<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 1, 1999
REGISTRATION NO. 333-78375
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
AUSTINS STEAKS & SALOON, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 5812 86-0723400
(State or Other Jurisdiction (Primary Standard Industrial (IRS Employer
of Incorporation or Classification Code Number) Identification
Organization) No.)
</TABLE>
--------------------------
<TABLE>
<S> <C>
AUSTINS STEAKS & SALOON, INC. PAUL C. SCHORR, III
6940 "O" STREET, SUITE 334 PRESIDENT
LINCOLN, NE 68510 AUSTINS STEAKS & SALOON, INC.
(402) 466-2333 6940 "O" STREET, SUITE 334
(Address including zip code, and telephone number, LINCOLN, NE 68510
including area code, of registrant's (402) 466-2333
principal executive offices) (Name, address, including zip code, telephone
number, including area code, of agent for service)
</TABLE>
--------------------------
COPIES TO:
STEPHEN E. GEHRING RICHARD R. SAYERS
CLINE, WILLIAMS, WRIGHT, JOHNSON & MAGEE, FOSTER, GOLDSTEIN & SAYERS
OLDFATHER 310 First Street, SW, Suite 1200
One Pacific Place P.O. Box 404
1125 South 103(rd), Suite 720 Roanoke, VA 24003-0404
Omaha, NE 68124-1090 (540) 343-9800
(402) 397-1700
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE FOLLOWING THE EFFECTIVENESS OF THIS REGISTRATION
STATEMENT.
--------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
AGGREGATE PROPOSED MAX
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE(2) AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common stock, $0.01 par value............... 11,219,250 $1.56 $17,502,030 $4,905(3)
</TABLE>
(1) Represents the number of shares of common stock of the Registrant, which may
be issued to stockholders of The WesterN SizzliN Corporation ("WesterN
SizzliN") pursuant to the merger described herein.
(2) Each share of common and Series B preferred stock and outstanding purchase
warrant of WesterN SizzliN will be converted into two shares of common stock
of the Registrant pursuant to the merger described herein. Pursuant to Rule
457(f)(1) under the Securities Act, the registration fee has been calculated
based on the average of the high and low prices per share of Registrant's
common stock as reported in the NASDAQ Bulletin Board section on May 27,
1999.
(3) $2,144.49 previously paid.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8 (a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8 (a),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
THE WESTERN SIZZLIN CORPORATION
SPECIAL MEETING OF STOCKHOLDERS
A MERGER PROPOSAL--YOUR VOTE IS VERY IMPORTANT
Your Board of Directors has approved a merger combining your company and
Austins Steaks & Saloon, Inc. Both companies are in the restaurant business.
Austins owns and operates seven moderately-priced, casual dining full service
restaurants located in Arizona, Nebraska and New Mexico. We are a family-style
steak, buffet and bakery restaurant chain with twenty company owned stores and
223 franchised units in 24 states.
Austins is a publicly traded company whose stock is currently traded on the
Bulletin Board section of NASDAQ. It has approximately 650 stockholders. Upon
completion of the merger, the existing Austins stockholders will own 7% of the
outstanding equity and you will own 93%. Upon the completion of the merger you
will receive a security publicly traded on the Bulletin Board section of NASDAQ.
We intend to seek a National Market or SmallCap NASDAQ listing as soon as
possible. The combination will also permit a reduction in overhead and
administrative expenses for Austins and a cost savings in food and restaurant
supplies. The addition of the Austins restaurant units is expected, over time,
to enhance the profitability of the combined company.
You will be asked to adopt the merger agreement at a special meeting of the
stockholders to be held on June 28, 1999 at 1:00 p.m. at the Sheraton Airport
Plaza at I-85 and Billy Graham Parkway, Charlotte, North Carolina. The
affirmative vote of a majority of the outstanding shares of WesterN SizzliN
common stock and Series B convertible preferred stock each voting as a class, is
required to approve the merger agreement and the merger. Your company will be
merged with a wholly owned subsidiary of Austins, Acquisition Sub and your
management and board of directors will control Austins.
If the merger is completed, you will receive (i) two shares of Austins
common stock for each share of WesterN SizzliN common and Series B preferred
stock you own and (ii) the right to immediately convert each WesterN SizzliN
common stock purchase warrant you own into two shares of Austins common stock.
The value of the Austins common stock to be received in the merger will be the
opening market value of the Austins common stock when the merger occurs.
Your Board of Directors has determined that the merger is fair to you and is
in your best interests. The Board of Directors recommends that you vote to
approve the merger agreement and the merger. This Proxy Statement/Prospectus
provides you with detailed information about the proposed merger. In addition,
you may obtain other information about Austins from documents filed with the
Securities and Exchange Commission. We encourage you to read this entire
document carefully.
Whether or not you plan to attend the special meeting, please take the time
to vote by completing and mailing the enclosed proxy card. If you sign, date and
mail your proxy card without indicating how you wish to vote, your proxy will be
counted as a vote in favor of the adoption of the merger agreement and the
merger. If you fail to return your card, the effect will be a vote against
adoption of the merger agreement and approval of the merger. YOUR VOTE IS VERY
IMPORTANT.
[SIGNATURE]
VICTOR F. FOTI,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED OF THE AUSTINS COMMON STOCK TO BE ISSUED
IN THE MERGER OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Proxy Statement/Prospectus dated June 2, 1999, and first mailed to you on June
8, 1999.
THE WESTERN SIZZLIN CORPORATION 416 JEFFERSON STREET ROANOKE, VA 24011
(540) 345-3195
<PAGE>
THE WESTERN SIZZLIN CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 28, 1999
TO: COMMON AND SERIES B PREFERRED STOCKHOLDERS.
Notice is hereby given that a special meeting of the Common and Series B
Preferred Stockholders of The WesterN SizzliN Corporation will be held at the
Sheraton Airport Plaza, I-85 and Billy Graham Parkway, Charlotte, North Carolina
on June 28, 1999, at 1:00 p.m. for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger ("Merger Agreement") dated April 30, 1999, among The
WesterN SizzliN Corporation ("WesterN SizzliN"), Austins Steaks & Saloon,
Inc. ("Austins") and Austins Acquisition Corp. ("Acquisition
Subsidiary"). The Merger Agreement provides for the merger of WesterN
SizzliN with the Acquisition Subsidiary, a newly formed Delaware
corporation, as a result of which WesterN SizzliN will become a wholly
owned subsidiary of Austins.
2. To consider and act upon any other matters that may properly come before
the meeting or any adjournment thereof.
The WesterN SizzliN Board of Directors has fixed the close of business on
June 4, 1999, as the record date for determining the Common and Series B
Preferred Stockholders having the right to vote at the meeting or any
adjournment thereof.
A list of such stockholders will be available for examination by a
stockholder for any purpose germaine to the meeting during ordinary business
hours at the offices of WesterN SizzliN at 416 Jefferson Street, Roanoke,
Virginia 24011, during the ten (10) days prior to the meeting.
The affirmative vote of a majority of the Common and Series B Preferred
Stock, each voting as a class, is required to approve and adopt the Merger
Agreement.
<TABLE>
<S> <C>
By Order of the Board of Directors,
June 2, 1999 [SIGNATURE]
ROBYN B. MABE
SECRETARY
</TABLE>
<PAGE>
AUSTINS STEAKS & SALOON, INC.
INFORMATION STATEMENT
JUNE 2, 1999
Your Board of Directors has unanimously approved a merger combining Austins
and The WesterN SizzliN Corporation. WesterN SizzliN is a family-style steak,
buffet and bakery restaurant chain with twenty company owned stores and 223
franchise units in 24 states. We own and operate seven moderately priced casual
dining full service restaurants located in Arizona, Nebraska and New Mexico. We
have been a publicly traded company since January, 1995. Our stock is currently
traded on the Bulletin Board section of NASDAQ. We have approximately 650
stockholders. WesterN SizzliN is a privately-held company with approximately 47
common and preferred stockholders.
Upon completion of the merger, our stockholders will own 7% of the
outstanding equity and WesterN SizzliN stockholders will own 93%. The
combination will permit the WesterN SizzliN stockholders to acquire publicly
traded security. This will give WesterN SizzliN stockholders a market for their
stock. We intend to seek a National Market or SmallCap NASDAQ listing as soon as
possible. Your Board believes that you cannot enhance your stockholder value
without merging or combining with a larger company. Your Board believes that the
combination with WesterN SizzliN will permit a reduction in the overhead and
administrative expenses for Austins and allow cost savings in food and
restaurant supply expenses. Your Board believes that the merger is fair to you
and is in your best interest.
The merger with WesterN SizzliN will be accomplished by using authorized but
unissued shares of Austins common stock which are being authorized as described
below. These shares will be contributed to a newly formed corporation called
Austins Acquisition Corp. In the body of this Information Statement that
corporation is referred to as Acquisition Sub. WesterN SizzliN will merge with
Acquisition Sub. Because the merger is structured in this way, your vote is not
required under Delaware law.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
Prior to the closing of the merger, it will be necessary, however, to reduce
the number of shares of Austins' common stock outstanding through what is called
a reverse split. Your common stock will be reverse split resulting in .32 share
for every one outstanding share. As a result, the 2,647,927 shares outstanding
will be reduced to 844,460 shares. This action requires an amendment to the
Austins' Certificate of Incorporation. In order to have sufficient shares to
accomplish the merger, we need to amend the Certificate of Incorporation to
increase the number of authorized shares of common stock to 20,000,000 shares.
Both of these amendments require a vote of a majority of the outstanding
Austins' shares. Paul C. Schorr, III, Roger D. Sack and Greg Cutchall own
approximately 66% of the outstanding shares of your company. Under Delaware law,
these three persons may consent to the approval of these amendments and no
meeting of the stockholders is necessary. Your Board has approved adopting the
amendments by this consent action. The rules under the Securities Exchange Act
of 1934 require that even though these amendments are being accomplished without
a meeting of stockholders, you are still entitled to the information contained
in this Information Statement. Please read the information carefully.
[LOGO]
PAUL C. SCHORR, III
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AUSTINS STEAKS & SALOON, INC. 6940 "O" STREET, SUITE 334 LINCOLN, NE 68510
(402) 464-3456
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SUMMARY................................................................................................... 1
The Companies........................................................................................... 3
The Special Meeting..................................................................................... 3
Required Vote........................................................................................... 3
Record Date and Voting Power............................................................................ 4
Share Ownership of Management........................................................................... 4
Austins Common Share Market Price Information........................................................... 4
Appraisal Rights........................................................................................ 4
WesterN SizzliN's Recommendation to You................................................................. 4
Reasons for the Merger.................................................................................. 4
Opinion of WesterN SizzliN's Financial Advisor.......................................................... 5
Risk Factors............................................................................................ 5
Conditions to the Merger................................................................................ 5
Termination of the Merger Agreement..................................................................... 5
Anticipated Accounting Treatment........................................................................ 5
Forward-Looking Statements.............................................................................. 5
MARKET PRICE AND DIVIDEND DATA............................................................................ 6
AUSTINS SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION............................................ 7
WESTERN SIZZLIN SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION.................................... 8
SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION........................................................ 9
COMPARATIVE PER SHARE DATA................................................................................ 9
RISK FACTORS.............................................................................................. 10
Risks Relating to the Merger............................................................................ 11
Competitive Advantages Not Achieved..................................................................... 11
No Initial Public Offering Opportunity.................................................................. 11
Austins May Not Recover Profitability................................................................... 11
Austins May Not Receive Additional NASDAQ Listing....................................................... 12
THE SPECIAL MEETING....................................................................................... 12
Date, Time and Place.................................................................................... 12
The Purpose of the Special Meeting...................................................................... 12
Record Date and Voting Power............................................................................ 12
Voting and Revocation of Proxies........................................................................ 12
Required Vote........................................................................................... 12
Solicitation of Proxies................................................................................. 13
Other Matters........................................................................................... 13
THE MERGER................................................................................................ 13
General Description of the Merger....................................................................... 13
Background.............................................................................................. 13
Reasons for the Merger.................................................................................. 15
Austins' Reasons for the Merger......................................................................... 15
WesterN SizzliN's Reasons for the Merger................................................................ 16
Opinion of WesterN SizzliN's Financial Advisor.......................................................... 17
Contribution Analysis................................................................................... 18
Discounted Cash Flow Analysis........................................................................... 18
Comparable Company Analysis............................................................................. 19
Comparable Transaction Analysis......................................................................... 19
Stock Trading Analysis.................................................................................. 20
Dissenting Stockholders................................................................................. 21
Material Federal Income Tax Consequences................................................................ 23
</TABLE>
<PAGE>
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PAGE
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<S> <C>
Anticipated Accounting Treatment........................................................................ 24
Restrictions on Resales by Affiliates................................................................... 24
Austins Options......................................................................................... 25
CERTAIN TERMS OF THE MERGER AGREEMENT..................................................................... 25
Effective Time of the Merger............................................................................ 25
Manner and Basis of Converting Common and Series B Preferred Stock...................................... 25
WesterN SizzliN Warrants................................................................................ 26
WesterN SizzliN Options................................................................................. 26
Conditions to the Merger................................................................................ 26
Representations and Warranties.......................................................................... 28
Certain Covenants; Conduct of Business Prior to the Merger.............................................. 28
Termination of the Merger Agreement..................................................................... 30
Expenses................................................................................................ 30
BUSINESS OF THE WESTERN SIZZLIN CORPORATION............................................................... 31
General................................................................................................. 31
Operating Strategy...................................................................................... 31
Unit Economics.......................................................................................... 33
Expansion............................................................................................... 33
Concept and Menu........................................................................................ 33
Our Concept............................................................................................. 34
Restaurant Layout and Design............................................................................ 35
Restaurant Food Delivery................................................................................ 35
Site Selection and Construction......................................................................... 36
Restaurant Operations................................................................................... 36
Restaurant Management and Employees..................................................................... 36
Recruiting.............................................................................................. 36
Management Training..................................................................................... 37
Purchasing.............................................................................................. 37
Reporting and Financial Controls........................................................................ 37
Hours of Operation...................................................................................... 37
Franchise Operations.................................................................................... 37
Marketing and Promotion................................................................................. 38
Restaurant Industry and Competition..................................................................... 39
Government Regulation................................................................................... 39
Trademarks.............................................................................................. 39
Employees............................................................................................... 40
Contingencies........................................................................................... 40
MANAGEMENT AND OTHER INFORMATION.......................................................................... 41
Executive Officers And Directors of WesterN SizzliN..................................................... 41
Classes of Directors.................................................................................... 43
Board Committees........................................................................................ 44
Executive Compensation.................................................................................. 44
Stock Option Plan....................................................................................... 44
Certain Transactions.................................................................................... 45
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS........................................................... 45
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS........................................................ 47
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET............................................................... 48
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS.................................................... 49
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS............................................... 50
DESCRIPTION OF AUSTINS CAPITAL STOCK...................................................................... 52
General................................................................................................. 52
Austins Common Stock.................................................................................... 52
Transfer Agent and Registrar............................................................................ 52
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
COMPARATIVE RIGHTS OF AUSTINS AND WESTERN SIZZLIN STOCKHOLDERS............................................ 53
Effect of the Merger on Rights of Stockholders.......................................................... 53
Authorized Capital Stock................................................................................ 53
Amendment of Certificate of Incorporation or Charter and Bylaws......................................... 54
Limitations on Director Liability....................................................................... 54
Indemnification......................................................................................... 54
Actions by Stockholders Without a Meeting............................................................... 55
Mergers, Consolidations, and Sales of Assets Generally.................................................. 55
Business Combinations with Certain Persons.............................................................. 55
Dissenters' Rights...................................................................................... 57
Stockholders' Rights to Examine Books and Records....................................................... 57
Dividends............................................................................................... 57
Number, Classification and Removal of Directors......................................................... 58
Voting Rights........................................................................................... 58
Power to Call Special Meeting........................................................................... 58
Stockholder Vote Required for Certain Transactions...................................................... 58
Action by Written Consent............................................................................... 59
Amendments to Bylaws.................................................................................... 59
INDEPENDENT AUDITORS...................................................................................... 59
LEGAL MATTERS............................................................................................. 59
EXPERTS................................................................................................... 59
WHERE YOU CAN FIND MORE INFORMATION ABOUT AUSTINS......................................................... 60
WESTERN SIZZLIN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..... 61
WESTERN SIZZLIN CONSOLIDATED FINANCIAL STATEMENTS......................................................... F-1
Appendices:
A--Agreement and Plan of Merger
B--Opinion of J.C. Bradford & Co., LLC
C--Selected Statutes from Tennessee Business Corporation Act
</TABLE>
<PAGE>
SUMMARY
This summary highlights selected information from this document. It does not
contain all the information that is important to you. To understand the merger
fully and to obtain more information about the legal terms of the merger, you
should read carefully this entire document and the other available information
referred to in "Where You Can Find More Information About Austins" on page 60.
The merger agreement is attached as Appendix A to this Proxy
Statement/Prospectus. We encourage you to read the merger agreement. It is the
legal document that governs the merger. We have included page references
parenthetically to direct you to a more complete description of the topics
presented in this summary.
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE? HOW WILL I BENEFIT?
A: Both companies are in compatible restaurant businesses. WesterN SizzliN
is substantially larger than Austins. WesterN SizzliN will obtain a
public trading market for its common stock as a result of the
transaction. We also believe that the current restaurant operations of
Austins can be profitable, on a combined basis, through overhead cost
reductions and lower food and supplies expenses.
Q: WHAT WILL I RECEIVE FOR MY WESTERN SIZZLIN SHARES AND WARRANTS?
A: You will receive two shares of Austins common stock in exchange for each
share of common and each share of Series B preferred stock you own of
WesterN SizzliN. You will also receive the right to immediately convert
each WesterN SizzliN common stock purchase warrant you own into two
shares of Austins common stock. This exchange ratio will not change, even
if the market price of Austins common stock increases or decreases
between now and the date that the merger is completed.
Q: WHO WILL CONTROL THE COMBINED COMPANIES?
A: WesterN SizzliN management and its board of directors. Upon completion of
the merger, the Austins board of directors will elect to its board the
nine WesterN SizzliN board members designated on page 41.
Q: WILL MY AUSTINS SHARES BE TRADEABLE?
A: Yes. Austins common stock is traded on the Bulletin Board section of
NASDAQ.
Q: WILL YOU SEEK A NATIONAL MARKET OR SMALLCAP LISTING FOR THE AUSTINS
STOCK?
A: Yes. As soon as practicable following the completion of the merger, we
will apply to NASDAQ for a National Market or SmallCap listing.
Q: WHAT DO I NEED TO DO NOW?
A: Just mail your signed proxy card in the enclosed return envelope as soon
as possible so that your shares can be voted at the June 30, 1999 special
meeting of WesterN SizzliN stockholders.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy card is voted
at the stockholder meeting. You can do this in one of three ways. First,
you can send a written notice stating that you would like to revoke your
proxy. Second, you can complete and submit a new proxy card. Third, you
can attend the meeting and vote in person. Your attendance alone will not
revoke your proxy.
1
<PAGE>
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed you will receive written instructions
for exchanging your shares of WesterN SizzliN common and Series B
preferred stock and your WesterN SizzliN warrants for shares of Austins
common stock.
Q: WILL THE COMBINED COMPANY PAY ANY FUTURE DIVIDENDS?
A: Austins does not expect to pay dividends on its common stock.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO ME?
A: The exchange of shares of WesterN SizzliN common and Series B preferred
stock for shares of Austins common stock in the merger will be tax-free
to you for federal income tax purposes. Your tax basis in the shares of
Austins common stock that you will receive in the merger will equal your
current tax basis in your WesterN SizzliN common and Series B preferred
stock.
TAX MATTERS CAN BE COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER
TO YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT
YOUR OWN TAX ADVISORS TO FULLY UNDERSTAND THE TAX CONSEQUENCES OF THE
MERGER TO YOU.
Q: ARE THERE CONDITIONS TO COMPLETE THE MERGER?
A: Yes. We believe they are usual and standard conditions and they are
described on page 26.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We hope to complete the merger by June 30, 1999. We are working toward
completing the merger as quickly as possible.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANIES?
A: Austins files periodic reports and other information with the Securities
and Exchange Commission. A copy of Austins' Form 10-KSB annual report for
1998 is enclosed. You may read and copy additional information through
the SEC's public reference facilities. Please call the SEC at
1-800-SEC-0330 for information about these facilities. This information
is also available through the Internet at the Edgar database site
maintained by the SEC at http://www.sec.gov and at the offices of the
National Association of Securities Dealers, Inc. For a more detailed
description of the information available, please see page 60.
WesterN SizzliN is a privately held company. Relevant information about
WesterN SizzliN is contained on pages 31 to 41.
Q: WHO CAN ANSWER MY QUESTIONS?
A: You should contact:
THE WESTERN SIZZLIN CORPORATION
Attn: Victor F. Foti
416 Jefferson Street
Roanoke, Virginia 24011
Telephone: (540) 345-3195
2
<PAGE>
THE COMPANIES
Austins Steaks & Saloon, Inc.
6840 "O" Street, Suite 334
Lincoln, Nebraska 68510
Austins owns and operates seven moderately priced, casual dining,
full-service restaurants. Austins-TM- restaurants featuring specialty prime rib
dishes, a variety of fresh-cut aged meats, home cooked entrees, salads and
sandwiches. Four of the restaurants are located in Omaha, Nebraska, one in
Albuquerque, New Mexico, one in Sante Fe, New Mexico and one in Scottsdale,
Arizona. The decor of the Austins restaurants emulates a "western roadhouse"
theme which features a variety of western and country artifacts. Austins
provides full liquor and bar service at each of its restaurants. All are open
for lunch and dinner. Restaurants are open seven days a week and have an average
per customer check of approximately $8.35 at lunch and $13.75 at dinner. Because
of its relative size and the intense competition in the restaurant business,
particularly in Omaha, Austins has not been profitable since 1994.
The WesterN SizzliN Corporation
416 Jefferson Street
Roanoke, Virginia 24011
WesterN SizzliN owns and operates a family-style steak, buffet and bakery
restaurant chain, headquartered in Roanoke, Virginia. WesterN SizzliN has twenty
company owned units and 223 franchised units in 24 states. WesterN SizzliN does
business under the names "WesterN SizzliN", "WesterN SizzliN Steakhouse",
"WesterN SizzliN County Fair", "Market Street Buffet & Bakery", "WesterN SizzliN
Wood Grill", and a "Great American Steak & Buffet". WesterN SizzliN restaurants
provide cooked steak, chicken and seafood dishes in a cafeteria-style line and
full service format. Some WesterN SizzliN restaurants and WesterN SizzliN Wood
Grill restaurants feature a buffet that may be ordered as a meal or in addition
to a meal. Typical WesterN SizzliN restaurants or WesterN SizzliN Wood Grill
restaurants seat 200 - 300 people and are open for lunch and dinner. Most have
banquet facilities. In addition, the WesterN SizzliN Wood Grill restaurant
features a display cooking grill and bakery operation. WesterN SizzliN
restaurants do not offer alcoholic beverages except for approximately 10.
WesterN SizzliN has 130 franchisees, 42 of whom are multiple unit
franchisees. The initial franchise fee for a WesterN SizzliN franchise
restaurant is $30,000 and $40,000 for a WesterN SizzliN Wood Grill franchise
restaurant. In addition to one time costs, WesterN SizzliN restaurant
franchisees pay 2% of gross sales and WesterN SizzliN Wood Grill franchisees pay
3% of gross sales as royalty fees. Franchisees also pay the lower of 1% of gross
sales or $190 per month to ADRF, Inc., a franchisee marketing fund operated by
WesterN SizzliN.
THE SPECIAL MEETING (SEE PAGE 12)
A special meeting of the stockholders of WesterN SizzliN will be held on
June 28, 1999 at the Sheraton Airport Plaza, I-85 and Billy Graham Parkway,
Charlotte, North Carolina at 1:00 p.m. local time to approve the merger
agreement and the merger.
REQUIRED VOTE (SEE PAGE 12)
The approval of the merger agreement and merger requires the affirmative
vote of a majority of the shares of WesterN SizzliN common stock and Series B
preferred stock outstanding on the record date.
3
<PAGE>
RECORD DATE AND VOTING POWER (SEE PAGE 12)
You are entitled to vote at the special meeting if you owned shares of
WesterN SizzliN common or preferred stock on the close of business on June 4,
1999. You will have one vote at the special meeting for each share of WesterN
SizzliN common or preferred stock you owned on the record date. There are
4,364,000 shares of WesterN SizzliN common stock and 874,375 shares of Series B
preferred stock entitled to be voted at the special meeting.
SHARE OWNERSHIP OF MANAGEMENT (SEE PAGE 46)
The directors and executive officers of WesterN SizzliN own approximately
13.8% of the common, and approximately 11.8% of the Series B preferred shares
entitled to vote at the special meeting. Management believes all of them will
vote their shares for the approval of the merger agreement and merger.
AUSTINS COMMON SHARE MARKET PRICE INFORMATION (SEE PAGE 6)
Austins common stock is currently quoted on the Bulletin Board section of
NASDAQ. On February 22, 1999, the last full trading day prior to the public
announcement of the proposed merger, Austins common stock closed at $.941.
WesterN SizzliN stock is not publicly traded.
APPRAISAL RIGHTS (SEE PAGE 21)
You are entitled to appraisal and dissenters' rights in connection with the
merger.
WESTERN SIZZLIN'S RECOMMENDATIONS TO YOU
The WesterN SizzliN Board of Directors believes that the merger is fair to
you and in your best interests. The WesterN SizzliN Board of Directors
recommends that you vote "FOR" approval of the merger agreement and merger.
REASONS FOR THE MERGER (SEE PAGE 15)
AUSTINS. The Austins Board of Directors approved the merger based upon
several factors, the most important of which are:
- the possibility that Austins stockholders can achieve a higher value for
their stock over time through combining with a profitable company.
- the ability to reduce administrative, overhead, food and supplies costs
through combining with a much larger restaurant organization.
- the possibility of expanding the Austins restaurant concept through a much
larger combined entity.
- the expectation that the combined company will be profitable while
Austins, standing alone, would likely just break even or lose money.
WESTERN SIZZLIN. The WesterN SizzliN Board of Directors believes that the
combination should result in several benefits to WesterN SizzliN and its
stockholders, the most important of which are:
- the ability for WesterN SizzliN stockholders to achieve a public trading
market for their common stock.
- the ability to add earnings and earnings per share through the reduction
of Austins administrative, overhead, food and supplies costs.
4
<PAGE>
- the addition of the Austins concept for franchising and growth in markets
not currently serviced by WesterN SizzliN.
OPINION OF WESTERN SIZZLIN'S FINANCIAL ADVISOR (SEE PAGE 17)
J.C. Bradford & Co., LLC, WesterN SizzliN's financial adviser, has given an
opinion that the exchange ratio resulting in WesterN SizzliN common and Series B
preferred stock and warrant holders owning 93% of the post-merger equity is fair
from a financial point of view to the WesterN SizzliN stock and warrant holders.
RISK FACTORS (SEE PAGE 10)
The merger and an investment in Austins common stock involve risks and
uncertainties, including those risks and uncertainties discussed under "Risk
Factors" on page 10 and in the documents included with this Proxy
Statement/Prospectus.
CONDITIONS TO THE MERGER (SEE PAGE 26)
Austins and WesterN SizzliN will not complete the merger unless the
following conditions are satisfied or, in some cases, waived:
- the continued accuracy of each party's representations and warranties and
the fulfillment of each party's promises contained in the merger
agreement;
- the approval of the merger agreement and the merger by the WesterN SizzliN
stockholders;
- the absence of any legal proceeding with respect to the merger that
materially affects Austins or WesterN SizzliN;
- the receipt of an opinion from both parties' attorneys that the merger
will constitute a tax-free reorganization; and
- the fairness opinion of J.C. Bradford & Co., LLC shall not have been
withdrawn.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 30)
Austins and WesterN SizzliN can agree by mutual written consent to terminate
the merger agreement at any time, whether before or after the receipt of
stockholder approval. In addition, either company can terminate the merger
agreement if:
- the merger is not completed on or before August 31, 1999;
- law or final court order prohibits the merger;
- the stockholders of WesterN SizzliN do not approve the merger agreement
and the merger;
- the other party materially breaches its representation warranties,
covenants or agreements set forth in the merger agreement and fails to
cure such breach within 20 business days; or
ANTICIPATED ACCOUNTING TREATMENT (SEE PAGE 24)
The merger is structured as a reverse acquisition and will be accounted for
using the purchase method of accounting.
FORWARD-LOOKING STATEMENTS (SEE PAGE 10)
This document and the documents that are included contain various
forward-looking statements about Austins, WesterN SizzliN and the combined
company, such as statements about future financial
5
<PAGE>
results, cost reductions, operating results, market positions, product
successes, strategies and competitive positions. Any expectations based on these
forward-looking statements are subject to risks and uncertainties and other
important factors, including those discussed in this document beginning on page
10 and in the documents that Austins incorporates by reference. These and many
other factors could affect the future financial and operating results of
Austins, WesterN SizzliN or the combined company. These factors could cause
actual results to differ materially from expectations based on forward-looking
statements made in this document or elsewhere by or on behalf of Austins,
WesterN SizzliN or the combined company. We encourage you to read carefully our
discussion of these factors.
MARKET PRICE AND DIVIDEND DATA
MARKET PRICES. Austins common stock is included in the Bulletin Board
section of the National Association of Securities Dealers Automated Quotations
System under the symbol "STAK". This table sets forth, for the calendar quarters
and period indicated, the range of high-and low per share sales prices for
Austins common stock as reported on NASDAQ.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1997 First Quarter.............................................................................. $ 3.14 1.57
Second Quarter.............................................................................. 3.14 1.96
Third Quarter............................................................................... 3.53 1.96
Fourth Quarter.............................................................................. 3.14 .79
1998 First Quarter.............................................................................. $ 4.31 .79
Second Quarter.............................................................................. 4.50 .72
Third Quarter............................................................................... 2.75 1.77
Fourth Quarter.............................................................................. 2.55 1.37
1999 First Quarter.............................................................................. $ 5.88 2.35
Second Quarter (through May 27, 1999)....................................................... 6.37 2.74
</TABLE>
All prices have been restated to reflect a 1 for 3.135 reverse split of
Austins common stock to be effective immediately prior to the closing of the
merger.
DIVIDENDS. No cash dividends have ever been declared or paid on Austins or
WesterN SizzliN common stock. The policies of Austins and WesterN SizzliN are to
retain earnings growth in their respective businesses.
6
<PAGE>
AUSTINS
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information for
each of the years ended December 31, 1994 through 1998 has been derived from
Austins' Consolidated Financial Statements, which have been audited by
PricewaterhouseCoopers LLP (1994 through 1997) and KPMG LLP (1998). For
additional information regarding plans and objectives of management for future
operations and financial condition and results of operations, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in Austins' Annual Report on Form 10-KSB for the year ended December
31, 1998, enclosed with this Proxy Statement/Prospectus. The information set
forth below is qualified by reference to and should be read in conjunction with
the consolidated financial statements and related notes included in the Form
10-KSB.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------------------
1994(2) 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue................................................. $ 4,001 $ 9,535 $ 10,440 $ 9,542 $ 9,374
Operating loss................................................ (165) (677) (1,113) (1,382) (370)
Loss before cumulative effect of change in accounting
principle................................................... (120) (568) (1,294) (1,496) (487)
Cumulative effect of change in accounting principle(3)........ -- -- (256) -- --
Net loss...................................................... (120) (568) (1,550) (1,496) (487)
Basic and diluted loss before cumulative effect of change in
accounting principle per share.............................. (0.26) (0.31) (0.60) (0.64) (0.20)
Basic and diluted cumulative effect of change in accounting
principle per share......................................... -- -- (0.12) -- --
Basic and diluted loss per share.............................. (0.26) (0.31) (0.72) (0.64) (0.20)
Shares used in computing basic and diluted loss per share..... 462 1,850 2,146 2,331 2,494
BALANCE SHEET DATA:
Working capital deficit....................................... $ (724) $ (1,122) $ (1,088) $ (796) $ (660)
Total assets.................................................. 3,567 6,374 5,481 4,133 4,094
Long-term debt, excluding current maturities.................. -- -- 469 969 1,252
Stockholders' equity.......................................... 1,733 4,573 3,523 2,027 1,830
OTHER FINANCIAL DATA:
Dividends paid(1)............................................. -- -- -- -- --
</TABLE>
- ------------------------
(1) Austins has never paid any dividends.
(2) On July 24, 1994, Austins purchased five restaurant corporations. Austins
accounted for this transaction using the purchase method of accounting.
Accordingly, the 1994 selected historical consolidated financial information
includes the net assets and results of operations from these five restaurant
corporations from the date of acquisition.
(3) In 1996, Austins changed the method of accounting for pre-opening costs.
Prior to 1996, labor costs and certain other costs relating to opening new
restaurants were capitalized and amortized over a 12 month period. Starting
January 1, 1996, Austins began to expense these costs as they were incurred.
The cumulative effect of this change was $255,512, reflecting the reversal
of the capitalized pre-opening costs as of December 31, 1995.
7
<PAGE>
WESTERN SIZZLIN
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information for
each of the years ended December 31, 1994 through 1998 has been derived from
WesterN SizzliN's Consolidated Financial Statements, which have been audited by
KPMG LLP, independent certified public accountants. For additional information
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations" relating to WesterN SizzliN included herein. The information set
forth below is qualified by reference to and should be read in conjunction with
the consolidated financial statements and related notes included herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------------------
1994 1995 1996(3) 1997 1998
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue.............................................. $ 9,364 $ 8,943 $ 29,724 $ 33,524 $ 37,094
Operating income........................................... 2,296 2,261 2,350 2,664 2,487
Income before extraordinary item........................... 645 811 562 1,056 1,169
Extraordinary loss, net of income tax benefit(2)........... -- -- -- -- (52)
Net income................................................. 645 811 562 1,056 1,117
Basic and diluted earnings before extraordinary item per
share.................................................... $ 0.17 $ 0.21 $ 0.12 $ 0.23 $ 0.25
Basic and diluted extraordinary loss, net of income tax
benefit per share........................................ -- -- -- -- (0.01)
Basic and diluted earnings per share....................... 0.17 0.21 0.12 0.23 0.24
Shares used in computing basic and diluted earnings per
share.................................................... 3,784 3,820 4,539 4,564 4,586
BALANCE SHEET DATA:
Working capital deficit.................................... $ (368) $ (297) $ (3,484) $ (1,816) $ (2,784)
Total assets............................................... 12,945 12,073 20,653 19,509 21,294
Obligations under capital lease, excluding current
maturities............................................... 21 5 54 115 82
Long-term debt, excluding current maturities............... 4,804 3,539 6,876 5,624 5,916
Stockholders' equity....................................... 5,553 6,380 8,009 9,303 9,805
OTHER FINANCIAL DATA:
Dividends paid(1).......................................... -- -- -- -- --
</TABLE>
- ------------------------
(1) WesterN SizzliN has never paid any dividends.
(2) On March 31, 1998, WesterN SizzliN completed financing agreements to replace
certain notes payable to stockholders, term notes, promissory notes, and
notes payable to banks. The refinancing resulted in a loss of $83,140 before
income tax benefit, which included write-offs of $74,476 of unamortized
discounts and $8,664 in deferred financing costs.
(3) In 1996, WesterN SizzliN purchased 10 stores. WesterN SizzliN accounted for
this transaction using the purchase method of accounting. Accordingly, the
1996 selected consolidated financial information includes the net assets and
results of operations from these ten stores from the date of acquisition.
8
<PAGE>
SELECTED PRO FORMA FINANCIAL INFORMATION
The following selected pro forma financial information has been derived from
and should be read in conjunction with the unaudited pro forma condensed
financial information and notes thereto included elsewhere in this Proxy
Statement/Prospectus on pages 47-52. The following unaudited selected pro forma
financial information is based on adjustments to the historical consolidated
balance sheets and related consolidated statements of operations of Austins and
WesterN SizzliN to give effect to the merger as a reverse acquisition using the
purchase method of accounting for business combinations. The following selected
unaudited pro forma financial information may not necessarily reflect the
financial condition or results of operations of Austins that would have actually
resulted had the merger occurred as of the date indicated or reflect the future
earnings of the combined companies.
AS OF AND YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<S> <C>
PRO FORMA STATEMENT OF OPERATIONS DATA:
Total revenues..................................................................... $ 46,468
Operating income................................................................... 2,012
Earnings before extraordinary item................................................. 772
Basic and diluted earnings per share............................................... 0.06
Book value per share............................................................... 1.07
Shares used in computing basic and diluted earnings and book value per share....... 12,064
PRO FORMA BALANCE SHEET DATA:
Working capital deficit............................................................ $ (3,744)
Total assets....................................................................... 26,685
Long-term debt and obligations under capital leases (excluding current
maturities)...................................................................... 7,250
Stockholders' equity............................................................... 12,933
</TABLE>
COMPARATIVE PER SHARE DATA
Set forth below are the net earnings and book value per common share data
for Austins and WesterN SizzliN, and Austin's on a pro forma basis. Austins pro
forma data reflects the 1 for 3.135 reverse split that will take place prior to
the merger. The information in the table below should be read in conjunction
with the respective audited consolidated financial statements and related notes
of Austins and WesterN SizzliN enclosed with and included in this Proxy
Statement/Prospectus, respectively.
AUSTINS
AS OF AND YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<S> <C>
HISTORICAL:
Net Loss.......................................................................... $ (487)
---------
---------
BASIC AND DILUTED PER SHARE AMOUNTS:
Net loss.......................................................................... $ (0.20)
---------
---------
Book value........................................................................ $ 0.69
---------
---------
</TABLE>
9
<PAGE>
WESTERN SIZZLIN
AS OF AND YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<S> <C>
HISTORICAL:
Income Before Extraordinary Item.................................................... $ 1,169
Extraordinary Item.................................................................. (52)
---------
Net Income.......................................................................... $ 1,117
---------
---------
BASIC AND DILUTED PER SHARE AMOUNTS:
Income Before Extraordinary Item.................................................... $ 0.25
Extraordinary Item.................................................................. (0.01)
---------
Net Income.......................................................................... $ 0.24
---------
---------
Book Value.......................................................................... $ 2.06
---------
---------
</TABLE>
AUSTINS
AS OF AND YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<S> <C>
HISTORICAL:
Net loss............................................................................ $ (487)
---------
---------
PRO FORMA BASIC AND DILUTED PER SHARE AMOUNTS (1):
Net loss............................................................................ $ (0.58)
---------
---------
Book value.......................................................................... $ 2.17
---------
---------
</TABLE>
- ------------------------
(1) Pro forma per share amounts reflect the 1 for 3.135 reverse split that will
take place prior to the merger.
RISK FACTORS
You should consider the following factors in evaluating whether to oppose
the merger agreement and merger. These factors should be considered in
conjunction with the other information included or incorporated by reference in
this Proxy statement/Prospectus. Certain of the information relating to Austins,
WesterN SizzliN and the combined company contained or incorporated by reference
in this Proxy Statement/Prospectus is forward-looking in nature. All statements
included or incorporated by reference in this Proxy Statement/Prospectus or made
by management of Austins or WesterN SizzliN other than statements of historical
fact regarding Austins, WesterN SizzliN or the combined company are
forward-looking statements. Examples of forward-looking statements include
statements regarding Austins', WesterN SizzliN's or the combined company's
future financial results, operating results, market positions, product
successes, business strategies, projected costs, future products, competitive
positions and plans and objectives of management for future operations. In some
cases, you can identify forward-looking statements by terminology, such as
"may," "will," "should," "would," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or "continue" or the negative of such
terms or other comparable terminology. Any expectations based on these
forward-looking statements are subject to risks and uncertainties and other
important factors, including those discussed in this document in this Risk
Factors section and in the documents that Austins and WesterN SizzliN
incorporate by reference. These and many other factors could affect the future
10
<PAGE>
financial and operating results of Austins, WesterN SizzliN or the combined
company. These factors could cause actual results to differ materially from
expectations based on forward-looking statements made in this document or
elsewhere by or on behalf of Austins, WesterN SizzliN or the combined company.
We encourage you to read carefully our discussion of these factors, as described
in the following paragraphs and in Austins' Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1998.
RISKS RELATING TO THE MERGER
Austins is a small restaurant company which has not been profitable since
1994. Given its current size, it cannot generate capital to grow or advertise
effectively with national steakhouse chains. The only practical way for its
stockholders to enhance the value of their stock is through a transaction like
the one proposed with WesterN SizzliN. The WesterN SizzliN transaction is the
only serious proposal known to the Austins Board of Directors.
WesterN SizzliN, on the other hand, is a much larger and profitable
restaurant company. Its stockholders put up risk capital to buy the company out
of bankruptcy in 1993. Since then, management has grown WesterN SizzliN into a
medium-sized, profitable business. WesterN SizzliN stockholders desire an
opportunity to obtain liquidity for their privately-held common stock. WesterN
SizzliN has considered "going public" through an initial public offering but
restaurant offerings are not currently in favor in the market. Several reputable
underwriting firms consulted by WesterN SizzliN have advised against an IPO. The
combination with Austins will give WesterN SizzliN stockholders a public trading
market for their shares.
In voting for the merger with Austins, WesterN SizzliN stockholders should,
however, consider the following:
COMPETITIVE ADVANTAGES NOT ACHIEVED
Management of Austins and WesterN SizzliN believe that the potential synergy
and compatibility of the product lines of the two companies, the financial
strength of WesterN SizzliN and the ability to franchise the Austins concept
will enhance the growth of the combined company and will allow the combined
company to compete more effectively in the restaurant business. Because the
restaurant business is one of the most intensely competitive in the country and
because the amount of consumer dollars allocated to restaurant spending has not
increased in recent years, it is possible that the anticipated growth will not
be achieved. It is also possible that the intense competition and the geographic
separation of the two operations will not permit the competitive advantages
contemplated by the managements.
NO INITIAL PUBLIC OFFERING OPPORTUNITY
By combining with Austins, the WesterN SizzliN stockholders will give up a
chance for an underwritten IPO in the event the market acceptance for restaurant
companies should change favorably. It is possible that an IPO could generate an
initial trading price higher than the one expected in the Austins transaction.
AUSTINS MAY NOT RECOVER PROFITABILITY
Austins has not been profitable since 1994. If the expected reduction in
Austins' overhead, administrative and food costs cannot be achieved, Austins
could continue to generate losses and decrease the value of the Austins' shares.
11
<PAGE>
AUSTINS MAY NOT RECEIVE ADDITIONAL NASDAQ LISTING
As soon as practicable following the completion of the merger, Austins
intends to apply for a National Market or SmallCap listing for its common stock.
The ability to achieve the listing depends upon meeting NASDAQ listing criteria.
Two of those criteria require a bid price of at least $5.00 for the stock and a
minimum of 400 shareholders each owning at least 100 shares. Austins does not
currently know whether these criteria can or will be met following the merger.
If the National Market or SmallCap listing cannot be obtained, the WesterN
SizzliN stock and warrant holders receiving Austins stock may experience a more
limited and illiquid market if and when they want to sell their Austins stock.
THE SPECIAL MEETING
DATE, TIME AND PLACE
The special meeting of stockholders of WesterN SizzliN will be held on June
28, 1999, at the Sheraton Airport Plaza, I-85 and Billy Graham Parkway,
Charlotte, North Carolina, commencing at 1:00 p.m. local time.
THE PURPOSE OF THE SPECIAL MEETING
The purposes of the special meeting are (i) to consider and vote upon a
proposal to adopt the merger agreement and approve the merger; and (ii) to
transact such other business as may properly come before the special meeting.
RECORD DATE AND VOTING POWER
Only holders of record of WesterN SizzliN common and Series B preferred
stock at the close of business on the record date, June 4, 1999, are entitled to
notice of, and to vote at, the special meeting. There were approximately 38
holders of record of WesterN SizzliN common stock and 33 holders of Series B
preferred stock on the record date. On that date, there were 4,364,000 shares of
WesterN SizzliN common and 874,375 shares of Series B preferred stock issued and
outstanding. Each share of WesterN SizzliN stock entitles the holder to one vote
on each matter submitted for stockholder approval. The holders of common and
Series B preferred stock will vote as separate classes. See "Security Ownership
by Certain Beneficial Owners" for information regarding persons known to the
management of WesterN SizzliN to be the beneficial owners of more than 5% of the
outstanding WesterN SizzliN common and Series B preferred stock.
VOTING AND REVOCATION OF PROXIES
All properly executed proxies that are not revoked will be voted at the
special meeting and at any adjournments or postponements in accordance with any
stockholder instructions. If a holder of WesterN SizzliN common or Series B
preferred stock executes and returns a proxy and does not specify otherwise, the
shares represented by such proxy will be voted "for" adoption of the merger
agreement and approval of the merger in accordance with the recommendation of
the Board of Directors of WesterN SizzliN. A stockholder of WesterN SizzliN who
has executed and returned a proxy may revoke it at any time before it is voted
at the special meeting by (i) executing and returning a proxy bearing a later
date, (ii) filing written notice of such revocation with the Secretary of
WesterN SizzliN, starting that the proxy is revoked or (iii) attending the
special meeting and voting in person.
REQUIRED VOTE
The presence, in person or by proxy, at the special meeting of the holders
of a majority of the shares of WesterN SizzliN common and Series B preferred
stock outstanding and entitled to vote at the
12
<PAGE>
special meeting is necessary to constitute a quorum at the meeting. The
affirmative vote of the holders of a majority of the shares of WesterN SizzliN
common and Series B preferred stock outstanding as the record date is required
to adopt the merger agreement and approve the merger. In determining whether the
merger agreement and the merger have received the requisite number of
affirmative votes, abstentions and broker non-votes will have the same effect as
a vote against the merger agreement and the merger. At the record date for the
special meeting, the directors and executive officers of WesterN SizzliN owned
approximately 13.8% of the outstanding shares of WesterN SizzliN common and
approximately 11.8% of the outstanding Series B preferred stock entitled to vote
at such meeting.
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers, employees and
agents of WesterN SizzliN may solicit proxies from WesterN SizzliN's
stockholders by personal interview, telephone, or otherwise. WesterN SizzliN
will bear the costs of the solicitation of proxies from its stockholders, except
that Austins will pay 7% and WesterN SizzliN will pay 93% of the cost of
printing this Proxy Statement/ Prospectus.
OTHER MATTERS
At the date of this Proxy Statement/Prospectus, the Board of Directors of
WesterN SizzliN does not know of any business to be presented at the special
meeting other than as set forth in the notice accompanying this Proxy
Statement/Prospectus. If any other matters should properly come before the
special meeting, it is intended that the shares represented by proxies will be
voted with respect to such matters in accordance with the judgment of the
persons voting such proxies.
THE MERGER
GENERAL DESCRIPTION OF THE MERGER
At the effective time of the merger, Acquisition Sub will be merged with and
into WesterN SizzliN, with WesterN SizzliN being the surviving corporation and
continuing as a wholly owned subsidiary of Austins under the name "WesterN
SizzliN." In the merger, each share of WesterN SizzliN common and Series B
preferred stock outstanding at the effective time of the merger will
automatically be converted into two shares of Austins common stock.
Based on the number of shares of Austins common stock and WesterN SizzliN
common and Series B preferred stock and common stock purchase warrants
outstanding as of the record date, 11,219,250 shares of Austins common stock
will be issuable pursuant to the merger agreement. This assumes no exercise
prior to the effective time of the merger of WesterN SizzliN stock options and
conversion of all WesterN SizzliN warrants. These shares will represent 93% of
the total Austins common stock to be outstanding after the issuance.
BACKGROUND
Over the last several years WesterN SizzliN has also identified strategic
objectives, including business combinations with third parties. WesterN SizzliN
management believes that for a restaurant company to grow, it needs to be
publicly traded in order to raise capital or have access to the public capital
markets. During meetings with several investment bankers and particularly, J.C.
Bradford & Co., LLC over the last year, it was the consensus that an IPO for
WesterN SizzliN could not happen until more growth has occurred. A possible
alternative was a merger with a publicly-held company that had synergies with
WesterN SizzliN. On this premise, J.C. Bradford & Co., LLC developed a list of
possible publicly-held companies that might be a fit. Austins was on this list
and was subsequently called.
13
<PAGE>
On August 12, 1998, at a regularly scheduled board meeting, the WesterN
SizzliN Board of Directors reviewed a strategic plan for WesterN SizzliN that
included the goal of completing one or more acquisitions during the following
year in order to gain critical mass and market presence. At this meeting, the
WesterN SizzliN Board of Directors considered the prospect that failing to
achieve sufficient critical mass, WesterN SizzliN should also consider the
alternative of merging, being acquired or purchasing another company or other
restaurant locations.
WesterN SizzliN and Austins have been familiar with each other's businesses.
Over the past year casual conversations on the restaurant business had taken
place between Victor F. Foti, President and Chief Executive Officer of WesterN
SizzliN, and Paul C. Schorr, III, Chairman of the Board of Directors, President
and Chief Executive Officer of Austins.
Over the last several years, Austins has considered complementary
acquisitions of companies that would fit with its management, product strategy
and distribution infrastructure. Austins identified WesterN SizzliN as a natural
fit based upon its market leadership, sufficient critical mass and product mix.
In September, 1998, Victor F. Foti made a telephone call to Paul C. Schorr,
III inquiring if Austins would have any interest in a merger. In September,
1998, Mr. Foti received a telephone message from Mr. Schorr that Austins'
management expressed a possible interest in a merger with WesterN SizzliN. On
September 22nd and 23rd, 1998 three executives from Austins met with WesterN
SizzliN management at Austins restaurants in Omaha, Nebraska. Both parties made
general presentations covering strategic directions, products and organizational
structure.
On October 8, 1998, WesterN SizzliN management met with J.C. Bradford & Co.,
LLC and outlined earlier discussions of potential synergies associated with a
possible merger with Austins.
On October 10th and 11th, 1998, Mr. Schorr, President and Chief Executive
Officer for Austins visited Mr. Foti in Roanoke, Virginia and again reviewed
Austin's interest in pursuing a business combination with WesterN SizzliN. Mr.
Schorr observed several WesterN SizzliN restaurants and visited the Great
American Steak & Buffet restaurants in the Northern Virginia area.
On November 11, 1998, at a regularly scheduled meeting of the WesterN
SizzliN Board of Directors, Mr. Foti led a discussion of strategic alternatives
available to WesterN SizzliN. At the meeting, the WesterN SizzliN Board of
Directors discussed a number of matters relating to these strategic
alternatives, including the trend within the industry toward consolidations, and
WesterN SizzliN's desire to achieve growth and become a public company for
visibility in public capital markets. The WesterN SizzliN Board of Directors
discussed the role of Austins and WesterN SizzliN in the industry's
consolidation and the benefits and risks associated with various acquisition
strategics. J.C. Bradford & Co., LLC presented its review of a possible merger
at the meeting but was not engaged to perform a "fairness opinion" at that time.
From September 22, 1998 through November 23, 1998, the Chief Financial
Officers of both companies and their legal counsel and financial advisors
exchanged various telephone calls and due diligence request lists with a view
toward preparing for subsequent discussion and meetings. Austins and WesterN
SizzliN then began their due diligence investigation of each other and engaged
in discussion concerning valuation issues, a pooling of interest or purchase
accounting and preparing merger models.
Throughout December, 1998, Austins and WesterN SizzliN reviewed with J.C.
Bradford & Co., LLC and their respective legal and accounting advisors pooling
of interests and purchase accounting issues and drafted merger models and
exchange ratios based on both accounting treatments.
In mid-January, 1999, having determined that a combination with the two
companies fit the strategic objectives of each company, Austins and WesterN
SizzliN discussed with greater specificity the
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possibility of the combination of WesterN SizzliN and Austins in a
stock-for-stock transaction accounted for as a reverse acquisition using the
purchase method of accounting. Austins, WesterN SizzliN, and their financial
advisors held several telephone conference calls, and presented for the first
time its proposed outline of the principal terms of a transaction including the
exchange ratio. Paul C. Schorr, III and Victor F. Foti agreed to recommend to
their respective boards an exchange ratio which would produce a post merger
ownership of the equity of 93% for WesterN SizzliN stockholders and 7% for
Austins stockholders. From time to time throughout the discussion with Austins,
the members of WesterN SizzliN Board of Directors were advised of and discussed
the progress of the discussions with Austins.
On February 10, 1999, the proposal for a combination of Austins and WesterN
SizzliN was again presented and discussed at a meeting of the Board of Directors
of WesterN SizzliN. J.C. Bradford & Co., LLC presented a merger model and Victor
F. Foti discussed the synergies of a combination. The Board of Directors
approved going forward with the merger subject to due diligence and a "fairness
opinion" from J.C. Bradford & Co., LLC.
On February 15, 1999, Austins' Board of Directors considered and acted upon
the combination with WesterN SizzliN. The Board of Directors of Austins
unanimously approved a letter of intent. They further approved going forward
with the merger subject to due diligence and the contemplated reverse stock
split.
The parties then negotiated a letter of intent which was signed as of
February 23, 1999.
Prior to the closing of the market on February 22, 1999, Austins and WesterN
SizzliN issued a joint press release announcing the proposed merger.
REASONS FOR THE MERGER
The following discussion of the parties' reasons for the merger contains a
number of forward-looking statements that reflect the current views of Austins
and/or WesterN SizzliN with respect to future events that may have an effect on
their future financial performance. See "Risk Factors."
AUSTINS' REASONS FOR THE MERGER
Austins is a small, seven unit steakhouse restaurant operation that has been
unable to increase its number of restaurant units as it planned when it went
public in January, 1995. Its inability to grow coupled with unprofitable
operations over the past four years has caused the price of its common stock to
decline from its $5.00 offering price to below $1.00. The Austins Board of
Directors, which owns approximately 68% of the outstanding stock has determined
that Austins either needs to be acquired by a larger company or effect a
business combination like the one proposed with WesterN SizzliN in order for the
stockholders to derive any increased value for their stockholdings. Without such
a business combination, the Board of Directors of Austins expects that Austins
will continue to operate a small number of units at a break-even or marginally
profitable basis.
Austins' Board of Directors has determined that the merger with WesterN
SizzliN to be in the best interest of Austins and its stockholders. In reaching
this determination, the Austins Board of Directors considered a number of
factors including the matters discussed above and the following:
- the possibility that the Austins' stockholders can achieve a higher value
for their stock over time through combining with a profitable company such
as WesterN SizzliN;
- the ability to reduce the administrative, overhead, food and supplies
costs of Austins through utilization of WesterN SizzliN's infrastructure
and buying power;
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<PAGE>
- the possibility of expanding the Austins' Western Roadhouse restaurant
concept through a much larger combined entity; and
- the expectation that the combined company will be profitable while
Austins, standing alone, would likely just breakeven or be marginally
profitable.
WESTERN SIZZLIN'S REASONS FOR THE MERGER
The WesterN SizzliN Board of Directors believes that, despite WesterN
SizzliN's success to date, increasing competition and industry consolidation
would make it increasingly important for WesterN SizzliN to grow and gain
critical mass in order to compete with large publicly held companies with
substantially greater resources. WesterN SizzliN's management has considered a
number of alternatives for enhancing its competitive position, including by
growing through the acquisition of smaller restaurant companies or merging with
another publicly held company. In the industry environment referred to above,
the WesterN SizzliN Board of Directors identified several potential benefits for
the WesterN SizzliN stockholders, employees and customers that it believes would
result from the merger. These potential benefits include:
- the potential synergy and compatibility between WesterN SizzliN and
Austins, based on the compatibility of the companies' product lines;
- the financial strength of WesterN SizzliN that would enable the combined
company to commit greater resources to both current and emerging concept
development efforts and fund the future internal growth of the combined
company's business;
- the ability to franchise the Austin's concept to enhance the growth of
WesterN SizzliN;
- the opportunity for WesterN SizzliN, as part of the combined company, to
compete more effectively in the increasingly competitive and rapidly
changing restaurant industry;
- the opportunity for WesterN SizzliN to have access to another capital
market;
- the merger consideration to be received by WesterN SizzliN stockholders
which at present project an accretion to WesterN SizzliN's earnings; and
- the greater liquidity to WesterN SizzliN stockholders of an investment in
Austins common stock (a publicly-held company) instead of WesterN SizzliN
common stock.
In the course of its deliberations during the Board of Directors meetings,
the WesterN SizzliN Board of Directors reviewed with WesterN SizzliN's
management a number of additional factors relevant to the merger, including the
strategic overview and prospects for WesterN SizzliN. The WesterN SizzliN Board
of Directors also considered, among other matters:
- the financial condition, results of operations, prospects and competitive
position of Austins and WesterN SizzliN before and after giving effect to
the merger;
- current financial market conditions and historical market prices and
trading information with respect to Austins common stock and WesterN
SizzliN common stock;
- the current industry and economic conditions;
- the consideration that WesterN SizzliN stockholders will receive in the
merger and the fact that, at the time the parties signed the merger
agreement, the market value of the Austins common stock to be issued in
the exchange for the WesterN SizzliN common stock could represent an
increase in value and liquidity of the WesterN SizzliN common stock;
- the implications for continued independent operation of WesterN SizzliN in
light of competitive market conditions;
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- the complementary management, products and services of Austins and WesterN
SizzliN;
- a comparison of selected recent acquisition and merger transactions in the
industry;
- the expected tax and accounting treatment of the merger;
- the valuation of J.C. Bradford & Co., LLC rendered at the February 10,
1999 meeting of the WesterN SizzliN Board of Directors that, based upon
and subject to the various conditions set forth in the merger model of
J.C. Bradford & Co., LLC, the exchange ratio was fair to holders of
WesterN SizzliN common and Series B preferred stock and warrant holders
from a financial point of view;
- the impact of the merger upon WesterN SizzliN's franchisees and employees;
and
- reports from management, financial advisors and legal counsel as to the
results of their investigation of Austins.
The WesterN SizzliN Board of Directors also considered a number of
potentially negative factors in its deliberations concerning the merger,
including:
- the geography of the Austin's locations and the management problems and
cost due to the distance between these locations; and
- the ability of management to develop current staff for restaurant
operations.
The WesterN SizzliN Board of Directors discussed with WesterN SizzliN
management the prospects for combinations with companies other than Austins and
the possibility that the benefits described above could be achieved through any
such combinations as well as the risks and benefits of a stand-alone strategy.
The WesterN SizzliN Board of Directors believed that certain of the above risks
were unlikely to occur or unlikely to have a material impact on the combined
company, while others could be avoided or mitigated by WesterN SizzliN or
Austins, and that, overall, the risks associated with the merger were outweighed
by the potential benefits of the merger.
The foregoing discussion of information and factors considered by the
WesterN SizzliN Board of Directors is not intended to be exhaustive but is
believed to include all material factors considered by the WesterN SizzliN Board
of Directors. In view of the wide variety of factors considered by the WesterN
SizzliN Board of Directors, the WesterN SizzliN Board of Directors did not find
it practicable to quantify or otherwise assign relative weight to the specific
factors considered. However, after taking into account all of the factors set
forth above, the WesterN SizzliN Board of Directors agreed that the merger
agreement and the consummation of the merger were fair to, and in the best
interests of, WesterN SizzliN and its stockholders and that WesterN SizzliN
should proceed with the merger.
OPINION OF WESTERN SIZZLIN'S FINANCIAL ADVISOR
WesterN SizzliN retained J.C. Bradford & Co., LLC to act as its financial
advisor in connection with the proposed transaction. At the request of the
WesterN SizzliN board, J.C. Bradford & Co., LLC delivered on April 29, 1999
materials outlining its financial analysis of the proposed transaction and an
oral opinion to the WesterN SizzliN board, followed by a written opinion as of
the same date, that the merger consideration was fair to the shareholders of
WesterN SizzliN from a financial point of view.
The full text of the J.C. Bradford & Co., LLC opinion is attached to this
document as Appendix B. The full text of the J.C. Bradford & Co., LLC opinion
sets forth the assumptions made by J.C. Bradford & Co., LLC in arriving at its
opinion as well as certain qualifications to the opinion. Furthermore, the full
text of the J.C. Bradford & Co., LLC opinion describes the information reviewed
by J.C. Bradford & Co., LLC and briefly describes the qualifications of J.C.
Bradford & Co., LLC to render an opinion as to the fairness, from a financial
point of view, of the merger consideration to the
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shareholders of WesterN SizzliN. The summary of the J.C. Bradford & Co., LLC
opinion is qualified in its entirety by reference to the full text of the J.C.
Bradford & Co., LLC opinion.
In preparing its report to the WesterN SizzliN board, J.C. Bradford & Co.,
LLC performed a variety of financial and comparative analyses, which are
described below. In arriving at its opinion, J.C. Bradford & Co., LLC did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, J.C. Bradford & Co., LLC believes that its
analyses and the factors considered as a whole and that selecting portions of
its analyses and the factors considered by it, without considering all analyses
and factors, could create a misleading or incomplete view of the processes
underlying such analyses and its opinion.
The following is a summary of certain of the analyses performed by J.C.
Bradford & Co., LLC in connection with its rendering the opinion to the board of
directors on April 29, 1999:
CONTRIBUTION ANALYSIS
J.C. Bradford & Co., LLC reviewed certain historical and estimated future
operating and financial information (including revenue, EBITDA, and net income)
for WesterN SizzliN and Austins and the relative contribution of Austins to the
combined company based on estimates provided by management of WesterN SizzliN
and Austins. EBITDA is earnings before interest, taxes and depreciation. This
indicated, among other things, that Austins would contribute for the fiscal
years ended December 31, 1998, 1999 and 2000, (1) 20%, 15%, and 16% of revenue,
respectively, (2) 5%, 13%, and 12% of EBITDA, respectively, and (3) 36%, 8%, and
8% of net income, respectively, as compared with an implied ownership of 7% of
the equity value of the combined company based on the exchange ratio. J.C.
Bradford & Co., LLC also performed an analysis of the relative estimated
contribution of WesterN SizzliN and Austins to the combined company on a pro
forma basis in 1998 after taking into account any of the possible cost savings
and operational efficiency benefits that management of WesterN SizzliN estimates
may be realized following the merger. This analysis indicated that Austins would
contribute (1) 17% of revenue as compared with an implied ownership of 7% of the
equity value of the combined company based on the exchange ratio (2) 12% of
EBITDA as compared with an implied ownership of 7% of the equity value of the
combined company based on the Exchange Ratio and (3) 7% of net income as
compared with an implied ownership of 7% of equity value of the combined company
based on the exchange ratio.
DISCOUNTED CASH FLOW ANALYSIS
Based on information obtained from the senior management of WesterN SizzliN
and from senior management of Austins as modified by the senior management of
WesterN SizzliN to take into account certain savings related to general and
administrative expenses expected to be eliminated as result of the merger, J.C.
Bradford & Co., LLC discounted to present value the future cash flows that each
of WesterN SizzliN and Austins are projected to generate through 2003, under
various circumstances. J.C. Bradford & Co., LLC calculated terminal values as of
the 2003 fiscal year-end for each of WesterN SizzliN and Austins by applying
multiples of EBITDA in fiscal year 2003. The cash flow streams and terminal
values were then discounted to present values using different discount rates
chosen to reflect different assumptions regarding WesterN SizzliN and Austins'
respective cost of capital. Based on the above described analysis, the implied
equity value of WesterN SizzliN ranged from $24.7 million to $36.7 million. The
implied equity value of Austins ranged from $3.2 to $4.9 million. Austins'
implied ownership of the equity value of the combined company therefore ranges
from 11.5% to 11.8% as compared to an implied ownership of 7% based on the
exchange ratio.
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COMPARABLE COMPANY ANALYSIS
Using publicly available information, J.C. Bradford & Co., LLC reviewed
certain financial and operating data for several publicly traded companies
engaged in businesses with characteristics similar to Austins. This group
included Family Steak Houses of Florida, Lone Star Steakhouse Saloon, Outback
Steakhouse Inc., Rare Hospitality International Inc., Roadhouse Grill Inc., and
Ryan's Family Steak Houses. The table below compares the ranges of multiples at
which the comparable companies were trading on the date of the opinion to the
multiples implied by the transaction value.
<TABLE>
<CAPTION>
MULTIPLE OF COMPARABLE COMPANIES ADJUSTED AVERAGE*
- ----------------------------------------------------------------------- --------------------- -------------------
<S> <C> <C>
Latest Twelve Months Earnings.......................................... 5.3x--17.5x 12.9x
1999 Estimated Earnings................................................ 10.1x--15.4x 14.7x
2000 Estimated Earnings................................................ 9.1x--13.8x 12.3x
Latest Twelve Months EBITDA............................................ 2.7x--8.6x 6.7x
Latest Twelve Months Revenue........................................... .45x--1.17x 0.7x
</TABLE>
- ------------------------
* Excludes high and low
Applying these multiples to the respective revenue, EBITDA and earnings of
each of WesterN SizzliN and Austins, J.C. Bradford & Co., LLC derived implied
equity values for both companies and derived an implied ownership of Austins of
the equity value of the combined company. This analysis indicated that Austins
would have an implied ownership of 7.3%, 7.7%, and 8.4% based on earnings
multiples for the fiscal years ended December 31, 1998, 1999, and 2000,
respectively, as compared with an implied ownership of 7% of the equity value of
the combined company based on the exchange ratio. The analysis also indicated
that Austins would have an implied ownership of 11.3% and 17.3% based on EBITDA
and revenue multiples, respectively, for the fiscal year ended December 31, 1998
as compared with an implied ownership of 7% of equity value of the combined
company based on the exchange ratio.
COMPARABLE TRANSACTION ANALYSIS
Using comparable transaction analysis, J.C. Bradford & Co., LLC calculated
the multiples paid in twenty-one acquisitions effected since January 1, 1994 of
companies engaged in businesses with characteristics similar to Austins. The
table below compares the ranges of multiples at which the transactions were
effected:
<TABLE>
<CAPTION>
MULTIPLE OF RANGE ADJUSTED AVERAGE*
- ------------------------------------------------------------------------------- -------------- -------------------
<S> <C> <C>
Latest Twelve Months Earnings.................................................. 13.5x--260x 29.1x
Latest Twelve Months EBIT...................................................... 8.6x--29.2x 15.9x
Latest Twelve Months EBITDA.................................................... 5.2x--18.1x 9.0x
Latest Twelve Months Revenue................................................... .5x--3.3x 1.1x
</TABLE>
- ------------------------
* Excludes high and low
Applying these multiples to the respective revenue, EBIT, EBITDA and
revenues of each of WesterN SizzliN and Austins, J.C. Bradford & Co., LLC
derived equity values for both companies and derived an implied ownership of
Austins of the equity value of the combined company. This analysis indicated
that Austins would have an implied ownership of 7.3%, 6.8%, 11.6%, and 17.1%
based on earnings, EBIT, EBITDA and revenue multiples, respectively, for the
fiscal year ended December 31, 1998, all as compared with an implied ownership
of 7% of the equity value of the combined company based on the exchange ratio.
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STOCK TRADING ANALYSIS
J.C. Bradford & Co., LLC reviewed and analyzed the historical trading volume
and prices at which the Austins common stock has traded since January 3, 1997 as
compared to the historical trading volume and prices for the Austins comparable
company group. J.C. Bradford & Co., LLC also reviewed and analyzed the
historical trading volume and prices at which the Austins common stock has
traded since January 3, 1997, as compared to the historical trading prices for
the Dow Jones Industrial Average, the NASDAQ Composite Index, and the Russell
2000 Index.
In performing its analysis, J.C. Bradford & Co., LLC made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of WesterN
SizzliN or Austins. The analyses performed by J.C. Bradford & Co., LLC are not
necessarily indicative of actual values, which may be significantly more or less
favorable than suggested by such analyses. The analyses were prepared solely as
part of J.C. Bradford & Co., LLC's analysis of the fairness from a financial
point of view of the merger consideration pursuant to the merger agreement and
were provided to WesterN SizzliN's board of directors in connection with the
delivery of the J.C. Bradford & Co., LLC opinion. The analyses do not purport to
be appraisals or to reflect the prices at which WesterN SizzliN or Austins might
actually be sold. In addition, as described above, the J.C. Bradford & Co., LLC
opinion was one of many factors taken into consideration by WesterN SizzliN's
board of directors in making its determination to approve the merger. The merger
consideration pursuant to the merger agreement was determined through
arms'-length negotiations between WesterN SizzliN and Austins and was approved
by WesterN SizzliN's board of directors.
J.C. Bradford & Co., LLC is a nationally recognized investment banking and
advisory firm. J.C. Bradford & Co., LLC, as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate, estate and
other purposes. J.C. Bradford & Co., LLC may continue to provide investment
banking services to the combined entity in the future. In the ordinary course of
its trading, brokerage and financing activities, J.C. Bradford & Co., LLC and
its affiliates may, at any time, have a long or short position in, and buy and
sell the debt or equity securities and senior loans of Austins for its account
or the account of its customers. J.C. Bradford & Co., LLC and its affiliates
have, in the past, provided financial advisory services to WesterN SizzliN.
WesterN SizzliN's board of directors engaged J.C. Bradford & Co., LLC to
render an opinion as to the fairness of the merger consideration to be paid to
the shareholders of WesterN SizzliN in connection with the board's discharge of
its fiduciary obligations. J.C. Bradford & Co., LLC has advised the board of
directors that it does not believe that any person (including any shareholder of
WesterN SizzliN) other than the board of directors has the legal right to rely
upon its opinion for any claim arising under state law and that, should any
claim be brought against it, it will raise this assertion as a defense. In the
absence of governing authority, this assertion will be resolved by the final
adjudication of such issue by a court of competent jurisdiction. Resolution of
this matter under state law, however, will have no effect on the rights and
responsibilities of any person under the federal securities laws or on the
rights or responsibilities of WesterN SizzliN's board of directors under
applicable state law.
Pursuant to the terms of an engagement letter dated May 21, 1998, WesterN
SizzliN agreed to pay J.C. Bradford & Co., LLC for acting as financial advisor
to the board of directors in connection with the proposed transaction a fee as
follows:
a fee of $50,000 payable in cash upon delivery of the opinion, and
an additional fee of $200,000 payable in cash upon the closing of the
transaction.
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In addition, WesterN SizzliN has agreed to reimburse Bradford for its
reasonable out-of-pocket expenses, including the fees and disbursements of its
counsel, and to indemnify J.C. Bradford & Co., LLC and certain related persons
against certain liabilities relating to or arising out of its engagement,
including certain liabilities under the federal securities laws.
DISSENTING STOCKHOLDERS
The provisions of Chapter 21 of the Tennessee Business Corporation Act
(referred to as Tennessee BCA), provide if the merger is consummated, any holder
of WesterN SizzliN common or Series B preferred stock who (i) gives to WesterN
SizzliN, prior to the vote at the special meeting with respect to the approval
of the merger agreement, written notice of such holder's intent to demand
payment for such holder's shares, and (ii) does not vote in favor of the merger,
shall be entitled to receive, upon compliance with the statutory requirements
summarized below, the fair value of such holder's shares as of the effective
date, excluding any appreciation or depreciation in anticipation of the merger.
A stockholder of record may assert dissenters' rights as to fewer than all
the shares registered in such holder's name only if such holder dissents with
respect to all shares beneficially owned by any one beneficial stockholder and
such holder notifies WesterN SizzliN in writing of the name and address of each
person on whose behalf such holder asserts dissenters' rights. The rights of
such a partial dissenter are determined as if the shares as to which such holder
dissents and such holder's other shares were registered in the names of
different stockholders. A beneficial stockholder may assert dissenters' rights
as to shares held on his or her behalf only if he or she dissents with respect
to all shares of which he or she is the beneficial stockholder or over which he
or she has power to direct the vote. A beneficial stockholder asserting
dissenters' rights to shares held on such holder's behalf shall notify WesterN
SizzliN in writing of the name and address of the record stockholder of the
shares, if known.
The written notice requirement referred to above will not be satisfied under
the Tennessee BCA by merely voting against approval of the merger agreement by
proxy or in person at the special meeting. In addition to not voting in favor of
the merger agreement, a stockholder wishing to preserve the right to dissent and
seek appraisal must give a separate written notice of such holder's intent to
demand payment for such holder's shares if the merger is effected, as discussed
above.
Any written notice of intent to demand payment pursuant to the foregoing
sections of the Tennessee BCA should be addressed as follows: The WesterN
SizzliN Corporation, 416 Jefferson Street, Roanoke, VA 24011, Attention:
Corporate Secretary.
If the merger is authorized at the special meeting, WesterN SizzliN must
deliver a written dissenters' notice to all holders of WesterN SizzliN common
and Series B preferred stock who satisfied the foregoing requirements. The
dissenters' notice must be sent within ten days after the effective date and
must (1) state where and when the demand for payment must be sent and where
certificates for shares of WesterN SizzliN common stock must be deposited, (2)
supply a form for demanding payment that includes the date of the first
announcement to news media or to stockholders of the terms of the merger and
requires that the person asserting dissenters' rights certify whether or not
such person, or if a nominee asserting dissenters' rights on behalf of a
beneficial stockholder, the beneficial stockholder acquired beneficial ownership
of the shares before that date, (3) set a date by which WesterN SizzliN must
receive the demand for payment not less than 30 nor more than 60 days after the
delivery of the notice, and (4) be accompanied by a copy of Chapter 23 of the
Tennessee BCA if not previously provided.
A stockholder of record who receives the dissenters' notice must demand
payment, certify whether such holder (or the beneficial stockholder on whose
behalf such holder is asserting dissenters' rights) acquired beneficial
ownership of the shares before the date set forth in the dissenters' notice, and
deposit such holder's certificates in accordance with the dissenters' notice.
Such stockholder will retain all other rights of a stockholder until those
rights are canceled or modified by the consummation of the
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merger. A stockholder who does not comply substantially with the requirements
that such holder demand payment and deposit such holder's share certificates
where required, each by the date set in the dissenters' notice, is not entitled
to payment for such holder's shares under Chapter 23 of the Tennessee BCA. A
demand for payment may not be withdrawn unless the surviving corporation
consents to the withdrawal.
Except as described below, as soon as the merger is consummated, or upon
receipt of a payment demand, WesterN SizzliN as the surviving corporation, must
pay to each dissenting stockholder who complied with the payment demand and
deposit requirements described above the amount WesterN SizzliN estimates to be
the fair value of such holder's shares, plus accrued interest from the effective
date. Such payment must be accompanied by (1) certain recent WesterN SizzliN
financial statements, (2) WesterN SizzliN's estimate of the fair value of the
shares and an explanation how the fair value was calculated, (3) an explanation
of how the interest was calculated, (4) a statement of the dissenter's right to
demand additional payment under Section 48-23-209 of the Tennessee BCA, and (5)
a copy of Chapter 23 of the Tennessee BCA if not previously provided.
WesterN SizzliN may elect to withhold such payment from a dissenter as to
any shares of which such dissenter (or the beneficial owner on whose behalf such
dissenter is asserting dissenters' rights) was not the beneficial owner on the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to stockholders of the terms of the proposed merger, unless the
beneficial ownership of the shares devolved upon him by operation of law from a
person who was the beneficial owner on the date of the first announcement. To
the extent WesterN SizzliN elects so to withhold payment, it shall estimate the
fair value of the shares, plus accrued interest, and shall pay this amount to
each dissenter who agrees to accept it in full satisfaction of such dissenter's
demand. WesterN SizzliN shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the fair value and interest
were calculated, and a statement of the dissenter's right to demand additional
payment under Section 48-23-209.
Section 48-23-209 of the Tennessee BCA provides that a dissenting
stockholder may notify WesterN SizzliN in writing of such holder's own estimate
of the fair value of such holder's shares and the interest due, and may demand
payment of such holder's estimate less any payment already received, if (i) such
holder believes that the amount offered by WesterN SizzliN is less than the fair
value of such holder's shares or that the interest due has been calculated
incorrectly, (ii) WesterN SizzliN fails to make payment under Section 48-23-206
or to offer payment under Section 48-23-208 within two months after the date set
for demanding payment; or (iii) WesterN SizzliN has failed to effect the merger
and does not return the deposited certificates within two months after the date
set for demanding payment. A dissenting stockholder waives such holder's right
to demand payment under Section 48-23-209 unless such holder notifies WesterN
SizzliN of such holder's demand in writing within one month after WesterN
SizzliN makes or offers payment for such holder's shares.
If a demand for payment under Section 48-23-209 remains unsettled, WesterN
SizzliN must commence a proceeding in the Circuit Court of Davidson County,
Tennessee, within two months after receiving the demand for additional payment
and must petition the court to determine the fair value of the shares and
accrued interest. If WesterN SizzliN does not commence the proceeding within
those two months, it is required to pay each dissenting stockholder whose demand
remains unsettled the amount demanded. WesterN SizzliN is required to make all
dissenting stockholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon all such parties. The court may appoint
appraisers to receive evidence and to recommend a decision on fair value. Each
dissenter made a party to the proceeding is entitled to judgment for the amount,
if any, by which the court finds the fair value of such dissenter's shares, plus
interest, exceeds the amount paid by WesterN SizzliN.
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The court, in an appraisal proceeding, must determine the costs of the
proceeding, excluding fees and expenses of attorneys and experts for the
respective parties, and must assess those costs against WesterN SizzliN, except
that the court may assess the costs against all or some of the dissenting
stockholders to the extent the court finds they acted arbitrarily, vexatiously,
or not in good faith in demanding payment under Section 48-23-209. The court
also may assess the fees and expenses of attorneys and experts for the
respective parties against WesterN SizzliN if the court finds WesterN SizzliN
did not substantially comply with the requirements of specified provisions of
the Tennessee BCA, or against either WesterN SizzliN or a dissenting stockholder
if the court finds that such party acted arbitrarily, vexatiously, or not in
good faith with respect to the rights provided by Chapter 23 of the Tennessee
BCA.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against WesterN SizzliN, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefitted.
In a proceeding commenced by dissenters to enforce the liability under
Section 48-23-301(a) where WesterN SizzliN failed to commence an appraisal
proceeding within the sixty day period, the court shall assess the costs of the
proceeding and the fees and expenses of dissenters' counsel against WesterN
SizzliN and in favor of the dissenters.
This is a summary of the material rights of a dissenting stockholder of
WesterN SizzliN, but is qualified in its entirety by reference to Chapter 23 of
the Tennessee BCA, included in Appendix C to this Proxy Statement/Prospectus. It
is not intended to give any right of dissent or payment to any stockholder and
should not be so read. Stockholders' rights of dissent and payment are limited
to those provided by law. Any WesterN SizzliN stockholder who intends to
exercise the right to dissent from consummation of the merger should carefully
review the text of such provisions and should also consult with such holder's
attorney. No further notice of the events giving rise to dissenters' rights or
any steps associated therewith will be furnished to WesterN SizzliN
stockholders, except as indicated above or otherwise required by law.
Any dissenting WesterN SizzliN stockholder who perfects such holder's right
to be paid the value of such holder's shares will recognize taxable gain or loss
upon receipt of cash for such shares for federal income tax purposes. See
"Material Federal Income Tax Consequences."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material federal income tax
consequences of the merger to the holders of WesterN SizzliN common and
preferred stock and warrant holders based upon current provisions of the
Internal Revenue Code, existing regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
Any such change, which may or may not be retroactive, could alter the tax
consequences to Austins, WesterN SizzliN or the stockholders of WesterN SizzliN
as described. No attempt has been made to comment on all federal income tax
consequences of the merger that may be relevant to particular holders. Any
WesterN SizzliN stockholder who does not hold his or her WesterN SizzliN stock
as a capital asset should seek separate tax advice.
In addition, the following discussion does not address the tax consequences
of the merger under state, local and foreign tax laws or the tax consequences of
transactions effectuated prior to or after the merger, (whether or not such
transactions are in connection with the merger). Accordingly, holders of WesterN
SizzliN stock are advised and expected to consult their own tax advisers
regarding the federal income tax consequences of the merger in light of their
personal circumstances and the consequences under state, local and foreign tax
laws.
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No ruling from the Internal Revenue Service has been or will be requested in
connection with the merger. Austins has received from its counsel, Cline,
Williams, Wright, Johnson & Oldfather, an opinion to the effect that the merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code; that Austins,
Acquisition Sub and WesterN SizzliN will each be a party to the reorganization,
and that Austins, Acquisition Sub and WesterN SizzliN will not recognize any
gain or loss as a result of the merger. WesterN SizzliN has received from its
counsel, Magee, Foster, Goldstein & Sayers, an opinion to the effect that the
merger will be treated for federal income tax purposes as a reorganization that
Austins, Acquisition Sub and WesterN SizzliN will each be a party to the
reorganization, and that stock and warrant holders of WesterN SizzliN will not
recognize any gain or loss upon the receipt of Austins common stock for their
WesterN SizzliN stock and warrants. Such opinions are subject to certain
assumptions and based on certain representations of Austins, Acquisition Sub and
WesterN SizzliN. Stockholders of WesterN SizzliN should be aware that such
opinions are not binding on the IRS and no assurance can be given that the IRS
will not adopt a contrary position or that a contrary IRS position would not be
sustained by a court.
The following federal income tax consequences will result from the merger
qualifying as a reorganization:
(a) no gain or loss will be recognized by Austins, Acquisition Sub or
WesterN SizzliN solely as a result of the merger;
(b) no gain or loss will be recognized by a holder of WesterN SizzliN common
or Series B preferred stock upon the exchange of all of such holder's
shares of WesterN SizzliN common or Series B preferred stock solely for
shares of Austins common stock in the merger;
(c) no gain or loss will be recognized by a holder of WesterN SizzliN common
stock purchase warrants upon the conversion of such holder's warrants
into shares of Austins common stock in the merger;
(d) the aggregate basis of the shares of Austins common stock received by a
WesterN SizzliN stock and warrant holder in the merger, will be the same
as the aggregate basis of the shares or warrants of WesterN SizzliN stock
surrendered in exchange; and
(e) the holding period of the shares of Austins common stock received by a
WesterN SizzliN stock holder in the merger will include the holding
period of the stock of WesterN SizzliN surrendered in exchange, provided
that such stock of WesterN SizzliN is held as a capital asset at the
effective time of the merger.
ANTICIPATED ACCOUNTING TREATMENT
This business combination is structured as a reverse acquisition and will be
accounted for using the purchase method of accounting. In a reverse acquisition,
the acquired company, WesterN SizzliN, will receive the majority of the voting
interests in the surviving combined company. WesterN SizzliN will be deemed to
be the acquiring company for financial reporting purposes. Therefore, all the
assets and liabilities of Austins, the legal acquirer, will be recorded at fair
value as required by the purchase method and the operations of Austins will be
reflected in the operations of the combined company from the date of the merger.
The historical consolidated financial statements for periods prior to the
consummation of the merger will not be restated as though the companies had been
combined from inception.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of Austins common stock to be received by WesterN SizzliN stock
and warrant holders in connection with the merger have been registered under the
Securities Act and, except as set forth in
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this paragraph, may be traded without restriction. The shares of Austins common
stock to be issued in connection with the merger and received by persons who may
be deemed to be "affiliates," as that term is defined in Rule 144 under the
Securities Act after the merger may be resold by them only in transactions
permitted by the resale provisions of Rule 144 under the Securities Act or as
otherwise permitted under the Securities Act.
AUSTINS OPTIONS
Austins has issued and outstanding, employee and directors' options to
purchase a total of 316,000 shares of Austins common stock. Upon the effective
date of the merger, the Austins board of directors will adjust all outstanding
options to reflect the 1 for 3.135 reverse split.
CERTAIN TERMS OF THE MERGER AGREEMENT
The following description is not complete and is qualified by reference to
the merger agreement, which is attached as Appendix A to this Proxy
Statement/Prospectus and is incorporated by reference.
EFFECTIVE TIME OF THE MERGER
The merger will become effective upon the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware. Assuming all conditions to
the merger contained in the merger agreement are satisfied or, if permissible,
waived, it is anticipated that the effective time of the merger will occur as
soon as practicable following the special meeting.
MANNER AND BASIS OF CONVERTING COMMON AND SERIES B PREFERRED STOCK
At the effective time of the merger, each share of WesterN SizzliN common
and Series B preferred stock outstanding, without any action on the part of the
holders, will automatically be converted into two shares of fully paid and
nonassessable Austins common stock. The number of shares of Austins common stock
into which each share of WesterN SizzliN common and Series B preferred stock
will be converted is referred to in this Proxy Statement/Prospectus as the
exchange ratio.
Promptly following the effective time of the merger Austins will cause First
National Bank of Omaha, which has been selected by Austins to act as exchange
agent, to mail to each record holder of WesterN SizzliN common and Series B
preferred stock immediately prior to the effective time of the merger,
information advising such holder of the consummation of the merger and a letter
of transmittal for use in exchanging WesterN SizzliN common and Series B
preferred stock certificates for Austins common stock certificates. After the
effective time of the merger, there will be no further registration of transfers
on the stock transfer books of WesterN SizzliN of shares of WesterN SizzliN
stock that were outstanding immediately prior to the effective time of the
merger. Share certificates should not be surrendered for exchange by
stockholders of WesterN SizzliN prior to the effective time of the merger.
After the effective time of the merger, until so surrendered and exchanged,
each certificate previously evidencing WesterN SizzliN stock shall be deemed to
evidence shares of Austins common stock. Unless and until any such certificates
that previously evidenced WesterN SizzliN stock shall be surrendered and
exchanged, no dividends or other distributions payable to the holders of record
of Austins common stock shall be paid to the holders of such certificates
previously evidencing WesterN SizzliN stock. Upon any such surrender and
exchange of such certificates, there shall be paid to the record holders of the
certificates issued and exchanged; (i) the amount, without interest, of any
dividends and other distributions with a record date on or after the effective
time of the merger previously paid with respect to such whole shares of Austins
common stock and (ii) at the appropriate payment date, the amount of any
dividends or other distributions with a record date on or after the effective
time of the merger but prior to surrender and a payment date occurring after
surrender, payable with respect to such whole shares of Austins common stock.
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WESTERN SIZZLIN WARRANTS
The merger agreement also provides at the effective time of the merger,
WesterN SizzliN stock purchase warrants issued in February 1, 1996 as a part of
a WesterN SizzliN refinancing transaction will be immediately convertible into
twice the number of shares of Austins common stock as the WesterN SizzliN common
stock subject to such WesterN SizzliN warrants. The total number of shares of
WesterN SizzliN common stock subject to the warrants is 371,250 and, therefore,
Austins will reserve an aggregate of 742,500 shares of Austins common stock for
issuance under the WesterN SizzliN warrants. The WesterN SizzliN warrants are
convertible into Austins common stock without payment of any further
consideration.
WESTERN SIZZLIN OPTIONS
The merger agreement provides that at the effective time of the merger each
outstanding WesterN SizzliN stock option will automatically become an option to
purchase two shares of Austins common stock at an exercise price per share of
Austins common stock of $1.50 per share. The term, exercisability, vesting
schedule, and all other terms and conditions of the WesterN SizzliN stock
options will otherwise be unchanged by these provisions and will operate in
accordance with their terms. All shares of Austins common stock issued upon
exercise of the exchanged WesterN SizzliN stock options will be registered under
an effective Form S-8 Registration Statement.
Based on the WesterN SizzliN stock options outstanding at the record date
and assuming none of such WesterN SizzliN stock options is exercised prior to
the effective time of the merger, Austins will be required at the effective time
of the merger to reserve an aggregate of 400,000 shares of Austins common stock
for issuance upon exercise of WesterN SizzliN stock options assumed by Austins
pursuant to the merger.
CONDITIONS TO THE MERGER
WESTERN SIZZLIN'S AND AUSTINS' CONDITIONS. The respective obligations of
Austins and WesterN SizzliN to consummate the merger are subject to the
satisfaction of certain conditions, including the following:
- adoption of the merger agreement and approval of the merger by the
stockholders of WesterN SizzliN; and
- the absence of any action, order or legal proceeding by a federal or state
court or governmental entity which would prohibit or prevent the
consummation of the merger.
WESTERN SIZZLIN'S CONDITIONS. The obligations of WesterN SizzliN to
consummate and effect the merger are further subject to the receipt of certain
closing certificates and fulfillment of the following conditions, or to their
waiver by WesterN SizzliN before the effective time of the merger:
- the representations and warranties contained in the merger agreement that
are modified by materiality or Austins' Material Adverse Effect shall be
true and correct in all material respects and those that are not so
modified shall be true and correct in all material respects on the date of
the merger agreement; Austins shall have performed and complied, in all
material respects, with all covenants required by the merger agreement to
be performed or complied with by Austins before the effective time of the
merger; and Austins shall have delivered to WesterN SizzliN a certificate,
dated as of the effective time of the merger and signed on behalf of
Austins by its president to both such effects;
- this Proxy Statement/Prospectus shall have become effective under the
Securities Act;
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- Austins shall have made effective provision for the assumption or
substitution at the effective time of the merger of all stock options
outstanding under plans maintained by WesterN SizzliN;
- WesterN SizzliN shall have received a favorable opinion from J.C. Bradford
& Co., LLC for inclusion in this Proxy Statement/Prospectus as to the
fairness, from a financial point of view, to the WesterN SizzliN stock and
warrant holders of the exchange ratio, which opinion shall not have been
withdrawn;
- Magee, Foster, Goldstein & Sayers shall have delivered to WesterN SizzliN
its written opinion substantially to the effect that: (x) the merger will
constitute a reorganization; (y) Austins, Acquisition Sub and WesterN
SizzliN will each be a party to that reorganization; and (z) no gain or
loss for U.S. federal income tax purposes will be recognized by the
holders of WesterN SizzliN common and Series B preferred stock and
warrants upon receipt of shares of Austins common stock in the merger, and
such opinion shall not have been withdrawn or modified in any material
respect;
- Cline, Williams, Wright, Johnson & Oldfather shall have delivered to
WesterN SizzliN its written opinion with respect to the certain
incorporation and authorization matters of Austins;
- the Board of Directors of Austins shall elect nine representatives of
WesterN SizzliN to the Board of Directors of Austins and Acquisition Sub;
and
- Austins shall have effected a one for 3.135 reverse split of its
outstanding common stock.
AUSTINS' CONDITIONS. The obligations of Austins to consummate and effect
the merger are further subject to the receipt of certain closing certificates
and fulfillment of the following conditions, or to the waiver thereof by Austins
before the effective time of the merger:
- the representations and warranties contained in the merger agreement that
are modified by materiality or WesterN SizzliN's Material Adverse Effect
shall be true and correct in all material respects and those that are not
so modified should be true and correct in all material respects on the
date of the merger agreement; Austins shall have performed and complied,
with in all material respects, with all covenants required by the merger
agreement to be performed or complied with by Austins before the effective
time of the merger; and WesterN SizzliN shall have delivered to Austins a
certificate, dated as of the effective time of the merger and signed on
behalf of WesterN SizzliN by its president to both such effects;
- Cline, Williams, Wright, Johnson & Oldfather shall deliver to Austins its
written opinion substantially to the effect that (x) the merger will
constitute a reorganization; (y) Austins, Acquisition Sub and WesterN
SizzliN will each be a party to that reorganization; and (z) Austins will
not recognize any gain or loss for U.S. federal income tax purposes as a
consequence of the merger, and such opinion shall not have been withdrawn
or modified in any material respect; and
- Magee, Foster, Goldstein & Sayers law firm shall have delivered to Austins
its written opinion with respect to the certain incorporation and
authorization matters of WesterN SizzliN.
"Material Adverse Effect" means any effect, change, event, circumstances or
condition which would have material adverse effect on the business, assets,
prospects, condition, financial or otherwise, properties, liabilities or the
results of operations of Austins or WesterN SizzliN, in each case including its
respective subsidiaries together with it taken as a whole, as the case may be.
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REPRESENTATIONS AND WARRANTIES
The merger agreement contains various representations and warranties made by
WesterN SizzliN and Austins relating to, among other things:
- its organization and similar corporate matters;
- the authorization execution, delivery performance and enforceability of
the merger agreement and the absence of conflicts, violations and defaults
under its charter and bylaws and certain other agreements and documents;
- its capitalization;
- the documents and reports filed by Austins with the SEC;
- its financial statements and the accuracy of the information contained
therein;
- the absence of any undisclosed liabilities, contracts or defaults;
- the absence of certain changes and events since a certain date;
- its brokers or investment bankers involved in the transaction;
- its employee benefit plans;
- the absence of investigations and litigation;
- the information provided by it for inclusion in this Proxy
Statement/Prospectus; and
- certain matters relating to taxes.
CERTAIN COVENANTS; CONDUCT OF BUSINESS PRIOR TO THE MERGER
AFFIRMATIVE COVENANTS OF WESTERN SIZZLIN. WesterN SizzliN has agreed that
prior to the effective time of the merger, except as to the extent set forth in
the merger agreement and Austins shall consent in writing, it will:
- conduct its business in the ordinary course and consistent with past
practice use its reasonable business efforts to preserve and keep in tact
its business organization, keep available the services of its officers and
employees and maintain satisfactorily relationships with all persons with
whom it does business;
- permit Austins and its officers and authorized representatives to inspect
its records and to consult with WesterN SizzliN officers, financial
advisors, accountants and attorneys for the purpose of determining the
accuracy of the representations and warranties made by WesterN SizzliN in
the merger agreement and to obtain contracts, agreements, financial and
operating data of Austins; and
- take all commercially reasonable business efforts as may be necessary,
advisable or proper to (i) consummate and make effective, in the most
expeditious manner practicable, the merger and the other transactions
contemplated by the merger agreement; (ii) insure that the representations
and warranties made by it in the merger agreement are true and correct at
the effective time of the merger, (iii) fully perform all covenants made
by it in the merger agreement and (iv) satisfy timely all other
obligations imposed upon it by the merger agreement.
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AFFIRMATIVE COVENANTS OF AUSTINS. Austins has agreed that prior to the
effective date of the time of the merger, except as to the extent set forth in
the Merger Agreement and WesterN SizzliN shall consent in writing, it will:
- conduct its business in the ordinary course and consistent with past
practice use its reasonable business efforts to preserve and keep in tact
its business organization, keep available the services of its officers and
employees and maintain satisfactorily relationships with all persons with
whom it does business;
- permit WesterN SizzliN and its officers and authorized representatives to
inspect its records and to consult with Austins officers, financial
advisors, accountants and attorneys for the purpose of determining the
accuracy of the representations and warranties made by Austins in the
merger agreement and to obtain contracts, agreements, financial and
operating data of Austins;
- take all action reasonably necessary to register the issuance of Austins'
stock to the stockholders of WesterN SizzliN in connection with the merger
under the Securities Act and take any action reasonably required to be
taken under state blue sky or securities laws in connection with the
issuance of the Austins common stock pursuant to the merger and pursuant
to all assumed WesterN SizzliN stock options; and
- take all commercially reasonable business efforts as may be necessary,
advisable or proper to (i) consummate and make effective, in the most
expeditious manner practicable, the merger and the other transactions
contemplated by the merger agreement; (ii) insure that the representations
and warranties made by it in the merger agreement are true and correct at
the effective time of the merger, (iii) fully perform all covenants made
by it in the merger agreement and (iv) satisfy timely all other
obligations imposed upon it by the merger agreement.
NEGATIVE COVENANTS OF WESTERN SIZZLIN AND AUSTINS. Austins and WesterN
SizzliN have agreed with each other that prior to the effective time of the
merger, neither will:
- except as otherwise provided in the merger agreement, amend its
certificate of incorporation or bylaws, consistent with past practice;
- issue, grant, sell, pledge or dispose of any shares or options, warrants,
commitments, subscription or rights of any kind to acquire or sell any
shares of the capital stock except with respect to the exercise of options
or warrants outstanding on the date of the merger agreement, consistent
with past practice;
- declare or pay any dividend on shares of its capital stock or make any
other distribution of assets to the holders thereof, consistent with past
practice;
- sell, transfer, mortgage, pledge or otherwise dispose of or encumber any
of its material assets or properties other than in the ordinary course of
business, consistent with past practice;
- enter into a lease of real property other than in the ordinary course of
business, consistent with past practice;
- increase the compensation of its officers or employees or enter into other
benefit plans other than in the ordinary course of business, consistent
with past practice; and
- create any debt obligations, guarantee or assume any debt, make any
capital expenditures or acquire the stock or assets of or merger with any
other person other than in the ordinary course of business, consistent
with past practice.
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Austins and WesterN SizzliN have each agreed that prior to the effective
time of the merger, they will:
- notify the other party in writing of (i) any event occurring subsequent to
the date of the merger agreement which would render any representation or
warranty of such party contained in the merger agreement untrue or
inaccurate and which would reasonably be expected to result in a Material
Adverse Effect, (ii) any Material Adverse Effect on such party, and (iii)
any material breach by such party of any covenant or agreement contained
in the merger agreement; and
- not take any action or fail to take any action which action or failure to
act would prevent, or would reasonably be likely to prevent, the merger
from qualifying as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986 and will use all reasonable efforts
to obtain the opinion of counsel to such effect.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to the effective
time of the merger, whether before or after the approval and adoption of the
merger agreement and approval of the merger by the stockholders of WesterN
SizzliN:
- by mutual written consent of Austins and WesterN SizzliN;
- by either Austins or WesterN SizzliN if:
- the merger has not been consummated on or prior to August 31, 1999;
- WesterN SizzliN stockholders have not approved the merger agreement;
- a governmental or court authority shall have issued an order ruling in
joining, restraining or prohibiting the consummation of the merger and
the order of decree or ruling shall become final and non-appealable;
- by Austins, if WesterN SizzliN has breached, in any material respect, any
of its representations, warranties, covenants or other agreements
contained in the merger agreement and either the breach or failure to
perform is incapable of being cured or has not been cured within twenty
days after given a written notice to WesterN SizzliN;
- by Austins, if the Board of Directors of WesterN SizzliN shall have
withdrawn or modified in a manner adverse to Austins' approval or
recommendation of the merger;
- by WesterN SizzliN, if Austins has breached, in any material respect, any
of its representations, warranties, covenants or other agreements
contained in the merger agreement and either the breach or failure to
perform is incapable of being cured or has not been cured within twenty
days after given a written notice to Austins;
- by WesterN SizzliN, if the Board of Directors of Austins shall have
withdrawn or modified in a manner adverse to WesterN SizzliN's approval or
recommendation of the merger; and
- by WesterN SizzliN in the event holders of 15% or more of the WesterN
SizzliN common and Series B preferred shares dissent and elect appraisal
rights.
EXPENSES
The merger agreement provides that if the merger is abandoned because the
merger agreement is terminated, all expenses will be paid by the party incurring
them.
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BUSINESS OF THE WESTERN SIZZLIN CORPORATION
GENERAL
As the WesterN SizzliN Corporation, we operate and franchise WesterN SizzliN
and WesterN SizzliN Wood Grill restaurants. We also operate Great American Steak
& Buffet and have franchised 1 Great American Steak & Buffet. We previously
franchised Market Street Buffet & Bakery restaurants. As of April 30, 1999, we
operate:
- 9 WesterN SizzliN restaurants;
- 1 WesterN SizzliN Wood Grill restaurant;
- 10 Great American Steak & Buffet restaurants;
In addition, our 130 franchisees operated 223 WesterN SizzliN, Wood Grill
and Market Street Buffet & Bakery restaurants.
Our restaurants are currently located in the states of Alabama, Arizona,
Arkansas, Colorado, Florida, Georgia, Illinois, Kansas, Kentucky, Louisiana,
Maryland, Mississippi, Missouri, New Mexico, North Carolina, Ohio, Oklahoma,
Pennsylvania, South Carolina, Tennessee, Texas, Virginia and West Virginia.
Our restaurants feature cooked steak, chicken and seafood dishes in a
cafeteria-style line and full service format and offer lunch and dinner and also
feature a buffet that may be ordered as a meal or in addition to a meal.
WesterN SizzliN Wood Grill and Great American Steak & Buffet restaurants
feature a buffet with display wood grill cooking in a full service format that
also offers entree's for lunch and dinner.
Market Street Buffet & Bakery restaurants feature traditional American food
and offer lunch and dinner at a fixed price with unlimited servings of all
buffet items and beverages. All of the restaurant concepts offer buffets and
most have scatter bar buffets providing efficiencies and an easy-to-use format
for guests.
We are actively engaged in expansion and expect to open approximately 40
restaurants in 1999 and 2000.
OPERATING STRATEGY
We have always set guest satisfaction as our first priority. Currently, we
operate under the following trade name concepts:
- WesterN SizzliN-Steak & More
- WesterN SizzliN Wood Grill
- Market Street Buffet and Bakery
- Great American Steak and Buffet Company
We believe that great food and excellent service are the key ingredients for
providing the very best in guest service. Consistently providing high quality,
flavorful food products with both a full line of entree offerings and an
enhanced buffet bar offering can be a challenge. Our goal is not only to meet
this challenge, but to exceed the guest expectation of both quality and service,
and to offer a price point that the guest will perceive as an exceptional value.
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There are several factors necessary for achieving our goal:
- Food Quality:
- Our restaurants use high quality ingredients in all menu offerings.
Additionally, all food preparation is done on premises, by either small
batch or large batch cooking procedures. Guest flow determines which
type will be used.
- We strive to ensure that each recipe is prepared and served promptly to
guarantee maximum freshness, appeal and that proper serving
temperatures are maintained. We believe that our food preparation and
delivery system enables us to produce higher quality and more flavorful
food than is possible in other steak and buffet or cafeteria style
restaurants.
- Menu Selection--Our restaurants emphasize two traditional American style
offerings--two restaurants in-one:
- The first is the traditional family style steakhouse, which became
popular during the 1960's. Since that time, the primary red meat
offering has grown extensively and now includes a vast array of
chicken, pork, seafood and many other protein dishes.
- The second is a full line of both hot & cold food buffet, which has
become a very appealing option for our guests. Our rotating daily menu
offerings, displayed on one of our many scatter bars in the buffet
area, clearly demonstrate our home cooking flavor profile.
We believe that our extensive food offering provides the guest with
delicious variety and a flavorful dining experience that will encourage them to
visit our restaurants time after time.
- Price/Value Relationship--
We are committed to providing our guests with an excellent price to value
alternative to full-service casual dining restaurants and other traditional
steak and buffet restaurants. At our restaurants, the guests are provided with a
choice of many different entree offerings they can also choose to enjoy our
"all-you-care-to-eat" unlimited food or buffet bar offerings. We believe the
perceived price value is excellent, with lunch ranging between $5.00 to $7.00
and dinner ranging between $6.00 to $8.00. Additionally, WesterN SizzliN
restaurants normally offer special reduced prices for senior citizens and
children--age 12 and under.
- WesterN SizzliN Atmosphere--
Our restaurants strive to provide a relaxing, enjoyable dining experience in
a friendly family oriented local atmosphere. This comfortable ambiance is
reinforced by providing a very pleasing and pleasant decor, which features a
variety of decorations, plants and attractive oak furniture packages. Our
restaurants strive to provide a higher level of service than other steak and
buffet style restaurants. Our co-worker training programs place significant
emphasis on developing friendly and helpful restaurant personnel.
- Efficient Food Service and Delivery System--
The WesterN SizzliN scatter bar format, food preparation methods and
restaurant layout are all designed to efficiently serve a large number of
guests, while enhancing the overall quality of the dining experience. In
addition, preparing food in the proper amounts, serving it in several easily
accessible areas (scatter bars) and closely monitoring consumption will shorten
guest lines, increase frequency of table turns, improve over-all quality and
reduce waste--thereby increasing guest satisfaction and restaurant level
profitability.
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UNIT ECONOMICS
We believe that company-owned WesterN SizzliN Steak & More and Great
American Steak and Buffet Company restaurants produce attractive
restaurant-level economics.
The 16 company-owned restaurants were open during the entire fiscal year of
1998. During this period of time, the restaurants generated the following:
<TABLE>
<CAPTION>
<S> <C>
Average net sales:..................................... $ 1,840,000
Average cash flow: (operating income plus
depreciation)........................................ $ 1,220,000
Average operating income:.............................. $ 90,000
</TABLE>
WesterN SizzliN's average cash investment for these 16 restaurants was
approximately $450,000, including building structures (where applicable),
building or leasehold improvements, equipment and fixtures and pre-opening
costs. Restaurant-level economics are affected to the extent that we primarily
convert or remodel existing locations, rather than paying initial developmental
costs for constructing new free-standing buildings. We cannot predict whether
average unit-level economics would be altered significantly, if in the future
the mix of restaurants placed in leased space within existing buildings, as
compared to free-standing buildings on company-owned or leased land, were to
change materially from our current mix.
EXPANSION
We are currently planning to open 40 restaurants during 1999 and 2000. This
will be a combined effort of the Director of Franchised Sales and other regional
franchise field consultants.
CONCEPT AND MENU
THE GREAT AMERICAN STEAK AND BUFFET COMPANY
At Great American Steak and Buffet Company restaurants, guests are greeted
immediately upon entering the restaurant by a host. Then, they are seated with
menus, utensils and introduced to their designated service personnel. All Great
American Steak and Buffet Company restaurants provide full table service through
out the dining experience and payment is made at the cashier station.
The Great American Steak and Buffet Company menu emphasizes traditional
American home cooking and includes a large assortment of fresh vegetables,
casseroles and other great entree selections. Lunch and dinner guests can choose
from ten to twelve entrees, which always include rotisserie and fried chicken,
fried fish, BBQ ribs, baked ham and carved roast beef, turkey or pork. In
addition to these entrees, each meal includes an extensive salad bar that
features fresh seasonal vegetables and fruits, as well as specialty pasta,
seafood, vegetable and fruit salads.
All Great American Steak and Buffet Company restaurants feature a wood
burning grill for display cooking in the dining area. The majority of our meat
entrees are prepared on the wood grill for a distinct mesquite wood flavoring. A
center focal point in our dining rooms includes the display bakery and dessert
bars, which feature freshly baked desserts and muffins. Dessert choices include
pudding, assorted cobblers, cookies, pies and cakes and two flavors of soft
serve frozen dairy desserts.
The Great American Steak and Buffet Company restaurants offer a fixed-price
lunch, dinner and Sunday breakfast, which entitles each guest to unlimited
servings of all buffet items.
- Price range for the lunch buffet: $5.99 to $6.49 (Monday-Friday)
- Price range for the dinner buffet: $7.99 to $8.49
(Monday-Sunday--depending on location)
The dinner buffet is served all day Saturday and Sunday--with the exception
on Sunday, most restaurants serve a breakfast buffet.
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Great American offers reduced prices to children and to senior citizens.
Great American offers a limited menu for lunch and dinner. All menu entrees are
prepared to order and include the cold side salad bar.
<TABLE>
<S> <C>
- - Price range for breakfast buffet: $5.99 to $6.49 (Weekend only):
- - Price range for lunch: $4.99 to $6.49
- - Price range for dinner: $5.99 to $9.99
</TABLE>
THE WESTERN SIZZLIN STEAK AND MORE
WesterN SizzliN Steak and More restaurants offer both the full-service
concept and the traditional line-service restaurants.
The traditional line service restaurant allows the guest to place entree
orders at a designated area of the restaurant, prior to being seated in the
dining area. This method expedites the food production process and the entrees
are immediately placed into production upon ordering. Generally, guests receive
their order within 6 - 8 minutes during lunch and 10 - 12 minutes during dinner.
The traditional WesterN SizzliN Steak and More menu emphasizes the use of
USDA Choice beef--hand cut steaks with our secret Gold
Dust-Registered Trademark- to deliver our unique flavor profile. Most of the
WesterN SizzliN Steak and More restaurants also feature scatter bars and the
display bakery area.
The offerings provide the same high quality, value and flavor profile as
outlined for the Great American menu, with the exception of the number of
entrees available for lunch and dinner. A traditional WesterN SizzliN offers
from five to seven entrees daily on the scatter bars. In addition to these
entrees, the buffet includes a large assortment of fresh vegetables and
casseroles. Also included is an extensive salad bar featuring fresh seasonal
vegetables, fruits, specialty pasta, seafood, vegetable and fruit salads.
WesterN SizzliN Steak and More restaurants also offer fixed-price lunch and
dinner buffets.
<TABLE>
<S> <C>
- - Price range for the lunch buffet: $4.99 to $5.49 (Monday-Friday)
- - Price range for the dinner buffet: $5.99 to $6.99 (Monday-Sunday--depending
on location)
</TABLE>
The dinner buffet is served all day Saturday and Sunday. We offer reduced
prices to children--age 12 and under and to senior citizens.
In addition, we offer a broad variety of menu offerings for lunch and
dinner--featuring Chicken, Seafood, Sandwiches and
FlameKist-Registered Trademark- Steaks. All menu entrees are prepared to order
and may be purchased with the buffet for a discounted price as a "SizzliN Meal
Deal."
<TABLE>
<S> <C>
- - Price range for Lunch: $2.99 to $4.99
- - Price range for Dinner: $3.99 to $10.99
</TABLE>
OUR CONCEPT
The WesterN SizzliN Steak and More and the Great American Steak and Buffet
Company restaurants incorporate scatter bar buffets that feature various buffet
islands located throughout the restaurants' food service areas--instead of the
traditional one or two-sided, cafeteria-style buffet lines. Guests can return
for more food as often as they wish and, due to the scatter bar format,
selection of additional food items will not typically require a guest to wait in
long food lines.
We believe the scatter bar concept enhances the quality of the dining
experience and reduces waste by eliminating the guest's need to take more of any
item than he or she may consume.
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Additionally, restaurant service personnel are assigned to specific dining areas
at all times to provide unlimited guest service throughout the dining
experience.
We strive to differentiate our restaurants from typical steak and buffet or
cafeteria restaurants by maintaining the high quality and distinct flavor
profile of our food offerings.
We specify only top quality ingredients, including fresh seasonal fruits and
vegetables, in our menu offerings and all menu items are prepared at the
individual restaurants. Menu items are prepared by the use of the daily food
prep plan, which is a tool designed to assist managers and prep cooks in
accurately planning the proper amount of food to be used during the course of a
day without under or over producing product. This procedure ensures that all
items are fresh, visually appealing and the best that we can make them.
By serving our core menu items daily, we believe we are able to provide both
variety and consistency to our guests, which encourages repeat visits.
We have developed uniform recipes of specified ingredients and instructions
to ensure consistent quality is achieved in all restaurants. Additionally, we
regularly test new menu items and upgrade ingredients and cooking methods to
improve the quality and consistency of our food. We believe our food preparation
and delivery system enables us to more closely achieve made-to-order quality
than is possible in a traditional steak and buffet restaurant.
RESTAURANT LAYOUT AND DESIGN
A typical WesterN SizzliN restaurant format is approximately 8,000/9,000
square feet with seating for approximately 300 guests. Our restaurants range in
size from 7,000 to 10,000 square feet with seating of approximately 180 to 300
guests. Each restaurant design contains an area suitable for the guest to wait
until seated.
A standardized proto-type design is used in construction, with modifications
made for each particular site. Even though we provide proto-type plans, a local
architect is used to make minor local adjustments to the design. We make our
standardized design available to our franchisees and maintain the final right of
approval on any design changes.
RESTAURANT FOOD DELIVERY
At our restaurants we have three different methods to deliver food to
customers:
- Full Service: the guest is seated by a host and presented with a menu. (A
typical full-service dining experience).
- Modified Line: the guest enters the restaurant, joins a que line and
places an order prior to being seated. After their order is placed, the
guest is seated by a host--The server takes over and the experience is
full-service from that point on.
- Traditional Line Service: our preferred method is full-service, but
several markets have found the modified-line to be more appropriate.
Typically, the restaurant food service area has four to six scatter bars
(buffets) positioned throughout a central area of the restaurant. These buffets
consist of a two to four hot bars, one to two cold bars, dessert bar, including
ice cream machine, and a bakery bar. Beverages are served by the servers.
The food service area is designed to be easily accessible from all seats.
Because the dining area in a WesterN SizzliN restaurant is quite large,
additional area dividers and a combination of table and booth seating are used
to create a more intimate dining experience. Considerable attention is devoted
to lighting and acoustics to allow for a comfortable atmosphere even when the
restaurant is at
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<PAGE>
maximum capacity. In addition to the basic dining room layout, most restaurants
are set up to accommodate banquet business, either by design or by collapsing
curtains which may be opened or closed. In addition to the public areas, each
restaurant has a food preparation and storage area, including a fully equipped
kitchen.
SITE SELECTION AND CONSTRUCTION
In selecting new restaurant locations, we consider target population
density, local competition, household income levels and trade area demographics,
as well as specific characteristics, including visibility, accessibility,
parking capacity and traffic volume. An important factor in site selection is
the convenience of the potential location to both lunch and dinner guests and
the occupancy cost of the proposed site. We also take into account the success
of other chain restaurants operating in the area.
Potential site locations are identified by a potential franchisee and/or
corporate personnel, consultants and independent real estate brokers. Our
executive management will visit and approve or disapprove any proposed
restaurant site. The majority of WesterN SizzliN restaurants are free standing
even though some restaurants are developed in other types of strip centers. We
project that most restaurants will continue to be free standing.
When a WesterN SizzliN restaurant has been built in an existing facility,
renovation and construction has taken approximately 60 to 120 days after the
required construction permits have been obtained. New construction of
free-standing restaurants requires a longer period of time and can range from
120 to 180 days. Also, when obtaining a construction permit, We have generally
experienced a waiting period ranging from approximately 20 to 90 days.
Restaurants are constructed by outside general contractors. We expect to
continue this practice for the foreseeable future. WesterN SizzliN occasionally
serves as its own general contractor and expects to do so in the future when
appropriate.
RESTAURANT OPERATIONS
Restaurant management is under the direction of our Executive Vice President
and Chief Operating Officer. Reporting directly to this position is the Vice
President of Franchise Operations/with seven Franchise Field Consultants and the
Vice President of Company Operations/with seven area supervisors who oversee
staffing, training and restaurant operations in specific geographical areas.
RESTAURANT MANAGEMENT AND EMPLOYEES
The management staff of a typical WesterN SizzliN restaurant consists of one
General Manager, one Assistant General Manager and two Associate Managers.
Individual restaurants typically employ between 40 and 80 non-management hourly
employees (a mix of both part-time and full-time workers), depending on
restaurant size and traffic.
The General Manager of a restaurant has responsibility for the day-to-day
operation of a restaurant and acts independently to maximize restaurant
performance, and is subject to company-established management policies. The
General Manager makes personnel decisions and determines orders for produce and
dairy products, as well as, centrally contracted food items and other supplies.
Our management compensation program includes "bonus" based on restaurant sales
growth and operational profit performance.
RECRUITING
We attempt to attract and train high quality employees at all levels of
restaurant operations. Generally, restaurant management has been recruited from
outside WesterN SizzliN and has had
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significant prior restaurant experience. As we continue to grow, our management
will recruit restaurant management personnel from among non-management
employees.
MANAGEMENT TRAINING
We have implemented strict operating standards. We maintain a strong
standardized training process which plays a critical role in maintaining
operational propriety. All management employees, including Assistant Managers,
regardless of former experience, participate in a six to eight week formal
course of training at one of our three regional training centers. Periodically,
additional training is provided during each calendar year through a series of
two to three day seminars, to provide the most current information on a variety
of topics including sales building techniques, labor controls and food cost
management. Non-management employees are generally trained at the local
restaurant site.
PURCHASING
We contract on 6 or 12-month agreements with vendors and manufacturers for
both corporate restaurants and our franchisee community in order to assure
compliance and consistency from restaurant to restaurant. We scrutinize velocity
reports provided by our distributors looking for opportunities to contract with
manufacturers combining our purchasing power nationwide and secure the lowest
cost of goods. Individual restaurants decide the amount of food inventory they
require and place specific orders several times per week with their distributor
of choice. Individual stores arrange for dairy, bread and produce from local
vendors to be delivered on an "as needed" basis. We are in the process of
setting up a closed distribution program with a national systems distributor to
lower our product distribution cost. When we accomplish these objectives, our
food cost will be lowered by several points. This will be achieved through
economies of scale, reduction in distribution expense and our mutual purchasing
power. As we begin this process we expect to eventually enroll 80% or more of
our restaurants in systems distribution.
REPORTING AND FINANCIAL CONTROLS
We maintain financial and accounting controls for each of our company owned
restaurants. We are in the process of establishing centralized accounting
functions through the use of an integrated Point of Sale system. Several
locations have implemented the system allowing restaurant management to
efficiently manage labor, food costs, and other direct operating expenses that
provides us rapid access to financial data. Each restaurant prepares a mid-month
profit and loss statement, and at the end of the month, operating statements are
prepared for each location by the accounting department. The mid-month and
monthly operating statements are reviewed at both our corporate level and the
restaurant level for variances for expected results to allow for any necessary
corrective actions to be taken as quickly as possible.
HOURS OF OPERATION
Restaurants in the WesterN SizzliN Corporation's system are open seven days
a week, typically from 11:00 a.m. to 10:00 p.m.
FRANCHISE OPERATIONS
In addition to operating company-owned restaurants, We franchise others to
operate WesterN SizzliN and WesterN SizzliN Wood Grill restaurants. We currently
have 145 franchisees operating 223 WesterN SizzliN and WesterN SizzliN Wood
Grill restaurants in 23 states.
Our standard franchise agreement for a "WesterN SizzliN" or a "WesterN
SizzliN Wood Grill" has a 20-year term, with one ten-year renewal option. It
provides for a one-time payment to us of an initial franchise fee and a
continuing royalty fee of 2% of gross sales for a "WesterN SizzliN" and 3% for a
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"WesterN SizzliN Wood Grill". We collect weekly and monthly sales reports from
our franchisees as well as periodic and annual financial statements.
Each franchisee is responsible for selecting the location for its
restaurant, subject to our approval. We consider such factors as demographics,
competition, traffic volume and patterns, parking, site layout, size and other
physical characteristics in approving proposed sites. In addition, all site and
building plans and specifications must be approved by us.
Franchisees must operate their restaurants in compliance with our operating
and recipe manuals. Franchisees are not required to purchase food products or
other supplies through our suppliers, but are required to purchase proprietary
products from us. Each franchised restaurant must have a designated Manager and
Assistant Manager who have completed our six-week manager training program or
who have been otherwise approved by us. For the opening of a restaurant, we
provide consultation and make our personnel generally available to a franchisee.
In addition, we send a team of personnel to the restaurant for up to two weeks
to assist the franchisee and its managers in the opening, the initial marketing
and training effort as well as the overall operation of the restaurant.
We may terminate a franchise agreement for a number of reasons, including a
franchisee's failure to pay royalty fees when due, failure to comply with
applicable laws, or repeated failure to comply with one or more requirements of
the franchise agreement. Many state franchise laws limit our ability to
terminate or refuse to renew a franchise. A franchisee may terminate a franchise
agreement and continue to operate the restaurant by paying liquidated damages to
us. We do not anticipate that the termination of any single franchise agreement
would have a materially adverse effect on our operations. Termination by a
multiple-unit franchisee of several franchise agreements for various locations
could, however, have a materially adverse affect on our operations.
Our franchise agreement contains provisions that prohibit franchisees from
disclosing proprietary information about our restaurant operating system. Our
standard franchise agreement also contains non-competition provisions that, for
the duration of the agreement and for two years following termination, prohibit
a franchisee from directly or indirectly competing with us or soliciting
employees to leave us. There is no assurance that these contractual provisions
will effectively prevent the appropriation by franchisees of business
opportunities and proprietary information. More discussion is contained in the
caption "Government Regulation."
MARKETING AND PROMOTION
Marketing and operations work hand-in-hand at WesterN SizzliN where a shared
mutual vision provides value to the guest through hard work, quality and high
standards. We know that communication plays a strong role in the fulfillment of
our goals.
The Advertising Development and Research Fund financed through vendor
support, corporate contributions and franchise dues is our in-house graphic art
design/marketing agency.
ADRF creates, designs and produces each marketing campaign for us and our
affiliates. Production includes four major marketing campaigns annually in
addition to menus, table tents, posters, indoor and outdoor signage, gift
certificates and other marketing tools.
The marketing effort is communicated through a vast system of printed
materials such as ADRF's corporate newsletter, Internet webpages, training
manuals, tapes and videos,
Our marketing department is nearly self-sufficient in production
capabilities with some of the most sophisticated computer and graphic equipment
available. ADRF is staffed by professionals experienced in all phases of
marketing, graphics / design, and communications. Their efforts have produced
and coordinated promotions that include national sweepstakes campaigns,
television commercials, national convention materials and training videos.
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The coordinated efforts of the ADRF department, area field consultants,
training instructors, corporate personnel, franchise owners, managers and the
entire system of operations share in the ongoing success of its marketing
programs.
RESTAURANT INDUSTRY AND COMPETITION
The restaurant industry is extremely competitive. We compete on the basis of
the quality and value of food products offered, price, service, ambiance and
overall dining experience. Our competitors include a large and diverse group of
restaurant chains and individually owned restaurants, including those that
utilize a buffet format. The number of restaurants with operations generally
similar to ours has grown considerably in the last several years. Because the
discretionary food spending of the American consumer has not grown in recent
years, restaurants such as ours must continually spend money on increased
advertising, food quality and menu upgrading. These factors coupled with the
proliferation of additional competitors may reduce our gross revenues and
adversely affect our profitability. We believe competition among this style of
restaurant is increasing.
In addition, our business is affected by changes in consumer tastes,
national, regional and local economic conditions and market trends. The
performance of individual restaurants may be affected by factors such as traffic
patterns, demographic considerations and the type, number and location of
competing restaurants. Our significant investment in and long-term commitment to
each of our restaurant sites limits our ability to respond quickly or
effectively to changes in local competitive conditions or other changes that
could affect our operations. Our continued success is dependent to a substantial
extent on our reputation for providing high quality and value and this
reputation may be affected not only by the performance of company-owned
restaurants but also by the performance of franchisee-owned restaurants over
which we have limited control.
GOVERNMENT REGULATION
Our business is subject to and affected by various federal, state and local
laws. Each restaurant must comply with state, county and municipal licensing and
regulation requirements relating to health, safety, sanitation, building
construction and fire prevention. Difficulties in obtaining or failure to obtain
required licenses or approvals could delay or prevent the development of
additional restaurants. We have not experienced significant difficulties in
obtaining such licenses and approvals to date.
We are subject to Federal Trade Commission regulation and various state laws
that regulate the offer and sale of franchises. The FTC requires us to provide
prospective franchisees with a franchise offering circular containing prescribed
information about us and our franchise operations. Some states in which we have
existing franchises and a number of states in which we might consider
franchising regulate the sale of franchise. Several states require the
registration of franchise offering circulars. Beyond state registration
requirements, several states regulate the substance of the franchisor-franchisee
relationship and, from time to time, bills are introduced in Congress aimed at
imposing federal registration on franchisors. Many of the state franchise laws
limit, among other things, the duration and scope of noncompetition and
termination provisions of franchise agreements.
Our restaurants are subject to federal and state laws governing wages,
working conditions, citizenship requirements and overtime. From time-to-time
federal and state legislatures increase minimum wages or mandate other
work-place changes that involve additional costs for our restaurants. There is
no assurance that we will be able to pass such increased costs on to our guests
or that, if we were able to do so, we could do so in a short period of time.
TRADEMARKS
We believe our rights in our trademarks and service marks are important to
our marketing efforts and a valuable part of our business. Following are marks
that are registered for restaurant services on
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the Principal Register of the U.S. Patent and Trademark Office: "WesterN
SizzliN", "WesterN SizzliN Steak House", "WesterN", "SizzliN", "WesterN SizzliN
Cow", "WesterN SizzliN Steak & More", "WesterN SizzliN County Fair Buffet and
Bakery", "Flamekist", "Marshall", "Gun Smoke", "Six Shooter", "Big Tex", "Dude",
"Trailblazer", "Ranger", "Cheyenne", "Colt 45", "Cookin' What America Loves
Best" and "Great American Steak and Buffet Company". The WesterN SizzliN
Corporation has applied for registration of the following marks: "WesterN
SizzliN Wood Grill and Buffet" and "WesterN SizzliN Wood Grill".
EMPLOYEES
As of December 31, 1998, we employed approximately 1,115 persons, of whom
approximately 1,000 were restaurant employees, 85 were restaurant management and
supervisory personnel, and 30 were corporate personnel. Restaurant employees
include both full-time and part-time workers and all are paid on an hourly
basis.
CONTINGENCIES
In February 1995, WesterN SizzliN's Board of Directors voted to terminate
with cause the employment of its then president. Subsequent to his termination,
the former president who currently owns more than 10 percent of WesterN
SizzliN's stock, filed suits against WesterN SizzliN and certain officers and
directors asserting a breach of his employment contract, interference with and
inducement of WesterN SizzliN by certain directors contributing to the asserted
breach of contract. The former president also claimed a right to expense
advances and indemnification against losses. These suits sought original damages
against WesterN SizzliN in excess of $1,319,000 in addition to expenses,
reimbursement of legal fees and indemnification against liabilities arising as a
result of these matters. Additionally, the former president sought in excess of
$1,319,000 and punitive damages on each cause of action from the named officers
and directors.
WesterN SizzliN answered and filed counterclaims. The named officers and
directors also filed answers. The answers and counterclaims denied the
allegations of the former president and asserted charges of conflict of
interest, interference with existing business relations and prospective business
advantages and defamation. In its counterclaim, WesterN SizzliN sought
unspecified actual damages as well as punitive damages of $5,000,000. The Board
also approved expense advances to the named officers and directors for their
defense. The named officers and directors may be entitled to indemnification
against any liabilities arising as a result of the lawsuits.
During 1996, the former president filed amended complaints against WesterN
SizzliN, and the named officers and directors seeking additional special
compensatory damages and alleging conspiracy to defraud on the part of the named
officers and directors. The amended complaints sought an additional $8,500,000
in special compensatory damages from WesterN SizzliN and $35,000,000 from each
of the named officers and directors. On January 27, 1997, under motions for
summary judgment, all claims asserted by the former president against the named
officers and directors were dismissed by the lower court. During 1997, WesterN
SizzliN was granted a partial summary judgment from the lower court dismissing
the special compensatory damages claim. Subsequently, an appeal was filed by the
former president, and by order entered on July 1, 1998, the Court of Appeals
reversed the trial court's entry of partial summary judgment in favor of WesterN
SizzliN. Subsequently, the Tennessee Supreme Court declined to accept WesterN
SizzliN's application for permission to appeal. The case has now been returned
to the trial court for a resolution of all the claims asserted against WesterN
SizzliN by the former president in his third amended complaint, including his
claim for special damages.
In September 1997, WesterN SizzliN filed suit against a former franchisee
seeking to recover past due franchise fees. Subsequently, during 1998 the former
franchisee filed a counterclaim against WesterN SizzliN alleging breach of
contract and warranty, fraud, negligence, negligent
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misrepresentation, breach of fiduciary duty, tortious interference, and breach
of the duty of good faith and fair dealing. The suit requests compensatory
damages, treble damages and exemplary damages of not less than $500,000 plus
prejudgment interest and attorney's fees.
We believe that we have substantive defenses against the lawsuits brought by
the former president and its former franchisee. The lawsuits are ongoing and
legal counsel is unable to render an opinion as to the ultimate outcome of these
litigation matters. Our management and our legal counsel will vigorously contest
these matters. We cannot predict the outcome of the litigation, and we are
unable to determine the effect on the consolidated financial statements of
WesterN SizzliN.
In addition to the litigation discussed in the preceding paragraphs, we are
involved in other litigation from time to time during the normal course of our
operations. We do not believe the ultimate outcome of this litigation will have
a material adverse effect on our financial position or our results of
operations. During 1998 and 1997, respectively, we spent $594,072 and $692,194
on legal expenses.
MANAGEMENT AND OTHER INFORMATION
After the consummation of the merger, WesterN SizzliN will be a wholly owned
subsidiary of Austins, and all of WesterN SizzliN's subsidiaries will be
indirect wholly owned subsidiaries of Austins. After the consummation of the
merger, Austins will be managed by the executive officers of WesterN SizzliN and
by a new board of directors comprised of nine representatives selected by
WesterN SizzliN plus Paul C. Schorr, III and Roger D. Sack. Certain information
relating to the management, executive compensation, certain relationships and
related transactions and other related matters pertaining to Austins is set
forth in its 1998 Annual Report on Form 10-KSB which is enclosed with and
included as a part of this Proxy Statement/Prospectus. Certain information
relating to the management, executive compensation, certain relationships and
related transactions pertaining to WesterN SizzliN is contained below.
EXECUTIVE OFFICERS AND DIRECTORS OF WESTERN SIZZLIN
WesterN SizzliN's executive officers and directors and their respective ages
and positions with WesterN SizzliN are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------- --- ---------------------------------------------------------
<S> <C> <C>
Victor F. Foti*+................................. 63 President and Chief Executive Officer and Director
Robert F. Puccio+................................ 61 Vice President, Chief Operating Officer
Robert L. Bass+.................................. 50 Vice President, Franchising
Robyn B. Mabe+................................... 37 Corporate Controller, Secretary/Treasurer
Vicki L. Gardner+................................ 46 Director, Marketing
Anderson Channell+............................... 58 Director, Purchasing
James Carson Quarles*............................ 62 Chairman
Stanley L. Bozeman, Jr.*......................... 43 Director
Jerry D. Gardner*................................ 52 Director
Thomas M. Hontzas*............................... 54 Director
Charles W. Mantooth*............................. 59 Director
Plato Pearson, Jr.*.............................. 74 Director
Clifton Worthington, Jr.*........................ 56 Director
A. Jones Yorke*.................................. 68 Director
</TABLE>
+ Indicates person who will be officers of the combined company.
* Indicates representatives to be elected to Austins and Acquisition Sub
boards.
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VICTOR F. FOTI has been WesterN SizzliN's President and Chief Executive
Officer since March 1, 1995. He has been a Director since May 14, 1997. He was
Director, Secretary, Treasurer and Executive Vice President from December 13,
1993 to March 1, 1995. Mr. Foti became a Certified Public Accountant in June,
1959 and was employed by the certified public accounting firm of Foti, Flynn,
Lowen & Co., P.C. in Roanoke, Virginia from 1976 to July 1, 1997. Mr. Foti has
been a WesterN SizzliN franchisee since July 1, 1986. Mr. Foti has served as
president of the Virginia Society of CPA's; served on the Board of Directors of
the Virginia Society of CPA's and the American Institute of CPA's.
ROBERT F. PUCCIO has been WesterN SizzliN's Executive Vice President and
Chief Operating Officer since March 1, 1999. Mr. Puccio was president and chief
operating officer with J & J Restaurant Group in Lancaster, Pennsylvania from
1996 to 1998. He was executive vice president with Moto Photo, Inc. in Dayton,
Ohio from 1993 to 1996. From 1989 to 1993 Mr. Puccio was president of the Retail
Division of Dole Food Company, after serving as president and chief executive
officer of Dole's House of Almonds subsidiary. Mr. Puccio was president and
chief operating officer for the Orange Julius Corporation in Santa Monica,
California between 1985 and 1989.
ROBERT L. BASS has been Vice President of WesterN SizzliN's Franchised
Operations since August 21, 1995. From 1990 until August 21, 1995, he was a
Regional Management Consultant for WesterN SizzliN and its predecessor. From
1985 until 1990, he was district manager for Golden Corral in Raleigh, North
Carolina.
ROBYN B. MABE has been WesterN SizzliN's Director of Accounting and
Corporate Controller since January 1, 1994. She has been Secretary since May,
1995 and Treasurer since August 13, 1997. Ms. Mabe was also named Treasurer of
ADRF, Inc. in 1996. Ms. Mabe is a Certified Public Accountant with eight years
experience in public accounting and two years experience as a controller prior
to her association with WesterN SizzliN.
VICKI L. GARDNER has been Director of Marketing of WesterN SizzliN since
August 15, 1998.Ms. Gardner was previously employed by Williams Supply Company
in Roanoke, Virginia as Director of Marketing from 1992 to 1998. She was the
previous owner/president of Your Business Connection, Ltd., a publishing firm,
and marketing director for Stone Manor Golf Community. Ms. Gardner is a
published writer and has extensive experience in many areas of television and
radio production.
ANDERSON CHANNELL has been Director of Purchasing for WesterN SizzliN since
October 6, 1997. Mr. Channel was vice president of procurement & marketing with
Alliant Food Services in Richmond, Virginia for three years and was director of
purchasing with Bigger Brothers Food Distributors in Knoxville, Tennessee for 12
years.
JAMES CARSON QUARLES has been a Director of WesterN SizzliN since February
26, 1996 and Chairman of the Board since November 25, 1996. Mr. Quarles retired
as President-Southwestern Region of Central Fidelity National Bank on December
31, 1994, completing a 37 year banking career. He is a member of the board of
directors and chairman of the executive committee of Trigon Healthcare, Inc., a
New York Stock Exchange company and he is a member of the Board of Visitors of
Radford University. Mr. Quarles has served as chairman of the board of
Friendship Manor, Inc., a nursing home and retirement community operation in
Roanoke, Virginia for over 20 years, and in addition, he is currently on the
Board of Directors of five other companies. Among his many past civic and
professional affiliations, he was a past member of the board of directors and
executive committee of the Virginia Bankers Association. Mr. Quarles has been
inducted into the National Business Colleges' Hall of Fame.
STANLEY L. BOZEMAN, JR. has been a WesterN SizzliN's Director since April
12, 1995. Mr. Bozeman has been a WesterN SizzliN franchisee since 1979. He is
presently the owner-operator of a restaurant in
42
<PAGE>
Griffin, Georgia. He is the general and managing partner of Bozeman Properties
Limited Partnership and owner of Stan Bozeman Rental Property Company.
JERRY D. GARDNER has been a WesterN SizzliN Director since May 14, 1998. Mr.
Gardner has been a WesterN SizzliN franchisee since 1976 and is presently the
owner-operator of three restaurants in Fort Smith, Arkansas area. Before
becoming involved in the franchise business, he worked for a certified public
accounting firm, entering private practice in 1973.
THOMAS M. HONTZAS has been a WesterN SizzliN Director since May 14, 1997.
Mr. Hontzas was executive vice president of Deposit Guaranty Corporation in
Columbus, Mississippi, a holding company with banking offices in three states.
He has been with the Deposit Guaranty Corporation since 1968. Mr. Hontzas has
been a WesterN SizzliN franchisee since December 20, 1979.
CHARLES W. MANTOOTH has been a WesterN SizzliN Director since May 14, 1998.
Mr. Mantooth has been a WesterN SizzliN franchisee since 1977 and is presently
the owner-operator of two restaurants in Danville, Virginia.
PLATO PEARSON, JR. has been a WesterN SizzliN Director since November 12,
1996. Mr. Pearson is the past chairman of the board of First Community Bank of
Gastonia, chief executive officer of Citizens National Bank and Independence
National Bank, all in Gastonia, North Carolina. He has been a Director of seven
public companies and past president and director of many civic organizations.
CLIFF WORTHINGTON, JR. has been a WesterN SizzliN Director since May 14,
1997. Mr. Worthington is on the board of trustees of Branch Bank and Trust
Company in Goldsboro, North Carolina. Mr. Worthington has been a WesterN SizzliN
franchisee since 1972 and is presently the owner-operator of restaurants in
Wilson and Goldsboro, North Carolina.
A. JONES YORKE was elected a Western SizzliN Director on May 12, 1999. Mr.
Yorke has been Chairman and a director of Auerbach Financial Group, Inc., an
investment firm in New York City since July 1998. Prior to that, Mr. Yorke
served as a senior officer of Weatherly Securities and Coleman & Company
Securities Corporation. He was previously president of PaineWebber, Inc. and
Executive Director of the Securities and Exchange Commission. Mr. Yorke is also
a director of Davel Communications and AMNEX, Inc.
CLASSES OF DIRECTORS
Directors currently serve for two and three year terms. The Directors are
elected at the Annual Meeting of the Shareholders as terms expire.
43
<PAGE>
BOARD COMMITTEES
We set up a committee system to delegate to smaller working groups of
directors certain roles regarding particular areas of the corporate affairs,
allowing those committee members to gain increased familiarity with their
assigned area, and provide advice or guidance to officers and the management of
the Corporation regarding matters within those particular areas. We have the
following specified committees: Nominations and Governance, Compensation,
Finance and Audit, and Executive Committee.
Each of our Directors receives a fee of $1,000 per meeting, plus expenses.
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth the annual base salary and
bonus paid during the last three fiscal years to our chief executive officer and
the vice presidents.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS
- ------------------------------------------------------------------------------ ------------- ---------- ---------
<S> <C> <C> <C>
Victor F. Foti................................................................ 1998 $ 180,000 $ 81,264
Chief Executive Officer and 1997 160,000 52,596
President 1996 130,000 25,000
Robert L. Bass................................................................ 1998 90,000 20,919
Vice President of Franchise 1997 88,000 17,879
Operations 1996 84,000 6,000
William F. Folsom*............................................................ 1998 80,000 20,919
Vice President of Company 1997 75,000 14,900
Operations 1996 61,600 6,000
</TABLE>
- ------------------------
* Mr. Folsom resigned May 7, 1999.
STOCK OPTION PLAN
We have an Incentive Stock Option Plan for the grant of stock options to
certain of our key employees and our directors.
The Stock Option Plan is administered by the Board of Directors. The Board
will determine the employees who will receive awards under the Stock Option Plan
and the terms of such awards. The award of a stock option entitles the recipient
to purchase a specified number of shares of Common Stock at the exercise price
set by the board. Listed below are the executive officers and directors who have
stock options. All options are currently exercisable at price of $3.00 per
share.
<TABLE>
<CAPTION>
OPTIONS GRANT EXPIRE
NAME GRANTED DATE DATE
- -------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Victor F. Foti.................................................................. 15,000 05/11/94 05/10/04
10,000 05/25/95 12/31/03
5,000 08/12/98 12/31/03
Robert L. Bass.................................................................. 5,000 01/17/94 01/16/04
5,000 01/01/96 12/31/03
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
OPTIONS GRANT EXPIRE
NAME GRANTED DATE DATE
- -------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Robyn B. Mabe................................................................... 1,500 01/01/96 12/31/03
1,500 03/11/98 12/31/03
2,000 08/12/98 12/31/03
Charles W. Mantooth............................................................. 5,000 08/12/98 12/31/03
Plato Pearson, Jr............................................................... 3,000 12/01/96 12/31/03
5,000 11/12/97 12/31/03
2,000 08/12/98 12/31/03
Thomas M. Hontzas............................................................... 5,000 08/12/98 12/31/03
A. Jones Yorke.................................................................. 10,000 05/12/99 05/12/04
Clifton Worthington, Jr......................................................... 5,000 08/12/98 12/31/03
Stanley L. Bozeman, Jr.......................................................... 5,000 08/12/98 12/31/03
--------- --------- ---------
ALL OFFICERS AND DIRECTORS AS A GROUP........................................... 85,000
---------
---------
</TABLE>
CERTAIN TRANSACTIONS
Messrs. Foti, Bozeman, Gardner, Hontzas, Mantooth and Worthington
collectively own franchises with respect to 16 WesterN SizzliN restaurants. The
franchises were granted on the same terms and conditions as franchises to
non-affiliated persons and these gentlemen pay the same royalty advertising and
other cost as any other non-affiliated franchisee.
VF Management, Inc., a corporation owned by Mr. Foti, leases aircraft to
Western SizzliN for corporate useage. Charges are made on an hourly rate
believed to be competitive for aircraft available from non-affiliated vendors.
In 1998 and 1997, Western SizzliN paid VF Management, Inc. $147,772 and $87,464,
respectively.
There are no other affiliated or related transactions between or among the
executive officers of WesterN SizzliN.
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
The following table and notes set forth certain information with respect to
the beneficial ownership of shares of Austins' common stock and WesterN SizzliN
common and Series B preferred stock and warrants as of April 30, 1999 by each
executive officer and director, executive officer of Austins and WesterN SizzliN
and by each person or group who is known to be the beneficial owner of more than
5% of the Austins and WesterN SizzliN common and Series B preferred stock and
warrants outstanding as of April 30, 1999 and the percentage ownership of
Austins' common stock each will own following the completion of the merger.
45
<PAGE>
BENEFICIAL OWNERSHIP (1)
<TABLE>
<CAPTION>
PERCENT OF TOTAL AFTER
AUSTINS NUMBER OF SHARES PERCENT OF TOTAL (%) MERGER (%)
- ---------------------------------------- --------------------- --------------------------- -----------------------
<S> <C> <C> <C>
Paul C. Schorr, III (2) ................ 261,828 30.76 2.17
President, Chief Executive Officer and
Director
Roger D. Sack (3) ...................... 229,804 27.07 1.90
Director
Gregory S. Cutchall (4) ................ 71,770 8.43 0.06
Director
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF TOTAL (%)
--------------------------------- -------------------------------------
WESTERN SIZZLIN COMMON PREFERRED WARRANTS COMMON PREFERRED WARRANTS
- --------------------------------------------- --------- ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Victor F. Foti (5) .......................... 150,000 37,500 28,125 3.41 4.29 7.58
Chief Executive Officer and President
Robert L. Bass (6) .......................... 10,000 -- -- 0.23 -- --
Vice President of Franchise and Operations
Robyn B. Mabe (6) ........................... 5,000 -- -- 0.23 -- --
Secretary/Treasurer
J. Carson Quarles ........................... 10,000 -- -- 0.23 -- --
Director
Stanley L. Bozman, Jr. (7) .................. 105,000 12,500 12,500 2.4 1.43 3.37
Director
Jerry D. Gardner (8) ........................ 105,000 12,500 12,500 2.4 2.86 3.37
Director
Thomas M. Hontzas (9) ....................... 55,000 3,125 1,563 1.59 .36 .42
Director
Charles W. Mantooth (10) .................... 130,000 12,500 25,000 2.98 1.43 6.73
Director
Donald Parks................................. 100,000 62,500 25,000 2.29 7.15 6.73
Clifton Worthington, Jr. (11) ............... 105,000 12,500 -- 2.4 1.43 --
Director
David K. Wachtel, Jr. (12)................... 534,000 150,000 -- 12.24 17.16 --
Titus Greene................................. 655,000 131,000 143,750 15.01 14.98 38.72
Joseph S. Cowart............................. 210,000 125,000 12,500 4.81 14.30 3.37
Thomas Cliett................................ 100,000 68,500 12,500 2.29 7.83 3.37
<CAPTION>
PERCENT OF
TOTAL AFTER
WESTERN SIZZLIN MERGER (%)
- --------------------------------------------- -------------
<S> <C>
Victor F. Foti (5) .......................... 4.82
Chief Executive Officer and President
Robert L. Bass (6) .......................... 0.17
Vice President of Franchise and Operations
Robyn B. Mabe (6) ........................... 0.083
Secretary/Treasurer
J. Carson Quarles ........................... 0.17
Director
Stanley L. Bozman, Jr. (7) .................. 2.32
Director
Jerry D. Gardner (8) ........................ 2.54
Director
Thomas M. Hontzas (9) ....................... 1.06
Director
Charles W. Mantooth (10) .................... 2.98
Director
Donald Parks................................. 3.34
Clifton Worthington, Jr. (11) ............... 2.09
Director
David K. Wachtel, Jr. (12)................... 12.19
Titus Greene................................. 16.57
Joseph S. Cowart............................. 6.19
Thomas Cliett................................ 3.23
</TABLE>
- ------------------------
(1) This table is based upon information supplied by officers, directors and
principal stockholders and stock ownership records of Austins and WesterN
SizzliN. Unless otherwise indicated in the footnotes to this table and
subject to community property laws where applicable, Austins and WesterN
SizzliN believe that each of the stockholders named in this table has sole
voting and investment power with respect to the shares indicated as
beneficially owned. Applicable percentages are based on 844,460 Austin post
split shares, 4,364,000 WesterN SizzliN common shares, 874,375 Series B
preferred shares and 371,250 warrants outstanding on April 30, 1999,
adjusted as required by rules promulgated by the SEC. Percentages after
merger based upon 12,063,710 Austins shares outstanding with the pre-merger
Austins shares reverse split 1 for 3.135.
46
<PAGE>
(2) Shares owned directly by The Schorr Family Company, Inc. of which Paul C.
Schorr, III is the president and chief executive officer.
(3) Includes 13,000 currently exercisable options.
(4) Shares owned by Steele Enterprises/MIHART, Inc. of which Gregory S.
Cutchall is the owner, president and chief executive officer.
(5) Includes 60,000 common and 37,500 preferred shares and 12,500 warrants
owned by VIAMAC, Inc. of which Mr. Foti is president and chief executive
officer and owns a majority of the outstanding stock; 50,000 common shares
and 15,625 warrants owned by H-H Corporation as to which Mr. Foti has
shared voting and investment power, and 30,000 currently exercisable
options.
(6) Represents currently exercisable options.
(7) Includes 5,000 currently exercisable options and 100,000 shares owned
jointly with his wife.
(8) Includes 5,000 currently exercisable options and 100,000 shares owned
jointly with his wife.
(9) Includes 5,000 currently exercisable options and 50,000 shares owned
jointly with his wife.
(10) Includes 5,000 currently exercisable options.
(11) Includes 5,000 currently exercisable options.
(12) Includes 434,000 shares owned by Restaurant Management Services, Inc.
which Mr. Wachtel controls.
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed balance sheet and statement of
operations reflect adjustments to the historical results of Austins and WesterN
SizzliN to give effect to the business combination of these two companies. This
business combination will be accounted for as a reverse acquisition using the
purchase method of accounting in accordance with generally accepted accounting
principles. In the acquisition, the shareholders of the acquired company,
WesterN SizzliN, receives the majority of the voting interests in the surviving
consolidated company. Therefore, WesterN SizzliN will be deemed to be the
acquiring company for financial reporting purposes and accordingly, all the
assets and liabilities of Austins will be recorded at fair value and the
operations of Austins will be reflected in the operations of the combined
company from the date of acquisition.
Pro forma adjustments, and the assumptions on which they are based are
described in the accompanying footnotes to the pro forma condensed financial
statements. The accompanying pro forma condensed balance sheet as of December
31, 1998 contains those pro forma adjustments necessary to reflect the business
combination as if it was consummated on that date. The accompanying pro forma
condensed statement of operations for the year ended December 31, 1998 contains
those pro forma adjustments necessary to reflect the business combination as if
it was consummated on January 1, 1998. The unaudited pro forma condensed
financial statements are based upon the historical financial statements of
Austins and WesterN SizzliN and should be read in conjunction with those
financial statements and notes thereto appearing in Austin's 1998 Form 10-KSB
and elsewhere in this document, respectively. The pro forma condensed financial
statements may not be indicative of actual financial position or results of
operations as of the date and for the period presented, respectively.
47
<PAGE>
AUSTINS
PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------
<S> <C> <C> <C> <C> <C>
WESTERN
AUSTINS SIZZLIN
(HISTORICAL) (HISTORICAL) DEBIT CREDIT PRO FORMA
------------ ------------ --------- --------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................ $ 44,211 643,536 -- 300,000(3) 387,747
Trade accounts receivable, net....................... -- 870,552 -- -- 870,552
Inventories.......................................... 116,490 298,617 -- -- 415,107
Prepaid expenses and other assets.................... 190,926 393,886 -- -- 584,812
Deferred income taxes................................ -- 121,883 -- -- 121,883
------------ ------------ --------- --------- ----------
Total current assets............................... 351,627 2,328,474 -- 300,000 2,380,101
------------ ------------ --------- --------- ----------
Property and equipment, net............................ 2,429,079 7,440,426 -- -- 9,869,505
Franchise royalty contracts, net....................... -- 6,302,954 -- -- 6,302,954
Goodwill and other intangibles, net.................... 530,916 4,718,743 1,563,774(4) -- 6,813,433
Other assets........................................... 782,300 503,247 33,273(5) -- 1,318,820
------------ ------------ --------- --------- ----------
Total assets....................................... $ 4,093,922 21,293,844 1,597,047 300,000 26,684,813
------------ ------------ --------- --------- ----------
------------ ------------ --------- --------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments of obligations under capital
leases and long-term debt.......................... $ 95,817 1,636,884 -- -- 1,732,701
Accounts payable..................................... 753,328 2,186,236 -- -- 2,939,564
Credit line note payable to bank..................... -- 410,868 -- -- 410,868
Accrued expenses and other........................... 162,283 878,805 -- -- 1,041,088
------------ ------------ --------- --------- ----------
Total current liabilities.......................... 1,011,428 5,112,793 -- -- 6,124,221
Obligations under capital leases and long-term debt.... 982,147 5,997,491 -- -- 6,979,638
Note payable to shareholder............................ 269,928 -- -- -- 269,928
Deferred income taxes.................................. -- 378,494 -- -- 378,494
------------ ------------ --------- --------- ----------
Total liabilities.................................. 2,263,503 11,488,778 -- -- 13,752,281
Stockholders' equity................................... 1,830,419 9,805,066 -- 1,297,047(6) 12,932,532
------------ ------------ --------- --------- ----------
Total liabilities and stockholders' equity......... $ 4,093,922 21,293,844 -- 1,297,047 26,684,813
------------ ------------ --------- --------- ----------
------------ ------------ --------- --------- ----------
</TABLE>
See accompanying notes to pro forma condensed financial statements.
48
<PAGE>
AUSTINS
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------
<S> <C> <C> <C> <C> <C>
WESTERN
AUSTINS SIZZLIN
(HISTORICAL) (HISTORICAL) DEBIT CREDIT PRO FORMA
------------ ------------ --------- --------- ----------
Revenue................................................ $ 9,373,647 37,094,347 -- -- 46,467,994
Operating expenses..................................... 9,743,700 34,607,629 104,964(7) -- 44,456,293
------------ ------------ --------- --------- ----------
Income (loss) from operations...................... (370,053) 2,486,718 104,964 -- 2,011,701
------------ ------------ --------- --------- ----------
Other income (expense):
Interest expense..................................... (116,769) (746,012) -- -- (862,781)
Interest income...................................... -- 45,015 -- -- 45,015
Other................................................ -- 179,221 -- -- 179,221
------------ ------------ --------- --------- ----------
(116,769) (521,776) -- -- (638,545)
------------ ------------ --------- --------- ----------
Earnings (loss) before income taxes and extraordinary
item................................................. (486,822) 1,964,942 104,964 -- 1,373,156
Income tax expense..................................... -- 796,151 -- 194,729(8) 601,422
------------ ------------ --------- --------- ----------
Earnings (loss) before extraordinary item.............. $ (486,822) 1,168,791 104,964 194,729 771,734
------------ ------------ --------- --------- ----------
------------ ------------ --------- --------- ----------
Pro forma earnings per share-basic and diluted(9):
Earnings before extraordinary item................. $ 0.06
----------
----------
Weighted average shares outstanding................ 12,063,710
----------
----------
</TABLE>
See accompanying notes to pro forma condensed financial statements.
49
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The unaudited pro forma condensed balance sheet reflects the historical
financial position of Austins and WesterN SizzliN at December 31, 1998, with pro
forma adjustments as if the business combination had taken place on December 31,
1998. The unaudited pro forma condensed statement of operations for the year
ended December 31, 1998 reflects the historical results of operations of Austins
and WesterN SizzliN with pro forma adjustments based on the assumption the
business combination was effective as of January 1, 1998.
(2) DESCRIPTION OF TRANSACTION
Pursuant to the April 30, 1999 Agreement and Plan of Merger between Austins
and WesterN SizzliN, WesterN SizzliN will be merged with and into a wholly owned
subsidiary of Austins. This business combination will be accounted for as a
reverse acquisition using the purchase method of accounting. Upon completion of
the acquisition, the existing Austins and WesterN SizzliN shareholders will own
approximately 7% and 93%, respectively, of the outstanding equity of the
combined company. The purchase price of the business combination is determined
based on the market price of Austin's securities over a reasonable period of
time before and after the two companies reached an agreement on the purchase
price and the proposed transaction was announced. Also included in the purchase
price are the direct costs incurred relating to the acquisition. On February 23,
1999, Austins and WesterN SizzliN signed a letter of intent agreeing on the
purchase price and announced the proposed transaction. The average closing
market price for the five business day period beginning February 19, 1999 and
ending February 25, 1999 for Austins was $1.27. Applying this price per share to
the Austins pre-split common shares issued and including the estimated direct
costs to be incurred as a result of the acquisition of $300,000 resulted in a
deemed purchase price of $3,427,466. The aggregate purchase price of the
acquisition was allocated based upon management's best estimate of the fair
values of identifiable assets and liabilities of Austins at the date of
acquisition as follows:
<TABLE>
<S> <C>
Current assets.................................................. $ 351,627
Property and equipment, net..................................... 2,429,079
Other assets.................................................... 815,573
Favorable lease rights.......................................... 661,121
Goodwill........................................................ 1,353,507
Trademarks...................................................... 80,062
Long-term debt.................................................. (1,077,964)
Current liabilities............................................. (915,611)
Note payable to shareholder..................................... (269,928)
----------
Total........................................................... $3,427,466
----------
----------
</TABLE>
(3) A pro forma adjustment of $300,000 has been made to cash to record the
estimated direct costs to be incurred as a result of the acquisition.
50
<PAGE>
(4) GOODWILL AND OTHER INTANGIBLES
A pro forma adjustment of $1,563,774 has been made to record the value of
goodwill and intangible assets purchased at the date of acquisition. The
adjustment is derived as follows:
<TABLE>
<CAPTION>
CARRYING PRO FORMA
FAIR VALUE VALUE ADJUSTMENT
------------ ---------- -----------
<S> <C> <C> <C>
Adjustment to goodwill and certain intangible assets...................... $ 80,062 530,916 (450,854)
Fair value of favorable lease rights...................................... 661,121 -- 661,121
Goodwill from acquisition................................................. 1,353,507 -- 1,353,507
------------ ---------- -----------
Net adjustment............................................................ 2,094,690 530,916 1,563,774
------------ ---------- -----------
------------ ---------- -----------
</TABLE>
(5) OTHER ASSETS
A pro forma adjustment of $33,273 has been made to record at fair value
other assets acquired at the date of acquisition. The adjustment is derived as
follows:
<TABLE>
<CAPTION>
CARRYING PRO FORMA
FAIR VALUE VALUE ADJUSTMENT
---------- --------- -----------
<S> <C> <C> <C>
Fair value of deposits........................................................ $ 42,843 42,843 --
Fair value of land held for sale.............................................. 547,280 535,039 12,241
Fair value of liquor licenses................................................. 225,450 193,183 32,267
Write-off of previously recorded other assets................................. -- 11,235 (11,235)
---------- --------- -----------
$ 815,573 782,300 33,273
---------- --------- -----------
---------- --------- -----------
</TABLE>
(6) STOCKHOLDERS' EQUITY
A pro forma adjustment has been made to reflect the value of Austins common
shares issued at the acquisition at their fair value of $3,127,466.
(7) OPERATING EXPENSES
A pro forma adjustment to operating expenses of $104,964 has been made to
record the effects of the business combination on amortization expense. The
adjustment is derived as follows:
<TABLE>
<S> <C>
Favorable lease rights (amortized over the life of the leases).................... $ 92,898
Goodwill (amortized over 15 years)................................................ $ 90,234
Less: Amortization expense of previously recorded goodwill
and certain other intangible assets............................................. (78,168)
---------
$ 104,964
---------
---------
</TABLE>
(8) INCOME TAX EXPENSE
A pro forma adjustment of $194,729 has been made to adjust income tax
expense to reflect the tax benefit of Austin's 1998 operating loss for the
consolidated statement of operations. An effective tax rate of 40 percent was
used to show the effect of the pro forma income tax adjustment. There is no pro
forma income tax adjustment related to the amortization of favorable lease
rights and goodwill created as a result of the business combination due to the
nondeductibility of these expenses to the surviving combined company.
51
<PAGE>
(9) PRO FORMA EARNINGS PER SHARE
Prior to the merger, Austin's common stock will reverse-split at 3.135
shares for every one outstanding share. Pursuant to the merger, each share
of WesterN SizzliN common and Series B convertible preferred stock
(4,364,000 and 874,375 shares outstanding at the date of acquisition,
respectively) will automatically be converted into two shares of Austin's
common stock. The Agreement also provides at the effective time of the
merger, WesterN SizzliN common stock purchase warrants will convert into two
shares of Austin's common stock. Warrants to purchase 371,250 shares of
common stock are outstanding at the date of acquisition.
Basic and diluted pro forma earnings per share have been computed by
dividing the pro forma earnings before extraordinary item available to
common shareholders by the weighted average common shares outstanding.
Weighted average shares outstanding for basic and diluted per share include
the assumed conversion of warrants to common stock on the acquisition date.
In addition, the weighted average shares outstanding is adjusted for the
effect of the 1 for 3.135 reverse stock split on Austin's common stock prior
to the acquisition.
The following shows the weighted average shares outstanding for the pro
forma basic and diluted per share computation:
Weighted average common shares:
<TABLE>
<S> <C>
Austins shares.................................................. 844,460
WesterN SizzliN shares.......................................... 10,476,750
WesterN SizzliN warrants........................................ 742,500
---------
12,063,710
---------
---------
</TABLE>
DESCRIPTION OF AUSTINS CAPITAL STOCK
GENERAL
The following description of certain of the provisions of the certificate of
incorporation and bylaws of Austins are general and are not complete. They are
qualified by reference to such documents, which are included as exhibits to the
registration statement of which this Proxy Statement/Prospectus is a part.
AUSTINS COMMON STOCK
Austins is authorized to issue 7,500,000 shares of Austins common stock, par
value $0.01 per share. As of April 30, 1999, there were 2,647,927 shares of
Austins common stock issued and outstanding and approximately 650 beneficial
holders of Austins common stock. The holders of Austins common stock are
entitled to one vote for each share of common stock held on all matters
submitted to a vote of stockholders. The holders of Austins common stock do not
have cumulative voting rights in the election of directors. The holders of
Austins common stock are entitled to receive ratably such dividends, if any, as
may be declared by the Board of Directors of Austins out of legally available
funds. In the event of liquidation, dissolution or winding up of Austins, the
holders of Austins common stock are entitled to share ratably in all assets of
Austins. The holders of Austins common stock have no preemptive, subscription,
redemptive or conversion rights. The outstanding shares are fully paid and
nonassessable.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Austins common stock is First
National Bank of Omaha.
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COMPARATIVE RIGHTS OF AUSTINS AND WESTERN SIZZLIN STOCKHOLDERS
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the merger, holders of WesterN SizzliN common stock will be
exchanging their shares of a Tennessee corporation governed by the Tennessee BCA
and WesterN SizzliN's Charter, as amended, and Bylaws, for shares of Austins, a
Delaware corporation governed by the Delaware General Corporation Law and
Austins' Certificate of Incorporation and Bylaws. Certain significant
differences exist between the rights of WesterN SizzliN stockholders and those
of Austins stockholders. The material differences are summarized below. The
following discussion is necessarily general; it is not intended to be a complete
statement of all differences affecting the rights of stockholders and their
respective entities, and it is qualified in its entirety by reference to the
Tennessee BCA and the Delaware GCL as well as to Austins' Certificate and Bylaws
and WesterN SizzliN's Charter and Bylaws.
AUTHORIZED CAPITAL STOCK
AUSTINS. The Certificate authorizes the issuance of up to 7,500,000
(20,000,000 upon the effective date of the merger) shares of Austins common
stock, par value $0.01, of which 2,647,927 shares were issued as of April 30,
1999, none of which were held as treasury shares. Immediately prior to
consummation of the Merger Austins will effect a reverse stock split, on the
basis of 1 post split share for each 3.135 shares presently outstanding. After
the reverse stock split Austins will have 844,460 shares of Austins common stock
issued and outstanding. Upon the consummation of the merger, Austin's
Certificate of Incorporation will also be amended to increase the authorized
shares to 20,000,000. Austins' Board of Directors may authorize the issuance of
additional shares of Austins common stock without further action by Austins'
stockholders, unless such action is required in a particular case by applicable
laws or regulations or by any stock exchange upon which Austins' capital stock
may be listed. The Certificate does not provide preemptive rights to Austins
stockholders.
The authority to issue additional shares of Austins' capital stock provides
Austins with the flexibility necessary to meet its future needs without the
delay resulting from seeking stockholder approval. The authorized but unissued
shares of Austins common stock will be issuable from time to time for any
corporate purpose, including, without limitation, stock splits, stock dividends,
employee benefit and compensation plans, acquisitions, and public or private
sales for cash as a means of raising capital. Such shares could be used to
dilute the stock ownership of persons seeking to obtain control of Austins. In
addition, the sale of a substantial number of shares of Austins common stock to
persons who have an understanding with Austins concerning the voting of such
shares, or the distribution or declaration of a dividend of shares of Austins
common stock or the right to receive Austins common stock to Austins
stockholders, may have the effect of discouraging or increasing the cost of
unsolicited attempts to acquire control of Austins.
WESTERN SIZZLIN. WesterN SizzliN's authorized capital stock consists of
10,000,000 shares of WesterN SizzliN common stock, par value $1.00. As of April
30, 1999, there were 4,364,000 shares of common stock, no shares of Series A
Convertible Preferred Stock and 874,375 shares of Series B preferred stock
issued and outstanding. WesterN SizzliN also has 371,250 common stock purchase
warrants issued and outstanding.
Pursuant to the Tennessee BCA, WesterN SizzliN's Board of Directors may
authorize the issuance of additional shares of WesterN SizzliN common stock
without further action by WesterN SizzliN's stockholders. WesterN SizzliN's
Charter, as amended, does not provide the stockholders of WesterN SizzliN with
preemptive rights to purchase or subscribe to any unissued authorized shares of
WesterN SizzliN common stock or any option or warrant for the purchase thereof.
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AMENDMENT OF CERTIFICATE OF INCORPORATION OR CHARTER AND BYLAWS
AUSTINS. The Delaware GCL generally provides that the approval of a
corporation's board of directors and the affirmative vote of a majority of (i)
all shares entitled to vote thereon and (ii) the shares of each class of stock
entitled to vote thereon as a class is required to amend a corporation's
certificate of incorporation, unless the certificate specifies a greater voting
requirement. The Certificate of Austins does not require a greater voting
requirement.
The Certificate also provides that the Board of Directors has the power to
adopt, amend, or repeal the Bylaws. Any action taken by the stockholders with
respect to adopting, amending, or repealing any Bylaws may be taken only upon
the affirmative vote of the holders of at least a majority of the outstanding
shares of Austins common stock.
WESTERN SIZZLIN. The Tennessee BCA generally provides that a Tennessee
corporation's charter may be amended by the affirmative vote of a majority of
the shares entitled to vote thereon, unless the charter provides for a higher or
lower voting requirement. WesterN SizzliN's Charter does not include special
provisions relating to amendment of the Charter.
The Board of Directors has the power to adopt, amend, or repeal the Bylaws
by a majority vote, subject to the right of the stockholders by majority vote to
adopt, amend, or repeal the Bylaws by majority vote.
LIMITATIONS ON DIRECTOR LIABILITY
AUSTINS. The Certificate provides that a director of Austins will have no
personal liability to Austins or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability for (i) any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) the payment of certain unlawful dividends and
the making of certain unlawful stock purchases or redemptions, or (iv) any
transaction from which the director derived an improper personal benefit.
Although this provision does not affect the availability of injunctive or
other equitable relief as a remedy for a breach of duty by a director, it does
limit the remedies available to a stockholder who has a valid claim that a
director acted in violation of such director's duties, if the action is among
those as to which liability is limited. This provision may reduce the likelihood
of stockholder derivative litigation against directors and may discourage or
deter stockholders or management from bringing a lawsuit against directors for
breach of their duties, even though such action, if successful, might have
benefitted Austins and its stockholders. The SEC has taken the position that
similar provisions added to other corporations' certificates of incorporation
would not protect those corporations' directors from liability for violations of
the federal securities laws.
WESTERN SIZZLIN. The Tennessee BCA includes similar provisions limiting a
director's liability.
INDEMNIFICATION
AUSTINS. The Certificate provides that Austins will indemnify its officers,
directors, employees, and agents to the full extent permitted by the Delaware
GCL. Under Section 145 of the Delaware GCL as currently in effect, other than in
actions brought by or in the right of Austins, indemnification would apply if it
were determined in the specific case that the proposed indemnitee acted in good
faith and in a manner that person reasonably believed to be in or not opposed to
the best interests of Austins and, with respect to any criminal proceeding, if
person had no reasonable cause to believe that the conduct was unlawful. In
actions brought by or in the right of Austins, indemnification probably would be
limited to reasonable expenses including attorneys' fees and would apply if it
were determined in the specific case that the proposed indemnitee acted in good
faith and in a manner that person reasonably believed to be in or not opposed to
the best interests of Austins, except that no indemnification may be
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made with respect to any matter as to which that person is adjudged liable to
Austins, unless, and only to the extent that, the court determines upon
application that, in view of all the circumstances of the case, the proposed
indemnitee is fairly and reasonably entitled to indemnification for such
expenses as the court deems proper. To the extent that any director, officer,
employee, or agent of Austins has been successful on the merits or otherwise in
defense of any action, suit, or proceeding, as discussed, whether civil,
criminal, administrative, or investigative, that person must be indemnified
against reasonable expenses incurred by that person.
WESTERN SIZZLIN. The Tennessee BCA and WesterN SizzliN's Bylaws provide for
indemnification of its directors, officers, employees, and agents in
substantially the same manner and with substantially the same effect as in the
case of Austins.
ACTIONS BY STOCKHOLDERS WITHOUT A MEETING
AUSTINS. The Certificate provides that any action required or permitted to
be taken by Austins stockholders may be effected by written consent by a
majority of the stockholders.
WESTERN SIZZLIN. Under the Tennessee BCA and WesterN SizzliN's Bylaws, any
action requiring or permitting stockholder approval may be approved by written
consent of stockholders holding all of the shares of WesterN SizzliN common
stock outstanding.
MERGERS, CONSOLIDATIONS, AND SALES OF ASSETS GENERALLY
AUSTINS. The Delaware GCL generally requires the approval of a majority of
the outstanding voting stock of Austins to effect (i) any merger or
consolidation with or into any other corporation, (ii) any sale, lease, or
exchange of all or substantially all of Austins property and assets, or (iii)
the dissolution of Austins. However, pursuant to the Delaware GCL, Austins may
enter into a merger transaction without stockholder approval if (i) Austins is
the surviving corporation, (ii) the agreement of merger does not amend in any
respect Austins' Certificate, (iii) each share of Austins stock outstanding
immediately prior to the effective date of the merger is to be an identical
outstanding or treasury share of Austins after the effective date of the merger,
and (iv) either no shares of Austins common stock and no shares, securities, or
obligations convertible into such stock are to be issued or delivered under the
plan of merger, or the authorized unissued shares or the treasury shares of
Austins common stock to be issued or delivered under the plan of merger plus
those initially issuable upon conversion of any other shares, securities, or
obligations to be issued or delivered under such plan do not exceed 20% of the
shares of Austins common stock outstanding immediately prior to the effective
date of the merger.
WESTERN SIZZLIN. The Tennessee BCA generally requires approval of a
majority of the outstanding shares of a corporation's voting stock to approve a
merger, consolidation, share exchange, sale of all or substantially all of the
corporation's assets, or similar corporate transaction.
BUSINESS COMBINATIONS WITH CERTAIN PERSONS
AUSTINS. Section 203 of the Delaware GCL places certain restrictions on
"business combinations" including, generally, mergers, sales and leases of
assets, issuances of securities, and similar transactions by Delaware
corporations with an "interested stockholder," generally the beneficial owner of
15% or more of the corporation's outstanding voting stock. Section 203 generally
applies to Delaware corporations, such as Austins, that have a class of voting
stock listed on a national securities exchange, authorized for quotation on an
interdealer quotation system of a registered national securities association, or
held of record by more than 2,000 stockholders, unless the corporation expressly
elects in its certificate of incorporation or bylaws not to be governed by
Section 203.
Austins has not specifically elected to avoid the application of Section
203. As a result, Section 203 generally would prohibit a business combination by
Austins or a subsidiary with an interested
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stockholder within three years after the person or entity becomes an interested
stockholder, unless (i) prior to the time when the person or entity became an
interested stockholder, Austins' Board of Directors approved either the business
combination or the transaction pursuant to which such person or entity became an
interested stockholder, (ii) upon consummation of the transaction in which the
person or entity became an interested stockholder, the interested stockholder
held at least 85% of the outstanding Austins voting stock, excluding shares held
by persons who are both officers and directors and shares held by certain
employee benefit plans, or (iii) once the person or entity becomes an interested
stockholder, the business combination is approved by Austins' Board of Directors
and by the holders of at least two-thirds of the outstanding Austins voting
stock, excluding shares owned by the interested stockholder.
WESTERN SIZZLIN. Corporations organized under Tennessee law are generally
subject to the Tennessee Business Combination Act, the Tennessee Control Share
Acquisition Act, the Tennessee Investor Protection Act, and the Tennessee
Greenmail Act.
The Tennessee Business Combination Act provides that a party beneficially
owning 10% or more of the voting power of any class or series of then
outstanding shares entitled to vote generally in the election of directors of a
corporation, defined as an "interested shareholder" cannot engage in a business
combination with the corporation for a period of five years following such
interested shareholder's share acquisition date, unless the transaction either
(i) is approved by at least two-thirds of the voting stock of the corporation
not beneficially owned by such interested shareholder at a meeting called for
such purpose no earlier than five years after such interested shareholder's
share acquisition date or (ii) satisfies certain fairness criteria specified in
the Tennessee BCA. The Tennessee Business Combination Act exempts transactions
with interested shareholders if the transaction is approved by the corporation's
board of directors prior to the time when the person became an interested
shareholder. The Tennessee Business Combination Act also exempts transactions
under certain other circumstances. WesterN SizzliN has not adopted a provision
in its Charter or Bylaws removing WesterN SizzliN from the coverage of the
Tennessee Business Combination Act.
The Tennessee Investor Protection Act imposes certain filing and disclosure
requirements on tender offers and covered share purchases that meet
jurisdictional requirements of the act.
The Tennessee Control Share Acquisition Act generally restricts voting
rights of shares acquired in certain control share acquisitions. Generally, if a
person acquires in one or a series of related transactions an amount of stock
equal to one-fifth or more of all of the voting power of a Tennessee corporation
subject to such provisions in a "control share acquisition," such shares have
only such voting rights as are accorded them by resolution adopted by the
majority of stockholders of the corporation. The TCSAA defines "control shares"
for purposes of such act and establishes the procedures under which an acquiring
person obtains stockholder action with respect to voting rights of control
shares.
The Tennessee Greenmail Act provides that it is unlawful for any Tennessee
corporation which has a class of voting stock registered or traded on a national
securities exchange or registered with the Commission pursuant to Section 12(g)
of the Exchange Act or any subsidiary of such corporation to purchase, directly
or indirectly, any of its shares at a price above the market value of such
shares from any person who holds more than 3% of the class of the securities to
be purchased if such person has held such shares for less than two years, unless
the purchase has been approved by the affirmative vote of a majority of the
outstanding shares of each class of voting stock of the corporation, or,
alternatively, unless the corporation makes an offer of at least equal value per
share to all holders of such class. The TGA does not apply to WesterN SizzliN
since its shares are not registered under Section 12(g) of the Exchange Act.
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DISSENTERS' RIGHTS
AUSTINS. The rights of dissenting stockholders of Austins are governed by
the Delaware GCL. Except as described below, any stockholder has the right to
dissent from any merger of which Austins could be a constituent corporation. No
appraisal rights are available, however, for (i) the shares of any class or
series of stock that is either listed on a national securities exchange, quoted
on the NASDAQ National Market, or held of record by more than 2,000 stockholders
or (ii) any shares of stock of the constituent corporation surviving a merger if
the merger did not require the approval of the surviving corporation's
stockholders, unless, in either case, the holders of such stock are required by
an agreement of merger or consolidation to accept for that stock something other
than: (1) shares of stock of the corporation surviving or resulting from the
merger or consolidation; (2) shares of stock of any other corporation that will
be listed at the effective date of the merger on a national securities exchange,
quoted on the NASDAQ National Market, or held of record by more than 2,000
stockholders; (3) cash in lieu of fractional shares of stock described in clause
(1) or (2) immediately above; or (4) any combination of the shares of stock and
cash in lieu of fractional shares described in clauses (1) through (3)
immediately above. Because the merger need not be approved by the stockholders
of Austins, holders of Austins stock will not have dissenters' rights in
connection with the merger.
WESTERN SIZZLIN. A summary of the pertinent provisions of the Tennessee BCA
pertaining to dissenters' rights is set forth under the caption "The
Merger--Dissenting Stockholders," and the provisions are included as Appendix C.
STOCKHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
AUSTINS. The Delaware GCL provides that a stockholder may inspect books and
records upon written demand under oath stating the purpose of the inspection, if
such purpose is reasonably related to such person's interest as a stockholder.
WESTERN SIZZLIN. Pursuant to the Tennessee BCA, upon written notice of a
demand to inspect corporate records and demonstration of a proper purpose, a
stockholder is entitled to inspect specified corporate records, including
accounting records, minutes of stockholder meetings and certain resolutions
adopted at director meetings, and stockholder records.
DIVIDENDS
AUSTINS. The Delaware GCL provides that, subject to any restrictions in the
corporation's certificate of incorporation, dividends may be declared from the
corporation's surplus, or, if there is no surplus, from its net profits for the
fiscal year in which the dividend is declared and the preceding fiscal year.
Dividends may not be declared, however, if the corporation's capital has been
diminished to an amount less than the aggregate amount of all capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets.
WESTERN SIZZLIN. Pursuant to the Tennessee BCA, a board of directors may
from time to time make distributions to its stockholders, subject to
restrictions in its charter, provided that no distribution may be made if, after
giving it effect, (i) the corporation would not be able to pay its debts as they
become due in the usual course of business, or (ii) the corporation's total
assets would be less than the sum of its total liabilities plus (unless the
charter permits otherwise) the amount that would be needed, if the corporation
were to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of stockholders whose preferential rights
are superior to those receiving the distribution.
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NUMBER, CLASSIFICATION AND REMOVAL OF DIRECTORS
Under the Austins bylaws, the number of directors, which is presently set at
a maximum of eleven, is determined by resolution of the Austins Board of
Directors. Newly created directorships resulting from any increase in the
authorized number of directors and any vacant directorships may be filled by a
majority of the directors then in office. Subject to certain exceptions, any
director or the entire Austins Board of Directors may be removed, with or
without cause, by the holders of a majority of the shares entitled to vote at an
election of directors.
The WesterN SizzliN bylaws authorize the WesterN SizzliN Board of Directors
to fix the number of directors. The number of directors presently authorized is
seven. Newly created directorships resulting from any increase in the number of
directors and any vacancies on the WesterN SizzliN Board of Directors resulting
from death, resignation, disqualification, removal or the failure of
stockholders to elect the entire WesterN SizzliN Board of Directors at a meeting
called for such purpose, shall by filled by the affirmative vote of a majority
of the remaining directors then in office. A director may be removed without
cause only by the affirmative vote of two-thirds of the outstanding shares of
WesterN SizzliN common stock entitled to vote. The provisions relating to the
number, classification and removal of directors contained in WesterN SizzliN's
bylaws may not be altered, amended or repealed without the affirmative vote of
holders of at least 80% of the outstanding shares of WesterN SizzliN common
stock entitled to vote.
VOTING RIGHTS
Neither Austins' nor WesterN SizzliN's charter provides for cumulative
voting rights for the election of directors or otherwise.
POWER TO CALL SPECIAL MEETING
The Austins bylaws provide that a special meeting of stockholders may be
called at any time by the Chairman of the Board, the President, a majority of
the Austins Board of Directors or holders of at least ten percent of the issued
and outstanding stock entitled to vote.
The WesterN SizzliN bylaws provide that a special meeting of the
stockholders may be called by the President or the WesterN SizzliN Board of
Directors at any time. Upon written request of any stockholder or stockholders
holding in the aggregate twenty percent of the voting power, the Secretary shall
call a special meeting to be held not less than thirty-five nor more than sixty
days after the receipt of such request.
STOCKHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
The Austins charter and bylaws contain no provision that would require
greater than a majority of stockholders to approve mergers, consolidations,
sales of a substantial amount of asset or other similar transactions.
The WesterN SizzliN charter provides that in order to effect certain
Business Combinations involving a Related Person or any person affiliated with a
Related Person the affirmative vote of at least two-thirds of the then
outstanding shares of stock voting as a class is required. This provision does
not apply if the Business Combination shall have been (i) approved by a majority
of the directors, or their successors not affiliated with the Related Person or
(ii) certain price and procedure requirements are met.
The specified "Business Combinations" to which the provisions of the WesterN
SizzliN charter apply include (i) any merger or consolidation with a Related
Person or its affiliate, (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition or security arrangement, investment, loan,
advance, guarantee, agreement to purchase, agreement to pay, extension of
credit, joint venture participation or other arrangement, in one transaction or
a series of transactions, for the benefit of a Related Person or its affiliate
involving assets, securities or commitments of WesterN SizzliN, any subsidiary
or any Related Person or its affiliate having a fair market value of $3 million
or more,
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(iii) the adoption of any plan or proposal for the liquidation or dissolution of
WesterN SizzliN, (iv) any reclassification of securities or recapitalization of
WesterN SizzliN that has the effect, directly or indirectly, of increasing the
proportionate share of capital stock beneficially owned by any Related Person or
its affiliate, or (v) any agreement, contract or other arrangement providing for
any of the foregoing.
A "Related Person" is defined as any person who (a) has announced or
publicly disclosed a plan or intention to become the beneficial owner of twenty
percent or more of the voting stock then outstanding or (b) is an affiliate of
WesterN SizzliN and who at any time within the two-year period immediately prior
to the date in question was the beneficial owner of twenty percent or more of
the votes entitled to be cast by holders of all then outstanding voting stock.
ACTION BY WRITTEN CONSENT
The Austins and WesterN SizzliN bylaws both provide that any action
permitted or required by law may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action
taken is signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a stockholder meeting. Prompt notice of the taking of any corporate action
without a meeting by less than unanimous consent shall be given to those
stockholders who have not consented in writing.
AMENDMENTS TO BYLAWS
The Austins bylaws provide that the Austins Board of Directors shall have
the power to adopt, amend and repeal the bylaws, subject to the right of the
stockholders in certain instances to vote with respect to any such amendments.
The WesterN SizzliN bylaws permit the stockholders the right to repeal,
alter or amend the bylaws or adopt new bylaws. The bylaws also authorize the
WesterN SizzliN Board of Directors to repeal, alter or amend the bylaws or adopt
new bylaws, provided that the directors do not make or alter any bylaw fixing
the qualifications, classifications, term of office or compensation of the
directors. The bylaws further provide that the affirmative vote of eighty
percent of the holders of shares entitled to vote for the election of directors
is required to amend certain provisions contained in the bylaws relating to
directors.
INDEPENDENT AUDITORS
It is expected that representatives of KPMG LLP will be present at the
WesterN SizzliN special meeting to respond to appropriate questions of
stockholders and to make a statement if they so desire.
LEGAL MATTERS
The validity of the Austins common stock to be issued in the merger has been
passed upon for Austins by Cline, Williams, Wright, Johnson & Oldfather, Omaha,
Nebraska. Certain tax consequences of the merger have been passed upon for
Austins by Cline, Williams, Wright, Johnson & Oldfather, Omaha, Nebraska and for
WesterN SizzliN by Magee, Foster, Goldstein & Sayers, Roanoke, Virginia.
EXPERTS
The consolidated financial statements included in the Austins 1998 Form
10-KSB, as of December 31, 1998 and 1997 and for the years then ended, have been
included herein in reliance upon the report of KPMG LLP (1998) and
PricewaterhouseCoopers LLP, (1997) independent certified public accountants,
appearing elsewhere herein, and upon the authority of these firms as experts in
accounting and auditing.
The consolidated financial statements of WesterN SizzliN as of December 31,
1998 and 1997 and for each of the years in the three-year period ended December
31, 1998, have been included herein in
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reliance upon the report of KPMG LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION ABOUT AUSTINS
Austins files annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information that the companies file at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms.
Austins' public filings are also available to the public from commercial
document retrieval services and at the Internet web site maintained by the SEC
at http://www.sec.gov. Reports, proxy statements and other information
concerning Austins also may be inspected at the offices of the National
Association of Securities Dealers, Inc., Listing Section, 1735 K Street,
Washington, D.C. 20006.
Austins has filed a Form S-4 Registration Statement to register with the SEC
the offering and sale of the shares of Austins common stock to be issued to
WesterN SizzliN stockholders in the merger. This Proxy Statement/Prospectus is a
part of such registration statement and constitutes a prospectus of Austins and
a proxy statement of WesterN SizzliN for the special meeting.
As allowed by SEC rules, this Proxy Statement/Prospectus does not contain
all the information that stockholders can find in the registration statement or
the exhibits to the registration statement.
The SEC allows Austins to incorporate information into this Proxy Statement/
Prospectus "by reference," which means that the companies can disclose important
information to you by referring you to another document filed separately with
the SEC. Austins hereby incorporates by reference additional documents that
Austins may file with the SEC between the date of this Proxy
Statement/Prospectus and the date of the WesterN SizzliN special meeting. These
include periodic reports, such as Quarterly Reports on Form 10-QSB and Current
Reports on Form 8-K, as well as proxy statements.
Austins has supplied all information contained or incorporated by reference
in this Proxy Statement/Prospectus relating to Austins or Acquisition Sub, and
WesterN SizzliN has supplied all such information relating to WesterN SizzliN.
If you are a stockholder of WesterN SizzliN, you may have received some of
the documents incorporated by reference. You may obtain documents from Austins
or the SEC or the SEC's Internet web site described above. The document
incorporated by reference is available from Austins without charge, excluding
all exhibits unless specifically incorporated by reference as an exhibit in this
Proxy Statement/Prospectus. Stockholders may obtain document incorporated by
reference in this Proxy Statement/ Prospectus by requesting in writing or by
telephone from the appropriate company at the following addresses:
AUSTINS STEAKS & SALOON, INC.
6940 "O" Street, Suite 334
Lincoln, Nebraska 68510
Tel: (402) 464-3456
If you would like to request documents, please do so by June 18, 1999 to
receive them before the special meeting. If you request any incorporated
documents, Austins will mail them to you by first-class mail, or other equally
prompt means, within one business day of receipt of your request.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED, INVOLVED OR INCORPORATED
BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE YOUR WESTERN SIZZLIN
SHARES AT THE WESTERN SIZZLIN SPECIAL MEETING. NO ONE HAS BEEN AUTHORIZED TO
PROVIDE YOU WITH INFORMATION THAT DIFFERS FROM THAT CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS IS DATED JUNE 2, 1999. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND
NEITHER THE MAILING OF THIS PROXY STATEMENT/PROSPECTUS TO STOCKHOLDERS NOR THE
ISSUANCE OF SHARES OF AUSTINS COMMON STOCK IN THE MERGER SHALL CREATE ANY
IMPLICATION TO THE CONTRARY.
60
<PAGE>
THE WESTERN SIZZLIN CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following tables set forth the percentage relationship to total
revenues, unless otherwise indicated, of certain income statement data, and
certain restaurant data for the years indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
<S> <C> <C> <C>
INCOME STATEMENT DATA: 1998 1997 1996
- ----------------------------------------------------------------------------------------- --------- --------- ---------
REVENUES:
Restaurant sales....................................................................... 81.9% 79.5% 76.0%
Franchise royalties and fees........................................................... 16.5 18.3 22.0
Seasoning sales........................................................................ 1.4 1.8 1.6
Other sales............................................................................ 0.2 0.4 0.4
--------- --------- ---------
Total revenues......................................................................... 100.0 100.0 100.0
COSTS AND EXPENSES:
Cost of company-operated stores.......................................................... 65.3 64.3 64.3
Cost of franchise operations............................................................. 8.4 8.9 9.4
Other cost of operations................................................................. 1.1 1.3 1.5
Restaurant operating expenses............................................................ 10.2 9.3 7.8
General and administrative expenses...................................................... 8.3 8.3 9.1
--------- --------- ---------
Income from operations................................................................... 6.7 7.9 7.9
Other income (expense)................................................................... (1.4) (2.6) (4.5)
Income before income tax expense and extraordinary item.................................. 5.3 5.3 3.4
Income tax expense....................................................................... 2.1 2.1 1.5
--------- --------- ---------
Income before extraordinary item......................................................... 3.2 3.2 1.9
Extraordinary loss on debt extinguishment, net of tax.................................... 0.2 -- --
--------- --------- ---------
Net income............................................................................... 3.0% 3.2% 1.9%
--------- --------- ---------
--------- --------- ---------
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------------
<S> <C> <C> <C>
1998 1997 1996
------------ ------------ ------------
RESTAURANT DATA:
Percentage increase (decrease) in comparable Company-operated restaurant
sales................................................................. (3.14) (2.42) 2.23
Number of Company-operated restaurants included in the respective years'
most recent comparable restaurant base................................ 20 16 11
Average sales for Company-owned restaurants included in the respective
year's most recent comparable restaurant base......................... $ 1,841,000 $ 2,327,000 $ 3,016,000
NUMBER OF COMPANY-OPERATED RESTAURANTS:
Beginning of period................................................... 16 11 1
Opened................................................................ 2 1 3
Closed................................................................ 0 0 0
Acquired from franchisee.............................................. 2 4 8
Acquired by franchisees............................................... 0 0 1
------------ ------------ ------------
End of period......................................................... 20 16 11
------------ ------------ ------------
------------ ------------ ------------
NUMBER OF U.S. FRANCHISED RESTAURANTS:
Beginning of period................................................... 229 249 271
Opened................................................................ 11 7 6
Closed................................................................ 13 23 21
Acquired by Company................................................... 2 4 8
Acquired from Company................................................. 0 0 1
------------ ------------ ------------
End of period......................................................... 225 229 249
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
1998 COMPARED TO 1997
REVENUES
Total revenues increased 10.65% to $37.1 million in 1998, from $33.5 million
in 1997. Company-operated restaurant sales increased 14% to $30.4 million in
1998, from $26.7 million in 1997. This increase was primarily due to the
addition of four (4) units during 1998. Comparable sales decreased 3.2% in 1998
over 1997 for Company-operated restaurants open throughout both years.
Franchise operation revenues decreased 0.6% to $6.11 million in 1998, from
$6.15 million in 1997. This decrease was due to a decrease in the number of
franchised units. Comparable sales increased 0.75% in 1998 over 1997 for
franchised restaurants open throughout both years.
COSTS AND EXPENSES
Restaurant cost of sales, consisting of food, beverage and paper costs,
decreased as a percentage of restaurant sales to 45.1% in 1998, from 46.7% in
1997. The primary reason for the decrease is attributable to concentration on
operating margins and matured operations.
Restaurant salaries and related taxes were comparable as a percentage of
restaurant sales for both years: 26.8% in 1998, and 26.2% in 1997. Occupancy
costs increased as a percentage of restaurant sales to 4.9% in 1998 from 4.3% in
1997 as a result of remodeling and property renovations.
Restaurant advertising and related costs increased as a percentage of
restaurant sales to 1.89% in 1998, from 1.0% in 1997 as a result of increased
advertising relating to reopenings of remodeled stores.
62
<PAGE>
General and administrative expenses remained flat as a percentage of total
revenues: 8.3% in 1998 and 1997.
Depreciation and amortization decreased slightly as a percentage of total
revenues to 1.8% in 1998, from 2.0% in 1997 as a result of certain assets being
fully depreciated or amortized prior to or during 1998.
INCOME TAX EXPENSE
Income tax expense reflects a combined current federal and state as well as
deferred income taxes. The Company's effective tax rate was 40.5% in 1998 and
1997.
1997 COMPARED TO 1996
REVENUES
Total revenues increased 12.2% to $33.5 million in 1997, from $29.9 million
in 1996. Company-operated restaurant sales increased 18.0% to $26.7 million in
1997, from $22.6 million in 1996. This increase was primarily due to the
addition of five (5) units during 1997. Comparable sales decreased 2.4% in 1997
over 1996 for Company-operated restaurants open throughout both years.
Franchise operation revenues decreased 6.0% to $6.15 million in 1997, from
$6.5 million in 1996. This decrease was due to a decrease in the number of
franchised units. Comparable sales increased 0.77% in 1997 over 1996 for
franchised restaurants open throughout both years.
COSTS AND EXPENSES
Restaurant cost of sales, consisting of food, beverage and paper costs,
decreased as a percentage of restaurant sales to 46.7% in 1997, from 48.1% in
1996. The primary reason for the decrease is attributable to concentration on
operating margins and matured operations.
Restaurant salaries and benefits decreased as a percentage of restaurant
sales to 27.2% in 1997, from 31.5% in 1996, due to concentration on operating
margins and matured operations.
Restaurant advertising and related costs increased as a percentage of
restaurant sales to 0.8% in 1997, from 0.3% in 1996 due to increased advertising
associated with more Company-operated stores.
General and administrative expenses declined slightly as a percentage of
total revenues to 8.3% in 1997 from 9.0% in 1996 due to a focus on cost control
and maturing operations.
Depreciation and amortization was comparable as a percentage of total
revenues: 2.0% in 1997, and 2.0% in 1996.
INCOME TAX EXPENSE
Income tax expense reflects a combined current federal and state as well as
deferred income taxes. The Company's effective tax rate was 40.5% in 1997 as
compared to 44.4% in 1996.
LIQUIDITY AND CAPITAL RESOURCES
We require capital primarily for the development and acquisition of
restaurants. Capital expenditures of $2.7 million, for 1998, were primarily
funded by cash flow from operations. Cash flows generated by operating
activities were approximately $3.26 million, $3.99 million and $4.08 million in
1998, 1997 and 1996, respectively. Cash flows from operations were the primary
source of capital expenditures and debt repayments during those years.
63
<PAGE>
Total 1999 capital expenditures are expected to be approximately $500,000 to
$1,000,000, primarily for the development or conversion of restaurants. During
1999, we plan to convert two Company-operated restaurants.
Capital resources available at December 31, 1998 include $643,536 of cash
and cash equivalents, and approximately $89,000 available under an existing
$500,000 line of credit. The Company has a working capital deficit of
approximately $2.8 million at December 31, 1998 and expects to fund this
deficit, planned capital expenditures and acquisitions from these resources,
operating cash flows, and lender financing.
YEAR 2000 ISSUE
We utilize management information systems and software technology that may
be affected by Year 2000 issues throughout its operations. During fiscal 1998,
we began to implement plans to ensure those systems continue to meet its
requirement. Our Year 2000 Project is proceeding on schedule. During fiscal
1998, we began by updating the computer systems at the Corporate level. The
Corporate office network was updated at the beginning of 1998. In addition to
the new computers and server, we updated their software to Windows 95. All
accounting and processing software bought during 1998 is "packaged software"
which is certified compliant. The cost of the hardware and software for the
Corporate office was approximately $15,000. The plan for 1999 is to complete the
Year 2000 Project and update the computers at the store level. The total
projected budget for these upgrades is less than $15,000. Similar to the items
purchased for the Corporate office, we are planning to buy or upgrade computers
for each restaurant. All of the "point-of-sale" software at the restaurant level
is also "packaged software" which is certified compliant.
We have also initiated communications with vendors and other third parties
whose computer systems' functionality could impact our operations. Currently
major vendors have responded with favorable confirmation of being Year 2000
compliant. As we are not electronically interfaced with any vendors at this
time, any Year 2000 issues not resolved by our vendors are not anticipated to
have a material impact on our computer systems. Other third parties have
responded that they are also resolving the Year 2000 problem. The credit card
processors understand the Year 2000 issues, and with these communications, we
will facilitate coordination of the Year 2000 solutions and will determine the
extent to which we may be vulnerable to failures of third parties to address
their own Year 2000 issues.
Based on the progress we have made in addressing our Year 2000 issues and
our plan and time line to complete its compliance program, we do not foresee
significant risks associated with its Year 2000 compliance at this time. As our
plan is to address its significant Year 2000 issues prior to being affected by
them, we have not developed a comprehensive contingency plan. However, if we
identify significant risks related to Year 2000 compliance or our progress
deviates form the anticipated time line, we will develop contingency plans as
deemed necessary at that time.
IMPACT OF INFLATION
As inflation has remained at relatively low levels in recent years, we do
not believe inflation has materially affected earnings during the past three
years. Substantial increases in costs, particularly labor, employee benefits or
food costs, could have a significant impact on us.
FORWARD LOOKING STATEMENTS
Certain information contained in this analysis, particularly information
regarding future financial performance and plans and objectives of management,
is forward looking. Certain factors could cause actual results to differ
materially from those expressed in forward looking statements. These factors
include, but are not limited to, our ability and the ability of our franchisees
to obtain suitable locations and financing for new restaurant development; the
hiring, training, and retention of management and
64
<PAGE>
other personnel; competition in the industry with respect to price, service,
location, and food quality; an increase in food cost due to seasonal
fluctuations, weather, and demand; changes in consumer tastes and demographic
trends; changes in federal and state laws, such as increases in minimum wage;
and factors associated with the Year 2000 evaluation and modification.
65
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
The Western Sizzlin Corporation:
We have audited the accompanying consolidated balance sheets of The Western
Sizzlin Corporation and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Western
Sizzlin Corporation and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
February 19, 1999, except for note 5
with respect to the debt waiver letter,
as to which the date is April 16, 1999
F-1
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................ $ 643,536 718,246
Trade accounts receivable, less allowance for
doubtful accounts of $251,397 in 1998 and $190,739
in 1997 (notes 3 and 5)............................ 870,552 901,973
Current installments of notes receivable (notes 3 and
5)................................................. 115,699 118,663
Current installments of lease receivable (notes 3 and
5)................................................. -- 8,579
Other receivables.................................... 76,205 160,517
Inventories (note 5)................................. 298,617 225,201
Prepaid expenses..................................... 201,982 108,917
Deferred income taxes (note 7)....................... 121,883 96,280
------------ ------------
Total current assets............................. 2,328,474 2,338,376
Notes receivable, less allowance for doubtful accounts
of $123,414 in 1998 and $132,131 in 1997, excluding
current installments (notes 3 and 5)................. 172,697 184,474
Property and equipment, net (notes 2, 3 and 5)......... 7,440,426 4,470,660
Franchise royalty contracts, net of accumulated
amortization of $3,151,477 in 1998 and $2,521,181 in
1997................................................. 6,302,954 6,933,250
Goodwill, net of accumulated amortization of $1,179,686
in 1998 and $786,458 in 1997 (note 2)................ 4,718,743 5,111,971
Financing and organization costs, net of accumulated
amortization of $12,145 in 1998 and $624,855 in
1997................................................. 178,158 169,885
Other assets, net (note 9)............................. 152,392 300,576
------------ ------------
$ 21,293,844 19,509,192
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
---------- ----------
<S> <C> <C>
Current liabilities:
Credit line note payable to bank (note 5)........................ $ 410,868 394,000
Current installments of long-term debt (note 5).................. 1,589,928 1,048,656
Current installments of obligations under capital leases (note
6)............................................................. 46,956 47,946
Accounts payable................................................. 2,186,236 1,652,513
Accrued expenses and other....................................... 878,805 1,011,146
---------- ----------
Total current liabilities.................................... 5,112,793 4,154,261
Long-term debt, excluding current installments (note 5)............ 5,915,892 5,623,753
Obligations under capital leases, excluding current installments
(note 6)......................................................... 81,599 114,978
Deferred income taxes (note 7)..................................... 378,494 313,474
---------- ----------
Total liabilities............................................ 11,488,778 10,206,466
---------- ----------
Stockholders' equity (notes 8 and 9):
Convertible preferred stock, series A, $10 par value (involuntary
liquidation preference of $10 per share). Authorized 25,000
shares; none issued and outstanding............................ -- --
Convertible preferred stock, series B, $1 par value (involuntary
liquidation preference of $1 per share). Authorized 875,000
shares; issued and outstanding 874,375 shares.................. 874,375 874,375
Common stock, $1 par value. Authorized 10,000,000 shares; issued
and outstanding 4,339,000 shares in 1998 and 4,639,000 shares
in 1997........................................................ 4,339,000 4,639,000
Additional paid-in capital....................................... 399,961 714,961
Retained earnings................................................ 4,191,730 3,074,390
---------- ----------
Total stockholders' equity................................... 9,805,066 9,302,726
Commitments and contingencies (notes 5, 6, 8, 9 and 10)............
---------- ----------
$21,293,844 19,509,192
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Company-operated stores............................................. $ 30,396,292 26,653,025 22,586,059
Franchise operations................................................ 6,108,504 6,146,601 6,538,526
Other............................................................... 589,551 724,320 599,340
------------- ------------- -------------
Total revenues (notes 3 and 5)................................ 37,094,347 33,523,946 29,723,925
------------- ------------- -------------
Costs and expenses:
Cost of company-operated stores (note 6).......................... 24,238,703 21,544,382 19,122,082
Cost of franchise operations...................................... 3,100,239 2,998,837 2,789,366
Other cost of operations.......................................... 403,149 442,471 429,607
Restaurant operating expenses (note 6)............................ 3,772,553 3,107,482 2,338,352
General and administrative........................................ 3,092,985 2,767,090 2,694,357
------------- ------------- -------------
34,607,629 30,860,262 27,373,764
------------- ------------- -------------
Income from operations........................................ 2,486,718 2,663,684 2,350,161
------------- ------------- -------------
Other income (expense):
Interest expense, including discount amortization
of $27,276, $161,742 and $226,776 in 1998,
1997 and 1996, respectively..................................... (746,012) (1,169,962) (1,521,845)
Interest income................................................... 45,015 24,711 28,566
Other............................................................. 179,221 256,210 153,346
------------- ------------- -------------
(521,776) (889,041) (1,339,933)
------------- ------------- -------------
Income before income tax expense
and extraordinary item...................................... 1,964,942 1,774,643 1,010,228
Income tax expense (note 7)......................................... 796,151 718,150 448,545
------------- ------------- -------------
Income before extraordinary item.............................. 1,168,791 1,056,493 561,683
Extraordinary loss on debt extinguishment (net of
income tax benefit of $31,689) (notes 5 and 7).................... 51,451 -- --
------------- ------------- -------------
Net income.................................................... $ 1,117,340 1,056,493 561,683
------------- ------------- -------------
------------- ------------- -------------
Earnings per share: (note 1 (p))
Income before extraordinary item:
Basic and diluted............................................... .25 .23 .12
Extraordinary item:
Basic and diluted............................................... (.01) -- --
------------- ------------- -------------
Net income:
Basic and diluted............................................... .24 .23 .12
------------- ------------- -------------
------------- ------------- -------------
Basic and diluted weighted average common shares outstanding.... 4,585,575 4,564,205 4,539,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
CONVERTIBLE CONVERTIBLE
PREFERRED PREFERRED ADDITIONAL
STOCK SERIES STOCK SERIES COMMON PAID-IN RETAINED
A B STOCK CAPITAL EARNINGS TOTAL
------------- ------------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995........... $ -- 874,375 4,039,000 10,000 1,456,214 6,379,589
Issuance of common stock in connection
with acquisition (500,000 shares at
$1.86 per share) (note 2)............. -- -- 500,000 430,000 -- 930,000
Issuance of stockholder notes with
detachable stock purchase warrants
(note 9).............................. -- -- -- 137,363 -- 137,363
Net income.............................. -- -- -- -- 561,683 561,683
------ ------------- ----------- ------------ ----------- ------------
Balances at December 31, 1996........... -- 874,375 4,539,000 577,363 2,017,897 8,008,635
Issuance of common stock in connection
with noncompete agreement (100,000
shares at $2.38 per share) (note 9)... -- -- 100,000 137,598 -- 237,598
Net income.............................. -- -- -- -- 1,056,493 1,056,493
------ ------------- ----------- ------------ ----------- ------------
Balances at December 31, 1997........... -- 874,375 4,639,000 714,961 3,074,390 9,302,726
Issuance of common stock in connection
with the purchase of equipment and
leasehold improvements (200,000 shares
at $2.50 per share) (note 4).......... -- -- 200,000 300,000 -- 500,000
Repurchase of common stock (500,000
shares at $2.23 per share) (note 2)... -- -- (500,000) (615,000) -- (1,115,000)
Net income.............................. -- -- -- -- 1,117,340 1,117,340
------ ------------- ----------- ------------ ----------- ------------
Balances at December 31, 1998........... $ -- 874,375 4,339,000 399,961 4,191,730 9,805,066
------ ------------- ----------- ------------ ----------- ------------
------ ------------- ----------- ------------ ----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................................................... $ 1,117,340 1,056,493 561,683
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary loss on debt extinguishment...................... 51,451 -- --
Depreciation and amortization of property and equipment........ 662,301 656,826 582,450
Amortization of discount on debt............................... 27,276 161,742 226,776
Amortization of franchise royalty contracts, goodwill,
financing and organization costs and other assets............ 1,315,689 1,209,783 1,180,217
Provision for bad debts........................................ 143,669 114,572 (9,590)
Provision for deferred taxes................................... 39,417 298,266 6,121
(Gain) loss on sale/disposal of property and equipment......... 4,004 (35,714) 9,120
(Increase) decrease in:
Trade accounts receivable.................................... (205,130) 16,561 405,431
Notes receivable............................................. 116,202 (29,677) (19,251)
Lease receivable............................................. 8,579 18,589 56,251
Other receivables............................................ 75,733 7 (132,765)
Inventories.................................................. (73,416) (36,485) (95,442)
Prepaid expenses............................................. (93,065) 203,670 (45,839)
Other assets................................................. 29,385 157,895 (166,060)
Increase (decrease) in:
Accounts payable............................................. 145,729 128,779 1,335,991
Accrued expenses............................................. (100,652) 72,983 185,079
------------- ------------- -------------
Net cash provided by operating activities.................. 3,264,512 3,994,290 4,080,172
------------- ------------- -------------
Cash flows from investing activities:
Acquisitions, net of cash received (note 2)........................ -- -- (3,789,033)
Additions to property and equipment................................ (2,740,496) (849,886) (1,256,764)
Proceeds from sale of property and equipment....................... 7,000 495,507 --
------------- ------------- -------------
Net cash used in investing activities...................... (2,733,496) (354,379) (5,045,797)
------------- ------------- -------------
Cash flows from financing activities:
Net increase (decrease) in credit line note payable................ 16,868 (102,013) 496,013
Proceeds from long-term debt....................................... 7,250,000 -- 3,558,250
Payments on long-term debt and capital leases...................... (6,567,291) (3,127,225) (2,948,633)
Financing costs.................................................... (190,303) -- (10,192)
Repurchase of common stock......................................... (1,115,000) -- --
------------- ------------- -------------
Net cash provided by (used in) financing activities........ (605,726) (3,229,238) 1,095,438
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents....... (74,710) 410,673 129,813
Cash and cash equivalents at beginning of the year................... 718,246 307,573 177,760
------------- ------------- -------------
Cash and cash equivalents at end of the year......................... $ 643,536 718,246 307,573
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF BUSINESS AND PRINCIPLES OF CONSOLIDATION
The Western Sizzlin Corporation (the "Company") is a franchisor and operator
of restaurants. At December 31, 1998, the Company had 246 franchises and
company-operated stores operating in 24 states. The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries, The Western Sizzlin Stores, Inc., Western Sizzlin Stores of Little
Rock, Inc. and Western Sizzlin Stores of Louisiana, Inc. All significant
intercompany accounts and transactions have been eliminated in consolidation.
(B) CASH EQUIVALENTS
Cash equivalents of $1,120,273 consist of overnight repurchase agreements at
December 31, 1998. The Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash equivalents.
(C) NOTES RECEIVABLE
Notes receivable are recorded at cost, less an allowance for impaired notes
receivable. Management, considering current information and events regarding the
borrowers' ability to repay their obligations, considers a note receivable to be
impaired when it is probable that the Company will be unable to collect all
amounts due according to the contractual terms of the note agreement. When a
note receivable is considered to be impaired, the amount of the impairment is
measured based on the present value of expected future cash flows discounted at
the note's effective interest rate. Impairment losses are included in the
allowance for doubtful notes receivable through a charge to bad debt expense.
Interest income on impaired notes is recognized on the cash basis.
(D) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market and consist primarily of food, beverages and restaurant supplies.
(E) PREPAID EXPENSES
At December 31, 1997, prepaid expenses include preopening costs incurred
prior to a restaurant opening and were being amortized over a 12-month period
commencing with the date the restaurant opens. All preopening costs were fully
amortized in 1998.
(F) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated on the
straight-line basis over the following estimated useful lives: buildings and
improvements--15 to 40 years; furniture, fixtures and equipment--3 to 10 years.
Property and equipment under capital leases and leasehold improvements are
generally amortized over the shorter of the asset's estimated useful life or the
lease term. If the estimated useful life of a leasehold improvement exceeds the
lease term and the lease allows for a renewable term and the Company intends to
renew the lease, the estimated useful life of the leasehold improvement is used
for amortization purposes. Gains or losses are recognized upon the disposal of
F-7
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
property and equipment and the cost and the related accumulated depreciation and
amortization are removed from the accounts. Maintenance, repairs and betterments
which do not enhance the value of or increase the life of the assets are
expensed as incurred.
(G) FRANCHISE ROYALTY CONTRACTS
Franchise royalty contracts are amortized on a straight-line basis over
fifteen years, the estimated average life of the franchise agreements. The
Company assesses the recoverability of this intangible asset by determining
whether the amortization of the franchise royalty contracts balance over their
remaining life can be recovered through undiscounted future operating cash flows
of the acquired operation. The amount of impairment, if any, is measured based
on projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds.
(H) GOODWILL
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over fifteen years,
the expected period to be benefited. The Company assesses the recoverability of
this intangible asset by determining whether the amortization of the goodwill
balance over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired operation. The amount of goodwill
impairment, if any, is measured based on projected discounted future operating
cash flows using a discount rate reflecting the Company's average cost of funds.
The assessment of the recoverability of goodwill will be impacted if estimated
future operating cash flows are not achieved.
(I) FINANCING AND ORGANIZATION COSTS
Financing and organization costs consist principally of expenses incurred to
obtain financing for the acquisition of the Company and other expenses incurred
with the organization of the Company. Financing costs are being amortized on the
straight-line method over the life of the loan and organization costs were being
amortized on the straight-line method over five years. Organization costs were
fully amortized in 1998.
(J) OTHER ASSETS
Other assets include the value of a noncompete agreement established in
connection with the Company leasing five additional stores (see note 9). This
cost is being amortized on the straight-line basis over two years, the term of
the noncompete agreement.
(K) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the
F-8
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
carrying amount of the assets exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell.
(L) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(M) FRANCHISE REVENUE
Initial franchise fees are recognized when all material services have been
substantially performed by the Company and the restaurant has opened for
business. Franchise royalties, which are based on a percentage of monthly sales,
are recognized as income on the accrual basis. Costs associated with franchise
operations are recognized on the accrual basis. The president and certain
members of the board of directors are also franchisees. As franchisees these
individuals have transactions from time to time with the Company, including
payments for franchise fees, during the normal course of business.
(N) STOCK OPTION PLAN
Prior to January 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1996, the Company adopted SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income disclosures
for employee stock option grants as if the fair-value-based method defined in
SFAS No. 123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosures under
SFAS No. 123.
(O) SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid approximately $719,000, $947,000 and $1,295,000 in cash for
interest and $936,000, $508,000 and $683,000 in cash for income taxes during
1998, 1997 and 1996, respectively. Noncash transactions for 1998 include capital
lease obligations for equipment of $14,581, write-offs of accounts and notes
receivable of $91,728, transfers between accounts receivable and notes
receivable of $119,372, equipment purchases included in accounts payable of
$387,994 and the issuance of 200,000 shares of common stock with an estimated
value of $500,000 in connection with the purchase of equipment and leasehold
improvements (see note 4). Noncash transactions for 1997 include capital
F-9
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
lease obligations for equipment totaling $113,986, write-offs of accounts and
notes receivable of $160,515, transfers between accounts receivable and notes
receivable of $100,045 and the issuance of 100,000 shares of common stock with
an estimated value of $237,598 under provisions of a noncompete agreement (see
note 9). Noncash transactions for 1996 include capital lease obligations for
equipment totaling $77,256, write-offs of accounts and notes receivable of
$136,597, 500,000 shares of common stock with an estimated value of $930,000
issued in conjunction with an acquisition and detachable stock purchase warrants
with an estimated value of $137,363 issued in connection with notes payable to
stockholders.
(P) EARNINGS PER SHARE
Basic earnings per share excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the Company. Stock
options for shares of common stock were not included in computing diluted
earnings per share because these effects are anti-dilutive. Convertible
preferred stock convertible into 874,375 shares of common stock and warrants for
371,250 of common stock also are not included in computing diluted earnings per
share since the conditions for their issuance, such as an initial public
offering or registration of the Company's common stock, have not taken place.
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations for the years indicated:
<TABLE>
<CAPTION>
BASIC AND
WEIGHTED DILUTED
INCOME AVERAGE EARNINGS
(LOSS) SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- -----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Income before extraordinary item......................................... $ 1,168,791 4,585,575 $ .25
Extraordinary item....................................................... (51,451) 4,585,575 (.01)
------------ -----
Net income............................................................... $ 1,117,340 4,585,575 $ .24
------------ ------------- -----
------------ ------------- -----
YEAR ENDED DECEMBER 31, 1997
Income before extraordinary item......................................... $ 1,056,493 4,564,205 $ .23
------------ -----
Net income............................................................... $ 1,056,493 4,564,205 $ .23
------------ ------------- -----
------------ ------------- -----
YEAR ENDED DECEMBER 31, 1996
Income before extraordinary item......................................... $ 561,683 4,539,000 $ .12
------------ -----
Net income............................................................... $ 561,683 4,539,000 $ .12
------------ ------------- -----
------------ ------------- -----
</TABLE>
F-10
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(Q) USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
(R) RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 and 1996 consolidated
financial statements to conform to the 1998 presentation.
(2) ACQUISITIONS
Effective January 1, 1996, the Company acquired certain assets and assumed
certain liabilities related to six stores owned by a current franchisee, the
Clark-Ellis Group. The total purchase price for the acquisition was
approximately $6.8 million and included a combination of $2.9 million of cash,
$3.0 million of debt and 500,000 shares of common stock with an estimated fair
value of $930,000. The estimated fair value of the common stock as determined by
an independent investment banker was approximately $1.86 per share. In addition,
the Company acquired a store from another franchisee with a total cash purchase
price of approximately $900,000 and this transaction was also effective January
1, 1996. These acquisitions have been accounted for under the purchase method of
accounting and, accordingly, the results of operations of the acquired
enterprises are included in the consolidated financial statements from the
effective date of the acquisitions. The goodwill arising as a result of the
excess of the purchase price over the fair market value of the net assets
acquired is a result of the Clark-Ellis transaction and is being amortized on
the straight-line method over 15 years.
The following table summarizes these acquisitions:
<TABLE>
<S> <C>
Purchase price......................................... $ 7,730,833
-----------
-----------
Cash................................................... $ 11,800
Accounts receivable.................................... 20,714
Inventory.............................................. 81,277
Prepaid expenses and other assets...................... 175,722
Property and equipment................................. 2,564,345
Accounts payable and accrued expenses.................. (71,454)
Notes payable.......................................... (950,000)
-----------
Net assets acquired (estimated fair value)..... $ 1,832,404
-----------
-----------
Excess of purchase price over fair value of net assets
acquired (goodwill).................................. $ 5,898,429
-----------
-----------
</TABLE>
The 500,000 shares of common stock with an estimated fair value of $1.86
issued in the Clark-Ellis transaction were reacquired by the Company in October
1998 for $2.23 per share.
F-11
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(3) ACCOUNTS AND NOTES RECEIVABLE
The activity in the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Allowance for doubtful accounts:
Beginning of year........................................................... $ 322,870 368,813 515,000
Provision for bad debts..................................................... 143,669 114,572 (9,590)
Accounts and notes receivable written off................................... (91,728) (160,515) (136,597)
---------- ---------- ----------
End of year............................................................. $ 374,811 322,870 368,813
---------- ---------- ----------
---------- ---------- ----------
Allowance for doubtful accounts allocated to:
Accounts receivable......................................................... $ 251,397 190,739 186,212
Notes receivable............................................................ 123,414 132,131 182,601
---------- ---------- ----------
$ 374,811 322,870 368,813
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The Company has various notes receivable from franchisees for amounts due
under franchise agreements. The recorded investment in notes receivable for
which an impairment has been recognized and the related allowance for doubtful
accounts were $411,810 and $123,414, respectively, at December 31, 1998,
$435,268 and $132,131, respectively, at December 31, 1997. The average recorded
investment in impaired notes was approximately $424,000, $451,000 and $456,000
during 1998, 1997 and 1996, respectively.
The Company's franchisees and Company-operated stores are not concentrated
in any specific geographic region, but are concentrated in the family steak
house business. No single franchisee accounts for a significant amount of the
Company's franchise revenue, and there were no significant accounts or notes
receivable from a single franchisee at December 31, 1998 or 1997. The Company
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of specific franchisees, historical collection trends and other
information. Generally, the Company does not require collateral to support
receivables.
(4) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 and 1997 consists of the
following:
<TABLE>
<CAPTION>
1998 1997
------------ ----------
<S> <C> <C>
Land and improvements.................................................................. $ 300,000 300,000
Buildings and improvements............................................................. 400,000 400,000
Furniture, fixtures and equipment...................................................... 3,657,565 2,728,794
Leasehold improvements................................................................. 5,195,406 2,541,434
------------ ----------
9,552,971 5,970,228
Less accumulated depreciation and amortization..................................... 2,112,545 1,499,568
------------ ----------
$ 7,440,426 4,470,660
------------ ----------
------------ ----------
</TABLE>
F-12
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(4) PROPERTY AND EQUIPMENT (CONTINUED)
On September 18, 1998, the Company assumed an existing lease of a store from
a franchisee. The purchase price for the store's equipment and leasehold
improvements was $700,000 and included a combination of $200,000 of cash and
200,000 shares of common stock with an estimated fair value of $500,000. The
$2.50 per share fair market value assigned to the common stock was based on
negotiations between the Company and the seller, a related party who owns more
than 10 percent of the Company's stock, and the Company's consideration of the
estimated fair market value of the stock. The Company has an option until
September 17, 2000 to buy back the stock for $500,000 which is based on $2.50
per share. From September 17, 2000 until September 17, 2002, the Company has an
option to buy back the stock at increasing purchase prices ranging from $600,000
($3.00 per share) to $700,000 ($3.50 per share).
(5) DEBT
Long-term debt at December 31, 1998 and 1997 consists of the following:
<TABLE>
<CAPTION>
1998 1997
------------ ----------
<S> <C> <C>
Notes payable to finance company with interest rates ranging from 9.82% to 10.07% due
in equal monthly installments, including principal and interest, ranging from $5,395
to $17,182, with final payments due from April 1, 2005 through April 1, 2013;
collateralized by real property, accounts receivable, inventory and furniture,
fixtures and equipment............................................................... $ 6,005,556 --
$750,000 note payable to bank, bearing interest at the prime rate (7.75% at December
31, 1998), due March 31, 1999; collateralized by accounts receivable and the
assignment of franchise royalty contracts............................................ 750,000 --
$300,000 term note payable to stockholder, bearing fixed interest at 10%, principal
balance including accrued interest due on or before March 14, 1999; collateralized by
the assignment of franchise revenues................................................. 300,000 --
12% notes payable to stockholders with effective interest rate of 18.4% due in equal
monthly installments of $157,268 including principal and interest, with final payment
due January 1, 1999; collateralized by the assignment of franchise revenues; paid in
full during 1998..................................................................... -- 1,890,690
Less unamortized discount............................................................ -- 46,146
------------ ----------
-- 1,844,544
12% notes payable to stockholders with effective interest rate of 13.82% due in equal
monthly principal installments of $17,470 (49,500 in 1997 before refinance in 1998),
with final payment due February 1, 2001; collateralized by the assignment of
franchise revenues; approximately $1.2 million refinanced during 1998................ 436,769 1,885,039
Less unamortized discount............................................................ -- 55,606
------------ ----------
436,769 1,829,433
</TABLE>
F-13
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(5) DEBT (CONTINUED)
<TABLE>
<CAPTION>
1998 1997
------------ ----------
<S> <C> <C>
$1,000,000 term notes, bearing fixed interest rates of 12%, monthly payments of
interest only; $50,000 principal due February 1997 and remainder due February 2001;
collateralized by property and equipment of stores acquired; paid in full during
1998................................................................................. $ -- 950,000
$2,000,000 promissory notes, bearing fixed interest rates of 12%, due in monthly
principal installments of $33,333 through January 2001; collateralized by property
and equipment of stores acquired; paid in full during 1998........................... -- 1,233,333
Various notes payable to banks with interest rates ranging from 8.75% to 9.25% due in
monthly installments ranging from $2,917 to $9,584, including principal and interest,
due November 1998 through January 2011; collateralized by real property, accounts
receivable, inventory, furniture and fixtures, and equipment; paid in full during
1998................................................................................. -- 785,007
Various notes payable to finance company with interest rates ranging from 8.9% to 9.9%
due in monthly installments ranging from $379 to $491 including principal and
interest, due in October 1999 through December 1999; collateralized by vehicles...... 13,495 30,092
------------ ----------
Total long-term debt, net of unamortized discount.................................. 7,505,820 6,672,409
Less current installments, net of current portion of unamortized discount of $-0- and
$75,425 in 1998 and 1997, respectively............................................. 1,589,928 1,048,656
------------ ----------
Long-term debt, net of unamortized discount, excluding current installments........ $ 5,915,892 5,623,753
------------ ----------
------------ ----------
</TABLE>
F-14
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
On March 31, 1998, the Company completed financing agreements to replace
certain notes payable to stockholders, term notes, promissory notes and notes
payable to banks. The refinancing resulted in a loss of $83,140 before income
tax benefit, which included write-offs of $74,476 of the unamortized discounts
and $8,664 in deferred financing costs.
The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1998 and years thereafter are as follows: 1999,
$1,589,928; 2000, $559,352; 2001, $403,513; 2002, $426,159; 2003, $470,445 and
years thereafter, $4,056,423.
During 1998, the Company replaced its existing line of credit with a
$500,000 secured line of credit from a commercial bank payable on demand,
bearing interest at the bank's prime rate which approximated 7.75 percent at
December 31, 1998, subject to annual renewal by the bank, and collateralized by
accounts receivable and the assignment of franchise royalty contracts.
Borrowings outstanding under the line of credit at December 31, 1998 were
$410,868.
The notes payable to finance company referred to above with a balance of
$6,005,556 at December 31, 1998 contains certain restrictive covenants including
debt coverage ratios and periodic reporting requirements. In addition, certain
subsidiaries are restricted from transferring assets or paying dividends to The
WesterN SizzliN corporation without obtaining the prior written consent of the
lender. The net assets of these subsidiaries subject to such restriction
approximated $789,000 of consolidated net assets at December 31, 1998. At
December 31, 1998, the Company was not in compliance with the debt coverage
ratio related to one store. A letter was obtained from the finance company dated
April 16, 1999, which waived such noncompliance through February 15, 2000.
(6) LEASES
The Company is obligated under various leases for offices, Company-operated
stores and equipment. The following schedule summarizes equipment under leases
that have been accounted for as capital leases and are included in property and
equipment in the accompanying consolidated balance sheets:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Equipment.............................................................. $ 199,927 199,577
Less accumulated amortization.......................................... 62,684 33,391
---------- ---------
Equipment under capital leases, net................................ $ 137,243 166,186
---------- ---------
---------- ---------
</TABLE>
F-15
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(6) LEASES (CONTINUED)
At December 31, 1998, minimum rental payments due under capital and
operating leases are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------- ------------
<S> <C> <C>
1999................................................................ $ 51,065 1,843,273
2000................................................................ 48,162 1,772,569
2001................................................................ 36,316 1,759,436
2002................................................................ 17,679 1,682,810
2003................................................................ -- 1,284,608
Subsequent years.................................................... -- 4,832,725
---------- ------------
Total minimum lease payments................................ 153,222 13,175,421
------------
------------
Imputed interest (rates ranging from 7% through 10%)................ 24,667
----------
Present value of net minimum lease payments................. 128,555
Less current installments of obligations under capital leases..... 46,956
----------
Obligations under capital leases, excluding current
installments.............................................. $ 81,599
----------
----------
</TABLE>
Total rent expense under operating leases for 1998, 1997 and 1996
approximated $1,579,000, $1,284,000 and $996,000, respectively. Taxes, insurance
and maintenance expenses relating to all leases are obligations of the Company.
The Company leases the location of one of its stores from a partnership, one
of whose partners is the former president of the Company. The operating lease
term is 20 years and calls for rental payments of approximately $86,190 per
year. In addition, the Company leases chartered air service from time to time
from a company owned by the president of the Company. The total expenses for
chartered air service was approximately $147,800, $87,500 and $42,900 for 1998,
1997 and 1996, respectively.
The Company currently has management agreements for the operation of two
properties. Future minimum payments to be received under these management
agreements for each of the five years subsequent to December 31, 1998 and years
thereafter are as follows: 1999, $96,000; 2000, $96,000; 2001, $96,000; 2002,
$104,000; 2003, $104,000 and years thereafter, $511,000.
F-16
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(7) INCOME TAXES
Income tax expense for the years ended December 31, 1998 and 1997 consists
of the following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
---------- --------- ---------
<S> <C> <C> <C>
Year ended December 31, 1998:
Federal....................................................................... $ 646,618 26,749 673,367
State......................................................................... 110,116 12,668 122,784
---------- --------- ---------
$ 756,734 39,417 796,151
---------- --------- ---------
---------- --------- ---------
Year ended December 31, 1997:
Federal....................................................................... $ 329,189 281,241 610,430
State......................................................................... 90,695 17,025 107,720
---------- --------- ---------
$ 419,884 298,266 718,150
---------- --------- ---------
---------- --------- ---------
Year ended December 31, 1996:
Federal....................................................................... $ 376,570 5,154 381,724
State......................................................................... 65,854 967 66,821
---------- --------- ---------
$ 442,424 6,121 448,545
---------- --------- ---------
---------- --------- ---------
</TABLE>
Income tax expense differs from the amount computed by applying the
statutory corporate tax rate of 34 percent to income before income tax expense
and extraordinary item as follows for the years ended December 31, 1998, 1997
and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
Expected income tax expense..................................................... $ 668,080 603,378 343,478
State income tax, net of federal income tax benefit............................. 77,900 71,095 44,102
Nondeductible goodwill.......................................................... 16,547 16,547 16,547
Other........................................................................... 33,624 27,130 44,418
---------- --------- ---------
$ 796,151 718,150 448,545
---------- --------- ---------
---------- --------- ---------
</TABLE>
The Company recognized an extraordinary loss on debt extinguishment of
$51,451 net of the related income tax benefit of $31,689.
F-17
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(7) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1998 and 1997 are presented below:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance for doubtful
accounts........................................................... $ 121,883 96,280
Other................................................................ 48,854 9,771
---------- ---------
Total gross deferred tax assets.................................. 170,737 106,051
---------- ---------
Deferred tax liabilities:
Property and equipment, principally due to differences in
depreciation....................................................... 245,888 81,299
Accounting method change............................................. 181,460 241,946
---------- ---------
Total gross deferred liabilities................................. 427,348 323,245
---------- ---------
Net deferred tax liability....................................... $ 256,611 217,194
---------- ---------
---------- ---------
</TABLE>
The net deferred tax liability consists of current deferred tax assets of
$121,883 and $96,280 and net noncurrent deferred tax liabilities of $378,494 and
$313,474 at December 31, 1998 and 1997, respectively.
Management has determined that a valuation allowance for deferred tax assets
is not necessary.
(8) CONVERTIBLE PREFERRED STOCK
The 874,375 shares of convertible preferred stock series B are convertible,
at the option of the holders, into common stock on a share-for-share basis in
the event of an initial public offering or registration of the Company's common
stock, liquidation, dissolution or winding up of the Company or sale of
substantially all of the Company's assets. Accordingly, 874,375 shares of
authorized but unissued common stock are reserved for the conversion of the
convertible preferred stock series B.
The holders of convertible preferred stock series A and convertible
preferred stock series B are not entitled to receive any dividend. Holders of
preferred stock will be entitled to distribution priority over the holders of
the common stock upon liquidation. Holders of preferred stock have no voting
rights except on such matters that directly impact or alter the terms of the
preferred stock.
(9) COMMON STOCK, OPTIONS AND WARRANTS
Common stockholders have unlimited voting rights and are entitled to receive
(after giving effect to the liquidation preference of any preferred stock) all
of the net assets in the event of dissolution of the Company.
The Company's Board of Directors has adopted an Employee Stock Option Plan
(the Plan) pursuant to which the Company's Board of Directors may grant stock
options to officers and key employees. The Plan authorizes grants of options to
purchase up to 200,000 shares of the Company's
F-18
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(9) COMMON STOCK, OPTIONS AND WARRANTS (CONTINUED)
authorized, but unissued common stock. Accordingly, 200,000 shares of
authorized, but unissued common stock are reserved for use in the Plan. All
stock options have been granted with an exercise price equal to or in excess of
the stock's fair market value at the date of grant. The term of each stock
option is fixed but no stock option shall be exercisable more than ten years
after the date the stock option is granted. All stock options granted under the
Plan are exercisable twelve months from date of grant.
The per share weighted average fair value of stock options granted during
1998, 1997 and 1996 of $.19, $.08 and $.07, respectively, was determined on the
date of grant utilizing the Black-Scholes option pricing model with the
following weighted average assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Expected dividend yield...................................................... 0% 0% 0%
Risk-free interest rate...................................................... 6% 7% 7%
Expected life of options..................................................... 5.5 years 7.5 years 7.5 years
Expected volatility.......................................................... 5% 5% 5%
</TABLE>
As discussed in note 1(n), the Company applies APB Opinion No. 25 in
accounting for its Plan and, accordingly, no compensation cost has been
recognized for its stock options in the consolidated financial statements. Had
the Company determined compensation cost based on the fair value of its stock
options at the grant date under SFAS No. 123, the Company's net income and net
income per share would have decreased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ---------- ----------
<S> <C> <C> <C>
Net income:
As reported............................................................. $ 1,117,340 1,056,493 561,683
Pro forma............................................................... 1,106,299 1,054,645 559,796
Basic and diluted net income per share:
As reported............................................................. $ .24 .23 .12
Pro forma............................................................... .24 .23 .12
</TABLE>
F-19
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(9) COMMON STOCK, OPTIONS AND WARRANTS (CONTINUED)
Stock option activity during the years ended December 31, 1998, 1997 and
1996 was as follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- -----------------
<S> <C> <C>
Balance at December 31, 1995........................................ 58,000 $ 3
Granted........................................................... 46,000 $ 3
Forfeited......................................................... (13,000) $ 3
---------
Balance at December 31, 1996........................................ 91,000 $ 3
Granted........................................................... 85,000 $ 3
Forfeited......................................................... (15,000) $ 3
---------
Balance at December 31, 1997........................................ 161,000 $ 3
Granted........................................................... 72,000 $ 3
Forfeited......................................................... (8,000) $ 3
---------
Balance at December 31, 1998........................................ 225,000 $ 3
---------
---------
Exercisable at December 31, 1998.................................... 153,000 $ 3
---------
---------
</TABLE>
At December 31, 1998, the weighted average remaining contractual life of
outstanding options was 4.15 years. The 225,000 stock options outstanding at
December 31, 1998 include 50,000 stock options issued in connection with a
noncompete agreement (see below).
In conjunction with the 12 percent notes payable to stockholders, which were
partially refinanced during 1998 (see note 5) and originally issued in 1996, the
Company issued detachable stock purchase warrants to the note holders entitling
the note holders to redeem these warrants in the event of a public offering or
registration of the Company's common stock or in the case of a reorganization,
consolidation, merger or conveyance of substantially all of the Company's assets
to another corporation. A total of 371,250 warrants were issued and may be
redeemed for an equivalent number of shares of common stock. The value ascribed
to these warrants, as determined by an independent investment banker, was $.37
per warrant for an aggregate of $137,363. Accordingly, the face amount of the
notes payable were discounted and a corresponding amount was recorded as
additional paid-in capital. The discount on the notes payable was amortized as
interest expense using the interest method over the life of the notes payable,
except for the portion that was written off in connection with the debt
refinancing in 1998 (see note 5).
On October 1, 1997, the Company leased five stores from a former franchisee.
In connection with this transaction, the former franchisee entered into a
noncompete agreement for a period of two years in exchange for 100,000 shares of
the Company's common stock and stock options for 50,000 shares exercisable at
$3.00 per share. The value assigned to the noncompete agreement by the Company
was $237,598 and was determined based on the estimated fair market value of the
stock at the date of grant. This amount is being amortized on a straight-line
basis over the term of the agreement. In
F-20
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(9) COMMON STOCK, OPTIONS AND WARRANTS (CONTINUED)
addition, the Company is required to spend at least $500,000 on property
improvements over the original lease term of five years.
The Company has reserved 421,250 shares of authorized but unissued common
stock for the exercise of the 371,250 warrants for common stock issued in
conjunction with the notes payable to stockholders and for the exercise of stock
options for 50,000 shares issued in conjunction with the noncompete agreement.
(10) CONTINGENCIES
In February 1995, the Company's Board of Directors voted to terminate the
employment of the former president with cause. Subsequent to his termination,
the former president, who currently owns more than 10 percent of the Company's
stock, filed suits against the Company and certain named officers and directors
asserting a breach of employment contract, interference with and inducement of
the Company by certain directors contributing to the breach of contract and a
right to advance expenses and indemnification against losses as a result of the
previously mentioned suits and counterclaims subsequently referred to hereafter.
These suits sought original damages against the Company in excess of $1,319,000
in addition to expenses for reimbursement of legal fees and indemnification
against liabilities arising as a result of these matters. Additionally, the
former president sought in excess of $1,319,000 and punitive damages on each
cause of action from the certain named officers and directors.
The Company answered and filed counterclaims in response to the previously
mentioned suits. The certain named officers and directors also filed answers.
The answers and counterclaims denied the allegations of the former president and
asserted charges of conflict of interest, interference with existing business
relations and prospective business advantages and defamation. In its
counterclaim, the Company seeks damages of an unspecified and as yet to be
determined amount in addition to punitive damages of $5,000,000. Furthermore, as
approved by the Board, the certain named officers and directors will be entitled
to advance expenses for their defense. Under certain circumstances, the named
officers and directors could be entitled to indemnification against any
liabilities arising as a result of the lawsuits.
During 1996, the former president filed amended complaints against the
Company, and certain named officers and directors seeking additional special
compensatory damages and alleging conspiracy to defraud on the part of certain
named officers and directors. The amended complaints sought an additional
$8,500,000 in special compensatory damages from the Company and $35,000,000 from
each of the certain named officers and directors. On January 27, 1997, under
motions for summary judgment, all claims asserted by the former president
against the certain named officers and directors were dismissed by the Court.
During 1997, the Company was granted a partial summary judgment from the Court
dismissing the special compensatory damages claim. Subsequently, an appeal was
filed by the former president, and by order entered on July 1, 1998, the Court
of Appeals reversed the trial court's entry of partial summary judgment in favor
of the Company dismissing the former president's claim for "special damages."
Subsequently, the Tennessee Supreme Court declined to accept the Company's
application for permission to appeal. The case has now been returned to the
trial court for a resolution
F-21
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(10) CONTINGENCIES (CONTINUED)
of all the claims asserted against Western Sizzlin Corporation by the former
president in his third amended complaint, including his claim for "special
damages."
In September 1997, the Company filed suit against a former franchisee
seeking to recover past due franchise fees. Subsequently, during 1998 the former
franchisee filed a counterclaim against the Company alleging breach of contract
and warranty, fraud, negligence, negligent misrepresentation, breach of
fiduciary duty, tortious interference, and breach of the duty of good faith and
fair dealing. The suit requests compensatory damages, treble damages and
exemplary damages of not less than $500,000 plus prejudgment interest and
attorney's fees.
The Company believes it has substantive defenses against the lawsuits
brought by the former president of the Company and its former franchisee. The
lawsuits are ongoing and legal counsel is unable to render an opinion as to the
ultimate outcome of these litigation matters. Management and its legal counsel
will vigorously contest these matters. Management cannot predict the outcome of
the litigation, and is unable to determine the effect on the consolidated
financial statements of the Company.
In addition to the litigation discussed in the preceding paragraphs, the
Company is involved in other litigation from time to time during the normal
course of its operations. Management does not believe the ultimate outcome of
this litigation will have a material effect on the financial position or the
results of operations of the Company. During 1998, 1997 and 1996, respectively,
the Company recognized $594,072, $692,194 and $800,460 of legal expenses.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1998 and 1997. Statement
of Financial Accounting Standards No. 107, DISCLOSURES ABOUT FAIR VALUE OF
FINANCIAL INSTRUMENTS, defines the fair value of a financial instrument as the
amount at which the instrument could be exchanged in a current transaction
between willing parties.
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents.............................. $ 643,536 643,536 718,246 718,246
Accounts receivable.................................... 870,552 870,552 901,973 901,973
Notes receivable....................................... 288,396 263,688 303,137 278,417
Lease receivable....................................... -- -- 8,579 8,579
Other receivables...................................... 76,205 76,205 160,517 160,517
Financial liabilities:
Credit line note payable to bank....................... $ 410,868 410,868 394,000 394,000
Accounts payble........................................ 2,186,236 2,186,236 1,652,513 1,652,513
Accrued expenses and other............................. 878,805 878,805 1,011,146 1,011,146
Long-term debt......................................... 7,505,820 7,408,810 6,672,409 6,602,510
</TABLE>
F-22
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amounts shown in the table are included in the balance sheet
under the indicated captions.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
- Cash and cash equivalents, accounts receivable, lease receivable, other
receivables, accounts payable and accrued expenses and other: The carrying
amounts approximate fair value because of the short maturity of those
instruments.
- Notes receivable and lease receivable: The fair value is determined as the
present value of expected future cash flows discounted at the interest
rate which approximates the rate currently offered by local lending
institutions for loans of similar terms to companies with comparable
credit risk.
- Long-term debt: The fair value of the Company's long-term debt is
estimated by discounting the future cash flows of each instrument at rates
which approximate those currently offered to the Company for similar debt
instruments of comparable maturities by the Company's lenders.
(12) REPORTABLE SEGMENTS
Effective January 1, 1998, the Company adopted SFAS No. 131, DISCLOSURES
ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which superseded SFAS
No. 14, FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS ENTERPRISE. SFAS No. 131
establishes standards for the way the Company reports information about
operating segments in its financial statements. The adoption did not affect
results of operations or financial position, but did affect the disclosure of
segment information.
The Company has defined two reportable segments: Company-operated
restaurants and franchising. The Company-operated restaurant segment consists of
the operations of all Company-operated restaurants and derives its revenues from
the operations of "Western SizzliN Steakhouse," "Great American Steak & Buffet"
and "Western Sizzlin Wood Grill." The franchising segment consists of franchise
sales and support activities and derives its revenues from sales of franchise
and development rights and collection of royalties from franchisees.
Generally, the Company evaluates performance and allocates resources based
on income (loss) before income taxes and extraordinary item. Administrative and
capital costs are allocated to segments based upon predetermined rates or actual
or estimated resource usage. The accounting policies of the segments are the
same as those described in the summary of significant accounting policies. The
Company accounts for intercompany sales and transfers as if the sales or
transfers were with third parties and eliminates the related profit in
consolidation.
Reportable segments are business units that provide different products or
services. Separate management of each segment is required because each business
unit is subject to different optional issues and strategies. Through December
31, 1998, all revenues for each business segment were derived from business
activities conducted with customers located in the United States. No single
external customer accounted for 10 percent or more of the Company's consolidated
revenues.
F-23
<PAGE>
THE WESTERN SIZZLIN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(12) REPORTABLE SEGMENTS (CONTINUED)
The following table summarizes reportable segment information:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------
1998 1997 1996
------------- ------------ ------------
<S> <C> <C> <C>
Revenues from reportable segments:
Restaurants......................................................... $ 30,396,292 26,653,025 22,586,059
Franchising and other............................................... 6,698,055 6,870,921 7,137,866
------------- ------------ ------------
Total revenues.................................................. $ 37,094,347 33,523,946 29,723,925
------------- ------------ ------------
------------- ------------ ------------
Depreciation and amortization:
Restaurants......................................................... $ 1,198,998 784,321 685,429
Franchising and other............................................... 778,992 1,052,588 1,077,238
------------- ------------ ------------
Total depreciation and amortization............................. $ 1,977,990 1,836,909 1,762,667
------------- ------------ ------------
------------- ------------ ------------
Interest expense:
Restaurants......................................................... $ 612,415 676,246 803,953
Franchising and other............................................... 133,597 493,716 717,892
------------- ------------ ------------
Total interest expense.......................................... 746,012 1,169,962 1,521,845
------------- ------------ ------------
------------- ------------ ------------
Interest income:
Restaurants......................................................... $ 27,630 10,971 1,994
Franchising and other............................................... 17,385 13,740 26,572
------------- ------------ ------------
45,015 24,711 28,566
------------- ------------ ------------
------------- ------------ ------------
Income (loss) before income taxes and extraordinary item:
Restaurants......................................................... $ 337,197 579,813 (266,589)
Franchising and other............................................... 1,627,745 1,194,830 1,276,817
------------- ------------ ------------
Total income before income taxes and extraordinary item......... $ 1,964,942 1,774,643 1,010,228
------------- ------------ ------------
------------- ------------ ------------
Gross fixed assets:
Restaurants......................................................... $ 8,011,776 4,430,570 3,661,973
Franchising and other............................................... 1,541,195 1,539,658 1,935,263
------------- ------------ ------------
Total gross fixed assets........................................ $ 9,552,971 5,970,228 5,597,236
------------- ------------ ------------
------------- ------------ ------------
Expenditures for fixed assets (including acquisitions):
Restaurants......................................................... $ 3,641,534 849,886 3,879,156
Franchising and other............................................... 1,537 -- --
------------- ------------ ------------
Total expenditures for fixed assets............................. $ 3,643,071 849,886 3,879,156
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
F-24
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
By and Among
Austins Steaks & Saloon, Inc.
Austins Acquisition Corp.
and
The WesterN SizzliN Corporation
DATED AS OF
APRIL 30, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
ARTICLE I TERMS OF THE MERGER...................................................................... A-1
1.1 The Merger............................................................................... A-1
1.2 Effective Time........................................................................... A-1
1.3 Merger Consideration..................................................................... A-1
1.4 Shareholders' Rights upon Merger......................................................... A-2
1.5 Surrender and Exchange of Shares; Payment of Austins Stock............................... A-2
1.6 Options and Warrants..................................................................... A-2
1.6.1 Options.................................................................................. A-2
1.6.2 Registration of Options.................................................................. A-3
1.6.3 Warrants................................................................................. A-3
1.7 Other Effects of Merger.................................................................. A-3
1.8 Registration Statement/Proxy Statement................................................... A-3
1.9 Compliance with Securities Act........................................................... A-4
1.10 Tax-Free Reorganization.................................................................. A-4
1.11 Additional Actions....................................................................... A-4
1.12 Dissenting Shares........................................................................ A-4
ARTICLE II REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF WESTERN SIZZLIN..................... A-5
2.1 Organization and Good Standing........................................................... A-5
2.2 Capitalization........................................................................... A-5
2.3 Authorization; Binding Agreement......................................................... A-6
2.4 Governmental Approvals................................................................... A-6
2.5 No Violations............................................................................ A-6
2.6 Litigation............................................................................... A-7
2.7 WesterN SizzliN Financial Statements..................................................... A-7
2.8 Absence of Certain Changes or Events..................................................... A-7
2.9 Compliance with Laws..................................................................... A-7
2.10 Permits.................................................................................. A-7
2.11 Finders and Brokers...................................................................... A-7
2.12 Contracts................................................................................ A-7
2.13 Employee Benefit Plans................................................................... A-8
2.14 Taxes and Returns........................................................................ A-8
2.15 Franchise Compliance..................................................................... A-9
ARTICLE III REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF AUSTINS............................. A-9
3.1 Organization and Good Standing........................................................... A-9
3.2 Capitalization........................................................................... A-9
3.3 Authorization; Binding Agreement......................................................... A-10
3.4 Governmental Approvals................................................................... A-10
3.5 No Violations............................................................................ A-10
3.6 Litigation............................................................................... A-10
3.7 Securities Filings....................................................................... A-10
3.8 Austins Financial Statements............................................................. A-11
3.9 Absence of Certain Changes or Events..................................................... A-11
3.10 Compliance with Laws..................................................................... A-11
3.11 Permits.................................................................................. A-11
3.12 Finders and Brokers...................................................................... A-11
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
3.13 Contracts................................................................................ A-12
3.14 Employee Benefit Plans................................................................... A-12
3.15 Taxes and Returns........................................................................ A-12
ARTICLE IV ADDITIONAL COVENANTS OF WESTERN SIZZLIN.................................................. A-13
4.1 Conduct of Business of WesterN SizzliN................................................... A-13
4.2 Notification of Certain Matters.......................................................... A-14
4.3 Access and Information................................................................... A-14
4.4 Shareholder Approval..................................................................... A-15
4.5 Reasonable Business Efforts.............................................................. A-15
4.6 Public Announcements..................................................................... A-15
4.7 Compliance............................................................................... A-15
ARTICLE V ADDITIONAL COVENANTS OF AUSTINS.......................................................... A-15
5.1 Conduct of Business of Austins........................................................... A-15
5.2 Notification of Certain Matters.......................................................... A-16
5.3 Access and Information................................................................... A-17
5.4 Reasonable Business Efforts.............................................................. A-17
5.5 Public Announcements..................................................................... A-17
5.6 Compliance............................................................................... A-17
5.7 SEC Filings, Shareholder Notices and News Releases....................................... A-17
ARTICLE VI CONDITIONS............................................................................... A-18
6.1 Conditions to Each Party's Obligations................................................... A-18
6.1.1 Shareholder Approval..................................................................... A-18
6.1.2 No Injunction or Action.................................................................. A-18
6.1.3 Governmental Approvals................................................................... A-18
6.1.4 Required Consents........................................................................ A-18
6.1.5 Blue Sky................................................................................. A-18
6.1.6 Reverse Split............................................................................ A-18
6.2 Conditions to Obligations of WesterN SizzliN............................................. A-18
6.2.1 Austins Representations and Warranties................................................... A-18
6.2.2 Performance by Austins................................................................... A-19
6.2.3 No Material Adverse Change............................................................... A-19
6.2.4 Certificates and Other Deliveries........................................................ A-19
6.2.5 S-4 Effective............................................................................ A-19
6.2.6 Opinion of Austins Counsel............................................................... A-19
6.2.7 Opinion of WesterN SizzliN Counsel....................................................... A-19
6.2.8 J.C. Bradford Opinion.................................................................... A-19
6.2.9 Post Merger Board........................................................................ A-19
6.3 Conditions to Obligations of Austins..................................................... A-19
6.3.1 WesterN SizzliN Representations and Warranties........................................... A-19
6.3.2 Performance by WesterN SizzliN........................................................... A-20
6.3.3 No Material Adverse Change............................................................... A-20
6.3.4 Certificates and Other Deliveries........................................................ A-20
6.3.5 Opinion of WesterN SizzliN Counsel....................................................... A-20
6.3.6 Opinion of Austins Counsel............................................................... A-20
ARTICLE VII TERMINATION AND ABANDONMENT
7.1 Termination.............................................................................. A-20
7.2 Effect of Termination and Abandonment.................................................... A-21
7.3 Procedure Upon Termination............................................................... A-21
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
ARTICLE VIII MISCELLANEOUS
8.1 Confidentiality.......................................................................... A-21
8.2 Amendment and Modification............................................................... A-22
8.3 Waiver of Compliance; Consents........................................................... A-22
8.4 Survival of Representations and Warranties............................................... A-22
8.5 Notices.................................................................................. A-23
8.6 Binding Effect; Assignment............................................................... A-23
8.7 Expenses................................................................................. A-24
8.8 Governing Law............................................................................ A-24
8.9 Counterparts............................................................................. A-24
8.10 Interpretation........................................................................... A-24
8.11 Entire Agreement......................................................................... A-24
8.12 Severability............................................................................. A-24
8.13 Specific Performance..................................................................... A-24
8.14 Third Parties............................................................................ A-24
8.15 Schedules................................................................................ A-24
</TABLE>
A-iii
<PAGE>
LIST OF SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.3 Merger Consideration for WesterN SizzliN Selling Shareholders
1.6.1 WesterN SizzliN Stock Options Converted to Austins Stock Options
1.6.3 WesterN SizzliN Warrants to be Exercisable for Austins Stock
2.5 WesterN SizzliN Required Approvals; Violations
2.6 WesterN SizzliN Litigation
2.8 WesterN SizzliN Subsequent Events
2.12 WesterN SizzliN Material Contracts
2.13 WesterN SizzliN Employee Benefit Plans
2.14 WesterN SizzliN Taxes and Returns
3.2 Rights and Restrictions with Respect to Austins Stock
3.6 Austins Litigation
3.13 Austins Contracts
3.14 Austins Employee Benefit Plans
3.15 Austins Taxes and Returns
4.2 WesterN SizzliN Key Officers
6.2.5 Opinion of Counsel to Austins
6.3.5 Opinion of Counsel to WesterN SizzliN
</TABLE>
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
1 Transmittal and Representation Letter
2 Affiliate Letter
3 Plan of Merger
</TABLE>
A-iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "AGREEMENT") made and entered into as
of April 30, 1999, by and among Austins Steaks & Saloon, Inc., a Delaware
corporation ("AUSTINS"), Austins Acquisition Corp., a Delaware corporation and
wholly owned subsidiary of Austins ("ACQUISITION SUBSIDIARY"), and The WesterN
SizzliN Corporation, a Tennessee corporation ("WESTERN SIZZLIN").
RECITALS
A. The respective Boards of Directors of WesterN SizzliN, Acquisition
Subsidiary and Austins have approved the merger (the "MERGER") of WesterN
SizzliN with and into Acquisition Subsidiary in accordance with the laws of the
States of Delaware and Tennessee and the provisions of this Agreement.
B. WesterN SizzliN, Acquisition Subsidiary and Austins desire to make
certain representations, warranties and agreements in connection with, and
establish various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements hereinafter set forth, the parties hereto
agree as follows:
ARTICLE I
TERMS OF THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, the Merger shall be consummated in accordance with the Delaware
General Corporation Law (the "DELAWARE ACT") and the Tennessee Business
Corporation Act (the "TENNESSEE ACT"). At the Effective Time (as defined in
SECTION 1.2 below), upon the terms and subject to the conditions of this
Agreement and pursuant to a Plan of Merger in the form to be mutually agreed
upon by Austins and WesterN SizzliN, WesterN SizzliN shall be merged with and
into Acquisition Subsidiary in accordance with the Delaware Act and the
Tennessee Act and the separate existence of WesterN SizzliN shall thereupon
cease, and Acquisition Subsidiary, as the surviving corporation in the Merger
(the "SURVIVING CORPORATION"), shall continue its corporate existence under the
laws of the State of Delaware as a subsidiary of Austins. The Certificate of
Incorporation of Acquisition Subsidiary shall be thereupon amended to change the
name to WesterN SizzliN, Inc. The parties shall prepare and execute a
certificate of merger (the "CERTIFICATE OF MERGER") in order to comply in all
respects with the requirements of the Delaware Act and the Tennessee Act and
with the provisions of this Agreement.
1.2 EFFECTIVE TIME. The Merger shall become effective at the time of the
filing of a Certificate of Merger with the Secretaries of State of Delaware and
Tennessee in accordance with the applicable provisions of the Delaware Act and
Tennessee Act or at such later time as may be specified in the Certificate of
Merger. The Certificate of Merger shall be filed as soon as practicable after
all of the conditions set forth in this Agreement have been satisfied or waived
by the party or parties entitled to the benefit of the same. Austins and WesterN
SizzliN shall mutually determine the time of such filing and the place where the
closing of the Merger (the "CLOSING") shall occur. The time when the Merger
shall become effective is herein referred to as the "EFFECTIVE TIME" and the
date on which the Effective Time occurs is herein referred to as the "CLOSING
DATE."
1.3 MERGER CONSIDERATION. (a) Subject to the provisions of this Agreement
and any applicable backup or other withholding requirements, each of the issued
and outstanding shares of common stock, par value $1.00 per share and Series B
Convertible Preferred Stock, par value $1.00 per share, of WesterN SizzliN
(individually, "WESTERN SIZZLIN COMMON STOCK" and "WESTERN SIZZLIN SERIES B
STOCK" and collectively, "WESTERN SIZZLIN SHARES") as of the Effective Time
shall be converted into the right to receive, and there shall be paid and issued
as hereinafter provided, in exchange for each of the
A-1
<PAGE>
WesterN SizzliN Shares, two shares of Austins common stock, $0.01 par value per
share ("AUSTINS STOCK"). The exact number of shares of Austins Stock to be
issued to each holder (the "SELLING SHAREHOLDER" and collectively "SELLING
SHAREHOLDERS") of WesterN SizzliN Shares is set forth on Schedule 1.3. The ratio
of two shares of Austins Stock for each one of WesterN SizzliN Shares shall be
referred to as the "Merger Ratio". The payment of the overall amount of Austins
Stock and the exact amount of the Austins Stock to be payable to each Selling
Shareholder is subject to payment of cash in lieu of any fractional share as
hereinafter provided.
(b) Prior to the Effective Time, Austins shall have effected a one for 3.135
reverse split of its outstanding common stock, thereby reducing its outstanding
shares to 844,460.
1.4 SHAREHOLDERS' RIGHTS UPON MERGER. Upon consummation of the Merger, the
certificates which theretofore represented WesterN SizzliN Shares (other than
Dissenting Shares) (the "CERTIFICATES") shall cease to represent any rights with
respect thereto, and, subject to applicable law and this Agreement, shall only
represent the right to receive the Austins Stock including the amount of cash,
if any, payable in lieu of fractional shares of Austins Stock into which the
WesterN SizzliN Shares have been converted pursuant to this Agreement.
1.5 SURRENDER AND EXCHANGE OF SHARES; PAYMENT OF AUSTINS STOCK. (a) Prior
to the Closing Date, Austins shall distribute to the Selling Shareholders the
Transmittal and Representation letter attached as EXHIBIT 1 to this Agreement.
On the Closing Date, each holder of a WesterN SizzliN Share (other than
Dissenting Shares) shall surrender and deliver the Certificates to Austins
together with a duly completed and executed Transmittal and Representation
Letter. Upon such surrender and delivery, the holder shall receive a certificate
representing the number of whole shares of Austins Stock into which such
holder's WesterN SizzliN Shares have been converted pursuant to this Agreement.
Until so surrendered and exchanged, each outstanding Certificate after the
Effective Time shall be deemed for all purposes to evidence the right to the
Austins Stock, subject to payment of cash in lieu of any fractional share;
PROVIDED, HOWEVER, that no dividends or other distributions, if any, in respect
of the shares of Austins Stock, declared before or after the Effective Time and
payable to holders of record after the Effective Time, shall be paid to the
holders of any unsurrendered Certificates until such Certificates and
Transmittal and Representation Letters are surrendered and delivered as provided
herein. Subject to applicable Law, after the surrender and exchange of
Certificates, the record holders thereof will be entitled to receive any such
dividends or other distributions without interest thereon, which theretofore
have become payable with respect to the number of shares of Austins Stock for
which such Certificates were exchangeable. Holders of any unsurrendered
Certificates shall not be entitled to vote Austins Stock until such Certificates
are exchanged pursuant to this Agreement.
(b) At the Effective Time, the stock transfer books of WesterN SizzliN shall
be closed and no transfer of WesterN SizzliN Shares shall be made thereafter,
other than transfers of WesterN SizzliN Shares that have occurred prior to the
Effective Time. In the event that, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be canceled and exchanged for
Austins Stock as provided in SECTION 1.3.
1.6 OPTIONS AND WARRANTS.
1.6.1 OPTIONS. At the Effective Time, Austins shall cause each holder
of a then outstanding and unexercised stock option granted under the WesterN
SizzliN Employee Stock Option Plan or granted on October 1, 1997 to a former
franchisee of WesterN SizzliN (the "WESTERN SIZZLIN OPTIONS") exercisable
for WesterN SizzliN Common Stock to receive, by virtue of the Merger and
without any action on the part of the holder thereof, options exercisable
for shares of Austins Stock ("AUSTINS OPTIONS") based upon two Austins
shares exercisable at a price of $1.50 per share and having the same other
terms and conditions as the WesterN SizzliN Options, including such terms
and conditions as may be incorporated by reference into the agreements
evidencing WesterN SizzliN Options pursuant to the plans or agreement under
which such WesterN SizzliN Options
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were granted. Schedule 1.6.1 contains a listing of the holders and numbers
of all WesterN SizzliN Options to be converted, the number and exercise
price for the Austins Options to be issued upon conversion thereof.
1.6.2 REGISTRATION OF OPTIONS. Austins shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Austins
common stock for delivery upon the exercise of the Austins Options after the
Effective Time. Immediately after the Effective Time, Austins shall file, or
cause to be filed, all necessary registration statements on Form S-8 or
other appropriate form as may be necessary in connection with the purchase
and sale of Austins stock contemplated by such Austins Options subsequent to
the Effective Time, and shall maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as any of the Austins Options
registered thereunder remain outstanding. As soon as practicable after the
Effective Time, Austins shall qualify under applicable state securities laws
the issuance of such shares of Austins stock issuable upon exercise of
Austins Options. Austins shall use reasonable business efforts to cause to
be taken any actions necessary on the part of Austins to enable subsequent
transactions in Austins stock after the Effective Time pursuant to the
Austins Options held by persons subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act ("EXCHANGE ACT") to be exempt
from the application of Section 16(b) of the Exchange Act, to the extent
permitted thereunder.
1.6.3 WARRANTS. At the Effective Time, Austins shall cause each holder
of a then outstanding and unexercised common stock purchase warrant to
acquire WesterN SizzliN Common Stock ("WesterN SizzliN Warrants") to receive
immediately upon notice by a WesterN SizzliN Warrant holder, two Austins
shares for each share of WesterN SizzliN Common Stock into which his/her
WesterN SizzliN Warrants were exchangeable immediately prior to the merger,
and thereafter upon the same terms and conditions as the WesterN SizzliN
Warrants including such terms and conditions as may be incorporated by
reference into the agreements evidencing WesterN SizzliN Warrants. Schedule
1.6.3 contains a listing of the holders and numbers of all WesterN SizzliN
Warrants.
1.7 OTHER EFFECTS OF MERGER. The Merger shall have all further effects as
specified in the applicable provisions of the Delaware Act.
1.8 REGISTRATION STATEMENT/PROXY STATEMENT. (a) Austins shall promptly
prepare and file with the Securities and Exchange Commission as soon as
practicable a Registration Statement on Form S-4 (the "Form S-4") under the
Securities Act of 1933, with respect to the Austins Stock issuable in the
Merger, a portion of which Registration Statement shall also serve as the proxy
statement with respect to the WesterN SizzliN Meeting (the "Proxy
Statement/Prospectus"). The respective parties will cause the Proxy
Statement/Prospectus and the Form S-4 to comply as to form in all material
respects with the applicable provisions of the Securities Act, the Securities
Exchange Act of 1934 and the rules and regulations thereunder. Austins shall
have the Form S-4 effective as long as is necessary to consummate the Merger.
Austins shall use its best efforts to obtain, prior to the effective date of the
Form S-4, all necessary state securities law or "Blue Sky" permits or approvals
required to carry out the transactions contemplated by the Merger Agreement.
Austins agrees that the Proxy Statement/Prospectus and each amendment and
supplement thereto at the time of mailing thereof and at the time of the WesterN
SizzliN Meeting, or, in the case of the Form S-4 and each amendment and
supplement thereto, at the time it is filed or becomes effective, will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statement therein, in
light of the circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that the foregoing shall not apply to the extent that any such untrue
statement of a material fact or omission to state a material fact was made by
Austins in reliance upon and in conformity with written information concerning
WesterN SizzliN furnished to Austins by WesterN SizzliN specifically for use in
the Proxy Statement/Prospectus. WesterN SizzliN agrees that the written
information concerning WesterN SizzliN
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provided by it for inclusion in the Proxy Statement/Prospectus and each
amendment or supplement thereto, at the time of mailing thereof and at the time
of the WesterN SizzliN Meeting, or, in the case of written information
concerning WesterN SizzliN provided by WesterN SizzliN for inclusion in the Form
S-4 or any amendment or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No amendment or supplement to the Proxy Statement/Prospectus
will be made by Austins without the approval of WesterN SizzliN. Austins will
advise WesterN SizzliN, promptly after it receives notice thereof, of the time
when the Form S-4 has become effective or any supplement or amendment has been
filed, the issuance of any stop order, the suspension of the qualification of
Austins Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the Commission for amendment of the Proxy
Statement/Prospectus or the Form S-4 or comments thereon and responses thereto
or requests by the Commission for additional information. At the effective date
of the registration statement on Form S-4, all of the Austins Stock to be issued
in the Merger shall be covered by such registration statement.
(b) NASDAQ LISTING. As soon as possible following the Effective Date,
Austins shall apply to NASDAQ to have its common stock listed as a National
Market or SmallCap stock.
1.9 COMPLIANCE WITH SECURITIES ACT. At least 30 days prior to the Closing
Date, WesterN SizzliN shall deliver to Austins a list of names and addresses of
those persons who were, in the WesterN SizzliN's reasonable judgment, at the
record date for the WesterN SizzliN Meeting, "affiliates" (each such person, an
"Affiliate") of WesterN SizzliN within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act. WesterN SizzliN shall use all
reasonable efforts to deliver or cause to be delivered to Austins, prior to the
Effective Date, from each of the Affiliates of WesterN SizzliN identified in the
foregoing list, an Affiliate Letter in the form attached hereto as Exhibit 2.
Austins shall be entitled to place legends as specified in such Affiliate
Letters on the certificates evidencing any Austins Stock be received by such
Affiliates pursuant to the terms of the Merger Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Austins
Stock, consistent with the terms of such Affiliate Letters.
1.10 TAX-FREE REORGANIZATION. The parties intend that the Merger qualify
as a reorganization within the meaning of Section 368 (a) of the Internal
Revenue Code of 1986, as amended, and the regulations thereunder (the "CODE").
None of the parties will knowingly take any action that would cause the Merger
to fail to qualify as a reorganization within the meaning of Section 368(a) of
the Code.
1.11 ADDITIONAL ACTIONS. If, at any time after the Effective Time, Austins
or Acquisition Subsidiary shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Acquisition
Subsidiary its right, title or interest in, to or under any of the rights,
properties or assets of Acquisition Subsidiary or WesterN SizzliN or otherwise
to carry out this Agreement, the officers and directors of the Acquisition
Subsidiary shall be authorized to execute and deliver, in the name and on behalf
of Acquisition Subsidiary or WesterN SizzliN, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of
Acquisition Subsidiary or WesterN SizzliN, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Acquisition Subsidiary or otherwise to carry out this Agreement.
1.12 DISSENTING SHARES. (a) Notwithstanding any provision of this
Agreement to the contrary, any WesterN SizzliN Shares held by a holder who has
demanded and perfected his demand for appraisal of his shares in accordance with
Section 48-23-102 of the Tennessee Act and as of the Effective Time has neither
effectively withdrawn nor lost his right to such appraisal (the "DISSENTING
SHARES"), shall not be
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converted into or represent a right to receive the Austins Stock pursuant to
SECTION 1.3 hereof, but the
holder thereof shall be entitled to only such rights as are granted by the
Tennessee Act.
(b) Notwithstanding the provisions of subsection (a) of this SECTION 1.12,
if any holder of WesterN SizzliN Shares who demands appraisal of such shares
under the Tennessee Act shall effectively withdraw or lose (through failure to
perfect or otherwise) his right to appraisal, then as of the Effective Time or
the occurrence of such event, whichever later occurs, such holders of WesterN
SizzliN Shares shall automatically be converted into and represent only the
right to receive Austins Stock pursuant to SECTION 1.3 hereof, without any
interest thereon, upon surrender of the certificate or certificates representing
such WesterN SizzliN Shares.
(c) If holders of more than 15% of the WesterN SizzliN Shares elect
dissenters' rights, WesterN SizzliN shall have the right to abandon the Merger
and terminate this Agreement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF WESTERN SIZZLIN
WesterN SizzliN represents, warrants and/or covenants to and with Austins as
follows:
2.1 ORGANIZATION AND GOOD STANDING. WesterN SizzliN is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Tennessee and has all requisite corporate or partnership power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. WesterN SizzliN is duly qualified or licensed and in good standing to
do business in each jurisdiction in which the character of the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not have a material
adverse effect on the business, assets (including, but not limited to,
intangible assets), prospects, condition (financial or otherwise), properties
(including, but not limited to, intangible properties), liabilities or the
results of operations of WesterN SizzliN ("WESTERN SIZZLIN MATERIAL ADVERSE
EFFECT"). WesterN SizzliN has heretofore made available to Austins accurate and
complete copies of the Articles of Incorporation and Bylaws, as currently in
effect, of WesterN SizzliN.
2.2 CAPITALIZATION. As of the date hereof, the authorized capital stock of
WesterN SizzliN consists of (a) 10,000,000 shares of WesterN SizzliN Common
Stock, $1.00 par value; (b) 25,000 shares of WesterN SizzliN Series A
Convertible Preferred Stock, $10.00 par value ("WESTERN SIZZLIN SERIES A
PREFERRED STOCK"); and (c) 875,000 shares of WesterN SizzliN Series B Stock,
$1.00 par value. As of March 31, 1999, (a) 4,364,000 shares of WesterN SizzliN
Common Stock were issued and outstanding, (not including 210,000 WesterN SizzliN
Options); (b) no shares of WesterN SizzliN Series A Preferred Stock were issued
and outstanding; and (c) 874,375 shares of WesterN SizzliN Series B Stock were
issued and outstanding, all of which will be converted to WesterN SizzliN Shares
prior to Closing. No other capital stock of WesterN SizzliN is authorized or
issued. All issued and outstanding shares of WesterN SizzliN are duly
authorized, validly issued, fully paid and non-assessable and were issued free
of preemptive rights and in compliance with applicable securities laws. Except
as set forth on SCHEDULES 1.6.1 AND 1.6.3 attached hereto and as otherwise
contemplated by this Agreement, as of the date hereof there are no outstanding
rights, subscriptions, warrants, puts, calls, unsatisfied preemptive rights,
options or other agreements of any kind relating to any of the outstanding,
authorized but unissued, unauthorized or treasury shares of the capital stock or
any other security of WesterN SizzliN, and there is no authorized or outstanding
security of any kind convertible into or exchangeable for any such capital stock
or other security. There are no restrictions upon the transfer of or otherwise
pertaining to the securities (including, but not limited to, the ability to pay
dividends thereon) or retained earnings of WesterN SizzliN or the ownership
thereof other than those imposed by the Securities Act, applicable state
securities laws or applicable corporate law.
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2.3 AUTHORIZATION; BINDING AGREEMENT. WesterN SizzliN has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the other agreements and documents referred to herein to
which WesterN SizzliN is or will be a party or a signatory (the "WESTERN SIZZLIN
ANCILLARY AGREEMENTS") and the consummation of the transactions contemplated
hereby and thereby, including, but not limited to, the Merger have been duly and
validly authorized by WesterN SizzliN's Board of Directors and no other
corporate proceedings on the part of WesterN SizzliN are necessary to authorize
the execution and delivery of this Agreement and the WesterN SizzliN Ancillary
Agreements or to consummate the transactions contemplated hereby or thereby
(other than the adoption of this Agreement by the shareholders of WesterN
SizzliN in accordance with the Tennessee Act and the Articles of Incorporation
and Bylaws of WesterN SizzliN). This Agreement has been duly and validly
executed and delivered by WesterN SizzliN and constitutes, and upon execution
and delivery thereof as contemplated by this Agreement, the WesterN SizzliN
Ancillary Agreements will constitute, the legal, valid and binding agreements of
WesterN SizzliN, enforceable against WesterN SizzliN in accordance with its and
their respective terms, except to the extent that enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by principles
of equity regarding the availability of remedies ("ENFORCEABILITY EXCEPTIONS").
2.4 GOVERNMENTAL APPROVALS. No consent, approval, waiver or authorization
of, notice to or declaration or filing with ("CONSENT") any nation or
government, state or other political subdivision thereof, any entity, authority
or body exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including, without
limitation, any governmental or regulatory authority, agency, department, board,
commission, administration or instrumentality, any court, tribunal or arbitrator
and any self-regulatory organization ("GOVERNMENTAL AUTHORITY") on the part of
WesterN SizzliN is required in connection with the execution or delivery by
WesterN SizzliN of this Agreement and the WesterN SizzliN Ancillary Agreements
or the consummation by WesterN SizzliN of the transactions contemplated hereby
or thereby other than (i) the filing of the Certificate of Merger with the
Secretary of State of Tennessee in accordance with the Tennessee Act, (ii)
filings with state securities laws administrators, (iii) such filings as may be
required in any jurisdiction where WesterN SizzliN is qualified or authorized to
do business as a foreign corporation in order to maintain such qualification or
authorization, and (iv) those Consents that, if they were not obtained or made,
do not or would not have a WesterN SizzliN Material Adverse Effect or materially
and adversely affect the ability of WesterN SizzliN to perform its obligations
as set forth in this Agreement or to consummate the transactions contemplated
hereby.
2.5 NO VIOLATIONS. The execution and delivery of this Agreement and the
WesterN SizzliN Ancillary Agreements, the consummation of the transactions
contemplated hereby and thereby and compliance by WesterN SizzliN with any of
the provisions hereof or thereof will not (i) conflict with or result in any
breach of any provision of the Articles of Incorporation or Bylaws or other
governing instruments of WesterN SizzliN, (ii) except as set forth on SCHEDULE
2.5 attached hereto, require any Consent under or result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration
or augment the performance required) under any of the terms, conditions or
provisions of any WesterN SizzliN Material Contract (as hereinafter defined),
(iii) result in the creation or imposition of any lien or encumbrance of any
kind upon any of the assets of WesterN SizzliN, or (iv) subject to obtaining the
Consents from Governmental Authorities referred to in SECTION 2.4, above,
contravene any applicable provision of any constitution, treaty, statute, law,
code, rule, regulation, ordinance, policy or order of any Governmental Authority
or other matters having the force of law including, but not limited to, any
orders, decisions, injunctions, judgments, awards and decrees of or agreements
with any court or other Governmental Authority ("Law",) currently in effect to
which WesterN SizzliN or its or any of their respective assets or properties are
subject, except in the case of clauses (ii), (iii) and (iv), above, for any
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deviations from the foregoing which do not or would not have a WesterN SizzliN
Material Adverse Effect.
2.6 LITIGATION. Except as set forth in SCHEDULE 2.6, there is no action,
cause of action, claim, demand, suit, proceeding, citation, summons, subpoena,
inquiry or investigation of any nature, civil, criminal, regulatory or
otherwise, in law or in equity, by or before any court, tribunal, arbitrator or
other Governmental Authority ("LITIGATION") pending, or to the knowledge of
WesterN SizzliN, threatened against WesterN SizzliN, any officer, director,
employee or agent thereof in his or her capacity as such, or as a fiduciary with
respect to any WesterN SizzliN Benefit Plan, as hereinafter defined, or
otherwise relating to WesterN SizzliN or its securities or any properties or
rights of WesterN SizzliN or any WesterN SizzliN Benefit Plan. Further, except
as set forth in SCHEDULE 2.6, WesterN SizzliN management is unaware of any facts
based upon which Litigation could be initiated against WesterN SizzliN.
2.7 WESTERN SIZZLIN FINANCIAL STATEMENTS. The audited financial statements
of WesterN SizzliN for the years ended December 31, 1997 and 1998 (the "WESTERN
SIZZLIN FINANCIAL STATEMENTS") have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes thereto) and present fairly, in all material
respects, the financial position of WesterN SizzliN as of the dates thereof and
the results of their operations for the periods then ended subject and in the
case of any interim financial statements, to normal year-end adjustments and any
other adjustments described therein.
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in SCHEDULE
2.8 attached hereto, since December 31, 1998, through the date of this
Agreement, there has not been (i) any event, occurrence, fact, condition,
change, development or effect ("EVENT") that has had or could reasonably be
expected to have a WesterN SizzliN Material Adverse Effect; or (ii) any
declaration, payment or setting aside for payment of any dividend or other
distribution or any redemption, purchase or other acquisition of any shares of
capital stock or securities of WesterN SizzliN by or from WesterN SizzliN.
2.9 COMPLIANCE WITH LAWS. To the best knowledge of WesterN SizzliN, the
business of WesterN SizzliN has been operated in compliance with all Laws
applicable to its business except for any instances of non-compliance which do
not and will not have a WesterN SizzliN Material Adverse Effect.
2.10 PERMITS. (i) WesterN SizzliN has all permits, certificates, licenses,
approvals, tariffs and other authorizations required in connection with the
operation of their business (collectively, "WESTERN SIZZLIN PERMITS"), (ii)
WesterN SizzliN is not in violation of any WesterN SizzliN Permit, and (iii) no
proceedings are pending or, to the knowledge of WesterN SizzliN, threatened, to
revoke or limit any WesterN SizzliN Permit, except, in each case, those the
absence or violation of which do not and will not have a WesterN SizzliN
Material Adverse Effect.
2.11 FINDERS AND BROKERS. Neither WesterN SizzliN nor any of its officers
or directors has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated hereby.
2.12 CONTRACTS. Except as set forth in SCHEDULE 2.12 attached hereto,
WesterN SizzliN is neither a party nor is subject to any material note, bond,
mortgage, indenture, contract, lease, license, agreement, understanding,
instrument, bid or proposal ("WESTERN SIZZLIN MATERIAL CONTRACT"), which WesterN
SizzliN Material Contract may be oral or in writing. For purposes of this
Section 2.12, a note, bond, mortgage, indenture, contract, lease, license,
agreement, understanding, instrument, bid or proposal shall be considered
material if it is required to be described in or filed as an exhibit to any
document filed under the Securities Act or the Exchange Act, as the case may be.
WesterN SizzliN has either made available to Austins true and accurate copies of
the WesterN SizzliN Material Contracts, or, if such WesterN SizzliN Material
Contracts are oral, has described the terms and obligations thereof
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to Austins. All such WesterN SizzliN Material Contracts are valid and binding
and are in full force and effect and enforceable against WesterN SizzliN in
accordance with their respective terms, subject to the Enforceability
Exceptions. Except as set forth in SCHEDULE 2.5 attached hereto, (i) no Consent
of any person is needed in order that each such WesterN SizzliN Material
Contract shall continue in full force and effect in accordance with its terms
without penalty, acceleration or rights of early termination by reason of the
consummation of the transactions contemplated by this Agreement, except for
Consents the absence of which would not have a WesterN SizzliN Material Adverse
Effect, and (ii) WesterN SizzliN is not in violation or breach of or default
under any such WesterN SizzliN Material Contract; nor to WesterN SizzliN's
knowledge is any other party to any such WesterN SizzliN Material Contract in
violation or breach of or default under any such WesterN SizzliN Material
Contract in each case where such violation or breach would have a WesterN
SizzliN Material Adverse Effect.
2.13 EMPLOYEE BENEFIT PLANS. Except as set forth in SCHEDULE 2.13 attached
hereto, there are no material Benefit Plans (as defined below) maintained or
contributed to by WesterN SizzliN ("WESTERN SIZZLIN BENEFIT PLAN"). A "BENEFIT
PLAN" shall include (i) an employee benefit plan as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended, together with
all regulations thereunder ("ERISA"), even if, because of some other provision
of ERISA, such plan is not subject to any or all of ERISA's provisions, and (ii)
whether or not described in the preceding clause, any pension, profit sharing,
stock bonus, deferred or supplemental compensation, retirement, thrift, stock
purchase or stock option plan, or any other compensation, welfare, fringe
benefit or retirement plan, program, policy, course of conduct, understanding or
arrangement of any kind whatsoever, providing for benefits for or the welfare of
any or all of the current or former employees or agents of WesterN SizzliN or
their beneficiaries or dependents; provided that Benefit Plans shall not include
any multiemployer plan, as defined in Section 3 (37) of ERISA (a "MULTIEMPLOYER
PLAN").
No WesterN SizzliN Benefit Plan is a defined benefit pension plan subject to
Title IV of ERISA or Section 412 of the Code. Each of the WesterN SizzliN
Benefit Plans has been maintained in material compliance with its terms and all
applicable Law, except where the failure to do so would not be reasonably likely
to result in a WesterN SizzliN Material Adverse Effect. WesterN SizzliN does not
contribute to, or have any outstanding liability with respect to, any
Multiemployer Plan.
Except as set forth in SCHEDULE 2.13 attached hereto, the consummation of
the transactions contemplated by this Agreement will not (i) entitle any
individual to severance pay, or (ii) accelerate the time of payment or vesting
of benefits or increase the amount of compensation due to any individual.
2.14 TAXES AND RETURNS. Except as disclosed in SCHEDULE 2.14 attached
hereto, WesterN SizzliN has timely filed, or caused to be timely filed all
material Tax Returns required to be filed by it, and has paid, collected or
withheld, or caused to be paid, collected or withheld, all material amounts of
Taxes required to be paid, collected or withheld, other than such Taxes for
which adequate reserves in the WesterN SizzliN Financial Statements have been
established or which are being contested in good faith. Except as set forth in
SCHEDULE 2.14 attached hereto, there are no claims or assessments pending
against WesterN SizzliN for any alleged deficiency in any Tax, and WesterN
SizzliN has not been notified in writing of any proposed Tax claims or
assessments against WesterN SizzliN (other than in each case, claims or
assessments for which adequate reserves in the WesterN SizzliN Financial
Statements have been established or which are being contested in good faith or
are immaterial in amount). Except as set forth in SCHEDULE 2.14 attached hereto,
WesterN SizzliN has not executed any waivers or extensions of any applicable
statute of limitations to assess any material amount of Taxes. Except as set
forth in SCHEDULE 2.14 attached hereto, there are no outstanding requests by
WesterN SizzliN for any extension of time within which to file any material Tax
Return or within which to pay any material amounts of Taxes shown to be due on
any return.
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(b) To the best knowledge of WesterN SizzliN, there are no liens for
material amounts of Taxes on the assets of WesterN SizzliN except for statutory
liens for current Taxes not yet due and payable.
(c) For purposes of this Agreement, the term "TAX" shall mean any federal,
state, local, foreign or provincial income, gross receipts, property, sales,
use, license, excise, franchise, employment, payroll, alternative or added
minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty imposed by any Governmental Authority. The
term "TAX RETURN" shall mean a report, return or other information (including
any attached schedules or any amendments to such report, return or other
information) required to be supplied to or filed with a governmental entity with
respect to any Tax, including an information return, claim for refund, amended
return or declaration or estimated Tax.
2.15 FRANCHISE COMPLIANCE. The WesterN SizzliN Uniform Franchise Offering
Circular dated March 8, 1999, complies, in all material respects, with the rules
and regulations promulgated by the Federal Trade Commission thereunder and any
applicable state laws relating to franchising in which WesterN SizzliN currently
has operating franchises or is offering franchises.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND
CERTAIN COVENANTS OF AUSTINS
Austins represents, warrants and/or covenants to and with WesterN SizzliN as
follows:
3.1 ORGANIZATION AND GOOD STANDING. Austins and Acquisition Subsidiary
each is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and each has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Austins is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the character of the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing would not have a
material adverse effect on the business, assets (including, but not limited to,
intangible assets), prospects, condition (financial or otherwise), properties
(including, but not limited to, intangible properties), liabilities or the
results of operations of Austins taken as a whole ("AUSTINS MATERIAL ADVERSE
EFFECT"). Austins has heretofore made available to WesterN SizzliN accurate and
complete copies of the Certificates of Incorporation and Bylaws, as currently in
effect, of Austins and Acquisition Subsidiary. Austins owns all of the 1,000
outstanding shares of capital stock of Acquisition Subsidiary.
3.2 CAPITALIZATION. As of the date hereof, the authorized capital stock of
Austins consists of 7,500,000 shares of Austins Stock, $0.01 par value. As of
March 31, 1999, 2,647,927 shares of Austins Stock were issued and outstanding.
No other capital stock of Austins is authorized or issued. All issued and
outstanding shares of the Austins Stock are duly authorized, validly issued,
fully paid and non-assessable and were issued free of preemptive rights and in
compliance with applicable securities laws. Except as set forth in the Austins
Securities Filings (as hereinafter defined) or on SCHEDULE 3.2 attached hereto,
or as otherwise contemplated by this Agreement, as of the date hereof there are
no outstanding rights, subscriptions, warrants, puts, calls, unsatisfied
preemptive rights, options or other agreements of any kind relating to any of
the outstanding, authorized but unissued, unauthorized or treasury shares of the
capital stock or any other security of Austins, and there is no authorized or
outstanding security of any kind convertible into or exchangeable for any such
capital stock or other security. Except as disclosed in the Austins Securities
Filings, there are no restrictions upon the transfer of or otherwise pertaining
to the securities (including, but not limited to, the ability to pay dividends
thereon) or retained earnings of Austins or the ownership thereof other than
those imposed by the Securities Act, the Securities Exchange Act, applicable
state securities laws or applicable corporate law.
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3.3 AUTHORIZATION; BINDING AGREEMENT. Austins and Acquisition Subsidiary
have all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the other agreements and documents referred
to herein to which Austins or Acquisition Subsidiary is or will be a party or a
signatory (the "AUSTINS ANCILLARY AGREEMENTS") and the consummation of the
transactions contemplated hereby and thereby, including, but not limited to, the
Merger have been duly and validly authorized by the respective Boards of
Directors of Austins and Acquisition Subsidiary, as appropriate, and no other
corporate proceedings on the part of Austins or Acquisition Subsidiary are
necessary to authorize the execution and delivery of this Agreement and the
Austins Ancillary Agreements or to consummate the transactions contemplated
hereby or thereby (other than the requisite approval by the sole shareholder of
Acquisition Subsidiary of this Agreement and the Merger). This Agreement has
been duly and validly executed and delivered by each of Austins and Acquisition
Subsidiary and constitutes, and upon execution and delivery thereof as
contemplated by this Agreement, the Austins Ancillary Agreements will
constitute, the legal, valid and binding agreements of Austins and Acquisition
Subsidiary, enforceable against each of Austins and Acquisition Subsidiary in
accordance with its and their respective terms, subject to the Enforceability
Exceptions.
3.4 GOVERNMENTAL APPROVALS. No Consent from or with any Governmental
Authority on the part of Austins or Acquisition Subsidiary is required in
connection with the execution or delivery by Austins and Acquisition Subsidiary
of this Agreement and the Austins Ancillary Agreements or the consummation by
Austins and Acquisition Subsidiary of the transactions contemplated hereby or
thereby other than state securities laws administrators, the National
Association of Securities Dealers, Inc. ("NASD") and any applicable Delaware
Governmental Authorities.
3.5 NO VIOLATIONS. The execution and delivery of this Agreement and the
Austins Ancillary Agreements, the consummation of the transactions contemplated
hereby and thereby and compliance by Austins with any of the provisions hereof
or thereof will not (i) conflict with or result in any breach of any provision
of the Certificate of Incorporation or Bylaws or other governing instruments of
Austins or Acquisition Subsidiary, (ii) require any Consent under or result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration or augment the performance required) under any of the terms,
conditions or provisions of any Austins Material Contract (as hereinafter
defined), (iii) result in the creation or imposition of any lien or encumbrance
of any kind upon any of the assets of Austins, or (iv) contravene any Law
currently in effect to which Austins or its or any of its assets or properties
is subject, except in the case of clauses (ii), (iii) and (iv), above, for any
deviations from the foregoing which do not or would not have an Austins Material
Adverse Effect.
3.6 LITIGATION. Except as set forth in SCHEDULE 3.6, there is no action,
cause of action, claim, demand, suit, proceeding, citation, summons, subpoena,
inquiry or investigation of any nature, civil, criminal, regulatory or
otherwise, in law or in equity, by or before any court, tribunal, arbitrator or
other Governmental Authority ("LITIGATION") pending, or to the knowledge of
Austins, threatened against Austins or Acquisition Subsidiary, any officer,
director, employee or agent thereof in his or her capacity as such, or as a
fiduciary with respect to any Austins Benefit Plan, as hereinafter defined, or
otherwise relating to Austins or its securities or any properties or rights of
Austins or any Austins Benefit Plan. Further, except as set forth in SCHEDULE
3.6, Austins management is unaware of any facts based upon which Litigation
could be initiated against Austins or Acquisition Subsidiary.
3.7 SECURITIES FILINGS. Austins has made available to WesterN SizzliN true
and complete copies of (i) its Annual Report on Form 10-KSB, for the years ended
December 31, 1997 and 1998, as filed with the Securities and Exchange Commission
("SEC"), (ii) its proxy statement relating to the annual meeting of shareholders
of Austins for 1998, as filed with the SEC. The reports and statements set forth
in clauses (i) through (iii), above, and those subsequently provided or required
to be provided pursuant to this Section, are referred to collectively as the
"AUSTINS SECURITIES FILINGS"). As of their
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respective dates, or as of the date of the last amendment thereof, if amended
after filing, none of the Austins Securities Filings (including all schedules
thereto and disclosure documents incorporated by reference therein), contained
or, as to Austins Securities Filings subsequent to the date hereof, will contain
any untrue statement of a material fact or omitted or, as to Austins Securities
Filings subsequent to the date hereof, will omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
the Austins Securities Filings at the time of filing or as of the date of the
last amendment thereof, if amended after filing, complied or, as to Austins
Securities Filings subsequent to the date hereof, will comply in all material
respects with the Securities Exchange Act or the Securities Act, as applicable.
There is no Litigation pending or, to the knowledge of Austins, threatened
against Austins, any officer, director, employee or agent thereof, in his
official capacity as such, or as a fiduciary with respect to any Austins Benefit
Plan, as hereinafter defined, or otherwise relating to Austins or the securities
of any of them, or any properties or rights of Austins or any Austins Benefit
Plan which is required to be described in any Austins Securities Filing that is
not so described. No event has occurred as a consequence of which Austins would
be required to file a Current Report on Form 8-K pursuant to the requirements of
the Exchange Act as to which such a report has not been timely filed with the
SEC. Any reports, statements and registration statements and amendments thereof
(including, without limitation, Reports on Form 10-KSB, Quarterly Reports on
Form 10-QSB and Current Reports on Form 8-K, as amended) filed by Austins with
the SEC after the date hereof shall be provided to WesterN SizzliN on the date
of such filing.
3.8 AUSTINS FINANCIAL STATEMENTS. The audited consolidated financial
statements and unaudited interim financial statements of Austins included in the
Austins Securities Filings (the "AUSTINS FINANCIAL STATEMENTS") have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as may be indicated therein or in the notes thereto)
and present fairly, in all material respects, the financial position of Austins
as at the dates thereof and the results of their operations and cash flows for
the periods then ended subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments, any other adjustments
described therein and the fact that certain information and notes have been
condensed or omitted in accordance with the Exchange Act.
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the
Austins Securities Filings and as described below, since December 31, 1998
through the date of this Agreement, there has not been: (i) any Event that has
had or could reasonably be expected to have an Austins Material Adverse Effect;
or (ii) any declaration, payment or setting aside for payment of any dividend or
other distribution or any redemption, purchase or other acquisition of any
shares of capital stock or securities of Austins by or from Austins.
3.10 COMPLIANCE WITH LAWS. To the best knowledge of Austins, the business
of Austins or Acquisition Subsidiary has been operated in compliance with all
Laws applicable to its business, except for any instances of non-compliance
which do not and will not have an Austins Material Adverse Effect.
3.11 PERMITS. (I) Austins and Acquisition Subsidiary have all permits,
certificates, licenses, approvals, tariffs and other authorizations required in
connection with the operation of their business (collectively, "AUSTINS
PERMITS"), (II) neither Austins nor Acquisition Subsidiary is not in violation
of any Austins Permit, and (iii) no proceedings are pending or, to the knowledge
of Austins, threatened, to revoke or limit any Austins Permit, except, in each
case, those the absence or violation of which do not and will not have a Austins
Material Adverse Effect.
3.12 FINDERS AND BROKERS. Neither Austins nor Acquisition Subsidiary nor
any of their officers or directors has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
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3.13 CONTRACTS. Except as set forth in SCHEDULE 3.13 attached hereto,
neither Austins nor Acquisition Subsidiary is a party or is subject to any
material note, bond, mortgage, indenture, contract, lease, license, agreement,
understanding, instrument, bid or proposal ( "AUSTINS MATERIAL CONTRACT"), which
Austins Material Contract may be oral or in writing. For purposes of this
Section 3.13, a note, bond, mortgage, indenture, contract, lease, license,
agreement, understanding, instrument, bid or proposal shall be considered
material if it is required to be described in or filed as an exhibit to any
document filed under the Securities Act or the Securities Exchange Act as the
case may be. Austins has either made available to WesterN SizzliN true and
accurate copies of the Austins Material Contracts, or, if such Austins Material
Contracts are oral, has described the terms and obligations thereof to Austins.
All such Austins Material Contracts are valid and binding and are in full force
and effect and enforceable against Austins in accordance with their respective
terms, subject to the Enforceability Exceptions. No Consent of any person is
needed in order that each such Austins Material Contract shall continue in full
force and effect in accordance with its terms without penalty, acceleration or
rights of early termination by reason of the consummation of the transactions
contemplated by this Agreement, except for Consents the absence of which would
not have a Austins Material Adverse Effect, nor is Austins or Acquisition
Subsidiary in violation or breach of or default under any such Austins Material
Contract; nor to Austins's knowledge is any other party to any such Austins
Material Contract in violation or breach of or default under any such Austins
Material Contract in each case where such violation or breach would have a
Austins Material Adverse Effect.
3.14 EMPLOYEE BENEFIT PLANS. Except as set forth in SCHEDULE 3.14 attached
hereto, there are no material Benefit Plans (as defined below) maintained or
contributed to by Austins or Acquisition Subsidiary ("AUSTINS BENEFIT PLAN"). A
"BENEFIT PLAN" shall include (i) an employee benefit plan as defined in Section
3(3) of ERISA, even if, because of some other provision of ERISA, such plan is
not subject to any or all of ERISA's provisions, and (ii) whether or not
described in the preceding clause, any pension, profit sharing, stock bonus,
deferred or supplemental compensation, retirement, thrift, stock purchase or
stock option plan, or any other compensation, welfare, fringe benefit or
retirement plan, program, policy, course of conduct, understanding or
arrangement of any kind whatsoever, providing for benefits for or the welfare of
any or all of the current or former employees or agents of Austins or their
beneficiaries or dependents; provided that Benefit Plans shall not include any
Multiemployer Plan.
No Austins Benefit Plan is a defined benefit pension plan subject to Title
IV of ERISA or Section
412 of the Code. Each of the Austins Benefit Plans has been maintained in
material compliance with its terms and all applicable Law, except where the
failure to do so would not be reasonably likely to result in an Austins Material
Adverse Effect. Austins does not contribute to, or have any outstanding
liability with respect to, any Multiemployer Plan.
Except as set forth in SCHEDULE 3.14 attached hereto, the consummation of
the transactions contemplated by this Agreement will not (i) entitle any
individual to severance pay, or (ii) accelerate the time of payment or vesting
of benefits or increase the amount of compensation due to any individual.
3.15 TAXES AND RETURNS. (a) Except as disclosed in SCHEDULE 3.14 attached
hereto, Austins has timely filed, or caused to be timely filed all material Tax
Returns required to be filed by it, and has paid, collected or withheld, or
caused to be paid, collected or withheld, all material amounts of Taxes required
to be paid, collected or withheld, other than such Taxes for which adequate
reserves in the Austins Financial Statements have been established or which are
being contested in good faith. Except as set forth in SCHEDULE 3.15 attached
hereto, there are no claims or assessments pending against Austins for any
alleged deficiency in any Tax, and Austins has not been notified in writing of
any proposed Tax claims or assessments against Austins (other than in each case,
claims or assessments for which adequate reserves in the Austins Financial
Statements have been established or which are being contested in good faith or
are immaterial in amount). Except as set forth in SCHEDULE 3.15 attached
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hereto, Austins has not executed any waivers or extensions of any applicable
statute of limitations to assess any material amount of Taxes. Except as set
forth in SCHEDULE 3.15 attached hereto, there are no outstanding requests by
Austins for any extension of time within which to file any material Tax Return
or within which to pay any material amounts of Taxes shown to be due on any
return.
(b) To the best knowledge of Austins, there are no liens for material
amounts of Taxes on the assets of Austins except for statutory liens for current
Taxes not yet due and payable.
(c) For purposes of this Agreement, the term "TAX" shall mean any federal,
state, local, foreign or provincial income, gross receipts, property, sales,
use, license, excise, franchise, employment, payroll, alternative or added
minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty imposed by any Governmental Authority. The
term "TAX RETURN" shall mean a report, return or other information (including
any attached schedules or any amendments to such report, return or other
information) required to be supplied to or filed with a governmental entity with
respect to any Tax, including an information return, claim for refund, amended
return or declaration or estimated Tax.
ARTICLE IV
ADDITIONAL COVENANTS OF WESTERN SIZZLIN
WesterN SizzliN represents, covenants and agrees as follows:
4.1 CONDUCT OF BUSINESS OF WESTERN SIZZLIN. Except as expressly
contemplated by this Agreement, during the period from the date of this
Agreement to the Effective Time, WesterN SizzliN shall conduct its business in
the ordinary course and consistent with past practice, subject to the
limitations contained in this Agreement, and WesterN SizzliN shall use its
reasonable business efforts to preserve intact its business organization, to
keep available the services of its officers and employees and to maintain
satisfactory relationships with all persons with whom it does business. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement, after the date of this Agreement and prior to the
Effective Time, WesterN SizzliN will not, without the prior written consent of
Austins:
(i) amend or propose to amend its Articles of Incorporation or Bylaws in
any material respect;
(ii) except for the possible sale of up to 500,000 treasury shares
repurchased in 1998, authorize for issuance, issue, grant, sell, pledge,
dispose of or propose to issue, grant, sell, pledge or dispose of any shares
of, or any options, warrants, commitments, subscriptions or rights of any
kind to acquire or sell any shares of, the capital stock or other securities
of WesterN SizzliN including, but not limited to, any securities convertible
into or exchangeable for shares of stock of any class of WesterN SizzliN,
except for the issuance of WesterN SizzliN Shares pursuant to the exercise
of stock options or warrants outstanding on the date of this Agreement in
accordance with their present terms and except for the grant of employee
stock options and issuance of WesterN SizzliN Shares pursuant to the
exercise thereof, in the ordinary course of business consistent with past
practice; and
(iii) split, combine or reclassify any shares of its capital stock or
declare, pay or set aside any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or directly or indirectly redeem, purchase or otherwise
acquire or offer to acquire any shares of its capital stock or other
securities;
(iv) other than in the ordinary course of business consistent with past
practice, (a) create, incur or assume any debt or obligations in respect of
capital leases, except refinancings of existing obligations on terms that
are no less favorable to WesterN SizzliN than the existing terms; (b)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly,
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indirectly, contingently or otherwise) for the obligations of any person;
(c) make any capital expenditures or make any loans, advances or capital
contributions to, or investments in, any other person (other than customary
travel, relocation or business advances to employees made in the ordinary
course of business consistent with past practice); (d) acquire the stock or
assets of, or merge or consolidate with, any other person; (e) voluntarily
incur any material liability or obligation (absolute, accrued, contingent or
otherwise); or (f) sell, transfer, mortgage, pledge or otherwise dispose of,
or encumber, or agree to sell, transfer, mortgage, pledge or otherwise
dispose of or encumber, any assets or properties, real, personal or mixed
material to WesterN SizzliN other than to secure debt permitted under (a) of
this clause (iv);
(v) increase in any manner the compensation of any of its officers or
employees or enter into, establish, amend or terminate any employment,
consulting, retention, change in control, collective bargaining, bonus or
other incentive compensation, profit sharing, health or other welfare, stock
option or other equity, pension, retirement, vacation, severance, deferred
compensation or other compensation or benefit plan, policy, agreement,
trust, fund or arrangement with, for or in respect of, any shareholder,
officer, director, other employee, agent, consultant or affiliate other than
as required pursuant to the terms of agreements in effect on the date of
this Agreement and such as are in the ordinary course of business consistent
with past practice; or
(vi) enter into any lease or amend any lease of real property other than
in the ordinary course of business consistent with past practice.
Furthermore, WesterN SizzliN covenants, represents and warrants that from
and after the date of this Agreement, unless Austins shall otherwise expressly
consent in writing, WesterN SizzliN shall use its reasonable business efforts to
maintain in full force and effect all WesterN SizzliN Permits necessary for, or
otherwise material to, such business.
4.2 NOTIFICATION OF CERTAIN MATTERS. WesterN SizzliN shall give prompt
notice to Austins if any of the following occur after the date of this
Agreement: (i) any notice of, or other communication relating to, a default or
Event which, with notice or lapse of time or both, would become a default under
any WesterN SizzliN Material Contract which could have a WesterN SizzliN
Material Adverse Effect; (ii) receipt of any notice or other communication in
writing from any third party alleging that the Consent of such third party is or
may be required in connection with the transactions contemplated by this
Agreement; (iii) receipt of any material notice or other communication from any
Governmental Authority in connection with the transactions contemplated by this
Agreement; (iv) the occurrence of an Event which could have a WesterN SizzliN
Material Adverse Effect; (v) the commencement or threat of any Litigation
involving or affecting WesterN SizzliN, or any of its properties or assets, or,
to its knowledge, any employee, agent, director or officer, in his or her
capacity as such, of WesterN SizzliN which, if pending on the date hereof, would
have been required to have been disclosed in this Agreement or which relates to
the consummation of the Merger or any material development in connection with
any Litigation disclosed by WesterN SizzliN in or pursuant to this Agreement;
(vi) the termination, for whatever reason, of the employment of any of the
WesterN SizzliN key officers listed on Schedule 4.2 which termination shall be
deemed to be the occurrence of an Event which could have a WesterN SizzliN
Material Adverse Effect; and (vii) the occurrence of any Event that could cause
a breach by WesterN SizzliN of any provision of this Agreement or a WesterN
SizzliN Ancillary Agreement, including such a breach that could occur if such
Event had taken place on or prior to the date of this Agreement.
4.3 ACCESS AND INFORMATION. Between the date of this Agreement and the
Effective Time, WesterN SizzliN will give, and shall direct its accountants and
legal counsel to give, Austins, and its respective authorized representatives
(including, without limitation, financial advisors, accountants and legal
counsel) at all reasonable times access as reasonably requested to all offices
and other facilities and to all contracts, agreements, commitments, books and
records of or pertaining to WesterN SizzliN,
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will permit the foregoing to make such reasonable inspections as they may
require and will cause its officers promptly to furnish Austins with such
financial and operating data and other information with respect to the business
and properties of WesterN SizzliN as Austins may from time to time reasonably
request.
4.4 SHAREHOLDER APPROVAL. As soon as practicable upon the effective date
of the Form S-4, WesterN SizzliN will take all steps necessary to duly call,
give notice of, convene and hold a meeting of its shareholders for the purpose
of approving the Merger, including this Agreement (the "WESTERN SIZZLIN
PROPOSAL") and for such other purposes as may be necessary or desirable in
connection with effectuating the transactions contemplated hereby. In the
alternative, shareholder approval of the WesterN SizzliN Proposal will be
obtained by the unanimous written consent of WesterN SizzliN's shareholders
without a meeting. Except as otherwise contemplated by this Agreement, the Board
of Directors of WesterN SizzliN (i) will recommend to the shareholders of
WesterN SizzliN that they approve the WesterN SizzliN Proposal, and (ii) will
use its reasonable best efforts to obtain any necessary approval by WesterN
SizzliN's shareholders of the WesterN SizzliN Proposal.
4.5 REASONABLE BUSINESS EFFORTS. Subject to the terms and conditions
herein provided, WesterN SizzliN agrees to use its reasonable business efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the Merger and the transactions contemplated by this
Agreement including, but not limited to (i) obtaining any necessary Consents to
this Agreement and the transactions contemplated hereby, (ii) the defending of
any Litigation against WesterN SizzliN challenging this Agreement or the
consummation of the transactions contemplated hereby, and (iii) obtaining all
Consents from Governmental Authorities required for the consummation of the
Merger and the transactions contemplated thereby. Upon the terms and subject to
the conditions hereof, WesterN SizzliN agrees to use reasonable business efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary to satisfy the other conditions of the closing set forth
herein.
4.6 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect, WesterN
SizzliN shall not, and shall cause its affiliates not to, issue or cause the
publication of any press release or any other announcement with respect to the
Merger, the WesterN SizzliN Proposal or the transactions contemplated hereby
without the consent of Austins, except where such release or announcement is
required by applicable Law, in which case WesterN SizzliN, prior to making such
announcement, shall consult with Austins regarding the same.
4.7 COMPLIANCE. In consummating the Merger and the transactions
contemplated hereby, WesterN SizzliN shall comply in all material respects with
the provisions of, or be in compliance, in all material respects, with all
applicable Laws.
ARTICLE V
ADDITIONAL COVENANTS OF AUSTINS
Austins covenants and agrees as follows:
5.1 CONDUCT OF BUSINESS OF AUSTINS. Except as expressly contemplated by
this Agreement, during the period from the date of this Agreement to the
Effective Time, Austins shall conduct its business in the ordinary course and
consistent with past practice, subject to the limitations contained in this
Agreement, and Austins shall use its reasonable business efforts to preserve
intact its business organization, to keep available the services of its officers
and employees and to maintain satisfactory relationships with all persons with
whom it does business. Without limiting the generality of the foregoing, and
except as otherwise expressly provided in this Agreement or as otherwise set
forth in the Austins Disclosure Letter (as hereinafter defined), after the date
hereof and prior to the Effective Time, Austins will not, without the prior
written consent of WesterN SizzliN:
(i) amend or propose to amend its Certificate of Incorporation or Bylaws
in any material respect;
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(ii) authorize for issuance, issue, grant, sell, pledge, dispose of or
propose to issue, grant, sell, pledge or dispose of any shares of, or any
options, warrants, commitments, subscriptions or rights of any kind to
acquire or sell any shares of, the capital stock or other securities of
Austins, including, but not limited to, any securities convertible into or
exchangeable for shares of stock of any class of Austins, except for the
issuance of shares of Austins Stock pursuant to the exercise of stock
options outstanding on the date of this Agreement in accordance with their
present terms and except for the grant of employee stock options and
issuance of shares of Austins Stock pursuant to the exercise thereof in the
ordinary course of business consistent with past practice;
(iii) except as otherwise contemplated by Section 1.3(b) of this
Agreement, split, combine or reclassify any shares of its capital stock or
declare, pay or set aside any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or directly or indirectly redeem, purchase or otherwise
acquire or offer to acquire any shares of its capital stock or other
securities; or
(iv) other than in the ordinary course of business consistent with past
practice, (a) create, incur or assume any debt or obligations in respect of
capital leases, except refinancings of existing obligations on terms that
are no less favorable to Austins than the existing terms; (b) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, indirectly, contingently or otherwise) for the obligations of any
person; (c) make any capital expenditures or make any loans, advances or
capital contributions to, or investments in, any other person (other than
customary travel, relocation or business advances to employees made in the
ordinary course of business consistent with past practice); (d) acquire the
stock or assets of, or merge or consolidate with, any other person; (e)
voluntarily incur any material liability or obligation (absolute, accrued,
contingent or otherwise); or (f) sell, transfer, mortgage, pledge or
otherwise dispose of, or encumber, or agree to sell, transfer, mortgage,
pledge or otherwise dispose of or encumber, any assets or properties, real,
personal or mixed material to Austins other than to secure debt permitted
under (a) of this clause (iv);
(v) increase in any manner the compensation of any of its officers or
employees or enter into, establish, amend or terminate any employment,
consulting, retention, change in control, collective bargaining, bonus or
other incentive compensation, profit sharing, health or other welfare, stock
option or other equity, pension, retirement, vacation, severance, deferred
compensation or other compensation or benefit plan, policy, agreement,
trust, fund or arrangement with, for or in respect of, any shareholder,
officer, director, other employee, agent, consultant or affiliate other than
as required pursuant to the terms of agreements in effect on the date of
this Agreement and such as are in the ordinary course of business consistent
with past practice; or
(vi) enter into any lease or amend any lease of real property other than
in the ordinary course of business consistent with past practice.
Furthermore, Austins covenants, represents and warrants that from and after
the date of this Agreement, unless WesterN SizzliN shall otherwise expressly
consent in writing, Austins shall use its reasonable business efforts to
maintain in full force and effect all the Austins Permits necessary for, or
otherwise material to, such business.
5.2 NOTIFICATION OF CERTAIN MATTERS. Austins shall give prompt notice to
WesterN SizzliN if any of the following occur after the date of this Agreement:
(i) any notice of, or other communication relating to, a default or Event which,
with notice or lapse of time or both, would become a default under any Austins
Material Contract which could have an Austins Material Adverse Effect; (ii)
receipt of any notice or other communication in writing from any third party
alleging that the Consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement; (iii) receipt
of any material notice or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement; (iv) the
occurrence of an Event
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which could have an Austins Material Adverse Effect; (v) the commencement or
threat of any Litigation involving or affecting Austins or any of its respective
properties or assets, or, to its knowledge, any employee, agent, director or
officer, in his or her capacity as such, of Austins or any of its subsidiaries
which, if pending on the date hereof, would have been required to have been
disclosed in this Agreement or which relates to the consummation of the Merger
or any material development in connection with any Litigation disclosed by
Austins in or pursuant to this Agreement or the Austins Securities Filings; and
(vi) the occurrence of any Event that could cause a breach by Austins of any
provision of this Agreement or an Austins Ancillary Agreement, including such a
breach that could occur if such Event had taken place on or prior to the date of
this Agreement.
5.3 ACCESS AND INFORMATION. Between the date of this Agreement and the
Effective Time, Austins will give, and shall direct its accountants and legal
counsel to give WesterN SizzliN, and its respective authorized representatives
(including, without limitation, its lenders, financial advisors, accountants and
legal counsel) at all reasonable times access as reasonably requested to all
offices and other facilities and to all contracts, agreements, commitments,
books and records of or pertaining to Austins, will permit the foregoing to make
such reasonable inspections as they may require and will cause its officers
promptly to furnish WesterN SizzliN with (a) such financial and operating data
and other information with respect to the business and properties of Austins as
WesterN SizzliN may from time to time reasonably request, and (b) a copy of each
material report, schedule and other document filed or received by Austins
pursuant to the requirements of applicable securities laws.
5.4. REASONABLE BUSINESS EFFORTS. Subject to the terms and conditions
herein provided, Austins agrees to use its reasonable business efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the Merger and the transactions contemplated by this Agreement
including, but not limited to (i) obtaining any necessary Contracts to this
Agreement and the transactions contemplated hereby, (ii) the defending of any
Litigation against Austins challenging this Agreement or the consummation of the
transactions contemplated hereby, or (iii) obtaining all consents from
Governmental Authorities required for the consummation of the Merger and the
transactions contemplated thereby. Upon the terms and subject to the conditions
hereof, Austins agrees to use reasonable business efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary to
satisfy the other conditions of the Closing set forth herein.
5.5 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect, Austins
shall not, and shall cause its affiliates not to, issue or cause the publication
of any press release or any other announcement with respect to the Merger, the
WesterN SizzliN Proposal, or the transactions contemplated hereby or thereby
without the consent of WesterN SizzliN, except where such release or
announcement is required by applicable Law or pursuant to any applicable listing
agreement with, or rules or regulations of, the NASD, in which case Austins,
prior to making such announcement, will consult with WesterN SizzliN regarding
the same.
5.6 COMPLIANCE. In consummating the Merger and the transactions
contemplated hereby, Austins shall comply in all material respects with the
provisions of the Securities Exchange Act and the Securities Act and shall
comply, and/or cause its subsidiaries to comply or to be in compliance, in all
material respects, with all other applicable Laws.
5.7 SEC FILINGS, SHAREHOLDER NOTICES AND NEWS RELEASES. Austins shall send
to WesterN SizzliN a copy of all material public reports and materials as and
when it sends the same to its shareholders, the SEC or any state or foreign
securities commission.
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ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of
each party to effect the Merger shall be subject to the fulfillment or waiver at
or prior to the Effective Time of the following conditions:
6.1.1 SHAREHOLDER APPROVAL. The WesterN SizzliN Proposal shall have
been approved at or prior to the Effective Time by the requisite vote of the
shareholders of WesterN SizzliN in accordance with the Tennessee Act.
6.1.2 NO INJUNCTION OR ACTION. No order, statute, rule, regulation,
executive order, stay, decree, judgment or injunction shall have been
enacted, entered, promulgated or enforced by any court or other Governmental
Authority which prohibits or prevents the consummation of the Merger which
has not been vacated, dismissed or withdrawn by the Effective Time. WesterN
SizzliN and Austins shall use their reasonable best efforts to have any of
the foregoing vacated, dismissed or withdrawn by the Effective Time.
6.1.3 GOVERNMENTAL APPROVALS. All Consents of any Governmental
Authority required for the consummation of the Merger and the transactions
contemplated by this Agreement shall have been obtained by Final Order (as
hereafter defined), except as may be waived by Austins and WesterN SizzliN
or those Consents the failure of which to obtain will not have a Surviving
Corporation Material Adverse Effect (as defined below). The term "FINAL
ORDER" with respect to any Consent of a Governmental Authority shall mean an
action by the appropriate Governmental Authority as to which: (i) no request
for stay by such Governmental Authority of the action is pending, no such
stay is in effect, and, if any deadline for filing any such request is
designated by statute or regulation, it has passed; (ii) no petition for
rehearing or reconsideration of the action is pending before such
Governmental Authority, and no appeal or comparable administrative remedy
with such or any other Governmental Authority is pending before such
Governmental Authority, and the time for filing any such petition, appeal or
administrative remedy has passed; (iii) such Governmental Authority does not
have the action under reconsideration on its own motion and the time for
such reconsideration has passed; and (iv) no appeal to a court, or request
for stay by a court, of the Governmental Authority action is pending or in
effect, and if any deadline for filing any such appeal or request is
designated by statute or rule, it has passed.
6.1.4 REQUIRED CONSENTS. Any required Consents of any person to the
Merger or the transactions contemplated hereby shall have been obtained and
be in full force and effect, except for those the failure of which to obtain
will not have a material adverse effect on the business, assets (including,
but not limited to, intangible assets), prospects, condition (financial or
otherwise), properties (including, but not limited to, intangible
properties), liabilities or the result of operations of the Surviving
Corporation ("SURVIVING CORPORATION MATERIAL ADVERSE EFFECT") or an Austins
Material Adverse Effect.
6.1.5 BLUE SKY. Austins shall have received all state securities law
authorizations necessary to consummate the transactions contemplated hereby.
6.1.6 REVERSE SPLIT. Austins shall have completed a one for 3.135
reverse split of its outstanding common stock.
6.2 CONDITIONS TO OBLIGATIONS OF WESTERN SIZZLIN. The obligation of
WesterN SizzliN to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the following additional conditions, any one or
more of which may be waived by WesterN SizzliN:
6.2.1 AUSTINS REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Austins contained in this Agreement that are modified by
materiality or Austins Material Adverse Effect
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shall be true and correct in all respects and those that are not so modified
shall be true and correct in all material respects, on the date hereof and,
except for changes not prohibited by this Agreement, as of the Effective
Time as if made at the Effective Time.
6.2.2 PERFORMANCE BY AUSTINS. Austins shall have performed and
complied with all of the covenants and agreements in all material respects
and satisfied in all material respects all of the conditions required by
this Agreement to be performed or complied with or satisfied by Austins at
or prior to the Effective Time.
6.2.3 NO MATERIAL ADVERSE CHANGE. There shall not have occurred after
the date hereof any Event that has or reasonably could be expected to have
an Austins Material Adverse Effect.
6.2.4 CERTIFICATES AND OTHER DELIVERIES. Austins shall have delivered
to WesterN SizzliN (i) a certificate executed on its behalf by its President
or another authorized officer to the effect that the conditions set forth in
SUBSECTIONS 6.2.1, 6.2.2 AND 6.2.3, above, have been satisfied; (ii) a
certificate of existence from the Secretary of State of the State of
Delaware stating that each of Austins and Acquisition Subsidiary is a
validly existing corporation; (iii) duly adopted resolutions of the Board of
Directors of each of Austins and the Board of Directors and shareholder of
Acquisition Subsidiary approving the execution, delivery and performance of
this Agreement, the Austins Ancillary Agreements and the instruments
contemplated hereby and thereby, each certified by its Secretary; and (iv)
such other documents and instruments as WesterN SizzliN reasonably may
request.
6.2.5. S-4 EFFECTIVE. The Form S-4 including the Proxy
Statement/Prospectus shall have become effective under the Securities Act.
6.2.6 OPINION OF AUSTINS COUNSEL. WesterN SizzliN shall have received
an opinion of counsel to Austins, in form and substance reasonably
satisfactory to WesterN SizzliN, covering the matters set forth in Schedule
6.2.5 attached hereto.
6.2.7 OPINION OF WESTERN SIZZLIN COUNSEL. WesterN SizzliN shall have
received an opinion of Magee, Foster, Goldstein & Sayers substantially to
the effect that:
(i) the merger will constitute a reorganization;
(ii) Austins, Acquisition Subsidiary and WesterN SizzliN will each be a
party to that reorganization;
(iii) no gain or loss for U.S. federal income tax purposes will be
recognized by the holders of WesterN SizzliN Shares and WesterN
SizzliN Warrants upon receipt of Austins Shares;
and such opinion shall have not been withdrawn or modified in any
material respect.
6.2.8. J.C. BRADFORD OPINION. WesterN SizzliN shall have received a
favorable opinion from J.C. Bradford & Company as to that the exchange ratio
is fair to the WesterN SizzliN Shares and Warrant holders from a financial
point of view, which opinion shall not have been withdrawn.
6.2.9 POST MERGER BOARD. The Board of Directors of Austins shall, at
the Effective Time, elect nine designated representatives of WesterN SizzliN
to the Board of Directors of Austins and Acquisition Subsidiary.
6.3 CONDITIONS TO OBLIGATIONS OF AUSTINS. The obligations of Austins to
effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following additional conditions, any one or more of which
may be waived by Austins:
6.3.1 WESTERN SIZZLIN REPRESENTATIONS AND WARRANTIES. The
representations and warranties of WesterN SizzliN contained in this
Agreement that are modified by materiality or WesterN SizzliN Material
Adverse Effect shall be true and correct in all respects, and those that are
not so modified shall be true and correct in all material respects, on the
date hereof and, except for changes not prohibited by this Agreement, as of
the Effective Time as if made at the Effective Time.
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6.3.2 PERFORMANCE BY WESTERN SIZZLIN. WesterN SizzliN shall have
performed and complied with all the covenants and agreements in all material
respects and satisfied in all material respects all the conditions required
by this Agreement to be performed or complied with or satisfied by WesterN
SizzliN at or prior to the Effective Time.
6.3.3 NO MATERIAL ADVERSE CHANGE. There shall have not occurred after
the date hereof any Event that has or reasonably could be expected to have a
WesterN SizzliN Material Adverse Effect or a Surviving Corporation Material
Adverse Effect.
6.3.4 CERTIFICATES AND OTHER DELIVERIES. WesterN SizzliN shall have
delivered, or caused to be delivered, to Austins (i) a certificate executed
on its behalf by its President or another duly authorized officer to the
effect that the conditions set forth in SUBSECTIONS 6.3.1, 6.3.2 AND 6.3.3,
above, have been satisfied; (ii) a certificate of good standing from the
Secretary of State of the State of Tennessee stating that WesterN SizzliN is
a validly existing corporation in good standing; (iii) duly adopted
resolutions of the Board of Directors and shareholders of WesterN SizzliN
approving the execution, delivery and performance of this Agreement, the
WesterN SizzliN Proposal, the WesterN SizzliN Ancillary Agreements and the
instruments contemplated hereby and thereby, certified by the Secretary of
WesterN SizzliN; (iv) a true and complete copy of the Articles of
Incorporation certified by the Secretary of State of the State of Tennessee,
and a true and complete copy of the Bylaws of WesterN SizzliN certified by
the Secretary thereof; (v) the duly executed WesterN SizzliN Tax Opinion
Certificate; and (vi) such other documents and instruments as Austins
reasonably may request.
6.3.5 OPINION OF WESTERN SIZZLIN COUNSEL. Austins shall have received
the opinion of counsel to WesterN SizzliN, in form and substance reasonably
satisfactory to Austins, covering the matters set forth in SCHEDULE 6.3.5
attached hereto.
6.3.6 OPINION OF AUSTINS COUNSEL. Austins shall have received the
opinion of Cline, Williams, Wright, Johnson & Oldfather substantially to the
effect that:
(i) the merger will constitute a reorganization;
(ii) Austins, Acquisition Subsidiary and WesterN SizzliN will each be a
party to that reorganization;
(iii) Austins will not recognize any gain or loss for U.S. federal income
tax purposes as a consequence to the Merger;
and such opinion shall not have been withdrawn or modified in any
material respect.
ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the shareholders of WesterN
SizzliN described herein:
(a) by mutual written consent of Austins and WesterN SizzliN;
(b) by either Austins or WesterN SizzliN if:
(i) the Merger shall not have been consummated on or prior to August
31, 1999; PROVIDED, HOWEVER, that the right to terminate this Agreement
pursuant to this SECTION 7.1(b)(i) shall not be available to any party
whose failure to perform any of its obligations under this Agreement
results in the failure of the Merger to be consummated by such time;
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(ii) the approval of WesterN SizzliN's shareholders required by
SECTION 6.1.1 shall not have been obtained at a meeting duly convened
therefor or at any adjournment or postponement thereof or by consent;
(iii) any Governmental Authority shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the consummation of the Merger and such order,
decree or ruling or other action shall have become final and
nonappealable;
(c) by Austins, if WesterN SizzliN shall have breached in any material
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform
is incapable of being cured or has not been cured within 30 days after the
giving of written notice to WesterN SizzliN;
(d) by WesterN SizzliN, in the event holders of 15% or more of the
WesterN SizzliN Shares dissent and elect appraisal rights;
(e) by Austins if the Board of Directors of WesterN SizzliN or any
committee thereof shall have withdrawn or modified in a manner adverse to
Austins its approval or recommendation of the WesterN SizzliN Proposal, or
failed to reconfirm its recommendation within fifteen business days after a
written request to do so;
(f) by WesterN SizzliN, if Austins shall have breached in any material
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform
is incapable of being cured or has not been cured within 30 days after the
giving of written notice to Austins;
(g) by WesterN SizzliN if the Board of Directors of Austins or any
committee thereof shall have withdrawn or modified in a manner adverse to
WesterN SizzliN its approval of the Merger or failed to reconfirm its
recommendation within fifteen business days after a written request to do
so.
The party desiring to terminate this Agreement pursuant to the preceding
paragraphs (b), (c), (d), (e), (f) and (g) shall give written notice of such
termination to the other party in accordance with SECTION 8.5 below.
7.2 EFFECT OF TERMINATION AND ABANDONMENT. (a) In the event of termination
of this Agreement and the abandonment of the Merger pursuant to this Article
VII, this Agreement (other than as set forth in SECTION 7.3, SECTION 8.1 AND
SECTION 8.7) shall become void and of no effect with no liability on the part of
any party hereto (or of any of its directors, officers, employees, agents, legal
or financial advisors or other representatives).
7.3 PROCEDURE UPON TERMINATION. In the event of termination and
abandonment pursuant to this Article VII, this Agreement shall terminate and the
Merger shall be abandoned without further action by WesterN SizzliN or Austins,
provided that the agreements contained in SECTIONS 7.2, 8.1 AND 8.7 hereof shall
remain in full force and effect. If this Agreement is terminated as provided
herein, each party shall use its reasonable best efforts to redeliver all
documents, work papers and other material (including any copies thereof) of any
other party relating to the transactions contemplated hereby, whether obtained
before or after the execution hereof, to the party furnishing the same.
ARTICLE VIII
MISCELLANEOUS
8.1 CONFIDENTIALITY. Unless (i) otherwise expressly provided in this
Agreement, (ii) required by applicable Law or any listing agreement with, or the
rules and regulations of, any applicable securities exchange or the NASD, (iii)
necessary to secure any required Consents as to which the other party has
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been advised, or (iv) consented to in writing by Austins and WesterN SizzliN,
any information or documents furnished in connection herewith shall be kept
strictly confidential by WesterN SizzliN, Austins and their respective officers,
directors, employees and agents. Prior to any disclosure pursuant to the
preceding sentence, the party intending to make such disclosure shall consult
with the other party regarding the nature and extent of the disclosure. Nothing
contained herein shall preclude disclosures to the extent necessary to comply
with accounting, SEC and other disclosure obligations imposed by applicable Law.
WesterN SizzliN shall cooperate with Austins and provide such information and
documents as may be required in connection with any such filings. To the extent
Austins provides to WesterN SizzliN undisclosed information concerning its
financial results for its three month period ending March 31, 1999, such
information shall be deemed material undisclosed information within the meaning
of the Securities Act and the Exchange Act and no recipient of such information
shall disclose it nor utilize it to buy or sell Austins stock until such
information has been publicly disclosed by Austins for a period of at least
forty-eight hours.
In the event the Merger is not consummated, each party shall use its
reasonable best efforts to return to the other any documents furnished by the
other and all copies thereof any of them may have made and will hold in absolute
confidence any information obtained from the other party except to the extent
(i) such party is required to disclose such information by Law or such
disclosure is necessary or desirable in connection with the pursuit or defense
of a claim, (ii) such information was known by such party prior to such
disclosure or was thereafter developed or obtained by such party independent of
such disclosure, or (iii) such information becomes generally available to the
public or is otherwise no longer confidential. Prior to any disclosure of
information pursuant to the exception in clause (i) of the preceding sentence,
the party intending to disclose the same shall so notify the party which
provided the same in order that such party may seek a protective order or other
appropriate remedy should it choose to do so.
8.2 AMENDMENT AND MODIFICATION. To the extent permitted by applicable law,
this Agreement may be amended, modified or supplemented only by a written
agreement among WesterN SizzliN, Austins and Acquisition Subsidiary, whether
before or after approval of this Agreement by the shareholders of WesterN
SizzliN and Acquisition Subsidiary.
8.3 WAIVER OF COMPLIANCE; CONSENTS. Any failure of WesterN SizzliN on the
one hand, or Austins on the other hand, to comply with any obligation, covenant,
agreement or condition herein may be waived by Austins on the one hand, or
WesterN SizzliN on the other hand, only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this SECTION
8.3.
8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations, warranties, covenants and agreements of WesterN SizzliN and
Austins contained herein or in any certificates or other documents delivered
prior to or at the Closing shall survive the execution and delivery of this
Agreement, notwithstanding any investigation made or information obtained by the
other party, but shall terminate at the Effective Time.
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8.5 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
facsimile, receipt confirmed, or on the next business day when sent by overnight
courier or on the second succeeding business day when sent by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(i) IF TO WESTERN SIZZLIN, TO:
The WesterN SizzliN Corporation
416 South Jefferson Street
Roanoke, VA 24011
Attention: Victor F. Foti
Telephone: (540) 345-3195
Fax: (540) 345-0831
WITH A COPY TO:
Richard R. Sayers
Magee, Foster, Goldstein & Sayers
310 First Street, SW, Suite 1200
P.O. Box 404
Roanoke, VA 24003-0404
Telephone: (540) 343-9800
Fax: (540) 343-9898
and
(ii) IF TO AUSTINS OR ACQUISITION SUBSIDIARY, TO:
Austins Steak & Saloon, Inc.
6940 "O" Street, Suite 334
Lincoln, NE 68510
Attention: Paul C. Schorr, III
Telephone: (402) 464-3456
Fax: (402) 464-7352
WITH A COPY TO:
Cline, Williams, Wright,
Johnson & Oldfather
1125 South 103rd St., Suite 720
Omaha, NE 68124
Attention: Stephen E. Gehring
Telephone: (402) 397-1700
Fax: (402) 397-1806
8.6 BINDING EFFECT; ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto prior to the Effective Time without the prior written
consent of the other party hereto, except that Acquisition Subsidiary may assign
to Austins or any other direct subsidiary of Austins any and all rights,
interests and obligations of Acquisition Subsidiary under this Agreement;
provided that any assignment by Acquisition Subsidiary of any or all of its
rights, interests and obligations under this Agreement to Austins shall require
that the Merger contemplated by this
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Agreement shall then be structured as a direct merger of WesterN SizzliN with
and into Austins or any other structure approved by WesterN SizzliN.
8.7 EXPENSES. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs or expenses, subject to the rights of such party
contemplated under SECTION 7.2, above.
8.8 GOVERNING LAW. This Agreement shall be deemed to be made in, and in
all respects shall be interpreted, construed and governed by and in accordance
with the laws of the State of Delaware, except as otherwise required by the
Tennessee Business Corporation Code.
8.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.10. INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement. As used in this Agreement, (i) the term "PERSON" shall mean and
include an individual, a partnership, a joint venture, a corporation, a limited
liability company, a trust, an association, an unincorporated organization, a
Governmental Authority and any other entity; and (ii) the term "AFFILIATE," with
respect to any person, shall mean and include any person controlling, controlled
by or under common control with such person.
8.11. ENTIRE AGREEMENT. This Agreement and the documents or instruments
referred to herein including, but not limited to, the Schedules attached hereto,
which Schedules are incorporated herein by reference, embody the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, representations,
warranties, covenants, or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and the
understandings between the parties with respect to such subject matter.
8.12 SEVERABILITY. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable in a jurisdiction, such provision shall be
modified or deleted, as to the jurisdiction involved, only to the extent
necessary to render the same valid, legal and enforceable, and the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired thereby nor shall the validity, legality or
enforceability of such provision be affected thereby in any other jurisdiction.
8.13. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Accordingly, the parties further agree that each party shall be
entitled to an injunction or restraining order to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other right or remedy to which such party may be entitled under
this Agreement, at law or in equity.
8.14 THIRD PARTIES. Nothing contained in this Agreement or in any
instrument or document executed by any party in connection with the transactions
contemplated hereby shall create any rights in, or be deemed to have been
executed for the benefit of, any person or entity that is not a party hereto or
thereto, or, a successor or permitted assign of such a party.
8.15 SCHEDULES. WesterN SizzliN and Austins acknowledge that the Schedules
to this Agreement: (i) relate to certain matters concerning the disclosures
required and transactions contemplated by this Agreement, (ii) are qualified in
their entirety by reference to specific provisions of this Agreement, (iii) are
not intended to constitute and shall not be construed as indicating that such
matter is required to be disclosed, nor shall such disclosure as construed as an
admission that such information is material
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with respect to WesterN SizzliN or Austins, as the case may be, except to the
extent required by this Agreement, and (iv) disclosure of the information
contained in one WesterN SizzliN or Austins Schedule shall be deemed as proper
disclosure for all WesterN SizzliN or Austins Schedules, as the case may be.
IN WITNESS WHEREOF, Austins, Acquisition Subsidiary and WesterN SizzliN have
caused this Agreement to be signed and delivered by their respective duly
authorized officers as of the date first above written.
AUSTINS STEAK & SALOON, INC.
By /s/ Paul C. Schorr, III
------------------------------------
Name: Paul C. Schorr, III
Title: President
AUSTINS ACQUISITION CORP.
By /s/ Paul C. Schorr, III
------------------------------------
Name: Paul C. Schorr, III
Title: President
THE WESTERN SIZZLIN CORPORATION
By /s/ Victor F. Foti
------------------------------------
Name: Victor F. Foti
Title: President
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EXHIBIT 1
TRANSMITTAL AND REPRESENTATION LETTER
AUSTINS / WESTERN SIZZLIN MERGER
This Transmittal and Representation Letter (the "Letter") constitutes an
agreement made by Austins Steaks & Saloon, Inc. ("Austins") and the undersigned
Selling Shareholder of Common and/or Series B Convertible Preferred Stock (the
"Shares") of The WesterN SizzliN Corporation ("WesterN SizzliN"). This Letter is
made and entered into pursuant to a Plan and Agreement of Merger dated as of
April 30, 1999 ("Agreement") by and among Austins, Austins Acquisition Corp. and
WesterN SizzliN to which this Letter is attached as Exhibit 1. All terms not
otherwise defined in this Letter shall have the same meaning as in the
Agreement.
1. SURRENDER OF WESTERN SIZZLIN SHARES. The Selling Shareholder hereby
tenders and delivers to Austins, WesterN SizzliN Shares represented by
Certificate(s) No.(s) . Such Shares are owned by the Selling
Shareholder free and clear of any liens or encumbrances of any type and the
Selling Shareholder has full authority and right to transfer and convey the
Shares to Austins in connection with the merger ("Merger"). The Selling
Shareholder desires that the shares of Austins Stock to be received in
connection with the Merger shall be registered in the same name(s) as the
WesterN SizzliN Shares unless different registration instructions are indicated
at the end of this Letter.
2. ACQUISITION OF AUSTINS COMMON STOCK. The Selling Shareholder
acknowledges and understands that on the Closing Date of the Merger, WesterN
SizzliN will become a wholly owned subsidiary of Austins and the Selling
Shareholder will receive Austins Stock in the amount set forth on Schedule 1.3
to the Agreement. The Selling Shareholder agrees and acknowledges that the
amounts shown on Schedule 1.3 are the true and correct amounts for the Selling
Shareholder.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Selling Shareholder
hereby represents, warrants and covenants to Austins that the Selling
Shareholder has received and carefully reviewed the Proxy Statement/Prospectus
of Austins dated June 2, 1999 including the Appendices, and Austins Securities
Filings attached thereto and has relied solely on the information set forth
therein.
4. MISCELLANEOUS.
a. The Selling Shareholder agrees that this Letter and the terms hereof
shall survive the Selling Shareholder's death or disability and shall be
binding upon the Selling Shareholder's heirs, personal representatives,
administrators, successors, and assigns.
b. This Letter shall be governed, enforced and construed in all respects in
accordance with the laws of the State of Nebraska.
A-26
<PAGE>
July , 1999.
<TABLE>
<S> <C>
Austins Steaks & Saloon, Inc.: The WesterN SizzliN Corporation:
By: -------------------------------------
-------------------------------------------
(Name) (Social
Authorized Officer Security No.)
--------------------------------------------
(Name) (Social
Security No.)
(If Shares are held jointly, both parties
must sign.)
</TABLE>
REGISTRATION INSTRUCTIONS FOR CHANGE OF REGISTRATION, IF ANY:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-27
<PAGE>
EXHIBIT 2
FORM OF AFFILIATE LETTER FOR AFFILIATES OF THE COMPANY
[DATE]
Austins Steak & Saloon, Inc.
6940 "O" Street, Suite 334
Lincoln, Nebraska 68510
Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of WesterN SizzliN, a Tennessee corporation ("WesterN SizzliN"),
as the term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of
Rule 145 of the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"). Pursuant to the terms of the Agreement and Plan
of Merger dated as of April 30, 1999 (the "Merger Agreement") among Austins, a
Delaware corporation ("Austins"), Austins Acquisition Corporation, a Delaware
corporation ("Sub"), and WesterN SizzliN, WesterN SizzliN will be merged with
and into the Sub (the "Merger"). Capitalized terms used in this letter without
definition shall have the meanings assigned to them in the Merger Agreement.
As a result of the Merger, I will receive shares of common stock, par value
$0.01 per share, of Austins (the "Austins Shares"). I will receive such Austins
Shares in exchange for shares owned by me of common stock, par value $.10 per
share, of WesterN SizzliN.
1. I represent, warrant and covenant to Austins with request to any Austins
Shares I receive as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Austins Shares in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
Austins Shares, to the extent I felt necessary, with my counsel or counsel
for WesterN SizzliN.
C. I have been advised that the issuance of the Austins Shares to me
pursuant to the Merger has been registered with the Commission under the Act
on a Registration Statement on Form S-4. However, I have also been advised
that, because at the time the Merger is submitted for vote of the
shareholders of WesterN SizzliN, (a) I may be deemed to be an affiliate of
WesterN SizzliN and (b) the distribution by me of the WesterN SizzliN Shares
has not been registered under the Act, I may not sell, transfer or otherwise
dispose of the Austins Shares issued to me in the Merger unless (i) such
sale, transfer or other disposition is made inconformity with the volume and
other limitations of Rule 145 promulgated by the Commission under the Act,
(ii) such sale, transfer or other disposition has been registered under the
Act or (iii) in the opinion of counsel reasonably acceptable to Austins,
such sale, transfer or other disposition is otherwise exempt from
registration under the Act.
D. I understand that except as provided for in the Merger Agreement,
Austins is under no obligation to register the sale, transfer or other
disposition of the Austins Shares by me or on my
A-28
<PAGE>
behalf under the Act or, except as provided in paragraph 2(A) below, to take
any other action necessary in order to make compliance with an exemption
from such registration available.
E. I also understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a registration
statement, Austins reserves the right to put the following legend on the
certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION OR THE SECURITIES ACT OF 1933."
F. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of WesterN SizzliN as described in the first
paragraph of this letter, nor as a waiver of any rights I may have to object
to any claim that I am such an affiliate on or after the date of this
letter.
2. By Austins' acceptance of this letter, Austins hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
Austins Shares pursuant to Rule 145 and, to the extent applicable, Rule 144
under the Act, Austins shall (a) use its reasonable best efforts to (i)
file, on a timely basis, all reports and data required to be filed with the
Commission by it pursuant to Section 13 of the Securities Exchange Act ov
1934, as amended (the "1934 Act"), and (ii) furnish to me upon a request a
written statement as to whether Austins has complied with such reporting
requirements during the 12 months preceding any proposed sale of the Austins
Shares by me under Rule 145, and (b) otherwise use its reasonable best
efforts to permit such sales pursuant to Rule 145 and Rule 144. Austins has
filed all reports to be filed with the Commission under Section 13 of the
1934 Act during the preceding 12 months.
B. It is understood and agreed that certificates with the legend set
forth in paragraph E above will be substituted by delivery of certificates
without such legend if (i) one year shall have elapsed from the date the
undersigned acquired the Austins Shares received in the Merger and the
provisions of Rule 145(d)(2) are then available to the undersigned, (ii) two
years shall have elapsed from the date undersigned acquired the Austins
Shares received in the Merger and the provisions of Rule 145(d)(3) are then
applicable to the undersigned, or (iii) Austins has received either an
opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to Austins,
A-29
<PAGE>
or a "no action" letter obtained by the undersigned form the staff of the
Commission, to the effect that the restrictions imposed by Rule 145 under
the Act no longer apply to the undersigned.
Very truly yours,
--------------------------------------
Name:
Agreed and Accepted this day of
July, 1999 by
<TABLE>
<S> <C>
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
</TABLE>
A-30
<PAGE>
EXHIBIT 3
PLAN OF MERGER
PLAN OF MERGER dated as of April 30, 1999 (the "Agreement"), by and among
Austins, a Delaware corporation ("Austins"), WesterN SizzliN, a Tennessee
corporation ("WesterN SizzliN") and Austins Acquisition Corp. ("Acquisition
Sub").
WITNESSETH
WHEREAS, Austins and WesterN SizzliN have entered into an Agreement and Plan
of Merger dated as of April 30, 1999 (the "Merger Agreement"), pursuant to which
(i) Austins has caused the formation of Acquisition Sub, and (ii) WesterN
SizzliN will merge with and into Acquisition Sub (the "Merger").
WHEREAS, the Boards of Directors of Austins, WesterN SizzliN and Acquisition
Sub have approved and adopted this Agreement and submitted it to their
respective stockholders for approval.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Except as otherwise provided herein or as set forth below, all capitalized
terms shall have the meaning set forth in the Merger Agreement. The capitalized
term set forth below shall have the following meanings:
1.1 "SURVIVING ENTITY" shall refer to Acquisition Sub as the surviving
entity in the Merger.
ARTICLE 2
TERM OF THE MERGER
2.1 THE MERGER
(a) Pursuant to this Agreement, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL") and the Tennessee Business
Corporation Act ("TBCA") at the Effective Time (as defined below), WesterN
SizzliN will be merged with and into Acquisition Sub. Acquisition Sub shall be
the Surviving Entity in the Merger and shall continue its corporate existence
under the laws of the State of Delaware.
(b) The term "Effective Time" shall mean the time and date which is (i) the
date and time of the filing of a certificate of merger relating to the Merger
with the Secretaries of State of the States of Delaware and Tennessee (or such
other date and time as may be specified in such certificate and permitted by
law) or (ii) such other time and date as is permissible in accordance with the
DGCL and as Austins and WesterN SizzliN may agree.
2.2 EFFECT ON WESTERN SIZZLIN COMMON AND PREFERRED STOCK AND WARRANTS. At
the Effective Time, without any action on the part of the holder of any shares
of WesterN SizzliN Common Stock, $1.00 par value ("WesterN SizzliN Common
Stock"), any shares of WesterN SizzliN Series B convertible preferred stock
("WesterN SizzliN Series B Preferred Stock") and any warrants to purchase the
common stock of WesterN SizzliN ("WesterN SizzliN Warrants"):
(a) CONVERSION OF WESTERN SIZZLIN COMMON AND SERIES B PREFERRED
STOCK. Except as otherwise provided and subject to Section 2.3, each issued and
outstanding share of WesterN SizzliN Common
A-31
<PAGE>
Stock and Series B Preferred Stock shall be converted into the right to receive
two fully paid and nonassessable shares of Austins Common Stock.
(b) EXERCISABILITY OF WESTERN SIZZLIN WARRANTS. Holders of each issued and
outstanding WesterN SizzliN Warrant shall immediately have the right, with the
payment of no further consideration, to convert the WesterN SizzliN Warrant into
two shares of Austins Common Stock. Until conversion, such WesterN SizzliN
Warrants shall continue thereafter in accordance with the terms of the WesterN
SizzliN Warrants.
(c) CANCELLATION AND RETIREMENT OF WESTERN SIZZLIN COMMON AND SERIES B
PREFERRED STOCK. All shares of WesterN SizzliN Common and Series B Preferred
Stock issued and outstanding immediately prior to the Effective Time shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such shares of
WesterN SizzliN Common and Series B Preferred Stock shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration in accordance with Section 2.2(a). No interest will be paid or
will accrue on the Merger Consideration or any dividends or distributions.
2.3 DISSENTING SHARES. Notwithstanding anything in this Agreement to the
contrary, WesterN SizzliN Common and Series B Preferred Stock outstanding
immediately prior to the Effective Time and held by a holder who has delivered a
written demand for appraisal of such shares in accordance with Section 48-23-209
of the TBCA ("Dissenting Shares"), shall not be converted as provided in Section
2.2(a) hereof, unless and until such holder fails to perfect or effectively
withdraws or otherwise loses his right to appraisal and payment under the TCBA.
If, after the Effective Time, any such holder fails to perfect or effectively
withdraws or loses his right to appraisal, such Dissenting Shares shall
thereupon be treated as if they had been converted as of the Effective Time into
the right to receive the Merger Consideration as provided in Section 2.2(a)
hereof, together with any dividends or distributions payable thereon or cash in
lieu of fractional shares, and to which such holder is entitled, without
interest thereon.
2.5 NO EFFECT ON ACQUISITION SUB STOCK. At the Effective Time, each share
of the common stock of Acquisition Sub outstanding immediately prior to the
Effective Time shall remain outstanding and not be affected by the Merger.
2.6 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
the DGCL and the TBCA.
2.7 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation and Bylaws of Acquisition Sub as in effect immediately prior to
the Effective Time shall be the Certificate of Incorporation and Bylaws of the
Surviving Entity.
2.8 DIRECTORS. The directors of Acquisition Sub immediately prior to the
Effective Time shall be the directors of the Surviving Entity as of the
Effective Time until the earlier of their resignation or removal or until their
respective successors are duly appointed or elected in accordance with
applicable law.
2.9 OFFICERS. The officers of Acquisition Sub immediately prior to the
Effective Time shall be the officers of the Surviving Entity until the earlier
of their resignation or removal or until their respective successors are duly
appointed or elected in accordance with applicable law.
ARTICLE 3
MISCELLANEOUS
3.1 AMENDMENTS
To the extent permitted by law, this Agreement may be amended by a
subsequent writing signed by the parties hereto upon the approval of the board
of directors of each of the parties hereto.
A-32
<PAGE>
3.2 SUCCESSORS
This Agreement shall be binding on the successors of Austins, WesterN
SizzliN and Acquisition Sub.
3.3 COUNTERPARTS
This Agreement may be executed in counterparts, and each such counterpart
shall be deemed to be an original instrument, but both such counterparts
together shall constitute but one agreement.
In witness whereof, Austins, WesterN SizzliN and Acquisition Sub have caused
this Agreement to be executed by their duly authorized representatives on the
date indicated.
<TABLE>
<S> <C> <C> <C>
ATTEST: AUSTINS STEAKS & SALOON, INC.:
By: By:
--------------------------------- ---------------------------------
Name: Name:
--------------------------------- ---------------------------------
Title: Title:
--------------------------------- ---------------------------------
ATTEST: THE WESTERN SIZZLIN CORPORATION:
By: By:
--------------------------------- ---------------------------------
Name: Name:
--------------------------------- ---------------------------------
Title: Title:
--------------------------------- ---------------------------------
ATTEST: AUSTINS ACQUISITION CORP.:
By: By:
--------------------------------- ---------------------------------
Name: Name:
--------------------------------- ---------------------------------
Title: Title:
--------------------------------- ---------------------------------
</TABLE>
A-33
<PAGE>
Appendix B
April 29, 1999
Board of Directors
WesterN SizzliN Corporation
P.O. Box 12167
Roanoke, Virginia 24023-2167
Gentlemen:
WesterN SizzliN Corporation ("WesterN SizzliN") and Austins Steaks & Saloon,
Inc. ("Austins") are contemplating a business combination pursuant to which
WesterN SizzliN would be merged with and into Austins Acquisition Corp.
("Austins Sub"), a wholly-owned subsidiary of Austins, with Austins Sub as the
surviving entity (the "Merger") pursuant to a draft of the Agreement and Plan of
Merger, dated April 23, 1999, by and among WesterN SizzliN, Austins and Austins
Sub (the "Agreement"). You have requested our opinion as to the fairness of the
Merger Consideration from a financial point of view to the shareholders of
WesterN SizzliN.
The Agreement provides for, among other things, the merger of WesterN
SizzliN with and into Austins Sub and the conversion in the Merger of each
outstanding share of WesterN SizzliN common stock into shares of Austins common
stock, and the conversion of each outstanding share of WesterN SizzliN Series B
Convertible Preferred Stock into shares of Austins common stock, as more
particularly set forth in the Agreement, so that after the conversion,
shareholders of WesterN SizzliN will control 93% of the outstanding common stock
of Austins (the Austins' shares to be received by the WesterN SizzliN
shareholders is referred to hereinafter as the "Merger Consideration.") In
addition, the Agreement provides that all of the outstanding warrants issued by
WesterN SizzliN will be converted into warrants to purchase Austins common
stock. The terms and conditions of the Merger are more fully set forth in the
Agreement. Capitalized terms used but not defined herein have the meanings
ascribed to those terms in the Agreement.
J.C. Bradford & Co., LLC, as part of its investment banking business,
engages in the valuation of businesses and securities in connection with mergers
and acquisitions, negotiated underwritings, secondary distributions of listed
and unlisted securities, private placements, and valuations for estate,
corporate, and other purposes. We have been engaged by the Board of Directors of
WesterN SizzliN to render this opinion in connection with the Merger and will
receive a fee from WesterN SizzliN for our services.
In conducting our analysis and arriving at our opinion, we have considered
such financial and other information as we deemed appropriate including, among
other things, the following:
- the Agreement;
- the historical and current financial position and results of operations of
WesterN SizzliN and Austins;
- certain internal operating data and financial analyses and forecasts of
WesterN SizzliN for the fiscal years beginning January 1, 1998 and ending
December 31, 2003 prepared by WesterN SizzliN's senior management;
- certain financial analysis and forecasts of Austins for the fiscal years
beginning January 1, 1999 and ending December 31, 2003, prepared by
WesterN SizzliN's senior management, who we understand based those
analysis and forecasts on discussion with Austins' senior management;
- certain financial and securities trading data of certain other companies,
the securities of which are publicly traded, that we believed to be
comparable to Austins;
B-1
<PAGE>
- the financial terms of certain other transactions involving acquisitions
of companies with characteristics similar to Austins; the reported price
and trading activity for Austins' common stock; and
- certain other financial studies, analyses and investigations we deemed
appropriate for purposes of our opinion.
We also have held discussions with members of the senior management of WesterN
SizzliN and Austins regarding the strategic rationale for, and the potential
benefits of, the transactions contemplated by the Agreement and the past and
current business operations, financial condition, and future prospects of
WesterN SizzliN and Austins, respectively.
We have taken into account our assessment of general economic, market, and
financial and other conditions and our experience in other transactions, as well
as our experience in securities valuation and our knowledge of the industry in
which WesterN SizzliN and Austins operate generally. Our opinion is necessarily
based on the information made available to us and conditions as they exist and
can be evaluated as of the date hereof.
We have assumed that the final version of the Agreement will not be
substantially different from the draft provided us. We have relied upon the
accuracy and completeness of all of the financial and other information reviewed
by us for purposes of our opinion and have not assumed any responsibility for,
nor undertaken an independent verification of, such information. With respect to
the internal operating data and financial analyses and forecasts supplied to us
(including forecasts of estimated cost savings and economic synergies as a
result of the Merger), we have assumed that such data, analyses and forecasts
were reasonably prepared on bases reflecting the best currently available
estimates and judgments of WesterN SizzliN's and Austins' senior management as
to the recent and likely future performance of WesterN SizzliN and Austins,
respectively. Accordingly, we express no opinion with respect to such analyses
or forecasts or the assumptions on which they are based.
We have assumed that the Merger will be consummated in accordance with the
terms set forth in the Agreement and accounted for under purchase accounting
principles. We were not asked to consider and our opinion does not address the
relative merits of the Merger as compared to any alternative business strategies
that might exist for WesterN SizzliN or the effect of any other transactions in
which WesterN SizzliN might engage. Furthermore, we have not made an independent
evaluation or appraisal of the assets or liabilities of WesterN SizzliN or any
of their subsidiaries or affiliates and have not been furnished with any such
evaluation or appraisal.
WesterN SizzliN is entitled to reproduce this opinion, in whole but not in
part, in the proxy statement as required by applicable law or where otherwise
appropriate; provided, however, that any excerpt or reference to this opinion
(including any summary thereof) in such document must be approved by us in
advance in writing. Notwithstanding the foregoing, this opinion does not
constitute a recommendation to any shareholder of WesterN SizzliN to vote in
favor of the Merger. We were engaged by the Board of Directors of WesterN
SizzliN to render this opinion in connection with the Board's discharge of its
fiduciary obligations. We have advised the Board of Directors that we do not
believe that any person (including a shareholder of WesterN SizzliN) other than
the Board of Directors has the legal right to rely upon this opinion for any
claim arising under state law and that, should any such claim be brought against
us, this assertion will be raised as a defense. In the absence of governing
authority, this assertion will be resolved by the final adjudication of such
issue by a court of competent jurisdiction. Resolution of this matter under
state law, however, will have no effect on the rights and responsibilities of
any person under the federal securities laws or on the rights or
responsibilities of WesterN SizzliN's Board of Directors under applicable state
law.
B-2
<PAGE>
Based upon and subject to the foregoing, and based upon such other matters
we consider relevant, it is our opinion that, as of the date hereof and based on
conditions as they currently exist, the Merger Consideration is fair, from a
financial point of view, to the shareholders of WesterN SizzliN.
Very truly yours,
<TABLE>
<S> <C> <C>
J.C. BRADFORD & CO., LLC
By: /s/ N. B. FORREST SHOAF
-----------------------------------------
N. B. Forrest Shoaf
SENIOR VICE PRESIDENT
</TABLE>
B-3
<PAGE>
APPENDIX C
TITLE 48. CORPORATIONS AND ASSOCIATIONS
FOR-PROFIT BUSINESS CORPORATIONS
CHAPTER 23. DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
Tenn. Code Ann. @ 48-23-102 (1999)
48-23-102. Right to dissent
(a) A shareholder is entitled to dissent from, and obtain payment of the fair
value of the shareholder's shares in the event of, any of the following
corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(A) If shareholder approval is required for the merger by @ 48-21-104 or
the charter and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its parent
under @ 48-21-105;
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to
court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed to
the shareholders within one (1) year after the date of sale;
(4) An amendment of the charter that materially and adversely affects rights
in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the shares to
acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any matter, or
to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or
(E) Reduces the number of shares owned by the shareholder to a fraction
of a share, if the fractional share is to be acquired for cash under
@ 48-16-104; or
(5) Any corporate action taken pursuant to a shareholder vote to the extent
the charter, bylaws, or a resolution of the board of directors provides
that voting or nonvoting shareholders are entitled to dissent and obtain
payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for the shareholder's
shares under this chapter may not challenge the corporate action creating
the shareholder's entitlement unless the action is unlawful or fraudulent
with respect to the shareholder or the corporation.
(c) Notwithstanding the provisions of subsection (a), no shareholder may dissent
as to any shares of a security which, as of the date of the effectuation of
the transaction which would otherwise give rise
C-1
<PAGE>
to dissenters' rights, is listed on an exchange registered under @ 6 of the
Securities Exchange Act of 1934, as amended, or is a "national market system
security," as defined in rules promulgated pursuant to the Securities
Exchange Act of 1934, as amended.
HISTORY: Acts 1986, ch. 887, @ 13.02.
TITLE 48. CORPORATIONS AND ASSOCIATIONS
FOR-PROFIT BUSINESS CORPORATIONS
CHAPTER 23. DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
Tenn. Code Ann. @ 48-23-103 (1999)
48-23-103. Dissent by nominees and beneficial owners
(a) A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any
one (1) person and notifies the corporation in writing of the name and
address of each person on whose behalf the record shareholder asserts
dissenters' rights. The rights of a partial dissenter under this subsection
are determined as if theshares as to which the partial dissenter dissents
and the partial dissenter's other shares were registered in the names of
different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares of any
one (1) or more classes held on the beneficial shareholder's behalf only if
the beneficial shareholder:
(1) Submits to the corporation the record shareholder's written consent to
the dissent not later than the time the beneficial shareholder asserts
dissenters' rights; and
(2) Does so with respect to all shares of the same class of which the person
is the beneficial shareholder or over which the person has power to
direct the vote.
HISTORY: Acts 1986, ch. 887, @ 13.03.
TITLE 48. CORPORATIONS AND ASSOCIATIONS
FOR-PROFIT BUSINESS CORPORATIONS
CHAPTER 23. DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
Tenn. Code Ann. @ 48-23-101 (1999)
48-23-101. Definitions
As used in this chapter, unless the context otherwise requires:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder;
(2) "Corporation" means the issuer of the shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer;
(3) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under @ 48-23-102 and who exercises that right when and in the manner
required by part 2 of this chapter;
C-2
<PAGE>
(4) "Fair value", with respect to a dissenter's shares, means the value of the
shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action;
(5) "Interest" means interest from the effective date of the corporate action
that gave rise to the shareholder's right to dissent until the date of
payment, at the average auction rate paid on United States treasury bills
with a maturity of six (6) months (or the closest maturity thereto) as of
the auction date for such treasury bills closest to such effective date;
(6) "Record shareholder" means the person in whose name shares are registered in
the records of a corporation or the beneficial owner of shares to the extent
of the rights granted by a nominee certificate on file with a corporation;
and
(7) "Shareholder" means the record shareholder or the beneficial shareholder.
HISTORY: Acts 1986, ch. 887, @ 13.01.
TITLE 48. CORPORATIONS AND ASSOCIATIONS
FOR-PROFIT BUSINESS CORPORATIONS
CHAPTER 23. DISSENTERS' RIGHTS
PART 3. JUDICIAL APPRAISAL OF SHARES
Tenn. Code Ann. @ 48-23-301 (1999)
48-23-301. Court action
(a) If a demand for payment under @ 48-23-209 remains unsettled, the corporation
shall commence a proceeding within two (2) months after receiving the
payment demand and petition the court to determine the fair value of
theshares and accrued interest. If the corporation does not commence the
proceeding within the two-month period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in a court of record having
equity jurisdiction in the county where the corporation's principal office
(or, if none in this state, its registered office) is located. If the
corporation is a foreign corporation without a registered office in this
state, it shall commence the proceeding in the county in this state where
the registered office of the domestic corporation merged with or whose
shares were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of this
state) whose demands remain unsettled, parties to the proceeding as in an
action against their shares and all parties must be served with a copy of
the petition. Nonresidents may be served by registered or certified mail or
by publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) is plenary and exclusive. The court may appoint one (1) or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of the
dissenter's shares, plus accrued interest, exceeds the amount paid by the
corporation; or
(2) For the fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold
payment under @ 48-23-208.
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<PAGE>
HISTORY: Acts 1986, ch. 887, @ 13.30.
TITLE 48. CORPORATIONS AND ASSOCIATIONS
FOR-PROFIT BUSINESS CORPORATIONS
CHAPTER 23. DISSENTERS' RIGHTS
PART 3. JUDICIAL APPRAISAL OF SHARES
Tenn. Code Ann. @ 48-23-302 (1999)
48-23-302. Court costs and counsel fees
(a) The court in an appraisal proceeding commenced under @ 48-23-301 shall
determine all costs of the proceeding, including the reasonable compensation
and expenses of appraisers appointed by the court. The court shall assess
the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable,
to the extent the court finds the dissenters acted arbitrarily, vexatiously,
or not in good faith in demanding payment under @ 48-23-209.
(b) The court may also assess the fees and expenses of counsel and experts for
the respective parties, in amounts the court finds equitable against:
(1) The corporation and in favor of any or all dissenters if the court finds
the corporation did not substantially comply with the requirements of
part 2 of this chapter; or
(2) Either the corporation or a dissenter, in favor of any other party, if
the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefitted.
HISTORY: Acts 1986, ch. 887, @ 13.31.
TITLE 48. CORPORATIONS AND ASSOCIATIONS
FOR-PROFIT BUSINESS CORPORATIONS
CHAPTER 23. DISSENTERS' RIGHTS
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
Tenn. Code Ann. @ 48-23-201 (1999)
48-23-201. Notice of dissenters' rights
(a) If proposed corporate action creating dissenters' rights under @ 48-23-102
is submitted to a vote at a shareholders' meeting, the meeting notice must
state that shareholders are or may be entitled to assert dissenters' rights
under this chapter and be accompanied by a copy of this chapter.
(b) If corporate action creating dissenters' rights under @ 48-23-102 is taken
without a vote of shareholders, the corporation shall notify in writing all
shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in @ 48-23-203.
(c) A corporation's failure to give notice pursuant to this section will not
invalidate the corporate action.
HISTORY: Acts 1986, ch. 887, @ 13.20.
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<PAGE>
TITLE 48. CORPORATIONS AND ASSOCIATIONS
FOR-PROFIT BUSINESS CORPORATIONS
CHAPTER 23. DISSENTERS' RIGHTS
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
Tenn. Code Ann. @ 48-23-202 (1999)
48-23-202. Notice of intent to demand payment
(a) If proposed corporate action creating dissenters' rights under @ 48-23-102
is submitted to a vote at a shareholders' meeting, a shareholder who wishes
to assert dissenters' rights must:
(1) Deliver to the corporation, before the vote is taken, written notice of
the shareholder's intent to demand payment for the shareholder's shares
if the proposed action is effectuated; and
(2) Not vote the shareholder's shares in favor of the proposed action. No
such written notice of intent to demand payment is required of any
shareholder to whom the corporation failed to provide the notice required
by @ 48-23-201.
(b) A shareholder who does not satisfy the requirements of subsection (a) is not
entitled to payment for the shareholder's shares under this chapter.
HISTORY: Acts 1986, ch. 887, @ 13.21.
TITLE 48. CORPORATIONS AND ASSOCIATIONS
FOR-PROFIT BUSINESS CORPORATIONS
CHAPTER 23. DISSENTERS' RIGHTS
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
Tenn. Code Ann. @ 48-23-203 (1999)
48-23-203. Dissenters' notice
(a) If proposed corporate action creating dissenters' rights under @ 48-23-102
is authorized at a shareholders' meeting, the corporation shall deliver a
written dissenters' notice to all shareholders who satisfied the
requirements of @ 48-23-202.
(b) The dissenters' notice must be sent no later than ten (10) days after the
corporate action was authorized by the shareholders or effectuated,
whichever is the first to occur, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the principal terms of
the proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not the person asserting
dissenters' rights acquired beneficial ownership of the shares before
that date;
(4) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than one (1) nor more than two (2) months
after the date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this chapter if the corporation has not
previously sent a copy of this chapter to the shareholder pursuant to @
48-23-201.
HISTORY: Acts 1986, ch. 887, @ 13.22.
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<PAGE>
TITLE 48. CORPORATIONS AND ASSOCIATIONS
FOR-PROFIT BUSINESS CORPORATIONS
CHAPTER 23. DISSENTERS' RIGHTS
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
Tenn. Code Ann. @ 48-23-204 (1999)
48-23-204. Duty to demand payment
(a) A shareholder sent a dissenters' notice described in @ 48-23-203 must demand
payment, certify whether the shareholder acquired beneficial ownership of
the shares before the date required to be set forth in the dissenters'
notice pursuant to @ 48-23-203(b)(3), and deposit the shareholder's
certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits the shareholder's share
certificates under subsection (a) retains all other rights of a shareholder
until these rights are cancelled or modified by the effectuation of the
proposed corporate action.
(c) A shareholder who does not demand payment or deposit the shareholder's share
certificates where required, each by the date set in the dissenters' notice,
is not entitled to payment for the shareholder's shares under this chapter.
(d) A demand for payment filed by a shareholder may not be withdrawn unless the
corporation with which it was filed, or the surviving corporation, consents
thereto.
HISTORY: Acts 1986, ch. 887, @ 13.23.
TITLE 48. CORPORATIONS AND ASSOCIATIONS
FOR-PROFIT BUSINESS CORPORATIONS
CHAPTER 23. DISSENTERS' RIGHTS
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
Tenn. Code Ann. @ 48-23-205 (1999)
48-23-205. Share restrictions
(a) The corporation may restrict the transfer of uncertificated shares from the
date the demand for their payment is received until the proposed corporate
action is effectuated or the restrictions released under @ 48-23-207.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
cancelled or modified by the effectuation of the proposed corporate action.
HISTORY: Acts 1986, ch. 887, @ 13.24.
TITLE 48. CORPORATIONS AND ASSOCIATIONS
FOR-PROFIT BUSINESS CORPORATIONS
CHAPTER 23. DISSENTERS' RIGHTS
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
Tenn. Code Ann. @ 48-23-206 (1999)
48-23-206. Payment
(a) Except as provided in @ 48-23-208, as soon as the proposed corporate action
is effectuated, or upon receipt of a payment demand, whichever is later, the
corporation shall pay each dissenter
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<PAGE>
who complied with @ 48-23-204 the amount the corporation estimates to be the
fair value of each dissenter's shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending
not more than sixteen (16) months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity
for that year, and the latest available interim financial statements, if
any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under @
48-23-209; and
(5) A copy of this chapter if the corporation has not previously sent a copy
of this chapter to the shareholder pursuant to @ 48-23-201 or @
48-23-203.
HISTORY: Acts 1986, ch. 887, @ 13.25.
TITLE 48. CORPORATIONS AND ASSOCIATIONS
FOR-PROFIT BUSINESS CORPORATIONS
CHAPTER 23. DISSENTERS' RIGHTS
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
Tenn. Code Ann. @ 48-23-207 (1999)
48-23-207. Failure to take action
(a) If the corporation does not effectuate the proposed action that gave rise to
the dissenters' rights within two (2) months after the date set for
demanding payment and depositing share certificates, the corporation shall
return the deposited certificates and release the transfer restrictions
imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation effectuates the proposed action, it must send
anew dissenters' notice under @ 48-23-203 and repeat the payment demand
procedure.
HISTORY: Acts 1986, ch. 887, @ 13.26.
TITLE 48. CORPORATIONS AND ASSOCIATIONS
FOR-PROFIT BUSINESS CORPORATIONS
CHAPTER 23. DISSENTERS' RIGHTS
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
Tenn. Code Ann. @ 48-23-208 (1999)
48-23-208. After-acquired shares
(a) A corporation may elect to withhold payment required by @ 48-23-206 from a
dissenter unless the dissenter was the beneficial owner of the shares before
the date set forth in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the principal terms of the
proposed corporate action.
(b) To the extent the corporation elects to withhold payment under subsection
(a), after effectuating the proposed corporate action, it shall estimate the
fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of the
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<PAGE>
dissenter's demand. The corporation shall send with its offer a statement of
its estimate of the fair value of the shares, an explanation of how the
interest was calculated, and a statement of the dissenter's right to demand
payment under @ 48-23-209.
HISTORY: Acts 1986, ch. 887, @ 13.27.
TITLE 48. CORPORATIONS AND ASSOCIATIONS
FOR-PROFIT BUSINESS CORPORATIONS
CHAPTER 23. DISSENTERS' RIGHTS
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
Tenn. Code Ann. @ 48-23-209 (1999)
48-23-209. Procedure if shareholder dissatisfied with payment or offer
(a) A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of the dissenter's shares and amount of interest
due, and demand payment of the dissenter's estimate (less any payment under
@ 48-23-206), or reject the corporation's offer under @ 48-23-208 and demand
payment of the fair value of the dissenter's shares and interest due, if:
(1) The dissenter believes that the amount paid under @ 48-23-206 or offered
under @ 48-23-208 is less than the fair value of the dissenter's shares
or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under @ 48-23-206 within two (2)
months after the date set for demanding payment; or
(3) The corporation, having failed to effectuate the proposed action, does
not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within two (2) months after
the date set for demanding payment.
(b) A dissenter waives the dissenter's right to demand payment under this
section unless the dissenter notifies the corporation of the dissenter's
demand in writing under subsection (a) within one (1) month after the
corporation made or offered payment for the dissenter's shares.
HISTORY: Acts 1986, ch. 887, @ 13.28.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law provides, in relevant
part, that a corporation organized under the laws of Delaware shall have the
power, and in certain cases, the obligation, to indemnify any person who was or
is a party or is threatened to be made a party to any suit or proceeding because
such person is or was a director, officer, employee or agent of the corporation
or is or was serving, at the request of the corporation, as a director, officer,
employee or agent of another corporation, against all costs actually and
reasonably incurred by him in connection with such suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal proceeding, he had no reason to believe his conduct was unlawful.
Similar indemnity is permitted to be provided to such persons in connection with
an action or suit by or in the right of the corporation, provided such person
acted in good faith and in a manner he believed to be in or not opposed to the
best interests of the corporation, and provided further (unless a court of
competent jurisdiction otherwise determines) that such person shall not have
been ajudged liable to the corporation. Article VII of Austins' By-Laws provides
for indemnification of the officers and directors of Austins to the fullest
extent permitted by applicable law. The directors and officers of Austins and
its subsidiaries are covered by a policy of insurance under which they are
insured, within limits and subject to certain limitations, against certain
expenses in connection with the defense of actions, suits or proceedings, and
certain liabilities that might be imposed as a result of such actions, suits or
proceedings in which they are parties by reason of being of having been
directors or officers.
ITEM 21. EXHIBITS
The following is a list of Exhibits included as a part of this Registration
Statement. The Registrant agrees to furnish supplementally a copy of any omitted
Exhibit to the Commission upon request. Items without an asterisk(s) are filed
with this Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------------- ---------------------------------------------------------------------------------------------------
<C> <S>
2 Agreement and Plan of Merger by and among Austins Steaks & Saloon, Inc. (Registrant), the WesterN
SizzliN Corporation and Austins Acquisition Corp. (Acquisition Sub) (included as part of Appendix
A to the registration statement filed herewith)
3.1* Certificate of Incorporation of Austins Steaks & Saloon, Inc.
3.2* By-Laws of Austins Steaks & Saloon, Inc.
5.1 Opinion of Cline, Williams, Wright, Johnson & Oldfather as to the legality of the securities being
registered
10.2* Stock Purchase Agreement among the Company, the Schorr Family Company, Inc. and Norman A. Lies
10.5* Lease dated January 18, 1989, between John Kai-Chee Moy and Cindie Suk-Ching Moy and Missouri
Development Company
10.6**** Lease Agreement dated March 1, 1995, between Martin A. Pedersen and Austins Omaha, Inc.
10.7*** Lease Agreement dated April 15, 1998, between Central Investment Co., Ltd. and Austins 72(nd),
Inc..
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------------- ---------------------------------------------------------------------------------------------------
<C> <S>
10.8**** Lease Agreement dated June 1, 1998, between Steer Enterprises, Inc. and Missouri Development
Company
10.8.1**** Offer to Purchase dated May 15, 1998, between Steer Enterprises, Inc./MIHART, Inc. and the Company
10.8.2**** Loan Assumption Agreement dated June 2, 1998, between Steer Enterprises, Inc., Gregory S. Cutchall,
and the Company
10.9* Standard Commercial Shopping Center Lease dated August 1, 1993, between Kinder-Crow L.P. and
Austins of New Mexico, Inc.
10.10* Commercial Lease dated March 10, 1994, between Jack Irwin and Austins Lincoln, Inc.
10.10.1**** Assignment and Consent dated March 13, 1998, between Jack Irwin, Austins Lincoln, Inc. and
Charlie's On The Lake, Inc.
10.10.2**** Assignment and Consent dated February 5, 1999, between Jack Irwin, Austins Lincoln, Inc., Paul C.
Schorr III, Charlie's On The Lake, Inc., and Charlie's Seafood Grill, Inc.
10.11* 1994 Austins Steaks & Saloon, Inc. Incentive and Nonqualified Stock Option Plan, as amended
10.11.1**** Amendment No. 2 to the 1994 Incentive and Nonqualified Stock Option Plan of the Company
10.11.2**** Amendment No. 3 to the 1994 Incentive and Nonqualified Stock Option Plan of the Company
10.13* Settlement Agreement dated March 24, 1994, between Missouri Development Company and Equitable Life
Assurance Society of the United States
10.15** Lease Agreement dated August 15, 1994, between Jacob Alcon and Petrita Alcon and Austins of
Albuquerque, Inc.
10.15.1**** Addendum to Location Lease Agreement dated June 30, 1998, by Jacob and Petrita Alcon, Paul C.
Schorr III, and the Company
10.16** Lease Agreement dated July 19, 1995, between 1001 Harney LLC and Austins Old Market, Inc.
10.17**** Lease Agreement dated September 5, 1972, between Lewis Properties, Inc. and Collins Properties,
Inc.
10.17.1**** Orders from the United States Bankruptcy Court for the Central District of California regarding the
assumption of Collins Properties, Inc. and the assignment to the Company
10.19**** Fifth Amendment to Commercial Note
10.20**** Commercial Note dated January 27, 1999, between U.S. Bank National Association and the Company
10.21**** Note Payable to Shareholder dated February 25, 1999, between Paul C. Schorr III and the Company
10.22**** Commercial Note dated January 3, 1999, between U.S. Bank National Association and the Company
10.23**** Commercial Note dated October 2, 1996, between Mid City Bank and Steer Enterprises, Inc.
16**** Letter on change of certifying accountant dated January 22, 1999
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------------- ---------------------------------------------------------------------------------------------------
<C> <S>
17.2 Fairness Opinion of J.C. Bradford & Co., LLC
21**** Subsidiaries of the Issuer
23.1 Consent of KPMG LLP (Austins)
23.2 Consent of KPMG LLP (WesterN SizzliN)
23.3 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Cline, Williams, Wright, Johnson & Oldfather (included as a part of Exhibit 5 and
Exhibit 8)
24 Power of Attorney (page S-6)
99 Proxy Card
</TABLE>
- ------------------------
* Incorporated by reference to the specific exhibit to the Form SB-2
Registration Statement, as filed with the Securities and Exchange Commission
on January 23, 1995, Registration No. 33-84440-D.
** Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1994.
*** Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995.
****Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1998.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers of sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Acts of 1933;
(ii) To reflect in the Proxy Statement/Prospectus any facts or events
arising after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in this Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in the post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered herein, 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.
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<PAGE>
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in
this Registration Statement shall be deemed to be a new Registration
Statement relating to the securities offered herein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) (1) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of
a prospectus which is part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed to be underwriters, in addition to
the information called for by the other Items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act and is used
in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to this Registration Statement and will not
be used until such amendment is effective, and that, for purposes of
determining liability under the Securities 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.
(d) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form within one business day of receipt
of such a request, and to send the incorporated documents by first class
mail or other equally prompt means. This undertaking includes information
contained in any documents filed subsequent to the effective date of this
Registration Statement through the date of responding to the request.
(e) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning the Transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
(f) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the 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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Austins Steaks &
Saloon, Inc. certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 and has duly caused this
Amendment No. 1 to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lincoln, Nebraska.
<TABLE>
<S> <C> <C>
AUSTINS STEAK & SALOON, INC.
By: /s/ PAUL C. SCHORR, III
-----------------------------------------
Paul C. Schorr, III
PRESIDENT
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons on
behalf of Austins Steaks & Saloon, Inc., the Registrant, in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ PAUL C. SCHORR III
- ------------------------------ President, Chief Executive June 1, 1999
Paul C. Schorr III Officer and Director
/s/ TRISHA N. GADE-JONES
- ------------------------------ Chief Financial Officer June 1, 1999
Trisha N. Gade-Jones
/s/ B. SCOTT BALL
- ------------------------------
by: Trisha N. Gade-Jones, Director June 1, 1999
Attorney-in-fact
/s/ ROGER D. SACK
- ------------------------------
by: Trisha N. Gade-Jones, Director June 1, 1999
Attorney-in-fact
/s/ GREGORY S. CUTCHALL
- ------------------------------
by: Trisha N. Gade-Jones, Director June 1, 1999
Attorney-in-fact
</TABLE>
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<PAGE>
THE WESTERN SIZZLIN CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR THE SPECIAL MEETING OF STOCKHOLDERS
JUNE 28, 1999
The undersigned hereby constitutes and appoints Titus Greene, Thomas Cliett
and Victor F. Foti, with full power to act alone or together, or any
substitute appointed by either of them as the undersigned is agent, attorney
and proxy to vote the number of shares the undersigned would be entitled to
vote if personally present at the Special Meeting of the Stockholders of The
WesterN SizzliN Corporation to be held at the Sheraton Airport Plaza, I-85
and Billy Graham Parkway, Charlotte, North Carolina, on the 28th day of June,
1999, at 1:00 p.m. or any adjournments thereof, as indicated hereon.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ADOPTION OF THE MERGER AND AGREEMENT AND PLAN OF MERGER AND
WITH DISCRETIONARY AUTHORITY ON ALL OTHER MATTERS.
<PAGE>
1. APPROVAL AND ADOPTION of the Agreement and Plan of Merger ("Merger
Agreement") dated April 30, 1999, among The WesterN SizzliN Corporation
("WesterN SizzliN"), Austins Steaks & Saloon, Inc. ("Austins") and Austins
Acquisition Corp. ("Acquisition Subsidiary"). The Merger Agreement
provides for the merger of WesterN SizzliN with the Acquisition
Subsidiary, a newly formed Delaware corporation, as a result of which
WesterN SizzliN will become a wholly owned subsidiary of Austins.
FOR AGAINST ABSTAIN
/ / / / / /
2. To consider and act upon any other matters that may properly come before
the meeting or any adjournment thereof.
Shares of Common Stock ______ _______
Shares of Series B Convertible Preferred Stock ________
Dated: June , 1999
--------------------
__________________________________
Signature of Stockholder
__________________________________
Signature of Stockholder
Please sign exactly as your name appears at the left. When signing as
attorney, executor, administrator, trustee, guardian or conservator, give
full title. All joint trustees must sign.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- ------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
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EXHIBIT 5.1
LAW OFFICES OF
CLINE, WILLIAMS, WRIGHT, JOHNSON & OLDFATHER
One Pacific Place
1125 South 103rd, Suite 720
Omaha, Nebraska 68124-1090
(402) 397-1700
FAX (402) 397-1806
May 28, 1999
Austins Steaks & Saloon, Inc.
6940 "O" Street, Suite 334
Lincoln, NE 68510
RE: FORM S-4 REGISTRATION STATEMENT
ASS03-CB001
Dear Sir/Madam:
You have requested our opinion with respect to the 11,219,250 shares of
Austins common stock, $0.01 par value per share ("Austins Stock") being
registered on Form S-4 Registration Statement pursuant to Registration No.
333-78375. The Austins Stock is to be issued to the holders of common stock,
Series B convertible preferred stock and common stock purchase warrants of The
WesterN SizzliN Corporation pursuant to a Plan and Agreement of Merger dated
April 30, 1999 ("Merger Agreement") among Austins Steaks & Saloon, Inc.
("Austins"), The WesterN SizzliN Corporation and Austins Acquisition Corp.
In preparing this opinion, we have reviewed (i) the Amended Certificate of
Incorporation of Austins as filed with the Delaware of Secretary of State; (ii)
the proposed amendment to Article IV to the Amended Certificate of Incorporation
increasing the authorized stock from 7,500,000 shares to 20,000,000 shares to be
effective prior to the issuance of the Austins Stock pursuant to the Merger
Agreement; and (iii) certain resolutions of the Board of Directors and
stockholders of Austins. We have also examined such issues of law and fact which
we deem necessary for purposes of this opinion.
Based upon the foregoing, it is our opinion that upon the Effective Time of
the merger pursuant to the Merger Agreement, the Austins Stock will be duly
authorized, validly issued, fully paid and non-assessable shares of Austins and
the holders thereof will not be subject to personal liability solely by reason
of being such holders.
We are members of the bar of the State of Nebraska and are not licensed or
admitted to practice law in any other jurisdiction, and we express no opinion
with respect to the laws of any jurisdiction other than Nebraska, the general
corporate laws of the State of Delaware and the federal laws of the United
States.
We consent to this opinion being filed as an exhibit to the Form S-4
Registration Statement of Austins, No. 333-78375.
Very truly yours,
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By: /s/ STEPHEN E. GEHRING
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Stephen E. Gehring
For the Firm
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EXHIBIT 23.1
CONSENT OF KPMG LLP
The Board of Directors
Austins Steaks & Saloon, Inc.:
We consent to incorporation in the Registration Statement (No. 333- ) on
Form S-4, of Austins Steaks & Saloon, Inc. of our report dated March 12, 1999,
relating to the consolidated balance sheet of Austins Steaks & Saloon, Inc. and
subsidiaries as of December 31, 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended, which
report appears in the December 31, 1998 annual report on Form 10-KSB of Austins
Steaks & Saloon, Inc.
We also consent to the references to our Firm under the headings "Experts"
and "Selected Historical Consolidated Financial Information" in the above
referenced Registration Statement.
KPMG LLP
Lincoln, Nebraska
May 28, 1999
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EXHIBIT 23.2
CONSENT OF KPMG LLP
The Board of Directors
The WesterN SizzliN Corporation:
We consent to incorporation in the Registration Statement (No. 333- ) on
Form S-4, of Austins Steaks & Saloon, Inc. of our report dated February 19,
1999, except Note 5 with respect to the debt waiver letter, as to which the date
is April 16, 1999, relating to the consolidated balance sheets of The WesterN
SizzliN Corporation and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1998.
We also consent to the references to our Firm under the headings "Experts"
and "Selected Historical Consolidated Financial Information" in the above
referenced Registration Statement.
KPMG LLP
Roanoke, Virginia
May 28, 1999
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EXHIBIT 23.3
CONSENT OF PRICEWATERHOUSECOOPERS LLP
We hereby consent to the use in this Registration Statement on Form S-4 of
Austins Steaks & Saloon, Inc. of our report dated March 6, 1998 relating to the
consolidated financial statements at and for the year ended December 31, 1997
which appear in Austins Steaks & Saloon, Inc.'s Annual Report on Form 10-KSB for
the year ended December 31, 1998. We also consent to the references to us under
the headings "Experts" and "Selected Historical Consolidated Financial
Information" in such Registration Statement.
PRICEWATERHOUSECOOPERS LLP
Omaha, Nebraska
May 28, 1999
