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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 28, 1999
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: 333-62615
______________________________
ROMACORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-4010466
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9304 Forest Lane, Suite 200
Dallas, Texas 75243
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code:
(214) 343-7800
______________________________
Securities registered pursuant to Section 12(b) of the Act:
None
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 is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. [ ]
As of March 28, 1999, 100 shares of Common Stock, $.01 par value,
were outstanding and held by Roma Restaurant Holdings, Inc.
==========================================================================
PART I
ITEM 1. BUSINESS
Romacorp, Inc. (the Company) is the operator and franchisor of the
largest national, casual dining chain specializing in ribs with 211
restaurants located in 27 states in the United States and in 20 foreign
countries and territories. Founded in Miami in 1972, the Company's
restaurants are primarily located in Florida, Texas and California. Both
the Tony Roma's name and its "Famous for Ribs" and "Tony Roma's A Place
for Ribs" slogans are well-recognized throughout the United States. The
restaurants offer a full and varied menu, including ribs, chicken,
steaks, seafood, salads and other menu items in a casual atmosphere that
is suitable for the entire family. Since the inception of Tony Roma's,
its baby-back ribs have won numerous consumer and industry awards in over
25 markets. In addition to its award-winning ribs, the menu features its
signature deep fried onion ring loaf. As of March 28, 1999, the Company
operated 50 Company-owned and two joint-venture restaurants in 12 states
and through its subsidiaries, franchised 97 restaurants in 20 states and
62 restaurants in international locations.
The Tony Roma's concept is designed to serve a demographically and
geographically diverse customer base, with high quality food at moderate
prices. Entrees typically range in price from $4.99 to $12.99 for lunch
and $4.99 to $16.99 for dinner. Dessert selections range in price from
$1.99 to $3.99. Tony Roma's restaurants are generally located in
free-standing buildings with approximately 200 seats and separate bar
areas. The restaurants have a fun, comfortable atmosphere with
distinctive and varied decor and provide consumers with high quality,
friendly service. The Tony Roma's concept is appropriate for a wide
variety of casual dining occasions including family dinners and
business lunches.
To assure consistent product quality and to obtain optimum pricing,
purchases of food and restaurant equipment for the Tony Roma's
restaurants are made through a centralized purchasing function in its
corporate office in Dallas, Texas. The Company negotiates directly with
meat processors for its rib inventory, which is principally maintained
in various independent warehouses. Inventory is then shipped to
restaurants via commercial distributors. Produce and dairy products are
obtained locally. Food and equipment pricing information is also
generally available to the Tony Roma's franchisee community.
The Company is generally not dependent upon any one supplier for
availability of its products; its food and other products are generally
available from a number of acceptable sources. The Company has a policy
of maintaining alternate suppliers for most of its baseline products.
The Company does not manufacture any products nor act as a middleman.
The Company utilizes local advertising for individual restaurants
and broadcast advertising where market penetration is efficient as well
as public relations activities aimed at individual restaurants and entire
markets. The Company's advertising campaigns emphasize freshness,
quality food, good service and value. During fiscal 1999, the Company's
expenditures for advertising were 2.8% of Company-owned restaurant
revenues.
The Company (then Romacorp) was acquired in June 1993 by NPC
International, Inc. (NPC). On April 24, 1998, Holdings, NPC and Sentinel
Capital Partners, L.P. executed a recapitalization agreement ("The
Recapitalization") effective June 28, 1998 related to the Company.
Romacorp, Inc. was renamed Roma Restaurant Holdings, Inc. (Holdings) and
the assets, liabilities and operations of Holdings were contributed to
its newly-created, wholly-owned subsidiary, Romacorp, Inc. Prior to the
Recapitalization, Romacorp was a wholly-owned subsidiary of NPC. In the
Recapitalization, Holdings redeemed stock held by NPC and NPC forgave and
contributed to the capital of the Company a payable to NPC in the amount
of $33,731,000. After the Recapitalization, NPC held 20% and Sentinel
through certain affiliates (Sentinel) held 80% of the equity of Holdings.
In conjunction with this transaction, $75,000,000 of 12% Senior Notes
were issued by the Company. The Company paid Holdings a dividend of
$75,300,000 consisting primarily of the proceeds from the 12% Senior
Notes, which was used by Holdings, along with Sentinel's equity
contribution, to effect the Recapitalization. This transaction was
accounted for as a leveraged recapitalization with the assets and
liabilities of Romacorp, Inc. retaining their historical value.
<PAGE>
Franchised Restaurants
Although the first Tony Roma's opened in 1972, franchising wasn't a
key element of Tony Roma's growth strategy until 1984. At March 28,
1999, the Company had 48 franchisees operating 159 units world wide. The
largest franchise holder operates a chain of 21 Tony Roma's restaurants.
Although there are some individual unit franchisees, the Company seeks
to attract franchisees who can develop several restaurants.
New domestic franchisees pay an initial franchise fee of $50,000 and
a continuing royalty of 4% of gross sales. In addition, franchisees are
required to contribute 0.5% of gross sales to a joint marketing account
and may be required to participate in local market advertising
cooperatives. All potential franchisees must meet certain operational
and financial criteria.
In return for the domestic franchisee's initial fee and royalties,
the Company provides a variety of services, including: real estate
services, site selection criteria and review/advice on construction cost
and administration; pre-opening and opening assistance, which include an
on-site training team to assist in recruitment, training, organization,
inventory planning and quality control; centralized and system-wide
purchasing opportunities; in-store management training programs,
advertising and marketing programs; and various administrative and
training programs developed by the Company.
International franchisees receive a modified version of the above
services. Currently, international franchises require a fee of $30,000
per unit and royalty rate of 3% of gross sales. However, costs
associated with visits to international locations by Company personnel
are borne by the international franchisee. International franchise
holders also contribute 0.25% to a joint marketing account.
Competition
The restaurant industry is highly competitive with respect to price,
value, service, location and food quality. Tony Roma's has developed
brand identity within the casual theme segment and is the only national
chain to focus on ribs. On a local and regional basis, the Company
competes with smaller chains, which also specialize in ribs, and with
larger concepts that include ribs as a menu item.
Employees
As of March 28, 1999, the Company employed approximately 3,000
persons (including full-time and part-time personnel), of whom
approximately 2,930 were restaurant employees and 70 were restaurant
supervision and corporate employees. Company restaurants employ an
average of approximately 60 full-time or part-time employees. None of
the Company's employees are covered by collective bargaining agreements,
and the Company has never experienced a major work stoppage, strike, or
labor dispute. The Company considers its employee relations to be good.
Trade Names, Trademarks and Service Marks
The trade name "Tony Roma's" and all other trademarks, service
marks, symbols, slogans, emblems, logos, and designs used in the Tony
Roma's restaurant system are of material importance to its business. The
domestic trademark and franchise rights are owned by Roma Dining LP, an
affiliate of Romacorp, Inc., and international trademarks/franchise
rights are owned by Roma Systems, Inc., a wholly owned subsidiary of
Romacorp, Inc. A subsidiary, Roma Franchise Corporation, through a
license with Roma Dining LP, offers and services franchises in the United
States and Roma Systems, Inc. offers services and franchises
internationally. The use of these trademarks/franchise rights are
licensed to franchisees under franchise agreements for use with respect
to the operation and promotion of their Tony Roma's restaurants.
Seasonality
Tony Roma's restaurant sales are traditionally higher from January
to March due to an increase in vacation and part-time residence activity
in warm weather climates and resort locations where a significant number
of the Company's restaurants are located.
<PAGE>
The location of the
Company-owned and franchised restaurants as of
March 28, 1999 is as follows:
State Company-Owned Joint Venture Franchised
Alabama............... 3 0 0
Alaska................ 0 0 1
Arizona................ 0 0 6
Arkansas............... 1 0 0
California............. 4 1 32
Colorado............... 0 0 5
Florida.............. 20 0 2
Hawaii................. 0 0 4
Indiana................ 0 0 1
Kentucky............... 0 0 2
Louisiana.............. 1 0 0
Maine................. 0 0 1
Minnesota.............. 0 0 2
Missouri............... 1 0 0
Nebraska............... 0 0 1
Nevada................. 3 0 3
New York............... 0 0 1
North Carolina......... 1 0 0
Ohio................... 0 0 3
Oklahoma.............. 2 0 0
Oregon.............. 0 0 3
South Carolina......... 1 0 2
Tennessee.............. 1 0 0
Texas.................. 12 1 5
Utah................... 0 0 7
Washington............ 0 0 13
Wisconsin.............. 0 0 3
------- ---- ----
Total U.S..... 50 2 97
Foreign Country/Territory Franchised
Aruba.......................... 1
Bahamas............................................ 1
Canada................................................12
China................................................. 1
El Salvador........................................ 1
Germany............................................. 1
Guam............................................... 2
Hong Kong........................................... 3
Indonesia......................................... 2
Japan................................................ 7
Korea.............................................. 3
Mexico................................................ 9
Peru.................................................. 2
Phillippines......................................... 1
Puerto Rico......................................... 2
Saipan.............................................. 1
Singapore............................................ 2
Spain................................................ 9
Taiwan............................................... 1
Thailand............................................ 1
-----
Total International...................... 62
=====
Government Regulation
All of the Company's operations are subject to various federal,
state and local laws that affect its business, including laws and
regulations relating to health, sanitation, alcoholic beverage control
and safety standards. To date, federal and state environmental
regulations have not had a material effect on the Company's operations,
but more stringent and varied requirements of local governmental bodies
with respect to zoning, building codes, land use and environmental
factors have in the past increased, and can be expected in the future to
increase, the cost of, and the time required for, opening new
restaurants. Difficulties or failures in obtaining required licenses or
approvals could delay or prohibit the opening of new restaurants. In some
instances, the Company may have to obtain zoning variances and land use
permits for its new restaurants. The Company believes it is operating in
compliance with all material laws and regulations governing its
operations.
The Company is also subject to the Fair Labor Standards Act, which
governs such matters as minimum wages, overtime and other working
conditions. A substantial majority of the Company's food service
personnel are paid at rates related to the minimum wage and other
employment laws and regulations; accordingly, increases in the minimum
wage result in higher labor costs.
In recent years many states have enacted laws regulating franchise
operations. Much of this legislation requires detailed disclosure in the
offer and sale of franchises and the registration of the franchisor with
state administrative agencies. The Company is also subject to Federal
Trade Commission regulations relating to disclosure requirements in the
sale of franchises. Additionally, certain states have enacted, and
others may enact, legislation governing the termination and non-renewal
of franchises and other aspects of the franchise relationship that are
intended to protect franchisees. The foregoing matters may result in
some modifications in the Company's franchising activities and some
delays or failures in enforcing certain of its rights and remedies under
license and lease agreements. The laws applicable to franchise operations
and relationships are developing rapidly, and the Company is unable to
predict the effect on its intended operations of additional requirements
or restrictions that may be enacted or promulgated or of court decisions
that may be adverse to franchisors.
Cautionary Factors That May Affect Future Results, Financial Condition
or Business
In order to take advantage of the safe harbor provisions for
forward-looking statements adopted by the Private Securities Litigation
Reform Act of 1995, the Company is hereby identifying important risks,
uncertainties and other factors that could affect the Company's actual
results of operations, financial condition or business and could cause
the Company's actual results of operations, financial condition or
business to differ materially from its historical results of operations,
financial condition or business or the results of operation, financial
condition or business contemplated by forward-looking statements made
herein or elsewhere orally or in writing by, or on behalf of, the
Company. Except for the historical information contained herein, the
statements made in this Annual Report on Form 10-K are forward-looking
statements that involve such risks, uncertainties and other factors that
could cause or contribute to such differences including, but not limited
to, those described below.
Consumer Demand and Market Acceptance. Food service businesses are
often affected by changes in consumer tastes, national, regional and
local economic conditions and demographic trends. The performance of
individual restaurants may be adversely affected by factors such as
traffic patterns, demographic considerations and the type, number and
location of competing restaurants. Multi-unit food service chains such
as the Company's can also be materially and adversely affected by
publicity resulting from food quality, illness, injury and other health
concerns or operating issues stemming from one restaurant or a limited
number of restaurants, including restaurants operated by the franchisor
or another franchisee.
Training and Retention of Skilled Management and Other Restaurant
Personnel. The Company's success depends substantially upon its ability
to recruit, train and retain skilled management and other restaurant
personnel. There can be no assurance that labor shortages, economic
conditions or other factors will not adversely affect the ability of the
Company to satisfy its requirements in this area.
Ability to Locate and Secure Acceptable Restaurant Sites. The
success of restaurants is significantly influenced by location. There
can be no assurance that current locations will continue to be
attractive, or additional locations can be located and secured, as
demographic patterns change. It is possible that the current locations
or economic conditions where restaurants are located could decline in the
future, resulting in potentially reduced sales in those locations. There
is also no assurance that further sites will produce the same results as
past sites.
Competition. The Company's future performance will be subject to a
number of factors that affect the restaurant industry generally,
including competition. The restaurant business is highly competitive and
the competition can be expected to increase. Price, restaurant location,
food quality, quality and speed of service and attractiveness of
facilities are important aspects of competition as are the effectiveness
of marketing and advertising programs. The competitive environment is
also often affected by factors beyond the Company's or a particular
restaurant's control. The Company's restaurants compete with a wide
variety of restaurants ranging from national and regional restaurant
chains (some of which have substantially greater financial resources than
the Company) to locally owned restaurants. There is also active
competition for advantageous commercial real estate sites suitable for
restaurants.
Unforeseeable Events and Conditions. Unforeseeable events and
conditions, many of which are outside the control of the Company, can
impact consumer patterns in the restaurant industry. These events
include weather patterns, severe storms and power outages, natural
disasters and other acts of God. Specific examples include but are not
limited to the Company's concentration of Tony Roma's operations and
franchisees in Florida and California, both being areas that have
historically suffered from severe weather and natural disasters. There
can be no assurance that the Company's operations will not be adversely
affected by such events in the future.
Commodities Costs, Labor Shortages and Costs and Other Risks.
Dependence on frequent deliveries of fresh produce and groceries subjects
food service businesses to the risk that shortages or interruptions in
supply, caused by adverse weather or other conditions, could adversely
affect the availability, quality and costs of ingredients. Specifically,
certain ingredients such as babyback ribs and chicken constitute a large
percentage of the total cost of the Company's food products.
Unforeseeable increases in the cost of these specific ingredients could
significantly increase the Company's cost of sales and correspondingly
decrease the Company's operating income. In addition, unfavorable trends
or developments concerning factors such as inflation, increased food,
labor and employee benefit costs (including increases in hourly wage and
minimum unemployment tax rates), regional weather conditions, interest
rates and the availability of experienced management and hourly employees
may also adversely affect the food service industry in general and the
Company's results of operations and financial condition in particular.
ITEM 2. PROPERTIES
Romacorp, Inc. selects all company-operated restaurant sites, and
has the right to approve all franchised restaurant locations. Sites are
selected using a screening model to analyze locations with an emphasis
on projected financial return, demographics (such as population density,
age and income distribution), analysis of restaurant competition in the
area, and an analysis of the site characteristics, including
accessibility, traffic counts, and visibility.
The current costs of constructing, equipping, and opening a new
freestanding restaurant range from $1,670,000 to $2,700,000, including
approximately $280,000 to $950,000 for land, approximately $985,000 to
$1,220,000 for sitework, construction, and landscaping, and approximately
$400,000 to $530,000 for furniture, and opening costs. The cost of
developing new Company restaurants will vary, primarily because of
varying costs of land, sitework, signage, preopening, and labor.
Units that are constructed within existing structures or mall areas
are typically less costly. The Company has developed standardized
restaurant designs using a freestanding building to be situated on
a 1-1/2 acre site. The design is continually revised and refined.
The 50 Company-owned Tony Roma's restaurants at March 28, 1999 are
owned and leased as follows:
Leased from unrelated parties 22
Land and building owned 19
Building owned by the Company and land leased 9
----
50
====
Some of the Company's leases contain percentage rent clauses
(typically 5% to 6% of gross sales) against which the minimum rent is
applied, and most are net leases under which the Company pays taxes,
maintenance, insurance, repairs and utility costs.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are engaged in ordinary and routine
litigation incidental to its business, but management does not anticipate
that any amounts that the Company may be required to pay by reason
thereof, net of insurance reimbursements, will have a materially adverse
effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security holder,
Roma Restaurant Holdings, Inc., during the fourth quarter of the fiscal
year ended March 28, 1999.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK HOLDER
MATTERS.
There is no established public trading market for the Company's
common stock.
ITEM 6. SELECTED FINANCIAL DATA
The following table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and the historical consolidated financial statements and the notes
related thereto of the Company included elsewhere in this report.
Fiscal Year Ended
3/28 3/29 3/23 3/24 3/28
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(Dollars in thousands)
Income Statement Data:
Revenues
Net restaurant sales $93,213 $86,408 $68,778 $51,499 $42,137
Net franchise revenues 8,723 8,482 8,526 7,570 7,291
------ ------ ------ ------ ------
Total revenues $101,936 $94,890 $77,304 $59,069 $49,428
====== ====== ====== ====== ======
Deprec and amortization $6,670 $7,197 $5,425 $3,993 $3,829
Operating income (1) 10,467 8,883 7,001 2,029 3,259
Net interest expense 8,147 2,412 1,550 876 335
Income taxes..... 925 2,315 2,017 545 1,203
Net income......... $ 1,661 $4,165 $3,476 $351 $1,691
Other Financial Data:
Cash flows from:
Operating activities.... $9,844 $9,874 $9,416 $5,355 $5,228
Investing activities (14,969) (10,686) (24,758) (16,491) (6,178)
Financing activities... 5,125 812 15,342 10,909 (483)
EBITDA (2) (4)........ $17,403 $16,089 $12,468 $5,765 $7,058
EBITDA Margin (2)(3)(4) 17.1% 17.0% 16.1% 9.8% 14.3%
Balance Sheet Data:
Facilities and
equipment, net...... $57,046 $52,600 $46,516 $25,755 $15,659
Total assets....... 84,035 74,747 68,724 50,104 36,196
Total borrowings and
payables to
affiliate (5).... 80,290 35,717 34,611 19,574 7,086
Shareholder's equity
(deficit) (6) (8,667) 31,292 27,127 23,651 23,301
-------------
(1) For fiscal 1996, operating income includes an impairment and
loss provision for underperforming assets of $3.5 million.
Without this provision, operating income would have been $5.5
million.
(2) As used herein, "EBITDA" represents net income plus: (i) net
interest; (ii) income taxes; and (iii) depreciation and
amortization including amortization of start-up costs. The
Company has included information concerning EBITDA in this Form
10-K because it believes that such information is used by
certain investors as one measure of an issuer's historical
ability to service debt. EBITDA is not a measure determined in
accordance with Generally Accepted Accounting Principles and
should not be considered as an alternative to, or more
meaningful than, earnings from operations or other traditional
indications of an issuer's operating performance. EBITDA as
presented may not be comparable to EBITDA or other similarly
titled measures defined and presented by other companies.
(3) EBITDA margin represents EBITDA divided by total revenues.
(4) For fiscal 1996, earnings include the impairment and loss
provisions for underperforming assets of $3.5 million. Without
this provision, EBITDA would have been $9.3 million and EBITDA
margin would have been 15.7%.
(5) Includes current portion of long-term borrowings.
(6) See "Item I Business" for a description of the Recapitalization
which was effective June 28, 1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward Looking Comments
The statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and other statements that
are not historical facts contained herein are forward looking statements
that involve estimates, risks and uncertainties, including but not
limited to: consumer demand and market acceptance risk; the level of and
the effectiveness of marketing campaigns by the Company; training and
retention of skilled management and other restaurant personnel; the
Company's ability to locate and secure acceptable restaurant sites; the
effect of economic conditions, including interest rate fluctuations, the
impact of competing restaurants and concepts, new product introductions,
product mix and pricing, the cost of commodities and other food products,
labor shortages and costs and other risks detailed herein.
Results of Operations
The following table sets forth the Company's historical consolidated
revenues for fiscal 1999, 1998 and 1997:
Fiscal Year
1999 1998 1997
----- ----- -----
Revenues (Dollars in millions)
Net restaurant sales. $93.2 $86.4 $68.8
Net franchise revenues 8.7 8.5 8.5
----- ----- -----
Total revenues....... $101.9 $94.9 $77.3
===== ===== =====
The following table sets forth certain consolidated historical
financial data for the Company expressed as a percentage of net
restaurant sales for fiscal 1999, 1998 and 1997:
Fiscal Year
1999 1998 1997
----- ----- -----
Net restaurant sales 100.0% 100.0% 100.0%
Cost of sales............ 33.7% 33.6% 33.3%
Direct labor.................. 30.9% 30.9% 31.2%
Other (1).................. 23.4% 24.3% 24.2%
----- ----- -----
88.0% 88.8% 88.7%
====== ====== ======
Income from Company-owned
restaurant operations...... 12.0% 11.2% 11.3%
----- ----- -----
________________
(1 ) Other operating expenses include rent, depreciation and
amortization, advertising, utilities, supplies, and insurance
among other costs directly associated with operation of restaurant
facilities.
Fiscal 1999 Compared to Fiscal 1998
Net restaurant sales. Net restaurant sales for fiscal 1999 increased
$6.8 million, or 7.9%, to $93.2 million from $86.4 million in fiscal
1998. This increase was due primarily to the addition of six restaurants
and an increase in comparable sales growth of 1.8% for restaurants open
for more than 18 months, partly offset by one less week of sales in
fiscal 1999 versus fiscal 1998. In addition, menu prices were increased
in November by a weighted average of 6%.
Net franchise revenues. Net franchise revenues for fiscal 1999
increased $241,000 to $8.7 million due to a decrease in bad debt expense
and an increase in net franchise fees. These increases were partly
offset by a decrease in royalty income, resulting from one less week of
operations in fiscal 1999 versus fiscal 1998. Comparable store sales
were down 4.4%, primarily a result of the devaluation of Asian currency.
Cost of sales. Cost of sales as a percentage of net restaurant sales
remained basically unchanged at 33.7% versus 33.6% a year ago with
average rib costs per pound over the year being relatively flat compared
to the prior year.
Direct labor. Direct labor as a percentage of net restaurant sales
remained unchanged at 30.9%.
Other. Other operating expenses for fiscal 1999 decreased to 23.4%
from 24.3% primarily due to a decrease in rent and advertising expenses,
partly offset by an increase in depreciation expense resulting from the
addition of new restaurants. Rent expense declined as a percentage of
sales due to an increase in the number of owned restaurants versus leased
restaurants.
General and administrative expenses. General and administrative
expenses increased $151,000 to $9.4 million primarily due to increased
corporate staff as necessary under new ownership, increased professional
fees and the addition of the management fee related to the
Recapitalization. These increases were offset by a decrease in
preopening costs resulting from fewer openings in fiscal 1999 than in
1998. Preopening costs are amortized over twelve months following a
restaurant opening.
Interest expense. Interest expense increased $5.7 million due to
interest from the $75 million senior notes issued June 1998 in the
Recapitalization.
Miscellaneous. Miscellaneous income for fiscal 1999 includes
$169,000 for business interruption insurance proceeds related to a
restaurant destroyed by fire in the prior year.
Tax provision. The Company's tax provision for fiscal 1999 resulted
in an effective tax rate of 35.8%, which is consistent with the prior
year rate of 35.7%. See Note 7 of the Notes to Consolidated Financial
Statements for a further discussion of the effective tax rate.
Fiscal 1998 Compared to Fiscal 1997
Net restaurant sales. Net restaurant sales for fiscal 1998 increased
$17.6 million, or 25.6%, to $86.4 million from $68.8 million in fiscal
1997. This increase was due largely to the addition of five restaurants
in fiscal 1998, 13 restaurants in fiscal 1997, and 0.9% comparable sales
growth for restaurants open for more than 18 months. In addition, a new
menu was introduced resulting in an approximate 2% weighted average price
increase.
Net franchise revenues. Net franchise revenues for fiscal 1998
decreased slightly primarily due to lower revenues from sales of
international franchise rights in fiscal 1998 than in fiscal 1997. This
decrease was partially offset by an increase in royalty revenue of 7% due
to growth of the franchise system.
Cost of sales. Cost of sales as a percentage of net restaurant sales
increased to 33.6% for fiscal 1998 from 33.3% for fiscal 1997 due to an
increase in the average price of baby-back ribs of 17% for the year. This
increase was partially offset by menu enhancements implemented in fiscal
1998 and fiscal 1997 which caused favorable sales mix changes and
included price increases on select items.
Direct labor. Direct labor as a percentage of net restaurant sales
decreased to 30.9% for fiscal 1998 from 31.2% for fiscal 1997. This
decrease was primarily due to fewer new restaurant openings, with six
restaurants opened in fiscal 1998 compared to 14 restaurants in fiscal
1997. The higher labor costs in fiscal 1997 were due to training and
increased staffing levels, which typically accompany restaurant openings
to ensure a favorable dining experience for first visit customers. This
decrease was partially offset by the increase in the federal minimum wage
in September 1997.
Other. Other operating expenses for fiscal 1998 were relatively flat
as a percentage of restaurant sales compared to fiscal 1997.
General and administrative expenses. General and administrative
expenses were relatively flat at approximately $9.3 million in both
fiscal 1998 and 1997. General and administrative expenses as a percentage
of total revenues decreased to 9.8% in fiscal 1998 from 12% in fiscal
1997, reflecting the leverage from year-over-year revenue growth. General
and administrative expenses include the amortization of goodwill and pre-
opening costs. These costs increased over fiscal 1997 due to the
amortization of pre-opening costs, which occurs over the twelve months
following a restaurant opening.
Interest expense. Interest expense grew consistently during fiscal
1998 as restaurant growth and development was financed through the
Company's borrowings from NPC.
Tax provision. The Company's tax provision for fiscal 1998 resulted
in an effective tax rate of 35.7% compared to 36.7% for fiscal 1997. See
Note 7 of the Notes to Consolidated Financial Statements for a discussion
of the differences which cause the effective tax rate to vary from the
statutory federal income tax rate of 35%.
Liquidity and Capital Resources
The Company's principal sources of liquidity on both a long-term and
short-term basis are cash flow generated from operations, two separate
commitments from a financial group to purchase and leaseback up to 11
restaurant properties and to fund the construction of up to 11
restaurants on leased land, and a Revolving Credit Facility. On March
28, 1999, the Company had a working capital deficit of $4.1 million
compared to a $1.8 million deficit at March 29, 1998. The increase in
the deficit is primarily due to the accrued interest related to the $75
million in senior notes. Like most restaurant companies, the Company is
able to operate with a working capital deficit because substantially all
of its sales are for cash while it generally receives credit from
suppliers. Further, receivables are not a significant asset in the
restaurant business and inventory turnover is rapid.
Concurrently with the consummation of the recapitalization and the
issuance of $75 million in notes, the Company entered into a Revolving
Credit Facility. This facility provides for borrowings in an aggregate
principal amount of up to $15 million, is a five-year facility and bears
interest at a rate per annum equal (at the Company's option) to: (i) a
floating rate per annum equal to the Prime Rate (as defined in the New
Revolving Credit Facility); or (ii) a floating rate per annum equal to
2.25% in excess of the LIBOR Rate (as defined in the New Revolving Credit
Facility). Obligations of the Company under the New Revolving Credit
Facility not paid when due shall bear interest at a default rate equal
to 2% in excess of the non-default interest rate. A commitment fee based
on an annual rate of .375% is payable monthly on any unused portion of the
commitment. As of March 28, 1999, $5,290,000 was outstanding under the
facility.
During September 1998, the Company obtained two commitments from a
financial group. One is a commitment to purchase, at the Company's
option, 11 restaurants not to exceed $1.75 million each or $19 million
in the aggregate and to subsequently enter into a leaseback agreement
with the Company as lessee. The lease agreement provides for an initial
minimum annual rent of 10% of the purchase price, which will increase 6%
on the third anniversary of the lease and an additional 6% every three
years thereafter. Payments are to be made monthly. The lease term will
be for 15 years with two five-year renewal options of five years each.
The minimum annual rent for the renewal option periods will be set at
fair market value. As of March 28, 1999, $5.5 million in those sale-
leaseback transactions had been completed. The second commitment, a
Leasehold Mortgage Loan Commitment, provides for the funding of the
construction of 11 restaurants on leased land at a rate of 450 basis
points over the then existing rate of 15-year United States Treasury
Notes with an amortization period of 15 years and payments to be made
monthly. Both commitments expire June 30, 2000.
Capital Expenditures
The Company's capital expenditures in fiscal 1999, 1998 and 1997
were approximately $15.1 million, $10.6 million and $23.8 million,
respectively. Such expenditures were used primarily to fund the
maintenance, renovation and new development of Company-owned restaurants.
The Company plans to open ten restaurants and complete one major remodel
during fiscal 2000 and estimates capital expenditures to be approximately
$21.7 million. The Company plans to fund approximately $16.5 million of
expenditures with sales leaseback transactions resulting in net capital
expenditures of $5.2 million, which will be funded by internally
generated cash flow and the existing credit facility.
Seasonality
Tony Roma's restaurant sales are traditionally higher from January
to March due to an increase in vacation and part-time residence activity
in warm weather climates and resort locations where a significant number
of the Company's restaurants are located.
Rib Pricing
Baby-back ribs represent approximately 25% of the Company's cost of
sales. Because ribs are a by-product of pork processing, their price is
influenced largely by the demand for boneless pork. Historically, the
cost of baby-back ribs has been volatile. Significant changes in the
prices of ribs could significantly increase the Company's cost of sales
and adversely effect the business, results of operations and financial
condition of the Company.
Effects of Inflation
Inflationary factors such as increases in food and labor costs
directly affect the Company's operations. Because many of the Company's
restaurant employees are paid on an hourly basis, changes in rates
related to federal and state minimum wage and tip credit laws will effect
the Company's labor costs. The Company cannot always effect immediate
price increases to offset higher costs and no assurance can be given that
the Company will be able to do so in the future.
Year 2000 Issue
The Company is in the process of evaluating and modifying its
computer systems and applications for Year 2000 compliance.
In conjunction with the Recapitalization, the Company entered into
a Transition Financial and Accounting Services Agreement (the
"Transition Services Agreement") with its former parent, NPC
International, Inc. (NPC) providing for accounting services, payroll
services and use of NPC's proprietary POS System. Management has reviewed
NPC's plans for Year 2000 compliance and NPC has completed substantially
all modifications and testing, including the POS System and will continue
testing systems throughout 1999. Terms of the Transition Services
Agreement provide for indemnification of NPC with respect to services
performed, in the absence of gross negligence. The Company, although not
incurring incremental costs to evaluate the NPC software, is responsible
for any necessary hardware upgrades, which are expected to be minimal.
In addition to a review of NPC's systems, the Company is in the
process of evaluating third party vendors for Year 2000 readiness. This
includes verbal as well as written inquiries to substantially all of the
Company's vendors. These responses will be assessed and prioritized in
order of significance to the business. To the extent that responses are
not satisfactory, contingency plans will be developed. Furthermore, the
Company has provided all franchises with information related to the risks
associated with the Year 2000.
Additionally, the Company is in the process of reviewing
non-information technology equipment and anticipates completion of this
effort by June 30, 1999. It is believed that any necessary upgrades or
replacements will be minimal and will be funded out of existing cash
flows from operations.
Since the majority of the systems work is being performed by NPC,
the Company will incur minimal costs related to the Year 2000 issue. Any
work performed to remedy any Year 2000 issues will be performed by
existing Company staff and any effect on the financial condition and
results of operations due to the diversion of resources will be
insignificant.
The Company does not believe the costs related to the Year 2000
compliance project will be material to its financial position or results
of operations. However, the cost of the project and the date on which the
Company plans to complete the Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of
certain resources, third party modification plans and other factors.
Unanticipated failures by critical vendors as well as the failure by the
Company to execute its own remediation efforts could have a material
adverse effect on the cost of the project and its completion date. As a
result, there can be no assurance that these forward-looking estimates
will be achieved and the actual cost and vendor compliance could differ
materially from those plans, resulting in material financial risk.
Recently Issued Accounting Pronouncements
In April 1998, Statement of Position ("SOP") 98-5 Accounting for
Costs of Start-up Activities was issued. The SOP requires the Company to
expense pre-opening costs as incurred and to report the initial adoption
as a cumulative effect of a change in accounting principles as described
in APB No. 20, Accounting Changes, during the first quarter of its fiscal
year 2000. The cumulative effect upon adoption will result in a one-time
charge to income in an amount equal to the net book value of the
Company's pre-opening costs. This change will also result in the
discontinuation of amortization of pre-opening cost expense in subsequent
periods. At March 28, 1999, the balance of pre-opening costs was $777,000
which will be written-off during the first quarter of fiscal year 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates
on debt and changes in commodity prices, particularly baby-back rib
prices.
The Company's exposure to interest rate risk relates to the variable
rate revolving credit loan that is benchmarked to United States and
European short-term interest rates. The Company does not use derivative
financial instruments to manage overall borrowing costs or reduce
exposure to adverse fluctuations in interest rates. The impact on the
Company's results of operations of a one-point interest rate change on
the outstanding balance of the variable rate debt as of March 28, 1999
would be immaterial.
Baby-back ribs represent approximately 25% of the Company's cost of
sales. Because ribs are a by-product of pork processing, their price is
influenced largely by the demand for boneless pork. Historically, the
cost of baby-back ribs has been volatile. Significant changes in the
prices of ribs could significantly increase the Company's cost of sales
and adversely effect the business, results of operations and financial
condition of the Company. The Company actively manages its rib costs
through supply commitments in advance of a specific need; however, the
arrangements are terminable at will at the option of either party without
prior notice. Therefore, there can be no assurance that any of the supply
commitments will not be terminated in the future. As a result, the
Company is subject to the risk of substantial and sudden price increases,
shortages or interruptions in supply of such items, which could have a
material adverse effect on the business, financial condition and results
of operations.
The Company purchases certain other commodities used in food
preparation. These commodities are generally purchased based upon market
prices established with vendors. These purchase arrangements may contain
contractual features that limit the price paid by establishing certain
price floors or caps. The Company does not use financial instruments to
hedge commodity prices because these purchase arrangements help control
the ultimate cost paid and any commodity price aberrations are generally
short term in nature.
This market risk discussion contains forward-looking statements.
Actual results may differ materially from this discussion based upon
general market conditions and changes in domestic and global financial
markets.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements are included under Item 14 of this Annual
Report.
ITEM 9.
The Company had no disagreements on accounting or financial matters
with its independent accountants to report under this Item 9.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company as of March 28,
1999 were:
Name Age Position
Robert B. Page . . .40 Chief Executive Officer, Director
Susan R. Holland . .42 Vice President, Finance - Chief
Financial Officer
David G. Short . . .60 Vice President, Legal, Secretary and
General Counsel
David S. Lobel . . .46 Chairman of the Board of Directors
Eric D. Bommer . . .30 Director
Philip Friedman. . .53 Director
John F. McCormack. .40 Director
Michael J. Myers . .58 Director
James K. Schwartz. .37 Director (resigned on May 12, 1999)
Robert B. Page has been President since June 1994. He serves as
Chief Executive Officer of the Company and as a director of the Company
and Holdings. Mr. Page joined the Company in October 1993 as Senior
Vice President of Operations and Chief Operations Officer until he became
President. From August 1988 to October 1993, Mr. Page was Senior Vice
President of Operations for the Pizza Division of NPC International, Inc.
Susan R. Holland was with El Chico Restaurants, Inc. from 1985 until
joining the Company in August 1998. Ms. Holland served as Acting Chief
Financial Officer from May 1998 and as Vice President, Treasurer,
Controller and Corporate Secretary since October 1996. Ms. Holland
joined El Chico Restaurants, Inc. as Controller and served as Treasurer
since August 1990. Ms. Holland is a Certified Public Accountant.
David G. Short has been Vice President-Legal, General Counsel and
Secretary since September 1990. From 1986 to 1990, Mr. Short was Vice
President, Legal and General Counsel of TGI Friday's, Inc. Mr. Short
also served as Vice President of NPC International, Inc. and certain of
its affiliates until the Recapitalization.
David S. Lobel serves as a director of the Company and Holdings. Mr.
Lobel founded Sentinel in 1995 and presently serves as Managing Partner.
From 1981 to 1995, Mr. Lobel was employed by First Century Partners, a
venture capital affiliate of Salomon Smith Barney, and served as a
general partner of funds managed by First Century from 1983 to 1995. Mr.
Lobel serves on the boards of various private companies.
Eric D. Bommer serves as a director of the Company and Holdings. Mr.
Bommer joined Sentinel in March 1997 and serves as Vice President. Prior
to joining Sentinel, he was an associate at Gefinor Acquisition Partners,
L.P., a private equity investment partnership, from June 1995 to March
1997. From 1993 to 1995, he worked in the Investment Banking Division
of CS First Boston. From 1992 to 1993, Mr. Bommer worked at LaSalle
Partners. Mr. Bommer serves on the boards of various private companies.
Philip Friedman serves as a director of the Company and Holdings.
Mr. Friedman is President of McAlister's Corporation, operator and
franchisor of the McAlister's Deli restaurant chain. From June 1996 to
January 1998, Mr. Friedman was President of Panda Management Company,
Inc., a developer and operator of 300 quick-service chinese restaurants.
In addition, from June 1986 to the present, Mr. Friedman has been
president of P. Friedman and Associates, Inc., a restaurant consulting
firm. Mr. Friedman serves as Chairman of the Board of Rosti Restaurants
and is a director of Panda Management Company, Inc., Paramark, Inc.,
Roadhouse Grill, Inc. and Eateries, Inc.
John F. McCormack serves as a director of the Company and Holdings.
Mr. McCormack co-founded Sentinel in 1995 and presently serves as a
Partner. From 1990 to 1995 Mr. McCormack served as Vice President at
First Century Partners, a venture capital affiliate of Salomon Smith
Barney. From 1983 to 1990, Mr. McCormack was employed by Coopers &
Lybrand, most recently as a Manager. Mr. McCormack serves on the boards
of various private companies.
Michael J. Myers serves as a director of the Company and Holdings.
Mr. Myers is the President of First Century Partners, a venture capital
affiliate of Salomon Smith Barney, and has been a Senior Advisory Partner
to Sentinel since 1995. Mr. Myers co-founded First Century Partners in
1972 and has served as its President since 1976. Mr. Myers is a director
of Office Depot and various private companies.
James K. Schwartz served as a director of the Company and Holdings.
He has served as President and Chief Operating Officer of NPC
International, Inc. since February 1995 and as a director since July
1996. From January 1993 to February 1995 Mr. Schwartz served as Vice
President and Chief Financial Officer of NPC International, Inc. From
1984 to 1991, he was associated with Ernst & Young LLP. On May 12, 1999,
Mr. Schwartz resigned from the Board of Directors of the Company and
Holdings.
<PAGE>
ITEM 11. COMPENSATION OF EXECUTIVE OFFICERS
The following summarizes, for each of the three fiscal years ended
March 28, 1999, March 29, 1998, and March 23, 1997, the compensation
awarded to, earned by, or paid to the Chief Executive Officer (the "CEO")
of the Company as of March 28, 1999, and the other executive officer
(other than the CEO) who served as an executive officer of the Company
or its subsidiaries as of March 28, 1999, whose annual compensation
exceeded $100,000 for the fiscal year ended March 28, 1999.
Summary Compensation Table
Annual Compensation
-------------------------------
Other
Fiscal Annual
Year Salary Bonus Compensation(1)
----- ------ ----- -------------
Name and Principal Position
---------------------------
Robert B. Page 1999 $194,231 $38,472 $4,668
Chief Executive Officer 1998 160,000 23,207 9,760
1997 140,000 62,500 9,414
David G. Short 1999 138,998 0 5,052
Vice President, Legal, 1998 132,500 0 9,147
Secretary and General 1997 125,000 0 9,128
Counsel
_______________
(1) Includes profit sharing contributions, car allowance and
insurance.
There were no options granted during the year ended March 28, 1999
or outstanding as of March 28, 1999. Accordingly, disclosure tables are
not presented.
Employment Agreements
In connection with the Recapitalization, the Company entered into an
employment agreement with Mr. Page. Such agreement provides for: (i) a
three year employment term with a maximum base of $200,000 per annum and
a bonus, based upon EBITDA objectives, up to 50% of base compensation;
(ii) severance benefits and noncompetition, nonsolicitation and
confidentiality agreements in certain situations; and (iii) the grant of
certain stock options in Holdings; and other terms and conditions of Mr.
Page's employment.
Compensation of Directors
The Company reimburses directors for out-of-pocket expenses incurred
by them in connection with services provided in such capacity. Mr. Myers
receives a quarterly payment of $7,500. Mr. Friedman receives a quarterly
payment of $3,500 and a payment of $1,000 per Board of Directors Meeting.
In addition, on May 12, 1999, Mr. Friedman was awarded a stock option
grant to purchase .88 shares at $12,500 per share, which vests 25% a year
over four years.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is or has been an officer or
employee of the Company or any of its subsidiaries or had any
relationship requiring disclosures pursuant to Item 404 of Regulation S-K.
In fiscal 1999, no executive officer of the Company served as a
director of another entity, one of whose executive officers served on the
Compensation Committee or on the Company's Board of Directors.
The Company reimbursed Sentinel for all out-of-pocket expenses
incurred in connection with the Recapitalization. In addition, pursuant
to a management agreement, Sentinel receives a management fee equal to
$300,000 per annum for the first two years of the term of the management
agreement and $500,000 per annum thereafter, and will be reimbursed for
certain out-of-pocket expenses.
<PAGE>
Report of the Compensation and Benefits Committee
The Compensation Committee of the Board of Directors, comprised of
the undersigned non-employee directors of the Company, has the
responsibility for determining compensation plans for all executive
officers. Any recommendations are submitted to the full Board of
Directors for approval.
The Committee has adopted a policy that the Company's executive
compensation plan should have three principal components:
- Competitive base salaries. In order to attract and retain high-
quality management the Company should offer appropriate salaries
commensurate with skills and experience. The Committee considers
recommendations by the Chief Executive Officer in determining
other executive base salaries, as well as information on industry
practice.
- A short term bonus plan. To encourage and reward near-term
improvements in the Company's performance, the Committee
determined to offer an annual bonus plan based on EBITDA
objectives. "EBITDA" represents net income plus: (i) net
interest; (ii) income taxes; and (iii) depreciation and
amortization including amortization of start-up costs. The
Committee believes EBITDA is an important measure in determining
the value of a privately-held company. Provision also has been
made for discretionary bonuses in certain situations.
- A long-term incentive plan. The Committee determined to
establish a long-term incentive plan to accomplish the following
objectives:
- reward sustained performance;
- balance short-term and long-term focus;
- attract and retain qualified management;
- build executive equity ownership;
- align executive and ownership interest; and
- minimize adverse financial statement impact of awards.
To these ends, the Committee determined that stock option awards are
effective in accomplishing the desired objectives.
The Committee is responsible for reviewing and recommending base
salary changes for executive officers. Effective with the completion of
the Recapitalization, Mr. Page was appointed Chief Executive Officer, and
a compensation package was determined based upon industry averages, the
size of the Company and Mr. Page's industry experience. In addition, the
existing Vice President, Legal, Secretary and General Counsel and the
newly hired Chief Financial Officer's compensation was determined by
considering market data for each officer's position, level of
responsibility, experience and, past performance, as applicable.
The executive short-term bonus plan for fiscal 1999 was based upon
an EBITDA target which when met would pay a pre-determined bonus to each
executive officer.
The Committee also recommends awards under the Company's non-qualified
stock option plan. On May 12, 1999, stock option grants
totaling 40.7 shares were made to the Chief Executive Officer, the two
named executive officers and certain other key employees. These grants
reflect an exercise price of $12,500 per share, which was determined to
be the fair market value at the date of grant as required by the Stock
Option Plan.
Federal income tax legislation has limited the deductibility of
certain compensation paid to the Chief Executive Officer and covered
employees to the extent the compensation exceeds $1,000,000.
Performance-based compensation and certain other compensation, as
defined, is not subject to the deduction limitation of this section
162(m) regulation. It is not currently anticipated that any covered
employee would earn annual compensation in excess of the $1,000,000
definition under existing or proposed compensation plans. The Company
continually reviews its compensation plans to minimize or avoid potential
adverse effects of this legislation. The Committee will consider
recommending such steps as may be required to qualify annual and long-
term incentive compensation for deductibility if that appears appropriate
at some time in the future.
Members of the Compensation and
Benefits Committee
David S. Lobel, Chairman
Michael J. Myers
<PAGE>
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
100% of the outstanding stock of the Company is owned by Roma
Restaurant Holdings, Inc. which, as of March 28, 1999, was owned 22.2%
by Sentinel Capital Partners, 44.0% by Sentinel Capital Partners II, 20%
by NPC International, Inc. and the remaining 13.8% by unrelated third
parties. The address of Sentinel Capital Partners is 777 Third Avenue,
32nd Floor, New York, New York 10017 and the address of NPC
International, Inc. is 14400 College Blvd., Lenexa, Kansas 66762.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transition Services Agreement
The Company entered into the Transition Service Agreement whereby
NPC will continue to provide administrative services to the Company for
an initial fee of $16,000 per week for a period of up to one year.
Services provided will include accounting services, payroll services and
use of NPC's proprietary restaurant technology system software (the "POS
System"). As part of the Transition Services Agreement, the Company was
granted a perpetual license to use the POS System. Effective March 29,
1999, the Company amended the contract whereby services will continue
through July 2001 with a weekly base service fee of $14,300 during fiscal
2000, $15,000 during fiscal 2001, and $15,750 during fiscal 2002. In
addition to the base fee, an incremental weekly fee shall be paid for
each restaurant opened on or after March 29, 1999 in the amount of $160
for fiscal 2000, $170 for fiscal 2001 and $180 for fiscal 2002.
Payment of Certain Fees and Expenses
The Company reimburses Sentinel for all out-of-pocket expenses
incurred in connection with the Recapitalization. In addition, pursuant
to a management agreement, Sentinel receives a management fee equal to
$300,000 per annum for the first two years of the term of the management
agreement and $500,000 per annum thereafter, and will be reimbursed for
certain out-of-pocket expenses.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
The following documents are filed as part of this report:
(1) Financial Statements:
The response to this portion of Item 14 is submitted as a
separate section of this report. See Index to Financial
Statements at page F-1.
(2) Financial Statement Schedules:
All schedules have been omitted as the required information is
inapplicable or the information is presented in the financial
statements or related notes.
(3) Exhibits:
The exhibits listed on the accompanying index to exhibits at
page 22 are filed as part of this Report.
(4) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
March 28, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the undersigned Registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Dallas, the State of Texas, on
June 24, 1999.
By: /s/ Robert B. Page
-------------------
Name: Robert B. Page
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated. Each person
whose signature to this report appears below hereby appoints Robert B.
Page and Susan R. Holland and each of them, any one of whom may act
without the joinder of the other, as his or her attorney-in-fact to sign
on his behalf, individually and in each capacity stated below, and to
file all amendments to this report, which amendment or amendments may
make such changes in and additions to the report as any such attorney-
in-fact may deem necessary or appropriate.
Signature Title Date
/s/ Robert B. Page Chief Executive Officer June 24, 1999
------------------- and Director (principal
Robert B. Page executive officer)
/s/ Susan R. Holland Vice President, Finance June 24, 1999
-------------------- and Chief Financial Officer,
Susan R. Holland (principal financial officer
and accounting officer)
/s/ David S. Lobel Chairman of the Board June 24, 1999
-------------------- of Directors
David S. Lobel
/s/ Eric D. Bommer Director June 24, 1999
---------------------
Eric D. Bommer
/s/ Philip Friedman Director June 24, 1999
-----------------------
Philip Friedman
/s/ John J. McCormack Director June 24, 1999
----------------------
John J. McCormack
/s/ Michael J. Myers Director June 24, 1999
--------------------
Michael J. Myers
<PAGE>
EXHIBITS INDEX
Exhibit
Number Description
2.1 Recapitalization Agreement dated April 24, 1998 by and
among the Company, NPC International, Inc., NPC Restaurant
Holdings, Inc. and Sentinel Capital Partners, L.P.
2.2 Assignment Agreement dated July 1, 1998 by and among
Sentinel, Sentinel Capital Partners II, L.P. ("Sentinel
II"), Omega Partners, L.P. ("Omega"), Provident Financial
Group, Inc. ("Provident"), Travelers Casualty and Surety
Company ("Travelers I"), The Travelers Insurance Company
("Travelers II"), The Travelers Life and Annuity Company
("Travelers III") and the Phoenix Insurance Company
("Phoenix", and together with Sentinel II, Omega,
Provident, Travelers I, Travelers II, and Travelers III,
the "Assignees") . . . . . . . . . . . . . . . . . .
3.1 Certificate of Incorporation of the Company . . . . . .
3.2 By-laws of the Company. . . . . . . . . . . . . . . . .
10.1 Indenture dated as of July 1, 1998 between the Company,
the Guarantors named therein and United States Trust
Company of New York. . . . . . . . . . . . . . . . .
10.2 Purchase Agreement dated as of June 26, 1998 among the
Company, Salomon Brothers Inc. and Schroder & Co. Inc. .
10.3 Registration Rights Agreement dated as of July 1, 1998
among the Company, the Guarantors named therein, Salomon
Brothers, Inc. and Schroder & Co. Inc.
10.4 Stockholders Agreement dated as of July 1, 1998 by and
among the Company, the Assignees and Holdings . .
10.5 Registration Rights Agreement dated July 1, 1998 by and
among the Company, NPC Restaurant Holdings, Inc., Sentinel
Capital Partners L.P., Sentinel Capital Partners II, L.P.,
Omega Partners, L.P., Provident Financial Group, Inc.,
Travelers Casualty and Surety Company, Travelers Insurance
Company, The Travelers Life and Casualty and The Phoenix
Insurance Company . . . .. . . . .
10.6 Transitional Financial and Accounting Services Agreement
dated as of July 1, 1998 by and among NPC Management, Inc.
and the Company . . . . . . . . . . . . . . . . . . . .
10.7 Management Services Agreement dated as of July 1, 1998 by
and among the Company and Sentinel . . . . . . . . .
10.8 Credit Agreement dated as of July 1, 1998 by and among the
Company, Roma Systems, Inc., Roma Franchise Corporation,
Roma Holdings, Inc., Roma Dining LP, The Provident Bank
and various lenders described therein. . . . . . . .
10.9 Management Agreement dated as of July 1, 1998 by and among
the Company and Robert B. Page
10.9a Amended and Restated Accounting and Management Information
Services Agreement dated January 20, 1999 . .
*10.10 Amended Management Agreement dated as of May 12, 1999 by
and among the Company and Robert B. Page . . . . . .
*10.11 Letter of employment and agreement dated as of July 13,
1998 by and among the Company and Susan R. Holland
10.12 Letter of commitment dated September 4, 1998 to the
Company from CAPTEC Financial Group, Inc.. . . . . .
21.1 Subsidiaries of the Issuer. . . . . . . . . . . . . . .
27.1 Financial Data Schedule . . . . . . . . . . . . . . . .
_____________
Filed as an exhibit to the Company's Form S-4, and incorporated
herein by reference.
* Management contract for compensation plan or arrangement.
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
Audited Consolidated Financial Statements:
Report of Independent Auditors F-2
Consolidated Balance Sheets -Assets
As of March 28, 1999 and March 29, 1998 F-3
Consolidated Balance Sheets - Liabilities and
Stockholder's Equity (Deficit)
As of March 28, 1999 and March 29, 1998 F-4
Consolidated Statements of Income
For the fiscal years ended March 28, 1999,
March 29, 1998 and March 23, 1997 F-5
Consolidated Statements of Changes in Stockholder's
Equity (Deficit)
For the fiscal years ended March 28, 1999,
March 29, 1998 and March 23, 1997 F-6
Consolidated Statements of Cash Flows
For the fiscal years ended March 28, 1999,
March 29, 1998 and March 23, 1997 F-7
Notes to Consolidated Financial Statements F-8
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Romacorp, Inc. and Subsidiaries
We have audited the accompanying balance sheets of Romacorp, Inc.
and Subsidiaries (the Company) as of March 28, 1999, and March 29, 1998
and the related statements of income, changes in stockholder's equity
(deficit), and cash flows for each of the three fiscal years in the
period ended March 28, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Romacorp,
Inc. and Subsidiaries at March 28, 1999, and March 29, 1998 and the
results of their operations and their cash flows for each of the three
fiscal years in the period ended March 28, 1999, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Kansas City, Missouri
April 28, 1999
<PAGE>
ROMACORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 28, March 29,
1999 1998
-------- --------
(Dollars in thousands)
Current Assets:
Cash and cash equivalents..... $ - $ -
Accounts receivable, net............. 1,637 1,351
Inventories of food and supplies......... 3,051 1,509
Deferred income tax asset........... 217 583
Prepaid expenses......... 1,059 583
Preopening costs................. 777 466
Other current assets......... 14 22
----- ------
Total current assets........ 6,755 4,514
Facilities and equipment, net... 57,046 52,600
Notes receivable, net.............. 719 757
Goodwill, net of accumulated amortization
of $5,184 and $4,450, respectively.... 13,792 14,526
Deferred income tax asset......... 1,642 1,423
Other assets............. 792 927
Debt issuance costs, net of accumulated
amortization of $337............... 3,289 -
------ ------
Total assets........ $84,035 $74,747
====== ======
The accompanying notes are an integral part of these consolidated
financial statements
ROMACORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
March 28, March 29,
1999 1998
--------- --------
(Dollars in thousands)
Current Liabilities:
Accounts payable............. $2,651 $1,094
Accrued interest............... 2,291 28
Current portion of closure reserve 100 100
Checks written in excess of cash 296 113
Other accrued liabilities........ 5,565 4,560
Current portion of long-term debt - 444
------ ------
Total current liabilities 10,903 6,339
Senior notes................ 75,000 -
Long-term debt.................. 5,290 889
Closure reserve............... 309 443
Payable to affiliate - 34,384
Long-term insurance reserves....... 1,200 1,400
Stockholder's Equity (Deficit):
Common stock, 2,000 shares authorized,
100 shares issued and outstanding - -
Paid-in capital.......... 66,469 17,444
Retained earnings (deficit):
Dividend to Holdings...... (75,351) -
Other..................... 215 13,848
------- -------
Total............... (75,136) 13,848
------- -------
Total stockholder's equity (deficit) (8,667) 31,292
Total liabilities and stockholder's
equity (deficit)............ $84,035 $74,747
======= =======
The accompanying notes are an integral part of these consolidated
financial statements
ROMACORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Fiscal Year Ended
March 28, March 29, March 23,
1997 1998 1997
----- ------- -------
(Dollars in thousands)
Net restaurant sales........ $93,213 $86,408 $68,778
Net franchise revenues........ 8,723 8,482 8,526
------ ------ ------
Total revenues......... 101,936 94,890 77,304
====== ====== ======
Cost of sales................. 31,399 29,011 22,921
Direct labor............... 28,836 26,694 21,461
Other...................... 21,819 21,038 16,645
General and administrative expenses 9,415 9,264 9,276
------ ------ ------
Total operating expenses.... 91,469 86,007 70,303
------ ------ ------
Operating income............. 10,467 8,883 7,001
Other income (expense):
Interest expense......... (8,147) (2,412) (1,550)
Miscellaneous.............. 266 9 42
------ ------ ------
Income before income taxes.. 2,586 6,480 5,493
Provision (benefit) for income taxes:
Current......... 778 3,138 731
Deferred............ 147 (823) 1,286
------ ------ ------
925 2,315 2,017
------ ------ ------
Net income............. $1,661 $4,165 $3,476
====== ====== ======
The accompanying notes are an integral part of these consolidated
financial statements
ROMACORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings Total
Balances at March 24, 1996 100 $- $17,444 $6,207 $23,651
Net earnings 3,476 3,476
------ ----- ------ ------ ------
Balances at March 23, 1997 100 - 17,444 9,683 27,127
Net earnings 4,165 4,165
------ ------ ------ ------ ------
Balances at March 28, 1998 100 - 17,444 13,848 31,292
Net earnings from March 29,
1998 to June 28, 1998 1,446 1,446
Payable to affiliate
contributed to capital - - 33,731 - 33,731
------ ------ ------ ------ ------
Balance at June 28, 1998 100 - 51,175 15,294 66,469
Contribution of Holdings net
assets to Romacorp, Inc.
(Note 1) - - 66,469 - 66,469
Dividend to Holdings - - - (75,351)(75,351)
Net earnings from June 29,
1998 to March 28, 1999 - - - 215 215
------ ------ ------ ------ ------
Balances at March 28, 1999 100 $- $66,469 $(75,136)$(8,667)
====== ====== ====== ====== =======
The accompanying notes are an integral part of these consolidated
financial statements
ROMACORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Fiscal Year Ended
March 28, March 29, March 23,
1999 1998 1997
------ ------ ------
(Dollars in thousands)
Operating Activities:
Net income.................... $1,661 $4,165 $3,476
Non-cash items included in net income:
Depreciation and amortization..... 5,750 5,260 3,808
Amortization of pre-opening costs. 920 1,937 1,617
Amortization of debt issuance costs 337 - -
Deferred income taxes......... 147 (823) 1,286
Change in assets and liabilities:
Accounts receivable, net....... (286) 122 (559)
Notes receivable, net......... - 57 27
Inventories of food and supplies.. (1,542) (848) 1,435
Preopening costs................ (1,231) (1,169) (2,095)
Other current assets............ (468) (71) (140)
Accounts payable............... 1,557 239 139
Accrued interest............... 2,263 (18) (18)
Other accrued liabilities...... 868 1,023 440
Other....................... (132) - -
------ ------ ------
Net cash flows provided by
operating activities. 9,844 9,874 9,416
------ ------ ------
Investing Activities:
Capital expenditures ........... (15,067) (10,610) (23,835)
Changes in other assets, net....... 98 (76) (923)
------- ------- -------
Net cash flows used by investing
activities.. (14,969) (10,686) (24,758)
------- ------- -------
Financing Activities:
Senior Notes.................... 75,000 - -
Dividend to Holdings........... (75,351) - -
Net borrowings under line-of-credit
agreement.... 5,290 - -
Debt issuance costs........ (3,626) - -
Payments of debt................. (1,333) (444) (711)
Proceeds from sale of assets...... 5,445 - -
Chng in checks written excess of cash 183 (294) 305
Net change in payable to affiliate (483) 1,550 15,748
------- ------- -------
Net cash flows provided by
financing activities..... 5,125 812 15,342
Net Change in Cash and Cash Equivalents - - -
Cash and Cash Equivalents At Beginning
of Year - - -
------ ------ ------
Cash and Cash Equivalents At End
of Year $- $- $-
======= ======= =======
Supplemental cash flow information:
Cash paid for interest $4,919 $278 $178
======= ======= =======
Cash paid for income taxes $10 $- $-
======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements
ROMACORP, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization, Operation and Basis of Presentation
The consolidated financial statements reflect the financial information
of Romacorp, Inc. and Subsidiaries through June 28, 1998, the effective
date of the Recapitalization (See Note 2). On that date, the former
Romacorp, Inc. was renamed Roma Restaurant Holdings, Inc. (Holdings) and
the assets, liabilities and operations of Holdings were contributed to
its newly-created, wholly-owned subsidiary, Romacorp Operating
Corporation, whose name was then changed to Romacorp, Inc. Subsequent to
June 28, 1998, the consolidated financial statements reflect the
financial information of the newly-created Romacorp, Inc. and
subsidiaries (the Company) and include the Company's operation of its
owned restaurants and franchise revenue from franchisees' use of
trademarks and other proprietary information in the operation of Tony
Roma's restaurants. The Company maintains its corporate office in Dallas,
Texas, and through its subsidiaries provides menu development, training,
marketing and other administrative services related to the operation of
the Roma Concept. All intercompany transactions between Romacorp, Inc.
and its Subsidiaries have been eliminated.
(2) Recapitalization
The Company (then Romacorp) was acquired in June 1993 by NPC
International, Inc. (NPC). On April 24, 1998, Holdings, NPC and Sentinel
Capital Partners, L.P. executed a recapitalization agreement ("The
Recapitalization") effective June 28, 1998 related to the Company.
Romacorp, Inc. was renamed Roma Restaurant Holdings, Inc. (Holdings) and
the assets, liabilities and operations of Holdings were contributed to
its newly-created, wholly-owned subsidiary, Romacorp, Inc. Prior to the
Recapitalization, Romacorp was a wholly-owned subsidiary of NPC. In the
Recapitalization, Holdings redeemed stock held by NPC and NPC forgave and
contributed to the capital of the Company a payable to NPC in the amount
of $33,731,000. After the Recapitalization, NPC held 20% and Sentinel
through certain affiliates (Sentinel) held 80% of the equity of Holdings.
In conjunction with this transaction, $75,000,000 of 12% Senior Notes
were issued by the Company. The Company paid Holdings a dividend of
$75,300,000 consisting primarily of the proceeds from the 12% Senior
Notes, which was used by Holdings, along with Sentinel's equity
contribution, to effect the Recapitalization. This transaction was
accounted for as a leveraged recapitalization with the assets and
liabilities of Romacorp, Inc. retaining their historical value.
(3) Summary of Significant Accounting Policies
Fiscal Year The Company operates on a 52 or 53 week fiscal year
ending on the last Sunday before the last Tuesday in March. The fiscal
years ended March 28, 1999, and March 23, 1997 each contained 52 weeks.
The fiscal year ended March 29, 1998 contained 53 weeks.
Cash Equivalents For purposes of the Consolidated Statements of Cash
Flows, the Company considers all highly liquid debt instruments with an
original maturity of three months or less to be cash equivalents. For
each period presented, substantially all cash was in the form of
depository accounts.
Inventories Inventories of food and supplies are valued at the lower
of cost (first-in, first-out method) or market.
Pre-opening Costs The Company amortizes pre-opening costs, which
principally represent the cost of hiring and training new personnel, over
a period of one year commencing with the restaurant's opening.
Facilities and Equipment - Facilities and equipment are recorded at
cost. Depreciation is charged on the straight-line basis for buildings,
furniture and equipment. Leasehold improvements are amortized on the
straight-line method over the life of the lease or the life of the
improvements whichever is shorter. Interest is capitalized with the
construction of new restaurants as part of the asset to which it relates.
Interest capitalized during 1999, 1998 and 1997 was $116,000, $332,000
and $339,000, respectively.
Long-lived Assets - The majority of the Company's long-lived assets
held for continuing use are evaluated for potential impairment on a
store-by-store basis. Assets held for sale are stated at estimated fair
value.
Goodwill - Goodwill represents the excess of cost over the identifiable
net assets acquired and is amortized on the straight-line method over
periods ranging from 25 to 40 years.
Franchise Revenue - The franchise agreements for Tony Roma's
restaurants provide for an initial fee and continuing royalty payments
based upon gross sales, in return for operational support, product
development, marketing programs and various administrative services.
Royalty revenue is recognized on the accrual basis, although initial fees
are not recognized until the franchisee's restaurant is opened. Fees for
granting exclusive development rights to specific geographic areas are
recognized when the right has been granted and cash received is non-
refundable. Net franchise revenue is presented net of direct expenses,
which include labor, travel and related costs of Franchise Business
Managers, who operate as liaisons between the franchise community and the
franchisor. Direct costs also include bad debt expense, and opening costs
consisting primarily of training expenses. Franchisees also participate
in national and local marketing programs, which are managed by the
Company. The related funding for these programs is separate and not
included in the accompanying financial statements.
Fair Value of Financial Instruments - As of March 28, 1999 and March
29, 1998, the fair value of the Company's financial instruments,
including cash equivalents, approximates their carrying value.
Income Taxes - The Company's results prior to June 28, 1998, are
included in the consolidated federal income tax return of NPC
International, Inc. As a result of the Recapitalization (see Note 2), the
Company began filing its own federal income tax return subsequent to June
28, 1998. The provisions for income taxes, reflected in the accompanying
statements, were calculated for the Company on a separate return basis.
The provisions for income taxes include taxes that are deferred because
of temporary differences between the financial statements and tax bases
of assets and liabilities. Deferred taxes arise principally from the use
of different depreciation methods and lives for tax purposes, and the
deferral of tax deductions for the insurance and closure reserves accrued
for financial statement purposes.
Insurance Reserves -The Company is self-insured for certain risks
and is covered by insurance policies for other risks. The Company
maintains reserves for their policy deductibles and other program
expenses using case basis evaluations and other analyses. The reserves
include estimates of future trends in claim severity and frequency, and
other factors, which could vary as claims, are ultimately settled.
Reserve estimates are continually reviewed and adjustments are reflected
in current operations. Changes in deductible amounts could impact both
the establishment of future reserves and/or the rate of premiums
incurred.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Advertising Costs - Advertising costs are expensed as incurred. The
Company incurred approximately $2,700,000, $2,700,000, and $2,130,000 of
such costs in fiscal 1999, fiscal 1998 and fiscal 1997, respectively.
Recently Issued Accounting Standards - In April 1998, Statement of
Position (SOP) 98-5 Accounting for Costs of Start-up Activities was
issued. The SOP requires the Company to expense pre-opening costs as
incurred and to report the initial adoption as a cumulative effect of a
change in accounting principle as described in APB No. 20, Accounting
Changes, during the first quarter of its fiscal year 2000. The cumulative
effect upon adoption will result in a one-time charge to income in an
amount equal to the net book value of the Company's pre-opening costs.
This change will also result in the discontinued amortization of
pre-opening cost expense in subsequent periods. At March 28, 1999, the
balance of pre-opening costs was $777,000.
(4) Accounts Receivable
Accounts receivable consists of the following:
March 28, March 29,
1999 1998
(Dollars in thousands)
Franchise receivables....... $1,303 $1,324
Other receivables........... 408 299
------- -------
1,711 1,623
Allowances for doubtful accounts... (74) (272)
------- -------
Net receivables............ $1,637 $1,351
======= =======
Franchise receivables represent royalties due based on a percent of
sales at the franchisees' Tony Roma's restaurants, and for other services
provided, and fees assessed in accordance with the franchise agreement.
Other receivables include amounts due for the sale of raw materials,
principally ribs, which the Company has sold from its supply to
franchisees. Other receivables also includes "banquet" sales to
significant individual customers and other miscellaneous items.
The Company generally does not require collateral on the accounts,
but has the right to terminate the franchise agreement in the event the
royalties becomes uncollectible.
(5) Facilities and Equipment
Facilities and equipment consists of the following:
Estimated March 28, March 29,
Useful Life 1999 1998
---------- --------- ---------
(Dollars in thousands)
Land.................... $14,371 $12,057
Buildings................ 15-30 years 26,374 26,790
Leasehold improvements..... 5-20 years 12,050 11,785
Furniture and equipment.... 3-10 years 17,112 14,898
Construction in progress.... 4,756 1,472
-------- --------
74,663 67,002
-------- --------
Less accumulated depreciation and
amortization..... (17,617) (14,402)
-------- --------
Net facilities and equipment $57,046 $52,600
======== ========
(6) Accrued Liabilities
Accrued liabilities consists of the following:
March 28, March 29,
1999 1998
-------- --------
(Dollars in thousands)
Compensation and related taxes $2,098 $1,438
Insurance claims and administration... 812 1,161
Taxes other than income and payroll.... 961 1,052
Gift certificates............. 595 313
Other......................... 1,099 596
-------- --------
Total accrued liabilities........ $5,565 $4,560
======== ========
<PAGE>
(7) Income Taxes
The provision (benefit) for income taxes consisted of the following:
For the Fiscal Year Ended
March 28, March 29, March 23,
1999 1998 1997
-------- -------- --------
(Dollars in thousands)
Current:
Federal.............. $533 $2,755 $330
State...................... 25 99 49
Foreign................ 220 284 352
------- ------- -------
778 3,138 731
------- ------- -------
Deferred:
Federal................... 147 (723) 581
State...................... - (26) 86
Foreign............... - (74) 619
------- ------- -------
147 (823) 1,286
------- ------- -------
Provision for income taxes.. $ 925 $2,315 $2,017
======= ======= =======
The differences between the provision for income taxes and the amount
computed by applying the statutory federal income tax rate to earnings
before income taxes are as follows:
For the Fiscal Year Ended
March 28, March 29, March 23,
1999 1998 1997
------- ------- -------
(Dollars in thousands)
Tax computed at statutory rate $902 $2,268 $1,923
Goodwill amortization......... 244 249 242
Tax credits................ (264) (372) (309)
State taxes, net of federal
effect, and other. 43 170 161
------- ------- -------
Provision for income taxes $ 925 $2,315 $2,017
======= ======= =======
<PAGE>
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 federal and state
income tax purposes. Significant components of the Company's deferred tax
assets and liabilities are as follows:
March 28, March 29,
1999 1998
-------- --------
Deferred tax assets: (Dollars in thousands)
Insurance reserves........... $551 $926
Closure reserves.............. 139 192
Accrued vacation............... 199 245
Depreciation................. 700 507
Allowance for doubtful accounts.... 25 97
Other, net.................... 509 204
------ ------
Total deferred tax assets.... 2,123 2,171
------- ------
Deferred tax liabilities:
Pre-opening expenses....... 264 165
Net deferred tax assets......... 1,859 2,006
Current.................... 217 583
------- -------
Non-current............. $1,642 $1,423
======= =======
A valuation allowance against deferred tax assets is required if,
based on the weight of available evidence, it is more likely than not
that some or all of the deferred tax assets will not be realized. The
Company believes, based on the expected timing of the reversal of the
future taxable temporary differences that no valuation allowance is
necessary.
(8) Senior Notes
Senior notes are comprised of $75.0 million in notes issued in
conjunction with the Recapitalization on June 28, 1998. Interest on the
notes accrue from the date of issuance and are payable in arrears on
January 1 and July 1 of each year commencing January 1, 1999, at the rate
of 12% per annum. The notes will mature on July 1, 2006. As of March 28,
1999, the fair value of the notes as estimated to be in the range of
approximately $72 million to $73.5 million based on the quoted market
rates for the debt.
<PAGE>
(9) Long-term Debt and Payable to Affiliate
Long-term debt as of March 28, 1999 consists of a note payable to
a bank under a $15 million revolving credit facility which is secured by
substantially all of the assets of the Company, and bears interest at the
Company's option of prime rate or up to LIBOR plus 2.25%. Both rates are
subject to maintaining certain financial covenants, and interest is
payable upon maturity of the LIBOR or monthly for prime rate advances.
In addition, a commitment fee based on an annual rate of .375% is payable
monthly on all unused commitments.
In addition to the credit facility, the Company obtained two
commitments from a financial group. One is a commitment to purchase, at
the Company's option, 11 restaurants not to exceed $1.75 million each or
$19.3 million in aggregate and subsequently enter into a lease agreement
with the Company as lessee. The lease agreement provides for a minimum
annual rent of 10% of the purchase price which will increase 6% on the
third anniversary of the lease and 6% every three years thereafter.
Payments are to be made monthly. The lease term will be for 15 years
with two five year renewal options of five years each. The minimum
annual rent for the renewal option periods will be set at fair market
value. The second commitment, a Leasehold Mortgage Loan Commitment
provides for the funding of the construction of 11 restaurants on leased
land, not to exceed $1.0 million each or $11.0 million in aggregate, at
a rate of 450 basis points over the then existing rate of fifteen year
United States Treasuries with an amortization period of 15 years and
payments to be made monthly. Both commitments expire June 30, 2000. As
of March 28, 1999, three sale leasebacks had been completed for $5.5
million.
Long-term debt as of March 29, 1998, consisted of a note payable
to a former franchisee. As part of the Recapitalization transaction,
this note was paid in full. In addition, in conjunction with the
Recapitalization, $33,887,000 in payable to affiliate was contributed to
capital.
(10) Commitments
The Company leases certain restaurant equipment and buildings
under operating leases. Rent expense for the fiscal years 1999, 1998,
and 1997 was $3,879,000, $3,879,000, and $3,412,000 respectively,
including additional rentals of approximately $724,000 in 1999, $712,000
during 1998, and $687,000 during 1997 which are based upon a percentage
of sales in excess of a base amount as specified in the lease. The
majority of the Company's leases contain renewal option(s) for 5 to 10
years. Renewal of the remaining leases is dependent on mutually
acceptable negotiations.
At March 28, 1999, minimum rental commitments under operating
leases that have initial or remaining non-cancelable lease terms in
excess of one year are as follows:
Fiscal Year (Dollars in thousands)
2000............. $3,116
2001..................... 2,942
2002.......................... 2,760
2003............................. 2,645
2004............................... 2,394
Thereafter 15,831
--------
$29,688
========
(11) Stock Option Plan
Holdings has a stock option plan (the "Stock Plan"), which reserved
for grant 44.4 shares to certain key employees and/or directors of the
Company. The stock options granted under the stock plan are non-
qualified options for federal income tax purposes. As of March 28, 1999,
no options have been granted.
(12) Summarized Financial Information
Summarized financial information for Romacorp Inc., excluding the
assets, liabilities, and operations of its wholly-owned subsidiaries, is
as follows (in thousands):
For the Fiscal Year Ended
March 28, March 29, March 23,
1999 1998 1997
-------- -------- --------
Total revenues.... $93,213 $86,408 $68,778
Total operating expenses.. 92,120 86,496 67,829
Operating income (loss).. 1,093 (88) 949
Loss before income taxes. 7,987 3,147 1,040
Net loss......... 5,210 2,093 771
March 28, March 29, March 23,
1999 1998 1997
-------- -------- --------
Current assets........... $ 6,388 $ 3,275 $ 3,348
Noncurrent assets...... 88,421 74,957 64,654
Current liabilities...... 2,183 1,641 5,812
Noncurrent liabilities... 101,293 45,299 51,448
(13) Related Party Transactions
The Company entered into a Transitional Financial and Accounting
Services Agreement (the "Transition Services Agreement") whereby NPC will
continue to provide administrative services to the Company for an initial
fee of $16,000 per week for a period of up to one year. Services provided
will include accounting services, payroll services and use of NPC's
proprietary restaurant technology system software (the "POS System").
As part of the Transition Services Agreement, the Company was granted a
perpetual license to use the POS System. Effective March 29, 1999, the
Company amended the contract whereby services will continue through July
2001 with a weekly base service fee of $14,300 during fiscal 2000,
$15,000 during fiscal 2001, and $15,750 during fiscal 2002. In addition
to the base fee, an incremental weekly fee shall be paid for each
restaurant opened on or after March 29, 1999 in the amount of $160 for
fiscal 2000, $170 for fiscal 2001 and $180 for fiscal 2002.
The Company reimbursed Sentinel for all out-of-pocket expenses incurred
in connection with the Recapitalization. In addition, pursuant to a
management agreement, Sentinel receives a management fee equal to
$300,000 per annum for the first two years of the term of the management
agreement and $500,000 per annum thereafter, and will be reimbursed for
certain out-of-pocket expenses.
EXHIBIT 10.9
EXECUTION COPY
MANAGEMENT AGREEMENT
--------------------
THIS MANAGEMENT AGREEMENT (this "Agreement") is made as of July 1,
1998, by and among Roma Restaurant Holdings,Inc., (formerly known as
Romacorp, Inc.), a Delaware corporation (the
"Company"), and Robert B. Page ("Executive"). Certain definitions are set
forth in Section 14 of this Agreement.
The Company and Executive desire to enter into an
agreement (i) setting forth the terms pursuant to which the
Company shall grant to Executive an option to acquire certain shares of
Common stock; (ii) setting forth the terms and conditions of Executive's
employment with the Company; and (iii) setting forth the obligation of
Executive to refrain from competing with the Company and/or its
Subsidiaries under certain circumstances as provided herein.
The parties hereto agree as follows:
STOCK AND OPTION PROVISIONS
1. [This Section intentionally omitted]
2. Stock Option.
a) Grant of Option. Pursuant to the Plan, the Company hereby
grants to Executive a nonqualified stock option (the "Option") to
purchase 11.11 shares (the "Option Shares") of Common, at a price per
share of $12,500.00 (the "Exercise Price"). The Exercise Price and the
number of Option Shares may be adjusted as provided in the Plan. The
Option is not intended to be an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code.
(b) Executive Bound by Plan. Attached hereto as Annex A is a copy of the
Plan which is incorporated herein by reference and made a part hereof.
Executive hereby acknowledges receipt of a copy of the Plan and agrees
to be bound by all the terms and provisions thereof. The Plan should be
carefully examined before any decision is made to exercise the option.
(c) Exercisability. Subject to Section 2(f), the Option shall be
exercisable, in whole or in part, by written notice to the Company at any
time, and from time to time, during the period of time after the date
hereof and prior to the tenth anniversary of the date hereof or such
earlier date upon which the Option expires as specified herein or in the
Plan. The Option may not be exercised for a fraction of a share of
Common. The Option is subject to cancellation as provided in the Plan.
(d) Vesting of Option. The Option shall vest with respect to the
Option Shares as follows:
(i) Time Option Shares. This Option shall vest with respect
to 5.55 Option Shares subject to this Option (the "Time Option Shares")
provided the Executive remains continuously employed with the Company
after the date hereof and through and including the vesting dates
described below as follows:
Number of Time
Vesting Date Option Shares Which Vest
The first anniversary of 1.11
the date hereof 1999
The last day of each of the 0.0925
firsts 48 months after the first
anniversary of the date hereof
provided, that upon the closing of a Sale of the Company, this Option
will immediately vest with respect to all of the unvested Time Option
Shares.
(ii) Performance Option Shares. This Option shall vest with respect
to 5.55 Option Shares (the "Performance Option Shares") upon the
attainment of certain goals described in this Section 2(d)(ii). This
Option shall vest with respect to 1.85 Performance Option Shares as of
the vesting dates set forth below if (x) the Company's EBITDA (as defined
below) for the fiscal year ending on such vesting date equals at least
the dollar amount set forth opposite such vesting date (each a "Target
EBITDA") and (y) the Executive has been continuously employed with the
Company from the date hereof through the applicable vesting date.
Vesting Dates Target EBITDA
Last day of fiscal year 1999 $18,806,000
Last day of fiscal year 2000 $20,580,000
Last day of fiscal year 2001 $25,393,000
Last day of fiscal year 2002 $30,950,000
; provided that the last day of fiscal year 2002 vesting date is provided
only for the purposes of vesting Performance Option Shares, if any, which
do not vest on the last day of fiscal year 2001 and in no event shall
more than 5.55 Option Shares vest pursuant to this Section 2(d)(ii).
The effective date of vesting shall be as set forth above even
though EBITDA for the applicable period may not be determined until a
date thereafter.
In the event that the Company does not achieve the Target EBITDA
provided in the table above as of the last day of fiscal year 1999, the
last day of fiscal year 2000 and/or the last day of fiscal year 2001, the
portion of the Option which did not vest on any such date shall vest if
the actual EBITDA for the following fiscal year exceeds the Target EBITDA
for such following fiscal year by an amount greater than or equal to the
shortfall in Target EBITDA for the prior fiscal year.
<PAGE>
In the event that (a) the Company consummates any acquisition of the
capital stock or assets of another corporation in any given year or
(b)the Company commits to a one-time unusual capital expenditure, the
Target EBITDA for such year will be adjusted to account for the pro-forma
and pro-rata EBITDA impact of such acquired corporation or such capital
expenditure, as the case may be.
"EBITDA" means earnings before interest, income taxes, depreciation,
amortization, Sentinel Capital Partners, L.P.'s or one of its affiliate's
management fee and non-recurring charges
(e) Early Expiration Upon Termination of Employment. Any portion-of
the Option that has previously vested prior to or on the date Executive's
employment with the Company, Roma Restaurant Holdings, Inc. (the
Company's parent) or the Company's Subsidiaries terminates (the
"Termination Date") for any reason other than termination by the Company
for Cause may be exercised by Executive within 30 days of the Termination
Date. If Executive does not elect to exercise any vested portion of the
Option within 30 days of the Termination Date, such portion shall expire
and shall no longer be exercisable. If Executive elects to exercise any
portion of such Option within 30 days of the Termination Date, such
portion shall be immediately subject to the Repurchase Option pursuant
to the terms and conditions set forth in Section 3. If the Executive's
employment is terminated by the Company for Cause, the portion of the
Option that is vested but not yet exercised shall be forfeited.
(f) Procedure for Exercise. Executive may exercise all or a portion
of the Option by delivering written notice of exercise to the Company,
together with (i) written acknowledgment that Executive has read and has
been afforded an opportunity to ask questions of management of the
Company regarding all financial and other information provided to
Executive regarding the Company and (ii) payment in full by delivery of
a cashiers or certified check in: the amount equal to the sum of (A) the
Exercise Price multiplied by the number of shares of Common to be
acquired and (b) the amount, if any, of any additional federal and state
income taxes required to be withheld by reason of the exercise of the
Option. As a condition to the exercise of any part of the Option,
Executive will permit the Company to, and at the request of Executive the
Company shall, deliver to him all financial and other information
regarding the Company and its Subsidiaries which it believes necessary
to enable Executive to make an informed investment decision.
(g) Securities Laws Restrictions. Executive represents that when
Executive exercises the Option he will be purchasing Option Shares for
Executive's own account and not on behalf of others. Executive
understands and acknowledges that federal and state securities laws
govern and restrict Executive's right to offer, sell or otherwise dispose
of any Option Shares unless Executive's of her, sale or other disposition
thereof is registered under the Securities Act and state securities laws
or, in the opinion of the Company' counsel, such offer, sale or other
disposition is exempt from registration thereunder. Executive agrees that
he will not offer, sell or otherwise dispose of any Option Shares in any
manner which would: (i) require the company to file any registration
statement (or similar filing under state law) with the Securities and
Exchange Commission or to amend or supplement any such filing or (ii)
violate or cause the Company to violate the Securities Act. the rules and
regulations promulgated thereunder or any other state or federal law
Executive further understands that the certificates for any Option Shares
Executive purchases will bear the legend set forth in Section 5 hereof
or such other legends as the Company necessary or desirable in connection
with the Securities Act or other rules, regulations or laws.
(h) Non-Transferability of the Option. The Option is personal to
Executive and is not transferable by Executive. Only Executive or
Permitted Transferees or their respective estates or heirs are entitled
to exercise the Option.
(i) Effect of Transfers in Violation of Agreement. The Company will
not be required (i) to transfer on its books any Option Shares which have
been sold or transferred in violation of any of the provisions set forth
in this Agreement, or (ii) to treat as owner of such shares, to accord
the right to vote as such owner or to pay dividends to any transferee to
whom such shares have been transferred in violation of this Agreement.
(j) Delivery of Shares. The date on which Executive has delivered
to the Company the items required under Section 2(f) is referred to
herein as Executive's Exercise Dates. Certificates for Option Shares
purchased upon exercise of the Option shall be delivered by the Company
to Executive within five business days after Executive's Exercise Date.
(k) Date of Issuance. The Option Shares issuable upon the exercise
of the Option shall be deemed to have been issued to Executive on
Executive's Exercise Date, and Executive shall be deemed for all purposes
to have become the record holder of such Option Shares on Executive's
Exercise Date.
(1) Fully Paid. The issuance of certificates for Option Shares upon
exercise of the Option shall be made without charge to Executive for any
issuance tax in respect thereof or other cost incurred by the Company in
connection with such exercise. Each Option Share issuable upon exercise
of the Option shall, upon payment of the exercise price therefor, be
fully paid and nonassessable and free from all liens and charges with
respect to the issuance thereof.
(m) Book Transfer. The Company shall not close its books against the
transfer of any Option Shares issued or issuable upon the exercise of the
Option in any manner which interferes with the timely exercise of the
Option.
(n) Filings. The Company shall assist and cooperate with Executive
to make any required governmental filings or obtain any governmental
approvals prior to or in connection with any exercise of the Option.
(o) Reservation. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common solely for
the purpose of issuance upon the exercise of the Option, such number of
shares of Common as are issuable upon the exercise of all outstanding
Options. All Option Shares which are so issuable shall, when issued, be
duly and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges. The Company shall take all such actions as may
be necessary to assure that all such Option Shares may be so issued
without violation of any applicable law or governmental regulation or any
required ends of any domestic securities exchange or market upon which
shares of Common may be listed (except for official notice of issuance
which shall be immediately delivered by the Company upon each such
issuance).
3. Repurchase Option.
(a) Repurchase Option. In the event that Executive is no longer
employed by the Company or any of its Subsidiaries for any reason, the
Executive Securities, whether held by Executive, or one or more Permitted
Transferees, will be subject to repurchase by the Company and the
Investors pursuant to the terms and conditions set forth in this Section
3 (the "Repurchase Option").
(b) Termination for Reasons Other than for Cause. If the Executive's
employment with the Company or any of its Subsidiaries is terminated for
any reason other than for Cause, then within one year after the
Termination Date, the Company may elect to purchase all or some of 50%
of the Executive Securities (other than the Option Shares) and 100% of
the Option Shares (collectively, the "Eligible Stock"), at a price per
share equal to the Fair Market Value thereof (x) as determined on the
Termination Date, if the Repurchase Notice (as defined in Section 3(d)
below) has been delivered within three months after the Termination Date,
or (y) as determined as of a date determined by the Board within 30 days
prior to the delivery of the Repurchase Notice, if the Repurchase Notice
is delivered after the third month following the Termination Date;
provided that if Executive terminates his employment and violates
Sections 10,11 or 12, the repurchase price for each share of Eligible
Stock shall be equal to the lesser of its Fair Market Value or the
Original Value thereof.
(c) Termination for Cause. If Executive is no longer employed by the
Company or any of its Subsidiaries as a result of Executive's termination
for Cause, then within one year after the Termination Date, the Company
may elect to purchase all or any portion of the Executive Securities
(collectively, the "Available Stock"), at a price per share equal to the
lower of the Fair Market Value thereof and the Original Value thereof.
(d) Repurchase Procedures. The Company may elect to exercise the right
to purchase all or any portion of the Eligible Stock or the Available
Stock, as the case may be, by delivering written notice (the "Repurchase
Notice") to the holder or holders of such Executive Securities. The
Repurchase Notice will set forth the number of shares of Executive
Securities to be acquired from such holder(s), the aggregate
consideration to be paid for such shares and the time and place for the
closing of the transaction. If any shares of Executive Securities are
held by Permitted Transferees of Executive, the Company shall purchase
the shares elected to be purchased from such holder(s) of shares of
Executive Securities pro rata according to the number of shares of
Executive Securities held by such holder(s) at the time of delivery of
such Repurchase Notice (determined as nearly as practicable to the
nearest share).
(e) Investors' Rights.
(i) If for any reason the Company does not elect to purchase all
of the Eligible Stock or the Available Stock, as the case may be, prior
to the 90th day following the Termination Date, Sentinel and then in
certain circumstances, each Investor will be entitled to exercise the
Repurchase Option, in the manner set forth in Section 3(d), for the
Eligible Stock or the Available Stock, as the case may be, that the
Company has not elected to purchase (the "Available Shares"). As soon as
practicable but in any event within thirty (30) days after the Company
determines that there will be Available Shares, the Company will deliver
written notice (the "Option Notice") to all Investors setting forth the
number of Available Shares and the price for each Available Share.
(ii) Sentinel will be permitted to purchase all or some of the
number (the "Sentinel Portion") of Available Shares equal to the product
of (A) Sentinel's Pro Rata Share and (B) the number of Available Shares,
by delivering written notice to the Company and the other Investors
within 30 days after receipt of the Option Notice from the Company (such
30-day period being referred to herein as the "Sentinel Election
Period"). The quotient determined by dividing (x) the number of shares
of Available Shares elected to be purchased by Sentinel and (y) the
Sentinel Portion, shall be referred to as the "Sentinel Percentage." If
Sentinel elects to purchase any of the Available Shares, each of the
other Investors shall be permitted to purchase all or some of the number
of Available Shares equal to the product of (m) the Sentinel Percentage,
(n) such Investor's Pro Rata Share and (o) the number of Available
Shares, by delivering written notice to the Company within 30 days after
receipt of the Option Notice from the Company.
(f) Closing. The closing of the transactions contemplated by this
Section 3 will take place on the date designated by the Company in the
Repurchase Notice, which date will not be more than 90 days after the
delivery of such notice. The Company and/or the Investors, as the case
may be, will pay for the Executive Securities to be purchased pursuant
to the Repurchase Option by delivery of, in the case of an Investor, a
check payable to the holder of Executive Securities, and in the case of
the Company (i) a check payable to the holder of such Executive
Securities, (ii) a note or notes payable in three equal annual
installments beginning on the first anniversary of the closing of such
purchase and bearing interest (payable quarterly) at a rate per annum
equal to 10% or (iii) both (i) and(ii) in the aggregate amount of the
purchase price for such shares (which note will also become due upon a
Change of Ownership). The Company and/or the Investors, as the case may
be, will receive customary representations and warranties from Executive
regarding the sale of the Executive Securities, including but not limited
to the representation that Executive has good and marketable title to the
Executive Securities to be transferred free and clear of all liens,
claims and other encumbrances.
(g) Restrictions on Repurchase. Notwithstanding anything to the
contrary contained in this Agreement, all repurchases of Executive
Securities by the Company shall be subject to applicable restrictions
contained in the Delaware General Corporation Law and in the Company's
and its Subsidiaries= debt and equity financing agreements. If any such
restrictions prohibit the repurchase of Executive Securities hereunder
which the Company is otherwise entitled or required to make, the Company
may make such repurchases as soon as it is permitted to do so under such
restrictions.
(h) Termination of Repurchase Right. The right of the Company and
the Investors to repurchase Executive Securities pursuant to this Section
3 shall terminate upon the first to occur of a Sale of the Company or a
Qualified Public Offering.
4. Stockholders Agreement. The parties hereto acknowledge that the shares
of Executive Securities are subject to the terms and conditions of the
Stockholders Agreement and such shares shall be deemed to be "Company
Shares" and the Executive shall be deemed to be a "Stockholder" for all
purposes of the Stockholders Agreement.
5. Restrictions on Transfer.
(a) The certificates representing the Executive Securities bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON
, 1998, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE AACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION THE THEREUNDER THE SECURITIES REPRESENTED BY
THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A
MANAGEMENT AGREEMENT AMONG ROMA RESTAURANT HOLDINGS, INC. (THE "COMPANY")
AND EXECUTIVE DATED AS OF JULY 1, 1998, AS AMENDED AND MODIFIED FROM TIME
TO TIME. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF
AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) No holder of Executive Securities may sell, transfer or dispose of
any Executive Securities (except pursuant to an effective registration
statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and
substance to the Company) that neither registration nor qualification
under the Securities Act and applicable state securities laws is required
in connection with such transfer.
EMPLOYMENT PROVISIONS
6. Employment. The Company shall employ Executive, and Executive hereby
accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date hereof and
ending as provided in Section 9 hereof (the "Employment Period").
7. Position and Duties.
(a) During the Employment Period, Executive shall serve as the Chief
Executive Officer of the Company and shall have the normal duties,
responsibilities and authority of the Chief Executive Officer, subject
to the power of the Board to expand or limit such duties,
responsibilities and authority and to override actions of the President.
(b) Executive shall report to the Board, and Executive shall devote
his best efforts and substantially all of his business time and attention
(except for permitted vacation periods and reasonable periods of illness
or other incapacity) to the business and affairs of the Company and its
Subsidiaries. Executive shall perform his duties and responsibilities to
the best of his abilities in a diligent, trustworthy, businesslike and
efficient manner.
(c) In addition, Executive shall be responsible for (i) providing
assistance to the Company in maintaining all of the Company's
relationships with its customers and suppliers, and (ii) assisting the
Company in the evaluation of new business opportunities.
8. Base Salary, Benefits and Bonuses.
(a) During the Employment Period, Executive's base salary shall be
$200,000 per annum or such higher rate as the Board may designate from
time to time (the "Base Salary"), which salary shall be payable in
regular installments in accordance with the Company's general payroll
practices and shall be subject to customary withholding. In addition,
during the Employment Period, Executive shall be entitled to participate
in all of the Company's employee benefit programs for which senior
executive employees of the Company and its Subsidiaries are generally
eligible, including, but not limited to the Company's group medical
coverage program, and Executive shall be eligible for paid vacation in
accordance with the policies of the Company.
(b) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing his duties under this
Agreement which are consistent with the Company's policies in effect from
time to time with respect to travel, entertainment and other business
expenses, subject to the Company's requirements with respect to reporting
and documentation of such expenses.
(c) In addition to the Base Salary, the Board shall award a bonus to
Executive following the end of each fiscal year equal to up to 50% of the
Executive's Base Salary based upon performance, determined at the
discretion of the Board. It is anticipated that in any given fiscal year
if the Company were to just meet the performance goals contained in the
Company's management plan, the bonus awarded under this Section 8(c)
would be approximately 25% of the Executive's Base Salary.
9. Term: Termination.
(a) The Employment Period shall end on the third annual anniversary
of the date hereof; provided that (i) the Employment Period shall
terminate prior to such date upon Executive's death, resignation or
Disability; (ii) the Employment Period may be terminated by the Company
at any time prior to such date for Cause or without Cause; (iii) the
Employment Period may be terminated by Executive at any time for any
reason (a "Voluntary Termination"); and (iv) unless each party is
notified in writing within 30 days before the third annual anniversary
of the date hereof or the end of a Renewal Period, the Employment Period
shall automatically be extended for additional one year periods (each
such period, a "Renewal Period").
(b) Upon (1) a Voluntary Termination of the employment relationship by
Executive other than within 10 days of a Good Reason Event or (2)
termination of the Executive's employment relationship by the Company for
Cause, prior to the end of the Employment Period (the "Term"), all future
compensation or bonuses to which Executive would otherwise be entitled
and all fixture benefits for which Executive would otherwise be eligible
shall cease and terminate as of the date of such termination; provided,
however, that any salary, bonus, incentive payment, deferred compensation
or other compensation or benefit which has been earned by or accrued for
the benefit of Executive prior to the date of termination shall not be
forfeited and shall be paid to Executive promptly.
(c) Upon a termination of Executive's employment prior to the end of
the Term other than (i) a termination by the Company for Cause or (ii)
a Voluntary Termination of the employment relationship by Executive other
than within 10 days of a Good Reason Event, the Executive shall be
entitled, in consideration of Executive's continuing obligations
hereunder after such termination (including, without limitation,
Executive's non-competition obligations), to receive his Base Salary,
payable bi-weekly, and fringe benefits, as if Executive's employment
(which shall cease on the date of such termination) had continued for the
twelve (12) months following termination; provided that in the event
Executive's employment is terminated for the reasons set forth in clauses
(i) or (ii) above, Executive shall be required to use his reasonable best
efforts to obtain, as expeditiously as possible, employment with at least
comparable salary and responsibilities commensurate with those set forth
herein. In such event, Executive's right to receive the amounts and
benefits set forth in this Section 9(c) shall terminate. Notwithstanding
the foregoing, if Executive obtains employment in accordance with this
Section 9(c) and the salary to be paid to Executive is less than the Base
Salary, the Company shall pay to Executive an amount equal to such
deficiency, payable bi-weekly, for the remainder of the severance period.
MISCELLANEOUS PROVISIONS
10. Confidential Information. Executive acknowledges that the
information, observations and data obtained by him while employed by the
Company and its Subsidiaries (including those obtained while employed by
the Company prior to the date of this Agreement) concerning the business
or affairs of the Company or any of its Subsidiaries ("CONFIDENTIAL
Information") are the property of the Company or such Subsidiary.
Therefore, Executive agrees that he shall not disclose to any
unauthorized person or use for his own purposes any Confidential
Information without the prior written consent of the Board, unless and
to the extent that (i) such information was otherwise available to
Executive from a source other than the Company and (ii) the
aforementioned matters become generally known to and available for use
by the public other than as a result of Executive's acts or omissions.
Executive shall deliver to the Company at the termination of the
Employment Period, or at any other time the Company may request, all
memoranda, notes, plans, records, reports, computer tapes, printouts and
software and other documents and data (and copies thereof) relating to
the Confidential Information, Work Product (as defined below) or the
business of the Company or any Subsidiary which he may then possess or
have under his control.
11. Inventions and Patents. Executive acknowledges that all inventions,
innovations, improvements, developments, methods, designs, analyses,
drawings, reports and all similar or related information (whether or not
patentable) which relate to the Company=s or any of its Subsidiaries=
actual or anticipated business, research and development or existing or
future products or services and which are conceived, developed or made
by Executive while employed by the Company and its Subsidiaries ("Work
Product") belong to the Company or such Subsidiary. Executive shall
promptly disclose such Work Product to the Board and perform all actions
reasonably requested by the Board (whether during or after the Employment
Period) to establish and confirm such ownership (including, without
limitation, assignments, consents, powers of attorney and other
instruments).
12. Non-Compete. Non-Solicitation.
(a) In further consideration of the compensation to be paid to
Executive hereunder, Executive acknowledges that in the course of his
employment with the Company prior to the date of this Agreement he has
become familiar, and during his continued employment with the Company he
shall become familiar, with the Company's trade secrets and with other
Confidential Information concerning the Company and its Subsidiaries and
that his services have been and shall be of special, unique and
extraordinary value to the Company and its Subsidiaries. Therefore,
Executive agrees that, during the period commencing on the date hereof
and ending on the third anniversary of the termination of the Employment
Period (including any Renewal Period) (the ANoncompete Period"), he shall
not directly or indirectly own any interest in, manage, control,
participate in, consult with, or render services for, any Person that is
in the casual dining rib restaurant business in the United States.
Nothing herein shall prohibit Executive from being a passive owner of not
more than 5% of the outstanding stock of any class of a corporation which
is publicly traded, so long as Executive has no active participation in
the business of such corporation.
(b) During the Noncompete Period, Executive shall not directly, or
indirectly through another entity, (i) induce or attempt to induce any
employee of the Company or any Subsidiary to leave the employ of the
Company or such Subsidiary, or in any way interfere with the relationship
between the Company or any Subsidiary and any employee thereof, (ii) hire
any person who was an employee of the Company or any Subsidiary at any
time during the Employment Period or (iii) induce or attempt to induce
any customer, supplier, licensee, licenser, franchisee or other business
relation of the Company or any Subsidiary to cease doing business with
the Company or such Subsidiary, or in any way interfere with the
relationship between any such customer, supplier, licensee or business
relation and the Company or any Subsidiary (including, without
limitation, making any negative statements or communications about the
Company or its Subsidiaries).
13. Enforcement. If, at the time of enforcement of Sections 10, 11 or
12 of this Agreement, a court holds that the restrictions stated herein
are unreasonable under circumstances then existing, the parties hereto
agree that the maximum period, scope or geographical area reasonable
under such circumstances shall be substituted for the stated period,
scope or area. Because Executive's services are unique and because
Executive has access to Confidential Information and Work Product, the
parties hereto agree that money damages would not be an adequate remedy
for any breach of this Agreement. Therefore, in the event a breach or
threatened breach of this Agreement, the Company or its successors or
assigns may, in addition to other rights and remedies existing in their
favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or
prevent any violations of, the provisions hereof (without posting a bond
or other security). In addition, in the event of an alleged breach or
violation by Executive of Section 12, the Noncompete Period shall be
tolled until such breach or violation has been duly cured. Executive
agrees that the restrictions contained in Section 12 are reasonable.
14. Definitions. All references to a fiscal year refer to the
Company's fiscal year.
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by, or under common control with such Person. For
purposes of this Agreement, the term "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with" as used with respect to any Person) means the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of such Person whether through ownership of
voting securities, by contract or otherwise.
"Board" means the board of directors of the Company.
"Cause" means (i) the continued failure by Executive to perform duties
described under Section 7 hereof (which failure is not cured within 5
days following notice from the Board), (ii) gross negligence (which is
not cured within 5 days after notice from the Board) or willful
misconduct by Executive in the performance of his duties or (iii)
Executive=s commission of a felony or other offense involving moral
turpitude.
"Change of Ownership" is any event pursuant to which (i) any Person
together with such Person's Affiliates (other than the Investors and
their Affiliates) collectively own at least 50% of the aggregate number
of shares of Common outstanding at any given time, and (ii) the Investors
and their Affiliates collectively cease to own at least 50% of the
aggregate number of shares of Common that they own on the date hereof (as
adjusted for stock splits, stock dividends and recapitalization and for
exchanges in connection with a merger, consolidation, reorganization or
sale).
"Closing" means the closing of the transactions contemplated by the
Recapitalization Agreement.
"Common" means the Company's Common Stock par value $.01 per share.
"Disability" means Executive's inability, due to illness, accident
injury, physical or mental incapacity or other disability, to carry out
effectively his duties and obligations to the Company or to participate
effectively and actively in the management of the Company for a period
of at least 90 consecutive days or for shorter periods aggregating 14
days (whether or not consecutive) during each three month period for not
less than six months, as determined by an independent physician.
"Executive Securities" means (i) the Option Shares which are issued
and outstanding from time to time, (ii) any other shares of Common
otherwise issued to, acquired by or held by Executive and (iii) shares
of the Company's capital stock issued with respect to the securities
specified in clauses (i) or (ii) above by way of a stock split, stock
dividend or other recapitalization; provided that Executive Securities
shall continue to be Executive Securities in the hands of any holder
other than Executive (except for the Company and the Investors and except
for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Executive Securities shall succeed to
all rights and obligations attributable to Executive as a holder of
Executive Securities hereunder.
"Fair Market Value" of each Option Share or share of Executive
Securities, as the case may be, means the marker value as determined in
good faith mutually by the Board and Executive; provided that if the
parties cannot agree within 30 days, the Fair Market Value will be
decided by a mutually acceptable independent investment bank, whose
determination will be final and binding.
"Family Group" means Executive's spouse and descendants (whether
natural or adopted) and any trust solely for the benefit of Executive
and/or Executive's spouse and/or descendants.
"Good Reason Event" means:
(a) Notwithstanding the exercise of the power granted to the
Company and the Board by the concluding clause of Section 7(a) hereof,
the assignment to the Employee of any duties inconsistent in any material
respect with Employee's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities initially
assigned to Executive and as contemplated by Section 7 of this Agreement,
or any other action that results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith
that is remedied within 10 days after receipt of written notice thereof
from the Employee to the Company; or
(b) Any failure by the Company to comply with any of the provisions
of this Agreement, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith that is remedied within 10 days after
receipt of written notice thereof from the Employee to the Company.
"Investor Shares@ means (i) any Common acquired by the Investors, and
(ii) any equity securities of the Company issued or issuable directly or
indirectly with respect to the securities referred to in clause (i) above
by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization; provided that Investor Shares shall not include (a)
shares of Common issued pursuant to the conversion or exercise of any
options, warrants or other convertible securities or (b) any equity
securities of the Company issued or issuable with respect to the
securities referred to in clause (a) above in connection with a
combination or split of shares, recapitalization, merger, consolidation
or other reorganization.
"Investors" means the parties listed on Schedule 1 attached hereto,
provided that if a party who is an employee of the Company as of the date
hereof or becomes an employee of the Company at any time after the date
hereof ceases to be an employee of the Company hereafter or thereafter,
such party shall be deemed to have been removed from the Schedule and
shall no longer be deemed an Investor for purposes of this Agreement.
"Option Shares" means, collectively, the Time Option Shares and the
Performance Option Shares.
"Original Value" means with respect to each Option Share, the
exercise price paid for such Option Share (each as proportionally
adjusted for all stock splits, stock dividends and other recapitalization
subsequent to the date hereof.
"Permitted Transferee@ has the meaning set forth in the Stockholders
Agreement.
"Person" means any natural person, corporation, partnership, limited
liability company, trust, unincorporated organization or other entity.
"Plan" means that certain Roma Restaurant Holdings, Inc. 1998 Stock
Option Plan.
"Pro Rata Share" means, with respect to each Investor, the quotient
determined by dividing (i) the total number of Investor Shares held by
such Investor, by (ii) the total number of Investor Shares held by all
Investors.
"Public Sale" means any sale pursuant to a registered public offering
under the Securities Act or any sale to the public pursuant to Rule 144
promulgated under the Securities Act effected through a broker, dealer
or market maker.
"Qualified Public Offering" has the meaning set forth in the
Stockholders Agreement.
"Recapitalization Agreement" means that certain Recapitalization
Agreement, dated as of April 24, 1998, by and among the Company and
certain other parhes thereto, as amended.
"Sale of the Company" means the first to occur of any transaction (i)
following which there has been a Change of Ownership, or (ii) involving
the sale of substantially all of the Company=s assets determined on a
consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Sentinel" means Sentinel Capital Partners, L.P., a Delaware limited
partnership.
"Stockholders Agreement" means that certain Stockholders Agreement
dated as of the date hereof, by and among the Company and the Company's
stockholders.
"Subsidiary" means any corporation, partnership, association or other
business entity of which (i) if a corporation, a majority of the total
voting power of shares of stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly
or indirectly, by the Company or (ii) if a partnership, association or
other business entity, a majority of the partnership or other similar
ownership interests thereof is at the time owned or controlled, directly
or indirectly, by the Company. For purposes hereof, the Company shall be
deemed to have a majority ownership interest in a partnership,
association or other business entity if the Company, directly or
indirectly, is allocated a majority of partnership, association, or other
business entity gains or losses, or is or controls the managing director
or general partner (or Person having like authority) of such partnership,
association or other business entity.
"Termination Date" has the meaning set forth in Section 2(e).
15. Notices. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable
overnight courier service (charges prepaid) to the Investors at the
addresses indicated in the Company's records and to the other recipients
at the address indicated below:
If to Executive: Robert Page
3924 Evesham
Plano, TX 75025
If to the Company: Roma Restaurant Holdings, Inc.
c/o Sentinel Capital Partners, L.P.
777 Third Avenue, 32nd Floor
New York, New York 10022
Attention: David S. Lobel
John F. McCormack
Eric D. Bommer
with a copy to: Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Frederick Tanne, Esquire
- and -
David Short
Romacorp, Inc.
9304 Forest Lane, Suite 200
Dallas, TX 75243
or such other address or to the attention of such other person as the
recipient party shall have specified by prior written notice to the
sending party. Any notice under this Agreement shall be deemed to have
been given when so delivered or sent or, if mailed, five days after
deposit in the U.S. mail.
16. General Provisions.
(a) Executive Acknowledgment. The Executive acknowledges that he/she
shall not be entitled to any salary, bonuses, benefits or options granted
hereunder unless and until the stockholders of the Company approve such
rights in compliance with the requirements of Section 280G(b) (5)(B) of
the Internal Revenue Code and proposed Treasury Regulation Section
1280G-l, Q&A 7.
(b) Transfers in Violation of Agreement. Any transfer or attempted
transfer of any Executive Securities in violation of any provision of
this Agreement shall be void, and the Company shall not record such
transfer on its books or treat any purported transferee of such Executive
Securities as the owner of such stock for any purpose.
(c) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other
jurisdiction, but this Agreement shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
(d) Complete Agreement. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the
complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or
among the parties, written or oral, which may have related to the subject
matter hereof in any way.
(e) Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which
taken together constitute one and the same agreement.
(f) Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by
Executive, the Company, the Investors and their respective successors and
assigns (including subsequent holders of Executive Securities); provided
that the rights and obligations of Executive under this Agreanent shall
not be assignable except in connection with a permitted transfer of
Executive Securties hereunder.
(g) Choice of Law. The corporate law of the State of Delaware shall
govern all questions concerning the relative rights of the Company,
Executive and the Investors. All issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement
and the exhibits and schedules hereto shall be governed by, and construed
in accordance with, the laws of the State of New York, without giving
effect to any choice of law or conflict of law rules or provisions
(whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the
State of New York.
(h) Remedies. Each of the parties to this Agreement (including the
Investors) shall be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including reasonable
attorney's fees) caused by any breach of any provision of this Agreement
and to exercise all other rights existing in its favor. The parties
hereto agree and acknowledge that money damages would not be an adequate
remedy for any breach of the provisions of this Agreement and that any
party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent
any violations of the provisions of this Agreement.
(i) Amendment and Waiver. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Company and
Executive. The provisions of Section 3 may be amended and waived only
with the prior written consent of the Investors.
(j) Third-Party Beneficiaries. The parties hereto acknowledge and
agree that the Investors are third party beneficiaries of this Agreement.
This Agreement will inure to the benefit of and be enforceable by the
Investors and their successors and assigns.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
ROMA RESTAURANT HOLDINGS, INC.
By: /s/David G. Short
Its: Vice President
/s/ Robert B. Page
Robert B. Page
<PAGE>
Schedule I
Sentinel Capital Partners, L.P.
Sentinel Capital Partners II, L.P.
Omega Partners, L.P.
The Provident Bank
Travelers Casualty and Surety Company
The Travelers Insurance Company The Travelers Life and Annuity Company
The Phoenix Insurance Company NPC Restaurant Holdings, Inc.
EXHIBIT 10.9A
EXECUTION COPY
REVISED AND RESTATED MANAGEMENT
THIS REVISED AND RESTATED MANAGEMENT AGREEMENT (this "Agreement")
is made as of May 12, 1999, revising and restating the Management
Agreement made as of July 1, 1998, by and among Roma Restaurant Holdings,
Inc., (formerly known as Romacorp, Inc.), a Delaware corporation (the
"Company"), and Robert B. Page ("Executive"). Certain definitions are set
forth in Section 14 of this Agreement.
The Company and Executive desire to enter into this revised and
restated agreement (i) setting forth the terms pursuant to which the
Company granted to Executive an option to acquire certain shares of
Common stock; (ii) setting forth the terms and conditions of Executive's
employment with the Company; and (iii) setting forth the obligation of
Executive to refrain from competing with the Company and/or its
Subsidiaries under certain circumstances as provided herein.
The parties hereto agree as follows:
STOCK AND OPTION PROVISIONS
1. [This Section intentionally omitted]
2. Stock Option.
a) Grant of Option. Pursuant to the Plan, the Company hereby
grants to Executive a nonqualified stock option (the "Option") to
purchase 8.80 shares (the "Option Shares") of Common, at a price per
share of $12,500.00 (the "Exercise Price"). The Exercise Price and the
number of Option Shares may be adjusted as provided in the Plan. The
Option is not intended to be an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code.
(b) Executive Bound by Plan. Attached hereto as Annex A is a copy of the
Plan which is incorporated herein by reference and made a part hereof.
Executive hereby acknowledges receipt of a copy of the Plan and agrees
to be bound by all the terms and provisions thereof. The Plan should be
carefully examined before any decision is made to exercise the option.
(c) Exercisabilitv. Subject to Section 2(f), the Option shall be
exercisable, in whole or in part, by written notice to the Company at any
time, and from time to time, during the period of time after the date
hereof and prior to the tenth anniversary of the date hereof or such
earlier date upon which the Option expires as specified herein or in the
Plan. The Option may not be exercised for a fraction of a share of
Common. The Option is subject to cancellation as provided in the Plan.
(d) Vesting of Option. The Option shall vest with respect to the
Option Shares as follows:
(i) Time Option Shares. This Option shall vest with respect
to 4.40 Option Shares subject to this Option (the "Time Option Shares")
provided the Executive remains continuously employed with the Company
after the date hereof and through and including the vesting dates
described below as follows:
Number of Time
Vesting Date Option Shares Which Vest
July l 1999 8.80 (1/10 of grant)
The last day of each of the 0.0733 (1/120 of the grant)
firsts 48 months after July 1, 1999
provided, that upon the closing of a Sale of the Company, this Option
will immediately vest with respect to all of the unvested Time Option
Shares.
(ii) Performance Option Shares. This Option shall vest with respect
to 4.40 Option Shares (the "Performance Option Shares") upon the
attainment of certain goals described in this Section 2(d)(ii). This
Option shall vest with respect to 1.466 Performance Option Shares as of
the vesting dates set forth below if (x) the Company's EBITDA (as defined
below) for the fiscal year ending on such vesting date equals at least
the dollar amount set forth opposite such vesting date (each a "Target
EBITDA") and (y) the Executive has been continuously employed with the
Company from the date hereof through the applicable vesting date.
Vesting Dates Target EBITDA
Last day of fiscal year 1999 $17,628,000
Last day of fiscal year 2000 $18,060,000
Last day of fiscal year 2001 $20,392,000
Last day of fiscal year 2002 $24,024,000
; provided that the last day of fiscal year 2002 vesting date is provided
only for the purposes of vesting Performance Option Shares, if any, which
do not vest on the last day of fiscal year 2001 and in no event shall
more than 4.40 Option Shares vest pursuant to this Section 2(d)(ii).
The effective date of vesting shall be as set forth above even
though EBITDA for the applicable period may not be determined until a
date thereafter.
In the event that the Company does not achieve the Target EBITDA
provided in the table above as of the last day of fiscal year 1999, the
last day of fiscal year 2000 and/or the last day of fiscal year 2001, the
portion of the Option which did not vest on any such date shall vest if
the actual EBITDA for the following fiscal year exceeds the Target EBITDA
for such following fiscal year by an amount greater than or equal to the
shortfall in Target EBITDA for the prior fiscal year.
<PAGE>
In the event that (a) the Company consummates any acquisition of the
capital stock or assets of another corporation in any given year or
(b)the Company commits to a one-time unusual capital expenditure, the
Target EBITDA for such year will be adjusted to account for the pro-forma
and pro-rata EBITDA impact of such acquired corporation or such capital
expenditure, as the case may be.
"EBITDA" means earnings before interest, income taxes, depreciation,
amortization, Sentinel Capital Partners, L.P.'s or one of its affiliate's
management fee and non-recurring charges
(e) Early Expiration Upon Termination of Employment. Any portion-of
the Option that has previously vested prior to or on the date Executive's
employment with the Company, Roma Restaurant Holdings, Inc. (the
Company's parent) or the Company's Subsidiaries terminates (the
"Termination Date") for any reason other than termination by the Company
for Cause may be exercised by Executive within 30 days of the Termination
Date. If Executive does not elect to exercise any vested portion of the
Option within 30 days of the Termination Date, such portion shall expire
and shall no longer be exercisable. If Executive elects to exercise any
portion of such Option within 30 days of the Termination Date, such
portion shall be immediately subject to the Repurchase Option pursuant
to the terms and conditions set forth in Section 3. If the Executive's
employment is terminated by the Company for Cause, the portion of the
Option that is vested but not yet exercised shall be forfeited.
(f) Procedure for Exercise. Executive may exercise all or a portion
of the Option by delivering written notice of exercise to the Company,
together with (i) written acknowledgment that Executive has read and has
been afforded an opportunity to ask questions of management of the
Company regarding all financial and other information provided to
Executive regarding the Company and (ii) payment in full by delivery of
a cashiers or certified check in: the amount equal to the sum of (A) the
Exercise Price multiplied by the number of shares of Common to be
acquired and (b) the amount, if any, of any additional federal and state
income taxes required to be withheld by reason of the exercise of the
Option. As a condition to the exercise of any part of the Option,
Executive will permit the Company to, and at the request of Executive the
Company shall, deliver to him all financial and other information
regarding the Company and its Subsidiaries which it believes necessary
to enable Executive to make an informed investment decision.
(g) Securities Laws Restrictions. Executive represents that when
Executive exercises the Option he will be purchasing Option Shares for
Executive's own account and not on behalf of others. Executive
understands and acknowledges that federal and state securities laws
govern and restrict Executive's right to offer, sell or otherwise dispose
of any Option Shares unless Executive's of her, sale or other disposition
thereof is registered under the Securities Act and state securities laws
or, in the opinion of the Company' counsel, such offer, sale or other
disposition is exempt from registration thereunder. Executive agrees that
he will not offer, sell or otherwise dispose of any Option Shares in any
manner which would: (i) require the company to file any registration
statement (or similar filing under state law) with the Securities and
Exchange Commission or to amend or supplement any such filing or (ii)
violate or cause the Company to violate the Securities Act. the rules and
regulations promulgated thereunder or any other state or federal law
Executive further understands that the certificates for any Option Shares
Executive purchases will bear the legend set forth in Section 5 hereof
or such other legends as the Company necessary or desirable in connection
with the Securities Act or other rules, regulations or laws.
(h) Non-Transferability of the Option. The Option is personal to
Executive and is not transferable by Executive. Only Executive or
Permitted Transferees or their respective estates or heirs are entitled
to exercise the Option.
(i) Effect of Transfers in Violation of Agreement. The Company will
not be required (i) to transfer on its books any Option Shares which have
been sold or transferred in violation of any of the provisions set forth
in this Agreement, or (ii) to treat as owner of such shares, to accord
the right to vote as such owner or to pay dividends to any transferee to
whom such shares have been transferred in violation of this Agreement.
(j) Delivery of Shares. The date on which Executive has delivered
to the Company the items required under Section 2(f) is referred to
herein as Executive's Exercise Dates. Certificates for Option Shares
purchased upon exercise of the Option shall be delivered by the Company
to Executive within five business days after Executive's Exercise Date.
(k) Date of Issuance. The Option Shares issuable upon the exercise
of the Option shall be deemed to have been issued to Executive on
Executive's Exercise Date, and Executive shall be deemed for all purposes
to have become the record holder of such Option Shares on Executive's
Exercise Date.
(1) Fully Paid. The issuance of certificates for Option Shares upon
exercise of the Option shall be made without charge to Executive for any
issuance tax in respect thereof or other cost incurred by the Company in
connection with such exercise. Each Option Share issuable upon exercise
of the Option shall, upon payment of the exercise price therefor, be
fully paid and nonassessable and free from all liens and charges with
respect to the issuance thereof.
(m) Book Transfer. The Company shall not close its books against the
transfer of any Option Shares issued or issuable upon the exercise of the
Option in any manner which interferes with the timely exercise of the
Option.
(n) Filings. The Company shall assist and cooperate with Executive
to make any required governmental filings or obtain any governmental
approvals prior to or in connection with any exercise of the Option.
(o) Reservation. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common solely for
the purpose of issuance upon the exercise of the Option, such number of
shares of Common as are issuable upon the exercise of all outstanding
Options. All Option Shares which are so issuable shall, when issued, be
duly and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges. The Company shall take all such actions as may
be necessary to assure that all such Option Shares may be so issued
without violation of any applicable law or governmental regulation or any
required ends of any domestic securities exchange or market upon which
shares of Common may be listed (except for official notice of issuance
which shall be immediately delivered by the Company upon each such
issuance).
3. Repurchase Option.
(a) Repurchase Option. In the event that Executive is no longer
employed by the Company or any of its Subsidiaries for any reason, the
Executive Securities, whether held by Executive, or one or more Permitted
Transferees, will be subject to repurchase by the Company and the
Investors pursuant to the terms and conditions set forth in this Section
3 (the "Repurchase Option").
(b) Termination for Reasons Other than for Cause. If the Executive's
employment with the Company or any of its Subsidiaries is terminated for
any reason other than for Cause, then within one year after the
Termination Date, the Company may elect to purchase all or some of 50%
of the Executive Securities (other than the Option Shares) and 100% of
the Option Shares (collectively, the "Eligible Stock"), at a price per
share equal to the Fair Market Value thereof (x) as determined on the
Termination Date, if the Repurchase Notice (as defined in Section 3(d)
below) has been delivered within three months after the Termination Date,
or (y) as determined as of a date determined by the Board within 30 days
prior to the delivery of the Repurchase Notice, if the Repurchase Notice
is delivered after the third month following the Termination Date;
provided that if Executive terminates his employment and violates
Sections 10,11 or 12, the repurchase price for each share of Eligible
Stock shall be equal to the lesser of its Fair Market Value or the
Original Value thereof.
(c) Termination for Cause. If Executive is no longer employed by the
Company or any of its Subsidiaries as a result of Executive's termination
for Cause, then within one year after the Termination Date, the Company
may elect to purchase all or any portion of the Executive Securities
(collectively, the "Available Stock"), at a price per share equal to the
lower of the Fair Market Value thereof and the Original Value thereof.
(d) Repurchase Procedures. The Company may elect to exercise the right
to purchase all or any portion of the Eligible Stock or the Available
Stock, as the case may be, by delivering written notice (the "Repurchase
Notice") to the holder or holders of such Executive Securities. The
Repurchase Notice will set forth the number of shares of Executive
Securities to be acquired from such holder(s), the aggregate
consideration to be paid for such shares and the time and place for the
closing of the transaction. If any shares of Executive Securities are
held by Permitted Transferees of Executive, the Company shall purchase
the shares elected to be purchased from such holder(s) of shares of
Executive Securities pro rata according to the number of shares of
Executive Securities held by such holder(s) at the time of delivery of
such Repurchase Notice (determined as nearly as practicable to the
nearest share).
(e) Investors' Rights.
(i) If for any reason the Company does not elect to purchase all
of the Eligible Stock or the Available Stock, as the case may be, prior
to the 90th day following the Termination Date, Sentinel and then in
certain circumstances, each Investor will be entitled to exercise the
Repurchase Option, in the manner set forth in Section 3(d), for the
Eligible Stock or the Available Stock, as the case may be, that the
Company has not elected to purchase (the "Available Shares"). As soon as
practicable but in any event within thirty (30) days after the Company
determines that there will be Available Shares, the Company will deliver
written notice (the "Option Notice") to all Investors setting forth the
number of Available Shares and the price for each Available Share.
(ii) Sentinel will be permitted to purchase all or some of the
number (the "Sentinel Portion") of Available Shares equal to the product
of (A) Sentinel's Pro Rata Share and (B) the number of Available Shares,
by delivering written notice to the Company and the other Investors
within 30 days after receipt of the Option Notice from the Company (such
30-day period being referred to herein as the "Sentinel Election
Period"). The quotient determined by dividing (x) the number of shares
of Available Shares elected to be purchased by Sentinel and (y) the
Sentinel Portion, shall be referred to as the "Sentinel Percentage." If
Sentinel elects to purchase any of the Available Shares, each of the
other Investors shall be permitted to purchase all or some of the number
of Available Shares equal to the product of (m) the Sentinel Percentage,
(n) such Investor's Pro Rata Share and (o) the number of Available
Shares, by delivering written notice to the Company within 30 days after
receipt of the Option Notice from the Company.
(f) Closing. The closing of the transactions contemplated by this
Section 3 will take place on the date designated by the Company in the
Repurchase Notice, which date will not be more than 90 days after the
delivery of such notice. The Company and/or the Investors, as the case
may be, will pay for the Executive Securities to be purchased pursuant
to the Repurchase Option by delivery of, in the case of an Investor, a
check payable to the holder of Executive Securities, and in the case of
the Company (i) a check payable to the holder of such Executive
Securities, (ii) a note or notes payable in three equal annual
installments beginning on the first anniversary of the closing of such
purchase and bearing interest (payable quarterly) at a rate per annum
equal to 10% or (iii) both (i) and(ii) in the aggregate amount of the
purchase price for such shares (which note will also become due upon a
Change of Ownership). The Company and/or the Investors, as the case may
be, will receive customary representations and warranties from Executive
regarding the sale of the Executive Securities, including but not limited
to the representation that Executive has good and marketable title to the
Executive Securities to be transferred free and clear of all liens,
claims and other encumbrances.
(g) Restrictions on Repurchase. Notwithstanding anything to the
contrary contained in this Agreement, all repurchases of Executive
Securities by the Company shall be subject to applicable restrictions
contained in the Delaware General Corporation Law and in the Company's
and its Subsidiaries= debt and equity financing agreements. If any such
restrictions prohibit the repurchase of Executive Securities hereunder
which the Company is otherwise entitled or required to make, the Company
may make such repurchases as soon as it is permitted to do so under such
restrictions.
(h) Termination of Repurchase Right. The right of the Company and
the Investors to repurchase Executive Securities pursuant to this Section
3 shall terminate upon the first to occur of a Sale of the Company or a
Qualified Public Offering.
4. Stockholders Agreement. The parties hereto acknowledge that the shares
of Executive Securities are subject to the terms and conditions of the
Stockholders Agreement and such shares shall be deemed to be "Company
Shares" and the Executive shall be deemed to be a "Stockholder" for all
purposes of the Stockholders Agreement.
5. Restrictions on Transfer.
(a) The certificates representing the Executive Securities bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON
, 1998, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE AACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION THE THEREUNDER THE SECURITIES REPRESENTED BY
THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A
MANAGEMENT AGREEMENT AMONG ROMA RESTAURANT HOLDINGS, INC. (THE "COMPANY")
AND EXECUTIVE DATED AS OF JULY 1, 1998, AS AMENDED AND MODIFIED FROM TIME
TO TIME. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF
AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) No holder of Executive Securities may sell, transfer or dispose of
any Executive Securities (except pursuant to an effective registration
statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and
substance to the Company) that neither registration nor qualification
under the Securities Act and applicable state securities laws is required
in connection with such transfer.
EMPLOYMENT PROVISIONS
6. Employment. The Company shall employ Executive, and Executive hereby
accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date hereof and
ending as provided in Section 9 hereof (the "Employment Period").
7. Position and Duties.
(a) During the Employment Period, Executive shall serve as the Chief
Executive Officer of the Company and shall have the normal duties,
responsibilities and authority of the Chief Executive Officer, subject
to the power of the Board to expand or limit such duties,
responsibilities and authority and to override actions of the President.
(b) Executive shall report to the Board, and Executive shall devote
his best efforts and substantially all of his business time and attention
(except for permitted vacation periods and reasonable periods of illness
or other incapacity) to the business and affairs of the Company and its
Subsidiaries. Executive shall perform his duties and responsibilities to
the best of his abilities in a diligent, trustworthy, businesslike and
efficient manner.
(c) In addition, Executive shall be responsible for (i) providing
assistance to the Company in maintaining all of the Company's
relationships with its customers and suppliers, and (ii) assisting the
Company in the evaluation of new business opportunities.
8. Base Salary, Benefits and Bonuses.
(a) During the Employment Period, Executive's base salary shall be
$200,000 per annum or such higher rate as the Board may designate from
time to time (the "Base Salary"), which salary shall be payable in
regular installments in accordance with the Company's general payroll
practices and shall be subject to customary withholding. In addition,
during the Employment Period, Executive shall be entitled to participate
in all of the Company's employee benefit programs for which senior
executive employees of the Company and its Subsidiaries are generally
eligible, including, but not limited to the Company's group medical
coverage program, and Executive shall be eligible for paid vacation in
accordance with the policies of the Company.
(b) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing his duties under this
Agreement which are consistent with the Company's policies in effect from
time to time with respect to travel, entertainment and other business
expenses, subject to the Company's requirements with respect to reporting
and documentation of such expenses.
(c) In addition to the Base Salary, the Board shall award a bonus to
Executive following the end of each fiscal year equal to up to 50% of the
Executive's Base Salary based upon performance, determined at the
discretion of the Board. It is anticipated that in any given fiscal year
if the Company were to just meet the performance goals contained in the
Company's management plan, the bonus awarded under this Section 8(c)
would be approximately 25% of the Executive's Base Salary.
9. Term: Termination.
(a) The Employment Period shall end on the third annual anniversary
of the date hereof; provided that (i) the Employment Period shall
terminate prior to such date upon Executive's death, resignation or
Disability; (ii) the Employment Period may be terminated by the Company
at any time prior to such date for Cause or without Cause; (iii) the
Employment Period may be terminated by Executive at any time for any
reason (a "Voluntary Termination"); and (iv) unless each party is
notified in writing within 30 days before the third annual anniversary
of the date hereof or the end of a Renewal Period, the Employment Period
shall automatically be extended for additional one year periods (each
such period, a "Renewal Period").
(b) Upon (1) a Voluntary Termination of the employment relationship by
Executive other than within 10 days of a Good Reason Event or (2)
termination of the Executive's employment relationship by the Company for
Cause, prior to the end of the Employment Period (the "Term"), all future
compensation or bonuses to which Executive would otherwise be entitled
and all fixture benefits for which Executive would otherwise be eligible
shall cease and terminate as of the date of such termination; provided,
however, that any salary, bonus, incentive payment, deferred compensation
or other compensation or benefit which has been earned by or accrued for
the benefit of Executive prior to the date of termination shall not be
forfeited and shall be paid to Executive promptly.
(c) Upon a termination of Executive's employment prior to the end of
the Term other than (i) a termination by the Company for Cause or (ii)
a Voluntary Termination of the employment relationship by Executive other
than within 10 days of a Good Reason Event, the Executive shall be
entitled, in consideration of Executive's continuing obligations
hereunder after such termination (including, without limitation,
Executive's non-competition obligations), to receive his Base Salary,
payable bi-weekly, and fringe benefits, as if Executive's employment
(which shall cease on the date of such termination) had continued for the
twelve (12) months following termination; provided that in the event
Executive's employment is terminated for the reasons set forth in clauses
(i) or (ii) above, Executive shall be required to use his reasonable best
efforts to obtain, as expeditiously as possible, employment with at least
comparable salary and responsibilities commensurate with those set forth
herein. In such event, Executive's right to receive the amounts and
benefits set forth in this Section 9(c) shall terminate. Notwithstanding
the foregoing, if Executive obtains employment in accordance with this
Section 9(c) and the salary to be paid to Executive is less than the Base
Salary, the Company shall pay to Executive an amount equal to such
deficiency, payable bi-weekly, for the remainder of the severance period.
MISCELLANEOUS PROVISIONS
10. Confidential Information. Executive acknowledges that the
information, observations and data obtained by him while employed by the
Company and its Subsidiaries (including those obtained while employed by
the Company prior to the date of this Agreement) concerning the business
or affairs of the Company or any of its Subsidiaries ("CONFIDENTIAL
Information") are the property of the Company or such Subsidiary.
Therefore, Executive agrees that he shall not disclose to any
unauthorized person or use for his own purposes any Confidential
Information without the prior written consent of the Board, unless and
to the extent that (i) such information was otherwise available to
Executive from a source other than the Company and (ii) the
aforementioned matters become generally known to and available for use
by the public other than as a result of Executive's acts or omissions.
Executive shall deliver to the Company at the termination of the
Employment Period, or at any other time the Company may request, all
memoranda, notes, plans, records, reports, computer tapes, printouts and
software and other documents and data (and copies thereof) relating to
the Confidential Information, Work Product (as defined below) or the
business of the Company or any Subsidiary which he may then possess or
have under his control.
11. Inventions and Patents. Executive acknowledges that all inventions,
innovations, improvements, developments, methods, designs, analyses,
drawings, reports and all similar or related information (whether or not
patentable) which relate to the Company=s or any of its Subsidiaries=
actual or anticipated business, research and development or existing or
future products or services and which are conceived, developed or made
by Executive while employed by the Company and its Subsidiaries ("Work
Product") belong to the Company or such Subsidiary. Executive shall
promptly disclose such Work Product to the Board and perform all actions
reasonably requested by the Board (whether during or after the Employment
Period) to establish and confirm such ownership (including, without
limitation, assignments, consents, powers of attorney and other
instruments).
12. Non-Compete. Non-Solicitation.
(a) In further consideration of the compensation to be paid to
Executive hereunder, Executive acknowledges that in the course of his
employment with the Company prior to the date of this Agreement he has
become familiar, and during his continued employment with the Company he
shall become familiar, with the Company's trade secrets and with other
Confidential Information concerning the Company and its Subsidiaries and
that his services have been and shall be of special, unique and
extraordinary value to the Company and its Subsidiaries. Therefore,
Executive agrees that, during the period commencing on the date hereof
and ending on the third anniversary of the termination of the Employment
Period (including any Renewal Period) (the ANoncompete Period"), he shall
not directly or indirectly own any interest in, manage, control,
participate in, consult with, or render services for, any Person that is
in the casual dining rib restaurant business in the United States.
Nothing herein shall prohibit Executive from being a passive owner of not
more than 5% of the outstanding stock of any class of a corporation which
is publicly traded, so long as Executive has no active participation in
the business of such corporation.
(b) During the Noncompete Period, Executive shall not directly, or
indirectly through another entity, (i) induce or attempt to induce any
employee of the Company or any Subsidiary to leave the employ of the
Company or such Subsidiary, or in any way interfere with the relationship
between the Company or any Subsidiary and any employee thereof, (ii) hire
any person who was an employee of the Company or any Subsidiary at any
time during the Employment Period or (iii) induce or attempt to induce
any customer, supplier, licensee, licenser, franchisee or other business
relation of the Company or any Subsidiary to cease doing business with
the Company or such Subsidiary, or in any way interfere with the
relationship between any such customer, supplier, licensee or business
relation and the Company or any Subsidiary (including, without
limitation, making any negative statements or communications about the
Company or its Subsidiaries).
13. Enforcement. If, at the time of enforcement of Sections 10, 11 or
12 of this Agreement, a court holds that the restrictions stated herein
are unreasonable under circumstances then existing, the parties hereto
agree that the maximum period, scope or geographical area reasonable
under such circumstances shall be substituted for the stated period,
scope or area. Because Executive's services are unique and because
Executive has access to Confidential Information and Work Product, the
parties hereto agree that money damages would not be an adequate remedy
for any breach of this Agreement. Therefore, in the event a breach or
threatened breach of this Agreement, the Company or its successors or
assigns may, in addition to other rights and remedies existing in their
favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or
prevent any violations of, the provisions hereof (without posting a bond
or other security). In addition, in the event of an alleged breach or
violation by Executive of Section 12, the Noncompete Period shall be
tolled until such breach or violation has been duly cured. Executive
agrees that the restrictions contained in Section 12 are reasonable.
14. Definitions. All references to a fiscal year refer to the
Company's fiscal year.
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by, or under common control with such Person. For
purposes of this Agreement, the term "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with" as used with respect to any Person) means the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of such Person whether through ownership of
voting securities, by contract or otherwise.
"Board" means the board of directors of the Company.
"Cause" means (i) the continued failure by Executive to perform duties
described under Section 7 hereof (which failure is not cured within 5
days following notice from the Board), (ii) gross negligence (which is
not cured within 5 days after notice from the Board) or willful
misconduct by Executive in the performance of his duties or (iii)
Executive=s commission of a felony or other offense involving moral
turpitude.
"Change of Ownership" is any event pursuant to which (i) any Person
together with such Person's Affiliates (other than the Investors and
their Affiliates) collectively own at least 50% of the aggregate number
of shares of Common outstanding at any given time, and (ii) the Investors
and their Affiliates collectively cease to own at least 50% of the
aggregate number of shares of Common that they own on the date hereof (as
adjusted for stock splits, stock dividends and recapitalization and for
exchanges in connection with a merger, consolidation, reorganization or
sale).
"Closing" means the closing of the transactions contemplated by the
Recapitalization Agreement.
"Common" means the Company's Common Stock par value $.01 per share.
"Disability" means Executive's inability, due to illness, accident
injury, physical or mental incapacity or other disability, to carry out
effectively his duties and obligations to the Company or to participate
effectively and actively in the management of the Company for a period
of at least 90 consecutive days or for shorter periods aggregating 14
days (whether or not consecutive) during each three month period for not
less than six months, as determined by an independent physician.
"Executive Securities" means (i) the Option Shares which are issued
and outstanding from time to time, (ii) any other shares of Common
otherwise issued to, acquired by or held by Executive and (iii) shares
of the Company's capital stock issued with respect to the securities
specified in clauses (i) or (ii) above by way of a stock split, stock
dividend or other recapitalization; provided that Executive Securities
shall continue to be Executive Securities in the hands of any holder
other than Executive (except for the Company and the Investors and except
for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Executive Securities shall succeed to
all rights and obligations attributable to Executive as a holder of
Executive Securities hereunder.
"Fair Market Value" of each Option Share or share of Executive
Securities, as the case may be, means the marker value as determined in
good faith mutually by the Board and Executive; provided that if the
parties cannot agree within 30 days, the Fair Market Value will be
decided by a mutually acceptable independent investment bank, whose
determination will be final and binding.
"Family Group" means Executive's spouse and descendants (whether
natural or adopted) and any trust solely for the benefit of Executive
and/or Executive's spouse and/or descendants.
"Good Reason Event" means:
(a) Notwithstanding the exercise of the power granted to the
Company and the Board by the concluding clause of Section 7(a) hereof,
the assignment to the Employee of any duties inconsistent in any material
respect with Employee's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities initially
assigned to Executive and as contemplated by Section 7 of this Agreement,
or any other action that results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith
that is remedied within 10 days after receipt of written notice thereof
from the Employee to the Company; or
(b) Any failure by the Company to comply with any of the provisions
of this Agreement, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith that is remedied within 10 days after
receipt of written notice thereof from the Employee to the Company.
"Investor Shares@ means (i) any Common acquired by the Investors, and
(ii) any equity securities of the Company issued or issuable directly or
indirectly with respect to the securities referred to in clause (i) above
by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization; provided that Investor Shares shall not include (a)
shares of Common issued pursuant to the conversion or exercise of any
options, warrants or other convertible securities or (b) any equity
securities of the Company issued or issuable with respect to the
securities referred to in clause (a) above in connection with a
combination or split of shares, recapitalization, merger, consolidation
or other reorganization.
"Investors" means the parties listed on Schedule 1 attached hereto,
provided that if a party who is an employee of the Company as of the date
hereof or becomes an employee of the Company at any time after the date
hereof ceases to be an employee of the Company hereafter or thereafter,
such party shall be deemed to have been removed from the Schedule and
shall no longer be deemed an Investor for purposes of this Agreement.
"Option Shares" means, collectively, the Time Option Shares and the
Performance Option Shares.
"Original Value" means with respect to each Option Share, the
exercise price paid for such Option Share (each as proportionally
adjusted for all stock splits, stock dividends and other recapitalization
subsequent to the date hereof.
"Permitted Transferee@ has the meaning set forth in the Stockholders
Agreement.
"Person" means any natural person, corporation, partnership, limited
liability company, trust, unincorporated organization or other entity.
"Plan" means that certain Roma Restaurant Holdings, Inc. 1998 Stock
Option Plan.
"Pro Rata Share" means, with respect to each Investor, the quotient
determined by dividing (i) the total number of Investor Shares held by
such Investor, by (ii) the total number of Investor Shares held by all
Investors.
"Public Sale" means any sale pursuant to a registered public offering
under the Securities Act or any sale to the public pursuant to Rule 144
promulgated under the Securities Act effected through a broker, dealer
or market maker.
"Qualified Public Offering" has the meaning set forth in the
Stockholders Agreement.
"Recapitalization Agreement" means that certain Recapitalization
Agreement, dated as of April 24, 1998, by and among the Company and
certain other parhes thereto, as amended.
"Sale of the Company" means the first to occur of any transaction (i)
following which there has been a Change of Ownership, or (ii) involving
the sale of substantially all of the Company=s assets determined on a
consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Sentinel" means Sentinel Capital Partners, L.P., a Delaware limited
partnership.
"Stockholders Agreement" means that certain Stockholders Agreement
dated as of the date hereof, by and among the Company and the Company's
stockholders.
"Subsidiary" means any corporation, partnership, association or other
business entity of which (i) if a corporation, a majority of the total
voting power of shares of stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly
or indirectly, by the Company or (ii) if a partnership, association or
other business entity, a majority of the partnership or other similar
ownership interests thereof is at the time owned or controlled, directly
or indirectly, by the Company. For purposes hereof, the Company shall be
deemed to have a majority ownership interest in a partnership,
association or other business entity if the Company, directly or
indirectly, is allocated a majority of partnership, association, or other
business entity gains or losses, or is or controls the managing director
or general partner (or Person having like authority) of such partnership,
association or other business entity.
"Termination Date" has the meaning set forth in Section 2(e).
15. Notices. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable
overnight courier service (charges prepaid) to the Investors at the
addresses indicated in the Company's records and to the other recipients
at the address indicated below:
If to Executive: Robert Page
3924 Evesham
Plano, TX 75025
If to the Company: Roma Restaurant Holdings, Inc.
c/o Sentinel Capital Partners, L.P.
777 Third Avenue, 32nd Floor
New York, New York 10022
Attention: David S. Lobel
John F. McCormack
Eric D. Bommer
with a copy to: Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Frederick Tanne, Esquire
- and -
David Short
Romacorp, Inc.
9304 Forest Lane, Suite 200
Dallas, TX 75243
or such other address or to the attention of such other person as the
recipient party shall have specified by prior written notice to the
sending party. Any notice under this Agreement shall be deemed to have
been given when so delivered or sent or, if mailed, five days after
deposit in the U.S. mail.
16. General Provisions.
(a) Executive Acknowledgment. The Executive acknowledges that he/she
shall not be entitled to any salary, bonuses, benefits or options granted
hereunder unless and until the stockholders of the Company approve such
rights in compliance with the requirements of Section 280G(b) (5)(B) of
the Internal Revenue Code and proposed Treasury Regulation Section
1280G-l, Q&A 7.
(b) Transfers in Violation of Agreement. Any transfer or attempted
transfer of any Executive Securities in violation of any provision of
this Agreement shall be void, and the Company shall not record such
transfer on its books or treat any purported transferee of such Executive
Securities as the owner of such stock for any purpose.
(c) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other
jurisdiction, but this Agreement shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
(d) Complete Agreement. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the
complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or
among the parties, written or oral, which may have related to the subject
matter hereof in any way.
(e) Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which
taken together constitute one and the same agreement.
(f) Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by
Executive, the Company, the Investors and their respective successors and
assigns (including subsequent holders of Executive Securities); provided
that the rights and obligations of Executive under this Agreanent shall
not be assignable except in connection with a permitted transfer of
Executive Securties hereunder.
(g) Choice of Law. The corporate law of the State of Delaware shall
govern all questions concerning the relative rights of the Company,
Executive and the Investors. All issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement
and the exhibits and schedules hereto shall be governed by, and construed
in accordance with, the laws of the State of New York, without giving
effect to any choice of law or conflict of law rules or provisions
(whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the
State of New York.
(h) Remedies. Each of the parties to this Agreement (including the
Investors) shall be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including reasonable
attorney's fees) caused by any breach of any provision of this Agreement
and to exercise all other rights existing in its favor. The parties
hereto agree and acknowledge that money damages would not be an adequate
remedy for any breach of the provisions of this Agreement and that any
party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent
any violations of the provisions of this Agreement.
(i) Amendment and Waiver. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Company and
Executive. The provisions of Section 3 may be amended and waived only
with the prior written consent of the Investors.
(j) Third-Party Beneficiaries. The parties hereto acknowledge and
agree that the Investors are third party beneficiaries of this Agreement.
This Agreement will inure to the benefit of and be enforceable by the
Investors and their successors and assigns.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
ROMA RESTAURANT HOLDINGS, INC.
By: /s/David G. Short
Its: Vice President
/s/ Robert B. Page
Robert B. Page
<PAGE>
Schedule I
Sentinel Capital Partners, L.P.
Sentinel Capital Partners II, L.P.
Omega Partners, L.P.
The Provident Bank
Travelers Casualty and Surety Company
The Travelers Insurance Company The Travelers Life and Annuity Company
The Phoenix Insurance Company NPC Restaurant Holdings, Inc.
<PAGE>
ROMA RESTAURANT HOLDINGS, INC.
1998 STOCK OPTION PLAN
ARTICLE I
Purpose of Plan
This 1998 Stock Option Plan (the "Plan") of Rome Restaurant Holdings,
Inc. (formerly known as Romacorp, Inc.) (the "Company"), adopted by the
Board of Directors of the Company on July 1, 1998, for executive and
other key employees of thc Company, is intended to advance the best
interests of the Company by providing those persons who have a
substantial responsibility for its management and growth with additional
incentives by allowing them to acquire an ownership interest in the
Company and thereby encourage them to contibute to the success of the
Company and to remaim in its employ. The avai1ability and offering of
stock options under the Plan also increases the Company's ability to
attract and retain individuals of exceptional managerial talent upon
whom, in large measure, the sustained progress, growth and profibility
of the Company depends. The Plan is a compensatory benefit plan within
the meaning of Rule 701 under the Securities Act and, unless and until
the Common Stock is publicly traded, the issuance of stock purchase
options and Common Stock pursuant to the Plan is intended to qualify for
the exemption from registration under the Securities Act provided by Rule
701.
ARTICLE II
Definitions
For purposes of the Plan, except where the context clearly indicates
otherwise, the follouring terms shall have the meanings set forth below:
"Board" sill mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute.
"Commmittee~" shall mean the committee of the Board which may be
designated by the Board to administer the Plan. The Committee shall be
composed of two or more directors as appointed from time to time to serve
by the Board.
<PAGE>
"Common Stock" shall mean the Company's Common Stock, par Value $.01
per share, or if the outstanding Common Stock is hereafter changed into
or exchanged for different stock or securities of the Company, such other
stock or securities.
"Company" has the meaning ascribed thereto in Article I hereof.
"Option Agreement" has the meaning ascribed thereto in Secdon 6.3
hereof.
"Options" shall have the meaning set forth in Article IV.
"Participant" shall mean any executive or other key employee or
director of the Company or any Subsidiary who has been selected to
participate in the Plan by the Conunittee or the Board.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a
trust, a joint venture, an unincorporated organizatlon and a governmental
entity or any department, agency or political subdivision thereof.
"Plan" has the meaning ascribed thereto in Article I hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Stockholders Agreement" means that Stockholders Agreement dated
as of June ___, l998 by and among the Company and the Company's
stockholders, attached as Exhibit A hereto.
"Subsidiary" means any subsidiary corporation (as such tetm is
defined in Section 424(f) of the Code) of the Company.
ARTICLE III
Administration
The Plan shall be administered by the Committee; provided that if
for any reason the Committee shall not have been appointed by the Board,
all authority and duties of the Committee under the Plan shall be vested
in and exercised by the Board. Subject to the limitations of the Plan,
the Committee shall have the sole and complete authority to: (i) select
Participants, (ii) grant Options to Participants in such forms and
amounts as it shall determine, (iii) impose such limitations,
restrictions and conditions upon such Options as it shall deem
appropriate, (iv) interpret the Plan and adopt, amend and rescind
administrative guidelines and other rules and regulations relating to the
Plan, (v) correct any defect or omission or reconcile any inconsistency
in the Plan or in any Option granted hereunder and (vi) make all other
determinations and take all other actions necessary or advisable for the
implementation and administration of the Plan. The Committee's
determinations on matters within its authority shall be conclusive and
binding upon the Participants, the Company and all other Persons. All
expenses associated with the administration of the Plan shall be borne
by the Company. The Committee may, as approved by the Board and to the
extent permissible by law, delegate any of its authority hereunder to
such persons as it deems appropriate.
ARTICLE IV
Limitation on Aggregate Shares
The number of shares of Common Stock with respect to which options may
be granted under the Plan (the "Options") and which may be issued upon
the exercise thereof shall not exceed, in the aggregate, 44.44 shares;
provided that the type and the aggregate number of shares which may be
subject to Options shall be subject to adjustment in accordance with the
provisions of Section 6.9 below, and further provided that to the extent
any Options expire unexercised or are canceled, terminated or forfeited
in any manner without the issuance of Common Stock thereunder, or if any
Options are exercised and the shares of Common Stock issued thereunder
are repurchased by the Company, such shares shall again be available
under the Plan. Shares of Common Stock available under the Plan may be
either authorized and unissued shares, treasury shares or a combination
thereof, as the Committee shall determine.
ARTICLE V
Awards
5.1 Options. The Committee may grant Options to Participants at any
time prior to the termination of this Plan in such quantity, at such
price, on such terms and subject to such conditions that are consistent
with this Plan and established by the Committee. Options granted under
this Plan shall be subject to such terms and conditions and evidenced by
agreements as shall be deteermined from time to time by the Committee.
5.2 Form of Option. Options granted under this Plan shall be
nonqualified stock options and are not intended to be "incentive stock
options" within the meaning of Section 422A of the Code or any successor
provision.
5.3 Exercise Price. The option exercise price per share of Common
Stock shall be fixed by the Committee at the time of grant.
5.4 Exercise Procedure. Options shall be exercisable, to the extent
they are vested, at any such time or times after the date of grant of
such Options and prior to the date of expiration thereof, subject to such
conditions or restrictions as the Conunittee shall decide in each case
when the Options are granted. Options be exercisable by delivering
written notice to the Company (to the attention of the Company's
Secretary) accompanied by payment in full of the applicable exercise
price. Payment of such exercise price shall be made in cash (including
check, bank draft, money order or wire transfer of immediately available
funds). At the time a Participant's exercise of Options, such Participant
shall be required to execute a joinder agreements making such Participant
a party to the Stockholders Agreement.
5.5 Vesting. Options may vest in one or more installments, upon the
passage of specified periods of time, upon the achievement by the Company
of certain performanace goals, or upon such other criteria, as the
Committee shall decide in each case when the Options are granted.
5.6 Terms of Options. The Committee shall determine the term of each
Ontion (including any early expirations thereof), which term shall in no
event exceed ten years from the date of grant.
ARTICLE VI
General Provisions
6.1 Repurchase Right. In the event a Participant's employment with
the Company is terminated for any reason, the Option Shares (whether
held by such Participant or one or more transferees and including any
Option Shares acquired subsequent to such termination of employment) will
be subject to repurchase by the Company pursuant to terms and conditions
set forth in such Participant's Option Agreement.
6.2 Written Agreement. Each Option granted hereunder shall be
embodied in a written agreement (an "Option Agreement") which shall be
signed by the Participant to whom the Option is granted and by the
Chairman or the President of the Company for and in the name and on
behalf of the Compamy and shall be subject to the terms and conditions
as set forth herein.
6.3 Listing. Registration and Compliance with Laws and Regulations.
Options shall be subject to the requirement that if at any time the
Committee shall determine, in its discretion, that the listing,
registration or qualification of the shares subject to the Options upon
any secutities exchange or under any state or federal securities or
other law or regulation, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition to or in
connection with the granting of the Options or the issuance or purchase
of shares thereunder, no Options may be granted or exercised, in whole
or in part, unless such listings registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee. The holders of such Options shall supply the
Company with such certificates, representations and infomation as the
Company shall request and shall otherwise cooperate with the Company in
obtaining such listing, registration, qualification, consent or approval.
In the case of officers and other Persons subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended, the Committee may at any
time impose any limitations upon the exercise of us Option that, in the
Committee's discretion, are necessity or desirable in order to comply
with such Section 16(b) and the rules and regulations thereunder. If the
Company, as part of an offering of securities or otherwise, finds it
desirable because of federal or state regulatory requirements to reduce
the period during which any Options may be exercised, the Committee, may,
in its discretion and without the Participant's consent, so reduce such
period on not less then 15 days' written notice to the holders thereof.
6.4 Withholding of Taxes. The Company shall be entitled if necessary
or desirable, to withhold from any Participant from any amounts due and
payable by the Company to such Participant (or secure payment from such
Participant in lieu of withholding) the amount of any withholding or
other tax due from the Company with respect to shares issuable under the
Options, and the Company may defer such issuance unless indemnified to
its satisfaction.
6.5 Notification of Inquiries and Agreements. Each Participant and
each Permitted Transferee shall notify the Company in writing within 10
days after the date such Participant or Permitted Transferee (i) first
obtains knowledge of any Internal Revenue Service inquiry, audit,
assertion, determination, investigation, or question relatingin any
manner to the value of Options granted hereunder, (ii) includes or agrees
(including without limitation, in any settlement, closing or other
similar agreement) to include in gross income with respect to any Option
granted under this Plan (A) any amount in excess of the amount reported
on Form 1099 or Form W-2 to such Participant by the Company, or (B) if
no such Form was received, any amount; and/or (iii) exercises, sells
disposes of, or otherwise transfers an Option acquired pursuant to this
Plan. Upon request, a Participant or Permitted Transferee shall provide
to the Company any information or document relating to any event
described in the preceding sentence which the Company (in its sole
discretion) requires in order to calculate and substantiate any change
in the Company's tax liability, as a result of such event
6.6 Options Not Tranferrable. Options may not be transferred other
than by will or the laws of descent and distribution and, during the
lifetime of the Participant to whom they were granted, may be exercised
only by such Participant (or, if such Participant is incapacitated, by
such Participant's legal guardian or legal representative). In the event
of the death of a Participant, Options which are not vested on the date
of death shall terminate; exercise of Options granted hereunder to such
Participant, which are vested as of the date of death, may be made only
by the executor or administrator of such Participant's estate or the
Person or Persons to whom such Participant's rights under the Options
will pass by will or the laws of descent and distribution.
6.7 Adjustments. In the event of a reorganization, recapita1ization,
stock dividend or stock split, or combination or other change in the
shares of Common Stock, the Board or the Committee may, in order to
prevent the dilution or enlargement of rights under outstanding Options,
make such adjustments in the number and type of shares authorized by the
Plan, the number and type of shares covered by outstanding Options and
the exercise prices specified therein as may be detemiincd to be
appropriate and equitable.
6.8 Rights of Participants. Nothing in the Plan shall interfere
with or limit in any way the right of the Company or any Subsidiary to
terminate any Participant's employment at any time (with or without
cause), or confer upon any Participant any right to continue in the
employ of the Company or any Subsidiary for any period of time or to
continue to receive such Participant's current (or other) rate of
compensation. No employee shall have a right to be selected as a
Participant or, having been so selected, to be selected again as a
Participant.
6.9 Amendment, Suspension and Termination of Plan. The Board or the
Committee may suspend or terminate the Plan or any portion thereof at any
time and may amend it from time to time in such respects as the Board or
the Committee may deem advisable; provided that no such amendment shall
be made without stockholder approval to the extent such approval is
required by law, agreement or the rules of any exchange upon which the
Common Stock is listed, and no such amendment, suspension or termination
shall impair the rights of Partcipants under outstanding Options without
the consent of the Participants affected thereby. No options shall be
granted hereunder after the tenth anniversary of the adoption of the
Plan.
6.10 Amendment, Modification and Cancellation of Outstanding
Options. The Committee may amend or modify any Option in any manner to
the extent that the Committee would have had the authority under the Plan
initially to grant such Option; provided that no such amendment or
modification shall impair tbe rights of any Participant under any Option
without the consent of such Participant. With the Participant's consent,
the Committee may cancel any Option and issue a new Option to such
Participant.
6.11 Indemnification. In addition to such other rights of
indemnification as they may have as members of the Board or the
Committee, the members of the Committee shall be indemnified by the
Company against all costs and expenses reasonably incurred by them in
connection with any action, suit or proceeding to which they or any of
them may be party by reason of any action taken or failure to act under
or in connection with the Plan or any Option granted thereunder, and
against all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the
Company) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding; provided that any such Committee member shall
be entitled to the indemnification rights set forth in this Section 6.13
only if such member has acted in good faith and in a manner that such
member reasonably believed to be in or not opposed to the best interests
of the Company and, with respect to any criminal action or proceeding,
had no reasonable cause to believe that such conduct was unlawfill, and
further provided that upon the institution of any such action, suit or
proceeding a Committee member shall give the Company written notice
thereof and an opportunity, at its own expense, to handle and defend the
same before such Commmittee member undertakes to handle and defend it on
his own behalf.
6.12 Restricted Securities. All Common Stock issued pursuant to the
terms of this Plan shall constitute "restricted securities," as that term
is defined in Rule 144 promulgated by the Securities and Exchange
Commission pursuant to the Securities Act, and may not be transferred
except in compliance with the registration requirements of the Securities
Act or an exemption therefrom.
* * * * *
Exhibit 10.11
July 13, 1998
Ms. Susan Holland
1029 Basilwood Drive
Coppell, Texas 75019
Dear Susan:
This will memorialize our offer to you to join Romacorp, Inc. in
accordance with our recent discussions. Effective the 3 day of
August, 1998 you will be appointed to the position of Vice President,
Finance and Chief Financial Officer of Romacorp, Inc. and its
subsidiary and affiliated companies. You will be charged with the
responsibility for management of the Company's financial functions,
most particularly the implementation of the corporate financial and
accounting infrastructure as the company goes through the process of
transition from a wholly-owned subsidiary of NPC International, Inc.
to a stand alone company with SEC and public reporting
responsibilities. The purpose of this letter is to set out,
generally, the terms and conditions of your employment.
Base Salary, Benefits and Bonuses
(a) Your beginning base salary will be $135,000 per year (the "Base
Salary"), which salary will be payable bi-weekly in accordance with
the Company's general payroll practices and shall be subject to
customary withholding. Compensation reviews will be annually
thereafter. In addition, you will be entitled to participate in all
of the Company's employee benefit programs for which senior executive
employees of the Company and its Subsidiaries are generally eligible,
including, but not limited to the Company's group medical coverage
program. You will be eligible for paid vacation in accordance with
the policies of the Company, except that you will be entitled to three
(3) weeks beginning in year one (1).
(b) The Company will reimburse all reasonable expenses incurred by
you in the course of performing your duties which are consistent with
the Company's policies in effect from time to time with respect to
travel, entertainment and other business expenses, subject to the
Company's requirements with respect to reporting and documentation of
such expenses.
(c) In addition to Base Salary, the Board of Directors may award a
bonus to you following the end of each fiscal year equal to up to 50%
of the Base Salary based upon performance, determined at the
discretion of the Board. It is anticipated that in any given fiscal
year if the Company were to just meet the performance goals contained
in the Company's management plan, the bonus awarded under this Section
would be approximately 25% of Base Salary.
(d) You will be granted a participation by Stock Option, pursuant to
a standard option agreement, in the Company's non-qualified 1998 Stock
Option Plan, with the amount and other terms as set by the Board.
(e) The Company will further pay, by advance or reimbursement, for
your continuing education required in connection with maintaining your
qualification as a Certified Public Accountant, as well as
professional dues to the AICPA, Texas State Board of Public Accounting
and the Dallas Chapter of CPS's.
Term: Termination
(a) Your employment may be terminated by the Company at any time for
cause or without cause or may be terminated by you at any time for any
reason (a "Voluntary Termination").
(b) Upon (1) a Voluntary Termination of the employment relationship
by you or (2) termination of the employment relationship by the
Company for cause, all future compensation or bonuses to which you
would otherwise be entitled and all future benefits for which you
would otherwise eligible shall cease and terminate as of the date of
such termination; provided, however, that any salary, bonus, incentive
payment, deferred compensation or other compensation or benefit which
has been earned by or accrued to your benefit prior to the date of
termination shall not be forfeited and shall be paid to you promptly
in accordance with the terms of such benefits.
(c) Upon a termination of your employment other than (i) a
termination by the Company for cause or (ii) a Voluntary Termination
of the employment relationship you shall be entitled, in consideration
of your continuing obligations hereunder after such termination, to
receive your Base Salary, payable bi-weekly, as if your employment
(which shall cease on the date of such termination) had continued for
the twelve (12) months following termination; provided that you shall
be required to use your reasonable best efforts to obtain, as
expeditiously as possible, employment with at least comparable salary
and responsibilities commensurate with those set forth herein. In
such event, your right to receive the amounts and benefits set forth
in this Section shall terminate.
Confidential Information
You acknowledge that the information, observations and data
obtained by you while employed by the Company concerning the business
or affairs of the Company or any of its Subsidiaries ("Confidential
Information") are the property of the Company or such Subsidiary.
Therefore, you agree that you shall not disclose to any unauthorized
person or use for your own purposes any Confidential Information
without the prior written consent of the Company, unless and to the
extend that (i) such information was otherwise available to you from a
source other than the Company and (ii) the aforementioned matters
become generally known to and available for use by the public other
than as a result of your acts or omissions. You shall deliver to the
Company at the termination of employment, or at any other time the
company may request, all memoranda, notes, plans, records, reports,
computer tapes, printouts and software and other documents and data
(and copies thereof) relating to the Confidential Information or the
business of the Company or any Subsidiary which you may then posses or
have under your control.
The near future will be very challenging for the Company and, we
expect, rewarding as well. Your position, and its responsibilities,
will be critical in that future. We are pleased that you have chosen
to join us.
To confirm your acceptance of the offer and terms and conditions
set out in this letter, please sign in the space provided below and
return one copy to me.
Very truly yours,
ROMACORP, INC.
Robert B. Page
President
AGREED AND ACCEPTED THIS 13 DAY OF July 1998.
s/s Susan Holland
----------------------
Susan Holland
10.12
Contract No. 8071
CAPTEC
Financial Group, Inc.
September 4, 1998
Roma Restaurant Holdings, Inc.
9304 Forest Lane
Suite 200
Dallas, Texas 75243
Attention: David Short
Re: Commitment
Dear Mr. Short:
In reliance upon the representations and warranties made by
Romacorp, Inc., a Delaware corporation ("Lessee"), in Lessee's
application package and any other documents provided to Captec
Financial Group, Inc., a Michigan corporation ("Lessor"), Lessor
agrees to purchase and lease the Properties (described below) and
Lessee agrees to sell and leaseback the Properties, in accordance with
the following terms and conditions:
LESSEE: Romacorp, Inc.
9304 Forest Lane
Suite 200
Dallas, Texas 75243
Phone Number (214) 343-7800
Facsimile Number: (214) 343-7777
PROPERTIES: Eleven (11) Tony Roma's restaurants
("Improvements") to be located at sites to
be determined ("Real Estate"), together
with all beneficial easements and
appurtenances thereto (the Improvements and
Real Estate as to each site is referred to
as "Property"). The Property will be more
particularly described in the commitment to
issue an owner's policy of title insurance
as required by Section 2(b) of the attached
General Conditions.
PURCHASE PRICE: Not to exceed One Million Seven Hundred
Fifty Thousand and 00/100 Dollars
($1,750,000.00) per Property, or Nineteen
Million Two Hundred Fifty Thousand and
00/100 Dollars ($19,250,000.00) in
aggregate, but in no event will the
Purchase Price for a Property exceed the
lesser of (i) actual certified cost, or
(ii) the appraised value set forth in the
appraisal required by Section '(a) of the
attached General Conditions. Lessor will
make up to five (a) monthly disbursements
to reimburse Lessee for costs related to
the acquisition of the Real Estate and the
construction of the Improvements for the
Property. Disbursements will be made in
accordance with a Disbursement Agreement
satisfactory to Lessor and Lessee.
CLOSING DATE: On or before June 30, 2000. Lessee shall
complete construction of the Improvements
for all Properties on or before December
31, 2000.
<PAGE>
LEASE: Lessee and Lessor will enter into Lessor's
standard form of Lease and Disbursement Agreement.
The Leases and Disbursement Agreements will
include the terms and provisions outlined below.
The Leases will be absolute, triple net leases.
LEASE TERM: The Interim Lease Term for a Property shall
commence on the Closing Date on which the Lessor
acquires the Real Estate and shall continue
through the last day of the month in which Lessee
shall complete construction the Improvements and
receive the final disbursement of funds for
construction costs related to the Improvements (in
accordance with the related Disbursement
Agreement); provided, however, in no event shall
the Interim Lease Term for the Lease extend beyond
five (5) months. The Lease Term for a Property
shall commence on the day following the expiration
of the Interim Lease Term, and shall continue for
fifteen (15) years with two (2) renewal options of
five (5) years each.
RENT: Minimum Annual Rent will be due and payable upon
commencement of the Lease Term and will equal ten
and 00/100 percent (10.00%) of the Purchase Price
of the Real Estate and the total of disbursements
by Lessor to Lessee for hard costs and soft costs
related to construction of the Improvements.
Minimum Annual Rent will be payable in monthly
installments on the first day of each month by
electronic funds transfer. Minimum Annual Rent
will be increased six and 00/100 percent (6.00%)
on the third anniversary date of the Lease Term
and six and 00/100 percent (6.00%) every three
years thereafter. Minimum Annual Rent for the
renewal option periods shall be set at fair market
value.
Interim Rent for the Interim Lease Term shall be
payable to Lessor monthly in an amount equal to
one and 3/4ths percent (1.75%) over the Prime Rate
in existence on the first day of that month
divided by 12 and multiplied by the average
monthly balance of the total advances made by
Lessor for the Purchase Price of the Real Estate
and disbursements for all costs related to
construction of the Improvements. Rent shall
accrue during the interim period and will be added
to the total purchase price advanced by Lessor.
The first monthly installment of Minimum Annual
Rent shall be due and payable upon commencement of
the Lease Term.
FEES AND EXPENSES A Commitment Fee of One Hundred Ninety Two
Thousand Five Hundred and 00/100 Dollars
($192,500.00) is due and payable to Lessor as
follows: (a) Seventy Thousand and 00/100 Dollars
($70,000.00), which will be applied to the first
eight (8) properties to be acquired and funded at
the rate of one half of one percent of the
property cost, is due and payable concurrent with
the return of this Commitment by Lessee; (b) the
balance of the fee (applicable to the first eight
(8) properties) due in the aggregate amount of
Seventy Thousand and 00/100 Dollars ($70,000.00)
is due and payable on a prorate basis (one half of
one percent) on the closing of each Property; (c)
provided that the initial minimum annual rent for
the final three properties has not been increased
or if increased, is acceptable to the Lessee, the
remaining balance of the Commitment Fee in the
amount of Fifty Two Thousand Five Hundred and
00/100 Dollars ($52,500.00) is due and payable on
a prorate basis on the closing of each Property.
In addition Lessor agrees that Lessee may fix the
initial minimum annual rent and interim rent for
a twelve (12) month period on the remaining three
(3) Leases (subject to fluctuation in market
capitalization rates) on or after the Commitment
and upon payment of one half of the applicable
unpaid Commitment Fee. No portion of the
Commitment Fee will be refunded or rebated to
Lessee by Lessor.
A Construction Funding Fee of Forty Eight Thousand
One Hundred Twenty Five and 00/100 Dollars
($48,125.00) is due and payable on a pro-rata
basis at the closing of each Property.
Upon expiration of the Commitment, any unpaid
balance of the Commitment Fee and/or Construction
Financing Fee shall be immediately due and payable
to Lender.
GENERAL CONDITIONS:
This Commitment is supplemented by and subject to
the attached Genera Conditions. The General
Conditions are incorporated into the terms and
provisions of this Commitment.
SPECIFIC CONDITIONS:
Lessor's obligation to close on the transactions
described in this Commitment is further
conditioned upon the following:
All agreements between Lessee (or its affiliates)
Lessor (or its affiliates), shall be cross-
collateralized and cross-defaulted.
During the term of this Commitment and throughout
the term of the Lease, Lessee and consolidated
affiliates shall provide Lessor with quarterly
management prepared and management certified
interim financial statements for the first three
quarters of each fiscal year of the Lessee. Such
financial statements are to be delivered to Lessor
within sixty (60) days of the close of each fiscal
quarter. Financial statements for the first
quarter ended June 30, 1998 are required prior to
closing the first Property.
During the term of this Commitment and throughout
the term of the Leases, Lessee and consolidated
affiliates shall provide Lessor with annual CPA
audited financial statements. Such financial
statements are to be delivered to Lessor within
one hundred twenty (120) days of the close of the
fiscal year end. The annual financial statements
of Lessee shall include unit level profit and loss
statements for the Property due within 120 days of
the close of the fiscal year end.
Subject to Lender's receipt and satisfactory
review of site information for each Property.
Lessor's obligation to close the transactions
described in this Commitment is subject to
Lessor's continual receipt and verification that
there has been no material adverse change in the
financial statements described above. During the
initial 18 months of the Commitment, the initial
minimum annual rent shall be fixed. but thereafter
may be increased to Lender's market rate for any
Lease not yet closed under this Commitment.
MISCELLANEOUS: This Commitment and the General Conditions
constitute a complete statement of the terms
and conditions of the described transaction. This
Commitment supersedes, in its entirety, Lessor's
previous Commitment to Lessee dated August 20,
1998. Any amendment to this Commitment will be
made in writing and must be signed by Lessee and
Lessor. This Commitment is not assignable by
Lessee.
If the foregoing meets with your approval, please acknowledge
your acceptance and agreement by executing and returning this
Commitment to Lessor, together with the portion of the Commitment Fee
currently due and payable, an amount equal to Seventy Thousand and
00/100 Dollars ($70,000.00), on or before September 12, 1998,
otherwise this Commitment will terminate and be of no force or effect.
CAPTEC FINANCIAL GROUP, INC.
By: /s/ Gary A. Bruder
Its Senior Vice
President, Administration
ACCEPTED AND AGREED TO:
ROMACORP, INC.
By: /S/ Robert B. Page
Its: President
Federal Tax I.D. No. 13-4010466
Date: September 10, 1998
cc: Beth Abbott
Bill McPherson
<PAGE>
GENERAL CONDITIONS
1. Site Review. Lessor's obligation to close the transaction
described in the Commitment is subject to Lessor's site review and
inspection of the Property and the results of the site review and
inspection being satisfactory to Lessor in all respects.
2. Supporting Documents. Lessor's obligation to close the
transaction described in the Commitment is subject to Lessor's receipt
of the following, satisfactory to Lessor in all respects, at least
fifteen (15) days prior to the Closing Date:
A. MAI Appraisal. An MAI appraisal of the Property, prepared by an
appraiser satisfactory to Lessor, shall be completed and submitted to
Lessor not earlier than sixty (60) days prior to the Closing Date.
B. Title Commitment and Title Policy. A commitment to issue an
owner's policy of title insurance, in the most recent ALTA form,
without standard exceptions, naming Lessor as insured, in the amount
of the Purchase Price of the Property, issued by a title insurance
company acceptable to Lessor, and including title endorsements deemed
necessary by Lessor's counsel, including, without limit, a
comprehensive zoning endorsement. Title to the Property must be
subject to no exceptions, unless approved in writing by Lessor prior
to the Closing Date. The commitment to issue an owner's policy of
title insurance must include an itemization of all outstanding and
pending special assessments (or must state that there are none) and
must include an itemization of all taxes affecting the Property, and
must state whether the taxes are current. Copies of all instruments
creating exceptions to title to the Property must be attached to the
commitment to issue an owner's policy of title insurance. The owner's
policy of title insurance must be issued effective on the Closing
Date. The title company must enter into the Disbursement Agreement
providing, among other things, that upon disbursement of funds to
Lessee for construction costs of the Improvements, the title company
shall issue an endorsement to the title policy, as of the disbursement
date, insuring title to the Real Estate and Improvements, free and
clear of liens, defects and encumbrances, other than those previously
approved by Lessor and increasing the insured amount by the amount so
disbursed.
C. Survey. A current survey, from a surveyor satisfactory to
Lessor, in it's sole discretion, completed not earlier than one
hundred twenty (120) days prior to the Closing Date, certified to the
Lessor and to the title insurance company and such other parties as
Lessor shall designate, in conformity with the survey requirements set
forth on the attached Exhibit A.
D. Insurance Policies. Insurance policies issued by companies
acceptable to Lessor for the following types of insurance coverage,
with loss payable clauses in favor of Lessor, and such other parties
as may be designated by Lessor:
(i) Commercial general liability insurance (including contractual
liability) with minimum limits of $1,000,000 each occurrence
and $2,000,000 aggregate per location.
(ii) All risk property damage insurance on a replacement cost
basis with no coinsurance.
(iii) Flood insurance, in amounts acceptable to Lessor, unless
evidence is provided that the Property is not located in a
federally designated flood plain area.
(iv) Rent loss or business interruption insurance covering a
period of not less than twelve (12) months.
(v) During construction of the Improvements builder's risk
insurance insuring the Improvements for not less than 100% of
their full insurable replacement cost.
All policies of insurance must name Lessor as an additional
insured and any other party designated by Lessor. All general
liability and property damage policies shall be written as primary
policies. Each policy of insurance must provide that it will not be
modified, amended or canceled without thirty (30) days' prior written
notice to Lessor. All policies must include appropriate clauses
pursuant to which the insurance carriers waive all rights of
subrogation against the insured party and all additional insured
parties with respect to all losses payable under such policies. Lessee
must deliver evidence to Lessor, on the Closing Date, that all
insurance policies are paid in full and are in full force and effect
for not less than one (1) year from the Closing Date. All policies of
insurance must contain appropriate loss payee endorsement and a clause
that any loss otherwise payable under such policies will be payable
notwithstanding any act or negligence of Lessor or Lessee.
All insurance companies providing the coverage required under
this provision shall be selected by Lessee and shall be rated A minus
(A-) or better by Best's Insurance Rating Service, shall be licensed
to write insurance policies in the state in which the property is
located, and shall be acceptable to Lessor in Lessor's reasonable
discretion.
E. Governmental Approvals. of compliance with all laws,
ordinances, rules, regulations and restrictions affecting the
Property, the construction of the improvements located on the Property
and the consummation of the transaction described in the Commitment,
including, without limit, liquor licenses, if applicable, certificates
of occupancy related to the Property, the approvals of all public
health departments and/or fire departments having jurisdiction over
the Property, and the approval of the appropriate governmental officer
exercising land use control over the Property stating:
(i) The zoning classification affecting the Property.
(ii) That the Property and its use complies with the
applicable zoning code, city ordinances and building
regulations.
(iii) That there are no variances, conditional use permits
or special use permits required for the use of the
Property or, if such permits are required, specifying
the existence of the permits and attaching copies of
the permits to the governmental officer's's letter.
F. Franchise Documents. Lessee will provide Lessor with a
letter from [Franchisor's Name] ("Franchisor") approving the Real
Estate site and all plans and specifications for the Improvements and
acknowledging that the Lessee is authorized to proceed with
construction. Lessee will also provide Lessor with a copy of a fully
executed franchise or license agreement acceptable to Lessor or a
letter from Franchisor acknowledging that the franchise or license
agreement will be issued upon completion of the Improvements.
G. Utilities and Roads. Evidence of the availability of
all utilities and roads necessary for the construction and operation
of the Improvements.
H. Plans and Specifications. Plans and specifications for
the Property prepared by an architect/engineer satisfactory to Lessor.
I. Physical Inspection Report. A report as to the physical
condition of all improvements located on the Property from an
inspecting architect or engineer satisfactory to Lessor.
J. Environmental Report. An environmental site assessment
report in favor of Lessor and such other parties as Lessor may
designate, from a licensed professional satisfactory to Lessor,
containing evidence satisfactory to Lessor that the Property and all
improvements on the Property are in compliance with federal. state and
local environmental laws, rules and regulations.
K. Tax Bills. Copies of the most recent real estate tax
bills and personal property tax bills relating to the Property and
evidence that all such tax bills have been paid in full.
L. Entity Documentation. Certified copies of the
corporate articles of incorporation, as amended, good standing
certificate, qualification to conduct business as a foreign
corporation (if required), incumbency certificate/corporate
resolutions of the board of directors and any other documents the
Lessor may reasonably require to evidence the authority of the
person(s) executing documents on behalf of the corporation(s). All
documents submitted to the Lessor must be certified within thirty (30)
days of the closing date by the appropriate governmental official
and/or authorized person(s) on behalf of the Lessee and/or the
Guarantor(s).
M. Certified Cost Statement. A certified cost statement
showing the cost of the Real Estate, a certified budget for the
construction of the improvements, a schedule of values of construction
costs, together with any other documentation that Lessor may require
to support such cost statements.
N. Search Results. UCC, tax lien, and judgment lien
search results as to Lessee, Guarantors and any other person or entity
as Lessor may request, certified as of a date within thirty (30) days
of the Closing Date.
O. Automatic Payment Plan. Lessee shall deliver an
executed electronic funds transfer authorization in favor of Lessor.
P. Development Documents. Lessor shall review and
approve the architect, architect's agreement, general contractor,
general contractor's agreement, major subcontractors (i.e. contracts
in excess of $25,000.00) and the major subcontractors' agreements
(collectively "Development Documents").
Q. Equity. Lessee shall deliver evidence satisfactory to
Lessor that Lessee has sufficient funds available to Lessee to fully
perform all of its obligations under the Commitment, including,
without limit, sufficient funds, when combined with funds to be
disbursed by Lessor for the costs of the Improvements, to cause
completion of construction of the Improvements.
R. Additional Documents. Such other documents,
instruments, opinions and/or assurances as Lessor may reasonably
require.
3. Document Provisions. The Lease will be prepared on Lessor's
standard form and will contain, among other matters, the following
provisions:
A. Liens. Lessee will be required to keep the Property
free from all liens and/or encumbrances (other than those acceptable
to Lessor) throughout the term of the Leases.
B. Compliance with Law. Lessee will comply with all laws,
ordinances, orders, rules and regulations of any governmental
authority having jurisdiction over the Property.
C. Utilities. Lessee will pay all utility charges related
to the Property.
D. Taxes. Lessee will pay all real estate taxes,
assessments. ad valorem taxes or gross receipts taxes imposed by any
authority having, the power to tax the Property. Lessee will further
agree to pay all personal property taxes related to the Property.
E. Maintenance and Repair. Lessee will maintain the
Property in good repair, order and condition.
F. Alterations. All structural alterations and all non-structural alterations
to the Property in excess of $25,000 will only
be made upon Lessee's receipt of Lessor's prior written approval. The
cost of all alterations will be paid for by Lessee.
G. Assignment Subletting. Lessee will not be permitted to
assign the Lease or Lessee's interest in the Lease or the Property
without obtaining the prior written consent of Lessor, which shall not
be unreasonably withheld. No assignment or subletting shall release
Tenant or alter the primary liability of Tenant to pay rent and
perform all other obligations under the Lease.
H. Default. The occurrence of any one or more of the
following events, among others, will constitute an event of default:
(i) Failing to make, when due, any payments required under
any Lease;
(ii) Failing to observe or perform any of the other
covenants, conditions or provisions contained in any Lease, which
failure continues for fifteen (15) days after written notice to Lessee
from Lessor;
(iii) Lessee's filing for bankruptcy or other similar
relief: or
(v) Vacating or abandoning the Property.
1. Hazardous Materials. As to the Property, Lessee will make
certain representations and warranties for the benefit of Lessor
regarding hazardous materials and relevant environmental laws, and
will further agree to indemnify and hold harmless Lessor from any
loss, liability, damage or expense that Lessor may incur as a result
thereof.
4. Documents. On the Closing Date, Lessee must execute and/or
deliver to Lessor all documents, monies, instruments and other items
required by the Commitment or the General Conditions, including,
without limit, a warranty deed to the Property, the Lease, the
Disbursement Agreement, a guaranty from each Guarantor, a closing
statement, an affidavit as to non-foreign status of Lessee,
affidavit(s) of Lessee and Guarantor(s), and an opinion of counsel to
Lessee and Guarantor(s). Lessor's obligation to close the transaction
described in the Commitment is subject to the receipt and approval by
Lessor and Lessor's counsel, of all such documents, monies,
instruments, and other items.
5. Costs. Fees and Expenses. The transaction described in the
Commitment will be made without cost to Lessor. Lessee will pay all
reasonable and necessary costs, fees and expenses incidental to the
transaction described in the Commitment, including appraisal fees,
inspection fees, title company charges, search fees, survey fees and
reasonable and necessary attorneys fees and expenses. All fees, costs
and expenses will be paid by Lessee on demand.
6. Broker. By accepting the Commitment, Lessee warrants that
Lessee has not contracted with anyone requiring the payment of a
brokerage commission for the transaction described in the Commitment.
Brokerage commissions, if any, shall be payable by Lessee or
Guarantor(s), and the acceptance of the Commitment shall constitute an
undertaking on the part of Lessee and Guarantor(s) to indemnify Lessor
against claims of brokers arising in connection with Lessor s
agreement to enter into and/or consummate the transaction described in
the Commitment.
7. Fair Credit Reporting Act. By accepting the Commitment,
Lessee and Guarantor(s) warrant that all credit information submitted
to Lessor is true and correct and authorize Lessor to make credit
investigations and obtain credit reports and other financial
information, written or oral, respecting the credit and financial
position of Lessee and Guarantor(s).
8. Interpretation. The Commitment and the General
Conditions will be construed in accordance with the laws of
the State of Michigan.
9. Termination. The Commitment and Lessor's obligations
under the Commitment may be terminated prior to closing at
Lessor's option if:
A. Lessee fails to comply with any of the terms of the
Commitment or the General Conditions;
B. A default exists in any financial obligation of
Lessee or Guarantor(s) which results in the acceleration of
such indebtedness;
C. Any representation made in any material submitted to
Lessor proves to be untrue, false or misleading, in any
material respect;
D. There has been a material adverse change in the
financial condition of Lessee or Guarantor(s) or there shall
exist a material action, suit or proceeding pending or
threatened against Lessee or Guarantor(s);
E. Any bankruptcy, reorganizations, insolvency or
similar proceeding is instituted by or against Lessee or
Guarantor(s);
F. The improvements on the Property are damaged or
destroyed or any portion thereof are subject to a proceeding
for condemnation or eminent domain; or
G. Lessee or Guarantor(s) shall die or be declared
incompetent or be dissolved, liquidated or wound up.
10. Definitions. All defined terms in the General
Conditions have the same meaning as set forth in the
Commitment to which the General Conditions are attached,
unless the context clearly requires otherwise.
<PAGE>
EXHIBIT A
SURVEY REQUIREMENTS
1. ALTA/As Built Survey.
The survey map must show:
a. The scale to which the map has been drawn and a north
directional arrow.
b. The identity of the local governmental units in which the
property is located (e.g., name of city, village or township
and county).
c. The location and dimensions by courses and distances of:
i. The property, proceeding by metes and bounds written on
the survey map from a fixed point of beginning around the
perimeter(s) of the plot(s) resuming to the fixed point.
(Unless the property is located in a recorded
subdivision, in which case the lot and block numbers,
subdivision name and recording information for the
subdivision should be given).
ii. The relationship of the point of beginning to the
monument by which it is referenced.
iii. The established building line(s) and setback line(s), if
any.
iv. The line of the street or streets abutting the property
and the names and widths of the streets.
v. The location of all utility lines (e.g., gas, water,
sewer, electricity, telephone), whether existing or
proposed, and the location of all existing and proposed
connections with the utility lines.
vi. All servient and beneficial easements, if any, and all
easements appurtenant to the property, if any, indicating
the identity, by fiber and page, if any, the origin
(e.g., Deed from A to B), if applicable, and nature
(e.g., ten foot sewer easement).
d. The location, nature (including character of construction and
number of stories), dimensions, distance from the property
lines on all sides, and occupant of the structures and
improvements on the property.
e. The location, dimensions and nature of:
i. All encroachments upon the property.
ii. All encroachments upon adjoining property. streets or
alleys by any buildings. structures or other improvements
upon the property.
iii. All party walls between, with or adjoining the properly,
and other property.
f. The location of all waterways, wet lands and established flood
plains, if any.
g. The means of ingress and egress to and from the property, if
other than by means of the abutting street(s). Identify
parking spaces, including handicapped.
h. If the property is described as being on a filed map, the
survey map should contain a legend relating the plot to the
map on which it is shown.
i. A legal description of the plot conforming to the standards of
Section 2, below.
j. A certificate in the form set forth in Section 3, below.
k. A certificate indicating the status of the property in terms
of the 100 year flood plain, as designated by the Army Corps
of Engineers.
2. Legal Description
The legal description must appear on the face of the survey map. The
legal description must conform entirely to the survey. Whatever form
is utilized, the precise legal description must be preceded by
identification of the appropriate street address, if one is
available. The acceptable forms of legal descriptions are the metes
and bounds description or the lot and block description.
3. Survey Certificate
All survey maps must display the following certificate, which
certificate must be executed by the surveyor:
CERTIFICATE
I, the undersigned, hereby certify to {CAPTEC ENTITY,
[CUSTOMER], and [TITLE COMPANY] that this print of survey is
based on a survey made by ______________________ Civil
Engineering/Registered Surveyor No. ____________, on
_________________, 199__, and that this print of survey
correctly shows the location of all buildings, structures and
other improvements situated on the premises herein described
and that except as shown hereon, there are no visible
easements or rights-of-way across said premises, or easements
or rights-of-way of which the undersigned has been advised,
or party walls or encroachments upon adjoining premises,
streets or alleys by any of said buildings, structures or
other improvements, or cemeteries or family burying grounds,
or encroachments of any nature upon the premises herein
described. I further certify that the property abuts an
accessible street or that there is ingress and egress to and
from the property.
Dated: __________
Civil Engineer/Registered Surveyor No.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001067457
<NAME> ROMACORP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-28-1999
<PERIOD-END> MAR-28-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,637
<ALLOWANCES> 0
<INVENTORY> 3,051
<CURRENT-ASSETS> 6,755
<PP&E> 57,046
<DEPRECIATION> 0
<TOTAL-ASSETS> 84,035
<CURRENT-LIABILITIES> 10,903
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (8,667)
<TOTAL-LIABILITY-AND-EQUITY> 84,035
<SALES> 93,213
<TOTAL-REVENUES> 101,916
<CGS> 31,399
<TOTAL-COSTS> 91,469
<OTHER-EXPENSES> (266)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,147
<INCOME-PRETAX> 2,586
<INCOME-TAX> 925
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,661
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
