Exhibit (b)(2) NationsBanc Montgomery Securities [LOGO] A Presentation to the Board of Directors February 12, 1998 Table of Contents Description of Ferrari I Transaction Overview II - Summary Term Sheet - Rationale for the Acquisition - Transaction Risks - Recent Restaurant Buyout Offers Valuation Analysis of Ferrari III - Multiples Analysis - Summary Valuation Analysis - Analysis of Premiums Paid - Analysis of Comparable Public Companies - Analysis of Comparable M&A Transactions - Discounted Cash Flow Analysis Summary IV Description of Ferrari Overview of Ferrari History - - Ferrari (the "Company") was founded in Massachusetts in 1981 by the Company's Founder, President and Chief Executive Officer Joseph Crugnale. As of December 1997, the Company operated 85 restaurants located in the Northeastern and Mid-Atlantic regions under the name of "Bertucci's Brick Oven Pizzeria." - - The Company is one of the originators of the wood-burning, brick-oven gourmet pizza restaurant concept. The Company operates full-service, relaxed family-style restaurants committed to offering affordable priced, high quality cuisine. General Business Overview - - Ferrari seeks to distinguish itself from its competitors in the family and adult casual-dining segments through offering a contemporary European style design, centered around a large-display area with brick oven and a moderately-priced menu that features fresh, natural ingredients with an emphasis on baked pizzas and creative pasta dishes. - - The restaurants are open daily for lunch and dinner. The average check per customer is approximately $8.00 to $10.00. Alcohol accounts for less than 10% of total net sales. - - The Company's restaurants seat approximately 160 people with an average unit size of approximately 5,700 square feet. The average cost of opening a typical restaurant has been approximately $1.4 million. The company operates all its restaurants and currently has no plans to develop a franchise program. Selected Management Profiles - - Joseph Crugnale, 46, has been the President of the Corporation since its founding in 1984. Mr. Crugnale is the former owner of Steve's Ice Cream. At the time he acquired Steve's in 1977, it was a one store ice cream shop. When Mr. Crugnale sold Steve's in 1983, the company had grown to a 26-store operation. - - Norman Mallett, 51, has been the Vice President - Finance, the Treasurer, and the Chief Financial Officer of the Company since 1991. Mr. Mallett served as the Director of Finance of the Company from 1987 to 1991. Prior to joining the Company, Mr. Mallett had been employed for 15 years by Shoney's South, Inc. Recent Issues Lack of Market Visibility - - Small Market Capitalization - approximately $55.5 million ($6.125 share price 2/10; 8.9 million shares outstanding) - - Low average weekly trading volume - 43,000 shares (last twelve months of trading). - - Stagnant stock price - $6.16 per share average stock price (last twelve months). Lowest Multiples Among Comparable Companies with Recent Performance Issues - - 4.5x EBITDA multiple versus 6.2x average comparable company EBITDA multiple. - - 10.6x EBIT multiple versus 10.7x average comparable company EBIT multiple. - - 0.5x Revenue multiple versus 1.3x average comparable company Revenue multiple. Lack of Visibility with Research - - Latest research issued by Schroder Wertheim in March 1997. - - NMS issued last research report on February 16, 1996. History of Earnings Shortfalls - - Recently announced Q4 1997 earnings shortfall of $0.07 per share. - - Missed earnings expectations for several quarters including Q2 1994, Q4 1993, Q1 1993, and Q4 1992. - - Actually exceeded Q4 1996 earnings estimates by 100% yet had no price movement. Geographic Concentration and Competitive Market Segment - - Operations concentrated in the Northeast. - - Italian and Pizzeria concept markets are saturated. - - Limited success with growth outside the Northeast. Historical Income Statement - -------------------------------------------------------- Dollars in millions, except per share data Historical ------------------------------ 1995 1996 1997 ------ ------ ------ Net Sales $120.3 $128.0 $136.7 Cost of Sales 31.1 32.5 34.1 ------ ------ ------ Gross Profit 89.2 95.6 102.6 Operating Expenses (1) 75.2 (2) 80.3 87.5 Net Operating Income 14.0 15.2 15.1 Depreciation 9.1 8.8 8.6 ------ ------ ------ EBIT 4.9 6.4 6.5 Depreciation 9.1 8.8 8.6 ------ ------ ------ EBITDA 14.0 15.2 15.1 Interest Income 0.0 0.0 0.0 Interest Expense 1.3 1.3 1.0 ------ ------ ------ Pre-tax Income 3.7 5.2 5.5 Income Taxes 1.4 1.9 2.0 ------ ------ ------ Net Income $ 2.3 $ 3.2 $ 3.5 ------ ------ ------ ------ ------ ------ Earnings Per Share $ 0.27 $ 0.36 $ 0.39 Shares Outstanding 8.7 8.9 8.9 Margins: - --------------------------------------------------------------------------------- Sales Growth 6.5% 6.8% Cost of Sales (% of sales) 25.8% 25.4% 24.9% Operating Expenses (% of Sales) 62.5% 62.7% 64.0% Depreciation (% of Sales) 7.6% 6.9% 6.3% Tax Rate 37.5% 37.5% 36.4% EBIT Margin 4.1% 5.0% 4.8% EBITDA Margin 11.7% 11.9% 11.1% Pre-Tax Margin 3.1% 4.0% 4.0% Net Margin 1.9% 2.5% 2.6% - ---------------- (1) Operating Expenses includes G&A and Taxes other than Income Taxes. Historical and Projected Balance Sheet - --------------------------------------- Dollars in millions Actual FY Ended December 31, ----------------------- 1995 1996 1997 ------ ------ ------ CURRENT ASSETS Cash $ 1.4 $ 4.3 $ 6.1 Accounts Receivable 0.2 0.2 0.2 Inventories 1.0 1.0 1.2 Other Current Assets 2.0 2.1 2.0 ------ ------ ------ TOTAL CURRENT ASSETS $ 4.5 $ 7.6 $ 9.5 PROPERTY, PLANT & EQUIPMENT (NET) 89.9 91.9 91.5 OTHER ASSETS 4.6 3.1 3.1 GOODWILL AND INTANGIBLE ASSETS -- -- -- TOTAL ASSETS $ 98.9 $102.5 $104.2 ------ ------ ------ ------ ------ ------ LIABILITIES AND SHAREHOLDERS' EQUITY Accounts Payable $ 4.2 4.2 $ 6.0 Accrued Expenses 0.5 1.0 1.7 Accrued Payroll 2.4 3.3 3.7 Other Liabilities 2.6 1.9 1.3 ------ ------ ------ TOTAL CURRENT LIABILITIES 9.7 10.4 12.7 Deferred Rent 5.6 6.1 6.6 Notes Payable 0.1 0.1 0.0 Total Bank Debt 19.5 18.5 13.5 Senior Sub Debt -- -- -- Stockholders' Equity 64.1 67.5 71.4 Total Liabilities and Stockholders' Equity $ 98.9 $102.5 $104.2 ------ ------ ------ ------ ------ ------ 1995 1996 1997 ------ ------ ------ RATIOS: Receivable Days 0.5 0.5 0.6 Payable Days 49.9 47.0 64.0 Inventory Turns 32.7 31.0 27.9 Other Current Assets (% of Revenue) 1.7% 1.5% 1.5% Other Assets (% of Sales) 3.8% 2.4% 2.3% Accrued Expenses (% of Revenues) 0.4% 0.8% 1.2% Accrued Payroll (% of Revenues) 2.0% 2.6% 2.7% Other Liabilities (% of Total Sales) 2.1% 1.5% 0.9% Capex (% of Sales) 23.0% 8.4% 6.5% Capex 27.6 10.8 8.9 Depreciation & Amortization 9.1 8.8 8.6 Deferred Rent 5.6 6.1 6.6 Shareholder Profile - ------------------------------------------------------------------------------ Directors and Executive Officers Holdings % of Total Institutions Holdings % of Total - -------------------------- ----------- ---------- ---------------------- ------------ ------------ Joseph Crugnale 2,177,710 24.7% TCW GROUP INC. 388,700 4.4% E. Bulkeley Griswold 7,000 * PRUDENTIAL INS CO/AMER 235,400 2.7% Robert L. Lestina, Jr. 3,000 * MASSACHUSETTS FINL SVCS 185,000 2.1% James Westra 4,499 * VANGUARD GROUP INC. 129,000 1.5% Allan J. Steinmetz 0 * SPEAR LEEDS & KELLOGG 128,566 1.5% Theodore R. Barber 1,000 * RYBACK MANAGEMENT CORP 126,800 1.4% Norman S. Mallett 53,000 * BARCLAYS BANK PLC 123,899 1.4% ------------ ----- ROSENBERG INST. EQ. MGMT 103,900 1.2% TOTAL INSIDERS 2,246,209 25.4% KENNEDY CAPITAL MGMT 65,000 * Other 855,391 9.7% 5% Institutional Holders Holdings % of Total ----------- ------- - -------------------------- ----------- ---------- Total Institutions 1,952,956 22.1% FIDELITY MGMT & RES CORP/ 722,400 8.2% DIMENSIONAL FUND ADVS. 502,600 5.7% Retail Float 2,956,801 33.5% FRANKLIN RESOURCE INC. 448,000 5.1% ----------- ---------- Total Shares Outstanding 8,828,966 100.0% Total 5% Holders 1,673,000 18.9% - ---------------------------- Source: Latest Proxy (excluding 61,400 options held by the Directors and Executive Officers as a group), 10-K and Spectrum Holdings. *indicates less than 1% of shares outstanding. Historical Price and Volume -- IPO to 2/10/98 - -------------------------------------------------------------------------- [GRAPH] Cumulative Distribution of Shares at Various Prices - -------------------------------------------------------------------------------- 2/5/97 - 2/10/98 [Graph Omitted] Price Range Shares Traded % Cum. % - ------------- ------------- ----------- ------------- $5.00 - $5.50 363,500 3.4% 3.4% $5.50 - $6.00 1,910,500 17.7% 21.1% $6.00 - $6.50 6,355,500 58.9% 79.9% $6.50 - $7.00 2,165,300 20.1% 100.0% - ------------- ------------- ----------- Total Volume Traded 10,794,800 100.0% Source: Stock price and volume traded figures from FactSet Research Systems Transaction Overview Summary Term Sheet Form of Transaction: Cash for stock merger. A newly formed company, Ten Ideas, Inc. ("Buyer") will purchase shares of Ferrari Common Stock. A "going-private," reverse triangular cash merger of a wholly-owned subsidiary of the Buyer with and into the Company, resulting in the cash-out of the public shareholders and the Company becoming a wholly-owned subsidiary of the Buyer. Consideration: Each share of Ferrari common stock issued and outstanding (approximately 8,948,324 shares fully-diluted) will be purchased for $8.00 per share which represents a premium of approximately 31.0% ($6.125 as of 2/10/98). Accounting Treatment: Purchase accounting Tax Treatment: The transaction will be a taxable event for the shareholders of Ferrari. Financing: The transaction will be financed by a combination of senior term and revolving debt, subordinated debt or other equity interests in the Buyer based on a fully financed commitment letter to be received from BancBoston Securities prior to executing the merger agreement. Equity: Joseph Crugnale and certain other members of management will roll-over 100% of their existing equity in the Company into the Buyer, and afford management participation in ownership of Buyer post-closing. Summary Term Sheet (continued) Options Treatment: Holders of outstanding options of Ferrari (representing approximately 297,550 shares) will be included in the merger. Representations and Warranties: Standard Buyer and Seller Representations and Warranties. No Shop: No Shop provision with a restriction on solicitation of competing offers provided, however, that there are no restrictions on responding to unsolicited offers or inquiries. Conditions to Closing: - Approval of Special Committee and Board of Directors - Approval of Ferrari's shareholders - Receipt of a Fairness Opinion - Absence of litigation - Satisfactory bring down of Representations of Warranties - No material adverse change in the business of Ferrari - No governmental prohibition Timing: - Announce to market on Friday, February 13, 1998 - File proxy/prospectus with SEC - Close immediately following Ferrari's shareholder approval Termination: - Customary termination events Rationale for Acquisition Public Scrutiny: The pressure of public markets to show continuous growth in stores and quarterly earnings has become counterproductive and conflicts with management's view that more controlled, localized growth is in the best long term interest of the business. Immediate Liquidity: The proposed merger would maximize shareholder value more effectively than a recapitalization or extraordinary cash dividend to shareholders, which would not resolve the underlying causes of the Company's under-performance in the market's view, and would likely be tax inefficient to the stockholders. Growth Potential: At a more measured growth pace, the Company's cash flow is adequate to support the debt necessary to consummate a transaction such as the proposed merger, but likely is not adequate to support the type of growth needed to significantly enhance stock value, even to the level represented by the terms of the proposal. Maximize Shareholder Value: Ferrari has a market capitalization of approximately $55 million dollars, an average weekly trading volume of 43,000 over the past twelve months and an inactive share price. Ferrari shareholders would gain liquidity as well as a premium of approximately 31% based on the 2/10/98 price of $6.125. Transaction Risks Conflicts of Interest: The transaction involves Management taking the company private and therefore presents an appearance of conflicts of interest. In order to avoid these concerns, the Company has created a Special Committee of Independent Directors to negotiate and evaluate management's proposal. Shareholder Lawsuits: Historically, transactions involving management have given rise to shareholder lawsuits which attempt to increase the purchase price and may inhibit the ultimate consummation of the transaction. Super-Majority Shareholder Vote: Under Massachusetts Corporate Law, approval of the merger requires a two-thirds super-majority vote of shareholders as opposed to a simple 51% majority vote. Recent Restaurant Buyout Offers - ----------------------------------------------------------------------------- Price Prior Offer Implied to Ann. Price Premium Result ----------- ------- --------- ----------------------------------- Sbarro* $26.63 $28.50 7.0% Pending. Announced 1/20/98; shareholder lawsuit filed 1/27/98. Davco $13.38 $18.00 34.6% Pending. Announced 10/97; Shareholder lawsuit filed. Ground Round $1.50 $1.65 10.0% Completed. Announced 9/2/97; closed 12/2/97. Perkins $10.88 $13.00 19.5% Completed. Announced 8/4/97; shareholder lawsuit filed; settlement reached: $14 per share and co. agreed to pay $0.32 dividend. NPC Intl. $6.25 $9.00 44.0% Withdrawn. Announced 11/6/95; shareholder lawsuit filed; withdrawn 12/11/95. * Company announced weaker than expected Q4 earnings and warned of weak future earnings simultaneously with the buyout offer. - ------------------------------------------------------------------------------- Valuation Analysis of Ferrari --------------------------------- MULTIPLES ANALYSIS --------------------------------- Analysis at Various Prices - ------------------------------------------------------------------------------- (dollars in millions) Ferrari Current Stock Price (1) $ 6.125 $ 7.00 $ 7.50 $ 8.00 $ 8.50 $ 9.00 Premium 0.0% 14.3% 22.4% 30.6% 38.8% 46.9% Ferrari Current Fully Diluted S/O (2): 8.9 8.9 8.9 8.9 8.9 8.9 - --------------------------------------------------------------------------------------------------------------------------- Fully Diluted Equity Value: $ 54.8 $ 62.6 $ 67.0 $ 71.5 $ 76.0 $ 80.5 - --------------------------------------------------------------------------------------------------------------------------- 1997 Net Debt (3) $ 14.1 $ 14.1 $ 14.1 $ 14.1 $ 14.1 $ 14.1 - --------------------------------------------------------------------------------------------------------------------------- Aggregate Value: $ 68.8 $ 76.7 $ 81.1 $ 85.6 $ 90.1 $ 94.5 - --------------------------------------------------------------------------------------------------------------------------- Aggregate Value/: ---------- Revenues (4) 1997 $ 136.7 0.5x 0.6x 0.6x 0.6x 0.7x 0.7x 1996 $ 128.0 0.5x 0.6x 0.6x 0.7x 0.7x 0.7x EBITDA (4) 1997 $ 15.1 4.5x 5.1x 5.4x 5.7x 5.9x 6.2x 1996 $ 15.2 4.5x 5.0x 5.3x 5.6x 5.9x 6.2x EBIT (4) 1997 $ 6.5 10.6x 11.8x 12.4x 13.1x 13.8x 14.5x 1996 $ 6.4 10.7x 11.9x 12.6x 13.3x 14.0x 14.7x Total Ferrari Restaurants (5) 85 $ 0.8 $ 0.9 $ 1.0 $ 1.0 $ 1.1 $ 1.1 Equity Value/: Net Income (4) 1997 $ 3.5 15.6x 17.8x 19.1x 20.4x 21.7x 22.9x 1996 $ 3.2 17.0x 19.4x 20.8x 22.2x 23.6x 24.9x ---------- - ------------------------ (1) Current stock price as of 2/10/98. (2) Fully diluted shares outstanding assumes the treasury method for the 297,550 options exercisable as of 2/10/98. (3) Net debt as of 12/27/97. Calculated as debt plus deferred liabilities minus cash. (4) LTM for the period ended 12/27/97. (5) Ferrari Restaurants includes 84 existing restaurants as of 12/27/97 and 1 Sal & Vinnie's Steakhouse. - -------------------------------------------------------------------- - -------------------------------------------------------------------- SUMMARY VALUATION ANALYSIS - -------------------------------------------------------------------- - -------------------------------------------------------------------- Ferrari Valuation Summary - ----------------------------------------------------------------------- Valuation Methodologies Equity Value Range Per Share ------------------ Methodology 1: Premiums Paid Analysis Low High - -------------- ------------------------------------------------ ----- ----- The difference between the acquisition cost and Selected Transactions: $7.37 - $8.05 the market capitalization is the control premium. Recent Restaurant Buyouts: $7.32 - $7.53 This analysis determines the average premiums that have been paid to purchase companies of similar size to Ferrari. Methodology 2: Comparable Public Company Methodology - -------------- ------------------------------------------------ A selected number of publicly traded companies Growth Restaurants with which are deemed to be the most comparable to Performance Issues: $6.00 - $10.00 the company are analyzed with respect to both Selected Comparable Restaurants: $5.99 - $ 8.56 operating performance and valuation data, resulting in an implied public market valuation. Methodology 3: Comparable M&A Transaction Methodology - -------------- ------------------------------------------------ Selected pending and completed M&A transactions Selected Restaurant Transactions: $6.94 - $ 8.15 are analyzed in a similar fashion to method 1. Comparable LBO Transactions: $7.00 - $11.00 This analysis focuses on multiples paid in the most comparable change of control transactions, therefore reflecting theoretical values which could be paid for the company. Methodology 4: Discounted Cash Flow Methodology - -------------- ------------------------------------------------ The company's long-term earnings potential is analyzed $7.01 - $9.37 by looking at its ability to generate free cash flow to the investor. The cash flow generated by the company and the potential terminal value of the company five years out is discounted back to reflect the net present value of those returns. ----------------- Indicated Valuation Range | $7.00 - $9.00 | ----------------- Ferrari Valuation Summary - -------------------------------------------------------------------- [Graph Omitted] Methodology 1 - -------------------------------------------------------------------- - -------------------------------------------------------------------- ANALYSIS OF PREMIUMS PAID - -------------------------------------------------------------------- - -------------------------------------------------------------------- Summary Analysis of Premiums Paid Over Pre-Announcement Price(1) - -------------------------------------------------------------------- 1/1/97 to 1/29/98 ONE DAY ONE WEEK 30 DAYS ------- -------- ------- Median Premium 20.3% 26.5% 31.4% Implied Value based on Price of $6.125 $7.37 $7.75 $8.05 $8.00 Offer Premium Over Price: Current 1 Week Ago 1 Month Ago $6.125 $6.19 $6.44 30.6% 29.3% 24.3% 3 Months Ago 6 Months Ago 1 Year Ago $6.38 $5.63 $5.56 25.5% 42.2% 43.8% - ------------------------ (1) Based on acquisitions between $50 million and $200 million, excluding technology and biotech deals. Source: Securities Data Company Selected Acquisitions Premiums Paid Analysis - $50 to $200 million (1) - -------------------------------------------------------------------------------- 1/1/97 to 1/29/98 Market Price Market Premium Acquisition Prior to Announcement Prior to Announcement Ann. Price ------------------------ ------------------------ Target Acquiror Date Per Share One Day One Week 30 Days One Day One Week 30 Days - -------------------------------- ------------------------------- ------ --------- ------- -------- ------- ------- -------- ------- Ambassador Bk of Commonwealth Fulton Finl Corp,Lancaster,PA 01/26/98 $34.72 $27.50 $27.00 $27.25 26.3% 28.6% 27.4% TransAmerican Waste Industries USA Waste Services Inc 01/27/98 1.57 1.44 1.59 1.22 9.2% (1.5)% 28.8% BT Office Products Intl Inc Koninklijke KNP BT NV 01/23/98 10.50 10.38 7.69 7.69 1.2% 36.6% 36.6% Buttrey Food and Drug Stores Albertson's Inc 01/21/98 15.50 10.75 10.75 10.50 44.2% 44.2% 47.6% Casino Magic Corp Grand Casinos Inc 01/21/98 1.77 2.03 1.53 1.22 (12.9)% 15.6% 45.2% Meridian Point Realty Trust EastGroup Properties 01/15/98 6.75 6.13 5.13 4.50 10.2% 31.7% 50.0% Schult Homes Corp Oakwood Homes Corp 01/07/98 22.50 22.25 20.38 18.88 1.1% 10.4% 19.2% National Media Corp ValueVision International Inc 01/06/98 3.26 3.44 2.75 3.81 NA 18.5% (14.5)% FP Bancorp,Escondidio,CA Zions Bancorp,Utah 12/30/97 27.27 23.50 21.50 21.50 16.0% 26.8% 26.8% Holmes Protection Group Inc Tyco International Ltd 12/30/97 17.00 18.00 18.00 19.75 (5.6)% (5.6)%(13.9)% United Fed Svgs Bk,Rocky Mount Triangle Bancorp,Raleigh,NC 12/27/97 22.05 17.00 12.50 11.75 29.7% 76.4% 87.7% Union Corp Outsourcing Solutions Inc 12/24/97 31.50 27.50 27.75 25.50 14.5% 13.5% 23.5% Essex County Gas Eastern Enterprises 12/23/97 49.36 39.00 31.75 30.63 26.6% 55.5% 61.2% First Home Bancorp Inc,NJ Sovereign Bancorp,PA 12/20/97 31.25 30.00 28.75 23.75 4.2% 8.7% 31.6% Network Long Distance Inc IXC Communications Inc 12/20/97 9.29 7.88 7.75 8.13 18.0% 19.9% 14.3% Southwest Bancshares Inc,IL Alliance Bancorp,Chicago,IL 12/18/97 32.35 28.00 25.00 25.50 15.5% 29.4% 26.9% Suburban Ostomy Supply Co Inc Invacare Corp 12/18/97 11.75 10.88 10.38 10.38 8.0% 13.3% 13.3% Franklin Bancorp,Washington,DC BB&T Corp,Winston-Salem,NC 12/17/97 22.45 18.50 17.00 14.50 21.4% 32.1% 54.8% Progressive Bank,Pawling,NY Hudson Chartered Bancorp,NY 12/17/97 41.86 36.63 36.00 33.00 14.3% 16.3% 26.8% Carnegie Bancorp,Princeton,NJ Sovereign Bancorp,PA 12/16/97 35.50 32.00 31.25 25.63 10.9% 13.6% 38.5% Christiana Cos Inc EVI Inc(Camac Holdings Inc) 12/16/97 33.39 40.75 41.63 40.88 (18.1)% (19.8)%(18.3)% MSB Bancorp Inc,Goshen,NY Hubco Inc,Mahwah,New Jersey 12/16/97 36.02 27.63 27.38 26.38 30.4% 31.6% 36.6% Perpetual Midwest Finl Inc Commercial Federal,Omaha,NE 12/16/97 30.67 27.75 28.50 26.00 10.5% 7.6% 18.0% First State Corp,Albany,Ga Regions Finl,Birmingham,AL 12/12/97 23.38 19.75 18.88 20.00 18.4% 23.9% 16.9% Somerset Savings Bank,MA UST Corp,Boston,MA 12/11/97 5.63 4.88 4.88 5.00 15.5% 15.5% 12.6% Deflecta-Shield Corp Lund International Holdings 11/29/97 16.00 12.00 12.00 9.00 33.3% 33.3% 77.8% RedFed Bancorp Inc,Redlands,CA Golden State Bancorp Inc 11/29/97 20.75 20.38 20.38 19.38 1.8% 1.8% 7.1% Universal Hospital Services Investor Group 11/27/97 15.50 12.00 12.00 12.38 29.2% 29.2% 25.3% New Jersey Steel(Von Roll) Co-Steel Inc 11/22/97 23.00 8.75 8.50 8.63 162.9% 170.6% 166.7% Meritrust Fed Svgs Bk,LA Whitney Holding Corp,Louisiana 11/21/97 73.00 51.22 51.50 49.75 42.5% 41.7% 46.7% BCB Financial Services Corp,PA Heritage Bancorp,Pottsville,PA 11/20/97 29.85 22.00 21.88 23.00 35.7% 36.5% 29.8% Charter Financial Inc,Illinois Magna Group Inc, St. Louis,MO 11/20/97 22.89 21.06 21.50 21.00 8.7% 6.5% 9.0% Century Finl Corp,Rochester,PA Citizens Bancshares Inc,OH 11/18/97 26.56 19.00 18.75 16.50 39.8% 41.7% 61.0% Granite Financial Inc Fidelity National Financial 11/18/97 17.00 10.75 10.75 10.88 58.1% 58.1% 56.3% CoBancorp Inc FirstMerit Corp,Akron,OH 11/04/97 44.50 40.25 34.00 29.25 10.6% 30.9% 52.1% ILC Technology Inc BEC Group Inc 11/01/97 24.53 11.75 11.81 11.75 108.8% 107.7% 108.8% Selected Acquisitions Premiums Paid Analysis - $50 to $200 million (1) - -------------------------------------------------------------------------------- 1/1/97 to 1/29/98 Market Price Market Premium Acquisition Prior to Announcement Prior to Announcement Ann. Price ------------------------ ------------------------ Target Acquiror Date Per Share One Day One Week 30 Days One Day One Week 30 Days - -------------------------------- ------------------------------- ------ --------- ------- -------- ------- ------- -------- ------- Emerald Isle Bancorp,Quincy,MA Eastern Bank Corp,Lynn,MA 10/24/97 33.00 25.50 25.63 24.75 29.4% 28.8% 33.3% Poughkeepsie Financial Corp Hubco Inc,Mahwah,New Jersey 10/24/97 10.61 10.50 10.31 9.06 1.0% 2.9% 17.1% Shelter Components Corp Kevco Inc 10/22/97 17.50 14.50 13.94 15.38 20.7% 25.6% 13.8% Cruise America Inc Budget Group Inc 10/21/97 9.88 8.38 8.69 7.06 18.0% 13.7% 39.9% Sybron Chemicals Inc Investor Group 10/21/97 34.50 26.25 26.25 24.88 31.4% 31.4% 38.7% Computational Systems Inc Emerson Electric Co 10/18/97 29.65 20.44 20.00 18.25 45.1% 48.3% 62.5% Starrett Corp Startt Acquisition LLC 10/18/97 12.25 11.00 10.88 9.88 11.4% 12.6% 24.1% Tranzonic Cos Linsalata Capital Partners II 10/18/97 29.00 29.44 29.88 27.75 (1.5)% (2.9)% 4.5% Omni Insurance Group Inc Hartford Financial Services 10/17/97 31.75 17.75 18.06 13.75 78.9% 75.8% 130.9% Thompson PBE Inc FinishMaster Inc(Lacey Distn) 10/16/97 8.00 6.38 6.00 5.63 25.5% 33.3% 42.2% Melamine Chemicals Inc Borden Chemical Inc(Borden) 10/10/97 20.50 12.00 11.88 12.00 70.8% 72.6% 70.8% Game Financial Corp Travelers Express Co(Viad) 09/25/97 10.75 10.25 10.25 10.25 4.9% 4.9% 4.9% Vectra Banking Corp,Denver,CO Zions Bancorp,Utah 09/25/97 28.17 23.63 23.75 19.13 19.2% 18.6% 47.3% First United Bancorp,SC Regions Finl,Birmingham,AL 09/24/97 20.24 16.75 17.50 25.25 20.8% 15.7% (19.8)% PALFED Inc Regions Finl,Birmingham,AL 09/24/97 27.39 21.50 18.00 16.50 27.4% 52.2% 66.0)% Tescorp Inc Supercanal Holding SA 09/18/97 4.50 4.19 3.38 3.25 7.5% 33.3% 38.5% Coml Bancshares,Parkersburg,WV WesBanco Inc,Wheeling,WV 09/13/97 78.38 53.00 53.38 47.00 47.9% 46.8% 66.8% Data Documents Inc Corporate Express Inc 09/11/97 16.08 14.50 14.00 12.75 10.9% 14.9% 26.1% Offshore Energy Development Titan Exploration Inc 09/10/97 8.51 4.38 9.00 9.25 94.5% (5.4)% (8.0)% DavCo Restaurants Inc Investor Group 09/06/97 20.00 13.38 13.38 13.00 49.5% 49.5% 53.8% Mid-Continent Bancshares,KS Commercial Federal,Omaha,NE 09/03/97 38.25 29.75 30.00 30.75 28.6% 27.5% 24.4% Value Property Trust Wellsford Real Properties Inc 08/29/97 16.17 12.94 13.38 13.63 25.0% 20.9% 18.7% Versa Technologies Inc Applied Power Inc 08/29/97 24.63 18.00 18.50 18.75 36.8% 33.1% 31.4% ACC Consumer Finance Corp Household International Inc 08/26/97 21.39 15.75 15.88 16.50 35.8% 34.7% 29.6% Allied Capital Corp Allied Capital Lending Corp 08/15/97 17.39 16.13 16.13 15.94 7.8% 7.8% 9.1% Talbert Medical Management MedPartners Inc 08/15/97 63.00 57.00 53.00 46.00 10.5% 18.9% 37.0% Uniforce Services Inc Comforce Corp 08/15/97 32.24 23.44 23.44 21.13 37.6% 37.6% 52.6% Isomedix Inc Steris Corp 08/13/97 20.50 19.38 17.75 18.00 5.8% 15.5% 13.9% National Sanitary Supply Co Unisource Worldwide Inc 08/12/97 21.00 22.50 17.50 14.25 (6.7)% 20.0% 47.4% Vacation Break USA Inc Fairfield Communities Inc 08/12/97 19.82 14.00 14.25 10.13 41.6% 39.1% 95.8% 1st United Bancorp,FL Wachovia Corp,Winston-Salem,NC 08/08/97 20.88 19.75 18.00 16.38 5.7% 16.0% 27.5% Covenant Bancorp,New Jersey First Union Corp,Charlotte,NC 08/06/97 18.87 21.00 19.25 17.75 (10.1)% (2.0)% 6.3% Belmont Homes Inc Cavalier Homes Inc 08/05/97 7.80 9.50 7.75 7.13 (17.9)% 0.6% 9.5% Perkins Family Restaurant LP Restaurant Co 08/05/97 14.00 10.88 11.06 10.63 28.7% 26.6% 31.8% Community Care of America Inc Integrated Health Services Inc 08/02/97 4.00 3.25 3.38 2.13 23.1% 18.5% 88.2% Bucyrus International Inc American Industrial Partners 08/01/97 18.00 13.50 12.25 10.50 33.3% 46.9% 71.4% Selected Acquisitions Premiums Paid Analysis - $50 to $200 million (1) - -------------------------------------------------------------------------------- 1/1/97 to 1/29/98 Market Price Market Premium Acquisition Prior to Announcement Prior to Announcement Ann. Price ------------------------ ------------------------ Target Acquiror Date Per Share One Day One Week 30 Days One Day One Week 30 Days - -------------------------------- ------------------------------- ------ --------- ------- -------- ------- ------- -------- ------- Santa Monica Bank Western Bancorp,California 08/01/97 28.00 24.50 23.81 21.75 14.3% 17.6% 28.7% Homegate Hospitality Inc Prime Hospitality Corp 07/26/97 12.37 9.50 9.25 9.63 30.2% 33.7% 28.5% Imo Industries Inc Constellation Capital Partners 07/26/97 7.05 5.94 5.88 5.75 18.7% 20.0% 22.6% Astrotech International Corp ITEQ Inc 07/25/97 10.93 7.50 6.69 6.13 45.7% 63.4% 78.4% ArgentBank,Thibodaux,Louisiana Hibernia Corp,New Orleans,LA 07/17/97 29.20 22.50 22.25 21.00 29.8% 31.2% 39.0% Airways Corp ValuJet Inc 07/11/97 6.81 5.38 5.25 5.13 26.7% 29.7% 32.9% Upper Peninsula Energy Corp WPS Resources Corp 07/11/97 24.64 18.50 19.00 18.25 33.2% 29.7% 35.0% Krystal Co Port Royal Holdings Inc 07/04/97 14.50 6.25 5.38 5.25 132.0% 169.8% 176.2% American Filtrona Corp Bunzl PLC 07/03/97 46.52 42.75 45.50 45.00 8.8% 2.2% 3.4% First Southeast Finl Corp,SC Carolina First Corp,SC 07/02/97 16.09 10.00 10.38 10.63 60.9% 55.1% 51.4% SMT Health Services Inc Three Rivers Holding Corp 06/25/97 11.75 11.25 11.50 10.88 4.4% 2.2% 8.0% American National Bancorp,MD Crestar Finl Corp,Richmond,VA 06/24/97 20.32 16.13 15.25 14.88 26.0% 33.2% 36.6% SHO-ME Finl,Mount Vernon,MO Union Planters Corp,Memphis,TN 06/24/97 40.10 40.25 37.13 33.63 (0.4)% 8.0% 19.3% Convest Energy Corp Forcenergy Inc 06/21/97 9.44 8.50 8.50 7.94 11.1% 11.1% 18.9% Edisto Resources Corp Forcenergy Inc 06/21/97 10.27 11.00 11.00 10.31 (6.6)% (6.6)% (0.4)% Hechinger Co Leonard Green & Partners LP 06/18/97 3.00 3.50 3.25 3.38 (14.3)% (7.7)% (11.1)% McFarland Energy Inc Monterey Resources Inc 06/18/97 18.55 16.63 13.13 12.81 11.6% 41.3% 44.8% Seda Specialty Packaging Corp CCL Industries Inc 06/18/97 29.00 22.00 21.25 19.00 31.8% 36.5% 52.6% Frederick's of Hollywood, Inc. Investor Group 06/17/97 7.75 4.13 4.25 4.88 87.9% 82.4% 59.0% Amrion Inc Whole Foods Market Inc 06/10/97 27.57 25.50 23.13 18.75 8.1% 19.2% 47.0% Peoples Bank,Catawba,NC Carolina First Bancshares,NC 06/10/97 31.00 30.00 28.00 27.00 3.3% 10.7% 14.8% Integrated Living Communities Whitehall Street Real Estate 05/31/97 11.50 9.06 9.50 7.63 26.9% 21.1% 50.8% National Picture and Frame Co Colonnade Capital LLC 05/31/97 12.00 9.13 9.38 9.38 31.5% 28.0% 28.0% DAKA International Inc Compass Group PLC 05/29/97 7.50 11.25 11.63 8.13 (33.3)% (35.5)% (7.7)% Alamco Inc Columbia Natural Resources Inc 05/28/97 15.75 14.63 14.13 13.50 7.7% 11.5% 16.7% Varsity Spirit Riddell Sports Inc 05/07/97 18.90 14.50 14.75 15.25 30.3% 28.1% 23.9% Virginia First Finl Corp,VA BB&T Corp,Winston-Salem,NC 05/07/97 24.38 13.75 13.75 14.00 77.3% 77.3% 74.1% Cardinal Bancshares,Kentucky Area Bancshares Corp,Kentucky 05/02/97 60.26 47.50 45.00 46.00 26.9% 33.9% 31.0% SC Bancorp,Anaheim,California Western Bancorp,California 04/30/97 14.25 11.88 10.88 10.38 20.0% 31.0% 37.3% Haverfield Corp,Lakewood,Ohio Charter One Finl,Cleveland,OH 04/24/97 29.22 23.50 21.63 22.44 24.3% 35.1% 30.2% LIVE Entertainment Inc Investor Group 04/19/97 6.00 5.63 5.63 4.00 6.7% 6.7% 50.0% Drilex International Inc Baker Hughes Inc 04/18/97 17.58 13.38 12.75 11.00 31.4% 37.9% 59.8% Kurzweil Applied Intelligence Lernout & Hauspie Speech 04/16/97 5.52 3.00 3.25 3.31 84.0% 69.8% 66.6% Public Storage Properties XVI Public Storage Inc 04/10/97 20.01 18.88 19.00 19.50 6.0% 5.3% 2.6% Public Storage Properties XVII Public Storage Inc 04/10/97 18.62 18.75 18.63 19.13 (0.7)% 0.0% (2.6)% Public Storage Ppties XVIII Public Storage Inc 04/10/97 19.55 18.63 18.25 19.00 5.0% 7.1% 2.9% Selected Acquisitions Premiums Paid Analysis - $50 to $200 million (1) - -------------------------------------------------------------------------------- 1/1/97 to 1/29/98 Market Price Market Premium Acquisition Prior to Announcement Prior to Announcement Ann. Price ------------------------ ------------------------ Target Acquiror Date Per Share One Day One Week 30 Days One Day One Week 30 Days - -------------------------------- ------------------------------- ------ --------- ------- -------- ------- ------- -------- ------- Public Storage Properties XIX Public Storage Inc 04/10/97 16.52 15.75 16.00 16.00 4.9% 3.3% 3.3% BNH Bancshares,New Haven,CT Citizens Financial Group,RI 04/09/97 15.50 13.50 12.25 13.00 14.8% 26.5% 19.2% People's Savings Finl,CT Webster Finl Corp,Waterbury,CT 04/05/97 34.00 32.00 32.88 31.25 6.3% 3.4% 8.8% Peak Technologies Group Inc Moore Corp Ltd 04/01/97 18.00 8.63 9.13 10.88 108.7% 97.3% 65.5% Community Bankshares,NH CFX Corp,Keene,New Hampshire 03/25/97 40.41 24.75 24.63 26.13 63.3% 64.1% 54.7% American List Corp Snyder Communications Inc 03/20/97 26.25 22.38 20.50 24.13 17.3% 28.0% 8.8% American Bancorp of Nevada,NV First Security Bk of Nevada,NV 03/18/97 24.73 20.50 19.75 19.00 20.6% 25.2% 30.2% Bank Corp of Georgia,Macon,GA Century South Banks Inc,GA 03/18/97 24.94 20.00 20.50 18.75 24.7% 21.7% 33.0% First Citizens Financial,MD Provident Bankshares,Maryland 03/12/97 31.30 24.75 22.00 21.25 26.5% 42.3% 47.3% Crop Growers Corp Fireman's Fund Insurance Co 03/07/97 10.25 8.50 8.88 7.25 20.6% 15.5% 41.4% CU Bancorp,Encino,California Pacific Century Financial Corp 02/26/97 15.34 13.25 13.00 12.25 15.8% 18.0% 25.2% Zapata Corp Investor 02/18/97 5.50 4.50 4.38 4.38 22.2% 25.7% 25.7% New Iberia Bancorp,Louisiana Regions Finl,Birmingham,AL 02/15/97 20.70 21.00 20.75 19.75 (1.4)% (0.2)% 4.8% North Star Universal Inc Michael Foods Inc 02/14/97 7.03 8.75 8.63 8.00 (19.7)% (18.5)% (12.1)% Portsmouth Bank Shares,NH CFX Corp,Keene,New Hampshire 02/14/97 17.81 13.38 12.88 12.88 33.2% 38.3% 38.3% Serv-Tech Inc Philip Environmental Inc 02/12/97 6.60 5.00 4.13 3.50 32.0% 60.0% 88.6% ESELCO Inc Wisconsin Energy Corp 01/24/97 44.50 29.50 29.75 26.25 50.8% 49.6% 69.5% American Recreation Centers AMF Bowling Centers(AMF Group) 01/18/97 8.50 7.38 6.38 5.00 15.3% 33.3% 70.0% Central & Southern Holding,GA Premier BancShares,Atlanta,GA 01/16/97 13.54 11.75 11.75 9.75 15.2% 15.2% 38.9% ---------------------------------------------------- Mean 24.7% 28.5% 36.2% Median 20.3% 26.5% 31.4% ---------------------------------------------------- - ------------------------------- (1) Based on acquisitions between $50 million and $200 million, excluding technology and biotech deals. SUMMARY ANALYSIS OF PREMIUMS PAID ON RECENT BUYOUT OFFERS - -------------------------------------------------------------------------------- ANN. PRICE PRIOR OFFER IMPLIED DATE TO ANN. PRICE PREMIUM --------- ----------- --------- ----------- Sbarro Inc. (1) Jan-98 $ 26.63 $ 28.50 7.0% Davco Restaurants Inc. Oct-97 $ 13.38 $ 18.00 34.5% Ground Round Restaurants Sep-97 $ 1.50 $ 1.65 10.0% Perkins Family Restaurants Aug-97 $ 10.88 $ 13.00 19.5% NPC International Nov-96 $ 6.25 $ 9.00 44.0% AVERAGE MEDIAN ------------- -------------- 23.0% 19.5% Implied Value based on Price of $6.125 $ 7.53 $ 7.32 - ------------------------ Source: Securities Data Company (1) Transaction is still pending. Methodology 2 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ ANALYSIS OF COMPARABLE PUBLIC COMPANIES - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Summary Analysis of Selected Growth Restaurants with Recent Performance Issues - -------------------------------------------------------------------------------- ($ in millions, except per share data) COMP. COMPANY IMPLIED FERRARI IMPLIED FERRARI VALUE MULTIPLES (1) EQUITY VALUATION (2) PER FULLY DILUTED SHARE (4) ---------------------- --------------------- --------------------------- MEAN MEDIAN FERRARI MEAN MEDIAN MEAN MEAN --------- ----------- --------- --------- --------- --------- --------- Revenues 1997 1.3x 0.9x $ 136.7 $ 158.6 $ 105.4 $ 17.74 $ 11.79 EBITDA 1997 6.3x 6.3x $ 15.1 $ 81.0 $ 81.3 $ 9.06 $ 9.10 EBIT 1997 10.8x 10.0x $ 6.5 $ 56.2 $ 51.4 $ 6.29 $ 5.75 EPS 1997 17.1x 13.8x $ 0.39 59.4 48.2 $ 6.65 $ 5.39 1998E (3) 13.3x 11.7x $ 0.55 65.3 57.5 $ 7.30 $ 6.43 Realistic Valuation Range $ 6.00 - $ 10.00 - ------------------------ (1) Includes Growth Restaurants with Recent Performance Issues. (2) Net debt of $14.1 million is used to adjust from Aggregate Value to Equity Value. Net Debt calculated as Debt plus deferred liabilities plus minus cash. (3) Estimates based on equity research from NationsBanc Montgomery and other investment banks. (4) Assumes 8.9 million fully diluted shares outstanding as of 12/27/97. Valuation Analysis of Selected Comparable Publicly Traded Restaurant Companies - ------------------------------------------------------------------------------ Chng from 12 Month LTM (1) Ticker Stock Price Twelve Month -------------------- Company Ended Symbol 2/10/98 Price Range Low High --------------------------- ------- ------ ---------- ---------------------- ------- --------- Cheesecake Factory 9/28/97 CAKE $30.88 $17.50 -- $34.00 76.4% (9.2%) Growth CKE Restaurants, Inc. 11/3/97 CKR 43.75 16.70 -- 46.25 161.9% (5.4%) Restaurants Dave & Buster's 11/2/97 DANB 22.88 12.67 -- 27.63 80.5% (17.2%) Il Fornaio 9/28/97 ILFO 15.06 11.00 -- 17.00 36.9% (11.4%) Landry's Seafood Rest 9/30/97 LDRY 27.75 12.88 -- 34.38 115.5% (19.3%) Papa John's Int'l 9/28/97 PZZA 36.38 22.63 -- 39.50 60.8% (7.9%) PJ America 9/28/97 PJAM 17.75 12.13 -- 18.88 46.4% (6.0%) Starbucks Corp. 9/28/97 SBUX 36.81 26.13 -- 44.75 40.9% (17.7%) Total Entertainment 9/9/97 TENT 7.50 4.38 -- 11.50 71.4% (34.8%) ------ ------- Average 76.8% (14.3%) Median 71.4% (11.4%) High Growth Apple South 9/28/97 APSO $13.19 $10.50 -- $20.00 25.6% (34.1%) Restaurants Logan's Roadhouse 10/5/97 RDHS 19.38 13.75 -- 28.13 40.9% (31.1%) With Performance Lone Star Steakhouse 9/9/97 STAR 20.13 16.13 -- 29.63 24.8% (32.1%) Issues Outback Steakhouse 9/30/97 OSSI 33.50 17.88 -- 33.50 87.4% 0.0% Planet Hollywood 9/28/97 PHL 8.75 6.75 -- 27.25 29.6% (67.9%) Rainforest Cafe 9/28/97 RAIN 13.03 10.75 -- 25.42 21.2% (48.7%) ------ ------- Average 38.3% (35.6%) Median 27.6% (33.1%)% Growth Brinker Int'l 9/24/97 EAT $18.94 $10.75 -- $18.56 76.2% 2.0% Restaurants Consolidated Products 9/24/97 COP 16.88 11.19 -- 17.75 50.8% (4.9%) Cracker Barrel 10/31/97 CBRL 36.44 23.75 -- 36.75 53.4% (0.9%) Foodmaker 9/28/97 FM 17.63 9.00 -- 21.00 95.8% (16.1%) Friendly Ice Cream Corp. 9/28/97 FRND 17.25 11.00 -- 18.25 56.8% (5.5%) Host Marriott Services Corp. 9/12/97 HMS 14.06 8.75 -- 15.88 60.7% (11.4%) IHOP Corp. 9/30/97 IHOP 34.50 23.63 -- 37.38 46.0% (7.7%) McDonald's Corp. 9/30/97 MCD 50.00 42.13 -- 54.88 18.7% (8.9%) Morton's Rest. Group 9/28/97 MRG 21.38 15.00 -- 25.06 42.5% (14.7%) O'Charley's, Inc. 10/5/97 CHUX 17.88 12.00 -- 19.38 49.0% (7.7%) Showbiz Pizza Time 9/26/97 SHBZ 26.00 16.50 -- 27.38 57.6% (5.0%) Sonic 11/30/97 SONC 29.38 12.63 -- 30.50 132.7% (3.7%) Tricon Global Restaurants 9/6/97 YUM 28.44 25.06 -- 36.25 13.5% (21.6%) Wendy's Int'l 9/28/97 WEN 21.06 19.63 -- 27.94 7.3% (24.6%) ------ ------- Average 52.7% (10.2%) Median 50.8% (7.7%) Growth Applebee's 9/28/97 APPB $19.63 $16.13 -- $30.38 21.7% (35.4%) Restaurants Au Bon Pain 10/4/97 ABPCA 7.88 5.88 -- 10.25 34.0% (23.2%) With Bertucci's 12/31/97 BERT 6.13 5.13 -- 7.06 19.5% (13.3%) Recent Boston Chicken, Inc. 10/5/97 BOST 7.03 6.00 -- 35.25 17.2% (80.1%) Performance Buffets, Inc. 10/8/97 BOCB 9.63 6.38 -- 11.88 51.0% (18.9%) Issues Cooker Restaurant Corp. 9/28/97 CGR 9.25 8.19 -- 12.25 13.0% (24.5%) Darden Restaurants 11/23/97 DRI 13.13 6.75 -- 13.31 94.4% (1.4%) Einstein/Noah Bagel Corp. 10/5/97 ENBX 5.06 5.00 -- 29.00 1.3% (82.5%) NPC International 9/23/97 NPCI 9.88 9.00 -- 15.50 9.7% (36.3%) Pollo Tropical, Inc. 9/28/97 POYO 9.13 3.63 -- 9.50 151.7% (3.9%) Rock Bottom Restaurants 9/28/97 BREW 5.88 5.38 -- 12.00 9.3% (51.0%) Ryan's Family Stkhouse 10/1/97 RYAN 8.44 7.19 -- 9.56 17.4% (11.8%) Sbarro, Inc. 10/5/97 SBA 29.31 25.13 -- 30.00 16.7% (2.3%) Taco Cabana 9/28/97 TACO 5.56 3.75 -- 6.00 48.3% (7.3%) Uno Restaurant Corp. 9/28/97 UNO 6.31 5.81 -- 7.50 8.6% (15.8%) ------ ------- Average 34.3% (27.2%) Median 17.4% (18.9%) Calendar EPS (2) Calendar P/E Multiples ----------------------- Secular ----------------------- 97 PE% of 98 PE% of Company 1996A 1997E 1998E Grth. Rate 1996A 1997E 1998E Grth. Rate Grth. Rate ----------------------- ------ ----- ----- ---------- ------- ------- ------ ---------- ---------- Growth Cheesecake Factory $0.53 $0.87 $1.10 28% 58.3 x 35.5 x 28.1 x 129.0% 102.1% Restaurants CKE Restaurants, Inc. 0.66 1.04 1.50 31% 65.9 x 42.1 x 29.2 x 136.2% 94.5% Dave & Buster's 0.58 0.75 1.03 30% 39.4 x 30.5 x 22.3 x 101.7% 74.4% Il Fornaio 0.32 0.44 0.55 25% 47.1 x 34.2 x 27.4 x 136.9% 109.5% Landry's Seafood Rest 0.76 1.02 1.30 30% 36.5 x 27.2 x 21.3 x 90.7% 71.2% Papa John's Int'l 0.66 0.93 1.20 30% 55.1 x 39.1 x 30.3 x 130.4% 101.0% PJ America 0.57 0.70 0.82 25% 31.1 x 25.4 x 21.6 x 101.4% 86.6% Starbucks Corp. 0.52 0.77 1.04 40% 70.8 x 47.8 x 35.4 x 119.5% 88.5% Total Entertainment 0.10 0.12 0.29 60% 75.0 x 62.5 x 25.9 x 104.2% 43.1% ------ ------ ------ ------ ------ ------- Average 33% 53.3 x 38.3 x 26.8 x 116.7% 85.6% Median 30% 55.1 x 35.5 x 27.4 x 119.5% 88.5% High Growth Restaurants Apple South $0.75 $0.79 $0.89 27% 17.6 x 16.7 x 14.8 x 62.7% 55.7% With Performance Logan's Roadhouse 0.71 0.99 1.27 28% 27.3 x 19.6 x 15.3 x 71.2% 55.5% Issues Lone Star Steakhouse 1.63 1.65 1.70 25% 12.3 x 12.2 x 11.8 x 48.8% 47.4% Outback Steakhouse 1.45 1.61 1.93 22% 23.1 x 20.8 x 17.4 x 93.0% 77.6% Planet Hollywood 0.47 0.48 0.43 15% 18.6 x 18.2 x 20.3 x 121.5% 135.7% Rainforest Cafe 0.27 0.51 0.77 40% 47.7 x 25.4 x 17.0 x 63.5% 42.5% ------ ------ ------ ------ ------ ------- Average 26% 24.4 x 18.8 x 16.1 x 76.8% 69.0% Median 26% 20.9 x 18.9 x 16.1 x 67.3% 55.6% Growth Restaurants Brinker Int'l $0.77 $0.90 $1.11 18% 24.6 x 21.0 x 17.1 x 116.9% 94.8% Consolidated Products 0.70 0.83 0.98 20% 24.2 x 20.3 x 17.2 x 101.4% 86.1% Cracker Barrel 1.23 1.52 1.82 18% 29.6 x 24.0 x 20.0 x 133.2% 111.2% Foodmaker 0.54 0.92 1.07 20% 32.6 x 19.2 x 16.5 x 95.8% 82.4% Friendly Ice Cream Corp. (3.07) (1.13) 1.24 35% NM NM 13.9 x NM 39.7% Host Marriott Services Corp. 0.40 0.58 0.69 25% 35.2 x 24.2 x 20.4 x 97.0% 81.5% IHOP Corp. 1.95 2.16 2.51 16% 17.7 x 16.0 x 13.7 x 99.8% 85.9% McDonald's Corp. 2.21 2.35 2.55 12% 22.6 x 21.3 x 19.6 x 177.3% 163.4% Morton's Rest. Group 0.97 1.25 1.50 20% 22.0 x 17.1 x 14.3 x 85.5% 71.3% O'Charley's, Inc. 0.75 0.97 1.11 20% 23.8 x 18.4 x 16.1 x 92.1% 80.5% Showbiz Pizza Time 0.70 1.31 1.61 21% 37.1 x 19.8 x 16.1 x 96.6% 78.6% Sonic 1.28 1.47 1.71 18% 22.9 x 20.0 x 17.2 x 111.0% 95.4% Tricon Global Restaurants 0.85 (0.54) 2.05 13% 33.5 x NM 13.9 x NM 111.0% Wendy's Int'l 1.19 1.30 1.45 14% 17.7 x 16.2 x 14.5 x 115.7% 103.8% ------ ------ ------ ------ ------ ------- Average 19% 26.6 x 19.7 x 16.4 x 109.6% 91.6% Median 20% 24.0 x 19.8 x 16.1 x 99.8% 85.9% Growth Restaurants Applebee's $1.27 $1.42 $1.75 22% 15.5 x 13.8 x 11.2 x 62.9% 51.0% With Au Bon Pain (0.05) 0.19 0.34 18% NM 41.4 x 23.2 x 236.8% 132.4% Recent Bertucci's 0.36 0.39 0.55 15% 17.0 x 15.7 x 11.1 x 104.7% 74.2% Performance Boston Chicken, Inc. 1.01 0.85 (0.82) 18% 7.0 x 8.3 x NM 46.0% NM Issues Buffets, Inc. 0.56 0.63 0.77 17% 17.2 x 15.3 x 12.5 x 90.9% 74.4% Cooker Restaurant Corp. 0.72 0.74 0.89 20% 12.8 x 12.5 x 10.4 x 62.5% 52.0% Darden Restaurants 0.50 0.50 0.70 12% 26.3 x 26.3 x 18.8 x 222.8% 159.2% Einstein/Noah Bagel Corp. 0.25 0.50 (0.34) 31% 20.3 x 10.1 x NM 33.1% NM NPC International 0.72 0.73 0.94 20% 13.7 x 13.5 x 10.5 x 69.4% 53.9% Pollo Tropical, Inc. 0.24 0.64 0.75 18% 38.0 x 14.3 x 12.2 x 81.5% 69.5% Rock Bottom Restaurants 0.52 0.56 0.65 18% 11.3 x 10.5 x 9.0 x 59.9% 51.6% Ryan's Family Stkhouse 0.71 0.82 0.89 12% 11.9 x 10.3 x 9.5 x 83.5% 76.9% Sbarro, Inc. 1.84 1.90 2.08 13% 15.9 x 15.4 x 14.1 x 123.4% 113.0% Taco Cabana 0.30 0.16 0.33 18% 18.5 x 34.8 x 16.9 x 195.9% 95.0% Uno Restaurant Corp. 0.19 0.46 N/A 15% 33.2 x 13.6 x NM 90.8% NM ------ ------ ------ ------ ------ ------- Average 18% 18.5 x 17.1 x 13.3 x 104.3% 83.6% Median 18% 16.5 x 13.8 x 11.7 x 83.5% 74.3% - -------------------------------------------------------------------------------------------------------------------------------- Overall Average 22.6 x 17.8 x 104.7% 84.7% Overall Median 19.7 x 16.9 x 98.4% 81.5% - -------------------------------------------------------------------------------------------------------------------------------- Calculation Analysis of Selected Comparable Publicly Traded Restaurant Companies - ------------------------------------------------------------------------------- AGGREGATE VALUE/LTM SHARES O/S MKT. CAP AGGREGATE BOOK VALUE PRICE TO DEBT / ----------------- COMPANY (MM) ($MM) VALUE PER SHARE BOOK CAPITAL REVENUES EBIT ------------------------- ---------- -------- --------- ---------- -------- ------- -------- ------ High Cheesecake Factory 13.0 $ 400.2 $ 351.0 $ 10.96 2.8x 0.0% 1.8x 30.4x Growth CKE Restaurants, Inc. 46.2 2,020.9 2,178.2 10.21 4.3x 29.3% 2.2x 30.4x Restaurants Dave & Buster's 13.0 297.8 280.2 9.97 2.3x 12.2% 2.4x 21.7x Il Fornaio 5.8 87.5 74.4 5.88 2.6x 0.0% 1.1x 18.0x Landry's Seafood Rest. 25.9 718.4 712.0 11.15 2.5x 5.1% 2.5x 18.4x Papa John's Int'l 29.0 1,056.2 980.8 7.00 5.2x 0.7% 2.1x 27.6x PJ America 5.8 102.6 95.3 6.17 2.9x 0.0% 2.7x 25.8x Starbucks Corp. 86.3 3,175.6 3,214.8 6.17 6.0x 26.6% 3.3x 36.4x Total Entertainment (2) 10.4 78.1 69.6 2.01 3.7x 0.0% 4.1x 37.3x ----- ----- Average 3.6x 8.2% 2.5x 27.3x Median 2.9x 0 7% 2.4x 27.6x High Growth Apple South (3) 38.8 $ 511.2 $ 975.7 $ 5.66 2.3x 68.0% 1.3x 12.7x Restaurants Logan's Roadhouse 7.1 138.3 110.7 9.77 2.0x 0.0% 1.8x 12.6x With Lone Star Steakhouse 41.1 827.0 676.3 13.47 1.5x 0.0% 1.2x 5.9x Performance Outback Steakhouse 47.8 1,602.1 1,671.2 8.12 4.1x 18.3% 1.5x 12.1x Issues Planet Hollywood 108.8 951.8 984.4 3.54 2.5x 11.7% 2.1x 9.8x Rainforest Cafe 26.2 341.0 212.2 8.27 1.6x 0.0% 2.3x 21.1x ----- ----- Average 2.3x 16.3% 1.7x 12.4x Median 2.2x 5.9% 1.7x 12.4x Growth Brinker Int'l 65.4 1,238.6 1,473.9 8.27 2.3x 33.0% 1.1x 14.7x Restaurants Consolidated Products 20.8 $ 350.2 $ 384.3 $ 4.48 3.8x 28.3% 1.4x 13.2x Cracker Barrel 61.5 2,240.8 2,239.8 11.27 3.2x 8.8% 1.9x 15.4x Foodmaker 39.1 689.9 1,009.0 2.25 7.9x 79.8% 0.9x 11.8x Friendly Ice Cream Corp. (2) 7.1 123.0 417.5 NM NM NM 0.6x 10.4x Host Marriott Services Corp. 34.6 486.6 812.7 NM NM NM 0.6x 12.1x IHOP Corp. 9.7 333.7 477.2 15.36 2.2x 52.1% 2.3x 7.5x McDonald's Corp. 688.8 34,438.9 40,219.2 13.31 3.8x 39.9% 3.6x 14.7x Morton's Rest. Group 6.5 139.8 164.8 4.02 5.3x 50.9% 0.9x 12.8x O'Charley's, Inc. 10.2 181.9 207.7 9.12 2.0x 22.9% 1.1x 13.2x Showbiz Pizza Time 18.7 485.5 494.7 8.74 3.0x 15.6% 1.5x 12.6x Sonic 12.8 374.8 417.2 9.70 3.0x 27.3% 2.2x 12.4x Tricon Global Restaurants 151.8 4,316.1 8,940.1 NM NM NM 1.0x 12.7x Wendy's Int'l 132.2 2,783.7 3,007.6 9.11 2.3x 27.4% 1.5x 10.2x ----- ----- Average 3.6x 35.3% 1.5x 12.2x Median 3.1x 27.9% 1.4x 12.6x Growth Applebee's 31.5 $617.7 $ 635.0 $ 8.99 2.2x 9.3% 1.3x 9.1x Restaurants Au Bon Pain 11.8 92.9 170.0 7.76 1.0x 46.9% 0.7x 10.2x With Bertucci's 8.9 54.7 68.8 7.99 0.8x 22.0% 0.5x 10.6x Recent Boston Chicken, Inc. 71.4 501.9 1,124.1 15.05 0.5x 40.6% 2.7x 8.6x Performance Buffets, Inc. 45.4 436.7 444.6 5.75 1.7x 15.3% 0.6x 10.0x Issues Cooker Restaurant Corp. 10.0 92.7 128.2 8.64 1.1x 30.4% 1.0x 9.7x Darden Restaurants 148.6 1,949.9 2,301.5 7.17 1.8x 26.0% 0.7x 16.2x Einstein/Noah Bagel Corp. 33.2 168.2 262.7 10.33 0.5x 26.7% 4.8x 8.9x NPC International 24.7 244.1 456.3 4.32 2.3x 66.9% 1.2x 11.6x Pollo Tropical, Inc. 8.2 74.6 77.8 3.44 2.7x 12.0% 1.2x 10.0x Rock Bottom Restaurants 8.1 47.7 76.9 8.04 0.7x 31.3% 0.5x 11.3x Ryan's Family Stkhouse 47.2 398.5 521.9 6.58 1.3x 28.5% 0.9x 9.5x Sbarro, Inc. 20.4 599.2 496.9 10.45 2.8x 0.0% 1.5x 8.3x Taco Cabana 14.8 82.5 100.8 7.52 0.7x 14.2% 0.8x 17.1x Uno Restaurant Corp. 11.0 69.2 114.2 6.46 1.0x 39.6% 0.6x 10.5x ----- ----- Average 1.4x 27.3% 1.3x 10.8x Median 1.1x 26.7% 0.9x 10.0x ---------------- ----- ------- ------ ----- ---- ----- ----- ----- Overall Average 1.6x 14.9x Overall Median 1.4x 12.5x ---------------- ----- ------- ------ ----- ---- ----- ----- ----- LTM MARGINS NUMBER OF UNITS (1) % UNIT GROWTH -------------------- -------------------- ----------------- EBITDA EBIT PRETAX NET 1996 1997E 1998E '96-'97 '97-'98 ------ ----- ------ ---- ---- ------ ------ ------- ------- High 15.1x 6.0% 6.0% 3.9% 17 23 30 35.3% 30.4% Growth 19.0x 7.2% 6.8% 4.1% 661 673 698 1.8% 3.7% Restaurants 11.9x 11.1% 10.5% 6.4% 9 13 18 44.4% 38.5% 9.4x 6.0% 6.3% 3.8% 12 15 17 25.0% 13.3% 13.2x 13.4% 14.1% 9.1% 76 111 151 46.1% 36.0% 18.1x 7.6% 8.4% 5.3% 1,156 1,491 1,836 29.0% 23.1% 20.3x 10.3% 12.1% 8.9% 46 61 93 32.6% 52.5% 22.0x 9.1% 9.7% 5.9% 1,006 1,364 1,643 35.6% 20.5% 23.0x 11.0% 7.0% 4.4% 11 16 36 45.5% 125.0% ----- ----- ----- ---- ----- ----- ----- ----- ------ 16.9x 9.1% 9.0% 5.7% 333 419 502 32.8% 38.1% 18.1x 9.1% 8.4% 5.3% 46 61 93 35.3% 30.4% High Growth 8.7x 10.5% 7.1% 4.7% 340 395 494 16.2% 25.1% Restaurants 9.2x 14.4% 15.5% 10.1% 17 27 43 58.8% 59.3% With 4.7x 20.3% 21.0% 13.7% 232 308 387 32.8% 25.6% Performance 9.2x 12.6% 13.2% 6.9% 421 518 628 23.0% 21.2% Issues 7.4x 21.2% 22.3% 14.0% 58 88 108 51.7% 22.7% 10.5x 10.7% 20.3% 13.0% 6 16 30 166.7% 87.5% ----- ----- ----- ---- ----- ----- ----- ----- ------ 8.3x 15.0% 16.6% 10.4% 179 225 282 58.2% 40.2% 9.0x 13.5% 17.9% 11.5% 145 198 248 42.2% 25.4% Growth 8.1x 7.2% 6.5% 4.3% 468 557 623 19.0% 11.8% Restaurants 8.9x 10.9% 9.5% 6.0% 219 261 311 19.2% 19.2% 12.3x 12.3% 12.3% 7.8% 257 307 362 19.5% 17.9% 8.2x 8.0% 4.2% 3.3% 1,270 1,289 1,389 1.5% 7.8% 5.8x 6.0% 1.2% 0.7% 707 696 727 (1.6%) 4.5% 6.6x 5.2% 2.4% 1.6% N/A N/A N/A N/A N/A 6.5x 30.8% 15.9% 9.7% 729 N/A N/A N/A N/A 11.6x 24.2% 20.8% 14.6% 21,022 23,622 26,370 12.4% 11.6% 8.2x 7.3% 5.9% 3.9% 67 47 57 (29.9%) 21.3% 8.2x 8.3% 6.5% 3.9% 69 82 97 18.8% 18.3% 7.6x 11.8% 11.3% 6.7% 314 N/A N/A N/A N/A 8.9x 17.4% 16.4% 10.3% 1,587 1,689 N/A 6.4% N/A 7.0x 7.5% 4.0% 2.2% 29,096 N/A N/A N/A N/A 7.7x 14.6% 14.1% 8.7% 4,933 5,247 5,767 6.4% 9.9% ----- ----- ----- ---- ----- ----- ----- ----- ------ 8.3x 12.6% 9.6% 6.1% 5,023 3,693 4,385 5.9% 13.8% 8.2x 10.9% 9.5% 6.0% 718 696 545 6.4% 14.8% Growth 6.9x 14.3% 14.6% 9.1% 853 1,058 1,228 24.0% 16.1% Restaurants 5.0x 6.7% 0.1% NM 291 356 N/A 22.3% N/A With 4.5x 4.8% 4.0% 2.6% 90 85 N/A (5.6%) N/A Recent 6.6x 31.0% 32.8% 17.5% 1,087 1,400 1,400 28.8% 0.0% Performance 5.3x 5.6% 5.3% 3.3% 278 318 N/A 14.4% N/A Issues 6.6x 10.3% 9.4% 6.1% 47 59 71 25.5% 20.3% 8.3x 4.5% 3.5% 2.1% 1,217 N/A N/A N/A N/A 7.4x 53.7% 50.0% 37.3% 314 635 835 102.2% 31.5% 7.3x 10.6% 8.0% 5.1% 547 599 636 9.5% 6.2% 8.2x 11.9% 10.9% 6.9% 43 53 N/A 23.3% N/A 4.3x 4.8% 4.2% 3.1% 49 63 69 28.6% 9.5% 6.3x 9.2% 8.3% 5.3% 250 269 271 7.6% 0.7% 5.9x 17.6% 18.2% 11.3% 816 862 947 5.6% 9.9% 6.3x 4.5% 3.7% 2.5% 126 143 N/A 13.5% N/A 4.9x 6.1% 4.5% 3.0% 158 176 N/A 11.4% N/A ----- ----- ----- ---- ----- ----- ----- ----- ------ 6.3x 13.0% 11.8% 8.2% 411 434 682 22.2% 11.8% 6.3x 9.2% 8.0% 5.2% 278 294 736 18.4% 9.7% ----- ----- ----- ---- ----- ----- ----- ----- ------ Overall Average 9.3x 26.3% 25.0% Overall Median 8.1x 22.3% 19.7% ----- ----- ----- ---- ----- ----- ----- ----- ------ - ------------------------ All data excludes restructuring charges, effects of changes in accounting principles and other non-recurring charges. (1) Includes Company and Franchised Restaurants. (2) All data is pro forma for the IPO. (3) Units for APSO exclude Tomato Rumba's and Hardee's. Summary Analysis of Selected Comparable Companies - ------------------------------------------------------------------------------ ($ in millions, except per share data) IMPLIED FERRARI VALUE COMP. COMPANY IMPLIED FERRARI PER FULLY DILUTED MULTIPLES EQUITY VALUATION (1) SHARE (2) ---------------------- ---------------------- -------------------- MEAN MEDIAN FERRARI MEAN MEDIAN MEAN MEDIAN --------- ----------- ----------- --------- ----------- --------- --------- Revenues 1997 0.8x 0.7x $136.7 $99.6 $76.5 $11.15 $8.56 EBITDA 1997 5.0x 5.0x $15.1 $62.3 $61.0 $6.97 $6.82 EBIT 1997 10.1x 10.4x $6.5 $51.7 $53.5 $5.78 $5.99 EPS 1997 20.2x 14.5x $0.39 $70.6 $50.6 $7.90 $5.66 1998E (3) 15.4x 14.1x $0.55 $75.9 $69.5 $8.49 $7.77 ------------------------------------------------------------------ Realistic Valuation Range $5.99 - $8.56 ------------------------------------------------------------------ Selected Comparable Companies Include: Au Bon Pain -Geographically concentrated in the Northeast; Recent performance problems. Rock Bottom Restaurants -Old Chicago Pizzeria represents similar casual-dining segment. Sbarro, Inc. -Italian segment; Recently announced a "going-private" transaction. Uno Restaurant Corp. -Similar casual-dining pizzeria concept; Limited growth potential. - ------------------------ (1) Net debt of $14.1 million is used to adjust from Aggregate Value to Equity Value. Net debt calculated as debt plus deferred liabilities minus cash. (2) Assumes 8.9 million fully diluted shares outstanding as of 12/27/97. (3) Estimates based on equity research from NationsBanc Montgomery and other investment banks. - ------------------------------------------------------------------------------- STOCK CHNG FROM 12 MONTH CALENDAR EPS (2) LTM (1) TICKER PRICE TWELVE MONTH ------------------ ------------------------- COMPANY ENDED SYMBOL 2/10/98 PRICE RANGE LOW HIGH 1996A 1997E 1998E - ------------------------- ------- ------- ------- ------------- ------- -------- ------- ------- ------- Au Bon Pain 10/4/97 ABPCA 7.88 5.88--10.25 34.0% (23.2%) (0.05) 0.19 0.34 Rock Bottom Restaurants 9/28/97 BREW 5.88 5.38--12.00 9.3% (51.0%) 0.52 0.56 0.65 Sbarro, Inc. 10/5/97 SBA 29.31 25.13--30.00 16.7% (2.3%) 1.84 1.90 2.08 Uno Restaurant Corp. 9/28/97 UNO 6.31 5.81--7.50 8.6% (15.8%) 0.19 0.46 N/ A ------ ------- Average 17.2% (23.1%) Median 13.0% (19.5%) SECULAR CALENDAR P/E MULTIPLES GRTH. ------------------------ 97 PE % OF 98 PE % OF COMPANY RATE 1996A 1997E 1998E GRTH. RATE GRTH. RATE - --------------------------- ------- ------- ------- ------- ----------- ----------- Au Bon Pain 18% NM 41.4x 23.2x 236.8% 132.4% Rock Bottom Restaurants 18% 11.3x 10.5x 9.0x 59.9% 51.6% Sbarro, Inc. 13% 15.9x 15.4x 14.1x 123.4% 113.0% Uno Restaurant Corp. 15% 33.2x 13.6x NM 90.8% NM --- ----- ----- ----- ------- ----- Average 16% 20.2x 20.2x 15.4x 127.8% 99.0% Median 16% 15.9x 14.5x 14.1x 107.1% 113.0% BOOK PRICE AGGREGATE VALUE/LTM SHARES O/S MKT. CAP AGGREGATE VALUE TO DEBT / ------------------------ COMPANY (MM) ($MM) VALUE PER SHARE BOOK CAPITAL REVENUES EBIT EBITDA - ------------------------- ---------- --------- --------- --------- ------ --------- -------- ----- ------ Au Bon Pain 11.8 92.9 170.0 7.76 1.0x 46.9% 0.7x 10.2x 5.0x Rock Bottom Restaurants 8.1 47.7 76.9 8.04 0.7x 31.3% 0.5x 11.3x 4.3x Sbarro, Inc. 20.4 599.2 496.9 10.45 2.8x 0.0% 1.5x 8.3x 5.9x Uno Restaurant Corp. 11.0 69.2 114.2 6.46 1.0x 39.6% 0.6x 10.5x 4.9x ----- ----- ---- Average 1.4x 29.5% 0.8x 10.1x 5.0x Median 1.0x 35.5% 0.7x 10.4x 5.0x LTM MARGINS NUMBER OF UNITS(3) % UNIT GROWTH ------------------------ ---------------------- -------------------- COMPANY EBIT PRETAX NET 1996 1997E 1998E '96-'97 '97-'98 - ------------------------ ----- -------- ------ ------ ------- ------- --------- --------- Au Bon Pain 6.7% 0.1% NM 291 356 N/A 22.3% N/A Rock Bottom Restaurants 4.8% 4.2% 3.1% 49 63 69 28.6% 9.5% Sbarro, Inc. 17.6% 18.2% 11.3% 816 862 947 5.6% 9.9% Uno Restaurant Corp. 6.1% 4.5% 3.0% 158 176 N/A 11.4% N/A ------ ----- ----- --- --- --- ----- ----- Average 8.8% 6.7% 5.8% 329 364 508 17.0% 9.7% Median 6.4% 4.4% 3.1% 225 266 508 16.9% 9.7% - ------------------------ All data excludes restructuring charges, effects of changes in accounting principles and other non-recurring charges. (1) All balance sheet and margin information applies to the period ended as of these dates. (2) Earnings estimates are from NationsBanc Montgomery Research, First Call and other sources. (3) Includes Company and Franchised Restaurants. Methodology 3 - ------------------------------------------------------------------------------- ANALYSIS OF COMPARABLE M&A TRANSACTIONS - ------------------------------------------------------------------------------- Selected Restaurant Merger & Acquisition Transactions ($ in millions, except per share data) IMPLIED FERRARI EQUITY TRANSACTION MULTIPLES IMPLIED FERRARI VALUE PER EQUITY VALUATION SHARE (2) ------------------------ ---------------------- --------------------- MEAN MEDIAN FERRARI MEAN MEDIAN MEAN MEDIAN --------- ------------- ----------- --------- ----------- --------- --------- Aggregate Value to: 1997 Revenues (1) 0.6x -- 0.6x $136.7 $72.3 $72.5 $8.09 -- $8.11 1997 EBITDA (1) 5.1x -- 5.7x $15.1 $63.0 $72.8 $7.05 -- $8.15 Equity Value to: 1997 Net Income 19.5x -- 17.7x $3.5 $68.4 $62.1 $7.65 -- $6.94 -------------------------------------------------- Indicated Valuation Range $6.94 -- $8.15 -------------------------------------------------- - ------------------------ Source: Securites Data Company and public filings. (1) Net debt of $14.1 million is used to adjust from Aggregate Value to Equity Value. Net debt calculated as debt plus deferred liabilities minus cash. (2) Assumes 8.9 million fully diluted shares outstanding as of 12/27/97. Selected Restaurant Merger & Acquisition Transactions - -------------------------------------------------------------------------------- ($ in millions) Equity/ Ann. Aggregate LTM Target Information --------------------------------------- Date Target/Acquiror Value (1) Revs EBITDA Net Inc Bk Val - ------------ ------------------------------------ ---------------- -------- -------- --------- --------- Dec-97 Apple South Inc./ $93.4 $733.0 $111.8 $34.7 $219.4 Applebee's International Inc. $93.4 Dec-97 Timber Lodge Steakhouse Inc./ $30.4 $24.3 $2.9 $1.0 $10.8 GB Foods Corp. $31.0 Oct-97 International Dairy Queen/ $585.0 $421.1 $59.7 $38.1 $195.3 Berkshire Hathaway, Inc. $585.0 Sep-97 Sagebrush Inc./ $38.4 $47.5 $6.1 $2.6 $18.7 WSMP Inc. $40.4 Sep-97 El Chico Restaurants Inc./ $49.0 $104.6 $10.3 $2.8 $29.2 Cracken Harkey & Co. $59.1 Sep-97 Checkers Drive-In Restaurants/ $22.3 $155.8 ($39.5) ($54.9) $53.1 Rally's Hamburgers Inc. $22.3 Sep-97 DavCo Restaurants Inc./ $133.6 $215.2 $16.7 $3.3 $47.1 Investor Group $212.5 Sep-97 Quality Dining Inc./ $49.0 $57.1 ($205.1) ($211.5) $30.5 Bruegger's Corp. $59.0 Sep-97 Ground Round Restaurants/ $14.5 $195.5 ($3.1) ($17.6) $36.7 GRR Holdings LLC (Boston Ventures) $14.5 Aug-97 Perkins Family Restaurant LP/ $76.3 $257.4 $34.0 $14.1 $61.2 Restaurant Co. $144.6 May-97 DAKA International Inc./ $189.6 $403.0 $13.7 ($11.9) $82.9 Compass Group PLC $194.0 Apr-97 Hardee's Food Systems Inc./ $222.9 $786.4 $19.5 ($30.2) $315.0 CKE Restaurants Inc. $327.0 Apr-97 Planet Hollywood International/ $200.0 $349.2 $87.7 $36.1 $375.9 Investor $200.0 Mar-97 Rally's Hamburgers Inc./ $111.8 $174.7 ($9.6) ($28.3) $119.6 Checkers Drive-In Restaurants $182.0 Aggregate Value as Equity Value as Ann. a Multiple of : a Multiple of : ----------------------------- --------------- Date Target/Acquiror Revs EBITDA Net Inc - ------------ ---------------------------------- ------------- ------------- --------------- Dec-97 Apple South Inc./ 0.1x 0.8x 2.7x Applebee's International Inc. Dec-97 Timber Lodge Steakhouse Inc./ 1.3x 10.6x 29.5x GB Foods Corp. Oct-97 International Dairy Queen/ 1.4x 9.8x 15.3x Berkshire Hathaway, Inc. Sep-97 Sagebrush Inc./ 0.9x 6.6x 14.8x WSMP Inc. Aggregate Value as Equity Value as Ann. a Multiple of : a Multiple of : ----------------------------- --------------- Date Target/Acquiror Revs EBITDA Net Inc - ------------ ---------------------------------- ------------- ------------- --------------- Sep-97 El Chico Restaurants Inc./ 0.6x 5.7x 17.5x Cracken Harkey & Co. Sep-97 Checkers Drive-In Restaurants/ 0.1x N/A N/A Rally's Hamburgers Inc. Sep-97 DavCo Restaurants Inc./ 0.9x 11.7x 33.4x Investor Group Sep-97 Quality Dining Inc./ 1.0x NA NA Bruegger's Corp. Sep-97 Ground Round Restaurants/ 0.3x N/A N/A GRR Holdings LLC (Boston Ventures) Aug-97 Perkins Family Restaurant LP/ 0.6x 4.3x 5.4x Restaurant Co. May-97 DAKA International Inc./ 0.5x 14.2x N/M Compass Group PLC Apr-97 Hardee's Food Systems Inc./ 0.4x 16.7x N/A CKE Restaurants Inc. Apr-97 Planet Hollywood International/ 0.6x 2.3x 5.5x Investor Mar-97 Rally's Hamburgers Inc./ 1.0x N/A N/A Checkers Drive-In Restaurants Selected Restaurant Merger & Acquisition Transactions - -------------------------------------------------------------------------------- ($ in millions) Equity/ Ann. Aggregate LTM Target Information --------------------------------------- Date Target/Acquiror Value (1) Revs EBITDA Net Inc Bk Val - ------------ ------------------------------------ ---------------- -------- -------- --------- --------- Feb-97 Hops Grill & Bar/ $57.0 $45.0 $5.0 N/A N/A Apple South, Inc. $57.0 Feb-97 McCormick & Schmick's/ $52.0 $67.2 $6.8 N/A N/A Apple South, Inc. $67.0 Jan-97 Checkers-Drive-In Restaurants/ N/A $160.7 ($31.9) ($51.3) $115.4 CKE Restaurants, Inc. Aug-96 Casa Bonita Inc./ $42.0 $81.4 $10.3 $2.3 $14.1 CKE Restaurants Inc. $42.0 Jun-96 Bugaboo Creek Steakhouse/ $48.5 $46.3 $6.0 $2.0 $24.5 Longhorn Steaks, Inc. $56.6 Jun-96 HomeTown Buffet/ $175.2 $246.2 $35.3 $6.9 $74.0 Buffets, Inc. $216.7 Apr-96 Bayport Restaurant Group/ $45.0 $53.6 $4.8 N/A $22.9 Landry's $75.0 Feb-96 Bruegger's Bagel Bakery/ $112.9 N/A ($2.2) N/A ($8.1) Quality Dining $112.9 Dec-95 Summit Family Restaurants/ $34.5 $121.1 $1.5 ($6.1) ($5.1) CKE Restaurants Inc. $42.5 Oct-95 Champps Entertainment, Inc./ $65.9 $12.5 $1.2 $0.4 N/A DAKA International $64.1 Oct-95 Brinker Intl. (Grady's and Spaggedies)/ $70.0 $91.6 $10.6 $3.5 $58.2 Quality Dining, Inc. $70.0 Sep-95 TPI Enterprises/ $106.0 $280.4 $17.6 ($6.2) $65.6 Shoney's $160.1 Aug-95 DF&R Restaurants/ $208.0 $91.6 $15.1 $6.7 $58.4 Apple South $196.6 May-95 Marcus Corp. (Applebee's Division)/ $48.0 $35.6 $4.1 N/A N/A Aggregate Value as Equity Value as Ann. a Multiple of : a Multiple of : ----------------------------- --------------- Date Target/Acquiror Revs EBITDA Net Inc - ------------ ---------------------------------- ------------- ------------- --------------- Feb-97 Hops Grill & Bar/ N/A 11.4x N/A Apple South, Inc. Feb-97 McCormick & Schmick's/ N/A 9.9x N/A Apple South, Inc. Jan-97 Checkers-Drive-In Restaurants/ N/A N/A N/A CKE Restaurants, Inc. Aug-96 Casa Bonita Inc./ 0.5x 4.1x N/A CKE Restaurants Inc. Jun-96 Bugaboo Creek Steakhouse/ 1.2x 9.4x 24.4x Longhorn Steaks, Inc. Aggregate Value as Equity Value as Ann. a Multiple of : a Multiple of : ----------------------------- --------------- Date Target/Acquiror Revs EBITDA Net Inc - ------------ ---------------------------------- ------------- ------------- --------------- Jun-96 HomeTown Buffet/ 0.9x 6.1x 25.3x Buffets, Inc. Apr-96 Bayport Restaurant Group/ 1.4x 15.5x N/A Landry's Feb-96 Bruegger's Bagel Bakery/ N/A N/A N/A Quality Dining Dec-95 Summit Family Restaurants/ 0.4x 27.8x NM CKE Restaurants Inc. Oct-95 Champps Entertainment, Inc./ 5.1x N/A N/M DAKA International Oct-95 Brinker Intl. (Grady's and Spaggedies)/ 0.8x 6.6x 20.1x Quality Dining, Inc. Sep-95 TPI Enterprises/ 0.6x 9.1x -17.1x Shoney's Aug-95 DF&R Restaurants/ 2.1x 13.0x 31.2x Apple South May-95 Marcus Corp. (Applebee's Division)/ 1.3x 11.8x N/A Selected Restaurant Merger & Acquisition Transactions - -------------------------------------------------------------------------------- ($ in millions) Equity/ Ann. Aggregate LTM Target Information --------------------------------------- Date Target/Acquiror Value (1) Revs EBITDA Net Inc Bk Val - ------------ ------------------------------------ ---------------- -------- -------- --------- --------- Apple South $48.0 Oct-94 Innovative Restaurant Concepts/ $53.2 $51.9 N/A $2.0 $10.6 Applebee's $65.2 Sep-94 Pub Ventures of New England/ $57.8 $32.0 $6.5 $2.4 $4.7 Applebee's $61.2 Jan-94 On The Border Cafes/ $30.4 $27.6 $2.4 $0.8 $6.9 Brinker International $32.1 Nov-93 St. Louis Bread Co./ $24.0 $17.8 $1.8 $1.3 N/A Au Bon Pain Co., Inc. $27.5 May-93 Chevy's/ $130.0 $84.0 $5.6 $2.0 $12.5 PepsiCo, Inc. $126.0 May-93 NRH Corp (Tony Roma's)/ $20.0 $46.3 $5.5 $1.1 $6.5 National Pizza Co. $27.3 May-93 Foodmaker Inc. (Chi Chi's)/ $270.0 $359.9 $45.0 $10.8 N/A Investor Group $270.0 Feb-93 Minnesota Franchisee/ $20.9 $24.4 $2.5 $1.1 $6.0 Applebee's $23.4 Jan-93 Two Pesos-Mexican Restaurant/ $21.4 $41.6 $0.1 ($3.2) $4.8 Taco Cabana, Inc. $23.6 Nov-92 TW Holdings/ $635.0(2) $3,685.4 $471.1 ($53.8) $177.7 KKR $2,852.7 Aggregate Value as Equity Value as Ann. a Multiple of : a Multiple of : ----------------------------- --------------- Date Target/Acquiror Revs EBITDA Net Inc - ------------ ---------------------------------- ------------- ------------- --------------- Apple South Oct-94 Innovative Restaurant Concepts/ 1.3x N/A 27.1x Applebee's Sep-94 Pub Ventures of New England/ 1.9x 9.4x 24.4x Applebee's Jan-94 On The Border Cafes/ 1.2x 13.4x 38.0x Brinker International Nov-93 St. Louis Bread Co./ 1.5x 15.3x 18.5x Au Bon Pain Co., Inc. May-93 Chevy's/ 1.5x 22.5x 65.0x PepsiCo, Inc. May-93 NRH Corp (Tony Roma's)/ 0.6x 5.0x 17.7x National Pizza Co. May-93 Foodmaker Inc. (Chi Chi's)/ 0.8x 6.0x 25.0x Investor Group Feb-93 Minnesota Franchisee/ 1.0x 9.4x 18.7x Applebee's Jan-93 Two Pesos-Mexican Restaurant/ 0.6x N/A N/M Taco Cabana, Inc. Nov-92 TW Holdings/ 0.8x 6.1x N/M KKR Selected Restaurant Merger & Acquisition Transactions - -------------------------------------------------------------------------------- ($ in millions) Equity/ Ann. Aggregate LTM Target Information --------------------------------------- Date Target/Acquiror Value (1) Revs EBITDA Net Inc Bk Val - ------------ ------------------------------------ ---------------- -------- -------- --------- --------- May-92 TaCasita & Sombrero Rosa/ $13.7 $20.5 $1.3 ($0.2) N/A Taco Cabana $13.7 May-92 California Pizza Kitchen, Inc./ $143.2 $60.0 N/A N/A N/A PepsiCo, Inc. $143.2 Mar-92 Zipps Drive Thru Inc./ $12.0 $19.5 $3.3 $1.1 N/A Rally's, Inc. $12.0 Feb-92 Bayport Restaurant Group/ N/A $23.0 $0.9 $0.3 $1.9 Acquisition Group Sep-90 Kentucky Fried Chicken (Franchises)/ $162.0 $140.0 $18.0 $6.0 N/A PepsiCo, Inc. $162.0 Sep-90 Sizzler Restaurants/ $304.9 $357.4 $51.2 $19.7 $172.7 Collins $302.5 Jan-90 Restaurant Associates/ $110.0 $240.0 N/A N/A N/A Kyotaru Co. Ltd. $110.0 Jan-90 Roy Rogers/ $365.0 $390.0 N/A N/A N/A Hardee's Food Systems $365.0 Dec-89 Dunkin' Donuts/ $333.2 $120.1 N/A $13.8 $11.2 Allied-Lyons PLC $332.2 Oct-89 Skipper's, Inc./ $31.3 $83.0 $4.7 $0.2 $18.3 National Pizza $42.3 Aug-89 Jerrico/ $472.9 $663.7 $70.1 $25.3 $245.8 Investor Group $566.5 Jun-89 Ground Round (Hanson's)/ $85.5 $203.0 $21.0 $7.4 $49.1 International Proteins $99.5 Aggregate Value as Equity Value as Ann. a Multiple of : a Multiple of : ----------------------------- --------------- Date Target/Acquiror Revs EBITDA Net Inc - ------------ ---------------------------------- ------------- ------------- --------------- May-92 TaCasita & Sombrero Rosa/ 0.7x 10.1x N/M Taco Cabana May-92 California Pizza Kitchen, Inc./ 2.4x N/A N/A PepsiCo, Inc. Mar-92 Zipps Drive Thru Inc./ 0.6x 3.6x 10.9x Rally's, Inc. Feb-92 Bayport Restaurant Group/ N/A N/A N/A Acquisition Group Sep-90 Kentucky Fried Chicken (Franchises)/ 1.2x 9.0x 27.0x PepsiCo, Inc. Sep-90 Sizzler Restaurants/ 0.8x 5.9x 15.5x Collins Jan-90 Restaurant Associates/ 0.5x N/A N/A Kyotaru Co. Ltd. Jan-90 Roy Rogers/ 0.9x N/A N/A Hardee's Food Systems Dec-89 Dunkin' Donuts/ 2.8x N/A 24.1x Allied-Lyons PLC Oct-89 Skipper's, Inc./ 0.5x 9.0x N/M National Pizza Aug-89 Jerrico/ 0.9x 8.1x 18.7x Investor Group Jun-89 Ground Round (Hanson's)/ 0.5x 4.7x 11.6x International Proteins Selected Restaurant Merger & Acquisition Transactions - -------------------------------------------------------------------------------- ($ in millions) Equity/ Ann. Aggregate LTM Target Information --------------------------------------- Date Target/Acquiror Value (1) Revs EBITDA Net Inc Bk Val - ------------ ------------------------------------ ---------------- -------- -------- --------- --------- Jun-89 TW Services/ $1,662.6 $3,627.9 $362.6 $54.9 $510.5 Coniston $2,709.7 Jun-89 Winchell's Donut House/ $26.1 $144.2 ($3.1) ($75.1) N/A Shato Holdings Ltd. $41.9 May-89 TGI Fridays/ $258.1 $403.0 $30.1 $12.9 $121.0 Carlson $213.1 Mar-89 S&A Restaurants/ $431.0 $716.1 $85.7 $7.3 $175.5 Investor Group $522.4 Dec-88 Franchise Enterprises/ $46.0 $103.1 $14.0 $0.5 $3.4 Investor Group $99.5 Oct-88 Church's Fried Chicken/ $395.7 $410.6 $41.3 $4.6 $243.5 Copeland $413.0 Aug-88 Foodmaker, Inc./ $244.2 $727.1 $98.5 $7.7 $116.6 Gibbons, Green, van Amerongen $769.9 Jul-88 Restaurant Management Svc./ $45.6 $44.8 $6.3 $2.3 $21.6 Golder,Thoma & Cressey $50.1 Mar-88 Shoney's South/ $131.5 $211.2 $33.1 $3.1 $81.0 TPI Enterprises $152.9 Jan-88 International King's Table/ $58.6 $91.4 $10.4 $1.9 $22.3 Horn & Hardart Co. $67.8 Dec-87 Hamburger Hamlets/ $29.2 $48.0 $6.7 $0.6 $13.9 Weatherly Restaurant Group $45.0 Nov-87 Calny's/ $53.0 $81.4 $15.0 $1.6 $40.0 PespsiCo. $94.3 Aggregate Value as Equity Value as Ann. a Multiple of : a Multiple of : ----------------------------- --------------- Date Target/Acquiror Revs EBITDA Net Inc - ------------ ---------------------------------- ------------- ------------- --------------- Jun-89 TW Services/ 0.7x 7.5x 30.3x Coniston Jun-89 Winchell's Donut House/ 0.3x N/M N/M Shato Holdings Ltd. May-89 TGI Fridays/ 0.5x 7.1x 20.0x Carlson Mar-89 S&A Restaurants/ 0.7x 6.1x 59.0x Investor Group Dec-88 Franchise Enterprises/ 1.0x 7.1x N/M Investor Group Oct-88 Church's Fried Chicken/ 1.0x 10.0x N/M Copeland Aug-88 Foodmaker, Inc./ 1.1x 7.8x 31.7x Gibbons, Green, van Amerongen Jul-88 Restaurant Management Svc./ 1.1x 8.0x 19.8x Golder,Thoma & Cressey Mar-88 Shoney's South/ 0.7x 4.6x 42.4x TPI Enterprises Jan-88 International King's Table/ 0.7x 6.5x 30.8x Horn & Hardart Co. Dec-87 Hamburger Hamlets/ 0.9x 6.7x 48.7x Weatherly Restaurant Group Nov-87 Calny's/ 1.2x 6.3x 33.1x PespsiCo. Selected Restaurant Merger & Acquisition Transactions - -------------------------------------------------------------------------------- ($ in millions) Equity/ LTM Target Information Ann. Aggregate --------------------------------------- Date Target/Acquiror Value (1) Revs EBITDA Net Inc Bk Val - ------------ ------------------------------------ ---------------- -------- -------- --------- --------- Oct-87 Restaurant Assoc. Industry/ $77.6 $230.5 $24.5 $4.3 $40.0 Management $125.5 Jun-87 Rusty Pelican/ $25.4 $59.4 $5.0 $0.5 $21.3 Paragon Restaurant Group $42.4 May-87 Denny's/ $218.0 $1,202.2 $123.7 ($17.1) $39.3 TW Services $782.5 Feb-87 Pizza Inn/ $51.8 $205.9 $16.2 ($0.9) $25.4 Pantera Corp. $82.0 Aggregate Value as Equity Value as Ann. a Multiple of : a Multiple of : ----------------------------- --------------- Date Target/Acquiror Revs EBITDA Net Inc - ------------ ---------------------------------- ------------- ------------- --------------- Oct-87 Restaurant Assoc. Industry/ 0.5x 5.1x 18.0x Management Jun-87 Rusty Pelican/ 0.7x 8.5x 50.8x Paragon Restaurant Group May-87 Denny's/ 0.7x 6.3x N/M TW Services Feb-87 Pizza Inn/ 0.4x 5.1x N/M Pantera Corp. Relevant Average 0.6x 5.1x 19.5x Relevant Median 0.6x 5.7x 17.7x - -------------------------------------------------------------------------------- Note: Average and Medians based on transactions in bold for companies with performance issues. (1) Aggregate value is assumed to be equal to equity value where liability data is unavailable. (2) KKR purchased a 47.2% interest in TW Holdings for $300 million, which implies an equity consideration of $635 million for 100% of the company. Comparable Management Buyout Offers - ------------------------------------------------------------------------------ ($ in millions, except per share data) IMPLIED FERRARI IMPLIED FERRARI EQUITY TRANSACTION MULTIPLES EQUITY VALUATION VALUE PER SHARE (2) -------------------------- -------------------- -------------------- MEAN MEDIAN FERRARI MEAN MEDIAN MEAN MEDIAN ------------- ----------- --------- --------- --------- --------- --------- Aggregate Value to: 1997 Revenues (1) 0.8x -- 0.9x $ 136.7 $ 100.0 $ 112.6 $ 11.19 -- $ 12.60 1997 EBITDA (1) 7.1x -- 6.2x $ 15.1 $ 93.5 $ 80.6 $ 10.46 -- $ 9.01 Equity Value to: 1997 Net Income 18.0x -- 15.2x $ 3.5 $ 63.2 $ 53.5 $ 7.07 -- $ 5.98 ------------------------------------------------- Indicated Valuation Range $ 7.00 -- $ 11.00 ------------------------------------------------- - ------------------------ Source: Securites Data Company and public filings. (1) Net debt of $14.1 million is used to adjust from Aggregate Value to Equity Value. Net Debt calculated as debt plus deferred liabilities minus cash. (2) Assumes 8.9 million fully diluted shares outstanding as of 12/27/97. COMPARABLE MANAGEMENT BUYOUT OFFERS - -------------------------------------------------------------------------------- ($ in millions) DATE AGGREGATE EQUITY ANNOUNCED TARGET NAME ACQUIROR NAME VALUE VALUE - --------- --------------------------- -------------------------- ----------- ----------- 01/20/98 Sbarro Inc Management Led Investor Group $490.5 $ 585.3 09/05/97 DavCo Restaurants Inc Management Led Investor Group 205.2 133.6 09/02/97 Ground Round Restuarants GRR Holdings LLC 56.9 18.4 08/04/97 Perkins Family Restaurant LP Restaurant Co 215.0 146.7 11/06/95 NPC International Inc Management Led Investor Group 306.0 228.4 AGGREGATE VALUE LAST TWELVE MONTHS TO: DATE ---------------------------------------------------- ------------------ EQUITY VALUE TO: ANNOUNCED REVENUE EBITDA NET INCOME BOOK VALUE REVENUE EBITDA NET INCOME - --------- ---------- ---------- ---------- ---------- ------- ------ ---------------- 01/20/98 $ 345.2 $ 85.6 $ 38.4 $ 213.6 1.4 x 5.7 x 15.2 x 09/05/97 221.4 17.6 4.0 28.5 0.9 x 11.7 x 33.4 x 09/02/97 195.5 -0.2 (17.6) 23.8 0.3 x NM NM 08/04/97 382.7 50.6 27.1 117.7 0.6 x 4.3 x 5.4 x 11/06/95 314.5 45.2 (15.2) 21.8 1.0 x 6.8 x NM ----------------------------------------------------------- Average 0.8 x 7.1 x 18.0 x Median 0.9 x 6.2 x 15.2 x ----------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS - ----------------------------------------------------------------------------- ($ in millions) PROJECTED ----------------------------------------------------- 1998 1999 2000 2001 2002 --------- --------- --------- --------- --------- Net Income................................................ $ 3.9 $ 4.6 $ 5.3 $ 5.9 $ 6.6 Net Interest Expense...................................... 0.8 0.1 (0.5) (0.9) (1.4) Income Tax................................................ 2.2 2.7 3.0 3.4 3.8 --- --- --- --------- --------- EBIAT..................................................... 6.9 7.4 7.9 8.4 8.9 Depreciation & Amortization............................... 9.2 9.8 10.4 11.1 11.8 Capital Expenditures...................................... (8.9) (8.9) (8.9) (8.9) (8.9) Estimated Changes in Net Working Capital.................. (0.4) 0.3 0.3 0.3 0.3 --- --- --- --------- --------- Free Cash Flow............................................ $ 6.8 $ 8.6 $ 9.7 $ 10.9 $ 12.2 PV of FCFs Discounted at 10.8%....................... $ 35.4 Year 2002 EBITDA..................................... 12.2 EBITDA Exit Multiple................................. 6.0x Year 2002 Exit Value................................. 73.2 PV of Exit Value..................................... $ 44.6 Total Aggregate Value of Firm........................ $ 80.0 Less: Net Debt (1)................................... 14.1 --------- Total Equity Value of Firm........................... $ 66.0 Total Fully Diluted Shares Outstanding............... 8.9 Equity Price per Fully Diluted Share................. $ 7.38 Equity Price per Share EBITDA EXIT MULTIPLE/DISCOUNT RATE ------------------------------- 6.0X 7.0 X 8.0 X --------- --------- --------- 10.0%.... 7.64 8.51 9.37 11.0%.... 7.32 8.14 8.97 12.0%.... 7.01 7.80 8.59 Note: Free Cash Flow discounted to end of February, 1998. (1) Net Debt is calculated as debt plus deferred liabilities plus transaction fees minus cash. Discounted Cash Flow Analysis--Calculation of Weighted Average Cost of Capital - ------------------------------------------------------------------------------- ($ in millions) Median Debt / Market Cap. = 27.9% Risk Free Rate (1) = 5.5% Average Unlevered Beta = 0.74 Relevered Beta = 0.88 Market Premium (2) = 8.4% Cost of Public Equity = 12.9% Pre-Tax Cost of Debt = 8.4% Tax Rate = 36.4% - ---------------------------------------------------- WACC 10.8% - ---------------------------------------------------- RELEVANT DATA: TOTAL MKT. NET DEBT/ UNLEV. COMPARABLE COMPANIES CAP. CAP. DEBT TOTAL CAP. BETA (3) BETA - ---------------------------------------- --------- --------- --------- ------------- ---------- ------- Applebee's $ 585.8 $ 568.5 $ 17.3 2.9% 1.08 1.06 Au Bon Pain 170.0 92.9 77.1 45.4% 0.75 0.58 Boston Chicken, Inc. 1,186.6 564.4 622.2 52.4% 1.74 1.30 Buffets, Inc. 428.3 420.4 7.9 1.9% 0.78 0.77 Cooker Restaurant Corp. 127.6 92.1 35.5 27.9% 0.68 0.58 Darden Restaurants 2,301.5 1,949.9 351.7 15.3% 0.88 0.80 Einstein/Noah Bagel Corp. 275.2 180.7 94.5 34.3% 1.45 1.19 NPC International 457.9 245.6 212.2 46.4% 0.73 0.56 Pollo Tropical, Inc. 77.8 74.6 3.2 4.1% 0.91 0.89 Rock Bottom Restaurants 75.9 46.7 29.2 38.5% 0.57 0.46 Ryan's Family Stkhouse 507.2 383.7 123.5 24.3% 0.71 0.61 Sbarro, Inc. 499.4 601.8 (102.4) NM 0.56 0.64 Taco Cabana 101.7 83.4 18.3 18.0% 0.69 0.62 Uno Restaurant Corp. 114.9 69.9 45.0 39.2% 0.45 0.36 ---------------------------------------------------------------- Average 27.0% 0.74 Median 27.9% 0.63 ---------------------------------------------------------------- - ------------------------ (1) 30 Year Treasury Rate as of 2/6/98. (2) Market Premium according to Ibbotson, data from 1923--1986. (3) Predicted Betas taken from Barra Beta Service. Income Statement - --------------------------------------------------------------------- ($ in millions, except EPS data) HISTORICAL PROJECTED -------------------------- ------------------------------------------------------ 1995 1996 1997 1998 P 1999 P 2000 P 2001 P 2002 P ------ ------ ------ ------- ------- -------- -------- -------- Net Sales $120.3 $128.0 $136.7 $145.6 $155.1 $165.2 $175.9 $187.3 Cost of Sales 31.1 32.5 34.1 36.3 38.7 41.2 43.9 46.7 ------ ------ ------ ------ ------ ------ ------ ------ Gross Profit 89.2 95.6 102.6 109.3 116.4 124.0 132.0 140.6 Operating Expenses(1) 75.2 80.3 87.5 93.2 99.2 105.7 112.5 119.8 Net Operating Income 14.0 15.2 15.1 16.1 17.2 18.3 19.5 20.8 Depreciation 9.1 8.8 8.6 9.2 9.8 10.4 11.1 11.8 ------ ------ ------ ------ ------ ------ ------ ------ EBIT 4.9 6.4 6.5 6.9 7.4 7.9 8.4 8.9 Depreciation 9.1 8.8 8.6 9.2 9.8 10.4 11.1 11.8 ------ ------ ------ ------ ------ ------ ------ ------ EBITDA 14.0 15.2 15.1 16.1 17.2 18.3 19.5 20.8 Interest Income 0.0 0.0 0.0 0.0 0.1 0.5 0.9 1.4 Interest Expense 1.3 1.3 1.0 0.9 0.2 0.0 0.0 0.0 ------ ------ ------ ------ ------ ------ ------ ------ Pre-tax Income 3.7 5.2 5.5 6.1 7.3 8.3 9.3 10.3 Income Taxes 1.4 1.9 2.0 2.2 2.7 3.0 3.4 3.8 ------ ------ ------ ------ ------ ------ ------ ------ Net Income $ 2.3 $ 3.2 $ 3.5 $ 3.9 $ 4.6 $ 5.3 $ 5.9 $ 6.6 Earnings Per Share $ 0.27 $ 0.36 $ 0.39 $ 0.44 $ 0.52 $ 0.60 $ 0.66 $ 0.74 Shares Outstanding 8.7 8.9 8.9 8.9 8.9 8.9 8.9 8.9 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Margins: Margin Assumptions: - --------------------------------------------------------- ---------------------------------------------------------------- Sales Growth 6.5% 6.8% 6.5% 6.5% 6.5% 6.5% 6.5% Cost of Sales (% of Sales) 25.8% 25.4% 24.9% 24.9% 24.9% 24.9% 24.9% 24.9% Operating Expenses (% of Sales) 62.5% 62.7% 64.0% 64.0% 64.0% 64.0% 64.0% 64.0% Depreciation (% of Sales) 7.6% 6.9% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% Tax Rate 37.5% 37.5% 36.4% 36.4% 36.4% 36.4% 36.4% 36.4% EBIT Margin 4.1% 5.0% 4.8% 4.8% 4.8% 4.8% 4.8% 4.8% EBITDA Margin 11.7% 11.9% 11.1% 11.1% 11.1% 11.1% 11.1% 11.1% Pre-Tax Margin 3.1% 4.0% 4.0% 4.2% 4.7% 5.1% 5.3% 5.5% Net Margin 1.9% 2.5% 2.6% 2.7% 3.0% 3.2% 3.4% 3.5% ------------------------ (1) Operating Expenses includes G&A and Taxes other than Income Taxes. BALANCE SHEET - -------------------------------------------------------------------------------- ($ in millions) ACTUAL PROJECTED FY ENDED DECEMBER FY ENDED DECEMBER ------------------------------- ----------------------------------------------------- 1995 1996 1997 1998 1999 2000 2001 2002 --------- --------- --------- --------- --------- --------- --------- --------- Current Assets Cash $ 1.4 $ 4.3 $ 6.1 $ 0.5 $ 2.1 $ 9.3 $ 17.7 $ 27.5 Accounts Receivable 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3 Inventories 1.0 1.0 1.2 1.3 1.4 1.5 1.6 1.7 Other Current Assets 2.0 2.1 2.0 2.2 2.3 2.5 2.6 2.8 --------- --------- --------- --------- --------- --------- --------- --------- Total Current Assets $ 4.5 $ 7.6 $ 9.5 4.2 6.1 13.5 22.2 32.3 Property, Plant & Equipment (net) 89.9 91.9 91.5 91.2 90.4 88.8 86.6 83.7 Other Assets 4.6 3.1 3.1 3.3 3.6 3.8 4.0 4.3 Goodwill and Intangible Assets -- -- -- -- -- -- -- -- Total Assets $ 98.9 $ 102.5 $ 104.2 $ 98.8 $ 100.0 $ 106.1 $ 112.9 $ 120.3 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Liabilities and Shareholders' Equity Accounts Payable $ 4.2 $ 4.2 $ 6.0 $ 6.4 $ 6.8 $ 7.2 $ 7.7 $ 8.2 Accrued Expenses 0.5 1.0 1.7 1.2 1.2 1.3 1.4 1.5 Accrued Payroll 2.4 3.3 3.7 3.9 4.2 4.5 4.7 5.1 Other Liabilities 2.6 1.9 1.3 1.3 1.3 1.3 1.3 1.3 --------- --------- --------- --------- --------- --------- --------- --------- Total Current Liabilities 9.7 10.4 12.7 12.8 13.5 14.3 15.1 16.0 Deferred Rent 5.6 6.1 6.6 6.6 6.6 6.6 6.6 6.6 Notes Payable 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Total Bank Debt 19.5 18.5 13.5 4.2 0.0 0.0 0.0 0.0 Senior Sub Debt -- -- -- -- -- -- -- -- Stockholders' Equity 64.1 67.5 71.4 75.3 79.9 85.2 91.1 97.7 Total Liabilities and Stockholders' Equity $ 98.9 $ 102.5 $ 104.2 $ 98.8 $ 100.0 $ 106.1 $ 112.9 $ 120.3 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ACTUAL PROJECTED ------------------------------- ----------------------------------------------------- 1995 1996 1997 1998 1999 2000 2001 2002 --------- --------- --------- --------- --------- --------- --------- --------- RATIOS: Receivable Days 0.5 0.5 0.6 0.6 0.6 0.6 0.6 0.6 Payable Days 49.9 47.0 64.0 64.0 64.0 64.0 64.0 64.0 Inventory Turns 32.7 31.0 27.9 27.9 27.9 27.9 27.9 27.9 Other Current Assets (% of Revenue) 1.7% 1.6% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Other Assets (% of Sales) 3.8% 2.4% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3% Accrued Expenses (% of Revenues) 0.4% 0.8% 1.2% 0.8% 0.8% 0.8% 0.8% 0.8% Accrued Payroll (% of Revenues) 2.0% 2.6% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% Other Liabilities (% of Total Sales) 2.1% 1.5% 0.9% 0.9% 0.9% 0.9% 0.9% 0.9% Capex (% of Sales) 23.0% 8.4% 6.5% 6.1% 5.7% 5.4% 5.1% 4.8% Capex 27.6 10.8 8.9 8.9 8.9 8.9 8.9 8.9 Depreciation & Amortization 9.1 8.8 8.6 9.2 9.8 10.4 11.1 11.8 Deferred Rent 5.6 6.1 6.6 6.6 6.6 6.6 6.6 6.6 STATEMENT OF CASH FLOWS - -------------------------------------------------------------------------------- ($ in millions) PROJECTED DECEMBER 31, ------------------------------------------------------- 1998 1999 2000 2001 2002 --------- --------- --------- --------- --------- NET INCOME 3.9 4.6 5.3 5.9 6.6 Depreciation and Amortization 9.2 9.8 10.4 11.1 11.8 (Incr.)/Decr. in AR 0.0 (0.0) (0.0) (0.0) (0.0) (Incr.)/Decr. in Inventories (0.1) (0.1) (0.1) (0.1) (0.1) (Incr.)/Decr. in Other Current Assets (0.2) (0.1) (0.2) (0.2) (0.2) (Incr.)/Decr. in Other Assets (0.2) (0.2) (0.2) (0.2) (0.3) Incr./(Decr.) in AP 0.4 0.4 0.4 0.5 0.5 Incr./(Decr.) Accrued Expenses (0.5) 0.1 0.1 0.1 0.1 Incr./(Decr.) Accrued Payroll 0.2 0.3 0.3 0.3 0.3 Incr./(Decr.) Other Liabilities 0.0 0.0 0.0 0.0 0.0 NET CASH PROVIDED BY OPERATING ACTIVITIES 12.7 14.7 16.0 17.3 18.7 CASH FLOWS FROM INVESTING ACTIVITIES CAPEX (8.9) (8.9) (8.9) (8.9) (8.9) Other 0.0 0.0 0.0 0.0 0.0 Company Recapitalization 0.0 0.0 0.0 0.0 0.0 --- --- --- --- --- NET CASH PROVIDED BY INVESTING ACTIVITIES (8.9) (8.9) (8.9) (8.9) (8.9) CASH FLOW FROM FINANCING ACTIVITIES Deferred Rent 0.0 0.0 0.0 0.0 0.0 Notes Payable and Capitalized Lease 0.0 0.0 0.0 0.0 0.0 Bank Debt (9.3) (4.2) 0.0 0.0 0.0 Senior Sub Debt 0.0 0.0 0.0 0.0 0.0 --- --- --- --- --- NET CASH PROVIDED BY FINANCING ACTIVITIES (9.3) (4.2) 0.0 0.0 0.0 NET CASH INCREASE/(DECREASE) (5.6) 1.6 7.1 8.4 9.8 CASH BEGINNING OF PERIOD 6.1 0.5 2.1 9.3 17.7 CASH END OF PERIOD 0.5 2.1 9.3 17.7 27.5 MINIMUM CASH BALANCE 0.5 0.5 0.5 0.5 0.5