judgments concerning differences between the financial and operating
characteristics of BCS and the selected public companies, which affects the
public trading values of BCS and the selected companies, which judgments are
reflected in Tucker Anthony's opinion.
Analysis of Selected Comparable Merger and Acquisition
Transactions. Tucker Anthony reviewed with the BCS Board the prices and
multiples paid for other restaurant companies in recent acquisitions. Tucker
Anthony specifically reviewed 18 completed and pending transactions within the
restaurant industry which were deemed relevant and for which relevant data was
available. Tucker Anthony limited its analysis of comparable transactions to
those that were announced between January 1, 1993 and the date of the
announcement of the Merger and that had transaction values greater than $20
million. These acquirer/acquiree transactions were as follows: Taco Cabana,
Inc./Two Peso's, Inc. (1993); National Pizza Company/NRH Corporation (1993);
Restaurant Enterprises Group, Inc./Foodmaker, Inc. (1993); Brinker
International, Inc./On the Border Cafes, Inc. (1994); Billy Blues Food
Corporation/Marco's Mexican Restaurants, Inc. (1993); Magellan Restaurant
Systems/Grill Concepts, Inc. (1994); Applebee's International, Inc./Pub Ventures
of New England, Inc. (1994); Applebee's International, Inc./Innovative
Restaurant Concepts (1994); Quality Dining, Inc./Grayling Corporation (1994);
Apple South, Inc./Marcus Corporation (1995); Apple South, Inc./DF&R Restaurants,
Inc. (1995); Shoney's, Inc./TPI Enterprises, Inc. (1995); Lone Star Steakhouse &
Saloon/DelFrisco's Double Eagle (1995); DAKA International, Inc./Champps
Entertainment, Inc. (1995); Noble Roman's, Inc./Papa Gino's (1996); Landry's
Seafood Restaurants, Inc./Bayport Restaurant Group, Inc. (1996); Zapata
Corporation/Houlihan's Restaurant Group, Inc. (1996); and Buffets, Inc./Hometown
Buffet, Inc. (1996).
Such analysis indicated the median of the ratios of the aggregate value in
the 13 completed public transactions to trailing twelve months revenues, EBITDA
and EBIT were 1.2 times, 8.9 times and 12.7 times, respectively. The analysis
indicated that the adjusted means of the ratios of the purchase price to
trailing twelve months revenues, EBITDA and EBIT were 1.5 times, 9.1 times and
12.6 times, respectively. These results compare to the ratios of the value of
the transaction to BCS's trailing twelve months revenues, EBITDA and EBIT of 1.3
times, 10.2 times and 19.6 times. Tucker Anthony also compared the median
percentage premium to trading prices four weeks prior to the announcement date
of the comparable mergers of 29.8% versus 32.3% for BCS (at the assumed price of
$10.25 per share compared to BCS's closing price on May 13, 1996). No acquired
business utilized in the analysis of selected comparable merger and acquisition
transactions was identical to BCS. Tucker Anthony believes that an appropriate
use of comparable merger and acquisitions analysis involves qualitative
judgments concerning differences in historical and projected financial and
operating characteristics of the comparable acquired businesses, which judgments
are reflected in Tucker Anthony's opinion.
50
<PAGE> 58
Stock Trading History. Tucker Anthony examined the history of the trading
prices, volume and ownership data of BCS Common Stock and LSI Common Stock, the
relationship between movements in the prices of BCS Common Stock and LSI Common
Stock and movements in certain stock indices specifically an index of comparable
companies (the Casual Dining Companies), the Standard and Poor's Restaurant
Index, the NASDAQ Composite Index and the Standard and Poor's 500 Composite
Index, and the relationship between movements in the prices of BCS Common Stock
and LSI Common Stock and press announcements and other public disclosures for
the period June 6, 1995 through June 13, 1996. From June 6, 1995 through June
13, 1996 (the last trading date prior to BCS's announcement that it had entered
into the BCS Merger Agreement), the highest closing price for BCS Common Stock
was $12.25 per share. During the same period, the lowest closing price for BCS
Common Stock was $6.25 per share. The weighted average trading price for BCS
Common Stock during the 26 weeks preceding the announcement was $8.80 per share
and for the preceding 52 weeks the weighted average trading price was $8.56 per
share. In the month prior to the announcement of the execution of the BCS Merger
Agreement, BCS Common Stock traded in the range of $7.50 to $8.50 per share.
Tucker Anthony also commented that the traded volume of the LSI Common
Stock was substantially greater than that of BCS Common Stock and, therefore,
ownership of the LSI Common Stock should provide greater liquidity for the
holders of BCS Common Stock.
Discounted Cash Flow Analysis. Using a discounted cash flow analysis,
Tucker Anthony analyzed the present value of the expected future cash flows that
BCS is projected to produce over a period ending June 25, 2000, based upon the
BCS Management Projections. Tucker Anthony calculated terminal values of BCS at
the end of the period and discounted such terminal values to present values at
different discount rates based upon a consideration of a number of factors,
including cost of capital, required rates of return to investors, and risks
attributable to uncertainty of the projected cash flow. The foregoing analysis
resulted in an average present value per share for BCS Common Stock of $10.02, a
median of $9.99, and a range of $8.36 to $11.84. As indicated below, this
analysis is not necessarily indicative of actual future results and does not
purport to reflect the prices at which any securities may trade at the present
time or any time in the future.
Pro Forma Accretion/Dilution Analysis. Tucker Anthony developed a pro
forma analysis of the combined entity, excluding any synergies that might result
from the BCS Merger. The analyses reflected a combination based on both BCS's
and LSI's existing management forecasts for calendar 1996 and 1997. The results
of the analyses show that the BCS Merger was accretive to LSI's projected
fully-taxed EPS for both calendar years 1996 and 1997, excluding costs
associated with the BCS Merger.
The opinion of Tucker Anthony should be read in its entirety. The summary
of the financial and comparative analysis set forth above contains information
with respect to all material analyses employed by Tucker Anthony in reaching its
opinion but does not purport to be a complete description of the presentation of
Tucker Anthony to the BCS Board or the analyses conducted by Tucker Anthony.
Tucker Anthony believes that its analyses must be considered as a whole and that
selecting portions of its analyses and the factors considered by it, without
considering all factors and analyses, could create an incomplete and/or
misleading view of the process underlying its opinion.
Tucker Anthony is an internationally recognized investment banking firm
with substantial experience in transactions similar to the BCS Merger and is
familiar with BCS and LSI and their respective businesses. As part of its
investment banking business, Tucker Anthony is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, private placements, secondary
distributions of listed and unlisted securities, and valuations for corporate
and other purposes. The BCS Board selected Tucker Anthony because of its
expertise, reputation, and familiarity with the restaurant industry. In
addition, Tucker Anthony was the sole managing underwriter in the initial public
equity offering for BCS and has in-depth understanding of BCS's business.
As compensation for its financial advisory services in connection with the
BCS Merger, Tucker Anthony will receive a transaction fee from BCS equal to 1.5%
of the Aggregate Value (calculated at the time of closing and including the
total indebtedness of BCS for borrowed money then outstanding) of the
transaction upon consummation of the Merger. Tucker Anthony is entitled to
receive an advisory fee of $50,000, $25,000
51
<PAGE> 59
of which has been paid, with the balance payable as of April 1996, and a fee of
$150,000 upon execution of the BCS Merger Agreement and delivery of its fairness
opinion, which is payable upon the earlier of the consummation of the
transaction or termination of the BCS Agreement. The aforementioned advisory
fees will be credited against the above mentioned transaction fee. Whether or
not the BCS Merger is consummated, BCS has agreed to reimburse Tucker Anthony
for reasonable expenses incurred by Tucker Anthony, including legal fees and
disbursements of counsel. BCS has also agreed to indemnify Tucker Anthony and
certain related persons against certain liabilities to which Tucker Anthony may
become subject as a result of its engagement, including liabilities under the
federal securities laws.
In the past, Tucker Anthony has acted as a financial advisor to BCS and was
the sole managing underwriter in BCS's initial public equity offering, and has
received customary fees for its underwriting services. In addition, in the
ordinary course of its business, Tucker Anthony actively trades the securities
of BCS for its own account and the securities of BCS and LSI for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. Furthermore, Tucker Anthony has in the ordinary course of
business, provided its clients with research coverage of BCS. Tucker Anthony has
not acted as financial advisor to LSI, nor has Tucker Anthony acted as manager
of any LSI security offering, and has not received any advisory or offering fees
from LSI.
EXCHANGE RATIOS
BCS Exchange Ratio
The BCS Merger Agreement provides that, at the Effective Time each issued
and outstanding share of BCS Common Stock (excluding shares held by BCS or any
of its subsidiaries or by LSI or any of its subsidiaries) shall cease to be
outstanding and shall be converted into and exchanged for the right to receive
that fraction of a share of LSI Common Stock (the "BCS Exchange Ratio") obtained
by dividing $10.25 by the average of the daily last sale prices for the shares
of LSI Common Stock for the 20 consecutive trading days on which such shares are
actually traded as over-the-counter securities and quoted on the Nasdaq National
Market (as reported by The Wall Street Journal or, if not reported thereby, any
other authoritative source) ending at the close of trading on the fifth trading
day immediately preceding the closing date of the Merger (the "Base Period
Trading Price").
Based on the 5,225,000 shares of BCS Common Stock outstanding on the BCS
Record Date, LSI would issue between 1,965,366 and 2,231,510 shares of LSI
Common Stock in the BCS Merger.
BRI Exchange Ratio
The Agreement and Plan of Merger by and among Bentley's Restaurant, Inc.
("BRI"), WPC and LSI, dated as of June 14, 1996, (the "BRI Merger Agreement")
provides that at the Effective Time each issued and outstanding share of common
stock, no par value, of BRI (the "BRI Common Stock") shall cease to be
outstanding and shall be converted into and exchanged for the right to receive
that multiple of a share of LSI Common Stock obtained by dividing (a) the
quotient of $40.00 divided by 1,000 shares of BRI Common Stock outstanding as of
June 14, 1996, by (b) the Base Period Trading Price. Based on the 1,000 shares
of BRI Common Stock outstanding on June 14, 1996, LSI would issue between one
and two shares of LSI Common Stock pursuant to the BRI Merger Agreement.
HSF Exchange Ratio
The Agreement and Plan of Merger by and among Hemenway Sea Foods, Inc.
("HSF"), WPC and LSI, dated as of June 14, 1996 (the "HSF Merger Agreement"),
provides that at the Effective Time each issued and outstanding share of Common
Stock, no par value, of HSF (the "HSF Common Stock") shall cease to be
outstanding and shall be converted into and exchanged for the right to receive
that multiple of a share of LSI Common Stock (the "HSF Exchange Ratio") obtained
by dividing (a) the quotient of $1,893,288 divided by 1,000 shares of HSF Common
Stock outstanding as of June 14, 1996, by (b) the Base Period Trading Price.
Based on the 1,000 shares of HSF Common Stock outstanding on June 14, 1996, LSI
would issue between 69,478 and 78,887 shares of LSI Common Stock pursuant to the
HSF Merger Agreement.
52
<PAGE> 60
OGM Exchange Ratio
The Agreement and Plan of Merger by and among Old Grist Mill Tavern, Inc.
("OGM"), WPC and LSI, dated as of June 14, 1996 (the "OGM Merger Agreement"),
provides that, at the Effective Time, each issued and outstanding share of
Common Stock, $100.00 par value, of OGM (the "OGM Common Stock") shall cease to
be outstanding and shall be converted into and exchanged for the right to
receive that multiple of a share of LSI Common Stock (the "OGM Exchange Ratio")
obtained by dividing (a) the quotient of $1,506,672.00, divided by 100 shares of
OGM Common Stock outstanding as of June 14, 1996, by (b) the Base Period Trading
Price. Based on the 100 shares of OGM Common Stock outstanding on June 14, 1996,
LSI would issue between 55,290 and 62,778 shares of LSI Common Stock pursuant to
the OGM Merger Agreement.
GOS Exchange Ratio
The Agreement and Plan of Merger by and among GOS Properties Limited
Liability Company ("GOS"), WPC and LSI, dated as of June 14, 1996 (the "GOS
Merger Agreement"), provides that, at the Effective Time, percentage membership
interest in GOS shall cease to be outstanding and shall be converted into the
right to receive that multiple of a share of LSI Common Stock obtained by
dividing (a) the quotient of $1,000,000.00 less any mortgage indebtedness of
GOS, divided by 100 (the total percentage interests of the members of GOS as of
June 14, 1996), by (b) the Base Period Trading Price. Based on the total
percentage interests of the members of GOS and the outstanding mortgage
indebtedness as of June 14, 1996, LSI would issue between 11,950 and 13,568
shares of LSI Common Stock pursuant to the GOS Merger Agreement.
WPC Property
The Purchase and Sale Agreement by and among Edward P. Grace, III, Samuel
J. Orr, Jr. and WPC (the "WPC Purchase Agreement") provides that, at the
Effective Time, the purchase price for the WPC Property of $1,000,0000, shall be
payable by WPC by (i) WPC's assumption of the mortgage indebtedness on the WPC
Property, plus (ii) the transfer to Messrs. Grace and Orr of that number of
shares of LSI Common (rounded up to the nearest whole share) obtained by
dividing the difference between the purchase price for the WPC Property and the
mortgage indebtedness assumed by WPC, by the Base Period Trading Price. Based on
the outstanding mortgage indebtedness as of June 14, 1996, LSI would issue
between 3,900 and 4,428 shares of LSI Common Stock pursuant to the WPC Purchase
Agreement.
For purposes of calculating the Exchange Ratios, the Base Period Trading
Price shall be deemed to equal (i) $27.25 in the event the Base Period Trading
Price is greater than $27.25 or (ii) $24.00 in the event the Base Period Trading
Price is less than $24.00. Furthermore, in the event LSI changes the number of
shares of LSI Common Stock issued and outstanding prior to the Effective Time as
a result of a stock split, stock dividend, or similar recapitalization with
respect to LSI Common Stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Exchange Ratios shall be proportionately adjusted.
FRACTIONAL SHARES
Pursuant to the terms of the Merger Agreements, each holder of shares of
BCS Common Stock or shares of the capital stock or interest in the WPC Merger
Parties exchanged pursuant to the Merger, who would otherwise have been entitled
to receive a fraction of a share of LSI Common Stock shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of LSI Common Stock multiplied by the last sale price per share of LSI
Common Stock as reported on the Nasdaq National Market on the trading day
immediately preceding the Effective Time. No such holder will be entitled to
dividends, voting rights, or any other rights as a shareholder in respect of any
fractional shares.
53
<PAGE> 61
CONVERSION OF STOCK OPTIONS, WARRANTS AND CONVERTIBLE NOTES
The BCS Merger Agreement provides that, at the Effective Time, all rights
with respect to BCS Common Stock pursuant to BCS Options granted under the BCS
Stock Plans which are outstanding at the Effective Time, whether or not
exercisable, shall be converted into and become rights with respect to LSI
Common Stock, and LSI shall assume each BCS Option, in accordance with the terms
of the BCS Stock Plan and stock option agreement by which it is evidenced. From
and after the Effective Time: (i) LSI or its Compensation Committee, as
appropriate, shall be substituted as the administrator of the BCS Stock Plan,
(ii) each BCS Option assumed by LSI may be exercised solely for shares of LSI
Common Stock, (iii) the number of shares of LSI Common Stock subject to such BCS
Option shall be equal to the number of shares of BCS Common Stock subject to
such BCS Option immediately prior to the Effective Time multiplied by the BCS
Exchange Ratio, and (iv) the per share exercise price under each such BCS Option
shall be adjusted by dividing the per share exercise price under each such BCS
Option by the BCS Exchange Ratio and rounding up to the nearest cent. It is
intended that the foregoing assumption be undertaken in a manner that will not
prejudice the rights of any holder of a BCS Option under the terms of the BCS
Option, the BCS Stock Plan or the corresponding stock option agreement or
constitute a "modification" as defined in Section 424 of the Code, as to any
stock option which is an "incentive stock option."
EFFECTIVE TIME
If the issuance of LSI Common Stock pursuant to the Merger Agreements is
approved by the requisite vote of LSI shareholders, the BCS Merger Agreement is
adopted by the requisite vote of BCS stockholders, and all other required
governmental and other consents and approvals are received, and if the other
conditions to the obligations of the parties to consummate the Merger are
satisfied or waived (as permitted), the Merger will be consummated and effected
on the date and at the time the proper certificates or articles, reflecting the
Merger, become effective with the relevant authorities in the jurisdictions in
which the parties to the Merger are organized (the "Effective Time"). LSI, BCS
and the WPC Parties have mutually agreed to use their reasonable efforts to
cause the Effective Time to occur on the first business day following the last
to occur of: (i) the effective date (including expiration of any applicable
waiting period) of the last required approval or clearance of any regulatory
authority having authority over and approving or exempting the Merger, (ii) the
date of which the shareholders of LSI approve the issuance of LSI Common Stock
pursuant to the Merger Agreements to the extent such approval is required by
applicable law, and (iii) the date on which the stockholders of BCS approve the
BCS Merger Agreement to the extent such approval is required by applicable law.
Assuming satisfaction of all conditions to consummation of the Merger, the
Merger is expected to be made effective during the third quarter of 1996. Either
LSI or BCS may terminate the Merger Agreements if the Merger has not been
consummated by December 31, 1996. See "-- Conditions to Consummation" and
"-- Amendment, Waiver, and Termination."
DISTRIBUTION OF LSI CERTIFICATES
BCS Merger
Promptly after the Effective Time, LSI shall cause the exchange agent
selected by LSI to mail appropriate transmittal materials to each record holder
of BCS Common Stock for use in effecting the surrender and cancellation of
certificates for BCS Common Stock in exchange for certificates for LSI Common
Stock (which shall specify that delivery shall be effected, and risk of loss and
title to the certificates theretofore representing shares of BCS Common Stock
shall pass, only upon proper delivery of such certificates to the exchange
agent). BCS STOCKHOLDERS SHOULD NOT SURRENDER THEIR CERTIFICATES FOR EXCHANGE
UNTIL THEY RECEIVE SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS. After the
Effective Time, each holder of shares of BCS Common Stock (excluding shares held
by BCS or any of its subsidiaries or by LSI or any of its subsidiaries), issued
and outstanding at the Effective Time shall surrender the certificate or
certificates representing such shares to the exchange agent, and the
certificates thus surrendered will be canceled. Unless otherwise designated by a
BCS stockholder on the transmittal letter, certificates representing shares of
LSI Common Stock issued to BCS stockholders in connection with the BCS Merger
will be issued and delivered to the tendering BCS stockholder at the address on
record with the BCS Common Stock transfer agent. LSI
54
<PAGE> 62
shall not be obligated to deliver the consideration to which any former holder
of BCS Common Stock are entitled until such holder surrenders such holder's
certificate or certificates representing such holder's shares for exchange. The
certificate or certificates so surrendered shall be duly endorsed as the
exchange agent may require. No party shall be liable to a holder for any
property delivered in good faith to a public official pursuant to any applicable
abandoned property law.
After the Effective Time, holders of BCS certificates will have no rights
with respect to the shares of BCS Common Stock represented thereby other than
the right to surrender such certificates and receive in exchange therefor the
shares of LSI Common Stock, if any, to which such holders are entitled, as
described above. In addition, no dividend or other distribution payable to
holders of record of LSI Common Stock will be paid to the holder of any such
certificates until such holder surrenders such certificates for exchange as
instructed. Subject to applicable law, upon surrender of the certificates, such
holder will receive the certificates representing the shares of LSI Common Stock
issuable upon the exchange or conversion of such shares, all withheld dividends
or other distributions (without interest), and any withheld cash payments
(without interest) to which such holder is entitled.
If any certificate for LSI Common Stock is to be issued in a name other
than that in which the certificate surrendered for exchange is issued, the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer, and the person requesting such exchange shall affix any
requisite stock transfer tax stamps to the certificates surrendered, shall
provide funds for their purchase, or shall establish to the exchange agent's
satisfaction that such taxes are not payable.
The WPC Mergers and the WPC Purchase
Promptly after the Effective Time, LSI shall cause the exchange agent
selected by LSI to mail appropriate transmittal materials to each record holder
of capital stock or interest in a WPC Merger Party or the WPC Property, for use
in effecting the surrender and cancellation of certificates or other documents
evidencing such stock or interest in exchange for LSI Common Stock (which shall
specify that delivery shall be effected, and risk of loss entitled to the
certificates or other documents theretofore representing shares or interest in a
WPC Merger Party or the WPC Property shall pass, only upon proper delivery of
such certificates or other documents to the exchange agent). HOLDERS SHOULD NOT
SURRENDER THEIR CERTIFICATES OR OTHER DOCUMENTS FOR EXCHANGE UNTIL THEY RECEIVE
SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS. After the Effective Time, each
holder of capital stock or other interest in a WPC Merger Party or the WPC
Property, issued and outstanding at the Effective Time shall surrender the
certificate or certificates or other documents representing such shares or
interest to the exchange agent, and the certificates or other documents thus
surrendered will be cancelled. Unless otherwise designated by a holder of
capital stock or interest in a WPC Merger Party or the WPC Property on the
transmittal letter, certificates representing shares of LSI Common Stock issued
to such holders in connection with the WPC Mergers or the WPC Purchase will be
issued and delivered to the tendering holder at the address indicated for the
receipt of notices in the relevant WPC Agreement. LSI shall not be obligated to
deliver the consideration to which holders of capital stock or interest in a WPC
Merger Party or the WPC Property are entitled until such holder surrenders such
holder's certificate or certificates or other documents representing such
holder's shares or interests for exchange. The certificate or certificates or
other documents so surrendered shall be duly endorsed as the exchange agent may
require. No party shall be liable to holder for any property delivered in good
faith to a public official pursuant to any applicable abandoned property law.
After the Effective Time, holders of certificates or other documents
representing shares of capital stock or interest in a WPC Merger Party or the
WPC Property will have no rights with respect to the shares or interests of a
WPC Merger Party or the WPC Property represented thereby other than the right to
surrender such certificates or other documents and receive in exchange therefor
the shares of LSI Common Stock, if any, to which such holders are entitled, as
described above. In addition, no dividend or other distribution payable to
holders of record of LSI Common Stock will be paid to the holder of any
certificates or documents representing shares or interests in a WPC Merger Party
or the WPC Property until such holder surrenders such certificates or other
documents for exchange as instructed. Subject to applicable law, upon surrender
of the certificates or other documents, such holder will receive the
certificates representing the shares of LSI
55
<PAGE> 63
Common Stock issuable upon the exchange or conversion of such shares or
interests, all withheld dividends or other distributions (without interest), and
any withheld cash payments (without interest) to which such holder is entitled.
If any certificate for LSI Common Stock is to be issued in a name other
than that in which the certificate or other document surrendered for exchange is
issued, the certificate or other document so surrendered shall be properly
endorsed and otherwise in proper form for transfer, and the person requesting
such exchange shall affix any requisite stock transfer tax stamps to the
certificates or other documents surrendered, shall provide funds for their
purchase, or shall establish to the exchange agent's satisfaction that such
taxes are not payable.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences of the Merger. This discussion is based on the provisions of the
Code, the United States Department of the Treasury Regulations thereunder and
rulings and court decisions as of the date hereof, all of which are subject to
change, possibly retroactive. The discussion is included for general information
purposes only, applies only to BCS stockholders and holders of capital stock of
or interests in a WPC Merger Party, who hold their stock as a capital asset, and
may not apply to BCS stockholders and holders of capital stock of or interests
in a WPC Merger Party who received their stock upon the exercise of employee
stock options or otherwise as compensation. LSI, BCS and the WPC Merger Parties
have not requested a ruling from the Internal Revenue Service (the "Service"). A
condition to consummation of the Merger is the receipt by each of LSI, BCS, BRI,
HSF and OGM of an opinion of Alston & Bird, counsel to LSI, as to the
qualification of the Tax-Free Mergers as tax-free reorganizations and certain
other federal income tax consequences of the Tax-Free Mergers and related
transactions, including, without limitation, that (i) no gain or loss will be
recognized for federal income tax purposes by BCS stockholders and holders of
capital stock in BRI, HSF and OGM (the "Tax-Free Holders") upon the exchange of
their shares of BCS Common Stock, BRI Common Stock, HSF Common Stock, and OGM
Common Stock, in each instance, for shares of LSI Common Stock (except to the
extent of any cash received), and (ii) none of the Tax-Free Parties will
recognize gain or loss as a consequence of the Tax-Free Mergers (except for
amounts resulting from any required change in accounting methods and any income
and deferred gain recognized pursuant to Treasury regulations issued under
Section 1502 of the Code).
LSI believes the Tax-Free Mergers will qualify as tax-free reorganizations
within the meaning of Section 368(a) of the Code. Among other things,
qualification as a tax-free reorganization is based on the Tax-Free Holders
maintaining sufficient equity ownership interest in LSI after the Merger. The
Service takes the position for purposes of issuing an advance ruling on
reorganizations, that the stockholders of an acquired corporation must maintain
a continuing equity ownership interest in the acquiring corporation equal, in
terms of value, to at least 50% of their interest in such acquired corporation.
For this purpose, shares exchanged for cash in lieu of any fractional shares of
LSI Common Stock will be treated as outstanding shares at the Effective Time.
Moreover, shares of BCS Common Stock, BRI Common Stock, HSF Common Stock, OGM
Common Stock and LSI Common Stock held by the Tax-Free Holders and otherwise
sold, redeemed or disposed of prior or subsequent to the Effective Time are
taken into account. In addition, management of LSI has no plan or intention to
cause LSI to redeem or otherwise reacquire the shares of LSI Common Stock issued
in the Tax-Free Mergers. In addition to the foregoing requirements certain
additional matters must be true with respect to the Merger. LSI believes that
these additional factual matters will be satisfied.
Provided the Tax-Free Mergers qualify as statutory mergers under applicable
state laws, the following will be the material federal income tax consequences:
(i) Each of the Tax-Free Mergers will qualify as a reorganization
within the meaning of Section 368(a) of the Code. Each of the Tax-Free
Parties will be "a party to a reorganization" within the meaning of Section
368(b).
(ii) None of BRI, HSF or OGM will recognize any gain or loss upon the
transfer of its assets to WPC in exchange solely for LSI Common Stock and
the assumption by WPC of the liabilities of BRI, HSF and OGM.
56
<PAGE> 64
(iii) No gain or loss will be recognized by LSI or WPC upon receipt by
WPC of the assets of BRI, HSF and OGM in exchange solely for LSI Common
Stock and the assumption by WPC of the liabilities of BRI, HSF, and OGM.
(iv) No gain or loss will be recognized by BCS upon the receipt of the
assets of WMC solely in exchange for shares of BCS Common Stock and the
assumption by BCS of the liabilities, if any, of WMC.
(v) No gain or loss will be recognized by WMC on the transfer of its
assets to BCS solely in exchange for shares of BCS Common Stock and the
assumption by BCS of the liabilities of WMC.
(vi) The basis of the assets of BRI, HSF and OGM in the hands of WPC
will, in each instance, be the same as the basis of those assets in the
respective hands of BRI, HSF and OGM immediately prior to the Tax-Free
Mergers.
(vii) The basis of the assets of WMC in the hands of BCS will, in each
instance, be the same as the basis of those assets in the hands of the WMC
immediately prior to the BCS Merger.
(viii) The holding period of the assets of BRI, HSF and OGM in the
hands of WPC will, in each instance, include the period during which such
assets were held by BRI, HSF and OGM, respectively.
(ix) The holding period of the assets of WMC in the hands of BCS will,
in each instance, include the period during which such assets were held by
WMC.
(x) No gain or loss will be recognized by the Tax-Free Holders upon
the exchange of their shares of BCS Common Stock, BRI Common Stock, HSF
Common Stock, and OGM Common Stock solely for shares of LSI Common Stock.
(xi) No gain or loss will be recognized by LSI upon the receipt of BCS
Common Stock solely in exchange for WMC Common Stock.
(xii) The basis of the shares of LSI Common Stock to be received by
the Tax-Free Holders will, in each instance, be the same as the basis of
the BCS Common Stock, BRI Common Stock, HSF Common Stock and OGM Common
Stock surrendered in exchange therefor.
(xiii) The holding period of the LSI Common Stock to be received by
the Tax-Free Holders will, in each instance, include the period during
which the shares of BCS Common Stock, BRI Common Stock, HSF Common Stock
and OGM Common Stock surrendered in exchange therefor had been held,
provided such shares were held by the Tax-Free Parties as a capital asset
at the Effective Time.
(xiv) Except as to holders of BRI Common Stock, the payment of cash to
Tax-Free Holders in lieu of fractional shares of LSI Common Stock will be
treated for federal income tax purposes as if the fractional shares were
issued as part of the exchange and then redeemed by LSI. These cash
payments will be treated as having been received as distributions in full
payment in exchange for the fractional shares of LSI Common Stock redeemed
as provided in Section 302(a) of the Code. Generally, any gain or loss
recognized upon such exchange will be capital gain or loss, provided the
fractional share would constitute a capital asset in the hands of the
exchanging stockholder. Holders of BRI Common Stock shall recognize gain,
if any, to the extent of cash received.
The Merger of GOS with and into WPC and the purchase of the WPC Property by
LSI pursuant to the WPC Purchase Agreement, will not qualify as a tax-free
reorganization within the meaning of the Code, and, as a result, a gain or loss
could be recognized for federal income purposes by the members of GOS and the
WPC Purchase Parties. See "The Merger -- Certain Federal Income Tax
Consequences."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH STOCKHOLDER AND OTHER FACTORS, EACH HOLDER OF
BCS COMMON STOCK OR CAPITAL STOCK OR INTERESTS IN A WPC MERGER PARTY OR THE WPC
PROPERTY IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO SUCH
57
<PAGE> 65
HOLDER OF THE MERGER (INCLUDING THE APPLICATION AND EFFECT OF FOREIGN, STATE AND
LOCAL INCOME AND OTHER TAX LAWS).
MANAGEMENT AND OPERATIONS AFTER THE MERGER
BCS will be the surviving corporation resulting from the BCS Merger and
will become a wholly-owned subsidiary of LSI. The BCS Merger Agreement provides
that from and after the Effective Time, the Board of Directors of BCS shall
consist of the directors of WMC immediately prior to the Effective Time. The BCS
Merger Agreement also provides that the officers of BCS in office immediately
prior to the Effective Time, together with such additional persons as may be
elected, shall serve as the officers of BCS from and after the Effective Time in
accordance with the bylaws of BCS. Further, the BCS Merger Agreement provides
that at or prior to the Effective Time, LSI and its Board of Directors shall
have taken such action as is necessary to elect the Chief Executive Officer of
BCS, Mr. Edward P. Grace, III, to the LSI Board of Directors effective as of the
Effective Time, and further, shall have taken such action as is necessary to
elect an additional person to the LSI Board of Directors, as of the Effective
Time, which person shall be approved by Mr. Grace.
WPC, a wholly-owned subsidiary of LSI, will be the surviving corporation
resulting from the WPC Mergers and the WPC Purchase. The WPC Agreements provide
that from and after the Effective Time, the Board of Directors of WPC shall
consist of the directors of WPC immediately prior to the Effective Time. The WPC
Agreements also provide that the officers of the WPC in office immediately prior
to the Effective Time, together with such additional persons as may be elected,
shall serve as the officers of WPC from and after the Effective Time in
accordance with the bylaws of WPC.
Except as set forth above, it is not expected that consummation of the
Merger will result in any change in the Board of Directors or management of LSI
or any of its other subsidiaries.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of June 14, 1996, the directors and executive officers of BCS held no
shares of LSI Common Stock. As of June 14, 1996, the directors and executive
officers of LSI held no shares of BCS Common Stock. Other than as described
herein, no director or executive officer of LSI or BCS, and no associate of any
such person, has any substantial interest, direct or indirect, in the Merger,
other than an interest arising from the ownership of BCS Options to purchase
such stock, in which case the director or officer receives no extra or special
benefit from his or her ownership of BCS Common Stock which is not shared on a
pro rata basis by all other holders of BCS Common Stock.
The WPC Mergers and the WPC Purchase
Certain members of BCS's management and Board of Directors have interests
in the Merger in addition to their interests as stockholders of BCS generally.
58
<PAGE> 66
Mr. Edward P. Grace, III, the President, Chief Executive Officer of BCS and
Chairman of the BCS Board of Directors and Mr. Samuel J. Orr, Jr. and Mr. Guy B.
Snowden, each a director of BCS, hold interests in certain of the WPC Merger
Parties and the WPC Property and will receive shares of LSI Common Stock in
exchange therefor (depending on the Exchange Ratio) as follows:
<TABLE>
<CAPTION>
SHARES OF LSI
COMMON STOCK TO
BE ISSUED
PERCENTAGE -----------------------
WPC PARTY OWNERSHIP MINIMUM(A) MAXIMUM(A)
---------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Bentley's Restaurants, Inc.
Mr. Grace......................................... 100% 1 2
Hemenway Sea Foods, Inc.
Mr. Grace......................................... 50% 34,739 39,444
Mr. Orr........................................... 50% 34,739 39,444
Old Grist Mill Tavern, Inc.
Mr. Grace......................................... 50% 27,645 31,389
Mr. Orr........................................... 50% 27,645 31,389
GOS Properties Limited Liability Company
Mr. Grace......................................... 33 1/3% 3,984 4,523
Mr. Orr........................................... 33 1/3% 3,984 4,523
Mr. Snowden....................................... 33 1/3% 3,984 4,523
WPC Property
Mr. Grace......................................... 50% 1,950 2,214
Mr. Orr........................................... 50% 1,950 2,214
</TABLE>
- ---------------
(a) The minimum and maximum number of shares of LSI Common Stock issued with
respect to the GOS Merger and the acquisition of the WPC Property will
depend upon the outstanding balance of mortgage indebtedness secured by the
property owned by GOS and the WPC Property at the Effective Time. The
numbers set forth above are based on the outstanding balances of such
indebtedness on June 14, 1996.
In each case, the BCS Board of Directors was aware of these factors and
considered them, among other matters, in approving the BCS Merger Agreement and
the transactions contemplated thereby.
Indemnification and Insurance. The Merger Agreements provide that LSI
shall not for a period of six years after the Effective Time amend, repeal or
otherwise modify the Certificate of Incorporation or Bylaws of BCS or the
governing instruments of the WPC Merger Parties in a manner that would adversely
affect the rights thereunder of persons who at any time prior to the Effective
Time were identified as prospective indemnitees pursuant to the provisions with
respect to indemnification set forth therein in respect of actions or omissions
occurring at or prior to the Effective Time (including without limitation, the
transactions contemplated by the Merger Agreements), unless such modification is
required by law. Pursuant to the Merger Agreements, LSI has guaranteed the
surviving corporation's (BCS with regard to the BCS Merger, and WPC with regard
to the WPC Mergers) obligations to provide the indemnification herein described.
LSI shall use its reasonable efforts to maintain the existing directors' and
officers' liability insurance policies of BCS and the WPC Merger Parties, if
any, (or a policy providing at least comparable coverage) for a period of five
years after the Effective Time of the Merger; provided, that LSI shall not be
obligated to make aggregate premium payments in respect of such policy which
exceed, for the portion relating to directors and officers, 200% of the annual
premium payments on current policies of BCS and the WPC Merger Parties in effect
on June 14, 1996.
Post-Acquisition Compensation and Benefits. The Merger Agreements provide
that, after the Effective Time, LSI will provide generally to officers and
employees of BCS and its subsidiaries and the WPC Merger Parties, employee
benefits under employee benefit plans (other than stock option or other plans
involving the potential issuance of LSI Common Stock), on terms and conditions
that, when taken as a whole, are substantially similar to those currently
provided by LSI and its subsidiaries to their similarly situated officers and
employees. For purposes of participation and vesting and benefit accrual (other
than benefit accrual under
59
<PAGE> 67
retirement plans) under such employee benefit plans, service with BCS or its
subsidiaries and the WPC Merger Parties prior to the Effective Time will be
treated as service with LSI or its subsidiaries. The Merger Agreements also
provide that LSI will honor all employment, severance, consulting and other
compensation contracts previously disclosed to LSI between BCS or any of its
subsidiaries or any WPC Merger Party and any current or former director, officer
or employee, and all provisions for vested amounts earned or accrued through the
Effective Time under BCS's and the WPC Merger Parties' benefit plans.
Grace Registration Rights Agreement. In connection with the execution of
the Voting Agreement, LSI has agreed to register, under certain circumstances,
the shares of LSI Common Stock acquired pursuant to the Merger by the
Stockholder, Mr. Edward P. Grace, III, under the Securities Act. Pursuant to the
Voting Agreement, LSI has granted to the Stockholder certain limited demand and
"piggy-back" registration rights with respect to the shares acquired by the
Stockholder in connection with the Merger. Under the terms of these registration
rights, if the Stockholder ceases to be a director of LSI within two years of
the Effective Time of the Merger, (i) the Stockholder may exercise one demand
right to register at least 2% of the then outstanding shares of LSI Common
Stock, and (ii) the Stockholder may request "piggy-back" registration in
connection with the registration of LSI Common Stock, but LSI may cancel such
registration at any time and the Stockholder's request is subject to reduction
in the number of Stockholder's shares to be registered by the managing
underwriter of such registration. These rights expire two years after the date
of the Effective Time of the Merger. LSI has agreed to maintain the availability
of prospectuses under such registration statements for a definitive period of
time, and such rights are subject to certain "blackout" periods necessary to (i)
protect LSI's material non-public information, or (ii) allow LSI's own
immediately planned offering to continue unaffected.
CONDITIONS TO CONSUMMATION
The obligations of LSI, BCS and the WPC Parties to consummate the Merger
are subject to the satisfaction or waiver (to the extent permitted) of the
following conditions: (i) the shareholders of LSI shall have approved the
issuance of LSI Common Stock pursuant to the Merger Agreements by the requisite
vote; (ii) the stockholders of BCS shall have adopted the BCS Merger Agreement
by the requisite vote; (iii) the required regulatory approvals and clearances
described under "-- Regulatory Approvals" shall have been received and shall be
in full force and effect with all waiting periods required by law having
expired, and no such regulatory approval shall be conditioned or restricted in a
manner which would, in the reasonable judgment of the Board of Directors of LSI,
so materially adversely affect the economic or business benefits of the
transactions contemplated by the Merger Agreements that had LSI known of such
condition it would not have entered into the Merger Agreements; (iv) each party
shall have received any required consents of third parties; (v) the Registration
Statement of which this Joint Proxy Statement/Prospectus is a part shall have
been declared effective by the Commission and shall not be subject to a stop
order or any threatened stop order, and the shares of LSI Common Stock issuable
in connection with the Merger shall have been qualified, registered or otherwise
approved for exchange under the securities laws of the various states in which
such qualification, registration or approval is required; (vi) the shares of LSI
Common Stock issuable pursuant to the Merger shall have been approved for
listing on the Nasdaq National Market, subject to effective notice of issuance;
(vii) LSI, BCS, BRI, HSF and OGM shall have received an opinion of Alston & Bird
as to certain federal income tax matters (see "-- Certain Federal Income Tax
Consequences"); (viii) LSI shall have received letters from LSI's independent
auditors to the effect that the Merger will qualify for pooling-of-interests
accounting treatment and letters from BCS's independent auditors to the effect
that such auditors are not aware of any matters relating to BCS or the WPC
Parties which would preclude the Merger from qualifying for pooling-of-interests
accounting (see "-- Accounting Treatment"); (ix) the accuracy, as of the date of
the Merger Agreements and as of the Effective Time, of the representations and
warranties of the other parties as set forth in the Merger Agreements; (x) the
other parties shall have performed in all material respects all of the
agreements, covenants, acts and undertakings to be performed by them pursuant to
the Merger Agreements; (xi) each party shall have received customary closing
documents, including, without limitation, an opinion of the other party's
counsel, dated the closing date, as to certain matters; (xii) LSI shall have
received letters from each affiliate of BCS to the extent necessary to assure
LSI, in its reasonable judgment, that the transactions contemplated in the
Merger Agreements will qualify for pooling-of-interests accounting treatment;
(xiii) the absence of any law or order or any action taken by any court,
governmental, or
60
<PAGE> 68
regulatory authority prohibiting, restricting, or making illegal the
consummation of the Merger; (ix) the stockholders' equity of BCS or the relevant
WPC Merger Party as of the last fiscal quarter preceding the Effective Time
shall not be materially less than such parties' stockholders equity as of March
31, 1996; and (x) BCS and each of the WPC Merger Parties shall have delivered to
LSI an audited balance sheet as of June 30, 1996, and the statements of income,
changes in stockholders' equity, and cash flows for the fiscal year then ended
together with the report of KPMG Peat Marwick LLP thereon, at least 30 calendar
days prior to the Effective Time.
No assurances can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or waived by the appropriate
party. As of the date of this Joint Proxy Statement/Prospectus, the parties have
no reason to believe that any of the conditions set forth above will not be
satisfied.
The conditions to consummation of the Merger may be waived, in whole or in
part, to the extent permissible under applicable law, by the party for whose
benefit the condition has been imposed, without the approval of the LSI
shareholders or the BCS stockholders. See "-- Amendment, Waiver, and
Termination."
REGULATORY APPROVALS
The obligations of LSI, BCS and the WPC Parties to perform the Merger
Agreements and consummate the Merger are subject to the consent of, filings and
registrations with, and notifications to, all regulatory authorities required
for consummation of the Merger having been obtained or made and are in full
force and effect and the expiration of all waiting periods required by law.
Furthermore, no consent from any regulatory authority which is necessary to
consummate the Merger shall be conditioned or restricted in a manner which in
the reasonable judgment of the Board of Directors of LSI would so materially
adversely impact the economic or business benefits of the Merger that, had such
condition or requirement been known, LSI would not, in its reasonable judgment,
have entered into the Merger Agreements.
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger may not be consummated until notifications
have been given and certain information has been furnished to the FTC and the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
the applicable waiting period has expired or been terminated. LSI and BCS filed
notification and report forms under the HSR Act with the FTC and the Antitrust
Division on July 15, 1996. At any time before or after consummation of the
Merger, the Antitrust Division or the FTC could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the consummation of the Merger or seeking
divestiture of substantial assets of LSI or BCS. At any time before or after the
Effective Time, and notwithstanding that the waiting period under the HSR Act
has expired, any state could take such action under the antitrust laws as it
deems necessary or desirable in the public interest. Such action could include
seeking to enjoin the consummation for the Merger or seeking divestiture of
substantial assets of LSI or BCS. Private parties may also seek to take legal
action under the antitrust laws under certain circumstances.
Based on information available to them, LSI and BCS believe that the Merger
can be effected in compliance with Federal and state antitrust laws. However,
there can be no assurance that a challenge to the consummation of the Merger on
antitrust grounds will not be made or that, if such a challenge were made, LSI
and BCS would prevail or would not be required to accept certain adverse
conditions in order to consummate the Merger.
Alcoholic beverage control regulations require the approvals from certain
liquor licensing authorities in connection with the Merger. The parties expect
that they will be able to obtain all such approvals. Failure to receive, or a
delay in obtaining, a liquor license approval could delay or prevent the
consummation of the Merger.
AMENDMENT, WAIVER, AND TERMINATION
The BCS Merger Agreement
To the extent permitted by law, BCS and LSI, with the approval of their
respective Boards of Directors, may amend the BCS Merger Agreement by written
agreement at any time without the approval of the
61
<PAGE> 69
shareholders of LSI or the stockholders of BCS, provided that after the adoption
of the BCS Merger Agreement by BCS's stockholders, no amendment may decrease the
consideration to be received by BCS stockholders without the requisite approval
of BCS stockholders.
Prior to or at the Effective Time, either BCS or LSI, acting through its
respective Board of Directors, chief executive officer or other authorized
officer, may waive any default in the performance of any term of the BCS Merger
Agreement by the other party, may waive or extend the time for the fulfillment
by the other party of any of its obligations under the BCS Merger Agreement, and
may waive any of the conditions precedent to the BCS Merger Agreement, except
any condition that, if not satisfied, would result in the violation of an
applicable law or governmental regulation.
The BCS Merger Agreement may be terminated, and the BCS Merger abandoned,
at any time prior to the Effective Time (i) by the mutual consent of the Boards
of Directors of BCS and LSI (ii) in the event of any inaccuracy of any
representation or warranty of the other party contained in the BCS Merger
Agreement which cannot be or has not been cured within 30 days after giving
written notice to the breaching party of such inaccuracy and which inaccuracy
would provide the terminating party the ability to refuse to consummate the BCS
Merger under the applicable standards set forth in the BCS Merger Agreement,
(iii) in the event of a material breach by the other party of any covenant or
agreement contained in the BCS Merger Agreement which cannot be or has not been
cured within 30 days after the giving of written notice to the breaching party
of such breach, (iv) if the BCS Merger is not consummated by December 31, 1996,
provided that the failure to consummate is not due to the breach by the party
electing to terminate, (v) if (1) any approval of any regulatory authority
required for consummation of the BCS Merger and the other transactions
contemplated by the BCS Merger Agreement has been denied by final non-appealable
action, or if any action taken by such authority is not appealed within the time
limit for appeal or (2) the shareholders of LSI or the stockholders of BCS fail
to vote their approval of the matters submitted for the approval by such
shareholders or stockholders at the LSI Meeting and the BCS Meeting, (vi) if any
of the conditions precedent to the obligations of such party to consummate the
BCS Merger have not been satisfied, fulfilled, or waived by the appropriate
party by December 31, 1996, (vii) by the Board of Directors of LSI or BCS in the
event that for any five consecutive trading days prior to the Effective Time the
last sale price of the LSI Common Stock on the Nasdaq National Market shall be
less than $21.00 per share.
In addition, LSI may unilaterally terminate the BCS Merger Agreement in the
event that BCS shall have notified LSI of the receipt of any tender offer or
exchange offer or any proposal for a merger, acquisition of all of the stock or
assets of, or other business combination involving BCS or any of its
subsidiaries or the acquisition of the substantial equity interest in, or a
substantial portion of the assets of, BCS or its substantial equity interest in,
or all or substantially all of the assets of, any of its subsidiaries (an
"Acquisition Proposal") and the determination of the Board of Directors of BCS
to cause BCS or any of its subsidiaries to furnish non-public information to
such person making such Acquisition Proposal and, within thirty days following
BCS's receipt of such Acquisition Proposal, the Board of Directors of BCS shall
have failed to reaffirm its approval of BCS Merger and the transactions
contemplated by the BCS Merger Agreement (to the exclusion of any other
Acquisition Proposal), or shall have resolved not to reaffirm the BCS Merger, or
shall have affirmed, recommended or authorized entering into any other
Acquisition Proposal or other transaction involving a merger, share exchange,
consolidation or transfer of substantially all of the assets of BCS. (The events
described in the preceding sentence shall hereinafter be referred to as a
"Termination Event"). See "-- Expenses and Fees."
BCS may unilaterally terminate the BCS Merger Agreement in the event that
prior to such time as the stockholders of BCS shall have adopted and approved
the BCS Merger Agreement, the Board of Directors of BCS shall have recommended
to the stockholders of BCS any other Acquisition Proposal or resolved to do so,
after having consulted with and considered the advice of outside counsel, and
reasonably determined in good faith that consideration of any Acquisition
Proposal would be required to comply with its fiduciary duties to BCS
stockholders under applicable law and after having consulted with and considered
the advice of outside counsel and BCS's financial advisor, shall have reasonably
determined in good faith that the potential acquiror is highly qualified. See
"-- Expenses and Fees."
62
<PAGE> 70
WPC Merger Agreements
To the extent permitted by law, LSI and the WPC Merger Parties, with the
approval of their respective Boards of Directors, may amend the WPC Merger
Agreements by written agreement at any time. Prior to or at the Effective Time,
either LSI or the WPC Merger Parties, acting through their respective Board of
Directors, chief executive officer or other authorized officer, may waive any
default in the performance of any term of the WPC Merger Agreements by the other
party, may waive or extend the time for fulfillment by the other party of any of
its obligations under the WPC Merger Agreements, and may waive any of the
conditions precedent to the WPC Merger Agreements, except any condition that, if
not satisfied, would result in the violation of an applicable law or
governmental regulation.
The WPC Merger Agreements may be terminated, and the WPC Mergers abandoned,
at any time prior to the Effective Time by the mutual consent of the Boards of
Directors of LSI and the WPC Merger Parties. In addition, the WPC Merger
Agreements may be terminated, and the WPC Mergers abandoned, prior to the
Effective Time by either LSI or the WPC Merger Parties if (i) any approval of
any regulatory authority required for consummation of the WPC Mergers and other
transactions contemplated by the WPC Merger Agreements has been denied by final
non-appealable action, or if any action taken by such authority is not appealed
within the time limit for appeal or (ii) LSI or BCS shall have terminated the
BCS Merger Agreement for any reason. The WPC Merger Agreements may also be
unilaterally terminated by LSI in the event that the BCS Merger shall not have
been consummated by December 31, 1996, if the failure to consummate the BCS
Merger is not caused by a breach of the BCS Merger Agreement by LSI.
WPC Purchase Agreement
Pursuant to WPC Purchase Agreement, WPC may, at its option, terminate the
WPC Purchase Agreement if: (i) the WPC Purchase Parties do not deliver the
documents and materials necessary to close the purchase; (ii) the transactions
contemplated by the BCS Merger Agreement are not closed; or (iii) the lender
under the loan secured by the WPC Property does not consent to the transfer of
the WPC Property and the assumption of its loan by WPC. The WPC Purchase Parties
may, at their option, terminate the WPC Purchase Agreement if: (i) WPC does not
deliver the documents and materials necessary to close the purchase; (ii) WPC
does not deliver the LSI Common Stock required to be paid as consideration for
the purchase; (iii) WPC does not assume all of the WPC Purchase Parties'
obligations under the loan; (iv) the BCS Merger is not closed; or (v) the lender
does not consent to the transfer of the WPC Property and the assumption of the
loan by WPC.
In addition, the WPC Purchase Agreement provides that WPC may, at its
option, terminate the WPC Purchase Agreement if all or any material part of the
WPC Property is (i) subject to a bona fide threat of condemnation or taken
thereby, or (ii) damaged or destroyed, and if such condemnation would, or would
be reasonably likely to, give LSI right to elect not to consummate the BCS
Merger. The WPC Purchase Agreement may be amended only by an amendment in
writing duly executed by each of the parties affected thereby.
CONDUCT OF BUSINESS PENDING THE MERGER
BCS and the WPC Merger Parties generally have agreed in the Merger
Agreements, unless the prior consent of LSI is obtained, and except as otherwise
contemplated by the Merger Agreements, to operate their businesses only in the
ordinary course, to use reasonable efforts to preserve their business
organizations and assets and to maintain their rights and franchises and to take
no action that would materially adversely affect either the ability of any party
to perform its covenants and agreements under the Merger Agreements or the
ability of any party to obtain any consents or approvals pursuant to any
contract, law, order or permit that are required for the transactions
contemplated by the Merger Agreements. In addition, the Merger Agreements
contain certain other restrictions applicable to the conduct of the businesses
of BCS and the WPC Parties prior to consummation of the Merger.
In addition, BCS and the WPC Parties have agreed not to solicit, directly
or indirectly, any Acquisition Proposal from any other person or entity. They
have also agreed not to negotiate with respect to any such
63
<PAGE> 71
proposal, to provide information to any party making such a proposal or to enter
into any agreement with respect to any such proposal, except in compliance with
legal obligations or the fiduciary obligations of their Boards of Directors. BCS
and the WPC Parties have also agreed to direct and use their reasonable efforts
to cause their advisors and other representatives not to engage in any of the
foregoing activities.
Pursuant to the Merger Agreements, LSI has agreed that, prior to the
Effective Time, it will continue to conduct its business and the business of its
subsidiaries in a manner designed in its reasonable judgment to enhance the
long-term value of the LSI Common Stock and the business prospects of LSI and to
the extent consistent therewith use all reasonable efforts to preserve intact
its core businesses and good will. In addition, LSI has agreed not to declare or
pay any dividend or make any distribution in respect of LSI Common Stock, and to
take no action which would materially adversely affect the ability of any party
to obtain any consents required for the transactions contemplated by the BCS
Merger Agreement or materially adversely affect the ability of any party to
perform its covenants and agreements under the BCS Merger.
With regard to the BCS Merger Agreement, BCS has agreed not to take certain
actions relating to the operation of its business pending consummation of the
BCS Merger without the prior consent of LSI, which consent may not be
unreasonably withheld, conditioned or delayed. Those actions generally include,
without limitation: (i) amending its Certificate of Incorporation (
"Certificate") or Bylaws; (ii) becoming responsible for any obligation for
borrowed money (other than indebtedness under its existing credit line) in
excess of an aggregate of $50,000, except in the ordinary course of the business
of BCS's subsidiaries consistent with past practices; (iii) acquiring or
exchanging any shares of its capital stock or paying any dividend or other
distribution in respect of its capital stock; (iv) subject to certain
exceptions, issuing, selling or pledging additional shares of any BCS capital
stock, any rights to acquire any such stock or any security convertible into
such stock, except pursuant to the exercise of outstanding stock options; (v)
adjusting or reclassifying any of its capital stock; (vi) acquiring control over
any other entity; (vii) granting any increase in compensation or benefits to its
employees or officers (except in accordance with past practice as previously
disclosed to LSI or as required by law), paying any bonus (except as previously
disclosed to LSI or in accordance with any existing program or plan), entering
into or amending any severance agreements with its officers or granting any
increase in compensation or other benefits to any of its directors (except in
accordance with past practice as previously disclosed to LSI); (viii) entering
into or amending any employment contract that it does not have the unconditional
right to terminate at any time on or after the Effective Time or upon
statutorily required notice without liability, except as previously disclosed to
LSI and except for any amendment required by law; (ix) adopting any new employee
benefit plan or program or materially changing any existing plan or program; (x)
making any significant changes in accounting methods, except for any change
required by law; (xi) commencing any litigation other than in accordance with
past practice or settling any litigation for material money damages; or (xii)
materially amending or terminating any material contracts.
EXPENSES AND FEES
The Merger Agreements provide that each party shall be responsible for its
own costs and expenses incurred in connection with the negotiation and
consummation of the transactions contemplated by the Merger Agreements, except
that each of LSI and BCS shall pay one-half of the filing fees payable in
connection with the Registration Statement and this Joint Proxy
Statement/Prospectus and printing costs incurred in connection with the
Registration Statement and this Joint Proxy Statement/Prospectus.
If the BCS Merger Agreement is terminated by LSI as the result of a
Termination Event or by BCS as the result of a Termination Event, then BCS has
agreed to pay all of the out-of-pocket costs and expenses of LSI, including cost
of counsel, investment bankers, actuaries and accountants up to but not
exceeding $750,000, upon presentation of such supporting documentation as BCS
may reasonably request.
If, within ten months following the termination of the BCS Merger Agreement
by LSI upon the occurrence of a Termination Event, or by BCS upon the occurrence
of a Termination Event, any third party acquires, merges with, combines with, or
purchases a significant amount of the assets of, or purchases 20% or more of the
voting securities of, BCS or enters into a binding agreement to do the
foregoing, then such third party (or BCS in the event that such third party
fails to pay) will be required to pay prior to the earlier of
64
<PAGE> 72
consummation of such transaction or execution of any letter of intent or
definitive agreement with BCS relating to such transaction, an amount in cash
equal to $2,000,000.00 less any amounts previously paid by BCS to LSI as a
result of the termination of the BCS Merger Agreement.
ACCOUNTING TREATMENT
The Merger is anticipated to be accounted for on a pooling-of-interests
accounting basis. Under this method of accounting, as of the Effective Time, the
assets and liabilities of BCS, the WPC Merger Parties and the WPC Property would
be added to those of LSI at their recorded book values and the stockholders'
equity accounts of LSI, BCS and the WPC Merger Parties would be combined on
LSI's consolidated balance sheet. Consummation of the Merger is conditioned on,
among other things, receipt by LSI of letters from LSI's independent auditors to
the effect that the Merger will qualify for pooling-of-interests accounting
treatment and letters from BCS's independent auditors to the effect that such
firm is not aware of any matters relating to BCS and the WPC Parties which would
preclude the Merger from qualifying for pooling-of-interests accounting
treatment. See "Summary" and "Pro Forma Combined Financial Data."
VOTING AGREEMENT
The following is a brief summary of certain provisions of a voting
agreement between LSI, BCS and Mr. Edward P. Grace, III (the "Stockholder"), the
holder of 2,415,000 shares, or 46.2%, of BCS Common Stock (the "Voting
Agreement").
The Voting Agreement provides that the Stockholder will vote such
Stockholder's shares of BCS Common Stock in favor of the BCS Merger, the
execution and delivery by BCS of the BCS Merger Agreement and the approval of
the terms thereof and each of the other transactions contemplated by the BCS
Merger Agreement, provided that the BCS Merger Agreement has not been amended so
as to reduce the consideration payable in the BCS Merger to a lesser amount of
LSI Common Stock. The Voting Agreement also provides that the Stockholder will
vote the Stockholder's shares of BCS Common Stock against any of the following
(each a "Completing Transaction"): any merger agreement or merger (other than
the BCS Merger Agreement and the BCS Merger), consolidation, combination, sale
of substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of or by BCS or any amendment of BCS's Certificate or
Bylaws or other proposal or transaction that would in any manner impede,
frustrate, prevent or nullify the BCS Merger, the BCS Merger Agreement or any of
the other transactions contemplated by the BCS Merger Agreement. The Stockholder
has granted an irrevocable proxy to LSI to vote the Stockholder's shares of BCS
Common Stock consistent with the foregoing agreements. The Stockholder has also
agreed not to, and not to permit any, of its representatives to, directly or
indirectly, solicit, initiate or encourage the submission of, any takeover
proposal or participate in any discussions or negotiations regarding, or furnish
to any person any 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 takeover proposal.
The Voting Agreement will terminate upon the earlier of the Effective Time
or the date upon which the BCS Merger Agreement is terminated in accordance with
its terms.
RESALES OF LSI COMMON STOCK
The shares of LSI Common Stock issued in connection with the Merger will be
freely transferable under the Securities Act, except for shares issued to any
stockholder who may be deemed to be an "affiliate" (generally including, without
limitation, directors, certain executive officers, and beneficial owners of 10%
or more of any class of capital stock) of BCS or the WPC Merger Parties for
purposes of Rule 145 under the Securities Act as of the date of the BCS Meeting,
or for purposes of applicable interpretations regarding pooling-of-interests
accounting treatment. Such affiliates may not sell their shares of LSI Common
Stock acquired in connection with the Merger except pursuant to an effective
registration statement under the Securities Act or other applicable exemption
from the registration requirements of the Securities Act and until such time as
financial results covering at least 30 days of combined operations of LSI, BCS,
the WPC Merger Parties and the WPC Property after the consummation of the Merger
have been published. LSI may place
65
<PAGE> 73
restrictive legends on certificates representing LSI Common Stock issued to all
persons who are deemed to be "affiliates" of BCS or the WPC Merger Parties under
Rule 145. In addition, BCS and the WPC Merger Parties have agreed to use their
reasonable efforts to cause each person or entity that is an "affiliate" to
enter into a written agreement in substantially the form attached to the Merger
Agreements relating to such restrictions on sale or other transfer. This Joint
Proxy Statement/Prospectus does not cover resales of LSI Common Stock received
by any person who may be deemed to be an affiliate of BCS or the WPC Merger
Parties.
PRO FORMA COMBINED FINANCIAL INFORMATION
The following pro forma combined financial information assumes that the
Merger has occurred and been accounted for on a pooling-of-interests basis for
all periods presented. It further assumes that LSI's acquisitions of Lone Star
Steaks, Inc. ("Lone Star"), two franchise restaurants, one each in Greensboro
and High Point, North Carolina ("Greensboro"), and the formation of the Carolina
Joint Venture (collectively, the "Purchase Business Combinations") occurred as
of the beginning of each period presented.
The pro forma combined financial information is based upon the historical
consolidated financial statements and the notes thereto of LSI, incorporated by
reference herein, and of BCS, included in Annex D to the Joint Proxy
Statement/Prospectus, and upon the historical financial information of the WPC
Merger Parties and the WPC Property. The pro forma combined statements of
earnings combine LSI's consolidated statements of earnings for the years ended
December 31, 1995, 1994, and 1993 and the three month period ended March 31,
1996 with the corresponding WPC Merger Parties' and the WPC Property's
statements of earnings for those same periods and with the corresponding BCS
consolidated (combined) statements of earnings for the twelve month periods
ended December 10, 1995, December 11, 1994, and December 12, 1993 and the
sixteen week period ended March 31, 1996, respectively. The pro forma combined
balance sheet combines LSI's March 31, 1996 consolidated balance sheet with the
consolidated balance sheet of BCS and the combined balance sheets of the WPC
Merger Parties and the WPC Property at March 31, 1996. The pro forma financial
information of BCS and the other entities has been adjusted to conform reporting
periods, presentation format and accounting policies to those of LSI. The pro
forma earnings per common and common equivalent share and weighted average
common and common equivalent shares outstanding are based on the combined
average number of LSI and BCS common and equivalent shares outstanding during
each period, based on the BCS Exchange Ratio and the maximum number of shares
assumed to be issued pursuant to the Exchange Ratios. Costs related to the
Merger are not reflected in this pro forma financial information, and will be
charged to expense as incurred.
The pro forma combined statement of earnings for the year ended December
31, 1995 presents the results of operations of LSI, BCS, the WPC Merger Parties
and the WPC Property, on a pooled basis, combined with (i) the unaudited
preacquisition earnings of Lone Star for the period from January 1, 1995 to June
28, 1995, (ii) the unaudited precombination earnings of the two Greensboro
restaurants for the period from January 1, 1995 to August 21, 1995, and (iii)
the unaudited earnings of the restaurant assets to be contributed to the
Carolina Joint Venture for the year ended December 31, 1995. The pro forma
combined statement of earnings for the three month period ended March 31, 1996
presents the results of operations of LSI, BCS, the WPC Merger Parties and the
WPC Property, on a pooled basis, combined with those of the restaurants of the
Carolina Joint Venture, which was formed subsequent to March 31, 1996. The pro
forma combined balance sheet as of March 31, 1996 presents the financial
position of LSI, BCS, the WPC Merger Parties and the WPC Property, on a pooled
basis, combined with the financial position of the Carolina Joint Venture at
March 31, 1996.
The combined pro forma financial information should be read in conjunction
with the consolidated (combined) financial statements and the related notes
thereto of BCS included elsewhere herein and those of LSI which are incorporated
herein by reference.
The pro forma financial information is presented for illustrative purposes
only and is not necessarily indicative of the operating results or financial
position that would have occurred if the Merger or the Purchase Business
Combinations had been consummated at the beginning of each of the periods
presented, nor is it necessarily indicative of future operating results or
financial position.
66
<PAGE> 74
LONGHORN STEAKS, INC.
PRO FORMA COMBINED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
WPC
MERGER
PARTIES CAROLINA(M)
AND WPC JOINT
PROPERTY VENTURE
LSI THREE BCS THREE THREE PRO FORMA THREE
MONTHS MONTHS MONTHS POOLED MONTHS
ENDED ENDED ENDED THREE ENDED TOTAL
MARCH 31, MARCH 31, MARCH 31, PRO FORMA MONTHS MARCH 31, PRO FORMA THREE MONTHS
1996 1996 1996 ADJUSTMENTS 1996 1996 ADJUSTMENTS 1996
---------- ---------- --------- ----------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Restaurant sales..... $ 31,922 $ 16,491 $ 2,051 $ -- $ 50,464 $ 1,174 $ -- $ 51,638
Wholesale meat
sales............... 1,633 -- -- -- 1,633 -- -- 1,633
Other................ 90 32 33 (32)(C) 90 -- (31) (H) 59
(33)(D)
---------- ---------- --------- --- ---------- --------- ----- ------------
Total Revenues....... 33,645 16,523 2,084 (65) 52,187 1,174 (31) 53,330
---------- ---------- --------- --- ---------- --------- ----- ------------
Cost of restaurant
sales............... 11,413 6,079 755 -- 18,247 444 -- 18,691
Cost of wholesale
meat sales.......... 1,587 -- -- -- 1,587 -- -- 1,587
Operating expenses
--restaurants... 15,819 8,285 1,192 (33)(D) 25,231 621 23(O) 25,875
(32)(C)
Operating
expenses -- meat
division............ 165 -- -- -- 165 -- -- 165
General and
administrative
expenses............ 2,419 1,192 -- -- 3,611 55 (36)(H) 3,630
---------- ---------- --------- --- ---------- --------- ----- ------------
Total costs and
expenses............ 31,403 15,556 1,947 (65) 48,841 1,120 (13) 49,948
---------- ---------- --------- --- ---------- --------- ----- ------------
Operating income..... 2,242 967 137 -- 3,346 54 (18) 3,382
---------- ---------- --------- --- ---------- --------- ----- ------------
Interest income
(expense)........... (56) (118) (39 ) -- (213 ) (4) -- (217)
Minority interest.... 68 -- -- -- 68 -- 84(M) 152
---------- ---------- --------- --- ---------- --------- ----- ------------
Earnings before
income taxes........ 2,118 849 98 -- 3,065 50 (102) 3,013
---------- ---------- --------- --- ---------- --------- ----- ------------
Income tax expense... 678 309 -- 34(E) 1,021 -- (16)(J) 1,005
---------- ---------- --------- --- ---------- --------- ----- ------------
Net earnings......... $ 1,440 $ 540 $ 98 $ (34) $ 2,044 $ 50 $ (86) $ 2,008
=========== =========== =========== ============= =========== =========== ============= ===============
Earnings per common
and common
equivalent share.... $ 0.20 $ 0.24 $ 0.61 $ 0.21 $ .21
=========== =========== =========== =========== ===============
Weighted average
common and common
equivalent shares
outstanding......... 7,141,000 2,231,510 159,663 9,532,173 9,532,173
=========== =========== =========== =========== ===============
</TABLE>
See notes to pro forma combined financial information.
67
<PAGE> 75
LONGHORN STEAKS, INC.
PRO FORMA COMBINED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
WPC MERGER
PARTIES AND PRO FORMA LONE STAR
LSI BCS WPC PROPERTY POOLED AND CAROLINA
YEAR ENDED YEAR ENDED YEAR ENDED PRO FORMA YEAR GREENSBORO JOINT
DEC. 31, 1995 DEC. 10, 1995 DEC. 31, 1995 ADJUSTMENTS 1995 (K,L) VENTURE(M)
------------- ------------- ------------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Restaurant sales.................. $ 102,188 $ 40,130 $ 6,961 $ -- $ 149,279 $3,174 $ 4,637
Wholesale meat sales.............. 6,495 -- -- -- 6,495 -- --
Other............................. 606 27 130 (27)(C) 606 -- --
(130)(D)
------------- ------------- ------------- ----------- --------- ---------- ----------
Total revenues............ 109,289 40,157 7,091 (157) 156,380 3,174 4,637
------------- ------------- ------------- ----------- --------- ---------- ----------
Cost of restaurant sales.......... 36,521 14,918 2,635 54,074 1,189 1,784
Cost of wholesale meat sales...... 6,159 -- -- 6,159 -- --
Operating
expenses -- restaurants......... 51,960 19,037 3,960 (27)(D) 74,800 1,606 2,198
(130)(C)
Operating expenses -- meat
division........................ 766 -- -- 766 -- --
Provision for restaurant
closings........................ 155 -- -- 155 -- --
General and administrative
expenses........................ 8,035 3,047 -- 11,082 203 409
------------- ------------- ------------- ----------- --------- ---------- ----------
Total costs and
expenses................ 103,596 37,002 6,595 (157) 147,036 2,998 4,391
------------- ------------- ------------- ----------- --------- ---------- ----------
Operating income.................. 5,693 3,155 496 -- 9,344 176 246
------------- ------------- ------------- ----------- --------- ---------- ----------
Interest income (expense)......... 395 81 (185) -- 291 13 (16)
Minority interest................. 5 -- -- -- 5 -- --
------------- ------------- ------------- ----------- --------- ---------- ----------
Earnings before income taxes...... 6,083 3,236 311 -- 9,630 189 230
------------- ------------- ------------- ----------- --------- ---------- ----------
Income tax expense................ 1,946 1,101 -- 109(E) 3,156 -- --
------------- ------------- ------------- ----------- --------- ---------- ----------
Net earnings...................... $ 4,137 $ 2,135 $ 311 $(109) $ 6,474 $ 189 $ 230
========= ========= ========= ======== ======== ======= ========
Earnings per common and common
equivalent share................ $ 0.61 $ 0.96 $ 1.95 $ 0.71
========= ========= ========= ========
Weighted average common and common
equivalent shares outstanding... 6,776,441 2,231,510 159,663 9,167,614
========= ========= ========= ========
<CAPTION>
PRO FORMA
COMBINED
PRO FORMA YEAR
ADJUSTMENTS 1995
----------- ----------
<S> <C> <C>
Restaurant sales.................. $ -- $ 157,090
Wholesale meat sales.............. -- 6,495
Other............................. (185) (H) 421
----------- ----------
Total revenues............ (185) 164,006
----------- ----------
Cost of restaurant sales.......... -- 57,047
Cost of wholesale meat sales...... -- 6,159
Operating
expenses -- restaurants......... 90(O) 78,694
Operating expenses -- meat
division........................ -- 766
Provision for restaurant
closings........................ -- 155
General and administrative
expenses........................ (63)(H) 11,631
----------- ----------
Total costs and
expenses................ 27 154,452
----------- ----------
Operating income.................. (212) 9,554
----------- ----------
Interest income (expense)......... (149)(I) 139
Minority interest................. 535(M) 540
----------- ----------
Earnings before income taxes...... (896) 9,153
----------- ----------
Income tax expense................ (154)(J) 3,002
----------- ----------
Net earnings...................... (742) 6,151
======== =========
Earnings per common and common
equivalent share................ $ 0.67
=========
Weighted average common and common
equivalent shares outstanding... 47,105(K) 9,214,719
======== =========
</TABLE>
See notes to pro forma combined financial information.
68
<PAGE> 76
LONGHORN STEAKS, INC.
PRO FORMA COMBINED STATEMENTS OF EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
WPC MERGER
PARTIES AND
LSI BCS WPC PROPERTY PRO FORMA
YEAR ENDED YEAR ENDED YEAR ENDED PRO FORMA POOLED
DEC. 31, 1994 DEC. 11, 1994 DEC. 31, 1994 ADJUSTMENTS YEAR 1994
------------- ------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Restaurant sales.................. $ 82,510 $ 21,493 $ 7,022 -- $ 111,025
Wholesale meat sales.............. 3,389 -- -- -- 3,389
615 186 130 (186)(C) 615
Other............................. (130)(D)
------------- ------------- ------------- ----------- ----------
Total revenues.......... 86,514 21,679 7,152 (316) 115,029
------------- ------------- ------------- ----------- ----------
Cost of restaurant sales.......... 29,613 7,790 2,552 -- 39,955
Cost of wholesale meat sales...... 3,138 -- -- -- 3,138
Operating
expenses -- restaurants......... 42,405 9,422 4,438 (186)(C) 55,949
(130)(D)
Operating expenses -- meat
division........................ 702 -- -- -- 702
Provision for restaurant
closings........................ 1,120 -- -- -- 1,120
General and administrative
expenses........................ 8,285 1,846 -- -- 10,131
------------- ------------- ------------- ----------- ----------
Total costs and
expenses.............. 85,263 19,058 6,990 (316) 110,995
------------- ------------- ------------- ----------- ----------
------------- ------------- ------------- ----------- ----------
Operating income.................. 1,251 2,621 162 -- 4,034
------------- ------------- ------------- ----------- ----------
Interest income (expense)......... 530 394 (130) -- 794
------------- ------------- ------------- ----------- ----------
Earnings before income taxes...... 1,781 3,015 32 -- 4,828
------------- ------------- ------------- ----------- ----------
Income tax expense................ 267 1,019 -- 11(E) 1,297
------------- ------------- ------------- ----------- ----------
Net Earnings...................... 1,514 1,996 32 (11) 3,531
========== ========== ========== ========= =========
Earnings per common and common
equivalent share................ 0.23 0.95 .20 .40
========== ========== ========== =========
Weighted average common and common
equivalent shares outstanding... 6,522,444 2,090,949 159,663 8,773,056
========== ========== ========== =========
</TABLE>
See notes to pro forma combined financial information.
69
<PAGE> 77
LONGHORN STEAKS, INC.
PRO FORMA COMBINED STATEMENTS OF EARNINGS
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
WPC MERGER
PARTIES AND
LSI BCS WPC PROPERTY PRO FORMA
YEAR ENDED YEAR ENDED YEAR ENDED PRO FORMA POOLED YEAR
DEC. 31, 1993 DEC. 12, 1993 DEC. 31, 1993 ADJUSTMENTS 1993
------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Restaurant sales.................. $ 66,338 $ 12,247 $ 7,125 $ -- $ 85,710
Wholesale meat sales.............. 3,504 -- -- -- 3,504
Other............................. 544 62 130 (128)(C) 478
(130)(D)
------------- ------------- ------------- ----------- -----------
Total revenues.......... 70,386 12,309 7,255 (258) 89,692
------------- ------------- ------------- ----------- -----------
Cost of restaurant sales.......... 23,406 4,221 2,516 -- 30,143
Cost of wholesale meat sales...... 3,174 -- -- -- 3,174
Operating
expenses -- restaurants......... 32,161 5,038 4,369 -- 41,568
Operating expenses -- meat
division........................ 734 -- -- -- 734
General and administrative
expenses........................ 6,285 2,380 -- (1,511)(F) 6,896
(128)(C)
(130)(D)
------------- ------------- ------------- ----------- -----------
Total costs and
expenses.............. 65,760 11,639 6,885 (1,769) 82,515
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Operating income.................. 4,626 670 370 1,511 7,177
------------- ------------- ------------- ----------- -----------
Interest income (expense)......... 582 (159) (151) 100(G) 372
------------- ------------- ------------- ----------- -----------
Earnings before income taxes...... 5,208 511 219 1,611 7,549
------------- ------------- ------------- ----------- -----------
Income tax expense................ 1,853 2 -- 930(E) 2,785
------------- ------------- ------------- ----------- -----------
Net earnings............ $ 3,355 $ 509 $ 219 $ 681 $ 4,764
========== ========== ========== ========= =========
Earnings per common and
common equivalent
share................. $ 0.53 $ 0.39 $ 1.37 $ 0.62
========== ========== ========== =========
Weighted average common and common
equivalent shares outstanding... 6,288,915 1,289,155 159,663 7,737,733
========== ========== ========== =========
</TABLE>
See notes to combined pro forma financial information.
70
<PAGE> 78
LONGHORN STEAKS, INC.
PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
WPC MERGER CAROLINA
PARTIES AND PRO FORMA PRO FORMA JOINT PRO FORMA PRO FORMA
LSI BCS WPC PROPERTY ADJUSTMENTS POOLED VENTURE ADJUSTMENTS COMBINED
-------- ------- ------------ ----------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.............. $ 3,076 $ 966 $ 21 $ -- $ 4,063 $ 3 $ -- $ 4,066
Marketable securities...... -- 521 -- -- 521 -- -- 521
Receivables................ 1,184 452 41 (110)(A) 1,567 124 -- 1,691
Inventories................ 4,938 1,819 151 -- 6,908 38 -- 6,946
Prepaid expenses and
other.................... 836 631 22 -- 1,489 2 -- 1,491
Preopening costs........... 1,566 682 -- -- 2,248 -- -- 2,248
Deferred taxes............. -- 512 -- -- 512 -- -- 512
-------- ------- ------ ----------- --------- -------- ----------- ---------
Total current.......... 11,600 5,583 235 (110) 17,308 167 -- 17,475
-------- ------- ------ ----------- --------- -------- ----------- ---------
Property and equipment,
net........................ 56,147 33,572 2,612 -- 92,331 905 -- 93,236
Intangible assets............ 5,294 431 108 -- 5,833 -- 1,049(B) 6,882
Property held for sale....... 679 -- -- -- 679 -- -- 679
Deferred taxes............... 101 -- -- -- 101 -- -- 101
Other........................ 1,261 40 132 -- 1,433 2 -- 1,435
-------- ------- ------ ----------- --------- -------- ----------- ---------
Total assets........... $75,082 $39,626 $3,087 $(110) $117,685 $1,074 $ 1,049 $119,808
======= ======= =========== ========== ======== ======= ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current debt............... $ -- $ -- $ 38 $ -- $ 38 $ -- $ -- $ 38
Accounts payable........... 4,678 2,472 181 (110)(A) 7,221 51 -- 7,272
Accrued expenses........... 4,545 1,230 187 -- 5,962 8 -- 5,970
Deferred taxes............. 442 -- -- -- 442 -- -- 442
Other...................... -- 1,042 269 -- 1,311 -- -- 1,311
-------- ------- ------ ----------- --------- -------- ----------- ---------
Total current
liabilities.......... 9,665 4,744 675 (110) 14,974 59 -- 15,033
-------- ------- ------ ----------- --------- -------- ----------- ---------
Long-term debt, excluding
current installments....... 9,500 9,600 1,808 -- 20,908 276 -- 21,184
Deferred taxes............... -- 155 -- 12(E) 167 -- -- 167
Other........................ -- 599 -- -- 599 -- -- 599
-------- ------- ------ ----------- --------- -------- ----------- ---------
Total liabilities........ 19,165 15,098 2,483 (98) 36,648 335 -- 36,983
-------- ------- ------ ----------- --------- -------- ----------- ---------
Minority interest............ 684 -- -- -- 684 739 1,049(B) 2,472
Stockholders' equity:
Common stock............... 41,406 52 25 -- 41,483 -- 20,581(N) 62,064
Additional
paid-in-capital.......... 919 20,035 546 -- 21,500 -- (20,581)(N) 919
Retained earnings.......... 12,908 4,442 33 (12)(E) 17,371 -- -- 17,371
Unrealized loss............ (1 ) -- -- (1 ) -- -- (1 )
-------- ------- ------ ----------- --------- -------- ----------- ---------
Total stockholders'
equity................. 55,233 24,528 604 (12) 80,353 -- -- 80,353
-------- ------- ------ ----------- --------- -------- ----------- ---------
Total liabilities and
stockholders' equity....... $75,082 $39,626 $3,087 $(110) $117,685 $1,074 $ 1,049 $119,808
======= ======= =========== ========== ======== ======= ========== ========
</TABLE>
See notes to pro forma combined financial information.
71
<PAGE> 79
LONGHORN STEAKS, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
(A) Intercompany receivables and payables among BCS and the WPC Merger
Parties totaled $110,000 at March 31, 1996. These intercompany accounts have
been eliminated for purposes of presentation in the pro forma combined balance
sheet.
(B) The pro forma adjustment to intangible assets reflects 51% of the
difference between the capital contribution credited to the minority partners
and the fair value of identified assets contributed to the joint ventures.
Notwithstanding this allocation, the minority partners and venture manager will
receive minority interest distributions of approximately 65% of net profit, as
defined in the joint venture agreement.
(C) BCS provides purchasing and management services to certain of the WPC
Merger Parties for a fee. Fees from these central services arrangements, net of
related expenses, are recorded as other revenue in BCS's financial statements.
This pro forma adjustment to other revenue and restaurant operating expenses
eliminates these net fees and related expenses.
(D) BCS leases one of its locations, under an operating lease, from one of
the WPC Parties. This pro forma adjustment eliminates other revenue from these
rentals and the related restaurant operating expense.
(E) Prior to the Merger the WPC Merger Parties were S Corporations or,
limited liability companies and the owners of the WPC Property were a
partnership, and accordingly, were not subject to corporate income taxes. This
pro forma adjustment to income taxes reflects income taxes as if the other
entities were subject to income taxes, assuming a blended rate (Federal and
state) of 35% for the three-month period ended March 31, 1996 and for each of
the years in the three year period ended December 31, 1995.
(F) Prior to January 1, 1994, all of the consolidated subsidiaries of BCS
were S Corporations with common ownership. Prior to January 1, 1994 stockholder
employees of BCS were paid bonuses based upon their respective percentage
interests in the S corporations' earnings. This pro forma adjustment to general
and administrative expenses is a reduction in compensation to the extent that
such compensation exceeded the maximum compensation payable to such individuals
under current compensation arrangements since January 1, 1994.
(G) The pro forma adjustment to interest expense reflects the reversal of
interest charges incurred in the period prior to BCS's stock offering that
relate to bank and stockholder debt repaid from the proceeds of that offering.
(H) The pro forma adjustments to franchise revenues and general and
administrative expenses reflect: (i) the elimination of franchise fees received
from the two Greensboro restaurants during the period January 1, 1995 to August
21, 1995; (ii) the elimination of royalty fees paid by two of the three
restaurants previously owned by the Carolina Joint Venture partners; (iii) the
addition of goodwill amortization assuming the acquisitions in (K) and (L) and
the formation of the joint venture in (M) had been made on January 1, of the
period presented and (iv) the elimination of compensation of a Region Manager
whose position was supplanted by the Venture Manager as described at Note O.
(I) The pro forma adjustment to interest expense reflects the accrual of
interest on approximately $4.7 million of additional indebtedness assumed to
have been incurred January 1, 1995 with the Lone Star and Greensboro
acquisitions. The debt is assumed to bear interest at an annual rate of 7.4%.
(J) Lone Star and the entity which owned the two Greensboro restaurants had
elected S corporation status and were not subject to corporate income taxes. The
pro forma adjustment to income taxes reflects the income tax effect of the above
adjustments, assuming a 32% blended state and federal tax rate.
(K) Effective June 29, 1995, LSI acquired certain assets of Lone Star for a
purchase price, including acquisition expenses, of $3,402,000. The purchase
price included cash consideration of $2,152,000 and 96,153 shares of LSI Common
Stock issued with a market value at the time of the transaction of $1,250,000.
The excess purchase price over the fair value of identifiable assets acquired
was $3,002,000 and is being amortized over 25 years.
72
<PAGE> 80
(L) Effective August 22, 1995, LSI purchased two franchised locations, the
Greensboro acquisition, for $2,564,000. The excess purchase price over the fair
value of identifiable assets acquired was $1,358,000 and is being amortized over
25 years.
(M) LSI entered into a joint venture in April 1996 under which LSI
contributed the two restaurants acquired in August 1995 (see L above) to the
Carolina Joint Venture and received a 51% interest. The joint venture partners
contributed restaurant assets of three previously franchised locations. The pro
forma adjustment to minority interest reflects the partners' pro forma share of
the Carolina Joint Venture's net profit, as defined in the joint venture
agreement had the venture been formed on January 1 of each period.
(N) The pro forma adjustment to common stock and additional paid-in capital
reflects the conversion of the BCS, and the WPC Merger Parties and the WPC
Property's capital structure to that of LSI.
(O) The Venture Manager of the Carolina Joint Venture receives certain
management fees for its operational management of the venture's restaurants.
This pro forma adjustment reflects the expense associated with these fees, had
the joint venture agreement been in place.
73
<PAGE> 81
CERTAIN DIFFERENCES IN THE RIGHTS OF LSI AND BCS STOCKHOLDERS
At the Effective Time, BCS stockholders automatically will become
shareholders of LSI, and their rights as shareholders will be determined by
LSI's Articles and Bylaws. BCS is a Delaware corporation governed by the
Delaware General Corporation Law ("DGCL"), while LSI is a Georgia corporation
governed by the Georgia Business Corporation Code ("GBCC"). Accordingly, set
forth below are the material differences between the rights of an LSI
shareholder under LSI's Articles and Bylaws and the GBCC, on the one hand, and
the rights of a BCS stockholder under BCS's Certificate and Bylaws and the DGCL,
on the other hand. This summary does not purport to be a complete discussion of,
and is qualified in its entirety by reference to, the DGCL, the GBCC and the
Articles or Certificate and Bylaws of each corporation.
AUTHORIZED CAPITAL STOCK
LSI
The authorized capital stock of LSI consists of 25,000,000 shares of LSI
Common Stock and 10,000,000 shares of preferred stock, no par value ("LSI
Preferred Stock"). The following description of the capital stock is qualified
in all respects by reference to LSI's Amended and Restated Articles of
Incorporation, as amended, (the "LSI Articles") and Bylaws, as amended, (the
"LSI Bylaws") copies of which are on file at LSI's principal executive offices.
LSI Common Stock. The holders of LSI Common Stock, subject to such rights
as may be granted to the holders of LSI Preferred Stock, elect all directors and
are entitled to one vote per share. Holders of LSI Common Stock are entitled to
receive dividends and other distributions when, as and if declared from time to
time by the Board of Directors out of funds legally available therefor subject
to any preferential rights of, and sinking fund or redemption or purchase rights
with respect to outstanding LSI Preferred Stock, if any. In the event of
voluntary or involuntary liquidation, dissolution or winding up of LSI, the
holders of LSI Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities subject to prior distribution rights of
any LSI Preferred Stock then outstanding. Holders of LSI Common Stock have no
preemptive or conversion rights and the LSI Common Stock is not subject to
further calls or assessment by LSI. There are no redemption or sinking fund
provisions applicable to the LSI Common Stock.
LSI Preferred Stock. LSI is authorized to issue 10,000,000 shares of LSI
Preferred Stock, none of which is outstanding. LSI Preferred Stock may be issued
from time to time by the Board of Directors of LSI, without shareholder
approval, in such series and with such voting powers, full or limited, and such
designations, preferences and relative, participating, optional or other special
rights, qualifications, limitations or restrictions as may be fixed by the Board
of Directors under Georgia law. The issuance of LSI Preferred Stock by the Board
of Directors could adversely affect the rights of holders of shares of LSI
Common Stock since LSI Preferred Stock may be issued having preference with
respect to dividends and in liquidation over the LSI Common Stock, and having
voting rights, contingent or otherwise, that could dilute the voting rights, net
income per share and net book value of the LSI Common Stock. In addition, while
the Board of Directors has no current intention of doing so, the ability of the
Board of Directors to issue shares of LSI Preferred Stock and to set the voting
powers and such designations, preferences and relative, participating, optional
or other special rights, qualifications, limitations or restrictions thereof
without further shareholder action could help to perpetuate incumbent management
of LSI or prevent a business combination involving LSI that is favored by LSI's
shareholders. As of the date of this Joint Proxy Statement/Prospectus the Board
of Directors has not authorized the issuance of any shares of LSI Preferred
Stock, and LSI has no agreements, arrangements or understandings with respect to
the issuance of any shares of LSI Preferred Stock.
BCS
The authorized capital stock of BCS consists of 20,000,000 shares of BCS
Common Stock. The following description of BCS capital stock is qualified in all
respects by reference to BCS's Amended and Restated Certificate of
Incorporation, as amended (the "BCS Certificate"), and Bylaws, as amended (the
"BCS Bylaws"), copies of which are on file at BCS's principal executive offices.
74
<PAGE> 82
BCS Common Stock. The holders of BCS Common Stock are entitled to one vote
per share on all matters submitted to the stockholders for a vote. All shares of
BCS Common Stock participate equally in dividends when, as and if declared by
the Board of Directors and share ratably in net assets on dissolution. The
shares of BCS Common Stock outstanding are duly authorized, validly issued,
fully paid and nonassessable and have no preference, conversion, exchange or
cumulative voting rights.
DIVIDENDS AND DISTRIBUTIONS
LSI
Unless provided otherwise by its articles of incorporation, a Georgia
corporation may pay dividends or make other distributions with respect to its
shares if after the dividend or distribution the corporation has the ability to
pay its debts as they become due and has net assets in excess of all senior
claims upon dissolution. LSI's Articles do not further limit LSI's ability to
pay dividends or make other distributions on LSI Common Stock except to the
extent that LSI Preferred Stock (none of which is outstanding) has preference as
to dividends.
BCS
A Delaware corporation, unless otherwise restricted by its certificate of
incorporation, may pay dividends out of surplus, or if no surplus exists, out of
net profits for the fiscal year in which the dividend is declared and/or for the
preceding fiscal year (but the directors may not declare and pay dividends out
of such net profits if the amount of capital of the corporation is less than the
aggregate amount of capital represented by the issued and outstanding stock of
all classes having preference upon the distribution of assets). BCS's
Certificate contains no restriction on dividends on the BCS Common Stock.
LIABILITY OF DIRECTORS
Both the DBCL and the GBCC allow a corporation to limit the personal
liability of directors with certain exceptions.
LSI
The LSI Articles provide that a director is not liable to LSI or its
shareholders for monetary damages for breaches of his duty of care or other
duties except for liability (i) for any appropriation, in violation of his
duties, of any business opportunity of the corporation, (ii) for acts or
omissions which involve intentional misconduct or a knowing violation of law,
(iii) for unlawful distributions, or (iv) for any transaction from which the
director derived an improper personal benefit.
BCS
The BCS Certificate provides that no director shall be personally liable to
BCS or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for (i) any breach of the director's duty of loyalty to BCS or
its stockholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) unlawful payment of
a dividend or repurchase of stock; or (iv) any transaction from which the
director derived an improper personal benefit.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
LSI
The GBCC authorizes a corporation to indemnify a director or officer
against loss or expense incurred in connection with any action, suit or
proceeding (other than an action by or in the right of a corporation in which
the director was adjudged liable to the corporation) if it is determined that
the director or officer acted in a manner he or she believed in good faith to be
in or not opposed to the best interests of the corporation and, in the case of
any criminal proceeding, had no reasonable cause to believe his or her conduct
was unlawful and, in the case of adjudicated liability, only if the director or
officer did not derive an improper personal
75
<PAGE> 83
benefit. Pursuant to LSI's Bylaws and indemnification agreements between LSI and
each of its officers and directors, LSI is obligated to indemnify each of its
directors and officers to the fullest extent permitted by law with respect to
all liability and loss suffered and reasonable expense incurred by such person
in any action, suit or proceeding in which such person was or is made or
threatened to be made a party or is otherwise involved by reason of the fact
that such person is or was a director or officer of LSI. LSI is obligated to pay
in advance the reasonable expenses of the directors and officers incurred in
defending such proceedings if (i) the indemnified party furnishes the
corporation a written affirmation of his good faith belief that he has met the
standard of conduct described in the first sentence above and (ii) the
indemnified party agrees to repay all amounts advanced if it is ultimately
determined that such person is not entitled to indemnification. A director will
not be indemnified if he is adjudged liable to LSI or is subjected to injunctive
relief in favor of LSI: (i) for any appropriation, in violation of his duties,
of any business opportunity of the corporation, (ii) for acts or omissions which
involve intentional misconduct or a knowing violation of law, (iii) for unlawful
distributions, or (iv) for any transaction from which the director derived an
improper personal benefit.
BCS
BCS will indemnify to the fullest extent permitted by the DGCL, as it
exists or may be amended (but, in the case of any such amendment, only to the
extent that such amendment permits BCS to provide broader indemnification rights
than said law permitted BCS to provide prior to such amendment), any person who
was or is a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he, or the person of whom he is the
legal representative, is or was a director or officer of BCS or is or was
serving at the request of BCS as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, against
all expense, liability and loss reasonably incurred or suffered by such person
in connection therewith, so long as the director acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
BCS, and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. At the indemnified person's request,
BCS must advance the expenses incurred by the indemnified person in defending
such proceeding provided that, if the DGCL requires, the payment of such
expenses incurred by a director or officer in his capacity as a director or
officer of BCS in advance shall be made only upon delivery to BCS of an
undertaking by such director or officer to repay all amounts so advanced if it
shall ultimately be determined that such director or officer is not entitled to
be indemnified.
As to actions by or in the right of BCS, the DGCL prohibits indemnification
of a person serving as a director, officer, employee or agent of BCS, or serving
at the request of BCS as a director, officer, trustee, employee or agent of or
in any other capacity with another corporation, partnership, joint venture,
trust or other enterprise, in respect of any claim, issue or matter as to which
such person has been adjudged liable to BCS unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
determines that, despite the adjudication of liability but in view of all the
circumstances, such person is entitled to indemnity for such expenses which such
court deems proper.
DIRECTORS AND CLASSES OF DIRECTORS
LSI
The Board of Directors of LSI is divided into three classes as nearly equal
in number as the total number of directors permits. Directors are elected to
each class at successive annual meetings to serve three year terms. Any newly
created or eliminated directorships resulting from an increase or decrease in
the number of authorized directors are divided equally among the three classes
so as to maintain such classes as nearly equal as possible. Any director or the
entire Board of Directors of LSI may be removed from office only for cause and
upon the affirmative vote of at least 75% of the holders of all classes of LSI
stock, voting as a single class. In the event LSI Preferred Stock is issued, the
holders of LSI Preferred Stock may be given the right to elect, acting as one
class, one or more additional members of the Board of Directors. If such right
is given to holders of LSI Preferred Stock, the members of the Board of
Directors elected by the holders of LSI Preferred Stock
76
<PAGE> 84
may only be removed by the holders of LSI Preferred Stock in accordance with the
terms of the LSI Preferred Stock.
The above-mentioned provisions (the "LSI Board Provisions") with regard to
the Board of Directors of LSI may have certain anti-takeover effects by
preventing or delaying a change in the membership of the Board of Directors of
LSI. The LSI Board Provisions are intended to encourage persons who may seek to
acquire control of LSI to initiate such an acquisition through negotiations with
the Board of Directors of LSI. However, the effect of the LSI Board Provisions
may be to discourage a third party from making a partial tender offer or
otherwise attempting to obtain a substantial position in the equity securities
of, or seeking to obtain control of, LSI. To the extent any potential acquirers
are deterred by the LSI Board Provisions, the LSI Board Provisions may have the
effect of preserving incumbent management in office.
BCS
The Board of Directors of BCS may range in size from three to nine members,
serving as a single class. Currently, six members serve on the Board of
Directors. Directors of BCS serve until the annual stockholders meeting
following their election and until their successors are elected and qualified.
Directors of BCS may be removed, with or without cause, by the affirmative vote
of the holders of a majority of the shares of BCS Common Stock then outstanding.
STOCKHOLDER MEETINGS
LSI
Georgia law provides that a special meeting of shareholders must be called
by the corporation's board of directors or any person authorized to do so by the
articles of incorporation or bylaws upon the written demand of the holders of at
least 25% (or any greater or lesser percentage as may be provided in the
articles of incorporation or bylaws) of the outstanding shares entitled to vote
on the issue to be considered at the special meeting. The LSI Bylaws provide
that the Board of Directors, the Chairman or the President may call special
meetings of the shareholders, but shareholders may not. The LSI Bylaws provide
for annual meetings of shareholders to be held during April or May of each year
and for special meetings to be held on call of the Board of Directors, Chairman
or President. Shareholders entitled to vote are entitled to written notice
stating the place, date, hour and, in the case of a special meeting, the purpose
of the meeting not less than 10 nor more than 60 days before the date of the
meeting. Unless the articles of incorporation or the GBCC provides otherwise,
the presence, in person or represented by proxy, of a majority of the votes
entitled to be cast on the matter by the voting group (i.e., all shares of one
or more classes or series that are entitled to vote and be counted together
collectively on a matter at a meeting of shareholders) constitutes a quorum.
When a quorum is present at a meeting, an action on a matter (other than the
election of directors) by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action,
unless the articles of incorporation, provisions of the bylaws validly adopted
by the shareholders or the GBCC requires a greater number of affirmative votes.
If the articles of incorporation or the GBCC provides for voting by two or more
voting groups on a matter, action on that matter is taken only when voted upon
by each voting group counted separately. Action may be taken by one voting group
on a matter even though no action is taken by another voting group entitled to
vote on the matter. With regard to the election of directors, unless otherwise
provided in the articles of incorporation, and assuming a quorum exists, action
on the election of directors is taken by a plurality of the votes cast by the
shares entitled to vote in the election. Under Georgia law, shareholders may act
without a meeting by unanimous written consent or, if the articles of
incorporation so authorize, subject to certain limitations, by the written
consent of the holders having not less than the percentage of stock required to
authorize the action taken at a meeting at which all shares entitled to vote
thereon were present. The LSI Bylaws provide that any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if one or more written consents, describing the action so taken, are
signed by all of the shareholders entitled to vote on the action.
77
<PAGE> 85
BCS
Under the DGCL, special meetings of stockholders may be called by the board
of directors or by such person or persons as may be authorized by the
certificate of incorporation or by the bylaws. The BCS Bylaws provide for annual
meetings to be held on the third Wednesday of October each year and for special
meetings to be held at the request of a majority of the Board of Directors or
the CEO. Stockholders entitled to vote are entitled to written notice stating
the place, date, hour and purpose of the meeting, and in cases other than annual
meetings, the notice shall also state that it is being issued by or at the
direction of the person calling the meeting, not less than 10 nor more than 60
days before the date of the meeting. The holders of a majority of the stock
issued and outstanding and entitled to vote at a meeting, present in person or
represented by proxy, constitutes a quorum. When a quorum is present at a
meeting, the vote of the holders of a majority of the stock having voting power,
present in person or by proxy, can approve any resolution properly brought
before the meeting, except: (i) that a plurality of the stock having the voting
power to elect a member of the Board of Directors shall be sufficient to elect
such member to the Board of Directors, or (ii) where a greater vote is required
by the certificate of incorporation or the DGCL. As permitted by the DGCL,
stockholders of BCS may not take any action by written consent in lieu of a
meeting.
STOCKHOLDER PROPOSALS
LSI
The LSI Bylaws do not contain any analogous provision to the BCS provision
regarding shareholder proposals set forth below.
BCS
At an annual meeting of the stockholders of BCS, or at any meeting in which
a stockholder shall nominate a person to be elected director, the BCS Bylaws
require stockholders to provide advance notice of proposals of business or
nominations for director. For business proposals to be properly brought before
an annual meeting, a stockholder must deliver written notice to the principal
executive offices of BCS not less than 30 days nor more than 60 days prior to
the annual meeting; provided, however, that in the event that less than 40 days
notice or prior public disclosure of the date of the annual meeting is given or
made to stockholders, notice by the stockholder to be timely must be received no
later than the close of business on the tenth day following the day on which
such notice of the annual meeting was mailed or such public disclosure was made.
To be in proper written form, a stockholder's notice to the Secretary of
intention to bring forth a business proposal shall set forth in writing as to
each matter the stockholder proposes to bring before the annual meeting: (i) a
brief description of the business desired to be brought before the meeting and
the reasons for conducting such business at the meeting; (ii) the name and
address, as they appear on BCS's books, of the stockholder proposing such
business; (iii) the class and number of shares of BCS which are beneficially
owned by the stockholder; and (iv) any material interest of the stockholder in
such business. To be in proper written form, a stockholder's notice to the
Secretary of intention to nominate a director shall set forth in writing: (i) as
to each person whom the stockholder proposes to nominate for election or
reelection as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, including, without limitation, such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected; and (ii) as to the stockholder giving the
notice, (x) the name and address, as they appear on BCS's books, of the
stockholder proposing such business, and (y) the class and number of shares of
BCS which are beneficially owned by the stockholder.
STOCKHOLDER INSPECTION RIGHTS
LSI
Under the GBCC, a shareholder of a corporation is entitled to inspect and
copy, during regular business hours at a reasonable location specified by the
corporation, any of the records of the corporation provided such
78
<PAGE> 86
shareholder gives to the corporation written notice of demand at least five days
in advance of the date such shareholder wishes to inspect and copy. As permitted
by the GBCC, the LSI Bylaws provide that the right of inspection shall not be
available to any shareholder owning 2% or less of the outstanding shares without
the prior approval of the board of directors, in its discretion.
BCS
Under the DGCL, any stockholder upon written demand under oath stating the
purpose thereof may inspect the books and records of a corporation and make
copies or extracts thereof, so long as such inspection is for a proper purpose
reasonably related to such persons interest as a stockholder, and provided that
such inspection request is made, in good faith and for such proper purpose.
ANTI-TAKEOVER PROVISIONS
LSI
LSI's Articles and Bylaws contain various provisions that may have the
effect, either alone or in combination with each other, of making more difficult
or discouraging a business combination or an attempt to obtain control of LSI
that is not approved by the Board of Directors. These provisions include (i) the
right of the Board of Directors to issue shares of unissued and unreserved LSI
Common Stock without shareholder approval, (ii) the right of the Board of
Directors to issue shares of LSI Preferred Stock in one or more series and to
designate the number of shares of each such series and the relative rights and
preferences of such series, including voting rights, terms of redemption,
redemption prices and conversion rights, without further shareholder approval,
(iii) the division of the Board of Directors into three classes, (iv)
prohibitions on the right of shareholders to remove directors other than for
cause and at a shareholders meeting for which notice of such purpose was given,
(v) prohibitions on the right of shareholders to call a special meeting of
shareholders or from acting by less than unanimous written consent in lieu of a
meeting, (vi) the right of the Board of Directors to consider the interests of
various constituencies, including employees, customers, suppliers and creditors
of LSI, as well as the communities in which LSI is located, in addition to the
interests of LSI and its shareholders, in discharging their duties and
determining what is in LSI's best interests, and (vii) a provision making
applicable to LSI provisions authorized by the GBCC relating to certain business
combinations.
As noted above, the LSI Bylaws make applicable to LSI provisions authorized
by the GBCC relating to business combinations with interested shareholders
("Corporate Takeover Provisions"). The Corporate Takeover Provisions are
designed to encourage any person, before acquiring 10% of LSI's voting shares,
to seek approval of the Board of Directors for the terms of any contemplated
business combination. The Corporate Takeover Provisions will prevent for five
years certain business combinations with an interested shareholder unless (i)
prior to the time such shareholder became an interested shareholder the Board of
Directors approved either the business combination or the transaction that
resulted in the shareholder becoming an interested shareholder, (ii) in the
transaction that resulted in the shareholder becoming an interested shareholder,
the interested shareholder became the beneficial owner of at least 90% of the
outstanding voting shares of LSI excluding, however, shares owned by LSI's
officers, directors, affiliates, subsidiaries and certain employee stock plans,
or (iii) subsequent to becoming an interested shareholder, such shareholder
acquired additional shares resulting in the interested shareholder becoming the
owner of at least 90% of LSI's outstanding voting shares and the business
combination is approved by the holders of a majority of LSI's voting shares,
excluding from said vote the stock owned by the interested shareholder or by
LSI's officers, directors, affiliates, subsidiaries and certain employee stock
plans.
Shareholders of LSI who became interested shareholders prior to the time of
the adoption of the Corporate Takeover Provisions are not subject to such
provisions.
BCS
BCS's Certificate and Bylaws contain several provisions that may make more
difficult the acquisition of control of BCS by means of a tender offer, open
market purchases, proxy fight or otherwise.
79
<PAGE> 87
Section 203 of the Delaware Law. In BCS's Certificate, BCS has expressly
elected to be governed by Section 203 of the DGCL. Section 203 of the DGCL
prevents an "interested stockholder" (defined in Section 203 generally as a
person owning 15% or more of a corporation's outstanding voting stock), from
engaging in a "business combination" (as defined in Section 203) with a
publicly-held Delaware corporation for three years following the date such
person became an interested stockholder unless (i) before such person became an
interested stockholder, the board of directors of the corporation approved the
transaction in which the interested stockholder became an interested stockholder
or approved the business combination, (ii) upon consummation of the transaction
that resulted in the interested stockholder becoming an interested stockholder,
the interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding stock
held by directors who are also officers of the corporation and by employee stock
plans that do not provide employees with the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer), or (iii) following the transaction in which such person became an
interested stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders by the
affirmative vote and not by written consent of the holders of two-thirds of the
outstanding voting stock of the corporation not owned by the interested
stockholder.
Advance Notice Provisions for Stockholder Proposals and Stockholder
Nominations of Directors. The BCS Bylaws establish an advance notice procedure
with regard to the nomination, other than by or at the direction of the Board of
Directors or a committee thereof, of candidates for election as directors (the
"Nomination Procedure") and with regard to certain matters to be brought before
an annual meeting of stockholders of BCS (the "Business Procedure").
The Nomination Procedure requires that a stockholder give prior written
notice, in proper form, of a planned nomination for the Board of Directors to
the Secretary of BCS. The requirements as to the form and timing of that notice
are specified in the BCS Bylaws. If the election inspectors determine that a
person was not nominated in accordance with the Nomination Procedure, such
person will not be eligible for election as a director.
Under the Business Procedure, a stockholder seeking to have any business
conducted at an annual meeting must give prior written notice, in proper form,
to the Secretary of BCS. The requirements as to the form and timing of that
notice are specified in the BCS Bylaws. If the Chairman or other officer
presiding at a meeting determines that other business was not properly brought
before such meeting in accordance with the Business Procedure, such business
will not be conducted at such meeting.
Although the BCS Bylaws do not give the Board of Directors any power to
approve or disapprove stockholder nominations for the election of directors or
of any other business desired by stockholders to be conducted at an annual or
any other meeting, the BCS Bylaws (i) may have the effect of precluding a
nomination for the election of directors or precluding the conduct of business
at a particular annual meeting if the proper procedures are not followed or (ii)
may discourage or deter a third party from conducting a solicitation of proxies
to elect its own slate of directors or otherwise attempting to obtain control of
BCS, even if the conduct of such solicitation or such attempt might be
beneficial to BCS and its stockholders.
Additional Common Stock. The Board of Directors is authorized to provide
for the issuance of additional shares of Common Stock. BCS believes that the
availability of the additional Common Stock will provide it with increased
flexibility in structuring possible future financings and in meeting other
corporate needs which might arise.
AMENDMENT OF THE ARTICLES OR CERTIFICATE OF INCORPORATION AND BYLAWS
LSI
Georgia law permits certain provisions of the articles of incorporation of
a corporation to be amended by action of its board of directors without
shareholder approval. New bylaws may be adopted and old bylaws may be amended or
repealed by the Board of Directors of LSI. Furthermore, the shareholders of LSI
may adopt, amend or repeal bylaws and provide that such adopted, repealed or
amended bylaws cannot be repealed,
80
<PAGE> 88
amended or re-enacted by the board of directors. Nevertheless, any new bylaws,
or any amendment or repeal of an existing bylaw, containing any provision
inconsistent in any manner with the provisions contained in Articles Six, Seven,
Eight, Nine and Ten of the LSI Articles or Sections 2.3, 2.12, 3.2, 3.3, 3.4,
9.1 through 9.18 and 12.1 of the LSI Bylaws (having to do with director
liability, constituency consideration, the election of directors, the right of
shareholders to call special meetings, amendment of the LSI Bylaws, shareholder
action without a meeting and the like) shall be effected only by that procedure
required under Georgia law for amendment of articles of incorporation.
BCS
The BCS Certificate provides that any provision of the BCS Certificate can
be amended, altered, changed or repealed as provided by the Delaware law. The
DGCL requires the affirmative vote of the holders of a majority of the shares
entitled to vote to amend the BCS Certificate.
The BCS Bylaws may be amended at any time at a meeting of stockholders or
directors, so long as such proposals of amendment are described in the notices
of such meetings.
DISSENTERS' RIGHTS
LSI
Subject to the exception provided below, under the GBCC, shareholders who
comply with the procedures of enforcing dissenters' rights may exercise such
rights, under certain circumstances, upon (i) the merger of a corporation, (ii)
the consummation of a plan of share exchange to which the corporation is the
acquired party, (iii) the sale or other disposition of all or substantially all
the corporate assets, (iv) an amendment of the articles of incorporation that
materially and adversely affects rights in respect of a dissenter's shares in
ways specified in the GBCC, or (v) any corporate action taken pursuant to a
shareholder vote to the extent that the close corporation section of the GBCC or
the articles of incorporation, the bylaws or a resolution of the board of
directors provides that shareholders are entitled to dissenters' rights.
However, there shall be no right of dissent in favor of the holder of shares of
any class or series which, at the record date fixed to determine the
shareholders entitled to receive notice of and to vote at a meeting at which a
plan of merger or share exchange or a sale or exchange of property or an
amendment of the articles of incorporation is to be acted on, were either listed
on a national securities exchange or held of record by more than 2,000
shareholders, unless: (1) in the case of a plan of merger or share exchange, the
holders of shares of the class or series are required under the plan of merger
or share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a national
securities exchange or held of record by more than 2,000 shareholders, except
for scrip or cash payments in lieu of fractional shares; or (2) the articles of
incorporation or a resolution of the board of directors approving the
transaction provides otherwise.
BCS
Like the GBCC, the DGCL provides for stockholder appraisal rights in
connection with mergers and consolidations generally, but does not permit
appraisal rights for holders of any class or series of stock that, at the record
date fixed to determine stockholders entitled to receive notice of and to vote
at the meeting to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an inter dealer quotation system by the National Association
of Securities Dealers, Inc., or (ii) held of record by more than 2,000 holders,
so long as stockholders received shares of the surviving corporation or another
corporation whose shares are so listed or designated or held of record by more
than 2,000 holders.
STOCKHOLDER APPROVAL OF MERGERS AND ASSET SALES
LSI
Under Georgia law, unless the articles of incorporation specify otherwise,
action by the shareholders of the surviving corporation on a plan of merger is
not required if (i) the articles of incorporation of the surviving
81
<PAGE> 89
corporation will not differ, with certain exceptions, from its articles before
the merger, (ii) each shareholder of the surviving corporation whose shares were
outstanding immediately before the effective date of merger will hold the same
number of shares, with identical designations, preferences, limitations and
relative rights, immediately after the merger, and (iii) the number and kinds of
shares outstanding immediately after the merger, plus the number and kind of
shares issuable as a result of the merger and by the conversion of securities
issued pursuant to the merger or the exercise of rights and warrants issued
pursuant to the merger, will not exceed the total number and kind of shares of
the surviving corporation authorized by its articles of incorporation
immediately before the merger. The NASD, however, requires shareholder approval
as a prerequisite to listing shares to be issued in certain mergers or other
merger transactions, such as where the transaction would result in the present
or potential increase of 20% or more in the outstanding shares of common stock
of the acquiring corporation.
BCS
Under Delaware law, the Merger must be adopted by a majority of all the
votes entitled to be cast on the Merger by all of the shares of BCS capital
stock entitled to vote on the Merger.
EXPERTS
The consolidated financial statements of LSI at December 31, 1995, and for
each of the years in the three-year period ended December 31, 1995, incorporated
by reference in LSI's Annual Report (Form 10-K) for the year ended December 31,
1995, have been audited by KPMG Peat Marwick LLP, independent auditors, as set
forth in their report thereon incorporated therein and incorporated herein by
reference in reliance upon such reports given on the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements of BCS at June 25, 1995, and for each
of the years in the three-year period ended June 25, 1995, have been included
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, included herein, and upon the authority of said
firm as experts in accounting and auditing.
Representatives of KPMG Peat Marwick LLP will be present at the Meetings
and will have an opportunity to make a statement if they so desire and to
respond to appropriate questions.
LEGAL MATTERS
The legality of the shares of LSI Common Stock being offered hereby is
being passed upon for LSI by Alston & Bird, Atlanta, Georgia. Alston & Bird,
counsel for LSI, also will opine as to certain federal income tax consequences
of the Merger. See "The Merger -- Certain Federal Income Tax Consequences."
OTHER MATTERS
As of the date of this Joint Proxy Statement/Prospectus, LSI's and BCS's
Board of Directors know of no matters that will be presented for consideration
at the LSI Meeting or the BCS Meeting, respectively other than as described in
this Joint Proxy Statement/Prospectus. However, if any other matter shall come
before such Meetings or any adjournments or postponements thereof and shall be
voted upon, the proposed proxy will be deemed to confer authority to the
individuals named as authorized therein to vote the shares represented by such
proxy as to any such matters that fall within the purposes set forth in the
Notice of Special Meeting as determined by a majority of the Board of Directors.
82
<PAGE> 90
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BUGABOO CREEK STEAK HOUSE, INC.,
WHIP MERGER CORPORATION
AND
LONGHORN STEAKS, INC.
DATED AS OF JUNE 14, 1996
<PAGE> 91
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of June 14, 1996, by and among BUGABOO CREEK STEAK HOUSE, INC. ("BCS"),
a Delaware corporation having its principal office located in East Providence,
Rhode Island; WHIP MERGER CORPORATION ("Sub"), a Georgia corporation having its
principal office located in Atlanta, Georgia; and LONGHORN STEAKS, INC. ("LSI"),
a Georgia corporation having its principal office located in Atlanta, Georgia.
PREAMBLE
The Boards of Directors of BCS, Sub and LSI are of the opinion that the
transactions described herein are in the best interests of the parties and their
respective shareholders. This Agreement provides for the acquisition of BCS by
LSI pursuant to the merger of Sub with and into BCS. At the effective time of
such merger, the outstanding shares of the capital stock of BCS shall be
converted into the right to receive shares of the common stock of LSI (except as
provided herein). As a result, shareholders of BCS shall become shareholders of
LSI and BCS shall continue to conduct its business and operations as a
wholly-owned subsidiary of LSI. The transactions described in this Agreement are
subject to the approvals of the shareholders of BCS, the shareholders of LSI,
expiration of the required waiting period under the HSR Act, and the
satisfaction of certain other conditions described in this Agreement. It is the
intention of the parties to this Agreement that the Merger for federal income
tax purposes shall qualify as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code, and for accounting purposes shall qualify
for treatment as a pooling of interests.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, Sub shall be merged with and into BCS in accordance with the
provisions of Section 252 of the DGCL and with the effect provided in Sections
259 and 261 of the DGCL and Section 1107 of the GBCC and with the effect
provided in Sections 1106 and 1107 of the GBCC (the "Merger"). BCS shall be the
Surviving Corporation resulting from the Merger and shall become a wholly-owned
Subsidiary of LSI and shall continue to be governed by the Laws of the State of
Delaware. The Merger shall be consummated pursuant to the terms of this
Agreement, which has been approved and adopted by the respective Boards of
Directors of BCS, Sub and LSI and by LSI, as the sole shareholder of Sub.
1.2 Time and Place of Closing. The closing of the transactions
contemplated hereby (the "Closing") will take place at 9:00 A.M. on the date
that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their authorized officers, may mutually agree. The Closing shall
be held at such place as may be mutually agreed upon by the Parties.
1.3 Effective Time. The Merger and other transactions contemplated by this
Agreement shall become effective on the date and at the time the Certificate of
Merger reflecting the Merger shall become effective with the Secretary of State
of the State of Delaware and the Certificate of Merger reflecting the Merger
become effective with the Secretary of State of the State of Georgia (the
"Effective Time"). Subject to the terms and conditions hereof, unless otherwise
mutually agreed upon in writing by authorized officers of each Party, the
Parties shall use their reasonable efforts to cause the Effective Time to occur
on the first business day following the last to occur of (i) the effective date
(including expiration of any applicable waiting period) of the last required
Consent of any Regulatory Authority having authority over and approving or
exempting
A-1
<PAGE> 92
the Merger, and (ii) the date on which the shareholders of BCS and LSI approve
this Agreement to the extent such approval is required by applicable Law.
ARTICLE 2
TERMS OF MERGER
2.1 Charter. The Certificate of Incorporation of BCS in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of BCS in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation until otherwise amended or
repealed.
2.3 Directors and Officers. The directors of Sub in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the directors of the Surviving Corporation
from and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation. The officers of BCS in office immediately prior to the Effective
Time, together with such additional persons as may thereafter be elected, shall
serve as the officers of the Surviving Corporation from and after the Effective
Time in accordance with the Bylaws of the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of LSI, BCS, Sub or the shareholders of any of the foregoing, the shares of the
constituent corporations shall be converted as follows:
(a) Each share of LSI Capital Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and
after the Effective Time.
(b) Each share of Sub Common Stock issued and outstanding at the
Effective Time shall cease to be outstanding and shall be converted into
one share of BCS Common Stock.
(c) Each share of BCS Common Stock excluding shares held by any BCS
Company or any LSI Company issued and outstanding at the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for
the right to receive that multiple of a share of LSI Common Stock (the
"Exchange Ratio") obtained by dividing $10.250 (the "Per Share Purchase
Price") by the Base Period Trading Price (defined to mean the average of
the daily last sale prices for the shares of LSI Common Stock for the
twenty (20) consecutive trading days on which such shares are actually
traded as over-the-counter securities and quoted on the Nasdaq National
Market (as reported by The Wall Street Journal or, if not reported thereby,
any other authoritative source) ending at the close of trading on the fifth
trading day immediately preceding the Closing Date) and rounded to the
third decimal place; provided, that for purposes of this calculation, the
Base Period Trading Price shall be deemed to equal (i) $27.250 in the event
the Base Period Trading Price is greater than $27.250 or (ii) $24.000 in
the event the Base Period Trading Price is less than $24.000 (collectively,
$27.250 and $24.000 are referred to as the "Base Period Trading Price
Limitations").
3.2 Anti-dilution Provisions. In the event LSI changes the number of
shares of LSI Common Stock issued and outstanding prior to the Effective Time as
a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, (i) the Base Period Trading Price Limitations shall be
adjusted to appropriately adjust the ratio under which shares of BCS Common
Stock will be converted into shares of LSI Common Stock pursuant to Section
3.1(c) of this Agreement, (ii) the Minimum Trading Price shall be appropriately
adjusted to reflect such change in the number of shares of LSI Common Stock
outstanding, and (iii) if necessary, the anticipated Effective Time shall be
postponed for an appropriate period
A-2
<PAGE> 93
of time agreed upon by the parties in order for the Base Period Trading Price to
reflect the market effect of such stock split, stock dividend, or similar
recapitalization.
3.3 Shares Held by BCS or LSI. Each of the shares of BCS Common Stock held
by any BCS Company or by any LSI Company shall be canceled and retired at the
Effective Time and no consideration shall be issued in exchange therefor.
3.4 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of BCS Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of LSI Common Stock (after taking into account all certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of LSI Common Stock multiplied
by the market value of one share of LSI Common Stock at the Effective Time. The
market value of one share of LSI Common Stock at the Effective Time shall be the
last sale price of LSI Common Stock on the Nasdaq National Market (as reported
by The Wall Street Journal or, if not reported thereby, any other authoritative
source) on the last trading day preceding the Effective Time. No such holder
will be entitled to dividends, voting rights, or any other rights as a
shareholder in respect of any fractional shares.
3.5 Conversion of Stock Options. (a) At the Effective Time, each option or
other right to purchase shares of BCS Common Stock pursuant to stock options or
stock appreciation rights ("BCS Options") granted by BCS under the BCS Stock
Plans, which are outstanding at the Effective Time, whether or not exercisable,
shall be converted into and become rights with respect to LSI Common Stock, and
LSI shall assume each BCS Option, in accordance with the terms of the BCS Stock
Plan and stock option agreement by which it is evidenced, except that from and
after the Effective Time, (i) LSI and its Stock Option Committee shall be
substituted for BCS and the Committee of BCS's Board of Directors (including, if
applicable, the entire Board of Directors of BCS) administering such BCS Stock
Plan, (ii) each BCS Option assumed by LSI may be exercised solely for shares of
LSI Common Stock (or cash in the case of stock appreciation rights), (iii) the
number of shares of LSI Common Stock subject to such BCS Option shall be equal
to the number of shares of BCS Common Stock subject to such BCS Option
immediately prior to the Effective Time multiplied by the Exchange Ratio, and
(iv) the per share exercise price under each such BCS Option shall be adjusted
by dividing the per share exercise price under each such BCS Option by the
Exchange Ratio and rounding up to the nearest cent. Notwithstanding the
provisions of clause (iii) of the preceding sentence, LSI shall not be obligated
to issue any fraction of a share of LSI Common Stock upon exercise of BCS
Options and any fraction of a share of LSI Common Stock that otherwise would be
subject to a converted BCS Option shall represent the right to receive a cash
payment upon exercise of such converted BCS Option equal to the product of such
fraction and the difference between the market value of one share of LSI Common
Stock at the time of exercise of such Option and the per share exercise price of
such Option. The market value of one share of LSI Common Stock at the time of
exercise of an Option shall be the last sale price of the LSI Common Stock on
the Nasdaq National Market (as reported by The Wall Street Journal or, if not
reported thereby, any other authoritative source) on the last trading day
preceding the date of exercise. In addition, notwithstanding the clauses (iii)
and (iv) of the first sentence of this Section 3.5, each BCS Option which is an
"incentive stock option" shall be adjusted as required by Section 424 of the
Internal Revenue Code, and the regulations promulgated thereunder, so as not to
constitute a modification, extension or renewal of the option, within the
meaning of Section 424(h) of the Internal Revenue Code. BCS agrees to take all
necessary steps to effectuate the foregoing provisions of this Section 3.5,
including using its reasonable efforts to obtain from each holder of a BCS
Option any Consent or Contract that may be deemed necessary or advisable in
order to effect the transactions contemplated by this Section 3.5.
(b) As soon as practicable after the Effective Time, LSI shall deliver to
the participants in each BCS Stock Plan an appropriate notice setting forth such
participant's rights pursuant thereto and the grants subject to such BCS Stock
Plan shall continue in effect on the same terms and conditions (subject to the
adjustments required by Section 3.5(a) after giving effect to the Merger), and
LSI shall comply with the terms of each BCS Stock Plan to ensure, to the extent
required by, and subject to the provisions of, such BCS Stock Plan, that BCS
Options which qualified as incentive stock options prior to the Effective Time
continue to qualify as incentive stock options after the Effective Time. At or
prior to the Effective Time, LSI shall take all corporate
A-3
<PAGE> 94
action necessary to reserve for issuance sufficient shares of LSI Common Stock
for delivery upon exercise of BCS Options assumed by it in accordance with this
Section 3.5. As soon as practicable after the Effective Time, LSI shall file a
registration statement on Form S-8 (or any successor or other appropriate
forms), with respect to the shares of LSI Common Stock subject to such options
and shall use its reasonable efforts to maintain the effectiveness of such
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.
With respect to those individuals who subsequent to the Merger will be subject
to the reporting requirements under Section 16(a) of the Exchange Act, where
applicable, LSI shall administer the BCS Stock Plan assumed pursuant to this
Section 3.5 in a manner that complies with Rule 16b-3 promulgated under the
Exchange Act to the extent the BCS Stock Plan complied with such rule prior to
the Effective Time.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, LSI and BCS
shall cause the exchange agent selected by LSI (the "Exchange Agent") to mail to
the former shareholders of BCS appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of BCS Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). The
Exchange Agent may establish reasonable and customary rules and procedures in
connection with its duties. After the Effective Time, each holder of shares of
BCS Common Stock (other than shares to be canceled pursuant to Section 3.3 of
this Agreement) issued and outstanding at the Effective Time shall surrender the
certificate or certificates representing such shares to the Exchange Agent and
shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2 of this Agreement. To the extent
required by Section 3.4 of this Agreement, each holder of shares of BCS Common
Stock issued and outstanding at the Effective Time also shall receive, upon
surrender of the certificate or certificates representing such shares, cash in
lieu of any fractional share of LSI Common Stock to which such holder may be
otherwise entitled (without interest). LSI shall not be obligated to deliver the
consideration to which any former holder of BCS Common Stock is entitled as a
result of the Merger until such holder surrenders such holder's certificate or
certificates representing the shares of BCS Common Stock for exchange as
provided in this Section 4.1. The certificate or certificates of BCS Common
Stock so surrendered shall be duly endorsed as the Exchange Agent may require.
Any other provision of this Agreement notwithstanding, neither LSI, the
Surviving Corporation nor the Exchange Agent shall be liable to a holder of BCS
Common Stock for any amounts paid or property delivered in good faith to a
public official pursuant to any applicable abandoned property Law. Adoption of
this Agreement by the shareholders of BCS shall constitute ratification of the
appointment of the Exchange Agent.
4.2 Rights of Former BCS Shareholders. At the Effective Time, the stock
transfer books of BCS shall be closed as to holders of BCS Common Stock
immediately prior to the Effective Time and no transfer of BCS Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of BCS Common Stock (other than
shares to be canceled pursuant to Sections 3.3 of this Agreement) shall from and
after the Effective Time represent for all purposes only the right to receive
the consideration provided in Sections 3.1 and 3.4 of this Agreement in exchange
therefor, subject, however, to the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which have been declared or made by BCS in respect of such shares
of BCS Common Stock in accordance with the terms of this Agreement and which
remain unpaid at the Effective Time. Whenever a dividend or other distribution
is declared by LSI on the LSI Common Stock, the record date for which is at or
after the Effective Time, the declaration shall include dividends or other
distributions on all shares of LSI Common Stock issuable pursuant to this
Agreement, but no dividend or other distribution payable to the holders of
record of LSI Common Stock as of any time subsequent to the Effective Time shall
be delivered to the holder of any certificate representing shares of BCS Common
Stock issued and outstanding at the Effective Time until such holder surrenders
such certificate for exchange as provided in Section 4.1 of
A-4
<PAGE> 95
this Agreement. However, upon surrender of such BCS Common Stock certificate,
both the LSI Common Stock certificate (together with all such undelivered
dividends or other distributions without interest) and any undelivered dividends
and cash payments payable hereunder (without interest) shall be delivered and
paid with respect to each share represented by such certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BCS
BCS hereby represents and warrants to LSI as follows:
5.1 Organization, Standing, and Power. BCS is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. BCS is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on BCS.
5.2 Authority; No Breach By Agreement. (a) BCS has the corporate power and
authority necessary to execute, deliver, and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery, and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of BCS, subject to the approval of this Agreement by the holders of a
majority of the outstanding shares of BCS Common Stock, which is the only
shareholder vote required for approval of this Agreement and consummation of the
Merger by BCS. Subject to such requisite shareholder approval, this Agreement
represents a legal, valid, and binding obligation of BCS, enforceable against
BCS in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by BCS, nor the
consummation by BCS of the transactions contemplated hereby, nor compliance by
BCS with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of BCS's Certificate of Incorporation or Bylaws, or (ii)
except as disclosed in Section 5.2 of the BCS Disclosure Memorandum, constitute
or result in a Default under, or require any Consent pursuant to, or result in
the creation of any Lien on any Asset of any BCS Company under, any Contract or
Permit of any BCS Company, except for any such Default, Consent or Lien that
would not have a Material Adverse Effect on BCS or on any restaurant owned or
operated by BCS, or, (iii) subject to receipt of the requisite Consents referred
to in Section 9.1(b) of this Agreement, violate any Law or Order applicable to
any BCS Company or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, no notice to, filing with, or Consent of, any public body
or authority is necessary for the consummation by BCS of the Merger and the
other transactions contemplated in this Agreement.
5.3 Capital Stock. (a) The authorized capital stock of BCS consists of
20,000,000 shares of BCS Common Stock, of which 5,225,000 shares are issued and
outstanding as of the date of this Agreement and not more than 5,225,000 shares,
plus any shares issued as the result of an exercise of an option existing as of
the date of this Agreement, will be issued and outstanding at the Effective
Time. All of the issued and outstanding shares of capital stock of BCS are duly
and validly issued and outstanding and are fully paid and nonassessable under
the DGCL. None of the outstanding shares of capital stock of BCS has been issued
in violation of any preemptive rights of the current or past shareholders of
BCS. BCS has reserved 600,000 shares of BCS Common Stock for issuance under the
BCS Stock Plans, pursuant to which options to purchase not more than 452,194
shares of BCS Common Stock are outstanding.
A-5
<PAGE> 96
(b) Except as set forth in Section 5.3(a) of this Agreement, or as
disclosed in Section 5.3 of the BCS Disclosure Memorandum, there are no shares
of capital stock or other equity securities of BCS outstanding and no
outstanding Rights relating to the capital stock of BCS.
5.4 BCS Subsidiaries. BCS has disclosed in Section 5.4 of the BCS
Disclosure Memorandum all of the BCS Subsidiaries (identifying its jurisdiction
of incorporation, each jurisdiction in which the character of its Assets or the
nature or conduct of its business requires it to be qualified and/or licensed to
transact business, and the number of shares owned and percentage ownership
interest represented by such share ownership). Except as disclosed in Section
5.4 of the BCS Disclosure Memorandum, BCS or one of its wholly-owned
Subsidiaries owns all of the issued and outstanding shares of capital stock (or
other equity interests) of each BCS Subsidiary. No capital stock (or other
equity interest) of any BCS Subsidiary is or may become required to be issued
(other than to another BCS Company) by reason of any Rights, and there are no
Contracts by which any BCS Subsidiary is bound to issue (other than to another
BCS Company) additional shares of its capital stock (or other equity interests)
or Rights or by which any BCS Company is or may be bound to transfer any shares
of the capital stock (or other equity interests) of any BCS Subsidiary (other
than to another BCS Company). There are no Contracts relating to the rights of
any BCS Company to vote or to dispose of any shares of the capital stock (or
other equity interests) of any BCS Subsidiary. All of the shares of capital
stock (or other equity interests) of each BCS Subsidiary held by a BCS Company
are fully paid and nonassessable under the applicable corporation Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are owned
by the BCS Company free and clear of any Lien. Except as disclosed in Section
5.4 of the BCS Disclosure Memorandum, each BCS Subsidiary is a corporation duly
organized, validly existing, and in good standing under the Laws of the
jurisdiction in which it is incorporated, and has the corporate power and
authority necessary for it to own, lease, and operate its Assets and to carry on
its business as now conducted. Each BCS Subsidiary is duly qualified or licensed
to transact business as a foreign corporation in good standing in the States of
the United States and foreign jurisdictions where the character of its Assets or
the nature or conduct of its business requires it to be so qualified or
licensed, except for such jurisdictions in which the failure to be so qualified
or licensed is not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on BCS. The minute book and other organizational
documents for each BCS Subsidiary have been made available to LSI for its
review, and, except as disclosed in Section 5.4 of the BCS Disclosure
Memorandum, are true and complete as in effect as of the date of this Agreement
and accurately reflect all amendments thereto and all proceedings of the Board
of Directors and shareholders thereof.
5.5 SEC Filings; Financial Statements. (a) BCS has timely filed and made
available to LSI all SEC Documents required to be filed by BCS since December
31, 1992 or such later date as BCS first filed, or was first obligated to file,
such SEC Documents (the "BCS SEC Reports"). The BCS SEC Reports (i) at the time
filed, complied in all material respects with the applicable requirements of the
Securities Laws and other applicable Laws and (ii) did not, at the time they
were filed (or, if amended or superseded by a filing, then on the date of such
filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such BCS SEC Reports or necessary in
order to make the statements in such BCS SEC Reports, in light of the
circumstances under which they were made, not misleading. No BCS Subsidiary is
required to file any SEC Documents.
(b) Each of the BCS Financial Statements (including, in each case, any
related notes) contained in the BCS SEC Reports, including any BCS SEC Reports
filed after the date of this Agreement until the Effective Time, complied as to
form in all material respects with the applicable published rules and
regulations of the Securities and Exchange Commission (the "SEC") with respect
thereto, was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except to the extent required by changes to
GAAP or as may be indicated in the notes to such financial statements or, in the
case of unaudited interim statements, as permitted by Form 10-Q of the SEC), and
fairly presented in all material respects the consolidated financial position of
BCS and its Subsidiaries as at the respective dates and the consolidated results
of operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount or effect and any pro forma financial information contained in the BCS
A-6
<PAGE> 97
Financial Statements is not necessarily indicative of the consolidated financial
position of BCS and the BCS Subsidiaries, as the case may be, as of the
respective dates thereof and the consolidated results of operations and cash
flows for the periods indicated.
5.6 Absence of Undisclosed Liabilities. No BCS Company has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on BCS, except Liabilities which are accrued or reserved against
in the consolidated balance sheets of BCS as of June 25, 1995 and March 31,
1996, included in the BCS Financial Statements delivered prior to the date of
this Agreement or reflected in the notes thereto, or as disclosed in Section 5.6
of the BCS Disclosure Memorandum. No BCS Company has incurred or paid any
Liability since March 31, 1996, except for such Liabilities (i) discussed in
Section 5.6 of the BCS Disclosure Memorandum or (ii) incurred or paid (A) in the
ordinary course of business consistent with past business practice and which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on BCS or (B) in connection with the transactions contemplated by
this Agreement. Except as disclosed in Section 5.6 of the BCS Disclosure
Memorandum, no BCS Company is directly or indirectly liable, by guarantee,
indemnity, or otherwise, upon or with respect to, or obligated, by discount or
repurchase agreement or in any other way, to provide funds in respect to, or
obligated to guarantee or assume any Liability of any Person, other than another
BCS Company, for any amount in excess of $25,000.
5.7 Absence of Certain Changes or Events. Since June 25, 1995, except as
disclosed in the BCS Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 5.7 of the BCS Disclosure Memorandum, (i)
there have been no events, changes, or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on BCS, and (ii) there has not been: (A) any material damage, destruction
or loss (not covered by insurance) with respect to any material assets of any
BCS Company that has resulted in a Material Adverse Effect on BCS, (B) any
material change by any BCS Company in its accounting methods, principles or
practices; (C) any declaration, setting aside or payment of any dividends or
distributions in respect of shares of BCS Common Stock or the shares of stock of
any BCS Subsidiary or any redemption, repurchase or other reacquisition of any
of BCS's equity securities or any of the equity securities of any BCS
Subsidiary; (D) any material increase in the benefits under, or the
establishment or amendment of, any material bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any material increase in the
compensation payable or to become payable to directors, officers or employees of
any BCS Company, except for increases in salaries or wages payable or to become
payable in the ordinary course of business and consistent with past practice and
the granting of stock options as reflected in Section 5.3 hereof.
5.8 Tax Matters. (a) Except for such matters as would not have a Material
Adverse Effect on BCS, all Tax Returns required to be filed by or on behalf of
any of the BCS Companies have been timely filed or requests for extensions have
been timely filed, granted, and have not expired for periods ended on or before
June 25, 1995, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, and all Tax Returns filed are complete
and accurate in all Material respects. All Taxes shown to be payable on filed
Tax Returns have been paid. To the knowledge of BCS, there is no audit
examination, deficiency, or refund Litigation with respect to any Taxes, except
as reserved against in the BCS Financial Statements delivered prior to the date
of this Agreement or as disclosed in Section 5.8 of the BCS Disclosure
Memorandum. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid.
(b) None of the BCS Companies has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due (excluding
such statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect.
(c) The provision for any Taxes due or to become due for any of the BCS
Companies for the period or periods through and including the date of the
respective BCS Financial Statements that has been made and is reflected on such
BCS Financial Statements is sufficient to cover all such Taxes.
(d) Deferred Taxes of the BCS Companies have been provided for in
accordance with GAAP.
A-7
<PAGE> 98
(e) None of the BCS Companies is a party to any Tax allocation or sharing
agreement and none of the BCS Companies has been a member of an affiliated group
filing a consolidated federal income Tax Return (other than a group the common
parent of which was BCS) or has any Liability for Taxes of any Person (other
than BCS and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local or foreign Law) as a transferee or
successor or by Contract or otherwise.
(f) Each of the BCS Companies is in compliance in all material respects
with records contain all information and documents (including properly completed
IRS Forms W-9) necessary to comply in all material respects with, all applicable
information reporting and Tax withholding requirements under federal, state, and
local Tax Laws, and such records identify with specificity all accounts subject
to backup withholding under Section 3406 of the Internal Revenue Code.
(g) Except as disclosed in Section 5.8 of the BCS Disclosure Memorandum,
none of the BCS Companies has made any payments, is obligated to make any
payments, or is a party to any Contract that could obligate it to make any
payments that would be disallowed as a deduction under Section 280G or 162(m) of
the Internal Revenue Code.
(h) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the BCS Companies that occurred during or after any
Taxable Period in which the Companies incurred a net operating loss that carries
over to any Taxable Period ending after June 25, 1995.
5.9 Assets. Except as disclosed in Section 5.9 of the BCS Disclosure
Memorandum or as disclosed or reserved against in the BCS Financial Statements
delivered prior to the date of this Agreement, the BCS Companies have good and
marketable title, free and clear of all Liens, to all of their respective
Assets. All tangible properties used in the businesses of the BCS Companies are
in good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with BCS's past practices. All items of
inventory of the BCS Companies reflected on the most recent balance sheet
included in the BCS Financial Statements delivered prior to the date of this
Agreement and prior to the Effective Time consisted and will consist, as
applicable, of items of a quality and quantity usable and saleable in the
ordinary course of business and conform to generally accepted standards in the
industry in which the BCS Companies are a part. All Assets which are material to
BCS's business on a consolidated basis, held under leases or subleases by any of
the BCS Companies, are held under valid Contracts enforceable in accordance with
their respective terms, and each such Contract is in full force and effect.
Section 5.9 of the BCS Disclosure Memorandum sets forth the scope of coverage of
all of BCS's insurance policies as of the date of this Agreement, the term of
each such policy and the premiums relating thereto. None of the BCS Companies
has received notice from any insurance carrier that (i) such insurance will be
canceled or that coverage thereunder will be reduced or eliminated, or (ii)
premium costs with respect to such policies of insurance will be substantially
increased. Except as disclosed in Section 5.9 of the BCS Disclosure Memorandum,
there are presently no claims pending under such policies of insurance and no
notices of denial of any material claim have been received by any BCS Company
under such policies. The Assets of the BCS Companies include all Assets required
to operate the business of the BCS Companies as presently conducted.
5.10 Intellectual Property. Section 5.10 of the BCS Disclosure Memorandum
sets forth a complete and accurate list of, and a brief description of all
governmental registrations or applications for governmental registrations of,
all Intellectual Property owned, used or licensed by or to BCS which are used in
or necessary for the conduct of BCS's business, except as to which the absence
of which would not have a Material Adverse Effect on BCS ("BCS Intellectual
Property"). No Person has asserted a claim in writing to BCS that BCS has
abandoned any BCS Intellectual Property and, to the Knowledge of BCS, BCS has
not abandoned any BCS Intellectual Property. Except as disclosed in Section 5.10
of the BCS Disclosure Memorandum, an BCS Company owns or has the lawful right to
use the BCS Intellectual Property. All BCS Intellectual Property licensed to any
BCS Company is identified as "licensed" in Section 5.10 of the BCS Disclosure
Memorandum. Except as disclosed in Section 5.10 of the BCS Disclosure
Memorandum, use of the BCS Intellectual Property by any of the BCS Companies has
not to the Knowledge of BCS misappropriated or infringed on any rights held or
owned by any third party, nor has any third party asserted any such claim. No
BCS Company is obligated to pay any royalties to any Person (other than another
BCS Company) with respect to any BCS
A-8
<PAGE> 99
Intellectual Property. Except as disclosed in Section 5.10 of the BCS Disclosure
Memorandum, every officer or management employee of any BCS Company is a party
to a Contract which requires such officer or management employee to keep
confidential any trade secrets, proprietary data, customer information, or other
business information of a BCS Company, and, to the Knowledge of BCS, no officer
is party to, nor to the Knowledge of BCS has BCS received any notice of any
other management employee being a party to, any Contract with any Person other
than a BCS Company which requires such officer or management employee to assign
any interest in any Intellectual Property to any Person other than a BCS Company
or to keep confidential any trade secrets, proprietary data, customer
information, or other business information of any Person other than a BCS
Company. Except as disclosed in Section 5.10 of the BCS Disclosure Memorandum,
to the Knowledge of BCS, no officer of any BCS Company is party to, nor to the
Knowledge of BCS has BCS received any notice of any other management employee
being a party to, any Contract which restricts or prohibits such officer or
management employee from engaging in activities competitive with any Person,
including any BCS Company.
5.11 Environmental Matters. (a) Except as would not have a Material
Adverse Effect on BCS, each BCS Company, its Participation Facilities, and its
Operating Properties are, and have been during the period of any BCS Company's
ownership or operation, in compliance with all Environmental Laws.
(b) There is no Litigation pending or, to the Knowledge of BCS, threatened
before any court, governmental agency, or authority or other forum in which any
BCS Company or any of its Operating Properties or Participation Facilities (or
BCS in respect of such Operating Property or Participation Facility) has been
or, with respect to threatened Litigation, may be named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental Law
or (ii) relating to the release into the environment of any Hazardous Material,
whether or not occurring at, on, under, adjacent to, or affecting (or
potentially affecting) a site owned, leased, or operated by any BCS Company or
any of its Operating Properties or Participation Facilities, nor, to the
Knowledge of BCS, is there any reasonable basis for any Litigation of a type
described in this sentence.
(c) During the period of (i) any BCS Company's ownership or operation of
any of their respective current properties, (ii) any BCS Company's participation
in the management of any Participation Facility, or (iii) any BCS Company's
holding of a security interest in an Operating Property, there have been no
releases of Hazardous Material in, on, under, adjacent to, or affecting (or to
the Knowledge of BCS reasonably likely to affect) such properties, except as
would not have a Material Adverse Effect on BCS. Prior to the period of (i) any
BCS Company's ownership or operation of any of their respective current
properties, (ii) any BCS Company's participation in the management of any
Participation Facility, or (iii) any BCS Company's holding of a security
interest in a Operating Property, to the Knowledge of BCS, there were no
releases of Hazardous Material in, on, under, or affecting any such property,
Participation Facility or Operating Property, except as would not have a
Material Adverse Effect on BCS.
5.12 Compliance with Laws. Each BCS Company has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, and there has occurred no Default under any such
Permit, except where the failure to possess such Permit or the occurrence of a
Default would not have a Material Adverse Effect on BCS or the restaurant to
which the Permit relates. Except as disclosed in Section 5.12 of the BCS
Disclosure Memorandum, none of the BCS Companies:
(a) is in Default under any of the provisions of its Certificate of
Incorporation or Bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for any Default that
would not have a Material Adverse Effect on BCS or any restaurants owned or
operated by BCS; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any BCS Company is in Material non-compliance with any of the Laws or
Orders which such governmental authority or Regulatory Authority enforces
which have not been resolved,
A-9
<PAGE> 100
(ii) threatening to revoke any Permits, or (iii) requiring any BCS Company
to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment, or memorandum of understanding, or
to adopt any Board resolution or similar undertaking.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to LSI.
5.13 Labor Relations. Except as disclosed in Section 5.13 of the BCS
Disclosure Memorandum, no BCS Company is the subject of any Litigation asserting
that it or any other BCS Company has committed an unfair labor practice (within
the meaning of the National Labor Relations Act or comparable state law) or
seeking to compel it or any other BCS Company to bargain with any labor
organization as to wages or conditions of employment, nor is any BCS Company
party to any collective bargaining agreement, nor is there any strike or other
labor dispute involving any BCS Company, pending or threatened, or to the
Knowledge of BCS, is there any activity involving any BCS Company's employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.
5.14 Employee Benefit Plans. (a) BCS has disclosed in Section 5.14 of the
BCS Disclosure Memorandum, and has delivered or made available to LSI prior to
the execution of this Agreement copies in each case of, all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by any BCS Company or ERISA Affiliate
thereof for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "BCS Benefit
Plans"). Any of the BCS Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "BCS ERISA Plan."
(b) All BCS Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on BCS. Each BCS ERISA Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue Service, and
BCS is not aware of any circumstances likely to result in revocation of any such
favorable determination letter. No BCS Company has engaged in a transaction with
respect to any BCS Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject any BCS Company to a
Tax imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA.
(c) No BCS ERISA Plan is, and no BCS Company has ever maintained or
contributed to, a "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code) or a multiemployer plan within the meaning of Section
3(37) of ERISA. No BCS Company has provided, or is required to provide, security
to any defined benefit plan or any single-employer plan of any entity which is
considered one employer with BCS under Section 4001 of ERISA or Section 414 of
the Internal Revenue Code or Section 302 of ERISA (whether or not waived) (an
"ERISA Affiliate") pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by any BCS Company with respect to any ongoing, frozen,
or terminated single-employer plan or the single-employer plan of any ERISA
Affiliate. No BCS Company has incurred any withdrawal Liability with respect to
a multiemployer plan under Subtitle B of Title IV of ERISA (regardless of
whether based on contributions of an ERISA Affiliate). No notice of a
"reportable event," within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
for any BCS Pension Plan or by any ERISA Affiliate within the 12-month period
ending on the date hereof.
A-10
<PAGE> 101
(e) Except as disclosed in Section 5.14 of the BCS Disclosure Memorandum,
no BCS Company has any Liability for retiree health and life benefits under any
of the BCS Benefit Plans and there are no restrictions on the rights of such BCS
Company to amend or terminate any such retiree health or benefit Plan without
incurring any Liability thereunder.
(f) Except as disclosed in Section 5.14 of the BCS Disclosure Memorandum,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, or otherwise) becoming
due to any director or any employee of any BCS Company from any BCS Company
under any BCS Benefit Plan or otherwise, (ii) increase any benefits otherwise
payable under any BCS Benefit Plan, or (iii) result in any acceleration of the
time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any BCS Company and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the BCS Financial Statements to the extent required
by and in accordance with GAAP.
5.15 Material Contracts. Except as disclosed in Section 5.15 of the BCS
Disclosure Memorandum or otherwise reflected in the BCS Financial Statements,
none of the BCS Companies, nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting, or retirement
Contract providing for payments to any Person, except for Contracts referred to
in Section 5.14(a) of this Agreement and unwritten Contracts with respect to the
employment of hourly personnel terminable at will or upon statutorily required
notice, (ii) any Contract relating to the borrowing of money by any BCS Company
or the guarantee by any BCS Company of any such obligation (other than Contracts
for purchase money indebtedness in an aggregate amount not exceeding $50,000,
Contracts evidencing trade payables, and Contracts relating to borrowings or
guarantees made in the ordinary course of business), (iii) any Contract which
prohibits or restricts any BCS Company from engaging in any business activities
in any geographic area, line of business or otherwise in competition with any
other Person, (iv) any Contract between or among BCS Companies, (v) any Contract
involving Intellectual Property, (vi) any lease of real property as lessee or
lessor, (vii) any Contract relating to the purchase or sale of any goods or
services (other than Contracts entered into in the ordinary course of business
and that are either (x) terminable by each BCS Company that is a party thereto
upon not more than sixty (60) days notice without payment or penalty or (y) has
a remaining term of not more than six months from the date of this Agreement and
involves payments not in excess of $20,000 per year), and (viii) any other
Contract or amendment thereto that would be required to be filed as an exhibit
to a Form 10-K filed by BCS with the SEC as of the date of this Agreement
(together with all Contracts referred to in Sections 5.9 and 5.14(a) of this
Agreement, the "BCS Contracts"). With respect to each BCS Contract and except as
disclosed in Section 5.15 of the BCS Disclosure Memorandum: (i) the Contract is
in full force and effect; (ii) no BCS Company is in Default thereunder except
for any such Default as would not have a Material Adverse Effect on BCS; (iii)
no BCS Company has repudiated or waived any material provision of any such
Contract; and (iv) no other party to any such Contract is, to the Knowledge of
BCS, in Default in any respect, or has repudiated or waived any material
provision thereunder. Except as disclosed in Section 5.15 of the BCS Disclosure
Memorandum, all of the indebtedness of any BCS Company for money borrowed is
prepayable at any time by such BCS Company without penalty or premium.
5.16 Legal Proceedings. Except as disclosed in Section 5.16 of the BCS
Disclosure Memorandum, there is no Litigation instituted or pending, or, to the
Knowledge of BCS, threatened (or unasserted but considered probable of assertion
and which if asserted would have at least a reasonable probability of an
unfavorable outcome) against any BCS Company, or against any director (limited,
as to directors, to Litigation with respect to which BCS would have an
indemnification obligation under its Certificate of Incorporation or Bylaws) or
employee benefit plan of any BCS Company, or against any Asset, interest, or
right of any of them, nor, except for matters which would not have a Material
Adverse Effect on BCS, are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding
A-11
<PAGE> 102
against any BCS Company. Section 5.16 of the BCS Disclosure Memorandum contains
a summary of all instituted or pending Litigation as of the date of this
Agreement to which any BCS Company is a party and which names a BCS Company as a
defendant or cross-defendant.
5.17 Reports. Since January 1, 1992, or the date of organization if later,
each BCS Company has timely filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with Regulatory Authorities (except failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on BCS. As of their respective dates, each of such reports and documents,
including the financial statements, exhibits, and schedules thereto, complied in
all material respects with all applicable Laws. As of its respective date, each
such report and document did not, in all material respects, 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 made therein, in light of the
circumstances under which they were made, not misleading, provided, however,
that to the extent that the foregoing relates to facts or omission regarding
Persons other than BCS and its Affiliates, such representation and warranty is
made to BCS's Knowledge.
5.18 Statements True and Correct. No statement, certificate, instrument,
or other writing furnished or to be furnished by any BCS Company or any
Affiliate thereof to LSI pursuant to this Agreement or any other document,
agreement, or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. BCS has furnished LSI with copies of all written BCS
Contracts, and such copies are true and correct copies of the written BCS
Contracts as such exist on the date of this Agreement. None of the information
supplied or to be supplied by any BCS Company or any Affiliate thereof for
inclusion in the Registration Statement to be filed by LSI with the SEC will,
when the Registration Statement becomes effective, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein not misleading. None of the information supplied or
to be supplied by any BCS Company or any Affiliate thereof for inclusion in the
Joint Proxy Statement to be mailed to each Party's shareholders in connection
with the Shareholders' Meetings, and any other documents to be filed by a BCS
Company or any Affiliate thereof with the SEC or any other Regulatory Authority
in connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Joint Proxy Statement,
when first mailed to the shareholders of BCS and LSI, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or, in the case of the Joint Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Shareholders'
Meetings, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the
Shareholders' Meetings. All documents that any BCS Company or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
5.19 Accounting, Tax and Regulatory Matters. No BCS Company or, to the
Knowledge of BCS, any Affiliate thereof has taken any action or has any
Knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the Merger from qualifying for pooling-of-interests accounting treatment or as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
5.20 State Takeover Laws. Each BCS Company has taken all necessary action
to exempt the transactions contemplated by this Agreement from any applicable
"moratorium," "fair price," "business combination," "control share," or other
anti-takeover Laws (collectively, "Takeover Laws"), including Section 203 of the
DGCL.
5.21 Charter Provisions. Each BCS Company has taken all action so that the
entering into of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement do not and will not result in the
grant of any rights to any Person under the Certificate of Incorporation,
A-12
<PAGE> 103
Bylaws or other governing instruments of any BCS Company or restrict or impair
the ability of LSI or any of its Subsidiaries to vote, or otherwise to exercise
the rights of a shareholder with respect to, shares of any BCS Company that may
be directly or indirectly acquired or controlled by it.
5.22 Shareholders' Agreement. Edward P. Grace, III has executed and
delivered to LSI an agreement in substantially the form of Exhibit 1.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF LSI
LSI hereby represents and warrants to BCS as follows:
6.1 Organization, Standing, and Power. LSI is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Georgia, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. LSI is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on LSI.
6.2 Authority; No Breach By Agreement. (a) LSI has the corporate power and
authority necessary to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of LSI, subject to the approval of the holders of a majority of the shares
of LSI Common Stock present and voting at a special meeting of LSI shareholders
at which a quorum is present, which is the only shareholder vote required for
approval of this Agreement and consummation of the merger by LSI. Subject to
such requisite shareholder approval, this Agreement represents a legal, valid,
and binding obligation of LSI, enforceable against LSI in accordance with its
terms.
(b) Neither the execution and delivery of this Agreement by LSI, nor the
consummation by LSI of the transactions contemplated hereby, nor compliance by
LSI with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of LSI's Articles of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any LSI Company under, any
Contract or Permit of any LSI Company or, (iii) subject to receipt of the
requisite approvals referred to in Section 9.1(b) of this Agreement, violate any
Law or Order applicable to any LSI Company or any of their respective material
Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, no notice to, filing with, or Consent of, any public body
or authority is necessary for the consummation by LSI of the Merger and the
other transactions contemplated in this Agreement.
6.3 Capital Stock. (a) The authorized capital stock of LSI consists of (i)
25,000,000 shares of LSI Common Stock, of which 8,466,350 shares are issued and
outstanding as of the date of this Agreement, and (ii) 10,000,000 shares of LSI
Preferred Stock, of which no shares are issued and outstanding. All of the
issued and outstanding shares of LSI Capital Stock are, and all of the shares of
LSI Common Stock to be issued in exchange for shares of BCS Common Stock upon
consummation of the Merger, when issued in accordance with the terms of this
Agreement, will be, duly and validly issued and outstanding and fully paid and
nonassessable under the GBCC. None of the outstanding shares of LSI Capital
Stock has been, and none of the shares of LSI Common Stock to be issued in
exchange for shares of BCS Common Stock upon consummation of the Merger will be,
issued in violation of any preemptive rights of the current or past shareholders
of LSI. LSI has reserved 2,018,350 shares of LSI Common Stock for issuance under
the LSI
A-13
<PAGE> 104
Stock Plans, pursuant to which options to purchase no more than 1,238,031 shares
of LSI Common Stock are outstanding.
(b) Except as set forth in Section 6.3(a) of this Agreement or as disclosed
in Section 6.3 of the LSI Disclosure Memorandum, there are no shares of capital
stock or other equity securities of LSI outstanding and no outstanding Rights
relating to the capital stock of LSI.
6.4 SEC Filings; Financial Statements. (a) LSI has timely filed and made
available to BCS all SEC Documents required to be filed by LSI since December
31, 1992 or such later date as LSI first filed, or was first obligated to file,
such SEC Documents (the "LSI SEC Reports"). The LSI SEC Reports (i) at the time
filed, complied in all material respects with the applicable requirements of the
Securities Laws and other applicable Laws and (ii) did not, at the time they
were filed (or, if amended or superseded by a filing, then on the date of such
filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such LSI SEC Reports or necessary in
order to make the statements in such LSI SEC Reports, in light of the
circumstances under which they were made, not misleading. No LSI Subsidiary is
required to file any SEC Documents.
(b) Each of the LSI Financial Statements (including, in each case, any
related notes) contained in the LSI SEC Reports, including any LSI SEC Reports
filed after the date of this Agreement until the Effective Time, complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except to
the extent required by changes to GAAP or as may be indicated in the notes to
such financial statements or, in the case of unaudited interim statements, as
permitted by Form 10-Q of the SEC), and fairly presented in all material
respects the consolidated financial position of LSI and its Subsidiaries as at
the respective dates and the consolidated results of operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount or effect, and any
pro forma financial information contained in the LSI Financial Statements is not
necessarily indicative of the consolidated financial position of LSI and the LSI
Subsidiaries, as the case may be, as of the respective dates thereof and the
consolidated results of operations and cash flows for the period indicated.
6.5 Absence of Undisclosed Liabilities. No LSI Company has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on LSI, except Liabilities which are accrued or reserved against
in the consolidated balance sheets of LSI as of December 31, 1995 and March 31,
1996, included in the LSI Financial Statements or reflected in the notes
thereto, or as disclosed in the LSI Disclosure Memorandum. No LSI Company has
incurred or paid any Liability since March 31, 1996, except for such Liabilities
(i) disclosed in the LSI Disclosure Memorandum or (ii) incurred or paid in the
ordinary course of business consistent with past business practice and which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on LSI.
6.6 Absence of Certain Changes or Events. Since December 31, 1995, except
as disclosed in the LSI Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 6.6 of the LSI Disclosure Memorandum, (i)
there have been no events, changes or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on LSI, and (ii) the LSI Companies have not taken any action, or failed
to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result in
a material breach or violation of any of the covenants and agreements of LSI
contained in Article 7 of this Agreement.
6.7 Compliance with Laws. Each LSI Company has in effect all Permits
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted except where the failure to possess such Permit
would not have a Material Adverse Effect on LSI or the restaurant to which the
Permit relates. Except as disclosed in Section 6.7 of the LSI Disclosure
Memorandum, no LSI Company:
(a) is in Default of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for any Default that
would not have a Material Adverse Effect on LSI or any restaurants owned or
operated by LSI; or
A-14
<PAGE> 105
(b) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any LSI Company is in Material non-compliance with any of the Laws or
Orders which such governmental authority or Regulatory Authority enforces
which have not been resolved, or (iii) requiring any LSI Company to enter
into or consent to the issuance of a cease and desist order, formal
agreement, directive, commitment or memorandum of understanding, or to
adopt any Board resolution or similar undertaking, which restricts
materially the conduct of its business.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review (other
than a review by the Securities and Exchange Commission of a public offering of
equity securities by LSI) or enforcement action by a federal or state securities
authority have been made available to BCS.
6.8 Legal Proceedings. Except as disclosed in Section 6.16 of the LSI
Disclosure Memorandum there is no Litigation instituted or pending, or, to the
Knowledge of LSI, threatened (or unasserted but considered probable of assertion
and which if asserted would have at least a reasonable probability of an
unfavorable outcome) against any LSI Company, or against any director, employee
or employee benefit plan of any LSI Company, or against any Asset, employee
benefit plan, interest, or right of any of them, that is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on LSI, nor
are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any LSI Company, that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on LSI.
6.9 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by any LSI Company or any Affiliate
thereof to BCS pursuant to this Agreement or any other document, agreement or
instrument referred to herein contains or will contain any untrue statement of
material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by any LSI
Company or any Affiliate thereof for inclusion in the Registration Statement to
be filed by LSI with the SEC, will, when the Registration Statement becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein not misleading.
None of the information supplied or to be supplied by any LSI Company or any
Affiliate thereof for inclusion in the Joint Proxy Statement to be mailed to
each Party's shareholders in connection with the Shareholders' Meetings, and any
other documents to be filed by any LSI Company or any Affiliate thereof with the
SEC or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Joint Proxy Statement, when first mailed to the shareholders
of BCS and LSI, be false or misleading with respect to any material fact, or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, in
the case of the Joint Proxy Statement or any amendment thereof or supplement
thereto, at the time of the Shareholders' Meetings, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of any proxy for the Shareholders' Meetings. All documents that any
LSI Company or any Affiliate thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
6.10 Authority of Sub. Sub is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Georgia as a
wholly-owned Subsidiary of LSI. The authorized capital stock of Sub shall
consist of 1,000 shares of Sub Common Stock, all of which is validly issued and
outstanding, fully paid and nonassessable and is owned by LSI free and clear of
any Lien. Sub has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Sub. This Agreement
represents a legal, valid, and binding obligation of Sub, enforceable against
Sub in accordance with its terms.
A-15
<PAGE> 106
6.11 Reports. Since January 1, 1992, or the date of organization if later,
each LSI Company has filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with (i) the SEC, including, but not limited to, Forms 10-K, Forms 10-Q,
Forms 8-K, and proxy statements, (ii) other Regulatory Authorities, and (iii)
any applicable state securities authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on LSI). As of
their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, 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 made therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of BCS. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement, unless
the prior written consent of LSI shall have been obtained, and except as
otherwise expressly contemplated herein, BCS shall and shall cause each of its
Subsidiaries to (a) operate its business in the usual, regular, and ordinary
course, (b) use its reasonable efforts preserve intact its business organization
and Assets and maintain its rights and franchises, and (c) take no action which
would (i) materially adversely affect the ability of any Party to obtain any
Consents required for the transactions contemplated hereby without imposition of
a condition or restriction of the type referred to in the last sentences of
Section 9.1(b) or 9.1(c) of this Agreement, or (ii) materially adversely affect
the ability of any Party to perform its covenants and agreements under this
Agreement.
7.2 Negative Covenants of BCS. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, BCS
covenants and agrees that it will not do or agree or commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following without
the prior written consent of the chief executive officer or chief financial
officer of LSI, which consent shall not be unreasonably withheld, conditioned or
delayed:
(a) amend the Certificate of Incorporation, Bylaws or other governing
instruments of any BCS Company, or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness under BCS's existing credit line or
indebtedness of a BCS Company to another BCS Company) in excess of an
aggregate of $50,000 (for the BCS Companies on a consolidated basis) except
in the ordinary course of the business of BCS Subsidiaries consistent with
past practices, or impose, or suffer the imposition, on any Asset of any
BCS Company of any Lien or permit any such Lien to exist (other than in
connection with Liens in effect as of the date hereof that are disclosed in
the BCS Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any BCS Company, or declare or pay any dividend or
make any other distribution in respect of BCS's capital stock; or
(d) except for this Agreement, or pursuant to the exercise of stock
options outstanding as of the date hereof or granted after the date hereof
pursuant to the General Manager Stock Incentive Program (the "GM Program")
and pursuant to the terms thereof in existence on the date hereof, or as
disclosed in Section 7.2(d) of the BCS Disclosure Memorandum, issue, sell,
pledge, encumber, authorize the issuance of, enter into any Contract to
issue, sell, pledge, encumber, or authorize the issuance of, or otherwise
permit to become outstanding, any additional shares of BCS Common Stock or
any other capital stock of any BCS Company, or any stock appreciation
rights, or any option, warrant, conversion, or other right to acquire any
such stock, or any security convertible into any such stock; or
A-16
<PAGE> 107
(e) adjust, split, combine or reclassify any capital stock of any BCS
Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of BCS Common Stock, or sell,
lease, mortgage or otherwise dispose of or otherwise encumber any shares of
capital stock of any BCS Subsidiary (unless any such shares of stock are
sold or otherwise transferred to another BCS Company) or any Asset having a
book value in excess of $10,000 other than in the ordinary course of
business for reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of three
years or less, purchase any securities or make any material investment,
either by purchase of stock of securities, contributions to capital, Asset
transfers, or purchase of any Assets, in any Person other than a
wholly-owned BCS Subsidiary, or otherwise acquire direct or indirect
control over any Person, other than in connection with (i) foreclosures in
the ordinary course of business, or (iii) the creation of new wholly-owned
Subsidiaries organized to conduct or continue activities otherwise
permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the employees or
officers of any BCS Company, except in accordance with past practice as
disclosed in Sections 5.14 and 5.15 of the BCS Disclosure Memorandum or as
required by Law; pay any severance or termination pay or any bonus other
than pursuant to written policies or written Contracts in effect on the
date of this Agreement and disclosed in Section 5.15 of the BCS Disclosure
Memorandum; and enter into or amend any severance agreements with officers
of any BCS Company; grant any material increase in fees or other increases
in compensation or other benefits to directors of any BCS Company except in
accordance with past practice disclosed in Sections 5.14 and 5.15 of the
BCS Disclosure Memorandum; or voluntarily accelerate the vesting of any
stock options or other stock-based compensation or employee benefits; or
(h) enter into or amend any employment Contract between any BCS
Company and any Person (unless such amendment is required by Law and except
for increases in compensation or benefits in accordance with past practice
as disclosed in Section 5.15 of the BCS Disclosure Memorandum) that the BCS
Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time
on or after the Effective Time or upon statutorily required notice;
(i) adopt any new employee benefit plan of any BCS Company or
terminate or withdraw from, or make any material change in or to, any
existing employee benefit plans of any BCS Company other than any such
change that is required by Law or that, in the opinion of counsel, is
necessary or advisable to maintain the tax qualified status of any such
plan, or make any distributions from such employee benefit plans, except as
required by Law, the terms of such plans or consistent with past practice;
or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any BCS Company
for Material money damages or restrictions upon the operations of any BCS
Company; or
(l) enter into, terminate or materially modify or amend any Contract
involving the payment of $50,000 or more, or waive, release, compromise or
assign any material rights or claims, except for: (i) purchases of
inventory in the ordinary course of business under existing Contracts
without alteration or amendment or pursuant to individual purchase orders
for one time, spot purchases; and (ii) Contracts in connection with the
construction of restaurants which are within the BCS capital plan for
restaurant expansion as disclosed in Section 7.2 of the BCS Disclosure
Memorandum.
7.3 Covenants of LSI. From the date of this Agreement until the earlier of
the Effective Time or the termination of this Agreement, LSI covenants and
agrees that it shall (x) continue to conduct its business and the business of
its Subsidiaries in a manner designed in its reasonable judgment, to enhance the
long-term value of the LSI Common Stock and the business prospects of the LSI
Companies and to the extent
A-17
<PAGE> 108
consistent therewith use all reasonable efforts to preserve intact the LSI
Companies' core businesses and goodwill with their respective employees and the
communities they serve, (y) not declare or pay any dividend or make any
distribution in respect of LSI Common Stock, and (z) take no action which would
(i) materially adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentences of
Section 9.1(b) or 9.1(c) of this Agreement, or (ii) materially adversely affect
the ability of any Party to perform its covenants and agreements under this
Agreement; provided, that the foregoing shall not prevent any LSI Company from
discontinuing or disposing of any of its Assets or business if such action is,
in the judgment of LSI, desirable in the conduct of the business of LSI and its
Subsidiaries. LSI further covenants and agrees that it will not, without the
prior written consent of the chief executive officer of BCS, which consent shall
not be unreasonably withheld, amend the Articles of Incorporation or Bylaws of
LSI, in each case, in any manner adverse to the holders of BCS Common Stock as
compared to rights of holders of LSI Common Stock generally as of the date of
this Agreement.
7.4 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flows for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not material). As of their
respective dates, such reports filed with the SEC will comply in all material
respects with the Securities Laws and will not contain any untrue statement of a
material fact or omit to state a 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. Any financial statements contained
in any other reports to another Regulatory Authority shall be prepared in
accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Shareholder Approval. As soon
as practicable after execution of this Agreement, LSI shall prepare and file the
Registration Statement with the SEC, and shall use its reasonable efforts to
cause the Registration Statement to become effective under the 1933 Act and take
any action required to be taken under the applicable state Blue Sky or
securities Laws in connection with the issuance of the shares of LSI Common
Stock upon consummation of the Merger. BCS shall cooperate in the preparation
and filing of the Registration Statement and shall furnish all information
concerning it and the holders of its capital stock as LSI may reasonably request
in connection with such action. BCS shall call a Shareholders' Meeting, to be
held as soon as reasonably practicable after the Registration Statement is
declared effective by the SEC, for the purpose of voting upon adoption of this
Agreement and such other related matters as it deems appropriate. LSI shall call
a Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and such other related matters as it
deems appropriate. In connection with the Shareholders' Meetings, (i) BCS and
LSI shall prepare and file with the SEC a Joint Proxy Statement and mail such
Joint Proxy Statement to their respective shareholders, (ii) the Parties shall
furnish to each other all information concerning them that they may reasonably
request in connection with such Joint Proxy Statement, (iii) the Board of
Directors of BCS and LSI shall recommend to their respective
A-18
<PAGE> 109
shareholders the adoption or approval of this Agreement (subject to the Board of
Directors of BCS, after having consulted with and considered the advice of
outside counsel, reasonably determining in good faith that the making of such
recommendation, or the failure to withdraw or modify its recommendation, would
constitute a breach of fiduciary duties of the members of such Board of
Directors to BCS's shareholder under applicable law), and (iv) the Board of
Directors and officers of BCS and LSI shall use their reasonable efforts to
obtain such shareholders' adoption or approval (subject to the Board of
Directors of BCS, after having consulted with and considered the advice of
outside counsel, reasonably determining in good faith that the taking of such
actions would constitute a breach of fiduciary duties of the members of such
Board of Directors to BCS's shareholder under applicable law). LSI and BCS shall
make all necessary filings with respect to the Merger under the Securities Laws.
8.2 Exchange Listing. LSI shall use its reasonable efforts to list, prior
to the Effective Time, on the Nasdaq National Market the shares of LSI Common
Stock to be issued to the holders of BCS Common Stock pursuant to the Merger,
and LSI shall give all notices and make all filings with the NASD required in
connection with the transactions contemplated herein.
8.3 Applications; Antitrust Notification. LSI shall prepare and file, and
BCS shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement. To the
extent required by the HSR Act, each of the Parties will within fifteen business
days of the date hereof file with the United States Federal Trade Commission and
the United States Department of Justice the notification and report form
required for the transactions contemplated hereby and any supplemental or
additional information which may reasonably be requested in connection therewith
pursuant to the HSR Act and will comply in all material respects with the
requirements of the HSR Act. The Parties shall deliver to each other copies of
all filings, correspondence and orders to and from all Regulatory Authorities in
connection with the transactions contemplated hereby.
8.4 Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, BCS shall execute and file the Certificate of
Merger with the Secretary of State of the State of Delaware and the Certificate
of Merger with the Secretary of State of the State of Georgia in connection with
the Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including using its reasonable efforts to lift or rescind any
Order adversely affecting its ability to consummate the transactions
contemplated herein and to cause to be satisfied the conditions referred to in
Article 9 of this Agreement; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use, and
shall cause each of its Subsidiaries to use, its reasonable efforts to obtain
all Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
8.6 Investigation and Confidentiality. (a) Prior to the Effective Time,
each Party shall keep the other Party advised of all material developments
relevant to its business and to consummation of the Merger and shall permit the
other Party to make or cause to be made such investigation of the business and
properties of it and its Subsidiaries and of their respective financial and
legal conditions as the other Party reasonably requests, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily with normal operations. No
investigation by a Party shall affect the representations and warranties of the
other Party.
(b) In addition to the Parties' respective obligations under the
Confidentiality Agreement, which is hereby reaffirmed and adopted, and
incorporated by reference herein each Party shall, and shall cause its advisers
and agents to, maintain the confidentiality of all confidential information
furnished to it by the other Party concerning its and its Subsidiaries'
businesses, operations, and financial positions and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return or certify the
A-19
<PAGE> 110
destruction of all documents and copies thereof, and all work papers containing
confidential information received from the other Party.
8.7 Press Releases. Prior to the Effective Time, BCS and LSI shall consult
with each other as to the form and substance of any press release or other
public disclosure materially related to this Agreement or any other transaction
contemplated hereby; provided, that nothing in this Section 8.7 shall be deemed
to prohibit any Party from making any disclosure which its counsel deems
necessary or advisable in order to satisfy such Party's disclosure obligations
imposed by Law.
8.8 Certain Actions. Except with respect to this Agreement and the
transactions contemplated hereby, no BCS Company nor any Affiliate thereof nor
any Representatives thereof retained by any BCS Company shall directly or
indirectly solicit any Acquisition Proposal by any Person. No BCS Company nor
any Affiliate or Representative thereof shall furnish any non-public information
that is not legally obligated to furnish, negotiate with respect to, or enter
into any Contract with respect to, any Acquisition Proposal, provided, however,
that prior to such time as the shareholders of BCS shall have adopted and
approved this Agreement in accordance with DGCL, nothing in this Section 8.8
shall prohibit the Board of Directors form (i) furnishing information to, or
entering into discussions or negotiations with, any Person that makes an
unsolicited Acquisition Proposal if and only to the extent that (A) the Board of
Directors of BCS, after having consulted with and considered the advice of
outside counsel, reasonably determines in good faith that such actions would be
required to comply with its fiduciary duties to BCS's shareholder under
applicable Law, and (B) after having consulted with and considered the advice of
outside counsel and BCS's financial advisor, BCS's Board of Directors reasonably
determines in good faith that the potential Acquiror is highly qualified, or
(ii) communicating information about such an Acquisition Proposal to is
shareholders if and to the extent that it is required to do so in order to
comply with its legal obligations as advised by counsel (included, without
limitation, its obligations under Rule 14e-2 promulgated under the 1934 Act.)
BCS shall promptly advise LSI following the receipt of any Acquisition Proposal
and the details thereof, and advise LSI of any developments with respect to such
Acquisition Proposal, including but not limited to, any decision by the Board of
Directors to cause any BCS Company to furnish non-public information to the
Person making such Acquisition Proposal, promptly upon the occurrence thereof.
BCS shall (i) immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Persons conducted heretofore
with respect to any of the foregoing, and (ii) direct and use its reasonable
efforts to cause all of its Representatives not to engage in any of the
foregoing.
8.9 Accounting and Tax Treatment. Each of the Parties undertakes and
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify for pooling-of-interests accounting
treatment and treatment as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 State Takeover Laws. Each BCS Company shall take all necessary steps
to exempt the transactions contemplated by this Agreement from, or if necessary
to challenge the validity or applicability of, any applicable Takeover Law,
including Section 203 of the DGCL.
8.11 Charter Provisions. Each BCS Company shall take all necessary action
to ensure that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby do not and will not result
in the grant of any rights to any Person under the Certificate of Incorporation,
Bylaws or other governing instruments of any BCS Company or restrict or impair
the ability of LSI or any of its Subsidiaries to vote, or otherwise to exercise
the rights of a shareholder with respect to, shares of any BCS Company that may
be directly or indirectly acquired or controlled by it.
8.12 Agreement of Affiliates. BCS has disclosed in Section 8.12 of the BCS
Disclosure Memorandum all Persons whom it reasonably believes is an "affiliate"
of BCS for purposes of Rule 145 under the 1933 Act. BCS shall use its reasonable
efforts to cause each such Person to deliver to LSI not later than 30 days after
the date of this Agreement, a written agreement, substantially in the form of
Exhibit 3, providing that such Person will not sell, pledge, transfer, or
otherwise dispose of the shares of BCS Common Stock held by such Person except
as contemplated by such agreement or by this Agreement and will not sell,
pledge, transfer, or otherwise dispose of the shares of LSI Common Stock to be
received by such Person upon consummation of
A-20
<PAGE> 111
the Merger except in compliance with applicable provisions of the 1933 Act and
the rules and regulations thereunder and until such time as financial results
covering at least 30 days of combined operations of LSI and BCS have been
published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies. Shares of LSI Common Stock issued to such
affiliates of BCS in exchange for shares of BCS Common Stock shall not be
transferable until such time as financial results covering at least 30 days of
combined operations of LSI and BCS have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies,
regardless of whether each such affiliate has provided the written agreement
referred to in this Section 8.12 (and LSI shall be entitled to place restrictive
legends upon certificates for shares of LSI Common Stock issued to affiliates of
BCS pursuant to this Agreement to enforce the provisions of this Section 8.12).
LSI shall not be required to maintain the effectiveness of the Registration
Statement under the 1933 Act for the purposes of resale of LSI Common Stock by
such affiliates.
8.13 Employee Benefits and Contracts. Following the Effective Time, LSI
shall provide generally to officers and employees of the BCS Companies employee
benefits under employee benefit and welfare plans (other than stock option or
other plans involving the potential issuance of LSI Common Stock), on terms and
conditions which when taken as a whole are substantially similar to those
currently provided by the LSI Companies to their similarly situated officers and
employees. For purposes of participation, vesting and (except in the case of LSI
retirement plans) benefit accrual under LSI's employee benefit plans, the
service of the employees of the BCS Companies prior to the Effective Time shall
be treated as service with a LSI Company participating in such employee benefit
plans. LSI also shall cause the Surviving Corporation and its Subsidiaries to
honor in accordance with their terms all employment, severance, consulting and
other compensation Contracts disclosed in Section 8.13 of the BCS Disclosure
Memorandum to LSI between any BCS Company and any current or former director,
officer, or employee thereof, and all provisions for vested benefits or other
vested amounts earned or accrued through the Effective Time under the BCS
Benefit Plans.
8.14 Indemnification and Insurance. (a) The Certificate of Incorporation
and By-laws of the Surviving Corporation shall contain the provisions with
respect to indemnification set forth in the Certificate of Incorporation and
By-laws of BCS on the date of this Agreement, which provisions shall not be
amended, repealed or otherwise modified for a period of six years after the
Effective Time in any manner that would adversely affect the rights thereunder
of Persons who at any time prior to the Effective Time were identified as
prospective indemnitees (the "Indemnified Parties") under the Certificate of
Incorporation or By-laws of BCS 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.
LSI will not permit the provisions with respect to indemnification set
forth in the Certificate of Incorporation and By-laws of any BCS Company on the
date of this Agreement to be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would adversely
affect the rights thereunder of Indemnified Parties under any such Certificate
of Incorporation or By-laws 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.
(b) LSI hereby guarantees the Surviving Corporation's indemnification
obligations pursuant to the Surviving Corporation's Certificate of Incorporation
and By-laws.
(c) LSI shall, or shall cause the Surviving Corporation to, use its
reasonable efforts (and BCS shall cooperate prior to the Effective Time in these
efforts) to maintain in effect for a period of five years after the Effective
Time BCS's existing directors' and officers' liability insurance policy
(provided that LSI may substitute therefor (i) policies of at least the same
coverage and amounts containing terms and conditions which are substantially no
less advantageous or (ii) with the consent of BCS given prior to the Effective
Time, any other policy) with respect to claims arising from facts or events
which occurred prior to the Effective Time and covering persons who are
currently covered by such insurance; provided, that neither LSI nor the
Surviving Corporation shall be obligated to make aggregate premium payments for
such five-year period in respect of such policy (or coverage replacing such
policy) which exceed, for the portion related to BCS's directors and officers,
200% of the annual premium payments on BCS's current policy in effect as of the
date of this Agreement (the "Maximum Amount").
A-21
<PAGE> 112
(d) This Section 8.14 is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties referred to herein, their heirs and
personal representatives and shall be binding on LSI and Sub and the Surviving
Corporation and their respective successors and assigns.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived pursuant to Section 11.6 of this Agreement:
(a) Shareholder Approval. The shareholders of BCS and LSI shall have
adopted or approved this Agreement, and the consummation of the
transactions contemplated hereby, including the Merger, as and to the
extent required by Law, by the provisions of any governing instruments, or
by the rules of the NASD.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (including requirements relating to
the raising of additional capital or the disposition of Assets) which in
the reasonable judgment of the Board of Directors of LSI would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement that, had such condition or
requirement been known, LSI would not, in its reasonable judgment, have
entered into this Agreement.
(c) Consents and Approvals. Each Party shall have obtained any and
all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b) of this Agreement) or for the preventing of
any Default under any Contract or Permit of such Party. No Consent so
obtained which is necessary to consummate the transactions contemplated
hereby shall be conditioned or restricted in a manner which in the
reasonable judgment of the Board of Directors of LSI would so materially
adversely impact the economic or business benefits of the transactions
contemplated by this Agreement that, had such condition or requirement been
known, LSI would not, in its reasonable judgment, have entered into this
Agreement.
(d) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which prohibits,
restricts or makes illegal consummation of the transactions contemplated by
this Agreement.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing, and all necessary approvals
under state securities Laws or the 1933 Act or 1934 Act relating to the
issuance or trading of the shares of LSI Common Stock issuable pursuant to
the Merger shall have been received.
(f) Exchange Listing. The shares of LSI Common Stock issuable
pursuant to the Merger shall have been approved for listing on the Nasdaq
National Market.
(g) Tax Matters. Each Party shall have received a written opinion of
counsel from Alston & Bird, in form reasonably satisfactory to such Parties
(the "Tax Opinion"), to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, (ii) the exchange in the Merger of BCS Common Stock for LSI Common
Stock will not give rise to gain or loss to the shareholders of BCS with
respect to such exchange (except to the extent of any cash received), and
(iii) none of BCS, LSI, or Sub will recognize gain or loss as a consequence
of the Merger (except for
A-22
<PAGE> 113
amounts resulting from any required change in accounting methods and any
income and deferred gain recognized pursuant to Treasury regulations issued
under Section 1502 of the Internal Revenue Code). In rendering such Tax
Opinion, such counsel shall be entitled to rely upon representations of
officers of BCS and LSI reasonably satisfactory in form and substance to
such counsel.
9.2 Conditions to Obligations of LSI. The obligations of LSI to perform
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by LSI pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of BCS set forth
in this Agreement shall be assessed as of the date of this Agreement and as
of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of BCS set forth in Section 5.3 of this Agreement shall be true
and correct (except for inaccuracies which are de minimus in amount). The
representations and warranties of BCS set forth in Sections 5.19, 5.20, and
5.21 of this Agreement shall be true and correct in all material respects.
There shall not exist (i) inaccuracies in the representations and
warranties of the BCS Parties set forth in the Acquisition Agreements
(including the representations and warranties set forth in Sections 5.3,
5.19, 5.20, and 5.21 of this Agreement) or (ii) breaches of agreements and
covenants of the BCS Parties set forth in the Acquisition Agreements, such
that the aggregate effect of such inaccuracies or breaches would have or be
reasonably likely to have, a Material Adverse Effect on BCS, assuming, for
this purpose only, that BCS was the owner of all of the Assets and
Liabilities of all of the BCS Parties; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "material" or "Material Adverse Effect" shall be deemed not
to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of BCS to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with.
(c) Certificates. BCS shall have delivered to LSI (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief
executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.2 of this Agreement as relates to BCS and
in Section 9.2(a) and 9.2(b) of this Agreement have been satisfied, and
(ii) certified copies of resolutions duly adopted by BCS's Board of
Directors and shareholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby,
all in such reasonable detail as LSI and its counsel shall request.
(d) Opinion of Counsel. LSI shall have received an opinion of
Hinckley, Allen & Snyder, counsel to BCS, dated as of the Closing, in form
reasonably satisfactory to LSI, as to the matters set forth in Exhibit 4.
(e) Pooling Letters. LSI shall have received letters, a draft dated
as of the date of filing of the Registration Statement with the SEC and a
final version dated as of the Effective Time, in form and substance
reasonably acceptable to LSI, from KPMG Peat Marwick LLP to the effect that
the Merger will qualify for pooling-of-interests accounting treatment. LSI
also shall have received letters, a draft dated as of the date of filing of
the Registration Statement with the SEC and a final version dated as of the
Effective Time, in form and substance reasonably acceptable to LSI, from
KPMG Peat Marwick LLP to the effect that such firm is not aware of any
matters relating to BCS and its Subsidiaries which would preclude the
Merger from qualifying for pooling-of-interests accounting treatment.
(f) Accountant's Letters. LSI shall have received from KPMG Peat
Marwick LLP letters dated not more than five days prior to (i) the date of
the Joint Proxy Statement and (ii) the Effective Time, with respect to
certain financial information regarding BCS, in form and substance
reasonably satisfactory to LSI, which letters shall be based upon customary
specified procedures undertaken by such firm in accordance with Statement
of Auditing Standard No. 72.
A-23
<PAGE> 114
(g) Affiliates Agreements. LSI shall have received from each
affiliate of BCS the affiliates letter referred to in Section 8.12 of this
Agreement, to the extent necessary to assure in the reasonable judgment of
LSI that the transactions contemplated hereby will qualify for
pooling-of-interests accounting treatment.
(h) Shareholders' Equity. BCS's shareholders' equity as of the
Closing/end of the last fiscal quarter preceding Closing shall not be less
than BCS's shareholders' equity as of March 31, 1996, excluding for
purposes of the calculation of such shareholders' equity the effects of (i)
all costs, fees and charges, including fees and charges of BCS's
accountants, counsel and financial advisors, whether or not accrued or
paid, that are related to the transaction contemplated by this Agreement,
and (ii) any reductions in BCS's shareholders' equity resulting from any
actions or changes in policies of BCS taken at the request of LSI.
(i) Fairness Opinion. LSI shall have received from The
Robinson-Humphrey Company, Inc. a letter, dated not more than five business
days prior to the date of the Proxy Statement, to the effect that, in the
opinion of such firm, the consideration to be received by LSI connection
with the Merger is fair, from a financial point of view, to LSI and its
shareholders.
(j) Landlord Estoppel Certificates. BCS shall have provided LSI with
an estoppel certificate of the landlord under each lease for the Capital
Grille restaurant sites, and at least eighty percent (80%) of the leases
for the Bugaboo Creek Steak House restaurant sites, which estoppel
certificate shall be dated as close to the date on which the Effective Time
occurs as LSI shall reasonably request and shall provide in substance that:
(i) the lease is in full force and effect; (ii) the landlord is not in
Default thereunder; (iii) the landlord has not repudiated or waived any
material provision of such lease; and (iv) no party to such lease other
than such landlord is, to the knowledge of the landlord, in Default in any
respect under such lease or has repudiated or waived any material provision
thereunder.
(k) Title Matters. BCS shall have delivered to LSI one or more title
commitments for policies of leasehold title insurance with respect to the
leases of restaurant sites to which any of the BCS Subsidiaries is a party
and one or more title commitments for policies of owner's title insurance
with respect to real property owned by any of the BCS Companies, which
leasehold title commitments shall reflect that the landlord of each such
site holds title to the site free of any encumbrance securing debt to any
Person other than Persons with whom the relevant BCS Company has a
non-disturbance and attornment agreement, and no other exception which
would have a Material Adverse Effect on the value of the property or BCS's
use thereof and which owner's title commitments shall reflect no exceptions
to title which would have a Material Adverse Effect on the value of the
property or BCS's use thereof. LSI shall notify BCS of any objections to
the exceptions reflected in such title commitments within Twenty-One (21)
days following the date on which BCS shall deliver to LSI each title
commitment, together with copies of all recorded documents listed as title
exceptions therein.
(l) BCS Audit. BCS shall have delivered to LSI the audited
consolidated balance sheet (including related notes and schedules, if any)
as of June 30, 1996, and the consolidated statements of income, changes in
shareholders' equity, and cash flows (including related notes and
schedules, if any) for the fiscal year then ended of BCS and its
Subsidiaries together with the report of KPMG Peat Marwick LLP thereon, at
least thirty (30) days prior to the Effective Time.
(m) Stock Options. The compensation or other relevant committee of
BCS's Board of Directors shall have taken, or caused to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable to effect the conversion of all BCS Options into rights with
respect to LSI Common Stock, as contemplated by Section 3.5 hereof, without
any other change in the terms of the BCS Options, including, but not
limited to, any acceleration (except the automatic acceleration of options
granted under the Bugaboo Creek Steak House, Inc. Non-Employee Director
Stock Plan) of the vesting of the BCS Options.
(n) Acquisition Agreements. Each and all of the agreements and
covenants of the parties to the Acquisition Agreements to be performed and
complied with pursuant to the Acquisition Agreements and
A-24
<PAGE> 115
the other agreements and covenants contemplated by the Acquisition
Agreements shall be duly performed and complied with prior to or
substantially simultaneously with the Effective Time.
9.3 Conditions to Obligations of BCS. The obligations of BCS to perform
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by BCS pursuant to Section 11.6(b) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of LSI set forth
in this Agreement shall be assessed as of the date of this Agreement and as
of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of LSI set forth in Section 6.3 of this Agreement shall be true
and correct (except for inaccuracies which are de minimus in amount). There
shall not exist inaccuracies in the representations and warranties of LSI
set forth in this Agreement (including the representations and warranties
set forth in Sections 6.3.) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a Material Adverse
Effect on LSI; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" shall be deemed not to include such
qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of LSI to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with.
(c) Certificates. LSI shall have delivered to BCS (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief
executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.3 of this Agreement as relates to LSI and
in Section 9.3(a) and 9.3(b) of this Agreement have been satisfied, and
(ii) certified copies of resolutions duly adopted by LSI's Board of
Directors and shareholders and Sub's Board of Directors and shareholders
evidencing the taking of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement, and the consummation
of the transactions contemplated hereby, all in such reasonable detail as
BCS and its counsel shall request.
(d) Opinion of Counsel. BCS shall have received an opinion of Alston
& Bird, counsel to LSI, dated as of the Effective Time, in form reasonably
acceptable to BCS, as to the matters set forth in Exhibit 5.
(e) Accountant's Letters. BCS shall have received from KPMG Peat
Marwick LLP letters dated not more than five days prior to (i) the date of
the Joint Proxy Statement and (ii) the Effective Time, with respect to
certain financial information regarding LSI, in form and substance
reasonably satisfactory to BCS, which letters shall be based upon customary
specified procedures undertaken by such firm.
(f) Fairness Opinion. BCS shall have received from Tucker Anthony
Incorporated a letter, dated not more than five business days prior to the
date of the Proxy Statement, to the effect that, in the opinion of such
firm, the consideration to be received by BCS shareholders in connection
with the Merger is fair, from a financial point of view, to such
shareholders.
(g) Board Representation. LSI and its Board of Directors shall have
taken such action as is necessary to elect the Chief Executive Officer of
BCS to the LSI Board of Directors effective as of the Effective Time, and
further, shall have taken such action as is necessary to elect an
additional Person to the LSI Board of Directors, as of the Effective Time,
which Person shall be approved by the Chief Executive Officer of BCS.
A-25
<PAGE> 116
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the adoption or approval of this Agreement by the
shareholders of BCS and LSI or both, this Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of LSI and the Board
of Directors of BCS; or
(b) By the Board of Directors of either Party in the event of a
material breach by the other Party of any representation or warranty
contained in this Agreement which cannot be or has not been cured within 30
days after the giving of written notice to the breaching Party of such
breach; or
(c) By the Board of Directors of either Party in the event of a
material breach by the other Party of any covenant or agreement contained
in this Agreement which cannot be or has not been cured within 30 days
after the giving of written notice to the breaching Party of such breach;
or
(d) By the Board of Directors of either Party in the event (i) any
Consent of any Regulatory Authority required for consummation of the Merger
and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
shareholders of BCS or LSI fail to adopt or approve this Agreement and the
transactions contemplated hereby as required by the DGCL and GBCC and the
rules of the NASD at the Shareholders' Meetings where the transactions were
presented to such shareholders for adoption or approval and voted upon; or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by December 31, 1996, if the failure
to consummate the transactions contemplated hereby on or before such date
is not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
(f) By the Board of Directors of either Party in the event that any of
the conditions precedent to the obligations of such Party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section
10.1(e) of this Agreement; or
(g) By LSI, in the event that BCS shall have notified LSI of the
receipt of any Acquisition Proposal and the determination of the Board of
Directors of BCS to cause any BCS Company to furnish non-public information
to the Person making such Acquisition Proposal and, within thirty (30) days
following BCS's receipt of such Acquisition Proposal the Board of Directors
of BCS shall have failed to reaffirm its approval of the Merger and the
transactions contemplated by this Agreement (to the exclusion of any other
Acquisition Proposal), or shall have resolved not to reaffirm the Merger,
or shall have affirmed, recommended or authorized entering into any other
Acquisition Proposal or other transaction involving a merger, share
exchange, consolidation or transfer of substantially all of the Assets of
BCS; or
(h) By BCS, if prior to such time as the shareholders of BCS shall
have adopted and approved this Agreement in accordance with DGCL, the Board
of Directors of BCS shall have recommended to the shareholders of BCS any
other Acquisition Proposal or resolved to do so in accordance with Section
8.8 hereof, or
(i) By the Board of Directors of either Party in the event that for
any five (5) consecutive trading days prior to the Effective Time the last
sale price of the LSI Common Stock on the Nasdaq National Market (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source) shall be less than $21.00 per share (the "Minimum
Trading Price").
10.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have no effect, except that (i) the provisions
of this Section 10.2 and Article 11 and Section 8.6(b) of this Agreement shall
survive any such termination and abandonment, and (ii) a termination pursuant to
Sections 10.1(b), 10.1(c) or 10.1(f) of
A-26
<PAGE> 117
this Agreement shall not relieve the breaching Party from Liability for an
uncured willful breach of a representation, warranty, covenant, or agreement
giving rise to such termination.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 2, 3, 4 and 11 and Sections 8.12, 8.13 and 8.14 of this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions. (a) Except as otherwise provided herein, the capitalized
terms set forth below shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Acquisition Agreements" shall mean this Agreement; the Merger
Agreement, dated as of the date hereof, by and among Bentley's Restaurant,
Inc. ("BRI"), Whip Pooling Corporation ("WPC") and LSI; the Merger
Agreement, dated as of the date hereof, by and among Hemenway's Sea Food,
Inc. ("HSF"), WPC and LSI; the Merger Agreement, dated as of the date
hereof, by and among Old Grist Mill Tavern, Inc. ("OGM"), WPC and LSI; the
Merger Agreement, dated as of the date hereof, by and among GOS Properties
L.L.C. ("GOS"), WPC and LSI; and the Purchase Agreement, dated as of the
date hereof, by and between Edward P. Grace, III, Samuel L. Orr, Jr. and
LSI.
"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, such Party or a
substantial equity interest in, or all or substantially all of the assets
of, any of its Subsidiaries.
"Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"Agreement" shall mean this Agreement and Plan of Merger, including
the Exhibits, schedules and Disclosure Memoranda delivered pursuant hereto
and incorporated herein by reference.
"Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"BCS Common Stock" shall mean the $.01 par value common stock of BCS.
"BCS Companies" shall mean, collectively, BCS and all BCS
Subsidiaries.
"BCS Disclosure Memorandum" shall mean the written information
entitled "Bugaboo Creek Steak House, Inc. Disclosure Memorandum" delivered
prior to the date of this Agreement to LSI describing in reasonable detail
the matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section shall not be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto. Where any
representation or warranty contained in the Agreement is limited or
qualified by the materiality of the matters as to which the
A-27
<PAGE> 118
representation or warranty is given, the inclusion of any matter in the
Disclosure Memorandum does not constitute a determination by BCS that such
matters are material.
"BCS Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of BCS as of March
31, 1996, and as of June 25, 1995, June 26, 1994, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the forty weeks ended
March 31, 1996, and for each of the three fiscal years ended June 25, 1995,
June 26, 1994, June 27, 1993, as filed by BCS in SEC Documents, and (ii)
the consolidated balance sheets of BCS (including related notes and
schedules, if any) and related statements of income, changes in
shareholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to periods
ended subsequent to March 31, 1996.
"BCS Parties" shall mean BCS, BRI, HSF, OGM, GOS, Edward P. Grace, III
and Samuel L. Orr, Jr.
"BCS Stock Plans" shall mean the existing stock option and other
stock-based compensation plans of BCS designated as follows: Bugaboo Creek
Steak House, Inc. 1994 Stock Plan and Bugaboo Creek Steak House, Inc.
Non-Employee Director Stock Plan.
"BCS Subsidiaries" shall mean the Subsidiaries of BCS, which shall
include the BCS Subsidiaries described in Section 5.4 of this Agreement and
any corporation or other organization acquired as a Subsidiary of BCS in
the future and held as a Subsidiary by BCS at the Effective Time.
"Business Combination" shall mean any of the following involving BCS
or its Subsidiaries: (a) any merger, consolidation, share exchange,
business combination, or other similar transaction (other than the
transactions contemplated by this Agreement); (b) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 20% or more of
the assets of BCS and its Subsidiaries, taken as a whole, in a single
transaction or series of related transactions; (c) any purchase of any
equity securities involving an acquisition of 20% or more of the
outstanding shares of capital stock of BCS, or an aggregate of 20% or more
of the outstanding shares of the capital stock of the BCS Subsidiaries, or
(d) any binding agreement pursuant to which BCS or its Subsidiaries agree
to do any of the foregoing.
"Certificate of Merger" shall mean the Certificate of Merger to be
executed by BCS and filed with the Secretary of State of the State of
Delaware relating to the Merger as contemplated by Section 1.1 of this
Agreement and/or the Certificate of Merger to be executed by BCS and filed
with the Secretary of State of the State of Georgia relating to the Merger
as contemplated by Section 1.1 of this Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
"Confidentiality Agreement" shall mean that certain Confidentiality
Agreement, dated April 7, 1996, between BCS and LSI.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets or business.
"Default" shall mean (i) any breach or violation of or default under
any Contract, Order or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order or Permit.
"DGCL" shall mean the Delaware General Corporation Law.
A-28
<PAGE> 119
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface or subsurface strata) and which
are administered, interpreted or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq. ("RCRA"), and other Laws relating to emissions,
discharges, releases or threatened releases of any Hazardous Material, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any Hazardous
Material.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exhibits" 1 through 5, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HSR Act" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"Intellectual Property" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, technology rights and licenses,
computer software (including any source or object codes therefor or
documentation relating thereto), trade secrets, franchises, know-how,
inventions, and other intellectual property rights.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"Joint Proxy Statement" shall mean the proxy statement used by BCS and
LSI to solicit the adoption or approval of their respective shareholders of
the transactions contemplated by this Agreement, which shall include the
prospectus of LSI relating to the issuance of the LSI Common Stock to
holders of BCS Common Stock.
"Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that
are known or should reasonably have been known in the reasonable exercise
of their duties by the Chairman, President, Chief Financial Officer, Chief
Accounting Officer, and Vice Presidents of Administration and Real Estate
of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities or business, including those promulgated, interpreted
or enforced by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts
A-29
<PAGE> 120
presented for collection or deposit in the ordinary course of business) of
any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, and (iii) Liens which do not materially
impair the use of or title to the Assets subject to such Lien.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution or demand letter, or notice (written
or oral) by any Person of governmental or other examination or
investigation, hearing, inquiry, administrative or other proceeding
alleging potential Liability, or any Regulatory Authority or other federal,
state or local governmental agency or department requesting information
relating to or affecting a Party, its business, its Assets (including
Contracts related to it), or the transactions contemplated by this
Agreement.
"LSI Capital Stock" shall mean, collectively, the LSI Common Stock,
the LSI Preferred Stock and any other class or series of capital stock of
LSI.
"LSI Common Stock" shall mean the no par value common stock of LSI.
"LSI Companies" shall mean, collectively, LSI and all LSI
Subsidiaries.
"LSI Disclosure Memorandum" shall mean the written information
entitled "Longhorn Steaks, Inc. Disclosure Memorandum" delivered prior to
the date of this Agreement to BCS describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section shall not be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
"LSI Financial Statements" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of LSI as of
March 31, 1996, and as of December 31, 1995 and 1994, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the three months ended
March 31, 1996, and for each of the three years ended December 31, 1995,
1994 and 1993, as filed by LSI in SEC Documents, and (ii) the consolidated
statements of condition of LSI (including related notes and schedules, if
any) and related statements of income, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any) included in SEC
Documents filed with respect to periods ended subsequent to March 31, 1996.
"LSI Preferred Stock" shall mean the no par value preferred stock of
LSI.
"LSI Stock Plans" shall mean the existing stock option and other
stock-based compensation plans of LSI designated as follows: Longhorn
Steaks, Inc. Amended and Restated 1992 Incentive Plan, Longhorn Steaks,
Inc. Stock Option Agreement with Richard E. Rivera and Longhorn Steaks,
Inc. 1996 Stock Plan for Outside Directors.
"LSI Subsidiaries" shall mean the Subsidiaries of LSI and any
corporation or other organization acquired as a Subsidiary of LSI in the
future and held as a Subsidiary by LSI at the Effective Time.
"Material Adverse Effect" on a Party shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries,
taken as a whole, or (ii) the ability of such Party to perform its
obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided that "material
adverse impact" shall not be deemed to include the impact of (a) changes in
Laws of general applicability or interpretations thereof by courts or
governmental authorities, (b) changes in generally accepted accounting
principles or regulatory accounting principles, (c) actions and omissions
of a Party (or any of its Subsidiaries) taken with the
A-30
<PAGE> 121
prior informed written Consent of the other Party in contemplation of the
transactions contemplated hereby, and (z) the Merger on the operating
performance of the Parties, including expenses incurred by the Parties in
consummating the transactions contemplated by this Agreement.
"Material" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq National Market" shall mean the Nasdaq Stock Market's National
Market of the National Association of Securities Dealers Automated
Quotations System.
"Operating Property" shall mean any property owned by the Party in
question or by any of its Subsidiaries or in which such Party or Subsidiary
holds a security interest, and, where required by the context, includes the
owner or operator of such property, but only with respect to such property.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency or Regulatory Authority.
"Participation Facility" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
"Party" shall mean either BCS or LSI, and "Parties" shall mean both
BCS and LSI.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets or business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by LSI
under the 1933 Act with respect to the shares of LSI Common Stock to be
issued to the shareholders of BCS in connection with the transactions
contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the NASD, the SEC,
the Federal Trade Commission, the United States Department of Justice, and
all other federal, state, county, local or other governmental or regulatory
agencies, authorities, instrumentalities, commissions, boards or bodies
having jurisdiction over the Parties and their respective Subsidiaries.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock
of a Person or by which a Person is or may be bound to issue additional
shares of its capital stock or other Rights.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
A-31
<PAGE> 122
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"Shareholders' Meetings" shall mean the respective meetings of the
shareholders of BCS and LSI to be held pursuant to Section 8.1 of this
Agreement, including any adjournment or adjournments thereof.
"Significant Subsidiary" shall mean any present or future consolidated
Subsidiary of the Party in question, the assets of which constitute ten
percent (10%) or more of the consolidated assets of such Party as reflected
on such Party's consolidated statement of condition prepared in accordance
with GAAP.
"Sub Common Stock" shall mean the $.01 par value common stock of Sub.
"Subsidiaries" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly
or through an unbroken chain of entities as to each of which 50% or more of
the outstanding equity securities is owned directly or indirectly by its
parent (provided, there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), or
(ii) in the case of partnerships, serves as a general partner.
"Surviving Corporation" shall mean BCS as the surviving corporation
resulting from the Merger.
"Tax Return" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
"Tax" or "Taxes" shall mean any federal, state, county, local, or
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, and other taxes,
assessments, charges, fares, or impositions, including interest, penalties,
and additions imposed thereon or with respect thereto.
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
<TABLE>
<S> <C>
Base Period Trading Price...................... Section 3.1(c)
Effective Time................................. Section 1.3
Per Share Purchase Price....................... Section 3.1(c)
BCS Contracts.................................. Section 5.15
BCS ERISA Plan................................. Section 5.14
BCS Options.................................... Section 3.5
BCS Benefit Plans.............................. Section 5.14
Base Period Trading Price Limitations.......... Section 3.1(c)
Closing........................................ Section 1.2
ERISA Affiliate................................ Section 5.14(b)
Exchange Agent................................. Section 4.1
Exchange Ratio................................. Section 3.1(c)
GM Program..................................... Section 5.3
Maximum Amount................................. Section 8.14
Merger......................................... Section 1.1
BCS Intellectual Property...................... Section 5.10
Minimum Trading Price.......................... Section 10.1(h)
SEC............................................ Section 5.4
Tax Opinion.................................... Section 9.1(h)
</TABLE>
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
A-32
<PAGE> 123
11.2 Expenses. (a) Except as otherwise provided in this Section 11.2, each
of the Parties shall bear and pay all direct costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, except that each of the Parties shall bear and pay
one-half of the filing fees payable in connection with the Registration
Statement and the Joint Proxy Statement and printing costs incurred in
connection with the printing of the Registration Statement and the Joint Proxy
Statement.
(b) Notwithstanding the foregoing, if this Agreement is terminated by LSI
pursuant to Section 10.1(g) or by BCS pursuant to Section 10.1(h), then BCS
shall promptly pay all the out-of-pocket costs and expenses of LSI, including
costs of counsel, investment bankers, actuaries and accountants up to but not
exceeding $750,000, upon presentation of such supporting documentation as BCS
may reasonably request.
(c) In addition to the foregoing, if, after the date of this Agreement and
within ten (10) months following any termination of this Agreement by LSI
pursuant to Section 10.1(g) or by BCS pursuant to Section 10.1(h) any
third-party shall enter into any Business Combination with BCS or its
Subsidiaries, such third-party that is a party to the Business Combination shall
pay to LSI, prior to the earlier of consummation of the Business Combination or
execution of any letter of intent or definitive agreement with BCS relating to
such Business Combination, an amount in cash equal to the sum of
(y) Two Million Dollars ($2,000,000), less
(z) any amounts previously paid by BCS to LSI pursuant to subsection
(b) of this Section 11.2,
which sum represents additional compensation for LSI's loss as the result of the
transactions contemplated by this Agreement not being consummated. In the event
such third-party shall refuse to pay such amounts, the amounts shall be an
obligation of BCS and shall be paid by BCS promptly upon notice to BCS by LSI.
11.3 Brokers and Finders. Except for Tucker Anthony Incorporated as to BCS
and except for The Robinson-Humphrey Company, Inc. as to LSI, each of the
Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed on its behalf any broker or
finder or incurred any Liability for any financial advisory fees, investment
bankers' fees, brokerage fees, commissions, or finders' fees in connection with
this Agreement or the transactions contemplated hereby. In the event of a claim
by any broker or finder based upon his or its representing or being retained by
or allegedly representing or being retained by BCS or LSI, each of BCS and LSI,
as the case may be, agrees to indemnify and hold the other Party harmless of and
from any Liability in respect of any such claim.
11.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (except, as to Section
8.6(b) of this Agreement, for the Confidentiality Agreement). Nothing in this
Agreement expressed or implied, is intended to confer upon any Person, other
than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, other than as
provided in Sections 8.13 and 8.14 of this Agreement.
11.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
shareholder approval of this Agreement has been obtained; provided, that after
any such approval by the holders of BCS Common Stock, there shall be made no
amendment that pursuant to Section 251(d) of the DGCL requires further approval
by such shareholders without the further approval of such shareholders.
11.6 Waivers. (a) Prior to or at the Effective Time, LSI, acting through
its Board of Directors, chief executive officer or other authorized officer,
shall have the right to waive any Default in the performance of any term of this
Agreement by BCS, to waive or extend the time for the compliance or fulfillment
by BCS of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of LSI under this
Agreement, except any condition which, if not satisfied, would result in the
A-33
<PAGE> 124
violation of any Law. No such waiver shall be effective unless in writing signed
by a duly authorized officer of LSI.
(b) Prior to or at the Effective Time, BCS, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
LSI, to waive or extend the time for the compliance or fulfillment by LSI of any
and all of its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of BCS under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of BCS.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this Agreement
in one or more instances shall be deemed to be or construed as a further or
continuing waiver of such condition or breach or a waiver of any other condition
or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. 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.
11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage prepaid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
BCS: Bugaboo Creek Steak House, Inc.
1275 Wampanoag Trail
East Providence, Rhode Island 02915
Telecopy Number: (401) 433-5986
Attention: Edward P. Grace, III
Copy to Counsel: Hinckley, Allen & Snyder
1500 Fleet Center
Providence, Rhode Island 02903
Telecopy Number: (401) 277-9600
Attention: Margaret D. Farrell
LSI: Longhorn Steaks, Inc.
8215 Roswell Road, Building 200
Atlanta, Georgia 30350
Telecopy Number: (770) 399-7796
Attention: Richard E. Rivera
Copy to Counsel: Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: William H. Avery
11.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws.
A-34
<PAGE> 125
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
11.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether under
any rule of construction or otherwise. No party to this Agreement shall be
considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated and accepted by all parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
11.13 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was 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
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
11.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
A-35
<PAGE> 126
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
<TABLE>
<S> <C>
ATTEST: BUGABOO CREEK STEAK HOUSE, INC.
/s/ CORINNE A. SYLVIA By: /s/ EDWARD P. GRACE, III
- -------------------------------------------- --------------------------------------------
Secretary President
[CORPORATE SEAL]
ATTEST: LONGHORN STEAKS, INC.
/s/ ANNE D. HUEMME By: /s/ RICHARD E. RIVERA
- -------------------------------------------- --------------------------------------------
Secretary President
[CORPORATE SEAL]
ATTEST: WHIP MERGER CORPORATION
/s/ F. FITZHUGH TAYLOR III By: /s/ RICHARD E. RIVERA
- -------------------------------------------- --------------------------------------------
Secretary President
[CORPORATE SEAL]
</TABLE>
A-36
<PAGE> 127
EXHIBIT 1
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made and entered into as
of June 14, 1996, by and between Longhorn Steaks, Inc., a Georgia corporation
("LSI"), Bugaboo Creek Steak House, Inc., a Delaware corporation ("BCS"), and
the undersigned (the "Stockholder").
WHEREAS, the Stockholder desires that LSI, Whip Merger Corporation, a
wholly owned subsidiary of LSI ("Sub"), and BCS enter into an Agreement and Plan
of Merger dated the date hereof (as the same may be amended or supplemented, the
"Merger Agreement") with respect to the merger of Sub with and into BCS (the
"Merger"); and
WHEREAS, the Stockholder and BCS are executing this Agreement as an
inducement to LSI to enter into and execute, and to cause Sub to enter into and
execute, the Merger Agreement;
NOW, THEREFORE, in consideration of the execution and delivery by LSI and
Sub of the Merger Agreement and the mutual covenants, conditions and agreements
contained herein and therein, the parties agree as follows:
1. Representations and Warranties. The Stockholder represents and warrants
to LSI as follows:
(a) The Stockholder is the record and beneficial owner of the number
of shares (such "Stockholder's Shares") of common stock, $.01 par value, of
BCS ("BCS Stock") set forth below such Stockholder's name on the signature
page hereof. Except for the Stockholder's Shares and any other shares of
BCS Stock subject hereto, the Stockholder is not the record or beneficial
owner of any shares of BCS Stock. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding agreement of, the
Stockholder, enforceable against him in accordance with its terms.
(b) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or to
which the Stockholder's Shares are subject. If the Stockholder is married
and the Stockholder's Shares constitute community property, this Agreement
has been duly executed and delivered by, and constitutes a valid and
binding agreement of, the Stockholder's spouse, enforceable against such
person in accordance with its terms. Consummation by the Stockholder of the
transactions contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to the Stockholder or the
Stockholder's Shares.
(c) The Stockholder's Shares and the certificates representing such
Shares are now, and at all times during the term hereof will be, held by
the Stockholder, or by a nominee or custodian for the benefit of such
Stockholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder.
(d) No broker, investment banker, financial adviser or other person is
entitled to any broker's, finder's, financial adviser's or other similar
fee or commission in connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of the Stockholder.
(e) The Stockholder is not acquiring any LSI Common Stock with a view
to, or for offer or sale in connection with, any distribution thereof
(within the meaning of the 1933 Act) that would be in violation of the
securities laws of the United States of America or any state thereof. The
Stockholder acknowledges that he, she or it (i) has such knowledge and
experience in business and financial matters and with respect to
investments in securities to enable the Stockholder to understand and
evaluate the risks of an investment in the LSI Common Stock to be acquired
by the Stockholder and to form an investment decision with respect thereto
and is able to bear the risk of such investment for an indefinite period
and to
<PAGE> 128
afford a complete loss thereof and (ii) is an "accredited investor" as
defined in Rule 501 of Regulation D under the 1933 Act.
(f) The Stockholder understands and acknowledges that LSI is entering
into, and causing Sub to enter into, the Merger Agreement in reliance upon
the Stockholder's execution and delivery of this Agreement. The Stockholder
acknowledges that the irrevocable proxy set forth in Section 4 is granted
in consideration for the execution and delivery of the Merger Agreement by
LSI and Sub.
2. Voting Agreements. While this Agreement is in effect, the Stockholder
agrees with, and covenants to, LSI as follows:
(a) At any meeting of stockholders of BCS called to vote upon the
Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval with
respect to the Merger and the Merger Agreement is sought (the
"Stockholders' Meeting"), the Stockholder shall vote (or cause to be voted)
the Stockholder's Shares in favor of the Merger, the execution and delivery
by BCS of the Merger Agreement, and the approval of the terms thereof and
each of the other transactions contemplated by the Merger Agreement,
provided that the terms of the Merger Agreement shall not have been amended
to reduce the consideration payable in the Merger to a lesser amount of LSI
Common Stock or otherwise to materially and adversely impair the
Stockholder's rights or increase the Stockholder's obligations thereunder.
(b) At any meeting of stockholders of BCS or at any adjournment
thereof or in any other circumstances upon which their vote, consent or
other approval is sought, the Stockholder shall vote (or cause to be voted)
such Stockholder's Shares against (i) any merger agreement or merger (other
than the Merger Agreement and the Merger), consolidation, combination, sale
of substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of or by BCS or (ii) any amendment of BCS's
Certificate of Incorporation or Bylaws or other proposal or transaction
involving BCS or any of its subsidiaries which amendment or other proposal
or transaction would in any manner impede, frustrate, prevent or nullify
the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement (each of the foregoing in clause (i)
or (ii) above, a "Competing Transaction").
3. Covenants. While this Agreement is in effect, the Stockholder agrees
with, and covenants to, LSI as follows:
(a) The Stockholder shall not (i) transfer (which term shall include,
without limitation, for the purposes of this Agreement, any sale, gift,
pledge or other disposition), or consent to any transfer of, any or all of
the Stockholder's Shares or any interest therein, except pursuant to the
Merger; (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares or
any interest therein, (iii) grant any proxy, power of attorney or other
authorization in or with respect to such Shares, except for this Agreement,
or (iv) deposit such Shares into a voting trust or enter into a voting
agreement or arrangement with respect to such Shares; provided, that the
Stockholder may transfer (as defined above) any of the Stockholder's Shares
to any other person who is on the date hereof, or to any family member of a
person or charitable institution which prior to the Stockholders Meeting
and prior to such transfer becomes, a party to this Agreement bound by all
the obligations of the "Stockholder" hereunder; provided, that the
Stockholder shall not transfer any of the Stockholder's Shares pursuant to
the preceding proviso and shall not transfer any other shares of BCS Stock
if any such transfer, either alone or in the aggregate with other transfers
by other persons who may be affiliates of BCS, would preclude LSI's ability
to account for the business combination to be effected by the Merger as a
pooling of interests.
(b) If a majority of the holders of BCS Stock approve the Merger and
the Merger Agreement, the Stockholder's Shares shall, pursuant to the terms
of the Merger Agreement, be exchanged for the consideration provided in the
Merger Agreement. The Stockholder hereby waives any rights of appraisal, or
rights to dissent from the Merger, that such Stockholder may have.
(c) The Stockholder shall not, nor shall it permit any investment
banker, attorney or other adviser or representative of the Stockholder to,
directly or indirectly, (i) solicit, initiate or encourage the
2
<PAGE> 129
submission of, any takeover proposal or (ii) participate in any discussions
or negotiations regarding, or furnish to any person any 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 takeover proposal. For all purposes hereof, "takeover
proposal" means any proposal for a merger or other business combination
involving BCS or any of its subsidiaries or any proposal or offer to
acquire in any manner, directly or indirectly, an equity interest in any
voting securities of, or a substantial portion of the assets of BCS or any
of its subsidiaries, other than the Merger and the other transactions
contemplated by the Merger Agreement and other than any transfer expressly
permitted by the proviso to Section 3(a).
4. Grant of Irrevocable Proxy; Appointment of Proxy. (a) While this
Agreement is in effect, the Stockholder hereby irrevocably grants to, and
appoints, LSI and Richard E. Rivera, President of LSI, and Anne D. Huemme, Chief
Financial Officer of LSI, in their respective capacities as officers of LSI, and
any individual who shall hereafter succeed to any such office of LSI, and each
of them individually, the Stockholder's proxy and attorney-in-fact (with full
power of substitution), for and in the name, place and stead of the Stockholder,
to vote the Stockholder's Shares, or grant a consent or approval in respect of
such Shares (i) in favor of the Merger, the execution and delivery of the Merger
Agreement and approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement, provided that the terms of the Merger
Agreement shall not have been amended to reduce the consideration payable in the
Merger to a lesser amount of LSI Common Stock or otherwise to materially and
adversely impair the Stockholder's rights or increase the Stockholder's
obligations thereunder, and (ii) against any Competing Transaction.
(b) The Stockholder represents that any proxies heretofore given in respect
of the Stockholder's shares are not irrevocable, and that any such proxies are
hereby revoked.
(c) The Stockholder hereby affirms that the irrevocable proxy set forth in
this Section 4 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of the Stockholder under this Agreement. The Stockholder hereby
further affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked while this Agreement is in effect. The
Stockholder hereby ratifies and confirms all that such irrevocable proxy may
lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of
Section 212 of the Delaware General Corporation Law as long as this Agreement is
in effect.
5. Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of such
Shares shall pass, whether by operation of law or otherwise, including without
limitation the Stockholder's successors or assigns. In the event of any stock
split, stock dividend, merger, reorganization, recapitalization or other change
in the capital structure of BCS affecting the BCS Stock, or the acquisition of
additional shares of BCS Stock or other voting securities of BCS by any
Stockholder, the number of Shares subject to the terms of this Agreement shall
be adjusted appropriately and this Agreement and the obligations hereunder shall
attach to any additional shares of BCS Stock or other voting securities of BCS
issued to or acquired by the Stockholder.
6. Stop Transfer. BCS agrees with, and covenants to, LSI that BCS shall
not register the transfer of any certificate representing any of the
Stockholder's Shares, unless such transfer is made to LSI or Sub or otherwise in
compliance with this Agreement. The Stockholder agrees that, if any certificates
representing Stockholder's Shares are released by the pledgee thereof, the
Stockholder will tender to BCS, within five business days after the date
thereof, any and all certificates representing such Stockholder's Shares and BCS
will inscribe upon such certificates the following legend: "The shares of Common
Stock, $.01 par value, of Bugaboo Creek Steak House, Inc. represented by this
certificate are subject to a Stockholders Agreement dated as of June 14, 1996,
and may not be sold or otherwise transferred, except in accordance therewith.
Copies of such Agreement may be obtained at the principal executive offices of
Bugaboo Creek Steak House, Inc."
3
<PAGE> 130
7. Registration Rights.
(a) Registration on Request. Subject to the terms and conditions set
forth herein, for a period of two years from the Effective Time of the
Merger, if Stockholder ceases to be director of LSI, upon written notice of
the Stockholder requesting that LSI effect the registration under the
Securities Act, of all or part of the LSI Common Stock issued to
Stockholder in the Merger ("Registrable Securities") held by Stockholder,
which notice shall specify the intended method or methods of disposition of
such Registrable Securities, LSI will use its reasonable efforts to effect
(at the earliest practicable date) the registration, under the Securities
Act, of such Registrable Securities for disposition in accordance with the
intended method or methods of disposition stated in such request, provided
that:
(i) if LSI shall have previously effected a registration with
respect to Registrable Securities pursuant to Section 7(c) hereof, LSI
shall not be required to effect a registration pursuant to this Section
7(a) until a period of 180 days shall have elapsed from the effective
date of the most recent such previous registration;
(ii) if, upon receipt of a registration request pursuant to this
Section 7(a), LSI is advised in writing by a recognized national
independent investment banking firm selected by LSI that, in such firm's
opinion, a registration at the time and on the terms requested would
adversely affect any public offering of securities of LSI by LSI (other
than in connection with employee benefit and similar plans) or by or on
behalf of any shareholder of LSI exercising a demand registration right
(collectively, a "LSI Offering") with respect to which LSI has commenced
preparations for a registration prior to the receipt of a registration
request pursuant to this Section 7(a), LSI shall not be required to
effect a registration pursuant to this Section 7(a) until 90 days after
the completion of such LSI Offering;
(iii) if, while a registration request pursuant to this Section
7(a) is pending, LSI determines in the good faith judgment of the
principal securities counsel or outside securities counsel of LSI that
the filing of a registration statement would require disclosure of
material information which LSI has a bona fide business purpose for
preserving as confidential, LSI shall not be required to effect a
registration pursuant to this Section 7(a) until the date upon which
such material information is disclosed to the public or ceases to be
material; and
(iv) Stockholder shall exercise registration rights pursuant to
this Section 7(a) one time only; provided, that a registration will not
count as an exercise of registration rights under this Section 7(a)
until the registration statement relating to such exercise has become
effective; provided, further that the number of shares of LSI Common
Stock registered pursuant to a requested pursuant to this Section 7(a)
shall be no less than 2% of the total outstanding number of shares of
LSI Common Stock outstanding at the time of such request.
(v) the Company shall only be obligated to effect a registration
requested pursuant to this Section 7(a) by the filing of a registration
statement on Form S-3 or any successor form which the Company is
eligible to use containing similar disclosure items and incorporation by
reference provisions, such form to be selected by the Company, after
consultation with counsel.
(b) Registration Expenses. "Registration Expenses" for a request
pursuant to this Section 7(a) shall be paid by Stockholder. Registration
Expenses shall mean all expenses incident to LSI's performance of or
compliance with the registration requirements set forth in this Agreement
regardless of whether any such registration becomes effective including,
without limitation, the following: (i) all fees, disbursements, and
expenses of counsel for LSI (United States and foreign), all reasonable
fees, disbursements and expenses of (a) counsel for Stockholder and (b)
LSI's independent certified public accountants in connection with the
registration of Registrable Securities to be disposed of under the
Securities Act; (ii) all fees and expenses in connection with the
preparation, printing and filing of the registration statement, any
preliminary prospectus or final prospectus, any other offering document and
amendments and supplements thereto (including, if applicable, the fees and
expenses of any "qualified independent underwriter" and its counsel that
may be required by the rules and regulations of the
4
<PAGE> 131
NASD) and the mailing and delivering of copies thereof to the underwriters
and dealers; (iii) all cost of printing or producing any agreements among
underwriters, underwriting agreements and blue sky or legal investment
memoranda, any selling agreements and any other documents in connection
with the offering, sale or delivery of Registrable Securities to be
disposed of; (iv) all expenses in connection with the qualification of
Registrable Securities to be disposed of for offering and sale under state
blue sky or securities laws, including the fees and disbursements of
counsel or the underwriters in connection with such qualification and in
connection with any blue sky and legal investment surveys; (v) any filing
fees incident to securing any required review by the NASD of the terms of
the sale of Registrable Securities to be disposed of; and (vi) all
application and filing fees in connection with listing the Registrable
Securities on a national securities exchange or automated quotation system
pursuant to the requirements hereof.
(c) Incidental Registration. For a period of two years from the date
of this Agreement, if Stockholder ceases to be a director of Longhorn
Steaks, LSI proposes to register any of its common stock for public sale
under the Securities Act, on a form and in a manner which would permit
registration of Registrable Securities for sale to the public under the
Securities Act, LSI will give prompt written notice to Stockholder of its
intention to do so, and upon the written request of Stockholder delivered
to LSI within 10 business days after the giving of any such notice (which
request shall specify the amount of Registrable Securities intended to be
disposed of by Stockholder and the intended method of disposition thereof),
LSI will use its reasonable efforts to effect, in connection with the
registration of the LSI Common Stock, the registration under the Securities
Act of all Registrable Securities which LSI has been so requested to
register by Stockholder, to the extent required to permit the disposition
(in accordance with the intended method or methods thereof as aforesaid) of
Registrable Securities so to be registered; provided that:
(i) if, at any time after giving such written notice of its
intention to register any LSI Common Stock and prior to the effective
date of the registration statement filed in connection with such
registration, LSI shall determine for any reason not to register the LSI
Common Stock LSI may, at its election, give written notice of such
determination to Stockholder and thereupon LSI shall be relieved of its
obligation to register such Registrable Securities in connection with
the registration of such LSI Common Stock;
(ii) LSI shall not be required to effect any registration of
Registrable Securities under this Section 7(c) incidental to the
registration of any of its securities solely in connection with mergers,
acquisitions, exchange offers, recapitalizations, reclassifications,
subscription offers, dividend reinvestment plans or stock option or
other benefit plans; and
(iii) in the event that Stockholder requests the registration of
Registrable Securities in connection with any underwritten registration
of LSI Common Stock and the managing underwriter of such registration
informs Stockholder and any other holder of securities of LSI requesting
registration in connection with such registration of LSI Common Stock in
writing of its belief that the distribution of all or a specified number
of such Registrable Securities concurrently with the securities being
distributed by such underwriters would interfere with the successful
marketing of the securities being distributed by such underwriters, then
LSI may, upon written notice to Stockholder and all such other
requesting holders, reduce pro rata (if and to the extent stated by such
managing underwriter to be necessary to eliminate such effect) the
number of such securities, the registration of which shall have been
requested by Stockholder and each such other holder so that the
resultant aggregate number of such securities so included in such
registration shall be equal to the number of securities stated in such
managing underwriter's letter.
No registration of Registrable Securities effected under this Section 7(c)
shall relieve LSI of its obligation to effect the one demand registration
of Registrable Securities pursuant to Section 7(a).
(d) Registration Expenses. Stockholder will pay all incremental
Registration Expenses in connection with any registration pursuant to
Section 7(c) that are attributable to Stockholder's participation in such
registration, including, specifically, fees and expenses of counsel for
Stockholder.
5
<PAGE> 132
(e) Registration and Qualification. In connection with the filing of
a Registration Statement pursuant to Section 7(a), and in supplementation
and not in limitation of the provisions hereof, Longhorn Steaks shall:
(i) notify the Stockholder as to the filing of the Registration
Statement and of all amendments or supplements thereto filed prior to
the effective date of such Registration Statement;
(ii) notify the Stockholder, promptly after Longhorn Steaks shall
receive notice thereof, of the time when said Registration Statement
became effective or when any amendment or supplement to any prospectus
forming a part of such Registration Statement has been prepared or filed
and use its reasonable efforts to ensure that the Registration Statement
remains effective for 120 days;
(iii) notify the Stockholder promptly of any request by the SEC for
the amending or supplementing of such Registration Statement or
prospectus or for additional information;
(iv) prepare and promptly file with the SEC and promptly notify the
Stockholder of the filing of any amendments or supplements to such
Registration Statement or prospectus as may be necessary to correct any
statements or omissions if, at any time when a prospectus relating to
the Registrable Securities is required to be delivered under the
Securities Act, any event with respect to Longhorn Steaks shall have
occurred as a result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading; and, in addition, prepare and file
with the SEC, promptly upon the Stockholder's written request, any
amendments or supplements to such Registration Statement or prospectus
which may be reasonably necessary or advisable in connection with the
distribution of the Registrable Securities;
(v) prepare, promptly upon request of the Stockholder or any
underwriters for the Stockholder, such amendment or amendments to such
Registration Statement and such prospectus or prospectuses as may be
reasonably necessary to permit compliance with the requirements of
Section 10(a)(3) of the Securities Act;
(vi) advise the Stockholder promptly after LSI shall receive notice
or obtain knowledge of the issuance of any stop order by the SEC
suspending the effectiveness of any such Registration Statement or
amendment thereto or of the initiation or threatening of any proceeding
for that purpose, and promptly use its reasonable efforts to prevent the
issuance of any stop order or obtain its withdrawal promptly if such
stop order should be issued;
(vii) use its reasonable efforts to qualify, as soon as reasonably
practicable, the Registrable Securities for sale under the securities or
Blue Sky laws of such states and jurisdictions within the United States
as shall be reasonably requested by the Stockholder (or any underwriter
therefor); provided, that LSI shall not be required in connection
therewith or as a condition thereto to qualify to do business, to become
subject to taxation or to file a consent to service of process generally
in any of the aforesaid states or jurisdictions;
(viii) furnish the Stockholder (and any underwriter therefor), as
soon as available, copies of any Registration Statement and each
preliminary or final prospectus, or supplement or amendment required to
be prepared pursuant hereto, all in such quantities as the Stockholder
(or such underwriters) may, from time to time, reasonably request;
(ix) if requested by the Stockholder, enter into an agreement with
the underwriters of the Registrable Securities being registered
containing customary provisions and reflecting the foregoing; and
6
<PAGE> 133
(f) Blackout Periods. (a) At any time when a registration statement
effected pursuant to Section 7(a) hereunder relating to Registrable
Securities is effective, upon written notice from LSI to Stockholder that
either:
(i) LSI has determined to engage in a LSI Offering and has been
advised in writing (with a copy to Stockholder) by a recognized national
independent investment banking firm selected by LSI that, in such firm's
opinion, Stockholder's sale of Registrable Securities pursuant to the
registration statement would adversely affect LSI's own immediately
planned LSI Offering (a "Transaction Blackout"); or
(ii) LSI determines in the good faith judgment of the principal
securities counsel or outside securities counsel of LSI that
Stockholder's sale of Registrable Securities pursuant to the
registration statement would require disclosure of material information
which LSI has a bona fide business purpose for preserving as
confidential (an "Information Blackout"), Stockholder shall suspend
sales of Registrable Securities pursuant to such registration statement
until the earlier of:
(X) (i) in the case of a Transaction Blackout, the earlier of
(A) 30 days after the completion of such LSI Offering, (B) the
termination of any "black out" period required by the underwriters to
be applicable to Stockholder, if any, in connection with such LSI
Offering, (C) promptly after abandonment of such LSI Offering and (D)
60 days after the date of LSI's written notice of Transaction
Blackout or
(ii) in the case of an Information Blackout, the earlier of (A)
the date upon which such material information is disclosed to the
public or ceases to be material or (B) 60 days after LSI makes such
good faith determination and
(Y) such time as LSI notifies Stockholder that sales pursuant to
such registration statement may be resumed (the number of days from
such suspension of sales of Stockholder until the day when such sales
may be resumed hereunder is hereinafter called a "Sales Blackout
Period"); provided, that LSI may not impose a Transaction Blackout
following the printing and distribution of a preliminary prospectus
in any underwritten public offering of Registrable Securities until
the termination of the distribution of such Registrable Securities.
(iii) If there is a Transaction Blackout or an Information
Blackout, the time period set forth in Section 7(e)(ii) shall be
extended for a number of days equal to the number of days in the Sales
Blackout Period.
(g) Preparation; Reasonable Investigation. In connection with the
preparation and filing of a registration statement registering Registrable
Securities under the Securities Act, LSI will give Stockholder and the
underwriters, if any, and their respective counsel and accountants, such
reasonable and customary access to its books and records and such
opportunities to discuss the business of LSI with its officers and the
independent public accountants who have certified its financial statements
as shall be necessary, in the opinion of Stockholder and such underwriters
or their respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
(h) Non-exclusive Means of Sale. Nothing in this Agreement shall be
deemed to preclude Stockholder from selling any Registrable Securities in
accordance with the provisions of Rule 144 or Rule 145(d) (or any successor
provision thereto) under the Securities Act in accordance with the
provisions hereof.
(i) Lock-ups. Stockholder agrees that for a period of up to 90 days
(or such other period, not to exceed 180 days, as LSI may agree with the
managing underwriter) after the effective date of any underwritten public
offering of LSI Common Stock, Stockholder will not, directly or indirectly,
sell, offer to sell or otherwise dispose of any LSI Common Stock other than
any of Stockholder's LSI Common Stock included in such public offering
unless otherwise consented by the representative of the underwriters in
such public offering.
(j) Term of Registration Rights. The registration rights set forth in
this Section 7 shall survive the termination of this Agreement and remain
in effect for a period of two years from the Effective Time of
7
<PAGE> 134
the Merger unless this Agreement is terminated as a result of a termination
of the Merger Agreement in accordance with its terms.
8. Regulatory Approvals. Each of the provisions of this Agreement is
subject to compliance with applicable regulatory conditions and receipt of any
required regulatory approvals.
9. Further Assurances. The Stockholder shall, upon request of LSI, execute
and deliver any additional documents and take such further actions as may
reasonably be deemed by LSI to be necessary or desirable to carry out the
provisions hereof and to vest the power to vote such Stockholder's Shares as
contemplated by Section 4 in LSI and the other irrevocable proxies described
therein at the expense of LSI.
10. Termination. This Agreement, and all rights and obligations of the
parties hereunder shall terminate upon the first to occur of (x) the Effective
Time of the Merger (except as set forth in Section 7(j) above), or (y) the date
upon which the Merger Agreement is terminated in accordance with its terms.
11. Miscellaneous. (a) Capitalized terms used and not otherwise defined in
this Agreement shall have the respective meanings assigned to them in the Merger
Agreement.
(b) All notices, requests, claims, demands and other communications under
this Agreement shall be in writing and shall be deemed given if delivered
personally or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice): (i) if to LSI, to the address set forth in
Section 11.8 of the Merger Agreement; and (ii) if to the Stockholder; to its
address shown below its signature on the last page hereof.
(c) The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
(d) This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement.
(e) This Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
(g) 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, except as expressly contemplated by Section 3(a) hereof. Any
assignment in violation of the foregoing shall be void.
(h) The Stockholder agrees that irreparable damage would occur and that LSI
would not have any adequate remedy at law 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 LSI
shall be entitled to an injunction or injunctions to prevent breaches by the
Stockholder of this Agreement and to enforce specifically the terms and
provisions of this Agreement in the Chancery Court of the State of Delaware (and
any appellate courts therefrom), this being in addition to any other remedy to
which they are entitled at law or in equity. In addition, each of the parties
hereto (i) consents to submit such party to the personal jurisdiction of the
Chancery Court of the State of Delaware (and any appellate courts therefrom) in
the event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (ii) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court and (iii) agrees that such party will not bring any action relating
to this Agreement or any of the transactions contemplated hereby in any court
other than such court.
(i) If any term, provision, covenant or restriction herein, or the
application thereof to any circumstance, shall, to any extent, be held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law.
8
<PAGE> 135
(j) No amendment, modification or waiver in respect of this Agreement shall
be effective against any party unless it shall be in writing and signed by such
party.
IN WITNESS WHEREOF, the undersigned parties have executed and delivered
this Stockholders Agreement as of the day and year first above written.
LONGHORN STEAKS, INC.
By: /s/ RICHARD E. RIVERA
------------------------------------
President
BUGABOO CREEK STEAK HOUSE, INC.
By: /s/ EDWARD P. GRACE, III
------------------------------------
President
STOCKHOLDER:
/s/ EDWARD P. GRACE, III
--------------------------------------
Name: Edward P. Grace, III
Address: 1275 Wampanoag Trail
---------------------------------
East Providence,
Rhode Island 02915
---------------------------------
Number of Shares
Beneficially Owned: 2,415,000
-------------------
9
<PAGE> 136
EXHIBIT 2
AFFILIATE AGREEMENT
Longhorn Steaks, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention:
- ------------------------------------------
- ------------------------------------------
Gentlemen:
The undersigned is a shareholder of Bugaboo Creek Steak House, Inc.
("BCS"), a corporation organized and existing under the laws of the State of
Delaware and located in East Providence, Rhode Island and will become a
shareholder of Longhorn Steaks, Inc. ("LSI") pursuant to the transactions
described in the Agreement and Plan of Merger, dated as of June 14, 1996 (the
"Agreement"), by and among LSI, Whip Merger Corporation ("Sub") and BCS. Under
the terms of the Agreement, Sub will be merged into and with BCS (the "Merger"),
and the shares of the $.01 par value common stock of BCS ("BCS Common Stock")
will be converted into and exchanged for shares of the no par value common stock
of LSI ("LSI Common Stock"). This Affiliate Agreement represents an agreement
between the undersigned and LSI regarding certain rights and obligations of the
undersigned in connection with the shares of LSI to be received by the
undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned and LSI hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to BCS
he is an "affiliate" under Rule 145(c) as defined in Rule 405 of the Rules and
Regulations of the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended ("1933 Act"), and the undersigned anticipates
that he will be such an "affiliate" at the time of the Merger.
2. Initial Restriction on Disposition. The undersigned agrees that he will
not sell, transfer, or otherwise dispose of his interests in, or reduce his risk
relative to, any of the shares of LSI Common Stock into which his shares of BCS
Common Stock are converted upon consummation of the Merger until such time as
LSI notifies the undersigned that the requirements of SEC Accounting Series
Release Nos. 130 and 135 ("ASR 130 and 135") have been met. The undersigned
understands that ASR 130 and 135 relate to publication of financial results of
post-Merger combined operations of LSI and BCS. LSI agrees that it will publish
such results within 45 days after the end of the first fiscal quarter of LSI
containing the required period of post-Merger combined operations and that it
will notify the undersigned promptly following such publication.
3. Covenants and Warranties of Undersigned. The undersigned represents,
warrants and agrees that:
(a) During the 30 days immediately preceding the Effective Time of the
Merger, the undersigned has not sold, transferred, or otherwise disposed of
his interests in, or reduced his risk relative to, any of the shares of BCS
Common Stock beneficially owned by the undersigned as of the record date
for determination of shareholders entitled to vote at the Shareholders'
Meeting of BCS held to approve the Merger.
(b) The LSI Common Stock received by the undersigned as a result of
the Merger will be taken for his own account and not for others, directly
or indirectly, in whole or in part.
(c) LSI has informed the undersigned that any distribution by the
undersigned of LSI Common Stock has not been registered under the 1933 Act
and that shares of LSI Common Stock received pursuant to the Merger can
only be sold by the undersigned (1) following registration under the 1933
<PAGE> 137
Act, or (2) in conformity with the volume and other requirements of Rule
145(d) promulgated by the SEC as the same now exist or may hereafter be
amended, or (3) to the extent some other exemption from registration under
the 1933 Act might be available. The undersigned understands that LSI is
under no obligation to file a registration statement with the SEC covering
the disposition of the undersigned's shares of LSI Common Stock or to take
any other action necessary to make compliance with an exemption from such
registration available.
(d) The undersigned will, and will cause each of the other parties
whose shares are deemed to be beneficially owned by the undersigned
pursuant to Section 8 hereof to, have all shares of BCS Common Stock
beneficially owned by the undersigned registered in the name of the
undersigned or such parties, as applicable, prior to the effective date of
the Merger and not in the name of any bank, broker-dealer, nominee or
clearinghouse.
(e) The undersigned is aware that LSI intends to treat the Merger as a
tax-free reorganization under Section 368 of the Internal Revenue Code
("Code") for federal income tax purposes. The undersigned agrees to treat
the transaction in the same manner as LSI for federal income tax purposes.
The undersigned acknowledges that Section 1.368-1(b) of the Income Tax
Regulations requires "continuity of interest" in order for the Merger to be
treated as tax-free under Section 368 of the Code. This requirement is
satisfied if, taking into account those BCS shareholders who receive cash
in exchange for their stock, who receive cash in lieu of fractional shares,
or who dissent from the Merger, there is no plan or intention on the part
of the BCS shareholders to sell or otherwise dispose of the LSI Common
Stock to be received in the Merger that will reduce such shareholders'
ownership to a number of shares having, in the aggregate, a value at the
time of the merger of less than 50% of the total fair market value of the
BCS Common Stock outstanding immediately prior to the Merger. The
undersigned has no prearrangement, plan or intention to sell or otherwise
dispose of an amount of his LSI Common Stock to be received in the Merger
which would cause the foregoing requirement not to be satisfied.
4. Restrictions on Transfer. The undersigned understands and agrees that
stop transfer instructions with respect to the shares of LSI Common Stock
received by the undersigned pursuant to the Merger will be given to LSI's
Transfer Agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests" and
may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as Longhorn Steaks, Inc. ("LSI") has
published the financial results covering at least 30 days of combined
operations after the effective date of the merger through which the
business combination was effected. In addition, the shares represented by
this certificate may not be sold, transferred or otherwise disposed of
except or unless (1) covered by an effective registration statement under
the Securities Act of 1933, as amended, (2) in accordance with (i) Rule
145(d) (in the case of shares issued to an individual who is not an
affiliate of LSI) or (ii) Rule 144 (in the case of shares issued to an
individual who is an affiliate of LSI) of the Rules and Regulations of such
Act, or (3) in accordance with a legal opinion satisfactory to counsel for
LSI that such sale or transfer is otherwise exempt from the registration
requirements of such Act."
Such legend will also be placed on any certificate representing LSI securities
issued subsequent to the original issuance of the LSI Common Stock pursuant to
the Merger as a result of any transfer of such shares or any stock dividend,
stock split, or other recapitalization as long as the LSI Common Stock issued to
the undersigned pursuant to the Merger has not been transferred in such manner
to justify the removal of the legend therefrom. Upon the request of the
undersigned, LSI shall cause the certificates representing the shares of LSI
Common Stock issued to the undersigned in connection with the Merger to be
reissued free of any legend relating to restrictions on transfer by virtue of
ASR 130 and 135 as soon as practicable after the requirements of ASR 130 and 135
have been met. In addition, if the provisions of Rules 144 and 145 are amended
to eliminate restrictions applicable to the LSI Common Stock received by the
undersigned pursuant to the Merger, or at the expiration of the restrictive
period set forth in Rule 145(d), LSI, upon the request of the undersigned, will
cause the certificates representing the shares of LSI Common Stock issued to the
2
<PAGE> 138
undersigned in connection with the Merger to be reissued free of any legend
relating to the restrictions set forth in Rules 144 and 145(d) upon receipt by
LSI of an opinion of its counsel to the effect that such legend may be removed.
5. Understanding of Restrictions on Dispositions. The undersigned has
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his ability to sell, transfer, or otherwise dispose
of the shares of LSI Common Stock received by the undersigned, to the extent he
believes necessary, with his counsel or counsel for BCS.
6. Filing of Reports by LSI. LSI agrees, for a period of three years after
the effective date of the Merger, to file on a timely basis all reports required
to be filed by it pursuant to Section 13 of the Securities Exchange Act of 1934,
as amended, so that the public information provisions of Rule 145(d) promulgated
by the SEC as the same are presently in effect will be available to the
undersigned in the event the undersigned desires to transfer any shares of LSI
Common Stock issued to the undersigned pursuant to the Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of LSI Common Stock received by him in connection
with the Merger at any time during the restrictive period set forth in Rule
145(d), the undersigned will provide the necessary representation letter to the
transfer agent for LSI Common Stock together with such additional information as
the transfer agent may reasonably request. If LSI's counsel concludes that such
proposed sale or transfer complies with the requirements of Rule 145(d), LSI
shall cause such counsel to provide such opinions as may be necessary to LSI's
Transfer Agent so that the undersigned may complete the proposed sale or
transfer.
8. Acknowledgments. The undersigned recognizes and agrees that the
foregoing provisions also apply to all shares of the capital stock of BCS and
LSI that are deemed to be beneficially owned by the undersigned pursuant to
applicable federal securities laws, which the undersigned agrees may include,
without limitation, shares owned or held in the name of (i) the undersigned's
spouse, (ii) any relative of the undersigned or of the undersigned's spouse who
has the same home as the undersigned, (iii) any trust or estate in which the
undersigned, the undersigned's spouse, and any such relative collectively own at
least a 10% beneficial interest or of which any of the foregoing serves as
trustee, executor, or in any similar capacity, and (iv) any corporation or other
organization in which the undersigned, the undersigned's spouse and any such
relative collectively own at least 10% of any class of equity securities or of
the equity interest. The undersigned further recognizes that, in the event that
the undersigned is a director or officer of LSI or becomes a director or officer
of LSI upon consummation of the Merger, among other things, any sale of LSI
Common Stock by the undersigned within a period of less than six months
following the effective time of the Mergers may subject the undersigned to
liability pursuant to Section 16(b) of the Securities Exchange Act of 1934, as
amended.
9. Miscellaneous. This Affiliate Agreement is the complete agreement
between LSI and the undersigned concerning the subject matter hereof. Any notice
required to be sent to any party hereunder shall be sent by registered or
certified mail, return receipt requested, using the addresses set forth herein
or such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of Delaware.
3
<PAGE> 139
This Affiliate Agreement is executed as of the day of ,
19 .
Very truly yours,
--------------------------------------
Signature
--------------------------------------
Print Name
--------------------------------------
--------------------------------------
--------------------------------------
Address
[add below the signatures of all
registered owners of shares deemed
beneficially owned by the affiliate]
--------------------------------------
Name:
--------------------------------------
Name:
--------------------------------------
Name:
AGREED TO AND ACCEPTED as of
, 19
LONGHORN STEAKS, INC.
By:
- --------------------------------------
4
<PAGE> 140
EXHIBIT 3
MATTERS AS TO WHICH HINCKLEY, ALLEN & SNYDER WILL OPINE
1. BCS is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with full corporate power and
authority to carry on the business in which it is engaged as described in the
proxy statement used to solicit the approval by the stockholders of BCS of the
transactions contemplated by the Agreement ("Proxy Statement"), and to own and
use its Assets.
2. The authorized capital stock of BCS consists of 20,000,000 shares of BCS
Common Stock, of which 5,225,000 shares were issued and outstanding as of
, 1996. The shares of BCS Common Stock that are issued and
outstanding were not issued in violation of any statutory preemptive rights of
shareholders, were duly issued and are fully paid and nonassessable under the
Delaware General Corporation Law. To our knowledge, except as set forth in
Section 5.3(a) of the Merger Agreement or Section 5.3 of the BCS Disclosure
Memorandum, there are no options, subscriptions, warrants, calls, rights or
commitments obligating BCS to issue any equity securities or acquire any of its
equity securities.
3. BCS owns directly or indirectly all the issued and outstanding shares of
the capital stock of the BCS Subsidiaries. To our knowledge, there are no
options, subscriptions, warrants, calls, rights or commitments obligating the
BCS Subsidiaries to issue or acquire any of its equity securities.
4. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the CERTIFICATE
OF INCORPORATION or Bylaws of BCS or, to our knowledge but without any
independent investigation, result in any conflict with, breach of, or default or
acceleration under any Contract or Order to which BCS is a party or by which BCS
is bound.
5. The Agreement has been duly and validly executed and delivered by BCS
and, assuming valid authorization, execution and delivery by LSI and Sub,
constitutes a valid and binding agreement of BCS enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, provided,
however, that we express no opinion as to the availability of the equitable
remedy of specific performance.
<PAGE> 141
EXHIBIT 4
MATTERS AS TO WHICH ALSTON & BIRD WILL OPINE
1. LSI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia with full corporate power and
authority to carry on the business in which it is engaged as described in the
proxy statement used to solicit the approval by the stockholders of BCS of the
transactions contemplated by the Agreement ("Proxy Statement"), and to own and
use its Assets.
2. Sub is a corporation duly organized and validly existing and in good
standing under the laws of the State of Georgia with full corporate power and
authority to carry on the business in which it is engaged as described in the
Proxy Statement, and to own and use its Assets.
3. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Articles of
Incorporation or Bylaws of LSI or, to our knowledge but without any independent
investigation, any Contract or Order to which LSI is a party or by which LSI is
bound. The adoption of the Agreement and compliance with its terms do not and
will not violate or contravene any provision of the Articles of Incorporation or
Bylaws of Sub or, to our knowledge but without any independent investigation,
any Contract or Order to which Sub is a party or by which Sub is bound.
4. The Agreement has been duly and validly executed and delivered by LSI,
and assuming valid authorization, execution and delivery by BCS, constitutes a
valid and binding agreement of LSI enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or similar laws affecting creditors' rights generally, provided,
however, that we express no opinion as to the availability of the equitable
remedy of specific performance.
5. The shares of LSI Common Stock to be issued to the shareholders of BCS
as contemplated by the Agreement have been registered under the Securities Act
of 1933, as amended, and when properly issued and delivered following
consummation of the Merger will be fully paid and non-assessable under the
Georgia Business Corporation Code.
<PAGE> 142
ANNEX B
FORM OF OPINION OF THE ROBINSON-HUMPHREY COMPANY, INC.
, 1996
Board of Directors
Longhorn Steaks, Inc.
8215 Roswell Road
Building 200
Atlanta, GA 30350
To the Members of the Board:
We understand that Longhorn Steaks, Inc. and one or more of its
subsidiaries (the "Company" or "Longhorn") is considering a proposed agreement
and plan of merger between the Company and Bugaboo Creek Steak House, Inc.
("Bugaboo") together with agreements and plans of merger with each of Bentley's
Restaurant, Inc. ("BRI"), Hemenway Sea Foods, Inc. ("HSF"), Old Grist Mill
Tavern, Inc. ("OGM") and GOS Properties Limited Liability Company ("GOS") and a
purchase and sale agreement with Edward P. Grace, III and Samuel J. Orr, Jr.
(the "WPC Purchase Parties"). We understand that under these proposed
transactions (collectively, the "Proposed Transaction"): (i) each of the issued
and outstanding shares of Common Stock of Bugaboo (the "Bugaboo Common Stock")
shall be exchanged for between .376 and .427 of a share, subject to certain
adjustments, of common stock of Longhorn (the "Longhorn Common Stock"), as
described in detail in the Agreement and Plan of Merger dated as of June 14,
1996 among Longhorn, Whip Merger Corporation and Bugaboo (the "BCS Agreement");
(ii) all issued and outstanding shares of common stock of BRI, HSF and OGM, all
percentage membership interests in GOS and the ownership of the WPC Purchase
Parties in the land being purchased from them shall be converted into or
exchanged for shares, subject to certain adjustments, of Longhorn Common
Stock, as described in detail in the Agreements and Plans of Merger each dated
as of June 14, 1996 among Longhorn, Whip Pooling Corporation and each of BRI,
HSF, OGM and GOS and the Purchase and Sale Agreement dated as of June 14, 1996
among Longhorn, Whip Pooling Corporation and the WPC Purchase Parties
(collectively, the "WPC Agreements" and together with the BCS Agreement, the
"Agreements").
We have been requested by the Company to render our opinion with respect to
the fairness, from a financial point of view, to the Company's stockholders of
the consideration to be paid by Longhorn in the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreements,
(2) publicly available information concerning the Company and Bugaboo which we
believe to be relevant to our inquiry, (3) financial and operating information
with respect to the business, operations and prospects of the Company and
Bugaboo furnished to us by the Company and Bugaboo, (4) trading histories of the
Company Common Stock and the Bugaboo Common Stock, (5) a comparison of the
historical financial results and present financial condition of the Company and
Bugaboo with those of other companies which we deemed relevant, (6) a comparison
of the financial terms of the Proposed Transaction with the financial terms of
certain other transactions which we deemed relevant, and (7) certain historical
data relating to percentage premiums paid in acquisitions of publicly traded
companies and (8) unaudited financial information provided by the WPC Parties
consisting of summary lease terms and summary profit and loss information for
each restaurant. In addition, we held discussions with the management of the
Company and Bugaboo concerning their businesses and operations, assets, present
conditions and future prospects and undertook such other studies, analyses and
investigations as we deemed appropriate.
We have relied upon the accuracy and completeness of the financial and
other information used by us in arriving at our opinion without independent
verification. In arriving at our opinion, we have not conducted a physical
inspection of the properties and facilities of the Company. We have not made nor
obtained any
B-1
<PAGE> 143
evaluations or appraisals of the assets or liabilities of the Company. Our
opinion is necessarily based upon market, economic and other conditions as they
exist and can be evaluated as of the date of this letter.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction. In addition, the Company has agreed to indemnify us for
certain liabilities arising out of the rendering of this opinion. We have served
as managing underwriter for three public offerings of the Company's securities
and have provided other investment banking services for the Company in the past.
We have received customary fees for these services. In the ordinary course of
our business, we actively trade in the Common Stock of the Company for our own
account and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be paid
by the Company in the Proposed Transaction is fair to the stockholders of the
Company.
Very truly yours,
B-2
<PAGE> 144
ANNEX C
FORM OF OPINION OF TUCKER ANTHONY INCORPORATED
, 1996
Board of Directors
Bugaboo Creek Steak House, Inc.
1275 Wampanoag Trail
East Providence, RI 02915
Gentlemen:
We understand that Bugaboo Creek Steak House, Inc., a Delaware corporation
("BCS" or the "Company"), is contemplating a merger (the "BCS Merger") with Whip
Merger Corporation, a Georgia corporation (the "Merger Sub"), a wholly owned
subsidiary of Longhorn Steaks, Inc., a Georgia corporation ("LSI") pursuant to
an Agreement and Plan of Merger dated June 14, 1996 (the "BCS Merger
Agreement"). We further understand that Edward P. Grace III, the Company's
principal stockholder, owns 2,415,000 shares of BCS Common Stock and has entered
into an agreement with LSI and the Company dated June 14, 1996 pursuant to which
he has agreed, subject to the terms and conditions thereof, to vote in favor of
the BCS Merger, and, under separate agreements, to sell three restaurants which
are unaffiliated with BCS and two parcels of real estate owned jointly by Mr.
Grace with others (the "Stockholder Agreements").
Pursuant to the BCS Merger Agreement, each share of Common Stock, par value
$0.01 of the Company ("BCS Common Stock") shall be converted into and exchanged
for the right to receive Common Stock, no par value, of LSI ("LSI Common Stock")
initially in an amount equal to $10.25 for each share of BCS Common Stock (equal
to .376 shares of LSI Common Stock, based on a maximum price per share of
$27.250). This ratio will adjust to ensure that BCS stockholders receive $10.25
worth of LSI Common Stock down to an exchange ratio established by dividing
$10.25 by $24.00 or .427 (the "Consideration"). The number of shares received
will be determined by the average closing price of LSI Common Stock for the 20
consecutive trading days ending business days prior to closing. If the average
closing price of LSI Common Stock is less than $21.00 per share for five
consecutive trading days prior to closing, the Company and LSI each have the
right to terminate the BCS Merger Agreement. We understand and have assumed that
the BCS Merger will constitute a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and will be treated as a
pooling-of-interests for accounting purposes.
You have requested our opinion as to whether the Consideration as provided
for in the BCS Merger Agreement to be received by the holders of the Company's
Common Stock other than its principal stockholder and affiliates (the "BCS
Stockholders") is fair, from a financial point of view, to the BCS Stockholders.
Tucker Anthony Incorporated ("Tucker Anthony"), as part of its investment
banking business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and for corporate and other purposes. Tucker
Anthony has acted as BCS's financial advisor in connection with, and has
participated in the negotiations leading to, the BCS Merger. Tucker Anthony will
receive fees for rendering this opinion and for acting as financial advisor, a
substantial portion of such advisory fee in contingent upon the closing of the
BCS Merger. In addition, Tucker Anthony acted as the sole managing underwriter
in the Company's initial public offering on April 13, 1994. Tucker Anthony has
not provided investment banking services to LSI.
In arriving at our opinion, we have, among other things:
(i) Reviewed, as set forth below, the BCS Merger Agreement, including
exhibits thereto;
(ii) Reviewed certain historical financial and other information
concerning the Company for the five fiscal years ended June 25, 1995 and
for the eleven months ended May 31, 1996, including BCS's Annual Reports on
Form 10-K and related publicly available financial information on BCS for
the two most recent fiscal years ended June 25, 1995, BCS's Quarterly
Reports on Form 10-Q for the periods
C-1
<PAGE> 145
ended March 31, 1996, December 10, 1995 and September 17, 1995 and BCS's
Proxy Statement dated September 22, 1995;
(iii) Reviewed certain historical financial and other information
concerning LSI including its Quarterly Report on Form 10-Q for the three
months ended March 31, 1996; its Prospectus dated March 26, 1996; its proxy
statement dated April 11, 1996 and its Annual Report on Form 10-K for the
fiscal year ended December 31, 1995;
(iv) Reviewed certain other information, including publicly available
information relating to the business, earnings, cash flow, assets and
prospects of BCS and LSI, respectively;
(v) Held discussions with the senior management of the Company and LSI
with respect to their past and current business, operations, assets and
financial performance, financial condition and future prospects;
(vi) Reviewed certain internal financial and other information of the
Company and LSI including financial projections prepared by their
respective managements;
(vii) Analyzed certain financial information, operating statistics and
market trading information of publicly traded companies that we deemed
comparable or otherwise relevant to our inquiry, and compared the Company
from a financial point of view with these companies; analyzed certain
financial information and operating statistics of publicly traded companies
that we deemed comparable or otherwise relevant to our inquiry, and
compared LSI from a financial point of view with these companies;
(viii) Compared the Consideration with the consideration received by
shareholders in other acquisitions of companies that we deemed comparable
or otherwise relevant to our inquiry;
(ix) Reviewed the market prices, historical trading activity and
ownership data of the BCS Common Stock and LSI Common Stock and considered
the prospects for price movements; and
(x) Conducted such other financial studies and analyses and reviewed
such other information as we deemed appropriate to enable us to render our
opinion. In our review, we have also taken into account an assessment of
general economic and business conditions and certain industry trends and
related matters.
In our review and analysis and in arriving at our opinion hereinafter
expressed, we have assumed and relied upon the accuracy and completeness of all
the financial and other information provided to us by the Company and LSI or
that is publicly available, and have not attempted to verify any of such
information. We have assumed (i) the financial projections of the Company and
LSI provided to us have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the Company's and LSI's
managements as to future financial performance and (ii) that such projections
will be realized in the amounts and time periods currently estimated by the
respective managements. We did not make or obtain any independent evaluation or
appraisals of any assets or liabilities of the Company, LSI or any of their
respective subsidiaries. Tucker Anthony's opinion necessarily is based upon
conditions as they exist and can be evaluated as of the date hereof.
For the purposes of the opinion hereinafter expressed, we have not been
asked to consider, and we have not considered, the effect of any federal, state
or local tax laws on the BCS Stockholders and have confined our review to the
receipt by the BCS Stockholders of the Consideration provided for in the BCS
Merger Agreement. Further, we have not addressed the terms of the Stockholder
Agreements and make no statements as to the fairness of these agreements. In
addition, you have not authorized us to solicit, and we have not solicited, any
indications of interest from any third party with respect to the purchase of the
BCS Common Stock or any part of the Company.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction. In the past, we have acted as financial
advisor to the Company (including acting as sole managing underwriter for the
Company's initial public offering) and have received customary fees for our
services. We have in the ordinary course of business, provided our clients with
research coverage of the Company. In addition, in the ordinary course of our
business, we actively trade the securities of the Company for our own
C-2
<PAGE> 146
account and the securities of the Company and LSI for the accounts of customers
and accordingly, may at any time hold a long or short position in such
securities. We have not acted as financial advisor to LSI, nor have we acted as
manager of any LSI security offering, and have not received any advisory or
offering fees from LSI.
Based upon and subject to the foregoing, and subject to the average trading
price being greater than or equal to $21.00, it is our opinion that, as of the
date hereof, the Consideration to be received by the BCS Stockholders pursuant
to the BCS Merger Agreement is fair, from a financial point of view, to the BCS
Stockholders.
This letter is addressed to the Board of Directors of the Company and may
not be relied upon, quoted, or made available to any third party without our
prior written consent. We hereby consent, however, to the inclusion of this
opinion as an exhibit or annex to any proxy or registration statement filed in
connection with the BCS Merger. The opinion rendered herein is given as of the
date hereof, and is limited in scope and subject matter as set forth herein. No
other opinions should be inferred beyond the opinion expressly stated herein.
Very truly yours,
C-3
<PAGE> 147
ANNEX D
CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS
OF BUGABOO CREEK STEAK HOUSE, INC.
D-1
<PAGE> 148
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Bugaboo Creek Steak House, Inc.:
We have audited the accompanying consolidated (combined) balance sheets of
Bugaboo Creek Steak House, Inc. and subsidiaries as of June 25, 1995 and June
26, 1994, the related consolidated (combined) statements of income,
stockholders' equity, and cash flows for each of the fiscal years in the
three-year period ended June 25, 1995. These consolidated (combined) financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated (combined)
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated (combined) financial statements referred
to above present fairly, in all material respects, the financial position of
Bugaboo Creek Steak House, Inc. and subsidiaries as of June 25, 1995 and June
26, 1994, the results of its operations and its cash flows for each of the
fiscal years in the three-year period ended June 25, 1995, in conformity with
generally accepted accounting principles.
As discussed in notes 1a and 1l, the entities within the combined Bugaboo
Creek Steak House, Inc. at June 27, 1993 changed from S corporation tax status
for income tax purposes to C corporation tax status in conjunction with a
reorganization, which became effective on January 1, 1994. The consolidated
financial statements for the period subsequent to the reorganization reflect
income tax expense under the Company's C corporation status.
KPMG PEAT MARWICK LLP
Providence, Rhode Island
August 4, 1995
D-2
<PAGE> 149
ANNEX D
CONSOLIDATED (COMBINED) BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, JUNE 25, JUNE 26,
1996 1995 1994
----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................. $ 965,536 $ 727,922 $ 733,713
Marketable securities -- available for sale (notes 2
and 10)............................................ 520,705 1,644,985 12,081,141
Accounts receivable, trade, less allowance for
doubtful accounts of $10,000 in 1995 and 1994...... 305,328 261,584 150,062
Construction allowance receivable from landlord....... -- 475,000
Interest & dividends receivable....................... 37,264 43,955 162,739
Accounts receivable, affiliates (note 9c)............. 110,058 114,815 100,985
Inventories........................................... 1,818,629 1,203,946 627,168
Prepaid expenses...................................... 631,492 476,390 314,886
Pre-opening costs..................................... 682,282 714,693 162,019
Deferred income taxes (note 7)........................ 511,529 197,346 --
----------- ----------- -----------
Total current assets.......................... 5,582,823 5,860,636 14,332,713
Net property and equipment (note 3)................... 33,571,558 23,411,455 8,725,663
Other Assets:
Note receivable from officer (note 9b)................ 40,794 41,391 42,000
Deferred income taxes (note 7)........................ -- -- 66,377
Intangible assets..................................... 431,666 178,542 57,807
----------- ----------- -----------
Total other assets............................ 472,460 219,933 166,184
----------- ----------- -----------
Total assets.................................. $39,626,841 $29,492,024 $23,224,560
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt (note 4)....... $ -- $ 13,000 $ --
Debt to stockholders (note 4)......................... -- -- 16,795
Accounts payable...................................... 2,472,466 3,791,655 743,935
Accounts payable, affiliates (note 9d)................ -- -- 75,226
Accrued expenses...................................... 921,375 439,049 318,142
Accrued and withheld taxes............................ 308,569 30,023 392,111
Unredeemed gift certificates.......................... 1,042,353 718,074 567,436
----------- ----------- -----------
Total current liabilities..................... 4,744,763 4,991,801 2,113,645
Long-term debt, excluding current installments (note
4)................................................. 9,600,000 787,000 --
Deferred rent (note 5)................................ 599,122 604,140 414,217
Deferred income taxes (note 7)........................ 155,546 112,528 --
----------- ----------- -----------
Total liabilities............................. 15,099,431 6,495,469 2,527,862
Stockholders' Equity (note 6):
Common stock.......................................... 52,250 52,250 52,250
Additional paid-in capital............................ 20,034,602 20,034,603 20,034,603
Retained earnings..................................... 4,441,832 2,906,240 735,497
Net unrealized gain (loss) on marketable securities
(note 2)........................................... (1,275) 3,462 (125,652)
----------- ----------- -----------
Total stockholders' equity.................... 24,527,410 22,996,555 20,696,698
Commitments and contingencies (note 10)
----------- ----------- -----------
Total liabilities and stockholders' equity.... $39,626,841 $29,492,024 $23,224,560
========== ========== ==========
</TABLE>
D-3
<PAGE> 150
CONSOLIDATED (COMBINED) STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FORTY WEEKS ENDED FISCAL YEARS ENDED
------------------------- ---------------------------------------
MARCH 31, APRIL 2, JUNE 25, JUNE 26, JUNE 27,
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net restaurant sales............ $37,920,589 $21,522,184 $29,939,836 $17,123,747 $10,013,037
Restaurant costs and operating
expenses:
Food and beverage costs....... 14,041,662 7,860,743 11,047,693 6,182,985 3,659,613
Restaurant operating
expenses................... 16,304,724 8,594,411 12,003,275 6,683,244 4,004,006
Depreciation and
amortization............... 2,467,545 1,078,663 1,539,611 692,942 408,346
----------- ----------- ----------- ----------- -----------
Total restaurant costs and
operating expenses......... 32,813,931 17,533,817 24,590,579 13,559,171 8,071,965
----------- ----------- ----------- ----------- -----------
Earnings from restaurant
operations.................... 5,106,658 3,988,367 5,349,257 3,564,576 1,941,072
Other (income) expense:
General and administrative
expense.................... 2,664,750 1,792,340 2,527,866 2,151,219 1,597,747
Other (income) expense, net
(note 8)................... (32,789) (70,755) (71,728) (215,288) (68,703)
Interest and dividend
income..................... (75,756) (362,640) (385,949) (147,197) --
Interest expense.............. 188,003 -- -- 128,217 91,583
----------- ----------- ----------- ----------- -----------
Earnings before taxes........... 2,362,450 2,629,422 3,279,068 1,647,625 320,445
Provision for income taxes (note
7)............................ 826,858 910,215 1,108,325 495,042 2,940
----------- ----------- ----------- ----------- -----------
Net income...................... $ 1,535,592 $ 1,719,207 $ 2,170,743 $ 1,152,583 $ 317,505
========== ========== ========== ========== ==========
Weighted average shares
outstanding................... 5,225,000 5,225,713 5,226,767
Earnings per share (note 1o).... $ 0.29 $ 0.33 $ 0.42
</TABLE>
D-4
<PAGE> 151
CONSOLIDATED (COMBINED) STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FORTY WEEKS ENDED FISCAL YEARS ENDED
--------------------------- ------------------------------------------
MARCH 31, APRIL 2, JUNE 25, JUNE 26, JUNE 27,
1996 1995 1995 1994 1993
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income............... $ 1,535,592 $ 1,719,207 $ 2,170,743 $ 1,152,583 $ 317,505
Adjustments to reconcile
net income to cash
provided by operating
activities:
Depreciation and
amortization........ 2,539,367 1,117,304 1,595,106 574,559 379,063
(Decrease) increase in
deferred rent....... (5,018) 126,998 189,923 103,946 155,375
Loss on sale of
assets.............. -- -- 67,363 -- --
(Increase) decrease in
accounts
receivable.......... (38,987) 13,880 (125,352) (55,531) (84,205)
Decrease (increase) in
inventories......... (614,683) (511,812) (576,778) (104,714) (157,162)
Decrease (increase) in
prepaid expenses.... (155,102) (120,310) (161,504) (241,188) (10,034)
Decrease (increase) in
pre-opening costs... (793,279) (632,941) (1,013,681) (124,845) (37,174)
(Increase) decrease in
deferred income
taxes............... (271,165) 66,377 (18,441) (66,377) --
Increase in intangible
assets.............. (275,656) (59,463) (143,159) (28,302) (25,141)
Decrease (increase) in
officer
receivable.......... 597 42,000 609 88,000 (130,000)
(Decrease) increase in
accounts payable and
accrued expense..... (1,551,358) 2,121,097 2,735,046 5,666 859,686
Increase (decrease) in
accrued and withheld
taxes............... 278,546 (221,711) (362,088) 353,433 (8,934)
Increase in unredeemed
gift certificates... 324,279 217,456 150,638 161,340 210,588
------------ ------------ ------------ ------------ ------------
Net cash provided
by operating
activities..... $973,133..... $ 3,878,082 $ 4,508,425 $ 1,818,570 $ 1,469,567
</TABLE>
D-5
<PAGE> 152
CONSOLIDATED (COMBINED) STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
FORTY WEEKS ENDED FISCAL YEARS ENDED
--------------------------- ------------------------------------------
MARCH 31, APRIL 2, JUNE 25, JUNE 26, JUNE 27,
1996 1995 1995 1994 1993
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from investing
activities:
Purchase of marketable
securities............ $ (487,663) $ -- $ (1,800,000) $(12,206,793) $ --
Proceeds from sale of
marketable
securities............ 511,345 6,529,654 11,875,340 -- --
Proceeds from maturity of
marketable
securities............ 1,095,861 -- 400,000 -- --
Decrease (increase) in
interest and dividends
receivable............ 6,691 -- 118,784 (162,739) --
Purchase of property and
equipment............. (11,851,248) (10,327,158) (15,791,091) (4,417,717) (2,870,841)
Proceeds from sale of
property and
equipment............. -- -- 16,191 -- --
Increase in construction
allowance
receivable............ (475,000) -- (475,000) -- --
------------ ------------ ------------ ------------ ------------
Net cash used in
investing
activities..... (10,250,014) (3,797,504) (5,655,776) (16,787,249) (2,870,841)
</TABLE>
D-6
<PAGE> 153
CONSOLIDATED (COMBINED) STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
FORTY WEEKS ENDED FISCAL YEARS ENDED
--------------------------- ------------------------------------------
MARCH 31, APRIL 2, JUNE 25, JUNE 26, JUNE 27,
1996 1995 1995 1994 1993
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from financing
activities:
Proceeds from common
stock issuance........ -- -- -- 19,475,567 507,994
Dividends and
distributions to
stockholders.......... -- -- -- (1,125,801) (160,448)
Proceeds from notes
payable............... -- -- -- 788,920 170,000
Repayments of notes
payable............... -- -- -- (877,958) (143,862)
Proceeds from notes
payable to
stockholders.......... -- -- -- 1,440,910 922,005
Repayments of notes
payable to
stockholders.......... -- (16,795) (16,795) (3,602,331) (202,520)
Proceeds from long-term
debt.................. 8,800,000 0 2,100,000 1,150,000 825,000
Repayment of long-term
debt.................. -- 0 (1,300,000) (2,223,067) (92,322)
Increase in book
overdrafts............ 714,495 -- 358,355 -- --
------------ ------------ ------------ ------------ ------------
Net cash (used
in) provided by
financing
activities..... 9,514,495... (16,795) 1,141,560 15,026,240 1,825,847
------------ ------------ ------------ ------------ ------------
Net (decrease) increase in
cash..................... 237,614 63,783 (5,791) 57,561 424,573
Cash and cash equivalents
at beginning of year..... 727,922 733,713 733,713 676,152 251,579
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents
at end of year........... $ 965,536 $ 797,496 $ 727,922 $ 733,713 $ 676,152
=========== =========== =========== =========== ===========
Supplemental disclosure of
cash flow information:
Cash paid for
interest....... $ 253,626 $ -- $ 1,800 $ 122,965 $ 91,835
Cash paid for
income taxes... $ 897,656 $ 1,056,031 $ 1,579,009 $ 257,151 $ 3,493
</TABLE>
D-7
<PAGE> 154
NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation and Business Activity
Bugaboo Creek Steak House, Inc. is a Delaware corporation organized in 1993
which owns and operates restaurants through separate subsidiaries organized for
each restaurant. The accompanying Consolidated (Combined prior to April 4, 1994)
Financial Statements include the accounts of Bugaboo Creek Steak House, Inc.,
its wholly owned subsidiaries (collectively, the "Operating Entities"), and
Phelps Grace Co., Inc., (collectively, the "Company"). Phelps Grace Co., Inc.
(PGCI) was a management company which, prior to April 4, 1994 provided
management and purchasing services for the Company and other related companies.
The other related companies ("Affiliates") consist of three restaurants located
in the greater Providence, Rhode Island area. PGCI has not provided services for
the Operating Entities subsequent to April 4, 1994, and is no longer part of the
consolidated group.
Until December 31, 1993, the Operating Entities and PGCI were organized as
a series of financially interdependent S corporations with common management and
share ownership. Edward P. Grace, III, the Chairman and Chief Executive Officer,
and Samuel J. Orr, Jr., a Director of Bugaboo Creek Steak House, Inc., owned
between 92% and 100% of the shares of each of the Operating Entities, with the
balance owned by executive employees of PGCI. Accordingly, the accompanying
Consolidated (Combined) Financial Statements have been presented as if the
entities comprising the Company were one entity for all periods presented. All
intercompany transactions of the Company have been eliminated in consolidation.
In a reorganization effective on January 1, 1994, all shares of stock of
the Operating Entities were exchanged for shares of stock of Bugaboo Creek Steak
House, Inc., so that the Operating Entities became wholly owned subsidiaries of
Bugaboo Creek Steak House, Inc. Since the reorganization was a consolidation of
entities under common control, it has been accounted for by combining the
historical accounts of the Operating Entities (in a manner similar to a pooling
of interests).
On April 4, 1994, Bugaboo Creek Steak House, Inc. acquired substantially
all the assets, liabilities and operations of PGCI in exchange for cash. The
purchase price was based on the net book value of assets less liabilities as of
April 4, 1994, which equaled $181,291.
On April 8, 1994, the Company declared and issued a 349-for-one stock
dividend, raising the number or shares issued and outstanding to 3,500,000. On
April 13, 1994, the Company issued 1,500,000 shares of Common Stock of Bugaboo
Creek Steak House, Inc. to the public as part of a public stock offering
registered with the Securities and Exchange Commission. On May 10, 1994, an
additional 225,000 shares were issued upon exercise by the underwriters of their
over allotment option. The total shares issued and outstanding at June 25, 1995
and June 26, 1994 were 5,225,000. The proceeds of the stock offerings were used
to repay bank and stockholder debt, purchase substantially all the assets,
liabilities and operations of PGCI, repay notes to stockholders representing
cumulative undistributed earnings of the combined S corporations, and fund new
restaurant development.
(b) Fiscal Year
The Company's fiscal year consists of thirteen periods of 28 days (four
weeks) each, and ends on the last Sunday in June. Fiscal 1995, 1994 and 1993
ended June 25, June 26 and June 27, respectively. Interim reporting periods
within each fiscal year consist of four quarters containing three, three, four,
and three 28-day periods each. Fiscal 1996, which ends on June 30, 1996, will
contain one additional week in the last period of the year resulting in a total
of 53 weeks in the fiscal year. Fiscal 1997 will return to a total of 52 weeks.
(c) Factors Affecting Comparability
As of June 25, 1995 the Company operated eleven Company-owned restaurants,
and provided management services to three Affiliates. Three of the eleven
Company owned restaurants were open as of the end of fiscal 1993 and three new
restaurants were opened during the year ended June 26, 1994. Five new
restaurants
D-8
<PAGE> 155
NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS (CONTINUED)
were opened during the year ended June 25, 1995, two in the second quarter, one
in the third quarter and two in the fourth quarter. Certain prior year balances
were reclassified to conform with current year presentation.
(d) Cash and Cash Equivalents
The Company maintains a number of bank accounts for the deposit of
restaurants' receipts and the payment of obligations. Excess funds (funds not
required for immediate use in the operation or development of restaurants) are
invested in securities with maturities of three months or less and are
classified as Cash Equivalents. The carrying amount of these instruments
approximates their fair values. The Company has no requirements for compensating
balances. The Company's cash management program utilizes zero-balance accounts.
Accordingly, all book overdraft balances have been reclassified to accounts
payable.
(e) Marketable Securities -- Available for Sale
Effective June 28, 1993, the Company adopted FASB Statement No. 115,
Accounting for Certain Investments in Debt and Equity Securities. Marketable
securities consist of debt and equity securities. These securities are
classified as available-for-sale and are reported at fair value, with any
unrealized gains or losses reflected as a separate component of stockholders'
equity.
(f) Accounts and Notes Receivable
Accounts receivable, trade represents those amounts due from restaurant
customers and suppliers. The accounts receivable, trade balance includes $94,667
and $53,709 of customer accounts receivable, $129,185 and $67,921 of bank card
accounts receivable, and $37,732 and $28,432 from suppliers and a limited number
of other accounts at June 25, 1995 and June 26, 1994, respectively. The
construction allowance receivable from landlord at June 25, 1995 arose in the
ordinary course of business and relates to terms in the lease of a Bugaboo Creek
Steak House restaurant which calls for a construction allowance payable by the
landlord to the Company. Interest and dividends receivable of $43,955 and
$162,739 consist of balances due relating to marketable securities as of June
25, 1995 and June 26, 1994, respectively. The note receivable from officer
represents a demand interest bearing note receivable from the Executive Vice
President of Operations to cover relocation expenses not reimburseable under the
Company's relocation policy (see note 9b).
(g) Inventories
Inventories are stated at the lower of cost or market determined on the
first-in, first-out basis. Total inventories had an aggregate value of
$1,203,946 and $627,168, which consisted of inventory held for resale of
$1,107,034 and $610,876 and operating supplies of $96,912 and $16,292 at June
25, 1995 and June 26, 1994, respectively.
(h) Pre-opening Costs
Pre-opening costs represent certain start-up costs incurred in preparing a
restaurant for opening (amortized on a straight-line basis over a one year
period). These costs include primarily recruitment, training, pre-opening
training meals served without charge to invited guests during the week prior to
opening and the purchase of certain supplies not ordinarily inventoried. Certain
other pre-opening costs such as rent and utilities represent period expenses
which are reported as such and not amortized. At June 25, 1995 and June 26, 1994
gross pre-opening costs were $1,013,681 and $209,137, with accumulated
amortization of $298,988 and $47,118, resulting in net pre-opening costs of
$714,693 and $162,019, respectively.
(i) Property and Equipment
Property and equipment are stated at cost. Depreciation on property and
equipment is provided using the straight-line method at rates based on the
estimated useful lives of the assets. Furniture and equipment is depreciated
over a seven to ten year period. Buildings and improvements are amortized over
the lesser of the
D-9
<PAGE> 156
NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS (CONTINUED)
useful life or the lease period, not exceeding 20 years. Interest costs
aggregating $5,000 during the fiscal year ended June 25, 1995 relating to the
purchase and construction of long-term assets was capitalized and is being
amortized over the related assets' estimated useful lives.
(j) Intangible Assets
Intangible assets consist of organization costs representing legal fees
incurred in the establishment of the companies (amortized on a straight-line
basis over a five-year period) and debt issue costs incurred in connection with
the revolving credit line with Citizens Bank (amortized on a straight-line basis
over the term of the credit line, with no amortization taken in 1995) (see note
4). The components of intangible assets at June 25, 1995 and June 26, 1994 were
as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Organization costs............................................... $178,554 $ 83,434
Accumulated amortization......................................... (48,051) (25,627)
Net organization costs........................................... 130,503 57,807
Debt issue costs................................................. 48,039 --
-------- --------
Total intangible assets.......................................... $178,542 $ 57,807
======== ========
</TABLE>
(k) Unredeemed Gift Certificates
The Company records a liability for outstanding gift certificates at the
time they are issued. Upon redemption, sales are recorded and the liability is
reduced by the amount of certificates redeemed.
(l) Income Taxes
Effective June 28, 1993 the Company adopted FASB Statement No. 109,
Accounting for Income Taxes, which required the asset and liability approach for
financial accounting and reporting for income taxes.
Prior to January 1, 1994, each of the legal entities included in the
Company had elected those provisions of the Internal Revenue Code (Subchapter S)
and state laws which provide for the income of the Company to be taxed at the
stockholder level. Accordingly, the consolidated statement of income for the
year ended June 26, 1994 includes a provision for federal and state income taxes
on earnings for the period of January 1, 1994 to June 26, 1994. The consolidated
statement of income for the year ended June 27, 1993 does not include a
provision for federal or state income taxes, except for minimum state tax
requirements.
(m) Postretirement and Postemployment Benefits
Effective June 28, 1993, the Company adopted the following Statements of
Financial Accounting Standards: Statement No. 106, Employer's Accounting for
Postretirement Benefits Other Than Pensions, and Statement No. 112, Employer's
Accounting for Postemployment Benefits. There was no impact of adoption on the
Consolidated Financial Statements of the Company for the periods ended June 25,
1995 and June 26, 1994.
(n) Advertising and Promotion Expenses
Advertising costs are expensed during the year in which they are incurred.
Promotion costs are expensed over the period of the promotional campaign.
Advertising expense was $509,018, $321,947 and $187,123 for the years ended June
25, 1995, June 26, 1994 and June 27, 1993, respectively. Included in prepaid
assets at June 25, 1995 is $34,118 of printed advertising inserts used in
on-going promotional programs.
D-10
<PAGE> 157
NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS (CONTINUED)
(o) Earnings Per Share
Earnings per share for the year ended June 25, 1995 is based on the
weighted average number of shares outstanding during the year and the assumed
exercise of dilutive stock options less the number of treasury shares assumed to
be purchased from the assumed proceeds using the average market price of the
Company's common stock. Prior to April 4, 1994 the Company consisted of a series
of financially interdependent S corporations with common management and share
ownership, and for the years ended June 26, 1994 and June 27, 1993 earnings per
share data is not comparable and therefore is not presented in the Consolidated
Financial Statements. Pro forma earnings per share (unaudited), adjusted for
factors of comparability such as taxes on income, were $0.29 and $0.09,
respectively.
(p) Unaudited Interim Financial Information
The accompanying interim consolidated financial statements of Bugaboo Creek
Steak House, Inc., and subsidiaries (the "Company") for the forty week periods
ended March 31, 1996 and April 2, 1995 have been prepared in accordance with
generally accepted accounting principles, and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. These financial statements have not been
audited by independent public accountants, but include all adjustments
(consisting of only normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial condition,
results of operations and cash flows for such periods.
The results of operations for the interim periods shown in this report are
not necessarily indicative of results for any future interim period or for the
entire year. These consolidated financial statements do not include all
disclosures associated with annual financial statements and accordingly should
be read in conjunction with the annual consolidated (combined) financial
statements and notes thereto.
(2) MARKETABLE SECURITIES -- AVAILABLE FOR SALE
All marketable securities held by the Company at June 25, 1995 were
classified as current and available-for-sale. As of June 25, 1995, the Company
has recorded an unrealized gain as a result of an increase in fair market value
above amortized cost of marketable securities in the amount of $3,462. This
unrealized gain has been reflected as a separate component of stockholders'
equity.
The components of investments in marketable securities as of June 25, 1995
were as follows:
<TABLE>
<CAPTION>
UNREALIZED
AMORTIZED HOLDING MARKET
COST GAINS VALUE
---------- ---------- ----------
<S> <C> <C> <C>
Debt securities.................................... $1,641,523 $3,462 $1,644,985
========= ======== =========
</TABLE>
Realized gain or loss on the sale of available-for-sale securities is
calculated on the specific identification method. Proceeds from the sale of
securities during the year ended June 25, 1995 were $11,875,340, and proceeds
from the maturity of securities were $400,000. Gross realized losses on those
sales were $106,512, with realized gains of $40,123. There were no sales of
securities during the year ended June 26, 1994.
The contractual maturity dates of debt securities as of June 25, 1995 are
as follows:
<TABLE>
<S> <C>
Maturity within 1 year................................................. $ 603,265
Maturity after 1 year through 5 years.................................. 1,041,720
----------
Total........................................................ $1,644,985
=========
</TABLE>
The Company has pledged marketable securities valued at $1,132,409 as
security against a bank letter of credit in the amount of $750,000 (see note
10).
D-11
<PAGE> 158
NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS (CONTINUED)
The components of investments in marketable securities as of June 26, 1994
were as follows:
<TABLE>
<CAPTION>
UNREALIZED
AMORTIZED HOLDING MARKET
COST LOSSES VALUE
----------- ---------- -----------
<S> <C> <C> <C>
Equity securities............................... $ 1,500,000 $ -- $ 1,500,000
Debt securities................................. 10,706,793 (125,652) 10,581,141
----------- ---------- -----------
Total................................. $12,206,793 $ (125,652) $12,081,141
========== ========= ==========
</TABLE>
(3) PROPERTY AND EQUIPMENT
Major classes of property and equipment at June 25, 1995 and June 26, 1994
are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Land....................................................... $ 871,067 $ --
Furniture and equipment.................................... 8,516,803 3,863,536
16,348,869 6,100,303
----------- ----------
25,736,739 9,963,839
Less accumulated depreciation.............................. (2,325,284) (1,238,176)
----------- ----------
Net property and equipment................................. $23,411,455 $8,725,663
========== =========
</TABLE>
(4) LONG-TERM DEBT AND DEBT TO STOCKHOLDERS
Long-term debt consists of funds drawn against a $10,000,000 revolving
credit facility with Citizens Bank. Debt to stockholders consists of notes
payable to the two principal stockholders of the Company. The balance of
long-term debt was as follows at June 25, 1995 and June 26, 1994:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Debt to stockholders......................................... $ -- $ 16,795
Notes payable under terms of a revolving credit line at the
bank's prime lending rate.................................. 800,000 --
Less current portion......................................... (13,000) (16,795)
-------- --------
Long-term debt............................................... $787,000 $ --
======== ========
</TABLE>
Under the terms of the revolving credit agreement with Citizens Bank dated
May 31, 1995, the outstanding balance of the borrowings against the facility may
be converted on or before May 31, 1996 to a term loan requiring fixed principal
repayments over a five year period. At such time the Company will pay to
Citizens Bank an unused facility fee of 0.25% of the unused balance of the
facility. A commitment fee of $25,000 was paid by the Company upon execution of
the agreement, and is being amortized over the term of the agreement.
Required principal payments for years ending after June 25, 1995 are as
follows; $13,000 in fiscal 1996, $160,000 in fiscal 1997, $160,000 in fiscal
1998, $160,000 in fiscal 1999, $160,000 in fiscal 2000, and $147,000 thereafter.
The prime lending rate of Citizens Bank was 9% on June 25, 1995.
Outstanding advances are subject to interest at the Company's option, at
either the bank's prime lending rate payable monthly, or 150 basis points over
the London Interbank Offered Rate (LIBOR). LIBOR contracts are subject to a
minimum balance of $1,000,000 per contract. No LIBOR contracts were in effect as
of June 25, 1995.
The agreement includes certain restrictive covenants, the most significant
of which provide that the Company meet minimum debt to net worth ratios, debt
coverage ratios and a minimum net worth as defined
D-12
<PAGE> 159
NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS (CONTINUED)
in the agreement. The agreement also provides covenants that restrict the
payment of dividends and certain other expenditures. At June 25, 1995 the
Company was in compliance with all debt covenants.
Debt to stockholders of $16,795 at June 26, 1994 represented undistributed
S corporation earnings previously taxed to stockholders.
Unaudited Interim Financial Information
The Company has entered into a $20,000,000 credit facility with Citizens
Bank and Fleet National Bank, both of Providence, Rhode Island, the proceeds of
which were used to repay advances outstanding on the existing credit facility
and to fund further development of new units. At March 31, 1996, the Company had
outstanding long-term debt of $9,600,000 under this line of credit.
(5) RENTAL EXPENSE AND LEASE COMMITMENTS
The Company leases restaurant and office facilities under various
noncancelable operating leases. The leases include minimum lease payments,
reimbursable operating costs, real estate taxes and additional amounts based on
sales at the individual locations. Lease terms range from five to twenty years
with options for renewal. With the exception of office and warehouse facilities,
the Company expects to exercise options to remain at these locations for a
minimum of 20 years. Under the terms of the leases there are certain rent
holidays and escalations in payments over the lease terms. The effects of the
holidays and escalations have been reflected in rent expense on a straight-line
basis over the life of the anticipated lease terms. The excess of expense over
cash payments has been reflected as deferred rent. Deferred rent will be reduced
during the periods when cash payments exceed rent expense. The Company also
leases vehicles and equipment under operating leases.
The Company leases a restaurant facility in Springfield, Virginia from a
related limited liability company owned by three directors of the Company (see
note 9c). The terms of the lease call for a minimum annual rent payment of
$130,000 for the initial term of 10 years, $156,000 for the first 5 year
extension and $171,600 for the second 5 year extension. Also payable as rent is
a percentage rent factor of 5% of sales in excess of the following minimum sales
levels: $2,600,000 per year for the initial term of 10 years, $3,120,000 per
year for the first 5 year extension, and $3,432,000 per year for the second 5
year extension. The Company believes the terms of the lease to be representative
of the terms generally available from other unrelated landlords in the area.
Future minimum lease payments under those operating leases with initial or
remaining terms of one year or more are summarized as follows:
<TABLE>
<CAPTION>
REAL VEHICLES AND
PROPERTY EQUIPMENT
----------- ------------
<S> <C> <C>
1996..................................................... $ 1,749,784 $ 36,750
1997..................................................... 1,970,909 32,317
1998..................................................... 1,984,270 30,471
1999..................................................... 2,014,449 7,623
2000..................................................... 1,946,701 --
Thereafter (through 2016)................................ 30,115,756 --
</TABLE>
Included in these totals are future minimum lease payments arising from
leases signed for three restaurant properties that were not in operation as of
June 25, 1995. One of these restaurants has subsequently opened for business,
and it is expected that the other two will begin operations in fiscal 1996.
D-13
<PAGE> 160
NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS (CONTINUED)
Rent expense on real property for the years ended June 25, 1995, June 26,
1994 and June 27, 1993 consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---------- -------- --------
<S> <C> <C> <C>
Minimum lease payments................................ $1,322,758 $706,780 $565,575
Additional sales-based rentals........................ 172,028 112,662 35,928
---------- -------- --------
Total rent expense.................................... $1,494,786 $819,442 $601,503
========= ======== ========
</TABLE>
In addition, lease expense for various vehicles and equipment amounted to
$49,433, $36,129 and $59,582 for the years ended June 25, 1995, June 26, 1994
and June 27, 1993, respectively.
(6) STOCKHOLDERS' EQUITY
(a) Reorganization
Until December 31, 1993, the Operating Entities and PGCI were organized as
a series of financially interdependent S corporations with common management and
share ownership. Undistributed earnings of the Company for the period in which
it operated as S corporations have been included as additional paid-in capital.
These undistributed earnings have been deemed a constructive distribution to
stockholders followed by a contribution to the capital of the Company. On
January 1, 1994 the shares of stock of the Operating Entities were exchanged for
10,000 shares of common stock of Bugaboo Creek Steak House, Inc. On April 8,
1994, the Company declared and issued a 349-for-one stock dividend, raising the
number of shares issued and outstanding to 3,500,000.
(b) Sale of Common Stock
On April 13, 1994 the Company sold 1,500,000 shares of Common Stock of
Bugaboo Creek Steak House, Inc. to the public as part of a public stock offering
registered with the Securities and Exchange Commission. On May 10, 1994 an
additional 225,000 shares were sold upon exercise by the underwriters of their
over allotment provision. The proceeds of the stock offerings were used to repay
bank and stockholder debt, purchase substantially all the assets, liabilities
and operations of PGCI, distribute cumulative undistributed earnings of the
Company, as combined S corporations, to stockholders and fund new restaurant
development.
The total shares authorized at June 25, 1995 were 20,000,000 at a par value
of $0.01. The total shares issued and outstanding at June 25, 1995 were
5,225,000.
(c) Stock Option Plans
Effective January 20, 1994 the Company adopted the 1994 Stock Plan
providing for the grant of awards covering a maximum of 500,000 shares of Common
Stock. At June 25, 1995 options to purchase up to 340,543 shares of Common Stock
were granted under the 1994 Stock Plan, of which none had been exercised. In
addition, options to purchase a total of 20,000 shares of Common Stock are
outstanding under the Director Plan, of which none had been exercised. At June
25, 1995 there were a total of 69,165 exercisable options. All options were
granted at prices of between $9.75 and $14.75.
(d) Phelps Grace Co., Inc.
PGCI was included in all prior years' Combined Financial Statements of the
Company. On April 4, 1994, the Company acquired substantially all assets,
liabilities and operations of PGCI (see note 1a). At June 26, 1994, the
stockholders' equity of PGCI was not included in the Consolidated Financial
Statements, and was treated as an effective distribution to the stockholders of
PGCI.
D-14
<PAGE> 161
NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS (CONTINUED)
(7) INCOME TAXES
Prior to January 1, 1994, each of the legal entities included in the
Company had elected those provisions of the Internal Revenue Code (Subchapter S)
and state laws which provide for the income of the Company to be taxed at the
stockholder level. The Company terminated the S corporation elections as of
December 31, 1993, and is subject to federal and state income taxes.
The provision for income taxes attributed to earnings before income tax
are:
<TABLE>
<CAPTION>
1995 1994 1993
---------- -------- ------
<S> <C> <C> <C>
Current
Federal............................................... $ 915,501 $455,057 $ --
State................................................. 211,265 106,362 2,940
---------- -------- ------
1,126,766 561,419 2,940
Deferred
Federal............................................... (11,878) (51,824) --
State................................................. (6,563) (14,553) --
---------- -------- ------
(18,441) (66,377) --
---------- -------- ------
Total Provision............................... $1,108,325 $495,042 $2,940
========= ======== ======
</TABLE>
A reconciliation of the statutory United States federal income tax rate to
the Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- -----
<S> <C> <C> <C>
Federal statutory income tax rate............................. 34.0% 34.0% 34.0%
State income taxes, net of Federal benefit.................... 4.2 3.7 6.8
Effect of S corporation elections............................. -- (5.9) (39.9)
Tax credits................................................... (5.0) (2.1) --
Other, net.................................................... 0.6 0.3 --
---- ---- -----
Effective tax rate............................................ 33.8% 30.0% 0.9%
==== ==== =====
</TABLE>
All earnings of the Company before tax are from domestic sources. The tax
effect of temporary differences that give rise to significant portions of the
deferred tax assets and liabilities at June 25, 1995 and June 26, 1994 are:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
ASSETS:
Deferred rent expense............................................ $245,764 $164,661
Excess book amortization......................................... 176,722 35,174
Gift certificates outstanding.................................... 31,730 25,495
Net operating loss carry-forwards................................ 45,096 --
Other............................................................ 8,142 3,969
-------- --------
Gross deferred tax assets........................................ 507,454 229,299
Less valuation reserve........................................... (45,096) --
-------- --------
Net deferred tax assets.......................................... 462,358 229,299
LIABILITIES:
Excess tax depreciation.......................................... 377,540 162,922
-------- --------
Net deferred tax asset........................................... $ 84,818 $ 66,377
======== ========
</TABLE>
At June 25, 1995 current deferred tax assets were $197,346, non-current
deferred tax assets were $265,012 and non-current deferred tax liabilities were
$377,540. At June 26, 1994, non-current deferred tax
D-15
<PAGE> 162
NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS (CONTINUED)
assets were $66,377. Any unused net operating losses will expire primarily
during fiscal 1999. However, based on the Company's history of taxable income
and the anticipation of sufficient taxable income in years when the temporary
differences are expected to become tax deductions, the Company believes that it
will realize the benefit of the net deferred tax assets.
(8) OTHER (INCOME) EXPENSE, NET
Under the terms of management services agreements dated April 4, 1994, the
Company provides purchasing and management services to each Affiliate in return
for a management fee of six percent of the Affiliate's sales. Prior to April 4,
1994, these services were performed by PGCI in return for a charge for central
services overhead and delivery expenses, both of which were allocated to
restaurants based on a percentage of individual restaurant sales to total
restaurant sales; and laundry fees, for which costs were allocated to
restaurants based upon the linen usage of each restaurant. All revenue and
expenses derived from management services provided to the Company restaurants
have been eliminated in the accompanying Consolidated Financial Statements.
Other income, net, consists of the above management fees net of allocated
overhead as well as other miscellaneous income from sources such as vending
machines and pay phones.
(9) RELATED PARTY TRANSACTIONS
(a) Debt to Stockholders
The Company had notes payable to stockholders as of June 26, 1994,
representing undistributed S corporation earnings previously taxed or taxable to
stockholders in the amount of $16,795.
(b) Note Receivable from Officer
The Company held a note receivable from the Executive Vice President of
Operations which constituted an advance of relocation expenses not covered by
the Company's relocation policy, and is secured by the equity in the officer's
former residence. The note is payable upon the sale of the officer's former
residence to the extent of the net proceeds of the sale, with the balance
payable over the following twenty-four months. The note bears an interest rate
of 8%. The note was converted on August 1, 1995 to a second mortgage secured by
the officer's equity in two residential homes, with fixed monthly payments over
a term of five years.
(c) Accounts Receivable, Affiliates
The Company was owed $85,468 and $36,063 from Affiliates arising from the
course of normal activities at June 25, 1995, and June 26, 1994, respectively,
net of amounts payable. In addition, at June 25, 1995 and June 26, 1994 the
Company was owed $29,347 and $64,922 from a related limited liability company
relating to the purchase of real estate in Springfield, Virginia for conversion
to a Bugaboo Creek Steak House restaurant. All of these receivables were current
and were not in default.
(d) Accounts Payable, Affiliates
At June 26, 1994, the Company owed $50,000 to an Affiliate relating to cash
advances. In addition the Company owed $25,226 to PGCI in relation to the
purchase of the assets of PGCI. Both of these amounts were repaid subsequent to
June 26, 1994.
(10) COMMITMENTS AND CONTINGENCIES
A standby letter of credit in the amount of $750,000 has been issued to
secure the Company's obligations under a lease of real estate. Drafts may be
presented against this letter of credit in the event that the Company is in
default of the terms of the lease, all applicable grace periods have expired and
the Company has failed to cure all such defaults. The amount of such drafts may
be for the amount presently due and owing by the
D-16
<PAGE> 163
NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS (CONTINUED)
Company to the landlord or the full amount of letter of credit if the landlord
has notified tenant that it has terminated the lease or has exercised its right
to repossess the leased premises.
As security for this standby letter of credit the Company has pledged
marketable securities valued at $1,132,409. If the bank at any time deems its
security insufficient or unsatisfactory or if the aggregate amount of the
obligations under the letter of credit exceed seventy-five percent (75%) of the
market value of the collateral, the Company may be required to provide
additional collateral.
The Company has in the normal course of business entered into agreements
with vendors for the purchase of restaurant equipment, furniture, fixtures,
buildings and improvements for restaurants that have not yet opened. At June 25,
1995 such commitments totaled $1,696,453.
The Company maintains an employee health insurance plan that is funded by
the Company and by employee contributions, with a stop-loss insurance policy to
cover claims in excess of $25,000 per claim and an aggregate maximum claim
liability of $293,155.
Unaudited Interim Financial Information
On January 2, 1996, the Company entered into a purchasing agreement with
Monfort FoodService for the purchase of beef. The agreement requires the Company
to purchase quantities of beef at fixed prices between January 1, 1996 and
December 31, 1996. The quantities contracted for are based on what management
believes to be conservative estimates of actual supplies that will be required
during such period.
(11) QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data (in thousands, except per share data)
for the years ended June 25, 1995 and June 26, 1994 and the three quarters of
fiscal 1996 ended on September 17, 1995, December 10, 1995, and March 31, 1996,
is follows:
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------
SEPTEMBER 17, DECEMBER 10, MARCH 31,
FISCAL 1996: 1995 1995 1996
------------------------------------------------- ------------- ------------ ---------
<S> <C> <C> <C>
Net restaurant sales............................. $ 9,978 $ 11,452 $16,491
Earnings from restaurant operations.............. 1,323 1,624 2,160
Provision for income taxes....................... 227 291 309
Net income....................................... 422 541 573
Earnings per share............................... $ 0.08 $ 0.10 $ 0.11
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------
SEPTEMBER 18, DECEMBER 11, APRIL 2, JUNE 25,
FISCAL 1995: 1994 1994 1995 1995
----------------------------------------- ------------- ------------ -------- --------
<S> <C> <C> <C> <C>
Net restaurant sales..................... $ 5,071 $6,167 $ 10,283 $8,418
Earnings from restaurant operations...... 1,012 1,111 1,866 1,361
Provision for income taxes............... 264 262 385 198
Net income............................... 501 498 720 452
Earnings per share....................... 0.10 0.10 0.14 0.09
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------
SEPTEMBER 19, DECEMBER 12, APRIL 3, JUNE 26,
FISCAL 1994: 1993 1993 1994 1994
----------------------------------------- ------------- ------------ -------- --------
<S> <C> <C> <C> <C>
Net restaurant sales..................... $ 3,283 $3,587 $ 5,045 $5,209
Earnings from restaurant operations...... 635 771 993 1,166
Provision for income taxes............... 1 -- 126 368
Net income............................... 93 64 493 503
</TABLE>
D-17
<PAGE> 164
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The GBCC authorizes a corporation to indemnify a director or officer
against loss or expense incurred in connection with any action, suit or
proceeding (other than an action by or in the right of a corporation in which
the director was adjudged liable to the corporation) if it is determined that
the director or officer acted in a manner he or she believed in good faith to be
in or not opposed to the best interests of the corporation and, in the case of
any criminal proceeding, had no reasonable cause to believe his or her conduct
was unlawful and, in the case of any adjudicated liability, only if the director
or officer did not derive an improper personal benefit. Pursuant to LSI's Bylaws
and indemnification agreements between LSI and each of its officers and
directors, LSI is obligated to indemnify each of its directors and officers to
the fullest extent permitted by law with respect to all liability and loss
suffered and reasonable expense incurred by such person in any action, suit or
proceeding in which such person was or is made or threatened to be made a party
or is otherwise involved by reason of the fact that such person is or was a
director or officer of LSI. LSI is obligated to pay in advance the reasonable
expenses of the directors and officers incurred in defending such proceedings if
(i) the indemnified party furnishes the corporation a written affirmation of his
good faith belief that he has met the standard of conduct described in the first
sentence above and (ii) the indemnified party agrees to repay all amounts
advanced if it is ultimately determined that such person is not entitled to
indemnification. A director will not be indemnified if he is adjudged liable to
LSI or is subjected to injunctive relief in favor of LSI: (i) for any
appropriation, in violation of his duties, of any business opportunity of the
corporation; (ii) for acts or omissions which involve intentional misconduct or
a knowing violation of law; (iii) for unlawful distributions; or (iv) for any
transaction from which the director derived an improper personal benefit.
In addition, pursuant to the authority of Georgia law, the Articles of
Incorporation of the Registrant also eliminates the monetary liability of
directors to the fullest extent permitted by Georgia law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions, the Registrant
has been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits (See exhibit index immediately preceding the exhibits for the
page number where each exhibit can be found)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------------------------------------------------------------------
<C> <C> <S>
2.1 -- Agreement and Plan of Merger, dated as of June 14, 1996, by and among Longhorn
Steaks, Inc., Bugaboo Creek Steak House, Inc. and Whip Merger Corporation (included
in ANNEX A to the Joint Proxy Statement/Prospectus and incorporated by reference
herein).
2.2 -- Agreement and Plan of Merger, dated June 14, 1996, by and among Bentley's
Restaurant, Inc., Longhorn Steaks, Inc. and Whip Pooling Corporation.
2.3 -- Agreement and Plan of Merger, dated June 14, 1996, by and among Hemenway Sea Foods,
Inc., Longhorn Steaks, Inc. and Whip Pooling Corporation.
2.4 -- Agreement and Plan of Merger, dated June 14, 1996, by and among Old Grist Mill
Tavern, Inc., Longhorn Steaks, Inc. and Whip Pooling Corporation.
2.5 -- Agreement and Plan of Merger, dated June 14, 1996, by and among GOS Properties
Limited Liability Company, Longhorn Steaks, Inc. and Whip Pooling Corporation.
2.6 -- Purchase and Sale Agreement, dated June 14, 1996, by and between Edward P. Grace,
III and Samuel J. Orr, Jr., as Sellers and Whip Pooling Corporation.
3.1 -- Amended and Restated Articles of Incorporation of the Registrant (incorporated by
reference from Exhibit 3(a) to Registration Statement on Form S-1, Registration
Statement No. 33-57942).
</TABLE>
II-1
<PAGE> 165
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------------------------------------------------------------------
<C> <C> <S>
3.2 -- Amended and Restated Bylaws of the Registrant (incorporated by reference from
Exhibit 3(b) to Registration Statement on Form S-1, Registration Statement
No.33-45695).
4.1 -- See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated Articles of
Incorporation and Bylaws of the Registrant defining rights of holders of Common
Stock of the Registrant.
5.1 -- Opinion of Alston & Bird.
*8.1 -- Opinion of Alston & Bird.
23.1 -- Consent of Alston & Bird.
23.2 -- Consent of KPMG Peat Marwick LLP.
23.3 -- Consent of KPMG Peat Marwick LLP.
23.4 -- Consent of The Robinson-Humphrey Company, Inc.
23.5 -- Consent of Tucker Anthony Incorporated.
24.1 -- Powers of Attorney (included on signature page hereof).
99.1 -- Form of Proxy for BCS Common Stock.
99.2 -- Form of Proxy for LSI Common Stock.
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules
Schedules are omitted because they are not required or are not applicable,
or the required information is shown in the financial statements or notes
thereto.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers for sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such posteffective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in
II-2
<PAGE> 166
the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the Registrant's Articles of Incorporation or Bylaws,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefor, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment for the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE> 167
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia, on July 12, 1996.
LONGHORN STEAKS, INC.
By: /s/ RICHARD E. RIVERA
------------------------------------
Richard E. Rivera
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Richard E. Rivera and Anne D. Huemme, and either
of them (with full power in each to act alone), as true and lawful
attorneys-in-fact, with full power of substitution, for him and in his name,
place and stead, in any and all capacities, to sign any amendments to this
Registration Statement and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-fact, or their
substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on July 12, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------- -------------------
<C> <S> <C>
/s/ RICHARD E. RIVERA President, Chief Executive July 12, 1996
- --------------------------------------------- Officer (principal
Richard E. Rivera executive officer) and
Director
/s/ ANNE D. HUEMME Chief Financial Officer and July 12, 1996
- --------------------------------------------- Secretary (principal
Anne D. Huemme financial and accounting
officer)
Chairman of the Board of July 12, 1996
- --------------------------------------------- Directors
George W. McKerrow, Jr.
/s/ DON L. CHAPMAN Director July 12, 1996
- ---------------------------------------------
Don L. Chapman
Director July 12, 1996
- ---------------------------------------------
George W. McKerrow, Sr.
/s/ JOHN METZ Director July 12, 1996
- ---------------------------------------------
John Metz
/s/ JOHN G. PAWLY Director July 12, 1996
- ---------------------------------------------
John G. Pawly
/s/ RONALD W. SAN MARTIN Director July 12, 1996
- ---------------------------------------------
Ronald W. San Martin
</TABLE>
II-4
<PAGE> 168
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------
<C> <C> <S>
2.1 -- Agreement and Plan of Merger, dated as of June 14, 1996, by and among Longhorn
Steaks, Inc., Bugaboo Creek Steak House, Inc. and Whip Merger Corporation (included
in ANNEX A to the Joint Proxy Statement/Prospectus and incorporated by reference
herein).
2.2 -- Agreement and Plan of Merger, dated June 14, 1996, by and among Bentley's
Restaurant, Inc., Longhorn Steaks, Inc. and Whip Pooling Corporation.
2.3 -- Agreement and Plan of Merger, dated June 14, 1996, by and among Hemenway Sea Foods,
Inc., Longhorn Steaks, Inc. and Whip Pooling Corporation.
2.4 -- Agreement and Plan of Merger, dated June 14, 1996, by and among Old Grist Mill
Tavern, Inc., Longhorn Steaks, Inc. and Whip Pooling Corporation.
2.5 -- Agreement and Plan of Merger, dated June 14, 1996, by and among GOS Properties
Limited Liability Company, Longhorn Steaks, Inc. and Whip Pooling Corporation.
2.6 -- Purchase and Sale Agreement, dated June 14, 1996, by and between Edward P. Grace
III and Samuel J. Orr, Jr., as Sellers and Whip Pooling Corporation.
5.1 -- Opinion of Alston & Bird.
23.1 -- Consent of Alston & Bird.
23.2 -- Consent of KPMG Peat Marwick LLP.
23.3 -- Consent of KPMG Peat Marwick LLP.
23.4 -- Consent of The Robinson-Humphrey Company, Inc.
23.5 -- Consent of Tucker Anthony Incorporated.
24.1 -- Powers of Attorney (included on signature page hereof).
99.1 -- Form of Proxy for BCS Common Stock.
99.2 -- Form of Proxy for LSI Common Stock.
</TABLE>
<PAGE> 1
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BENTLEY'S RESTAURANT, INC.,
WHIP POOLING CORPORATION
AND
LONGHORN STEAKS, INC.
DATED AS OF JUNE 14, 1996
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of June 14, 1996, by and among BENTLEY'S RESTAURANT, INC. ("BRI"), a
Rhode Island corporation having its principal office located in East Providence
Rhode Island; THE SHAREHOLDER OF BENTLEY'S RESTAURANT, INC., EDWARD P. GRACE,
III, (the "Shareholder"); WHIP POOLING CORPORATION ("WPC"), a Georgia
corporation having its principal office located in Atlanta, Georgia; and
LONGHORN STEAKS, INC. ("LSI"), a Georgia corporation having its principal
office located in Atlanta, Georgia.
PREAMBLE
The Boards of Directors of BRI, WPC and LSI are of the opinion that the
transactions described herein are in the best interests of the parties and
their respective shareholders. This Agreement provides for the acquisition of
BRI by LSI pursuant to the merger of BRI with and into WPC. At the effective
time of such merger, the outstanding shares of the capital stock of BRI shall
be converted into the right to receive shares of the common stock of LSI
(except as provided herein). As a result, the shareholder of BRI shall become
a shareholder of LSI and WPC shall continue to conduct BRI's business and
operations as a wholly-owned subsidiary of LSI. The transactions described in
this Agreement are subject to the approval of the shareholders of LSI,
expiration of the required waiting period under the HSR Act, the consummation
of the Agreement and Plan of Merger dated the same date as the date hereof by
and among Bugaboo Creek Steak House, Inc. ("BCS"); Whip Merger Corporation; and
LSI (the "BCS Agreement," together with the related agreements in connection
therewith, the "BCS Transaction") and the satisfaction of certain other
conditions described in this Agreement. It is the intention of the parties to
this Agreement that the Merger for federal income tax purposes shall qualify as
a "reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code, and for accounting purposes shall qualify for treatment as a pooling of
interests.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement, at the
Effective Time, BRI shall be merged with and into WPC in accordance with the
provisions of Section 7-1.1-70 of the GLRI and with the effect provided in
Section 7-1.1-69 of the GLRI and Section 1107 of the GBCC and with the effect
provided in Sections 1106 and 1107 of the GBCC (the "Merger"). WPC shall be
the Surviving Corporation resulting from the Merger and shall continue
- 1 -
<PAGE> 3
to be governed by the Laws of the State of Georgia. The Merger shall
be consummated pursuant to the terms of this Agreement, which has been approved
and adopted by the respective Boards of Directors of BRI, WPC and LSI and by
LSI, as the sole shareholder of WPC and by Shareholder as the sole shareholder
of BRI.
1.2 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "Closing") will take place at 9:00 A.M. on the date
that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the
Parties, acting through their authorized officers, may mutually agree. The
Closing shall be held at such place as may be mutually agreed upon by the
Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated by
this Agreement shall become effective on the date and at the time the Articles
of Merger reflecting the Merger shall become effective with the Secretary of
State of the State of Rhode Island and the Certificate of Merger reflecting the
Merger become effective with the Secretary of State of the State of Georgia
(the "Effective Time"). Subject to the terms and conditions hereof, unless
otherwise mutually agreed upon in writing by authorized officers of each Party,
the Parties shall use their reasonable efforts to cause the Effective Time to
occur on the first business day following the last to occur of (i) the
effective date (including expiration of any applicable waiting period) of the
last required Consent of any Regulatory Authority having authority over and
approving or exempting the Merger, and (ii) the date on which the shareholders
of LSI approve this Agreement to the extent such approval is required by
applicable Law.
ARTICLE 2
TERMS OF MERGER
2.1 CHARTER. The Certificate of Incorporation of WPC in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until otherwise amended or repealed.
2.2 BYLAWS. The Bylaws of WPC in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until otherwise
amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of WPC in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the directors of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation. The officers of WPC in office immediately prior to
the Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of the Surviving Corporation from and
after the Effective Time in accordance with the Bylaws of the Surviving
Corporation.
- 2 -
<PAGE> 4
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of LSI, BRI, WPC or the shareholders of any of the foregoing, the shares of the
constituent corporations shall be converted as follows:
(a) Each share of LSI Capital Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and
after the Effective Time.
(b) Each share of BRI Common Stock issued and outstanding at the
Effective Time shall cease to be outstanding and shall be converted into
and exchanged for the right to receive that multiple of a share of LSI
Common Stock (the "Exchange Ratio") obtained by dividing $40.000 (the
purchase price) by 1,000 shares of BRI Common Stock outstanding as of the
date hereof (the "Per Share Purchase Price") by the Base Period Trading
Price (defined to mean the average of the daily last sale prices for the
shares of LSI Common Stock for the 20 consecutive trading days on which
such shares are actually traded as over-the-counter securities and quoted
on the Nasdaq National Market (as reported by The Wall Street Journal or,
if not reported thereby, any other authoritative source) ending at the
close of trading on the fifth trading day immediately preceding the Closing
Date) and rounded to the third decimal place; provided, that for purposes
of this calculation, the Base Period Trading Price shall be deemed to equal
(i) $27.250 in the event the Base Period Trading Price is greater than
$27.250 or (ii) $24.000 in the event the Base Period Trading Price is less
than $24.000 (collectively, $27.250 and $24.000 are referred to as the
"Base Period Trading Price Limitations").
3.2 ANTI-DILUTION PROVISIONS. In the event LSI changes the number of
shares of LSI Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or
similar recapitalization for which a record date is not established) shall be
prior to the Effective Time, (i) the Base Period Trading Price Limitations
shall be adjusted to appropriately adjust the ratio under which shares of BRI
Common Stock will be converted into shares of LSI Common Stock pursuant to
Section 3.1(b) of this Agreement, (ii) the Minimum Trading Price shall be
appropriately adjusted to reflect such change in the number of shares of LSI
Common Stock outstanding, and (iii) if necessary, the anticipated Effective
Time shall be postponed for an appropriate period of time agreed upon by the
parties in order for the Base Period Trading Price to reflect the market effect
of such stock split, stock dividend, or similar recapitalization.
3.3 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of BRI Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of LSI Common Stock (after taking into account all certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of LSI Common Stock multiplied
by
- 3 -
<PAGE> 5
the market value of one share of LSI Common Stock at the Effective Time.
The market value of one share of LSI Common Stock at the Effective Time shall
be the last sale price of LSI Common Stock on the Nasdaq National Market (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source) on the last trading day preceding the Effective Time. No
such holder will be entitled to dividends, voting rights, or any other rights
as a shareholder in respect of any fractional shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, LSI and BRI
shall cause the exchange agent selected by LSI (the "Exchange Agent") to mail
to the former shareholders of BRI appropriate transmittal materials (which
shall specify that delivery shall be effected, and risk of loss and title to
the certificates theretofore representing shares of BRI Common Stock shall
pass, only upon proper delivery of such certificates to the Exchange Agent).
The Exchange Agent may establish reasonable and customary rules and procedures
in connection with its duties. After the Effective Time, each holder of shares
of BRI Common Stock issued and outstanding at the Effective Time shall
surrender the certificate or certificates representing such shares to the
Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the consideration provided in Section 3.1 of this Agreement, together
with all undelivered dividends or distributions in respect of such shares
(without interest thereon) pursuant to Section 4.2 of this Agreement. To the
extent required by Section 3.3 of this Agreement, each holder of shares of BRI
Common Stock issued and outstanding at the Effective Time also shall receive,
upon surrender of the certificate or certificates representing such shares,
cash in lieu of any fractional share of LSI Common Stock to which such holder
may be otherwise entitled (without interest). LSI shall not be obligated to
deliver the consideration to which any former holder of BRI Common Stock is
entitled as a result of the Merger until such holder surrenders such holder's
certificate or certificates representing the shares of BRI Common Stock for
exchange as provided in this Section 4.1. The certificate or certificates of
BRI Common Stock so surrendered shall be duly endorsed as the Exchange Agent
may require. Any other provision of this Agreement notwithstanding, neither
LSI, the Surviving Corporation nor the Exchange Agent shall be liable to a
holder of BRI Common Stock for any amounts paid or property delivered in good
faith to a public official pursuant to any applicable abandoned property Law.
Execution of this Agreement by the Shareholder shall constitute ratification of
the appointment of the Exchange Agent.
4.2 RIGHTS OF FORMER BRI SHAREHOLDERS. At the Effective Time, the stock
transfer books of BRI shall be closed as to holders of BRI Common Stock
immediately prior to the Effective Time and no transfer of BRI Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of BRI Common Stock shall from
and after the Effective Time represent for all purposes only the right to
receive the consideration provided in Sections 3.1 and 3.3 of this Agreement in
exchange therefor, subject, however, to the Surviving Corporation's obligation
to pay any dividends or make any other distributions with a record date prior
to the Effective Time which have been declared or made by
- 4 -
<PAGE> 6
BRI in respect of such shares of BRI Common Stock in accordance with the
terms of this Agreement and which remain unpaid at the Effective Time.
Whenever a dividend or other distribution is declared by LSI on the LSI Common
Stock, the record date for which is at or after the Effective Time, the
declaration shall include dividends or other distributions on all shares of LSI
Common Stock issuable pursuant to this Agreement, but no dividend or other
distribution payable to the holders of record of LSI Common Stock as of any
time subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of BRI Common Stock issued and outstanding at
the Effective Time until such holder surrenders such certificate for exchange
as provided in Section 4.1 of this Agreement. However, upon surrender of such
BRI Common Stock certificate, both the LSI Common Stock certificate (together
with all such undelivered dividends or other distributions without interest)
and any undelivered dividends and cash payments payable hereunder (without
interest) shall be delivered and paid with respect to each share represented by
such certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BRI
BRI and the Shareholder, jointly and severally, hereby represent and
warrant to LSI as follows:
5.1 ORGANIZATION, STANDING, AND POWER. BRI is a corporation duly
organized, validly existing, and in good standing under the Laws of the State
of Rhode Island, and has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its Assets. BRI is
duly qualified or licensed to transact business as a foreign corporation in
good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on BRI. BRI
has no Subsidiaries.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) BRI has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of BRI, and the Shareholder
has unanimously approved this Agreement, which is the only shareholder vote
required for approval of this Agreement and consummation of the Merger by BRI.
This Agreement represents a legal, valid, and binding obligation of BRI and
the Shareholder, enforceable against BRI and the Shareholder in accordance with
its terms.
(b) Neither the execution and delivery of this Agreement by BRI, nor the
consummation by BRI of the transactions contemplated hereby, nor compliance by
BRI with any
- 5 -
<PAGE> 7
of the provisions hereof, will (i) conflict with or result in a breach of
any provision of BRI's Articles of Incorporation or Bylaws, or (ii) except
as disclosed in Section 5.2 of the BRI Disclosure Memorandum, constitute or
result in a Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any Asset of BRI under, any Contract or Permit of BRI,
except for any such Default, Consent or Lien that would not have a Material
Adverse Effect on BRI or on any restaurant owned or operated by BRI, or, (iii)
subject to receipt of the requisite Consents referred to in Section 9.1(b) of
this Agreement, violate any Law or Order applicable to BRI or any of its
material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit
plans, or under the HSR Act, no notice to, filing with, or Consent of, any
public body or authority is necessary for the consummation by BRI of the Merger
and the other transactions contemplated in this Agreement.
5.3 CAPITAL STOCK.
(a) The authorized capital stock of BRI consists of 2,000 shares of BRI
Common Stock, of which 1,000 shares are issued and outstanding as of the date
of this Agreement and not more than 1,000 shares, will be issued and
outstanding at the Effective Time. All of the issued and outstanding shares of
capital stock of BRI are duly and validly issued and outstanding and are fully
paid and nonassessable under the GLRI. None of the outstanding shares of
capital stock of BRI has been issued in violation of any preemptive rights of
the current or past shareholders of BRI.
(b) Except as set forth in Section 5.3(a) of this Agreement, or as
disclosed in Section 5.3 of the BRI Disclosure Memorandum, there are no shares
of capital stock or other equity securities of BRI outstanding and no
outstanding Rights relating to the capital stock of BRI.
5.4 FINANCIAL STATEMENTS. Each of the BRI Financial Statements
(including, in each case, any related notes) delivered to LSI and/or its
advisors was true and correct and fairly presented in all material
respects (i) the financial position of BRI as at the respective dates and (ii)
the results of operations and cash flows for the periods indicated; except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount or effect and any pro forma financial information contained
in the BRI Financial Statements is not necessarily indicative of the financial
position of BRI as of the respective dates thereof and the results of
operations and cash flows for the periods indicated.
5.5 [INTENTIONALLY OMITTED].
- 6 -
<PAGE> 8
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. BRI does not have any Liabilities
that are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on BRI, except as disclosed in Section 5.6 of the BRI
Disclosure Memorandum. BRI has not incurred or paid any Liability since March
31, 1996, except for such Liabilities (i) discussed in Section 5.6 of the BRI
Disclosure Memorandum or (ii) incurred or paid (A) in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
BRI or (B) in connection with the transactions contemplated by this Agreement.
Except as disclosed in Section 5.6 of the BRI Disclosure Memorandum, BRI is not
directly or indirectly liable, by guarantee, indemnity, or otherwise, upon or
with respect to, or obligated, by discount or repurchase agreement or in any
other way, to provide funds in respect to, or obligated to guarantee or assume
any Liability of any Person for any amount in excess of $10,000.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 25, 1995, except as
disclosed in Section 5.7 of the BRI Disclosure Memorandum, (i) there have been
no events, changes, or occurrences which have had, or are reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on BRI, and
(ii) there has not been: (A) any material damage, destruction or loss (not
covered by insurance) with respect to any material assets of BRI that has
resulted in a Material Adverse Effect on BRI, (B) any material change by BRI in
its accounting methods, principles or practices; (C) any redemption, repurchase
or other reacquisition of any of BRI's equity securities; (D) any material
increase in the benefits under, or the establishment or amendment of, any
material bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including, without limitation, the
granting of stock options, stock appreciation rights, performance awards, or
restricted stock awards), stock purchase or other employee benefit plan, or any
material increase in the compensation payable or to become payable to
directors, officers or employees of BRI, except for increases in salaries or
wages payable or to become payable in the ordinary course of business and
consistent with past practice.
5.8 TAX MATTERS.
(a) Except for such matters as would not have a Material Adverse Effect on
BRI, all Tax Returns required to be filed by or on behalf of BRI have been
timely filed or requests for extensions have been timely filed, granted, and
have not expired for periods ended on or before December 31, 1995, and on or
before the date of the most recent fiscal year end immediately
preceding the Effective Time, and all Tax Returns filed are complete and
accurate in all Material respects. All Taxes shown to be payable on filed Tax
Returns have been paid. To the Knowledge of BRI, there is no audit
examination, deficiency, or refund Litigation with respect to any Taxes, except
as disclosed in Section 5.8 of the BRI Disclosure Memorandum. All Taxes and
other Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid.
(b) BRI has not executed an extension or waiver of any statute of
limitations on the assessment or collection of any Tax due (excluding such
statutes that relate to years
- 7 -
<PAGE> 9
currently under examination by the Internal Revenue Service or other applicable
taxing authorities) that is currently in effect.
(c) Deferred Taxes of BRI have been provided for in accordance with GAAP.
(d) BRI is not a party to any Tax allocation or sharing agreement and BRI
has not been a member of an affiliated group filing a consolidated federal
income Tax Return or has any Liability for Taxes of any Person (other than BRI)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign Law) as a transferee or successor or by Contract or otherwise.
(e) BRI is in compliance in all material respects with records contain all
information and documents (including properly completed IRS Forms W-9)
necessary to comply in all material respects with, all applicable information
reporting and Tax withholding requirements under federal, state, and local Tax
Laws, and such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code.
(f) Except as disclosed in Section 5.8 of the BRI Disclosure Memorandum,
BRI has not made any payments, is not obligated to make any payments, and is
not a party to any Contract that could obligate it to make any payments that
would be disallowed as a deduction under Section 280G or 162(m) of the Internal
Revenue Code.
(g) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of BRI that occurred during or after any Taxable Period in
which BRI incurred a net operating loss that carries over to any Taxable Period
ending after December 31, 1995.
5.9 ASSETS. Except as disclosed in Section 5.9 of the BRI Disclosure
Memorandum, BRI has good and marketable title, free and clear of all Liens, to
all of its Assets. All tangible properties used in the business of BRI are in
good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with BRI's past practices. All items of
inventory of BRI reflected on the most recent balance sheet included in the BRI
Financial Statements delivered prior to the Effective Time will consist of
items of a quality and quantity usable and saleable in the ordinary course of
business and conform to generally accepted standards in the industry in which
BRI is a part. All Assets which are material to BRI's business, held under
leases or subleases by BRI, are held under valid Contracts enforceable
in accordance with their respective terms, and each such Contract is in full
force and effect. Section 5.9 of the BRI Disclosure Memorandum sets forth the
scope of coverage of all of BRI's insurance policies as of the date of this
Agreement, the term of each such policy and the premiums relating thereto. BRI
has not received notice from any insurance carrier that (i) such insurance will
be canceled or that coverage thereunder will be reduced or eliminated, or (ii)
premium costs with respect to such policies of insurance will be substantially
increased. Except as disclosed in Section 5.9 of the BRI Disclosure
Memorandum, there are presently no claims pending under such policies of
insurance and no notices of denial of any material claim have been received by
BRI under such policies. The Assets of BRI include all Assets required to
operate the business of BRI as presently conducted.
- 8 -
<PAGE> 10
The Assets of HSF include all Assets required to operate the business
of HSF as presently conducted. To the Knowledge of BRI, all leases for
restaurant sites are in full force and effect and the landlord is not in
Default thereunder and has not repudiated or waived any material provision of
such lease. To the Knowledge of BRI, the landlord of each lease for a
restaurant site holds title to the site free of any encumbrance securing debt
to any Person other than Persons with whom the relevant BCS Company has a
non-disturbance and attornment agreement, and there is no other exception to
title which would have a Material Adverse Effect on the value of the property
or BRI's use thereof.
5.10 INTELLECTUAL PROPERTY. Section 5.10 of the BRI Disclosure Memorandum
sets forth a complete and accurate list of, and a brief description of all
governmental registrations or applications for governmental registrations of,
all Intellectual Property owned, used or licensed by or to BRI which are used
in or necessary for the conduct of BRI's business, except as to which the
absence of which would not have a Material Adverse Effect on BRI ("BRI
Intellectual Property"). No Person has asserted a claim in writing to BRI that
BRI has abandoned any BRI Intellectual Property and, to the Knowledge of BRI,
BRI has not abandoned any BRI Intellectual Property. Except as disclosed in
Section 5.10 of the BRI Disclosure Memorandum, BRI owns or has the lawful right
to use the BRI Intellectual Property. Except as disclosed in Section 5.10 of
the BRI Disclosure Memorandum, use of the BRI Intellectual Property by BRI or
the Shareholder has not to the Knowledge of BRI misappropriated or infringed on
any rights held or owned by any third party, nor has any third party asserted
any such claim. BRI is not obligated to pay any royalties to any Person with
respect to any BRI Intellectual Property. Except as disclosed in Section 5.8
of the BRI Disclosure Memorandum, every officer or management employee of BRI
is a party to a Contract which requires such officer or management employee to
keep confidential any trade secrets, proprietary data, customer information, or
other business information of BRI, and, to the Knowledge of BRI, no officer is
party to, nor to the Knowledge of BRI has BRI received any notice of any other
management employee being a party to, any Contract with any Person other than
BRI which requires such officer or management employee to assign any interest
in any Intellectual Property to any Person other than BRI or to keep
confidential any trade secrets, proprietary data, customer information, or
other business information of any Person other than BRI. Except as disclosed
in Section 5.10 of the BRI Disclosure Memorandum, to the Knowledge of BRI, no
officer of BRI is party to, nor to the Knowledge of BRI has BRI received any
notice of any other management employee being a party to, any Contract which
restricts or prohibits such officer, director or management employee from
engaging in activities competitive with any Person, including BRI.
5.11 ENVIRONMENTAL MATTERS.
(a) Except as would not have a Material Adverse Effect on BRI, its
Participation Facilities, and its Operating Properties are, and have been
during the period of BRI's ownership or operation, in compliance with all
Environmental Laws.
(b) There is no Litigation pending or, to the Knowledge of BRI, threatened
before any court, governmental agency, or authority or other forum in which BRI
or any of its Operating Properties or Participation Facilities has been or,
with respect to threatened Litigation,
- 9 -
<PAGE> 11
may be named as a defendant (i) for alleged noncompliance (including by
any predecessor) with any Environmental Law or (ii) relating to the release
into the environment of any Hazardous Material, whether or not occurring at,
on, under, adjacent to, or affecting (or potentially affecting) a site owned,
leased, or operated by BRI or any of its Operating Properties or Participation
Facilities, nor, to the Knowledge of BRI, is there any reasonable basis for any
Litigation of a type described in this sentence which could reasonably be
expected to have a Material Adverse Effect on BRI.
(c) During the period of (i) BRI's ownership or operation of any of its
current properties, (ii) BRI's participation in the management of any
Participation Facility, or (iii) BRI's holding of a security interest in an
Operating Property, there have been no releases of Hazardous Material in, on,
under, adjacent to, or affecting (or to the Knowledge of BRI reasonably likely
to affect) such properties, except as would not have a Material Adverse Effect
on BRI. Prior to the period of (i) BRI's ownership or operation of any of its
current properties, (ii) BRI's participation in the management of any
Participation Facility, or (iii) BRI's holding of a security interest in a
Operating Property, to the Knowledge of BRI, there were no releases of
Hazardous Material in, on, under, or affecting any such property, Participation
Facility or Operating Property, except as would not have a Material Adverse
Effect on BRI.
5.12 COMPLIANCE WITH LAWS. BRI has in effect all Permits necessary for it
to own, lease, or operate its material Assets and to carry on its business as
now conducted, and there has occurred no Default under any such Permit, except
where the failure to possess such Permit or the occurrence of a Default would
not have a Material Adverse Effect on BRI or the restaurant to which the Permit
relates. Except as disclosed in Section 5.12 of the BRI Disclosure Memorandum,
BRI:
(a) is not in Default under any of the provisions of its Articles of
Incorporation or Bylaws (or other governing instruments);
(b) is not in Default under any Laws, Orders, or Permits applicable to
its business or employees conducting its business, except for any Default
that would not have a Material Adverse Effect on BRI or any restaurants
owned or operated by BRI; or
(c) has not since January 1, 1993, received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that BRI is in material non-compliance with any of the Laws or Orders which
such governmental authority or Regulatory Authority enforces which has not
been resolved, (ii) threatening to revoke any Permits, or (iii) requiring
BRI to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment, or memorandum of understanding, or
to adopt any Board resolution or similar undertaking.
5.13 LABOR RELATIONS. Except as disclosed in Section 5.13 of the BRI
Disclosure Memorandum, BRI is not the subject of any Litigation asserting that
it has committed an unfair labor practice (within the meaning of the National
Labor Relations Act or comparable state law)
- 10 -
<PAGE> 12
or seeking to compel it to bargain with any labor organization as to
wages or conditions of employment, nor is BRI party to any collective
bargaining agreement, nor is there any strike or other labor dispute involving
BRI, pending or threatened, or to the Knowledge of BRI, is there any activity
involving BRI's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
(a) BRI has disclosed in Section 5.14 of the BRI Disclosure Memorandum,
and has delivered or made available to LSI prior to the execution of this
Agreement copies in each case of, all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plan, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health
plans, all life insurance plans, and all other employee benefit plans or fringe
benefit plans, including "employee benefit plans" as that term is defined in
Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole or
in part by, or contributed to by BRI or ERISA Affiliate thereof for the benefit
of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "BRI Benefit Plans"). Any of
the BRI Benefit Plans which is an "employee pension benefit plan," as that term
is defined in Section 3(2) of ERISA, is referred to herein as a "BRI ERISA
Plan."
(b) All BRI Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on BRI. Each BRI ERISA Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue Service,
and BRI is not aware of any circumstances likely to result in revocation of any
such favorable determination letter. BRI has not engaged in a transaction with
respect to any BRI Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject BRI to a Tax imposed
by either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA.
(c) No BRI ERISA Plan is, and BRI has never maintained or contributed to,
a "defined benefit plan" (as defined in Section 414(j) of the Internal Revenue
Code) or a multiemployer plan within the meaning of Section 3(37) of ERISA.
BRI has not provided, or is required to provide, security to any defined
benefit plan or any single-employer plan of any entity which is considered one
employer with BRI under Section 4001 of ERISA or Section 414 of the Internal
Revenue Code or Section 302 of ERISA (whether or not waived) (an "ERISA
Affiliate") pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by BRI with respect to any ongoing, frozen, or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate. BRI has not incurred any
- 11 -
<PAGE> 13
withdrawal Liability with respect to a multiemployer plan under Subtitle
B of Title IV of ERISA (regardless of whether based on contributions
of an ERISA Affiliate). No notice of a "reportable event," within the meaning
of Section 4043 of ERISA for which the 30-day reporting requirement has not
been waived, has been required to be filed for any BRI Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date hereof.
(e) Except as disclosed in Section 5.14 of the BRI Disclosure Memorandum,
BRI has no Liability for retiree health and life benefits under any of the BRI
Benefit Plans and there are no restrictions on the rights of BRI to amend or
terminate any such retiree health or benefit Plan without incurring any
Liability thereunder.
(f) Except as disclosed in Section 5.14 of the BRI Disclosure Memorandum,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, or otherwise) becoming
due to any director or any employee of BRI under any BRI Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any BRI Benefit
Plan, or (iii) result in any acceleration of the time of payment or vesting of
any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of BRI and their respective beneficiaries, other than entitlements
accrued pursuant to funded retirement plans subject to the provisions of
Section 412 of the Internal Revenue Code or Section 302 of ERISA, have been
fully reflected on the BRI Financial Statements.
5.15 MATERIAL CONTRACTS. Except as disclosed in Section 5.15 of the BRI
Disclosure Memorandum BRI, nor any of its Assets, businesses, or operations, is
a party to, or is bound or affected by, or receives benefits under, (i) any
employment, severance, termination, consulting, or retirement Contract
providing for payments to any Person, except for Contracts referred to in
Section 5.13(a) of this Agreement and unwritten Contracts with respect to the
employment of hourly personnel terminable at will or upon statutorily required
notice, (ii) any Contract relating to the borrowing of money by BRI or the
guarantee by BRI of any such obligation (other than Contracts for purchase
money indebtedness in an aggregate amount not exceeding $10,000,
Contracts evidencing trade payables, and Contracts relating to borrowings or
guarantees made in the ordinary course of business), (iii) any Contract which
prohibits or restricts BRI from engaging in any business activities in any
geographic area, line of business or otherwise in competition with any other
Person, (iv) any Contract involving Intellectual Property, (v) any lease of
real property as lessee or lessor, and (vi) any Contract relating to the
purchase or sale of any goods or services (other than Contracts entered into in
the ordinary course of business and that are either (x) terminable by BRI upon
not more than 60 days notice without payment or penalty or (y) has a remaining
term of not more than six months from the date of this Agreement and involves
payments not in excess of $10,000 per year), (together with all Contracts
referred to in Sections 5.9 and 5.13(a) of this Agreement, the "BRI
Contracts"). With respect to each BRI Contract and except as disclosed in
Section 5.15 of the BRI Disclosure Memorandum: (i) the Contract is in full
- 12 -
<PAGE> 14
force and effect; (ii) BRI is not in Default thereunder except for any such
Default as would not have a Material Adverse Effect on BRI; (iii) BRI has not
repudiated or waived any material provision of any such Contract; and (iv) no
other party to any such Contract is, to the Knowledge of BRI, in Default in any
respect, or has repudiated or waived any material provision thereunder. Except
as disclosed in Section 5.15 of the BRI Disclosure Memorandum, all of the
indebtedness of BRI for money borrowed is prepayable at any time by BRI without
penalty or premium.
5.16 LEGAL PROCEEDINGS. Except as disclosed in Section 5.16 of the BRI
Disclosure Memorandum, there is no Litigation instituted or pending, or, to the
Knowledge of BRI, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against BRI, or against any director (limited, as to
directors, to Litigation with respect to which BRI would have an
indemnification obligation under its Articles of Incorporation or Bylaws) or
employee benefit plan of BRI, or against any Asset, interest, or right of any
of them, nor, except for matters which would not have a Material Adverse Effect
on BRI, are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against BRI. Section 5.16 of the BRI
Disclosure Memorandum contains a summary of all instituted or pending
Litigation as of the date of this Agreement to which BRI is a party and which
names BRI as a defendant or cross-defendant.
5.17 REPORTS. Since January 1, 1992, or the date of organization if
later, BRI has timely filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with Regulatory Authorities (except failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on BRI). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its
respective date, each such report and document did not, in all material
respects, 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
made therein, in light of the circumstances under which they were made, not
misleading, provided, however, that to the extent that the foregoing relates to
facts or omission regarding Persons other than BRI and its Affiliates, such
representation and warranty is made to BRI's Knowledge.
5.18 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument,
or other writing furnished or to be furnished by BRI or any Affiliate thereof
to LSI pursuant to this Agreement or any other document, agreement, or
instrument referred to herein contains or will contain any untrue statement of
material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. BRI has furnished, or within 14 days will furnish, LSI with
copies of all written BRI Contracts, and such copies are true and correct
copies of the written BRI Contracts as such exist on the date of this
Agreement. None of the information supplied or to be supplied by BRI or any
Affiliate thereof for inclusion in the Registration Statement to be filed by
LSI with the Securities and Exchange Commission (the "SEC") will, when the
Registration Statement becomes effective, be false or misleading with respect
to any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to
- 13 -
<PAGE> 15
be supplied by BRI or any Affiliate thereof for inclusion in the Joint Proxy
Statement to be mailed in connection with the BCS Transaction, and any other
documents to be filed by BRI or any Affiliate thereof with the SEC or any other
Regulatory Authority in connection with the transactions contemplated thereby,
will, at the respective time such documents are filed, and with respect to the
Joint Proxy Statement, when first mailed to the shareholders of BCS and LSI, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in the case of
the Joint Proxy Statement or any amendment thereof or supplement thereto, at
the time of the Shareholders' Meetings, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Shareholders' Meetings. All documents that BRI or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all
material respects with the provisions of applicable Law.
5.19 ACCOUNTING, TAX AND REGULATORY MATTERS. Neither BRI nor, to the
Knowledge of BRI, any Affiliate thereof has taken any action or has any
Knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the Merger from qualifying for pooling-of-interests accounting treatment or as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
5.20 STATE TAKEOVER LAWS. BRI has taken all necessary action to exempt
the transactions contemplated by this Agreement from any applicable
"moratorium," "fair price," "business combination," "control share," or other
anti-takeover Laws (collectively, "Takeover Laws").
5.21 CHARTER PROVISIONS. BRI has taken all action so that the entering
into of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement do not and will not result in the
grant of any rights to any Person under the Articles of Incorporation, Bylaws
or other governing instruments of BRI.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF LSI
LSI hereby represents and warrants to BRI as follows:
6.1 ORGANIZATION, STANDING, AND POWER. LSI is a corporation duly
organized, validly existing, and in good standing under the Laws of the State
of Georgia, and has the corporate power and authority to carry on its business
as now conducted and to own, lease and operate its Assets. LSI is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except
- 14 -
<PAGE> 16
for such jurisdictions in which the failure to be so qualified or
licensed is not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on LSI.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) LSI has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of LSI, subject to the approval
of the holders of a majority of the shares of LSI Common Stock present and
voting at a special meeting of LSI shareholders at which a quorum is present,
which is the only shareholder vote required for approval of this Agreement and
consummation of the merger by LSI. Subject to such requisite shareholder
approval, this Agreement represents a legal, valid, and binding obligation of
LSI, enforceable against LSI in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by LSI, nor the
consummation by LSI of the transactions contemplated hereby, nor compliance by
LSI with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of LSI's Articles of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any LSI Company under, any
Contract or Permit of any LSI Company or, (iii) subject to receipt of the
requisite approvals referred to in Section 9.1(b) of this Agreement, violate
any Law or Order applicable to any LSI Company or any of their respective
material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities,
and other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit
plans, or under the HSR Act, no notice to, filing with, or Consent of, any
public body or authority is necessary for the consummation by LSI of the Merger
and the other transactions contemplated in this Agreement.
6.3 CAPITAL STOCK.
(a) The authorized capital stock of LSI consists of (i) 25,000,000 shares
of LSI Common Stock, of which 8,466,350 shares are issued and outstanding as of
the date of this Agreement, and (ii) 10,000,000 shares of LSI Preferred Stock,
of which no shares are issued and outstanding. All of the issued and
outstanding shares of LSI Capital Stock are, and all of the shares of LSI
Common Stock to be issued in exchange for shares of BRI Common Stock upon
consummation of the Merger, when issued in accordance with the terms of this
Agreement, will be, duly and validly issued and outstanding and fully paid and
nonassessable under the GBCC. None of the outstanding shares of LSI Capital
Stock has been, and none of the shares of LSI Common Stock to be issued in
exchange for shares of BRI Common Stock upon consummation of the Merger will
be, issued in violation of any preemptive rights of the current or past
- 15 -
<PAGE> 17
shareholders of LSI. LSI has reserved 2,018,350 shares of LSI Common Stock for
issuance under the LSI Stock Plans, pursuant to which options to purchase no
more than 1,238,031 shares of LSI Common Stock are outstanding.
(b) Except as set forth in Section 6.3(a) of this Agreement or as
disclosed in Section 6.3 of the LSI Disclosure Memorandum, there are no shares
of capital stock or other equity securities of LSI outstanding and no
outstanding Rights relating to the capital stock of LSI.
6.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) LSI has timely filed and made available to BRI all SEC Documents
required to be filed by LSI since December 31, 1992 or such later date as LSI
first filed, or was first obligated to file, such SEC Documents (the "LSI SEC
Reports"). The LSI SEC Reports (i) at the time filed, complied in all material
respects with the applicable requirements of the Securities Laws and other
applicable Laws and (ii) did not, at the time they were filed (or, if amended
or superseded by a filing, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such LSI SEC Reports or necessary in order to make the statements in
such LSI SEC Reports, in light of the circumstances under which they were made,
not misleading. No LSI Subsidiary is required to file any SEC Documents.
(b) Each of the LSI Financial Statements (including, in each case, any
related notes) contained in the LSI SEC Reports, including any LSI SEC Reports
filed after the date of this Agreement until the Effective Time, complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except to the extent required by changes to GAAP or as may be
indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly
presented in all material respects the consolidated financial position of LSI
and its Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount or effect, and any pro forma financial information contained in the LSI
Financial Statements is not necessarily indicative of the consolidated
financial position of LSI and the LSI Subsidiaries, as the case may be, as of
the respective dates thereof and the consolidated results of operations and
cash flows for the period indicated..
6.5 ABSENCE OF UNDISCLOSED LIABILITIES. No LSI Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on LSI, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of LSI as of
December 31, 1995 and March 31, 1996, included in the LSI Financial Statements
or reflected in the notes thereto, or as disclosed in the LSI Disclosure
Memorandum. No LSI Company has incurred or paid any Liability since March 31,
1996, except for such Liabilities (i) disclosed in the LSI Disclosure
Memorandum or (ii) incurred or paid in the ordinary course of
- 16 -
<PAGE> 18
business consistent with past business practice and which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on LSI.
6.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995, except
as disclosed in the LSI Financial Statements delivered prior to the date of
this Agreement or as disclosed in Section 6.6 of the LSI Disclosure Memorandum,
(i) there have been no events, changes or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on LSI, and (ii) the LSI Companies have not taken any action, or failed
to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result
in a material breach or violation of any of the covenants and agreements of LSI
contained in Article 7 of this Agreement.
6.7 COMPLIANCE WITH LAWS. Each LSI Company has in effect all Permits
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted. Except as disclosed in Section 6.7 of the LSI
Disclosure Memorandum, no LSI Company:
(a) is in Default of any Laws, Orders or Permits applicable to its
business or employees conducting its business; or
(b) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any LSI Company is not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces, or
(ii) requiring any LSI Company to enter into or consent to the issuance of
a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review (other
than a review by the SEC of a public offering of equity securities by LSI) or
enforcement action by a federal or state securities authority have been made
available to BRI.
6.8 LEGAL PROCEEDINGS. Except as disclosed in Section 6.16 of the LSI
Disclosure Memorandum there is no Litigation instituted or pending, or, to the
Knowledge of LSI, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any LSI Company, or against any director,
employee or employee benefit plan of any LSI Company, or against any Asset,
employee benefit plan, interest, or right of any of them, that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
LSI, nor are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any LSI Company, that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on LSI.
- 17 -
<PAGE> 19
6.9 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument or
other writing furnished or to be furnished by any LSI Company or any Affiliate
thereof to BRI pursuant to this Agreement or any other document, agreement or
instrument referred to herein contains or will contain any untrue statement of
material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by any LSI
Company or any Affiliate thereof for inclusion in the Registration Statement to
be filed by LSI with the SEC, will, when the Registration Statement becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein not
misleading. None of the information supplied or to be supplied by any LSI
Company or any Affiliate thereof for inclusion in the Joint Proxy Statement to
be mailed to each Party's shareholders in connection with the Shareholders'
Meetings, and any other documents to be filed by any LSI Company or any
Affiliate thereof with the SEC or any other Regulatory Authority in connection
with the transactions contemplated hereby, will, at the respective time such
documents are filed, and with respect to the Joint Proxy Statement, when first
mailed to the shareholders of BRI and LSI, be false or misleading with respect
to any material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Joint Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Shareholders' Meetings, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Shareholders' Meetings.
All documents that any LSI Company or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
6.10 AUTHORITY OF WPC. WPC is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Georgia as a
wholly-owned Subsidiary of LSI. The authorized capital stock of WPC shall
consist of 1,000 shares of WPC Common Stock, all of which is validly issued and
outstanding, fully paid and nonassessable and is owned by LSI free and clear of
any Lien. WPC has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of WPC. This Agreement
represents a legal, valid, and binding obligation of WPC, enforceable against
WPC in accordance with its terms.
6.11 REPORTS. Since January 1, 1992, or the date of organization if
later, each LSI Company has filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with (i) the SEC, including, but not limited to, Forms 10-K, Forms 10-Q,
Forms 8-K, and proxy statements, (ii) other Regulatory Authorities, and (iii)
any applicable state securities authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on LSI). As
of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all
- 18 -
<PAGE> 20
material respects with all applicable Laws. As of its respective date,
each such report and document did not, in all material respects, 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 made therein, in light
of the circumstances under which they were made, not misleading.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF BRI. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement, unless
the prior written consent of LSI shall have been obtained, and except as
otherwise expressly contemplated herein, BRI shall (a) operate its business in
the usual, regular, and ordinary course, (b) use its reasonable efforts
preserve intact its business organization and Assets and maintain its rights
and franchises, and (c) take no action which would (i) materially adversely
affect the ability of any Party to obtain any Consents required for the
transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentences of Section 9.1(b) or
9.1(c) of this Agreement, or (ii) materially adversely affect the
ability of any Party to perform its covenants and agreements under this
Agreement.
7.2 NEGATIVE COVENANTS OF BRI. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, BRI
covenants and agrees that it will not do or agree or commit to do, any of the
following without the prior written consent of the chief executive officer or
chief financial officer of LSI, which consent shall not be unreasonably
withheld, conditioned or delayed:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of BRI, or
(b) incur any additional debt obligation or other obligation for
borrowed money in excess of an aggregate of $10,000 (other than
indebtedness for trade payables in the ordinary course of business
consistent with past practices), or impose, or suffer the imposition, on
any Asset of BRI of any Lien or permit any such Lien to exist (other than
in connection with Liens in effect as of the date hereof that are disclosed
in Section 5.9 of BRI Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of BRI, or declare or pay any dividend or make any other
distribution in respect of BRI's capital stock (other than amounts equal to
the shareholders' aggregate accumulated adjustments account (as defined in
Section 1368(e)(1) of the Internal Revenue Code); provided, that in no
event shall any such distribution be made that would result in the BCS
Transaction not qualifying for accounting purposes for treatment as a
pooling of interests); or
- 19 -
<PAGE> 21
(d) except for this Agreement, or as disclosed in Section 5.14 of the
BRI Disclosure Memorandum, issue, sell, pledge, encumber, authorize the
issuance of, enter into any Contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding, any
additional shares of BRI Common Stock or any other capital stock of BRI, or
any stock appreciation rights, or any option, warrant, conversion, or other
right to acquire any such stock, or any security convertible into any such
stock; or
(e) adjust, split, combine or reclassify any capital stock of BRI or
issue or authorize the issuance of any other securities in respect of or in
substitution for shares of BRI Common Stock, or sell, lease, mortgage or
otherwise dispose of or otherwise encumber any Asset having a book value in
excess of $10,000; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of three
years or less, purchase any securities or make any material investment,
either by purchase of stock of securities, contributions to capital, Asset
transfers, or purchase of any Assets, in any Person, or otherwise acquire
direct or indirect control over any Person; or
(g) grant any increase in compensation or benefits to the employees or
officers of BRI, except in accordance with past practice as disclosed in
Section 5.14 of the BRI Disclosure Memorandum or as required by Law; pay
any severance or termination pay or any bonus other than pursuant to
written policies or written Contracts in effect on the date of this
Agreement and disclosed in Section 5.14 of the BRI Disclosure Memorandum;
and enter into or amend any severance agreements with officers of BRI;
grant any material increase in fees or other increases in compensation or
other benefits to directors of BRI except in accordance with past practice
disclosed in Section 5.14 of the BRI Disclosure Memorandum; or voluntarily
accelerate the vesting of any employee benefit; or
(h) enter into or amend any employment Contract between BRI and any
Person (unless such amendment is required by Law and except for increases
in compensation or benefits in accordance with past practice as disclosed
in Section 5.14 or 5.15 of the BRI Disclosure Memorandum) that BRI does not
have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the
Effective Time or upon statutorily required notice; or
(i) adopt any new employee benefit plan of BRI or terminate or
withdraw from, or make any material change in or to, any existing employee
benefit plans of BRI other than any such change that is required by Law or
that, in the opinion of counsel, is necessary or advisable to maintain the
tax qualified status of any such plan, or make any distributions from such
employee benefit plans, except as required by Law, the terms of such plans
or consistent with past practice; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
- 20 -
<PAGE> 22
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of BRI for Material
money damages or restrictions upon the operations of BRI; or
(l) enter into, terminate or materially modify or amend any Contract
involving the payment of $10,000 or more, or waive, release, compromise or
assign any material rights or claims, except for purchases of inventory in
the ordinary course of business under existing Contracts or pursuant to
individual purchase orders.
7.3 COVENANTS OF LSI. From the date of this Agreement until the earlier
of the Effective Time or the termination of this Agreement, LSI covenants and
agrees that it shall (x) continue to conduct its business and the business of
its Subsidiaries in a manner designed in its reasonable judgment, to enhance
the long-term value of the LSI Common Stock and the business prospects of the
LSI Companies and to the extent consistent therewith use all reasonable efforts
to preserve intact the LSI Companies' core businesses and goodwill with their
respective employees and the communities they serve, (y) not declare or
pay any dividend or make any distribution in respect of LSI Common Stock, and
(z) take no action which would (i) materially adversely affect the ability of
any Party to obtain any Consents required for the transactions contemplated
hereby without imposition of a condition or restriction of the type referred to
in the last sentences of Section 9.1(b) or 9.1(c) of this Agreement, or (ii)
materially adversely affect the ability of any Party to perform its covenants
and agreements under this Agreement; provided, that the foregoing shall not
prevent any LSI Company from discontinuing or disposing of any of its Assets or
business if such action is, in the judgment of LSI, desirable in the conduct of
the business of LSI and its Subsidiaries. LSI further covenants and agrees
that it will not, without the prior written consent of the chief executive
officer of BRI, which consent shall not be unreasonably withheld, amend the
Articles of Incorporation or Bylaws of LSI, in each case, in any manner adverse
to the holders of BRI Common Stock as compared to rights of holders of LSI
Common Stock generally as of the date of this Agreement.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.5 REPORTS. Each Party shall file all reports required to be filed by it
with Regulatory Authorities between the date of this Agreement and the
Effective Time and shall deliver to the other Party copies of all such reports
promptly after the same are filed. If financial statements are contained in
any such reports filed with the SEC, such financial statements will fairly
present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods
then ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material). As
of their respective
- 21 -
<PAGE> 23
dates, such reports filed with the SEC will comply in all material
respects with the Securities Laws and will not contain any untrue statement of
a material fact or omit to state a 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. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL. As
soon as practicable after execution of this Agreement, LSI shall prepare and
file the Registration Statement with the SEC, and shall use its reasonable
efforts to cause the Registration Statement to become effective under
the 1933 Act and take any action required to be taken under the applicable
state Blue Sky or securities Laws in connection with the issuance of the shares
of LSI Common Stock upon consummation of the Merger. BRI shall cooperate in the
preparation and filing of the Registration Statement and shall furnish all
information concerning it and the holders of its capital stock as LSI may
reasonably request in connection with such action. LSI shall call a
Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and such other related matters as it
deems appropriate. In connection with the Shareholders Meeting, (i) the Board
of Directors of LSI shall recommend to their shareholders the approval of this
Agreement, and (ii) the Board of Directors and officers of LSI shall use their
reasonable efforts to obtain such shareholders' approval. LSI and BRI shall
make all necessary filings with respect to the Merger under the Securities
Laws.
8.2 EXCHANGE LISTING. LSI shall use its reasonable efforts to list, prior
to the Effective Time, on the Nasdaq National Market the shares of LSI Common
Stock to be issued to the holders of BRI Common Stock pursuant to the Merger,
and LSI shall give all notices and make all filings with the NASD required in
connection with the transactions contemplated herein.
8.3 APPLICATIONS; ANTITRUST NOTIFICATION. LSI shall prepare and file, and
BRI shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement. To
the extent required by the HSR Act, each of the Parties will within 15 business
days of the date hereof file with the United States Federal Trade Commission
and the United States Department of Justice the notification and report form
required for the transactions contemplated hereby and any supplemental or
additional information which may reasonably be requested in connection
therewith pursuant to the HSR Act and will comply in all material respects with
the requirements of the HSR Act. The Parties shall deliver to each other
copies of all filings, correspondence and orders to and from all Regulatory
Authorities in connection with the transactions contemplated hereby.
- 22 -
<PAGE> 24
8.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, BRI and WPC shall execute and file the Articles
of Merger with the Secretary of State of the State of Rhode Island and WPC
shall execute and file the Certificate of Merger with the Secretary of State of
the State of Georgia in connection with the Closing.
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, each Party agrees to use its reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper, or advisable under applicable Laws to consummate and
make effective, as soon as practicable after the date of this Agreement, the
transactions contemplated by this Agreement, including using its reasonable
efforts to lift or rescind any Order adversely affecting its ability to
consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9 of this Agreement; provided, that
nothing herein shall preclude either Party from exercising its rights under
this Agreement. Each Party shall use its reasonable efforts to obtain all
Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
8.6 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and of its
financial and legal conditions as the other Party reasonably requests, provided
that such investigation shall be reasonably related to the transactions
contemplated hereby and shall not interfere unnecessarily with normal
operations. No investigation by a Party shall affect the representations and
warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the
other Party concerning its businesses, operations, and financial positions and
shall not use such information for any purpose except in furtherance of the
transactions contemplated by this Agreement. If this Agreement is terminated
prior to the Effective Time, each Party shall promptly return or certify the
destruction of all documents and copies thereof, and all work papers containing
confidential information received from the other Party.
8.7 PRESS RELEASES. Prior to the Effective Time, BRI and LSI shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.8 CERTAIN ACTIONS. Except with respect to this Agreement and the
transactions contemplated hereby, neither BRI nor any Affiliate thereof nor any
Representatives thereof retained by BRI shall directly or indirectly solicit
any Acquisition Proposal by any Person. Neither BRI nor any Affiliate or
Representative thereof shall furnish any non-public information that is not
- 23 -
<PAGE> 25
legally obligated to furnish, negotiate with respect to, or enter into any
Contract with respect to, any Acquisition Proposal unless BCS has determined
that it must consider an Acquisition Proposal in accordance with Section 8.8 of
the BCS Agreement and requests BRI to furnish information to, or enter into
discussions or negotiations with, the Person who has made such Acquisition
Proposal. BRI shall promptly advise LSI following the receipt of any
Acquisition Proposal and the details thereof, and advise LSI of any
developments with respect to such Acquisition Proposal, including but not
limited to, any decision by the Board of Directors to cause BRI to furnish
non-public information to the Person making such Acquisition Proposal, promptly
upon the occurrence thereof. BRI shall (i) immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
Persons conducted heretofore with respect to any of the foregoing, and (ii)
direct and use its reasonable efforts to cause all of its Representatives not
to engage in any of the foregoing.
8.9 ACCOUNTING AND TAX TREATMENT. Each of the Parties undertakes and
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify for pooling-of-interests
accounting treatment and treatment as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 STATE TAKEOVER LAWS. BRI shall take all necessary steps to exempt
the transactions contemplated by this Agreement from, or if necessary to
challenge the validity or applicability of, any applicable Takeover Law.
8.11 CHARTER PROVISIONS. BRI shall take all necessary action to ensure
that the entering into of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby do not and will not result in the
grant of any rights to any Person under the Articles of Incorporation, Bylaws
or other governing instruments of BRI.
8.12 AGREEMENT OF AFFILIATES. BRI has disclosed in Section 8.12 of the
BRI Disclosure Memorandum all Persons whom it reasonably believes is an
"affiliate" of BRI for purposes of Rule 145 under the 1933 Act. BRI shall use
its reasonable efforts to cause each such Person to deliver to LSI not later
than 30 days after the date of this Agreement, a written agreement,
substantially in the form of Exhibit 1, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of BRI Common Stock
held by such Person except as contemplated by such agreement or by this
Agreement and will not sell, pledge, transfer, or otherwise dispose of the
shares of LSI Common Stock to be received by such Person upon consummation of
the Merger except in compliance with applicable provisions of the 1933 Act and
the rules and regulations thereunder and until such time as financial results
covering at least 30 days of combined operations of LSI and BRI have been
published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies. Shares of LSI Common Stock issued to such
affiliates of BRI in exchange for shares of BRI Common Stock shall not be
transferable until such time as financial results covering at least 30 days of
combined operations of LSI and BRI have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies,
regardless of whether each such affiliate has provided the written agreement
referred to in this Section 8.12 (and LSI shall be entitled to place
restrictive legends
- 24 -
<PAGE> 26
upon certificates for shares of LSI Common Stock issued to affiliates
of BRI pursuant to this Agreement to enforce the provisions of this Section
8.12). LSI shall not be required to maintain the effectiveness of the
Registration Statement under the 1933 Act for the purposes of resale of LSI
Common Stock by such affiliates.
8.13 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective Time, LSI
shall provide generally to officers and employees of BRI employee benefits
under employee benefit and welfare plans (other than stock option or
other plans involving the potential issuance of LSI Common Stock), on terms and
conditions which when taken as a whole are substantially similar to those
currently provided by the LSI Companies to their similarly situated officers
and employees. For purposes of participation, vesting and (except in the case
of LSI retirement plans) benefit accrual under LSI's employee benefit plans,
the service of the employees of BRI prior to the Effective Time shall be
treated as service with a LSI Company participating in such employee benefit
plans. LSI also shall cause the Surviving Corporation to honor in accordance
with their terms all employment, severance, consulting and other compensation
Contracts disclosed in Section 8.13 of the BRI Disclosure Memorandum to LSI
between BRI and any current or former director, officer, or employee thereof,
and all provisions for vested benefits or other vested amounts earned or
accrued through the Effective Time under the BRI Benefit Plans.
8.14 INDEMNIFICATION AND INSURANCE.
(a) Subject to the terms and conditions of this Section 8.14, Shareholder
agrees to indemnify and hold harmless LSI, from and against any and all
assessments, losses, damages (including special and consequential damages
incurred by third party claims claimants), liabilities, and out of pocket costs
and expenses, including without limitation, interest, penalties, cost of
external investigation (i.e., not including cost of employees of LSI) and
defense, and reasonable attorneys' and other professional fees and expenses
paid, suffered or incurred by LSI within the later period of: (i) one (1) year
following the Effective Time or (ii) first publication by LSI of audited
consolidated financial statements covering an accounting period after the
Effective Date for those items that would be expected to be encountered in the
audit process; and resulting from, based upon, or arising out of:
(i) the inaccuracy, untruth or incompleteness of any representation or
warranty of BRI or the Shareholder contained in or made pursuant to the
Agreement or in the BRI Disclosure Memorandum or any certificate or Exhibit
furnished by BRI in connection therewith; or
(ii) a breach of or failure to perform any covenant or agreement of BRI or
the Shareholder made in the Agreement.
Provided, that the right to indemnification shall extend beyond such period
with respect to any claim for which written notice was given to Shareholder
during such period but shall expire on the expiration of the applicable
statutes of limitations unless an action has been brought with respect thereto.
- 25 -
<PAGE> 27
(b) An indemnification claim shall be made by LSI by delivery of a written
notice to Shareholder requesting indemnification and specifying in reasonable
detail the basis on which indemnification is sought and the amount for which
indemnification is sought.
(c) Shareholder shall have 30 days to object to an indemnification claim
by delivery of a written notice of such objection to LSI specifying in
reasonable detail the basis for such objection. Failure to timely so object
shall constitute a final and binding acceptance of the indemnification
claim by Shareholder, and the indemnification claim shall be paid in accordance
with Section 11(d). If an objection is timely interposed by Shareholder, then
LSI and Shareholder shall negotiate in good faith for a period of 60 business
days from the date LSI receives such objection prior to commencing any formal
legal action, suit or proceeding with respect to such indemnification claim.
(d) Upon final determination of the amount of an indemnification claim,
whether by agreement between Shareholder and LSI or by an arbitration award or
other adjudication, Shareholder shall pay the amount of such indemnification
claim within ten (10) days of the date such amount is finally determined and
all relevant appeal periods have expired. Payment shall be made by delivery to
LSI of shares of LSI Common Stock, which shall be valued for such purpose at
the last sale price of such common stock on the Nasdaq National Market (as
reported in The Wall Street Journal or, if not reported thereby, any other
authoritative source) on the last trading day preceding the Effective Time,
such price to be appropriately adjusted for changes in the number of shares of
LSI Common Stock outstanding as a result of a stock split, stock dividend, or
similar recapitalization occurring after the Effective Time and before the
delivery of such shares to LSI.
(e) Upon payment in full of any indemnification claim, Shareholder shall
be subrogated to the extent of such payment to the rights of LSI against any
person or entity with respect to the subject matter of such indemnification
claim.
(f) Shareholder shall not be liable to LSI for any indemnification
hereunder except to the extent that the aggregate assessments, losses, damages
(including special and consequential damages incurred by third party claims
claimants), liabilities, and out of pocket costs and expenses, including
without limitation, interest, penalties, cost of external investigation (i.e.,
not including cost of employees of LSI) and defense, and reasonable attorneys'
and other professional fees and expenses subject to indemnification for which
Shareholder is responsible exceeds Ten Thousand Dollars ($10,000).
Notwithstanding any other provision hereof, in no event shall the obligation of
Shareholder to indemnify LSI pursuant to this Section 8.14 exceed the aggregate
value of the total number of shares of LSI Common Stock issued to Shareholder
pursuant to the Agreement valued at the last sale price of such common stock on
the Nasdaq National Market (as reported in The Wall Street Journal or, if not
reported thereby, any other authoritative source) on the last trading day
preceding the Effective Time.
- 26 -
<PAGE> 28
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
of each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived pursuant to Section 11.6 of this Agreement:
(A) SHAREHOLDER APPROVAL. The shareholders of LSI shall have approved
this Agreement, and the consummation of the transactions contemplated
hereby, including the Merger, as and to the extent required by Law, by the
provisions of any governing instruments, or by the rules of the NASD.
(B) REGULATORY APPROVALS. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (including requirements relating to
the raising of additional capital or the disposition of Assets) which in
the reasonable judgment of the Board of Directors of LSI would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement that, had such condition or
requirement been known, LSI would not, in its reasonable judgment, have
entered into this Agreement.
(C) CONSENTS AND APPROVALS. Each Party shall have obtained any and
all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b) of this Agreement) or for the preventing of
any Default under any Contract or Permit of such Party. No Consent so
obtained which is necessary to consummate the transactions contemplated
hereby shall be conditioned or restricted in a manner which in the
reasonable judgment of the Board of Directors of LSI would so materially
adversely impact the economic or business benefits of the transactions
contemplated by this Agreement that, had such condition or requirement been
known, LSI would not, in its reasonable judgment, have entered into this
Agreement.
(D) LEGAL PROCEEDINGS. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which prohibits,
restricts or makes illegal consummation of the transactions contemplated by
this Agreement.
(E) REGISTRATION STATEMENT. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing, and all necessary approvals
under state securities Laws or the 1933 Act or 1934 Act relating to the
- 27 -
<PAGE> 29
issuance or trading of the shares of LSI Common Stock issuable pursuant to
the Merger shall have been received.
(F) EXCHANGE LISTING. The shares of LSI Common Stock issuable
pursuant to the Merger shall have been approved for listing on the Nasdaq
National Market.
(G) TAX MATTERS. Each Party shall have received a written opinion of
counsel from Alston & Bird, in form reasonably satisfactory to such Parties
(the "Tax Opinion"), to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, (ii) the exchange in the Merger of BRI Common Stock for LSI Common
Stock will not give rise to gain or loss to the shareholders of BRI with
respect to such exchange (except to the extent of any cash received), and
(iii) none of BRI, LSI or WPC will recognize gain or loss as a consequence
of the Merger (except for amounts resulting from any required change in
accounting methods and any income and deferred gain recognized pursuant to
Treasury regulations issued under Section 1502 of the Internal Revenue
Code). In rendering such Tax Opinion, such counsel shall be entitled to
rely upon representations of officers of BRI and LSI reasonably
satisfactory in form and substance to such counsel.
9.2 CONDITIONS TO OBLIGATIONS OF LSI. The obligations of LSI to perform
this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by LSI pursuant to Section 11.6(a) of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of BRI set forth
in this Agreement shall be assessed as of the date of this Agreement and as
of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of BRI set forth in Section 5.3 of this Agreement shall be true
and correct (except for inaccuracies which are de minimus in amount). The
representations and warranties of BRI set forth in Sections 5.19, 5.20, and
5.21 of this Agreement shall be true and correct in all material respects.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of BRI to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
material respects.
(C) CERTIFICATES. BRI shall have delivered to LSI (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief
executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.1 of this Agreement as relates to BRI and
in Section 9.2(a) and 9.2(b) of this Agreement have been satisfied, and
(ii) certified copies of resolutions duly adopted by BRI's Board of
Directors and
- 28 -
<PAGE> 30
shareholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby,
all in such reasonable detail as LSI and its counsel shall request.
(D) OPINION OF COUNSEL. LSI shall have received an opinion of
Hinckley, Allen & Snyder, counsel to BRI, dated as of the Closing, in form
reasonably satisfactory to LSI, as to the matters set forth in Exhibit 2.
(E) POOLING LETTERS. LSI shall have received letters, a draft dated
as of the date of filing of the Registration Statement with the SEC and a
final version dated as of the Effective Time, in form and substance
reasonably acceptable to LSI, from KPMG Peat Marwick LLP to the effect that
the Merger will qualify for pooling-of-interests accounting treatment. LSI
also shall have received letters, a draft dated as of the date of filing of
the Registration Statement with the SEC and a final version dated as of the
Effective Time, in form and substance reasonably acceptable to LSI, from
KPMG Peat Marwick LLP to the effect that such firm is not aware of any
matters relating to BRI and its Subsidiaries which would preclude the
Merger from qualifying for pooling-of-interests accounting treatment.
(F) ACCOUNTANT'S LETTERS. LSI shall have received from KPMG Peat
Marwick LLP letters dated not more than five days prior to (i) the date of
the Joint Proxy Statement and (ii) the Effective Time, with respect to
certain financial information regarding BRI, in form and substance
reasonably satisfactory to LSI, which letters shall be based upon customary
specified procedures undertaken by such firm in accordance with Statement
of Auditing Standard No. 72.
(G) AFFILIATES AGREEMENTS. LSI shall have received from each
affiliate of BRI the affiliates letter referred to in Section 8.12 of this
Agreement, to the extent necessary to assure in the reasonable judgment of
LSI that the transactions contemplated hereby will qualify for
pooling-of-interests accounting treatment.
(H) SHAREHOLDERS' EQUITY. BRI's shareholders' equity as of the end of
the last fiscal quarter preceding Closing shall not be materially less than
BRI's shareholders' equity as of March 31, 1996, excluding for purposes of
the calculation of such shareholders' equity the effects of (i) all costs,
fees and charges, including fees and charges of BRI's accountants, counsel
and financial advisors, whether or not accrued or paid, that are related to
the transaction contemplated by this Agreement, and (ii) any reductions in
BRI's shareholders' equity resulting from any actions or changes in
policies of BRI taken at the request of LSI.
(I) FAIRNESS OPINION. LSI shall have received from The
Robinson-Humphrey Company, Inc. a letter, dated not more than five business
days prior to the date of the Proxy Statement, to the effect that, in the
opinion of such firm, the consideration to be received by LSI connection
with the Merger is fair, from a financial point of view, to LSI and its
shareholders.
- 29 -
<PAGE> 31
(J) BRI AUDIT. BRI shall have delivered to LSI an audited balance
sheet (including related notes and schedules, if any) as of June 25, 1995
and as of March 31, 1996, and the statements of income, changes in
shareholders' equity, and cash flows (including related notes and
schedules, if any) for the fiscal year ended June 25, 1995, and the 40
weeks ended March 31, 1996, of BRI together with the report of KPMG Peat
Marwick LLP thereon, at least 40 calendar days after the date of this
Agreement. BRI shall have delivered to LSI an audited balance sheet
(including related notes and schedules, if any) as of June 30, 1996, and
the statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the fiscal year then
ended, of BRI together with the report of KPMG Peat Marwick LLP thereon, at
least 30 calendar days prior to the Effective Time.
9.3 CONDITIONS TO OBLIGATIONS OF BRI. The obligations of BRI to perform
this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by BRI pursuant to Section 11.6(b) of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of LSI set forth
in this Agreement shall be assessed as of the date of this Agreement and as
of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of LSI set forth in Section 6.3 of this Agreement shall be true
and correct (except for inaccuracies which are de minimus in amount).
There shall not exist inaccuracies in the representations and warranties of
LSI set forth in this Agreement (including the representations and
warranties set forth in Sections 6.3.) such that the aggregate effect of
such inaccuracies has, or is reasonably likely to have, a Material Adverse
Effect on LSI; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" shall be deemed not to include such
qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of LSI to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with.
(C) CERTIFICATES. LSI shall have delivered to BRI (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief
executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.1 of this Agreement as relates to LSI and
in Section 9.3(a) and 9.3(b) of this Agreement have been satisfied, and
(ii) certified copies of resolutions duly adopted by LSI's Board of
Directors and shareholders and WPC's Board of Directors and shareholders
evidencing the taking of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement,
- 30 -
<PAGE> 32
and the consummation of the transactions contemplated hereby, all in
such reasonable detail as BRI and its counsel shall request.
(D) OPINION OF COUNSEL. BRI shall have received an opinion of Alston
& Bird, counsel to LSI, dated as of the Effective Time, in form reasonably
acceptable to BRI, as to the matters set forth in Exhibit 3.
(E) ACCOUNTANT'S LETTERS. BRI shall have received from KPMG Peat
Marwick LLP letters dated not more than five days prior to (i) the date of
the Joint Proxy Statement and (ii) the Effective Time, with respect to
certain financial information regarding LSI, in form and substance
reasonably satisfactory to BRI, which letters shall be based upon customary
specified procedures undertaken by such firm.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this Agreement,
and notwithstanding the adoption or approval of this Agreement by the
shareholders of BRI and LSI or both, this Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of LSI and the Board
of Directors of BRI; or
(b) By the Board of Directors of either Party in the event (i) any
Consent of any Regulatory Authority required for consummation of the Merger
and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
shareholders of LSI fail to adopt or approve this Agreement and the
transactions contemplated hereby as required by the GBCC and the rules of
the NASD at the Shareholders' Meeting where the transactions were presented
to such shareholders for approval and voted upon; or
(c) By BRI or LSI, if LSI or BCS has terminated the BCS Agreement for
any reason; or
(d) By LSI, in the event that the BCS Transaction shall not have been
consummated by December 31, 1996, if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by
any breach of this Agreement by LSI.
10.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and
- 31 -
<PAGE> 33
have no effect, except that (i) the provisions of this Section 10.2 and
Article 11 and Section 8.6(b) of this Agreement shall survive any such
termination and abandonment, and (ii) a termination pursuant to Sections
10.1(b) or 10.1(c) of this Agreement shall not relieve the breaching Party from
Liability for an uncured willful breach of a representation, warranty,
covenant, or agreement giving rise to such termination.
ARTICLE 11
MISCELLANEOUS
11.1 DEFINITIONS.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, such Party or a
substantial equity interest in, or all or substantially all of the assets
of, any of its Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including
the Exhibits, schedules and Disclosure Memoranda delivered pursuant hereto
and incorporated herein by reference.
"ARTICLES OF MERGER" shall mean the Articles of Merger to be executed
by BRI and WPC and filed with the Secretary of State of the State of Rhode
Island relating to the Merger as contemplated by Section 1.1 of this
Agreement.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"BRI COMMON STOCK" shall mean the no par value common stock of BRI.
"BRI DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Bentley's Restaurant, Inc. Disclosure Memorandum" delivered prior
to the date of this Agreement to LSI describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect
- 32 -
<PAGE> 34
to one Section shall not be deemed to be disclosed for purposes of any
other Section not specifically referenced with respect thereto. Where any
representation or warranty contained in the Agreement is limited or
qualified by the materiality of the matters as to which the representation
or warranty is given, the inclusion of any matter in the Disclosure
Memorandum does not constitute a determination by BRI that such matters are
material.
"BRI FINANCIAL STATEMENTS" shall mean (i) the balance sheets
(including related notes and schedules, if any) of BRI as of December 31,
1993 and the related statements of income, changes in shareholders' equity,
and cash flows (including related notes and schedules, if any) for the
fiscal year ended December 31, 1993, and (ii) the balance sheets of BRI
(including related notes and schedules, if any) and related statements of
income, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) with respect to periods ended subsequent to
December 31, 1993.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger
to be executed by WPC and filed with the Secretary of State of the
State of Georgia relating to the Merger as contemplated by Section 1.1 of
this Agreement.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CONSENT" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person pursuant
to any Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets or business.
"DEFAULT" shall mean (i) any breach or violation of or default under
any Contract, Order or Permit, (ii) any occurrence of any event that
with the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order or Permit.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface or subsurface strata) and which
are administered, interpreted or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq. ("RCRA"), and other Laws relating to emissions,
discharges, releases or threatened releases of any Hazardous Material, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any Hazardous
Material.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
- 33 -
<PAGE> 35
"EXHIBITS" 1 through 3, inclusive, shall mean the
Exhibits so marked, copies of which are attached to this Agreement. Such
Exhibits are hereby incorporated by reference herein and made a part
hereof, and may be referred to in this Agreement and any other related
instrument or document without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"GLRI" shall mean the General Laws of Rhode Island.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"INTELLECTUAL PROPERTY" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, technology rights and licenses,
computer software (including any source or object codes therefor or
documentation relating thereto), trade secrets, franchises, know-how,
inventions, and other intellectual property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"JOINT PROXY STATEMENT" shall mean the proxy statement used by BCS and
LSI to solicit the adoption or approval of their respective shareholders of
the transactions contemplated by the BCS Agreement and this Agreement, as
the case may be, which shall include the prospectus of LSI relating to the
issuance of the LSI Common Stock to holders of BRI Common Stock.
"KNOWLEDGE" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that
are known or should reasonably have been known in the reasonable exercise
of their duties by the Chairman, President, Chief Financial Officer, Chief
Accounting Officer, any Vice Presidents of Administration and Real Estate
and, with regard to BRI, shall also mean and include the Shareholder of
such Person.
"LAW" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities or business, including those promulgated, interpreted
or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge,
- 34 -
<PAGE> 36
reservation, restriction, security interest, title retention or other
security arrangement, or any adverse right or interest, charge, or claim of
any nature whatsoever of, on, or with respect to any property or property
interest, other than (i) Liens for current property Taxes not yet due
and payable, and (iii) Liens which do not materially impair the use of or
title to the Assets subject to such Lien.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution or demand letter, or notice (written
or oral) by any Person of governmental or other examination or
investigation, hearing, inquiry, administrative or other proceeding
alleging potential Liability, or any Regulatory Authority or other federal,
state or local governmental agency or department requesting information
relating to or affecting a Party, its business, its Assets (including
Contracts related to it), or the transactions contemplated by this
Agreement.
"LSI CAPITAL STOCK" shall mean, collectively, the LSI Common Stock,
the LSI Preferred Stock and any other class or series of capital stock of
LSI.
"LSI COMMON STOCK" shall mean the no par value common stock of LSI.
"LSI COMPANIES" shall mean, collectively, LSI and all LSI
Subsidiaries.
"LSI DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Longhorn Steaks, Inc. Disclosure Memorandum" delivered prior to
the date of this Agreement to BRI describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section shall not be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
"LSI FINANCIAL STATEMENTS" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of LSI as of
March 31, 1996, and as of December 31, 1995 and 1994, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the three months ended
March 31, 1996, and for each of the three years ended December 31, 1995,
1994 and 1993, as filed by LSI in SEC Documents, and (ii) the consolidated
statements of condition of LSI (including related notes and schedules, if
any) and related statements of income, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any) included in SEC
Documents filed with respect to periods ended subsequent to March 31, 1996.
"LSI PREFERRED STOCK" shall mean the no par value preferred stock of
LSI.
"LSI STOCK PLANS" shall mean the existing stock option and other
stock-based compensation plans of LSI designated as follows: Longhorn
Steaks, Inc. Amended and Restated 1992 Incentive Plan, Longhorn Steaks,
Inc. Stock Option Agreement with Richard E. Rivera and Longhorn Steaks,
Inc. 1996 Stock Plan for Outside Directors.
"LSI SUBSIDIARIES" shall mean the Subsidiaries of LSI and any
corporation or other organization acquired as a Subsidiary of LSI in the
future and held as a Subsidiary by LSI at the Effective Time.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries,
taken as a whole, or (ii) the ability of such Party to perform
- 35 -
<PAGE> 37
its obligations under this Agreement or to consummate the Merger or the
other transactions contemplated by this Agreement, provided that "material
adverse impact" shall not be deemed to include the impact of (a) changes in
Laws of general applicability or interpretations thereof by courts or
governmental authorities, (b) changes in generally accepted accounting
principles or regulatory accounting principles, (c) actions and omissions
of a Party (or any of its Subsidiaries) taken with the prior informed
written Consent of the other Party in contemplation of the transactions
contemplated hereby, and (z) the Merger on the operating performance of the
Parties, including expenses incurred by the Parties in consummating the
transactions contemplated by this Agreement.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ NATIONAL MARKET" shall mean the Nasdaq Stock Market's National
Market of the National Association of Securities Dealers Automated
Quotations System.
"OPERATING PROPERTY" shall mean any property owned by the Party in
question or by any of its Subsidiaries or in which such Party or Subsidiary
holds a security interest, and, where required by the context, includes the
owner or operator of such property, but only with respect to such property.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
"PARTY" shall mean either BRI or LSI, and "PARTIES" shall mean both
BRI and LSI.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets or business.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by LSI
under the 1933 Act with respect to the shares of LSI Common Stock to be
issued to the shareholders of BRI in connection with the transactions
contemplated by this Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the NASD, the SEC,
the Federal Trade Commission, the United States Department of Justice, and
all other federal, state, county, local or other governmental or regulatory
agencies, authorities,
- 36 -
<PAGE> 38
instrumentalities, commissions, boards or bodies having jurisdiction over
the Parties and their respective Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock
of a Person or by which a Person is or may be bound to issue additional
shares of its capital stock or other Rights.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"SHAREHOLDERS MEETING" shall mean the meeting of the shareholders of
LSI to be held pursuant to Section 8.1 of this Agreement, including any
adjournment or adjournments thereof.
"SIGNIFICANT SUBSIDIARY" shall mean any present or future consolidated
Subsidiary of the Party in question, the assets of which constitute ten
percent (10%) or more of the consolidated assets of such Party as reflected
on such Party's consolidated statement of condition prepared in accordance
with GAAP.
"SUBSIDIARIES" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly
or through an unbroken chain of entities as to each of which 50% or more of
the outstanding equity securities is owned directly or indirectly by its
parent (provided, there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), or
(ii) in the case of partnerships, serves as a general partner.
"SURVIVING CORPORATION" shall mean WPC as the surviving corporation
resulting from the Merger.
"TAX RETURN" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
"TAX" or "TAXES" shall mean any federal, state, county, local, or
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, and other taxes,
assessments, charges, fares, or impositions, including interest, penalties,
and additions imposed thereon or with respect thereto.
"WPC COMMON STOCK" shall mean the $.01 par value common stock of WPC.
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
- 37 -
<PAGE> 39
Base Period Trading Price Section 3.1(c)
Effective Time Section 1.3
Per Share Purchase Price Section 3.1(c)
BRI Contracts Section 5.15
BRI ERISA Plan Section 5.14
BRI Benefit Plans Section 5.14
Base Period Trading Price Limitations Section 3.1(c)
Closing Section 1.2
ERISA Affiliate Section 5.14(b)
Exchange Agent Section 4.1
Exchange Ratio Section 3.1(c)
Merger Section 1.1
BRI Intellectual Property Section 5.10
Minimum Trading Price Section 10.1(h)
SEC Section 6.7
Tax Opinion Section 9.1(h)
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 EXPENSES. Each of the Parties shall bear and pay all direct costs
and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including filing, registration and
application fees, printing fees, and fees and expenses of its own financial or
other consultants, investment bankers, accountants, and counsel.
11.3 BROKERS AND FINDERS. Except for Tucker Anthony Incorporated as to
BRI and except for The Robinson-Humphrey Company, Inc. as to LSI, each of the
Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed on its behalf any broker or
finder or incurred any Liability for any financial advisory fees, investment
bankers' fees, brokerage fees, commissions, or finders' fees in connection with
this Agreement or the transactions contemplated hereby. In the event of a
claim by any broker or finder based upon his or its representing or being
retained by or allegedly representing or being retained by BRI or LSI, each of
BRI and LSI, as the case may be, agrees to indemnify and hold the other Party
harmless of and from any Liability in respect of any such claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this
Agreement expressed or implied, is intended to confer upon any Person, other
than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, other than as
provided in Sections 8.13 and 8.14 of this Agreement.
- 38 -
<PAGE> 40
11.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
shareholder approval of this Agreement has been obtained; provided, that after
any such approval by the holders of BRI Common Stock, there shall be made no
amendment that requires further approval by such shareholders without the
further approval of such shareholders.
11.6 WAIVERS.
(a) Prior to or at the Effective Time, LSI, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
BRI, to waive or extend the time for the compliance or fulfillment by BRI of
any and all of its obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of LSI under this Agreement, except
any condition which, if not satisfied, would result in the violation of any
Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of LSI.
(b) Prior to or at the Effective Time, BRI, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
LSI, to waive or extend the time for the compliance or fulfillment by LSI of
any and all of its obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of BRI under this Agreement, except
any condition which, if not satisfied, would result in the violation of any
Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of BRI.
(c) The failure of any Party at any time or times to require performance
of any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this
Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. 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.
11.8 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or
by courier or overnight carrier, to the persons at the addresses set forth
below (or at such other address as may be provided hereunder), and shall be
deemed to have been delivered as of the date so delivered:
- 39 -
<PAGE> 41
BRI and Shareholder: Bentley's Restaurant, Inc.
c/o Bugaboo Creek Steak House, Inc.
1275 Wampanoag Trail
East Providence, Rhode Island 02915
Telecopy Number: (401) 433-5986
Attention: Edward P. Grace, III
Copy to Counsel: Hinckley, Allen & Snyder
1500 Fleet Center
50 Kennedy Plaza
Providence, Rhode Island 02903
Telecopy Number: (401) 277-9600
Attention: Margaret D. Farrell
LSI: Longhorn Steaks, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Telecopy Number: (770) 399-7796
Attention: Richard E. Rivera
Copy to Counsel: Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: William H. Avery
11.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws.
11.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
11.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether
under any rule of construction or
- 40 -
<PAGE> 42
otherwise. No party to this Agreement shall be considered the
draftsman. The parties acknowledge and agree that this Agreement has been
reviewed, negotiated and accepted by all parties and their attorneys and shall
be construed and interpreted according to the ordinary meaning of the words
used so as fairly to accomplish the purposes and intentions of all parties
hereto.
11.13 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was 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 the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
11.14 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
- 41 -
<PAGE> 43
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
BENTLEY'S RESTAURANT, INC.
By: /s/ Edward P. Grace, III
------------------------------
President
[CORPORATE SEAL]
ATTEST: LONGHORN STEAKS, INC.
/s/ Anne D. Huemme
- --------------------------- By: /s/ Richard E. Rivera
Secretary ------------------------------
President
[CORPORATE SEAL]
ATTEST: WHIP POOLING CORPORATION
/s/ F. Fitzhugh Taylor, III
- --------------------------- By: /s/ Richard E. Rivera
Secretary ------------------------------
President
[CORPORATE SEAL]
SHAREHOLDER
/s/ Edward P. Grace, III
----------------------------------
Edward P. Grace, III
- 42 -
<PAGE> 44
EXHIBIT 1: FORM OF AGREEMENT OF AFFILIATES OF BRI.
<PAGE> 45
AFFILIATE AGREEMENT
Longhorn Steaks, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Gentlemen:
The undersigned is a shareholder of Bentley's Restaurant, Inc. ("BRI"), a
corporation organized and existing under the laws of the State of Rhode Island
and located in Providence, Rhode Island, and will become a shareholder of the
Longhorn Steaks, Inc. ("LSI") pursuant to the transactions described in the
Agreement and Plan of Merger, dated as of June 14, 1996 (the "Agreement"), by
and among LSI, Whip Pooling Corporation ("WPC") and BRI. Under the terms of
the Agreement, BRI will be merged into and with WPC (the "Merger"), and the
shares of the no par value common stock of BRI ("BRI Common Stock") will be
converted into and exchanged for shares of the no par value common stock of LSI
("LSI Common Stock"). This Affiliate Agreement represents an agreement between
the undersigned and LSI regarding certain rights and obligations of the
undersigned in connection with the shares of LSI to be received by the
undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned and LSI hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
BRI he is an "affiliate" under Rule 145(c) as defined in Rule 405 of the Rules
and Regulations of the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended ("1933 Act"), and the undersigned
anticipates that he will be such an "affiliate" at the time of the Merger.
2. Initial Restriction on Disposition. The undersigned agrees that he
will not sell, transfer, or otherwise dispose of his interests in, or reduce
his risk relative to, any of the shares of LSI Common Stock into which his
shares of BRI Common Stock are converted upon consummation of the Merger until
such time as LSI notifies the undersigned that the requirements of SEC
Accounting Series Release Nos. 130 and 135 ("ASR 130 and 135") have been met.
The undersigned understands that ASR 130 and 135 relate to publication of
financial results of post-Merger combined operations of LSI and BRI. LSI
agrees that it will publish such results within 45 days after the end of the
first fiscal quarter of LSI containing the required period of post-Merger
combined operations and that it will notify the undersigned promptly following
such publication.
3. Covenants and Warranties of Undersigned. The undersigned represents,
warrants and agrees that:
(a) During the 30 days immediately preceding the Effective Time of the
Merger, the
<PAGE> 46
undersigned has not sold, transfered, or otherwise disposed of his
interests in, or reduced his risk relative to, any of the shares of BRI
Common Stock beneficially owned by the undersigned as of the record date
for determination of shareholders entitled to vote at the Shareholders'
Meeting of BRI held to approve the Merger.
(b) The LSI Common Stock received by the undersigned as a result of
the Merger will be taken for his own account and not for others, directly
or indirectly, in whole or in part.
(c) LSI has informed the undersigned that any distribution by the
undersigned of LSI Common Stock has not been registered under the 1933 Act
and that shares of LSI Common Stock received pursuant to the Merger can
only be sold by the undersigned (1) following registration under the 1933
Act, or (2) in conformity with the volume and other requirements of Rule
145(d) promulgated by the SEC as the same now exist or may hereafter be
amended, or (3) to the extent some other exemption from registration under
the 1933 Act might be available. The undersigned understands that LSI is
under no obligation to file a registration statement with the SEC covering
the disposition of the undersigned's shares of LSI Common Stock or to take
any other action necessary to make compliance with an exemption from such
registration available.
(d) The undersigned will, and will cause each of the other parties
whose shares are deemed to be beneficially owned by the undersigned
pursuant to Section 8 hereof to, have all shares of BRI Common Stock
beneficially owned by the undersigned registered in the name of the
undersigned or such parties, as applicable, prior to the effective date of
the Merger and not in the name of any bank, broker-dealer, nominee or
clearinghouse.
(e) The undersigned is aware that LSI intends to treat the Merger as a
tax-free reorganization under Section 368 of the Internal Revenue Code
("Code") for federal income tax purposes. The undersigned agrees to treat
the transaction in the same manner as LSI for federal income tax purposes.
The undersigned acknowledges that Section 1.368-1(b) of the Income Tax
Regulations requires "continuity of interest" in order for the Merger to be
treated as tax-free under Section 368 of the Code. This requirement is
satisfied if, taking into account those BRI shareholders who receive cash
in exchange for their stock, who receive cash in lieu of fractional shares,
or who dissent from the Merger, there is no plan or intention on the part
of the BRI shareholders to sell or otherwise dispose of the LSI Common
Stock to be received in the Merger that will reduce such shareholders'
ownership to a number of shares having, in the aggregate, a value at the
time of the merger of less than 50% of the total fair market value of the
BRI Common Stock outstanding immediately prior to the Merger. The
undersigned has no prearrangement, plan or intention to sell or otherwise
dispose of an amount of his LSI Common Stock to be received in the Merger
which would cause the foregoing requirement not to be satisfied.
4. Restrictions on Transfer. The undersigned understands and agrees that
stop transfer instructions with respect to the shares of LSI Common Stock
received by the undersigned
-2-
<PAGE> 47
pursuant to the Merger will be given to LSI's Transfer Agent and that there
will be placed on the certificates for such shares, or shares issued in
substitution thereof, a legend stating in substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of
interests" and may not be sold, nor may the owner thereof reduce his
risks relative thereto in any way, until such time as Longhorn Steaks,
Inc. ("LSI") has published the financial results covering at least 30
days of combined operations after the effective date of the merger
through which the business combination was effected. In addition, the
shares represented by this certificate may not be sold, transferred or
otherwise disposed of except or unless (1) covered by an effective
registration statement under the Securities Act of 1933, as amended,
(2) in accordance with (i) Rule 145(d) (in the case of shares issued
to an individual who is not an affiliate of LSI) or (ii) Rule 144 (in
the case of shares issued to an individual who is an affiliate of LSI)
of the Rules and Regulations of such Act, or (3) in accordance with a
legal opinion satisfactory to counsel for LSI that such sale or
transfer is otherwise exempt from the registration requirements of
such Act."
Such legend will also be placed on any certificate representing LSI securities
issued subsequent to the original issuance of the LSI Common Stock pursuant to
the Merger as a result of any transfer of such shares or any stock dividend,
stock split, or other recapitalization as long as the LSI Common Stock issued
to the undersigned pursuant to the Merger has not been transferred in such
manner to justify the removal of the legend therefrom. Upon the request of the
undersigned, LSI shall cause the certificates representing the shares of LSI
Common Stock issued to the undersigned in connection with the Merger to be
reissued free of any legend relating to restrictions on transfer by virtue of
ASR 130 and 135 as soon as practicable after the requirements of ASR 130 and
135 have been met. In addition, if the provisions of Rules 144 and 145 are
amended to eliminate restrictions applicable to the LSI Common Stock received
by the undersigned pursuant to the Merger, or at the expiration of the
restrictive period set forth in Rule 145(d), LSI, upon the request of the
undersigned, will cause the certificates representing the shares of LSI Common
Stock issued to the undersigned in connection with the Merger to be reissued
free of any legend relating to the restrictions set forth in Rules 144 and
145(d) upon receipt by LSI of an opinion of its counsel to the effect that such
legend may be removed.
5. Understanding of Restrictions on Dispositions. The undersigned has
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his ability to sell, transfer, or otherwise
dispose of the shares of LSI Common Stock received by the undersigned, to the
extent he believes necessary, with his counsel or counsel for BRI.
6. Filing of Reports by LSI. LSI agrees, for a period of three years
after the effective date of the Merger, to file on a timely basis all reports
required to be filed by it pursuant to Section 13 of the Securities Exchange
Act of 1934, as amended, so that the public information provisions of Rule
145(d) promulgated by the SEC as the same are presently in effect will be
available to the undersigned in the event the undersigned desires to transfer
any shares of LSI Common Stock issued to the undersigned pursuant to the
Merger.
-3-
<PAGE> 48
7. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of LSI Common Stock received by him in connection
with the Merger at any time during the restrictive period set forth in Rule
145(d), the undersigned will provide the necessary representation letter to the
transfer agent for LSI Common Stock together with such additional information
as the transfer agent may reasonably request. If LSI's counsel concludes that
such proposed sale or transfer complies with the requirements of Rule 145(d),
LSI shall cause such counsel to provide such opinions as may be necessary to
LSI's Transfer Agent so that the undersigned may complete the proposed sale or
transfer.
8. Acknowledgments. The undersigned recognizes and agrees that the
foregoing provisions also apply to all shares of the capital stock of BRI and
LSI that are deemed to be beneficially owned by the undersigned pursuant to
applicable federal securities laws, which the undersigned agrees may include,
without limitation, shares owned or held in the name of (i) the undersigned's
spouse, (ii) any relative of the undersigned or of the undersigned's spouse who
has the same home as the undersigned, (iii) any trust or estate in which the
undersigned, the undersigned's spouse, and any such relative collectively own
at least a 10% beneficial interest or of which any of the foregoing serves as
trustee, executor, or in any similar capacity, and (iv) any corporation or
other organization in which the undersigned, the undersigned's spouse and any
such relative collectively own at least 10% of any class of equity securities
or of the equity interest. The undersigned further recognizes that, in the
event that the undersigned is a director or officer of LSI or becomes a
director or officer of LSI upon consummation of the Merger, among other things,
any sale of LSI Common Stock by the undersigned within a period of less than
six months following the effective time of the Mergers may subject the
undersigned to liability pursuant to Section 16(b) of the Securities Exchange
Act of 1934, as amended.
9. Miscellaneous. This Affiliate Agreement is the complete agreement
between LSI and the undersigned concerning the subject matter hereof. Any
notice required to be sent to any party hereunder shall be sent by registered
or certified mail, return receipt requested, using the addresses set forth
herein or such other address as shall be furnished in writing by the parties.
This Affiliate Agreement shall be governed by the laws of the State of Rhode
Island.
This Affiliate Agreement is executed as of the ____ day of _________,
19__.
Very truly yours,
---------------------------
Signature
---------------------------
Print Name
---------------------------
---------------------------
---------------------------
Address
-4-
<PAGE> 49
[add below the signatures of all registered
owners of shares deemed beneficially owned
by the affiliate]
---------------------------
Name:
---------------------------
Name:
---------------------------
Name:
AGREED TO AND ACCEPTED as of
_______________, 19__
LONGHORN STEAKS, INC.
By:
---------------------------
-5-
<PAGE> 50
EXHIBIT 2: MATTERS AS TO WHICH HINCKLEY, ALLEN & SNYDER WILL OPINE.
<PAGE> 51
MATTERS AS TO WHICH HINCKLEY, ALLEN & SNYDER WILL OPINE
1. BRI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Rhode Island with full corporate power
and authority to carry on the business in which it is engaged and to own and
use its Assets .
2. The authorized capital stock of BRI consists of 2,000 shares of BRI
Common Stock, of which 1,000 shares were issued and outstanding as of
_________, 1996. The shares of BRI Common Stock that are issued and
outstanding were not issued in violation of any statutory preemptive rights of
shareholders, were duly issued and are fully paid and nonassessable under the
General Law of Rhode Island. To our knowledge, except as set forth in Section
5.3(a) of the Merger Agreement or Section 5.3 of the BRI Disclosure Memorandum,
there are no options, subscriptions, warrants, calls, rights or commitments
obligating BRI to issue any equity securities or acquire any of its equity
securities.
3. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Articles
of Incorporation or Bylaws of BRI or, to our knowledge but without any
independent investigation, result in any conflict with, breach of, or default
or acceleration under any Contract or Order to which BRI is a party or by which
BRI is bound.
4. The Agreement has been duly and validly executed and delivered by BRI
and, assuming valid authorization, execution and delivery by LSI and WPC,
constitutes a valid and binding agreement of BRI enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, provided,
however, that we express no opinion as to the availability of the equitable
remedy of specific performance.
<PAGE> 52
EXHIBIT 3: MATTERS AS TO WHICH ALSTON & BIRD WILL OPINE.
<PAGE> 53
MATTERS AS TO WHICH ALSTON & BIRD WILL OPINE
1. LSI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia with full corporate power and
authority to carry on the business in which it is engaged as described in the
proxy statement used to solicit the approval by the shareholders of LSI of the
transactions contemplated by the Agreement ("Proxy Statement"), and to own and
use its Assets.
2. WPC is a corporation duly organized and validly existing and in good
standing under the laws of the State of Georgia with full corporate power and
authority to carry on the business in which it is engaged as described in the
Proxy Statement, and to own and use its Assets.
3. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Articles
of Incorporation or Bylaws of LSI or, to our knowledge but without any
independent investigation, any Contract or Order to which LSI is a party or by
which LSI is bound. The adoption of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Articles
of Incorporation or Bylaws of WPC or, to our knowledge but without any
independent investigation, any Contract or Order to which WPC is a party or by
which WPC is bound.
4. The Agreement has been duly and validly executed and delivered by LSI,
and assuming valid authorization, execution and delivery by BRI, constitutes a
valid and binding agreement of LSI enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or similar laws affecting creditors' rights generally,
provided, however, that we express no opinion as to the availability of the
equitable remedy of specific performance.
5. The shares of LSI Common Stock to be issued to the shareholders of BRI
as contemplated by the Agreement have been registered under the Securities Act
of 1933, as amended, and when properly issued and delivered following
consummation of the Merger will be fully paid and non-assessable under the
Georgia Business Corporation Code.
<PAGE> 1
EXHIBIT 2.3
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HEMENWAY SEA FOODS, INC.,
WHIP POOLING CORPORATION
AND
LONGHORN STEAKS, INC.
DATED AS OF JUNE 14, 1996
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of June 14, 1996, by and among HEMENWAY SEA FOODS, INC. ("HSF"), a
Rhode Island corporation having its principal office located in Providence,
Rhode Island; all of the shareholders of HSF, EDWARD P. GRACE, III and SAMUEL
J. ORR, JR. (the "Shareholders"), WHIP POOLING CORPORATION ("WPC"), a Georgia
corporation having its principal office located in Atlanta, Georgia; and
LONGHORN STEAKS, INC. ("LSI"), a Georgia corporation having its principal
office located in Atlanta, Georgia.
PREAMBLE
The Boards of Directors of HSF, WPC and LSI are of the opinion that the
transactions described herein are in the best interests of the parties and
their respective shareholders. This Agreement provides for the acquisition of
HSF by LSI pursuant to the merger of HSF with and into WPC. At the effective
time of such merger, the outstanding shares of the capital stock of HSF shall
be converted into the right to receive shares of the common stock of LSI
(except as provided herein). As a result, shareholders of HSF shall become
shareholders of LSI and WPC shall continue to conduct HSF's business and
operations as a wholly-owned subsidiary of LSI. The transactions described in
this Agreement are subject to the approval of the shareholders of LSI,
expiration of the required waiting period under the HSR Act, the consummation
of the Agreement and Plan of Merger dated the same date as the date hereof by
and among Bugaboo Creek Steak House, Inc. ("BCS"); Whip Merger Corporation, and
LSI; (the "BCS Agreement," together with the agreements upon which the
consummation of the BCS Agreement is conditioned, the "BCS Transaction"), and
the satisfaction of certain other conditions described in this Agreement. It
is the intention of the parties to this Agreement that the Merger for federal
income tax purposes shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code, and for accounting purposes shall
qualify for treatment as a pooling of interests.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement, at the
Effective Time, HSF shall be merged with and into WPC in accordance with the
provisions of Section 7-1.1-1170 of the GLRI and with the effect provided in
Sections 7-1.1-169 of the GLRI and Section 1107 of the GBCC and with the effect
provided in Sections 1106 and 1107 of the GBCC
<PAGE> 3
(the "Merger"). WPC shall be the Surviving Corporation resulting from
the Merger and shall continue to be governed by the Laws of the State of
Georgia. The Merger shall be consummated pursuant to the terms of this
Agreement, which has been approved and adopted by the respective Boards of
Directors of HSF, WPC and LSI and by LSI, as the sole shareholder of WPC and by
the Shareholders of HSF.
1.2 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "Closing") will take place at 9:00 A.M. on the date
that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the
Parties, acting through their authorized officers, may mutually agree. The
Closing shall be held at such place as may be mutually agreed upon by the
Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated by
this Agreement shall become effective on the date and at the time the Articles
of Merger reflecting the Merger shall become effective with the Secretary of
State of the State of Rhode Island and the Certificate of Merger reflecting the
Merger become effective with the Secretary of State of the State of Georgia
(the "Effective Time"). Subject to the terms and conditions hereof, unless
otherwise mutually agreed upon in writing by authorized officers of each Party,
the Parties shall use their reasonable efforts to cause the Effective Time to
occur on the first business day following the last to occur of (i) the
effective date (including expiration of any applicable waiting period) of the
last required Consent of any Regulatory Authority having authority over and
approving or exempting the Merger, and (ii) the date on which the shareholders
of LSI approve this Agreement to the extent such approval is required by
applicable Law.
ARTICLE 2
TERMS OF MERGER
2.1 CHARTER. The Certificate of Incorporation of WPC in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until otherwise amended or repealed.
2.2 BYLAWS. The Bylaws of WPC in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until otherwise
amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of WPC in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the directors of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation. The officers of WPC in office immediately prior to
the Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of the Surviving Corporation from and
after the Effective Time in accordance with the Bylaws of the Surviving
Corporation.
- 2 -
<PAGE> 4
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of LSI, HSF, WPC or the shareholders of any of the foregoing, the shares of the
constituent corporations shall be converted as follows:
(a) Each share of LSI Capital Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and
after the Effective Time.
(b) Each share of HSF Common Stock issued and outstanding at the
Effective Time shall cease to be outstanding and shall be converted into
and exchanged for the right to receive that multiple of a share of LSI
Common Stock (the "Exchange Ratio") obtained by dividing $1,893,288 (the
purchase price) by 1000 (the number of shares of HSF Common Stock
outstanding as of the date of this Agreement) (the "Per Share Purchase
Price") by the Base Period Trading Price (defined to mean the average of
the daily last sale prices for the shares of LSI Common Stock for the 20
consecutive trading days on which such shares are actually traded as
over-the-counter securities and quoted on the Nasdaq National Market (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source) ending at the close of trading on the fifth trading
day immediately preceding the Closing Date) and rounded to the third
decimal place; provided, that for purposes of this calculation, the Base
Period Trading Price shall be deemed to equal (i) $27.250 in the event the
Base Period Trading Price is greater than $27.250 or (ii) $24.000 in the
event the Base Period Trading Price is less than $24.000 (collectively,
$27.250 and $24.000 are referred to as the "Base Period Trading Price
Limitations").
3.2 ANTI-DILUTION PROVISIONS. In the event LSI changes the number of
shares of LSI Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or
similar recapitalization for which a record date is not established) shall be
prior to the Effective Time, (i) the Base Period Trading Price Limitations
shall be adjusted to appropriately adjust the ratio under which shares of HSF
Common Stock will be converted into shares of LSI Common Stock pursuant to
Section 3.1(b) of this Agreement, and (ii) if necessary, the anticipated
Effective Time shall be postponed for an appropriate period of time agreed upon
by the parties in order for the Base Period Trading Price to reflect the market
effect of such stock split, stock dividend, or similar recapitalization.
3.3 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of HSF Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of LSI Common Stock (after taking into account all certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of LSI Common Stock multiplied
by the market value of one share of LSI Common Stock at the Effective Time.
The market value of
- 3 -
<PAGE> 5
one share of LSI Common Stock at the Effective Time shall be the last sale
price of LSI Common Stock on the Nasdaq National Market (as reported by The
Wall Street Journal or, if not reported thereby, any other authoritative
source) on the last trading day preceding the Effective Time. No such holder
will be entitled to dividends, voting rights, or any other rights as a
shareholder in respect of any fractional shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, LSI and HSF
shall cause the exchange agent selected by LSI (the "Exchange Agent") to mail
to the former shareholders of HSF appropriate transmittal materials (which
shall specify that delivery shall be effected, and risk of loss and title to
the certificates theretofore representing shares of HSF Common Stock shall
pass, only upon proper delivery of such certificates to the Exchange Agent).
The Exchange Agent may establish reasonable and customary rules and procedures
in connection with its duties. After the Effective Time, each holder of shares
of HSF Common Stock issued and outstanding at the Effective Time shall
surrender the certificate or certificates representing such shares to the
Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the consideration provided in Section 3.1 of this Agreement, together
with all undelivered dividends or distributions in respect of such shares
(without interest thereon) pursuant to Section 4.2 of this Agreement. To the
extent required by Section 3.3 of this Agreement, each holder of shares of HSF
Common Stock issued and outstanding at the Effective Time also shall receive,
upon surrender of the certificate or certificates representing such shares,
cash in lieu of any fractional share of LSI Common Stock to which such holder
may be otherwise entitled (without interest). LSI shall not be obligated to
deliver the consideration to which any former holder of HSF Common Stock is
entitled as a result of the Merger until such holder surrenders such holder's
certificate or certificates representing the shares of HSF Common Stock for
exchange as provided in this Section 4.1. The certificate or certificates of
HSF Common Stock so surrendered shall be duly endorsed as the Exchange Agent
may require. Any other provision of this Agreement notwithstanding, neither
LSI, the Surviving Corporation nor the Exchange Agent shall be liable to a
holder of HSF Common Stock for any amounts paid or property delivered in good
faith to a public official pursuant to any applicable abandoned property Law.
Execution of this Agreement by the Shareholder shall constitute ratification of
the appointment of the Exchange Agent.
4.2 RIGHTS OF FORMER HSF SHAREHOLDERS. At the Effective Time, the stock
transfer books of HSF shall be closed as to holders of HSF Common Stock
immediately prior to the Effective Time and no transfer of HSF Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of HSF Common Stock shall from
and after the Effective Time represent for all purposes only the right to
receive the consideration provided in Sections 3.1 and 3.3 of this Agreement in
exchange therefor, subject, however, to the Surviving Corporation's obligation
to pay any dividends or make any other distributions with a record date prior
to the Effective Time which have been declared or made by
- 4 -
<PAGE> 6
HSF in respect of such shares of HSF Common Stock in accordance with
the terms of this Agreement and which remain unpaid at the Effective Time.
Whenever a dividend or other distribution is declared by LSI on the LSI Common
Stock, the record date for which is at or after the Effective Time, the
declaration shall include dividends or other distributions on all shares of LSI
Common Stock issuable pursuant to this Agreement, but no dividend or other
distribution payable to the holders of record of LSI Common Stock as of any
time subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of HSF Common Stock issued and outstanding at
the Effective Time until such holder surrenders such certificate for exchange
as provided in Section 4.1 of this Agreement. However, upon surrender of such
HSF Common Stock certificate, both the LSI Common Stock certificate (together
with all such undelivered dividends or other distributions without interest)
and any undelivered dividends and cash payments payable hereunder (without
interest) shall be delivered and paid with respect to each share represented by
such certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF HSF
HSF and the Shareholders hereby jointly and severally represent and
warrant to LSI as follows:
5.1 ORGANIZATION, STANDING, AND POWER. HSF is a corporation duly
organized, validly existing, and in good standing under the Laws of the State
of Rhode Island, and has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its Assets. HSF is
duly qualified or licensed to transact business as a foreign corporation in
good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on HSF. HSF
has no Subsidiaries.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) HSF has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of HSF, and the HSF
Shareholders have unanimously approved this Agreement, which is the only
shareholder vote required for approval of this Agreement and consummation of
the Merger by HSF. This Agreement represents a legal, valid, and binding
obligation of HSF and the Shareholders, enforceable against HSF and the
Shareholders in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by HSF, nor the
consummation by HSF of the transactions contemplated hereby, nor compliance by
HSF with any
- 5 -
<PAGE> 7
of the provisions hereof, will (i) conflict with or result in a breach of
any provision of HSF's Articles of Incorporation or Bylaws, or (ii) except as
disclosed in Section 5.2 of the HSF Disclosure Memorandum, constitute or result
in a Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any Asset of HSF under, any Contract or Permit of HSF,
except for any such Default, Consent or Lien that would not have a Material
Adverse Effect on HSF or on any restaurant owned or operated by HSF, or, (iii)
subject to receipt of the requisite Consents referred to in Section 9.1(b) of
this Agreement, violate any Law or Order applicable to HSF or any of its
material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit
plans, or under the HSR Act, no notice to, filing with, or Consent of, any
public body or authority is necessary for the consummation by HSF of the Merger
and the other transactions contemplated in this Agreement.
5.3 CAPITAL STOCK.
The authorized capital stock of HSF consists of 2,000 shares of HSF Common
Stock, of which 1,000 shares are issued and outstanding.
(a) All of the shares of capital stock issued and outstanding as of the
date hereof and at the Effective Time are held by the Shareholders. All of the
issued and outstanding shares of capital stock of HSF are duly and validly
issued and outstanding and are fully paid and nonassessable under the GLRI.
None of the outstanding shares of capital stock of HSF has been issued in
violation of any preemptive rights of the current or past shareholders of HSF.
(b) Except as set forth in Section 5.3(a) of this Agreement, or as
disclosed in Section 5.3 of the HSF Disclosure Memorandum, there are no shares
of capital stock or other equity securities of HSF outstanding and no
outstanding Rights relating to the capital stock of HSF.
5.4 FINANCIAL STATEMENTS. Each of the HSF Financial Statements
(including, in each case, any related notes) delivered to LSI and/or its
advisors was true and correct and fairly presented in all material respects (i)
the financial position of HSF as at the respective dates and (ii) the results
of operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount or effect and any pro forma financial information contained
in the HSF Financial Statements is not necessarily indicative of the financial
position of HSF as of the respective dates thereof and the results of
operations and cash flows for the periods indicated.
5.5 [INTENTIONALLY OMITTED].
- 6 -
<PAGE> 8
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. HSF has no Liabilities that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on HSF, except as disclosed in Section 5.6 of the HSF Disclosure
Memorandum. HSF has not incurred or paid any Liability since March 31, 1996,
except for such Liabilities (i) discussed in Section 5.6 of the HSF Disclosure
Memorandum or (ii) incurred or paid (A) in the ordinary course of business
consistent with past business practice and which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on HSF or (B)
in connection with the transactions contemplated by this Agreement. Except as
disclosed in Section 5.6 of the HSF Disclosure Memorandum, HSF is not directly
or indirectly liable, by guarantee, indemnity, or otherwise, upon or with
respect to, or obligated, by discount or repurchase agreement or in any other
way, to provide funds in respect to, or obligated to guarantee or assume any
Liability of any Person for any amount in excess of $10,000.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 25, 1995, except as
disclosed in Section 5.7 of the HSF Disclosure Memorandum, (i) there have been
no events, changes, or occurrences which have had, or are reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on HSF, and
(ii) there has not been: (A) any material damage, destruction or loss (not
covered by insurance) with respect to any material assets of HSF that has
resulted in a Material Adverse Effect on HSF, (B) any material change by HSF in
its accounting methods, principles or practices; (C) any redemption, repurchase
or other reacquisition of any of HSF's equity securities; (D) any material
increase in the benefits under, or the establishment or amendment of, any
material bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including, without limitation, the
granting of stock options, stock appreciation rights, performance awards, or
restricted stock awards), stock purchase or other employee benefit plan, or any
material increase in the compensation payable or to become payable to
directors, officers or employees of HSF, except for increases in salaries or
wages payable or to become payable in the ordinary course of business and
consistent with past practice.
5.8 TAX MATTERS.
(a) Except for such matters as would not have a Material Adverse Effect on
HSF, all Tax Returns required to be filed by or on behalf of HSF have been
timely filed or requests for extensions have been timely filed, granted, and
have not expired for periods ended on or before December 31, 1995, and on or
before the date of the most recent fiscal year end immediately preceding the
Effective Time, and all Tax Returns filed are complete and accurate in all
Material respects. All Taxes shown to be payable on filed Tax Returns have
been paid. To the Knowledge of HSF, there is no audit examination, deficiency,
or refund Litigation with respect to any Taxes, except as disclosed in Section
5.8 of the HSF Disclosure Memorandum. All Taxes and other Liabilities due with
respect to completed and settled examinations or concluded Litigation have been
paid.
(b) HSF has not executed an extension or waiver of any statute of
limitations on the assessment or collection of any Tax due (excluding such
statutes that relate to years
- 7 -
<PAGE> 9
currently under examination by the Internal Revenue Service or other applicable
taxing authorities) that is currently in effect.
(c) Deferred Taxes of HSF have been provided for in accordance with GAAP.
(d) HSF is not a party to any Tax allocation or sharing agreement and HSF
has not been a member of an affiliated group filing a consolidated federal
income Tax Return or has any Liability for Taxes of any Person (other than HSF)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign Law) as a transferee or successor or by Contract or otherwise.
(e) HSF is in compliance in all material respects with records contain all
information and documents (including properly completed IRS Forms W-9)
necessary to comply in all material respects with, all applicable information
reporting and Tax withholding requirements under federal, state, and local Tax
Laws, and such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code.
(f) Except as disclosed in Section 5.8 of the HSF Disclosure Memorandum,
HSF has not made any payments, is not obligated to make any payments, and is
not a party to any Contract that could obligate it to make any payments that
would be disallowed as a deduction under Section 280G or 162(m) of the Internal
Revenue Code.
(g) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of HSF that occurred during or after any Taxable Period in
which HSF incurred a net operating loss that carries over to any Taxable Period
ending after December 31, 1995.
5.9 ASSETS. Except as disclosed in Section 5.9 of the HSF Disclosure
Memorandum, HSF has good and marketable title, free and clear of all Liens, to
all of its respective Assets. All tangible properties used in the businesses
of HSF are in good condition, reasonable wear and tear excepted, and are usable
in the ordinary course of business consistent with HSF's past practices. All
items of inventory of HSF reflected on the most recent balance sheet included
in the HSF Financial Statements delivered prior to the Effective Time will
consist, as applicable, of items of a quality and quantity usable and saleable
in the ordinary course of business and conform to generally accepted standards
in the industry in which HSF is a part. All Assets which are material to HSF's
business, held under leases or subleases by HSF, are held under valid Contracts
enforceable in accordance with their respective terms, and each such Contract
is in full force and effect. Section 5.9 of the HSF Disclosure Memorandum sets
forth the scope of coverage of all of HSF's insurance policies as of the date
of this Agreement, the term of each such policy and the premiums relating
thereto. HSF has not received notice from any insurance carrier that (i) such
insurance will be canceled or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. Except as disclosed in Section 5.9 of the HSF
Disclosure Memorandum, there are presently no claims pending under such
policies of insurance and no notices of denial of any material claim have been
received by HSF under such policies. To the Knowledge of HSF, all leases for
- 8 -
<PAGE> 10
restaurant sites are in full force and effect and the landlord is not
in Default thereunder and has not repudiated or waived any material
provision of such lease. To the Knowledge of HSF, the landlord of each lease
for a restaurant site holds title to the site free of any encumbrance securing
debt to any Person other than Persons with whom the relevant BCS Company has a
non-disturbance and attornment agreement and there is no other exception to
title which would have a Material Adverse Effect on the value of the property
or HSF's use thereof.
5.10 INTELLECTUAL PROPERTY. Section 5.10 of the HSF Disclosure Memorandum
sets forth a complete and accurate list of, and a brief description of all
governmental registrations or applications for governmental registrations of,
all Intellectual Property owned, used or licensed by or to HSF which are used
in or necessary for the conduct of HSF's business, except as to which the
absence of which would not have a Material Adverse Effect on HSF ("HSF
Intellectual Property"). No Person has asserted a claim in writing to HSF that
HSF has abandoned any HSF Intellectual Property and, to the Knowledge of HSF,
HSF has not abandoned any HSF Intellectual Property. Except as disclosed in
Section 5.10 of the HSF Disclosure Memorandum, HSF owns or has the lawful right
to use the HSF Intellectual Property. Except as disclosed in Section 5.10 of
the HSF Disclosure Memorandum, use of the HSF Intellectual Property by HSF or
the Shareholders has not to the Knowledge of HSF misappropriated or infringed
on any rights held or owned by any third party, nor has any third party
asserted any such claim. HSF is not obligated to pay any royalties to any
Person with respect to any HSF Intellectual Property. Except as disclosed in
Section 5.10 of the HSF Disclosure Memorandum, every officer or management
employee of HSF is a party to a Contract which requires such officer or
management employee to keep confidential any trade secrets, proprietary data,
customer information, or other business information of HSF, and, to the
Knowledge of HSF, no officer is party to, nor to the Knowledge of HSF has HSF
received any notice of any other management employee being a party to, any
Contract with any Person other than HSF which requires such officer or
management employee to assign any interest in any Intellectual Property to any
Person other than HSF or to keep confidential any trade secrets, proprietary
data, customer information, or other business information of any Person other
than HSF. Except as disclosed in Section 5.10 of the HSF Disclosure
Memorandum, to the Knowledge of HSF, no officer of HSF is party to, nor to the
Knowledge of HSF has HSF received any notice of any other management employee
being a party to, any Contract which restricts or prohibits such officer,
director or management employee from engaging in activities competitive with
any Person, including HSF.
5.11 ENVIRONMENTAL MATTERS.
(a) Except as would not have a Material Adverse Effect on HSF, HSF, its
Participation Facilities, and its Operating Properties are, and have been
during the period of HSF's ownership or operation, in compliance with all
Environmental Laws.
(b) There is no Litigation pending or, to the Knowledge of HSF, threatened
before any court, governmental agency, or authority or other forum in which HSF
or any of its Operating Properties or Participation Facilities has been or,
with respect to threatened Litigation, may be named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental Law
or (ii) relating to the release into the environment of any Hazardous
- 9 -
<PAGE> 11
Material, whether or not occurring at, on, under, adjacent to, or affecting (or
potentially affecting) a site owned, leased, or operated by HSF or any of its
Operating Properties or Participation Facilities, nor, to the Knowledge of HSF,
is there any reasonable basis for any Litigation of a type described in this
sentence which could reasonably be expected to have a Material Adverse Effect
on HSF.
(c) During the period of (i) HSF's ownership or operation of any of its
current properties, (ii) HSF's participation in the management of any
Participation Facility, or (iii) HSF's holding of a security interest in an
Operating Property, there have been no releases of Hazardous Material in, on,
under, adjacent to, or affecting (or to the Knowledge of HSF reasonably likely
to affect) such properties, except as would not have a Material Adverse Effect
on HSF. Prior to the period of (i) HSF's ownership or operation of any of its
current properties, (ii) HSF's participation in the management of any
Participation Facility, or (iii) HSF's holding of a security interest in a
Operating Property, to the Knowledge of HSF, there were no releases of
Hazardous Material in, on, under, or affecting any such property, Participation
Facility or Operating Property, except as would not have a Material Adverse
Effect on HSF.
5.12 COMPLIANCE WITH LAWS. HSF has in effect all Permits necessary for it
to own, lease, or operate its material Assets and to carry on its business as
now conducted, and there has occurred no Default under any such Permit, except
where the failure to possess such Permit or the occurrence of a Default would
not have a Material Adverse Effect on HSF or the restaurant to which the Permit
relates. Except as disclosed in Section 5.12 of the HSF Disclosure Memorandum,
HSF:
(a) is not in Default under any of the provisions of its Articles of
Incorporation or Bylaws (or other governing instruments);
(b) is not in Default under any Laws, Orders, or Permits applicable to
its business or employees conducting its business, except for any Default
that would not have a Material Adverse Effect on HSF or any restaurants
owned or operated by HSF; or
(c) has not since January 1, 1993, received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that HSF is not in material compliance with any of the Laws or Orders which
such governmental authority or Regulatory Authority enforces which has not
been resolved, (ii) threatening to revoke any Permits, or (iii) requiring
HSF to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment, or memorandum of understanding, or
to adopt any Board resolution or similar undertaking.
5.13 LABOR RELATIONS. Except as disclosed in Section 5.13 of the HSF
Disclosure Memorandum, HSF is not the subject of any Litigation asserting that
it has committed an unfair labor practice (within the meaning of the National
Labor Relations Act or comparable state law) or seeking to compel it to bargain
with any labor organization as to wages or conditions of employment, nor is HSF
party to any collective bargaining agreement, nor is there any strike or
- 10 -
<PAGE> 12
other labor dispute involving HSF, pending or threatened, or to the Knowledge
of HSF, is there any activity involving HSF's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
(a) HSF has disclosed in Section 5.14 of the HSF Disclosure Memorandum,
and has delivered or made available to LSI prior to the execution of this
Agreement copies in each case of, all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plan, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health
plans, all life insurance plans, and all other employee benefit plans or fringe
benefit plans, including "employee benefit plans" as that term is defined in
Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole or
in part by, or contributed to by HSF or ERISA Affiliate thereof for the benefit
of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "HSF Benefit Plans"). Any of
the HSF Benefit Plans which is an "employee pension benefit plan," as that term
is defined in Section 3(2) of ERISA, is referred to herein as a "HSF ERISA
Plan."
(b) All HSF Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on HSF. Each HSF ERISA Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue Service,
and HSF is not aware of any circumstances likely to result in revocation of any
such favorable determination letter. HSF has not engaged in a transaction with
respect to any HSF Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject HSF to a Tax imposed
by either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA.
(c) No HSF ERISA Plan is, and HSF has never maintained or contributed to,
a "defined benefit plan" (as defined in Section 414(j) of the Internal Revenue
Code) or a multiemployer plan within the meaning of Section 3(37) of ERISA.
HSF has not provided, or is not required to provide, security to any defined
benefit plan or any single-employer plan of any entity which is considered one
employer with HSF under Section 4001 of ERISA or Section 414 of the Internal
Revenue Code or Section 302 of ERISA (whether or not waived) (an "ERISA
Affiliate") pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by HSF with respect to any ongoing, frozen, or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate. HSF has not incurred any withdrawal Liability with respect to a
multiemployer plan under Subtitle B of Title IV of ERISA (regardless of whether
based on contributions of an ERISA Affiliate). No notice of a "reportable
- 11 -
<PAGE> 13
event," within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed for
any HSF Pension Plan or by any ERISA Affiliate within the 12-month period
ending on the date hereof.
(e) Except as disclosed in Section 5.14 of the HSF Disclosure Memorandum,
HSF has no Liability for retiree health and life benefits under any of the HSF
Benefit Plans and there are no restrictions on the rights of HSF to amend or
terminate any such retiree health or benefit Plan without incurring any
Liability thereunder.
(f) Except as disclosed in Section 5.14 of the HSF Disclosure Memorandum,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, or otherwise) becoming
due to any director or any employee of HSF under any HSF Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any HSF Benefit
Plan, or (iii) result in any acceleration of the time of payment or vesting of
any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of HSF and their respective beneficiaries, other than entitlements
accrued pursuant to funded retirement plans subject to the provisions of
Section 412 of the Internal Revenue Code or Section 302 of ERISA, have been
fully reflected on the HSF Financial Statements.
5.15 MATERIAL CONTRACTS. Except as disclosed in Section 5.15 of the HSF
Disclosure Memorandum HSF, nor any of its Assets, businesses, or operations, is
a party to, or is bound or affected by, or receives benefits under, (i) any
employment, severance, termination, consulting, or retirement Contract
providing for payments to any Person, except for Contracts referred to in
Section 5.13(a) of this Agreement and unwritten Contracts with respect to the
employment of hourly personnel terminable at will or upon statutorily required
notice, (ii) any Contract relating to the borrowing of money by HSF or the
guarantee by HSF of any such obligation (other than Contracts for purchase
money indebtedness in an aggregate amount not exceeding $10,000, Contracts
evidencing trade payables, and Contracts relating to borrowings or guarantees
made in the ordinary course of business), (iii) any Contract which prohibits or
restricts HSF from engaging in any business activities in any geographic area,
line of business or otherwise in competition with any other Person, (iv) any
Contract involving Intellectual Property, (v) any lease of real property as
lessee or lessor, and (vi) any Contract relating to the purchase or sale of any
goods or services (other than Contracts entered into in the ordinary course of
business and that are either (x) terminable by HSF upon not more than 60 days
notice without payment or penalty or (y) has a remaining term of not more than
six months from the date of this Agreement and involves payments not in excess
of $10,000 per year) (together with all Contracts referred to in Sections 5.9
and 5.13(a) of this Agreement, the "HSF Contracts"). With respect to each HSF
Contract and except as disclosed in Section 5.15 of the HSF Disclosure
Memorandum: (i) the Contract is in full force and effect; (ii) HSF is not in
Default thereunder except for any such Default as would not have a Material
Adverse Effect on HSF; (iii) HSF has not repudiated or waived any material
- 12 -
<PAGE> 14
provision of any such Contract; and (iv) no other party to any such
Contract is, to the Knowledge of HSF, in Default in any respect, or has
repudiated or waived any material provision thereunder. Except as disclosed in
Section 5.15 of the HSF Disclosure Memorandum, all of the indebtedness of HSF
for money borrowed is prepayable at any time by HSF without penalty or premium.
5.16 LEGAL PROCEEDINGS. Except as disclosed in Section 5.16 of the HSF
Disclosure Memorandum, there is no Litigation instituted or pending, or, to the
Knowledge of HSF, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against HSF, or against any director (limited, as to
directors, to Litigation with respect to which HSF would have an
indemnification obligation under its Articles of Incorporation or Bylaws) or
employee benefit plan of HSF, or against any Asset, interest, or right of any
of them, nor, except for matters which would not have a Material Adverse Effect
on HSF, are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against HSF. Section 5.16 of the HSF
Disclosure Memorandum contains a summary of all instituted or pending
Litigation as of the date of this Agreement to which HSF is a party and which
names HSF as a defendant or cross-defendant.
5.17 REPORTS. Since January 1, 1992, or the date of organization if
later, HSF has timely filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with Regulatory Authorities (except failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on HSF). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its
respective date, each such report and document did not, in all material
respects, 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
made therein, in light of the circumstances under which they were made, not
misleading, provided, however, that to the extent that the foregoing relates to
facts or omission regarding Persons other than HSF and its Affiliates, such
representation and warranty is made to HSF's Knowledge.
5.18 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument,
or other writing furnished or to be furnished by HSF or any Affiliate thereof
to LSI pursuant to this Agreement or any other document, agreement, or
instrument referred to herein contains or will contain any untrue statement of
material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. HSF has furnished, or within 14 days will furnish, LSI with
copies of all written HSF Contracts, and such copies are true and correct
copies of the written HSF Contracts as such exist on the date of this
Agreement. None of the information supplied or to be supplied by HSF or any
Affiliate thereof for inclusion in the Registration Statement to be filed by
LSI with the Securities and Exchange Commission (the "SEC") will, when the
Registration Statement becomes effective, be false or misleading with respect
to any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by HSF or any Affiliate thereof for inclusion in the Joint Proxy
Statement to be mailed in connection with the BCS Transaction, and any other
documents to be filed by HSF or any
- 13 -
<PAGE> 15
Affiliate thereof with the SEC or any other Regulatory Authority in connection
with the transactions contemplated thereby, will, at the respective time
such documents are filed, and with respect to the Joint Proxy Statement,
when first mailed to the shareholders of BCS and LSI, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or, in the case of the Joint Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Shareholders'
Meetings, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the
Shareholders' Meetings. All documents that HSF or any Affiliate thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
5.19 ACCOUNTING, TAX AND REGULATORY MATTERS. Neither HSF nor, to the
Knowledge of HSF, any Affiliate thereof has taken any action or has any
Knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the Merger from qualifying for pooling-of-interests accounting treatment or as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
5.20 STATE TAKEOVER LAWS. HSF has taken all necessary action to exempt
the transactions contemplated by this Agreement from any applicable
"moratorium," "fair price," "business combination," "control share," or other
anti-takeover Laws (collectively, "Takeover Laws").
5.21 CHARTER PROVISIONS. HSF has taken all action so that the entering
into of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement do not and will not result in the
grant of any rights to any Person under the Articles of Incorporation, Bylaws
or other governing instruments of HSF.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF LSI
LSI hereby represents and warrants to HSF as follows:
6.1 ORGANIZATION, STANDING, AND POWER. LSI is a corporation duly
organized, validly existing, and in good standing under the Laws of the State
of Georgia, and has the corporate power and authority to carry on its business
as now conducted and to own, lease and operate its Assets. LSI is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the
failure to be so qualified or licensed is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on LSI.
- 14 -
<PAGE> 16
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) LSI has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of LSI, subject to the approval
of the holders of a majority of the shares of LSI Common Stock present and
voting at a special meeting of LSI shareholders at which a quorum is present,
which is the only shareholder vote required for approval of this Agreement and
consummation of the merger by LSI. Subject to such requisite shareholder
approval, this Agreement represents a legal, valid, and binding obligation of
LSI, enforceable against LSI in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by LSI, nor the
consummation by LSI of the transactions contemplated hereby, nor compliance by
LSI with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of LSI's Articles of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any LSI Company under, any
Contract or Permit of any LSI Company or, (iii) subject to receipt of the
requisite approvals referred to in Section 9.1(b) of this Agreement, violate
any Law or Order applicable to any LSI Company or any of their respective
material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit
plans, or under the HSR Act, no notice to, filing with, or Consent of, any
public body or authority is necessary for the consummation by LSI of the Merger
and the other transactions contemplated in this Agreement.
6.3 CAPITAL STOCK.
(a) The authorized capital stock of LSI consists of (i) 25,000,000 shares
of LSI Common Stock, of which 8,466,350 shares are issued and outstanding as of
the date of this Agreement, and (ii) 10,000,000 shares of LSI Preferred Stock,
of which no shares are issued and outstanding. All of the issued and
outstanding shares of LSI Capital Stock are, and all of the shares of LSI
Common Stock to be issued in exchange for shares of HSF Common Stock upon
consummation of the Merger, when issued in accordance with the terms of this
Agreement, will be, duly and validly issued and outstanding and fully paid and
nonassessable under the GBCC. None of the outstanding shares of LSI Capital
Stock has been, and none of the shares of LSI Common Stock to be issued in
exchange for shares of HSF Common Stock upon consummation of the Merger will
be, issued in violation of any preemptive rights of the current or past
shareholders of LSI. LSI has reserved 2,018,350 shares of LSI Common Stock for
issuance
- 15 -
<PAGE> 17
under the LSI Stock Plans, pursuant to which options to purchase no more than
1,238,031 shares of LSI Common Stock are outstanding.
(b) Except as set forth in Section 6.3(a) of this Agreement or as
disclosed in Section 6.3 of the LSI Disclosure Memorandum, there are no shares
of capital stock or other equity securities of LSI outstanding and no
outstanding Rights relating to the capital stock of LSI.
6.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) LSI has timely filed and made available to HSF all SEC Documents
required to be filed by LSI since December 31, 1992 or such later date as LSI
first filed, or was first obligated to file, such SEC Documents (the "LSI SEC
Reports"). The LSI SEC Reports (i) at the time filed, complied in all material
respects with the applicable requirements of the Securities Laws and other
applicable Laws and (ii) did not, at the time they were filed (or, if amended
or superseded by a filing, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such LSI SEC Reports or necessary in order to make the statements in
such LSI SEC Reports, in light of the circumstances under which they were made,
not misleading. No LSI Subsidiary is required to file any SEC Documents.
(b) Each of the LSI Financial Statements (including, in each case, any
related notes) contained in the LSI SEC Reports, including any LSI SEC Reports
filed after the date of this Agreement until the Effective Time, complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except to
the extent required by changes to GAAP or as may be indicated in the notes to
such financial statements or, in the case of unaudited interim statements, as
permitted by Form 10-Q of the SEC), and fairly presented in all material
respects the consolidated financial position of LSI and its Subsidiaries as at
the respective dates and the consolidated results of operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount or effect, and any
pro forma financial information contained in the LSI Financial Statements is
not necessarily indicative of the consolidated financial position of LSI and
the LSI Subsidiaries, as the case may be, as of the respective dates thereof
and the consolidated results of operations and cash flows for the period
indicated.
6.5 ABSENCE OF UNDISCLOSED LIABILITIES. No LSI Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on LSI, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of LSI as of
December 31, 1995 and March 31, 1996, included in the LSI Financial Statements
or reflected in the notes thereto, or as disclosed in the LSI Disclosure
Memorandum. No LSI Company has incurred or paid any Liability since March 31,
1996, except for such Liabilities (i) disclosed in the LSI Disclosure
Memorandum or (ii) incurred or paid in the ordinary course of business
consistent with past business practice and which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on LSI.
- 16 -
<PAGE> 18
6.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995, except
as disclosed in the LSI Financial Statements delivered prior to the date of
this Agreement or as disclosed in Section 6.6 of the LSI Disclosure Memorandum,
(i) there have been no events, changes or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on LSI, and (ii) the LSI Companies have not taken any action, or failed
to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result
in a material breach or violation of any of the covenants and agreements of LSI
contained in Article 7 of this Agreement.
6.7 COMPLIANCE WITH LAWS. Each LSI Company has in effect all Permits
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted. Except as disclosed in Section 6.7 of the LSI
Disclosure Memorandum, no LSI Company:
(a) is in Default of any Laws, Orders or Permits applicable to its
business or employees conducting its business; or
(b) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any LSI Company is not in material compliance with any of the Laws or
Orders which such governmental authority or Regulatory Authority enforces
which has not been resolved, or (ii) requiring any LSI Company to enter
into or consent to the issuance of a cease and desist order, formal
agreement, directive, commitment or memorandum of understanding, or to
adopt any Board resolution or similar undertaking, which restricts
materially the conduct of its business.
6.8 LEGAL PROCEEDINGS. Except as disclosed in Section 6.16 of the LSI
Disclosure Memorandum there is no Litigation instituted or pending, or, to the
Knowledge of LSI, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any LSI Company, or against any director,
employee or employee benefit plan of any LSI Company, or against any Asset,
employee benefit plan, interest, or right of any of them, that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
LSI, nor are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any LSI Company, that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on LSI.
6.9 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument or
other writing furnished or to be furnished by any LSI Company or any Affiliate
thereof to HSF pursuant to this Agreement or any other document, agreement or
instrument referred to herein contains or will contain any untrue statement of
material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by
any LSI Company or any Affiliate thereof for inclusion in the Registration
Statement to be filed by LSI with the SEC, will, when the Registration
Statement becomes effective, be false or misleading with respect to any
- 17 -
<PAGE> 19
material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any LSI Company or any Affiliate thereof for inclusion in the Joint
Proxy Statement to be mailed to each Party's shareholders in connection with
the Shareholders' Meetings, and any other documents to be filed by any LSI
Company or any Affiliate thereof with the SEC or any other Regulatory Authority
in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to the Joint Proxy
Statement, when first mailed to the shareholders of HSF and LSI, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Joint Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Shareholders' Meetings, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for the
Shareholders' Meetings. All documents that any LSI Company or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all
material respects with the provisions of applicable Law.
6.10 AUTHORITY OF WPC. WPC is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Georgia as a
wholly-owned Subsidiary of LSI. The authorized capital stock of WPC shall
consist of 1,000 shares of WPC Common Stock, all of which is validly issued and
outstanding, fully paid and nonassessable and is owned by LSI free and clear of
any Lien. WPC has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of WPC. This Agreement
represents a legal, valid, and binding obligation of WPC, enforceable against
WPC in accordance with its terms.
6.11 REPORTS. Since January 1, 1992, or the date of organization if
later, each LSI Company has filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with (i) the SEC, including, but not limited to, Forms 10-K, Forms 10-Q,
Forms 8-K, and proxy statements, (ii) other Regulatory Authorities, and (iii)
any applicable state securities authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on LSI). As
of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, 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 made therein, in light of the circumstances
under which they were made, not misleading.
- 18 -
<PAGE> 20
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF HSF. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement, unless
the prior written consent of LSI shall have been obtained, and except as
otherwise expressly contemplated herein, HSF shall (a) operate its business in
the usual, regular, and ordinary course, (b) use its reasonable efforts
preserve intact its business organization and Assets and maintain its rights
and franchises, and (c) take no action which would (i) materially adversely
affect the ability of any Party to obtain any Consents required for the
transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentences of Section 9.1(b) or
9.1(c) of this Agreement, or (ii) materially adversely affect the ability of
any Party to perform its covenants and agreements under this Agreement.
7.2 NEGATIVE COVENANTS OF HSF. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, HSF
covenants and agrees that it will not do or agree or commit to do any of the
following without the prior written consent of the chief executive officer or
chief financial officer of LSI, which consent shall not be unreasonably
withheld, conditioned or delayed:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of HSF, or
(b) incur any additional debt obligation or other obligation for
borrowed money in excess of an aggregate of $10,000 (other than
indebtedness for trade payables in the ordinary course of business
consistent with past practices) or impose, or suffer the imposition, on any
Asset of HSF of any Lien or permit any such Lien to exist (other than in
connection with Liens in effect as of the date hereof that are disclosed in
Section 5.9 of the HSF Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of HSF, or declare or pay any dividend or make any other
distribution in respect of HSF's capital stock other than amounts equal to
the shareholders' aggregate accumulated adjustments account (as defined in
Section 1368(e)(1) of the Internal Revenue Code); provided, that in no
event shall HSF undertake any action under this Section 7.2(c) that would
result in the BCS Transaction not qualifying for accounting purposes for
treatment as a pooling of interests; or
(d) except for this Agreement, or as disclosed in Section 5.14 of the
HSF Disclosure Memorandum, issue, sell, pledge, encumber, authorize the
issuance of, enter into any Contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding, any
additional shares of HSF Common Stock or any other
- 19 -
<PAGE> 21
capital stock of HSF, or any stock appreciation rights, or any option,
warrant, conversion, or other right to acquire any such stock, or any
security convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital stock of HSF or
issue or authorize the issuance of any other securities in respect of or in
substitution for shares of HSF Common Stock, or sell, lease, mortgage or
otherwise dispose of or otherwise encumber any Asset having a book value in
excess of $10,000; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of three
years or less, purchase any securities or make any material investment,
either by purchase of stock of securities, contributions to capital, Asset
transfers, or purchase of any Assets, in any Person, or otherwise acquire
direct or indirect control over any Person; or
(g) grant any increase in compensation or benefits to the employees or
officers of HSF, except in accordance with past practice as disclosed in
Section 5.14 of the HSF Disclosure Memorandum or as required by Law; pay
any severance or termination pay or any bonus other than pursuant to
written policies or written Contracts in effect on the date of this
Agreement and disclosed in Section 5.14 of the HSF Disclosure Memorandum;
and enter into or amend any severance agreements with officers of HSF;
grant any material increase in fees or other increases in compensation or
other benefits to directors of HSF except in accordance with past practice
disclosed in Section 5.14 of the HSF Disclosure Memorandum; or voluntarily
accelerate the vesting of any employee benefits; or
(h) enter into or amend any employment Contract between HSF and any
Person (unless such amendment is required by Law and except for increases
in compensation or benefits in accordance with past practice as disclosed
in Section 5.14 or 5.15 of the HSF Disclosure Memorandum) that HSF does not
have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the
Effective Time or upon statutorily required notice; or
(i) adopt any new employee benefit plan of HSF or terminate or
withdraw from, or make any material change in or to, any existing employee
benefit plans of HSF other than any such change that is required by Law or
that, in the opinion of counsel, is necessary or advisable to maintain the
tax qualified status of any such plan, or make any distributions from such
employee benefit plans, except as required by Law, the terms of such plans
or consistent with past practice; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of HSF for Material
money damages or restrictions upon the operations of HSF; or
- 20 -
<PAGE> 22
(l) enter into, terminate or materially modify or amend any Contract
involving the payment of $10,000 or more, or waive, release, compromise or
assign any material rights or claims, except for purchases of inventory in
the ordinary course of business under existing Contracts or pursuant to
individual purchase orders.
7.3 COVENANTS OF LSI. From the date of this Agreement until the earlier
of the Effective Time or the termination of this Agreement, LSI covenants and
agrees that it shall (x) continue to conduct its business and the business of
its Subsidiaries in a manner designed in its reasonable judgment, to enhance
the long-term value of the LSI Common Stock and the business prospects of the
LSI Companies and to the extent consistent therewith use all reasonable efforts
to preserve intact the LSI Companies' core businesses and goodwill with their
respective employees and the communities they serve, (y) not declare or pay any
dividend or make any distribution in respect of LSI Common Stock, and (z) take
no action which would (i) materially adversely affect the ability of any Party
to obtain any Consents required for the transactions contemplated hereby
without imposition of a condition or restriction of the type referred to in the
last sentences of Section 9.1(b) or 9.1(c) of this Agreement, or (ii)
materially adversely affect the ability of any Party to perform its covenants
and agreements under this Agreement; provided, that the foregoing shall not
prevent any LSI Company from discontinuing or disposing of any of its Assets or
business if such action is, in the judgment of LSI, desirable in the conduct of
the business of LSI and its Subsidiaries. LSI further covenants and agrees
that it will not, without the prior written consent of the chief executive
officer of HSF, which consent shall not be unreasonably withheld, amend the
Articles of Incorporation or Bylaws of LSI, in each case, in any manner adverse
to the holders of HSF Common Stock as compared to rights of holders of LSI
Common Stock generally as of the date of this Agreement.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.5 REPORTS. Each Party shall file all reports required to be filed by it
with Regulatory Authorities between the date of this Agreement and the
Effective Time and shall deliver to the other Party copies of all such reports
promptly after the same are filed. If financial statements are contained in
any such reports filed with the SEC, such financial statements will fairly
present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods
then ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material). As
of their respective dates, such reports filed with the SEC will comply in all
material respects with the Securities Laws and will not contain any untrue
statement of a material fact or omit to state a 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. Any financial
statements contained
- 21 -
<PAGE> 23
in any other reports to another Regulatory Authority shall be prepared in
accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL. As
soon as practicable after execution of this Agreement, LSI shall prepare and
file the Registration Statement with the SEC, and shall use its reasonable
efforts to cause the Registration Statement to become effective under the 1933
Act and take any action required to be taken under the applicable state Blue
Sky or securities Laws in connection with the issuance of the shares of LSI
Common Stock upon consummation of the Merger. HSF shall cooperate in the
preparation and filing of the Registration Statement and shall furnish all
information concerning it and the holders of its capital stock as LSI may
reasonably request in connection with such action. LSI shall call a
Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and such other related matters as it
deems appropriate. In connection with the Shareholders' Meeting, (i) the Board
of Directors of LSI shall recommend to their shareholders the approval of this
Agreement, and (ii) the Board of Directors and officers of LSI shall use their
reasonable efforts to obtain such shareholders' approval. LSI and HSF shall
make all necessary filings with respect to the Merger under the Securities
Laws.
8.2 EXCHANGE LISTING. LSI shall use its reasonable efforts to list, prior
to the Effective Time, on the Nasdaq National Market the shares of LSI Common
Stock to be issued to the holders of HSF Common Stock pursuant to the Merger,
and LSI shall give all notices and make all filings with the NASD required in
connection with the transactions contemplated herein.
8.3 APPLICATIONS; ANTITRUST NOTIFICATION. LSI shall prepare and file, and
HSF shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement. To
the extent required by the HSR Act, each of the Parties will within 15 business
days of the date hereof file with the United States Federal Trade Commission
and the United States Department of Justice the notification and report form
required for the transactions contemplated hereby and any supplemental or
additional information which may reasonably be requested in connection
therewith pursuant to the HSR Act and will comply in all material respects with
the requirements of the HSR Act. The Parties shall deliver to each other
copies of all filings, correspondence and orders to and from all Regulatory
Authorities in connection with the transactions contemplated hereby.
8.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, HSF and WPC shall execute and file the
Articles of Merger with the Secretary of State of the State of Rhode Island and
WPC shall execute and file the Certificate of Merger with the Secretary of
State of the State of Georgia in connection with the Closing.
- 22 -
<PAGE> 24
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, each Party agrees to use its reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper, or advisable under applicable Laws to consummate and
make effective, as soon as practicable after the date of this Agreement, the
transactions contemplated by this Agreement, including using its reasonable
efforts to lift or rescind any Order adversely affecting its ability to
consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9 of this Agreement; provided, that
nothing herein shall preclude either Party from exercising its rights under
this Agreement. Each Party shall use its reasonable efforts to obtain all
Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
8.6 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and of its
financial and legal conditions as the other Party reasonably requests, provided
that such investigation shall be reasonably related to the transactions
contemplated hereby and shall not interfere unnecessarily with normal
operations. No investigation by a Party shall affect the representations and
warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the
other Party concerning its businesses, operations, and financial positions and
shall not use such information for any purpose except in furtherance of the
transactions contemplated by this Agreement. If this Agreement is terminated
prior to the Effective Time, each Party shall promptly return or certify the
destruction of all documents and copies thereof, and all work papers containing
confidential information received from the other Party.
8.7 PRESS RELEASES. Prior to the Effective Time, HSF and LSI shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.8 CERTAIN ACTIONS. Except with respect to this Agreement and the
transactions contemplated hereby, neither HSF nor any Affiliate thereof nor any
Representatives thereof retained by HSF shall directly or indirectly solicit
any Acquisition Proposal by any Person. Neither HSF nor any Affiliate or
Representative thereof shall furnish any non-public information that is not
legally obligated to furnish, negotiate with respect to, or enter into any
Contract with respect to, any Acquisition Proposal unless HSF has determined
that it must consider an Acquisition Proposal in accordance with Section
8.8 of this Agreement and requests HSF to furnish information to and/or
enter into discussions or negotiations with the Person who has made
- 23 -
<PAGE> 25
such Acquisition Proposal. HSF shall promptly advise LSI following the
receipt of any Acquisition Proposal and the details thereof, and advise LSI of
any developments with respect to such Acquisition Proposal, including but not
limited to, any decision by the Board of Directors to cause HSF to furnish
non-public information to the Person making such Acquisition Proposal, promptly
upon the occurrence thereof. HSF shall (i) immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
Persons conducted heretofore with respect to any of the foregoing, and (ii)
direct and use its reasonable efforts to cause all of its Representatives not
to engage in any of the foregoing.
8.9 ACCOUNTING AND TAX TREATMENT. Each of the Parties undertakes and
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify for pooling-of-interests
accounting treatment and treatment as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 STATE TAKEOVER LAWS. HSF shall take all necessary steps to exempt
the transactions contemplated by this Agreement from, or if necessary to
challenge the validity or applicability of, any applicable Takeover Law.
8.11 CHARTER PROVISIONS. HSF shall take all necessary action to ensure
that the entering into of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby do not and will not result in the
grant of any rights to any Person under the Articles of Incorporation, Bylaws
or other governing instruments of HSF.
8.12 AGREEMENT OF AFFILIATES. HSF has disclosed in Section 8.12 of the
HSF Disclosure Memorandum all Persons whom it reasonably believes is an
"affiliate" of HSF for purposes of Rule 145 under the 1933 Act. HSF shall use
its reasonable efforts to cause each such Person to deliver to LSI not later
than 30 days after the date of this Agreement, a written agreement,
substantially in the form of Exhibit 1, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of HSF Common Stock
held by such Person except as contemplated by such agreement or by this
Agreement and will not sell, pledge, transfer, or otherwise dispose of the
shares of LSI Common Stock to be received by such Person upon consummation of
the Merger except in compliance with applicable provisions of the 1933 Act and
the rules and regulations thereunder and until such time as financial results
covering at least 30 days of combined operations of LSI and HSF have been
published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies. Shares of LSI Common Stock issued to such
affiliates of HSF in exchange for shares of HSF Common Stock shall not be
transferable until such time as financial results covering at least 30 days of
combined operations of LSI and HSF have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies,
regardless of whether each such affiliate has provided the written agreement
referred to in this Section 8.12 (and LSI shall be entitled to place
restrictive legends upon certificates for shares of LSI Common Stock issued to
affiliates of HSF pursuant to this Agreement to enforce the provisions of this
Section 8.12). LSI shall not be required to maintain the effectiveness
of the Registration Statement under the 1933 Act for the purposes of resale of
LSI Common Stock by such affiliates.
- 24 -
<PAGE> 26
8.13 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective Time, LSI
shall provide generally to officers and employees of HSF employee benefits
under employee benefit and welfare plans (other than stock option or other
plans involving the potential issuance of LSI Common Stock), on terms and
conditions which when taken as a whole are substantially similar to those
currently provided by the LSI Companies to their similarly situated officers
and employees. For purposes of participation, vesting and (except in the case
of LSI retirement plans) benefit accrual under LSI's employee benefit plans,
the service of the employees of HSF prior to the Effective Time shall be
treated as service with a LSI Company participating in such employee benefit
plans. LSI also shall cause the Surviving Corporation to honor in accordance
with their terms all employment, severance, consulting and other compensation
Contracts disclosed in Section 8.13 of the HSF Disclosure Memorandum to LSI
between HSF and any current or former director, officer, or employee thereof,
and all provisions for vested benefits or other vested amounts earned or
accrued through the Effective Time under the HSF Benefit Plans.
8.14 INDEMNIFICATION.
(a) Subject to the terms and conditions of this Section 8.14,
Shareholders, jointly and severally, agree to indemnify and hold harmless LSI,
from and against any and all assessments, losses, damages (including special
and consequential damages incurred by third party claims claimants),
liabilities, and out of pocket costs and expenses, including without
limitation, interest, penalties, cost of external investigation (i.e., not
including cost of employees of LSI) and defense, and reasonable attorneys' and
other professional fees and expenses paid, suffered or incurred by LSI within
the later period of (i) one (1) year following the Effective Time or (ii) first
publication by LSI of audited consolidated financial statements covering an
accounting period after the Closing Date for those items that would be expected
to be encountered in the audit process; and resulting from, based upon, or
arising out of:
(i) the inaccuracy, untruth or incompleteness of any representation
or warranty of HSF or the Shareholders contained in or made pursuant to this
Agreement or in the HSF Disclosure Memorandum or any certificate or Exhibit
furnished by HSF in connection therewith; or
(ii) a breach of or failure to perform any covenant or agreement of
HSF or the Shareholders made in this Agreement.
Provided, that the right to indemnification shall extend beyond such period
with respect to any claim for which written notice was given to the
Shareholders during such period but shall expire on the expiration of the
applicable statutes of limitations unless an action has been brought with
respect thereto.
(b) An indemnification claim shall be made by LSI by delivery of a written
notice to the Shareholders requesting indemnification and specifying in
reasonable detail the basis on which indemnification is sought and the amount
for which indemnification is sought.
- 25 -
<PAGE> 27
(c) The Shareholders shall have 30 days to object to an indemnification
claim by delivery of a written notice of such objection to LSI specifying in
reasonable detail the basis for such objection. Failure to timely so object
shall constitute a final and binding acceptance of the indemnification claim by
the Shareholders, and the indemnification claim shall be paid in accordance
with Section 11(d). If an objection is timely interposed by the Shareholders,
then LSI and the Shareholders shall negotiate in good faith for a period of 60
business days from the date LSI receives such objection prior to commencing any
formal legal action, suit or proceeding with respect to such indemnification
claim.
(d) Upon final determination of the amount of an indemnification claim,
whether by agreement between the Shareholders and LSI or by an arbitration
award or other adjudication, the Shareholders shall pay the amount of such
indemnification claim within ten (10) days of the date such amount is finally
determined and all relevant appeal periods have expired. Payment shall be made
by delivery to LSI of shares of LSI Common Stock, which shall be valued for
such purpose at the last sale price of such common stock on the Nasdaq National
Market (as reported in The Wall Street Journal or, if not reported thereby, any
other authoritative source) on the last trading day preceding the Effective
Time, such price to be appropriately adjusted for changes in the number of
shares of LSI Common Stock outstanding as a result of a stock split, stock
dividend, or similar recapitalization occurring after the Effective Time and
before the delivery of such shares to LSI.
(e) Upon payment in full of any indemnification claim, the Shareholders
shall be subrogated to the extent of such payment to the rights of LSI against
any person or entity with respect to the subject matter of such indemnification
claim.
(f) Shareholders shall not be liable to LSI for any indemnification
hereunder except to the extent that the aggregate assessments, losses, damages
(including special and consequential damages incurred by third party claims
claimants), liabilities, and out of pocket costs and expenses, including
without limitation, interest, penalties, cost of external investigation (i.e.,
not including cost of employees of LSI) and defense, and reasonable attorneys'
and other professional fees and expenses subject to indemnification for which
Shareholders are responsible exceeds ten thousand dollars ($10,000).
Notwithstanding any other provision hereof, in no event shall the obligation of
the Shareholders to indemnify LSI pursuant to this Section 8.14 exceed the
aggregate value of the total number of shares of LSI Common Stock issued to
Shareholder pursuant to this Agreement valued at the last sale price of such
common stock on the Nasdaq National Market (as reported in The Wall Street
Journal or, if not reported thereby, any other authoritative source) on the
last trading day preceding the Effective Time.
8.15 ASSUMPTION OF GUARANTEES. LSI shall use its reasonable efforts to
relieve, prior to the Effective Time, each of the Shareholder's guarantees on
the outstanding indebtedness under the HSF credit facility and any lease
guarantees pursuant to HSF leases; provided, that in no event shall LSI
undertake any action under this Section 8.15 that would result in the BCS
Transaction not qualifying for accounting purposes for treatment as a pooling
of interests.
- 26 -
<PAGE> 28
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
of each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived pursuant to Section 11.6 of this Agreement:
(A) SHAREHOLDER APPROVAL. The shareholders of LSI shall have adopted
or approved this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required by
Law, by the provisions of any governing instruments, or by the rules of the
NASD.
(B) REGULATORY APPROVALS. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (including requirements relating to
the raising of additional capital or the disposition of Assets) which in
the reasonable judgment of the Board of Directors of LSI would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement that, had such condition or
requirement been known, LSI would not, in its reasonable judgment, have
entered into this Agreement.
(C) CONSENTS AND APPROVALS. Each Party shall have obtained any and
all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b) of this Agreement) or for the preventing of
any Default under any Contract or Permit of such Party. No Consent so
obtained which is necessary to consummate the transactions contemplated
hereby shall be conditioned or restricted in a manner which in the
reasonable judgment of the Board of Directors of LSI would so materially
adversely impact the economic or business benefits of the transactions
contemplated by this Agreement that, had such condition or requirement been
known, LSI would not, in its reasonable judgment, have entered into this
Agreement.
(D) LEGAL PROCEEDINGS. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which prohibits,
restricts or makes illegal consummation of the transactions contemplated by
this Agreement.
(E) REGISTRATION STATEMENT. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing, and all necessary approvals
under state securities Laws or the 1933 Act or 1934 Act relating to the
- 27 -
<PAGE> 29
issuance or trading of the shares of LSI Common Stock issuable pursuant to
the Merger shall have been received.
(F) EXCHANGE LISTING. The shares of LSI Common Stock issuable
pursuant to the Merger shall have been approved for listing on the Nasdaq
National Market.
(G) TAX MATTERS. Each Party shall have received a written opinion of
counsel from Alston & Bird, in form reasonably satisfactory to such Parties
(the "Tax Opinion"), to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, (ii) the exchange in the Merger of HSF Common Stock for LSI Common
Stock will not give rise to gain or loss to the shareholders of HSF with
respect to such exchange (except to the extent of any cash received), and
(iii) none of HSF, LSI or WPC will recognize gain or loss as a consequence
of the Merger (except for amounts resulting from any required change in
accounting methods and any income and deferred gain recognized pursuant to
Treasury regulations issued under Section 1502 of the Internal Revenue
Code). In rendering such Tax Opinion, such counsel shall be entitled to
rely upon representations of officers of HSF and LSI reasonably
satisfactory in form and substance to such counsel.
9.2 CONDITIONS TO OBLIGATIONS OF LSI. The obligations of LSI to perform
this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by LSI pursuant to Section 11.6(a) of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of HSF set forth
in this Agreement shall be assessed as of the date of this Agreement and as
of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of HSF set forth in Section 5.3 of this Agreement shall be true
and correct (except for inaccuracies which are de minimus in amount). The
representations and warranties of HSF set forth in Sections 5.19, 5.20, and
5.21 of this Agreement shall be true and correct in all material respects.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of HSF to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
material respects.
(C) CERTIFICATES. HSF shall have delivered to LSI (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief
executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.1 of this Agreement as relates to HSF and
in Section 9.2(a) and 9.2(b) of this Agreement have been satisfied, and
(ii) certified copies of resolutions duly adopted by HSF's Board of
Directors and
- 28 -
<PAGE> 30
shareholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby,
all in such reasonable detail as LSI and its counsel shall request.
(D) OPINION OF COUNSEL. LSI shall have received an opinion of
Hinckley, Allen & Snyder, counsel to HSF, dated as of the Closing, in form
reasonably satisfactory to LSI, as to the matters set forth in Exhibit 3.
(E) POOLING LETTERS. LSI shall have received letters, a draft dated
as of the date of filing of the Registration Statement with the SEC and a
final version dated as of the Effective Time, in form and substance
reasonably acceptable to LSI, from KPMG Peat Marwick LLP to the effect that
the Merger will qualify for pooling-of-interests accounting treatment. LSI
also shall have received letters, a draft dated as of the date of filing of
the Registration Statement with the SEC and a final version dated as of the
Effective Time, in form and substance reasonably acceptable to LSI, from
KPMG Peat Marwick LLP to the effect that such firm is not aware of any
matters relating to HSF and its Subsidiaries which would preclude the
Merger from qualifying for pooling-of-interests accounting treatment.
(F) ACCOUNTANT'S LETTERS. LSI shall have received from KPMG Peat
Marwick LLP letters dated not more than five days prior to (i) the date of
the Joint Proxy Statement and (ii) the Effective Time, with respect to
certain financial information regarding HSF, in form and substance
reasonably satisfactory to LSI, which letters shall be based upon customary
specified procedures undertaken by such firm in accordance with Statement
of Auditing Standard No. 72.
(G) AFFILIATES AGREEMENTS. LSI shall have received from each
affiliate of HSF the affiliates letter referred to in Section 8.12 of this
Agreement, to the extent necessary to assure in the reasonable judgment of
LSI that the transactions contemplated hereby will qualify for
pooling-of-interests accounting treatment.
(H) SHAREHOLDERS' EQUITY. HSF's shareholders' equity as of the
Closing/end of the last fiscal quarter preceding Closing shall not be less
than HSF's shareholders' equity as of March 31, 1996, excluding for
purposes of the calculation of such shareholders' equity the effects of (i)
all costs, fees and charges, including fees and charges of HSF's
accountants, counsel and financial advisors, whether or not accrued or
paid, that are related to the transaction contemplated by this Agreement,
(ii) distributions to Shareholders permitted under Section 7.2(c) hereof,
and (iii) any reductions in HSF's shareholders' equity resulting from any
actions or changes in policies of HSF taken at the request of LSI.
(I) FAIRNESS OPINION. LSI shall have received from The
Robinson-Humphrey Company, Inc. a letter, dated not more than five business
days prior to the date of the Proxy Statement, to the effect that, in the
opinion of such firm, the consideration to be received by LSI connection
with the Merger is fair, from a financial point of view, to LSI and its
shareholders.
- 29 -
<PAGE> 31
(J) HSF AUDIT. HSF shall have delivered to LSI an audited balance
sheet (including related notes and schedules, if any) as of June 25 , 1996,
and as of March 31, 1996, and the statements of income, changes in
shareholders' equity, and cash flows (including related notes and
schedules, if any) for the fiscal year ended June 25, 1995 and the 40 weeks
ended March 31, 1996, of HSF together with the report of KPMG Peat Marwick
LLP thereon, at least 40 calendar days after the date of this Agreement.
HSF shall have delivered to LSI an audited balance sheet (including related
notes and schedules, if any) as of June 30, 1996, and the statements of
income, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) for the fiscal year then ended, of HSF
together with the report of KPMG Peat Marwick LLP thereon, at least 30
calendar days prior to the Effective Time.
9.3 CONDITIONS TO OBLIGATIONS OF HSF. The obligations of HSF to perform
this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by HSF pursuant to Section 11.6(b) of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of LSI set forth
in this Agreement shall be assessed as of the date of this Agreement and as
of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of LSI set forth in Section 6.3 of this Agreement shall be true
and correct (except for inaccuracies which are de minimus in amount).
There shall not exist inaccuracies in the representations and warranties of
LSI set forth in this Agreement (including the representations and
warranties set forth in Sections 6.3.) such that the aggregate effect of
such inaccuracies has, or is reasonably likely to have, a Material Adverse
Effect on LSI; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" shall be deemed not to include such
qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of LSI to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with.
(C) CERTIFICATES. LSI shall have delivered to HSF (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief
executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.3 of this Agreement as relates
to LSI and in Section 9.3(a) and 9.3(b) of this Agreement have been
satisfied, and (ii) certified copies of resolutions duly adopted by LSI's
Board of Directors and shareholders and WPC's Board of Directors and
shareholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement,
- 30 -
<PAGE> 32
and the consummation of the transactions contemplated hereby, all in such
reasonable detail as HSF and its counsel shall request.
(D) OPINION OF COUNSEL. HSF shall have received an opinion of Alston
& Bird, counsel to LSI, dated as of the Effective Time, in form reasonably
acceptable to HSF, as to the matters set forth in Exhibit 3.
(E) ACCOUNTANT'S LETTERS. HSF shall have received from KPMG Peat
Marwick LLP letters dated not more than five days prior to (i) the date of
the Joint Proxy Statement and (ii) the Effective Time, with respect to
certain financial information regarding LSI, in form and substance
reasonably satisfactory to HSF, which letters shall be based upon customary
specified procedures undertaken by such firm.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this Agreement,
and notwithstanding the adoption or approval of this Agreement by the
shareholders of HSF and LSI or both, this Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of LSI and the Board
of Directors of HSF; or
(b) By the Board of Directors of either Party in the event (i) any
Consent of any Regulatory Authority required for consummation of the Merger
and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
shareholders of LSI fail to adopt or approve this Agreement and the
transactions contemplated hereby as required by the GBCC and the rules of
the NASD at the Shareholders' Meeting where the transactions were presented
to such shareholders for approval and voted upon; or
(c) By HSF or LSI, if LSI or BCS has terminated the BCS Agreement for
any reason; or
(d) By LSI in the event that the BCS Transaction shall not have been
consummated by December 31, 1996, if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by
any breach of this Agreement by LSI.
10.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and
- 31 -
<PAGE> 33
have no effect, except that (i) the provisions of this Section 10.2 and
Article 11 and Section 8.6(b) of this Agreement shall survive any such
termination and abandonment, and (ii) a termination pursuant to Sections
10.1(b) or 10.1(c) of this Agreement shall not relieve the breaching Party from
Liability for an uncured willful breach of a representation, warranty,
covenant, or agreement giving rise to such termination.
ARTICLE 11
MISCELLANEOUS
11.1 DEFINITIONS.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, such Party or a
substantial equity interest in, or all or substantially all of the assets
of, any of its Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including
the Exhibits, schedules and Disclosure Memoranda delivered pursuant hereto
and incorporated herein by reference.
"ARTICLES OF MERGER" shall mean the Articles of Merger to be executed
by HSF and WPC and filed with the Secretary of State of the State of Rhode
Island relating to the Merger as contemplated by Section 1.1 of this
Agreement.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"CERTIFICATE OF MERGER" shall mean the Certificate to be executed by
WPC and filed with the Secretary of State of the State of Georgia relating
to the Merger as contemplated by Section 1.1 of this Agreement.
"CLOSING DATE" shall mean the date on which the Closing occurs.
- 32 -
<PAGE> 34
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets or business.
"DEFAULT" shall mean (i) any breach or violation of or default under
any Contract, Order or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order or Permit.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface or subsurface strata) and which
are administered, interpreted or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq. ("RCRA"), and other Laws relating to emissions,
discharges, releases or threatened releases of any Hazardous Material, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any Hazardous
Material.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EXHIBITS" 1 through 3, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"GLRI" shall mean the General Laws of Rhode Island.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HSF COMMON STOCK" shall mean the no par value common stock of HSF.
"HSF DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Hemenway Sea Foods, Inc. Disclosure Memorandum" delivered prior
to the date of this
- 33 -
<PAGE> 35
Agreement to LSI describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure is
being made. Information disclosed with respect to one Section shall not be
deemed to be disclosed for purposes of any other Section not specifically
referenced with respect thereto. Where any representation or warranty
contained in the Agreement is limited or qualified by the materiality of
the matters as to which the representation or warranty is given, the
inclusion of any matter in the Disclosure Memorandum does not constitute a
determination by HSF that such matters are material.
"HSF FINANCIAL STATEMENTS" shall mean (i) the balance sheets (including
related notes and schedules, if any) of HSF as of June 25, 1995, and the
related statements of income, changes in shareholders' equity, and cash
flows (including related notes and schedules, if any) for the fiscal year
ended June 25, 1995 and (ii) the balance sheets of HSF (including related
notes and schedules, if any) and related statements of income, changes in
shareholders' equity, and cash flows (including related notes and
schedules, if any) with respect to periods ended subsequent to June 25,
1995.
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"INTELLECTUAL PROPERTY" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, technology rights and
licenses, computer software (including any source or object codes therefor
or documentation relating thereto), trade secrets, franchises, know-how,
inventions, and other intellectual property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"JOINT PROXY STATEMENT" shall mean the proxy statement used by BCS and
LSI to solicit the adoption or approval of their respective shareholders
of the transactions contemplated by this Agreement, which shall include the
prospectus of LSI relating to the issuance of the LSI Common Stock to
holders of BCS Common Stock.
"KNOWLEDGE" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts
that are known or should reasonably have been known in the reasonable
exercise of their duties by the Chairman, President, and Chief Financial
Officer, and with respect to HSF shall also include Edward P. Grace III.
"LAW" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities or business, including those promulgated, interpreted
or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any
- 34 -
<PAGE> 36
adverse right or interest, charge, or claim of any nature whatsoever
of, on, or with respect to any property or property interest, other than
(i) Liens for current property Taxes not yet due and payable, and (iii)
Liens which do not materially impair the use of or title to the Assets
subject to such Lien.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution or demand letter, or notice (written
or oral) by any Person of governmental or other examination or
investigation, hearing, inquiry, administrative or other proceeding
alleging potential Liability, or any Regulatory Authority or other federal,
state or local governmental agency or department requesting information
relating to or affecting a Party, its business, its Assets (including
Contracts related to it), or the transactions contemplated by this
Agreement.
"LSI CAPITAL STOCK" shall mean, collectively, the LSI Common Stock,
the LSI Preferred Stock and any other class or series of capital stock of
LSI.
"LSI COMMON STOCK" shall mean the no par value common stock of LSI.
"LSI COMPANIES" shall mean, collectively, LSI and all LSI
Subsidiaries.
"LSI DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Longhorn Steaks, Inc. Disclosure Memorandum" delivered prior to
the date of this Agreement to HSF describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section shall not be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
"LSI FINANCIAL STATEMENTS" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of LSI as of
March 31, 1996, and as of December 31, 1995 and 1994, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the three months ended
March 31, 1996, and for each of the three years ended December 31, 1995,
1994 and 1993, as filed by LSI in SEC Documents, and (ii) the consolidated
statements of condition of LSI (including related notes and schedules, if
any) and related statements of income, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any) included in SEC
Documents filed with respect to periods ended subsequent to March 31, 1996.
"LSI PREFERRED STOCK" shall mean the no par value preferred stock of
LSI.
"LSI STOCK PLANS" shall mean the existing stock option and other
stock-based compensation plans of LSI designated as follows: Longhorn
Steaks, Inc. Amended and Restated 1992 Incentive Plan, Longhorn Steaks,
Inc. Stock Option Agreement with Richard E. Rivera and Longhorn Steaks,
Inc. 1996 Stock Plan for Outside Directors.
"LSI SUBSIDIARIES" shall mean the Subsidiaries of LSI and any
corporation or other organization acquired as a Subsidiary of LSI in the
future and held as a Subsidiary by LSI at the Effective Time.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial
position, business, or results of operations of such Party and its
Subsidiaries, taken as a whole, or (ii) the ability of such Party to
perform its obligations under this Agreement or to consummate the Merger or
the other transactions
- 35 -
<PAGE> 37
contemplated by this Agreement, provided that "material adverse impact"
shall not be deemed to include the impact of (a) changes in Laws of general
applicability or interpretations thereof by courts or governmental
authorities, (b) changes in generally accepted accounting principles or
regulatory accounting principles, (c) actions and omissions of a Party (or
any of its Subsidiaries) taken with the prior informed written Consent of
the other Party in contemplation of the transactions contemplated hereby,
and (z) the Merger on the operating performance of the Parties, including
expenses incurred by the Parties in consummating the transactions
contemplated by this Agreement.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ NATIONAL MARKET" shall mean the Nasdaq Stock Market's National
Market of the National Association of Securities Dealers Automated
Quotations System.
"OPERATING PROPERTY" shall mean any property owned by the Party in
question or by any of its Subsidiaries or in which such Party or Subsidiary
holds a security interest, and, where required by the context, includes the
owner or operator of such property, but only with respect to such property.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
"PARTY" shall mean either HSF or LSI, and "PARTIES" shall mean both
HSF and LSI.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets or business.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by LSI
under the 1933 Act with respect to the shares of LSI Common Stock to be
issued to the shareholders of HSF in connection with the transactions
contemplated by this Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the NASD, the SEC,
the Federal Trade Commission, the United States Department of Justice, and
all other federal, state, county, local or other governmental or regulatory
agencies, authorities,
- 36 -
<PAGE> 38
instrumentalities, commissions, boards or bodies having jurisdiction over
the Parties and their respective Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock
of a Person or by which a Person is or may be bound to issue additional
shares of its capital stock or other Rights.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"SHAREHOLDERS MEETINGS" shall mean the meeting of the shareholders of
LSI to be held pursuant to Section 8.1 of this Agreement, including any
adjournment or adjournments thereof.
"SIGNIFICANT SUBSIDIARY" shall mean any present or future consolidated
Subsidiary of the Party in question, the assets of which constitute ten
percent (10%) or more of the consolidated assets of such Party as reflected
on such Party's consolidated statement of condition prepared in accordance
with GAAP.
"SUBSIDIARIES" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly
or through an unbroken chain of entities as to each of which 50% or more of
the outstanding equity securities is owned directly or indirectly by its
parent (provided, there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), or
(ii) in the case of partnerships, serves as a general partner.
"SURVIVING CORPORATION" shall mean WPC as the surviving corporation
resulting from the Merger.
"TAX RETURN" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
"TAX" or "TAXES" shall mean any federal, state, county, local, or
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, and other taxes,
assessments, charges, fares, or impositions, including interest, penalties,
and additions imposed thereon or with respect thereto.
"WPC COMMON STOCK" shall mean the $.01 par value common stock of WPC.
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
- 37 -
<PAGE> 39
Base Period Trading Price Limitations Section 3.1(c)
Base Period Trading Price Section 3.1(c)
Closing Section 1.2
Effective Time Section 1.3
ERISA Affiliate Section 5.14(b)
Exchange Agent Section 4.1
Exchange Ratio Section 3.1(c)
HSF Contracts Section 5.15
HSF Benefit Plans Section 5.14
HSF ERISA Plan Section 5.14
HSF Intellectual Property Section 5.10
Merger Section 1.1
Per Share Purchase Price Section 3.1(c)
SEC Section 5.18
Tax Opinion Section 9.1(h)
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 EXPENSES. Each of the Parties shall bear and pay all direct costs
and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including filing, registration and
application fees, printing fees, and fees and expenses of its own financial or
other consultants, investment bankers, accountants, and counsel.
11.3 BROKERS AND FINDERS. Except for Tucker Anthony Incorporated as to
HSF and except for The Robinson-Humphrey Company, Inc. as to LSI, each of the
Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed on its behalf any broker or
finder or incurred any Liability for any financial advisory fees, investment
bankers' fees, brokerage fees, commissions, or finders' fees in connection with
this Agreement or the transactions contemplated hereby. In the event of a
claim by any broker or finder based upon his or its representing or being
retained by or allegedly representing or being retained by HSF or LSI, each of
HSF and LSI, as the case may be, agrees to indemnify and hold the other Party
harmless of and from any Liability in respect of any such claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this
Agreement expressed or implied, is intended to confer upon any Person, other
than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, other than as
provided in Sections 8.13 and 8.14 of this Agreement.
- 38 -
<PAGE> 40
11.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
shareholder approval of this Agreement has been obtained; provided, that after
any such approval by the holders of HSF Common Stock, there shall be made no
amendment that requires further approval by such shareholders without the
further approval of such shareholders.
11.6 WAIVERS.
(a) Prior to or at the Effective Time, LSI, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
HSF, to waive or extend the time for the compliance or fulfillment by HSF of
any and all of its obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of LSI under this Agreement, except
any condition which, if not satisfied, would result in the violation of any
Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of LSI.
(b) Prior to or at the Effective Time, HSF, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
LSI, to waive or extend the time for the compliance or fulfillment by LSI of
any and all of its obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of HSF under this Agreement, except
any condition which, if not satisfied, would result in the violation of any
Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of HSF.
(c) The failure of any Party at any time or times to require performance
of any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this
Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. 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.
11.8 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or
by courier or overnight carrier, to the persons at the addresses set forth
below (or at such other address as may be provided hereunder), and shall be
deemed to have been delivered as of the date so delivered:
- 39 -
<PAGE> 41
HSF and Shareholders: Hemenway Sea Foods, Inc.
c/o Bugaboo Creek Steak House, Inc.
1275 Wampanoag Trail
East Providence, Rhode Island 02915
Telecopy Number: (401) 433-5986
Attention: Edward P. Grace, III
Copy to Counsel: Hinckley, Allen & Snyder
1500 Fleet Center
50 Kennedy Plaza
Providence, Rhode Island 02903
Telecopy Number: (401) 277-9600
Attention: Margaret D. Farrell
LSI: Longhorn Steaks, Inc.
8215 Roswell Road, Building 200
Atlanta, Georgia 30350
Telecopy Number: (770) 399-7796
Attention: Richard E. Rivera
Copy to Counsel: Alston & Bird
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: William H. Avery
11.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws.
11.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
11.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether
under any rule of construction or otherwise. No party to this Agreement shall
be considered the draftsman. The parties acknowledge and agree that this
Agreement has been reviewed, negotiated and accepted by all
- 40 -
<PAGE> 42
parties and their attorneys and shall be construed and interpreted according to
the ordinary meaning of the words used so as fairly to accomplish the purposes
and intentions of all parties hereto.
11.13 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was 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 the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
11.14 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
- 41 -
<PAGE> 43
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
HEMENWAY SEA FOODS, INC.
By: /s/ Edward P. Grace, III
------------------------------
President
[CORPORATE SEAL]
ATTEST: LONGHORN STEAKS, INC.
/s/ Anne D. Huemme By: /s/ Richard E. Rivera
- ------------------------------ ------------------------------
Secretary Richard E. Rivera
President
[CORPORATE SEAL]
ATTEST: WHIP POOLING CORPORATION
/s/ F. Fitzhugh Taylor, III By: /s/ Richard S. Rivera
- ------------------------------ ------------------------------
Secretary
President
[CORPORATE SEAL]
- 42 -
<PAGE> 44
THE SHAREHOLDERS:
EDWARD P. GRACE, III
/s/ Edward P. Grace, III
--------------------------------
SAMUEL J. ORR, JR.
/s/ Samuel J. Orr, Jr.
--------------------------------
By: David Rizzo as Attorney-in-Fact
- 43 -
<PAGE> 45
EXHIBIT 1: FORM OF AGREEMENT OF AFFILIATES OF HSF.
<PAGE> 46
AFFILIATE AGREEMENT
Longhorn Steaks, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention:
--------------
--------------
Gentlemen:
The undersigned is a shareholder of Hemenway Sea Foods, Inc. ("HSF"), a
corporation organized and existing under the laws of the State of Rhode Island
and located in Providence, Rhode Island, and will become a shareholder of the
Longhorn Steaks, Inc. ("LSI") pursuant to the transactions described in the
Agreement and Plan of Merger, dated as of June 14, 1996 (the "Agreement"), by
and among LSI, Whip Pooling Corporation ("WPC") and HSF. Under the terms of
the Agreement, HSF will be merged into and with WPC (the "Merger"), and the
shares of the no par value common stock of HSF ("HSF Common Stock") will be
converted into and exchanged for shares of the no par value common stock of LSI
("LSI Common Stock"). This Affiliate Agreement represents an agreement between
the undersigned and LSI regarding certain rights and obligations of the
undersigned in connection with the shares of LSI to be received by the
undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned and LSI hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
HSF he is an "affiliate" under Rule 145(c) as defined in Rule 405 of the Rules
and Regulations of the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended ("1933 Act"), and the undersigned
anticipates that he will be such an "affiliate" at the time of the Merger.
2. Initial Restriction on Disposition. The undersigned agrees that he
will not sell, transfer, or otherwise dispose of his interests in, or reduce
his risk relative to, any of the shares of LSI Common Stock into which his
shares of HSF Common Stock are converted upon consummation of the Merger until
such time as LSI notifies the undersigned that the requirements of SEC
Accounting Series Release Nos. 130 and 135 ("ASR 130 and 135") have been met.
The undersigned understands that ASR 130 and 135 relate to publication of
financial results of post-Merger combined operations of LSI and HSF. LSI
agrees that it will publish such results within 45 days after the end of the
first fiscal quarter of LSI containing the required period of post-Merger
combined operations and that it will notify the undersigned promptly following
such publication.
<PAGE> 47
3. Covenants and Warranties of Undersigned. The undersigned represents,
warrants and agrees that:
(a) During the 30 days immediately preceding the Effective Time of the
Merger, the undersigned has not sold, transfered, or otherwise disposed of
his interests in, or reduced his risk relative to, any of the shares of HSF
Common Stock beneficially owned by the undersigned as of the record date
for determination of shareholders entitled to vote at the Shareholders'
Meeting of HSF held to approve the Merger.
(b) The LSI Common Stock received by the undersigned as a result of
the Merger will be taken for his own account and not for others, directly
or indirectly, in whole or in part.
(c) LSI has informed the undersigned that any distribution by the
undersigned of LSI Common Stock has not been registered under the 1933 Act
and that shares of LSI Common Stock received pursuant to the Merger can
only be sold by the undersigned (1) following registration under the 1933
Act, or (2) in conformity with the volume and other requirements of Rule
145(d) promulgated by the SEC as the same now exist or may hereafter be
amended, or (3) to the extent some other exemption from registration under
the 1933 Act might be available. The undersigned understands that LSI is
under no obligation to file a registration statement with the SEC covering
the disposition of the undersigned's shares of LSI Common Stock or to take
any other action necessary to make compliance with an exemption from such
registration available.
(d) The undersigned will, and will cause each of the other parties
whose shares are deemed to be beneficially owned by the undersigned
pursuant to Section 8 hereof to, have all shares of HSF Common Stock
beneficially owned by the undersigned registered in the name of the
undersigned or such parties, as applicable, prior to the effective date of
the Merger and not in the name of any bank, broker-dealer, nominee or
clearinghouse.
(e) The undersigned is aware that LSI intends to treat the Merger as a
tax-free reorganization under Section 368 of the Internal Revenue Code
("Code") for federal income tax purposes. The undersigned agrees to treat
the transaction in the same manner as LSI for federal income tax purposes.
The undersigned acknowledges that Section 1.368-1(b) of the Income Tax
Regulations requires "continuity of interest" in order for the Merger to be
treated as tax-free under Section 368 of the Code. This requirement is
satisfied if, taking into account those HSF shareholders who receive cash
in exchange for their stock, who receive cash in lieu of fractional shares,
or who dissent from the Merger, there is no plan or intention on the part
of the HSF shareholders to sell or otherwise dispose of the LSI Common
Stock to be received in the Merger that will reduce such shareholders'
ownership to a number of shares having, in the aggregate, a value at the
time of the merger of less than 50% of the total fair market value of the
HSF Common Stock outstanding immediately prior to the Merger. The
undersigned has no prearrangement, plan or intention to sell or otherwise
dispose of an amount of his LSI Common Stock to be received in the Merger
which would cause the foregoing requirement not to be satisfied.
-2-
<PAGE> 48
4. Restrictions on Transfer. The undersigned understands and agrees that
stop transfer instructions with respect to the shares of LSI Common Stock
received by the undersigned pursuant to the Merger will be given to LSI's
Transfer Agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in
substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of
interests" and may not be sold, nor may the owner thereof reduce his
risks relative thereto in any way, until such time as Longhorn Steaks,
Inc. ("LSI") has published the financial results covering at least 30
days of combined operations after the effective date of the merger
through which the business combination was effected. In addition, the
shares represented by this certificate may not be sold, transferred or
otherwise disposed of except or unless (1) covered by an effective
registration statement under the Securities Act of 1933, as amended,
(2) in accordance with (i) Rule 145(d) (in the case of shares issued
to an individual who is not an affiliate of LSI) or (ii) Rule 144 (in
the case of shares issued to an individual who is an affiliate of LSI)
of the Rules and Regulations of such Act, or (3) in accordance with a
legal opinion satisfactory to counsel for LSI that such sale or
transfer is otherwise exempt from the registration requirements of
such Act."
Such legend will also be placed on any certificate representing LSI securities
issued subsequent to the original issuance of the LSI Common Stock pursuant to
the Merger as a result of any transfer of such shares or any stock dividend,
stock split, or other recapitalization as long as the LSI Common Stock issued
to the undersigned pursuant to the Merger has not been transferred in such
manner to justify the removal of the legend therefrom. Upon the request of the
undersigned, LSI shall cause the certificates representing the shares of LSI
Common Stock issued to the undersigned in connection with the Merger to be
reissued free of any legend relating to restrictions on transfer by virtue of
ASR 130 and 135 as soon as practicable after the requirements of ASR 130 and
135 have been met. In addition, if the provisions of Rules 144 and 145 are
amended to eliminate restrictions applicable to the LSI Common Stock received
by the undersigned pursuant to the Merger, or at the expiration of the
restrictive period set forth in Rule 145(d), LSI, upon the request of the
undersigned, will cause the certificates representing the shares of LSI Common
Stock issued to the undersigned in connection with the Merger to be reissued
free of any legend relating to the restrictions set forth in Rules 144 and
145(d) upon receipt by LSI of an opinion of its counsel to the effect that such
legend may be removed.
5. Understanding of Restrictions on Dispositions. The undersigned has
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his ability to sell, transfer, or otherwise
dispose of the shares of LSI Common Stock received by the undersigned, to the
extent he believes necessary, with his counsel or counsel for HSF.
6. Filing of Reports by LSI. LSI agrees, for a period of three years
after the effective date of the Merger, to file on a timely basis all reports
required to be filed by it pursuant to Section 13 of the Securities Exchange
Act of 1934, as amended, so that the public information provisions of Rule
145(d) promulgated by the SEC as the same are presently in effect will be
-3-
<PAGE> 49
available to the undersigned in the event the undersigned desires to transfer
any shares of LSI Common Stock issued to the undersigned pursuant to the
Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of LSI Common Stock received by him in connection
with the Merger at any time during the restrictive period set forth in Rule
145(d), the undersigned will provide the necessary representation letter to the
transfer agent for LSI Common Stock together with such additional information
as the transfer agent may reasonably request. If LSI's counsel concludes that
such proposed sale or transfer complies with the requirements of Rule 145(d),
LSI shall cause such counsel to provide such opinions as may be necessary to
LSI's Transfer Agent so that the undersigned may complete the proposed sale or
transfer.
8. Acknowledgments. The undersigned recognizes and agrees that the
foregoing provisions also apply to all shares of the capital stock of HSF and
LSI that are deemed to be beneficially owned by the undersigned pursuant to
applicable federal securities laws, which the undersigned agrees may include,
without limitation, shares owned or held in the name of (i) the undersigned's
spouse, (ii) any relative of the undersigned or of the undersigned's spouse who
has the same home as the undersigned, (iii) any trust or estate in which the
undersigned, the undersigned's spouse, and any such relative collectively own
at least a 10% beneficial interest or of which any of the foregoing serves as
trustee, executor, or in any similar capacity, and (iv) any corporation or
other organization in which the undersigned, the undersigned's spouse and any
such relative collectively own at least 10% of any class of equity securities
or of the equity interest. The undersigned further recognizes that, in the
event that the undersigned is a director or officer of LSI or becomes a
director or officer of LSI upon consummation of the Merger, among other things,
any sale of LSI Common Stock by the undersigned within a period of less than
six months following the effective time of the Mergers may subject the
undersigned to liability pursuant to Section 16(b) of the Securities Exchange
Act of 1934, as amended.
9. Miscellaneous. This Affiliate Agreement is the complete agreement
between LSI and the undersigned concerning the subject matter hereof. Any
notice required to be sent to any party hereunder shall be sent by registered
or certified mail, return receipt requested, using the addresses set forth
herein or such other address as shall be furnished in writing by the parties.
This Affiliate Agreement shall be governed by the laws of the State of Rhode
Island.
This Affiliate Agreement is executed as of the ____ day of _________,
19__.
Very truly yours,
---------------------------
Signature
---------------------------
Print Name
---------------------------
---------------------------
-4-
<PAGE> 50
---------------------------
Address
[add below the signatures of all registered
owners of shares deemed beneficially owned
by the affiliate]
---------------------------
Name:
---------------------------
Name:
---------------------------
Name:
AGREED TO AND ACCEPTED as of
_______________, 19__
LONGHORN STEAKS, INC.
By:
---------------------------
-5-
<PAGE> 51
EXHIBIT 2: MATTERS AS TO WHICH HINCKLEY, ALLEN & SNYDER WILL OPINE.
<PAGE> 52
MATTERS AS TO WHICH HINCKLEY, ALLEN & SNYDER WILL OPINE
1. HSF is a corporation duly organized, validly existing and in good
standing under the laws of the State of Rhode Island with full corporate power
and authority to carry on the business in which it is engaged as described in
the proxy statement used to solicit the approval by the stockholders of LSI of
the transactions contemplated by the Agreement ("Proxy Statement"), and to own
and use its Assets .
2. The authorized capital stock of HSF consists of ________ shares of HSF
Common Stock, of which 1,000 shares were issued and outstanding as of
_________, 1996. The shares of HSF Common Stock that are issued and
outstanding were not issued in violation of any statutory preemptive rights of
shareholders, were duly issued and are fully paid and nonassessable under the
General Law of Rhode Island. To our knowledge, except as set forth in Section
5.3(a) of this Agreement or Section 5.3 of the BCS Disclosure Memorandum, there
are no options, subscriptions, warrants, calls, rights or commitments
obligating HSF to issue any equity securities or acquire any of its equity
securities.
3. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Articles
of Incorporation or Bylaws of HSF or, to our knowledge but without any
independent investigation, result in any conflict with, breach of, or default
or acceleration under any Contract or Order to which HSF is a party or by which
HSF is bound.
4. The Agreement has been duly and validly executed and delivered by HSF
and, assuming valid authorization, execution and delivery by LSI and WPC,
constitutes a valid and binding agreement of HSF enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, provided,
however, that we express no opinion as to the availability of the equitable
remedy of specific performance.
<PAGE> 53
EXHIBIT 3: MATTERS AS TO WHICH ALSTON & BIRD WILL OPINE.
<PAGE> 54
MATTERS AS TO WHICH ALSTON & BIRD WILL OPINE
1. LSI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia with full corporate power and
authority to carry on the business in which it is engaged as described in the
proxy statement used to solicit the approval by the stockholders of LSI of the
transactions contemplated by the Agreement ("Proxy Statement"), and to own and
use its Assets.
2. WPC is a corporation duly organized and validly existing and in good
standing under the laws of the State of Georgia with full corporate power and
authority to carry on the business in which it is engaged as described in the
Proxy Statement, and to own and use its Assets.
3. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Articles
of Incorporation or Bylaws of LSI or, to our knowledge but without any
independent investigation, any Contract or Order to which LSI is a party or by
which LSI is bound. The adoption of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Articles
of Incorporation or Bylaws of WPC or, to our knowledge but without any
independent investigation, any Contract or Order to which WPC is a party or by
which WPC is bound.
4. The Agreement has been duly and validly executed and delivered by LSI,
and assuming valid authorization, execution and delivery by HSF, constitutes a
valid and binding agreement of LSI enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or similar laws affecting creditors' rights generally,
provided, however, that we express no opinion as to the availability of the
equitable remedy of specific performance.
5. The shares of LSI Common Stock to be issued to the shareholders of HSF
as contemplated by the Agreement have been registered under the Securities Act
of 1933, as amended, and when properly issued and delivered following
consummation of the Merger will be fully paid and non-assessable under the
Georgia Business Corporation Code.
<PAGE> 1
EXHIBIT 2.4
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
OLD GRIST MILL TAVERN, INC.,
WHIP POOLING CORPORATION
AND
LONGHORN STEAKS, INC.
DATED AS OF JUNE 14, 1996
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of June 14, 1996, by and among OLD GRIST MILL TAVERN, INC.
("OGM"), a Massachusetts corporation having its principal office located in
Seekonk, Massachusetts; all of the shareholders of OGM, EDWARD P. GRACE, III
and SAMUEL J. ORR (the "Shareholders"), WHIP POOLING CORPORATION ("WPC"), a
Georgia corporation having its principal office located in Atlanta, Georgia;
and LONGHORN STEAKS, INC. ("LSI"), a Georgia corporation having its principal
office located in Atlanta, Georgia.
PREAMBLE
The Boards of Directors of OGM, WPC and LSI are of the opinion
that the transactions described herein are in the best interests of the parties
and their respective shareholders. This Agreement provides for the acquisition
of OGM by LSI pursuant to the merger of OGM with and into WPC. At the effective
time of such merger, the outstanding shares of the capital stock of OGM shall
be converted into the right to receive shares of the common stock of LSI
(except as provided herein). As a result, shareholders of OGM shall become
shareholders of LSI and WPC shall continue to conduct OGM's business and
operations as a wholly-owned subsidiary of LSI. The transactions described in
this Agreement are subject to the approval of the shareholders of LSI,
expiration of the required waiting period under the HSR Act, the consummation
of the Agreement and Plan of Merger dated the same date as the date hereof by
and among Bugaboo Creek Steak House, Inc. ("BCS"); Whip Merger Corporation, and
LSI; (the "BCS Agreement," together with the agreements upon which the
consummation of the BCS Agreement is conditioned, the "BCS Transaction"), and
the satisfaction of certain other conditions described in this Agreement. It is
the intention of the parties to this Agreement that the Merger for federal
income tax purposes shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code, and for accounting purposes shall
qualify for treatment as a pooling of interests.
Certain terms used in this Agreement are defined in Section 11.1 of
this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, OGM shall be merged with and into WPC in
accordance with the provisions of Chapter 156B, Section 79 of the MBCL and with
the effect provided in the provisions of Chapter 156B, Section 80 of the MBCL
and Section 1107 of the GBCC and with the effect provided in Sections
<PAGE> 3
1106 and 1107 of the GBCC (the "Merger"). WPC shall be the Surviving
Corporation resulting from the Merger and shall continue to be governed by the
Laws of the State of Georgia. The Merger shall be consummated pursuant to the
terms of this Agreement, which has been approved and adopted by the respective
Boards of Directors of OGM, WPC and LSI and by LSI, as the sole shareholder of
WPC and by the Shareholders of OGM.
1.2 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "Closing") will take place at 9:00 A.M. on the date
that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their authorized officers, may mutually agree. The Closing shall
be held at such place as may be mutually agreed upon by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions
contemplated by this Agreement shall become effective on the date and at the
time the Articles of Merger reflecting the Merger shall become effective with
the Secretary of State of the Commonwealth of Massachusetts and the Certificate
of Merger reflecting the Merger become effective with the Secretary of State of
the State of Georgia (the "Effective Time"). Subject to the terms and conditions
hereof, unless otherwise mutually agreed upon in writing by authorized officers
of each Party, the Parties shall use their reasonable efforts to cause the
Effective Time to occur on the first business day following the last to occur of
(i) the effective date (including expiration of any applicable waiting period)
of the last required Consent of any Regulatory Authority having authority over
and approving or exempting the Merger, and (ii) the date on which the
shareholders of LSI approve this Agreement to the extent such approval is
required by applicable Law.
ARTICLE 2
TERMS OF MERGER
2.1 CHARTER. The Certificate of Incorporation of WPC in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until otherwise amended or repealed.
2.2 BYLAWS. The Bylaws of WPC in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until otherwise
amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of WPC in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the directors of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation. The officers of WPC in office immediately prior to
the Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of the Surviving Corporation from and after
the Effective Time in accordance with the Bylaws of the Surviving Corporation.
- 2 -
<PAGE> 4
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this
Article 3, at the Effective Time, by virtue of the Merger and without any action
on the part of LSI, OGM, WPC or the shareholders of any of the foregoing, the
shares of the constituent corporations shall be converted as follows:
(a) Each share of LSI Capital Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(b) Each share of OGM Common Stock issued and outstanding
at the Effective Time shall cease to be outstanding and shall be
converted into and exchanged for the right to receive that multiple of a
share of LSI Common Stock (the "Exchange Ratio") obtained by dividing
$1,506,672 (the purchase price) by 100 (the number of shares of OGM
Common Stock outstanding as of the date of this Agreement) (the "Per
Share Purchase Price") by the Base Period Trading Price (defined to mean
the average of the daily last sale prices for the shares of LSI Common
Stock for the 20 consecutive trading days on which such shares are
actually traded as over-the-counter securities and quoted on the Nasdaq
National Market (as reported by The Wall Street Journal or, if not
reported thereby, any other authoritative source) ending at the close of
trading on the fifth trading day immediately preceding the Closing Date)
and rounded to the third decimal place; provided, that for purposes of
this calculation, the Base Period Trading Price shall be deemed to equal
(i) $27.250 in the event the Base Period Trading Price is greater than
$27.250 or (ii) $24.000 in the event the Base Period Trading Price is
less than $24.000 (collectively, $27.250 and $24.000 are referred to as
the "Base Period Trading Price Limitations").
3.2 ANTI-DILUTION PROVISIONS. In the event LSI changes the number
of shares of LSI Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, (i) the Base Period Trading Price Limitations shall be
adjusted to appropriately adjust the ratio under which shares of OGM Common
Stock will be converted into shares of LSI Common Stock pursuant to Section
3.1(b) of this Agreement, and (ii) if necessary, the anticipated Effective Time
shall be postponed for an appropriate period of time agreed upon by the parties
in order for the Base Period Trading Price to reflect the market effect of such
stock split, stock dividend, or similar recapitalization.
3.3 FRACTIONAL SHARES. Notwithstanding any other provision of
this Agreement, each holder of shares of OGM Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of LSI Common Stock (after taking into account all certificates delivered
by such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of LSI Common Stock multiplied
by the market value of
- 3 -
<PAGE> 5
one share of LSI Common Stock at the Effective Time. The market value of one
share of LSI Common Stock at the Effective Time shall be the last sale price of
LSI Common Stock on the Nasdaq National Market (as reported by The Wall Street
Journal or, if not reported thereby, any other authoritative source) on the
last trading day preceding the Effective Time. No such holder will be entitled
to dividends, voting rights, or any other rights as a shareholder in respect of
any fractional shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, LSI
and OGM shall cause the exchange agent selected by LSI (the "Exchange Agent") to
mail to the former shareholders of OGM appropriate transmittal materials (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of OGM Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). The
Exchange Agent may establish reasonable and customary rules and procedures in
connection with its duties. After the Effective Time, each holder of shares of
OGM Common Stock issued and outstanding at the Effective Time shall surrender
the certificate or certificates representing such shares to the Exchange Agent
and shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2 of this Agreement. To the extent
required by Section 3.3 of this Agreement, each holder of shares of OGM Common
Stock issued and outstanding at the Effective Time also shall receive, upon
surrender of the certificate or certificates representing such shares, cash in
lieu of any fractional share of LSI Common Stock to which such holder may be
otherwise entitled (without interest). LSI shall not be obligated to deliver the
consideration to which any former holder of OGM Common Stock is entitled as a
result of the Merger until such holder surrenders such holder's certificate or
certificates representing the shares of OGM Common Stock for exchange as
provided in this Section 4.1. The certificate or certificates of OGM Common
Stock so surrendered shall be duly endorsed as the Exchange Agent may require.
Any other provision of this Agreement notwithstanding, neither LSI, the
Surviving Corporation nor the Exchange Agent shall be liable to a holder of OGM
Common Stock for any amounts paid or property delivered in good faith to a
public official pursuant to any applicable abandoned property Law. Execution of
this Agreement by the Shareholder shall constitute ratification of the
appointment of the Exchange Agent.
4.2 RIGHTS OF FORMER OGM SHAREHOLDERS. At the Effective Time, the
stock transfer books of OGM shall be closed as to holders of OGM Common Stock
immediately prior to the Effective Time and no transfer of OGM Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of OGM Common Stock shall from
and after the Effective Time represent for all purposes only the right to
receive the consideration provided in Sections 3.1 and 3.3 of this Agreement in
exchange therefor, subject, however, to the Surviving Corporation's obligation
to pay any dividends or make any other distributions with a record date prior to
the Effective Time which have been declared or
- 4 -
<PAGE> 6
made by OGM in respect of such shares of OGM Common Stock in accordance with the
terms of this Agreement and which remain unpaid at the Effective Time. Whenever
a dividend or other distribution is declared by LSI on the LSI Common Stock, the
record date for which is at or after the Effective Time, the declaration shall
include dividends or other distributions on all shares of LSI Common Stock
issuable pursuant to this Agreement, but no dividend or other distribution
payable to the holders of record of LSI Common Stock as of any time subsequent
to the Effective Time shall be delivered to the holder of any certificate
representing shares of OGM Common Stock issued and outstanding at the Effective
Time until such holder surrenders such certificate for exchange as provided in
Section 4.1 of this Agreement. However, upon surrender of such OGM Common Stock
certificate, both the LSI Common Stock certificate (together with all such
undelivered dividends or other distributions without interest) and any
undelivered dividends and cash payments payable hereunder (without interest)
shall be delivered and paid with respect to each share represented by such
certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF OGM
OGM and the Shareholders hereby jointly and severally represent and
warrant to LSI as follows:
5.1 ORGANIZATION, STANDING, AND POWER. OGM is a corporation duly
organized, validly existing, and in good standing under the Laws of the
Commonwealth of Massachusetts, and has the corporate power and authority to
carry on its business as now conducted and to own, lease and operate its Assets.
OGM is duly qualified or licensed to transact business as a foreign corporation
in good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on OGM. OGM
has no Subsidiaries.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) OGM has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of OGM, and the
OGM Shareholders have unanimously approved this Agreement, which is the only
shareholder vote required for approval of this Agreement and consummation of the
Merger by OGM. This Agreement represents a legal, valid, and binding obligation
of OGM and the Shareholders, enforceable against OGM and the Shareholders in
accordance with its terms.
(b) Neither the execution and delivery of this Agreement
by OGM, nor the consummation by OGM of the transactions contemplated hereby, nor
compliance by OGM with
- 5 -
<PAGE> 7
any of the provisions hereof, will (i) conflict with or result in a breach of
any provision of OGM's Articles of Incorporation or Bylaws, or (ii) except as
disclosed in Section 5.2 of the OGM Disclosure Memorandum, constitute or result
in a Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any Asset of OGM under, any Contract or Permit of OGM,
except for any such Default, Consent or Lien that would not have a Material
Adverse Effect on OGM or on any restaurant owned or operated by OGM, or, (iii)
subject to receipt of the requisite Consents referred to in Section 9.1(b) of
this Agreement, violate any Law or Order applicable to OGM or any of its
material Assets.
(c) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate and securities
Laws, and rules of the NASD, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation with respect to any employee
benefit plans, or under the HSR Act, no notice to, filing with, or Consent of,
any public body or authority is necessary for the consummation by OGM of the
Merger and the other transactions contemplated in this Agreement.
5.3 CAPITAL STOCK.
(a) The authorized capital stock of OGM consists of 5,000
shares of OGM Common Stock, of which 100 shares are issued and outstanding. All
of the shares of capital stock issued and outstanding as of the date hereof and
at the Effective Time are held by the Shareholders. All of the issued and
outstanding shares of capital stock of OGM are duly and validly issued and
outstanding and are fully paid and nonassessable under the MBCL. None of the
outstanding shares of capital stock of OGM has been issued in violation of any
preemptive rights of the current or past shareholders of OGM.
(b) Except as set forth in Section 5.3(a) of this
Agreement, or as disclosed in Section 5.3 of the OGM Disclosure Memorandum,
there are no shares of capital stock or other equity securities of OGM
outstanding and no outstanding Rights relating to the capital stock of OGM.
5.4 FINANCIAL STATEMENTS. Each of the OGM Financial Statements
(including, in each case, any related notes) delivered to LSI and/or its
advisors was true and correct and fairly presented in all material respects (i)
the financial position of OGM as at the respective dates and (ii) the results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in amount
or effect and any pro forma financial information contained in the OGM Financial
Statements is not necessarily indicative of the financial position of OGM as of
the respective dates thereof and the results of operations and cash flows for
the periods indicated.
5.5 [INTENTIONALLY OMITTED].
- 6 -
<PAGE> 8
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. OGM has no Liabilities
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on OGM, except as disclosed in Section 5.6 of the OGM Disclosure
Memorandum. OGM has not incurred or paid any Liability since March 31, 1996,
except for such Liabilities (i) discussed in Section 5.6 of the OGM Disclosure
Memorandum or (ii) incurred or paid (A) in the ordinary course of business
consistent with past business practice and which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on OGM or (B)
in connection with the transactions contemplated by this Agreement. Except as
disclosed in Section 5.6 of the OGM Disclosure Memorandum, OGM is not directly
or indirectly liable, by guarantee, indemnity, or otherwise, upon or with
respect to, or obligated, by discount or repurchase agreement or in any other
way, to provide funds in respect to, or obligated to guarantee or assume any
Liability of any Person for any amount in excess of $10,000.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 25, 1995,
except as disclosed in Section 5.7 of the OGM Disclosure Memorandum, (i) there
have been no events, changes, or occurrences which have had, or are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
OGM, and (ii) there has not been: (A) any material damage, destruction or loss
(not covered by insurance) with respect to any material assets of OGM that has
resulted in a Material Adverse Effect on OGM, (B) any material change by OGM in
its accounting methods, principles or practices; (C) any redemption, repurchase
or other reacquisition of any of OGM's equity securities; (D) any material
increase in the benefits under, or the establishment or amendment of, any
material bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including, without limitation, the
granting of stock options, stock appreciation rights, performance awards, or
restricted stock awards), stock purchase or other employee benefit plan, or any
material increase in the compensation payable or to become payable to directors,
officers or employees of OGM, except for increases in salaries or wages payable
or to become payable in the ordinary course of business and consistent with past
practice.
5.8 TAX MATTERS.
(a) Except for such matters as would not have a Material
Adverse Effect on OGM, all Tax Returns required to be filed by or on behalf of
OGM have been timely filed or requests for extensions have been timely filed,
granted, and have not expired for periods ended on or before December 31, 1995,
and on or before the date of the most recent fiscal year end immediately
preceding the Effective Time, and all Tax Returns filed are complete and
accurate in all Material respects. All Taxes shown to be payable on filed Tax
Returns have been paid. To the Knowledge of OGM, there is no audit examination,
deficiency, or refund Litigation with respect to any Taxes, except as disclosed
in Section 5.8 of the OGM Disclosure Memorandum. All Taxes and other
Liabilities due with respect to completed and settled examinations or concluded
Litigation have been paid.
(b) OGM has not executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due (excluding
such statutes that relate to years
- 7 -
<PAGE> 9
currently under examination by the Internal Revenue Service or other applicable
taxing authorities) that is currently in effect.
(c) Deferred Taxes of OGM have been provided for in
accordance with GAAP.
(d) OGM is not a party to any Tax allocation or sharing
agreement and OGM has not been a member of an affiliated group filing a
consolidated federal income Tax Return or has any Liability for Taxes of any
Person (other than OGM) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign Law) as a transferee or successor
or by Contract or otherwise.
(e) OGM is in compliance in all material respects with
records contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply in all material respects with, all applicable
information reporting and Tax withholding requirements under federal, state,
and local Tax Laws, and such records identify with specificity all accounts
subject to backup withholding under Section 3406 of the Internal Revenue Code.
(f) Except as disclosed in Section 5.8 of the OGM
Disclosure Memorandum, OGM has not made any payments, is not obligated to make
any payments, and is not a party to any Contract that could obligate it to make
any payments that would be disallowed as a deduction under Section 280G or
162(m) of the Internal Revenue Code.
(g) There has not been an ownership change, as defined in
Internal Revenue Code Section 382(g), of OGM that occurred during or after any
Taxable Period in which OGM incurred a net operating loss that carries over to
any Taxable Period ending after December 31, 1995.
5.9 ASSETS. Except as disclosed in Section 5.9 of the OGM
Disclosure Memorandum, OGM has good and marketable title, free and clear of all
Liens, to all of its respective Assets. All tangible properties used in the
businesses of OGM are in good condition, reasonable wear and tear excepted, and
are usable in the ordinary course of business consistent with OGM's past
practices. All items of inventory of OGM reflected on the most recent balance
sheet included in the OGM Financial Statements delivered prior to the Effective
Time will consist, as applicable, of items of a quality and quantity usable and
saleable in the ordinary course of business and conform to generally accepted
standards in the industry in which OGM is a part. All Assets which are material
to OGM's business, held under leases or subleases by OGM, are held under valid
Contracts enforceable in accordance with their respective terms, and each such
Contract is in full force and effect. Section 5.9 of the OGM Disclosure
Memorandum sets forth the scope of coverage of all of OGM's insurance policies
as of the date of this Agreement, the term of each such policy and the premiums
relating thereto. OGM has not received notice from any insurance carrier that
(i) such insurance will be canceled or that coverage thereunder will be reduced
or eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. Except as disclosed in Section 5.9 of the OGM
Disclosure Memorandum, there are presently no claims pending under such policies
of insurance and no notices of denial of
- 8 -
<PAGE> 10
any material claim have been received by OGM under such policies. The Assets of
OGM include all Assets required to operate the business of OGM as presently
conducted. To the Knowledge of OGM, all leases for restaurant sites are in full
force and effect and the landlord is not in Default thereunder and has not
repudiated or waived any material provision of such lease. To the Knowledge of
OGM, the landlord of each lease for a restaurant site holds title to the site
free of any encumbrance securing debt to any Person other than Persons with
whom the relevant BCS Company has a non-disturbance and attornment agreement
there is no other exception to title which would have a Material Adverse Effect
on the value of the property or OGM's use thereof.
5.10 INTELLECTUAL PROPERTY. Section 5.10 of the OGM Disclosure
Memorandum sets forth a complete and accurate list of, and a brief description
of all governmental registrations or applications for governmental registrations
of, all Intellectual Property owned, used or licensed by or to OGM which are
used in or necessary for the conduct of OGM's business, except as to which the
absence of which would not have a Material Adverse Effect on OGM ("OGM
Intellectual Property"). No Person has asserted a claim in writing to OGM that
OGM has abandoned any OGM Intellectual Property and, to the Knowledge of OGM,
OGM has not abandoned any OGM Intellectual Property. Except as disclosed in
Section 5.10 of the OGM Disclosure Memorandum, OGM owns or has the lawful right
to use the OGM Intellectual Property. Except as disclosed in Section 5.10 of
the OGM Disclosure Memorandum, use of the OGM Intellectual Property by OGM or
the Shareholders has not to the Knowledge of OGM misappropriated or infringed on
any rights held or owned by any third party, nor has any third party asserted
any such claim. OGM is not obligated to pay any royalties to any Person with
respect to any OGM Intellectual Property. Except as disclosed in Section 5.10 of
the OGM Disclosure Memorandum, every officer or management employee of OGM is a
party to a Contract which requires such officer or management employee to keep
confidential any trade secrets, proprietary data, customer information, or other
business information of OGM, and, to the Knowledge of OGM, no officer is party
to, nor to the Knowledge of OGM has OGM received any notice of any other
management employee being a party to, any Contract with any Person other than
OGM which requires such officer or management employee to assign any interest in
any Intellectual Property to any Person other than OGM or to keep confidential
any trade secrets, proprietary data, customer information, or other business
information of any Person other than OGM. Except as disclosed in Section 5.10 of
the OGM Disclosure Memorandum, to the Knowledge of OGM, no officer of OGM is
party to, nor to the Knowledge of OGM has OGM received any notice of any other
management employee being a party to, any Contract which restricts or prohibits
such officer, director or management employee from engaging in activities
competitive with any Person, including OGM.
5.11 ENVIRONMENTAL MATTERS.
(a) Except as would not have a Material Adverse Effect on
OGM, OGM, its Participation Facilities, and its Operating Properties are, and
have been during the period of OGM's ownership or operation, in compliance with
all Environmental Laws.
(b) There is no Litigation pending or, to the Knowledge of
OGM, threatened before any court, governmental agency, or authority or other
forum in which OGM or any of its Operating Properties or Participation
Facilities has been or, with respect to threatened Litigation,
- 9 -
<PAGE> 11
may be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material, whether or not occurring at, on, under,
adjacent to, or affecting (or potentially affecting) a site owned, leased, or
operated by OGM or any of its Operating Properties or Participation Facilities,
nor, to the Knowledge of OGM, is there any reasonable basis for any Litigation
of a type described in this sentence which could reasonably be expected to have
a Material Adverse Effect on OGM.
(c) During the period of (i) OGM's ownership or operation
of any of its current properties, (ii) OGM's participation in the management of
any Participation Facility, or (iii) OGM's holding of a security interest in an
Operating Property, there have been no releases of Hazardous Material in, on,
under, adjacent to, or affecting (or to the Knowledge of OGM reasonably likely
to affect) such properties, except as would not have a Material Adverse Effect
on OGM. Prior to the period of (i) OGM's ownership or operation of any of its
current properties, (ii) OGM's participation in the management of any
Participation Facility, or (iii) OGM's holding of a security interest in a
Operating Property, to the Knowledge of OGM, there were no releases of Hazardous
Material in, on, under, or affecting any such property, Participation Facility
or Operating Property, except as would not have a Material Adverse Effect on
OGM.
5.12 COMPLIANCE WITH LAWS. OGM has in effect all Permits necessary
for it to own, lease, or operate its material Assets and to carry on its
business as now conducted, and there has occurred no Default under any such
Permit, except where the failure to possess such Permit or the occurrence of a
Default would not have a Material Adverse Effect on OGM or the restaurant to
which the Permit relates. Except as disclosed in Section 5.12 of the OGM
Disclosure Memorandum, OGM:
(a) is not in Default under any of the provisions of its
Articles of Incorporation or Bylaws (or other governing instruments);
(b) is not in Default under any Laws, Orders, or Permits
applicable to its business or employees conducting its business, except
for any Default that would not have a Material Adverse Effect on OGM or
any restaurants owned or operated by OGM; or
(c) has not since January 1, 1993, received any
notification or communication from any agency or department of federal,
state, or local government or any Regulatory Authority or the staff
thereof (i) asserting that OGM is not in material compliance with any of
the Laws or Orders which such governmental authority or Regulatory
Authority enforces which has not been resolved, (ii) threatening to
revoke any Permits, or (iii) requiring OGM to enter into or consent to
the issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or to adopt any Board
resolution or similar undertaking.
5.13 LABOR RELATIONS. Except as disclosed in Section 5.13 of the
OGM Disclosure Memorandum, OGM is not the subject of any Litigation asserting
that it has committed an unfair
- 10 -
<PAGE> 12
labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel it to bargain with any labor
organization as to wages or conditions of employment, nor is OGM party to any
collective bargaining agreement, nor is there any strike or other labor dispute
involving OGM, pending or threatened, or to the Knowledge of OGM, is there any
activity involving OGM's employees seeking to certify a collective bargaining
unit or engaging in any other organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
(a) OGM has disclosed in Section 5.14 of the OGM
Disclosure Memorandum, and has delivered or made available to LSI prior to the
execution of this Agreement copies in each case of, all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by,
sponsored in whole or in part by, or contributed to by OGM or ERISA Affiliate
thereof for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "OGM Benefit
Plans"). Any of the OGM Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "OGM ERISA Plan."
(b) All OGM Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on OGM. Each OGM
ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and OGM is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. OGM has not
engaged in a transaction with respect to any OGM Benefit Plan that, assuming
the taxable period of such transaction expired as of the date hereof, would
subject OGM to a Tax imposed by either Section 4975 of the Internal Revenue
Code or Section 502(i) of ERISA.
(c) No OGM ERISA Plan is, and OGM has never maintained or
contributed to, a "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code) or a multiemployer plan within the meaning of Section
3(37) of ERISA. OGM has not provided, or is not required to provide, security
to any defined benefit plan or any single-employer plan of any entity which is
considered one employer with OGM under Section 4001 of ERISA or Section 414 of
the Internal Revenue Code or Section 302 of ERISA (whether or not waived) (an
"ERISA Affiliate") pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of
ERISA has been or is expected to be incurred by OGM with respect to any
ongoing, frozen, or terminated single-
- 11 -
<PAGE> 13
employer plan or the single-employer plan of any ERISA Affiliate. OGM has not
incurred any withdrawal Liability with respect to a multiemployer plan under
Subtitle B of Title IV of ERISA (regardless of whether based on contributions
of an ERISA Affiliate). No notice of a "reportable event," within the meaning
of Section 4043 of ERISA for which the 30-day reporting requirement has not
been waived, has been required to be filed for any OGM Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date hereof.
(e) Except as disclosed in Section 5.14 of the OGM
Disclosure Memorandum, OGM has no Liability for retiree health and life
benefits under any of the OGM Benefit Plans and there are no restrictions on
the rights of OGM to amend or terminate any such retiree health or benefit Plan
without incurring any Liability thereunder.
(f) Except as disclosed in Section 5.14 of the OGM
Disclosure Memorandum, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of OGM under any OGM
Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under
any OGM Benefit Plan, or (iii) result in any acceleration of the time of
payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of OGM and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the OGM Financial Statements.
5.15 MATERIAL CONTRACTS. Except as disclosed in Section 5.15 of
the OGM Disclosure Memorandum OGM, nor any of its Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting, or retirement
Contract providing for payments to any Person, except for Contracts referred to
in Section 5.13(a) of this Agreement and unwritten Contracts with respect to
the employment of hourly personnel terminable at will or upon statutorily
required notice, (ii) any Contract relating to the borrowing of money by OGM or
the guarantee by OGM of any such obligation (other than Contracts for purchase
money indebtedness in an aggregate amount not exceeding $10,000, Contracts
evidencing trade payables, and Contracts relating to borrowings or guarantees
made in the ordinary course of business), (iii) any Contract which prohibits or
restricts OGM from engaging in any business activities in any geographic area,
line of business or otherwise in competition with any other Person, (iv) any
Contract involving Intellectual Property, (v) any lease of real property as
lessee or lessor, and (vi) any Contract relating to the purchase or sale of any
goods or services (other than Contracts entered into in the ordinary course of
business and that are either (x) terminable by OGM upon not more than 60 days
notice without payment or penalty or (y) has a remaining term of not more than
six months from the date of this Agreement and involves payments not in excess
of $10,000 per year) (together with all Contracts referred to in Sections 5.9
and 5.13(a) of this Agreement, the "OGM Contracts"). With respect to each
- 12 -
<PAGE> 14
OGM Contract and except as disclosed in Section 5.15 of the OGM Disclosure
Memorandum: (i) the Contract is in full force and effect; (ii) OGM is not in
Default thereunder except for any such Default as would not have a Material
Adverse Effect on OGM; (iii) OGM has not repudiated or waived any material
provision of any such Contract; and (iv) no other party to any such Contract
is, to the Knowledge of OGM, in Default in any respect, or has repudiated or
waived any material provision thereunder. Except as disclosed in Section 5.15
of the OGM Disclosure Memorandum, all of the indebtedness of OGM for money
borrowed is prepayable at any time by OGM without penalty or premium.
5.16 LEGAL PROCEEDINGS. Except as disclosed in Section 5.16 of the
OGM Disclosure Memorandum, there is no Litigation instituted or pending, or, to
the Knowledge of OGM, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against OGM, or against any director (limited, as to
directors, to Litigation with respect to which OGM would have an indemnification
obligation under its Articles of Incorporation or Bylaws) or employee benefit
plan of OGM, or against any Asset, interest, or right of any of them, nor,
except for matters which would not have a Material Adverse Effect on OGM, are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against OGM. Section 5.16 of the OGM Disclosure
Memorandum contains a summary of all instituted or pending Litigation as of the
date of this Agreement to which OGM is a party and which names OGM as a
defendant or cross-defendant.
5.17 REPORTS. Since January 1, 1992, or the date of organization
if later, OGM has timely filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with Regulatory Authorities (except failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on OGM). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its respective
date, each such report and document did not, in all material respects, 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 made therein,
in light of the circumstances under which they were made, not misleading,
provided, however, that to the extent that the foregoing relates to facts or
omission regarding Persons other than OGM and its Affiliates, such
representation and warranty is made to OGM's Knowledge.
5.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument, or other writing furnished or to be furnished by OGM or any
Affiliate thereof to LSI pursuant to this Agreement or any other document,
agreement, or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. OGM has furnished, or within 14 days will furnish,
LSI with copies of all written OGM Contracts, and such copies are true and
correct copies of the written OGM Contracts as such exist on the date of this
Agreement. None of the information supplied or to be supplied by OGM or any
Affiliate thereof for inclusion in the Registration Statement to be filed by
LSI with the Securities and Exchange Commission (the "SEC") will, when the
Registration Statement
- 13 -
<PAGE> 15
becomes effective, be false or misleading with respect to any material fact, or
omit to state any material fact necessary to make the statements therein not
misleading. None of the information supplied or to be supplied by OGM or any
Affiliate thereof for inclusion in the Joint Proxy Statement to be mailed in
connection with the BCS Transaction, and any other documents to be filed by OGM
or any Affiliate thereof with the SEC or any other Regulatory Authority in
connection with the transactions contemplated thereby, will, at the respective
time such documents are filed, and with respect to the Joint Proxy Statement,
when first mailed to the shareholders of BCS and LSI, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or, in the case of the Joint Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Shareholders'
Meetings, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the
Shareholders' Meetings. All documents that OGM or any Affiliate thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
5.19 ACCOUNTING, TAX AND REGULATORY MATTERS. Neither OGM nor, to
the Knowledge of OGM, any Affiliate thereof has taken any action or has any
Knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the Merger from qualifying for pooling-of-interests accounting treatment or as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
5.20 STATE TAKEOVER LAWS. OGM has taken all necessary action to
exempt the transactions contemplated by this Agreement from any applicable
"moratorium," "fair price," "business combination," "control share," or other
anti-takeover Laws (collectively, "Takeover Laws").
5.21 CHARTER PROVISIONS. OGM has taken all action so that the
entering into of this Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement do not and will not result in
the grant of any rights to any Person under the Articles of Incorporation,
Bylaws or other governing instruments of OGM.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF LSI
LSI hereby represents and warrants to OGM as follows:
6.1 ORGANIZATION, STANDING, AND POWER. LSI is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Georgia, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. LSI is duly qualified or
licensed to transact business as a foreign corporation
- 14 -
<PAGE> 16
in good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on LSI.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) LSI has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of LSI, subject
to the approval of the holders of a majority of the shares of LSI Common Stock
present and voting at a special meeting of LSI shareholders at which a quorum is
present, which is the only shareholder vote required for approval of this
Agreement and consummation of the merger by LSI. Subject to such requisite
shareholder approval, this Agreement represents a legal, valid, and binding
obligation of LSI, enforceable against LSI in accordance with its terms.
(b) Neither the execution and delivery of this Agreement
by LSI, nor the consummation by LSI of the transactions contemplated hereby, nor
compliance by LSI with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of LSI's Articles of Incorporation or
Bylaws, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any LSI
Company under, any Contract or Permit of any LSI Company or, (iii) subject to
receipt of the requisite approvals referred to in Section 9.1(b) of this
Agreement, violate any Law or Order applicable to any LSI Company or any of
their respective material Assets.
(c) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate and securities
Laws, and rules of the NASD, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation with respect to any employee
benefit plans, or under the HSR Act, no notice to, filing with, or Consent of,
any public body or authority is necessary for the consummation by LSI of the
Merger and the other transactions contemplated in this Agreement.
6.3 CAPITAL STOCK.
(a) The authorized capital stock of LSI consists of (i)
25,000,000 shares of LSI Common Stock, of which 8,466,350 shares are issued and
outstanding as of the date of this Agreement, and (ii) 10,000,000 shares of LSI
Preferred Stock, of which no shares are issued and outstanding. All of the
issued and outstanding shares of LSI Capital Stock are, and all of the shares of
LSI Common Stock to be issued in exchange for shares of OGM Common Stock upon
consummation of the Merger, when issued in accordance with the terms of this
Agreement, will be, duly and validly issued and outstanding and fully paid and
nonassessable under the GBCC. None of the outstanding shares of LSI Capital
Stock has been, and none of the shares of LSI
- 15 -
<PAGE> 17
Common Stock to be issued in exchange for shares of OGM Common Stock upon
consummation of the Merger will be, issued in violation of any preemptive
rights of the current or past shareholders of LSI. LSI has reserved 2,018,350
shares of LSI Common Stock for issuance under the LSI Stock Plans, pursuant to
which options to purchase no more than 1,238,031 shares of LSI Common Stock are
outstanding.
(b) Except as set forth in Section 6.3(a) of this
Agreement or as disclosed in Section 6.3 of the LSI Disclosure Memorandum, there
are no shares of capital stock or other equity securities of LSI outstanding and
no outstanding Rights relating to the capital stock of LSI.
6.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) LSI has timely filed and made available to OGM all SEC
Documents required to be filed by LSI since December 31, 1992 or such later date
as LSI first filed, or was first obligated to file, such SEC Documents (the "LSI
SEC Reports"). The LSI SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Laws and
other applicable Laws and (ii) did not, at the time they were filed (or, if
amended or superseded by a filing, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated in such LSI SEC Reports or necessary in order to make the statements
in such LSI SEC Reports, in light of the circumstances under which they were
made, not misleading. No LSI Subsidiary is required to file any SEC Documents.
(b) Each of the LSI Financial Statements (including, in
each case, any related notes) contained in the LSI SEC Reports, including any
LSI SEC Reports filed after the date of this Agreement until the Effective
Time, complied as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except to the extent required by changes to GAAP or as may be
indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly
presented in all material respects the consolidated financial position of LSI
and its Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount or effect, and any pro forma financial information contained in the LSI
Financial Statements is not necessarily indicative of the consolidated
financial position of LSI and the LSI Subsidiaries, as the case may be, as of
the respective dates thereof and the consolidated results of operations and
cash flows for the period indicated.
6.5 ABSENCE OF UNDISCLOSED LIABILITIES. No LSI Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on LSI, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of LSI as of
December 31, 1995 and March 31, 1996, included in the LSI Financial Statements
or reflected in the notes thereto, or as disclosed in the LSI Disclosure
Memorandum. No LSI Company has incurred or paid any Liability since March 31,
1996, except for such Liabilities (i)
- 16 -
<PAGE> 18
disclosed in the LSI Disclosure Memorandum or (ii) incurred or paid in the
ordinary course of business consistent with past business practice and which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on LSI.
6.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1995, except as disclosed in the LSI Financial Statements delivered prior to
the date of this Agreement or as disclosed in Section 6.6 of the LSI Disclosure
Memorandum, (i) there have been no events, changes or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on LSI, and (ii) the LSI Companies have not taken any
action, or failed to take any action, prior to the date of this Agreement,
which action or failure, if taken after the date of this Agreement, would
represent or result in a material breach or violation of any of the covenants
and agreements of LSI contained in Article 7 of this Agreement.
6.7 COMPLIANCE WITH LAWS. Each LSI Company has in effect all
Permits necessary for it to own, lease or operate its material Assets and to
carry on its business as now conducted. Except as disclosed in Section 6.7 of
the LSI Disclosure Memorandum, no LSI Company:
(a) is in Default of any Laws, Orders or Permits
applicable to its business or employees conducting its business; or
(b) since January 1, 1993, has received any notification
or communication from any agency or department of federal, state, or
local government or any Regulatory Authority or the staff thereof (i)
asserting that any LSI Company is not in material compliance with any of
the Laws or Orders which such governmental authority or Regulatory
Authority enforces which has not been resolved, or (iii) requiring any
LSI Company to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business.
6.8 LEGAL PROCEEDINGS. Except as disclosed in Section 6.16 of
the LSI Disclosure Memorandum there is no Litigation instituted or pending, or,
to the Knowledge of LSI, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any LSI Company, or against any director,
employee or employee benefit plan of any LSI Company, or against any Asset,
employee benefit plan, interest, or right of any of them, that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
LSI, nor are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any LSI Company, that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on LSI.
6.9 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument or other writing furnished or to be furnished by any LSI Company or
any Affiliate thereof to OGM pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were
- 17 -
<PAGE> 19
made, not misleading. None of the information supplied or to be supplied by any
LSI Company or any Affiliate thereof for inclusion in the Registration Statement
to be filed by LSI with the SEC, will, when the Registration Statement becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein not misleading.
None of the information supplied or to be supplied by any LSI Company or any
Affiliate thereof for inclusion in the Joint Proxy Statement to be mailed to
each Party's shareholders in connection with the Shareholders' Meetings, and any
other documents to be filed by any LSI Company or any Affiliate thereof with the
SEC or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Joint Proxy Statement, when first mailed to the shareholders
of OGM and LSI, be false or misleading with respect to any material fact, or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, in
the case of the Joint Proxy Statement or any amendment thereof or supplement
thereto, at the time of the Shareholders' Meetings, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of any proxy for the Shareholders' Meetings. All documents that any
LSI Company or any Affiliate thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
6.10 AUTHORITY OF WPC. WPC is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Georgia as
a wholly-owned Subsidiary of LSI. The authorized capital stock of WPC shall
consist of 1,000 shares of WPC Common Stock, all of which is validly issued and
outstanding, fully paid and nonassessable and is owned by LSI free and clear of
any Lien. WPC has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of WPC. This Agreement
represents a legal, valid, and binding obligation of WPC, enforceable against
WPC in accordance with its terms.
6.11 REPORTS. Since January 1, 1992, or the date of organization
if later, each LSI Company has filed all reports and statements, together with
any amendments required to be made with respect thereto, that it was required
to file with (i) the SEC, including, but not limited to, Forms 10-K, Forms
10-Q, Forms 8-K, and proxy statements, (ii) other Regulatory Authorities, and
(iii) any applicable state securities authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on LSI). As
of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, 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 made therein, in light of the circumstances
under which they were made, not misleading.
- 18 -
<PAGE> 20
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF OGM. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of LSI shall have been obtained,
and except as otherwise expressly contemplated herein, OGM shall (a) operate
its business in the usual, regular, and ordinary course, (b) use its reasonable
efforts preserve intact its business organization and Assets and maintain its
rights and franchises, and (c) take no action which would (i) materially
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentences of Section 9.1(b) or
9.1(c) of this Agreement, or (ii) materially adversely affect the ability of
any Party to perform its covenants and agreements under this Agreement.
7.2 NEGATIVE COVENANTS OF OGM. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
OGM covenants and agrees that it will not do or agree or commit to do any of
the following without the prior written consent of the chief executive officer
or chief financial officer of LSI, which consent shall not be unreasonably
withheld, conditioned or delayed:
(a) amend the Articles of Incorporation, Bylaws or other
governing instruments of OGM, or
(b) incur any additional debt obligation or other
obligation for borrowed money in excess of an aggregate of $10,000
(other than indebtedness for trade payables in the ordinary course of
business consistent with past practices) or impose, or suffer the
imposition, on any Asset of OGM of any Lien or permit any such Lien to
exist (other than in connection with Liens in effect as of the date
hereof that are disclosed in Section 5.9 of the OGM Disclosure
Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange
(other than exchanges in the ordinary course under employee benefit
plans), directly or indirectly, any shares, or any securities
convertible into any shares, of the capital stock of OGM, or declare or
pay any dividend or make any other distribution in respect of OGM's
capital stock other than amounts equal to the shareholders' aggregate
accumulated adjustments account (as defined in Section 1368(e)(1) of the
Internal Revenue Code); provided, that in no event shall OGM undertake
any action under this Section 7.2(c) that would result in the BCS
Transaction not qualifying for accounting purposes for treatment as a
pooling of interests; or
(d) except for this Agreement, or as disclosed in Section
5.14 of the OGM Disclosure Memorandum, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell,
pledge, encumber, or authorize the issuance of, or otherwise
- 19 -
<PAGE> 21
permit to become outstanding, any additional shares of OGM Common Stock
or any other capital stock of OGM, or any stock appreciation rights, or
any option, warrant, conversion, or other right to acquire any such
stock, or any security convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital
stock of OGM or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of OGM Common Stock, or
sell, lease, mortgage or otherwise dispose of or otherwise encumber any
Asset having a book value in excess of $10,000; or
(f) except for purchases of U.S. Treasury securities or
U.S. Government agency securities, which in either case have maturities
of three years or less, purchase any securities or make any material
investment, either by purchase of stock of securities, contributions to
capital, Asset transfers, or purchase of any Assets, in any Person, or
otherwise acquire direct or indirect control over any Person; or
(g) grant any increase in compensation or benefits to the
employees or officers of OGM, except in accordance with past practice as
disclosed in Section 5.14 of the OGM Disclosure Memorandum or as
required by Law; pay any severance or termination pay or any bonus other
than pursuant to written policies or written Contracts in effect on the
date of this Agreement and disclosed in Section 5.14 of the OGM
Disclosure Memorandum; and enter into or amend any severance agreements
with officers of OGM; grant any material increase in fees or other
increases in compensation or other benefits to directors of OGM except
in accordance with past practice disclosed in Section 5.14 of the OGM
Disclosure Memorandum; or voluntarily accelerate the vesting of any
employee benefits; or
(h) enter into or amend any employment Contract between
OGM and any Person (unless such amendment is required by Law and except
for increases in compensation or benefits in accordance with past
practice as disclosed in Section 5.14 or 5.15 of the OGM Disclosure
Memorandum) that OGM does not have the unconditional right to terminate
without Liability (other than Liability for services already rendered),
at any time on or after the Effective Time or upon statutorily required
notice; or
(i) adopt any new employee benefit plan of OGM or
terminate or withdraw from, or make any material change in or to, any
existing employee benefit plans of OGM other than any such change that
is required by Law or that, in the opinion of counsel, is necessary or
advisable to maintain the tax qualified status of any such plan, or make
any distributions from such employee benefit plans, except as required
by Law, the terms of such plans or consistent with past practice; or
(j) make any significant change in any Tax or accounting
methods or systems of internal accounting controls, except as may be
appropriate to conform to changes in Tax Laws or regulatory accounting
requirements or GAAP; or
- 20 -
<PAGE> 22
(k) commence any Litigation other than in accordance with
past practice, settle any Litigation involving any Liability of OGM for
Material money damages or restrictions upon the operations of OGM; or
(l) enter into, terminate or materially modify or amend
any Contract involving the payment of $10,000 or more, or waive,
release, compromise or assign any material rights or claims, except for
purchases of inventory in the ordinary course of business under existing
Contracts or pursuant to individual purchase orders.
7.3 COVENANTS OF LSI. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, LSI
covenants and agrees that it shall (x) continue to conduct its business and the
business of its Subsidiaries in a manner designed in its reasonable judgment, to
enhance the long-term value of the LSI Common Stock and the business prospects
of the LSI Companies and to the extent consistent therewith use all reasonable
efforts to preserve intact the LSI Companies' core businesses and goodwill with
their respective employees and the communities they serve, (y) not declare or
pay any dividend or make any distribution in respect of LSI Common Stock, and
(z) take no action which would (i) materially adversely affect the ability of
any Party to obtain any Consents required for the transactions contemplated
hereby without imposition of a condition or restriction of the type referred to
in the last sentences of Section 9.1(b) or 9.1(c) of this Agreement, or (ii)
materially adversely affect the ability of any Party to perform its covenants
and agreements under this Agreement; provided, that the foregoing shall not
prevent any LSI Company from discontinuing or disposing of any of its Assets or
business if such action is, in the judgment of LSI, desirable in the conduct of
the business of LSI and its Subsidiaries. LSI further covenants and agrees that
it will not, without the prior written consent of the chief executive officer of
OGM, which consent shall not be unreasonably withheld, amend the Articles of
Incorporation or Bylaws of LSI, in each case, in any manner adverse to the
holders of OGM Common Stock as compared to rights of holders of LSI Common Stock
generally as of the date of this Agreement.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give
written notice promptly to the other Party upon becoming aware of the occurrence
or impending occurrence of any event or circumstance relating to it or any of
its Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.5 REPORTS. Each Party shall file all reports required to be
filed by it with Regulatory Authorities between the date of this Agreement and
the Effective Time and shall deliver to the other Party copies of all such
reports promptly after the same are filed. If financial statements are contained
in any such reports filed with the SEC, such financial statements will fairly
present the consolidated financial position of the entity filing such statements
as of the dates indicated and the consolidated results of operations, changes in
shareholders' equity, and cash flows for the periods then ended in accordance
with GAAP (subject in the case of interim financial statements to normal
recurring year-end adjustments that are not material). As of their respective
dates, such reports filed with the SEC will comply in all material respects with
the Securities Laws
- 21 -
<PAGE> 23
and will not contain any untrue statement of a material fact or omit to state a
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. Any financial statements contained in any other reports to
another Regulatory Authority shall be prepared in accordance with Laws
applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER
APPROVAL. As soon as practicable after execution of this Agreement, LSI shall
prepare and file the Registration Statement with the SEC, and shall use its
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act and take any action required to be taken under the applicable state
Blue Sky or securities Laws in connection with the issuance of the shares of LSI
Common Stock upon consummation of the Merger. OGM shall cooperate in the
preparation and filing of the Registration Statement and shall furnish all
information concerning it and the holders of its capital stock as LSI may
reasonably request in connection with such action. LSI shall call a
Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and such other related matters as it
deems appropriate. In connection with the Shareholders' Meeting, (i) the Board
of Directors of LSI shall recommend to their shareholders the approval of this
Agreement, and (ii) the Board of Directors and officers of LSI shall use their
reasonable efforts to obtain such shareholders' approval. LSI and OGM shall make
all necessary filings with respect to the Merger under the Securities Laws.
8.2 EXCHANGE LISTING. LSI shall use its reasonable efforts to
list, prior to the Effective Time, on the Nasdaq National Market the shares of
LSI Common Stock to be issued to the holders of OGM Common Stock pursuant to
the Merger, and LSI shall give all notices and make all filings with the NASD
required in connection with the transactions contemplated herein.
8.3 APPLICATIONS; ANTITRUST NOTIFICATION. LSI shall prepare and
file, and OGM shall cooperate in the preparation and, where appropriate, filing
of, applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement. To the
extent required by the HSR Act, each of the Parties will within 15 business days
of the date hereof file with the United States Federal Trade Commission and the
United States Department of Justice the notification and report form required
for the transactions contemplated hereby and any supplemental or additional
information which may reasonably be requested in connection therewith pursuant
to the HSR Act and will comply in all material respects with the requirements of
the HSR Act. The Parties shall deliver to each other copies of all filings,
correspondence and orders to and from all Regulatory Authorities in connection
with the transactions contemplated hereby.
- 22 -
<PAGE> 24
8.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, OGM and WPC shall execute and file the Articles of
Merger with the Secretary of State of the Commonwealth of Massachusetts and WPC
shall execute and file the Certificate of Merger with the Secretary of State of
the State of Georgia in connection with the Closing.
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms
and conditions of this Agreement, each Party agrees to use its reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper, or advisable under applicable Laws to
consummate and make effective, as soon as practicable after the date of this
Agreement, the transactions contemplated by this Agreement, including using its
reasonable efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9 of this Agreement; provided, that
nothing herein shall preclude either Party from exercising its rights under this
Agreement. Each Party shall use its reasonable efforts to obtain all Consents
necessary or desirable for the consummation of the transactions contemplated by
this Agreement.
8.6 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each Party shall keep the
other Party advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and of its
financial and legal conditions as the other Party reasonably requests, provided
that such investigation shall be reasonably related to the transactions
contemplated hereby and shall not interfere unnecessarily with normal
operations. No investigation by a Party shall affect the representations and
warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and
agents to, maintain the confidentiality of all confidential information
furnished to it by the other Party concerning its businesses, operations, and
financial positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return or certify the destruction of all documents and copies thereof, and all
work papers containing confidential information received from the other Party.
8.7 PRESS RELEASES. Prior to the Effective Time, OGM and LSI
shall consult with each other as to the form and substance of any press release
or other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.8 CERTAIN ACTIONS. Except with respect to this Agreement and
the transactions contemplated hereby, neither OGM nor any Affiliate thereof nor
any Representatives thereof retained by OGM shall directly or indirectly solicit
any Acquisition Proposal by any Person. Neither OGM nor any Affiliate or
Representative thereof shall furnish any non-public information
- 23 -
<PAGE> 25
that is not legally obligated to furnish, negotiate with respect to, or enter
into any Contract with respect to, any Acquisition Proposal unless OGM has
determined that it must consider an Acquisition Proposal in accordance with
Section 8.8 of the BCS Agreement and requests OGM to furnish information to
and/or enter into discussions or negotiations with the Person who has made such
Acquisition Proposal. OGM shall promptly advise LSI following the receipt of
any Acquisition Proposal and the details thereof, and advise LSI of any
developments with respect to such Acquisition Proposal, including but not
limited to, any decision by the Board of Directors to cause OGM to furnish
non-public information to the Person making such Acquisition Proposal, promptly
upon the occurrence thereof. OGM shall (i) immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
Persons conducted heretofore with respect to any of the foregoing, and (ii)
direct and use its reasonable efforts to cause all of its Representatives not
to engage in any of the foregoing.
8.9 ACCOUNTING AND TAX TREATMENT. Each of the Parties undertakes
and agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not, to qualify for pooling-of-interests
accounting treatment and treatment as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 STATE TAKEOVER LAWS. OGM shall take all necessary steps to
exempt the transactions contemplated by this Agreement from, or if necessary to
challenge the validity or applicability of, any applicable Takeover Law.
8.11 CHARTER PROVISIONS. OGM shall take all necessary action to
ensure that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby do not and will not result
in the grant of any rights to any Person under the Articles of Incorporation,
Bylaws or other governing instruments of OGM.
8.12 AGREEMENT OF AFFILIATES. OGM has disclosed in Section 8.12 of
the OGM Disclosure Memorandum all Persons whom it reasonably believes is an
"affiliate" of OGM for purposes of Rule 145 under the 1933 Act. OGM shall use
its reasonable efforts to cause each such Person to deliver to LSI not later
than 30 days after the date of this Agreement, a written agreement,
substantially in the form of Exhibit 1, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of OGM Common Stock
held by such Person except as contemplated by such agreement or by this
Agreement and will not sell, pledge, transfer, or otherwise dispose of the
shares of LSI Common Stock to be received by such Person upon consummation of
the Merger except in compliance with applicable provisions of the 1933 Act and
the rules and regulations thereunder and until such time as financial results
covering at least 30 days of combined operations of LSI and OGM have been
published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies. Shares of LSI Common Stock issued to such
affiliates of OGM in exchange for shares of OGM Common Stock shall not be
transferable until such time as financial results covering at least 30 days of
combined operations of LSI and OGM have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies,
regardless of whether each such affiliate has provided the written agreement
referred to in this Section 8.12 (and LSI shall be entitled to place
- 24 -
<PAGE> 26
restrictive legends upon certificates for shares of LSI Common Stock issued to
affiliates of OGM pursuant to this Agreement to enforce the provisions of this
Section 8.12). LSI shall not be required to maintain the effectiveness of the
Registration Statement under the 1933 Act for the purposes of resale of LSI
Common Stock by such affiliates.
8.13 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective
Time, LSI shall provide generally to officers and employees of OGM employee
benefits under employee benefit and welfare plans (other than stock option or
other plans involving the potential issuance of LSI Common Stock), on terms and
conditions which when taken as a whole are substantially similar to those
currently provided by the LSI Companies to their similarly situated officers and
employees. For purposes of participation, vesting and (except in the case of LSI
retirement plans) benefit accrual under LSI's employee benefit plans, the
service of the employees of OGM prior to the Effective Time shall be treated as
service with a LSI Company participating in such employee benefit plans. LSI
also shall cause the Surviving Corporation to honor in accordance with their
terms all employment, severance, consulting and other compensation Contracts
disclosed in Section 8.13 of the OGM Disclosure Memorandum to LSI between OGM
and any current or former director, officer, or employee thereof, and all
provisions for vested benefits or other vested amounts earned or accrued through
the Effective Time under the OGM Benefit Plans.
8.14 INDEMNIFICATION.
(a) Subject to the terms and conditions of this Section 8.14,
Shareholders, jointly and severally, agree to indemnify and hold harmless LSI,
from and against any and all assessments, losses, damages (including special and
consequential damages incurred by third party claims claimants), liabilities,
and out of pocket costs and expenses, including without limitation, interest,
penalties, cost of external investigation (i.e., not including cost of employees
of LSI) and defense, and reasonable attorneys' and other professional fees and
expenses paid, suffered or incurred by LSI within the later period of: (i) one
(1) year following the Effective Time or (ii) first publication by LSI of
audited consolidated financial statements covering an accounting period after
the Closing Date for those items that would be expected to be encountered in the
audit process; and resulting from, based upon, or arising out of:
(i) the inaccuracy, untruth or incompleteness of any
representation or warranty of OGM or the Shareholders contained in or made
pursuant to the this Agreement or in the OGM Disclosure Memorandum or any
certificate or Exhibit furnished by OGM in connection therewith; or
(ii) a breach of or failure to perform any covenant or agreement
of OGM or the Shareholders made in this Agreement.
Provided, that the right to indemnification shall extend beyond such period with
respect to any claim for which written notice was given to the Shareholders
during such period but shall expire on the expiration of the applicable statutes
of limitations unless an action has been brought with respect thereto.
- 25 -
<PAGE> 27
(b) An indemnification claim shall be made by LSI by delivery of a
written notice to the Shareholders requesting indemnification and specifying in
reasonable detail the basis on which indemnification is sought and the amount
for which indemnification is sought.
(c) The Shareholders shall have 30 days to object to an indemnification
claim by delivery of a written notice of such objection to LSI specifying in
reasonable detail the basis for such objection. Failure to timely so object
shall constitute a final and binding acceptance of the indemnification claim by
the Shareholders, and the indemnification claim shall be paid in accordance with
Section 11(d). If an objection is timely interposed by the Shareholders, then
LSI and the Shareholders shall negotiate in good faith for a period of 60
business days from the date LSI receives such objection prior to commencing any
formal legal action, suit or proceeding with respect to such indemnification
claim.
(d) Upon final determination of the amount of an indemnification claim,
whether by agreement between the Shareholders and LSI or by an arbitration award
or other adjudication, the Shareholders shall pay the amount of such
indemnification claim within ten (10) days of the date such amount is finally
determined and all relevant appeal periods have expired. Payment shall be made
by delivery to LSI of shares of LSI Common Stock, which shall be valued for such
purpose at the last sale price of such common stock on the Nasdaq National
Market (as reported in The Wall Street Journal or, if not reported thereby, any
other authoritative source) on the last trading day preceding the Effective
Time, such price to be appropriately adjusted for changes in the number of
shares of LSI Common Stock outstanding as a result of a stock split, stock
dividend, or similar recapitalization occurring after the Effective Time and
before the delivery of such shares to LSI.
(e) Upon payment in full of any indemnification claim, the Shareholders
shall be subrogated to the extent of such payment to the rights of LSI against
any person or entity with respect to the subject matter of such indemnification
claim.
(f) Shareholders shall not be liable to LSI for any indemnification
hereunder except to the extent that the aggregate assessments, losses, damages
(including special and consequential damages incurred by third party claims
claimants), liabilities, and out of pocket costs and expenses, including without
limitation, interest, penalties, cost of external investigation (i.e., not
including cost of employees of LSI) and defense, and reasonable attorneys' and
other professional fees and expenses subject to indemnification for which
Shareholders are responsible exceeds ten thousand dollars ($10,000).
Notwithstanding any other provision hereof, in no event shall the obligation of
the Shareholders to indemnify LSI pursuant to this Section 8.14 exceed the
aggregate value of the total number of shares of LSI Common Stock issued to
Shareholder pursuant to this Agreement valued at the last sale price of such
common stock on the Nasdaq National Market (as reported in The Wall Street
Journal or, if not reported thereby, any other authoritative source) on the last
trading day preceding the Effective Time.
- 26 -
<PAGE> 28
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived pursuant to Section 11.6 of this
Agreement:
(A) SHAREHOLDER APPROVAL. The shareholders of LSI shall
have adopted or approved this Agreement, and the consummation of the
transactions contemplated hereby, including the Merger, as and to the
extent required by Law, by the provisions of any governing instruments,
or by the rules of the NASD.
(B) REGULATORY APPROVALS. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities
required for consummation of the Merger shall have been obtained or made
and shall be in full force and effect and all waiting periods required
by Law shall have expired. No Consent obtained from any Regulatory
Authority which is necessary to consummate the transactions contemplated
hereby shall be conditioned or restricted in a manner (including
requirements relating to the raising of additional capital or the
disposition of Assets) which in the reasonable judgment of the Board of
Directors of LSI would so materially adversely impact the economic or
business benefits of the transactions contemplated by this Agreement
that, had such condition or requirement been known, LSI would not, in
its reasonable judgment, have entered into this Agreement.
(C) CONSENTS AND APPROVALS. Each Party shall have
obtained any and all Consents required for consummation of the Merger
(other than those referred to in Section 9.1(b) of this Agreement) or
for the preventing of any Default under any Contract or Permit of such
Party. No Consent so obtained which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a
manner which in the reasonable judgment of the Board of Directors of LSI
would so materially adversely impact the economic or business benefits
of the transactions contemplated by this Agreement that, had such
condition or requirement been known, LSI would not, in its reasonable
judgment, have entered into this Agreement.
(D) LEGAL PROCEEDINGS. No court or governmental or
regulatory authority of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) or taken any other action which
prohibits, restricts or makes illegal consummation of the transactions
contemplated by this Agreement.
(E) REGISTRATION STATEMENT. The Registration Statement
shall be effective under the 1933 Act, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued, no
action, suit, proceeding or investigation by the SEC to suspend the
effectiveness thereof shall have been initiated and be continuing, and
all necessary approvals under state securities Laws or the 1933 Act or
1934 Act relating to the
- 27 -
<PAGE> 29
issuance or trading of the shares of LSI Common Stock issuable pursuant
to the Merger shall have been received.
(F) EXCHANGE LISTING. The shares of LSI Common Stock
issuable pursuant to the Merger shall have been approved for listing on
the Nasdaq National Market.
(G) TAX MATTERS. Each Party shall have received a written
opinion of counsel from Alston & Bird, in form reasonably satisfactory
to such Parties (the "Tax Opinion"), to the effect that (i) the Merger
will constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code, (ii) the exchange in the Merger of OGM Common
Stock for LSI Common Stock will not give rise to gain or loss to the
shareholders of OGM with respect to such exchange (except to the extent
of any cash received), and (iii) none of OGM, LSI or WPC will recognize
gain or loss as a consequence of the Merger (except for amounts
resulting from any required change in accounting methods and any income
and deferred gain recognized pursuant to Treasury regulations issued
under Section 1502 of the Internal Revenue Code). In rendering such Tax
Opinion, such counsel shall be entitled to rely upon representations of
officers of OGM and LSI reasonably satisfactory in form and substance to
such counsel.
9.2 CONDITIONS TO OBLIGATIONS OF LSI. The obligations of LSI to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by LSI pursuant to Section 11.6(a) of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this
Section 9.2(a), the accuracy of the representations and warranties of
OGM set forth in this Agreement shall be assessed as of the date of this
Agreement and as of the Effective Time with the same effect as though
all such representations and warranties had been made on and as of the
Effective Time (provided that representations and warranties which are
confined to a specified date shall speak only as of such date). The
representations and warranties of OGM set forth in Section 5.3 of this
Agreement shall be true and correct (except for inaccuracies which are
de minimus in amount). The representations and warranties of OGM set
forth in Sections 5.19, 5.20, and 5.21 of this Agreement shall be true
and correct in all material respects.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all
of the agreements and covenants of OGM to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(C) CERTIFICATES. OGM shall have delivered to LSI (i) a
certificate, dated as of the Effective Time and signed on its behalf by
its chief executive officer and its chief financial officer, to the
effect that the conditions set forth in Section 9.1 of this Agreement as
relates to OGM and in Section 9.2(a) and 9.2(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by
OGM's Board of Directors and
- 28 -
<PAGE> 30
shareholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and
the consummation of the transactions contemplated hereby, all in such
reasonable detail as LSI and its counsel shall request.
(D) OPINION OF COUNSEL. LSI shall have received an
opinion of Hinckley, Allen & Snyder, counsel to OGM, dated as of the
Closing, in form reasonably satisfactory to LSI, as to the matters set
forth in Exhibit 3.
(E) POOLING LETTERS. LSI shall have received letters, a
draft dated as of the date of filing of the Registration Statement with
the SEC and a final version dated as of the Effective Time, in form and
substance reasonably acceptable to LSI, from KPMG Peat Marwick LLP to
the effect that the Merger will qualify for pooling-of-interests
accounting treatment. LSI also shall have received letters, a draft
dated as of the date of filing of the Registration Statement with the
SEC and a final version dated as of the Effective Time, in form and
substance reasonably acceptable to LSI, from KPMG Peat Marwick LLP to
the effect that such firm is not aware of any matters relating to OGM
and its Subsidiaries which would preclude the Merger from qualifying for
pooling-of-interests accounting treatment.
(F) ACCOUNTANT'S LETTERS. LSI shall have received from
KPMG Peat Marwick LLP letters dated not more than five days prior to (i)
the date of the Joint Proxy Statement and (ii) the Effective Time, with
respect to certain financial information regarding OGM, in form and
substance reasonably satisfactory to LSI, which letters shall be based
upon customary specified procedures undertaken by such firm in
accordance with Statement of Auditing Standard No. 72.
(G) AFFILIATES AGREEMENTS. LSI shall have received from
each affiliate of OGM the affiliates letter referred to in Section 8.12
of this Agreement, to the extent necessary to assure in the reasonable
judgment of LSI that the transactions contemplated hereby will qualify
for pooling-of-interests accounting treatment.
(H) SHAREHOLDERS' EQUITY. OGM's shareholders' equity as
of the end of the last fiscal quarter preceding Closing shall not be
materially less than OGM's shareholders' equity as of March 31, 1996,
excluding for purposes of the calculation of such shareholders' equity
the effects of (i) all costs, fees and charges, including fees and
charges of OGM's accountants, counsel and financial advisors, whether or
not accrued or paid, that are related to the transaction contemplated by
this Agreement, (ii) distributions to shareholders permitted under
Section 7.2(c) hereof, and (iii) any reductions in OGM's shareholders'
equity resulting from any actions or changes in policies of OGM taken at
the request of LSI.
(I) FAIRNESS OPINION. LSI shall have received from The
Robinson-Humphrey Company, Inc. a letter, dated not more than five
business days prior to the date of the Proxy Statement, to the effect
that, in the opinion of such firm, the consideration to be received by
LSI connection with the Merger is fair, from a financial point of view,
to LSI and its shareholders.
- 29 -
<PAGE> 31
(J) OGM AUDIT. OGM shall have delivered to LSI an audited
balance sheet (including related notes and schedules, if any) as of June
25, 1995, and as of March 31, 1996, and the statements of income,
changes in shareholders' equity, and cash flows (including related notes
and schedules, if any) for the fiscal year ended June 25, 1995 and the
40 weeks ended March 31, 1996, of OGM together with the report of KPMG
Peat Marwick LLP thereon, at least 40 calendar days after the date of
this Agreement. OGM shall have delivered to LSI an audited balance sheet
(including related notes and schedules, if any) as of June 30, 1996, and
the statements of income, changes in shareholders' equity, and cash
flows (including related notes and schedules, if any) for the fiscal
year then ended, of OGM together with the report of KPMG Peat Marwick
LLP thereon, at least 30 calendar days prior to the Effective Time.
9.3 CONDITIONS TO OBLIGATIONS OF OGM. The obligations of OGM to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by OGM pursuant to Section 11.6(b) of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this
Section 9.3(a), the accuracy of the representations and warranties of
LSI set forth in this Agreement shall be assessed as of the date of this
Agreement and as of the Effective Time with the same effect as though
all such representations and warranties had been made on and as of the
Effective Time (provided that representations and warranties which are
confined to a specified date shall speak only as of such date). The
representations and warranties of LSI set forth in Section 6.3 of this
Agreement shall be true and correct (except for inaccuracies which are
de minimus in amount). There shall not exist inaccuracies in the
representations and warranties of LSI set forth in this Agreement
(including the representations and warranties set forth in Sections
6.3.) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on LSI; provided
that, for purposes of this sentence only, those representations and
warranties which are qualified by references to "material" or "Material
Adverse Effect" shall be deemed not to include such qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all
of the agreements and covenants of LSI to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with.
(C) CERTIFICATES. LSI shall have delivered to OGM (i) a
certificate, dated as of the Effective Time and signed on its behalf by
its chief executive officer and its chief financial officer, to the
effect that the conditions set forth in Section 9.3 of this Agreement as
relates to LSI and in Section 9.3(a) and 9.3(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by
LSI's Board of Directors and shareholders and WPC's Board of Directors
and shareholders evidencing the taking of all corporate action necessary
to authorize the execution, delivery and performance of this Agreement,
- 30 -
<PAGE> 32
and the consummation of the transactions contemplated hereby, all in
such reasonable detail as OGM and its counsel shall request.
(D) OPINION OF COUNSEL. OGM shall have received an
opinion of Alston & Bird, counsel to LSI, dated as of the Effective
Time, in form reasonably acceptable to OGM, as to the matters set forth
in Exhibit 3.
(E) ACCOUNTANT'S LETTERS. OGM shall have received from
KPMG Peat Marwick LLP letters dated not more than five days prior to (i)
the date of the Joint Proxy Statement and (ii) the Effective Time, with
respect to certain financial information regarding LSI, in form and
substance reasonably satisfactory to OGM, which letters shall be based
upon customary specified procedures undertaken by such firm.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this
Agreement, and notwithstanding the adoption or approval of this Agreement by
the shareholders of OGM and LSI or both, this Agreement may be terminated and
the Merger abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of LSI
and the Board of Directors of OGM; or
(b) By the Board of Directors of either Party in the
event (i) any Consent of any Regulatory Authority required for
consummation of the Merger and the other transactions contemplated
hereby shall have been denied by final nonappealable action of such
authority or if any action taken by such authority is not appealed
within the time limit for appeal, or (ii) the shareholders of LSI fail
to adopt or approve this Agreement and the transactions contemplated
hereby as required by the GBCC and the rules of the NASD at the
Shareholders' Meeting where the transactions were presented to such
shareholders for approval and voted upon; or
(c) By OGM or LSI, if LSI or BCS has terminated the BCS
Agreement for any reason; or
(d) By LSI in the event that the BCS Transaction shall
not have been consummated by December 31, 1996, if the failure to
consummate the transactions contemplated hereby on or before such date
is not caused by any breach of this Agreement by LSI.
10.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and
- 31 -
<PAGE> 33
have no effect, except that (i) the provisions of this Section 10.2 and Article
11 and Section 8.6(b) of this Agreement shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 10.1(b) or 10.1(c) of
this Agreement shall not relieve the breaching Party from Liability for an
uncured willful breach of a representation, warranty, covenant, or agreement
giving rise to such termination.
ARTICLE 11
MISCELLANEOUS
11.1 DEFINITIONS.
(a) Except as otherwise provided herein, the capitalized
terms set forth below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"ACQUISITION PROPOSAL" with respect to a Party shall mean
any tender offer or exchange offer or any proposal for a merger,
acquisition of all of the stock or assets of, or other business
combination involving such Party or any of its Subsidiaries or the
acquisition of a substantial equity interest in, or a substantial
portion of the assets of, such Party or a substantial equity interest
in, or all or substantially all of the assets of, any of its
Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person; (ii) any
officer, director, partner, employer, or direct or indirect beneficial
owner of any 10% or greater equity or voting interest of such Person; or
(iii) any other Person for which a Person described in clause (ii) acts
in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger,
including the Exhibits, schedules and Disclosure Memoranda delivered
pursuant hereto and incorporated herein by reference.
"ARTICLES OF MERGER" shall mean the Articles of Merger to be
executed by OGM and WPC and filed with the Secretary of State of the
Commonwealth of Massachusetts relating to the Merger as contemplated by
Section 1.1 of this Agreement.
"ASSETS" of a Person shall mean all of the assets,
properties, businesses and rights of such Person of every kind, nature,
character and description, whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise relating to or utilized
in such Person's business, directly or indirectly, in whole or in part,
whether or not carried on the books and records of such Person, and
whether or not owned in the name of such Person or any Affiliate of such
Person and wherever located.
"CERTIFICATE OF MERGER" shall mean the Certificate to be
executed by WPC and filed with the Secretary of State of the State of
Georgia relating to the Merger as contemplated by Section 1.1 of this
Agreement.
"CLOSING DATE" shall mean the date on which the Closing
occurs.
- 32 -
<PAGE> 34
"CONSENT" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person
pursuant to any Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement,
arrangement, authorization, commitment, contract, indenture, instrument,
lease, obligation, plan, practice, restriction, understanding or
undertaking of any kind or character, or other document to which any
Person is a party or that is binding on any Person or its capital stock,
Assets or business.
"DEFAULT" shall mean (i) any breach or violation of or
default under any Contract, Order or Permit, (ii) any occurrence of any
event that with the passage of time or the giving of notice or both
would constitute a breach or violation of or default under any Contract,
Order or Permit, or (iii) any occurrence of any event that with or
without the passage of time or the giving of notice would give rise to a
right to terminate or revoke, change the current terms of, or
renegotiate, or to accelerate, increase, or impose any Liability under,
any Contract, Order or Permit.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to
pollution or protection of human health or the environment (including
ambient air, surface water, ground water, land surface or subsurface
strata) and which are administered, interpreted or enforced by the
United States Environmental Protection Agency and state and local
agencies with jurisdiction over, and including common law in respect of,
pollution or protection of the environment, including the Comprehensive
Environmental Response Compensation and Liability Act, as amended, 42
U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases or threatened releases of
any Hazardous Material, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of any Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"EXHIBITS" 1 through 3, inclusive, shall mean the Exhibits so
marked, copies of which are attached to this Agreement. Such Exhibits are
hereby incorporated by reference herein and made a part hereof, and may
be referred to in this Agreement and any other related instrument or
document without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance or toxic
substance (as those terms are defined by any applicable Environmental
Laws) and (ii) any chemicals, pollutants, contaminants, petroleum,
petroleum products, or oil (and specifically shall include asbestos
requiring abatement, removal or encapsulation pursuant to the
requirements of governmental authorities and any polychlorinated
biphenyls).
"HSR ACT" shall mean Section 7A of the Clayton Act, as added
by Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
- 33 -
<PAGE> 35
"INTELLECTUAL PROPERTY" shall mean copyrights, patents,
trademarks, service marks, service names, trade names, technology rights
and licenses, computer software (including any source or object codes
therefor or documentation relating thereto), trade secrets, franchises,
know-how, inventions, and other intellectual property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated
thereunder.
"JOINT PROXY STATEMENT" shall mean the proxy statement used
by BCS and LSI to solicit the adoption or approval of their respective
shareholders of the transactions contemplated by this Agreement, which
shall include the prospectus of LSI relating to the issuance of the LSI
Common Stock to holders of BCS Common Stock.
"KNOWLEDGE" as used with respect to a Person (including
references to such Person being aware of a particular matter) shall mean
those facts that are known or should reasonably have been known in the
reasonable exercise of their duties by the Chairman, President, and
Chief Financial Officer, and with respect to OGM shall also include the
Edward P. Grace III.
"LAW" shall mean any code, law, ordinance, regulation,
reporting or licensing requirement, rule, or statute applicable to a
Person or its Assets, Liabilities or business, including those
promulgated, interpreted or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or expense
(including costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for
collection or deposit in the ordinary course of business) of any type,
whether accrued, absolute or contingent, liquidated or unliquidated,
matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement,
lien, mortgage, pledge, reservation, restriction, security interest,
title retention or other security arrangement, or any adverse right or
interest, charge, or claim of any nature whatsoever of, on, or with
respect to any property or property interest, other than (i) Liens for
current property Taxes not yet due and payable, and (iii) Liens which do
not materially impair the use of or title to the Assets subject to such
Lien.
"LITIGATION" shall mean any action, arbitration, cause of
action, claim, complaint, criminal prosecution or demand letter, or
notice (written or oral) by any Person of governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding alleging potential Liability, or any Regulatory Authority or
other federal, state or local governmental agency or department
requesting information relating to or affecting a Party, its business,
its Assets (including Contracts related to it), or the transactions
contemplated by this Agreement.
"LSI CAPITAL STOCK" shall mean, collectively, the LSI Common
Stock, the LSI Preferred Stock and any other class or series of capital
stock of LSI.
"LSI COMMON STOCK" shall mean the no par value common stock
of LSI.
"LSI COMPANIES" shall mean, collectively, LSI and all LSI
Subsidiaries.
"LSI DISCLOSURE MEMORANDUM" shall mean the written
information entitled "Longhorn Steaks, Inc. Disclosure Memorandum"
delivered prior to the date of this Agreement to OGM describing in
reasonable detail the matters contained therein and, with
- 34 -
<PAGE> 36
respect to each disclosure made therein, specifically referencing each
Section of this Agreement under which such disclosure is being made.
Information disclosed with respect to one Section shall not be deemed to
be disclosed for purposes of any other Section not specifically
referenced with respect thereto.
"LSI FINANCIAL STATEMENTS" shall mean (i) the consolidated
statements of condition (including related notes and schedules, if any)
of LSI as of March 31, 1996, and as of December 31, 1995 and 1994, and
the related statements of income, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any) for the three
months ended March 31, 1996, and for each of the three years ended
December 31, 1995, 1994 and 1993, as filed by LSI in SEC Documents, and
(ii) the consolidated statements of condition of LSI (including related
notes and schedules, if any) and related statements of income, changes
in shareholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to
periods ended subsequent to March 31, 1996.
"LSI PREFERRED STOCK" shall mean the no par value preferred
stock of LSI.
"LSI STOCK PLANS" shall mean the existing stock option and
other stock-based compensation plans of LSI designated as follows:
Longhorn Steaks, Inc. Amended and Restated 1992 Incentive Plan, Longhorn
Steaks, Inc. Stock Option Agreement with Richard E. Rivera and Longhorn
Steaks, Inc. 1996 Stock Plan for Outside Directors.
"LSI SUBSIDIARIES" shall mean the Subsidiaries of LSI and
any corporation or other organization acquired as a Subsidiary of LSI in
the future and held as a Subsidiary by LSI at the Effective Time.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event,
change or occurrence which, individually or together with any other
event, change or occurrence, has a material adverse impact on (i) the
financial position, business, or results of operations of such Party and
its Subsidiaries, taken as a whole, or (ii) the ability of such Party to
perform its obligations under this Agreement or to consummate the Merger
or the other transactions contemplated by this Agreement, provided that
"material adverse impact" shall not be deemed to include the impact of
(a) changes in Laws of general applicability or interpretations thereof
by courts or governmental authorities, (b) changes in generally accepted
accounting principles or regulatory accounting principles, (c) actions
and omissions of a Party (or any of its Subsidiaries) taken with the
prior informed written Consent of the other Party in contemplation of
the transactions contemplated hereby, and (z) the Merger on the
operating performance of the Parties, including expenses incurred by the
Parties in consummating the transactions contemplated by this Agreement.
"MATERIAL" for purposes of this Agreement shall be
determined in light of the facts and circumstances of the matter in
question; provided that any specific monetary amount stated in this
Agreement shall determine materiality in that instance.
"MBCL" shall mean the Massachusetts General Business
Corporation Law.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"NASDAQ NATIONAL MARKET" shall mean the Nasdaq Stock
Market's National Market of the National Association of Securities
Dealers Automated Quotations System.
"OGM COMMON STOCK" shall mean the $100 par value common
stock of OGM.
- 35 -
<PAGE> 37
"OGM DISCLOSURE MEMORANDUM" shall mean the written
information entitled "Old Grist Mill Tavern, Inc. Disclosure
Memorandum" delivered prior to the date of this Agreement to LSI
describing in reasonable detail the matters contained therein and, with
respect to each disclosure made therein, specifically referencing each
Section of this Agreement under which such disclosure is being made.
Information disclosed with respect to one Section shall not be deemed to
be disclosed for purposes of any other Section not specifically
referenced with respect thereto. Where any representation or warranty
contained in the Agreement is limited or qualified by the materiality of
the matters as to which the representation or warranty is given, the
inclusion of any matter in the Disclosure Memorandum does not constitute
a determination by OGM that such matters are material.
"OGM FINANCIAL STATEMENTS" shall mean (i) the balance sheets
(including related notes and schedules, if any) of OGM as of June 25,
1995, and the related statements of income, changes in shareholders'
equity, and cash flows (including related notes and schedules, if any)
for the fiscal year ended June 25, 1995 and (ii) the balance sheets of
OGM (including related notes and schedules, if any) and related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) with respect to periods
ended subsequent to June 25, 1995.
"OPERATING PROPERTY" shall mean any property owned by the
Party in question or by any of its Subsidiaries or in which such Party
or Subsidiary holds a security interest, and, where required by the
context, includes the owner or operator of such property, but only with
respect to such property.
"ORDER" shall mean any administrative decision or award,
decree, injunction, judgment, order, quasi-judicial decision or award,
ruling, or writ of any federal, state, local or foreign or other court,
arbitrator, mediator, tribunal, administrative agency or Regulatory
Authority.
"PARTICIPATION FACILITY" shall mean any facility or property
in which the Party in question or any of its Subsidiaries participates
in the management and, where required by the context, said term means
the owner or operator of such facility or property, but only with
respect to such facility or property.
"PARTY" shall mean either OGM or LSI, and "PARTIES" shall
mean both OGM and LSI.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a
party or that is or may be binding upon or inure to the benefit of any
Person or its securities, Assets or business.
"PERSON" shall mean a natural person or any legal,
commercial or governmental entity, such as, but not limited to, a
corporation, general partnership, joint venture, limited partnership,
limited liability company, trust, business association, group acting in
concert, or any person acting in a representative capacity.
"REGISTRATION STATEMENT" shall mean the Registration
Statement on Form S-4, or other appropriate form, including any
pre-effective or post-effective amendments or supplements thereto, filed
with the SEC by LSI under the 1933 Act with respect to the shares of LSI
Common Stock to be issued to the shareholders of OGM in connection with
the transactions contemplated by this Agreement.
- 36 -
<PAGE> 38
"REGULATORY AUTHORITIES" shall mean, collectively, the NASD,
the SEC, the Federal Trade Commission, the United States Department of
Justice, and all other federal, state, county, local or other
governmental or regulatory agencies, authorities, instrumentalities,
commissions, boards or bodies having jurisdiction over the Parties and
their respective Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial
advisor, attorney, accountant, consultant, or other representative of a
Person.
"RIGHTS" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever
relating to, or securities or rights convertible into or exchangeable
for, shares of the capital stock of a Person or by which a Person is or
may be bound to issue additional shares of its capital stock or other
Rights.
"SEC DOCUMENTS" shall mean all forms, proxy statements,
registration statements, reports, schedules, and other documents filed,
or required to be filed, by a Party or any of its Subsidiaries with any
Regulatory Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act
of 1940, as amended, the Trust Indenture Act of 1939, as amended, and
the rules and regulations of any Regulatory Authority promulgated
thereunder.
"SHAREHOLDERS MEETINGS" shall mean the meeting of the
shareholders of LSI to be held pursuant to Section 8.1 of this
Agreement, including any adjournment or adjournments thereof.
"SIGNIFICANT SUBSIDIARY" shall mean any present or future
consolidated Subsidiary of the Party in question, the assets of which
constitute ten percent (10%) or more of the consolidated assets of such
Party as reflected on such Party's consolidated statement of condition
prepared in accordance with GAAP.
"SUBSIDIARIES" shall mean all those corporations,
associations, or other business entities of which the entity in question
either (i) owns or controls 50% or more of the outstanding equity
securities either directly or through an unbroken chain of entities as
to each of which 50% or more of the outstanding equity securities is
owned directly or indirectly by its parent (provided, there shall not be
included any such entity the equity securities of which are owned or
controlled in a fiduciary capacity), or (ii) in the case of
partnerships, serves as a general partner.
"SURVIVING CORPORATION" shall mean WPC as the surviving
corporation resulting from the Merger.
"TAX RETURN" shall mean any report, return, information
return, or other information required to be supplied to a taxing
authority in connection with Taxes, including any return of an affiliated
or combined or unitary group that includes a Party or its Subsidiaries.
"TAX" or "TAXES" shall mean any federal, state, county,
local, or foreign income, profits, franchise, gross receipts, payroll,
sales, employment, use, property, withholding, excise, occupancy, and
other taxes, assessments, charges, fares, or impositions, including
interest, penalties, and additions imposed thereon or with respect
thereto.
"WPC COMMON STOCK" shall mean the $.01 par value common
stock of WPC.
- 37 -
<PAGE> 39
(b) The terms set forth below shall have the meanings
ascribed thereto in the referenced sections:
<TABLE>
<S> <C>
Base Period Trading Price Limitations Section 3.1(c)
Base Period Trading Price Section 3.1(c)
Closing Section 1.2
Effective Time Section 1.3
ERISA Affiliate Section 5.14(b)
Exchange Agent Section 4.1
Exchange Ratio Section 3.1(c)
Merger Section 1.1
OGM Contracts Section 5.15
OGM Benefit Plans Section 5.14
OGM ERISA Plan Section 5.14
OGM Intellectual Property Section 5.10
Per Share Purchase Price Section 3.1(c)
SEC Section 5.18
Tax Opinion Section 9.1(h)
</TABLE>
(c) Any singular term in this Agreement shall be deemed
to include the plural, and any plural term the singular. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed followed by the words "without limitation."
11.2 EXPENSES. Each of the Parties shall bear and pay all direct
costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including filing, registration and
application fees, printing fees, and fees and expenses of its own financial or
other consultants, investment bankers, accountants, and counsel.
11.3 BROKERS AND FINDERS. Except for Tucker Anthony Incorporated
as to OGM and except for The Robinson-Humphrey Company, Inc. as to LSI, each
of the Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed on its behalf any broker or
finder or incurred any Liability for any financial advisory fees, investment
bankers' fees, brokerage fees, commissions, or finders' fees in connection with
this Agreement or the transactions contemplated hereby. In the event of a claim
by any broker or finder based upon his or its representing or being retained by
or allegedly representing or being retained by OGM or LSI, each of OGM and LSI,
as the case may be, agrees to indemnify and hold the other Party harmless of
and from any Liability in respect of any such claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement between the Parties with respect to
the transactions contemplated hereunder and supersedes all prior arrangements
or understandings with respect thereto, written or oral. Nothing in this
Agreement expressed or implied, is intended to confer upon any Person, other
than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under
- 38 -
<PAGE> 40
or by reason of this Agreement, other than as provided in Sections 8.13 and
8.14 of this Agreement.
11.5 AMENDMENTS. To the extent permitted by Law, this Agreement
may be amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties, whether before or
after shareholder approval of this Agreement has been obtained; provided, that
after any such approval by the holders of OGM Common Stock, there shall be made
no amendment that requires further approval by such shareholders without the
further approval of such shareholders.
11.6 WAIVERS.
(a) Prior to or at the Effective Time, LSI, acting
through its Board of Directors, chief executive officer or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by OGM, to waive or extend the time for the compliance
or fulfillment by OGM of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of LSI
under this Agreement, except any condition which, if not satisfied, would
result in the violation of any Law. No such waiver shall be effective unless in
writing signed by a duly authorized officer of LSI.
(b) Prior to or at the Effective Time, OGM, acting
through its Board of Directors, chief executive officer or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by LSI, to waive or extend the time for the compliance
or fulfillment by LSI of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of OGM
under this Agreement, except any condition which, if not satisfied, would
result in the violation of any Law. No such waiver shall be effective unless in
writing signed by a duly authorized officer of OGM.
(c) The failure of any Party at any time or times to
require performance of any provision hereof shall in no manner affect the right
of such Party at a later time to enforce the same or any other provision of
this Agreement. No waiver of any condition or of the breach of any term
contained in this Agreement in one or more instances shall be deemed to be or
construed as a further or continuing waiver of such condition or breach or a
waiver of any other condition or of the breach of any other term of this
Agreement.
11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. 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.
11.8 NOTICES. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
by hand, by facsimile transmission, by registered or certified mail, postage
pre-paid, or by courier or overnight carrier, to the persons at
- 39 -
<PAGE> 41
the addresses set forth below (or at such other address as may be provided
hereunder), and shall be deemed to have been delivered as of the date so
delivered:
<TABLE>
<S> <C>
OGM and Shareholders: Old Grist Mill Tavern, Inc.
c/o Bugaboo Creek Steak House, Inc.
1275 Wampanoag Trail
East Providence, Rhode Island 02915
Telecopy Number: (401) 433-5986
Attention: Edward P. Grace, III
Copy to Counsel: Hinckley, Allen & Snyder
1500 Fleet Center
50 Kennedy Plaza
Providence, Rhode Island 02903
Telecopy Number: (401) 277-9600
Attention: Margaret D. Farrell
LSI: Longhorn Steaks, Inc.
8215 Roswell Road, Building 200
Atlanta, Georgia 30350
Telecopy Number: (770) 399-7796
Attention: Richard E. Rivera
Copy to Counsel: Alston & Bird
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: William H. Avery
</TABLE>
11.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Delaware, without regard
to any applicable conflicts of Laws.
11.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
- 40 -
<PAGE> 42
11.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against any party, whether
under any rule of construction or otherwise. No party to this Agreement shall
be considered the draftsman. The parties acknowledge and agree that this
Agreement has been reviewed, negotiated and accepted by all parties and their
attorneys and shall be construed and interpreted according to the ordinary
meaning of the words used so as fairly to accomplish the purposes and
intentions of all parties hereto.
11.13 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
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 the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
11.14 SEVERABILITY. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
- 41 -
<PAGE> 43
IN WITNESS WHEREOF, each of the Parties has caused this Agreement
to be executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
OLD GRIST MILL TAVERN, INC.
By: /s/ Edward P. Grace, III
------------------------------
President
[CORPORATE SEAL]
ATTEST: LONGHORN STEAKS, INC.
/s/ Anne D. Huemme By: /s/ Richard E. Rivera
- --------------------------- -------------------------------
Secretary Richard E. Rivera
President
[CORPORATE SEAL]
ATTEST: WHIP POOLING CORPORATION
/s/ F. Fitzhugh Taylor, III /s/ Richard E. Rivera
- --------------------------- By: ------------------------------
Secretary President
[CORPORATE SEAL]
- 42 -
<PAGE> 44
THE SHAREHOLDERS:
EDWARD P. GRACE, III
/s/ Edward P. Grace, III
---------------------------------
SAMUEL J. ORR, JR.
/s/ Samuel J. Orr, Jr.
---------------------------------
By: David Rizzo as Attorney-in-Fact
- 43 -
<PAGE> 45
EXHIBIT 1: FORM OF AGREEMENT OF AFFILIATES OF OGM.
<PAGE> 46
AFFILIATE AGREEMENT
Longhorn Steaks, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention:
--------------------
--------------------
Gentlemen:
The undersigned is a shareholder of Old Grist Mill Tavern, Inc. ("OGM"),
a corporation organized and existing under the laws of the Commonwealth of
Massachusetts and located in Boston, Masschusetts, and will become a
shareholder of the Longhorn Steaks, Inc. ("LSI") pursuant to the transactions
described in the Agreement and Plan of Merger, dated as of June , 1996 (the
"Agreement"), by and among LSI, Whip Pooling Corporation ("WPC") and OGM. Under
the terms of the Agreement, OGM will be merged into and with WPC (the
"Merger"), and the shares of the $100 par value common stock of OGM ("OGM
Common Stock") will be converted into and exchanged for shares of the no par
value common stock of LSI ("LSI Common Stock"). This Affiliate Agreement
represents an agreement between the undersigned and LSI regarding certain
rights and obligations of the undersigned in connection with the shares of LSI
to be received by the undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned and LSI hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as
to OGM he is an "affiliate" under Rule 145(c) as defined in Rule 405 of the
Rules and Regulations of the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended ("1933 Act"), and the undersigned
anticipates that he will be such an "affiliate" at the time of the Merger.
2. Initial Restriction on Disposition. The undersigned agrees that he
will not sell, transfer, or otherwise dispose of his interests in, or reduce
his risk relative to, any of the shares of LSI Common Stock into which his
shares of OGM Common Stock are converted upon consummation of the Merger until
such time as LSI notifies the undersigned that the requirements of SEC
Accounting Series Release Nos. 130 and 135 ("ASR 130 and 135") have been met.
The undersigned understands that ASR 130 and 135 relate to publication of
financial results of post-Merger combined operations of LSI and OGM. LSI agrees
that it will publish such results within 45 days after the end of the first
fiscal quarter of LSI containing the required period of post-Merger combined
operations and that it will notify the undersigned promptly following such
publication.
3. Covenants and Warranties of Undersigned. The undersigned
represents, warrants and agrees that:
<PAGE> 47
(a) During the 30 days immediately preceding the Effective Time
of the Merger, the undersigned has not sold, transfered, or otherwise
disposed of his interests in, or reduced his risk relative to, any of
the shares of OGM Common Stock beneficially owned by the undersigned as
of the record date for determination of shareholders entitled to vote at
the Shareholders' Meeting of OGM held to approve the Merger.
(b) The LSI Common Stock received by the undersigned as a result
of the Merger will be taken for his own account and not for others,
directly or indirectly, in whole or in part.
(c) LSI has informed the undersigned that any distribution by
the undersigned of LSI Common Stock has not been registered under the
1933 Act and that shares of LSI Common Stock received pursuant to the
Merger can only be sold by the undersigned (1) following registration
under the 1933 Act, or (2) in conformity with the volume and other
requirements of Rule 145(d) promulgated by the SEC as the same now exist
or may hereafter be amended, or (3) to the extent some other exemption
from registration under the 1933 Act might be available. The undersigned
understands that LSI is under no obligation to file a registration
statement with the SEC covering the disposition of the undersigned's
shares of LSI Common Stock or to take any other action necessary to make
compliance with an exemption from such registration available.
(d) The undersigned will, and will cause each of the other
parties whose shares are deemed to be beneficially owned by the
undersigned pursuant to Section 8 hereof to, have all shares of OGM
Common Stock beneficially owned by the undersigned registered in the
name of the undersigned or such parties, as applicable, prior to the
effective date of the Merger and not in the name of any bank,
broker-dealer, nominee or clearinghouse.
(e) The undersigned is aware that LSI intends to treat the
Merger as a tax-free reorganization under Section 368 of the Internal
Revenue Code ("Code") for federal income tax purposes. The undersigned
agrees to treat the transaction in the same manner as LSI for federal
income tax purposes. The undersigned acknowledges that Section
1.368-1(b) of the Income Tax Regulations requires "continuity of
interest" in order for the Merger to be treated as tax-free under
Section 368 of the Code. This requirement is satisfied if, taking into
account those OGM shareholders who receive cash in exchange for their
stock, who receive cash in lieu of fractional shares, or who dissent
from the Merger, there is no plan or intention on the part of the OGM
shareholders to sell or otherwise dispose of the LSI Common Stock to be
received in the Merger that will reduce such shareholders' ownership to
a number of shares having, in the aggregate, a value at the time of the
merger of less than 50% of the total fair market value of the OGM Common
Stock outstanding immediately prior to the Merger. The undersigned has
no prearrangement, plan or intention to sell or otherwise dispose of an
amount of his LSI Common Stock to be received in the Merger which would
cause the foregoing requirement not to be satisfied.
<PAGE> 48
4. Restrictions on Transfer. The undersigned understands and agrees
that stop transfer instructions with respect to the shares of LSI Common Stock
received by the undersigned pursuant to the Merger will be given to LSI's
Transfer Agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in
substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests"
and may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as Longhorn Steaks, Inc. ("LSI") has
published the financial results covering at least 30 days of combined
operations after the effective date of the merger through which the
business combination was effected. In addition, the shares represented
by this certificate may not be sold, transferred or otherwise disposed
of except or unless (1) covered by an effective registration statement
under the Securities Act of 1933, as amended, (2) in accordance with (i)
Rule 145(d) (in the case of shares issued to an individual who is not an
affiliate of LSI) or (ii) Rule 144 (in the case of shares issued to an
individual who is an affiliate of LSI) of the Rules and Regulations of
such Act, or (3) in accordance with a legal opinion satisfactory to
counsel for LSI that such sale or transfer is otherwise exempt from the
registration requirements of such Act."
Such legend will also be placed on any certificate representing LSI securities
issued subsequent to the original issuance of the LSI Common Stock pursuant to
the Merger as a result of any transfer of such shares or any stock dividend,
stock split, or other recapitalization as long as the LSI Common Stock issued
to the undersigned pursuant to the Merger has not been transferred in such
manner to justify the removal of the legend therefrom. Upon the request of the
undersigned, LSI shall cause the certificates representing the shares of LSI
Common Stock issued to the undersigned in connection with the Merger to be
reissued free of any legend relating to restrictions on transfer by virtue of
ASR 130 and 135 as soon as practicable after the requirements of ASR 130 and
135 have been met. In addition, if the provisions of Rules 144 and 145 are
amended to eliminate restrictions applicable to the LSI Common Stock received
by the undersigned pursuant to the Merger, or at the expiration of the
restrictive period set forth in Rule 145(d), LSI, upon the request of the
undersigned, will cause the certificates representing the shares of LSI Common
Stock issued to the undersigned in connection with the Merger to be reissued
free of any legend relating to the restrictions set forth in Rules 144 and
145(d) upon receipt by LSI of an opinion of its counsel to the effect that such
legend may be removed.
5. Understanding of Restrictions on Dispositions. The undersigned has
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his ability to sell, transfer, or otherwise
dispose of the shares of LSI Common Stock received by the undersigned, to the
extent he believes necessary, with his counsel or counsel for OGM.
6. Filing of Reports by LSI. LSI agrees, for a period of three years
after the effective date of the Merger, to file on a timely basis all reports
required to be filed by it pursuant to Section 13 of the Securities Exchange
Act of 1934, as amended, so that the public information provisions of Rule
145(d) promulgated by the SEC as the same are presently in effect will be
<PAGE> 49
available to the undersigned in the event the undersigned desires to transfer
any shares of LSI Common Stock issued to the undersigned pursuant to the
Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of LSI Common Stock received by him in connection
with the Merger at any time during the restrictive period set forth in Rule
145(d), the undersigned will provide the necessary representation letter to the
transfer agent for LSI Common Stock together with such additional information
as the transfer agent may reasonably request. If LSI's counsel concludes that
such proposed sale or transfer complies with the requirements of Rule 145(d),
LSI shall cause such counsel to provide such opinions as may be necessary to
LSI's Transfer Agent so that the undersigned may complete the proposed sale or
transfer.
8. Acknowledgments. The undersigned recognizes and agrees that the
foregoing provisions also apply to all shares of the capital stock of OGM and
LSI that are deemed to be beneficially owned by the undersigned pursuant to
applicable federal securities laws, which the undersigned agrees may include,
without limitation, shares owned or held in the name of (i) the undersigned's
spouse, (ii) any relative of the undersigned or of the undersigned's spouse who
has the same home as the undersigned, (iii) any trust or estate in which the
undersigned, the undersigned's spouse, and any such relative collectively own
at least a 10% beneficial interest or of which any of the foregoing serves as
trustee, executor, or in any similar capacity, and (iv) any corporation or
other organization in which the undersigned, the undersigned's spouse and any
such relative collectively own at least 10% of any class of equity securities
or of the equity interest. The undersigned further recognizes that, in the
event that the undersigned is a director or officer of LSI or becomes a
director or officer of LSI upon consummation of the Merger, among other things,
any sale of LSI Common Stock by the undersigned within a period of less than
six months following the effective time of the Mergers may subject the
undersigned to liability pursuant to Section 16(b) of the Securities Exchange
Act of 1934, as amended.
9. Miscellaneous. This Affiliate Agreement is the complete agreement
between LSI and the undersigned concerning the subject matter hereof. Any
notice required to be sent to any party hereunder shall be sent by registered
or certified mail, return receipt requested, using the addresses set forth
herein or such other address as shall be furnished in writing by the parties.
This Affiliate Agreement shall be governed by the laws of the State of
Massachusetts.
This Affiliate Agreement is executed as of the ____ day of _________,
19__.
Very truly yours,
---------------------------
Signature
---------------------------
Print Name
---------------------------
---------------------------
- 4 -
<PAGE> 50
---------------------------
Address
[add below the signatures of all registered
owners of shares deemed beneficially owned
by the affiliate]
---------------------------
Name:
---------------------------
Name:
---------------------------
Name:
AGREED TO AND ACCEPTED as of
_______________, 19__
LONGHORN STEAKS, INC.
By:
-------------------------
<PAGE> 51
EXHIBIT 2: MATTERS AS TO WHICH HINCKLEY, ALLEN & SNYDER WILL OPINE.
<PAGE> 52
MATTERS AS TO WHICH HINCKLEY, ALLEN & SNYDER WILL OPINE
1. OGM is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts with full
corporate power and authority to carry on the business in which it is engaged as
described in the proxy statement used to solicit the approval by the
stockholders of LSI of the transactions contemplated by the Agreement ("Proxy
Statement"), and to own and use its Assets.
2. The authorized capital stock of OGM consists of 5,000 shares
of OGM Common Stock, of which 100 shares were issued and outstanding as of
_________, 1996. The shares of OGM Common Stock that are issued and outstanding
were not issued in violation of any statutory preemptive rights of shareholders,
were duly issued and are fully paid and nonassessable under the Massachusetts
Business Corporation Law. To our knowledge, except as set forth in Section
5.3(a) of the Merger Agreement or Section 5.3 of the BCS Disclosure Memorandum,
there are no options, subscriptions, warrants, calls, rights or commitments
obligating OGM to issue any equity securities or acquire any of its equity
securities.
3. The execution and delivery of the Agreement and compliance
with its terms do not and will not violate or contravene any provision of the
Articles of Organization or Bylaws of OGM or, to our knowledge but without any
independent investigation, result in any conflict with, breach of, or default
or acceleration under any Contract or Order to which OGM is a party or by which
OGM is bound.
4. The Agreement has been duly and validly executed and
delivered by OGM and, assuming valid authorization, execution and delivery by
LSI and WPC, constitutes a valid and binding agreement of OGM enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, provided, however, that we express no opinion as to the
availability of the equitable remedy of specific performance.
<PAGE> 53
EXHIBIT 3: MATTERS AS TO WHICH ALSTON & BIRD WILL OPINE.
<PAGE> 54
MATTERS AS TO WHICH ALSTON & BIRD WILL OPINE
1. LSI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia with full corporate power
and authority to carry on the business in which it is engaged as described in
the proxy statement used to solicit the approval by the stockholders of LSI of
the transactions contemplated by the Agreement ("Proxy Statement"), and to own
and use its Assets.
2. WPC is a corporation duly organized and validly existing and
in good standing under the laws of the State of Georgia with full corporate
power and authority to carry on the business in which it is engaged as described
in the Proxy Statement, and to own and use its Assets.
3. The execution and delivery of the Agreement and compliance
with its terms do not and will not violate or contravene any provision of the
Articles of Incorporation or Bylaws of LSI or, to our knowledge but without any
independent investigation, any Contract or Order to which LSI is a party or by
which LSI is bound. The adoption of the Agreement and compliance with its terms
do not and will not violate or contravene any provision of the Articles of
Incorporation or Bylaws of WPC or, to our knowledge but without any independent
investigation, any Contract or Order to which WPC is a party or by which WPC is
bound.
4. The Agreement has been duly and validly executed and
delivered by LSI, and assuming valid authorization, execution and delivery by
OGM, constitutes a valid and binding agreement of LSI enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, or similar laws affecting creditors' rights
generally, provided, however, that we express no opinion as to the availability
of the equitable remedy of specific performance.
5. The shares of LSI Common Stock to be issued to the
shareholders of OGM as contemplated by the Agreement have been registered under
the Securities Act of 1933, as amended, and when properly issued and delivered
following consummation of the Merger will be fully paid and non-assessable under
the Georgia Business Corporation Code.
<PAGE> 1
EXHIBIT 2.5
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
GOS PROPERTIES LIMITED LIABILITY COMPANY,
WHIP POOLING CORPORATION
AND
LONGHORN STEAKS, INC.
DATED AS OF JUNE 14, 1996
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and entered into as of June 14, 1996, by and among GOS PROPERTIES LIMITED
LIABILITY COMPANY ("GOS"), a Virginia corporation having its principal office
located in Springfield, Virginia; all of the shareholders of GOS, EDWARD P.
GRACE, III, SAMUEL J. ORR, JR. and GUY B. SNOWDEN (the "Shareholders"), WHIP
POOLING CORPORATION ("WPC"), a Georgia corporation having its principal office
located in Atlanta, Georgia; and LONGHORN STEAKS, INC. ("LSI"), a Georgia
corporation having its principal office located in Atlanta, Georgia. All
references in this Agreement to Shareholder or Shareholders shall mean and
include members in interest.
PREAMBLE
The Boards of Directors of GOS, WPC and LSI are of the opinion
that the transactions described herein are in the best interests of the parties
and their respective shareholders. This Agreement provides for the acquisition
of GOS by LSI pursuant to the merger of GOS with and into WPC. At the effective
time of such merger, the outstanding interests of the Shareholders in GOS shall
be converted into the right to receive shares of the common stock of LSI
(except as provided herein). As a result, Shareholders of GOS shall become
shareholders of LSI and WPC shall continue to conduct GOS's business and
operations as a wholly-owned subsidiary of LSI. The transactions described in
this Agreement are subject to the approval of the shareholders of LSI,
expiration of the required waiting period under the HSR Act, the consummation
of the Agreement and Plan of Merger dated the same date as the date hereof by
and among Bugaboo Creek Steak House, Inc. ("BCS"); Whip Merger Corporation, and
LSI; (the "BCS Agreement," together with the agreements upon which the
consummation of the BCS Agreement is conditioned, the "BCS Transaction"), and
the satisfaction of certain other conditions described in this Agreement. It is
the intention of the parties to this Agreement that the Merger for accounting
purposes shall qualify for treatment as a pooling of interests.
Certain terms used in this Agreement are defined in Section
11.1 of this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, GOS shall be merged with and into WPC in
accordance with Section 13.1-1072 of the VLLCA and with the effect provided in
the provisions of Section 13.1-1073 of the VLLCA
<PAGE> 3
and Section 1107 of the GBCC and with the effect provided in Sections 1106 and
1107 of the GBCC (the "Merger"). WPC shall be the Surviving Corporation
resulting from the Merger and shall continue to be governed by the Laws of the
State of Georgia. The Merger shall be consummated pursuant to the terms of this
Agreement, which has been approved and adopted by the respective Boards of
Directors of WPC and LSI and by LSI, as the sole shareholder of WPC and by the
Shareholders of GOS.
1.2 TIME AND PLACE OF CLOSING. The closing of the
transactions contemplated hereby (the "Closing") will take place at 9:00 A.M.
on the date that the Effective Time occurs (or the immediately preceding day if
the Effective Time is earlier than 9:00 A.M.), or at such other time as the
Parties, acting through their authorized officers, may mutually agree. The
Closing shall be held at such place as may be mutually agreed upon by the
Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions
contemplated by this Agreement shall become effective on the date and at the
time the Articles of Merger reflecting the Merger shall become effective with
the Secretary of State of the Commonwealth of Virginia and the Certificate of
Merger reflecting the Merger become effective with the Secretary of State of
the State of Georgia (the "Effective Time"). Subject to the terms and
conditions hereof, unless otherwise mutually agreed upon in writing by
authorized officers of each Party, the Parties shall use their reasonable
efforts to cause the Effective Time to occur on the first business day
following the last to occur of (i) the effective date (including expiration of
any applicable waiting period) of the last required Consent of any Regulatory
Authority having authority over and approving or exempting the Merger, and (ii)
the date on which the shareholders of LSI approve this Agreement to the extent
such approval is required by applicable Law.
ARTICLE 2
TERMS OF MERGER
2.1 CHARTER. The Certificate of Incorporation of WPC in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until otherwise amended or repealed.
2.2 BYLAWS. The Bylaws of WPC in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation until
otherwise amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of WPC in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation. The officers of WPC in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the officers of the Surviving Corporation
from and after the Effective Time in accordance with the Bylaws of the
Surviving Corporation.
- 2 -
<PAGE> 4
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of
this Article 3, at the Effective Time, by virtue of the Merger and without any
action on the part of LSI, GOS, WPC or the shareholders of any of the
foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of LSI Capital Stock issued and
outstanding immediately prior to the Effective Time shall remain issued
and outstanding from and after the Effective Time.
(b) Each share of GOS Common Stock issued and outstanding
at the Effective Time shall cease to be outstanding and shall be
converted into and exchanged for the right to receive that multiple of a
share of LSI Common Stock (the "Exchange Ratio") obtained by dividing
$1,000,000 less any mortgage indebtedness of GOS (the purchase price) by
100 (the total percentage interest of the Shareholders in GOS as of the
date of this Agreement) (the "Per Interest Purchase Price") by the Base
Period Trading Price (defined to mean the average of the daily last sale
prices for the shares of LSI Common Stock for the 20 consecutive trading
days on which such shares are actually traded as over-the-counter
securities and quoted on the Nasdaq National Market (as reported by The
Wall Street Journal or, if not reported thereby, any other authoritative
source) ending at the close of trading on the fifth trading day
immediately preceding the Closing Date) and rounded to the third decimal
place; provided, that for purposes of this calculation, the Base Period
Trading Price shall be deemed to equal (i) $27.250 in the event the Base
Period Trading Price is greater than $27.250 or (ii) $24.000 in the
event the Base Period Trading Price is less than $24.000 (collectively,
$27.250 and $24.000 are referred to as the "Base Period Trading Price
Limitations"). For purposes of this Agreement, "share of GOS Common
Stock" shall mean one percentage membership interest of GOS.
3.2 ANTI-DILUTION PROVISIONS. In the event LSI changes
the number of shares of LSI Common Stock issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend, or similar
recapitalization with respect to such stock and the record date therefor (in
the case of a stock dividend) or the effective date thereof (in the case of a
stock split or similar recapitalization for which a record date is not
established) shall be prior to the Effective Time, (i) the Base Period Trading
Price Limitations shall be adjusted to appropriately adjust the ratio under
which shares of GOS Common Stock will be converted into shares of LSI Common
Stock pursuant to Section 3.1(b) of this Agreement, and (ii) if necessary, the
anticipated Effective Time shall be postponed for an appropriate period of time
agreed upon by the parties in order for the Base Period Trading Price to
reflect the market effect of such stock split, stock dividend, or similar
recapitalization..
3.3 FRACTIONAL SHARES. Notwithstanding any other
provision of this Agreement, each holder of shares of GOS Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of LSI Common Stock (after taking into account
all certificates delivered by such holder) shall receive, in lieu thereof,
- 3 -
<PAGE> 5
cash (without interest) in an amount equal to such fractional part of a share
of LSI Common Stock multiplied by the market value of one share of LSI Common
Stock at the Effective Time. The market value of one share of LSI Common Stock
at the Effective Time shall be the last sale price of LSI Common Stock on the
Nasdaq National Market (as reported by The Wall Street Journal or, if not
reported thereby, any other authoritative source) on the last trading day
preceding the Effective Time. No such holder will be entitled to dividends,
voting rights, or any other rights as a shareholder in respect of any
fractional shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective
Time, LSI and GOS shall cause the exchange agent selected by LSI (the "Exchange
Agent") to mail to the former shareholders of GOS appropriate transmittal
materials (which shall specify that delivery shall be effected, and risk of
loss and title to the certificates or other documents theretofore representing
or evidencing shares of GOS Common Stock shall pass, only upon proper delivery
of such certificates or other documents to the Exchange Agent). The Exchange
Agent may establish reasonable and customary rules and procedures in connection
with its duties. After the Effective Time, each holder of shares of GOS Common
Stock issued and outstanding at the Effective Time shall surrender the
certificate or certificates or other documents representing or evidencing such
shares to the Exchange Agent and shall promptly upon surrender thereof receive
in exchange therefor the consideration provided in Section 3.1 of this
Agreement, together with all undelivered dividends or distributions in respect
of such shares (without interest thereon) pursuant to Section 4.2 of this
Agreement. To the extent required by Section 3.3 of this Agreement, each holder
of shares of GOS Common Stock issued and outstanding at the Effective Time also
shall receive, upon surrender of the certificate or certificates or other
documents representing or evidencing such shares, cash in lieu of any
fractional share of LSI Common Stock to which such holder may be otherwise
entitled (without interest). LSI shall not be obligated to deliver the
consideration to which any former holder of shares of GOS Common Stock is
entitled as a result of the Merger until such holder surrenders such holder's
certificate or certificates or other documents representing or evidencing the
shares of GOS Common Stock for exchange as provided in this Section 4.1. The
certificate or certificates or other documents representing or evidencing
shares of GOS Common Stock so surrendered shall be duly endorsed as the
Exchange Agent may require. Any other provision of this Agreement
notwithstanding, neither LSI, the Surviving Corporation nor the Exchange Agent
shall be liable to a holder of shares of GOS Common Stock for any amounts paid
or property delivered in good faith to a public official pursuant to any
applicable abandoned property Law. Execution of this Agreement by the
Shareholder shall constitute ratification of the appointment of the Exchange
Agent.
4.2 RIGHTS OF FORMER GOS SHAREHOLDERS. At the Effective
Time, the membership books of GOS shall be closed as to holders of GOS Common
Stock immediately prior to the Effective Time and no transfer of GOS Common
Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 4.1 of
this Agreement, each certificate or other document theretofore
- 4 -
<PAGE> 6
representing or evidencing shares of GOS Common Stock shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Sections 3.1 and 3.3 of this Agreement in exchange
therefor, subject, however, to the Surviving Corporation's obligation to pay
any dividends or make any other distributions with a record date prior to the
Effective Time which have been declared or made by GOS in respect of such
shares of GOS Common Stock in accordance with the terms of this Agreement and
which remain unpaid at the Effective Time. Whenever a dividend or other
distribution is declared by LSI on the LSI Common Stock, the record date for
which is at or after the Effective Time, the declaration shall include
dividends or other distributions on all shares of LSI Common Stock issuable
pursuant to this Agreement, but no dividend or other distribution payable to
the holders of record of LSI Common Stock as of any time subsequent to the
Effective Time shall be delivered to the holder of any certificate or other
document representing or evidencing shares of GOS Common Stock issued and
outstanding at the Effective Time until such holder surrenders such certificate
for exchange as provided in Section 4.1 of this Agreement. However, upon
surrender of such GOS Common Stock certificate or other documents, both the LSI
Common Stock certificate (together with all such undelivered dividends or other
distributions without interest) and any undelivered dividends and cash payments
payable hereunder (without interest) shall be delivered and paid with respect
to each share represented by such certificate or other documents.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF GOS
GOS and the Shareholders hereby jointly and severally
represent and warrant to LSI as follows:
5.1 ORGANIZATION, STANDING, AND POWER. GOS is a limited
liability company duly organized, validly existing, and in good standing under
the Laws of the Commonwealth of Virginia, and has the corporate power and
authority to carry on its business as now conducted and to own, lease and
operate its Assets. GOS is duly qualified or licensed to transact business as a
foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or
conduct of its business requires it to be so qualified or licensed, except for
such jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on GOS. GOS has no Subsidiaries.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) GOS has the corporate power and authority
necessary to execute, deliver, and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution,
delivery, and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of GOS, and the GOS Shareholders have unanimously approved this Agreement,
which is the only shareholder vote required for approval of this Agreement and
consummation of the Merger by GOS. This
- 5 -
<PAGE> 7
Agreement represents a legal, valid, and binding obligation of GOS and the
Shareholders, enforceable against GOS and the Shareholders in accordance with
its terms.
(b) Neither the execution and delivery of this
Agreement by GOS, nor the consummation by GOS of the transactions contemplated
hereby, nor compliance by GOS with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of GOS's Articles of
Organization or Operating Agreement, or (ii) except as disclosed in Section 5.2
of the GOS Disclosure Memorandum, constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of GOS under, any Contract or Permit of GOS, except for any such Default,
Consent or Lien that would not have a Material Adverse Effect on GOS or on any
restaurant owned or operated by GOS, or, (iii) subject to receipt of the
requisite Consents referred to in Section 9.1(b) of this Agreement, violate any
Law or Order applicable to GOS or any of its material Assets.
(c) Other than in connection or compliance with
the provisions of the Securities Laws, applicable state corporate and
securities Laws, and rules of the NASD, and other than Consents required from
Regulatory Authorities, and other than notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, or under the HSR Act, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
GOS of the Merger and the other transactions contemplated in this Agreement.
5.3 CAPITAL STOCK.
(a) All of the interests in GOS as of the date
hereof and at the Effective Time are held by the Shareholders. All of the
issued and outstanding interests of GOS are duly and validly issued and
outstanding and are fully paid and nonassessable under the VLLCA. None of the
outstanding interests of GOS has been issued in violation of any preemptive
rights of the current or past shareholders of GOS.
(b) Except as set forth in Section 5.3(a) of this
Agreement, or as disclosed in Section 5.3 of the GOS Disclosure Memorandum,
there are no shares of capital stock or other equity securities of, or
membership interests in, GOS outstanding and no outstanding Rights relating to
the capital stock of, or membership interests in, GOS.
5.4 FINANCIAL INFORMATION. The financial information
(including, in each case, any related notes) delivered to LSI and/or its
advisors was true and correct and fairly presented in all material respects (i)
the financial position of GOS as at the respective dates and (ii) the results
of operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount or effect.
5.5 [INTENTIONALLY OMITTED].
- 6 -
<PAGE> 8
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. GOS has no
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on GOS, except as disclosed in Section 5.6
of the GOS Disclosure Memorandum. GOS has not incurred or paid any Liability
since March 31, 1996, except for such Liabilities (i) discussed in Section 5.6
of the GOS Disclosure Memorandum or (ii) incurred or paid (A) in the ordinary
course of business consistent with past business practice and which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on GOS or (B) in connection with the transactions contemplated by this
Agreement. Except as disclosed in Section 5.6 of the GOS Disclosure
Memorandum, GOS is not directly or indirectly liable, by guarantee, indemnity,
or otherwise, upon or with respect to, or obligated, by discount or repurchase
agreement or in any other way, to provide funds in respect to, or obligated to
guarantee or assume any Liability of any Person for any amount in excess of
$10,000.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 25,
1995, except as disclosed in Section 5.7 of the GOS Disclosure Memorandum, (i)
there have been no events, changes, or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on GOS, and (ii) there has not been: (A) any material damage,
destruction or loss (not covered by insurance) with respect to any material
assets of GOS that has resulted in a Material Adverse Effect on GOS, (B) any
material change by GOS in its accounting methods, principles or practices; (C)
any redemption, repurchase or other reacquisition of any of GOS's equity
securities; (D) any material increase in the benefits under, or the
establishment or amendment of, any material bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any material increase in the
compensation payable or to become payable to directors, officers or employees
of GOS, except for increases in salaries or wages payable or to become payable
in the ordinary course of business and consistent with past practice.
5.8 TAX MATTERS.
(a) Except for such matters as would not have a
Material Adverse Effect on GOS, all Tax Returns required to be filed by or on
behalf of GOS have been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1995, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, and all Tax Returns filed are
complete and accurate in all Material respects. All Taxes shown to be payable
on filed Tax Returns have been paid. To the Knowledge of GOS, there is no audit
examination, deficiency, or refund Litigation with respect to any Taxes, except
as disclosed in Section 5.8 of the GOS Disclosure Memorandum. All Taxes and
other Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid.
(b) GOS has not executed an extension or waiver
of any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to
- 7 -
<PAGE> 9
years currently under examination by the Internal Revenue Service or other
applicable taxing authorities) that is currently in effect.
(c) Deferred Taxes of GOS have been provided for in accordance with GAAP.
(d) GOS is not a party to any Tax allocation or
sharing agreement and GOS has not been a member of an affiliated group filing a
consolidated federal income Tax Return or has any Liability for Taxes of any
Person (other than GOS) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign Law) as a transferee or successor
or by Contract or otherwise.
(e) GOS is in compliance in all material respects
with records contain all information and documents (including properly
completed IRS Forms W-9) necessary to comply in all material respects with, all
applicable information reporting and Tax withholding requirements under
federal, state, and local Tax Laws, and such records identify with specificity
all accounts subject to backup withholding under Section 3406 of the Internal
Revenue Code.
(f) Except as disclosed in Section 5.8 of the GOS
Disclosure Memorandum, GOS has not made any payments, is not obligated to make
any payments, and is not a party to any Contract that could obligate it to make
any payments that would be disallowed as a deduction under Section 280G or
162(m) of the Internal Revenue Code.
(g) There has not been an ownership change, as
defined in Internal Revenue Code Section 382(g), of GOS that occurred during or
after any Taxable Period in which GOS incurred a net operating loss that
carries over to any Taxable Period ending after December 31, 1995.
5.9 ASSETS. Except as disclosed in Section 5.9 of the GOS
Disclosure Memorandum, GOS has good and marketable title, free and clear of all
Liens, to all of its respective Assets. All tangible properties used in the
businesses of GOS are in good condition, reasonable wear and tear excepted, and
are usable in the ordinary course of business consistent with GOS's past
practices. All items of inventory of GOS reflected on the most recent balance
sheet included in the GOS Financial Statements delivered prior to the Effective
Time will consist, as applicable, of items of a quality and quantity usable and
saleable in the ordinary course of business and conform to generally accepted
standards in the industry in which GOS is a part. All Assets which are material
to GOS's business, held under leases or subleases by GOS, are held under valid
Contracts enforceable in accordance with their respective terms, and each such
Contract is in full force and effect. Section 5.9 of the GOS Disclosure
Memorandum sets forth the scope of coverage of all of GOS's insurance policies
as of the date of this Agreement, the term of each such policy and the premiums
relating thereto. GOS has not received notice from any insurance carrier that
(i) such insurance will be canceled or that coverage thereunder will be reduced
or eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. Except as disclosed in Section 5.9 of the GOS
Disclosure Memorandum, there are presently no claims pending under such
policies of insurance and no notices of denial of
- 8 -
<PAGE> 10
any material claim have been received by GOS under such policies. To the
Knowledge of GOS, all leases for restaurant sites are in full force and effect
and the landlord is not in Default thereunder and has not repudiated or waived
any material provision of such lease. To the Knowledge of GOS, the landlord of
each lease for a restaurant site holds title to the site free of any
encumbrance securing debt to any Person other than Persons with whom the
relevant BCS Company has a non-disturbance and attornment agreement, and there
is no other exception to title which would have a Material Adverse Effect on
the value of the property or GOS's use thereof.
5.10 INTELLECTUAL PROPERTY. Section 5.10 of the GOS
Disclosure Memorandum sets forth a complete and accurate list of, and a brief
description of all governmental registrations or applications for governmental
registrations of, all Intellectual Property owned, used or licensed by or to
GOS which are used in or necessary for the conduct of GOS's business, except as
to which the absence of which would not have a Material Adverse Effect on GOS
("GOS Intellectual Property"). No Person has asserted a claim in writing to GOS
that GOS has abandoned any GOS Intellectual Property and, to the Knowledge of
GOS, GOS has not abandoned any GOS Intellectual Property. Except as disclosed
in Section 5.10 of the GOS Disclosure Memorandum, GOS owns or has the lawful
right to use the GOS Intellectual Property. Except as disclosed in Section
5.10 of the GOS Disclosure Memorandum, use of the GOS Intellectual Property by
GOS or the Shareholders has not to the Knowledge of GOS misappropriated or
infringed on any rights held or owned by any third party, nor has any third
party asserted any such claim. GOS is not obligated to pay any royalties to any
Person with respect to any GOS Intellectual Property. Except as disclosed in
Section 5.10 of the GOS Disclosure Memorandum, every officer or management
employee of GOS is a party to a Contract which requires such officer or
management employee to keep confidential any trade secrets, proprietary data,
customer information, or other business information of GOS, and, to the
Knowledge of GOS, no officer is party to, nor to the Knowledge of GOS has GOS
received any notice of any other management employee being a party to, any
Contract with any Person other than GOS which requires such officer or
management employee to assign any interest in any Intellectual Property to any
Person other than GOS or to keep confidential any trade secrets, proprietary
data, customer information, or other business information of any Person other
than GOS. Except as disclosed in Section 5.10 of the GOS Disclosure Memorandum,
to the Knowledge of GOS, no officer of GOS is party to, nor to the Knowledge of
GOS has GOS received any notice of any other management employee being a party
to, any Contract which restricts or prohibits such officer, director or
management employee from engaging in activities competitive with any Person,
including GOS.
5.11 ENVIRONMENTAL MATTERS.
(a) Except as would not have a Material Adverse
Effect on GOS, GOS, its Participation Facilities, and its Operating Properties
are, and have been during the period of GOS's ownership or operation, in
compliance with all Environmental Laws.
(b) There is no Litigation pending or, to the
Knowledge of GOS, threatened before any court, governmental agency, or
authority or other forum in which GOS or any of its Operating Properties or
Participation Facilities has been or, with respect to threatened Litigation,
may be named as a defendant (i) for alleged noncompliance (including by any
- 9 -
<PAGE> 11
predecessor) with any Environmental Law or (ii) relating to the release into
the environment of any Hazardous Material, whether or not occurring at, on,
under, adjacent to, or affecting (or potentially affecting) a site owned,
leased, or operated by GOS or any of its Operating Properties or Participation
Facilities, nor, to the Knowledge of GOS, is there any reasonable basis for any
Litigation of a type described in this sentence which could reasonably be
expected to have a Material Adverse Effect on GOS.
(c) During the period of (i) GOS's ownership or
operation of any of its current properties, (ii) GOS's participation in the
management of any Participation Facility, or (iii) GOS's holding of a security
interest in an Operating Property, there have been no releases of Hazardous
Material in, on, under, adjacent to, or affecting (or to the Knowledge of GOS
reasonably likely to affect) such properties, except as would not have a
Material Adverse Effect on GOS. Prior to the period of (i) GOS's ownership or
operation of any of its current properties, (ii) GOS's participation in the
management of any Participation Facility, or (iii) GOS's holding of a security
interest in a Operating Property, to the Knowledge of GOS, there were no
releases of Hazardous Material in, on, under, or affecting any such property,
Participation Facility or Operating Property, except as would not have a
Material Adverse Effect on GOS.
5.12 COMPLIANCE WITH LAWS. GOS has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, and there has occurred no Default under any such
Permit, except where the failure to possess such Permit or the occurrence of a
Default would not have a Material Adverse Effect on GOS or the restaurant to
which the Permit relates. Except as disclosed in Section 5.12 of the GOS
Disclosure Memorandum, GOS:
(a) is not in Default under any of the provisions of its
Articles of Organization or Operating Agreement (or other governing
instruments);
(b) is not in Default under any Laws, Orders, or Permits
applicable to its business or employees conducting its business, except
for any Default that would not have a Material Adverse Effect on GOS or
any restaurants owned or operated by GOS; or
(c) has not since January 1, 1993, received any
notification or communication from any agency or department of federal,
state, or local government or any Regulatory Authority or the staff
thereof (i) asserting that GOS is not in material compliance with any of
the Laws or Orders which such governmental authority or Regulatory
Authority enforces which has not been resolved, (ii) threatening to
revoke any Permits, or (iii) requiring GOS to enter into or consent to
the issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or to adopt any Board
resolution or similar undertaking.
5.13 LABOR RELATIONS. Except as disclosed in Section 5.13
of the GOS Disclosure Memorandum, GOS is not the subject of any Litigation
asserting that it has committed an unfair labor practice (within the meaning of
the National Labor Relations Act or comparable state law) or seeking to compel
it to bargain with any labor organization as to wages or conditions
- 10 -
<PAGE> 12
of employment, nor is GOS party to any collective bargaining agreement, nor is
there any strike or other labor dispute involving GOS, pending or threatened,
or to the Knowledge of GOS, is there any activity involving GOS's employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
(a) GOS has disclosed in Section 5.14 of the GOS
Disclosure Memorandum, and has delivered or made available to LSI prior to the
execution of this Agreement copies in each case of, all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by,
sponsored in whole or in part by, or contributed to by GOS or ERISA Affiliate
thereof for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "GOS Benefit
Plans"). Any of the GOS Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "GOS ERISA Plan."
(b) All GOS Benefit Plans are in compliance with
the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on GOS. Each GOS
ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and GOS is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. GOS has not
engaged in a transaction with respect to any GOS Benefit Plan that, assuming
the taxable period of such transaction expired as of the date hereof, would
subject GOS to a Tax imposed by either Section 4975 of the Internal Revenue
Code or Section 502(i) of ERISA.
(c) No GOS ERISA Plan is, and GOS has never
maintained or contributed to, a "defined benefit plan" (as defined in Section
414(j) of the Internal Revenue Code) or a multiemployer plan within the meaning
of Section 3(37) of ERISA. GOS has not provided, or is not required to provide,
security to any defined benefit plan or any single-employer plan of any entity
which is considered one employer with GOS under Section 4001 of ERISA or
Section 414 of the Internal Revenue Code or Section 302 of ERISA (whether or
not waived) (an "ERISA Affiliate") pursuant to Section 401(a)(29) of the
Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title
IV of ERISA has been or is expected to be incurred by GOS with respect to any
ongoing, frozen, or terminated single-employer plan or the single-employer plan
of any ERISA Affiliate. GOS has not incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
- 11 -
<PAGE> 13
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any GOS Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) Except as disclosed in Section 5.14 of the
GOS Disclosure Memorandum, GOS has no Liability for retiree health and life
benefits under any of the GOS Benefit Plans and there are no restrictions on
the rights of GOS to amend or terminate any such retiree health or benefit Plan
without incurring any Liability thereunder.
(f) Except as disclosed in Section 5.14 of the
GOS Disclosure Memorandum, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) result in
any payment (including severance, unemployment compensation, golden parachute,
or otherwise) becoming due to any director or any employee of GOS under any GOS
Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under
any GOS Benefit Plan, or (iii) result in any acceleration of the time of
payment or vesting of any such benefit.
(g) The actuarial present values of all accrued
deferred compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees
and former employees of GOS and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the GOS Financial Statements.
5.15 MATERIAL CONTRACTS. Except as disclosed in Section
5.15 of the GOS Disclosure Memorandum GOS, nor any of its Assets, businesses,
or operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting, or retirement
Contract providing for payments to any Person, except for Contracts referred to
in Section 5.13(a) of this Agreement and unwritten Contracts with respect to
the employment of hourly personnel terminable at will or upon statutorily
required notice, (ii) any Contract relating to the borrowing of money by GOS or
the guarantee by GOS of any such obligation (other than Contracts for purchase
money indebtedness in an aggregate amount not exceeding $10,000, Contracts
evidencing trade payables, and Contracts relating to borrowings or guarantees
made in the ordinary course of business), (iii) any Contract which prohibits or
restricts GOS from engaging in any business activities in any geographic area,
line of business or otherwise in competition with any other Person, (iv) any
Contract involving Intellectual Property, (v) any lease of real property as
lessee or lessor, and (vi) any Contract relating to the purchase or sale of any
goods or services (other than Contracts entered into in the ordinary course of
business and that are either (x) terminable by GOS upon not more than 60 days
notice without payment or penalty or (y) has a remaining term of not more than
six months from the date of this Agreement and involves payments not in excess
of $10,000 per year) (together with all Contracts referred to in Sections 5.9
and 5.13(a) of this Agreement, the "GOS Contracts"). With respect to each GOS
Contract and except as disclosed in Section 5.15 of the GOS Disclosure
Memorandum: (i) the Contract is in full force and effect; (ii) GOS is not in
Default thereunder except for any such
- 12 -
<PAGE> 14
Default as would not have a Material Adverse Effect on GOS; (iii) GOS has not
repudiated or waived any material provision of any such Contract; and (iv) no
other party to any such Contract is, to the Knowledge of GOS, in Default in any
respect, or has repudiated or waived any material provision thereunder. Except
as disclosed in Section 5.15 of the GOS Disclosure Memorandum, all of the
indebtedness of GOS for money borrowed is prepayable at any time by GOS without
penalty or premium.
5.16 LEGAL PROCEEDINGS. Except as disclosed in Section
5.16 of the GOS Disclosure Memorandum, there is no Litigation instituted or
pending, or, to the Knowledge of GOS, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against GOS, or against any director
(limited, as to directors, to Litigation with respect to which GOS would have
an indemnification obligation under its Articles of Organization or Operating
Agreement) or employee benefit plan of GOS, or against any Asset, interest, or
right of any of them, nor, except for matters which would not have a Material
Adverse Effect on GOS, are there any Orders of any Regulatory Authorities,
other governmental authorities, or arbitrators outstanding against GOS. Section
5.16 of the GOS Disclosure Memorandum contains a summary of all instituted or
pending Litigation as of the date of this Agreement to which GOS is a party and
which names GOS as a defendant or cross-defendant.
5.17 REPORTS. Since January 1, 1992, or the date of
organization if later, GOS has timely filed all reports and statements,
together with any amendments required to be made with respect thereto, that it
was required to file with Regulatory Authorities (except failures to file which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on GOS). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its
respective date, each such report and document did not, in all material
respects, 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
made therein, in light of the circumstances under which they were made, not
misleading, provided, however, that to the extent that the foregoing relates to
facts or omission regarding Persons other than GOS and its Affiliates, such
representation and warranty is made to GOS's Knowledge.
5.18 STATEMENTS TRUE AND CORRECT. No statement,
certificate, instrument, or other writing furnished or to be furnished by GOS
or any Affiliate thereof to LSI pursuant to this Agreement or any other
document, agreement, or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. GOS has furnished, or within fourteen
(14) days will furnish, LSI with copies of all written GOS Contracts, and such
copies are true and correct copies of the written GOS Contracts as such exist
on the date of this Agreement. None of the information supplied or to be
supplied by GOS or any Affiliate thereof for inclusion in the Registration
Statement to be filed by LSI with the Securities and Exchange Commission (the
"SEC") will, when the Registration Statement becomes effective, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein not misleading. None of the
information
- 13 -
<PAGE> 15
supplied or to be supplied by GOS or any Affiliate thereof for inclusion in the
Joint Proxy Statement to be mailed in connection with the BCS Transaction, and
any other documents to be filed by GOS or any Affiliate thereof with the SEC or
any other Regulatory Authority in connection with the transactions contemplated
thereby, will, at the respective time such documents are filed, and with
respect to the Joint Proxy Statement, when first mailed to the shareholders of
BCS and LSI, be false or misleading with respect to any material fact, or omit
to state any material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, or, in the
case of the Joint Proxy Statement or any amendment thereof or supplement
thereto, at the time of the Shareholders' Meetings, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of any proxy for the Shareholders' Meetings. All documents that
GOS or any Affiliate thereof is responsible for filing with any Regulatory
Authority in connection with the transactions contemplated hereby will comply
as to form in all material respects with the provisions of applicable Law.
5.19 ACCOUNTING, TAX AND REGULATORY MATTERS. Neither GOS
nor, to the Knowledge of GOS, any Affiliate thereof has taken any action or has
any Knowledge of any fact or circumstance that is reasonably likely to (i)
prevent the Merger from qualifying for pooling-of-interests accounting
treatment or as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b) of this
Agreement or result in the imposition of a condition or restriction of the type
referred to in the last sentence of such Section.
5.20 STATE TAKEOVER LAWS. GOS has taken all necessary
action to exempt the transactions contemplated by this Agreement from any
applicable "moratorium," "fair price," "business combination," "control share,"
or other anti-takeover Laws (collectively, "Takeover Laws").
5.21 CHARTER PROVISIONS. GOS has taken all action so that
the entering into of this Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement do not and will not result in
the grant of any rights to any Person under the Articles of Organization,
Operating Agreement or other governing instruments of GOS.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF LSI
LSI hereby represents and warrants to GOS as follows:
6.1 ORGANIZATION, STANDING, AND POWER. LSI is a
corporation duly organized, validly existing, and in good standing under the
Laws of the State of Georgia, and has the corporate power and authority to
carry on its business as now conducted and to own, lease and operate its
Assets. LSI is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or
- 14 -
<PAGE> 16
licensed, except for such jurisdictions in which the failure to be so qualified
or licensed is not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on LSI.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) LSI has the corporate power and authority
necessary to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
LSI, subject to the approval of the holders of a majority of the shares of LSI
Common Stock present and voting at a special meeting of LSI shareholders at
which a quorum is present, which is the only shareholder vote required for
approval of this Agreement and consummation of the merger by LSI. Subject to
such requisite shareholder approval, this Agreement represents a legal, valid,
and binding obligation of LSI, enforceable against LSI in accordance with its
terms.
(b) Neither the execution and delivery of this
Agreement by LSI, nor the consummation by LSI of the transactions contemplated
hereby, nor compliance by LSI with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of LSI's Articles of
Incorporation or Bylaws, or (ii) constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of any LSI Company under, any Contract or Permit of any LSI Company or,
(iii) subject to receipt of the requisite approvals referred to in Section
9.1(b) of this Agreement, violate any Law or Order applicable to any LSI
Company or any of their respective material Assets.
(c) Other than in connection or compliance with
the provisions of the Securities Laws, applicable state corporate and
securities Laws, and rules of the NASD, and other than Consents required from
Regulatory Authorities, and other than notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, or under the HSR Act, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
LSI of the Merger and the other transactions contemplated in this Agreement.
6.3 CAPITAL STOCK.
(a) The authorized capital stock of LSI consists
of (i) 25,000,000 shares of LSI Common Stock, of which 8,466,350 shares are
issued and outstanding as of the date of this Agreement, and (ii) 10,000,000
shares of LSI Preferred Stock, of which no shares are issued and outstanding.
All of the issued and outstanding shares of LSI Capital Stock are, and all of
the shares of LSI Common Stock to be issued in exchange for shares of GOS
Common Stock upon consummation of the Merger, when issued in accordance with
the terms of this Agreement, will be, duly and validly issued and outstanding
and fully paid and nonassessable under the GBCC. None of the outstanding shares
of LSI Capital Stock has been, and none of the shares of LSI Common Stock to be
issued in exchange for shares of GOS Common Stock upon consummation of the
Merger will be, issued in violation of any preemptive rights of the current or
past
- 15 -
<PAGE> 17
shareholders of LSI. LSI has reserved 2,018,350 shares of LSI Common Stock for
issuance under the LSI Stock Plans, pursuant to which options to purchase no
more than 1,238,031 shares of LSI Common Stock are outstanding.
(b) Except as set forth in Section 6.3(a) of this
Agreement or as disclosed in Section 6.3 of the LSI Disclosure Memorandum,
there are no shares of capital stock or other equity securities of LSI
outstanding and no outstanding Rights relating to the capital stock of LSI.
6.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) LSI has timely filed and made available to
GOS all SEC Documents required to be filed by LSI since December 31, 1992 or
such later date as LSI first filed, or was first obligated to file, such SEC
Documents (the "LSI SEC Reports"). The LSI SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Laws and other applicable Laws and (ii) did not, at the time they
were filed (or, if amended or superseded by a filing, then on the date of such
filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such LSI SEC Reports or necessary in
order to make the statements in such LSI SEC Reports, in light of the
circumstances under which they were made, not misleading. No LSI Subsidiary is
required to file any SEC Documents.
(b) Each of the LSI Financial Statements
(including, in each case, any related notes) contained in the LSI SEC Reports,
including any LSI SEC Reports filed after the date of this Agreement until the
Effective Time, complied as to form in all material respects with the
applicable published rules and regulations of the SEC with respect thereto, was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except to the extent required by changes to GAAP or as may be
indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly
presented in all material respects the consolidated financial position of LSI
and its Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount or effect, and any pro forma financial information contained in the LSI
Financial Statements is not necessarily indicative of the consolidated
financial position of LSI and the LSI Subsidiaries, as the case may be, as of
the respective dates thereof and the consolidated results of operations and
cash flows for the period indicated..
6.5 ABSENCE OF UNDISCLOSED LIABILITIES. No LSI Company
has any Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on LSI, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of LSI as of
December 31, 1995 and March 31, 1996, included in the LSI Financial Statements
or reflected in the notes thereto, or as disclosed in the LSI Disclosure
Memorandum. No LSI Company has incurred or paid any Liability since March 31,
1996, except for such Liabilities (i) disclosed in the LSI Disclosure
Memorandum or (ii) incurred or paid in the ordinary course of
- 16 -
<PAGE> 18
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
LSI.
6.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December
31, 1995, except as disclosed in the LSI Financial Statements delivered prior
to the date of this Agreement or as disclosed in Section 6.6 of the LSI
Disclosure Memorandum, (i) there have been no events, changes or occurrences
which have had, or are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on LSI, and (ii) the LSI Companies have
not taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a material breach or violation of any of the
covenants and agreements of LSI contained in Article 7 of this Agreement.
6.7 COMPLIANCE WITH LAWS. Each LSI Company has in effect
all Permits necessary for it to own, lease or operate its material Assets and
to carry on its business as now conducted. Except as disclosed in Section 6.7
of the LSI Disclosure Memorandum, no LSI Company:
(a) is in Default of any Laws, Orders or Permits
applicable to its business or employees conducting its business; or
(b) since January 1, 1993, has received any notification
or communication from any agency or department of federal, state, or
local government or any Regulatory Authority or the staff thereof (i)
asserting that any LSI Company is not in material compliance with any of
the Laws or Orders which such governmental authority or Regulatory
Authority enforces which has not been resolved, or (ii) requiring any
LSI Company to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business.
6.8 LEGAL PROCEEDINGS. Except as disclosed in Section
6.16 of the LSI Disclosure Memorandum there is no Litigation instituted or
pending, or, to the Knowledge of LSI, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any LSI Company, or against any
director, employee or employee benefit plan of any LSI Company, or against any
Asset, employee benefit plan, interest, or right of any of them, that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on LSI, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any LSI Company,
that are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on LSI.
6.9 STATEMENTS TRUE AND CORRECT. No statement,
certificate, instrument or other writing furnished or to be furnished by any
LSI Company or any Affiliate thereof to GOS pursuant to this Agreement or any
other document, agreement or instrument referred to herein contains or will
contain any untrue statement of material fact or will omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were
- 17 -
<PAGE> 19
made, not misleading. None of the information supplied or to be supplied by any
LSI Company or any Affiliate thereof for inclusion in the Registration
Statement to be filed by LSI with the SEC, will, when the Registration
Statement becomes effective, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any LSI Company or any Affiliate thereof for inclusion in the Joint
Proxy Statement to be mailed to each Party's shareholders in connection with
the Shareholders' Meetings, and any other documents to be filed by any LSI
Company or any Affiliate thereof with the SEC or any other Regulatory Authority
in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to the Joint Proxy
Statement, when first mailed to the shareholders of GOS and LSI, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Joint Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Shareholders' Meetings, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for the
Shareholders' Meetings. All documents that any LSI Company or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all
material respects with the provisions of applicable Law.
6.10 AUTHORITY OF WPC. WPC is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Georgia as a wholly-owned Subsidiary of LSI. The authorized capital stock of
WPC shall consist of 1,000 shares of WPC Common Stock, all of which is validly
issued and outstanding, fully paid and nonassessable and is owned by LSI free
and clear of any Lien. WPC has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
WPC. This Agreement represents a legal, valid, and binding obligation of WPC,
enforceable against WPC in accordance with its terms.
6.11 REPORTS. Since January 1, 1992, or the date of
organization if later, each LSI Company has filed all reports and statements,
together with any amendments required to be made with respect thereto, that it
was required to file with (i) the SEC, including, but not limited to, Forms
10-K, Forms 10-Q, Forms 8-K, and proxy statements, (ii) other Regulatory
Authorities, and (iii) any applicable state securities authorities (except, in
the case of state securities authorities, failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on LSI). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its
respective date, each such report and document did not, in all material
respects, 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
made therein, in light of the circumstances under which they were made, not
misleading.
- 18 -
<PAGE> 20
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF GOS. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of LSI shall have been obtained,
and except as otherwise expressly contemplated herein, GOS shall (a) operate
its business in the usual, regular, and ordinary course, (b) use its reasonable
efforts preserve intact its business organization and Assets and maintain its
rights and franchises, and (c) take no action which would (i) materially
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentences of Section 9.1(b) or
9.1(c) of this Agreement, or (ii) materially adversely affect the ability of
any Party to perform its covenants and agreements under this Agreement.
7.2 NEGATIVE COVENANTS OF GOS. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, GOS covenants and agrees that it will not do or agree or commit to
do any of the following without the prior written consent of the chief
executive officer or chief financial officer of LSI, which consent shall not be
unreasonably withheld, conditioned or delayed:
(a) amend the Articles of Organization, Operating
Agreement or other governing instruments of GOS, or
(b) incur any additional debt obligation or other
obligation for borrowed money in excess of an aggregate of $10,000
(other than indebtedness for trade payables in the ordinary course of
business consistent with past practices) or impose, or suffer the
imposition, on any Asset of GOS of any Lien or permit any such Lien to
exist (other than in connection with Liens in effect as of the date
hereof that are disclosed in Section 5.9 of the GOS Disclosure
Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange
(other than exchanges in the ordinary course under employee benefit
plans), directly or indirectly, any shares, or any securities
convertible into any shares, of the capital stock of, or interests in,
GOS, or declare or pay any dividend or make any other distribution in
respect of GOS's capital stock or membership interests other than
amounts equal to the aggregate amount of undistributed taxable income of
GOS; provided, that in no event shall GOS undertake any action under
this Section 7.2(c) that would result in the BCS Transaction not
qualifying for accounting purposes for treatment as a pooling of
interests; or
(d) except for this Agreement, or as disclosed in Section
5.14 of the GOS Disclosure Memorandum, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell,
pledge, encumber, or authorize the issuance of, or otherwise permit to
become outstanding, any additional shares of GOS Common Stock or any
other
- 19 -
<PAGE> 21
capital stock of GOS, or any stock appreciation rights, or any option,
warrant, conversion, or other right to acquire any such stock, or any
security convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital
stock of GOS or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of GOS Common Stock, or
sell, lease, mortgage or otherwise dispose of or otherwise encumber any
Asset having a book value in excess of $10,000; or
(f) except for purchases of U.S. Treasury securities or
U.S. Government agency securities, which in either case have maturities
of three years or less, purchase any securities or make any material
investment, either by purchase of stock of securities, contributions to
capital, Asset transfers, or purchase of any Assets, in any Person, or
otherwise acquire direct or indirect control over any Person; or
(g) grant any increase in compensation or benefits to the
employees or officers of GOS, except in accordance with past practice as
disclosed in Section 5.14 of the GOS Disclosure Memorandum or as
required by Law; pay any severance or termination pay or any bonus other
than pursuant to written policies or written Contracts in effect on the
date of this Agreement and disclosed in Section 5.14 of the GOS
Disclosure Memorandum; and enter into or amend any severance agreements
with officers of GOS; grant any material increase in fees or other
increases in compensation or other benefits to directors of GOS except
in accordance with past practice disclosed in Section 5.14 of the GOS
Disclosure Memorandum; or voluntarily accelerate the vesting of any
employee benefits; or
(h) enter into or amend any employment Contract between
GOS and any Person (unless such amendment is required by Law and except
for increases in compensation or benefits in accordance with past
practice as disclosed in Section 5.14 or 5.15 of the GOS Disclosure
Memorandum) that GOS does not have the unconditional right to terminate
without Liability (other than Liability for services already rendered),
at any time on or after the Effective Time or upon statutorily required
notice; or
(i) adopt any new employee benefit plan of GOS or
terminate or withdraw from, or make any material change in or to, any
existing employee benefit plans of GOS other than any such change that
is required by Law or that, in the opinion of counsel, is necessary or
advisable to maintain the tax qualified status of any such plan, or make
any distributions from such employee benefit plans, except as required
by Law, the terms of such plans or consistent with past practice; or
(j) make any significant change in any Tax or accounting
methods or systems of internal accounting controls, except as may be
appropriate to conform to changes in Tax Laws or regulatory accounting
requirements or GAAP; or
(k) commence any Litigation other than in accordance with
past practice, settle any Litigation involving any Liability of GOS for
Material money damages or restrictions upon the operations of GOS; or
- 20 -
<PAGE> 22
(l) enter into, terminate or materially modify or amend
any Contract involving the payment of $10,000 or more, or waive,
release, compromise or assign any material rights or claims, except for
purchases of inventory in the ordinary course of business under existing
Contracts or pursuant to individual purchase orders.
7.3 COVENANTS OF LSI. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
LSI covenants and agrees that it shall (x) continue to conduct its business and
the business of its Subsidiaries in a manner designed in its reasonable
judgment, to enhance the long-term value of the LSI Common Stock and the
business prospects of the LSI Companies and to the extent consistent therewith
use all reasonable efforts to preserve intact the LSI Companies' core
businesses and goodwill with their respective employees and the communities
they serve, (y) not declare or pay any dividend or make any distribution in
respect of LSI Common Stock, and (z) take no action which would (i) materially
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentences of Section 9.1(b) or
9.1(c) of this Agreement, or (ii) materially adversely affect the ability of
any Party to perform its covenants and agreements under this Agreement;
provided, that the foregoing shall not prevent any LSI Company from
discontinuing or disposing of any of its Assets or business if such action is,
in the judgment of LSI, desirable in the conduct of the business of LSI and its
Subsidiaries. LSI further covenants and agrees that it will not, without the
prior written consent of the manager of GOS, which consent shall not be
unreasonably withheld, amend the Articles of Incorporation or Bylaws of LSI, in
each case, in any manner adverse to the holders of GOS Common Stock as compared
to rights of holders of LSI Common Stock generally as of the date of this
Agreement.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to
give written notice promptly to the other Party upon becoming aware of the
occurrence or impending occurrence of any event or circumstance relating to it
or any of its Subsidiaries which (i) is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on it or (ii) would cause or
constitute a material breach of any of its representations, warranties, or
covenants contained herein, and to use its reasonable efforts to prevent or
promptly to remedy the same.
7.5 REPORTS. Each Party shall file all reports required
to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements
will fairly present the consolidated financial position of the entity filing
such statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods
then ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material). As
of their respective dates, such reports filed with the SEC will comply in all
material respects with the Securities Laws and will not contain any untrue
statement of a material fact or omit to state a 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. Any financial
statements contained
- 21 -
<PAGE> 23
in any other reports to another Regulatory Authority shall be prepared in
accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER
APPROVAL. As soon as practicable after execution of this Agreement, LSI shall
prepare and file the Registration Statement with the SEC, and shall use its
reasonable efforts to cause the Registration Statement to become effective
under the 1933 Act and take any action required to be taken under the
applicable state Blue Sky or securities Laws in connection with the issuance of
the shares of LSI Common Stock upon consummation of the Merger. GOS shall
cooperate in the preparation and filing of the Registration Statement and shall
furnish all information concerning it and the holders of its capital stock as
LSI may reasonably request in connection with such action. LSI shall call a
Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and such other related matters as it
deems appropriate. In connection with the Shareholders' Meeting, (i) the Board
of Directors of LSI shall recommend to their shareholders the approval of this
Agreement, and (ii) the Board of Directors and officers of LSI shall use their
reasonable efforts to obtain such shareholders' approval. LSI and GOS shall
make all necessary filings with respect to the Merger under the Securities
Laws.
8.2 EXCHANGE LISTING. LSI shall use its reasonable
efforts to list, prior to the Effective Time, on the Nasdaq National Market the
shares of LSI Common Stock to be issued to the holders of GOS Common Stock
pursuant to the Merger, and LSI shall give all notices and make all filings
with the NASD required in connection with the transactions contemplated herein.
8.3 APPLICATIONS; ANTITRUST NOTIFICATION. LSI shall
prepare and file, and GOS shall cooperate in the preparation and, where
appropriate, filing of, applications with all Regulatory Authorities having
jurisdiction over the transactions contemplated by this Agreement seeking the
requisite Consents necessary to consummate the transactions contemplated by
this Agreement. To the extent required by the HSR Act, each of the Parties will
within 15 business days of the date hereof file with the United States Federal
Trade Commission and the United States Department of Justice the notification
and report form required for the transactions contemplated hereby and any
supplemental or additional information which may reasonably be requested in
connection therewith pursuant to the HSR Act and will comply in all material
respects with the requirements of the HSR Act. The Parties shall deliver to
each other copies of all filings, correspondence and orders to and from all
Regulatory Authorities in connection with the transactions contemplated hereby.
8.4 FILINGS WITH STATE OFFICES. Upon the terms and
subject to the conditions of this Agreement, GOS and WPC shall execute and file
the Articles of Merger with the Secretary of State of the Commonwealth of
Virginia and WPC shall execute and file the Certificate of Merger with the
Secretary of State of the State of Georgia in connection with the Closing.
- 22 -
<PAGE> 24
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the
terms and conditions of this Agreement, each Party agrees to use its reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper, or advisable under applicable Laws to
consummate and make effective, as soon as practicable after the date of this
Agreement, the transactions contemplated by this Agreement, including using its
reasonable efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9 of this Agreement; provided, that
nothing herein shall preclude either Party from exercising its rights under
this Agreement. Each Party shall use its reasonable efforts to obtain all
Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
8.6 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each Party shall
keep the other Party advised of all material developments relevant to its
business and to consummation of the Merger and shall permit the other Party to
make or cause to be made such investigation of the business and properties of
it and of its financial and legal conditions as the other Party reasonably
requests, provided that such investigation shall be reasonably related to the
transactions contemplated hereby and shall not interfere unnecessarily with
normal operations. No investigation by a Party shall affect the representations
and warranties of the other Party.
(b) Each Party shall, and shall cause its
advisers and agents to, maintain the confidentiality of all confidential
information furnished to it by the other Party concerning its businesses,
operations, and financial positions and shall not use such information for any
purpose except in furtherance of the transactions contemplated by this
Agreement. If this Agreement is terminated prior to the Effective Time, each
Party shall promptly return or certify the destruction of all documents and
copies thereof, and all work papers containing confidential information
received from the other Party.
8.7 PRESS RELEASES. Prior to the Effective Time, GOS and
LSI shall consult with each other as to the form and substance of any press
release or other public disclosure materially related to this Agreement or any
other transaction contemplated hereby; provided, that nothing in this Section
8.7 shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.8 CERTAIN ACTIONS. Except with respect to this
Agreement and the transactions contemplated hereby, neither GOS nor any
Affiliate thereof nor any Representatives thereof retained by GOS shall
directly or indirectly solicit any Acquisition Proposal by any Person. Neither
GOS nor any Affiliate or Representative thereof shall furnish any non-public
information that is not legally obligated to furnish, negotiate with respect
to, or enter into any Contract with respect to, any Acquisition Proposal unless
GOS has determined that it must consider an Acquisition Proposal in accordance
with Section 8.8 of this Agreement and requests GOS to furnish information to
and/or enter into discussions or negotiations with the Person who has made
- 23 -
<PAGE> 25
such Acquisition Proposal. GOS shall promptly advise LSI following the receipt
of any Acquisition Proposal and the details thereof, and advise LSI of any
developments with respect to such Acquisition Proposal, including but not
limited to, any decision by the Board of Directors to cause GOS to furnish
non-public information to the Person making such Acquisition Proposal, promptly
upon the occurrence thereof. GOS shall (i) immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
Persons conducted heretofore with respect to any of the foregoing, and (ii)
direct and use its reasonable efforts to cause all of its Representatives not
to engage in any of the foregoing.
8.9 ACCOUNTING TREATMENT. Each of the Parties undertakes
and agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not, to qualify for pooling-of-interests
accounting treatment.
8.10 STATE TAKEOVER LAWS. GOS shall take all necessary
steps to exempt the transactions contemplated by this Agreement from, or if
necessary to challenge the validity or applicability of, any applicable
Takeover Law.
8.11 CHARTER PROVISIONS. GOS shall take all necessary
action to ensure that the entering into of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby do not and will
not result in the grant of any rights to any Person under the Articles of
Organization, Operating Agreement or other governing instruments of GOS.
8.12 AGREEMENT OF AFFILIATES. GOS has disclosed in Section
8.12 of the GOS Disclosure Memorandum all Persons whom it reasonably believes
is an "affiliate" of GOS for purposes of Rule 145 under the 1933 Act. GOS shall
use its reasonable efforts to cause each such Person to deliver to LSI not
later than 30 days after the date of this Agreement, a written agreement,
substantially in the form of Exhibit 1, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of GOS Common Stock
held by such Person except as contemplated by such agreement or by this
Agreement and will not sell, pledge, transfer, or otherwise dispose of the
shares of LSI Common Stock to be received by such Person upon consummation of
the Merger except in compliance with applicable provisions of the 1933 Act and
the rules and regulations thereunder and until such time as financial results
covering at least 30 days of combined operations of LSI and GOS have been
published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies. Shares of LSI Common Stock issued to such
affiliates of GOS in exchange for shares of GOS Common Stock shall not be
transferable until such time as financial results covering at least 30 days of
combined operations of LSI and GOS have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies,
regardless of whether each such affiliate has provided the written agreement
referred to in this Section 8.12 (and LSI shall be entitled to place
restrictive legends upon certificates for shares of LSI Common Stock issued to
affiliates of GOS pursuant to this Agreement to enforce the provisions of this
Section 8.12). LSI shall not be required to maintain the effectiveness of the
Registration Statement under the 1933 Act for the purposes of resale of LSI
Common Stock by such affiliates.
- 24 -
<PAGE> 26
8.13 EMPLOYEE BENEFITS AND CONTRACTS. Following the
Effective Time, LSI shall provide generally to officers and employees of GOS
employee benefits under employee benefit and welfare plans (other than stock
option or other plans involving the potential issuance of LSI Common Stock), on
terms and conditions which when taken as a whole are substantially similar to
those currently provided by the LSI Companies to their similarly situated
officers and employees. For purposes of participation, vesting and (except in
the case of LSI retirement plans) benefit accrual under LSI's employee benefit
plans, the service of the employees of GOS prior to the Effective Time shall be
treated as service with a LSI Company participating in such employee benefit
plans. LSI also shall cause the Surviving Corporation to honor in accordance
with their terms all employment, severance, consulting and other compensation
Contracts disclosed in Section 8.13 of the GOS Disclosure Memorandum to LSI
between GOS and any current or former director, officer, or employee thereof,
and all provisions for vested benefits or other vested amounts earned or
accrued through the Effective Time under the GOS Benefit Plans.
8.14 INDEMNIFICATION.
(a) Subject to the terms and conditions of this Section 8.14,
Shareholders, jointly and severally, agree to indemnify and hold harmless LSI,
from and against any and all assessments, losses, damages (including special
and consequential damages incurred by third party claims claimants),
liabilities, and out of pocket costs and expenses, including without
limitation, interest, penalties, cost of external investigation (i.e., not
including cost of employees of LSI) and defense, and reasonable attorneys' and
other professional fees and expenses paid, suffered or incurred by LSI within
the later period of: (i) one (1) year following the Effective Time or (ii)
first publication by LSI of audited consolidated financial statements covering
an accounting period after the Closing Date for those items that would be
expected to be encountered in the audit process; and resulting from, based
upon, or arising out of:
(i) the inaccuracy, untruth or incompleteness of any
representation or warranty of GOS or the Shareholders contained in or made
pursuant to this Agreement or in the GOS Disclosure Memorandum or any
certificate or Exhibit furnished by GOS in connection therewith; or
(ii) a breach of or failure to perform any covenant or
agreement of GOS or the Shareholders made in this Agreement.
Provided, that the right to indemnification shall extend beyond such period
with respect to any claim for which written notice was given to the
Shareholders during such period but shall expire on the expiration of the
applicable statutes of limitations unless an action has been brought with
respect thereto.
(b) An indemnification claim shall be made by LSI by delivery of a
written notice to the Shareholders requesting indemnification and specifying in
reasonable detail the basis on which indemnification is sought and the amount
for which indemnification is sought.
- 25 -
<PAGE> 27
(c) The Shareholders shall have 30 days to object to an
indemnification claim by delivery of a written notice of such objection to LSI
specifying in reasonable detail the basis for such objection. Failure to timely
so object shall constitute a final and binding acceptance of the
indemnification claim by the Shareholders, and the indemnification claim shall
be paid in accordance with Section 11(d). If an objection is timely interposed
by the Shareholders, then LSI and the Shareholders shall negotiate in good
faith for a period of 60 business days from the date LSI receives such
objection prior to commencing any formal legal action, suit or proceeding with
respect to such indemnification claim.
(d) Upon final determination of the amount of an indemnification
claim, whether by agreement between the Shareholders and LSI or by an
arbitration award or other adjudication, the Shareholders shall pay the amount
of such indemnification claim within ten (10) days of the date such amount is
finally determined and all relevant appeal periods have expired. Payment shall
be made by delivery to LSI of shares of LSI Common Stock, which shall be valued
for such purpose at the last sale price of such common stock on the Nasdaq
National Market (as reported in The Wall Street Journal or, if not reported
thereby, any other authoritative source) on the last trading day preceding the
Effective Time, such price to be appropriately adjusted for changes in the
number of shares of LSI Common Stock outstanding as a result of a stock split,
stock dividend, or similar recapitalization occurring after the Effective Time
and before the delivery of such shares to LSI.
(e) Upon payment in full of any indemnification claim, the
Shareholders shall be subrogated to the extent of such payment to the rights of
LSI against any person or entity with respect to the subject matter of such
indemnification claim.
(f) Shareholders shall not be liable to LSI for any
indemnification hereunder except to the extent that the aggregate assessments,
losses, damages (including special and consequential damages incurred by third
party claims claimants), liabilities, and out of pocket costs and expenses,
including without limitation, interest, penalties, cost of external
investigation (i.e., not including cost of employees of LSI) and defense, and
reasonable attorneys' and other professional fees and expenses subject to
indemnification for which Shareholders are responsible exceeds ten thousand
dollars ($10,000). Notwithstanding any other provision hereof, in no event
shall the obligation of the Shareholders to indemnify LSI pursuant to this
Section 8.14 exceed the aggregate value of the total number of shares of LSI
Common Stock issued to Shareholder pursuant to this Agreement valued at the
last sale price of such common stock on the Nasdaq National Market (as reported
in The Wall Street Journal or, if not reported thereby, any other authoritative
source) on the last trading day preceding the Effective Time.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The
respective obligations of each Party to perform this Agreement and consummate
the Merger and the other transactions
- 26 -
<PAGE> 28
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived pursuant to Section 11.6 of this Agreement:
(A) SHAREHOLDER APPROVAL. The shareholders of LSI shall
have adopted or approved this Agreement, and the consummation of the
transactions contemplated hereby, including the Merger, as and to the
extent required by Law, by the provisions of any governing instruments,
or by the rules of the NASD.
(B) REGULATORY APPROVALS. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities
required for consummation of the Merger shall have been obtained or made
and shall be in full force and effect and all waiting periods required
by Law shall have expired. No Consent obtained from any Regulatory
Authority which is necessary to consummate the transactions contemplated
hereby shall be conditioned or restricted in a manner (including
requirements relating to the raising of additional capital or the
disposition of Assets) which in the reasonable judgment of the Board of
Directors of LSI would so materially adversely impact the economic or
business benefits of the transactions contemplated by this Agreement
that, had such condition or requirement been known, LSI would not, in
its reasonable judgment, have entered into this Agreement.
(C) CONSENTS AND APPROVALS. Each Party shall have
obtained any and all Consents required for consummation of the Merger
(other than those referred to in Section 9.1(b) of this Agreement) or
for the preventing of any Default under any Contract or Permit of such
Party. No Consent so obtained which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a
manner which in the reasonable judgment of the Board of Directors of LSI
would so materially adversely impact the economic or business benefits
of the transactions contemplated by this Agreement that, had such
condition or requirement been known, LSI would not, in its reasonable
judgment, have entered into this Agreement.
(D) LEGAL PROCEEDINGS. No court or governmental or
regulatory authority of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) or taken any other action which
prohibits, restricts or makes illegal consummation of the transactions
contemplated by this Agreement.
(E) REGISTRATION STATEMENT. The Registration Statement
shall be effective under the 1933 Act, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued, no
action, suit, proceeding or investigation by the SEC to suspend the
effectiveness thereof shall have been initiated and be continuing, and
all necessary approvals under state securities Laws or the 1933 Act or
1934 Act relating to the issuance or trading of the shares of LSI Common
Stock issuable pursuant to the Merger shall have been received.
(F) EXCHANGE LISTING. The shares of LSI Common Stock
issuable pursuant to the Merger shall have been approved for listing on
the Nasdaq National Market.
- 27 -
<PAGE> 29
9.2 CONDITIONS TO OBLIGATIONS OF LSI. The obligations of
LSI to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by LSI pursuant to Section 11.6(a) of this
Agreement:
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this
Section 9.2(a), the accuracy of the representations and warranties of
GOS set forth in this Agreement shall be assessed as of the date of this
Agreement and as of the Effective Time with the same effect as though
all such representations and warranties had been made on and as of the
Effective Time (provided that representations and warranties which are
confined to a specified date shall speak only as of such date). The
representations and warranties of GOS set forth in Section 5.3 of this
Agreement shall be true and correct (except for inaccuracies which are
de minimus in amount). The representations and warranties of GOS set
forth in Sections 5.19, 5.20, and 5.21 of this Agreement shall be true
and correct in all material respects.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all
of the agreements and covenants of GOS to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(C) CERTIFICATES. GOS shall have delivered to LSI (i) a
certificate, dated as of the Effective Time and signed on its behalf by
its manager, to the effect that the conditions set forth in Section 9.1
of this Agreement as relates to GOS and in Section 9.2(a) and 9.2(b) of
this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by GOS's Board of Directors and shareholders
evidencing the taking of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such
reasonable detail as LSI and its counsel shall request.
(D) OPINION OF COUNSEL. LSI shall have received an
opinion of Hinckley, Allen & Snyder, counsel to GOS, dated as of the
Closing, in form reasonably satisfactory to LSI, as to the matters set
forth in Exhibit 3.
(E) POOLING LETTERS. LSI shall have received letters, a
draft dated as of the date of filing of the Registration Statement with
the SEC and a final version dated as of the Effective Time, in form and
substance reasonably acceptable to LSI, from KPMG Peat Marwick LLP to
the effect that the Merger will qualify for pooling-of-interests
accounting treatment. LSI also shall have received letters, a draft
dated as of the date of filing of the Registration Statement with the
SEC and a final version dated as of the Effective Time, in form and
substance reasonably acceptable to LSI, from KPMG Peat Marwick LLP to
the effect that such firm is not aware of any matters relating to GOS
and its Subsidiaries which would preclude the Merger from qualifying for
pooling-of-interests accounting treatment.
- 28 -
<PAGE> 30
(F) ACCOUNTANT'S LETTERS. LSI shall have received from
KPMG Peat Marwick LLP letters dated not more than five days prior to (i)
the date of the Joint Proxy Statement and (ii) the Effective Time, with
respect to certain financial information regarding GOS, in form and
substance reasonably satisfactory to LSI, which letters shall be based
upon customary specified procedures undertaken by such firm in
accordance with Statement of Auditing Standard No. 72.
(G) AFFILIATES AGREEMENTS. LSI shall have received from
each affiliate of GOS the affiliates letter referred to in Section 8.12
of this Agreement, to the extent necessary to assure in the reasonable
judgment of LSI that the transactions contemplated hereby will qualify
for pooling-of-interests accounting treatment.
(H) SHAREHOLDERS' EQUITY. GOS's shareholders' equity as
of the end of the last fiscal quarter preceding Closing shall not be
materially less than GOS's shareholders' equity as of March 31, 1996,
excluding for purposes of the calculation of such shareholders' equity
the effects of (i) all costs, fees and charges, including fees and
charges of GOS's accountants, counsel and financial advisors, whether or
not accrued or paid, that are related to the transaction contemplated by
this Agreement, (ii) distributions to shareholders permitted under
Section 7.2(c) hereof, and (iii) any reductions in GOS's shareholders'
equity resulting from any actions or changes in policies of GOS taken at
the request of LSI.
(I) FAIRNESS OPINION. LSI shall have received from The
Robinson-Humphrey Company, Inc. a letter, dated not more than five
business days prior to the date of the Proxy Statement, to the effect
that, in the opinion of such firm, the consideration to be received by
LSI connection with the Merger is fair, from a financial point of view,
to LSI and its shareholders.
(J) GOS AUDIT. GOS shall have delivered to LSI an audited
balance sheet (including related notes and schedules, if any) as of June
25, 1995, and as of March 31, 1996, and the statements of income,
changes in shareholders' equity, and cash flows (including related notes
and schedules, if any) for the fiscal year ended June 25, 1995 and the
40 weeks ended March 31, 1996, of GOS together with the report of KPMG
Peat Marwick LLP thereon, at least 40 calendar days after the date of
this Agreement. GOS shall have delivered to LSI an audited balance sheet
(including related notes and schedules, if any) as of June 30, 1996, and
the statements of income, changes in shareholders' equity, and cash
flows (including related notes and schedules, if any) for the fiscal
year then ended, of GOS together with the report of KPMG Peat Marwick
LLP thereon, at least 30 calendar days prior to the Effective Time.
9.3 CONDITIONS TO OBLIGATIONS OF GOS. The obligations of
GOS to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by GOS pursuant to Section 11.6(b) of this
Agreement:
- 29 -
<PAGE> 31
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this
Section 9.3(a), the accuracy of the representations and warranties of
LSI set forth in this Agreement shall be assessed as of the date of this
Agreement and as of the Effective Time with the same effect as though
all such representations and warranties had been made on and as of the
Effective Time (provided that representations and warranties which are
confined to a specified date shall speak only as of such date). The
representations and warranties of LSI set forth in Section 6.3 of this
Agreement shall be true and correct (except for inaccuracies which are
de minimus in amount). There shall not exist inaccuracies in the
representations and warranties of LSI set forth in this Agreement
(including the representations and warranties set forth in Sections
6.3.) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on LSI; provided
that, for purposes of this sentence only, those representations and
warranties which are qualified by references to "material" or "Material
Adverse Effect" shall be deemed not to include such qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all
of the agreements and covenants of LSI to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with.
(C) CERTIFICATES. LSI shall have delivered to GOS (i) a
certificate, dated as of the Effective Time and signed on its behalf by
its chief executive officer and its chief financial officer, to the
effect that the conditions set forth in Section 9.3 of this Agreement as
relates to LSI and in Section 9.3(a) and 9.3(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by
LSI's Board of Directors and shareholders and WPC's Board of Directors
and shareholders evidencing the taking of all corporate action necessary
to authorize the execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated hereby, all in
such reasonable detail as GOS and its counsel shall request.
(D) OPINION OF COUNSEL. GOS shall have received an
opinion of Alston & Bird, counsel to LSI, dated as of the Effective
Time, in form reasonably acceptable to GOS, as to the matters set forth
in Exhibit 3.
(E) ACCOUNTANT'S LETTERS. GOS shall have received from
KPMG Peat Marwick LLP letters dated not more than five days prior to (i)
the date of the Joint Proxy Statement and (ii) the Effective Time, with
respect to certain financial information regarding LSI, in form and
substance reasonably satisfactory to GOS, which letters shall be based
upon customary specified procedures undertaken by such firm.
- 30 -
<PAGE> 32
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of
this Agreement, and notwithstanding the adoption or approval of this Agreement
by the shareholders of GOS and LSI or both, this Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of LSI
and the Members of GOS; or
(b) By the Board of Directors of LSI or the Members of
GOS in the event (i) any Consent of any Regulatory Authority required
for consummation of the Merger and the other transactions contemplated
hereby shall have been denied by final nonappealable action of such
authority or if any action taken by such authority is not appealed
within the time limit for appeal, or (ii) the shareholders of LSI fail
to adopt or approve this Agreement and the transactions contemplated
hereby as required by the GBCC and the rules of the NASD at the
Shareholders' Meeting where the transactions were presented to such
shareholders for approval and voted upon; or
(c) By GOS or LSI, if LSI or BCS has terminated BCS
Agreement for any reason; or
(d) By LSI in the event that the BCS Transaction shall
not have been consummated by December 31, 1996, if the failure to
consummate the transactions contemplated hereby on or before such date
is not caused by any breach of this Agreement by LSI.
10.2 EFFECT OF TERMINATION. In the event of the
termination and abandonment of this Agreement pursuant to Section 10.1 of this
Agreement, this Agreement shall become void and have no effect, except that (i)
the provisions of this Section 10.2 and Article 11 and Section 8.6(b) of this
Agreement shall survive any such termination and abandonment, and (ii) a
termination pursuant to Sections 10.1(b) or 10.1(c) of this Agreement shall not
relieve the breaching Party from Liability for an uncured willful breach of a
representation, warranty, covenant, or agreement giving rise to such
termination.
ARTICLE 11
MISCELLANEOUS
11.1 DEFINITIONS.
(a) Except as otherwise provided herein, the
capitalized terms set forth below shall have the following meanings:
- 31 -
<PAGE> 33
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"ACQUISITION PROPOSAL" with respect to a Party shall mean any
tender offer or exchange offer or any proposal for a merger, acquisition
of all of the stock or assets of, or other business combination
involving such Party or any of its Subsidiaries or the acquisition of a
substantial equity interest in, or a substantial portion of the assets
of, such Party or a substantial equity interest in, or all or
substantially all of the assets of, any of its Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person; (ii) any
officer, director, partner, employer, or direct or indirect beneficial
owner of any 10% or greater equity or voting interest of such Person; or
(iii) any other Person for which a Person described in clause (ii) acts
in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger,
including the Exhibits, schedules and Disclosure Memoranda delivered
pursuant hereto and incorporated herein by reference.
"ARTICLES OF MERGER" shall mean the Articles of Merger to be
executed by GOS and WPC and filed with the Secretary of State of the
Commonwealth of Virginia relating to the Merger as contemplated by
Section 1.1 of this Agreement.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character
and description, whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise relating to or utilized
in such Person's business, directly or indirectly, in whole or in part,
whether or not carried on the books and records of such Person, and
whether or not owned in the name of such Person or any Affiliate of such
Person and wherever located.
"CERTIFICATE OF MERGER" shall mean the Certificate to be
executed by WPC and filed with the Secretary of State of the State of
Georgia relating to the Merger as contemplated by Section 1.1 of this
Agreement.
"CLOSING DATE" shall mean the date on which the Closing
occurs.
"CONSENT" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person
pursuant to any Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement,
arrangement, authorization, commitment, contract, indenture, instrument,
lease, obligation, plan, practice, restriction, understanding or
undertaking of any kind or character, or other document to which any
Person is a party or that is binding on any Person or its capital stock,
Assets or business.
"DEFAULT" shall mean (i) any breach or violation of or default
under any Contract, Order or Permit, (ii) any occurrence of any event
that with the passage of time or the giving of notice or both would
constitute a breach or violation of or default under any Contract, Order
or Permit, or (iii) any occurrence of any event that with or without the
passage of time or the giving of notice would give rise to a right to
terminate or revoke, change the current terms of, or renegotiate, or to
accelerate, increase, or impose any Liability under, any Contract, Order
or Permit.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution
or protection of human health or the environment (including ambient air,
surface water, ground water, land surface or subsurface strata) and
which are administered, interpreted or enforced by the
- 32 -
<PAGE> 34
United States Environmental Protection Agency and state and local
agencies with jurisdiction over, and including common law in respect of,
pollution or protection of the environment, including the Comprehensive
Environmental Response Compensation and Liability Act, as amended, 42
U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases or threatened releases of
any Hazardous Material, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of any Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended. "EXHIBITS" 1 through 3, inclusive, shall mean the
Exhibits so marked, copies of which are attached to this Agreement. Such
Exhibits are hereby incorporated by reference herein and made a part
hereof, and may be referred to in this Agreement and any other related
instrument or document without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"GOS COMMON STOCK" shall mean the interests of the members of
GOS.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance or toxic
substance (as those terms are defined by any applicable Environmental
Laws) and (ii) any chemicals, pollutants, contaminants, petroleum,
petroleum products, or oil (and specifically shall include asbestos
requiring abatement, removal or encapsulation pursuant to the
requirements of governmental authorities and any polychlorinated
biphenyls).
"HSR ACT" shall mean Section 7A of the Clayton Act, as added
by Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"INTELLECTUAL PROPERTY" shall mean copyrights, patents,
trademarks, service marks, service names, trade names, technology rights
and licenses, computer software (including any source or object codes
therefor or documentation relating thereto), trade secrets, franchises,
know-how, inventions, and other intellectual property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated
thereunder.
"JOINT PROXY STATEMENT" shall mean the proxy statement used by
BCS and LSI to solicit the adoption or approval of their respective
shareholders of the transactions contemplated by this Agreement, which
shall include the prospectus of LSI relating to the issuance of the LSI
Common Stock to holders of BCS Common Stock.
"KNOWLEDGE" as used with respect to a Person (including
references to such Person being aware of a particular matter) shall mean
those facts that are known or should reasonably have been known in the
reasonable exercise of their duties by the Chairman, President, and
Chief Financial Officer, and with respect to GOS shall also include
Edward P. Grace III.
"LAW" shall mean any code, law, ordinance, regulation,
reporting or licensing requirement, rule, or statute applicable to a
Person or its Assets, Liabilities or business, including those
promulgated, interpreted or enforced by any Regulatory Authority.
- 33 -
<PAGE> 35
"LIABILITY" shall mean any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or expense
(including costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for
collection or deposit in the ordinary course of business) of any type,
whether accrued, absolute or contingent, liquidated or unliquidated,
matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement,
lien, mortgage, pledge, reservation, restriction, security interest,
title retention or other security arrangement, or any adverse right or
interest, charge, or claim of any nature whatsoever of, on, or with
respect to any property or property interest, other than (i) Liens for
current property Taxes not yet due and payable, and (ii) Liens which do
not materially impair the use of or title to the Assets subject to such
Lien.
"LITIGATION" shall mean any action, arbitration, cause of
action, claim, complaint, criminal prosecution or demand letter, or
notice (written or oral) by any Person of governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding alleging potential Liability, or any Regulatory Authority or
other federal, state or local governmental agency or department
requesting information relating to or affecting a Party, its business,
its Assets (including Contracts related to it), or the transactions
contemplated by this Agreement.
"LSI CAPITAL STOCK" shall mean, collectively, the LSI Common
Stock, the LSI Preferred Stock and any other class or series of capital
stock of LSI.
"LSI COMMON STOCK" shall mean the no par value common stock of
LSI.
"LSI COMPANIES" shall mean, collectively, LSI and all LSI
Subsidiaries.
"LSI DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Longhorn Steaks, Inc. Disclosure Memorandum" delivered prior
to the date of this Agreement to GOS describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect
to one Section shall not be deemed to be disclosed for purposes of any
other Section not specifically referenced with respect thereto.
"LSI FINANCIAL STATEMENTS" shall mean (i) the consolidated
statements of condition (including related notes and schedules, if any)
of LSI as of March 31, 1996, and as of December 31, 1995 and 1994, and
the related statements of income, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any) for the three
months ended March 31, 1996, and for each of the three years ended
December 31, 1995, 1994 and 1993, as filed by LSI in SEC Documents, and
(ii) the consolidated statements of condition of LSI (including related
notes and schedules, if any) and related statements of income, changes
in shareholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to
periods ended subsequent to March 31, 1996.
"LSI PREFERRED STOCK" shall mean the no par value preferred
stock of LSI.
"LSI STOCK PLANS" shall mean the existing stock option and
other stock-based compensation plans of LSI designated as follows:
Longhorn Steaks, Inc. Amended and
- 34 -
<PAGE> 36
Restated 1992 Incentive Plan, Longhorn Steaks, Inc. Stock Option
Agreement with Richard E. Rivera and Longhorn Steaks, Inc. 1996 Stock
Plan for Outside Directors.
"LSI SUBSIDIARIES" shall mean the Subsidiaries of LSI and any
corporation or other organization acquired as a Subsidiary of LSI in the
future and held as a Subsidiary by LSI at the Effective Time.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event,
change or occurrence which, individually or together with any other
event, change or occurrence, has a material adverse impact on (i) the
financial position, business, or results of operations of such Party and
its Subsidiaries, taken as a whole, or (ii) the ability of such Party to
perform its obligations under this Agreement or to consummate the Merger
or the other transactions contemplated by this Agreement, provided that
"material adverse impact" shall not be deemed to include the impact of
(a) changes in Laws of general applicability or interpretations thereof
by courts or governmental authorities, (b) changes in generally accepted
accounting principles or regulatory accounting principles, (c) actions
and omissions of a Party (or any of its Subsidiaries) taken with the
prior informed written Consent of the other Party in contemplation of
the transactions contemplated hereby, and (z) the Merger on the
operating performance of the Parties, including expenses incurred by the
Parties in consummating the transactions contemplated by this Agreement.
"MATERIAL" for purposes of this Agreement shall be determined
in light of the facts and circumstances of the matter in question;
provided that any specific monetary amount stated in this Agreement
shall determine materiality in that instance.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"NASDAQ NATIONAL MARKET" shall mean the Nasdaq Stock Market's
National Market of the National Association of Securities Dealers
Automated Quotations System.
"OPERATING PROPERTY" shall mean any property owned by the
Party in question or by any of its Subsidiaries or in which such Party
or Subsidiary holds a security interest, and, where required by the
context, includes the owner or operator of such property, but only with
respect to such property.
"ORDER" shall mean any administrative decision or award,
decree, injunction, judgment, order, quasi-judicial decision or award,
ruling, or writ of any federal, state, local or foreign or other court,
arbitrator, mediator, tribunal, administrative agency or Regulatory
Authority.
"PARTICIPATION FACILITY" shall mean any facility or property
in which the Party in question or any of its Subsidiaries participates
in the management and, where required by the context, said term means
the owner or operator of such facility or property, but only with
respect to such facility or property.
"PARTY" shall mean either GOS or LSI, and "PARTIES" shall
mean both GOS and LSI.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a
party or that is or may be binding upon or inure to the benefit of any
Person or its securities, Assets or business.
"PERSON" shall mean a natural person or any legal, commercial
or governmental entity, such as, but not limited to, a corporation,
general partnership, joint venture, limited
- 35 -
<PAGE> 37
partnership, limited liability company, trust, business association,
group acting in concert, or any person acting in a representative
capacity.
"REGISTRATION STATEMENT" shall mean the Registration Statement
on Form S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by
LSI under the 1933 Act with respect to the shares of LSI Common Stock to
be issued to the shareholders of GOS in connection with the transactions
contemplated by this Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the NASD,
the SEC, the Federal Trade Commission, the United States Department of
Justice, and all other federal, state, county, local or other
governmental or regulatory agencies, authorities, instrumentalities,
commissions, boards or bodies having jurisdiction over the Parties and
their respective Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial
advisor, attorney, accountant, consultant, or other representative of a
Person.
"RIGHTS" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever
relating to, or securities or rights convertible into or exchangeable
for, shares of the capital stock of a Person or by which a Person is or
may be bound to issue additional shares of its capital stock or other
Rights.
"SEC DOCUMENTS" shall mean all forms, proxy statements,
registration statements, reports, schedules, and other documents filed,
or required to be filed, by a Party or any of its Subsidiaries with any
Regulatory Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act
of 1940, as amended, the Trust Indenture Act of 1939, as amended, and
the rules and regulations of any Regulatory Authority promulgated
thereunder.
"SHAREHOLDERS MEETINGS" shall mean the meeting of the
shareholders of LSI to be held pursuant to Section 8.1 of this
Agreement, including any adjournment or adjournments thereof.
"SIGNIFICANT SUBSIDIARY" shall mean any present or future
consolidated Subsidiary of the Party in question, the assets of which
constitute ten percent (10%) or more of the consolidated assets of such
Party as reflected on such Party's consolidated statement of condition
prepared in accordance with GAAP.
"SUBSIDIARIES" shall mean all those corporations,
associations, or other business entities of which the entity in question
either (i) owns or controls 50% or more of the outstanding equity
securities either directly or through an unbroken chain of entities as
to each of which 50% or more of the outstanding equity securities is
owned directly or indirectly by its parent (provided, there shall not be
included any such entity the equity securities of which are owned or
controlled in a fiduciary capacity), or (ii) in the case of
partnerships, serves as a general partner.
"SURVIVING CORPORATION" shall mean WPC as the surviving
corporation resulting from the Merger.
"TAX RETURN" shall mean any report, return, information
return, or other information required to be supplied to a taxing
authority in connection with Taxes, including
- 36 -
<PAGE> 38
any return of an affiliated or combined or unitary group that includes a
Party or its Subsidiaries.
"TAX" or "TAXES" shall mean any federal, state, county, local,
or foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, and other
taxes, assessments, charges, fares, or impositions, including interest,
penalties, and additions imposed thereon or with respect thereto.
"VLLCA" shall mean the Virginia Limited Liability Company Act.
"WPC COMMON STOCK" shall mean the $.01 par value common stock
of WPC.
(b) The terms set forth below shall have the
meanings ascribed thereto in the referenced sections:
<TABLE>
<S> <C>
Base Period Trading Price Limitations Section 3.1(c)
Base Period Trading Price Section 3.1(c)
Closing Section 1.2
Effective Time Section 1.3
ERISA Affiliate Section 5.14(b)
Exchange Agent Section 4.1
Exchange Ratio Section 3.1(c)
GOS Contracts Section 5.15
GOS Benefit Plans Section 5.14
GOS ERISA Plan Section 5.14
GOS Intellectual Property Section 5.10
Merger Section 1.1
Per Share Purchase Price Section 3.1(c)
share of GOS Common Stock Section 3.1(b)
SEC Section 5.18
</TABLE>
(c) Any singular term in this Agreement shall be
deemed to include the plural, and any plural term the singular. Whenever the
words "include," "includes" or "including" are used in this Agreement, they
shall be deemed followed by the words "without limitation."
11.2 EXPENSES. Each of the Parties shall bear and pay all
direct costs and expenses incurred by it or on its behalf in connection with
the transactions contemplated hereunder, including filing, registration and
application fees, printing fees, and fees and expenses of its own financial or
other consultants, investment bankers, accountants, and counsel.
11.3 BROKERS AND FINDERS. Except for Tucker Anthony
Incorporated as to GOS and except for The Robinson-Humphrey Company, Inc. as to
LSI, each of the Parties represents and warrants that neither it nor any of its
officers, directors, employees, or Affiliates has employed on its behalf any
broker or finder or incurred any Liability for any financial advisory fees,
investment bankers' fees, brokerage fees, commissions, or finders' fees in
connection with this Agreement or the transactions contemplated hereby. In the
event of a claim by any broker or finder based upon his or its representing or
being retained by or allegedly representing or being
- 37 -
<PAGE> 39
retained by GOS or LSI, each of GOS and LSI, as the case may be, agrees to
indemnify and hold the other Party harmless of and from any Liability in
respect of any such claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly
provided herein, this Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement between the Parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. Nothing
in this Agreement expressed or implied, is intended to confer upon any Person,
other than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, other than as
provided in Sections 8.13 and 8.14 of this Agreement.
11.5 AMENDMENTS. To the extent permitted by Law, this
Agreement may be amended by a subsequent writing signed by each of the Parties
upon the approval of the Boards of Directors of each of the Parties, whether
before or after shareholder approval of this Agreement has been obtained;
provided, that after any such approval by the holders of GOS Common Stock,
there shall be made no amendment that requires further approval by such
shareholders without the further approval of such shareholders.
11.6 WAIVERS.
(a) Prior to or at the Effective Time, LSI,
acting through its Board of Directors, chief executive officer or other
authorized officer, shall have the right to waive any Default in the
performance of any term of this Agreement by GOS, to waive or extend the time
for the compliance or fulfillment by GOS of any and all of its obligations
under this Agreement, and to waive any or all of the conditions precedent to
the obligations of LSI under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of LSI.
(b) Prior to or at the Effective Time, GOS,
acting through its Board of Directors, chief executive officer or other
authorized officer, shall have the right to waive any Default in the
performance of any term of this Agreement by LSI, to waive or extend the time
for the compliance or fulfillment by LSI of any and all of its obligations
under this Agreement, and to waive any or all of the conditions precedent to
the obligations of GOS under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of GOS.
(c) The failure of any Party at any time or times
to require performance of any provision hereof shall in no manner affect the
right of such Party at a later time to enforce the same or any other provision
of this Agreement. No waiver of any condition or of the breach of any term
contained in this Agreement in one or more instances shall be deemed to be or
construed as a further or continuing waiver of such condition or breach or a
waiver of any other condition or of the breach of any other term of this
Agreement.
- 38 -
<PAGE> 40
11.7 ASSIGNMENT. Except as expressly contemplated hereby,
neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any Party hereto (whether by operation of Law or
otherwise) without the prior written consent of the other Party. 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.
11.8 NOTICES. All notices or other communications which
are required or permitted hereunder shall be in writing and sufficient if
delivered by hand, by facsimile transmission, by registered or certified mail,
postage pre-paid, or by courier or overnight carrier, to the persons at the
addresses set forth below (or at such other address as may be provided
hereunder), and shall be deemed to have been delivered as of the date so
delivered:
GOS and Shareholders: GOS Properties Limited Liability
Company
c/o Bugaboo Creek Steak House, Inc.
1275 Wampanoag Trail
East Providence, Rhode Island 02915
Telecopy Number: (401) 433-5986
Attention: Edward P. Grace, III
Copy to Counsel: Hinckley, Allen & Snyder
1500 Fleet Center
50 Kennedy Plaza
Providence, Rhode Island 02903
Telecopy Number: (401) 277-9600
Attention: Margaret D. Farrell
LSI: Longhorn Steaks, Inc.
8215 Roswell Road, Building 200
Atlanta, Georgia
Telecopy Number: (770) 399-7796
Attention: Richard E. Rivera
Copy to Counsel: Alston & Bird
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: William H. Avery
11.9 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the Laws of the State of Delaware, without
regard to any applicable conflicts of Laws.
- 39 -
<PAGE> 41
11.10 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
11.11 CAPTIONS. The captions contained in this Agreement
are for reference purposes only and are not part of this Agreement.
11.12 INTERPRETATIONS. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against any
party, whether under any rule of construction or otherwise. No party to this
Agreement shall be considered the draftsman. The parties acknowledge and agree
that this Agreement has been reviewed, negotiated and accepted by all parties
and their attorneys and shall be construed and interpreted according to the
ordinary meaning of the words used so as fairly to accomplish the purposes and
intentions of all parties hereto.
11.13 ENFORCEMENT OF AGREEMENT. The Parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specific terms or was
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 the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
11.14 SEVERABILITY. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
- 40 -
<PAGE> 42
IN WITNESS WHEREOF, each of the Parties has caused this
Agreement to be executed on its behalf and its corporate seal to be hereunto
affixed and attested by officers thereunto as of the day and year first above
written.
GOS PROPERTIES LIMITED LIABILITY
COMPANY
By: /s/ Edward P. Grace, III
-----------------------------
Manager
[CORPORATE SEAL]
ATTEST: LONGHORN STEAKS, INC.
/s/ Anne D. Huemme By: /s/ Richard E. Rivera
- ------------------------ -----------------------------
Secretary Richard E. Rivera
President
[CORPORATE SEAL]
ATTEST: WHIP POOLING CORPORATION
/s/ F. Fitzhugh Taylor, III
- ------------------------ By: /s/ Richard E. Rivera
Secretary -----------------------------
President
[CORPORATE SEAL]
- 41 -
<PAGE> 43
THE SHAREHOLDERS:
EDWARD P. GRACE III
/s/ Edward P. Grace, III
---------------------------------
SAMUEL J. ORR, JR.
/s/ Samuel J. Orr, Jr.
---------------------------------
By: David Rizzo as Attorney-in-fact
GUY B. SNOWDEN
/s/ Guy B. Snowden
---------------------------------
- 42 -
<PAGE> 44
EXHIBIT 1: FORM OF AGREEMENT OF AFFILIATES OF GOS.
<PAGE> 45
AFFILIATE AGREEMENT
Longhorn Steaks, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention:
---------------------
---------------------
Gentlemen:
The undersigned is a member of GOS Properties L.L.C. ("GOS"), a
limited liability company organized and existing under the laws of the
Commonwealth of Virginia and located in East Providence, Rhode Island and will
become a shareholder of the Longhorn Steaks, Inc. ("LSI") pursuant to the
transactions described in the Agreement and Plan of Merger, dated as of June
14, 1996 (the "Agreement"), by and among LSI, Whip Pooling Corporation ("WPC")
and GOS. Under the terms of the Agreement, GOS will be merged into and with WPC
(the "Merger"), and the interests of GOS ("GOS Interests") will be converted
into and exchanged for shares of the no par value common stock of LSI ("LSI
Common Stock"). This Affiliate Agreement represents an agreement between the
undersigned and LSI regarding certain rights and obligations of the undersigned
in connection with the shares of LSI to be received by the undersigned as a
result of the Merger.
In consideration of the Merger and the mutual covenants contained
herein, the undersigned and LSI hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that
as to GOS he is an "affiliate" under Rule 145(c) as defined in Rule 405 of the
Rules and Regulations of the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended ("1933 Act"), and the undersigned
anticipates that he will be such an "affiliate" at the time of the Merger.
2. Initial Restriction on Disposition. The undersigned agrees
that he will not sell, transfer, or otherwise dispose of his interests in, or
reduce his risk relative to, any of the shares of LSI Common Stock into which
his interests in GOS are converted upon consummation of the Merger until such
time as LSI notifies the undersigned that the requirements of SEC Accounting
Series Release Nos. 130 and 135 ("ASR 130 and 135") have been met. The
undersigned understands that ASR 130 and 135 relate to publication of financial
results of post-Merger combined operations of LSI and GOS. LSI agrees that it
will publish such results within 45 days after the end of the first fiscal
quarter of LSI containing the required period of post-Merger combined
operations and that it will notify the undersigned promptly following such
publication.
3. Covenants and Warranties of Undersigned. The undersigned
represents, warrants and agrees that:
<PAGE> 46
(a) During the 30 days immediately preceding the Effective Time of
the Merger, the undersigned has not sold, transfered, or otherwise
disposed of his interests in, or reduced his risk relative to, his
interests in GOS.
(b) The LSI Common Stock received by the undersigned as a result
of the Merger will be taken for his own account and not for others,
directly or indirectly, in whole or in part.
(c) LSI has informed the undersigned that any distribution by the
undersigned of LSI Common Stock has not been registered under the 1933
Act and that shares of LSI Common Stock received pursuant to the Merger
can only be sold by the undersigned (1) following registration under the
1933 Act, or (2) in conformity with the volume and other requirements of
Rule 145(d) promulgated by the SEC as the same now exist or may
hereafter be amended, or (3) to the extent some other exemption from
registration under the 1933 Act might be available. The undersigned
understands that LSI is under no obligation to file a registration
statement with the SEC covering the disposition of the undersigned's
shares of LSI Common Stock or to take any other action necessary to make
compliance with an exemption from such registration available.
(d) The undersigned will, and will cause each of the other parties
whose shares are deemed to be beneficially owned by the undersigned
pursuant to Section 8 hereof to, have all interests in GOS beneficially
owned by the undersigned registered in the name of the undersigned or
such parties, as applicable, prior to the effective date of the Merger
and not in the name of any bank, broker-dealer, nominee or
clearinghouse.
4. Restrictions on Transfer. The undersigned understands and
agrees that stop transfer instructions with respect to the shares of LSI Common
Stock received by the undersigned pursuant to the Merger will be given to LSI's
Transfer Agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in
substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests"
and may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as Longhorn Steaks, Inc. ("LSI") has
published the financial results covering at least 30 days of combined
operations after the effective date of the merger through which the
business combination was effected. In addition, the shares represented
by this certificate may not be sold, transferred or otherwise disposed
of except or unless (1) covered by an effective registration statement
under the Securities Act of 1933, as amended, (2) in accordance with (i)
Rule 145(d) (in the case of shares issued to an individual who is not an
affiliate of LSI) or (ii) Rule 144 (in the case of shares issued to an
individual who is an affiliate of LSI) of the Rules and Regulations of
such Act, or (3) in accordance with a legal opinion satisfactory to
counsel for LSI that such sale or transfer is otherwise exempt from the
registration requirements of such Act."
Such legend will also be placed on any certificate representing LSI securities
issued subsequent to the original issuance of the LSI Common Stock pursuant to
the Merger as a result of any transfer
- 2 -
<PAGE> 47
of such shares or any stock dividend, stock split, or other recapitalization as
long as the LSI Common Stock issued to the undersigned pursuant to the Merger
has not been transferred in such manner to justify the removal of the legend
therefrom. Upon the request of the undersigned, LSI shall cause the
certificates representing the shares of LSI Common Stock issued to the
undersigned in connection with the Merger to be reissued free of any legend
relating to restrictions on transfer by virtue of ASR 130 and 135 as soon as
practicable after the requirements of ASR 130 and 135 have been met. In
addition, if the provisions of Rules 144 and 145 are amended to eliminate
restrictions applicable to the LSI Common Stock received by the undersigned
pursuant to the Merger, or at the expiration of the restrictive period set
forth in Rule 145(d), LSI, upon the request of the undersigned, will cause the
certificates representing the shares of LSI Common Stock issued to the
undersigned in connection with the Merger to be reissued free of any legend
relating to the restrictions set forth in Rules 144 and 145(d) upon receipt by
LSI of an opinion of its counsel to the effect that such legend may be removed.
5. Understanding of Restrictions on Dispositions. The undersigned
has carefully read the Agreement and this Affiliate Agreement and discussed
their requirements and impact upon his ability to sell, transfer, or otherwise
dispose of the shares of LSI Common Stock received by the undersigned, to the
extent he believes necessary, with his counsel or counsel for GOS.
6. Filing of Reports by LSI. LSI agrees, for a period of three
years after the effective date of the Merger, to file on a timely basis all
reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, so that the public information provisions of
Rule 145(d) promulgated by the SEC as the same are presently in effect will be
available to the undersigned in the event the undersigned desires to transfer
any shares of LSI Common Stock issued to the undersigned pursuant to the
Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to sell
or otherwise transfer the shares of LSI Common Stock received by him in
connection with the Merger at any time during the restrictive period set forth
in Rule 145(d), the undersigned will provide the necessary representation
letter to the transfer agent for LSI Common Stock together with such additional
information as the transfer agent may reasonably request. If LSI's counsel
concludes that such proposed sale or transfer complies with the requirements of
Rule 145(d), LSI shall cause such counsel to provide such opinions as may be
necessary to LSI's Transfer Agent so that the undersigned may complete the
proposed sale or transfer.
8. Acknowledgments. The undersigned recognizes and agrees that
the foregoing provisions also apply to all shares of the capital stock of GOS
and LSI that are deemed to be beneficially owned by the undersigned pursuant to
applicable federal securities laws, which the undersigned agrees may include,
without limitation, shares owned or held in the name of (i) the undersigned's
spouse, (ii) any relative of the undersigned or of the undersigned's spouse who
has the same home as the undersigned, (iii) any trust or estate in which the
undersigned, the undersigned's spouse, and any such relative collectively own
at least a 10% beneficial interest or of which any of the foregoing serves as
trustee, executor, or in any similar capacity, and (iv) any corporation or
other organization in which the undersigned, the undersigned's spouse and any
such relative collectively own at least 10% of any class of equity securities
or of the equity
- 3 -
<PAGE> 48
interest. The undersigned further recognizes that, in the event that the
undersigned is a director or officer of LSI or becomes a director or officer of
LSI upon consummation of the Merger, among other things, any sale of LSI Common
Stock by the undersigned within a period of less than six months following the
effective time of the Mergers may subject the undersigned to liability pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as amended.
9. Miscellaneous. This Affiliate Agreement is the complete
agreement between LSI and the undersigned concerning the subject matter hereof.
Any notice required to be sent to any party hereunder shall be sent by
registered or certified mail, return receipt requested, using the addresses set
forth herein or such other address as shall be furnished in writing by the
parties. This Affiliate Agreement shall be governed by the laws of the State of
Virginia.
This Affiliate Agreement is executed as of the ____ day of _________,
19__.
Very truly yours,
---------------------------
Signature
---------------------------
Print Name
---------------------------
---------------------------
---------------------------
Address
[add below the signatures of all
registered owners of shares deemed
beneficially owned by the affiliate]
---------------------------
Name:
---------------------------
Name:
---------------------------
Name:
AGREED TO AND ACCEPTED as of
_______________, 19__
LONGHORN STEAKS, INC.
By:_________________________
- 4 -
<PAGE> 49
EXHIBIT 2: MATTERS AS TO WHICH HINCKLEY, ALLEN & SNYDER WILL OPINE.
<PAGE> 50
MATTERS AS TO WHICH HINCKLEY, ALLEN & SNYDER WILL OPINE
1. GOS is a limited liability company duly organized,
validly existing and in good standing under the laws of the Commwealth of
Virginia with full corporate power and authority to carry on the business in
which it is engaged as described in the proxy statement used to solicit the
approval by the stockholders of LSI of the transactions contemplated by the
Agreement ("Proxy Statement"), and to own and use its Assets .
2. [The authorized membership interests of GOS consists
of ___________ of GOS membership interest, of which ______________ was issued
and outstanding as of _________, 1996. The shares of GOS Common Stock that are
issued and outstanding were not issued in violation of any statutory preemptive
rights of shareholders, were duly issued and are fully paid and nonassessable
under the Virginia Limited Liability Company Act. To our knowledge, except as
set forth in Section 5.3(a) of the Merger Agreement or Section 5.3 of the GOS
Disclosure Memorandum, there are no options, subscriptions, warrants, calls,
rights or commitments obligating GOS to issue any equity securities or
interests or acquire any of its equity securities or iinterests.]
3. The execution and delivery of the Agreement and
compliance with its terms do not and will not violate or contravene any
provision of the Articles of Organization or Operating Agreement of GOS or, to
our knowledge but without any independent investigation, result in any conflict
with, breach of, or default or acceleration under any Contract or Order to
which GOS is a party or by which GOS is bound.
4. The Agreement has been duly and validly executed and
delivered by GOS and, assuming valid authorization, execution and delivery by
LSI and WPC, constitutes a valid and binding agreement of GOS enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, provided, however, that we express no opinion as to the
availability of the equitable remedy of specific performance.
<PAGE> 51
EXHIBIT 3: MATTERS AS TO WHICH ALSTON & BIRD WILL OPINE.
<PAGE> 52
MATTERS AS TO WHICH ALSTON & BIRD WILL OPINE
1. LSI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Georgia with full corporate
power and authority to carry on the business in which it is engaged as
described in the proxy statement used to solicit the approval by the
stockholders of GOS of the transactions contemplated by the Agreement ("Proxy
Statement"), and to own and use its Assets.
2. WPC is a corporation duly organized and validly
existing and in good standing under the laws of the State of Georgia with full
corporate power and authority to carry on the business in which it is engaged
as described in the Proxy Statement, and to own and use its Assets.
3. The execution and delivery of the Agreement and
compliance with its terms do not and will not violate or contravene any
provision of the Articles of Incorporation or Bylaws of LSI or, to our
knowledge but without any independent investigation, any Contract or Order to
which LSI is a party or by which LSI is bound. The adoption of the Agreement
and compliance with its terms do not and will not violate or contravene any
provision of the Articles of Incorporation or Bylaws of WPC or, to our
knowledge but without any independent investigation, any Contract or Order to
which WPC is a party or by which WPC is bound.
4. The Agreement has been duly and validly executed and
delivered by LSI, and assuming valid authorization, execution and delivery by
GOS, constitutes a valid and binding agreement of LSI enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, or similar laws affecting creditors' rights
generally, provided, however, that we express no opinion as to the availability
of the equitable remedy of specific performance.
5. The shares of LSI Common Stock to be issued to the
shareholders of GOS as contemplated by the Agreement have been registered under
the Securities Act of 1933, as amended, and when properly issued and delivered
following consummation of the Merger will be fully paid and non-assessable
under the Georgia Business Corporation Code.
<PAGE> 1
EXHIBIT 2.6
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered
into as of the 14th day of June, 1996, by and between EDWARD P. GRACE, III and
SAMUEL J. ORR, JR. (together, jointly and severally, "Seller"), and WHIP
POOLING CORPORATION, a Georgia corporation ("Purchaser");
WHEREAS, Seller is the owner of a certain tract or parcel of land more
particularly described in Exhibit A attached hereto and by this reference made
a part hereof (the "Land") commonly known as Old Grist Mill Restaurant and
Tavern, 390 Fall River Avenue, Seekonk, Bristol County, Massachusetts; and
WHEREAS, Seller desires to sell, and Purchaser desires to purchase, the
Property (as hereinafter defined); and
WHEREAS, Bugaboo Creek Steak House, Inc. ("BCS"), an affiliate of Seller,
and Whip Merger Corporation and Longhorn Steaks, Inc. ("Longhorn"), affiliates
of Purchaser, are parties to that certain Agreement and Plan of Merger dated on
or about the date hereof (the "Merger Agreement"; capitalized terms not defined
herein shall have the respective meanings provided therein);
NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars
($10.00), the mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
Section 1. PURCHASE AND SALE.
Upon the terms and conditions hereinafter set forth, Seller agrees to sell
and Purchaser agrees to purchase the Land, together with:
1.1 All buildings, improvements, landscaping and fixtures now or hereafter
located on the Land and owned by Seller (hereinafter referred to collectively as
the "Improvements");
1.2 All rights, licenses, privileges and easements appurtenant to the Land,
if any (herein referred to collectively as the "Rights");
1.3 All equipment, machinery and other tangible personal property owned by
Seller which is located on the Land or within the Improvements and used in
connection with the operation thereof (herein referred to collectively as the
"Tangible Personal Property");
1.4 All of Seller's right, title and interest in and to any other
intangible personal property owned by Seller in connection with the Land, the
Improvements or the Tangible
<PAGE> 2
Personal Property, and all of Seller's rights under all permits and licenses,
zoning approvals, certificates of occupancy, warranties, lien waivers,
contracts, utility arrangements and other documents, leases (including, without
limitation, the Lease, as hereinafter defined) and agreements relating to the
development, construction, ownership, operation and occupancy thereof, to the
extent the same are assignable by Seller, and subject to any consents required
from third parties (herein referred to collectively as the "Intangible Personal
Property").
All of Seller's right, title and interest in and to the foregoing Land, Rights,
Improvements, Tangible Personal Property and Intangible Personal Property are
hereinafter collectively referred to as the "Property."
Section 2. TITLE V INSPECTION.
Seller shall obtain an inspection of the Property's "septic system" within
nine (9) months prior to the Closing or, upon Seller's determination that
weather conditions preclude inspection prior to the Closing, within six (6)
months following the Closing. Such inspection shall be conducted by a certified
system inspector approved by the Massachusetts Department of Environmental
Protection, pursuant to 310 CMR 15.301(7) and performed in accordance with the
scope and criteria specified in 310 CMR 15.302. In the event that such
inspection establishes that the septic system requires upgrading, alterations,
improvements or reconstruction, Purchaser shall perform such and assume the
obligation to comply with the provisions of Title V regarding such upgrading,
alterations, improvements or reconstruction of such system. The Property's
septic system is currently operating sufficiently for the current use of the
Property and, to the best of Seller's knowledge, does not require upgrading,
alterations, improvements or reconstruction of such system.
Section 3. PURCHASE PRICE AND PAYMENT.
The purchase price for the Property (the "Purchase Price") shall be One
Million and No/100 Dollars ($1,000,000.00). Said Purchase Price shall be
payable by Purchaser to Seller at Closing by (i) Purchaser's assumption of the
Mortgage Indebtedness, plus (ii) Purchaser's transfer to Seller of shares of
common stock of Longhorn Common Stock, no par value ("Longhorn Stock"). At
Closing, Seller shall receive that number of shares of Longhorn Stock obtained
by dividing the difference between the Purchase Price and the Mortgage
Indebtedness assumed by Purchaser, by the average of the daily last sale prices
of Longhorn Stock for the 20 consecutive trading days on which such shares are
actually traded as over-the-counter securities and quoted on the Nasdaq National
Market (as reported in The Wall Street Journal or, if not reported thereby, any
other authoritative source) ending at the close of trading on the fifth trading
day immediately preceding the Effective Date (the "Base Period Trading Price")
and rounded to the third decimal place; provided, however, that for purposes of
this calculation, the Base Period Trading Price shall be deemed to equal (i)
$27.250 in the event the Base Period Trading Price is greater than $27.250 or
(ii) $24.000 in the event the Base Period Trading Price is less than $24.000,
rounded up to the nearest one (1) share. The "Mortgage Indebtedness" shall mean
the outstanding balance of principal and interest under the Mortgage Loan (as
hereinafter defined), which Purchaser shall assume in connection with
- 2 -
<PAGE> 3
the Closing; provided, however, that the Mortgage Indebtedness assumed by
Purchaser shall not exceed the Purchase Price. The "Mortgage Loan" shall mean
that certain first mortgage loan made by Citizens Savings Bank to Seller secured
by all or any part of the Property and evidenced by that certain Secured
Promissory Note dated July 21, 1994 in the original principal amount of
$1,015,000.00.
Section 4. SELLER'S REPRESENTATIONS, WARRANTIES AND
AGREEMENTS.
Seller hereby represents and warrants to, and agrees with, Purchaser as
follows:
4.1 Title to Property. Seller owns fee simple title to the Land and
the Improvements on the Land, subject to the Permitted Title Exceptions.
4.2 No Agreements. There are no written or oral promises,
understandings or commitments between Seller and any other party with respect to
the Property, except as reflected in the Permitted Title Exceptions (as defined
below) and for the Lease and the Service Contracts (as defined below).
4.3 Service Contracts. Listed on Exhibit B attached hereto and by this
reference incorporated herein are all contracts and agreements relating to the
management, maintenance and operation of the Property to which Seller is a party
or which are binding upon Seller (collectively, the "Service Contracts"). All
such Service Contracts shall be terminated by Seller on or prior to the date of
Closing, unless Purchaser shall have elected to assume any of the Service
Contracts, in which case Seller shall, to the extent the same are assignable by
Seller, and subject to any consents required from third parties, transfer such
Service Contracts to Purchaser at Closing and cooperate with Purchaser in
obtaining any necessary consent to the transfer of such Service Contracts.
4.4 No Other Agreements. Other than the Permitted Title Exceptions,
the Lease and the Service Contracts, there are and shall be no leases, service
contracts, management agreements or other agreements or instruments in force or
effect that grant to any person whomsoever or any entity whatsoever any right,
title, interest or benefit in or to all or any part of the Property or any
rights relating to the use, operation, management, maintenance or repair of all
of any part of the Property from and after the date of Closing.
4.5 Seller's Employees. There are no employees or agents of Seller
engaged in the operation and maintenance of the Property to whom Purchaser shall
have at or after Closing any obligation whatsoever, except for obligations
arising on or after the date of Closing under any Service Contract which
Purchaser elects to assume at Closing.
4.6 Taxes. Seller has paid or caused to be paid all real estate taxes
and personal property taxes pertaining to the Property due and payable through
the date hereof. Seller agrees to submit to Purchaser promptly upon receipt
copies of any and all new bills or
- 3 -
<PAGE> 4
notices pertaining to real estate or personal property taxes or assessments
applicable to the Property which are received by Seller during the term of this
Agreement.
4.7 Governmental Permits and Compliance with Laws. To the best of
Seller's knowledge, all governmental permits, licenses and certificates required
for the current occupancy and use of the Property have been acquired and are in
good standing, except those that do not have a material adverse effect on the
occupancy and use of the Property. Seller has not received written notice of
any violations of law, municipal or county ordinances, or other legal
requirements with respect to the Property (or any part thereof) or with respect
to the use, occupancy or construction thereof.
4.8 Environmental Matters.
4.8.1 Except as would not have a material adverse effect on the
Property, its operations or its value, the Property is, and has been during the
period of Seller's ownership or operation, in compliance with all Environmental
Laws.
4.8.2 There is no Litigation pending or, to the knowledge of
Seller, threatened, before any court, governmental agency, or authority or other
forum in which Seller or any BCS Company has been or, with respect to threatened
Litigation, may be named as a defendant (i) for alleged noncompliance of the
Property (including by any predecessor) with any Environmental Law or (ii)
relating to the release into the environment of any Hazardous Material, on,
under, adjacent to or affecting (or potentially affecting) the Property, nor, to
the knowledge of Seller, is there any reasonable basis for any Litigation of a
type described in this sentence.
4.8.3 During the period of (i) Seller's ownership or operation of
the Property, or (ii) Tenant's operation of the Property, there have been no
releases of Hazardous Material in, on, under, adjacent to, or affecting (or to
the knowledge of Seller reasonably likely to affect) the Property, except as
would not have a material adverse effect on the Property, its operations or its
value. Prior to the period of (i) Seller's ownership or operation of any of the
Property, or (ii) Tenant's operation of the Property to the knowledge of Seller,
there were no releases of Hazardous Material in, on, under, or affecting any the
Property, except as would not have a material adverse effect on the Property,
its operations or its value.
4.9 Litigation. There exists no actual or pending, and Seller has no
knowledge of any threatened, litigation or proceeding by any organization,
person, individual, or governmental board, commission, department, agency or
instrumentality against Seller with respect to the Property or against the
Property. Seller is not operating the Property under or subject to, or in
default with respect to, any order, writ, injunction or decree of any court or
federal, state, municipal or other governmental agency or department,
commission, board or instrumentality. There is no labor dispute, grievance,
controversy or strike pending or threatened against Seller with respect to the
Property.
- 4 -
<PAGE> 5
4.10 The Lease. There are no leases or other occupancy agreements with
respect to the Land or the Improvements, other than an unwritten lease (the
"Lease") pursuant to which Seller leases the Land and Improvements to Old Grist
Mill Tavern, Inc. ("Tenant"). The Lease is in full force and effect, and has
not been assigned or subleased in whole or in part in any manner whatsoever.
4.11 Accuracy of Information. The information set forth herein and in
the Exhibits hereto and the materials furnished and to be furnished to Purchaser
by Seller pursuant to this Agreement is complete and accurate as to the subject
matter thereof and does not omit to state or include any material information
necessary to make such materials or information not misleading.
Seller shall refrain, and shall cause Tenant to refrain, from taking any
action which would cause any of the foregoing representations and warranties to
become incorrect or untrue at any time prior to the date of Closing, and shall
promptly notify Purchaser, in writing, of any event or condition known to Seller
which occurs prior to Closing hereunder and which causes a material change in
the facts relating to, or the truth of, any of the above representations and
warranties. At the Closing, Seller shall reaffirm and restate such
representations and warranties, subject to disclosure of any changes in facts or
circumstances which may have occurred since the date hereof.
Section 5. PURCHASER'S INSPECTION OF THE PROPERTY.
Purchaser shall have the privilege at any time during the existence of
this Agreement of going upon the Property, personally or through agents,
representatives or designees, to inspect and examine the condition of the
Property, to conduct surveys, to determine the compliance of the Land and
Improvements as constructed with all federal, state and local laws, ordinances,
rules and regulations applicable thereto and to conduct engineering or
environmental tests or studies which it may deem necessary or desirable,
provided that the same are reasonably related to the transactions contemplated
hereby, do not interfere unnecessarily with normal operations of the Property,
and are customary in scope for real estate transactions similar to the
transactions contemplated by this Agreement (excluding the BCS Transactions).
Seller shall also make available to Purchaser all existing books and records
maintained by Seller or any property manager relating to the operation of the
Property. Seller shall cooperate with such inspectors and further agrees to
promptly provide Purchaser, its agents, employees, representatives or
contractors with copies of any plans and specifications, permits, licenses,
zoning approvals, certificates of occupancy, warranties, lien waivers, utility
arrangements and other materials relating to the existing development and
construction of the Property and the current ownership and occupancy thereof as
shall be in the possession of Seller and as shall be reasonably requested from
time to time. Purchaser shall pay all costs incurred in making any tests,
surveys, analyses and investigations of the Property and shall indemnify and
hold Seller harmless from and against any and all liens which may arise as a
result of the activities of Purchaser or its agents, representatives or
designees on the Property and against any and all claims for death or injury to
persons or properties arising out of or as a result of Purchaser or its agents,
representatives or designees
- 5 -
<PAGE> 6
going upon the Property pursuant to the provisions of this Section or otherwise.
Purchaser agrees to keep the results of such surveys, tests and studies
confidential, and not to disclose the same to any third parties, other than
Purchaser's officers, directors, employees, attorneys, consultants, accountants,
agents and advisors whom Purchaser reasonably deems have a need to know the
information contained therein.
Section 6. TITLE AND SURVEY MATTERS.
6.1 Seller's fee simple title to the Property is subject only to the
matters listed in Exhibit C attached hereto (the "Permitted Title Exceptions").
6.2 Notwithstanding anything to the contrary herein contained, Seller
covenants and agrees that at or prior to Closing Seller shall (i) pay in full
and cause to be canceled any loan security documents which encumber the Property
(other than security documents securing the Mortgage Loan and assumed by
Purchaser in connection with the Closing), (ii) pay in full and cause to be
canceled and discharged or otherwise bond and discharge as liens against the
Property all mechanics', contractors', tax and other liens which encumber the
Property as of the date hereof or which may be filed against the Property after
the date hereof and on or prior to the date of Closing, (iii) pay in full all
due ad valorem taxes and assessments of any kind constituting a lien against the
Property, subject to proration at Closing pursuant to Section 9.6 hereof, and
(iv) pay in full and cause to be canceled and discharged all judgments which
have attached to and become a lien against the Property. In the event Seller
fails to cause such liens and encumbrances to be paid and canceled at or prior
to Closing, Purchaser shall be entitled to pay such amount to the holder thereof
as may be required to pay and cancel same, and to credit against the Purchase
Price the amount so paid.
6.3 If the legal description prepared on the basis of a survey differs
from the legal description attached hereto as Exhibit A, Seller shall, at
Purchaser's request, execute and deliver to Purchaser at Closing a bargain and
sale deed, in recordable form, containing a legal description of the Property
based upon such survey.
6.4 Seller shall, as soon as reasonably practicable, obtain at its
sole expense and deliver to Purchaser an ALTA Commitment for Title Insurance
(the "Commitment"), which Commitment shall reflect that Seller is the fee simple
owner of the Property, subject to no exceptions other than Permitted Title
Exceptions. Purchaser shall notify Seller of any objections to the exceptions
reflected in such title commitments within twenty-one (21) days following the
date on which Seller delivers the Commitment to Purchaser with copies of all
recorded documents listed as exceptions therein..
Section 7. SELLER'S ADDITIONAL COVENANTS.
Seller hereby further covenants and agrees as follows:
7.1 No New Encumbrances. Without Purchaser's consent, which shall not
be unreasonably withheld, from and after the date of this Agreement to the
Effective Date,
- 6 -
<PAGE> 7
Seller shall not convey or encumber any portion of the Property or any rights
therein, nor enter into any conveyance, security document, easement or other
agreement granting to any person or entity any rights with respect to the
Property or any part thereof, or any interest whatsoever therein, or any option
with respect thereto, without the prior written consent of Purchaser.
7.2 Operation and Maintenance. From and after the date of this
Agreement to the Effective Date, Seller shall, and shall cause Tenant to,
operate and maintain the Property, at its expense, in the same manner as Seller
and Tenant have operated and maintained it prior to the date of this Agreement
and shall deliver the Property to Purchaser at Closing in the same condition as
on the date hereof, natural wear and tear (and damage by fire or other casualty
if Seller elects to proceed with the purchase of the Property pursuant to
Section 11.1 or 11.2 hereof) excepted. Seller shall, and shall cause Tenant to,
also use all reasonable efforts to preserve its relations with suppliers and
others having business dealings with it with respect to the Property and shall,
and shall cause Tenant to, pay in full at or prior to the date and time of
Closing, all accounts payable of Seller, if any, with respect to the Property
for any labor, services, materials or similar matters necessary to the operation
and maintenance of the Property.
7.3 Compliance with Governmental Requirements. From and after the
date of this Agreement to the Effective Date, Seller shall, at its expense,
comply with all requirements of all laws, orders, ordinances, rules and
regulations of any governmental authority or agency or instrumentality thereof
having jurisdiction over the Property or the use or occupancy thereof.
7.4 Insurance. From and after the date of this Agreement to the
Effective Date, Seller shall, at its expense, continue to maintain insurance
policies providing coverages in at least the amounts and against the risks
covered by the insurance policies maintained by Seller as of the date of this
Agreement.
Section 8. CONDITIONS.
8.1 Purchaser's Conditions. The obligations of Purchaser under this
Agreement are subject to fulfillment and satisfaction (or waiver in writing by
Purchaser), at or prior to Closing, of each of the following conditions:
8.1.1 Compliance with Agreement. Seller shall, as of the date and
time for Closing, execute and deliver of all of the documents,
instruments, papers and materials that are required by Section 9 hereof
to be executed and/or delivered prior to or at the date and time of
Closing.
8.1.2 Reserved.
8.1.3 Consummation of BCS Transactions. The transactions
contemplated by the Merger Agreement (collectively, the "BCS
Transactions") shall have been
- 7 -
<PAGE> 8
consummated, or shall be consummated substantially contemporaneously with
the Closing.
8.1.4 Assumption of Mortgage Loan. The lender under the Mortgage
Loan shall have consented to the transfer of the Property to Purchaser
and the assumption by Purchaser of Seller's obligations thereunder.
If, by the date and time of Closing, any of the foregoing conditions is
not performed or satisfied for any reason whatsoever or, alternatively, is not
expressly waived by Purchaser in writing, Purchaser shall, in addition to any
other remedies it may be entitled to hereunder, have the right to terminate
this Agreement and, in the event any such failure of condition is the result of
Seller's default in the performance of its obligations and agreements
hereunder, then Purchaser shall have the rights and remedies set forth in
Section 10.2 hereof.
8.2 Seller's Conditions. The obligations of Seller under this
Agreement shall be subject to fulfillment and satisfaction (or waiver in writing
by Seller), at or prior to Closing, of each of the following conditions:
8.2.1 Compliance with Agreement. Purchaser shall, as of the date
and time of Closing, execute and deliver of all of the documents,
instruments, papers and materials described in Section 9 hereof to be
executed and/or delivered at or prior to the date and time of Closing;
and
8.2.2 Delivery of Longhorn Stock. Purchaser shall deliver to Seller
at the date and time of Closing all shares of Longhorn Stock required by
this Agreement so to be delivered by Purchaser at Closing.
8.2.3 Assumption of Mortgage Loan. Purchaser shall have assumed all
of Seller's liabilities, duties and obligations under the Mortgage Loan.
8.2.4 Consummation of BCS Transactions. The BCS Transactions shall
have been consummated, or shall be consummated substantially
contemporaneously with the Closing.
8.2.5 Consent to Assumption of Mortgage Loan. The lender under the
Mortgage Loan shall have consented to the transfer of the Property to
Purchaser and the assumption by Purchaser of Seller's obligations under
the Mortgage Loan. In the event that the lender under the Mortgage Loan
does not release Seller from its obligations under the Mortgage Loan
(Seller hereby agreeing that no such release shall be a condition to
Seller's obligation to close the transactions contemplated hereby),
Purchaser hereby shall indemnify and hold Seller harmless from and against
any and all liabilities, claims and causes of actions arising after the
date of the Closing and caused by Purchasers default under the documents
evidencing and securing the Mortgage Loan, and not caused, directly or
indirectly, by Seller's action or inaction.
- 8 -
<PAGE> 9
If by the date and time of Closing, any of the foregoing requirements or
conditions of Seller is not fully performed or satisfied or, alternatively, is
not expressly waived in writing, Seller shall have no obligation to consummate
the transaction described herein and, in addition, Seller shall have such
remedies as are described in Section 10.1 below in the event any such failure
of condition is the result of Purchaser's default in the performance of its
obligations and agreements hereunder.
Section 9. CLOSING.
9.1 Closing Date. The closing of the purchase and sale of the
Property (the "Closing") shall be held substantially contemporaneously with the
consummation of the BCS Transactions, at the same location, but shall not be
effective until the Effective Time.
9.2 Deliveries by Seller at Closing. Seller shall deliver to
Purchaser at Closing the following documents (all of which shall be duly
executed, witnessed and notarized where required):
9.2.1 A Quitclaim Deed with quitclaim covenants (the "Quitclaim
Deed") conveying fee simple title to the Land and the Improvements
thereon to Purchaser, free and clear of all liens, encumbrances,
easements, and restrictions, except for the Permitted Title Exceptions,
in a form typically used in arms-length transactions in Massachusetts and
reasonably satisfactory to Purchaser and Seller in form and substance;
9.2.2 A Bargain and Sale Deed (without any covenants) as described
in Section 6.3 above, if requested by Purchaser, in form and substance
reasonably satisfactory to Purchaser and Seller;
9.2.3 A Bill of Sale and Blanket Transfer and Assignment whereby
Seller shall convey to Purchaser all of Seller's right, title and
interest in and to the Tangible Personal Property and the Intangible
Personal Property, substantially in the form attached hereto as Exhibit
D;
9.2.4 A certificate restating and reaffirming Seller's
representations and warranties and confirming the performance of
Seller's covenants, substantially in the form used by BCS in connection
with the consummation of the BCS Transactions (which certificate may
disclose (i) changes after the date hereof, (ii) inaccuracies in the
representations and warranties set forth herein and (iii) Seller's
failure to perform covenants, provided that such disclosures shall not
limit Purchaser's remedies hereunder for breaches of the original
representations and warranties set forth herein);
9.2.5 An affidavit from Seller certifying that Seller is not a
"foreign person" as defined in, and in compliance with, Section 1445 of
the Internal Revenue Code of 1986, as amended, reasonably satisfactory to
Purchaser in form and substance;
- 9 -
<PAGE> 10
9.2.6 A title affidavit executed by Seller and in form and substance
reasonably satisfactory to the Title Company and Purchaser and containing
the representations which the Title Company and Purchaser shall
reasonably require in order to issue its owner's title insurance policy
insuring Purchaser's fee simple title to the Property free of exceptions
other than the Permitted Title Exceptions;
9.2.7 If required or advisable under Massachusetts law and practice,
an affidavit certifying that no commission is due any commercial real
estate broker acting as agent for Seller, in form and substance
reasonably acceptable to Purchaser and Seller;
9.2.8 A closing statement mutually agreeable to Seller and
Purchaser.
9.3 Additional Deliveries by Seller. In addition to the documents
described in Section 9.2 above, Seller shall deliver to Purchaser at Closing
the following additional materials:
9.3.1 All such plans and specifications, site plans, building and
development permits, certificates of occupancy, operating
permits and other documents as shall be in the possession
of or otherwise available to Seller and which relate to the
development, construction, governmental compliance,
occupancy or operation of the Property; and
9.3.2 Possession of the Property shall be delivered by Seller to
Purchaser at Closing, subject to the Lease.
9.4 Deliveries by Purchaser at Closing. At Closing, Purchaser shall
deliver to Seller the following documents and materials (all of which shall be
duly executed, witnessed and notarized where appropriate):
9.4.1 Shares of Longhorn Stock, calculated in accordance with
Section 3 hereof, free and clear of all liens and
encumbrances whatsoever (other than any restrictions under
any federal, state or local securities or "blue sky" laws);
9.4.2 If required or advisable under Massachusetts law and
practice, an affidavit certifying that no commission is due
any commercial real estate broker acting as agent for
Purchaser, in form and substance reasonably acceptable to
Seller and Purchaser; and
9.4.3 A closing statement mutually agreeable to Seller and
Purchaser.
9.5 Closing Costs. Purchaser shall pay all costs and expenses of all
inspections and any survey which the Purchaser obtains with respect to the
Property, all recording and
- 10 -
<PAGE> 11
notary fees, the fees and expenses of Purchaser's attorneys, and all other costs
incurred by the Purchaser. Seller shall pay the costs of any and all transfer
and stamp and similar taxes on the Quitclaim Deed. and any bargain and sale deed
and any other similar types of taxes required by the Commonwealth of
Massachusetts, the fees and expenses of Seller's attorneys, the cost of the
title commitment obtained by Seller hereunder and all other costs incurred by
the Seller.
9.6 Prorations. Seller and Purchaser shall prorate, in a manner
customary in the Commonwealth of Massachusetts taxes, assessments and utility
charges related to the Property based upon the most current information
available at Closing, with an agreement to adjust such prorations subsequent to
Closing based upon final accurate information.
9.7 Further Assurances. After Closing, the parties shall deliver to
each other any additional materials which are necessary to further assure the
consummation of the purchase and sale contemplated herein on the terms described
herein. From and after Closing, each party shall afford to the other reasonable
access to any information in its possession concerning the operations of the
Property (including the right to copy the same at the expense of the party
desiring the copy) for purposes of ascertaining post-Closing adjustments, tax
examinations or audits, or other similar purposes.
Section 10. DEFAULT.
In the event of a willful breach by Purchaser in the performance of its
obligations and agreements under the terms of this Agreement that is not cured,
Seller may, as Seller's sole and exclusive remedy, recover from Purchaser any
costs or damages suffered or incurred by Seller as a result of such default.
Seller's remedies under this Section 10 above shall survive any
termination of this Agreement.
10.2 Default by Seller. In the event of default by Seller in
performance of its obligations or agreements under the terms hereof, Purchaser
may, at Purchaser's sole election, and as Purchaser's sole and exclusive
remedies:
10.2.1 obtain specific performance of this Agreement against
Seller and recover from Seller the costs incurred by
Purchaser in so obtaining such specific performance, such
costs to be recovered only in accordance with Section 14
hereof; and/or
10.2.2 ,if such default of Seller constitutes a willful breach and
is not cured, recover from Seller, any costs or damages
suffered or incurred by Purchaser as a result of such
default, but only in accordance with Section 14 hereof.
- 11 -
<PAGE> 12
Purchaser's remedies under Section 10.2.2 above shall survive any
termination of this Agreement.
Section 11. CONDEMNATION OR DESTRUCTION.
11.1 Condemnation. Seller hereby represents and warrants that Seller
has no knowledge of any action or proceeding pending or instituted for
condemnation or other taking of all or any part of the Property by friendly
acquisition or statutory proceeding. Seller agrees to give Purchaser immediate
written notice of such actions or proceedings that may result in the taking of
all or a part of the Property. If prior to Closing all or any material part of
the Property is subject to a bona fide threat of condemnation by a body having
the power of eminent domain or is taken by eminent domain or condemnation, or
sale in lieu thereof, and such action or proceeding would, or be reasonably
likely to, give Longhorn the right to elect not to consummate the BCS
Transactions, then Purchaser, by notice to Seller given within twenty (20)
calendar days of Purchaser's receiving actual notice of such threat,
condemnation or taking, may elect to terminate this Agreement.
11.2 Damage or Destruction. If prior to Closing all or any material
part of the Property is damaged or destroyed by any cause, Seller shall
immediately notify Purchaser in writing of the nature and extent of such damage
and destruction, and, if such damage or destruction would, or be reasonably
likely to, give Longhorn the right to elect not to consummate the BCS
Transactions, then Purchaser shall have the right, exercised by written notice
to Seller given within twenty (20) calendar days of Purchaser's receiving
Seller's notice of such damage or destruction, to terminate this Agreement.
11.3 Termination. If this Agreement is terminated as a result of the
provisions of either Section 11.1 or Section 11.2 hereof, neither party hereto
shall have any further rights or obligations under this Agreement whatsoever,
except for such rights and obligations that, by the express terms hereof,
survive any termination of this Agreement.
11.4 Awards and Proceeds. If Purchaser does not elect to terminate
this Agreement following any notice of a threat of or taking by condemnation or
of damage or destruction to the Property, as provided above, this Agreement
shall remain in full force and effect and the conveyance of the Property
contemplated herein, less any interest taken by eminent domain or condemnation,
or sale in lieu thereof, shall be effected with no further adjustments. At
Closing, Seller shall assign, transfer and set over to Purchaser all of Seller's
right, title and interest in and to any insurance claims or any awards, payments
or insurance proceeds that have been or that may thereafter be made for any such
taking or sale in lieu thereof, or for any such damage or destruction; provided,
however, that such rights and sums transferred to Purchaser shall be limited to
the Purchase Price, less any such rewards, payments or proceeds theretofore used
for restoration of the Property pursuant to a plan of restoration approved in
writing by Purchaser.
- 12 -
<PAGE> 13
Section 12. ASSIGNMENT.
Except as expressly contemplated hereby, neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any party
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party.
Section 13. BROKERS' COMMISSIONS.
Seller and Purchaser each represent and warrant to the other that neither
has employed, retained or consulted any broker, agent or finder in carrying on
the negotiations in connection with this Agreement or the purchase and sale
referred to herein, and Seller and Purchaser shall each indemnify and hold the
other harmless from and against any and all claims, demands, causes of action,
debts, liabilities, judgments and damages (including costs and reasonable
attorneys' fees incurred in connection with the enforcement of this indemnity)
which may be asserted or recovered against the indemnified party on account of
any brokerage fee, commission or other compensation arising by reason of the
indemnitor's breach of this representation and warranty. This Section 13 shall
survive the Closing or any termination of this Agreement.
Section 14. INDEMNIFICATION.
14.1 Subject to the terms and conditions of this Section 14, Seller
agrees to indemnify and hold harmless Purchaser, from and against any and all
assessments, losses, damages (including special and consequential damages
incurred by third party claims claimants), liabilities, and out of pocket costs
and expenses, including without limitation, interest, penalties, cost of
external investigation (i.e., not including cost of employees of Purchaser) and
defense, and reasonable attorneys' and other professional fees and expenses
paid, suffered or incurred by Purchaser within the later period of (i) one (1)
year following the Effective Time or (ii) first publication by Purchaser of
audited consolidated financial statements covering an accounting period after
the date of the Closing for those items that would be expected to be encountered
in the audit process, and resulting from, based upon, or arising out of:
14.1.2 the inaccuracy, untruth or incompleteness of any
representation or warranty of Seller contained in or made
pursuant to this Agreement; or
14.1.3 a breach of or failure to perform any covenant or agreement
of Seller made in this Agreement.
Provided, that the right to indemnification shall extend beyond such period
with respect to any claim for which written notice was given to Seller during
such period but shall expire on the expiration of the applicable statutes of
limitations unless an action has been brought with respect thereto.
- 13 -
<PAGE> 14
14.2 An indemnification claim shall be made by Purchaser by delivery of
a written notice to Seller requesting indemnification and specifying in
reasonable detail the basis on which indemnification is sought and the amount
for which indemnification is sought.
14.3 Seller shall have thirty (30) days to object to an indemnification
claim by delivery of a written notice of such objection to Purchaser specifying
in reasonable detail the basis for such objection. Failure to timely so object
shall constitute a final and binding acceptance of the indemnification claim by
Seller, and the indemnification claim shall be paid in accordance with Section
14.4 hereof. If an objection is timely interposed by Seller, then Purchaser and
Seller shall negotiate in good faith for a period of sixty (60) business days
from the date Purchaser receives such objection prior to commencing any formal
legal action, suit or proceeding with respect to such indemnification claim.
14.4 Upon final determination of the amount of an indemnification
claim, whether by agreement between Seller and Purchaser or by an arbitration
award or other adjudication, Seller shall pay the amount of such indemnification
claim within ten (10) days of the date such amount is finally determined and all
relevant appeal periods have expired. Payment shall be made by delivery to
Purchaser of shares of Longhorn Stock free and clear of all liens and
encumbrances whatsoever (other than any restrictions under any federal, state or
local securities or "blue sky" laws), which shares shall be valued for such
purpose at the mean average of the last high and low sale price of Longhorn
Stock on the Nasdaq National Market (as reported in The Wall Street Journal or,
if not reported thereby, any other authoritative source) on the last trading day
preceding the Effective Time, such price to be appropriately adjusted for
changes in the number of shares of Longhorn Stock outstanding as a result of a
stock split, stock dividend, or similar recapitalization occurring after the
Effective Time and before the delivery of such shares to Purchaser.
14.5 Upon payment in full of any indemnification claim, Seller shall be
subrogated to the extent of such payment to the rights of Purchaser against any
person or entity with respect to the subject matter of such indemnification
claim.
14.6 Notwithstanding any other provision hereof, in no event shall the
obligation of Seller to indemnify Purchaser pursuant to this Section 14 exceed
the aggregate value of the total number of shares of Longhorn Stock issued to
Seller pursuant to this Agreement valued at the mean average of the last high
and low sale price of such Longhorn stock on the Nasdaq National Market (as
reported in The Wall Street Journal or, if not reported thereby, any other
authoritative source) on the last trading day preceding the Effective time.
Section 15. NOTICES.
All notices, demands, and any and all other communications which may be or
are required to be given to or made by either party to the other in connection
with this
- 14 -
<PAGE> 15
Agreement shall be in writing and shall be deemed to have been properly given if
delivered by hand, sent by registered or certified mail, return receipt
requested, or by recognized overnight courier service or by facsimile
transmission to the addresses or numbers set out below or at such other
addresses or numbers as may be specified by written notice and delivered in
accordance herewith. Any such notice, request or other communication shall be
considered given or delivered, as the case may be, on the date of delivery as
provided above as evidenced by signed receipt therefor or facsimile confirmation
thereof.
SELLER: Edward P. Grace, III
c/o Bugaboo Creek Steak House, Inc.
1275 Wampanoag Trail
East Providence, Rhode Island 02915
Telecopy No. 401-433-5986
And to: Samuel J. Orr, Jr.
c/o Bugaboo Creek Steak House, Inc.
1275 Wampanoag Trail
East Providence, Rhode Island 02915
Telecopy No. 401-433-5986
With a copy to: Margaret D. Farrell, Esq.
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, Rhode Island 02903
Telecopy No. (401) 277-9600
PURCHASER: Whip Pooling Corporation
8215 Roswell Road, Building 200
Atlanta, Georgia 30350
Attention: Richard E. Rivera
With a copy to: William H. Avery, Esq.
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy No. (404) 881-7777
Section 16. MISCELLANEOUS.
16.1 Survival. All provisions herein and all obligations of Purchaser
and Seller pursuant to this Agreement which are to be performed or apply to
circumstances subsequent to the Closing, and every indemnity contained herein,
shall survive the Closing and shall not be merged into any instrument or
conveyance delivered at Closing. All representations and warranties of Seller
contained in this Agreement (and in any certificate or other instrument
- 15 -
<PAGE> 16
delivered by or on behalf of Seller pursuant hereto or in connection with the
transaction contemplated hereby) shall be effective as of the date of such
representations or warranties and shall survive the Closing.
16.2 Construction; Joint and Several Liability. This Agreement shall
be construed and interpreted under the laws of the State of Delaware. The
titles of sections and subsections herein have been inserted as a matter of
convenience of reference only and shall not control or affect the meaning or
construction of any of the terms or provisions herein. All references herein to
the singular shall include the plural, and vice versa. Whenever the masculine,
feminine or neuter gender is used herein, it shall equally include the others,
as appropriate. References to Seller shall be deemed to refer to each person
constituting Seller, both individually and in the aggregate. The liabilities,
duties and obligations of each person constituting Seller hereunder are joint
and several.
16.3 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument.
16.4 Remedies Cumulative. Except as provided in Sections 10.1 and 10.2
above, all rights, powers and privileges conferred hereunder upon the parties in
any specific Section shall be cumulative but not restrictive of those given in
other Sections of this Agreement and by law.
16.5 No Waiver. No failure of either party to exercise any power given
either party hereunder or to insist upon strict compliance by either party with
its obligations hereunder, and no custom or practice of the parties at variance
with the terms hereof shall constitute a waiver of either party's right to
demand exact compliance with the terms hereof.
16.6 Time of Essence. Time is of the essence in complying with the
terms, conditions and agreements of this Agreement.
16.7 Entire Agreement. This Agreement contains the entire agreement of
the parties hereto and no representations, inducements, promises or agreements,
oral or otherwise, between the parties not embodied herein shall be of any force
or effect.
16.8 Binding Effect. Subject to Section 12 hereof, this Agreement
shall be binding upon and inure to the benefit of the parties hereto, their
respective heirs, successors and assigns.
16.9 Saturdays, Sundays, Legal Holidays. If the time period by which
any right, option, or election provided under this Agreement must be exercised
or by which any acts or payments required hereunder must be performed or paid,
or by which the Closing must be held, expires on a Saturday, Sunday, legal or
bank holiday (any other day being a "business day" for all purposes in this
Agreement), then such time period shall be automatically extended to the close
of business on the next regularly scheduled business day.
- 16 -
<PAGE> 17
16.10 Amendments. Any amendment to this Agreement shall not be binding
upon any of the parties to this Agreement unless such amendment is in writing
duly executed by each of the parties affected thereby.
16.11 Exhibits. All Exhibits attached hereto are incorporated herein by
reference and made a part of this Agreement as if fully set forth herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed under seal by their respective duly authorized representatives as of
the date and year first above written.
SELLER:
/s/ Edward P. Grace, III
------------------------------(SEAL)
Edward P. Grace, III
/s/ Samuel J. Orr, Jr.
------------------------------(SEAL)
Samuel J. Orr, Jr.
By: David Rizzo as Attorney-in-Fact
PURCHASER:
WHIP POOLING CORPORATION
By: /s/ Richard E. Rivera
---------------------------------------
Printed Name: Richard E. Rivera
-----------------------------
Title: President & CEO
------------------------------------
- 17 -
<PAGE> 18
EXHIBIT A TO PURCHASE AND SALE AGREEMENT
LEGAL DESCRIPTION
<PAGE> 19
EXHIBIT A
That certain tract of parcel of land with all buildings and improvements
thereon, situated at the intersection of Fall River Avenue and Arcade Avenue,
in the Town of Seekonk, commonwealth of Massachusetts, and bounded and
described as follows:
Beginning at the property line intersection of Fall River Avenue (Mass. Highway
114-A) and Arcade Avenue, said intersection being the southern most part of the
parcel herein described:
thence running northeasterly along Arcade Avenue Three Hundred Fifty-five and
61/100 (355.61) feet to land now on formerly of Joseph A. and Marion F.
Krawczyk;
thence turning an interior angle of 90 (degree)-00'-00" and running
northwesterly along said KRAWCZYK property One Hundred Two and 48/100 (102.48)
feet;
thence turning an interior angle of 263 (degree)-19'-00" and running
northeasterly One Hundred and 97/100 (100.97) feet to a point;
thence turning an interior angle of 167 (degree-31'-00" and running still in
a northeasterly direction One Hundred Five and 80/100 (105.80) feet to a point;
thence turning an interior angle of 162 (degree)-58'-00" and running
northerly One Hundred Twenty-three and 65/100 (123.65) feet to the northwest
corner of property now on formerly of ROYAL I.R. and MIRIAM W. POYTON, the
last three corners described bounding easterly on said KRAWCZYK property;
thence turning an interior angle of 45 (degree)-45'-34" and running
southwesterly Six Hundred Fifty-seven and 77/100 (657.77) feet to a point in
the easterly line of Fall River Avenue;
thence turning an interior angle of 84 (degree)-16'-51" and running
southeasterly along Fall River Avenue Two Hundred Forty-eight (248.00) feet,
more or less, to a point in the easterly line of Fall River Avenue;
thence turning an interior angle of 169 (degree)-36'-05" and running along
Fall River Avenue Eighty-four and 34/100 (84.34) feet to the point and place of
beginning.
This parcel contains approximately 3.21 Acres.
<PAGE> 20
EXHIBIT B TO PURCHASE AND SALE AGREEMENT
SERVICE CONTRACTS
<PAGE> 21
EXHIBIT C TO PURCHASE AND SALE AGREEMENT
PERMITTED TITLE EXCEPTIONS
1. Taxes and assessments not yet due and payable.
2. Rights of the Tenant, as a tenant only, under the Lease.
3. Easements, covenants, restrictions, encumbrances and agreements of
record which, both individually and in the aggregate, do not have a
material adverse effect on the Property, its operations or its value.
4. The documents and instruments securing the Mortgage Loan.
<PAGE> 22
EXHIBIT D TO PURCHASE AND SALE AGREEMENT
BILL OF SALE AND BLANKET TRANSFER AND ASSIGNMENT
THIS BILL OF SALE is made and entered into as of the [DATE 2], by and
between EDWARD P. GRACE, III and SAMUEL J. ORR, JR. (hereinafter referred to as
"Seller") and WHIP POOLING CORPORATION, a Georgia corporation (hereinafter
referred to as "Purchaser").
W I T N E S S E T H:
Seller and Purchaser hereby stipulate that the following facts form the
basis for this Bill of Sale:
Substantially contemporaneously herewith, Seller is conveying to Purchaser
the real property (the "Real Property") described on Exhibit A attached hereto
and incorporated herein by this reference pursuant to that certain Purchase and
Sale Agreement by and between Seller and Purchaser dated as of the [DATE] (the
"Agreement");
In connection with the conveyance of the Property to Purchaser, Seller has
agreed to sell to Purchaser and Purchaser has agreed to purchase from Seller
certain personal property.
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration in hand paid by
Purchaser to Seller, the receipt and sufficiency of which are hereby
acknowledged by Seller, Seller has granted, bargained, sold, assigned,
transferred, conveyed and delivered, and by these presents does grant, bargain,
sell, assign, transfer, convey and deliver unto Purchaser, its successors and
assigns, the Tangible Personal Property and the Intangible Personal Property,
each as defined in the Agreement (collectively, the "Personal Property").
TO HAVE AND TO HOLD the aforesaid Personal Property unto Purchaser, its
successors and assigns, forever.
Seller will warrant and forever defend the right and title to the Personal
Property unto Purchaser against the claims of all persons whomsoever.
Seller, for itself and its successors and assigns, covenants and agrees
that in the event there is any Personal Property otherwise covered by this Bill
of Sale which cannot be transferred or assigned by it without the consent of or
notice to a third party and with respect to which any necessary consent or
notice has not at the date of delivery of this Bill of Sale been given or
obtained, the beneficial interest in and to, and the obligations and
liabilities under, the same shall in any event pass hereby to Purchaser, as of
the date hereof, who shall perform all such obligations and assume all such
liabilities; and Seller, for itself and its
<PAGE> 23
successors and assigns, covenants and agrees (i) to hold, and hereby declares
that it holds, such Personal Property in trust for and for the benefit of
Purchaser, its successors and assigns, (ii) to use all reasonable efforts to
obtain and secure a valid transfer or transfers of such Service Contracts and
Intangible Property, (iii) to use all reasonable efforts to make or complete
such transfers as soon as reasonably possible and (iv) to hold Purchaser
harmless from any and all damages and liabilities incurred as a result of such
lack of consent.
THE PERSONAL PROPERTY IS CONVEYED AS-IS, WHERE-IS, WITH ALL FAULTS,
WITHOUT ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER INCLUDING, WITHOUT
LIMITATION, WARRANTIES OF HABITABILITY, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
IN WITNESS WHEREOF, Seller and Purchaser have executed this Bill of Sale
as of the date and year first above written.
SELLER:
---------------------------------(SEAL)
Edward P. Grace, III
---------------------------------(SEAL)
Samuel J. Orr, Jr.
PURCHASER:
WHIP POOLING CORPORATION
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
- 2 -
<PAGE> 1
EXHIBIT 5.1
OPINION OF ALSTON & BIRD
July 12, 1996
Longhorn Steaks, Inc.
Building 200
8215 Roswell Road
Atlanta, Georgia 30350
Re: Registration Statement on Form S-4 Covering a Maximum of 2,393,683 Shares
of Common Stock
Ladies and Gentlemen:
This opinion is being rendered in connection with (i) the proposed merger
of Whip Merger Corporation ("WMC"), a subsidiary of Longhorn Steaks, Inc.
("LSI") with and into Bugaboo Creek Steak House, Inc. ("BCS"), (ii) the proposed
merger of four companies related to BCS, the WPC Merger Parties, with and into
Whip Pooling Corporation ("WPC"), a subsidiary of LSI, and (iii) the proposed
purchase by WPC of a parcel of real estate from the WPC Purchase Parties,
parties also related to BCS, in which LSI will issue up to 2,393,683 shares of
its no par value common stock (the "Shares"), upon the terms and conditions set
forth in the Merger Agreements and described in its Registration Statement on
Form S-4 (the "Registration Statement"), as filed on July 12, 1996 by LSI with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended.
As counsel for LSI, we have examined such corporate records and documents
as we have deemed relevant and necessary as the basis for this opinion, and we
are familiar with the actions taken by LSI in connection with the authorization,
registration, issuance and sale of the Shares.
Based upon the foregoing, it is our opinion that the Shares, upon their
issuance in accordance with the terms and conditions set forth in the Merger
Agreements, will be duly authorized and validly issued, fully paid and
non-assessable under the Georgia Business Corporation Code as in effect on this
date.
Unless otherwise defined herein, all terms defined in the Registration
Statement have the meanings ascribed to them in the Registration Statement.
Very truly yours,
ALSTON & BIRD
By: /s/ WILLIAM H. AVERY
------------------------------------
William H. Avery
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ALSTON & BIRD
We consent to the filing of our opinion, dated July 12, 1996, as Exhibit
5.1 to the Registration Statement on Form S-4 of Longhorn Steaks, Inc. and to
all references to our firm in the Joint Proxy Statement/ Prospectus included in
such Registration Statement.
Atlanta, Georgia
July 12, 1996
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Longhorn Steaks, Inc.
We consent to the use of our report on the consolidated financial
statements of Longhorn Steaks, Inc., incorporated by reference in this
registration statement on Form S-4, and to the reference to our firm under the
heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
July 12, 1996
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Bugaboo Creek Steak House, Inc.
We consent to the use of our report included herein on the consolidated
financial statements of Bugaboo Creek Steak House, Inc. and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Providence, Rhode Island
July 12, 1996
<PAGE> 1
EXHIBIT 23.4
CONSENT OF THE ROBINSON-HUMPHREY COMPANY, INC.
We consent to the use in this Registration Statement on Form S-4 (the
"Registration Statement") of our letter to the Board of Directors of Longhorn
Steaks, Inc. ("LSI") included in Annex B to the Joint Proxy Statement/Prospectus
that is a part of the Registration Statement, and to the references to such
letter and our firm in the Joint Proxy Statement/Prospectus. In giving such
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933 or the
rules and regulations of the Securities and Exchange Commission thereunder.
THE ROBINSON-HUMPHREY COMPANY, INC.
Atlanta, Georgia
July 12, 1996
<PAGE> 1
EXHIBIT 23.5
CONSENT OF TUCKER ANTHONY INCORPORATED
We consent to the use in this Registration Statement on Form S-4 (the
"Registration Statement") of our letter to the Board of Directors of Bugaboo
Creek Steak House, Inc. ("BCS") included in Annex C to the Joint Proxy
Statement/Prospectus that is a part of the Registration Statement, and to the
references to such letter and our firm in the Joint Proxy Statement/Prospectus.
In giving such consent, we do not thereby admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933 or the rules and regulations of the Securities and Exchange Commission
thereunder.
TUCKER ANTHONY INCORPORATED
Boston, Massachusetts
July 12, 1996
<PAGE> 1
EXHIBIT 99.1
BUGABOO CREEK STEAK HOUSE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Edward P. Grace III and Corrine A. Sylvia,
or either of them, each with full power of substitution, acting jointly or by
any of them if only one be present and acting, attorneys and proxies to vote in
the manner specified below (according to the number of shares which the
undersigned would be entitled to cast if then personally present), all the
shares of Common Stock of Bugaboo Creek Steak House, Inc. ("BCS") held of record
by the undersigned on , 1996, at the Special Meeting of Stockholders
to be held at , on , 1996, at
, including any adjournments
thereof.
1. To adopt the BCS Merger Agreement pursuant to which, among other matters, (a)
WMC will merge with and into BCS, with BCS becoming a wholly-owned subsidiary
of LSI, and (b) the shares of BCS Common Stock will be converted into the
right to receive shares of LSI Common Stock, as described in the Joint Proxy
Statement/Prospectus dated , 1996.
FOR / / AGAINST / / ABSTAIN / /
2. In their discretion, to vote upon such other business as may properly come
before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1 ABOVE.
WITNESS my hand and seal this day of , 1996.
------------------------------
------------------------------
Signature of Stockholder
PLEASE SIGN THIS PROXY EXACTLY
AS YOUR NAME OR NAMES APPEARS
HEREON. IF STOCK IS HELD
JOINTLY, SIGNATURES SHOULD
APPEAR FOR BOTH NAMES. WHEN
SIGNING AS AN ATTORNEY,
EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN OR
CUSTODIAN, PLEASE INDICATE THE
CAPACITY IN WHICH YOU ARE
ACTING.
Please fill in, date and sign the proxy and return it in the enclosed postpaid
envelope.
<PAGE> 1
EXHIBIT 99.2
LONGHORN STEAKS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints and , or either of them, each with
full power of substitution, acting jointly or by any of them if only one be
present and acting, attorneys and proxies to vote in the manner specified below
(according to the number of shares which the undersigned would be entitled to
cast if then personally present), all the shares held of record by the
undersigned on , 1996, at the Special Meeting of Shareholders to be
held at , Atlanta time, on , 1996, at , including any
adjournments thereof.
1. To approve the issuance of shares of LSI Common Stock pursuant to: (i)
the BCS Merger Agreement, pursuant to which, among other matters, WMC will merge
with and into BCS, with BCS becoming a wholly-owned subsidiary of LSI and each
share of BCS capital stock being converted into the right to receive shares of
LSI Common Stock; (ii) the WPC Merger Agreements, pursuant to which, among other
matters, each of the WPC Merger Parties will merge with and into WPC, and each
share of capital stock or membership interest in each WPC Merger Party will be
converted into the right to receive shares of LSI Common Stock; and (iii) the
WPC Purchase Agreement, pursuant to which, among other matters, WPC will
purchase from Messrs. Grace and Orr, all of their interest in the WPC Property
in exchange for the rights to receive shares of LSI Common Stock, all as
described in the Joint Proxy Statement/Prospectus dated , 1996.
FOR / / AGAINST / / ABSTAIN / /
2. In their discretion, to vote upon such other business as may properly
come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1 ABOVE.
WITNESS my hand and seal this day of , 1996.
------------------------------
------------------------------
Signature of Shareholder
PLEASE SIGN THIS PROXY EXACTLY
AS YOUR NAME OR NAMES APPEARS
HEREON. IF STOCK IS HELD
JOINTLY, SIGNATURES SHOULD
APPEAR FOR BOTH NAMES. WHEN
SIGNING AS AN ATTORNEY,
EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN OR
CUSTODIAN, PLEASE INDICATE THE
CAPACITY IN WHICH YOU ARE
ACTING.
Please fill in, date and sign the proxy and return it in the enclosed postpaid
envelope.
