<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934. For the fiscal year ended January 2, 2000.
or
Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from
______________ to ______________.
Commission file number 1-8766
J. ALEXANDER'S CORPORATION
(Exact name of Registrant as specified in its charter)
Tennessee 62-0854056
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
P.O. Box 24300
3401 West End Avenue
Nashville, Tennessee 37203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (615)269-1900
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of Class: Name of each exchange on which registered:
- ----------------------------------------------- ------------------------------------------
<S> <C>
Common stock, par value $.05 per share. New York Stock Exchange
Series A junior preferred stock purchase rights. New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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 (229.405 of this chapter) 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. / /
The aggregate market value of the voting stock held by non-affiliates of
the registrant, computed by reference to the last sales price on the New York
Stock Exchange of such stock as of March 23, 2000, was $17,511,646, assuming
that (i) all shares beneficially held by members of the Company's Board of
Directors are shares owned by "affiliates," a status which each of the directors
individually disclaims and (ii) all shares held by the Trustee of the J.
Alexander's Corporation Employee Stock Ownership Plan are shares owned by an
"affiliate".
The number of shares of the Company's Common Stock, $.05 par value,
outstanding at March 23, 2000, was 6,851,950.
DOCUMENT INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2000 Annual Meeting of
Shareholders to be held May 16, 2000, are incorporated by reference into Part
III.
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PART I
ITEM 1. BUSINESS
J. Alexander's Corporation (the "Company") operates as a proprietary
concept 21 J. Alexander's full-service, casual dining restaurants located in
Tennessee, Ohio, Florida, Kansas, Alabama, Michigan, Illinois, Colorado, Texas,
Kentucky and Louisiana. J. Alexander's is a traditional restaurant with an
American menu that features prime rib of beef; hardwood-grilled steaks, seafood
and chicken; pasta; salads and soups; assorted sandwiches, appetizers and
desserts; and a full-service bar. Management believes quality food, outstanding
service and value are critical to the success of J. Alexander's.
Prior to 1997, the Company was also a franchisee of Wendy's
International, Inc. ("Wendy's International"). However, in November 1996, the
Company sold 52 of its 58 Wendy's Old Fashioned Hamburgers restaurants ("Wendy's
Restaurants") to Wendy's International. The six restaurants not acquired by
Wendy's International in November 1996 were sold or closed.
Unless the context requires otherwise, all references to the Company
include J. Alexander's Corporation and its subsidiaries.
J. ALEXANDER'S RESTAURANT OPERATIONS
General. J. Alexander's is a quality casual dining restaurant with a
contemporary American menu. J. Alexander's strategy is to provide a broad range
of high-quality menu items that are intended to appeal to a wide range of
consumer tastes and which are served by a courteous, friendly and well-trained
service staff. The Company believes that quality food, outstanding service and
value are critical to the success of J. Alexander's.
Each restaurant is generally open from 11:00 a.m. to 11:00 p.m. Monday
through Thursday, 11:00 a.m. to 12:00 midnight on Friday and Saturday and 11:00
a.m. to 10:00 p.m. on Sunday. Entrees available at lunch and dinner generally
range in price from $6.00 to $23.00. The Company estimates that the current
average check per customer, excluding alcoholic beverages, is approximately
$15.60. J. Alexander's net sales during fiscal 1999 were $78.5 million, of which
alcoholic beverage sales accounted for approximately 14%.
The Company opened its first J. Alexander's restaurant in Nashville,
Tennessee in May 1991. Since that time, the Company opened two restaurants in
1992, two restaurants in 1994, four restaurants in 1995, five restaurants in
1996, four restaurants in 1997, two restaurants in 1998 and one restaurant
during 1999. The Company plans to open an additional J. Alexander's during 2000
in Cincinnati, Ohio.
Menu. The J. Alexander's menu is designed to appeal to a wide variety of
tastes and features prime rib of beef; hardwood-grilled steaks, seafood and
chicken; pasta; salads and soups; and assorted sandwiches, appetizers and
desserts. As a part of the Company's commitment to quality, soups, sauces,
salsa, salad dressings and desserts are made daily from scratch; steaks, chicken
and seafood are grilled over genuine hardwood; all steaks are U.S.D.A.
Midwestern, Corn-fed Choice Beef, aged a minimum of 21 days; and imported
Italian pasta, topped with fresh grated parmesan cheese, is used. Emphasis on
quality is present throughout the entire J. Alexander's menu. Desserts such as
chocolate cake and carrot cake are prepared in-house, and each restaurant bakes
its featured croissants.
Guest Service. Management believes that prompt, courteous and efficient
service is an integral part of the J. Alexander's concept. The management staff
of each restaurant are referred to as "coaches" and the other employees as
"champions". The Company seeks to hire coaches who are committed to the
principle that quality products and service are key factors to success in the
restaurant industry. Each J. Alexander's restaurant typically employs five
fully-trained concept coaches and two kitchen coaches. Many of the coaches have
previous experience in full-service restaurants and all complete an intensive J.
Alexander's development program, generally lasting for 19 weeks, involving all
aspects of restaurant operations.
Each J. Alexander's typically employs 45 to 65 service personnel, 25 to
30 kitchen employees, 8 to 10 host persons and 6 to 8 pubkeeps. The Company
places significant emphasis on its initial training program. In addition,
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the coaches hold training breakfasts for the service staff to further enhance
their product knowledge. Management believes J. Alexander's restaurants have a
low table to server ratio, which is designed to provide better, more attentive
service. The Company is committed to employee empowerment, and each member of
the service staff is authorized to provide complimentary entrees in the event
that a guest has an unsatisfactory dining experience or the food quality is not
up to the Company's standards. Further, all members of the service staff are
trained to know the Company's product specifications and to alert management of
any potential problems.
Quality Assurance. A key position in each J. Alexander's restaurant is
the quality control coordinator. This position is staffed by a coach who
inspects each plate of food before it is served to a guest. The Company believes
that this product inspection by a member of management is a significant factor
in maintaining consistent, high food quality in its restaurants.
Another important component of the quality assurance system is the
preparation of taste plates. Certain menu items are taste-tested daily by a
coach to ensure that only the highest quality food is served in the restaurant.
The Company also uses a service evaluation program to monitor service staff
performance, food quality and guest satisfaction.
Restaurant and Site Selection. The J. Alexander's restaurants built from
1992 through a portion of 1996 have generally been freestanding structures that
contain approximately 7,400 square feet and seat approximately 230 people. The
exterior of these restaurants typically combines brick, fieldstone and copper
with awnings covering the windows and entrance. The restaurants' interiors are
designed to provide a comfortable dining experience and feature high ceilings,
wooden trusses with exposed pipes and an open kitchen immediately adjacent to
the reception area. Consistent with the Company's intent to develop different
looks for different markets, the last three restaurants opened in 1996
represented a departure from the "warehouse" style building described above. The
J. Alexander's in Troy, Michigan is located inside the prestigious Somerset
Collection mall and features a very upscale, contemporary design. The
Chattanooga, Tennessee J. Alexander's features a stucco style exterior and
includes a number of other unique design features as the result of being
converted from another freestanding restaurant building acquired by the Company.
Beginning with the Memphis, Tennessee restaurant opened in December 1996, most
J. Alexander's restaurants have been built based on a building design intended
to provide a high level of curb appeal using exterior craftsman-style
architecture with unique natural materials such as stone, stained woods and
weathering copper. The Company developed a new building design in conjunction
with its entry into the Baton Rouge market during 1998 and utilized a similar
building for its restaurant opened in West Bloomfield, Michigan during 1999.
This latest building design features interior finishes and materials which
reflect the blend of international and Craftsman architecture. Elements such as
steel, concrete, stone and glass are subtly incorporated to give a contemporary
feel to the space and provide an overall comfortable ambiance.
Management estimates that capital expenditures for completion of the
Cincinnati, Ohio restaurant which will be located on leased land and opened in
2000 and for other additions and improvements to existing restaurants will total
approximately $4 million in 2000. In addition, the Company is actively seeking
locations for additional restaurants to be opened in 2001. If a satisfactory
location is found and successfully negotiated, any amounts expended in 2000 for
this location, including land acquisition if the site were purchased, would be
in addition to the amounts discussed above. Excluding the cost of land
acquisition, the Company estimates that the cash investment for site preparation
and for constructing and equipping a J. Alexander's restaurant is currently
approximately $3 million. While the Company prefers to own its sites because of
the long-term value of owning these assets, restaurants opened since 1997 have
been located on leased land. The cost of land for restaurants opened in 1997
ranged from $800,000 to $1,150,000.
The Company is actively seeking to acquire additional sites for new J.
Alexander's restaurants primarily in the midwestern and the southeastern areas
of the United States. The timing of restaurant openings depends upon the
selection and availability of suitable sites and other factors. The Company has
no current plans to franchise J. Alexander's restaurants.
The Company believes that its ability to select high profile restaurant
sites is critical to the success of the J. Alexander's operations. Once a
prospective site is identified and preliminary site analysis is performed and
evaluated, members of the Company's senior management team visit the proposed
location and evaluate the particular site and the surrounding area. The Company
analyzes a variety of factors in the site selection process, including local
market demographics, the number, type and success of competing restaurants in
the immediate and
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surrounding area and accessibility to and visibility from major thoroughfares.
The Company also obtains an independent market analysis to verify its own
conclusion that a potential restaurant site meets the Company's criteria. In
1997, the Company established site selection criteria calling for higher
population densities and higher household incomes than were met by certain of
its previous locations. The West Bloomfield, Michigan restaurant opened in 1999
was the first restaurant to be opened under these more stringent criteria. To
date, this restaurant has met all of the Company's sales expectations. The
Company believes that this change in site selection criteria will further
enhance its site selection process.
SERVICE MARK
The Company has registered the service mark J. Alexander's Restaurant
with the United States Patent and Trademark Office and believes that it is of
material importance to the Company's business.
COMPETITION
The restaurant industry is highly competitive. The Company believes that
the principal competitive factors within the industry are site location, product
quality, service and price; however, menu variety, attractiveness of facilities
and customer recognition are also important factors. The Company's restaurants
compete not only with numerous other casual dining restaurants with national or
regional images, but also with other types of food service operations in the
vicinity of each of the Company's restaurants. These include other restaurant
chains or franchise operations with greater public recognition, substantially
greater financial resources and higher total sales volume than the Company. The
restaurant business is often affected by changes in consumer tastes, national,
regional or local economic conditions, demographic trends, traffic patterns and
the type, number and location of competing restaurants.
PERSONNEL
As of January 2, 2000, the Company employed approximately 2,050 persons.
The Company believes that its employee relations are good. It is not a party to
any collective bargaining agreements.
GOVERNMENT REGULATION
Each of the Company's restaurants is subject to various federal, state
and local laws, regulations and administrative practices relating to the sale of
food and alcoholic beverages, and sanitation, fire and building codes.
Restaurant operating costs are also affected by other governmental actions that
are beyond the Company's control, which may include increases in the minimum
hourly wage requirements, workers' compensation insurance rates and unemployment
and other taxes. Difficulties or failures in obtaining the required licenses or
approvals could delay or prevent the opening of a new restaurant.
Alcoholic beverage control regulations require each of the Company's J.
Alexander's restaurants to apply for and obtain from state authorities a license
or permit to sell liquor on the premises and, in some states, to provide service
for extended hours and on Sundays. Typically, licenses must be renewed annually
and may be revoked or suspended for cause at any time. The failure of any
restaurant to obtain or retain any required liquor licenses would adversely
affect the restaurant's operations. In certain states, the Company may be
subject to "dram-shop" statutes, which generally provide a person injured by an
intoxicated person the right to recover damages from the establishment which
wrongfully served alcoholic beverages to the intoxicated person. Of the eleven
states where J. Alexander's operates, ten have dram-shop statutes or recognize a
cause of action for damages relating to sales of liquor to obviously intoxicated
persons and/or minors. The Company carries liquor liability coverage with an
aggregate limit of $2 million and a limit per "common cause" of $1 million as
part of its comprehensive general liability insurance.
The Americans with Disabilities Act ("ADA") prohibits discrimination on
the basis of disability in public accommodations and employment. The ADA became
effective as to public accommodations in January 1992 and as to employment in
July 1992. Construction and remodeling projects since January 1992 have taken
into account the requirements of the ADA. While no further expenditures relating
to ADA compliance in existing restaurants are anticipated, the Company could be
required to further modify its restaurants' physical facilities to comply with
the
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provisions of the ADA.
RISK FACTORS
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company is including the following cautionary
statements identifying important factors that could cause the Company's actual
results to differ materially from those projected in forward looking statements
of the Company made by, or on behalf of, the Company.
The Company Faces Challenges in Opening New Restaurants. The Company's
continued growth depends on its ability to open new J. Alexander's restaurants
and to operate them profitably, which will depend on a number of factors,
including the selection and availability of suitable locations, the hiring and
training of sufficiently skilled management and other personnel and other
factors, some of which are beyond the control of the Company. In addition, it
has been the Company's experience that new restaurants generate operating losses
while they build sales levels to maturity. The Company currently operates
twenty-one J. Alexander's restaurants, of which seven have been open for less
than three years. Because of the Company's relatively small J. Alexander's
restaurant base, an unsuccessful new restaurant could have a more adverse effect
on the Company's results of operations than would be the case in a restaurant
company with a greater number of restaurants.
The Company Faces Intense Competition. The restaurant industry is
intensely competitive with respect to price, service, location and food quality,
and there are many well-established competitors with substantially greater
financial and other resources than the Company. Some of the Company's
competitors have been in existence for a substantially longer period than the
Company and may be better established in markets where the Company's restaurants
are or may be located. The restaurant business is often affected by changes in
consumer tastes, national, regional or local economic conditions, demographic
trends, traffic patterns and the type, number and location of competing
restaurants.
The Company May Experience Fluctuations in Quarterly results. The
Company's quarterly results of operations are affected by timing of the opening
of new J. Alexander's restaurants, and fluctuations in the cost of food, labor,
employee benefits, and similar costs over which the Company has limited or no
control. The Company's business may also be affected by inflation. In the past,
management has attempted to anticipate and avoid material adverse effects on the
Company's profitability from increasing costs through its purchasing practices
and menu price adjustments, but there can be no assurance that it will be able
to do so in the future.
Government Regulation and Licensing May Delay New Restaurant Openings or
Affect Operations. The restaurant industry is subject to extensive state and
local government regulation relating to the sale of food and alcoholic
beverages, and sanitation, fire and building codes. Termination of the liquor
license for any J. Alexander's restaurant would adversely affect the revenues
for the restaurant. Restaurant operating costs are also affected by other
government actions that are beyond the Company's control, which may include
increases in the minimum hourly wage requirements, workers' compensation
insurance rates and unemployment and other taxes. If the Company experiences
difficulties in obtaining or fails to obtain required licensing or other
regulatory approvals, this delay or failure could delay or prevent the opening
of a new J. Alexander's restaurant. The suspension of, or inability to renew, a
license could interrupt operations at an existing restaurant, and the inability
to retain or renew such licenses would adversely affect the operations of the
new restaurants.
The Company may be delisted by the New York Stock Exchange. On October 8,
1999, the Company announced, at the request of the New York Stock Exchange (the
Exchange), that it currently fell below the newly effective Exchange continued
listing standard requiring total market capitalization of at least $50 million
and total stockholders' equity of at least $50 million. In response to this
situation, the Company submitted a business plan to the Listings and Compliance
Committee (the Committee) of the Exchange setting forth the Company's plans for
compliance with the newly effective standard. On November 30, 1999, the Company
announced that the Committee had reviewed its plan and agreed to continue the
Company's listing on the Exchange. The Committee has indicated that it will be
monitoring the Company's progress versus its plan on a quarterly basis and has
noted that all listed companies are expected to be in compliance with the
continued listing standards by February 2001. Should the Exchange delist the
Company, management believes an adequate alternative trading market will be
available.
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EXECUTIVE OFFICERS OF THE COMPANY
The following list includes names and ages of all of the executive
officers of the Company indicating all positions and offices with the Company
held by each such person and each such person's principal occupations or
employment during the past five years. All such persons have been appointed to
serve until the next annual appointment of officers and until their successors
are appointed, or until their earlier resignation or removal.
<TABLE>
<CAPTION>
Name and Age Background Information
- ------------ ----------------------
<S> <C>
Ronald E. Farmer, 53 Vice-President of Development since May, 1996; Director
of Development from October, 1993 to May, 1996; President
of Dinelite Corporation, a franchisee of Po Folks
Restaurants, from 1987 to 1993.
R. Gregory Lewis, 47 Chief Financial Officer since July 1986; Vice President
of Finance and Secretary since August 1984.
J. Michael Moore, 40 Vice-President of Human Resources and Administration
since November, 1997; Director of Human Resources and
Administration from August 1996 to November, 1997;
Director of Operations of Pioneer Music Group, a
Nashville-based record label, April, 1996 to August,
1996; Director of Operations, J. Alexander's Restaurants,
Inc. from March, 1993 to April, 1996.
Mark A. Parkey, 37 Vice-President since May, 1999; Controller of the Company
since May 1997; Director of Finance from January, 1993 to
May, 1997.
Lonnie J. Stout II, 53 Chairman since July 1990; Director, President and Chief
Executive Officer since May 1986.
</TABLE>
ITEM 2. PROPERTIES
As of January 2, 2000, the Company had 21 J. Alexander's casual dining
restaurants in operation and one J. Alexander's restaurant under construction.
The following table gives the locations of, and describes the Company's interest
in, the land and buildings used in connection with the above:
<TABLE>
<CAPTION>
Site Leased
Site and Building and Building Space
Owned by the Owned by the Leased to the
Company Company Company Total
------- ------- ------- -----
<S> <C> <C> <C> <C>
J. Alexander's Restaurants:
Alabama 1 0 0 1
Colorado 1 0 0 1
Florida 2 1 0 3
Illinois 1 0 0 1
Kansas 1 0 0 1
Michigan 1 1 1 3
Ohio 3 2 0 5
Tennessee 3 0 1 4
Texas 0 1 0 1
Kentucky 0 1 0 1
Louisiana 0 1 0 1
-- -- -- --
Total 13 7 2 22
== == == ==
</TABLE>
(a) In addition to the above, the Company leases two of its former Wendy's
properties which are in turn leased to others.
(b) See Item 1. for additional information concerning the Company's
restaurants.
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All of the Company's J. Alexander's restaurant lease agreements may be
renewed at the end of the initial term (generally 15 to 20 years) for periods of
five or more years. Certain of these leases provide for minimum rentals plus
additional rent based on a percentage of the restaurant's gross sales in excess
of specified amounts. These leases usually require the Company to pay all real
estate taxes, insurance premiums and maintenance expenses with respect to the
leased premises.
Corporate offices for the Company are located in leased office space in
Nashville, Tennessee.
ITEM 3. LEGAL PROCEEDINGS
As of March 23, 2000, the Company was not a party to any pending legal
proceedings material to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1999.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The common stock of J. Alexander's Corporation is listed on the New York
Stock Exchange under the symbol JAX. The approximate number of record holders of
the Company's common stock at March 23, 2000, was 1,600. The following table
summarizes the price range of the Company's common stock for each quarter of
1999 and 1998, as reported from price quotations from the New York Stock
Exchange:
<TABLE>
<CAPTION>
1999 1998
---- ----
Low High Low High
--- ---- --- ----
<S> <C> <C> <C> <C>
1st Quarter $3 9/16 $4 9/16 $4 7/16 $6 1/16
2nd Quarter 3 1/2 4 9/16 4 5/16 5 5/16
3rd Quarter 2 7/8 3 13/16 2 1/2 4 13/16
4th Quarter 1 5/16 3 1/4 2 1/4 4 5/16
</TABLE>
The Company has never paid cash dividends on its common stock. The
Company intends to retain earnings to invest in the Company's business. Payment
of future dividends will be within the discretion of the Company's Board of
Directors and will depend, among other factors, on earnings, capital
requirements and the operating and financial condition of the Company.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth the selected financial data for each of
the years in the five-year period ended January 2, 2000:
<TABLE>
<CAPTION>
Years Ended
-----------
JANUARY 2 January 3 December 28 December 29 December 31
(Dollars in thousands, except per share data) 2000 1999(1) 1997 1996 1995
- --------------------------------------------- ---- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net sales $78,454 74,200 57,138 90,879 79,288
General and administrative expenses $7,124 5,815 5,793 7,100 6,778
Pre-opening expense $264 660 1,580 1,503 658
Net income (loss) $(332) (1,485)(2) (5,991)(3) 7,208(5) 5,016(6)
Depreciation and amortization $4,041 4,067 3,138 (4) 4,674 3,644
Cash flow from operations $4,465 4,149 (2,150) 3,393 7,586
Capital expenditures $4,884 4,914 16,619 22,589 20,255
FINANCIAL POSITION
Cash and investments $933 1,022 134 12,549 2,739
Property and equipment, net $62,142 61,440 60,573 47,016 46,915
Total assets $65,635 65,120 64,421 66,827 60,140
Long-term obligations $18,128 21,361 20,231 15,930 18,512
Stockholders' equity $37,840 33,731 34,995 40,461 32,975
PER SHARE DATA
Basic earnings (loss) per share $(.05) (.27) (1.11) 1.36 .95
Diluted earnings (loss) per share $(.05) (.27) (1.11) 1.26 .92
Stockholders' equity $5.59 6.21 6.45 7.60 6.25
Market price at year end $3.13 4.00 4.81 8.50 9.50
J. ALEXANDER'S RESTAURANT DATA
Net sales $78,454 74,200 57,138 42,105 25,594
Weighted average annual sales per unit $3,892 3,809 3,772 3,885 3,980
Units open at year end 21 20 18 14 9
</TABLE>
1 Includes 53 weeks of operations, compared to 52 weeks for all other
years presented.
2 Includes pre-tax gain of $264 related to the Company's divestiture of
its Wendy's restaurants in 1996.
3 Includes an $885 charge to earnings to reflect the cumulative effect of
the change in the Company's accounting policy for pre-opening costs to
expense them as incurred. Also includes deferred tax expense of $2,393
related to an adjustment of the Company's beginning of the year
valuation allowance for deferred taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes"
(SFAS No. 109) and a pre-tax gain of $669 related to the Company's
divestiture of its Wendy's restaurants in 1996.
4 Excludes pre-opening expense which was expensed as incurred effective
with the beginning of fiscal 1997.
5 Includes pre-tax gain of $9,400 related to the Company's divestiture of
its Wendy's restaurants during 1996.
6 Includes tax benefit of $1,782 related to recognition of deferred tax
assets in accordance with SFAS No. 109.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
General
J. Alexander's Corporation owns and operates upscale, high-volume,
casual dining restaurants which offer a contemporary American menu and place a
special emphasis on food quality and professional service. At January 2, 2000,
the Company owned and operated 21 J. Alexander's restaurants in 11 states.
For fiscal year 1999, the Company's loss before income taxes of
$299,000 represented an improvement of almost $1.2 million from the loss before
income taxes of $1,485,000 incurred in 1998. This improvement was due primarily
to an improvement in operating income of approximately $700,000 and a reduction
in interest expense of approximately $400,000. In addition, the Company realized
a gain of $166,000 on the early retirement of a portion of its Convertible
Debentures purchased to meet sinking fund requirements.
The Company's loss of $1,485,000 before income taxes for 1998 compares
to a loss in 1997 of $2,421,000 before income taxes and the cumulative effect of
a change in accounting principle. The 1997 results include a gain of $669,000
related to the divestiture of the Company's Wendy's operations in 1996. An
additional gain of $264,000 was recorded on the divestiture in 1998. The loss
before the Wendy's gains, income taxes and cumulative effect adjustment
decreased by $1,341,000 in 1998 compared to 1997, as higher restaurant operating
income and reduced pre-opening expenses more than offset increased net interest
expense and a slight increase in general and administrative expenses during
1998. The Company's net loss of $1,485,000 for 1998 includes no income tax
benefit. All of the Company's deferred tax assets, consisting primarily of net
operating loss carryforwards and various tax credit carryforwards, were fully
reserved through the use of a valuation allowance at the end of both fiscal 1999
and 1998.
The Company's net loss of $5,991,000 for 1997 included an increase of
$2,393,000 in the valuation allowance for deferred tax assets and an $885,000
charge to reflect the cumulative effect of a change in the Company's accounting
principle for pre-opening costs to expense them as incurred.
The following table sets forth, for the fiscal years indicated, (i) the
percentages which the items in the Company's Consolidated Statements of
Operations bear to total net sales, and (ii) other selected operating data:
<TABLE>
<CAPTION>
Fiscal Year
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 32.6 34.2 34.1
Restaurant labor and related costs 33.5 33.2 33.0
Depreciation and amortization of restaurant property
and equipment 4.7 5.1 5.0
Other operating expenses 18.3 18.4 18.9
----- ----- -----
Total restaurant operating expenses 89.1 91.0 91.0
General and administrative expenses 9.1 7.8 10.1
Pre-opening expense .3 .9 2.8
Gain on Wendy's disposition -- .4 1.2
----- ----- -----
Operating income (loss) 1.5 .7 (2.8)
Other income (expense):
Interest expense, net (2.0) (2.7) (1.5)
Gain on purchase of debentures .2 -- --
Other, net (.1) -- --
----- ----- -----
Total other expense (1.9) (2.7) (1.5)
Loss before income taxes (.4) (2.0) (4.2)
Income tax provision -- -- (4.7)
----- ----- -----
Loss before cumulative effect of change in (.4) (2.0) (8.9)
accounting principle
Cumulative effect of change in accounting principle -- -- (1.5)
----- ----- -----
Net loss (.4)% (2.0)% (10.5)%
===== ===== =====
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Restaurants open at end of period 21 20 18
Weighted average weekly sales per restaurant $76,300 $73,200 $72,500
</TABLE>
NET SALES
Net sales increased by approximately $4.3 million, or 5.7%, to $78.5
million in fiscal year 1999 from $74.2 million in 1998. The $74.2 million of
sales recorded in 1998 represents an increase of $17.1 million, or 29.9%, over
$57.1 million of sales reported in 1997. The 1999 increase was due to the
opening of new restaurants - two in 1998 and one in 1999 - and to an increase of
4.2% in weighted average weekly sales per restaurant. The increase in 1998 was
primarily a result of new restaurant openings; average weekly sales per
restaurant increased by 1% in 1998. Fiscal 1998 contained 53 weeks of operations
compared to 52 weeks for both 1999 and 1997.
Same store sales, which include comparable results for all restaurants
open for more than 12 months, increased 4.1% to $76,300 per week in 1999 on a
base of 20 restaurants. Same store sales for 1998 also averaged $76,300 per
week, on a base of 17 restaurants, and increased 4.8% over the $72,800 average
for 1997.
Management estimates that menu prices were approximately 5% higher in
1999 than in 1998 and also approximately 5% higher in 1998 than 1997. The
Company estimates that guest counts on a same store basis increased by
approximately 2% in 1998 and declined by approximately 1% in 1999. Near the end
of the third quarter of 1999, however, the Company repositioned its menu to
place more emphasis on its premium offerings and daily feature items, while
de-emphasizing certain lower priced menu items. As a result of these changes and
a number of other guest service improvement initiatives begun in 1997, same
store sales increased by 8.6% in the fourth quarter of 1999 as compared to the
same period in 1998, with guest counts increasing by approximately 2 to 3%
during this period. Same store sales increases have remained in this range
during the first two months of 2000.
RESTAURANT COSTS AND EXPENSES
Total restaurant operating expenses decreased to 89.1% for 1999
compared to 91% for both 1998 and 1997, with restaurant operating margins
increasing to 10.9% in 1999 from 9% in both 1998 and 1997. The decrease in
restaurant operating expenses as a percentage of sales in 1999 was a result of a
decrease in these costs and expenses in the same store group of 20 restaurants
to 87.8% in 1999 from 90.8% in 1998, with these same store reductions more than
offsetting higher costs associated with new restaurants opened during 1998 and
1999. Restaurant operating margins for the same store restaurant group increased
to 12.2% in 1999 from 9.2% in 1998. The largest factor contributing to the
operating expense decrease in 1999 was the decrease in cost of sales resulting
from management's emphasis on increased efficiencies in this area and the menu
price increases noted above. Another factor contributing to the improvement was
the Company's decision to change the estimated useful life of its buildings from
25 to 30 years and the estimated life of leasehold improvements to include an
amortization period based on the lesser of the lease term, generally including
renewal options, or the useful life of the asset. The effect of these changes,
which were implemented as of January 4, 1999, was to decrease restaurant
operating expenses for 1999 by $333,000, or .4% of sales. Restaurant operating
expenses for the same store group of 17 restaurants decreased to 87.7% in 1998
from 90.7% in 1997 due to the favorable effect of higher sales volumes,
particularly as relates to labor costs and other operating expenses, which
include certain components that are relatively fixed in nature.
As noted in previous filings, certain of the Company's newer
restaurants have not yet reached their targeted level of sales performance and
continue to significantly affect its overall financial performance. As an
indication of this, the Company's 14 restaurants opened prior to 1997 posted
restaurant operating margins of 14.9% for 1999, while averaging weekly sales of
$81,000 per restaurant. Restaurant margins for 1999 for the six restaurants
opened in 1997 and 1998 were a negative .8% on average weekly sales of $60,000
per restaurant. These six restaurants continue to show good progress, however,
and averaged sales of $64,200 per week in the fourth quarter of 1999. The
Company's four newest restaurants posted losses at the restaurant level of
approximately $1 million for 1999.
Management believes that the performance of newer restaurants is
attributable primarily to two factors. The first of these factors is the
Company's "quiet opening" approach. In order to maximize the quality of guest
service and successfully complete the extensive training and support of J.
Alexander's staff, there is typically little or no advertising or promotion of
new J. Alexander's restaurants. While management believes this approach is the
10
<PAGE> 11
best way to build a new restaurant's reputation and to build sales over time,
the sometimes lower initial sales volumes combined with higher expenses
associated with the emphasis placed on training and quality of operations during
the opening months, typically result in the financial performance of newer
restaurants trailing that of more mature restaurants. The Company expects newly
opened restaurants to experience operating losses in their initial months of
operation. Also, the Company believes that certain of its newer restaurants
located in mid-size, rather than larger markets will take longer to build to
satisfactory sales levels than was originally expected. Management believes that
all or virtually all of the Company's restaurants have the potential over time
to reach satisfactory sales levels.
Beginning in 1998 the Company lowered its new restaurant development
plans to allow management to focus intently on improving sales and profits in
its existing restaurants while maintaining operational excellence. Also, in 1997
the Company established criteria calling for higher population densities and
higher household incomes than were met by certain of its previous locations. The
West Bloomfield, Michigan restaurant opened in 1999 was the first restaurant to
be opened under these more stringent criteria. To date, the West Bloomfield
restaurant has met all of the Company's sales expectations.
Management remains optimistic about the prospects for J. Alexander's
and continues to believe that the primary issue faced by the Company in
maintaining consistent profitability is the improvement of sales in several of
its restaurants, and particularly certain of its newer restaurants. It believes
that actions taken to date, including guest service initiatives which were
implemented two years ago, the menu repositioning implemented in the third
quarter of 1999, and the change in development criteria, together with continued
emphasis on increasing sales and profits are having and will continue to have a
positive impact on the Company's sales and financial performance for 2000 and
that the Company will be profitable in 2000. The Company's profit of
approximately $400,000 for the fourth quarter of 1999 provides evidence of
significant improvements. Further, only two restaurants - one of which was the
new West Bloomfield restaurant opened in November - posted restaurant operating
losses in the fourth quarter of 1999; losses at those two restaurants totaled
approximately $100,000.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses, which include supervisory costs as
well as management training costs and all other costs above the restaurant
level, increased by $1,309,000, or 22.5%, in 1999 compared to 1998. As a
percentage of sales these expenses increased to 9.1% in 1999 from 7.8% in 1998.
These increases were due primarily to lower than normal general and
administrative expenses in 1998 which were, in turn, principally due to
favorable experience under both the Company's workers' compensation program and
its self-insured group medical insurance program which allowed the Company to
reduce its level of accruals and expense related to those programs for 1998. In
addition, increases in management training costs which combined with management
relocation and procurement costs comprise approximately 20% of the general and
administrative category, contributed to higher general and administrative costs
during 1999.
General and administrative expenses increased slightly in fiscal 1998
compared to 1997. For the 1998 year favorable experience under the Company's
workers' compensation program and under the Company's self-insured group medical
insurance program largely offset increases in management training costs and
relocation costs for restaurant management personnel. As a percentage of sales,
general and administrative expenses decreased to 7.8% in 1998 from 10.1% in 1997
due to higher sales levels achieved.
General and administrative expenses for 2000 are expected to remain at
approximately the same percentage of sales as 1999.
PRE-OPENING EXPENSE
In 1997 the Company changed its accounting policy to expense all
pre-opening costs as incurred rather than deferring and amortizing them over a
period of twelve months from each restaurant's opening. A charge of $885,000 was
recorded as of the beginning of 1997 to reflect the cumulative effect of this
change. As the Company only opened one restaurant in 1999 and two restaurants in
1998, pre-opening expenses, which are typically approximately $350,000 per
restaurant, were significantly less in those years than the $1,580,000 of
pre-opening expenses incurred in 1997 when four restaurants were opened.
11
<PAGE> 12
OTHER INCOME AND EXPENSE
Interest expense decreased by $416,000 in 1999 compared to 1998 due
primarily to reductions in the outstanding balance of the Company's convertible
subordinated debentures and a reduction in the Company's line of credit after
applying proceeds from sales of stock in March and June, 1999, to the
outstanding balance on the line. Net interest expense increased by $1,142,000 in
1998 compared to 1997 primarily due to the use of the Company's line of credit
to fund a portion of the cost of developing new restaurants.
"Other, net" expense of $93,000 for 1999 was the result of expenses
associated with the write-off of facilities and equipment replaced in connection
with various capital maintenance projects which more than offset miscellaneous
income categories.
INCOME TAXES
Under the provisions of SFAS No. 109 "Accounting for Income Taxes", the
Company had gross deferred tax assets of $4,726,000 and $5,324,000 and gross
deferred tax liabilities of $616,000 and $929,000 at January 2, 2000 and January
3, 1999, respectively. The deferred tax assets at January 2, 2000 relate
primarily to $3,098,000 of net operating loss carryforwards and $3,079,000 of
tax credit carryforwards available to reduce future federal income taxes.
The recognition of deferred tax assets depends on the likelihood of
taxable income in future periods in amounts sufficient to realize the assets.
The deferred tax assets must be reduced through use of a valuation allowance to
the extent future income is not likely to be generated in such amounts. Due to
the loss incurred in 1997 and because the Company operates with a high degree of
financial and operating leverage, with a significant portion of operating costs
being fixed or semi-fixed in nature, management was unable to conclude that it
was more likely than not that its existing deferred tax assets would be realized
and in the fourth quarter of 1997 increased the beginning of the year valuation
allowance for these assets by $2,393,000. At December 28, 1997, the Company's
valuation allowance for deferred tax assets was $3,865,000.
During both 1998 and 1999, management was again unable to conclude that
it was more likely than not that its existing deferred tax assets would be
realized. The valuation allowance related to the Company's deferred tax assets
totaled $4,395,000 and $4,110,000 at January 3, 1999 and January 2, 2000,
respectively. Approximately $12,200,000 of future taxable income would be needed
to realize the Company's tax credit and net operating loss carryforwards at
January 2, 2000. These carryforwards expire in the years 2000 through 2019.
Approximately $1,400,000 of taxable income would be needed to realize the
carryforwards which expire in 2000 and $800,000 to use those which expire in
2001.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary need for capital for the past three years has
been for the development and maintenance of its J. Alexander's restaurants. In
addition, beginning in 1998, the Company has been required to meet an annual
sinking fund requirement of $1,875,000 in connection with its outstanding
Convertible Subordinated Debentures. The Company has met its capital needs and
maintained liquidity primarily by use of cash flow from operations, use of its
bank line of credit and through other sources discussed below.
Capital expenditures totaled $4,884,000, $4,914,000 and $16,619,000 for
1999, 1998 and 1997, respectively, and were primarily for the development of new
J. Alexander's restaurants. For 1997, the Company had negative cash flow from
operations totaling $2,150,000. Capital expenditures for 1997 were funded
primarily by the proceeds from the sale of the Company's Wendy's operations in
1996 and use of the Company's bank line of credit. Beginning in 1998, capital
expenditures were significantly reduced as a result of the Company's lower new
restaurant development rate, and cash flow from operations of $4,149,000
represented 84% of the capital expenditures for the year. For 1999, cash flow
from operations of $4,465,000 comprised 91% of total capital expenditures for
the year. The remaining capital expenditures for 1998 and 1999 along with other
needs during both years were funded by use of the Company's line of credit and,
for 1999, by the sale of common stock as discussed below.
12
<PAGE> 13
For 2000, the Company plans to construct and open one restaurant on
leased land in the Cincinnati, Ohio market. Management estimates that the cost
to complete the Cincinnati restaurant and for capital maintenance for existing
restaurants will be approximately $4 million for 2000. In addition, the Company
may incur capital expenditures for the purchase of property and/or construction
of restaurants for locations to be opened in fiscal 2001. Any such expenditures
are dependent upon the timing and success of management's efforts to locate
acceptable sites and are not expected to exceed $2 million.
While a working capital deficit of $6,409,000 existed as of January 2,
2000, the Company does not believe this deficit impairs the overall financial
condition of the Company. Certain of the Company's expenses, particularly
depreciation and amortization, do not require current outlays of cash. Also,
requirements for funding accounts receivable and inventories are relatively
insignificant; thus virtually all cash generated by operations is available to
meet current obligations. As of January 2, 2000, debentures in the principal
amount of $902,000 had been purchased by the Company for use toward satisfying
the annual sinking fund requirement of $1,875,000 for this issue for 2000.
In 1999, the Company's Board of Directors established a loan program
designed to enable eligible employees to purchase shares of the Company's common
stock. Under the program participants may borrow an amount equal to the full
price of common stock purchased. The plan authorizes $1 million in loans to
employees. Purchases of stock under the plan totaled $486,000 during 1999, with
the remainder of the authorized amount being purchased by February 2000. The
employee loans, which are reported as a deduction from stockholders' equity, are
payable on December 31, 2006, unless repaid sooner pursuant to terms of the
plan.
The Company maintains a bank line of credit of $20 million which is
expected to be used as needed for funding of capital expenditures and to provide
liquidity for meeting working capital or other needs. At January 2, 2000,
borrowings outstanding under this line of credit were $8,019,000. In March of
2000, the term of the line of credit was extended by one year through July 1,
2001. The amended line of credit agreement contains covenants which require the
Company to achieve specified results of operations and specified levels of
senior debt to EBITDA (earnings before interest, taxes, depreciation and
amortization) and to maintain certain other financial ratios. The Company was in
compliance with these covenants at January 2, 2000 and, based on a current
assessment of its business, believes it will continue to comply with these
covenants through July 1, 2001. The credit agreement also contains certain
limitations on capital expenditures and restaurant development by the Company
(generally limiting the Company to the development of two new restaurants per
year) and restricts the Company's ability to incur additional debt outside the
bank line of credit. The interest rate on borrowings under the line of credit is
currently based on LIBOR plus a spread of two to three percent, depending on the
ratio of senior debt to EBITDA. The line of credit includes an option to convert
outstanding borrowings to a term loan prior to July 1, 2001.
In March 1999 the Company developed a plan for raising additional
equity capital to further strengthen its financial position and, as part of this
plan, completed a private sale of 1,086,266 shares of common stock to Solidus,
LLC, an affiliate of one of the directors of the Company, for approximately $4.1
million. In addition, on June 21, 1999, the Company completed a rights offering
wherein shareholders of the Company purchased an additional 240,615 shares of
common stock at a price of $3.75 per share, which was the same price per share
as stock sold in the private sale. The private sale and the rights offering
raised total net proceeds to the Company of approximately $4.8 million which
were used to repay a portion of the debt outstanding under the Company's bank
line of credit. Amounts repaid can be reborrowed in accordance with the terms of
the line of credit agreement. The Company believes that raising additional
equity capital and repaying a portion of its outstanding debt will benefit the
Company by reducing its debt to equity ratio and reducing interest expense and
that it will provide greater flexibility to the Company in providing for future
financing needs.
IMPACT OF ACCOUNTING CHANGES
There are no pending accounting pronouncements that, when adopted, are
expected to have a material effect on the Company's results of operations or its
financial condition.
13
<PAGE> 14
IMPACT OF INFLATION AND OTHER FACTORS
Virtually all of the Company's costs and expenses are subject to normal
inflationary pressures and the Company is continually seeking ways to cope with
their impact. By owning a number of its properties, the Company avoids certain
increases in occupancy costs. New and replacement assets will likely be acquired
at higher costs but this will take place over many years. In general, the
Company tries to offset increased costs and expenses through additional
improvements in operating efficiencies and by increasing menu prices over time,
as permitted by competition and market conditions.
IMPACT OF THE YEAR 2000 ISSUE
In prior years, the Company discussed the nature and progress of its
plans to become Year 2000 ready. In late 1999, the Company completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in
mission critical information technology and non-information technology systems
and believes those systems successfully responded to the Year 2000 date change.
Management estimates the total cost associated with the remediation of its
system was approximately $200,000. The Company is not aware of any material
problems resulting from Year 2000 issues, either with its internal systems or
the products and services of third parties. The Company will continue to monitor
its mission critical computer applications and those of its suppliers and
vendors throughout the year 2000 to ensure that any latent Year 2000 matters
that may arise are addressed promptly.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
The foregoing discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's consolidated results of operations and financial condition. The
discussion should be read in conjunction with the consolidated financial
statements and notes thereto. All references are to fiscal years unless
otherwise noted. The forward-looking statements included in Management's
Discussion and Analysis of Financial Condition and Results of Operations
relating to certain matters involve risks and uncertainties, including
anticipated financial performance, business prospects, anticipated capital
expenditures and other similar matters, which reflect management's best judgment
based on factors currently known. Actual results and experience could differ
materially from the anticipated results or other expectations expressed in the
Company's forward-looking statements as a result of a number of factors.
Forward-looking information provided by the Company pursuant to the safe harbor
established under the Private Securities Litigation Reform Act of 1995 should be
evaluated in the context of these factors. In addition, the Company disclaims
any intent or obligation to update these forward-looking statements.
ITEM 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Disclosure About Interest Rate Risk. The Company is subject to market
risk from exposure to changes in interest rates based on its financing and cash
management activities. The Company utilizes a mix of both fixed-rate and
variable-rate debt to manage its exposures to changes in interest rates. (See
Notes E and F to the Consolidated Financial Statements appearing elsewhere
herein.) The Company does not expect changes in interest rates to have a
material effect on income or cash flows in fiscal 2000, although there can be no
assurances that interest rates will not significantly change.
Commodity Price Risk. Many of the food products purchased by the
Company are affected by commodity pricing and are, therefore, subject to price
volatility caused by weather, production problems, delivery difficulties and
other factors which are outside the control of the Company. Essential supplies
and raw materials are available from several sources and the Company is not
dependent upon any single source of supplies or raw materials. The Company's
ability to maintain consistent quality throughout its restaurant system depends
in part upon its ability to acquire food products and related items from
reliable sources. When the supply of certain products is uncertain or prices are
expected to rise significantly, the Company may enter into purchase contracts or
purchase bulk quantities for future use. The Company has purchase commitments
for terms of one year or less for food and supplies with a variety of vendors.
Such commitments generally include a pricing schedule for the period covered by
the agreements. The Company has established long-term relationships with key
beef and seafood vendors and brokers. Adequate alternative sources of supply are
believed to exist for substantially all products. While the supply and
14
<PAGE> 15
availability of certain products can be volatile, the Company believes that it
has the ability to identify and access alternative products as well as the
ability to adjust menu prices if needed. Significant items that could be subject
to price fluctuations are beef, seafood, produce, pork and dairy products among
others. The Company believes that any changes in commodity pricing which cannot
be adjusted for by changes in menu pricing or other product delivery strategies
would not be material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
INDEX OF FINANCIAL STATEMENTS
Page
----
<S> <C>
Independent Auditors' Report 16
Consolidated statements of operations - Years ended January 2, 2000,
January 3, 1999 and December 28, 1997 17
Consolidated balance sheets - January 2, 2000 and January 3, 1999 18
Consolidated statements of cash flows - Years ended January 2, 2000,
January 3, 1999 and December 28, 1997 19
Consolidated statements of stockholders' equity - Years ended January 2, 2000,
January 3, 1999 and December 28, 1997 20
Notes to consolidated financial statements 21-30
</TABLE>
The following consolidated financial statement schedule of J. Alexander's
Corporation and subsidiaries is included in Item 14(d):
Schedule II-Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
15
<PAGE> 16
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Stockholders
J. Alexander's Corporation
We have audited the accompanying consolidated balance sheets of J.
Alexander's Corporation and subsidiaries as of January 2, 2000 and January 3,
1999, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three fiscal years in the period ended
January 2, 2000. Our audits also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 consolidated financial position of J.
Alexander's Corporation and subsidiaries at January 2, 2000 and January 3, 1999,
and the consolidated results of their operations and their cash flows for each
of the three fiscal years in the period ended January 2, 2000 in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in Note A to the financial statements, the Company changed
its method of accounting for pre-opening costs in 1997.
/s/ Ernst & Young LLP
Nashville, Tennessee
February 21, 2000, except for the subsequent
event described in Note E as to
which the date is March 17, 2000
16
<PAGE> 17
J. ALEXANDER'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended
-----------
JANUARY 2 January 3 December 28
2000 1999 1997
---- ---- ----
<S> <C> <C> <C>
Net sales $78,454,000 $74,200,000 $57,138,000
Costs and expenses:
Cost of sales 25,568,000 25,410,000 19,480,000
Restaurant labor and related costs 26,289,000 24,663,000 18,871,000
Depreciation and amortization of restaurant
property and equipment 3,688,000 3,758,000 2,860,000
Other operating expenses 14,323,000 13,659,000 10,813,000
----------- ----------- -----------
Total restaurant operating expenses 69,868,000 67,490,000 52,024,000
----------- ----------- -----------
Income from restaurant operations 8,586,000 6,710,000 5,114,000
General and administrative expenses 7,124,000 5,815,000 5,793,000
Pre-opening expense 264,000 660,000 1,580,000
Gain on Wendy's disposition - 264,000 669,000
----------- ----------- -----------
Operating income (loss) 1,198,000 499,000 (1,590,000)
----------- ----------- -----------
Other income (expense):
Interest expense (1,570,000) (1,986,000) (1,030,000)
Interest income - - 186,000
Gain on purchase of Debentures 166,000 - -
Other, net (93,000) 2,000 13,000
----------- ----------- -----------
Total other expense (1,497,000) (1,984,000) (831,000)
----------- ----------- -----------
Loss before income taxes (299,000) (1,485,000) (2,421,000)
Income tax provision (33,000) - (2,685,000)
----------- ----------- -----------
Loss before cumulative effect of change in
accounting principle (332,000) (1,485,000) (5,106,000)
Cumulative effect of change in accounting principle - - (885,000)
----------- ----------- -----------
Net loss $ (332,000) $(1,485,000) $(5,991,000)
=========== =========== ===========
Basic earnings per share:
Loss before accounting change $(.05) $(.27) $(.95)
Cumulative effect of change in accounting principle - - (.16)
----- ----- ------
Net loss $(.05) $(.27) $(1.11)
===== ===== ======
Diluted earnings per share:
Loss before accounting change $(.05) $(.27) $(.95)
Cumulative effect of change in accounting principle - - (.16)
----- ----- ------
Net loss $(.05) $(.27) $(1.11)
===== ===== ======
</TABLE>
See notes to consolidated financial statements.
17
<PAGE> 18
J. ALEXANDER'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 2 January 3
2000 1999
---- ----
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $933,000 $1,022,000
Accounts and notes receivable, including current portion of
direct financing leases, net of allowances for possible losses 103,000 77,000
Inventories at lower of cost (first-in, first-out method) or market 703,000 800,000
Prepaid expenses and other current assets 422,000 324,000
-------- ----------
TOTAL CURRENT ASSETS 2,161,000 2,223,000
OTHER ASSETS 844,000 887,000
PROPERTY AND EQUIPMENT, at cost, less allowances for depreciation
and amortization 62,142,000 61,440,000
DEFERRED CHARGES, less accumulated amortization of $1,116,000 and
$995,000 at January 2, 2000, and January 3, 1999, respectively 488,000 570,000
-------- ----------
$65,635,000 $65,120,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $2,254,000 $2,124,000
Accrued expenses and other current liabilities 3,630,000 3,893,000
Unearned revenue 1,691,000 1,367,000
Current portion of long-term debt and obligations under capital leases 995,000 1,917,000
-------- ----------
Total Current Liabilities 8,570,000 9,301,000
LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES, net of portion
classified as current 18,128,000 21,361,000
OTHER LONG-TERM LIABILITIES 1,097,000 727,000
STOCKHOLDERS' EQUITY
Common Stock, par value $.05 per share: Authorized 10,000,000
shares; issued and outstanding 6,772,209 and 5,431,335 shares at
January 2, 2000, and January 3, 1999, respectively 339,000 272,000
Preferred Stock, no par value: Authorized 1,000,000 shares; none issued -- --
Additional paid-in capital 34,733,000 30,007,000
Retained earnings 3,940,000 4,272,000
-------- ----------
39,012,000 34,551,000
Note receivable - Employee Stock Ownership Plan (686,000) (820,000)
Employee receivables - 1999 Loan Program (486,000) --
-------- ----------
TOTAL STOCKHOLDERS' EQUITY 37,840,000 33,731,000
---------- ----------
Commitments and Contingencies
$65,635,000 $65,120,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 19
J. ALEXANDER'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
-----------
JANUARY 2 January 3 December 28
2000 1999 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(332,000) $(1,485,000) $(5,991,000)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization of property and equipment 3,919,000 3,936,000 3,004,000
Cumulative effect of change in accounting principle - - 885,000
Amortization of deferred charges 121,000 131,000 134,000
Employee Stock Ownership Plan expense 134,000 123,000 85,000
Gain on Wendy's disposition - (264,000) (669,000)
Deferred income tax provision - - 2,393,000
Other, net 274,000 125,000 41,000
Changes in assets and liabilities:
(Increase) decrease in accounts and notes receivable (64,000) 502,000 (58,000)
(Increase) decrease in inventories 97,000 (111,000) (155,000)
(Increase) decrease in prepaid expenses and
other current assets (98,000) 63,000 (18,000)
Increase in deferred charges (40,000) (27,000) (61,000)
Increase in accounts payable 34,000 29,000 242,000
Increase (decrease) in accrued expenses and other
current liabilities (274,000) 1,037,000 (2,468,000)
Increase in unearned revenue 324,000 15,000 445,000
Increase in other long-term liabilities 370,000 75,000 41,000
----------- ---------- ------------
Net cash provided (used) by operating activities 4,465,000 4,149,000 (2,150,000)
----------- ---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (4,788,000) (5,040,000) (17,481,000)
Proceeds from sale of Wendy's restaurant operations -- 228,000 625,000
Other, net 82,000 328,000 (17,000)
----------- ---------- ------------
Net cash used by investing activities (4,706,000) (4,484,000) (16,873,000)
----------- ---------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds under bank line of credit agreement 28,640,000 28,961,000 11,614,000
Payments under bank line of credit agreement (29,891,000) (25,914,000) (5,391,000)
Payments on long-term debt and obligations
under capital leases (2,904,000) (1,922,000) (55,000)
Purchase of stock for 1999 Loan Program (486,000) -- --
Sale of stock and exercise of stock options 4,793,000 98,000 440,000
----------- ---------- ------------
Net cash provided by financing activities 152,000 1,223,000 6,608,000
----------- ---------- ------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (89,000) 888,000 (12,415,000)
Cash and cash equivalents at beginning of year 1,022,000 134,000 12,549,000
----------- ---------- ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 933,000 $1,022,000 $ 134,000
=========== ========== ============
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 20
J. ALEXANDER'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Note
Receivable-
Employee Employee
Additional Stock Receivables- Total
Outstanding Common Paid-In Retained Ownership 1999 Loan Stockholders'
Shares Stock Capital Earnings Plan Program Equity
------ ----- ------- -------- ---- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT
DECEMBER 29, 1996 5,322,507 $ 266,000 $ 29,475,000 $ 11,748,000 $ (1,028,000) $ -- $ 40,461,000
Exercise of stock options,
including tax benefits, and
sale of stock under Employee
Stock Purchase Plan 99,031 6,000 434,000 -- -- -- 440,000
Reduction of note receivable-
Employee Stock Ownership
Plan -- -- -- -- 85,000 -- 85,000
Net loss -- -- -- (5,991,000) -- -- (5,991,000)
--------- ---------- ------------ ------------ ------------ ---------- ------------
BALANCES AT
DECEMBER 28, 1997 5,421,538 272,000 29,909,000 5,757,000 (943,000) -- 34,995,000
Exercise of stock options,
including tax benefits 9,797 -- 98,000 -- -- -- 98,000
Reduction of note receivable-
Employee Stock Ownership
Plan -- -- -- -- 123,000 -- 123,000
Net loss -- -- -- (1,485,000) -- -- (1,485,000)
--------- ---------- ------------ ------------ ------------ ---------- ------------
BALANCES AT
JANUARY 3, 1999 5,431,335 272,000 30,007,000 4,272,000 (820,000) -- 33,731,000
Stock sold in private trans-
action and through rights
offering 1,326,881 66,000 4,697,000 -- -- -- 4,763,000
Exercise of stock options 13,993 1,000 29,000 -- -- -- 30,000
Reduction of note receivable-
Employee Stock Ownership
Plan -- -- -- -- 134,000 -- 134,000
Purchase of stock-1999
Loan Program -- -- -- -- -- (486,000) (486,000)
Net loss -- -- -- (332,000) -- -- (332,000)
--------- ---------- ------------ ------------ ------------ ---------- ------------
BALANCES AT
JANUARY 2,2000 6,772,209 $ 339,000 $ 34,733,000 $ 3,940,000 $ (686,000) $ (486,000) $ 37,840,000
=========== ========== ============ ============ ============ ========== ============
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 21
J. ALEXANDER'S CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of J. Alexander's Corporation and its wholly-owned subsidiaries (the
Company). The Company owns and operates 21 J. Alexander's restaurants in eleven
states throughout the United States. Prior to 1997, the Company also owned and
operated 58 Wendy's Old Fashioned Hamburgers restaurants as a franchisee of
Wendy's International, Inc. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain reclassifications
have been made in the prior years' consolidated financial statements to conform
to the 1999 presentation.
FISCAL YEAR: The Company's fiscal year ends on the Sunday closest to December 31
and each quarter typically consists of thirteen weeks. Fiscal 1998 included 53
weeks compared to 52 weeks for fiscal years 1999 and 1997. The fourth quarter of
1998 included 14 weeks.
CASH EQUIVALENTS: Cash equivalents consist of highly liquid investments with an
original maturity of three months or less when purchased.
PROPERTY AND EQUIPMENT: Depreciation and amortization are provided on the
straight-line method over the following estimated useful lives: buildings - 30
years, restaurant and other equipment - two to 10 years, and capital leases and
leasehold improvements - lesser of life of assets or terms of leases, generally
including renewal options.
DEFERRED CHARGES: Costs in excess of net assets acquired are being amortized
over 40 years using the straight-line method. Debt issue costs are amortized
principally by the interest method over the life of the related debt.
INCOME TAXES: The Company accounts for income taxes under the liability method
required by Statement of Financial Accounting Standards (SFAS) No. 109
"Accounting for Income Taxes". SFAS No. 109 requires that deferred tax assets
and liabilities be established based on the difference between the financial
statement and income tax bases of assets and liabilities measured at tax rates
that will be in effect when the differences reverse.
EARNINGS PER SHARE: In 1997, the Financial Accounting Standards Board issued
SFAS No. 128 "Earnings Per Share". SFAS No. 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been presented and,
where appropriate, restated to conform to the requirements of SFAS No. 128.
REVENUE RECOGNITION: Restaurant revenues are recognized when food and service
are provided. Unearned revenue consists of gift certificates sold, but not
redeemed.
PRE-OPENING COSTS: Effective December 30, 1996, the Company changed its method
of accounting for pre-opening costs to expense these costs as incurred and
recorded the cumulative effect of this change in accounting principle resulting
in an after tax charge of $885,000 ($.16 per share) in fiscal 1997. The impact
in fiscal 1997 in addition to the cumulative effect was to increase the net loss
by $282,000 ($.05 per share). In 1998, the American Institute of Certified
Public Accountants issued a new accounting standard under Statement of Position
98-5 "Reporting on the Costs of Start-Up Activities". The requirements under
this standard are consistent with the Company's policy which was adopted
December 30, 1996. Thus, adoption of this standard had no impact on the
Company's financial statements.
21
<PAGE> 22
FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and assumptions were
used by the Company in estimating its fair value disclosures for financial
instruments:
Cash and cash equivalents: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates fair value.
Long-term debt: The carrying amount of the Company's borrowings with
variable interest rates approximates their fair value. The fair value of the
Company's convertible subordinated debentures was determined based on quoted
market prices (see Note E). Due to the immaterial amounts involved, fair value
of other fixed rate long-term debt was estimated to approximate its carrying
amount.
Contingent liabilities: In connection with the sale of its Mrs.
Winner's Chicken & Biscuit restaurant operations and the disposition of its
Wendy's restaurant operations, the Company remains secondarily liable for
certain real and personal property leases. The Company does not believe it is
practicable to estimate the fair value of these contingencies and does not
believe any significant loss is likely.
DEVELOPMENT COSTS: Certain direct and indirect costs are capitalized as building
costs in conjunction with acquiring and developing new J. Alexander's restaurant
sites and amortized over the life of the related building. Development costs of
$203,000, $292,000 and $307,000 were capitalized during 1999, 1998 and 1997,
respectively.
SELF-INSURANCE: The Company is generally self-insured, subject to stop-loss
limitations, for losses and liabilities related to its group medical plan and,
for most of 1997 through 1999, except for the state of Ohio, for workers'
compensation claims. Losses are accrued based upon the Company's estimates of
the aggregate liability for claims incurred using certain estimation processes
applicable to the insurance industry and, where applicable, based on Company
experience.
ADVERTISING COSTS: The Company charges costs of production and distribution of
advertising to expense at the time the costs are incurred. Advertising expense
was $70,000, $289,000 and $255,000 in 1999, 1998 and 1997, respectively.
STOCK BASED COMPENSATION: The Company accounts for its stock compensation
arrangements in accordance with Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" and, accordingly, typically
recognizes no compensation expense for such arrangements.
USE OF ESTIMATES IN FINANCIAL STATEMENTS: Judgment and estimation are utilized
by management in certain areas in the preparation of the Company's financial
statements. Some of the more significant areas include the valuation allowance
relative to the Company's deferred tax assets and reserves for self-insurance of
group medical claims and workers' compensation benefits. Management believes
that such estimates have been based on reasonable assumptions and that such
reserves are adequate.
IMPAIRMENT: SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of", requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Accordingly, when indicators
of impairment are present with respect to an individual restaurant, the Company
periodically evaluates the carrying value of that restaurant's property and
equipment and intangibles.
COMPREHENSIVE INCOME: In 1998, the Company adopted a new disclosure
pronouncement, SFAS No. 130, "Reporting Comprehensive Income". The Company has
no items of comprehensive income and, accordingly, adoption of the Statement has
had no effect on the consolidated financial statements.
BUSINESS SEGMENTS: In 1998, the Company also adopted another new disclosure
pronouncement, SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information". SFAS No. 131 requires companies to report selected segment
information when certain size tests are met. Management has determined that the
Company operates in only one segment.
22
<PAGE> 23
NOTE B - SALE OF STOCK
On March 22, 1999, the Company completed a private sale of 1,086,266
shares of common stock for approximately $4.1 million to Solidus, LLC
("Solidus"). E. Townes Duncan, a director of the Company, is a minority owner of
and manages the investments of Solidus. In addition, on June 21, 1999 the
Company completed a rights offering wherein shareholders of the Company
purchased an additional 240,615 shares of common stock at a price of $3.75 per
share, which was the same price per share as stock sold in the private sale.
When combined with the proceeds from the private sale noted above, the rights
offering raised net proceeds to the Company of approximately $4.8 million, which
was used to repay a portion of the debt outstanding under the Company's
revolving credit facility. Amounts repaid can be reborrowed in accordance with
the terms of the line of credit agreement.
NOTE C - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
YEARS ENDED
-----------
JANUARY 2 January 3 December 28
2000 1999 1997
---- ---- ----
<S> <C> <C> <C>
NUMERATOR:
Net loss before cumulative effect of change in
accounting principle $ (332,000) $(1,485,000) $(5,106,000)
Cumulative effect of change in accounting principle - - (885,000)
---------- ----------- -----------
Net loss (numerator for basic earnings per share) (332,000) (1,485,000) (5,991,000)
Effect of dilutive securities - - -
---------- ----------- -----------
Net loss after assumed conversions (numerator
for diluted earnings per share) $ (332,000) $(1,485,000) $(5,991,000)
---------- ----------- -----------
DENOMINATOR:
Weighted average shares (denominator for basic earnings
per share) 6,428,000 5,426,000 5,409,000
Effect of dilutive securities -- -- --
---------- ----------- -----------
Adjusted weighted average shares and assumed conversions
(denominator for diluted earnings per share) 6,428,000 5,426,000 5,409,000
========== ========== ===========
Basic earnings per share:
Loss before accounting change $ (.05) $ (.27) $ (.95)
Cumulative effect of change in accounting principle -- -- (.16)
---------- ----------- -----------
Net loss $ (.05) $ (.27) $ (1.11)
========= =========== ===========
Diluted earnings per share:
Loss before accounting change $ (.05) $ (.27) $ (.95)
Cumulative effect of change in accounting principle -- -- (.16)
---------- ---------- -----------
Net loss $ (.05) $ (.27) $ (1.11)
========= ========== ===========
</TABLE>
In situations where the exercise price of outstanding options is
greater than the average market price of common shares, such options are
excluded from the computation of diluted earnings per share because of their
antidilutive impact. Due to net losses in the three years presented, all options
outstanding were excluded from the computation of diluted earnings per share.
23
<PAGE> 24
NOTE D - PROPERTY AND EQUIPMENT
Balances of major classes of property and equipment are as follows:
<TABLE>
<CAPTION>
JANUARY 2 January 3
2000 1999
---- ----
<S> <C> <C>
Land $13,126,000 $13,126,000
Buildings 29,314,000 29,158,000
Buildings under capital leases 276,000 276,000
Leasehold improvements 18,088,000 15,351,000
Restaurant and other equipment 15,556,000 14,519,000
Construction in progress (estimated additional cost
to complete at January 2, 2000, $2,255,000) 277,000 63,000
----------- -----------
76,637,000 72,493,000
Less allowances for depreciation and amortization (14,495,000) (11,053,000)
----------- -----------
$62,142,000 $61,440,000
=========== ===========
</TABLE>
Effective as of January 4, 1999, the Company changed the estimated
useful life of its buildings from 25 years to 30 years. Also, the estimated life
of leasehold improvements was changed to include an amortization period based on
the lesser of the lease term, generally including renewal options, or the useful
life of the asset, including the longer 30 year life for structures. The effect
of these changes was to decrease the net loss reported for 1999 by $333,000,
representing a decrease to the diluted loss per share of $.05 for 1999.
NOTE E - LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES
Long-term debt and obligations under capital leases at January 2, 2000,
and January 3, 1999, are summarized below:
<TABLE>
<CAPTION>
JANUARY 2, 2000 January 3, 1999
--------------- ---------------
CURRENT LONG-TERM Current Long-Term
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Convertible Subordinated Debentures, 8.25%, due 2003 $973,000 $10,000,000 $1,875,000 $11,875,000
Bank credit agreement, at variable interest rates ranging
from 6.9% to 8.5%, available through July 1, 2001 -- 8,019,000 -- 9,270,000
Obligations under capital leases, 9.75% to 11.50%
interest, payable through 2005 22,000 109,000 42,000 216,000
-------- ----------- ---------- -----------
$995,000 $18,128,000 $1,917,000 $21,361,000
======== =========== ========== ===========
</TABLE>
Aggregate maturities of long-term debt, including required sinking fund
payments, for the five years succeeding January 2, 2000, are as follows: 2000 -
$995,000; 2001 - $9,918,000 (includes line of credit balance); 2002 -
$1,902,000; 2003 - $6,281,000; 2004 - $27,000.
The Convertible Subordinated Debentures due 2003 are convertible into
common stock of the Company at any time prior to maturity at $17.75 per share,
subject to adjustment in certain events. At January 2, 2000, 618,197 shares of
common stock were reserved for issuance upon conversion of the outstanding
debentures. The debentures are redeemable upon not less than 30 days' notice at
the option of the Company, in whole or in part, at 100% of the principal amount,
together with accrued interest to the redemption date. The effective interest
rate on the debentures is 8.68%. The Debenture Indenture requires minimum annual
sinking fund payments of $1,875,000 through 2002.
The Company maintains an unsecured bank line of credit agreement for up
to $20,000,000 of revolving credit for the purpose of financing capital
expenditures. Borrowings outstanding under this line of credit totaled
$8,019,000 and $9,270,000 at January 2, 2000 and January 3, 1999, respectively.
In March 2000, the term of the line of credit was extended by one year through
July 1, 2001. The amended credit agreement contains covenants which require the
Company to achieve specified results of operation and specified levels of senior
debt to EBITDA (earnings before interest, taxes, depreciation and amortization)
and to maintain certain other financial ratios. It also contains certain
limitations on capital expenditures and restaurant development by the Company
(generally limiting the Company to the development of two new restaurants per
year) and restricts the Company's ability to incur additional debt outside the
bank line of credit. The interest rate on borrowings under the line of credit is
based on
24
<PAGE> 25
LIBOR plus two to three percent, depending on certain financial ratios achieved
by the Company. All amounts outstanding under the line become due on July 1,
2001, unless the Company exercises its option to convert outstanding borrowings
to a term loan prior to that time.
Cash interest payments amounted to $1,606,000, $2,011,000 and
$1,483,000, in 1999, 1998 and 1997, respectively. Interest costs of $48,000,
$96,000 and $453,000 were capitalized as part of building and leasehold costs in
1999, 1998, and 1997, respectively.
The carrying value and estimated fair value of the Company's
Convertible Subordinated Debentures were $10,973,000 and $10,424,000,
respectively, at January 2, 2000.
NOTE F - LEASES
At January 2, 2000, the Company was lessee under both ground leases
(the Company leases the land and builds its own buildings) and improved leases
(lessor owns the land and buildings) for restaurant locations. These leases are
generally operating leases.
Real estate lease terms are generally for 15 to 20 years and, in many
cases, provide for rent escalations and for one or more five-year renewal
options. The Company is generally obligated for the cost of property taxes,
insurance and maintenance. Certain real property leases provide for contingent
rentals based upon a percentage of sales. In addition, the Company is lessee
under other noncancellable operating leases, principally for office space.
Accumulated amortization of buildings under capital leases totaled
$243,000 at January 2, 2000 and $229,000 at January 3, 1999. Amortization of
leased assets is included in depreciation and amortization expense.
Total rental expense amounted to:
<TABLE>
<CAPTION>
Years Ended
-----------
JANUARY 2 January 3 December 28
2000 1999 1997
---- ---- ----
<S> <C> <C> <C>
Minimum rentals under operating leases $1,768,000 $1,566,000 $1,218,000
Contingent rentals 67,000 69,000 63,000
Less: Sublease rentals (199,000) (260,000) (260,000)
---------- ---------- ----------
$1,636,000 $1,375,000 $1,021,000
========== ========== ==========
</TABLE>
At January 2, 2000, future minimum lease payments under capital leases
and noncancellable operating leases (including renewal options) with initial
terms of one year or more are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------ ------
<S> <C> <C>
2000 $ 35,000 $ 1,570,000
2001 35,000 1,663,000
2002 35,000 1,589,000
2003 35,000 1,621,000
2004 27,000 1,379,000
Thereafter -- 28,417,000
-------- -----------
Total minimum payments 167,000 $36,239,000
-------- ===========
Less imputed interest (36,000)
--------
Present value of minimum rental payments 131,000
Less current maturities at January 2, 2000 (22,000)
--------
Long-term obligations at January 2, 2000 $109,000
========
</TABLE>
Minimum future rentals receivable under subleases for operating leases
at January 2, 2000, amounted to $991,000.
25
<PAGE> 26
NOTE G - INCOME TAXES
At January 2, 2000, the Company had net operating loss carryforwards of
$3,098,000 for income tax purposes that expire in the years 2000 through 2018.
Tax credit carryforwards (consisting of investment and jobs tax credits which
expire in the years 2000 and 2001, FICA tip credits which expire in the years
2009 through 2019 and alternative minimum tax credits which may be carried
forward indefinitely) of $3,079,000 are also available to reduce future federal
income taxes.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax liabilities and assets as of January 2,
2000, and January 3, 1999, are as follows:
<TABLE>
<CAPTION>
JANUARY 2 January 3
2000 1999
---- ----
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation $ 114,000 $ 407,000
Other - net 502,000 522,000
---------- ----------
Total deferred tax liabilities 616,000 929,000
---------- ----------
Deferred tax assets:
Capital/finance leases 3,000 6,000
Deferred compensation accruals 225,000 194,000
Self-insurance accruals 58,000 65,000
Net operating loss carryforwards 1,053,000 1,687,000
Tax credit carryforwards 3,079,000 3,101,000
Other - net 308,000 271,000
---------- ----------
Total deferred tax assets 4,726,000 5,324,000
Valuation allowance for deferred tax assets (4,110,000) (4,395,000)
---------- ----------
616,000 929,000
---------- ----------
Net deferred tax assets $ -- $ --
========== ==========
</TABLE>
SFAS No. 109 establishes procedures to measure deferred tax assets and
liabilities and assess whether a valuation allowance relative to existing
deferred tax assets is necessary. Since the fourth quarter of 1997, management
has concluded that, based upon results of operations during the periods in
question and its near-term forecast of future taxable earnings, a valuation
allowance was appropriate relative to its deferred tax assets. At January 2,
2000, the Company had no net deferred tax assets and a valuation allowance of
$4,110,000.
Significant components of the income tax provision (benefit) are as
follows:
<TABLE>
<CAPTION>
Years Ended
JANUARY 2 January 3 December 28
2000 1999 1997
---- ---- ----
<S> <C> <C> <C>
Currently payable:
Federal $31,000 $(94,000) $ 31,000
State 2,000 94,000 261,000
------- ----------- ----------
Total 33,000 -- 292,000
Deferred -- -- 2,393,000
------- ----------- ----------
Income tax provision $33,000 $ -- $2,685,000
======= =========== ==========
</TABLE>
The Company's consolidated effective tax rate differed from the federal
statutory rate as set forth in the following table:
26
<PAGE> 27
<TABLE>
<CAPTION>
Years Ended
JANUARY 2 January 3 December 28
2000 1999 1997
---- ---- ----
<S> <C> <C> <C>
Tax benefit computed at federal statutory rate (34%) $(102,000) $(505,000) $(1,124,000)
State and local income taxes 1,000 63,000 172,000
Non-deductible expenses 160,000 156,000 98,000
Effect of net operating loss carryforwards and tax credits 259,000 (244,000) (326,000)
Valuation of deferred tax assets (285,000) 530,000 3,865,000
---------- ------------ ----------
Income tax provision $ 33,000 $ -- $2,685,000
========== ============ ==========
</TABLE>
The Company made income tax payments of $180,000 and $1,126,000 in 1999
and 1997, respectively. The Company received net income tax refunds of $814,000
in 1998.
NOTE H - STOCK OPTIONS AND BENEFIT PLANS
Under the Company's 1994 Employee Stock Incentive Plan, officers and
key employees of the Company may be granted options to purchase shares of the
Company's common stock. In addition, the 1990 Stock Option Plan for Outside
Directors provides for the granting of options to purchase the Company's common
stock at the fair market price at the date of the grant to members of the
Company's Board of Directors who are not employees. Options to purchase the
Company's common stock also remain outstanding under the Company's 1982
Incentive Stock Option Plan and 1985 Stock Option Plan, although the Company no
longer has the ability to issue additional shares under these plans.
A summary of options under the Company's option plans is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Options Shares Option Prices Price
- ------- ------ ------------- -----
<S> <C> <C> <C> <C>
Outstanding at December 29, 1996 529,287 $1.38- $13.00 $6.83
Issued 326,600 5.69- 8.75 6.79
Exercised (93,419) 1.38- 7.63 4.19
Expired or canceled (97,818) 7.38- 11.69 7.58
------- --------------- -----
Outstanding at December 28, 1997 664,650 1.38- 13.00 6.75
Issued 355,220 2.75- 4.97 2.79
Exercised (10,000) 2.00 2.00
Expired or canceled (331,050) 4.94- 13.00 7.45
------- --------------- -----
Outstanding at January 3, 1999 678,820 1.38- 11.69 4.40
Issued 189,000 2.25- 4.06 2.30
Exercised (14,000) 1.75- 3.81 2.13
Expired or canceled (43,300) 3.81- 11.69 4.60
------- --------------- -----
Outstanding at January 2, 2000 810,520 $1.38- $11.69 $3.95
======= =============== =====
</TABLE>
Options exercisable and shares available for future grant are as
follows:
<TABLE>
<CAPTION>
JANUARY 2 January 3 December 28
2000 1999 1997
---- ---- ----
<S> <C> <C> <C>
Options exercisable 344,004 221,171 269,439
Shares available for grant 190,564 123,014 218,384
</TABLE>
27
<PAGE> 28
The following table summarizes information about stock options
outstanding at January 2, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Number Number
Outstanding at Weighted Weighted Exercisable at Weighted
Range of January 2 Average Remaining Average Exercise January 2 Average
Exercise Prices 2000 Contractual Life Price 2000 Exercise Price
- --------------- ---- ---------------- ----- ---- --------------
<S> <C> <C> <C> <C> <C> <C>
$1.38- $2.25 264,500 6.8 years $2.01 84,500 $1.50
2.75- 2.88 327,520 8.8 years 2.75 107,507 2.75
3.81- 5.69 58,500 7.8 years 5.50 38,666 5.54
7.38- 11.69 160,000 5.3 years 9.02 113,331 8.81
- ------- ------ ------- ----- ------- -----
$1.38- $11.69 810,520 $3.95 344,004 $4.75
======= ====== ======= ===== ======= =====
</TABLE>
Options exercisable at January 3, 1999 and December 28, 1997 had
weighted average exercise prices of $5.23 and $6.00, respectively.
In 1995, the Financial Accounting Standards Board issued SFAS No. 123
"Accounting for Stock Based Compensation". This standard defines a fair value
based method of accounting for an employee stock option or similar equity
instrument. This statement gives entities a choice of recognizing related
compensation expense by adopting the new fair value method or continuing to
measure compensation using the intrinsic value approach under Accounting
Principles Board (APB) Opinion No. 25 "Accounting for Stock Issued to
Employees", the former standard. The Company has elected to follow APB No. 25
and related Interpretations in accounting for its stock compensation plans
because, as discussed below, the alternative fair value accounting provided for
under SFAS No. 123 requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB No. 25, because
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, which also requires that the information be determined
as if the Company has accounted for its employee stock options granted
subsequent to December 31, 1994 under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1999, 1998 and 1997, respectively: risk-free interest rates of
5.94%, 4.62% and 6.04%; no annual dividend yield; volatility factors of .4500,
.3795 and .3619 based on monthly closing prices since August, 1990; and an
expected option life of 10 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
Years Ended
JANUARY 2 January 3 December 28
2000 1999 1997
---- ---- ----
<S> <C> <C> <C>
Pro forma net loss $(688,000) $(2,076,000) $(6,503,000)
Pro forma loss per share
Basic $ (.11) $ (.38) $ (1.20)
Diluted $ (.11) $ (.38) $ (1.20)
</TABLE>
The weighted average fair value per share for options granted during
1999, 1998 and 1997 was $1.50, $1.61 and $4.09, respectively.
28
<PAGE> 29
The Company has an Employee Stock Purchase Plan under which 75,547
shares of the Company's common stock are available for issuance. A total of
15,760 shares were issued under the plan in 1997. No shares were issued under
the plan in 1998 or 1999.
The Company has a Salary Continuation Plan which provides retirement
and death benefits to certain key employees. The expense recognized under this
plan was $94,000, $59,000 and $113,000 in 1999, 1998 and 1997, respectively.
The Company has a Savings Incentive and Salary Deferral Plan under
Section 401(k) of the Internal Revenue Code which allows qualifying employees to
defer a portion of their income on a pre-tax basis through contributions to the
plan. All Company employees with at least 1,000 hours of service during the
twelve month period subsequent to their hire date, or any calendar year
thereafter, and who are at least 21 years of age are eligible to participate.
For each dollar of participant contributions, up to 3% of each participant's
salary, the Company makes a minimum 10% matching contribution to the plan. The
Company's matching contribution for 1999 totaled $36,000, or 25% of eligible
participant contributions. For 1998 and 1997, the Company recognized expense of
$29,000 and $22,000, respectively.
In 1999, the Company established the 1999 Loan Program (Loan Program)
to allow eligible employees to make purchases of the Company's common stock.
Under the terms of the Loan Program, all full-time employees as well as
part-time employees who had at least five years of employment with the Company
were eligible to borrow amounts ranging from a minimum of $10,000 to a maximum
of 100% of their annual salary. Borrowings in excess of the maximum are allowed
upon approval by the Compensation Committee or the officers of the Company, as
applicable. Such borrowings are to be used exclusively to purchase shares of the
Company's common stock and shall accrue interest at the rate of 3% annually from
the date of the last purchase of shares under the program until paid in full.
Interest is payable quarterly until December 31, 2006 at which time there will
be a balloon payment of the unpaid interest and the entire principal amount due.
In the event that a participant receives from the Company bonus compensation,
30% of any such bonus is to be applied to the outstanding principal balance of
the note. Further, a participant's loan may be declared due and payable upon
termination of a participant's employment or failure to make any payment when
due, as well as under other circumstances set forth in the program documents.
The maximum aggregate amount of loans authorized is $1,000,000. As of January 2,
2000, the Loan Program had purchased 160,300 shares of Company stock at an
aggregate purchase price of $486,000. The purchase of stock under the Loan
Program has been reported as a reduction from the Company's stockholders'
equity.
In addition to shares purchased in the manner described above,
participants in the Loan Program will receive a stock bonus award on one share
of common stock for every 20 shares of common stock purchased under the program.
Participants in the Loan Program will also receive an award of one share of
restricted common stock for every 20 shares of common stock purchased under the
program. Both the stock bonus award and the restricted stock award will be
issued pursuant to the Company's 1994 Employee Stock Incentive Plan, with the
restricted stock award scheduled to vest at the rate of 20% of the number of
shares awarded on each of the second through sixth anniversaries of the date of
the last purchase of shares under the Loan Program.
For purposes of computing earnings per share, the shares purchased
through the Loan Program are included as outstanding shares in the weighted
average share calculation.
NOTE I - EMPLOYEE STOCK OWNERSHIP PLAN
In 1992, the Company established an Employee Stock Ownership Plan
(ESOP) which purchased 457,055 shares of Company common stock from the Massey
Company, a trust created by the late Jack C. Massey, the Company's former Board
Chairman, and the Jack C. Massey Foundation at $3.75 per share for an aggregate
purchase price of $1,714,000. The Company funded the ESOP by loaning it an
amount equal to the purchase price, with the loan secured by a pledge of the
unallocated stock held by the ESOP. The note receivable from the ESOP has been
reported as a reduction from the Company's stockholders' equity.
The Company has made a contribution to the ESOP each year since the
ESOP was established allowing the ESOP to make its scheduled loan repayments to
the Company, with the exception of 1996 when no contribution was made.
Contributions made to the ESOP resulted in net compensation expense of $135,000,
$123,000 and $85,000 for
29
<PAGE> 30
1999, 1998 and 1997, respectively, with corresponding reductions in the ESOP
note receivable. The terms of the ESOP note, as amended in 1997, call for
interest to be paid at an annual rate of 10% and for repayment of the ESOP
note's remaining principle in annual amounts ranging from $148,000 to $197,000
over the period 2000 through 2003.
All Company employees with at least 1,000 hours of service during the
twelve month period subsequent to their hire date, or any calendar year
thereafter, and who are at least 21 years of age are eligible to participate.
The ESOP generally requires five years of service with the Company in order for
an ESOP participant's account to vest. Allocation of stock is made to
participants' accounts as the ESOP's loan is repaid and is in proportion to each
participant's compensation for each year. Shares allocated under the ESOP were
305,424 and 267,515 at January 2, 2000 and January 3, 1999, respectively.
For purposes of computing earnings per share, the shares originally
purchased by the ESOP are included as outstanding shares in the weighted average
share calculation.
NOTE J - SHAREHOLDER RIGHTS PLAN
The Company's Board of Directors has adopted a shareholder rights plan
to protect the interests of the Company's shareholders if the Company is
confronted with coercive or unfair takeover tactics by encouraging third parties
interested in acquiring the Company to negotiate with the Board of Directors.
The shareholder rights plan is a plan by which the Company has
distributed rights ("Rights") to purchase (at the rate of one Right per share of
common stock) one-hundredth of a share of no par value Series A Junior Preferred
(a "Unit") at an exercise price of $12.00 per Unit. The Rights are attached to
the common stock and may be exercised only if a person or group acquires 20% of
the outstanding common stock or initiates a tender or exchange offer that would
result in such person or group acquiring 10% or more of the outstanding common
stock. Upon such an event, the Rights "flip-in" and each holder of a Right will
thereafter have the right to receive, upon exercise, common stock having a value
equal to two times the exercise price. All Rights beneficially owned by the
acquiring person or group triggering the "flip-in" will be null and void.
Additionally, if a third party were to take certain action to acquire the
Company, such as a merger or other business combination, the Rights would
"flip-over" and entitle the holder to acquire shares of the acquiring person
with a value of two times the exercise price. The Rights are redeemable by the
Company at any time before they become exercisable for $0.01 per Right and
expire May 16, 2004. In order to prevent dilution, the exercise price and number
of Rights per share of common stock will be adjusted to reflect splits and
combinations of, and common stock dividends on, the common stock.
During 1999, the shareholder rights plan was amended by altering the
definition of "acquiring person" to specify that Solidus, LLC and its affiliates
shall not be or become an acquiring person as the result of its acquisition of
Company common stock in excess of 20% or more of Company common stock
outstanding (See Note B - Sale of Stock).
NOTE K - COMMITMENTS AND CONTINGENCIES
As a result of the disposition of its Wendy's operations in 1996, the
Company remains secondarily liable for certain real property leases with
remaining terms of one to sixteen years. The total amount of lease payments
remaining on these leases at January 2, 2000 was approximately $4.3 million. In
connection with the sale of its Mrs. Winner's Chicken & Biscuit restaurant
operations in 1989 and certain previous dispositions, the Company remains
secondarily liable for certain real and personal property leases with remaining
terms of one to six years. The total amount of lease payments remaining on these
leases at January 2, 2000, was approximately $1.8 million. Additionally, in
connection with the previous disposition of certain other Wendy's restaurant
operations, primarily the southern California Wendy's restaurants in 1982, the
Company remains secondarily liable for certain real property leases with
remaining terms of one to seven years. The total amount of lease payments
remaining on these leases as of January 2, 2000, was approximately $800,000.
The Company is a party to legal proceedings incidental to its business.
In the opinion of management, the ultimate liability with respect to these
actions will not materially affect the operating results or the financial
position of the Company.
30
<PAGE> 31
NOTE L - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities included the following:
<TABLE>
<CAPTION>
JANUARY 2 January 3
2000 1999
---- ----
<S> <C> <C>
Taxes, other than income taxes $1,584,000 $1,401,000
Salaries and wages 584,000 750,000
Insurance 249,000 493,000
Interest 82,000 191,000
Other 1,131,000 1,058,000
---------- ----------
$3,630,000 $3,893,000
========== ==========
</TABLE>
31
<PAGE> 32
Quarterly Results of Operations
The following is a summary of the quarterly results of operations for
the years ended January 2, 2000 and January 3, 1999 (dollars in thousands,
except per share amounts):
<TABLE>
<CAPTION>
1999 Quarters Ended
-------------------
April 4 July 4 October 3 January 2
------- ------ --------- ---------
<S> <C> <C> <C> <C>
Net sales $19,208 $18,762 $19,041 $21,443
Net income (loss) 244 (166) (820) 410
Basic earnings per share $ .04 $ (.03) $ (.12) $ .06
Diluted earnings per share $ .04 $ (.03) $ (.12) $ .06
</TABLE>
<TABLE>
<CAPTION>
1998 Quarters Ended
-------------------
March 29 June 28 September 27 January 3(1)
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales $ 17,512 $ 18,095 $ 18,087 $ 20,506
Net income (loss) (1,104) (365) (383) 367(2)
Basic earnings per share $ (.20) $ (.07) $ (.07) $ .07
Diluted earnings per share $ (.20) $ (.07) $ (.07) $ .07
</TABLE>
1 Represents a 14-week quarter ending January 3, 1999, compared to 13-week
quarters for all other quarters presented.
2 Includes pre-tax gain of $264 related to disposal of Wendy's restaurant
operations in 1996.
32
<PAGE> 33
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required under this item with respect to directors of
the Company is incorporated herein by reference to the "Proposal No. 1: Election
of Directors" section and the "Section 16(a) Beneficial Ownership Reporting
Compliance" section of the Company's Proxy Statement for the 2000 Annual Meeting
of Shareholders to be held May 16, 2000. (See also "Executive Officers of the
Company" under Part I of this Form 10-K.)
ITEM 11. EXECUTIVE COMPENSATION
The information required under this item is incorporated herein by
reference to the "Executive Compensation" section of the Company's Proxy
Statement for the 2000 Annual Meeting of Shareholders to be held May 16, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required under this item is incorporated herein by
reference to the "Security Ownership of Certain Beneficial Owners and
Management" section of the Company's Proxy Statement for the 2000 Annual Meeting
of Shareholders to be held May 16, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required under this item is incorporated herein by
reference to the "Certain Relationships and Related Transactions" section of the
Company's Proxy Statement for the 2000 Annual Meeting of Shareholders to be held
May 16, 2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) See Item 8.
(a)(2) The information required under Item 14, subsection (a)(2)
is set forth in a supplement filed as part of this report
beginning on page F-1.
(a)(3) Exhibits:
(3)(a)(1) Charter (Exhibit 3(a) of the Registrant's Report on Form
10-K for the year ended December 30, 1990, is incorporated
herein by reference).
(3)(a)(2) Amendment to Charter dated February 7, 1997 (Exhibit
(3)(a)(2) of the Registrant's Report on Form 10-K for the
year ended December 29, 1996 is incorporated herein by
reference).
(3)(b) Restated Bylaws as currently in effect. (Exhibit 3(b) of
the Registrant's Report on Form 10-K for the year ended
January 3, 1999 is incorporated herein by reference).
(4)(a) Form of Indenture dated as of May 19, 1983, between the
Registrant and First American National Bank of Nashville,
Trustee (Exhibit 4 of the Registrant's quarterly report on
Form 10-Q for the quarter ended June 30, 1983, is
incorporated herein by reference).
(4)(b) Rights Agreement dated May 16, 1989, by and between
Registrant and NationsBank (formerly Sovran Bank/Central
South) including Form of Rights Certificate and Summary of
Rights (Exhibit 3 to the Report on Form 8-K dated May 16,
1989, is incorporated herein by reference).
33
<PAGE> 34
(4)(c) Amendments to Rights Agreement dated February 22, 1999, by
and between the Registrant and SunTrust Bank. (Exhibit
4(c) of the Registrant's Report on Form 10-K for the year
ended January 3, 1999 is incorporated herein by
reference).
(4)(d) Amendment to Rights Agreement dated March 22, 1999, by and
between the Registrant and SunTrust Bank. (Exhibit 4(d) of
the Registrant's Report on Form 10-k for the year ended
January 3, 1999 is incorporated herein by reference).
(4)(e) Stock Purchase and Standstill Agreement dated March 22,
1999, by and between the Registrant and Solidus, LLC.
(Exhibit 4(e) of the Registrant's Report on Form 10-K for
the year ended January 3, 1999 is incorporated herein by
reference).
(10)(a) Employee Stock Ownership Plan (Exhibit 1 to the
Registrant's Report on Form 8-K dated June 25, 1992, is
incorporated herein by reference).
(10)(b) Employee Stock Ownership Trust Agreement dated June 25,
1992 between Registrant and Third National Bank in
Nashville. (Exhibit 2 to the Registrant's Report on Form
8-K dated June 25, 1992, is incorporated herein by
reference).
(10)(c) Secured Promissory Note dated June 25, 1992 from the
Volunteer Capital Corporation Employee Stock Ownership
Trust to Registrant (Exhibit 4 to the Registrant's Report
on Form 8-K dated June 25, 1992, is incorporated herein by
reference).
(10)(d) Pledge and Security Agreement dated June 25, 1992, by and
between Registrant and Third National Bank in Nashville as
the Trustee for the Volunteer Capital Corporation Employee
Stock Ownership Trust (Exhibit 5 to the Registrant's
Report on Form 8-K dated June 25, 1992, is incorporated
herein by reference).
(10)(e) $30,000,000 Loan Agreement dated August 29, 1995 by and
between Volunteer Capital Corporation, VCE Restaurants,
Inc., Total Quality Management, Inc. and NationsBank of
Tennessee, N.A. (Exhibit 10.1 of the Registrant's
quarterly report on Form 10-Q for the quarter ended
October 1, 1995 is incorporated herein by reference).
(10)(f) Asset Purchase Agreement dated October 25, 1996 by and
between VCE Restaurants, Inc., Volunteer Capital
Corporation and Wendy's International, Inc. (Exhibit 10.1
of the Registrant's quarterly report on Form 10-Q for the
quarter ended September 29, 1996 is incorporated herein by
reference).
(10)(g) Amended and Restated Secured Promissory Note dated
November 21, 1997 from the J. Alexander's Corporation
Employee Stock Ownership Trust to Registrant. (Exhibit
(10)(g) of the Registrant's Report on Form 10-K for the
year ended December 28, 1997 is incorporated herein by
reference).
(10)(h) Amendment to Loan Agreement dated March 27, 1998, by and
between J. Alexander's Corporation, J. Alexander's
Restaurants, Inc. and NationsBank of Tennessee, N.A.
(Exhibit (10)(h) of the Registrant's Report on Form 10-K
for the year ended December 28, 1997 is incorporated
herein by reference).
(10)(i) Line of Credit Note dated March 27, 1998, by and between
J. Alexander's Corporation, J. Alexander's Restaurants,
Inc. and NationsBank of Tennessee, N.A. (Exhibit (10)(i)
of the Registrant's Report on Form 10-K for the year ended
December 28, 1997 is incorporated herein by reference).
34
<PAGE> 35
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
(10)(j) Written description of Salary Continuation Plan
(description of Salary Continuation Plan included in the
Registrant's Proxy Statement for Annual Meeting of
Shareholders, May 10, 1994, is incorporated herein by
reference).
(10)(k) Form of Severance Benefits Agreement between the
Registrant and Messrs. Stout and Lewis (Exhibit (10)(j) of
the Registrant's Report on Form 10-K for the year ended
December 31, 1989, is incorporated herein by reference).
(10)(l) 1982 Incentive Stock Option Plan (incorporated by
reference to pages B-1 through B-6 of Registration
Statement No 2-78140).
(10)(m) Amended and restated 1982 Employee Stock Purchase Plan
(incorporated by reference from the Registrant's Current
Report on Form 8-K filed March 29, 1996).
(10)(n) 1985 Stock Option Plan (incorporated by reference to pages
15 through 20 of the Registrant's Proxy Statement for
Annual Meeting of Shareholders, May 8, 1985, and Exhibit A
to the Registrant's Proxy Statement for Annual Meeting of
Shareholders, May 11, 1993).
(10)(o) 1990 Stock Option Plan for Outside Directors (Exhibit A of
the Registrant's Proxy Statement for Annual Meeting of
Shareholders, May 8, 1990, is incorporated herein by
reference).
(10)(p) 1994 Employee Stock Incentive Plan (incorporated by
reference to Exhibit 4(c) of Registration Statement on
Form S-8, Registration No. 33-77476).
(10)(q) Amendment to 1994 Employee Stock Incentive Plan (Appendix
A of the Registrant's Proxy Statement for Annual Meeting
of Shareholders, May 20, 1997, is incorporated herein by
reference).
(10)(r) 1999 Loan Program (incorporated herein by reference to
Exhibit A of Registration Statement on Form S-8,
Registration No. 333-91431).
(10)(s) Amendment to Employee Stock Ownership Plan, dated
June 29, 1994.
(10)(t) Amendment to Employee Stock Ownership Plan, dated
February 17, 1998
(10)(u) Amendment to Employee Stock Ownership Plan, dated
December 30, 1998.
(10)(v) Second Amendment to Loan Agreement dated March 30, 2000,
by and between J. Alexander's Corporation, J. Alexander's
Restaurants, Inc. and Bank of America, N.A. (successor to
NationsBank of Tennessee, N.A.).
(10)(w) Renewal of Line of Credit Note dated March 30, 2000, by
and between J. Alexander's Corporation, J. Alexander's
Restaurants, Inc. and Bank of America, N.A. (successor to
NationsBank of Tennessee, N.A.).
(21) List of subsidiaries of Registrant.
(23) Consent of Independent Auditors.
35
<PAGE> 36
(b) Reports on Form 8-K:
On November 23, 1999 the Company filed a Current Report on Form 8-K
containing Item 5 describing a press release dated November 19, 1999
(also filed as an exhibit to the Form 8-K), stating that the Company's
Board of Directors had declined to pursue discussions with O'Charley's,
Inc., regarding the possibility of a merger of the two companies.
(c) Exhibits - The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) Financial Statement Schedules - The response to this portion of Item 14
is submitted as a separate section of this report.
36
<PAGE> 37
SIGNATURES
Pursuant to the requirements of Section 13 and 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.
J. ALEXANDER'S CORPORATION
Date: 3/31/00 By: /s/ Lonnie J. Stout II
-------- ------------------------------------------------
Lonnie J. Stout II
Chairman, President and Chief Executive Officer
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>
Name Capacity Date
---- -------- ----
<S> <C> <C>
/s/ Lonnie J. Stout II Chairman, President, Chief Executive Officer 3/31/00
- ---------------------- and Director (Principal Executive Officer)
Lonnie J. Stout II
/s/ R. Gregory Lewis Vice President and Chief Financial Officer 3/31/00
- ---------------------- (Principal Financial Officer)
R. Gregory Lewis
/s/ Mark A. Parkey Vice President and Controller 3/31/00
- ---------------------- (Principal Accounting Officer)
Mark A. Parkey
/s/ E. Townes Duncan Director 3/31/00
- ----------------------
E. Townes Duncan
/s/ Garland G. Fritts Director 3/31/00
- ----------------------
Garland G. Fritts
/s/ John L.M. Tobias Director 3/31/00
- ----------------------
John L.M. Tobias
</TABLE>
<PAGE> 38
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(2), (c) and (d)
FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FISCAL YEAR ENDED JANUARY 2, 2000
J. ALEXANDER'S CORPORATION AND SUBSIDIARIES
NASHVILLE, TENNESSEE
F-1
<PAGE> 39
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
J. ALEXANDER'S CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ ------ ------
Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other Accounts Deductions- at End
Description of Period Expenses Describe Describe of Period
----------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Year ended January 2, 2000:
Valuation allowance for
deferred tax assets $4,395,000 $(285,000) $0 $0 $4,110,000
Year ended January 3, 1999:
Valuation allowance for deferred
tax assets $3,865,000 $530,000 $0 $0 $4,395,000
Year ended December 28, 1997:
Valuation allowance for
deferred tax assets $0 $3,865,000(1) $0 $0 $3,865,000
</TABLE>
(1) Includes a $2,393,000 increase to the beginning of the year valuation
allowance reflecting a change in circumstances which resulted in a
judgement that a 100% valuation allowance was appropriate as of December
28, 1997.
F-2
<PAGE> 40
J. ALEXANDER'S CORPORATION
EXHIBIT INDEX
Reference Number
per Item 601 of
Regulation S-K Description
- -------------- -----------
(10)(s) Amendment to Employee Stock Ownership Plan, dated June
29, 1994.
(10)(t) Amendment to Employee Stock Ownership Plan, dated
February 17, 1998.
(10)(u) Amendment to Employee Stock Ownership Plan, dated
December 30, 1998.
(10)(v) Second Amendment to Loan Agreement dated March 30, 2000,
by and between J. Alexander's Corporation, J. Alexander's
Restaurants, Inc. and Bank of America, N.A. (successor to
NationsBank of Tennessee, N.A.).
(10)(w) Renewal of Line of Credit Note dated March 30, 2000, by
and between J. Alexander's Corporation, J. Alexander's
Restaurants, Inc. and Bank of America, N.A. (successor to
NationsBank of Tennessee, N.A.).
(21) List of subsidiaries of Registrant.
(23) Consent of Ernst & Young LLP, independent auditors
(27) Financial Data Schedule (FOR SEC USE ONLY)
<PAGE> 1
EXHIBIT 10(s)
SECOND AMENDMENT TO
VOLUNTEER CAPITAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, effective as of January 1, 1992, Volunteer Capital
Corporation, a Tennessee corporation ("Company"), adopted the Volunteer Capital
Corporation Employee Stock Ownership Plan ("Plan") which was subsequently
amended effective as of January 1, 1992; and
WHEREAS, certain technical changes to the Plan are required in order
to maintain the Plan in compliance with the Internal Revenue Code as amended by
the Unemployment Compensation Amendments of 1992 and the Omnibus Reconciliation
Act of 1993; and
WHEREAS, in connection with the Company's request for a determination
letter, the Internal Revenue Service has suggested that the Plan be amended in
certain respects.
NOW, THEREFORE, effective on January 1, 1992, except as otherwise
indicated, the Company amends its Plan in the following respects:
1. Section 2.1(f) is amended to provide as follows:
(f) Affiliated Company: Any corporation which is a member of a
controlled group of corporations of which an Adopting Company is a member, or
any unincorporated trade or business which is under the common control of or
with any Adopting Company, or any affiliated service group of which an Adopting
Company is a member, which are required to be aggregated with Employer under
Section 414(b), (c), (m) or (o) of the Code.
<PAGE> 2
2. Effective January 1, 1994, Section 2.1(r) is amended to
provide as follows:
(r) Compensation: The total of all amounts paid for employment by the
Employer to or for the benefit of a Participant during the Plan Year (as shown
on the Form W-2 filed for federal income tax purposes), such as salary, bonus,
wage, commission, and overtime payments. Compensation shall not include any of
the following (even if includible in gross income):
(i) reimbursements or other expense
allowances and moving expenses (including indemnity
payments for loss on sale of an Employee's home);
(ii) fringe benefits (cash and non-cash),
deferred compensation and welfare benefits; and
(iii) salary reduction contributions or
other elective deferrals under the Flexible Benefit
Plan or any other plan pursuant to Section 125 of
the Code.
Notwithstanding the foregoing, Compensation shall include any salary
reduction or other elective deferrals to the Savings Incentive Plan or
any other plan pursuant to Section 401(k) of the Code.
Compensation in excess of the first $200,000 (as adjusted
from time to time pursuant to Section 415(d) of the Code) for any
Employee shall not be taken into account. Effective for Plan Years
commencing after December 31, 1993, Compensation in excess of the
first $150,000 (as adjusted from time to time pursuant to Section
401(a)(17)(B) of the Code) for any Employee shall not be taken into
account. For purposes of this limit, the compensation of each Family
Member (restricted to the spouse or lineal descendant under the age of
19) of a Participant who is a 5-Percent Owner or who is a Highly
Compensated Employee and one of the ten most highly paid employees for
the Plan Year shall be combined with the Compensation of such
5-Percent Owner or Highly Compensated Employee.
3. Section 2.1(bbb) is amended to provide as follows:
(bbb) Year of Eligibility Service: A twelve
consecutive-month period in which an Employee has completed
1,000 Hours of Service. The initial computation period shall
be measured from the date employment commenced and subsequent
computation periods shall be based on the Plan Year beginning
with the Plan
2
<PAGE> 3
Year which includes the first anniversary of the date
employment commenced.
In the case of an Employee who, under the Plan, does
not have any nonforfeitable right to an accrued benefit,
Years of Eligibility Service before any period of consecutive
one-year Breaks in Service shall not be taken into account if
the number of consecutive Breaks in Service equals or exceeds
the greater of five (5) or the number of such Years of
Eligibility Service prior to the period of consecutive Breaks
in Service.
Years of Eligibility Service prior to January 1,
1992 shall be taken into account.
4. Section 2.1(ccc) is amended to provide as follows:
(ccc) Year of Vesting Service. A Plan Year in
which an Employee has completed 1,000 Hours of Service,
except:
(1) In the case of any Employee who has
five consecutive one-year Breaks in Service, Years
of Vesting Service after such consecutive Breaks in
Service shall not be taken into account for purposes
of determining the nonforfeitable percentage of his
Account as it existed prior to the period of
consecutive Breaks in Service.
(2) In the case of an Employee who, under
the Plan, does not have any nonforfeitable right to
an accrued benefit, Years of Vesting Service before
any period of consecutive one-year Breaks in Service
shall not be taken into account if the number of
consecutive Breaks in Service equals or exceeds the
greater of five (5) or the number of such Years of
Vesting Service prior to the period of consecutive
Breaks in Service.
Years of Vesting Service prior to January 1, 1987,
shall be excluded without exception. Years of Vesting Service
as of December 31, 1991 shall be determined based on the
number of calendar years commencing on January 1, 1987 and
anniversaries thereof during which the Employee was credited
with at least one Hour of Service. Such determination shall
be made in accordance with paragraphs 1 and 2 of this Section
2.1(ccc). For all Employees, regardless of their hire date,
all Years of Vesting Service commencing on or after January
1, 1992, shall be determined under the
3
<PAGE> 4
foregoing rules of this Section 2.1(ccc) excluding this
last paragraph.
5. Effective January 1, 1993, Section 2.1 (ddd) is added to
provide as follows:
(ddd) Direct Rollover: A Direct Rollover is a payment by the
Plan to the Eligible Retirement Plan specified by the
Distributee.
6. Effective January 1, 1993, Section 2.1 (eee) is added to
provide as follows:
(eee) Distributee: A Distributee includes a Participant and
Former Participant. In addition, the Participant's surviving spouse
and the Participant's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code, are Distributees with regard to the
interest of the spouse or former spouse.
7. Effective January 1, 1993, Section 2.1 (fff) is added to
provide as follows:
(fff) Eligible Retirement Plan: Any of the following:
(i) an individual retirement account as described
in Code Section 408(a),
(ii) an individual retirement annuity as described in
Code Section 408(b),
(iii) an annuity plan as described in Code Section
403(a), or
(iv) a qualified trust as describe in Code Section
401(a) which is exempt from tax under Code Section 501(a) and
which accepts Eligible Rollover Distributions; provided,
however, that in the case of an Eligible Rollover
Distribution to the surviving spouse, an Eligible Retirement
Plan is an individual retirement account or individual
retirement annuity.
8. Effective January 1, 1993, Section 2.1 (ggg) is added to
provide as follows:
(ggg) Eligible Rollover Distribution: Any distribution
of all or any portion of the balance to the credit of the Distributee,
except that an Eligible Rollover Distribution does not include any of
the following:
4
<PAGE> 5
(i) any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) over the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies)
of the Distributee and the Distributee's designated
Beneficiary,
(ii) a distribution over a period certain of ten
years or more,
(iii) a distribution to the extent such distribution
is required under Code Section 401(a)(9) for Participants who
have attained age 70-1/2, or
(iv) the portion of any distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
Employer securities).
9. Section 4.3(b) is amended to provide as follows:
(b) After termination of employment with Employer and
with all Affiliated Companies (other than for disability, normal retirement,
early retirement, delayed retirement, or death), but no later than the end of
the Plan Year following the Plan Year in which such termination occurs, the
Participant shall be entitled to receive a "cash out" of such Participant's
"vested benefit" as determined pursuant to Section 6.8 provided that such
"vested benefit" is not greater than $10,000. Distribution of a vested benefit
greater than $10,000 shall occur at the time provided in the last paragraph of
this Section 4.3(b). Such cash out of the vested benefit shall not be made in
the absence of written consent thereto by the Participant if the vested benefit
(as determined pursuant to Section 6.8) attributable to Employer contributions
is greater than $3,500. For the sole purpose of determining whether the vested
benefit is less than $3,500 or $10,000, as the case may be, Company Stock in the
Participant's Company Stock Sub-Account shall be valued at its market value on
the first trading date of the Plan Year during which the distribution is
scheduled to occur. A Participant having a vested benefit of zero shall be
deemed to have been cashed out hereunder on the date of his termination of
employment. Upon such a deemed payment, the Participant's nonvested Account
balance shall become a Forfeiture upon the date of the cash out. Such Forfeiture
shall then be allocated to the Accounts of other Participants as provided in
Section 5.2.
A Participant having a vested benefit of zero who is deemed to receive
a cash out upon termination of employment, and who later resumes employment
covered under the Plan before the last day of the Plan Year in which the
Participant incurs five (5)
5
<PAGE> 6
consecutive Breaks in Service commencing after the deemed distribution, shall
have restored the Participant's previous balance in his Account at the time of
the cash out, with no adjustment for Income or other earnings, and all Years of
Service, whether before or after the cash-out date, shall be counted for
purposes of determining the Participant's vested percentage in the restored
Account balance. The number of shares in Company Stock restored to his Company
Stock Sub-Account shall be the number of shares which can be purchased, based
on the market value per share on the date of the deemed repayment, for a sum
equal to the market value of the shares in the Participant's Company Stock
Sub-Account on the date of the deemed cash out.
Forfeitures which have become available for allocation during the Plan
Year in which a deemed repayment occurs shall first be allocated to the extent
required to restore the Participant's previously nonvested Account balance in
full, and any remaining Forfeitures shall be allocated as provided in Section
5.2. If available Forfeitures are insufficient to restore the Participant's
previously nonvested Account balance, the difference shall be provided by a
special Employer contribution. The foregoing special contribution and
allocation of Forfeitures shall not be considered as part of the annual
Addition for that Participant in connection with the limitations of Section 5.3
hereof.
If a distribution is not made at the time specified in the first
paragraph of this Section 4.3(b) because the Participant's vested benefit is
greater than $10,000, as determined by reference to the market value of the
Company Stock on the first trading date of the Plan Year during which the
distribution would have been made if the vested benefit had been less than
$10,000, the Participant shall be entitled to elect to receive a distribution
of his vested benefit during the third Plan Year following the Plan Year during
which he terminated employment with Employer and with all Affiliated Companies.
10. Section 5.2(e) is amended to provide as follows:
(e) Financed Shares. Company Stock acquired by the Trust
through an Acquisition Loan ("Financed Shares") shall be held in the Loan
Suspense Account, and the total number of shares to be allocated each Plan Year
to the Company Stock Sub-Accounts of Participants shall be determined by
multiplying the total number of shares purchased with the Acquisition Loan (or,
in years subsequent to such purchase, the number of Financed Shares held in the
Loan Suspense Account immediately preceding the date of such allocation) by a
fraction, the numerator of which is the total amount of principal and interest
payments made on the Acquisition Loan by the Trust for the Plan Year and the
denominator of which is the sum of the numerator plus the
6
<PAGE> 7
principal and interest payments to be made for all future Plan Years on the
Acquisition Loan. In the discretion of the Committee, the number of shares to
be allocated shall be determined solely with reference to principal payments in
the above formula if (1) the loan provides for payments of principal and
interest at a cumulative rate that is not less rapid at any time than level
annual payment of such amounts for ten (10) years, (2) the disregarded interest
is determined to be interest under standard loan amortization tables, and (3)
the term of the loan does not exceed ten (10) years, whether initially or by
reason of renewal, extension or refinancing of the Acquisition Loan.
Financed Shares thus released from the Loan Suspense Account
shall be allocated to the Company Stock Sub-Accounts of those Participants
entitled to share in such allocation under Section 5.2(a) in the following
manner:
(1) First, with respect to Financed Shares released by
reason of Employer contributions used to repay the
Acquisition Loan, in the manner provided in Section
5.2(a); and
(2) Second, with respect to Financed Shares released by
reason of the application of dividends on Company
Stock, in accordance with the provisions of Section
5.2(g).
If an interim Valuation Date is selected pursuant to Section 6.14, the
foregoing allocation rules shall be applied for the period commencing on
January 1 of that Plan Year and ending on the interim Valuation Date, taking
into account only principal and interest paid on the Acquisition Loan and
Compensation of Participants during that period. A similar allocation shall be
made for the period commencing on the interim Valuation Date and ending on
December 31 of that Plan Year, taking into account only principal and interest
paid on the Acquisition Loan and Compensation of Participants during that
period.
11. Section 5.2(g)(3) is amended to provide as follows:
(3) No allocation of cash dividends on Company
Stock, and no allocation of Financed Shares released from the
Loan Suspense Account by reason of such dividends, shall be
made to the Account of a Participant for a Plan Year to the
extent the Participant receives during that Plan Year a
distribution of Company Stock with regard to which the
dividends were paid. Any such cash dividends or Financed
Shares released from the Loan Suspense Account by reason of
such dividends shall be allocated as Income in accordance
with Section 5.2(f).
7
<PAGE> 8
12. Section 5.3 is amended to provide as follows:
5.3 Maximum Additions: The "annual addition" for any Participant shall
not exceed the amount determined hereunder. For any Participant, annual
addition shall mean, for this Plan, the Additions for that Participant, and for
any other plan in which the Participant participates, annual addition shall
mean the sum of employer contributions, employee contributions and forfeitures
allocated on behalf of the Participant for a Plan Year, which is defined to be
the limitation year. The determination of the annual addition shall be made as
if all defined contribution plans of the Employer and any Affiliated Company
were one plan and any participant contributions to defined benefit plans will
be treated as contributions to defined contribution plans.
Notwithstanding anything contained herein to the contrary, the total
annual Additions made to the Account of a Participant for any Plan Year shall
not exceed the lesser of the "defined contribution plan dollar limitation" or
25 percent (25%) of the Participant's Section 415 Compensation for such Plan
Year. The "defined contribution plan dollar limitation" shall be the greater of
(i) $30,000 or
(ii) one-fourth of the defined benefit dollar limitation
set forth in Section 415(b)(1) of the Code as in
effect for the Plan Year.
If, in any year, as the result of the allocation of Forfeitures, a
reasonable error in estimating a Participant's compensation, or other limited
facts and circumstances, the Additions would exceed the limitation for any
Participant, such excess shall be reallocated to eligible Participants as a
Forfeiture for the Plan Year. If such reallocated Additions cause the
limitation to be exceeded for all Participants, such excess shall be held in a
suspense account. The amounts in such suspense account shall be allocated as of
each Valuation Date until the account is exhausted, the allocation to be
analogous to that provided in Section 5.2(a). Income shall not be allocated to
such suspense account. If a suspense account is in existence at any time during
a particular Plan Year, other than the first Plan Year for which the suspense
account is created, all amounts in the suspense account must be allocated and
reallocated to Participants' Accounts (subject to the limitations of Section
415 of the Code) before any Employer contributions which would constitute
Additions may be made for that Plan Year.
In addition to this Plan, the Employer maintains the Savings Incentive
Plan with a limitation year corresponding to the Plan Year. If a Participant is
also a participant in the Savings Incentive Plan, the limitation upon the
annual additions which may otherwise be credited to his Savings Incentive Plan
account shall be first reduced by the total Additions, for the Plan Year
8
<PAGE> 9
credited to such Participant's Account under this Plan, and the Additions to
this Plan shall not be reduced by reason of any annual additions to the Savings
Incentive Plan.
13. Section 5.4 is amended to provide as follows:
5.4 Allocation of Top-Heavy Special Contribution to Provide Minimum
Benefits: For Top-Heavy Plan Years, the Employer contributions made pursuant to
Section 4.1 and the special contribution described in Section 4.4 shall first
be allocated to the Account of each Non-Key Employee in an amount sufficient to
provide the Minimum Benefit described by the following test. The sum of
Employer contributions and Forfeitures allocated during the Plan Year to the
Account maintained for each Participant who is a Non-Key Employee shall be at
least as great as a percentage of such Non-Key Employee's Section 415
Compensation. Such percentage shall be equivalent to the highest ratio for a
Key Employee for that Plan Year of
(i) the sum of Employer contributions and Forfeitures
allocated to the Account of the Key Employee, to
(ii) the compensation of the Key Employee (restricted to
$200,000, or $150,000 after January 1, 1994, as
adjusted from time to time pursuant to Section
401(a)(17) of the Code); provided, however, that the
percentage shall not exceed three percent (3%).
This Minimum Benefit shall be provided in every Top-Heavy Plan Year to all
Participants who are Non-Key Employees and who have not terminated employment
with Employer at the end of the Plan Year.
The Provisions of this Section 5.4 shall not apply, and no Employer
special contribution pursuant to Section 4.4 shall be required, for any Non-Key
Employee to the extent that such Non- Key Employee is a participant in the
Savings Incentive Plan or another defined contribution plan included with this
Plan in a Required or Permissive Aggregation Group (as those terms are defined
in Section 13.2(c) and (d)) and the Employer has provided an allocation of the
minimum benefit applicable to top-heavy plans in such other defined
contribution plan.
14. Section 6.1 is amended to provide as follows:
6.1 Time for Distribution: Distribution of benefits to a Participant
or Beneficiary shall occur at the date specified in whichever is applicable of
paragraphs (a), (b) or (c), subject to the override provisions of paragraphs
(d), (e), (f) and (g) of this Section 6.1:
9
<PAGE> 10
(a) Retirement. Distribution shall occur no later than
the end of the 60-day period after the close of the Plan Year in which
a Participant retires on or after his Early Retirement Date or his
Normal Retirement Date.
(b) Death or Disability. Distribution shall occur no
later than the end of the 60-day period after the close of the Plan
Year in which occurs a Participant's Disability Benefit Date or in
which a Participant terminates employment with the Employer (or a
Former Participant's employment with an Affiliated Company) by reason
of his death.
(c) Other Termination. If the Participant's employment
with Employer and with all Affiliated Companies is terminated other
than for disability, normal retirement, early retirement, delayed
retirement or death, distribution shall occur at the time provided in
Section 4.3(b) for a "cash out" of such Participant's benefits.
(d) Administrative Extension. In the event that due to
administrative delays it is not possible for the Committee to
calculate the value of the benefit to be distributed to a Participant
pursuant to paragraph (a), (b) or (c) above, then distribution shall
be deferred until such calculation can be made, but may not be
deferred for a longer time than is prescribed in applicable
regulations under ERISA or the Code.
(e) Age 70 1/2. Distribution shall occur not later than
the April 1 next following the calendar year in which a Participant
attains age 70 1/2, whether or not the Participant remains in the
employ of the Employer or an Affiliated Company.
(f) Option to Delay. Except for a distribution on account
of a Participant's death, no distribution whose value exceeds $3,500
shall be made prior to the Participant's Normal Retirement Date
without the written consent of the Participant. If the Participant
fails to consent to such distribution within 90 days of notification
by the Committee that the distribution is to be made, then
distribution shall be deferred until the earlier of the Participant's
death, or Normal Retirement Date.
(g) Normal Retirement Date Override. Subject to any
election described in paragraph (f), distribution to a Participant
whose termination of employment has occurred shall commence no later
than 60 days after the end of the Plan Year in which occurs his Normal
Retirement Date.
The foregoing paragraphs (d), (e), (f) and (g) are applicable notwithstanding
anything to the contrary contained in paragraphs (a), (b) and (c).
10
<PAGE> 11
The Plan shall give written notice to a Participant or Beneficiary,
eligible for a distribution of benefits pursuant to this Section 6.1. Such
notice shall be given to an eligible Participant or Beneficiary no less than 30
days but no more than 90 days prior to the proposed date of distribution.
Distribution of such benefits, in excess of $3,500, during this period shall
comply with the requirements of Section 4.3(b). However, if the distribution is
one to which Sections 401(a)(11) and 417 of the Code do not apply, such
distribution may commence less than 30 days after such notice provided that the
Committee clearly informs the Participant or Beneficiary that he has a right to
a period of at least 30 days after receiving such notice to consider the
decision of whether or not to elect a distribution and that the Participant or
Beneficiary, after receiving such notice, affirmatively elects a distribution.
15. Section 6.8(b) is amended to provide as follows:
(b) For a Plan Year for which the Plan is a Top-Heavy Plan, the
percentage shall be as follows:
<TABLE>
<CAPTION>
Percentage of
Years of Vesting Service Account
------------------------ -------------
<S> <C>
fewer than 3 0%
3 or more 100%
</TABLE>
16. Effective January 1, 1993, Section 6.15 is added to provide as
follows:
6.15 Direct Rollover: With respect to distributions made after
December 31, 1992, notwithstanding any provision of the Plan to the contrary
that would otherwise limit a Distributee's election under this Section 6.15, a
Distributee may elect, at the time and in the manner prescribed by the
Committee, to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Distributee in a
Direct Rollover. The Plan provisions otherwise applicable to distributions
continue to apply to this direct Rollover option. The Distributee shall, in the
time and manner prescribed by the Committee, specify the amount to be directly
transferred and the Eligible Retirement Plan to receive the transfer. Any
portion of a distribution which is not transferred shall be distributed to the
Distributee in the form specified in Section 6.11.
17. Effective January 1, 1993, Section 9.9 is added to provide the
following:
11
<PAGE> 12
9.9 No Restrictions on Financed Shares. Except as required by the
securities laws or other applicable laws, no Company Stock originally acquired
as Financed Shares shall be subject to a put, call or other option, or
buy-sell, right of first refusal, or similar arrangement while held by and when
distributed from the Plan, whether or not the Plan is then an employee stock
ownership plan as described in Section 4975(e)(7) of the Code.
IN WITNESS WHEREOF, Volunteer Capital Corporation has caused this
amendment to be executed this 29th day of June, 1994, effective as of the dates
indicated herein, by its duly authorized officers.
VOLUNTEER CAPITAL CORPORATION
By:/s/ R. Gregory Lewis
--------------------------
Title:Vice-President-Finance
Attest:
/s/ Ruth Ann Tidwell
- ------------------------------
12
<PAGE> 1
EXHIBIT 10(t)
THIRD AMENDMENT TO
J. ALEXANDER'S CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, effective as of January 1, 1992, Volunteer Capital
Corporation, a Tennessee corporation, now J. Alexander's Corporation
("Company"), adopted the Volunteer Capital Corporation Employee Stock Ownership
Plan, which was subsequently renamed the J. Alexander's Corporation Employee
Stock Ownership Plan ("Plan"); and
WHEREAS, the Company desires to amend the Plan (i) to remove the
requirement that a participant must wait until at least age 60 to receive his
benefits if he does not elect a distribution at the customary time after
termination of employment, (ii) to remove to the extent permitted by law the
requirement that distributions commence at age 70 1/2 even though the
participant has not retired, (iii) to increase the limit for an involuntary
cashout to $5,000, (iv) to reflect the change in the name of the Plan, and (v)
to make certain other technical changes required by changes in federal tax law.
NOW, THEREFORE, effective on January 1, 1997, except as otherwise
indicated, the Company amends its Plan in the following respects:
1. Effective January 1, 1998, Section 2.1(r) is amended to provide as
follows:
(r) Compensation. The total of all amounts paid for
employment by the Employer to or for the benefit of a Participant
during the Plan Year (as shown on the Form W-2 filed for federal
income tax purposes), such as salary, bonus, wage, commission, and
overtime payments. Compensation shall not include any of the following
(even if includible in gross income):
(i) reimbursements or other expense allowances and
moving expenses (including indemnity payments for loss on
sale of an Employee's home); and
(ii) fringe benefits (cash and non-cash), deferred
compensation and welfare benefits.
<PAGE> 2
Notwithstanding the foregoing, Compensation shall include any salary
reduction or other elective deferrals to the Savings Incentive Plan or
any other plan pursuant to Section 401(k) of the Code and salary
reduction contributions or other elective deferrals under the Flexible
Benefit Plan or any other plan pursuant to Section 125 of the Code.
Compensation in excess of the first $150,000 (as adjusted from time to
time pursuant to Section 401(a)(17)(B) of the Code) for any Employee
shall not be taken into account.
2. Section 2.1(o) is amended to provide as follows:
(o) Company. J. Alexander's Corporation, a Tennessee
corporation, and any successor, purchaser, or transferee of the
operating assets and business of J. Alexander's Corporation, which
elects to continue the Plan.
3. Effective January 1, 1998, Section 2.1(z) is deleted.
4. Section 2.1(dd) is amended to provide as follows:
(dd) Flexible Benefits Plan: J. Alexander's Corporation
Flexible Benefits Plan, a cafeteria plan pursuant to Section 125 of
the Code, as amended from time to time.
5. Section 2.1(gg) is amended to provide as follows:
(gg) Highly Compensated Employee: A Highly Compensated
Employee is any Employee who:
(1) was a 5-Percent Owner at any time during the
Plan Year or the preceding Plan Year; or
(2) received Section 415 Compensation from the
Employer in excess of $80,000 for the preceding plan Year
and, if elected by the Employer for a Plan Year in accordance
with Section 414(q)(1)(B)(ii) of the Code, was in the
top-paid group of employees of the Employer for the preceding
Plan Year.
In making the above determination, Section 415 Compensation shall
include salary reductions or elective deferrals under the Savings
Incentive Plan or any other plan pursuant to Section 401(k) of the
Code and salary reductions or elective deferrals under the Flexible
Benefits Plan or other plan pursuant to Section 125 of the Code. The
$80,000 amount is indexed and shall be adjusted pursuant to Treasury
Regulations.
2
<PAGE> 3
6. Section 2.1(jj) is amended to provide as follows:
(jj) Key Employee: Any Employee or former Employee (and
his Beneficiaries) who, at any time during the Plan Year which
includes the Determine Date, or any of the preceding four (4) Plan
Years, is -
(a) An officer of any Affiliated Company having
annual Section 415 Compensation grater than 50 percent of the
limitation in effect under Section 415(b)(1)(A) of the Code
for any such Plan Year;
(b) One of the ten Employees having annual Section
415 Compensation greater than the limitation in effect under
Section 415(c)(1)(A) of the Code and owning (or considered as
owning within the meaning of Section 318 of the Code) both
more than a one-half percent (0.5%) interest and the largest
percentage ownership interests in any of the Affiliated
Companies;
(c) A 5-percent Owner; or
(d) A 1-percent Owner (defined as any person who
would be a 5-percent Owner if "one percent (1%) " were
substituted for "five percent (5%)" each place it appears in
Section 2.1(cc) having annual Section 415 Compensation of
more than $150,000.
For purposes of this definition, Section 415 Compensation shall
include elective deferrals under Sections 125 and 402(a)(8) of the
Code. For purposes of determining the number of officers taken into
account pursuant to Treasury Regulation ss.1.416-1, employees
described in Section 414(q)(5) of the Code shall be excluded.
7. Section 2.1(tt) is amended to provide as follows:
(tt) Savings Incentive Plan: J. Alexander's Corporation
Savings Incentive and Salary Deferral Plan, a profit sharing and
401(k) plan originally established effective January 1, 1985, as
amended from time to time.
8. Effective January 1, 1998, Section 2.1(uu) is amended to provide as
follows:
(uu) Section 415 Compensation: The total "wages" paid for
employment by the Employer (and all Affiliated Companies) to or for
the benefit of a Participant during the Plan Year (as shown on the
Form W-2 filed for federal income tax purposes). For purposes of this
determination, "wages" shall mean wages as defined in withholding at
the source, and all other payments of compensation to the Employee by
the Employer for which the Employer is required to furnish the
Employee a written statement under Sections 6041(d) and 6051(a)(3) of
the Code, but determined without regard to any rules that limit the
remuneration included in wages based on the nature or location of the
employment or the
3
<PAGE> 4
services performed, and excluding from wages amounts paid or reimbursed
by the Employer for moving expenses incurred by an Employee to the
extent that at the time of the payment it is reasonable to believe
that these amounts are deductible by the Employee under Section 217 of
the Code. Section 415 Compensation shall include salary reductions or
elective deferrals under the Savings Incentive Plan or any other plan
pursuant to Section 401(k) of the Code and salary reductions or other
elective deferrals under the Flexible Benefits Plan or any other plan
pursuant to Section 125 of the Code.
9. Effective January 1, 1998, the first paragraph of Section 4.3(b) is
amended to provide as follows:
(b) After termination of employment with Employer and with
all Affiliated Companies (other than for disability, normal
retirement, early retirement, delayed retirement, or death), but no
later than the end of the Plan Year following the Plan Year in which
such termination occurs, the Participant shall be entitled to receive
a "cashout" of such Participant's "vested benefit" as determined
pursuant to Section 6.8 provided that such "vested benefit" is not
greater than $10,000. Distribution of a vested benefit greater than
$10,000 shall occur at the time provided in the last paragraph of this
Section 4.3(b). Such cash out of the vested benefit shall not be made
in the absence of written consent thereto by the Participant if the
vested benefit (as determined pursuant to Section 6.8) attributable to
Employer contributions is greater than $5,000. For the sole purpose of
determining whether the vested benefit is less than $5,000 or $10,000,
as the case may be, Company Stock in the Participant's Company Stock
Sub-Account shall be valued at its market value on the first trading
date of the Plan Year during which the distribution is scheduled to
occur. A Participant having a vested benefit of zero shall be deemed
to have been cashed out hereunder on the date of his termination of
employment. Upon such a payment (or deemed payment) of the
Participant's entire vested benefit, his nonvested Account balance
shall become a Forfeiture upon the date of the cash out. Such
Forfeiture shall then be allocated to the Accounts of other
Participants as provided in Section 5.2.
10. The first paragraph in Section 5.3 is amended to provide as
follows:
5.3 Maximum Additions. Notwithstanding anything contained
herein to the contrary, the total Additions made to the Account of a
Participant for any Plan Year shall not exceed the lesser of $30,000
(as adjusted from time to time pursuant to Section 415(d) of the Code)
or 25 percent (25%) of the Participant's Section 415 Compensation for
such Plan Year.
11. Section 6.1 is amended to provide as follows:
(e) Age 70 1/2: Except for a 5-Percent Owner, distribution
shall commence not later than the April 1 next following the later of
the calendar year in which a Participant attains age 70 1/2 or
retires; provided, however, that a Participant who was born before
July 1, 1928, may elect to have his distribution commence not later
than the April 1 next following
4
<PAGE> 5
the calendar year in which such Participant attains age 70 1/2 whether
or not he remains in the employ of the Employer. For a 5-Percent
Owner, distribution shall commence not later than the April 1 next
following the calendar year in which such Participant attains age
70 1/2 whether or not he remains in the employ of the Employer. A
Participant receiving distributions pursuant to this Section 6.1(e) as
of January 1, 1997, who has not retired and who is not a 5-Percent
Owner, may elect to cease receiving such distributions until the April
1 next following the calendar year in which such Participant retires.
Such distribution of a Participant's benefits shall be made
in accordance with the following requirements and shall otherwise
comply with Section 401(a)(9) of the Code and the Treasury Regulations
thereunder (including Regulation Section 1.401(a)(9)-2). In accordance
with Section 401(a)(9) of the Code and the Treasury Regulations
thereunder, for purposes of determining the maximum period over which
distributions must be made under Section 401(a)(9) of the Code, a
Participant (or his spouse, if applicable) may elect whether or not
life expectancy will be recalculated as permitted under Section
401(a)(9)(D) of the Code; provided, however, that such election must
be made no later than the first required distribution date under
Section 401(a)(9) of the Code, after which such election shall be
irrevocable. Absent such an election, life expectancies shall be
recalculated.
12. Effective January 1, 1998, Section 6.1(f) is amended to provide as
follows:
(f) Option to Delay. Except for a distribution on account of
a Participant's death, no distribution whose value exceeds $5,000
shall be made prior to the Participant's Normal Retirement Date
without the written consent of the Participant.
IN WITNESS WHEREOF, J. Alexander's Corporation has caused this
amendment to be executed this 17th day of February, 1998, effective as of the
dates indicted herein, by its duly authorized officers.
J. ALEXANDER'S CORPORATION
By: /s/ J. Michael Moore
-------------------------------------------
Title: Vice President of Administration and
Human Resources
Attest:
/s/ Ruth Ann Tidwell
- ---------------------------
5
<PAGE> 1
EXHIBIT 10(u)
FOURTH AMENDMENT TO
J. ALEXANDER'S CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, effective as of January 1, 1992, Volunteer Capital
Corporation, a Tennessee corporation, now J. Alexander's Corporation (the
"Company"), adopted the Volunteer Capital Corporation Employee Stock Ownership
Plan, which was subsequently renamed the J. Alexander's Corporation Employee
Stock Ownership Plan (the "Plan"); and
WHEREAS, the Company desires to amend the Plan to make certain
technical changes required by changes in the federal tax law; and
WHEREAS, the Company desires to remove for each participant in the
Plan (a "Participant") who is not a corporate officer of the Company the
limitation that a Participant with a vested benefit greater than $10,000 who
terminates employment must wait until the third plan year following the plan
year of termination to elect to receive a distribution; and
WHEREAS, the Company desires to permit the Plan to pay a third-party
(instead of to the Participant or Beneficiary) such portion of a Participant's
benefit under the terms of the Plan as shall be specified by a judgment or
settlement issued or entered into with respect to such a participant having
been convicted of a crime involving the Plan or subject to a civil judgment or
settlement between the Secretary of Labor and the Participant in connection
with a violation of the fiduciary provisions of ERISA.
NOW, THEREFORE, effective on January 1, 1998, except as otherwise
indicated, the Company amends its Plan in the following respects:
1. Effective January 1, 1997, Section 2.1(gg) is amended to provide as
follows:
(gg) Highly Compensated Employee: A Highly Compensated
Employee for the purposes of determinations regarding the current Plan
Year is any Employee who:
<PAGE> 2
(1) was a 5-Percent Owner at any time during the
Plan Year or the preceding Plan Year; or
(2) received Section 415 Compensation (as adjusted
below) from the Employer in excess of $80,000 for the
preceding Plan Year and, if elected by the Employer for a
Plan Year in accordance with Section 414(q)(1)(B)(ii) of the
Code, was in the top-paid group of the Employer for the
preceding Plan Year. The "top-paid group" referred to in the
preceding sentence consists of the 20% most highly
compensated employees of the Employer ranked on the basis of
compensation received during the next prior Plan Year. For
the purposes of determining the number of employees in the
"top-paid group" referred to in the preceding sentence,
employees described in Code Section 414(q)(5) and Q&A 9(b) of
Section 1.414(q)-1T of the Treasury Regulations are excluded.
In making the above determination, "Section 415
Compensation" shall include salary reductions or elective
deferrals under the Savings Incentive Plan or any other plan
pursuant to Section 401(k) of the Code and salary reductions
or elective deferrals under the Flexible Benefits Plan or
other plan pursuant to Section 125 of the Code. The $80,000
amount is indexed and shall be adjusted pursuant to Treasury
Regulations. Furthermore, solely for purposes of this Section
2.1(gg), "Employer" shall include any Affiliated Company.
2. Effective January 1, 1997, Section 2.1(qq) is amended to provide as
follows:
(qq) Plan: J. Alexander's Corporation Employee Stock
Ownership Plan, as set forth herein and amended from time to time.
3. Section 2.1(uu) is amended to provide as follows:
(uu) Section 415 Compensation: The total "wages" paid for
employment by the Employer (and all Affiliated Companies) to or for
the benefit of a Participant during the Plan Year (as shown on the
Form W-2 filed for federal income tax purposes). For purposes of this
determination, "wages" shall mean wages as defined in withholding at
the source, and all other payments of compensation to the Employee by
the Employer for which the Employer is required to furnish the
Employee a written statement under Sections 6041(d) and 6051(a)(3) of
the Code, but determined without regard to any rules that limit the
remuneration included in wages based on the nature or location of the
employment or the services performed, and excluding from wages amounts
paid or reimbursed by the Employer for moving expenses incurred by an
Employee to the extent that at the time of the payment it is
reasonable to believe that these amounts are deductible by the
Employee under Section 217 of the Code. The term "Section 415
Compensation" shall include salary reductions or elective deferrals,
as defined in Section 402(g)(3) of the Code, under the Savings
Incentive Plan or any other plan pursuant to Section 401(k) of the
Code and any amount which is contributed or deferred by the Employer
at the election of the Employee and which is not includable in the
gross income of the Employee by reason of Section 127 or 457 of the
Code.
2
<PAGE> 3
4. The first paragraph of Section 4.3(b) is amended to provide
as follows:
(b) After termination of employment with Employer and with all
Affiliated Companies (other than for disability, normal retirement,
early retirement, delayed retirement, or death), but no later than the
end of the Plan Year following the Plan Year in which such termination
occurs, the Participant shall be entitled to receive a "cashout" of
such Participant's "vested benefit" as determined pursuant to Section
6.8; provided, however, that corporate officers of the Company may
receive the cashout referred to in this Section 4.3(b) only if such
"vested benefit" is not greater than $10,000. Distribution to a
corporate officer of the Company of a vested benefit greater than
$10,000 shall occur at the time provided in the last paragraph of this
Section 4.3(b). Such cash out of the vested benefit shall not be made
in the absence of written consent thereto by the Participant if the
vested benefit (as determined pursuant to Section 6.8) attributable to
Employer contributions is greater than $5,000. For the sole purpose of
determining whether the vested benefit is less than $5,000 or $10,000,
as the case may be, Company Stock in the Participant's Company Stock
Sub-Account shall be valued at its market value on the first trading
date of the Plan Year during which the distribution is scheduled to
occur. A Participant having a vested benefit of zero shall be deemed
to have been cashed out hereunder on the date of his termination of
employment. Upon such a payment (or deemed payment) of the
Participant's entire vested benefit, his nonvested Account balance
shall become a Forfeiture upon the date of the cash out. Such
Forfeiture shall then be allocated to the Accounts of other
Participants as provided in Section 5.2.
5. The last paragraph of Section 4.3(b) is amended to provide as
follows:
If a distribution is not made at the time specified in the
first paragraph of this Section 4.3(b) because the Participant is a
corporate officer of the Company and such Participant's vested benefit
is greater than $10,000, as determined by reference to the market
value of the Company Stock on the first trading date of the Plan Year
during which the distribution would have been made if such
Participant's vested benefit had been less than $10,000, such
Participant shall be entitled to elect to receive a distribution of
his vested benefit during the third Plan Year following the Plan Year
during which he terminated employment with the Employer and with all
Affiliated Companies.
6. Effective January 1, 1997, Section 9.6 is amended to provide as
follows:
9.6 Leased Employees: Notwithstanding any other provisions
of the Plan, for purposes of determining the number or identity of
Highly Compensated Employees and for purposes of the pension
requirements of Section 414(n)(3) of the Code, the employees of the
Employer shall include "leased employees." The term "leased employees"
means any persons who are not employees of the Employer and who (i)
provide services to the Employer pursuant to an agreement between the
Employer and any other person, (ii) perform such services for the
employer on a substantially full-time basis for a period of at least
one calendar year, and (iii) perform such services under the primary
direction or control by the Employer.
3
<PAGE> 4
7. Effective October 13, 1996, as to affected Employees who are
reemployed on or after December 12, 1994, Section 9.9 is added to provide as
follows:
9.9 Qualified Military Service: Notwithstanding any
provision of this Plan to the contrary, contributions, benefits, and
service credit with respect to qualified military service will be
provided in accordance with Section 414(u) of the Code.
8. Section 9.10 is added to provide as follows:
9.10 Certain Judgments, Orders, Decrees and Settlements:
Effective for judgments, orders and decrees issued, and settlements
entered into, on or after August 5, 1997, the Plan shall be permitted
to pay a third-party (instead of to the Participant or Beneficiary)
such portion of the Participant's benefit under the Plan as shall be
specified by such a judgment, order or decree issued, or settlement
entered into, in connection with:
(a) the Participant's conviction for a crime
involving the Plan; or
(b) a civil judgment (or consent or decree) entered
by a court in an action brought in connection with a
violation of the fiduciary provisions of ERISA; or
(c) a settlement agreement between the Secretary of
Labor and the Participant in connection with a violation of
the fiduciary provisions of ERISA.
To be effective, the court order establishing such liability
must require that the Participant's benefit under the Plan be applied
to satisfy such liability. If the Participant is married at the time,
his benefit under the Plan is offset to satisfy the liability. Spousal
consent to such offset is required unless the spouse is also required
to pay an amount to the Plan in the judgment, order, decree or
settlement, or the judgment, order, decree or settlement provides a
fifty percent (50%) survivor annuity for the spouse.
IN WITNESS WHEREOF, J. Alexander's Corporation has caused this
amendment to be executed this 30th day of December, 1998, effective as of the
dates indicted herein, by its duly authorized officers.
J. ALEXANDER'S CORPORATION
By: /s/ J. Michael Moore
------------------------------------------
Title: Vice President of Human Resources and
Administration
Attest:
/s/ Janice M. Jackson
- --------------------------------
4
<PAGE> 1
EXHIBIT 10(v)
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT ("Second Amendment") entered
into this 30th day of March, 2000, by and among J. ALEXANDER'S CORPORATION
(f/k/a VOLUNTEER CAPITAL CORPORATION), J. ALEXANDER'S RESTAURANTS, INC. (f/k/a
TOTAL QUALITY MANAGEMENT, INC.), Tennessee corporations (collectively referred
to as the "Borrower"), and BANK OF AMERICA, N.A., SUCCESSOR TO NATIONSBANK,
N.A., SUCCESSOR TO NATIONSBANK OF TENNESSEE, N.A., a national banking
association ("Lender").
WITNESSETH
WHEREAS, Borrower and Lender entered into that certain Loan Agreement
dated June 30, 1995, as amended by that Amendment to Loan Agreement dated March
27, 1998 ("Loan Agreement") and that Line of Credit Note dated June 30, 1995 in
the maximum principal amount of Thirty Million and 00/100 Dollars
($30,000,000.00), as amended and restated by that Line of Credit Note dated
March 27, 1998 in the maximum principal amount of Twenty Million and 00/100
Dollars ($20,000,000.00), and as further amended and restated by that Renewal
Line of Credit Note of even date herewith in the amount of Twenty Million and
00/100 Dollars ($20,000,000.00) ("Line of Credit Note"); and
WHEREAS, Volunteer Capital Corporation has changed its name to J.
Alexander's Corporation and Total Quality Management, Inc. has changed its name
to J. Alexander's Restaurants, Inc.; and
WHEREAS, Borrower and Lender desire to amend the Loan Agreement as
provided herein; and
NOW, THEREFORE, for the mutual promises contained herein and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Sections 1.b. & c. of the Loan Agreement shall be deleted in
their entirety and in lieu thereof shall read the following:
b. Interest Rate. From the date hereof until the stated
maturity of the Note, interest shall accrue at the LIBOR Rate plus a
spread of 2.0%, 2.25%, 2.5% or 3.0% depending on the Senior Debt
Coverage Ratio ("SDCR") as further provided herein. If the SDCR is
less than or equal to 2.75 but greater than 2.5, the LIBOR spread will
be 3.0%; if the SDCR is less than or equal to 2.5 but greater than
2.25, the LIBOR spread will be 2.5%; if the SDCR is less than or equal
to 2.25 but greater than 2.0, the LIBOR spread will be 2.25%; if the
SDCR is less than or equal to 2.0, the LIBOR spread will be 2.0%:
1
<PAGE> 2
i. As used in this Agreement, Lender's "Prime Rate" is the
fluctuating rate of interest established by Lender from time to time
as its "Prime Rate", whether or not such rate shall be otherwise
published. Such Prime Rate is established by Lender as an index or
base rate and may or may not at any time be the best or lowest rate
charged by Lender on any loan. If at any time or from time to time the
Prime Rate increases or decreases, then the rate of interest hereunder
shall be correspondingly increased or decreased effective on the day
on which any such increase or decrease of the Prime Rate changes,
unless otherwise herein provided. In the event that Lender, during the
term hereof, shall abolish or abandon the practice of establishing a
Prime Rate, or should the same become unascertainable, Lender shall
designate a reasonably comparable reference rate which shall be deemed
to be the Prime Rate.
ii. For purposes hereof, the Senior Debt Coverage Ratio, ("SDCR")
is defined as Senior Funded Debt (as defined herein) divided by
EBITDA, all measured on a trailing four-quarter basis. Senior Funded
Debt means all long-term debt, the current portion of long-term debt,
obligations under Leases (both long-term and current), any notes
payable or other borrowed money, but Senior Funded Debt does not
include any subordinated or convertible debt.
iii. For purposes hereof, the "LIBOR Rate" shall mean the rate of
interest based on the Eurodollar Daily Floating Rate. The Eurodollar
Daily Floating Rate is a floating rate of interest and will change on
and as of the date of a change in the Eurodollar Daily Floating Rate.
The period of time during which the Eurodollar Daily Floating Rate
shall be applicable shall be a Eurodollar Daily Floating Rate Interest
Period. "Eurodollar Daily Floating Rate" shall mean the fluctuating
rate of interest equal to the rate of interest per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Telerate Page 3750 (or any successor page) as the one month London
interbank offered rate for deposits in Dollars at approximately 11:00
A.M. (London time) on the second preceding Business Day, as adjusted
from time to time in Bank's sole discretion for then applicable
reserve requirements, deposit insurance assessment rates and other
regulatory costs. If for any reason such rate is not available, the
term "Eurodollar Daily Floating Rate" shall mean the fluctuating rate
of interest equal to the rate of interest per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen
LIBO Page as the one month London interbank offered rate for deposits
in Dollars at approximately 11:00 A.M. (London time) on the second
preceding Business Day, as adjusted from time to time in Bank's sole
discretion for then applicable reserve requirements, deposit insurance
assessment rates and other regulatory costs; provided, however, if
more than one rate is specified on Telerate Page 3750 or on Reuters
Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all rates on that page. Interest hereunder shall be calculated based
upon a 360-day year and actual days elapsed. If the adoption of or
change in any applicable legal requirement or any change in the
interpretation or administration thereof by any governmental authority
or compliance by the Lender with any request or directive (whether or
not having the force of law)
2
<PAGE> 3
from any central bank or other governmental authority, shall at any
time as a result of any portion of the principal balance of this Note
being maintained on the LIBOR Rate:
A. Subject the Lender to any tax (including without
limitation any United States Interest Equalization Tax), levy, impost,
duty, charge, fee (collectively "Taxes"), other than income and
franchise taxes of the United States and its political subdivisions;
or
B. Change the basis of taxation on payments due from
the Borrower to the Lender under any LIBOR Rate Borrowing (otherwise
than by a change in the rate of taxation of the overall net income of
the Lender); or
C. Impose, modify, increase or make applicable any
reserve requirement, special deposit requirement or similar
requirement (including, but not limited to, state law requirements and
Regulation D) against assets held by the Lender, or against deposits
or accounts in or for the account of the Lender, or against any loans
made by the Lender, or against any other funds, obligations or other
property owned or held by Lender; or
D. Impose on the Lender any other condition regarding
any LIBOR Rate Borrowing;
and the result of any of the foregoing is to increase the cost to the
Lender of agreeing to make or of making, renewing or maintaining such
borrowing on the basis of the LIBOR Rate, or reduce the amount of
principal or interest received by the Lender, then, upon demand by the
Lender, the Borrower shall pay to the Lender, from time to time as
specified by the Lender, additional amounts which shall reasonably
compensate the Lender for such increased cost or reduced amount
relating to LIBOR Rate Borrowings outstanding after Lender's demand.
The Lender's reasonable determination of the amount of any such
increased cost, increased reserve requirement or reduced amount shall
be conclusive and binding, absent manifest error.
iv. In no event shall the interest rate charged on the Line of
Credit exceed the maximum rate allowed under applicable law. Any
amounts paid in excess of the maximum lawful rate shall be applied to
reduce the principal amount of Borrower's obligations to Lender or
shall be refunded to Borrower, at Lender's election. After maturity
(by acceleration or otherwise), the principal amount under the Line of
Credit shall bear interest at the rate of interest in effect
immediately before maturity plus three percent (3%).
c. Payments. Payment of all obligations arising under
the Line of Credit shall be made as follows:
3
<PAGE> 4
(1) Interest. Interest on the outstanding
principal balance under the Line of Credit shall be paid in
arrears on the first (1st) day of each month beginning on
April 1, 2000.
(2) Voluntary Prepayment. Voluntary prepayments
of principal or accrued interest may be made, in whole or in
part, at any time without penalty.
(3) Mandatory Prepayment. Borrower must
immediately prepay any amount by which the principal balance
of the Line of Credit exceeds $20,000,000.
(4) All Amounts Due. All remaining principal,
interest and expenses outstanding under the Line of Credit
shall become due July 1, 2001, unless the borrower exercises
its option to extend for a seven (7) year term, in which case
all remaining principle, interest and expenses outstanding
under the Line of Credit shall become due July 1, 2008.
(5) Conversion to Term Loan. Subject to the
provisions contained herein, Borrower has the option to
convert this Line of Credit Note to a Term Note. Providing
that Borrower is not then in default hereunder, Borrower may
make a written election to convert the Line of Credit Note to
a Term Note any time prior to July 1, 2001. The written
election must be delivered to Payee at least thirty (30) days
prior to the conversion date. After receipt of the election,
Payee has sole discretion to determine what collateral will
be required of Maker to provide security for the term loan.
Payee will notify Maker whether or in what manner the term
loan shall be securitized within fifteen (15) days after
receiving the election. Upon conversion, there will be a
conversion fee equal to one-quarter (1/4) of one percent (1%)
of the then outstanding principal balance. The unpaid
principal balance will then be repayable in eighty-four (84)
equal monthly installments of principal with the first
principal payment due thirty (30) days following the
conversion date. Interest will continue to be paid monthly at
the same time as the principal payment is due. Interest shall
accrue on the Term Note at the Bank of America, N.A. Prime
Rate, as it may change from time to time or the LIBOR Rate
discussed above (subject to the restriction on the number of
LIBOR borrowings discussed above) or at a fixed rate to be
determined by Payee at the time of receiving the written
election. Maker shall specify the interest rate option (Prime
Rate, LIBOR Rate or fixed) to be used in the conversion
election.
2. Section 30.l of the Loan Agreement is hereby deleted
in its entirety and in lieu thereof shall read as follows:
l. Capital Expenditures. Make capital expenditures
(including capitalized leases) during fiscal year 2000 and
during each fiscal year thereafter exceeding, in the
aggregate, $10,000,000.00 per fiscal year.
4
<PAGE> 5
3. Section 31.e of the Loan Agreement is hereby deleted
in its entirety and in lieu thereof shall read as follows:
e. Profit/Loss. For any 2 consecutive fiscal quarters,
Borrower's cumulative pretax loss shall not exceed
$250,000, and Borrower's pretax profit shall exceed $500,000
for the fiscal year ending December 31, 2000 and each fiscal
year thereafter.
4. Except as amended in this Second Amendment, the
provisions contained in the Loan Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this document through
authorized agents on the day and date first above written.
BANK OF AMERICA, N.A., SUCCESSOR TO
NATIONSBANK, N.A., SUCCESSOR TO
NATIONSBANK OF TENNESSEE, N.A.
By: /s/ William H. Diehl
-------------------------------------------
Title: Senior Vice President
----------------------------------------
J. ALEXANDER'S CORPORATION
(f/k/a VOLUNTEER CAPITAL CORPORATION)
By: /s/ R. Gregory Lewis
-------------------------------------------
Title: Vice President and Chief
Financial Officer
----------------------------------------
J. ALEXANDER'S RESTAURANTS, INC.
(f/k/a TOTAL QUALITY MANAGEMENT, INC.)
By: /s/ R. Gregory Lewis
-------------------------------------------
Title: Vice President - Finance
----------------------------------------
5
<PAGE> 1
EXHIBIT 10(w)
RENEWAL LINE OF CREDIT NOTE
$20,000,000.00 Nashville, Tennessee March 30, 2000
FOR VALUE RECEIVED, J. ALEXANDER'S CORPORATION (f/k/a VOLUNTEER
CAPITAL CORPORATION) and J. ALEXANDER'S RESTAURANTS, INC. (f/k/a TOTAL QUALITY
MANAGEMENT, INC.), Tennessee corporations (the "Maker"), jointly and severally
promise to pay to the order of BANK OF AMERICA, N.A., SUCCESSOR TO NATIONSBANK,
N.A., SUCCESSOR TO NATIONSBANK OF TENNESSEE, N.A. ("Payee" or "Bank of
America"), the sum of Twenty Million and No/100 Dollars ($20,000,000.00), or as
much thereof as may be outstanding from time to time, together with interest
thereon as set forth below.
This Note is an amendment and restatement of that certain Line of
Credit Note dated March 27, 1998 from Maker to Payee in the amount of Twenty
Million and No/100 Dollars ($20,000,000.00). Advances under this Note shall be
governed by that certain Loan Agreement dated August 29, 1995, as amended by
that Amendment to Loan Agreement dated March 27, 1998, and as further amended
by that Second Amendment to Loan Agreement of even date herewith ("Loan
Agreement"). Subject to the provisions of the Loan Agreement, Maker may borrow,
repay and reborrow and there is no limit on the number of advances against this
Note as long as the total unpaid principal balance at any time outstanding does
not exceed Twenty Million and No/100 Dollars ($20,000,000.00).
From the date hereof until the stated maturity of this Note, interest
shall accrue at the LIBOR Rate plus a spread of 2.0%, 2.25%, 2.5% or 3.0%
depending on the Senior Debt Coverage Ratio ("SDCR") as further provided in the
Loan Agreement.
From the date hereof until the stated maturity of this Note, a
non-usage fee of either .25%, .35% or .50% based upon the daily average unused
amount and based on the SDCR will be paid quarterly in arrears. If the SDCR is
less than or equal to 2.75 but greater than 2.5, the fee will be .50%; if the
SDCR is less than or equal to 2.5 but greater than 2.25, the fee will be .35%;
if the SDCR is less than or equal to 2.25, the fee will be .25%.
Interest in arrears shall be due and payable on the first (1st) day of
each month beginning on April 1, 2000. All remaining principal and interest
shall become due on July 1, 2001 under the three year revolver, or July 1, 2008
if the option to convert to an additional seven (7) year term loan is
exercised.
Subject to the provisions contained herein, Maker has the option to
convert this Line of Credit Note to a Term Note. Providing that Borrower is not
then in default hereunder, Borrower may make a written election to convert the
Line of Credit Note to a Term Note any time prior to July 1, 2001. The written
election must be delivered to Payee at least thirty (30) days prior to the
conversion date. After receipt of the election, Payee has sole discretion to
determine what collateral will be required of Maker to provide security for the
term loan. Payee will notify Maker whether or in what manner the
1
<PAGE> 2
term loan shall be securitized within fifteen (15) days after receiving the
election. Upon conversion, there will be a conversion fee equal to one-quarter
(1/4) of one percent (1%) of the then outstanding principal balance. The unpaid
principal balance will then be repayable in eighty-four (84) equal monthly
installments of principal with the first principal payment due thirty (30) days
following the conversion date. Interest will continue to be paid monthly at the
same time as the principal payment is due. Interest shall accrue on the Term
Note at the Bank of America Prime Rate, as it may change from time to time or
the LIBOR Rate discussed above or at a fixed rate to be determined by Payee at
the time of receiving the written election. Maker shall specify the interest
rate option (Prime Rate, LIBOR Rate or fixed) to be used in the conversion
election.
As used herein, the term "Bank of America Prime Rate" shall mean the
fluctuating rate of interest established by Bank of America from time to time
as its "Prime Rate", whether or not such rate shall be otherwise published.
Such Prime Rate is established by Bank of America as an index or base rate and
may or may not at any time be the best or lowest rate charged by Bank of
America on any loan. If at any time or from time to time the Prime Rate
increases or decreases, then the rate of interest hereunder shall be
correspondingly increased or decreased effective on the day on which any such
increase or decrease of the Prime Rate changes, unless otherwise herein
provided. In the event that Bank of America, during the term hereof, shall
abolish or abandon the practice of establishing a Prime Rate, or should the
same become unascertainable, Bank of America shall designate a comparable
reference rate which shall be deemed to be the Prime Rate for purposes hereof.
For purposes hereof, the "LIBOR Rate" shall mean interest based on the
Eurodollar Daily Floating Rate. The Eurodollar Daily Floating Rate is a
floating rate of interest and will change on and as of the date of a change in
the Eurodollar Daily Floating Rate. The period of time during which the
Eurodollar Daily Floating Rate shall be applicable shall be a Eurodollar Daily
Floating Rate Interest Period. "Eurodollar Daily Floating Rate" shall mean the
fluctuating rate of interest equal to the rate of interest per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page
3750 (or any successor page) as the one month London interbank offered rate for
deposits in Dollars at approximately 11:00 A.M. (London time) on the second
preceding Business Day, as adjusted from time to time in Bank's sole discretion
for then applicable reserve requirements, deposit insurance assessment rates
and other regulatory costs. If for any reason such rate is not available, the
term "Eurodollar Daily Floating Rate" shall mean the fluctuating rate of
interest equal to the rate of interest per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as
the one month London interbank offered rate for deposits in Dollars at
approximately 11:00 A.M. (London time) on the second preceding Business Day, as
adjusted from time to time in Bank's sole discretion for then applicable
reserve requirements, deposit insurance assessment rates and other regulatory
costs; provided, however, if more than one rate is specified on Telerate Page
3750 or on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all rates on that page.
Interest hereunder shall be calculated based upon a 360 day year and
actual days elapsed. The interest rate required hereby shall not exceed the
maximum rate permissible under applicable law, and any amounts paid in excess
of such rate shall be applied to reduce the principal amount hereof or shall be
refunded to Maker, at the option of the holder of this Note.
2
<PAGE> 3
All amounts due under this Note are payable at par in lawful money of
the United States of America, at the principal place of business of Payee in
Nashville, Tennessee, or at such other address as the Payee or other holder
hereof (herein "Holder") may direct.
Any payment not made within fifteen (15) days of its due date will be
subject to assessment of a late charge equal to five percent (5%) of such
payment. Holder's right to impose a late charge does not evidence a grace
period for the making of payments hereunder.
The occurrence of any of the following shall constitute an event of
default under this Note: (a) the failure of Maker to timely pay any amount due
Holder under this Note or any other obligation to Holder if such failure
continues for ten (10) days after notice of nonpayment from Holder to Maker
provided, however, that should Holder give Maker a notice of nonpayment, then
for the twelve month period following such notice of nonpayment, Holder shall
not be required to give Maker notice of nonpayment and Maker will be in default
if it fails to make a monetary payment within ten (10) days of the due date;
(b) the institution of proceedings by Maker under any state insolvency law or
under any federal bankruptcy law; (c) the institution of proceedings against
Maker under any state insolvency law or under any federal bankruptcy law, if
such proceedings are not dismissed within sixty (60) days; (d) Maker's becoming
insolvent or generally failing to pay its debts as they become due; (e) the
discovery by Holder that Maker has made a material misrepresentation of
financial condition in any written statement made to any present or previous
Holder which remains uncured for thirty (30) days; (f) the instigation of legal
proceedings against Maker for the violation of a material criminal statute; (g)
the issuance of an attachment against property of Maker unless removed, by bond
or otherwise, within ten (10) days; (h) the entry of a judgment against Maker
that remains unsatisfied for thirty (30) days after execution may first issue;
(i) Maker's liquidation or cessation of business; (j) the occurrence of a
default under the terms of any loan agreement, security agreement, deed of
trust, or similar document to which Maker is a party or to which any property
securing this Note is subject which results in the acceleration of an
indebtedness of One Hundred Thousand and 00/100 Dollars ($100,000.00) or more;
or (k) the occurrence of any of the foregoing with regard to any surety,
guarantor, endorser, or other person or entity primarily or secondarily liable
for the payment of the indebtedness evidenced by this Note.
Upon the occurrence of an event of default, as defined above, Holder
may, at its option and without notice, terminate any obligation to advance
funds under this Note, declare all principal and interest provided for under
this Note, and any other obligations of Maker to Holder, to be presently due
and payable, and Holder may enforce any remedies available to Holder under any
documents securing or evidencing debts of Maker to Holder. Holder may waive any
default before or after it occurs and may restore this Note in full effect
without impairing the right to declare it due for a subsequent default, this
right being a continuing one. Upon default, at Holder's election, the remaining
unpaid principal balance of the indebtedness evidenced hereby and all expenses
due Holder shall bear interest at the interest rate in effect immediately
before the default plus three percent (3%).
All amounts received for payment of this Note shall be first applied
to any expenses due Holder under this Note or under any other documents
evidencing or securing obligations of Maker to
3
<PAGE> 4
Holder, then to accrued interest, and finally to the reduction of principal.
Prepayment of principal or accrued interest may be made, in whole or in part,
at any time without penalty. Any prepayment(s) shall reduce the final
payment(s) and shall not reduce or defer installments next due.
This Note may be freely transferred by Holder.
Maker and all sureties, guarantors, endorsers and other parties to
this instrument hereby consent to any and all renewals, waivers, modifications,
or extensions of time (of any duration) that may be granted by Holder with
respect to this Note and severally waive demand, presentment, protest, notice
of dishonor, and all other notices that might otherwise be required by law. All
parties hereto waive the defense of impairment of collateral and all other
defenses of suretyship.
Maker's performance under this Note is unsecured. There will be a
negative pledge on existing unencumbered assets, as further described in the
Loan Agreement.
Maker and all sureties, guarantors, endorsers and other parties hereto
agree to pay reasonable attorneys' fees and all court and other costs that
Holder may incur in the course of efforts to collect the debt evidenced hereby
or to protect Holder's interest in any collateral securing the same.
The validity and construction of this Note shall be determined
according to the laws of Tennessee applicable to contracts executed and
performed within that state. If any provision of this Note should for any
reason be invalid or unenforceable, the remaining provisions hereof shall
remain in full effect.
The provisions of this Note may be amended or waived only by
instrument in writing signed by the Holder and Maker and attached to this Note.
Any controversy or claim between or among the parties to this Note or
any related loan or collateral agreements or instruments (collectively, "Loan
Documents"), including any claim based on or arising from an alleged tort,
shall be determined by binding arbitration in accordance with the Federal
Arbitration Act (or if not applicable, the applicable state law), the Rules of
Practice and Procedure for the arbitration of commercial disputes of Judicial
Arbitration and Mediation Services, Inc. (J.A.M.S.), and the "special rules"
set forth below. In the event of any inconsistency, the special rules shall
control. Judgment upon any arbitration award may be entered in any court having
jurisdiction. Any party to the Loan Documents may bring an action, including a
summary or expedited proceeding, to compel arbitration of any controversy or
claim to which this agreement applies in any court having jurisdiction over
such action.
The following "Special Rules" shall apply. The arbitration shall be
conducted in Nashville, Tennessee and administered by J.A.M.S. who will appoint
an arbitrator; if J.A.M.S. is unable or legally precluded from administering
the arbitration, then the American Arbitration Association will serve. All
arbitration hearings will be commenced within 90 days of the demand for
arbitration; further, the arbitrator shall only, upon a showing of cause, be
permitted to extend the commencement of such hearing for up to an additional 60
days.
4
<PAGE> 5
Nothing in foregoing arbitration shall be deemed to (i) limit the
applicability of any otherwise applicable statutes of limitation or repose and
any waivers contained in the Loan Documents; or (ii) be a waiver by Bank of
America of the protection afforded to it by 12 U.S.C. Sec. 91 or any
substantially equivalent state law; or (iii) limit the rights of Bank of
America under the Loan Documents (a) to exercise self help remedies such as
(but not limited to) set-off, or (b) to foreclose against any real or personal
property collateral, or (c) to obtain from a court provisional or ancillary
remedies such as (but not limited to) injunctive relief, possession of
collateral or the appointment of a receiver. Bank of America may exercise such
self help rights, foreclose upon such property, or obtain such provisional or
ancillary remedies before, during or after the pendency of any arbitration
proceeding brought pursuant to the Loan Documents. At Bank of America's option,
foreclosure under a deed of trust or mortgage may be accomplished by any of the
following: the exercise of a power of sale under the deed of trust or mortgage,
or by judicial sale under the deed of trust or mortgage, or by judicial
foreclosure. Neither this exercise or self help remedies nor the institution or
maintenance of an action for foreclosure or provisional or ancillary remedies
shall constitute a waiver of the right of any party, including the claimant in
any such action, to arbitrate the merits of the controversy or claim
occasioning resort to such remedies.
Words used herein indicating gender or number shall be read as context
may require.
J. ALEXANDER'S CORPORATION
(f/k/a VOLUNTEER CAPITAL CORPORATION)
By: /s/ R. Gregory Lewis
---------------------------------------------
Title: Vice President and Chief
Financial Officer
-------------------------------------------
J. ALEXANDER'S RESTAURANTS, INC.
(f/k/a TOTAL QUALITY MANAGEMENT, INC.)
By: /s/ R. Gregory Lewis
---------------------------------------------
Title: Vice President - Finance
-------------------------------------------
5
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF J. ALEXANDER'S CORPORATION
<TABLE>
<CAPTION>
STATE OF NAME UNDER WHICH
SUBSIDIARY INCORPORATION BUSINESS IS DONE
- ---------- ------------- ----------------
<S> <C> <C>
J. Alexander's Restaurants, Inc. Tennessee J. Alexander's Restaurant
J. Alexander's Restaurants of Kansas, Inc. Kansas J. Alexander's Restaurant
J. Alexander's Restaurants of Texas, Inc. Texas J. Alexander's Restaurant
</TABLE>
<PAGE> 1
EXHIBIT 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the following J. Alexander's
Corporation Registration Statements:
a. Form S-8 Registration Statement (No. 333-91431) pertaining to the J.
Alexander's Corporation 1999 Loan Program, filed on November 22, 1999;
b. Form S-8 Registration Statement (No. 333-49393) pertaining to the 1994
Employee Stock Incentive Plan, filed on April 3, 1998;
c. Form S-8 Registration Statement (No. 33-77478) pertaining to the 1985
Stock Option Plan, filed on May 25, 1994;
d. Form S-8 Registration Statement (No. 33-77476) pertaining to the 1994
Employee Stock Incentive Plan, filed on April 6, 1994;
e. Form S-8 Registration Statement (No. 33-39870) pertaining to the 1990
Stock Option Plan for Outside Directors, filed on April 9, 1991;
f. Form S-8 Registration Statement (No. 33-4483) pertaining to the 1985
Stock Option Plan, filed on April 1, 1986;
g. Form S-8 Registration Statement (No. 2-78140) pertaining to the 1982
Incentive Stock Option Plan, filed on June 25, 1982; and
h. Form S-8 Registration Statement (No. 2-78139) pertaining to the 1982
Employee Stock Purchase Plan, filed on June 25, 1982;
of our report dated February 21, 2000, except for the subsequent event described
in Note E as to which the date is March 17, 2000, with respect to the
consolidated financial statements and schedule of J. Alexander's Corporation
included in the Annual Report (Form 10-K) for the year ended January 2, 2000.
/s/ Ernst & Young LLP
Nashville, Tennessee
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED JANUARY 2, 2000
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-START> JAN-04-1999
<PERIOD-END> JAN-02-2000
<CASH> 933
<SECURITIES> 0
<RECEIVABLES> 103
<ALLOWANCES> 0
<INVENTORY> 703
<CURRENT-ASSETS> 2,161
<PP&E> 76,637
<DEPRECIATION> 14,495
<TOTAL-ASSETS> 65,635
<CURRENT-LIABILITIES> 8,570
<BONDS> 18,128
0
0
<COMMON> 339
<OTHER-SE> 37,501
<TOTAL-LIABILITY-AND-EQUITY> 65,635
<SALES> 78,454
<TOTAL-REVENUES> 78,454
<CGS> 25,568
<TOTAL-COSTS> 51,857
<OTHER-EXPENSES> 18,011
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,570
<INCOME-PRETAX> (299)
<INCOME-TAX> 33
<INCOME-CONTINUING> (332)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (332)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
</TABLE>
