As filed with th
Securities and Exchange Commission on December 6, 1996
Registration Statement No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
Form S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_________________________
AMERICAN RESTAURANT GROUP HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<C> Delaware <C> 5812 <C>33-0592148
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
450 Newport Center Drive
Newport Beach, California 92660
(714) 721-8000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
_________________________
William J. McCaffrey, Jr.
Chief Financial Officer
American Restaurant Group Holdings, Inc.
(714) 721-8000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy To:
Philip T. Ruegger III, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
_________________________
Approximate date of commencement of proposed sale to the public: As promptly
as practicable after this registration statement becomes effective.
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>
<PAGE>
Proposed Proposed
Title of each maximum maximum
class of offering aggregate
securities to be Amount to be price per offering Amount of
registered registered Debenture<F1> price <F1><F2> registration
fee
<S> <C> <C> <C> <C>
14% Senior Discount $17,000,000 76.07134% $12, 932, 128 $3,919
Debentures due
2005, Series B
<FN>
<F1> Estimated solely for purposes of calculating the amount of
registration fee.
<F2> Exclusive of any accrued original issue discount.
</TABLE>
_________________________
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, as amended, or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
Prospectus
American Restaurant Group Holdings, Inc.
Offer to Exchange its 14% Senior Discount Debentures due 2005, Series B, which
have been registered under the Securities Act, for any and all of its
outstanding 14% Senior Discount Debentures due 2005, Series A.
The Exchange Offer and Withdrawal Rights will Expire at 5:00 P.M.,
New York City Time, on , 1997, Unless Extended.
American Restaurant Group Holdings, Inc. ("Holdings") hereby offers
upon the terms and subject to the conditions set forth in this Prospectus and
in the accompanying Letter of Transmittal to exchange (the "Exchange Offer") up
to $17,000,000 in aggregate principal amount of its 14% Senior Discount
Debentures due 2005, Series B (the "Exchange Debentures"), for up to
$17,000,000 in aggregate principal amount of its outstanding 14% Senior
Discount Debentures due 2005, Series A (the "Debentures") issued pursuant to
the First Supplemental Indenture, dated as of March 13, 1996 (the "First
Supplemental Indenture"), with respect to the Indenture, dated as of December
1, 1993, between Holdings and United States Trust Company of New York, as
trustee. The Debentures constitute Additional Series A Securities under and as
defined in the First Supplemental Indenture and the Exchange Debentures will
constitute Additional Series B Securities under and as defined in the First
Supplemental Indenture.
The terms of the Exchange Debentures are substantially identical in
all respects (including interest rate and maturity) to the terms of the
Debentures for which they may be exchanged pursuant to the Exchange Offer,
except that the Exchange Debentures are freely transferable by holders thereof,
except as provided in the next paragraph below. For a complete description of
the terms of the Exchange Debentures, see "Description of the Exchange
Debentures." There will be no proceeds to Holdings from the Exchange Offer.
Holdings' obligation to consummate the Exchange Offer is subject to certain
conditions. See "The Exchange Offer" and "Registration Rights Agreement."
Holdings reserves the right to terminate or amend the Exchange Offer at any
time prior to the Expiration Date (as defined herein) upon the occurrence of
any such condition. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Debentures being tendered for exchange.
The Debentures were originally issued and sold on March 13, 1996 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Act"), in reliance upon the exemption provided in Section 4(2) of the Act.
Accordingly, the Debentures may not be reoffered, resold or otherwise pledged,
hypothecated or transferred in the United States unless so registered or unless
an applicable exemption from the registration requirements of the Act is
available. The Exchange Debentures are being offered hereunder in order to
satisfy the obligations of Holdings under a registration rights agreement
relating to the Debentures. See "The Exchange Offer--Purpose of the Exchange
Offer." The Exchange Debentures issued pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by holders thereof (other
than by any such holder that is an "affiliate" of Holdings within the meaning
of Rule 405 under the Act) without compliance with the registration and
prospectus delivery provisions of the Act provided that such Exchange
Debentures are acquired in the ordinary course of such holders' business and
such holders have no arrangement with any person to participate in the
distribution of such Exchange Debentures. Each broker-dealer that receives
Exchange Debentures for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Debentures. The Letter of Transmittal relating to the Exchange
Offer states that by so acknowledging and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Debentures received in exchange for Debentures where such Debentures
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. Holdings will, for a period of 180 days after <PAGE>
the
Exchange Date (as defined herein), make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
Holders of Debentures whose Debentures are not tendered and accepted
in the Exchange Offer will continue to hold such Debentures and will be
entitled to all the rights and preferences and will be subject to the
limitations applicable thereto under the indenture governing the Debentures and
the Exchange Debentures. Following consummation of the Exchange Offer, the
holders of Debentures will continue to be subject to the existing restrictions
upon transfer thereof and Holdings will have no further obligation to such
holders to provide for the registration under the Act of the Debentures held by
them.
The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Debentures being tendered for exchange. The Exchange Offer
will expire at 5:00 p.m., New York City time, on , 1997, unless
extended (the "Expiration Date"). The date of acceptance for exchange of the
Debentures (the "Exchange Date") will be the first business day following the
Expiration Date. Debentures tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date; otherwise such tenders will
be irrevocable. Holdings will pay all expenses incident to the Exchange Offer.
Interest on the Exchange Debentures which are issued in exchange for
Debentures will accrue commencing December 15, 1998.
No assurance can be given that an active public or private market for
the Exchange Debentures will develop. Holdings does not intend to list the
Exchange Debentures on any securities exchange. To the extent that Debentures
are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Debentures could be adversely affected.
See "Risk Factors" for a description of certain factors that should be
considered by participants in the Exchange Offer.
_________________________
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 PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
_________________________
The date of this Prospectus is , 1996.
<PAGE>
AVAILABLE INFORMATION
Holdings has filed with the Securities and Exchange Commission (the
"Commission") a registration statement relating to the Exchange Debentures
offered hereby (together with all amendments and exhibits, referred to as the
"Registration Statement") under the Act. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement. Statements made in this Prospectus as to the contents
of any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document filed
or incorporated by reference as an exhibit to the Registration Statement,
reference is made to such exhibit for a more complete description thereof, and
each such statement shall be deemed qualified in its entirety by such
reference.
Holdings is subject to the informational and reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports and other information with the
Commission. The Registration Statement and the exhibits and schedules thereto,
as well as such reports and other information filed by Holdings with the
Commission, may be inspected without charge and copied at prescribed rates at
the Public Reference Section of the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Regional Offices of the Commission at 7
World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Such reports
and other documents may also be obtained from the web site that the Commission
maintains at http://www.sec.gov. In addition, so long as any Debentures or any
Exchange Debentures are outstanding, Holdings will furnish to the holders
thereof the quarterly and annual financial reports that Holdings is required to
file with the Commission under the Exchange Act (or similar reports in the
event Holdings is not at the time required to file such reports with the
Commission).
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
IN CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY HOLDINGS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE DEBENTURES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF HOLDINGS SINCE THE DATE HEREOF.
<PAGE>
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 26
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . 45
DESCRIPTION OF CERTAIN INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . 46
THE EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
DESCRIPTION OF THE EXCHANGE DEBENTURES . . . . . . . . . . . . . . . . . . 60
DESCRIPTION OF THE DEBENTURES . . . . . . . . . . . . . . . . . . . . . . . 87
REGISTRATION RIGHTS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 87
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS . . . . . . . . . . 89
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . F-1
<PAGE>
PROSPECTUS SUMMARY
This summary does not purport to be complete and is qualified in its entirety
by reference to the detailed information appearing elsewhere in this
Prospectus. Terms not defined in this summary are defined elsewhere herein.
Holdings is a Delaware corporation which owns 100% of the outstanding
common stock of American Restaurant Group, Inc. ("ARG"). Holdings conducts
business through ARG and has no operations of its own. See "Holdings." The
primary asset of Holdings is the common stock of ARG, its wholly owned
subsidiary. References herein to the "Company" mean, collectively, Holdings
and ARG. Unless the context otherwise requires, references herein to "ARG"
mean American Restaurant Group, Inc. and its subsidiaries.
The Company
The Company operates 249 restaurants primarily located in the western
and southwestern United States. The Company is comprised of two principal
concepts: Black Angus, a steakhouse chain serving the western United States,
and Grandy's, a chicken chain serving the southern United States. The Company
is principally positioned in the casual dining segment of the restaurant
industry. For the twelve months ended December 25, 1995, the Company had
revenues of $446.0 million.
Black Angus
Founded in 1964, Black Angus is a steakhouse chain in the western
United States. The Company operates 98 Stuart Anderson's Black Angus and
Stuart Anderson's Cattle Company restaurants located primarily in California,
the Pacific Northwest and Arizona. Black Angus restaurants feature steak and
prime rib, but also serve chicken and seafood entrees, and all restaurants
include lounge areas. For the twelve months ended December 25, 1995, Black
Angus had revenues of $243.6 million.
Grandy's
Grandy's, founded in 1973, operates 108 restaurants located
principally in Texas, Oklahoma and Florida. Grandy's is a family-oriented,
quick-service concept. Grandy's differentiates itself from other fast food
restaurants by offering comparable prices and speed, but with the quality and
ambiance of a full-service restaurant. The menu features fried chicken,
grilled chicken and country breakfasts. In addition to the company-operated
restaurants, as of December 25, 1995, the Company franchised 56 restaurants in
the southern United States. For the twelve months ended December 25, 1995,
Grandy's had revenues of $101.8 million.
Other Concepts
The Company also operates four smaller concepts: Spoons, Spectrum,
National Sports Grill and Velvet Turtle. Spoons, founded in 1978, operates 20
casual-style restaurants located throughout California and features sizzling
fajitas, festive salads, half-pound hamburgers, fresh french fries, tacos and
full bar service. Founded in 1970, Spectrum operates 16 unique, upscale,
specialty restaurants located throughout California under such names as
"Prego", "Tutto Mare" and "MacArthur Park". National Sports Grill operates six
sports-theme restaurants offering generous portions and microbrewery beers and
providing video telecasts of national and regional sporting events. Velvet
Turtle currently operates one restaurant that management expects to dispose of.
Formation
The Company was formed by Mr. Anwar S. Soliman, Chairman of the Board
and Chief Executive Officer of the Company, and other members of current senior
management, to acquire restaurant operations of Saga Corporation in February
1987. Mr. Soliman and other members of the Company's current senior management
average more than 20 years experience in the restaurant industry and own
approximately 61% of all outstanding shares of common stock, $.01 par value per
share (the "Common Stock") and rights to acquire such Common Stock.
<PAGE>
The Exchange Offer
Securities Offered . . . . . . $17,000,000 aggregate principal amount of
14% Senior Discount Debentures due 2005,
Series B (the "Exchange Debentures"). The
Exchange Debentures will be issued under
the Indenture, dated as of December 1,
1993, as supplemented by the First
Supplemental Indenture thereto, dated as
of March 13, 1996 (the "Debenture
Indenture"), between Holdings and United
States Trust Company of New York, as
trustee, pursuant to which the Debentures
were issued. The terms of the Exchange
Debentures are substantially identical in
all respects (including interest rate and
maturity) to the terms of the Debentures
that are to be exchanged therefor, except
that the Exchange Debentures are freely
transferable by holders thereof (except as
provided herein), and are not issued
subject to any covenant regarding
registration under the Act. See
"Description of the Exchange Debentures."
Exchange Offer . . . . . . . . The Exchange Debentures are being offered
in exchange for a like principal amount of
the Debentures. Debentures may be
exchanged only in integral multiples of
$1,000. Holdings has agreed to make the
Exchange Offer in order to satisfy its
obligations under a registration rights
agreement (the "Registration Rights
Agreement"), dated as of March 13, 1996,
relating to the Debentures. For a
description of the procedures for
tendering, see "The Exchange Offer--Tender
Procedure."
<PAGE>
Expiration Date; Withdrawal . . The Exchange Offer will expire at 5:00
P.M., New York City time, on ,
1997 or such later date and time to which
it may be extended in the sole discretion
of Holdings (the "Expiration Date"). The
date of acceptance for exchange of the
Debentures (the "Exchange Date") will be
the first business day following the
Expiration Date. Debentures tendered
pursuant to the Exchange Offer may be
withdrawn at any time prior to the
Expiration Date. Any Debentures not
accepted for exchange for any reason will
be returned without expense to the
tendering holders thereof as promptly as
practicable after the expiration or
termination of the Exchange Offer.
Conditions to the Exchange Offer The Exchange Offer is subject to certain
conditions. See "The Exchange Offer--
Conditions to the Exchange Offer." The
Exchange Offer is not conditioned upon any
minimum aggregate principal amount of
Debentures being tendered for exchange.
Certain Federal Income Tax
Considerations . . . . . . . The exchange of the Debentures for the
Exchange Debentures should not be a
taxable event to the holder, and the
holder should not recognize any taxable
gain or loss or any interest income as a
result of such exchange. See "Certain
United States Federal Income Tax
Considerations."
Untendered Debentures . . . . . Upon consummation of the Exchange Offer,
the holders of Debentures, if any, will
have no further registration or other
rights under the Registration Rights
Agreement. Holders of Debentures who do
not tender their Debentures in the
Exchange Offer or whose Debentures are not
accepted for exchange will continue to
hold such Debentures and will be entitled
to all the rights and preferences and will
be subject to the limitations applicable
<PAGE>
thereto under the Debenture Indenture,
except for any such rights or limitations
which, by their terms, terminate or cease
to be effective as a result of this
Exchange Offer. All untendered and
tendered but unaccepted Debentures will
continue to be subject to the restrictions
on transfer provided therein. To the
extent that Debentures are tendered and
accepted in the Exchange Offer, the
trading market for untendered and tendered
but unaccepted Debentures could be
adversely affected.
Resales . . . . . . . . . . . . Based on an interpretation by the staff of
the Commission set forth in no-action
letters issued to third parties, Holdings
believes that Exchange Debentures issued
pursuant to the Exchange Offer in exchange
for Debentures may be offered for resale,
resold and otherwise transferred by
holders thereof (other than any such
holder which is an "affiliate" of Holdings
within the meaning of Rule 405 under the
Act) without compliance with the
registration and prospectus delivery
provisions of the Act, provided that such
Exchange Debentures are acquired in the
ordinary course of such holders' business
and such holders have no arrangement with
any person to participate in the
distribution of such Exchange Debentures.
See "Morgan Stanley & Co. Inc.," SEC
No-Action Letter (available June 5, 1991)
and "Exxon Capital Holdings Corporation,"
SEC No-Action Letter (available May 13,
1988). Each broker or dealer that receives
Exchange Debentures for its own account in
exchange for Debentures, where such
Debentures were acquired by such broker or
dealer as a result of market-making or
other activities, must acknowledge that it
will deliver a Prospectus in connection
with any sale of such Exchange Debentures.
See "Plan of Distribution."
Terms of the Exchange Debentures
Maturity Date . . . . . . . . . December 15, 2005.
Interest Rate and Payment Dates Commencing December 15, 1998, interest
will accrue until maturity at the rate of
<PAGE>
14% per annum and will be payable semi-
annually on each June 15 and December 15,
commencing June 15, 1999.
Original Issue Discount . . . . The Exchange Debentures will be issued
with original discount requiring holders
of the Exchange Debentures to include
amounts in gross income for federal income
tax purposes in advance of receipt of the
cash to which the income is attributable.
See "Certain United States Federal Income
Tax Considerations--Original Issue
Discount."
Optional Redemption . . . . . . The Exchange Debentures are redeemable at
the option of Holdings, in whole or in
part, at any time on or after December 15,
1998 at the redemption prices set forth
herein, plus accrued interest, if any, to
the date of redemption.
Ranking . . . . . . . . . . . . The Exchange Debentures will rank pari
passu in right of payment with all senior
indebtedness of Holdings and senior in
right of payment to all subordinated
indebtedness of Holdings. The Exchange
Debentures will be senior unsecured
obligations of Holdings, but will be
structurally subordinated to claims
against Holdings' subsidiaries. At
December 25, 1995, the aggregate amount of
indebtedness and other obligations of ARG
(including trade payables) that
effectively ranked senior to the
Debentures (and the Exchange Debentures)
was approximately $262.0 million. See
"Risk Factors--High Leverage and Ability
to Service Debt;" "--Holding Company
Structure; Limitations on Access to Cash
Flow; Ranking."
Change of Control . . . . . . . In the event of a Change of Control (as
defined herein), Holdings is obligated to
make an offer to purchase all outstanding
Exchange Debentures at a redemption price
of 101% of the Accreted Value thereof to
the repurchase date (if prior to December
15, 1998) or 101% of the principal amount
thereof plus accrued and unpaid interest,
if any, thereon to the repurchase date (if
on or after December 15, 1998). See
"Description of the Exchange Debentures--
<PAGE>
Change of Control" and "--Certain
Covenants." The Debenture Indenture
contains covenants relating to, among
other things, the incurrence of additional
indebtedness, the payment of dividends,
the repurchase of stock and the making of
certain other Restricted Payments (as
defined herein), the creation of certain
liens, transactions with affiliates,
mergers and certain consolidations, and
the transfer of certain assets.
Use of Proceeds
There will be no cash proceeds to Holdings for the exchange pursuant to the
Exchange Offer. Holdings received net proceeds of approximately $7.1 million
from the issuance and sale of the Debentures. Substantially all of such net
proceeds were contributed to ARG. ARG used such net proceeds for general
corporate purposes.
Risk Factors
Holders of the Debentures should consider carefully the information set forth
under "Risk Factors," as well as the other information set forth in this
Prospectus before tendering Debentures in exchange for the Exchange Debentures.
SUMMARY HISTORICAL
CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial data for each
of the last five years ended December 25, 1995 has been derived from the
consolidated financial statements of the Company which have been audited by
Arthur Andersen LLP, independent accountants. The financial data for the
thirty-nine weeks ended September 25, 1995 and September 23, 1996 has been
derived from the Company's unaudited financial statements, which in the opinion
of management include all adjustments necessary for a fair presentation of the
data for interim periods. The results of operations for the thirty-nine weeks
ended September 23, 1996 are not necessarily indicative of the results that may
be expected for the full fiscal year. This Selected Historical Financial Data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and notes thereto included elsewhere in this Prospectus.
<PAGE>
<TABLE>
<CAPTION>
Year Ended Thirty-nine Weeks Ended
-------------------------------------------------------- -------------------------
Dec. 30, Dec. 28, Dec. 27, Dec. 26, Dec. 25, Sept. 25, Sept. 23,
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- ----------- -----------
(dollars in thousands) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
REVENUES:
Black Angus . . . . . . . . $216,679 $225,796 $235,345 $253,634 $243,624 $184,745 $191,141
Grandy's . . . . . . . . . . 103,565 106,701 111,166 109,301 101,839 78,094 68,320
Other concepts . . . . . . . 105,244 92,520 91,398 97,471 100,503 75,803 73,527
________ ________ ________ ________ ________ ________ ________
Total revenues . . . . . . 425,488 425,017 437,909 460,406 445,966 338,642 332,988
RESTAURANT COSTS:
Food and beverage . . . . . 133,620 132,767 142,828 138,270 104,501 105,473
136,255
Payroll . . . . . . . . . . 127,720 131,016 132,292 136,151 134,532 101,717 100,936
Direct operating . . . . . . 92,533 95,419 109,462 108,382 110,399 81,588 83,922
Depreciation and Amortization 22,910 26,330 25,682 26,723 23,171 17,461 15,486
________ ________ ________ ________ ________ ________ ________
Total restaurant costs . . 376,783 385,532 403,691 414,084 406,372 305,267 305,817
General and administrative 28,811 28,429 29,895 31,063 31,387 23,166 20,021
expenses . . . . . . . . . . .
Non-cash charge for impairment
of long-lived assets . . . . -- -- -- -- 20,178 -- --
Operating profit (loss) . . . . 19,894 11,056 4,323 15,259 (11,971) 10,209 7,150
Interest expense, net . . . . . 22,916 23,185 23,982 34,190 35,450 26,458 28,433
Net loss before extraordinary
loss . . . . . . . . . . . . (2,898) (12,228) (19,457) (18,995) (47,496) (16,302) (21,358)
Extraordinary loss on
extinguishment of debt . . . -- (17,775) (10,790) -- -- -- (1,095)
Net loss . . . . . . . . . . . $ (2,898) $(30,003) $(30,247) $(18,995) $(47,496) $(16,302) $(22,453)
Ratio of earnings to fixed
charges --(deficiency) <F1> (3,022) (12,129) (19,659) (18,931) (47,421) (16,249) (21,283)
BALANCE SHEET DATA:
Plant and equipment, net . . . $198,131 $190,017 $181,889 $181,496 $171,030 $181,765 $125,653
Total assets . . . . . . . . . 296,646 298,494 299,068 288,228 254,491 271,435 203,298
Long-term obligations,
including current portion . 193,547 215,627 273,355 277,820 291,987 293,830 266,217
Redeemable cumulative preferred 69,381 73,291 -- -- -- -- --
stock . . . . . . . . . . . . .
Common stockholders' equity (24,597) (60,735) (47,140) (66,135) (113,681) (82,487) (136,134)
(deficit) . . . . . . . . . . .
____________________
<FN>
<F1> For the purpose of determining the ratio of earnings to fixed
charges, earnings consist of earnings before extraordinary loss,
<PAGE>
income taxes and fixed charges. Fixed charges consist of
interest on indebtedness, the amortization of debt issue costs
and that portion of operating rental expense representative of
the interest factor.
</TABLE>
<PAGE>
RISK FACTORS
Each holder of Debentures should consider carefully the following specific
risk factors, as well as the other information set forth in this Prospectus
before tendering Debentures in exchange for Exchange Debentures offered hereby.
The risk factors set forth below are generally applicable to the Debentures as
well as the Exchange Debentures.
High Leverage and Ability to Service Debt
Holdings and ARG are substantially leveraged companies. At September 23,
1996, Holdings' total consolidated long-term indebtedness was approximately
$266 million. For 1995, Holdings' earnings before extraordinary loss, income
taxes and fixed charges were insufficient to cover fixed charges in the amount
of $47.4 million. The degree to which Holdings and ARG are leveraged could
have important consequences to holders of the Exchange Debentures, including
the following, any of which could affect ARG's ability to make distributions to
Holdings to permit Holdings to make payments with respect to the Exchange
Debentures: (i) ARG's significant degree of leverage could make it vulnerable
to changes in general economic conditions; and (ii) ARG's ability to obtain
additional financing for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes may be impaired.
ARG's ability to make payments to Holdings to pay cash interest on the
Exchange Debentures and to repay the Exchange Debentures at maturity will be
dependent on ARG's future operating performance, which is itself dependent on a
number of factors including general economic conditions and financial, business
and other factors affecting the operations of ARG, many of which are beyond its
control. Management believes that ARG will generate sufficient cash flow from
operations, together with asset sales, in the future to service its debt and to
make payments to Holdings to enable it to pay cash interest on the Exchange
Debentures. If, however, ARG is unable to generate sufficient cash flow from
operations and asset sales in the future to service its debt and to make
payments to Holdings, it may be required to refinance all or a portion of its
existing debt or to obtain additional financing. There can be no assurance
that any such refinancing would be available, particularly in view of ARG's
current high level of debt and the fact that substantially all of the assets of
ARG and its subsidiaries are pledged to secure obligations under previous debt
agreements. See "Capitalization" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
The discretion of the Company's management with respect to the business of
the Company is also limited by financial and operating covenants contained in
the indentures governing ARG's existing Senior Secured Notes due 1998 as
amended (the "Senior Secured Notes"), the amended and restated subordinated
loan agreement dated as of March 20, 1992 (the "Subordinated Loan Agreement")
governing ARG's 10 1/4% Subordinated Notes (the "Subordinated Notes") and ARG's
letter of credit facility (the "Credit Facilities"). Such covenants include,
among other things, (i) restrictions on the ability of the Company to dispose
of assets, incur debt, create liens, make capital expenditures above stated
amounts and make certain investments and (ii) requirements that the Company
meet certain financial performance tests and consummate certain asset sales.
<PAGE>
The ability of ARG and its subsidiaries to incur additional debt is severely
limited by such covenants. As of the date of this Prospectus, ARG was in
compliance with the covenants contained in its existing debt instruments.
Holding Company Structure; Limitations on Access to Cash Flow; Ranking
Holdings conducts business through ARG and has no operations of its own.
The primary asset of Holdings is the common stock of ARG. Consequently,
Holdings relies on the cash flow of ARG in order to meet its debt service
obligations. The debt instruments of ARG severely restrict, among other
things, the payment of dividends, the making of loans by ARG to Holdings and
Holdings' ability to make the mandatory repurchase of the Exchange Debentures
required by the Debenture Indenture upon a Change of Control (as defined
herein). For a further description of these restrictions, see "Description of
Certain Indebtedness."
As a result of the relationship of Holdings and ARG, the creditors of
Holdings, including the holders of the Exchange Debentures, effectively rank
junior to all creditors of ARG, including the bank lenders under the Credit
Facilities, the holders of the Senior Secured Notes and the trade creditors of
ARG, notwithstanding that the Exchange Debentures will be senior obligations of
Holdings. Accordingly, in the event of the dissolution, bankruptcy,
liquidation or reorganization of Holdings and ARG, the holders of the Exchange
Debentures may not receive any amounts with respect to the Exchange Debentures
until after the payment in full of the claims of creditors of ARG. As of
September 23, 1996, the aggregate amount of indebtedness and other obligations
of ARG to which the holders of the Exchange Debentures would have been
structurally subordinated was approximately $223.2 million.
Recent Losses
ARG experienced net losses after extraordinary items of $30.0 million in
1993, $12.1 million in 1994, $39.7 million in 1995 and $14.8 million in the
thirty-nine weeks ended September 23, 1996. If ARG continues to have net
losses there could be a material adverse effect on the business of ARG which
could affect ARG's ability to make distributions to Holdings for the payment of
its obligations under the Exchange Debentures. See "--Holding Company
Structure; Limitations on Access to Cash Flow; Ranking," "--High Leverage and
Ability to Service Debt," "Description of Certain Indebtedness--Subordinated
Loan Agreement" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Concentration of Ownership and Control of the Company
Holdings owns 100% of ARG's outstanding Common Stock. All of Holdings'
management stockholders have entered into a voting trust agreement (the "Voting
Trust Agreement") in accordance with which Anwar S. Soliman, Chairman and Chief
Executive Officer of ARG and Holdings, exercises, as voting trustee, all voting
and substantially all other rights to which such shareholders would otherwise
be entitled until the earlier of December 31, 2001 or the earlier termination
of the Voting Trust Agreement. As a result, Mr. Soliman is considered the
<PAGE>
beneficial owner of approximately 82.4% of the outstanding shares of Holdings'
common stock (approximately 61% on a fully diluted basis).
Upon the occurrence of a Change of Control, the holders of the Exchange
Debentures will have the right, subject to certain conditions, to require
Holdings to repurchase their Exchange Debentures at 101% of the Accreted Value
thereof to the repurchase date (if prior to December 15, 1998) or 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of repurchase (if on or after December 15, 1998). If a Change of Control were
to occur, it is unlikely that the Company would be able to repay all of its
obligations under the Debenture Indenture and other indebtedness that would
become payable. See "Description of the Exchange Debentures--Change of
Control."
Original Issue Discount Consequences
The Exchange Debentures will be issued at a substantial discount from
their principal amount. Consequently, the purchasers of the Exchange
Debentures generally will be required to include amounts in gross income for
federal income tax purposes in advance of receipt of the cash payments to which
the income is attributable. For a more detailed discussion of the federal
income tax consequences to the holders of the Exchange Debentures of the
purchase, ownership and disposition of the Exchange Debentures, see "Certain
Federal Income Tax Considerations."
If a bankruptcy case is commenced by or against Holdings or ARG under the
United States Bankruptcy Code (the "Bankruptcy Code") after the issuance of the
Exchange Debentures, the claim of a holder of Exchange Debentures with respect
to the principal amount thereof may be limited to an amount equal to the sum of
(i) the initial offering price of the Exchange Debentures and (ii) that portion
of the original issue discount which is not deemed to constitute "unmatured
interest" for purposes of the Bankruptcy Code. An original issue discount that
was not amortized as of any such bankruptcy filing would constitute "unmatured
interest."
Absence of Public Market for the Exchange Debentures
The Exchange Debentures are being offered to the holders of the
Debentures. The Debentures were offered and sold in March 1996 to an
institutional investor and are eligible for trading in the Private Offerings,
Resale and Trading through Automatic Linkages (PORTAL) Market. Prior to the
Exchange Offer, there has been no market for the Exchange Debentures. Holdings
does not currently intend to list the Exchange Debentures on any securities
exchange. Accordingly, no assurance can be given that any market for the
Exchange Debentures will develop, or, if any such market develops, as to the
liquidity of such market.
Exchange Offer Procedures
Issuance of the Exchange Debentures in exchange for Debentures pursuant to
the Exchange Offer will be made only after a timely receipt by Holdings of such
Debentures, a properly completed and duly executed Letter of Transmittal and
<PAGE>
all other required documents. Therefore, holders of Debentures desiring to
tender such Debentures in exchange for Exchange Debentures should allow
sufficient time to ensure timely delivery. Holdings is under no duty to give
notification of defects or irregularities with respect to the tenders of
Debentures for exchange. Debentures that are not tendered or are tendered but
not accepted will, following the consummation of the Exchange Offer, continue
to be subject to the existing restrictions upon transfer thereof and Holdings
will have no further obligation to provide for the registration under the Act
of such Debentures. In addition, any holder of Debentures who tenders in the
Exchange Offer for the purpose of participating in a distribution of the
Exchange Debentures may be deemed to have received restricted securities and,
if so, will be required to comply with the registration and prospectus delivery
requirements of the Act in connection with any resale transaction. To the
extent that Debentures are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Debentures could be
adversely affected. See "The Exchange Offer." Each broker-dealer that receives
Exchange Debentures for its own account in exchange for Debentures, where such
Debentures were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Debentures. See "Plan
of Distribution".
THE COMPANY
General
The Company operates 249 restaurants primarily located in the western and
southwestern United States. The Company is comprised of two principal
concepts: Black Angus, the leading steakhouse chain serving the western United
States, and Grandy's, a leading chicken chain serving the southern United
States. The Company is principally positioned in the casual dining segment of
the restaurant industry.
Black Angus
Founded in 1964, Black Angus is a steakhouse chain in the western United
States. The Company operates 98 Stuart Anderson's Black Angus and Stuart
Anderson's Cattle Company restaurants located primarily in California, the
Pacific Northwest and Arizona. Black Angus restaurants feature steak and prime
rib, but also serve chicken and seafood entrees, and all restaurants include
lounge areas. For the thirty-nine weeks ended September 23, 1996, Black Angus
had revenues of $191.1 million.
Grandy's
Grandy's, founded in 1973, operates 108 restaurants located principally in
Texas, Oklahoma and Florida. Grandy's is a family-oriented quick-service
concept. Grandy's differentiates itself from other fast food restaurants by
offering comparable prices and speed, but with the quality and ambiance of a
full-service restaurant. The menu features fried chicken, grilled chicken and
country breakfasts. In addition to the company-operated restaurants, as of
September 23, 1996, the Company franchised 56 restaurants in the southern
<PAGE>
United States. For the thirty-nine weeks ended September 23, 1996, Grandy's
had revenues of $68.3 million.
Other Concepts
The Company also operates four smaller concepts: Spoons, Spectrum,
National Sports Grill and Velvet Turtle. Spoons, founded in 1978, operates 20
casual-style restaurants located throughout California and features sizzling
fajitas, festive salads, half-pound hamburgers, tacos and full bar service.
Founded in 1970, Spectrum operates 16 unique, upscale, specialty restaurants
located throughout California under such names as "Prego", "Tutto Mare" and
"MacArthur Park". National Sports Grill operates six sports-theme restaurants
offering generous portions and microbrewery beers and providing video telecasts
of national and regional sporting events. Velvet Turtle currently operates one
restaurant that management expects to dispose of. For the thirty-nine weeks
ended September 23, 1996, these other concepts had revenues of $73.5 million.
Formation
The Company was formed by Mr. Anwar S. Soliman, Chairman of the Board and
Chief Executive Officer of the Company, and other members of current senior
management, to acquire restaurant operations of Saga Corporation in February
1987. Mr. Soliman and other members of the Company's current senior management
average more than 20 years experience in the restaurant industry.
USE OF PROCEEDS
There will be no cash proceeds to Holdings for the exchange pursuant to the
Exchange Offer. Holdings received net proceeds of approximately $7.1 million
from the issuance and sale of the Debentures. Substantially all of such net
proceeds were contributed to ARG. ARG used such net proceeds for general
corporate purposes.
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of Holdings
as of September 23, 1996. The table should be read in conjunction with the
Consolidated Financial Statements and notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
As of September 23, 1996<F1>
------------------------------
(unaudited)
(dollars in thousands)
<S> <C>
Short-term debt:
Working capital facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0
Current portion of capitalized lease obligations . . . . . . . . . . . . . . . . . . . . . . . 895
Current portion of other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
--------
Total short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,019
--------
Long-term debt:
Capitalized lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,670
Existing senior secured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,358
Subordinated term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 481
Existing 14% senior discount debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,579
New 14% senior discount debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,110
--------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,198
--------
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
Common stockholders' equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Paid-in capital<F2> . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,539
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (153,625)
Treasury stock (9,126 shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50)
--------
Total common stockholders' deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (136,134)
--------
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $130,083
========
____________________
<FN>
<F1> All indebtedness, other than that shown for the 14% Senior Discount
Debentures, represents indebtedness of ARG. See "Risk Factors--High
Leverage and Ability to Service Debt;" "--Holding Company Structure;
Limitations on Access to Cash Flow; Ranking."
<PAGE>
<F2> Does not include shares of Common Stock reserved for issuance upon the
exercise of stock options which may be granted to certain management
employees. See "Security Ownership of Certain Beneficial Owners and
Management," and "Management--Stock Option Plan."
</TABLE>
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial data for each of
the last five years ended December 25, 1995 has been derived from the
consolidated financial statements of the Company which have been audited by
Arthur Andersen LLP, independent accountants. The financial data for the
thirty-nine weeks ended September 25, 1995 and September 23, 1996, has been
derived from the Company's unaudited financial statements, which in the opinion
of management include all adjustments necessary for a fair presentation of the
data for interim periods. The results of operations for the thirty-nine weeks
ended September 23, 1996 are not necessarily indicative of the results that may
be expected for the full fiscal year. This Selected Historical Financial Data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year Ended Thirty-nine Weeks Ended
-------------------------------------------------------- -------------------------
Dec. 30, Dec. 28, Dec. 27, Dec. 26, Dec. 25, Sept. 25, Sept. 23,
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ------------ ------------
(dollars in thousands) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
REVENUES:
Black Angus . . . . . . . . $216,679 $225,796 $235,345 $253,634 $243,624 $184,745 $191,141
Grandy's . . . . . . . . . . 103,565 106,701 111,166 109,301 101,839 78,094 68,320
Other concepts . . . . . . . 105,244 92,520 91,398 97,471 100,503 75,803 73,527
-------- -------- -------- -------- -------- -------- --------
Total revenues . . . . . . 425,488 425,017 437,909 460,406 445,966 338,642 332,988
RESTAURANT COSTS:
Food and beverage . . . . . 133,620 132,767 136,255 142,828 138,270 104,501 105,473
Payroll . . . . . . . . . . 127,720 131,016 132,292 136,151 134,532 101,717 100,936
Direct operating . . . . . . 92,533 95,419 109,462 108,382 110,399 81,588 83,922
Depreciation and Amortization 22,910 26,330 25,682 26,723 23,171 17,461 15,486
-------- -------- -------- -------- -------- -------- --------
Total restaurant costs . . 376,783 385,532 403,691 414,084 406,372 305,267 305,817
General and administrative 28,811 28,429 29,895 31,063 31,387 23,166 20,021
expenses . . . . . . . . . . .
Non-cash charge for impairment
of long-lived assets . . . . -- -- -- -- 20,178 -- --
Operating profit (loss) . . . . 19,894 11,056 4,323 15,259 (11,971) 10,209 7,150
Interest expense, net . . . . . 22,916 23,185 23,982 34,190 35,450 26,458 28,433
Net loss before extraordinary
loss . . . . . . . . . . . . (2,898) (12,228) (19,457) (18,995) (47,496) (16,302) (21,358)
Extraordinary loss on
extinguishment of debt . . . -- (17,775) (10,790) -- -- -- (1,095)
Net loss . . . . . . . . . . . $ (2,898) $(30,003) $(30,247) $(18,995) $(47,496) $(16,302) $(22,453)
Ratio of earnings to fixed
charges --(deficiency) <F1> (3,022) (12,129) (19,659) (18,931) (47,421) (16,249) (21,283)
BALANCE SHEET DATA:
Plant and equipment, net . . . $198,131 $190,017 $181,889 $181,496 $171,030 $181,765 $125,653
Total assets . . . . . . . . . 296,646 298,494 299,068 288,228 254,491 271,435 203,298
Long-term obligations,
including current portion . 193,547 215,627 273,355 277,820 291,987 293,830 266,217
Redeemable cumulative preferred 69,381 73,291 -- -- -- -- --
stock . . . . . . . . . . . . .
Common stockholders' equity (24,597) (60,735) (47,140) (66,135) (113,681) (82,487) (136,134)
(deficit) . . . . . . . . . . .
____________________
<FN>
<F1> For the purpose of determining the ratio of earnings to fixed charges,
earnings consist of earnings before extraordinary loss, income taxes
and fixed charges. Fixed charges consist of interest on indebtedness,
the amortization of debt issue costs and that portion of operating
rental expense representative of the interest factor.
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the Consolidated
Financial Statements and notes included elsewhere in this Prospectus. The
following discussion should also be read in conjunction with the "Selected
Historical Financial Data," "The Company" and "Business" discussions included
elsewhere in this Prospectus.
Results of Operations
Thirty-nine weeks ended September 25, 1995 and September 23, 1996:
Revenues. Total revenues decreased 1.7% from $338.6 million in the
thirty-nine weeks ended September 25, 1995 to $333.0 million in the thirty-nine
weeks ended September 23, 1996. Comparable restaurant revenues decreased 2.6%.
There were 248 restaurants operating as of September 25, 1995 and 249
restaurants operating as of September 23, 1996.
Black Angus revenues increased 3.5% to $191.1 million in the thirty-
nine weeks ended September 23, 1996 as compared to the thirty-nine weeks ended
September 25, 1995, reflecting an increase in comparable restaurant revenues of
1.5%. Comparable restaurant food sales increased 2.8% over the prior year
while beverage sales decreased 2.6% partially as a result of deemphasizing the
late-night lounge business and converting areas for late night dancing into
additional dining room seating. There were three new restaurants opened in
1996.
Grandy's revenues decreased 12.5% from $78.1 million in the thirty-
nine weeks ended September 25, 1995 to $68.3 million in the thirty-nine weeks
ended September 23, 1996. Comparable restaurant revenues were 12.3% lower than
the prior year in part due to less use of discounting to stimulate sales and
less effective advertising and promotion. Franchise revenues were $2.1 million
in the thirty-nine weeks ended September 25, 1995 and $1.9 million in the
thirty-nine weeks ended September 23, 1996.
Other revenues decreased 3.0% from $75.8 million in the thirty-nine
weeks ended September 25, 1995 to $73.5 million in the thirty-nine weeks ended
September 23, 1996. Comparable restaurant revenues decreased 2.5%.
Food and Beverage Costs. Food and beverage costs as a percentage of
revenues increased from 30.9% in the thirty-nine weeks ended September 25, 1995
to 31.7% in the thirty-nine weeks ended September 23, 1996, due primarily to
higher seafood and grocery costs.
Payroll Costs. As a percentage of revenues, labor costs increased
from 30.0% in the thirty-nine weeks ended September 25, 1995 to 30.3% in the
thirty-nine weeks ended September 23, 1996. The increase was due primarily to
higher restaurant management payroll costs.
<PAGE>
Direct Operating Costs. As a percentage of revenues, total direct
operating costs increased from 24.1% in the thirty-nine weeks ended September
25, 1995 to 25.2% in the thirty-nine weeks ended September 23, 1996. The
increase was due primarily to higher advertising expenses.
Depreciation and Amortization. As a percentage of revenues,
depreciation and amortization decreased from 5.2% in the thirty-nine weeks
ended September 25, 1995 to 4.7% in the thirty-nine weeks ended September 23,
1996. The decrease was due primarily to the non-cash reduction of the
historical cost of certain long-lived assets in December 1995.
General and Administrative Expenses. General and administrative
expenses decreased 13.6% from $23.2 million in the thirty-nine weeks ended
September 25, 1995 to $20.0 million in the thirty-nine weeks ended September
23, 1996. The decrease was due primarily to the December 1995 restructuring of
administrative personnel which resulted in a reduction of payroll costs.
General and administrative expenses as a percentage of revenues were 6.8% and
6.0% for the thirty-nine weeks ended September 25, 1995 and the thirty-nine
weeks ended September 23, 1996, respectively.
Operating Profit. Due to the items mentioned above, operating profit
decreased from $10.2 million in the thirty-nine weeks ended September 25, 1995
to $7.2 million in the thirty-nine weeks ended September 23, 1996. As a
percentage of revenues, operating profit decreased from 3.0% to 2.1%.
Interest Expense. Interest expense increased from $26.5 million in
the thirty-nine weeks ended September 25, 1995 to $28.4 million in the thirty-
nine weeks ended September 23, 1996. The Company's average stated interest
rate increased from 11.9% in the thirty-nine weeks ended September 25, 1995 to
12.1% in the thirty-nine weeks ended September 23, 1996. Average borrowings
(excluding capitalized lease obligations) increased from $270.4 million in the
thirty-nine weeks ended September 25, 1995 to $289.2 million in the thirty-nine
weeks ended September 23, 1996.
Extraordinary Loss. An extraordinary loss of $1.1 million occurred in
September 1996 with the extinguishment of a bank loan and a portion of the
Company's Senior Secured Notes. The extraordinary loss resulted in a non-cash
charge to expense for capitalized debt costs associated with the debt repaid.
Years Ended December 27, 1993, December 26, 1994 and December 25,
1995:
Revenues. Total revenues increased 5.1% from $437.9 million in 1993
to $460.4 million in 1994 followed by a 3.1% decrease to $446.0 million in
1995. The decrease in 1995 was a result of lower comparable restaurant
revenues and the closure of three restaurants, partially offset by the opening
of five restaurants. There were 242, 246 and 248 restaurants operating at the
end of 1993, 1994 and 1995, respectively.
Black Angus revenues increased 7.8% from $235.3 million in 1993 to
$253.6 million in 1994 then decreased 3.9% to $243.6 million in 1995. The
decrease in 1995 revenues was due to a decrease in comparable restaurant
<PAGE>
revenues of 6.7%. Comparable restaurant food sales decreased 4.6% compared to
1994 while beverage sales decreased 11.8% as a result of de-emphasizing the
late-night lounge business and converting the dance floors of some restaurants
to additional dining areas. One new restaurant opened in 1993, three more
opened in 1994 and an additional three opened in 1995. All seven are in
California.
Grandy's revenues decreased 1.7% from $111.2 million in 1993 to $109.3
million in 1994 followed by a 6.8% decrease to $101.8 million in 1995. The
decrease in 1995 was primarily a result of lower lunch and dinner sales.
Comparable restaurant revenues in 1995 were 6.7% lower than 1994. Two under-
performing restaurants closed in 1993, two closed in 1994 and one closed in
1995. Franchise revenues were $2.7 million, $2.5 million and $2.2 million in
1993, 1994 and 1995, respectively.
Other revenues increased 6.6% from $91.4 million in 1993 to $97.5
million in 1994 then increased 3.1% to $100.5 million in 1995. In 1993, the
Company opened one restaurant and closed two restaurants. In 1994, the Company
opened seven restaurants and closed six restaurants resulting in increased
revenues. The increase in 1995 was the net result of opening two new
restaurants and closing two poor performing restaurants. Comparable restaurant
revenues decreased 2.8% in 1995.
Food and Beverage Costs. As a percentage of revenues, food and
beverage costs decreased from 31.1% in 1993 to 31.0% in 1994 and remained
constant at 31.0% in 1995.
Payroll Costs. As a percentage of revenues, labor costs decreased
from 30.2% in 1993 to 29.6% in 1994 and then increased to 30.2% in 1995. The
increase in 1995 was primarily a result of higher restaurant management costs.
Direct Operating Costs. Direct operating costs consist of occupancy,
advertising and other expenses incurred by individual restaurants. As a
percentage of revenues, these costs decreased from 25.0% in 1993 to 23.5% in
1994 and then increased to 24.8% in 1995. The increase was a result of higher
occupancy costs and increased repairs and maintenance expenses.
Depreciation and Amortization. Depreciation and amortization consists
of depreciation of fixed assets used by individual restaurants, division and
corporate offices, as well as amortization of intangible assets. As a
percentage of revenues, depreciation and amortization decreased from 5.9% in
1993 to 5.8% in 1994 and then decreased to 5.2% in 1995. The decrease was
primarily due to the furniture, fixtures and equipment purchased in the 1987
acquisition which became fully depreciated in the first quarter of 1995.
General and Administrative Expenses. General and administrative
expenses as a percentage of revenues were 6.8% in 1993, 6.7% in 1994 and 7.0%
in 1995. The increase in 1995 was due primarily to added real estate, research
and development, and risk management/safety functions at the corporate office
as well as general inflation.
<PAGE>
Non-Cash Charge for Impairment of Long-Lived Assets. In December 1995
certain assets, including fixed assets and certain related intangible assets,
were valued at less than their historic costs and resulted in a non-cash charge
of $20.2 million. This non-cash charge was 4.5% of revenues. There were no
charges for impairment of long-lived assets in 1993 or 1994.
Operating Profit. As a result of the items discussed above, operating
profit increased from $4.3 million in 1993 to $15.3 million in 1994 and then
decreased to an operating loss of $12.0 million in 1995 (an operating profit of
$8.2 million before the non-cash charge for impairment of long-lived assets).
As noted in the discussion of revenues, the Company's divisions are not uniform
in size or profitability. For example, for the fiscal year ended 1995, Black
Angus and Grandy's had operating profits of $20.6 million and $3.1 million,
respectively.
Interest Expense - Net. Interest expense increased from $24.0 million
in 1993 to $34.2 million in 1994 and then to $35.5 million in 1995. The
average interest rate on Company borrowings was 10.6%, 11.8% and 11.9% for
1993, 1994 and 1995, respectively. Average borrowings (excluding capitalized
lease obligations) increased from $204.9 million in 1993 to $263.7 million in
1994 and then to $273.5 million in 1995.
Income Taxes. Income taxes increased from a credit of $202,000 in
1993 to a provision of $64,000 in 1994 and then increased to a provision of
$75,000 in 1995. The 1993 credit was less than applicable statutory rates
because of losses for which no federal benefit was recorded. The 1994 and 1995
provisions represent amounts provided for certain minimum state income taxes.
Extraordinary Loss. An extraordinary loss of $10.8 million occurred
in December 1993 with the extinguishment of a prior term loan. This
extraordinary loss resulted from a non-cash charge to expense for capitalized
debt costs associated with the debt repaid. There were no extraordinary losses
in 1994 or 1995.
Liquidity and Capital Resources
The Company's primary sources of liquidity are cash flow from
operations and borrowings under its credit facilities. The Company requires
capital principally for the acquisition and construction of new restaurants,
the remodeling of existing restaurants and the purchase of new equipment and
leasehold improvements.
In general, restaurant businesses do not have significant accounts
receivable because sales are made for cash or by credit card vouchers which are
ordinarily paid within a few days, and do not maintain substantial inventory as
a result of the relatively brief shelf life and frequent turnover of food
products. Additionally, restaurants generally are able to obtain trade credit
in purchasing food and restaurant supplies. As a result, restaurants are
frequently able to operate with working capital deficits, i.e., current
liabilities exceed current assets. At September 23, 1996, the Company had a
working capital deficit of $51.2 million.
<PAGE>
The Company estimates that capital expenditures of $10.0 million to
$13.0 million are required annually to maintain and refurbish its existing
restaurants. In addition, the Company spends approximately $10.0 million to
$13.0 million annually for repairs and maintenance which are expensed as
incurred. Other capital expenditures, which are generally discretionary, are
primarily for the construction of new restaurants and for expanding,
reformatting and extending the capabilities of existing restaurants and for
general corporate purposes. The Company expects to spend approximately $3.0
million to $6.0 million on new restaurants in 1996, primarily during the second
half of 1996, and depending on market conditions, to increase its capital
expenditures for new restaurants thereafter. Total capital expenditures were
$13.4 million for the thirty-nine weeks ended September 25, 1995 and $8.1
million for the thirty-nine weeks ended September 23, 1996. The Company's
credit agreement contains limitations on the amount of capital expenditures
that the Company may incur.
On August 28, 1996, the holders of the Senior Secured Notes consented
to an amendment which increased the interest rate on substantially all of the
Senior Secured Notes from 12% to 13% and changed interest payment dates from
semi-annual to quarterly beginning December 15, 1996. The amendment also
replaced a net worth covenant with an EBITDA covenant and required the Company
to consummate asset sales or sale/leaseback transactions on or prior to
December 31, 1996. In addition to requiring completion of the sale/leaseback
of the 24 restaurants mentioned below, the amendment requires the Company to
generate net cash proceeds from additional asset sales or sale/leasebacks of
$25.0 million.
On September 13, 1996, ARG completed a sale/leaseback transaction
under which it sold the real property relating to 24 Stuart Anderson's Black
Angus and Stuart Anderson's Cattle Company restaurants for an aggregate sales
price of $48.1 million and simultaneously executed long-term leases under which
it will continue to operate the restaurants. The proceeds of the transaction
have been applied in accordance with the requirements of ARG's debt
instruments, as follows: to redeem at par principal and interest thereon of
the Senior Secured Notes in the amount of $34.3 million; to repay bank debt and
to partially cash collateralize outstanding letters of credit in a combined
amount of $4.8 million; for fees and expenses of this transaction as well as
the consent solicitation relating to the Senior Secured Notes in a total amount
of $4.6 million; and $4.4 million retained by ARG to be invested in productive
assets within six months.
ARG's senior credit facilities provide for a letter of credit facility
of $12.4 million until March 31, 1997. This letter of credit facility was
fully utilized as of November 25, 1996. Having repaid the outstanding bank
debt mentioned above, the Company does not have a working capital facility.
Although the Company is highly leveraged, based upon current and projected
levels of operations and anticipated growth, the Company expects that cash flow
generated from operations together with its other available sources of
liquidity, including additional asset sales or sale/leaseback transactions,
will be adequate to make required payments of principal and interest on its
indebtedness, to make anticipated capital expenditures and to finance working
capital requirements.
<PAGE>
The Company expects to pursue additional asset sales and
sale/leaseback transactions in the immediate future subject to completion on
terms acceptable to the Company. Thus, although the Company expects such
transactions to be completed, there can be no assurance of such completion on
acceptable terms.
Net Operating Losses
The Company's net operating loss carryforwards may be subject to
significant limitations on use or elimination under applicable provisions of
the Internal Revenue Code of 1986, as amended, as a result of changes in
ownership of the Company. As a result, investors should not rely on the
availability to the Company of a material amount of net operating losses in the
future.
Impact of Inflation
Although inflationary increases in food, labor or operating costs
could adversely affect operations, the Company has generally been able to
offset increases in cost through price increases, labor scheduling and other
management actions.
BUSINESS
Introduction
ARG, through its subsidiaries competes predominantly in the midscale
segment of the United States restaurant industry. ARG was formed on August 13,
1986 by Anwar S. Soliman, Chairman of the Board and Chief Executive Officer of
ARG and other members of current senior management, to acquire certain
operations of Saga Corporation, a wholly owned subsidiary of Marriott
Corporation (the "Acquisition"). The Acquisition was completed in February
1987. (Prior to the completion of the Acquisition, ARG had no significant
operations.) ARG is a wholly owned subsidiary of Holdings.
As of September 23, 1996, ARG operated 249 restaurants located in 16
states, principally California and Texas. ARG operates six restaurant
divisions: Black Angus (western-style steak houses specializing in steak and
prime rib), Grandy's (family-oriented, quick-service restaurants specializing
in fried and grilled chicken, country-fried steak and country breakfasts),
Spoons (casual-style restaurants featuring fajitas, salads and hamburgers),
Spectrum (upscale Northern Italian, American and Mexican specialty
restaurants), National Sports Grill (sports-theme restaurants featuring
generous portions and micro-brewery beers), and Velvet Turtle (a white-
tablecloth restaurant offering classic Continental cuisine). ARG believes that
the Velvet Turtle concept has limited long-term potential and, accordingly, has
closed all but one of these restaurants. In addition, as of September 23,
1996, Grandy's franchised 56 restaurants in the southern United States.
Black Angus
<PAGE>
General. Black Angus is a steakhouse chain serving the western United
States. Founded in 1964, Black Angus operates 98 Stuart Anderson's Black Angus
and Stuart Anderson's Cattle Company steak house restaurants located primarily
in California, the Pacific Northwest and Arizona. Black Angus restaurants are
typically located in highly visible and heavily traveled areas in or near
retail and commercial businesses. The restaurants are generally freestanding
and generally range in size from 6,600 to 12,000 square feet, seating 300 to
435 customers. Black Angus restaurants are distinctively western in their
interior and exterior design and feature booth seating for dining, attractive
lounge areas with audio and video entertainment, parking facilities and, in
some cases, dance floors. They are generally open for lunch from 11:30 a.m. to
4:00 p.m. and for dinner from 4:00 p.m. to 10:00 p.m.
Menu Strategy. Black Angus restaurants are targeted to appeal to
middle-income couples and families, emphasizing quality and value, by offering
moderately priced entrees. The menu emphasizes beef with selections that
include prime rib and steak, and, in response to increased customer demand,
chicken and fish as well as lighter accompanying items. Currently, 27% of the
menu's entrees are nonbeef. In order to capitalize on consumer desires for
lighter, quicker meals, Black Angus has introduced a lunch menu with most items
guaranteed to be served within ten minutes.
In 1995, the average check per person, excluding beverages, was $8.11
at lunch and $14.44 at dinner. Excluding beverages, dinner accounted for
approximately 85% of revenues while lunch accounted for approximately 15% of
revenues. Beverage sales, which include the concept's late-night
entertainment, accounted for approximately 24% of total revenues.
Advertising and Promotion. The Company concentrates on television as
the most effective medium for reaching its highly concentrated markets. The
television advertisements feature price points which convey the Company's high
value image and emphasize the concept's excellent food quality.
Grandy's
General. Founded in 1973, Grandy's operates 108 restaurants located
principally in Texas, Oklahoma and Florida. Grandy's is a leading
family-oriented, quick-service concept. Grandy's differentiates itself from
other fast food restaurants by offering comparable prices and speed, but with
the quality and ambiance of a full-service restaurant. In addition to its
company-operated restaurants, as of September 23, 1996 the Company franchised
56 restaurants in the southern United States. Grandy's restaurants are
generally freestanding and are located near shopping malls or other highly
visible, heavily traveled areas. The restaurants range in size from 3,800 to
5,200 square feet and have dining areas which generally seat 130 to 220
customers. All restaurants offer self-service and free drink refills, and all
but two restaurants have drive-thru service. Grandy's restaurants are
generally open from 6:00 a.m. to 10:00 p.m. and serve breakfast, lunch and
dinner. Grandy's differentiates itself from its competitors by offering
complete home-style meals with limited service.
<PAGE>
Menu Strategy. The menu features fried and grilled chicken,
grilled-chicken sandwiches, chicken nuggets and country-fried steak, served
with a choice of vegetable plus mashed potatoes, gravy and rolls. Grandy's has
also introduced pre-packaged salads for both drive-thru and in-store customers.
Breakfast is an important part of the Grandy's concept and includes scrambled
eggs with cheese, bacon, sausage, hot cakes, freshly baked cinnamon rolls and
biscuits, coffee and juice. Most restaurants have breakfast bars either daily
or on weekends. Grandy's does not serve alcoholic beverages. Unlike most
other restaurant chains, Grandy's is strong during each of the three dining
periods that it serves daily. In 1995, breakfast, lunch and dinner accounted
for 22%, 42% and 36% of revenues, respectively, and the average check per
person was $3.71. Approximately 51% of Grandy's 1995 revenues were for
consumption in the dining room as opposed to take out.
Advertising and Promotion. The Company concentrates on television as
the most effective medium for reaching its highly concentrated markets.
Grandy's also relies on print advertising in its smaller markets and, to a
lesser extent, in its principal markets.
Franchising. As of September 23, 1996, the Company franchised 56
Grandy's restaurants in the southern United States and the Company intends to
continue its franchising activities both domestically and internationally.
The Company's recent domestic franchise agreements generally require a
fee of $30,000 per initial restaurant ($15,000 for each subsequent restaurant),
ongoing royalties of approximately 4% of sales (3% for some older franchises)
and, in certain cases, co-operative advertising contributions of approximately
4% of sales. The Company provides certain support functions for franchisees,
including initial training and ongoing monitoring and consultations. The
Company does not provide financing for franchisees.
The Company has reduced the number of franchised Grandy's restaurants
from 95 in 1991 to 56 as of September 23, 1996, as a result of the acquisition
by Grandy's of nine franchised restaurants and the termination of
underperforming franchises.
Other Concepts
Spoons
General. Spoons, founded in 1978, operates 20 casual-style
restaurants located throughout California. Spoons restaurants are generally
freestanding, located in heavily traveled areas, ranging in size from 5,500 to
7,800 square feet and seating approximately 200 customers. These full-service
restaurants average a 40-minute table turnover and offer booth and table
seating in a casual, highly energetic atmosphere. In addition, each restaurant
has a lounge area which also serves food. Spoons provides the customer with a
fresh, value-oriented alternative to traditional quick-service restaurants.
Spoons restaurants are generally open from 11:00 a.m. to 12:00 midnight and
feature the same menu all day.
<PAGE>
Menu Strategy. Spoons restaurants offer full service with a menu
featuring hickory-smoked baby back ribs; freshly ground, half-pound hamburgers;
fresh french fries; sizzling fajitas (steak, chicken and tuna); marinated tuna
and steak sandwiches; soft tacos; pasta platters; festive salads; and "Tex-Mex"
appetizers such as nachos, "buffalo" wings and quesadillas. Although the
typical Spoons customer is in the 18-49 age group, the Company believes that
the Spoons California grill concept and menu have a wide appeal encompassing
couples, families and senior citizens. The average time from placing to
serving an order is under ten minutes. In 1995, the average food check per
person was $7.29. Lunch and dinner accounted for 34% and 50% of revenues,
respectively, in 1995, with beverages accounting for 16% of revenues.
Advertising and Promotion. The Company concentrates on free standing
newspaper inserts as the most effective medium for reaching its highly
concentrated markets. In 1995, total advertising and promotion expenditures
were $2.1 million. The Company runs product promotions designed to generate
strong earnings and repeat business by emphasizing the value of the Spoons
dining experience.
Spectrum
General. As of September 23, 1996, Spectrum, founded in 1970,
operated 16 unique, upscale, specialty restaurants located throughout
California. All restaurants focus on "authentic" Northern Italian,
contemporary American or Mexican cuisine, prepared by talented and experienced
chefs and served in an elegant atmosphere. The division includes four "Prego",
three "Tutto Mare", two "MacArthur Park" and seven other restaurants which,
although operated under different names, generally concentrate on Northern
Italian food. Spectrum restaurants vary in size and physical type but are
primarily located in close proximity to concentrations of young professionals
and other upper-income customers. The restaurants are generally open from
11:00 a.m. to 12:00 midnight.
Menu Strategy. Each Spectrum restaurant focuses on preparing
"authentic" cuisine of the featured country, with many daily specials depending
on the restaurant. The restaurants are usually built with an open kitchen and
all food is prepared fresh with an emphasis on quality and service. In 1995,
excluding beverages, dinner accounted for approximately 43% of revenues with an
average food check of $18.07 per person, while lunch accounted for
approximately 20% of revenues with an average food check of $14.64 per person.
Beverages, primarily wine by the bottle or the glass and served with meals,
accounted for approximately 24% of revenues in 1995. Beverage revenues as a
percentage of total revenues have remained stable over the past three years.
Advertising and Promotion. Due to the unique cuisine and atmosphere
of each of its restaurants, Spectrum does relatively little advertising,
relying instead on word-of-mouth. Spectrum has developed a successful
"frequency building" program called "Table One" with 15,000 members who earn
gift certificates or other prizes based on expenditures in the restaurants. A
modest amount of advertising for individual restaurants is done in magazines
and several of the restaurants conduct promotional events.
<PAGE>
National Sports Grill
National Sports Grill, founded in 1993, operated six sports-theme
restaurants as of September 23, 1996. This concept offers a menu featuring
generous portions and microbrewery beers and provides multiple video telecasts
of national and regional sporting events as well as interactive video games and
other sporting related games.
National Sports Grill restaurants are freestanding and generally range
in size form 10,000 to 17,000 square feet, seating approximately 200 to 300
customers. The restaurants feature a bar, a dining room and a billiards room
with multiple video screens throughout. National Sports Grill restaurants are
typically open from 11:00 a.m. to 2:00 a.m.
Velvet Turtle
The Company operated one Velvet Turtle restaurant as of September 23,
1996. Velvet Turtle is a full-service, white-tablecloth restaurant catering to
the special occasion diner and a more affluent customer. Due to the decline of
this customer base for chain restaurants, management began to de-emphasize the
concept in 1991. The Company expects to dispose of the remaining Velvet Turtle
restaurant.
Restaurant Operations
The Company is operated as six separate divisions. The Black Angus
and Grandy's divisions are each organized functionally with separate
operations, marketing, finance, real estate and human resources departments.
The four smaller divisions share among them certain support functions such as
marketing, finance, administration and human resources. The Company provides
strategic direction and approves major capital expenditures, annual budgets and
all salaries above a specified level. In addition, the Company provides
purchasing, cash management, insurance and other treasury functions, and
accounting and legal expertise, all on a centralized basis.
The Company's cash management system is highly sophisticated with
controls down to the server level. The Company uses a centralized cash
concentration system which sweeps all of its cash accounts on a daily basis.
There is a central payable and check writing system with roughly 9,000 vendors
profiled on the system.
The Company uses a combination of in-house and outside-contracted
services for its management information system needs. In-house systems include
a point-of-sale system for each restaurant and stand-alone computing at the
restaurant, division and corporate levels. The Company currently contracts for
payroll services and for mainframe-based data processing.
Each restaurant is staffed with a general manager who is directly
responsible for the operation of the restaurant, including product quality,
cleanliness, service, inventory, cash control and the appearance and conduct of
store employees. Except for Grandy's, most restaurants also have one or two
assistant managers and a chef. Managers and supervisory personnel train other
<PAGE>
restaurant employees in accordance with detailed procedures and guidelines
prescribed by each division.
General managers are supervised by district managers, each of whom is
responsible for approximately seven restaurants. District managers, general
managers, assistant managers and chefs are eligible for bonuses under each
division's extra compensation program, for which goals and objectives are
established based on the profitability, sales and other factors relating to the
restaurants.
Purchasing and Distribution
To ensure standards of quality and to maximize pricing efficiencies, a
central Purchasing Department coordinates the supply of almost all restaurant
items. The Company purchases products throughout the United States and abroad
through agreements with various food-service vendors. The Company routinely
uses public cold storage facilities and makes forward commitments in order to
establish the availability and price of key food items such as beef and
seafood. The Company is not dependent upon any of its distributors for the
operation of its business and believes that satisfactory arrangements could be
made to replace any of its current distributors, if necessary, on a timely
basis.
Competition and Markets
All aspects of the restaurant business are highly competitive. Price,
restaurant location, food quality, service and attractiveness of facilities are
important aspects of competition, and the competitive environment is often
affected by factors beyond a particular restaurant management's control,
including changes in the public's taste and eating habits, population and
traffic patterns and economic conditions. The Company's restaurants compete
with a wide variety of restaurants, ranging from national and regional
restaurant chains to locally owned restaurants. The Company believes that its
principal competitive strengths lie in the distinctive atmosphere and food
presentation offered; the value, variety and quality of food products served;
the quality and training of its employees; the experience and ability of its
management; and the economies of scale enjoyed by the Company because of its
size and geographic concentration. The Company continually monitors consumer
tastes and adjusts and updates its menus accordingly. The Company operates a
research facility near its headquarters which develops new menu items for each
of the Company's concepts.
Employees
At December 25, 1995, the Company employed approximately 14,400
persons, of whom approximately 13,400 were hourly employees in restaurants,
approximately 800 were salaried employees in restaurants (managers and chefs)
and approximately 200 were hourly and salaried employees in divisional and
corporate management and administration. Approximately 61% of the hourly
restaurant employees work on a part-time basis (25 hours or less per week).
None of the Company's facilities is unionized. The Company believes it
<PAGE>
provides competitive compensation and benefits to its employees and that its
employee relations are good.
Regulation
Each restaurant is subject to regulation by federal agencies and to
licensing and regulation by state and local health, sanitation, safety, fire
and other departments. In addition, each restaurant (except for Grandy's) is
subject to licensing with respect to the sale of alcoholic beverages. The loss
of licenses or permits by the Company's restaurants to sell alcohol would
interrupt or terminate the Company's ability to serve alcoholic beverages at
those restaurants and, if a significant number of restaurants were affected,
could have a material adverse effect on the Company. The Company believes it
has good relations with the various alcoholic beverage authorities.
The Company is subject to the Fair Labor Standards Act and various
state laws governing such matters as minimum wages, overtime and other working
conditions. Substantially all of the Company's restaurant employees are paid
at rates related to the federal and state minimum wage, and, accordingly,
increases in the minimum wage increase the Company's labor costs.
Legal Proceedings
The Company is involved in various litigation incidental to its
business, including claims arising out of lounge-related incidents, third-party
injuries, the sale of alcoholic beverages, worker's compensation cases and
contract lawsuits, the claims for which sometimes involve substantial damages.
Based on information presently available, management does not believe that the
outcome of such litigation will have a material adverse effect on the Company's
financial position.
Service Marks
The Company regards its service marks and trademarks as important to
the identification of its restaurants and believes they have significant value
in the conduct of its business. The Company has registered various service
marks and trademarks with the United States Patent and Trademark Office. In
addition, certain service marks have been registered in the State of
California, in various other states and in certain foreign countries.
Seasonality
Except with respect to Grandy's, the Company's restaurant revenues and
profitability are not subject to significant seasonal fluctuations. Grandy's
revenues and profits are traditionally higher during the spring and summer
months because of factors such as increased travel and improved weather
conditions affecting the public's dining habits.
Properties
Of the 249 restaurants operated by the Company on September 23, 1996,
the Company owns the land and building for 42, owns the building and leases the
<PAGE>
land for 69, and leases both land and building for the remaining 138
restaurants. Most of the Company's restaurants are freestanding and range from
approximately 4,000 square feet for a Grandy's restaurant to as much as 17,000
square feet for a National Sports Grill restaurant. Most of the Company's
leases provide for the payment of the greater of a set base rental or a
percentage rental of up to 6% of gross revenues, plus real estate taxes,
insurance and other expenses. When the Company has so desired, it generally
has been able to renew its restaurant leases as they expire. However, there
can be no assurance that it will be able to do so in the future.
In addition, the Company owns the land and building for the Grandy's
headquarters in Lewisville, Texas, and leases office space for its other
divisions and corporate headquarters in Los Altos, San Francisco, and Newport
Beach, California. The Company also leases a facility in Newport Beach,
California, which it uses for centralized research and development.
The following table sets forth, as of September 23, 1996, the number
of Company-operated restaurants by division and state of operation:
Number of Company-Operated Restaurants by State and Division
<TABLE>
<CAPTION>
Total
National Number
Black Concept Sports Velvet of
State Angus Grandy's Spoons Spectrum Grill Turtle Restaurants
----------- -------- -------- ------- --------- --------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
California 56 5 20 16 6 1 104
Texas . . . -- 70 -- -- -- -- 70
Oklahoma . -- 17 -- -- -- -- 17
Washington 11 -- -- -- -- -- 11
Florida . . -- 10 -- -- -- -- 10
Arizona . . 8 -- -- -- -- -- 8
Colorado . 5 -- -- -- -- -- 5
Kansas . . -- 5 -- -- -- -- 5
Oregon . . 5 -- -- -- -- -- 5
Minnesota . 4 -- -- -- -- -- 4
Indiana . . 3 -- -- -- -- -- 3
Hawaii . . 2 -- -- -- -- -- 2
New Mexico 1 1 -- -- -- -- 2
Alaska . . 1 -- -- -- -- -- 1
Idaho . . . 1 -- -- -- -- -- 1
Nevada . . 1 -- -- -- -- -- 1
-- --- -- -- -- -- ---
Total . . . 98 108 20 16 6 1 249
== === == == == == ===
<PAGE>
</TABLE>
MANAGEMENT
Directors and Executive Officers
Set forth below is certain information about the Company's directors
and each of its executive officers and key management personnel. Unless
otherwise specified, each person holds the same position with both Holdings and
ARG.
Name Age Position with the Company
Anwar S. Soliman 58 Chairman, Chief Executive
Officer, Director
Ralph S. Roberts 54 President and Chief Operating
Officer, Director
William J. McCaffrey, Jr. 50 Chief Financial Officer, Vice
President, Treasurer, Assistant
Secretary, Director
Wilfred H. Partridge 67 Vice President--Purchasing--ARG
Patrick J. Kelvie, Esq. 45 Secretary and General Counsel
Richard I. Beattie, Esq. 57 Director
Officers are elected by the Board of Directors and serve at the
discretion of the Board.
Anwar S. Soliman. Mr. Soliman is Chairman, Chief Executive Officer
and a Director of Holdings. He has served as Chairman, Chief Executive Officer
and a Director of ARG since its organization in 1986. Prior to joining the
Company, Mr. Soliman was Executive Vice President of W.R. Grace & Co.
("Grace") and Group Executive of the Grace Restaurant Group, which he started
in 1977. Mr. Soliman spent 22 years with Grace in various executive positions.
He is also a trustee of Newport Harbor Art Museum and a member of the Board
Council of Boys Hope of California. Mr. Soliman received both a B. Commerce
and an M.B.A. from Alexandria University and a Ph.D. from New York University.
Ralph S. Roberts. Mr. Roberts is President, Chief Operating Officer
and a Director of Holdings. He has served as a Director of ARG since 1991 and
has served as the President and Chief Operating Officer of ARG since 1986. Mr.
Roberts has more than 25 years of experience in the restaurant industry and
before joining the Company was Deputy Group Executive of Operations of the
Grace Restaurant Group and Vice President of Grace. Prior to joining Grace in
1980, he was Vice President of the Stouffer Restaurant Division and President
and co-founder of the Rusty Scupper restaurants. Mr. Roberts received a B.A.
from Princeton University.
William J. McCaffrey, Jr. Mr. McCaffrey is Chief Financial Officer,
Vice President, Treasurer, Assistant Secretary and a Director of Holdings. He
has served as a Director of ARG since 1991 and has served as the Chief
<PAGE>
Financial Officer, Vice President, Treasurer and Assistant Secretary of ARG
since 1986. Prior thereto he was Chief Financial Officer of the Grace
Restaurant Group, having spent 12 years with Grace. For eight years,
Mr. McCaffrey was assistant to the Chief Executive Officer of Grace. He
received a B.S., M.E. from the University of Notre Dame and an M.B.A. from
Harvard University.
Wilfred H. Partridge. Mr. Partridge has served as Vice President
responsible for purchasing and distribution for ARG since 1986. Mr. Partridge
has more than 30 years of experience in the restaurant industry, encompassing
purchasing, production and distribution, as well as restaurant operations, and
was President of Grace Restaurant Services before joining the Company.
Mr. Partridge served as Vice President of Purchasing, Production and
Distribution with Marriott Corporation (Bob's Big Boy Division) for 19 years.
He served as Director of Manufacturing and Distribution for Foodmaker Company
(Jack-in-the-Box) and also operated his own restaurants in the San Diego area.
He received a B.A. in Commercial Science from Benjamin Franklin University.
Patrick J. Kelvie. Mr. Kelvie is Secretary and General Counsel of
Holdings. He has served as General Counsel of ARG since 1987 and Secretary of
ARG since 1989. From 1987 to 1989, Mr. Kelvie was an Assistant Secretary of
ARG. Between 1978 and 1987, Mr. Kelvie held various legal counsel positions
for Saga Corporation. Mr. Kelvie received a B.A. from the University of
California at Berkeley and a J.D. from Harvard Law School.
Richard I. Beattie. Mr. Beattie is a Director of Holdings. He has
served as a Director of ARG since 1991. Mr. Beattie also serves on the Board
of Directors of Harley-Davidson, Inc. Mr. Beattie has been a partner in the
law firm of Simpson Thacher & Bartlett since 1975, except for a four-year
period in which he served in the administration of President Carter. He is
chairman of the board of the Fund for New York City Public Education and a
trustee of Carnegie Corporation and a member of the board of trustees of
WNET/Channel Thirteen (the New York City station of the Public Broadcasting
System). Mr. Beattie has also been named as President Clinton's Special
Emissary for Cyprus. He received a B.A. from Dartmouth College and an LL.B.
from the University of Pennsylvania.
Executive Compensation
The following table sets forth the cash compensation for services
rendered in all capacities which ARG paid to or accrued for the Chief Executive
Officer and each of the other four most highly compensated executive officers.
Summary Compensation Table
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------------------ ------------------------------------------------
Other
Annual Restricted No. of All Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary Bonus sation<F1> Award(s) SARS Payouts sation<F2>
------------------------------- ---------- ------------ ----------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anwar S. Soliman 1995 $1,233,640 $ 0 $62,660 -- -- -- $ 18,002
(Chairman and CEO) 1994 1,189,580 0 92,635 -- -- -- 17,552
1993 1,062,124 0 101,540 -- -- -- 12,329
Ralph S. Roberts 1995 704,935 0 28,230 -- -- -- 8,351
(President and CEO) 1994 659,907 0 43,400 -- -- -- 5,759
1993 589,203 0 55,935 -- -- -- 4,031
William J. McCaffrey, Jr. 1995 311,539 30,000 0 -- -- -- 9,571
(Chief Financial Officer) 1994 287,115 35,000 5,425 -- -- -- 9,093
1993 262,212 35,000 7,545 -- -- -- 6,684
Wilfred H. Partridge 1995 279,231 30,000 0 -- -- -- 5,884
(Vice President-Purchasing) 1994 259,692 35,000 7,325 -- -- -- 26,982
1993 239,769 25,000 14,040 -- -- -- 18,286
Patrick J. Kelvie 1995 175,000 0 0 -- -- -- 1,262
(Secretary and General 1994 167,731 0 0 -- -- -- 1,849
Counsel) 1993 154,000 0 0 -- -- -- 1,520
<F1> Amounts shown are for reimbursement during the fiscal year for the payment
of premiums and income taxes thereon relating to executive life and
disability plans.
<F2> Amounts shown in this column for the last fiscal year include the
following: group term life insurance premiums of $18,002, $8,351, $6,958
and $3,510 for Messrs. Soliman, Roberts, McCaffrey and Partridge,
respectively; and company matching contributions to a 401(k) plan of
$2,613, $2,374 and $1,262 for Messrs. McCaffrey, Partridge and Kelvie,
respectively.
</TABLE>
Employment Agreements
The following table sets forth, with respect to each executive officer
who has entered into an employment agreement with the Company, the base salary
for such officer provided for therein together with the termination date of
such agreement:
<PAGE>
<TABLE>
<CAPTION>
Name of Individual Position(s) Held Salary Date
------------------------------------- ----------------------------------------------- ----------------------- -----------------
<S> <C> <C> <C>
Anwar S. Soliman Chairman and Chief Executive Officer $1,233,640 12/31/96
Ralph S. Roberts President and Chief Operating Officer 704,935 12/31/96
Wilfred H. Partridge Vice President--Purchasing 290,000 12/31/96
</TABLE>
Each of the employment agreements entered into between the Company and
such executive officers provides, among other things, for adjustments to the
base salaries and automatic extensions of the termination date. The agreements
also provide for certain other benefits, including, in the case of Mr. Soliman,
one year's severance pay equal to his then annual salary in the event of
disability or death; in the case of Mr. Roberts, one year's severance pay in
the event of death and salary for the remainder of the calendar year in the
event of disability; and, in the case of Mr. Partridge, six months' severance
pay in the event of death and salary for the remainder of the calendar year in
the event of disability. The employment agreements of Mr. Soliman and
Mr. Roberts each provide for six months' severance pay if either executive
terminates his employment for cause. None of ARG's employment agreements
provide for any continuing salary obligations in the event of a termination by
ARG for cause.
Stock Option Plan
Holdings has adopted a Stock Option Plan for Key Employees (the
"Plan") providing for the grant of non-qualified stock options ("Options") to
selected employees. Holdings has reserved 45,600 shares of common stock for
issuance under the Plan. The Plan is designed, through the award of incentive
compensation, to attract and retain key employees who are in a position to make
a significant contribution to the successful operation of the business of
Holdings and its subsidiaries. The Board of Directors will designate persons
to be granted awards under the Plan, the number of Options to purchase shares
to be granted, and any other conditions relating to the awards as it may deem
appropriate, consistent with the provisions of the Plan.
The Plan provides that the exercise price for Options granted pursuant
to the Plan shall be at least equal to the fair market value of the stock on
the date of grant. Options granted under the Plan shall expire on the earlier
of the tenth anniversary of the date the Option was granted or the 60th day
following termination of the optionee's employment with Holdings or its
subsidiaries. The Options will be exercisable after five years (or such
earlier date as may be specified by the Board of Directors or the Compensation
Committee thereof). Options will not be transferrable (other than by will or
the laws of descent and distribution) and, during the optionee's lifetime, will
only be exercisable by the optionee.
Holders of shares of common stock received pursuant to the Plan will
be required to become a party to the Voting Trust Agreement and a stockholder's
agreement having terms and conditions comparable to those contained in the
Common Stock Subscription Agreements (as herein defined). See "Business" and
"Security Ownership of Certain Beneficial Owners and Management."
<PAGE>
Savings Plan
ARG currently has the American Restaurant Group Savings and Investment
Plan (the "Savings Plan"), which is a 401(k) plan established for the benefit
of employees who have satisfied certain requirements. These requirements
include completion of one year of service with a minimum of 1,000 hours worked.
Subject to applicable limits imposed on tax qualified plans, eligible employees
may elect pre-tax contributions up to 18.5% of a participant's total earnings
for a calendar year (but not in excess of $9,500 for 1996). ARG makes matching
contributions to the Savings Plan equal to 25% of the participant's
contributions up to 6% of the participant's earnings. A participant is
entitled to a distribution from the Savings Plan upon termination of employment
and any such distribution will be in a lump sum form. Distributable benefits
are based on the value of the participant's individual account balance which is
invested at the direction of the participant in one or a combination of six
investment funds, none of which include investments in the Company. Under
certain circumstances, a participant may borrow amounts held in his account
under the Savings Plan. Based upon the Savings Plan vesting schedule, as of
1995, 80% of ARG matching contributions were vested for Messrs. McCaffrey,
Partridge and Kelvie.
Executive Insurance Plans
ARG has made available an executive disability insurance plan to
Messrs. Soliman, Roberts, McCaffrey and Partridge which provides supplemental
disability income based on a percentage of their respective monthly salaries.
In 1995, the cost to ARG of such disability insurance for these executives was
$65,800.
Messrs. Soliman, Roberts, McCaffrey and Partridge and their dependents
also participate in an executive medical plan which covers all of their medical
and dental expenditures. In 1995, the cost to ARG of this plan for these
executives as a group was $32,800.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Holdings owns 100% of ARG's outstanding common stock. All of the
Holdings' management stockholders have entered into the Voting Trust Agreement
in accordance with which Anwar S. Soliman, Chairman and Chief Executive Officer
of the Company, exercises, as voting trustee, all voting and substantially all
other rights to which such shareholders would otherwise be entitled until the
earlier of December 31, 2001 or the earlier termination of the Voting Trust
Agreement. As a result, Mr. Soliman is considered the beneficial owner of
approximately 82.4% of the outstanding shares of Holdings' common stock
(approximately 61% on a fully diluted basis).
As of November 25, 1996, certain holders of the senior discount
debentures held approximately 18% of the shares of Holdings' common stock
(approximately 13% on a fully diluted basis).
The following table sets forth certain information regarding the
beneficial ownership of Holdings common stock, as of November 25, 1996, by (i)
each of the Company's directors, (ii) the Chief Executive Officer and certain
other highly compensated executive officers of the Company, (iii) all executive
<PAGE>
officers and directors as a group and (iv) each person believed by the Company
to own beneficially more than 5% of Holdings' outstanding common stock. As of
the date of this Prospectus, Holdings owned all of the issued and outstanding
capital stock of the ARG.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent
Name and Address Ownership of Class
<S> <C> <C>
Anwar S. Soliman 228,577<F1> 33.5%
Roberts Family Limited Partnership 114,266 16.8
William J. McCaffrey, Jr. 28,567 4.2
Wilfred H. Partridge 28,567 4.2
Patrick J. Kelvie 4,563 0.7
Richard I. Beattie -- --
Nomura Holding America Inc. 39,358<F2> 5.8
2 World Financial Center
Building B, 17th Floor
New York, New York 10281
Swiss Bank Corporation 39,355<F2> 5.8
c/o SBL Capital Markets, Inc.
45 Broadway, 26th Floor
New York, New York 10006
Dean Witter, Discover & Co. and
Dean Witter InterCapital Inc. 78,557<F3> 11.5
Two World Trade Center
New York, New York 10048
All directors and officers of the
Company as a group (6 persons) 404,540 59.3
<F1> Does not include 187,371 shares of Common Stock which Mr. Soliman is
deemed to be the owner of pursuant to the Voting Trust Agreement.
<F2> Represents warrants which are immediately exercisable at a nominal
price per share. None of such warrants is exercisable after July 31,
2001.
<F3> Pursuant to a Schedule 13G dated February 13, 1996, Dean Witter,
Discover & Co. and Dean Witter InterCapital Inc. reported holding
78,557 shares the beneficial ownership of which they disclaimed.
</TABLE>
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summaries are qualified in their entirety by reference
to the definitive agreements and instruments described herein.
Credit Facilities
General. The Company has entered into the Credit Facilities which
provide for a letter of credit facility in the principal amount of $12.4
million, which may be used only by the subsidiaries of ARG party to the Credit
Facilities to support certain insurance, workers' compensation and performance
or payment obligations of such subsidiaries. The letter of credit facility
matures on March 31, 1997.
The Credit Facilities provide for certain fees typical for letter of
credit facilities.
The Credit Facilities are secured by a pledge of the stock of all of
the Subsidiary Guarantors, a guarantee by ARG and all of the Subsidiary
Guarantors and a first priority lien on substantially all real and personal
property of ARG and the Subsidiary Guarantors. See "--Intercreditor Agreement
and Collateral Documents."
The Credit Facilities contain financial and other covenants,
including, without limitation, (i) restrictions on the incurrence of
indebtedness, leases, liens and contingent obligations, (ii) restrictions on
mergers, acquisitions, sales of assets, investments and transactions with
affiliates, (iii) restrictions on dividends and other payments with respect to
shares of ARG's capital stock, (iv) restrictions on redemptions, prepayments
and distributions with respect to debt other than debt under the Credit
Facilities, (v) restrictions on capital expenditures, (vi) financial
performance tests, (vii) restrictions on amendments to the Debenture Indenture
and the indentures relating to the Senior Secured Notes and certain other
agreements, (viii) a prohibition on engaging in businesses unrelated to the
business currently conducted by ARG and (ix) requirements that certain
substantial asset sales be consummated. The Credit Facilities also contain
provisions prohibiting Holdings from engaging in any business other than
ownership of ARG and from pledging the capital stock of ARG and requiring
Holdings to contribute to ARG the net proceeds of any public offering of equity
securities.
Events of Default under the Credit Facilities include, among others,
(i) any failure of ARG to pay amounts owing under the Credit Facilities within
5 days after the date due, (ii) the breach by ARG or any of its subsidiaries of
any covenants, representations or warranties contained in the Credit
Facilities, (iii) any failure to pay amounts due under other indebtedness or
contingent obligations of ARG or any of its subsidiaries or defaults that
result in or permit the acceleration of such indebtedness or contingent
obligations, if the aggregate amount of such indebtedness or contingent
obligations exceeds a specified amount, (iv) certain events of bankruptcy,
insolvency or dissolution of ARG or any of its subsidiaries and (v) certain
changes of control of ARG.
<PAGE>
Intercreditor Agreement and Collateral Documents
Pursuant to mortgages, deeds of trust, personal property security
agreements, pledge agreements, a trademark security agreement and a cash
collection account agreement, in each case executed and delivered by ARG and/or
the Subsidiary Guarantors on March 20, 1992 (as amended or supplemented,
collectively, the "Collateral Documents"), ARG and the Subsidiary Guarantors
granted to Bankers Trust Company, as Collateral Agent (the "Collateral Agent"),
a security interest in substantially all of their respective assets (the
"Collateral"), for the benefit of the secured parties referred to in the
respective Collateral Documents. The obligations of ARG and the Subsidiary
Guarantors under the Credit Facilities, the Senior Secured Notes (as herein
defined) and the respective guarantees thereof are secured pari passu on a
first priority basis by substantially all of the assets of ARG and the
Subsidiary Guarantors pursuant to the Collateral Documents. The Collateral
Documents also provide for additional lenders ("Additional Lenders") to become
beneficiaries thereof pursuant to procedures described in the Intercreditor
Agreement referred to below, so long as the additional indebtedness
("Additional Debt") incurred from such Additional Lenders is permitted by the
Credit Facilities (or any refinancing thereof) and the indentures relating to
the Senior Secured Notes.
The ability of the Collateral Agent to enter into amendments to the
Collateral Documents and to exercise its remedies thereunder, and to release
Collateral and take certain other actions in respect thereof, is governed by
the Intercreditor Agreement. The Intercreditor Agreement provides that
amendments to the Collateral Documents (other than Material Amendments (as
defined in the Intercreditor Agreement)) and releases of Collateral (other than
releases of a Substantial Portion of Collateral (as defined in the
Intercreditor Agreement) and releases pursuant to permitted asset sales),
generally require only the consent of the holders of a majority of the
outstanding indebtedness under the Credit Facilities (or any refinancing
thereof). After such indebtedness has been paid in full, such amendments and
releases will require the consent of a majority of the sum of the outstanding
indebtedness under the Senior Secured Notes and the outstanding Additional
Debt. Subject to certain exceptions, material amendments and releases of a
substantial portion of collateral require consent of (a) a majority of the sum
of the outstanding indebtedness under the Credit Facilities (or any refinancing
thereof) and the indentures relating to the Senior Secured Notes and certain
material outstanding Additional Debt and (b) 25% of the holders of each class
of indebtedness described in clause (a) above. Under certain circumstances the
consent of a majority of the outstanding indebtedness under the Credit
Facilities (or any refinancing thereof) and/or the indentures relating to the
Senior Secured Notes is required before the Collateral Agent may release or
foreclose upon the Collateral. The Intercreditor Agreement provides that
proceeds of any foreclosure upon the Collateral shall be applied pro rata to
any outstanding senior indebtedness entitled to the benefits of the
Intercreditor Agreement (including the Senior Secured Notes).
<PAGE>
Senior Secured Notes
In September 1992, ARG issued $120,000,000 aggregate principal amount
of Senior Secured Notes. In December of 1993, ARG issued an additional
$50,000,000 aggregate principal amount of Senior Secured Notes. The following
is a summary of the material terms of the Senior Secured Notes:
Guarantee and Security. The obligations under the Senior Secured
Notes are secured by a pledge of the stock of all of the Subsidiary Guarantors,
a guarantee of such borrowings by all of the Subsidiary Guarantors and a first
priority lien on substantially all real and personal property of ARG and the
Subsidiary Guarantors. See "Description of Certain Indebtedness--Intercreditor
Agreement and Collateral Documents."
Interest and Maturity. The Senior Secured Notes bear interest, paid
quarterly on March 15, June 15, September 15 and December 15 of each year, at a
rate of 13% per annum and will mature on September 15, 1998.
Redemption. At the option of ARG, the Senior Secured Notes may be
redeemed in whole or from time to time in part at a redemption price equal to
the applicable percentage of the principal amount thereof set forth below,
together with accrued and unpaid interest to the Redemption Date (as defined),
if redeemed during the periods as follows: (i) until March 14, 1997 at 105%;
(ii) March 15, 1997 through September 15, 1997 at 102.5% and (iii) thereafter,
at 100%. In addition, ARG is required to make a sinking fund payment on
September 15, 1997 in an amount, when added to the aggregate principal amount
of Senior Secured Notes redeemed with the proceeds of asset sales, sufficient
to retire 50% of the aggregate principal amount of Senior Secured Notes
originally issued under the indentures relating thereto (collectively, the
"Existing Senior Secured Note Indenture"), at a redemption price equal to 100%
of the principal amount thereof, together with accrued and unpaid interest to
the Redemption Date.
Events of Default and Remedies. The following are Events of Default
under the Existing Senior Secured Note Indenture with respect to the Senior
Secured Notes: (a) failure to pay principal of the Senior Secured Notes when
due; (b) failure to pay any interest on the Senior Secured Notes when due,
continued for 30 days; (c) failure to perform any covenant of ARG or any
Subsidiary Guarantor in the Existing Senior Secured Note Indenture or the
Senior Secured Notes (continued, in the case of certain covenants, for 30 days
after written notice); (d) failure to pay at final maturity the principal
amount of any indebtedness of ARG or the Subsidiary Guarantors, or acceleration
of the stated maturity of any such indebtedness, if the aggregate principal
amount of such indebtedness, together with the principal amount of any other
such indebtedness in default for failure to pay principal at final maturity or
which has been accelerated, aggregates $10 million or more at any time;
(e) certain events of bankruptcy, insolvency or reorganization; (f) foreclosure
and certain actions to foreclose on a material portion of the collateral
securing indebtedness of ARG and the Subsidiary Guarantors; (g) the entering of
final judgments not covered by insurance for the payment of money which in the
aggregate at any one time exceeds $10 million, which shall remain undischarged
and unbonded for a period (during which execution shall not be effectively
stayed) of 60 days after such judgment becomes final and nonappealable; and
(h) failure by ARG or the Subsidiary Guarantors to maintain the first priority
<PAGE>
lien on a material portion of the Collateral for the benefit of the holders of
the Senior Secured Notes and the holders of other Senior Indebtedness (as
defined).
Restrictive Covenants. The Existing Senior Secured Note Indenture
imposes certain limitations on the ability of ARG and each Subsidiary Guarantor
to, among other things, make payments in respect of the ARG's capital stock,
enter into transactions with affiliates and significant stockholders, incur
additional indebtedness or liens, allow to become effective any payment
restriction with respect to any of the Subsidiaries (as defined), dispose of
substantially all of the properties or assets used in the operation of Black
Angus restaurants, make certain other asset sales, amend certain agreements,
cause the Subsidiary Guarantors to issue preferred stock or dispose of capital
stock of the Subsidiary Guarantors. Additionally, except under certain
circumstances, ARG may not merge or consolidate with, or sell or convey all or
substantially all of its assets to, any person, or adopt a plan of liquidation.
As described above under "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources," ARG is
also required to consummate asset sales on sale/leaseback transactions on or
prior to December 31, 1996.
Maintenance of Consolidated EBITDA. ARG is required to maintain
Consolidated EBITDA (as defined) for each period of four consecutive fiscal
quarters ending on or after December 30, 1996 at the levels specified below:
Date Amount
December 30, 1996 $33,000,000
March 31, 1997 34,000,000
June 30, 1997 35,000,000
September 29, 1997 35,500,000
December 29, 1997 36,000,000
March 30, 1998 36,500,000
June 29, 1998 37,000,000
In addition, ARG is required to maintain Consolidated EBITDA of at
least $13,000,000 for each period of two consecutive fiscal quarters.
Net Proceeds Purchase. ARG is required, upon certain asset sales or
the incurrence of mortgage indebtedness, to purchase with a specified portion
of the net proceeds thereof the Senior Secured Notes at a price equal to 100%
of the aggregate principal amount thereof, plus accrued interest to the date of
purchase.
Change of Control Offer. Upon the occurrence of a change of control,
each holder shall have the right to require the repurchase of such holder's
Senior Secured Notes at a purchase price equal to 101% of the principal amount
thereof plus accrued interest, if any, to the date of purchase.
<PAGE>
Subordinated Loan Agreement
ARG has outstanding Subordinated Notes aggregating $45.0 million
issued to Merrill Lynch in July 1991 (and subsequently sold by Merrill Lynch to
a group of financial institutions) and maturing on September 30, 2000.
The interest rate applicable to the Subordinated Notes is a fixed rate
of 10.25%, with optional prepayments of the Subordinated Notes prohibited until
December 14, 1997. The holders of the Subordinated Notes has been granted
registration rights with respect to the Subordinated Notes.
The Subordinated Loan Agreement provides that the indebtedness under
the Subordinated Loan Agreement (including principal, premium, if any, and
interest) is subordinated in right of payment to the prior payment in full of
all Senior Indebtedness (as defined therein), including the indebtedness under
the Credit Facilities and the Senior Secured Notes.
The Subordinated Notes are secured on a second priority basis by a
pledge of the stock of all of the Subsidiary Guarantors directly owned by ARG,
subject to the prior lien of the Collateral Agent in favor of the banks under
the Credit Facilities and the holders of the Senior Secured Notes.
The Subordinated Loan Agreement contains various restrictive financial
and other covenants including, without limitation, (i) restrictions on the
incurrence of indebtedness, leases and liens, (ii) restrictions on mergers,
acquisitions, sales of assets, investments and transactions with affiliates,
(iii) restrictions on dividends and other payments with respect to shares of
ARG's capital stock, (iv) a prohibition on engaging in businesses unrelated to
the business conducted by ARG as of March 20, 1992 and (v) an EBITDA
maintenance covenant comparable to the EBITDA maintenance covenant contained in
the Existing Senior Secured Note Indenture that becomes applicable once ARG's
senior debt is paid in full. In addition, if the consolidated EBITDA of ARG
falls below a specified level for two consecutive fiscal quarters, ARG is
required to offer to purchase at par a portion of the outstanding Subordinated
Notes.
THE EXCHANGE OFFER
Purpose of the Exchange Offer
The Debentures were originally issued and sold on March 13, 1996. The
offer and sale of the Debentures was not required to be registered under the
Act in reliance upon the exemption provided by Section 4(2) of the Act. In
connection with the sale of the Debentures, Holdings agreed to file with the
Commission, and use all reasonable efforts to cause to become effective, a
registration statement relating to an exchange offer (the "Exchange Offer
Registration Statement") pursuant to which new debentures of Holdings covered
by such Exchange Offer Registration Statement and containing terms identical in
all respects to the terms of the Debentures would be offered in exchange for
Debentures tendered at the option of the holders thereof or, if applicable
interpretations of the staff of the Commission did not permit Holdings to
effect such an exchange offer, Holdings agreed, at its cost, to file a shelf
<PAGE>
registration statement covering resales of the Debentures (the "Shelf
Registration Statement") and use all reasonable efforts to have such Shelf
Registration Statement declared effective and kept effective for a period of
three years from the effective date thereof.
The purpose of the Exchange Offer is to fulfill Holdings' obligations
with respect to the Registration Rights Agreement. Except as provided under
"Plan of Distribution" with respect to certain broker-dealers, this Prospectus
may not be used by any holder of the Debentures or any holder of the Exchange
Debentures to satisfy the registration and prospectus delivery requirements
under the Act that may apply in connection with any resale of the Debentures or
the Exchange Debentures. See "--Terms of the Exchange," below.
Terms of the Exchange
Holdings hereby offers to exchange, subject to the conditions set
forth herein and in the Letter of Transmittal accompanying this Prospectus,
$1,000 in principal amount of Exchange Debentures for each $1,000 in principal
amount of Debentures. The terms of the Exchange Debentures are identical in all
respects to the terms of the Debentures for which they may be exchanged
pursuant to this Exchange Offer, except that the Exchange Debentures will
generally be freely transferable by holders thereof and will not be subject to
any covenant regarding registration. The Exchange Debentures will evidence the
same debt as the Debentures and will be entitled to the benefits of the
Debenture Indenture. See "Description of the Exchange Debentures."
The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Debentures being tendered for exchange
Holdings has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the
Exchange Debentures issued pursuant to the Exchange Offer in exchange for the
Debentures may be offered for sale, resold or otherwise transferred by any
holder without compliance with the registration and prospectus delivery
provisions of the Act. Instead, based on an interpretation by the staff of the
Commission set forth in a series of no-action letters issued to third parties,
Holdings believes that Exchange Debentures issued pursuant to the Exchange
Offer in exchange for Debentures may be offered for sale, resold and otherwise
transferred by any holder of such Exchange Debentures (other than any such
holder which is an "affiliate" of Holdings within the meaning of Rule 405 under
the Act) without compliance with the registration and prospectus delivery
provisions of the Act, provided that such Exchange Debentures are acquired in
the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Debentures. Any holder who tenders in the Exchange Offer for
the purpose of participating in a distribution of the Exchange Debentures
cannot rely on such interpretation by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Debentures for its own account in exchange for Debentures, where such
Debentures were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
<PAGE>
prospectus in connection with any resale of such Exchange Debentures. See "Plan
of Distribution."
Interest on the Exchange Debentures shall accrue commencing December
15, 1998.
Tendering holders of the Debentures shall not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Debentures
pursuant to the Exchange Offer.
Expiration Date; Extensions; Termination; Amendments
The Exchange Offer shall expire on the Expiration Date. The term
"Expiration Date" means 5:00 p.m., New York City time, on , 1997,
unless Holdings in its sole discretion extends the period during which the
Exchange Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date on which the Exchange Offer, as so extended by
Holdings, shall expire. Holdings reserves the right to extend the Exchange
Offer at any time and from time to time by giving oral or written notice to
United States Trust Company of New York (the "Exchange Agent") and by timely
public announcement communicated, unless otherwise required by applicable law
or regulation, by making a release to the Dow Jones News Service. During any
extension of the Exchange Offer, all Debentures previously tendered pursuant to
the Exchange Offer will remain subject to the Exchange Offer.
The Exchange Date will be the first business day following the
Expiration Date. Holdings expressly reserves the right to (i) terminate the
Exchange Offer and not accept for exchange any Debentures if either of the
events set forth below under "Conditions to the Exchange Offer" shall have
occurred and shall not have been waived by Holdings and (ii) amend the terms of
the Exchange Offer in any manner which, in its good faith judgment, is
advantageous to the holders of the Debentures, whether before or after any
tender of the Debentures. Unless Holdings terminates the Exchange Offer prior
to 5:00 p.m., New York City time, on the Expiration Date, Holdings will
exchange the Exchange Debentures for the Debentures on the Exchange Date.
Tender Procedure
The tender to Holdings of Debentures by a holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between such
holder and Holdings in accordance with the terms and subject to the conditions
set forth herein and in the Letter of Transmittal.
A holder of Debentures may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all references in
this Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Debentures being tendered and any required
signature guarantees, to the Exchange Agent at its address set forth on the
back cover of this Prospectus on or prior to the Expiration Date (or complying
<PAGE>
with the procedure for book-entry transfer described below) or (ii) complying
with the guaranteed delivery procedures described below.
If tendered Debentures are registered in the name of the signer of the
Letter of Transmittal and the Exchange Debentures to be issued in exchange
therefor are to be issued (and any untendered Debentures are to be reissued) in
the name of the registered holder (which term, for the purposes described
herein, shall include any participant in The Depository Trust Company (also
referred to as a "book-entry transfer facility") whose name appears on a
security listing as the owner of Debentures), the signature of such signer need
not be guaranteed. In any other case, the tendered Debentures must be endorsed
or accompanied by written instruments of transfer in form satisfactory to
Holdings and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a commercial bank
or trust company located or having an office, branch, agency or correspondent
in the United States, or by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. (any of the
foregoing hereinafter referred to as an "Eligible Institution"). If the
Exchange Debentures and/or Debentures not exchanged are to be delivered to an
address other than that of the registered holder appearing on the register for
the Debentures, the signature in the Letter of Transmittal must be guaranteed
by an Eligible Institution.
The method of delivery of Debentures and all other documents is at the
election and risk of the holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance be
obtained, and the mailing be made sufficiently in advance of the Expiration
Date to permit delivery to the Exchange Agent on or before the Expiration Date.
The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Debentures at the book-
entry transfer facility for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in the book-entry transfer facility's system may make book-entry
delivery of Debentures by causing such book-entry transfer facility to transfer
such Debentures into the Exchange Agent's account with respect to the
Debentures in accordance with the book-entry transfer facility's procedures for
such transfer. Although delivery of Debentures may be effected through book-
entry transfer into the Exchange Agent's accounts at the book-entry transfer
facility, an appropriate Letter of Transmittal with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth on the
back cover page of this Prospectus on or prior to the Expiration Date, or, if
the guaranteed delivery procedures described below are complied with, within
the time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not
permit a Letter of Transmittal or Debentures to reach the Exchange Agent before
the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if the Exchange Agent has
received at its office listed on the back cover hereof on or prior to the
Expiration Date a letter, telegram or facsimile transmission (receipt confirmed
<PAGE>
by telephone and an original delivered by guaranteed overnight courier) from an
Eligible Institution setting forth the name and address of the tendering
holder, the names in which the Debentures are registered and, if possible, the
certificate numbers of the Debentures to be tendered, and stating that the
tender is being made thereby and guaranteeing that within five New York Stock
Exchange trading days after the date of execution of such letter, telegram or
facsimile transmission by the Eligible Institution, the Debentures, in proper
form for transfer (or a confirmation of book-entry transfer of such Debentures
into the Exchange Agent's account at the book-entry transfer facility), will be
delivered by such Eligible Institution together with a properly completed and
duly executed Letter of Transmittal (and any other required documents). Unless
Debentures being tendered by the above-described method are deposited with the
Exchange Agent within the time period set forth above (accompanied or preceded
by a properly completed Letter of Transmittal and any other required
documents), Holdings may, at its option, reject the tender. Copies of a Notice
of Guaranteed Delivery which may be used by Eligible Institutions for the
purposes described in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i)
the tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Debentures (or a confirmation of book-entry transfer of such
Debentures into the Exchange Agent's account at the book-entry transfer
facility) is received by the Exchange Agent, or (ii) a Notice of Guaranteed
Delivery or letter, telegram or facsimile transmission to similar effect (as
provided above) from an Eligible Institution is received by the Exchange Agent.
Issuances of Exchange Debentures in exchange for Debentures tendered pursuant
to a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided above) by an Eligible Institution
will be made only against deposit of the Letter of Transmittal (and any other
required documents) and the tendered Debentures.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Debentures will be
determined by Holdings, whose determination will be final and binding. Holdings
reserves the absolute right to reject any or all tenders not in proper form or
the acceptance for exchange of which may, in the opinion of Holdings' counsel,
be unlawful. Holdings also reserves the absolute right to waive any of the
conditions of the Exchange Offer or any defect or irregularity in the tender of
any Debentures. None of Holdings, the Exchange Agent or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
Terms and Conditions of the Letter of Transmittal
The Letter of Transmittal contains, among other things, the following
terms and conditions, which are part of the Exchange Offer.
The party tendering Debentures for exchange (the "Transferor")
exchanges, assigns and transfers the Debentures to Holdings and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's agent and
attorney-in-fact to cause the Debentures to be assigned, transferred and
exchanged. The Transferor represents and warrants that it has full power and
<PAGE>
authority to tender, exchange, assign and transfer the Debentures, and to
acquire Exchange Debentures issuable upon the exchange of such tendered
Debentures, and that, when the same are accepted for exchange, Holdings will
acquire good and unencumbered title to the tendered Debentures free and clear
of all liens, restrictions, charges and encumbrances and not subject to any
adverse claim. The Transferor also warrants that it will, upon request, execute
and deliver any additional documents deemed by the Exchange Agent or Holdings
to be necessary or desirable to complete the exchange, assignment and transfer
of tendered Debentures or transfer ownership of such Debentures on the account
books maintained by a book-entry transfer facility. The Transferor further
agrees that acceptance of any tendered Debentures by Holdings and the issuance
of Exchange Debentures in exchange therefor shall constitute performance in
full by Holdings of its obligations under the Registration Rights Agreement and
that Holdings shall have no further obligations or liabilities thereunder
except as provided in Section 7 of said agreement. All authority conferred by
the Transferor will survive the death or incapacity of the Transferor and every
obligation of the Transferor shall be binding upon the heirs, legal
representatives, successors, assigns, executors and administrators of such
Transferor.
The Transferor certifies that it is not an "affiliate" of Holdings
within the meaning of Rule 405 under the Act and that it is acquiring the
Exchange Debentures offered hereby in the ordinary course of such Transferor's
business and that such Transferor has no arrangement with any person to
participate in the distribution of such Exchange Debentures. Each Transferor
which is a broker-dealer receiving Exchange Debentures for its own account must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Debentures. By so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Act. This Prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection with resales of
Exchange Debentures received in exchange for Debentures where such Debentures
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. Holdings will, for a period of 180 days after the
Expiration Date, make this Prospectus available to any broker-dealer for use in
connection with any such resale.
Withdrawal Rights
Tenders of Debentures pursuant to the Exchange Offer are irrevocable,
except that Debentures tendered pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date.
To be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Exchange Agent
at its address set forth on the back cover of this Prospectus, and with respect
to a facsimile transmission, must be confirmed by telephone and an original
delivered by guaranteed overnight delivery. Any such notice of withdrawal must
specify the person named in the Letter of Transmittal as having tendered
Debentures to be withdrawn, the certificate numbers of Debentures to be
withdrawn, the principal amount of Debentures to be withdrawn, a statement that
such holder is withdrawing his election to have such Debentures exchanged, and
<PAGE>
the name of the registered holder of such Debentures, and must be signed by the
holder in the same manner as the original signature on the Letter of
Transmittal (including any required signature guarantees) or be accompanied by
evidence satisfactory to Holdings that the person withdrawing the tender has
succeeded to the beneficial ownership of the Debentures being withdrawn. The
Exchange Agent will return the properly withdrawn Debentures promptly following
receipt of notice of withdrawal. If Debentures have been tendered pursuant to
the procedure for book-entry transfer, any notice of withdrawal must specify
the name and number of the account at the book-entry transfer facility to be
credited with the withdrawn Debentures or otherwise comply with the book-entry
transfer facility procedure. All questions as to the validity of notices of
withdrawals, including time of receipt, will be determined by Holdings and such
determination will be final and binding on all parties.
Acceptance of Debentures for Exchange; Delivery of Exchange Debentures
Upon the terms and subject to the conditions of the Exchange Offer,
the acceptance for exchange of Debentures validly tendered and not withdrawn
and issuance of the Exchange Debentures will be made on the Exchange Date. For
the purposes of the Exchange Offer, Holdings shall be deemed to have accepted
for exchange validly tendered Debentures when, as and if Holdings has given
written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of
Debentures for the purposes of receiving Exchange Debentures from Holdings and
causing the Debentures to be assigned, transferred and exchanged. Upon the
terms and subject to the conditions of the Exchange Offer, delivery of Exchange
Debentures to be issued in exchange for accepted Debentures will be made by the
Exchange Agent promptly after acceptance by Holdings of the tendered
Debentures. Tendered Debentures not accepted for exchange by Holdings will be
returned without expense to the tendering holders promptly following the
Expiration Date or, if Holdings terminates the Exchange Offer prior to the
Expiration Date, promptly after the Exchange Offer is so terminated.
Conditions to the Exchange Offer
Notwithstanding any other provision of the Exchange Offer, or any
extension of the Exchange Offer, Holdings will not be required to issue
Exchange Debentures in respect of any properly tendered Debentures not
previously accepted and may terminate the Exchange Offer (by oral or written
notice to the Exchange Agent and by timely public announcement communicated,
unless otherwise required by applicable law or regulation, by making a release
to the Dow Jones News Service), or, at its option, modify or otherwise amend
the Exchange Offer, if either of the following events occur:
(a) any law, rule or regulation or applicable interpretations of the
staff of the Commission which, in the good faith determination of Holdings,
do not permit Holdings to effect the Exchange Offer; or
(b) there shall occur a change in the current interpretation by the
staff of the Commission which permits the Exchange Debentures issued
pursuant to the Exchange Offer in exchange for Debentures to be offered for
<PAGE>
resale, resold and otherwise transferred by holders thereof (other than any
such holder which is an "affiliate" of Holdings within the meaning of Rule
405 under the Act) without compliance with the registration and prospectus
delivery provisions of the Act provided that such Exchange Debentures are
acquired in the ordinary course of such holders' business and such holders
have no arrangement with any person to participate in the distribution of
such Exchange Debentures.
Holdings expressly reserves the right to terminate the Exchange Offer
and not accept for exchange any Debentures upon the occurrence of either of the
foregoing conditions (which represent all of the material conditions to the
acceptance by Holdings of properly tendered Debentures). In addition, Holdings
may amend the Exchange Offer at any time prior to the Expiration Date if either
of the conditions set forth above occur. Moreover, regardless of whether either
of such conditions has occurred, Holdings may amend the Exchange Offer in any
manner which, in its good faith judgment, is advantageous to holders of the
Debentures.
The foregoing conditions are for the sole benefit of Holdings and may
be waived by Holdings, in whole or in part, in its sole discretion. Any
determination made by Holdings concerning an event, development or circumstance
described or referred to above will be final and binding on all parties.
Exchange Agent
United States Trust Company of New York has been appointed as the
Exchange Agent for the Exchange Offer. Letters of Transmittal must be addressed
to the Exchange Agent at its address set forth on the back cover page of this
Prospectus. United States Trust Company of New York, also acts as Trustee under
the Debenture Indenture.
Delivery to an address other than as set forth herein, or
transmissions of instructions via a facsimile or telex number other than the
ones set forth herein, will not constitute a valid delivery.
Solicitation of Tenders; Expenses
Holdings has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. Holdings
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. Holdings will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this and related documents to the
beneficial owners of the Debentures and in handling or forwarding tenders for
their customers.
No person has been authorized to give any information or to make any
representation in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations
should not be relied upon as having been authorized by Holdings. Neither the
<PAGE>
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of Holdings since the respective dates as of which information is given
herein. The Exchange Offer is not being made to (nor will tenders be accepted
for or on behalf of) holders of Debentures in any jurisdiction in which the
making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, Holdings may, at its
discretion, take such action as it may deem necessary to make the Exchange
Offer in any such jurisdiction and extend the Exchange Offer to holders of
Debentures in such jurisdiction. In any jurisdiction in which the securities
laws or the blue sky laws of which require the Exchange Offer to be made by a
licensed broker or dealer, the Exchange Offer is being made on behalf of
Holdings by one or more registered brokers or dealers which are licensed under
the laws of such jurisdiction.
Other
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Debentures are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Debentures pursuant to the terms of, this Exchange Offer,
Holdings will have fulfilled a covenant contained in the Registration Rights
Agreement. Holders of the Debentures who do not tender their certificates in
the Exchange Offer will continue to hold such certificates and will be
entitled to all the rights, and limitations applicable thereto, under the
Debenture Indenture, except for any such rights under the Registration Rights
Agreement which by their terms terminate or cease to have further effectiveness
as a result of the making of this Exchange Offer. See "Description of the
Exchange Debentures." All untendered Debentures will continue to be subject to
the restrictions on transfer set forth in the Debenture Indenture.
Holdings may in the future seek to acquire untendered Debentures in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. Holdings has no present plan to acquire any Debentures
which are not tendered in the Exchange Offer.
DESCRIPTION OF THE EXCHANGE DEBENTURES
The Exchange Debentures will be issued under an Indenture, dated as of
December 1, 1993, as supplemented by the First Supplemental Indenture thereto,
dated as of March 13, 1996 (the "Debenture Indenture"), between the Company and
United States Trust Company of New York as trustee (the "Debenture Trustee").
The terms of the Exchange Debentures will be identical in all respects to the
terms of the Debentures and to the $88,557,000 aggregate principal amount of
Series B Securities (as defined in the Debenture Indenture) issued on March 16,
1994 under the Debenture Indenture (the "Existing Series B Debentures"). The
following summaries of certain provisions of the Exchange Debentures and the
Debenture Indenture do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, the provisions of the Exchange
<PAGE>
Debentures and the Debenture Indenture, respectively, including the definitions
therein of certain terms. Particular provisions and defined terms referred to
in the following summaries refer to and incorporate by reference the provisions
and defined terms of the Debenture Indenture.
Principal, Maturity and Interest
The Exchange Debentures, together with the Debentures and the Existing
Series B Debentures, are limited in aggregate principal amount to $105,887,000.
The Exchange Debentures will be issued only in fully registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
The Exchange Debentures will mature on December 15, 2005. No interest
on the Exchange Debentures will accrue until December 15, 1998. Interest on
the Exchange Debentures will accrue thereafter at the rate of 14% per annum and
will be payable semi-annually on each June 15 and December 15, commencing on
June 15, 1999 to the holders of record of the Exchange Debentures (the
"Holders") at the close of business on the immediately preceding June 1 and
December 1.
Principal of, premium, if any, and interest on the Exchange Debentures
will be payable, and the Exchange Debentures may be presented for registration
of transfer or exchange, at the corporate trust office of the Debenture Trustee
or such other office or agency of the Company as may be designated by the
Company for such purpose. At the option of the Company, payment of interest
may be made by check mailed to the Holders at their respective addresses set
forth in the register of Holders of Exchange Debentures.
Mandatory Redemption
Except as set forth below under "Change of Control" and "Certain
Covenants--Limitation on Sale of Assets," the Company will not be required to
make mandatory redemption payments with respect to the Exchange Debentures.
Optional Redemption and Prepayment
Except as set forth herein, the Exchange Debentures will not be
redeemable at the Company's option prior to December 15, 1998. Thereafter, the
Exchange Debentures will be subject to redemption at the option of the Company,
in whole or in part, upon not less than 30 nor more than 60 days' notice, at
the redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest, if any, thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
December 15 of the years indicated below:
Year Percentage
- ---- ----------
1998 107.0%
1999 103.5%
2000 and thereafter 100.0%
<PAGE>
Selection and Notice
In case of a partial redemption, selection of the Exchange Debentures
or portions thereof for redemption shall be made by the Debenture Trustee by
lot, pro rata or in such manner as it shall deem appropriate and fair and in
such manner as complies with any applicable legal requirements. Exchange
Debentures may be redeemed in part in multiples of $1,000 principal amount
only. Notice of redemption will be sent, by first class mail, postage prepaid,
at least 30 days and not more than 60 days prior to the date fixed for
redemption to each Holder whose Exchange Debentures are to be redeemed at the
last address for such Holder then shown on the registry books. If any
Debenture is to be redeemed in part only, the notice of redemption that relates
to such Debenture shall state the portion of the principal amount thereof to be
redeemed. A new Debenture in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Debenture. On and after any redemption date, interest will cease
to accrue on the Exchange Debentures or part thereof called for redemption as
long as the Company has deposited with the Paying Agent funds in satisfaction
of the redemption price pursuant to the Debenture Indenture.
Change of Control
In the event of a Change of Control (the date of such occurrence being
a "Change of Control Date"), the Company shall notify the Holders in writing of
such occurrence and shall make an offer to purchase for cash (a "Change of
Control Offer"), on a business day (a "Change of Control Payment Date") not
later than 70 days following the Change of Control Date, all Exchange
Debentures then outstanding at a purchase price (the "Change of Control
Purchase Price") equal to 101% of the Accreted Value thereof to the Change of
Control Payment Date (if prior to December 15, 1998) or 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the Change of
Control Payment Date (if on or after December 15, 1998). Notice of a Change of
Control Offer shall be mailed by the Company not less than 30 days nor more
than 40 days before the Change of Control Payment Date. The Change of Control
Offer is required to remain open for at least 20 business days and until the
close of business on the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that
the Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Exchange Debentures that might be delivered by
Holders seeking to accept the Change of Control Offer.
The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of the Exchange Debentures
pursuant to a Change of Control Offer. To the extent that the provisions of
any securities laws or regulations conflict with the "Change of Control"
provisions of the Debenture Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Debenture Indenture by virtue thereof.
<PAGE>
Certain Covenants
Limitation on Restricted Payments. The Company will not, directly or
indirectly, (a) declare or pay any dividend or make any distribution on its
Capital Stock, or otherwise, to its shareholders (other than dividends or
distributions payable in its Qualified Capital Stock), (b) purchase, redeem or
otherwise acquire or retire for value, or permit any Subsidiary to purchase,
redeem or otherwise acquire for value, any Qualified Capital Stock of the
Company (including any warrants, rights or options to purchase or acquire
shares of any class of such Capital Stock but excluding exchangeable or
convertible Indebtedness of such person), other than through the issuance in
exchange therefor solely of Qualified Capital Stock of the Company, (c) redeem,
repurchase, defease, or otherwise acquire or retire for value, or permit any of
its Subsidiaries to, directly or indirectly, redeem, repurchase, defease, or
otherwise acquire or retire for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment, Indebtedness of the
Company that is subordinate in right of payment to the Debentures or the
Exchange Debentures or (d) make, or permit any of its Subsidiaries to make, any
Investment (excluding any Permitted Investment) (each of the foregoing actions
set forth in clauses (a), (b), (c) and (d) being referred to as a "Restricted
Payment"), if at the time of such Restricted Payment or immediately after
giving effect thereto, (i) a Default or Event of Default shall have occurred
and be continuing, (ii) immediately after such Restricted Payment and after
giving effect thereto on a pro forma basis, the Company could not incur at
least $1.00 of additional Indebtedness pursuant to the first paragraph of the
"Limitation on Incurrence of Additional Indebtedness" covenant (without giving
effect to the second paragraph thereof), or (iii) such Restricted Payment,
together with all other Restricted Payments subsequent to the Issue Date (the
amount expended for such purposes, if other than in cash, shall be the fair
market value of such property as determined in good faith by senior management
of the Company or, if the market value of such property exceeds $1,000,000, by
the Board of Directors (which determination shall be evidenced by a Board
Resolution)) shall exceed the sum of:
(1) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such
loss) of the Company earned from the beginning of the first fiscal
quarter commencing after the Issue Date to the date of such Restricted
Payment (treating such period as a single accounting period); and
(2) 100% of the aggregate Net Cash Proceeds received by the
Company from any person (other than a Subsidiary) from the issuance
and sale after the Issue Date of Qualified Capital Stock (excluding
(A) Qualified Capital Stock paid as a dividend on any Capital Stock or
as interest on any Indebtedness and (B) any Net Cash Proceeds from
issuances and sales of Qualified Capital Stock financed directly or
indirectly using funds borrowed from the Company or any Subsidiary,
until and to the extent such borrowing is repaid).
The foregoing provisions shall not prohibit:
<PAGE>
(1) the payment of any dividend within 60 days after the
date of its declaration if the dividend would have been permitted on
the date of declaration;
(2) the acquisition, redemption or retirement of any shares
of Capital Stock of the Company or the repayment of any Indebtedness
of the Company in exchange for or solely out of the proceeds of the
substantially concurrent sale (other than to a Subsidiary) of shares
of Qualified Capital Stock;
(3) any payments by the Company to repurchase its Common
Stock from employees of the Company or any of its Subsidiaries (or
their respective estates or heirs) pursuant to the terms of the Common
Stock Subscription Agreements (or the Stock Option Plan); provided
that such payments shall not exceed in the aggregate $1,000,000 in any
Yearly Period (provided that any unused amounts may be carried over to
the immediately succeeding Yearly Period); provided, however, that in
addition to the foregoing, the Company may repurchase its Common Stock
pursuant to the terms of the Common Stock Subscription Agreements (or
the Stock Option Plan) through the issuance of debt securities in an
aggregate principal amount outstanding at any time of up to $2,000,000
and having the maturity, interest rate and subordination provisions
referred to in the Common Stock Subscription Agreements as in effect
on the Issue Date; and provided, further, that, for purposes of this
clause (3) only, the aggregate cash purchase price paid by the Company
to repurchase such Common Stock shall be deemed to have been reduced
by the amount, if any, of cash proceeds received by the Company
subsequent to the Issue Date from the sale or resale of Common Stock
to employees of the Company or any of its Subsidiaries;
(4) the refinancing, refunding, replacement or exchange of
Indebtedness of the Company incurred after the Issue Date which by its
terms is subordinate in right and priority of payment to the prior
performance and payment in full of the Indebtedness under the
Debenture Indenture and the Debentures and the Exchange Debentures for
Disqualified Capital Stock of the Company or for other Indebtedness of
the Company incurred after the Issue Date which is also so
subordinated; provided that such Disqualified Capital Stock or
subordinated Indebtedness was incurred in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant;
(5) payments to repurchase Common Stock with the proceeds of
key-man life insurance from the estate or heirs of Anwar S. Soliman
and Ralph S. Roberts; and
(6) the payment of cash dividends on any Preferred Stock of
the Company issued in exchange for, or in order to refinance,
Indebtedness as to which cash interest was payable at the time of such
exchange or refinancing, provided that the Fixed Charge Coverage Ratio
at the time of and after giving effect to any such dividend payment is
equal to or greater than 1.75 to 1.0;
<PAGE>
provided that (A) in the case of clauses (2) through (6), no Default or Event
of Default shall have occurred and be continuing at the time of such payment or
as a result thereof and (B) in the case of clause (1), such dividends are
declared and paid in accordance with the Company's Certificate of Incorporation
and applicable law.
In determining the aggregate amount of Restricted Payments permissible
under clause (iii) of the first paragraph hereunder, amounts expended, incurred
or outstanding pursuant to clauses (1), (3) and (6) of the immediately
preceding paragraph shall be included as Restricted Payments and amounts
expended, incurred or outstanding pursuant to clauses (2), (4) and (5) of the
immediately preceding paragraph shall not be included as Restricted Payments.
Limitation on Incurrence of Additional Indebtedness. The Company will
not, and will not permit any of its Subsidiaries to, after the Issue Date,
directly or indirectly, incur, assume, guarantee, become liable, contingently
or otherwise, with respect to, or otherwise become responsible for the payment
of (collectively "incur") any Indebtedness; provided, however, that the Company
or any Subsidiary may incur Indebtedness if (A) no Default or Event of Default
shall have occurred and be continuing at the time of or as a consequence of the
incurrence of such Indebtedness and (B) on the date of the incurrence of such
Indebtedness, the Fixed Charge Coverage Ratio of the Company would be greater
than or equal to 2.25 to 1.0.
Notwithstanding the foregoing, the Company and its Subsidiaries may
incur (i) Indebtedness of ARG and its Subsidiaries under the Credit Facility
and any refinancing, refunding, replacement or extension thereof in an
aggregate principal amount at any time outstanding not to exceed $26 million
(plus obligations for related payments for early termination, interest, fees,
expenses and indemnities and other amounts payable thereunder or in connection
therewith); (ii) Indebtedness evidenced by the Senior Secured Notes;
(iii) Indebtedness evidenced by the Debentures and the Exchange Debentures;
(iv) purchase money Indebtedness incurred in the ordinary course of business,
or Indebtedness incurred for Capital Expenditures directly related to the
restaurant business of the Company and its Subsidiaries not to exceed
$10,000,000 in the aggregate; (v) intercompany Indebtedness between and among
the Subsidiaries and the Company; (vi) other Indebtedness existing on the Issue
Date as in effect on the Issue Date (after giving affect to the application of
the Net Proceeds of the Offerings); (vii) Indebtedness incurred for Capitalized
Leases and any renewals, extensions, refinancings or replacements thereof;
provided that (a) such Capitalized Leases are directly related to the
restaurant business of the Company and its Subsidiaries, (b) the aggregate
principal amount incurred pursuant to this clause (vii) in any Yearly Period
shall not exceed $5,000,000 (provided that any unused amounts may be carried
over to the next two (but not any subsequent) Yearly Periods) and (c) the
aggregate principal amount incurred pursuant to this clause (vii) at any time
outstanding shall not exceed $20,000,000; (viii) Mortgage Indebtedness;
provided, that such Mortgage Indebtedness may, at the option of the Company, be
incurred by a Mortgage Subsidiary; and provided, further, (a) the loan-to-value
ratio is not less than 60% and not more than 100% for properties owned in fee
at the time of issuance; and (b) the Net Cash Proceeds of Mortgage Indebtedness
with respect thereto are used to make an Asset Sale Offer if required by the
<PAGE>
covenant "Limitation on Sale of Assets"; (ix) Indebtedness in the form of
promissory notes issued to a financing subsidiary of an insurance company in
connection with the furnishing of credit support for workers' compensation and
general liability obligations; provided that such Indebtedness is not, and is
not required by GAAP to be, reflected on the balance sheet of the Company or
any of its Subsidiaries; (x) Indebtedness of the Company pursuant to promissory
notes issued in accordance with a Common Stock Subscription Agreement to
repurchase Common Stock from an employee of the Company or any Subsidiary
pursuant to such Agreement; (xi) Indebtedness under letters of credit (other
than Letter of Credit Obligations); provided that such letters of credit are
issued in connection with furnishing of credit support for (a) workers'
compensation, insurance and general liability obligations of the Company or any
Subsidiary or (b) the performance, payment, deposit or surety obligations of
the Company or any Subsidiary, and in the case of obligations under this clause
(b) if required by law or governmental rule or regulation or in accordance with
the custom and practice in the restaurant industry; provided, further, that
such obligations are not for money borrowed; (xii) Indebtedness of a Subsidiary
of the Company which is Acquired Indebtedness to the extent that such
Indebtedness could have been incurred by the Company pursuant to the
immediately preceding paragraph; (xiii) Interest Swap Obligations; provided
that the stated notional amount of such Interest Swap Obligations does not
exceed the principal amount of floating rate Indebtedness of the Company or the
Subsidiary to which such Interest Swap Obligations relate; (xiv) any
Refinancing Indebtedness and (xv) Indebtedness not otherwise expressly
permitted by clauses (i) through (xiv) above in an aggregate principal amount
not to exceed $25,000,000 at any one time.
Limitation on Transactions with Affiliates and Significant
Stockholders. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with or for the
benefit of, an Affiliate or Significant Stockholder (or any Affiliate of such
Significant Stockholder) of the Company or any Subsidiary (an "Affiliate
Transaction"), other than (i) Affiliate Transactions (including lease
transactions) that are fair to the Company or such Subsidiary, as the case may
be, and on terms at least as favorable as might reasonably have been obtainable
at such time from an unaffiliated party; provided that, if any such Affiliate
Transaction involves or has a value of more than $1,000,000, the determination
that such Affiliate Transaction is fair to the Company or such Subsidiary, as
the case may be, and is on terms at least as favorable as might reasonably have
been obtainable at such time from an unaffiliated party must be made reasonably
and in good faith by the Board of Directors of the Company or such Subsidiary,
as the case may be, which determination shall be evidenced by a Board
Resolution; provided, further, that if an Affiliate Transaction or series of
related Affiliate Transactions involves or has a value of more than $10,000,000
the Company or such Subsidiary, as the case may be, must receive an opinion
from an Independent Financial Advisor, to the effect that the financial terms
of such Affiliate Transaction are fair to the Company or such Subsidiary, as
the case may be, from a financial point of view, (ii) any Restricted Payment
that is made in compliance with the provisions of the "Limitation on Restricted
Payments" covenant, (iii) reasonable and customary fees and compensation paid
<PAGE>
to, and indemnity provided on behalf of, officers, directors, employees or
consultants of the Company or any Subsidiary, as determined by the Board of
Directors of the Company or any Subsidiary or the senior management thereof in
good faith, (iv) transactions exclusively between or among the Company and any
of its Subsidiaries or exclusively between or among such Subsidiaries, provided
such transactions are not otherwise prohibited by the Debenture Indenture,
(v) any agreement as in effect as of the Issue Date or any amendment thereto or
any transaction contemplated thereby (including pursuant to any amendment
thereto) so long as any such amendment is not disadvantageous to the
Debentureholders in any material respect, (vi) the existence of, or the
performance by the Company or any of its Subsidiaries of its obligations under
the terms of, any Common Stock Subscription Agreement or other stockholder
agreement or any stock option or incentive plan (including any registration
rights agreement or purchase agreement related thereto) to which it is a party
as of the Issue Date and any similar agreements which it may enter into
thereafter; provided, however, that the performance by the Company or any of
its Subsidiaries of obligations under any future amendment to any such existing
agreement or under any similar agreement entered into after the Issue Date
shall only be permitted by this clause (vi) to the extent that the terms of any
such amendment or new agreement are not otherwise disadvantageous to the
Debentureholders in any material respect, or (vii) transactions permitted by,
and complying with, the provisions of the "Limitations on Mergers,
Consolidations or Sales of Assets" covenant.
Limitation on Payment Restrictions Affecting Subsidiaries. The
Company will not, and will not permit any Subsidiary to, directly or
indirectly, create or suffer to exist, or allow to become effective, any
Payment Restriction with respect to any of its Subsidiaries, except for (a) any
such restrictions contained in (i) the Credit Facility and the documents
related thereto as in effect on the Issue Date, as any such Payment Restriction
may apply to any present or future Subsidiary, (ii) Indebtedness of any
Subsidiary existing on the Issue Date and the documents relating thereto, in
each case, as in effect on the Issue Date, (iii) the Debenture Indenture,
(iv) the Senior Secured Note Indentures, as in effect on the Issue Date,
(v) Indebtedness of a person existing at the time such person becomes a
Subsidiary; provided that (x) such Indebtedness is not incurred in connection
with, or in contemplation of, such person becoming a Subsidiary, (y) such
restriction is not applicable to any person, or the properties or assets of any
person, other than the person so acquired and (z) such Indebtedness is
otherwise permitted to be incurred pursuant to the "Limitation on Incurrence of
Additional Indebtedness" covenant and (vi) secured Indebtedness otherwise
permitted to be incurred pursuant to the "Limitation on Incurrence of
Additional Indebtedness" covenant that limits the right of the debtor to
dispose of the assets securing such Indebtedness; (b) customary non-assignment
provisions restricting subletting or assignment of any lease or assignment of
any contract of any Subsidiary; (c) customary net worth provisions contained in
leases and other agreements entered into by a Subsidiary of the Company in the
ordinary course of business; (d) customary restrictions with respect to a
Subsidiary of the Company pursuant to an agreement that has been entered into
for the sale or disposition of any of the Capital Stock or assets of such
Subsidiary; (e) customary provisions in instruments or agreements relating to
any Lien prohibiting the transfer of the property subject to such Lien; (f)
<PAGE>
restrictions contained in documents relating to Indebtedness incurred to
refinance, refund, extend or renew Indebtedness referred to in clause (a) above
or amendments to documents relating to the Indebtedness referred to in clause
(a) above; provided that the restrictions contained therein relating to the
payment of dividends by such Subsidiaries are not materially less favorable to
the Holders than those provided for in such Indebtedness being refinanced,
refunded, extended, renewed or amended; and (g) restrictions contained in
documents relating to other Indebtedness incurred in accordance with the
"Limitation on Incurrence of Additional Indebtedness" covenant; provided that
the restrictions contained therein relating to the payment of dividends by such
Subsidiaries are not materially less favorable to the Holders than those
provided for in the Credit Facility as in effect on the Issue Date.
Limitation on Liens. The Company shall not create, incur, assume or
suffer to exist any Liens upon any of its assets other than Liens to secure
Indebtedness which is pari passu with the Debentures and the Exchange
Debentures so long as the Debentures are secured on an equal and ratable basis
with such Indebtedness. Notwithstanding the foregoing, the Company shall be
permitted to incur, assume or suffer to exist (i) Permitted Liens; (ii) Liens
existing on the Issue Date; (iii) Liens to secure Indebtedness which is
incurred to renew, extend, replace or refinance Indebtedness secured by a Lien
on any property or asset of the Company and which is permitted to be incurred
pursuant to the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that such Liens do not extend to or cover any property or asset other
than the property or asset securing the Indebtedness being renewed, extended,
replaced or refinanced; (iv) Liens with respect to Acquired Indebtedness
permitted to be incurred under the "Limitation on Incurrence of Additional
Indebtedness" covenant; provided that such Liens secured such Acquired
Indebtedness at the time of the incurrence of such Acquired Indebtedness by the
Company and were not incurred in connection with, or in anticipation of, the
incurrence of such Acquired Indebtedness by the Company; and provided, further,
that such Liens do not extend to or cover any property or assets of the Company
other than the property or assets that secured the Acquired Indebtedness prior
to the time such Indebtedness became Acquired Indebtedness of the Company and
are no more favorable to the lienholders than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired Indebtedness by the
Company; (v) Liens in favor of the Debenture Trustee; (vi) Liens not otherwise
permitted hereby which secure Indebtedness or other obligations permitted to be
incurred hereunder not exceeding $5,000,000 in the aggregate at any one time;
(vii) Liens on cash collateral consisting solely of borrowed money evidenced by
the promissory notes referred to in clause (ix) of the second paragraph of the
"Limitation on Incurrence of Additional Indebtedness" covenant securing
obligations relating to the credit support arrangements referred to therein;
and (viii) any replacement, extension or renewal, in whole or in part, of any
Lien described in the foregoing clauses (i) through (vii); provided that if any
such clauses limit the amount secured or the assets subject to such Liens, no
extension or renewal shall increase the amount or the assets subject to such
Liens. Notwithstanding anything to the contrary herein, the Company will not
create, incur, assume, or suffer to exist any Lien on any of the Capital Stock
of ARG owned by the Company.
<PAGE>
Limitation on Sale of Assets. The Company will not, and will not
permit any of its Subsidiaries to, consummate any Asset Sale, unless (i) the
Company or the applicable Subsidiary receives consideration at the time of such
Asset Sale at least equal to the fair market value of the assets sold or
otherwise disposed of (as determined in good faith by senior management of the
Company, or if the aggregate fair market value of all non-cash consideration
(other than Cash Equivalents) received by the Company or such Subsidiary, as
the case may be, from such Asset Sale shall be greater than $2,000,000 but less
than $5,000,000 by the Board of Directors of the Company or, if the aggregate
fair market value of all non-cash consideration (other than Cash Equivalents)
received by the Company or such Subsidiary, as the case may be, from any such
Asset Sale shall be $5,000,000 or greater, as determined in good faith by an
Independent Financial Advisor) and (ii) except in the case of Asset Sales with
respect to one or more Designated Restaurants, at least 75% of the
consideration received by the Company or such Subsidiary, as the case may be,
from such Asset Sale shall be cash or Cash Equivalents. Nothing in this
covenant shall have the effect of prohibiting any transaction expressly
permitted by the "Limitation on Mergers, Consolidations or Sales of Assets"
covenant.
Upon the date of consummation of any Asset Sale or upon receipt of Net
Cash Proceeds of Mortgage Indebtedness (the date of such consummation or
receipt, a "Consummation Date"), the Net Cash Proceeds thereof shall be applied
by the Company or such Subsidiary within 270 days of the relevant Consummation
Date at its election to either: (i) the payment of amounts outstanding under
Indebtedness of the Company or a Subsidiary, or (ii) a Related Business
Investment, or (iii) a combination of payment and investment permitted by the
foregoing clauses (i) and (ii). On the earlier of (A) the 271st day after a
Consummation Date or (B) such date as the Board of Directors of the Company or
of such Subsidiary determines (as evidenced by a Board Resolution) not to apply
such Net Cash Proceeds as set forth in clauses (i)-(iii) of the next preceding
sentence (each of (A) and (B), a "Net Proceeds Offer Trigger Date"), the
aggregate amount of Net Cash Proceeds which have not been applied on or before
such Net Proceeds Offer Trigger Date as permitted in clauses (i), (ii) and
(iii) of the next preceding sentence (the "Net Proceeds Offer Amount") shall be
applied by the Company or such Subsidiary to make an offer to purchase for cash
(the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date")
not less than 30 nor more than 60 days following the applicable Net Proceeds
Offer Trigger Date, from all Holders on a pro rata basis Debentures and
Exchange Debentures with an Accreted Value or principal amount, as the case may
be, equal to the Net Proceeds Offer Amount at a price equal to 100% of the
Accreted Value, if the Net Proceeds Offer Payment Date is prior to December 15,
1998, or 100% of principal amount, if the Net Proceeds Offer Payment Date is
subsequent to December 15, 1998, of the Debentures or Exchange Debentures to be
repurchased, plus accrued and unpaid interest, if any, thereon to the date of
repurchase. Notwithstanding the foregoing, if a Net Proceeds Offer Amount is
less than $5 million, the application of the Net Cash Proceeds constituting
such Net Proceeds Offer Amount to a Net Proceeds Offer may be deferred until
such time as such Net Proceeds Offer Amount plus the aggregate amount of all
Net Proceeds Offer Amounts arising from all subsequent Asset Sales and
incurrences of Mortgage Indebtedness by the Company and its Subsidiaries
aggregates at least $5 million, at which time the Company or such Subsidiary
<PAGE>
shall apply all Net Cash Proceeds constituting all Net Proceeds Offer Amounts
that have been so deferred to make a Net Proceeds Offer (the first date the
aggregate of all such deferred Asset Sale Offer Amounts is equal to $5 million
or more shall be deemed to be a "Net Proceeds Offer Trigger Date").
Any Net Cash Proceeds remaining after the purchase of Debentures and
Exchange Debentures on any Net Proceeds Offer Purchase Date shall become
general unrestricted funds of the Company and its Subsidiaries, and may be
applied without regard to the restrictions described in this "Limitation on
Sale of Assets" covenant or clause (viii) of the "Limitations on Incurrence of
Additional Indebtedness" covenant.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Subsidiaries as an entirety to a
person in a transaction permitted under the covenant "Limitation on Mergers,
Consolidations or Sales of Assets" below, the successor corporation shall be
deemed to have sold the properties and assets of the Company and its
Subsidiaries not so transferred for purposes of this covenant, and shall comply
with the provisions of this covenant with respect to such deemed sale as if it
were an Asset Sale.
Each Net Proceeds Offer will be mailed to the record Holders as shown
on the register of Holders within 10 days following the Net Proceeds Offer
Trigger Date, with a copy to the Debenture Trustee, and shall comply with the
procedures set forth in the Debenture Indenture. Upon receiving notice of the
Net Proceeds Offer, Holders may elect to tender their Debentures or Exchange
Debentures in whole or in part in integral multiples of $1,000 principal amount
at maturity in exchange for cash. To the extent Holders properly tender
Debentures and Exchange Debentures in an aggregate amount exceeding the Net
Proceeds Offer Amount, Debentures and Exchange Debentures of tendering Holders
will be repurchased on a pro rata basis (based on amounts tendered). A Net
Proceeds Offer shall remain open for a period of 20 business days or such
longer period as may be required by law.
If an offer is made to repurchase the Debentures and Exchange
Debentures pursuant to a Net Proceeds Offer, the Company will and will cause
its Subsidiaries to comply with all tender offer rules under state and Federal
securities laws, including, but not limited to, Section 14(e) under the
Exchange Act and Rule 14e-1 thereunder, to the extent applicable to such offer.
Limitation on Issuance of Preferred Stock by Subsidiaries. The
Company will not permit any Subsidiary to issue any Preferred Stock or to have
outstanding any shares of Preferred Stock, except (a) issuances of Preferred
Stock to the Company or a Wholly-Owned Subsidiary of the Company; provided that
the Company or such Wholly-Owned Subsidiary at all times is the sole beneficial
and record owner of such Preferred Stock and (b) Preferred Stock issued in
accordance with the "Limitation on Incurrence of Additional Indebtedness"
covenant.
Restriction on Sale and Issuance of ARG Stock. The Company will not
permit ARG to issue any of its Capital Stock (including any rights, options or
warrants with respect thereto), or any securities convertible into or
<PAGE>
exchangeable or exercisable for its Capital Stock, to any person other than the
Company or one or more of its Wholly-Owned Subsidiaries nor permit any person
(other than the Company or one or more of its Wholly-Owned Subsidiaries) to own
or hold any Capital Stock of ARG. In the event any Wholly-Owned Subsidiary
which holds Capital Stock of ARG shall cease to be a Wholly-Owned Subsidiary,
such event shall be deemed to be the issuance of Capital Stock of ARG to a
person other than the Company or a Wholly-Owned Subsidiary. Nothing in this
covenant shall have the effect of prohibiting any transaction expressly
permitted by the "Limitation on Mergers, Consolidations or Sales of Assets"
covenant or the "Limitation on Issuance of Preferred Stock by Subsidiaries"
covenant.
Limitation on Mergers, Consolidations or Sales of Assets. The Company
shall not in a single transaction or through a series of related transactions,
(i) consolidate with or merge with or into any other person, or transfer (by
lease, assignment, sale or otherwise) all or substantially all of its
properties and assets as an entirety or substantially as an entirety to another
person or group of affiliated persons or (ii) adopt a Plan of Liquidation,
unless, in either case, (1) either the Company shall be the continuing person,
or the person (if other than the Company) formed by such consolidation or into
which the Company is merged or to which all or substantially all of the
properties and assets of the Company as an entirety or substantially as an
entirety are transferred (or, in the case of a Plan of Liquidation, any person
to which assets are transferred) (the Company or such other person being
hereinafter referred to as the "Surviving Person") shall be a corporation
organized and validly existing under the laws of the United States, any State
thereof or the District of Columbia, and shall expressly assume, by
supplemental indenture, executed and delivered to the Debenture Trustee, in
form satisfactory to the Debenture Trustee, all the obligations of the Company
under the Debentures, the Exchange Debentures and the Debenture Indenture; (2)
except in the case of a transaction described in clause (i) or (ii) above
between Holdings and ARG, immediately after giving effect to such transaction
on a pro forma basis, the Surviving Person could incur $1.00 of Indebtedness
pursuant to the first paragraph of the "Limitation on Incurrence of Additional
Indebtedness" covenant (without giving effect to the second paragraph thereof);
(3) immediately before and immediately after giving effect to such transaction
and the assumption of the obligations as set forth in clause (1) above and the
incurrence or anticipated incurrence of any Indebtedness to be incurred in
connection therewith, no Default or Event of Default shall have occurred and be
continuing; and (4) the Company has delivered to the Debenture Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, transfer or adoption and such supplemental indenture
comply with this covenant and that all conditions precedent herein provided
relating to such transaction have been satisfied.
Supplemental Debenture Indentures. The Debenture Indenture permits
the Company and the Debenture Trustee, together, to amend or supplement the
Debenture Indenture or the Debentures and the Exchange Debentures without
notice to or consent of any Holder: (i) to cure any ambiguity, defect or
inconsistency; provided that such amendment or supplement does not adversely
affect the rights of any Holder; (ii) to comply with the "Limitation on
Mergers, Consolidations or Sales of Assets" covenant; (iii) to provide for
<PAGE>
uncertificated Debentures or Exchange Debentures in addition to or in place of
certificated Debentures or Exchange Debentures; (iv) to comply with any
requirements of the Commission in connection with the qualification of the
Debenture Indenture under the Trust Indenture Act of 1939, as amended (the
"TIA"); or (v) to make any other change that does not materially adversely
affect the rights of any Holders under the Debenture Indenture. Subject to the
absolute and unconditional rights of any Holder to receive principal, premium,
if any, and interest, other modifications, amendments or supplements to the
Debenture Indenture or the Debentures and Exchange Debentures may be made with
the consent of the Holders of not less than a majority in aggregate principal
amount of the then outstanding Debentures and Exchange Debentures, and such
modifications, amendments or supplemental indentures will be binding on every
Holder whether or not such Holder has consented thereto; provided that no such
modification, amendment or supplemental indenture shall, without the consent of
Holders of each outstanding Debenture and Exchange Debenture affected thereby,
among other things, (i) reduce the aggregate principal amount of Debentures and
Exchange Debentures whose Holders must consent to an amendment, supplement or
waiver of any provision of the Debenture Indenture or the Debentures and
Exchange Debentures; (ii) reduce the rate or extend the time for payment of
interest on any Debenture or Exchange Debenture; (iii) reduce the principal
amount of any Debenture or Exchange Debenture; (iv) change the maturity date of
any Debenture or Exchange Debenture, or alter the optional redemption
provisions of the Debenture Indenture, in a manner adverse to any Holder; (v)
make any changes in the provisions concerning waivers of Defaults or Events of
Default by Holders or the rights of Holders to recover the principal of,
interest on, or redemption payment with respect to, any Debenture or Exchange
Debenture; (vi) make the principal of, or the interest on, any Debenture or
Exchange Debenture payable in money other than as provided for in the Debenture
Indenture and the Debentures and Exchange Debentures as in effect on the Issue
Date.
Events of Default
The following are Events of Default under the Debenture Indenture:
(i) default in the payment of any interest on the Debentures or the
Exchange Debentures when it becomes due and payable and such default
continues for a period of 30 days or more; or
(ii) the default in the payment of the principal of, or premium, if
any, on any Debenture or Exchange Debenture when the same becomes due and
payable at maturity, upon acceleration, redemption or otherwise (including,
without limitation, the failure to purchase Debentures or Exchange
Debentures tendered pursuant to a Change of Control Offer or Asset Sale
Offer); or
(iii) default in the performance, or breach, of any covenant in the
Debenture Indenture (other than defaults specified in clause (i) or (ii)
above), and continuance of such default or breach for a period of 30 days
after written notice to the Company by the Debenture Trustee or to the
Company and the Debenture Trustee by the holders of at least 25% in
<PAGE>
aggregate principal amount of the outstanding Debentures and Exchange
Debentures; or
(iv) failure by the Company or any Subsidiary to perform any term,
covenant, condition, or provision of one or more classes or issues of other
Indebtedness in an aggregate principal amount of $10,000,000 or more, which
failure results in an acceleration of the maturity thereof; or
(v) final judgments not covered by insurance for the payment of money
which in the aggregate at any one time exceeds $10,000,000 shall be rendered
against the Company or any of its Significant Subsidiaries by a court of
competent jurisdiction and shall remain undischarged and unbonded for a
period (during which execution shall not be effectively stayed) of 60 days
after such judgment becomes final and nonappealable; or
(vi) certain events of bankruptcy or insolvency with respect to the
Company or any Significant Subsidiary shall have occurred.
If an Event of Default (other than an Event of Default specified in
clause (vi) above with respect to the Company) occurs and is continuing, then
the Holders of at least 25% in aggregate principal amount of the outstanding
Debentures and Exchange Debentures may, by written notice, and the Debenture
Trustee upon the request of the Holders of not less than 25% in aggregate
principal amount of the outstanding Debentures and Exchange Debentures shall,
declare the Accreted Value of (if prior to December 15, 1998) or all principal
of, premium, if any, and accrued interest on (if on or after December 15, 1998)
the Debentures and the Exchange Debentures to be due and payable immediately.
Upon any such declaration such amounts shall become due and payable
immediately. If an Event of Default specified in clause (vi) above occurs with
respect to the Company and is continuing, then the Accreted Value of (if prior
to December 15, 1998) or all principal of, premium, if any, and accrued
interest on (if on or after December 15, 1998) the Debentures and the Exchange
Debentures shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Debenture Trustee or any
Holder.
After a declaration of acceleration, the Holders of a majority in
aggregate principal amount of outstanding Debentures and Exchange Debentures
may, by notice to the Debenture Trustee, rescind such declaration of
acceleration if all existing Events of Default have been cured or waived, other
than nonpayment or principal of, premium, if any, and accrued interest on the
Debentures and the Exchange Debentures that has become due solely as a result
of such acceleration and if the rescission of acceleration would not conflict
with any judgment or decree. The Holders of a majority in aggregate principal
amount of the outstanding Debentures and the Exchange Debentures also have the
right to waive past defaults under the Debenture Indenture except a default in
the payment of principal of, premium, if any, or interest on any Debenture or
Exchange Debenture, or in respect of a covenant or a provision which cannot be
modified or amended without the consent of all Holders.
No Holder of any of the Debentures or Exchange Debentures has any
right to institute any proceeding with respect to the Debenture Indenture or
<PAGE>
any remedy thereunder, unless the Holders of at least 25% in aggregate
principal amount of the outstanding Debentures and the Exchange Debentures have
made written request, and offered reasonable indemnity to the Debenture Trustee
to institute such proceeding as Debenture Trustee, the Debenture Trustee has
failed to institute such proceeding within 30 days after receipt of such notice
and the Debenture Trustee has not within such 30-day period received directions
inconsistent with such written request by Holders of a majority in aggregate
principal amount of the outstanding Debentures and Exchange Debentures. Such
limitations do not apply, however, to a suit instituted by a Holder of a
Debenture or Exchange Debenture for the enforcement of the payment of the
principal of, premium, if any, or accrued interest on, such Debenture or
Exchange Debenture on or after the respective due dates expressed in such
Debenture or Exchange Debenture.
The Holders of a majority in aggregate principal amount of the
outstanding Debentures and Exchange Debentures may direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee, or exercising any trust, or power conferred on the Debenture Trustee.
Subject to certain restrictions, however, the Debenture Trustee may refuse to
follow any directions that conflict with law or the Debenture Indenture.
Defeasance
The Company may at any time terminate all of its obligations with
respect to the Debentures and the Exchange Debentures ("defeasance"), except
for certain obligations, including those regarding any trust established for a
defeasance and obligations to register the transfer or exchange of the
Debentures and Exchange Debentures, to replace mutilated, destroyed, lost or
stolen Debentures and Exchange Debentures and to maintain agencies in respect
of Debentures and Exchange Debentures. The Company may at any time terminate
its obligations under certain covenants set forth in the Debenture Indenture,
some of which are described under "Certain Covenants" above, and any omission
to comply with such obligations shall not constitute a Default or an Event of
Default with respect to the Debentures and Exchange Debentures issued under the
Debenture Indenture ("covenant defeasance"). In order to exercise either
defeasance or covenant defeasance, the Company must irrevocably deposit in
trust, for the benefit of the holders of the Debentures and the Exchange
Debentures, with the Debenture Trustee money or U.S. government obligations, or
a combination thereof, in such amounts as will be sufficient to pay the
principal of, and premium, if any, and interest on the Debentures and the
Exchange Debentures to redemption or maturity and comply with certain other
conditions, including the delivery of an opinion as to certain tax matters.
The Debenture Indenture will be discharged and will cease to be of
further effect (except as to surviving rights or registration of transfer or
exchange of Debentures and Exchange Debentures) as to all outstanding
Debentures and Exchange Debentures when either (a) all such Debentures and
Exchange Debentures theretofore authenticated and delivered (except lost,
stolen or destroyed Debentures and Exchange Debentures which have been replaced
or paid and Debentures and Exchange Debentures for whose payment moneys has
theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust)
<PAGE>
have been delivered to the Debenture Trustee for cancellation; or (b) (i) all
such Debentures and Exchange Debentures not theretofore delivered to the
Debenture Trustee for cancellation have become due and payable and the Company
has irrevocably deposited or caused to be deposited with the Debenture Trustee,
as trust funds, an amount of money sufficient to pay and discharge the entire
indebtedness on the Debentures and Exchange Debentures not theretofore
delivered to the Debenture Trustee for cancellation, for principal, premium, if
any, and accrued interest to the date of such deposit; (ii) the Company has
paid all sums payable by it under the Debenture Indenture; and (iii) the
Company has delivered irrevocable instructions to the Debenture Trustee to
apply the deposited money toward the payment of the Debentures and Exchange
Debentures at maturity or the redemption date, as the case may be. In addition,
the Company must deliver an Officer's Certificate and an Opinion of Counsel
stating that all conditions precedent to satisfaction and discharge have been
complied with.
Certain Definitions
"Accreted Value" means, as of any date of determination prior to
December 15, 1998, the sum of (a) the initial offering price of each Debenture
and (b) the portion of the excess of the principal amount of each Debenture
over such initial offering price which shall have been amortized through such
date, such amount to be so amortized on a daily basis and compounded
semi-annually on each June 15 and December 15 at the rate of 14% per annum from
the date of issuance of the Debentures through the date of determination
computed on the basis of a 360-day year of twelve 30-day months. For the
purposes of determining the Accreted Value of the Debentures, the initial
offering price thereof shall be $688.75 per $1,000 principal amount of
Debentures and the date of issuance thereof shall be March 13, 1996.
"Acquired Indebtedness" means Indebtedness of a person or any of its
subsidiaries existing at the time such person becomes a Subsidiary or assumed
in connection with the acquisition of assets from such person (whether by
merger, consolidation, purchase of assets or otherwise) and not incurred by
such person in connection with, or in anticipation or contemplation of, such
person becoming a Subsidiary or such acquisition.
"Affiliate" means, when used with reference to any person, any other
person directly or indirectly controlling, or controlled by, or under direct or
indirect common control with, the referent person or such other person, as the
case may be. For the purposes of this definition, "control" when used with
respect to any specified person means the power to direct or cause the
direction of management or policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," "controlling" and "controlled" have the meanings
correlative to the foregoing. For purposes of "Limitations on Transactions
with Affiliates and Significant Stockholders", the term "Affiliate" shall
include any person who, as a result of any transaction described in
"Limitations on Transactions with Affiliates and Significant Stockholders"
would become an Affiliate. Notwithstanding the foregoing, the term
"Affiliate," with respect to the Company and its Affiliates, shall not include
BT Securities Corporation or any of its Affiliates.
<PAGE>
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Sale" means any sale, lease, assignment or other disposition
for value by the Company or any of its Subsidiaries (including, without
limitation, any Sale/leaseback) to any other person of (i) any of the Capital
Stock of any Subsidiary of the Company owned by the Company or any of its
Subsidiaries, (ii) all or substantially all of the assets of any division or
line of business of the Company or any of its Subsidiaries or (iii) any other
assets or rights, or related group of assets or rights, of the Company or any
of its Subsidiaries having a book value or sales price in excess of $150,000
(it being understood that if the book value or sales price thereof exceeds
$150,000, the entire value and not just the portion thereof in excess of
$150,000 shall be subject to the "Limitation on Sale of Assets" covenant) other
than the trade-in or replacement of assets for or with assets of comparable
value in the ordinary course of business of the Company and its Subsidiaries,
provided that any sale or transfer of assets (a) from a Subsidiary to the
Company or any Wholly-Owned Subsidiary or (b) made in accordance with the
"Limitation on Mergers, Consolidations or Sales of Assets" covenant shall not
constitute an Asset Sale.
"Average Life" means, as of any date of determination, with respect to
any Indebtedness, the quotient obtained by dividing (i) the sum of the products
of the numbers of years (calculated to the nearest one-twelfth) from such date
of determination to the respective dates of each successive scheduled principal
payment in respect of such Indebtedness multiplied by the amount of such
principal payment by (ii) the sum of all such principal payments.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"Board of Directors" means, with respect to any person, the board of
directors of such person or any committee of the board of directors of such
person duly authorized, with respect to any particular matter, to exercise the
power of the board of directors of such person.
"Board Resolution" means, with respect to any person, a duly adopted
resolution of the Board of Directors of such person.
"Capital Expenditures" shall mean payments for the Company's and its
Subsidiaries' assets, or improvements, replacements, substitutions or additions
thereto, that have a useful life of more than one year and which, in accordance
with generally accepted accounting principles consistently applied, are
required to be capitalized (as opposed to expensed in the period in which the
payment occurred).
"Capital Lease", as applied to any person, means any lease of any
property (whether real, personal or mixed) by that person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that person.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated) of
<PAGE>
corporate stock, including each class of common stock and preferred stock of
such person, together with any warrants, rights or options to purchase or
acquire any of the foregoing.
"Cash Equivalents" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc.; (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-2 from Standard & Poor's Corporation or at least P-2 from Moody's
Investors Service, Inc.; (iv) certificates of deposit or bankers' acceptance
maturing within one year from the date of acquisition thereof issued by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of not
less than $500,000,000; (v) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; and (vi) investments in money market funds substantially all the assets
of which are comprised of securities of the types described in clauses (i)
through (v) above.
"Change of Control" means (i) an event whereby at any time any
"person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the
Exchange Act), excluding the Permitted Investors and their Affiliates,
acquires, in one or more transactions, (a) beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of more than 50 percent of the
total voting power represented by all then outstanding Capital Stock of the
Company ordinarily (and apart from rights exercisable under certain
circumstances) having the right to vote in the election of directors or (b) the
power to elect a majority of the Board of Directors of the Company or (ii) so
long as any Senior Secured Notes remain outstanding, the occurrence of a
"Change of Control" as such term is defined in the Senior Secured Note
Indenture governing such Senior Secured Notes.
"Common Stock" means the common stock of the Company, par value $.01
per share.
"Common Stock Subscription Agreements" means the Common Stock
Subscription Agreements between the Company and certain officers and executives
of the Company or its Subsidiaries, together with any other agreements entered
into from time to time by the Company and certain officers or executives of the
Company or its Subsidiaries in connection with the acquisition of Common Stock
by such officers or executives, in each case as amended, supplemented or
otherwise modified from time to time.
<PAGE>
"Company" means American Restaurant Group Holdings, Inc. until a
successor replaces it pursuant to the Debenture Indenture and thereafter means
such successor.
"Consolidated EBITDA" means, for any period, the sum (without
duplication) of (i) Consolidated Net Income, (ii) provisions for taxes based on
income, (iii) Consolidated Interest Expense, (iv) to the extent Consolidated
Net Income has been reduced thereby, amortization expense, depreciation expense
and other non-cash expenses other than non-cash interest, (v) losses on Asset
Sales and (vi) other non-cash items other than non-cash interest reducing
Consolidated Net Income less the sum (without duplication) of (a) gains on
Asset Sales and (b) other non-cash items increasing Consolidated Net Income,
all as determined on a consolidated basis for the Company and its Subsidiaries
in conformity with GAAP. For the purposes of calculating Consolidated EBITDA
pursuant to the "Limitation on Incurrence of Additional Indebtedness" covenant,
amounts otherwise excluded from Consolidated Net Income pursuant to
clause (iii) of the definition thereof shall be included.
"Consolidated Interest Expense" means, for any period, interest
expense with respect to all outstanding Indebtedness of the Company and its
Subsidiaries, including the net costs associated with Interest Swap
Obligations, for such period determined on a consolidated basis in conformity
with GAAP.
"Consolidated Net Income" means, for any period, the net income (or
loss) of the Company and its Subsidiaries, after provisions for taxes, on a
consolidated basis for such period taken as a single accounting period
determined in conformity with GAAP; provided that there shall be excluded
(i) the income (or loss) of any Person (other than the Company or any
Subsidiary of the Company), except to the extent of the amount of dividends or
other distributions actually paid to the Company or any of its Subsidiaries by
such Person during such period, (ii) the income (or loss) of any Person accrued
prior to the date it becomes a Subsidiary of the Company to the extent that the
declaration or payments of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulations applicable to that Subsidiary and
(iii) the income of any Subsidiary of the Company to the extent that the
declaration or payments of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary.
"Credit Facility" means the Credit Agreement, dated as of March 20,
1992, as amended as of the Issue Date, by and among ARG, certain of its
subsidiaries, the Lenders and Bankers Trust Company, as agent, as the same may
be further amended, extended, renewed, restated, supplemented or otherwise
modified (in whole or in part, and without limitation as to amount, terms,
conditions, covenants and other provisions) from time to time, and any
agreement governing Indebtedness incurred to refund, refinance or replace the
borrowings and commitments then outstanding or permitted to be outstanding
under such Credit Agreement or such agreement. The Company shall promptly
<PAGE>
notify the Debenture Trustee of any such refunding, refinancing or replacement
of the Credit Facility.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Designated Restaurant" means any restaurant designated by the Company
concurrently with an Asset Sale in respect thereof so long as, for the most
recent period of twelve consecutive calendar months ending more than 30 days
prior to the date of such Asset Sale the net income of such restaurant before
any charge for interest expense, income taxes, depreciation, amortization and
divisional and corporate general and administrative expense was less than zero,
provided, that the maximum number of restaurants so designated shall be limited
to 5 in any Yearly Period and 25 during the term of the Debenture Indenture.
"Disqualified Capital Stock" means, with respect to any person, any
Capital Stock of such person that, by its terms, by the terms of any agreement
related thereto or by the terms of any security into which it is convertible,
puttable or exchangeable, is, or upon the happening of an event or the passage
of time would be, required to be redeemed or repurchased by such person or its
subsidiaries, including at the option of the holder, in whole or in part, or
has, or upon the happening of an event or passage of time would have, a
redemption or similar payment due, on or prior to the Maturity Date, or any
other Capital Stock of such person designated as Disqualified Capital Stock by
such person at the time of issuance; provided, however, that if such Capital
Stock is redeemable or repurchasable solely at the option of such person, such
Capital Stock shall not constitute Disqualified Capital Stock unless so
designated; provided, however, that the existence of the put rights contained
in the Common Stock Subscription Agreements as in effect on the Issue Date
hereof (or as such agreements may be amended from time to time in any manner
not materially adverse to the Holders) shall not render the Common Stock, to
which such agreements relate, as Disqualified Capital Stock.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Fixed Charge Coverage Ratio" means, with respect to any person, the
ratio of (i) the sum of Consolidated EBITDA during the four full fiscal
quarters ending on or prior to the date of the transaction giving rise to the
need to calculate the Fixed Charge Coverage Ratio (the "Transaction Date") to
(ii) Consolidated Interest Expense of such person for the four full fiscal
quarters ending on or prior to the Transaction Date plus the product of (x) the
amount of all cash dividend payments on any series of Preferred Stock of such
person or any Subsidiary of such person (other than any such cash dividend
payments made to such person or a Wholly-Owned Subsidiary of such person) times
(y) a fraction, the numerator of which is one and the denominator of which is
one minus the then current effective consolidated federal, state and local tax
rate of such person, in each case during the four full fiscal quarters ending
on or prior to the Transaction Date.
<PAGE>
"GAAP" means generally accepted accounting principles as in effect in
the United States of America as of the date of the Debenture Indenture (it
being understood that calculations in connection with the definitions,
covenants and other provisions of the Debenture Indenture shall utilize
accounting principles and policies in conformity with those used to prepare the
financial statements of the Company for the fiscal year ended December 28,
1992).
"Holder" or "Debentureholder" means the person in whose name a
Debenture is registered on the Registrar's books.
"Indebtedness" as applied to any person, means, without duplication,
(i) all indebtedness for borrowed money whether or not evidenced by a
promissory note, draft or similar instrument (including, without limitation,
obligations with respect to letters of credit (which shall include the stated
amount thereof and any unreimbursed drawings in relation thereto), bankers'
acceptances and Interest Swap Obligations), (ii) that portion of obligations
with respect to Capital Leases that is properly classified as a liability on a
balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted
representing extensions of credit, (iv) any obligation owed for all or any part
of the deferred purchase price of property or services, which purchase price is
due more than six months from the date of incurrence of the obligation in
respect thereof, if and to the extent such obligation is properly classified as
a liability in conformity with GAAP, (v) all indebtedness to the extent secured
by any Lien on any property or asset owned by that person regardless of whether
the indebtedness secured thereby shall have been assumed by that person or is
nonrecourse to the credit of that person and (vi) all Disqualified Capital
Stock of the Company and all Preferred Stock of any Subsidiary (other than any
such Preferred Stock owned by the Company or a Wholly-Owned Subsidiary) (the
amount of Indebtedness represented by any such Disqualified Capital Stock or
Preferred Stock will be the greater of the voluntary or involuntary liquidation
preference with respect thereto).
"Independent Financial Advisor" means a reputable accounting,
appraisal or investment banking firm that is, in the reasonable judgment of the
Board of Directors of the Company, qualified to perform the task for which such
firm has been engaged hereunder and disinterested and independent with respect
to the Company and its Affiliates.
"Interest Swap Obligations" means the obligations of any person,
pursuant to any arrangement with any other person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest
on a stated notional amount in exchange for periodic payments made to such
other person calculated by applying a fixed or a floating rate of interest on
the same notional amount.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Investment" as applied to any person, means any direct or indirect
purchase or other acquisition by that person of, or of a beneficial interest
<PAGE>
in, stock or other securities of any other person (other than a person that
prior to the relevant purchase or acquisition was the Company or a Subsidiary),
or any direct or indirect loan, advance (other than advances to employees for
moving and travel expenses, drawing accounts and similar expenditures made in
the ordinary course of business) or capital contribution by that person to any
other person (other than the Company or a Subsidiary), including all
indebtedness and accounts receivable from that other person that are not
current assets or did not arise from sales of goods or services to that other
person in the ordinary course of business. The amount of any Investment shall
be the fair market value of such Investment, as determined at the time such
Investment is made.
"Issue Date" means the date of first issuance of the Debentures under
the Debenture Indenture.
"Lenders" means the Lenders listed on the signature pages of the
Credit Facility, together with any financial institution that may become a
party to the Credit Facility as therein provided.
"Letter of Credit Obligations" means Indebtedness of the Company and
its Subsidiaries with respect to letters of credit issued pursuant to the
Credit Facility.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest).
"Maturity Date" means December 15, 2005.
"Mortgage Indebtedness" means mortgage-backed Indebtedness secured by
real property fee or leasehold interests (together with related furniture,
fixtures and equipment) and any renewals, extensions, refinancings or
replacements thereof.
"Mortgage Subsidiary" means a Subsidiary, the sole activities of which
shall be the holding of any real property fee or leasehold interests and
related furniture, fixtures and equipment, the incurrence by such Subsidiary of
Mortgage Indebtedness permitted by clause (viii) of the "Limitations on
Incurrence of Additional Indebtedness" covenant (provided, that the Net Cash
Proceeds of such Mortgage Indebtedness are used in the manner contemplated in
such clause) and the leasing of such assets to the Company and its Subsidiaries
on terms customary for similar types of leases.
"Net Cash Proceeds" means with respect to any person the cash proceeds
(including any cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise, but only as and when so
received and excluding the portion of such deferred payment which constitutes
interest, which portion shall be deemed not to constitute Net Cash Proceeds)
received by such person from any sale, transfer or other disposition of
property or issuance of a security net of (i) the direct costs relating to such
sale, transfer, or other disposition (including, without limitation, legal,
<PAGE>
accounting and investment banking fees and sales commissions), (ii) taxes paid
or payable ((a) including, without limitation, income taxes reasonably
estimated to be actually payable as a result of any disposition of property
within two years of the date of disposition and (b) but after taking into
account any reduction in tax liability due to available tax credits or
deductions and any tax sharing arrangements), (iii) amounts required to be
applied to the repayment of Indebtedness secured by a Lien on any such
property, and (iv) any reasonable reserve for adjustment in respect of the sale
price of such property.
"Operating Lease" means, as applied to any person, any lease
(including, without limitation, leases that may be terminated by the lessee at
any time) of any property (whether real, personal or mixed) that is not a
Capital Lease other than any such lease under which that person is the lessor.
"Payment Restriction" means, with respect to a subsidiary of any
person, any material encumbrance, restriction or limitation, either by
operation of the terms of its charter or by reason of any agreement or
instrument to which the Company or any Subsidiary is a party, on the ability of
(i) such subsidiary to (a) pay dividends or make other distributions on its
Capital Stock or make payments on any obligation, liability or Indebtedness
owed to such person or any other subsidiary of such person, (b) make loans or
advances to such person or any other subsidiary of such person, or (c) transfer
any of its material properties or assets to such person or any other subsidiary
of such person, or (ii) such person or any other subsidiary of such person to
receive or retain any such (a) dividends, distributions or payments, (b) loans
or advances, or (c) transfer of material properties or assets.
"Permitted Investment" by any person means (i) any Related Business
Investment, (ii) Investments in securities not constituting cash or Cash
Equivalents and received in connection with an Asset Sale or any other
disposition of assets not constituting an Asset Sale by reason of the $150,000
threshold contained in the definition thereof, (iii) cash and Cash Equivalents,
(iv) Investments existing on the Issue Date, (v) Investments by the Company in
its Subsidiaries, (vi) Investments by Subsidiaries in the Company or any
Subsidiary, (vii) Investments in the form of obligations of third parties which
obligations were acquired in connection with the settlement or other compromise
of legal proceedings in the ordinary course of business, (viii) Investments in
connection with any merger, consolidation or sale of assets in accordance with
the provisions of the "Limitation on Mergers, Consolidations or Sales of
Assets" covenant, and (ix) other Investments so long as the aggregate amount so
expended by the Company or its Subsidiaries shall not exceed $2,500,000 net of
any cash amounts received by the Company or its Subsidiaries from any
Investments made pursuant to this clause (ix).
"Permitted Investors" means Anwar Soliman, Ralph Roberts, the members
of their immediate families, the respective estates, spouses, heirs, ancestors,
lineal descendants, legatees and legal representatives of any of the foregoing
and the trustee of any bona fide trust of which one or more of the foregoing
are the sole beneficiaries or the grantors thereof.
<PAGE>
"Permitted Liens" shall mean (i) Liens for taxes, assessments or
governmental charges or claims the payment of which is not at the time required
by the "Payment of Taxes and Other Claims" covenant; (ii) statutory Liens of
landlords and Liens of carriers, warehousemen, mechanics, materialmen and other
Liens imposed by law incurred in the ordinary course of business which either
(a) are for sums not yet delinquent or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made therefor, or (b) do not in the aggregate with respect to
any one property so encumbered have a material adverse effect on the value or
use of such property; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for the payment of
borrowed money); (iv) any attachment or judgment Lien unless the judgment it
secures would constitute an Event of Default; (v) easements, rights-of-way,
restrictions, minor defects or irregularities in title and other similar
charges or encumbrances which (a) do not interfere in any material respect with
the ordinary conduct of the business of the Company or any of its Subsidiaries
and (b) do not in the aggregate with respect to any one property have a
material adverse effect on the use of such property; (vi) any interest or title
of a lessor or lessee under any lease; (vii) purchase-money Liens on inventory,
fixtures, furniture and equipment incurred in the ordinary course of business
and Liens on goods for sale on consignment or a similar basis; and (viii) Liens
in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or other agency or political subdivision thereof.
"Plan of Liquidation" means, with respect to any person, a plan
(including by operation of law) that provides for, contemplates or the
effectuation of which is preceded or accompanied by (whether or not
substantially contemporaneously, in phases or otherwise) (i) the sale, lease,
conveyance or other disposition of all or substantially all of the assets of
such person otherwise than as an entirety or substantially as an entirety and
(ii) the distribution of all or substantially all of the proceeds of such sale,
lease, conveyance or other disposition and all or substantially all of the
remaining assets of such person to holders of Capital Stock of such person.
"Preferred Stock" means, with respect to any person, any Capital Stock
of such person other than common stock of such person and any warrants, rights
or options to purchase or acquire such common stock.
"Qualified Capital Stock" means, with respect to any person, any
Capital Stock of such person that is not Disqualified Capital Stock.
"Refinancing Indebtedness" means any Indebtedness issued in connection
with any refinancing, refunding, replacement or extension, in whole or in part,
of any Indebtedness incurred pursuant to clauses (b) (ii), (iii), (vi) or (xiv)
<PAGE>
of the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided, that (a) such Refinancing Indebtedness shall have an Average Life
equal to or greater than the Average Life of either (I) the Indebtedness being
refinanced, refunded, replaced or extended or (II) the Debentures, (b)
Indebtedness incurred by any Subsidiary of the Company shall not be used to
refinance, refund, replace or extend any Indebtedness of the Company, (c)
Indebtedness incurred to refinance any Indebtedness of the Company subordinated
or junior in right of payment to the Debentures shall be subordinated or junior
in right of payment at least to the same extent as the Indebtedness being
refinanced and (d) such Refinancing Indebtedness is in an aggregate principal
amount not in excess of the outstanding aggregate principal amount of the
Indebtedness being refinanced plus any premium required by the terms thereof
and the amount of customary fees and expenses payable by the Company in
connection therewith.
"Related Business Investment" means (i) any Investment by the Company
or any Subsidiary in any other person at least 80% of whose revenues are
derived from the operation of one or more restaurants; and (ii) any Capital
Expenditures or other expenditures related to the business of the Company and
its Subsidiaries as it is conducted in accordance with the terms of the
Debenture Indenture.
"Sale/leaseback" means any lease, whether an Operating Lease or a
Capital Lease, whereby the Company or any of its Subsidiaries, directly or
indirectly, becomes or remains liable as lessee or as guarantor or other
surety, of any property (whether real or personal or mixed) whether now owned
or hereafter acquired, (i) that the Company or its Subsidiaries, as the case
may be, has sold or transferred or is to sell or transfer to any other person
(other than the Company or any of its Subsidiaries), or (ii) that the Company
or its Subsidiaries, as the case may be, intends to use for substantially the
same purpose as any other property that has been or is to be sold or
transferred by the Company or any such Subsidiary to any person (other than the
Company or any of its Subsidiaries) in connection with such lease.
"Senior Secured Notes" means the separate issues of Senior Secured
Notes Due 1998 under the Senior Secured Note Indentures.
"Senior Secured Note Indentures" means the Indenture dated as of
September 15, 1992 among ARG, the Subsidiary Guarantors named therein and
U.S. Trust Company of California, N.A., as trustee and the Indenture, dated as
of December 1, 1993 among ARG, the Subsidiary Guarantors named therein and
U.S. Trust Company of California, N.A., as trustee, in each case as amended,
supplemented or otherwise modified from time to time.
"Significant Stockholder" means, with respect to any person, any other
person who is the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of more than 10% of any class of equity securities of such person
that are entitled to vote on a regular basis for the election of directors of
such person.
"Significant Subsidiary" means each subsidiary of the Company that is
either (a) a "significant subsidiary" as defined in Rule 1-02(v) of Regulation
<PAGE>
S-X under the Securities Act and the Exchange act (as such regulation is in
effect on the date hereof) or (b) material to the financial condition or
results of operations of the Company and its Subsidiaries taken as a whole.
"Stock Option Plan" means the Stock Option Plan for Key Employees of
the Company, as amended or otherwise modified from time to time.
"subsidiary" of any person means (i) a corporation a majority of whose
Capital Stock with voting power, under ordinary circumstances, to elect
directors is, at the date of determination, directly or indirectly, owned by
such person, by one or more subsidiaries of such person or by such person and
one or more subsidiaries of such person or (ii) a partnership in which such
person or a subsidiary of such person is, at the date of determination, a
general partner of such partnership, or (iii) any other person (other than a
corporation or a partnership) in which such person, a subsidiary of such person
or such person and one or more subsidiaries of such person, directly or
indirectly, at the date of determination, has (x) at least a majority ownership
interest or (y) the power to elect or direct the election of a majority of the
directors or other governing body of such person.
"Subsidiary" means any subsidiary of the Company.
"Wholly-Owned Subsidiary" means, with respect to any Person, any
subsidiary of such Person all the outstanding shares of Capital Stock of which
are owned directly by such Person or another Wholly-Owned Subsidiary of such
Person except for (i) directors' qualifying shares, if applicable and
(ii) Preferred Stock of such Subsidiary.
"Yearly Period" means a fiscal year of the Company and its
Subsidiaries. On the date of the Debenture Indenture, the fiscal year of the
Company and its Subsidiaries ends on the last Monday of December of each year.
Delivery and Form
The certificates representing the Exchange Debentures will be issued
only in fully registered form, without coupons, in denominations of $1,000 and
any integral multiple thereof. The Exchange Debentures will be deposited with,
or on behalf of, The Depository Trust Company, New York, New York ("DTC"), and
registered in the name of Cede & Co. as DTC's nominee in the form of a global
Debenture certificate.
DESCRIPTION OF THE DEBENTURES
The terms of the Debentures are substantially identical in all
respects (including principal amount, interest rate and maturity) to the terms
of the Exchange Debentures for which they may be exchanged pursuant to this
Exchange Offer, except that the Debentures are not freely transferable by
holders thereof and were issued subject to certain covenants regarding
registration as provided therein and in the Registration Rights Agreement
(which covenants will terminate and be of no further force or effect upon
completion of this Exchange Offer).
<PAGE>
REGISTRATION RIGHTS AGREEMENT
Holdings entered into the Registration Rights Agreement for the
benefit of the holders of the Debentures. The following summary of certain
provisions of the Registration Rights Agreement does not purport to be complete
and is subject to, and is qualified by reference to, all the provisions of such
agreement which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part.
Pursuant to the Registration Rights Agreement Holdings has agreed, for
the benefit of the holders of the Debentures, that it will, at its cost, (i)
within 30 days after December 1, 1996 (the "Commencement Date"), file a
registration statement (the "Exchange Offer Registration Statement") with the
Commission with respect to the Exchange Offer and (ii) within 120 days after
the Commencement Date, use its best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Act. Holdings has
agreed to keep the Exchange Offer open for not less than 30 days (or longer if
required by applicable law) after the date notice of the Exchange Offer is
mailed to the holders of the Debentures.
In the event that applicable interpretations of the staff of the
Commission do not permit Holdings to effect the Exchange Offer, or if for any
other reason the Exchange Offer is not consummated within 180 days of the
Commencement Date, Holdings will, at its own expense, (a) as promptly as
practicable, file a shelf registration statement covering resales of the
Debentures (the "Shelf Registration Statement"), (b) use its best efforts to
cause the Shelf Registration Statement to be declared effective under the Act
and (c) use its best efforts to keep effective the Shelf Registration Statement
until three years after its effective date. Holdings will, in the event of the
Shelf Registration Statement, provide to each holder of the Debentures copies
of the prospectus, which is a part of the Shelf Registration Statement, notify
each such holder when the Shelf Registration Statement for the Debentures has
become effective and take certain other actions as are required to permit
unrestricted resales of the Debentures. A holder of Debentures who sells such
Debentures pursuant to the Shelf Registration Statement generally would be
required to be named as a selling securityholder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement which are
applicable to such a holder (including certain indemnification rights and
obligations).
If Holdings fails to comply with the above provisions, then, as
liquidated damages, additional interest (the "Additional Interest") shall
become payable in respect of the Debentures as follows:
(i) if the Exchange Offer Registration Statement or Shelf
Registration Statement is not filed within 30 days after the
Commencement Date, then commencing on the 31st day after the Issue
Date, Additional Interest shall accrue on the Debentures (in addition
to the accretion of OID) at a rate of .50% per annum;
<PAGE>
(ii) if an Exchange Offer Registration Statement or Shelf
Registration Statement is not declared effective within 120 days after
the Commencement Date, then commencing on the 121st day after such
date, Additional Interest shall accrue on the Debentures (in addition
to the accretion of OID) at a rate of .50% per annum; and
(iii) if either (A) Holdings has not exchanged the Exchange
Debentures for all Debentures validly tendered in accordance with the
terms of the Exchange Offer on or prior to 60 days after the date on
which the Exchange Offer Registration Statement was declared effective
or (B) if the Exchange Offer Registration Statement ceases to be
effective at any time prior to the time that the Exchange Offer is
consummated or (C) if applicable, the Shelf Registration Statement has
been declared effective and such Shelf Registration Statement ceases
to be effective at any time prior to the third anniversary of its
effective date, then Additional Interest shall accrue on the
Debentures (in addition to the accretion of OID) at a rate of .50% per
annum on (x) the 61st day after such effective date, in the case of
clause (A) above, or (y) the date the Exchange Offer Registration
Statement ceases to be effective, in the case of clause (B) above, or
(z) the day the Shelf Registration Statement ceases to be effective,
in the case of clause (C) above;
provided, that (1) upon the filing of the Exchange Offer Registration
Statement or a Shelf Registration Statement (in the case of clause (i) above),
(2) upon the effectiveness of the Exchange Offer Registration Statement or a
Shelf Registration Statement (in the case of clause (ii) above), or (3) upon
the exchange of Exchange Debentures for all Debentures tendered (in the case of
clause (iii)(A) above) or upon the effectiveness of the Exchange Offer
Registration Statement which had ceased to remain effective (in the case of
clause (iii)(B) above), or upon the effectiveness of the Shelf Registration
Statement which has ceased to remain effective (in the case of clause (iii)(C)
above, Additional Interest on the Debentures as a result of clause (i), (ii) or
(iii) above (or the relevant subclause thereof), as the case may be, shall
cease to accrue.
Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) above will be payable in cash, semiannually on each June 15 and December
15, commencing with the first such date occurring after any such Additional
Interest commences to accrue. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
Accreted Value of the Debentures, multiplied by a fraction, the numerator of
which is the number of days such Additional Interest rate was applicable during
such period (determined on the basis of a 360-day year comprised of twelve 30-
day months) and the denominator of which is 360.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Debentures pursuant to the terms of the Exchange Offer,
Holdings will have fulfilled its obligations under the Registration Rights
Agreement and accordingly, there will be no increase in the interest rate on
the Debentures and the holders of the Debentures will have no further
registration or other rights under such Agreement.
<PAGE>
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS
Exchange of Debentures
The exchange of Debentures for Exchange Debentures in the Exchange
Offer should not constitute a taxable event to Holders. Consequently, no gain
or loss will be recognized by a Holder upon receipt of an Exchange Debenture,
the holding period of the Exchange Debenture will include the holding period
the Debenture and the basis of the Exchange Debenture will be the same as the
basis of the Debenture immediately before the exchange.
In any event, persons considering the exchange of Debentures for
Exchange Debentures should consult their own tax advisors concerning the United
States federal income tax consequences in light of their particular situations
as well as any consequences arising under the laws of any other taxing
jurisdiction.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Debentures for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus with any resale of such Exchange Debentures. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of Exchange Debentures received in exchange
for Debentures where such Exchange Debentures were acquired as a result of
market-making activities or other trading activities. Holdings will, for a
period of 180 days after the Expiration Date, make this Prospectus, as amended
or supplemented, available to any broker-dealer for use in connection with any
such resale.
Holdings will not receive any proceeds from any sale of Exchange
Debentures by broker-dealers. Exchange Debentures received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Debentures or a
combination of such methods of resales, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchaser of any such
Exchange Debentures. Any broker-dealer that resells Exchange Debentures that
were received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange
Debentures may be deemed to be an "underwriter" within the meaning of the Act
and any profit on any such resale of Exchange Debentures and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Act.
<PAGE>
For a period of 180 days after the Expiration Date, Holdings will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. Holdings has agreed in the Registration Rights
Agreement to pay all expenses incident to the Exchange Offer other than
commissions or concessions of any brokers or dealers.
Prior to the offering contemplated hereby, there has been no active
market for the Exchange Debentures. The Initial Purchaser has advised Holdings
that it currently intends to make a market in the Exchange Debentures,but it is
not obligated to do so and may discontinue any such market making at any time
without notice. Accordingly, there can be no assurance that an active market
will develop for the Exchange Debentures.
LEGAL MATTERS
The validity of the Exchange Debentures under New York law and certain
tax matters will be passed upon for Holdings by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), New York, New York. Mr.
Beattie, a partner at Simpson Thacher & Bartlett, is a director of each of
Holdings and ARG.
EXPERTS
The financial statements and schedules included in this Prospectus and
elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets as of December 26, 1994 and December 25, 1995 and September 23,
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Income for the Years Ended December 27, 1993, December 26, 1994 and
December 25, 1995 and the Thirty-nine Weeks Ended September 25, 1995 and September 23,
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Common Stockholders' Equity for Years Ended December 27, 1993,
December 26, 1994 and December 25, 1995 and the Thirty-nine Weeks Ended September 23,
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows for Years Ended December 27, 1993, December 26, 1994 and
December 25, 1995 and the Thirty-nine Weeks Ended September 25, 1995 and September 23,
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
American Restaurant Group Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of AMERICAN
RESTAURANT GROUP HOLDINGS, INC. (a Delaware corporation) AND SUBSIDIARIES as of
December 26, 1994 and December 25, 1995, and the related consolidated
statements of operations, common stockholders' equity and cash flows for the
years ended December 27, 1993, December 26, 1994 and December 25, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 audit 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 financial statements referred to above present fairly, in
all material respects, the financial position of American Restaurant Group
Holdings, Inc. and subsidiaries as of December 26, 1994 and December 25, 1995,
and the results of their operations and their cash flows for the years ended
December 27, 1993, December 26, 1994 and December 25, 1995, in conformity with
generally accepted accounting principles.
As explained in Note 2 of the financial statements, effective December 25,
1995, the Company changed its method of accounting for the impairment of long-
lived assets, with which we concur.
ARTHUR ANDERSEN LLP
Orange County, California
February 21, 1996
<PAGE>
AMERICAN RESTAURANT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 26, 1994, DECEMBER 25, 1995
AND SEPTEMBER 23, 1996
<TABLE>
<CAPTION>
December 26, December 25, September 23,
1994 1995 1996
ASSETS ------------------ ------------------ ------------------
(unaudited)
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 15,032,000 $ 10,385,000 $ 6,060,000
Accounts receivable, net of reserve of $559,000, $777,000 and
$849,000 at December 26, 1994, December 25, 1995 and September
23, 1996, respectively 7,565,000 7,734,000 7,720,000
Inventories 8,080,000 6,597,000 6,582,000
Prepaid expenses 5,039,000 4,607,000 2,624,000
------------ ------------ ------------
Total current assets 35,716,000 29,323,000 22,986,000
------------ ------------ ------------
PROPERTY AND EQUIPMENT:
Land and land improvements 54,023,000 52,991,000 23,163,000
Buildings and leasehold improvements 143,399,000 141,382,000 117,673,000
Fixtures and equipment 93,395,000 90,520,000 92,881,000
Property held under capital leases 14,307,000 13,067,000 13,067,000
Construction in progress 6,169,000 3,749,000 6,763,000
------------ ------------ ------------
311,293,000 301,709,000 253,547,000
Less-Accumulated depreciation 129,797,000 130,679,000 127,894,000
------------ ------------ ------------
181,496,000 171,030,000 125,653,000
------------ ------------ ------------
OTHER ASSETS:
Intangible assets 20,354,000 14,137,000 14,144,000
Deferred debt costs 26,547,000 26,552,000 27,542,000
Leasehold interests 10,990,000 10,176,000 10,176,000
Franchise rights 10,400,000 8,798,000 8,798,000
Liquor licenses and other 5,499,000 3,899,000 5,750,000
Cost in excess of net assets acquired 19,258,000 14,671,000 14,671,000
------------ ------------ ------------
93,048,000 78,233,000 81,081,000
<PAGE>
Less-Accumulated amortization 22,032,000 24,095,000 26,422,000
------------ ------------ ------------
71,016,000 54,138,000 54,659,000
------------ ------------ ------------
Total assets $288,228,000 $254,491,000 $203,298,000
============ ============ ============
</TABLE>
(consolidated balance sheets continued on following page)
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 26, December 25, September 23,
1994 1995 1996
----------------- ----------------- -----------------
(unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 30,945,000 $ 29,239,000 $ 30,649,000
Accrued liabilities 14,297,000 14,226,000 13,818,000
Accrued insurance 14,289,000 16,694,000 17,223,000
Accrued interest 5,980,000 5,855,000 509,000
Accrued payroll costs 11,032,000 10,171,000 11,016,000
Current portion of obligations under capital leases 889,000 858,000 895,000
Current portion of long-term debt 207,000 7,850,000 124,000
----------- ------------- ------------
Total current liabilities 77,639,000 84,893,000 74,234,000
----------- ------------- ------------
LONG-TERM LIABILITIES, net of current portion:
Obligations under capital leases 10,202,000 9,344,000 8,670,000
Long-term debt 266,522,000 273,935,000 256,528,000
----------- ------------- ------------
Total long-term liabilities 276,724,000 283,279,000 265,198,000
----------- ------------- ------------
COMMITMENTS AND CONTINGENCIES
PREFERRED STOCK, $0.01 par value; 10,000 shares authorized, no shares
issued or outstanding at December 26, 1994, December 25, 1995 or
September 23, 1996
COMMON STOCKHOLDERS' EQUITY:
Common Stock, $0.01 par value; 1,000,000 shares authorized, 513,631
shares issued and outstanding at December 26, 1994 and 513,631 shares
issued and 504,505 shares outstanding at December 25, 1995 and
September 23, 1996 2,000 2,000 2,000
Treasury stock -- (50,000) (50,000)
Paid-in capital 17,539,000 17,539,000 17,539,000
Accumulated deficit (83,676,000) (131,172,000) (153,625,000)
----------- ------------- ------------
<PAGE>
Total common stockholders' deficit (66,135,000) (113,681,000) (136,134,000)
----------- ------------- ------------
Total liabilities and common stockholders' equity $288,228,000 $ 254,491,000 $203,298,000
=========== ============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
AMERICAN RESTAURANT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 27, 1993, DECEMBER 26, 1994, DECEMBER 25, 1995
AND THE THIRTY-NINE WEEKS ENDED SEPTEMBER 25, 1995 AND SEPTEMBER 23, 1996
<TABLE>
<CAPTION>
Year Ended Thirty-Nine Weeks Ended
----------------------------------------------------- ---------------------------------
December 27, December 26, December 25, September 25, September 23,
1993 1994 1995 1995 1996
----------------- ----------------- -------------- --------------- ----------------
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . $437,909,000 $460,406,000 $445,966,000 $338,642,000 $332,988,000
RESTAURANT COSTS:
Food and beverage . . . . . . . . . 136,255,000 142,828,000 138,270,000 104,501,000 105,473,000
Payroll . . . . . . . . . . . . . . 132,292,000 136,151,000 134,532,000 101,717,000 100,936,000
Direct operating . . . . . . . . . 109,462,000 108,382,000 110,399,000 81,588,000 83,922,000
Depreciation and amortization . . . 25,682,000 26,723,000 23,171,000 17,461,000 15,486,000
GENERAL AND ADMINISTRATIVE EXPENSES . . 29,895,000 31,063,000 31,387,000 23,166,000 20,021,000
NON-CASH CHARGE FOR IMPAIRMENT OF LONG-
LIVED ASSETS . . . . . . . . . . . . -- -- 20,178,000 -- --
------------ ------------ ------------ ------------ ------------
Operating profit (loss) 4,323,000 15,259,000 (11,971,000) 10,209,000 7,150,000
INTEREST EXPENSE, net . . . . . . . . . 23,982,000 34,190,000 35,450,000 26,458,000 28,433,000
------------ ------------ ------------ ------------ ------------
Loss before provision (credit) for
income taxes and extraordinary
loss . . . . . . . . . . . . . . . (19,659,000) (18,931,000) (47,421,000) (16,249,000) (21,283,000)
PROVISION (CREDIT) FOR INCOME TAXES . . (202,000) 64,000 75,000 53,000 75,000
------------ ------------ ------------ ------------ ------------
Loss before extraordinary loss . . (19,457,000) (18,995,000) (47,496,000) (16,302,000) (21,358,000)
EXTRAORDINARY LOSS ON EXTINGUISHMENT OF
DEBT . . . . . . . . . . . . . . . . (10,790,000) -- -- -- 1,095,000
------------ ------------ ------------ ------------ ------------
Net loss . . . . . . . . . . . . . $(30,247,000) $(18,995,000) $(47,496,000) $(16,302,000) $(22,453,000)
============ ============ ============ ============ ============
</TABLE>
<PAGE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
AMERICAN RESTAURANT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 27, 1993, DECEMBER 26, 1994
AND DECEMBER 25, 1995 AND THE THIRTY-NINE WEEKS ENDED SEPTEMBER 23, 1996
<TABLE>
<CAPTION>
Accumulated
Common Stock Treasury Stock Paid-in Capital Deficit Total
--------------- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 28, 1992 $1,000 $ (27,000) $2,047,000 $ (62,756,000) $ (60,735,000)
Net loss . . . . . . . . . . . . . . . -- -- -- (30,247,000) (30,247,000)
Preferred stock dividends . . . . . . . -- -- -- (3,723,000) (3,723,000)
Issuance of common stock . . . . . . . 1,000 -- 4,431,000 -- 4,432,000
Purchase of treasury stock . . . . . . -- (96,000) (38,000) -- (134,000)
Cancellation of common stock . . . . . -- 123,000 (123,000) -- --
Cancellation of warrants . . . . . . . -- -- 722,000 -- 722,000
Gain on purchase of preferred stock . . -- -- 10,500,000 32,045,000 42,545,000
------ --------- ----------- ------------- -------------
BALANCE, December 27, 1993 . . . . . . . . 2,000 -- 17,539,000 (64,681,000) (47,140,000)
Net loss . . . . . . . . . . . . . . . -- -- -- (18,995,000) (18,995,000)
------ --------- ----------- ------------- -------------
BALANCE, December 26, 1994 . . . . . . . . 2,000 -- 17,539,000 (83,676,000) (66,135,000)
Net loss . . . . . . . . . . . . . . . -- -- -- (47,496,000) (47,496,000)
Purchase of treasury stock . . . . . . -- (50,000) -- -- (50,000)
------ --------- ----------- ------------- -------------
BALANCE, December 25, 1995 . . . . . . . . 2,000 (50,000) 17,539,000 (131,172,000) (113,681,000)
Net loss (unaudited) . . . . . . . . . -- -- -- (22,453,000) (22,453,000)
------ --------- ----------- ------------- -------------
BALANCE, September 23, 1996 (unaudited) . . $2,000 $ (50,000) $17,539,000 $(153,625,000) $(136,134,000)
====== ========= =========== ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
AMERICAN RESTAURANT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 27, 1993, DECEMBER 24, 1994
AND DECEMBER 25, 1995 AND FOR THE THIRTY-NINE WEEKS
ENDED SEPTEMBER 25, 1995 AND SEPTEMBER 23, 1996
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------------------------------------------
December 27, December 26, December 25, September 25, September 23,
1993 1994 1995 1995 1996
--------------- --------------- --------------- --------------- ---------------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $437,818,000 $460,024,000 $446,355,000 $ 339,178,000 $ 332,995,000
Cash paid to suppliers and employees (403,319,000) (414,550,000) (413,219,000) (320,071,000) (313,070,000)
Interest paid, net (23,718,000) (27,800,000) (27,912,000) (25,968,000) (26,390,000)
Income taxes paid (8,000) (62,000) (95,000) (75,000) (75,000)
----------- ------------ ------------ ------------- -------------
Net cash provided by (used in) operating
activities 10,773,000 17,612,000 5,129,000 (6,936,000) (6,540,000)
----------- ------------ ------------ ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (11,666,000) (22,178,000) (16,277,000) (13,386,000) (8,138,000)
Net (increase) decrease in other assets 32,000 209,000 181,000 439,000 (1,858,000)
Proceeds from disposition of assets 72,000 508,000 29,000 28,000 49,433,000
----------- ------------ ------------ ------------- -------------
Net cash provided by (used in) investing
activities (11,562,000) (21,461,000) (16,067,000) (12,919,000) 39,437,000
----------- ------------ ------------ ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on indebtedness (62,736,000) (631,000) (3,877,000) (277,000) (40,186,000)
Borrowings on indebtedness 121,352,000 -- 11,000,000 11,000,000 7,664,000
Net increase in deferred debt costs (7,407,000) (510,000) (5,000) (5,000) (4,063,000)
Payments on capital lease obligations (888,000) (970,000) (777,000) (576,000) (637,000)
Purchase of treasury stock (134,000) -- (50,000) (50,000) --
Purchase of preferred stock (34,500,000) -- -- -- --
----------- ------------ ------------ ------------- -------------
Net cash provided by (used in) financing
activities 15,687,000 (2,111,000) 6,291,000 10,092,000 (37,222,000)
----------- ------------ ------------ ------------- -------------
NET INCREASE (DECREASE) IN CASH 14,898,000 (5,960,000) (4,647,000) (9,763,000) (4,325,000)
CASH, at beginning of period 6,094,000 20,992,000 15,032,000 15,032,000 10,385,000
----------- ------------ ------------ ------------- -------------
CASH, at end of period $ 20,992,000 $ 15,032,000 $ 10,385,000 $ 5,269,000 $ 6,060,000
=========== ============ ============ ============= =============
<PAGE>
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Net loss $(30,247,000) $(18,995,000) $(47,496,000) $ (16,302,000) $ (22,453,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Extraordinary loss on extinguishment of debt 10,790,000 -- -- -- 1,095,000
Loss on impairment of long-lived assets -- -- 20,178,000 -- --
Depreciation and amortization 25,682,000 26,723,000 23,171,000 17,461,000 15,486,000
Loss on disposition of assets 5,156,00 2,183,000 684,000 3,000 412,000
Accretion on indebtedness -- 6,616,000 7,565,000 5,608,000 7,389,000
(Gain) loss in value of interest rate swap -- (661,000) 98,000 95,000 --
Gain on extinguishment of debt -- (550,000) -- -- --
(Increase) decrease in current assets:
Accounts receivable, net (91,000) (382,000) 389,000 536,000 7,000
Inventories (444,000) (769,000) 1,483,000 1,441,000 15,000
Prepaid expenses 1,683,000 (1,817,000) (1,288,000) 81,000 1,551,000
Increase (decrease) in current liabilities:
Accounts payable (4,151,000) 5,453,000 (1,706,000) (6,970,000) 1,410,000
Accrued liabilities 1,421,000 (1,671,000) 870,000 (3,697,000) (7,480,000)
Accrued insurance (1,014,000) (794,000) 2,167,000 1,572,000 529,000
Accrued interest 264,000 (45,000) (125,000) (5,213,000) (5,346,000)
Accrued payroll costs 1,934,000 2,321,000 (861,000) (1,551,000) 845,000
Deferred income taxes (210,000) -- -- -- --
----------- ------------ ------------ ------------- -------------
Net cash provided by (used in) operating
activities $ 10,773,000 $ 17,612,000 $ 5,129,000 $ (6,936,000) $ (6,540,000)
=========== ============ ============ ============= =============
</TABLE>
<PAGE>
AMERICAN RESTAURANT GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 27, 1993, DECEMBER 26, 1994 AND DECEMBER 25, 1995 AND
SEPTEMBER 23, 1996
(Information for the thirty-nine weeks ended September 25, 1995 and
September 23, 1996 is unaudited)
1. Summary of Significant Accounting Policies
a. Company
American Restaurant Group Holdings, Inc. ("Holdings"), a
Delaware corporation, was formed in September 1993 to own 100%
of the outstanding common stock of American Restaurant Group,
Inc. ("ARG"), a Delaware corporation. The ARG shareholders
exchanged their shares for shares of Holdings. This
transaction has been accounted for in a manner similar to a
pooling of interests and, accordingly, the financial
statements of ARG have been presented for periods prior to the
formation of Holdings.
Holdings, through ARG and its subsidiaries (collectively, the
"Company"), operates middle and upper price dinner houses,
casual dining restaurants and fast food restaurants primarily
in California and Texas. At year end 1993, 1994 and 1995, the
Company operated 242, 246, and 248 restaurants, respectively.
b. Operations
The Company's operations are effected by local and regional
economic conditions, including competition in the restaurant
industry, and the effect that such conditions have on the
markets it serves. Due to a decline in restaurant revenues in
1995, the Company has initiated plans and transactions in 1996
to assist it in meeting its obligations subsequent to December
25, 1995. These initiatives include increased and focused
advertising, restructuring personnel and resulting payroll and
pursuing negotiations to sell or refinance certain real
estate. In addition, Holdings has contributed $7,148,000 to
the paid-in capital of ARG subsequent to December 25, 1995.
While management feels that these plans and transactions will
allow it to continue to meet its obligations subsequent to
December 25, 1995, there can be no assurance that they will be
sufficient.
<PAGE>
c. Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated.
d. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions which affect the reported
amounts of assets and liabilities, the disclosure of
contingent assets and liabilities and the reported amounts of
revenues and expenses. Actual results could differ from those
estimates.
e. Inventories and Prepaid Expenses
Inventories consist of food, beverages and supplies and are
valued at the lower of cost (first-in, first-out method) or
market value. When a restaurant is opened, the initial
purchase of expendable equipment, such as china, glassware and
silverware, is set up as prepaid supplies and is not
depreciated; however, all replacements are expensed.
f. Advertising Costs
Advertising costs are accrued as a percentage of sales and
expensed during the year. Production costs are allocated to
the related advertisements. At year end, production costs for
advertisements which have not been aired are included in
prepaid expenses. Prepaid advertising costs of $1,324,000 and
$1,946,000 were included in prepaid expenses at December 26,
1994 and December 25, 1995, respectively. Advertising
expenses included in net loss were $16,967,000, $17,644,000,
$16,768,000, $11,985,000 and $15,146,000 in fiscal years
1993, 1994, 1995 and for the thirty-nine weeks ended
September 25, 1995 and September 23, 1996, respectively.
g. Preopening Costs
Costs incurred in connection with opening a new restaurant,
principally occupancy and staff training, are accumulated as
prepaid expenses and amortized over the initial year of
operations.
h. Property and Equipment
The Company provides for depreciation and amortization based
upon the estimated useful lives of depreciable assets using
the straight-line method. Estimated useful lives are as
follows:
<PAGE>
Land improvements 20 years
Buildings 30 to 35 years
Leasehold improvements Life of lease
Fixtures and equipment 3 to 10 years
Property held under capital leases Life of lease
i. Interest Costs
Interest costs incurred during the construction period of
restaurants are capitalized. The Company capitalized
approximately $68,000, $184,000, $130,000, $130,000 and
$107,000 for the years ended 1993, 1994, 1995 and for the
thirty-nine weeks ended September 25, 1995 and September 23,
1996, respectively.
j. Other Assets
Other assets include intangible assets, leasehold interests,
franchise rights, liquor licenses and cost in excess of net
assets acquired. These costs are amortized using the
straight-line method over the periods estimated to be
benefited, not greater than 40 years.
Deferred debt costs are amortized using the effective interest
method over the related debt term.
Estimated useful lives are as follows:
Intangible assets 3 to 40 years
Deferred debt costs Term of debt
Leasehold interests Life of lease
Franchise rights 35 years
Liquor licenses 40 years
Cost in excess of net assets acquired 40 years
k. Intangible Assets
The following table details the components of intangible
assets included in the accompanying consolidated balance
sheets (in thousands):
<TABLE>
<CAPTION>
December 26, December 25, September 23,
1994 1995 1996
------------- ------------- -------------
(unaudited)
<S> <C> <C> <C>
Assembled workforce $ 6,830 $ 5,556 $ 5,555
Going concern elements 4,765 3,854 3,854
Trademark/service marks 3,672 2,963 2,963
Acquisition costs 1,660 1,322 1,322
Critical mass 3,000 -- --
Other 427 442 449
<PAGE>
-------- ------- -------
Total $ 20,354 $14,137 $14,144
======== ======= =======
</TABLE>
l. Insurance
The Company self-insures the first $100,000 of its annual
medical and dental benefits per family. The Company also
self-insures the first $100,000 of property damage and the
first $250,000 to $350,000 per incident for general liability,
automotive liability and workers' compensation risks inherent
in its operations. Reserves for losses are established
currently based upon estimated obligations.
m. Franchise Income
The Company franchises fast food restaurants both domestically
and internationally. Franchise fees are recognized as income
as services are rendered. Initial franchise fees upon
entering international franchise agreements are recorded as
income when the franchise units are opened. Franchise
royalties based upon a percentage of the franchisees' gross
sales are accrued currently. Revenues include franchise
royalties and franchise fees of $2,690,000, $2,483,000,
$2,176,000, $2,082,000 and $1,854,000, respectively, for the
years ended 1993, 1994 and 1995 and the thirty-nine weeks
ended September 25, 1995 and September 23, 1996. There were
78, 59, 55, 55 and 56 franchised restaurants at year end 1993,
1994, 1995 and the thirty-nine weeks ended September 25, 1995
and September 23, 1996, respectively.
n. Accounting Period
The Company's fiscal year ends on the last Monday in December.
o. Reclassifications
Certain prior year accounts have been reclassified to conform
to the current year presentation.
p. Unaudited Interim Consolidated Financial Statements
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments (all
of which are of a normal recurring nature) necessary to
present fairly the Company's financial position as of
September 23, 1996, and the results of its operations and its
cash flows for the thirty-nine weeks ended September 25, 1995
and September 23, 1996. The Company's results for an interim
<PAGE>
period are not necessarily indicative of the results that may
be expected for the year.
2. Impairment of Long-Lived Assets
Effective December 25, 1995, the Company adopted the provisions of
Financial Accounting Standards Number 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" (FAS 121). The new statement changes the method of
valuing long-lived assets, including the Company's intangible assets
and cost in excess of net assets acquired, whereby long-lived assets
are to be carried at the lower of cost or, if impaired, fair value of
the asset, rather than net realizable value. Various assumptions and
estimates are used to determine fair value. The calculation of the
impairment loss is based on estimated future cash flows. The
estimates used to determine the impairment adjustment can change in
the near term as the economy and operations of specific restaurants
change. The adoption of FAS 121, together with the effects of
continuing adverse operations of certain restaurants, resulted in a
pre-tax non-cash charge of $20,178,000. The Company continually
reevaluates for impairment of long-lived assets and depending on
operations of specific restaurants may have additional non-cash
charges in the future.
3. Lease Obligations
The Company leases certain of its operating facilities under terms
ranging up to 40 years. These leases are classified as both operating
and capital leases. Certain of the leases contain provisions calling
for additional rentals based on sales or other provisions obligating
the Company to pay related property taxes and certain other expenses.
The following is a summary of property held under leases that have
been capitalized and included in the accompanying consolidated balance
sheets (in thousands):
<TABLE>
<CAPTION>
December 26, December 25, September 23,
1994 1995 1996
---------------- ---------------- ----------------
(unaudited)
<S> <C> <C> <C>
Property $14,307 $13,067 $13,067
Less-Accumulated depreciation 7,095 6,650 7,144
------- ------- -------
$ 7,212 $ 6,417 $ 5,923
======= ======= =======
</TABLE>
The following represents the minimum lease payments remaining under
noncancelable operating leases and capitalized leases as of December
25, 1995 (in thousands):
<PAGE>
<TABLE>
<CAPTION>
Operating Capitalized
Fiscal years ending Leases Leases
------------------- ---------------------- ----------------------
<S> <C> <C>
1996 $ 20,849 $ 2,025
1997 19,643 1,966
1998 17,355 1,881
1999 16,030 1,791
2000 14,712 1,694
Thereafter 95,408 8,332
-------- -------
Total minimum lease payments $ 183,997 $17,689
======== =======
Less-imputed interest (7.75 percent to
15.5 percent) 7,487
-------
Present value of minimum lease payments 10,202
Less-Current portion 858
-------
Long-term portion $ 9,344
-------
</TABLE>
Rental expense (including $1,322,000, $1,300,000, $1,019,000, $809,000
and $789,000, respectively, for contingent rents under operating
leases) was $20,605,000, $21,823,000, $22,863,000, $17,072,000 and
$17,572,000 during 1993, 1994 and 1995 and for the thirty-nine weeks
ended September 25, 1995 and September 23, 1996, respectively.
4. Long-Term Debt
In 1991, ARG secured financing of $45,000,000 which was subordinated
to existing debt.
In 1992, ARG issued and sold $120,000,000 of senior secured notes.
These 12.0% notes are due September 15, 1998. Simultaneously with its
issuance of the notes, ARG entered into a senior credit agreement
providing for a term loan of $40,000,000, a revolving credit facility
of $11,000,000 and a letter of credit facility of $15,000,000. ARG
used the proceeds to repay existing debt and to purchase previously
issued warrants from the previous lender.
In December 1993, the Company consummated a refinancing which
included, among other things, (a) the private placement by ARG of
$50,000,000 of senior secured notes due September 15, 1998 (the "Note
Offering") and (b) the private placement by Holdings of 88,557 units
<PAGE>
consisting of $88,557,000 aggregate principal amount of 14% senior
discount debentures due 2005 and 88,557 shares of Holdings common
stock (the "Debenture Offering") at a total price of $45,000,000.
Substantially all of the net proceeds of the Debenture Offering were
contributed by Holdings to ARG. The combined net proceeds from the
Note Offering and the Debenture Offering were used by ARG to repay a
portion of ARG's indebtedness and to retire all of its outstanding
preferred stock at a cost which was $42,545,000 less than its book
value. ARG repaid the senior term loan and the outstanding
indebtedness on the revolving credit facility. The existing credit
agreement was also amended and restated for the revolving credit and
letter of credit facilities. ARG recorded an extraordinary loss on
extinguishment of debt relating to the write-off of capitalized debt
costs in the amount of $10,790,000.
In March 1994, the Company consummated a registered exchange offer
whereby ARG exchanged $50,000,000 of its 12% senior secured notes due
September 15, 1998, Series B, for one hundred percent of the senior
secured notes that had been privately placed in the Note Offering and
Holdings exchanged $88,557,000 of its 14% senior discount debentures
due 2005 for one hundred percent of the senior discount debentures
that had been privately placed in the Debenture Offering.
In 1995, ARG amended its credit facilities to provide for a working
capital facility of $5,000,000 until June 30, 1996. In 1996, the
letter of credit facility of $13,500,000 was extended until September
30, 1996.
ARG is required to meet covenants which, among other things, require
ARG to maintain certain financial ratios measured quarterly. As of
December 25, 1995, while ARG was not in compliance with certain of
these covenants, waivers have been obtained from the lenders and the
covenants have been amended.
A covenant in ARG's senior secured notes requires a minimum net worth.
If at the end of any two consecutive fiscal quarters ARG's net worth
falls below this minimum, ARG is obligated to make an offer to
purchase ten percent of the principal amount of its senior secured
notes plus accrued interest. ARG's net worth was less than this
minimum at December 25, 1995. If ARG's net worth is less than this
minimum at March 25, 1996, ARG must either obtain a waiver from the
note holders or offer to purchase ten percent of the notes for
$17,000,000, plus accrued interest.
In August 1996, the Senior Secured Note holders of ARG consented to an
amendment which increased the interest rate from 12% to 13% and
changed interest payment dates from semi-annual to quarterly beginning
December 15, 1996. The consent also replaced a net worth covenant
with an EBITDA covenant and requires the Company to consummate asset
sales or sale/leaseback transactions prior to December 31, 1996.
After completing the sale/leaseback of the 24 restaurants mentioned
<PAGE>
below, the Company is required to generate net cash proceeds from
additional asset sales or sale/leasebacks of $25,000,000.
In September 1996, in connection with the sale/leaseback of 24 Stuart
Anderson's Black Angus and Stuart Anderson's Cattle Company
restaurants, ARG redeemed at par principal $32,386,000 of its Senior
Secured Notes and repaid the $3,660,000 outstanding on its revolving
line of credit.
Substantially all assets of ARG are pledged to its senior lenders. In
addition, the subsidiaries have guaranteed the indebtedness owed by
ARG and such guarantee is secured by substantially all of the assets
of the subsidiaries. In connection with such indebtedness, contingent
and mandatory prepayments may be required under certain specified
conditions and events. There are no compensating balance
requirements. A quarterly commitment fee of 0.5% per annum is payable
on the portion of the revolving credit facility not used for revolving
credit loans and on the letter of credit facility. In addition, under
certain circumstances, a quarterly fee of 2.50% per annum is payable
on certain unused portions of the letter of credit facility. A
quarterly fee of 2.75% per annum is payable on outstanding letters of
credit.
At year end 1994 and 1995, ARG had outstanding letters of credit
primarily related to its self-insurance programs of approximately
$14,785,000 and $14,435,000, respectively. At September 23, 1996, the
Company had outstanding letters of credit of approximately
$13,500,000.
Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 26, December 25, September 23,
1994 1995 1996
------------ ------------ -------------
(unaudited)
<S> <C> <C> <C>
Senior discount debentures, interest
only due semiannually beginning June
15, 1999 at 14%, matures December 15,
2005 . . . . . . . . . . . . . . . . . $ 51,779 $ 59,257 $ 73,689
Senior secured notes, interest only due
semiannually beginning September 15,
1992 at 13%, principal due September
15, 1998, sinking fund payment of 50
percent of principal due September
15, 1997 . . . . . . . . . . . . . . . 120,000 120,000 93,652
<PAGE>
Senior secured notes, interest only due
semiannually beginning March 15, 1994
at 13%, principal due September 15,
1998, sinking fund payment of 50
percent of principal due September
15, 1997 . . . . . . . . . . . . . . . 49,584 49,671 43,706
Revolving line of credit, interest at
the prime rate (8.5% at December 25,
1995) plus 1.875% or LIBOR (5.625% at
December 25, 1995) plus 3.25% due
quarterly, matures June 30, 1996 . . . -- 7,500 --
Subordinated note payable, quarterly
principal payments of $5,625,000 due
beginning December 31, 1998, interest
only due quarterly at 10.25% . . . . . 45,000 45,000 45,000
Other . . . . . . . . . . . . . . . . . . 366 357 605
-------- -------- --------
266,729 281,785 256,652
Less-Current portion . . . . . . . . . . 207 7,850 124
-------- -------- --------
Long-term portion . . . . . . . . . . . . $266,522 $273,935 $256,528
======== ======== ========
</TABLE>
Maturities of long-term debt during each of the five fiscal years
subsequent to year end 1995 are $7,850,000, $84,843,000, $84,835,000,
$22,500,000 and $22,500,000.
5. Income Taxes
On January 1, 1993, the Company adopted, prospectively, FAS No. 109.
The adoption of this statement has no material effect on the Company's
financial statements.
The Company's provision (credit) for income taxes includes the
following components (in thousands):
<PAGE>
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------------------
December 27, December 26, December 25,
1993 1994 1995
------------------ ------------------ ------------------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . $ -- $ -- $ --
State . . . . . . . . . . . . . . . 68 64 75
------ ---- ----
68 64 75
------ ---- ----
Deferred:
Federal . . . . . . . . . . . . . . -- -- --
State . . . . . . . . . . . . . . . (270) -- --
------ ---- ----
(270) -- --
------ ---- ----
Total provision (credit) . . . . . . . . $ (202) $ 64 $ 75
====== ==== ====
</TABLE>
The deferred income tax provision (credit) resulted form the following
temporary differences in the recognition of revenues and expenses for
tax and financial reporting purposes (in thousands):
<TABLE>
<CAPTION>
Year Ended
----------------------------------------------------------
December 27, December 26, December 25,
1993 1994 1995
------------------ ------------------ ------------------
<S> <C> <C> <C>
Tax depreciation less than depreciation
for financial reporting purposes . . . . $ (2,792) $ (2,850) $ (1,313)
Costs capitalized for financial reporting
purposes and expensed on tax return . . (192) 283 (482)
Decrease (increase) in liability reserves (1,459) 841 (1,460)
Carryover of tax net operating loss . . . (73,887) (79,426) (95,945)
Other, net 230 370 57
-------- -------- --------
(78,100) (80,782) (99,143)
Valuation allowance . . . . . . . . . . . 77,830 80,782 99,143
-------- -------- --------
Net deferred tax (asset) liability . . . $ (270) $ -- $ --
======== ======== ========
</TABLE>
The components of the Company's deferred income tax liability are as
follows (in thousands):
<TABLE>
<PAGE>
<CAPTION>
Year Ended
--------------------------------------
December 26, December 25,
1994
1995
------------------ ------------------
<S> <C> <C>
Tax depreciation greater than depreciation for
financial reporting purposes . . . . . . . . $ 8,952 $ 7,639
Costs capitalized for financial reporting
purposes and expensed on tax return . . . . . . 5,060 4,578
Increase in liability reserves . . . . . . . . (1,908) (3,368)
Carryover of tax net operating loss . . . . . . (79,426) (95,945)
Other, net . . . . . . . . . . . . . . . . . . 815 872
------- -------
(66,507) (86,224)
Valuation allowance 66,507 86,224
------- -------
Net deferred tax liability $-- $--
======= =======
</TABLE>
<PAGE>
The effective tax rate differs from the Federal statutory rate of 34
percent as a result of the following items (in thousands):
<TABLE>
<CAPTION>
Year Ended
----------------------------------------------------------
December 27, December 26, December 25,
1993 1994 1995
------------------ ------------------ ------------------
<S> <C> <C> <C>
Federal income tax credit at statutory
rates . . . . . . . . . . . . . . . . . . $(6,684) $(6,437) $(16,123)
State income tax provision for which no
federal benefit was recorded . . . . . . 45 42 50
Losses for which no federal benefit was
recorded . . . . . . . . . . . . . . . 5,897 5,757 14,175
Permanent items, principally intangible
amortization . . . . . . . . . . . . . 540 702 1,973
------- ------- --------
Provision (benefit) for income taxes . . $ (202) $ 64 $ 75
======= ======= ========
</TABLE>
At December 25, 1995, the Company had available net operating loss
carryforwards for Federal income tax purposes of $95,945,000, expiring
in 2003 to 2010.
6. Commitments and Contingencies
ARG is obligated under employment agreements with certain officers and
employees. Obligations under the agreements are $2,529,000, $300,000
and $300,000 in 1996, 1997 and 1998, respectively, provide for
periodic increases and expire from 1996 to 1998 unless extended.
ARG has been named as defendant in various lawsuits. It is the
opinion of management that the outcome of such litigation will not
materially affect the Company's financial position or results of
operations.
7. Preferred Stock
At year end 1994 and 1995, there were 10,000 authorized shares of
preferred stock (one cent par value). There were no issued or
outstanding shares.
8. Common Stock
Common stock (one cent par value) authorized, issued and outstanding
is as follows:
<TABLE>
<PAGE>
<CAPTION>
December 26, December 25, September 23,
1994 1995 1996
-------------- -------------- --------------
(unaudited)
<S> <C> <C> <C>
Shares authorized . . . . . . . . . . . . . . . . . 1,000,000 1,000,000 1,000,000
Shares issued . . . . . . . . . . . . . . . . . . . 513,631 513,631 513,631
Shares outstanding . . . . . . . . . . . . . . . . 513,631 504,505 504,505
Treasury shares . . . . . . . . . . . . . . . . . . -- 9,126 9,126
</TABLE>
The Chairman and certain other members of the Company's management own
all outstanding shares of Holdings common stock other than shares of
Holdings common stock issued to holders of the debenture units in
connection with the refinancing and rights to acquire shares of
Holdings common stock issuable upon exercise of options and warrants.
All such shares owned by management are subject to a common stock
voting trust agreement, in accordance with which the Chairman and
Chief Executive Officer of the Company exercises all voting and
substantially all other rights to which stockholders would otherwise
be entitled until the earlier of December 31, 2001 or the termination
of the common stock voting trust agreement.
During 1993, ARG acquired 5,350 shares of treasury stock. All ARG
Treasury stock was cancelled with the refinancing in December 1993.
During the years ended 1994 and 1995, and the thirty-nine weeks ended
September 23, 1996, the Company acquired no shares, 9,126 shares and
no shares of treasury stock, respectively.
9. Employee Stock Option Plan
The Company adopted a Stock Option Plan for Key Employees (the "Plan")
which allows for the issuance of options on up to 45,600 shares of
common stock at an exercise price at least equal to the fair market
value on the date of grant. At year end 1994 and 1995, and at
September 23, 1996, the Company had options outstanding for 21,572
shares, 19,290 shares and 12,440 shares, respectively. Holders of
common stock shares received pursuant to the Plan will be required to
become a party to the voting trust agreement mentioned above.
<PAGE>
UNITED STATES TRUST COMPANY OF NEW YORK
Exchange Agent:
By Hand/Overnight Express:
(insured or registered recommended)
United States Trust Company of
New York
65 Beaver Street
Ground Floor
New York, NY 10005
Attn: Corporate Trust and
Agency Services
By Mail:
(insured or registered recommended)
United States Trust Company of
New York
P.O. Box 843
Cooper Station
New York, New York 10276
Attention: Corporate Trust and
Agency Services
By Overnight Delivery:
(insured or registered recommended)
United States Trust Company of
New York
770 Broadway
7th Floor
New York, New York 10003
Attention: Corporate Trust and
Agency Services
By Facsimile:
(212) 420-6152
(For Eligible Institutions Only)
Confirm By Telephone:
800-548-6565
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
(the "GCL") provides in relevant part that a Delaware corporation may indemnify
any persons, including officers and directors, who are, or are threatened to be
made, parties to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of such corporation), by reason of the fact
that such person is or was an officer or director of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. The indemnity may include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, provided such officer or director acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the corporation's best interests and, for criminal proceedings, had no
reasonable cause to believe that his conduct was illegal. A Delaware
corporation may indemnify officers and directors in an action by or in the
right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation in the performance of his
duty. Where an officer or director is successful on the merits or otherwise in
the defense of any action referred to above, the corporation must indemnify him
against the expenses which such officer or director actually and reasonably
incurred.
Article IV of the by-laws of American Restaurant Group Holdings, Inc.
("Holdings") provides for indemnification of its officers and directors to the
fullest extent permitted by Section 145 of the GCL.
Section 102(b)(7) of the GCL provides that a Delaware corporation may
eliminate or limit the personal liability of a director to a Delaware
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the GCL relating to the unlawful payment of a
dividend or an unlawful stock purchase or redemption or (iv) for any
transaction from which the director derived an improper personal benefit.
Article 7 of the Certificate of Incorporation of Holdings provides for
the elimination of personal liability of its directors for monetary damages for
breach of fiduciary duty as a director, except as otherwise provided by the GCL.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
<PAGE>
Exhibit No. Description
3.1 Certificate of Incorporation of Holdings, filed with the
Secretary of State of Delaware on September 24, 1993.***
3.2 Certificate of Amendment to Certificate of Incorporation of
Holdings, filed with the Secretary of State of Delaware on
December 10, 1993.***
3.3 By-Laws of Holdings.***
4.1 Indenture, dated as of December 1, 1993, between Holdings and
United States Trust Company of New York.***
4.2 First Supplemental Indenture, dated as of March 13, 1996,
between the Company and United States Trust Company of New
York.*****
4.3 Specimen Certificate of 14% Senior Discount Debentures due
2005, Series A.***
4.4 Specimen Certificate of 14% Senior Discount Debentures due
2005, Series B ("Exchange Debenture").***
4.5 Indenture, dated as of December 1, 1993, between American
Restaurant Group, Inc. ("ARG") and U.S. Trust Company of
California, N.A. (including the form of notes).**
4.6 Shareholders and Registration Rights Agreement, dated as of
December 14, 1993, between Holdings, certain management
stockholders and BT Securities Corporation.***
4.7 Registration Rights Agreement, dated as of March 13, 1996,
between the Company and certain purchasers referred to
therein.*****
4.8 Amended and Restated Credit Agreement, dated as of December
13, 1993, among ARG, the subsidiaries of ARG parties thereto,
Bankers Trust Company, as Agent, and the several banks named
thereto.**
4.9 Second Amended and Restated Subordinated Loan Agreement, dated
as of December 14, 1993, between ARG and Merrill Lynch
Interfunding Inc.**
4.10 Registration Rights Agreement, dated as of December 14, 1993,
between ARG and Merrill Lynch Interfunding Inc.**
4.11 Stockholders and Registration Rights Agreement, dated as of
December 14, 1993, among Holdings, ARG, the stockholders
parties thereto and Merrill Lynch Interfunding Inc.**
4.12 Warrant Certificate, dated as of December 14, 1993, between
Holdings and Merrill Lynch Interfunding Inc.***
<PAGE>
4.13 Indenture, dated as of September 15, 1992, between ARG and
U.S. Trust Company of California, N.A., as Trustee (including
the form of note).*
4.14 Intercreditor Agreement, dated March 20, 1992, among Bankers
Trust Company, as Collateral Agent and as Agent, U.S. Trust
Company of California, N.A., as Trustee, Merrill Lynch
Interfunding Inc., ARG and the Subsidiary Guarantors.*
4.15 Acknowledgement to Intercreditor Agreement, dated as of
December 13, 1993, between the Lenders named therein and U.S.
Trust Company of California, N.A., as Trustee.**
4.16 First Supplemental Indenture, dated as of December 9, 1993,
between ARG and U.S. Trust Company of California, N.A., as
Trustee.**
4.17 Limited Waiver and Fourth Amendment to Amended and Restated
Credit Agreement, dated November 1, 1995, among ARG, the
subsidiaries of ARG parties hereto, Bankers Trust Company, as
Agent, and the several banks named thereto.****
4.18 Limited Waiver and Fifth Amendment to Amended and Restated
Credit Agreement, dated February 27, 1996, among ARG, the
subsidiaries of ARG parties hereto, Bankers Trust Company, as
Agent, and the several banks named thereto.****
5.1 Opinion of Simpson Thacher & Bartlett.
8.1 Opinion of Simpson Thacher & Bartlett regarding tax matters.
9.1 Common Stock Voting Trust Agreement, dated as of December 14,
1993, among the stockholders named therein and Anwar S.
Soliman, as Voting Trustee.***
10.1 Common Stock Subscription Agreement, dated as of December 14,
1993, between Holdings and Anwar S. Soliman.***
10.2 Common Stock Subscription Agreement, dated as of December 14,
1993, between Holdings and Ralph S. Roberts.***
10.3 Common Stock Subscription Agreements, each dated as of
December 14, 1993, between Holdings and the subscriber party
thereto.***
10.4 Amended and Restated Employment Agreement, dated as of
December 14, 1993, between ARG and Anwar S. Soliman.***
10.5 Amended and Restated Employment Agreement, dated as of
December 14, 1993, between ARG and Ralph S. Roberts.***
10.6 Amended and Restated Employment Agreement, dated as of
December 14, 1993, between ARG and Wilfred H. Partridge.***
10.7 Employment Agreement, dated as of March 21, 1995, between
Grandy's, Inc. and George E. Miller.****
<PAGE>
10.8 Stock Option Plan for Key Employees of American Restaurant
Group Holdings, Inc.***
12.1 Statement of Computation of the Ratios of Earnings to Fixed
Charges.
22.1 Subsidiaries of Holdings.***
24.1 Consent of Arthur Andersen LLP
24.2 Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1
hereto).
25.1 Powers of Attorney (included in the signature pages to the
Registration Statement).
26.1 Statement of Eligibility and Qualification (Form T-1) under
the Trust Indenture Act of 1939 of United States Trust Company
of New York.***
28.1 Form of Letter of Transmittal.
28.2 Form of Notice of Guaranteed Delivery.
28.3 Form of Exchange Agency Agreement to be entered into between
Holdings and United States Trust Company of New York.
__________
* Incorporated by reference to ARG's Registration Statement No. 33-48183
on Form S-4 filed with the Securities and Exchange Commission on May
28, 1992, as amended with Amendment No. 1 filed on September 11, 1992.
** Incorporated by reference to ARG's Current Report on Form 8-K dated
December 14, 1993 filed with the Securities and Exchange Commission on
December 30, 1993.
*** Incorporated by reference to the Registrant's Registration Statement
No. 33-74012 on Form S-4 filed with the Securities and Exchange
Commission on January 12, 1994.
**** Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 25, 1995 filed with the
Securities and Exchange Commission on March 21, 1996.
***** Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended March 25, 1996 filed with the
Securities and Exchange Commission on May 8, 1996.
(b) Financial Statement Schedules. See Index to Consolidated
Financial Statement Schedules.
Item 22. Undertakings
<PAGE>
A. Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, 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 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by 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 Act and will be governed by the final
adjudication of such issue.
B. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or 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
Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or 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; or
(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.
(2) That, for the purpose of determining any liability under
the Act, each such post-effective 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.
(4) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to Item 4,
10(b), 11 or 13 of this form, 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.
<PAGE>
(5) 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.
<PAGE>
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, hereunto duly authorized in the City of Newport
Beach, State of California on the 6th day of December, 1996.
AMERICAN RESTAURANT GROUP HOLDINGS, INC.
By:
/s/ William J. McCaffrey, Jr.
-----------------------------
William J. McCaffrey, Jr.
Chief Financial Officer, Vice President,
Treasurer and Assistant Secretary (and Director)
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Patrick J. Kelvie and William J. McCaffrey, Jr. and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements 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,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with respect to this Registration Statement or any amendments or supplements
hereto in the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or their substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Anwar S. Soliman Chairman, Chief Executive December 3, 1996
- ------------------------------ Officer and Director
(Anwar S. Soliman) (Principal Executive Officer)
/s/ William J. McCaffrey, Jr. Chief Financial Officer, December 3, 1996
- ------------------------------ Vice President, Treasurer,
(William J. McCaffrey, Jr.) Assistant Secretary and
Director (Principal
Financial and Accounting
Officer)
- ------------------------------ President, Chief Operating December 6, 1996
(Ralph S. Roberts) Officer and Director
/s/ Richard I. Beattie Director December , 1996
- ------------------------------
(Richard I. Beattie)
<PAGE>
Exhibit 5.1
December 6, 1996
American Restaurant Group Holdings, Inc.
450 Newport Center Drive
Newport Beach, California 92660
Ladies and Gentlemen:
We have acted as counsel for American Restaurant Group Holdings,
Inc., a Delaware corporation (the "Company"), in connection with the
Registration Statement on Form S-4 (the "Registration Statement") filed by the
Company with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"), relating to the
issuance by the Company of $17,000,000 aggregate principal amount of its 14%
Senior Discount Debentures due 2005, Series B (the "Exchange Debentures"),
which are to be offered by the Company in exchange for $17,000,000 aggregate
principal amount of its outstanding 14% Senior Discount Debentures due 2005,
Series A (the "Debentures").
We have examined an executed copy of the Registration Statement
and the Indenture dated as of December 1, 1993, as supplemented by the First
Supplemental Indenture thereto, dated as of March 13, 1996 (the "Debenture
Indenture") between the Company and United States Trust Company of New York, as
Trustee (the "Debenture Trustee"), which has been filed with the Commission as
an Exhibit to the Registration Statement. In addition, we have examined, and
have relied as to matters of fact upon, the originals or copies, certified or
otherwise identified to our satisfaction, of such corporate records,
agreements, documents and other instruments and such certificates or comparable
documents of public officials and of officers and representatives of the
<PAGE>
Company, and have made such other and further investigations, as we have deemed
relevant and necessary as a basis for the opinion hereinafter set forth.
In such examination, we have assumed that the Debenture Indenture
has been duly authorized, executed and delivered by the Debenture Trustee. In
addition, we have assumed the genuineness of all signatures, the legal capacity
of natural persons, the authenticity of all documents submitted to us as
originals and the conformity to original documents of all documents submitted
to us as certified or photostatic copies, and the authenticity of the originals
of such latter documents.
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that, when the Registration
Statement shall have become effective, the Exchange Debentures, when executed
and authenticated in accordance with the provisions of the Indenture and
delivered in exchange for the Debentures as contemplated in the Registration
Statement and the Indenture, will constitute valid and legally binding
obligations of the Company in accordance with and subject to the terms thereof
and of the Indenture.
Our opinion set forth above is subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally,
general equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
We are members of the Bar of the State of New York and we do not
express any opinion herein concerning any law other than the law of the State
of New York and the federal law of the United States. This opinion is rendered
to you solely in connection with the above-described transaction and may not be
relied upon for any other purpose without our prior written consent.
<PAGE>
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and any amendment thereto and to the reference to our
firm under the caption "Legal Matters" in the Prospectus included therein.
Very truly yours,
/s/ Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT
EXHIBIT 28.1
LETTER OF TRANSMITTAL
for
Tender of all Outstanding
14% Senior Discount Debentures
Due 2005, Series A
in Exchange for
14% Senior Discount Debentures
Due 2005, Series B
of
AMERICAN RESTAURANT GROUP HOLDINGS, INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON _______ __, 1997 (the "EXPIRATION DATE")
UNLESS EXTENDED BY AMERICAN RESTAURANT GROUP HOLDINGS, INC.
EXCHANGE AGENT:
UNITED STATES TRUST COMPANY OF NEW YORK
By Hand/Overnight Express: By Mail:
(insured or registered recommended) (insured or registered recommended)
United States Trust Company of United States Trust Company of
New York New York
65 Beaver Street P.O. Box 843
Ground Floor Cooper Station
New York, NY 10005 New York, New York 10276
Attn: Corporate Trust and Attention: Corporate Trust and
Agency Services Agency
By Overnight Delivery:
(insured or registered recommended)
United States Trust Company of
New York
770 Broadway
7th Floor
New York, New York 10003
Attention: Corporate Trust and
Agency Services
By Facsimile: Confirm By Telephone:
(212) 420-6152 (800) 548-6565
(For Eligible Institutions Only)
Delivery of this Letter of Transmittal to an address other than as
set forth above or transmission of instructions via a facsimile transmission to
a number other than as set forth above will not constitute a valid delivery.
<PAGE>
The undersigned acknowledges receipt of the Prospectus dated
________ __, 199_ (the "Prospectus") of American Restaurant Group Holdings,
Inc. ("Holdings"), and this Letter of Transmittal (the "Letter of
Transmittal"), which together describe Holdings' offer (the "Exchange Offer")
to exchange $1,000 in principal amount of its 14% Senior Discount Debentures
Due 2005, Series B (the "Exchange Debentures") for each $1,000 in principal
amount of outstanding 14% Senior Discount Debentures Due 2005, Series A (the
"Debentures"). The terms of the Exchange Debentures are substantially
identical in all respects (including principal amount, interest rate and
maturity) to the terms of the Debentures for which they may be exchanged
pursuant to the Exchange Offer, except that the Exchange Debentures are freely
transferable by holders thereof (except as provided herein or in the
Prospectus) and are not subject to any covenant regarding registration under
the Securities Act of 1933, as amended (the "Act").
The undersigned has checked the appropriate boxes below and signed
this Letter of Transmittal to indicate the action the undersigned desires to
take with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Debentures to which this Letter of Transmittal
relates. If the space provided below is inadequate, the Certificate Numbers
and Principal Amounts should be listed on a separate signed schedule affixed
hereto.
<PAGE>
DESCRIPTION OF DEBENTURES TENDERED HEREWITH
Aggregate
Name(s) and Address(es) Principal Amount Principal
of Registered Holder(s) Certificate Represented Amount
(Please fill in) Number(s)<F1> by Debentures<F1> Tendered<F2>
_______________________ _____________ __________________ _____________
_______________________ _____________ __________________ _____________
_______________________ _____________ __________________ _____________
_______________________ _____________ __________________ _____________
_______________________ _____________ __________________ _____________
_______________________ _____________ __________________ _____________
Total __________________ _____________
_______________
[FN]
<F1> Need not be completed by book-entry holders.
<F2> Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Debentures. See
instruction 2.
This Letter of Transmittal is to be used either if certificates
of Debentures are to be forwarded herewith or if delivery of Debentures is to
be made by book-entry transfer to an account maintained by the Exchange Agent
or its agent at The Depository Trust Company, pursuant to the procedures set
forth in "The Exchange Offer--Tender Procedure" in the Prospectus. Delivery of
documents to the book-entry transfer facility does not constitute delivery to
the Exchange Agent.
Holders whose Debentures are not immediately available or who
cannot deliver their Debentures and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date must tender their Debentures
according to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offer--Tender Procedure."
|__| CHECK HERE IF TENDERED DEBENTURES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT OR ITS AGENT
WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution __________________________________________
|__| The Depository Trust Company
Account Number _________________________________________________________
Transaction Code Number ________________________________________________
<PAGE>
|__| CHECK HERE IF TENDERED DEBENTURES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) ___________________________________________
Name of Eligible Institution that Guaranteed Delivery __________________
Date of Execution of Notice of Guaranteed Delivery _____________________
If Delivered by Book-Entry Transfer:
Account Number ________________________________________________________
|__| CHECK HERE IF EXCHANGE DEBENTURES ARE TO BE DELIVERED TO PERSON OTHER
THAN PERSON SIGNING THE LETTER OF TRANSMITTAL:
Name __________________________________________________________________
(Please Print)
Address _______________________________________________________________
_______________________________________________________________________
(Including Zip Code)
|__| CHECK HERE IF EXCHANGE DEBENTURES ARE TO BE DELIVERED TO ADDRESS
DIFFERENT FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Address _______________________________________________________________
_______________________________________________________________________
(Including Zip Code)
|__| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _________________________________________________________________
Address: ______________________________________________________________
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer,
the undersigned hereby tenders to Holdings the above-described principal amount
of the Debentures indicated above. Subject to, and effective upon, the
acceptance for exchange of the Debentures tendered herewith, the undersigned
hereby exchanges, assigns and transfers to, or upon the order of, Holdings all
right, title and interest in and to such Debentures. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of Holdings, in connection with the Exchange
Offer) to cause the Debentures to be assigned, transferred and exchanged. The
undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Debentures and to acquire Exchange
Debentures issuable upon the exchange of such tendered Debentures, and that,
when the same are accepted for exchange, Holdings will acquire good and
unencumbered title to the tendered Debentures, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim.
The undersigned also warrants that it will, upon request, execute and deliver
any additional documents deemed by the Exchange Agent or Holdings to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Debentures or transfer ownership of such Debentures on the account
books maintained by the book-entry transfer facility. The undersigned further
agrees that acceptance of any and all validly tendered Debentures by Holdings
and the issuance of Exchange Debentures in exchange therefor shall constitute
performance in full by Holdings of its obligations under the Registration
Rights Agreement (as defined in the Prospectus) and that Holdings shall have no
further obligations or liabilities thereunder except as provided in Section 7
of said agreement.
The Exchange Offer is subject to certain conditions as set forth in
the Prospectus under the caption "The Exchange Offer--Conditions to the
Exchange Offer." The undersigned recognizes that as a result of these
conditions (which may be waived, in whole or in part, by Holdings), as more
particularly set forth in the Prospectus, Holdings may not be required to
exchange any of the Debentures tendered hereby and, in such event, the
Debentures not exchanged will be returned to the undersigned at the address
shown above.
By tendering, each holder of Debentures represents that Exchange
Debentures acquired in the exchange will be obtained in the ordinary course of
such holder's business, that such holder has no arrangement with any person to
participate in the distribution of such Exchange Debentures, that such holder
is not an " affiliate" of Holdings within the meaning of Rule 405 under the Act
and that such holder is not engaged in, and does not intend to engage in, a
distribution of the Exchange Debentures. Any holder of Debentures using the
Exchange Offer to participate in a distribution of the Exchange Debentures (i)
cannot rely on the position of the staff of the Securities and Exchange
Commission enunciated in its interpretive letter with respect to Exxon Capital
Holdings Corporation (available April 13, 1989) or similar letters and (ii)
must comply with the registration and prospectus requirements of the Act in
connection with a secondary resale transaction.
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
<PAGE>
Exchange Debentures. If the undersigned is a broker-dealer that will receive
Exchange Debentures for its own account in exchange for Debentures that were
acquired as a result of market-making activities or other trading activities,
it acknowledges that it will deliver a prospectus in connection with any resale
of such Exchange Debentures; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Act.
All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned. Tendered
Debentures may be withdrawn at any time prior to the Expiration Date in
accordance with the terms of the Letter of Transmittal.
Certificates for all Exchange Debentures delivered in exchange for
tendered Debentures and any Debentures delivered herewith but not exchanged,
and registered in the name of the undersigned, shall be delivered to the
undersigned at the address shown below the signature of the undersigned.
<PAGE>
TENDERING HOLDER(S) SIGN HERE
(Complete accompanying substitute Form W-9)
______________________________________________________________________________
______________________________________________________________________________
Signature(s) of Holder(s)
Dated ________________ Area Code and Telephone Number: ____________________
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) of Debentures. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, please set forth the
full title of such person.) See Instruction 3.
Name(s) ______________________________________________________________________
______________________________________________________________________________
(Please Print)
Capacity (full title) ________________________________________________________
Address ______________________________________________________________________
______________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No. __________________________________________________
Taxpayer Identification No. __________________________________________________
GUARANTEE OF SIGNATURE(S)
(If Required - See Instruction 3)
Authorized Signature ________________________________________________________
Name ________________________________________________________________________
Title _______________________________________________________________________
Address _____________________________________________________________________
Name of Firm ________________________________________________________________
Area Code and Telephone No. _________________________________________________
Dated __________________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Certificates.
Certificates for all physically delivered Debentures or confirmation
of any book-entry transfer to the Exchange Agent's or its agent's account at a
book-entry transfer facility of Debentures tendered by book-entry transfer, as
well as a properly completed and duly executed copy of this Letter of
Transmittal or facsimile thereof, and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at any of its
addresses set forth herein on or prior to the Expiration Date.
The method of delivery of this Letter of Transmittal, the Debentures
and any other required documents is at the election and risk of the holder, and
except as otherwise provided below, the delivery will be deemed made only when
actually received or confirmed by the Exchange Agent. If such delivery is by
mail, it is suggested that registered mail with return receipt requested,
properly insured, be used. In all cases sufficient time should be allowed to
permit timely delivery.
Holders whose Debentures are not immediately available or who cannot
deliver their Debentures and all other required documents to the Exchange Agent
on or prior to the Expiration Date or comply with book-entry transfer
procedures on a timely basis must tender their Debentures pursuant to the
guaranteed delivery procedure set forth in the Prospectus under "The Exchange
Offer--Tender Procedure." Pursuant to such procedure: (i) such tender must be
made by or through an Eligible Institution (as defined in the Prospectus); (ii)
on or prior to the Expiration Date the Exchange Agent must have received from
such Eligible Institution a letter, telex, telegram or facsimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight courier) setting forth the name and address of the tendering holder,
the names in which such Debentures are registered, and, if possible, the
certificate numbers of the Debentures to be tendered; and (iii) all tendered
Debentures (or a confirmation of any book-entry transfer of such Debentures
into the Exchange Agent's account at a book-entry transfer facility) as well as
this Letter of Transmittal and all other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within five New York Stock
Exchange trading days after the date of execution of such letter, telex,
telegram or facsimile transmission, all as provided in the Prospectus under the
caption "The Exchange Offer--Tender Procedure."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal
(or facsimile thereof), shall waive any right to receive notice of the
acceptance of the Debentures for exchange.
2. Partial Tenders; Withdrawals.
If less than the entire principal amount of Debentures evidenced by a
submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the box entitled "Principal Amount Tendered." A
newly issued certificate for the principal amount of Debentures submitted but
not tendered will be sent to such holder as soon as practicable after the
Expiration Date. All Debentures delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise clearly indicated.
<PAGE>
Tenders of Debentures pursuant to the Exchange Offer are irrevocable,
except that Debentures tendered pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date. To be effective, a written,
telegraphic, telex or facsimile transmission notice of withdrawal must be
received by the Exchange Agent by 5:00 P.M., New York City time, on the
Expiration Date unless extended by Holdings. Any such notice of withdrawal
must specify the person named in the Letter of Transmittal as having tendered
Debentures to be withdrawn, the certificate numbers of the Debentures to be
withdrawn, the principal amount of Debentures delivered for exchange, a
statement that such holder is withdrawing his or her election to have such
Debentures exchanged, and the name of the registered holder of such Debentures,
and must be signed by the holder in the same manner as the original signature
on the Letter of Transmittal (including any required signature guarantees) or
be accompanied by evidence satisfactory to Holdings that the person withdrawing
the tender has succeeded to the beneficial ownership of the Debentures being
withdrawn. The Exchange Agent will return the properly withdrawn Debentures
promptly following receipt of notice of withdrawal. If Debentures have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn Debentures or otherwise
comply with the book-entry transfer facility's procedures. All questions as to
the validity of notices of withdrawals, including time of receipt, will be
determined by Holdings, and such determination will be final and binding on all
parties.
3. Signature on this Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures.
If this Letter of Transmittal is signed by the registered holder(s)
of the Debentures tendered hereby, the signature must correspond with the
name(s) as written on the face of the certificates without alteration,
enlargement or any change whatsoever.
If any of the Debentures tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Debentures registered in different names are tendered,
it will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal as there are different registrations of Debentures.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the Debentures) of Debentures listed and tendered hereby, no
endorsements of certificates or separate written instruments of transfer or
exchange are required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Debentures listed, such Debentures must be
endorsed or accompanied by separate written instruments of transfer or exchange
in form satisfactory to Holdings and duly executed by the registered holder, in
either case signed exactly as the name or names of the registered holder or
holders appear(s) on the Debentures.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
<PAGE>
others acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by Holdings, proper evidence
satisfactory to Holdings of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Debentures are tendered: (i) by a
registered holder of such Debentures; or (ii) for the account of an Eligible
Institution.
4. Transfer Taxes.
Holdings shall pay all transfer taxes, if any, applicable to the
transfer and exchange of Debentures to it or its order pursuant to the Exchange
Offer. If a transfer tax is imposed for any reason other than the transfer and
exchange of Debentures to Holdings or its order pursuant to the Exchange Offer,
the amount of any such transfer taxes (whether imposed on the registered holder
or any other person) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exception therefrom is not submitted
herewith the amount of such transfer taxes will be billed directly to such
tendering holder.
Except as provided in this Instruction 4, it will not be necessary
for transfer tax stamps to be affixed to the Debentures listed in this Letter
of Transmittal.
5. Waiver of Conditions.
Holdings reserves the absolute right to waive, in whole or in part,
either of the conditions to the Exchange Offer set forth in the Prospectus.
6. Mutilated, Lost, Stolen or Destroyed Debentures.
Any holder whose Debentures have been mutilated, lost, stolen or
destroyed, should contact the Exchange Agent at the address indicated below for
further instructions.
7. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as
requests for additional copies of the Prospectus and this Letter of
Transmittal, may be directed to the Exchange Agent at the address and telephone
number set forth above. In addition, all questions relating to the Exchange
Offer, as well as requests for assistance or additional copies of the
Prospectus and this Letter of Transmittal, may be directed to Holdings at 450
Newport Center Drive, Newport Beach, California 92660, Attention: William J.
McCaffrey, Jr. (telephone: (714) 721-8000).
IMPORTANT: This Letter of Transmittal or a facsimile thereof
(together with certificates of Debentures or confirmation of book-entry
transfer and all other required documents) or a Notice of Guaranteed Delivery
must be received by the Exchange Agent on or prior to the Expiration Date.
<TABLE>
Exhibit 12.1
<CAPTION>
American Restaurant Group Holdings, Inc.
Statement of Computation of Ratio of Earnings to Fixed Charges
(Dollars in Thousands)
Thirty-Nine Weeks
Year Ended Ended
December December December December December September September
30, 28, 27, 26, 25, 25, 23,
1991 1992 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Net loss before taxes . . . .
Extraordinary loss . . . ($ 3,022) ($12,129) ($19,659) ($18,931) ($47,421) ($16,249) ($21,283)
Fixed charges . . . . . . . . 29,373 32,642 34,708 44,534 46,292 34,545 36,838
Total earnings . . . . . . . 26,351 20,513 15,049 25,603 (1,129) 18,296 15,555
Fixed charges:
Operating lease expense . 15,718 17,416 19,283 20,523 21,844 16,263 16,783
Interest factor . . . . . . . 33% 33% 33% 33% 33% 33% 33%
Interest portion . . . . . . 5,187 5,747 6,363 6,773 7,209 5,367 5,538
Interest expense . . . . . . 22,916 23,185 23,982 34,190 35,450 26,458 28,433
Amortization of debt costs . 1,270 3,710 4,363 3,571 3,633 2,720 2,867
Total fixed charges . . . . . 29,373 32,642 34,708 44,534 46,292 34,545 36,838
Ratio of earnings to fixed
charges . . . . . . . . . . . 0.90 0.63 0.43 0.57 (0.02) 0.53 0.42
</TABLE>
EXHIBIT 24.1
ARTHUR ANDERSEN LLP
CONSENT
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Orange Country, California
December 5, 1996
EXHIBIT 28.1
LETTER OF TRANSMITTAL
for
Tender of all Outstanding
14% Senior Discount Debentures
Due 2005, Series A
in Exchange for
14% Senior Discount Debentures
Due 2005, Series B
of
AMERICAN RESTAURANT GROUP HOLDINGS, INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON _______ __, 1997 (the "EXPIRATION DATE")
UNLESS EXTENDED BY AMERICAN RESTAURANT GROUP HOLDINGS, INC.
EXCHANGE AGENT:
UNITED STATES TRUST COMPANY OF NEW YORK
By Hand/Overnight Express: By Mail:
(insured or registered recommended) (insured or registered recommended)
United States Trust Company of United States Trust Company of
New York New York
65 Beaver Street P.O. Box 843
Ground Floor Cooper Station
New York, NY 10005 New York, New York 10276
Attn: Corporate Trust and Attention: Corporate Trust and
Agency Services Agency
By Overnight Delivery:
(insured or registered recommended)
United States Trust Company of
New York
770 Broadway
7th Floor
New York, New York 10003
Attention: Corporate Trust and
Agency Services
By Facsimile: Confirm By Telephone:
(212) 420-6152 (800) 548-6565
(For Eligible Institutions Only)
Delivery of this Letter of Transmittal to an address other than as
set forth above or transmission of instructions via a facsimile transmission to
a number other than as set forth above will not constitute a valid delivery.
<PAGE>
The undersigned acknowledges receipt of the Prospectus dated
________ __, 199_ (the "Prospectus") of American Restaurant Group Holdings,
Inc. ("Holdings"), and this Letter of Transmittal (the "Letter of
Transmittal"), which together describe Holdings' offer (the "Exchange Offer")
to exchange $1,000 in principal amount of its 14% Senior Discount Debentures
Due 2005, Series B (the "Exchange Debentures") for each $1,000 in principal
amount of outstanding 14% Senior Discount Debentures Due 2005, Series A (the
"Debentures"). The terms of the Exchange Debentures are substantially
identical in all respects (including principal amount, interest rate and
maturity) to the terms of the Debentures for which they may be exchanged
pursuant to the Exchange Offer, except that the Exchange Debentures are freely
transferable by holders thereof (except as provided herein or in the
Prospectus) and are not subject to any covenant regarding registration under
the Securities Act of 1933, as amended (the "Act").
The undersigned has checked the appropriate boxes below and signed
this Letter of Transmittal to indicate the action the undersigned desires to
take with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Debentures to which this Letter of Transmittal
relates. If the space provided below is inadequate, the Certificate Numbers
and Principal Amounts should be listed on a separate signed schedule affixed
hereto.
<PAGE>
DESCRIPTION OF DEBENTURES TENDERED HEREWITH
Aggregate
Name(s) and Address(es) Principal Amount Principal
of Registered Holder(s) Certificate Represented Amount
(Please fill in) Number(s)<F1> by Debentures<F1> Tendered<F2>
_______________________ _____________ __________________ _____________
_______________________ _____________ __________________ _____________
_______________________ _____________ __________________ _____________
_______________________ _____________ __________________ _____________
_______________________ _____________ __________________ _____________
_______________________ _____________ __________________ _____________
Total __________________ _____________
_______________
[FN]
<F1> Need not be completed by book-entry holders.
<F2> Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Debentures. See
instruction 2.
This Letter of Transmittal is to be used either if certificates
of Debentures are to be forwarded herewith or if delivery of Debentures is to
be made by book-entry transfer to an account maintained by the Exchange Agent
or its agent at The Depository Trust Company, pursuant to the procedures set
forth in "The Exchange Offer--Tender Procedure" in the Prospectus. Delivery of
documents to the book-entry transfer facility does not constitute delivery to
the Exchange Agent.
Holders whose Debentures are not immediately available or who
cannot deliver their Debentures and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date must tender their Debentures
according to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offer--Tender Procedure."
|__| CHECK HERE IF TENDERED DEBENTURES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT OR ITS AGENT
WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution __________________________________________
|__| The Depository Trust Company
Account Number _________________________________________________________
Transaction Code Number ________________________________________________
<PAGE>
|__| CHECK HERE IF TENDERED DEBENTURES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) ___________________________________________
Name of Eligible Institution that Guaranteed Delivery __________________
Date of Execution of Notice of Guaranteed Delivery _____________________
If Delivered by Book-Entry Transfer:
Account Number ________________________________________________________
|__| CHECK HERE IF EXCHANGE DEBENTURES ARE TO BE DELIVERED TO PERSON OTHER
THAN PERSON SIGNING THE LETTER OF TRANSMITTAL:
Name __________________________________________________________________
(Please Print)
Address _______________________________________________________________
_______________________________________________________________________
(Including Zip Code)
|__| CHECK HERE IF EXCHANGE DEBENTURES ARE TO BE DELIVERED TO ADDRESS
DIFFERENT FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Address _______________________________________________________________
_______________________________________________________________________
(Including Zip Code)
|__| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _________________________________________________________________
Address: ______________________________________________________________
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer,
the undersigned hereby tenders to Holdings the above-described principal amount
of the Debentures indicated above. Subject to, and effective upon, the
acceptance for exchange of the Debentures tendered herewith, the undersigned
hereby exchanges, assigns and transfers to, or upon the order of, Holdings all
right, title and interest in and to such Debentures. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of Holdings, in connection with the Exchange
Offer) to cause the Debentures to be assigned, transferred and exchanged. The
undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Debentures and to acquire Exchange
Debentures issuable upon the exchange of such tendered Debentures, and that,
when the same are accepted for exchange, Holdings will acquire good and
unencumbered title to the tendered Debentures, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim.
The undersigned also warrants that it will, upon request, execute and deliver
any additional documents deemed by the Exchange Agent or Holdings to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Debentures or transfer ownership of such Debentures on the account
books maintained by the book-entry transfer facility. The undersigned further
agrees that acceptance of any and all validly tendered Debentures by Holdings
and the issuance of Exchange Debentures in exchange therefor shall constitute
performance in full by Holdings of its obligations under the Registration
Rights Agreement (as defined in the Prospectus) and that Holdings shall have no
further obligations or liabilities thereunder except as provided in Section 7
of said agreement.
The Exchange Offer is subject to certain conditions as set forth in
the Prospectus under the caption "The Exchange Offer--Conditions to the
Exchange Offer." The undersigned recognizes that as a result of these
conditions (which may be waived, in whole or in part, by Holdings), as more
particularly set forth in the Prospectus, Holdings may not be required to
exchange any of the Debentures tendered hereby and, in such event, the
Debentures not exchanged will be returned to the undersigned at the address
shown above.
By tendering, each holder of Debentures represents that Exchange
Debentures acquired in the exchange will be obtained in the ordinary course of
such holder's business, that such holder has no arrangement with any person to
participate in the distribution of such Exchange Debentures, that such holder
is not an " affiliate" of Holdings within the meaning of Rule 405 under the Act
and that such holder is not engaged in, and does not intend to engage in, a
distribution of the Exchange Debentures. Any holder of Debentures using the
Exchange Offer to participate in a distribution of the Exchange Debentures (i)
cannot rely on the position of the staff of the Securities and Exchange
Commission enunciated in its interpretive letter with respect to Exxon Capital
Holdings Corporation (available April 13, 1989) or similar letters and (ii)
must comply with the registration and prospectus requirements of the Act in
connection with a secondary resale transaction.
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
<PAGE>
Exchange Debentures. If the undersigned is a broker-dealer that will receive
Exchange Debentures for its own account in exchange for Debentures that were
acquired as a result of market-making activities or other trading activities,
it acknowledges that it will deliver a prospectus in connection with any resale
of such Exchange Debentures; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Act.
All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned. Tendered
Debentures may be withdrawn at any time prior to the Expiration Date in
accordance with the terms of the Letter of Transmittal.
Certificates for all Exchange Debentures delivered in exchange for
tendered Debentures and any Debentures delivered herewith but not exchanged,
and registered in the name of the undersigned, shall be delivered to the
undersigned at the address shown below the signature of the undersigned.
<PAGE>
TENDERING HOLDER(S) SIGN HERE
(Complete accompanying substitute Form W-9)
______________________________________________________________________________
______________________________________________________________________________
Signature(s) of Holder(s)
Dated ________________ Area Code and Telephone Number: ____________________
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) of Debentures. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, please set forth the
full title of such person.) See Instruction 3.
Name(s) ______________________________________________________________________
______________________________________________________________________________
(Please Print)
Capacity (full title) ________________________________________________________
Address ______________________________________________________________________
______________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No. __________________________________________________
Taxpayer Identification No. __________________________________________________
GUARANTEE OF SIGNATURE(S)
(If Required - See Instruction 3)
Authorized Signature ________________________________________________________
Name ________________________________________________________________________
Title _______________________________________________________________________
Address _____________________________________________________________________
Name of Firm ________________________________________________________________
Area Code and Telephone No. _________________________________________________
Dated __________________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Certificates.
Certificates for all physically delivered Debentures or confirmation
of any book-entry transfer to the Exchange Agent's or its agent's account at a
book-entry transfer facility of Debentures tendered by book-entry transfer, as
well as a properly completed and duly executed copy of this Letter of
Transmittal or facsimile thereof, and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at any of its
addresses set forth herein on or prior to the Expiration Date.
The method of delivery of this Letter of Transmittal, the Debentures
and any other required documents is at the election and risk of the holder, and
except as otherwise provided below, the delivery will be deemed made only when
actually received or confirmed by the Exchange Agent. If such delivery is by
mail, it is suggested that registered mail with return receipt requested,
properly insured, be used. In all cases sufficient time should be allowed to
permit timely delivery.
Holders whose Debentures are not immediately available or who cannot
deliver their Debentures and all other required documents to the Exchange Agent
on or prior to the Expiration Date or comply with book-entry transfer
procedures on a timely basis must tender their Debentures pursuant to the
guaranteed delivery procedure set forth in the Prospectus under "The Exchange
Offer--Tender Procedure." Pursuant to such procedure: (i) such tender must be
made by or through an Eligible Institution (as defined in the Prospectus); (ii)
on or prior to the Expiration Date the Exchange Agent must have received from
such Eligible Institution a letter, telex, telegram or facsimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight courier) setting forth the name and address of the tendering holder,
the names in which such Debentures are registered, and, if possible, the
certificate numbers of the Debentures to be tendered; and (iii) all tendered
Debentures (or a confirmation of any book-entry transfer of such Debentures
into the Exchange Agent's account at a book-entry transfer facility) as well as
this Letter of Transmittal and all other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within five New York Stock
Exchange trading days after the date of execution of such letter, telex,
telegram or facsimile transmission, all as provided in the Prospectus under the
caption "The Exchange Offer--Tender Procedure."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal
(or facsimile thereof), shall waive any right to receive notice of the
acceptance of the Debentures for exchange.
2. Partial Tenders; Withdrawals.
If less than the entire principal amount of Debentures evidenced by a
submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the box entitled "Principal Amount Tendered." A
newly issued certificate for the principal amount of Debentures submitted but
not tendered will be sent to such holder as soon as practicable after the
Expiration Date. All Debentures delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise clearly indicated.
<PAGE>
Tenders of Debentures pursuant to the Exchange Offer are irrevocable,
except that Debentures tendered pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date. To be effective, a written,
telegraphic, telex or facsimile transmission notice of withdrawal must be
received by the Exchange Agent by 5:00 P.M., New York City time, on the
Expiration Date unless extended by Holdings. Any such notice of withdrawal
must specify the person named in the Letter of Transmittal as having tendered
Debentures to be withdrawn, the certificate numbers of the Debentures to be
withdrawn, the principal amount of Debentures delivered for exchange, a
statement that such holder is withdrawing his or her election to have such
Debentures exchanged, and the name of the registered holder of such Debentures,
and must be signed by the holder in the same manner as the original signature
on the Letter of Transmittal (including any required signature guarantees) or
be accompanied by evidence satisfactory to Holdings that the person withdrawing
the tender has succeeded to the beneficial ownership of the Debentures being
withdrawn. The Exchange Agent will return the properly withdrawn Debentures
promptly following receipt of notice of withdrawal. If Debentures have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn Debentures or otherwise
comply with the book-entry transfer facility's procedures. All questions as to
the validity of notices of withdrawals, including time of receipt, will be
determined by Holdings, and such determination will be final and binding on all
parties.
3. Signature on this Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures.
If this Letter of Transmittal is signed by the registered holder(s)
of the Debentures tendered hereby, the signature must correspond with the
name(s) as written on the face of the certificates without alteration,
enlargement or any change whatsoever.
If any of the Debentures tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Debentures registered in different names are tendered,
it will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal as there are different registrations of Debentures.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the Debentures) of Debentures listed and tendered hereby, no
endorsements of certificates or separate written instruments of transfer or
exchange are required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Debentures listed, such Debentures must be
endorsed or accompanied by separate written instruments of transfer or exchange
in form satisfactory to Holdings and duly executed by the registered holder, in
either case signed exactly as the name or names of the registered holder or
holders appear(s) on the Debentures.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
<PAGE>
others acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by Holdings, proper evidence
satisfactory to Holdings of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Debentures are tendered: (i) by a
registered holder of such Debentures; or (ii) for the account of an Eligible
Institution.
4. Transfer Taxes.
Holdings shall pay all transfer taxes, if any, applicable to the
transfer and exchange of Debentures to it or its order pursuant to the Exchange
Offer. If a transfer tax is imposed for any reason other than the transfer and
exchange of Debentures to Holdings or its order pursuant to the Exchange Offer,
the amount of any such transfer taxes (whether imposed on the registered holder
or any other person) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exception therefrom is not submitted
herewith the amount of such transfer taxes will be billed directly to such
tendering holder.
Except as provided in this Instruction 4, it will not be necessary
for transfer tax stamps to be affixed to the Debentures listed in this Letter
of Transmittal.
5. Waiver of Conditions.
Holdings reserves the absolute right to waive, in whole or in part,
either of the conditions to the Exchange Offer set forth in the Prospectus.
6. Mutilated, Lost, Stolen or Destroyed Debentures.
Any holder whose Debentures have been mutilated, lost, stolen or
destroyed, should contact the Exchange Agent at the address indicated below for
further instructions.
7. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as
requests for additional copies of the Prospectus and this Letter of
Transmittal, may be directed to the Exchange Agent at the address and telephone
number set forth above. In addition, all questions relating to the Exchange
Offer, as well as requests for assistance or additional copies of the
Prospectus and this Letter of Transmittal, may be directed to Holdings at 450
Newport Center Drive, Newport Beach, California 92660, Attention: William J.
McCaffrey, Jr. (telephone: (714) 721-8000).
IMPORTANT: This Letter of Transmittal or a facsimile thereof
(together with certificates of Debentures or confirmation of book-entry
transfer and all other required documents) or a Notice of Guaranteed Delivery
must be received by the Exchange Agent on or prior to the Expiration Date.
EXHIBIT 28.2
NOTICE OF GUARANTEED DELIVERY
for
Tender of all Outstanding
14% Senior Discount Debentures
Due 2005, Series A
in Exchange for
14% Senior Discount Debentures
Due 2005, Series B
of
AMERICAN RESTAURANT GROUP HOLDINGS, INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON _______ __, 1997 (the "EXPIRATION DATE")
UNLESS EXTENDED BY AMERICAN RESTAURANT GROUP HOLDINGS, INC.
Registered holders of outstanding 14% Senior Discount Debentures Due
2005, Series A (the "Debentures") who wish to tender their Debentures in
exchange for a like principal amount of new 14% Senior Discount Debentures Due
2005, Series B (the "Exchange Debentures") and whose Debentures are not
immediately available or who cannot deliver their Debentures and Letter of
Transmittal (and any other documents required by the Letter of Transmittal) to
United States Trust Company of New York (the "Exchange Agent") prior to the
Expiration Date, may use this Notice of Guaranteed Delivery or one
substantially equivalent hereto. This Notice of Guaranteed Delivery may be
delivered by hand or sent by facsimile transmission (receipt confirmed by
telephone and an original delivered by guaranteed overnight delivery) or mail
to the Exchange Agent. See "The Exchange Offer--Tender Procedure" in the
Prospectus.
<PAGE>
The Exchange Agent for the Exchange Offer is:
UNITED STATES TRUST COMPANY OF NEW YORK
By Hand/Overnight Express: By Mail:
(insured or registered recommended) (insured or registered recommended)
United States Trust Company of United States Trust Company of
New York New York
65 Beaver Street P.O. Box 843
Ground Floor Cooper Station
New York, NY 10005 New York, New York 10276
Attn: Corporate Trust and Attention: Corporate Trust and
Agency Services Agency Services
By Overnight Delivery:
(insured or registered recommended)
United States Trust Company of
New York
770 Broadway
7th Floor
New York, New York 10003
Attention: Corporate Trust and
Agency Services
By Facsimile: Confirm By Telephone:
(212) 420-6152 (800) 548-6565
(For Eligible Institutions Only)
Delivery of this Notice of Guaranteed Delivery to an address other
than as set forth above or transmission of instructions via a facsimile
transmission to a number other than as set forth above will not constitute a
valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Debentures
indicated below, upon the terms and subject to the conditions contained in the
Prospectus dated ________ __, 199_ of American Restaurant Group Holdings, Inc.
(the "Prospectus"), receipt of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
Name and address of registered
holder as it appears on the 14% Certificate Number(s) Principal Amount
Senior Discount Debentures Due of Debentures of Debentures
2005, Series A ("Debentures") Tendered Tendered
(Please Print)
_________________________________ _____________________ __________________
_________________________________ _____________________ __________________
_________________________________ _____________________ __________________
_________________________________ _____________________ __________________
_________________________________ _____________________ __________________
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, hereby guarantees to deliver to
the Exchange Agent at one of its addresses set forth above, the certificates
representing the Debentures, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal, within five New York Stock Exchange, Inc. trading days after the
date of execution of this Notice of Guaranteed Delivery.
Name of Firm: _______________________ ______________________________________
(Authorized Signature)
Address: ____________________________ Title: _______________________________
____________________________________ Name: ________________________________
(Zip Code) (Please type or print)
Area Code and Telephone Number: Date: ________________________________
____________________________________
NOTE: DO NOT SEND DEBENTURES WITH THIS NOTICE OF GUARANTEED DELIVERY.
DEBENTURES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
EXHIBIT 28.3
________ __, 199_
EXCHANGE AGENCY AGREEMENT
United States Trust Company of New York
555 South Flower Street, Suite 2700
Los Angeles, California 90071
Dear Sirs:
American Restaurant Group Holdings, Inc., a Delaware corporation (the
"Company), proposes to offer to exchange (the "Exchange Offer") up to
$17,000,000 in aggregate principal amount of a new series of its 14% Senior
Discount Debentures due 2005 (the "Exchange Debentures") for up to $17,000,000
in aggregate principal amount of its outstanding 14% Senior Discount Debentures
due 2005 (the "Debentures").
The Exchange Offer will commence on ________ __, 199_. The Exchange
Offer and withdrawal rights will expire at 5:00 p.m., New York City time, on
________ __, 1997, unless the Company extends the offer by written notice to
you (the "Expiration Date").
1. Appointment as Exchange Agent. Subject to your acceptance
hereof, the Company appoints you as the exchange agent (the "Exchange Agent")
for the purposes and upon the terms and conditions set forth herein. In this
connection, the Company has enclosed the Exchange Documents (as defined below)
and certified copies of resolutions of the Company's Board of Directors
approving the Exchange Offer and authorizing the officers of the Company to
enter into this Agreement and to carry out the transactions contemplated by the
Exchange Offer.
2. Compensation. The Company has entered into an agreement with
you with respect to compensation for various services and no additional
compensation is payable in connection with your services hereunder.
3. Receipt of Tenders. You shall receive all tenders of Debentures
and determine whether each such tender has been made in accordance with the
procedures set forth in the Prospectus relating to the Exchange Offer dated
________ __, 199_ (the "Prospectus") or the Letter of Transmittal described
therein (the "Letter of Transmittal"), subject to the right of the Company to
determine the validity of any tender, as described in the Prospectus.
Determination of all questions as to the validity, form, eligibility
(including time of receipt) and acceptance for exchange of any tender of
Debentures shall be made by the Company, whose determination shall be final and
binding.
You shall segregate all tenders which are in accordance with the
procedures set forth in the Prospectus or the Letter of Transmittal from those
which are not ("Defective Deposits"). Upon consultation with the Company or
its representatives, you shall use your best efforts to cause holders who
effected any Defective Deposit to cure such Defective Deposit.
<PAGE>
You will hold all items which are deposited for tender with you after
5:00 p.m., New York City time, on the date the Exchange Offer expires pending
further instructions from an officer of the Company.
4. Exchange Documents. At the request of the Company you shall
furnish copies of any or all of the Prospectus, the Letter of Transmittal and
the Notice of Guaranteed Delivery (collectively, the "Exchange Documents")
promptly to any person designated in such request. All mailings under this
Section shall be by first class mail, postage prepaid, unless otherwise
specified in such request. The Company will furnish you with such additional
copies of the Exchange Documents as you may request to fulfill your obligations
under this Section.
5. Notification of Changes in the Exchange Offer. At the request
of the Company, you shall notify tendering holders of Debentures in the event
of any rescission or modification of the Exchange Offer. In the event of any
such rescission, you will return all tendered Debentures to the persons
entitled thereto, at the request of the Company.
6. Delivery of Exchange Debentures; Irrevocability of Tenders;
Return of Debentures. On the fifth and tenth business days following the
commencement of the Exchange Offer and on each business day thereafter, up to
and including the Expiration Date, you are to advise Mr. William J. McCaffrey,
Jr., Chief Financial Officer of the Company, or another designated officer or
agent of the Company, orally (to be promptly confirmed in writing) of the
aggregate principal amount of Debentures which have been properly tendered
pursuant to the Exchange Offer. In addition, you will also inform the
aforementioned person or persons upon oral request made from time to time prior
to the Expiration Date of such other information as they may reasonably
request. Upon the expiration of the Exchange Offer, Mr. McCaffrey, or another
designated officer or agent of the Company will confirm to you orally (oral
notice to be promptly confirmed in writing) or in writing the aggregate
principal amount of Debentures being exchanged for Exchange Debentures pursuant
to the Exchange Offer. The Debentures accepted for exchange are to be
cancelled.
As soon as practicable after the Company notifies you of its election
to exchange Debentures pursuant to the preceding paragraph and upon receipt by
you of certificates for the Exchange Debentures in an aggregate principal
amount equal to the principal amount of Debentures to be exchanged pursuant to
any such election, you shall (i) deliver the tendered Debentures, which have
previously been cancelled, to such person or entity as the Company shall
designate by written notice to you, and (ii) deliver over your window or send
by first-class mail postage prepaid to, or at the direction of, each holder
whose Debentures are being exchanged a certificate for the Exchange Debentures
in respect of the aggregate principal amount of Debentures so exchanged.
Tenders pursuant to the Exchange Offer are irrevocable, except that
Debentures tendered pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date.
If, pursuant to the terms of the Exchange Offer, the Company does not
accept and exchange all or any part of the Debentures, or Debentures are
tendered but withdrawn prior to the Expiration Date, or partial tenders are
made, you shall promptly return to, or, upon the order of, the tendering
holder, certificates for Debentures not exchanged or, to the extent required,
submit to the Company for reissuance to, or upon the order of, the tendering
<PAGE>
holder certificates for Debentures not tendered or exchanged, which certificate
shall be returned to you for disposition.
Certificates for unexchanged Debentures shall be forwarded by first
class mail under an existing insurance policy protecting you and the Company
from loss or liability arising out of the non-receipt or non-delivery of such
certificates or by registered mail insured separately for the replacement value
of such certificates.
7. Limited Liability of Exchange Agent. As Exchange Agent you:
(a) shall have no duties or obligations other than those
specifically set forth herein;
(b) will not be required to and will make no representations and
have no responsibilities as to the validity, sufficiency, value or
genuineness of any Debentures, Letters of Transmittal or documents
deposited with you, or of any Debentures or Exchange Debentures delivered
by you, pursuant to the Exchange Offer or of any signatures or
endorsements, other than your own, or any thereof;
(c) shall not be obligated to take any action hereunder that might
in your judgment involve any expense or liability unless you have been
furnished with reasonable indemnity;
(d) shall not be liable for any action taken or omitted by you, or
any action suffered by you to be taken or omitted, without negligence,
misconduct or bad faith on your part, in connection with this Agreement or
your compliance with the instructions set forth herein or with any written
or oral instructions delivered to you pursuant hereto, and may rely on,
and shall be protected in acting on, any certificate, instrument, opinion,
notice, letter, telegram or other document, or any security, delivered to
you and reasonably believed by you to be genuine and to have been signed
by a proper party or parties;
(e) may rely on, and shall be protected in acting on, the written or
oral instructions, with respect to any matter relating to your duties as
Exchange Agent, of any officer of the Company; and
(f) may consult counsel satisfactory to you (including counsel for
the Company) and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by you hereunder in good faith and in accordance with such advice
of such counsel.
8. Indemnification of Exchange Agent. The Company agrees to
reimburse you for, to indemnify you against and hold you harmless from all
liability, cost or expense (including reasonable fees and expenses of counsel)
that may be paid, incurred or suffered by you or to which you may become
subject without negligence, misconduct or bad faith on your part, arising out
of or in connection with this Agreement.
The Company shall be notified by you, by letter or by cable or telex
confirmed by letter, of the written assertion of a claim against you or of any
action commenced against you, within ten days after you shall have received any
such written assertion of a claim or shall have been served with the summons or
other first legal process giving information as to the nature and basis of the
<PAGE>
claim, but failure to so notify the Company shall not relieve the Company from
any liability which the Company otherwise may have on account of this Section
8. The Company shall be entitled to participate at its own expense in the
defense of any such claim, and if the Company so elects at any time after
receipt of such notice, the Company shall assume the defense of any suit
brought to enforce any such claim. In the event that the Company assumes the
defense of any such claim, the Company shall not be liable for any fees and
expenses of counsel thereafter incurred by you for the defense of such claim
unless there shall be a conflict of your interests and those of the Company.
9. Notices. Except as otherwise expressly provided herein, all
notice and other communications hereunder shall be in writing, shall be
delivered by hand or first class mail, postage prepaid, shall be deemed given
when received and shall be sent to the addresses listed below or to such other
addresses as the addressee shall designate from time to time by notice:
Company: American Restaurant Group Holdings, Inc.
450 Newport Center Drive
Newport Beach, California 92660
Attention: Mr. William J. McCaffrey, Jr.
Chief Financial Officer
Exchange
Agent: United States Trust Company of New York
555 South Flower Street, Suite 2700
Los Angeles, California 90071
Attention: Corporate Trust Department
Ms. Sandra Leess
10. Amendment, Modification. This Agreement may not be modified,
amended or supplemented without an express written agreement executed by the
parties hereto.
11. Governing Law; Benefit of Agreement. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW RULES THEREOF. This Agreement
shall inure solely to the benefit of, and the obligations created hereby shall
be binding upon, the parties hereto and their respective successors and
assigns. No other person shall acquire or have any rights under or by virtue
of this Agreement.
<PAGE>
If the foregoing is in accordance with your understanding, would you
please indicate your agreement by signing and returning the enclosed copy of
this letter to the Company.
Very truly yours,
AMERICAN RESTAURANT GROUP HOLDINGS, INC.
By:___________________________________________
Name: William J. McCaffrey, Jr.
Title: Vice President and
Chief Financial Officer
Agreed to this ____ day
of _________, 199_
UNITED STATES TRUST
COMPANY OF NEW YORK
By:___________________________________
Name:
Title:
