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Title: |
Proxy Statement |
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Entities: |
BFX Hospitality Group Inc; Cooker Restaurant Corpora; Cooker Restaurant Corpora; Cucos Inc.; Cucos Inc.; First National Bank of Boston; First Union National Bank; Grill Concepts, Inc.; Grill Concepts, Inc.; Mexican Restaurants Inc.; Mexican Restaurants Inc.; Quality Dining, Inc.; Roadhouse Grill, Inc.; Roadhouse Grill, Inc.; Total Entertainment Restaurant Corp.; Total Entertainment Restaurant Corp.; Bryan Cave |
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Date: |
2000 |
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Preview shows 49KB of 431KB total |
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$99 |
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#1311148 |
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<PAGE>
BFX HOSPITALITY GROUP, INC.
226 Bailey Avenue, Suite 101
Fort Worth, Texas 76107
(817) 332-4761
___________________________
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
_____________, 2000
___________________________
THE SPECIAL MEETING
Time, Date and Place
This proxy statement is being furnished in connection with the solicitation
of proxies by the board of directors (the "Board") of BFX Hospitality Group,
Inc., a Delaware corporation (the "Company"), for use at the special meeting of
stockholders to be held at 10:00 o'clock a.m. (C.S.T.) on _____________, 2000
in the Longhorn Room of the Stockyards Hotel, 109 East Exchange Avenue, Fort
Worth, Texas (including any adjournment or postponement, the "Special Meeting").
Matters to Be Considered at the Special Meeting
At the Special Meeting, stockholders of the Company will be asked to
approve the merger (the "Merger") of the Company with and into American
Hospitality, LLC, a Delaware limited liability company ("American"), which is a
wholly owned subsidiary of Hospitality Concepts, LLC, a Delaware limited
liability company ("Hospitality"), with American continuing as the surviving
company (the "Surviving Company") pursuant to an Agreement and Plan of Merger
dated as of August 11, 2000, as amended (the "Merger Agreement"), by and between
the Company, American and Hospitality, and to approve and adopt the Merger
Agreement. The Merger Agreement provides, subject to the approval of a majority
of the stockholders of the Company at the Special Meeting and subject to the
satisfaction or waiver of certain other conditions, that: (i) the Company will
be merged with and into American, with American continuing as the Surviving
Company; (ii) each share of the Company's common stock, par value $0.05 per
share ("Common Stock"), that is issued and outstanding at the effective time of
the Merger (the "Effective Time"), including the associated right to purchase
shares upon certain events occurring under the Company's Rights Agreement, but
excluding shares of Common Stock held by the Company or any of its subsidiaries
as treasury stock and shares held by dissenting stockholders who have validly
exercised and perfected their rights under Delaware law (the "Dissenting
Stockholders"), will be converted into the right to receive $2.25
Page - 1
<PAGE>
per share in cash, without interest, subject to any applicable back-up or other
withholding requirements (the "Merger Consideration"); and (iii) each
outstanding option to purchase shares of Common Stock, whether vested or not, as
of the date of the Merger will be converted into the right to receive the
excess, if any, of the Merger Consideration over the exercise price of the
shares under the option ("Option Consideration"). Under the terms of the Merger
Agreement, the Merger is subject to the satisfaction or waiver of certain
special conditions, in addition to other conditions that are typical in
transactions similar to the Merger. These include (i) concurrently with the
closing of the Merger and on terms reasonably acceptable to Hospitality (a) sale
of all of the membership interests of Cabo-Fort Worth #1, L.L.C. to Hospitality,
(b) sale of all of the assets of Cats Meow, Inc. to Cats Meow, LLC, a wholly
owned subsidiary of Hospitality, (c) sale of all of the assets of Lucile's
Stateside Bistro-Texas, Inc. to Lucile's, LLC, a wholly owned subsidiary of
Hospitality, (d) sale of all of the assets of Stockyards Hotel, Inc. to
Stockyards Hotel, LLC, a wholly owned subsidiary of Hospitality, (e) sale of all
of the intellectual property assets of American Food Classics, Inc. to
Hospitality and (f) sale of all of the intellectual property assets of the
Company to Hospitality; (ii) no increased liability related to the Company's
Superfund site in Vestal, New York or any other liability resulting from
violations of any environmental laws in excess of that provided on the Company's
June 30, 2000 balance sheet; (iii) extension on terms reasonably acceptable to
Hospitality of the existing lease for the Company's Cat's Meow facility in New
Orleans, Louisiana which terminates on September 30, 2009; (iv) renewal of the
existing lease of the Company's Vestal, New York plant site which terminates on
February 28, 2006, unless the lessee exercises its option to renew, for an
additional term of five years; and (v) obtaining financing on satisfactory
terms. A copy of the executed Merger Agreement is included in this proxy
statement as Appendix I.
Hospitality has been formed to acquire indirectly, through the Merger, the
Company. Robert H. McLean ("Mr. McLean") is the Chairman, President and Chief
Executive Officer of the Company and is currently the sole owner of Hospitality.
Mr. McLean is currently discussing certain terms of the Limited Liability
Company Agreement (defined below) with five other members of the Company's
Management: Robert Korman ("Mr. Korman"), Frank J. Milan ("Mr. Milan"), Terry
Kearney ("Mr. Kearney"), Hampton Hodges ("Mr. Hodges") and Walter D. Rogers, Jr.
("Mr. Rogers"). It is anticipated that before the Merger occurs, Messrs. McLean,
Kornan, Milan, Kearney, Hodges and Rogers (together, the "Management Group")
will own 60%, 15%, 10%, 10%, 2.5%, and 2.5% of Hospitality, respectively. As of
the Record Date, the members of the Management Group beneficially owned
1,141,914 shares of Common Stock, representing approximately 25.95% of the
outstanding Common Stock.
Pursuant to the Delaware General Corporation Law (the "DGCL"), the
affirmative vote of holders of at least a majority of the outstanding shares of
Common Stock is required to approve the Merger Agreement. It is anticipated
that the members of the Management Group and their spouses will vote the
1,141,914 shares of Common Stock held of record by them, representing
approximately 25.95% of the outstanding Common Stock, in favor of the approval
of the Merger Agreement. In addition, it is anticipated that the members of the
Board who are not members of the Management Group will vote the 285,805 shares
of Common Stock held of record by them representing approximately 6.49% of the
outstanding Common Stock in favor of the Merger Agreement.
Page - 2
<PAGE>
The Board appointed an independent committee of the Board (the "Independent
Committee") to review, evaluate and negotiate the terms of the Merger Agreement
and to make a recommendation to the Board concerning the fairness of the Merger.
The Independent Committee is comprised of three directors, John M. Edgar, Bruno
D'Agostino and Russell J. Sarno, who are neither officers of the Company nor
members of the Management Group (but who will receive cash in exchange for their
shares of Common Stock and existing options to buy Common Stock, upon
consummation of the Merger). The Independent Committee retained two investment
banking firms, Sanders Morris Harris, Inc. of Houston, Texas and George K. Baum
& Company of Kansas City, Missouri (together, the "Financial Advisors") to
render fairness opinions. On August 11, 2000, each of the Financial Advisors
delivered its written opinion to the Board, after having already delivered its
opinion to the Independent Committee, to the effect that the Merger
Consideration of $2.25 in cash per share of Common Stock to be received in the
Merger by the Company's stockholders was, as of that date, fair, from a
financial point of view, to the Company's stockholders who are not members of
the Management Group (the "Public Stockholders"). Copies of the Financial
Advisors' written opinions are attached as Appendix II and Appendix III to this
proxy statement. You are urged to read the opinions in their entirety for a
description of the assumptions made, the matters considered and the procedures
followed by the Financial Advisors.
Based on the unanimous recommendation of the Independent Committee, the
Board (not including Messrs. McLean, Rogers and Hodges who excused themsleves
from the meeting) unanimously determined that the Merger is in the best
interests of the Company and its stockholders, approved the terms of the Merger
Agreement and recommended that the Merger Agreement be approved and adopted by
the stockholders of the Company.
All shares of Common Stock represented by properly executed proxies
received prior to or at the Special Meeting and not revoked will be voted in
accordance with the instructions indicated in such proxies. IF NO INSTRUCTIONS
ARE INDICATED, THOSE PROXIES WILL BE VOTED FOR THE APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND IN THE DISCRETION OF THE PERSONS NAMED IN THE PROXY WITH
RESPECT TO SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING. A
stockholder may revoke a proxy at any time before it is voted at the Special
Meeting by (i) executing and delivering to the secretary of the Company a proxy
bearing a later date, (ii) filing written notice of revocation with the
secretary of the Company stating that the proxy is revoked or (iii) attending
the Special Meeting and voting in person.
In addition to the solicitation of proxies by use of the mails, directors,
officers and employees of the Company, without receiving additional
compensation, may solicit proxies by telephone, telecopier or personal
interview. The Company will also request brokerage houses and other custodians,
nominees and fiduciaries to forward soliciting material to the beneficial owners
of Common Stock held of record by such custodians and will reimburse such
custodians for their expenses in forwarding soliciting materials. The Company
has retained Beacon Hill Partners, Inc. a proxy solicitation firm, to aid in the
solicitation of proxies and in the planning and organization of the Special
Meeting for a fee of $6,000 plus expenses.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
Page - 3
<PAGE>
EXCHANGE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION OR
UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The Board knows of no additional matters that will be presented for
consideration at the Special Meeting. Execution of the accompanying proxy,
however, confers on the designated proxy holders discretionary authority to vote
in accordance with their best judgment on such other business, if any, that may
properly come before, and all matters incident to the conduct of, the Special
Meeting or any adjournments or postponements of the Special Meeting.
The date of this proxy statement is ___________, 2000.
AVAILABLE INFORMATION
The Company, Hospitality and the Management Group have filed with the
Securities and Exchange Commission (the "SEC"), a Rule 13E-3 Transaction
Statement on Schedule 13E-3 (including any amendments, the "Schedule 13E-3 ")
under the Securities Exchange Act of 1934 (the "Exchange Act") with respect to
the Merger. This proxy statement does not contain all of the information
contained in the Schedule 13E-3 and its exhibits, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. The Company is
subject to the informational requirements of the Exchange Act and files reports,
proxy statements and other information with the SEC in accordance with the
Exchange Act.
The Schedule 13E-3 and its exhibits, and the reports, proxy statements and
other information filed by the Company with the SEC under the Exchange Act can
be inspected and copied at the public reference facilities maintained by the SEC
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's
Regional Offices at Suite 1300, Seven World Trade Center, New York, New York
10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies also can be obtained at prescribed rates from
the Public Reference Section of the SEC at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 or by calling 1-800-SEC-0330. The SEC also
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC. The address for that site on the world wide web is sec.gov. The
information about the Company on the SEC's web site is part of this proxy
statement and references in this proxy statement to any web site are references
only to the information contained on the web sites and do not include any other
information that may be obtained by hyperlink or reference to any other web
site.
Except as otherwise indicated in this proxy statement, all information
about the Company contained in this proxy statement has been supplied by the
Company, and all information about Hospitality, American and the members of the
Management Group contained in this proxy statement has been supplied by
Hospitality or the members of the Management Group or is based on publicly
available documents on file with the SEC and other public records.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY
Page - 4
<PAGE>
STATEMENT IN CONNECTION WITH THE SOLICITATION OF PROXIES MADE HEREBY, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON.
Page - 5
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY................................................................................................ 9
SELECTED FINANCIAL DATA................................................................................ 15
THE PARTIES............................................................................................ 16
The Company....................................................................................... 16
Hospitality and its Subsidiaries.................................................................. 16
THE SPECIAL MEETING.................................................................................... 16
Time, Date and Place.............................................................................. 16
Record Date, Voting Securities and Quorum......................................................... 16
Vote Required..................................................................................... 17
Proxies........................................................................................... 17
THE MERGER AND RELATED SPECIAL FACTORS................................................................. 19
Background of the Company......................................................................... 19
Purpose of and Reasons for the Merger; Certain Effects of the Merger.............................. 24
Determination of Fairness of the Merger by the Independent Committee and the Board of Directors... 26
Opinions of Independent Committee's Financial Advisors............................................ 30
Sanders Morris Harris, Inc................................................................... 30
Value Range Comparison.................................................................. 32
Discounted Cash Flow Analysis........................................................... 32
Premium Over Recent Stock Prices........................................................ 34
Valuation of Cat's Meow................................................................. 34
Valuation of Lucile's................................................................... 35
Valuation of Stockyards Hotel and H3 Ranch Restaurant................................... 35
Valuation of Cabo Facilities............................................................ 35
Valuation of the EPA Liability.......................................................... 35
Comparable Company Analysis............................................................. 35
Comparable Transactions and Premiums.................................................... 36
George K. Baum & Company..................................................................... 38
Comparable Company Analysis............................................................. 40
Discounted Cash Flow Analysis........................................................... 41
Mergers and Acquisitions Premium Analysis............................................... 41
Going Private Premium Analysis.......................................................... 41
Stock Trading Analysis.................................................................. 42
Certain Projections............................................................................... 43
Conflicts of Interests............................................................................ 45
Future Plans of the Company....................................................................... 45
Rights of Dissenting Stockholders................................................................. 46
Estimated Fees and Expenses; Sources of Funds..................................................... 50
Expenses.......................................................................................... 51
</TABLE>
Page - 6
<PAGE>
<TABLE>
<S> <C>
THE MERGER AGREEMENT................................................................................... 51
The Merger........................................................................................ 51
Effective Time.................................................................................... 51
Certificate of Formation and Limited Liability Company Agreement of the Surviving Company......... 52
Directors and Officers of the Surviving Company................................................... 52
Conversion of Securities in the Merger; Treatment of Derivatives.................................. 52
Payment for and Surrender of Company Common Shares................................................ 53
Closing of Stock Transfer Records................................................................. 54
Representations and Warranties.................................................................... 54
Acquisition Proposals............................................................................. 55
Interim Operations of the Company................................................................. 56
Certain Filings and Other Actions................................................................. 56
Access to Information............................................................................. 57
Insurance; Indemnity.............................................................................. 57
Financing......................................................................................... 58
Conditions........................................................................................ 58
Conditions to Each Party's Obligation To Effect the Merger................................... 58
Conditions to Obligation of the Company To Effect the Merger................................. 58
Conditions to Obligation of Hospitality to Effect the Merger................................. 59
Termination....................................................................................... 59
Termination by Mutual Consent................................................................ 59
Termination by Either the Company or Hospitality............................................. 59
Termination by the Company................................................................... 60
Termination by Hospitality................................................................... 60
Effect of Termination and Abandonment........................................................ 60
Amendment......................................................................................... 61
Material U.S. Federal Income Tax Consequences of the Merger....................................... 61
Accounting Treatment of the Merger................................................................ 63
Regulatory Approvals.............................................................................. 63
Litigation........................................................................................ 63
MARKET INFORMATION..................................................................................... 64
SECURITY OWNERSHIP..................................................................................... 65
PURCHASES OF COMMON STOCK BY AND OTHER
TRANSACTIONS WITH CERTAIN PERSONS...................................................................... 66
TRANSACTION OF OTHER BUSINESS.......................................................................... 67
INDEPENDENT ACCOUNTANTS................................................................................ 67
DOCUMENTS INCORPORATED BY REFERENCE.................................................................... 68
APPENDICES
Appendix I - Agreement and Plan of Merger
Appendix II - Opinion of Sanders Morris Harris, Inc.
Appendix III - Opinion of George K. Baum & Company
Appendix IV - Section 262 of the Delaware General Corporation Law
Appendix V - Form of Proxy
</TABLE>
Page - 7
<PAGE>
INDEX OF DEFINITIONS
<TABLE>
<CAPTION>
TERMS DEFINED IN THIS PROXY PAGES
Statement: WHERE DEFINED
--------------------------- -------------
<S> <C>
Acquisition Proposal............................................ 55
Action.......................................................... 57
American........................................................ 1
Amex............................................................ 25, 64
Available Information........................................... 16
Bank of Boston.................................................. 20
Baum............................................................ 22
beneficially owned.............................................. 65
BFX............................................................. 64
Board........................................................... 1
broker non-votes................................................ 17
Certain Projections............................................. 43
Certificates.................................................... 53
Change of Control............................................... 61
Common Stock.................................................... 1
Company......................................................... 1, 9
Company Common Shares........................................... 52
Comparable Companies............................................ 40
CTI............................................................. 15
DCF Analysis.................................................... 32
DGCL............................................................ 2
Dissenters' Rights.............................................. 46
dissenting stockholders......................................... 1
DLLCA........................................................... 51
EBIT............................................................ 36
EBITDA.......................................................... 35
Effective Time.................................................. 1, 51
EPS............................................................. 36, 40
Exchange Act.................................................... 4
fair value...................................................... 46
Financial Advisors.............................................. 3, 22
FMV............................................................. 32
FTC............................................................. 63
FYE............................................................. 44
Governmental Entity............................................. 54
Hospitality..................................................... 1
HSR Act......................................................... 63
Indemnified Party............................................... 57
Independent Committee.......................................... 3
leveraged buy-out............................................... 63
LLC Agreement................................................... 52
LTM............................................................. 40
Management Group................................................ 2
market check.................................................... 29
Merger.......................................................... 1
Merger Agreement................................................ 1
Merger Consideration............................................ 2
Mr. Hodges...................................................... 2
Mr. Kearney..................................................... 2
Mr. Korman...................................................... 2
Mr. McLean...................................................... 2
Mr. Milan....................................................... 2
Mr. Rogers...................................................... 2
Non-Merger Consideration Shares................................. 52
Option Consideration............................................ 2, 53
P/Es............................................................ 40
Paying Agent.................................................... 53
Payment Fund.................................................... 53
Person.......................................................... 55
Public Announcement Date........................................ 26
Public Stockholders............................................. 3, 25
Record Date..................................................... 16
record holder................................................... 46
Sanders......................................................... 22
Schedule 13E-3.................................................. 4
SEC............................................................. 4
Special Meeting................................................. 1
stockholder..................................................... 46
Subsidiary...................................................... 52
Surviving Company............................................... 1
Third Party..................................................... 55
VAP............................................................. 42
Vestal Superfund Site........................................... 19
we.............................................................. 9
</TABLE>
Page - 8
<PAGE>
SUMMARY
This summary highlights selected information from this proxy statement.
This summary is not complete and may not contain all of the information that you
should consider before determining whether to vote for approval of the merger
and adoption of the related merger agreement. You should carefully read the
entire proxy statement before making your decision.
In this proxy statement, we refer to BFX Hospitality Group, Inc. and its
subsidiaries as "we", "our" or "the Company."
Stockholders are urged to read carefully the proxy statement in its
entirety.
Time, Date and Place The special meeting will be held on
___________, 2000 at 10:00 a.m., local
time, in the Longhorn Room of the Stockyards
Hotel, 109 East Exchange Avenue, Fort Worth,
Texas.
Purposes of the Special Meeting To consider and vote on the approval and
adoption of the merger agreement with
Hospitality and American (attached as
Appendix I) and such other matters as may
properly come before the special meeting or
any postponements or adjournments of the
special meeting.
Voting Rights The close of business on ___________, 2000
has been fixed as the record date for
determining holders of our common stock
entitled to notice of and to vote at the
special meeting. Each share of our common
stock outstanding on the record date is
entitled to one vote at the special meeting.
As of the record date, 4,400,866 shares of
our common stock were outstanding. The
presence, in person or by proxy, of the
holders of a majority of the shares of our
common stock entitled to vote at the special
meeting is necessary to constitute a quorum
for the transaction of business at the
special meeting.
A stockholder may revoke a proxy at any time
before voting by delivering a written notice
of revocation to the secretary of the
company, by executing and delivering a later-
dated proxy or by attending the special
meeting and voting in person. UNLESS CONTRARY
INSTRUCTIONS ARE INDICATED ON THE PROXY, ALL
SHARES OF COMMON STOCK REPRESENTED BY VALID
PROXIES WILL BE VOTED FOR APPROVAL OF THE
MERGER AGREEMENT.
Page - 9
<PAGE>
Required Vote The affirmative vote of holders of a majority of all of
the outstanding shares of common stock is required to
approve the merger agreement. It is anticipated that
the members of the management group and their spouses
will vote the 1,141,914 shares of common stock held of
record by them (representing approximately 25.95% of
the outstanding common stock) in favor of the matters
to be voted upon. It also is anticipated that the
members of the board of directors who are not members
of the management group will vote the 285,805 shares of
common stock held of record by them (representing
approximately 6.49% of the outstanding common stock) in
favor of the merger agreement.
Effective Time of the
Merger The merger is expected to become effective as of
the date and time of the filing of a certificate of
merger with the Secretary of State of the State of
Delaware, which is anticipated to occur approximately
one business day after the approval of the merger
agreement by the company's stockholders and the
satisfaction or waiver of the other conditions to the
merger, as stated in the merger agreement.
Recommendation of the
Board of Directors Based on, among other things, the recommendation of the
independent committee and the fairness opinions of
Sanders Morris Harris, Inc., and George K. Baum &
Company, who rendered fairness opinions to the
independent committee and the board of directors, the
board of directors (with Messrs. McLean, Rogers and
Hodges excusing themselves from the meeting) has
determined that the merger is fair and in the best
interests of the company and its stockholders, has
approved the merger agreement and unanimously
recommends that the stockholders vote FOR approval and
adoption of the merger agreement.
Opinions of Independent
Committee's Financial
Advisors The independent committee retained Sanders Morris
Harris, Inc., and George K. Baum & Company, to render
fairness opinions in connection with the merger. On
August 11, 2000, the financial advisors delivered their
written opinions to the board of directors, after
having already delivered their opinions to the
independent committee, to the effect that, as of that
date and subject to the qualifications and assumptions
set forth in those opinions, the consideration of $2.25
in cash per share of common stock to be received by the
stockholders in the merger is fair from a financial
point of view to the stockholders of the company who
are not members of the
Page - 10
<PAGE>
management group. Copies of those written opinions,
which set forth, among other things, assumptions made,
matters considered and limitations on the review
undertaken in connection with the opinions, are
attached as Appendices II and III and are incorporated
by reference. YOU SHOULD CAREFULLY READ THE OPINIONS IN
THEIR ENTIRETY.
Conflicts of Interest In considering the recommendation of the board of
directors with respect to the merger, you should be
aware that, upon consummation of the merger:
. the members of the management group (including
Messrs. McLean, Korman, Milan, Kearney, Hodges and
Rogers) will be the sole equity owners of Hospitality
and, indirectly, the surviving company;
. the members of the management group will receive the
same merger consideration for their shares of the
company's common stock and the same consideration for
any unexercised options that they own as all other
stockholders and option holders receive; and
. each director of the company will receive the same
merger consideration for the shares of common stock
that he owns.
Accordingly, the members of the management group and
the directors of the company have a direct economic
interest in the merger. The board of directors of the
company appointed to the independent committee three
directors who are neither officers of the company nor
members of the management group (and whose economic
interest was not deemed to be sufficient to affect
their independence) to review, evaluate and negotiate
the terms of the merger agreement and to make a
recommendation to the board of directors concerning the
merger. The independent committee retained independent
financial advisors and independent legal counsel.
Certain Effects of the
Merger Following the merger, the management group will own all
of the units of Hospitality, and Hospitality will own
all of the units of American, as the surviving company,
and all of the units of the other subsidiaries that
will acquire the company's existing operating
subsidiaries as part of the merger. Thus, the members
of the management group will be the sole indirect
beneficiaries of any future earnings and growth of the
company, and the company's stockholders who are not
members of the management group will not benefit from
any increases in the value of the company or any
payment of
Page - 11
<PAGE>
dividends on the units of Hospitality and will not
bear the risk of any decreases in value of the
company. As a result of the merger, the company will
be privately held, there will be no public market for
its capital stock and the existing common stock of
the company will cease to be listed on the American
Stock Exchange.
Future Plans for the
Company The management of Hospitality and the surviving
company will evaluate their business and operations
after the consummation of the merger and make such
changes as are deemed appropriate. Hospitality's
expenses will be substantially reduced below those of
the company because it will not be subject to the
expenses of being a public company.
Merger Agreement The company, American and Hospitality have entered
into Themerger agreement, providing for the merger of
the company with and into American, with American
being the surviving company, and providing for the
acquisition of the assets of three of the company's
four operating subsidiaries (Cat's Meow, Lucile's and
Stockyards Hotel) by three newly formed, wholly owned
subsidiaries of Hospitality. The merger agreement
also provides for Hospitality to acquire all of the
outstanding membership interests of the fourth
subsidiary, Cabo-Fort Worth #1, L.L.C. A copy of the
merger agreement is attached as Appendix I. Under the
terms of the merger agreement, each share of the
company's common stock that is issued and outstanding
immediately before the effective date, including the
associated right to purchase shares upon certain
events occurring under our rights agreement, (other
than shares of common stock held by the company or
any of its subsidiaries as treasury stock and shares
of common stock held by dissenting stockholders) will
be converted into the right to receive $2.25 in cash,
without interest. As a result of the merger, the
surviving company will be owned by Hospitality and
Hospitality will be owned by the members of the
management group. The company has agreed not to
participate or engage in any discussions with anyone
other than Hospitality and the management group
regarding any acquisition proposal involving the
company, except with respect to unsolicited written
proposals or offers if the independent committee or
the board of directors reasonably believes that there
is a substantial risk that a failure to consider an
unsolicited written proposal or offer would violate
its fiduciary duties. Hospitality is entitled to a
breakup fee of $500,000 if it terminates the merger
agreement as a result of:
Page - 12
<PAGE>
. the independent committee or board of directors
withdrawing or modifying its approval or
recommendation of the merger or recommending or
approving a third party proposal; or
. the company soliciting takeover proposals of any
type.
In addition, any termination that results in the
payment of the breakup fee will also result in a
"change of control" under employment agreements between
the company and some of the members of the management
group, which would cost the company an estimated
$1,850,000 if the management group members elect to
terminate their employment with the company.
Appraisal Rights If the merger is consummated, dissenting stockholders
will be entitled to demand payment of the fair value of
their shares of common stock in accordance with the
procedures set forth in Section 262 of the Delaware
General Corporation Law. Stockholders wishing to
exercise appraisal rights must:
. continue to hold their shares through the effective
time of the merger;
. vote against or abstain from voting for the approval
and adoption of the merger agreement;
. deliver to the company, before the taking of the vote
on the merger at the special meeting, a written demand
for appraisal, providing reasonable identification of
the holder of record; and
. strictly comply with the other requirements of the
Delaware General Corporation Law.
Failure to follow the procedures required by Section
262 of the Delaware General Corporation Law may result
in the loss of appraisal rights (in which event a
stockholder will be entitled to receive the
consideration for the shares of common stock that the
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