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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year ended December 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-28930
ROADHOUSE GRILL, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0367604
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6600 NORTH ANDREWS AVENUE, SUITE 160, FT. LAUDERDALE, FLORIDA 33309
(Address of principal executive offices and zip code)
Registrant's telephone number (954)489-9699
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, par value $.03 per share
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in Definitive Proxy or Information
Statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 13, 1998 was $10,746,146 based upon the closing
sale price of $4.25 as reported on the Nasdaq National Market on March 13, 1998.
The number of shares of the registrant's common stock outstanding as of
March 13, 1998 was 9,305,408.
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ROADHOUSE GRILL, INC.
FORM 10-K
FISCAL YEAR ENDED DECEMBER 28, 1997
INDEX
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PART I
Item 1. Business.............................................................................. 1
Item 2. Properties............................................................................ 7
Item 3. Legal Proceedings..................................................................... 9
Item 4. Submission of Matters to a Vote of Security Holders................................... 9
PART II
Item 5. Market for Registrant's Common Equity and
Related Shareholder Matters.................................................... 9
Item 6. Selected Financial Data............................................................... 10
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................................. 11
Item 8. Financial Statements and Supplementary Data........................................... 15
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure......................................... 15
PART III
Item 10. Directors and Executive Officers of the Registrant.................................... 16
Item 11. Executive Compensation................................................................ 17
Item 12. Security Ownership of Certain Beneficial Owners and Management........................ 21
Item 13. Certain Relationships and Related Transactions........................................ 22
PART IV
Item 14. Financial Statements and Exhibits..................................................... 24
Signatures ...................................................................................... 25
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PART I
ITEM 1. BUSINESS
This Form 10-K contains forward-looking statements, including
statements regarding among other things (i) the Company's growth strategies,
(ii) anticipated trends in the economy and the restaurant industry and (iii) the
Company's future financing plans. In addition, when used in this Form 10-K, the
words "believes", "anticipates", "expects" and similar words often are intended
to identify certain forward-looking statements. These forward-looking statements
are based largely on the Company's expectations and are subject to a number of
risks and uncertainties, many of which are beyond the Company's control. Actual
results could differ materially from these forward-looking statements as a
result of changes in trends in the economy and the restaurant industry,
reductions in the availability of financing, increases in interest rates and
other factors. In light of the foregoing, there is no assurance that the
forward-looking statements contained in this Form 10-K will in fact prove
correct or occur. The Company does not undertake any obligation to revise these
forward-looking statements to reflect future events or circumstances.
Roadhouse Grill, Inc. (the "Company") owns and operates 43 and
franchises three full-service, casual dining restaurants under the name
"Roadhouse Grill". The Company was incorporated in October 1992 and opened the
first Company-owned restaurant in Pembroke Pines, Florida in March of 1993.
Since then, the Company has opened 42 more restaurants in Florida, Georgia,
South Carolina, Mississippi, Louisiana, Arkansas, Alabama, New York and Ohio.
One of the Company-owned restaurants is a joint venture located in Kendall,
Florida in which the Company currently owns a 50% interest ("Kendall"). The
three franchised restaurants are located in Las Vegas, Nevada; Ampang, Malaysia
and Bangsar Baru, Malaysia. These restaurants opened in July 1997, April 1996
and November 1995, respectively. As of December 28, 1997, the Company also had a
franchise in Jalan Sultan Ismail, Malaysia, which ceased its operations on March
15, 1998. See "Subsequent Events."
As of December 28, 1997, the Company had four restaurants licensed by
Buffets, Inc. Subsequent to fiscal 1997, the Company dissolved its licensing
arrangement with Buffets, Inc. Buffets, Inc. will discontinue using the
Roadhouse Grill name in its present form and there are no future liabilities on
either Company's part. See "Subsequent Events".
The Company is changing its fiscal year end from the last Sunday in
December to the last Sunday in April. The Company will file a Form 10-K for the
transition period which is from December 29, 1997 through April 26, 1998.
THE ROADHOUSE GRILL CONCEPT
The key elements that define the Roadhouse Grill concept are:
* PREMIUM QUALITY GRILLED ENTREES AND A DIVERSE MENU. The Roadhouse
Grill menu features aged USDA Choice steaks and ribs, chicken and
seafood. Fresh steaks and prime rib are aged to achieve optimal
flavor and tenderness. In addition to grilled selections, the menu
includes a variety of appetizers, sandwiches, salads and desserts,
including signature items such as Roadhouse cheese wraps, hot
out-of-the-oven yeast rolls and a daily selection of homemade ice
cream.
* HIGH VALUE TO GUESTS. Roadhouse Grill strives to provide a high
value dining experience for its guests by offering a broad,
moderately priced menu and serving generous portions. At Roadhouse
Grill restaurants, the price of each entree includes a choice of
house or Caesar salad, a choice of baked sweet potato, baked potato,
home fries, french fries or rice pilaf and hot out-of-the-oven
homemade yeast rolls. From 11 a.m. to 3 p.m. Monday through Friday,
each Roadhouse Grill offers a selection of "Lunch in a Rush" menu
items ranging from entree salads to specialty sandwiches, all served
to order quickly and priced at $6.49 or less. As of December 28,
1997, the average guest check, including beverage, was approximately
$12.59. The average check for lunch and dinner was $10.26 and
$14.07, respectively.
* ATTENTIVE, FRIENDLY SERVICE. The Company believes that a
distinctive, enjoyable dining experience is made possible through
excellent service. Accordingly, the Company seeks to hire
individuals who possess strong initiative and the ability to provide
quality and personalized service. Roadhouse Grill attempts to foster
the individuality of its employees, encouraging them to converse and
interact with guests on a friendly, casual basis. Servers often sit
down at the table with guests to take orders, and the restaurant
manager aims to visit each table to help ensure customer
satisfaction.
* SPACIOUS, OPEN LAYOUT. Roadhouse Grill restaurants are designed to
have a fun and casual atmosphere. The interior of each restaurant is
large, open and visually appealing, with exposed ceilings and brick
and lapboard cedar walls decorated with colorful murals and neon
signs. Multi-level seating provides guests with a full view of the
restaurant, including the exhibition grill and display kitchen,
allowing everyone to enjoy the Roadhouse Grill experience. The
exhibition cooking area features a mesquite-fired grill, a kitchen
where homemade yeast rolls are made throughout the day and a display
case filled with fresh cuts of meat, seafood and salads. To help
create Roadhouse Grill's casual ambiance, metal pails of roasted
peanuts top each table and guests are encouraged to toss peanut
shells on the floor. Drinks are served in mason jars, long-neck
beers are delivered in metal buckets filled with ice, and popular
rock, country and western music entertains guests. Each restaurant
features a bar to entertain adult customers while waiting, features
special Happy Hour prices, where permitted, and encourages viewing
of sporting events. The exterior of each restaurant features
rough-sawed siding, a wrap-around wood plank porch, a tin roof
trimmed in neon and an oversized "Roadhouse Grill" sign. See "Site
Selection; Design and Layout."
* BROAD CUSTOMER APPEAL; FOCUS ON FAMILIES. The Roadhouse Grill
concept is designed to appeal to a broad range of customers,
including business people, couples, singles and particularly
families. The Company believes that to be
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attractive to families a concept must be appealing to both children
and parents. Consequently, Roadhouse Grill restaurants furnish
children with coloring menus, balloons and a free souvenir cup, and
all Roadhouse Grill prototype restaurants have a game room featuring
pinball and video games. In addition, each restaurant offers a
special "Kids' Menu" featuring an assortment of entrees for
approximately $2.99. In 1997, for the second consecutive year,
Roadhouse Grill was voted "Favorite Family Dining Restaurant" in a
survey conducted by SUNSHINE MAGAZINE, the South Florida based
Sun-Sentinel Sunday magazine. For adults, each Roadhouse Grill
restaurant offers beverages from its full-service bar, which is
separated from the dining area.
SITE SELECTION
The Company believes the site selection process is critical to the
long-term success of any restaurant and, accordingly, devotes significant time
and effort to the investigation and evaluation of potential locations. Among the
factors it considers in the site selection process are advertising and
management efficiency, market demographics (including population, age and median
household income), traffic patterns and activity, site visibility and
accessibility, and proximity to residential developments, office complexes,
hotels, retail establishments and entertainment areas. Subsequent to Fiscal
1997, in an effort to realize greater media efficiency, the Company has adopted
the strategy of clustering restaurants in markets that can support them with
cost-effective media advertising. In addition, the Company believes that
clustering multiple units in metropolitan markets allows more efficient use of
supervision of the restaurants. The Company also considers existing or potential
competition in the area and attempts to analyze the performance of other area
restaurants.
Management generally determines which geographic areas may be suitable for
Roadhouse Grill restaurants and then employs real estate agents and brokers to
identify potential sites in each area. In connection with the Company's
evaluation, Company personnel visit and analyze each potential site. After a
location has been leased or purchased and the necessary licenses and permits
obtained, the average time for construction of new Roadhouse Grill restaurants
has been approximately 120 days and the average time for renovation of an
existing building has been approximately 90 days. However, there can be no
assurances that such construction schedules can be maintained in the future.
DESIGN AND LAYOUT
Roadhouse Grill believes its restaurants are large, open and visually
appealing, with exposed ceilings and brick and lapboard cedar walls decorated
with colorful murals and neon signs. The typical interior also includes
multi-level seating, an exhibition grill and display kitchen and a game room
featuring pinball and video games. The exterior of each restaurant features
rough-sawed siding, a wrap-around wood plank porch, a tin roof trimmed in neon
and an oversized "Roadhouse Grill" sign. Roadhouse Grill restaurants range from
approximately 5,800 square feet to 12,000 square feet in size. The Company has
grown by both acquiring and converting restaurants and by constructing new
restaurants utilizing the Company prototype. The first prototype building used
by the Company was approximately 7,500 square feet in size with 230 seats and
was reduced in 1996 to 6,800 square feet and 210 seats. Subsequent to Fiscal
1997, the Company has developed a 5,600 square foot prototype and simultaneously
increased seating capacity to 225 seats. The Company expects to test and further
evaluate the 5,600 square foot prototype in Fiscal 1998, and if successful, to
utilize the design in future expansion.
UNIT ECONOMICS
The average cost of constructing, furnishing and installing fixtures for
the eleven Roadhouse Grills opened in Fiscal 1997 was $1,440,000 excluding land
costs. Of the 43 Company-owned restaurants, the real estate is owned in 13 of
the properties and has averaged $911,000 per property. The Company's previous
expansion strategy included the purchase of land if economically feasible. The
Company intends to lease land and may lease buildings in the future depending
upon the cost of capital and the expected return on investment. The Company does
not currently intend to purchase additional land. Preopening costs averaged
$149,000 for the eleven restaurants opened in Fiscal 1997 making the average
total investment, excluding land, $1,589,000 in Fiscal 1997. The Company
formerly used only one contractor to construct 42 of the 43 existing Roadhouse
Grills. Subsequent to Fiscal 1997, the Company began competitively bidding its
construction contracts and has opened one restaurant after completing the
bidding process. This restaurant opened in Morrow, Georgia in February of 1998
for a total investment, excluding land, of $1,359,000. The Company expects that
construction costs will continue to be reduced from former levels due to
competitive bidding.
MENU AND PRICING
The Roadhouse Grill menu features aged USDA Choice steaks and prime rib,
beef ribs, chicken and seafood, all of which are grilled to order. The Company's
steaks and prime rib are aged both before and after being cut and trimmed. The
menu features over sixty items, including eight cuts of steak ranging from 6 oz.
to 18 oz. In addition to grilled selections, the menu offers a wide variety of
appetizers, sandwiches, salads and desserts, including signature items such as
Roadhouse cheese wraps and a daily selection of homemade ice cream. Each entree
is served with a choice of a house salad or caesar salad, a choice of baked
sweet potato, baked potato, home fries, french fries or rice pilaf and homemade
yeast rolls. Roadhouse Grill restaurants are open seven days a week for lunch
and dinner and offer full bar service. Prices range from $7.99 to $16.99 for
lunch and dinner entrees except for the Fort Lauderdale restaurant which has a
price range of
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$8.99 to $16.99, due to its location at a waterfront tourist destination. From
11 a.m. to 3 p.m. Monday through Friday, in addition to its full menu, each
Roadhouse Grill offers a selection of 18 "Lunch in a Rush" menu items ranging
from char-broiled steak salad to hand-breaded chicken strips and french fries,
all prepared to order quickly and priced at $6.49 or less. As of December 28,
1997 the average guest check, including beverage, was approximately $12.59. The
average checks for lunch and dinner were approximately $10.26 and $14.07,
respectively.
RESTAURANT OPERATIONS AND MANAGEMENT
RESTAURANT PERSONNEL. The Company believes that excellent service
contributes significantly to a distinctive, enjoyable dining experience.
Accordingly, the Company seeks to hire individuals who possess strong initiative
and the ability to provide quality and personalized service. Roadhouse Grill
attempts to foster the individuality of its employees, encouraging them to
interact with customers on a friendly, casual basis. The Company recruits both
experienced restaurant managers from outside the Company and promotes qualified
employees from within the Company. The Company seeks to retain high-quality
restaurant managers and personnel by providing them with opportunities for
promotion and financial incentives based on individual restaurant performance.
These financial incentives include a bonus plan that enables each restaurant
manager to earn a portion of a bonus pool by achieving certain predetermined
performance goals. During fiscal 1997, the Company's turnover rates were
approximately 71% for restaurant staff and 37% for restaurant managers, which
are significantly below the restaurant industry averages of 92% for staff
employees and 50% for managers (as reported by the National Restaurant
Association).
Roadhouse Grill restaurants generally operate with a general manager, a
dining room manager, a kitchen manager and one or two assistant managers
depending upon volume. In the fourth quarter of Fiscal 1997, the Company tested
correlating the number of managers to sales volumes. As a result, one management
position was eliminated from each of 28 restaurants. The Company believes that
streamlining management labor has had a beneficial impact on operating margins
and has been transparent to its customers. The general manager of each
restaurant has primary responsibility for managing the day-to-day operations of
the restaurant in accordance with Company standards. The general manager and
kitchen manager of each restaurant generally are responsible for interviewing,
hiring and training restaurant staff. Each restaurant has a staff of
approximately 90 employees. The Company currently employs 10 area supervisors,
each of whom is responsible for 3 to 5 restaurants. There are two regional
directors, each of whom is responsible for 5 supervisors. The two regional
directors communicate daily with the Vice President of Operations.
The Company devotes a significant amount of time and resources to
restaurant management and staff training. Each new manager participates in an
eight-week training program, which is conducted at designated training
restaurants, before assuming an assistant manager position (or, in some
instances, a kitchen manager position) at a Roadhouse Grill restaurant. This
program is designed to provide training in all areas of restaurant operations,
including food preparation and service, alcoholic beverage service, Company
philosophy, operating standards, policies and procedures, and business
management and administration techniques. The managers of the training
restaurant conduct weekly evaluations of each manager trainee.
In connection with the opening of each new restaurant, the Company sends an
experienced training team to train and assist the new restaurant employees. The
training team generally arrives at each restaurant two weeks prior to opening
and remains for four weeks after opening. Typically, the top three managers (the
general manager, the dining room manager and the kitchen manager) of each new
restaurant are individuals who have been managers at an existing Roadhouse Grill
restaurant.
INTERNAL CONTROLS AND RESTAURANT REPORTING. The Company maintains financial
and accounting controls for each of its restaurants through the use of
centralized accounting and management information systems. The Company uses a
computerized point-of-sale system to collect sales information from each
restaurant, and restaurant managers are provided access to the operating
statements for their respective restaurant.
PURCHASING. Roadhouse Grill operates a centralized purchasing system that
is utilized by all restaurants operated by the Company. The Company purchased
approximately 93% of its food and other products from two distributors during
fiscal 1997. In the fourth quarter of 1997, the Company began competitively
bidding all food and non-food items with a goal of increasing the number of
suppliers and reducing costs. As of December 28, 1997, the Company purchased
food and other products from four distributors, with the majority of the items
purchased from the two distributors used during the beginning of the year.
ADVERTISING AND MARKETING
The Company attempts to build brand awareness by providing a distinctive
dining experience that results in a significant number of new customers being
attracted through word of mouth, as well as by traditional marketing efforts and
promotional activities. The Company believes that clustering multiple
restaurants in target markets will help build brand awareness and increase
efficiencies in its marketing efforts. The Company's advertising strategy
previously consisted primarily of print and radio media and used a fictitious
character called Cowboy Jim. In the latter part of 1997, the Company conducted
an advertising agency review and selected WestWayne Inc. because of that
company's former success,
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especially with restaurant chains. Focus groups were conducted by WestWayne and
the Company in the latter half of Fiscal 1997 resulting in a new strategy to
create and build brand identity via radio and television media. This new
strategy has been implemented subsequent to Fiscal 1997. See "Subsequent
Events". The advertising will be focused on "irreverent" or "rambunctious"
behavior at Roadhouse Grill restaurants. The Company's new motto is: "There is a
time and a place to get rambunctious...Roadhouse Grill. Where you can always
eat, drink and be yourself." The Company also markets at the restaurant level
through sponsorship of community charity activities, sporting events, festivals
and Chamber of Commerce events. Prior to opening a restaurant, the Company
typically conducts a six-week print and radio advertising campaign and holds a
"VIP Night" at which city officials, Chamber of Commerce members, police, fire
and rescue personnel, local business people, area media and others are invited
to have "dinner on the Roadhouse."
FRANCHISING
The Company has granted franchise rights to the Roadhouse Grill concept in
Asia and the Pacific Rim and in certain limited geographic areas in the United
States. Pursuant to its expansion strategy, the Company expects to concentrate
its future franchising activity in Asia and the Pacific Rim through its
international franchisees, Roadhouse Grill Asia Pacific (H.K.) Limited
("Roadhouse Grill Hong Kong") and Roadhouse Grill Asia Pacific (Cayman) Limited
("Roadhouse Grill Asia")
INTERNATIONAL FRANCHISING. In January 1996, the Company entered into a
Master Development Agreement with Roadhouse Grill Hong Kong, which provides for
the development and franchising of Roadhouse Grill restaurants in Hong Kong.
Under the agreement, Roadhouse Grill Hong Kong is not required to develop any
specific number of restaurants in Hong Kong, but any restaurants that it
develops are credited against the development obligations of Roadhouse Grill
Asia under Roadhouse Grill Asia's Master Development Agreement with the Company.
Roadhouse Grill Hong Kong or its affiliates are not required to pay any
franchise or reservation fee for restaurants that it develops, but it is
responsible for paying or reimbursing approved expenses incurred by the Company
in connection with the opening of each restaurant. In addition, Roadhouse Grill
Hong Kong is required to pay a royalty on gross sales in connection with the
operation of each of its restaurants. Under certain circumstances, Roadhouse
Grill Hong Kong or the Company may grant franchises to third parties in Hong
Kong. In that event, the Company was entitled to receive 50% of any franchise
and reservation fees and 50% of any royalty fee payable by the third party
franchisee, subject to limitations on the amounts payable to the Company of
$10,000 per restaurant in the case of franchise and reservations fees and 2.5%
of gross sales in the case of royalty fees. Effective December 1, 1997, the
agreement was amended to allow the Company to receive 40% of any royalty fee
payable by the third party franchisee, subject to a limitation of 2.0% of gross
sales. Amounts for franchise and reservation fees were left unchanged.
In January 1996, the Company also entered into a Master Development
Agreement with Roadhouse Grill Asia which covers countries in Asia and the
Pacific Rim (other than Hong Kong), including, but not limited to, Australia,
China, India, Indonesia, Japan, Malaysia, New Zealand, North Korea, South Korea,
The Philippines and Thailand. Under the agreement, Roadhouse Grill Asia is
required to open and maintain at least 30 Roadhouse Grill restaurants during the
first ten years of the term of the agreement, with a minimum of two restaurants
to be developed each year. Under certain circumstances, Roadhouse Grill Asia or
the Company may grant franchises to third parties in the territory. The fee
arrangements under the agreement are substantially the same as those under the
agreement between the Company and Roadhouse Grill Hong Kong. See Item 13
"Certain Relationships and Related Transactions."
DOMESTIC FRANCHISING. The Company has entered into franchise
arrangements for the development and operation of Roadhouse Grill restaurants in
Clark County, Nevada. The first Clark County franchise opened in July of 1997 in
Las Vegas, Nevada, and the second one is under construction. Additionally, the
Company has dissolved its previous franchise relationship with Buffets, Inc. and
an agreement has been reached whereby Buffets, Inc. will discontinue using the
Roadhouse Grill name in its present form. See "Subsequent Events."
COMPETITION
The restaurant industry is highly competitive. The Company competes with a
broad range of restaurants, including national and regional casual dining chains
as well as locally-owned restaurants, some of which operate with concepts
similar to that of the Company. Many of the Company's competitors are well
established and have substantially greater market presence and financial and
other resources than the Company. The entrance of new competitors into the
Company's market areas or the expansion of operations by existing competitors
could have a material adverse effect on the Company's results of operations and
financial condition. In addition, the Company competes with other restaurant
companies and retailers for sites, labor and, in many cases, customers. The
Company believes that the key competitive factors in the restaurant industry are
quality of food and service, price, location and concept. To the extent that one
or more of its competitors becomes more successful with respect to any key
competitive factors, the Company's business could be adversely affected.
The restaurant industry is affected by changes in consumer tastes as well
as national, regional and local economic conditions, demographic trends, traffic
patterns, and the type, number and location of competing restaurants. Dependence
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on fresh meats and produce also subjects restaurant companies to the risk that
shortages or interruptions of supply could adversely affect the availability,
quality or cost of ingredients. In addition, factors such as inflation,
increased food, labor and employee benefit costs and the availability of
qualified management and hourly employees also may adversely affect the
restaurant industry generally and the Company's restaurants in particular. The
success and future profitability of the Company will depend in part on its
ability to identify and to respond appropriately to changing conditions within
the restaurant industry.
GOVERNMENT REGULATION
Each Roadhouse Grill restaurant is subject to numerous federal, state and
local laws and governmental regulations, including those relating to the
preparation, sale and service of food and alcoholic beverages, designation of
non-smoking and smoking areas, accessibility of restaurants to disabled
customers, development and construction of restaurants and environmental
matters. Roadhouse Grill also is subject to laws governing its relationship with
employees, including minimum wage requirements, overtime, working conditions and
immigration requirements. Difficulties or failures in obtaining the required
construction and operating licenses, permits or approvals could delay or prevent
the opening of a new restaurant. Roadhouse Grill believes that it is operating
in compliance in all material respects with applicable laws and regulations that
govern its operations.
Alcoholic beverage control regulations require each Roadhouse Grill
restaurant to apply to a state authority and, in certain locations, county
and/or municipal authorities for a license or permit to sell alcoholic beverages
on the premises and to provide service for extended hours. Typically, licenses
must be renewed annually and may be revoked or suspended for cause at any time.
If a liquor license for any restaurant were lost, revenues for that restaurant
would be adversely affected. Alcoholic beverage control regulations relate to
numerous aspects of the Company's restaurants, including minimum age of patrons
consuming and employees serving alcoholic beverages, hours of operation,
advertising, wholesale purchasing, inventory control, and handling, storage and
dispensing of alcoholic beverages. The Company is also subject to "dram-shop"
statutes, which generally provide a person, injured by an intoxicated person the
right to recover damages from an establishment that wrongfully served alcoholic
beverages to the intoxicated person. The Company carries liquor liability
coverage as part of its existing comprehensive general liability insurance.
In connection with its sale of franchises, the Company is subject to the
United States Federal Trade Commission rules and regulations and state laws that
regulate the offer and sale of franchises. The Company also is subject to laws
that regulate certain aspects of the franchise relationship.
The Company is subject to various local, state and federal laws regulating
the discharge of pollutants into the environment. The Company believes that its
operations are in compliance in all material respects with applicable
environmental laws and regulations. The Company conducts environmental audits of
all proposed restaurant sites in order to determine whether there is any
evidence of contamination prior to purchasing or entering into a lease with
respect to such sites. However, there can be no assurance that the Company will
not incur material environmental liability in connection with any of its owned
or leased properties.
EMPLOYEES
At December 28, 1997, the Company employed 278 salaried employees, of whom
30 served in corporate and administrative capacities and 248 served as
restaurant management personnel. In addition, the Company employed 4,070 persons
on an hourly basis. None of the Company's employees are covered by a collective
bargaining agreement, and the Company has never experienced an organized work
stoppage, strike or labor dispute. The Company believes its relations with its
employees are good.
TRADEMARKS, SERVICE MARKS AND TRADE DRESS
Roadhouse Grill believes its trademarks, service marks and trade dress are
important to its marketing efforts. Roadhouse Grill has registered the
"Roadhouse Grill" service mark, the "Cowboy Jim and rocking chair" design and
the slogan "Good Food and a Smile . . . That's Roadhouse Style" with the U.S.
Patent and Trademark Office. The Company currently has registered the "Roadhouse
Grill" service mark in France and Malaysia and has been approved for
registration in Canada. The Company also currently has applied for registration
of the "Roadhouse Grill" service mark in approximately 33 additional foreign
countries, including Australia, Brazil, China, Germany, Hong Kong, Indonesia,
Japan, Mexico, New Zealand, The Philippines, South Africa, Spain, Thailand and
the United Kingdom.
SUBSEQUENT EVENTS
Subsequent to the year ended December 28, 1997, several significant events
occurred as follows:
1. The Company dissolved its previous licensing arrangement with Buffets, Inc.
with respect to four restaurants previously operated by Buffets, Inc. as
licensees. Buffets will discontinue using the Roadhouse Grill name in its
present form and there are no future liabilities on either company's part.
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2. The Company discontinued the use of the fictitious character "Cowboy Jim"
and replaced its advertising agency. Focus groups were conducted and a new
slogan was adopted: "There is a time and a place to get
rambunctious...Roadhouse Grill, where you can always eat, drink and be
yourself". A major television and radio media campaign began in select
Roadhouse Grill markets in February 1998.
3. On February 6, 1998, the Company's Board of Directors approved the issuance
of 400,000 shares of Common Stock to Berjaya Group (Cayman) Limited
("Berjaya"), the majority shareholder of the Company, to convert $1,500,000
of debt outstanding to common equity at a price of $3.75 per share, based
on the closing market price as of February 6, 1998. The debt carried an
interest rate of 8.5% and was scheduled to be repaid during the first
quarter of 1998.
4. The Company received commitments for a $15 million financing from FINOVA
Capital Corporation with four tranches at various interest rates and
maturity dates. These monies will be used for expansion of the Company.
There can be no assurance that this financing will be completed. There can
be assurance that this financing will be completed.
5. The Company also has received commitments to finance through sale-leaseback
type transactions the construction of approximately 30 to 40 additional
restaurants, depending on the availability of appropriate restaurant sites
that meet or exceed the Company's criteria. See "Site Selection." There can
be assurance that this financing will be completed.
6. In February 1998, the Company's Board of Directors elected Vincent Tan as
Chairman of the Board of Directors of the Company. Mr. Tan replaces Tan Kim
Poh who died in January 1998. Vincent Tan is the Chairman and Chief
Executive Officer of Berjaya Group Berhad, a Malaysian company which owns
Berjaya, the majority shareholder of the Company. Berjaya Group Berhad is a
$2 billion conglomerate with over 22,000 employees worldwide and is
headquartered in Malaysia.
7. In February 1998, the Company's Board of Directors elected Ayman Sabi as
President and Chief Executive Officer of the Company. He served as Chairman
of the Company's Executive Committee from November 1997 to February 1998.
Mr. Sabi is a Director and shareholder of Roadhouse Grill and has
significant experience in the restaurant and retail industries.
8. On March 15, 1998, the Company's franchise located in Jalan Sultan Ismail,
Malaysia, ceased its operations.
6
<PAGE> 9
ITEM 2. PROPERTIES
As of December 28, 1997, all but 13 of the Company's restaurants were
located in leased space. Initial lease expirations range from five to twenty
years, with the majority of these leases providing renewal options extending the
lease term to twenty years. All of the Company's leases provide for a minimum
annual rent, and three of the leases call for additional rent based on sales
volume at the particular location over specified minimum levels. Generally, the
leases are triple net leases which require the Company to pay the costs of
insurance, taxes and a portion of the lessors' operating costs.
The Company leases approximately 8,000 square feet for its corporate offices in
Fort Lauderdale, Florida under a three-year lease expiring September 30, 1998.
The Company is currently seeking new office space and expects to sign a new
lease prior to September 1998.
The following table provides information with respect to each of the
Company's owned, leased and franchised restaurants as of December 28, 1997.
<TABLE>
<CAPTION>
APPROXIMATE SQUARE OWNED, LEASED
FOOTAGE/SEATING OR
LOCATION OPENING DATE CAPACITY(1) FRANCHISED
- -------- ------------ ---------- ----------
<S> <C> <C> <C>
COMPANY-OWNED:
- --------------
Pembroke Pines (Fort Lauderdale), FL March 1, 1993 5,800/210 Leased
North Miami, FL (2) November 1, 1993 7,800/220 Leased
Coral Springs (Fort Lauderdale), FL December 6, 1993 10,000/230 Leased
West Palm Beach, FL February 21, 1994 6,000/220 Leased
Kendall (Miami), FL (2) June 28, 1994 8,000/230 Leased
Winter Park (Orlando), FL September 10, 1994 12,000/240 Leased
Deerfield Beach (Fort Lauderdale), FL January 16, 1995 7,500/230 Leased
Bradenton, FL February 20, 1995 10,000/280 Owned
Davie (Fort Lauderdale), FL (2) March 15, 1995 5,800/210 Leased
Tampa, FL April 10, 1995 8,600/220 Leased
St. Petersburg, FL May 16, 1995 6,200/190 Leased
Delray Beach, FL June 27, 1995 7,500/230 Leased
Kissimmee, FL July 18, 1995 7,500/230 Owned
Lakeland, FL July 18, 1995 6,300/190 Leased
Jacksonville, FL August 15, 1995 8,300/210 Owned
Orlando South, FL October 10, 1995 7,500/230 Leased
Tallahassee, FL October 30, 1995 7,500/230 Owned
Ocala, FL October 31, 1995 7,500/230 Owned
Fort Lauderdale, FL (2) (3) December 14, 1995 12,000/200 Leased
North Palm Beach, FL February 15, 1996 8,500/230 Owned
Sandy Springs (Atlanta), GA March 14, 1996 6,800/210 Leased
Longwood (Orlando), FL May 13, 1996 7,500/230 Owned
Orange Park (Jacksonville), FL May 30, 1996 6,800/210 Owned
Fort Myers, FL July 2, 1996 6,800/210 Owned
Columbia, SC July 2, 1996 8,400/220 Owned
Cheektowaga (Buffalo), NY August 27, 1996 5,000/190 Leased
Kennesaw (Atlanta), GA September 4, 1996 6,800/210 Leased
</TABLE>
- ------------------------------
1 Excludes bar seating.
2 The North Miami and Kendall restaurants originally were owned by limited
liability companies in which the Company held a 50% ownership interest. The
Davie and Fort Lauderdale restaurants were both opened in March 1993, as
franchised restaurants. The Company acquired 100% ownership of the North
Miami, Davie and Fort Lauderdale restaurants in March 1995.
3 The Fort Lauderdale restaurant was closed for remodeling from September to
December 1995. The date indicated in the above chart is the restaurant's
re-opening date.
7
<PAGE> 10
<TABLE>
<CAPTION>
APPROXIMATE SQUARE OWNED, LEASED
FOOTAGE/SEATING OR
LOCATION OPENING DATE CAPACITY (1) FRANCHISED
- -------- ------------ ----------- ----------
<S> <C> <C> <C>
COMPANY-OWNED:
- --------------
Amherst (Buffalo), NY September 24, 1996 5,000/190 Leased
Lake Worth (West Palm Beach), FL October 22, 1996 6,000/200 Leased
Greenville, SC October 22, 1996 6,800/210 Owned
Duluth (Atlanta), GA November 25, 1996 6,800/210 Leased
Rochester, NY December 4, 1996 7,140/210 Leased
Melbourne, FL January 21, 1997 6,800/192 Leased
Biloxi, MS March 11, 1997 6,000/200 Leased
Columbia, SC April 8, 1997 6,800/210 Owned
Hilliard (Columbus), OH May 27, 1997 6,800/210 Leased
Baton Rouge, LA June 29, 1997 6,800/210 Leased
Mobile, AL June 27, 1997 6,800/210 Leased
Marrero, LA September 9, 1997 6,800/210 Leased
Shreveport, LA October 27, 1997 6,800/210 Leased
Miami, FL December 9, 1997 6,800/210 Leased
Columbus, OH December 9, 1997 6,800/210 Leased
N. Little Rock, AR December 16, 1997 6,800/210 Owned
FRANCHISED:
- -----------
Bangsar Baru, Malaysia November 20, 1995 5,800/160 Franchised
Ampang, Malaysia April 24, 1996 7,000/200 Franchised
Las Vegas, NV July 15, 1997 6,800/253 Franchised
</TABLE>
- --------------------------------
1 Excludes bar seating.
8
<PAGE> 11
ITEM 3. LEGAL PROCEEDINGS
The Company is party to certain legal proceedings arising in the ordinary
course of business. In the opinion of the Company, any resulting liability will
not have material adverse effect on the Company or its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no maters submitted for a vote of security holders during the
fourth quarter of 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
MARKET INFORMATION
The Company's authorized and issued common equity consists of 9,305,408
shares of Common Stock, par value $.03 per share.
The common stock of the Company is traded over-the-counter on the NASDAQ
National Market System under the symbol "GRLL". The following table indicates
the high and low sale prices for the Common Stock as reported by NASDAQ.
BID PRICES
----------
FISCAL 1997 HIGH LOW
----------- ---- ---
First Quarter 7 1/2 4 7/8
Second Quarter 6 5
Third Quarter 7 13/16 4 5/8
Fourth Quarter 5 3/16 3 3/16
BID PRICES
----------
FISCAL 1996 HIGH LOW
----------- ---- ---
First Quarter - -
Second Quarter - -
Third Quarter - -
Fourth Quarter 6 3/8 5 5/8
The Company's Common Stock commenced trading on November 26, 1996.
DIVIDENDS
Since the Company's Initial Public Offering in 1996, the Company has not
declared or paid any cash dividends or distributions on its capital stock. The
Company does not intend to pay any cash dividends on its Common Stock in the
foreseeable future, as the current policy of the Company's Board of Directors is
to retain all earnings to support operations and finance expansion. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources." Future declaration and payment of
dividends, if any, will be determined in light of then current conditions,
including the Company's earnings, operations, capital requirements, financial
condition, and other factors deemed relevant by the Board of Directors.
NUMBER OF STOCKHOLDERS
As of March 13, 1998, there were 72 shareholders of record (not including
those shares held through brokerage accounts) of the Company's Common Stock.
9
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth for the periods and the dates indicated
selected financial data of the Company. The following should be read in
conjunction with the Financial Statements and Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEAR
-----------
STATEMENT OF OPERATIONS DATA: 1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenues ................................. $ 3,465 $ 11,389 $ 34,275 $ 62,433 $ 92,795
Cost of restaurant sales:
Food and beverage ........................ 1,471 4,085 12,084 21,382 30,991
Labor and benefits ....................... 988 4,606 12,019 19,749 27,849
Occupancy and other ...................... 1,219 2,318 8,710 13,773 19,598
----------- ----------- ----------- ----------- -----------
Total cost of restaurant sales ....... 3,678 11,009 32,813 54,904 78,438
Depreciation and amortization .................. 47 415 1,663 3,136 4,980
General and administrative ..................... 280 1,913 3,328 4,471 6,208
Impairment of long-lived assets ................ -- -- -- -- 1,120
----------- ----------- ----------- ----------- -----------
Total operating expenses ............. 4,005 13,337 37,804 62,511 90,746
----------- ----------- ----------- ----------- -----------
Operating income (loss) ........................ (540) (1,948) (3,529) (78) 2,049
Other income (expense):
Interest expense, net .................... (40) (180) (404) (1,296) (1,552)
Equity in net income (loss) of
affiliate(1) .......................... (136) (411) 284 206 62
Other, net ............................... 3 20 159 278 320
Loss on sale of investment in affiliate .. -- -- -- -- (611)
----------- ----------- ----------- ----------- -----------
Total other income (expense) ......... (173) (571) 39 (812) (1,781)
----------- ----------- ----------- ----------- -----------
Pretax income (loss) ................. (713) (2,519) (3,490) (890) 268
Income tax ........................... -- -- -- -- 176
----------- ----------- ----------- ----------- -----------
Net income (loss) .............................. $ (713) $ (2,519) $ (3,490) $ (890) $ 92
=========== =========== =========== =========== ===========
Basic and diluted
net income (loss) per common share ...... (5,893) (1.25) (1.00) (0.18) 0.01
=========== =========== =========== =========== ===========
Weighted average shares outstanding ............ 121 2,023,250 3,496,570 4,909,894 9,305,408
=========== =========== =========== =========== ===========
BALANCE SHEET DATA:
Working capital .......................... $ (2,040) $ 7,409 $ (7,560) $ (5,605) $ (5,886)
Total assets ............................. 1,685 24,843 42,201 67,335 75,432
Long-term debt and due to related parties,
including current portion ............ 1,591 4,858 13,324 13,657 18,115
Obligations under capital leases,
including current portion ............ -- 1,272 4,484 4,271 7,908
Total shareholders' equity (deficit) ..... (613) 17,639 20,261 41,100 41,295
</TABLE>
- --------------------------
1 See Note 1 of Financial Statements.
10
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Roadhouse Grill, Inc. owns and operates 43 and franchises three
full-service, casual dining restaurants under the name "Roadhouse Grill." The
Company was incorporated in October 1992 and opened the first Company-owned
restaurant in Pembroke Pines, Florida in March of 1993. Since then, the Company
has opened 42 more restaurants in Florida, Georgia, South Carolina, Mississippi,
Louisiana, Arkansas, Alabama, New York and Ohio. One of the Company-owned
restaurants is a joint venture located in Kendall, Florida in which the Company
currently owns a 50% interest. The three franchised restaurants are located in
Las Vegas, Nevada; Ampang, Malaysia and Bangsar Baru, Malaysia. These
restaurants opened in July 1997, April 1996 and November 1995, respectively. As
of December 28, 1997, the Company also had a franchise in Jalan Sultan Ismail,
Malaysia, which ceased its operations on March 15, 1998. See "Subsequent
Events".
As of December 28, 1997, the Company had four restaurants licensed by
Buffets, Inc. Subsequent to fiscal 1997, the Company dissolved its licensee
arrangement with Buffets, Inc. Buffets, Inc. will discontinue using the
Roadhouse Grill name in its present form and there are no future liabilities on
either company's part. See "Subsequent Events."
The Company's revenues are derived primarily from the sale of food and
beverages. Sales of alcoholic beverages accounted for approximately 13.0%, 12.5%
and 11.7% of total revenues in fiscal 1995, fiscal 1996, and fiscal 1997
respectively. Franchise and management fees have accounted for less than 1% of
the Company's total revenues for all periods since its inception.
The Company's new restaurants can be expected to incur above-average costs
during the first few months of operation. Pre-opening costs, such as employee
recruiting and training costs and other initial expenses incurred in connection
with the opening of a new restaurant, are amortized over a twelve-month period
commencing with the first full accounting period after the restaurant opens.
During fiscal 1997, pre-opening expenses incurred in connection with the opening
of 11 Company-owned restaurants in 1997 averaged approximately $149,000.
In the first four years of operation, fiscal 1993, fiscal 1994, fiscal 1995
and fiscal 1996, the Company incurred net losses of $713,000, $2.5 million, $3.5
million, and $890,000 respectively. As a result of the Company's net operating
losses and associated net operating loss carry-forward, the Company had no
federal income tax payable for fiscal years ended December 31, 1995, December
29, 1996 and December 28, 1997. Accordingly, the Company has made no provision
for federal income taxes payable for such fiscal years. At December 28, 1997,
the Company had a net operating loss carry forward of approximately $1,661,000.
The average cash investment, excluding real estate costs and pre-opening
expenses, required to open each of the Roadhouse Grill restaurants opened by the
Company prior to December 28, 1997 was approximately $1,400,000. The average
real estate acquisition cost for the 13 restaurant sites owned by the Company
was approximately $911,000. The Company has obtained financing in connection
with the acquisition of its owned properties, which financing generally has
required a down payment of 10% of the purchase price. The average annual
occupancy cost in fiscal 1997 for the restaurant sites leased by the Company was
approximately $105,000 per site. The Company expects that the average cash
investment required to open its prototype restaurants, including pre-opening
expenses but excluding real estate costs, will be approximately $1.1 million or
$1.6 million, depending upon whether the Company converts an existing building
or constructs a new restaurant.
In August 1996, the Company contracted to purchase from an unaffiliated
third party the remaining 50% interest in the Kendall joint venture from the
joint venture partners for a purchase price of $2,300,000. The purchase price
was to be paid from the proceeds of the initial public offering completed by the
Company in December 1996 in which 2,500,000 shares were sold at $6.00 per share
(the "Initial Public Offering"). During the first quarter of 1997, the agreement
was amended as follows: the purchase price was changed to $1,800,000 with a
deposit of $400,000 paid in January 1997, and the remaining $1,400,000 payable
by December 31, 1997 when the acquisition is closed and consummated. The Company
was granted the option of extending the acquisition date from December 31,1997
to June 30, 1998, at which time the purchase price increases to $1,850,000. In
addition, the Kendall joint venture paid a dividend of $20,000 per month to the
sellers throughout the first quarter of 1997 and will pay a dividend of $11,667
per month to the sellers thereafter. In August of 1997, the joint venture
partners advised they were revoking the amendment to the agreement and demanded
performance according to the terms of the original contract. The Company
notified the joint venture partners that the attempted revocation of the
amendment and demand for performance of the original agreement constitutes a
repudiation of the agreement to purchase, relieving the Company of it obligation
to purchase and demanded return of its $400,000 deposit. Thereafter, the Company
commenced an action in the Broward County, Florida Circuit Court for declaration
of its rights and damages based upon the joint venture partners' failure to
return the deposit. Although the ultimate disposition of this action cannot be
predicted with certainty management does not believe that the outcome of such
action, which is pending, shoud result in a materially adverse effect on the
Company's financial position, results of operation or liquidity.
In December 1996, the Company purchased, from an unaffiliated third party,
a 50% interest in Boca Roadhouse, L.C., a limited liability company that owns
the Boca Raton, Florida, Roadhouse Grill restaurant ("Boca Raton Joint
Venture"). Prior to the acquisition, the restaurant had been a franchise managed
by the Company under a management agreement. In December 1997, operations at the
Boca restaurant were discontinued and the Company sold its interest in the Boca
Raton Joint Venture to Boca Raton Roadhouse Grill, L.C., recognizing a loss of
$611,000.
11
<PAGE> 14
In January 1997, the Company developed a plan to deal with the Year 2000
problem and began converting its computer systems to be Year 2000 compliant. The
plan provides for the conversion efforts to be completed by the end of 1999. The
Year 2000 problem is the result of computer programs being written using two
digits rather than four to define the applicable year. The Company believes that
it will not experience a material impact due to conversion efforts.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain selected
statement of operations data expressed as a percentage of total revenues.
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------------
1994 1995 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenues................................................ 100.0% 100.0% 100.0% 100.0%
Cost of Company restaurant sales:
Food and beverage.......................................... 35.9 35.3 34.2 33.4
Labor and benefits......................................... 40.4 35.1 31.6 30.0
Occupancy and other........................................ 20.4 25.4 22.1 21.1
------- ------- ------- ------
Total cost of Company restaurant sales................... 96.7 95.8 87.9 84.5
Depreciation and amortization................................. 3.6 4.9 5.0 5.4
General and administrative.................................... 16.8 9.7 7.2 6.7
Impairment of long-lived assets............................... - - - 1.2
------- ------- ------- ------
Total operating expenses................................... 117.1 110.4 100.1 97.8
------- ------- ------- ------
Operating income (loss).................................... (17.1) (10.4) (0.1) 2.2
Total other income (expense).................................. (5.0) 0.1 (1.3) (1.9)
------- ------- ------- ------
Pretax income (loss).......................................... (22.1) (10.3) (1.4) 0.3
Income tax.................................................... - - - 0.2
------- ------- ------- ------
Net income (loss)............................................. (22.1)% (10.3)% (1.4)% 0.1%
======= ======= ======= ======
</TABLE>
FISCAL 1997 COMPARED TO FISCAL 1996
RESTAURANTS OPEN. At the beginning of fiscal 1997, there were 33
Company-owned restaurants in operation (including the Kendall and Boca Raton,
Florida restaurants, which were owned by limited liability companies in which
the Company held a 50% ownership interest). During fiscal 1997, the Company
opened 11 new restaurants and sold its ownership interest in the Boca Raton
limited liability company, ending the year with 43 Company-owned restaurants in
operation (including the Kendall limited liability company in which the company
held a 50% ownership interest). This represents a 30.3% year-over-year increase
in the number of Company-owned restaurants.
TOTAL REVENUES. Total revenues increased $30.4 million, or 48.6%, from
$62.4 million in fiscal 1996 to $92.8 million for fiscal 1997. This increase was
attributable to the opening of additional restaurants during fiscal 1997 and the
inclusion of all 13 Company-owned restaurants added in fiscal 1996 for the
entire fiscal year ended 1997. For fiscal 1997, same-store sales decreased 3.2%
based on a restaurant base of 23 restaurants, with 22 located in Florida.
FOOD AND BEVERAGE. Food and beverage costs increased $9.6 million, or
44.9%, from $21.4 million in fiscal 1996 to $31.0 million in fiscal 1997.
However, food and beverage costs decreased as a percentage of total revenues
from 34.2% for fiscal 1996 to 33.4% in fiscal 1997. This decrease was the result
of various margin improvement initiatives, an increase in the availability of
volume discounts and a larger base of mature restaurants which have lower
average food costs than recently opened locations.
LABOR AND BENEFITS. Labor and benefits increased $8.1 million, or 41.0%
from $19.7 million in fiscal 1996 to $27.8 million in fiscal 1997. However,
labor and benefit costs as a percentage of total revenues decreased from 31.6%
in fiscal 1996 to 30.0% in fiscal 1997. This decrease was the result of improved
productivity of the Company's in-store meat operation and the larger base of
mature restaurants which lessens the overall impact of higher labor costs
normally experienced at recently opened restaurants.
OCCUPANCY AND OTHER. Occupancy and other costs increased $5.8 million, or
42.3% from $13.8 million in fiscal 1996 to $19.6 million in fiscal 1997.
However, occupancy and other costs decreased as a percentage of total revenues
from 22.1% in fiscal 1996 to 21.1% in fiscal 1997. This decrease was primarily
attributable to operating efficiencies achieved in direct operating expenses and
a decrease in marketing expense partially offset by an increase in preopening
amortization as a percentage of sales.
12
<PAGE> 15
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased $1.9 million, or 58.8%, from $3.1 million in fiscal 1996 to $5.0
million in fiscal 1997. Depreciation and amortization as a percentage of total
revenues increased from 5.0% for fiscal 1996 to 5.4% for fiscal 1997. This is
primarily due to the Company entering into sale-leaseback transactions for the
financing of certain restaurant furniture, fixtures and equipment. The
transactions resulted in capital leases with terms shorter than the original
lives of the furniture, fixtures and equipment; therefore, depreciation expense
increased for the year ended December 28, 1997.
GENERAL AND ADMINISTRATIVE. General and administrative expense increased
$1.7 million, or 38.8%, from $4.5 million in fiscal 1996 to $6.2 million in
fiscal 1997. General and administrative expense as a percentage of total
revenues decreased from 7.2% for fiscal 1996 to 6.7% for fiscal 1997. This
decrease is a result of economies of scale attained due to a greater number of
Company-owned restaurants in operation during fiscal 1997 compared to fiscal
1996, partially offset by severance charges totaling $430,000.
IMPAIRMENT OF LONG-LIVED ASSETS. The Company recognized an impairment loss
of $1,120,238 relating to the write-down of assets of two Company-owned
restaurants. The write-down was calculated according to the provisions of
Financial Accounting Standard SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of". This statement
requires that long-lived assets be reviewed for impairment whenever
circumstances indicate that the carrying amount of an asset may not be
recoverable. The impairment loss to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the assets.
TOTAL OTHER INCOME (EXPENSE). Total other income (expense) increased by
$1.0 million from expense of $800,000 in fiscal 1996 to expense of $1.8 million
in fiscal 1997. As a percentage of revenues, other (expense) increased by 0.6%
points from 1.3% for the year ended December 29, 1996 to 1.9% for the year ended
December 28, 1997. This variance was primarily due to a loss incurred on the
sale of the Boca Raton joint venture during fiscal 1997. The loss amounted to
$611,000 or 0.7% of revenues. This was partially offset by a decrease in
interest expense of 0.4% as a percent of revenues due to higher sales volumes
from new restaurants without a corresponding increase in interest expense
dollars. Also impacting this variance is a 0.3% decrease as a percent of
revenues in equity in net income of affiliate.
FISCAL 1996 COMPARED TO FISCAL 1995
-----------------------------------
RESTAURANTS OPEN. At the beginning of fiscal 1996, there were 19
Company-owned restaurants in operation (including the Kendall, Florida Roadhouse
Grill restaurant, which was owned by a limited liability company in which the
Company held a 50% ownership interest). At December 29, 1996, there were 33
Company-owned restaurants in operation (including the Kendall and Boca Raton
limited liability companies in which the company held a 50% ownership interest),
a 73.7% year-over-year increase in the number of Company-owned restaurants.
TOTAL REVENUES. Total revenues increased $28.1 million, or 82.2%, from
$34.3 million in fiscal 1995 to $62.4 million for fiscal 1996. This increase was
attributable to the opening of additional restaurants during fiscal 1996 and the
inclusion of all 13 Company-owned restaurants added in fiscal 1995 for the
entire fiscal year ended 1996, and was partially offset by modest decreases in
sales at other restaurants open during such period.
FOOD AND BEVERAGE. Food and beverage costs increased $9.3 million, or
76.9%, from $12.1 million in fiscal 1995 to $21.4 million in fiscal 1996.
However, food and beverage costs decreased as a percentage of total revenues
from 35.3% for fiscal 1995 to 34.2% in fiscal 1996. This decrease reflects, (i)
the opening of new restaurants over a larger base of Company-owned restaurants
in operation during the fiscal year ended December 29, 1996 compared to the
fiscal year ended December 31, 1995 and (ii) a continuing decline in food costs
resulting from increased efficiencies associated with the implementation in
fiscal 1995 of detailed recipes, training manuals, inventory controls and other
management tools.
LABOR AND BENEFITS. Labor and benefits increased $7.7 million, or 64.3%
from $12.0 million in fiscal 1995 to $19.7 million in fiscal 1996. However,
labor and benefit costs as a percentage of total revenues decreased from 35.1%
in fiscal 1995 to 31.6% in fiscal 1996. The decrease was primarily attributable
to spreading the costs associated with training managers for new restaurants
over a larger base of Company-owned restaurants in operation during fiscal 1996
compared to fiscal 1995.
OCCUPANCY AND OTHER. Occupancy and other costs increased $5.1 million, or
58.1% from $8.7 million in fiscal 1995 to $13.8 million in fiscal 1996. However,
occupancy and other costs decreased as a percentage of total revenues from 25.4%
in fiscal 1995 to 22.1% in fiscal 1996. The decreased percentage resulted
primarily from a significant increase in the percentage of restaurants owned, as
opposed to leased, by the Company during fiscal 1996, as compared to fiscal
1995.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased $1.4 million, or 88.6%, from $1.7 million in fiscal 1995 to $3.1
million in fiscal 1996. Depreciation and amortization as a percentage of total
revenues increased from 4.9% for fiscal 1995 to 5.0% for fiscal 1996. The
increase in this percentage resulted primarily from an increase in the
percentage of restaurants owned by the Company as opposed to leased during the
fiscal year 1996, as compared to fiscal 1995.
13
<PAGE> 16
GENERAL AND ADMINISTRATIVE. General and administrative expense increased
$1.2 million, or 34.4%, from $3.3 million in fiscal 1995 to $4.5 million in
fiscal 1996. General and administrative expense as a percentage of total
revenues decreased from 9.7% for fiscal 1995 to 7.2% for fiscal 1996. Economies
of scale resulting from a greater number of Company-owned restaurants in
operation during fiscal 1996 compared to fiscal 1995, were offset by increased
expenses in the latter half of fiscal 1995 associated with increasing the
management and support staff infrastructure in anticipation of future expansion.
TOTAL OTHER INCOME (EXPENSE). Total other income (expense) decreased by
$851,000 from income of $39,000 in fiscal 1995 to expense of $812,000 in fiscal
1996. This decrease resulted primarily from interest expense incurred in
connection with the purchase of a total of ten restaurants sites during fiscal
1995 and fiscal 1996, and was partially offset by income earned by the Kendall,
Florida Roadhouse Grill restaurant, which was accounted for under the equity
method of accounting. See Note 5 of Notes to Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company requires capital principally for the opening of new restaurants
and has financed its requirements through the private placement of Common Stock
and Preferred Stock, an Initial Public Offering, bank loans, leasing facilities
and loans from certain private parties, including present and former
shareholders of the Company.
In September 1997, the Company entered into a $15 million loan facility
with Finova Capital Corporation. The facility consists of a 15-year term loan
collateralized by real estate with a 9.55% interest rate. The loan facility
contains customary financial covenants including minimum cash flow coverage
ratio, leverage ratio, and minimum shareholders' equity requirements. The
proceeds were used, in part, to liquidate existing mortgages on 12 restaurants,
which amounted to $7.4 million as of September 28, 1997. The remaining balance
of $7.3 million, net of fees and other costs, was used primarily for expansion
of the Company.
In June 1997 and July 1997, the Company entered into sale leaseback
agreements with unaffiliated third parties for interior furniture, fixtures and
equipment located in 11 Company-owned restaurants. The Company received proceeds
of approximately $1.8 million and $2.3 million, respectively, net of fees and
other costs. These proceeds were used for expansion of the Company.
In December 1996, the Company completed an Initial Public Offering of
2,500,000 shares of common stock at $6.00 per share. The total proceeds of
approximately $13.2 million, net of underwriting discounts and other costs
incurred in connection with the Initial Public Offering, were used as follows:
$5.3 million for the repayment of debt; $454,000 for the acquisition of a 50
percent interest in the Boca Raton Joint Venture; and $7.4 million for expansion
of the Company.
The Company's capital expenditures aggregated approximately $15.2 million
for fiscal 1997 substantially all of which were used to open Roadhouse Grill
restaurants. In January 1997, the Company repaid a promissory note in the amount
of $500,000 to SunTrust Bank Miami, N.A. In addition, the Company paid a
$400,000 deposit on the purchase of the remaining 50% interest in the Kendall
joint venture.
The Company anticipates that it will require additional financing in order
to continue to open new restaurants. The Company has identified prospective
sources of such financing including a revolving credit facility and
build-to-suit financing arrangements. There can be no guarantee or assurance
that the Company will conclude current financing discussions or that necessary
financing will otherwise be available on terms acceptable to the Company, if at
all. In the event the Company is unable to secure additional financing
sufficient to support continued growth, the Company's operating and financial
plans would require revision.
Subsequent to year end, the Company received commitments for a $15 million
financing from FINOVA Capital Corporation with four tranches at various interest
rates and maturity dates. Tranche one is for a total of $3.5 million, $2.9
million of which was funded on March 27, 1998. Tranche one is for a term of 10
years, with a 8.7% interest rate and is collateralized by personal property and
fixtures at four Company-owned restaurants. These funds will be used for
expansion of the Company. The remaining portions of tranche one and tranches two
through four are expected to fund throughout 1998. There can be no assurance
that these additional financings will be completed.
The Company also received commitments to finance through sale-leaseback
type transactions the construction of approximately 30 to 40 additional
restaurants, depending on the availability of appropriate restaurant sites that
meet or exceed the Company's criteria. See "Site Selection." However, there can
be no assurance that this financing will be completed.
At December 28, 1997, the Company owed Berjaya, its majority shareholder
$3,000,000 under a promissory note dated September 27, 1996 bearing interest at
8.5%. In January 1998, the Company paid $1,500,000 of the outstanding balance
on this promissory note. On February 6, 1998, the Company's Board of Directors
approved the issuance of 400,000 shares of Common Stock to Berjaya to convert
the remaining debt outstanding of $1,500,000 to common equity at a price of
$3.75 per share based on the closing market price as of February 6, 1998.
Funds available for operations and expansion of the Company at December
28, 1997 were $3.7 million. As is common in the restaurant industry, the
Company has generally operated with negative working capital ($5.9 million as of
December 28, 1997). The Company does not have significant receivables or
inventory and receives trade credit on its purchases of food and supplies.
SEASONALITY AND QUARTERLY RESULTS
- ---------------------------------
The Company's sales and earnings fluctuate seasonally. Historically, the
Company's highest earnings have occurred in its first and fourth fiscal
quarters. In addition, quarterly results have been, and in the future are likely
to be, substantially affected by the timing of new restaurant openings. Because
of the seasonality of the Company's business and the impact of new restaurant
openings, results for any quarter are not necessarily indicative of the results
that may be achieved for a full fiscal year.
14
<PAGE> 17
IMPACT OF INFLATION
- -------------------
The Company does not believe that inflation has materially affected its
results of operations during the past five fiscal years. Substantial increases
in costs and expenses, particularly food, supplies, labor and operating expenses
could have a significant impact on the Company's operating results to the extent
that such increases cannot be passed along to customers.
ACCOUNTING MATTERS
- ------------------
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128. "Earnings Per Share"
("SFAS No. 128"). This statement specifies the computation, presentation and
disclosure requirements for earnings per share ("EPS"). It replaces the
presentation of primary and fully diluted EPS with basic and diluted EPS. Basic
EPS excludes all dilution and is based upon the weighted average number of
common shares outstanding during the year. Diluted EPS reflects the potential
dilution that would occur if securities or other contracts to issue common
stock were exercised or converted into common stock. The Company has adopted
the provisions of SFAS No. 128 which is effective for periods ending after
December 15, 1997. The Company has restated all previously reported per share
amounts to conform to the new presentation.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 129. "Disclosure of Information about
Capital Structure" ("SFAS No. 129"), which establishes standards for disclosing
information about an entity's capital structure. This Statement is effective for
financial statements for both interim and annual periods ending after December
15, 1997. The Company adopted SFAS No. 129 during fiscal 1997 and determined
there is no material impact to the financial position or results of operations
of the Company.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130. "Reporting Comprehensive Income" ("SFAS
No. 130"), which establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and losses)
in a full set of general-purpose financial statements. This Statement requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income, be reported in a financial statement that is
displayed with the same prominence as other financial statements. This Statement
is effective for fiscal years beginning after December 15, 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Index to Financial Statements" on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
15
<PAGE> 18
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the directors and executive officers of the Company
is as follows:
VINCENT TAN, age 46. The Company's Board of Directors elected Vincent Tan
as Chairman of the Board of Directors of the Company in February 1998. Mr. Tan
replaces Tan Kim Poh who died in January 1998. Vincent Tan is the Chairman and
Chief Executive Officer of Berjaya Group Berhad, a Malaysian company which owns
Berjaya, the majority shareholder of the Company.
AYMAN SABI, age 34. Mr. Sabi was elected President and Chief Executive
Officer of the Company in February 1998. He served as Chairman of the Company's
Executive Committee from November 1997 to February 1998. Mr. Sabi became a
director of the Company in February 1997. He is presently the Chairman and Chief
Executive Officer of SABi International Developments, a trading, contracting and
investment company which owns, operates and invests in various restaurant
concepts, both domestically and internationally. Mr. Sabi also serves, as a
member of the Board of Directors of Tunis International Bank, Tunisia.
ALAIN K.K. LEE, age 42. Alain K.K. Lee was elected as a Director of the
Company in January 1998. Mr. Lee is currently a Deputy General Manager for
Berjaya Group Berhad, a Malaysian company which owns Berjaya, the majority
shareholder of the Company. He serves on the Board of several affiliated
companies in the food industry. Mr. Lee has also served as Berjaya Group Chief
Financial Officer and Deputy Chief Executive Officer of several other Berjaya
Group companies.
PHILIP FRIEDMAN, age 51. Mr. Friedman has served as a director of the
Company since September 1996. Since January 1996, Mr. Friedman has served as
President of Panda Management, Inc. In addition, since June 1986, Mr. Friedman
has served as the President of P. Friedman & Associates, Inc., a business
planning and management consulting firm. He is Chairman of the Board of Rosti
Restaurants. Mr. Friedman is also a director of Eateries, Inc.; Paramark, Inc.;
and P&E Production Technology Management, Inc. On occasion, Mr. Friedman has
taken interim advisory positions with clients of P. Friedman & Associates, Inc.
and these positions have included: Advisor to the President of Roy Rogers
Restaurants (1993), Chief Financial Officer for Service America Corporation
(1990) and Executive Vice President for Sutton Place Gourmet (1988). From 1984
to 1986, Mr. Friedman was Vice President, Finance, Administration and Senior
Planning Associate of Cini-Little International, Inc. Prior to that, he was Vice
President of Planning and Vice President, Big Boy Franchising for Marriott
Corporation. Mr. Friedman held similar executive positions with Chi-Chi's, Inc.
and Pepsico's Pizza Hut division.
PHILLIP RATNER, age 53. Mr. Ratner has served as a director of the Company
since March 1997. He is the Chairman, President and Chief Executive Officer of
Spaghetti Warehouse, Inc., Garland, Texas. From 1984 to 1994, Mr. Ratner served
in various executive positions, including President and Chief Executive Officer
in 1987, with Acapulco Restaurants, Inc. Prior to his association with Acapulco
Restaurants, Mr. Ratner was employed by El Torito from 1979 to 1984, serving as
Executive Vice President of Operations from 1982 to 1984.
DENNIS C. JONES, age 44. Mr. Jones has served as Chief Financial Officer,
Executive Vice-President of Finance and Treasurer of the Company since March
1996. From October 1994 to January 1996, Mr. Jones served as Chief Financial
Officer of Louise's Trattoria, Inc., which operated 19 Italian restaurants,
primarily in southern California. From 1984 to October 1994, Mr. Jones was
employed by Acapulco Restaurants, Inc., which operated approximately 50 Mexican
restaurants, primarily in California, in various financial management positions,
including Chief Financial Officer from January 1991 to October 1994.
BRAD H. HABER, age 37. Mr. Haber has served as Vice-President of Operations
of the Company since June 1997, as Vice-President of Training since September
1996 and as Director of Training since March 1995. From February 1992 to March
1995, Mr. Haber served as Manager Training Supervisor and as a restaurant
general manager of O'Charley's Restaurants, Inc. From June 1990 to February
1992, Mr. Haber was employed by Brinker International, Inc. as the manager of a
Chili's restaurant.
16
<PAGE> 19
All directors serve until the next annual meeting of shareholders and the
election and qualification of their successors. Directors receive $2,500 for
attending each meeting.
Officers are appointed by the Board of Directors and serve at the
discretion of the board.
The Company currently has an Audit Committee and a Compensation
Committee. During fiscal 1997, the Board of Directors held ten meetings. The
Audited Committee and the Compensation Committee each held one meeting during
fiscal 1997.
17
<PAGE> 20
To the Company's knowledge for the fiscal year ended December 28, 1997
and for the period ended March 30, 1998, no person who was a director, officer
of beneficial owner of greater than 10% of the Company's outstanding common
stock or any other person subject to Section 16 of the Securities and Exchange
Commission act of 1934 failed to file on a timely basis reports required by
Section 16 of such act.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the amount of compensation for services
rendered in all capacities to the Company during fiscal 1997, 1996 and 1995 by
the executive officers of the Company who received compensation in excess of
$100,000 during 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------- ----------------------- -------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
- --------------------------- ---- ------ ----- ------------ ------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ayman Sabi(2) 1997 60,000(3)
Director, President
and Chief Executive Officer
Dennis C. Jones
Chief Financial Officer 1997 $132,527 - - - - - -
and Executive Vice-President 1996 72,692 - - - - - -
1995 - - - - - - -
Brad H. Haber 1997 $103,373 - - - - - -
Vice-President of Operations 1996 73,461 - - - - - -
1995 49,841 - - - - - -
J. David Toole III (1)
Former Director, President 1997 $296,154 $ 50,000 - - - - -
and Chief Executive Officer 1996 200,000 100,000 - - - - -
1995 120,000 34,566 - - - - -
</TABLE>
OPTIONS GRANTS TABLE
The following table sets forth information concerning the stock options
granted to the Named Executives in 1997:
OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES UNDERLYING OPTIONS GRANTED TO EXERCISE OR BASE EXPIRATION
NAME OPTIONS GRANTED EMPLOYEES IN FISCAL YEAR PRICE ($/Sh) DATE
- ---- -------------- ------------------------ ------------ ----
<S> <C> <C> <C> <C>
Dennis C. Jones 30,000 16% $6.75 December 2004
Brad H. Haber 15,000 8% $6.75 December 2004
</TABLE>
- ----------------------
1 J. David Toole III resigned as Chief Executive Officer, President and
director of the Company in July 1997.
2 Ayman Sabi was elected President and Chief Executive Officer of the Company
in February 1998. He served as Chairman of the Company's Executive Committee
from November 1997 to February 1998.
3 Amount represents fees paid to SABi International, a management consulting
and investment firm owned by Mr. Sabi.
18
<PAGE> 21
OPTION REPRICING TABLE
The following table sets forth information concerning stock options that were
repriced in 1997:
OPTION REPRICING
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET PRICE ORIGINAL
SECURITIES OF STOCK AT EXERCISE OPTION TERM
UNDERLYING TIME OF PRICE AT NEW REMAINING AT
OPTIONS REPRICING TIME OF EXERCISE DATE OF
NAME DATE REPRICED(#) ($) REPRICING PRICE($) REPRICING
- ---- ---- ----------- --- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Dennis C. Jones 7/2/97 16,666 $5.88 $10.80 $6.75 78 months
Brad H. Haber 7/2/97 6,666 5.88 10.80 6.75 78 months
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation and Stock Option Committee (the "Committee") of the Board, which
has responsibility for all aspects of the compensation program for the executive
officers of the Company. The Committee is composed entirely of non-employee
directors who are not eligible to participate in any of the Company's executive
compensation programs.
OVERVIEW AND PHILOSOPHY
- -----------------------
The Objectives of the Company's executive compensation programs are to:
* Attract, motivate and retain the highest quality executives.
* Align their financial interests with those of the Company's long-term
investors.
* Inspire them to achieve tactical and strategic objectives in a manner
consistent with the Company's corporate values.
In furtherance of these objectives, the Company's executive compensation
policies and programs are designed to:
* Focus participants on high priority goals to increase shareholder value.
* Encourage behaviors that exemplify the Company's core values relating to
customers, quality of performance, employees, integrity, teamwork and good
citizenship.
* Increase executive stock ownership to promote a proprietary interest in
the success of the Company.
There are two major components of the Company's executive officer
compensation: (1) base salary and (2) long-term stock incentives. Formerly, the
Company had an annual cash bonus incentive program for the President and Chief
Executive Officer.
19
<PAGE> 22
BASE SALARY
- -----------
In establishing base salaries for executive officers for 1997, the
Committee considered (1) the significant scope of the duties and
responsibilities of each officer's position, (2) individual contributions, (3)
the increased experience level gained over the past year by those executive
officers holding new positions, (4) the Committee's overall philosophy of paying
executive officers according to a competitive framework, and (5) comparable
compensation practices in the casual dining industry.
LONG-TERM STOCK INCENTIVES
- --------------------------
The Committee believes that stock options are an important component of
executive compensation. The Company believes that stock options encourage
executive officers to remain in the Company's employ, as long-term rewards are
linked to stock price appreciation.
The Board adopted the 1994 Stock Option Plan (the "Original Plan") with an
effective date of February 14, 1994. The Board and the shareholders of the
Company amended and restated the Original Plan effective November 8, 1996 by
adopting and approving the Plan. The Plan provides for grants of nonqualified
stock options to Company employees and to non-employee officers, directors and
consultants of the Company. The Plan is administered by the Compensation and
Stock Option Committee. A maximum of 516,666 shares of Common Stock may be
issued pursuant to the Plan. As of December 28, 1997, options to purchase
382,656 shares were outstanding under the Plan at a weighted-average exercise
price of $6.72 per share. Except for 3,333 options which vested immediately upon
their grant, all of the options granted to date under the Plan vest over a three
year period from the date of grant, subject to the acceleration of vesting upon
a change of control of the Company.
The term of the options is determined by the Committee, but in any event
may not exceed ten years from the date of grant. The exercise price, which is
the fair market value on the date of the grant, may be paid in cash, Common
Stock or a combination of both cash and Common Stock
In addition to options that have been granted under the Plan, the Company
has granted two options, which were not covered by the Plan to J. David Toole,
III. Pursuant to these options, Mr. Toole may acquire up to 166,666 shares of
the Company's Common Stock at a price of $7.50 per share and up to 150,000
shares of the Company's Common Stock at $5.58 per share. These options had
original expiration dates of September 2002 and October 2004, respectively. Due
to his resignation from the Company in July 1997, it was determined in his
severance agreement that the expiration dates for both sets of options would be
July 31, 1998.
OTHER INFORMATION
- -----------------
Section 162(m) of the Internal Revenue Code places an annual limitation of
$1,000,000 on the compensation of certain executive officers of publicly held
corporations that can be deducted for federal income tax purposes unless such
compensation is based on performance. No executive officer of the Company
received annual compensation in excess of $1,000,000 in 1997 or in any prior
year. The Company's bonus and equity-based compensation plans are designed to
meet the requirements of Section 162(m) by basing all incentive compensation on
identifiable performance criteria. The Committee does not anticipate that any
executive officer base salary will exceed $1,000,000.
Vincent Tan Alain K.K. Lee Phillip Ratner
----------- -------------- --------------
20
<PAGE> 23
PERFORMANCE GRAPH
The following line graph compares the percentage change in the cumulative
total return of the Company's Common Stock, Nasdaq Combination Composite Index
and a Company compiled peer group index ("Peer Group") consisting of Rare
Hospitality International, Inc. ("RARE"); Lone Star Steakhouse & Saloon,
("STAR"); Outback Steakhouse, Inc., ("OSSI"); and Logan's Roadhouse, Inc.,
("RDHS") over the period December 30, 1996 through December 28, 1997. The graph
assumes an initial investment of $100 on December 30, 1996, the first day of
Fiscal 1997, and the reinvestment of dividends, if any.
<TABLE>
<CAPTION>
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Peer Group 100 100.134 94.182 82.685 72.886 92.551 91.679 95.370 86.174 91.813 84.128 75.705
GRLL 100 111.111 113.333 106.687 91.111 97.778 107.787 126.667 95.556 88.889 74.453 57.776
Nasdaq Composite 100 106.857 101.819 94.500 97.904 109.089 111.887 123.807 125.652 131.260 126.578 117.366
</TABLE>
(GRAPHIC)
21
<PAGE> 24
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Board has fixed the close of business on March 13, 1998, as the record
date, on which there were outstanding 9,305,408 shares. The following table sets
forth certain information regarding the beneficial ownership of the Company's
Common Stock as of March 13, 1998 by each person known to the Company to own
beneficially more than five percent of the Company's Common Stock, each
director, each named executive, and all executive officers and directors as a
group.
COMMON STOCK
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------------------ ------------------ ----------------
<S> <C> <C>
Vincent Tan(1) 5,635,466 60.6%
Ayman Sabi(2) 577,515 6.2%
Alain K.K. Lee(3) - -
Philip Friedman(4) 5,000 0.1%
Phillip Ratner(5) 5,000 0.1%
Dennis C. Jones(6) 22,110 0.2%
Brad H. Haber(7) 11,110 0.1%
Dr. Christian F. Horn(8) 582,922 6.3%
Berjaya Group (Cayman) Limited(1) 5,635,466 60.6%
Cupertino Ventures Partnership III, L.P.(8) 551,256 5.9%
All executive officers and directors 6,256,201 67.23%
as a group (seven persons)(1)(2)(3)(4)(5)(6)(7)(8)(9)
</TABLE>
- --------
1 Mr. Vincent Tan was elected Chairman of the Board of Directors of the
Company in February 1998. The Common Stock shown above includes 5,635,466 shares
beneficially owned by Berjaya Group (Cayman) Limited ("Berjaya"). As
Chairman/Chief Executive Officer of Berjaya Group Berhad, the owner of 100% of
the outstanding shares of Berjaya, Mr. Tan may be deemed to be the beneficial
owner of all of the shares owned by Berjaya in accordance with Rule 13d-3 under
the Securities and Exchange Act of 1934. Mr. Tan disclaims ownership of the
shares beneficially owned by Berjaya. The address for Mr. Tan and Berjaya is
Level 28, Menara Shahzan Insas, 30 Jalan Ismail, 50250 Kuala Lumpur, Malaysia.
2 Includes 5,000 shares beneficially owned by Mr. Sabi that are exercisable
within 60 days of the date of this Form 10K. Mr. Sabi owns no shares of record.
The number above represents (i) 160,565 shares beneficially owned by Arab
Multinational Investment Company; and (ii) 411,950 shares beneficially owned by
Societe Financiere Privee S.A. Geneve. As agent for these entities, Mr. Sabi may
be deemed to be the beneficial owner of all of the shares owned by these
entities in accordance with Rule 13d-3 under the Securities and Exchange Act of
1934. The address for Mr. Sabi is 6600 N. Andrews Avenue, Suite 160, Ft.
Lauderdale, Florida 33309.
3 Alain K.K. Lee was elected Director of the Company in January 1998. Mr. Lee
is currently a Deputy General Manager for Berjaya Group Berhad, a Malaysian
company which owns Berjaya, the majority shareholder of the Company. Mr. Lee's
address is Lot 12A-03, 12A Floor, Wisma Cosway, No 88, Jalan Raja Chulan, 50200,
Kuala Lumpur, Malaysia.
4 Represents 5,000 shares subject to options owned by Mr. Friedman that are
exercisable within 60 days of the date of this Form 10-K. The address for Mr.
Friedman is 899 El Centro Street, South Pasadena, California 91030.
5 Represents 5,000 shares subject to options owned by Mr. Ratner that are
exercisable within 60 days of the date of this Form 10-K. The address for Mr.
Ratner is Wet I-30, Garland, Texas, 75043.
6 Includes 21,110 shares subject to options beneficially owned by Mr. Jones
that are exercisable within 60 days of the date of this Form 10-K. The address
for Mr. Jones is 6600 N. Andrews Avenue, Suite 160, Ft. Lauderdale, Florida
33309.
7 Represents 11,110 shares subject to options benefifically owned by Mr. Haber
that are exercisable within 60 days of this Form 10-K. The address for Mr. Haber
is 6600 N. Andrews Avenue, Suite 160, Ft. Lauderdate, Florida 33309.
8 Includes (i) 15,000 shares subject to options beneficially owned by Dr. Horn
that are exercisable within 60 days of the date of this Form 10-K and (ii)
551,256 shares beneficially owned by Cupertino. As the Managing Partner of Horn
Ventures II, L.P., a general partner of Cupertino, Dr. Horn may be deemed to the
beneficial owner of all the shares owned by Cupertino in accordance with Rule
13d-3 under the Securities Exchange Act of 1934. Dr. Horn served as Chairman of
the Board of Directors of the Company from August 1996 to July 197 and was a
director of the Company from January 1994 to July 1997. He resigned from both
capacities in July 1997. The address for Dr. Horn and Cupertino is 20300 Stevens
Creek Blvd., Suite 330, Cupertino, California, 95014.
9 Includes 47,220 shares subject to options that are exercisable within 60
days of this Form 10-K.
22
<PAGE> 25
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In fiscal 1995, the Company obtained loans in the aggregate amount of
approximately $2.5 million from John Y. Brown, Jr. During fiscal 1995, Mr. Brown
was the Chairman of the Board of Directors of the Company and was a shareholder.
In January 1996, these loans were consolidated and extended under the Company's
unsecured promissory note dated January 15, 1996, in the principal amount of
$2.5 million, bearing interest at 8.5 percent per annum, the principal of and
accrued interest on which were due and payable in full upon the closing, and
from the proceeds, of the Initial Public Offering. The funds obtained by the
Company from such loan were used to finance the opening of new restaurants. The
loan was initially unsecured but in July 1996 was cross-collateralized by the
lien granted on the additional $1.5 million loan described in the next
paragraph.
In July 1996, the Company borrowed an additional $1.5 million from Mr.
Brown under the Company's secured promissory note dated July 12, 1996, bearing
interest at 8.5 percent per annum, the principal of and accrued interest on
which were paid on August 19, 1996 from a portion of the proceeds of the
Company's $2.0 million loan from Berjaya described below. The loan, the proceeds
of which were used to finance the opening of new restaurants, was secured by a
lien on all of the furniture, fixtures and equipment located in the Company's
restaurants on July 12, 1996 that had not been previously pledged to a third
party. Following the repayment of this loan, the Company in September 1996
obtained a new loan from Mr. Brown in the amount of $1.5 million, which was
secured by the same collateral as the July 1996 note and which is evidenced by
the Company's promissory note dated September 5, 1996, bearing interest at 5.0
percent per annum and payable in full upon the closing of the Initial Public
Offering. The proceeds of this loan were used for general corporate purposes,
including opening new restaurants.
In July 1996, the Company borrowed $500,000 from Cupertino, a shareholder
of the Company, under the Company's unsecured promissory note dated July 15,
1996, bearing interest at 8.5 percent per annum, the principal of and accrued
interest on which were paid on August 19, 1996. The proceeds of this loan were
used to finance the opening of new restaurants. Dr. Christian F. Horn, the
Chairman of the Board of Directors of the Company, is the Managing Partner of
Horn Ventures Partners II, L.P., which is a General Partner of Cupertino.
In August 1996, the Company borrowed $2.0 million from Berjaya, the
majority shareholder of the Company, under an unsecured promissory note dated
August 16, 1996, bearing interest at 8.5 percent per annum. The proceeds of this
loan were used to repay the July 1996 $1.5 million loan from Mr. Brown and the
$500,000 loan from Cupertino described above. In September 1996, the Company
borrowed $3.0 million from Berjaya, its principal shareholder, under an
unsecured promissory note dated September 27, 1996, bearing interest at 8.5
percent per annum. The proceeds of this loan were used for general corporate
purposes, including opening new restaurants. In November 1997, the Company paid
Berjaya $2,000,000 in order to liquidate the promissory note dated August 16,
1996. In January 1998, the Company paid $1,500,000 of the outstanding amount of
the promissory note dated September 1996. On February 6, 1998, the Company's
Board of Directors approved the issuance of 400,000 shares to Berjaya to convert
the $1,500,000 debt outstanding to common equity at a price of $3.75 per share,
based on the closing market price as of February 6, 1998. Vincent Tan, the
Chairman of the Board of Directors of the Company is Chairman and Chief
Executive Officer of Berjaya Group Berhad.
Berjaya owns Roadhouse Grill Hong Kong and Roadhouse Grill Asia. In January
1996, the Company entered into a Master Development Agreement with Roadhouse
Grill Hong Kong which provides for the development and franchising of Roadhouse
Grill restaurants in Hong Kong. Under the agreement, Roadhouse Grill Hong Kong
is not required to develop any specific number of restaurants in Hong Kong, but
any restaurants that it develops are credited against the development
obligations of Roadhouse Grill Asia under Roadhouse Grill Asia's Master
Development Agreement with the Company. Roadhouse Grill Hong Kong is not
required to pay any franchise or reservation fee for restaurants that it
develops, but it is responsible for paying or reimbursing approved expenses
incurred by the Company in connection with the opening of each restaurant. In
addition, Roadhouse Grill Hong Kong was required to pay a royalty in connection
with the operation of each of its restaurants in the amount of 2.0 % of gross
sales for each restaurant's first three years of operation and 3.0 % thereafter.
Effective December 1, 1997, the agreement was amended with respect to royalty
fees. The royalty fees will remain at 2.0% of gross sales for the life of the
agreement. Under certain circumstances, Roadhouse Grill Hong Kong or the Company
was able to grant franchises to third parties in Hong Kong. In that event, the
Company was entitled to receive 50.0 % of any franchise and reservation fees and
50.0% of any royalty fee payable by the third party franchisee, subject to
limitations on the amounts payable to the Company of $10,000 per restaurant in
the case of franchise and reservations fees and 2.5 % of gross sales in the case
of royalty fees. Effective December 1, 1997, the agreement was amended to allow
the Company to receive 40.0% of any royalty fee payable by the third party
franchisee, subject to a limitation of 2.0% of gross sales. Amounts for
franchise and reservation fees were unchanged.
23
<PAGE> 26
In January 1996, the Company also entered into a Master Development
Agreement with Roadhouse Grill Asia, which covers countries in Asia and the
Pacific Rim (other than Hong Kong), including but not limited to, Australia,
China, India, Indonesia, Japan, Malaysia, New Zealand, North Korea, South Korea,
The Philippines and Thailand. Under the agreement, Roadhouse Grill Asia is
required to open and maintain at least 30 Roadhouse Grill restaurants during the
first ten years of the term of the agreement, with a minimum of two restaurants
to be developed each year. Under certain circumstances, Roadhouse Grill Asia or
the Company may grant franchises to third parties in the territory. The fee
arrangement under the agreement are substantially the same as those under the
agreement between the Company and Roadhouse Grill Hong Kong.
During the fourth quarter of 1997, the Company engaged National Retail
Group Inc. ("NRG"), a real estate consulting firm, and SABi International
Developments, Inc. ("SABi"), a management consulting and investment firm, to
provide specified real estate development and management consulting services to
the Company, addressing problems from previous management actions. SABi is
wholly owned by Ayman Sabi, and NRG is an affiliate of SABi International. Mr.
Sabi was and remains a director of the Company, was Chairman of the Company's
Executive Committee from November 1997 to February 1998, and was elected
President and Chief Executive Officer of the Company on February 6, 1998. The
Company paid fees and reimbursed expenses in the aggregate amounts of $168,214
and $60,000 to NRG and SABi, respectively. The Company believes amounts paid for
services rendered by NRG and SABi were fair and competitive, and represented the
fair market value of such services.
24
<PAGE> 27
PART IV
ITEM 14. FINANCIAL STATEMENTS AND EXHIBITS
(a) List of documents filed as part of this report:
1. Financial Statements
The Financial Statements are listed in the accompanying "Index to
Financial Statements" on Page F-1.
2. Financial Statement Schedules
Financial Statement Schedules are listed in the accompanying "Index to
Financial Statements" on Page F-1
3. Exhibits
The exhibits filed with or incorporated by reference in this report
are listed on the Exhibit Index beginning on page E-1.
(b) Reports on Form 8-K:
In a report on Form 8-K filed with the Securities and Exchange
Commission on December 23, 1997, the Company announced a change in fiscal
year end and the financial reporting schedule changes associated with the
new fiscal period.
25
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on this 30th day of
March, 1998.
ROADHOUSE GRILL, INC.
By: /s/ Ayman Sabi
------------------------------
Ayman Sabi
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Ayman Sabi President, Chief Executive MARCH 30, 1998
----------------------------------- Officer and Director ----------------
Ayman Sabi (Principal Executive Officer)
/s/ Dennis C. Jones Chief Financial Officer, MARCH 30, 1998
----------------------------------- (Principal Financial Officer --------------
Dennis C. Jones and Principal
Accounting Officer)
/s/ Philip Friedman Director MARCH 30, 1998
----------------------------------- --------------
Philip Friedman
/s/ Vincent Tan Chairman of the Board MARCH 30, 1998
----------------------------------- of Directors ----------------
Vincent Tan
/s/ Phillip Ratner Director MARCH 30, 1998
----------------------------------- --------------
Phillip Ratner
/s/ Alain K.K. Lee Director MARCH 30, 1998
----------------------------------- ----------------
Alain K.K. Lee
</TABLE>
26
<PAGE> 29
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.............................................................................. F-2
Balance Sheets as of December 29, 1996 and December 28, 1997.............................................. F-3
Statements of Operations for the Fiscal Years Ended December 31, 1995, December 29, 1996
and December 28, 1997................................................................................. F-4
Statements of Changes in Shareholders' Equity for the Fiscal Years Ended December 31, 1995,
December 29, 1996 and December 28, 1997............................................................... F-5
Statements of Cash Flows for the Fiscal Years Ended December 31, 1995, December 29, 1996
And December 28, 1997................................................................................. F-6
Notes to Financial Statements............................................................................. F-7
</TABLE>
F-1
<PAGE> 30
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Roadhouse Grill, Inc.:
We have audited the accompanying balance sheets of Roadhouse Grill, Inc. as of
December 29, 1996 and December 28, 1997, and the related statements of
operations, shareholders' equity and cash flows for each of the three years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Roadhouse Grill, Inc. as of
December 29, 1996 and December 28, 1997, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
February 20, 1998
Miami, Florida
F-2
<PAGE> 31
ROADHOUSE GRILL, INC.
BALANCE SHEETS
December 29, 1996 and December 28, 1997
<TABLE>
<CAPTION>
December 29, December 28,
1996 1997
-------------- --------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ............................................... $ 6,257,157 $ 3,733,390
Accounts receivable ..................................................... 196,542 162,815
Inventory ............................................................... 814,225 930,580
Current portion of note receivable ...................................... 76,634 80,371
Pre-opening costs, net .................................................. 1,508,310 1,104,080
Prepaid expenses ........................................................ 577,883 814,910
------------ ------------
Total current assets ................................................. 9,430,751 6,826,146
Note receivable ........................................................... 218,539 139,804
Property, & equipment, net ................................................ 54,129,230 63,434,855
Intangible assets, net of accumulated amortization of $92,270
and $161,341 at December 29, 1996 and December 28, 1997,
respectively ............................................................ 877,260 839,101
Other assets .............................................................. 1,479,718 3,558,444
Investment in and advances to affiliates .................................. 1,199,382 633,194
------------ ------------
Total assets ......................................................... $ 67,334,880 $ 75,431,544
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable ........................................................ $ 5,246,738 $ 3,760,665
Accrued expenses ........................................................ 3,059,142 4,352,536
Due to related parties .................................................. 5,000,000 3,000,000
Current portion of long-term debt ....................................... 1,452,935 463,862
Current portion of capital lease obligations ............................ 277,381 1,134,723
------------ ------------
Total current liabilities ............................................ 15,036,196 12,711,786
Long-term debt ............................................................ 7,204,451 14,651,376
Capital lease obligations ................................................. 3,993,858 6,773,662
------------ ------------
Total liabilities .................................................... 26,234,505 34,136,824
Shareholders' equity:
Common stock $.03 par value. Authorized 30,000,000 shares;
issued and outstanding 9,305,408 ........................................ 279,162 279,162
Additional paid-in-capital .............................................. 48,433,344 48,535,944
Accumulated deficit ..................................................... (7,612,131) (7,520,386)
------------ ------------
Total shareholders' equity ........................................... 41,100,375 41,294,720
Commitments and contingencies (note 13 and 14) ............................ -- --
------------ ------------
Total liabilities and shareholders' equity ................................ $ 67,334,880 $ 75,431,544
============ ============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 32
ROADHOUSE GRILL, INC.
STATEMENTS OF OPERATIONS
For the fiscal years ended December 31, 1995, December 29, 1996 and
December 28, 1997
<TABLE>
<CAPTION>
Fiscal Year
---------------------------------------------
1995 1996 1997
------------- ------------ ------------
<S> <C> <C> <C>
Total revenue .............................. $ 34,275,496 $ 62,433,131 $ 92,795,056
Cost of restaurant sales:
Food and beverage ....................... 12,084,134 21,381,810 30,991,210
Labor and benefits ...................... 12,019,723 19,748,626 27,849,037
Occupancy and other ..................... 8,710,597 13,773,532 19,598,326
------------ ------------ ------------
Total cost of restaurant sales .......... 32,814,454 54,903,968 78,438,573
Depreciation and amortization .............. 1,662,650 3,136,272 4,980,469
General and administrative ................. 3,327,680 4,470,900 6,207,580
Impairment of long-lived assets ............ -- -- 1,120,238
------------ ------------ ------------
Total operating expenses ................ 37,804,784 62,511,140 90,746,860
------------ ------------ ------------
Operating income (loss) ................. (3,529,288) (78,009) 2,048,196
Other income (expense):
Interest expense, net ................... (404,009) (1,296,393) (1,552,496)
Equity in net income of affiliates ...... 284,241 206,489 61,892
Other, net .............................. 159,152 277,983 320,408
Loss on sale of investment in affiliate . -- -- (610,550)
------------ ------------ ------------
Total other income (expense) ............ 39,384 (811,921) (1,780,746)
------------ ------------ ------------
Pretax income (loss) .................... (3,489,904) (889,930) 267,450
Income tax .............................. -- -- 175,705
------------ ------------ ------------
Net income (loss) .................. $ (3,489,904) $ (889,930) $ 91,745
============ ============ ============
Basic and diluted net income (loss) per
common share ............................... $ (1.00) $ (0.18) $ 0.01
============ ============ ============
Weighted average common shares
outstanding ................................ 3,496,570 4,909,894 9,305,408
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 33
ROADHOUSE GRILL, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the fiscal years ended December 31, 1995, December 29, 1996 and
December 28, 1997
<TABLE>
<CAPTION>
Common Stock (a) Preferred Stock Additional
-------------------- ---------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit Total
--------- -------- --------- --------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1995................. 3,181,482 $ 95,444 5,875,025 $ 58,750 $ 20,717,368 (3,232,297) $ 17,639,265
Issuance of common stock ............. 620,624 18,618 -- -- 6,000,573 -- 6,019,191
Stock options exercised .............. 118,518 3,556 -- -- 49,777 -- 53,333
Stock options outstanding ............ -- -- -- -- 118,800 -- 118,800
Deferred compensation ................ -- -- -- -- (79,200) -- (79,200)
Net loss ............................. -- -- -- -- -- (3,489,904) (3,489,904)
--------- -------- ---------- --------- ------------ ----------- ------------
Balance December 31, 1995 .............. 3,920,624 117,618 5,875,025 58,750 26,807,318 (6,722,201) 20,261,485
Issuance of common stock ............. 3,287,030 98,612 -- -- 21,590,608 -- 21,689,220
Conversion of Series A to common stock 1,175,000 35,250 (3,525,000) (35,250) -- -- --
Conversion of Series B to common stock 922,754 27,682 (2,350,025) (23,500) (4,182) -- --
Deferred compensation ................ -- -- -- -- 39,600 -- 39,600
Net loss ............................. -- -- -- -- -- (889,930) (889,930)
--------- -------- ---------- --------- ------------ ----------- ------------
Balance December 29, 1996 .............. 9,305,408 279,162 -- -- 48,433,344 (7,612,131) 41,100,375
Deferred compensation ................ -- -- -- -- 102,600 -- 102,600
Net income ........................... -- -- -- -- -- 91,745 91,745
--------- -------- ---------- --------- ------------ ----------- ------------
Balance December 28, 1997 .............. 9,305,408 $279,162 -- $ -- $ 48,535,944 $(7,520,386) $ 41,294,720
========== ======== =========== ========= ============ =========== ============
</TABLE>
- ----------------------
(a) Number of shares of Common Stock does not include 400,000 shares pending to
be issued to Berjaya Group (Cayman) Limited, ("Berjaya") based on conversion of
existing debt to common stock. (See Note 7 to the Financial Statements).
See accompanying notes to financial statements.
F-5
<PAGE> 34
ROADHOUSE GRILL, INC.
STATEMENTS OF CASH FLOWS
For the fiscal years ended December 31, 1995, December 29, 1996 and
December 28, 1997
<TABLE>
<CAPTION>
December 31 December 29 December 28
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) ................................................... ($ 3,489,904) ($ 889,930) 91,745
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization ..................................... 1,662,650 3,136,272 4,980,469
Non-cash compensation expense ..................................... 39,600 39,600 102,600
Equity in net income of affiliate ................................. (284,241) (206,489) (61,892)
Impairment of long-lived assets ................................... -- -- 1,120,238
Loss on sale of investment in affiliate ........................... -- -- 610,550
Changes in assets and liabilities, net of acquisitions of businesses:
Decrease (increase) in accounts receivable ........................ 133,868 (76,716) 79,218
Decrease (increase) in other assets ............................... (882,068) (176,422) (1,911,280)
Decrease (increase) in prepaid expense ............................ (85,342) (336,880) (237,027)
(Decrease) increase in accounts payable ........................... 911,772 3,414,788 (1,486,073)
(Decrease) increase in accrued expenses ........................... 1,760,798 759,644 1,361,504
Decrease (increase) in inventory .................................. (300,608) (408,640) (116,355)
Decrease (increase) in pre-opening costs, net ..................... (250,941) (1,191,672) 404,230
------------ ------------ ------------
Net cash provided by (used in) operating activities ............. (784,416) 4,063,555 4,937,927
------------ ------------ ------------
Cash flows from investing activities
Dividends received from affiliate .................................. -- -- 58,335
Advances to affiliates, net ......................................... 26,031 (222,120) (41,241)
Payments for intangibles ............................................ -- (54,570) (30,912)
Proceeds from payment on notes receivable ........................... 49,235 46,362 74,998
Proceeds from sale-leaseback transactions ........................... 1,185,960 395,164 4,286,578
Purchase of property and equipment .................................. (14,541,042) (19,859,672) (15,192,521)
Acquisition of restaurants .......................................... (3,000,000) (480,000) --
Deposit on Kendall restaurant acquisition ........................... -- -- (400,000)
Capital contribution to affiliate ................................... -- (75,000) (25,351)
------------ ------------ ------------
Net cash used in investing activities ........................... (16,279,816) (20,249,836) (11,270,114)
------------ ------------ ------------
Cash flows from financing activities
Proceeds from short-term debt and amounts due to related parties .... 6,615,000 7,000,000 --
Repayments of amounts due to related parties ........................ -- (4,600,000) (2,000,000)
Proceeds from long-term debt ........................................ -- -- 15,000,000
Repayments of long-term debt ........................................ (407,977) (694,459) (8,542,148)
Payments on capital lease obligations ............................... (144,765) (256,381) (649,432)
Proceeds from issuance of common and preferred stock ................ 6,072,524 18,189,235 --
------------ ------------ ------------
Net cash provided by financing activities ......................... 12,134,782 19,638,395 3,808,420
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents ....................... (4,929,450) 3,452,114 (2,523,767)
Cash and cash equivalents at beginning of year ......................... 7,734,493 2,805,043 6,257,157
------------ ------------ ------------
Cash and cash equivalents at end of year ............................... $ 2,805,043 $ 6,257,157 $ 3,733,390
============ ============ ============
Supplementary disclosures:
Interest paid ....................................................... $ 525,276 $ 1,369,897 $ 2,215,401
============ ============ ============
Income taxes paid ................................................... $ -- $ -- $ 155,836
============ ============ ============
</TABLE>
Noncash investing and financing activities:
During the fiscal year ended December 31, 1995 the Company entered into
capital leases for property and equipment in the amount of $4,100,000. In
addition, the Company entered into mortgage notes payable amounting to
approximately $2,000,000 during the fiscal year ended December 31, 1995. The
Company assumed $270,000 in debt in connection with the assumption of a lease
from a third party.
During the fiscal year ended December 29, 1996, $3,500,000 of long-term debt
was converted to common stock. The Company entered into capital lease
obligations and seller financing mortgage agreements of $44,000 and
$2,144,070, respectively, during the period from January 1, 1996 to December
29, 1996.
During the fiscal year ended December 28, 1997, the Company entered into
capital lease obligations of $4,286,000.
See accompanying notes to financial statements.
F-6
<PAGE> 35
ROADHOUSE GRILL, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995, December 29, 1996 and December 28, 1997
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS
Roadhouse Grill, Inc. (the "Company") was incorporated under the laws
of the state of Florida in 1992. The principal business of the Company is
the operation of specialty restaurants. The Company has also granted
franchises and licenses to operate restaurants under the "Roadhouse Grill"
name.
Roadhouse Grill, Inc. (the "Company") owns and operates 43 and
franchises three full-service, casual dining restaurants under the name
"Roadhouse Grill". The Company was incorporated in October 1992 and opened
the first Company-owned restaurant in Pembroke Pines, Florida in March of
1993. Since then, the Company has opened 42 more restaurants in Florida,
Georgia, South Carolina, Mississippi, Louisiana, Arkansas, Alabama, New
York and Ohio. One of the Company-owned restaurants is a joint venture
located in Kendall, Florida in which the Company currently owns a 50%
interest ("Kendall"). The Company manages the operations of the Kendall
restaurant pursuant to its individual operating agreement. Under this
operating agreement, the Company receives management fees and is allocated
its share of the restaurant's profits and losses. The three franchised
restaurants are located in Las Vegas, Nevada; Ampang, Malaysia and Bangsar
Baru, Malaysia. These restaurants opened in July 1997, April 1996 and
November 1995, respectively. As of December 28, 1997, the Company also had
a franchise in Jalan Sultan Ismail, Malaysia, which ceased its operations
on March 15, 1998. See "Subsequent Events."
During 1997, the Company also had a 50 percent interest in Boca Raton
Roadhouse Grill, L.C., a limited liability company that owned the Boca
Raton, Florida Roadhouse Grill restaurant ("Boca"). In December 1997,
operations at the Boca restaurant were discontinued and the Company sold
its interest in Boca to Boca Raton Roadhouse Grill, L.C. (see Note 5). The
Company managed the operations of the Boca restaurant pursuant to its
individual operating agreement. Under such operating agreement, the Company
received management fees and was allocated its share of the restaurant's
profits and losses.
Subsequent to year-end, the Company dissolved its previous licensing
and franchising agreements with Buffets Inc. Buffets will discontinue using
the Roadhouse Grill name in its present form and there are no future
liabilities on either company's part. See "Subsequent Events."
(B) INVESTMENT IN AFFILIATES
The Company's 50 percent interest in Kendall is accounted for under the
equity method.
(C) PROPERTY AND EQUIPMENT
Property and equipment are carried at cost less accumulated
depreciation. The cost of restaurants held under capital leases is recorded
at the lower of the net present value of the minimum lease payments or the
fair value of the leased property at the inception of the lease. Repairs
and maintenance are charged to expense as incurred. Major renewals and
betterments, which substantially extend the useful life of the property,
are capitalized and depreciated over the useful life of the asset. When
assets are retired or otherwise disposed of, the cost and accumulated
depreciation are removed from their respective accounts and any gain or
loss is recognized.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets. Amortization of capitalized leased
assets is calculated using the straight-line method over the shorter of the
estimated useful life of the leased asset or the lease term.
(D) INTANGIBLES
Intangibles consist primarily of goodwill recorded as a result of a
restaurant acquisition in 1995 (see Note 14) and are being amortized on a
straight-line basis over 17 years, which is the lease term of the
respective restaurant property. The Company evaluates whether changes have
occurred that would require revision of the remaining estimated useful life
of the assigned goodwill or render goodwill not recoverable. If such
circumstances arise, the Company uses undiscounted future cash flows to
determine whether the goodwill is recoverable. In 1996, the Company adopted
Statement of Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed of".
(E) CASH AND CASH EQUIVALENTS
The Company considers all short-term investments with an original
maturity of three months or less to be cash equivalents.
(F) INVENTORY
Inventories are valued at the lower of cost (based on first-in,
first-out inventory costing) or net realizable value and consist primarily
of restaurant food items, beverages and paper supplies.
F-7
<PAGE> 36
(G) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(H) PRE-OPENING COSTS
Pre-opening costs are costs incurred in the opening of new stores
(primarily payroll costs) which are capitalized and amortized over a
one-year period commencing with the first full period after the new
restaurant opens.
Deferred costs related to sites subsequently determined to be
unsatisfactory, and general site selection costs which cannot be identified
with a specific restaurant, are charged to operations.
(I) FISCAL YEAR
The Company's fiscal year ends on the Sunday nearest December 31. On
December 11, 1997 the Company's Board of Directors voted to change the
Company's fiscal reporting year to coincide with that of the majority
shareholder, Berjaya Group (Cayman) Limited. The new fiscal year will end
on the last Sunday in April.
(J) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(K) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments have been determined
based on available information and appropriate valuation methodologies. The
carrying amounts of accounts receivable, accounts payable and accrued
expenses approximate fair value due to the short-term nature of the
accounts. The fair value of long-term debt is estimated based on market
rates of interest currently available to the Company. The fair value of
long-term debt at December 29, 1996 and December 28, 1997 is approximately
$7,597,000, and $15,115,238, respectively.
(L) REVENUE RECOGNITION
Total revenues include sales at Company-operated restaurants, royalties
received from restaurants operating under franchise and license agreements,
and fees earned under management agreements. Revenue earned from the game
rooms and vending machines in the restaurants is included in other income.
(M) NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 129. "Disclosure of
Information about Capital Structure" ("SFAS No. 129"), which establishes
standards for disclosing information about an entity's capital structure.
This Statement is effective for financial statements for both interim and
annual periods ending after December 15, 1997. The Company adopted SFAS
No.129 during fiscal 1997 and determined there is no material impact to the
financial position or results of operations of the Company.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130. "Reporting Comprehensive Income"
("SFAS No. 130"), which establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and
losses) in a full set of general-purpose financial statements. This
Statement requires that all items that are required to be recognized under
accounting standards as components of comprehensive income, be reported in
a financial statement that is displayed with the same prominence as other
financial statements. This Statement is effective for fiscal years
beginning after December 15, 1997.
(N) NET INCOME (LOSS) PER COMMON SHARE
Earnings per share amounts are based upon the weighted average number
of common and common equivalent shares outstanding during the year. Common
equivalent shares are excluded from the computation in the periods in which
they have an anti-dilutive effect. In February 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 128. "Earnings Per Share" ("SFAS No. 128"). This statement
specifies the computation, presentation and disclosure requirements for
earnings per share. ("EPS"). It replaces the presentation of primary and
fully diluted EPS with basic and diluted EPS. Basic EPS excludes all
dilution and is based upon the weighted average number of common shares
outstanding during the year. Diluted EPS reflects the potential dilution
that would occur if securities or other contracts to issue common stock
were exercised or converted into
F-8
<PAGE> 37
common stock. The Company has adopted the provisions of SFAS No. 128 which
is effective for periods ending after December 15, 1997. The Company has
restated all previously reported per share amounts to conform to the new
presentation.
As of December 31, 1995, December 29, 1996 and December 28, 1997, the
Company had no common stock equivalents outstanding that were required to
be included in earnings per share calculations, therefore, basic and
diluted earnings per share amounts were equal.
On February 6, 1998, the Company's Board of Directors approved the
issuance of 400,000 shares of Common Stock to Berjaya to convert
$1,500,000 of debt to common equity at a price of $3.75 per share, based
on the closing market price as of February 6, 1998.
On October 9, 1996, the Board of Directors declared a one-for-three
reverse stock split (see Note 9). All per share data appearing in the
financial statements have been retroactively adjusted for the reverse
split.
(O) ADVERTISING COSTS
During 1995, the Company adopted Statement of Position 93-7, "Reporting
on Advertising Costs" (SOP 93-7). The adoption of SOP 93-7 did not have a
material impact on the Company's financial position or results of
operations. The Company expenses all advertising costs as incurred.
Advertising expense for the fiscal years ending December 31, 1995, December
29, 1996 and December 28, 1997 amounted to approximately $1,273,000,
$1,378,000 and $1,127,000, respectively.
(P) RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform to the
current presentation.
(2) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at:
<TABLE>
<CAPTION>
December 29, December 28, Estimated
1996 1997 USEFUL LIVES
---- ---- ------------
<S> <C> <C> <C>
Building................................. $17,018,598 $18,459,424 20 years
Land................................... 10,842,818 11,848,765 -
Furniture and equipment................ 13,319,318 17,867,811 3-7 years
Leasehold improvements................. 12,695,856 23,614,442 7-10 years
---------- ----------
53,876,590 71,790,442
Less accumulated depreciation......... 5,046,035 9,373,710
---------- ---------
48,830,555 62,416,732
Construction in progress............. 5,298,675 1,018,123
---------- ---------
$54,129,230 $63,434,855
=========== ===========
</TABLE>
Included in property and equipment are buildings and equipment under
capital leases of $4,661,633 and $8,937,819 at December 29, 1996 and
December 28, 1997, respectively, (see Note 3). The Company capitalized
interest costs of approximately $269,000 and $394,000 during the fiscal
years ended December 29, 1996, and December 28, 1997, respectively, with
respect to qualifying construction projects.
F-9
<PAGE> 38
(3) CAPITAL LEASES
The following is a schedule of future minimum lease payments required
under capital leases as of December 28, 1997:
1998.................................................. $ 1,986,143
1999.................................................. 1,990,051
2000.................................................. 1,832,672
2001.................................................. 1,377,359
2002.................................................. 654,228
Thereafter............................................ 4,654,856
-----------
Total minimum lease payments.......................... 12,495,309
Less amount representing interest at varying rates
ranging from 9.5 percent to 13 percent.............. 4,586,924
-----------
Present value of net minimum capital lease payments... 7,908,385
Less current portion of capital lease obligations..... 1,134,723
-----------
Minimum capital lease obligations excluding current ..
portion.............................................. $ 6,773,662
===========
During the fiscal year ended December 28, 1997, the Company entered
into several agreements for the sale and leaseback of restaurant equipment
for a period of forty-eight months at five Company restaurants and sixty
months at six Company restaurants, which were recorded as capital leases.
The equipment was sold at book value of approximately $4,286,000. The
restaurants had been opened for less than a year and had minimal
accumulated depreciation, as such, no material gain or loss resulted from
the transaction.
(4) OPERATING LEASES
The Company leases the majority of its operating restaurant facilities.
The lease terms range from 5 to 10 years and generally provide for renewal
options extending the lease term to 20 years.
The following is a schedule of future minimum lease payments required
under operating leases that have remaining noncancelable lease terms in
excess of one year as of December 28, 1997:
1998...................................... $ 3,120,999
1999...................................... 2,891,450
2000...................................... 2,979,772
2001...................................... 2,935,711
2002...................................... 2,839,950
Thereafter................................ 15,048,891
----------
Total minimum lease payments.............. $ 29,816,773
==========
The total rent expense for operating leases was $1,524,900, $1,719,900
and $3,089,746 for fiscal 1995, fiscal 1996 and fiscal 1997, respectively.
F-10
<PAGE> 39
(5) INVESTMENT IN AND ADVANCES TO AFFILIATES
As discussed in Note 1(a), the Company had a 50 percent interest in
Boca at December 29, 1996, and a 50 percent interest in Kendall at December
31, 1995, December 29, 1996 and December 28, 1997.
The Company accounted for these investments under the equity method.
Summarized balance sheet and income statement information for these
investments is as follows:
DECEMBER 31, DECEMBER 29, DECEMBER 28,
SUMMARIZED BALANCE SHEETS: 1995 1996 1997
------------ ------------ ----------
Current assets ..................... $ 117,246 $ 320,050 $ 55,267
Property and equipment, net ........ 823,273 1,561,202 648,937
Other .............................. 27,325 29,576 19,721
---------- ---------- ----------
Total assets ..................... 967,844 1,910,828 723,925
---------- ---------- ----------
Current liabilities ................ 838,160 401,391 369,564
Due to related parties and other
liabilities ....................... 79,975 462,062 --
---------- ---------- ----------
Total liabilities ................ 918,135 863,453 369,564
---------- ---------- ----------
Net assets ......................... $ 49,709 1,047,375 354,361
========== ========== ==========
SUMMARIZED STATEMENTS OF OPERATIONS:
Revenue ............................ $3,684,177 $5,447,911 3,226,727
---------- ---------- ----------
Operating income ................... $ 403,039 $ 372,882 335,055
---------- ---------- ----------
Net income ......................... $ 319,296 $ 337,993 $ 287,031
---------- ---------- ----------
Under the terms of the operating agreements discussed in Note 1(a),
profits and losses are allocated 50 percent to each partner for each
affiliate. Kendall cash distributions are paid 25 percent to the Company
and 75 percent to its partner until such time as the partners recover their
investment. Thereafter, the cash distributions are paid 50 percent to each
partner.
During 1997, the Company also had a 50 percent interest in Boca Raton
Roadhouse Grill, L.C., a limited liability company that owned the Boca
Raton, Florida Roadhouse Grill restaurant ("Boca"). In December 1997,
operations at the Boca restaurant were discontinued and the Company sold
its interest in Boca to Boca Raton Roadhouse Grill, L.C. The Company
recognized a loss of $611,000 on the sale of its fifty percent interest.
During 1997, the Company managed the operations of Boca pursuant to its
operating agreement. Under such operating agreement, the Company received
management fees and was allocated its share of the restaurant's profits and
losses.
Also included in investment in and advances to affiliates at December
29, 1996 and December 28, 1997 are $377,380 and $250,423, respectively, in
cash advances made by the Company to its affiliates.
(6) MAJOR SUPPLIERS
For the fiscal years ended December 29, 1996 and December 28, 1997, two
suppliers comprised approximately 89% and 94%, respectively, of the
Company's purchases. Purchases from these suppliers were approximately
$21.4 million and $32.3 million for fiscal 1996 and fiscal 1997,
respectively.
(7) DUE TO RELATED PARTIES
At December 29, 1996 and December 28, 1997, due to related parties
consists principally of promissory notes in the amounts of $5,000,000 and
$3,000,000, respectively, due to Berjaya, the majority shareholder of the
Company. These notes bear interest at 8.5 percent.
In November 1997, the Company paid Berjaya $2,000,000 in order to
liquidate one of two promissory notes outstanding at December 29, 1996. On
January 12, 1998, the Company paid $1,500,000 of the second promissory
note, which had an original principal amount of $3,000,000. On February 6,
1998, the Company's Board of Directors approved the issuance of 400,000
shares of Common Stock to Berjaya to convert the remaining debt outstanding
of $1,500,000 to common equity at a price of $3.75 per share, based on the
closing market price as of February 6, 1998. The debt carried an interest
rate of 8.5% and was scheduled to be repaid during the first quarter of
1998.
F-11
<PAGE> 40
(8) LONG-TERM DEBT
In September 1997, the Company entered into a $15 million loan facility
with Finova Capital Corporation. The facility consists of a 15-year term
loan collateralized by real estate with a 9.55% interest rate. The proceeds
were used in part to liquidate existing mortgages on 12 restaurants, which
amounted to $7.4 million as of September 1997. The remaining balance of
$7.3 million, net of fees and other costs, was primarily used for expansion
of the Company. Monthly principal and interest payments for this facility
are due through October 2012.
Annual maturities on notes payable as of December 28, 1997 are as
follows:
1998.............................. $463,862
1999.............................. 552,416
2000.............................. 605,364
2001.............................. 668,476
2002.............................. 832,761
Thereafter........................ 11,992,359
----------
15,115,238
Less current portion.............. 463,862
----------
14,651,376
The carrying amount of assets used as collateral is approximately
$27,860,000 and $23,120,775 at December 29, 1996 and December 28, 1997,
respectively.
(9) CAPITAL STOCK
As of December 31, 1995, the Company's capital structure consisted of
30,000,000 shares of authorized common stock, with a par value of $.01 of
which 9,544,446 shares were issued and outstanding.
In April 1996, Berjaya converted $3,500,000 of debt into shares of
common stock at $3.60 per share. In addition, Berjaya purchased an
additional $5,000,000 of shares of common stock at $3.60 per share.
On October 9, 1996, the Board of Directors approved a one-for-three
reverse common stock split, which was effective prior to the date of the
Company's Initial Public Offering. In addition, the Board of Directors
approved an increase in the common stock par value from $0.01 to $0.03. The
number of shares in the accompanying financial statements have been
restated to retroactively reflect the reverse stock split. There were no
changes to the Company's common stock and additional paid-in capital
accounts as a result of the reverse stock split and par value change.
In December 1996, the Company completed an Initial Public Offering of
2,500,000 shares of common stock at $6.00 per share. The proceeds of
approximately $13.2 million, net of underwriting discounts and other costs
incurred in connection with the Initial Public Offering, were used for the
repayment of debt, the acquisition of a 50 percent interest in a former
franchised restaurant, and for expansion of the Company.
On February 6, 1998, the Company's Board of Directors approved the
issuance of 400,000 shares to Berjaya to convert $1,500,000 of debt
outstanding to common equity at a price of $3.75 per share, based on the
closing market price as of February 6, 1998. The debt carried an interest
rate of 8.5% and was scheduled to be repaid during the first quarter of
1998.
F-12
<PAGE> 41
(10) STOCK OPTION PLANS
During the fiscal year ended January 1, 1995, options were issued to
the former President and Chief Executive Officer to purchase 355,555 shares
of the authorized, but unissued shares of common stock at a purchase price
of $0.15 per share in connection with the founding of the Company. An
additional 500,000 options were issued to the former President and Chief
Executive Officer at $2.50 per share during the fiscal year ended January
1, 1995. These options are exercisable at any time prior to July 31, 1998.
During the fiscal year ending December 31, 1995, certain of these options
were exercised whereby 355,555 shares of common stock were purchased at
$0.15 per share. In October 1996, the Company granted 450,000 options to
the former President and Chief Executive Officer at $3.60 per share,
subject to adjustment for the reverse stock split discussed below and for
such other adjustments provided in the stock option agreement. In
connection with the granting of these options, the Company has recorded
$39,600 in compensation expense for each of the fiscal years ended December
31, 1995 and December 29, 1996 and $102,600 for the year ended December 28,
1997. At December 31, 1995, December 29, 1996 and December 28, 1997,
deferred compensation expense amounted to $79,200, $39,600 and $0,
respectively, and is included in additional paid-in capital.
As discussed in Note 9, the Board of Directors declared a one-for-three
reverse stock split in October 1996. Concurrent with the reverse split, the
number of shares issuable upon the exercise of each outstanding option was
adjusted for the one-for-three reverse split and the exercise of each
outstanding option was adjusted such that the total amount paid upon
exercise of the option in full did not change. All of the following
information regarding stock options has been adjusted to reflect the
reverse stock split.
A stock option plan (the "Plan") was adopted for employees of the
Company and members of the Board of Directors who are not employees, and
83,333, 216,666 and 516,666 shares of the Company's common stock were
reserved for issuance pursuant to such plan at December 31, 1995, December
29, 1996 and December 28, 1997, respectively. These options vest over a
three-year period from the date of grant and are exercisable for a period
of ten years after grant. On April 25, 1994, options were issued to a
consultant of the Company to purchase 3,333 shares of common stock at a
purchase price of $4.50 per share. During the fiscal years ending December
31, 1995, the Company granted options to employees under the stock option
plan to purchase 52,658 shares of common stock at $7.50 per share and
granted certain directors options to purchase 6,666 shares of the Company's
common stock at a price of $7.50 per share. The fair market value of common
stock at the time of issuance of these options was $3.10 per share. During
1996, the Company granted options to employees to purchase 115,416 shares
of common stock at a price of $10.80 per share and certain directors
options to purchase 50,000 shares of the Company's common stock at a prices
ranging from $6.00 to $6.13 per share. During 1997, the Company granted
options to employees to purchase 173,000 shares of common stock at a price
of $6.75 per share and certain directors options to purchase 15,000 shares
of the Company's common stock at a price of $6.38 per share.
At December 28, 1997, there were 134,010 additional shares available
for grant under the Plan. The per share weighted-average fair value of
stock options granted during 1995, 1996 and 1997 was $4.12, $4.20 and $3.49
respectively, on the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions: 1995 - expected
dividend yield 0.0%, risk-free interest rate of 6.6%, historical volatility
of 66.4% and an expected life of 8 years; 1996 - expected dividend yield
0.0%, risk-free interest rate of 6.6%, historical volatility of 66.4% and
an expected life of 8 years; 1997 - expected dividend yield 0.0%, risk-free
interest rate of 6.1%, historical volatility of 63.6% and an expected life
of 4 years.
On February 11, 1997, the Board of Directors authorized a repricing
program which allows employees to elect to reprice all of their outstanding
options to purchase common stock of the Company, granted under the Stock
Option Agreement dated May 1, 1996. Effective February 11, 1997, the
employees' stock options were repriced to $6.75 per share and registered
with the Securities and Exchange Commission (the "SEC") effective July 2,
1997.
F-13
<PAGE> 42
The Company applies APB 25 in accounting for its Plan and, accordingly,
recognized compensation expense for certain options, as discussed above.
Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Company's net loss
would have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) As reported $(3,489,904) $ (889,930) $ 91,745
Pro forma (3,612,122) (1,278,541) (9,773)
Net income (loss) per share As reported $ (1.00) $ (0.18) $ 0.01
Pro forma (1.03) (0.26) 0.00
</TABLE>
Pro forma net loss reflects only options granted in 1995, 1996 and
1997. Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net loss
amounts presented above because compensation cost is reflected over the
options' vesting period ranging from one to three years and compensation
cost for options granted prior to January 1, 1995 is not considered.
Stock option activity during the periods indicated is as follows:
Number of Weighted-Average
Shares Exercise Price
------ --------------
Balance at January 1, 1995....... 288,518 $ 4.57
Granted..................... 59,324 7.50
Exercise.................... (118,518) 0.45
Forfeited................... -- --
Expired..................... -- --
Balance at December 31, 1995..... 229,324 7.46
Granted..................... 315,416 7.56
Exercised................... -- --
Forfeited................... -- --
Expired..................... -- --
Balance at December 29, 1996..... 544,740 7.52
Granted..................... 188,000 6.72
Exercised................... -- --
Forfeited................... (15,068) 6.86
Expired..................... (18,349) 7.13
Balance at December 28, 1997..... 699,323 $ 6.66
At December 29, 1996 the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $4.50 - $10.80 and
6.77 years, respectively.
At December 28, 1997 the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $4.50 - $7.50 and 3.7
years, respectively.
At December 31, 1995, December 29, 1996 and December 28, 1997, the
number of options exercisable was 78,098, 135,875 and 398,417 respectively,
and the weighted-average exercise price of those options was $7.37, $7.43
and 6.66 respectively.
(11) INCOME TAXES
As a result of the Company's net operating losses and associated net
operating loss carry-forward, the Company had no federal income tax payable
for fiscal years ended December 31, 1995, December 29, 1996 and December
28, 1997. The Company had income tax expense amounting to $175,705,
representing state income tax and alternative minimum tax.
F-14
<PAGE> 43
The tax effects of the temporary differences comprising deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 28,
1996 1997
--------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward .............................. $ 1,811,000 $ 666,000
Preopening expenses, differences principally
due to differences in amortization ....................... 420,000 319,000
Accrued workers' compensation ................................ 136,000 131,000
Property and equipment ....................................... -- 1,004,000
Other ........................................................ 316,000 1,178,000
Less valuation allowance ..................................... (2,572,000) (3,258,000)
----------- -----------
111,000 40,000
Deferred tax liabilities:
Property and equipment principally due to
differences in depreciation ............................... (111,000) --
----------- -----------
Other ........................................................ -- (40,000)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
At December 29, 1996 and December 28, 1997, the Company had no deferred
tax assets or liabilities reflected on its financial statements since the
net deferred tax assets are completely offset by a valuation allowance. In
assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the level of historical income, scheduled reversal of deferred
tax liabilities, and projected further taxable income in making this
assessment.
At December 28, 1997, the Company has a net operating loss carry
forward of $1,661,000 consisting of $1,105,000 and $556,000 expiring in
varying amounts through 2010 and 2011, respectively.
The actual income tax expense differs from the "expected" income tax
effect (computed by applying the U.S. federal corporate tax rate of 34
percent to earnings before income taxes), for the year ended December 28,
1997 as follows:
DECEMBER 28,
1997
-----------------
Income taxes at statutory rates................ 34.0%
State and local taxes, net of federal
tax benefit................................ 18.0%
Alternative minimum tax........................ 26.0%
Utilization of Net Operating Loss
carry forward............................... (72.0)%
FICA tip tax credit........................... 58.0%
Other non-deductible items..................... (1.0)%
-----------------
65.0%
=================
(12)CONCENTRATIONS OF BUSINESS AND CREDIT RISK
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash in bank and
investment custodian accounts. At times, the Company maintains cash
balances in excess of insured limits. The custodian of the investment
account is a major financial institution.
Approximately 60 percent of the restaurants currently owned and
operated by the Company are located in the state of Florida. Consequently,
the operations of the Company are affected by fluctuations in the Florida
economy. Furthermore, the Company may be affected by changing conditions
within the foodservice industry.
(13) COMMITMENTS AND CONTINGENCIES
The Company is a party to legal proceedings arising in the ordinary
course of business, many of which are covered by insurance. In the opinion
of management, disposition of these matters will not materially affect the
Company's financial condition.
F-15
<PAGE> 44
At December 28, 1997, the Company had five restaurants under
development. The estimated cost to complete these restaurants and other
capital projects in process was approximately $5,659,000 at December 28,
1997.
(14) ACQUISITIONS
At January 1, 1995, the Company was a 50 percent owner in its North
Miami restaurant. In January 1995, the Company acquired the remaining 50
percent interest in North Miami for $800,000. The transaction was accounted
for using the purchase method of accounting. The purchase price was
allocated based on the fair value of the assets acquired at the time of
acquisition. Approximately $797,000 was allocated to property and equipment
and approximately $65,000 was allocated to inventory and other assets. In
connection with the acquisition, the Company also assumed certain
liabilities in the amount of $385,000.
During March 1995, the Company acquired two Roadhouse Grill restaurants
from a franchisee for $2.2 million. The transaction was accounted for using
the purchase method of accounting. The purchase price of the restaurants
was allocated to property and equipment based on the estimated fair value
of the assets at the date of acquisition. Approximately $1,555,000 was
allocated to property and equipment as a result of the acquisition. The
acquisition generated goodwill of approximately $645,000.
In August 1996, the Company entered into an agreement to purchase the
remaining 50 percent interest in the Kendall Roadhouse Grill, L.C. a
limited liability company that owns the Kendall, Florida Roadhouse Grill
restaurant ("Kendall Joint Venture" ) from the joint venture partners for a
purchase price of $2,300,000. The purchase price was to be paid from the
proceeds of the initial public offering completed by the Company in
December 1996 in which 2,500,000 shares were sold at $6.00 per share (the
"Initial Public Offering"). During the first quarter of 1997, the agreement
was amended as follows: the purchase price was changed to $1,800,000 with a
deposit of $400,000 paid in January 1997, and the remaining $1,400,000
payable by December 31, 1997 when the acquisition is closed and
consummated. The Company was granted the option of extending the
acquisition date from December 31, 1997 to June 30, 1998, at which time the
purchase price increases to $1,850,000. In addition, the Kendall Joint
Venture paid a dividend of $20,000 per month to the sellers throughout the
first quarter of 1997 and will pay a dividend of $11,667 per month to the
sellers thereafter. In August of 1997, the joint venture partners advised
they were revoking the amendment to the agreement and demanded performance
according to the terms of the original contract. The Company notified the
joint venture partners that the attempted revocation of the amendment and
demand for performance of the original agreement constitutes a repudiation
of the agreement to purchase, relieving the Company of its obligation to
purchase and demanded return of its $400,000 deposit. Thereafter, the
Company commenced an action in the Broward County, Florida Circuit Court
for a declaration of its rights and damages based upon the joint venture
partners' failure to return the deposit. Although the ultimate disposition
of this action cannot be predicted with certainty management does not
believe that the outcome of such action, which is pending, should result in
a materially adverse effect on the Company's financial position, results of
operation or liquidity.
In December 1996, the Company acquired a 50 percent ownership interest
in its Boca Raton restaurant for approximately $480,000. The transaction
was accounted for using the purchase method of accounting. The excess of
the purchase price over the fair value of the investment amounted to
$203,000 and is treated as goodwill, which was being amortized over the
remaining lease term of the Boca Raton restaurant. Such amount has been
included in investment in affiliates at December 29, 1996. Subsequent to
the acquisition, the Company and the owner of the remaining 50 percent
interest each contributed $75,000 to its Boca Raton restaurant.
In December 1997, operations at the Boca Raton restaurant were discontinued
and the Company sold its interest in the Boca restaurant to Boca Raton
Roadhouse Grill, L.C. (See Note 5). The Company managed the operations of
the Boca Raton restaurant pursuant to its individual operating agreement.
Under such operating agreement, the Company received management fees and
was allocated its share of the restaurant's profits and losses.
(15) EMPLOYEE 401(K) PLAN AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
On June 3, 1997, the Board of Directors of the Company approved a plan
to provide mid-level employees with an employee savings plan pursuant to
Section 401(k) of the Internal Revenue Service Code (the "Code"). As an
alternative to providing highly compensated employees with participation in
such 401(k) plan, which would have required the Company to extend plan
benefits to a broader group of employees, the Company also authorized a
Supplemental Executive Retirement Plan (the "SERP") for execution. A formal
plan, in each case, was adopted by the Company during the fourth quarter of
1997.
The 401(k) plan permits participants to contribute, on a pre-tax basis,
a percentage of compensation but not in excess of the maximum level allowed
by the Code. The Company will match 10% up to the first six percent
contributed by each employee. The cost recognized by the Company during
fiscal 1997, for matching contributions, was approximately $5,400.
The SERP permits participants to contribute, on a pre-tax basis, a
maximum of 15% of annual compensation. The Company will match 100% up to
the first 10% of annual compensation contributed. The cost recognized by
the Company during fiscal 1997, for matching contributions, was
approximately $16,600.
(16) SEVERANCE CHARGES
During the third quarter of 1997, the Company recognized severance
charges totaling $430,000.
F-16
<PAGE> 45
(17) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
DISPOSED OF
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the fair
value of an asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value
less costs to sell. During the fourth quarter of 1997, the Company
recognized an impairment loss of $1,120,238 for the write-down of assets at
two Company-owned restaurants.
(18) RELATED PARTY TRANSACTIONS
Berjaya directly or indirectly owns Roadhouse Grill Hong Kong and
Roadhouse Grill Asia. In January 1996, the Company entered into a Master
Development Agreement with Roadhouse Grill Hong Kong which provides for the
development and franchising of Roadhouse Grill restaurants in Hong Kong.
Roadhouse Grill Hong Kong is not required to pay any franchise or
reservation fee for restaurants that it develops, but it is responsible for
paying or reimbursing approved expenses incurred by the Company in
connection with the opening of each restaurant. In addition, Roadhouse
Grill Hong Kong is required to pay a royalty in connection with the
operation of each of its restaurants in the amount of 2.0 % of gross sales.
Under certain circumstances, Roadhouse Grill Hong Kong or the Company may
grant franchises to third parties in Hong Kong. In that event, the Company
is entitled to receive 50 % of any franchise and reservation fees and 40 %
of any royalty fee payable by the third party franchisee, subject to
limitations on the amounts payable to the Company of $10,000 per restaurant
in the case of franchise and reservations fees and 2.0 % of gross sales in
the case of royalty fees.
In January 1996, the Company also entered into a Master Development
Agreement with Roadhouse Grill Asia, which covers countries in Asia and the
Pacific Rim (other than Hong Kong), including but not limited to,
Australia, China, India, Indonesia, Japan, Malaysia, New Zealand, North
Korea, South Korea, The Philippines and Thailand. Under the agreement,
Roadhouse Grill Asia is required to open and maintain at least 30 Roadhouse
Grill restaurants during the first ten years of the term of the agreement,
with a minimum of two restaurants to be developed each year. Under certain
circumstances, Roadhouse Grill Asia or the Company may grant franchises to
third parties in the territory. The fee arrangements under the agreement
are substantially the same as those under the agreement between the Company
and Roadhouse Grill Hong Kong.
As of December 28, 1997 there were three Roadhouse Grill restaurants
operating in Malaysia under the Master Development Agreement with Roadhouse
Grill Asia. The Company recorded $51,000 in royalty income from those
restaurants during fiscal 1997. Subsequent to December 28, 1997, one of the
franchisees in Malaysia ceased operations. See "Subsequent Events."
During the fourth quarter of 1997, the Company engaged National Retail
Group Inc. ("NRG"), a real estate consulting firm, and SABi International
Developments, Inc. ("SABi"), a management consulting and investment firm,
to provide specified real estate development and management consulting
services to the Company, addressing problems from previous management
actions. SABi is wholly owned by Ayman Sabi, and NRG is an affiliate of
SABi. Mr. Sabi was and remains a director of the Company, was
Chairman of the Company's Executive Committee from November 1997 to
February 1998, and was elected President and Chief Executive Officer of the
Company on February 6, 1998. The Company paid fees and reimbursed expenses
in the aggregate amounts of $168,214 and $60,000 to NRG and SABi,
respectively.
(19) INTERNAL REVENUE SERVICE EXAMINATION
The Internal Revenue Service is currently examining the Company's
income tax returns for the years 1995 and 1996. The Company believes that
resolution of this exam will not have a material adverse effect on the
Company's financial condition or results of operation.
F-17
<PAGE> 46
(20) QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the unaudited quarterly results of
operations for the years ended December 28, 1997 and December 29, 1996:
<TABLE>
<CAPTION>
1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL YEAR
------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
1997:
Total revenues $22,970,545 $22,960,818 $23,319,421 $23,544,272 $92,795,056
Operating income (loss) 1,453,421 1,164,619 (76,761) (493,083) 2,048,196
Net income (loss) 1,264,794 949,681 (498,699) (1,624,031) 91,745
Basic net income (loss) per share 0.14 0.10 (0.05) (0.17) 0.01
Diluted net income (loss) per share 0.14 0.10 (0.05) (0.17) 0.01
1996:
Total revenues $ 13,868,867 $ 13,764,180 $ 16,147,214 $ 18,652,870 $ 62,433,131
Operating income (loss) 476,656 (331,963) (210,251) (12,451) (78,009)
Net income (loss) 346,025 (514,446) (401,047) (320,462) (889,930)
Basic net income (loss) per share .09 (0.11) (0.08) (0.05) (0.18)
Diluted net income (loss) per share .06 (0.11) (0.08) (0.05) (0.18)
</TABLE>
F-18
<PAGE> 47
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1 Articles of Incorporation of the Company (incorporated by reference from
the Company's Registration Statement on Form S-1 as filed with the
Securities and Exchange Commission on September 26, 1996, as amended (the
"Registration Statement")).
3.2 Bylaws of the Company (incorporated by reference from the Company's
Registration Statement).
10.1 Intentionally omitted
10.2 Form of the Company's Development Agreement (incorporated by reference
from the Company's Registration Statement).
10.3 Form of the Company's Franchise Agreement (incorporated by reference from
the Company's Registration Statement).
10.4 Intentionally omitted
10.5 Form of the Company's Stock Option Agreement (incorporated by reference
from the Company's Registration Statement).
10.6 Sub-Lease Agreement, dated July 31, 1995, between Equitable Real Estate
Investment, Inc., Compass management and Leasing, Inc. and the Company.,
for property located at 6600 N. Andrews Ave., Ste. 160, Ft. Lauderdale,
Florida 33309 (incorporated by reference from the Company's Registration
Statement).
10.7 Assignment and Assumption Agreement, dated March 15, 1995, between
Roadhouse Waterway, inc. and Roadhouse Grill Commercial, Inc., for
property located in Fort Lauderdale, Florida (lease of restaurant
premises) (incorporated by reference from the Company's Registration
Statement).
10.8 Lease Agreement, dated April 26, 1994, between Piccadilly Cafeterias,
Inc. and the Company, for property located in Winter Park, Florida (lease
of restaurant premises) (incorporated by reference from the Company's
Registration Statement).
10.9 Ground Lease, dated May 25, 1995, between Bruno, Inc. and the Company,
for property located in Sandy Springs, Georgia (lease of restaurant
premises) (incorporated by reference from the Company's Registration
Statement).
10.10 Lease, dated April 17, 1995, between Captec Net Lease Realty, Inc. and
New York Roasters, for property located in Cheektowaga, New York (lease
of restaurant premises, assumed by the Company) (incorporated by
reference from the Company's Registration Statement).
10.11 Operating Agreement dated April 28, 1994, of Kendall Roadhouse Grill,
L.C. (incorporated by reference from the Company's Registration
Statement).
10.12 Management Agreement, dated November 8, 1994, between Boca Roadhouse, Inc
and the Company (incorporated by reference from the Company's
Registration Statement).
10.13 Intentionally omitted
10.14 Intentionally omitted
10.15 Intentionally omitted
10.16 Intentionally omitted
10.17 Intentionally omitted
10.18 Intentionally omitted
E-1
<PAGE> 48
10.19 1994 Registration Rights Agreement, dated February 10, 1994 (incorporated
by reference from the Company's Registration Statement).
10.20 Amendment to 1994 Registration Rights Agreement, dated June 8, 1994
(incorporated by reference from the Company's Registration Statement).
10.21 Amendment to 1994 Registration Rights Agreement, dated July 26, 1996
(incorporated by reference from the Company's Registration Statement).
10.22 Stock Option Agreement, dated February 10, 1994, between the Company and
J. David Toole III (incorporated by reference from the Company's
Registration Statement).
10.23 Intentionally omitted
10.24 Intentionally omitted
10.25 Intentionally omitted
10.26 Intentionally omitted
10.27 Intentionally omitted
10.28 Purchase and Sale Agreement, dated August 30, 1996, between
Roadwear, Inc. and the Company, relating to the Kendall restaurant
(incorporated by reference from the Company's Registration Statement).
10.29 Intentionally omitted
10.30 Promissory note, dated August 16, 1996, made by the Company in favor of
Berjaya (incorporated by reference from the Company's Registration
Statement).
10.31 Master Development Agreement, dated January 5, 1996, between the Company
and Roadhouse Grill Asia (incorporated by reference from the Company's
Registration Statement).
10.32 Lease Transfer and Assumption Agreement for equipment used in New York
Roadhouse Grill restaurant, dated March 29, 1995, assumed by the Company
(incorporated by reference from the Company's Registration Statement).
10.33 Intentionally omitted
10.34 Intentionally omitted
10.35 Intentionally omitted
10.36 Intentionally omitted
10.37 Amended and Restated 1994 Stock Option Plan (incorporated by reference
from the Company's Registration Statement).
10.38 Stock Purchase Agreement dated May 26, 1995 between the Company and the
several purchasers named in Schedule I (incorporated by reference from
the Company's Registration Statement).
10.39 Investment Agreement, dated October 25, 1995 between Berjaya and the
Company (incorporated by reference from the Company's Registration
Statement).
10.40 Intentionally omitted
10.41 Stock Option Agreement between the Company and J. David Toole III, dated
October 24, 1996 (incorporated by reference from the Company's
Registration Statement).
10.42 Master Lease Agreement between the Company and Pacific Financial Company,
dated June 2, 1997 (incorporated by reference from the Company's Form 10Q
for the fiscal quarter ended June 29, 1997). Severance Agreement dated
July 29, 1997, between the Company and John David Toole III (incorporated
by reference to Exhibit 4.8 to Post-Effective Amendment No. 2 to the
Company's Registration Statement on Form S-8, dated August 19, 1997).
E-2
<PAGE> 49
10.43 Severance Agreement dated July 29, 1997, between the Company and John
David Toole III (incorporated by reference to Exhibit 4.8 to
Post-Effective Amendment No. 2 to the Company's Registration Statement
on Form S-8, dated August 19, 1997).
10.44 Loan and Security Agreement by and between the Company and Finova Capital
Corporation, dated September 12, 1997. Incorporated by reference from the
Company's Form 10-Q for the fiscal quarter ended September 28, 1997.
10.45 Mortgage and Security Agreement by and between the Company and Finova
Capital Corporation, dated September 5, 1997. Incorporated by reference
from the Company's Form 10-Q for the fiscal quarter ended September 28,
1997.
10.46 Promissory Note, dated September 5, 1997, made by the Company in favor of
Finova Capital Corporation. Incorporated by reference from the Company's
Form 10-Q for the fiscal quarter ended September 28, 1997.
10.47 Agreement for Purchase and Sale of Membership Interest in Boca Roadhouse,
L.C., a limited liability company, dated December 15, 1997.
10.48 Roadhouse Grill, Inc. Deferred Compensation Plan. Effective June 3, 1997.
10.49 Amendment dated December 1, 1997 to that Master Development Agreement
executed January 5, 1996 by and between Roadhouse Grill, Inc. and
Roadhouse Grill Asia Pacific (H.K.) Limited.
10.50 Amendment dated December 1, 1997 to that Master Development Agreement
executed January 5, 1996 by and between Roadhouse Grill, Inc. and
Roadhouse Grill Asia Pacific (Cayman) Limited.
21.0 Subsidiaries of the Registrant.
23.0 Consent of Experts and Counsel.
27 Financial Data Schedule.
E-3
<PAGE> 1
EXHIBIT 10.47
AGREEMENT FOR PURCHASE AND SALE
OF MEMBERSHIP INTEREST
----------------------
This Agreement is made as of the 15th day of December, 1997,
by and between Boca Roadhouse, Inc., a Florida corporation ("Buyer"), Roadhouse
Grill, Inc., a Florida corporation ("Seller"), and Boca Roadhouse, L.C., a
Florida limited liability company (the "Company").
WITNESSETH:
WHEREAS, Buyer and Seller are the sole members of the Company which
owns and operates a Roadhouse Grill franchised restaurant located at 21212 St.
Andrews Blvd., Boca Raton, Florida 33434 (the "Restaurant"); and
WHEREAS, Buyer desires to purchase and Seller desires to sell Seller's
fifty percent (50%) membership interest in the Company (the "Membership
Interest") upon the terms and conditions hereafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the sum of ten dollars ($10.00) and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereby agree as follows:
1. RECITALS CONFIRMED. The foregoing recitals are true and correct and
are incorporated herein by reference.
2. PURCHASE AND SALE OF MEMBERSHIP INTEREST. Buyer hereby agrees to buy
from Seller and Seller hereby agrees to sell to Buyer the Membership Interest
free and clear of all claims, liens, obligations and encumbrances except as
explicitly provided for herein.
3. PURCHASE PRICE. The purchase price shall be One Hundred Dollars
($100.00) payable in full at closing.
4. REPRESENTATIONS AND WARRANTIES BY SELLER. The parties acknowledge
that notwithstanding Buyer's ownership of fifty percent (50%) of the membership
interests of the Company, Seller has: managed all of the operations of the
Restaurant pursuant to the Management Agreement (as hereinafter defined);
managed and controlled all of the operational activities of the Company, as
Operating Manager thereof pursuant to the Operating Agreement (as hereinafter
defined); and controlled all of the operations of the overall Roadhouse Grill
franchise system in accordance with the Franchise Agreement (as hereinafter
defined). Subject to and in light of the foregoing, Seller hereby represents and
warrants that:
DETAIL OF PAYABLE TO ROADHOUSE GRILL, INC.
Vouchers paid by RHG, Inc. $ 66,569.89 See attached schedule for breakdown
Instore Transfers $ 188.98
Payroll $ 9,450.69
Services paid by RHG, Inc. $ 75,429.97 See attached schedule for breakdown
-----------
$151,639.50
===========
<PAGE> 2
(a) Seller is duly organized, validly existing and in good
standing under the laws of the State of Florida, and has all the necessary
powers to own its properties and carry on its business as now owned and operated
by it.
(b) The Company is duly organized, validly existing and in
good standing under the laws of the State of Florida and has all the necessary
powers to own its properties and carry on its business as now owned and operated
by it.
(c) The Company's articles of organization were filed December
16, 1996, and have not been modified or amended. A copy of the Company's
Operating Agreement dated December 12, 1996, by and among Buyer and Seller (the
"Operating Agreement") has been provided to Buyer. Said Operating Agreement has
not been revoked, modified or amended. Seller's Membership Interest is validly
issued and outstanding, fully paid and non-assessable, and was issued in
compliance with all applicable federal and state securities laws.
(d) Except for the Membership Interest and the membership
interests in the Company owned by Buyer, no membership interests in the Company
have ever been or as of closing will be issued. There are no options, warrants,
conversion privileges or other rights presently outstanding to purchase or
transfer with respect to the Membership Interest or any other membership
interests in the Company except for rights created by this Agreement.
(e) Seller has full power and authority to enter into, execute
and deliver this Agreement and all other documents and instruments to be
executed and delivered by Seller pursuant to or in furtherance of this Agreement
and to consummate the transactions contemplated hereunder. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been or shall be duly authorized by all
necessary corporate action on the part of Seller and by all necessary action on
the part of the Company. Seller and the Company each have the right, power,
legal capacity, and authority to enter into and perform their respective
obligations under this Agreement and this Agreement constitutes, and each
document or instrument to be executed by Seller and/or the Company pursuant to
the terms hereof upon its execution and delivery will have been duly executed
and delivered and will constitute, the valid and legally binding obligations of
the Seller and the Company enforceable in accordance with their terms.
(f) Except as listed on Exhibit 4(f) attached hereto and
incorporated herein by reference, there are no liens, mortgages, restrictions,
pledges, encumbrances or charges on the Membership Interest or on any of the
assets of the Company.
2
<PAGE> 3
(g) Exhibit 4(g) lists all contracts and agreements, verbal
and written, to which the Company is a party or to which its assets are subject,
which will not be terminated or otherwise satisfied contemporaneously with
closing. Except as set forth on Exhibit 4(g), neither the execution nor the
delivery of this Agreement, nor the consummation of the transactions
contemplated by it, will result in a breach of, or give rise to termination of,
or accelerate the performance required by any terms of, any agreement to which
the Company is a party, or constitute a default thereunder or result in the
creation of any lien, charge, or encumbrance upon any of the assets of the
Company.
(h) Except as listed on Exhibit 4(h) attached hereto and
incorporated herein by reference, no consent, authorization, approval,
exemption, or other action by, and no filing, registration, or qualification
with, any third party, including, without limitation, any governmental
authority, will be necessary in connection with the execution and delivery of
this Agreement and all documents to be entered into in connection therewith, and
the consummation of the transactions contemplated hereby and thereby, or the
performance by Seller of its obligations hereunder and thereunder.
(i) The Company has operated its business in compliance with
all laws, rules, regulations and ordinances of governmental authorities
affecting the business and has paid all taxes required to be paid by it. The
Company has accurately prepared and timely and properly filed all United States
income tax returns and all state and local tax returns that are required to be
filed by it, and has paid or made provision for the payment of all taxes that
have become due pursuant to such returns. The federal income tax returns of the
Company have not been audited by the Internal Revenue Service. No deficiency,
assessment or proposed adjustment of the Company's federal, state or local tax
returns is pending.
(j) Except for the Cairo action described in paragraph 11(c)
of this Agreement, there are no judgments, actions, suits or proceedings pending
or threatened against the Company, or affecting any of its properties or rights,
and Seller is not aware of any facts which might result in any such action,
suit, or proceeding. The Company is not in default with respect to any order or
decree of any court or of any governmental agency or instrumentality.
(k) None of the representations and warranties made by Seller
in any certificate, exhibit or memorandum furnished or to be furnished by it or
on its behalf, and information contained and statements made therein, contains
or will contain any untrue statement or a material fact, or omits any material
fact, the omission of which would be misleading.
3
<PAGE> 4
5. REPRESENTATIONS AND WARRANTIES BY BUYER. Buyer hereby represents and
warrants that:
(a) Buyer is duly organized, validly existing and in good
standing under the laws of the State of Florida, and has all the necessary
powers to own its properties and carry on its business as now owned and operated
by it.
(b) Buyer has full power and authority to enter into, execute
and deliver this Agreement and all other documents and instruments to be
executed and delivered by Buyer pursuant to or in furtherance of this Agreement
and to consummate the transactions contemplated hereunder. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been or shall be duly authorized by all
necessary corporate action on the part of Buyer. Buyer has the right, power,
legal capacity, and authority to enter into and perform its obligations under
this Agreement and this Agreement constitutes, and each document or instrument
to be executed by Buyer pursuant to the terms hereof upon its execution and
delivery will have been duly executed and delivered and will constitute, the
valid and legally binding obligations of the Buyer enforceable in accordance
with their terms.
(c) No consent, authorization, approval, exemption or other
action by, and no filing, registration or qualification with, any governmental
authority is or will be necessary in connection with the execution and delivery
by Buyer of this Agreement and all documents to be entered into in connection
herewith, the consummation of the transactions contemplated hereby and thereby,
or the performance by Buyer of its obligations hereunder and thereunder.
(d) Buyer represents that the Membership Interest is being
acquired for investment for its own account, not as a nominee or agent, and not
with a view to the sale or other transfer thereof, and that it has no present
intention of selling or otherwise transferring the same.
(e) None of the representations and warranties made by Buyer
in any certificate, exhibit or memorandum furnished or to be furnished by it or
on its behalf, and information contained and statements made therein, contains
or will contain any untrue statement or a material fact, or omits any material
fact, the omission of which would be misleading.
6. CLOSING. The transfer of the Membership Interest by Seller to Buyer
(the "Closing") shall take place on or before December 14, 1997 at such time and
place as the parties agree (the "Closing Date").
4
<PAGE> 5
(a) At the Closing, Seller shall deliver or cause to be
delivered to Buyer, the following instruments and documents, in form and
substance satisfactory to Buyer, against delivery of the items specified in
Section 6(b):
(i) Assignment of Membership Interest and
Certificate(s) representing the Membership
Interest being acquired in connection with
this transaction;
(ii) Company resolution(s) approving the
transaction on the part of the Company;
(iii) Corporate resolution(s) approving the
transaction on the part of the Seller;
(iv) Termination of the Company's Operating
Agreement between Buyer and Seller.
(v) Termination of the Franchise Agreement;
(vi) Termination of the Management Agreement;
(vii) Deleted;
(viii) Assignments and assumptions of executory
contracts, if any; and
(ix) Such other documents and instruments as
shall be necessary or convenient to
effectuate this transaction, including,
without limitation, all books and records of
the Company.
(b) At the Closing, Buyer shall deliver or cause to be
delivered to Seller, the following instruments and documents, in form and
substance satisfactory to Sellers, against delivery of the items specified in
Section 6(a):
(i) A check in the amount of the purchase price;
(ii) Corporation resolution(s) approving the
transaction;
(iii) Termination of the Company's Operating
Agreement between Buyer and Seller.
(iv) Termination of the Franchise Agreement;
(v) Termination of the Management Agreement;
(vi) Deleted;
5
<PAGE> 6
(vii) Assignments and assumptions of executory
contracts, if any; and
(viii) Such other documents and instruments as
shall be necessary or convenient to
effectuate this transaction.
Each party at any time after the Closing Date, will execute,
acknowledge, and deliver any further deeds, assignments, conveyances, and other
assurances, documents and instruments of transfer, reasonably requested by the
other party, and will take any other action consistent with the terms of this
Agreement that may reasonably be requested by the other party for the purpose of
complying with the terms of this Agreement.
7. Intentionally Deleted.
8. COSTS.
(a) Each of the parties represents and warrants that it has
dealt with no broker or finder in connection with any of the transactions
contemplated by this Agreement and, insofar as it knows, no broker is entitled
to any commission or finder's fee in connection with any of these transactions.
Seller and Buyer each agree to indemnify and hold harmless one another against
any loss, liability, damage, cost, claim or expense incurred by reason of any
brokerage, commission, or finder's fee alleged to be payable because of any act,
omission, or statement of the indemnifying party.
(b) Except as may otherwise be provided in this Agreement,
each of the parties shall pay all costs and expenses incurred or to be incurred
by it in negotiating and preparing this Agreement and in closing and carrying
out the transactions contemplated by this Agreement.
(c) If any legal action or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with any provisions of this Agreement, the
successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and expenses, court costs and all expenses even if
not taxable as court costs (including, but not limited to, all attorneys' fees
and expenses incident to any appeals), incurred in that action or proceeding, in
addition to any other relief to which such party or parties may be entitled.
8.A. LIABILITIES, COSTS, EXPENSES, PAYABLES AND ADJUSTMENTS. Exhibit
8A-1 lists all costs, expenses, liabilities and obligations owed by the Company
as of December 7, 1997, which are known or reflected on the Company's books and
records ("Contract Date Payables"). Seller represents that the Contract Date
Payables are accurate, to the best of the Company's knowledge,
6
<PAGE> 7
information and belief, and represent legitimate obligations of the Company
consistent with the Company's books and records and prior accounting practices.
Exhibit 8A-2 lists all cash, cash equivalents and any other assets owned by the
Company which may be used to satisfy Company obligations ("Contract Date Cash
and Equivalents"). Seller represents that the Contract Date Cash and Equivalents
are accurate, to the best of the Company's knowledge, information and belief,
and represent legitimate assets of the Company consistent with the Company's
books and records and prior accounting practices. The parties shall utilize the
Contract Date Cash and Equivalents and otherwise satisfy the Contract Date
Payables, as well as costs, expenses, liabilities, obligations and Cash and Cash
Equivalents arising subsequent to December 7, 1997, and prior to the Closing
Date (or arising after the Closing Date, but proratable to a period prior to the
Closing Date) in the following manner:
(a) The Contract Date Payables shall be reduced by the sum of
the Seller's Credit and the Affiliate's Credit (as described in paragraph 11
herein) in the total amount of $206,639.50, leaving a "Reduced Contract Date
Payables" of $125,628.00.
(b) Seller shall cause the Company to apply the total Contract
Date Cash and Equivalents (and shall be given a credit for the Lease and sales
tax deposits, as reflected in Exhibit 8A-2) to arrive at a "Net Contract Date
Payables" of $50,701.04. The Seller shall pay to the Company the sums of $20,247
and $30,000 for the food and liquor inventory and the small wares, respectively
(as reflected on Exhibit 8A-2). Company hereby transfers title (upon receipt of
payment) to such assets, as well as to all proprietary items and assets which
require de-identification under the Franchise Agreement, to Seller, and Seller
is hereby authorized to remove such items from the Company's business premises.
(c) Within ten (10) days after Closing, Buyer shall pay to the
Company an amount equal to fifty percent (50%) of the Net Contract Date Payables
in the amount of $25,351.00, plus $11,680.00 representing the aforedescribed
deposits.
(d) The Contract Date Payables constitute all known
obligations of the Company through December 7, 1997, and Seller is unaware of
any additional obligations which may arise prior to Closing, or which are
properly proratable to a period prior to Closing other than normal operating
expenses which Seller anticipates will be covered by additional cash and cash
equivalents generated through the Closing Date.
(e) Accordingly, subject to payment by Buyer to Seller in
accordance with paragraph 8A(c), Seller shall satisfy all Reduced Contract Date
Payables, at its sole cost and expense, utilizing the Contract Date Cash and
Equivalents therefor.
7
<PAGE> 8
(f) In the event that the Company incurs costs, expenses,
liabilities and obligations in excess of cash and cash equivalents attributable
to any period through the Closing Date or properly proratable through the
Closing Date (excluding any amounts payable to Seller or affiliates of Seller
which amounts Seller expressly waives), up to a total deficit of $10,000.00
(specifically including, but not limited to a bill for roof repair from Trammell
Crow in the approximate amount of $5,700), such deficit shall be divided evenly
among the parties. Seller shall pay any portion of the deficit in excess of
$10,000. Because Seller maintains the Company's existing bank account, and Buyer
anticipates establishing a new bank account for the Company within which to
conduct operations, Seller shall account for all costs, expenses, liabilities,
obligations, cash and cash equivalents of the Company arising subsequent to
December 7, 1997, and attributable any period prior to the Closing. On January
30, 1997 ("Adjustment Date"), Seller shall provide Buyer with an accounting for
all of such items through the Adjustment Date. Subject to a reasonable review,
Buyer shall pay its share of the deficit, if any, shown thereon, subject to the
limitations described in paragraph 8A(f) above.
(g) Seller acknowledges that Buyer has relied upon Seller's
preparation of the financial statements supporting exhibits 8A-1 and 8A-2 in
entering into this Agreement.
9. OBLIGATIONS OF THE PARTIES AND CERTAIN OTHER TRANSACTIONS
AFTER CLOSING.
(a) Seller hereby agrees to indemnify Buyer and Company from
and hold them harmless against claims, damages, liabilities and losses incurred
by Buyer and/or Company and resulting from any materially inaccurate
representation made by the Seller in or under this Agreement or breach or
default in the performance by the Seller of any of the covenants or obligations
to be performed by it hereunder.
(b) From and after the Closing Date, Buyer shall immediately
notify Seller of any claim made for which Buyer or Company seeks indemnification
from Seller pursuant to Section 9(a) or otherwise in this Agreement. With
respect to any such liability, Buyer shall not, except with the prior written
consent of Seller, make or accept, as the case may be, any payment of, or settle
or offer to settle or consent to any compromise with respect to, any such
liability.
(c) Buyer hereby agrees to indemnify Seller from and hold it
harmless against claims, damages, liabilities and losses incurred by Seller and
resulting from any materially inaccurate representation made by Buyer in or
under this Agreement or breach or default in the performance by Buyer of any of
the covenants or obligations to be performed by it hereunder.
8
<PAGE> 9
(d) From and after the Closing Date, Seller shall immediately
notify Buyer of any claim made for which Seller seeks indemnification pursuant
to Section 9(c) or otherwise in this Agreement. With respect to any such
liability, Seller shall not, except with the prior written consent of Buyer,
make or accept, as the case may be, any payment of or settle or offer to settle
or consent to any compromise with respect to, any and such liability.
(e) Seller shall cause the Company to provide notice to all
parties to the Contracts of the transaction contemplated hereby. Buyer shall not
be required to assume any of such contracts to which the Company is not a party;
provided, that Seller shall reasonably cooperate to assign its rights under any
such contracts that Buyer elects to assume.
(f) Seller hereby indemnifies Buyer and Company from and holds
them harmless against any and all claims, damages, liabilities and losses
resulting from customers claiming under gift certificates sold or issued by
Seller or Company prior to Closing.
(g) Except as otherwise provided herein, all representations,
warranties, covenants, agreements and obligations hereunder or otherwise made in
writing by either party pursuant hereto shall survive the execution and delivery
of this Agreement and the closing of the transactions contemplated hereby.
10. LIMITED JOINDER/GUARANTY INDEMNIFICATION. Buyer, and Buyer's
individual shareholders, E. Hal Dickson, George Burmeister and William Hoffman,
jointly and severally, hereby indemnify Seller from and hold it harmless against
(i) Seller's obligation under that certain Indemnification Agreement dated
December 12, 1996, by and between Seller and Dennis Forgione and Dawn Forgione
(collectively "Forgione"), pursuant to which Seller indemnified Forgione for
their guaranty (the "Guaranty") under that certain Lease Agreement (the "Lease")
between Seller and TCW Fund IV Holding Co. ("Landlord"), as subsequently
assigned to and assumed by the Company, and (ii) the Cairo obligation described
in paragraph 11(c) of this Agreement. The parties agree and acknowledge, that as
of the date hereof, the Guaranty is limited to Twenty Thousand Dollars
($20,000). Buyer shall cause its shareholders to execute the limited joinder to
this Agreement.
11. SALE OF NEW BUSINESS WITHIN EIGHTEEN MONTHS. In the event Buyer, or
a Permissible transferee (as hereinafter defined) of Buyer, sells all or
substantially all of the Company's assets or all or substantially all of the
equity ownership in the Company and/or enters into any agreement to sell or
which provides any option to buy (excluding franchise and/or operating
agreements which provide for such options in the event of default and/or
transfers to related parties which own or control or are owned or controlled by
the Buyer ("Permissible transferee")), within eighteen (18) months of the date
hereof, Seller shall be entitled to a portion of the net sales proceeds (after
payment of customary
9
<PAGE> 10
and usual closing expenses), in accordance with the following formula:
(a) The decision to sell shall be made by Buyer in its sole
and absolute discretion.
(b) Exhibit 8A-1 contains a list of the Company's accounts
payable and payables to related parties which includes $151,639.50 which Seller
claims is owed to Seller ("Seller's Credit") and $55,000.00 Seller claims is
owed to an affiliate ("Affiliate's Credit"). Seller represents that Seller's
Credit and Affiliate's Credit are the sum of, as of the Closing Date, amounts of
costs and expenses advanced by Seller or affiliates of Seller on behalf of the
Company over and above amounts contributed equally by Seller and Buyer, and/or
owed to Seller but not paid by the Company. Seller shall not be entitled to such
Seller's Credit, or any part thereof, nor Affiliate's Credit, or any part
thereof, unless a sale occurs in accordance with this paragraph 11.
(c) Buyer represents that it has paid or will pay the sum of
One Hundred Ten Dollars ($110,000) to Edward Cairo, Sr. and Norma Cairo, as
settlement in full of that certain action filed in Palm Beach County Circuit
Court styled EDWARD CAIRO, SR. AND NORMA CAIRO, PLAINTIFF V. BOCA ROADHOUSE,
INC., DEFENDANT, CASE, NO. CL-97-008346, and in satisfaction of all claims
brought thereunder (collectively, the "Cairo obligation"). Buyer also
anticipates that it will expend considerable sums for renovation and/or
conversion of the Company's business premises to accommodate a new business (the
"Conversion Expenses"). For purposes of this paragraph 10(b), the sum of the
Cairo obligation and the Conversion Expenses shall be referred to as "Buyer's
Credit".
(d) The net sales proceeds shall be paid to Buyer and Seller
on a pro rata basis based upon the Buyer's Credit and the sum of the Seller's
Credit and Affiliate's Credit, or any part thereof, until paid in full.
(e) After payment of the Buyer's Credit and the Seller's and
Affiliate's Credits in full, Seller shall be entitled to fifty percent (50%) of
the remaining net sales proceeds, if any; provided, that if Seller procures the
buyer, then its 50% share shall be increased to 60%; and further provided that
if Buyer procures the buyer, then Seller's share shall be decreased to 40%.
(f) Seller shall have the right to review all offers and
contracts submitted to Buyer and/or Company for the purchase and sale of the
Company and/or its assets which are subject to Seller's rights under this
paragraph 11.
12. FRANCHISE AGREEMENT. Seller and Buyer entered into that certain
Roadhouse Grill Franchise Agreement (the "Franchise Agreement") on or about
November 8, 1994 between Buyer, as franchisee, and Seller, as franchisor. The
Franchise Agreement was
10
<PAGE> 11
subsequently assigned to and assumed by the Company on or about December 12,
1996, which assignment and assumption was consented to by Seller, as franchisor.
The parties hereby terminate the Franchise Agreement, effective on the Closing
Date. Seller shall, in good faith, remove all proprietary items to which it is
entitled pursuant to the Franchise Agreement and shall take all other action and
do all things necessary in order to terminate the Franchise Agreement in
accordance with the terms thereof without cost to Buyer or the Company. Each
party hereby releases the other from any other obligations under the Franchise
Agreement, including, without limitation, all rights and obligations referred to
in paragraph 14 of the Franchise Agreement (except paragraph C thereof).
13. MANAGEMENT AGREEMENT. Seller and Buyer entered into that certain
Roadhouse Grill Management Agreement (the "Management Agreement") on or about
November 8, 1994 between Buyer and Seller. The Management Agreement was
subsequently assigned to and assumed by the Company on or about December 12,
1996, which assignment and assumption was consented to by Seller, as Manager.
The parties hereby terminate the Management Agreement, effective on the Closing
Date. Seller shall, in good faith, take all action and do all things necessary
in order to terminate the Management Agreement in accordance with the terms
thereof (including, without limitation, the transfer of all licenses, if any)
without cost to Buyer or the Company. Each party hereby releases the other from
any other obligations under the Management Agreement. Notwithstanding the
foregoing, the parties acknowledge that Seller's Credit (described in paragraph
11(b) herein) includes management fees, which shall be payable along with the
balance of the Seller's Credit in accordance with the terms of paragraph 11.
14. OPERATING AGREEMENT. On or about December 12, 1996, Buyer and
Seller entered into the Operating Agreement of Boca Roadhouse, L.C. (the
"Operating Agreement") as sole members of the Company. Buyer and Seller hereby
terminate the Operating Agreement and release each other from any and all
obligations thereunder effective as of the Closing Date.
15. TAX RETURNS. The parties hereby select KPMG Peat Marwick as the
accountants to prepare all required income tax returns of the Company for all
periods which include the Closing Date; provided that Buyer shall be responsible
for the tax liability attributable to any income arising between Closing and
December 31, 1997. The costs of such tax return preparation, income tax
liability, if any, and all costs, if any, which may be incurred upon audit or
other examination shall be borne equally by the parties; provided, that Buyer
shall be responsible for any tax liability of Company attributable to a period
after the Closing Date.
11
<PAGE> 12
16. MISCELLANEOUS PROVISIONS.
(a) This Agreement represents the entire understanding and
agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties.
(b) The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, but only by a writing signed by the
party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
(c) No party shall assign his or its rights and/or obligations
hereunder without the prior written consent of each other party to this
Agreement, said consent not to be unreasonably withheld.
(d) All of the terms and provisions of this Agreement, whether
so expressed or not, shall be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective legal representatives,
successors and permitted assigns.
(e) All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including
telecopy or facsimile communication) and shall be (as elected by the person
giving such notice) hand delivered by messenger or courier service, or mailed
(airmail if international) by registered or certified mail (postage prepaid),
return receipt requested, addressed to such address as any party may designate
by notice complying with the terms of this Section. Each such notice shall be
deemed delivered (a) on the date delivered if by personal delivery; (b) on the
date of transmission with confirmed answer back if by telecopy or facsimile; and
(c) on the date upon which the return receipt is signed or delivery is refused
or the notice is designated by the postal authorities as not deliverable, as the
case may be, if mailed.
(f) If any part of this Agreement or any other Agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
(g) In this Agreement, the use of any gender shall be deemed
to include all genders, and the use of the singular shall include the plural,
wherever it appears appropriate from the context.
12
<PAGE> 13
(h) The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even if known,
shall not affect the rights of such party to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
any party of any breach of any provision of this Agreement should not be
construed as a waiver of the provision itself, or a waiver of any right, power
or remedy under this Agreement. No notice to or demand on any party in any case
shall, of itself, entitle such party to any other or further notice or demand in
similar or other circumstances.
(i) Nothing in this Agreement, whether express or implied, is
intended to confer any rights or remedies under or by reason of this Agreement
on any person other than the parties hereto and their respective legal
representatives, successors and permitted assigns, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of any
third persons to any party to this Agreement, nor shall any provision give any
third persons any right of subrogation or action over or against any party to
this Agreement.
(j) No remedy herein conferred upon any party is intended to
be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise. No single
or partial exercise by any party of any right, power or remedy hereunder shall
preclude any other or further exercise thereof.
(k) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(l) This Agreement and all transactions contemplated by this
Agreement shall be governed by, and construed and enforced in accordance with,
the internal laws of the State of Florida without regard to principles of
conflicts of laws.
(m) The parties hereby agree from time to time to execute and
deliver such further and other transfers, assignments and documents and do all
matters and things which may be convenient or necessary to more effectively and
completely carry out the intentions of this Agreement.
13
<PAGE> 14
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the date first above written.
COMPANY: SELLER:
BOCA ROADHOUSE, L.C. ROADHOUSE GRILL, INC.
By: Boca Roadhouse, Inc., By: /s/ Dennis C. Jones
Member ------------------------
Its: Chief Financial Officer
-----------------------
By: /s/ William A. Hoffman
----------------------
Its: President
-------------------
BUYER:
By: Roadhouse Grill, Inc., BOCA ROADHOUSE, INC.
Member
By: By: /s/ William A. Hoffman
--------------------- ----------------------
Its: Its: President
-------------------- ---------------------
LIMITED JOINDER
---------------
The undersigned, being all of the shareholders of the Buyer, execute
this Limited Joinder solely to signify their obligation, jointly and severally,
to indemnify Seller from and hold it harmless against Seller's obligation for
indemnification of Forgione under the Guaranty and the Cairo obligation as
described in paragraph 10 of this Agreement.
/s/ William A. Hoffman
--------------------------
William A. Hoffman
/s/ George Burmeister
--------------------------
George Burmeister
--------------------------
E. Hal Dickson
14
<PAGE> 15
EXHIBITS LIST
EXHIBIT
4(f) Liens and Encumbrances
4(g) Contracts
4(h) Consents and Approvals
8A-1 Contract Date Payables
8A-2 Contract Date Cash and Equivalents
<PAGE> 16
EXHIBIT 4(F)
LIENS AND ENCUMBRANCES
1) Ice Machine UCC-1
<PAGE> 17
EXHIBIT 4(G)
CONTRACTS
<PAGE> 18
EXHIBIT 4(H)
CONSENTS AND APPROVALS
None.
<PAGE> 19
EXHIBIT 8A-1
CONTRACT DATE PAYABLES
Accounts Payable (see attached $249,673.54
supporting schedule 8A-1.2)
Due to Related Parties $ 55,000.00
Accrued Expenses:
Marketing Bonus $ 1,000
Sales Tax Payable $12,500
Real/Personal Property Taxes $12,378
Liquor Tax $ 1,716
-------
$ 27,594.00
------------
SUBTOTAL $332,267.54
Less: Seller's Credit
(see attached supporting
schedule 8A-1.1) ($151,639.50)
Affiliate's Credit ($ 55,000.00)
------------
Reduced Contract Date Payables $125,628.04
============
<PAGE> 20
EXHIBIT 8A-2
CONTRACT DATE CASH AND EQUIVALENTS
Cash and Cash Equivalents $13,000.00
Food and Liquor Inventory $20,247.00
Small Wares $30,000.00
Lease Security Deposit $ 5,000.00
Sales Tax Security Deposit $ 6,680.00
----------
$74,927.00
==========
<PAGE> 1
Exhibit 10.48
================================================================================
ROADHOUSE GRILL, INC.
DEFERRED COMPENSATION PLAN
EFFECTIVE JUNE 3, 1997
================================================================================
<PAGE> 2
ROADHOUSE GRILL, INC.
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Definitions ........................................................... 1
2. Savings Deposits by Participants ...................................... 3
3. Company Credits to Participants ....................................... 3
4. Participants' Accounts; Life Insurance Contracts ...................... 4
5. Vesting ............................................................... 4
6. Payments During Life .................................................. 5
7. Payment on Death; Beneficiary ......................................... 5
8. Limitation on Nondeductible Payment ................................... 6
9. Intended Tax Consequences ............................................. 6
10. Intended ERISA Consequences ........................................... 7
11. Funding ............................................................... 7
12. Participant's Rights Unsecured ........................................ 7
13. Administration ........................................................ 8
14. Claims Procedure ...................................................... 8
15. Amendment or Termination of Plan ...................................... 9
16. Notice ................................................................ 9
17. Employment Rights ..................................................... 9
18. Independence of Benefits .............................................. 9
19. Assignability ......................................................... 10
20. Governing Law; Binding Effect; Limitations Period; Venue .............. 10
21. Pronouns and Heading .................................................. 10
</TABLE>
-i-
<PAGE> 3
ROADHOUSE GRILL, INC.
DEFERRED COMPENSATION PLAN
This Deferred Compensation Plan is adopted effective as of the 3rd of
June, 1997, by Roadhouse Grill, Inc., a Florida corporation (referred to herein
as the "Company").
WITNESSETH:
WHEREAS, the Company intends to provide certain executive and
management-level employees to be designated by the Board as participants in this
Plan with an opportunity to save for retirement on a tax-deferred basis; and
WHEREAS, the Company desires to retain the valuable services of certain
executive and management-level employees and encourage such employees to
continue employment with the Company by making contributions to match the
tax-deferred savings elected by executive and certain management-level
employees; and
WHEREAS, this Deferred Compensation Plan is intended to qualify as an
unfunded deferred compensation plan maintained primarily to provide deferred
compensation for eligible Participants, all of whom are members of a select
group of management or highly compensated employees of the Company for purposes
of the Employee Retirement Income Security Act of 1974, as amended.
NOW, THEREFORE, the Company adopts this Deferred Compensation Plan:
1. DEFINITIONS
(a) BOARD means the Board of Directors of the Company.
(b) CODE means the Internal Revenue Code of 1986, as amended.
(c) COMPANY means Roadhouse Grill, Inc. and, as the context may dictate,
the Employer of the Participant.
(d) COMPENSATION means a Participant's total compensation paid to such
Participant by the Company during the Plan Year for services rendered,
including base salary, cash bonuses and any amounts contributed by the
Participant on a salary reduction basis to any plan maintained by the
Company under Internal Revenue Code Sections 401(k) or 125, but
excluding non-cash items of compensation or income. Compensation does
not include any such amounts paid to a Participant before the effective
date that he became a Participant herein or after the effective date of
the end of his participation herein.
<PAGE> 4
(e) CONTROLLED GROUP means that group of entities consisting of (i) the
Company, (ii) any corporation which is a member of a controlled group
of corporations (as defined in Code Section 414(b)) that includes the
Company and (iii) any trade or business (whether or not incorporated)
that is under common control (as defined in Code Section 414(c)) with
the Company.
(f) EMPLOYEE means any person employed by any member of the Controlled
Group.
(g) EMPLOYER means the Company and any other member of the Controlled
Group.
(h) ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
(i) PARTICIPANT means an Employee designated by the Board to participate in
this plan, whose participation in the Plan has begun or resumed and has
not yet ended.
(j) PERMANENT DISABILITY shall have the same meaning hereunder as under the
Employer's long-term disability plan. If the Participant is not covered
by the Employer's long-term disability plan, the term Permanent
Disability means a determination has been made by the Board that the
Participant would be eligible for such benefits if the Participant were
covered by the Employer's long-term disability plan. No other
determination or definition of disability or disabled status shall
govern for purposes of this Plan.
(k) PLAN means this Roadhouse Grill, Inc., Deferred Compensation Plan, as
set forth in this plan instrument and as it may be amended from time to
time.
(l) PLAN YEAR means the 12 month period commencing June 3, 1997, and ending
June 2, 1998, and the 12-month periods commencing on each subsequent
June 3 while the Plan remains in effect.
(m) SAVINGS DEPOSITS ACCOUNT means the account referred to in Section 4(a)
hereof.
(n) TRIGGERING EVENT means the first to occur of termination of a
Participant's employment for any reason other than death or a
Participant attaining the later of age 65 or 10 years of service under
the Plan. For this purpose, the term "years of service" means the
number of complete 12-month periods beginning with the first date that
the Participant performs service for the Employer that have elapsed
during the period of the Participant's employment by the Employer.
(o) VESTED PARTICIPANT means a Participant who is one hundred percent
(100%) vested in all benefits hereunder, as defined in Section 5
hereof. A "Non-Vested Participant" means a Participant who is not one
hundred percent (100%) vested in all benefits hereunder, as defined in
Section 5 hereof.
-2-
<PAGE> 5
2. SAVINGS DEPOSITS BY PARTICIPANTS
(a) SAVINGS DEPOSITS BY PARTICIPANTS. Each Participant may make savings
deposits to the Plan in any amount of his compensation by agreeing to
reduce his compensation by such amount. However, such amounts cannot
exceed a ceiling established by the Board for each Participant prior to
the beginning of each Plan Year and are referred to herein a as a
Participant's "savings deposits".
(b) SIGN-UP PROCEDURE FOR SAVINGS DEPOSITS. A Participant who wishes to
make savings deposits must complete an enrollment form specifying the
amount of his savings deposits, agreeing to reduce his compensation by
such amount, and providing such other information (including a
designation of beneficiary) as the Board may require. A Participant may
elect to begin making savings deposits as of any enrollment date. The
first of each month while the Plan is in effect is an enrollment date.
(c) CHANGES IN SAVINGS DEPOSITS. Subject to the ceiling established by the
Board for a Participant for any Plan Year, a participant making savings
deposits may increase or reduce deposits to any higher or lower amount
he elects, suspend savings deposits and resume such deposits at any
amount by so specifying on a form filed with the Board. Any changes
will become effective on the first Plan Year anniversary date after he
files the completed form with the Board. Any changes in a Participant's
savings deposits may affect benefits he receives under the Plan.
(d) EFFECTIVENESS OF ELECTIONS. Any election by a participant to make
savings deposits, increase, reduce, suspend or resume his savings
deposits will be effective only with respect to compensation earned
after the Participant files the appropriate form with the Board and
will not be effective with respect to any compensation already earned
by the Participant when he files such form with the Board.
3. COMPANY CREDITS TO PARTICIPANTS
(a) MATCHING COMPANY CREDITS. For each Plan Year, the Company will credit
each Participant who makes savings deposits during such Plan Year with
a matching contribution amount equal to at least 100% of each
Participant's savings deposits made during such Plan Year; provided
that the Company will provide matching contributions only on savings
deposits up to a specified amount (the "matching ceiling") and will not
match savings deposits above the matching ceiling. The matching ceiling
will be a specified amount of each Participant's compensation. The
matching ceiling for any Plan Year will be determined by the Board and
communicated to Participants before the beginning of each Plan Year.
(b) COMPANY CREDITS. Company matching credits for a Plan Year will be made
no later than thirty (30) days after the end of each Plan Year.
-3-
<PAGE> 6
4. PARTICIPANTS' ACCOUNTS; LIFE INSURANCE CONTRACTS
(a) SAVINGS DEPOSITS ACCOUNTS. Savings deposits by a Participant and
Company credits on a Participant's behalf will be credited to an
account in the name of such Participant. Such account will be called
his "Savings Deposits Account."
(b) LIFE INSURANCE CONTRACT. The Company intends to purchase a life
insurance contract on the life of each Participant in the amount that
can be purchased with premiums equal to the credits to such
Participant's Savings Deposits Account. The life insurance contract
will be issued by an insurer selected by the Company in its discretion
and will provide such accumulation values, cash surrender values, death
benefits and other rights and features as the Company in its discretion
determines. However, the Company will not be obligated to purchase a
life insurance contract on the life of any Participant; if the Company
determines not to purchase a life insurance contract on the life of a
Participant, for purposes of determining the rights and benefits of
such Participant hereunder, the Company will nevertheless designate a
life insurance contract which could have been purchased with such
Participant's Savings Deposits Account (a "Designated Contract"). Any
such life insurance contract (whether purchased by the Company or
designated by the Company) will be referred to herein as the
"Participant's Contract". The Company will be the sole owner and
beneficiary of each Participant's Contract and will possess and may
exercise all incidents of ownership with respect to all such contracts.
No Participant will have any interest in a Participant's Contract
purchased by the Company prior to the distribution of such contract to
the Participant (should this occur in accordance with Section 6
hereof). In order to be a participant, an employee of the Company
agrees to submit to medical examinations, supply such information and
execute such documents as may be required by the insurance company in
order for the Company to purchase any such policy.
(c) RECORDS OF ACCOUNTS. The Board may itself maintain records of
Participants' Savings Deposits Accounts or the Board may arrange for
such records to be maintained by an outside service provider. If the
Board arranges with a service provider to maintain records of
Participants' accounts, the Board will provide such information as is
necessary for the service provider to maintain such accounts as
required herein. Any reference herein to any requirements that the
Board keep certain records or accounts will be satisfied if the Board
arranges for an outside service provider to keep such records or
accounts.
5. VESTING
Each Participant is one hundred percent (100%) vested in that portion
of his or her Savings Deposits Account attributable to the
Participant's savings deposits. Each Employee designated as a
Participant as of the effective date of the Plan also is one hundred
percent (100%) vested in all benefits hereunder. Each Employee
subsequently designated as Participants by the Company shall either be
designated as one hundred percent (100%) vested in all benefits
hereunder on (i) the date said Employee becomes a Participant
-4-
<PAGE> 7
hereunder or (ii) the first to occur of (a) the date of such
Participant's death or Permanent Disability if a Triggering Event shall
not already have occurred for such Participant or (b) the date five (5)
years after the date on which said Employee becomes a Participant
hereunder except that vesting shall cease on the occurrence of a
Triggering Event; provided, however, that in the event the Company is
sold or merged with another entity, all Participants who are not one
hundred percent (100%) vested on the date immediately preceding such
event shall automatically become one hundred (100%) vested in all
benefits hereunder.
6. PAYMENTS DURING LIFE
(a) With respect to a Vested Participant who experiences a Triggering
Event, within one (1) year of such Triggering Event the Company shall
have the option of either (i) distributing the Participant's Contract
to such Participant or (ii) surrendering the Participant's Contract to
the issuer and distributing to such Participant the cash surrender
value of such contract, in either case (A) increased by the amount of
the Company's expected federal and state income tax savings, if any,
from obtaining an income tax deduction for the compensation paid to
such Participant as a result of such distribution and (B) reduced by
the amount of the Company's cumulative prior federal and state income
taxes, if any, resulting from the income from the increase in the cash
surrender value of such Contract plus the Company's expected federal
and state income tax, if any, on the income or gain recognized from
such surrender and/or distribution. If the Company does not own a life
insurance contract on such Participant, within one (1) year of the
Triggering Event the Company shall distribute to such Participant an
amount in cash equal to the cash surrender value of the Designated
Contract on the life of such Participant after taking into account the
amount of the Company's expected federal and state income tax savings
and payment, if any, from such distribution as described in (A) and (B)
of the foregoing sentence. In no event shall a Vested Participant
receive an amount less than such Participant's total savings deposits
plus interest equal to five percent (5%) of the amount of such
Participant's savings deposits, calculated annually.
(b) With respect to Non-Vested Participant who experiences a Triggering
Event, within one (1) year of the Triggering Event, the Company shall
distribute to such Participant an amount equal to such Participant's
total savings deposits plus interest equal to five percent (5%) of the
amount of such Participant's savings deposits, calculated annually. Any
funds in such Participant's Savings Deposits Account in excess of the
funds required to be paid to such Participant under the foregoing
sentence shall be retained by, or paid to, the Company.
7. PAYMENT ON DEATH; BENEFICIARY
Upon the death of a Participant prior to a Triggering Event, such
Participant's designated beneficiary shall receive cash equal to the
amount of the proceeds from the Participant's Contract within thirty
(30) days of receipt thereof by the Company or cash equal to the
-5-
<PAGE> 8
death benefit of the Designated Contract on the life of such
Participant within sixty (60) days of the death of such Participant.
Any delay in payment by the insurer of proceeds due to the Company
following the death of a Participant shall similarly delay the
Company's obligation to make payment hereunder. Upon the death of a
Participant after a Triggering Event, any amounts in excess of the
funds required to be paid to the Participant under Section 6 shall be
retained by, or paid to, the Company. The Participant may designate a
beneficiary on a beneficiary designation form provided by the Board. If
the Participant fails to name a beneficiary, the Participant's
beneficiary shall be the Participant's surviving spouse, if any, or, if
there is no surviving spouse, the beneficiary shall be the
Participant's estate.
8. LIMITATION ON NONDEDUCTIBLE PAYMENT
Notwithstanding the foregoing provisions concerning payment to a
Participant, if the Board reasonably determines that payment to a
Participant of any portion of the benefit due to the Participant
hereunder will not be deductible by the Company for income tax purposes
because of the limit imposed by Code Section 162(m), payment of the
excess amount may, in the Company's discretion, be deferred until the
first date following termination of the Participant's employment on
which the Board reasonably determines that payment of the excess amount
will be deductible by the Company for income tax purposes. For purposes
of this subsection, the term "excess amount" means the amount by which
the limit on deductible payments under Code Section 162(m) would be
exceeded by payment to the Participant of the benefit due under the
Plan, after first taking into consideration taxable compensation
payments to the Participant under all other agreements or arrangements
with the Company or any member of the Controlled Group. The excess
amount shall remain credited to the Participant's Savings Deposit
Account and subject to all other terms and conditions of the Plan until
paid to the Participant or Beneficiary.
9. INTENDED TAX CONSEQUENCES
It is the Company's intent that the Participant's savings deposits, the
Company's matching credits and any increases thereto will not be
subject to income taxes to the Participant until the Participant (or
his or her beneficiary) receives any amount hereunder and will not be
deductible by the Company until payment hereunder. The Participant's
savings deposits will be subject to employment taxes, with respect to
which the Employer shall report and withhold appropriately. However, if
any portion of a Participant's Savings Deposits Account is found in a
"determination" (within the meaning of Section 1313(a) of the Code) to
have been includable in gross income by a Participant before payment of
such amounts to the Participant under the Plan, such amounts shall be
immediately paid to the Participant, notwithstanding any other
provision of the Plan. The amount of any such payment shall reduce the
Participant's Savings Deposits Account.
-6-
<PAGE> 9
10. INTENDED ERISA CONSEQUENCES
If it is determined, as defined below, that the Plan does not qualify
as an unfunded deferred compensation plan maintained primarily to
provide deferred compensation for eligible Participants, all of whom
are members of a select group of management or highly compensated
employees of the Employer for purposes of ERISA, then the Company may
terminate the entire Plan or discontinue the participation of those
Participants with respect to whom such determination is made. In that
case, the Participant shall be paid all amounts then due him or her
hereunder as of the Participant experienced a Triggering Event,
calculated and paid as determined in Section 6 hereof, notwithstanding
any other provision of the Plan. For purposes of this Section, the term
"determined" means determined by the Board in its sole discretion or
determined by a court of competent jurisdiction the decision of which
cannot be appealed or with respect to which the appeal period has
expired without any party filing a notice of appeal.
11. FUNDING
The Company shall not be obligated under any circumstances to fund its
obligations under this Plan. The Company may elect to fund this Plan
informally in whole or in part, and the manner of such informal funding
shall be the exclusive decision of the Company. If the Company decides
to informally fund this Plan by procuring life insurance for its own
benefit on the life of any Participant, the form of such insurance and
the amount shall be the exclusive decision of the Company. The Company
may choose to create a trust for purposes of funding its obligations
hereunder. In the event that the Company creates such a trust, to
assets to be transferred to such trust shall be the exclusive decision
of the Company. With respect to any assets that the Company chooses to
transfer to such a trust, including a life insurance contracts on the
life of a Participant, the obligation of the Company hereunder shall
become the obligation of the trustee of such trust.
12. PARTICIPANT'S RIGHTS UNSECURED
Nothing contained herein shall be construed as providing for assets to
be held in trust or escrow or any other form of asset segregation for a
Participant or his designated beneficiary. The right of a Participant
or his designated beneficiary to receive a distribution hereunder shall
be an unsecured claim against the general assets of the Company, shall
be no greater than the right of any unsecured general creditor of the
Company, and neither the Participants nor their designated
beneficiaries shall have any rights in or against any specific assets
of the Company. Any insurance policy purchased on the life of a
Participant to informally fund the Company's obligations hereunder
shall constitute a general asset of the Company, whether owned by the
Company or a trust created by the Company, and may be disposed of by
such trust or the Company at such time and for such purposes as it may
deem appropriate. Any rights hereunder may not be encumbered or
assigned by a Participant or any Participant's beneficiary.
-7-
<PAGE> 10
13. ADMINISTRATION
This Plan shall be administered by the Board which shall have the
authority to interpret this Plan and issue such regulations as it deems
appropriate. The Board will designate those persons who will be
Participants and will decide on the termination of a Participant's
participation hereunder; provided, that no such action shall
retroactively deprive a Participant of any amount credited to his
Savings Deposits Account or any benefit he was entitled to under the
Plan calculated as of the effective date of his termination of
participation hereunder. The Board shall have the duty and
responsibility of maintaining records, making the requisite
calculations and disbursing the payments hereunder. The Board's
interpretations, determinations, regulations and calculations shall be
final and binding on all persons and parties concerned. The Board
Administrator may delegate to an Employee or other person any of its
duties under the Plan, provided that such delegation shall not relieve
the Board of the responsibility for the performance of such duties.
14. CLAIMS PROCEDURE
(a) A Participant or beneficiary who believes that he or she is being
denied a benefit to which he is entitled under the Plan (hereinafter
referred to as a "Claimant") may file a written request for such
benefit with the Board or its delegate (herein referred to as the
"Claims Administrator") setting forth the claim. Upon receipt of a
claim, the Claims Administrator shall advise the Claimant that a reply
will be forthcoming within ninety (90) days and shall, in fact, deliver
such reply within such period. The Claims Administrator may, however,
extend the reply period for an additional ninety (90) days for
reasonable cause. If the claim is denied in whole or in part, the
Claims Administrator shall advise the Claimant in writing of its
determination, using language calculated to be understood by the
Claimant, setting forth: (1) the specific reason or reasons for such
denial; (2) the specific reference to pertinent provisions of this Plan
on which such denial is based; (3) a description of any additional
material or information necessary for the Claimant to perfect his claim
and an explanation why such material or such information is necessary;
(4) appropriate information as to the steps to be taken if the Claimant
wishes to submit the claim for review; and (5) the time limits for
requesting a review.
(b) Within sixty (60) days after the receipt by the Claimant of the written
determination described above, the Claimant may request in writing that
the Claims Administrator review the determination. The Claimant or his
or her duly authorized representative may, but need not, review the
pertinent documents and submit issues and comments in writing for
consideration by the Claims Administrator. If the Claimant does not
request a review of the determination within such sixty (60) day
period, the Claimant shall be barred and estopped from challenging the
Claims Administrator's determination.
(c) Within sixty (60) days after receipt of a request for review, the
Claims Administrator will review its previous determination. After
consideration of all materials presented by the Claimant, the Claims
Administrator will render a written determination, written in a
-8-
<PAGE> 11
manner calculated to be understood by the Claimant, setting forth the
specific reasons for the decision and containing specific references to
the pertinent provisions of the Plan on which the determination is
based. If special circumstances require that the sixty (60) day time
period be extended, the Claims Administrator will so notify the
Claimant and will render the decision as soon as possible, but no later
than one hundred twenty (120) days after receipt of the request for
review.
15. AMENDMENT OR TERMINATION OF PLAN
The Board, at any time and from time to time, may amend or modify any
or all of the provisions of this Plan or may terminate this Plan.
Notwithstanding the foregoing, no termination or amendment of the Plan
may reduce the benefits payable under the plan to any person with
respect to a Participant whose employment with the Company was
terminated, who attained age 65 or died before such termination or
amendment, and no termination or amendment may reduce the benefits to
be paid with respect to a Participant on the date of such termination
or amendment below the amount that such Participant would have received
if his employment had terminated on the date before such termination or
amendment.
16. NOTICE
Any notice or other communication hereunder shall be in writing and
shall be deemed to have been duly given or delivered (a) as of the
third business day after mailing by certified or registered mail,
postage prepaid, or (b) as of the second business day after delivery to
a national express delivery service, to the last known addresses of the
parties or such other addresses at which the parties shall from time to
time notify one another.
17. EMPLOYMENT RIGHTS
This Plan shall not be deemed to create a contract of employment
between the Company and any Participant and shall create no right in
any Participant to continue in the Company's employ for any specific
period of time.
18. INDEPENDENCE OF BENEFITS
The benefits payable under this Plan shall be independent of, and in
addition to, any other benefits or compensation, payable under any
other employment agreements or benefit arrangements that now exist or
may hereafter exist from time to time between the Company and any
Participant. Nor does this Plan in any way affect or reduce the
existing and future compensation and other benefits of the Participant.
-9-
<PAGE> 12
19. ASSIGNABILITY
Except insofar as this provision may be contrary to applicable law, no
sale, transfer, alienation, assignment, pledge, collateralization, or
attachment of any benefits under this Plan shall be valid or recognized
by the Company.
20. GOVERNING LAW; BINDING EFFECT; LIMITATIONS PERIOD; VENUE
The parties hereto agree that all matters pertaining to the validity,
construction and effect of this Plan shall be determined in accordance
with the laws of the State of Florida to the extent not preempted by
ERISA. This Plan shall be binding upon and insure to the benefit of the
parties hereto and their respective successors and assigns. Any legal
action or proceeding hereunder may be brought only following exhaustion
of the Participant's administrative remedies and within a period of
three years from the date the claim was incurred, unless other
applicable law would permit a longer period of time within which to
bring an action. Any such legal action or proceeding may be initiated
only in Broward County or Miami-Dade County, Florida or the county in
which the Employer of the Participant has its principal place of
business.
21. PRONOUNS AND HEADING
As used herein, all pronouns shall include the masculine, feminine,
neuter, singular and plural thereof wherever the context and facts
require such construction. The headings, titles, and subtitles herein
are inserted for convenience of reference only and are to be ignored in
any construction of the provisions hereof.
-10-
<PAGE> 1
Exhibit 10.49
AMENDMENT
This AMENDMENT dated December 1, 1997 (the "Amendment") is to that Master
Development Agreement executed January 5, 1996 by and between Roadhouse Grill,
Inc. ("Company") and Roadhouse Grill Asia Pacific (H.K.) Limited ("Developer")
(the "Development Agreement").
In consideration of the mutual covenants and consideration set forth herein, and
as authorized and directed by the Board of Directors of the Company by action of
November 18, 1997, it is hereby agreed:
1. Section 8.A. (2) of the Development Agreement is hereby amended to read as
follows:
(2) Forty percent (40%) of the royalty fee paid by each Third Party
Franchisee, due and payable within ten (10) days after the end of the
month in which the fee was received by Developer from each Third Party
Franchisee in the Territory; subject however, that the maximum royalty
fee due the Company shall not exceed two percent (2.0%) of gross sales
as defined in the Franchise Agreement.
2. Section 8.B. (2) of the Development Agreement is hereby amended to read as
follows:
(2) A royalty fee in the amount of two percent (2%) of gross sales as
defined in the Franchise Agreement, due and payable within ten (10) days
after the end of the month in which sales were made.
3. The amendments provided for herein shall be effective as of December 1,
1997.
4. Except as specifically provided in this Amendment, the terms of the
Development Agreement are ratified.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement in ___ counterparts on the day and year first above written.
DEVELOPER
ROADHOUSE GRILL ASIA PACIFIC (H.K.)
LIMITED, a Hong Kong corporation
By: Witness:
-------------------------- -----------------------
Title:
-----------------------
COMPANY
ROADHOUSE GRILL, INC.
a Florida corporation
By: Witness:
-------------------------- -----------------------
Title:
-----------------------
<PAGE> 1
Exhibit 10.50
AMENDMENT
This AMENDMENT dated December 1, 1997 (the "Amendment") is to that Master
Development Agreement executed January 5, 1996 by and between Roadhouse Grill,
Inc. ("Company") and Roadhouse Grill Asia Pacific (Cayman) Limited
("Developer")(the "Development Agreement").
In consideration of the mutual covenants and consideration set forth herein, and
as authorized and directed by the Board of Directors of the Company by action of
November 18, 1997, it is hereby agreed:
1. Section 8.A. (2) of the Development Agreement is hereby amended to read as
follows:
(2) Forty percent (40%) of the royalty fee paid by each Third Party
Franchisee, due and payable within ten (10) days after the end of the
month in which the fee was received by Developer from each Third Party
Franchisee in the Territory; subject however, that the maximum royalty
fee due the Company shall not exceed two percent (2.0%) of gross sales
as defined in the Franchise Agreement.
2. Section 8.B.(2) of the Development Agreement is hereby amended to read as
follows:
(2) A royalty fee in the amount of two percent (2%) of gross sales as
defined in the Franchise Agreement, due and payable within ten (10) days
after the end of the month in which sales were made.
3. The amendments provided for herein shall be effective as of December 1,
1997.
4. Except as specifically provided in this Amendment, the terms of the
Development Agreement are ratified.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement in ___ counterparts on the day and year first above written.
DEVELOPER
ROADHOUSE GRILL ASIA PACIFIC (CAYMAN)
LIMITED., a Cayman Islands corporation
By: Witness:
-------------------------- -----------------------
Title:
-----------------------
COMPANY
ROADHOUSE GRILL, INC.
a Florida corporation
By: Witness:
-------------------------- -----------------------
Title:
-----------------------
<PAGE> 1
Exhibit 21.0
SUBSIDIARIES OF THE REGISTRANT
- ------------------------------
None
<PAGE> 1
EXHIBIT 23.0
(KPMG PEAT MARWICK LETTERHEAD)
Accountant's Consent
The Board of Directors
Roadhouse Grill, Inc.
We consent to incorpation by reference in the registration statement No.
333-30593 on Form S-8 of Roadhouse Grill, Inc. of our report dated February 20,
1998, relating to the balance sheets of Roadhouse Grill, Inc. as of December 29,
1996 and December 28, 1997, and the related statements of operations,
shareholders' equity and cash flows for each of the years in the three-year
period ended December 28, 1997 which report appears in the December 28, 1997,
annual report on Form 10-K of Roadhouse Grill, Inc.
/s/ KPMG PEAT MARWICK LLP
March 30, 1998
Miami, Florida
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> DEC-28-1997
<CASH> 3,733,390
<SECURITIES> 0
<RECEIVABLES> 162,815
<ALLOWANCES> 0
<INVENTORY> 930,580
<CURRENT-ASSETS> 6,826,146
<PP&E> 63,434,855
<DEPRECIATION> 9,373,710
<TOTAL-ASSETS> 75,431,544
<CURRENT-LIABILITIES> 12,711,786
<BONDS> 0
0
0
<COMMON> 279,162
<OTHER-SE> 41,015,558
<TOTAL-LIABILITY-AND-EQUITY> 75,431,544
<SALES> 92,541,373
<TOTAL-REVENUES> 92,795,056
<CGS> 78,438,573
<TOTAL-COSTS> 90,746,860
<OTHER-EXPENSES> 228,250
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,552,496
<INCOME-PRETAX> 267,450
<INCOME-TAX> 175,705
<INCOME-CONTINUING> 91,745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 91,745
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
