UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy Statement
Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment
No. ____)
Filed
by the Registrant |
x |
Filed by
a Party other than the Registrant |
¨ |
Check the appropriate
box:
| x | Preliminary
Proxy Statement |
| ¨ | Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ¨ | Definitive
Proxy Statement |
| ¨ | Definitive
Additional Materials |
| ¨ | Soliciting
Material Pursuant to §240.14a-12 |
FRISCH'S
RESTAURANTS, INC.
(Name of Registrant
as Specified in Its Charter)
(Name of Person(s)
Filing Proxy Statement if other than the Registrant)
Payment of
Filing Fee (Check the appropriate box):
| x | Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
| 1) | Title
of each class of securities to which transaction applies: |
Common
Stock, no par of Frisch’s Restaurants, Inc.
| 2) | Aggregate
number of securities to which transaction applies: |
5,131,579
shares of common stock, 38,750 shares issuable upon exercise of stock options
| 3) | Per
unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it
was determined): |
The
maximum aggregate value was determined based upon the sum of (A)5,131,579 shares of common stock multiplied $34.05 per share and
(B) options to purchase 38,8750 shares multiplied by $16.99 (difference between $34.05 and weighted average exercise price of
$17.06)
| 4) | Proposed
maximum aggregate value of transaction: $174,727,497 |
| 5) | Total
fee paid: $20,303.34 |
| ¨ | Fee
paid previously with preliminary materials. |
| ¨ | Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date of its
filing. |
1) |
Amount
Previously Paid: |
|
2) |
Form,
Schedule or Registration Statement No.: |
|
Dear
Shareholder of Frisch’s Restaurants, Inc.:
On
May 21, 2015, Frisch’s Restaurants, Inc. (“Frisch’s”) entered into an Agreement and Plan of Merger (the
“Merger Agreement”) to be acquired by FRI Holding Company, LLC (“Holding”) through its wholly-owned subsidiary,
FRI Merger Sub, LLC (“Merger Sub”). Each of Holding and Merger Sub is an affiliate of NRD Partners I, LP, a newly-formed
private equity fund (the “Fund”). Subject to the terms and conditions of the Merger Agreement, Merger Sub will be
merged with and into Frisch’s and Frisch’s will survive the merger as a wholly-owned subsidiary of Holding.
If
the merger is approved by our shareholders and completed, our shareholders will have the right to receive $34.00 in cash, without
interest and less any applicable withholding taxes, for each share of common stock, no par value per share, of FRS that they own
immediately prior to the effective time of the merger. The price of $34.00 per share of Frisch’s common stock represents
a premium of approximately 21 percent to the $28.12 closing price per share of Frisch’s common stock on the NYSE MKT on
May 21, 2015, the day prior to the announcement that Frisch’s had entered into the Merger Agreement.
You
are cordially invited to attend a special meeting of our shareholders to be held in connection with the proposed merger on August
11, 2015 at Frisch’s corporate headquarters located at 2800 Gilbert Avenue, Cincinnati, Ohio 45209-1206 (the “Special
Meeting”).
Following
careful consideration, the Frisch’s Board of Directors (the “Board”) unanimously approved the Merger Agreement,
the merger and the other transactions contemplated by the merger. The merger cannot be completed unless Frisch’s shareholders
approve the merger. The Board unanimously recommends that Frisch’s shareholders vote “FOR” the proposal to
approve the merger.
At
the Special Meeting, shareholders will also be asked to vote on a proposal to approve on a nonbinding, advisory basis, certain
compensation that will be paid by Frisch’s to certain executive officers of Frisch’s. The Board unanimously recommends
that Frisch’s shareholders vote “FOR” this proposal.
Also,
at the Special Meeting, shareholders will be asked to vote on a proposal to approve an adjournment of the Special Meeting, if
necessary or appropriate, to solicit additional votes for the approval of the proposal to approve the Merger Proposal. The
Board unanimously recommends that Frisch’s shareholders vote “FOR” this proposal.
Your
vote is very important, regardless of the number of shares you own. Whether or not you expect to attend the special meeting in
person, please vote or otherwise submit a proxy to vote your shares as promptly as possible so that your shares may be represented
and voted at the Special Meeting. The failure to vote on the proposal to approve the Merger Agreement will have the same effect
as a vote “AGAINST” this proposal.
The
obligations of Frisch’s and Holding to complete the merger are subject to the satisfaction or waiver of conditions. The
accompanying proxy statement contains detailed information about Frisch’s, the Special Meeting, the Merger Agreement, the
merger and the transactions contemplated by the Merger Agreement.
Thank
you for your confidence in Frisch’s.
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Sincerely, |
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Daniel W. Geeding |
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Chairman of the Board |
Neither
the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved of the merger, passed
upon the merits of the Merger Agreement or the merger, or determined if the accompanying proxy statement is accurate or complete.
Any representation to the contrary is a criminal offense.
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS (the “SPECIAL MEETING”)
DATE & TIME |
August 11, 2015 at 9:00 A.M., Eastern Time |
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PLACE |
2800 Gilbert Avenue, Cincinnati, Ohio 45209 |
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ITEMS OF BUSINESS |
1. To consider and vote
on a proposal (the “Merger Proposal”) to approve the Agreement and Plan of Merger, dated as of May
21, 2015 (the “Merger Agreement”), among Frisch’s Restaurants, Inc. (“Frisch’s”), FRI
Holding Company, LLC (“Holding”), and FRI Merger Sub, LLC (“Merger Sub”), both affiliates of NRD Partners
I, LP (“Fund”), pursuant to which Merger Sub will merge with and into Frisch’s with Frisch’s surviving
as a wholly owned subsidiary of Holding; |
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2. To consider and vote
on a proposal to approve, on a nonbinding, advisory basis, certain compensation that will be paid by Frisch’s to certain
named executive officers (the “Certain Executive Compensation Matters Proposal”); and |
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3. To consider and vote
on a proposal to approve an adjournment of the Special Meeting, if necessary or appropriate, for the purpose of soliciting
additional votes for the approval of the merger proposal (the “Adjournment Proposal”). |
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RECORD DATE |
Only shareholders of record at the close of business on July ___,
2015 (the “Record Date”) are entitled to notice of, and to vote at, the Special Meeting and at any adjournment
or postponement of the Special Meeting. |
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VOTING BY PROXY |
The Frisch’s Board of Directors (the “Board”)
is soliciting your proxy to assure that a quorum is present and that your shares are represented and voted at the Special
Meeting. For information on submitting your proxy, please see the attached proxy statement and enclosed proxy card. If you
later decide to vote in person at the Special Meeting, information is also provided on revoking your proxy prior to the Special
Meeting. |
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RECOMMENDATIONS |
The Frisch’s Board unanimously recommends that you vote: |
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• |
“FOR” the Merger Proposal; |
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• |
“FOR” the Certain Executive Compensation Matters Proposal;
and |
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• |
“FOR” the Adjournment Proposal. |
YOUR
VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE VOTE AS DESCRIBED IN THE INSTRUCTIONS
CONTAINED IN THESE MATERIALS OR COMPLETE, DATE, SIGN AND RETURN A PROXY CARD AS PROMPTLY AS POSSIBLE. IF YOU RECEIVE MORE THAN
ONE PROXY BECAUSE YOU OWN SHARES REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH PROXY SHOULD BE VOTED. IF YOU DO NOT SUBMIT
YOUR PROXY, INSTRUCT YOUR BROKER HOW TO VOTE YOUR SHARES OR VOTE IN PERSON AT THE SPECIAL MEETING ON THE MERGER PROPOSAL, IT WILL
HAVE THE SAME EFFECT AS A VOTE “AGAINST” THE MERGER PROPOSAL.
Your
proxy may be revoked at any time before the vote at the Special Meeting by following the procedures outlined in the accompanying
proxy statement.
Please
note that we intend to limit attendance at the Special Meeting to Frisch’s shareholders as of the Record Date (or their
authorized representatives), as well as our invited guests. If your shares are held by a broker, bank or other nominee and you
wish to vote in person at the Special Meeting, you must bring to the Special Meeting a legal proxy from the broker, bank or other
nominee that holds your shares authorizing you to vote in person at the Special Meeting. Please also bring to the Special Meeting
your account statement evidencing your beneficial ownership of Frisch’s common stock as of the record date. All shareholders
should also bring photo identification.
The
proxy statement of which this notice forms a part provides a detailed description of the Merger Agreement, the merger and the
transactions contemplated by the Merger Agreement. We urge you to read the proxy statement, including any documents incorporated
by reference and its annexes carefully and in their entirety. If you have any questions concerning the merger or the proxy statement,
would like additional copies of the proxy statement or need help voting your shares of Frisch’s common stock, please contact
the Office of the Secretary at Frisch’s Restaurants, Inc. 2800 Gilbert Avenue, Cincinnati, Ohio 45206-1206, Telephone (513)
559-5216, Attention: Donald A. Bodner, Secretary.
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By Order of the Board of Directors, |
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________________________ |
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Donald A. Bodner, Secretary |
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Cincinnati, Ohio |
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___________, 2015 |
ANNEX A: |
AGREEMENT AND PLAN OF MERGER |
ANNEX B: |
OPINION OF RAYMOND JAMES & ASSOCIATES, INC. |
ANNEX C: |
SECTIONS 1701.84 and 1701.85 of the OHIO GENERAL CORPORATION LAW
(the “OGCL”) |
SUMMARY
TERM SHEET
This
summary highlights information contained elsewhere in this proxy statement and may not contain all the information that is important
to you with respect to the Merger and the other matters being considered at the Special Meeting of Frisch’s. We urge you
to read carefully the remainder of this proxy statement, including the attached annexes and the other documents to which we have
referred you. For additional information on Frisch’s included in documents incorporated by reference into this proxy statement,
see the section titled “Where You Can Find More Information” beginning on page ____.
The
accompanying proxy statement is dated July ___, 2015, and together with the enclosed form of proxy, is first being mailed to Frisch’s
shareholders on or about July ___, 2015.
All
references to “Frisch’s Restaurants, Inc.,” “Frisch’s”, “FRS”, the “Company”,
“we,” “us,” or “our” in this proxy statement refer to Frisch’s Restaurants, Inc., an
Ohio corporation. All references to the “Fund” refer to NRD Partners I, L.P., a Delaware limited partnership; all
references to “Holding” refer to the Fund’s affiliate, FRI Holding Company, LLC, a Delaware limited liability
company; and all references to “Merger Sub” refer to FRI Merger Sub, LLC, an Ohio limited liability company and a
wholly-owned subsidiary of Holding formed for the sole purpose of effecting the Merger. For the purposes of this proxy statement,
all references to “NRD” refer to NRD Holdings, LLC, and all of its affiliates. All references to “Frisch’s
Common Stock” refer to the common stock, no par value per share, of Frisch’s. All references to the “Board”
refer to the Board of Directors of Frisch’s. All references to the “Merger” refer to the merger of Merger Sub
with and into Frisch’s with Frisch’s surviving as a wholly-owned subsidiary of Holding. All references to the “Merger
Agreement” refer to the Agreement and Plan of Merger, dated as of May 21, 2015, and as may be further amended from time
to time, by and among Frisch’s, Holding and Merger Sub, a copy of which is included as Annex A to this proxy statement (without
disclosure schedules). Frisch’s, following the completion of the Merger, is sometimes referred to in this proxy statement
as the “Surviving Corporation.” Terms used but not defined in this proxy statement should be given the same meaning
as in the Merger Agreement.
The Companies
Frisch’s
Restaurants, Inc.
Frisch’s
is a regional company that operates full service family-style restaurants under the name “Frisch’s Big Boy.”
All Frisch’s Big Boy restaurants are currently located in various regions of Ohio, Kentucky and Indiana. The Company owns
the trademark “Frisch’s” and has exclusive, irrevocable ownership of the rights to the “Big Boy”
trademark, trade name and service marks in the states of Kentucky and Indiana, and in most of Ohio and Tennessee. All of the Frisch’s
Big Boy restaurants also offer “drive-thru” service. The Company also licenses Big Boy restaurants to other operators,
currently in certain parts of Ohio, Kentucky and Indiana.
Frisch’s
Common Stock is listed with, and trades on, the New York Stock Exchange (“NYSE MKT”) under the symbol “FRS.”
Our corporate website address is www.frischs.com. The information provided on the Frisch’s website is not part of
this proxy statement and is not incorporated in this proxy statement by reference hereby or by any other reference to Frisch’s
website provided in this proxy statement.
NRD Partners
I, L.P. (the “Fund”)
The
Fund is a private equity fund founded in November 2014 by Aziz Hashim to acquire brands that offer superior products and compelling
unit economics and help them grow to their fullest potential through the Fund’s expanding network of franchisee investors.
For more information, please visit www.nrdcapital.com. The information provided on the Fund website is not part of this
proxy statement and is not incorporated in this proxy statement by reference hereby or by any other reference to Holding’s
website provided in this proxy statement.
FRI Holding
Company, LLC (“Holding”)
Holding
was formed in April 2015 solely for the purpose of entering into the Merger Agreement and completing such other transactions as
necessary to finance the Merger. After the closing of the Merger, Holding would also act as the holding company and sole shareholder
of Frisch’s. Holding has not carried out any activities to date, except for activities incidental to its formation and activities
undertaken in connection with the transactions contemplated by the Merger Agreement, which includes certain financing transactions
entered into for the purpose of financing the Merger.
FRI Merger
Sub, LLC (“Merger Sub”)
Merger
Sub was formed in April 2015 solely for the purpose of completing the Merger with Frisch’s. Merger Sub has not carried out
any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions
contemplated by the Merger Agreement.
NRD Holdings,
LLC (“NRD”)
NRD
is a limited liability company formed on June 1, 2012 by Aziz Hashim to conduct acquisition activities. NRD entered into a non-disclosure
agreement on July 14, 2014, responded to Frisch’s bid proposal in October 2014, and thereafter engaged in negotiations regarding
a proposed transaction with Frisch’s prior to the formation of the Fund.
Strategic
Financial Intermediation, LLC (“FinCo”)
FinCo
is a limited liability company formed on April 2, 2015 that has entered into contracts in connection with the sale-leaseback transaction
described in this proxy statement. Under the contracts, FinCo will purchase real estate assets from Frisch’s and sell the
assets to an independent third-party institutional investor. FinCo will use most of the proceeds from the transaction to purchase
bonds issued by Holding and to acquire preferred equity units in Holding.
The Special
Meeting
Date, Time
and Place (see page ___)
The
Special Meeting of Frisch’s shareholders (the “Special Meeting”) is scheduled to be held at Frisch’s headquarters
located at 2800 Gilbert Avenue, Cincinnati, Ohio 45206-1206 on August 11, 2015 at 9:00 A.M., Eastern Time.
Purpose
of the Special Meeting (see page __)
The
Special Meeting is being held in order to consider and vote on the following proposals:
| • | to
approve the Merger (the “Merger Proposal”); |
| • | to
approve, on a nonbinding, advisory basis, certain compensation that will be paid by Frisch’s
to certain named executive officers (the “Certain Executive Compensation Matters
Proposal”); and |
| • | to
approve the adjournment of the Special Meeting, if necessary or appropriate, for the
purpose of soliciting additional votes for the approval of the Merger Proposal (the “Adjournment
Proposal”). |
A
majority of the outstanding shares of Frisch’s Common Stock must be voted to approve the Merger Proposal as a condition
for the Merger to occur. If the Frisch’s shareholders fail to approve the Merger Proposal, the Merger will not occur.
Record Date;
Shareholders Entitled to Vote (see page ___)
Only
holders of Frisch’s Common Stock at the close of business on _________, 2015, the record date for the Special Meeting (the
“Record Date”), will be entitled to notice of, and to vote at, the Special Meeting or any adjournments or postponements
of the Special Meeting. At the close of business on the Record Date, 5,131,579 shares of Frisch’s Common Stock were issued
and outstanding.
Holders
of Frisch’s Common Stock are entitled to one vote for each share of Frisch’s Common Stock they own at the close of
business on the Record Date.
Quorum (see
page __)
The
presence at the Special Meeting, in person or by proxy, of the holders of a majority of the shares of Frisch’s Common Stock
outstanding on the Record Date will constitute a quorum. There must be a quorum for business to be conducted at the Special Meeting.
However, even if a quorum does not exist, a majority of the shares of Frisch’s Common Stock present or represented by proxy
at the Special Meeting and entitled to vote may adjourn the meeting to another place, date or time. Failure of a quorum to be
represented at the Special Meeting will necessitate an adjournment or postponement of the Special Meeting and will subject Frisch’s
to additional expense.
Required
Vote (see page ___)
Approval
of the Merger Proposal requires the affirmative vote of at least a majority of the shares of Frisch’s Common Stock outstanding
at the close of business on the Record Date.
Approval
of the Certain Executive Compensation Matters Proposal does not require the affirmative vote of any specified number of shares
of Frisch’s Common Stock.
Approval
of the Adjournment Proposal requires the affirmative vote of a majority of the votes cast with respect to this matter in person
or represented by proxy at the Special Meeting and entitled to vote thereon.
Voting at
the Special Meeting (see page __)
If
your shares are registered directly in your name with our transfer agent, you are considered a “shareholder of record”
and you may vote your shares in person at the Special Meeting or by mail [over the internet or by telephone]. If you plan to attend
the Special Meeting and wish to vote in person, you will be given a ballot at the Special Meeting. Although Frisch’s offers
four different voting methods, Frisch’s encourages you to vote over the internet or by telephone, as Frisch’s believes
they are convenient, cost-effective and reliable voting methods. If you choose to vote your shares over the internet or by telephone,
there is no need for you to mail back your proxy card.
If
your shares are held by your broker, bank or other nominee, you are considered the beneficial owner of shares held in “street
name” and you will receive a form from your broker, bank or other nominee seeking instruction from you as to how your shares
should be voted. If you are a beneficial owner and you wish to vote in person at the Special Meeting, you must bring to the Special
Meeting a legal proxy from the broker, bank or other nominee that holds your shares authorizing you to vote in person at the Special
Meeting.
Shareholders
who are entitled to vote at the Special Meeting, as well as Frisch’s invited guests, may attend the Special Meeting. Beneficial
owners should bring a copy of an account statement reflecting their ownership of Frisch’s Common Stock as of the Record
Date. All shareholders should bring photo identification.
Frisch’s
recommends that you vote as soon as possible, even if you are planning to attend the Special Meeting, so that the vote count will
not be delayed.
Solicitation
of Proxies (see page ___)
The
Board is soliciting your proxy, and Frisch’s will bear the cost of soliciting proxies. Solicitation initially will be made
by mail. Forms of proxies and proxy materials may also be distributed through brokers, banks and other nominees to the beneficial
owners of shares of Frisch’s Common Stock, in which case these parties will be reimbursed for their reasonable out-of-pocket
expenses. Proxies may also be solicited in person or by telephone, facsimile, electronic mail or other electronic medium or, without
additional compensation, by Frisch’s directors, officers and employees.
Adjournment
(see page ___)
In
addition to the Merger Proposal, Frisch’s shareholders are also being asked to approve the Adjournment Proposal, which will
give the Board authority to adjourn the Special Meeting for the purpose of soliciting additional votes in favor of the Merger
Proposal if there are not sufficient votes at the time of the Special Meeting to approve the Merger Proposal. If the Adjournment
Proposal is approved, the Special Meeting could be adjourned by the Board as permitted under the terms of the Merger Agreement.
In addition, the Board, as permitted under the terms of the Merger Agreement, could postpone the meeting before it commences,
whether for the purpose of soliciting additional votes or for other reasons. If the Special Meeting is adjourned for the purpose
of soliciting additional votes, shareholders who have already submitted their proxies will be able to revoke them at any time
prior to their use.
The Merger
Structure
of the Merger (see page ___)
If
the Merger is completed, then at the effective time of the Merger (the “Effective Time”), Merger Sub will merge with
and into Frisch’s, the separate corporate existence of Merger Sub will cease and Frisch’s will survive the Merger
as a wholly-owned subsidiary of Holding. After the Effective Time, Holding will own 100 percent of Frisch’s outstanding
stock and current shareholders will no longer have any equity interest in Frisch’s.
What Shareholders
Will Receive in the Merger (see page ___)
Upon
the terms and subject to the conditions of the Merger Agreement, at the Effective Time, Frisch’s shareholders will have
the right to receive $34.00 in cash (the “Merger Consideration”), without interest and less any applicable withholding
taxes, for each share of Frisch’s Common Stock that they own immediately prior to the Effective Time.
Treatment
of Frisch’s Equity Awards (see page ___)
The
Merger Agreement provides that outstanding equity-based awards under Frisch’s equity plans will be treated as set forth
below.
Stock
Options. At the Effective Time, Frisch’s will cause each outstanding option, whether vested or unvested, to represent
the right to receive a payment in cash, without interest and less any applicable withholding taxes, equal to the product of the
excess, if any, of the Merger Consideration of $34.00 over the exercise price of the option, multiplied by the number of shares
subject to such option.
Restricted
Shares. At the Effective Time, each outstanding share of Frisch’s Common Stock subject to time-based vesting or lapse
restrictions under any stock or incentive plan of Frisch’s shall automatically vest such that each holder thereof will be
entitled to 100 percent of the shares of Frisch’s Common Stock underlying such awards and the holder thereof will receive
the Merger Consideration of $34.00 for each such share.
Recommendation
of the Board of Directors (see page ___)
The
Board unanimously determined that the Merger Agreement is fair, advisable and in the best interests of Frisch’s and its
shareholders and adopted and approved the Merger Agreement. In the course of reaching this decision, the Board considered a number
of factors in its deliberations, which can be found in the section titled “The Merger Proposal (Proposal 1) — Recommendation
of the Board and Reasons for the Merger” beginning on page ___. The Board unanimously recommends that the Frisch’s
shareholders vote:
| • | “FOR”
the Merger Proposal; |
| • | “FOR”
the Certain Executive Compensation Matters Proposal; and |
| • | “FOR”
the Adjournment Proposal. |
Opinion
of Raymond James & Associates, Inc. (See page ___)
At
Frisch’s May 21, 2015 special Board meeting, representatives of Raymond James & Associates, Inc. (“Raymond James”)
rendered Raymond James’ oral opinion, which was subsequently confirmed by delivery of a written opinion (the “Opinion”)
dated May 21, 2015 to the Board as to whether, as of such date, the Merger Consideration to be received by the holders of the
Frisch’s Common Stock (other than the Excluded Persons, as defined below) in the Merger pursuant to the Merger Agreement
was fair from a financial point of view to such holders, based upon and subject to the qualifications, limitations, assumptions,
and other matters considered in connection with the preparation of its opinion. For purposes of the Opinion, and with the Board’s
consent, Raymond James assumed that the Merger Consideration was $34.00 per share. For purposes of the Opinion, Excluded Persons
was defined as the Fund, Holding, Merger Sub, NRD Holdings, LLC, any of their respective subsidiaries or affiliates, Frisch’s
and holders of Frisch’s Common Stock issued and outstanding immediately prior to the Effective Time (as defined in the Merger
Agreement) who have not voted in favor of adoption of the Agreement or consented thereto in writing and who have properly exercised
appraisal rights of such shares.
The
full text of the Opinion, which sets forth, among other things, the various qualifications, assumptions, matters considered and
limitations on the scope of the review undertaken, is attached as Annex B to this document. Raymond James provided its Opinion
for the information and assistance of the Board (solely in its capacity as such) in connection with, and for purposes of, its
consideration of the Merger and its Opinion only addressed whether the Merger Consideration to be received by the holders of Frisch’s
Common Stock (other than the Excluded Persons) in the Merger pursuant to the Merger Agreement was fair, from a financial point
of view, to such holders. The Opinion did not address any other term or aspect of the Merger Agreement or the Merger contemplated
thereby nor did it express any opinion as to the impact of the matters referenced in Note I – “Immaterial Revision”
to the Condensed Consolidated Financial Statements of Frisch’s Restaurants’ Form 10-Q as filed with the Securities
and Exchange Commission for the period ended December 16, 2014 (“Note I”), as to which Raymond James understood that
Frisch’s Restaurants conducted such diligence and other investigations, and obtained such advice from qualified professionals,
as it deemed necessary. The Opinion did not constitute a recommendation to the Board or any holder of the Frisch’s Common
Stock as to how the Board, such stockholder or any other person should vote or otherwise act with respect to the Merger or any
other matter.
Interests
of Frisch’s Directors and Executive Officers in the Merger (see page ___)
In
considering the recommendation of the Board that you vote “FOR” the Merger Proposal, you should be aware that, aside
from their interests as Frisch’s shareholders, Frisch’s directors and executive officers have interests in the Merger
that are different from, or in addition to, the interests of other Frisch’s shareholders generally. The Board was aware
of these interests and considered them, among other things, in approving the Merger Agreement and recommending that the shareholders
approve the Merger Agreement. These interests include:
| • | accelerated
vesting of any restricted shares held by Frisch’s directors and officers and the
cash out of any stock options held by Frisch’s directors and officers; |
| • | cash
payment of accelerated incentive bonuses prorated from June 3, 2015 to the Effective
Time to Craig F. Maier, President and Chief Executive Officer, as provided for in his
interim employment agreement extension effective June 3, 2015 (the “Employment
Agreement Extension”) and the other Named Executive Officers under the continuation
of the previously-approved Senior Executive Bonus Plan. For illustration purposes only,
assuming the Merger was consummated on July 28, 2015 and the Company’s pre-tax
earnings are in excess of 7 percent of total revenue, the amounts of incentive bonuses
payable are as follows: Craig F. Maier - $93,121; Mark R. Lanning, Vice President of
Finance and Chief Financial Officer - $14,141; Michael E. Conner, Vice President of Human
Resources - $11,142; Michael R. Everett, Vice President of Information Technology - $11,189;
and Karen F. Maier, Vice President of Marketing - $11,058 (actual payment amounts to
be calculated on Company performance as of the Effective Time); and |
| • | the
provision of indemnification and insurance arrangements under the Merger Agreement and
Frisch’s articles of incorporation and bylaws. |
Financing
of the Merger (see page ___)
The
Merger Consideration is being financed through a combination of financing sources, including an equity commitment pursuant to
which the Fund has agreed to provide equity financing and an agreement whereby a third-party has agreed to provide the balance
of funds necessary to consummate the Merger in the form of a sale-leaseback transaction involving certain of the Company’s
real property assets (together, the “Financing Sources”). The Financing Sources have provided written assurances confirming
the amounts to be provided or, as to the third-party funds, the conditional availability of such funds. The payment and performance
obligations of Holding and Merger Sub in connection with the transaction are guaranteed by an agreement between the Company and
the Fund (the “Guarantee”). The Merger Agreement contains no financing contingency. Holding intends to use cash on
hand provided by the Fund and the proceeds of a sale-leaseback transaction to pay the Merger Consideration and Merger-related
costs.
Regulatory
Clearances and Approvals Required for the Merger (see page ___)
No
filing was necessary under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). No
other regulatory clearance or approval is required.
Material
U.S. Federal Income Tax Consequences of the Merger (see page ___)
The
conversion of each share of Frisch’s Common Stock into the right to receive cash in the Merger will be a taxable transaction
for U.S. federal income tax purposes and may also be taxable under state and local and other tax laws. You should read the section
titled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page (__), and you are encouraged
to consult your own tax advisors regarding the U.S. federal income tax consequences of the Merger to you in your particular circumstances,
as well as tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.
Appraisal
Rights (see page ___)
Under
Ohio law, if you own Frisch’s Common Stock and do not vote in favor of adopting the Merger Agreement, you will have the
right to seek appraisal of the fair value of your Frisch’s Common Stock under Sections 1701.84 and 1701.85 of the Ohio General
Corporation Law (the “OGCL”), if the Merger is completed. This value could be more than, less than, or the same as
the Merger Consideration for Frisch’s Common Stock.
Failure
to strictly comply with all procedures required by Section 1701.85 of the OGCL will result in a loss of the right to appraisal.
For example, merely voting against the adoption of the Merger Agreement will not preserve your right to appraisal under the OGCL.
Also, the submission of a proxy not marked “AGAINST” or “ABSTAIN” will result in the waiver of appraisal
rights.
If
you hold shares in the name of a broker or other nominee, you must instruct your nominee to take the steps necessary to enable
you to demand appraisal for your Frisch’s Common Stock.
Annex
C to this proxy statement contains the full text of Sections 1701.84 and 1701.85 of the OGCL, which relates to appraisal rights.
We encourage you to read these provisions carefully and in their entirety.
Expected
Timing of the Merger (see page ___)
We
expect to complete the Merger during the third quarter of calendar year 2015. However, Frisch’s cannot predict the actual
date on which the Merger will be completed, if at all, because completion is subject to conditions beyond Frisch’s control.
There may be a substantial amount of time between the Special Meeting and the completion of the Merger. We expect to complete
the Merger promptly following the receipt of all required clearances and approvals and the satisfaction or, to the extent permitted,
waiver of the other conditions to the consummation of the Merger. See the section titled “The Merger Agreement — Conditions
to the Closing of the Merger” beginning on page ___.
Restrictions
on Solicitation of Acquisition Proposals (see page ___)
From
the date of the Merger Agreement until the earlier of the Effective Time or the termination of the Merger Agreement, Frisch’s
is required to immediately cease any solicitations, discussions or negotiations that may be ongoing with respect to an Acquisition
Proposal with any person (as defined in the Merger Agreement). Frisch’s is generally not permitted to:
| • | initiate,
solicit or knowingly encourage, facilitate or assist the making of a competing Acquisition
Proposal; |
| • | engage
in, continue or participate in any discussions or negotiations with any person regarding
any competing Acquisition Proposal; |
| • | furnish
to any person any nonpublic information or afford access to the business, properties,
assets or personnel of Frisch’s to facilitate the making of any competing Acquisition
Proposal; or |
| • | enter
into any Company Acquisition Agreement. |
If,
however, before the Frisch’s shareholders approve the Merger Agreement, (i) Frisch’s receives from a third party a
bona fide written competing Acquisition Proposal that the Board determines in good faith, after consultation with its financial
advisors and outside legal counsel, constitutes a Superior Proposal or would reasonably be expected to result in a Superior Proposal
(as defined in the Merger Agreement), and (ii) the Board determines that it is reasonably necessary to comply with its fiduciary
duties, then:
| • | Frisch’s
must give timely notice to Holding of its receipt of an Acquisition Proposal; |
| • | Frisch’s
may furnish to such third party access and nonpublic information with regard to Frisch’s
and its subsidiaries under a confidentiality agreement; |
| • | Frisch’s
may engage or participate in any discussions with such person; and |
| • | the
Board may withhold, withdraw or change its recommendation to Frisch’s shareholders
regarding the transaction with Holding following receipt of a Superior Proposal, subject
to complying with certain notice and other specified conditions, including giving
Holding the opportunity to propose changes to the Merger Agreement in response to such
Superior Proposal. |
Conditions
to the Closing of the Merger (see page __)
Each
party’s obligation to effect the Merger is subject to the satisfaction or, to the extent permitted, waiver of various conditions,
including the following:
| • | the
Merger Proposal is approved by Frisch’s shareholders at the Special Meeting; |
| • | no
governmental authority has enacted, issued, enforced or entered any order, injunction
or decree or statute, rule or regulation that makes illegal, enjoins or otherwise prohibits
the consummation of the transactions contemplated by the Merger Agreement; |
| • | the
parties’ respective representations and warranties in the Merger Agreement must
be true and correct, subject to certain materiality thresholds, as of the date of the
closing of the Merger; |
| • | the
parties shall have performed or complied in all material respects with each of their
respective obligations under the Merger Agreement at or prior to the closing of the Merger;
and |
| • | since
the date of the Merger Agreement, no event, change, circumstance, occurrence, effect
or state of facts has occurred that would result in a Material Adverse Effect on Frisch’s
(as defined in the Merger Agreement). |
Termination
of the Merger Agreement (see page ___)
Frisch’s
and Holding can terminate the Merger Agreement under certain circumstances, including:
| • | by
mutual written consent; |
| • | if
the Merger has not occurred on or before July 30, 2015, subject to one automatic extension
of thirty days, and such other extensions as shall be mutually agreed between Holding
and Frisch’s, but in no event later than September 30, 2015, such subsequent extension
only being available to Frisch’s if Holding is able to extend the availability
of financing, and such right to terminate the Merger Agreement for this reason shall
not be available to any party whose breach of any representation, warranty, covenant
or agreement set forth in the Merger Agreement has been the cause of, or resulted in,
the failure of the Merger to be consummated on or before the closing date; |
| • | if
a governmental authority has issued a final and non-appealable order having the effect
of permanently restraining, enjoining or otherwise prohibiting the consummation of the
Merger, provided that the right to terminate the Merger Agreement under this circumstance
will not be available to any party whose failure to perform its obligations under the
Merger Agreement has been a principal cause of or resulted in such order; |
| • | if
approval of the Merger Proposal by the Frisch’s shareholders has not been obtained
at the Special Meeting or at any adjournment or postponement thereof at which a vote
on the approval of the Merger Proposal was taken; |
| • | acceptance
of a Superior Proposal, (i) by Frisch’s, if Frisch’s has received a Superior
Proposal and the Board has made a determination to accept such Superior Proposal, provided
that Frisch’s shall have paid any amounts due as fees and expenses, or (ii) by
Holding, if (a) Board or any committee thereof has failed to make, withdrawn, amended,
modified, or materially qualified, in a manner adverse to Holding or Merger Sub, the
Board recommendation, has recommended an Acquisition Proposal, has failed to recommend
against acceptance of any tender offer or exchange offer for the shares of Frisch’s
Common Stock within ten business days after the commencement of such offer, has made
any public statement inconsistent with the Board recommendation, or resolved or agreed
to take any of the foregoing actions, (b) Frisch’s shall have entered into, or
publicly announced its intention to enter into, a Company Acquisition Agreement, as defined
in the Merger Agreement (other than an Acceptable Confidentiality Agreement, as defined
in the Merger Agreement), or (c) Frisch’s or the Board (or any committee of the
Board) has publicly announced its intentions to do any of the actions specified herein; |
| • | if
the mutual conditions to the parties’ obligations to consummate the Merger and
the conditions to the obligations of Holding and Merger Sub to consummate the Merger
are satisfied (other than those conditions that by their terms are to be satisfied by
actions taken at the closing of the Merger), either party has notified the other party
that it is ready and willing to close and the other party has failed to consummate the
Merger within three business days of receiving such notice. |
Frisch’s
can terminate the Merger Agreement:
| • | upon
a breach or inaccuracy in any of Holding’s or Merger Sub’s representations
or warranties or the failure of Holding or Merger Sub to perform any of its obligations
under the Merger Agreement, which in any case would result in the failure of any condition
to our obligation to close the Merger to be satisfied and which breach, inaccuracy or
failure is not capable of being cured before the earlier of (i) twenty days following
receipt by Frisch’s of written notice of such breach, inaccuracy or failure to
perform and (ii) September 30, 2015; |
Holding
can terminate the Merger Agreement:
| • | upon
a breach or inaccuracy in any of Frisch’s representations or warranties or Frisch’s
failure to perform any of its obligations under the Merger Agreement, which in any case
would result in the failure of any condition to Holding’s obligation to close the
Merger to be satisfied and which breach, inaccuracy or failure is not capable of being
cured before the earlier of (i) twenty days following receipt by Holding of written notice
of such breach, inaccuracy or failure to perform and (ii) September 30, 2015. |
If
either Frisch’s or Holding terminates the Merger Agreement, the Merger Agreement shall become void and have no effect, and
none of Frisch’s, Holding, any of their respective subsidiaries or any of the officers or directors of any of them shall
have any liability of any nature whatsoever under the Merger Agreement, or in connection with the transactions contemplated by
the Merger Agreement, except for (i) those provisions that survive any termination of the Merger Agreement and (ii) neither Frisch’s
nor Holding shall be relieved or released from liability for willful breach of the Merger Agreement or for fraud under applicable
law. Nothing shall limit or prevent any party from exercising any rights or remedies it may have under the Merger Agreement in
lieu of terminating the Merger Agreement.
Termination
Fees and Expenses (see page ___)
Frisch’s
is obligated to pay Holding a termination fee of $5,000,000 (the “Company Termination Fee”) if the Merger Agreement
is terminated by Frisch’s after the Board has determined to accept a Superior Proposal. The termination fee must also be
paid by Frisch’s if the Merger Agreement is terminated by Holding if the Board has modified its current recommendation to
approve the Merger Agreement, has recommended another Acquisition Proposal, has failed to recommend against accepting a tender
or exchange offer or has entered into or announced Frisch’s intention to enter into a Company Acquisition Agreement.
Directors’
and Officers’ Indemnification and Insurance (see page ___)
Following
the Effective Time, Holding shall cause the Surviving Corporation to indemnify Frisch’s and its subsidiaries’ present
and former directors and executive officers. In addition, following the Effective Time, the Surviving Corporation will maintain
in effect provisions in the Surviving Corporation’s organizational documents related to indemnification and advancement
of expenses and not amend or repeal such terms in any manner that would adversely affect the rights of such individuals. For a
period of six years, the Merger Agreement also provides that Frisch’s current officers and directors must be covered under
Frisch’s existing directors’ and officers’ liability insurance policies, or coverage that is no less favorable,
covering any claims arising with respect to acts or omissions before the Effective Time of the Merger. At or before the Effective
Time, Frisch’s intends to purchase a directors’ and officers’ liability “tail” insurance policy
that must be honored and maintained by Holding following the Effective Time.
Delisting
and Deregistration of Frisch’s Common Stock (see page ___)
If
the Merger is completed, Frisch’s Common Stock will be delisted from the NYSE MKT and deregistered under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”).
Litigation
Relating to the Merger (see page ___)
[RESERVED]
Market Prices
of Frisch’s Common Stock (see page ___)
The
Merger Consideration of $34.00 per share of Frisch’s Common Stock represents a premium of approximately 21 percent to the
$28.12 closing price per share of Frisch’s Common Stock on the NYSE MKT on May 21, 2015, the day prior to the announcement
that Frisch’s had entered into the Merger Agreement. The closing price of the Frisch’s Common Stock on the NYSE MKT
on ___________, 2015, the most recent practicable date prior to the filing of this proxy statement, was $__.__ per share. You
are encouraged to obtain current market prices of Frisch’s Common Stock in connection with voting your shares of Frisch’s
Common Stock.
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following
are brief answers to some of the questions that you may have regarding the Merger, the Special Meeting and the proposals being
considered at the Special Meeting. We urge you to carefully read the remainder of this proxy statement because the information
in this section does not provide all the information that might be important to you with respect to the Merger and the Special
Meeting. Additional important information is also contained in the annexes attached to this proxy statement and the documents
referred to or incorporated by reference into this proxy statement.
| Q. | Why
am I receiving these proxy materials? |
| A. | On May 21,
2015, Frisch’s entered into the Merger Agreement providing for the Merger of Merger
Sub with and into Frisch’s, pursuant to which Frisch’s will survive the Merger
as a wholly-owned subsidiary of Holding. You are receiving this proxy statement in connection
with the solicitation by the Board of proxies of Frisch’s shareholders in favor
of the Merger Proposal and the other matters to be voted on at the Special Meeting. |
| Q. | What
is the proposed transaction? |
| A. | If the Merger
Proposal is approved by Frisch’s shareholders and the other conditions to the consummation
of the Merger contained in the Merger Agreement are satisfied or waived, Merger Sub will
merge with and into Frisch’s. Frisch’s will be the Surviving Corporation
in the Merger and will be privately held as a wholly owned subsidiary of Holding. |
| Q. | What
will I receive in the Merger? |
| A. | Under the
terms of the Merger Agreement, if the Merger is completed, you will be entitled to receive
$34.00 in cash, without interest and less any applicable withholding taxes, for each
share of Frisch’s Common Stock you own. For example, if you own 100 shares of Frisch’s
Common Stock, you will be entitled to receive $3,400.00 in cash in exchange for your
shares, without interest and less any applicable withholding taxes. You will not be entitled
to receive shares in the Surviving Corporation or in Holding. |
| Q. | What
other effects will the Merger have on Frisch’s? |
| A. | If the Merger
is completed, Frisch’s Common Stock will be delisted from the NYSE and deregistered
under the Exchange Act, and Frisch’s will no longer be required to file periodic
reports with the Securities and Exchange Commission (the “SEC”) with respect
to Frisch’s Common Stock, in each case in accordance with applicable law. Following
the completion of the Merger, Frisch’s Common Stock will no longer be publicly
traded and you will no longer have any interest in Frisch’s future earnings or
growth; each share of Frisch’s Common Stock you hold will represent only the right
to receive $34.00 in cash, without interest and less any applicable withholding taxes. |
| Q. | Where
and when is the Special Meeting, and who may attend? |
| A. | The Special
Meeting will be held at Frisch’s headquarters located at 2800 Gilbert Avenue, Cincinnati,
Ohio on August 11, 2015 at 9:00 A.M., Eastern Time. The meeting room will open at 8:30
A.M., Eastern Time and registration will begin at that time. Shareholders who are entitled
to vote, as well as our invited guests, may attend the meeting. |
| Q. | What
must I bring to attend the Special Meeting? |
| A. | Beneficial
owners of shares held in “street name” should bring a copy of an account
statement reflecting their ownership of Frisch’s Common Stock as of the Record
Date. All shareholders should bring photo identification. |
| Q. | Who
can vote at the Special Meeting? |
| A. | All Frisch’s
shareholders of record as of the close of business on ________ ___, 2015, the Record
Date for the Special Meeting, are entitled to receive notice of, attend and vote at the
Special Meeting, or any adjournment or postponement thereof. Each share of Frisch’s
Common Stock is entitled to one vote on all matters that come before the meeting. At
the close of business on the Record Date, there were 5,131,579 shares of Frisch’s
Common Stock issued and outstanding. |
| Q. | What
matters will be voted on at the Special Meeting? |
| A. | At
the Special Meeting, you will be asked to consider and vote on the following proposals: |
| • | the
Certain Executive Compensation Matters Proposal; and |
| • | the
Adjournment Proposal. |
| Q. | How
does the Board recommend that I vote on the proposals? |
| A. | The
Board unanimously recommends that you vote: |
| • | “FOR”
the Merger Proposal; |
| • | “FOR”
the Certain Executive Compensation Matters Proposal; and |
| • | “FOR”
the Adjournment Proposal. |
| Q. | What
vote is required to approve the Merger Proposal? |
| A. | The Merger
Proposal will be approved if shareholders holding at least a majority of the shares of
Frisch’s Common Stock outstanding and entitled to vote at the close of business
on the Record Date vote “FOR” the proposal. |
| Q. | What
vote is required to approve the other proposals? |
| A. | The Adjournment
Proposal will be approved if a majority of the votes cast with respect to this matter
in person or represented by proxy at the Special Meeting and entitled to vote thereon
vote “FOR” such proposal. Approval of the Certain Executive Compensation
Matters Proposal does not require the affirmative vote of any specified number of shares
of Frisch’s Common Stock. |
| Q. | Do
you expect the Merger to be taxable to Frisch’s shareholders? |
| A. | The exchange
of Frisch’s Common Stock for cash in the Merger will be a taxable transaction for
U.S. federal income tax purposes and may also be taxable under state, local or other
tax laws. You should read the section titled “Material U.S. Federal Income Tax
Consequences of the Merger” beginning on page ___, and you are encouraged to consult
your own tax advisors regarding the U.S. federal income tax consequences of the Merger
to you in your particular circumstances, as well as tax consequences arising under the
laws of any state, local or foreign taxing jurisdiction. |
| Q. | When
is the Merger expected to be completed? |
| A. | The parties
to the Merger Agreement expect to complete the Merger during the third quarter of calendar
year 2015, subject to receipt of shareholder approval of the Merger Proposal. However,
Frisch’s cannot predict the actual date on which the Merger will be completed,
if at all, because completion is subject to conditions beyond Frisch’s control.
See the section titled “The Merger Agreement — Conditions to the Closing
of the Merger” beginning on page ___. |
| Q. | What
happens if the Merger is not completed? |
| A. | If the Merger
Proposal is not approved by Frisch’s shareholders, or if the Merger is not completed
for any other reason, Frisch’s shareholders will not receive any payment for their
shares of Frisch’s Common Stock in connection with the Merger. Instead, Frisch’s
will remain an independent public company and shares of Frisch’s Common Stock will
continue to be listed and traded on the NYSE MKT. If the Merger Agreement is terminated
under specified circumstances, Frisch’s may be required to pay Holding a termination
fee of $5,000,000. See the section titled “The Merger Agreement — Termination
Fees and Expenses” beginning on page ____ for a discussion of the circumstances
under which Frisch’s will be required to pay a termination fee. |
| Q. | Who
is soliciting my vote? |
| A. | The Board
is soliciting your proxy and Frisch’s will bear the cost of soliciting proxies.
Solicitation initially will be made by mail. Forms of proxies and proxy materials may
also be distributed through brokers, banks or other nominees to beneficial owners of
shares of Frisch’s Common Stock, in which case these parties will be reimbursed
for their reasonable out-of-pocket expenses. Proxies may also be solicited in person
or by telephone, facsimile, electronic mail or other electronic medium or, without additional
compensation, by Frisch’s directors, officers and employees. |
| Q. | What
do I need to do now? |
| A. | Carefully
read and consider the information contained in and incorporated by reference into this
proxy statement, including the attached annexes. Whether or not you expect to attend
the Special Meeting in person, please submit a proxy to vote your shares as promptly
as possible so that your shares may be represented and voted at the Special Meeting. |
| Q. | How
do I vote if my shares are registered directly in my name? |
| A. | If your shares
are registered directly in your name with our transfer agent, you are considered a “shareholder
of record” and there are four methods by which you may vote your shares at the
Special Meeting: |
| • | Internet:
To vote over the internet, go to www.proxyvote.com and follow the steps outlined
on the secure website. Please have your proxy card available for reference because you
will need the validation details that are located on your proxy card in order to cast
your vote over the internet. If you vote over the internet, you do not have to mail in
a proxy card. |
| • | Telephone:
To vote by telephone, call toll-free 1-8__-___-____ within the United States any time
prior to __:__ __.M. Eastern Time, on _________ ___, 2015 on a touchtone phone. Please
have your proxy card available for reference because you will need the validation details
that are located on your proxy card in order to cast your vote by telephone. If you vote
by telephone, you do not have to mail in a proxy card. |
| • | Mail:
To vote by mail, complete, sign and date a proxy card and return it promptly to the address
indicated on the proxy card. If you return your signed proxy card to us before the Special
Meeting and do not subsequently revoke your proxy, we will vote your shares as you direct. |
| • | In
Person: You may attend the Special Meeting and vote your shares in person, rather than
voting your shares by mail, over the internet or by telephone. You will be given a ballot
when you arrive. |
Whether
or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the meeting
and vote in person if you have already voted by proxy. Please choose only one method to cast your vote by proxy. We encourage
you to vote over the internet or by telephone, both of which are convenient, cost-effective and reliable alternatives to returning
a proxy card by mail.
| Q. | How
do I vote if my shares are held in the name of my broker, bank or other nominee? |
| A. | If your shares
are held by your broker, bank or other nominee, you are considered the beneficial owner
of shares held in “street name” and you will receive a form from your broker,
bank or other nominee seeking instruction from you as to how your shares should be voted.
If you are a beneficial owner and you wish to vote in person at the Special Meeting,
you must bring to the Special Meeting a legal proxy from the broker, bank or other nominee
that holds your shares authorizing you to vote in person at the Special Meeting. |
| Q. | Can
I change or revoke my proxy after it has been submitted? |
| A. | Yes. You
can change or revoke your proxy at any time before the final vote at the Special Meeting.
If you are the record holder of your shares, you may change or revoke your proxy by: |
| • | voting
again over the internet or by telephone prior to __:__ _.M., Eastern Time, on _________
__, 2015; |
| • | timely
sending a written notice that you are revoking your proxy to our Secretary; |
| • | timely
delivering a valid, later-dated proxy; or |
| • | attending
the Special Meeting and notifying the election officials that you wish to revoke your
proxy to vote in person. Simply attending the Special Meeting will not, by itself, revoke
your proxy. |
If
you are the beneficial owner of shares held in “street name,” you will have to follow the instructions provided by
your broker, bank or other nominee to change or revoke your proxy.
| Q. | How
many shares of Frisch’s Common Stock must be present to constitute a quorum for
the meeting? |
| A. | The presence
at the Special Meeting, in person or by proxy, of a majority of the shares of Frisch’s
Common Stock outstanding on the Record Date will constitute a quorum. There must be a
quorum for business to be conducted at the Special Meeting. However, even if a quorum
does not exist, a majority of the shares of Frisch’s Common Stock present or represented
by proxy at the Special Meeting and entitled to vote may adjourn the Special Meeting
to another place, date or time. Failure of a quorum to be present at the Special Meeting
will necessitate an adjournment or postponement of the Special Meeting and will subject
Frisch’s to additional expense. As of the Record Date, there were 5,131,579 shares
of Frisch’s Common Stock outstanding. Accordingly, 2,565,790 shares of Frisch’s
Common Stock must be present or represented by proxy at the Special Meeting to constitute
a quorum. |
| Q. | What
if I abstain from voting on any proposal? |
| A. | If you attend
the Special Meeting or submit a proxy card, but abstain from voting on any proposal,
your shares will still be counted for purposes of determining whether a quorum exists,
but will not be voted on any proposal. As a result, your abstention from voting will
have the same effect as a vote “AGAINST” the Merger Proposal, but will have
no effect on the outcome of the Adjournment Proposal. |
| Q. | Will
my shares be voted if I do not sign and return my proxy card or vote by telephone or
over the internet or in person at the Special Meeting? |
| A. | If you are
a shareholder of record and you do not sign and return your proxy card or vote by telephone,
over the internet or in person, your shares will not be voted at the Special Meeting
and will not be counted for purposes of determining whether a quorum exists. The failure
to return your proxy card or otherwise vote your shares at the Special Meeting will have
no effect on the outcome of the Adjournment Proposal. However, the vote to approve the
Merger Proposal is based on the total number of shares of Frisch’s Common Stock
outstanding on the Record Date, not just the shares that are counted as present in person
or by proxy at the Special Meeting. As a result, if you fail to return your proxy card
or otherwise vote your shares at the Special Meeting, it will have the same effect as
a vote “AGAINST” the Merger Proposal. |
You
will have the right to receive the Merger Consideration if the Merger Proposal is approved and the Merger is completed even if
your shares are not voted at the Special Meeting. However, if your shares are not voted at the Special Meeting, it will have the
same effect as a vote “AGAINST” the Merger Proposal.
| Q. | What
is a broker non-vote? |
| A. | Broker non-votes
are shares held in “street name” by brokers, banks and other nominees that
are present or represented by proxy at the Special Meeting, but with respect to which
the broker, bank or other nominee is not instructed by the beneficial owner of such shares
how to vote on a particular proposal and such broker, bank or nominee does not have discretionary
voting power on such proposal. Under NYSE rules, brokers, banks and other nominees holding
shares in “street name” do not have discretionary voting authority with respect
to any of the three proposals described in this proxy statement. If a beneficial owner
of shares of Frisch’s Common Stock held in “street name” does not give
voting instructions to the broker, bank or other nominee, then those shares will not
be counted as present in person or by proxy at the Special Meeting. As a result, it is
expected that there will not be any broker non-votes in connection with any of the three
proposals described in this proxy statement. The failure to issue voting instructions
to your broker, bank or other nominee will have no effect on the outcome of the Adjournment
Proposal. However, the vote to approve the Merger Proposal is based on the total number
of shares of Frisch’s Common Stock outstanding on the Record Date, not just the
shares that are counted as present in person or by proxy at the Special Meeting. As a
result, if you fail to issue voting instructions to your broker, bank or other nominee,
it will have the same effect as a vote “AGAINST” the Merger Proposal. |
| Q. | Will
my shares held in “street name” or another form of record ownership be combined
for voting purposes with shares I hold of record? |
| A. | No. Because
any shares you may hold in “street name” will be deemed to be held by a different
shareholder than any shares you hold of record, any shares held in “street name”
will not be combined for voting purposes with shares you hold of record. Similarly, if
you own shares in various registered forms, such as jointly with your spouse, as trustee
of a trust or as custodian for a minor, you will receive, and will need to sign and return,
a separate proxy card for those shares because they are held in a different form of record
ownership. Shares held by a corporation or business entity must be voted by an authorized
officer of the entity. Shares held in an individual retirement account must be voted
under the rules governing the account. |
| Q. | Am
I entitled to exercise appraisal rights instead of receiving the Merger Consideration
for my shares of Frisch’s Common Stock? |
| A. | Yes. In accordance
with Sections 1701.84 and 1701.85 of the Ohio General Corporation Law, if you do not
vote in favor of the adoption of the Merger Agreement you will have the right to seek
appraisal of the fair value of your Frisch’s Common Stock if the Merger is completed,
but only if you submit a written demand for an appraisal on or before the tenth day following
the Special Meeting and you comply with the Ohio law procedures explained in this proxy
statement. |
| Q. | What
happens if I sell my Frisch’s Common Stock before the completion of the Merger? |
| A. | If you transfer
your Frisch’s Common Stock, you will have transferred your right to receive the
Merger Consideration in the Merger. In order to receive the Merger Consideration, you
must hold your Frisch’s Common Stock through the completion of the Merger. |
| Q. | Should
I send in my stock certificates or other evidence of ownership now? |
| A. | No. After
the Merger is completed, you will receive a letter of transmittal from the Paying Agent
for the Merger with detailed written instructions for exchanging your Frisch’s
Common Stock for the consideration to be paid to former Frisch’s shareholders in
connection with the Merger. If you are the beneficial owner of Frisch’s Common
Stock held in “street name,” you may receive instructions from your broker,
bank or other nominee as to what action, if any, you need to take to effect the surrender
of such shares. Please do not send in your stock certificates now. |
| Q: | When
will I receive the cash consideration for my shares? |
| A: | After the
Merger is completed, when you properly complete and return the letter of transmittal
and required documentation described in the written instructions referenced above, you
will receive from the Paying Agent a payment of the cash consideration for your shares. |
| Q. | What
does it mean if I get more than one proxy card or voting instruction card? |
| A. | If your shares
are registered differently or are held in more than one account, you will receive more
than one proxy card or voting instruction card. Please complete and return all of the
proxy cards or voting instruction cards you receive (or submit each of your proxies over
the internet or by telephone) to ensure that all of your shares are voted. |
| Q. | What
is householding and how does it affect me? |
| A. | The SEC permits
companies to send a single set of proxy materials to any household at which two or more
shareholders reside, unless contrary instructions have been received, but only if the
company provides advance notice and follows certain procedures. In such cases, each shareholder
continues to receive a separate notice of meeting and proxy card. Frisch’s has
not implemented these householding rules with respect to its record holders; however,
certain brokerage firms may have instituted householding for beneficial owners of Frisch’s
Common Stock held through brokerage firms. If your family has multiple accounts holding
Frisch’s Common Stock, you may have already received a householding notification
from your broker. Please contact your broker directly if you have any questions or require
additional copies of this proxy statement. The broker will arrange for delivery of a
separate copy of this proxy statement promptly upon your written or oral request. You
may decide at any time to revoke your decision to household, and thereby receive multiple
copies of proxy materials. |
| Q. | When
will Frisch’s announce the voting results of the Special Meeting, and where can
I find the voting results? |
| A. | Frisch’s
intends to announce the preliminary voting results at the Special Meeting, and will report
the final voting results of the Special Meeting in a Current Report on Form 8-K filed
with the SEC. All reports that Frisch’s files with the SEC are publicly available
when filed. |
| Q: | Who
can help answer my other questions? |
| A: | If you have
questions about the Merger, require assistance in submitting your proxy or voting your
shares, or need additional copies of this proxy statement or the enclosed proxy card,
please contact Frisch’s Office of the Secretary via email or phone. |
|
Frisch’s Restaurants, Inc. |
|
2800 Gilbert Avenue |
|
Cincinnati, Ohio 45206 |
|
Email: Proxyvote@frischs.com |
|
Telephone: (513) 559-5216 |
If
your broker, bank or other nominee holds your shares, you should also call your broker, bank or other nominee for additional information.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
proxy statement contains certain statements that are forward-looking within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended, and as defined in the of the U.S. Private Securities Litigation Reform Act of 1995. These statements
are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict.
Actual outcomes and results may differ materially from those expressed in, or implied by, our forward-looking statements. Words
such as “expects,” “anticipates,” “believes,” “estimates” and other similar expressions
of future or conditional verbs such as “will,” “should,” “would” and “could” are
intended to identify such forward-looking statements. Readers of this proxy statement should not rely solely on the forward-looking
statements and should consider all uncertainties and risks throughout this document. The statements are representative only as
of the date they are made, and we undertake no obligation to update any forward-looking statement.
All
forward looking-statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially
from those set forth in our forward-looking statements. We face risks that are inherent in the businesses and the markets in which
we operate. Factors that might cause our future performance to vary from that described in our forward-looking statements include:
| • | the
occurrence of any event, change or other circumstances that could give rise to the termination
of the Merger Agreement; |
| • | the
failure to receive, on a timely basis or otherwise, approval of the Merger Proposal by
our shareholders or the approval of government or regulatory agencies with regard to
the Merger; |
| • | the
failure of one or more conditions to the closing of the Merger Agreement to be satisfied; |
| • | the
amount of the costs, fees, expenses and charges related to the Merger Agreement or Merger; |
| • | risks
arising from the Merger’s diversion of management’s attention from our ongoing
business operations; |
| • | risks
that our stock price may decline significantly if the Merger is not completed; |
| • | the
ability to retain and hire key personnel and maintain relationships with customers, suppliers
and other business partners pending the completion of the Merger; |
| • | changes
in federal, state or local laws or regulations; |
| • | the
extent and speed of successful execution of strategic initiatives; |
| • | timing
of new restaurant openings and related revenues and expenses; |
| • | increases
or decreases in existing restaurant revenues; |
| • | the
risk that the Company may be subject to litigation in connection with the Merger; and |
| • | other
risks and uncertainties set forth in our filings with the SEC, especially in the “Risk
Factors” and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” sections of our annual reports on Form 10-K and quarterly
reports on Form 10-Q, current reports on Form 8-K and other SEC filings. |
Additional
risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations
and also could cause actual results to differ materially from those included, contemplated or implied by the forward-looking statements
made in this report, and the reader should not consider any of the above list of factors to be a complete set of all potential
risks or uncertainties. All subsequent written or oral forward- looking statements concerning the Merger or the other transactions
contemplated by the Merger Agreement or other matters addressed in this proxy statement and attributable to Frisch’s or
any person acting on Frisch’s behalf are expressly qualified in their entirety by the cautionary statements contained or
referred to in this section of this proxy statement.
THE
COMPANIES
Frisch’s
Restaurants, Inc.
Frisch’s
Restaurants, Inc.
2800 Gilbert
Avenue
Cincinnati,
OH 45206
(513) 961-2660
Frisch’s
is a regional company that operates full service family-style restaurants under the name “Frisch’s Big Boy.”
All Frisch’s Big Boy restaurants are currently located in various regions of Ohio, Kentucky and Indiana. The Company owns
the trademark “Frisch’s” and has exclusive, irrevocable ownership of the rights to the “Big Boy”
trademark, trade name and service marks in the states of Kentucky and Indiana, and in most of Ohio and Tennessee. All of the Frisch’s
Big Boy restaurants also offer “drive-thru” service. The Company also licenses Big Boy restaurants to other operators,
currently in certain parts of Ohio, Kentucky and Indiana.
Frisch’s
Common Stock are listed with, and trade on, the New York Stock Exchange (NYSE MKT) under the symbol “FRS.” Our corporate
website address is www.frischs.com. The information provided on the Frisch’s website is not part of this proxy statement
and is not incorporated in this proxy statement by reference hereby or by any other reference to Frisch’s website provided
in this proxy statement.
For additional
information about Frisch’s included in documents incorporated by reference into this proxy statement, see the section titled
“Where You Can Find More Information”.
NRD Partners
I, L.P. (the “Fund”)
NRD Partners
I, L.P.
4170 Ashford
Dunwoody Road, Suite 390,
Atlanta, GA
30319
(404) 865-3356
Attention:
Aziz Hashim
About the
Fund
The
Fund, a limited partnership organized under the laws of the State of Delaware, is a private equity fund founded by Aziz Hashim
in November 2014 to acquire brands that offer superior products and compelling unit economics and help them grow to their fullest
potential through the Fund's expanding network of franchisee investors. For more information, please visit www.nrdcapital.com.
The information provided on the Fund’s website is not part of this proxy statement and is not incorporated in this proxy
statement by reference hereby or by any other reference to the Fund’s website provided in this proxy statement.
FRI Holding
Company, LLC (“Holding”)
FRI Holding
Company, LLC
4170 Ashford
Dunwoody Road, Suite #390
Atlanta, GA
30319
(404) 865-3356
Attention:
Aziz Hashim
About Holding
Holding
was formed in April 2015 solely for the purpose of entering into the Merger Agreement and completing such other transactions as
necessary to finance the Merger. After the closing of the Merger, Holding would also act as the holding company and sole shareholder
of Frisch’s. Holding has not carried out any activities to date, except for activities incidental to its formation and activities
undertaken in connection with the transactions contemplated by the Merger Agreement, which includes certain financing transactions
entered into for the purpose of financing the Merger.
FRI Merger
Sub, LLC (“Merger Sub”)
FRI Merger
Sub, LLC
4170 Ashford
Dunwoody Road, Suite #390
Atlanta, GA
30319
(404) 865-3356
Attention:
Aziz Hashim
About Merger
Sub
Merger
Sub was formed in April 2015 solely for the purpose of completing the Merger with Frisch’s. Merger Sub has not carried out
any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions
contemplated by the Merger Agreement. Upon consummation of the Merger, Merger Sub will merge with and into Frisch’s the
separate corporate existence of Merger Sub will cease, and Frisch’s will continue as the Surviving Corporation and a wholly
owned subsidiary of Holding.
NRD Holdings,
LLC (“NRD”)
NRD Holdings,
LLC
4170 Ashford
Dunwoody Road, Suite #390
Atlanta, GA
30319
(404) 865-3356
Attention:
Aziz Hashim
About NRD
NRD
is a limited liability company formed on June 1, 2012 by Aziz Hashim to conduct acquisition activities. NRD entered into a non-disclosure
agreement on July 14, 2014, responded to Frisch’s bid proposal in October 2014, and thereafter engaged in negotiations regarding
a proposed transaction with Frisch’s prior to the formation of the Fund.
Strategic
Financial Intermediation, LLC (“FinCo”)
Strategic Financial
Intermediation, LLC
4170 Ashford
Dunwoody Road, Suite #390
Atlanta, GA
30319
(404) 865-3356
Attention:
Aziz Hashim
About FinCo
FinCo
is a limited liability company formed on April 2, 2015 that has entered into contracts in connection with the sale-leaseback transaction
described in this proxy statement. Under the contracts, FinCo will purchase real estate assets from Frisch’s and sell the
assets to an independent third-party institutional investor. FinCo will use most of the proceeds from the transaction to purchase
bonds issued by Holding and to acquire preferred equity units in Holding.
THE
SPECIAL MEETING
This proxy
statement is being provided to the Frisch’s shareholders as part of a solicitation of proxies by the Board for use at the
Special Meeting to be held at the time and place specified below, and at any properly convened meeting following an adjournment
or postponement of the Special Meeting.
Date, Time
and Place
The
Special Meeting is scheduled to be held at Frisch’s headquarters located at 2800 Gilbert Avenue, Cincinnati, Ohio 45206-1206
on August 11, 2015 at 9:00 A.M., Eastern Time.
Purpose
of the Special Meeting
At
the Special Meeting, Frisch’s shareholders will be asked to consider and vote on the following proposals:
| • | the
Merger Proposal, which is further described in the sections titled “The Merger
Proposal (Proposal 1)”; |
| • | the
Certain Executive Compensation Matters Proposal; and |
| • | the
Adjournment Proposal. |
Frisch’s
shareholders must approve the Merger Proposal as a condition to the completion of the Merger. If the Frisch’s shareholders
fail to approve the Merger Proposal, the Merger will not occur.
Other
than the matters described above, no other vote will be taken on any other matters at the Special Meeting or any adjournment or
postponement thereof.
Recommendation
of the Board of Directors
The
Board unanimously determined the Merger Agreement is fair, advisable and in the best interests of Frisch’s and its shareholders
and adopted and approved the Merger Agreement. In the course of reaching this decision, the Board considered a number of factors
in its deliberations, which can be found in the section titled “The Merger Proposal (Proposal 1) — Recommendation
of the Board and Reasons for the Merger” beginning on page __.
The
Board unanimously recommends that the Frisch’s shareholders vote “FOR” the Merger Proposal, “FOR”
the Certain Executive Compensation Matters Proposal and “FOR” the Adjournment Proposal.
Record
Date; Shareholders Entitled to Vote
Only
holders of Frisch’s Common Stock at the close of business on ____________, 2015, the Record Date for the Special Meeting,
will be entitled to notice of, and to vote at, the Special Meeting or any adjournments or postponements of the Special Meeting.
At the close of business on the Record Date, 5,131,579 shares of Frisch’s Common Stock were issued and outstanding.
Holders
of Frisch’s Common Stock are entitled to one vote for each share of Frisch’s Common Stock they own at the close of
business on the Record Date.
Quorum
The
presence at the Special Meeting, in person or by proxy, of the holders of a majority of the shares of Frisch’s Common Stock
outstanding on the Record Date will constitute a quorum. There must be a quorum for business to be conducted at the Special Meeting.
However, even if a quorum does not exist, a majority of the shares of Frisch’s Common Stock present or represented by proxy
at the Special Meeting and entitled to vote may adjourn the meeting to another place, date or time. Failure of a quorum to be
represented at the Special Meeting will necessitate an adjournment or postponement of the Special Meeting and will subject Frisch’s
to additional expense.
Once
a share is represented in person or by proxy at the Special Meeting, it will be counted for purposes of determining whether a
quorum exists at the Special Meeting and any adjournment or postponement of the Special Meeting. However, if a new Record Date
is set for the adjourned or postponed Special Meeting, a new quorum will have to be established. If you submit a properly executed
proxy card, even if you abstain from voting, your shares will be counted for purposes of determining whether a quorum exists at
the Special Meeting.
Required
Vote
The
approval of the Merger Proposal requires the affirmative vote of a majority of the shares of Frisch’s Common Stock outstanding
at the close of business on the Record Date.
Approval
of the Adjournment Proposal requires the affirmative vote of a majority of the votes cast with respect to such matter in person
or represented by proxy at the Special Meeting and entitled to vote thereon.
Abstentions
and Broker Non-Votes
An
abstention occurs when a shareholder attends a meeting, either in person or by proxy, but abstains from voting. At the Special
Meeting, abstentions will be counted for purposes of determining whether a quorum exists. Abstaining from voting will have
the same effect as a vote “AGAINST” the Merger Proposal, but will have no effect on the outcome of the Adjournment
Proposal.
If
no instruction as to how to vote is given (including no instruction to abstain from voting) in an executed, duly returned and
not revoked proxy, the proxy will be voted “FOR” (i) approval of the Merger Proposal, (ii) approval of the Certain
Executive Compensation Matters Proposal, and (iii) approval of the Adjournment Proposal.
Broker
non-votes are shares held in “street name” by brokers, banks and other nominees that are present or represented by
proxy at the Special Meeting, but with respect to which the broker, bank or other nominee is not instructed by the beneficial
owner of such shares how to vote on a particular proposal and such broker, bank or nominee does not have discretionary voting
power on such proposal. Because, under NYSE rules, brokers, banks and other nominees holding shares in “street name”
do not have discretionary voting authority with respect to any of the three proposals described in this proxy statement, if a
beneficial owner of Frisch’s Common Stock held in “street name” does not give voting instructions to the broker,
bank or other nominee, then those shares will not be counted as present in person or by proxy at the Special Meeting. As a result,
it is expected that there will not be any broker non-votes in connection with any of the three proposals described in this proxy
statement.
Failure
to Vote
If
you are a shareholder of record and you do not sign and return your proxy card or vote over the internet, by telephone or in person
at the Special Meeting, your shares will not be voted at the Special Meeting, will not be counted as present in person or by proxy
at the Special Meeting and will not be counted for purposes of determining whether a quorum exists.
As
discussed above, under NYSE rules, brokers and other record holders do not have discretionary voting authority with respect to
any of the three proposals described in this proxy statement. Accordingly, if you are the beneficial owner of shares held
in “street name” and you do not issue voting instructions to your broker, bank or other nominee, your shares will
not be voted at the Special Meeting and will not be counted as present in person or by proxy at the Special Meeting or counted
for purposes of determining whether a quorum exists.
A
failure to vote will have no effect on the outcome of Adjournment Proposal. However, the vote to approve the Merger Proposal is
based on the total number of shares of Frisch’s Common Stock outstanding on the Record Date, not just the shares that are
counted as present in person or by proxy at the Special Meeting. As a result, if you fail to vote your shares, it will have
the same effect as a vote “AGAINST” the Merger Proposal.
Voting by
Frisch’s Directors and Executive Officers
At
the close of business on the Record Date, directors and executive officers of Frisch’s and their affiliates were entitled
to vote 1,213,099 shares of Frisch’s Common Stock, or approximately 23.6 percent of the shares of Frisch’s Common
Stock issued and outstanding on that date. Frisch’s directors and executive officers have informed us that they intend to
vote their shares in favor of the Merger Proposal and the other proposals to be considered at the Special Meeting so long as the
recommendation of the Board with respect to these proposals has not changed, although none of Frisch’s directors or executive
officers is obligated to do so, except for Craig F. Maier and Karen F. Maier, who have entered into voting agreements with Holding
in which those two directors have delivered an irrevocable proxy to Holding with respect to the Merger (the “Voting Agreements”).
The Voting Agreements specifically preserve the right of the two directors to discharge all of their fiduciary duties to Frisch’s
and its shareholders.
Voting at
the Special Meeting
If
your shares are registered directly in your name with our transfer agent, you are considered a “shareholder of record”
and there are four methods by which you may vote your shares at the Special Meeting. You may attend the Special Meeting and vote
your shares in person, rather than signing and returning your proxy card, or you may vote your shares by authorizing the persons
named as proxies on the proxy card to vote your shares at the Special Meeting by returning the proxy card by mail, through the
internet or by telephone. Although Frisch’s offers four different voting methods, Frisch’s encourages you to vote
over the internet or by telephone, as Frisch’s believes they are the most convenient, cost-effective and reliable voting
methods. If you choose to vote your shares over the internet or by telephone, there is no need for you to mail back your proxy
card. We also recommend that you vote as soon as possible, even if you are planning to attend the Special Meeting, so that the
vote count will not be delayed.
| • | To
Vote in Person: If you plan to attend the Special Meeting and wish to vote in
person, you will be given a ballot at the Special Meeting. |
| • | To
Vote Over the Internet: To vote over the internet, go to www.proxyvote.com
and follow the steps outlined on the secure website. Please have your proxy card
available for reference because you will need the validation details that are located
on your proxy card in order to cast your vote. If you vote over the internet, you do
not have to mail in a proxy card. |
| • | To
Vote by Telephone: To vote by telephone, call toll-free 1-800-_________ within
the United States at any time prior to 11:59 P.M., Eastern Time, on ________ __, 2015
on a touchtone phone. Please have your proxy card available for reference because you
will need the validation details that are located on your proxy card in order to cast
your vote. If you vote by telephone, you do not have to mail in a proxy card. |
| • | To
Vote by Mail: To vote by mail, complete, sign and date the proxy card and return
it promptly to the address indicated on the proxy card. If you sign and return your proxy
card without indicating how you want your Frisch’s Common Stock to be voted with
regard to a particular proposal, your Frisch’s Common Stock will be voted in favor
of such proposal. If you return your proxy card without a signature, your shares will
not be counted as present at the Special Meeting and cannot be voted. |
If
your shares are held by your broker, bank or other nominee, you are considered the beneficial owner of shares held in “street
name” and you will receive a form from your broker, bank or other nominee seeking instruction from you as to how your shares
should be voted. If you are a beneficial owner and you wish to vote in person at the Special Meeting, you must bring to the Special
Meeting a legal proxy from the broker, bank or other nominee that holds your shares authorizing you to vote in person at the Special
Meeting.
Shareholders
who are entitled to vote at the Special Meeting, as well as our invited guests, may attend the Special Meeting. Beneficial owners
should bring a copy of an account statement reflecting their ownership of Frisch’s Common Stock as of the Record Date. All
shareholders should bring photo identification.
Revocation
of Proxies
You
can change or revoke your proxy at any time before the final vote at the Special Meeting. If you are the record holder of your
shares, you may revoke your proxy by:
| • | voting
again over the internet or by telephone prior to 11:59 P.M., Eastern Time, on _______
__, 2015; |
| • | timely
sending a written notice that you are revoking your proxy to our Secretary; |
| • | timely
delivering a valid, later-dated proxy; or |
| • | attending
the Special Meeting and notifying the election officials that you wish to revoke your
proxy to vote in person. Simply attending the Special Meeting will not, by itself, revoke
your proxy. |
If
you are the beneficial owner of shares held in “street name,” you should contact your broker, bank or other nominee
with questions about how to change or revoke your voting instructions.
Solicitation
of Proxies
The
Board is soliciting your proxy, and Frisch’s will bear the cost of soliciting proxies. Solicitation initially will be made
by mail. Forms of proxies and proxy materials may also be distributed through brokers, banks and other nominees to the beneficial
owners of Frisch’s Common Stock, in which case these parties will be reimbursed for their reasonable out-of-pocket expenses.
Proxies may also be solicited in person or by telephone, facsimile, electronic mail or other electronic medium or, without additional
compensation, by Frisch’s directors, officers and employees.
Adjournment
In
addition to the Merger Proposal and the Certain Executive Compensation Matters Proposal, Frisch’s shareholders are also
being asked to approve the Adjournment Proposal, which will give the Frisch’s Board authority to adjourn the special meeting
for the purpose of soliciting additional votes in favor of the Merger Proposal if there are not sufficient votes at the time of
the special meeting to approve the Merger Proposal. If a quorum does not exist, the holders of a majority of the shares of Frisch’s
common stock present or represented by proxy at the special meeting and entitled to vote may adjourn the special meeting to another
place, date or time. If the Adjournment Proposal is approved, the special meeting could be adjourned by the Frisch’s Board
as permitted under the terms of the Merger Agreement. In addition, the Frisch’s Board, as permitted under the terms of the
Merger Agreement, could postpone the meeting before it commences, whether for the purpose of soliciting additional votes or for
other reasons. If the special meeting is adjourned or postponed for the purpose of soliciting additional votes, shareholders who
have already submitted their proxies will be able to revoke them at any time prior to their use. If you return a proxy and do
not indicate how you wish to vote on the Adjournment Proposal, your shares will be voted in favor of the Adjournment Proposal.
Other Information
You
should not return your stock certificate or send documents representing Frisch’s Common Stock with the proxy card. If the
Merger is completed, the Paying Agent for the Merger will send you a letter of transmittal and instructions for exchanging your
Frisch’s Common Stock for the consideration to be paid to the former Frisch’s shareholders in connection with the
Merger.
Assistance
If
you have questions about the Merger, require assistance in submitting your proxy or voting your shares, or need additional copies
of this proxy statement or the enclosed proxy card, please contact Frisch’s Office of the Secretary by phone or e-mail for
additional assistance.
|
Frisch’s Restaurants, Inc. |
|
2800 Gilbert Avenue |
|
Cincinnati, Ohio 45206 |
|
Email: Proxyvote@frischs.com |
|
Telephone: (513) 559-5216 |
If
your broker, bank or other nominee holds your shares, you should also call your broker, bank or other nominee for additional information.
THE
MERGER PROPOSAL
(PROPOSAL
1)
The
discussion of the Merger in this proxy statement is qualified in its entirety by reference to the Merger Agreement, a copy of
which is attached to this proxy statement as Annex A, and hereby incorporated by reference into this proxy statement. We urge
you to read carefully the proxy statement, the Merger Agreement and the other documents referred to herein, including the documents
incorporated by reference, for a more detailed description of the Merger.
Structure
of the Merger
Subject
to the terms and conditions of the Merger Agreement and in accordance with the Ohio General Corporation Law (the “OGCL”),
at the Effective Time, Merger Sub will merge with and into Frisch’s, the separate corporate existence of Merger Sub will
cease and Frisch’s will survive the Merger as a wholly-owned subsidiary of Holding. The Merger Consideration and other amounts
payable in connection with the Merger will be financed as described in the section titled “Financing of the Merger”.
What
Shareholders Will Receive in the Merger
At
the Effective Time, each outstanding share of Frisch’s Common Stock (other than Frisch’s Common Stock held by Holding,
Merger Sub, the Fund, any of their respective subsidiaries or affiliates, Frisch’s and holders of Frisch’s Common
Stock issued and outstanding immediately prior to the Effective Time who have not voted in favor of adoption of the Merger Agreement
or consented thereto in writing and who have properly exercised appraisal rights with respect to such Shares) will be automatically
converted into the right to receive $34.00 in cash, without interest and less any applicable withholding taxes. After the Merger
is completed, current holders of Frisch’s Common Stock will have only the right to receive a cash payment in respect of
their shares of Frisch’s Common Stock, and will no longer have any rights as holders of Frisch’s Common Stock, including
voting or other rights, and Holding will own 100 percent of Frisch’s outstanding Frisch’s Common Stock. Frisch’s
Common Stock held by Holding, the Fund, or any of their respective subsidiaries or affiliates will be canceled at the Effective
Time.
Treatment
of Frisch’s Equity Awards
Stock
Options. At the Effective Time, Frisch’s will cause each outstanding option, whether vested or unvested, to represent
the right to receive a payment in cash, without interest and less any applicable withholding taxes, equal to the product of the
excess, if any, of the Merger Consideration of $34.00 per share over the exercise price of the option, multiplied by the number
of shares subject to such options.
Restricted
Shares. At the Effective Time, each outstanding share of Frisch’s Common Stock subject to time-based vesting or lapse
restrictions under any stock or incentive plan of Frisch’s shall automatically vest such that each holder thereof will be
entitled to 100 percent of the Frisch’s Common Stock underlying such awards and the holder thereof will receive the Merger
Consideration of $34.00 for each such share.
Effects
on Frisch’s if the Merger Is Not Completed
If
the Merger Proposal is not approved by Frisch’s shareholders or if the Merger is not completed for any other reason, Frisch’s
shareholders will not receive any payment for their shares in connection with the Merger. Instead, Frisch’s will remain
an independent public company and shares of Frisch’s Common Stock will continue to be listed and traded on the NYSE MKT.
In addition, if the Merger is not completed, Frisch’s expects that management will operate Frisch’s business in a
manner similar to that in which it is being operated today and that Frisch’s shareholders will continue to be subject to
the same opportunities and risks to which they are currently subject, including, without limitation, risks related to the highly
competitive industry in which Frisch’s operates and current economic conditions.
Furthermore,
if the Merger is not completed, and depending on the circumstances that would have caused the Merger not to be completed, it is
likely that the price of Frisch’s Common Stock will decline. If that were to occur, it is uncertain when, if ever, the price
of Frisch’s Common Stock would return to the price at which it trades as of the date of this proxy statement.
Accordingly,
if the Merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value
of your Frisch’s Common Stock. If the Merger is not completed, the Board will continue to evaluate and review Frisch’s
business operations, properties, dividend policy and capitalization, among other things, make such changes as are deemed appropriate
and continue to seek to identify strategic alternatives to enhance shareholder value. If the Merger Proposal is not approved by
Frisch’s shareholders or if the Merger is not completed for any other reason, there can be no assurance that any other transaction
acceptable to Frisch’s will be offered or that Frisch’s business, prospects or results of operation will not be adversely
impacted.
Further,
if the Merger Agreement is terminated under specified circumstances, Frisch’s may be required to pay Holding a termination
fee of $5,000,000. See the section titled “The Merger Agreement — Termination Fees and Expenses” for a discussion
of the circumstances under which Frisch’s will be required to pay a termination fee.
Background
of the Merger
As
part of the ongoing oversight and management of the policies and operations of Frisch’s, the Board and management regularly
reviewed and assessed the Company’s long-term strategic goals and opportunities, the competitive environment, food retail
industry trends, the current economic climate, the Company’s short- and long-term performance in light of its strategic
plan, and the performance of the Company’s management team. In connection with these activities, the Board also periodically
considered strategic alternatives, including potential business combinations, acquisitions, and dispositions.
Prior
to May 2012, Frisch’s had two principal operating divisions: the Big Boy Division, under which it operates the Big Boy restaurants,
and the Golden Corral Division, under which the Company, from January 1999 to May 2012, operated grill buffet style restaurants
under the name “Golden Corral” pursuant to certain licensing agreements. Following the sale of the Golden Corral Division
in May 2012, the Board and management continued their examination and review of industry conditions and trends, and of opportunities
and strategic options for the Company while introducing new initiatives to reduce costs and increase sales. In January 2013, the
Board began the process of identifying and engaging outside resources to assist the Board and management in developing a plan
to maximize shareholder value through future initiatives and direction. As part of this strategic planning, the Board engaged
several outside resources to consider the Company’s strategic alternatives and opportunities to enhance shareholder value,
including (in discussion with certain of the outside parties): valuation analyses; maintaining the status quo; sale-leasebacks
of certain real estate assets; minority buyout transactions; going private transactions; traditional sale transactions; and refranchising
initiatives.
In
June 2013, the Board authorized the Company’s engagement of Raymond James to provide certain general financial advisory
services. In July 2013, representatives of Raymond James met with the Board and discussed their preliminary thoughts on market
conditions, the Company’s potential strategic alternatives and possible methodologies for valuing the Company. The Board
discussed with the representatives of Raymond James whether the public markets were adequately appreciating Frisch’s key
investment attributes and that there could be upside to the value represented by the then current share price should the Company
and the Board pursue a transaction.
At
the regular quarterly Board meeting held in October 2013, representatives of Raymond James joined the meeting and discussed their
views on the Board’s earlier question of whether the current public markets might be undervaluing Frisch’s common
stock. The Board discussed a number of strategic alternatives that might have the potential of realizing a greater shareholder
value than the current market was reflecting.
At
the regular quarterly Board meeting held in January 2014, representatives of Raymond James discussed with the Board financial
and other factors that investors may use to compare Frisch’s to other restaurant companies. The purpose of the discussion
was to inform the Board of how certain of Frisch’s financial and operational metrics compared to a selection of other publicly-traded
restaurant companies.
Representatives
of Raymond James attended the regular quarterly Board meeting held in April 2014, to discuss current market conditions and provide
an update of Frisch’s market position and its performance relative to select other publicly-traded restaurant concepts.
At
an April 2014 Special Meeting of the Board, the Board approved the formation of a Strategy Committee of Frisch’s Board to
facilitate oversight of the strategic alternatives review process. Board members Daniel Geeding, Lorrence Kellar, and Jerome Montopoli
were appointed as members of the Strategy Committee, with Mr. Geeding serving as Chairman. At the same meeting, the Board authorized
the engagement of Raymond James as exclusive financial advisor for the Company in the evaluation of strategic alternatives, including
a potential sale of the Company and requested that Raymond James assist the Strategy Committee in its process. During the events
referred to in this proxy statement, Raymond James acted solely on the instructions and directions of the Board and, with the
Board’s authorization, the Strategy Committee. Descriptions in this proxy statement of Raymond James’ activities relate
to items undertaken based upon those instructions and directions.
In
April 2014, an organizational meeting of the Strategy Committee was held via telephone. The Strategy Committee and the representatives
of Raymond James discussed a possible timeline and a possible schedule of data to be assembled by management for due diligence
purposes. The Chairman indicated that regular meetings of the Strategy Committee, in person or telephonically, would be scheduled
as needed to provide the Strategy Committee members, management team participants, and outside advisors the opportunity to monitor
and discuss the strategic alternative review process.
On
May 12, 2014, a telephonic meeting of the Strategy Committee was held to update members on the status of the preparation of a
uniform Non-Disclosure Agreement (“NDA”) being prepared by Company counsel and the process for identifying possible
interested parties.
On
May 27, 2014, the Strategy Committee held a telephonic meeting for update purposes. The Strategy Committee reviewed the progress
and timing of the phased compilation of due diligence materials to be supplied by management. The Chairman then led a discussion
regarding contacts initiated by Party A and Party B and interactions with the same. As a result of the discussion, management
was authorized to continue discussions with these contacts and report back to the Strategy Committee.
On
May 28, 2014 there was an in-person due diligence session among representatives of Raymond James and management in Cincinnati,
Ohio to review the Company’s corporate history, operations, growth strategy, and financial results. Following the May 28
meeting, representatives of Raymond James conducted further due diligence on the Company and assisted Company management in preparing
a confidential information memorandum (“CIM”) to be provided to potential buyers.
A
telephonic meeting of the Strategy Committee was held on June 9, 2014 during which the proposed form of NDA was reviewed. The
Strategy Committee discussed the NDA sent to Party A and the comments received from a representative of Party A. Raymond James
was asked to discuss a proposed timeline for receipt and comments on marketing materials.
In
early July 2014, Raymond James received the Company’s authorization to begin contacting potential buyers. During July and
August 2014, representatives of Raymond James contacted 53 parties, including both strategic and financial parties, regarding
interest in a possible transaction involving a sale of the Company. NDAs were sent to all interested parties in advance of their
receiving any detailed materials. Following execution of the NDA, interested parties received a copy of the Company’s CIM
along with copies of its most recently reported 10-K and 10-Q filings. Representatives of Raymond James also contacted several
potential lenders and sale-leaseback providers. During this period, representatives of Raymond James provided the Strategy Committee
and management with periodic updates on interactions with potential buyers via telephone.
At
the regular quarterly Board meeting held on July 30, 2014, the Strategy Committee provided an extensive report through the Chairman,
indicating that the process assigned to the Strategy Committee was proceeding in a timely manner.
The
Strategy Committee held a status call on August 11, 2014 in which representatives of Raymond James provided an update on the status
of interactions with potential buyers, lenders and sale-leaseback providers. During this telephonic discussion, the Strategy Committee
discussed how initial indications of interest had been requested from potential buyers by August 14, 2014. The next step directed
by the Strategy Committee was to conduct a review by the Strategy Committee to determine if the nature and quality of the bids
warranted invitations for further steps including management presentations with one or more bidders. Mr. Maier reported on a call
from a representative of NRD and representatives reported on its discussions with a representative of Party A. The Strategy Committee
determined that further discussions and interactions with the representative of Party A were warranted. The Strategy Committee
also determined that estimated dates previously identified were achievable to allow ample time for discussion, analysis, and deliberation
by the Strategy Committee and the Board.
On
August 13, 2014, a preliminary indication of interest from Party L for a sale-leaseback in support of a potential transaction
was transmitted to the Strategy Committee.
On
August 15, 2014, at the Strategy Committee’s direction, representatives of Raymond James met with members of management
in Cincinnati, Ohio to review a draft of the management presentation to be used with prospective buyers if the process continued
following the Strategy Committee’s review of indications of interest.
In
the first three weeks of August 2014, the Company received preliminary, non-binding indications of interest from 10 parties. The
acquisition price identified in the preliminary non-binding indications of interest received ranged from $26.00 (subsequently
revised to $28.00 per share) to $35.00 per share and each indication was expressly conditioned on the completion of due diligence
and the negotiation of satisfactory definitive agreements.
On
August 21, 2014, a meeting of the Strategy Committee was held to review the 10 first round bids with representatives of Raymond
James, Company counsel and management. Representatives of Raymond James reported that in addition to the 10 initial indications
of interest received to date, they were still awaiting final feedback from six parties. The Strategy Committee unanimously decided
that the quality of the responses was sufficient to warrant that the project should proceed to the next step and instructed Raymond
James to invite seven parties into the second round of the process where they would be allowed to meet with certain members of
the management team and to conduct further due diligence on the Company. Three parties were eliminated from further participation
for a number of reasons, including, but not limited to, an inadequate showing of the ability to close a transaction, an unwillingness
to work further without exclusivity (which the Strategy Committee deemed not in the Company’s best interest at this point
in the process given the continued strong interest of other prospects), the inclusion of an offer of stock as part of the indicated
consideration, or an initial financial range below that of the other prospective bidders. Raymond James was also asked to complete
initial communications with those prospects who were marginally late with expressions of interest but who might still provide
a credible and complete indication of interest. None of these late parties subsequently submitted a bid.
On
August 29, 2014, the Chairman informed the Board via electronic mail that the Strategy Committee had approved seven potential
buyers to move to the next level of participation. He reported that this would involve multi-hour meetings with Mr. Maier and
Mr. Lanning, which would likely take place during the second and third weeks of September in Cincinnati, Ohio.
In
early September 2014 a select set of due diligence information was made available by the Company to the invited parties and their
prospective lenders in advance of their upcoming management presentations, and to help facilitate a more expeditious post-management-presentation
diligence period.
On
September 8, 2014, the Strategy Committee held a status call to keep the members apprised of activities involving the work of
Raymond James and the Company’s senior management.
Between
September 9 and 19, 2014, the Company’s management (with representatives of Raymond James attending) conducted management
presentations and provided restaurant tours to the seven potential buyers.
The
potential buyers who attended the management presentations were also given access to a virtual, secure data room prepared by Frisch’s.
Requests for information not found in the data room, and questions for Company personnel, were to be submitted via e-mail to representatives
of Raymond James, who worked with Frisch’s to evaluate and promptly respond to such requests.
On
September 12, 2014, the Strategy Committee met telephonically to consider a request from Party M to become a participant in further
discussions with the Company under the terms of an NDA. After discussion, the proposed NDA between the Company and Party M was
approved.
On
September 18, 2014, Party M filed an amendment to its Schedule 13D “Beneficial Ownership Report” pursuant to SEC rules.
In this filing, Party M reported that, in connection with its previously reported investment in Frisch’s, Party M had requested
that Frisch’s provide it with certain non-public information relating to the Company’s business and that, in order
to protect the Company’s confidential business information, it had entered into an NDA with the Company.
On
September 20, 2014, the Cincinnati Enquirer reported on Party M’s SEC filings, that it had acquired a 5.1 percent stake
in the Company, and that the Company had agreed to share confidential business information after Party M signed an NDA. In its
Schedule 13D disclosures, Party M referred to the Company as “undervalued and an attractive investment opportunity.”
The
next meeting of the Strategy Committee was held on September 29, 2014. Representatives of Raymond James and Company management
updated the Strategy Committee on the meetings conducted with the seven invited parties and management. The Strategy Committee
concluded that Party M, working with Party N, should be encouraged to go forward with the scheduled process and to submit an indication
of interest if they wished to do so. Also at this meeting, representatives of Raymond James and Company counsel reviewed a potential
Bid Instruction Letter and a “Summary of Material Terms” prepared by Company counsel for distribution to prospects
and to be included in the prospects’ final proposal. The final version of these two documents, after approval by the Strategy
Committee, was authorized to be furnished to those prospects who indicated an intent to provide a final proposal.
On
September 30, 2014, following the Strategy Committee’s authorization, representatives of Raymond James distributed the second
round bid instruction letter and Summary of Material Terms to the remaining prospective bidders.
On
October 1, 2014, representatives of Raymond James received an additional indication of interest from Party M and Party N at $30.00
per share.
On
October 3, 2014, representatives of Raymond James met telephonically with counsel for NRD to discuss certain due diligence matters
related to the Company. That same day representatives of Raymond James and management held a conference call with representatives
of Party J to review Party J’s additional due diligence questions on the Company; on October 6, 2014, representatives of
Raymond James and management held a conference call with Party F to review Party F’s additional due diligence questions
on the Company; and on October 8, 2014, the Company conducted a telephonic management presentation with Party M and Party N.
On
October 14, 2014, Party N informed representatives of Raymond James that it had elected not to proceed further with evaluating
a potential transaction. Following that discussion, representatives of Raymond James spoke with Party M, which, in light of Party
N’s decision, informed the Raymond James representatives that it would also no longer be pursuing a transaction.
On
October 16 and 17, 2014 the Company received second round Letters of Intent from five interested parties, with bids ranging from
$30.00 to $35.00 per share, as well as comments to the Summary of Material Terms. Three parties, including Party M, had withdrawn
from the process and elected not to submit Letters of Intent.
On
October 20, 2014, a meeting of the Strategy Committee was held at the Company’s corporate office with all members of the
Committee and Company counsel in attendance along with management representatives. Representatives of Raymond James participated
via telephone. Representatives of Raymond James and Company counsel reviewed the five second-round bids with the Strategy Committee
and provided an overview of the proposals, focusing on price per share, structure of the proposed transaction, special terms or
conditions, comments to the responses to the Company’s proposed Summary of Material Terms and certainty of closing. All
proposals included some combination of third-party debt, sale-leaseback financing, and equity components. A detailed discussion
of each individual proposal was conducted. Following the discussion, the Strategy Committee determined that it was in Frisch’s
shareholders’ best interests to pursue further refinements to each of the five identified proposals, at least into the next
round of the selection process. Although each of those bidders had been asked by the Company to submit bids at their highest levels,
the Strategy Committee nevertheless asked, Raymond James to again encourage each firm to provide their best proposal. The Strategy
Committee also asked that Raymond James follow up with each firm on points of clarification, particularly with respect to financing
sources and other matters identified generally as an aspect of the participants’ ability to consummate the transaction.
On
October 22, 2014, the Board held its regularly scheduled quarterly meeting. At the Board’s request, representatives of Raymond
James reviewed the recent receipt of five formal proposals and further summarized the contacts’ “feedback” comments.
The Raymond James representatives pointed out that no proposal contemplated only using a successful bidder’s “cash
on hand” but rather all of the proposals contemplated the use of third-party debt and/or sale-leaseback financing. After
reviewing the material terms of each prospect’s proposal, as well as considering the possible next steps, the Board declined
to accept any proposal as submitted. Instead, the Board directed the Raymond James representatives to again contact each of the
five potential buyers to deliver the Board’s concerns identified with each proposal, such as pricing, financing availability,
and variations on proposed termination, break-up, and other fees and reimbursements. The Board asked the representatives of Raymond
James to work with the potential buyers early in the next week and report first to the Strategy Committee and then, if appropriate,
to the Board, for a special telephonic Board meeting to address responses to their concerns.
On
October 23 and 24, 2014, representatives of Raymond James contacted each of the five parties who submitted Letters of Intent to
further clarify and/or seek improvement to certain elements of their proposals.
On
October 24, 2014, NRD held a conference call with representatives of Raymond James and one of its financing sources to confirm
and ask questions regarding the financing source’s intent to support a NRD-led transaction.
On
October 24, and 25, 2014, in response to the request of the Company, NRD provided certain additional information to the Company
regarding its availability of capital to fund a transaction and the status of its private equity fund raising being used to provide
the equity portion of the transaction consideration.
On
October 25, 2014, the Strategy Committee held a telephonic meeting to receive updates of the status of all five prospects. Party
D and Party F did not provide additional upward price adjustments and seemed less interested in pursuing a competitive pricing
process to the degree required to make their proposals competitive. Meanwhile, NRD, Party E, and Party J were considering further
refinements to the price and/or terms of their respective proposals as the Company had requested. The Strategy Committee’s
consensus was to give each of the three remaining parties a few more days to refine terms and final price.
The
next Strategy Committee meeting, on October 29, 2014, provided an opportunity for the Strategy Committee members to review revised
proposals received from three potential buyers. Party D and Party F had been informed their bid was lower than the others and
they appeared to be no longer active in the process. The Strategy Committee, management, representatives of Raymond James and
Company counsel conducted an in-depth discussion of each of the top three remaining proposals, including specific feedback given
by each party regarding the Company’s requested enhancements to both price and certainty of close. The summary of the proposals
as of that meeting was as follows:
| · | NRD,
the highest bidder at $35.50 per share, moved its bid up from $35.00 per share and provided
additional detail seeking to assure the Company of its ability to fund the equity portion
of its proposal. NRD further clarified that it intended to pay the seller’s transaction
costs incurred to third party providers (subject to a cap), and that these costs would
have no diminution effect on the $35.50 per share consideration. NRD also identified
an asset management firm, Party R, with whom NRD had begun preliminary participation
discussions. According to NRD, Party R was considering pairing with NRD as co-investor
in the Company and would need to engage in additional due diligence. With respect to
NRD’s proposal, representatives of Raymond James also mentioned their discussions
with Party S, a financing source, which had reiterated its strong, long-standing relationship
with the CEO of NRD and its comfort with him as an operator. |
| · | Party
E’s updated proposal was $33.50 per share, up from $33.00 per share. Party E emphasized
its certainty of closure and experience with similar types of transactions in its updated
bid. |
| · | Party
J had the largest price jump of all three proposals, rising to $34.00 per share from
$32.50 per share. |
In
light of the factors considered and discussed, including the per share price and other terms associated with each offer, members
of the Strategy Committee unanimously decided to recommend to the full Board that the Company proceed with NRD’s proposal
which was the highest by $1.50 per share. The Strategy Committee members agreed that an initial benchmark of fifteen days from
the signing of an Exclusivity Agreement with NRD would allow the Company to further assess NRD’s certainty of the funding
necessary to consummate a transaction. This initial period would be followed by two subsequent fifteen day extension periods if
the Company, through identified “milestones,” felt satisfied with NRD’s progress.
The
Board convened telephonically on October 30, 2014 to review the three highest bids received from potential acquirers, then review
the recommendations of the Strategy Committee. Representatives of Raymond James and Company counsel reviewed the material terms
of the top three proposals with the Board.
After
further discussion among the Board members, the Chairman presented the recommendation of the Strategy Committee, recommending
to the Board that it enter into an Exclusivity Agreement with the highest bidder, NRD. An Exclusivity Agreement generally restricts
the Company from engaging in any substantive communications with other prospects about a proposed transaction. To provide assurances
on NRD’s ability to complete the transaction, the Strategy Committee’s recommendation included imposing “benchmarks”,
or checkpoints, for NRD to achieve specified milestones of progress within the Exclusivity Period, with the understanding that
NRD’s failure to meet these milestones would be cause for possible termination of the Exclusivity Period. The Board unanimously
adopted a resolution empowering the Strategy Committee to negotiate the terms of an Exclusivity Agreement with NRD and to present
it to the Board for its review and approval.
On
November 4, 2014, a telephonic Board meeting was held to review and discuss the proposed Exclusivity Agreement with NRD. The Board
unanimously approved the proposed Exclusivity Agreement with NRD. On November 5, 2014, the Company executed an Exclusivity Agreement
with NRD.
On
November 15, 2014, the Strategy Committee held a telephonic meeting to discuss the terms of a First Supplement to the Exclusivity
Agreement to address NRD’s request for real estate diligence reimbursement up to a cap. The Strategy Committee voted unanimously
to recommend the approval of a First Supplement to the Exclusivity Agreement to the full Board and on November 19, 2014, the Board
at a special meeting, authorized the Chairman to execute a First Supplement to the Exclusivity Agreement between the Company and
NRD in substantially the form provided to the Board at this meeting. The parties executed the First Supplement to the Exclusivity
Agreement on that same day.
On
November 20, 2014, the Strategy Committee held a telephonic meeting to evaluate the submissions of NRD in support of its efforts
to establish that NRD would be entitled to the Second Exclusivity Period under the modified Exclusivity Agreement. The Strategy
Committee unanimously (1) approved the materials presented as partial documentation of the availability of the equity portion
of the transactions consideration and (2) concluded that NRD was entitled to proceed to the Second Exclusivity Period, contingent
on NRD providing certain additional supporting documents, which it did. From November 20 and 21, 2014, representatives of NRD
met with members of management at Frisch’s headquarters in Cincinnati.
On
November 25, 2014, representatives of Raymond James reported to the Strategy Committee that it received an unsolicited telephone
call from a representative of Party E expressing Party E’s interest in submitting a revised proposal. In light of the terms
of the Exclusivity Agreement, the representatives of Raymond James did not respond to any of Party E’s statements or provide
any information to Party E.
On
November 26, 2014, Company counsel sent NRD’s counsel an initial draft of a Merger Agreement along with a letter advising
NRD’s counsel that the Strategy Committee and the Board would meet the following week at which time the Strategy Committee
would assess whether NRD had fulfilled its obligations under the Exclusivity Agreement.
On
November 26, 2014, in response to requests from the Company for evidence of firm commitment letters with no contingencies from
all of NRD’s financing sources, NRD’s counsel emailed Company counsel to indicate that although the delivery of such
commitment letters was not a necessary step under the express terms of the Exclusivity Agreement, NRD was willing to deliver such
letters if the Exclusivity Period of the parties was extended by a reasonable period of time, in order to give the financing sources
the opportunity to complete their due diligence review.
On
December 2, 2014, representatives of Raymond James advised Company counsel that Raymond James had received two unsolicited messages
from a representative of Party E indicating Party E’s potential interest in submitting a revised proposal. Consistent with
the terms of the Exclusivity Agreement, and at the direction of Company counsel, representatives of Raymond James did not respond
to any of Party E’s statements or provide any information to Party E in response to these two messages.
On
December 2, 2014, the Strategy Committee held a telephonic meeting to discuss NRD’s due diligence efforts. The members of
the Strategy Committee recognized that NRD had commenced and made progress with its business due diligence but did not appear
to have commenced real estate due diligence. The Party E interactions were also discussed.
On
December 3, 2014, at the direction of the Strategy Committee, Company counsel sent a letter to NRD’s counsel regarding her
email of November 26, 2014 and the Company’s position on the milestones contained in the Exclusivity Agreement of November
5, 2014 (as modified by the First Supplement of November 19, 2014). On December 4, 2014, representatives of Raymond James participated
in a telephone call with NRD to discuss the content of that letter.
On
December 5, 2014, NRD’s CEO emailed Mr. Maier reiterating NRD’s continuing interest in the transaction. Also on December
5, 2014, counsel for NRD transmitted a letter to Company counsel, stating that NRD believed it had fulfilled all of its obligations
to date, and attaching additional information requested by the Company, including an executed term sheet from NRD’s sale-leaseback
financing source, Party O. Also in that letter, counsel for NRD reconfirmed the price and material terms set forth in NRD’s
Final Proposal. The letter also requested an extension of the Exclusivity Period to January 21, 2015 and access to all information
it deemed necessary to complete its due diligence review in a timely manner.
On
December 5, 2014 in a telephonic meeting, the Strategy Committee discussed the expiration of NRD’s second Exclusivity Period
on that day. The Strategy Committee, in response to a request from NRD, unanimously adopted a resolution extending NRD’s
Second Exclusivity Period until 5:00 P.M. Eastern Standard Time (EST) on December 9, 2014. The Strategy Committee members agreed
to reconvene the Strategy Committee meeting in progress on December 7, 2014 to consider further steps, if any, to be taken by
the Board or the Strategy Committee.
Company
counsel advised NRD’s counsel that the Strategy Committee had agreed to grant NRD’s request extending the Second Exclusivity
Period until 5:00 P.M. EST on December 9, 2014.
On
December 7, 2014, the Strategy Committee discussed various issues relating to any extension request generally as well as NRD’s
request specifically. The Committee asked Company counsel to contact NRD’s counsel and inform her that the Strategy Committee
would be in a position to recommend that the Board grant NRD an additional exclusivity period only if specific deadlines were
met by NRD relating to financing, definitive agreement language and certain due diligence matters. The Strategy Committee members
then agreed to reconvene the meeting in progress on December 8, 2014.
At
the Strategy Committee’s direction, on December 8, 2014, Company counsel informed NRD’s counsel that, after its review
of her December 5, 2014 letter, the Strategy Committee concluded that the materials from NRD were insufficient to support a position
that NRD had complied with all of its obligations under the Exclusivity Agreement. In that letter, the Company outlined a list
of specific conditions, including a list of deadlines, which in the Company’s opinion would have to be met to continue the
exclusivity arrangement. The letter informed NRD that its failure to meet these dates and other expectations would result in a
termination of exclusivity.
Later
that day, representatives of Raymond James received an unsolicited email communication from Party E with a revised proposal, subject
to remaining due diligence, to purchase all of Frisch’s Common Stock for a price of $35.50 per share in cash.
Also
on December 8, 2014 and after the conclusion of the Strategy Committee meeting, representatives of Raymond James received an email
from Party R, to whom NRD had considered granting a minority mezzanine investment position in the transaction. In the email, Party
R informed Raymond James it was no longer planning to be a part of NRD’s financing. This email was forwarded to the Board
prior to a planned telephonic meeting of the Board meeting on December 9, 2014 at 5:30 P.M. EST.
On
December 9, 2014, and prior to the planned Board meeting, a telephonic meeting of the Strategy Committee was held, at which Company
counsel and representatives of Raymond James provided an update on the ongoing discussions with NRD’s counsel regarding
the extension of NRD’s Exclusivity Period, including NRD counsel’s indication that it was preparing a response to
the Company’s December 8, 2014 letter.
A
Special Board Meeting was held telephonically on December 9, 2014. This meeting was held at 5:30 P.M. EST, after NRD’s 5:00
P.M. EST deadline expired. In advance of, and in preparation for, the meeting, the Board had received certain briefing materials
and background information distributed by Company counsel. Company counsel and representatives of Raymond James updated the Board,
focusing on where Frisch’s and NRD stood in the process.
During
the Special Board Meeting, the Chairman stated that in his opinion the Company had given NRD sufficient time to respond regarding
its progress and the deadlines. Other directors expressed similar views with respect to termination of NRD’s exclusivity
arrangement at this time, discussing the merits of both extending and terminating the arrangement. The Board adopted a resolution
that the Exclusivity Agreement between the Company and NRD be terminated immediately and that such termination be communicated
forthwith to counsel for NRD. Mr. Maier and Ms. Maier did not participate in this portion of the call and did not vote on the
resolution.
Following
the Board’s resolution of termination, the Chairman then polled the Board to determine what sort of directions and/or guidance
they would like to provide to Raymond James. After some discussion, the Chairman asked for confirmation that the consensus of
the Board members was to ask Raymond James to resume its communications with certain of those prospects who had previously submitted
final proposals. Each of the directors confirmed the accuracy of the Chairman’s summary.
After
adjournment of the Special Board Meeting, the Company sent NRD’s counsel notice of termination of the Exclusivity Agreement.
Company
counsel received a letter from NRD’s counsel on December 9, 2014, after the Special Board Meeting had already commenced,
responding to the Company’s proposed list of deadlines and conditions for continued exclusivity. The letter informed the
Company of the current status of NRD’s continued efforts to proceed with the transaction generally and to specifically address
the Company’s indicated concerns. The letter also indicated that despite NRD’s continued efforts, some of the deadlines
proposed in the Company’s December 8, 2014 letter would need to be modified or extended to accommodate the due diligence
review being conducted by third-party financing sources, over which NRD did not have direct control. The letter also reiterated
NRD’s previous request that in light of the efforts being taken by NRD to satisfy the Company’s requests, the existing
Exclusivity Period (expiring that day) should be extended until January 21, 2015.
On
December 10, 2014, both Company counsel and Raymond James received letters from NRD’s counsel, contending that NRD had satisfied
the conditions set forth in the Exclusivity Agreement for a Final Exclusivity Period to commence on December 5, 2014 (to end on
January 4, 2015) and maintaining that Company counsel’s December 9, 2014 letter terminating the Exclusivity Agreement constituted
wrongful termination and was a violation of the Exclusivity Agreement.
A
telephonic meeting of the Strategy Committee was held on December 10, 2014. Company counsel updated the Strategy Committee on
the December 9, 2014 and December 10, 2014 letters received from NRD’s counsel. As part of the Company’s exploration
of the possibility of developing other credible offers if any, the Strategy Committee further determined that it was appropriate
for representatives of Raymond James to engage in substantive discussions at this time with potential bidders who had shown or
were likely to show continued interest. In particular, representatives of Raymond James were asked by the Strategy Committee to
engage in discussions with Party E regarding the possibility of a revised offer. The Strategy Committee agreed to reconvene on
December 11th.
Following
the Strategy Committee call on December 10th, representatives of Raymond James had a telephone call with NRD’s CEO, during
which NRD’s CEO told the representatives of Raymond James that he would address another letter to the Board requesting an
opportunity to complete the transaction by the third week of January 2015. In that communication, NRD’s CEO reaffirmed the
price per share of $35.50 and agreed to seek to fully negotiate all of the terms of a merger agreement expeditiously. On December
11, 2014, representatives of Raymond James spoke again with NRD’s CEO to discuss whether NRD would be submitting a letter
to the Board.
Company
counsel received a letter from NRD’s CEO on December 11, 2014 and forwarded it to the Strategy Committee. In the letter,
NRD’s CEO asked Company counsel to personally convey to the Strategy Committee his confidence in NRD’s ability to
close the transaction and his continued enthusiasm for the acquisition. NRD’s CEO again requested that NRD and its lending
partners be afforded the opportunity to complete their work under a proposed exclusivity period ending January 21, 2015, with
a goal to enter into a definitive merger agreement on or around that date.
On
December 12, 2014, the Strategy Committee held a telephonic meeting to discuss NRD’s most recent communications. Representatives
of Raymond James reported that on the evening of December 11, 2014, NRD expressed some concern about proceeding with real estate
due diligence without an exclusivity arrangement. NRD reported that it was done with its business due diligence, but still had
to complete its real estate due diligence, merger agreement negotiations, and operations and transitional planning meetings. With
respect to additional contemplated senior debt financing, NRD reported that Party V remained interested and expected to deliver
a term sheet by the end of the week of December 15, 2014 and a firm commitment letter by the end of December. NRD reported to
representatives of Raymond James that its equity fund was doing its first close that day. At the conclusion of these reports and
discussions, the Strategy Committee members determined that it would make no recommendation to the Board recommending another
exclusivity period with NRD at this time.
Also
at the December 12, 2014 Strategy Committee meeting representatives of Raymond James reported on their December 11, 2014 conversation
with Party E that it had been working with Party Q as a partner in making a proposal. Representatives of Raymond James then reported
on the due diligence work Party E reported it still had to do and several alternative scenarios under which Party E indicated
a willingness to continue its work.
After
the discussion, the Strategy Committee instructed representatives of Raymond James to determine if Party E would offer a higher
price. The consensus of the Strategy Committee was that this effort to seek a higher price was meritorious. Representatives of
Raymond James were asked by the Strategy Committee to continue in discussions with NRD.
On
December 13 and 14, 2014, representatives of Raymond James emailed Party E updated financial information as provided by and approved
for distribution by the Company. On December 15, Party E emailed representatives of Raymond James a presentation it hoped would
give the Board additional color on the work Party E had done around this transaction and its history of completing restaurant
acquisitions in a timely fashion, along with its proposed remaining due diligence.
On
December 16, 2014, the Strategy Committee met telephonically. Representatives of Raymond James updated the current status of discussions
with both Party E and NRD. The Strategy Committee discussed the fact that the proposals of NRD and Party E were at the same price
and considered characteristics of the two proposals that might be clarified to distinguish the two prospects. The Strategy Committee
asked representatives of Raymond James to seek additional information about Party E’s financing and to seek a higher price
as well as arranging a discussion between Company counsel and Party E’s counsel. Raymond James did so on the following day.
On
December 17, 2014, as requested by the Strategy Committee, representatives of Raymond James emailed NRD’s CEO requesting
updates to the information previously discussed with NRD. In response, NRD’s CEO indicated that it was continuing to work
and that a further communication to the Strategy Committee would be forthcoming. On December 18th, Company counsel received NRD’s
mark-up of the proposed Merger Agreement along with an equity commitment letter in support of the transaction.
On
that same day, December 18th, Party E informed representatives of Raymond James that further conversations with its financing
sources had led to a revised assessment of the transaction and that it was no longer willing to offer $35.50 per share.
On
December 19, 2014, the Strategy Committee held a telephonic meeting to be updated on information regarding NRD and Party E. Representatives
of Raymond James reported on recent communications with both parties. Representatives of Raymond James also reported that they
had received a call that morning from Party X indicating that it was back in discussions with Party E regarding a potential proposal,
but that any revised offer from them would be at a $30.50 share price. The Strategy Committee members were in favor of moving
ahead with NRD and considering granting NRD’s request for renewed exclusivity. The Strategy Committee asked representatives
of Raymond James to proceed with continued discussions with NRD following the outline of the requests of the Strategy Committee
regarding financing and due diligence. The meeting was adjourned in progress until December 22nd in order to obtain clarity on
NRD’s commitments and milestone achievements.
On
December 21, 2014, NRD’s CEO emailed materials containing updated financial information for the Strategy Committee’s
consideration. NRD indicated it had selected Party S as the senior loan provider for the acquisition and provided a term sheet
in support of that selection. Additionally, NRD stated that it had been negotiating with both Party O and Party Z as potential
sale-leaseback financing providers. Party O had previously submitted a proposed term sheet detailing its possible financing.
On
December 22, 2014, the Strategy Committee resumed the deliberations it had begun at its December 19th meeting. Representatives
of Raymond James updated the Strategy Committee on information received from NRD. There was discussion among Strategy Committee
members about a possible renewal of exclusivity to NRD at this time, but the Strategy Committee members agreed that no exclusivity
arrangement would be recommended at this time. The Strategy Committee did discuss certain parameters under which it might be willing
to consider a renewed exclusivity arrangement with NRD and instructed Company counsel and, instructed representatives of Raymond
James to further discuss these terms with NRD.
On
December 26, 2014, Company counsel provided the Strategy Committee with a Briefing Memorandum and a proposed Second Exclusivity
Agreement between Frisch’s and NRD. The terms of the proposal were the result of negotiations undertaken pursuant to the
Strategy Committee’s directions between NRD’s counsel and the Company counsel.
On
December 27, 2014, the Strategy Committee held a special meeting via telephone. The special meeting had been scheduled to discuss
the terms of the proposed Second Exclusivity Agreement and next steps. The Committee was advised of a special internal situation
at the Company which required attention. As a result of developments relating to this internal Company matter, the Strategy Committee
deferred further discussions on a possible grant of exclusivity.
Mr.
Lanning reported to the Strategy Committee that he had contacted the forensic investigation group of a national accounting firm,
who was to be formally engaged at the direction of the Audit Committee to investigate the internal matter. Following a discussion
among the Strategy Committee members, a consensus was reached by which the Strategy Committee directed representatives of Raymond
James to contact NRD’s CEO, and directed Company counsel to contact NRD’s counsel, and in each case to inform that
representatives of NRD that an internal matter would result in a delay in addressing the exclusivity arrangement with NRD.
On
December 27, 2014, at the request of the Strategy Committee, representatives of Raymond James telephoned NRD’s CEO and,
using talking points provided by Company counsel and approved by the Company, informed NRD of a potential delay. Also on that
same day, Company counsel telephoned NRD’s counsel to inform NRD’s counsel of the potential delay. Mr. Maier and NRD’s
CEO also discussed a potential delay.
On
December 30, 2014, the Board held a special telephonic meeting. As previously arranged, representatives of Raymond James dialed
into only a portion of the meeting at the Board’s request. Without describing any details of the special internal situation
to the representatives of Raymond James, the Chairman conducted a discussion of the impact of various hypothetical internal Company
situations on the potential transaction with NRD and the effect of such situations on NRD’s possible Second Exclusivity
Agreement. The Board discussed strategy with respect to NRD and determined that there should be a communication with NRD, specifically
between Company counsel and counsel for NRD, but that information about the specific nature of the situation or the process being
undertaken would not be provided.
At
a meeting on January 12, 2015, the Strategy Committee was provided with a review and update with respect to NRD and the current
steps being taken to address effects of the Company’s special internal situation on the possibility of a renewed exclusivity
arrangement with NRD. Representatives of Raymond James joined a portion of the meeting via teleconference, at the Strategy Committee’s
request, to report that NRD had expressed continued interest in the deal. The members of the Strategy Committee then discussed
several scheduling matters related to NRD.
A
regular Board meeting was held on January 14, 2015. Representatives of Raymond James, at the request of the Board, joined a portion
of the Board meeting via telephone to provide an update regarding NRD. The focus of the update was interactions with NRD relative
to the Company’s special internal matter. The Board discussed communications between representatives of Raymond James and
NRD, between Company counsel and NRD’s counsel, and between Mr. Maier and NRD’s CEO. NRD’s CEO was reported
to have stated to Mr. Maier that NRD stood ready to resume its work to get a deal done despite the delay. The consensus of the
Board members was that further discussion about the NRD relationship should be pursued.
On
January 16, 2015, Company counsel contacted the New York Stock Exchange (NYSE) to notify it of the Company’s intent to file
a Form 8-K on or about January 20, 2015 to report a misappropriation of Company funds by a Company employee. Also on January 16,
2015, Company counsel, special counsel for Frisch’s and Mr. Lanning met with the U.S. Attorney to provide the facts developed
to date in connection with the forensic investigation.
Also
on that same day, the Company received an unsolicited indication of interest from Party U and Party T. Party U and T’s bid
was in an implied per share range of $32.00 to $33.00, subject to due diligence (including Party U meeting management which it
had not done). That indication was below the then-current price being offered by NRD; moreover, the proposal was silent on financing
terms and amounts to be provided from different financing sources.
On
January 19, 2015, the Strategy Committee meeting met telephonically to discuss the unsolicited contact from Party U that had occurred
on January 16, 2015. Given the proposal’s terms and the uncertainty in timeline, the Strategy Committee decided to continue
its negotiations with NRD. The consensus of the Strategy Committee was that discussions should proceed with NRD in an effort to
develop the terms of the Second Exclusivity Agreement taking into account time lines and further diligence activities necessitated
by the Company-employee defalcation.
Following
that meeting, a special Board meeting was held telephonically on January 19, 2015, during which the Board unanimously authorized
(1) issuance of a news release regarding a special investigation being conducted by the Company’s Audit Committee about
an employee defalcation, (2) the Form 8-K filing with the SEC relating to the employee defalcation at the Company, (3) the filing
of the civil complaint against a former employee and other defendants, and (4) the filing of the Form 12b-25 with the SEC on or
before January 26, 2015 indicating the Company would be late filing its Form 10-Q for the Second Quarter Ended December 16, 2014.
Representatives from Raymond James, who, at the request of Strategy Committee, had dialed in just prior to the vote on the resolutions,
reported on the recent written joint proposal from Party U and Party T, discussed at the Strategy Committee meeting just prior
to the Board meeting. The Chairman, on behalf of the Strategy Committee, reported that Party U and T’s offer was materially
deficient in price offered, remaining due diligence, certainty and speed. The Board unanimously decided to continue talks with
NRD and to decline the offer from Party U and T.
Pursuant
to the Board’s instructions, on January 20, 2015, Frisch’s filed a civil lawsuit in the Court of Common Pleas for
Hamilton County, Ohio against a former employee for allegedly defrauding the Company and embezzling a then-estimated $3.3 million
over a multi-year period.
On
that same day, as directed by the Board, the Company filed a Form 8-K with the SEC and the press release was issued. There was
no suspension of trading by the NYSE.
The
press release issued on January 20, 2015, announced the filing of the civil lawsuit described above; that the appropriate law
enforcement agencies had been notified; that the Company’s Audit Committee of the Board had launched a special investigation
retaining forensic accountants to assist with the investigation; that the Company was evaluating the impact of the fraud on its
reports on internal controls over financial reporting; and that at the time of the press release, the fraud was not expected to
have a material impact on previously reported net income for fiscal years 2014, 2013, 2012, and the first quarter of fiscal 2015.
On
January 22, 2015, representatives of NRD, members of management, Company counsel and representatives of Raymond James met telephonically
to discuss a renewed period of exclusivity.
On
January 23, 2015, the Company filed a Form 12b-25 with the SEC stating the Company was unable to timely file its Second Quarter
Form 10-Q due to the timing and discovery of a Company employee’s defalcation and the ongoing special investigation directed
by the Company’s Audit Committee. The Company’s Form 10-Q for the period ended December 16, 2014 had been due by January
25, 2015. In its Form 12b-25 filing, the Company further stated it was unable by the required filing date to complete information
required to be included in the Report and anticipated not being able to make such filing until further steps in forensic and accounting
reviews were completed. The Company stated that it continued to believe that the fraud would not have a material impact on previously
reported net income for fiscal years 2014, 2013, 2012 and the first and second quarters of fiscal 2015. The filing also reported
that in order to maintain its listing the Company was required to submit a plan of compliance on or before February 17, 2015 advising
the NYSE of actions it had taken or would be taking to regain compliance with the continued listing standards by May 4, 2015.
On
January 30, 2015, a special meeting of the Strategy Committee was held telephonically for the purpose of reviewing and approving
a proposed Second Exclusivity Agreement between the Company and NRD, in which the Company agreed to a Second Exclusivity Period
commencing on the date of the Agreement until 5 P.M. EST on April 3, 2015 and the conditions under which a Third Exclusivity Period
would automatically begin prior to the expiration of the Second Exclusivity Period. The Second Exclusivity Agreement required
Frisch’s to provide NRD periodic updates about the misappropriation investigation and provided for automatic extensions
of the Exclusivity Period until at least fifteen days after Frisch’s conducted its investigation into the misappropriation.
The Second Exclusivity Agreement also provided that the Company would reimburse NRD’s costs in conducting real estate due
diligence, subject to a cap. The Strategy Committee unanimously voted to recommend to the Board the Final Draft of the Second
Exclusivity Agreement.
On
January 30, 2015, a special Board meeting was held via telephone to consider the recommendation of the Strategy Committee that
the Board approve and authorize the Company entering into the Second Exclusivity Agreement between the Company and NRD. The Board
unanimously approved the Second Exclusivity Agreement. Later that day, both parties signed the Second Exclusivity Agreement.
On
February 13, 2015, in response to a notice of non-compliance from the NYSE, the Company submitted its Late Filer Compliance Plan
to the NYSE in response to its official notice of non-compliance dated February 3, 2015. The plan included specific milestones
and details related to the completion of the filing. On March 13, 2015, the Form 10-Q for the Second Quarter of Fiscal Year 2015
was filed with the SEC to resume timely filing of required SEC forms and information.
On
February 4, 5, 19 and 20, 2015, representatives of NRD met with members of management in Cincinnati, Ohio to conduct additional
due diligence. Representatives of Raymond James participated in the meeting on February 4, 2015.
A
special meeting of the Strategy Committee was held telephonically on February 13, 2015 to discuss the status of interactions with
NRD and to provide a brief overview of ongoing due diligence.
On
February 16, 2015, representatives of Raymond James, members of management, and representatives of NRD met telephonically to review
additional due diligence questions regarding the Company.
A
meeting of the Strategy Committee was held telephonically on February 27, 2015 for a general update of interactions with NRD.
On
March 7, 2014, the Strategy Committee met telephonically to consider new information received from NRD. The Company was informed
that NRD and its proposed senior debt lender, Party S, had agreed not to proceed with financing support. Nonetheless, NRD had
reiterated its commitment to finishing the deal, even without Party S and expressed that it had alternative sources of financing
available. The Strategy Committee engaged in a discussion about timing of next steps with respect to NRD’s exclusivity arrangement
and ability to terminate the relationship with NRD, if desired. The Strategy Committee decided to defer any formal action.
On
March 9, 2015, at the request of the Strategy Committee, representatives of Raymond James spoke with representatives of NRD to
acquire information for the Board on NRD’s alternative financing sources.
On
March 12, 2015, representatives of NRD met with members of management in Cincinnati to conduct additional due diligence. After
those meetings, NRD’s representative emailed representatives of Raymond James reporting NRD’s decision to change its
bid price to $32.00 per share from $35.50 per share. NRD stated it adjusted its proposed purchase price because of reasons
including changes in the operating assumptions of its financial model, increased costs associated with certain elements of the
transaction and an increase in estimated taxes associated with the transaction.
A
telephonic meeting of the Strategy Committee was held on March 13, 2015. Raymond James detailed its discussions with NRD’s
representative about NRD’s reduced bid of $32.00 per share. The Strategy Committee members extensively discussed the implications
of the modified bid received from NRD and potential courses of action in light of their fiduciary responsibilities to the Company’s
shareholders. The Strategy Committee concluded that it was in the best interests of the shareholders to give NRD time to modify
their proposal with the expectation that the $32.00 price would be adjusted upward. The Strategy Committee decided to reconvene
in several days after receiving a response from NRD. On March 13, 2015, representatives of Raymond James, at the request of the
Company, spoke with NRD’s CEO to deliver the Strategy Committee’s message and to inform NRD that the next Strategy
Committee meeting was March 17th.
On
the afternoon of March 13, 2015, the Audit Committee Report to the Board of Directors regarding the Special Investigation, detailing
the results of the special investigation into the former employee’s defalcation of Company funds, was provided to the Board
on instruction of the Chairman of the Audit Committee, Mr. Montopoli. That same day at the direction of the Strategy Committee,
the draft Board Report was sent to NRD under the restrictions of the NDA between NRD and the Company.
At
a meeting of the Strategy Committee on March 17, 2015, representatives of Raymond James then provided an overview of their discussions
with NRD, conducted at the request of the Strategy Committee, stating that NRD’s CEO had contacted them to reiterate NRD’s
desire to complete the transaction. Representatives of Raymond James also discussed certain market and financial updates with
the Committee as requested by its Chairman. The Strategy Committee members discussed its confidence level in NRD and possible
alternatives that did not include NRD, particularly given the Company’s previous receipt of additional bids ranging in price
from $30.00 to $34.00 per share, although these bidders had not completed due diligence and all of those bids had been received
before the defalcation was uncovered. The Strategy Committee decided to submit a list of six substantive requirements to NRD in
order to maintain its exclusivity, including, but not limited to, a revised offer of $34.00 per share, a substantial nonrefundable
deposit, NRD’s agreement not to include any right to make any price adjustments in the Merger Agreement, and NRD’s
agreement to complete Merger Agreement work by April 30, 2015. The Strategy Committee unanimously voted to continue discussions
with NRD, subject to its initial agreement to these additional conditions.
A
special Board meeting was held telephonically on March 18, 2015. Recent events were reviewed with the Board, including the disengagement
of Party S from further negotiations, and a reconfirmation from NRD that NRD’s sources of financing now came exclusively
from equity from the NRD Fund and sale-leaseback proceeds from Party O. The Board discussed alternatives including further pursuit
of a transaction with NRD the termination of such discussions or the pursuit of an alternative path. The Chairman proposed a resolution
recommended by the Strategy Committee requiring six items to deliver enhanced shareholder value above and beyond the current offer
of $32.00 per share, improve confidence with NRD’s commitment to completing a transaction on an agreed upon set of deal
terms, and to address other priority issues. Members of the Strategy Committee then gave their views and discussed the situation
with the other Board members. The Board unanimously authorized the Strategy Committee to negotiate and enter into a Supplement
to the Exclusivity Agreement under certain conditions. Raymond James was instructed by the Board to communicate the points and
conditions to NRD’s representatives, with a deadline of noon on March 23, 2015 to accept or otherwise respond. On March
18, 2015, representatives of Raymond James, acting pursuant to the Board’s direction, spoke with NRD’s CEO and delivered
the terms to NRD’s CEO.
A
telephonic meeting of the Strategy Committee was held on March 23, 2015. The members of the Strategy Committee reviewed NRD’s
responses to the six conditions proposed by the Company. The main objection received from NRD was the size of the deposit requested
for the Company by the Board. The Strategy Committee members reiterated their desire for a substantial deposit by NRD, even if
held in escrow. The Strategy Committee focused its attention on the conditions under which the Company would continue to engage
with NRD and by consensus determined that, at minimum, NRD must provide some form of substantial deposit and would need to provide
specific parameters about which of any other conditions of the Exclusivity Agreement were being proposed in a modified form. Once
the Strategy Committee received written final clarification from NRD on its proposed terms, it would consider that proposition
and determine whether to recommend further action by the Board.
Shortly
after the Strategy Committee meeting, on March 23, 2015, NRD’s CEO responded in a letter to the Board to the six conditions
proposed by the Company. NRD’s response summarized the terms that it would agree to as part of an extended exclusivity arrangement,
including a $34.00 per share transaction price.
A
telephonic meeting of the Strategy Committee was held on March 27, 2015 to determine what action it should take on NRD’s
letter of March 23, 2015. The Strategy Committee unanimously approved the Supplement to the Second Exclusivity Agreement as reasonable
and in the best interests of the Frisch’s shareholders, authorized Company counsel and Raymond James to proceed with completion
of a final version of the Supplement for presentation to the Board at a special meeting on or before March 30, 2015.
A
special Board meeting was held telephonically on March 30, 2015. The purpose of the meeting was a presentation of the Strategy
Committee’s recommendation adopted on March 27, 2015 that Frisch’s enter into a First Supplement to the Second Exclusivity
Agreement (“First Supplement”) with NRD. After discussion, the Board unanimously determined that the material terms
of the Company’s proposed First Supplement were reasonable and in the best interests of the shareholders of the Company,
including the terms of a deposit and escrow, that Company counsel was authorized to proceed with completion of a final version
of the First Supplement, and that the Chairman of the Strategy Committee was authorized on behalf of the Company (1) to execute
the final version of the First Supplement, so long as such version encompasses the material terms presented to the Board at this
meeting, and (2) to take such steps as were necessary to establish the escrow and deposit account referred to in the First Supplement.
On
April 1, 2015, representatives of Raymond James met telephonically with members of management, Party O representatives and NRD
representatives to discuss the Party O’s financing of the transaction and real estate due diligence.
On
April 1, 2015, the Strategy Committee held a meeting telephonically to approve the final form of the First Supplement to the Second
Exclusivity Agreement. Thereafter, the Company and NRD executed that document.
On
April 7, 2015, the Strategy Committee held a meeting telephonically during which it received updates from Company counsel and
representatives of Raymond James.
On
April 8, 2015, the Board held its regularly scheduled quarterly meeting. At the request of the Board, representatives of Raymond
James attended a portion of the meeting to discuss the timeline and NRD updates. During an executive session, the Board discussed
matters prior to closing, including possible considerations for bonuses to be awarded upon the Compensation Committee’s
recommendation and an interim extension of Mr. Maier’s employment contract set to expire on June 2, 2015. Pursuant to Board
direction, on April 10, 2015, the Form 10-Q for the Third Quarter of Fiscal Year 2015 was timely filed with the SEC.
On
April 12, 2015, representatives of Raymond James received a status request email from Party T. Representatives of Raymond James
did not respond in light of the Company’s restrictions undertaken in the terms of the exclusivity arrangement with NRD.
On
April 17, 2015, a telephonic Strategy Committee meeting was held. The purpose of the meeting was to receive updates on business
and financing matters relating to the Merger Agreement as well as a number of legal issues.
On
April 22, 2015, the Strategy Committee held a telephonic meeting. Company counsel provided updates on the status of the Merger
Agreement and reported that there were still some substantive and textual issues. The Strategy Committee discussed severance issues
and maintaining operation of the Company pre- and post-Closing.
On
April 24, 2015, a telephonic meeting of the Strategy Committee was held. Company counsel provided a brief update on the status
of the Merger Agreement. The Chairman reported that the Strategy Committee would be asking for some discretion from the Board
regarding any additional extensions of exclusivity, as there was a possibility the April 30, 2014 exclusivity deadline could not
be met.
On
April 24, 2015 a special meeting of the Board was held telephonically. The purpose of the meeting was an update and consideration
of authorization of an extension of exclusivity with NRD. The Chairman informed the Board that, although close, it was not clear
that the Merger Agreement was capable of being fully negotiated by the deadline of April 30, 2015. The Board unanimously voted
to authorize the Strategy Committee at its discretion to grant one or more extensions of the Exclusivity Period with NRD for an
aggregate period of not more than thirty days.
A
special meeting of the Strategy Committee was held telephonically on April 29, 2015. Mr. Kellar was not present for the meeting.
The Strategy Committee received updates and discussed an extension of the Exclusivity Agreement deadline, warranted by several
Merger Agreement issues to be resolved. An extension until May 13, 2015 was discussed and approved by the Strategy Committee.
The Strategy Committee voted to extend the deadline for completion of the Merger Agreement to May 13, 2015.
On
April 28, 2015, representatives of Raymond James met telephonically with NRD and Party O to discuss updates on real estate due
diligence.
On
May 4, 2015, a Strategy Committee meeting was held telephonically. The Strategy Committee was provided with updates on compensation
matters being considered by the Compensation Committee. The Strategy Committee also discussed and agreed to extend NRD’s
exclusivity for a short period and pursuant to such authorization the Company and NRD executed an exclusivity extension until
May 22, 2015.
On
May 8, 2015, a Strategy Committee meeting was held telephonically to consider extending exclusivity to May 22, 2015. The Strategy
Committee unanimously approved such an extension and it was agreed a special Board meeting would be scheduled for on or before
that date.
On
May 19, 2015, the Strategy Committee held a telephonic meeting to discuss updates on process and deliverables for the Board meeting
set for May 21, 2015.
On
May 21, 2015, the Board held a special meeting for the purpose of considering the approval and execution of the proposed Merger
Agreement. In advance of the meeting, the Board had been provided with an Agenda, the draft Merger Agreement and attachments,
and related documents for its consideration, including the proposed form of a Press Release and communications to employees, franchisees,
and suppliers. Company counsel discussed the material terms of the Merger Agreement and attachments. Representatives of Raymond
James rendered Raymond James’ oral opinion, which was subsequently confirmed by delivery of a written opinion dated May
21, 2015 to the Board, as of such date, to the effect that the Merger Consideration to be received by the holders of the Frisch’s
Common Stock (other than the Excluded Persons) in the Merger pursuant to the Merger Agreement was fair from a financial point
of view to such holders, based upon and subject to the qualifications, limitations, assumptions, and other matters considered
in connection with the preparation of its opinion. The Board voted unanimously to approve executing the Merger Agreement; to approve
the award of a special bonus to Mr. Lanning and an award to Mr. Maier; to distribute to the communication package to the appropriate
persons; and to file the Form 8-K with the SEC and to notify the NYSE of the issuance of the press release and the filing of the
Form 8-K.
On
May 21, 2015, the Company and NRD executed the Merger Agreement.
The
Merger Agreement was first announced on May 22, 2015 with the filing of the Company’s Form 8-K. A press release was also
issued on that subject on the same day.
On
May 29, 2015, a Strategy Committee call was held telephonically. The Strategy Committee was updated as to the timeline for the
filing of the Proxy and the anticipated shareholder meeting and closing date.
This summary
is not meant to be an exhaustive description of the information and factors considered by the Board and/or any Committee of the
Board, but is believed to address the material information and factors considered. In view of the wide variety of factors considered
by the Board (Committee), it is not possible to quantify or to give relative weights to the various factors. In considering the
factors discussed above, individual directors may have given different weights to different factors. After taking into consideration
all of the factors set forth above as a whole, as well as other factors not specifically described above, the Board concluded
that the merger is advisable and in the best interests of Frisch’s shareholders, and approved the Merger Agreement and the
transactions contemplated by the Merger Agreement.
Recommendation
of the Board and Reasons for the Merger
The Board recommends
that you vote “FOR” the Merger Proposal.
At
the special Board meeting held on May 21, 2015, the Board unanimously determined the Merger Agreement to be fair, advisable and
in the best interests of Frisch’s and its shareholders.
In
the course of reaching its decision, the Board consulted with Frisch’s senior management, financial advisors and Frisch’s
outside legal counsel. In addition, the Board reviewed a significant amount of information and considered a number of substantive
factors, including, among others, the following:
| • | Premium
to the trading price of Frisch’s Common Stock. The Board considered the
fact that the $34.00 per share in cash to be paid as Merger Consideration represents
a premium of approximately 21 percent over the closing price of $28.12 on May 21, 2015,
the day prior to the announcement that Frisch’s had entered into the Merger Agreement. |
| • | Merger
Consideration. The Board considered the $34.00 per share in cash to be paid as
Merger Consideration in relation to the historic trading ranges of Frisch’s Common
Stock and the potential trading range of Frisch’s Common Stock absent takeover
speculation, and the possibility that absent such speculation it could take a considerable
period of time before the trading price of Frisch’s Common Stock would trade at
a level in excess of the per share Merger Consideration of $34.00 on a present value
basis. |
| • | Future
Dividend Declaration and Payments. The Board considered that the Merger Agreement
permitted the payment of regular quarterly cash dividends or distributions authorized
by the Company Board, not exceeding $0.20 per share of Frisch’s Common Stock as
appropriately adjusted in the event of any stock split, reverse stock split, stock dividend,
reclassification or similar transaction. |
| • | Negotiations
with Holding. The Board considered the benefits that we were able to obtain during
our extensive negotiations with Holding from the beginning of the process to the end
of the negotiations. The Board concluded that we had obtained the highest price per share
that Holding was willing to agree to pay, considering the extensive negotiations between
the parties. |
| • | Cash
consideration. The Board considered the fact that the Merger Consideration would
be paid solely in cash, which, compared to noncash consideration, provides certainty
and immediate liquidity and value to our shareholders. |
| • | Thorough
process. The Board considered that Frisch’s, with the assistance of Raymond
James, conducted a lengthy and thorough process, during which representatives of Frisch’s
and Raymond James, at the direction of the Company, contacted multiple potential bidders
including both financial and strategic parties. The Board considered the risks and uncertainties
facing Frisch’s shareholders associated with possible strategic alternatives to
the Merger (including potential alternative Acquisition Proposals and the possibility
of remaining an independent and/or public company), and the timing and likelihood of
accomplishing such alternatives. |
| • | Opinion
of Financial Advisor. The Board considered the financial analyses presented by
Raymond James, as well as the Opinion of Raymond James, dated May 21, 2015, to the Board,
as of such date and based upon and subject to the factors, procedures, assumptions, qualifications
and limitations set forth in such Opinion, as to the fairness, from a financial point
of view, to the holders of Frisch’s Common Stock (other than the Excluded Persons)
of the $34.00 cash per share Merger Consideration to be received by such holders in the
Merger pursuant to the proposed Merger Agreement. The Opinion is more fully described
in the subsection titled “ — Opinion of Raymond James” and the full
text of the opinion is attached to this proxy statement as Annex B. |
| • | Frisch’s
current condition. The Board considered information with respect to our financial
condition, results of operations, business, competitive position and business strategy,
on both an historical and prospective basis, as well as current industry, economic and
market conditions and trends. |
| • | Frisch’s
future prospects. The Board considered Frisch’s future prospects if we
were to remain independent, including the increasingly competitive landscape and the
business, financial and execution risks, our relationships with customers and suppliers
and the risks associated with continued independence discussed below. |
| • | Risks
associated with continued independence. The Board considered the risks associated
with going forward as an independent company, including the potential market and execution
risks associated with Frisch’s business including the need for financial investment
to continue to compete with competitors that, as a result of increasing food costs and
changes in customers’ dining habits, have better purchasing power, and an enhanced
ability to lower expenses and leverage technology costs. The Board also considered the
risk that, if we did not enter into the Merger Agreement with Holding, the price that
might be received by Frisch’s shareholders selling shares in the open market, both
in the short term and the long term, could be less than the Merger Consideration. The
Board concluded that the Merger Consideration enabled shareholders to realize a substantial
portion of Frisch’s potential future value without the market or execution risks
associated with continued independence. |
| • | Economic
conditions. The Board considered the current state of the economy and general
uncertainty surrounding forecasted economic conditions both in the near term and the
long term, generally and within our industry. |
| • | Arms-length
negotiations. The Board considered that the Merger Agreement was the product
of arms-length negotiations and contained customary terms and conditions. |
| • | Merger
Agreement. The Board considered the terms of the Merger Agreement, including: |
| • | the
representations, warranties and covenants of the parties, the conditions to the parties’
obligations to complete the Merger and their ability to terminate the Merger Agreement; |
| • | Holding’s
undertakings to use reasonable best efforts to obtain required regulatory approvals,
if any, and to avoid or eliminate each and every impediment under any antitrust law so
as to enable the consummation to occur as soon as possible; |
| • | the
absence of a financing condition in the Merger Agreement; |
| • | the
right of Frisch’s and the Board to respond to a competing proposal from other bidders,
subject to certain restrictions and the requirement that we pay Holding the applicable
termination fee if we terminate the Merger Agreement to accept a Superior Proposal; |
| • | the
belief of the Board that, although the termination fee provisions might have the effect
of discouraging competing third-party proposals or reducing the price of such proposals,
such provisions are customary for transactions of this size and type, and its belief
that the $5,000,000 termination fee, representing approximately 2.9 percent of the equity
value of the transaction, was reasonable in the context of comparable transactions, particularly
given the lengthy and thorough process described above and, specifically, discussions
with certain other bidders that we held in advance of the execution of the Merger Agreement; |
| • | Frisch’s
right to change its recommendation, subject to certain restrictions, in connection with
a Superior Proposal; and |
| • | the
fact that the end date under the Merger Agreement (which may be extended under certain
circumstances) allows for sufficient time to consummate the transaction. |
| • | Likelihood
of consummation. The Board considered the likelihood that the Merger would be
completed, in light of, among other things, the conditions to the Merger and the absence
of a financing condition, the relative likelihood of obtaining required regulatory approvals,
if any, Holding’s representation that it will have sufficient financial resources
to pay the Merger Consideration and consummate the Merger, and the remedies available
to us under the Merger Agreement in the event of various breaches by Holding. |
| • | Possibility
of more favorable bid. The Board considered the possibility that a third party
with the financial means could submit an unsolicited offer that could result in a Superior
Proposal which would permit Frisch’s to terminate the Merger Agreement and accept
if Holding were unwilling to match such proposal. |
| • | Shareholders’
ability to reject the Merger. The Board considered the fact that the Merger is
subject to approval by Frisch’s shareholders, who would be free to reject the Merger. |
| • | Shareholder’s
right of appraisal. The fact that Frisch’s shareholders who dissent from
the Merger will have appraisal rights, as described in the section entitled “—Appraisal
Rights”. |
In
the course of reaching its decision, the Board also considered a number of potentially negative factors including, among others,
the following:
| • | Participation
in future gains. The Board considered the fact that we will no longer exist as
an independent public company and Frisch’s shareholders will forgo any future increase
in Frisch’s value that might result from our earnings or possible growth as an
independent and/or public company. The Board concluded that the premium reflected in
the Merger Consideration of approximately 21 percent to the closing price of Frisch’s
Common Stock on May 21, 2015 constituted fair compensation for the loss of the potential
shareholder benefits that could be realized by our strategic plan and related sensitivity
analyses on a risk-adjusted basis. |
| • | Risks
associated with announcement and pendency of the Merger. The Board considered
the risk that the announcement and pendency of the Merger may cause substantial harm
to relationships with our employees, vendors, customers and partners and may divert management
and employee attention away from the day-to-day operation of our business. |
| • | Risks
associated with a failure to consummate the Merger. The Board considered the
fact that there can be no assurance that all conditions to the parties’ obligations
to consummate the Merger will be satisfied and, as a result, the possibility that the
Merger might not be completed. The Board noted that, if the Merger were not completed,
(i) we will have incurred significant risk and transaction and opportunity costs, including
the possibility of disruption to our operations, diversion of management and employee
attention, employee attrition and a potentially negative effect on our business and customer
relationships, (ii) depending on the circumstances that caused the Merger not to be completed,
it is likely that the price of Frisch’s Common Stock will decline significantly
and (iii) the market’s perception of our prospects could be adversely affected. |
| • | Regulatory
risk. The Board considered the risk that necessary regulatory approvals, if any,
may be delayed, conditioned or denied. |
| • | Financing
risk. The Board considered the risk that, while the Merger Agreement is not by
its terms subject to a financing condition, if Holding fails to deliver sufficient funds,
the Merger may not be consummated and Frisch’s remedies in such event may not be
sufficient to compensate us for all of the potential losses we may incur under such circumstances. |
| • | Strategic
alternatives. The Board considered the possible strategic alternatives to the
Merger (including potential alternative Acquisition Proposals and the possibility of
remaining independent), the potential values and benefits facing Frisch’s shareholders
associated with such alternatives and the timing and likelihood of accomplishing such
alternatives. |
| • | Restrictions
on the operation of our business. The Board considered the restrictions on the
conduct of our business prior to the completion of the Merger, which could delay or prevent
us from realizing certain business opportunities or taking certain actions with respect
to our operations we would otherwise take absent the pending Merger. |
| • | Non-solicitation
provision. The Board considered the fact that the Merger Agreement precludes
us from actively soliciting alternative proposals. |
| • | Termination
fees. The Board considered the possibility that the termination fee payable to
Holding if the Merger Agreement is terminated under certain circumstances might have
the effect of discouraging alternative Acquisition Proposals or reducing the price of
such proposals. |
| • | Tax
treatment. The Board considered the fact that an all cash transaction would be
taxable to Frisch’s shareholders that are U.S. holders for U.S. federal income
tax purposes. |
| • | Interests
of officers and directors. The Board considered the fact that our executive officers
and directors may have interests in the transaction that are different from, or in addition
to, those of our shareholders. These interests are more fully described in the subsection
titled “ — Interests of Frisch’s Directors and Executive Officers in
the Merger” beginning on page __. |
| • | Risk
factors. The Board considered other risks and uncertainties as described above
under “Cautionary Statement Regarding Forward-Looking Statements.” |
While
the Board considered potentially positive and potentially negative factors, the Board concluded that, overall, the potentially
positive factors outweighed the potentially negative factors. Accordingly, the Board unanimously determined the Merger Agreement
to be fair, advisable and in the best interests of Frisch’s and the shareholders.
The
foregoing discussion is not intended to be an exhaustive list of the information and factors considered by the Board in its consideration
of the Merger, but is merely a summary of the material positive factors and material negative factors considered by the Board
in that regard. In view of the number and variety of factors and the amount of information considered, the Board did not find
it practicable to, and did not make specific assessments of, quantify or otherwise assign relative weights to, the specific factors
considered in reaching its determination. In addition, the Board did not undertake to make any specific determination as to whether
any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, and
individual members of the Board may have given different weights to different factors. Based on the totality of the information
presented, the Board collectively reached the unanimous decision to adopt, approve and authorize the execution and delivery of
the Merger Agreement and the consummation of the Merger and other transactions contemplated thereby in light of the factors described
above and other factors that the members of the Board felt were appropriate.
This
explanation of Frisch’s reasons for the Merger and other information presented in this section is forward-looking in nature
and, therefore, should be read in light of the section titled “Cautionary Statement Regarding Forward-Looking Statements.”
Opinion
of Raymond James
Frisch’s
retained Raymond James as financial advisor on April 16, 2014. Pursuant to that engagement, the Board requested that Raymond James
evaluate the fairness, from a financial point of view, to the holders of Frisch’s Common Stock (other than the Excluded
Persons) of the Merger Consideration to be received by such holders pursuant to the Merger Agreement.
At
the May 21, 2015 special meeting of the Board, representatives of Raymond James rendered its oral opinion, which was subsequently
confirmed by delivery of the Opinion to the Board as to whether, as of such date, the Merger Consideration to be received by the
holders of the Frisch’s Common Stock (other than the Excluded Persons) in the Merger pursuant to the Agreement was fair
from a financial point of view to such holders, based upon and subject to the qualifications, limitations, assumptions and other
matters considered in connection with the preparation of its opinion.
The
full text of the Opinion is attached as Annex B to this proxy statement. The summary of the Opinion set forth in this document
is qualified in its entirety by reference to the full text of such written Opinion. Holders of Frisch’s Common Stock are
urged to read the Opinion in its entirety.
Raymond
James provided its Opinion for the information of the Board (solely in its capacity as such) in connection with, and for purposes
of, its consideration of the Merger and its Opinion only addresses whether the Merger Consideration to be received by the holders
of Frisch’s Common Stock (other than the Excluded Persons) in the Merger pursuant to the Merger Agreement was fair, from
a financial point of view, to such holders. The Opinion did not address any other term or aspect of the Merger Agreement or the
Merger contemplated thereby nor did it express any opinion as to the impact of the matters referenced in Note I, as to which Raymond
James understood that Frisch’s conducted such diligence and other investigations, and obtained such advice from qualified
professionals, as it deemed necessary. The Opinion did not constitute a recommendation to the Board or to any holder of Frisch’s
Common Stock as to how the Board, such stockholder or any other person should vote or otherwise act with respect to the Merger
or any other matter.
In
connection with its review of the proposed Merger and the preparation of its Opinion, Raymond James, among other things:
| · | reviewed
the financial terms and conditions as stated in (i) the draft dated May 19, 2015 of the
Merger Agreement (the “Draft Agreement”) and (ii) the draft dated May 18,
2015 of the Guarantee by and between Frisch’s and the Fund (the “Draft Guarantee”,
and together with the Draft Agreement, the “Draft Transaction Documents”); |
| · | reviewed
certain information related to the historical, current and future operations, financial
condition and prospects of Frisch’s made available to Raymond James by Frisch’s,
including, but not limited to, financial projections prepared by the management of Frisch’s
relating to Frisch’s for the fiscal periods ending June 2, 2015 through May 29,
2018, as approved for Raymond James’ use by Frisch’s which we refer to in
this section as the “Projections”; |
| · | reviewed
Frisch’s recent public filings and certain other publicly available information
regarding Frisch’s; |
| · | reviewed
financial, operating and other information regarding Frisch’s and the industry
in which it operates; |
| · | reviewed
the financial and operating performance of Frisch’s and those of other selected
public companies that Raymond James deemed to be relevant; |
| · | considered
the publicly available financial terms of certain transactions that Raymond James deemed
to be relevant; |
| · | reviewed
the then-current and historical market prices for Frisch’s Common Stock, and the
then-current market prices of the publicly traded securities of certain other companies
that Raymond James deemed to be relevant; |
| · | conducted
such other financial studies, analyses and inquiries and considered such other information
and factors, as Raymond James deemed appropriate; |
| · | reviewed
a certificate addressed to Raymond James from a member of senior management of Frisch’s
regarding, among other things, the accuracy of the information, data and other materials
(financial or otherwise) provided to, or discussed with, Raymond James by or on behalf
of Frisch’s (the “Certificate”); and |
| · | discussed
with members of the senior management of Frisch’s certain information relating
to the aforementioned and any other matters which Raymond James deemed relevant to its
inquiry. |
With
the Board’s consent and in accordance with the representations set forth in the Certificate, Raymond James assumed and relied
upon the accuracy and completeness of all information supplied by or on behalf of Frisch’s or otherwise reviewed by or discussed
with Raymond James, and Raymond James did not undertake any duty or responsibility to, nor did Raymond James, independently verify
any of such information. Raymond James did not make or obtain an independent appraisal of the assets or liabilities (contingent
or otherwise) of Frisch’s. With respect to the Projections and any other information and data provided to or otherwise reviewed
by or discussed with Raymond James, Raymond James, with the Board’s consent, assumed that the Projections and such other
information and data were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments
of management of Frisch’s and Raymond James relied upon Frisch’s to advise Raymond James promptly if any information
previously provided became inaccurate or was required to be updated during the period of its review. Raymond James expressed no
opinion with respect to the Projections or the assumptions on which they were based. Raymond James assumed that the final form
of each of the Guarantee and the Merger Agreement would be substantially similar to the draft of each such document reviewed by
Raymond James, and that the Merger would be consummated in accordance with the terms of the Draft Transaction Documents without
waiver or amendment of any conditions thereto. Furthermore, Raymond James assumed, in all respects material to its analysis, that
the representations and warranties of each party contained in the Draft Transaction Documents were true and correct and that each
party would perform all of the covenants and agreements required to be performed by it under the Draft Transaction Documents without
being waived. Raymond James also relied upon and assumed, without independent verification, that (i) the Merger would be consummated
in a manner that complies in all respects with all applicable international, federal and state statutes, rules and regulations,
and (ii) all governmental, regulatory, and other consents and approvals necessary for the consummation of the Merger would be
obtained and that no delay, limitations, restrictions or conditions would be imposed or amendments, modifications or waivers made
that would have an effect on the Merger or Frisch’s that would be material to its analyses or Opinion. Raymond James did
not express any opinion as to the impact of the matters referenced in Note I, as to which Raymond James understood that Frisch’s
conducted such diligence and other investigations, and obtained such advice from qualified professionals, as it deemed necessary.
Raymond James assumed, with the Board’s consent, that nothing that may arise from the matters underlying Note I would have
a material effect on Raymond James’ analyses or its Opinion.
Raymond
James expressed no opinion as to the underlying business decision to effect the Merger, the structure or tax consequences of the
Merger, or the availability or advisability of any alternatives to the Merger. Raymond James provided advice to Frisch’s
with respect to the proposed Merger. Raymond James did not, however, recommend any specific amount of consideration or that any
specific consideration constituted the only appropriate consideration for the Merger. The Opinion is limited to the fairness,
from a financial point of view, of the Merger Consideration to be received by the holders (other than the Excluded Persons) of
Frisch’s Common Stock.
Raymond
James expressed no opinion with respect to any other reasons (legal, business, or otherwise) that may support the decision of
the Board to approve or consummate the Merger. Furthermore, no opinion, counsel or interpretation was intended by Raymond James
on matters that require legal, accounting or tax advice. Raymond James assumed that such opinions, counsel or interpretations
had been or would be obtained from appropriate professional sources. Furthermore, Raymond James relied, with the consent of Frisch’s,
on the fact that Frisch’s was assisted by legal, accounting and tax advisors, and, with the consent of Frisch’s relied
upon and assumed the accuracy and completeness of the assessments by Frisch’s and its advisors, as to all legal, accounting
and tax matters with respect to Frisch’s and the Merger.
In
formulating its opinion, Raymond James considered only what it understood to be the consideration to be received by the holders
of Frisch’s Common Stock as is described above, and Raymond James did not consider and expressed no opinion on the fairness
of the amount or nature of any compensation to be paid or payable to any of the Frisch’s officers, directors or employees,
or such class of persons, whether relative to the compensation received by the holders of the Frisch’s Common Stock or otherwise.
Raymond James was not requested to opine as to, and its Opinion did not express an opinion as to or otherwise address, among other
things: (1) the fairness of the Merger to the holders of any class of securities, creditors or other constituencies of Frisch’s,
or to any other party, except and only to the extent expressly set forth in the last sentence of its opinion or (2) the fairness
of the Merger to any one class or group of Frisch’s or any other party’s security holders or other constituents vis-à-vis
any other class or group of Frisch’s or such other party’s security holders or other constituents (including, without
limitation, the allocation of any consideration to be received in the Merger amongst or within such classes or groups of security
holders or other constituents). Raymond James expressed no opinion as to the impact of the Merger on the solvency or viability
of Frisch’s or Holding or the ability of Frisch’s or Holding to pay their respective obligations when they come due.
Material Financial
Analyses
The
following summarizes the material financial analyses reviewed by Raymond James with the Board at its special meeting on May 21,
2015, which material was considered by Raymond James in rendering its opinion. No company or transaction used in the analyses
described below is identical or directly comparable to Frisch’s or the contemplated Merger.
Selected
Companies Analysis. Raymond James reviewed and compared certain financial information relating to Frisch’s to corresponding
information for a selected group of eight U.S. headquartered publicly-traded companies in the restaurant industry. Although none
of the selected companies was identical or directly comparable to Frisch’s, the companies listed were selected because they
are publicly-traded companies, had market capitalizations below $500 million and were of comparable size to Frisch’s based
on corresponding financial information and ratios. The group of selected companies excluded high unit growth companies and companies
that are predominately franchised. Raymond James deemed the following companies to be relevant to Frisch’s:
| • | Carrols
Restaurant Group, Inc. |
| • | Bravo
Brio Restaurant Group, Inc. |
| • | Ignite
Restaurant Group, Inc. |
| • | Diversified
Restaurant Holdings, Inc. |
| • | Flanigan’s
Enterprises Inc. |
Raymond
James calculated various financial multiples for each company, including (i) enterprise value (market value plus the sum of total
outstanding third-party debt, capital leases and underfunded pension obligations less cash and cash equivalents) compared to both
revenue and earnings before interest, taxes, depreciation and amortization, or EBITDA, for the twelve months results ended April
7, 2015, in the case of Frisch’s, or as of the most recent publicly reported twelve months in the case of the selected companies,
referred to as LTM, as well as to Wall Street research analysts’ projected revenue and EBITDA for the selected companies
for the next twelve months results, referred to as NTM, (ii) adjusted enterprise value (enterprise value plus debt equivalent
of real estate operating leases capitalized at eight times rent expense) compared to the LTM EBITDAR (EBITDA plus rent expense)
results and (iii) equity value per share compared to earnings per share, using the LTM results as well as Wall Street estimates
for the selected companies for the NTM period. Raymond James considered EBITDA and EBITDAR results on an adjusted basis to eliminate
the impact of non-recurring, non-operating or non-cash items, including, but not limited to, stock-based compensation and other
non-recurring charges. The estimates published by Wall Street research analysts were not prepared in connection with the Merger
or at the request of Raymond James and may or may not prove to be accurate. Raymond James reviewed the mean, median, minimum and
maximum relative valuation multiples of the selected public companies and compared them to corresponding valuation multiples for
Frisch’s implied by the Merger Consideration. The results of the selected public companies analysis are summarized below:
| |
Enterprise
Value / Revenue | | |
Enterprise
Value / Adjusted EBITDA | | |
Adjusted
Enterprise Value / Adjusted EBITDAR | | |
Price/
Earnings | |
| |
LTM | | |
NTM | | |
LTM | | |
NTM | | |
LTM | | |
LTM | |
Mean | |
| 0.6 | x | |
| 0.6 | x | |
| 9.2 | x | |
| 8.7 | x | |
| 8.7 | x | |
| 15.6 | x |
Median | |
| 0.6 | x | |
| 0.5 | x | |
| 7.5 | x | |
| 8.9 | x | |
| 7.8 | x | |
| 16.6 | x |
Minimum | |
| 0.5 | x | |
| 0.5 | x | |
| 6.9 | x | |
| 7.7 | x | |
| 7.3 | x | |
| 11.4 | x |
Maximum | |
| 0.7 | x | |
| 0.7 | x | |
| 12.9 | x | |
| 9.4 | x | |
| 11.5 | x | |
| 18.8 | x |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Merger Consideration | |
| 0.8 | x | |
| 0.8 | x | |
| 6.8 | x | |
| 6.4 | x | |
| 6.8 | x | |
| 16.9 | x |
Furthermore,
Raymond James applied the mean, median, minimum and maximum relative valuation multiples for each of the metrics to Frisch’s
actual and projected financial results and determined the implied equity price per share of Frisch’s Common Stock and then
compared those implied equity values per share to the Merger Consideration of $34.00 per share. The results of this are summarized
below:
| |
Enterprise
Value / Revenue | | |
Enterprise
Value / Adjusted EBITDA | | |
Adjusted
Enterprise Value / Adjusted EBITDAR | | |
Price/ Earnings | |
| |
LTM | | |
NTM | | |
LTM | | |
NTM | | |
LTM | | |
LTM | |
Mean | |
$ | 25.41 | | |
$ | 23.87 | | |
$ | 46.07 | | |
$ | 45.87 | | |
$ | 45.33 | | |
$ | 31.36 | |
Median | |
$ | 26.39 | | |
$ | 23.12 | | |
$ | 37.58 | | |
$ | 46.91 | | |
$ | 40.75 | | |
$ | 33.46 | |
Minimum | |
$ | 21.31 | | |
$ | 20.88 | | |
$ | 34.77 | | |
$ | 40.75 | | |
$ | 38.10 | | |
$ | 22.90 | |
Maximum | |
$ | 29.60 | | |
$ | 28.55 | | |
$ | 64.53 | | |
$ | 49.37 | | |
$ | 60.07 | | |
$ | 37.72 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Merger Consideration | |
$ | 34.00 | | |
$ | 34.00 | | |
$ | 34.00 | | |
$ | 34.00 | | |
$ | 34.00 | | |
$ | 34.00 | |
Selected
Transaction Analysis. Raymond James analyzed publicly available information relating to nine acquisitions of U.S. headquartered
publicly-traded companies in the restaurant industry. Although none of the selected target companies is identical or directly
comparable to Frisch’s, the target companies listed were selected because they were publicly-traded companies, the transactions
had an enterprise value between $25 million and $500 million and the transactions were announced since January 1, 2010. Raymond
James prepared a summary of the relative valuation multiples paid in these transactions. The selected transactions used in the
analysis included:
| • | JAB
Holdings Company acquired Einstein Noah Restaurant Group, Inc. announced September 2014 |
| • | Apex
Restaurant Management, Inc. acquired Morgan’s Foods Inc. announced March 2014 |
| • | Fidelity
National Financial, Inc. acquired J. Alexander’s Corporation announced June 2012 |
| • | Angelo,
Gordon & Co. acquired Benihana Inc. announced May 2012 |
| • | Fidelity
National Financial, Inc. acquired O’Charley’s Inc. announced February 2012 |
| • | Landry’s,
Inc. acquired Morton’s Restaurant Group, Inc. announced December 2011 |
| • | Landry’s,
Inc. acquired McCormick & Schmick’s Seafood Restaurants, Inc. announced November
2011 |
| • | Golden
Gate Capital acquired California Pizza Kitchen, Inc. announced May 2011 |
| • | Mill
Road Capital acquired Rubio’s Restaurants, Inc. announced May 2010 |
Raymond
James examined valuation multiples of transaction enterprise value compared to the target companies’ revenue and EBITDA
on an adjusted basis to eliminate the impact of non-recurring, non-operating or non-cash items, including, but not limited to,
stock-based compensation and other non-recurring charges and adjusted enterprise value compared to the target companies’
EBITDAR, in each case for twelve months ended prior to announcement of the transaction, where such information was publicly available.
Raymond James reviewed the mean, median, minimum and maximum relative valuation multiples of the selected transactions and compared
them to corresponding valuation multiples for Frisch’s implied by the Merger Consideration. Furthermore, Raymond James applied
the mean, median, minimum and maximum relative valuation multiples to Frisch’s actual LTM revenue, EBITDA or EBITDAR to
determine the implied equity price per share and then compared those implied equity values per share to the Merger Consideration
of $34.00 per share. The results of the selected transactions analysis are summarized below:
| |
Enterprise Value/LTM | | |
Implied
Equity Price | |
| |
Revenue | | |
Per Share | |
Mean | |
| 0.6 | x | |
$ | 24.03 | |
Median | |
| 0.6 | x | |
| 24.61 | |
Minimum | |
| 0.2 | x | |
| 10.47 | |
Maximum | |
| 1.1 | x | |
| 44.29 | |
| |
| | | |
| | |
Merger Consideration | |
| 0.8 | x | |
$ | 34.00 | |
| |
Enterprise Value/LTM | | |
Implied
Equity Price | |
| |
Adjusted
EBITDA | | |
Per Share | |
Mean | |
| 7.5 | x | |
$ | 37.90 | |
Median | |
| 7.0 | x | |
| 34.97 | |
Minimum | |
| 6.1 | x | |
| 30.91 | |
Maximum | |
| 9.5 | x | |
| 47.44 | |
| |
| | | |
| | |
Merger Consideration | |
| 6.8 | x | |
$ | 34.00 | |
| |
Adjusted Enterprise Value/LTM | | |
Implied
Equity Price | |
| |
Adjusted
EBITDAR | | |
Per Share | |
Mean | |
| 7.8 | x | |
$ | 40.99 | |
Median | |
| 7.6 | x | |
| 39.57 | |
Minimum | |
| 7.1 | x | |
| 37.36 | |
Maximum | |
| 9.0 | x | |
| 47.04 | |
| |
| | | |
| | |
Merger Consideration | |
| 6.8 | x | |
$ | 34.00 | |
Discounted
Cash Flow Analysis. Raymond James performed a discounted cash flow analysis of Frisch’s to calculate the estimated present
value of the standalone, unlevered, after-tax free cash flows that Frisch’s was forecasted to generate during the period
of the Projections. Raymond James used unleveraged free cash flows, defined as earnings before interest, after taxes, plus depreciation,
plus amortization, less pre-opening expense, less capital expenditures, less investment in working capital.
The
discounted cash flow analysis was based on the Projections as provided by Frisch’s management. Consistent with the periods
included in the Projections, Raymond James used fiscal year 2018 as the final year for the analysis and applied terminal multiples,
ranging from 6.0x to 8.0x, to fiscal year 2018 EBITDA in order to derive a range of terminal values for Frisch’s in fiscal
year 2018.
The
projected unleveraged free cash flows and terminal values were discounted using rates ranging from 11.1 percent to 13.1 percent,
which reflected the weighted average after-tax cost of debt and equity capital associated with executing Frisch’s business
plan. The resulting range of present enterprise values was adjusted by Frisch’s current capitalization and divided by the
number of diluted shares outstanding in order to arrive at a range of present values per Frisch’s share. Raymond James reviewed
the range of per share prices derived in the discounted cash flow analysis and compared them to the price per share for Frisch’s
implied by the Merger Consideration. The results of the discounted cash flow analysis are summarized below:
| |
Equity
Value/ Per Share | |
Minimum | |
$ | 27.92 | |
Maximum | |
$ | 37.48 | |
| |
| | |
Merger Consideration | |
$ | 34.00 | |
Additional
Considerations. The preparation of a fairness opinion is a complex process and is not susceptible to a partial analysis or
summary description. Raymond James believes that its analyses must be considered as a whole and that selecting portions of its
analyses, without considering the analyses taken as a whole, would create an incomplete view of the process underlying its opinion.
In addition, Raymond James considered the results of all such analyses and did not assign relative weights to any of the analyses,
but rather made qualitative judgments as to significance and relevance of each analysis and factor, so the ranges of valuations
resulting from any particular analysis described above should not be taken to be the view of Raymond James as to the actual value
of Frisch’s.
In
performing its analyses, Raymond James made numerous assumptions with respect to industry performance, general business, economic
and regulatory conditions and other matters, many of which are beyond the control of Frisch’s. The analyses performed by
Raymond James are not necessarily indicative of actual values, trading values or actual future results which might be achieved,
all of which may be significantly more or less favorable than suggested by such analyses. Such analyses were provided to the Board
(solely in its capacity as such) and were prepared solely as part of the analysis of Raymond James of the fairness, from a financial
point of view, to the holders of Frisch’s Common Stock (other than Excluded Persons) of the Merger Consideration to be received
by such holders in connection with the proposed Merger pursuant to the Merger Agreement. The analyses do not purport to be appraisals
or to reflect the prices at which companies may actually be sold, and such estimates are inherently subject to uncertainty. The
Opinion was one of many factors taken into account by the Board in making its determination to approve the Merger. Neither the
Opinion nor the analyses described above should be viewed as determinative of the Board’s or Frisch’s management’s
views with respect to Frisch’s, Holding or the Merger. Raymond James provided advice to Frisch’s with respect to the
proposed Merger. Raymond James did not, however, recommend any specific amount of consideration to the Board or that any specific
Merger Consideration constituted the only appropriate consideration for the Merger. Frisch’s placed no limits on the scope
of the analysis performed, or opinion expressed, by Raymond James.
The
Opinion was based upon market, economic, financial and other circumstances and conditions existing and disclosed to Raymond James
on May 19, 2015, and any material change in such circumstances and conditions would require a reevaluation of the Opinion, which
it was under no obligation to undertake. Raymond James relied upon and assumed, without independent verification, that there had
been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of Frisch’s
since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to
Raymond James that would be material to its analyses or its Opinion, and that there was no information or any facts that would
make any of the information reviewed by Raymond James incomplete or misleading in any material respect.
Raymond
James has provided certain strategic advisory services to Frisch’s (in the previous two years) for which it has been paid
approximately $100,000 in fees (separately from any amounts that were paid to Raymond James under the April 16, 2014 engagement
letter described in this proxy statement pursuant to which Raymond James was retained as a financial advisor to Frisch’s
to assist in reviewing strategic alternatives).
For
services rendered in connection with the delivery of its Opinion, Frisch’s paid Raymond James a fee of $250,000 upon delivery
of its Opinion, which fee was not contingent upon the successful completion of the Merger or the conclusion reached within Raymond
James’ opinion. Frisch’s will pay Raymond James a fee of approximately $2,900,000 for advisory services in connection
with the Merger, of which (after crediting the $100,000 fee referred to above) approximately $2,800,000 is contingent upon the
closing of the Merger. In addition, Frisch’s also agreed to reimburse certain of Raymond James’ expenses and to indemnify
Raymond James against certain liabilities arising out of its engagement.
Raymond
James is actively involved in the investment banking business and regularly undertakes the valuation of investment securities
in connection with public offerings, private placements, business combinations and similar transactions. In the ordinary course
of business, Raymond James may trade in the securities of Frisch’s for its own account and for the accounts of its customers
and, accordingly, may at any time hold a long or short position in such securities. Furthermore, Raymond James may provide investment
banking, financial advisory and other financial services to Frisch’s, Holding, Merger Sub or other participants in the Merger
in the future, for which Raymond James may receive compensation.
Certain
Financial Projections
Frisch’s
provided certain non-public financial information to Raymond James in its capacity as its financial advisor, including projections
by management of Frisch’s standalone financial performance for fiscal years 2015 through 2018. These financial projections
represent management’s reasonable estimates and good faith judgments as to the future growth and financial performance of
the Company, including forecasts of total revenue, EBITDA, working capital, capital expenditures and the effective tax rate. These
financial projections were used by Raymond James in performing certain of the analyses described in the section titled “
— Opinion of Raymond James”. These financial projections were also provided to Holding.
The
financial projections were not prepared with a view to public disclosure. The financial projections included in this proxy statement
have been prepared by, and are the responsibility of, Frisch’s management. The financial projections were prepared solely
for internal use of Frisch’s and are subjective in many respects. Although a summary of the financial projections is presented
with numerical specificity, they reflect numerous assumptions and estimates as to future events made by our management that our
management believed were reasonable at the time the financial projections were prepared, taking into account the relevant information
available to management at the time. However, this information is not fact and should not be relied upon as being necessarily
indicative of actual future results. In addition, the financial projections do not take into account any circumstances or events
occurring after the date that they were prepared and do not give effect to the Merger. As a result, there can be no assurance
that the financial projections will be realized, and actual results may be materially better or worse than those contained in
the financial projections. The inclusion of this information should not be regarded as an indication that the Board, Frisch’s,
Raymond James or any other recipient of this information considered, or now considers, the forecasts to be predictive of actual
future results.
The
financial projections are forward-looking statements. For information on factors that may cause Frisch’s future results
to materially vary or the financial projections not to be achieved, see "Cautionary Statement Concerning Forward-Looking
Information," below.
A
summary of these financial projections is set forth below.
Financial Projections
($ in thousands)
Projected Fiscal
Year (1)
| |
2015
(2) | | |
2016 | | |
2017 | | |
2018 | |
Total Revenue | |
$ | 212,067 | | |
$ | 217,553 | | |
$ | 226,160 | | |
$ | 237,949 | |
EBITDA (3)(4) | |
$ | 25,666 | | |
$ | 27,022 | | |
$ | 27,701 | | |
$ | 28,750 | |
| (1) | Frisch’s
fiscal year consists of 52 or 53 weeks and ends on the Tuesday nearest to end of May. |
| (2) | This column
contains projections provided earlier in the negotiation process and does not reflect
actual fiscal 2015 results. |
| (3) | EBITDA represents
earnings before interest, taxes, depreciation, amortization and non-recurring expenses. |
| (4) | EBITDA is
a non-Generally Accepted Accounting Principles (“GAAP”) financial measure.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute
for, financial information presented in compliance with GAAP. |
Interests
of Frisch’s Directors and Executive Officers in the Merger
In
considering the recommendation of the Board that you vote to approve the Merger Proposal, you should be aware that, aside from
their interests as Frisch’s shareholders, Frisch’s directors and executive officers have interests in the Merger that
are different from, or in addition to, the interests of Frisch’s shareholders generally.
With
regard to our directors serving on the Board, areas where their interests may differ from those of other Frisch’s shareholders
relate to the impact of the transaction on the directors’ outstanding equity awards, deferred fee arrangements and the provision
of indemnification and insurance arrangements pursuant to the Merger Agreement and Frisch’s articles of incorporation and
bylaws, which reflect the fact that such directors may be subject to claims arising from their service on the Board.
Our
executive officers, Craig F. Maier, Mark R. Lanning, Michael E. Conner, Michael R. Everett, and Karen F. Maier (the “Named
Executive Officers”), may have interests that differ from or are in addition to those of our shareholders due to their potential
receipt of the following payments and benefits that may be triggered by or otherwise relate to the Merger:
| • | accelerated
cash payment of incentive bonuses at the Effective Time of the Merger that were previously
approved under either the Employment Agreement Extension with Craig F. Maier or as part
of the Senior Executive Bonus Plan; |
| • | accelerated
vesting of the restricted shares held by the executive officers; and |
| • | the
right to continued indemnification and insurance coverage pursuant to the Merger Agreement. |
These interests
are described in more detail below, and certain of them are quantified in the tables below in accordance with applicable SEC rules.
Incentive Bonus
Payments
Pursuant
to Craig F. Maier’s Employment Agreement Extension, effective June 3, 2015, Mr. Maier is entitled to receive a cash bonus
payment upon the closing of the Merger based upon the Pre-tax performance of the Company for the fiscal 2016 measurement period
prior to the closing of the Merger. The incentive compensation is equal to (a) 1.5 percent of the Company’s pre-tax earnings,
if in such measurement period pre-tax earnings equal or exceeds 4 percent (but are less than 5 percent) of the Company’s
total revenue, and (b) an additional 1 percent of the Company’s pre-tax earnings is added (a total of 2.5 percent of the
Company’s pre-tax earnings) if in such measurement period the Company’s pre-tax earnings are equal to or exceed 5
percent of the Company’s total revenue. However, the incentive compensation is reduced, if necessary, the extent that the
accrual of the incentive compensation would reduce pre-tax earnings below 4 percent of the Company’s total revenue.
In
addition, Mr. Maier is to receive a percentage of his base pay as a lump-sum payment in lieu of a contribution to the Trust established
for the Chief Executive Officer under the Nondeferred Cash Balance Plan for the fiscal 2016 measurement period prior to the closing
of the Merger if the Company’s pre-tax earnings equal or exceed 4 percent of its total revenue, based upon the following
schedule:
Pre-Tax
Earnings as a Percentage of Total Revenue
| |
Contribution
to the Plan as a Percentage of Salary | |
At least 4%, but less than 5% | |
| 18 | % |
At least 5%, but less than 6% | |
| 37 | % |
At least 6% | |
| 55 | % |
In
conjunction with the entering into the Merger Agreement on May 21, 2015, the Board approved the extension of the Senior Executive
Bonus Plan to cover the measurement period in Fiscal 2016 through the closing of the Merger. Under the Bonus Plan, the Chief Financial
Officer and other non-operations senior executives are eligible to earn incentive bonuses of up to 40 percent of their pro-rated
annual base salary. However, no incentive bonuses are paid unless pre-tax earnings of the Company are at least 4 percent of total
revenue.
The
calculation of compensation based on the Senior Executive Bonus Plan is based on the following table:
Pre-Tax
Earnings as a Percentage of Total Revenue | |
Contribution
to the Plan as a Percentage of Salary | |
4 – 4.9% | |
| 10 | % |
5 – 5.9% | |
| 20 | % |
6 – 6.9% | |
| 30 | % |
7% or over | |
| 40 | % |
Assuming
the Chief Financial Officer and other non-operations senior executives earned the maximum under this Plan and assuming a measurement
period ended July 28, 2015, the Senior Executive Bonus Plan compensation for the other Named Executive Officers, except for Mr.
Maier, would be as follows:
Incentive Bonuses
for Named Executive Officers
Name | |
Incentive
Bonus ($) | |
Mark R. Lanning | |
$ | 14,923 | |
Michael E. Conner | |
$ | 11,142 | |
Michael R. Everett | |
$ | 11,189 | |
Karen F. Maier | |
$ | 11,058 | |
TOTAL | |
$ | 48,312 | |
Treatment of Executive
Officer and Director Equity and Equity-Based Awards
As
described under “The Merger Agreement — Treatment of Frisch’s Equity Awards”, each option to purchase
Frisch’s Common Stock, each outstanding share of Frisch’s Common Stock subject to time-based vesting or lapse restrictions
and all stock units held by non-employee directors will be treated as set forth below.
Treatment
of Stock Options
The Merger
Agreement provides that at the Effective Time of the Merger, each option to purchase Frisch’s Common Stock, whether vested
or unvested, that is outstanding and unexercised as of the Effective Time will be canceled and the holder thereof will be entitled
to receive an amount in cash, without interest and less any applicable withholding taxes, equal to (i) the number of shares subject
to such option, multiplied by (ii) the excess, if any, of $34.00 over the exercise price of the option. Payments with respect
to options to purchase Frisch’s Common Stock canceled under the Merger Agreement will be made as soon as reasonably practicable
following the Effective Time. With the exception of Mr. Conner and Ms. Maier (each owning 1,750 options as of the close date),
none of our other Named Executive Officers currently holds any outstanding stock options. The number of outstanding stock options,
as of July 28, 2015, held by our directors is shown in the table below:
Outstanding
Stock Options Held by Directors
Director | |
Stock
Options | |
Dale P. Brown | |
| - | |
Daniel W. Geeding | |
| 10,000 | |
Robert J. Dourney | |
| - | |
Lorrence T. Kellar | |
| - | |
William J. Reik, Jr. | |
| 13,000 | |
Jerome P. Montopoli | |
| 9,000 | |
Donald H. Walker | |
| - | |
Treatment
of Restricted Stock (granted to Board members and the Chief Executive Officer)
The Merger
Agreement provides that immediately before the Effective Time each outstanding share of Frisch’s Common Stock subject to
time-based vesting conditions (“Restricted Stock”) under any stock or incentive plan of Frisch’s will fully
vest such that each holder of shares of Restricted Stock will become 100 percent vested in all such shares and will receive the
Merger Consideration of $34.00 for each share of previously issued Restricted Stock.
Indemnification
and Insurance
After
the Effective Time of the Merger, Frisch’s will indemnify our and our Subsidiaries’ present and former directors and
officers for any claims arising out of the fact that such individuals served in such capacities at or before the Effective Time
of the Merger, to the fullest extent permitted by law. In addition, following the Effective Time of the Merger, the Surviving
Corporation will maintain in effect provisions providing rights to indemnification, exculpation from liability and advancement
of expenses to such individuals in the Surviving Corporation’s organizational documents and not amend or repeal such terms
in any manner that would adversely affect the rights of the individuals covered by such provisions.
For
six years following the Effective Time of the Merger, Holding will cause the present directors and executive officers be covered
under Frisch’s existing directors’ and officers’ liability insurance policies, or other coverage that is no
less favorable, covering any claims arising with respect to acts or omissions occurring before the Effective Time of the Merger.
The Merger Agreement also provides that, at or prior to the Effective Time, we may purchase a directors’ and officers’
liability “tail” insurance policy on the same terms and conditions as the existing directors’ and officers’
liability (and fiduciary) insurance maintained by us, in an amount not to exceed 200 percent of the annual premiums of the current
policies maintained by us. If purchased, Holding must cause Frisch’s to maintain and honor such policy for its full term.
No Employment
Agreements with Executive Officers or Directors
As
of the date of this proxy statement, other than the arrangements previously discussed, none of our executive officers or directors
has entered into any agreement, arrangement or understanding with Frisch’s or its subsidiaries or with Holding or their
respective affiliates specifically regarding employment with, or the right to participate in the equity of, Frisch’s or
Holding on a going-forward basis following the completion of the Merger, and no member of the Board has entered into any agreement,
arrangement or understanding with Holding or its affiliates regarding the right to participate in the equity of Holding following
the completion of the Merger. However, Holding has publicly stated that it expects Frisch’s to be operated as a subsidiary
of Holding following the Merger and to continue to be led by key members of Frisch’s senior management team, except for
Mr. Maier and Ms. Maier, who will resign. None of the Board members will remain on the Board or become members of the Holding
Board of Directors.
Quantification
of Payments and Benefits to Executive Officers
The
Named Executive Officers of Frisch’s are entitled to receive certain compensation from Frisch’s pursuant to existing
plans and pro-rated to the Effective Time, consisting of incentive bonuses and accelerated vesting of restricted stock that was
granted to Craig F. Maier in October 2014. Under the terms of the Merger Agreement, except for Craig F. Maier and Karen F. Maier,
who will retire at the closing of the Merger, the other Named Executive Officers of Frisch’s who are included in the category
of “Covered Employees” under the Merger Agreement have been granted 180 days of guaranteed continued employment and
benefits with Frisch’s following the Effective Time, subject to the Company’s right to terminate them for Cause, as
defined in the Merger Agreement.
The
following table and related footnotes present information about the potential merger-related payments payable to Frisch’s
named executive officers in connection with the Merger, after giving effect to the Merger assuming it took place on August __,
2015, and assuming all other conditions to the payment of such amounts were satisfied. Certain payments are payable at the Effective
Time, while other payments, such as the severance payments and benefits, are only payable, as permitted under the rules of Internal
Revenue Code Section 409A, upon the executive officer’s qualifying termination of employment in connection with the Merger.
This table does not include the value of benefits which the named executive officers already have a vested right to receive without
regard to the occurrence of the Merger:
Merger-Related
Compensation
Name | |
Cash
($) (1) | | |
Equity
($) (2) | | |
Pension
/ NQDC ($) (3) | | |
Perquisites
/ Benefits ($) (4) | | |
Tax
Reimbursements ($) (5) | | |
Other
($) (6) | | |
Total
($) (7) | |
Craig F. Maier | |
$ | - | | |
$ | 40,000 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 93,121 | | |
$ | 133,121 | |
Mark R. Lanning | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 14,142 | | |
$ | 14,142 | |
Michael E. Conner | |
$ | - | | |
$ | 21,175 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 11,142 | | |
$ | 32,317 | |
Michael R. Everett | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 11,189 | | |
$ | 11,189 | |
Karen F. Maier | |
$ | - | | |
$ | 21,175 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 11,058 | | |
$ | 33,233 | |
| (1) | Cash severance
payment (e.g., base salary, bonus and pro-rata non-equity incentive plan). Pursuant to
the Merger Agreement, both Craig F. Maier and Karen F. Maier have agreed to retire at
the closing of the Merger and are not eligible to receive any severance payments. The
Company does not have Change of Control or written severance agreements with any of its
other Named Executive Officers, but has a practice of granting one week severance payment
and continuation of benefits for each year of service in certain circumstances when employment
is terminated without cause. Any severance payments agreed to during the 180 day period
and related to base pay would be payable over the number of weeks to which the employee
would be entitled to receive benefits. |
| (2) | Dollar value
of the acceleration of a restricted stock award to Craig F. Maier in October 2014 and
the payment of in-the-money fully vested stock option awards in consideration of cancelling
such outstanding stock awards. Mr. Conner and Ms. Maier have fully vested stock options
that would be settled in cash as the difference between the $34.00 offer price and the
exercise price of the option. |
| (3) | Pension
and nonqualified deferred compensation benefit enhancements. |
| (4) | Perquisites
and other personal benefits and health and welfare benefits; non-qualified deferred compensation.
As discussed in footnote (1) above, Frisch’s has an informal practice of providing
employees terminated without cause one week of severance payment and benefits continuation
for each year of service provided to the Company. In addition, executive officers are
provided a supplemental medical reimbursement benefit that reimburses out-of-pocket medical,
dental and vision expenses. This taxable benefit is grossed up and included in the individual’s
income. The benefit is limited to a maximum of 10 percent of the executive’s annual
base salary and incentive compensation and would be pro-rated based upon years of service
provided to Frisch’s. Reimbursement payments to employees would only be made upon
submission of proof of payment. |
| (5) | Tax reimbursements
and benefits. |
| (6) | “Other”
refers to any additional elements not specifically included in other columns of the table.
Pursuant to Craig F. Maier’s Employment Agreement Extension, effective June 3,
2015 and covering the period of time through the closing of the Merger, Mr. Maier is
entitled to receive a lump-sum incentive bonus payment upon the closing of the Merger
based upon the pre-tax performance of Frisch’s. The incentive compensation is equal
to (a) 1.5 percent of Frisch’s pre-tax earnings, if in such measurement period
pre-tax earnings equal or exceeds 4 percent (but are less than 5 percent) of Frisch’s
total revenue, and (b) an additional 1 percent of Frisch’s pre-tax earnings is
added (a total of 2.5 percent of Frisch’s pre-tax earnings) if in such measurement
period Frisch’s pre-tax earnings are equal to or exceed 5 percent of Frisch’s
total revenue. However, the incentive compensation is reduced, if necessary, to the extent
that the accrual of the incentive compensation would reduce pre-tax earnings below 4
percent of Frisch’s total revenue. |
In addition,
Mr. Maier is to receive a percentage of his base pay as a lump-sum payment in lieu of a contribution to the Trust established
for CEO under the Nondeferred Cash Balance Plan for the fiscal 2016 measurement period prior to the closing of the Merger if Frisch’s
pre-tax earnings equal or exceed 4 percent of its total revenue, based upon a predetermined performance schedule that ranges in
earned benefits between 18 percent and 55 percent of Mr. Maier’s base pay. The above table assumes that Mr. Maier has earned
the maximum incentive award under the Employment Agreement.
In combination
with entering into the Merger Agreement, the Board authorized the extension of the previously approved Senior Executive Bonus
Plan for the pro-rated period through the Effective Time.
| (7) | Aggregate
dollar value of the sum of all amounts reported. |
Financing
of the Merger
There is no financing condition to the Merger. Holdings intends to use cash on hand and cash received
from FinCo from the completion of a simultaneous sale-leaseback of certain of Frisch's real estate assets (the "Properties")
to pay the Merger Consideration and Merger-related costs. The sale-leaseback transaction will be with an independent third-party
institutional investor.
In the flow of funds memorandum governing these steps, the sale-leaseback provider will contribute cash proceeds from the sale-leaseback
transaction directly to the Paying Agent and the Fund will contribute cash directly to the Paying Agent, which amounts, when combined,
shall satisfy the Merger Consideration in full. The Surviving Corporation and the sale-leaseback provider will also simultaneously
sign a lease agreement under which the sale-leaseback provider leases the Properties back to Frisch's.
Under the Merger Agreement,
Frisch's must use reasonable efforts to cooperate with Holdings and Merger Sub in connection with obtaining financing, so long
as such cooperation does not unreasonably interfere with Frisch's ongoing operations. See "The Merger Agreement - Financing".
Regulatory
Clearances and Approvals Required for the Merger
No
filing was necessary under the HSR Act. No other regulatory clearance or approval is required.
Delisting
and Deregistration of Frisch’s Common Stock
If
the Merger is completed, the Frisch’s Common Stock currently listed on the NYSE MKT will cease to be listed on the NYSE
MKT and will be deregistered under the Exchange Act.
Appraisal
Rights of Frisch’s Shareholders
The
Merger Agreement provides that any shares of Frisch’s Common Stock held by a shareholder who has demanded and perfected
the demand for appraisal of such holder’s shares of Frisch’s Common Stock pursuant to Sections 1701.84 and 1701.85
of the OGCL and as of the Effective Time of the Merger has not withdrawn or lost the right to such appraisal will not be converted
into or represent the right to receive Merger Consideration and such holder will only be entitled to the rights granted to dissenting
shareholders under applicable provisions of Ohio law; provided, however, that if such holder effectively withdraws or loses the
right to appraisal (through failure to perfect or otherwise), then the holder’s shares will automatically be converted into
and represent only the right to receive the Merger Consideration.
Litigation
Relating to the Merger
[RESERVED]
THE
MERGER AGREEMENT
The
following discussion sets forth the principal terms of the Merger Agreement, a copy of which is attached as Annex A to this proxy
statement and is incorporated by reference herein. The rights and obligations of the parties are governed by the express terms
and conditions of the Merger Agreement and not by this discussion, which is summary by nature. This discussion is not complete
and is qualified in its entirety by reference to the complete text of the Merger Agreement. You are encouraged to read the Merger
Agreement carefully in its entirety, as well as this proxy statement and any documents incorporated by reference herein, before
making any decisions regarding the Merger.
The
Merger Agreement has been included to provide you with information regarding its terms. It is not intended to provide any other
factual information about Frisch’s. The representations and warranties in the Merger Agreement were made only for the purposes
of the Merger Agreement as of the specific dates therein, and were solely for the benefit of the parties to the Merger Agreement.
The representations and warranties contained in the Merger Agreement may be subject to limitations agreed upon by the parties
to the Merger Agreement and are qualified by information in confidential disclosure schedules provided in connection with the
signing of the Merger Agreement. These confidential disclosure schedules contain information that modifies, qualifies and creates
exceptions to the representations and warranties set forth in the Merger Agreement. Moreover, certain representations and warranties
in the Merger Agreement may be subject to a standard of materiality provided for in the Merger Agreement and have been used for
the purpose of allocating risk among the parties, rather than establishing matters of fact. You should not rely on the representations,
warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Frisch’s
or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties
may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in Frisch’s
public disclosures. You should read the representations and warranties in the Merger Agreement and their description in this proxy
statement in conjunction with the other information contained in the reports, statements and filings we publicly file with the
SEC.
The
Merger
Subject
to the terms and conditions of the Merger Agreement and in accordance with Ohio General Corporation Law (the “OGCL”),
at the Effective Time, Merger Sub, a wholly owned subsidiary of Holding created solely for the purpose of engaging in the transactions
contemplated by the Merger Agreement, will merge with and into Frisch’s and Frisch’s will survive the Merger as a
wholly owned subsidiary of Holding.
Closing
and Effectiveness of Merger
The
closing of the Merger shall take place no later than the earlier of (i) the first Tuesday after satisfaction or waiver of the
conditions precedent set forth in the Merger Agreement, or (ii) September 30, 2015. The parties will file articles of Merger with
the Ohio Secretary of State and the Merger will become effective upon such filing (or at such later time as may be agreed to by
the parties and specified in the articles of Merger).
We
expect to complete the Merger during the third quarter of calendar year 2015. However, Frisch’s cannot predict the actual
date on which the Merger will be completed, if at all, because completion is subject to conditions beyond Frisch’s control.
There may be a substantial amount of time between the Special Meeting and the completion of the Merger. We expect to complete
the Merger promptly following the receipt of all required clearances and approvals and the satisfaction or, to the extent permitted,
waiver of the other conditions to the consummation of the Merger. See the sections titled “The Merger Agreement—Conditions
to the Closing of the Merger”.
Articles
of Incorporation and Bylaws
The
articles of incorporation and bylaws of the Surviving Corporation will be amended and restated in their entirety at the Effective
Time in the form agreed to by Frisch’s and Holding until thereafter amended in accordance with the provisions thereof and
as provided by law.
Directors
and Officers of the Surviving Corporation
The
directors and officers of Merger Sub immediately before the Effective Time will be the initial directors and officers of the Surviving
Corporation, respectively. The directors and officers will serve in accordance with the articles of incorporation and bylaws of
the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected
and qualified.
Merger
Consideration
At
the Effective Time, each outstanding share of Frisch’s Common Stock (other than Frisch’s Common Stock held by Holding
or Merger Sub) will be converted into the right to receive $34.00 in cash, without interest and less any applicable withholding
taxes. After the Merger is completed, current holders of Frisch’s Common Stock will have only the right to receive the Merger
Consideration, and will no longer have any rights as holders of Frisch’s Common Stock, including voting or other rights,
and Holding will own 100 percent of the Frisch’s Common Stock.
Exchange
Procedures
At
or before the Effective Time, Holding will deposit in trust to American Stock Transfer & Trust Company, LLC, 6201 15th Avenue,
Brooklyn, New York 11219 (“Paying Agent”) an amount in cash sufficient to pay the Merger Consideration to each holder
of Frisch’s Common Stock. Within five business days after the Effective Time, Holding will instruct Paying Agent to mail
a letter of transmittal and instructions to each holder of record of Frisch’s Common Stock. The letter of transmittal and
instructions will tell Frisch’s shareholders how to surrender their Frisch’s Common Stock certificates or shares that
may be represented by book entry in exchange for payment of the Merger Consideration.
You
should not return your share certificates with the enclosed proxy card, and you should not forward your share certificates to
the Paying Agent without a letter of transmittal.
Registered
shareholders will not receive the Merger Consideration until they surrender their book-entry shares or share certificates to the
Paying Agent, together with a properly completed and signed letter of transmittal and any other documents as may be required by
the letter of transmittal or accompanying instructions. The Merger Consideration will be provided only in accordance with the
procedures set forth in the letter of transmittal.
At
the Effective Time of the Merger, our stock transfer books will be closed, and there will be no further registration of transfers
of outstanding shares of Frisch’s Common Stock.
Treatment
of Frisch’s Equity Awards
Stock
Options. At the Effective Time, Frisch’s will cause each outstanding option, whether vested or unvested, to represent
the right to receive a payment in cash, without interest and less any applicable withholding taxes, equal to the product of the
excess, if any, of the Merger Consideration of $34.00 over the exercise price of the option, multiplied by the number of shares
subject to such option.
Restricted
Shares. At the Effective Time, each outstanding share of Frisch’s common stock subject to time-based vesting or lapse
restrictions under any stock or incentive plan of Frisch’s will fully vest such that each holder thereof will be entitled
to 100 percent of the Frisch’s Common Stock underlying such awards and the holder thereof will receive the Merger Consideration
of $34.00 for each such share.
Appraisal
Rights
If
the Merger Agreement is approved, each Frisch’s shareholder objecting to the Merger Agreement may be entitled to seek relief
as a dissenting shareholder under Sections 1701.84 and 1701.85 of the OGCL. The following is a summary of the principal steps
a shareholder must take to perfect his or her appraisal rights under the OGCL. This summary is qualified by reference to a complete
copy of Sections 1701.84 and 1701.85 of the OGCL, which is attached as Annex C to this proxy statement. Any dissenting shareholder
contemplating exercise of his or her appraisal rights is urged to carefully review the provisions of Sections 1701.84 and 1701.85
and to consult an attorney, since failure to follow fully and precisely the procedural requirements of the statute may result
in termination or waiver of such rights.
To
perfect appraisal rights, a dissenting shareholder must satisfy each of the following conditions and must otherwise comply with
Section 1701.85:
| • | A
dissenting shareholder must be a record holder on ________, 2015 of the Frisch’s
Common Stock as to which such shareholder seeks to exercise appraisal rights. Because
only shareholders of record on the Record Date may exercise appraisal rights, any person
who beneficially owns Frisch’s Common Stock that are held of record by a broker,
fiduciary, nominee or other holder and who desires to exercise appraisal rights must
instruct the record holder of the Frisch’s Common Stock to satisfy all of the requirements
outlined under Section 1701.85. |
| • | A
dissenting shareholder must not vote his or her shares of Frisch’s Common Stock
in favor of the proposal to adopt the Merger Agreement at the Special Meeting. Failing
to vote or abstaining from voting does not waive a dissenting shareholder’s rights.
However, a proxy returned to Frisch’s signed but not marked to specify voting instructions
will be voted in favor of the proposal to adopt the Merger Agreement and will be deemed
a waiver of appraisal rights. A dissenting shareholder may revoke his or her proxy at
any time before it is voted at the Special Meeting by: (i) filing with Frisch’s
an instrument revoking it; (ii) delivering a duly executed proxy bearing a later date;
or (iii) attending and giving notice of the revocation of the proxy at the Special Meeting. |
| • | A
dissenting shareholder must deliver a written demand for payment of the fair value of
his or her shares of Frisch’s Common Stock to Frisch’s on or before the tenth
day following the Special Meeting. Any written demand must specify the shareholder’s
name and address, the number and class of shares held on the Record Date, and the amount
claimed as the “fair cash value” of the Frisch’s Common Stock. Frisch’s
will not notify shareholders of the expiration of this ten-day period. |
| • | If
Frisch’s so requests, a dissenting shareholder must submit his or her Frisch’s
Common Stock certificates to Frisch’s within fifteen days of such request for endorsement
thereon by Frisch’s that demand for appraisal has been made. Such a request is
not an admission by Frisch’s that a dissenting shareholder is entitled to relief.
Frisch’s will promptly return the share certificates to the dissenting shareholder.
At the option of Frisch’s, a dissenting shareholder who fails to deliver his or
her certificate upon request from Frisch’s may have his or her appraisal rights
terminated, unless a court otherwise directs for good cause shown. |
Frisch’s
and a dissenting shareholder may come to agreement as to the fair cash value of the shares of Frisch’s Common Stock. If
Frisch’s and any dissenting shareholder cannot agree upon the fair cash value of the shares of Frisch’s Common Stock,
then either may, within three months after service of demand by the dissenting shareholder, file a petition in the Court of Common
Pleas of Hamilton County, Ohio, for a determination that the shareholder is entitled to exercise appraisal rights and to determine
the fair cash value of the shares of Frisch’s Common Stock. The court may appoint one or more appraisers to recommend a
fair cash value. The fair cash value is to be determined as of the day prior to the date of the Special Meeting. The fair cash
value is the amount that a willing seller, under no compulsion to sell, would be willing to accept, and that a willing buyer,
under no compulsion to purchase, would be willing to pay, but in no event may the fair cash value exceed the amount specified
in the dissenting shareholder’s demand. In determining this value, any appreciation or depreciation in the market value
of the shares of Frisch’s Common Stock resulting from the Merger is excluded. The Ohio Supreme Court, in Armstrong v.
Marathon Oil Company, 32 Ohio St. 3d 397 (1987), has held that fair cash value for publicly traded shares of a company with
significant trading activity will be the market price for such shares on the date that the transaction is submitted to the shareholders
or directors for final approval, as adjusted to exclude the impact of the transaction giving rise to the appraisal rights. The
fair cash value may ultimately be more or less than the per share Merger Consideration. Shareholders should note that investment
banking opinions as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such
as the Merger, are not intended to be opinions as to fair value under the OGCL. Interest on the fair cash value and costs of the
proceedings, including reasonable compensation to any appraisers, are to be assessed or apportioned as the court considers equitable.
Payment
of the fair cash value must be made within thirty days after the later of the final determination of such value or the closing
date of the Merger. Such payment shall be made only upon simultaneous surrender to Frisch’s of the share certificates for
which such payment is made.
A
dissenting shareholder’s rights to receive the fair cash value of his or her shares of Frisch’s Common Stock will
terminate if:
| • | the
dissenting shareholder has not complied with Section 1701.85; |
| • | the
Merger is abandoned or is finally enjoined or prevented from being carried out or the
Frisch’s shareholders rescind their adoption of the Merger Agreement; |
| • | the
dissenting shareholder withdraws his or her demand with the consent of Frisch’s
by its Board; or |
| • | the
dissenting shareholder and Board have not agreed on the fair cash value per share and
neither has filed a timely complaint in the Court of Common Pleas of Hamilton County,
Ohio. |
All
rights accruing from shares of Frisch’s Common Stock, including voting and dividend and distribution rights, are suspended
from the time a dissenting shareholder makes demand with respect to such shares until the termination or satisfaction of the rights
and obligations of the dissenting shareholder and Frisch’s arising from the demand. During this period of suspension, any
dividend or distribution paid on the shares of Frisch’s Common Stock will be paid to the record owner as a credit upon the
fair cash value thereof. If a shareholder’s appraisal rights are terminated other than by purchase by Frisch’s of
the dissenting shareholder’s shares of Frisch’s Common Stock, then at the time of termination all rights will be restored
and all distributions that would have been made, but for suspension, will be made.
Representations
and Warranties
The
Merger Agreement contains representations and warranties made by each of the parties regarding aspects of their respective businesses,
financial condition and structure, as well as other facts pertinent to the Merger.
Our
representations and warranties relate to, among other things:
| • | our
and our subsidiaries’ organization, existence, corporate power and authority, good
standing, qualification to do business and similar corporate matters; |
| • | our
and our subsidiaries’ capitalization and capital structure; |
| • | our
corporate power and authority to enter into and perform out obligations under the Merger
Agreement and complete the Merger, and the enforceability and due execution and delivery
of the Merger Agreement; |
| | |
| • | consents,
approvals, filings and registrations required from governmental entities to enter into
the Merger Agreement and complete the Merger; |
| • | financial
statements and SEC filings, internal reporting controls and the Sarbanes-Oxley Act of
2002, off-balance-sheet arrangements and the absence of undisclosed liabilities; |
| • | the
absence since June 3, 2014 of any events that have had or would reasonably be expected
to have a material adverse effect on Frisch’s, or certain actions by Frisch’s
not taken in the ordinary course of business consistent with past practice; |
| • | the
absence of proceedings, claims, actions or governmental or regulatory investigations
or other proceedings pending or threatened against us and the absence of certain orders
against us; |
| • | our
and our subsidiaries’ compliance with applicable law; |
| • | our
and our subsidiaries’ compliance with tax laws and other tax matters; |
| • | employment,
labor and employee-benefit matters affecting us or our subsidiaries; |
| • | our
and our subsidiaries’ material contracts; |
| • | owned
and leased real estate; |
| • | the
absence of any rights agreement; “poison pill” or similar agreements and
plans; |
| • | brokers
and financial advisors; |
| • | our
receipt of an opinion from Raymond James regarding the fairness, from a financial point
of view, of the consideration to be received by holders of Frisch’s Common Stock
(other than Excluded Persons); |
| • | compliance
with applicable anticorruption laws; |
| • | related
party transactions; and |
Some
of our representations and warranties are qualified as to Frisch’s knowledge or as to items disclosed as schedules to the
Merger Agreement and others are qualified as to materiality or by exceptions related to the absence of a Company Material Adverse
Effect. Under the Merger Agreement, “Company Material Adverse Effect” with respect to Frisch’s means any event,
change, circumstance, occurrence, effect or state of facts that is or would reasonably be expected to become, individually or
in the aggregate, (a) materially adverse to the business, assets, condition or results of operations of the Company taken as a
whole, or (b) materially impairs or prevents or materially delays the ability of the Company to consummate the transaction contemplated
by the Merger Agreement; provided, however, that none of the following events, changes, circumstances, or statements of fact,
either alone or in combination, will constitute a Company Material Adverse Effect under this definition:
| • | those
events generally affecting the industry of the Company or the economy or financial or
securities markets of the United States, including effects resulting from any regulatory
or political conditions or developments in general (unless such events, changes, circumstances,
occurrences, effects and states of fact have a disproportionate impact on the Company
taken as a whole); |
| • | any
outbreak or escalation of hostilities or declared or undeclared acts of war or terrorism; |
| • | changes
or proposed changes in Law or GAAP (unless such changes or proposed changes have a disproportionate
impact on the Company taken as a whole); |
| • | any
change in the market price or trading volume of any securities of the Company; |
| • | any
change of or failure to meet, in and of itself, any internal or public projections, forecasts,
budgets or estimates of or relating to the Company for any period; |
| • | any
hurricane, tropical storm, flood, forest fire, earthquake, winter storm, snow storm,
or any similar natural disaster; |
| • | the
execution, announcement, performance and existence of this Agreement; |
| • | any
action taken or not taken by the Company at the request of or with the approval of the
Buyer; or |
| • | any
action taken by Parent, Merger Sub or any of their Affiliates. |
Holding
and Merger Sub also make a number of representations and warranties to us regarding various matters pertinent to the Merger, including
the following topics:
| • | organization,
existence, good standing, qualification to do business and similar corporate matters; |
| • | corporate
power and authority to enter into and perform their obligations under the Merger Agreement
and complete the Merger, and the enforceability and due execution and delivery of the
Merger Agreement; |
| • | the
absence of conflicts with their respective organizational documents, applicable law or
certain contracts as a result of the execution, delivery and performance of the Merger
Agreement and the consummation of the transactions contemplated thereby; |
| • | consents,
approvals, filings and registrations required from governmental entities to enter into
the Merger Agreement and complete the Merger; |
| • | the
absence of any approval needed by holders of Holding’s outstanding securities; |
| • | the
absence of proceedings, claims, actions or governmental or regulatory investigations
or other proceedings pending or threatened against Holding and the absence of certain
orders against Holding; |
| • | the
accuracy of the information supplied by Holding or any of its affiliates in connection
with this proxy statement; |
| • | the
purposes of the formation of Merger Sub and the absence of any business activities conducted
by it; |
| • | the
availability and sufficiency of funds to pay the Merger Consideration and Merger-related
costs; |
| • | the
absence of any agreement, arrangement or understanding among Holding, Merger Sub or any
of their affiliates, on the one hand, and any holder of Frisch’s securities or
any officer, director or employee of Frisch’s, on the other hand; |
| • | ownership
by Holding of Frisch’s Common Stock or other securities of Frisch’s; |
| • | brokers
and financial advisors; |
| • | access
to information about Frisch’s provided to Holding and Merger Sub; and |
Some
of Holding’s and Merger Sub’s representations and warranties are qualified as to materiality or as set forth in the
disclosure schedule delivered by Holding and Merger Sub to the Company on the date of the Merger Agreement or by exceptions related
to the absence of a Holding Material Adverse Effect. Under the Merger Agreement, “Parent Material Adverse Effect”
(with respect to Holding and Merger Sub) means any change, event, circumstance or development, in each case that, individually
or in the aggregate, is materially adverse with respect to, or would be reasonably expected to have, any material adverse effect
on, the ability of Parent or Merger Sub to timely consummate the transactions contemplated by this Agreement or timely perform
any of their other respective obligations hereunder. Parent has made available to Frisch’s before the date of the Merger
Agreement a true, complete and correct copy of the Articles of Incorporation and Regulations or other equivalent organizational
documents of Parent and Merger Sub, each as amended through the date of the Merger Agreement.
The
representations and warranties of each of the parties to the Merger Agreement will expire upon the completion of the Merger or
the termination of the Merger Agreement.
Guarantee
of Fund
Subject
to the terms of the Guarantee, the Fund has absolutely, unconditionally, and irrevocably guaranteed to Frisch’s (i) the
due, punctual and complete payment and performance of the payment and performance obligations of Holding and Merger Sub, and (ii)
the accuracy and reliability of the representations and warranties of Holding and Merger Sub as set out in the Merger Agreement.
The Guarantee will terminate automatically at the earlier of the date the Merger Agreement is terminated or the Effective Time.
Conduct
of Business Pending the Merger
We
have agreed to restrictions on the operation of our business until the earlier of the Effective Time or the termination of the
Merger Agreement. We have agreed, in general, to conduct our business consistent with past practice and will use all commercially
reasonable efforts to keep available the services of our key employees, maintain satisfactory relations with our lenders, material
suppliers, franchisees, and other persons with whom we have material business relationships and maintain in effect material insurance
policies, except as may be required by law, consented to in writing by Holding, permitted by the Merger Agreement or as permitted
by disclosure in our confidential disclosure schedules. In addition, we have agreed that, subject to specified exceptions, neither
we nor our subsidiaries will, without the prior written consent of Holding:
| • | authorize
or pay any dividend or other distribution with respect to our outstanding capital stock,
other than (a) regular quarterly cash dividends or distributions authorized by the Board
not exceeding $0.20 per share as appropriately adjusted in the event of any stock split,
reverse stock split, stock dividend, reclassification or similar transaction, or (b)
dividends and distributions paid by subsidiaries of Frisch’s to Frisch’s
or to any of its wholly owned subsidiaries; |
| • | enter
into any agreement with respect to the voting of any Frisch’s securities; |
| • | split,
combine or reclassify any of our capital stock or issue, sell or authorize or propose
the issuance or sale of any securities in respect of, in lieu of or in substitution for
shares of our capital stock, except for any such transaction by a wholly owned subsidiary
of Frisch’s that remains a wholly owned subsidiary after consummation of such transaction; |
| • | except
as permitted by law, existing agreements or our existing benefit plans or as provided
in our confidential disclosure schedules to the Merger Agreement, materially increase
the compensation or other benefits payable or provided to our employees, officers or
directors, enter into any employment, change-of-control or severance agreement with employees,
officers, directors or other service providers, or adopt, enter into, amend, or terminate,
or take any action to accelerate rights under any new or amended plan, trust, fund, policy
or arrangement for the benefit of any current or former directors, officers or employees
or any of their beneficiaries; |
| • | enter
into or make any loans, advances or capital contributions to, or investments in, any
other person or make any change in our existing borrowing, lending or investment arrangements; |
| • | change
our material financial accounting policies or procedures or any methods or reporting
income, deductions or other items for financial accounting purposes, except as required
by GAAP, SEC rule or policy or applicable law; |
| • | amend
our articles of incorporation or bylaws or permit any of our subsidiaries to amend their
articles of incorporation, bylaws or similar organizational documents in a manner adverse
to Holding or Merger Sub or as would reasonably be expected to have a Frisch’s
material adverse effect; |
| • | issue,
sell, pledge, dispose of or encumber any shares of our capital stock or other securities,
take any action to cause any of our stock options currently unexercisable to become exercisable
or make any changes in our capital structure, other than issuances of Frisch’s
Common Stock upon the exercise of previously granted stock options; |
| • | purchase,
redeem or otherwise acquire any shares of our stock or other securities, other than in
connection with transactions among us and any of our subsidiaries or in satisfaction
of withholding obligations in connection with the exercise of stock options or the vesting
of restricted shares; |
| • | incur,
assume, guarantee, prepay or become liable for any indebtedness for borrowed money, except
for indebtedness among us and any of our subsidiaries, guarantees by us of indebtedness
of any of our subsidiaries and indebtedness under our existing credit facilities; |
| • | sell,
lease, license, transfer, exchange, swap, mortgage, encumber, subject to lien, or otherwise
dispose of any portion of our tangible properties or assets having a value in excess
of $50,000, individually or in the aggregate, except (i) under existing agreements in
effect before the execution of the Merger Agreement, (ii) the sale of inventory in the
ordinary course of business consistent with past practice, (iii) with respect to a small
number of stores that we are permitted to divest or close and (iv) with respect to certain
matters described in our confidential disclosure schedules; |
| • | other
than in the ordinary course of business, enter into any new material contracts or change
the terms of any current material contracts, other than renewals or replacements of existing
material contracts that are on similar terms or in connection with the making of certain
capital expenditures permitted under the Merger Agreement, or terminate any material
contract; |
| • | enter
into any contract that materially restricts us or any of our subsidiaries from engaging
or competing in any line of business or in any geographic area or any contract that would
be breached by the Merger, or require the consent of a third party to continue such contract
as a result of the Merger; |
| • | enter
into any material contract or agreement that would be breached by, or require the consent
of any other person in order to continue following, consummation of the transactions
contemplated by this Agreement; |
| • | acquire
by Merger, consolidation, purchase of stock or assets, or agreement to so acquire any
entity, store, business or assets that constitute a business or a division of any other
company, or all or a substantial portion of the assets of any other company, or make
any loans, advances, capital contributions or investments in any other company; |
| • | make
or agree to make any capital expenditure in excess of certain amounts set forth in our
confidential disclosure schedules, with the exception of (a) capital expenditures per
store in an amount up to $200,000 per store (not including the cost of acquisition of
such store), (b) $1,000,000 in the aggregate over the amounts as set forth in our confidential
disclosure schedules, and (c) construction and equipment contracts and/or to acquire
land to build, remodel, or construct additional restaurants in an aggregate amount not
to exceed $500,000; |
| • | adopt
or enter into any plan of complete or partial liquidation, dissolution, Merger, consolidation,
restructuring, recapitalization or other reorganization; |
| • | enter
into any new line of business outside of the businesses currently undertaken by us; |
| • | institute,
settle, or compromise any material litigation, investigation, arbitration, proceeding
or other claim involving us, any shareholder litigation or dispute against us or any
of our officers or directors or any litigation, arbitration, proceeding or dispute relating
to the Merger, other than settlements that involve payment of monetary damages by us
not in excess of such amounts agreed upon by us and Holding and without the imposition
of equitable relief on or the admission of wrongdoing by us or any of our officers or
directors; |
| • | make
or change any material tax election or tax or accounting method, file any amended tax
returns or enter into any agreement or settlement of tax claims, audits or assessments,
surrender any right to claim a material tax refund or consent to any extension or waiver
of the limitations period applicable to any material tax claim or assessment, except
as may be required by law, where adequate reserves have been made or as would not reasonably
be expected to materially increase any tax liability or materially decrease any tax asset;
or |
| • | abandon,
encumber, convey title (in whole or in part), exclusively license or grant any right
or other licenses to our Intellectual Property, other than in the ordinary course of
business consistent with past practice; |
| • | sell
(or offer for sale) any franchises; |
| • | enter
into any understandings, arrangements or agreements, whether oral or in writing, individually
or in the aggregate, that will result in, or would be reasonably expected to result in,
the Transaction Costs (as defined in the Merger Agreement) at the closing of the Merger
being materially higher than the Projected Transaction Costs (as defined in the Merger
Agreement), except for reasonable and necessary fees and expenses incurred by the Company
in connection with regulatory approvals or shareholder voting and other approvals necessary
to consummate the transaction contemplated by the Merger Agreement; |
| • | enter
into any transaction that would be subject to disclosure pursuant to Item 404 of Regulation
S-K; |
| • | take
any action that would reasonably be expected to, in the individual or in the aggregate,
prevent, materially delay or materially impede the consummation of the Merger or the
other transactions contemplated by this Agreement; or |
| • | agree
to take any of the foregoing actions. |
Special
Meeting and Proxy Statement
Frisch’s
has agreed to call a meeting of its shareholders to be held as soon as reasonably practicable after the mailing of this proxy
statement for the purpose of obtaining the approval of the Merger Agreement by Frisch’s shareholders and to use its reasonable
best efforts to obtain such approval, including by recommendation that the Frisch’s shareholders vote in favor of the Merger
Proposal. In connection with the Special Meeting, Frisch’s has also agreed to prepare and file with the SEC a proxy statement
as promptly as practicable after the execution of the Merger Agreement.
Restrictions
on Solicitation of Acquisition Proposals
From
the date of the Merger Agreement until the earlier of the Effective Time or the termination of the Merger Agreement, Frisch’s
is required to immediately cease any solicitations, discussions or negotiations that may be ongoing with respect to an Acquisition
Proposal with any person. Frisch’s is generally not permitted to:
| • | initiate,
solicit or knowingly encourage, facilitate or assist the making of a competing Acquisition
Proposal; |
| • | engage
in, continue or participate in any discussions or negotiations with any person regarding
any competing Acquisition Proposal; |
| • | furnish
to any person any nonpublic information or afford access to the business, properties,
assets or personnel of Frisch’s to facilitate the making of a competing Acquisition
Proposal; or |
| • | enter
into any Company Acquisition Agreement. |
If,
however, before the Frisch’s shareholders approve the Merger Agreement, Frisch’s receives from a third party an unsolicited
bona fide written Acquisition Proposal that the Board determines in good faith, after consultation with its financial advisors
and outside legal counsel, constitutes a Superior Proposal or would reasonably be expected to result in a Superior Proposal, Frisch’s,
its officers, directors, financial advisors and authorized agents may, if reasonably necessary to comply with its fiduciary duties:
| • | furnish
to such third party access and nonpublic information with regard to Frisch’s and
its subsidiaries under an acceptable confidentiality agreement, a copy of which shall
be promptly provided to Holding; |
| • | engage
or participate in any discussions with such person; and |
| • | withhold,
withdraw or change its recommendation to Frisch’s shareholders regarding the transaction
with Holding following receipt of a Superior Proposal, subject to complying with certain
notice and other specified conditions, including giving Holding the opportunity to propose
changes to the Merger Agreement in response to such Superior Proposal. |
In
engaging in such permitted discussions or negotiations regarding an Acquisition Proposal, we must comply with the following procedures:
| • | within
two days of receipt of any Acquisition Proposal, notify Holding of the material terms
of such Acquisition Proposal, including whether such offer is a Superior Proposal, and
furnish Holding with a copy of any written Acquisition Proposal; |
| • | keep
Holding fully informed of the status and material terms of any such Acquisition Proposal
including any material amendments or proposed amendments as to price and other material
terms; |
| • | provide
Holding with at least forty-eight hours prior notice of any meeting of Board (or such
lesser notice as is provided to the members of the Board) at which the Board is reasonably
expected to consider any Acquisition Proposal. |
| • | provide
Holding with a list of any non-public information concerning Frisch’s business,
present or future performance, financial condition or results of operations, provided
to any third party, and, to the extent such information has not been previously provided
to Holding, copies of such information; |
Holding
shall have a period of not less than seven business days after receipt of notice of a Superior Proposal to submit an Acquisition
Proposal describing any adjustments to the terms of this Agreement. If Holding submits such an Acquisition Proposal, Frisch’s
agrees to negotiate changes to this Agreement as described in Holding’s Acquisition Proposal in good faith and in a timely
manner, but for a period of not less than seven business days after receiving Holding’s Acquisition Proposal. If at any
time there are any material revisions to the terms of any Superior Proposal, including any revision in price, Holding shall have
a new opportunity of not less than seven business days to respond.
For
purposes of the Merger Agreement, a “Superior Proposal” means a bona fide written Acquisition Proposal from an unaffiliated
third party (other than Holding) which Board determines in good faith, after receiving the advice of its outside legal and financial
advisors, that (a) the terms and conditions of such proposal are more favorable to Frisch’s stockholders from a financial
point of view than the transactions contemplated herein (after taking into account the expected timing and risk and likelihood
of consummation and including taking into account any adjustment to the terms and conditions proposed by Holding in response to
such proposal) and (b) that the transaction contemplated by such proposal is reasonably likely to be consummated in accordance
with its terms; provided, that for purposes of the definition of “Superior Proposal,” the references to “20%”
in the definition of Acquisition Proposal shall be deemed to be references to “40%.”
For
purposes of the Merger Agreement, an “Acquisition Proposal” means any bona fide proposal or offer, or interest in
making a proposal or offer received after the execution of this Agreement, relating to (a) a merger, joint venture, partnership,
consolidation, dissolution, liquidation, tender offer, recapitalization, reorganization, share exchange, business combination
or similar transaction involving Frisch’s (or any Subsidiary or subsidiaries of Frisch’s whose business constitutes
20 percent or more of the net revenues, net income or assets (based on fair market value) of Frisch’s and its Subsidiaries,
taken as a whole), (b) the acquisition of 20 percent or more of the outstanding shares of any class of capital stock of Frisch’s
or 20 percent or more of the voting power represented by the outstanding voting securities of Frisch’s, (c) a tender offer
or exchange offer or other transaction which, if consummated, would result in a direct or indirect acquisition of 20 percent or
more of the total voting power of the capital stock of Frisch’s or 20 percent or more of the voting power represented by
the outstanding voting securities of Frisch’s, (d) the acquisition in any manner, directly or indirectly, of 20 percent
or more of the consolidated total assets (based on fair market value) of Frisch’s and its Subsidiaries (or to which 20 percent
or more of Frisch’s revenues or earnings on a consolidated basis are attributable) including, for this purpose, the outstanding
assets and equity interests of the Subsidiaries of Frisch’s, (e) any transaction that would result in person obtaining the
ability to elect a majority of Board or (f) any other transaction having a similar effect to those described in clauses (a) through
(e), and in each case other than the transactions between Holding, Merger Sub and Frisch’s contemplated by this Agreement.
For
purposes of the Merger Agreement, an “Acceptable Confidentiality Agreement” means a confidentiality agreement that
contains terms that are not materially less favorable in the aggregate to Frisch’s than those contained in the Confidentiality
Agreement (except with regard to standstill provisions); provided, however, that an Acceptable Confidentiality Agreement shall
not include any provision having the effect of prohibiting Frisch’s from satisfying its obligations under this Agreement.
Board
Recommendation
Under
the terms of the Merger Agreement, subject to the exceptions described below, the Board has agreed to recommend that the Frisch’s
shareholders vote in favor of the Merger Proposal.
Notwithstanding
the foregoing, at any time prior to the receipt of Frisch’s shareholder approval of the Merger Proposal, the Board may change
its recommendation and terminate the Merger Agreement and enter into Company Acquisition Agreement (as defined in the Merger Agreement)
with respect to a Superior Proposal if, among other circumstances, the Board determines in good faith, after consultation with
its outside legal counsel, that failure to take such action would be inconsistent with its fiduciary obligations.
Termination
Fees and Expenses
Frisch’s
has agreed to pay Holding a termination fee of $5,000,000 if the Merger Agreement is terminated by either party in connection
with Frisch’s acceptance of a Superior Proposal.
If
Holding receives payment of our termination fee, such fee, together with any indemnification or reimbursement owed in connection
with enforcing the termination fee provisions of the Merger Agreement, will constitute the sole and exclusive remedy of Holding
and Merger Sub against us and any related party, subject to certain exceptions including with respect to Holding’s right
to seek specific performance of our obligations under the Merger Agreement. The Parties acknowledge and agree that in no event
shall Frisch’s be required to pay the termination fee on more than one occasion, whether or not the termination fee may
be payable under more than one provision of the Merger Agreement at the same or at different times and the occurrence of different
events.
Except
in connection with the payment of any termination fees, at or before closing, Holding shall pay or cause to be paid by Frisch’s
the total transactions costs incurred by Frisch’s but unpaid at closing. The costs and expenses of printing and mailing
the Proxy Statement and all filing and other fees paid to the SEC in connection with the Merger shall be borne equally by Frisch’s
and Holding, and all HSR fees shall be borne by Holding, and all transaction costs shall be paid by the Party incurring such transaction
costs, whether or not the Merger is consummated, unless otherwise provided in the Merger Agreement.
If
we fail to pay in a timely manner any amount due as described above and, in order to obtain such payment, Holding commences a
claim, action, suit or other proceeding that results in a judgment against us, we will have to pay to Holding its reasonable and
documented costs and expenses, including reasonable and documented attorneys’ fees, in connection with such suit, together
with interest on such amount from and including the date payment of such amount was due to but excluding the date of actual payment
at the prime rate set forth in the Wall Street Journal in effect on the date such payment was required to be made through the
date such payment was actually received.
Efforts
to Complete the Merger
Each
of the parties is required to use its reasonable best efforts to take promptly all actions reasonably necessary as follows:
| • | to
obtain all necessary, proper or advisable waivers, consents, clearances, approvals or
expirations or terminations of waiting periods as may be required by law or any governmental
entity to consummate and make effective, and satisfy all conditions to, in the most expeditious
manner practicable, the transactions contemplated by the Merger Agreement; |
| • | facilitate
the obtaining of any necessary final order from any governmental entity approving the
Merger and/or to remove any impediment to the consummation of the Merger. |
| • | obtain
all necessary permits, waivers, consents, approvals and actions or nonactions from governmental
entities necessary to consummate the transactions contemplated by the Merger Agreement,
including all requirements under the HSR Act with respect to the Merger, all fees incurred
under such act and applicable regulations to be paid by Holding, at its own expense,
including legal fees, fees of economists, and fees of marketing experts; |
| • | furnish
all information in connection with the approvals of or filings with any governmental
entity and promptly cooperate with and furnish information in connection with any requirements
imposed upon Holding or any of its affiliates in connection with the Merger Agreement; |
| • | request
early termination of any applicable waiting period under the HSR Act, if applicable,
and use their reasonable best efforts to cause the expiration or termination of any applicable
waiting periods under the HSR Act (the “HSR Clearance”), and shall supply
to the Antitrust Division of the United States Department of Justice or the United States
Federal Trade Commission as promptly as reasonably practicable any additional information
or documents that may be requested; |
| • | avoid
the entry of, or to have vacated, lifted, reversed or overturned any order, whether temporary,
preliminary or permanent, that would restrain, prevent or delay the closing on or before
the End Date; |
| • | obtain
all necessary consents or waivers that are or may be required by any third parties, including
any consents or waivers that Holding deems necessary in connection with any reorganization
of the Surviving Corporation’s assets or liabilities that might occur contemporaneously
with the Closing; |
| • | provide
such other assistance as Holding may deem necessary in connection with the anticipated
transition of the Company; and |
| • | execute
and deliver any additional instruments necessary and acceptable to Holding’s or
Frisch’s respective counsel to consummate and fully carry out the purposes of the
Merger. |
Holding
is also required to use its reasonable best efforts to avoid or eliminate any impediments under any antitrust laws, including
by effecting, by consent decree, hold separate order or otherwise, the sale, divestiture or disposition of assets of Holding or
Frisch’s, or otherwise committing to take actions after the Effective Time that would limit Holding’s freedom of action
with respect to, or its ability to operate or retain, certain assets of Holding or Frisch’s, provided that Frisch’s
will not be required to take any action that would result in a material reduction in the reasonably anticipated economic benefits
to it contemplated by the Merger Agreement measured over a commercially reasonable period.
Holding
and Frisch’s shall cooperate and consult with each other in connection with the making of all filings, notifications, communications,
submissions and taking all other material actions, subject to applicable legal limitations and the instructions of any governmental
entity. Holding and Frisch’s shall keep each other apprised on a current basis of the status of matters relating to the
completion of the transactions in the Merger Agreement, including promptly furnishing the other with material communications received
by Holding or Frisch’s or their respective subsidiaries or affiliates, from any third party and/or any governmental entity.
Subject to applicable Law relating to the exchange of information, Holding and Frisch’s shall permit counsel for the other
Party reasonable opportunity to review in advance, and consider in good faith the views of the other Party in connection with,
any proposed notifications or filings and any written communications or submissions, and with respect to any such notification,
filing, written communication or submission, any documents submitted therewith to any Governmental Entity, provided, however,
that materials may be redacted (i) to remove references concerning the valuation of the businesses of Holding, or proposals from
third parties with respect thereto, (ii) as necessary to comply with contractual agreements and (iii) as necessary to address
reasonable privilege or confidentiality concerns. Holding and Frisch’s agree not to participate in any substantive meeting
or discussion, either in person or by telephone, with any Governmental Entity in connection with the proposed transactions unless
it consults with the other Party in advance and, to the extent not prohibited by such Governmental Entity, gives the other Party
the opportunity to attend and participate.
Neither
Holding nor Frisch’s shall take or agree to take any action that would be reasonably likely to prevent or materially delay
the closing of the Merger.
Employee
Benefits
Under
the Merger Agreement, Holding has agreed that for a period of 180 days from the Closing, Covered Employees, defined in the Merger
Agreement as Frisch’s corporate and commissary employees working at 2800 Gilbert Avenue and 3011 Stanton Avenue in Cincinnati,
Ohio, shall:
| • | each
receive no less than the same base salary or hourly wage rate provided to such employee
immediately before the Effective Time; |
| • | each
receive no less than the same annual or more frequent bonus or commission opportunity
provided to such employee immediately before the Effective Time; |
| • | for
a period beginning as of the Effective Time and continuing at least until the end of
the “plan year” for each respective Company Benefit Plan, receive other compensation
and benefits (other than equity and equity-based awards) that are no less favorable for
all continuing employees in the aggregate than those provided under the compensation
and benefit plans, programs, policies, agreements and arrangement of Frisch’s in
effect immediately before the Effective Time. |
Notwithstanding
the foregoing, nothing will prevent the Surviving Corporation or any of its subsidiaries from terminating the employment of any
employee of the Company, including any Covered Employee, for Cause, as defined in the Merger Agreement. Additional agreements
by Holding and Merger Sub with respect to employee benefits are described in more detail in the Merger Agreement.
Directors’
and Officers’ Indemnification and Insurance
The
Merger Agreement provides for certain indemnification and insurance rights in favor of our and our subsidiaries’ current
and former directors, officers, and employees. Following the Effective Time, Holding will cause the Surviving Corporation to indemnify
our and our subsidiaries’ present and former directors, executive officers, and employees in connection with claims, liabilities
or judgments arising out of (i) the fact that such person is or was one of our or our subsidiaries’ officer, directors,
or employees, and pertaining to any matter, act or omission existing or occurring at or before the Effective Time or (ii) the
Merger Agreement of any of the transactions contemplated by the Merger Agreement. In addition, following the Effective Time, the
Surviving Corporation will maintain in effect provisions providing rights to indemnification, exculpation from liability and advancement
of expenses to such individuals in the Surviving Corporation’s organizational documents and not amend or repeal such terms
in any manner that would adversely affect the rights of the individuals covered by such provisions.
For
six years following the Effective Time of the Merger, Holding, Merger Sub, and the Surviving Corporation will indemnify, defend
and hold harmless, and provide advancement of reasonable expenses to, each indemnified party against all proceedings, losses,
claims, damages, costs, expenses, liabilities or judgments or amounts that are paid in settlement of or in connection with any
proceeding based in whole or in part on or arising in whole or in part out of the fact that such person was a director, officer
or employee of Frisch’s or any of its subsidiaries, and pertaining to any matter existing or occurring, or any acts or omissions
occurring, at or before the Effective Time, whether asserted or claimed before, or at or after, the Effective Time. However, the
Merger Agreement provides that such indemnification will not be construed to grant any person any right of indemnification for
any act or omission not made in good faith or in the best interest of the shareholders of Frisch’s or its subsidiaries or
as provided in applicable corporate documents in effect during the acts or events under which the claim for indemnification has
arisen.
For
six years following the Effective Time of the Merger, Holding, Merger Sub, and the Surviving Corporation will cause the present
directors and executive officers to be covered under Frisch’s existing directors’ and officers’ liability insurance
policies, or other coverage that is no less favorable, covering any claims arising with respect to acts or omissions occurring
before the Effective Time of the Merger. The Merger Agreement also provides that, at or prior to the Effective Time, we may purchase
a directors’ and officers’ liability “tail” insurance policy on the same terms and conditions as the existing
directors’ and officers’ liability insurance maintained by us, with respect to matters existing or occurring at or
before the Effective Time, covering without limitation the transactions contemplated in the Merger Agreement, in an amount not
to exceed 200 percent of the annual premiums of the current policies maintained by us. If purchased, Holding must cause Frisch’s
to maintain and honor such policy for its full term. If such “tail” policy is obtained by Frisch’s, Holding
shall cause such policy to be maintained in full force and effect, for its full term, and cause all obligations thereunder to
be honored by the Surviving Corporation.
Holding
and Merger Sub shall cause Surviving Corporation to pay all expenses, including reasonable attorney’s fees, which may be
incurred in connection with any indemnified person’s enforcement of their rights.
If
the Surviving Corporation or Holding (or any of their successors or assigns) shall (i) consolidate with or merge into any other
person and shall not be the continuing or Surviving Corporation or entity of such consolidation or Merger or (ii) transfer all
or substantially all of its properties and assets to any person, then, and in each such case, the Surviving Corporation or Holding,
as the case may be, shall make or cause to be made, proper provisions so that the successors and assigns of the Surviving Corporation
or Holding, as the case may be, shall assume all of the obligations of the Surviving Corporation or Holding.
Nothing
in the Merger Agreement is intended to, shall be construed to or shall release, waive or impair any rights to directors’
and officer’s insurance claims under any policy that is or has been in existence with respect to Frisch’s or any of
its subsidiaries for any of their respective directors, officers or other employees, it being understood and agreed that the indemnification
provided for in the Merger Agreement is not before or in substitution for any such claims under such policies.
The
indemnification and insurance provisions of the Merger Agreement are intended to benefit, and are enforceable by, the indemnified
persons and their respective heirs or legal representatives. The obligations set forth in the Merger Agreement shall not be terminated,
amended or otherwise modified in any manner that adversely affects any indemnified part, or any person who is a beneficiary under
the policies referred to in the Merger Agreement and their heirs and representatives, without the prior written consent of such
affected indemnified party or other person.
Financing
At
the closing, Holding must have sufficient cash, available lines of credit or other sources of immediately available funds to enable
Holding to pay the aggregate Merger Consideration and to perform its obligations with respect to the transactions contemplated
in the Merger Agreement.
The
Fund has represented and confirmed in writing that it has received financing commitments sufficient to make the payments for the
aggregate Merger Consideration. However, in no event shall the receipt or availability of any funds or financing by Parent, Merger
Sub or any of their Affiliates or any other financing transactions be a condition to any of Parent’s or Merger Sub’s
obligations under this Agreement.
The
Fund has delivered, as required, a true and complete copy of (i) an executed commitment letter pursuant to which the equity provider
has unconditionally agreed to provide Holding and Merger Sub with the amount of equity financing set forth in such letter (the
“Equity Commitment Letters”); (ii) an executed agreement pursuant to which a third-party has agreed to provide the
balance of funds necessary to consummate the transactions contemplated by the Merger Agreement (the “Financing Agreement”,
and together with the Equity Commitment Letters, collectively the “Financing Sources”); and (iii) letters in form
and content satisfactory to Frisch’s as of the date of the Merger Agreement from each of the Financing Sources confirming
the amounts and enforceability of such agreement or letter (collectively referred to as the “Financing”). Holding
has confirmed that the amounts identified in the Equity Commitment Letter and in the Financing Agreement represent binding commitments
to fund the full amount of the Merger Consideration.
None
of the commitments from the Financing Sources has been amended or modified, prior to the date hereof (except as permitted by,
or disclosed in, the Merger Agreement) and the respective obligations and commitments contained in the commitments from the Financing
Sources have not been withdrawn or rescinded in any respect. The commitments from the Financing Sources are in full force and
effect as of the date of this proxy statement. The commitments from the Financing Sources are the legal, valid and binding obligations
of Holding and Merger Sub, as applicable, and, to the knowledge of Holding, each of the other parties thereto.
No
event has occurred or circumstance exists which, with or without notice, lapse of time or both, would or would reasonably be expected
to constitute a default or breach on the part of Holding or Merger Sub, as applicable, or to the knowledge of Holding, any other
parties thereto, under the commitments from the Financing Sources.
Holding
has advised Frisch’s that Holding has no reason to believe, as of the date of this proxy statement, that any of the conditions
to the Financing contemplated in the commitments from the Financing Sources will not be satisfied or that the Financing will not
be made available to Parent and Merger Sub at or prior to the Effective Time.
As
of the date of this proxy statement, there are no side letters or other agreements, contracts or arrangements related to the Financing,
as applicable, of the full amount of the Financing other than as expressly set forth in the commitments from the Financing Sources
and delivered to the Company prior to the date hereof. Parent and Merger Sub have fully paid, or caused to be fully paid, any
and all commitment or other fees which are due and payable on or prior to the date hereof pursuant to the terms of the commitments
from the Financing Sources.
Conditions
to the Closing of the Merger
Each
party’s obligation to effect the Merger is subject to the satisfaction of various conditions, which include the following:
| • | the
Merger Agreement is approved by Frisch’s shareholders at a Special Meeting; and |
| • | no
order, injunction or decree issued by any court or agency of competent jurisdiction is
in effect or statute, rule, regulation, order injunction or decree enacted, entered or
enforced by any governmental entity that prohibits or makes illegal the consummation
of the Merger or any other transactions contemplated by the Merger Agreement. |
Holding
and Merger Sub will not be obligated to effect the Merger unless the following conditions are satisfied or waived by Holding and
Merger Sub:
| • | our
representations and warranties are true and correct as of the closing date of the Merger
subject to the materiality standards set forth in the Merger Agreement; |
| • | we
have performed in all material respects all of our obligations under the Merger Agreement
at or prior to the closing of the Merger; |
| • | since
the date of the Merger Agreement, there has not been a Frisch’s material adverse
effect; |
| • | holders
of not more than 10 percent of Frisch’s Common Stock immediately prior to the Effective
Time shall constitute dissenting shares or shall otherwise have rights of appraisal with
respect to the transactions contemplated by the Merger Agreement; |
| • | executives
Craig F. Maier and Karen F. Maier shall have tendered letters of resignation to Frisch’s,
stepped down from their respective positions, and waived all rights, except those to
benefits and compensation under employment agreements or Frisch’s benefit plans
or Board-awarded bonuses, either may have to any payment triggered by the voluntary or
involuntary termination of any position held at Frisch’s; |
| • | each
member of the Board shall have tendered a letter of resignation to Frisch’s, stepped
down from each position held at Frisch’s, and waived all rights except for indemnification
rights under applicable corporate documents each Board member may have to any payment
triggered by the voluntary or involuntary termination of any position held at Frisch’s; |
| • | no
later than two business days prior to the closing, Frisch’s must deliver to Holding
a complete and accurate accounting of all costs and expenses of Frisch’s incurred
in connection with its engagement of third party providers whose services were used by
Frisch’s in connection with the consideration and consummation of the transactions
contemplated by the Merger Agreement, including but not limited to financial advisors,
investment bankers, attorneys and accountants, including fees, costs and expenses accrued
and earned as a result of the closing; |
| • | Holding
has received a certificate executed by our chief executive officer or chief financial
officer confirming that these conditions have been satisfied. |
We
will not be obligated to effect the Merger unless the following conditions are satisfied or waived by Frisch’s:
| • | the
representations and warranties of Holding and Merger Sub are true and correct as of the
closing date of the Merger subject to the materiality standards set forth in the Merger
Agreement; |
| • | Holding
and Merger Sub have performed in all material respects with each of their obligations
under the Merger Agreement at or prior to the closing of the Merger; and |
| • | we
have received a certificate executed by the chief executive officer or chief financial
officer of Holding and Merger Sub confirming that these conditions have been satisfied. |
Termination
of the Merger Agreement
Frisch’s
and Holding can terminate the Merger Agreement under certain circumstances, including:
| • | by
mutual written consent; |
| • | if
the Merger has not occurred on or before July 30, 2015, subject to one automatic extension
of thirty days, and such other extensions as shall be mutually agreed between Holding
and Frisch’s, but in no event later than September 30, 2015, such subsequent extension
only being available to Frisch’s if Holding is able to extend the availability
of financing, and such right to terminate the Merger Agreement for this reason shall
not be available to any party whose breach of any representation, warranty, covenant
or agreement set forth in the Merger Agreement has been the cause of, or resulted in,
the failure of the Merger to be consummated on or before the closing date; |
| • | if
a governmental authority has issued a final and non-appealable order having the effect
of permanently restraining, enjoining or otherwise prohibiting the consummation of the
Merger, provided that the right to terminate the Merger Agreement under this circumstance
will not be available to any party whose failure to perform its obligations under the
Merger Agreement has been a principal cause of or resulted in such order; |
| • | if
approval of the Merger Proposal by the Frisch’s shareholders has not been obtained
at the Special Meeting or at any adjournment or postponement thereof at which a vote
on the approval of the Merger Proposal was taken; |
| • | acceptance
of a Superior Proposal, (i) by Frisch’s, if Frisch’s has received a Superior
Proposal and Board has made a determination to accept such Superior Proposal, provided
that Frisch’s shall have paid any amounts due as fees and expenses, or (ii) by
Holding, if (a) Board or any committee thereof has failed to make, withdrawn, amended,
modified, or materially qualified, in a manner adverse to Holding or Merger Sub, the
Board recommendation, has recommended an Acquisition Proposal, has failed to recommend
against acceptance of any tender offer or exchange offer for Frisch’s Common Stock
within ten business days after the commencement of such offer, has made any public statement
inconsistent with the Board recommendation, or resolved or agreed to take any of the
foregoing actions, (b) Frisch’s shall have entered into, or publicly announced
its intention to enter into, a Company Acquisition Agreement (other than an Acceptable
Confidentiality Agreement), or (c) Frisch’s or Board (or any committee of Board)
has publicly announced its intentions to do any of the actions specified herein; |
| • | if
the mutual conditions to the parties’ obligations to consummate the Merger and
the conditions to the obligations of Holding and Merger Sub to consummate the Merger
are satisfied (other than those conditions that by their terms are to be satisfied by
actions taken at the closing of the Merger), either party has notified the other party
that it is ready and willing to close and the other party has failed to consummate the
Merger within three business days of receiving such notice. |
Frisch’s
can terminate the Merger Agreement:
| • | upon
a breach or inaccuracy in any of Holding’s or Merger Sub’s representations
or warranties or the failure of Holding or Merger Sub to perform any of its obligations
under the Merger Agreement, which in any case would result in the failure of any condition
to our obligation to close the Merger to be satisfied and which breach, inaccuracy or
failure is not capable of being cured before the earlier of (i) twenty days following
receipt by Frisch’s of written notice of such breach, inaccuracy or failure to
perform and (ii) September 30, 2015; |
Holding
can terminate the Merger Agreement:
| • | upon
a breach or inaccuracy in any of Frisch’s representations or warranties or Frisch’s
failure to perform any of its obligations under the Merger Agreement, which in any case
would result in the failure of any condition to Holding’s obligation to close the
Merger to be satisfied and which breach, inaccuracy or failure is not capable of being
cured before the earlier of (i) twenty days following receipt by Holding of written notice
of such breach, inaccuracy or failure to perform and (ii) September 30, 2015; |
If
either Frisch’s or Holding terminates the Merger Agreement, none of Frisch’s, Holding, any of their respective subsidiaries
or any of the officers or directors of any of them shall have any liability of any nature whatsoever under the Merger Agreement,
or in connection with the transactions contemplated by the Merger Agreement, except for (i) those provisions that survive any
termination of the Merger Agreement and (ii) neither Frisch’s nor Holding shall be relieved or released from liability for
willful breach of the Merger Agreement or for fraud under applicable law. Nothing shall limit or prevent any party from exercising
any rights or remedies it may have under the Merger Agreement in lieu of terminating the Merger Agreement.
The
party desiring to terminate the Merger Agreement pursuant to any of the above reasons shall give written notice of such termination
to the other party in accordance with the Merger Agreement, specifying the provision or provisions pursuant to which such termination
is affected.
Amendment
and Waiver of the Merger Agreement
The
Merger Agreement may be amended by the parties at any time prior to the Effective Time, provided that after Frisch’s shareholders
approve the Merger Agreement, the parties are prohibited from making any amendment that changes the amount or form of the Merger
Consideration, changes any term of the articles of incorporation of the Surviving Corporation, changes any terms and conditions
of the Merger Agreement if such change would adversely affect the holders of any security of Frisch’s or any change that,
by applicable law or otherwise, requires further approval of Frisch’s shareholders. The Merger Agreement may only be amended
by an instrument in writing signed by the parties.
At
any time prior to the Effective Time, each party may waive the other party’s compliance with certain provisions of the Merger
Agreement.
Specific
Performance; Remedies
Holding,
Merger Sub and we have agreed that irreparable damage would occur in the event that any of the provisions of the Merger Agreement
are not performed or are otherwise breached. The parties will be entitled to seek equitable relief, without posting a bond or
undertaking, including injunctive relief and specific performance, to prevent breaches of the Merger Agreement and to enforce
specifically the terms and provisions of the Merger Agreement.
HISTORICAL MARKET
PRICES OF FRISCH’S COMMON STOCK AND DIVIDEND INFORMATION
Frisch’s
Common Stock trades on NYSE MKT under the symbol “FRS.” The following table shows, for the periods indicated, the
high and low closing sales price of Frisch’s Common Stock as reported by the NYSE MKT and the dividends declared per share
of Frisch’s Common Stock.
Fiscal
Quarter | |
High | | |
Low | | |
Dividend
Per Share | |
Fiscal 2015 | |
| | | |
| | | |
| | |
First Quarter ended September 23, 2014 | |
$ | 28.85 | | |
$ | 21.61 | | |
$ | 0.18 | |
Second Quarter ended December 16, 2014 | |
$ | 28.56 | | |
$ | 24.73 | | |
$ | 0.20 | |
Third Quarter ended March 10, 2015 | |
$ | 28.06 | | |
$ | 24.88 | | |
$ | 0.20 | |
Fourth Quarter (through June 2, 2015) | |
$ | 34.30 | | |
$ | 26.80 | | |
$ | 0.20 | |
| |
| | | |
| | | |
| | |
Fiscal 2014 | |
| | | |
| | | |
| | |
First Quarter ended September 17, 2013 | |
$ | 20.87 | | |
$ | 15.73 | | |
$ | 0.16 | |
Second Quarter ended December 10, 2013 | |
$ | 23.60 | | |
$ | 21.50 | | |
$ | 0.18 | |
Third Quarter ended March 4, 2014 | |
$ | 25.76 | | |
$ | 22.68 | | |
$ | 0.18 | |
Fourth Quarter ended June 3, 2014 | |
$ | 23.66 | | |
$ | 22.49 | | |
$ | 0.18 | |
| |
| | | |
| | | |
| | |
Fiscal Year 2013 | |
| | | |
| | | |
| | |
First Quarter ended September 18, 2012 | |
$ | 21.02 | | |
$ | 16.30 | | |
$ | 9.66 | * |
Second Quarter ended December 11, 2012 | |
$ | 20.03 | | |
$ | 15.28 | | |
$ | 0.16 | |
Third Quarter ended March 5, 2013 | |
$ | 18.69 | | |
$ | 16.66 | | |
$ | 0.16 | |
Fourth Quarter ended May 28, 2013 | |
$ | 17.98 | | |
$ | 14.87 | | |
$ | 0.16 | |
*Includes special
dividend of $9.50 in connection with the sale of Golden Corral.
The
closing sales price of Frisch’s Common Stock on the NYSE MKT on ___________, 2015, the latest practicable date before the
printing of this proxy statement, was $______ per share. The closing sales price of Frisch’s Common Stock on the NYSE MKT
on May 21, 2015, the day prior to the announcement that Frisch’s had entered into the Merger Agreement, was $28.12 per share.
You are urged to obtain current market quotations for Frisch’s Common Stock when considering whether to approve the Merger
Proposal.
As
of April 10, 2015, there were approximately 1,357 record holders of Frisch’s Common Stock. Following the merger, there will
be no further public market for Frisch’s Common Stock.
The
payment of dividends is at the discretion of the Board and subject to legal and contractual requirements. The terms of our credit
facility restricts our ability to pay dividends and make certain other restricted payments if, after giving effect to such restricted
payment an event of default under the amended credit agreement would exist or Frisch’s would not be in compliance with certain
specified financial covenants. In addition, under the merger agreement, as described in “The Merger Agreement— Conduct
of Business Pending the Merger”, we are prohibited from paying any dividend or other distribution on shares of Frisch’s
Common Stock prior to the completion of the Merger, other than (i) regular quarterly cash dividends or distributions authorized
by the Board before the Effective Time of the Merger, not exceeding $0.20 per share or (ii) dividends and distributions paid by
our subsidiaries to us or any of our other subsidiaries.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following tables set forth information concerning the beneficial ownership, within the meaning of applicable securities regulations,
of Frisch’s Common Stock by (i) each person known to us to be the beneficial owner of 5 percent or more of the outstanding
shares of Frisch’s Common Stock; (ii) each director of Frisch’s; (iii) each named executive officer of Frisch’s;
and (iv) all current directors and executive officers of Frisch’s as a group. The information below is provided as of May
28, 2015 (except as noted below) and the information for FRI Holding Company, LLC, Royce & Associates, LLC, Reik & Co.,
LLC, Craig F. Maier, Karen F. Maier, Dimensional Fund Advisors LP, and Active Owners Fund LP is based solely on the latest
Schedule 13 reports each entity had filed with the SEC as of such date. The nature of beneficial ownership of the shares included
is presented in the notes following the table.
Name
and Address of Beneficial
Owner | |
Number
of Shares Beneficially
Owned (1) | | |
Percent
of Class | |
FRI Holding Company, LLC 4170 Ashford Dunwoody
Road Suite 390 Atlanta, Georgia 30319 | |
| 827,266 | (2) | |
| 16.12 | |
Royce & Associates, LLC 1414 Avenue of Americas New
York, New York 10019 | |
| 816,520 | (3) | |
| 15.91 | |
Reik & Co., LLC 15 West 53rd Street, Suite 12B New
York, New York 10019 | |
| 637,631 | (4) | |
| 12.17 | |
Craig F. Maier 2800 Gilbert Avenue Cincinnati, Ohio 45206 | |
| 520,007 | (2)(5) | |
| 10.13 | |
Karen F. Maier 2800 Gilbert Avenue Cincinnati, Ohio 45206 | |
| 307,259 | (2)(6) | |
| 5.99 | |
Dimensional Fund Advisors LP Palisades West, Building One 6300
Bee Cave Road Austin, Texas 78746 | |
| 275,636 | (7) | |
| 5.37 | |
Active Owners Fund LP 1800 N. Highland Avenue, 5th Floor Los
Angeles, CA 90028 | |
| 260,137 | (8) | |
| 5.07 | |
| (1) | “Beneficial
Ownership” for purposes of the table, is determined according to the meaning of
applicable securities regulations and based on a review of reports filed with the Securities
and Exchange Commission pursuant to Section 13(d) of the Exchange Act. |
| (2) | FRI Holding
Company, LLC reported in its Schedule 13D filed with the SEC on June 1, 2015 that it
had shared voting power over 827,266 shares by virtue of having entered into Voting Agreements
dated as of May 21, 2015 with Craig F. Maier and Karen F. Maier, both of whom are shareholders
and beneficial owners of Frisch’s. |
| (3) | Royce &
Associates, LLC (“Royce”) reported in its Schedule 13G/AF filed with the
SEC on January 9, 2015 that it had beneficial ownership of 816,520 shares. Royce had
sole power to vote over 816,520 shares and sole power to dispose 816,520 shares. |
| (4) | Reik &
Co., LLC (“Reik LLC”) reported in its Schedule 13G filed with the SEC on
April 20, 2015 that it had beneficial ownership of 637,631 shares, including sole power
to vote over 248,294 shares and sole power to dispose 637,631 shares. William J. Reik,
Jr., a director of the Company, is a Managing Member of Reik LLC. The number of shares
reported includes all shares personally owned by Mr. Reik, which are also reported in
the section below entitled “Director.” |
| (5) | Includes
38,577 shares of owned by Frisch New Richmond Big Boy, Inc., of which Mr. Maier is President
and sole shareholder; 2037 shares owned as Trustee of three trusts for the benefit of
his minor children; and 52,062 shares as Trustee of the Jack C. Maier Trusts for the
benefit of Craig Maier Family. Shares beneficially owned by Craig F. Maier are subject
to the Voting Agreement disclosure in footnote (2) above. |
| (6) | Includes
1,750 shares Ms. Maier has the right to acquire pursuant to the exercise of stock options.
Shares beneficially owned by Ms. Maier are subject to the Voting Agreement disclosure
in footnote (2) above. |
| (7) | Dimensional
Fund Advisors LP (“Dimensional”) reported in its Schedule 13G/A filed with
the SEC on February 5, 2015 that it had beneficial ownership of 275,636 shares, together
with its affiliates. Dimensional had sole power to vote over 270,526 shares and sole
power to dispose 275,636 shares. |
| (8) | Active Owners
Fund LP (“AOF”) reported in its Schedule 13D filed with the SEC on September
18, 2014 that it had beneficial ownership of 260,137 shares, together with its affiliates.
AOF had sole power to vote over 260,137 shares and sole power to dispose 260,137 shares. |
Except as otherwise
indicated, the persons named in the table below have sole voting and investment power over the shares included in the table.
Name
of Beneficial Owner | |
Frisch’s
Common Stock Beneficially Owned | | |
Percent
of Class | |
Directors | |
| | | |
| | |
Daniel W. Geeding | |
| 29,163 | (1) | |
| * | |
Jerome P. Montopoli | |
| 21,742 | (2) | |
| * | |
Craig F. Maier (also a Named Executive Officer) | |
| 520,007 | (3) | |
| 10.13 | |
Dale P. Brown | |
| 16,183 | | |
| * | |
Lorrence T. Kellar | |
| 22,578 | | |
| * | |
William J. Reik, Jr. | |
| 238,021 | (4) | |
| 4.64 | |
Karen F. Maier (also a Named Executive Officer) | |
| 307,259 | (5) | |
| 5.99 | |
Robert J. (RJ) Dourney | |
| 12,407 | | |
| * | |
Donald H. Walker | |
| 16,818 | | |
| * | |
| |
| | | |
| | |
Other Named Executive Officers | |
| | | |
| | |
Mark R. Lanning | |
| 4,428 | | |
| * | |
Michael E. Conner | |
| 8,113 | | |
| * | |
Michael R. Everett | |
| 2,616 | | |
| * | |
| |
| | | |
| | |
All current directors and executive officers as a group | |
| 1,213,099 | (6) | |
| 23.64 | |
*Percentage information
is omitted for individuals who owned less than 1 percent of the outstanding shares of Frisch’s Common Stock and Frisch’s
Common Stock deemed outstanding due to exercisable options.
| (1) | Includes
10,000 shares Mr. Geeding has the right to acquire pursuant to the exercise of stock
options. |
| (2) | Includes
9,000 shares Mr. Montopoli has the right to acquire pursuant to the exercise of stock
options. |
| (3) | See footnote
(5) to the chart in the preceding section “Security Ownership of Certain Beneficial
Owners.” |
| (4) | Includes
13,000 shares Mr. Reik has the right to acquire pursuant to the exercise of stock options. |
| (5) | See footnote
(6) to the chart in the preceding section “Security Ownership of Certain Beneficial
Owners.” |
| (6) | Includes
35,750 shares the group has the right to acquire pursuant to the exercise of stock options. |
MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The
following are the material U.S. federal income tax consequences of the Merger to “U.S. holders” and “non-U.S.
holders” (in each case, as defined below) of Frisch’s Common Stock whose shares of Common Stock are converted into
the right to receive cash in the Merger. This discussion is based on the current provisions of the Internal Revenue Code of 1986,
as amended (the “Code”), applicable U.S. Treasury regulations promulgated thereunder, judicial authority and administrative
rulings in effect as of the date of this proxy statement, all of which are subject to change, possibly with retroactive effect.
Any such change could alter the tax consequences to the holders as described herein. No ruling from the Internal Revenue Service
(“IRS”) has been or will be sought with respect to any aspect of the Merger.
This
discussion does not purport to be a complete analysis of all potential tax effects of the Merger. For example, it does not consider
the effect of any applicable state, local or foreign income tax laws, or of any non-income tax laws. In addition, this discussion
does not address the tax consequences of transactions effectuated prior to or after the completion of the Merger (whether or not
such transactions occur in connection with the Merger), including, without limitation, the acquisition or disposition of Frisch’s
Common Stock other than pursuant to the Merger, or the tax consequences to holders of stock options issued by Frisch’s which
are canceled or converted, as the case may be, in connection with the Merger. Furthermore, this discussion applies only to holders
that hold their Frisch’s Common Stock as “capital assets” within the meaning of Section 1221 of the Code (generally,
property held for investment). In addition, this discussion does not address all aspects of U.S. federal income tax consequences
that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special rules,
such as:
| • | dealers
or traders subject to a mark-to-market method of tax accounting with respect to Frisch’s
Common Stock; |
| • | persons
holding Frisch’s Common Stock as part of a straddle, hedging transaction, conversion
transaction, integrated transaction or constructive sale transaction; |
| • | holders
whose functional currency is not the U.S. dollar; |
| • | persons
who acquired Frisch’s Common Stock through the exercise of employee stock options
or otherwise as compensation; |
| • | banks
and certain other financial institutions; |
| • | regulated
investment companies; |
| • | real
estate investment trusts; |
| • | partnerships,
S corporations or other pass-through entities; |
| • | controlled
foreign corporations and passive foreign investment companies; |
| • | certain
former citizens or residents of the United States; |
| • | tax-exempt
organizations; |
| • | tax-qualified
retirement plans; or |
| • | persons
subject to the United States alternative minimum tax. |
If
a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) holds Frisch’s Common Stock,
the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the
partnership. Partnerships holding Frisch’s Common Stock and partners in such partnerships should consult their tax advisors
as to the particular U.S. federal income tax consequences of the Merger to them.
U.S.
Holders
For
purposes of this discussion, the term “U.S. holder” means a beneficial owner of Frisch’s Common Stock that is:
| • | a
citizen or resident of the United States; |
| • | a
corporation, or other entity taxable as a corporation for U.S. federal income tax purposes,
created or organized under the laws of the United States, any state thereof or the District
of Columbia; |
| • | an
estate the income of which is subject to U.S. federal income taxation regardless of its
source; or |
| • | a
trust if (i) a court within the United States can exercise primary supervision over the
trust’s administration and one or more U.S. persons are authorized to control all
substantial decisions of the trust or (ii) it has a valid election in effect under applicable
U.S. Treasury regulations to be treated as a U.S. person. |
The
conversion of Frisch’s Common Stock into the right to receive cash in the Merger will be a taxable transaction for U.S.
federal income tax purposes. In general, a U.S. holder whose shares of Frisch’s Common Stock are converted into the right
to receive cash in the Merger will recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the
difference, if any, between the amount of cash received with respect to such shares and the U.S. holder’s adjusted tax basis
in such shares. Gain or loss will be determined separately for each block of Frisch’s Common Stock (i.e., shares of Frisch’s
Common Stock acquired at the same cost in a single transaction). Such gain or loss generally will be treated as long-term capital
gain or loss if the U.S. holder’s holding period in Frisch’s Common Stock exceeds one year at the time of the completion
of the Merger. Long- term capital gains of non-corporate U.S. holders generally are subject to U.S. federal income tax at preferential
rates. The deductibility of capital losses is subject to limitations. Certain U.S. holders that are individuals, trusts or estates
are subject to a 3.8 percent U.S. federal tax on certain investment income, including gain from the conversion the Frisch’s
Common Stock into the right to receive cash in the Merger.
Non-U.S.
Holders
A
“non-U.S. holder” is a beneficial owner of Frisch’s Common Stock that is not a U.S. holder or a partnership
(or any other entity classified as a partnership for U.S. federal income tax purposes). Payments made to a non-U.S. holder upon
the conversion of the shares of Frisch’s Common Stock into the right to receive cash in the Merger generally will not be
subject to U.S. federal income tax unless:
| • | the
gain, if any, on such shares is effectively connected with a trade or business of the
non-U.S. holder in the United States (and, if required by an applicable income tax treaty,
is attributable to the non-U.S. holder’s permanent establishment in the United
States); |
| • | the
non-U.S. holder is an individual who is present in the United States for 183 days or
more in the taxable year of the exchange of shares of Frisch’s Common Stock for
cash pursuant to the Merger and certain other conditions are met; or |
| • | the
non-U.S. holder owned, directly or under certain constructive ownership rules of the
Code, more than 5 percent of Frisch’s Common Stock at any time during the five-year
period preceding the Merger, and Frisch’s is or has been a “United States
real property holding corporation” within the meaning of Section 897(c)(2) of the
Code for U.S. federal income tax purposes at any time during the shorter of the five-year
period preceding the Merger or the period that the non-U.S. holder held Frisch’s
Common Stock. |
A
non-U.S. holder described in the first bullet point immediately above will be subject to regular U.S. federal income tax on any
gain from the conversion of shares of Frisch’s Common Stock into the right to receive cash in the Merger as if the non-U.S.
holder were a U.S. holder, subject to an applicable income tax treaty providing otherwise. If such non-U.S. holder is a foreign
corporation, it may also be subject to a branch profits tax equal to 30 percent of its effectively connected earnings and profits
(or a lower treaty rate). A non-U.S. holder described in the second bullet point immediately above will be subject to tax at a
rate of 30 percent (or a lower treaty rate) on any gain realized, which may be offset by U.S.-source capital losses recognized
in the same taxable year, even though the individual is not considered a resident of the United States.
Frisch’s
has not undertaken the analysis necessary to determine whether or not it is or has been at any time during the five-year period
preceding the Effective Time of the Merger a “United States real property holding corporation” for U.S. federal income
tax purposes.
Information
Reporting and Backup Withholding
Payments
made in exchange for the Frisch’s Common Stock generally will be subject to information reporting unless the holder is an
“exempt recipient” and may also be subject to backup withholding at a rate of 28 percent. To avoid backup withholding,
U.S. holders that do not otherwise establish an exemption should complete and return Internal Revenue Service Form W-9, certifying
that such U.S. holder is a U.S. person, the taxpayer identification number provided is correct and such U.S. holder is not subject
to backup withholding. A non-U.S. holder that provides the applicable withholding agent with an Internal Revenue Service Form
W-8BEN (or other applicable IRS Form W-8) will generally establish an exemption from backup withholding.
Amounts
withheld under the backup withholding rules are not additional taxes and may be refunded or credited against a holder’s
U.S. federal income tax liability, provided the relevant information is timely furnished to the Internal Revenue Service.
THIS DISCUSSION
OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. WE URGE YOU TO CONSULT
WITH YOUR OWN TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION, AS
WELL AS ANY TAX CONSEQUENCES OF THE MERGER ARISING UNDER THE FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE,
LOCAL, FOREIGN OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
ADVISORY
VOTE ON CERTAIN EXECUTIVE COMPENSATION MATTERS
(PROPOSAL
2)
Pursuant
to Section 14A of the Exchange Act, we are seeking a non-binding advisory vote on the approval of certain compensation matters
of Named Executive Officers, Craig F. Maier and Mark R. Lanning, as disclosed in this proxy statement in accordance with the compensation
disclosure rules of the SEC. The Board approved these elements of executive compensation at their May 21, 2015 special Board meeting.
Shareholders
hold an advisory vote on executive compensation annually. Accordingly, shareholders approved executive compensation at the 2013
and 2014 Annual Shareholders Meetings. This proposal, commonly known as a “Say-on-Pay” proposal, gives you as a shareholder
the opportunity to endorse or not endorse our executive pay program for the Named Executive Officers.
This
non-binding, advisory vote is not intended to address the previously submitted overall compensation proposal of our Named Executive
Officers and Frisch’s compensation principles, policies and practices, but rather to address certain specific items of compensation.
The specific items of compensation set by the Compensation Committee and approved by the Board are: a $340,000 bonus to Mark R.
Lanning, CFO and Vice President - Finance; two paintings appraised at $4,200 awarded to Craig F. Maier, President and CEO; and
Mr. Maier’s interim Employment Agreement Extension, which extends month-to-month until the closing of the Merger. The Compensation
Committee and the Board believe that our compensation philosophy, design and practices are effective and appropriate in implementing
our strategic goals. Accordingly, we ask our shareholders to vote “FOR” the following resolution:
“RESOLVED,
that the recommendation of the Compensation Committee, voted on and approved by the Board of Directors, for the Award of Special
Bonus to Mark R. Lanning is hereby accepted and approved in the amounts recommended by the Committee; that the recommendation
of the Committee, voted on and approved by the Board of Directors, for an award to Craig F. Maier in the form and manner recommended
by the Committee is hereby accepted and approved; and that the interim extension of the employment agreement between the Company
and Craig F. Maier is hereby approved.”
The
vote on the Certain Executive Compensation Matters Proposal is a vote separate and apart from the vote on the Merger Proposal.
Accordingly, you may vote to approve the Merger Proposal and vote not to approve the Certain Executive Compensation Matters Proposal,
and vice versa.
Because
your vote is advisory, it will not be binding upon Frisch’s or the Board, Holding, or the Surviving Corporation. However,
Frisch’s, our Board and the Compensation Committee value the opinions of our shareholders and to the extent there is any
significant vote against the certain compensation of the named executive officers as disclosed in this proxy statement, we will
consider our shareholders’ concerns and the Compensation Committee and the Board will evaluate whether any actions are necessary
to address those concerns.
Approval
of this proposal requires the affirmative vote of the holders of a majority of the votes cast with respect to this matter in person
or represented by proxy at the Special Meeting and entitled to vote thereon (provided a quorum is present in person or by proxy).
Abstentions and the failure to vote your shares will have no effect on the outcome of the proposal. Similarly, broker non-votes
will have no effect on the outcome of the proposal.
The
Board unanimously recommends a vote “FOR” advisory approval of the Certain Executive Compensation Matters Proposal
as disclosed in this proxy statement.
ADJOURNMENT
PROPOSAL
(PROPOSAL
3)
Frisch’s
shareholders are being asked to approve a proposal that will give us authority to adjourn the Special Meeting for the purpose
of soliciting additional proxies in favor of the Merger Proposal if there are not sufficient votes at the time of the Special
Meeting to approve the Merger Proposal. If a quorum does not exist, the Special Meeting may be adjourned to another place, date
or time if approved by the holders of a majority of the votes cast with respect to the motion to adjourn in person or represented
by proxy. If the Adjournment Proposal is approved, the Special Meeting could be adjourned by the Board. In addition, the Board,
as permitted under the terms of the Merger Agreement, could postpone the Special Meeting before it commences, whether for the
purpose of soliciting additional proxies or for other reasons. If the Special Meeting is adjourned or postponed for the purpose
of soliciting additional proxies, shareholders who have already submitted their proxies will be able to revoke them at any time
prior to their use. If you sign and return a proxy and do not indicate how you wish to vote on any proposal, your shares will
be voted in favor of the Adjournment Proposal. Frisch’s does not intend to call a vote on this proposal if the Merger Proposal
has been approved at a Special Meeting.
The
Board unanimously recommends a vote “FOR” the Adjournment Proposal.
FUTURE
FRISCH’S SHAREHOLDER PROPOSALS
Frisch’s
does not expect to hold its 2015 annual meeting of shareholders unless the Merger is not completed. If the Merger is not completed,
Frisch’s shareholders as of the applicable Record Date will continue to be entitled to attend and participate in Frisch’s
annual meeting of shareholders. If Frisch’s holds its 2015 annual meeting of shareholders, shareholder proposals intended
to be presented for inclusion in Frisch’s proxy statement and form of proxy pursuant to Rule 14a-8 of the Exchange Act for
such meeting must have been received at Frisch’s principal executive offices by Donald A. Bodner, Secretary, at Frisch’s
Restaurants, Inc. 2800 Gilbert Avenue, Cincinnati, Ohio 45206-1206, Telephone (513) 559-5216, Attention: Donald A. Bodner, Secretary,
on or before, July 8, 2015 and must have met the requirements of Rule 14a-8.
MULTIPLE
SHAREHOLDERS SHARING ONE ADDRESS
In
accordance with Rule 14a-3(e)(1) under the Exchange Act, one proxy statement will be delivered to two or more shareholders
who share an address, unless Frisch’s has received contrary instructions from one or more of the shareholders.
Frisch’s will deliver promptly upon written or oral request a separate copy of the proxy statement to a shareholder at
a shared address to which a single copy of the proxy statement was delivered. Requests for additional copies of the proxy
statement, and requests that in the future separate proxy statements be sent to shareholders who share an address, should be
directed to: Frisch’s Restaurants, Inc. 2800 Gilbert Avenue, Cincinnati, Ohio 45206-1206, Telephone (513) 559-5216,
Attention: Donald A. Bodner, Secretary. In addition, shareholders who share a single address but receive multiple copies of
the proxy statement may request that in the future they receive a single copy by contacting Frisch’s at the address and
phone number set forth in the prior sentence.
WHERE
YOU CAN FIND MORE INFORMATION
Frisch’s
is subject to the reporting requirements of the Exchange Act. Accordingly Frisch’s files annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy any document that we file with the SEC at the Public
Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. In addition, Frisch’s SEC filings also are available to the public
at the internet website maintained by the SEC at www.sec.gov. Frisch’s also make available free of charge through
its website its Form 10-Ks, Form 10-Qs, and Form 8-Ks, and Form 4s, as soon as reasonably practicable after it electronically
files such reports or amendments with, or furnishes them to, the SEC. Frisch’s internet website address is www.frischs.com.
The information located on, or hyperlinked or otherwise connected to, Frisch’s website is not, and shall not be deemed to
be, a part of this proxy statement or incorporated into any other filings that we make with the SEC.
The
SEC allows us to “incorporate by reference” the information we file with the SEC into this proxy statement, which
means that we can disclose important information to you by referring you to other documents filed separately with the SEC. The
information incorporated by reference is deemed to be part of this proxy statement, except that information that we file later
with the SEC will automatically update and supersede this information. This proxy statement incorporates by reference the documents
listed below that have been previously filed with the SEC (other than, in each case, documents or information deemed to have been
furnished and not filed in accordance with SEC rules):
| • | Frisch’s
Annual Report on Form 10-K for the fiscal year ended June 3, 2014; |
| • | Frisch’s
Quarterly Reports on Form 10-Q for the periods ended September 23, 2014, December 16,
2014, and March 10, 2015; and |
| • | Current
Reports on Form 8-K dated August 5, 2014, October 22, 2014, October 24, 2014, January
20, 2015, February 6, 2015, March 13, 2015, March 20, 2015, April 8, 2015, and May 22,
2015. |
We
also incorporate by reference into this proxy statement additional documents that Frisch’s may file with the SEC under Section
13(a), 13(C), 14 or 15(d) of the Exchange Act, from the date of this proxy statement until the date of the Special Meeting; provided,
however, that we are not incorporating by reference any additional documents or information furnished and not filed with the SEC.
You
may request a copy of documents incorporated by reference at no cost, by writing to Donald A. Bodner, Secretary, Frisch’s
Restaurants, Inc., 2800 Gilbert Avenue, Cincinnati, Ohio 45206-1206, or by calling (513) 559-5216.
THIS
PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM
IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED
BY REFERENCE INTO THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS ACCURATE AS OF ANY
DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO SHAREHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
FRISCH'S
RESTAURANTS, INC.
2800
GILBERT AVENUE
CINCINNATI, OH 45206 |
VOTE
BY INTERNET - www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern
Daylight Savings Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the
web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
VOTE
BY MAIL
Mark,
sign, and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing,
c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
VOTE
BY PHONE – 1-___-___-____
Use
any touch-one telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on _________ __, 2015. Have
your proxy card in hand when you call and then follow the instructions. |
TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
M49020-P29724 |
|
KEEP
THIS PORTION FOR YOUR RECORDS. |
|
|
DETACH
AND RETURN THIS PORTION ONLY. |
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
FRISCH'S
RESTAURANTS, INC.
The
Board of Directors of Frisch’s Restaurants, Inc. recommends that you vote FOR Proposals 1, 2 and 3.
|
|
|
For |
|
Against |
|
Abstain |
1. |
Approval of the Agreement
and Plan of Merger, dated as of May 21, 2015, among Frisch’s Restaurants, Inc., FRI Holding Company, LLC, and FRI Merger
Sub, LLC. |
|
¨ |
|
¨ |
|
¨ |
|
|
|
|
|
|
|
|
2. |
Approval, on a non-binding,
advisory basis, of Certain Named Executive Officer Compensation Matters. |
|
¨ |
|
¨ |
|
¨ |
|
|
|
|
|
|
|
|
3. |
Approval of an adjournment
of the Special Meeting of Shareholders of Frisch’s Restaurants, Inc., if necessary or appropriate, for the purpose of
soliciting additional votes for the approval of the Merger Proposal. |
|
¨ |
|
¨ |
|
¨ |
The undersigned
hereby acknowledges receipt of the Notice of Special Meeting of Shareholders, dated _____, 2015, and the Proxy Statement furnished
therewith.
Please indicate
if you plan to attend this meeting. |
¨ |
¨ |
|
|
Yes |
No |
|
This
Proxy is solicited on behalf of the Company’s Board of Directors. The Proxy, when properly executed, will be voted in the
manner directed herein by the undersigned. If no direction is made but the Proxy is properly signed, this Proxy will be voted
for the approval of Proposal 1, for Proposals 2 and 3, and in the discretion of the proxies, in accordance with any recommendations
of the Board of Directors, on any other matters that may properly be presented at the meeting. If cumulative voting is properly
declared with respect to the election of Directors, the votes will be cast in such a way as to effect the election of all nominees,
or as many thereof as possible, in accordance with the recommendations of the Board of Directors.
To
change the address on your account, please check the box at right |
¨ |
and indicate your
new address in the address space on the reverse side. |
|
Please note that
changes to the registered name(s) on the account may |
|
not be submitted
via this method. |
|
PLEASE
SIGN, DATE, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Note:
Please sign exactly as your name or names appear(s) on this Proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation,
please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign
in partnership name by authorized person.
|
|
|
|
|
Signature
[Please sign within this box] |
Date |
|
Signature
(if Joint Owners) |
Date |
SPECIAL
MEETING OF THE SHAREHOLDERS OF
FRISCH’S
RESTAURANTS, INC.
__________
___, 2015
NOTICE
OF INTERNET AVAILABILITY OF PROXY MATERIALS:
The
Notice of Special Meeting and Proxy Statement
are
available at www.frischs.com.
These
items are also available at www.proxyvote.com.
Please
sign, date, and mail your proxy card in the envelope provided as soon as possible.
↓ Please
detach along perforated line and mail in the envelope provided IF you are not voting via the Internet. ↓
PROXY
FRISCH'S
RESTAURANTS, INC.
SPECIAL
MEETING OF SHAREHOLDERS AUGUST 11, 2015 at 9:00 AM
This
proxy is solicited by the Board of Directors.
The undersigned
hereby appoints Craig F. Maier and Daniel W. Geeding, each or either of them, as the undersigned’s proxies, with full power
of substitution, to represent and to vote all common stock of Frisch's Restaurants, Inc. (the "Company") which the undersigned
is entitled to vote at the Special Meeting of Shareholders of the Company to be held at the executive offices of Frisch’s
Restaurants, Inc., 2800 Gilbert Avenue, Cincinnati, Ohio 45206-1206, on Tuesday, August 11, 2015, at 9:00 a.m., Eastern Daylight
Savings Time, and at any and all adjournments thereof, as fully and with the same force and effect as the undersigned could do
if personally present. The proxies are directed to vote the shares as set forth on the reverse side.
This
proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted
in accordance with the Board of Directors' recommendations.
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Address
Changes/Comments: _______________________________________________________ |
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(If you noted any Address
Changes/Comments above, please mark corresponding box on the reverse side.) |
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(Continued and to be
signed and dated on reverse side) |
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AGREEMENT
AND PLAN OF MERGER
among
FRI
Holding Company, LLC, a Delaware limited liability company
and
FRI
Merger Sub, LLC, an Ohio limited liability company
and
Frisch’s
Restaurants, Inc., an Ohio corporation
dated as of
May 21, 2015
EXECUTION VERSION
AGREEMENT
AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER is dated as of May 21, 2015 (this “Agreement”), by and among FRI Holding Company,
LLC, a Delaware limited liability company (“Parent”), FRI Merger Sub, LLC, an Ohio limited liability company,
and a wholly owned subsidiary of Parent (“Merger Sub”), and Frisch’s Restaurants, Inc., an Ohio corporation
(the “Company”). Each of the aforementioned entities is referred to herein as a “Party”
and, together, as the “Parties.”
WITNESSETH:
WHEREAS,
the Parties intend that Merger Sub be merged with and into the Company (the “Merger”), with the Company surviving
the Merger as a wholly owned subsidiary of Parent in a transaction intended to qualify as a taxable stock acquisition under Section
1001 of the Internal Revenue Code of 1986, as amended (the “Code”);
WHEREAS,
the Board of Directors of the Company (the “Company Board”) has (i) determined that it is in the best interests
of the Company and its shareholders, and declared it advisable, to enter into this Agreement, (ii) adopted this Agreement, (iii)
approved the execution, delivery and performance of this Agreement and the transactions contemplated hereby, and (iv) resolved
to recommend adoption of this Agreement by the shareholders of the Company;
WHEREAS,
the sole member of Parent has adopted and approved this Agreement, and has caused Merger Sub to adopt and approve this Agreement,
and declared it advisable for Parent and Merger Sub, respectively, to enter into this Agreement;
WHEREAS,
concurrently with the execution and delivery of this Agreement, as a condition and inducement to the willingness of the Company
to enter into this Agreement, NRD Partners I, L.P. (“Guarantor”) has executed and delivered a guarantee in
favor of the Company dated concurrently with this Agreement (the “Guarantee”), pursuant to which Guarantor
is guaranteeing certain obligations of Parent and Merger Sub in connection with this Agreement; and
WHEREAS,
the Parties desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also
to prescribe certain conditions to the Merger;
NOW,
THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained in this Agreement, and
other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, the Parties agree as follows:
ARTICLE
1. THE MERGER
1.1 The
Merger. Subject to the terms and conditions of this Agreement,
in accordance with the laws of the State of Ohio (“Ohio Law”), at the Effective Time (as defined in Section
1.3, below), Merger Sub shall merge with and into the Company. The Company shall be the surviving corporation in the Merger (the
“Surviving Corporation”) and shall continue its corporate existence under Ohio Law. As of the Effective Time,
the separate corporate existence of Merger Sub shall cease.
1.2 Closing.
The closing of the Merger (the “Closing”)
shall take place at 10:00 a.m., Eastern time, on a date to be specified by Parent and the Company (the “Closing Date”),
which shall be no later than the earlier of (i) the first Tuesday after satisfaction or waiver of the conditions set forth in
Article 6 (other than the delivery of items to be delivered at the Closing and other than satisfaction of those conditions
that by their nature are to be satisfied at the Closing, it being understood that the occurrence of the Closing shall remain subject
to the delivery of such items and the satisfaction or waiver of such conditions at the Closing), or (ii) September 30, 2015. The
Closing will take place at the offices of Cummins & Brown LLC, 312 Walnut Street, Suite 1000, Cincinnati, Ohio 45243, unless
another place is agreed to in writing by Parent and the Company.
1.3 Effective
Time. The Merger shall become effective upon the filing of the
Articles of Merger with the Ohio Secretary of State (the “Articles of Merger”) or at such later time as is
agreed to by Parent and the Company and set forth in the Articles of Merger (the “Effective Time”).
1.4 Effects
of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in this Agreement, the Articles of Merger and Ohio Law.
1.5 Articles
of Incorporation; Code of Regulations.
(a) At
the Effective Time, the Company’s Third Amended Articles of Incorporation (“Company Articles”) shall
be amended in form and substance satisfactory to Parent, and, as so amended, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended.
(b)
At the Effective Time, the Company’s Amended and Restated Code of Regulations dated October 2, 2006 (“Company Regulations”)
shall be amended in form and substance satisfactory to Parent, shall be the Code of Regulations of the Surviving Corporation until
thereafter amended.
1.6 Directors
and Officers of the Surviving Corporation.
(a)
Each of the Parties shall take all necessary action to cause the managers of Merger Sub immediately before the Effective Time
to be the directors of the Surviving Corporation immediately following the Effective Time, until their respective successors are
duly elected or appointed and qualified or their earlier death, resignation or removal in accordance with the Articles of Incorporation
and Regulations of the Surviving Corporation.
(b) The
officers of Merger Sub immediately before the Effective Time shall be the officers of the Surviving Corporation until their respective
successors are duly appointed and qualified or their earlier death, resignation or removal in accordance with the Articles of
Incorporation and Regulations of the Surviving Corporation.
1.7 Further
Actions. If at any time after the Effective Time, the
Surviving Corporation shall determine, in its sole discretion, or shall be advised, that any deeds, bills of sale, instruments
of conveyance, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm its
right, title or interest in, to or under any of the rights, properties or assets of either of the Company or Merger Sub, or otherwise
to carry out this Agreement, then the officers and directors of the Surviving Corporation shall be authorized to execute and deliver,
in the name and on behalf of either the Company or Merger Sub, all such deeds, bills of sale, instruments of conveyance, assignments
and assurances and to take and do, in the name and on behalf of each of such parties or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all right, title or interest in, to and under such
rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE
2. CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
2.1 Effect
on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the Company or the holder of any of the following securities:
(a) Conversion
of Common Stock. Subject to the adjustments set forth in Section 2.2, each share of common stock, no par value per
share, of the Company issued and outstanding immediately before the Effective Time (collectively, the “Company Common
Stock” and, each, a “Share”), including all Restricted Shares (as defined in Section 2.4(a)),
shall be converted automatically into the right to receive $34.00 per Share in cash (the “Merger Consideration”),
without interest, except for shares to be cancelled in accordance with Section 2.1(b) and Dissenting Shares as provided
for in Section 2.5 below. All Shares that have been converted into the right to receive the Merger Consideration as provided
in this Section 2.1(a) shall be automatically cancelled upon the conversion thereof and shall cease to exist, and the holders
of certificates that immediately before the Effective Time represented such Shares shall cease to have any rights with respect
to such Shares other than the right to receive the Merger Consideration pursuant to this Section 2.1(a) upon the surrender
of such certificates in accordance with Section 2.3, without interest. Stock Options and the rights associated therewith
pursuant to this Agreement are described in Section 2.4 of this Agreement.
(b) Parent-
and Merger Sub-Owned Shares. Each Share that is owned directly by Parent, Merger Sub or the Company (as treasury stock or
otherwise) or any of their respective direct or indirect Subsidiaries, immediately before the Effective Time (the “Cancelled
Shares”) shall be cancelled and shall cease to exist, and no consideration shall be delivered in exchange for such cancellation.
(c) Conversion
of Merger Sub Membership Interests. Each membership interest in Merger Sub issued and outstanding immediately before the Effective
Time shall be converted at the Effective Time into and become one validly issued, fully paid and nonassessable share of common
stock, no par value per share, of the Surviving Corporation. At the Effective Time, new stock certificates of the Surviving Corporation
shall be issued and will be deemed for all purposes to represent all issued and outstanding shares of common stock of the Surviving
Corporation into which membership interests in Merger Sub were converted in accordance with the immediately preceding sentence.
2.2 Changes
in Capital Stock. The Merger Consideration shall be
adjusted to reflect fully the effect of any reclassification, stock split, reverse split, stock dividend (including any dividend
or distribution of securities convertible into Company Common Stock), reorganization, recapitalization or other like change with
respect to Company Common Stock occurring (or for which a record date is established) after the date hereof and before the Effective
Time.
2.3 Exchange
of Certificates.
(a) Paying
Agent. At or before the Effective Time, Parent shall deposit, or shall cause to be deposited, with U.S. Bank National Association,
425 Walnut Street, Cincinnati, Ohio 45202, or, in the alternative, an agent chosen by the Parent and acceptable to the Company,
to act as paying agent hereunder (the “Paying Agent”), in trust for the benefit of holders of the Shares, cash
in U.S. dollars sufficient to pay the aggregate Merger Consideration in exchange for all of the Shares outstanding immediately
before the Effective Time, payable upon due surrender of the certificates that immediately before the Effective Time represented
Shares (“Certificates”) (or effective affidavits of loss in lieu thereof) or noncertificated Shares represented
by book entry (“Book-Entry Shares”) pursuant to the provisions of this Article 2 (such cash being hereinafter
referred to as the “Exchange Fund”).
(b) Payment
Procedures.
(i) As
soon as reasonably practicable after the Effective Time and in any event not later than the fifth business day following the Closing
Date, the Surviving Corporation shall instruct the Paying Agent to mail to each holder of record of Shares that were converted
into the Merger Consideration pursuant to Section 2.1 the following: (A) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to Certificates shall pass, only upon delivery of Certificates (or effective
affidavits of loss in lieu thereof) or Book-Entry Shares to the Paying Agent and shall be in such form and have such other provisions
as Parent and the Company may mutually agree) and (B) instructions for use by the Shareholder in effecting the surrender of Certificates
(or effective affidavits of loss in lieu thereof) or Book-Entry Shares in exchange for the Merger Consideration.
(ii) Upon
surrender of Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares to the Paying Agent together
with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other
documents as may be reasonably required by the Paying Agent, the holder of such Certificates (or effective affidavits of loss
in lieu thereof) or Book-Entry Shares shall be entitled to receive from the Exchange Fund in exchange therefor an amount in cash
equal to the product of (x) the number of Shares represented by such holder’s properly surrendered Certificates (or effective
affidavits of loss in lieu thereof) or Book-Entry Shares and (y) the Merger Consideration. No interest will be paid or accrued
on any amount payable upon due surrender of Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares.
In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, payment upon
due surrender of the Certificate may be paid to such a transferee if the Certificate formerly representing such Shares is presented
to the Paying Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable
stock transfer Taxes have been paid or are not applicable. The Merger Consideration, paid in full with respect to any Share in
accordance with the terms hereof, shall be deemed to have been paid in full satisfaction of all rights pertaining to such Share.
Any portion of the Merger Consideration made available to the Paying Agent in respect of any Dissenting Shares (as defined below)
shall be dealt with in accordance with Section 2.5 below.
(iii) Each
of the Paying Agent, the Company, Parent, Merger Sub and their respective Subsidiaries or agents, as applicable, shall be entitled
to deduct and withhold from any amounts otherwise payable under this Agreement such amounts as it is required to deduct and withhold
under the Code, and the regulations promulgated thereunder, or any provision of state, local or foreign Tax Law with respect to
the making of such payment. To the extent that amounts are so deducted or withheld, such deducted or withheld amounts (A) shall
be remitted by the applicable entity to the appropriate Governmental Entity (as defined in Section 3.5) within the period
required under applicable Law and (B) shall be treated for all purposes of this Agreement as having been paid to the person in
respect of which such deduction or withholding was made.
(c) Closing
of Transfer Books. At the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further
registration of transfers on the stock transfer books of the Surviving Corporation of the Shares that were outstanding immediately
before the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or Parent for
transfer, the holder of Certificates shall be given a copy of the letter of transmittal referred to in Section 2.3(b) and
instructed to comply with the instructions in that letter of transmittal in order to receive the cash to which such holder is
entitled pursuant to this Article 2.
(d) Termination
of Exchange Fund. Any portion of the Exchange Fund (including the proceeds of any investments thereof) that remains undistributed
to the former holders of Shares for 180 days after the Effective Time shall be delivered to the Surviving Corporation upon demand,
and any former holders of Shares who have not surrendered their Shares in accordance with this Section 2.3 shall thereafter
look only to the Surviving Corporation for payment of their claim for the Merger Consideration, without any interest thereon,
upon due surrender of their Shares.
(e) No
Liability. Anything herein to the contrary notwithstanding, none of the Company, Parent, Merger Sub, the Surviving Corporation,
the Paying Agent or any other person shall be liable to any holder or former holder of Shares or to any other person for any amount
properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.
(f) Investment
of Exchange Fund. The Paying Agent shall invest all cash included in the Exchange Fund as reasonably directed by Parent; provided,
however, that any investment of such cash shall be limited to direct short-term obligations of, or short-term obligations fully
guaranteed as to principal and interest by, the U.S. government. Any interest and other income resulting from such investments
shall be paid to the Surviving Corporation pursuant to Section 2.3(d).
(g) Lost
Certificates. In the case of any Certificate that has been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the Paying Agent or Parent, the
posting by such person of a bond in customary amount as indemnity against any claim that may be made against it with respect to
such Certificate, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate a check in the amount
of the number of Shares represented by such lost, stolen or destroyed Certificate multiplied by the Merger Consideration, without
any interest thereon.
2.4 Company
Stock Plan.
(a) Immediately
before the Effective Time, each share of Company Common Stock granted subject to time-based, performance or other vesting or lapse
restrictions pursuant to any Company Stock Plan (as defined in Section 2.4(b)) (each, a “Restricted Share”),
that is outstanding and subject to such restrictions immediately before the Effective Time, shall automatically vest and any performance
conditions shall be deemed to have been satisfied to the maximum extent possible such that the recipient shall be entitled to
100% of the shares of Company Common Stock subject to such Restricted Share, and the Company’s reacquisition right with
respect to each Restricted Share shall lapse, and the holder thereof shall, subject to this Article 2, be entitled to receive
the Merger Consideration (as defined in Section 2.1(a)) with respect to each such Restricted Share.
(b) The
Company shall take such action as shall be required:
(i) to
cause the vesting of any unvested options to purchase Company Common Stock (“Company Stock Options”) granted
under any stock option plans or other equity-related plans of the Company (the “Company Stock Plans”) to be
accelerated in full immediately before the Effective Time; and
(ii) to
cause each outstanding Company Stock Option to represent, as of the Effective Time, solely the right to receive, in accordance
with this Section 2.4 and subject to Section 2.3(b)(iii), a lump sum cash payment in the amount of the Option Consideration,
if any, with respect to such Company Stock Option and to no longer represent the right to purchase Company Common Stock or any
other equity security of the Company, Parent, the Surviving Corporation or any other person or any other consideration.
(c)
Each holder of a Company Stock Option cancelled pursuant to Section 2.4(b)(ii) shall receive from Parent or the Surviving
Corporation, in respect and in consideration of each such Company Stock Option, as soon as practicable following the Effective
Time (but in any event not later than five Business Days), an amount (net of applicable Taxes) equal to the product of (i) the
excess, if any, of (A) the Merger Consideration per Share over (B) the exercise price per share of Company Common Stock subject
to such Company Stock Option, multiplied by (ii) the total number of Shares subject to such Company Stock Option (whether or not
then vested or exercisable), without any interest thereon (the “Option Consideration”). In the event that the
exercise price of any Company Stock Option is equal to or greater than the Merger Consideration, such Company Stock Option shall
be cancelled, without any consideration being payable in respect thereof, and shall have no further force or effect. The Option
Consideration shall constitute the Merger Consideration for each Share that was subject to a Company Stock Option, and the holder
of such Shares shall receive no other payment or consideration, and such Shares shall be cancelled immediately upon payment of
the Option Consideration.
(d) Following
the execution of this Agreement, (i) if and as required by the Company Stock Plans, the Company shall mail to each person who
is a holder of Company Stock Options a letter describing the treatment of and payment for such Company Stock Options pursuant
to this Section 2.4 and providing instructions for use in obtaining payment for such Company Stock Options, and (ii) the
Company shall take all actions necessary or appropriate to terminate the Company Stock Plans as of the Effective Time (including
any necessary or appropriate action of the Company Board). Parent shall, or shall cause the Surviving Corporation to, at all times
from and after the Effective Time maintain sufficient liquid funds to satisfy its obligations to holders of Company Stock Options
pursuant to this Section 2.4.
2.5 Dissenting
Shares. Notwithstanding any provision of this Agreement to the
contrary, including Section 2.1, shares of Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares cancelled in accordance with Section 2.1(b)) and held by a holder who has not voted in favor of
adoption of this Agreement or consented thereto in writing and who has properly exercised appraisal rights of such shares in accordance
with Ohio Law (such shares of Company Common Stock being referred to collectively as the “Dissenting Shares”
until such time as such holder fails to perfect or otherwise loses such holder's appraisal rights under Ohio Law with respect
to such shares) shall not be converted into a right to receive the Merger Consideration, but instead shall be entitled to only
such rights as are granted by Ohio Law; provided, however, that if, after the Effective Time, such holder fails to perfect, withdraws
or loses such holder's right to appraisal pursuant to Ohio Law or if a court of competent jurisdiction shall determine that such
holder is not entitled to the relief provided by Ohio Law, such shares of Company Common Stock shall be treated as if they had
been converted as of the Effective Time into the right to receive the Merger Consideration in accordance with Section 2.1(a),
without interest thereon, upon surrender of such Certificate or Book-Entry Share. The Company shall provide Parent prompt written
notice of any demands received by the Company for appraisal of shares of Company Common Stock, any withdrawal of any such demand
and any other demand, notice or instrument delivered to the Company prior to the Effective Time pursuant to Ohio Law that relates
to such demand. The Company shall keep Parent fully informed of the status of all negotiations and proceedings with respect to
such demands, and consult with Parent prior to making any payment with respect to, or settle or offer to settle, any such demands.
2.6 Company
Executive Savings Plan. For
each share of Company Common Stock that has been allocated to participants under the Company’s Executive Savings Plan, such
participant shall be entitled to receive the Merger Consideration, without interest, in the form and at the time specified by
the terms of the Company’s Executive Savings Plan. Allocated Shares under the Company’s Executive Savings Plan shall
be automatically cancelled and shall cease to exist upon payment of the Merger Consideration. Any Shares under the
Company’s Executive Savings Plan that have been reserved for issuance, but that have not yet been allocated to participants
immediately before the Effective Time, shall be cancelled and cease to exist and no consideration shall be delivered in exchanged
for the cancellation of such Shares.
ARTICLE
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
For
purposes of this Agreement, “Company Material Adverse Effect” means any event, change, circumstance, occurrence,
effect or state of facts that is or would reasonably be expected to become, individually or in the aggregate, (a) materially adverse
to the business, assets, condition or results of operations of the Company taken as a whole, or (b) materially impairs or prevents
or materially delays the ability of the Company to consummate the transaction contemplated by this Agreement; provided, however,
that none of the following events, changes, circumstances, or statements of fact, either alone or in combination, will constitute
a Company Material Adverse Effect under this definition: (i) those events generally affecting the industry of the Company or the
economy or financial or securities markets of the United States, including effects resulting from any regulatory or political
conditions or developments in general (unless such events, changes, circumstances, occurrences, effects and states of fact have
a disproportionate impact on the Company taken as a whole); (ii) any outbreak or escalation of hostilities or declared or undeclared
acts of war or terrorism; (iii) changes or proposed changes in Law or GAAP (unless such changes or proposed changes have a disproportionate
impact on the Company taken as a whole); (iv) any change in the market price or trading volume of any securities of the Company;
(v) any change of or failure to meet, in and of itself, any internal or public projections, forecasts, budgets or estimates of
or relating to the Company for any period; (vi) any hurricane, tropical storm, flood, forest fire, earthquake, winter storm, snow
storm, or any similar natural disaster; (vii) the execution, announcement, performance and existence of this Agreement; (viii)
any action taken or not taken by the Company at the request of or with the approval of the Buyer; or (ix) any action taken by
Parent, Merger Sub or any of their Affiliates.
The
Company represents and warrants to Parent and Merger Sub that as of the date of this Agreement and at the Effective Time (as and
if called for in the manner set forth in this Agreement), except as set forth in the disclosure schedule delivered by the Company
to Parent and Merger Sub on the date of this Agreement (the “Company Disclosure Schedule”) (it being understood
that any information set forth on one section or subsection of the Company Disclosure Schedule shall be deemed to apply and quality
the section or subsection of this Agreement to the extent that it is reasonably apparent that such information is relevant to
such other section or subsection):
3.1 Organization;
Standing; Power. The Company is a corporation duly organized
and validly existing under Ohio Law, has all requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as now being conducted and is duly qualified to do business and is in good standing (where
applicable as a legal concept) as a foreign corporation in each jurisdiction in which the character of the properties it owns,
operates or leases or the nature of its activities makes such qualification necessary, except for such failures to be so organized,
qualified or in good standing that would not be reasonably expected to have a Company Material Adverse Effect.
3.2 Capitalization.
(a) The
authorized capital stock of the Company consists of 15,000,000 shares, consisting of 12,000,000 shares of Company Common Stock
and 3,000,000 shares of Company Preferred Stock. The rights and privileges of each class of the Company’s capital stock
are as set forth in the Company Articles. As of the close of business on the date hereof, (i) 5,131,579 shares of Company Common
Stock were outstanding, and (ii) no shares of Company Preferred Stock were outstanding.
(b) An
aggregate of 38,750 shares of Company Common Stock were reserved for issuance pursuant to Company Stock Options, 95,190 shares
of Company Common Stock were held as Restricted Shares (which Restricted Shares are included in the number of Shares listed in
Section 3.2(a)). Section 3.2(b) of the Company Disclosure Schedule sets forth a complete and accurate list, as of
the close of business on the date hereof, of (i) all outstanding Company Stock Options, indicating with respect to each such Company
Stock Option the name of the holder thereof, the number of shares of Company Common Stock subject to such Company Stock Option,
the exercise price and the date of grant, (ii) all outstanding Restricted Shares, indicating with respect to such Restricted Shares
the name of the holder thereof and the number of Restricted Shares held thereby, and (iii) all other outstanding equity compensation
arrangements relating to any Company Securities, including all shares of Company Common Stock that have been allocated to participants
under the Company’s Executive Savings Plan, and the name of the holders thereof. The Company has made available to Parent
complete and accurate copies of all Company Stock Plans, the forms of all stock option agreements evidencing Company Stock Options
and the forms of all agreements pursuant to which the currently outstanding Restricted Shares were awarded.
(c) Except
(i) as set forth in this Section 3.2, and (ii) as reserved for future grants under Company Stock Plans, (A) there are no
equity securities of any class of, or other voting interests in, the Company or any Subsidiary or any security exchangeable into
or exercisable for such equity securities issued, reserved for issuance or outstanding, and (B) there are no options, warrants,
equity securities, calls, rights, commitments or agreements of any character to which the Company or any of its Subsidiaries is
a party or by which the Company or any of its Subsidiaries is bound obligating the Company or any of its Subsidiaries to issue,
exchange, transfer, deliver or sell, or cause to be issued, exchanged, transferred, delivered or sold, shares of capital stock
or other equity interests of, or voting interests in, the Company or any security or rights convertible into or exchangeable or
exercisable for any such shares or other equity interests or voting rights, or obligating the Company or any of its Subsidiaries
to grant, extend, accelerate the vesting of, otherwise modify or amend or enter into any such option, warrant, equity security,
call, right, commitment or agreement (the securities listed in clauses (A) and (B) above, collectively, “Company Securities”).
(d) Simultaneously
with entering into this Agreement, Craig F. Maier and Karen F. Maier have each signed a Voting Agreement, in the form substantially
approved by Parent, agreeing to vote each Share held by such person in favor of the transactions contemplated in this Agreement,
subject to the reservations and conditions stated in each Voting Agreement. Except for those certain Voting Agreements identified
on Section 3.2(d) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to or
is bound by any agreements or understandings with respect to the voting (including voting trusts and proxies) or sale or transfer
(including agreements imposing transfer restrictions) of any Company Securities.
(e) All
outstanding Company Securities, upon issuance on the terms and conditions specified in the instruments pursuant to which they
are issuable, will be, duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation
of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any
provision of Ohio Law, the Company Articles or the Company Regulations, or any agreement to which the Company is a party or is
otherwise bound. All outstanding Company Securities have been issued or granted, as applicable, in compliance in all material
respects with all applicable securities Laws.
(f) There
are no obligations, contingent or otherwise, of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any Company Securities or to provide funds to the Company or any Subsidiary for any such purpose other than as provided in award
agreements relating to Company Stock Options or Restricted Shares as they relate to using shares of Company Common Stock to pay
withholding of income Taxes at the minimum statutory levels.
(g) There
was no outstanding indebtedness for borrowed money of the Company or its Subsidiaries other than as reflected in the consolidated
balance sheet of the Company as of June 3, 2014, or as filed with the Company SEC Form 10-Q for the period ended March 10, 2015,
or incurred in the ordinary course of business consistent in all material respects with past practice after the date of the such
balance sheet.
3.3 Subsidiaries.
(a) Section
3.3(a) of the Company Disclosure Schedule sets forth, the name and jurisdiction of organization for each Subsidiary. For purposes
of this Agreement, the term “Subsidiary” means, with respect to any Party, any corporation, partnership, trust,
limited liability company or other noncorporate business enterprise in which such Party (or another Subsidiary of such Party)
holds stock or other ownership interests representing more than 50% of the voting power of all outstanding stock or ownership
interests of such entity.
(b) Each
Subsidiary of the Company is duly organized, validly existing and in good standing (where applicable as a legal concept) under
the Laws of the jurisdiction of its organization, has all requisite company power and authority to own, lease and operate its
properties and assets and to carry on its business as now being conducted, and is duly qualified to do business and is in good
standing (where applicable as a legal concept) as a foreign company in each jurisdiction where the character of its properties
owned, operated or leased or the nature of its activities makes such qualification necessary, except for such failures to be so
organized, qualified or in good standing that would not be reasonably expected to have a Company Material Adverse Effect. All
of the outstanding shares of capital stock and other equity securities or interests of each Subsidiary are owned, of record and
beneficially, by the Company or another of its Subsidiaries free and clear of all security interests, liens, claims, pledges,
agreements, limitations in the Company’s voting rights, charges or other encumbrances. Except as set forth on Section
3.3(b) of the Company Disclosure Schedule, there are no outstanding or authorized options, warrants, rights, agreements or
commitments to which the Company or any of its Subsidiaries is a party or which are binding on any of them providing for the issuance,
disposition or acquisition of any capital stock of any Subsidiary of the Company. There is no outstanding equity compensation
with respect to any Subsidiary of the Company. Except as listed on Section 3.3(b) of the Company Disclosure Schedule, there
are no voting trusts, proxies or other agreements or understandings with respect to the voting of any capital stock of any Subsidiary
of the Company.
(c) The
Company does not control, directly or indirectly, or have any material direct or indirect equity participation or similar interest
in any corporation, partnership, limited liability company, joint venture, trust or other business association or entity that
is not a Subsidiary of the Company, other than as set forth on Section 3.3(c) of the Company Disclosure Schedule. Neither
the Company nor any of its Subsidiaries has any funding commitment with respect to any of the entities or investments described
in Section 3.3(c) of the Company Disclosure Schedule except as set forth in the governing documents for such entities or
investments, all of which have been made available to Parent.
3.4 Authority;
No Violation.
(a) The
Company has all requisite corporate power and authority to execute and deliver this Agreement and, subject to the approval of
this Agreement by the minimum affirmative vote required by applicable Law of the holders of the outstanding shares of Company
Common Stock entitled to vote at such meeting (the “Requisite Shareholder Approval”), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby
have been duly, validly authorized by the Company Board. The Company Board has determined that this Agreement and the transactions
contemplated hereby are advisable and in the best interests of the Company and its shareholders, has passed resolutions adopting
this Agreement and the transactions contemplated hereby, has directed that the Agreement be submitted to the Company’s shareholders
for consideration at a duly held meeting of such shareholders and has recommended that the Company’s shareholders vote in
favor of the approval of this Agreement and the transactions contemplated hereby (“Company Board Recommendation”).
Except for the Requisite Shareholder Approval, no other corporate proceedings on the part of the Company are necessary to approve
this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered
by the Company and (assuming due authorization, execution and delivery by Parent and Merger Sub) constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with its terms (except as may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar Laws affecting the rights of creditors generally and subject to general principles
of equity whether applied in a court of law or a court of equity (the “Bankruptcy and Equity Exception”)).
(b) Neither
the execution and delivery of this Agreement by the Company nor the consummation by the Company of the transactions contemplated
hereby, nor compliance by the Company with any of the terms or provisions of this Agreement, will (i) violate any provision of
the Company Articles or the Company Regulations, or (ii) assuming that the Requisite Shareholder Approval and the consents, approvals
and filings referred to in Section 3.5 are duly obtained and/or made, (A) violate any statute, code, ordinance, rule, regulation
or Order (as defined in Section 3.9(b)) applicable to the Company, any of its Subsidiaries or any of their respective properties
or assets or (B) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a
default (or an event that, with notice or lapse of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien
upon any of the respective properties or assets of the Company or any of its Subsidiaries under, any of the terms, conditions
or provisions of any Company Material Contract (as defined in Section 3.14(a)), except, in the case of clause (B) of this
Section 3.4(b), as set forth on Section 3.4(b) of the Company Disclosure Schedule or that would not be reasonably
expected to have a Company Material Adverse Effect. Section 3.4(b) of the Company Disclosure Schedule identifies all leases
for real property to which the Company or any of its Subsidiaries is a party for which consent of the landlord is required in
connection with the Merger and that are material to the Company’s business.
3.5 Consents
and Approvals. No consents or approvals of or filings or registrations
with any federal, state or foreign court, arbitrational tribunal, administrative agency or commission or other governmental authority
or instrumentality or self-regulatory organization (each, a “Governmental Entity”) are necessary in connection
with the execution and delivery of this Agreement or the consummation by the Company of the Merger and the other transactions
contemplated by this Agreement, except for (a) notices or filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the “HSR Act”), or any other antitrust Law, (b) the filing of the Articles of Merger with the Ohio
Secretary of State pursuant to Ohio Law, (c) filings required under, and compliance with the requirements of, the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder (the “Securities Act”) and
the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange
Act”), (d) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required
under applicable state securities Laws or the rules and regulations of the New York Stock Exchange, and (e) such other consents,
approvals, licenses, permits, orders, authorizations, registrations, declarations, notices and filings that, if not obtained or
made, would not be reasonably expected to have a Company Material Adverse Effect.
3.6 SEC
Filings; Financial Statements; Information Provided.
(a) The
Company has filed, or furnished, as the case may be, all registration statements, forms, reports and other documents (including
exhibits and all information incorporated therein) required to be filed by the Company with, or furnished by the Company to, the
Securities and Exchange Commission (the “SEC”) since December 31, 2009. All such registration statements, forms,
reports and other documents (including exhibits and all information incorporated therein) filed or furnished after such date (including
those that the Company may file after the date hereof until the Closing) are referred to herein as the “Company SEC Reports.”
Except for the Company’s quarterly report on Form 10-Q filed with the SEC for the period ended December 16, 2014 (the “Q2
Fiscal 2015 Report”), the Company SEC Reports (i) were or will be filed on a timely basis, (ii) at the time filed, complied,
or will comply when filed, in all material respects with the applicable requirements of the Securities Act and the Exchange Act,
as the case may be, and the rules and regulations of the SEC thereunder applicable to such Company SEC Reports and (iii) did not
or will not at the time they were or are filed contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such Company SEC Reports or necessary in order to make the statements in such Company SEC Reports, in
the light of the circumstances under which they were made, not misleading. There are no outstanding or unresolved comments in
comment letters received from the SEC or its staff. There has been no material correspondence between the SEC and the Company
since December 31, 2009 that is not available on the SEC’s Electronic Data Gathering and Retrieval database. No Subsidiary
of the Company is subject to the reporting requirements of Section 13(a) or Section 15(d) of the Exchange Act.
(b) Except
for the matters described in the Company’s Q2 Fiscal 2015 Report and the Company’s quarterly report on Form 10-Q filed
with the SEC for the period ended March 10, 2015 (the “Q3 Fiscal 2015 Report”), each of the consolidated financial
statements (including, in each case, any related notes and schedules) contained or incorporated by reference or to be contained
or incorporated by reference in the Company SEC Reports at the time filed (i) complied or will comply as to form in all material
respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, (ii)
were or will be prepared in accordance with United States generally accepted accounting principles (“GAAP”)
applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited interim financial statements, as permitted by the SEC on Form 10-Q under the Exchange Act) and (iii)
fairly presented or will fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries
as of the dates indicated and the consolidated results of their operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments.
(c) The
information to be supplied by or on behalf of the Company for inclusion in the proxy statement to be sent to the shareholders
of the Company in connection with the Company Shareholder Meeting (as defined in Section 5.5(a)) (as amended or supplemented
from time to time and including any document incorporated by reference therein, the “Proxy Statement”) shall
not, on the date the Proxy Statement is first mailed to shareholders of the Company or on any other date of filing with the SEC,
or at the time of the Company Shareholder Meeting, contain any statement that, at such time and in light of the circumstances
under which it shall be made, is false or misleading with respect to any material fact, or omits to state any material fact necessary
in order to make the statements made therein not false or misleading in light of the circumstances under which they were or shall
be made, or omits to state any material fact necessary to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Shareholder Meeting that has become false or misleading; provided, however, that the Company
makes no representation or warranty to Parent as to the accuracy of any information described in Section 4.4 of this Agreement.
The Proxy Statement will comply in all material respects with the requirements of the Exchange Act. If at any time before the
Company Shareholder Meeting any fact or event relating to the Company or any of its Affiliates that should be set forth in an
amendment or supplement to the Proxy Statement should be discovered by the Company or should, to the Company’s knowledge,
occur, the Company shall, promptly after becoming aware thereof, inform Parent of such fact or event and take all actions necessary
to so amend or supplement the Proxy Statement. For purposes of this Agreement, the term “Affiliate” when used
with respect to any party means any person who is an “affiliate” of that party within the meaning of Rule 405 promulgated
under the Securities Act.
(d) Except
for the matters described in the Company’s Q2 and Q3 Fiscal 2015 Reports, the Company maintains (i) disclosure controls
and procedures required by Rule 13a-15 or 15d-15 under the Exchange Act, which disclosure controls and procedures are effective
to ensure that all information required to be disclosed by the Company, including its Subsidiaries, in the reports that it files
or submits under the Exchange Act, is accumulated and communicated to the Company’s management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure; and (ii) a system
of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) which is designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with GAAP, and includes those policies and procedures that: (A) pertain to the maintenance of
records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company
and its Subsidiaries; (B) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and that receipts and expenditures are being made only in accordance with authorizations
of management and directors of the Company; and (C) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the assets of the Company or its Subsidiaries that could have a material effect
on the financial statements.
(e) Except
as disclosed in the Q2 and Q3 Fiscal 2015 Reports: (i) the Company’s management has completed an assessment of the effectiveness
of the Company’s system of internal control over financial reporting in compliance with the requirements of Section 404
of the Sarbanes-Oxley Act for the fiscal year ended June 3, 2014, and such assessment concluded that such controls were effective,
(ii) the Company has continued to maintain an effective system of internal controls and there were no changes in the Company’s
internal control over financial reporting since June 3, 2014 that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting, and (iii) since December 31, 2009, neither the Company
nor, to the knowledge of the Company, the Company’s independent registered accountant has identified or been made aware
of: (a) any significant deficiency or material weakness in the design or operation of internal control over financial reporting
utilized by the Company; (b) any illegal act or fraud, whether or not material, that involves the Company’s management
or other employees; or (c) any claim or allegation regarding any of the foregoing.
(f) Except
as disclosed in the Q2 and Q3 Fiscal 2015 Reports, since December 31, 2009, subject to any applicable grace periods, the Company
and each of its officers and directors have been in compliance in all material respects with (i) the applicable listing, corporate
governance and other rules and regulations of the New York Stock Exchange, (ii) the applicable provisions of Sarbanes-Oxley Act
of 2002, as amended and including the rules and regulations promulgated thereunder, and (iii) all requirements under rules under
the Exchange Act. Neither the Company nor any of its Subsidiaries has outstanding (nor has arranged or modified since the enactment
of the Sarbanes-Oxley Act) any “extensions of credit” to directors or executive officers of the Company or any of
its Subsidiaries.
(g) Neither
the Company nor of its Subsidiaries is a party to or has any obligation or other commitment to become a party to any securitization
transaction, off-balance sheet partnership or any similar agreement where the result, purpose or intended effect of such agreement
is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any of its Subsidiaries
in any of the Company’s published financial statements or other Company SEC Reports.
(h) Except
as disclosed in the Q2 and Q3 Fiscal 2015 Reports, to the knowledge of the Company, none of the Company SEC Reports is the subject
of ongoing SEC review and there are no inquiries or investigations by the SEC or any internal investigations pending or threatened,
in each case regarding any accounting practices of the Company or its Subsidiaries.
3.7 No
Undisclosed Liabilities. Except (a) as reflected or reserved
against in the Company’s financial statements as of and for the period ended June 3, 2014 (as amended or restated, if applicable)
or the notes thereto included in the Company’s annual report on Form 10-K filed with the SEC on August 7, 2014, (b) as reflected
or reserved against in the Company’s financial statements as of and for the periods ended September 23, 2014 and December
16, 2014 (as amended or restated, if applicable) or the notes thereto included in the Company’s quarterly report on Form
10-Q filed with the SEC on October 30, 2014 and March 13, 2015, respectively (c) for current liabilities or obligations incurred
in the ordinary course of business consistent with past practice since the date of such financial statements, (d) for liabilities
incurred on behalf of the Company or any Subsidiary in connection with this Agreement and (e) for liabilities or obligations that
have been discharged or paid in full, neither the Company nor any of its Subsidiaries has any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, and whether due or to become due, that would be required by GAAP to be
reflected or reserved against on a consolidated balance sheet (or the notes thereto) of the Company and its Subsidiaries, other
than those which would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect.
3.8 Absence
of Certain Changes or Events. Except as set forth in the Company
SEC Reports, since June 3, 2014:
(a) No
event has occurred that has had or is reasonably expected to have, either individually or in the aggregate with all other events,
a Company Material Adverse Effect; and
(b) The
Company and its Subsidiaries have carried on their respective businesses in all material respects in the ordinary course of business
consistent with their past practice.
3.9 Legal
Proceedings.
(a) Except
as disclosed on Section 3.9(a) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is a
party to any, and there is no pending or, to the Company’s knowledge, threatened, legal, administrative, arbitral or other
proceeding, claim, action, charge, complaint, petition, representation, assessment or governmental or regulatory investigation
of any nature (“Proceeding”) against the Company or any of its Subsidiaries or any of their officers or directors
in their capacities as such, and, to the Company’s knowledge, no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of a Proceeding.
(b) Except
as disclosed on Section 3.9(b) of the Company Disclosure Schedule, to the Company’s knowledge, there is no injunction,
judgment, decree, ruling, opinion, writs, decision, determination, directive, or regulatory restriction (other than those of general
application that apply to similarly situated companies or their Subsidiaries) imposed upon the Company, any of its Subsidiaries
or the assets of the Company or any of its Subsidiaries (“Order”).
3.10 Compliance
with Laws.
(a) Except
as set forth in Section 3.10(a) of the Company Disclosure Schedule, the Company and each of its Subsidiaries are, and have
been since January 1, 2010, in compliance with, not in violation of, and have not received any written notice alleging any violation
with respect to, any state or federal statutes, laws, common laws, ordinances, codes, rules, Orders, regulations, governmental
guidelines or interpretations having the force of law, permits, licenses, franchises, regulations, and orders of Governmental
Entities (collectively, “Laws”) with respect to the conduct of its business, or the ownership or operation
of its properties or assets, except for failure to comply or violations that would not (i) reasonably be expected to have a Company
Material Adverse Effect, or (ii) as of the date hereof, prevent or materially impair or delay the consummation of the Merger.
To the Company’s knowledge, no event has occurred or circumstance exists that (with or without notice or lapse of time)
may constitute or result in a material violation by the Company or any of its Subsidiaries of, or a failure on the part of Company
or any of its Subsidiaries to materially comply with, any Laws. Neither the Company nor any of its Subsidiaries has received a
written notice from any Governmental Entity indicating an intention to conduct any investigation or review, and, to the Company’s
knowledge, no current investigation or review by any Governmental Entity is threatened regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any Laws.
(b) Section
3.10(b) of the Company Disclosure Schedule contains a complete and accurate list of all grants, authorizations, licenses,
permits, registrations, easements, variances, exceptions, consents, certificates, approvals and orders necessary for the Company
or any of its Subsidiaries to own, lease and operate the properties of the Company and its Subsidiaries or to carry on its business
as it is now being conducted (the “Company Permits”). Each of the Company and its Subsidiaries is in possession
of all Company Permits and no suspension or cancellation of any material Company Permits is pending, except where the failure
to have or the suspension or cancellation of any Company Permits would not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect. To the Company’s knowledge, no event has occurred or circumstance exists
that may (with or without notice or lapse of time) constitute or result, directly or indirectly, in a material violation of, or
a failure to comply with, any term or requirement of any Company Permits.
3.11 Tax
Matters.
(a) Each
of the Company and its Subsidiaries (i) has duly and timely filed (including all applicable extensions) all income Tax Returns
and all other material Tax Returns required to be filed by it on or before the date of this Agreement (all such returns being
accurate and complete in all material respects), (ii) has paid or caused to be paid all Taxes shown thereon as arising and due,
and (iii) has duly paid or made provision in accordance with GAAP for the payment of all material Taxes that have been incurred
or are due or claimed to be due from it by federal, state, foreign or local taxing authorities (including, if and to the extent
applicable, those due in respect of its properties, income, business, capital stock, deposits, franchises, licenses, sales and
payrolls) other than Taxes that are not yet delinquent, that have not been finally determined or that are being contested in good
faith and for which no provision or reserve is required in accordance with GAAP.
(b) The
Company and its Subsidiaries have given or otherwise made available to Parent true, correct and complete copies of all Tax Returns
required to be filed by the Company for any tax period ending after June 1, 2010. The Company and its Subsidiaries have complied
in all material respects with all applicable information reporting and withholding requirements with respect to Taxes (including
withholding of Taxes in connection with amounts paid or owing to any employee, former employee or independent contractor).
(c) Except
as disclosed on Section 3.11(c) of the Company Disclosure Schedule, (i) the Company and its Subsidiaries are not currently
under examination or audit by the Internal Revenue Service (“IRS”), (ii) there are no material Proceedings
pending, or asserted, for Taxes or assessments upon the Company or any of its Subsidiaries for which the Company does not have
reserves that are adequate under GAAP, (iii) there is no currently effective agreement or other document extending, or having
the effect of extending, the period of assessment or collection of any material Taxes, and (iv) neither the Company nor any of
its Subsidiaries is a party to or is bound by any Tax-sharing, -allocation or –indemnification agreement or arrangement,
excluding any such agreement or arrangement (x) exclusively between or among the Company and its Subsidiaries, (y) entered into
in the ordinary course of business and the principal subject of which is not Taxes or liability for Taxes, or (z) where the inclusion
of a Tax indemnification or allocation provision is customary or incidental to an agreement the primary nature of which is not
Tax sharing or indemnification.
(d) Except
for Permitted Liens, there are no Liens for Taxes upon the assets or properties of the Company or any of its Subsidiaries. Within
the past five years, neither the Company nor any of its Subsidiaries has been a “distributing corporation” or a “controlled
corporation” in a distribution intended to qualify under Section 355(a) of the Code. Except as disclosed on Section 3.11(d)
of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is required to include in income for a
taxable period beginning after the Closing Date any adjustment pursuant to Section 481(a) of the Code, no such adjustment has
been proposed by the IRS with respect to taxable periods beginning after the Closing Date, and no pending request for permission
to change any accounting method has been submitted to the IRS by the Company or any of its Subsidiaries. Neither the Company nor
any of its Subsidiaries has participated in a “listed transaction” as defined in Treasury Regulation Section 1.6011-4(b)(2).
(e) As
used in this Agreement, the term “ Tax” or “Taxes” means (i) all federal, state, local and
foreign income, estimated, excise, gross receipts, gross income, ad valorem, profits, gains, property, capital, sales,
transfer, use, payroll, employment, severance, withholding, duties, intangibles, franchise, backup-withholding, value-added and
other taxes, charges, levies or like assessments together with all penalties and additions to tax and interest thereon, (ii) any
liability for Taxes described in clause (i) above under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign Law) and (iii) any and all liability for the payment of any amounts as a result of any express or implied obligation
to indemnify any other person, or any successor or transferee liability, in respect of any items described in clause (i) or (ii)
above.
(f) As
used in this Agreement, the term “Tax Return” means a report, return or other information (including any amendments)
required to be supplied to a Governmental Entity with respect to Taxes including, where permitted or required, combined or consolidated
returns for any group of entities that includes the Company or any of its Subsidiaries.
3.12 Employee
Benefit Matters.
(a) Section
3.12(a) of the Company Disclosure Schedule sets forth a true, complete and correct list of each “employee benefit plan”
as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended and including the regulations promulgated
thereunder (“ERISA”), as well as each employee or director benefit or compensation plan, arrangement or agreement
and each employment, consulting, bonus, incentive or deferred compensation, vacation, equity-based, severance, termination, retention,
change-in-control, profit-sharing, material fringe benefit, health, welfare, death or disability benefit plan, program, agreement
or arrangement for the benefit of any current, former or retired employee, service provider or director of the Company or any
of its Subsidiaries entered into, maintained or contributed to by the Company or any of its Subsidiaries or to which the Company
or any of its Subsidiaries is obligated to contribute or has any liability (such plans, programs, agreements, arrangements and
commitments, collectively, the “Company Benefit Plans”). Other than the Company’s Subsidiaries, there
are no other entities that together with the Company would be treated as a single employer under Section 414(b), (c), (m) or (o)
of the Code (each such entity, an “ERISA Affiliate”).
(b) With
respect to each Company Benefit Plan, the Company has made available to Parent and Merger Sub true, complete and correct copies
of the following (as applicable): (i) the written document evidencing such Company Benefit Plan (or a description, if the Company
Benefit Plan is not written); (ii) any summary plan description and summaries of material modification; (iii) any related trust
agreements, insurance contracts or documents of any other funding arrangements; (iv) all amendments, modifications or supplements
to any such document; (v) the most recent actuarial report and financial statements, if any are required by applicable Law; (vi)
with respect to any Company Benefit Plan intended to be “qualified” under Section 401(a) of the Code, the most recent
determination letter from the IRS; (vii) the most recent Form 5500 required to have been filed with the U.S. Department of Labor,
including all schedules thereto; and (viii) any notices to or from the IRS or any office or representative of the U.S. Department
of Labor or any other Governmental Entity relating to any compliance issues in respect of any such Company Benefit Plan.
(c) To
the Company’s knowledge, with respect to each Company Benefit Plan, except as set forth on Section 3.12(c) of the
Company Disclosure Schedule:
(i) each
Company Benefit Plan is being and has been administered in all material respects in accordance with ERISA, the Code and all other
applicable Laws and in all material respects in accordance with its terms and governing documents;
(ii) no
Proceeding or Order has been threatened, asserted, instituted or, to the Company’s knowledge, is anticipated against any
of the Company Benefit Plans (other than a routine Proceeding for benefits and appeals of such Proceeding), any trustee or fiduciaries
thereof, the Company (including any Subsidiary thereof), any director, officer or employee thereof, or any of the assets of any
trust of any of the Company Benefit Plans;
(iii) all
contributions, premiums and other payments required to be made with respect to any Company Benefit Plan have been made on or before
their due dates under applicable Law and the terms of such Company Benefit Plan;
(iv) all
obligations of the Company, each Subsidiary and ERISA Affiliate and each fiduciary under each Company Benefit Plan, whether arising
by operation of Law or by contract, required to be performed under Section 4980B of the Code, as amended, and Sections 601 through
609 of ERISA, or similar state Law (“COBRA”), including such obligations that may arise by virtue of the transactions
contemplated by this Agreement, have been or will be timely performed in all material respects; and
(v) none
of the Company Benefit Plans is under audit or investigation by the IRS, the U.S. Department of Labor or any other Governmental
Entity.
(d) Each
Company Benefit Plan that is intended to be “qualified” under Section 401(a) of the Code has received a favorable
determination letter from the IRS to such effect and to the knowledge of the Company no condition exists that could reasonably
be expected to (i) result in the revocation of any such letter, or (ii) otherwise adversely affect the qualified status of each
such Company Benefit Plan.
(e) No
Company Benefit Plan that is subject to Title IV of ERISA and the minimum funding standards of Section 412 of the Code or Section
302 of ERISA has failed to meet such minimum funding standards or otherwise failed to materially comply with Section 412 of the
Code or Section 302 of ERISA. The Company and its ERISA Affiliates have not incurred any material liability to the Pension Benefit
Guaranty Corporation (other than Pension Benefit Guaranty Corporation premiums, which have been paid when due) or otherwise under
Title IV of ERISA or under the Code that has not been satisfied in full and to the Company’s knowledge no condition exists
that could reasonably be likely to result in the Company or any of its ERISA Affiliates incurring any material liability under
Title IV of ERISA. To the Company’s knowledge, no reportable event has occurred within the meaning of Section 4043(c) of
ERISA for which the 30-day notice requirement has not been waived.
(f) No
Company Benefit Plan is a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA. Neither the Company
nor any of its Subsidiaries or ERISA Affiliates has within the last six years (i) contributed to or had an obligation to contribute
to any multiemployer plan or (ii) incurred any withdrawal liability from any multiemployer plan. Except as set forth on Section
3.12(f) of the Company Disclosure Schedule, the fair market value of the assets held under each Company Benefit Plan that
is subject to Title IV of ERISA is sufficient so as to permit a “standard termination” of each such plan under Section
4041(b) of ERISA without the need to make any additional contributions to such plan. With respect to each Company Benefit Plan
subject to Title IV of ERISA, the adjusted funding target attainment percentage (within the meaning of Section 436 of the Code)
for the plan year of the plan that includes the date of this Agreement, as certified by the plan’s actuary, is not less
than 80%. The sum of the (i) excess of the present value of accrued benefits under any Company Benefit Plan that is subject to
Title IV of ERISA over the current value of assets of such Company Benefit Plan, as of the most recent valuation date for such
Company Benefit Plan, and (ii) any amounts not contributed to a “rabbi” trust or individual grantor trust with respect
to the Company's Supplemental Executive Retirement Plan, and the Company's Nonqualified Deferred Compensation Plan, are described
on Section 3.12(f) of the Company Disclosure Schedule.
(g) Except
with respect to the Company Benefit Plans set forth on Section 3.12(g) of the Company Disclosure Schedule and except as
required by Sections 2.4 and 2.6 hereof, neither the execution or delivery of this Agreement nor the consummation
of the transactions contemplated by this Agreement will, either alone or in conjunction with any other event, (i) result in any
payment or benefit becoming due or payable, or required to be provided, to any current, former or retired director, executive
officer, employee, consultant, independent contractor or other service provider of the Company or any of its Subsidiaries or ERISA
Affiliates, (ii) increase the amount or value of any benefit or compensation otherwise payable or required to be provided to any
such director, employee or independent contractor, (iii) result in the acceleration of the time of payment, vesting or funding
of any such benefit or compensation or (iv) result in any amount failing to be deductible by reason of Section 280G of the Code
or be subject to any excise tax imposed under Section 4999 of the Code.
(h) The
Company, any other “disqualified person” (as defined in Section 4975 of the Code), any “party-in-interest”
(as defined in Section 3(14) of ERISA) and, to the knowledge of the Company, any trustee or administrator of any Company Benefit
Plan, have not engaged in a nonexempt “prohibited transaction,” as defined in Section 4975 of the Code and Section
406 of ERISA, in each case, that could reasonably be expected to give rise to any material tax or penalty under Section 4975 of
the Code or Sections 406, 502(i) or 502(l) of ERISA.
(i) Except
as set forth on Section 3.12(i) of the Company Disclosure Schedule and except as required by Sections 2.4 and 2.6
hereof, to the Company’s knowledge, no payment made or to be made in respect of any employee or former employee of the
Company or any of its Subsidiaries would reasonably be expected to be nondeductible by reason of Section 162(m) of the Code.
(j) To
the Company’s knowledge, no Company Benefit Plan that provides deferred compensation subject to Section 409A of the Code
(i) has failed to either materially comply with the requirements of Section 409A of the Code and the applicable guidance issued
thereunder in form and operation; (ii) has been funded in a manner described in Section 409A(b) of the Code; and (iii) provides
for the gross-up of any person with respect to any failure to comply with Section 409A of the Code.
(k) Except
as disclosed in Section 3.12(k) of the Company Disclosure Schedule, neither the Company nor its Subsidiaries (i) provides
health or welfare benefits for any retired or former employee or (ii) is obligated to provide health or welfare benefits to any
active employees after their retirement or other termination of service, unless required to do so under COBRA.
3.13 Labor
Matters.
(a) To
the Company’s knowledge, the Company and its Subsidiaries are and have been since January 1, 2010, in material compliance
with all applicable Laws relating to labor and employment, including those relating to wages, hours, collective bargaining, unemployment
compensation, workers’ compensation, equal employment opportunity, age and disability discrimination, immigration control,
employee classification, information privacy and security, payment and withholding of Taxes and continuation coverage with respect
to group health plans. Since January 1, 2010, there has not been, and there is not pending or, to the knowledge of the Company,
threatened, any material labor dispute, work stoppage, labor strike or lockout against the Company or any of its Subsidiaries
by employees.
(b) As
of the date hereof no employee of the Company or any of its Subsidiaries is covered by an effective or pending collective bargaining
agreement or similar labor agreement. As of the date hereof, to the knowledge of the Company, there has not been any activity
on behalf of any labor organization or employee group to organize any such employees. As of the date hereof, there is no (i) unfair
labor practice Proceeding against the Company or any of its Subsidiaries pending before the National Labor Relations Board or
any other labor relations tribunal or authority and, to the knowledge of the Company, no such Proceeding is threatened, (ii) Proceeding
pending before the National Labor Relations Board or any other labor relations tribunal or authority or (iii) grievance or pending
Proceeding against the Company or any of its Subsidiaries that arose out of or under any collective bargaining agreement.
(c) Section
3.13(c) of the Company Disclosure Schedule sets forth a true, complete and correct list of the following information for each
employee of the Company and each of its Subsidiaries with the title regional director, vice president or above (collectively,
the “Key Employees”) as of the Business Day immediately preceding the date hereof: name; employing entity;
job title; primary work location; and the Company’s or its Subsidiary’s classification of such employee as exempt
or not exempt from applicable minimum wage and overtime Laws. Except as disclosed in Section 3.13(c) of the Company Disclosure
Schedule, all employees and independent contractors, and other individual service providers of the Company or its Subsidiaries
are employed or retained on an “at-will” basis and can be terminated at any time, upon any grounds permitted under
applicable Laws.
3.14 Contracts.
(a) Section
3.14(a) of the Company Disclosure Schedule sets forth a complete and accurate list of all contracts and agreements to which
the Company or any of its Subsidiaries is a party:
(i) in
connection with which or pursuant to which the Company and its Subsidiaries paid, in the aggregate during the fiscal year ended
June 3, 2014, more than $500,000 to any vendor for merchandise resold by the Company and its Subsidiaries;
(ii) in
connection with which or pursuant to which, the Company or any of its Subsidiaries will be required to make payments or incur
costs in excess of $200,000 in either of the next two years;
(iii) any
Franchise Agreements (as defined in Section 3.24(b));
(iv) that
is a services agreement, equipment lease, logistics agreement, information technology agreement, agreement related to software
or intellectual property license (other than any architectural or construction-related contract) in connection with which or pursuant
to which the Company and its Subsidiaries paid, in the aggregate during the fiscal year ended June 3, 2014, more than $500,000
to any person;
(v) related
to indebtedness for borrowed money owed by the Company or any of its Subsidiaries having an outstanding amount in excess of $500,000
individually, other than any such indebtedness between or among any of the Company and any of its Subsidiaries;
(vi) that
prohibits or otherwise restricts, in any material respect, the Company or any of its Subsidiaries from freely engaging in business,
or competing with any person, anywhere in the world, including as provided in the agreement with Big Boy Restaurants International,
LLC;
(vii) that
requires the Company or any of its Subsidiaries to purchase from or engage a third-party for all of the Company’s requirements
for a given product or service, or obligates the Company or any of its Subsidiaries to conduct business on an exclusive basis
with any third party, or upon consummation of the Merger will obligate Parent, the Surviving Corporation or any of their respective
Subsidiaries to conduct business on an exclusive basis with any third party;
(viii) that
is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K promulgated by the SEC (“Regulation
S-K”)) with respect to the Company and its Subsidiaries, whether or not filed with the SEC;
(ix) that
is an employment or consulting agreement with any executive officer or other employee of the Company or any of its Subsidiaries
or member of the Company Board (or any former employee, executive officer or board member, to the extent such contract has continuing
obligations as of the date hereof);
(x)
that is a joint venture, partnership, limited liability company or other similar agreement or arrangement in which the Company
or any of its Subsidiaries is still a member, partner or shareholder in connection with which the Company or any of its Subsidiaries
has a recorded balance (on a GAAP basis) of more than $500,000;
(xi) providing
for indemnification or any guaranty by the Company or any Subsidiary thereof, that is material to the Company and its Subsidiaries,
individually, other than (x) any guaranty by the Company or a Subsidiary of any of the obligations of the Company or another wholly-owned
Subsidiary, or (y) providing for indemnification of customers, directors, officers or other persons in the ordinary course of
business;
(xii) that
involves the acquisition from another person or disposition to another person (other than acquisitions or dispositions of inventory,
merchandise, products, services, properties and other assets in the ordinary course of business), of assets or capital stock or
other equity interests for outside of the ordinary course of business;
in
the case of clauses (i) through (xii), other than those that are terminable by the Company or any of its Subsidiaries on no more
than 30 days’ notice without material liability or financial obligation to the Company or any of its Subsidiaries (collectively,
the “Company Material Contracts”). The Company has made available to Parent and Merger Sub a complete and accurate
copy of each Company Material Contract.
(b) Each
Company Material Contract is a valid and binding agreement of the Company or one of its Subsidiaries, as the case may be, and,
to the knowledge of the Company, any counterparty thereto, and is in full force and effect, except where the failure to be in
full force and effect would not reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any
of its Subsidiaries nor, to the Company’s knowledge, any other party to any Company Material Contract is in violation of
or in default under (nor does there exist any condition that, upon the passage of time or the giving of notice or both, would
cause such a violation of or default under) any Company Material Contract which violation or default would reasonably be expected
to result in a Company Material Adverse Effect.
(c) Except
for any conflicts, violations, breaches, defaults, terminations, cancellations, accelerations, losses, penalties or Liens, and
for any consents or waivers not obtained, that would not reasonably be expected to have a Company Material Adverse Effect or as
set forth in Section 3.4(b) of the Company Disclosure Schedule, the execution and delivery of this Agreement by the Company
do not, and the consummation by the Company of the transactions contemplated by this Agreement shall not conflict with, or result
in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right
of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, require a consent or waiver
under, constitute a change in control under, require the payment of a penalty under or result in the imposition of any Lien (other
than a Permitted Lien) on the Company’s or any of its Subsidiary’s assets under, any of the terms, conditions or provisions
of any Company Material Contract.
(d) To
its knowledge, neither the Company nor any of its Subsidiaries has entered into any transaction after January 1, 2010 that would
be subject to disclosure pursuant to Item 404 of Regulation S-K that has not been disclosed in the Company SEC Reports.
3.15 Property.
(a) Except
as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect,
the Company or one of its Subsidiaries has good and valid title to all of its tangible assets listed in Section 3.15(a)(i) of
the Company Disclosure Schedule, free and clear of all mortgages, security interests, pledges, liens and charges (collectively,
“Liens”), other than the following (each a “Permitted Lien” or collectively “Permitted
Liens): (i) Liens for current Taxes and assessments not yet past due or the amount or validity of which is being contested
in good faith by appropriate proceedings, (ii) inchoate mechanics’, workmen’s, repairmen’s, warehousemen’s
and carriers’ Liens arising in the ordinary course of business of the Company or such Subsidiary consistent with past practice,
(iii) any such matters of record, Liens and other imperfections of title that do not, individually or in the aggregate, materially
and adversely impair the continued ownership, value, use and operation of the assets to which they relate in the business of the
Company and its Subsidiaries as currently conducted, (iv) any liens, claims or judgments of a monetary nature, except as otherwise
classified as Permitted Liens hereunder, which are disclosed in the financial statements of the Company in the SEC Reports as
secured indebtedness, and which shall be paid at or prior to the Closing, (v) those matters provided in Section 3.15(a)(ii)
of the Company Disclosure Schedule, and (vi) any mortgages, security interests, pledges, liens, charges or encumbrances on
title affecting a ground lessor’s interest in any of the Leased Real Property or affecting the interest of a subtenant of
Company or its Subsidiaries therein (“Lessor’s Encumbrances”). Notwithstanding anything to the contrary
contained herein, except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, to the knowledge of the Company without independent investigation or inquiry, the Company or one of its
Subsidiaries has title to, or in the case of leased tangible assets, a leasehold interest in, all of its tangible assets listed
in Section 3.15(a)(iii) of the Company Disclosure Schedule to the extent disclosed therein. With regard to those owned and leased
tangible assets listed in Section 3.15(a)(iv) of the Company Disclosure Schedule, the Company makes no representation as to the
condition of the title or leasehold status of such tangible assets.
(b) Section
3.15(b) of the Company Disclosure Schedule sets forth a true and complete list of (i) all real property owned by the Company
or any of its Subsidiaries (the “Owned Real Property”), and (ii) all real property leased by or for the benefit
of the Company or any of its Subsidiaries (the “Leased Real Property”), identifying the current use(s) of each
such property. Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, the Company has delivered or made available to Parent copies of (i) the deeds and other instruments related
to title by which the Company and any of its Subsidiaries acquired such real property and interests, and copies of all title insurance
policies, title exceptions, environmental reports, engineering studies, opinions, abstracts, and surveys in the possession of
the Company or any of its Subsidiaries and relating to such property or interests, and (ii) all leases, subordination agreements,
non-disturbance agreements and leases and all amendments and modifications thereof related to the Leased Real Property. To the
Company’s knowledge, and except as other otherwise conditioned or disclosed herein and in the Company Disclosure Schedule,
each of the Company and its Subsidiaries has (i) insurable title in fee simple to all Owned Real Property, and (ii) insurable
leasehold title to all Leased Real Property, in each case, free and clear of all Liens, other than Permitted Liens. Except as
has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect,
no parcel of Owned Real Property, or Leased Real Property is subject to any governmental Order to be sold or is being condemned,
expropriated or otherwise taken by any Governmental Entity with or without payment of compensation therefor, nor, to the knowledge
of the Company, has any such condemnation, expropriation or taking been proposed or notice thereof received. Each of the Company
and its Subsidiaries enjoys peaceful and undisturbed possession under all such leases. To the knowledge of the Company, without
independent investigation, all leases of Leased Real Property and all amendments and modifications thereto are in full force and
effect, and there exists no material default under any such lease by the Company, any of its Subsidiaries or any other party thereto,
nor has any event occurred that, with notice or lapse of time or both, would constitute a material default thereunder by the Company,
any of its Subsidiaries or any other party thereto. To the Company’s knowledge, without independent investigation, no foreclosure
proceedings are pending on any Lessor’s Encumbrance, and no ground lessor is in default of any Lessor’s Encumbrance
or has otherwise failed to comply with, in any material respect, any Lessor’s Encumbrance, nor has any event occurred that,
with notice or lapse of time or both, would constitute a material default under any Lessor’s Encumbrance.
(c) Except
as set forth in this Section 3.15 and Section 3.4(a), Sections 3.15(a)(i)-(iv), and Section 3.15(b)
of the Company Disclosure Schedule, to the Company’s knowledge (i) there are no contractual or legal restrictions that preclude
or restrict the ability of the Company or any of its Subsidiaries to use any Owned Real Property or Leased Real Property for the
current use of such real property in all material respects, (ii) all plants, warehouses, distribution centers, structures and
other buildings on the Owned Real Property or Leased Real Property are in all material respects adequately maintained and are
in good operating condition and repair for the requirements of the business of the Company and its Subsidiaries as currently conducted
and are adequate for the uses to which they are being put, and none of such buildings, plants, structures, or equipment is in
need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost, and
except for ordinary wear and tear, (iii) the building, plants, structures, and equipment of the Company and its Subsidiaries are
sufficient for the continued conduct of the Company’s and the Subsidiaries’ businesses after the Closing in substantially
the same manner as conducted prior to the Closing, and (iv) all buildings, plants, and structures owned by the Company or its
Subsidiaries lie wholly within the boundaries of the Owned Real Property or Leased Real Property and do not encroach upon the
property of, or otherwise conflict with the property rights of, any other person, except as noted on title insurance policies.
3.16 Intellectual
Property.
(a) The
Company has uncontested ownership of and the right to us all trademarks and service marks involving the BIG BOY name and image,
and other associated trademarks and services marks, as described in agreements with Big Boy Restaurants International, LLC (the
“Big Boy Marks”), within the area comprising the states of Indiana; Kentucky; Ohio, except for the counties
of Cuyahoga, Lorain, Medina, Summit, Portage, Geauga and Lake; and Tennessee, except for the counties of Anderson, Blount, Campbell,
Claiborne, Cooke, Cumberland, Fentress, Grainger, Hamblen, Hancock, Jefferson, Knox, Loudon, Monroe, Morgan, Roane, Scott, Sevier
and Union (the “Core Territories”). The Company and Big Boy Restaurants International, LLC have filed concurrent
use registrations with the US Patent and Trademark Office to reflect a concurrent ownership in each Big Boy Mark, and have agreed
to file concurrent use registration with the US Patent and Trademark Office for any future acquired or developed Big Boy Marks.
(b) Section
3.16(b) of the Company Disclosure Schedule sets forth a true and complete list of all material registered trademarks and service
marks and other material intellectual property that is the subject of any registration or filing with any Governmental Entity,
and all pending applications with respect to any of the foregoing, that are owned by the Company or any of its Subsidiaries and
used by the Company or any of its Subsidiaries in the conduct of their businesses as currently conducted, including the Big Boy
Marks (“Company Registered IP”). Subject to concurrent registration rights with Big Boy Restaurants International,
LLC for the Big Boy Marks, each item of Company Registered IP is owned exclusively by the Company or one of its Subsidiaries,
materially free and clear of all Liens except for Permitted Liens, subsisting, unexpired and, to the knowledge of the Company,
valid and enforceable, in each case. Subject to the knowledge-qualified, noninfringement representation in Section 3.16(d)(ii)
below with respect to third-party patents, either the Company or a Subsidiary of the Company owns, or is licensed or otherwise
possesses adequate rights to use (in the manner and to the extent it has used the same), all trademarks, service marks, trade
names, domain names, copyrights, patents, trade secrets and other intellectual property of any kind (whether registered or unregistered)
used in their businesses as currently conducted and that are material to the businesses of the Company and its Subsidiaries taken
as a whole as currently conducted, including the Big Boy Marks (collectively, the “Company Intellectual Property”).
(c) Section
3.16(c) of the Company Disclosure Schedule sets forth a true, complete and correct list of all territorial restrictions on
the Company’s ownership of, or right to use, sublicense or grant Franchises for third-parties to use or sublicense, any
Company Intellectual Property, including the restrictions on the Company’s use of the Big Boy Marks outside of the Core
Territories (“Restricted Territories”). Outside of the Restricted Territories, there are no territorial limitations
on the Company’s ownership, use, or ability to sublicense or grant Franchises using, or grant others the right to sublicense
or grant Franchises using, any Company Intellectual Property.
(d) (i)
There is no pending or, to the knowledge of the Company, threatened Proceeding or Order by any person alleging infringement, misappropriation,
dilution or territorial encroachment by the Company or any of its Subsidiaries of/on the intellectual property rights of any person
or challenging the validity, enforceability or ownership of any Company Intellectual Property owned by or exclusively licensed
to the Company or any of its Subsidiaries or the right to use to any other Company Intellectual Property; (ii) the conduct of
the businesses of the Company and its Subsidiaries (A) has not infringed, misappropriated or diluted any intellectual property
rights (other than patents) and has not encroached on any Restricted Territory, (B) does not infringe, misappropriate or dilute,
any intellectual property rights (other than patents) or encroach on any Restricted Territory, and (C) to the knowledge of the
Company, does not infringe, misappropriate or dilute any patents of any person; (iii) there is no pending Proceeding or Order
made by the Company or any of its Subsidiaries alleging infringement, misappropriation or other violation by others of the Company
Intellectual Property, owned by or exclusively licensed to the Company or any of its Subsidiaries, including encroachment on the
Core Territories; (iv) to the knowledge of the Company, no person is infringing, misappropriating or diluting any Company Intellectual
Property owned by or exclusively licensed to the Company or any of its Subsidiaries, or is encroaching on the Core Territories;
(v) the consummation of the Merger and the other transactions contemplated by this Agreement will not result in the loss of, or
give rise to any right of any person to terminate or modify any of the Company’s or any Subsidiaries’ rights or obligations
under, any agreement under which the Company or any of its Subsidiaries grants to any person, or any person grants to the Company
or any of its Subsidiaries, a license or right under or with respect to any Company Intellectual Property, including the Company’s
rights to use the Big Boy Marks in the Core Territories; and (vi) no Company Intellectual Property owned by the Company or any
of its Subsidiaries is subject to any outstanding Order restricting or limiting the use, exploitation or licensing thereof by
the Company or any of its Subsidiaries, except that the Big Boy Marks are subject to concurrent registration rights with Big Boy
Restaurants International, LLC.
(e) The
Company and each of its Subsidiaries has taken commercially reasonable steps to maintain the Company Intellectual Property, including
by timely filing any necessary concurrent use registrations for the Big Boy Marks, and to protect and preserve the confidentiality
of all trade secrets included in the Company Intellectual Property.
3.17 Environmental
Matters.
(a) Except
as set forth in Section 3.17(a)(i) of the Company Disclosure Schedule, and except as has not had and would not reasonably
expect to have, individually or in the aggregate, a Company Material Adverse Effect, and without independent investigation as
to the Owned Real Property and Leased Real Property as set forth on Section 3.17(a)(ii), to the Company’s knowledge,
(i) there is no Proceeding or Order or notice of any kind with respect to any environmental, health or safety matters or any private
or governmental environmental, health or safety investigations or remediation activities of any nature seeking to impose, or that
are reasonably likely to result in, any liability or obligation of the Company or any of its Subsidiaries arising under common
law or under any local, state or federal environmental, health or safety Law, relating to pollution or protection of human health
or the environment including, without limitation, regulations relating to emissions, discharges, releases or threatened releases
of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products, asbestos
or asbestos containing materials, or polychlorinated biphenyls, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of such substances and materials (collectively, “Environmental
Laws”) including, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, pending
or, to the Company’s knowledge, threatened against the Company or any of its Subsidiaries, (ii) to the knowledge of the
Company, without independent investigation, neither the Company nor any of its Subsidiaries are in violation of any Environmental
Law, and there is no reasonable basis for, or circumstances that are reasonably likely to give rise to, any Proceeding, Order
or remediation by any Governmental Entity or any third party that would give rise to any liability or obligation on the part of
the Company or any of its Subsidiaries, and (iii) to the Company’s knowledge, neither the Company nor any of its Subsidiaries
is subject to any agreement, Order, letter or memorandum by or with any Governmental Entity or third party imposing any material
liability or obligation with respect to any of the foregoing.
(b) Except
as set forth in Schedule 3.17(a) of the Company Disclosure Schedule referenced above, and except as has not had and would not
reasonably expect to have, individually or in the aggregate, a Company Material Adverse Effect, to the Company’s knowledge,
without independent investigation, the Company and its Subsidiaries are, and have been, in material compliance with all Environmental
Laws, which compliance includes the possession, maintenance of, compliance with, or application for, all Permits required under
applicable environmental Laws for the operation of the business of the Company and its Subsidiaries as currently conducted. Neither
the Company nor any of its Subsidiaries has (i) produced, processed, manufactured, generated, transported, treated, handled, used,
stored, disposed of or released any hazardous substances that are regulated under environmental Laws, except in compliance with
environmental Laws, at any real property owned or leased by the Company or any of its Subsidiaries, or (ii) to the Company’s
knowledge, without independent investigation, exposed any employee or any third party to any hazardous substances that are regulated
under environmental Laws under circumstances reasonably expected to give rise to any material liability or obligation under any
Environmental Laws, except as otherwise set forth in Schedule 3.17(a) of the Company Disclosure Schedule.
3.18 Insurance. The
Company and its Subsidiaries maintain insurance policies with reputable insurance carriers against all risks of a character and
in such amounts as are usually insured against by similarly situated companies in the same or similar businesses. All such material
insurance policies (i) are in full force and effect, (ii) since the most recent renewal date, no notice of cancellation, premium
increase, or material modification has been received, (iii) are to the Company’s knowledge provided by carriers who are
financially solvent, and (iv) have not been subject to any lapse in coverage. There are no claims related to the business conducted
by, or any assets or properties owned or leased by, the Company and its Subsidiaries pending under any such insurance policies
as to which coverage has been questioned, denied or disputed or in respect of which there is an outstanding reservation of rights.
None of the Company or any of its Subsidiaries or Affiliates is in default under, or has otherwise failed to comply with, in any
material respect, any provision contained in any such insurance policy.
3.19 No
Rights Plan. There
is no shareholder rights plan, “poison pill” antitakeover plan or other similar agreement or plan in effect to which
the Company is a party or is otherwise bound.
3.20 Broker’s
Fees. Neither the Company nor any of its Subsidiaries
nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker’s
fees, commissions or finder’s fees in connection with the Merger or related transactions contemplated by this Agreement,
other than as set forth on Section 3.20 of the Company Disclosure Schedule and pursuant to letter agreements, true, complete
and correct copies of which have been previously delivered to Parent and Merger Sub.
3.21 Opinion
of Financial Advisor. The
Company Board has received an opinion from Raymond James & Associates, Inc. to the effect that, as of the date of the opinion
and based upon and subject to the matters considered, procedures followed, assumptions made, qualifications and limitations on
its review as set forth therein, the Merger Consideration to be received by the shareholders of the Company (other than the holders
of Cancelled Shares and Dissenting Shares) is fair to such shareholders from a financial point of view, and that as of the date
of this Agreement such opinion has not been withdrawn, revoked or modified.
3.22 Certain
Business Practices. To the Company’s knowledge,
neither the company nor any of its Subsidiaries, nor any director or officer of the Company or any of its Subsidiaries acting
for or on behalf of the Company or any of its Subsidiaries, has (a) used any funds for unlawful contributions, gifts, entertainment
or other unlawful payments relating to political activity, (b) made any unlawful payment to any foreign or domestic government
official or employee or to any foreign or domestic political party or campaign or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, (c) consummated any transaction, made any payment, entered into any agreement or arrangement
or taken any other action in violation of Section 1128B(b) of the Social Security Act, as amended, or (d) made any other unlawful
payment where, in the case of clause (a), (b), (c) or (d), such payment or action would be reasonably expected to have a Company
Material Adverse Effect.
3.23 Related
Party Transactions. Except as disclosed in Section
3.23 of the Company Disclosure Schedule, no executive officer or director of the Company or any of its Subsidiaries or any
person owning 5% or more of the shares of Company Common Stock (or any of such person's immediate family members or Affiliates
or associates) is a party to any agreement with or binding upon the Company or any of its Subsidiaries or any of their respective
assets, rights or properties or has any interest in any property owned by the Company or any of its Subsidiaries or has engaged
in any transaction with any of the foregoing within the last twelve (12) months.
3.24 Franchise
Matters. For purposes of this Agreement, “Franchise”
means any “franchise” or “business opportunity” as defined under any applicable Franchise Laws, and (ii)
“Franchise Laws” means (a) the Federal Trade Commission Rule entitled “Disclosure Requirements and Prohibitions
Concerning Franchising and Business Opportunity Ventures,” 16 C.F.R. Part 436 (1979) for the time period up to June 30,
2008, (b) the Federal Trade Commission Rule entitled “Disclosure Requirements and Prohibitions Concerning Franchising,”
16 C.F.R. Part 436 (2007) for the time period on and after July 1, 2008, (c) the Federal Trade Commission Rule entitled “Disclosure
Requirements and Prohibitions Concerning Business Opportunities,” 16 C.F.R. Part 437 (2007), (d) the Uniform Franchise Offering
Circular Guidelines adopted by the North American Securities Administrators Association on April 25, 1993 for the time period
up to June 30, 2008, (e) the 2008 Franchise Registration and Disclosure Guidelines adopted by the North American Securities Administrators
Association on July 1, 2008 for the time period on and after July 1, 2008, and (e) any other federal, state, local or foreign
constitution, statute, law, ordinance, rule, authorization or regulation promulgated or issued by a Governmental Entity that governs,
regulates or otherwise affects the offer or sale of franchises or business opportunities.
(a) Except
as disclosed in Section 3.24(a) of the Company Disclosure Schedule, to the Company’s knowledge, within the Core Territories,
the Company is the only person that currently operates, has operated, or has the right to offer or grant Franchises for, Frisch’s
Big Boy restaurants. Other than the Company, no Subsidiary or Affiliate of the Company, has ever offered or sold Franchises for
Frisch’s Big Boy restaurants. Neither the Company, nor any Subsidiary or Affiliate of the Company, currently operates
or has ever operated any franchise system other than the Franchise System, or granted any person a Franchise in any line of business
other than the Franchise System.
(b) Section
3.24(b) of the Company Disclosure Schedules sets forth a true, complete and correct list of:
(i) all
Franchises currently operating under the franchise system offered by the Company for Frisch’s Big Boy restaurants (the “Franchise
System”) under the terms of any agreement, document, arrangement, or understanding whether written or oral, which are
directly or indirectly related to the grant of a Franchise by the Company, or the grant of any future rights to acquire from the
Company, or develop, a Franchise (each a “Franchise Agreement”);
(ii) all
persons currently operating a Franchise under the Franchise System (“Franchisees”);
(iii) any
currently effective arrangements including operating agreements with any Franchisee to make payments other than as specified in
their Franchise Agreement.
(c) Except
as disclosed in Section 3.24(c) of the Company Disclosure Schedule, no person has any unexercised right or obligation to
develop a Franchise under the Franchise System in the future, has received any territorial exclusivity or development rights related
to the Franchise System, or has been granted any other form of exclusive or protected territory.
(d) No
Franchisee is entitled to any rebate, payment, reimbursement or other consideration from the Company or any of its Subsidiaries
or Affiliates, in connection with the sale of products or services to such Franchisee, whether such sale was made by the Company,
its Subsidiaries or Affiliates, or any third-party supplier of goods and services, which in the aggregate would not be reasonably
expected to have a Company Material Adverse Effect.
(e) The
Company and its Subsidiaries have materially complied with all Franchise Laws relating to franchise sales and disclosure, licensing
and registration of the Franchise System as currently operated. None of the Company or its Subsidiaries has furnished any materials
or information that could be construed as “earnings claim” information or “financial performance representation”
information in violation of the requirements specified in the applicable Franchise Laws to any person the Company is considering
granting a Franchise. Each Franchisee was delivered a copy of the appropriate uniform franchise offering circular or franchise
disclosure document issued or otherwise used by Company in connection with the offer and sale of Franchises, in accordance with
applicable Franchise Laws.
(f) Except
as set forth on Section 3.24(f) of the Company Disclosure Schedule, the Company and its Subsidiaries are presently in material
compliance with all Franchise Agreement obligations or requirements, and the consummation of the transactions contemplated hereby
will not affect the validity of any Franchise Agreements. Each Franchise Agreement has been duly executed by the Company or its
Subsidiary, constitutes the valid and binding agreement enforceable by the Company or its Subsidiary in accordance with its terms,
and complies with all applicable Franchise Laws and any applicable judgments, consents or decrees from any Governmental Entity
having jurisdiction with respect to the offer and sale of Franchises by the Company.
3.25 No
Other Representations or Warranties. Except for the representations
or warranties contained in this Article 3, neither the Company nor any other person makes any other express or implied
representation or warranty with respect to the Company or its Subsidiaries, their businesses, operations, assets, liabilities,
financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or
prospects (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects)
or the accuracy or completeness of any information regarding the Company or its Subsidiaries.
3.26 Full
Disclosure. No representation or warranty by the Company in
this Agreement and no statement contained in the Company Disclosure Schedules contains any untrue statement of a material fact,
or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they
are made, not misleading. To the knowledge of the Company, there is no event or circumstance which the Company has not disclosed
to Parent which could reasonably be expected to have a Company Material Adverse Effect.
ARTICLE
4. REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
For
purposes of this Agreement, the term “Parent Material Adverse Effect” means any change, event, circumstance
or development, in each case that, individually or in the aggregate, is materially adverse with respect to, or would be reasonably
expected to have, any material adverse effect on, the ability of Parent or Merger Sub to timely consummate the transactions contemplated
by this Agreement or timely perform any of their other respective obligations hereunder. Parent has made available to the Company
before the date of this Agreement a true, complete and correct copy of the Articles of Incorporation and Regulations or other
equivalent organizational documents of Parent and Merger Sub, each as amended through the date of this Agreement.
Parent
and Merger Sub jointly and severally represent and warrant to the Company that as of the date of this Agreement and at the Effective
Time (as and if called for in the manner set forth in this Agreement), except as set forth in the disclosure schedule delivered
by Parent and Merger Sub to the Company on the date of this Agreement (the “Parent Disclosure Schedule”) (it
being understood that any information set forth on one section or subsection of the Parent Disclosure Schedule shall be deemed
to apply and qualify the section or subsection of this Agreement to which it corresponds in number and each other section or subsection
of this Agreement to the extent that it is reasonably apparent that such information is relevant to such other section or subsection),
as follows:
4.1 Organization,
Qualification, Subsidiaries, Etc. Each of Parent and Merger
Sub is a legal entity duly organized, validly existing and in good standing (where applicable as a legal concept) under the Laws
of the jurisdiction of its organization, has all requisite power and authority to own, lease and operate its properties and assets
and to carry on its business as now being conducted, and is duly qualified to do business and, where applicable as a legal concept,
is in good standing (where applicable as a legal concept) as a foreign company in each jurisdiction in which the character of
properties it owns, operates or leases or the nature of its activities makes such qualification necessary, except where the failure
to be in good standing, or to have such power or authority, would not reasonably be expected to, individually or in the aggregate,
have a Parent Material Adverse Effect.
4.2 Authority;
No Violation.
(a) Each
of Parent and Merger Sub has all requisite power and authority to enter into this Agreement and, subject to the adoption of this
Agreement by Parent in its capacity as the sole member of Merger Sub (the “Merger Sub Member Approval”), to
consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement and the consummation
of the transactions contemplated by this Agreement by Parent and Merger Sub have been duly adopted and authorized by all necessary
action on the part of each of Parent and Merger Sub, subject only to the required receipt of Merger Sub Member Approval. This
Agreement has been duly executed and delivered by each of Parent and Merger Sub and constitutes the valid and binding obligation
of each of Parent and Merger Sub, enforceable against each of them in accordance with its terms, subject to the Bankruptcy and
Equity Exception.
(b) The
execution and delivery of this Agreement by each of Parent and Merger Sub do not, and the consummation by Parent and Merger Sub
of the transactions contemplated by this Agreement shall not, (i) conflict with, or result in any violation or breach of, any
provision of the organizational documents of Parent or Merger Sub, (ii) conflict with, or result in any violation or breach of,
or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of any material benefit) under, require a consent or waiver under, constitute a change
in control under, require the payment of a penalty under or result in the imposition of any Lien (other than a Permitted Lien)
on Parent’s or Merger Sub’s assets under, any of the terms, conditions or provisions of any lease, license, contract
or other agreement, instrument or obligation to which Parent or Merger Sub is a party or by which any of them or any of their
properties or assets may be bound, or (iii) subject to obtaining Merger Sub Member Approval and compliance with the requirements
specified in clauses (i), (ii), (iii) and (iv) of Section 4.2(c), conflict with or violate any Law or Order applicable
to Parent or Merger Sub or any of its or their respective properties or assets, except in the case of clauses (ii) and (iii) of
this Section 4.2(b) for any such conflicts, violations, breaches, defaults, terminations, cancellations, accelerations,
losses, penalties or Liens, and for any consents or waivers not obtained, that would not reasonably be expected to have a Parent
Material Adverse Effect.
(c) No
consent, approval, license, permit, order or authorization of, or registration, declaration, notice or filing with, any Governmental
Entity or any stock market or stock exchange on which shares of common stock of Parent are listed for trading is required by or
with respect to Parent or Merger Sub in connection with the execution and delivery of this Agreement by Parent or Merger Sub or
the consummation by Parent or Merger Sub of the transactions contemplated by this Agreement, except for (i) the premerger notification
requirements under the HSR Act or any other antitrust Law, (ii) the filing of the Articles of Merger with the Ohio Secretary of
State, (iii) filings required under, and compliance with the requirements of, the Securities Act and the Exchange Act, and (iv)
such other consents, approvals, licenses, permits, orders, authorizations, registrations, declarations, notices and filings that,
if not obtained or made, would be reasonably expected to have a Parent Material Adverse Effect.
(d) No
vote of the members of Parent is necessary for the consummation by Parent of the transactions contemplated by this Agreement.
4.3 Legal
Proceedings. There is no Proceeding pending or, to the knowledge
of Parent or Merger Sub, threatened against Parent, Merger Sub, any of their respective Affiliates or any of their respective
properties or assets, at law or in equity, and there is no Order by or before any Governmental Entity, in each case that, individually
or in the aggregate, would reasonably expected to have a Parent Material Adverse Effect. There is no judgment outstanding against
Parent, Merger Sub or any of their respective Affiliates that, individually or in the aggregate, would reasonably be expected
to have a Parent Material Adverse Effect.
4.4 Proxy
Statement; Other Information. The information to be
supplied by or on behalf of Parent and its Affiliates for inclusion in the Proxy Statement shall not, on the date the Proxy Statement
is first mailed to shareholders of the Company or at the time of the Company Shareholder Meeting, contain any statement that,
at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material
fact, or omits to state any material fact necessary in order to make the statements made in the Proxy Statement not false or misleading,
or omits to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation
of proxies for the Company Shareholder Meeting that has become false or misleading; provided, however, that the Company makes
no representation or warranty to Parent as to the accuracy of any statements made or incorporated by reference therein by the
Company or its representatives for inclusion or incorporation by reference in the Proxy Statement. If at any time before the Company
Shareholder Meeting any fact or event relating to Parent or any of its Affiliates that should be set forth in an amendment or
supplement to the Proxy Statement should be discovered by Parent or should, to the knowledge of Parent, occur, Parent shall, promptly
after becoming aware thereof, inform the Company of such fact or event.
4.5 Operations
of Merger Sub. Merger Sub was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement, has engaged in no other business activities and has conducted
its operations only as contemplated by this Agreement.
4.6 Available
Funds; Financing Commitments.
(a) The
proceeds to be provided by the commitments, as identified on Schedule 4.6(b) of the Parent Disclosure Schedule (“Financing
Commitments”), are sufficient to make the payments for the aggregate Merger Consideration set forth in Section 2.1(a).
In no event shall the receipt or availability of any funds or financing by Parent, Merger Sub or any of their Affiliates or any
other financing transactions be a condition to any of Parent’s or Merger Sub’s obligations under this Agreement; provided,
however, that no Financing Source has terminated its Financing Commitment as described in Section 6.2(d).
(b) Schedule
4.6(b) of the Parent Disclosure Schedule contains a true and complete copy of (i) an executed commitment letter pursuant to
which the equity provider has unconditionally agreed to provide Parent and Merger Sub with the amount of equity financing set
forth in such letter (the “Equity Commitment Letter”); (ii) an executed agreement pursuant to which a third-party
has agreed to provide the balance of funds necessary to consummate the transactions contemplated by this Agreement (the “Financing
Agreement”, and together with the Equity Commitment Letter, collectively the “Financing Sources”);
and (iii) letters in form and content satisfactory to the Company dated as of the execution date of this Agreement from each of
the Financing Sources confirming the amounts and enforceability of such agreement or letter (collectively referred to as the “Financing”).
The amounts identified in the Equity Commitment Letter and in the Financing Agreement shall represent binding commitments to fund
the full amount of the Merger Consideration set forth in Section 2.1(a).
(c) None
of the Financing Commitments has been amended or modified, prior to the date hereof (except as permitted by this Agreement, or
disclosed in Section 4.6 of the Parent Disclosure Schedules) and the respective obligations and commitments contained in
the Financing Commitments have not been withdrawn or rescinded in any respect. The Financing Commitments are in full force and
effect. The Financing Commitments are the legal, valid and binding obligations of Parent and Merger Sub, as applicable, and, to
the knowledge of Parent, each of the other parties thereto. The Financing Commitments are enforceable in accordance with their
respective terms against Parent and Merger Sub, as applicable and, to the knowledge of Parent, each of the other parties thereto.
There are no conditions precedent or other contingencies related to the funding of the full amount of the Financing, other than
as set forth in the Financing Commitments.
(d) No
event has occurred or circumstance exists which, with or without notice, lapse of time or both, would or would reasonably be expected
to constitute a default or breach on the part of Parent or Merger Sub, as applicable, or to the knowledge of Parent, any other
parties thereto, under the Financing Commitments.
(e) Parent
has no reason to believe that any of the conditions to the Financing contemplated in the Financing Commitments will not be satisfied
or that the Financing will not be made available to Parent and Merger Sub at or prior to the Effective Time. To the reasonable
belief of Parent, the terms of the Financing Agreement, are such that the “Seller” (as defined in the Financing Agreement)
will more likely than not be considered the “person acquiring the property” within the meaning of Section 453(f)(3)
of the Code.
(f) There
are no side letters or other agreements, contracts or arrangements related to the funding or investing, as applicable, of the
full amount of the Financing other than as expressly set forth in the Financing Commitments. Parent and Merger Sub have fully
paid, or caused to be fully paid, any and all commitment or other fees which are due and payable on or prior to the date hereof
pursuant to the terms of the Financing Commitments.
4.7 Agreements
with Company Shareholders, Directors, Officers and Employees. Except
for those certain Voting Agreements identified on Section 3.2(d), none of Parent, Merger Sub or any of their respective
Affiliates is a party to any contract or agreement, or has made or entered into any formal or informal arrangements or other understandings
(whether or not binding), with any holder of the Company’s capital stock or any director, officer or employee of the Company
or any of its Subsidiaries that in any way relates to this Agreement, the transactions contemplated by this Agreement or the post-closing
operation of the Surviving Corporation.
4.8 Parent
Ownership of Company Securities. Parent and its Subsidiaries
do not beneficially own (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) any shares of Company Common
Stock or other securities of the Company or any options, warrants or other rights to acquire Company Common Stock or other securities
of, or any other economic interest (through derivative securities or otherwise) in, the Company.
4.9 Broker’s
Fees. Neither Parent nor any Subsidiary of Parent nor
any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker’s
fees, commissions or finder’s fees in connection with the Merger or related transactions contemplated by this Agreement.
4.10 Access
to Information; Disclaimer. Each of Parent and Merger
Sub acknowledges and agrees that it (a) has had an opportunity to discuss the business and affairs of the Company and its Subsidiaries
with the management of the Company, (b) has had (i) reasonable access to the books and records of the Company and its Subsidiaries
and (ii) full access to (1) the electronic dataroom maintained by the Company for purposes of the transactions contemplated by
this Agreement, and (2) access to the real estate database of the Company, (c) has been afforded the opportunity to ask questions
of and receive answers from officers of the Company, and (d) has conducted its own independent investigation of the Company and
its Subsidiaries, their respective businesses and the transactions contemplated hereby, and has not relied on any representation,
warranty or other statement by any person on behalf of the Company or any of its Subsidiaries, other than the representations
and warranties of the Company expressly contained in Article 3 of this Agreement and that all other representations and
warranties, including any implied warranties, are specifically disclaimed. Without limiting the foregoing, each of Parent and
Merger Sub further acknowledges and agrees that none of the Company or any of its shareholders, Affiliates or Representatives
has made any representation or warranty concerning any estimates, projections, forecasts, business plans or other forward-looking
information regarding the Company, its Subsidiaries or their respective businesses and operations. Each of Parent and Merger Sub
hereby acknowledges that there are uncertainties inherent in attempting to develop such estimates, projections, forecasts, business
plans and other forward-looking information with which Parent and Merger Sub are familiar, that Parent and Merger Sub are taking
full responsibility for making their own evaluation of the adequacy and accuracy of all estimates, projections, forecasts, business
plans and other forward-looking information furnished to them (including the reasonableness of the assumptions underlying such
estimates, projections, forecasts, business plans and other forward-looking information), and that Parent and Merger Sub will
have no claim against the Company or any of its shareholders, Affiliates or Representatives with respect thereto, other than fraud
in connection therewith.
4.11 Solvency. Based
on information made available to Parent by the Company, the Surviving Corporation will be Solvent as of the Effective Time and
immediately after giving effect to the transactions contemplated by this Agreement, including the Financing and the payment of
the aggregate Merger Consideration, any repayment or refinancing of debt contemplated in this Agreement or the Financing Commitments,
payment of all amounts required to be paid in connection with the consummation of the transactions contemplated hereby, and payment
of all related fees and expenses. For the purposes of this Agreement, the term “Solvent” when used with respect
to any Person, means that, as of any date of determination, (i) as of such date will be able to pay its debts as they become
due and shall own property having a fair saleable value greater than the amounts required to pay its debts (including a reasonable
estimate of the amount of all contingent liabilities) as they become absolute and mature; and (ii) shall not have, as of
such date, unreasonably small capital to carry on its business. Neither Parent nor Merger Sub is entering into the transactions
contemplated by this Agreement with the intent to hinder, delay or defraud either present or future creditors of Parent or the
Surviving Corporation.
4.12 Guarantee.
Concurrently with the execution of this Agreement, Parent
and Merger Sub have delivered to the Company true and correct copies of the executed Guarantee. The Guarantee is in full force
and effect and constitutes the legal, valid and binding obligation of Guarantor, enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’
rights generally and general principles of equity, and has not been amended, withdrawn or rescinded in any respect. No event has
occurred which, with or without notice, lapse of time or both, would constitute a default on the part of Guarantor under its Guarantee.
4.13 Organization
and Financial Condition of Guarantor.
(a) Guarantor
is a legal entity duly organized, validly existing and in good standing (where applicable as a legal concept) under the Laws of
the jurisdiction of its incorporation or organization. Parent and Merger Sub have delivered to Company a true and complete
copy of the Limited Partnership Agreement of Guarantor.
(b) No
regularly prepared balance sheet or income statement of Guarantor exists. As of the Closing Date, the total value of the
assets of Guarantor, excluding any cash that will be used as the Merger Consideration, will be less than $15,300,000.
(c) No
person has the right to 50% or more of the profits of Guarantor, or to 50% or more of the assets of Guarantor upon dissolution.
ARTICLE
5. COVENANTS AND AGREEMENTS
5.1 Conduct
of the Company’s Business Before the Effective Time.
(a) From
and after the date hereof and before the Effective Time or the date, if any, on which this Agreement is earlier terminated pursuant
to Section 7.1, and except (i) as may be required by applicable Law, (ii) as may be consented to in writing by Parent (such
consent not to be unreasonably withheld, conditioned or delayed), (iii) as may be expressly required or expressly permitted by
this Agreement (as qualified by the Company Disclosure Schedule), or (iv) as set forth in Section 5.1(a) of the Company
Disclosure Schedule, the Company covenants and agrees with Parent that the business of the Company and its Subsidiaries shall
be conducted in the ordinary course of business consistent with past practice and the Company shall use all commercially reasonable
efforts to (A) keep available the services of its current key employees (which, except for those policies and agreements disclosed
in Section 5.1(a) of the Company Disclosure Schedule, shall not include any obligation to grant any increase in compensation
or benefits or enter into any retention agreement), (B) maintain satisfactory relationships with its lenders, material suppliers,
Franchisees, and others having material business relationships with it, and (C) maintain in effect the material insurance policies
of the Company and its Subsidiaries as in effect on the date hereof in the ordinary course of business consistent with past practice.
(b) Without
limiting the generality of Section 5.1(a), but subject to the exceptions contained in clauses (i) through (iv) of Section
5.1(a), the Company, on behalf of itself and its Subsidiaries, agrees that between the date hereof and the Effective Time
or the date, if any, on which this Agreement is earlier terminated pursuant to Section 7.1, without the prior written consent
of Parent, the Company:
(i) shall
not, and shall not permit any of its Subsidiaries to, authorize or pay any dividends on or make any distribution with respect
to its outstanding shares of capital stock (whether in cash, assets, stock or any Company Securities), other than (A) regular
quarterly cash dividends or distributions authorized by the Company Board, not exceeding $0.20 per Share as appropriately adjusted
in the event of any stock split, reverse stock split, stock dividend, reclassification or similar transaction, or (B) dividends
and distributions paid by Subsidiaries of the Company to the Company or to any of its wholly owned Subsidiaries;
(ii) shall
not, and shall not permit any of its Subsidiaries to, enter into any agreement with respect to the voting of, any Company Securities;
(iii) shall
not, and shall not permit any of its Subsidiaries to, split, combine or reclassify, any of its capital stock or issue, sell or
authorize or propose the issuance or sale of any Company Securities in respect of, in lieu of or in substitution for shares of
its capital stock, except for any such transaction by a wholly owned Subsidiary of the Company that remains a wholly owned Subsidiary
after consummation of such transaction;
(iv) except
as required by applicable Law, existing written agreements or the Company Benefit Plans; as in the ordinary course of business
consistent with past practice; as consented to in writing by Parent or Merger Sub; or as set forth on Section 5.1(b)(iv)
of the Company Disclosure Schedule, shall not, and shall not permit any of its Subsidiaries to (A) increase the compensation or
other benefits payable or provided to its employees, officers or directors, except increases for employees (other than officers
and directors) in the ordinary course of business, in accordance with past practices, (B) enter into any employment, change-of-control
or severance agreement with any employee, officer, director or other service provider of the Company or any of its Subsidiaries,
or (C) establish, adopt, enter into, amend, terminate, or take any action to accelerate rights under any plan, trust, fund, policy
or arrangement for the benefit of any current or former directors, officers or employees or any of their beneficiaries, except
as otherwise permitted pursuant to clauses (A) and (B) of this Section 5.1(b)(iv) or Sections 2.4 or 2.6
hereof;
(v) shall
not, and shall not permit any of its Subsidiaries to, enter into or make any loans, advances or capital contributions to, or investments
in, any other person (other than loans or advances in the ordinary course of business consistent with past practice) or make any
change in its existing borrowing, lending or investment arrangements for or on behalf of any of such persons, except as required
by the terms of any Company Benefit Plan and as set forth on Section 5.1(b)(iv) of the Company Disclosure Schedule;
(vi) shall
not, and shall not permit any of its Subsidiaries to, change material financial accounting policies or procedures or any of its
methods of reporting income, deductions or other items for financial accounting purposes, except as required by GAAP, SEC rule
or policy or applicable Law;
(vii) shall
not (A) amend or propose to amend any provision of the Company Articles or Company Regulations, or (B) permit any of its Subsidiaries
to amend or propose to amend any provision of such Subsidiary’s Articles of Incorporation or Regulations or similar charter
or organizational documents in a manner adverse to Parent or Merger Sub or as would reasonably be expected to have a Company Material
Adverse Effect, except the Company must in all cases provide Parent prior notice of such proposed amendments;
(viii) except
for transactions exclusively among the Company and its wholly owned Subsidiaries or among the Company’s wholly owned Subsidiaries,
shall not, and shall not permit any of its Subsidiaries to, issue, sell, pledge, dispose of or encumber, or authorize the issuance,
sale, pledge, disposition or encumbrance of, any Company Securities, take any action to cause to be exercisable any otherwise
unexercisable Company Stock Option (except as otherwise provided by the terms of this Agreement or the express terms of any unexercisable
options or awards outstanding on the date hereof) or otherwise make any changes (by combination, merger, consolidation, reorganization,
liquidation, split, combination, reclassification, adjustment or otherwise) in the capital structure of the Company or any of
its Subsidiaries or amend the terms of any Company Securities, other than issuances of shares of Company Common Stock in respect
of any exercise of Company Stock Options outstanding on the date hereof; provided, however, that the Company may grant, to directors,
officers, and employees of the Company or any of its Subsidiaries Company Stock Options or other equity-based awards (in the case
of Company Stock Options, with an exercise price equal to the fair market value of shares of Company Common Stock on the date
of grant), so long as such grants are made under the Company Stock Plans in the ordinary course of business consistent with past
practice or the provisions of this Agreement;
(ix)
except for transactions exclusively among the Company and its wholly owned Subsidiaries or among the Company’s wholly owned
Subsidiaries, shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, purchase, redeem or otherwise
acquire any Company Securities, other than the acquisition of shares of Common Stock from a holder of a Company Stock Option in
satisfaction of withholding obligations or in payment of the exercise price or from a holder of Restricted Shares in satisfaction
of withholding obligations upon the vesting of such shares (in the case of Company Stock Options, with an exercise price equal
to the fair market value of shares of Company Common Stock on the date of grant);
(x) shall
not, and shall not permit any of its Subsidiaries to, incur, assume, guarantee, prepay or otherwise become liable for any indebtedness
for borrowed money (directly, contingently or otherwise), except for (A) any indebtedness for borrowed money among the Company
and its wholly owned Subsidiaries or among the Company’s wholly owned Subsidiaries, (B) guarantees by the Company of indebtedness
for borrowed money of Subsidiaries of the Company, which indebtedness is incurred in compliance with this Section 5.1(b)(x),
and (C) indebtedness for borrowed money pursuant to its existing credit facilities;
(xi) except
for transactions exclusively among the Company and its wholly owned Subsidiaries or among the Company’s wholly owned Subsidiaries,
shall not, and shall not permit any of its Subsidiaries to, sell, lease, license, transfer, exchange or swap, mortgage or otherwise
encumber (including securitizations), or subject to any Lien (other than Permitted Liens) or otherwise dispose of any portion
of its tangible properties or assets having a value in excess of $50,000, individually or in the aggregate (including equity interests
in any Subsidiaries), except (A) pursuant to existing agreements in effect before the execution of this Agreement and listed in
the Company Disclosure Schedule, (B) for the sale of inventory in the ordinary course of business consistent with past practice,
or (C) with respect to the matters set forth on Section 5.1(b)(xi) of the Company Disclosure Schedule;
(xii) (A)
enter into any new contract that would have been a Company Material Contract if it were entered into at or before the date hereof
(other than (1) renewal or replacement of any existing Company Material Contract with a vendor or customer, the terms and conditions
of which renewal or replacement Company Material Contract, in the aggregate, are at least as favorable to the Company as the existing
Company Material Contract or are otherwise on market terms, or (2) contracts entered into in connection with the making of capital
expenditures permitted under Section 5.1(b)(xiv)), (B) terminate any Company Material Contract, (C) other than in the ordinary
course of business, materially modify, amend or waive any material right under or renew any Company Material Contract, (D) enter
into or extend the term or scope of any contract or agreement that purports to materially restrict the Company, or any of its
Subsidiaries, from engaging or competing in any line of business or in any geographic area, or (E) enter into any material contract
or agreement that would be breached by, or require the consent of any other person in order to continue such contract or agreement
in full force following, consummation of the transactions contemplated by this Agreement;
(xiii) shall
not, and shall not permit any of its Subsidiaries to, acquire (by merger, consolidation, purchase of stock or assets or otherwise),
or agree to so acquire any entity, store, business or assets that constitute a business or division of any person, or all or a
substantial portion of the assets of any person (or business or division thereof), or make any loans, advances, capital contributions
or investments in any person (or business or division thereof) other than as contemplated on Section 5.1(b)(xiii) of the
Company Disclosure Schedule;
(xiv) shall
not, and shall not permit any of its Subsidiaries to, make or agree to make any capital expenditure (excluding the investments
described on Section 5.1(a) of the Company Disclosure Schedule and capital expenditures made in connection with acquisitions
permitted under Section 5.1(b)(xiii)) in excess of the amounts set forth on Section 5.1(b)(xiv) of the Company Disclosure
Schedule, except that the Company may make additional capital expenditures in the amount of (A) up to $200,000 per store
acquired in accordance with Section 5.1(b)(xiii) (not including the cost of acquisition of such store), and (B) $1,000,000
in the aggregate above the amounts set forth on Section 5.1(b)(xiv) of the Company Disclosure Schedule, and (C) may enter
into construction and equipment contracts and/or acquire land to build, remodel, or construct additional restaurants in an aggregate
amount not to exceed $500,000;
(xv) shall
not, and shall not permit any of its Subsidiaries to, adopt or enter into a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries;
(xvi) shall
not, and shall not permit any of its Subsidiaries to, enter into any new line of business outside the businesses being conducted
by the Company and its Subsidiaries on the date hereof and any reasonable extensions thereof;
(xvii) shall
not, and shall not permit any of its Subsidiaries to, institute, settle (or offer or propose to settle) or compromise, (A) any
material Proceeding or Order involving or against the Company or any of its Subsidiaries, (B) any shareholder Proceeding against
the Company or any of its officers or directors, or (C) any Proceeding that relates to the transactions contemplated hereby, in
each case, other than settlements that involve the payment of monetary damages by the Company not in excess of such amounts as
may be agreed upon between the Company and Parent and, in each case, without the imposition of equitable relief on, or the admission
of wrongdoing by, the Company, any of its Subsidiaries or any of its officers or directors;
(xviii) shall
not, and shall not permit any of its Subsidiaries to, make or change any material Tax election, change any material annual Tax
accounting period, adopt or change any material method of Tax accounting or file any material amended Tax Returns, enter into
any closing agreement with respect to a material amount of Taxes, settle any material Tax claim, audit or assessment, surrender
any right to claim a material Tax refund or consent to any extension or waiver of the limitations period applicable to any material
Tax claim or assessment; except, in each case, (x) as may be required by applicable Law, (y) with respect to such Tax claims,
audits, obligations or other matters for which reserves that are adequate under GAAP have been made, or (z) where such action
or omission would not be reasonably expected to have the effect of materially increasing the Tax liability or materially decreasing
any Tax asset of the Company or any of its Subsidiaries;
(xix) abandon,
encumber, convey title (in whole or in part), exclusively license or grant any right or other licenses to Company Intellectual
Property, other than in the ordinary course of business consistent with past practice;
(xx) sell
(or offer for sale) any Franchises;
(xxi) enter
into any understandings, arrangements or agreements, whether oral or in writing, that individually or in the aggregate, will result
in, or would be reasonably expected to result in, the Transaction Costs (as defined in Section 5.17) of the Company at
Closing being materially higher than the Projected Transaction Costs, except for reasonable and necessary fees and expenses incurred
by the Company in connection with regulatory approvals or shareholder voting and other approvals necessary to consummate the transaction
contemplated by this Agreement; provided, however, that Company shall keep
Parent fully informed of the status of any matters that will materially impact the Transaction
Costs, and shall use good faith efforts to incur only such Transaction Costs that are necessary to consummate the transaction
contemplated by this Agreement;
(xxii) enter
into any transaction that would be subject to disclosure pursuant to Item 404 of Regulation S-K;
(xxiii) shall
not, and shall not permit any of its Subsidiaries to, take any action that would reasonably be expected to, in the individual
or in the aggregate, prevent, materially delay or materially impede the consummation of the Merger or the other transactions contemplated
by this Agreement; and
(xxiv) shall
not, and shall not permit any of its Subsidiaries to, agree, in writing or otherwise, to take any of the foregoing actions.
5.2 Conduct
of Business of Parent and Merger Sub.
(a) Parent
and Merger Sub shall comply with their obligations under the Equity Commitment Letter and the Financing Agreement and use their
reasonable best efforts to (i) arrange and obtain the Financing on the terms and conditions described in the Financing Commitments,
(ii) negotiate and finalize definitive agreements with respect thereto on the terms and conditions contained in the Financing
Commitments, which shall be in full force and effect at the time of the execution of this Agreement and through the Closing, (iii) satisfy
on a timely basis all conditions applicable to Parent and Merger Sub in such definitive agreements that are within its control,
(iv) consummate the Financing no later than the Closing, and (v) enforce their rights under the Financing Commitments and
related agreements.
(b) In
the event all or any portion of the Financing becomes unavailable on the terms and conditions contemplated therein, Parent and
Merger Sub shall use their reasonable best efforts to arrange to obtain any such financing from alternative sources as promptly
as practicable following the occurrence of such event (the “Alternative Financing”), including entering into
definitive agreements with respect thereto (such definitive agreements entered into pursuant to this Section 5.2 being
referred to as the “Financing Agreements”), provided, that the Alternative Financing shall not (i) reasonably
be expected to delay or prevent the Closing; or (ii) reduce the aggregate amount of available Financing. Parent and Merger
Sub shall (x) furnish complete and correct and executed copies of the Financing Agreements promptly upon their execution, (y)
give the Company prompt notice of any Alternative Financing, and (z) keep the Company reasonably informed of the status of its
efforts and arrange the Financing and shall promptly notify the Company in writing of any material modifications to the Financing.
(c) Between
the date hereof and the Effective Time, Parent and Merger Sub shall not, and shall not permit any of their respective Subsidiaries
or Affiliates to, take or agree to take any action (including entering into agreements with respect to any acquisitions, mergers,
consolidations or business combinations) that would reasonably be expected to, individually or in the aggregate, have a Parent
Material Adverse Effect or otherwise prevent or materially delay the consummation of the transactions contemplated by this Agreement
(including to delay in any material respect the obtainment of any approval required under antitrust Law.
5.3 Financing
Transactions. The Parties each agree to take all necessary
actions as are consistent with their duties and responsibilities and legal obligations to their constituencies (e.g. shareholders,
LLC members and/or employees) to effect the transactions identified in Schedule 4.6 of the Parent Disclosure Schedules.
5.4 Proxy
Statement. As promptly as practicable after the execution
of this Agreement, the Company, in cooperation with Parent, shall prepare and file with the SEC the Proxy Statement. The Company
(i) shall provide Parent with a reasonable opportunity to review and comment on a draft of the Proxy Statement before the Proxy
Statement is filed with the SEC and (ii) shall consider in good faith including in the Proxy Statement all comments reasonably
proposed by Parent in respect of the Proxy Statement. The Company shall promptly respond to any comments of the SEC or its staff
concerning the Proxy Statement and shall cause the Proxy Statement to be mailed to its shareholders as promptly as practicable
after the resolution of any such comments. The Company shall notify Parent promptly upon the receipt of any written comments from
the SEC or its staff or any other government officials and of any request by the SEC or its staff or any other government officials
for amendments or supplements to the Proxy Statement and, upon the request of Parent, shall supply Parent with copies of all written
correspondence between the Company or any of its Representatives, on the one hand, and the SEC, or its staff or any other government
officials, on the other hand, with respect to the Proxy Statement. The Company (i) shall provide Parent with a reasonable opportunity
to review and comment on any responses to comments or inquiries by the SEC with respect to any filings of the Proxy Statement,
(ii) shall consider in good faith including in such responses all comments reasonably proposed by Parent in respect of the filings
and (iii) shall provide Parent and its counsel a reasonable opportunity to participate in any material discussions or meetings
with the SEC or its staff with respect to such filings to the extent permitted by the SEC. The Company shall use its reasonable
best efforts to cause all documents that it is responsible for filing with the SEC or other regulatory authorities under this
Section 5.4 to comply in all material respects with all applicable requirements of Law, and to resolve all SEC comments
with respect to the Proxy Statement. Whenever any event occurs that is required to be set forth in an amendment or supplement
to the Proxy Statement (including to correct any information that has become false or misleading), Parent or the Company, as the
case may be, shall promptly inform the other of such occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to shareholders of the Company, such amendment or supplement.
5.5 Shareholder
Approval.
(a) The
Company shall call a meeting of its shareholders to be held as soon as reasonably practicable after the mailing of the Proxy Statement
for the purpose of obtaining the Requisite Shareholder Approval (including any meeting that occurs after any adjournment or postponement,
the “Company Shareholder Meeting”), on substantially the terms and conditions set forth in this Agreement,
and shall use its reasonable best efforts to cause such meeting to occur as soon as reasonably practicable. The Company Board
shall use its reasonable best efforts to obtain from its shareholders the Requisite Shareholder Approval, including by adopting
the Company Board Recommendation. The Company shall keep Parent and Merger Sub updated with respect to proxy solicitation results
as requested Parent. Once the Company Shareholder Meeting has been called and noticed, the Company shall not postpone or adjourn
the Company Shareholder Meeting other than as reasonably determined by the Company to comply with applicable Law or as may be
required in the reasonable business judgment of the Company Board in order to discharge its fiduciary duties.
(b) Each
of Parent, Merger Sub and the Company shall, and shall cause its respective Subsidiaries to, use their reasonable best efforts
(i) to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal requirements that
may be imposed on such Party or its Subsidiaries with respect to the Merger and, subject to the conditions set forth in Article
6, to consummate the transactions contemplated by this Agreement, and (ii) to obtain (and to cooperate with any other Party
to obtain) any material consent, authorization, order or approval of, or any exemption by, any Governmental Entity and any other
third party that is required to be obtained by the Company or Parent or any of their respective Subsidiaries in connection with
the Merger and the other transactions contemplated by this Agreement.
5.6 Access
to Information; Confidentiality.
(a) From
the date of this Agreement until the Effective Time, the Company shall, and shall cause its Subsidiaries to, afford to Parent
and Parent's directors, officers, employees, advisors, attorneys and financing sources (with respect to any person, the foregoing
persons are referred to herein as such person's “Representatives”) reasonable opportunities to discuss Company
matters with the Company’s vice-presidents, regional directors, and Company-designated employees that represent key functions
of the business solely for the purpose of allowing Parent to develop a transition plan, at reasonable times and in a manner as
shall not unreasonably interfere with the business or operations of the Company or any Subsidiary thereof, and provide reasonable
access to all books, records, contracts, intranets, extranets or other online portals, and other assets of the Company and its
Subsidiaries and such other access as shall be reasonably requested by Parent (including the opportunity to meet other employees)
and consented to by the Company (which consent shall not be unreasonably withheld). The Company shall, and shall cause its Subsidiaries
to, furnish promptly to Parent such other information concerning the business and properties of the Company and its Subsidiaries
as Parent may reasonably request from time to time. Neither the Company nor any of its Subsidiaries shall be required to provide
access to or to disclose information (x) where such access or disclosure would jeopardize the attorney-client privilege of such
party or contravene any Law, Order, fiduciary duty or binding agreement entered into before the date of this Agreement or (y)
regarding an Acquisition Proposal that is not required to be disclosed to the other Party pursuant to Section 5.7. The
Company shall make appropriate and reasonable substitute disclosure arrangements under circumstances in which the restrictions
of the preceding sentence apply.
(b) All
information and materials provided by the Company pursuant to or in connection with this Agreement or the transactions contemplated
hereby shall be subject to the provisions of the confidentiality letter agreement entered into between the Company and Parent
dated July 14, 2014 (the “Confidentiality Agreement”).
5.7 Non-Solicitation. From
the date of this Agreement until the Effective Time:
(a) The
Company shall not, and shall cause its Subsidiaries not to, and shall not authorize or permit its and its Subsidiaries' Representatives
to, directly or indirectly, solicit, initiate or knowingly take any action to facilitate or encourage the submission of any Acquisition
Proposal (as defined in subparagraph (f)(ii) below), or, subject to Section 5.7(c), (i) conduct or engage in any discussions
or negotiations with, disclose any non-public information relating to the Company or any of its Subsidiaries to, afford access
to the business, properties, assets, books or records of the Company or any of its Subsidiaries to, or knowingly assist, participate
in, facilitate or encourage any effort by, any third party that is seeking to make, or has made, any Acquisition Proposal, or
(ii) enter into any agreement in principle, letter of intent, term sheet, acquisition agreement, merger agreement, option agreement,
joint venture agreement, partnership agreement or other agreement relating to any Acquisition Proposal (each, a “Company
Acquisition Agreement”). The Company shall, and shall cause its Subsidiaries to cease immediately and cause to be terminated,
and shall not authorize or knowingly permit any of its or their Representatives to continue, any and all existing activities,
discussions or negotiations, if any, with any third party conducted prior to the date hereof with respect to any Acquisition Proposal.
(b) If,
before receipt of the Requisite Shareholder Approval, the Company receives an unsolicited Acquisition Proposal from a third party
that the Company’s Board determines in good faith, after consultation with its financial advisors and outside legal counsel,
constitutes a Superior Proposal (as defined below in subparagraph (f)(iii)) or would reasonably be expected to result in a Superior
Proposal, the Company, its officers, directors, financial advisors, and authorized agents may, if reasonably necessary to comply
with its fiduciary duties:
(i)
Furnish to such third party access and nonpublic information with regard to the Company under an Acceptable Confidentiality Agreement
(a copy of which shall be promptly provided to Parent);
(ii) Engage
or participate in any discussions with such person or entity; and
(iii) Withhold,
withdraw, or change the Company Board Recommendation, subject to complying with any notice and other specified conditions set
forth in this Agreement, including Parent’s right to respond to any the opportunity to propose changes to this Agreement
in response to such Superior Proposal.
Except as set forth
in this Section 5.7(c), the Company Board shall not enter into (or permit any Subsidiary to enter into) a Company Acquisition
Agreement.
(c) The
Company will, within two (2) days of receipt of any Acquisition Proposal, notify Parent of the material terms of any Acquisition
Proposal concerning the Company that either the Company or the Board has received, or any written inquiry that would reasonably
be expected to lead to an Acquisition Proposal, including, without limitation, whether such offer is a Superior Proposal, and
furnish Parent with a copy of any written Acquisition Proposal. The Company shall keep Parent fully informed of the status and
material terms of any such Acquisition Proposal including any material amendments or proposed amendments as to price and other
material terms thereof. The Company shall provide Parent with at least forty-eight (48) hours prior notice of any meeting of the
Company Board (or such lesser notice as is provided to the members of the Company Board) at which the Company Board is reasonably
expected to consider any Acquisition Proposal. The Company shall promptly provide Parent with a list of any non-public information
concerning the Company's business, present or future performance, financial condition or results of operations, provided to any
third party, and, to the extent such information has not been previously provided to Parent, copies of such information.
(d) Parent
shall have a period of not less than seven (7) Business Days after receipt of notice of a Superior Proposal to submit an Acquisition
Proposal describing any adjustments to the terms of this Agreement. If Parents submits such an Acquisition Proposal, the Company
agrees to negotiate changes to this Agreement as described in Parent’s Acquisition Proposal in good faith and in a timely
manner, but for a period of not less than seven (7) Business Days after receiving Parent’s Acquisition Proposal. If at any
time there are any material revisions to the terms of any Superior Proposal, including, any revision in price, Parent shall have
a new opportunity of not less than seven (7) Business Days to respond.
(e) As
used in this Agreement:
(i) “Acceptable
Confidentiality Agreement” means a confidentiality agreement that contains terms that are not materially less favorable
in the aggregate to the Company than those contained in the Confidentiality Agreement (except with regard to standstill provisions);
provided, however, that an Acceptable Confidentiality Agreement shall not include any provision having the effect of prohibiting
the Company from satisfying its obligations under this Agreement.
(ii) “Acquisition
Proposal” means any bona fide proposal or offer, or interest in making a proposal or offer, received or renewed after
the execution of this Agreement, relating to (A) a merger, joint venture, partnership, consolidation, dissolution, liquidation,
tender offer, recapitalization, reorganization, share exchange, business combination or similar transaction involving the Company
(or any Subsidiary or Subsidiaries of the Company whose business constitutes 20% or more of the net revenues, net income or assets
(based on fair market value) of the Company and its Subsidiaries, taken as a whole), (B) the acquisition of 20% or more of the
outstanding shares of any class of capital stock of the Company or 20% or more of the voting power represented by the outstanding
voting securities of the Company, (C) a tender offer or exchange offer or other transaction which, if consummated, would result
in a direct or indirect acquisition of 20% or more of the total voting power of the capital stock of the Company or 20% or more
of the voting power represented by the outstanding voting securities of the Company, (D) the acquisition in any manner, directly
or indirectly, of 20% or more of the consolidated total assets (based on fair market value) of the Company and its Subsidiaries
(or to which 20% or more of the Company’s revenues or earnings on a consolidated basis are attributable) including, for
this purpose, the outstanding assets and equity interests of the Subsidiaries of the Company, (E) any transaction that would result
in person obtaining the ability to elect a majority of the Company Board or (F) any other transaction having a similar effect
to those described in clauses (A) through (E), and in each case other than the transactions between Parent, Merger Sub and the
Company contemplated by this Agreement.
(iii) “Superior
Proposal” means a bona fide written Acquisition Proposal from an unaffiliated third party (other than the Parent) which
the Company Board determines in good faith, after receiving the advice of its outside legal and financial advisors, that (a) the
terms and conditions of such proposal are more favorable to the Company’s stockholders from a financial point of view than
the transactions contemplated herein (after taking into account the expected timing and risk and likelihood of consummation and
including taking into account any adjustment to the terms and conditions proposed by the Parent in response to such proposal)
and (b) that the transaction contemplated by such proposal is reasonably likely to be consummated in accordance with its terms;
provided, that for purposes of the definition of “Superior Proposal,” the references to “20%” in
the definition of Acquisition Proposal shall be deemed to be references to “40%.”
5.8 Efforts.
(a) Each
of the Parties shall, and shall cause its Subsidiaries to, use its reasonable best efforts to take promptly, or cause to be taken,
all actions, and to do promptly, or cause to be done, all things reasonably necessary, proper or advisable to obtain all necessary
actions or nonactions, waivers, consents, clearances, approvals, or expirations or terminations of waiting periods as may be required
to consummate and make effective, and to satisfy all conditions to, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
(b) In
furtherance and not in limitation of the covenants of the Parties contained in this Article 5, each of Parent and the Company
shall use its reasonable best efforts to seek to, as soon as reasonably practicable after the date hereof:
(i) obtain
all necessary permits, waivers, consents, approvals and actions or nonactions from Governmental Entities necessary to consummate
the transactions contemplated by this Agreement, including all required Notification and Report Forms under the HSR Act with respect
to the Merger. Parent shall, at its own expense, pay all fees incurred in connection with filings made under the HSR Act and applicable
regulations, including legal fees, fees of economists, and fees of marketing experts;
(ii) furnish
all information in connection with the approvals of or filings with any Governmental Entity and will promptly cooperate with and
furnish information in connection with any requirements imposed upon Parent or any of its Affiliates in connection with this Agreement
and the transactions contemplated hereby;
(iii) request
early termination of any applicable waiting period under the HSR Act, and use their reasonable best efforts to cause the expiration
or termination of any applicable waiting periods under the HSR Act (the “HSR Clearance”), and shall supply
to the Antitrust Division of the United States Department of Justice or the United States Federal Trade Commission as promptly
as reasonably practicable any additional information or documents that may be requested;
(iv) avoid
the entry of, or to have vacated, lifted, reversed or overturned any Order, whether temporary, preliminary or permanent, that
would restrain, prevent or delay the Closing on or before the End Date; and
(v) obtain
all necessary consents or waivers that are or may be required by any third parties, including any consents or waivers that Parent
deems necessary in connection with any reorganization of the Surviving Corporation’s assets or liabilities that might occur
contemporaneously with the Closing;
(vi) provide
such other assistance as Parent may deem necessary in connection with the anticipated transition of the Company; and
(vii) execute
and deliver of any additional instruments necessary and acceptable to Parent’s or the Company’s respective counsel
to consummate the Merger and to fully carry out the purposes of this Agreement.
(c) Parent
and the Company shall cooperate and consult with each other in connection with the making of all filings, notifications, communications,
submissions and taking all other material actions pursuant to this Section 5.8, and, subject to applicable legal limitations
and the instructions of any Governmental Entity, Parent and the Company shall keep each other apprised on a current basis of the
status of matters relating to the completion of the transactions contemplated thereby, including promptly furnishing the other
with copies of notices or other material communications received by Parent and the Company, as the case may be, or any of their
respective Subsidiaries or Affiliates, from any third party and/or any Governmental Entity with respect to such transactions.
Subject to applicable Law relating to the exchange of information, Parent and the Company shall permit counsel for the other Party
reasonable opportunity to review in advance, and consider in good faith the views of the other Party in connection with, any proposed
notifications or filings and any written communications or submissions, and with respect to any such notification, filing, written
communication or submission, any documents submitted therewith to any Governmental Entity; provided, however, that
materials may be redacted (i) to remove references concerning the valuation of the businesses of Parent, or proposals from third
parties with respect thereto, (ii) as necessary to comply with contractual agreements and (iii) as necessary to address reasonable
privilege or confidentiality concerns. Parent and the Company agree not to participate in any substantive meeting or discussion,
either in person or by telephone, with any Governmental Entity in connection with the proposed transactions unless it consults
with the other Party in advance and, to the extent not prohibited by such Governmental Entity, gives the other Party the opportunity
to attend and participate.
(d) Except
as otherwise permitted under this Agreement, neither Parent nor Company shall (and shall cause its Subsidiaries and Affiliates
not to) take or agree to take any action that would be reasonably likely to prevent or materially delay the Closing.
5.9 Public
Disclosure. The initial press release with respect to this
Agreement and the transactions contemplated hereby shall be a release by the Company; provided, however, that Parent has the opportunity
to review and provide comments to that release prior to its issuance. Thereafter, each of Parent, Merger Sub and the Company shall
each use its reasonable best efforts to consult with the other Parties before issuing any other press release or otherwise making
any public statement with respect to the Merger or this Agreement (including if such public statement is required by applicable
Law or New York Stock Exchange rules). The restrictions set forth in this Section 5.9 shall not apply to any communication
made by the Company regarding an Acquisition Proposal or the withholding, withdrawal or modification of the approval or Company
Board Recommendation with respect to the transactions contemplated by this Agreement.
5.10 Employees;
Benefit Plans.
(a) For
a period of 180 days after the Closing Date, Parent shall, or shall cause the Surviving Corporation or any of their respective
Subsidiaries or Affiliates to, continue to employ all of the Company’s corporate and commissary employees working at 2800
Gilbert Avenue and 3011 Stanton Avenue in Cincinnati, Ohio at the Effective Time (each, a “Covered Employee”);
provided, however, that nothing in this Agreement shall prevent Parent, the Surviving Corporation, or any of their
respective Subsidiaries or Affiliates, from terminating any employee of the Company, including Covered Employees, for Cause. For
the purposes of this Section 5.10, “Cause” means (i) commission of a felony or any other act or omission involving
dishonesty, embezzlement, misappropriation, fraud or moral turpitude, (ii) misconduct in the performance of the duties of the
Covered Employee, (iii) failure to follow reasonable directives in the course of the Covered Employee’s employment, (iv)
unauthorized dissemination of any confidential, non-public or proprietary information of the Company, Parent, the Surviving Corporation,
or any of their respective Subsidiaries or Affiliates, (vi) any course of conduct amounting to gross negligence or willful misconduct,
(vii) any material and/or repeated unexcused absence or failure to perform assigned duties commensurate with such Covered Employee's
position, (viii) use of illegal drugs, refusal to submit to a drug test, attempting to modify the results of a drug test, or failure
to pass a drug test, or (ix) any other behavior which causes harm or prejudice to the business, reputation or goodwill of the
Company, Parent, the Surviving Corporation, or any of their respective Subsidiaries or Affiliates.
(b) Parent
shall, or shall cause the Surviving Corporation or any of their respective Subsidiaries or Affiliates to, provide to each Covered
Employee, while employed by Parent, the Surviving Corporation or any of their respective Subsidiaries or Affiliates after the
Closing Date, (i) for a period of 180 days following the Closing Date, no less than the same base salary or hourly wage rate,
and no less than the same short-term (annual or more frequent) bonus or commission opportunity, provided to such Covered Employee
immediately before the Effective Time, and (ii) for a period beginning as of the Effective Time and continuing at least until
the end of the "plan year" for each respective Company Benefit Plan (the “Benefits Continuation Period”),
other compensation and employee benefits (excluding equity and equity-based awards and any benefits under a defined benefit pension
plan) for all Covered Employees, substantially comparable in the aggregate as those provided to such Covered Employees in the
aggregate under the Company Benefit Plans in effect immediately before the Effective Time, it being understood that Parent may
elect to (i) provide each Covered Employee with such substantially comparable benefits through coverage under employee benefits
plans, programs and arrangements of Parent or its Affiliates or Subsidiaries, (ii) cause the Surviving Corporation to provide
each Covered Employee with such substantially comparable benefits through continued coverage under Company Benefit Plans or (iii)
provide each Covered Employee with such substantially comparable benefits through a combination of coverage under the employee
benefits plans, programs and arrangements of Parent or its Affiliates or Subsidiaries and continued coverage under the Company
Benefit Plans.
(c) Parent
shall, or shall cause the Surviving Corporation and each of their respective Subsidiaries and Affiliates to, honor all Company
Benefit Plans (including for the avoidance of doubt all severance, change-in-control and similar plans and agreements) in accordance
with their terms as in effect immediately before the Effective Time, subject to any amendment or termination thereof that may
be permitted by the terms of such Company Benefit Plans; provided, however, that nothing herein shall prevent the
amendment or termination of any specific Company Benefit Plan or other plan, program, policy, agreement or arrangement, or interfere
with Parent’s, the Surviving Corporation’s or any of their respective Subsidiaries’ or Affiliates’ rights
or obligations to make such amendments or modifications as are necessary to comply with, or that are permitted under applicable
Law.
(d) For
all purposes under (i) all employee benefit plans of Parent, the Surviving Corporation and their respective Subsidiaries and Affiliates
providing benefits to any Covered Employee after the Effective Time, other than the Company Benefit Plans (the “New Plans”),
each Covered Employee shall receive full credit for all purposes (including eligibility, vesting and benefit accrual but not for
benefit accrual purposes under any New Plan that is a defined benefit plan) for such Covered Employee’s years of service
with the Company and its Subsidiaries before the Effective Time (including predecessor or acquired entities or any other entities
for which the Company and its Subsidiaries have given credit for prior service) to the same extent as such Covered Employee was
entitled, before the Effective Time, to credit for such service under any similar or comparable Company Benefit Plan, or with
respect to any New Plan for which there is no similar or comparable Company Benefit Plan, but only to the same extent as such
service would be recognized if it had been performed as an employee of Parent, the Surviving Corporation or their respective Subsidiaries
and Affiliates (in each case except to the extent such credit would result in a duplication of benefits) and (ii) the Company
Benefit Plans, each Covered Employee's service before the Effective Time with the Company and its Subsidiaries shall continue
to be recognized for all purposes (including eligibility, vesting and benefit accrual) in accordance with the terms of each such
Company Benefit Plan (in each case except to the extent such credit would result in a duplication of benefits). In addition, where
applicable, and without limiting the generality of the foregoing: (i) at the Effective Time, each Covered Employee immediately
shall be eligible to participate, without any waiting time, in each New Plan applicable to the Covered Employees as of the Effective
Time to the extent the Covered Employee's service with the Company or its Subsidiaries prior to the Effective Time is sufficient
to satisfy the waiting period requirements, if any, under such New Plan; (ii) Parent shall make commercially reasonable best efforts
to cause all pre-existing condition exclusions or limitations and actively-at-work requirements of each New Plan applicable to
the Covered Employees at the Effective Time to be waived or satisfied for such Covered Employee and his or her covered dependents
to the extent waived or satisfied under a similar or comparable Company Benefit Plan as of the Effective Time; (iii) Parent shall
make commercially reasonable best efforts to cause all eligible expenses incurred by each Covered Employee and his or her covered
dependents during the portion of the plan year of the Company Benefit Plan ending on the date such Covered Employee’s participation
in the New Plan begins (if such date is within Benefits Continuation Period) to be taken into account under such New Plan for
purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable to such Covered Employees
and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such New Plan;
and (iv) in all cases, all amounts contributed as of the Closing Date by any Covered Employee to any Company Benefit Plan that
is a Code Section 125 cafeteria plan or health savings account arrangement shall remain credited to such Covered Employee’s
account under the applicable plan or arrangement following the Closing Date, subject to the terms and conditions of the applicable
plan or arrangement.
(e) With
respect to any accrued but unused vacation or paid time off to which any Covered Employee is entitled pursuant to the vacation
or paid time off policy applicable to such Covered Employee immediately before the Effective Time (the “Vacation Policy”),
Parent shall, or shall cause the Surviving Corporation or any of their respective Subsidiaries or Affiliates to, (i) allow such
Covered Employee to use such accrued vacation or paid time off (subject to the terms of the applicable vacation plan or policy,
including any maximums that may prohibit the Covered Employee from accruing any new vacation or paid time off until such prior
time is used) and (ii) if any Covered Employee’s employment terminates during the Benefits Continuation Period under circumstances
entitling the Covered Employee to severance pay under the Company Severance Plan, pay the Covered Employee, in cash, an amount
equal to the value of the accrued vacation or paid time off.
(f) Prior
to the Closing but only after receipt of the Requisite Shareholder Approval and the satisfaction of the condition to closing set
forth in Section 6.1(c) (but earlier upon mutual agreement of the Parties), the Company shall cooperate with Parent’s
reasonable requests to (i) arrange and conduct for employees of the Company, an open enrollment period for any New Plans and employee
orientation sessions (with such sessions to be held at times reasonably agreed to by Parent and the Company), and (ii) meet with
employees of the Company (either individually or in groups) during breaks, outside of scheduled work hours or as otherwise agreed
to by Parent and the Company.
(g) Except
as set forth in this Section 5.10, nothing in this Agreement shall confer upon any current or former employee of the Company,
Parent, the Surviving Corporation or any of their respective Subsidiaries or Affiliates, any rights (including for sake of clarity,
any third party beneficiary rights) or remedies including any right to employment or continued employment for any specified period,
of any nature or kind whatsoever. No provision of this Section 5.10 is intended to modify, amend or create any employee
benefit plan of the Company, Parent, Surviving Corporation or any of their respective Subsidiaries or Affiliates.
(h) With
respect to awards of options or Restricted Shares that the Company would have granted on or after the date of this Agreement,
in the ordinary course of business in the absence of the restrictions contained in Section 5.1(b) of this Agreement, the
Compensation Committee of the Company Board shall make in the ordinary course the determinations of time-vesting awards and the
performance-vesting awards it would grant to employees of the Company for fiscal year 2015 and shall prorate such awards if necessary
from the date of this Agreement to the Effective Time if the Effective Time occurs before the end of fiscal year 2016 (each such
award, a “Company Contingent Award”). Notwithstanding the foregoing, such Company Contingent Awards (A) may
not exceed 10,000 shares of Company Common Stock in the aggregate, or the equivalent cash amount, and (B) must be distributed
among the different levels of employees of the Company and its Subsidiaries approximately in the same proportions as awards of
options or of Restricted Shares have been distributed among the different levels of employees of the Company in the last three
fiscal years.
5.11 Indemnification;
Directors’ and Officers’ Insurance.
(a) The
Parties shall cooperate and use their reasonable best efforts to defend against and respond to any threatened or actual Proceeding,
including any such Proceeding in which any individual who is now, or has been at any time before the date of this Agreement, or
who becomes before the Effective Time, a director, officer or employee of the Company or any of its Subsidiaries or who is or
was serving at the request of the Company or any of its Subsidiaries as a director, officer or employee of another person (the
“Indemnified Parties”), is, or is threatened to be, made a party based in whole or in part on, or arising in
whole or in part out of, or pertaining to (i) the fact that he is or was a director, officer or employee of the Company or any
of its Subsidiaries before the Effective Time, or (ii) this Agreement or any of the transactions contemplated by this Agreement,
whether asserted or arising before or after the Effective Time; provided, however, that nothing in this provision will be construed
to grant any person any right of indemnification other than as provided by the Company Articles, Company Regulations or applicable
Law. All rights to indemnification, including advancement of expenses, and exculpation from liabilities for acts or omissions
occurring at or before the Effective Time now existing in favor of any Indemnified Party as provided in any applicable Articles
of Incorporation or Regulations (or comparable organizational documents), and any existing indemnification agreements set forth
on Section 5.11(a) of the Company Disclosure Schedule, shall survive the Merger and shall continue in full force and effect
in accordance with their terms, and shall not be amended, repealed or otherwise modified after the Effective Time in any manner
that would adversely affect the rights thereunder of such individuals for acts or omissions occurring at or before the Effective
Time, it being understood that nothing in this sentence shall require any amendment to the Articles of Incorporation or Regulations
of the Surviving Corporation.
(b) For
six (6) years after the Effective Time, to the fullest extent permitted under applicable Law, the Parent, the Merger Sub, and
the Surviving Corporation shall indemnify, defend and hold harmless, and provide advancement of reasonable expenses to, each Indemnified
Party against all Proceedings, losses, claims, damages, costs, expenses, liabilities or judgments or amounts that are paid in
settlement of or in connection with any Proceeding based in whole or in part on or arising in whole or in part out of the fact
that such person is or was a director, officer or employee of the Company or any Subsidiary of the Company, and pertaining to
any matter existing or occurring, or any acts or omissions occurring, at or before the Effective Time, whether asserted or claimed
before, or at or after, the Effective Time (including matters, acts or omissions occurring in connection with the approval of
this Agreement and the consummation of the transactions contemplated hereby); provided, however, that nothing in this provision
will be construed to grant any person any right of indemnification for any act or omission not made in good faith and in the best
interest of the shareholders of the Company and its Subsidiaries or as provided under the applicable Articles of Incorporation
and Regulations in effect during the acts or events under which the claim for indemnification has arisen.
(c) Parent
and Merger Sub shall cause Surviving Corporation to cause the individuals serving as officers and directors of the Company or
any of its Subsidiaries immediately before the Effective Time to be covered for a period of six (6) years from the Effective Time
by the directors’ and officers’ liability insurance policies maintained by the Company or its Subsidiaries (provided,
that Parent may substitute therefor policies of at least the same coverage and amounts containing terms and conditions that are
not less advantageous to such officers and directors than such policy) with respect to acts or omissions occurring before the
Effective Time that were committed by such officers and directors in their capacity as such; provided, that in no event
shall Parent be required to expend annually in the aggregate an amount in excess of 200% of the annual premiums currently paid
by the Company or its Subsidiaries for such insurance (the “Insurance Amount”). At the Company’s option,
the Company may purchase before the Effective Time, a six-year prepaid “tail policy” on terms and conditions providing
substantially equivalent benefits as the current policies of directors’ and officers’ liability insurance maintained
by the Company and its Subsidiaries with respect to matters existing or occurring at or before the Effective Time, covering without
limitation the transactions contemplated hereby; provided, that the annual premium therefor would not be in excess of 200%
of the last annual premium paid before the Effective Time. If such prepaid “tail policy” has been obtained by the
Company before the Effective Time, Parent shall cause such policy to be maintained in full force and effect, for its full term,
and cause all obligations thereunder to be honored by the Surviving Corporation.
(d) Parent
and Merger Sub shall cause Surviving Corporation to pay all expenses, including reasonable attorneys’ fees, that may be
incurred by the persons referred to in this Section 5.11 in connection with their enforcement of their rights provided
in this Section 5.11.
(e) Parent
and Merger Sub agree that all rights to exculpation, indemnification and advancement of expenses for acts or omissions occurring
at or before the Effective Time, whether asserted or claimed before, at or after the Effective Time, now existing in favor of
the current or former directors, officers or employees, as the case may be, of the Company or any of its Subsidiaries as provided
in their respective Articles of Incorporation or Regulations or other organization documents or in any agreement shall survive
the Merger and shall continue in full force and effect. The provisions of this Section 5.11 are intended to be in addition
to the rights otherwise available to the current officers and directors of the Company by Law, charter, statute, regulation or
agreement, and shall operate for the benefit of, and shall be enforceable by, each of the Indemnified Parties, their heirs and
their Representatives. The obligations set forth in this Section 5.11 shall not be terminated, amended or otherwise modified
in any manner that adversely affects any Indemnified Party, or any person who is a beneficiary under the policies referred to
in this Section 5.11 and their heirs and Representatives, without the prior written consent of such affected Indemnified
Party or other person.
(f) If
the Surviving Corporation or Parent or any of their successors or assigns shall (i) consolidate with or merge into any other person
and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfer all or substantially
all of its properties and assets to any person, then, and in each such case, the Surviving Corporation or Parent, as the case
may be, shall make or cause to be made, proper provisions so that the successors and assigns of the Surviving Corporation or Parent,
as the case may be, shall assume all of the obligations of the Surviving Corporation or Parent, as the case may be set forth in
this Section 5.11.
(g) Nothing
in this Agreement is intended to, shall be construed to or shall release, waive or impair any rights to directors’ and officers’
insurance claims under any policy that is or has been in existence with respect to the Company or any of its Subsidiaries for
any of their respective directors, officers or other employees, it being understood and agreed that the indemnification provided
for in this Section 5.11 is not before or in substitution for any such claims under such policies.
(h) The
provisions of this Section 5.11 shall survive the Effective Time and are intended to be for the benefit of, and shall be
enforceable by, each Indemnified Party and his or her heirs and Representatives.
5.12 Notice
of Certain Events. Each of Parent, Merger Sub and the Company
shall promptly advise the other of: (a) any change or event having or reasonably expected to have a Company Material Adverse Effect
or Parent Material Adverse Effect on it, as the case may be, (b) any change or event that it believes would or would be reasonably
likely to cause or constitute a material breach of any of its representations, warranties or covenants contained in this Agreement,
(c) any notice or other communication from any person alleging that consent of such person is or may be required, or from any
Governmental Entity, in connection with the transactions contemplated by this Agreement; and (d) any material legal actions commenced,
or to such party’s knowledge, threatened; provided, however, that, notwithstanding the above, the delivery
of any notice pursuant to this Section 5.12 will not limit or otherwise affect the remedies available hereunder to the
Party receiving such notice or the conditions to such Party’s obligation to consummate the Merger.
5.13 Stock
Exchange Delisting; Exchange Act Deregistration. Before
the Effective Time, the Company shall cooperate with Parent and use its commercially reasonable best efforts to take, or cause
to be taken, all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on its part under applicable
Laws and rules and policies of the New York Stock Exchange and SEC to enable the delisting by the Surviving Corporation of the
Common Stock from the New York Stock Exchange and the deregistration of the Common Stock under the Exchange Act as promptly as
practicable after the Effective Time, and in any event no more than fifteen (15) trading days after the Closing Date.
5.14 Control
of Operations. Nothing contained in this Agreement shall
give Parent or Merger Sub, directly or indirectly, the right to control or direct the Company’s operations before the Effective
Time. Before the Effective Time, the Company shall exercise, consistent with the terms and conditions of this Agreement, complete
control and supervision over its operations.
5.15 Section
16 Matters. Before the Effective Time, the Company will
take such steps as may be reasonably necessary or appropriate to cause any disposition of shares of Company Common Stock or conversion
of any derivative securities in respect of shares of Company Common Stock in connection with the consummation of the transactions
contemplated by this Agreement to be exempt under Rule 16b-3 promulgated under the Exchange Act. The Parent agrees to cooperate
with the Company in all respects necessary for the Company to take the actions contemplated by this Section 5.15.
5.16 Financing
Cooperation. Prior to the Closing, the Company shall,
and shall cause its Subsidiaries to, use reasonable best efforts to provide to Parent and Merger Sub, at Parent’s sole expense,
all cooperation reasonably requested by Parent that is necessary in connection with obtaining the Financing, any contemporaneous
reorganization of the Surviving Corporation and any other matters related to the transition of the Company (so long as such cooperation
does not unreasonably interfere with the ongoing operations of the Company and its Subsidiaries), including:
(a) furnishing
Parent and Merger Sub such financial and other pertinent information regarding the Company as may be reasonably requested by Parent,
including by granting Parent reasonable access pursuant to Section 5.6;
(b) assisting
Parent in the preparation of customary offering memoranda, bank information memoranda, authorization letters, confirmations and
undertakings, rating agency presentations and lender presentations relating to obtaining financing in connection with the Merger;
(c) using
reasonable best efforts to satisfy the conditions precedent set forth in any definitive documentation relating to financing in
connection with the Merger to the extent the satisfaction of such conditions requires the cooperation of or is within the control
of the Company;
(d) using
reasonable best efforts to cooperate with the financing sources’ due diligence investigation, to the extent customary and
reasonable and not unreasonably interfering with the business of the Company;
(e) obtaining
any third-party consents or waivers deemed necessary by Parent, including consents and waivers that might be required in connection
with any reorganization of the Surviving Corporation’s assets or liabilities anticipated by Parent to occur contemporaneously
with the Closing;
(f) using
commercially reasonable efforts to obtain accountant’s comfort letters and legal opinions reasonably requested by Parent
and customary for such financings, including issuing any customary representations letters to Grant Thornton.
Anything
in this Section 5.16 to the contrary notwithstanding, until the Effective Time occurs, neither the Company nor any of its
Subsidiaries, nor any of their respective directors or officers, as the case may be, shall (i) be required to pay any commitment
or other similar fee, (ii) enter into any definitive agreement or have any liability or any obligation under any certificate,
document, instrument, credit agreement or any related document or any other agreement or document related to the Financing, (iii)
unless promptly reimbursed by Parent, be required to incur any other expenses in connection with the Financing or (iv) be required
to take any action in his/her capacity as a director or officer of the Company or any of its Subsidiaries with respect to the
Financing. The amounts required to be paid or reimbursed in this paragraph shall not be deemed a part of or subject to the expense
limitation provisions in Section 7.3.
5.17 Transaction
Costs. The Company has delivered to Parent an estimate
of all costs and expenses that the Company will incur, to the Company’s knowledge, in connection with its engagement of
third party providers whose services are anticipated to be used by the Company in connection with the consideration and consummation
of the transactions contemplated by this Agreement, including but not limited to financial advisors, investment bankers, attorneys
and accountants, whether payable before or after the Closing Date, but excluding any amounts paid as of the date of this Agreement
(“Projected Transaction Costs”), and any supporting evidence that Parent has reasonably requested to support
the Projected Transaction Costs, including any definitive agreements between the Company and material third-party providers.
5.18 Further
Assurances. At and after the Effective Time, the officers
and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of the Company
or Merger Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company
or Merger Sub, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Corporation any
and all right, title and interest in, to and under any of the rights, properties or assets of the Company acquired or to be acquired
by the Surviving Corporation as a result of, or in connection with, the Merger.
ARTICLE
6. CONDITIONS
PRECEDENT
6.1 Conditions
to Each Party’s Obligation To Effect the Merger. The
respective obligations of the Parties to effect the Merger shall be subject to the satisfaction at or before the Effective Time
of the following conditions:
(a) Shareholder
Approval. The Requisite Shareholder Approval shall have been obtained.
(b) No
Orders or Restraints; Illegality. No Order issued by any court or agency of competent jurisdiction or other legal restraint
or prohibition preventing the consummation of the Merger, or any of the other transactions contemplated by this Agreement shall
be in effect. No statute, rule, regulation or Order shall have been enacted, entered, promulgated or enforced by any Governmental
Entity that prohibits or makes illegal consummation of the Merger or any other transactions contemplated by this Agreement.
(c) Regulatory
Approvals. (i) The applicable waiting period under the HSR Act (and any extension thereof) relating to the Merger shall have
expired or been earlier terminated and any Agreement with any Governmental Entity not to close the Merger shall have expired or
been terminated and (ii) other than the filing of the Articles of Merger, all authorizations, consents, orders or approvals of,
or declarations or filings with, or expirations of waiting periods imposed by, any Governmental Entity in connection with the
Merger and the consummation of the other transactions contemplated by this Agreement, the failure of which to file, obtain or
occur would be reasonably expected to have a Parent Material Adverse Effect or a Company Material Adverse Effect, shall have been
filed, been obtained or occurred on terms and conditions which would not be reasonably expected to have a Parent Material Adverse
Effect or a Company Material Adverse Effect.
6.2 Conditions
to Obligations of Parent and Merger Sub. The obligations of
Parent and Merger Sub to effect the Merger are also subject to the satisfaction, or waiver by Parent and Merger Sub, at or before
the Effective Time, of the following conditions:
(a) Representations
and Warranties.
(i) The
representations and warranties of the Company set forth in this Agreement (other than the representations and warranties set forth
in the first and third sentences of Section 3.2(a), the first sentence of Section 3.2(b), Section 3.2(c),
Section 3.2(d), Section 3.2(e), Section 3.2(f), Section 3.2(g), the second through fourth sentences
of Section 3.3(b), Section 3.4(a), Section 3.6(b), Section 3.8(a), the first sentence of Section
3.11(a), Section 3.19 and Section 3.20) shall be true and correct as of the Closing Date as though made on and
as of the Closing Date (except to the extent such representations and warranties are specifically made as of a particular date,
in which case such representations and warranties shall be true and correct as of such date), without giving effect to any materiality
or “Material Adverse Effect” qualifications therein, except for such breaches that, individually or in the aggregate,
have not had or would not reasonably be expected to have a Company Material Adverse Effect.
(ii) The
representations and warranties of the Company set forth in the first and third sentence of Section 3.2(a), the first sentence
of Section 3.2(b), Section 3.2(c), Section 3.2(d), Section 3.2(e), Section 3.2(f), Section
3.2(g), the second through fourth sentences of Section 3.3(b), Section 3.4(a), Section 3.6(b), Section
3.8(a), the first sentence of Section 3.11(a), Section 3.19 and Section 3.20 shall be true and correct
as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties
are specifically made as of a particular date, in which case such representations and warranties shall be true and correct as
of such date), without giving effect to any materiality or “Material Adverse Effect” qualifications therein, except
for de minimus inaccuracies.
(b) Performance
of Obligations of the Company. The Company shall have performed in all material respects all obligations required to be performed
by it under this Agreement at or before the Effective Time.
(c) No
Material Adverse Effect. Since the date of this Agreement, there shall not have occurred any Company Material Adverse Effect.
(d) No
Breach of Financing. No Financing Source has terminated its Financing Commitment (i) on the grounds that a representation
or warranty made by Parent and/or Merger Sub as to the condition, quality, sufficiency or title of any real property assets of
the Company is not true and complete in all material respects, or (ii) as a result of any other Lien on the real property assets
of the Company that was not disclosed in the Company Disclosure Schedules.
(e) Appraisal
Rights. Holders of not more than 10% of the Company Common Stock immediately prior to the Effective Time shall constitute
Dissenting Shares or shall otherwise have rights of appraisal with respect to the transactions contemplated by this Agreement.
(f) Retirement
of Certain Executives. Craig Maier and Karen Maier shall have (i) tendered letters of resignation to the Company and any Subsidiaries
or Affiliates of the Company at which he/she holds any position, (ii) stepped down from each position he/she holds at the Company
or at any of the Company’s Affiliates and Subsidiaries, and (iii) waived all rights he/she may have to any payment triggered
by the voluntary or involuntary termination of any position he/she holds at the Company or at any of the Company’s Affiliates
and Subsidiaries; provided, however, that nothing in this Agreement will limit such person’s right to receive
deferred benefits and compensation accrued in the ordinary course of such person’s employment under the terms of any applicable
employment agreement or Company Benefit Plans.
(g) Resignation
of Company Board. Each member of the Company Board shall have (i) tendered a letter of resignation to the Company and any
Subsidiaries or Affiliates of the Company at which he/she holds any position, (ii) stepped down from each position he/she holds
at the Company or at any of the Company’s Affiliates and Subsidiaries, and (iii) waived all rights except for indemnification
rights under applicable Articles of Incorporation or Regulations he/she may have to any payment triggered by the voluntary or
involuntary termination of any position he/she holds at the Company or at any of the Company’s Affiliates and Subsidiaries.
(h) Statement
of Transaction Costs. No later than two (2) business days prior to the Closing Date, the Company must deliver to Parent a
complete and accurate accounting (“Statement of Transaction Costs”) of all costs and expenses of the Company
incurred in connection with its engagement of third party providers whose services were used by the Company in connection with
the consideration and consummation of the transactions contemplated by this Agreement, including but not limited to financial
advisors, investment bankers, attorneys and accountants, whether payable before or after the Closing Date, including fees, costs
and expenses accrued and earned as a result of the Closing of the transactions contemplated by this Agreement (“Transaction
Costs”).
(i) Officer’s
Certificate. The Company shall have delivered to Parent a certificate, dated as of the Closing Date, signed on behalf of the
Company by the chief executive officer or the chief financial officer of the Company, certifying to the satisfaction of the conditions
specified in this Section 6.2.
6.3 Conditions
to Obligations of the Company.
The
obligation of the Company to effect the Merger is also subject to the satisfaction or waiver by the Company at or before the Effective
Time of the following conditions:
(a) Representations
and Warranties. The representations and warranties of Parent and Merger Sub set forth in this Agreement shall be true and
correct as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties
are specifically made as of a particular date, in which case such representations and warranties shall be true and correct as
of such date), without giving effect to any materiality or “Material Adverse Effect” qualifications therein, except
for such breaches that have not had or would not reasonably be expected to have a Parent Material Adverse Effect.
(b) Performance
of Obligations of Parent and Merger Sub. Parent and Merger Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement on or before the Closing Date.
(c) Officer’s
Certificate. Parent and Merger Sub shall have delivered to the Company a certificate, dated as of the Closing Date, signed
on behalf of Parent and Merger Sub by the respective chief executive officer or the chief financial officer of Parent and Merger
Sub, certifying to the satisfaction of the conditions specified in Sections 6.3(a) and 6.3(b).
6.4 Frustration
of Closing Conditions. None of the Company, Parent or Merger
Sub may rely, either as a basis for not consummating the Merger or terminating this Agreement and abandoning the Merger, on the
failure of any condition set forth in Section 6.1, Section 6.2 or Section 6.3, as the case may be, to be satisfied if such failure
was caused by such Party’s material breach of any provision of this Agreement or breach of the requirement to use efforts
in accordance with Section 5.5(b).
ARTICLE
7. TERMINATION AND AMENDMENT
7.1 Termination.
This Agreement may be terminated by the Company or Parent
under certain circumstances, including.
(a) Mutual
Consent. By mutual written consent of the Company and Parent;
(b) Delay.
By either the Company or Parent, if the Merger shall not have been consummated on or before July 30, 2015 (the “End Date”),
subject to one automatic extension of thirty (30) days, and such other extensions as shall be mutually agreed between Parent and
the Company; provided, however, such subsequent extension is only available to Company if Parent is able to extend the availability
of Financing. The right to terminate this Agreement pursuant to this Section 7.1(b) shall not be available to any party
whose breach of any representation, warranty, covenant or agreement set forth in this Agreement has been the cause of, or resulted
in, the failure of the Merger to be consummated on or before the End Date.
(c) No
Regulatory Approval. By either Parent or the Company if a Governmental Entity has issued a final and non-appealable Order
having the effect of permanently prohibiting the consummation of the transactions contemplated by this Agreement (provided, that
the right to terminate this Agreement under this Section 7.1(c) shall not be available to any Party whose failure to fulfill
any obligation under this Agreement has been a principal cause of or resulted in such Order);
(d) Failure
of Shareholder Approval. By either Parent or the Company, if the Requisite Shareholder Approval has not been obtained at a
special meeting or adjournment or postponement thereof at which a vote on the approval of the proposed transaction was taken,
unless the provisions of Section 7.1(e) shall apply;
(e) Acceptance
of Superior Proposal.
(i) By
the Company, if the Company has received a Superior Proposal and the Company Board has made a determination to accept such Superior
Proposal, in accordance with the terms of Section 5.7; provided, that the Company shall have paid any amounts due
pursuant to Section 7.3(b) in accordance with the terms, and at the times, specified therein.
(i) By
Parent, if (i) the Company Board or any committee thereof has failed to make, withdrawn, amended, modified, or materially qualified,
in a manner adverse to Parent or Merger Sub, the Company Board Recommendation, has recommended an Acquisition Proposal, has failed
to recommend against acceptance of any tender offer or exchange offer for the shares of Company Common Stock within ten (10) Business
Days after the commencement of such offer, has made any public statement inconsistent with the Company Board Recommendation, or
resolved or agreed to take any of the foregoing actions, (ii) the Company shall have entered into, or publicly announced its intention
to enter into, a Company Acquisition Agreement (other than an Acceptable Confidentiality Agreement), or (iii) the Company or the
Company Board (or any committee thereof) has publicly announced its intentions to do any of actions specified in this Section
7.1(e).
(f) Company
Breach. By Parent, if there has been a breach in any representation or warranty of the Company or a failure to perform a covenant
or agreement on the part of the Company set forth in this Agreement, which breach, inaccuracy or failure to perform (i) would
cause the conditions set forth in Sections 6.2(a)-(e) not to be satisfied and (ii) shall not have been cured, or is not
capable of being cured, within 20 days following receipt by the Company of written notice of such breach or failure to perform
from Parent (or, if earlier, the End Date);
(g) Parent
or Merger Sub Breach. By the Company, if there has been a breach in any representation or warranty of Parent or Merger Sub
or a failure to perform a covenant or agreement on the part of Parent or Merger Sub set forth in this Agreement, which breach,
inaccuracy or failure to perform (i) would cause the conditions set forth in Section 6.3(a) or 6.3(b) not to be
satisfied and (ii) shall not have been cured, or is not capable of being cured, within 20 days following receipt by Parent of
written notice of such breach or failure to perform from the Company (or, if earlier, the End Date); or
(h) Failure
to Consummate. By either Party, if (i) all of the conditions set forth in Sections 6.1 and 6.2 have been satisfied
by that Party (other than delivery of items to be delivered at the Closing and other than satisfaction of those conditions that
by their nature are to be satisfied by actions taken at the Closing), (ii) that Party has notified the other Party in writing
that it is ready and willing to consummate the transactions contemplated by this Agreement (subject to the satisfaction of all
of the conditions set forth in Sections 6.1 and 6.3) and (iii) the other Party fails to consummate the transactions
contemplated by this Agreement within three Business Days following the delivery of such notice (for the avoidance of doubt, it
being understood that in accordance with the proviso to Section 7.1(b), during such period of three Business Days following
delivery of such notice, the other Party shall not be entitled to terminate this Agreement pursuant to Section 7.1(b)).
The
Party desiring to terminate this Agreement pursuant to any clause of this Section 7.1 (other than clause (a)) shall give
written notice of such termination to the other Party in accordance with Section 8.2, specifying the provision or provisions
hereof pursuant to which such termination is affected.
7.2 Effect
of Termination. If either the Company or Parent terminates
this Agreement as provided in Section 7.1, this Agreement shall forthwith become void and have no effect, and none of the Company,
Parent, any of their respective Subsidiaries or any of the officers or directors of any of them shall have any liability of any
nature whatsoever under this Agreement, or in connection with the transactions contemplated by this Agreement, except that (i)
Sections 5.5(b), 7.2, 7.3, 7.4, 7.5 and Article 8 shall survive any termination of this Agreement and (ii) neither the Company
nor Parent shall be relieved or released from liability for willful breach of this Agreement or for fraud under applicable Law.
Nothing shall limit or prevent any Party from exercising any rights or remedies it may have under Section 8.10 in lieu of terminating
this Agreement pursuant to Section 7.1.
7.3 Fees
and Expenses.
(a) At
or before the Closing, Parent shall pay or cause to be paid by the Company the total Transaction Costs incurred by the Company
but unpaid at Closing. The costs and expenses of printing and mailing the Proxy Statement and all filing and other fees paid to
the SEC in connection with the Merger shall be borne equally by the Company and Parent, all HSR costs shall be borne by Parent,
and all Transaction Costs shall be paid by the Party incurring such Transaction Costs, whether or not the Merger is consummated,
unless otherwise provided in this Agreement.
(b) The
Company shall pay to Parent a termination fee in the amount of $5,000,000 (the “Company Termination Fee”) in
immediately available funds if this Agreement is terminated by either Party pursuant to Section 7.1(e).
(c) The
Company Termination Fee must be paid no later than fifteen (15) Business Days following the event that triggers such payment described
in Section 7.3(b). In the event that Parent shall receive full payment of the Company Termination Fee, (i) the receipt
of such amount shall be deemed to be liquidated damages and the sole and exclusive remedy of Parent, Merger Sub and their Affiliates
against the Company and its Subsidiaries or any of their respective former, current or future equity holders, controlling persons,
directors, officers, employees, agents, Representatives, general or limited partners, managers, management companies, members,
shareholders, Affiliates or assignees and any and all former, current or future equity holders, controlling persons, directors,
officers, employees, agents, general or limited partners, managers, management companies, members, shareholders, Affiliates or
assignees of any of the foregoing, and any and all former, current or future heirs, executors, administrators, trustees, successors
or assigns of any of the foregoing (collectively, “Company Related Parties”), (ii) no Company Related Party
shall have any other liability or obligation for any or all losses or damages suffered or incurred by Parent, Merger Sub or any
other Parent Related Parties in connection with this Agreement (and the termination hereof) or any matter forming the basis for
such termination, and (iii) none of Parent, Merger Sub, any of their respective Affiliates or any other Parent Related Party shall
be entitled to bring or maintain any other Proceeding against the Company, any of its Affiliates or any other Company Related
Party arising out of such termination, any of the transactions contemplated hereby or any matters forming the basis for such termination.
The Parties acknowledge and agree that in no event shall the Company be required to pay the Company Termination Fee on more than
one occasion, whether or not the Company Termination Fee may be payable under more than one provision of this Agreement at the
same or at different times and the occurrence of different events.
(d) The
Parties acknowledge that the agreements contained in this Section 7.3 and in Section 8.10 are an integral part of
the transactions contemplated by this Agreement, and that, without these agreements, the Parties would not enter into this Agreement;
accordingly, if the Company or Parent, as the case may be, fails to timely pay any amount due under this Section 7.3, and,
in order to obtain the payment, the Company or Parent, as the case may be, commences a suit that results in a judgment against
the other Party for the payment set forth in this Section 7.3, such paying Party shall pay the other party or Parties,
as applicable, its reasonable and documented costs and expenses (including reasonable and documented attorneys’ fees) in
connection with such suit, together with interest on such amount at the prime rate as published in The Wall Street Journal in
effect on the date such payment was required to be made through the date such payment was actually received.
7.4 Amendment.
This Agreement may be amended by the Parties, by action taken
or authorized by their respective governing bodies, at any time before or after approval of the matters presented in connection
with the Merger by the shareholders of the Company; provided, however, that after any approval of the transactions contemplated
by this Agreement by the shareholders of the Company, there may not be, without further approval of such shareholders, any amendment
of this Agreement (other than as contemplated by this Agreement) that (a) alters or changes the amount or the form of the Merger
Consideration to be delivered under this Agreement to the holders of Company Common Stock, if such alteration or change would
adversely affect the holders of any security of the Company, (b) alters or changes any term of the Articles of Incorporation of
the Surviving Corporation, if such alteration or change would adversely affect the holders of any security of the Company, (c)
alters or changes any of the terms and conditions of this Agreement if such alteration or change would adversely affect the holders
of any securities of the Company or (d) by applicable Law otherwise requiring the further approval of such shareholders. This
Agreement may not be amended except by an instrument in writing signed on behalf of each of the Parties.
7.5 Extension;
Waiver. At any time before the Effective Time, the Parties,
by action taken or authorized by their respective governing bodies, may, to the extent legally allowed, (a) extend the time for
the performance of any of the obligations or other acts of any other Party, (b) waive any inaccuracies in the representations
and warranties contained in this Agreement or (c) waive compliance with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a Party to any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such Party, but such extension or waiver or failure to insist on strict compliance with an obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE
8. GENERAL PROVISIONS
8.1 Nonsurvival
of Representations, Warranties and Agreements. None
of the representations, warranties, covenants and agreements set forth in this Agreement or in any instrument delivered pursuant
to this Agreement shall survive the Effective Time, except for Sections 5.9 and 5.10 and for those other covenants and agreements
contained in this Agreement that by their express terms apply or are to be performed in whole or in part after the Effective Time.
8.2 Notices.
All notices and other communications in connection with
this Agreement shall be in writing and shall be deemed given if delivered personally, sent via facsimile (with confirmation),
mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) to the
Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):
(a) if
to the Company, to:
Frisch’s
Restaurants, Inc.
2800
Gilbert Avenue
Cincinnati,
Ohio 45206
Attention:
Craig F. Maier
with
a copy to:
Cummins
& Brown LLC
312
Walnut Street
Suite
1000
Cincinnati,
Ohio 45202
Attention:
James R. Cummins
and
(b) if
to Parent or Merger Sub, to:
FRI
Holding Company, LLC
4170
Ashford Dunwoody Road, Suite #390
Atlanta,
GA 30319
Attention:
Aziz Hashim
with
a copy to:
Cheng
Cohen LLC
311
North Aberdeen Street
Suite
400
Chicago,
Illinois 60607
Attention:
Amy Cheng
8.3 Interpretation. When
a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference shall be to an Article or Section
of, or Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever
the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed
to be followed by the words “without limitation.” This Agreement shall not be interpreted or construed to require
any person to take any action, or fail to take any action, if to do so would violate any applicable Law.
8.4 Certain
Definitions. For purposes of this Agreement:
(a) “Business
Day” means any day other than a Saturday, Sunday or a day on which the banks in Ohio are authorized by Law or Order
to be closed.
(b) “knowledge”
of any person that is not an individual means the actual knowledge, after reasonable investigation, of the individuals identified
in Section 8.4(b) of the Company Disclosure Schedule, except that knowledge shall be assumed for the purpose of this Agreement
if such person or has received notice of such fact or other matter.
(c) “person”
means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization
or other entity (including its permitted successors and assigns).
8.5 Counterparts. This
Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the Parties and delivered to the other Party, it being understood that
each Party need not sign the same counterpart. A facsimile copy or electronic transmission of a signature page shall be deemed
to be an original signature page.
8.6 Entire
Agreement. This Agreement (including the Disclosure Schedules
and Exhibits hereto and the other documents and the instruments referred to in this Agreement), together with the Confidentiality
Agreement, constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between
the Parties with respect to the subject matter of this Agreement, other than the Confidentiality Agreement.
8.7 Governing
Law; Jurisdiction.
(a) Ohio
Law (without regard to any jurisdiction’s conflict-of-laws principles) exclusively governs all matters based upon, arising
out of, or relating in any way to this Agreement and all other written agreements, documents and certificates expressly required
by this Agreement to be delivered to another Party on the date hereof or at or before the Closing (collectively, the “Transaction
Documents”) and the transactions contemplated by the Transaction Documents, including all Proceedings arising out of
or relating to this Agreement or any of the other Transaction Documents as well as the interpretation, construction, performance
and enforcement of this Agreement or any of the other Transaction Documents.
(b) The
Parties agree that any suit, action or proceeding brought by any Party to enforce any provision of, or based on any matter arising
out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought exclusively in any federal
or state court located in Cincinnati, Ohio. Each of the Parties submits to this exclusive jurisdiction of such courts in any suit,
action or Proceeding seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement
or the transactions contemplated hereby and hereby irrevocably waives the benefit of jurisdiction derived from present or future
domicile or otherwise in such action of Proceeding. Each Party irrevocably waives, to the fullest extent permitted by Law, any
objection that it may now or hereafter have to the laying of the venue of any such suit, action or Proceeding in any such court
or that any such suit, action or Proceeding brought in any such court has been brought in an inconvenient forum. Each Party agrees
that any such suit, action or Proceeding will constitute a complex business case, and, if a Party initiates such a suit, action
or proceeding in Ohio state court, it must be brought in the Ohio Business Courts as a business case.
8.8 WAIVER
OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY SUCH ACTION OR PROCEEDING, INCLUDING ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY FINANCING IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT: (A) NO REPRESENTATIVE OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH ACTION OR PROCEEDING,
SEEK TO ENFORCE THE FOREGOING WAIVER; (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (C) IT MAKES THIS
WAIVER VOLUNTARILY; AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
IN THIS SECTION 8.8.
8.9 Assignment;
Third-Party Beneficiaries.
(a) Neither
this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned by any of the Parties (whether
by operation of Law or otherwise) without the prior written consent of the other Parties. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable by all of the Parties and their respective successors
and assigns.
(b) Except
(i) from and after the Effective Time, for the rights of holders of equity securities issued by the Company to receive the consideration
set forth in Article 2 (with respect to which such holders shall be third-party beneficiaries) and (ii) as provided in
Section 5.11 (with respect to which the Indemnified Parties shall be third-party beneficiaries), this Agreement is not
intended, and shall not be deemed, to confer any rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns, to create any agreement of employment with any person or to otherwise create any third-party
beneficiary hereto. The representations and warranties in this Agreement are the product of negotiations among the Parties and
are for the sole benefit of the Parties. Any inaccuracies in such representations and warranties are subject to waiver by the
Parties in accordance with Section 7.5 without notice or liability to any other person. In some instances, the representations
and warranties in this Agreement may represent an allocation among the Parties of risks associated with particular matters regardless
of the knowledge of any of the Parties. Consequently, persons other than the Parties may not rely upon the representations and
warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any
other date.
(c) No
provision in this Agreement modifies or amends or creates any Employee Benefit Plan unless this Agreement explicitly states that
the provision “amends” or “creates” that Employee Benefit Plan, and no third party shall be entitled to
enforce any provision of this Agreement on the grounds that it is an amendment to, or a creation of, an Employee Benefit Plan,
unless that provision explicitly states that such enforcement rights are being conferred. This provision shall not prevent the
Parties to this Agreement from enforcing any provision of this Agreement. If a person not entitled to enforce this Agreement brings
a lawsuit or other action to enforce any provision in this Agreement as an amendment to, or creation of an Employee Benefit Plan,
and that provision is construed to be such an amendment or creation despite not being explicitly designated as one in this Agreement,
that provision shall lapse retroactively, thereby precluding it from having any effect.
8.10 Enforcement.
(a) Except
as otherwise provided herein, any and all remedies herein expressly conferred upon a person will be deemed cumulative with, and
not exclusive of, any other remedy conferred hereby, or by law or equity upon such person, and the exercise by a person of any
one remedy will not preclude the exercise of any other remedy.
(b) The
Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled
to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement, in each case without posting a bond or undertaking, this being in addition to any other remedy to which they
are entitled at law or in equity. Each of the Parties agrees that it will not oppose the granting of an injunction, specific performance
and other equitable relief on the basis that (i) the Party seeking such remedy has an adequate remedy at law or (ii) an award
of specific performance is not an appropriate remedy for any reason at law or equity. For the avoidance of doubt, each Party may
pursue at its sole discretion both a grant of specific performance and monetary damages to which it may be lawfully entitled.
8.11 Disclosure
Schedules. The Company Disclosure Schedules and the Parent
Disclosure Schedules shall each be arranged in Sections corresponding to the numbered Sections contained in this Agreement. The
disclosure in any such Section, whether related to representations, warranties, covenants or agreements, shall qualify the corresponding
Section of this Agreement. The disclosure in any Section of this Agreement in Article 3 or Article 4 shall qualify
each other Section in Article 3 or Article 4 to the extent that it is reasonably apparent that such information
is relevant in such other Sections. The inclusion of any information in the Company Disclosure Schedules or the Parent Disclosure
Schedules, or in any update thereto, shall not be deemed to be an admission or acknowledgment, in and of itself, that such information
is required by the terms hereof to be disclosed, is material, has resulted in or would result in a Company Material Adverse Effect
or a Parent Material Adverse Effect, or is outside the ordinary course of business.
(Rest of Page
Intentionally Left Blank)
IN
WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized officers as of the
date first above written.
|
FRISCH’S RESTAURANTS, INC. |
|
|
|
|
Sign: |
/s/ Craig F. Maier |
|
|
|
|
Name: Craig F. Maier |
|
|
|
Title: President & Chief Executive Officer |
|
|
|
FRI HOLDING COMPANY, LLC |
|
|
|
By: NRD Capital Management, LLC,
its Manager |
|
|
|
|
Sign: |
/s/ Aziz Hashim |
|
|
|
Name: Aziz Hashim |
|
|
|
Title: Managing Member |
|
|
|
FRI MERGER SUB, LLC |
|
|
|
By: NRD Capital Management, LLC,
its Manager |
|
|
|
Sign: |
/s/ Aziz Hashim |
|
|
|
Name: Aziz Hashim |
|
|
|
Title: Managing Member |
Signature Page
to Agreement and Plan of Merger
May 21, 2015
OPINION LETTER
May 21, 2015
Board of Directors
Frisch’s Restaurants, Inc.
2800 Gilbert
Avenue
Cincinnati, OH 45206
Members of
the Board of Directors:
We understand
that FRI Holding Company, LLC (“FRI”), a portfolio company of NRD Partners I, L.P. (“NRD Partners”), FRI
Merger Sub, LLC (“Merger Sub”), a wholly-owned subsidiary of FRI, and Frisch’s Restaurants, Inc. (the “Company”),
propose to enter into the Agreement (defined below) pursuant to which, among other things, Merger Sub will be merged with and
into the Company (the “Merger”) with the Company surviving the Merger as a wholly owned subsidiary of FRI and that,
in connection with the Merger, each outstanding share of common stock, no par value per share, of the Company (the “Common
Shares”) will be converted into the right to receive $34.00 in cash, subject to adjustment as set forth in the Agreement
(the “Common Share Merger Consideration”). We further understand that, pursuant to the Guarantee (as defined below),
NRD Partners has agreed to guarantee certain obligations of FRI and Merger Sub in connection with the Agreement. “Excluded
Persons” shall be defined as NRD Partners, FRI, Merger Sub, NRD Holdings, LLC, an affiliate of NRD Partners (“NRD”),
any of their respective subsidiaries or affiliates, the Company and holders of Common Shares issued and outstanding immediately
prior to the Effective Time (as defined in the Agreement) who have not voted in favor of adoption of the Agreement or consented
thereto in writing and who have properly exercised appraisal rights of such shares. The Board of Directors of the Company (the
“Board”) has requested that Raymond James & Associates, Inc. (“Raymond James”) provide an opinion
(the “Opinion”) to the Board as to whether, as of the date hereof, the Common Share Merger Consideration to be received
by the holders of the Common Shares (other than the Excluded Persons) in the Merger pursuant to the Agreement is fair from a financial
point of view to such holders. For purposes of this Opinion, and with your consent, we have assumed that the Common Share Merger
Consideration is $34.00 per share.
In connection
with our review of the proposed Merger and the preparation of this Opinion, we have, among other things:
| 1. | reviewed the financial terms and
conditions as stated in (i) the draft dated May 19, 2015 of the Agreement (the “Agreement”)
and (ii) the draft dated May 18, 2015 of the Guarantee by and between the Company and
NRD Partners (the “Guarantee”, and together with the Agreement, the “Transaction
Documents”); |
880
Carillon Parkway // St. Petersburg, FL 33716 // T 800.248.8863 // raymondjames.com |
Raymond
James & Associates, Inc., member New York Stock Exchange/SIPC Raymond James Financial Services, Inc., member
FINRA/SIPC |
Board of Directors
Frisch’s Restaurants, Inc.
May 21, 2015
Page
2
| 2. | reviewed certain information related
to the historical, current and future operations, financial condition and prospects of
the Company made available to us by the Company, including, but not limited to, financial
projections prepared by the management of the Company relating to the Company for the
fiscal period ending May 29, 2018, as approved for our use by the Company (the “Projections”); |
| 3. | reviewed the Company’s recent
public filings and certain other publicly available information regarding the Company; |
| 4. | reviewed financial, operating and
other information regarding the Company and the industry in which it operates; |
| 5. | reviewed the financial and operating
performance of the Company and those of other selected public companies that we deemed
to be relevant; |
| 6. | considered the publicly available
financial terms of certain transactions we deemed to be relevant; |
| 7. | reviewed the current and historical
market prices for the Common Shares, and the current market prices of the publicly traded
securities of certain other companies that we deemed to be relevant; |
| 8. | conducted such other financial studies,
analyses and inquiries and considered such other information and factors as we deemed
appropriate; |
| 9. | reviewed a certificate addressed
to Raymond James from a member of senior management of the Company regarding, among other
things, the accuracy of the information, data and other materials (financial or otherwise)
provided to, or discussed with, Raymond James by or on behalf of the Company (the “Certificate”);
and |
| 10. | discussed with members of the senior
management of the Company certain information relating to the aforementioned and any
other matters which we have deemed relevant to our inquiry. |
Board of Directors
Frisch’s Restaurants, Inc.
May 21, 2015
Page
3
With your consent and in accordance
with the representations set forth in the Certificate, we have assumed and relied upon the accuracy and completeness of all information
supplied by or on behalf of the Company or otherwise reviewed by or discussed with us, and we have undertaken no duty or responsibility
to, nor did we, independently verify any of such information. We have not made or obtained an independent appraisal of the assets
or liabilities (contingent or otherwise) of the Company. With respect to the Projections and any other information and data provided
to or otherwise reviewed by or discussed with us, we have, with your consent, assumed that the Projections and such other information
and data have been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments
of management of the Company, and we have relied upon the Company to advise us promptly if any information previously provided
became inaccurate or was required to be updated during the period of our review. We express no opinion with respect to the Projections
or the assumptions on which they are based. We have assumed that the final form of each of the Guarantee and the Agreement will
be substantially similar to the draft of each such document reviewed by us, and that the Merger will be consummated in accordance
with the terms of the Transaction Documents without waiver or amendment of any conditions thereto. Furthermore, we have assumed,
in all respects material to our analysis, that the representations and warranties of each party contained in the Transaction Documents
are true and correct and that each such party will perform all of the covenants and agreements required to be performed by it
under the Transaction Documents without being waived. We have relied upon and assumed, without independent verification, that
(i) the Merger will be consummated in a manner that complies in all respects with all applicable international, federal and state
statutes, rules and regulations, and (ii) all governmental, regulatory, and other consents and approvals necessary for the consummation
of the Merger will be obtained and that no delay, limitations, restrictions or conditions will be imposed or amendments, modifications
or waivers made that would have an effect on the Merger or the Company that would be material to our analyses or this Opinion.
We do not express any opinion as to the impact of the matters referenced in Note I – “Immaterial Revision” of
the Company’s Form 10-Q as filed with the Securities and Exchange Commission for the period ended March 10, 2015 (“Note
I”), as to which we understand the Company has conducted such diligence and other investigations, and has obtained such
advice from qualified professionals, as it deems necessary. We have assumed, with your consent, that nothing that may arise from
the matters underlying Note I will have a material effect on our analyses or this Opinion.
Our opinion is based upon market,
economic, financial and other circumstances and conditions existing and disclosed to us as of May 19, 2015 and any material change
in such circumstances and conditions would require a reevaluation of this Opinion, which we are under no obligation to undertake.
We have relied upon and assumed, without independent verification, that there has been no change in the business, assets, liabilities,
financial condition, results of operations, cash flows or prospects of the Company since the respective dates of the most recent
financial statements and other information, financial or otherwise, provided to us that would be material to our analyses or this
Opinion, and that there is no information or any facts that would make any of the information reviewed by us incomplete or misleading
in any material respect.
We express no
opinion as to the underlying business decision to effect the Merger, the structure or tax consequences of the Merger or the availability
or advisability of any alternatives to the Merger. We provided advice to the Company with respect to the proposed Merger. We did
not, however, recommend any specific amount of consideration or that any specific consideration constituted the only appropriate
consideration for the Merger. Our opinion is limited to the fairness, from a financial point of view, of the Common Share Merger
Consideration to be received by the holders (other than the Excluded Persons) of the Common Shares.
Board of Directors
Frisch’s Restaurants, Inc.
May 21, 2015
Page
4
We express no
opinion with respect to any other reasons, legal, business, or otherwise, that may support the decision of the Board to approve
or consummate the Merger. Furthermore, no opinion, counsel or interpretation is intended by Raymond James on matters that require
legal, accounting or tax advice. It is assumed that such opinions, counsel or interpretations have been or will be obtained from
the appropriate professional sources. Furthermore, we have relied, with the consent of the Company, on the fact that the Company
has been assisted by legal, accounting and tax advisors and we have, with the consent of the Company, relied upon and assumed
the accuracy and completeness of the assessments by the Company and its advisors as to all legal, accounting and tax matters with
respect to the Company and the Merger.
In formulating
our opinion, we have considered only what we understand to be the consideration to be received by the holders of Common Shares
as is described above and we did not consider and we express no opinion on the fairness of the amount or nature of any compensation
to be paid or payable to any of the Company’s officers, directors or employees, or class of such persons, whether relative
to the compensation received by the holders of the Common Shares or otherwise. We have not been requested to opine as to, and
this Opinion does not express an opinion as to or otherwise address, among other things: (1) the fairness of the Merger to the
holders of any class of securities, creditors, or other constituencies of the Company, or to any other party, except and only
to the extent expressly set forth in the last sentence of this Opinion or (2) the fairness of the Merger to any one class or group
of the Company’s or any other party’s security holders or other constituencies vis-à-vis any other class or
group of the Company’s or such other party’s security holders or other constituents (including, without limitation,
the allocation of any consideration to be received in the Merger amongst or within such classes or groups of security holders
or other constituents). We are not expressing any opinion as to the impact of the Merger on the solvency or viability of the Company
or FRI or the ability of the Company or FRI to pay their respective obligations when they come due.
The delivery of this opinion was
approved by an opinion committee of Raymond James.
Raymond James has been engaged to
render financial advisory services to the Company in connection with the proposed Merger and will receive a fee for such services,
a substantial portion of which is contingent upon consummation of the Merger. Raymond James will also receive a fee upon the delivery
of this Opinion, which is not contingent upon the successful completion of the Merger or on the conclusion reached herein. In
addition, the Company has agreed to reimburse certain of our expenses and to indemnify us against certain liabilities arising
out of our engagement.
In the ordinary course of our business,
Raymond James may trade in the securities of the Company for our own account or for the accounts of our customers and, accordingly,
may at any time hold a long or short position in such securities. Raymond James has provided certain strategic advisory services
to the Company (in the previous two years) for which it has been paid approximately $100,000 in fees. Furthermore, Raymond James
may provide investment banking, financial advisory and other financial services to the Company, FRI, NRD and/or NRD Partners or
other participants in the Merger in the future, for which Raymond James may receive compensation.
Board of Directors
Frisch’s Restaurants, Inc.
May 21, 2015
Page
5
It is understood
that this letter is for the information of the Board (solely in each director’s capacity as a member of the Board) in evaluating
the proposed Merger and does not constitute a recommendation to any shareholder of the Company regarding how said shareholder
should vote on the proposed Merger. Furthermore, this letter should not be construed as creating any fiduciary duty on the part
of Raymond James to any such party. This Opinion may not be reproduced or used for any other purpose without our prior written
consent, except that this Opinion may be disclosed in and filed with a proxy statement used in connection with the Merger that
is required to be filed with the Securities and Exchange Commission, provided that this Opinion is quoted in full in such proxy
statement.
Based upon and subject to the foregoing,
it is our opinion that, as of the date hereof, the Common Share Merger Consideration to be received by the holders (other than
the Excluded Persons) of the Common Shares in the Merger pursuant to the Agreement is fair, from a financial point of view, to
such holders.
Very truly yours,
RAYMOND JAMES & ASSOCIATES,
INC.
ORC
Ann. 1701.84
§ 1701.84
Persons entitled to relief as dissenting shareholders.
(A)
Except as provided in division (B) of this section, the following are entitled to relief
as dissenting shareholders under section 1701.85 of the Revised Code:
| (1) | Shareholders
of a domestic corporation that is being merged or consolidated into a surviving or new
entity, domestic or foreign, pursuant to section
1701.78, 1701.781,
1701.79,
1701.791,
or 1701.801 of the Revised Code; |
| (2) | In
the case of a merger into a domestic corporation, shareholders of the surviving corporation
who under section 1701.78
or 1701.781 of the Revised Code
are entitled to vote on the adoption of an agreement of merger, but only as to the shares
so entitling them to vote; |
| (3) | Shareholders,
other than the parent corporation, of a domestic subsidiary corporation that is being
merged into the domestic or foreign parent corporation pursuant to section
1701.80 of the Revised Code; |
| (4) | In
the case of a combination or a majority share acquisition, shareholders of the acquiring
corporation who under section 1701.83 of the
Revised Code are entitled
to vote on such transaction, but only as to the shares so entitling them to vote; |
| (5) | Shareholders
of a domestic subsidiary corporation into which one or more domestic or foreign corporations
are being merged pursuant to section 1701.801
of the Revised Code; |
| (6) | Shareholders
of a domestic corporation that is being converted pursuant to section
1701.792 of the Revised Code.
|
| (B) | All
of the following shareholders shall not be entitled to relief as dissenting shareholders
under section 1701.85 of the Revised Code: |
| (1) | Shareholders
described in division (A)(1) or (6) of this section, if both of the following apply: |
| (a) | The
shares of the corporation for which the dissenting shareholder would otherwise be entitled
to relief under division (A)(1) or (6) of this section are listed on a national securities
exchange as of the day immediately preceding the date on which the vote on the proposal
is taken at the meeting of the shareholders. |
| (b) | The
consideration to be received by the shareholders consists of shares or shares and cash
in lieu of fractional shares that, immediately following the effective time of a merger,
consolidation, or conversion, as applicable, are listed on a national securities exchange
and for which no proceedings are pending to delist the shares from the national securities
exchange as of the effective time of the merger, consolidation, or conversion. |
| (2) | Shareholders
described in division (A)(2) of this section, if the shares so entitling them to vote
are listed on a national securities exchange both as of the day immediately preceding
the date on which the vote on the proposal is taken at the meeting of the shareholders
and immediately following the effective time of the merger and there are no proceedings
pending to delist the shares from the national securities exchange as of the effective
time of the merger; |
| (3) | The
shareholders described in division (A)(4) of this section, if the shares so entitling
them to vote are listed on a national securities exchange both as of the day immediately
preceding the date on which the vote on the proposal is taken at the meeting of the shareholders
and immediately following the effective time of the combination or majority share acquisition,
and there are no proceedings pending to delist the shares from the national securities
exchange as of the effective time of the combination or majority share acquisition. |
ORC
Ann. 1701.85
§ 1701.85
Dissenting shareholder’s demand for fair cash value of shares.
(A)
| (1) | A
shareholder of a domestic corporation is entitled to relief as a dissenting shareholder
in respect of the proposals described in sections
1701.74, 1701.76,
and 1701.84 of the Revised Code,
only in compliance with this section. |
| (2) | If
the proposal must be submitted to the shareholders of the corporation involved, the dissenting
shareholder shall be a record holder of the shares of the corporation as to which the
dissenting shareholder seeks relief as of the date fixed for the determination of shareholders
entitled to notice of a meeting of the shareholders at which the proposal is to be submitted,
and such shares shall not have been voted in favor of the proposal. |
| (3) | Not
later than twenty days before the date of the meeting at which the proposal will be submitted
to the shareholders, the corporation may notify the corporation’s shareholders
that relief under this section is available. The notice shall include or be accompanied
by all of the following: |
| (a) | A
copy of this section; |
| (b) | A
statement that the proposal can give rise to rights under this section if the proposal
is approved by the required vote of the shareholders; |
| (c) | A
statement that the shareholder will be eligible as a dissenting shareholder under this
section only if the shareholder delivers to the corporation a written demand with the
information provided for in division (A)(4) of this section before the vote on the proposal
will be taken at the meeting of the shareholders and the shareholder does not vote in
favor of the proposal. |
| (4) | If
the corporation delivers notice to its shareholders as provided in division (A)(3) of
this section, a shareholder electing to be eligible as a dissenting shareholder under
this section shall deliver to the corporation before the vote on the proposal is taken
a written demand for payment of the fair cash value of the shares as to which the shareholder
seeks relief. The demand for payment shall include the shareholder’s address, the
number and class of such shares, and the amount claimed by the shareholder as the fair
cash value of the shares. |
| (5) | If
the corporation does not notify the corporation’s shareholders pursuant to division
(A)(3) of this section, not later than ten days after the date on which the vote on the
proposal was taken at the meeting of the shareholders, the dissenting shareholder shall
deliver to the corporation a written demand for payment to the dissenting shareholder
of the fair cash value of the shares as to which the dissenting shareholder seeks relief,
which demand shall state the dissenting shareholder’s address, the number and class
of such shares, and the amount claimed by the dissenting shareholder as the fair cash
value of the shares. |
| (6) | If
a signatory, designated and approved by the dissenting shareholder, executes the demand,
then at any time after receiving the demand, the corporation may make a written request
that the dissenting shareholder provide evidence of the signatory’s authority.
The shareholder shall provide the evidence within a reasonable time but not sooner than
twenty days after the dissenting shareholder has received the corporation’s written
request for evidence. |
| (7) | The
dissenting shareholder entitled to relief under division (A)(3) of section 1701.84
of the Revised Code in the case of a merger pursuant to section 1701.80
of the Revised Code and a dissenting shareholder entitled to relief under division
(A)(5) of section 1701.84 of the Revised Code in the case of a merger pursuant
to section 1701.801 of the Revised Code shall be a record holder of the
shares of the corporation as to which the dissenting shareholder seeks relief as of the
date on which the agreement of merger was adopted by the directors of that corporation.
Within twenty days after the dissenting shareholder has been sent the notice provided
in section 1701.80 or 1701.801 of the Revised Code, the dissenting
shareholder shall deliver to the corporation a written demand for payment with the same
information as that provided for in division (A)(4) of this section. |
ORC Ann. 1701.85
| (8) | In
the case of a merger or consolidation, a demand served on the constituent corporation
involved constitutes service on the surviving or the new entity, whether the demand is
served before, on, or after the effective date of the merger or consolidation. In the
case of a conversion, a demand served on the converting corporation constitutes service
on the converted entity, whether the demand is served before, on, or after the effective
date of the conversion. |
| (9) | If
the corporation sends to the dissenting shareholder, at the address specified in the
dissenting shareholder’s demand, a request for the certificates representing the
shares as to which the dissenting shareholder seeks relief, the dissenting shareholder,
within fifteen days from the date of the sending of such request, shall deliver to the
corporation the certificates requested so that the corporation may endorse on them a
legend to the effect that demand for the fair cash value of such shares has been made.
The corporation promptly shall return the endorsed certificates to the dissenting shareholder.
A dissenting shareholder’s failure to deliver the certificates terminates the dissenting
shareholder’s rights as a dissenting shareholder, at the option of the corporation,
exercised by written notice sent to the dissenting shareholder within twenty days after
the lapse of the fifteen-day period, unless a court for good cause shown otherwise directs.
If shares represented by a certificate on which such a legend has been endorsed are transferred,
each new certificate issued for them shall bear a similar legend, together with the name
of the original dissenting holder of the shares. Upon receiving a demand for payment
from a dissenting shareholder who is the record holder of uncertificated securities,
the corporation shall make an appropriate notation of the demand for payment in its shareholder
records. If uncertificated shares for which payment has been demanded are to be transferred,
any new certificate issued for the shares shall bear the legend required for certificated
securities as provided in this paragraph. A transferee of the shares so endorsed, or
of uncertificated securities where such notation has been made, acquires only the rights
in the corporation as the original dissenting holder of such shares had immediately after
the service of a demand for payment of the fair cash value of the shares. A request under
this paragraph by the corporation is not an admission by the corporation that the shareholder
is entitled to relief under this section. |
| (B) | Unless
the corporation and the dissenting shareholder have come to an agreement on the fair
cash value per share of the shares as to which the dissenting shareholder seeks relief,
the dissenting shareholder or the corporation, which in case of a merger or consolidation
may be the surviving or new entity, or in the case of a conversion may be the converted
entity, within three months after the service of the demand by the dissenting shareholder,
may file a complaint in the court of common pleas of the county in which the principal
office of the corporation that issued the shares is located or was located when the proposal
was adopted by the shareholders of the corporation, or, if the proposal was not required
to be submitted to the shareholders, was approved by the directors. Other dissenting
shareholders, within that three-month period, may join as plaintiffs or may be joined
as defendants in any such proceeding, and any two or more such proceedings may be consolidated.
The complaint shall contain a brief statement of the facts, including the vote and the
facts entitling the dissenting shareholder to the relief demanded. No answer to a complaint
is required. Upon the filing of a complaint, the court, on motion of the petitioner,
shall enter an order fixing a date for a hearing on the complaint and requiring that
a copy of the complaint and a notice of the filing and of the date for hearing be given
to the respondent or defendant in the manner in which summons is required to be served
or substituted service is required to be made in other cases. On the day fixed for the
hearing on the complaint or any adjournment of it, the court shall determine from the
complaint and from evidence submitted by either party whether the dissenting shareholder
is entitled to be paid the fair cash value of any shares and, if so, the number and class
of such shares. If the court finds that the dissenting shareholder is so entitled, the
court may appoint one or more persons as appraisers to receive evidence and to recommend
a decision on the amount of the fair cash value. The appraisers have power and authority
specified in the order of their appointment. The court thereupon shall make a finding
as to the fair cash value of a share and shall render judgment against the corporation
for the payment of it, with interest at a rate and from a date as the court considers
equitable. The costs of the proceeding, including reasonable compensation to the appraisers
to be fixed by the court, shall be assessed or apportioned as the court considers equitable.
The proceeding is a special proceeding and final orders in it may be vacated, modified,
or reversed on appeal pursuant to the Rules of Appellate Procedure and, to the extent
not in conflict with those rules, Chapter 2505. of the Revised Code. If, during the pendency
of any proceeding instituted under this section, a suit or proceeding is or has been
instituted to enjoin or otherwise to prevent the carrying out of the action as to which
the shareholder has dissented, the proceeding instituted under this section shall be
stayed until the final determination of the other suit or proceeding. Unless any provision
in division (D) of this section is applicable, the fair cash value of the shares that
is agreed upon by the parties or fixed under this section shall be paid within thirty
days after the date of final determination of such value under this division, the effective
date of the amendment to the articles, or the consummation of the other action involved,
whichever occurs last. Upon the occurrence of the last such event, payment shall be made
immediately to a holder of uncertificated securities entitled to payment. In the case
of holders of shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates representing
the shares for which the payment is made. |
ORC
Ann. 1701.85
(C)
| (1) | If
the proposal was required to be submitted to the shareholders of the corporation, fair
cash value as to those shareholders shall be determined as of the day prior to the day
on which the vote by the shareholders was taken and, in the case of a merger pursuant
to section 1701.80
or 1701.801 of the Revised Code,
fair cash value as to shareholders of a constituent subsidiary corporation shall be determined
as of the day before the adoption of the agreement of merger by the directors of the
particular subsidiary corporation. The fair cash value of a share for the purposes of
this section is the amount that a willing seller who is under no compulsion to sell would
be willing to accept and that a willing buyer who is under no compulsion to purchase
would be willing to pay, but in no event shall the fair cash value of a share exceed
the amount specified in the demand of the particular shareholder. In computing fair cash
value, both of the following shall be excluded: |
| (a) | Any
appreciation or depreciation in market value resulting from the proposal submitted to
the directors or to the shareholders; |
| (b) | Any
premium associated with control of the corporation, or any discount for lack of marketability
or minority status. |
| (2) | For
the purposes of this section, the fair cash value of a share that was listed on a national
securities exchange at any of the following times shall be the closing sale price on
the national securities exchange as of the applicable date provided in division (C)(1)
of this section: |
| (a) | Immediately
before the effective time of a merger or consolidation; |
| (b) | Immediately
before the filing of an amendment to the articles of incorporation as described in division
(A) of section 1701.74 of the Revised Code; |
| (c) | Immediately
before the time of the vote described in division (A)(1)(b) of section
1701.76 of the Revised Code.
|
(D)
| (1) | The
right and obligation of a dissenting shareholder to receive fair cash value and to sell
such shares as to which the dissenting shareholder seeks relief, and the right and obligation
of the corporation to purchase such shares and to pay the fair cash value of them terminates
if any of the following applies: |
ORC
Ann. 1701.85
| (a) | The
dissenting shareholder has not complied with this section, unless the corporation by
its directors waives such failure; |
| (b) | The
corporation abandons the action involved or is finally enjoined or prevented from carrying
it out, or the shareholders rescind their adoption of the action involved; |
| (c) | The
dissenting shareholder withdraws the dissenting shareholder’s demand, with the
consent of the corporation by its directors; |
| (d) | The
corporation and the dissenting shareholder have not come to an agreement as to the fair
cash value per share, and neither the shareholder nor the corporation has filed or joined
in a complaint under division (B) of this section within the period provided in that
division. |
| (2) | For
purposes of division (D)(1) of this section, if the merger, consolidation, or conversion
has become effective and the surviving, new, or converted entity is not a corporation,
action required to be taken by the directors of the corporation shall be taken by the
partners of a surviving, new, or converted partnership or the comparable representatives
of any other surviving, new, or converted entity. |
| (E) | From
the time of the dissenting shareholder’s giving of the demand until either the
termination of the rights and obligations arising from it or the purchase of the shares
by the corporation, all other rights accruing from such shares, including voting and
dividend or distribution rights, are suspended. If during the suspension, any dividend
or distribution is paid in money upon shares of such class or any dividend, distribution,
or interest is paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest which, except
for the suspension, would have been payable upon such shares or securities, shall be
paid to the holder of record as a credit upon the fair cash value of the shares. If the
right to receive fair cash value is terminated other than by the purchase of the shares
by the corporation, all rights of the holder shall be restored and all distributions
which, except for the suspension, would have been made shall be made to the holder of
record of the shares at the time of termination. |
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