EXHIBIT (d)(3)
BERTUCCI'S INC.
PROXY STATEMENT
This Proxy Statement (the "Proxy Statement") is being furnished to the
stockholders of Bertucci's, Inc., a Massachusetts corporation ("Bertucci's" or
the "Company"), in connection with the solicitation of Bertucci's proxies by the
Board of Directors of the Company for use at the Special Meeting of Stockholders
of the Company, including any adjournments or postponements thereof, scheduled
to be held on , 1998 at 9:00 a.m., at the Company's corporate
headquarters located at 14 Audubon Road, Wakefield, Massachusetts 01880 (the
"Special Meeting"). This Proxy Statement relates to the proposed merger (the
"Merger") of Ten Ideas Acquisition Corp., a Massachusetts corporation
("Acquisition") that has been formed by Joseph Crugnale, Bertucci's founder,
President and Chief Executive Officer, with and into the Company pursuant to the
Agreement and Plan of Merger, dated as of February 13, 1998 (the "Merger
Agreement"), by and among Ten Ideas, Inc., a Delaware corporation and the sole
stockholder of Acquisition ("Ten Ideas"), the Company and Acquisition.
Pursuant to the Merger, each share of Bertucci's Common Stock, par value
$0.005 per share ("Bertucci's Common Stock" or the "Shares"), issued and
outstanding immediately prior to the effective time of the Merger (the
"Effective Time") (other than (i) shares of Bertucci's Common Stock held by
Bertucci's or any wholly owned subsidiary thereof, (ii) 2,177,710 shares of
Bertucci's Common Stock which will be contributed to Ten Ideas by Joseph
Crugnale and a trust for the benefit of his minor children and (iii) shares of
Bertucci's Common Stock owned by stockholders who have duly perfected their
appraisal rights) will be converted into the right to receive $8.00 per share in
cash.
The Merger requires the approval at the Special Meeting of the holders of
not less than two-thirds in interest of the shares of Bertucci's Common Stock
entitled to vote thereon. Holders of Bertucci's Common Stock who dissent from
the Merger in compliance with the Massachusetts General Laws will be entitled to
appraisal rights under Sections 86 through 98 of Chapter 156B of the
Massachusetts General Laws ("MGL") in connection with the Merger as described
herein. See "APPRAISAL RIGHTS" and ANNEX III attached hereto.
At its meeting on February 12, 1998, the Board of Directors of Bertucci's
(the "Board"), by unanimous vote of all of the directors, other than Mr.
Crugnale, approved the Merger and determined, among other things, that the
Merger Agreement and the transactions contemplated thereby, including the
Merger, taken together, are fair and in the best interests of Bertucci's and its
stockholders and resolved to recommend that holders of Bertucci's Common Stock
approve the Merger Agreement, including the Merger and the other transactions
contemplated by the Merger Agreement.
Bertucci's Common Stock is listed for trading on the Nasdaq National Market
("Nasdaq") under the symbol "BERT." On , 1998, the last reported
sale price of Bertucci's Common Stock was $ per share. On February 13,
1998, the last trading day before public announcement of the execution of the
Merger Agreement, the last reported sale price of Bertucci's Common Stock was
$6.00 per share. If the Merger is approved, the Company will seek to have
Bertucci's Common Stock delisted from Nasdaq.
This Proxy Statement, the accompanying form of Proxy card (the "Proxy") and
the other enclosed documents are first being mailed to stockholders of the
Company on or about , 1998.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION. THE COMMISSION HAS NOT PASSED UPON THE FAIRNESS
OR MERITS OF THIS TRANSACTION NOR UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
TABLE OF CONTENTS
AVAILABLE INFORMATION 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 5
FORWARD-LOOKING STATEMENTS 5
SUMMARY 6
INTRODUCTION 14
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING 14
VOTING AT THE SPECIAL MEETING 15
Proxies 15
Record Date; Stock Entitled to Vote; Quorum 16
Solicitation of Proxies 16
SPECIAL FACTORS 17
Background of the Merger 17
Fairness of the Merger; Recommendation of the Board of Directors 19
Opinion of Financial Advisor 21
- Analysis of Premiums Paid 22
- Comparable Company Analysis 23
- Comparable Transactions Analysis 23
- Discounted Cash Flow Analysis 23
Interests of Certain Persons in the Merger; Conflicts of Interest 24
Purpose of the Merger 25
Certain Effects of the Merger 26
Plans for the Company After the Merger 26
Risk That the Merger Will Not Be Consummated 26
Certain Risks in the Event of Bankruptcy 27
Litigation Challenging the Merger 27
THE COMPANY 29
General 29
Restaurant Locations and Expansion Plans 30
Marketing 31
Restaurant Operations and Management 31
Purchasing Operations 32
Competition 32
Government Regulation 32
Service Marks 33
Employees 33
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Properties 33
Legal Proceedings 34
THE MERGER 35
Background of the Merger 35
Merger Consideration 35
Effective Time 35
Conversion of Acquisition Stock 35
Conversion of Bertucci's Common Stock; Procedures for Exchange of Certificates 36
Conduct of Business Pending the Merger 36
Conditions to the Consummation of the Merger 36
Federal Income Tax Considerations 37
Anticipated Accounting Treatment 37
Effect on Stock Options and Employee Benefit Matters 37
Nasdaq Delisting 38
Merger Financing 38
Fees and Expenses 39
Bertucci's Capital Stock 39
- Bertucci's Common Stock 39
- Bertucci's Preferred Stock 40
CERTAIN PROVISIONS OF THE MERGER AGREEMENT 40
The Merger 40
Representations and Warranties 40
Certain Pre-Closing Covenants 41
No Solicitation of Alternative Transactions 42
Articles of Organization and Bylaws 42
Board of Directors and Officers of the Company Following the Merger 42
Stock Options and Employee Benefit Plans 43
Access to Information and Confidentiality 43
Commercially Reasonable Efforts 43
Indemnification and Insurance 43
Conditions to the Consummation of the Merger 43
Termination 45
Amendment and Waiver 46
Expenses and Certain Required Payments 46
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 48
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY 49
MARKET PRICES AND DIVIDENDS ON THE SHARES 50
CERTAIN TRANSACTIONS IN THE COMMON STOCK 51
APPRAISAL RIGHTS 51
EXPERTS 51
OTHER INFORMATION AND STOCKHOLDER PROPOSALS 52
3
AVAILABLE INFORMATION
No person is authorized to give any information or to make any
representations, other than as contained in this Proxy Statement, in connection
with the Merger, and, if given or made, such information or representations may
not be relied upon as having been authorized by Bertucci's, Ten Ideas or
Acquisition. The delivery of this Proxy Statement shall not, under any
circumstances, create any implication that there has been no change in the
information set forth herein or in the affairs of the Company since the date
hereof.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or at
its regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission at http://www.sec.gov. Bertucci's Common
Stock is listed on Nasdaq and certain reports, proxy statements and other
information concerning the Company may be inspected and copied at the offices of
The Nasdaq Stock Market, Inc., 1735 K Street, Washington, D.C. 20006.
4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement incorporates by reference documents which are not
presented herein or delivered herewith. Copies of any such documents relating to
the Company, other than exhibits to such documents (unless such exhibits
specifically are incorporated by reference in such documents), are available
without charge, upon written or oral request, from Bertucci's, Inc., 14 Audubon
Road, Wakefield, MA 01880, Attention: Norman S. Mallett, Treasurer, Vice
President -- Finance and Chief Financial Officer, telephone: (781) 246-6700. In
order to ensure timely delivery of the documents requested, any such request
should be made by , 1998.
The following documents previously filed by the Company (File No. 0-19315)
with the Commission are incorporated in this Proxy Statement by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 27, 1997.
(2) The Company's Proxy Statement, dated April 16, 1997, which was mailed to
the Company's stockholders in connection with the Annual Meeting of
Stockholders held on May 13, 1997.
(3) The description of Bertucci's Common Stock set forth in the Company's
Registration Statement on Form 8-A, filed on May 29, 1991.
(4) The Company's Current Report on Form 8-K, dated February 13, 1998.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13 (a), 13 (c), 14 and 15 (d) of the Exchange Act prior to the date
of the Special Meeting shall be deemed to be incorporated by reference herein
and to be part hereof from the date of the filing of such reports and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein, or in any other subsequently filed document incorporated by reference
herein, modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute part of this Proxy Statement.
FORWARD-LOOKING STATEMENTS
Cautionary statement for purposes of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995: Certain statements contained
in this Proxy Statement, including statements regarding the opening of new
restaurants, are forward-looking and represent the Company's expectations or
beliefs concerning future events. The Company cautions that these and similar
statements involve risks, uncertainties, and assumptions relating to the
operations and results of operations of the Company, competitive factors and
pricing pressures, shifts in consumer demand, the costs of products and
services, general economic conditions, and the acts of third parties, as well as
other factors which are detailed, from time to time, in the Company's periodic
reports filed with the Commission.
5
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT. REFERENCE IS MADE TO THE MORE DETAILED INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT AND THE ANNEXES
HERETO. STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THIS PROXY STATEMENT AND
THE ANNEXES HERETO IN THEIR ENTIRETY.
THE SPECIAL MEETING
Time and Place; Record Date......... A Special Meeting of Stockholders of Bertucci's will
be held on , 1998, at 9:00 a.m. Eastern Time at
Bertucci's, Inc. corporate headquarters, 14 Audubon
Road, Wakefield, MA 01880. Stockholders of record at
the close of business on , 1998 (the
"Record Date") will be entitled to notice of, and to
vote at, the Special Meeting. At the close of business
on the Record Date, there were outstanding and
entitled to vote 8,908,621 shares of Bertucci's Common
Stock.
Matters to be Considered............ The purpose of the Special Meeting is to approve and
adopt the Merger Agreement and the transactions
contemplated thereby, including the Merger, pursuant
to which (a) Acquisition will merge with and into
Bertucci's with Bertucci's being the surviving
corporation (the "Surviving Corporation"), (b) the
stockholders of Bertucci's will receive the cash
consideration described below in the Summary under
"THE MERGER--Effect of the Merger" and (c) Bertucci's
will thereby become a wholly-owned subsidiary of Ten
Ideas, all the stock of which will be owned
immediately prior to the Effective Time by Joseph
Crugnale, the Company's founder, President and Chief
Executive Officer.
Required Votes...................... Approval of the Merger Agreement requires the
affirmative vote of stockholders holding two-thirds in
interest of the shares of Bertucci's Common Stock
entitled to vote thereon. Joseph Crugnale, who
beneficially owns approximately 24.4% of the issued
and outstanding shares of Bertucci's Common Stock,
intends to vote such shares in favor of the resolution
to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the
Merger. See "THE SPECIAL MEETING--Required Votes" and
"THE MERGER--Interests of Certain Persons in the
Merger."
Voting of Proxies................... Shares of Bertucci's Common Stock represented by a
properly executed Proxy received in time for the
Special Meeting will be voted in the manner specified
in the Proxy. Properly executed Proxies that do not
contain any instruction to vote for or against or to
abstain from voting on a particular matter
6
will be voted in favor of such matter. See
"INTRODUCTION--Voting at The Special Meeting--
Proxies." It is not expected that any matter other
than the proposal to approve and adopt the Merger
Agreement will be brought before the stockholders at
the Special Meeting. If, however, other matters are
properly presented, the persons named as proxies will
vote in accordance with their best judgment with
respect to such matters.
Adjournments; Revocability of If the Special Meeting is adjourned or postponed, for
Proxies............................. whatever reason, the approval of the Merger Agreement
shall be considered and voted upon by stockholders of
the Company at the subsequent, reconvened meeting, if
any. You may revoke your Proxy at any time prior to
its exercise by (i) attending the Special Meeting and
voting in person (although attendance at the Special
Meeting will not in and of itself constitute
revocation of a Proxy), (ii) giving notice of
revocation of your Proxy at the Special Meeting, or
(iii) delivering (a) a written notice of revocation of
your Proxy, or (b) a duly executed Proxy relating to
the matters to be considered at the Special Meeting,
bearing a date later than the Proxy previously
executed, to the Clerk of Bertucci's, c/o Bertucci's,
Inc., 14 Audubon Road, Wakefield, Massachusetts 01880.
Unless revoked in one of the manners set forth above,
Proxies in the form enclosed will be voted at the
Special Meeting in accordance with your instructions.
Solicitation of Proxies............. The cost of soliciting Proxies will be borne by the
Company. The Company may solicit Proxies and the
Company's directors, officers and employees may also
solicit Proxies by telephone, facsimile telegram or
personal interview. These persons will receive no
additional compensation for their services.
Arrangements will be made to furnish copies of Proxy
materials to fiduciaries, custodians and brokerage
houses for forwarding to beneficial owners of
Bertucci's Common Stock. Such persons will be
reimbursed for their reasonable out-of pocket
expenses. Morrow & Co., Inc. will assist in the
solicitation of Proxies by the Company for a fee of
$8,000, plus reasonable out-of-pocket expenses and a
reasonable fee for each telephone solicitation.
HOLDERS OF BERTUCCI'S COMMON STOCK SHOULD NOT SEND
STOCK CERTIFICATES WITH THEIR PROXY CARDS. IF THE
MERGER IS CONSUMMATED, A LETTER OF TRANSMITTAL WILL BE
MAILED TO STOCKHOLDERS TO EXCHANGE THEIR STOCK
CERTIFICATES FOR THE CASH PRICE.
7
THE MERGER
Effect of the Merger................ At the Effective Time, Acquisition will be merged with
and into Bertucci's, and Bertucci's will continue as
the surviving corporation in the Merger and as a
wholly-owned subsidiary of Ten Ideas. Subject to
certain provisions as described herein with respect to
shares owned by Bertucci's or any wholly owned
subsidiary of Bertucci's, and with respect to
Dissenting Shares (as defined under "APPRAISAL RIGHTS"
below), each issued and outstanding share of
Bertucci's Common Stock will be converted into the
right to receive in cash from Bertucci's following the
Merger an amount equal to $8.00 (the "Cash Price").
Each stockholder of Bertucci's (other than Ten Ideas)
shall receive the Cash Price with respect to all of
such stockholder's shares of Bertucci's Common Stock.
Following the Merger, the Company's existing
stockholders (other than Mr. Crugnale, through his
ownership of Ten Ideas), will have no continuing
ownership interest in the Company and will no longer
participate in the future earnings and potential
growth of the Company.
Recommendation of the Board of At its February 12, 1998 meeting, the Board of
Directors........................... Directors of the Company, by unanimous vote, (i)
determined that the Merger Agreement and the
transactions contemplated thereby, including the
Merger, taken together, are fair and in the best
interests of the Company and its stockholders, and
(ii) resolved to recommend that the holders of
Bertucci's Common Stock approve the Merger Agreement
and the transactions contemplated thereby, including
the Merger. See "SPECIAL FACTORS--Fairness of the
Merger; Recommendation of the Board of Directors" and
"THE MERGER--Background of the Merger," "--Opinion of
Financial Advisor," and "--Reasons for the Merger."
Opinion of Financial Advisor........ On February 12, 1998, NationsBanc Montgomery
Securities LLC ("NMS") delivered its oral opinion,
which was subsequently confirmed in writing as of the
same date, to the Special Committee of the Company's
Board of Directors to the effect that, as of such
date, the cash consideration to be received in the
Merger by the stockholders of the Company is fair to
such stockholders from a financial point of view. In
arriving at its opinion, NMS, among other things,
reviewed certain information and conducted certain
analyses with respect to Bertucci's Common Stock and
the Merger. For information on the assumptions made,
matters considered and limits of the review by NMS,
see "SPECIAL FACTORS--Opinion of Financial Advisor."
Holders of
8
Bertucci's Common Stock are urged to read in its
entirety the opinion of NMS, dated February 12, 1998,
a copy of which appears as ANNEX II to this Proxy
Statement.
Conditions to the Merger............ The obligations of Bertucci's, Ten Ideas and
Acquisition to consummate the Merger are subject to
various conditions, including, without limitation, the
approval of the Merger Agreement and the transactions
contemplated thereby by the holders of the requisite
number of shares of Bertucci's Common Stock, the
obtaining of any other material third party or
governmental consents, and the absence of any
injunction or other legal restraint or prohibition
preventing the consummation of the Merger. Ten Ideas
and the Company have been advised by the Federal Trade
Commission that the Merger is not a reportable
transaction under Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
The obligations of Ten Ideas and Acquisition to effect
the Merger are further subject to, among other things,
(i) the continuing material accuracy of the Company's
representations and warranties made in the Merger
Agreement, (ii) the performance of all material
obligations of the Company under the Merger Agreement,
(iii) no material adverse change to the Company's
business, assets, condition (financial or otherwise)
or results of operations, (iv) no more than 10% of the
Company's stockholders exercising their appraisal
rights, (v) the absence of pending or threatened
material litigation intended to prevent the Merger,
(vi) the receipt of all necessary consents or
approvals of governmental entities and all third
parties in connection with the execution of the Merger
Agreement and the transactions contemplated therein
and (vii) the receipt of financing proceeds, on terms
set forth in commitment letters executed at the time
of the Merger Agreement or on such other terms as the
Company and Ten Ideas may reasonably agree or are not
materially more onerous, in an amount sufficient to
consummate the transactions contemplated by the
Merger, including an amount sufficient to pay the Cash
Price. See "THE MERGER--Merger Financing."
The Company's obligations to effect the Merger are
further subject to, among other things, (i) the
continuing material accuracy of the representations
and warranties of Ten Ideas and Acquisition made in
the Merger Agreement, (ii) the performance of all
material obligations of Ten Ideas and Acquisition
under the Merger Agreement, and (iii) the
9
absence of certain governmental proceedings intended
to prevent the Merger.
The conditions to each party's obligation to
consummate the Merger may be waived by such party in
its discretion. See "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT--Conditions to the Consummation of the
Merger" and "--Expenses and Certain Required
Payments."
Litigation Challenging the Merger... After the announcement of the Merger, three purported
class action lawsuits were filed in February, 1998 in
Massachusetts Superior Court, by the same counsel,
against the Company and its Board of Directors in
connection with the Merger. Plaintiffs claim that the
Merger is, or consummation thereof would be, wrongful,
unfair and in breach of the individual defendants'
fiduciary duties. The plaintiffs allege that the Cash
Price is grossly inadequate, the Merger would be
consummated without an auction of the Company or other
market check, and that the defendants possess
non-public information concerning the condition and
prospects of the Company. The plaintiffs in these
purported class actions seek preliminary and permanent
injunctive relief against the Merger, unspecified
monetary damages and other relief. Defendants
vigorously contest these claims and believe that they
are without merit. To date, the plaintiffs have not
filed a motion for a preliminary injunction or other
preliminary relief.
Merger Financing.................... At the Effective Time, Bertucci's is expected to enter
into debt financing arrangements aggregating
approximately $77.5 million, which will consist of
both debt securities (the "Debt Securities") and a
senior term and revolving credit facility (the "Credit
Facilities"). It is anticipated that the full proceeds
of the Debt Securities and a portion of the proceeds
available pursuant to the Credit Facilities would be
used to finance the conversion into cash of the shares
of Bertucci's Common Stock and stock options currently
outstanding. In addition, the Credit Facilities would
be used to provide for Bertucci's working capital
requirements at the time of and following the Merger.
Acquisition has entered into commitment letters with
financing sources to provide such financing. See "THE
MERGER--Merger Financing."
Certain Federal Income Tax The receipt of cash by a stockholder pursuant to the
Consequences........................ Merger will generally be treated as a sale of stock
generating capital gain equal to the cash received
less the stockholder's basis in the stock sold.
Bertucci's may, in certain circumstances, be
10
required to withhold tax from cash paid to
stockholders. See "THE MERGER--Federal Income Tax
Considerations."
Treatment of Company Stock At the Effective Time: (x) each Company Stock Option
Options............................. granted under the 1989, 1993 and 1997 Stock Option
Plans (as defined under "THE MERGER--Effect on Stock
Options and Employee Benefit Matters") outstanding
immediately prior to the Effective Time, to the extent
not already vested, will vest in full in accordance
with the terms of such plans as a consequence of the
Merger and will be canceled in exchange for a cash
payment from the Company (subject to any applicable
withholding taxes) equal to the product of (1) the
total number of shares of Bertucci's Common Stock
subject to such Company Stock Option and (2) the
excess of $8.00 over the exercise price per share of
Bertucci's Common Stock subject to such Company Stock
Option; and (y) each Company Stock Option granted
under the 1987 Stock Option Plan (as defined under
"THE MERGER--Effect on Stock Options and Employee
Benefit Matters") outstanding immediately prior to the
Effective Time shall, to the extent then exercisable,
be canceled in accordance with the terms of such plan
in exchange for a cash payment from the Company
(subject to any applicable withholding taxes) equal to
the product of (1) the total number of vested shares
of Bertucci's Common Stock subject to such Company
Stock Option and (2) the excess, if any, of $8.00 over
the exercise price per share of Bertucci's Common
Stock subject to such Company Stock Option. The
Company's stock option plans will terminate as of the
Effective Time, and following the Effective Time no
holder of a Company Stock Option or participant in any
Company stock option plan will have any right
thereunder to acquire equity securities of the Company
following the Merger.
Interests of Certain Persons in the Certain directors and officers of the Company,
Merger.............................. including Mr. Crugnale have interests, described
herein, that may present them with potential conflicts
of interest in connection with the Merger. The Board
of Directors is aware of the conflicts and considered
them in addition to the other matters described or
referred to under "SPECIAL FACTORS--Fairness of the
Merger; Recommendation of the Board of Directors."
"--Interests of Certain Persons in the Merger;
Conflicts of Interest" and "--Purpose of the Merger."
Termination of the Merger The Merger Agreement may be terminated at any time
Agreement........................... prior to the Effective Time by mutual written consent
of Bertucci's and Ten Ideas. The Merger Agreement may
also be
11
terminated by either Bertucci's or Ten Ideas in
certain circumstances, including, but not limited to,
the following: (i) if upon a vote at the Special
Meeting, or any adjournment thereof, the requisite
approval of the stockholders of Bertucci's shall not
have been obtained; (ii) if the Merger shall not have
been consummated on or before July 31, 1998 (provided
that the failure to consummate the Merger is not
attributable to the failure of the terminating party
to fulfill its obligations pursuant to the Merger
Agreement); or (iii) if any court of competent
jurisdiction or other governmental authority has
issued an order, decree or ruling or taken any action
restraining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have
become final and nonappealable. In addition, the
Merger Agreement may be terminated unilaterally by
either Bertucci's or Ten Ideas under certain
circumstances described herein, including if the Board
of Directors of the Company shall have approved an
alternative acquisition proposal after determining
that such approval is necessary in the exercise of its
fiduciary obligations under applicable law. See
"CERTAIN PROVISIONS OF THE MERGER AGREEMENT--
Termination."
Termination Fee and Expenses........ Under certain circumstances described herein,
termination of the Merger Agreement prior to the
Effective Time will result in the payment by the
Company to Ten Ideas of a termination fee of $1.5
million and reimbursement of expenses aggregating up
to $750,000. See "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT--Termination" and "--Expenses and Certain
Required Payments."
Ten Ideas and Acquisition........... Ten Ideas and Acquisition were incorporated in
connection with the Merger by Joseph Crugnale and have
not carried on any activities to date other than those
incident to their formation and the transactions
contemplated by the Merger Agreement. The principal
offices of Ten Ideas and Acquisition are located at 14
Audubon Road, Wakefield, Massachusetts 01880;
telephone number (781) 246-6700.
Dissenting Stockholders' Appraisal Under Sections 86 through 98, inclusive, of Chapter
Rights.............................. 156B of the Massachusetts General Laws (the "MGL"), a
stockholder of the Company may dissent from the
Merger, demand appraisal of, and obtain payment for,
the fair value of such holder's shares of Bertucci's
Common Stock. In order to dissent, a Stockholder must
(i) not vote for the adoption of the Merger Agreement,
(ii) deliver a written objection to the merger and a
demand for appraisal to the Company prior to
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the taking of a vote on the Merger Agreement at the
Special Meeting, or any postponements or adjournments
thereof, and (iii) otherwise comply with the
requirements of Section 86 through 98, inclusive, of
the MGL, a copy of which is included in this Proxy
Statement as ANNEX III. See "APPRAISAL RIGHTS" for a
summary of the rights of Stockholders to demand
appraisal and a description of the procedure required
to be followed to exercise such rights.
Selected Financial Data............. Set forth herein are certain selected historical
financial and other data relating to Bertucci's. The
selected historical data should be read in conjunction
with Bertucci's historical financial statements,
including the notes thereto, incorporated by reference
in this Proxy Statement.
Market Information.................. Bertucci's Common Stock is traded on the Nasdaq
National Market under the symbol "BERT." On February
13, 1998, the last trading day before the public
announcement of the proposal, the reported closing
price per Share was $6.00. On , 1998, the
last full trading day prior to the date of this Proxy
Statement, the reported closing price per Share was
$ .
Security Ownership of Management.... As of March 15, 1998, directors and executive officers
of the Company and their affiliates were beneficial
owners of an aggregate of 2,331,987 shares of
Bertucci's Common Stock (approximately 26.2% of the
outstanding shares), including 2,177,710 Shares of
Bertucci's Common Stock (approximately 24.4% of the
outstanding Shares) beneficially owned by Mr.
Crugnale.
13
INTRODUCTION
This Proxy Statement is being furnished to holders of Bertucci's Common
Stock in connection with the solicitation of proxies by the Board of Directors
of Bertucci's for use at the Special Meeting of Stockholders of Bertucci's, Inc.
to be held at Bertucci's corporate headquarters located at 14 Audubon Road,
Wakefield, Massachusetts 01880 on , 1998, beginning at 9:00
a.m. Eastern Time, and at any adjournments or postponements thereof. This Proxy
Statement is accompanied by a form of Proxy for use at the Special Meeting. At
the Special Meeting, Bertucci's stockholders will be asked to approve a Merger
Agreement, pursuant to which Acquisition will merge with and into Bertucci's,
resulting in Bertucci's being a wholly-owned subsidiary of Ten Ideas.
This Proxy Statement and the accompanying form of Proxy are being mailed to
stockholders of the Company on or about , 1998.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the stockholders of the Company will be asked to
consider and vote upon a proposal to adopt the Merger Agreement. If the
requisite votes in favor of the proposal are obtained and certain other
conditions are satisfied or, where permissible, waived, the terms of the Merger
Agreement provide, among other things, that: (i) Acquisition will be merged with
and into Bertucci's with Bertucci's being the surviving corporation (the
"Surviving Corporation") and (ii) each share of Bertucci's Common Stock issued
and outstanding immediately prior to the Effective Time (other than Shares held
at the Effective Time in Bertucci's treasury, by any subsidiary of Bertucci's,
by Ten Ideas or by Acquisition, which will be canceled without payment, and
other than Shares in respect of which appraisal rights have been perfected
properly under the applicable sections of the MGL) will be converted into the
right to receive $8.00 in cash, without interest. It is currently anticipated
that the Merger will occur as promptly as practicable after adoption of the
Merger Agreement by the Stockholders at the Special Meeting and the satisfaction
or, where permissible, waiver of the other conditions to the consummation of the
Merger. There can be no assurance that, even if the requisite Stockholder
approval is obtained, the other conditions to the Merger will be satisfied or
waived, or that the Merger will be consummated. See "SPECIAL FACTORS--Risk that
the Merger Will Not Be Consummated." A copy of the Merger Agreement is attached
to this Proxy Statement as ANNEX I. For additional information concerning the
terms and conditions of the Merger, see "THE MERGER."
Ten Ideas and Acquisition are newly incorporated entities organized by
Joseph Crugnale, the Company's founder, President and Chief Executive Officer,
for the purpose of effecting the transactions described in this Proxy Statement.
Upon consummation of the Merger, Bertucci's will become a wholly-owned
subsidiary of Ten Ideas. Prior to the Effective Time of the Merger, Ten Ideas is
expected to be owned entirely by Mr. Crugnale and his affiliates.
The Board of Directors unanimously approved the Merger Agreement and has
determined that the Merger is fair to, and in the best interests of, all of the
stockholders of the Company and has recommended that the stockholders of the
Company vote in favor of adoption of the Merger Agreement and approval of the
Merger. For a discussion of the factors considered by the Board of Directors in
reaching it conclusions, see "SPECIAL FACTORS--Fairness of the Merger;
Recommendation of the Board of Directors." For a description of certain
interests of certain of Bertucci's directors and officers that may have
presented them
14
with actual or potential conflicts of interest in connection with the Merger,
see "SPECIAL FACTORS--Background of the Merger," "--Purpose of the Merger" and
"--Interests of Certain Persons in the Merger; Conflicts of Interest."
VOTING AT THE SPECIAL MEETING
The Board of Directors has fixed the close of business on , 1998
as the "Record Date" for determining the Stockholders entitled to notice of and
to vote at the Special Meeting. Accordingly, only holders of record of Shares as
of the Record Date will be entitled to notice of and to vote at the Special
Meeting. On the Record Date, there were 8,908,621 Shares, held by approximately
700 holders of record, outstanding and entitled to vote. The Company is unaware
of any fractional shares outstanding. Stockholders may cast one vote per Share,
either in person or by properly executed Proxy, on each matter to be voted on at
the Special Meeting.
Votes cast in person or by Proxy at the Special Meeting will be tabulated by
Boston EquiServe, L.P. (the "Transfer Agent"). The Transfer Agent will treat
abstentions as Shares that are present and entitled to vote. In addition, if a
broker submits a Proxy indicating that it does not have discretionary authority
as to certain Shares to vote on a particular matter, those Shares will be
treated as present and entitled to vote.
THE MERGER CONSTITUTES A MATTER OF GREAT IMPORTANCE TO STOCKHOLDERS OF THE
COMPANY. IF THE MERGER AGREEMENT IS ADOPTED AND THE MERGER IS CONSUMMATED, THE
OWNERSHIP INTERESTS OF THE STOCKHOLDERS IN THE COMPANY (OTHER THAN THE ONGOING
INTEREST OF TEN IDEAS) WILL CEASE IN EXCHANGE FOR THE RIGHT TO RECEIVE A CASH
PAYMENT OF $8.00 PER SHARE OR TO PURSUE APPRAISAL RIGHTS. ACCORDINGLY,
STOCKHOLDERS ARE URGED TO READ AND CONSIDER CAREFULLY THE INFORMATION PRESENTED
IN THIS PROXY STATEMENT.
Because the vote on the Merger Agreement and the transactions contemplated
thereby, including the Merger, requires the approval of holders of two-thirds in
interest of the votes entitled to be cast by the holders of all outstanding
shares of Bertucci's Common Stock, abstentions and broker non-votes will have
the same effect as a vote against this proposal.
PROXIES
All Shares represented at the Special Meeting by properly executed Proxies
received prior to or at the Special Meeting, and not revoked before their use,
will be voted in accordance with the instructions thereon. If no instructions
are given, properly executed Proxies will be voted FOR adoption of the Merger
Agreement. If any other matters are properly presented to the Special Meeting or
any adjournments or postponements thereof, the persons named in the enclosed
form of Proxy as acting thereunder will have discretion to vote on such matters
in accordance with their best judgment. The Company does not know of any matters
other than the adoption of the Merger Agreement that will be presented at the
Special Meeting.
A stockholder who has given a Proxy may revoke it at any time before it is
voted at the Special Meeting, or any postponements or adjournments thereof, by
filing with the Clerk of the Company, at the address of the Company set forth
herein, a written revocation bearing a later date than the Proxy being revoked,
or by submission of a validly executed Proxy bearing a later date than the Proxy
being revoked, or by attending the Special Meeting, or any postponements or
adjournments thereof, and voting in person
15
(although attendance at the Special Meeting, or any postponements or
adjournments thereof, will not in and of itself constitute revocation of a
Proxy).
Proxies are being solicited by and on behalf of the Board of Directors. The
Company will bear the cost of the Special Meeting and the cost of soliciting
proxies therefor, including the cost of printing and mailing the Proxy material.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only holders of Bertucci's Common Stock at the close of business on
, 1998 will be entitled to receive notice of and to vote at the
Special Meeting. At the close of business on the Record Date, the Company had
outstanding and entitled to vote 8,908,621 shares of Bertucci's Common Stock.
Shares of Bertucci's Common Stock represented by properly executed Proxies which
are marked "abstain" or which are not marked as to any particular matter will be
counted as Shares present for purposes of determining the presence of a quorum
on all matters. Proxies relating to "street name" shares that are voted by
brokers will be counted as Shares present for purposes of determining the
presence of a quorum on all matters, but will not be treated as shares having
voted at the Special Meeting as to any proposal as to which authority to vote is
withheld by the broker.
The presence, in person or by Proxy, at the Special Meeting of the holders
of at least 4,454,311 shares of Bertucci's Common Stock, I.E., a majority in
interest of the shares of Bertucci's Common Stock outstanding on the record
date, is necessary to constitute a quorum for the transaction of business. The
affirmative vote of the holders of 5,939,081 shares of Bertucci's Common Stock,
I.E., two-thirds interest of the votes entitled to be cast by the holders of all
outstanding shares of Bertucci's Common Stock, is necessary to approve the
Merger Agreement and the transactions contemplated thereby, including the
Merger. Under applicable Massachusetts law, the transaction does not require the
approval of a majority of holders of Bertucci's Common Stock unaffiliated with
Ten Ideas. Abstentions will be counted as present for the purposes of
determining whether a quorum is present, but will not be counted as votes cast
in favor of the Merger Agreement.
Because the vote on the Merger Agreement and the transactions contemplated
thereby, including the Merger, requires the approval of holders of two-thirds in
interest of the votes entitled to be cast by the holders of all outstanding
shares of Bertucci's Common Stock, abstentions and broker non-votes will have
the same effect as a vote against this proposal.
SOLICITATION OF PROXIES
The Company will bear the cost of the solicitation of Proxies. In addition
to solicitation by mail, the directors, officers and employees of the Company
may solicit Proxies from stockholders of the Company by telephone, facsimile or
in person. Such directors, officers and employees will not be additionally
compensated for any such solicitation but may be reimbursed for out-of-pocket
expenses in connection therewith. Arrangements will also be made with brokerage
houses and other custodians, nominees and fiduciaries for their forwarding of
solicitation material to the beneficial owners of shares held of record by such
persons and Company will reimburse such custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses in connection therewith.
Morrow & Co., Inc. will assist in the solicitation of Proxies by the Company
for a fee of $8,000, plus reasonable out-of-pocket expenses and a reasonable fee
for each telephone solicitation.
HOLDERS OF BERTUCCI'S COMMON STOCK SHOULD NOT SEND STOCK CERTIFICATES WITH
THEIR PROXY CARDS.
16
SPECIAL FACTORS
BACKGROUND OF THE MERGER
Bertucci's completed its initial public offering of Shares in June, 1991 at
an offering price (adjusted for a stock split in March, 1992) of $8.67 per
Share. As the Company expanded during its early years of operation as a public
company, the market price of the Shares generally appreciated in value. However,
as the Company expanded into locations increasingly remote from its original
base in the metropolitan Boston area and competition within the restaurant
industry intensified, a number of the newly-opened restaurants failed to perform
up to expectations, and the financial performance of the Company declined.
Commencing in 1994, results of operations of the Company consistently fell short
of securities analysts' expectations, resulting in a steady decline in the
trading price of the Company's stock. The Company recorded a charge of $5.3
million in fiscal 1995 in connection with three locations closed in February,
1996. The market price of the Shares fell below $10.00 in January, 1995 and has
never recovered to that level thereafter. The Shares traded within a range of
$4.25 to $7.25 during fiscal 1996 and from $5.00 to $7.063 during fiscal 1997.
The last reported sales price for the Shares prior to the announcement of the
Merger was $6.00 per Share.
Throughout this period, Bertucci's Board of Directors discussed its concern
over the Company's operating results and the concommitant decline in the trading
price of the Company's Shares. At the initiation of the Board of Directors
several changes in management were made, without any discernable effect on the
results of operations. During 1995, the Board of Directors engaged an investment
banking firm to consider various strategic alternatives for the Company,
including a potential sale of the Company. However, the investment banking firm
was not able to present to the Board of Directors a transaction which the Board
of Directors felt would be in the best interest of the Company's stockholders.
By November of 1997, the Board of Directors had grown increasingly concerned
about the future prospects of the Company. At the invitation of the Board of
Directors, representatives of NMS addressed the Board of Directors and discussed
conditions prevailing within the restaurant industry generally, as well as the
challenges facing the Company. After considering the presentation made by the
representatives of NMS, the Board of Directors convened a special meeting on
December 4, 1997 at which representatives of NMS were invited to make a full
presentation to the Board of Directors as to the strategic alternatives
available to the Company. At the December 4, 1997 meeting, the representatives
of NMS again reviewed with the Board of Directors the conditions prevailing in
the restaurant industry generally, as well as the strengths and weaknesses of
the Company. The representatives of NMS then discussed with the Company the full
range of strategic alternatives available to the Company, including an
acquisition by the Company of another restaurant entity or concept, the
extension by the Company of its brand equity through other means, a sale of the
Company to a strategic or financial buyer, which could include participation by
management, the payment by the Company of a cash dividend or the repurchase by
the Company of a portion of its shares, and the continuation by the Company of
its current operations without pursuit of a strategic transaction. After
reviewing the presentation by the representatives of NMS, and taking into
account the continuing challenges facing the Company, the Board of Directors
determined that it was in the best interest of the stockholders of the Company
to consider a sale of the Company. Mr. Crugnale indicated that if the Company
were to be sold, he would likely have an interest in structuring, or
participating in, a purchase of the Company. Accordingly, a special committee of
independent non-employee directors (the "Special Committee"), consisting of E.
Bulkeley Griswold, Robert L. Lestina, Jr. and Allan J. Steinmetz, was formed to
consider potential strategic alternatives. The Special Committee thereafter
engaged NMS to serve as its financial advisor and Hutchins, Wheeler & Dittmar, A
Professional
17
Corporation, as its special counsel. Mr. Crugnale was advised to engage separate
counsel to assist him in considering whether to prepare an offer to acquire the
Company. Mr. Crugnale did not participate in any of the meetings of the Special
Committee.
At the request of the Special Committee, NMS began a review of publicly and
privately available information concerning the Company, as well as a review of
publicly available information concerning certain other restaurant companies and
recent business combinations in the restaurant industry. NMS was also directed
to approach selected potential strategic acquirors in the restaurant industry
and potential financial acquirors to determine whether they had an interest in
acquiring the Company and, if so, at what price. The Special Committee
determined that it was not in the best interest of the stockholders of the
Company to conduct a public auction for the Company, because they concluded that
such a process would likely result in the loss of a significant number of the
Company's managers, and would be extremely disruptive to the operations of the
Company's restaurants. During the months of December and January,
representatives of NMS approached potential strategic and financial acquirors,
and reported the results of these conversations to representatives of the
Special Committee. The representatives of NMS reported that given the Company's
disappointing results of operations, it was not viewed as a potential growth
concept by the strategic acquirors, and therefore was not an attractive
acquisition candidate. The representatives of NMS reported that several of the
financial acquirors and investors whom they approached expressed an interest in
investing in or acquiring the Company, but only at a relatively modest premium
to the trading value of the Company's shares, and only if management of the
Company were prepared to participate in such a transaction.
In late December, 1997 and early January, 1998, Mr. Crugnale engaged
BancBoston Securities Inc. as his financial advisor and engaged his own legal
and accounting advisors. During January, 1998, Mr. Crugnale held discussions
with potential sources of financing for the proposed acquisition. In addition,
Mr. Crugnale incorporated Ten Ideas, of which he is the sole shareholder and
director.
On February 3, 1998, Ten Ideas submitted a written proposal to the Special
Committee to acquire the outstanding publicly-held Shares at a price of $7.50
per Share, to be effected through a cash merger of Acquisition, a subsidiary of
Ten Ideas, with and into Bertucci's. Such a merger would be subject, pursuant to
Massachusetts law, to the approval of two-thirds in interest of the holders of
the Shares.
The Special Committee, together with NMS and the Company's legal counsel,
considered the proposal and informed Mr. Crugnale that it believed that the
price offered was inadequate. The Special Committee also insisted that it would
not approve of an acquisition transaction without firm financing commitments.
Representatives of the Special Committee continued to discuss with Mr. Crugnale
and his advisors the offer made by Ten Ideas. On February 7, 1998, Mr.
Crugnale's legal and financial advisors informed representatives of the Special
Committee that they were prepared to increase their offer to $7.75 per share,
and that such offer would be accompanied by firm financing commitments, subject
to only usual and customary conditions. The Special Committee convened a meeting
on February 8, 1998 with its financial and legal advisors. The members of the
Special Committee reviewed at length the strategic alternatives available to the
Company, and concluded that it would recommend acceptance of an offer from Ten
Ideas but only at a price of $8.00 per share, if appropriate terms of a Merger
Agreement could be negotiated. The position of the Special Committee was
communicated to the financial and legal advisors of Ten Ideas, and following
further negotiations, Ten Ideas agreed to increase its offer to $8.00 per Share
and agreed to obtain firm written financing commitments.
18
On February 9, 1998, counsel for Ten Ideas presented to counsel for the
Company a proposed form of the Merger Agreement, who distributed it among the
members of the Special Committee and discussed it with them. The parties
negotiated the terms of the proposed Merger Agreement throughout the week of
February 9, 1998. During this week, management also contacted the members of
the Board by telephone to give them a preliminary indication of the Company's
fiscal 1997 financial results as they were being finalized.
On the evening of February 12, 1998, the Special Committee met with its
financial and legal advisors to consider the proposed transaction. At this
meeting, NMS presented orally its opinion as investment bankers that, as of such
date, the aggregate consideration to be received by the stockholders pursuant to
the proposed Merger was fair to such stockholders from a financial point of
view. The representatives of NMS also reported that they had conducted a further
pre-market check of potential strategic and financial buyers, and that on the
basis of those efforts they felt it was unlikely that a third party would offer
more than the price offered by Ten Ideas. The Special Committee's legal advisors
reported to the members of the Special Committee on the proposed terms of the
Merger Agreement. In particular, they noted that the terms of the Merger
Agreement permit the Board of Directors, if required in the exercise of the
Board's fiduciary duties, to withdraw its recommendation of the Merger and to
accept an acquisition proposal which is more favorable to the stockholders of
the Company upon payment of a break up fee and expense reimbursement. The
Special Committee also reviewed the recent results of operations of the Company,
and discussed the likely effect of the disappointing results for the fourth
quarter of fiscal 1997 on the trading value of the Shares. Following its
discussion, the Special Committee resolved to recommend to the Board of
Directors that the offer of Ten Ideas at $8.00 per Share be accepted.
The Board then invited Mr. Crugnale to join the meeting and discussed
further with him his proposed financing arrangements and his plans for the
Company and its employees following the proposed Merger. Thereafter, by
unanimous vote of all of the directors, the Board determined the Merger to be
fair and in the best interests of Bertucci's and its stockholders, approved the
Merger Agreement and the transactions contemplated thereby, including the
Merger, and recommended that the stockholders vote in favor of approval and
adoption of the Merger Agreement and the transactions contemplated thereby. The
Board's approval was given subject to the execution and delivery of the final
form of the Merger Agreement and the delivery by Acquisition of written
commitments for the necessary financing to consummate the transaction.
At approximately 6:00 p.m. on the following day, February 13, 1998,
Acquisition received from its prospective financing sources executed commitment
letters for financing to consummate the Merger, and Ten Ideas and Acquisition
delivered to the Company's counsel an executed counterpart of the Merger
Agreement and the written financing commitments, whereupon the Company issued a
press release announcing the Merger and a simultaneous release announcing its
financial results for the fourth quarter of fiscal 1997 and the full fiscal
year.
FAIRNESS OF THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS.
The Board of Directors by unanimous vote of all of the directors, has
approved the Merger Agreement and the transactions contemplated thereby and
determined that the Merger is fair to, and in the best interests of, the
stockholders of the Company. The Board of Directors recommends that all holders
of Shares vote their Shares in favor of the Merger.
19
The Board of Directors has reviewed the Company's position within the
restaurant industry, the near and longer term prospects for that industry, and
the strategic alternatives available to the Company, all with a view to
maximizing stockholder value. In conducting its review, the Board considered the
Company's results of operations, including those for the fourth quarter of
fiscal 1997, which fell considerably short of securities analysts' expectations.
In light of the Board's review of the Company's competitive position and recent
operating results, anticipated trends in the industry, and the prospects for the
Company, the Board determined that it would be in the best interest of the
Company's stockholders for the Board to approve the Merger Agreement. In
approving the Merger Agreement and the transactions contemplated thereby, and
recommending that all holders Shares vote their Shares in favor of the Merger
Agreement, the Board of Directors considered the following material factors:
(i) The terms of the Merger Agreement and the fact that they were the
product of arms-length negotiations among the parties;
(ii) The trading price of shares of the Company since its initial public
offering, including recent trends;
(iii) The Company's projected financial performance, competitive position
and current trends in the restaurant industry;
(iv) The results of the process undertaken by NMS to identify and solicit
indications of interest from selected potential purchasers with respect
to the purchase of the Company;
(v) The presentation by NMS at the December 4, 1997 and February 12, 1998
meetings of the Board of Directors, and the oral opinion of NMS delivered
to the Board at the February 12, 1998 meeting (which was subsequently
confirmed in writing) to the effect that, as of such date and based upon
the assumptions and the other matters to be set forth in its written
opinion, the $8.00 per Share consideration to be received by the holders
of Shares in the Merger is fair to such holders from a financial point of
view. A copy of the opinion of NMS, which sets forth the assumptions
made, the matters considered and the limitations of the review undertaken
by NMS, is attached hereto as ANNEX II. Stockholders are urged to read
the opinion of NMS carefully in its entirety;
(vi) The fact that the terms of the Merger Agreement permit the Board of
Directors, if required by the Board's fiduciary duties, to withdraw its
recommendation of the Merger to accept an acquisition proposal which is
more favorable to the Bertucci's stockholders upon payment of a
reasonable break up fee and reimbursement of expenses;
(vii) The fact that an affirmative vote of the holders of two-thirds in
interest of the outstanding shares of Bertucci's Common Stock is required
to approve and adopt the Merger Agreement.
(viii) The fact that the offer made by Ten Ideas was for cash and
accompanied by financing commitments, subject to customary conditions;
and
(ix) The availability of dissenters' rights of appraisal in the Merger.
The Board of Directors did not assign relative weights to the above factors
or determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendations as being based on the totality
of the information presented to and considered by it.
20
OPINION OF FINANCIAL ADVISOR
Pursuant to an engagement letter dated December 5, 1997 (the "Engagement
Letter"), the Special Committee of the Board of Directors (the "Special
Committee") engaged NMS to act as its exclusive financial advisor in connection
with the consideration by the Company of various strategic and financial
alternatives available to it to maximize stockholder value. NMS is a nationally
recognized firm and, as part of its investment banking activities, is regularly
engaged in the valuation of businesses and their securities in connection with
merger transactions and other types of acquisitions, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. The Special Committee selected
NMS as its financial advisor on the basis of its experience and expertise in
transactions similar to the Merger and its reputation and experience in the
restaurant and investment communities and its historical investment banking
relationship with the Company.
In connection with the consideration by the Special Committee of the merits
of the Merger, NMS was asked under the terms of the Engagement Letter to perform
various financial analyses and deliver to the Special Committee its opinion
based on such analyses. At the February 12, 1998 meeting of the Special
Committee, NMS delivered its oral opinion, and subsequently confirmed in writing
as of such date, that the consideration to be received by the stockholders of
the Company in the Merger is fair to Bertucci's stockholders from a financial
point of view (the "NMS Opinion"). No limitations were imposed by the Special
Committee upon NMS with respect to the investigations made or the procedures
followed by it in rendering its opinion except that NMS was not authorized to,
and did not, solicit any indications of interest from any potential third party,
either financial or strategic, to acquire all or any part of the Company other
than a group of potential strategic and financial buyers selected by the Company
in consultation with NMS.
THE FULL TEXT OF NMS' WRITTEN OPINION TO THE COMPANY'S BOARD OF DIRECTORS,
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS OF
REVIEW BY NMS, IS ATTACHED HERETO AS ANNEX II AND IS INCORPORATED HEREIN BY
REFERENCE AND SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY IN CONNECTION WITH
THIS PROXY STATEMENT. THE FOLLOWING SUMMARY OF NMS' OPINION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION. NMS' OPINION IS ADDRESSED
TO THE SPECIAL COMMITTEE ONLY AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
STOCKHOLDER OF THE COMPANY AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE SPECIAL
MEETING.
In connection with its opinion, NMS has among other things: (i) reviewed
certain publicly available financial and other data with respect to the Company,
including the consolidated financial statements for recent years and interim
periods to December 27, 1997 and certain other relevant financial and operating
data relating to the Company made available to NMS from published sources and
from the internal records of the Company; (ii) reviewed the financial terms and
conditions of the draft Merger Agreement; (iii) reviewed certain publicly
available information concerning the trading of, and the trading market for, the
Company's common stock; (iv) compared the Company from a financial point of view
with certain other companies in the restaurant industry that NMS deemed to be
relevant; (v) considered the financial terms, to the extent publicly available,
of selected recent business combinations of companies in the restaurant industry
which NMS deemed to be comparable, in whole or in part, to the Merger; (vi)
reviewed and discussed with representatives of the management of the Company
certain information of a business and financial nature regarding the Company;
(vii) made inquiries regarding and discussed the Merger and the draft Merger
Agreement and other matters related thereto with the Company's counsel; (viii)
made inquiries of selected third parties on a confidential basis regarding an
investment in or acquisition of the Company; and (ix) performed such other
analyses and examinations as NMS deemed appropriate.
21
Based upon the foregoing, but subject to the limitations set forth below and
in reliance upon the assumptions set forth below, NMS provided the Special
Committee with its opinion as investment bankers that, as of the date of the NMS
Opinion, the consideration to be received by the stockholders of the Company
pursuant to the Merger was fair to the holders of such Shares from a financial
point of view. The terms of the Merger and the amount of the consideration to be
received by stockholders of the Company thereunder were determined pursuant to
negotiations between the Company and Ten Ideas and not pursuant to
recommendations of NMS.
In connection with its review, NMS did not independently verify the
foregoing information and relied on such information being accurate and complete
in all material respects. With respect to the financial forecasts for the
Company, NMS assumed for purposes of its opinion that the forecasts were
reasonably prepared on bases reflecting the best available estimates at the time
of preparation as to the future financial performance of the Company and that
the forecasts provided a reasonable basis upon which NMS could form its opinion.
NMS also assumed that there were no material changes in the Company's assets,
financial condition, results of operations, business or prospects since the date
of the last financial statements made available to NMS. NMS relied on advice of
counsel and the independent accountants to the Company as to all legal and
financial reporting matters, respectively, with respect to the Company, the
Merger and the draft Merger Agreement. NMS has assumed that the Merger will be
consummated in a manner that complies in all respects with the applicable
provisions of the Exchange Act and all other applicable federal and state
statutes, rules and regulations. In addition, NMS did not assume responsibility
for making an independent evaluation, appraisal or physical inspection of the
assets or liabilities (contingent or otherwise) of the Company and was not
furnished with any such appraisals. Finally, NMS' opinion was based on economic,
monetary, market and other conditions as in effect on, and the information made
available to NMS as of February 12, 1998.
NMS also assumed with the Company's consent that the Merger Agreement will
be consummated in accordance with the terms described in the Merger Agreement,
without any amendments thereto, and without waiver by the Company of any of the
conditions to its obligations thereunder.
Set forth below is a brief summary of selected analyses presented by NMS to
the Special Committee on February 12, 1998 in connection with the NMS Opinion.
ANALYSIS OF PREMIUMS PAID
NMS reviewed the acquisition premiums paid for two comparable groups of
selected public companies for certain periods prior to announcing a transaction
(premiums paid one day, one week and four weeks prior). For the first group,
consisting of 127 transactions valued at between $50 million and $200 million,
the mean and median premiums paid in the transaction as compared to one day
prior to the announcement of the transaction were 24.7% and 20.3%, respectively,
as compared to a premium of approximately 33.0% to be paid for Bertucci's in the
Merger. A valuation based on an analysis of premiums paid on this comparable
group yields a price range for the Company of $7.37 to $8.05 per share versus
the Cash Price of $8.00 per share. The average and median acquisition premium on
comparable restaurant buyout offers, the second group reviewed, yielded a mean
and median premium of 23.0% and 19.5%, respectively. A valuation based on an
analysis of such premiums paid yielded an implied per share valuation of $7.32
to $7.53 versus the Cash Price of $8.00 per share.
22
COMPARABLE COMPANY ANALYSIS
NMS analyzed a group of fourteen comparable public companies that included
selected restaurant companies. As a multiple of last twelve months' ("LTM")
revenue, earnings before interest, taxes, depreciation and amortization
("EBITDA") and EBIT, the restaurant comparable companies trade at a median of
0.9x, 6.3x and 10.0x, respectively, indicating a realistic valuation range for
the Company of between $6.00 and $10.00 per share. From this analysis, NMS also
determined that the Cash Price of $8.00 per share, representing a 20.5x price to
1997 earnings ratio, represents a fair offer when compared to the prevailing
price to LTM earnings ratios for other comparable restaurant companies
(mean: 17.1x; median: 13.8x). NMS also analyzed a subgroup of four restaurant
companies within the group of selected restaurant companies which it believed to
be particularly comparable to the Company (including Au Bon Pain, Sbarro, Inc.,
Uno Restaurant Corp. and Rock Bottom Restaurants (Old Chicago Pizzeria)). Based
on LTM EBITDA for this group, NMS arrived at a realistic valuation range for the
Company of $6.82 to $6.97 per share, compared to the Cash Price of $8.00.
COMPARABLE TRANSACTIONS ANALYSIS
NMS developed a list of sixteen comparable merger and acquisition
transactions involving selected restaurant companies to determine comparable
transaction multiples of revenue, EBITDA and net income. From this analysis, NMS
determined that the $8.00 Cash Price, representing a multiple of approximately
5.7x LTM EBITDA, compares favorably to the multiples paid for other comparable
restaurant companies (mean: 5.1x; median: 5.7x). Additionally, the median
comparable transaction multiple of equity value to net income was 17.7x,
indicating a per share valuation for the Company of $6.94 versus the Cash Price
of $8.00 per share.
No other company or transaction used in the above analysis as a comparison
is identical to the Company or the Merger. Accordingly, an analysis of the
results of the foregoing involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading value of the
companies to which the Company and the Merger are being compared. Mathematical
analysis (such as determining average or median) is not, in itself, a meaningful
method of using comparable transaction data.
DISCOUNTED CASH FLOW ANALYSIS
NMS applied a discounted cash flow analysis to the financial cash flow
forecasts for the Company for calendar years 1998 to 2002. Using this
information, NMS calculated the net present value of free cash flows the Company
could generate through 2002 using discount rates of 10%, 11% and 12%. NMS'
estimate of the appropriate discount rate was based on the weighted average cost
of capital of comparable restaurant companies. NMS also calculated the terminal
value of the Company in the year 2002 based on exit multiples of 2002 EBITDA
ranging from 6.0x to 8.0x and discounted these terminal values using discount
rates of 10%, 11% and 12%. This analysis indicated the Company's computed per
share price is $7.01 to $9.37.
Inherent in any discounted cash flow valuation are the use of a number of
assumptions, including the accuracy of projections, and the subjective
determination of an appropriate terminal value and discount rate to apply to the
projected cash flows of the entity under examination. Variations in any of these
assumptions or judgements could significantly alter the results of a discounted
cash flow analysis.
23
The summary set forth above does not purport to be a complete description of
the presentation by NMS to the Special Committee or the analyses performed by
NMS. The preparation of a fairness opinion necessarily is not susceptible to
partial analysis or summary description. NMS believes that such analyses and the
summary set forth above must be considered as a whole and that selecting
portions of its analyses and of the factors considered, without considering all
such analyses and factors, would create an incomplete view of the analyses set
forth in its presentation to the Special Committee. In addition, NMS may have
given various analyses more or less weight than other analyses, and may have
deemed various assumptions more or less probable than other assumptions, so that
the ranges of valuations resulting from any particular analysis described above
should not be taken to be NMS' view of the actual value of the Company.
In performing its analyses, NMS made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of the Company. The analyses
performed by NMS are not necessarily indicative of actual values or actual
future results, which may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as part of NMS' analysis of
the fairness of the Merger to the Company stockholders and were provided to the
Special Committee in connection with the delivery of the NMS Opinion. The
analyses do not purport to be appraisals or to reflect the prices at which a
company might actually be sold or the prices at which any securities may trade
at the present time or at any time in the future. NMS used in its analyses
various projections of future performance prepared by the management of the
Company. The projections are based on numerous variables and assumptions which
are inherently unpredictable and must be considered not certain of occurrence as
projected. Accordingly, actual results could vary significantly from those set
forth in such projections.
As described above, the NMS Opinion and presentation to the Special
Committee were among the many factors taken into consideration by the Company's
Board of Directors in making its determination to approve, and to recommend that
its stockholders approve, the Merger.
Pursuant the Engagement Letter, the Company paid NMS (i) a retainer fee of
$50,000 on December 5, 1997, and (ii) an additional fee of $250,000 on February
12, 1998 following the delivery of the NMS Opinion, both of which will be
credited against any fee payable to NMS upon consummation of the Merger. Upon
consummation of the Merger, the Company will become obligated to pay NMS a fee
of approximately $1.25 million. The Company has also agreed to reimburse NMS for
its reasonable out-of-pocket expenses. Pursuant to a separate letter agreement,
the Company has agreed to indemnify NMS, its affiliates, and their respective
partners, directors, officers, agents, consultants, employees and controlling
persons against certain liabilities, including liabilities under the federal
securities laws.
In the past, NMS has provided financial advisory and investment banking
services to the Company and has received customary fees for the rendering of
such services. In the ordinary course of its business, NMS actively trades
securities of the Company for its own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER; CONFLICTS OF INTEREST
In considering the recommendation of the Board of Directors with respect to
the Merger, stockholders should be aware that certain members of Bertucci's
Board of Directors have certain interests that present them with actual or
potential conflicts of interest in connection with the Merger. The Board of
Directors was aware of these conflicts and considered them among the other
matters described under
24
"SPECIAL FACTORS--Fairness of the Merger; Recommendation of the Board of
Directors," "THE MERGER--Effect on Stock Options and Employee Benefit Matters,"
and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
In particular, Mr. Crugnale, the Company's founder, President and Chief
Executive Officer and a member of the Board of Directors, may benefit from the
Merger as described under "--Purpose of the Merger." In addition, the other
members of the Board of Directors and officers of the Company beneficially own
Shares and options to purchase Shares for which they would receive the same cash
payments as other stockholders upon the closing of the Merger (less the exercise
price, in the case of options).
The compensation levels and employee benefit plans and programs for
directors, officers and employees of Bertucci's after the Merger are expected to
be substantially the same as those currently provided by Bertucci's, except that
the Company's existing stock option plans and Employee Stock Purchase Plan will
be terminated. Ten Ideas will consider the implementation of a new
profit-sharing plan following the Merger. No director or officer of the Company
will receive any payment under any employment or severance agreement as a result
of the Merger.
PURPOSE OF THE MERGER
The Company has entered into the Merger Agreement because the Board of
Directors concluded that the Merger was fair to, and in the best interests of,
the Company's stockholders. In particular, the Board concluded that it was
unlikely at the time that the Company could be sold in a transaction, or any
transaction could be consummated, other than the Merger, in which the
stockholders would have an opportunity to obtain a premium to current market
prices, and that the $8.00 per Share price payable in the Merger represented an
attractive alternative to the potential for future market appreciation of the
Bertucci's Common Stock.
The purpose of the Merger for Ten Ideas and Mr. Crugnale is to enable Mr.
Crugnale to own and operate the business which he founded, and to control the
business and affairs of Bertucci's to a greater extent than he is currently
able. Ten Ideas regards the acquisition of the Shares in the Merger as an
attractive investment opportunity because it believes that Bertucci's future
business prospects are favorable, although undervalued by the public equity
markets. By rolling over all of Mr. Crugnale's existing equity interest in
Bertucci's into Ten Ideas, and by leveraging that investment value, Ten Ideas
will be able to provide the unaffiliated stockholders of the Company with an
opportunity to realize now on the fair value of their shares. Although the
effect of the Merger will be to substantially increase the Company's leverage,
and hence its investment risk, Ten Ideas believes that Bertucci's operations
will provide adequate cash flow to service the debt incurred to fund the Merger,
and over time will increase stockholder value. In addition, operating as a
private company should allow Bertucci's increased flexibility to slow down
growth and close under-performing restaurants when appropriate, and to take such
other actions as needed to manage and operate its business. These actions are
often not well received by the public equity markets due to such markets' focus
on short-term increases in reported quarterly earnings.
In order to provide a prompt and orderly transfer of ownership of Bertucci's
from the public stockholders to Ten Ideas, in light of relevant financial,
legal, tax and other considerations, and to facilitate the required financing
for the transaction, the acquisition has been structured as a merger pursuant to
which, if the Merger Agreement is adopted by the requisite vote of the
stockholders, Acquisition will be
25
merged with and into Bertucci's. Following the Merger, the Bertucci's Common
Stock currently outstanding will no longer represent an equity interest in
Bertucci's.
CERTAIN EFFECTS OF THE MERGER
Upon consummation of the Merger, the stockholders of the Company will be
entitled to receive a payment in cash of $8.00 per Share, without interest, or
to exercise appraisal rights pursuant to the MGL if properly demanded prior to
the vote on the Merger at the Special Meeting. The existing stockholders (other
than Mr. Crugnale through his ownership of Ten Ideas), as of the Effective Time,
will have no continuing ownership interest in the Company and will no longer
participate in the future earnings and potential growth of the Company.
As a result of the Merger, the Company will become a privately held,
wholly-owned subsidiary of Ten Ideas. From the Effective Time, the Shares will
no longer be traded on Nasdaq, and price quotations with respect to sales of
Shares in the public market will no longer be available. The registration of the
Shares under the Exchange Act will terminate and this termination will eliminate
the Company's obligation to file periodic financial and other information with
the Commission and will make certain of the provisions of the Exchange Act, such
as the short-swing profit recovery provisions of Section 16(b) and the
requirement, under the proxy rules of Regulation 14A, of furnishing a proxy or
information statement in connection with stockholders meetings no longer
applicable to the Company.
Pursuant to the terms of the Merger Agreement, the Board of Directors of
Acquisition shall become, upon consummation of the Merger, the Board of
Directors of the Surviving Corporation. Mr. Crugnale is the sole current
director of Acquisition and is expected to be the only director of the Surviving
Corporation.
PLANS FOR THE COMPANY AFTER THE MERGER
It is expected that following the Merger the business and operations of the
Company will, except as set forth in this Proxy Statement, be conducted by
Surviving Corporation substantially as they are currently conducted.
Except as described in this Proxy Statement, neither Mr. Crugnale, Ten
Ideas, nor Acquisition has any present plans or proposals that relate to or
would result in an extraordinary corporate transaction involving the Company's
corporate structure, business or management, such as a merger, reorganization,
liquidation, relocation of any operations of the Company or sale or transfer of
a material amount of assets. However, Ten Ideas will continue to evaluate the
business and operations of the Surviving Corporation following the Merger and
may propose or develop new plans and proposals which it considers to be in the
best interests of the Surviving Corporation and its stockholders. Specifically,
Ten Ideas currently intends to continue the Company's current strategy of
slower, more controlled growth at a rate of four to six new restaurants per
year, rather than eight to ten stores as in some recent years, although the
Company intends to proceed with the opening of each of the seven restaurants
currently under development. See "THE COMPANY-- Restaurant Locations and
Expansion Plans."
RISK THAT THE MERGER WILL NOT BE CONSUMMATED
Consummation of the Merger is subject to several conditions, including
receipt of the required stockholder approval, the absence of an injunction or
other order restraining consummation of the transactions contemplated by the
Merger Agreement, receipt by Ten Ideas and/or Acquisition of the
26
required financing to complete the Merger and to pay related fees and expenses
and holders of not more than 10% of the outstanding Shares electing to demand
appraisal rights. See "THE MERGER--Conditions to the Consummation of the Merger"
and "APPRAISAL RIGHTS." Although, as described in "THE MERGER--Merger
Financing," Ten Ideas has obtained commitments for the required financing, these
commitments contain numerous conditions. Therefore, even if the requisite
stockholder approval is obtained, there can be no assurance that the Merger will
be consummated.
The Merger Agreement provides that Ten Ideas is entitled to payment from
Bertucci's of a $1.5 million termination fee and reimbursement from Bertucci's
for its expenses incurred in connection with the Merger Agreement and
consummation of the transactions contemplated thereby in the event that the
Merger Agreement is terminated by Bertucci's because of the exercise by the
Board of Directors of its right under the Merger Agreement to accept another
acquisition proposal pursuant to its fiduciary obligations to stockholders under
applicable law, or if the Merger Agreement is terminated by Ten Ideas following
the Board of Directors of Bertucci's (i) withdrawal or modification of, in a
manner adverse to Ten Ideas, its approval or recommendation of the Merger or
(ii) approval of another acquisition proposal; provided that such reimbursement
for expenses shall not exceed an aggregate of $750,000. In addition, the Merger
Agreement provides for certain other circumstances in which such expenses must
be reimbursed. See "CERTAIN PROVISIONS OF THE MERGER AGREEMENT-- Expenses and
Certain Required Payments" and "--Conditions to the Consummation of the Merger."
It is expected that if the Merger Agreement is not adopted by the
stockholders, or if the Merger is not consummated for any other reason, the
Company's current management, under the direction of the Board of Directors,
will continue to manage the Company as an on-going business. No other
transaction is currently being considered by the Company as an alternative to
the Merger.
CERTAIN RISKS IN THE EVENT OF BANKRUPTCY
If the Company is insolvent at the Effective Time or becomes insolvent as a
result of the Merger, the transfer of funds representing the $8.00 per Share
price payable to stockholders of the Company upon consummation of the Merger may
be deemed to be a "fraudulent conveyance" under applicable law, and therefore
may be subject to claims of certain creditors of the Company. If such a claim is
asserted by the creditors of the Company after the Merger, there is a risk that
persons who were stockholders of the Company at the Effective Time will be
ordered by a court to turn over to the Company's trustee in bankruptcy all or a
portion of the $8.00 per Share in cash they received upon the consummation of
the Merger.
Based upon the projected capitalization of the Company at the time of the
Merger and projected results of operations and cash flow after the Merger,
management of the Company has no reason to believe that the Company and its
subsidiaries, on a consolidated basis, will be insolvent immediately after
giving effect to the Merger.
LITIGATION CHALLENGING THE MERGER
After the announcement of the Merger, three purported class action lawsuits
were filed in February, 1998 in Massachusetts Superior Court, by the same
counsel, against the Company and its Board of Directors in connection with the
Merger. Plaintiffs claim that the Merger is, or consummation thereof would be,
wrongful, unfair and in breach of the individual defendant's fiduciary duties.
The plaintiffs allege that the Cash Price is grossly inadequate, the Merger
would be consummated without an auction of the
27
Company or other market check, and the defendants allegedly possess non-public
information concerning the condition and prospects of the Company. The
plaintiffs in these purported class actions seek preliminary and permanent
injunctive relief against the Merger, unspecified monetary damages and other
relief. Defendants vigorously contest these claims and believe that they are
without merit. To date, the plaintiffs have not filed a motion for a preliminary
injunction or other preliminary relief.
28
THE COMPANY
GENERAL
As of the fiscal year ended December 27, 1997, the Company operated a chain
of eighty-four full-service, Italian restaurants under the "Bertucci's Brick
Oven Pizzeria" name in the Northeastern and Mid-Atlantic regions, and the
Chicago, Illinois, and Atlanta, Georgia, metropolitan areas. The restaurants'
menu features original-recipe gourmet pizza, prepared in brick ovens, and other
high-quality, moderately-priced Italian food. In addition, the Company also
operates Sal and Vinnie's Sicilian Steakhouse, which was opened in the first
quarter of 1997 in Norwood, Massachusetts.
Bertucci's seeks to distinguish itself from its competitors in the family
and adult casual-dining market segments through offering:
- a distinctive, yet moderately-priced menu that features fresh, natural
ingredients and includes brick-oven baked gourmet pizzas and bread, a wide
variety of pasta items, appetizers, and desserts;
- a contemporary European-style design, centered around a large-display
cooking area with brick ovens, customized for each particular restaurant's
location, with no two restaurants looking alike; and
- a relaxed, family atmosphere, as evidenced by moderate sales of alcoholic
beverages which, during fiscal year 1997 accounted for only 8.7% of net
sales.
The Bertucci's concept features lower-cost food items and a restaurant
design with a lower capital investment (averaging $1.2 million) than many
competitors that offer a broader menu. Accordingly, the restaurants are able to
offer customers excellent value while permitting the Company to maintain
relatively high restaurant-unit operating margins.
The first Bertucci's Brick Oven Pizzeria was opened in Somerville,
Massachusetts in 1981 by the Company's founder, President and Chief Executive
Officer, Joseph Crugnale. In 1985, the Company began expanding and as of
December 27, 1997, operated eighty-four Bertucci's restaurants, of which
thirty-one were located in Massachusetts, two each were located in Rhode Island
and Washington, DC, three were located in New Jersey and New Hampshire, four
each were located in New York and Pennsylvania, six each were located in Georgia
and Maryland, nine were located in Connecticut, and seven were located in
Illinois and Virginia. In addition, the Company operates one Sal and Vinnie's
restaurant in Massachusetts. During the 1996 fiscal year, two locations in
Florida and one location in New Jersey were closed. Four Bertucci's restaurants
and one Sal and Vinnie's restaurant were opened in 1997, and the Company expects
to open five to six restaurants in 1998. The Company's strategy is to pursue
controlled expansion in contiguous areas that can support multiple locations,
with an emphasis on future expansion into existing markets.
Average sales per restaurant open for the full period were $1,673,000,
$1,671,000, and $1,712,000 in 1995, 1996, and 1997, respectively.
The Company's restaurants are full-service, casual-dining restaurants that
feature gourmet Italian food with an emphasis on brick-oven baked pizzas and
creative pasta dishes. During fiscal year 1997, sales of pizza accounted for
approximately 40% of net sales. Through development of a distinctive menu and a
contemporary European-style design, the Company strives to offer a unique dining
experience with excellent value for the price. The Company's restaurants appeal
to a diverse target market. In addition to adult-dining, family-dining is
encouraged, and a special menu is provided for children. All of the
29
Company's restaurants are open for lunch and dinner, seven days a week. Most
items on the menu may be purchased for take-out service or delivery, which,
during fiscal year 1997, accounted for approximately 27% of net sales.
The Company's signature product, gourmet pizza, is offered with a wide
variety of cheese, vegetable, and meat toppings, and is prepared in brick ovens.
By baking its pizzas in brick ovens at an unusually high temperature, but for a
relatively short period of time, the Company is able to produce a light crust
while preserving the flavor and moisture of the toppings. Management believes
that the Company's original recipes and brick-oven baking techniques combine to
produce a superior pizza that is difficult to duplicate. In addition to pizzas,
the Company's menu features a variety of pasta items, appetizers, soups, salads,
calzones, and desserts that are prepared fresh daily according to Bertucci's
special recipes. Natural, fresh ingredients are a cornerstone of the Bertucci's
concept. In order to ensure the uniform high-quality and freshness of its menu
offerings, the Company makes all of its own dough, sauces, mixes, and desserts.
For the fiscal year ended December 27, 1997, the average check per customer
at the Company's restaurants, including beverages, was approximately $7.40 for
lunch and approximately $9.95 for dinner. Full bar-service is available at most
of the Company's restaurants, and beer and wine are available at all locations.
In keeping with its emphasis on offering distinctive menu selections, the
Company offers Bertucci's Lite beer, a private-label beer brewed according to
the Company's proprietary specifications. Limited seating is available in the
bar areas to accommodate those waiting to be seated. The Company does not
believe that changes in public attitude toward alcoholic-beverage consumption
and stricter governmental regulation of establishments serving alcoholic
beverages will have a material adverse effect on its business.
Management believes that the unique interior decor of the Company's
restaurants contributes to the distinctive dining experience enjoyed by its
customers. Each of the Company's restaurants features a contemporary,
European-style, open-kitchen design centered around brick ovens. Ingredients are
displayed and food is prepared on polished granite counters located in front of
the brick ovens, in plain view of diners. Bocce-ball courts and outdoor patios
have been included at selected sites, further enhancing the distinctive decor.
The interior-decor theme is artistically adapted to each site, and therefore no
two restaurants are alike. The floor plan of the Company's restaurants is
flexible, permitting tables to be easily rearranged to accommodate large groups
or parties.
RESTAURANT LOCATIONS AND EXPANSION PLANS
As of December 27, 1997, the Company operated eighty-five restaurants in
Connecticut, Georgia, Illinois, Maryland, Massachusetts, New Hampshire, New
Jersey, New York, Pennsylvania, Rhode Island, Virginia, and Washington, D.C.
Through the course of the Company's expansion, management has determined
that the optimal size for the Company's restaurants is approximately 5,700
square feet, with seating for approximately 160 customers. The average cost of
opening a typical restaurant during 1997 was approximately $1.2 million, of
which $650,000 is attributable to leasehold improvements, $450,000 is
attributable to furniture, fixtures, and equipment, and $100,000 is attributable
to preopening expenses.
The Company intends to continue its strategy of adding restaurants through
controlled growth in contiguous areas that can support multiple locations, with
an emphasis on future expansion into selected Massachusetts and Pennsylvania
markets. During fiscal year 1998, the Company anticipates opening five to
30
six restaurants. So far in 1998, the Company has six Bertucci's restaurants and
one Sal and Vinnie's restaurant under development.
Expansion during fiscal year 1999 is expected to be at the level of four to
five restaurants. The Company's expansion plans are based primarily on
management's evaluation of market potential. The Company has not commissioned
any independent, third-party evaluation of its expansion plans.
All of the Bertucci's restaurants are operated by the Company, and the
Company currently has no plans to develop a franchise program.
MARKETING
The Company focuses on the family and adult casual-dining market segments.
To reach these segments, it targets its restaurant locations for areas with a
median to high family income. Management believes that the Company's commitment
to customer service and price value is the most effective approach to attracting
customers. Accordingly, the Company historically has focused its resources on
providing its customers with superior service and value, and has relied
primarily on word-of-mouth to attract new and repeat customers. Management
believes that its strategy of locating multiple restaurants within a defined
geographic area will enable newer restaurants to benefit from the
name-recognition and reputation for quality developed by existing restaurants.
The Company employs print and direct mail advertising, and conducts local
restaurant promotions. During fiscal year 1997, the Company's expenditures for
advertising and marketing were approximately 3.3% of its revenues. The Company
plans to increase its advertising expenditures in 1998 by utilizing a
combination of local media vehicles such as television, radio, outdoor
billboards, and direct mail in most of its major markets.
RESTAURANT OPERATIONS AND MANAGEMENT
The Company strives to maintain quality and consistency in its restaurants
through the careful training and supervision of personnel and the establishment
of standards relating to food and beverage preparation, maintenance of
facilities, and conduct of personnel. The Company maintains financial and
accounting controls for each of its restaurants through use of centralized
accounting and management information systems. Sales information is collected
daily from each restaurant, and restaurant managers are provided with weekly
operating statements for their locations. Cash is controlled through daily
deposits of sales proceeds in local operating accounts, the balances of which
are wire-transferred daily to the Company's principal operating account.
Each new restaurant employee of the Company participates in a ten day
training program during which he or she works under the close supervision of a
restaurant manager. Management strives to instill enthusiasm and dedication in
its employees. Management regularly solicits employee suggestions concerning
restaurant operations, and strives to be responsive to employee concerns. A
toll-free number is available for use by any employee who has a suggestion,
comment, or complaint, and management meets regularly with employees at each of
the restaurants.
Restaurant managers, many of whom are drawn from the Company's restaurant
personnel, complete an eight-to-ten-week training program during which they are
instructed in areas including food quality and preparation, customer service,
alcoholic beverage service, liquor liability avoidance, and employee relations.
Restaurant managers are provided with operations manuals relating to food and
beverage preparation, and operation of restaurants.
31
Management has made a conscious commitment to ensure customer service of the
highest standards. Employees work toward the goal of 100% customer satisfaction,
and are empowered to address customers' needs with immediate attention and
action. A toll-free Customer Comment Line is available to all customers, with a
guaranteed response in twenty-four hours.
Operations at the Company's restaurants are managed by eleven region
managers, each of whom is responsible for supervising the operations of six to
twelve restaurants. The region managers report directly to the Vice
President-Operations. Region managers meet at least once a week with restaurant
management to review operations and to resolve issues. Working with region and
restaurant managers, the Company's executive management defines operations and
performance objectives for each restaurant. An incentive plan has been
established in which region and restaurant managers participate. Awards under
the incentive plan are tied to achievement of specified operating targets.
The staff for a typical Bertucci's restaurant consists of one general
manager, two managers, and approximately forty to sixty hourly employees, most
of whom are part-time personnel. The Company holds regular meetings of its
restaurant managers that cover new products, continuing training, and aspects of
business management.
PURCHASING OPERATIONS
Management believes in maintaining as much on-site preparation of food
products at the restaurants as possible in order to ensure freshness and
quality, and to enhance the dining experience through the visual display of
fresh ingredients. The Company negotiates directly with manufacturers,
importers, brokers, and wholesale suppliers of primary food ingredients and
beverage products to ensure consistent quality and freshness of products in its
restaurants, and to obtain competitive pricing. Management believes that all
essential food and beverage products are available from alternative, qualified
suppliers.
COMPETITION
The restaurant business is highly competitive and is affected by many
factors, including general economic conditions, changes in consumer taste and
spending habits, and population and traffic patterns. The Company competes with
a number of restaurants within its markets, both locally owned and units of
regional or national chains. Many of the Company's competitors have greater
financial resources and longer operating histories than the Company. The Company
believes that its ability to compete effectively will continue to depend upon
its ability to offer high-quality, moderately-priced food in a full-service,
distinctive dining environment.
GOVERNMENT REGULATION
The Company's restaurants are subject to numerous federal, state, and local
laws affecting health, sanitation, and safety standards, as well as to state and
local licensing regulation of the sale of alcoholic beverages. Each restaurant
has appropriate licenses from regulatory authorities allowing it to sell liquor,
and/or beer and wine, and each restaurant has food service licenses from local
health authorities. The Company's licenses to sell alcoholic beverages must be
renewed annually and may be suspended or revoked at any time for cause,
including violation by the Company or its employees of any law or regulation
pertaining to alcoholic beverage control, such as those regulating the minimum
age of patrons or employees, advertising, wholesale purchasing, inventory
control, handling, and storage. The failure of a restaurant to obtain or retain
liquor or food service licenses could adversely affect operations. However,
32
each restaurant is operated in accordance with standardized procedures designed
to ensure compliance with all applicable codes and regulations.
In some states, the Company is subject to "dram-shop" statutes which
generally provide that a person who is injured by an intoxicated person may
attempt to recover damages from an establishment that served alcoholic beverages
to the person who caused injury. While the Company carries liquor-liability
coverage as part of its existing comprehensive general liability insurance, a
judgment against the Company under a dram-shop statute in excess of the
Company's liability coverage could have a material adverse effect on the
Company.
The development and construction of additional restaurants will be subject
to compliance with applicable zoning, land use, and environmental regulations.
The Company is also subject to federal and state employment laws concerning such
items as minimum wages, working conditions, overtime, tip credits,
discrimination, harassment, and immigration. The Company believes that it is in
material compliance with each such law and that continued compliance will not
significantly affect its restaurant operating costs.
SERVICE MARKS
The Company has registered the names "Bertucci's," "Bertucci's Brick Oven
Pizzeria," and "Sal and Vinnie's Sicilian Steakhouse," as service marks and
trademarks with the United States Patent and Trademark Office. The Company is
aware of names similar to that of the Company used by third parties in certain
limited geographical areas. Such third-party use may prevent the Company from
licensing the use of its mark for restaurants in such areas. Except for these
areas, the Company is not aware of any infringing uses that could materially
affect its business. The Company has filed applications with the United States
Patent and Trademark Office to register "Food Does Not Lie" as a service mark,
and its olive design as a trademark and service mark. The Company intends to
protect its service marks and trademarks by appropriate legal action whenever
necessary.
EMPLOYEES
As of February 13, 1998, the Company employed 4,685 persons, fifty-eight of
whom were corporate personnel, 307 of whom were region, restaurant, or trainee
managers, and 4,320 of whom were restaurant personnel.
The Company considers its employee relations to be good. None of the
Company's employees are covered by a collective-bargaining agreement.
PROPERTIES
At the end of fiscal year 1997, all of the Company's restaurants, except its
locations in Westport, Connecticut, Columbia, Maryland, Peabody and Marlboro,
Massachusetts, and Wayne, Pennsylvania, were established in leased space. The
Sal and Vinnie's restaurant located in Norwood, Massachusetts, is leased from
the Company's President. Initial restaurant lease terms range from two years to
forty years. The majority of the leases provide for an option to renew for
additional terms ranging from five years to twenty years. All of the Company's
leases provide for a specified annual rental, and most leases call for
additional rents based on sales volumes exceeding specified levels. Generally,
the leases are net leases that require the Company to pay all taxes, insurance,
and maintenance costs.
33
In September 1993, the Company moved into its corporate headquarters in
Wakefield, Massachusetts. The Company acquired a 60,000-square-foot office
building in December 1992, and after renovations were completed, approximately
20,000 square feet of office and administrative space were created. Another
40,000 square feet of storage space is available and can be utilized as
additional office space when needed.
LEGAL PROCEEDINGS
From time to time, lawsuits are filed against the Company in the ordinary
course of business. Except as set forth below, the Company is not a party to any
litigation that, in the judgment of management after consultation with counsel,
is likely to have a material adverse effect on the Company or its business, and
the Company is not aware that any such litigation is threatened. These separate
lawsuits, each purporting to be a class actions were filed in February, 1998 by
the same counsel against the Company and its Board of Directors in connection
with the Merger. Plaintiffs in these actions charge that the Merger is, or
consummation thereof would be, wrongful, unfair and in breach of the individual
defendants' fiduciary duties. See "SPECIAL FACTORS--Litigation Challenging the
Merger."
34
THE MERGER
BACKGROUND OF THE MERGER
As described above, the decision of the Board to approve, and recommend
adoption and approval by Bertucci's stockholders of, the Merger Agreement and
the transactions contemplated thereby, including the Merger, followed extensive
negotiations between the Special Committee and Ten Ideas regarding the terms of
the Merger. The Board's deliberations included a detailed review of Bertucci's
business, results of operations and prospects, including the likelihood of
effecting an alternative transaction and the ranges of values to Bertucci's
stockholders that might be achievable in an alternative transaction and the
financial and other terms of the proposed Merger. For a statement of the
material factors considered by the Board in connection with its approval and
recommendation, See "SPECIAL FACTORS--Purpose of the Merger; Recommendation of
the Board."
THE BOARD RECOMMENDS THAT BERTUCCI'S STOCKHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTION CONTEMPLATED THEREBY,
INCLUDING THE MERGER.
Four of the five members of the Board who voted to approve the Merger
Agreement and the transactions contemplated thereby, including the Merger, are
non-employees of the Company and its subsidiaries. The fifth voting member is
Joseph Crugnale, the Company's founder, President and Chief
Executive Officer.
MERGER CONSIDERATION
Subject to certain provisions as described herein, other than with respect
to shares of Bertucci's Common Stock owned by Ten Ideas, the Company or any
wholly owned subsidiary of the Company, and with respect to dissenting shares,
each issued and outstanding share of Bertucci's Common Stock (other than
Electing Shares as defined below) will be entitled to receive in cash from the
Company following the Merger an amount equal to $8.00.
Any shares of Bertucci's Common Stock owned by the Company or by any wholly
owned subsidiary of the Company, will automatically be canceled at the Effective
Time and will cease to exist.
EFFECTIVE TIME
The Merger will become effective upon the filing of the Articles of Merger
with the Secretary of State of the Commonwealth of Massachusetts or upon such
other date as is specified in such Articles of Merger in accordance with the MGL
and as Ten Ideas and the Company shall agree (the "Effective Time"). Subject to
certain limitations, the Merger Agreement may be terminated by either party if,
among other reasons, the Merger has not been consummated on or before July 31,
1998. See "CERTAIN PROVISIONS OF THE MERGER AGREEMENT--Conditions to the
Consummation of the Merger" and "--Termination."
CONVERSION OF ACQUISITION STOCK
In the Merger, the shares of stock of Acquisition issued and outstanding
immediately prior to the Effective Time will become the shares of the Surviving
Corporation.
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CONVERSION OF BERTUCCI'S COMMON STOCK; PROCEDURES FOR EXCHANGE OF CERTIFICATES
At the Effective Time, shares of Bertucci's Common Stock (other than shares
as to which appraisal rights are properly exercised) will be converted into the
right to receive the Cash Price.
As soon as practicable following the Effective Time, the Exchange Agent will
send a letter of transmittal to each holder of Bertucci's Common Stock. The
letter of transmittal will contain instructions with respect to the surrender of
certificates representing shares of Bertucci's Common Stock or fractions thereof
in exchange for cash.
STOCKHOLDERS OF THE COMPANY SHOULD NOT FORWARD STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED THE LETTER OF TRANSMITTAL.
As soon as practicable after the Effective Time, each holder of an
outstanding certificate or certificates at such time which prior thereto
represented shares of Bertucci's Common Stock shall, upon surrender to the
Exchange Agent of such certificate or certificates and acceptance thereof by the
Exchange Agent, be entitled to the amount of cash, into which the number of
shares of Bertucci's Common Stock previously represented by such certificate or
certificates surrendered shall have been converted pursuant to the Merger
Agreement. The Exchange Agent will accept such certificates upon compliance with
such reasonable terms and conditions as the Exchange Agent may impose to effect
an orderly exchange thereof in accordance with normal exchange practices. After
the Effective Time, there will be no further transfer on the records of the
Company or its transfer agent of certificates representing shares of Bertucci's
Common Stock which have been converted, in whole or in part, pursuant to the
Merger Agreement into the right to receive cash, and if such certificates are
presented to the Company for transfer, they will be canceled against delivery of
cash. Until surrendered as contemplated by the Merger Agreement, each
certificate for shares of Bertucci's Common Stock will be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the consideration contemplated by the Merger Agreement. No interest
will be paid or will accrue on any cash payable as consideration in the Merger.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, the Company has agreed to carry on its
business and that of its subsidiaries prior to the Effective Time in the usual,
regular and ordinary course of business consistent with past practice. See
"CERTAIN PROVISIONS OF THE MERGER AGREEMENT--Certain Pre-Closing Covenants."
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The obligation of the Company and Ten Ideas to consummate the Merger are
subject to various conditions, including, without limitation, obtaining
requisite stockholder approval, the termination or expiration of the relevant
waiting period under the HSR Act and the absence of any injunction or other
legal restraint or prohibition preventing the consummation of the Merger. The
Federal Trade Commission has advised the Company and Ten Ideas that the Merger
is not a reportable event under the HSR Act. See "CERTAIN PROVISIONS OF THE
MERGER AGREEMENT--Conditions to the Consummation of the Merger."
36
FEDERAL INCOME TAX CONSIDERATIONS
The receipt of cash by a Stockholder pursuant to the Merger will be treated
as a sale of stock generating capital gain equal to the cash received less the
stockholder's basis in the stock sold. Bertucci's may, in certain circumstances,
be required to withhold tax from cash paid to stockholders.
THOUGH THE FOREGOING ARE THE MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
GENERALLY APPLICABLE TO THE MERGER, THE DISCUSSION DOES NOT ADDRESS EVERY
FEDERAL INCOME TAX CONCERN THAT MAY BE APPLICABLE TO A PARTICULAR STOCKHOLDER.
EACH STOCKHOLDER IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISOR TO
DETERMINE THE TAX CONSEQUENCES TO SUCH STOCKHOLDER, IN THE LIGHT OF SUCH
STOCKHOLDER'S PARTICULAR CIRCUMSTANCES, OF THE DISPOSITION OF BERTUCCI'S COMMON
STOCK PURSUANT TO THE MERGER.
ANTICIPATED ACCOUNTING TREATMENT
The Company intends that the Merger will be treated as a leveraged purchase
transaction. Accordingly, the continuing investors in the Company will account
for their investment at its historical cost basis.
EFFECT ON STOCK OPTIONS AND EMPLOYEE BENEFIT MATTERS
At the Effective Time (x) each stock option to purchase shares of Bertucci's
Common Stock ("Company Stock Options") granted under the Company's 1989
Time-Accelerated Restricted Stock Option Plan, the 1993 Stock Option Plan for
Non-Employee Directors and 1997 Stock Option Plan (collectively, the "1989, 1993
and 1997 Stock Option Plans") outstanding immediately prior to the Effective
Time will vest, in accordance with the terms of such plans, as a consequence of
the Merger and (y) each such Company Stock Option will be canceled in exchange
for a payment from the Company (subject to any applicable withholding taxes) of
an amount equal to the product of (1) the total number of shares of Bertucci's
Common Stock subject to such Company Stock Option and (2) the excess of $8.00
over the exercise price per share of Bertucci's Common Stock subject to such
Company Stock Option, payable in cash immediately following the Effective Time.
At the Effective Time, each unexercised and outstanding Company Stock Option
granted under the Company's 1987 Stock Option Plan (the "1987 Stock Option Plan"
and, together with the 1986 and 1993 Stock Option Plans, the "Stock Option
Plans") shall, to the extent exercisable, be canceled, in accordance with the
terms of such plan, in exchange for a payment from the Company after the Merger
(subject to any applicable withholding taxes) equal to the product of (1) the
total number of vested shares of Bertucci's Common Stock subject to such Company
Stock Option and (2) the excess of $8.00 over the exercise price per share of
Bertucci's Common Stock subject to such Company Stock Option, payable in cash
immediately following the Effective Time.
The aggregate cash payment to be made on account of the cancellation of
Company Stock Options as set forth above is approximately $1.0 million.
The Stock Option Plans and the Company's Employee Stock Purchase Plan will
terminate as of the Effective Time, and following the Effective Time no holder
of a Company Stock Option nor any participant in any Stock Option Plan will have
any right thereunder to acquire equity securities of the Company following the
Merger.
37
NASDAQ DELISTING
Following the consummation of the Merger, the Company will seek to have the
Bertucci's Common Stock, which is currently traded on Nasdaq, delisted.
MERGER FINANCING
At the Effective Time, the Company, Ten Ideas and Acquisition are expected
to have entered into financing arrangements aggregating approximately $77.5
million, which will consist of both debt securities (the "Debt Securities") and
senior term and revolving credit facilities (collectively, the "Credit
Facilities"). It is anticipated that the full proceeds of the Debt Securities
and a portion of the proceeds available pursuant to the Credit Facilities would
be used to finance the conversion into cash of the shares of Bertucci's Common
Stock and stock options currently outstanding, and to refinance Bertucci's
outstanding indebtedness. In addition, the Credit Facilities would be used to
provide for Bertucci's working capital requirements at the time of and following
the Merger. On February 13, 1998, Acquisition received commitment letters to
provide such financing. The commitments are subject to customary conditions,
including the negotiation, execution and delivery of definitive documentation
with respect to the financings contemplated by the commitments.
Under the Credit Facility, BankBoston, N.A., Fleet National Bank and a
syndicate of other banks will provide the Company with $57.5 million senior
secured term and revolving credit facilities. Borrowings under the Credit
Facilities would bear interest at a margin over BankBoston, N.A.'s base rate or
the Eurodollar rate.
The Credit Facilities would mature in June, 2003, except for a $15 million
term loan that would mature in June, 2004. The obligations of the Company under
the Credit Facilities would be secured by substantially all of the Company's
assets and the stock of the Company's subsidiaries and the proceeds of the
foregoing.
The Company plans to issue $20 million original principal amount of Debt
Securities, with an interest rate of 11.0% per annum. The Debt Securities will
have a maturity of seven years from the date of issue. The Debt Securities will
be general unsecured obligations of the Company, ranking senior to all existing
and future subordinated indebtedness of the Company and pari passu in right of
payment with all other existing and future unsubordinated indebtedness of the
Company, but junior in right of payment to the Credit Facilities. The purchasers
of the Debt Securities are also expected to receive certain warrants to acquire
common stock of Ten Ideas.
The definitive agreements for the financing to be provided under the
commitment letters have not been reached. Accordingly, not all of the terms of
the financing have been finalized, and the provisions described herein may
change materially as a result of the negotiation of definitive agreements. It is
a condition to the financing that definitive agreements be entered into. In
addition, it is anticipated that the obligation of the lenders to provide
financing will be subject to the satisfaction of certain other conditions,
including among others, the satisfaction of all conditions precedent to the
Merger.
The definitive agreements for the financing are also expected to contain
numerous restrictive covenants, including covenants related to capital
expenditures, mergers and asset sales or purchases, incurrence of debt
obligations, liens and contingent obligations, termination, name changes,
transactions with affiliates, distributions and dividends and use of proceeds.
The definitive agreements also are expected to contain standard event of default
provisions, including, among other things, payment defaults,
38
misrepresentations, covenant defaults, and other material contracts,
cross-defaults into other material indebtedness, failure to have perfected liens
of purported priority, bankruptcy events, adverse judgments, and changes of
control.
FEES AND EXPENSES
The aggregate fees and expenses paid and estimated to be paid by Ten Ideas
and Bertucci's in connection with the Merger, the Financing and related
transactions are as follows:
Financing Fees $2,450,000
Investment Banking and Financial Advisory $1,665,000
Legal and Accounting $ 500,000
Printing and Distribution $ 100,000
SEC Filings $ 12,000
Miscellaneous $ 73,000
---------
TOTAL $4,800,000
---------
To the extent not paid prior to the Effective time by Ten Ideas or
Bertucci's, all such fees and expenses will be paid by the company surviving the
Merger if the Merger is consummated. If the Merger is not consummated, each
party will bear its respective fees and expenses, except as provided in the
Merger Agreement, See "THE MERGER--Fees and Expenses."
BERTUCCI'S CAPITAL STOCK
Bertucci's is authorized by its Restated Articles of Organization to issue
an aggregate of 15,000,000 shares of Common Stock, par value $.005 per share and
200,000 shares of Preferred Stock, par value $.01 per share. The following is a
summary of certain of the rights and privileges pertaining to Bertucci's capital
stock. For a full description of Bertucci's capital stock, reference is made to
the Company's Restated Articles of Organization, a copy of which is on file with
the Commission.
BERTUCCI'S COMMON STOCK
The holders of Bertucci's Common Stock are entitled to one vote per share on
all matters submitted for action by the stockholders. Stockholders holding in
excess of two-thirds in interest of the shares of Bertucci's Common Stock can,
if they elect to do so, approve the Merger. There is no provision for cumulative
voting with respect to the election of directors. Accordingly, the holders of
more than 50% of the shares of Bertucci's Common Stock can, if they choose to do
so, elect all of the directors. In such event, the holders of the remaining
shares will not be able to elect any directors.
Subject to the rights of any holders of outstanding Preferred Stock, all
shares of Bertucci's Common Stock are entitled to share in such dividends as the
Board of Directors may from time to time declare from sources legally available
therefor.
Subject to the rights of any holders of outstanding Preferred Stock, upon
liquidation or dissolution of the Company, whether voluntary or involuntary, all
shares of Bertucci's Common Stock are entitled to share equally in the assets
available for distribution to stockholders after payment of all prior
obligations of the Company.
39
BERTUCCI'S PREFERRED STOCK
The Board of Directors is also empowered under the Company's Restated
Articles of Organization and without further stockholder action to divide any
and all shares of the Preferred Stock into series and to fix and determine the
relative fights and preferences of the shares of any series so established. The
issuance of Preferred Stock by the Board of Directors could affect the rights of
holders of shares of Common Stock. For example, issuance of the Preferred Stock
could result in a class of securities outstanding that will have certain
preferences with respect to dividends and in liquidation over the Common Stock,
and may enjoy certain voting rights, contingent or otherwise, in addition to
that of the Common Stock, and could result in the dilution of the voting rights,
net income per share and net book value of the Common Stock.
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement which appears as ANNEX I to this Proxy Statement and is incorporated
herein by reference. Such summary is qualified in its entirety by reference to
the Merger Agreement.
THE MERGER
The Merger Agreement provides that, following the approval of the Merger and
the adoption of the Merger Agreement by the affirmative vote of the holders of
two-thirds of the outstanding shares of Bertucci's Common Stock entitled to vote
thereon and the satisfaction or waiver of the other conditions to the Merger,
Acquisition will be merged with and into the Company, and the Company will
continue as the surviving corporation in the Merger.
If the conditions to the Merger are satisfied or waived, the parties will
file with the Secretary of State of The Commonwealth of Massachusetts a duly
executed Articles of Merger, and the Merger will become effective upon the
filing and acceptance thereof or at such other time as is provided in the
Certificate of Merger in accordance with the MGL and as Ten Ideas and the
Company agree.
Each share of Bertucci's Common Stock outstanding at the Effective Time
(other than shares of Bertucci's Common Stock held by Bertucci's or any wholly
owned subsidiary thereof and Dissenting Shares) will be entitled to the Cash
Price as more fully described under "THE MERGER--Merger Consideration."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties of
the Company relating, with respect to the Company and its subsidiaries, to,
among other things, (a) organization, standing and similar corporate matters;
(b) subsidiaries; (c) the Company's capital structure; (d) the authorization,
execution, delivery, performance and enforceability of the Merger Agreement and
related matters; (e) documents filed by the Company with the Commission, the
accuracy of information contained therein; (f) the absence of undisclosed
liabilities; (g) the accuracy of information supplied by the Company in
connection with this Proxy Statement; (h) the absence of certain changes or
events since the date of the most recent financial statements filed with the
Commission, including material adverse changes with respect to the Company; (i)
the absence of pending or threatened material litigation; (j) brokers's fees and
expenses; (k) the receipt of an oral opinion, confirmed in writing, of NMS; (l)
the recommendation of the Board of Directors of the Company with respect to the
Merger Agreement, the Merger and related
40
transactions; and (m) the lack of any provisions in the Company's organizational
documents restricting the Company from entering into the Merger Agreement and
the transactions contemplated thereunder.
The Merger Agreement contains customary representations and warranties of
Ten Ideas and Acquisition relating to among other things, (a) organization,
standing and similar corporate matters; (b) Ten Ideas's and Acquisition's
capital structure; (c) the authorization, execution, delivery, performance and
enforceability of the Merger Agreement and related matters; (d) broker's fees
and expenses; (e) financing; and (f) the accuracy of information supplied by Ten
Ideas and Acquisition in connection with this Proxy Statement.
CERTAIN PRE-CLOSING COVENANTS
Pursuant to the Merger Agreement, the Company has agreed, until the
Effective Time (except as otherwise specifically required by the terms of the
Merger Agreement), that it will, and will cause each subsidiary, to operate its
business in the ordinary course of business. Without limiting the generality of
the foregoing, until the Effective Time, the Company has agreed that it will
not, and will not permit any of its subsidiaries, without the prior consent of
Ten Ideas to, (i) (x) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property) in respect of, any of
the Company's outstanding capital stock, (y) split, combine or reclassify any of
its outstanding capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
outstanding capital stock, or (z) purchase, redeem or otherwise acquire any
shares of outstanding capital stock or any rights, warrants or options to
acquire any such shares; (ii) issue, sell, grant, pledge or otherwise encumber
any shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities, except for the issuance of
shares of Common Stock upon exercise of Company Stock Options outstanding prior
to the date of the Merger Agreement, or take any action that would make the
Company's representations and warranties set forth in the Merger Agreement not
true and correct in all material respects; (iii) amend its Restated Articles of
Organization or Restated By-laws or the comparable charter or organizational
documents of any Subsidiary; (iv) acquire any business or any corporation,
partnership, joint venture, association or other business organization or
division thereof (or any interest therein), or form any subsidiaries; (v) sell
or otherwise dispose of any of its substantial assets, except in the ordinary
course of business; (vi) make any capital expenditures, enter into leases or
agreements for new locations, or make other commitments with respect thereto,
except capital expenditures, leases, agreements or commitments (A) disclosed in
the Merger Agreement, or (B) not exceeding $100,000 in the aggregate as the
Company may, in its discretion, deem appropriate; (vii) (x) incur any
indebtedness for borrowed money or guaranty any such indebtedness of another
person, other than (A) borrowings in the ordinary course under existing lines of
credit (or under any refinancing of such existing lines), (B) indebtedness owing
to, or guaranties of indebtedness owing to, the Company or (C) in connection
with the financing of the Merger, or (y) make any loans or advances to any other
person, other than routine advances to employees; (viii) grant or agree to grant
to any employee any increase in wages or bonus, severance, profit sharing,
retirement, deferred compensation, insurance or other compensation or benefits,
or establish any new compensation or benefit plans or arrangements, or amend or
agree to amend any existing Company employee benefit plans, except as may be
required under existing agreements or in the ordinary course of business
consistent with past practices; (ix) merge, amalgamate or consolidate with any
other person or entity in any transaction, sell all or substantially all of its
business or assets, or acquire all or substantially all of the business or
assets of any other person or entity; (x) enter into or amend any employment,
consulting, severance or similar agreement with any person; (xi) change its
accounting policies in any
41
material respect, except as required by generally accepted accounting
principles; or (xii) commit or agree to take any of the foregoing actions.
NO SOLICITATION OF ALTERNATIVE TRANSACTIONS
The Merger Agreement provides that neither the Company nor any of its
subsidiaries (nor any of their respective officers, directors, employees,
representatives, agents or other affiliates), will directly or indirectly, (i)
solicit, initiate or knowingly encourage the submission of any Acquisition
Proposal (as defined below) or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any non-public information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; PROVIDED, HOWEVER, that the foregoing shall not prohibit
the Board of Directors of the Company (or, if applicable, the duly appointed
Special Committee thereof) from: (A) furnishing information to, or entering into
discussions or negotiations with, any person in connection with an unsolicited
bona fide Acquisition Proposal by such person if, and to the extent that, the
Board of Directors of the Company (or the Special Committee thereof), after
consultation with independent legal counsel (who may be the Company's regularly
engaged independent counsel), determines in good faith that such action is
required for the Board of Directors of the Company to comply with its fiduciary
obligations to stockholders under applicable law; (B) withdrawing or modifying
its recommendation referred to in the Merger Agreement following receipt of a
bona fide unsolicited Acquisition Proposal if the Board of Directors of the
Company (or the Special Committee), after consultation with independent legal
counsel (who may be the Company's regularly engaged independent counsel),
determines in good faith that such action is necessary for the Board of
Directors of the Company to comply with its fiduciary duties to stockholders
under applicable law; or (C) making to the Company's stockholders any
recommendation and related filing with the Commission as required by Rule 14e-2
and 14d-9 under the Exchange Act, with respect to any tender offer, or taking
any other legally required action (including, without limitation, the making of
public disclosures as may be necessary or advisable under applicable securities
laws); and provided further, however, that, in the event of an exercise of the
Company's or its Board of Director's (or the Special Committee's) rights under
clause (i), (ii) or (iii) above, notwithstanding anything contained in the
Merger Agreement to the contrary, such failure shall not constitute a breach of
the Merger Agreement by the Company. The Company has agreed to provide immediate
written notice to Ten Ideas of the receipt of any such Acquisition Proposal and
of the Company's intention to furnish information to, or enter into discussions
or negotiations with, such person or entity. As used in the Merger Agreement,
the term "Acquisition Proposal" means any proposal with respect to a merger,
consolidation, share exchange, tender offer or similar transaction involving the
Company, or any purchase or other acquisition of all or any significant portion
of the assets of the Company, or any equity interest in the Company, other than
the transactions contemplated hereby.
ARTICLES OF ORGANIZATION AND BYLAWS
The Company's Restated Articles of Organization and Amended and Restated
Bylaws shall be the Articles of Organization and Bylaws of the Surviving
Corporation.
BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY FOLLOWING THE MERGER
The Merger Agreement also provides that the directors and officers of
Acquisition at the Effective Time will be directors and officers of the Company
following the Merger, until the earlier of their
42
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS
The treatment in the Merger of outstanding Company Stock Options and of the
Company's employee benefit plans will be as described in "THE MERGER--Effect on
Stock Options and Employee Benefit Matters."
ACCESS TO INFORMATION AND CONFIDENTIALITY
Subject to applicable provisions regarding confidentiality, the Company has
agreed in the Merger Agreement to provide to Ten Ideas complete access to the
Company's facilities, books and records and to cause its representatives to
cooperate fully with Ten Ideas and its representatives in connection with the
due diligence investigation of the Company and its business.
COMMERCIALLY REASONABLE EFFORTS
Pursuant to the Merger Agreement and subject to certain conditions and
limitations described therein, the parties have agreed to use commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective in
the most expeditious manner practicable, the Merger and the transactions
contemplated by the Merger Agreement.
INDEMNIFICATION AND INSURANCE
Under the Merger Agreement, the Company will indemnify each person who at
any time has been or becomes a director or officer prior to the Effective Time,
and his heirs and personal representatives, against any and all expenses
incurred in connection with any proceeding arising out of or pertaining to any
action or omission occurring prior to the Effective Time to the full extent
permitted under Massachusetts law and the Surviving Corporation's Restated
By-laws in effect as of the Effective Time or under any indemnification
agreement in effect as of the date of the Merger Agreement. Ten Ideas or the
Surviving Corporation will, for a period of not less than six years following
the Effective Time, maintain directors' and officers' liability insurance
covering each person presently covered by the Company's officers' and directors'
liability insurance or who will be so covered at the Effective Time with respect
to actions or omissions occurring prior to the Effective Time, on terms no less
favorable than such insurance maintained in effect by the Company as of the date
of the Merger Agreement in terms of coverage and amounts; provided, that the
Surviving Corporation will not be required to pay in the aggregate an annual
premium for directors' and officers' insurance in excess of 125% of the last
annual premium paid prior to the date of the Merger Agreement; provided that the
Surviving Corporation shall be obligated to provide as much coverage as may be
obtained for such amount.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The obligations of Ten Ideas and Acquisition to effect the Merger are
subject to various conditions which include, in addition to certain other
customary closing conditions, the following: (i) the Merger shall have been
adopted and approved by the affirmative vote of the holders of two-thirds of the
outstanding shares of Bertucci's Common Stock; (ii) all filings required to be
made prior to the Effective Time with,
43
and all consents, approvals, permits and authorizations required to be obtained
prior to the Effective Time from, any third party or any governmental entities,
which, either individually or in the aggregate, if not obtained would have a
material adverse effect on the Company or would prevent consummation of the
Merger, shall have been made or obtained (as the case may be); (iii) no
temporary restraining order, judgment, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect; provided, however, the parties invoking this condition shall use their
best efforts to have any such order or injunction vacated; (iv) the
representations and warranties of the Company set forth in the Merger Agreement
that are qualified by materiality shall be true and correct and such
representations and warranties that are not so qualified shall be true and
correct in all material respect in each case as of the date of the Merger
Agreement and as of the closing date as though made on and as of the closing
date; (v) the Company shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement at or
prior to the closing date; (vi) on or prior to the Effective Time, Ten Ideas
and/or Acquisition shall have received the cash proceeds of the financing
contemplated by the Merger Agreement in amounts sufficient to consummate the
Merger; (vii) the number of shares of the Company common stock having exercised
appraisal rights shall constitute no greater than 10% of the total number of
shares of the Bertucci's Common Stock outstanding immediately prior to the
Effective Time, on a fully diluted basis; (viii) at or prior to the Effective
Time, Ten Ideas and/or Acquisition shall have received all of the necessary
consents and/or approvals of governmental entities and all third parties in
connection with the execution and delivery of the Merger Agreement and the
consummation of the Merger and the other transactions contemplated thereby,
unless the failure to obtain such consent and/or approval would not have a
material adverse effect on the Company or the financing; (ix) at or prior to the
Effective Time, the Company's Board of Directors shall not have withdrawn or
modified, in a manner adverse to Ten Ideas or Acquisition, its recommendation
pursuant to the Merger Agreement, and NMS shall not have withdrawn or modified,
in a manner adverse to Ten Ideas or Acquisition, its fairness opinion with
respect to the Merger; (x) there shall have occurred no event, occurrence, fact,
condition, change, damage, destruction, loss or other development that has
constituted or resulted in, or would reasonably be expected to constitute or
result in, a material adverse effect on the Company; and (xi) there shall not be
threatened, instituted or pending any action, proceeding, application or
counterclaim by any governmental entity or third party before any court or
governmental regulatory or administrative agency, authority or tribunal (A)
which if adversely determined would have a material adverse effect on the
Company after the Merger or the ability of Ten Ideas or Acquisition to perform
their obligations hereunder or in connection with the financing, or (B) which
challenges or seeks to challenge, restrain or prohibit the consummation of the
Merger.
The obligations of the Company to effect the Merger are subject to various
conditions including (i) the Merger shall have been adopted and approved by the
affirmative vote of the holders of two-thirds of the outstanding shares of
Bertucci's Common Stock; (ii) all filings required to be made prior to the
Effective Time with, and all consents, approvals, permits and authorizations
required to be obtained prior to the Effective Time from, any third party or any
governmental entities, which, either individually or in the aggregate, if not
obtained would have a material adverse effect on the Company or would prevent
consummation of the Merger, shall have been made or obtained (as the case may
be); (iii) no temporary restraining order, judgment, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger shall
be in effect; provided, however, the parties invoking this condition shall use
their best efforts to have any such order or injunction vacated; (iv) the
representations and warranties of Ten Ideas and Acquisition
44
set forth in the Merger Agreement that are qualified by materiallity shall be
true and correct and such representations and warranties of Ten Ideas and
Acquisition that are not so qualified shall be true and correct in all material
respects in each case as of the date of the Merger Agreement and as of the
closing date as though made on and as of the closing date; (v) Ten Ideas and
Acquisition shall have performed in all material respects all obligations
required to be performed by them under the Merger Agreement at or prior to the
Closing Date; (vi) there shall not be threatened, instituted or pending any
action, proceeding, application or counterclaim by any governmental entity or
third party before any court or governmental regulatory or administrative
agency, authority or tribunal (A) which if adversely determined would have a
material adverse effect on the ability of the Company to perform its obligations
under the Merger Agreement or (B) which challenges or seeks to challenge,
restrain or prohibit the consummation of the Merger. and (vii) at or prior to
the Effective Time, NMS shall not have withdrawn its fairness opinion.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the Merger by the stockholders: (a) by
mutual written consent of Ten Ideas and the Company; or (b) by either Ten Ideas
or the Company: (i) if, upon a vote at the Special Meeting, or any adjournment
thereof, the adoption and approval of the Merger Agreement and the Merger by the
stockholders of the Company required by Massachusetts law, the Company's
Restated Articles of Organization or the terms of the Merger Agreement shall not
have been obtained; or (ii) if the Merger shall not have been consummated on or
before July 31, 1998, provided that the failure to consummate the Merger is not
attributable to the failure of the terminating party to fulfill its obligations
pursuant to the Merger Agreement; or (iii) if any governmental entity shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable; or (c)
by the Company, if the Board of Directors of the Company shall have approved an
Acquisition Proposal after determining, after consultation with independent
legal counsel (who may be the Company's regularly engaged independent counsel),
that such approval is necessary in the exercise of its fiduciary obligations
under applicable law; or (d) by Ten Ideas, if the Board of Directors of the
Company shall have approved an Acquisition Proposal or withdrawn or modified, in
a manner adverse to Ten Ideas or Acquisition, the Board of Director's
recommendation pursuant to the Merger Agreement; or (e) by Ten Ideas, if any of
the specified conditions set forth in the Merger Agreement shall have become
incapable of fulfillment, and shall not have been waived by Ten Ideas, or if the
Company shall breach in any material respect any of its representations,
warranties or obligations hereunder and such breach shall not have been cured in
all material respects or waived and the Company shall not have provided
reasonable assurance that such breach will be cured in all material respects on
or before the Closing Date, but only if such breach, singly or together with all
other such breaches, constitutes a failure of the specified conditions contained
in the Merger Agreement as of the date of such termination; or (f) by the
Company, if any of the specified conditions set forth in the Merger Agreement
shall have become incapable of fulfillment, and shall not have been waived by
the Company, or if Ten Ideas or Acquisition shall breach in any material respect
any of their respective representations, warranties or obligations hereunder and
such breach shall not have been cured in all material respects or waived and Ten
Ideas or Acquisition, as the case may be, shall not have provided reasonable
assurance that such breach will be cured in all material respects on or before
the Closing Date, but only if such breach, singly or together with all other
such breaches, constitutes a failure of the specified conditions contained in
the Merger Agreement as of the date of such termination; provided, however, that
45
the party seeking termination pursuant to the Merger Agreement is not in breach
of any of its material representations, warranties, covenants or agreements
contained in the Merger Agreement.
In the event of termination of the Merger Agreement, the Merger Agreement
will become void and will have no effect, without any liability or obligation on
the part of the Company, Ten Ideas or Acquisition, other than under certain
specified provisions of the Merger Agreement relating to payment of fees and
expenses, as described in more detail below, fees and expenses, confidentiality
agreements and the effect of termination of the Merger Agreement.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties at any time before or
after any required approval of matters presented in connection with the Merger
by the stockholders of the Company; provided, that after any such approval,
there shall be made no amendment which reduces the consideration payable in the
Merger or adversely affects the rights of the Company's stockholders without the
approval by such stockholders. Consent of the Company to such amendment or
waiver must include consent of the Special Committee. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the parties, (b) waive any inaccuracies in
the representations and warranties in the Merger Agreement or any document
delivered pursuant thereto, or (c) subject to the approval of stockholders
required by law, waive compliance with any of the agreements or conditions of
the other parties contained in the Merger Agreement. The failure of the Company
or Ten Ideas to assert any of its rights under the Merger Agreement will not
constitute a waiver of such rights.
EXPENSES AND CERTAIN REQUIRED PAYMENTS
In the event of a termination of the Merger Agreement, (a) by the Company,
if the Board of Directors of the Company shall have approved an Acquisition
Proposal after determining, after consultation with independent legal counsel
(who may be the Company's regularly engaged independent counsel), that such
approval is necessary in the exercise of its fiduciary obligations under
applicable law; or (b) by Ten Ideas, if the Board of Directors of the Company
shall have approved an acquisition proposal or withdrawn or modified, in a
manner adverse to Ten Ideas or Acquisition, the Board of Director's
recommendation pursuant to the Merger Agreement; or (c) by Ten Ideas, if as a
result of a willful breach by the Company any of the conditions set forth in the
Merger Agreement shall have become incapable of fulfillment, and shall not have
been waived by Ten Ideas, or if the Company shall breach in any material respect
any of its representations, warranties or obligations under the Merger Agreement
and such breach shall not have been cured in all material respects or waived and
the Company shall not have provided reasonable assurance that such breach will
be cured in all material respects on or before the Closing Date, but only if
such breach, singly or together with all other such breaches, constitutes a
failure of the conditions contained in the Merger Agreement as of the date of
such termination; or (d) by the Company as a result of the withdrawal or
modification of the fairness opinion of NMS, the Company shall promptly after
such event pay to the Ten Ideas in cash an amount equal to the aggregate
out-of-pocket costs and reasonable expenses of Ten Ideas in connection with the
Merger up to an aggregate amount not to exceed $750,000, including, without
limitation, commitment, appraisal and other fees relating to the financing and
the reasonable fees and disbursements of accountants, attorneys and investment
bankers, whether retained by Parent or by any other person. Furthermore, if the
Merger Agreement is terminated pursuant to clauses (a) and (b) above, pursuant
to clause (c) above in the event of a willful breach by the Company or pursuant
46
to clauses (c) or (d) above as a result of the withdrawal or modification of the
fairness opinion of NMS, the Company shall also pay to Ten Ideas a termination
fee of $1,500,000.
Except as otherwise provided above, all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such expenses, except the parties will bear
equally, the costs of any applicable HSR filing fee and that the Company will
pay all costs and expenses (x) in connection with printing and mailing the Proxy
Statement, as well as all SEC filing fees relating to the transactions
contemplated therein and (y) of obtaining any consents of any third party.
47
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the beneficial
ownership of Bertucci's Common Stock (i) by each stockholder who is known by the
Company to own beneficially in excess of 5% of the outstanding Common Stock,
(ii) by each director, and (iii) by all officers and directors as a group, as of
March 15, 1998. Except as otherwise indicated, all persons listed below have (i)
sole voting power and investment power with respect to their shares of Common
Stock, except to the extent that authority is shared by spouses under applicable
law, and (ii) record and beneficial ownership with respect to their shares of
Common Stock.
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNER** OF BENEFICIAL PERCENT OF
AND NAME OF DIRECTOR TITLE OF CLASS OWNERSHIP CLASS
- ---------------------------------------------------------------- ----------------- ------------------ -----------
Joseph Crugnale................................................. Common Stock 2,177,710(1) 24.4%
E. Bulkeley Griswold............................................ Common Stock 15,000(2) *
Robert L. Lestina, Jr........................................... Common Stock 11,000(3) *
James Westra.................................................... Common Stock 12,499(4) *
Allan J. Steinmetz.............................................. Common Stock 8,000(5) *
Theodore R. Barber.............................................. Common Stock 10,600(6) *
Norman S. Mallett............................................... Common Stock 80,500(7) *
All Directors and officers as a group (9 persons)............... Common Stock 2,331,987(8) 26.2%
- ------------------------
* Less than 1.0%
** Unless otherwise specified, the beneficial owner's address is c/o
Bertucci's.
(1) Of such shares, 2,938 shares are held in trusts for the benefit of Mr.
Crugnale's minor children.
(2) Of such shares, 8,000 are purchasable by Mr. Griswold under options
presently exercisable or exercisable within sixty days of March 15, 1998,
and 7,000 are held by Mr. Griswold's 401(k) plan.
(3) Of such shares, 8,000 are purchasable by Mr. Lestina under options presently
exercisable or exercisable within sixty days of March 15, 1998. In addition,
Mr. Lestina holds 3,000 of such shares jointly with his wife.
(4) Of such shares, 2,600 shares are held in the Hutchins, Wheeler & Dittmar
Profit Sharing Trust, in which Mr. Westra has a beneficial interest, 8,000
are purchasable by Mr. Westra under options presently exercisable or
exercisable within sixty days of March 15, 1998, and 1,899 shares are held
by Mr. Westra's wife. Mr. Westra disclaims beneficial ownership of the
shares held by his wife.
(5) All of these shares are purchasable under options presently exercisable or
exercisable within sixty days of March 15, 1998.
(6) Of such shares, 9,600 are purchasable under options presently exercisable or
exercisable within sixty days of March 15, 1998.
(7) Of such shares, 27,500 shares are purchasable by Mr. Mallett under options
presently exercisable.
(8) Included in this figure are 85,100 shares purchasable by certain officers
and Directors under options presently exercisable or exercisable with sixty
days of March 15, 1998.
48
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The data for fiscal years ended 1993 through 1997 are derived from audited
financial statements of the Company. Selected consolidated financial data should
be read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Consolidated Financial Statements
and the Notes thereto included the Company's Form 10-K and incorporated by
reference in this Proxy Statement. Historical results are not necessarily
indicative of results to be expected in the future.
FISCAL YEARS ENDED
---------------------------------------------------------------
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
25, 27, 30, 28, 27,
1993 1994 1995 1996 1997
(52 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS)
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA:
Net sales....................... $ 74,625 $ 102,797 $ 120,260 $ 128,044 $ 136,720
Cost and expenses:
Cost of sales................. 19,368 26,039 31,060 32,484 34,102
Operating expenses............ 33,778 48,804 60,673 65,986 71,652
General and administrative
expenses.................... 4,918 6,566 8,239 7,720 8,828
Depreciation and
amortization................ 4,840 7,327 9,083 8,781 8,626
Taxes other than income....... 3,530 5,106 6,268 6,633 6,990
Restaurant closing expense.... -- -- 5,336 -- --
----------- ----------- ----------- ----------- -----------
Total costs and expenses.... 66,434 93,842 120,659 121,604 130,198
----------- ----------- ----------- ----------- -----------
Operating income (loss)..... 8,191 8,955 (399) 6,440 6,522
Interest expense, net........... 82 155 1,253 1,297 1,037
Interest income................. 657 33 21 15 32
----------- ----------- ----------- ----------- -----------
Income (loss) before income
tax expense (benefit)....... 8,766 8,833 (1,631) 5,158 5,517
Income tax expense (benefit).... 3,127 3,223 (745) 1,933 2,009
----------- ----------- ----------- ----------- -----------
Net income (loss)............. $ 5,639 $ 5,610 $ (886) $ 3,225 $ 3,508
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Earnings (loss) per common
share--basic.................. $ 0.66 $ 0.64 $ (0.10) $ 0.37 $ 0.40
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Earnings (loss) per common
share--diluted................ $ 0.63 $ 0.63 $ (0.10) $ 0.36 $ 0.39
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
BALANCE SHEET DATA:
Working capital (deficit)....... $ (3,973) $ (5,738) $ (5,258) $ (2,857) $ (3,740)
Total assets.................... 70,181 93,114 98,938 102,528 105,516
Long-term debt, including
current portion............... -- 14,000 19,438 18,438 13,500
Shareholders' equity............ 58,804 64,846 64,092 67,538 71,371
49
MARKET PRICES AND DIVIDENDS ON THE SHARES
Bertucci's Common Stock commenced trading on the Nasdaq National Market
(ticker symbol BERT) on June 28, 1991. Prior to June 28, 1991, there was no
market for Bertucci's Common Stock. On February 13, 1998, the last trading day
before the public announcement of the proposal, the reported closing price per
Share was $6.00. On , 1998, the last full trading day prior to the date of
this Proxy Statement, the reported closing sale price per Share was $ .
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT PRICE QUOTATION FOR THE COMMON STOCK.
The Company has not paid any cash dividends on its Common Stock and does not
intend to pay cash dividends on its Common Stock for the foreseeable future. The
Company intends to retain future earnings to finance further development.
The following table sets forth, for the fiscal quarters indicated, the high
and low closing sales prices per Share, as quoted on the Nasdaq National Market
before .
FISCAL QUARTER ENDED HIGH LOW
---------------------- --------- ---------
1996
First Quarter.................... April 20, 1996 $ 6.000 $ 4.500
Second Quarter................... July 13, 1996 $ 7.250 $ 4.875
Third Quarter.................... October 5, 1996 $ 5.375 $ 4.250
Fourth Quarter................... December 28, 1996 $ 6.125 $ 4.500
1997
First Quarter.................... April 19, 1997 $ 6.625 $ 5.000
Second Quarter................... July 19, 1997 $ 7.063 $ 5.125
Third Quarter.................... October 4, 1997 $ 7.000 $ 5.375
Fourth Quarter................... December 27, 1997 $ 6.813 $ 5.750
1998 through March 15, 1998...... $ 7.938 $ 6.000
50
CERTAIN TRANSACTIONS IN THE COMMON STOCK
Except as set forth above, there were no transactions in the Shares that
were effected during the past 60 days by (i) the Company, (ii) any director or
executive officer of the Company, (iii) any persons controlling the Company or
(iv) any director or executive officer of the persons ultimately in control of
the Company, Ten Ideas or Acquisition.
APPRAISAL RIGHTS
Under the MGL, Stockholders of the Company will have certain dissenters'
rights of appraisal. If the Merger is approved by the stockholders at the
Meeting and the Merger is effected, any stockholder (i) who files with the
Company before the taking of the vote on the Merger, written objection to the
proposed action stating that such stockholder intends to demand payment for such
stockholder's shares if the action is taken and (ii) whose shares are not voted
in favor of such action has or may have the right to demand in writing from the
Company, within twenty days after the date of mailing to such stockholder of
notice in writing that the corporate action has become effective, payment for
such stockholder's shares and an appraisal of the value thereof, the Company and
any such stockholder shall in such case have the rights and duties and shall
follow the procedure set forth in sections 86 to 98, inclusive, of the MGL.
Failure to vote against the Merger will constitute a waiver of the rights set
forth in ANNEX III filed herewith. Except as set forth herein, stockholders of
the Company will not be entitled to appraisal rights in connection with the
Merger.
EXPERTS
Representatives of Arthur Andersen LLP are expected to be present at the
Special Meeting, where they will have the opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions.
51
OTHER INFORMATION AND STOCKHOLDER PROPOSALS
Management of the Company knows of no other matters that may properly be, or
which are likely to be, brought before the Special Meeting. However, if any
other matters are properly brought before such Special Meeting, the persons
named in the enclosed Proxy or their substitutes will vote the Proxies in
accordance with their judgment with respect to such matters.
By Order of the Board of Directors
/S/ JAMES WESTRA
James Westra, Clerk
52