<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 20, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
CARLSON RESTAURANTS WORLDWIDE INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5812 75-2356076
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
7540 LBJ FREEWAY
DALLAS, TEXAS 75251
(972) 450-5400
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
WALLACE B. DOOLIN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CARLSON RESTAURANTS WORLDWIDE INC.
7540 LBJ FREEWAY
DALLAS, TEXAS 75251
(972) 450-5400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
GALE R. MELLUM, ESQ. EDWARD S. ROSENTHAL, ESQ.
FAEGRE & BENSON LLP FRIED, FRANK, HARRIS, SHRIVER &
2200 NORWEST CENTER JACOBSON
90 SOUTH SEVENTH STREET 350 SOUTH GRAND AVENUE
MINNEAPOLIS, MN 55402 LOS ANGELES, CA 90071
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Class A Common Stock, $.01 par value.............................................. $145,000,000 $40,310
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) of the Securities Act of 1933, as amended.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Prospectus (Not Complete)
Issued , 1999
The information in this prospectus is not complete and may be changed without
notice. Carlson Restaurants may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities, and Carlson Restaurants is
not soliciting offers to buy these securities in any state where the offer or
sale of these securities is not permitted.
<PAGE>
<TABLE>
<S> <C> <C>
[CRW LOGO] SHARES [TGIF LOGO]
CARLSON RESTAURANTS WORLDWIDE INC.
CLASS A COMMON STOCK
</TABLE>
----------------
Carlson Restaurants Worldwide Inc. is offering shares of Class A common
stock in a firmly underwritten offering. This is Carlson Restaurants' initial
public offering, and no public market currently exists for Carlson Restaurants'
shares. Carlson Restaurants anticipates that the initial public offering price
will be between $ and $ per share. After the offering, the market price
for Carlson Restaurants' Class A common stock may be outside of this range.
------------------------
Application has been made for the Class A common stock to be approved for
listing on the New York Stock Exchange under the symbol "CWR."
------------------------
INVESTING IN THE CLASS A COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 9.
---------------------
<TABLE>
<CAPTION>
Per Share Total
----------- ---------
<S> <C> <C>
Offering Price $ $
Discounts and Commissions to Underwriters $ $
Offering Proceeds to Company $ $
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Carlson Restaurants Worldwide Inc. has granted the underwriters the right to
purchase up to an additional shares of Class A common stock to cover any
over-allotments.
The underwriters can exercise this right at any time within thirty days after
the offering.
Banc of America Securities LLC expects to deliver the shares of Class A common
stock to investors on , 1999.
[BANC OF AMERICA SECURITIES LLC
MERRILL LYNCH & CO
MORGAN STANLEY DEAN WITTER]
------------------------
, 1999
<PAGE>
INSIDE FRONT COVER
[T.G.I. Friday's Timeline]
1965 - The first T.G.I. Friday's restaurant opens in New York City.
1971 - A group of Dallas businessmen franchise a T.G.I. Friday's restaurant in
Dallas.
1972 - T.G.I. Friday's Group (Dallas) merges into TGI Friday's Inc. (New York.)
1974 - T.G.I. Friday's introduces what will become one of its all-time
favorites-Loaded Potato Skins.
1975 - TGI Friday's Inc., which has grown to 12 restaurants in nine states, is
acquired by Carlson Companies, Inc.
1978 - T.G.I. Friday's is introduced in Florida, Illinois, Missouri and
Colorado.
1982 - T.G.I. Friday's introduces its Mocha Mud Pie.
1983 - T.G.I. Friday's introduces Friday's Flings, flavorful, non-alcoholic
drinks.
1984 - T.G.I. Friday's chain grows to 105 restaurants.
1986 - Whitbread & Co. PLC opens the first international T.G.I. Friday's in
Birmingham, England.
1989 - TGI Friday's Inc. enters into its first international joint venture to
operate T.G.I. Friday's in Asia.
1990 - T.G.I. Friday's grows to 169 restaurants worldwide.
1992 - T.G.I. Friday's is voted #1 menu variety by diners surveyed by
RESTAURANTS & INSTITUTIONS magazine.
New international openings include Seoul, Korea; Cancun, Mexico; Madrid, Spain;
and Haymarket, England.
1993 - T.G.I. Friday's grows to 243 domestic restaurants and 20 international
restaurants.
1994 - "From it's inception in 1965, T.G.I. Friday's celebrated its name, 'Thank
Goodness it's Friday'. But the 1980's changed the market, with romantic affairs
yeilding to family affairs."-- NATION'S RESTAURANT NEWS, MARCH 29, 1993
T.G.I. Friday's celebrates the opening of its 300th restaurant, which is located
in Seoul, Korea.
The first T.G.I. Friday's opens in Berlin, Germany. It's the first American
casual dining restaurant to open in what was formerly East Germany.
1995 - T.G.I. Friday's opens in eight new countries: Australia, Brazil, Canada,
Chile, China, Indonesia, Panama and Switzerland. T.G.I. Friday's restaurants are
now located in 23 countries worldwide.
SUCCESS magazine ranks TGI Friday's Inc. as one of the top 100 franchisors.
RESTAURANT BUSINESS magazine names Friday's Hospitality Worldwide Inc. as
"Employer of Choice".
<PAGE>
1996 - TGI Friday's restaurants open in ten new countries: Argentina, Cyprus,
Honduras, India, Kuwait, South Africa, Sweden, Thailand, Turkey and United Arab
Emirates.
For the second consecutive year, SUCCESS magazine ranks TGI Friday's Inc. as one
of the top 100 franchisors.
1997 - TGI Friday's becomes the first American casual dining restaurant chain to
open a restaurant in Moscow, Russia.
Seoul/Korea Italianni's became our 100th international restaurant.
1998 - Friday's Hospitality Worldwide changes its name to Carlson Restaurants
Worldwide Inc.
500th T.G.I. Friday's opens in Plymouth, Minnesota.
100th international T.G.I. Friday's debuts in Edinburgh, Scotland.
Carlson Restaurants Worldwide teams with chef Stephan Pyles and acquires Star
Canyon and AquaKnox. We also debut a new "Big City Italian" concept, Timpano
Italian Chophouse and Samba Room, a Cuban Bar and Latin Cafe.
1999 - Carlson Restaurants Worldwide Inc. files Initial Public Offering to trade
on the New York Stock Exchange.
[Pictures of T.G.I. Friday's employees, guests, menu items and branded retail
products.]
[Pictures of T.G.I. Friday's locations in Malta; Scotland; and Lewisville,
Texas; as well as pictorial examples of old and new T.G.I. Friday's locations.]
<PAGE>
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. This prospectus is not an offer to sell, nor is
it seeking an offer to buy, these securities in any state where the offer or
sale is not permitted. The information in this prospectus is complete and
accurate as of the date on the front cover, but the information may have changed
since that date.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary.................................................................................................... 4
Risk Factors............................................................................................... 9
Use of Proceeds............................................................................................ 15
Dividend Policy............................................................................................ 15
Capitalization............................................................................................. 16
Dilution................................................................................................... 17
Selected Consolidated Financial Data....................................................................... 18
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 19
Business................................................................................................... 28
Management................................................................................................. 40
Relationship with Carlson Companies and Related Transactions............................................... 47
Principal Stockholder...................................................................................... 50
Shares Eligible for Future Sale............................................................................ 50
Description of Capital Stock............................................................................... 51
Underwriting............................................................................................... 55
Legal Matters.............................................................................................. 57
Experts.................................................................................................... 57
Where You Can Find More Information........................................................................ 57
Index to Consolidated Financial Statements................................................................. F-1
</TABLE>
------------------------
EXCEPT AS OTHERWISE STATED, ALL INFORMATION PRESENTED IN THIS PROSPECTUS
ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND ASSUMES
COMPLETION OF THE RECLASSIFICATION OF OUR OUTSTANDING COMMON STOCK INTO
SHARES OF CLASS B COMMON STOCK. T.G.I. FRIDAY'S-REGISTERED TRADEMARK- AND
FRIDAY'S-REGISTERED TRADEMARK-, AS WELL AS ADDITIONAL NAMES AND LOGOS APPEARING
IN THIS PROSPECTUS, ARE REGISTERED TRADEMARKS OF CARLSON RESTAURANTS WORLDWIDE
INC. THIS PROSPECTUS ALSO INCLUDES NAMES AND TRADEMARKS OF OTHER COMPANIES WHICH
ARE THE PROPERTY OF THEIR RESPECTIVE HOLDERS.
3
<PAGE>
SUMMARY
THE ITEMS IN THE FOLLOWING SUMMARY ARE DESCRIBED IN MORE DETAIL LATER IN
THIS PROSPECTUS. THIS SUMMARY PROVIDES AN OVERVIEW OF SELECTED INFORMATION AND
DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD CONSIDER. THEREFORE, YOU SHOULD
ALSO READ THE MORE DETAILED INFORMATION SET OUT IN THIS PROSPECTUS, INCLUDING
THE FINANCIAL STATEMENTS. THE TERMS "WE" AND "CARLSON RESTAURANTS" MEAN CARLSON
RESTAURANTS WORLDWIDE INC. AND ITS SUBSIDIARIES. THE TERM "CARLSON COMPANIES"
MEANS CARLSON COMPANIES, INC. AND ITS SUBSIDIARIES.
CARLSON RESTAURANTS WORLDWIDE INC.
Carlson Restaurants is a global leader in the development, operation and
franchising of casual dining restaurants, principally under the T.G.I. Friday's
brand. Our T.G.I. Friday's system has grown since its inception in 1965 to
become one of the largest casual dining restaurant companies worldwide. The
T.G.I. Friday's system, which currently includes T.G.I. Friday's, Front Row
Sports Grill and Friday's American Bar, includes 530 restaurants, with 125
restaurants located outside the United States. Of the 530 restaurants, 184 are
owned and operated by us or operated by us under management agreements and 346
are operated by our global franchise network. As part of our growth strategy, we
have developed or acquired six additional restaurant concepts, totaling 24
company owned or operated and franchised restaurants. While we plan to focus our
growth on the T.G.I. Friday's system, we also intend to selectively expand some
of these innovative concepts based on strict performance criteria. Including
these additional concepts, Carlson Restaurants' worldwide system currently
includes over 550 company owned or operated and franchised restaurants located
in 46 countries which generated system-wide sales of over $1.4 billion in fiscal
1998.
Since the first T.G.I. Friday's opened in New York City in 1965, we have
offered guests high quality, moderately priced, innovative menu and drink items
served by a friendly, knowledgeable staff in a fun atmosphere. Our selection of
approximately 100 menu items includes signature dishes such as our Jack Daniel's
Grill items and Tex-Mex Tower, as well as a variety of other beef, chicken,
seafood and pasta items. Our entrees are complemented by a wide assortment of
appetizers, salads and desserts. Our menu variety, coupled with our extensive
selection of creative adult beverages, enables us to enhance the appeal of our
T.G.I. Friday's restaurants and attract guest traffic from lunch time through
late evening.
Our business strategy is to expand our position as a global leader of
branded restaurants based on the following:
- CAPITALIZE ON THE STRENGTH OF THE T.G.I. FRIDAY'S BRAND. As a global
leader of branded restaurants in the casual dining industry for over 30
years, our business strategy is based on the continued investment in our
successful brand. Through the development of innovative food items and
creative adult beverages, and by using targeted advertising campaigns and
our guest loyalty program, we believe that we will be able to
differentiate ourselves from our competitors and continue enhancing the
T.G.I. Friday's brand.
- CONTINUE WORLDWIDE GROWTH OF THE T.G.I. FRIDAY'S SYSTEM. We intend to
continue the domestic and international expansion of the T.G.I. Friday's
system of restaurants by building upon our leadership position as one of
the largest systems of casual dining restaurants worldwide. Our new unit
development will focus on both company owned restaurants and restaurants
owned by our strong global network of franchisees.
- CAPITALIZE ON OUR STRONG GLOBAL FRANCHISING NETWORK. Our development
agreements with experienced multi-unit restaurant operators will continue
to be a key component of our continuing expansion of the T.G.I. Friday's
system. We currently have 43 domestic franchisees operating 221
restaurants and 38 international franchisees operating 125 restaurants. In
addition to continuing the growth of our T.G.I. Friday's franchising
system both domestically and
4
<PAGE>
internationally, we currently offer our international franchisees the
opportunity to develop our Italianni's concept and plan to offer both our
domestic and international franchisees the opportunity to develop
additional concepts in the future.
- PROVIDE AN EXCEPTIONAL DINING EXPERIENCE. We offer our guests an
exceptional dining experience by providing innovative, cravable menu and
drink items, coupled with efficient and friendly service in a comfortable,
relaxing environment. We believe that our nine consecutive quarters of
increases in comparable restaurant sales at company owned or operated
restaurants indicate our ability to consistently deliver exceptional value
to our guests.
- DELIVER ATTRACTIVE UNIT ECONOMICS. Our restaurants generate attractive
unit level economics. We currently own and operate 36 restaurants that are
similar in size to our 6,800 square foot prototype, of which 30 had been
open at least 12 months at June 28, 1999. During this twelve-month period,
these 30 restaurants had average restaurants sales of approximately $3.4
million, average operating income of approximately $504,000, or 14.7% of
restaurant sales, and average cash flow of approximately $691,000, or
20.2% of restaurant sales. Since the beginning of fiscal 1998, our total
investment per company owned 6,800 square foot prototype, net of landlord
contributions, has averaged approximately $2.1 million, with additional
average pre-opening costs of approximately $115,000 per restaurant. We
have recently developed a smaller 5,600 square foot prototype which will
require a lower investment and which we expect will generate slightly
lower sales volumes than our larger prototype with similar or better
operating income and cash flow margins.
- LEVERAGE OUR MANAGEMENT'S EXPERIENCE AND EXPERTISE. Our talented senior
management team, led by Wallace B. Doolin who has over 29 years of
experience in the restaurant industry, has extensive expertise in the
operation of company owned or operated restaurants and the management of
domestic and international franchisee networks. This expertise also
extends to the development and implementation of multiple concepts across
a broad range of dining segments.
- ENHANCE GROWTH THROUGH ADDITIONAL CONCEPTS. While we plan to focus our
growth on the T.G.I. Friday's system, we also intend to leverage our
industry and operational expertise by selectively expanding certain of our
additional concepts in order to capitalize on opportunities in attractive
segments of the dining market.
We were incorporated on December 13, 1990 as a Delaware corporation. Through
our predecessor entities, we have been operating our current business since
1965. Our principal executive offices are located at 7540 LBJ Freeway, Suite
100, Dallas, Texas 75251, and our telephone number is (972) 450-5400.
5
<PAGE>
CARLSON COMPANIES' OWNERSHIP INTEREST IN CARLSON RESTAURANTS
Carlson Companies, one of the largest privately held corporations in the
United States, is a leading provider of services to corporations and consumers,
with system-wide sales of approximately $21.7 billion in 1998. Carlson Companies
serves its corporate customers by providing expertise in integrated marketing
and relationship management services, business travel management and hospitality
services for business travelers. Carlson Companies serves consumers with its
worldwide restaurant, hotel, cruise and leisure travel agency brands. In
addition to the Carlson Restaurants' brands, Carlson Companies' brands include
Radisson Hotels Worldwide, Regent International Hotels, Country Inns & Suites by
Carlson, Radisson Seven Seas Cruises, Carlson Lifestyle Living, Carlson Vacation
Ownership, Carlson Wagonlit Travel, Travel Agents International and Carlson
Marketing Group. Carlson Companies operates in more than 140 countries around
the world.
Following this offering Carlson Companies will own 100% of our outstanding
Class B common stock, representing % of the voting power of all classes of
our voting stock and % of the total outstanding shares of our common stock.
We anticipate that Carlson Companies' voting power of all classes of our voting
stock will be % if the underwriters exercise their over-allotment option
in full, representing % of the total outstanding shares of our common stock.
We have been advised by Carlson Companies that it has no present intention to
dispose of any of the shares of our capital stock that it will own after this
offering.
Prior to this offering, there have been significant transactions between us
and Carlson Companies. These transactions have involved us utilizing certain of
Carlson Companies' marketing, financial and administrative support, purchasing
and other services. We have or will enter into various agreements and
relationships with Carlson Companies to provide for the continuity of these
services after this offering. For more information about these agreements, see
"Relationship with Carlson Companies and Related Transactions."
THE OFFERING
<TABLE>
<S> <C>
Class A common stock offered................... shares
Common stock to be outstanding after the offering:
Class A common stock......................... shares
Class B common stock......................... shares
Total...................................... shares
Use of proceeds................................ For repayment of intercompany indebtedness
to Carlson Companies. See "Use of
Proceeds."
Voting rights:
Class A common stock......................... One vote per share
Class B common stock......................... 10 votes per share
Other common stock provisions.................. Apart from the different voting rights, the
holders of Class A common stock and Class B
common stock generally have identical
rights. See "Description of Capital Stock."
Risk factors................................... See "Risk Factors" and the other
information included in this prospectus for
a discussion of factors you should
carefully consider before deciding to
invest in shares of the Class A common
stock.
Proposed New York Stock Exchange symbol........ "CWR"
</TABLE>
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1) TWENTY-SIX WEEKS ENDED
---------------------------------------- ---------------------------------
PRO FORMA PRO FORMA
DECEMBER 30, DECEMBER 29, DECEMBER 28, DECEMBER 28, JUNE 29, JUNE 28, JUNE 28,
1996 1997 1998 1998(2) 1998 1999 1999(2)
------------ ------------ ------------ ------------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue
Company restaurant sales..... $ 396,784 $ 418,468 $ 483,311 $ 483,311 $ 233,772 $ 275,130 $ 275,130
Managed restaurant
revenue.................... 73,317 76,779 74,905 74,905 37,332 41,093 41,093
Franchising revenue.......... 29,209 35,199 38,292 38,292 16,890 19,593 19,593
Licensing revenue............ 2,906 3,627 2,780 2,780 1,521 1,630 1,630
------------ ------------ ------------ ------------ --------- --------- -----------
Total revenue.............. 502,216 534,073 599,288 599,288 289,515 337,446 337,446
Cost of sales.................. 139,840 143,228 165,221 165,221 79,630 91,702 91,702
Restaurant operating
expenses..................... 276,357 286,077 315,513 315,513 152,745 181,021 181,021
General and administrative
expenses..................... 50,122 55,218(3) 64,582(3) 51,748 31,792(3) 28,240(3) 27,589
Depreciation and amortization
expense...................... 20,712 23,401 27,457 27,457 13,288 15,437 15,437
Other (income) expense......... 264 (863) 533 533 (99) 1,696 1,696
------------ ------------ ------------ ------------ --------- --------- -----------
Income from operations....... 14,921 27,012 25,982 38,816 12,159 19,350 20,001
Interest expense............... 2,509 2,571 4,216 1,787 3,082
------------ ------------ ------------ ------------ --------- --------- -----------
Income before income taxes..... 12,412 24,441 21,766 10,372 16,268
Provision for income taxes..... 3,899 8,740 7,875 3,754 5,691
------------ ------------ ------------ ------------ --------- --------- -----------
Net income..................... $ 8,513 $ 15,701 $ 13,891 $ $ 6,618 $ 10,577 $
------------ ------------ ------------ ------------ --------- --------- -----------
------------ ------------ ------------ ------------ --------- --------- -----------
Basic and diluted net income
per share.................... $ $ $ $ $ $ $
Shares used in calculation of
basic and diluted net income
per share(4).................
RESTAURANT DATA
Total system sales:
T.G.I. Friday's system..... $1,155,827 $1,291,007 $1,442,933 $ 701,899 $ 794,678
Additional concepts........ 23,612 25,711 36,203 15,507 23,330
------------ ------------ ------------ --------- ---------
Total.................... $1,179,439 $1,316,718 $1,479,136 $ 717,406 $ 818,008
------------ ------------ ------------ --------- ---------
------------ ------------ ------------ --------- ---------
Restaurants open (end of
period):
T.G.I. Friday's system:
Company owned.............. 121 129 149 139 156
Managed.................... 28 27 27 26 27
Franchised................. 246 291 332 303 343
------------ ------------ ------------ --------- ---------
Total T.G.I. Friday's
system................. 395 447 508 468 526
Additional concepts(5)....... 13 17 25 25 27
------------ ------------ ------------ --------- ---------
Total.................... 408 464 533 493 553
------------ ------------ ------------ --------- ---------
------------ ------------ ------------ --------- ---------
Change in T.G.I. Friday's
domestic system comparable
restaurant sales(6):
Company owned.............. (1.3%) 3.7% 3.7% 3.8% 1.7%
Managed.................... (4.5) 2.9 1.7 2.8 2.5
Franchised system.......... (2.2) 2.6 4.3 4.6 2.7
Total T.G.I. Friday's
domestic system........ (2.0) 3.1 3.9 4.1 2.2
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
AS OF JUNE 28, 1999
---------------------------------------
PRO FORMA
PRO AS
ACTUAL(7) FORMA(8) ADJUSTED(9)
----------- ----------- -------------
<S> <C> <C> <C>
BALANCE SHEET DATA
Cash and cash equivalents.................................. $ 60,925 $ 5,925 $
Total assets............................................... 344,841 289,841
Long-term obligations, less current maturities............. 8,631 8,631
Long-term debt-affiliate................................... 193,034 193,034
Stockholders' equity....................................... 2,248 2,248
</TABLE>
- ------------------------------
(1) Our fiscal year ends on the last Monday in December. The fiscal year ended
December 30, 1996 is comprised of 53 weeks. The other fiscal years presented
are comprised of 52 weeks.
(2) The pro forma information gives effect to the payment of a $175,000 dividend
declared on June 16, 1999, of which $120,000 was paid in the form of a
promissory note on June 28, 1999 and $55,000 was paid in cash subsequent to
June 28, 1999, the application of the net proceeds of this offering and
changes in our on-going relationship with Carlson Companies as described in
"Relationship with Carlson Companies and Related Transactions," as if all of
these transactions occurred at the beginning of the relevant period. The
resulting adjustments are as follows:
- Elimination of $11,360 in general and administrative expenses allocated to
us by Carlson Companies in fiscal 1998, which will no longer be allocated
to us, commencing in fiscal 1999, as a result of this offering.
- Elimination of $1,474 and $651 of compensation expense in 1998 and in the
twenty-six weeks ended June 28, 1999, respectively, related to the
replacement of our previous long-term incentive plan with a stock
incentive plan upon completion of this offering, under which we do not
anticipate incurring any compensation expense. See "Management-Incentive
Compensation Plans."
- Elimination of $4,136 and $2,675 of interest expense that was allocated
from Carlson Companies in fiscal 1998 and in the twenty-six weeks ended
June 28, 1999, respectively, and replacement of that interest with
interest expense of $ and $ in fiscal 1998 and in the twenty-six
weeks ended June 28, 1999, respectively, attributed to the refinancing of
all intercompany indebtedness, after giving effect to the application of
the net proceeds of this offering. See "Relationship with Certain
Companies and Related Transactions."
(3) The fiscal years ended December 29, 1997, December 28, 1998, and the
twenty-six weeks ended June 29, 1998 and June 28, 1999, include Year 2000
remediation expenses of $550, $3,823, $1,067, and $1,686, respectively,
which are included in general and administrative expenses.
(4) Based on shares outstanding immediately prior to the offering and
shares to be subject to stock options issued upon conversion of grants
under our previous long-term incentive plan. See "Management-Incentive
Compensation Plans" and "Capitalization."
(5) The number of restaurants open at December 28, 1998, June 29, 1998 and June
28, 1999 includes four restaurants which are part of a concept we no longer
own. This concept, which we originally sold in 1995, was repossessed by us
in 1998 and sold subsequent to June 28, 1999.
(6) Comparable restaurant sales include the food, beverage and merchandise sales
of restaurants that have been in operation for at least twelve months as of
the beginning of the fiscal year containing the relevant period.
(7) The actual balance sheet data reflects a $175,000 dividend declared on June
16, 1999, of which $120,000 was paid in the form of a promissory note on
June 28, 1999. The remaining $55,000 was paid in cash subsequent to June 28,
1999.
(8) The pro forma balance sheet data gives effect to the payment, subsequent to
June 28, 1999, of the $55,000 cash portion of a $175,000 dividend.
(9) The pro forma as adjusted balance sheet data is adjusted to give effect to
the receipt by us of the estimated net proceeds of $ from the sale of
shares of Class A common stock in this offering at an assumed offering
price of $ per share and the repayment of $ of long-term
debt-affiliate.
8
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE YOU DECIDE
TO BUY OUR CLASS A COMMON STOCK. YOU SHOULD ALSO CONSIDER THE OTHER INFORMATION
IN THIS PROSPECTUS. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS,
FINANCIAL CONDITION, OPERATING RESULTS OR CASH FLOWS COULD BE MATERIALLY
ADVERSELY AFFECTED. THIS COULD CAUSE THE TRADING PRICE OF OUR CLASS A COMMON
STOCK TO DECLINE, AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THESE STATEMENTS RELATE TO OUR FUTURE PLANS, OBJECTIVES,
EXPECTATIONS AND INTENTIONS. THESE STATEMENTS MAY BE IDENTIFIED BY THE USE OF
WORDS SUCH AS "EXPECTS," "ANTICIPATES," "BELIEVES," "INTENDS," "PLANS" AND
SIMILAR EXPRESSIONS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED IN THESE STATEMENTS. FACTORS THAT COULD CONTRIBUTE TO THESE
DIFFERENCES INCLUDE THOSE DISCUSSED BELOW AND ELSEWHERE IN THIS PROSPECTUS. WE
UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE RESULTS OR OTHERWISE.
OUR BUSINESS COULD BE MATERIALLY ADVERSELY AFFECTED IF WE ARE UNABLE TO EXPAND
IN A TIMELY AND PROFITABLE MANNER
To continue to grow, we and our franchisees must open new restaurants on a
timely and profitable basis. We have experienced delays in restaurant openings
from time to time and may experience delays in the future. Delays or failures in
opening new restaurants could materially adversely affect our business,
financial condition, operating results or cash flows. To date, we have opened 11
company owned or operated restaurants in fiscal 1999 and our franchisees have
opened 27 restaurants. We expect to open an additional 19 company owned or
operated restaurants during the remainder of fiscal 1999 and expect our
franchisees to open an additional 34 restaurants. Our ability to expand
successfully will depend on a number of factors, some of which are beyond our
control, including:
- identification and availability of suitable restaurant sites;
- competition for restaurant sites;
- negotiation of favorable leases;
- timely development in certain cases of commercial, residential, street or
highway construction near our restaurants;
- management of construction and development costs of new restaurants;
- securing required governmental approvals and permits;
- recruitment of qualified operating personnel, particularly culinary
experts and restaurant managers;
- competition in new markets; and
- general economic conditions.
In addition, we contemplate entering new markets, including international
markets and nontraditional locations, in which we have no or limited operating
experience. These new markets may have different demographic characteristics,
competitive conditions, consumer tastes and discretionary spending patterns than
our existing markets, which may cause our new restaurants to be less successful
in these markets than in our existing markets.
DIFFICULTIES IN OUR FRANCHISE OPERATIONS MAY ADVERSELY AFFECT US
Our success is dependent, in part, on the development and growth of our
franchising program. There can be no assurance that we will continue to
successfully locate and attract suitable franchisees
9
<PAGE>
or that our franchisees will have the business abilities or sufficient access to
capital to open restaurants or operate restaurants in a manner consistent with
our concepts and standards. The success of our franchising program will depend
on factors such as identifying the availability of suitable sites on acceptable
lease or purchase terms, obtaining necessary approvals and permits and adapting
to changing economic and business conditions. If a significant number of our
franchisees stop participating in purchases from the national distribution
company that is the primary supplier of our food, our leverage with this
supplier could be adversely affected. Our international franchisees also depend
on the stability of foreign social, economic and political conditions. See
"Business-Our Franchise System."
We are also subject to a substantial number of state and foreign laws
regulating the offer and sale of franchises. These laws impose registration and
disclosure requirements on franchisors in the offer and sale of franchises and
may also regulate termination, renewal fees and other substantive aspects of our
relationship with our franchisees. We are subject to Federal Trade Commission
regulations governing disclosure requirements in the sale of franchises. We
believe that we are in compliance with applicable laws and regulations governing
our operations.
OUR INTERNATIONAL FRANCHISE OPERATIONS ARE SUBJECT TO SOCIAL, POLITICAL AND
ECONOMIC RISKS AND MAY BE ADVERSELY AFFECTED BY FOREIGN CURRENCY FLUCTUATIONS
In fiscal 1998, approximately 2.1% of our net revenues came from franchise
royalties, franchise fees and concept fees paid by our international
franchisees. Social, economic and political conditions in these international
markets may adversely affect the ability of our international franchisees to pay
these fees, which could adversely affect our business, financial condition,
operating results or cash flows. The overall risks to our international
franchisees include changes in foreign governmental policies, and other
political or economic developments. These developments may lead to new pricing,
tax or other policies and monetary fluctuations which may adversely affect our
international franchisees. Recent economic turmoil in Asia has adversely
affected our business, financial condition, operating results or cash flows with
respect to our franchisees' restaurants in Asia.
OUR IMPLEMENTATION OF NEW BUSINESS CONCEPTS AND STRATEGIES MAY NOT BE SUCCESSFUL
We continue to initiate new business concepts and strategies, including the
development of new restaurant concepts, the introduction of new menu items and
the development of international and nontraditional locations. We have limited
experience in the development and operation of restaurant concepts other than
T.G.I. Friday's. There can be no assurance that we will continue to develop new
concepts and strategies, that such concepts and strategies will be successful or
profitable or that such concepts and strategies will fill the strategic roles we
intend.
FLUCTUATIONS IN OUR OPERATING RESULTS MAY RESULT IN DECREASES IN OUR STOCK PRICE
Our operating results may fluctuate significantly due to several factors,
including the timing of new restaurant openings and related expenses,
profitability of new restaurants, increases or decreases in comparable
restaurant sales, interest rates, general economic conditions, consumer
confidence in the economy, changes in consumer preferences, competitive factors
and weather conditions. As a result, our operating results may fall below the
expectations of public market analysts and investors. In that event, the price
of our Class A common stock would likely decrease.
In the past, our preopening costs have varied significantly from quarter to
quarter primarily due to the timing of restaurant openings. We typically incur
most preopening costs for a new restaurant within the two months immediately
preceding, and the month of, its opening. In addition, our labor and operating
costs for a newly opened restaurant during the first three to six months of
operation are materially greater than what can be expected after that time, both
in aggregate dollars and as a percentage of restaurant sales. Accordingly, the
volume and timing of new restaurant openings in any
10
<PAGE>
quarter has had and is expected to continue to have a significant impact on
quarterly preopening costs, labor and direct costs. Due to these factors,
results for a quarter may not be indicative of results to be expected for any
other quarter or for a full fiscal year. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for a discussion of
our historical operating results.
WE COULD FACE LABOR SHORTAGES
Our success depends in part upon our ability to attract, motivate and retain
a sufficient number of qualified employees, including restaurant managers,
kitchen staff and wait staff, necessary to meet our expansion schedule.
Qualified individuals needed to fill these positions are in short supply in
certain areas, and the inability to recruit and retain such individuals may
delay the planned openings of new restaurants or result in high employee
turnover in existing restaurants which could have a material adverse effect on
our business, financial condition, operating results or cash flows.
Additionally, competition for qualified employees could require us to pay higher
wages to attract sufficient employees, which could result in higher labor costs.
CHANGES IN CONSUMER PREFERENCES OR DISCRETIONARY CONSUMER SPENDING COULD
NEGATIVELY IMPACT OUR RESULTS
Most of our restaurants feature full-service food and beverage selections
served in a casual dining atmosphere. Our continued success depends, in part,
upon the popularity of our menu items and this style of casual dining. Shifts in
consumer preferences away from our cuisine or dining style could materially
adversely affect our business, financial condition, operating results or cash
flows. Also, our success depends to a significant extent on numerous factors
affecting discretionary consumer spending, including economic conditions,
disposable consumer income and consumer confidence. Adverse changes in these
factors could reduce guest visits or impose practical limits on pricing, either
of which could materially adversely affect our business, financial condition,
operating results or cash flows.
OUR OPERATIONS DEPEND ON GOVERNMENTAL LICENSES AND WE MAY FACE LIABILITY UNDER
"DRAM SHOP" STATUTES
Our business depends on obtaining and maintaining required food service and
liquor licenses for each of our restaurants. If we fail to hold all necessary
licenses, we may be forced to delay or cancel new restaurant openings and close
or reduce operations at existing locations. In addition, our sale of alcoholic
beverages subjects us to "dram shop" statutes in most states. These statutes
allow an injured person to recover damages from an establishment that served
alcoholic beverages to an intoxicated person who caused the injury. If we
receive a judgment substantially in excess of our insurance coverage, or if we
fail to maintain our insurance coverage, our business, financial condition,
operating results or cash flows could be materially and adversely affected. See
"Business-Government Regulations" for a discussion of the regulations we must
comply with.
COMPLAINTS OR LITIGATION FROM GUESTS MAY MATERIALLY ADVERSELY AFFECT US
We are, from time to time, the subject of complaints or litigation from
guests alleging illness, injury or other food quality, health or operational
concerns. Adverse publicity resulting from these allegations may materially
adversely affect us and our restaurants, regardless of whether the allegations
are valid or whether we are liable. These claims may divert our financial and
management resources that would otherwise be used to benefit the future
performance of our operations. Our reputation may be adversely affected by
publicity relating to restaurants operated by our franchisees. We have less
ability to assure compliance with our standards at our franchised restaurants
than we do at our company owned or operated restaurants.
11
<PAGE>
WE FACE UNCERTAINTY REGARDING RISK OF YEAR 2000 COMPLIANCE
Carlson Restaurants, our franchisees and third parties with which we do
business, rely on numerous computer systems for day to day operations. We cannot
predict whether we will be able to effectively address our Year 2000 issues in a
timely and cost-efficient manner and without interruption to our business. We
have initiated discussions with our franchisees and our significant suppliers
regarding their plans to solve Year 2000 issues where their systems interface
with our systems or otherwise affect our operations. We cannot predict whether
Year 2000 difficulties encountered by third parties with whom we do business
will have a material adverse effect on our business, financial condition,
operating results or cash flows. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Year 2000 Compliance" for a
discussion of our Year 2000 readiness.
LOSS OF OUR PRIMARY SUPPLIER OR INCREASED FOOD COSTS COULD MATERIALLY ADVERSELY
AFFECT OUR OPERATING RESULTS
Our profitability depends in part on our ability to anticipate and react to
changes in food costs. We rely on one national distribution company as the
primary supplier of our food and other restaurant supplies. Although we believe
that alternative sources of supply are available, any increase in prices or
failure to perform by this national distribution company could cause our food
costs to increase. Further, various factors beyond our control, including
adverse weather conditions and governmental regulation, may affect our food
costs. We cannot predict whether we will be able to effectively anticipate and
react to changing food costs by adjusting our purchasing practices and menu
prices, and a failure to do so could materially adversely affect our business,
financial condition, operating results or cash flows.
OUR EXISTING STOCKHOLDER WILL RETAIN SIGNIFICANT CONTROL WHICH COULD DEPRESS THE
PRICE OF YOUR SHARES
Upon completion of this offering, our existing stockholder, Carlson
Companies, will own 100% of our outstanding Class B common stock. The shares of
Class B common stock are entitled to 10 votes per share on all matters submitted
to a vote of stockholders and the shares of Class A common stock are entitled to
one vote per share on all matters submitted to a vote of stockholders. As a
result, Carlson Companies will own approximately % of our total voting power
and will be able to control us and direct our affairs, including the election of
directors and approval of significant corporate transactions. In addition, we
are reliant upon Carlson Companies for various corporate functions that they
provide to us on a fee basis, such as purchasing, accounting and insurance, that
may make it difficult for another company to acquire us. This concentration of
ownership also may delay, defer or prevent a change in our control, and make
some transactions more difficult or impossible without Carlson Companies'
support. These transactions might include proxy contests, mergers, tender
offers, open market purchase programs or other purchases of Class A common stock
that could give our stockholders the opportunity to realize a premium over the
then prevailing market price for shares of Class A common stock. See "Principal
Stockholders" for information about Carlson Companies and the number of shares
it will control.
CHANGES IN OUR RELATIONSHIP WITH CARLSON COMPANIES COULD REDUCE OUR OPERATING
INCOME
After this offering, we will continue to obtain various services from
Carlson Companies under a shared services agreement. The services provided by
Carlson Companies under this agreement are material to our operations. These
services include obtaining supplies and providing insurance, accounting
services, human resources information services, benefits administration,
transaction processing services, various tax and treasury services and
information technology maintenance and systems development. The intention of
this agreement is to continue the relationship between us and Carlson Companies
in a manner consistent with past practices. If the shared services agreement is
terminated, we will have to obtain the services covered by the agreement on our
own. We may not be
12
<PAGE>
able to replace all of these services in a timely manner or on terms, including
cost, that are as favorable as those we receive from Carlson Companies.
Carlson Companies' position as our controlling stockholder may cause
conflicts of interest to arise over the nature, quality and pricing of services
or products provided to us by Carlson Companies or by us to Carlson Companies
under the shared services agreement or other agreements. Furthermore, because we
are currently a wholly-owned subsidiary of Carlson Companies, none of our
agreements with Carlson Companies resulted from arm's-length negotiations and,
therefore, the prices we are charged for services provided by Carlson Companies
may be higher or lower than prices that would be charged to third parties. For
more information about these agreements, see "Relationship with Carlson
Companies and Related Transactions."
OUR PARTICIPATION IN CARLSON COMPANIES' CASH MANAGEMENT PROGRAM AND CARLSON
COMPANIES' POSITION AS OUR PRIMARY LENDER COULD RESULT IN FINANCIAL LOSSES
As a part of our ongoing relationship with Carlson Companies, we participate
in its cash management program. Carlson Companies is our primary lender and
source of working capital. We currently have an arrangement whereby they lend us
funds on an as needed basis. We have entered into a credit agreement with
Carlson Companies which covers all of our outstanding indebtedness to them and
will cover our ongoing cash requirements. Our ability to borrow funds to finance
our operations is subject to Carlson Companies' ability to raise working capital
and draw on its own line of credit. Any impairment of Carlson Companies' ability
to lend us funds could adversely affect our business, financial condition,
operating results or cash flows.
We deliver all of our excess cash to Carlson Companies for inclusion in its
cash management program. While we are a debtor of Carlson Companies, this cash
will be used to pay down our intercompany indebtedness to them. Upon completion
of this offering, our intercompany cash management account with Carlson
Companies will be an interest-earning asset or an interest-bearing liability
depending on the level of cash receipts and disbursements. When our cash account
with Carlson Companies is positive, we are a general creditor of Carlson
Companies with respect to such funds and our rights to these funds are subject
to Carlson Companies' financial condition and the rights of other creditors. As
a result, our rights to these funds may be adversely affected by any financial
difficulties or insolvency experienced by Carlson Companies.
WE HAVE HISTORICALLY BEEN A MEMBER OF A CONSOLIDATED TAX GROUP WITH CARLSON
COMPANIES WHICH COULD LEAD TO LIABILITY FOR US
Prior to the completion of this offering, we and Carlson Companies are part
of a consolidated group for tax purposes. As a result, we are jointly and
severally liable with Carlson Companies for all tax liabilities incurred and
paid by any member of the Carlson Companies consolidated tax group. Upon
consummation of this offering we will no longer be a part of this consolidated
tax group for federal income tax purposes and we will no longer be part of a
combined tax group for purposes of taxation in a few states. However, we will
remain jointly and severally liable with Carlson Companies for all tax
liabilities relating to prior periods. In addition, we will continue to be part
of a combined tax group with Carlson Companies for purposes of taxation by some
states. Our tax sharing agreement with Carlson Companies allows Carlson
Companies to control our tax decisions with respect to periods and returns for
which we are part of a consolidated or combined tax group. As a result, Carlson
Companies may be able to make decisions in its collective best interest that may
not be in our best interest.
FOUR OF OUR DIRECTORS MAY HAVE CONFLICTS OF INTEREST BECAUSE THEY ARE ALSO
CARLSON COMPANIES DIRECTORS OR OFFICERS
Four of our directors are also directors or officers of Carlson Companies,
which may create conflicts of interest. Our certificate of incorporation permits
Carlson Companies to engage in the same or similar activities as we do. Our
certificate of incorporation also provides that Carlson Companies
13
<PAGE>
does not have to tell us about a corporate opportunity, may pursue that
opportunity or acquire it for itself, or may direct that opportunity to another
person without liability to us or our stockholders.
OUR CLASS A COMMON STOCK MAY NOT DEVELOP AN ACTIVE, LIQUID TRADING MARKET
We do not know the level of trading volume that will exist for our Class A
common stock after the offering. Trading volume levels may affect your ability
to sell your shares quickly at the current market price. The initial public
offering price of our Class A common stock has been determined by our
negotiations with the underwriters. You may not be able to resell the Class A
common stock you buy at or above the initial public offering price.
OUR STOCK PRICE MAY BE VOLATILE
The market price of our Class A common stock could fluctuate significantly
in response to quarterly operating results and other factors, including many
over which we have no control and that may not be directly related to us. The
stock market has, from time to time, experienced extreme price and volume
fluctuations, which have often been unrelated or disproportionate to the
operating performance of particular companies. Fluctuations or decreases in the
trading price of our Class A common stock may adversely affect your ability to
trade your shares. In addition, these fluctuations could adversely affect our
ability to raise capital through future equity financings.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE AND LIMIT OUR
ABILITY TO RAISE CAPITAL IN THE MARKET
Sales of substantial amounts of our stock in the public market, or the
perception that these sales may occur, could adversely affect the market price
of our stock and our ability to raise capital through a public offering of our
equity securities. After this offering, the shares offered under this prospectus
will be freely tradeable. The outstanding shares of our Class B
common stock may be sold after their 180-day lock-up period, subject to the
restrictions of Rule 144 under the Securities Act of 1933. See "Shares Eligible
for Future Sale" for a discussion of potential future sales of our common stock.
PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, OUR BY-LAWS AND DELAWARE LAW
COULD DISCOURAGE POTENTIAL ACQUISITION PROPOSALS AND DELAY OR PREVENT A CHANGE
IN CONTROL
Our certificate of incorporation will authorize the board of directors to
issue up to 10,000,000 shares of preferred stock and to determine the powers,
preferences, privileges, rights, including voting rights, qualifications,
limitations and restrictions of those shares without any further vote or action
by the stockholders. The rights of the holders of common stock will be subject
to, and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. The charter and by-laws, among other
things, require that stockholder actions occur at duly called meetings of the
stockholders, limit who may call special meetings of stockholders, do not permit
cumulative voting in the special meetings of stockholders, do not permit
cumulative voting in the election of directors and require advance notice of
stockholder proposals and director nominations. Also, Section 203 of the
Delaware General Corporation Law restricts certain business combinations with
any "interested stockholder" as defined by the statute. These and other
provisions could have the effect of making it more difficult for a third party
to acquire a majority of outstanding voting stock, discourage a hostile bid or
delay, prevent or deter a merger, acquisition or tender offer in which our
stockholders could receive a premium for their shares, or a proxy contest for
control of the company or other changes in our management. See "Description of
Capital Stock."
14
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the shares of Class A common
stock offered by us are estimated to be approximately $ , after deducting
the underwriting discount and estimated offering expenses and assuming an
initial public offering price of $ , or approximately $ if the
over-allotment option is exercised in full.
We intend to use the entire amount of the net proceeds of the offering to
repay a portion of our intercompany indebtedness to Carlson Companies. The
indebtedness to be repaid is covered by our credit agreement with Carlson
Companies. The interest rate on all advances made under this credit agreement is
1.25% over the three-month London Inter-Bank Offered Rate, or LIBOR, at the time
the advance is made. The credit agreement will expire on December 31, 2001,
unless Carlson Companies' ownership of all outstanding shares of our common
stock falls below 50% in which case the credit agreement may be terminated upon
90 days notice by either party. The indebtedness outstanding under the credit
agreement includes $70.4 million in debt historically allocated to us by Carlson
Companies, $120.0 million incurred for the partial payment of a dividend to
Carlson Companies and accrued interest on these obligations at the time they
were refinanced.
DIVIDEND POLICY
We currently intend to retain all future earnings for the operation and
expansion of our business and do not anticipate paying cash dividends on our
common stock in the foreseeable future. Any payment of cash dividends in the
future will be at the discretion of our board of directors and will depend upon
our results of operations, earnings, capital requirements, contractual
restrictions, outstanding indebtedness and other factors deemed relevant by our
board.
On June 16, 1999, our board of directors declared a dividend of $175.0
million to our sole stockholder, Carlson Companies, of which $55.0 million was
paid in cash and $120.0 million was paid in the form of a promissory note. Aside
from this dividend, we have not declared or paid any cash dividends on our
common stock since 1991.
15
<PAGE>
CAPITALIZATION
The following table sets forth, at June 28, 1999, our cash and cash
equivalents and capitalization on three different bases. First, the information
is set forth on an actual basis, which reflects a $175.0 million dividend
declared on June 16, 1999, of which $120.0 million was paid in the form of a
promissory note on June 28, 1999 and $55.0 million was paid in cash subsequent
to June 28, 1999. Second, the information is set forth on a pro forma basis to
reflect payment of the $55.0 million cash portion of the dividend. The pro forma
information also gives effect to the reclassification of our one outstanding
share of common stock into shares of Class B common stock. Third, the
information is set forth on a pro forma as adjusted basis to reflect the
issuance of Class A common stock offered by us in this offering and the
application of the estimated net proceeds from the offering to repay a portion
of our intercompany indebtedness. This table should be read in conjunction with
the consolidated financial statements and their notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
JUNE 28, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Cash and cash equivalents........................................ $ 60,925 $ 5,925 $
--------- ----------- -----------
--------- ----------- -----------
Long-term debt, excluding current portion:
Notes payable and capital lease obligations.................... 8,631 8,631
Long-term debt-affiliate....................................... 193,034 193,034
Minority interests............................................... 2,561 2,561
Stockholders' equity:
Preferred stock, par value $.01 per share, 10,000,000 shares
authorized, no shares issued and outstanding................. - - -
Common stock, par value $1.00 per share, 100 shares authorized,
1 share issued and outstanding, actual; no shares issued and
outstanding, pro forma and pro forma as adjusted............. 0 - -
Class A common stock, par value $.01 per share, 100,000,000
shares authorized, no shares issued and outstanding, actual
and pro forma; shares issued and outstanding, pro forma
as adjusted(1)............................................... - -
Class B common stock, par value $.01 per share, 35,000,000
shares authorized, no shares issued and outstanding, actual;
shares issued and outstanding, pro forma and pro forma as
adjusted..................................................... -
Additional paid-in capital..................................... 2,479 2,479
Unrealized holding losses of marketable securities............. (231) (231)
Retained earnings.............................................. 0 0
--------- ----------- -----------
Total common stockholders' equity................................ 2,248 2,248
--------- ----------- -----------
Total capitalization....................................... $ 206,474 $ 206,474 $
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
- ------------------------
(1) Excludes shares of Class A common stock reserved for issuance upon
exercise of stock options granted effective upon consummation of this
offering and an additional shares of Class A common stock reserved for
issuance upon exercise of future grants of stock options or other awards
under our stock incentive plan. See "Management-Incentive Compensation
Plans" for a description of our stock incentive plan.
16
<PAGE>
DILUTION
Our net tangible book value as of June 28, 1999 was a deficit of
approximately $30.1 million, or $ per share of common stock, after giving
effect to the reclassification of our common stock and assuming shares of
Class B common stock outstanding on such date. Net tangible book value per share
is determined by subtracting total liabilities from tangible assets and dividing
the remainder by the number of shares of common stock outstanding. Assuming this
offering was consummated on June 28, 1999, after giving effect to the issuance
of shares of Class A common stock offered by us in this offering at an
assumed initial public offering price of $ per share, after applying the net
proceeds of this offering and after deducting the underwriting discount,
commissions and estimated offering expenses, the as adjusted net tangible book
value as of June 28, 1999 would have been $ , or $ per share of common
stock. This represents an immediate increase in net tangible book value of $
per share to Carlson Companies and an immediate dilution of $ per share to new
investors purchasing Class A common stock in this offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share................................... $
---------
Net tangible book value per share before this offering.................. $
---------
Increase per share attributable to new investors(1).....................
---------
As adjusted net tangible book value per share after this offering.........
---------
Dilution per share to new investors(2).................................... $
---------
---------
</TABLE>
- ------------------------
(1) After deducting the underwriting discount, commissions and estimated
expenses of this offering.
(2) Dilution is determined by subtracting net tangible book value per share
after giving effect to this offering from the initial public offering price
paid by a new investor for a share of Class A common stock.
The following table summarizes, as of June 28, 1999, the number of shares of
common stock purchased, the total consideration paid to us and the average price
per share paid by Carlson Companies for the shares of Class B common stock that
they will hold after the reclassification of our common stock and by investors
purchasing shares of Class A common stock in this offering, assuming an initial
public offering price of $ per share and before deducting the underwriting
discount, commissions and our estimated offering expenses.
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
------------------------ -------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Carlson Companies.......................................... % $ 80,088,000 % $
New investors..............................................
----------- --- ------------- ---
Total...................................................... 100% 100%
----------- --- ------------- ---
----------- --- ------------- ---
</TABLE>
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following selected consolidated financial data for the five fiscal years
ended December 28, 1998 are derived from our audited consolidated financial
statements. The selected consolidated financial data as of and for the
twenty-six weeks ended June 29, 1998 and June 28, 1999, have been derived from
our unaudited condensed consolidated financial statements which, in the opinion
of management, reflect all adjustments necessary to present fairly, in
accordance with generally accepted accounting principles, the information for
those periods. The audited consolidated financial statements and their notes for
each of the three fiscal years ended December 28, 1998, and the report of
independent public accountants on those years, are included elsewhere in this
prospectus. This selected consolidated financial data should be read in
conjunction with the consolidated financial statements and their notes,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other financial information included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
TWENTY-SIX
FISCAL YEAR ENDED(1) WEEKS ENDED
------------------------------------------------------------------------- -------------
DECEMBER 26, DECEMBER 25, DECEMBER 30, DECEMBER 29, DECEMBER 28, JUNE 29,
1994 1995 1996 1997 1998 1998
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue
Company restaurant sales...... $ 402,958 $ 403,717 $ 396,784 $ 418,468 $ 483,311 $ 233,772
Managed restaurant
revenue..................... 65,787 69,996 73,317 76,779 74,905 37,332
Franchising revenue........... 19,728 23,894 29,209 35,199 38,292 16,890
Licensing revenue............. 801 2,316 2,906 3,627 2,780 1,521
------------- ------------- ------------- ------------- ------------- -------------
Total revenue............... 489,274 499,923 502,216 534,073 599,288 289,515
Cost of sales................... 135,566 138,624 139,840 143,228 165,221 79,630
Restaurant operating expenses... 277,123 289,115 276,357 286,077 315,513 152,745
General and administrative
expenses(2)................... 38,636 38,234 50,122 55,218 64,582 31,792
Depreciation and amortization
expense....................... 17,306 19,412 20,712 23,401 27,457 13,288
Other (income) expense(3)....... (18,299) 6,120 264 (863) 533 (99)
------------- ------------- ------------- ------------- ------------- -------------
Income from operations........ 38,942 8,418 14,921 27,012 25,982 12,159
Interest expense................ 2,097 1,306 2,509 2,571 4,216 1,787
------------- ------------- ------------- ------------- ------------- -------------
Income before income taxes...... 36,845 7,112 12,412 24,441 21,766 10,372
Provision for income taxes...... 12,923 1,045 3,899 8,740 7,875 3,754
------------- ------------- ------------- ------------- ------------- -------------
Net income...................... $ 23,922 $ 6,067 $ 8,513 $ 15,701 $ 13,891 $ 6,618
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
Basic and diluted net income per
share......................... $ $ $ $ $ $
Shares used in calculation of
basic and diluted net income
per share(4)..................
<CAPTION>
AS OF AS OF
------------------------------------------------------------------------- -------------
DECEMBER 26, DECEMBER 25, DECEMBER 30, DECEMBER 29, DECEMBER 28, JUNE 29,
1994 1995 1996 1997 1998 1998
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and cash equivalents....... $ 8,962 $ 4,323 $ 13,381 $ 27,061 $ 50,364 $ 24,704
Total assets.................... 232,129 223,769 237,510 256,208 322,879 275,703
Long-term obligations, less
current maturities............ 1,287 5,802 5,988 6,009 8,797 8,776
Long-term debt-affiliate(5)..... 49,129 30,843 27,409 32,007 70,359 39,429
Stockholder's equity(5)......... 121,240 128,485 136,644 152,659 166,631 159,510
<CAPTION>
JUNE 28,
1999
-------------
<S> <C>
STATEMENT OF OPERATIONS DATA
Revenue
Company restaurant sales...... $ 275,130
Managed restaurant
revenue..................... 41,093
Franchising revenue........... 19,593
Licensing revenue............. 1,630
-------------
Total revenue............... 337,446
Cost of sales................... 91,702
Restaurant operating expenses... 181,021
General and administrative
expenses(2)................... 28,240
Depreciation and amortization
expense....................... 15,437
Other (income) expense(3)....... 1,696
-------------
Income from operations........ 19,350
Interest expense................ 3,082
-------------
Income before income taxes...... 16,268
Provision for income taxes...... 5,691
-------------
Net income...................... $ 10,577
-------------
-------------
Basic and diluted net income per
share......................... $
Shares used in calculation of
basic and diluted net income
per share(4)..................
JUNE 28,
1999
-------------
<S> <C>
BALANCE SHEET DATA
Cash and cash equivalents....... $ 60,925
Total assets.................... 344,841
Long-term obligations, less
current maturities............ 8,631
Long-term debt-affiliate(5)..... 193,034
Stockholder's equity(5)......... 2,248
</TABLE>
- ------------------------------
(1) Our fiscal year ends on the last Monday in December. The fiscal year ended
December 30, 1996 is comprised of 53 weeks. The other fiscal years presented
are comprised of 52 weeks.
(2) The fiscal years ended December 29, 1997, December 28, 1998, and the
twenty-six weeks ended June 29, 1998 and June 28, 1999, include Year 2000
remediation expenses of $550, $3,823, $1,067, and $1,686, respectively,
which are included in general and administrative expenses.
(3) Other income for the year ended December 26, 1994 includes a $21,000 gain
from the sale of 20 operating restaurants to a franchisee.
(4) Based on shares outstanding immediately prior to the offering and
shares to be subject to stock options issued upon conversion of grants
under our previous long-term incentive plan. See "Management-Incentive
Compensation Plans" and "Capitalization."
(5) The balance sheet data reflects a $175,000 dividend declared on June 16,
1999, of which $120,000 was paid in the form of a promissory note on June
28, 1999, and $55,000 was paid in cash subsequent to June 28, 1999.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Our worldwide system of restaurants currently includes over 550 company
owned or operated and franchised restaurants located in 46 countries. We are a
global leader in the development, operation and franchising of casual dining
restaurants, principally under the T.G.I. Friday's brand. Our additional
concepts include the cafe concepts Samba Room and Taqueria Canonita, as well as
the dinner house concepts Timpano Italian Chophouse, Italianni's, Star Canyon
and AquaKnox.
Since the first T.G.I. Friday's restaurant opened in New York City in 1965,
the T.G.I. Friday's system, which includes T.G.I. Friday's, Front Row Sports
Grill and Friday's American Bar, has grown to 530 restaurants, including 125
restaurants located outside the United States. The T.G.I. Friday's system
includes 156 restaurants owned and operated by us, 28 restaurants we operate
under management agreements and 346 restaurants operated by our global franchise
network consisting of 43 domestic and 38 international franchisees. We opened
our first Italianni's restaurant in 1992 and have developed or acquired all of
our other additional concepts since 1997. Our additional concepts currently
include a total of 24 company owned or operated and franchised restaurants. The
management agreements relating to the restaurants we operate appoint us as the
exclusive agent for the supervision, direction and control of the operations and
management of the applicable restaurant in exchange for payment to us of a
management fee based on a percentage of sales and reimbursement of our expenses.
Our revenue consists primarily of company restaurant sales, managed
restaurant revenue and franchising revenue. Company restaurant sales include
food, beverage and merchandise sales at company owned restaurants. In fiscal
1998, alcoholic beverages accounted for approximately 22% of company restaurant
sales. Managed restaurant revenue includes management fees for restaurants we
operate under management agreements and reimbursement of expenses we incur in
operating these restaurants. Franchising revenue includes royalty fees,
franchise fees and non-refundable concept fees from franchise operations. In
addition, we receive revenue from trademark licensing fees paid by manufacturers
of our retail branded food and beverage products.
Our revenue from domestic franchisees includes a 4.0% royalty on net sales
and franchise fees that must be paid for each restaurant prior to opening. Our
revenue from international franchisees typically includes a royalty ranging from
2.0% to 4.0% of net sales and franchise fees that must be paid for each
restaurant prior to opening, as well as individually negotiated concept fees.
Nonrefundable concept fees are paid by franchisees primarily based on the number
of potential restaurants that can be established in the franchisee's territory.
See "Business-Our Franchise System" for additional information regarding our
arrangements with franchisees.
Comparable restaurant sales include food, beverage and merchandise sales at
restaurants that have been in operation for twelve full months as of the
beginning of the fiscal year including the relevant period. As of June 28, 1999,
we had 134 company owned restaurants which met this criteria.
Cost of sales is composed primarily of the cost of food and beverages.
Restaurant operating expenses include labor, occupancy, marketing, management
training and other store-level costs. Cost of sales and restaurant operating
expenses include expenses incurred at our managed restaurants for which we are
reimbursed. The majority of the components of our cost of sales are variable and
are expected to generally increase with sales volume. Restaurant operating
expenses also generally increase with sales volume, but decline as a percentage
of revenue as sales increase. Occupancy costs generally include both a fixed
rental plus a percentage rental based on gross sales. General and administrative
expenses are composed of expenses associated with all corporate and
administrative functions that support existing operations and provide an
infrastructure to support future growth, including management and staff
salaries, employee benefits, travel, information systems, training and market
19
<PAGE>
research. Depreciation and amortization includes depreciation of restaurant and
corporate fixed assets, as well as amortization of goodwill. Pre-opening costs
associated with new restaurants are expensed as incurred which may cause
fluctuations in our quarterly operating results depending on the timing of new
restaurant openings.
Our historical general and administrative expenses include expenses incurred
by us, including payments to Carlson Companies for services they provide, and
amounts allocated to us by Carlson Companies. Commencing in June 1997, as part
of an overall review of the services Carlson Companies provides to its
subsidiaries, Carlson Companies determined to change the manner in which it
provides certain financial services to its subsidiaries and the manner in which
it receives financial information from its subsidiaries. As a result, in the
second quarter of fiscal 1999, the financial services provided by Carlson
Companies to us increased, which will result in an increase in our payments to
Carlson Companies for its services. We expect that this increase will be at
least partially offset by decreases in our direct general and administrative
expenses to the extent we no longer provide these services internally. The
amount historically allocated to us by Carlson Companies will be eliminated in
future periods. This will result in an overall reduction in our general and
administrative expenses.
We anticipate a charge of approximately $11.0 million to income from
operations to occur in the third quarter of 1999 due to the closure of, and
write-off of assets at, eight underperforming restaurants. This charge is
significantly higher than charges typically associated in any given fiscal year
with closures of our stores.
Carlson Companies is our primary lender and nearly all of our interest
expense consists of amounts we pay to Carlson Companies on outstanding
intercompany debt. On August 19, 1999, we entered into a credit agreement with
Carlson Companies which covers all of our intercompany indebtedness. During the
third quarter of 1999, we will experience a significant increase in our interest
expense as a result of the $120.0 million in debt we incurred to Carlson
Companies in partial payment of a dividend, which will be partially repaid with
the net proceeds of this offering. In addition, we participate in Carlson
Companies' cash management program which holds our cash received from operations
in Carlson Companies' centralized cash accounts and funds our cash disbursements
on a daily basis. Cash paid into our intercompany cash management account may be
used to reduce our indebtedness to Carlson Companies.
Upon completion of this offering, Carlson Companies will beneficially own
shares of our common stock representing in the aggregate % of the combined
voting power of all of our outstanding common stock, or % if the underwriters'
over-allotment option is exercised in full. We have entered into, or will enter
into, agreements and arrangements with Carlson Companies governing the
relationships between us and Carlson Companies and providing for the allocation
of tax and other liabilities and obligations relating to periods prior to and
after this offering. We also plan to continue purchasing additional goods and
services from Carlson Companies and its affiliates in the ordinary course of
business. See "Relationship with Carlson Companies and Related Transactions" for
a discussion of our principal agreements and arrangements with Carlson Companies
and "Liquidity and Capital Resources" in this Management's Discussion and
Analysis of Financial Condition and Results of Operations for a description of
certain terms of our debt payable to Carlson Companies and other relevant
information.
Our fiscal year ends on the last Monday in December. Our 1998 and 1997
fiscal years each consisted of 52 weeks, and our 1996 fiscal year consisted of
53 weeks.
20
<PAGE>
RESULTS OF OPERATIONS
Our operating results for fiscal years 1996, 1997 and 1998, and for the
twenty-six weeks ended June 29, 1998 and June 28, 1999, expressed as a
percentage of total revenue were as follows:
<TABLE>
<CAPTION>
TWENTY-SIX
FISCAL YEAR ENDED WEEKS ENDED
------------------------------------------ --------------------------
DECEMBER 30, DECEMBER 29, DECEMBER 28, JUNE 29, JUNE 28,
1996 1997 1998 1998 1999
------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenue
Company restaurant sales................... 79.0% 78.3% 80.6% 80.8% 81.5%
Managed restaurant revenue................. 14.6 14.4 12.5 12.9 12.2
Franchising revenue........................ 5.8 6.6 6.4 5.8 5.8
Licensing revenue.......................... 0.6 0.7 0.5 0.5 0.5
----- ----- ----- ----- -----
Total revenue............................ 100.0 100.0 100.0 100.0 100.0
Cost of sales................................ 27.8 26.8 27.6 27.5 27.2
Restaurant operating expenses................ 55.0 53.6 52.6 52.7 53.6
General and administrative expenses.......... 10.0 10.3 10.8 11.0 8.4
Depreciation and amortization expense........ 4.1 4.4 4.6 4.6 4.6
Other (income) expense, net.................. 0.1 (0.2) 0.1 - 0.5
----- ----- ----- ----- -----
Income from operations..................... 3.0 5.1 4.3 4.2 5.7
Interest expense............................. 0.5 0.5 0.7 0.6 0.9
----- ----- ----- ----- -----
Income before income taxes................... 2.5 4.6 3.6 3.6 4.8
Provision for income taxes................... 0.8 1.7 1.3 1.3 1.7
----- ----- ----- ----- -----
Net income................................... 1.7% 2.9% 2.3% 2.3% 3.1%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
TWENTY-SIX WEEK PERIOD ENDED JUNE 28, 1999 COMPARED TO TWENTY-SIX WEEK PERIOD
ENDED JUNE 29, 1998
REVENUE. Total revenue increased by $47.9 million, or 16.6%, to $337.4
million in the first half of 1999 from $289.5 million in the first half of 1998.
The increase was primarily attributable to increased sales of $41.3 million at
company owned restaurants, increased managed restaurant revenue of $3.8 million
and increased franchising revenue of $2.7 million.
Company restaurant sales increased by $41.3 million, or 17.7%, to $275.1
million in the first half of 1999 from $233.8 million in the first half of 1998.
The increase in company restaurant sales during the first half of 1999 was
primarily the result of an increase in the number of owned restaurants.
Comparable company owned restaurant sales increased by $3.9 million, or 1.7%, in
the first half of 1999 from the first half of 1998, which was primarily
attributable to a continuing shift in the sales mix toward higher-priced menu
items and the effect in 1999 of menu price increases during the second half of
1998.
Managed restaurant revenue increased by $3.8 million, or 10.1%, to $41.1
million in the first half of 1999 from $37.3 million in the first half of 1998.
The increase in managed restaurant revenue during the first half of 1999 was
primarily the result of an increase in the aggregate number of restaurant
operating weeks due to new restaurant openings and an increase in sales at
comparable managed restaurants due to a continuing shift in the sales mix
towards higher-priced menu items and the effect in 1999 of menu price increases
during the second half of 1998.
Franchising revenue increased by $2.7 million, or 16.0%, to $19.6 million in
the first half of 1999 from $16.9 million in the first half of 1998. The
increase in franchising revenue was comprised primarily of a $2.0 million
increase in royalty fees and a $400,000 increase in franchise fees in the first
21
<PAGE>
half of 1999. The increase in royalty fees was primarily attributable to an
increase in the number of franchised restaurants. In addition, comparable
restaurant sales at domestic franchised restaurants increased by 2.7% in the
first half of 1999. The increase in franchise fees primarily resulted from an
increase in the number of franchised restaurant openings from 10 in the first
half of 1998 to 13 in the first half of 1999.
COST OF SALES. Cost of sales as a percentage of revenue decreased to 27.2%
in the first half of 1999 from 27.5% in the first half of 1998. This decrease
was primarily attributable to lower costs of certain food products and alcoholic
beverages and the elimination of certain lower-margin menu items, partially
offset by a shift in the sales mix toward higher cost menu items.
RESTAURANT OPERATING EXPENSES. Restaurant operating expenses as a
percentage of revenue increased to 53.6% in the first half of 1999 from 52.7% in
the first half of 1998. This increase was driven by increased labor costs,
principally resulting from an enhanced employee benefits package initiated in
the first half of 1999 to attract and retain restaurant management and
employees.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses as
a percentage of revenue decreased to 8.4% in the first half of 1999 from 11.0%
in the first half of 1998. This decrease was primarily attributable to a $5.7
million decrease in allocated expenses from Carlson Companies reflecting a
change in allocation methodology, partially offset by an increase in Year 2000
remediation expenses from $1.1 million in the first half of 1998 to $1.7 million
in the first half of 1999. We expect an approximate $1.0 million charge to
general and administrative expenses to occur in the third quarter of 1999 due to
charges associated with the conversion of grants under the previous long-term
incentive plan into cash and stock options upon completion of this offering. We
expect our future expenses related to long-term incentive plans to be zero as we
plan to convert to a stock incentive plan upon completion of this offering under
which we expect to grant stock options at market prices. See
"Management-Incentive Compensation Plans."
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense as a percentage of revenue was 4.6% in the first half of both 1999 and
1998. We anticipate that depreciation and amortization expense will increase
slightly as a percentage of revenue in future periods as we implement our new
point of sale system and make ongoing improvements to company owned restaurants.
INTEREST EXPENSE. Interest expense as a percentage of revenue increased to
0.9% in the first half of 1999 from 0.6% in the first half of 1998 due to the
increase in allocated intercompany indebtedness from Carlson Companies in the
first half of fiscal 1999. During the third quarter of 1999, we will experience
a significant increase in our interest expense due to the $120.0 million
increase in indebtedness to Carlson Companies, resulting from the partial
payment of a dividend. This indebtedness will be partially repaid with the
proceeds of this offering.
FISCAL YEAR ENDED DECEMBER 28, 1998 COMPARED TO FISCAL YEAR ENDED DECEMBER 29,
1997
REVENUE. Total revenue increased by $65.2 million, or 12.2%, to $599.3
million in 1998 from $534.1 million in 1997. The increase was primarily
attributable to increased sales of $64.8 million at company owned restaurants
and increased franchising revenue of $3.1 million, partially offset by decreased
managed restaurant revenue of $1.9 million.
Company restaurant sales increased by $64.8 million, or 15.5%, to $483.3
million in 1998 from $418.5 million in 1997. The increase in company restaurant
sales during 1998 was primarily the result of an increase in the number of owned
restaurants. Comparable company owned restaurant sales increased by $14.4
million, or 3.5%, in 1998 from 1997. The increase in comparable company owned
restaurant sales in 1998 was primarily attributable to a menu price increase of
approximately 3.2% and the successful introduction of new menu items.
22
<PAGE>
Managed restaurant revenue decreased by $1.9 million, or 2.4%, to $74.9
million in 1998 from $76.8 million in 1997. The decrease in managed restaurant
revenue during 1998 was primarily the result of a decrease in the aggregate
number of restaurant operating weeks due to the timing of restaurant openings
and closures. This decrease was partially offset by an increase in sales at
comparable managed restaurants due to a menu price increase and the successful
introduction of new menu items.
Franchising revenue increased by $3.1 million, or 8.8%, to $38.3 million in
1998 from $35.2 million in 1997. The increase in franchising revenue was
comprised primarily of an increase in royalty fees in 1998. The increase in
royalty fees was primarily attributable to an increase in the number of
franchised restaurants. In addition, comparable restaurant sales at domestic
franchised restaurants increased by 4.3% in 1998. The increase in franchising
revenue was partially offset by a significant reduction in average restaurant
sales volumes at restaurants located in Asia due to poor economic conditions.
COST OF SALES. Cost of sales as a percentage of revenue increased to 27.6%
in 1998 from 26.8% in 1997. This increase was primarily attributable to a shift
in the sales mix towards new higher-cost menu items, as well as higher food
costs for dairy products. This increase was partially offset by a decrease in
alcoholic beverage costs as a percentage of sales primarily due to a shift in
the sales mix towards higher margin alcoholic beverage items.
RESTAURANT OPERATING EXPENSES. Restaurant operating expenses as a
percentage of revenue decreased to 52.6% in 1998 from 53.6% in 1997. This
decrease was primarily attributable to reduced labor costs at company owned or
operated restaurants resulting from savings generated by a tip sharing
initiative and labor productivity programs initiated during the second half of
1997, which were partially offset by an increase in restaurant management
expenses.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses as
a percentage of revenue increased to 10.8% in 1998 from 10.3% in 1997. This
increase was primarily attributable to a $4.2 million increase in allocated
expenses from Carlson Companies and an increase in Year 2000 remediation
expenses from $550,000 in 1997 to $3.8 million in 1998.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense as a percentage of revenue increased to 4.6% in 1998 from 4.4% in 1997.
This increase resulted primarily from depreciation expense related to capital
additions at existing restaurants.
INTEREST EXPENSE. Interest expense as a percentage of revenue increased to
0.7% in 1998 from 0.5% in 1997 due to an increase in allocated indebtedness from
Carlson Companies in 1998.
FISCAL YEAR ENDED DECEMBER 29, 1997 COMPARED TO FISCAL YEAR ENDED DECEMBER 30,
1996
REVENUE. Total revenue increased by $31.9 million, or 6.3%, to $534.1
million in 1997 from $502.2 million in 1996. The increase was primarily
attributable to increased sales of $21.7 million at company owned restaurants,
increased managed restaurant revenue of $3.5 million and increased franchising
revenue of $6.0 million.
Company restaurant sales increased by $21.7 million, or 5.5%, to $418.5
million in 1997 from $396.8 million in 1996. The increase in company restaurant
sales during 1997 was primarily the result of an increase in the number of owned
restaurants. Comparable company owned restaurant sales increased by $13.9
million, or 3.6%, in 1997 from 1996. The increase in comparable company owned
restaurant sales in 1997 was primarily attributable to a menu price increase and
the successful introduction of new menu items.
23
<PAGE>
Managed restaurant revenue increased by $3.5 million, or 4.7%, to $76.8
million in 1997 from $73.3 million in 1996. This increase was primarily
attributable to an increase in sales at managed restaurants due to a menu price
increase and the successful introduction of new menu items.
Franchising revenue increased by $6.0 million, or 20.5%, to $35.2 million in
1997 from $29.2 million in 1996. The increase in franchising revenue was
comprised of a $4.1 million increase in royalty fees, a $1.0 million increase in
franchise fees and a $900,000 increase in concept fees. The increase in royalty
fees was primarily attributable to an increase in the number of franchised
restaurants. In addition, comparable restaurant sales at domestic franchised
restaurants increased by 2.6% in 1997. The increases in franchise fees and
concept fees resulted primarily from an increase in new franchised restaurant
openings from 37 in 1996 to 55 in 1997.
COST OF SALES. Cost of sales as a percentage of revenue decreased to 26.8%
in 1997 from 27.8% in 1996. This decrease was primarily attributable to lower
costs of certain food products.
RESTAURANT OPERATING EXPENSES. Restaurant operating expenses as a
percentage of revenue decreased to 53.6% in 1997 from 55.0% in 1996. This
decrease resulted from lower labor costs and insurance expenses as a percentage
of revenue in 1997. The decrease in labor costs resulted from savings generated
by a tip sharing initiative and labor productivity programs initiated during the
second half of 1997, which were partially offset by an increase in restaurant
management expenses. The decrease in insurance expenses was due to improved
claims experience at our restaurants.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses as
a percentage of revenue increased to 10.3% in 1997 from 10.0% in 1996. This
increase resulted from an increase in expenses attributable to field management
and certain information technology initiatives, which were partially offset by a
$2.3 million decrease in allocated expenses from Carlson Companies.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense as a percentage of revenue increased to 4.4% in 1997 from 4.1% in 1996.
This increase resulted primarily from depreciation expense related to capital
additions at existing restaurants.
INTEREST EXPENSE. Interest expense as a percentage of revenue was 0.5% in
both 1997 and 1996.
QUARTERLY RESULTS
Our quarterly operating results may fluctuate significantly due to several
factors, including the timing of new restaurant openings and related expenses,
profitability of new restaurants, increases or decreases in comparable
restaurant sales, general economic conditions, consumer confidence in the
economy, changes in consumer preferences, competitive factors and weather
conditions.
In the past, our preopening costs have varied significantly from quarter to
quarter primarily due to the timing of restaurant openings. We typically incur
most preopening costs for a new restaurant within the two months immediately
preceding, and the month of, its opening. In addition, our labor and operating
costs for a newly opened restaurant during the first three to six months of
operation are materially greater than what can be expected after that time, both
in aggregate dollars and as a percentage of restaurant sales. Accordingly, the
volume and timing of new restaurant openings in any quarter has had, and is
expected to continue to have, a significant effect on quarterly preopening
costs, labor and direct costs. Due to these factors, results for a quarter may
not be indicative of results to be expected for any other quarter or for a full
fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
We have historically funded our capital requirements primarily with cash
flow from operations and borrowings from Carlson Companies. We currently have a
credit agreement with Carlson Companies which covers all of our intercompany
indebtedness.
24
<PAGE>
Our working capital balance increased from $9.4 million at December 29, 1997
to $33.4 million at December 28, 1998, primarily due to an increase in levels of
our cash held by Carlson Companies in fiscal 1998. Amounts held by Carlson
Companies consist of transfers of excess cash generated by our operations to
Carlson Companies' cash management program. Our working capital balance declined
to a deficit of $18.7 million at June 28, 1999, as a result of the $55.0 million
dividend payable as of June 28, 1999. Net cash provided by operating activities
increased from $42.2 million in fiscal 1997 to $44.1 million in fiscal 1998, and
was $34.8 million in the first half of fiscal 1999. The increase from fiscal
1997 to fiscal 1998 was due to increased profitability and favorable timing of
operational receipts and payments.
Accounts receivable are due principally from franchisees for royalties
earned and goods and services provided. We had allowances of $823,000 as of
December 29, 1997, $1.5 million as of December 28, 1998 and $1.6 million as of
June 28, 1999 to cover estimated loss exposures related to accounts receivable.
On June 16, 1999, our board of directors declared a dividend of $175.0
million to Carlson Companies. Of this total, $120.0 million was paid in the form
of a promissory note on June 28, 1999 and $55.0 million was paid in cash
thereafter. Our outstanding intercompany indebtedness at June 28, 1999 consisted
of a $70.4 million promissory note and a $120.0 million promissory note payable
to Carlson Companies, as well as accrued interest.
On August 19, 1999, we entered into a credit agreement with Carlson
Companies, at which time all of our outstanding intercompany indebtedness,
including the promissory notes and accrued interest described above, was
refinanced into this facility. Under this credit agreement, which bears interest
at 1.25% over the three-month LIBOR and expires on December 31, 2001, Carlson
Companies will lend us up to $225.0 million. We intend to use the net proceeds
from this offering to repay a portion of the outstanding indebtedness under this
facility. Following the completion of this offering and the application of the
net proceeds, the borrowing availability under this credit agreement will be
reduced to $105.0 million.
Capital expenditures consist of construction of new restaurants, purchases
of new and replacement restaurant furniture and equipment, ongoing restaurant
remodeling programs, purchases of land for future restaurant sites, and
acquisitions of existing restaurants from franchisees and third parties. Capital
expenditures were $39.8 million in 1997, $57.1 million in fiscal 1998 and $26.6
million in the first half of fiscal 1999. The increase between fiscal 1997 and
fiscal 1998 was attributable to an increase in the number of new company owned
restaurants opened during fiscal 1998. During fiscal 1997, we opened nine new
company owned restaurants. During fiscal 1998 and the first half of fiscal 1999,
we opened 29 and 9 new company owned restaurants, respectively. We estimate that
our capital expenditures during the second half of fiscal 1999 will be
approximately $49.0 million. We expect our capital expenditures to increase
moderately as we open an increasing number of new restaurants. Our capital
expenditure requirements in fiscal 1997, fiscal 1998 and the first half of
fiscal 1999 were financed primarily through internally generated funds and
borrowings from Carlson Companies.
We believe that the proceeds from this offering, combined with borrowings
available from Carlson Companies, liquid assets and cash generated from
operations, will provide sufficient funds for our capital requirements for the
foreseeable future. In the event that additional capital is required, we may
seek to raise such capital through public or private equity or debt financings.
There can be no assurance that such capital will be available on favorable
terms, if at all.
INFLATION
The primary inflationary factors affecting our operations are food and labor
costs. A large number of our restaurant personnel are paid at rates based on the
applicable minimum wage, and increases in
25
<PAGE>
the minimum wage directly affect our labor costs. To date, inflation has not had
a material impact on our operating results.
YEAR 2000 COMPLIANCE
The Year 2000 will have a broad impact on the business environment in which
we operate due to the possibility that many computerized systems across all
industries may be unable to process information containing dates beginning in
the Year 2000. We have established an enterprise-wide program to prepare our
computer systems and applications for the Year 2000 and are utilizing both
internal and external resources to identify, correct and test the systems for
Year 2000 compliance. The majority of our systems reprogramming has been
completed. We anticipate that systems testing efforts will be completed by
October 31, 1999. We expect that all mission-critical systems will be Year 2000
compliant prior to the end of the 1999 calendar year.
The nature of our business is such that the business risks associated with
the Year 2000 can be reduced by surveying our food and beverage vendors and our
franchise business partners to ensure that they are aware of the Year 2000
business risks and are appropriately addressing these risks.
Because third party failures could have a material impact on our ability to
conduct business, questionnaires have been sent to all of our significant
vendors to obtain reasonable assurance that plans are being developed to address
the Year 2000 issue. We are currently assessing the returned questionnaires,
categorizing the responses based upon readiness for the Year 2000 and
prioritizing in order of significance to our business. To the extent that
vendors do not provide us with satisfactory evidence of their readiness to
handle Year 2000 issues, contingency plans are being developed. Our contingency
plans include the identification of alternate vendors that are Year 2000
compliant and the engagement of these vendors, or the purchasing of back-up
inventory from existing vendors, in all instances where our existing vendors are
unable to provide us with assurance of their Year 2000 readiness. Furthermore,
we have provided information to all franchise business partners regarding the
potential business risks associated with the Year 2000 issue, and we have sent
compliance surveys to our franchisees to assess their readiness for the Year
2000. We intend to make every reasonable effort to assess the Year 2000
readiness of our significant business partners and to address the identified
risks.
We have substantially completed an inventory of our information technology
and non-information technology equipment and have addressed the Year 2000
compliance of this equipment. Carlson Companies has also represented to us that
their information technology and non-information technology equipment is
substantially Year 2000 compliant.
Testing and remediation of our systems and applications is expected to cost
approximately $6.6 million. Of these costs, we have incurred approximately $6.3
million and the remaining $300,000 is expected to be incurred during the
remainder of fiscal 1999. All estimated costs have been budgeted and are
expected to be funded through cash flows from operations.
We do not believe the costs related to the Year 2000 compliance project will
be material to our financial position. However, the cost of the project and the
date on which we plan to complete the Year 2000 modifications and testing are
based on management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of certain
resources and third party modification plans. Our worst case scenario involves
unanticipated failures by critical vendors and franchise partners, including
Carlson Companies, as well as our failure to execute our own remediation
efforts, which would have a material adverse effect on the cost of the project
and its completion date. As a result, there can be no assurance that our
forward-looking estimates will be achieved or that actual cost and vendor
compliance will not differ materially from those plans, resulting in material
financial risk.
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<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates paid on our
intercompany debt payable to Carlson Companies. The intercompany debt bears
interest at 1.25% over the three-month LIBOR. The interest cost of the
intercompany debt will vary with changes in LIBOR, and significant increases in
LIBOR could adversely affect our operating results.
We have no derivative financial instruments or derivative commodity
instruments in our cash and cash equivalents and investments. We lend all of our
excess cash to Carlson Companies, which is collected daily under Carlson
Companies' cash management program. On any business day that we have excess cash
available, we may, at our option, use that cash to repay any outstanding debt to
Carlson Companies or make advances to Carlson Companies if no debt is
outstanding. Carlson Companies' cash management program uses cash collected to
pay down Carlson Companies' revolving line of credit or invests it in investment
grade, highly liquid investments consisting of money market instruments, bank
certificates of deposit, overnight investments in top-rated commercial paper and
U.S. government and governmental agency instruments.
We conduct business in 46 countries. Substantially all revenues derived from
international markets are royalty fees, franchise fees and concept fees.
Primarily all of our transactions are conducted, and our accounts denominated,
in United States dollars. However, since royalty fees are calculated based upon
net sales denominated in local currency, we are subject to foreign currency rate
fluctuations against the U.S. dollar.
We purchase certain commodities such as beef, chicken, flour and cooking
oil. These commodities are generally purchased under agreements based upon
market prices established with vendors, and are, therefore, subject to price
volatility caused by weather, production problems, delivery difficulties and
other factors which are outside of our control. These purchase arrangements may
contain contractual features that limit the price paid by establishing certain
price floors or caps. We do not use financial instruments to hedge commodity
prices because our purchase arrangements help control the ultimate cost paid and
any significant commodity price fluctuations are generally short term in nature.
27
<PAGE>
BUSINESS
OVERVIEW
Carlson Restaurants is a global leader in the development, operation and
franchising of casual dining restaurants, principally under the T.G.I. Friday's
brand. Since the first T.G.I. Friday's restaurant opened in New York City in
1965, the T.G.I. Friday's system, which includes T.G.I. Friday's, Front Row
Sports Grill and Friday's American Bar, has grown to 530 restaurants, including
125 restaurants located outside the United States. We own or operate 184
restaurants and our global franchise network, consisting of 43 domestic and 38
international franchisees, operates a total of 346 restaurants. All T.G.I.
Friday's restaurants offer our innovative, signature menu and drink items served
by our knowledgeable staff in a fun, comfortable and relaxing atmosphere. In
addition to the concepts in our T.G.I. Friday's system, we have developed or
acquired six additional cafe and dinner house dining concepts, currently
totaling 24 company owned or operated and franchised restaurants. These concepts
include the cafe concepts Samba Room and Taqueria Canonita, as well as the
dinner house concepts Timpano Italian Chophouse, Italianni's, Star Canyon and
AquaKnox. We plan to focus our expansion efforts on the T.G.I. Friday's system
and, to a lesser degree, on those additional concepts that meet our strict
performance criteria. Carlson Restaurants' worldwide system currently includes
over 550 company owned or operated and franchised restaurants located in 46
countries.
BUSINESS STRATEGY
Our business strategy is to expand our position as a global leader of
branded restaurants by providing a consistently high quality restaurant
experience, innovative products and concepts and legendary service. We believe
that by leveraging the strength of the T.G.I. Friday's brand and our corporate
infrastructure, we can exceed the expectations of our guests, offer our
employees a quality working environment and increase stockholder value. Key
components of this strategy include:
CAPITALIZE ON THE STRENGTH OF THE T.G.I. FRIDAY'S BRAND
As a leader in the casual dining industry for over 30 years, we believe that
the strong consumer awareness of our brand name is one of our greatest
strengths. By continuing to invest in our trusted brand name through the
development of innovative food items and creative adult beverages, and by using
targeted advertising campaigns, we believe that we will be able to continue to
grow our business, expand our market penetration and improve our profitability.
We strive to retain our current guests, encourage increased restaurant
visitation and expand our guest base by responding quickly to changing consumer
preferences, leveraging our menu variety and developing innovative food and
beverage items. We believe that our dedication to providing a wide variety of
high quality food, a fun atmosphere and legendary guest service will allow us to
differentiate ourselves from our competitors and maintain and enhance our brand
recognition.
CONTINUE GLOBAL GROWTH OF THE T.G.I. FRIDAY'S SYSTEM
We intend to utilize our strong brand name and the core competencies
developed through years of experience to continue the domestic and international
expansion of the T.G.I. Friday's system of restaurants. Our growth will build
upon our leadership position as one of the largest systems of casual dining
restaurants worldwide. Our growth strategy will focus on adding new units that
are both company owned and owned by our strong global network of franchisees. We
believe that our knowledge base, internal operating structures and our ability
to continually innovate will allow us to obtain a leadership position in each of
the markets we enter by successfully developing new units and integrate them
into the T.G.I. Friday's system.
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CAPITALIZE ON OUR STRONG GLOBAL FRANCHISING NETWORK.
Our development agreements with experienced multi-unit restaurant operators
will continue to be a key component of our continuing expansion of the T.G.I.
Friday's system. We currently have 43 domestic franchisees operating 221
restaurants and 38 international franchisees operating 125 restaurants. In
addition to continuing to grow our T.G.I. Friday's franchising system both
domestically and internationally, we currently offer our international
franchisees the opportunity to develop our Italianni's concept and plan to offer
both our domestic and international franchisees the opportunity to franchise
additional concepts in the future. We believe that franchisee development of our
additional concepts will allow us to increase our penetration of existing
markets.
PROVIDE AN EXCEPTIONAL DINING EXPERIENCE
We continually evaluate all of our restaurants' menus to ensure that we are
providing our guests with highly desirable food and beverage items. We devote
substantial effort to developing innovative, cravable menu offerings, which
undergo extensive consumer testing prior to being added to our menus. We have a
34-year tradition of providing our guests with quick, efficient and friendly
service with the goal of exceeding every guest's expectations. We also offer a
comfortable, relaxing environment where guests can enjoy themselves. Our ability
to provide an exceptional dining experience has allowed our company owned or
operated T.G.I. Friday's restaurants to achieve nine consecutive quarters of
monthly comparable restaurant sales increases. Our additional concepts have
menus tailored to the preferences of each concept's targeted segment of the
dining market. These innovative, chef-driven menus are supported by unique
interior decor, music, lights, layout and food presentation that contribute to
the overall dining experience.
DELIVER ATTRACTIVE UNIT ECONOMICS
We believe that our focus on operations at the restaurant level results in
attractive unit economics throughout our T.G.I. Friday's system. We currently
own and operate 36 restaurants that are similar in size to our 6,800 square foot
prototype, of which 30 had been open at least 12 months at June 28, 1999. During
this twelve-month period, these 30 restaurants had average restaurants sales of
approximately $3.4 million, average operating income of approximately $504,000,
or 14.7% of restaurant sales, and average cash flow of approximately $691,000,
or 20.2% of restaurant sales. Since the beginning of fiscal 1998, our total
investment per company owned 6,800 square foot prototype, net of landlord
contributions, has averaged approximately $2.1 million, with additional average
pre-opening costs of approximately $115,000 per restaurant. We have also
developed a smaller 5,600 square foot prototype which will require a lower
investment and which we expect will generate slightly lower sales volumes than
our larger prototype with similar or better operating income and cash flow
margins.
CAPITALIZE ON OUR MANAGEMENT'S EXPERIENCE AND EXPERTISE
Our talented and experienced senior management team is led by President and
Chief Executive Officer Wallace B. Doolin who has worked in the restaurant
industry for over 29 years. In addition, our senior management team has
extensive expertise in the operation of company owned or operated restaurants
and the management of domestic and international franchisee networks. This
expertise also extends to the development and implementation of multiple
concepts across a broad range of dining segments. Many of our senior executives
are recognized as restaurant industry leaders, serving on numerous boards and
committees of prominent trade associations. We believe that these leadership
roles allow us to help shape the direction of our industry and to anticipate and
capitalize on industry trends. We believe the experience and expertise of our
senior management team positions us to successfully execute our strategy and
grow our business.
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<PAGE>
ENHANCE GROWTH THROUGH ADDITIONAL CONCEPTS
We intend to enhance the growth of our business by leveraging our management
expertise and corporate infrastructure to selectively expand our existing cafe
and dinner house concepts and by developing new concepts. We plan to focus our
expansion efforts only on those concepts that meet strict economic return
criteria. We believe that our additional concepts provide excellent
opportunities to further penetrate existing markets, serve additional segments
of the dining market and expand into attractive new locations. We intend to
utilize our systems, experience and scale in the operation of our additional
concepts while conveying the image of independent restaurants to our guests.
OUR T.G.I. FRIDAY'S SYSTEM
T.G.I. FRIDAY'S
T.G.I. Friday's is a full-service casual dining restaurant featuring quality
food served by a friendly, knowledgeable waitstaff in a lively, fun atmosphere.
We have a broad guest base ranging from single adults to families with children
for whom we strive to create a memorable dining experience. Our lunch time
through late night service allows these guests to visit our restaurants at many
different times of the day. T.G.I. Friday's, which has a history of creating
innovative menu items, popularized the potato skins appetizer and many frozen
and ice cream drinks, such as the Mudslide. We have also introduced creative and
flavorful non-alcoholic beverages, such as Flings, to appeal to younger guests
and guests favoring non-alcoholic beverages.
Our T.G.I. Friday's menu offers guests a wide variety of trusted signature
entrees and appetizers, innovative menu items and a full assortment of desserts
and beverages at prices that appeal to a broad range of consumers and provide
exceptional value. For example, our Jack Daniel's Grill items add special flavor
to baby back ribs, pork chops, New York strip steak, chicken and salmon by
basting these fresh cuts of meat with a smoky maple sauce that captures the full
flavor of Jack Daniel's whiskey. Our Tex-Mex Tower is a trio of appetizers,
including nachos, quesadillas and our Fire Bites. Our Mudslides are frozen
drinks with the classic taste of T.G.I. Friday's Mocha Mud Pie. Menus are
updated several times a year with new product introductions to increase both
guest visits and profitability.
In addition to our wide variety of food items, our restaurants offer an
extensive selection of creative adult beverages, which we believe differentiates
us from our competitors. We believe that our beverage service contributes
substantially to our overall success and increases individual restaurant sales
and profitability. The merchandising of our adult beverages and the introduction
of new drink items is an important factor in the appeal of our restaurants and
enhances our late night success. During fiscal 1998, alcoholic beverages
accounted for 22% of total sales in our domestic company owned or operated
restaurants.
We offer a fun, comfortable and relaxing environment in each restaurant to
complement our high value menu. The exterior of each restaurant typically has
red and white awnings and many have a patio for outdoor dining. The decor of the
restaurant consists of informal seating with dark wood tables and booths,
Tiffany-style lamps, striped tabletops and nostalgic memorabilia. The bar area
features brass rails, stained glass and a prominent adult beverage display. We
focus on high quality decor and regularly reinvest in our restaurants to
maintain and enhance the quality of our atmosphere. Dressed in red and white
striped shirts and irreverent hats and buttons, our efficient staff and
entertaining bartenders provide the quality service necessary for an enjoyable
dining experience. Our restaurants range from 3,500 to 10,000 square feet of
interior space, with a dining seating capacity of 100 to 360 persons. Most of
our currently planned new restaurants will be prototype units of 5,600 or 6,800
square feet, with a dining seating capacity of 200 to 235 persons.
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<PAGE>
Entree selections in our domestic company owned or operated restaurants
range in price from $5.99 to $16.49. A full-service bar is available at each of
these T.G.I. Friday's restaurants, offering a wide variety of cocktails, frozen
drinks and non-alcoholic beverages.
FRIDAY'S AMERICAN BAR
Friday's American Bar, an extension of the T.G.I. Friday's concept, is
designed as a small, neighborhood corner bar with a casual atmosphere. Friday's
American Bar has a more limited menu featuring traditional T.G.I. Friday's menu
items. A full-service bar is available at each Friday's American Bar, offering a
wide variety of alcoholic and non-alcoholic beverages.
There are currently seven domestic company owned or operated and five
international franchised Friday's American Bars located primarily in airports
and urban areas. Entree selections at domestic company owned or operated
Friday's American Bar restaurants range in price from $5.99 to $12.99. During
fiscal 1998, alcoholic beverages accounted for 35% of total sales at company
owned or operated Friday's American Bars.
FRONT ROW SPORTS GRILL
Front Row Sports Grill offers a broad dining and entertainment experience
combining the American past-times of food and sports in one location. There are
currently three domestic company operated and one international franchised Front
Row Sports Grills, including locations in The Ballpark in Arlington, Texas and
Bank One Ballpark in Phoenix, Arizona, which feature viewing access to the
playing field. We plan to open an additional Front Row Sports Grill in Miller
Park in Milwaukee, Wisconsin during fiscal 2000 and expect to limit the
development of additional Front Row Sports Grills to select large capacity
sporting arenas.
Entree selections at domestic company operated Front Row Sports Grills range
in price from $5.99 to $15.99. A full-service bar is available at each Front Row
Sports Grill, offering a wide variety of alcoholic and non-alcoholic beverages.
During fiscal 1998, alcoholic beverages accounted for 29% of total sales at
company operated Front Row Sports Grills.
T.G.I. FRIDAY'S RETAIL BRANDED PRODUCTS
We license our name to select producers and distributors of retail products.
These licensees offer a selection of frozen appetizers, frozen desserts and
premixed alcoholic beverages for retail sale. Retail branded products serve to
reinforce our brand image among consumers and increase brand awareness. We do
not currently license the right to sell our entrees and have no plans to do so
in the future. Licensees are required to conform to our product quality,
trademark usage and product placement requirements. Licensing revenues from
retail branded products represented approximately 0.5% of our total revenue in
fiscal 1998.
UNIT ECONOMICS
Historically, we developed T.G.I. Friday's units that ranged in size from
3,500 to 10,000 square feet. We currently plan to develop new T.G.I. Friday's
restaurants based on either a 6,800 square foot prototype or a smaller 5,600
square foot prototype, depending on market demographics and real estate
availability. We currently own and operate 36 restaurants that are similar in
size to our 6,800 square foot prototype, of which 30 had been open at least 12
months at June 28, 1999. During this twelve-month period, these 30 restaurants
had average restaurants sales of approximately $3.4 million, average operating
income of approximately $504,000, or 14.7% of restaurant sales, and average cash
flow of approximately $691,000, or 20.2% of restaurant sales. Cash flow
represents operating income before depreciation and amortization.
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We currently own and operate 14 restaurants based on the 5,600 square foot
prototype, of which only four had been open at least twelve months at June 28,
1999. We expect the smaller prototypes to require a lower investment and
generate slightly lower sales volumes with similar or better operating income
and cash flow margins as the larger prototype units.
Since the beginning of fiscal 1998, our total investment per company owned
6,800 square foot prototype, net of landlord contributions, has averaged
approximately $2.1 million, with additional average pre-opening costs of
approximately $115,000 per restaurant. Over the same period, our total
investment per 5,600 square foot prototype has averaged approximately $1.7
million, with additional average pre-opening costs of approximately $120,000 per
restaurant. We expect that planned future restaurants will require similar
capital investments.
OUR FRANCHISE SYSTEM
Our franchise system focuses on expanding our business through franchise
development with large franchisees, both domestically and internationally. Our
T.G.I. Friday's system includes 43 domestic franchisees operating 221
restaurants and 38 international franchisees operating 125 restaurants. We have
offered franchises for T.G.I. Friday's restaurants in the United States under
our current system since 1978 and in various international markets since 1986.
We are also utilizing our franchise system as a key component to the
international growth of our Italianni's concept, which currently includes 11
international restaurants. In fiscal 1999, we estimate that we will have a total
of approximately 61 franchised restaurant openings in the United States and in
29 foreign countries, of which 27 have already opened.
Our largest domestic franchisee is Main Street & Main Incorporated. Main
Street & Main operates 47 T.G.I. Friday's restaurants. Main Street & Main has
exclusive development rights to the T.G.I. Friday's concept in most of
California, Arizona and Nevada, as well as in some other areas. Our largest
international franchisee is Whitbread PLC. Whitbread operates 30 T.G.I. Friday's
restaurants, most of which are located in England.
DOMESTIC AND INTERNATIONAL DEVELOPMENT AND FRANCHISE AGREEMENTS. We offer
domestic and international franchisees an exclusive development agreement for an
identified geographic territory. The development agreement requires that a
franchisee develop a specific number of restaurants within its territory over a
specified period of time. Under the terms of our franchise agreements for
individual restaurants, the franchisee must pay a franchise fee for each
restaurant prior to opening and an ongoing royalty fee based on a percentage of
gross sales. Domestic royalty fees are 4.0% of net sales and international
royalty fees range from 2.0% to 4.0% of net sales. In addition, our domestic
franchisees must spend a total of up to 4.0% of each restaurant's annual gross
sales on national and local advertising, including a mandatory contribution to a
fund for national advertising. Upon execution of our development agreements for
international markets, we require the payment of a concept fee which is
generally based on the size of the territory and number of restaurants to be
developed. We have the right to terminate a development agreement if the
development schedule is not met.
QUALITY CONTROL. We provide our franchisees with physical specifications
for our prototype restaurants and reserve the right to modify or prohibit any
plan. Franchisees are responsible for selecting the restaurant site and
obtaining our consent to the location. While franchisees are not required to
purchase their equipment, supplies or services from us, they must use approved
suppliers and comply with our standards. Franchisees are granted a license to
use our proprietary marks and may use our information technology systems related
to restaurant operations. We reserve the right to inspect and monitor each
franchise restaurant for compliance with our standards of quality, service and
cleanliness. We have the right to terminate a franchise if the franchisee does
not operate and maintain its restaurants in accordance with these standards. We
also offer franchises for the other concepts in
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the T.G.I. Friday's system under arrangements that may have terms which differ
from our standard agreements.
TRAINING, SUPPORT AND REPRESENTATION OF FRANCHISEES. We provide advice and
assistance to franchisees in connection with the operation and management of
each restaurant through our training program, meetings, on-site visits and
written materials. We maintain a Franchise Advisory Council that acts in an
advisory capacity for the domestic franchisees to provide input and feedback on
advertising programs, operations and other aspects of our franchise system. The
members of the council are elected by the franchisees. Franchisees have the
right to review national advertising fund expenditures quarterly.
RESTAURANT LOCATIONS
The current locations of company owned or operated and franchised
restaurants in the T.G.I. Friday's system are described below:
<TABLE>
<CAPTION>
COMPANY OWNED OR
OPERATED FRANCHISED TOTAL
------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
OTHER OTHER OTHER
T.G.I. SYSTEM T.G.I. SYSTEM T.G.I. SYSTEM
FRIDAY'S CONCEPTS FRIDAY'S CONCEPTS FRIDAY'S CONCEPTS
-------- -------- -------- -------- -------- --------
DOMESTIC
Northeast..................... 64 3 50 - 114 3
Southeast..................... 41 2 30 - 71 2
Midwest....................... 40 - 71 1 111 1
West.......................... 29 5 69 - 98 5
-------- -------- -------- -------- -------- --------
DOMESTIC TOTAL............ 174 10 220 1 394 11
-------- -------- -------- -------- -------- --------
INTERNATIONAL
Europe........................ - - 43 4 43 4
Asia/Pacific Rim.............. - - 38 1 38 1
Mexico/Americas............... - - 26 1 26 1
Middle East/Africa............ - - 12 - 12 -
-------- -------- -------- -------- -------- --------
INTERNATIONAL TOTAL....... - - 119 6 119 6
-------- -------- -------- -------- -------- --------
WORLDWIDE TOTAL........... 174 10 339 7 513 17
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
In addition to the restaurants listed above, there are eight T.G.I. Friday's
restaurants owned or franchised by TGIFNY, Inc., an unrelated company with
exclusive rights to build and operate T.G.I. Friday's restaurants within a
seven-mile radius of Columbus Circle in New York City. These rights were
retained in the original sale of T.G.I. Friday's to us. We do not receive any
revenues from the operation of these restaurants and do not have any right to
operate or franchise others to operate T.G.I. Friday's in this area.
OUR ADDITIONAL CONCEPTS
As part of our growth strategy, we have developed or acquired a total of six
concepts outside of our T.G.I. Friday's system. These innovative concepts convey
the image of independent restaurants, while leveraging our systems, processes
and industry experience. These restaurants, which currently include two cafe
concepts and four dinner house concepts, provide us with the opportunity to
bring additional concepts to our existing markets and to new markets. We intend
to selectively expand these and other additional concepts under the direction of
our Senior Vice President-Emerging Brands in order to capitalize on what we
believe are trends towards more complex flavor profiles and ethnic dining
experiences.
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CAFE CONCEPTS
SAMBA ROOM, A CUBAN BAR AND LATIN CAFE. This concept, influenced by Cuban,
Brazilian, Peruvian, Argentine and Caribbean culture, is an upscale white-linen
Latin cafe. Samba Room's menu selections include Cordero, a rack of lamb with a
banana-orange lentil salsa and mango-mint mojo, and Lechon, a roast pork
tenderloin with sweet potato hash, black beans and pickled red onions, served
with side dishes ranging from black beans and rice to exotic rum vanilla mashed
boniato. Bossa Nova dance rhythms, palm-tree accents and mango-infused aromas
accent the dining room and cocktail bar area. Samba Room serves fresh exotic
juices, a highly-caffeinated Cafe Cubano and Cuban cocktails. Entree selections
range in price from $7.50 to $19.00. We currently own and operate one Samba Room
that seats approximately 150 people for dinner, which opened in December 1998 in
Dallas, Texas. We expect to open two additional Samba Rooms during the remainder
of fiscal 1999.
TAQUERIA CANONITA. This concept, created by renowned chef Stephan Pyles,
features the authentic taste of the marketplaces of Mexico. The menu offers
tacos, tamales, tostadas, gorditas and rellenos with grilled and roasted meats,
vegetables and seafood. Taqueria Canonita has a full-service bar, offering a
wide variety of cocktails, frozen drinks and non-alcoholic beverages. We
currently own and operate one Taqueria Canonita, which opened in June 1999 at
The Venetian Hotel-Resort-Casino in Las Vegas, Nevada.
DINNER HOUSE CONCEPTS
TIMPANO ITALIAN CHOPHOUSE. This concept revives the big city dining
experience of the classy restaurants and clubs of Chicago and New York in the
mid-fifties to early-sixties. The menu features signature selections such as
Bone-In New York Strip, Grilled Swordfish and One-Pound Center-Cut Pork Chops,
as well as Italian pastas and full-bodied red wines. The restaurant, which seats
approximately 340 people for dinner, provides swing music, dark lighting, a
full-service bar and a piano lounge. Entree selections range in price from $8.95
to $23.95. We currently own and operate one Timpano Italian Chophouse, which
opened in Rockville, Maryland in June 1998. We expect to open one additional
Timpano Italian Chophouse during the remainder of fiscal 1999.
ITALIANNI'S. Italianni's restaurants serve large portions of both
traditional Italian fare and specialty signature dishes such as Salmon Oreganato
and Veal Saltimbocca. Italianni's provides authentic Italian cuisine in an
inviting old world atmosphere that encourages guests to share the dining
experience with friends and family. A full-service bar is available at each
Italianni's restaurant. Our Italianni's restaurants range in size from 6,000 to
8,000 square feet. Entree selections at domestic Italianni's restaurants range
in price from $6.95 to $16.95. There are currently seven domestic and 11
international Italianni's restaurants, of which 12 are operated by franchisees,
including all of the international locations. We plan to grow this concept
exclusively in international markets through our franchisees.
STAR CANYON AND AQUAKNOX. Renowned chef Stephan Pyles created our
award-winning Star Canyon and AquaKnox concepts. Star Canyon features recipes
representing the many facets of the Lone Star State served in a sophisticated
Texas ranch style restaurant with cowboy accents. AquaKnox features a
contemporary selection of fresh seafood from around the globe in an atmosphere
displaying Asian influences and water themes. Entree selections at Star Canyon
and AquaKnox range in price from $18.00 to $28.00. We currently own and operate
two Star Canyon restaurants. The first originally opened in May 1994 in Dallas,
Texas and was acquired by us in March 1998. A second location opened in May 1999
at The Venetian Hotel-Resort-Casino in Las Vegas, Nevada. We currently own and
operate one AquaKnox which originally opened in November 1997 in Dallas, Texas
and was acquired by us in March 1998.
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EXPANSION STRATEGY AND SITE SELECTION
We intend to concentrate our growth on the T.G.I. Friday's brand. We
anticipate that the expansion of our T.G.I. Friday's system will occur through
company owned or operated and franchisee owned restaurants domestically and
primarily through franchisee owned restaurants internationally. Our long-term
objective is to expand our restaurant concepts by opening additional units in
strategically desirable markets and developing new concepts for corporate and
franchise development, both domestically and internationally. The development
and expansion of our additional concepts will allow us to increase our
penetration of existing markets and will be based on our examination of each
concept's economic performance and long-term growth potential.
We believe that a restaurant's location is critically important to its
success and we devote significant effort to the site selection process. Our site
selection criteria focus on the demographics of the residents in the market area
of the location, traffic patterns, the size of the location and its proximity to
shopping and other centers of population concentration. Senior management
evaluates each location prior to opening a company restaurant or consenting to a
location for franchise development. We have identified locations and signed
leases for 18 of the 19 company owned or operated restaurants we plan to open
during the remainder of fiscal 1999 and we are in lease negotiations on the
remaining site. In addition, we have identified all locations for company owned
or operated restaurants we plan to open during fiscal 2000.
The flexibility of our restaurant formats allows us to take advantage of the
opportunities presented by both traditional locations and nontraditional
locations, such as hotels, airports, food courts, sports stadiums, theaters,
theme parks and other family entertainment centers. We anticipate that most of
our future company owned or operated restaurants will be constructed on leased
property.
The following table illustrates our restaurant openings to date during
fiscal 1999 and our current planned openings for the remainder of fiscal 1999.
Our projections regarding planned openings by franchisees are based on
information provided to us by our franchisees.
<TABLE>
<CAPTION>
PLANNED OPENINGS
YEAR TO DATE FISCAL FOR REMAINDER OF
1999 OPENINGS FISCAL 1999
--------------------- ---------------------
COMPANY COMPANY
OWNED OWNED
OR OR
OPERATED FRANCHISED OPERATED FRANCHISED
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
T.G.I. Friday's
Domestic......................... 9 15 16 19
International.................... - 9 - 9
Other T.G.I. Friday's system
concepts
Domestic......................... - 1 - -
International.................... - 1 - 3
Cafe
Domestic......................... 1 - 2 -
International.................... - - - -
Dinner houses
Domestic......................... 1 - 1 -
International.................... - 1 - 3
--------- --------- --------- ---------
TOTALS............................. 11 27 19 34
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
35
<PAGE>
OPERATIONS AND MANAGEMENT
Our philosophy is to maintain and operate each concept in order to ensure
that the culture, recruitment, support services, training programs and unique
operating environments are preserved while leveraging the benefits and
infrastructure of our corporate organization. We emphasize the quality and
service of each restaurant while maintaining the independent character of each
concept. These factors are critical to the long-term success of our concepts.
RESTAURANT MANAGEMENT. Each of our T.G.I. Friday's restaurants is led by a
management team including a general manager, a kitchen manager, and two or more
additional managers. T.G.I. Friday's markets are divided into regions and each
region is staffed by a Vice President of Operations, Directors of Operations, a
Director of Human Resources, Director of Marketing, a Facilities Manager and
Regional Managers. We have divided the United States into five regions and the
international territories into Europe, Asia/Pacific Rim, Middle East/Africa and
Mexico/Americas. We provide restaurant managers with a competitive
performance-based compensation program based on unit-level sales and profit, as
well as guest and employee satisfaction as measured by Gallup survey results.
RECRUITING AND TRAINING. We actively recruit qualified employees who share
our commitment to providing superior guest service and we develop our staff to
promote qualified employees into management positions within the company. We
provide an extensive training program for all restaurant managers. The training
program emphasizes adherence to company standards and covers all aspects of
managing a restaurant, including kitchen and bar management, food and beverage
preparation, inventory control, purchasing, labor management, training and
administrative procedures. The incentive plans and benefit packages we offer to
our management level employees encourage achievement of performance objectives
and foster a sense of loyalty and a personal commitment to providing high
quality guest service.
OPERATIONAL CONTROL SYSTEMS. Restaurant management and operating results
are monitored through daily reporting and frequent visits from our divisional
vice presidents and multi-unit managers. We utilize an integrated information
system to manage the flow of information within each of our restaurants and
between restaurants and our corporate office. This system includes a
point-of-sale, or POS, local area network that helps facilitate restaurant
operations by recording sales transactions and printing orders in the
appropriate locations within the restaurant. Additionally, we utilize the POS
system to authorize and transmit credit card transactions, record employee time
clock information, schedule labor, assist in cost analysis and produce a variety
of management reports. Select information that is captured from the POS system
is transmitted to our corporate office on a daily basis, which enables senior
management to continually monitor operating results. We believe that the current
POS system in company owned or operated restaurants is Year 2000 compliant.
We use software and hardware developed by vendors experienced in the
restaurant industry. These systems are integrated to provide senior management
with daily and weekly sales and cost analysis, monthly detailed profit
statements and comparisons between actual and budgeted operating results.
MARKETING AND PROMOTION
To attract new guests and increase visits by our existing guests, we engage
national advertising agencies to create, develop and place our advertising in a
broad range of media including television, radio and print with national,
regional and local coverage. We focus our advertising primarily on the
introduction of new menu items. We and our domestic franchisees contribute to a
national advertising fund for maintaining, directly administering and preparing
standardized advertising and promotional activities and spend additional amounts
on local advertising. The restaurants in our T.G.I. Friday's system participate
in the Friday's Gold Points frequency program. This program, administered by
Gold Points Corporation, a wholly-owned subsidiary of Carlson Companies,
encourages and rewards guest
36
<PAGE>
loyalty and includes Carlson Companies' other retail brands, such as Radisson
Hotels and Country Inns & Suites, as well as other consumer businesses. This
program also allows us to use direct marketing and inform our guests of new
products. At July 31, 1999, we had over four million members in Friday's Gold
Points and its predecessor program, Frequent Friday's.
PURCHASING
Our ability to maintain consistent product quality throughout each of our
restaurant concepts depends on the procurement of food and related items from
reliable sources. Provisions, a division of Carlson Companies, performs
centralized purchasing services for all of our company owned or operated and
franchised restaurants in our T.G.I. Friday's system and for Carlson Companies'
other retail businesses. Working with Provisions, we continually research and
evaluate various ingredients and products in an effort to maintain the highest
quality products and to be responsive to changing consumer tastes. To maximize
purchasing efficiencies and to provide for the freshest ingredients for our menu
items, each restaurant's management determines the quantities of food and
supplies required. To obtain the benefits of bulk purchasing, each of our
restaurants orders items primarily through an independent national distribution
company that obtains products on terms negotiated by Provisions. We believe that
all essential food and beverage products are available from qualified suppliers
at competitive prices should an alternative source be required.
In order to present a uniform appearance of our T.G.I. Friday's restaurants
and consistent preparation of our menu items, we coordinate purchasing of
kitchen equipment, furniture and decorative memorabilia through selected
suppliers. Our franchisees are subject to standards and specifications for
establishing and operating their restaurants. The franchisees must use approved
suppliers when purchasing food and beverage products, kitchen equipment,
furniture and decorative memorabilia.
COMPETITION
The restaurant industry is highly competitive. There are a substantial
number of restaurant operations that compete directly and indirectly with us,
some of which may have greater financial and other resources than we do and may
be better established in markets where we may open future locations. Changes in
consumer tastes, economic conditions, demographic trends and the location and
number of, and type of food served by, competing restaurants could adversely
affect our business as could the unavailability of experienced management and
hourly employees.
EMPLOYEES
At July 31, 1999, we employed approximately 21,650 persons, of whom
approximately 450 were corporate personnel, 1,000 were restaurant managers or
management trainees and 20,200 were employed in non-management restaurant
positions. We believe that our working conditions and compensation packages are
competitive and consider relations with our employees to be good. None of our
employees are covered by any collective bargaining agreements and we have never
experienced an organized work stoppage or strike.
PROPERTIES
We currently own or have a joint venture interest in 184 restaurants. Of
these restaurants, we lease the land and building for 175 sites, own the land
and lease the building for one site, and own the land and building for eight
sites. Our leases generally have an initial term of ten or twenty years, with
several renewal terms of four to five years, and generally provide for a fixed
rental plus a percentage rental based on gross sales. Our headquarters are
located in approximately 110,000 square feet of leased space in Dallas, Texas.
37
<PAGE>
INTELLECTUAL PROPERTY
Our registered servicemarks and logos include: "T.G.I. Friday's,"
"Friday's," "T.G.I. Friday's & Design," "Friday's American Bar," "Friday's
American Bar & Shield Design," "Friday's American Bar & Mirror Design" and
"Front Row Sports Grill." In addition to being registered with the United States
Patent and Trademark Office, several of these servicemarks and logos have also
been registered in foreign countries. As of July 31, 1999, we had registered or
pending servicemarks and logos in approximately 115 countries. We actively use
and pursue registration of our servicemarks and other proprietary rights and we
believe that they have significant value and are important to the marketing of
our restaurant concepts. We will continue to vigorously protect our proprietary
rights. However, we cannot predict whether steps taken by us to protect our
proprietary rights will be adequate to prevent misappropriation of these rights
or the use by others of restaurant features based upon, or otherwise similar to,
our concepts. It may be difficult for us to prevent others from copying elements
of our concepts and any litigation to enforce our rights will likely involve
significant costs. We license the Italianni's mark for its use in connection
with our restaurants in the United States and pursue international registrations
of the mark in our own name.
GOVERNMENT REGULATIONS
Our restaurants are subject to regulation by federal agencies and to
licensing and regulation by state and local health, sanitation, building,
zoning, safety, fire and other departments relating to the development and
operation of restaurants. These regulations include matters relating to
environmental, building construction, zoning requirements and the preparation
and sale of food and alcoholic beverages. Our facilities are licensed and
subject to regulation under state and local fire, health and safety codes.
The development and construction of additional restaurants will be subject
to compliance with applicable zoning, land use and environmental regulations.
There can be no assurance that we will be able to obtain necessary licenses or
other approvals on a cost-effective and timely basis in order to construct and
develop restaurants in the future. Various federal and state labor laws govern
our operations and our relationship with our employees, including minimum wage,
overtime, working conditions, fringe benefit and citizenship requirements.
Approximately 22% of total sales in domestic company owned or operated
restaurants in the T.G.I. Friday's system are attributable to the sale of
alcoholic beverages. We are required to comply with the alcohol licensing
requirements of the federal government, states and municipalities where our
restaurants are located. Alcoholic beverage control regulations require
applications to state authorities and, in some locations, county and municipal
authorities for a license and permit to sell alcoholic beverages. Typically,
licenses must be renewed annually and may be revoked or suspended for cause at
any time. Alcoholic beverage control regulations relate to numerous aspects of
the daily operations of the restaurants, including minimum age of guests and
employees, hours of operation, advertising, wholesale purchasing, inventory
control and handling, storage and dispensing of alcoholic beverages. Failure to
comply with federal, state or local regulations could cause our licenses to be
revoked or force us to terminate the sale of alcoholic beverages at one or more
of our restaurants.
We are subject to state "dram shop" laws and regulations, which generally
provide that anyone injured by an intoxicated person may seek to recover damages
from an establishment that wrongfully served alcoholic beverages to the
intoxicated person. We require our restaurant staff to go through training
regarding these laws and regulations. While we carry liquor liability coverage
as part of our existing comprehensive general liability insurance, there can be
no assurance that we will not be subject to a judgment in excess of our
insurance coverage or that we will be able to obtain or continue to maintain
liquor liability insurance coverage at reasonable costs, if at all.
38
<PAGE>
The federal Americans with Disability Act prohibits discrimination on the
basis of disability in public accommodations and employment. We are required to
comply with the Americans with Disabilities Act and regulations relating to
accommodating the needs of the disabled in connection with the construction of
new facilities and with significant renovations of existing facilities.
The Federal Clean Air Act and similar state laws require state and local
areas to meet national air quality standards limiting emissions of ozone, carbon
monoxide and particulate matters, including caps on emissions from commercial
food preparation. Some areas have also adopted or are considering proposals that
would regulate indoor air quality. Many states, counties, cities and
municipalities have enacted laws governing smoking in bars and restaurants.
LEGAL PROCEEDINGS
From time to time, we are a defendant in litigation arising in the ordinary
course of business, including claims resulting from "slip and fall" accidents,
"dram shop" lawsuits, claims under federal and state laws governing access to
public accommodations, employment-related claims and claims from guests alleging
illness, injury or other food quality, health or operational concerns. To date,
none of such litigation, some of which is covered by insurance, has had a
material effect on us.
39
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is certain information concerning our executive officers and
directors:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- --------------------------------- --- -------------------------------------------------------------------------
<S> <C> <C>
Curtis C. Nelson................. 35 Chairman of the Board
Wallace B. Doolin................ 52 President, Chief Executive Officer and Director
Jeff D. Warne.................... 38 Vice President and Chief Financial Officer
Stephen M. King.................. 41 Chief Operating Officer-T.G.I. Friday's Domestic Business
Richard T. Snead................. 48 Chief Operating Officer-International Business
John F. Gilbert.................. 43 Senior Vice President-Marketing
Rosalyn T. Mallet................ 44 Senior Vice President-Human Resources and Operations Services
Royce A. Ring.................... 47 Senior Vice President-Emerging Brands
Charles A. Ehmke, Jr............. 38 Vice President-Information Technology
Richard L. Richardson............ 40 Vice President-Development
Leslie Sharman................... 44 Vice President-Legal, General Counsel and Secretary
Ralph W. Beha.................... 48 Director
Edwin C. Gage.................... 58 Director
Martyn R. Redgrave............... 47 Director
</TABLE>
CURTIS C. NELSON has served as Chairman of the Board since August 1999 and
as a director since June 1998. Mr. Nelson has been President of Carlson
Hospitality Worldwide since January 1997, prior to which time he had served as
Executive Vice President and Chief Operating Officer since August 1995. Carlson
Hospitality Worldwide is a wholly-owned subsidiary of Carlson Companies and our
direct parent corporation. From March 1993 to August 1995, Mr. Nelson held
various positions with Country Hospitality Worldwide, which operated a chain of
hotels and family dining restaurants, serving most recently as President and
Chief Executive Officer. From November 1989 until March 1993, Mr. Nelson held
various management and executive positions with Radisson Hotels International, a
Carlson Companies affiliate. Mr. Nelson is a director of DC International, a
provider of architectural and investment services and a franchisee and manager
of Radisson Hotels. Mr. Nelson also serves as a member of the Travel Business
Roundtable, a coalition of 70 chief executive officers representing the travel
and tourism industry, and the Alumni Board for the Carlson School of Management.
WALLACE B. DOOLIN has served as President, Chief Executive Officer and a
director since January 1994. From January 1992 to January 1994, he served as our
Executive Vice President of Development. Mr. Doolin has over 29 years of
experience in the restaurant industry including as president of Applebee's
Neighborhood Grill & Bar, Senior Vice President of Acquisitions and Concept
Development of the W.R. Grace Restaurant Division, President and Chief Executive
Officer of Flakey Jake's, director of operations of Steak and Ale Restaurants
and an independent restaurant proprietor. Mr. Doolin is active in many food
service industry groups and serves as a board member and member of the executive
committee of the National Restaurant Association, a director of the Employment
Policies Institute, chairperson for the COEX 2000 and fundraiser and volunteer
for two anti-hunger associations, Share Our Strength and The North Texas
Foodbank.
JEFF D. WARNE has served as Vice President and Chief Financial Officer since
December 1998. Prior to joining Carlson Restaurants, he worked for Carlson
Companies from December 1990 to December 1998, where he held the position of
Vice President of Business Planning from June 1996 to December 1998, and
Director of Business Planning from October 1994 to June 1996. He also worked for
the Coopers & Lybrand accounting firm from June 1984 to December 1990, most
recently as an audit manager, and is a member of the American Institute of
Certified Public Accountants.
40
<PAGE>
STEPHEN M. KING has served as Chief Operating Officer-T.G.I. Friday's
Domestic Business since January 1998. He joined Carlson Restaurants in June 1984
as a financial analyst and has held various positions in the finance department,
as well as the position of Vice President of Development. Prior to his current
position, he was Executive Vice President of Operations from July 1995 to
January 1998. Mr. King served as Vice President of Finance and Chief Financial
Officer from February 1989 to July 1995.
RICHARD T. SNEAD has served as Chief Operating Officer-International
Business since January 1998. He joined Carlson Restaurants in April 1997 as
Executive Vice President. Prior to joining Carlson Restaurants, Mr. Snead was
Senior Vice President of Store Operations and Retail Development at Casual
Corner Group, a retail apparel company, from February 1996 to April 1997. Before
joining Casual Corner, Mr. Snead served as President of New Business Development
and head of the International Business of Lenscrafters, a retail optical
company, from December 1993 to January 1996. Mr. Snead also has over 14 years of
experience in the restaurant industry with Burger King, serving most recently as
President of Burger King-International, and over 10 years of experience in
international franchised restaurant operations.
JOHN F. GILBERT has served as Senior Vice President-Marketing since January
1998. He joined Carlson Restaurants in March 1996 as Vice President of
Marketing. Prior to joining Carlson Restaurants, Mr. Gilbert was Vice President
of Marketing for General Cinema Theaters, a national movie theater company, from
June 1994 to February 1996, where he was responsible for consumer marketing
activities and the development of the non-traditional food business. He also
served as Senior Director of Marketing for KFC/PepsiCo from January 1990 through
June 1994.
ROSALYN T. MALLET has served as Senior Vice President-Human Resources and
Operations Services since September 1998. Ms. Mallet joined Carlson Restaurants
as Vice President of Human Resources and Operations Services in July 1997. Prior
to joining Carlson Restaurants, she served as Vice President of Human Resources
and Training for Applebee's International from January 1996 to July 1997 and as
Vice President of Franchise Systems Development for Applebee's from February
1995 to January 1996. Ms. Mallet was also a co-founder and partner of American
Service Management Resources, a human resources consulting firm, from October
1988 to February 1995. She is a member of the Board of Directors of AIDS Arms
and Share Our Strength.
ROYCE A. RING has served as Senior Vice President-Emerging Brands since
January 1998. He joined Carlson Restaurants as Vice President of Concept
Development in July 1997. Our emerging brands currently consist of our cafe and
dinner house concepts. Prior to joining Carlson Restaurants, Mr. Ring was Vice
President and a partner at Restaurant Development Group from September 1995
until July 1997 and was responsible for corporate development, marketing,
profitability and day-to-day operations of fifteen separately branded
full-service restaurant concepts in downtown Chicago.
CHARLES A. EHMKE, JR. has served as Vice President-Information Technology
since joining Carlson Restaurants in February 1998. Prior to joining Carlson
Restaurants, he served as Vice President of International Systems for Tricon
Global Restaurants from March 1991 through February 1998, where he was
responsible for creating and implementing strategic information technology plans
for the entire international organization, which encompassed three restaurant
brands and over 10,000 restaurants.
RICHARD L. RICHARDSON has served as Vice President-Development since March
1999, after serving as one of our Vice Presidents of Operations since February
1997. Previously, he held various operations positions within Carlson
Restaurants from October 1995 to February 1997. From July 1993 to July 1995, Mr.
Richardson was Vice President of Operations of the Florida Restaurant Group, a
nine unit franchisee of Black-Eyed Pea Restaurants. From July 1982 to July 1993,
Mr. Richardson was the Vice President of Operations of Black-Eyed Pea
Restaurants.
41
<PAGE>
LESLIE SHARMAN has served as Vice President-Legal, General Counsel and
Secretary since October 1995. Prior to joining Carlson Restaurants, Ms. Sharman
was with Burger King from October 1987 to October 1995, where she held the
position of Vice President and Assistant General Counsel from October 1991
through October 1995. Ms. Sharman is active in the restaurant industry, with
memberships in the International Franchise Association and Roundtable for Women
in Foodservice. She is also on the boards of the Women's Foodservice Forum and
the American Beverage Institute and acts as Board Counsel to MultiCultural
Foodservice and Hospitality Alliance.
RALPH W. BEHA has served as a director since August 1999. Mr. Beha has been
Associate General Counsel and Assistant Secretary of Carlson Companies since
September 1997. From July 1992 to March 1997, Mr. Beha served as General Counsel
of Control Data Systems, a global systems integration company. From 1982 until
July 1992, he held various positions in the Legal Department at Control Data
Corporation.
EDWIN C. GAGE has served as a director since August 1999. Mr. Gage has been
the Chairman and Chief Executive Officer of Gage Marketing Group, an integrated
marketing services company, since 1992. From 1983 to 1992, Mr. Gage held various
positions at Carlson Companies, including President and Chief Executive Officer.
Mr. Gage also serves as a director of Carlson Companies, SuperValu, AHL Services
and Imaginet.
MARTYN R. REDGRAVE has served as a director since August 1999. Mr. Redgrave
has been the Executive Vice President and Chief Financial Officer of Carlson
Companies since February 1994. Prior to joining Carlson Companies, Mr. Redgrave
was with PepsiCo, a beverage and snack foods company, for over 14 years, serving
in a variety of executive and general management positions for PepsiCo's
corporate offices and subsidiaries, including Pizza Hut, Kentucky Fried Chicken
and Taco Bell. Most recently he served as the Senior Vice President of Finance
and Worldwide Chief Financial Officer of Kentucky Fried Chicken from 1990 to
1994. Prior to joining PepsiCo, Mr. Redgrave was employed by Arthur Andersen and
Company for six years in various positions, including Audit Manager.
BOARD OF DIRECTORS; COMMITTEES
Our board of directors currently consists of five members. We intend to
appoint four additional directors, including three non-employee directors, prior
to or upon completion of this offering. In addition, prior to or upon completion
of this offering, we will establish an audit committee and a compensation
committee and we may establish additional committees of the board. All of the
members of the audit and compensation committees will be non-employee directors.
The audit committee of the board will be responsible for recommending to the
board the appointment of our independent auditors, analyzing the reports and
recommendations of the auditors and reviewing internal audit procedures and
controls.
The compensation committee of the board will be responsible for reviewing
and recommending the compensation structure for our officers and directors,
including salaries, participation in incentive compensation and benefit plans,
stock option plans and other forms of compensation.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to provisions of the Delaware General Corporate Law, our current
Certificate of Incorporation and Bylaws provide, and our Amended and Restated
Certificate of Incorporation and Restated By-Laws will provide, that our
directors shall not be personally liable for monetary damages to us or our
stockholders for a breach of fiduciary duty to the full extent that the law
permits the limitation or elimination of the liability of directors.
42
<PAGE>
COMPENSATION OF DIRECTORS
Our directors are reimbursed for certain reasonable expenses incurred to
attend board meetings. Directors who are also our employees receive no
remuneration for services as members of the board of directors or any board
committee. Directors are eligible to receive certain grants of stock options.
See "Management-Incentive Compensation Plans" for a discussion of director
eligibility.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We have not yet established a compensation committee of our board of
directors. Prior to or upon completion of this offering, we will establish a
compensation committee. Decisions relating to our executive compensation are
currently made by our board of directors. Wallace B. Doolin is one of our
executive officers and a member of the board of directors. None of our executive
officers serves as a member of the board of directors or compensation committee
of any entity which has one or more than one executive officers serving as a
member of our board of directors or compensation committee.
EXECUTIVE COMPENSATION
The following table contains information concerning compensation for fiscal
1998 earned by our President and Chief Executive Officer and the four other most
highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
----------------------- COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION SALARY(1) BONUS(1)(2) PAYOUTS(4) COMPENSATION(5)
- ------------------------------------------------------ ---------- ----------- ------------- ----------------
<S> <C> <C> <C> <C>
Wallace B. Doolin
President, Chief Executive Officer and Director..... $ 461,654(3) $ 321,971 $ - $ 13,840
Stephen M. King
Chief Operating Officer-T.G.I. Friday's Domestic
Business............................................ 250,000 177,874 177,821 11,757
Richard T. Snead
Chief Operating Officer-International Business...... 250,000 120,598 - 2,400
John F. Gilbert
Senior Vice President-Marketing..................... 190,000 72,196 45,544 8,955
Leslie Sharman
Vice President-Legal, General Counsel and
Secretary........................................... 171,000 70,909 27,599 8,540
</TABLE>
- ------------------------------
(1) Includes amounts earned in fiscal 1998 but deferred under our 401(k) plan
($4,800 for each of the named executive officers) and deferred compensation
plan ($22,881 for Mr. Doolin, $18,713 for Mr. King, $31,659 for Mr. Gilbert
and $18,407 for Ms. Sharman).
(2) Amounts paid to the named executive officers as bonuses are granted
according to the Carlson Companies Annual Bonus Plan, which defines
performance-based goals for each of the participants. Fiscal 1998
performance goals were tied to financial factors, such as operating income
before tax and income after capital charge, and other objectives, such as
Year 2000 remediation efforts and strategic goals.
(3) Includes $41,654 of salary earned in fiscal 1998 that was credited to Mr.
Doolin's account under the Deferred Compensation Agreement between TGI
Friday's Inc. and Mr. Doolin. Under the agreement, we automatically credit
10% of Mr. Doolin's base salary, before any pre-tax reductions, to his
account. Additionally, the agreement permits Mr. Doolin to defer up to 25%
of his salary and all of his bonus.
(4) Includes amounts paid out or deferred at the election of the named executive
officer under the company's Deferred Compensation Plan during fiscal 1998.
Mr. Gilbert deferred $29,749 and Ms. Sharman deferred $27,599 of the fiscal
1998 payout amounts.
(5) All Other Compensation includes matching credits we provided under our
401(k) plan ($2,400 for each of the named executive officers) and under our
nonqualified deferred compensation plan ($11,440 for Mr. Doolin, $9,357 for
Mr. King, $6,555 for Mr. Gilbert and $6,140 for Ms. Sharman).
43
<PAGE>
INCENTIVE COMPENSATION PLANS
CARLSON LEGACY PLAN
Our executives previously participated in Carlson Companies' Carlson Legacy
Plan. The plan is directed toward rewarding key executives of Carlson Companies
who have a major impact on Carlson Companies' performance. The selection of the
participants and the size of the grant are determined by the sole discretion of
the administrative committees. Approximately one-half of the units granted to
each of the named executive officers are tied to our performance and one-half
are tied to the performance of Carlson Companies. The Management Compensation
Committee of Carlson Companies determines the value of the units each year based
on formulas tied to the performance of the relevant business units.
Upon exercise, the participant receives an amount equal to the difference
between the value of the exercised units on the date of exercise and their value
on the date of the grant. The units are considered vested in full at the end of
the third year after grant, at which time they are no longer subject to
forfeiture upon any type of termination of the participant's employment. The
units awarded may be exercised as to one-third of the units at the end of the
third year following the grant, as to two-thirds of the units at the end of the
fourth year following the grant and as to all of the units at the end of the
fifth year following the grant. Any units that have not been exercised at the
end of the sixth year must be paid out or deferred into the deferred
compensation plan.
Following this offering, our executives will no longer receive awards under
this plan and their outstanding units will be converted to deferred compensation
and/or stock options under our 1999 Stock Incentive Plan, which is described
below. Prior to the completion of this offering, the Management Compensation
Committee will determine the value of the vested units. Participants who would
have vested units at the end of this year will receive the difference between
the current value of those units as determined by the Management Compensation
Committee and the value of the units on the date they were granted as deferred
compensation under our deferred compensation plan.
In addition, participants with vested units will receive non-qualified stock
options under our stock incentive plan with an exercise price equal to the
initial public offering price. The number of non-qualified stock options granted
to participants upon conversion of their vested units will be determined by
multiplying the number of vested units times their current value. The product is
then divided by the initial public offering price, which will also be the
exercise price, to determine the number of shares that will be subject to the
stock options. The stock options that replace vested units will not be subject
to forfeiture upon any type of termination of the participant's employment after
November 1999. The stock options that replace the units granted in 1994 will
become exercisable in December 2000 and will expire in February 2001. The stock
options that replace the units granted in 1995 will become exercisable in
December 2000 and will expire in December 2001. The stock options that replace
the units granted in 1996 will become exercisable in December 2001 and will
expire in December 2002.
Participants with unvested units will receive non-qualified stock options
with an exercise price representing a discount from the initial public offering
price under our stock incentive plan. The number of non-qualified stock options
granted to participants upon conversion of their unvested units will be
determined by multiplying the number of unvested units times their current
value. The product is then divided by the initial public offering price to
determine the number of shares that will be subject to the stock options. The
unvested units granted in 1997 will convert to stock options with an exercise
price of approximately 82% of the initial public offering price and the unvested
units granted in 1998 will convert to stock options with an exercise price of
approximately 87% of the initial public offering price. The stock options that
replace unvested units will not be subject to forfeiture upon any type of
termination of the participant's employment after December 2000 for stock
options that replace units granted in 1997 or after December 2001 for stock
options that replace units granted in 1998. The stock options that replace units
granted in 1997 will become exercisable in December 2001 and will expire in
December 2003. The stock options that replace units granted in 1998 will become
exercisable in December 2001 and will expire in December 2004.
44
<PAGE>
The following table provides information concerning units granted to the
five named executive officers and Mr. Warne during fiscal 1998 under the Carlson
Legacy Plan. Each unit represents the right to receive an amount equal to the
difference between the value of the unit on the date of exercise, as determined
by Carlson Companies' compensation committee, less the value of the unit on the
date of grant.
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR
OTHER PERIOD ESTIMATED FUTURE PAYOUTS
UNTIL UNDER NON-STOCK PRICE-BASED
NUMBER OF MATURATION OR PLANS
NAME UNITS PAYOUT(1) MAXIMUM(2)
- ------------------------------------------------ ----------- ----------------- --------------------------------
<S> <C> <C> <C>
Wallace B. Doolin............................... 27,998 Three years
Jeff D. Warne................................... 7,079 Three years
Stephen M. King................................. 13,922 Three years
Richard T. Snead................................ 13,922 Three years
John F. Gilbert................................. 8,172 Three years
Leslie Sharman.................................. 4,540 Three years
</TABLE>
- ------------------------
(1) The units previously vested after three years. However, upon completion of
this offering, the units will be converted into stock options under our 1999
Stock Incentive Plan that will vest in two years and have a five year term.
(2) These payout amounts state the number of stock options into which the units
granted in fiscal 1998 will be converted upon consummation of this offering
based on an assumed initial public offering price of $ per share.
CARLSON RESTAURANTS WORLDWIDE INC. 1999 STOCK INCENTIVE PLAN
It is anticipated that, prior to the consummation of this offering, our
board of directors and Carlson Companies, as our sole stockholder, will approve,
effective on the consummation of this offering, the Carlson Restaurants
Worldwide Inc. 1999 Stock Incentive Plan. A total of shares of Class
A common stock will be reserved for issuance under the stock incentive plan. The
stock incentive plan authorizes the grant of options to purchase common stock
intended to qualify as incentive stock options, as defined in Section 422 of the
Internal Revenue Code of 1986, and the grant of options that do not so qualify.
The exercise price of options granted under the stock incentive plan must be at
least equal to the fair market value of the Class A common stock on the date of
grant, provided that grants of nonqualified stock options made pursuant to
conversion of awards under the Carlson Legacy Plan may be at less than fair
market value. The exercise price of incentive options granted to an optionee who
owns stock possessing more than 10% of the voting power of our outstanding
capital stock must be at least equal to 110% of the fair market value of the
common stock on the date of grant, and such optionee must exercise his or her
option within five years from the date of the grant of such option. The stock
incentive plan provides, that, upon a merger, consolidation or other fundamental
change, all outstanding plan options and other awards may be substituted with
similar options or awards of the corporation surviving any such merger or
consolidation, or such options or awards may be made immediately exercisable in
full. The stock incentive plan also provides for awards of stock appreciation
rights, restricted stock and other stock-based awards, as well as performance
units.
The stock incentive plan will be administered by our compensation committee.
By the terms of the stock incentive plan, the compensation committee selects the
individuals to whom options will be granted and determines the option exercise
price and other terms of each award, subject to the provisions of the stock
incentive plan. Incentive stock options may be granted under the stock incentive
plan to our key employees and the key employees of our affiliates within the
meaning of the Internal Revenue Code, including officers and directors who are
also employees. Nonqualified options may be
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granted under the stock incentive plan to officers and other employees and to
directors and other individuals providing services to us, whether or not they
are our employees.
STOCK OPTION GRANTS AS OF THE OFFERING
As of the offering, our named executive officers and Mr. Warne will hold the
following options to purchase our Class A common stock under our 1999 Stock
Incentive Plan:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------- ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN OR BASE EXPIRATION ------------------------
NAME GRANTED(1) FISCAL YEAR PRICE(2) DATE 5%(3) 10%(3)
- ---------------------------------------- ----------- ------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Wallace B. Doolin....................... (1)
Jeff D. Warne........................... (1)
Stephen M. King......................... (1)
Richard T. Snead........................ (1)
John F. Gilbert......................... (1)
Leslie Sharman.......................... (1)
</TABLE>
- ------------------------
(1) These options will be granted as of the date the offering is completed.
(2) Calculated based upon an assumed initial public offering price of $ per
share.
(3) The 5% and 10% rates of appreciation were set by the Securities and Exchange
Commission and are not intended to forecast future appreciation, if any, of
our Class A common stock.
DEFERRED COMPENSATION PLANS
RESTATED TGI FOR YOUR INVESTMENT PLAN
All of our employees, including our executive officers, may participate in
the TGI For Your Investment Plan, our 401(k) savings plan. Participants may
elect to contribute between one and ten percent of their basic salary under the
plan each year, up to the annual federal limit established by the Internal
Revenue Service. Each year we make a matching contribution equal to 25% of the
participant's contribution up to a maximum of ten percent of the participant's
base salary. We may also make an additional discretionary matching contribution
of up to 25% of the participant's contribution for the year. Participants are
fully vested in their own compensation and our previous long-term incentive plan
payout contributions when the amounts are credited to their account. In addition
to other events that may accelerate vesting, a participant becomes fully vested
in the matching contribution made by the company in the employee's fifth year of
service.
TGI FRIDAY'S INC. DEFERRED COMPENSATION PLAN
We offer our executive officers and other highly compensated employees an
opportunity to defer amounts of their salary, bonus and long-term incentive plan
compensation under the TGI Friday's Deferred Compensation Plan. This is a
nonqualified plan that is only available for participants who have contributed
the maximum amount permitted under our 401(k) plan. Each year we make a
contribution to the participant's account based on the salary and/or bonus
reduction agreement with the participant for that year and an additional
matching contribution equal to 25% of the participant's contribution up to a
maximum of ten percent of the participant's base salary less the maximum
permitted salary reduction under the 401(k) plan. Furthermore, we may make an
additional discretionary matching contribution equal to a maximum of 10% of the
participant's base salary less the maximum permitted salary reduction under the
401(k) plan. Participants can defer up to 25% of their salary compensation under
the 401(k) plan and deferred compensation plan. If the participant is a key
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employee, the entire amount of a participant's bonus may be deferred under the
deferred compensation plan. Participants are fully vested in their own
compensation and long-term incentive plan payout contributions when the amounts
are credited to their account. In addition to other events that may accelerate
vesting, a participant becomes fully vested in the matching contributions made
by the company in the employee's fifth year of service.
RELATIONSHIP WITH CARLSON COMPANIES AND RELATED TRANSACTIONS
Immediately prior to this offering, our sole stockholder is Carlson
Companies. Upon completion of this offering, Carlson Companies will beneficially
own 100% of our outstanding Class B common stock. The Class B common stock is
entitled to ten votes per share on any matter submitted to a vote of our
stockholders. Upon completion of this offering, the common stock beneficially
owned by Carlson Companies will represent in the aggregate % of the combined
voting power of all of our outstanding common stock, or % if the underwriters'
over-allotment option is exercised in full. For as long as Carlson Companies
continues to beneficially own shares of common stock representing more than 50%
of the combined voting power of our common stock, Carlson Companies will be able
to direct the election of all of the members of our board of directors and
exercise a controlling influence over our business and affairs, including any
determinations with respect to mergers or other business combinations, the
acquisition or disposition of assets, the incurrence of indebtedness, the
issuance of any additional common stock or other equity securities, the
repurchase or redemption of common stock or preferred stock and the payment of
dividends. Similarly, Carlson Companies will have the power to determine matters
submitted to a vote of our stockholders without the consent of our other
stockholders, will have the power to prevent a change in control of the company
and could take other actions that might be favorable to Carlson Companies.
Carlson Companies has advised us that its current intent is to continue to
hold all of the common stock beneficially owned by it following this offering.
However, Carlson Companies is not subject to any contractual obligations to
retain its controlling interest, except that Carlson Companies has agreed,
subject to certain exceptions, not to sell or otherwise dispose of any shares of
common stock for a period of 180 days after the date of this prospectus without
the prior written consent of Banc of America Securities LLC. As a result, there
can be no assurance as to the period of time during which Carlson Companies will
maintain its beneficial ownership of common stock of the company owned by it
following the offering.
We have entered into, or will enter into, agreements and arrangements with
Carlson Companies, governing the relationships between us and Carlson Companies,
and providing for the allocation of tax and other liabilities and obligations
relating to periods prior to and after the offering. See Notes 6, 7, 8 and 10 to
the Notes to Consolidated Financial Statements for a description of the amounts
we have paid to Carlson Companies pursuant to these agreements and arrangements
in 1998 and prior years. We also plan to continue purchasing goods and services
from Carlson Companies and its affiliates in the ordinary course of business.
Copies of the forms of our agreements with Carlson Companies are filed as
exhibits to the registration statement of which this prospectus is a part. Our
principal agreements and arrangements with Carlson Companies are described
below. We currently estimate that the fees that we will pay to Carlson Companies
for marketing, financial, administrative and support services during fiscal 2000
will be approximately $2.5 to $3.0 million.
TERMS OF THE SHARED SERVICES AGREEMENT. We have entered into a shared
services agreement with Carlson Companies whereby various services are provided
to us by Carlson Companies. The shared services agreement has a term of ten
years subject to early termination if Carlson Companies' ownership falls below
50% of the total outstanding shares of our common stock. The agreement applies
to areas such as risk management and insurance services, employee benefits
services, processing of accounts payable, accounts receivable, general ledger,
fixed assets and other accounting functions, certain tax and treasury services,
cash management services, information technology and management information
services support and the procurement of certain supplies. These services were
provided by
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Carlson Companies prior to our entering into the shared services agreement. The
cost of the provided services is computed on generally the same terms as it was
prior to the shared services agreement. The methods of billing are determined by
the type of service being provided and are comparable to the methods used to
calculate amounts billed to Carlson Companies' other subsidiaries. These methods
include Carlson Companies' total cost of providing the service, actual
third-party costs plus administrative expenses incurred by Carlson Companies,
the company funded and employee funded payroll deductions for participation in
the employee benefit plans, the pro rata allocation across Carlson Companies for
savings realized by volume purchasing, and actuarially determined or third-party
premiums for insurance programs. In addition, we will pay Carlson Companies a
flat monthly fee of $66,667 for unallocated general and administrative services.
TERMS OF THE TAX SHARING AGREEMENT. We are currently part of a consolidated
tax group with Carlson Companies and it has historically controlled all of our
tax decisions. Following this offering, we will no longer be part of Carlson
Companies' consolidated tax group for federal income tax purposes. We have
entered into a tax sharing agreement with Carlson Companies, effective as of
August 1, 1999, which provides for the allocation of tax benefits and
obligations during the periods that we are included in the consolidated federal
or combined state and local income tax returns filed by Carlson Companies. The
tax sharing agreement generally requires us to pay Carlson Companies the amount
of federal, state and local taxes that we would have been required to pay had we
filed our own tax return or returns and not been included in Carlson Companies'
consolidated or combined groups. Notwithstanding the tax sharing agreement, we
are jointly and severally liable for taxes due for all periods during which we
are included in the Carlson Companies' consolidated group. Carlson Companies
continues to control our tax decisions with respect to periods for which we are
part of Carlson Companies' consolidated or combined tax group.
TERMS OF ARRANGEMENTS WITH PROVISIONS. We have used and plan to continue to
use the services of Provisions, a division of Carlson Companies, as a buying
agent for the negotiation of purchase arrangements and discounts with vendors of
food, beverages and other supplies for our owned and franchised restaurants. Our
restaurants order items from an independent national distribution company that
obtains products on terms negotiated by Provisions. Provisions also provides us
with additional services such as quality assurance audits of vendors, assistance
in developing product specifications and product sourcing services. We do not
pay Provisions for the services it provides to us, although Provisions receives
compensation directly from vendors in the form of discounts, commissions and
other fees. We do not pay Provisions any fees for food or other restaurant
supplies purchased on terms negotiated by Provisions. Additionally, if we
receive a rebate from an equipment vendor due to terms negotiated by Provisions,
we pass that rebate on to Provisions.
TERMS OF INSURANCE ARRANGEMENTS. We participate in the company-wide risk
management and insurance program of Carlson Companies. We pay premiums,
determined annually by an independent actuary, to NAFCO Insurance Company, Ltd.,
a wholly-owned subsidiary of Carlson Holdings, Inc., for retained casualty
losses for workers' compensation and liability insurance coverages. Carlson
Holdings, Inc. is the parent company of Carlson Companies. We pay for a portion
of the premium costs on insurance policies bought by Carlson Companies, based on
our proportion of loss experience under those policies. We also pay for a
portion of the Carlson Companies risk management and insurance administration
costs, including claims handling, actuarial services and letters of credit,
based primarily on our proportion of services used.
TERMS OF CASH MANAGEMENT PROGRAM AND INTERCOMPANY CREDIT AGREEMENT.
Historically, we have participated in Carlson Companies' centralized cash
management program. Cash received from operations is transferred to Carlson
Companies' centralized cash accounts and cash disbursements are funded from the
centralized cash accounts on a daily basis. On August 19, 1999, we entered into
an intercompany credit agreement with Carlson Companies, under which we will
continue to participate in Carlson Companies' cash management program. Cash
requirements for our day-to-day operating purposes, and for our capital
expenditures, are met with advances under the credit agreement. On any
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business day that we have excess cash available, we may, at our option, use it
to repay any outstanding advances we have under the intercompany credit
agreement, or make an advance to Carlson Companies if no advances are
outstanding. Advances we make to Carlson Companies bear interest at the
three-month LIBOR at the time of the advance.
The maximum borrowing availability under the intercompany credit agreement
is $225.0 million prior to the completion of this offering, and $105.0 million
after completion of this offering and the application of the net proceeds to
repay a portion of our intercompany indebtedness. As part of the intercompany
credit agreement, a $120.0 million promissory note to Carlson Companies in
partial payment of a dividend and a $70.4 million note to Carlson Companies,
which represented indebtedness allocated to us by Carlson Companies, were
refinanced along with accrued interest. The proceeds from this offering will be
used to partially repay indebtedness to Carlson Companies. The interest rate on
all advances made under the intercompany credit agreement is 1.25% over the
three-month LIBOR at the time of the advance. The intercompany credit agreement
will expire on December 31, 2001, unless Carlson Companies' ownership of all
outstanding shares of our common stock falls below 50% in which case the credit
agreement may be terminated upon 90 days notice by either party.
TERMS OF FRIDAY'S GOLD POINTS PROGRAM. Our company owned or operated and
franchised T.G.I. Friday's and Italianni's restaurants participate in a loyalty
program that offers guests points for purchases made in the restaurants. The
points can be redeemed for in-restaurant food items and other awards. From 1995
through the first quarter of 1999, we participated in and administered a program
which operated under the names Frequent Friday's for T.G.I. Friday's restaurants
and Pasta Points for Italianni's restaurants. We are in the process of
converting the Frequent Friday's and Pasta Points programs into Gold Points,
which is a loyalty program administered by Gold Points Corporation, a
wholly-owned subsidiary of Carlson Companies. We are in the process of
negotiating a license agreement for the use of this program in our restaurant
systems. We are also negotiating an agreement with our domestic franchisees for
the use of Gold Points in the T.G.I. Friday's franchise system. This program may
result in additional liability to us if a franchisee ends participation in the
program and does not fully fund the estimated cost of redeeming outstanding
guest points.
TERMS OF REAL ESTATE RELATIONSHIPS. We lease five properties from Carlson
Companies, or affiliates of Carlson Companies, for operation of our restaurants.
The lease terms generally range from five to twenty years with five-year renewal
options. The rental amounts we pay Carlson Companies under each lease include a
fixed rental fee plus a fee based on a percentage of our gross sales at that
restaurant. We paid Carlson Companies approximately $300,000 during fiscal 1998
under these lease agreements. In addition, Carlson Companies has guaranteed
payment of ten of our restaurant leases. Real estate commitments under such
guarantees were approximately $5.0 million as of December 28, 1998. We are also
the general partner in four limited partnerships which were formed for the
purpose of acquiring a restaurant site, constructing a restaurant on the site
and leasing the restaurant back to us. The limited partners in these limited
partnerships include some of our officers, employees and Carlson Companies. We
believe that the terms of these arrangements are no less favorable to us than
could be obtained from non-affiliated persons.
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PRINCIPAL STOCKHOLDER
Prior to this offering, Carlson Companies, through its wholly-owned
subsidiary Carlson Hospitality Worldwide Inc., owned 100% of our capital stock.
Following this offering, Carlson Hospitality Worldwide will beneficially own
100% of our outstanding Class B common stock and, accordingly, will own common
stock representing approximately % of the economic interest in our company, or
% if the underwriters' over-allotment options are exercised in full. This
represents approximately % of the combined voting power of our outstanding
common stock, or % if the underwriters' over-allotment option is exercised in
full. Beneficial ownership of at least 80% of our total voting power is required
in order for Carlson Hospitality Worldwide to be able to effect a tax-free
spin-off or certain other tax-free transactions. The address of Carlson
Hospitality Worldwide is Carlson Parkway, P.O. Box 59159, Minneapolis, Minnesota
55459-8249. All of the outstanding capital stock of Carlson Holdings, Inc., of
which Carlson Companies is a wholly-owned subsidiary, is held as follows.
One-half of the voting common stock is held in one or more trusts over which
Marilyn C. Nelson, as trustee, holds the sole voting power and one-half of the
voting common stock is held in one or more trusts over which Barbara C. Gage, as
trustee, holds the sole voting power. The address of Ms. Nelson is Carlson
Parkway, P.O. Box 59159, Minneapolis, Minnesota 55459-8249, and the address of
Ms. Gage is 10000 Highway 55, Minneapolis, Minnesota 55441. Ms. Nelson and Ms.
Gage are sisters. Ms. Nelson is the mother of Curtis C. Nelson, the Chairman of
our Board of Directors. Ms. Gage is the spouse of Edwin C. Gage, one of our
directors.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering, the shares of Class A
common stock sold in this offering will be freely tradable without restriction
under the Securities Act of 1933, unless purchased by an "affiliate" of ours, as
that term is defined in Rule 144 under the Securities Act. Carlson Companies and
our directors and officers have agreed not to sell or dispose of any shares of
common stock or securities convertible into or exchangeable or exercisable for
common stock for a period of 180 days after the date of this prospectus without
the prior written consent of Banc of America Securities LLC. We can give no
assurance concerning how long these parties will continue to hold their common
stock after this offering.
After this offering, Carlson Companies will own 100% of our outstanding
Class B common stock. Any common stock held by one of our affiliates will be
subject to the resale limitations required by Rule 144. Rule 144 defines an
affiliate as a person that directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with
the issuer.
After this offering, Carlson Companies will be our affiliate. Therefore, as
long as Carlson Companies remains an affiliate, they may sell our common stock
only:
- under an effective registration statement under the Securities Act,
- under Rule 144, or
- under another exemption from registration.
Carlson Companies is not under any contractual obligation to retain our
common stock, except during the 180-day period noted above.
In general, under Rule 144 as currently in effect, a person, or persons
whose shares are aggregated, including an affiliate, who has beneficially owned
shares for at least one year, within any three-month period commencing 90 days
after the date of this prospectus, may sell a number of shares that does not
exceed the greater of:
- one percent of the number of shares of Class A common stock then
outstanding, this would be shares immediately after this offering,
or
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- the average weekly trading volume of the Class A common stock during the
four calendar weeks preceding the sale.
Sales under Rule 144 are generally subject to certain manner of sale
provisions and notice requirements and to the availability of current public
information about us. Under Rule 144(k), a person who is not deemed to have been
our affiliate at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years, is
entitled to sell the shares without having to comply with the manner of sale,
public information, volume limitation or notice provisions of Rule 144.
We intend to file a registration statement on Form S-8 covering all shares
of common stock issuable upon exercise of stock options to be issued upon
completion of this offering and stock options or other benefits to be granted
under our stock incentive plan. Upon the consummation of this offering, we will
have outstanding stock options with respect to an aggregate of
shares of common stock. Upon this registration on Form S-8, an additional
shares of common stock, together with any additional shares of
common stock which will be issuable pursuant to stock options or other benefits
to be granted under our stock incentive plan, will be eligible for sale in the
public market.
Prior to the offering, there has been no market for the Class A common
stock, and we cannot predict the effect, if any, that public sales of shares or
the availability of shares for sale will have on the market price prevailing
from time to time. Sales of substantial amounts of Class A common stock in the
public market following the offering, or the perception that sales may occur,
could adversely affect the prevailing market price of the Class A common stock
and our ability to raise capital through a public offering of our equity
securities.
DESCRIPTION OF CAPITAL STOCK
Upon consummation of this offering, our authorized capital stock will
consist of 135,000,000 shares of common stock, par value $.01 per share, and
10,000,000 shares of preferred stock, par value $.01 per share. Of the
135,000,000 shares of common stock, 100,000,000 shares will be designated as
Class A common stock and 35,000,000 shares will be designated as Class B common
stock. There are no shares of preferred stock outstanding as of the date of this
prospectus. Of the 100,000,000 shares of common stock designated as Class A
common stock, shares are being sold by us in this offering and
shares are reserved for issuance upon conversion of Class B common
stock into Class A common stock. Of the 35,000,000 shares of common stock
designated as Class B common stock, shares will be outstanding and
held by Carlson Companies upon consummation of this offering. A description of
the material terms and provisions of our Amended and Restated Certificate of
Incorporation affecting the relative rights of the Class A common stock, the
Class B common stock and the preferred stock is set forth below. The description
is intended as a summary and is qualified in its entirety by reference to the
form of our Amended and Restated Certificate of Incorporation and Restated
By-Laws filed with the registration statement relating to this prospectus.
DESCRIPTION OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK
VOTING RIGHTS. The holders of Class A common stock and Class B common stock
generally have identical rights except that holders of Class A common stock are
entitled to one vote per share while holders of Class B common stock are
entitled to ten votes per share on all matters to be voted on by the
stockholders. Holders of shares of Class A common stock and Class B common stock
are not entitled to cumulate their votes in the election of directors. Generally
all matters to be voted on by the stockholders must be approved by a majority of
the votes entitled to be cast by all shares of Class A common stock and Class B
common stock present in person or represented by a proxy, voting together as a
single class, subject to any voting rights granted to holders of any preferred
stock.
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DIVIDENDS. The holders of Class A common stock and Class B common stock
share equally in any dividends or distributions made by us. Our board of
directors currently intends to retain future earnings for the development of our
business and does not anticipate paying regular quarterly dividends on the Class
A common stock or Class B common stock for the foreseeable future. Under
Delaware law, the declaration of dividends is within the discretion of the board
of directors and future dividends, if any, will depend upon various factors,
including our net income, current and anticipated cash needs and any other
factors deemed relevant by the board of directors. By virtue of their stock
ownership, Carlson Companies will have the ability to change the size and
composition of our board of directors and control the payment of dividends by
us.
CONVERSION. Each share of Class B common stock is convertible into one
share of Class A common stock. Any shares of Class B common stock transferred to
a person other than Carlson Companies or any of its subsidiaries shall
automatically convert to shares of Class A common stock upon such disposition,
except for a disposition effected in connection with a transfer of Class B
common stock to the beneficial owners of Carlson Companies as a dividend
intended to be a tax-free spin-off. No assurance can be given that such
conversion would be consummated. Carlson Companies has no current plans with
respect to a tax-free spin-off of our company.
All shares of Class B common stock shall automatically convert into Class A
common stock if the number of outstanding shares of Class B common stock falls
below 20% of the outstanding shares of common stock. This will prevent Carlson
Companies from decreasing its economic interest in the company to less than %
while still retaining control of approximately of the voting power of our
company. All conversions will be effected on a share-for-share basis.
Automatic conversion of the Class B common stock into Class A common stock
if Carlson Companies decreases its economic interest in our company to less than
20% is intended to ensure that Carlson Companies retains voting control by
virtue of its ownership of Class B common stock only if it has a sizable
economic interest in our company.
OTHER RIGHTS. In the event of our liquidation, dissolution or winding up,
after payment in full of the amounts required to be paid to holders of preferred
stock, all holders of common stock, regardless of class, are entitled to share
ratably in any assets available for distribution to holders of shares of common
stock.
No shares of either class of common stock are subject to redemption or have
preemptive rights to purchase additional shares of common stock.
Upon consummation of this offering, all the outstanding shares of Class A
common stock and Class B common stock will be legally issued, fully paid and
nonassessable.
Application has been made for the Class A common stock to be approved for
listing on the New York Stock Exchange under the symbol "CWR."
PREFERRED STOCK
Our Amended and Restated Certificate of Incorporation permits us to issue up
to 10,000,000 shares of preferred stock, from time to time, in one or more
series and with such designation and preferences for each series as are stated
in the resolutions providing for the designation and issue of each such series
adopted by our board of directors. Our board of directors is authorized by our
Amended and Restated Certificate of Incorporation to determine the voting,
dividend, redemption and liquidation preferences and limitations pertaining to
such series. The board of directors, without stockholder approval, may issue
preferred stock with voting rights and other rights that could adversely affect
the voting power of the holders of our common stock and could have certain
anti-takeover effects. We have no present plans to issue any shares of preferred
stock. The ability of the board of
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directors to issue preferred stock without stockholder approval could have the
effect of delaying, deferring or preventing a change in control of our company
or the removal of existing management.
CORPORATE OPPORTUNITIES
Our Amended and Restated Certificate of Incorporation provides:
- neither Carlson Companies nor any subsidiary of Carlson Companies shall
have a duty to refrain from engaging directly or indirectly, in the same
or similar business activities or lines of business as us; and
- neither Carlson Companies nor any subsidiary of Carlson Companies or any
officer or director of Carlson Companies will be liable to us or to our
stockholders for breach of any fiduciary duty by reason of any such
activities or of such person's participation in such activities.
Our Amended and Restated Certificate of Incorporation also provides that if
Carlson Companies or any subsidiary of Carlson Companies acquires knowledge of a
potential transaction or matter which may be a corporate opportunity both for
Carlson Companies or such subsidiary and for us, neither Carlson Companies nor
such subsidiary shall have a duty to communicate or offer such corporate
opportunity to us and shall not be liable to our company or our stockholders for
breach of fiduciary duty as a stockholder or controlling person of a stockholder
by reason of the fact that Carlson Companies or such subsidiary pursues or
acquires such opportunity for itself, directs such corporate opportunity to
another person, or does not communicate information regarding such corporate
opportunity to us.
Where corporate opportunities are offered to persons who are directors or
officers of both us and Carlson Companies, our Amended and Restated Certificate
of Incorporation provides that such director or officer will have fully
satisfied his or her fiduciary duty to us and to our stockholders and will have
no liability to us or our stockholders if such person acts in a manner
consistent with the following policy:
- a corporate opportunity offered to any person who is an officer of our
company and also a director of Carlson Companies belongs to us;
- a corporate opportunity offered to any person who is one of our directors
and who is also a director or officer of Carlson Companies, shall belong
to us if such opportunity is expressly offered to such person solely in
his or her capacity as one of our directors, and otherwise shall belong to
Carlson Companies; and
- a corporate opportunity offered to any person who is an officer of both of
us and Carlson Companies shall belong to us.
These provisions of our Amended and Restated Certificate of Incorporation
attempt to eliminate certain rights that might have been available to
stockholders under Delaware law had such provisions not been included in the
Amended and Restated Certificate of Incorporation, although the enforceability
of such provisions has not been established and there is an absence of relevant
judicial authority.
Our board of directors currently consists of five members, four of whom
serve concurrently as members of the board of directors and/or officers of
Carlson Companies. In addition, a significant number of our associates and
officers will also be associates or officers of Carlson Companies or its
subsidiaries.
These provisions of our Amended and Restated Certificate of Incorporation
shall expire on the date that Carlson Companies ceases to own beneficially
common stock representing at least 20% of the outstanding shares of common
stock.
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ADVANCE NOTICE PROVISION
Our Restated By-laws will provide for an advance notice procedure for the
nomination, other than by or at the direction of the board of directors, of
candidates for election as directors as well as for other stockholder proposals
to be considered at annual meetings of stockholders. In general, notice of
intent to nominate a director or raise matters at such meetings will have to be
received by us not less than 60 days prior to the date fixed for the annual
meeting, and must contain certain information concerning the persons to be
nominated or the matters to be brought before the meeting and concerning the
stockholders submitting the proposal.
POTENTIAL ANTI-TAKEOVER EFFECT OF PROVISIONS OF CHARTER DOCUMENTS AND DELAWARE
GENERAL CORPORATION LAW
Our Amended and Restated Certificate of Incorporation will authorize our
board of directors to issue up to 10,000,000 shares of preferred stock and to
determine the powers, preferences, privileges, rights, including voting rights,
qualifications, limitations and restrictions of those shares without any further
vote or action by the stockholders. The rights of the holders of common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. Our Amended and
Restated Certificate of Incorporation and Restated By-Laws, among other things,
also require that stockholder actions occur at duly called meetings of the
stockholders, limit who may call special meetings of stockholders, do not permit
cumulative voting in the special meetings of stockholders, do not permit
cumulative voting in the election of directors and require advance notice of
stockholder proposals and director nominations.
We are a Delaware corporation subject to Section 203 of the Delaware General
Corporation Law. Section 203 provides that, subject to certain exceptions, a
corporation shall not engage in any business combination with any "interested
stockholder" for a three-year period following the date that such stockholder
becomes an interested stockholder unless:
- prior to such date, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder:
- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or
- on or subsequent to such date, the business combination is approved by the
board of directors of the corporation and by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
Except as specified in Section 203 of the DGCL, an interested stockholder is
defined to include:
- any person that is the owner of 15% or more of the outstanding voting
stock of the corporation, or is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation, at any time within the three years immediately
prior to the relevant date; and
- the affiliates and associates of any such person.
Under certain circumstances, Section 203 of the DGCL makes it more difficult
for an interested stockholder to effect various business combinations with the
company for a three-year period, although our stockholders may elect to exclude
us from the restrictions imposed thereunder, Carlson Companies is not an
interested stockholder within the meaning of Section 203 and, by virtue of its
beneficial ownership of common stock, Carlson Companies is in a position to
elect to exclude us from the restrictions under Section 203, but currently has
no intention to do so.
TRANSFER AGENT AND REGISTRAR
Bank of New York has been appointed as the transfer agent and registrar for
our common stock.
54
<PAGE>
UNDERWRITING
We are offering the shares of Class A common stock described in this
prospectus through a number of underwriters. Banc of America Securities LLC,
Merrill, Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley Dean
Witter are the representatives of the underwriters. We have entered into an
underwriting agreement with the representatives. Subject to the terms and
conditions of the underwriting agreement, we have agreed to sell to the
underwriters, and the underwriters have each agreed to purchase, the number of
shares of Class A common stock listed next to its name in the following table.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------------------------------- -----------
<S> <C>
Banc of America Securities LLC..................................
Merrill, Lynch, Pierce, Fenner & Smith
Incorporated.........................................
Morgan Stanley Dean Witter......................................
-----------
Total.........................................................
-----------
-----------
</TABLE>
The underwriting agreement provides that the underwriters must buy all of
the shares if they buy any of them. The underwriters will sell the shares to the
public when and if the underwriters buy the shares from us.
The underwriters initially will offer shares to the public at the price
specified on the cover page of this prospectus. The underwriters may allow to
some dealers a concession of not more than $ per share. The underwriters may
also allow, and any other dealers may reallow, a concession of not more than $
per share to some other dealers. If all the shares are not sold at the initial
public offering price, the underwriters may change the offering price and the
other selling terms. The Class A common stock is offered subject to a number of
conditions, including:
- receipt and acceptance of the Class A common stock by the underwriters,
and
- the right on the part of the underwriters to reject orders in whole or in
part.
We have granted the underwriters an option to buy up to additional
shares of Class A common stock. These additional shares would cover sales of
shares by the underwriters that exceed the number of shares specified in the
table above. The underwriters have 30 days to exercise this option. If the
underwriters exercise this option, they will each purchase additional shares
approximately in proportion to the amounts specified in the table above.
We and Carlson Companies, as our sole stockholder, have entered into lock-up
agreements with the underwriters. Under these agreements, we may not issue any
new shares of common stock (except on exercise of outstanding options), and
Carlson Companies may not dispose of any common stock or securities convertible
into or exchangeable for shares of common stock. These restrictions will be in
effect for a period of 180 days after the date of this prospectus. At any time
and without notice, Banc of America Securities LLC may, in its sole discretion,
release all or some of the securities from these lock-up agreements.
We will indemnify the underwriters against some liabilities, including some
liabilities under the Securities Act. If we are unable to provide this
indemnification, we will contribute to payments the underwriters may be required
to make in respect of those liabilities.
In connection with this offering, the underwriters may purchase and sell
shares of Class A common stock in the open market. These transactions may
include:
- short sales,
55
<PAGE>
- stabilizing transactions, and
- purchases to cover positions created by short sales.
Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in this offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the Class A common stock while this
offering is in progress.
The underwriters also may impose a penalty bid. This means that if the
representatives purchase shares in the open market in stabilizing transactions
or to cover short sales, the representatives can require the underwriters that
sold those shares as part of this offering to repay the underwriting discount
received by them.
The underwriters may engage in activities that stabilize, maintain or
otherwise affect the price of the Class A common stock, including:
- over-allotment,
- stabilization,
- syndicate covering transactions, and
- imposition of penalty bids.
As a result of these activities, the price of the Class A common stock may
be higher than the price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue them at any time.
The underwriters may carry out these transactions on the New York Stock
Exchange, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed 5%
of the total number of shares of Class A common stock offered by this
prospectus.
Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be negotiated between us and the
underwriters. Among the factors to be considered in such negotiations are:
- our history and prospects, taking into account the prospects of the
industries in which we compete,
- our past and present financial performance,
- an assessment of our management,
- the present state of our development,
- the prospects for our future earnings,
- the prevailing market conditions of relevant United States securities
markets at the time of this offering, and
- market valuations of publicly traded companies that we and the
representatives believe to be comparable to us.
56
<PAGE>
LEGAL MATTERS
The validity of the shares of Class A common stock offered by this
prospectus and other legal matters will be passed upon for us by Faegre & Benson
LLP, Minneapolis, Minnesota. The validity of the shares of Class A common stock
offered by this prospectus will be passed upon for the underwriters by Fried,
Frank, Harris, Shriver & Jacobson (a partnership including professional
corporations), Los Angeles, California.
EXPERTS
The consolidated financial statements and schedule included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the SEC for the
stock we are offering by this prospectus. This prospectus does not include all
of the information contained in the registration statement. You should refer to
the registration statement and its exhibits for additional information. Whenever
we make reference in this prospectus to any of our contracts, agreements or
other documents, the references are not necessarily complete and you should
refer to the exhibits attached to the registration statement for copies of the
actual contract, agreement or other document. When we complete this offering, we
will also be required to file annual, quarterly and special reports, proxy
statements and other information with the SEC.
You can read our SEC filings, including the registration statement, over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference facilities at 450
Fifth Street, NW, Washington, DC 20549, 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. You may also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of the SEC at 450
Fifth Street, NW, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference facilities. Our
SEC filings are also available at the offices of the New York Stock Exchange at
20 Broad Street, New York, New York 10005.
57
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
(unaudited)
Condensed Consolidated Balance Sheets as of December 28, 1998 and June 28, 1999........................... F-2
Condensed Consolidated Statements of Operations for the twenty-six week periods ended June 29, 1998 and
June 28, 1999........................................................................................... F-3
Condensed Consolidated Statements of Cash Flows for the twenty-six week periods ended June 29, 1998 and
June 28, 1999........................................................................................... F-4
Notes to Condensed Consolidated Financial Statements...................................................... F-5
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS OF CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
Report of Independent Public Accountants.................................................................. F-8
Consolidated Balance Sheets as of December 29, 1997 and December 28, 1998................................. F-9
Consolidated Statements of Operations for the fiscal years ended December 30, 1996, December 29, 1997, and
December 28, 1998....................................................................................... F-10
Consolidated Statements of Stockholder's Equity for the fiscal years ended December 30, 1996, December 29,
1997, and December 28, 1998............................................................................. F-11
Consolidated Statements of Cash Flows for the fiscal years ended December 30, 1996, December 29, 1997, and
December 28, 1998....................................................................................... F-12
Notes to Consolidated Financial Statements................................................................ F-13
</TABLE>
F-1
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 28, JUNE 28,
1998 1999
-------------------- -------------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents....................... $ 50,364 $ 60,925
Accounts and notes receivable, net.............. 18,669 19,504
Inventories..................................... 6,126 5,978
Prepaid expenses and other assets............... 4,972 5,057
Assets held for sale, net....................... 4,116 4,091
-------- --------
Total current assets.......................... 84,247 95,555
PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET......... 180,791 192,340
DEFERRED INCOME TAXES............................. 7,614 7,845
GOODWILL, net..................................... 27,298 26,027
OTHER ASSETS, net................................. 22,929 23,074
-------- --------
Total assets.................................. $ 322,879 $ 344,841
-------- --------
-------- --------
</TABLE>
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term obligations............... $ 1,498 $ 580
Accounts payable.......................................... 12,866 13,987
Dividend payable.......................................... - 55,000
Accrued liabilities....................................... 36,475 44,657
-------- --------
Total current liabilities............................... 50,839 114,224
LONG-TERM OBLIGATIONS, less current maturities.............. 8,797 8,631
LONG-TERM DEBT-AFFILIATE.................................... 70,359 193,034
OTHER LIABILITIES........................................... 23,559 24,143
-------- --------
Total liabilities....................................... 153,554 340,032
MINORITY INTERESTS.......................................... 2,694 2,561
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, par value $1.00, 100 shares authorized, 1
share issued and outstanding............................ - -
Additional paid-in capital................................ 80,088 2,479
Unrealized holding losses of marketable securities........ (271) (231)
Retained earnings......................................... 86,814 -
-------- --------
Total stockholder's equity.............................. 166,631 2,248
-------- --------
Total liabilities and stockholder's equity.............. $ 322,879 $ 344,841
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-2
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
TWENTY-SIX WEEK PERIOD
ENDED
----------------------
JUNE 29, JUNE 28,
1998 1999
---------- ----------
<S> <C> <C>
REVENUE:
Company restaurant sales................................................................ $ 233,772 $ 275,130
Managed restaurant revenue.............................................................. 37,332 41,093
Franchising revenue..................................................................... 16,890 19,593
Licensing revenue....................................................................... 1,521 1,630
---------- ----------
Total revenue......................................................................... 289,515 337,446
COST AND EXPENSES:
Cost of sales........................................................................... 79,630 91,702
Restaurant operating expenses........................................................... 152,745 181,021
General and administrative expenses..................................................... 31,792 28,240
Depreciation and amortization expense................................................... 13,288 15,437
Other (income) expense, net............................................................. (99) 1,696
---------- ----------
INCOME FROM OPERATIONS.................................................................... 12,159 19,350
INTEREST EXPENSE, NET..................................................................... 1,787 3,082
---------- ----------
INCOME BEFORE INCOME TAXES................................................................ 10,372 16,268
PROVISION FOR INCOME TAXES................................................................ 3,754 5,691
---------- ----------
NET INCOME................................................................................ $ 6,618 $ 10,577
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-3
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
TWENTY-SIX WEEK PERIOD
ENDED
----------------------
JUNE 29, JUNE 28,
1998 1999
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.............................................................................. $ 6,618 $ 10,577
Non-cash items included in net income:
Depreciation and amortization....................................................... 13,288 15,437
Provision for deferred compensation................................................. 1,753 2,126
Recognition of deferred franchise revenue........................................... (212) (492)
Loss on impairment of assets........................................................ - 1,250
Deferred income taxes............................................................... (909) (231)
Other non-cash items, net........................................................... 50 211
Changes in:
Accounts receivable................................................................. (2,283) (1,148)
Inventories......................................................................... 23 148
Prepaid expenses and other assets................................................... 342 (85)
Accounts payable.................................................................... (2,266) 1,121
Accrued liabilities................................................................. 747 5,870
---------- ----------
Net cash provided by operating activities......................................... 17,151 34,784
---------- ----------
INVESTING ACTIVITIES:
Purchases of property, equipment and improvements....................................... (24,213) (26,613)
Investments in unconsolidated joint ventures............................................ (1,647) (1,160)
Distributions from unconsolidated joint ventures........................................ 1,148 1,325
Acquisition of other assets............................................................. (5,657) (348)
Proceeds from sale of land.............................................................. - 960
Collection of notes receivable.......................................................... 901 22
---------- ----------
Net cash used in investing activities............................................. (29,468) (25,814)
---------- ----------
FINANCING ACTIVITIES:
Proceeds from long-term obligations..................................................... 2,554 297
Proceeds from long-term debt-affiliate.................................................. 7,422 2,675
Principal payments on long-term obligations............................................. (16) (1,381)
---------- ----------
Net cash provided by financing activities......................................... 9,960 1,591
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...................................... (2,357) 10,561
CASH AND CASH EQUIVALENTS, beginning of period............................................ 27,061 50,364
---------- ----------
CASH AND CASH EQUIVALENTS, end of period.................................................. $ 24,704 $ 60,925
---------- ----------
---------- ----------
Supplemental disclosure of cash flow information:
Interest paid........................................................................... $ 762 $ 914
Income taxes............................................................................ $ 3,879 $ 3,102
Noncash investing and financing activities:
Dividend:
Paid with promissory note............................................................. - $ 120,000
Dividend payable...................................................................... - $ 55,000
Debt incurred for purchase of restaurant assets......................................... $ 1,805 $ -
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-4
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TWENTY-SIX WEEK PERIODS ENDED JUNE 29, 1998 AND JUNE 28, 1999
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated balance sheet as of June
28, 1999, and the unaudited condensed consolidated statements of operations and
cash flows for the twenty-six week periods ended June 29, 1998 and June 28, 1999
should be read in conjunction with the consolidated financial statements and
accompanying footnotes of Carlson Restaurants Worldwide Inc. (the "Company") as
of December 29, 1997 and December 28, 1998 and for each of the three years in
the period ended December 28, 1998, included elsewhere herein. In the opinion of
management, the accompanying consolidated financial statements contain all
material adjustments, consisting principally of normal recurring adjustments,
necessary for a fair presentation of the Company's financial position, results
of operations, and cash flows. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
applicable rules and regulations, although the Company believes that the
disclosures herein are adequate to make the information presented not
misleading. The operating results for the interim periods are not necessarily
indicative of the results to be expected for a full year.
2. ACCRUED LIABILITIES:
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28, JUNE 28,
1998 1999
------------ ------------
<S> <C> <C>
Accrued compensation............................................. $ 10,985 $ 10,147
Gift certificates liability...................................... 4,573 2,618
Deferred franchise revenue....................................... 4,181 3,230
Advertising expenses............................................. 2,893 7,291
Property taxes................................................... 2,756 3,595
Sales taxes...................................................... 2,847 3,311
Federal income taxes............................................. 1,016 5,101
Other............................................................ 7,224 9,364
------------ ------------
$ 36,475 $ 44,657
------------ ------------
------------ ------------
</TABLE>
The Company's liability for advertising expenses has risen from the December
1998 level due to an increase in domestic marketing initiatives. The increase in
tax liabilities is the result of the timing of interim tax payments to the
various governmental authorities.
3. LONG-TERM DEBT-AFFILIATE:
In partial payment of a dividend declared on June 16, 1999, the Company
issued a $120,000,000 promissory note to Carlson Companies, Inc., our sole
stockholder, on June 28, 1999. The promissory note bears annual interest at 7.8%
and is due June 30, 2004. In addition, on August 19, 1999, the Company entered
into an Intercompany Credit Agreement with Carlson Companies, under which the
Company can borrow up to $225,000,000 prior to the completion of the anticipated
initial public offering of the Company's securities, and $105,000,000 after
completion of the anticipated offering and application of the net proceeds to
repay intercompany indebtedness. Amounts borrowed under this
F-5
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
TWENTY-SIX WEEK PERIODS ENDED JUNE 29, 1998 AND JUNE 28, 1999
(UNAUDITED)
3. LONG-TERM DEBT-AFFILIATE: (CONTINUED)
agreement bear interest at the three-month London Inter-Bank Offered Rate
("LIBOR") on the date of the advance plus 1.25%. This agreement expires on
December 31, 2001 or earlier if certain events occur, including if Carlson
Companies' ownership of all outstanding shares of the Company's common stock
falls below 50%, in which case the agreement may be terminated upon 90 days
notice by either party. All intercompany indebtedness was refinanced by this
agreement.
4. STOCKHOLDER'S EQUITY:
On June 16, 1999 the Company's Board of Directors declared a $175,000,000
dividend to Carlson Companies, of which $120,000,000 was paid on June 28, 1999
in the form of the promissory note due June 30, 2004, and $55,000,000 was paid
in cash subsequent to June 28, 1999 (see Note 8).
5. ALLOCATED GENERAL AND ADMINISTRATIVE EXPENSES:
The Company has historically been allocated certain charges for general and
administrative expenses incurred by Carlson Companies. These allocated expenses
totalled $5,700,000 during the twenty-six week period ended June 29, 1998.
Beginning in fiscal 1999, the Company will not be allocated these general and
administrative expenses and, accordingly, a comparable expense is not reflected
in the accompanying statement of operations for the twenty-six week period ended
June 28, 1999.
6. COMPREHENSIVE INCOME:
Comprehensive income for the twenty-six week periods ended June 29, 1998 and
June 28, 1999 is substantially equal to net income as reported.
7. SEGMENT AND RELATED INFORMATION:
The Company adopted Statement of Financial Accounting Standard No. 131,
"Disclosures About Segments of an Enterprise and Related Information," in 1998,
which establishes standards for reporting certain information about operating
segments, their products and services, geographic areas of operations and major
customers. The Company's two reportable segments, United States and
international restaurant operations, are strategic business units that offer
similar restaurant products and services but are managed separately. There are
no intersegment sales or transfers.
Segment information for total assets and capital expenditures are not
presented as such information is not used in measuring the segment's performance
or allocating resources among segments.
F-6
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
TWENTY-SIX WEEK PERIODS ENDED JUNE 29, 1998 AND JUNE 28, 1999
(UNAUDITED)
7. SEGMENT AND RELATED INFORMATION: (CONTINUED)
Summarized financial information for the twenty-six week periods ended June
28, 1999 and June 29, 1998 concerning the Company's reportable segments is shown
in the following table. The "Other" column includes corporate items and other
income and expense items not allocated to reportable segments (in thousands):
<TABLE>
<CAPTION>
UNITED
STATES INTERNATIONAL
RESTAURANT RESTAURANT
OPERATIONS OPERATIONS OTHER TOTAL
------------ ------------- --------- ----------
<S> <C> <C> <C> <C>
June 28, 1999
Revenues...................................................... $ 331,589 $ 5,857 $ - $ 337,446
Income (loss) before income taxes............................. 21,862 1,348 (6,942) 16,268
June 29, 1998
Revenues...................................................... 284,835 4,680 - 289,515
Income (loss) before income taxes............................. 20,416 (519) (9,525) 10,372
</TABLE>
The following table presents the details of "Other" segment income (loss)
before income taxes (in thousands):
<TABLE>
<CAPTION>
TWENTY-SIX WEEK PERIOD ENDED
----------------------------
JUNE 29, 1998 JUNE 28, 1999
------------- -------------
<S> <C> <C>
Corporate expenses.................................................................. $ (5,865) $ 24
Interest expense, net............................................................... (1,787) (3,082)
Goodwill amortization expense....................................................... (609) (609)
Other expenses, net................................................................. (1,264) (3,275)
------------- -------------
Total........................................................................... $ (9,525) $ (6,942)
------------- -------------
------------- -------------
</TABLE>
8. SUBSEQUENT EVENTS:
In July 1999, the Company sold the assets of and rights to the four Dalts
restaurants for $2,750,000. This price approximated the net carrying value of
the four restaurants. The purchase price was financed by a promissory note from
the purchaser and is collateralized by the restaurant assets.
In August 1999, the Company announced its plans to register and sell shares
of common stock in an initial public offering. The Company intends to use the
net proceeds to repay a portion of the borrowings under the Intercompany Credit
Agreement.
F-7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholder of
Carlson Restaurants Worldwide Inc.:
We have audited the accompanying consolidated balance sheets of Carlson
Restaurants Worldwide Inc. (a Delaware corporation, and a subsidiary of Carlson
Hospitality Worldwide Inc.) and subsidiaries as of December 29, 1997, and
December 28, 1998, and the related consolidated statements of operations,
stockholder's equity, and cash flows for each of the three fiscal years in the
period ended December 28, 1998. 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 Carlson Restaurants
Worldwide Inc. and subsidiaries as of December 29, 1997, and December 28, 1998,
and the results of their operations and their cash flows for each of the three
fiscal years in the period ended December 28, 1998, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
February 15, 1999 (except with respect to the matters
discussed in Note 13, as to which the date is August 19, 1999)
F-8
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 28,
1997 1998
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................................................... $ 27,061 $ 50,364
Accounts and notes receivable, net................................................. 15,524 18,669
Inventories........................................................................ 5,621 6,126
Prepaid expenses and other assets.................................................. 3,994 4,972
Assets held for sale, net.......................................................... - 4,116
------------ ------------
Total current assets............................................................. 52,200 84,247
PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET............................................ 153,079 180,791
DEFERRED INCOME TAXES................................................................ 4,959 7,614
GOODWILL, net........................................................................ 24,990 27,298
OTHER ASSETS, net.................................................................... 20,980 22,929
------------ ------------
Total assets..................................................................... $ 256,208 $ 322,879
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term obligations........................................ $ 30 $ 1,498
Accounts payable................................................................... 10,322 12,866
Accrued liabilities................................................................ 32,416 36,475
------------ ------------
Total current liabilities........................................................ 42,768 50,839
LONG-TERM OBLIGATIONS, less current maturities....................................... 6,009 8,797
LONG-TERM DEBT-AFFILIATE............................................................. 32,007 70,359
OTHER LIABILITIES.................................................................... 20,832 23,559
------------ ------------
Total liabilities................................................................ 101,616 153,554
MINORITY INTERESTS................................................................... 1,933 2,694
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, par value $1.00, 100 shares authorized, 1 share issued
and outstanding.................................................................. - -
Additional paid-in capital......................................................... 80,088 80,088
Unrealized holding losses of marketable securities................................. (352) (271)
Retained earnings.................................................................. 72,923 86,814
------------ ------------
Total stockholder's equity....................................................... 152,659 166,631
------------ ------------
Total liabilities and stockholder's equity....................................... $ 256,208 $ 322,879
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------
DECEMBER 30, DECEMBER 29, DECEMBER 28,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
REVENUE:
Company restaurant sales............................................ $ 396,784 $ 418,468 $ 483,311
Managed restaurant revenue.......................................... 73,317 76,779 74,905
Franchising revenue................................................. 29,209 35,199 38,292
Licensing revenue................................................... 2,906 3,627 2,780
------------ ------------ ------------
Total revenue..................................................... 502,216 534,073 599,288
COST AND EXPENSES:
Cost of sales....................................................... 139,840 143,228 165,221
Restaurant operating expenses....................................... 276,357 286,077 315,513
General and administrative expenses................................. 50,122 55,218 64,582
Depreciation and amortization expense............................... 20,712 23,401 27,457
Other (income) expense, net......................................... 264 (863) 533
------------ ------------ ------------
INCOME FROM OPERATIONS................................................ 14,921 27,012 25,982
INTEREST EXPENSE, NET................................................. 2,509 2,571 4,216
------------ ------------ ------------
INCOME BEFORE INCOME TAXES............................................ 12,412 24,441 21,766
PROVISION FOR INCOME TAXES............................................ 3,899 8,740 7,875
------------ ------------ ------------
NET INCOME............................................................ $ 8,513 $ 15,701 $ 13,891
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN COMPREHENSIVE RETAINED
STOCK CAPITAL INCOME EARNINGS TOTAL
------------ ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 25, 1995..................... $ - $ 80,088 $ (312) $ 48,709 $ 128,485
Comprehensive income:
Net income................................. - - - 8,513
Change in unrealized losses on marketable
securities, net of tax................... - - (354) -
Total comprehensive income................. - - - - 8,159
------------ ----------- ------- ---------- ----------
BALANCE, December 30, 1996..................... - 80,088 (666) 57,222 136,644
Comprehensive income:
Net income................................. - - - 15,701
Change in unrealized losses on marketable
securities, net of tax................... - - 314 -
Total comprehensive income................. - - - - 16,015
------------ ----------- ------- ---------- ----------
BALANCE, December 29, 1997..................... - 80,088 (352) 72,923 152,659
Comprehensive income:
Net income................................. - - - 13,891
Change in unrealized losses on marketable
securities, net of tax................... - - 81 -
Total comprehensive income................. - - - - 13,972
------------ ----------- ------- ---------- ----------
BALANCE, December 28, 1998..................... $ - $ 80,088 $ (271) $ 86,814 $ 166,631
------------ ----------- ------- ---------- ----------
------------ ----------- ------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------
DECEMBER 30, DECEMBER 29, DECEMBER 28,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.......................................................... $ 8,513 $ 15,701 $ 13,891
Non-cash items included in net income:
Depreciation and amortization................................... 20,712 23,401 27,457
Provision for deferred compensation............................. 1,966 2,017 3,543
Recognition of deferred franchise revenue....................... (588) (1,531) (1,260)
Deferred income taxes........................................... (2,949) 1,091 (2,998)
Loss on impairment of assets.................................... 1,527 237 549
Other non-cash items, net....................................... (1,514) (1,315) 681
Changes in:
Accounts receivable............................................. (643) (1,239) (4,686)
Inventories..................................................... 132 (172) (505)
Prepaid expenses and other assets............................... (999) 3,241 (635)
Accounts payable................................................ (1,448) 586 2,618
Accrued liabilities............................................. 9,404 149 5,402
------------ ------------ ------------
Net cash provided by operating activities..................... 34,113 42,166 44,057
------------ ------------ ------------
INVESTING ACTIVITIES:
Purchases of property, equipment and improvements................... (24,071) (39,827) (57,113)
Investments in unconsolidated joint ventures........................ (3,668) (269) (4,197)
Distributions from unconsolidated joint ventures.................... 1,164 2,035 2,034
Acquisition of other assets......................................... (461) (607) (5,831)
Proceeds from sale of land, restaurants and facilities.............. 3,185 1,408 2,440
Collection of notes receivable...................................... 2,575 5,951 1,110
------------ ------------ ------------
Net cash used in investing activities......................... (21,276) (31,309) (61,557)
------------ ------------ ------------
FINANCING ACTIVITIES:
Proceeds from long-term obligations................................. 236 51 2,591
(Payments on) proceeds from long-term debt-affiliate................ (3,434) 4,598 38,352
Principal payments on long-term obligations......................... (581) (1,826) (140)
------------ ------------ ------------
Net cash (used in) provided by financing activities........... (3,779) 2,823 40,803
------------ ------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS............................. 9,058 13,680 23,303
CASH AND CASH EQUIVALENTS, beginning of period........................ 4,323 13,381 27,061
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of period.............................. $ 13,381 $ 27,061 $ 50,364
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1996, DECEMBER 29, 1997 AND DECEMBER 28, 1998
1. SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
Carlson Restaurants Worldwide Inc. and subsidiaries (the "Company") is a
wholly owned subsidiary of Carlson Hospitality Worldwide Inc., which is a
subsidiary of Carlson Companies, Inc., which is 100% owned by Carlson Holdings,
Inc. (collectively referred to as "Carlson Companies").
The Company develops, operates and franchises various casual dining
restaurant concepts in both the United States and international markets.
The Company's fiscal year ends on the last Monday in December. The 1998 and
1997 fiscal years consisted of 52 weeks, and the 1996 fiscal year consisted of
53 weeks.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Carlson
Restaurants Worldwide Inc., its wholly owned subsidiaries, and certain majority
owned joint ventures. Investments in unconsolidated joint ventures in which the
Company owns 20% to 50% are accounted for by the equity method. The Company's
related share of income or loss is included in other (income) expenses, net in
the accompanying consolidated statements of operations. All material
intercompany accounts and transactions have been eliminated.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash equivalents, marketable securities, accounts and
notes receivable, accounts payable and debt approximate fair value.
CASH AND CASH EQUIVALENTS
The Company considers amounts receivable from credit card companies and all
highly liquid temporary investments with original maturities of three months or
less to be cash equivalents. All excess cash of the Company is deposited with
Carlson Companies. No interest was earned on these funds through fiscal 1998
(see Note 7).
ACCOUNTS AND NOTES RECEIVABLE
Accounts receivable are due principally from franchisees for royalties
earned and goods and services provided, and from third parties under the terms
of various inventory purchasing and asset sale agreements. The Company had an
allowance of $823,000 and $1,526,000 as of December 29, 1997 and December 28,
1998, respectively, to cover estimated loss exposures related to accounts
receivable.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist primarily of food and beverages.
F-13
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 1996, DECEMBER 29, 1997 AND DECEMBER 28, 1998
1. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
ASSETS HELD FOR SALE
Assets held for sale include net assets that are in the process of being
sold and are recorded at the lower of carrying value or fair market value less
cost to sell.
In fiscal 1998, management approved plans to dispose of two parcels of
undeveloped land with an aggregate carrying value of $1,463,000. Additionally,
in 1998 the Company repossessed the rights to four Dalts restaurants through the
bankruptcy court for an amount equal to the Company's claims against the former
owner. Both the undeveloped land and restaurant assets are included in assets
held for sale (see Note 13).
PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property and equipment are carried at cost and are depreciated over their
estimated useful lives (ranging from 4 to 20 years), using the straight-line
method. Depreciation of leasehold improvements is based upon the lesser of the
applicable lease term, in the event of a lease, or the estimated useful lives of
such assets, using the straight-line method.
GOODWILL
The excess of purchase price over tangible net assets acquired is recorded
at cost and amortized over their estimated useful lives, which range from 5 to
25 years. The Company assesses the recoverability of goodwill and other
intangible assets by determining whether the asset balance can be recovered over
its remaining life through undiscounted future operating cash flows of the
acquired assets. As of December 29, 1997 and December 28, 1998, accumulated
amortization was $10,704,000 and $13,190,000, respectively.
OTHER ASSETS
The Company has investments in a number of joint ventures, which are
accounted for using the equity method. The Company's total investments in joint
ventures were $11,764,000 and $14,086,000 at December 29, 1997 and December 28,
1998, respectively. Equity in earnings (losses) of joint ventures included
within other income (expense), net was ($760,000), $751,000 and $218,000 in
1996, 1997, and 1998, respectively.
Trademarks, lease acquisition costs and other identifiable intangible assets
are recorded at cost and amortized over their estimated useful lives, which
range from 18 to 40 years. The total amount of such assets, net of accumulated
amortization, was $4,035,000 and $6,173,000 at December 29, 1997 and December
28, 1998, respectively.
Marketable securities, categorized as available for sale, consist of an
investment in equity securities of a franchisee with a cost basis of $1,100,000.
The Company records changes in fair value, net of tax, as a separate component
of stockholder's equity until a gain or loss is realized, at which time gain or
loss is recognized in net income. Net unrealized holding losses at December 29,
1997, and December 28, 1998, were $352,000 and $271,000, respectively.
Other assets also include notes receivable of $3,651,000 and $296,000, less
allowances of $588,000 and $50,000 as of December 29, 1997 and December 28,
1998, respectively.
F-14
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 1996, DECEMBER 29, 1997 AND DECEMBER 28, 1998
1. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed Of," the Company evaluates its assets at the individual restaurant
level for units not selected for closure using each restaurant's historical
operating results as a primary indicator of potential impairment. The Company
deems a restaurant's assets to be impaired if management's estimate of
undiscounted future cash flows generated directly by the assets are less than
their respective carrying value. If a restaurant's assets are deemed to be
impaired, the loss is measured by the amount by which the carrying value exceeds
their estimated fair value. Accordingly, pre-tax expenses of $1,527,000,
$237,000 and $549,000 were recorded in other (income) expense, net in the
accompanying consolidated statements of operations to reduce the carrying value
of impaired assets of ongoing restaurants in 1996, 1997 and 1998, respectively.
INCOME TAXES
Deferred tax assets and liabilities are computed based on the difference
between the financial statement and income tax basis of assets and liabilities
using the enacted marginal tax rate. Deferred income tax expenses or benefits
are based on changes in the deferred tax asset or liability from period to
period.
REVENUE RECOGNITION
Company restaurant sales include proceeds from the sale of food, beverages
and merchandise at Company owned restaurants.
The Company operates various restaurants under long-term management
agreements. The operating responsibilities associated with the managed
restaurants are substantially the same for owned restaurants, including the
payment of wages, liabilities to vendors and insurance coverage. Management fee
income and reimbursable management operating costs are recognized as managed
restaurant revenue in the accompanying consolidated statements of operations
currently based upon services performed. Expenses incurred in relationship to
the management of restaurant operations are reflected in cost of sales and
restaurant operating expenses.
Franchising revenue includes royalty fees, initial franchise fees and, in
the case of international franchisees, nonrefundable concept fees. Royalty fees
are recognized as income based on sales at franchise restaurants. Revenue from
initial franchise fees and concept fees was, in the aggregate, $3,644,000,
$5,573,000 and $4,953,000 in 1996, 1997 and 1998, respectively. Opening
franchise fees and the related expenses are recognized as the Company's
obligations regarding services to be preformed in opening a restaurant are
fulfilled, which generally is at the time a restaurant is opened. Nonrefundable
concept fees are related to international franchise development agreements and
are recognized as revenue upon restaurant openings on a pro-rata basis for the
total number of restaurants to be developed in a franchisee's territory as
specified in the development agreement.
Licensing revenue is recognized as income currently based upon sales of
retail branded products under various company trade names by third party
vendors.
F-15
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 1996, DECEMBER 29, 1997 AND DECEMBER 28, 1998
1. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
ADVERTISING
Production costs of commercials are charged to operations as the commercials
are first aired. The costs of other marketing, promotion and advertising
programs are charged to operations in the year incurred. Advertising expense was
$8,501,000, $10,763,000 and $11,759,000 in 1996, 1997 and 1998, respectively,
and is included in restaurant operating expenses in the consolidated statements
of operations.
PREOPENING EXPENSES
Preopening expenses, consisting primarily of managers' salaries and
relocation, advertising and employee payroll and related training costs incurred
prior to the opening of a restaurant, are expensed as incurred.
EARNINGS PER SHARE
In 1997 the Financial Accounting Standards Board issued Statement No. 128
"Earnings Per Share." Statement No. 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Basic earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share reflect potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. Because there is only one share of
common stock outstanding, earnings per share amounts for all periods have not
been presented.
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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
COMPREHENSIVE INCOME
The Company's comprehensive income transactions, as defined in Statement of
Financial Accounting Standard No. 130, "Reporting Comprehensive Income,"
resulted from net unrealized holding gains and losses on its marketable
securities categorized as available for sale and are classified as unrealized
holding losses of marketable securities on the accompanying consolidated balance
sheet.
RELATIONSHIP WITH SIGNIFICANT SUPPLIER
The Company relies upon a national distribution company as the primary
supplier of its food. Purchases from the distribution company were $126,062,000
in fiscal 1998. Although the Company believes alternative sources of supply are
available, any significant increase in price or failure to perform by this
national distribution company could cause food costs to increase, and have a
material adverse effect on the operating results and cash flow of the Company.
F-16
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 1996, DECEMBER 29, 1997 AND DECEMBER 28, 1998
1. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities." Statement
No. 133 requires companies to record derivatives on the balance sheet as assets
and liabilities measured at fair value. Gains or losses resulting from changes
in the fair values of those derivatives would be accounted for depending on the
use of the derivative and whether it qualifies for hedge accounting. Statement
No. 133 is effective for fiscal years beginning after June 15, 2000, with
earlier adoption encouraged. The Company is not currently involved with
derivative instruments or hedging activities, and therefore, will measure the
impact of this statement as it becomes necessary.
2. PROPERTY, EQUIPMENT AND IMPROVEMENTS:
Property, equipment and improvements, net consist of the following (in
thousands):
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Land................................................................ $ 12,444 $ 11,670
Buildings and leasehold improvements................................ 127,231 158,848
Furniture and equipment............................................. 136,807 158,295
Construction in progress............................................ 4,506 1,301
----------- -----------
280,988 330,114
Less-accumulated depreciation and amortization...................... (127,909) (149,323)
----------- -----------
Property, equipment and improvements, net........................... $ 153,079 $ 180,791
----------- -----------
----------- -----------
</TABLE>
Depreciation and amortization expense related to property, equipment and
improvements amounted to $18,828,000, $21,148,000 and $24,814,000 in 1996, 1997
and 1998, respectively.
3. ACCRUED LIABILITIES:
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Accrued compensation.................................................... $ 10,851 $ 10,985
Gift certificates liability............................................. 3,717 4,573
Deferred franchise revenue.............................................. 3,107 4,181
Advertising expenses.................................................... 3,566 2,893
Property taxes.......................................................... 2,237 2,756
Sales taxes............................................................. 2,183 2,847
Other................................................................... 6,755 8,240
--------- ---------
$ 32,416 $ 36,475
--------- ---------
--------- ---------
</TABLE>
Deferred franchise revenue consists of fees received from franchisees for
initial franchise fees and concept fees related to restaurants which have not
opened as of the end of the period. The Company is
F-17
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 1996, DECEMBER 29, 1997 AND DECEMBER 28, 1998
3. ACCRUED LIABILITIES: (CONTINUED)
obligated to provide certain design, construction and store opening assistance
for future restaurant openings.
4. OTHER LIABILITIES:
Other liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Deferred franchise revenue.............................................. $ 8,602 $ 8,964
Deferred compensation arrangements...................................... 4,318 7,510
Other................................................................... 7,912 7,085
--------- ---------
$ 20,832 $ 23,559
--------- ---------
--------- ---------
</TABLE>
5. INCOME TAXES:
The Company is included in the consolidated federal income tax return of
Carlson Companies. Under the provisions of a tax sharing agreement, the Company
is treated as a separate entity for purposes of determining the income tax
provision.
The components of the provision for income taxes reflected in the
accompanying consolidated statements of operations are as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal........................................................ $ 5,347 $ 5,524 $ 8,482
Foreign........................................................ 778 1,042 970
State.......................................................... 723 1,083 1,421
--------- --------- ---------
6,848 7,649 10,873
--------- --------- ---------
Deferred:
Federal........................................................ (2,721) 851 (2,637)
State.......................................................... (228) 240 (361)
--------- --------- ---------
(2,949) 1,091 (2,998)
--------- --------- ---------
Total income tax provision................................... $ 3,899 $ 8,740 $ 7,875
--------- --------- ---------
--------- --------- ---------
</TABLE>
Foreign taxes represent withholding taxes from international royalties.
F-18
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 1996, DECEMBER 29, 1997 AND DECEMBER 28, 1998
5. INCOME TAXES: (CONTINUED)
The following table reconciles the effective tax rate provided in the
financial statements to the statutory rate:
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Federal income taxes at the statutory rate................ 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit............ 1.6 3.4 3.1
Amortization expense...................................... 4.8 2.1 2.0
Tax credits............................................... (11.7) (5.7) (6.8)
Other items, net.......................................... 1.7 1.0 2.9
----- ----- -----
Effective income tax rate................................. 31.4% 35.8% 36.2%
----- ----- -----
----- ----- -----
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Deferred tax asset:
Deferred revenue....................................................... $ 4,563 $ 4,998
Marketable securities.................................................. 1,498 1,482
Deferred compensation.................................................. 1,108 1,744
Other.................................................................. 1,345 1,961
--------- ---------
Total deferred tax assets.............................................. 8,514 10,185
Deferred tax liabilities (primarily depreciation and amortization)....... (1,389) (62)
--------- ---------
Net deferred tax asset................................................... $ 7,125 $ 10,123
--------- ---------
--------- ---------
Current deferred tax asset............................................... $ 2,166 $ 2,509
--------- ---------
--------- ---------
Noncurrent deferred tax asset............................................ $ 4,959 $ 7,614
--------- ---------
--------- ---------
</TABLE>
The Company did not record any valuation allowance for deferred tax assets
at December 29, 1997 or December 28, 1998.
F-19
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 1996, DECEMBER 29, 1997 AND DECEMBER 28, 1998
6. LONG-TERM OBLIGATIONS:
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations consist of the following (in
thousands):
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Capital lease obligations................................................ $ 5,933 $ 8,312
Promissory notes......................................................... - 1,805
Other obligations........................................................ 106 178
--------- ---------
6,039 10,295
Less-current portion..................................................... (30) (1,498)
--------- ---------
Long-term obligations, noncurrent........................................ $ 6,009 $ 8,797
--------- ---------
--------- ---------
</TABLE>
Capital lease obligations consist primarily of long-term lease obligations
for restaurant facilities.
Payments on capital lease obligations due in each of the next five fiscal
years and thereafter are as follows (in thousands):
<TABLE>
<S> <C>
1999....................................................... $ 1,120
2000....................................................... 1,195
2001....................................................... 1,234
2002....................................................... 1,234
2003....................................................... 1,282
Thereafter................................................. 17,975
---------
24,040
Less-amounts representing interest......................... 15,728
---------
Capital lease obligations, net............................. $ 8,312
---------
---------
</TABLE>
The $1,805,000 unsecured promissory notes, arising from the acquisition of
certain restaurant assets, bear interest at an annual rate of 8.5%. Annual
principal payments of $1,363,000 and $442,000 are due in 1999 and 2000,
respectively.
LONG-TERM DEBT-AFFILIATE
Debt and the related interest costs incurred by Carlson Companies on behalf
of the Company were allocated to the Company in the form of a demand note which
is due on December 31, 2001, at an interest rate based on the cost of debt
incurred by Carlson Companies on behalf of the Company (8.4% during fiscal 1996,
9.3% during fiscal 1997 and 7.6% during fiscal 1998). Debt balances of
$32,007,000 and $70,359,000 were outstanding at December 29, 1997 and December
28, 1998, respectively (see Note 13).
F-20
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 1996, DECEMBER 29, 1997 AND DECEMBER 28, 1998
6. LONG-TERM OBLIGATIONS: (CONTINUED)
INTEREST EXPENSE, NET
Interest expense, net includes the following (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Interest expense-affiliate........................................................ $ 2,402 $ 2,423 $ 4,136
Interest expense-other............................................................ 1,783 1,655 1,810
Interest income................................................................... (1,334) (776) (208)
Interest capitalized.............................................................. (342) (731) (1,522)
--------- --------- ---------
$ 2,509 $ 2,571 $ 4,216
--------- --------- ---------
--------- --------- ---------
</TABLE>
7. OTHER RELATED-PARTY TRANSACTIONS:
The Company engages in various transactions with Carlson Companies and its
affiliates, including payment of amounts for federal and certain state income
taxes to Carlson Companies. Additionally, Carlson Companies acts as an agent of
the Company for procurement of certain food, beverages and restaurant equipment.
In addition, Carlson Companies purchases certain insurance and pays certain
insurance claims on behalf of the Company (see Note 10), for which Carlson
Companies receives an administrative fee. Carlson Companies also has guaranteed
the Company's performance under certain leases of the Company's restaurants (see
Note 8) and has leased certain restaurant properties to the Company with annual
rental expense of approximately $300,000.
Various departments within Carlson Companies bill the Company for
administrative, information technology and corporate finance related costs on an
expense reimbursement or charge for services basis. These charges are included
as a component of general and administrative expenses and totaled $1,021,000,
$1,415,000, and $1,743,000 in 1996, 1997 and 1998, respectively.
Additionally, Carlson Companies allocates certain of its general and
administrative expenses to its subsidiaries based on each subsidiaries' business
activities, as measured by its sales, payroll expense and property, in
proportion to the business activity of all Carlson Companies affiliates. These
charges are included as a component of general and administrative expenses and
totaled $9,474,000, $7,142,000, and $11,360,000 in 1996, 1997 and 1998,
respectively.
The Company has an arrangement whereby the Company can make deposits with or
borrow funds from Carlson Companies. The funds deposited with or borrowed from
Carlson Companies do not earn interest income or incur interest expense. The
Company had deposits under terms of this arrangement of $15,867,000 and
$38,092,000 at December 29, 1997 and December 28, 1998, respectively, which are
included in cash and cash equivalents in the accompanying consolidated balance
sheets.
In fiscal 1996, the Company paid a real estate affiliate of Carlson
Companies a fee of $1,191,000 for services provided related to the management
and sale of a building owned by the Company which contained a T.G.I. Friday's
restaurant and commercial office space.
F-21
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 1996, DECEMBER 29, 1997 AND DECEMBER 28, 1998
8. OPERATING LEASES:
The Company leases restaurant facilities, its corporate headquarters
building, and certain equipment under operating leases with fixed terms ranging
from two to twenty years. Most of the leases for restaurant facilities require
the Company to pay certain expenses and the greater of an annual base rent
amount or a percentage of annual gross sales, as defined. Rent expense for
fiscal years 1996, 1997 and 1998 was $25,373,000, $27,357,000 and $29,666,000,
respectively (including $2,462,000, $2,802,000 and $3,188,000, respectively,
attributable to percentage rent in excess of base amounts).
At December 28, 1998, the minimum rental commitments under the long-term
noncancelable leases are as follows (in thousands):
<TABLE>
<S> <C>
1999.............................................................. $ 32,880
2000.............................................................. 30,963
2001.............................................................. 29,036
2002.............................................................. 27,217
2003.............................................................. 23,201
Thereafter........................................................ 56,673
---------
Total............................................................. $ 199,970
---------
---------
</TABLE>
Certain of these leases, with commitments totaling $41,900,000, are related
to restaurants, which have been closed or sold to franchisees. The underlying
lease obligations have been assumed by third parties, however, the Company
remains the primary obligor on these leases.
Carlson Companies has guaranteed repayment of certain of the aforementioned
leases. Rental commitments guaranteed by Carlson Companies were $4,967,000 at
December 28, 1998.
In addition, as part of its development program, the Company continues to
negotiate and enter into leases related to future restaurant sites. Generally, a
commitment is signed whereby rental payments commence upon the occurrence of
certain events. As of December 28, 1998, the Company had approved leases, not
included in the above table, which will require future base rental payments of
approximately $14,500,000 and had committed a total cost to the Company of
approximately $24,000,000 for such restaurants.
9. STOCKHOLDER'S EQUITY:
The Company's outstanding common stock consists of one share of stock which
is held by Carlson Companies (see Note 13).
10. OTHER COMMITMENTS AND CONTINGENCIES:
The Company and its subsidiaries are parties to various legal proceedings
and complaints arising in the ordinary course of business. Since most of these
matters are covered by insurance, management believes that the ultimate
resolution of these matters will not have a material adverse effect on the
Company's consolidated financial statements.
Casualty, general liability and property insurance premiums are paid based
on historical claims experience and the provisions of the insurance policies.
Insurance expense was $11,697,000, $8,764,000
F-22
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 1996, DECEMBER 29, 1997 AND DECEMBER 28, 1998
10. OTHER COMMITMENTS AND CONTINGENCIES: (CONTINUED)
and $8,520,000 in fiscal years 1996, 1997 and 1998, respectively, of which
$11,005,000, $7,211,000 and $7,313,000, respectively, was paid to an insurance
carrier owned by Carlson Companies.
The Company, through Carlson Companies, has standby letters of credit
totaling $2,907,000 available to secure potential casualty and general liability
insurance costs.
The Company has a 401(k) Savings and Profit Sharing Plan. The plan allows
eligible employees to contribute up to 10 percent of their compensation on a
pre-tax basis. The Company makes a contribution match of 25 percent of employee
contributions and may make a discretionary contribution match up to 25 percent
of employee contributions based upon the Company's profitability. The Board of
Directors authorizes discretionary contributions to the plan. The contribution
expense for the plan was $1,153,000, $1,191,000, and $1,343,000 in 1996, 1997
and 1998, respectively.
The Company has a deferred compensation plan for highly compensated
employees. The intent of the program is to allow these employees to contribute
to a retirement plan after reaching the maximum limits of the 401(k) Savings and
Profit Sharing Plan. The Company, for the benefit of the employees, administers
contributions to the plan. The expense for the deferred compensation plan was
$143,000, $338,000 and $926,000 in 1996, 1997 and 1998, respectively.
Certain employees of the Company participate in a long-term incentive plan,
which is administered by Carlson Companies. The expense for the long-term
incentive plan totaled $1,393,000, $1,305,000, and $1,562,000 in 1996, 1997 and
1998, respectively, (see Note 13).
11. SUPPLEMENTAL CASH FLOW INFORMATION:
The following is supplemental cash flow information for the fiscal years
ended (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Cash paid during the year for:
Interest.......................................................................... $ 3,490 $ 3,543 $ 5,311
Income taxes...................................................................... 9,984 4,616 10,595
Non-cash investing and financing activities:
Acquisition of restaurant assets through forgiveness of notes and other
receivables..................................................................... 3,130 - 2,431
Debt incurred for purchase of restaurant assets................................... 1,533 - 1,805
</TABLE>
F-23
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 1996, DECEMBER 29, 1997 AND DECEMBER 28, 1998
12. SEGMENT AND RELATED INFORMATION:
The Company adopted Statement of Financial Accounting Standard No. 131,
"Disclosures About Segments of an Enterprise and Related Information," in 1998,
which establishes standards for reporting certain information about operating
segments, their products and services, geographic areas of operations and major
customers. The Company's two reportable segments, United States and
international restaurant operations, are strategic business units that offer
similar restaurant products and services, but are managed separately.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. There are no intersegment sales
or transfers. The Company evaluates performance based on operating profit of the
respective segments, before income taxes, accounting changes, nonrecurring items
and interest income and expense.
UNITED STATES RESTAURANT OPERATIONS
The United States restaurant segment is responsible for the development,
operation, and franchising of restaurants. Revenues and operating profits for
the United States restaurant segment are derived from operations of company
owned or company operated restaurants, initial franchise fees and ongoing
royalty fees.
INTERNATIONAL RESTAURANT OPERATIONS
The international restaurant segment is primarily responsible for expanding
business through the franchise system, which includes franchise and joint
venture development. Revenues and operating profits for the international
segment are derived from franchise and concept fees for exclusive development
rights of a geographic territory and ongoing royalty fees.
Segment information for total assets and capital expenditures are not
presented as such information is not used in measuring the segment's performance
or allocating resources among segments and is impracticable to prepare.
Additionally, the international segment operating profit is primarily derived
from franchise activities which require minimal assets or capital expenditures.
F-24
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 1996, DECEMBER 29, 1997 AND DECEMBER 28, 1998
12. SEGMENT AND RELATED INFORMATION: (CONTINUED)
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The "Other" column includes corporate
items and other income and expense items not allocated to reportable segments
(in thousands):
<TABLE>
<CAPTION>
UNITED
STATES INTERNATIONAL
RESTAURANT RESTAURANT
OPERATIONS OPERATIONS OTHER TOTAL
------------ ------------ --------- ----------
<S> <C> <C> <C> <C>
1998
Revenues...................................................... $ 586,678 $ 12,610 $ - $ 599,288
Income (loss) before income taxes............................. 40,852 1,625 (20,711) 21,766
Depreciation and amortization expense......................... 25,755 483 1,219 27,457
Equity in earnings of joint ventures.......................... 214 4 - 218
1997
Revenues...................................................... $ 521,820 $ 12,253 $ - $ 534,073
Income (loss) before income taxes............................. 32,847 3,087 (11,493) 24,441
Depreciation and amortization expense......................... 21,623 559 1,219 23,401
Equity in earnings of joint ventures.......................... 739 12 - 751
1996
Revenues...................................................... $ 493,476 $ 8,740 $ - $ 502,216
Income (loss) before income taxes............................. 23,522 1,481 (12,591) 12,412
Depreciation and amortization expense......................... 19,158 312 1,242 20,712
Equity in losses of joint ventures............................ (195) (565) - (760)
</TABLE>
The following table presents the details of "Other" income (loss) before
income taxes (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Corporate expenses.................................................. $ (9,474) $ (7,689) $ (11,510)
Interest expense, net............................................... (2,509) (2,571) (4,216)
Goodwill amortization expense....................................... (1,242) (1,219) (1,219)
Other income (expense), net......................................... 634 (14) (3,766)
---------- ---------- ----------
Total........................................................... $ (12,591) $ (11,493) $ (20,711)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-25
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 1996, DECEMBER 29, 1997 AND DECEMBER 28, 1998
13. SUBSEQUENT EVENTS:
On June 16, 1999, the Company's Board of Directors declared a $175,000,000
dividend to Carlson Companies of which $120,000,000 was paid in the form of a
promissory note on June 28, 1999 and $55,000,000 was paid thereafter. The
promissory note bore annual interest at 7.8% and was due June 30, 2004. On
August 19, 1999, the Company entered into an Intercompany Credit Agreement with
Carlson Companies, under which the Company can borrow up to $225,000,000 prior
to the completion of the anticipated initial public offering of the Company's
securities, and $105,000,000 after completion of the anticipated offering and
application of the net proceeds to repay a portion of our intercompany
indebtedness. The amounts borrowed under this agreement bear interest at the
three-month London Inter-Bank Offered Rate ("LIBOR") on the date of the advance
plus 1.25%. This agreement expires on December 31, 2001, or earlier if certain
events occur, including if Carlson Companies' ownership of all outstanding
shares of the Company's common stock falls below 50%, in which case the
agreement may be terminated upon 90 days notice by either party. All
intercompany indebtedness was refinanced with this agreement.
In July 1999, the Company sold the assets of and rights to four Dalts
restaurants for $2,750,000. This price approximated the net carrying value of
the four restaurants. The purchase price was financed by a promissory note from
the purchaser and is collateralized by the restaurant assets.
In August 1999, the Company announced its plans to register and sell shares
of common stock in an initial public offering. The Company intends to use the
net proceeds to repay a portion of the borrowings under the Intercompany Credit
Agreement.
F-26
<PAGE>
INSIDE BACK COVER
[Logos of Cafe and Dinner House concepts.]
<TABLE>
<S> <C>
SAMBA ROOM ITALIANNI'S RESTAURANTS
- - Cool Cocktails - Casual Italian Dishes
- - Latin Fusion Flavors - Generous Portions
- - Smooth, Stylish Service - Authentic Italian
- - Intoxicating Rhythms - Homestyle Cuisine
- - Pre-Castro Havana - Warmhearted Service
- - Jet-Set Drum Beat - Affordable Wine Selection
- - Sensual, Taboo - Family Value
TAQUERIA CANONITA STAR CANYON-NEW TEXAS CUISINE
- - Mexico City Soul Food - Stephan Pyles, Award Winning Chef
- - Buzzing Energy - New Texas Cuisine
- - Fast and Furious - Cowboy Chic
- - Affordable, Informal - Southern Hospitality
- - Hand-tooled - Flawless Service
- - Colorful Style - Innovative, Genuine Comfort
- - Sippin' Tequila
TIMPANO ITALIAN CHOPHOUSE
- Big City Chophouse
- Swank Bar
- Crisp, Snappy Service
- Martini-fueled
- Italian Accents
- Big Night
- Larger than life
</TABLE>
[Graphic of globe with CRW concept logos circling and names of all countries in
which CRW operates in background.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
<TABLE>
<S> <C>
[CRW [TGIF
Logo] Logo]
</TABLE>
------------------------
Prospectus
, 1999
------------------------
[BANC OF AMERICA SECURITIES LLC
MERRILL LYNCH & COMORGAN STANLEY DEAN WITTER]
Until , 1999, all dealers that buy, sell or trade the common
stock may be required to deliver a prospectus, regardless of whether they are
participating in the offering. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses in connection with the issuance and distribution of the shares of
Class A common stock being registered hereunder, other than underwriting
commissions and expenses, are set forth below.
<TABLE>
<S> <C>
SEC registration fee............................................ $ 40,310
NASD filing fee................................................. 15,000
New York Stock Exchange listing fee............................. *
Legal fees and expenses......................................... *
Accounting fees and expenses.................................... *
Printing expenses............................................... *
Transfer agent fees and expenses................................ *
Miscellaneous expenses.......................................... *
-----------
Total....................................................... $ *
-----------
-----------
</TABLE>
- ------------------------
* To be filed by amendment.
Each of the amounts set forth above, other than the SEC registration fee and
the NASD filing fee, is an estimate.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, or DGCL, permits
indemnification of officers, directors and other corporate agents under certain
circumstances and subject to certain limitations. The Registrant's Amended and
Restated Certificate of Incorporation and Restated By-laws provide that the
Registrant shall indemnify its directors, officers, employees and agents to the
full extent permitted by the DGCL, including circumstances in which
indemnification is otherwise discretionary under Delaware law. In addition, the
Registrant plans to enter into separate indemnification agreements with its
directors and executive officers which will require the Registrant, among other
things, to indemnify them against certain liabilities which may arise by reason
of their status or service, other than liabilities arising from acts or
omissions not in good faith or willful misconduct. Carlson Companies, Inc. also
indemnifies its employees against claims, losses or damages incurred as a result
of their actions in the course of their employment, including service as a
director of the Registrant. The Registrant also maintains director and officer
liability insurance.
These indemnification provisions and the indemnification agreements to be
entered into between the Registrant and its executive officers and directors may
be sufficiently broad to permit indemnification of the Registrant's executive
officers and directors for liabilities, including reimbursement of expenses
incurred, arising under the Securities Act of 1933.
The Underwriting Agreement filed as Exhibit 1 to this Registration Statement
provides for indemnification by the Underwriters of the Registrant and its
officers and directors for certain liabilities arising under the Securities Act
or 1933, or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Not applicable.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation of the Registrant, as amended and as currently in effect.
3.2 Form of Amended and Restated Certificate of Incorporation of the Registrant to be effective upon
completion of this offering.
3.3 Bylaws of the Registrant, as currently in effect.
3.4 Form of Restated By-Laws of the Registrant to be effective upon completion of this offering.
4.1 Specimen of Class A common stock certificate.*
4.2 Specimen of Class B common stock certificate.*
5 Opinion of Faegre & Benson LLP.*
10.1 Shared Services Agreement.
10.2 Tax Sharing Agreement.
10.3 Intercompany Credit Agreement.
10.4 Form of 1999 Stock Incentive Plan.*
10.5 T.G.I. Friday's Inc. Deferred Compensation Plan, as amended.
10.6 Deferred Compensation Agreement between T.G.I. Friday's Inc. and Wallace Doolin.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Faegre & Benson LLP (to be included in Exhibit No. 5 to the Registration Statement).
24 Powers of Attorney.
27 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by Amendment.
(b) FINANCIAL STATEMENT SCHEDULES
Schedule II, Valuation and Qualifying Accounts and Reserves
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions summarized in Item 14 above, or otherwise,
the Registrant has been advised that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification is
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act, and will be governed
by the final adjudication of such issue.
II-2
<PAGE>
The undersigned Registrant hereby undertakes to provide to the Underwriters,
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant under Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas,
on August 20, 1999.
<TABLE>
<S> <C> <C>
CARLSON RESTAURANTS WORLDWIDE INC.
By: /s/ WALLACE B. DOOLIN
-----------------------------------------
Wallace B. Doolin
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on August 20, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------- ----------------------------------------------
<C> <S>
/s/ WALLACE B. DOOLIN President, Chief Executive Officer and
------------------------------------------- Director
Wallace B. Doolin (Principal Executive Officer and Director)
/s/ JEFF D. WARNE
------------------------------------------- Chief Financial Officer
Jeff D. Warne (Principal Financial and Accounting Officer)
/s/ CURTIS C. NELSON*
------------------------------------------- Director
Curtis C. Nelson
/s/ EDWIN C. GAGE*
------------------------------------------- Director
Edwin C. Gage
/s/ MARTYN R. REDGRAVE*
------------------------------------------- Director
Martyn R. Redgrave
/s/ RALPH W. BEHA*
------------------------------------------- Director
Ralph W. Beha
</TABLE>
- ------------------------
* Wallace B. Doolin, by signing his name hereto, does hereby sign this
document on behalf of each of the above-named officers and/or directors of
the Registrant pursuant to powers of attorney duly executed by such persons.
<TABLE>
<S> <C> <C>
By: /s/ WALLACE B. DOOLIN
-----------------------------------------
Wallace B. Doolin, Attorney-in-Fact
</TABLE>
II-4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholder of
Carlson Restaurants Worldwide Inc.
We have audited in accordance with generally accepted auditing standards the
consolidated financial statements of Carlson Restaurants Worldwide Inc. and
subsidiaries included in this registration statement on Form S-1 and have issued
our report thereon dated February 15, 1999 (except with respect to the matters
discussed in Note 13, as to which the date is August 19, 1999). Our audits were
made for the purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. Schedule II, Valuation and Qualifying Accounts, is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic consolidated
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Dallas, Texas,
February 15, 1999
S-1
<PAGE>
SCHEDULE II
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED (CREDITED)
BEGINNING OF TO EXPENSE BALANCE AT
PERIOD (INCOME) DEDUCTIONS(A) END OF PERIOD
------------- ------------------- ------------- -------------
<S> <C> <C> <C> <C>
Allowance for non-collection of accounts
receivable:
1996......................................... $ 1,146 $ 587 $ (374) $ 1,359
1997......................................... 1,359 375 (911) 823
1998......................................... 823 1,012 (309) 1,526
Allowance for non-collection of notes receivable:
1996......................................... 4,447 (1,200) (1,618) 1,629
1997......................................... 1,629 (925) (116) 588
1998......................................... 588 9 (547) 50
</TABLE>
- ------------------------
(a) Deductions result from write-off of accounts or notes receivable and the
related allowance for non-collection.
S-2
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation of the Registrant, as amended and as currently in effect.
3.2 Form of Amended and Restated Certificate of Incorporation of the Registrant to be effective upon
completion of this offering.
3.3 Bylaws of the Registrant, as currently in effect.
3.4 Form of Restated By-Laws of the Registrant to be effective upon completion of this offering.
4.1 Specimen of Class A common stock certificate.*
4.2 Specimen of Class B common stock certificate.*
5 Opinion of Faegre & Benson LLP.*
10.1 Shared Services Agreement.
10.2 Tax Sharing Agreement.
10.3 Intercompany Credit Agreement.
10.4 Form of 1999 Stock Incentive Plan.*
10.5 T.G.I. Friday's Inc. Deferred Compensation Plan, as amended.
10.6 Deferred Compensation Agreement between T.G.I. Friday's Inc. and Wallace Doolin.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Faegre & Benson LLP (to be included in Exhibit No. 5 to the Registration Statement).
24 Powers of Attorney.
27 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by Amendment.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
FRIDAY'S HOLDINGS, INC.
_________
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes
hereinafter stated, under the provisions and subject to the requirements of
the laws of the State of Delaware (particularly Chapter 1, Title 8 of the
Delaware Code and the acts amendatory thereof and supplemental thereto, and
known, identified and referred to as the "General Corporation Law of the
State of Delaware"), hereby certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is
Friday's Holdings, Inc.
SECOND: The address, including street, number, city, and county, of
the registered office of the corporation in the State of Delaware is 32
Loockerman Square, Suite L-100, City of Dover, County of Kent; and the name
of the registered agent of the corporation in the State of Delaware is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation
shall have authority to issue is One Hundred (100). The par value of each of
such shares is One Dollar ($1.00). All such shares are of one class and are
shares of Common Stock.
FIFTH: The name and the mailing address of the incorporator are as
follows:
NAME MAILING ADDRESS
N. S. Truax 32 Loockerman Square, Suite L-100
Dover, Delaware 19901
SIXTH: The corporation is to have perpetual existence.
<PAGE>
SEVENTH: Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a
summary way of this corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for this
corporation under the provisions of section 291 of Title 8 of the Delaware
Code or on the application of trustees in dissolution or of any receiver or
receivers appointed for this corporation under the provisions of Section 279
of Title 8 of the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three-fourths in value
of the creditors or class of creditors, and/or of the stockholders or class
of stockholders of this corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this corporation as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders,
of this corporation, as the case may be, and also on this corporation.
EIGHTH: For the management of the business and for the conduct of
the affairs of the corporation, and in further definition, limitation and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the
affairs of the corporation shall be vested in its Board of
Directors. The number of directors which shall constitute the
whole Board of Directors shall be fixed by, or in the manner
provided in, the By-Laws. The phrase "whole Board" and the phrase
"total number of directors" shall be deemed to have the same
meaning, to wit, the total number of directors which the
corporation would have if there were no vacancies. No election of
directors need be by written ballot.
2. After the original or other By-Laws of the corporation
have been adopted, amended, or repealed, as the case may be, in
accordance with the provisions of Section 109 of the General
Corporation Law of the State of Delaware, and, after the
corporation has received any payment for any of its stock, the
power to adopt, amend, or repeal the By-Laws of the corporation may
be exercised by the Board of Directors of the corporation;
provided, however, that any provision for the classification of
directors of the corporation for staggered terms pursuant to the
provisions of subsection (d) of Section 141 of the General
Corporation Law of the State of Delaware shall be set forth in an
initial By-Law or in a By-Law adopted by the stockholders entitled
to vote of the corporation unless provisions for such
classification shall be set forth in this certificate of
incorporation.
<PAGE>
3. Whenever the corporation shall be authorized to issue
only one class of stock, each outstanding share shall entitle the
holder thereof to notice of, and the right to vote at, any meeting
of stockholders. Whenever the corporation shall be authorized to
issue more than one class of stock, no outstanding share of any
class of stock which is denied voting power under the provisions of
the certificate of incorporation shall entitle the holder thereof
to the right to vote at any meeting of stockholders except as the
provisions of paragraph (2) of subsection (b) of section 242 of the
General Corporation Law of the state of Delaware shall otherwise
require; provided, that no share of any such class which is
otherwise denied voting power shall entitle the holder thereof to
vote upon the increase or decrease in the number of authorized
shares of said class.
NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the provisions of
paragraph (7) of subsection (b) of Section 102 of the General Corporation Law
of the State of Delaware, as the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to
in or covered by said section, and the indemnification provided for herein
shall not be deemed exclusive of any other rights to which those indemnified
may be entitled under any By-Law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ELEVENTH: The corporation is prohibited from ever conducting
business outside the state of Texas. All of the corporation's business will
be conducted in the state of Texas. All employees or agents of the
corporation shall be prohibited from conducting business on behalf of the
corporation outside of the state of Texas.
TWELFTH: From time to time any of the provisions of this certificate
of incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and
all rights at any time conferred upon the stockholders of the corporation by
this certificate of incorporation are granted subject to the provisions of
this Article TWELFTH.
<PAGE>
Signed on December 13, 1990.
/s/ N.S. Truax
---------------------------------------
N.S. Truax
Incorporator
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF
INCORPORATION
OF
FRIDAY'S HOLDINGS, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
FRIDAY'S HOLDINGS, INC.
2. The certificate of incorporation of the corporation is hereby amended by
striking out Article I thereof and by substituting in lieu of said Article
the following new Article: "The name of the corporation is FRIDAY'S
HOSPITALITY WORLDWIDE INC."
3. The amendment of the certificate of incorporation herein certified has
been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
The effective time of the amendment herein certified shall be January 12,
1995.
Signed on January 10, 1995.
/s/ Carol M. Chopp
------------------------------------------
Carol M. Chopp, Vice President & Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF
INCORPORATION
OF
FRIDAY'S HOSPITALITY WORLDWIDE INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
FRIDAY'S HOSPITALITY WORLDWIDE INC.
2. The certificate of incorporation of the corporation is hereby amended by
striking out Article I thereof and by substituting in lieu of said Article
the following new Article: "The name of the corporation is CARLSON
RESTAURANTS WORLDWIDE INC."
3. The amendment of the certificate of incorporation herein certified has
been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
The effective time of the amendment herein certified shall be February 19,
1998.
Signed on February 19, 1998.
/s/ Carol M. Chopp
------------------------------------------
Carol M. Chopp, Vice President & Secretary
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CARLSON RESTAURANTS WORLDWIDE INC.
The undersigned, Wallace B. Doolin and Leslie Sharman, certify that
they are the President and Secretary, respectively, of Carlson Restaurants
Worldwide Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Corporation"), and do hereby certify as follows:
1. The name of the Corporation is Carlson Restaurants Worldwide Inc.
The Corporation was originally incorporated under the name Friday's Holdings,
Inc., and the original Certificate of Incorporation of the Corporation was
filed in the office of the Secretary of State of the State of Delaware on
December 13, 1990.
2. This Amended and Restated Certificate of Incorporation was duly
adopted by the Corporation's stockholders by written action pursuant to
Sections 228, 242 and 245 of the General Corporation Law of the State of
Delaware and the written notice required by Section 228 of the General
Corporation Law of the State of Delaware (the "DGCL") has been given to all
stockholders.
3. The text of the Amended and Restated Certificate of Incorporation
as heretofore amended or supplemented is hereby restated and further amended
to read in its entirety as follows:
FIRST: The name of the Corporation is Carlson Restaurants Worldwide
Inc.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1013 Centre Road, in the City of Wilmington, County
of New Castle, Delaware 19805. The name of the registered agent of the
Corporation in the State of Delaware is Corporation Service Company.
THIRD: The purpose of this Corporation is to engage in any lawful
act or activity for which corporations may be organized under the DGCL as the
same exists or may hereafter be amended.
FOURTH:
Section 1. CAPITAL STOCK.
(a) The total number of shares of stock which the Corporation shall
have authority to issue is 145,000,000 shares, consisting of 135,000,000
shares of Common Stock, par value $.01 per share (the "Common Stock"), and
10,000,000 shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock"). The Common Stock of the Corporation shall be divided
into two classes, consisting of Class A Common Stock and Class B
<PAGE>
Common Stock. The Preferred Stock may be issued in one or more series having
such designations as may be fixed by the Board of Directors.
(b) The Board of Directors is authorized to provide for the issue of
all or any shares of the Common Stock and the Preferred Stock, to determine
the number of shares of and to fix for any series of Preferred Stock such
voting powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights,
and such qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions adopted by the Board of
Directors or a duly authorized committee thereof providing for the issue of
such series and as may be permitted by the DGCL.
(c) The number of authorized shares of any class or classes of stock
may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of a majority of the Common Stock
of the Corporation irrespective of the provisions of Section 242(b)(2) of the
DGCL.
Section 2. COMMON STOCK.
(a) ISSUANCE AND CONSIDERATION. Any unissued or treasury shares of
the Common Stock may be issued for such consideration as may be fixed in
accordance with applicable law from time to time by the Board of Directors.
(b) DIVIDENDS. Subject to the rights of holders of the Preferred
Stock, the holders of the Common Stock shall be entitled to receive, when and
as declared by the Board of Directors, out of the assets of the Corporation
which are by law available therefor, dividends payable either in cash, in
property, or in shares of stock and the holders of the Preferred Stock shall
not be entitled to participate in any such dividends (unless otherwise
provided by the Board of Directors in any resolution providing for the issue
of a series of Preferred Stock).
(c) NUMBER OF SHARES. Of the 135,000,000 shares of Common Stock of
the Corporation, 100,000,000 shares are designated as shares of Class A
Common Stock and 35,000,000 shares are designated as shares of Class B Common
Stock.
(d) POWERS, PREFERENCES, ETC. The following is a statement of the
powers, preferences and relative participating, optional or other special
rights and qualifications, limitations and restrictions of the Class A Common
Stock and Class B Common Stock of the Corporation:
(1) Except as otherwise set forth below in this Article Fourth,
the powers, preferences and relative participating, optional or other special
rights and qualifications, limitations or restrictions of the Class A Common
Stock and Class B Common Stock shall be identical in all respects.
2
<PAGE>
(2) Subject to the rights of the holders of Preferred Stock, and
subject to any other provisions of this Amended and Restated Certificate of
Incorporation, holders of Class A Common Stock and Class B Common Stock shall
be entitled to receive such dividends and other distributions in cash, stock
of any corporation or property of the Corporation as may be declared thereon
by the Board of Directors from time to time out of assets or funds of the
Corporation legally available therefor and shall share equally on a per share
basis in all such dividends and other distributions. In the case of
dividends or other distributions payable in Common Stock, including
distributions pursuant to stock splits or divisions of Common Stock of the
Corporation, only shares of Class A Common Stock shall be paid or distributed
with respect to Class A Common Stock or Class B Common Stock. Neither the
shares of Class A Common Stock nor the shares of Class B Common Stock may be
reclassified, subdivided or combined unless such reclassification,
subdivision or combination occurs simultaneously and in the same proportion
for each class.
(3) At every meeting of the stockholders of the Corporation
every holder of Class A Common Stock shall be entitled to one vote in person
or by proxy for each share of Class A Common Stock standing in his or her
name on the transfer books of the Corporation, and every holder of Class B
Common Stock shall be entitled to ten votes in person or by proxy for each
share of Class B Common Stock standing in his or her name on the transfer
books of the Corporation in connection with the election of directors and all
other matters submitted to a vote of stockholders. Except as may be
otherwise required by law or by this Article Fourth, the holders of Class A
Common Stock and Class B Common Stock shall vote together as a single class,
subject to any voting rights which may be granted to holders of Preferred
Stock, on all matters submitted to a vote of the holders of Common Stock.
(4) In the event of any dissolution, liquidation or winding up
of the affairs of the Corporation, whether voluntary or involuntary, after
payment in full of the amounts required to be paid to the holders of
Preferred Stock, the remaining assets and funds of the Corporation shall be
distributed pro rata to the holders of the Class A Common Stock and Class B
Common Stock. For the purposes of this paragraph (d)(4), the voluntary
sale, conveyance, lease, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the assets
of the Corporation or a consolidation or merger of the Corporation with one
or more other corporations (whether or not the Corporation is the corporation
surviving such consolidation or merger) shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary.
(5) (A) Each share of Class B Common Stock is convertible at the
option of the holder thereof into one share of Class A Common Stock. At the
time of a voluntary conversion, the holder of shares of Class B Common Stock
shall deliver to the office of the Corporation or any transfer agent for the
Class B Common Stock (i) the certificate or certificates representing the
shares of Class B Common Stock to be converted, duly endorsed in blank or
accompanied by proper instruments of transfer, and (ii) written notice to the
Corporation stating that such holder elects to convert such share or shares
and stating the name and address in which each certificate for shares of
Class A Common Stock issued upon such conversion is to be issued. Such
voluntary conversion shall be deemed to have been effected
3
<PAGE>
at the close of business on the date when such delivery is made to the
Corporation or such transfer agent of the shares to be converted, and the
person exercising such voluntary conversion shall be deemed to be the holder
of record of the number of shares of Class A Common Stock issuable upon such
conversion at such time. The Corporation shall promptly deliver certificates
evidencing the appropriate number of shares of Class A Common Stock to such
person.
(B) Each share of Class B Common Stock shall automatically convert
into one share of Class A Common Stock upon the transfer of such share if,
after such transfer, such share is not beneficially owned by Carlson
Companies, Inc., its wholly-owned subsidiaries or successors ("Carlson
Companies") unless such transfer is effected in connection with a transfer of
Class B Common Stock to the beneficial owners of Carlson Companies as a
dividend intended to be on a tax-free basis under the Internal Revenue Code
of 1986, as amended from time to time. For purposes of this paragraph (d)(5),
the term "beneficially owned" with respect to shares of Class B common Stock
means ownership by a person who, directly or indirectly, through any contract,
arrangement, understan ding, relationship or otherwise controls the voting
power (which includes the power to vote or to direct the voting of) of such
Class B Common Stock.
Each share of Class B Common Stock shall automatically convert into
one share of Class A Common Stock on the date on which the number of shares
of Class B Common Stock outstanding is less than 20% of the outstanding
shares of Common Stock.
As promptly as practicable after the time of conversion, upon the
delivery to the Corporation of certificates formerly representing shares of
Class B Common Stock, the Corporation shall deliver or cause to be delivered,
to or upon the written order of the record holder of the surrendered
certificates formerly representing shares of Class B Common Stock, a
certificate of certificates representing the number of fully paid and
nonassessable shares of Class A Common Stock into which the shares of Class B
Common Stock formerly represented by such certificates have been converted in
accordance with the provisions of this paragraph (d)(5)(B).
(C) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but
unissued Common Stock and its issued Common Stock held in its treasury for
the purpose of effecting any conversion of the Class B Common Stock pursuant
to this paragraph (d)(5), the full number of shares of Class A Common Stock
then deliverable upon any such conversion of all outstanding shares of Class
B Common Stock.
Immediately upon such conversion, the rights of the holders of shares
of Class B Common Stock as such shall cease and such holders shall be treated
for all purposes as having become the record owners of the shares of Class A
Common Stock issuable upon such conversion; provided, however, that such
persons shall be entitled to receive when paid any dividends declared on the
Class B Common Stock as of a record date preceding the time of such
conversion and unpaid as of the time of such conversion.
4
<PAGE>
(D) The Corporation will pay any and all documentary, stamp or
similar issue or transfer taxes payable in respect of the issue or delivery
of shares of one class of Common Stock on the conversion of shares of the
other class of Common Stock pursuant to this paragraph (d)(5); provided,
however, that the Corporation shall not be required to pay any tax which may
be payable in respect of any registration of transfer involved in the issue
or delivery of shares of one class of Common Stock in a name other than that
of the registered holder of the other class of Common Stock converted, and no
such issue or delivery shall be made unless and until the person requesting
such issue has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(E) Concurrently with any conversion of Class B Common Stock into
Class A Common Stock effected pursuant to paragraphs (d)(5)(A) and (B)
above, each share of Class B Common Stock that is converted (i) shall be
retired and canceled and shall not be reissued and (ii) shall proportionally
decrease the number of shares of Class B Common Stock designated hereby. The
Secretary of the Corporation shall be, and hereby is, authorized and directed
to file with the Secretary of State of the State of Delaware one or more
Certificates of Decrease of Designated Shares to record any such decrease in
designated shares of Class B Common Stock.
(F) Immediately upon the effectiveness of this Amended and Restated
Certificate of Incorporation each share of common stock of the Corporation,
par value $1.00 per share, that is issued and outstanding immediately prior
to such effectiveness, shall be changed into and reclassified as ___________
shares of Class B Common Stock.
Section 3. PREFERRED STOCK.
(a) SERIES AND LIMITS OF VARIATIONS BETWEEN SERIES. Any unissued or
treasury shares of the Preferred Stock may be issued from time to time in one
or more series for such consideration as may be fixed from time to time by
the Board of Directors and each share of a series shall be identical in all
respects with the other shares of such series, except that, if the dividends
thereon are cumulative, the date from which they shall be cumulative may
differ. Before any shares of Preferred Stock of any particular series shall
be issued, a certificate shall be filed with the Secretary of State of
Delaware setting forth the designation, rights, privileges, restrictions, and
conditions to be attached to the Preferred Stock of such series and such
other matters as may be required, and the Board of Directors shall fix and
determine, and is hereby expressly empowered to fix and determine, in the
manner provided by law, the particulars of the shares of such series (so far
as not inconsistent with the provisions of this Article Fourth applicable to
all series of Preferred Stock), including, but not limited to, the following:
(1) the distinctive designation of such series and the number of
shares which shall constitute such series, which number may be increased
(except where otherwise provided by
5
<PAGE>
the Board of Directors in creating such series) or decreased (but not below
the number of shares thereof then outstanding) from time to time by like
action of the Board of Directors;
(2) the annual rate of dividends payable on shares of such series,
the conditions upon which such dividends shall be payable and the date from
which dividends shall be cumulative in the event the Board of Directors
determines that dividends shall be cumulative;
(3) whether such series shall have voting rights, in addition to the
voting rights provided by law and, if so, the terms of such voting rights;
(4) whether such series shall have conversion privileges and, if so,
the terms and conditions of such conversion, including, but not limited to,
provision for adjustment of the conversion rate upon such events and in such
manner as the Board of Directors shall determine;
(5) whether or not the shares of such series shall be redeemable and,
if so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(6) whether such series shall have a sinking fund for the redemption
or purchase of shares of that series and, if so, the terms and amount of such
sinking fund;
(7) the rights of the shares of such series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
and
(8) any other relative rights, preferences and limitations of such
series.
Section 4. NO PREEMPTIVE RIGHTS. Except as otherwise set forth above
in this Article Fourth, no holder of shares of this Corporation of any class
shall be entitled, as such, as a matter of right, to subscribe for or
purchase shares of any class now or hereafter authorized, or to purchase or
subscribe for securities convertible into or exchangeable for shares of the
Corporation or to which there shall be attached or appertain any warrants or
rights entitling the holders thereof to purchase or subscribe for shares.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
Section 1. The management of the business and the conduct of the
affairs of the Corporation shall be vested in the Board of Directors. The
number of directors which
6
<PAGE>
shall constitute the whole Board of Directors shall be fixed by, or in the
manner provided in, the By-Laws. The phrase "whole Board" and the phrase
"total number of directors" shall be deemed to have the same meaning, to wit,
the total number of directors which the Corporation would have if there were
no vacancies. No election of directors need be by written ballot.
Section 2. Whenever the Corporation shall be authorized to issue
only one class of stock, each outstanding share shall entitle the holder
thereof to notice of, and the right to vote at, any meeting of stockholders.
Whenever the Corporation shall be authorized to issue more than one class of
stock, no outstanding share of any class of stock which is denied voting
power under the provisions of this Certificate of Incorporation shall entitle
the holder thereof to the right to vote at any meeting of stockholders
except as the provisions of paragraph (2) of subsection (b) of Section 242 of
the DGCL shall otherwise require.
SEVENTH: No director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty by such director as a director; provided, however, that this
Article Seventh shall not eliminate or limit the liability of a director to
the extent provided by applicable law (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the director received an improper personal benefit.
No amendment to or repeal of this Article Seventh shall apply to or have any
effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal. If the laws of the State of
Delaware are hereafter changed to permit further elimination or limitation of
the liability of directors, then the liability of each director of the
Corporation shall thereupon be eliminated or limited to the fullest extent
then permitted by law.
EIGHTH: The Corporation shall, to the fullest extent permitted by
Section 145 of the DGCL, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify under the
DGCL from and against any and all of the expenses, liabilities or other
matters referred to in or covered by the DGCL, and the indemnification
provided for herein shall not be deemed exclusive of any other rights to
which those indemnified may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
his or her official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
NINTH: The Board of Directors shall have concurrent power with the
stockholders to adopt, alter, amend or repeal the By-Laws of the Corporation.
The Board of Directors may so adopt or change the By-Laws upon the
affirmative vote of the number of directors which shall constitute, under the
provisions of the By-Laws, the action of the Board of Directors.
7
<PAGE>
TENTH:
Section 1. In anticipation that the Corporation will cease to be a
wholly owned subsidiary of Carlson Companies but that Carlson Companies will
remain a substantial stockholder of the Corporation, and in anticipation that
the Corporation and Carlson Companies may engage in the same or similar
activities or lines of business and have an interest in the same areas of
corporate opportunities, and in recognition of (i) the benefits to be derived
by the Corporation through its continued contractual, corporate and business
relations with Carlson Companies (including service of officers and directors
of Carlson Companies as officers and directors of the Corporation) and (ii)
the difficulties attendant to any director, who desires and endeavors fully
to satisfy such director's fiduciary duties, in determining the full scope of
such duties in any particular situation, the provisions of this Article Tenth
are set forth to regulate, define and guide the conduct of certain affairs of
the Corporation as they may involve Carlson Companies and its officers and
directors, and the powers, rights, duties and liabilities of the Corporation
and its officers, directors and stockholders in connection therewith.
Section 2.
(a) Carlson Companies shall not have a duty to refrain from engaging
directly or indirectly in the same or similar business activities or lines of
business as the Corporation, and
(b) neither Carlson Companies nor any officer or director thereof
shall be liable to the Corporation or its stockholders for breach of any
fiduciary duty by reason of any such activities of Carlson Companies or of
such person's participation therein.
In the event that Carlson Companies acquires knowledge of a potential
transaction or matter that may be a corporate opportunity for both Carlson
Companies and the Corporation, Carlson Companies shall have no duty to
communicate or offer such corporate opportunity to the Corporation and shall
not be liable to the Corporation or its stockholders for breach of any
fiduciary duty as a stockholder of the Corporation or controlling person of a
stockholder by reason of the fact that Carlson Companies pursues or acquires
such corporate opportunity for itself, directs such corporate opportunity to
another person or entity, or does not communicate information regarding, or
offer, such corporate opportunity to the Corporation.
Section 3. In the event that a director or officer of the
Corporation, who is also a director or officer of Carlson Companies, acquires
knowledge of a potential transaction or matter which may be a corporate
opportunity for both the Corporation and Carlson Companies, such director or
officer shall have fully satisfied and fulfilled his or her fiduciary duty to
the Corporation and its stockholders with respect to such corporate
opportunity, and shall not be liable to the Corporation or its stockholders
for breach of any fiduciary duty by reason of the fact that Carlson Companies
pursues or acquires such corporate opportunity for itself or directs such
corporate opportunity to another person or
8
<PAGE>
does not communicate information regarding such corporate opportunity to the
Corporation, if such director or officer acts consistent with the following:
(a) a corporate opportunity offered to any person who is an officer
of the Corporation, and who is also a director of Carlson Companies, shall
belong to the Corporation;
(b) a corporate opportunity offered to any person who is a director
of the Corporation, and who is also a director or officer of Carlson
Companies shall belong to the Corporation if such opportunity is expressly
offered to such person solely in his or her capacity as a director of the
Corporation, and otherwise shall belong to Carlson Companies; and
(c) a corporate opportunity offered to any person who is an officer
of both the Corporation and Carlson Companies shall belong to the Corporation.
Section 4. Any person or entity purchasing or otherwise acquiring any
interest in any shares of capital stock of the Corporation shall be deemed to
have notice of and to have consented to the provisions of this Article Tenth.
Section 5. For purposes of this Article Tenth only, (i) the term
"Corporation" shall mean the Corporation and all corporations, partnerships,
joint ventures, associations and other entities in which the Corporation
beneficially owns (directly or indirectly) fifty percent or more of the
outstanding voting stock, voting power or similar voting interests, and (ii)
the term "Carlson Companies" shall mean Carlson Companies and all
corporations, partnerships, joint ventures, associations and other entities
(other than the Corporation, defined in accordance with clause (i) of this
Section 5) in which Carlson Companies beneficially owns (directly or
indirectly) fifty percent or more of the outstanding voting stock, voting
power or similar voting interests.
Section 6. Notwithstanding anything in this Amended and Restated
Certificate of Incorporation to the contrary, the foregoing provisions of
this Article Tenth shall expire on the date that Carlson Companies ceases to
own beneficially Common Stock representing at least 20% of the number of
outstanding shares of Common Stock of the Corporation. Neither the
alteration, amendment, change or repeal of any provision of this Article
Tenth nor the adoption of any provision of this Amended and Restated
Certificate of Incorporation inconsistent with any provision of this Article
Tenth shall eliminate or reduce the effect of this Article Tenth in respect
of any matter occurring, or any cause of action, suit or claim that, but for
this Article Tenth, would accrue or arise, prior to such alteration,
amendment, repeal or adoption.
9
<PAGE>
IN WITNESS WHEREOF, Carlson Restaurants Worldwide Inc. has caused
this Amended and Restated Certificate of Incorporation to be executed by
Wallace B. Doolin, its President, and attested to by Leslie Sharman, its
Secretary, on the ____ day of ________, 1999.
CARLSON RESTAURANTS WORLDWIDE INC.
By: ___________________________________
Wallace B. Doolin, President
ATTEST:
By: ___________________________________
Leslie Sharman, Secretary
10
<PAGE>
EXHIBIT 3.3
BYLAWS
OF
FRIDAY'S HOLDINGS, INC.
(a Delaware corporation)
______________
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing
stock in the corporation shall be signed by, or in the name of, the
corporation by the Chairman or Vice-Chairman of the Board of Directors, if
any, or by the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
corporation. Any or all the signatures on any such certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer, transfer agent, or registrar at the date
of issue.
Whenever the corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, and whenever
the corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock or
uncertificated shares in place of any certificate theretofore issued by it,
alleged to have been lost, stolen, or destroyed, and the Board of Directors
may require the owner of the lost, stolen, or destroyed certificate, or his
legal representative, to give the corporation a bond sufficient to indemnify
the corporation against any claim that may be made against it on account of
the alleged loss, theft, or destruction of any such certificate or the
issuance of any such new certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by
the General Corporation Law, the Board of Directors of the corporation may
provide by resolution or resolutions that some or all of any or all classes
or series of the stock of the corporation shall be uncertificated shares.
Within a reasonable time after the issuance or
<PAGE>
transfer of any uncertificated shares, the corporation shall send to the
registered owner thereof any written notice prescribed by the General
Corporation Law.
3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall
not be required to, issue fractions of a share. If the corporation does not
issue fractions of a share, it shall (1) arrange for the disposition of
fractional interests by those entitled thereto, (2) pay in cash the fair
value of fractions of a share as of the time when those entitled to receive
such fractions are determined, or (3) issue scrip or warrants in registered
form (either represented by a certificate or uncertificated) or bearer form
(represented by a certificate) which shall entitle the holder to receive a
full share upon the surrender of such scrip or warrants aggregating a full
share. A certificate for a fractional share or an uncertificated fractional
share shall, but scrip or warrants shall not unless otherwise provided
therein, entitle the holder to exercise voting rights, to receive dividends
thereon, and to participate in any of the assets of the corporation in the
event of liquidation. The Board of Directors may cause scrip or warrants to
be issued subject to the conditions that they shall become void if not
exchanged for certificates representing the full shares or uncertificated
full shares before a specified date, or subject to the conditions that the
shares for which scrip or warrants are exchangeable may be sold by the
corporation and the proceeds thereof distributed to the holders of scrip or
warrants, or subject to any other conditions which the Board of Directors may
impose.
4. STOCK TRANSFERS. Upon compliance with provisions restricting
the transfer or registration of transfer of shares of stock, if any,
transfers or registration of transfers of shares of stock of the corporation
shall be made only on the stock ledger of the corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the corporation or with a
transfer agent or a registrar, if any, and, in the case of shares represented
by certificates, on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation
may determine the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, the Board of Directors
may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than sixty nor less than
ten days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting. In order that the corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board
2
<PAGE>
of Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the Board
of Directors, and which date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining the stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by the General Corporation Law, shall be the first date
on which a signed written consent setting forth the action taken or proposed
to be taken is delivered to the corporation by delivery to its registered
office in the State of Delaware, its principal place of business, or an
officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed
by the Board of Directors and prior action by the Board of Directors is
required by the General Corporation Law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion, or
exchange of stock, or for the purpose of any other lawful action, the Board
of Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted, and which
record date shall be not more than sixty days prior to such action. If no
record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the
right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock"
or "shares of stock" or "stockholder" or "stockholders" refers to an
outstanding share or shares of stock and to a holder or holders of record of
outstanding shares of stock when the corporation is authorized to issue only
one class of shares of stock, and said reference is also intended to include
any outstanding share or shares of stock and any holder or holders of record
of outstanding shares of stock of any class upon which or upon whom the
certificate of incorporation confers such rights where there are two or more
classes or series of shares of stock or upon which or upon whom the General
Corporation Law confers such rights notwithstanding that the certificate of
incorporation may provide for more than one class or series of shares of
stock, one or more of which are limited or denied such rights thereunder;
provided, however, that no such right shall vest in the event of an increase
or a decrease in the authorized number of shares of stock of any class or
series which is otherwise denied voting rights under the provisions of the
certificate of incorporation, except as any provision of law may otherwise
require.
3
<PAGE>
7. STOCKHOLDER MEETINGS.
- TIME. The annual meeting shall be held on the date and at the
time fixed, from time to time, by the directors, provided, that the first
annual meeting shall be held on a date within thirteen months after the
organization of the corporation, and each successive annual meeting shall be
held on a date within thirteen months after the date of the preceding annual
meeting. A special meeting shall be held on the date and at the time fixed
by the directors.
- PLACE. Annual meetings and special meetings shall be held at
such place, within or without the State of Delaware, as the directors may,
from time to time, fix. Whenever the directors shall fail to fix such place,
the meeting shall be held at the registered office of the corporation in the
State of Delaware.
- CALL. Annual meetings and special meetings may be called by the
directors or by any officer instructed by the directors to call the meeting.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall
be given, stating the place, date, and hour of the meeting and stating the
place within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual
meeting shall state that the meeting is called for the election of directors
and for the transaction of other business which may properly come before the
meeting, and shall (if any other action which could be taken at a special
meeting is to be taken at such annual meeting) state the purpose or purposes.
The notice of a special meeting shall in all instances state the purpose or
purposes for which the meeting is called. The notice of any meeting shall
also include, or be accompanied by, any additional statements, information,
or documents prescribed by the General Corporation Law. Except as otherwise
provided by the General Corporation Law, a copy of the notice of any meeting
shall be given, personally or by mail, not less than ten days nor more than
sixty days before the date of the meeting, unless the lapse of the prescribed
period of time shall have been waived, and directed to each stockholder at
his record address or at such other address which he may have furnished by
request in writing to the Secretary of the corporation. Notice by mail shall
be deemed to be given when deposited, with postage thereon prepaid, in the
United States Mail. If a meeting is adjourned to another time, not more than
thirty days hence, and/or to another place, and if an announcement of the
adjourned time and/or place is made at the meeting, it shall not be necessary
to give notice of the adjourned meeting unless the directors, after
adjournment, fix a new record date for the adjourned meeting. Notice need
not be given to any stockholder who submits a written waiver of notice signed
by him before or after the time stated therein. Attendance of a stockholder
at a meeting of stockholders shall constitute a waiver of notice of such
meeting, except when the stockholder attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders need be specified in any written waiver of notice.
4
<PAGE>
- STOCKHOLDER LIST. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city or other municipality
or community where the meeting is to be held, which place shall be specified
in the notice of the meeting, or if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be inspected
by any stockholder who is present. The stock ledger shall be the only
evidence as to who are the stockholders entitled to examine the stock ledger,
the list required by this section or the books of the corporation, or to vote
at any meeting of stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be
presided over by one of the following officers in the order of seniority and
if present and acting - the Chairman of the Board, if any, the Vice-Chairman
of the Board, if any, the President, a Vice-President, or, if none of the
foregoing is in office and present and acting, by a chairman to be chosen by
the stockholders. The Secretary of the corporation, or in his absence, an
Assistant Secretary, shall act as secretary of every meeting, but if neither
the Secretary nor an Assistant Secretary is present the Chairman of the
meeting shall appoint a secretary of the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a
stockholder is entitled to participate, whether by waiving notice of any
meeting, voting or participating at a meeting, or expressing consent or
dissent without a meeting. Every proxy must be signed by the stockholder or
by his attorney-in-fact. No proxy shall be voted or acted upon after three
years from its date unless such proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and,
if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A proxy may be made irrevocable regardless of
whether the interest with which it is coupled is an interest in the stock
itself or an interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but
need not, appoint one or more inspectors of election to act at the meeting or
any adjournment thereof. If an inspector or inspectors are not appointed,
the person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspectors at
such meeting with strict impartiality and according to the best of his
ability. The inspectors, if any, shall determine the number of shares of
stock outstanding and the voting power of each, the shares of stock
represented at the meeting, the existence of a quorum, the validity and
effect of proxies, and
5
<PAGE>
shall receive votes, ballots, or consents, hear and determine all challenges
and questions arising in connection with the right to vote, count and
tabulate all votes, ballots, or consents, determine the result, and do such
acts as are proper to conduct the election or vote with fairness to all
stockholders. On request of the person presiding at the meeting, the
inspector or inspectors, if any, shall make a report in writing of any
challenge, question, or matter determined by him or them and execute a
certificate of any fact found by him or them.
- QUORUM. The holders of a majority of the outstanding shares of
stock shall constitute a quorum at a meeting of stockholders for the
transaction of any business. The stockholders present may adjourn the
meeting despite the absence of a quorum.
- VOTING. Each share of stock shall entitle the holders thereof to
one vote. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled
to vote on the election of directors. Any other action shall be authorized
by a majority of the votes cast except where the General Corporation Law
prescribes a different percentage of votes and/or a different exercise of
voting power, and except as may be otherwise prescribed by the provisions of
the certificate of incorporation and these Bylaws. In the election of
directors, and for any other action, voting need not be by ballot.
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by
the General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special
meeting of stockholders, may be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to
those stockholders who have not consented in writing. Action taken pursuant
to this paragraph shall be subject to the provisions of Section 228 of the
General Corporation Law.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by or under the direction of the Board of
Directors of the corporation. The Board of Directors shall have the
authority to fix the compensation of the members thereof. The use of the
phrase "whole board" herein refers to the total number of directors which the
corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a
stockholder, a citizen of the United States, or a resident of the State of
Delaware. The initial Board of Directors shall consist of one person.
Thereafter the number of directors constituting the whole board shall be at
least one. Subject to the foregoing limitation and
6
<PAGE>
except for the first Board of Directors, such number may be fixed from time
to time by action of the stockholders or of the directors, or, if the number
is not fixed, the number shall be one. The number of directors may be
increased or decreased by action of the stockholders or of the directors.
3. ELECTION AND TERM. The first Board of Directors, unless the
members thereof shall have been named in the certificate of incorporation,
shall be elected by the incorporator or incorporators and shall hold office
until the first annual meeting of stockholders and until their successors are
elected and qualified or until their earlier resignation or removal. Any
director may resign at any time upon written notice to the corporation.
Thereafter, directors who are elected at an annual meeting of stockholders,
and directors who are elected in the interim to fill vacancies and newly
created directorships, shall hold office until the next annual meeting of the
stockholders and until their successors are elected and qualified or until
their earlier resignation or removal. Except as the General Corporation Law
may otherwise require, in the interim between annual meetings of stockholders
or of special meetings of stockholders called for the election of directors
and/or for the removal of one or more directors and for the filling of any
vacancy in that connection, newly created directorships and any vacancies in
the Board of Directors, including unfilled vacancies resulting from the
removal of directors for cause or without cause, may be filled by the vote of
a majority of the remaining directors then in office, although less than a
quorum, or by the sole remaining director.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall
fix, except that the first meeting of a newly elected Board shall be held as
soon after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without
the State of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which
the time and place have been fixed. Special meetings may be called by or at
the direction of the Chairman of the Board, if any, the Vice-Chairman of the
Board, if any, of the President, or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be
given for special meetings in sufficient time for the convenient assembly of
the directors thereat. Notice need not be given to any director or to any
member of a committee of directors who submits a written waiver of notice
signed by him before or after the time stated therein. Attendance of any
such person at a meeting shall constitute a waiver of notice of such meeting,
except when he attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither
7
<PAGE>
the business to be transacted at, nor the purpose of, any regular or special
meeting of the directors need be specified in any written waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall
constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided, that such majority shall constitute at least one-third of
the whole Board. A majority of the directors present, whether or not a
quorum is present, may adjourn a meeting to another time and place. Except
as herein otherwise provided, and except as otherwise provided by the General
Corporation Law, the vote of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board. The
quorum and voting provisions herein stated shall not be construed as
conflicting with any provisions of the General Corporation Law and these
Bylaws which govern a meeting of directors held to fill vacancies and newly
created directorships in the Board or action of disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any
such committee, as the case may be, by means of conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and
if present and acting, shall preside at all meetings. Otherwise, the
Vice-Chairman of the Board, if any and if present and acting, or the
President, if present and acting, or any other director chosen by the Board,
shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by
the General Corporation Law, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.
6. COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting
of the committee. In the absence or disqualification of any member of any
such committee or committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board, shall have and may exercise the powers and authority
of the Board of Directors in the management of the business and affairs of
the corporation with the exception of any authority the delegation of which
is prohibited by Section 141 of the General Corporation Law, and may
authorize the seal of the corporation to be affixed to all papers which may
require it.
8
<PAGE>
7. WRITTEN ACTION. Any action required or permitted to be taken
at any meeting of the Board of Directors or any committee thereof may be
taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
ARTICLE III
OFFICERS
The officers of the corporation shall consist of a President, a
Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by
the Board of Directors, a Chairman of the Board, a Vice-Chairman of the
Board, an Executive Vice-President, one or more other Vice-Presidents, one or
more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers with such titles as the resolution of the Board of Directors
choosing them shall designate. Except as may otherwise be provided in the
resolution of the Board of Directors choosing him, no officer other than the
Chairman or Vice-Chairman of the Board, if any, need be a director. Any
number of offices may be held by the same person, as the directors may
determine.
Unless otherwise provided in the resolution choosing him, each
officer shall be chosen for a term which shall continue until the meeting of
the Board of Directors following the next annual meeting of stockholders and
until his successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and
perform such duties in the management and operation of the corporation as
shall be prescribed in the resolutions of the Board of Directors designating
and choosing such officers and prescribing their authority and duties, and
shall have such additional authority and duties as are incident to their
office except to the extent that such resolutions may be inconsistent
therewith. The Secretary or an Assistant Secretary of the corporation shall
record all of the proceedings of all meetings and actions in writing of
stockholders, directors, and committees of directors, and shall exercise such
additional authority and perform such additional duties as the Board shall
assign to him. Any officer may be removed, with or without cause, by the
Board of Directors. Any vacancy in any office may be filled by the Board of
Directors.
ARTICLE IV
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors
shall prescribe.
9
<PAGE>
ARTICLE V
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be
subject to change, by the Board of Directors.
ARTICLE VI
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. Every person who was or is a
party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he or she is or was a director, officer, employee
or agent of the Corporation or is or was serving at the request of the
Corporation or for its benefit as a director, officer, employee or agent of
another corporation, or as its representative in a joint venture, trust or
other enterprise, shall be indemnified and held harmless by the Corporation
to the fullest extent legally permissible under the Business Corporation Law
of the State of Delaware in the manner prescribed therein, from time to time,
against all expenses, liabilities and losses (including attorneys' fees,
judgments, fines and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith.
SECTION 2. OTHER INDEMNIFICATION. The rights of indemnification
conferred by this Article shall not be exclusive of any other rights which
such directors, officers, employees or agents may have or hereafter acquire
and, without limiting the generality of such statement, they shall be
entitled to their respective rights of indemnification under any agreement,
vote of shareholders, provision of law or otherwise, as well as their rights
under this Article.
ARTICLE VII
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter, or
repeal these Bylaws and to adopt new Bylaws may be exercised by the Board of
Directors or by the stockholders.
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<PAGE>
EXHIBIT 3.4
RESTATED
BY-LAWS
OF
CARLSON RESTAURANTS WORLDWIDE INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
I. OFFICES........................................................................................................1
Section 1.01. Registered Office.........................................................................1
Section 1.02. Other Offices.............................................................................1
II. STOCKHOLDERS..................................................................................................1
Section 2.01. Place of Meetings.........................................................................1
Section 2.02. Annual Meetings...........................................................................1
Section 2.03. Special Meetings..........................................................................2
Section 2.04. Notice of Meetings........................................................................2
Section 2.05. Waiver of Notice..........................................................................2
Section 2.06. Quorum....................................................................................2
Section 2.07. Adjourned Meetings........................................................................2
Section 2.08. Voting....................................................................................3
Section 2.09. Proxies...................................................................................3
Section 2.10. Fixing Date for Determination of Stockholders of Record...................................4
Section 2.11. Action by Written Consent of Stockholders.................................................5
Section 2.12. Stockholder List..........................................................................6
Section 2.13. Voting Procedures and Inspectors of Elections.............................................6
III. BOARD OF DIRECTORS...........................................................................................7
Section 3.01. General Powers; Organization..............................................................7
Section 3.02. Number, Qualification and Term of Office..................................................7
Section 3.03. Resignation and Removal; Vacancies........................................................7
Section 3.04. Regular Meetings..........................................................................8
Section 3.05. Special Meetings..........................................................................8
Section 3.06. Notice of Special Meetings................................................................8
Section 3.07. Waiver of Notice..........................................................................8
Section 3.08. Quorum....................................................................................8
Section 3.09. Committees of Directors...................................................................9
Section 3.10. Conference Communications.................................................................9
Section 3.11. Action by Written Consent of Directors...................................................10
Section 3.12. Compensation.............................................................................10
Section 3.13. Nomination Procedures....................................................................10
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IV. OFFICERS.....................................................................................................11
Section 4.01. Number...................................................................................11
Section 4.02. Election, Term of Office and Qualifications..............................................11
Section 4.03. Compensation.............................................................................11
Section 4.04. Resignation and Removal; Vacancies.......................................................11
Section 4.05. Chief Executive Officer..................................................................11
Section 4.06. Chairman of the Board....................................................................11
Section 4.07. President................................................................................12
Section 4.08. Vice Presidents..........................................................................12
Section 4.09. Secretary................................................................................12
Section 4.10. Treasurer................................................................................12
Section 4.11. Authority and Other Duties...............................................................12
V. INDEMNIFICATION...............................................................................................13
Section 5.01. Indemnification..........................................................................13
Section 5.02. Insurance................................................................................14
Section 5.03. Expenses Payable in Advance..............................................................14
VI. STOCK........................................................................................................15
Section 6.01. Certificates for Stock...................................................................15
Section 6.02. Issuance of Stock........................................................................15
Section 6.03. Partly Paid Stock........................................................................16
Section 6.04. Registered Stockholders..................................................................16
Section 6.05. Transfer of Stock........................................................................16
Section 6.06. Lost, Stolen or Destroyed Certificates...................................................16
Section 6.07. Facsimile Signatures.....................................................................16
VII. MISCELLANEOUS...............................................................................................17
Section 7.01. Dividends................................................................................17
Section 7.02. Interested Directors and Officers........................................................17
Section 7.03. Voting Securities Held by the Corporation................................................18
Section 7.04. Execution of Instruments.................................................................18
Section 7.05. Advances.................................................................................18
Section 7.06. Fiscal Year..............................................................................18
Section 7.07. Corporate Seal...........................................................................18
Section 7.08. Form of Records..........................................................................19
Section 7.09. Power to Amend...........................................................................19
</TABLE>
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RESTATED BY-LAWS OF
CARLSON RESTAURANTS WORLDWIDE INC.
I. OFFICES
Section 1.01. REGISTERED OFFICE. The Corporation shall
maintain a registered office and registered agent within the State of
Delaware at such place as may be designated from time to time by the Board of
Directors of the Corporation.
Section 1.02. OTHER OFFICES. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine or as the business of
the Corporation may require.
II. STOCKHOLDERS
Section 2.01. PLACE OF MEETINGS. Meetings of stockholders
may be held at the principal executive office of the Corporation or at such
other place as may be designated by the Board of Directors or the chief
executive officer of the Corporation.
Section 2.02. ANNUAL MEETINGS. An annual meeting of
stockholders shall be held in each calendar year for the election of
directors on such date and at such time as shall be designated from time to
time by the Board of Directors. Any other proper business may be transacted
at the annual meeting, provided that such business is properly brought before
the meeting. To be properly brought before the meeting, business must be (a)
specified in the notice of meeting (or a supplement thereto) given by or at
the direction of the Board of Directors, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (c)
properly brought before the meeting by a stockholder. For business to be
properly brought before the annual meeting by a stockholder, written notice
of such business must be delivered to, or mailed to and received by, the
Secretary of the Corporation at the principal executive offices of the
Corporation not less than 60 days before the date fixed for the annual
meeting; provided, however, that if less than 70 days' prior public
disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder shall be timely if received by the Secretary of the
Corporation not later than the close of business on the tenth day following
the day on which notice of the date of the meeting was mailed or on which
such public disclosure was made, whichever is earlier. In no event shall the
public disclosure of an adjournment of an annual meeting commence a new time
period for the giving of a stockholder's notice as described above. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting
and the reasons for conducting such business at the annual meeting, (b) the
name and address, as they appear on
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the Corporation's books, of the stockholder proposing such business and the
name and address of the beneficial owner, if different than the stockholder
of record, on whose behalf the proposal is made, (c) the class and number of
shares of the Corporation that are beneficially owned by the stockholder and
such beneficial owner, if any, and (d) any material interest of the
stockholder or such beneficial owner in such business. Notwithstanding
anything in these By-Laws to the contrary, no business shall be conducted at
any annual meeting except in accordance with the procedures set forth in this
Section. The chief executive officer or other person presiding at the annual
meeting shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting in accordance with
the provisions of this Section, and if he or she should so determine, he or
she shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
Section 2.03. SPECIAL MEETINGS. Except as otherwise
specifically provided by the Certificate of Incorporation, a special meeting
of stockholders, for any purpose or purposes, may be called only by the chief
executive officer or by a majority of the Board of Directors. Business
transacted at any special meeting shall be limited to the purposes stated in
the notice of the meeting.
Section 2.04. NOTICE OF MEETINGS. A written notice stating
the place, date and hour of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
given not less then 10 nor more than 60 days before the date of such meeting
to each stockholder of record of the Corporation entitled to vote at such
meeting. Such notice shall be personally delivered or mailed and, if mailed,
shall be deemed to be given when deposited in the mail, postage prepaid,
addressed to the stockholder's mailing address shown upon the records of the
Corporation.
Section 2.05. WAIVER OF NOTICE. Notice of any meeting of
stockholders may be waived either before or after such meeting in a writing
signed by the person or persons entitled to the notice. Attendance of a
person at a meeting also shall constitute a waiver of notice of such meeting,
except when the person attends a meeting for the express purpose of objecting
at the beginning of the meeting to the transaction of any business because
the meeting is not lawfully called or convened.
Section 2.06. QUORUM. At each meeting of stockholders,
except where otherwise provided by law or the Certificate of Incorporation or
these By-Laws, the holders of a majority of the outstanding capital stock
entitled to vote at the meeting, present in person or represented by proxy,
shall constitute a quorum. If a quorum is once present at the meeting, the
stockholders may continue to transact business until adjournment
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
Section 2.07. ADJOURNED MEETINGS. The stockholders present
at any meeting may, by majority vote, adjourn the meeting from time to time
to a later day or hour or to
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another place. The stockholders entitled to vote at any meeting at which a
quorum is not present in person or represented by proxy may so adjourn the
meeting until a quorum shall be present or represented. If any adjournment is
for more than 30 days, or if after adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting. Otherwise, notice
of any adjourned meeting need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken. At an adjourned
meeting at which a quorum is present or represented by proxy, any business
may be transacted which might have been transacted at the meeting as
originally convened.
Section 2.08. VOTING.
(a) Except as otherwise provided in the Certificate of
Incorporation, each stockholder entitled to vote at any meeting of
stockholders shall have one vote for each share of stock having voting power
upon the matter in question that is held by such stockholder and registered
in the stockholder's name on the books of the Corporation as of the
applicable record date. Shares of its own stock belonging to the Corporation
or to another corporation, if a majority of the shares entitled to vote in
the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation to vote stock, including but not limited
to its own stock, held by it in a fiduciary capacity.
(b) All elections of directors shall be conducted by
written ballot, unless the Certificate of Incorporation provides otherwise.
The vote upon any other question before a meeting need not be by written
ballot, and need not be conducted by inspectors, unless otherwise determined
by the Board of Directors or the officer presiding at the meeting or
otherwise provided in Section 2.13. At all meetings of stockholders for the
election of directors a plurality of the votes cast shall be sufficient to
elect such directors. All other elections and questions at a meeting shall be
decided by a majority vote of the shares entitled to vote on the subject
matter, the holders of which are present in person or represented by proxy at
the meeting at the time of the vote, except where otherwise required by the
laws of Delaware, the Certificate of Incorporation or these By-Laws.
Section 2.09. PROXIES.
(a) Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him or her by
proxy by an instrument executed in writing, provided that no such proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. A stockholder may revoke any proxy that is not
irrevocable by attending the meeting and voting in person or by filing with
the Secretary of the Corporation an instrument in writing revoking the proxy
or another duly executed proxy
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bearing a later date. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power.
(b) A stockholder may sign or authorize the written
authorization by telegram, cablegram or other means of electronic
transmission setting forth or submitted with information sufficient to
determine that the stockholder authorized such transmission. If it is
determined that such telegrams, cablegrams or other electronic transmissions
are valid, the inspectors or, if there are no inspectors, such other persons
making that determination shall specify the information upon which they
relied. Any copy, facsimile, telecommunication or other reproduction of the
original writing or transmission may be used in lieu of the original,
provided that it is a complete reproduction of the entire original.
(c) If any written authorization designates two or
more persons to act as proxies, a majority of such persons present at the
meeting, or, if only one shall be present, then that one, shall have and may
exercise all of the powers conferred by such written instrument upon all of
the persons so designated unless the instrument shall otherwise provide.
Section 2.10. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS
OF RECORD.
(a) For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date not more
than 60 nor less than 10 days before the date of any such meeting. If no
record date is fixed, the record date for such purpose shall be at the close
of business on the day next preceding the day on which notice is given, or,
if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
(b) For the purpose of determining the stockholders
entitled to consent to corporate action in writing without a meeting, the
Board of Directors may fix a record date not more than 10 days after the date
upon which the resolution fixing the record date for such written action is
adopted by the Board of Directors. If no record date is fixed and prior
action of the Board of Directors with respect to the subject of such written
action is not required by the Delaware General Corporation Law, the record
date for such purpose shall be at the close of business on the first day on
which a written consent signed by a stockholder is delivered to the
Corporation by delivery to the registered office of the Corporation in
Delaware (which shall be by hand or by certified or registered mail, return
receipt requested), to the principal place of business of the Corporation, or
to the officer or agent of the Corporation having custody of the
Corporation's minutes of stockholders' meetings and proceedings. If no record
date is fixed and prior action of the Board of Directors with respect to the
subject of such written action is
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required by the Delaware General Corporation Law, the record date for such
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) For the purpose of determining the stockholders
entitled to receive any dividend or other distribution or allotment of any
rights, or to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action not
specified elsewhere in this Section 2.10, the Board of Directors may fix a
record date not more than 60 days before any such action. If no record date
is so fixed, the record date for such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
(d) In no event shall any record date fixed by the
Board of Directors pursuant to this Section 2.10 precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors.
Section 2.11. ACTION BY WRITTEN CONSENT OF STOCKHOLDERS.
(a) Unless otherwise provided in the Certificate of
Incorporation, any action required or permitted to be taken at any annual or
special meeting of the stockholders may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted, and shall be delivered to the
Corporation by delivery to its registered office in the State of Delaware
(which shall be by hand or by certified or registered mail, return receipt
requested), to the principal place of business of the Corporation or to the
officer or agent of the Corporation having custody of the Corporation's
minutes of stockholders' meetings and proceedings. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented
in writing.
(b) Every written consent shall bear the date of
signature of each stockholder who signs the consent and no written consent
shall be effective to take the corporate action referred to therein unless,
within 60 days of the earliest dated consent delivered in the manner required
by Section 2.11(a) to the Corporation, written consents signed by a
sufficient number of holders to take action are delivered to the Corporation
as required by Section 2.11(a).
Section 2.12. STOCKHOLDER LIST. The officer who has charge
of the stock ledger shall prepare and make, at least 10 days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose
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germane to the meeting, during ordinary business hours, for a period of at
least 10 days before the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any
stockholder who is present. Upon the willful neglect or refusal of the
directors to produce such a list at any meeting for the election of
directors, they shall be ineligible for election to any office at such
meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of stockholders
or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
Section 2.13. VOTING PROCEDURES AND INSPECTORS OF
ELECTIONS. The following provisions shall apply at such time as the
Corporation shall have a class of voting stock that is (1) listed on a
national securities exchange, (2) authorized for quotation on an inter-dealer
quotation system of a registered national securities association, or (3) held
of record by more than 2,000 stockholders.
(a) The Corporation shall, in advance of any meeting
of stockholders, appoint one or more inspectors to act at the meeting and
make a written report thereof. The Corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If
no inspector or alternate is able to act at a meeting of the stockholders,
the person presiding at the meeting shall appoint one or more inspectors to
act at the meeting. Each inspector, before entering upon the discharge of his
or her duties, shall take and sign an oath faithfully to execute the duties
of inspector with strict impartiality and according to the best of his or her
ability.
(b) The inspectors shall: (1) ascertain the number of
shares outstanding and the voting power of each; (2) determine the shares
represented at a meeting and the validity of proxies and ballots; (3) count
all votes and ballots; (4) determine and retain for a reasonable period a
record of the disposition of any challenges made to any determination by the
inspectors; and (5) certify their determination of the number of shares
represented at the meeting, and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors.
(c) The date and time of the opening and the closing
of the polls for each matter upon which the stockholders will vote at a
meeting shall be announced at the meeting. No ballot, proxies or votes, nor
any revocations thereof or changes thereto, shall be accepted by the
inspectors after the closing of the polls.
(d) In determining the validity and counting of
proxies and ballots, the inspectors shall be limited to an examination of the
proxies, any envelopes submitted with those proxies, any information provided
in connection with an appointment of proxy by
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electronic transmission, ballots and the regular books and records of the
Corporation, except that the inspectors may consider other reliable
information for the limited purpose of reconciling proxies and ballots
submitted by or on behalf of banks, brokers, their nominees or similar
persons which represent more votes than the holder of a proxy is authorized
by the record owner to cast or more votes than the stockholder holds of
record. If the inspectors consider other reliable information for the limited
purpose permitted herein, the inspectors at the time they make their
certification pursuant to clause (b)(5) of this Section shall specify the
precise information considered by them including the person or persons from
whom they obtained the information, when the information was obtained, the
means by which the information was obtained and the basis for the inspectors'
belief that such information is accurate and reliable.
III. BOARD OF DIRECTORS
Section 3.01. GENERAL POWERS; ORGANIZATION. The business of
the Corporation shall be managed by or under the direction of its Board of
Directors, which may exercise all such powers of the Corporation and do all
such lawful acts and things as are not by the Delaware General Corporation
Law or by the Certificate of Incorporation or these By-Laws directed or
required to be exercised or done by the stockholders. The Board of Directors
may annually elect a Chairman of the Board from among its members who shall
preside at its meetings. The Secretary shall act as secretary of the meeting,
but in his or her absence the chairman of the meeting may appoint any person
to act as secretary of the meeting. Any meeting of the Board of Directors may
be held within or without the State of Delaware.
Section 3.02. NUMBER, QUALIFICATION AND TERM OF OFFICE. The
number of directors constituting the Board of Directors shall be fixed from
time to time by resolution of the Board of Directors, but shall be not more
than 15. Except as otherwise provided in the Certificate of Incorporation and
except as provided in Section 3.03 of these By-Laws, the directors shall be
elected at the annual meeting of the stockholders and each director elected
shall hold office until his or her successor is elected and qualified.
Directors need not be stockholders.
Section 3.03. RESIGNATION AND REMOVAL; VACANCIES.
(a) Any director may resign at any time upon giving
written notice to the Corporation. Directors may be removed only in
accordance with the applicable provisions of the Delaware General Corporation
Law and any applicable provisions of the Certificate of Incorporation.
(b) Except as otherwise provided in the Certificate of
Incorporation, vacancies (whether existing or to take effect at a future
date), and newly created directorships
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resulting from any increase in the authorized number of directors elected by
all of the stockholders having the right to vote as a single class, may be
filled by a majority of the directors then in office, in their sole
discretion and whether or not constituting less than a quorum, and the
directors so chosen shall hold office until the next election of directors
and until their successors are duly elected and qualified, or until their
earlier resignation, retirement or removal.
Section 3.04. REGULAR MEETINGS. Regular meetings of the
Board of Directors may be held without notice at such time and place as may
be designated from time to time by the Board of Directors.
Section 3.05. SPECIAL MEETINGS. Special meetings of the
Board of Directors may be called from time to time by the Chairman, if any,
or the President, and, upon request by any two directors, shall be called by
the Chairman or the President.
Section 3.06. NOTICE OF SPECIAL MEETINGS. Notice of each
special meeting of the Board of Directors stating the place, date and hour of
the meeting shall be given to each director by mail not less than 72 hours,
or personally or by telephone, telegram, cablegram or other electronic
transmission not less than 72 hours, before the date and hour of the meeting.
Section 3.07. WAIVER OF NOTICE. Notice of any meeting of
the Board of Directors may be waived either before or after such meeting in a
writing signed by each director or directors to whom the notice was not duly
given. Attendance of a director at a meeting also shall constitute a waiver
of notice of such meeting, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
Section 3.08. QUORUM. Unless otherwise specifically
provided by the Certificate of Incorporation or these By-Laws, at all
meetings of the Board of Directors a majority of the total number of
directors shall constitute a quorum for the transaction of business, and the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
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Section 3.09. COMMITTEES OF DIRECTORS.
(a) The Board of Directors may, by resolution adopted
by a majority of the total number of directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation and to have such name as may be determined by the Board of
Directors. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of the committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in place of any such absent
or disqualified member.
(b) Subject to subsection (c) of this Section 3.09 and
to the Delaware General Corporation Law, any committee may exercise the
powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation to the extent provided in the
resolution designating the committee, and may authorize the corporate seal,
if any, to be affixed to all papers that may require it.
(c) No committee shall have the power or authority to
amend the Certificate of Incorporation of the Corporation (except as
permitted by the Delaware General Corporation Law), to adopt an agreement of
merger or consolidation under Section 251 or 252 of the Delaware General
Corporation Law, to recommend to the stockholders the sale, lease or exchange
of all or substantially all of the Corporation's property and assets, to
recommend to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or to amend the By-Laws of the Corporation; and,
unless the resolution establishing the committee or the Certificate of
Incorporation expressly so provides, no such committee shall have the power
or authority to declare a dividend, to authorize the issuance of stock or to
adopt a certificate of ownership and merger pursuant to Section 253 of the
Delaware General Corporation Law.
(d) Each committee shall keep regular minutes of its
proceedings and report the same to the Board of Directors when required.
Unless the Board of Directors otherwise provides, each committee may make,
alter and repeal rules for the conduct of its business. In the absence of
such rules each committee shall conduct its business in the same manner as
the Board of Directors conducts it business pursuant to these By-Laws.
Section 3.10. CONFERENCE COMMUNICATIONS. Directors may
participate in any meeting of the Board of Directors, or of any duly
constituted committee thereof, by means of a conference telephone or other
comparable communications equipment which all persons participating in the
meeting can hear and communicate with each other. For the purpose of
establishing a quorum and taking any action at the meeting, such directors
participating pursuant to this Section 3.10 shall be deemed present in person
at the meeting.
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Section 3.11. ACTION BY WRITTEN CONSENT OF DIRECTORS. Any
action required or permitted to be taken at a meeting of the Board of
Directors or any committee thereof may be taken without a meeting if all
directors or committee members consent thereto in writing and the writing or
writings are filed with the minutes of proceedings of the Board of Directors
or the committee.
Section 3.12. COMPENSATION. The Board of Directors shall
have the authority to fix the compensation of directors.
Section 3.13. NOMINATION PROCEDURES. No person (other than
a person nominated by or at the direction of the Board of Directors) shall be
eligible for election as a director at any annual or special meeting unless
timely notice is given in writing of such nomination by a stockholder of
record to the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to, or mailed to and received by, the Secretary of
the Corporation at the principal executive offices of the Corporation not
less than 60 days before the date fixed for the meeting; provided, however,
that in the event that less than 70 days' prior public disclosure of the date
of the meeting is given or made to stockholders, notice by the stockholder
shall be timely if received not later than the close of business on the tenth
day following the day on which notice of the date of the meeting is mailed or
on which such public disclosure was made, whichever is earlier. In no event
shall public disclosure of an adjournment of an annual meeting commence a new
time period for the giving of a stockholder's notice as described above. A
stockholder's notice to the Secretary shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or re-election as a
director, (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation which are beneficially owned by
such person and (iv) if the solicitation of proxies is subject to Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended, any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
pursuant to said Regulation 14A; and (b) as to the stockholder giving notice
and the beneficial owner, if other than such record owner, on whose behalf
the nomination is made, (i) the name and address, as they appear on the
Corporation's records, of the stockholder and the name and address of such
other beneficial owner, if any, and (ii) the class and number of shares of
the Corporation which are beneficially owned by the stockholder or beneficial
owner. The chief executive officer or other person presiding at the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the provisions of this Section,
and if he or she should so determine, he or she shall so declare to the
meeting and any such defective nomination shall be disregarded.
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IV. OFFICERS
Section 4.01. NUMBER. The Board of Directors shall elect a
President, a Secretary and a Treasurer, and it may, if it so determines,
elect a Chairman of the Board from among its members. The Board of Directors
may also choose one or more Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers or any other officers or agents
as the Board of Directors may designate. Any person may hold two or more
offices.
Section 4.02. ELECTION, TERM OF OFFICE AND QUALIFICATIONS.
The Board of Directors shall elect the officers of the Corporation, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties not inconsistent with these By-Laws as shall be determined from
time to time by the Board of Directors. All officers of the Corporation shall
hold their offices until their respective successors are elected and
qualified, or until their respective offices are eliminated by vote of the
Board of Directors, or until their earlier resignation, retirement or
removal. Officers may be, but need not be, directors.
Section 4.03. COMPENSATION. The salaries of the officers of
the Corporation shall be fixed from time to time by the Board of Directors or
by the chief executive officer if authorized by the Board of Directors.
Section 4.04. RESIGNATION AND REMOVAL; VACANCIES.
(a) Any officer may resign at any time upon written
notice to the Corporation. Any such resignation, however, shall be without
prejudice to any contract rights of the Corporation as to such officer.
(b) Any officer may be removed from office, with or
without cause, by a vote of the Board of Directors. Any such removal,
however, shall be without prejudice to any contract rights of such officer as
to the Corporation.
(c) Any vacancy occurring in any office of the
Corporation may be filled by the Board of Directors.
Section 4.05. CHIEF EXECUTIVE OFFICER. The Board of
Directors shall designate the Chairman or the President as the chief
executive officer of the Corporation. If there be no Chairman, the President
shall be the chief executive officer. The chief executive officer shall have
the general powers and duties of management and supervision usually vested in
and imposed upon the chief executive officer of a corporation. The chief
executive officer shall preside at all meetings of the stockholders.
Section 4.06. CHAIRMAN OF THE BOARD. The Chairman, if one
is elected, shall preside at all meetings of the Board of Directors. During
the absence or disability of the
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President, the Chairman shall exercise all the powers and discharge all the
duties of the President.
Section 4.07. PRESIDENT. The President, subject to the
control of the Board of Directors and the Chairman (if the Chairman is the
chief executive officer of the Corporation), shall have general supervision
of the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect.
Section 4.08. VICE PRESIDENTS. During the absence or
disability of the Chairman and the President, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated by the Board of Directors or, in the absence of any designation,
in the order they were first elected as Vice Presidents) shall perform the
duties and have the authority of the President.
Section 4.09. SECRETARY. The Secretary (or in the absence
of the Secretary, any Assistant Secretary or other person appointed by the
Chairman to serve as Acting Secretary) shall keep the minutes of the meetings
of the stockholders, the Board of Directors and any committees in a book to
be kept for that purpose. The Secretary shall maintain the stock ledger and
prepare the stockholder list as required by these By-Laws. The Secretary
shall duly give notice of all meetings of the stockholders, the Board of
Directors and committees of the Board, if any.
Section 4.10. TREASURER. The Treasurer shall keep accurate
accounts of all moneys of the Corporation received or disbursed. He or she
shall deposit all moneys, drafts and checks in the name of and to the credit
of the Corporation in such banks and depositories as the Board of Directors
shall from time to time designate. The Treasurer shall have power to endorse
for deposit all notes, checks and drafts received by the Corporation. The
Treasurer shall render to the Board of Directors or the chief executive
officer of the Corporation, whenever required, an account of all his or her
transactions as Treasurer and of the financial condition of the Corporation.
Section 4.11. AUTHORITY AND OTHER DUTIES. All officers of
the Corporation shall be subject to the supervision and direction of the
Board of Directors and, in addition to the foregoing authority and duties,
all officers of the Corporation shall respectively have such authority and
perform such other duties in the management of the business of the
Corporation as may be designated from time to time by the Board of Directors.
Unless expressly prohibited by a resolution adopted by the Board of
Directors, an officer elected or appointed by the Board may, without the
approval of the Board, delegate some or all of the duties and powers of his
or her office to other persons.
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V. INDEMNIFICATION
Section 5.01. INDEMNIFICATION. The Corporation shall
indemnify its officers and directors, and former officers and directors, for
such expenses and liabilities, in such manner, under such circumstances, and
to such extent, as required or permitted by the Delaware General Corporation
Law, as amended from time to time. The determination of whether any such
person is eligible for indemnification under this Section 5.01 shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no
such directors, or if such directors so direct, by independent legal counsel
in a written opinion, or (3) by the stockholders; provided, however, that if
a Change in Control (as defined below) has occurred and the person seeking
indemnification so requests, a determination of whether such person is
eligible for indemnification under this Section 5.01 shall be made in a
written opinion rendered by independent legal counsel chosen by the person
seeking indemnification and not reasonably objected to by the Board of
Directors, and such determination shall be binding on the Corporation. The
fees and expenses of such independent counsel shall be paid by the
Corporation. For such purpose, (X) "independent legal counsel" shall mean
legal counsel other than an attorney, or a firm having associated with it an
attorney, who has been retained by or has performed services for the
Corporation or the person seeking indemnification within the previous three
years; and (Y) a "Change in Control" shall be deemed to have occurred if:
(i) a majority of the directors of the Corporation shall
be persons other than persons (A) who were directors of the Corporation
on the date this Section was adopted, (B) for whose election proxies
shall have been solicited by the Board of Directors or (C) who are then
serving as directors appointed by the Board of Directors to fill
vacancies on the Board of Directors caused by newly-created
directorships or the death or resignation (but not removal) of a
director;
(ii) 30 percent or more of the outstanding shares of
voting stock of the Corporation is acquired or beneficially owned (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, or any successor rule thereto) by any person (other than the
Corporation, a subsidiary of the Corporation or the person seeking
indemnification) or group of persons, not including the person seeking
indemnification, acting in concert;
(iii) the stockholders of the Corporation approve a
definitive agreement or plan to (A) merge or consolidate the
Corporation with or into another corporation (other than (1) a merger
or consolidation with a subsidiary of the Corporation or (2) a merger
in which the Corporation is the surviving corporation and no
outstanding voting stock of the Corporation (other than fractional
shares) held by stockholders immediately before the merger is
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converted into cash, securities, or other property), (B) sell or
otherwise dispose of all or substantially all of the assets of the
Corporation (in one transaction or a series of transactions) or (C)
liquidate or dissolve the Corporation, unless a majority of the voting
stock (or the voting equity interest) of the surviving corporation or
of any corporation (or other entity) acquiring all or substantially all
of the assets of the Corporation (in the case of a merger,
consolidation or disposition of assets) is, immediately following the
merger, consolidation or disposition of assets, beneficially owned by
the person seeking indemnification or a group of persons, including the
person seeking indemnification, acting in concert; or
(iv) the Corporation enters into an agreement in principle
or a definitive agreement relating to an event described in clause (i),
(ii) or (iii) above which ultimately results in an event described
therein, or a tender or exchange offer or proxy contest is commenced
which ultimately results in an event described therein.
Section 5.02. INSURANCE. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee, trustee or agent of another
corporation, partnership, limited liability company, joint venture, trust,
employee benefit plan or other enterprise, against any liability or expense
asserted against or incurred by such person in or arising from that capacity,
or arising out of his or her status as such, whether or not the Corporation
would otherwise have the power or the obligation to indemnify the person
against such liability or expense. The Company shall not be obligated under
these By-Laws to make any payment in connection with any claim made against
any person if and to the extent that such person has actually received
payment therefor under any insurance policy or policies.
Section 5.03. EXPENSES PAYABLE IN ADVANCE. Expenses
(including attorneys' fees and expenses) incurred by a director or officer,
or a former director or officer, in defending, investigating, preparing to
defend, or being or preparing to be a witness in, a threatened or pending
action, suit, proceeding or claim against him or her, whether civil or
criminal, shall be paid by the Corporation in advance of the final
disposition of such action, suit, proceeding or claim upon receipt by the
Corporation of a request therefor and an undertaking by or on behalf of the
director or officer, or former director or officer, to repay such amounts if
it ultimately shall be determined that he or she is not entitled to be
indemnified by the Corporation.
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VI. STOCK
Section 6.01. CERTIFICATES FOR STOCK.
(a) The shares of stock of the Corporation shall be
either certificated or uncertificated.
(b) Every holder of duly issued certificated shares of
stock in the Corporation shall be entitled to a certificate, to be in such
form as shall be prescribed by the Board of Directors, certifying the number
of shares owned by him or her. The certificates for such shares shall be
numbered in the order in which they shall be issued and shall be signed in
the name of the Corporation by the Chairman, the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary, and the seal of the Corporation, if any, shall be
affixed thereto.
(c) A certificate representing shares of stock issued
by the Corporation shall, if the Corporation is authorized to issue shares of
more than one class or series, set forth upon the face or back of the
certificate, or shall state that the Corporation will furnish to any
stockholder upon request and without charge, a full statement of the powers,
designations, preferences and relative, participating, optional or other
special rights of each class or series of stock and the qualifications,
limitations or restrictions of such preferences and/or rights of each class
or series authorized to be issued.
(d) The Board of Directors may provide by resolution
that some or all shares of any or all classes and series of the stock of the
Corporation will be uncertificated. Any such resolution shall not apply to
shares represented by a certificate until the certificate is surrendered to
the Corporation.
Section 6.02. ISSUANCE OF STOCK. The Board of Directors is
authorized to cause to be issued stock of the Corporation up to the full
amount authorized by the Certificate of Incorporation in such amounts and for
such consideration as may be determined by the Board of Directors. No shares
shall be allotted except in consideration of cash, labor, personal or real
property (or leases thereof), or a combination of the foregoing, or of an
amount transferred from surplus to stated capital upon a stock dividend. At
the time of such allotment of stock, the Board of Directors shall state its
determination of the fair value to the Corporation in monetary terms of any
consideration other than cash for which shares are allotted. The amount of
consideration to be received in cash or otherwise shall not be less than the
par value of the shares so allotted. Stock so issued shall be fully paid and
nonassessable. Treasury shares may be disposed of by the Corporation for such
consideration as may be fixed by the Board of Directors, or by the
stockholders if the Certificate of Incorporation so provides.
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Section 6.03. PARTLY PAID STOCK. The Corporation may issue
the whole or any part of its stock as partly paid and subject to call for the
remainder of the consideration to be paid therefor. The total amount of the
consideration to be paid for any partly paid stock and the amount paid
thereon shall be stated upon the face or back of each certificate issued to
represent any such partly paid stock (or, in the case of uncertificated
stock, on the books and records of the Corporation), the total amount of the
consideration to be paid therefor and the amount paid thereon shall be
stated. The Board of Directors may, from time to time, demand payment in
respect of each share of stock not fully paid, of such sum of money as the
necessities of the business may, in the judgment of the Board of Directors,
require, not exceeding in the whole the balance remaining unpaid on such
stock, and such sum so demanded shall be paid to the Corporation at such
times and by such installments as the directors shall direct.
Section 6.04. REGISTERED STOCKHOLDERS. The Corporation
shall be entitled to recognize the exclusive right of a person registered on
its books as the owner of shares to receive dividends, and to vote as such
owner, and to hold liable for calls and assessments a person registered on
its books as the owner of shares, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part
of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
Section 6.05. TRANSFER OF STOCK. Transfers of stock on the
books of the Corporation may be authorized only by the stockholder named in
the certificate, the stockholder's legal representative or the stockholder's
duly authorized attorney-in-fact and upon surrender of the certificate or the
certificates for such stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books. No new certificate or certificates shall be
issued in exchange for any existing certificate until such certificate shall
have been so canceled, except in cases provided for in Section 6.06.
Section 6.06. LOST, STOLEN OR DESTROYED CERTIFICATES. Any
stockholder claiming a certificate for stock to be lost, stolen or destroyed
shall make an affidavit of that fact in such form as the Corporation may
require and shall, if the Corporation so requires, give the Corporation a
bond of indemnity in form, in an amount, and with one or more sureties
satisfactory to the Corporation, to indemnify the Corporation against any
claims which may be made against it on account of the alleged loss, theft or
destruction of the certificate or issuance of such new certificate. A new
certificate may then be issued for the lost, stolen or destroyed certificate.
Section 6.07. FACSIMILE SIGNATURES. Any or all of the
signatures of the officers or agents of the Corporation on any stock
certificate may be facsimiles. In case any officer,
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transfer agent or registrar who has signed or whose facsimile signature has
been placed on any such certificate shall cease to be such officer, transfer
agent or registrar before such certificate is issued, it nevertheless may be
issued by the Corporation as though the person who signed such certificate or
whose facsimile signature or signatures had been placed thereon were such
officer, transfer agent or registrar at the date of issue.
VII. MISCELLANEOUS
Section 7.01. DIVIDENDS.
(a) Subject to any restrictions contained in the
Certificate of Incorporation, the Board of Directors may declare and pay
dividends upon the shares of the Corporation's capital stock from the
Corporation's surplus, or if there be none, out of its net profits for the
current fiscal year and/or the preceding fiscal year. Dividends may be paid
in cash, in property or in shares of capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation. Upon the
declaration of any dividend on fully paid shares, the Corporation shall
declare a dividend upon partly paid shares of the same class, but only upon
the basis of the percentage of the consideration actually paid thereon.
(b) If the dividend is to be paid in shares of the
theretofore unissued capital stock of the Corporation, the Board of Directors
shall, by resolution, direct that there be designated as capital in respect
of such shares an amount which is not less than the aggregate par value of
par value shares being declared as a dividend and, in the case of shares
without par value being declared as a dividend, such amount as shall be
determined by the Board of Directors; provided, however, that no such
designation as capital shall be necessary if shares are being distributed by
the Corporation pursuant to a split-up or division of its stock.
Section 7.02. INTERESTED DIRECTORS AND OFFICERS. No
contract or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for that reason, or solely because
an interested director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or her vote is counted for
such purpose, if: (a) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to
the Board of Directors or the committee, and the Board of Directors or
committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; (b) the material facts as
to his or her relationship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote thereon, and
the contract or transaction is specifically approved in good faith by vote of
the
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stockholders; or (c) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof, or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum
at a meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
Section 7.03. VOTING SECURITIES HELD BY THE CORPORATION.
Unless otherwise ordered by the Board of Directors, powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name
of and on behalf of the Corporation by the Chairman or the President, and
either such officer may, in the name of and on behalf of the Corporation,
take all such action as such officer may deem advisable to vote in person or
by proxy at any meeting of security holders of other corporations in which
the Corporation may hold securities, and at any such meeting such officer
shall possess and may exercise any and all rights and powers incident to the
ownership of such securities that the Corporation might have possessed and
exercised if it had been present. The Board of Directors may from time to
time confer like powers upon any other person or persons.
Section 7.04. EXECUTION OF INSTRUMENTS.
(a) All deeds, mortgages, notes, bonds, checks,
contracts and other instruments pertaining to the business and affairs of the
Corporation shall be signed on behalf of the Corporation by the Chairman, if
any, or the President, or any Vice President, or by such other person or
persons as may be designated from time to time by the Board of Directors.
(b) If a document must be executed by persons holding
different offices or functions and one person holds such offices or exercises
such functions, that person may execute the document in more than one
capacity if the document indicates each such capacity.
Section 7.05. ADVANCES. The Corporation may, without a vote
of the directors, advance money to its directors, officers or employees to
cover expenses that can reasonably be anticipated to be incurred by them in
the performance of their duties and for which they would be entitled to
reimbursement in the absence of an advance.
Section 7.06. FISCAL YEAR. The fiscal year end of the
Corporation shall be the last Monday in December or such other date as may be
fixed from time to time by resolution of the Board of Directors.
Section 7.07. CORPORATE SEAL. The corporate seal, if one is
adopted by the Board of Directors, shall be circular in form and shall have
inscribed thereon the name of the Corporation, the word "Delaware" and the
words "Corporate Seal." The seal may be used by
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causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise placed on any document requiring it.
Section 7.08. FORM OF RECORDS. Any records maintained by
the Corporation in the regular course of its business, including its stock
ledger, books of account, and minute books, may be kept on, or be in the form
of, punch cards, magnetic tape, photographs, microphotographs, or any other
information storage device, provided that the records so kept can be
converted into clearly legible form within a reasonable time. The Corporation
shall so convert any records so kept upon the request of any person entitled
to inspect the same.
Section 7.09. POWER TO AMEND. These By-Laws may be altered,
amended or repealed or new By-Laws may be adopted by the stockholders or by
the Board of Directors, if such power is conferred upon the Board of
Directors by the Certificate of Incorporation, at any annual meeting of the
stockholders or of the Board of Directors, or at any special meeting of the
stockholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of
such special meeting. If the power to adopt, amend or repeal these By-Laws is
conferred upon the Board of Directors by the Certificate of Incorporation it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal these By-Laws.
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SERVICES AGREEMENT
This Shared Services Agreement (this "Agreement") is entered into as of
August 19, 1999 (the "Effective Date") by and between Carlson Restaurants
Worldwide Inc., a Delaware corporation ("CRW"), and Carlson Companies, Inc. a
Minnesota corporation ("CCI").
RECITALS
WHEREAS, CRW is issuing shares of Class A Common Stock, $0.01 par value
per share ("Class A Common Stock"), to the public in an offering (the
"Initial Public Offering") registered under the Securities Act of 1933, as
amended;
WHEREAS, CCI beneficially owns all of the issued and outstanding CRW
Class B Common Stock, par value $0.01 per share ("Class B Common Stock");
WHEREAS, CCI has heretofore directly or indirectly provided certain
administrative, financial, management and other services to CRW or its
Subsidiaries (as defined below);
WHEREAS, on the terms and subject to the conditions set forth herein,
CRW desires to retain CCI as an independent contractor to provide, directly
or indirectly, certain of those services to CRW and its Subsidiaries after
the Effective Date; and
WHEREAS, on the terms and subject to the conditions set forth herein,
CCI desires to provide, directly or indirectly, such services to CRW and its
Subsidiaries.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, CCI and CRW, for themselves,
their successors and assigns, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. As used in this Agreement, the following
terms will have the following meanings, applicable both to the singular and
the plural forms of the terms described:
"CCI" has the meaning ascribed thereto in the preamble hereto.
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"CRW" has the meaning ascribed thereto in the preamble hereto.
"CRW Entities" means CRW and its Subsidiaries and "CRW Entity" shall
mean any of the CRW Entities.
"CRW Indemnified Person" has the meaning ascribed thereto in Section 4.05.
"Actions" has the meaning ascribed thereto in Section 4.04.
"Agreement" has the meaning ascribed thereto in the preamble hereto, as
such agreement may be amended and supplemented from time to time in
accordance with its terms.
"Benefit Billing" has the meaning ascribed thereto in Section 3.01.
"Benefits Services" has the meaning ascribed thereto in Section 3.05.
"Change Notice" has the meaning ascribed thereto in Section 3.07.
"Class A Common Stock" has the meaning ascribed thereto in the recitals
to this Agreement.
"Class B Common Stock" has the meaning ascribed thereto in the recitals
to this Agreement.
"Common Stock" means the Class B Common Stock, the Class A Common Stock
and any other class of CRW capital stock representing the right to vote
generally for the election of directors.
"Customary Billing" has the meaning ascribed thereto in Section 3.01.
"Effective Date" has the meaning ascribed thereto in the preamble to
this Agreement.
"Employee Welfare Plans" has the meaning ascribed thereto in Section
4.02.
"Initial Public Offering" has the meaning ascribed thereto in the
recitals to this Agreement.
"CCI Entities" means CCI and Subsidiaries of CCI and "CCI Entity" shall
mean any of the CCI Entities.
"CCI Indemnified Person" has the meaning ascribed thereto in Section
4.03.
"Pass-Through Billing" has the meaning ascribed thereto in Section 3.01.
"Payment Date" has the meaning ascribed thereto in Section 3.06.
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"Person" means any individual, partnership, limited liability company,
joint venture, corporation, trust, unincorporated organization, government
(and any department or agency thereof) or other entity.
"Schedule I" means the first schedule hereto which lists the Services
(other than Services relating to employee plan and benefit matters) to be
provided by CCI to CRW and sets forth the related billing methodology.
"Schedule II" means the second schedule attached hereto which lists the
Services relating to employee plans and benefit arrangements to be provided
by CCI to CRW and sets forth the related billing methodology.
"Schedules" has the meaning ascribed thereto in Section 3.01.
"SEC" means the United States Securities and Exchange Commission.
"Service Costs" has the meaning ascribed thereto in Section 3.01.
"Services" has the meaning ascribed thereto in Section 2.01.
"Subsidiary" means, as to any Person, any corporation, association,
partnership, joint venture or other business entity of which more than 50% of
the voting capital stock or other voting ownership interests is owned or
controlled directly or indirectly by such Person or by one or more of the
Subsidiaries of such Person or by a combination thereof. Subsidiary, when
used with respect to CCI or CRW, shall also include any other entity
affiliated with CCI or CRW, as the case may be, that CCI and CRW may
hereafter agree in writing shall be treated as a "Subsidiary" for the
purposes of this Agreement. CRW shall not be deemed to be a Subsidiary of
CCI for purposes of this Agreement.
Section 1.02. Internal References. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement and
references to the parties shall mean the parties to this Agreement.
ARTICLE II
PURCHASE AND SALE OF SERVICES
Section 2.01. Purchase and Sale of Services. (a) On the terms and
subject to the conditions of this Agreement and in consideration of the
Service Costs described below, CCI agrees to provide to CRW, or procure the
provision to CRW of, and CRW agrees to purchase from CCI, the services
described in Schedules I and II (the "Services"). Unless otherwise
specifically agreed by CCI and CRW, the Services to be provided or procured
by CCI hereunder shall be substantially similar in scope, quality, and nature
to those provided to, or procured on behalf of, the CRW Entities prior to the
Effective Date.
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(b) It is understood that (i) Services to be provided to CRW under this
Agreement will, at CRW's request, be provided to Subsidiaries of CRW and (ii)
CCI may satisfy its obligation to provide or procure Services hereunder by
causing one or more of its Subsidiaries to provide or procure such Services.
With respect to Services provided to, or procured on behalf of, any
Subsidiary of CRW, CRW agrees to pay on behalf of such Subsidiary all amounts
payable by or in respect of such Services.
Section 2.02. Additional Services. In addition to the Services to be
provided or procured by CCI pursuant to Section 2.01, if requested by CRW,
and to the extent that CCI and CRW may mutually agree, CCI shall provide
additional services (including services not provided by CCI to the CRW
Entities prior to the Effective Date) to CRW. The scope of any such services,
as well as the term, costs, and other terms and conditions applicable to such
services, shall be as mutually agreed by CCI and CRW.
ARTICLE III
SERVICE COSTS; OTHER CHARGES
Section 3.01. Service Costs Generally. Schedules I and II hereto
(collectively, the "Schedules") indicate, with respect to each Service listed
therein, whether the costs to be charged to CRW for such Service or program
are determined by (i) the customary billing method ("Customary Billing"),
(ii) the pass-through billing method ("Pass-Through Billing"), or (iii) a
calculation of certain costs relating to employee benefit plans and benefit
arrangements including CCI's reasonable and actual costs (including any
contributions and premium costs and certain third-party expenses and
allocations of certain CCI personnel expenses), generally in accordance with
past practice, subject to Section 3.05 hereof, relating to participation by
CRW employees in any of CCI's benefit plans ("Benefits Billing"); (iv) percent
of savings achieved through volume purchasing ("Percent of Savings"); and (v)
actuarially determined premiums ("Premiums"). The Customary Billing,
Pass-Through Billing, and Benefits Billing Percent of Savings and Premiums
methods applicable to Services provided to CRW, together with the unallocated
general and administrative expense billing described in Section 3.05, are
collectively referred to herein as the "Service Costs". CRW agrees to pay to
CCI in the manner set forth in Section 3.06 the Service Costs applicable to
each of the Services provided by CCI.
Section 3.02. Customary Billing. The costs of Services determined by
the Customary Billing method shall be comparable to the costs charged from
time to time to other businesses operated by CCI for comparable services,
which shall reflect CCI's cost, as determined by CCI from time to time and
including the cost of capital, associated with the delivery of such Services.
Section 3.03. Pass-Through Billing. The costs of Services determined
by the Pass-Through Billing method shall be equal to the third-party costs
and expenses incurred by CCI or any of its Subsidiaries on behalf of any CRW
Entity. If CCI incurs costs or expenses on behalf of CRW or any of its
Subsidiaries as well as other businesses operated by CCI, CCI will allocate
any such costs or expenses in good faith between the various businesses on
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behalf of which such costs or expenses were incurred as CCI shall determine
in the exercise of CCI's reasonable judgment. CCI shall apply usual and
accepted accounting conventions in making such allocations and CCI or its
agents shall keep and maintain such books and records as may be reasonably
necessary to make such allocations. CCI shall make copies of such books and
records available to any CRW Entity upon request and with reasonable notice.
Section 3.04. Benefits Billing. (a) Prior to the Effective Date, certain
employees of CRW participated in the following benefit plans sponsored by
CCI: health, dental, medical, short- and long-term disability and life
insurance, and the Carlson Legacy Plan (collectively, the "CCI Plans"). On
and after the Effective Date, CRW associates shall continue to be eligible to
participate in the CCI Plans except for the Carlson Legacy Plan, subject to
the terms of the governing plan documents as interpreted by the appropriate
plan fiduciaries. On and after the Effective Date, subject to regulatory
requirements and the provisions of Section 4.01 hereof, CCI will continue to
provide Benefits Services to and in respect of CRW employees with reference
to the CCI Plans as it administered the plans prior to the Effective Date.
(b) The costs payable by CRW for Services relating to employee plans
and benefit arrangements ("Benefits Services") may be charged on the basis of
Customary Billing, Pass-Through Billing, or Benefits Billing. It is express
intent of the parties that Services Costs relating to the administration of
CRW employee plans and the performance of related Services will not exceed
reasonable compensation for such Services. Costs associated with certain
plans and programs identified in Schedule II will be paid through CRW funding
and employee payroll deductions for such plans and programs. Benefit
Services consists of those categories of Services which are more fully
described on Schedule II attached hereto.
(c) Each party to this Agreement may request changes in the applicable
terms of or services relating to CCI Plans, approval of which shall not be
unreasonably withheld; provided, however, that approval of changes in the
terms of any of CCI Plans shall, after consultation with CRW, be in the sole
discretion of CCI.
(d) CCI and CRW agree to cooperate fully with each other in the
administration and coordination of regulatory and administrative requirements
associated with CCI Plans. Such coordination, upon request, will include
(but is not limited to) the following: sharing payroll data for
determination of highly compensated employees, providing census information
(including accrued benefits) for purposes of running discrimination tests,
providing actuarial reports for purposes of determining the funded status of
any plan, review and coordination of insurance and other independent third
party contracts, and providing for review of all summary plan descriptions,
requests for determination letters, insurance contracts, Forms 5500,
financial statement disclosures and plan documents.
Section 3.05. Unallocated General and Administrative Services. In
addition to the charges for the specific Services described in Schedules I
and II, CRW shall pay to CCI, as an additional Service Cost, the fixed amount
of $66,667 per month during the initial term and any extension of this
Agreement for unallocated general and administrative services,
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including the cost of capital associated with the delivery thereof, which are
provided by CCI to CRW and not otherwise identified to a specific Service
under this Agreement.
Section 3.06. Invoicing and Settlement of Costs. (a) CCI will invoice
or notify CRW on a monthly basis (not later than the fifth day of each
month), either directly or through CCI's intercompany billing system, in a
manner substantially consistent with the billing practices used in connection
with services provided to the CRW Entities prior to the Effective Date
(except as otherwise agreed), of the Service Costs. In connection with the
invoicing described in this Section 3.06(a), CCI will provide to CRW the same
billing data and level of detail as it customarily provided to the CRW
Entities prior to the Effective Date and as it customarily provides to other
businesses operated by CCI and such other data for CRW's review as may be
reasonably requested by CRW.
(b) CRW agrees to pay on or before 30 days after the date on which CCI
invoices or notifies CRW of the Service Costs after the Effective Date (or
the next Business Day, if such day is not a Business Day) (each, a "Payment
Date"), at CCI's option upon reasonable notice to CRW, through CCI's
intercompany billing system or, if applicable, CCI's cash management systems,
without set off, all amounts invoiced by CCI pursuant to paragraph (a) during
the preceding calendar month (or since the Effective Date, in the case of the
first Payment Date). If CRW fails to pay any monthly payment (except for
legitimately contested invoiced amounts) within 90 days of the relevant
Payment Date, CRW shall be obligated to pay, in addition to the amount due on
such Payment Date, interest on such amount at the prime, or the prime lending
rate quoted by the WALL STREET JOURNAL plus 3% per annum compounded monthly
from the relevant Payment Date through the date of payment.
Section 3.07. Amended Schedules. (a) Prior to September 30 of each year
for so long as the relevant Services continue to be provided under this
Agreement, CCI shall prepare and deliver to CRW updated versions of Schedules
I and II (to the extent applicable), setting forth with respect to the
Services described in such Schedules, any proposed changes in billing
methodology and, to the extent available, the Service Costs estimated to be
payable for such Services for the then current fiscal year. Except as CRW
and CCI may otherwise agree, and except as specifically described in this
Agreement (including the Schedules), the method of allocating and charging
the costs reflected on Schedules I and II, and any updated versions of such
schedules, shall be consistent with CCI's prior practices with respect to the
allocation of costs for services to the CRW Entities immediately prior to the
Effective Date; provided that if CCI changes the method of allocating and
charging such costs to CCI businesses generally, such revised method shall
also be applied to CRW and CRW shall be notified in writing preferably at
least 90, but not less than 60, days in advance of implementing such revised
method (a "Change Notice").
(b) If a revised method of allocating and charging costs for particular
Services would result in a significant increase in the amount of Service
Costs that CRW would be obligated to pay under this Agreement as compared to
those that would be payable were such method not revised, then,
notwithstanding Article VI, CRW shall have the right during the 90-day period
following receipt of CCI's Change Notice to terminate such Services upon
written notice to CCI, and such termination shall be effective on the
implementation date of the change in
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methodology. Such change in allocation method shall be deemed accepted by CRW
if no such notice of termination is received by CCI during such 90-day
period, and thereafter any termination shall be governed by the provisions of
Article VI. For purposes of this paragraph (b), a "significant increase"
means, with respect to any amount, an aggregate increase of more than 10%
over the prior year's cost for the affected Service (provided such increase
is at least $100,000) without a corresponding increase in the quantity of
services provided.
ARTICLE IV
THE SERVICES
Section 4.01. General Standard of Service. Except as otherwise agreed
with CRW or described in this Agreement, and provided that CCI is not
restricted by contract with third parties or by applicable law, CCI agrees
that the nature, quality, and standard of care applicable to the delivery of
the Services hereunder will be substantially the same as that of the Services
which CCI provides from time to time throughout its businesses; provided that
in no event shall such standard of care be less than the standard of care
that CCI has customarily provided to the CRW Entities with respect to the
relevant Service prior to the Effective Date. CCI shall use its reasonable
business efforts to ensure that the nature and quality of Services provided
to CRW employees either by CCI directly or through administrators under
contract shall be undifferentiated as compared with the same services
provided to or on behalf of CCI associates under CCI Plans.
Section 4.02. Delegation. Subject to Section 4.01 above, CRW hereby
delegates to CCI final, binding, and exclusive authority, responsibility, and
discretion to interpret and construe the provisions of the CCI Plans in which
CRW has elected to participate and which are administered by CCI under this
Agreement. CCI may further delegate such authority to plan administrators to:
(i) provide administrative and other services;
(ii) reach factually supported conclusions consistent with the terms
of the CCI Plans;
(iii) make a full and fair review of each claim denial and decision
related to the provision of benefits provided or arranged for under the CCI
Plans, pursuant to the requirements of ERISA, if within sixty days after
receipt of the notice of denial, a claimant requests in writing a review for
reconsideration of such decisions. The Plan Administrator shall notify the
claimant in writing of its decision on review. Such notice shall satisfy all
ERISA requirements relating thereto; and
(iv) notify the claimant in writing of its decision on review.
Section 4.03. Limitation of Liability. CRW agrees that none of CCI and
its Subsidiaries and their respective directors, officers, agents, and
employees (each, a "CCI Indemnified Person") shall have any liability,
whether direct or indirect, in contract or tort or otherwise, to CRW for or
in connection with the Services rendered or to be rendered by any
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<PAGE>
CCI Indemnified Person pursuant to this Agreement, the transactions
contemplated hereby or any CCI Indemnified Person's actions or inactions in
connection with any such Services or transactions, except for damages which
have resulted from such CCI Indemnified Person's gross negligence or willful
misconduct in connection with any such Services, actions or inactions.
Section 4.04. Indemnification of CCI by CRW. CRW agrees to indemnify and
hold harmless each CCI Indemnified Person from and against any damages, and
to reimburse each CCI Indemnified Person for all reasonable expenses as they
are incurred in investigating, preparing, pursuing, or defending any claim,
action, proceeding, or investigation, whether or not in connection with
pending or threatened litigation and whether or not any CCI Indemnified
Person is a party (collectively, "Actions"), arising out of or in connection
with Services rendered or to be rendered by any CCI Indemnified Person
pursuant to this Agreement, the transactions contemplated hereby or any CCI
Indemnified Person's actions or inactions in connection with any such
Services or transactions; provided that CRW will not be responsible for any
damages of any CCI Indemnified Person that have resulted from (a) such CCI
Indemnified Person's gross negligence or willful misconduct in connection
with any of the advice, actions, inactions, or Services referred to above or
(b) the exercise by CCI of its authority, responsibility or discretion to
interpret and construe the provisions of the CCI Plans pursuant to Section
4.02 hereof.
Section 4.05. Indemnification of CRW by CCI. CCI agrees to indemnify and
hold harmless CRW and its Subsidiaries and their respective directors,
officers, agents, and employees (each, a "CRW Indemnified Person") from and
against any damages, and will reimburse each CRW Indemnified Person for all
reasonable expenses as they are incurred in investigating, preparing, or
defending any Action, arising out of or in connection with the gross
negligence or willful misconduct of any CCI Indemnified Person in connection
with the Services rendered or to be rendered pursuant to this Agreement or
the transactions contemplated hereby.
Section 4.06. Further Indemnification. To the extent that any other
Person has agreed to indemnify any CCI Indemnified Person or to hold a CCI
Indemnified Person harmless and such Person provides services to CCI or any
affiliate of CCI relating directly or indirectly to any employee plan or
benefit arrangement for which Benefit Services are provided under this
Agreement, CCI will exercise reasonable efforts (x) to make such agreement
applicable to any CRW Indemnified Person so that each CRW Indemnified Person
is held harmless or indemnified to the same extent as any CCI Indemnified
Person or (y) otherwise make available to each CRW Indemnified Person the
benefits of such agreement.
Section 4.07. Reports. CCI shall provide or shall cause to be provided
to CRW with data or reports requested by CRW relating to (i) benefits paid to
or on behalf of CRW employees under CCI Plans, including but not limited to
financial statements, claims history, and census information, and (ii) other
information relating to the Services that is required to satisfy any
reporting or disclosure requirement of ERISA or the Code. CCI will provide
such information within a reasonable period of time after it is requested.
The costs for reports which are substantially similar to reports prepared by
CCI or on behalf of CCI generally for
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its businesses shall be billed as part of the Benefit Costs. The cost for
additional reports shall be billed as incremental costs in accordance with
Section 3.06.
ARTICLE V
ADDITIONAL AGREEMENT
Section 5.01. Notice. Unless otherwise agreed in writing by the parties,
CRW agrees to provide CCI with at least two months prior written notice of
any material change in the eligible CRW employees and retirees covered by any
CCI Plan, and any change in the scope of Services to be provided by CCI with
respect to such plans and arrangements. Notwithstanding the preceding
sentence, if CRW provides CCI with less than two months notice of any such
change and CCI is nonetheless able, with reasonable efforts, to effectuate
such change with such shorter notice, then CCI shall implement the requested
change.
ARTICLE VI
TERM AND TERMINATION
Section 6.01. Term. Except as otherwise provided in this Article VI or
in Section 7.05 or as otherwise agreed in writing by the parties, this
Agreement shall have an initial term of ten years from the Effective Date,
and will be renewed automatically thereafter for successive one-year terms
unless either CRW or CCI elects not to renew this Agreement upon not less
than six months' written notice.
Section 6.02. Termination. (a) After the initial ten-year term, CRW may
from time to time terminate this Agreement with respect to one or more of the
Services, in whole or in part, upon giving at least six months' prior notice
to CCI.
(b) This Agreement will be subject to early termination by either CRW
or CCI upon six months' written notice if CCI owns less than fifty percent
(50%) of the outstanding shares of Common Stock of CRW.
(c) CCI may terminate any affected Service at any time if CRW shall
have failed to perform any of its material obligations under this Agreement
relating to such Service, CCI has notified CRW in writing of such failure,
and such failure shall have continued for a period of 60 days after receipt
of CRW of notice of such failure.
(d) CRW may terminate any affected Service at any time if CCI shall
have failed to perform any of its material obligations under this Agreement
relating to such Service, CRW has notified CCI in writing of such failure,
and such failure shall have continued for a period of 60 days after receipt
by CCI of notice of such failure.
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(e) Each of CRW and CCI agrees that prior to exercising its rights
under this Section 6.02 it will consult for a reasonable period with the
other party in advance of such termination as to its implementation.
(f) CRW may terminate any affected Service pursuant to Section 3.07(b)
hereof.
Section 6.03. Effect of Termination. (a) Other than as required by law,
upon termination of any Service pursuant to Section 6.01 or Section 6.02, and
upon termination of this Agreement in accordance with its terms, CCI will
have no further obligation to provide the terminated Service (or any Service,
in the case of termination of this Agreement) and CRW will have no obligation
to pay any fees relating to such Services or make any other payments
hereunder; provided that notwithstanding such termination, (i) CRW shall
remain liable to CCI for fees owed and payable in respect of Services
provided prior to the effective date of the termination; (ii) CCI shall
continue to charge CRW for administrative and program costs relating to
benefits paid after but incurred prior to the termination of any Service and
other services required to be provided and payments required to be made after
the termination of such Service and CRW shall be obligated to pay such
expenses in accordance with the terms of this Agreement; and (iii) the
provisions of Articles IV, V, VI and VII shall survive any such termination.
All program and administrative costs attributable to CRW employees for CCI
Plans that relate to any period after the effective date of any such
termination shall be for the account of CRW.
(b) Following termination of this Agreement with respect to any
Service, CCI and CRW agree to cooperate in providing for an orderly
transition of such Service to CRW or to a successor service provider.
Without limiting the foregoing, CCI agrees to (i) provide, within 90 days of
the termination, copies in a format designated by CCI, all records relating
directly or indirectly to benefit determinations of CRW employees, including
but not limited to compensation and service records, correspondence, plan
interpretive policies, plan procedures, administration guidelines, minutes,
or any data or records required to be maintained by law and (ii) work with
CRW in developing a transition schedule.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Prior Agreements. In the event there is any conflict
between the provisions of this Agreement, on the one hand, and provisions of
prior services agreements among CCI or its Subsidiaries and any of the CRW
businesses (the "Prior Agreements"), on the other hand, the provisions of
this Agreement shall govern and such provisions in the Prior Agreements are
deemed to be amended so as to conform with this Agreement.
Section 7.02. Future Litigation and Other Proceedings. In the event that
CRW (or any of its officers or directors) or CCI (or any of its officers or
directors) at any time after the date hereof initiates or becomes subject to
any litigation or other proceedings before any governmental authority or
arbitration panel with respect to which the parties have no prior agreements
(as to indemnification or otherwise), the party (and its officers and
directors) that
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has not initiated and is not subject to such litigation or other proceedings
shall comply, at the other party's expense, with any reasonable requests by
the other party for assistance in connection with such litigation or other
proceedings (including by way of provision of information and making
available of employees as witnesses). In the event that CRW (or any of its
officers or directors) and CCI (or any of its officers or directors) at any
time after the date hereof initiate or become subject to any litigation or
other proceedings before any governmental authority or arbitration panel with
respect to which the parties have no prior agreements (as to indemnification
or otherwise), each party (and its officers and directors) shall, at their
own expense, coordinate their strategies and actions with respect to such
litigation or other proceedings to the extent such coordination would not be
detrimental to their respective interests and shall comply, at the expense of
the requesting party, with any reasonable requests of the other party for
assistance in connection therewith (including by way of provision of
information and making available of employees as witnesses).
Section 7.03. No Agency. Nothing in this Agreement shall constitute or
be deemed to constitute a partnership or joint venture between the parties
hereto or, except to the extent provided in Section 4.02, constitute or be
deemed to constitute any party the agent or employee of the other party for
any purpose whatsoever and neither party shall have authority or power to
bind the other or to contract in the name of, or create a liability against,
the other in any way or for any purpose.
Section 7.04. Subcontractors. CCI may hire or engage one or more
subcontractors to perform all or any of its obligations under this Agreement,
provided that, subject to Section 4.03, CCI will in all cases remain
primarily responsible for all obligations undertaken by it in this Agreement
with respect to the scope, quality and nature of the Services provided to CRW.
Section 7.05. Force Majeure. (a) For purposes of this Section, "force
majeure" means an event beyond the control of either party, which by its
nature could not have been foreseen by such party, or, if it could have been
foreseen, was unavoidable, and includes without limitation, acts of God,
storms, floods, riots, fires, sabotage, civil commotion or civil unrest,
interference by civil or military authorities, acts of war (declared or
undeclared) and failure of energy sources.
(b) Neither party shall be under any liability for failure to fulfill
any obligation under this Agreement, so long as and to the extent to which
the fulfillment of such obligation is prevented, frustrated, hindered, or
delayed as a consequence of circumstances of force majeure, provided always
that such party shall have exercised all due diligence to minimize to the
greatest extent possible the effect of force majeure on its obligations
hereunder.
(c) Promptly on becoming aware of force majeure causing a delay in
performance or preventing performance of any obligations imposed by this
Agreement (and termination of such delay), the party affected shall give
written notice to the other party giving details of the same, including
particulars of the actual and, if applicable, estimated continuing effects of
such force majeure on the obligations of the party whose performance is
prevented or delayed. If such notice shall have been duly given, any actual
delay resulting from such force majeure shall be deemed not to be a breach of
this Agreement, and the period for performance of the
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obligation to which it relates shall be extended accordingly, provided that
if force majeure results in the performance of a party being delayed for a
period which causes a material and continuing impact on the conduct of the
business of the other party (but in no event less than 14 days), such other
party shall have the right to terminate this Agreement with respect to any
Service effected by such delay forthwith by written notice.
Section 7.06. Entire Agreement. This Agreement (including the Schedules
constituting a part of this Agreement) and any other writing signed by the
parties that specifically references this Agreement constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter hereof.
This Agreement is not intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.
Section 7.07. Information. Subject to applicable law and privileges,
each party hereto covenants and agrees to provide the other party with all
information regarding itself and transactions under this Agreement that the
other party reasonably believes are required to comply with all applicable
federal, state, county and local laws, ordinances, regulations and codes,
including, but not limited to, securities laws and regulations.
Section 7.08. Confidential Information. CRW and CCI hereby covenant and
agree to hold in trust and maintain confidential all Confidential Information
relating to the other party. "Confidential Information" shall mean all
information disclosed by either party to the other in connection with this
Agreement whether orally, visually, in writing or in any other tangible form,
and includes, but is not limited to, economic and business data, business
plans, and the like, but shall not include (i) information which becomes
generally available other than by release in violation of the provisions of
this Section 7.08, (ii) information which becomes available on a
non-confidential basis to a party from a source other than the other party to
this Agreement provided the party in question reasonably believes that such
source is not or was not bound to hold such information confidential, (iii)
information acquired or developed independently by a party without violating
this Section 7.08 or any other confidentiality agreement with the other party
and (iv) information that any party hereto reasonably believes it is required
to disclose by law, provided that it first notifies the other party hereto of
such requirement and allows such party a reasonable opportunity to seek a
protective order or other appropriate remedy to prevent such disclosure.
Without prejudice to the rights and remedies of either party to this
Agreement, a party disclosing any Confidential Information to the other party
in accordance with the provisions of this Agreement shall be entitled to
equitable relief by way of an injunction if the other party hereto breaches
or threatens to breach any provision of this Section 7.08.
Section 7.09. Notices. Any notice, instruction, direction or demand
under the terms of this Agreement required to be in writing will be duly
given upon delivery, if delivered by hand, overnight receipted carrier, or
mail, to the following addresses:
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(a) If to CRW, to:
Carlson Restaurants Worldwide Inc.
7540 LBJ Freeway
Dallas, Texas 75251
Attention: General Counsel
(b) If to CCI, to:
Carlson Companies, Inc.
701 Carlson Parkway
Minneapolis, MN 55459-8249
Attention: Legal Department
with a copy to:
Carlson Hospitality Group Inc.
701 Carlson Parkway
Minneapolis, MN 55459-8214
Attention: President and CEO
or to such other addresses or telecopy numbers as may be specified by like
notice to the other parties.
Section 7.10. Governing Law and Dispute Resolution. This Agreement shall
be construed in accordance with and governed by the substantive internal laws
of the State of Minnesota. If either party is not satisfied with the other
party's performance of its obligations under this Agreement, a written
description of the problem shall be provided to the executive financial
management of the offending party by the executive financial management of
the aggrieved party, and both parties shall use good faith efforts to resolve
the problem before bringing any legal action.
Section 7.11. Severability. If any provision of this Agreement shall be
invalid or unenforceable, such invalidity or unenforceability shall not
render the entire Agreement invalid. Rather, the Agreement shall be
construed as if not containing the particular invalid or unenforceable
provision, and the rights and obligations of each party shall be construed
and enforced accordingly.
Section 7.12. Amendment. This Agreement may only be amended by a written
agreement executed by both parties hereto.
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Section 7.13. Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be deemed an original and all of which,
when taken together, shall constitute one agreement.
Section 7.14. Services to CCI. (a) CRW agrees to continue to participate
in the Owners' Club Card and Friday's Gold Card programs.
(b) CRW agrees to permit CCI and its Subsidiaries to display the
trademarks and service marks owned by CRW or any of its Subsidiaries in CCI's
publicity materials and for other similar purposes at no cost to CCI or its
Subsidiaries and in a manner consistent with prior practice.
Section 7.15. Year 2000 Readiness. (a) CRW and CCI agree that each will
cooperate with the other and use its best efforts to ensure that the internal
Critical Systems in its operations will be Year 2000 Compliant beginning
December 31, 1999 and continuing from that date forward. A "Critical
System" means a system which, if it failed, would materially adversely affect
a party's performance obligations under this Agreement.
(b) Neither party represents or warrants to the other that systems
external to its systems, such as the outside power grid, suppliers,
transportation systems, and the like are Year 2000 Compliant, or that such
external systems will not adversely affect such party's obligations or
performance under this Agreement. Neither party shall be obligated to
mitigate any damages resulting from year 2000 failures of such external
systems.
(c) "Year 2000 Compliant" means a system will not produce interruptions
or errors processing date data for all dates to, through and after January 1,
2000, including leap years, when the Critical Systems are used with accurate
date data in accordance with their documentation, provided all other systems
(e.g., other software, firmware and hardware) used with a party's system
properly exchange date data with such party's system.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their duly authorized representatives.
CARLSON RESTAURANTS WORLDWIDE INC.
By: /s/ Wallace B. Doolin
------------------------------------
Name: Wallace B. Doolin
Title: President and CEO
CARLSON COMPANIES, INC.
By: /s/ Martyn R. Redgrave
-------------------------------------
Name: Martyn R. Redgrave
Title: Executive Vice President and CFO
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<PAGE>
Services Agreement
Schedule I:
Services (Excluding Benefit Plans and Arrangements)
<TABLE>
<CAPTION>
- ---------------------------------------- -------------------------------------------------- --------------------------------
SERVICE DESCRIPTION BILLING METHODOLOGY
- ---------------------------------------- -------------------------------------------------- --------------------------------
<S> <C> <C>
IT-MIS Systems Workstation technical support and IT consulting Customary
- ---------------------------------------- -------------------------------------------------- --------------------------------
Employee Communications Internal enterprise-wide employee communications Pass-Through Billing
- ---------------------------------------- -------------------------------------------------- --------------------------------
Corporate HR Services Resume scanning and database tool; compensation Customary
consulting
- ---------------------------------------- -------------------------------------------------- --------------------------------
Corporate Accounting External audit of shared services function; Customary
preparation of consolidated management reports;
accounting policies and procedures
- ---------------------------------------- -------------------------------------------------- --------------------------------
Corporate Procurement and Strategic Enterprise-wide procurement services (exclusive Percent of savings
Sourcing of Provisions-TM- services)
- ---------------------------------------- -------------------------------------------------- --------------------------------
Tax Tax consulting and tax examination support Customary
- ---------------------------------------- -------------------------------------------------- --------------------------------
Treasury and Cash Management Debt, bank relationship, and investment Customary
management; cash concentration and management
services
- ---------------------------------------- -------------------------------------------------- --------------------------------
Legal Corporate legal support Customary
- ---------------------------------------- -------------------------------------------------- --------------------------------
Corporate Executive Meetings and Corporate-wide executive management meetings and Pass-Through Billing
Briefings briefings
- ---------------------------------------- -------------------------------------------------- --------------------------------
Accounts Payable Processing of purchase orders, invoices, and Customary
travel and entertainment expenses
- ---------------------------------------- -------------------------------------------------- --------------------------------
Financial Information Technology Support of Oracle-TM- Financial Systems Customary
- ---------------------------------------- -------------------------------------------------- --------------------------------
Accounting to Reporting Maintenance of General Ledger and accounting Customary
support
- ---------------------------------------- -------------------------------------------------- --------------------------------
Fixed Assets Fixed Asset accounting support Customary
- ---------------------------------------- -------------------------------------------------- --------------------------------
Order to Cash Accounts receivable system support and cash Customary
receipt processing
- ---------------------------------------- -------------------------------------------------- --------------------------------
Corporate Security Background checks and specialized security Pass-Through Billing
services
- ---------------------------------------- -------------------------------------------------- --------------------------------
Corporate Travel Services Travel services; ticketing, travel expense Customary and Pass-Through
management and reporting, credit card management. Billing
- ---------------------------------------- -------------------------------------------------- --------------------------------
Remote Network Access Access charges for remote computer users Pass-Through Billing
- ---------------------------------------- -------------------------------------------------- --------------------------------
Risk Management and Insurance Services Maintenance of risk management and insurance Premiums for retained casualty
program services losses; Customary for all other
- ---------------------------------------- -------------------------------------------------- --------------------------------
</TABLE>
<PAGE>
Services Agreement
Schedule II:
Benefit Plans and Arrangements
<TABLE>
<CAPTION>
- ---------------------------------------- -------------------------------------------------- --------------------------------
SERVICE DESCRIPTION BILLING METHODOLOGY
- ---------------------------------------- -------------------------------------------------- --------------------------------
<S> <C> <C>
Benefit Plans and Benefit Trust Administration of health and welfare benefit Benefits Billing
Administration plans; consulting on plan design
- ---------------------------------------- -------------------------------------------------- --------------------------------
</TABLE>
<PAGE>
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT ("Agreement") is entered into as of August
19, 1999 by and between Carlson Holdings, Inc., a Minnesota corporation ("CHI")
and Carlson Restaurants Worldwide Inc., a Delaware corporation (Restaurants).
This Agreement supercedes all prior Tax Sharing Agreements entered into
between CHI and Restaurants.
RECITALS
WHEREAS, CHI is the common parent corporation of an affiliated group of
corporations within the meaning of Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code") and of combined groups as defined under similar
laws of other jurisdictions (the "CHI Group"), and Restaurants and Restaurants'
Affiliates are members of such groups; and
WHEREAS, the groups of which CHI is the common parent and in which
Restaurants and Restaurants' Affiliates are members, file and intend to file
Consolidated Returns and Combined Returns to the extent required or permitted
under federal, state, and local laws; and
WHEREAS, CHI and Restaurants desire to agree upon a method for
determining the financial consequences to each party and their subsidiaries
resulting from the filing of a consolidated federal income tax return and the
filing of returns relating to combined state taxes.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, CHI and Restaurants for
themselves, their successors, and assigns, hereby agree as follows:
ARTICLE I
DEFINITIONS
Definitions. For purposes of this Agreement, the terms set forth below
shall have the following meanings.
1.1. "AUDIT" includes any audit, assessment of Taxes, other examination by
any Tax Authority, proceeding, or appeal of such proceeding relating
to Taxes, whether administrative or judicial.
1.2. "COMBINED GROUP" means a group of corporations or other entities that
file a Combined Return.
1.3. "COMBINED RETURN" means any Tax Return with respect to Non-Federal
Taxes filed on a consolidated, combined (including nexus combination,
worldwide combination, domestic combination, line of business
combination or any other form of combination) or unitary basis
wherein one or more members of the Restaurants Group join in the
filing of a Tax Return with CHI or a CHI subsidiary that is not also
a member of the Restaurants Group.
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1.4. "CONSOLIDATED GROUP" means the affiliated group of corporations
within the meaning of Section 1504(a) of the Code of which CHI is
the common parent and which includes the Restaurants Group.
1.5. "CONSOLIDATED RETURN" means any Tax Return with respect to Federal
Income Taxes filed by CHI and its subsidiaries pursuant to Section
1501 of the Code.
1.6. "DECOMBINATION" means any event pursuant to which CHI or the
Restaurants Group cease to be includible in a Combined Group.
1.7. "DECOMBINATION DATE" means the close of business on the day on which
a Decombination occurs. Unless otherwise required by the relevant
Tax Authority or a court of competent jurisdiction, CHI and
Restaurants, for itself and the Restaurants Group, agree to file
all Tax Returns, and to take all other actions, relating to
Non-Federal Combined Taxes in a manner consistent with the
position that Restaurants and its affiliates are included in the
Combined Group for all days through and including a Decombination
Date.
1.8. "DECONSOLIDATION" means any event pursuant to which CHI or the
Restaurants Group cease to be includible in the Consolidated Group.
1.9. "DECONSOLIDATION DATE" means the close of business on the day on
which a Deconsolidation occurs. Unless otherwise required by the
relevant Tax Authority or a court of competent jurisdiction, CHI
and Restaurants, for itself and the Restaurants Group, agree to
file all Tax Returns, and to take all other actions, relating to
Federal Income Taxes in a manner consistent with the position that
Restaurants and the Restaurants Group are includible in the
Consolidated Group for all days through and including a
Deconsolidation Date.
1.10. "ESTIMATED TAX INSTALLMENT DATE" means the installment due dates
prescribed in Section 6655(c) of the Code (presently April 15,
June 15, September 15 and December 15).
1.11. "CHI GROUP" means CHI and its affiliates other than the Restaurants
Group.
1.12. "FEDERAL INCOME TAXES" means any tax imposed under Subtitle A of
the Code (including the taxes imposed by Sections 11, 55, 59A and
1201(a) of the Code), including any interest, addition to tax, or
penalties applicable thereto, and any other income-based United
States federal taxes which are hereinafter imposed upon
corporations.
1.13. "FINAL DETERMINATION" means (a) the final resolution of any tax
(or other matter) for a taxable period, including any related
interest or penalties, that, under applicable law, is not subject
to further appeal, review
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<PAGE>
or modification through proceedings or otherwise, including (1)
the expiration of a statute of limitations (giving effect to any
extension, waiver or mitigation thereof) or a period for the
filing of claims for refunds amended returns, appeals from adverse
determinations, or recovering any refund (including by offset),
(2) a decision, judgment, decree, or other order by a court of
competent jurisdiction, which has become final and unappealable,
(3) a closing agreement or an accepted offer in compromise under
Section 7121 or 7122 of the Code, or comparable agreements under
laws of other jurisdictions, (4) execution of an Internal Revenue
Service Form 870 or 870AD, or by a comparable form under the laws
of other jurisdictions (excluding, however, any such form that
reserves (whether by its terms or by operation of law) the right
of the Tax Authority to assert a further deficiency), or (5) any
allowance of a refund or credit, but only after the expiration of
all periods during which such refund or credit may be recovered
(including by way of offset) or (b) the payment of tax by any
member of the Consolidated Group or Combined Group with respect to
any item disallowed or adjusted by a Tax Authority provided CHI
determines no action should be taken to recoup such payment but
only after consultation with Restaurants regarding any issues
pertaining to the Restaurants Group.
1.14. "RESTAURANTS' AFFILIATE" means any corporation or other entity
directly or indirectly owned or controlled by Restaurants, as of
the date of execution of this Agreement, which is includible in
the Restaurants Group.
1.15. "RESTAURANTS GROUP" means the affiliated group of corporations as
defined in Section 1504(a) of the Code, or similar group of
entities as defined under similar laws of other jurisdictions,
including Restaurants and Restaurants' affiliates, of which
Restaurants is deemed to be the common parent, and any corporation
or other entity which may have been, may be, or may become a
member of such group from time to time.
1.16. "RESTAURANTS GROUP COMBINED TAX LIABILITY" means, with respect to
any taxable year, the Restaurants Group's liability for
Non-Federal Combined Taxes as determined under Section 2.3 of this
Agreement.
1.17. "RESTAURANTS GROUP FEDERAL INCOME TAX LIABILITY" means with
respect to any taxable year, the Restaurants Group's liability for
Federal Income Taxes as determined under Section 2.2 of this
Agreement.
1.18 "NON-FEDERAL COMBINED TAXES" means any Non-Federal Income Taxes with
respect to which a Combined Return is filed.
1.19. "NON-FEDERAL SEPARATE TAXES" means any Non-Federal Income Taxes that
are not Non-Federal Combined Taxes.
1.20. "NON-FEDERAL INCOME TAXES" includes all federal taxes not imposed
under Subtitle A of the Code and all state, local, and foreign
taxes, charges, fees, levies, imposts, duties, or other
assessments of a similar
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nature, including, without limitation, income, alternative or
add-on minimum, gross receipts, excise, employment, sales, use,
transfer, license, payroll, franchise, severance, stamp,
occupation, windfall profits, withholdings, unemployment,
disability, ad valorem, highway use, commercial rent, capital
stock, paid up capital, recording, registration, property, real
property gains, value added, business license, custom duties, or
other tax or governmental fee of any kind whatsoever, imposed or
required to be withheld by any domestic Tax Authority (excluding
any federal governmental agency of the United States), including
any interest, additions to tax, or penalties applicable thereto.
1.21. "POST-DECONSOLIDATION PERIOD" means a taxable period beginning after
the Deconsolidation Date.
1.22. "PRE-DECONSOLIDATION PERIOD" means a taxable period ending on or
prior to the Deconsolidation Date.
1.23. "PRO FORMA RESTAURANTS GROUP COMBINED RETURN" means a Pro Forma
Restaurants Group Combined Return prepared pursuant to Section 2.3
of this Agreement.
1.24. "PRO FORMA RESTAURANTS GROUP CONSOLIDATED RETURN" means a Pro
Forma Restaurants Group Consolidated Return prepared pursuant to
Section 2.2 of this Agreement.
1.25. "REDETERMINATION AMOUNT" means, with respect to any taxable year, the
amount determined under Section 3.7 of the Agreement.
1.26. "SPECIAL TAX ATTRIBUTES" means any net operating loss, net capital
loss, investment tax credit, foreign tax credit, targeted jobs tax
credit, work opportunity tax credit, credit for increasing
research activities, charitable deduction or any other deduction,
credit or tax attribute which could reduce taxes (including
without limitation deductions and credits related to alternative
minimum taxes).
1.27. "STRADDLE PERIOD" means a taxable period beginning on or prior to and
ending after the Deconsolidation or Decombination Date.
1.28. "TAX AUTHORITY" means the Internal Revenue Service and any state,
local, or other governmental authority responsible for the
administration of any Taxes.
1.29. "TAXES" means Federal Income Taxes and Non-Federal Income Taxes.
1.30. "TAX RETURN" means any return, declaration, statement, report,
schedule, certificate, form, information return or any other
document (and any related or supporting information) including an
amended tax return required to be supplied to, or filed with, a
Tax Authority with respect to Taxes.
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SECTION 2. TAX SHARING
2.1. RESTAURANTS' LIABILITY FOR FEDERAL INCOME TAXES AND NON-FEDERAL
COMBINED TAXES. With respect to each taxable year in which
Restaurants is a member of the CHI Consolidated Group or a CHI
Combined Group, Restaurants shall pay to CHI (or CHI shall pay to
Restaurants) in accordance with the procedures set forth in
Section 3, an amount equal to the sum of the Restaurants Group
Federal Income Tax Liability (or refund) and the Restaurants Group
Combined Tax Liability (or refund) for such taxable year.
2.2. RESTAURANTS GROUP FEDERAL INCOME TAX LIABILITY FOR CONSOLIDATED
RETURN YEARS.
(a) IN GENERAL. With respect to any taxable year for which CHI and
Restaurants file a Consolidated Return, the Restaurants Group
Federal Income Tax Liability shall be the sum, for such
taxable year, of (1) the Restaurants Group's liability for
Federal Income Taxes as determined on the Pro Forma
Restaurants Group Consolidated Return, and (2) any interest,
penalties and other additions applicable to such taxes.
(b) PRO FORMA FEDERAL RETURN. With respect to each taxable year,
Restaurants shall prepare or cause to be prepared a pro forma
consolidated federal income tax return for the Restaurants
Group ("Pro Forma Restaurants Group Consolidated Return") as
if (except as provided in Section 2.2(c)) the Restaurants
Group was not, nor ever was a part of the Consolidated Group,
but rather was a separate affiliated group of corporations,
consisting of Restaurants and Restaurants' Affiliates of which
Restaurants was the common parent filing a consolidated
federal income tax return pursuant to Section 1501 of the
Code.
(c) OPERATING RULES. The Pro Forma Restaurants Group Consolidated
Return shall be prepared:
(1) reflecting the elections, methods of accounting, and
positions with respect to specific items to be made
or used in the Consolidated Return;
(2) giving effect to any deduction or credit for any
Restaurants Special Tax Attribute as determined on
the Pro Forma Restaurants Group Consolidated Return.
In addition, Restaurants shall receive the benefit of
any deduction or credit for any Restaurants Special
Tax Attributes for which a tax benefit is actually
received in a Consolidated Return, but for this
purpose, if the Restaurants Group and the CHI Group
contribute like Special Tax Attributes to a
Consolidated Return (not necessarily in the same
taxable year) which are partially or fully limited
under the Code, then Restaurants
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shall only receive benefit for such like Special
Tax Attributes based on a ratio of their Special
Tax Attributes to the total Special Tax Attributes
of the Consolidated Group. If a Special Tax
Attribute is limited by the above, the Restaurants
Group shall be entitled to utilize such Special
Tax Attribute to the extent allowed when carried
forward or carried back to a Pro Forma Restaurants
Group Consolidated Return;
(3) applying the top marginal income tax rate used in the
Consolidated Return without regard to the graduated
tax brackets in Code Sec. 11(b) (the top marginal
rate is currently 35 percent);
(4) reflecting transactions with members of the
Consolidated Group that are not also members of the
Restaurants Group as if such transactions were not
with members of the same Consolidated Group;
(5) reflecting deductions for Non-Federal Combined Taxes
estimated as provided for in Section 2.3 of this
Agreement;
(6) reflecting no allocation of other special items
allowed under the Code such as the amounts under
Sections 1561(a)(2), 1561(a)(3), and 179(d)(2),
unless CHI specifically approves an allocation to
Restaurants.
2.3. RESTAURANTS GROUP COMBINED TAX LIABILITY
(a) IN GENERAL. With respect to any taxable year in which
Restaurants participates in the filing of a Combined Return
with CHI, the Restaurants Group Combined Tax Liability shall
be the sum, for such taxable years, of (1) the Restaurants
Group's liability for Non-Federal Income Taxes as determined
on the Pro Forma Restaurants Group Combined Returns, and (2)
any interest, penalties and other additions applicable to
Restaurants Group's liability.
(b) PRO FORMA COMBINED RETURNS. Each taxable year, Restaurants
shall prepare or cause to be prepared pro forma combined tax
returns or other schedule for the Restaurants Group ("Pro
Forma Restaurants Group Combined Returns") determined as if
the Restaurants Group was not and never was part of the
Combined Group, but rather was a separate group of which
Restaurants was the common parent filing combined tax returns.
(c) OPERATING RULES. The Pro Forma Restaurants Group Combined
Returns shall be prepared by reference to:
(1) the Restaurants Group's taxable income or loss from
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(or other similar line representing taxable
income before net operating loss deduction and
special deductions) of the Pro Forma Restaurants
Group Consolidated Return, adjusted to take into
account (i) those members of the Restaurants Group
which are included in the Combined Return, (ii)
Restaurants Group Special Tax Attributes; and (iii)
material adjustments necessary to reflect the laws of
the applicable jurisdiction;
(2) apportionment factors determined by taking into
account only those members of the Restaurants Group
which are included in the Combined Return;
(3) the applicable tax rate(s) imposed by each
jurisdiction; and
(4) the fact that if a Restaurants Group Special Tax
Attribute cannot be fully utilized in the Pro Forma
Restaurants Group Combined Return, the Restaurants
Group will only be able to realize a benefit from
such Special Tax Attribute to the extent it is
allowed to utilize such Special Tax Attribute when
carried forward or carried back to a Pro Forma
Restaurants Group Combined Return in future or prior
years.
2.4. ALLOCATION OF OTHER SPECIAL ITEMS REQUIRED UNDER THE
CODE
In the event of a Deconsolidation after which period CHI and
Restaurants remain members of a controlled group as defined in
Section 1563 of the Code, all allocations of special items such as
those required under Sections 179 and 1561 shall be allocated to
CHI unless a specific allocation to Restaurants is approved by CHI.
SECTION 3. PAYMENT OF TAXES AND SHARING AMOUNTS
3.1. FEDERAL INCOME TAXES. CHI shall timely file the Consolidated
Return and pay timely to the Internal Revenue Service all Federal
Income Taxes, if any, of the Consolidated Group (including the
Restaurants Group) due and payable for all Pre-Deconsolidation
Periods.
3.2. NON-FEDERAL COMBINED TAXES. CHI shall timely file all Combined
Returns and pay timely to the appropriate Tax Authorities all
Non-Federal Combined Taxes, if any, of the Combined Group
(including the Restaurants Group) due and payable for all
Pre-Decombination Periods and Straddle Periods.
3.3. NON-FEDERAL SEPARATE TAXES. Restaurants shall pay timely to the
appropriate Tax Authorities all Non-Federal Separate Taxes, if
any, of the Restaurants Group due and payable for all
Pre-Deconsolidation Periods and Straddle Periods.
3.4. OTHER FEDERAL TAXES. The parties shall each pay timely to the
appropriate governmental authorities all of their respective other
federal taxes (excluding Federal Income Taxes for
Pre-Deconsolidation Periods,
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which are governed by Section 3.1. of this Agreement), if any, due
and payable for all Pre-Deconsolidation Periods, Straddle Periods,
and Post-Deconsolidation Periods.
3.5. TAX SHARING INSTALLMENT PAYMENTS
(a) FEDERAL INCOME TAXES. At each Estimated Tax Installment Date
with respect to any Pre-Deconsolidation Period or Straddle
Period, Restaurants shall determine under Section 6655 of the
Code the estimated amount of the related installment of the
Restaurants Group Federal Income Tax Liability and shall then
pay to CHI the amount thus determined. In addition, the
provisions of this Section 3.5(a) shall apply to any Federal
Income Tax payment made with the filing of the extension of
the Consolidated Return.
(b) NON-FEDERAL COMBINED TAXES. At each Estimated Tax Installment
Date with respect to any Pre-Decombination Period or Straddle
Period, Restaurants shall determine the estimated amount of
the related installment of the Restaurants Group Non-Federal
Combined Income Tax Liability and shall then pay to CHI the
amount thus determined. In addition, the provisions of this
Section 3.5(b) shall apply to any Non-Federal Combined Income
Tax payment made with the filing of the extension of the
Non-Federal Combined Returns.
3.6. TAX SHARING TRUE UP PAYMENTS
(a) FEDERAL INCOME TAXES. An amount equal to the difference, if
any, between the Restaurants Group Federal Income Tax
Liability for such taxable year as shown on the Pro Forma
Restaurants Group Consolidated Return and the aggregate amount
paid by Restaurants with respect to such taxable year under
Section 3.5(a) of this Agreement shall be paid to CHI (or paid
to Restaurants as the case may be) on or before the due date
of the CHI Consolidated Returns.
(b) NON-FEDERAL COMBINED TAXES. An amount equal to the difference,
if any, between the Restaurants Group Non-Federal Combined
Income Tax Liability for such taxable year as shown on the Pro
Forma Restaurants Group Combined Returns and the aggregate
amount paid by the Restaurants with respect to such taxable
year under Section 3.5(b) of this Agreement shall be paid to
CHI (or paid to Restaurants as the case may be) on or before
the due date of the CHI Non-Federal Combined Returns.
3.7. REDETERMINATION AMOUNTS
(a) IN GENERAL. In the event of any redetermination of any item of
income, gain, loss, deduction or credit of any member of the
Consolidated Group or Combined Group as a result of a Final
Determination or any settlement or compromise with any Tax
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Authority (including any amended tax return or claim for
refund filed by CHI), Restaurants shall pay CHI or CHI shall
pay Restaurants as the case may be, the Redetermination
Amount.
(b) CONSULTATION. CHI shall consult with Restaurants prior to
settlement or payment regarding the proposed redetermination
of any item mentioned in (a) above consistent with prior
practices.
(c) COMPUTATION. The Redetermination Amount shall be the
difference, if any, between all amounts previously determined
under Section 2 of this Agreement and all amounts that would
have been determined under Section 2 of this Agreement taking
such redetermination into account (including any additions to
tax or penalties applicable to Restaurants Group's liability),
together with interest for each day calculated (1) with
respect to redeterminations affecting Federal Income Taxes, at
the rate determined, in the case of payment by Restaurants
(relating to underpayments of tax by Restaurants), under
Section 6621(a)(2) of the Code and, in the case of payment by
CHI (relating to overpayments of tax by Restaurants), under
Section 6621(a)(1) of the Code, and (2) with respect to
redeterminations affecting Non-Federal Combined Taxes, under
similar laws, if any, of other jurisdictions.
(d) PAYMENT. CHI shall deliver to Restaurants a schedule
reflecting the computation of any Redetermination Amount with
respect to any taxable year. Not later than thirty (30) days
after the date such schedule is delivered, Restaurants shall
review such schedule and shall pay CHI, or CHI shall pay
Restaurants, such Redetermination Amount.
3.8. INTEREST. Payments under this Section 3 that are not made within
the prescribed period shall thereafter bear interest at the
Federal short-term rate established pursuant to Section 6621(b) of
the Code.
SECTION 4. PROCEDURAL MATTERS
4.1. AGENT, PREPARATION AND FILING OF RETURNS. Until Deconsolidation or
Decombination, CHI shall be the sole and exclusive agent of
Restaurants and any member of the Restaurants Group in any and all
matters relating to (a) Federal Income Taxes of the Consolidated
Group and (b) any Non-Federal Combined Taxes for all
Pre-Deconsolidation Periods, Pre-Decombination Periods and
Straddle Periods. CHI shall have the sole and exclusive
responsibility for the preparation and filing of any (a)
Consolidated Return or (b) Combined Return for all
Pre-Deconsolidation Periods, Pre-Decombination Periods and
Straddle Periods. In its sole discretion, but following
consultation with Restaurants consistent with prior practices, CHI
shall have the exclusive right with respect to any such
Consolidated Return or Combined Return (a) to
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determine (1) the manner in which such Tax Return shall be
prepared and filed, including, without limitation, the manner in
which any item of income, gain, loss, deduction or credit shall be
reported, (2) whether any extensions may be requested, (3) the
elections that will be made by any member of the Consolidated
Group or Combined Group, and (4) whether any amended tax returns
should be filed; (b) to control, contest, and represent the
interests of the Consolidated Group and Combined Group in any
Audit and to resolve, settle, or agree to any adjustment or
deficiency proposed, asserted or assessed as a result of any
Audit; (c) to file, prosecute, compromise or settle any claim for
refund; and (d) to determine whether any refunds to which the
Consolidated Group or Combined Group may be entitled, shall be
paid by way of refund or credited against the tax liability of the
Consolidated Group and Combined Group, provided that the refunds
can be credited to periods that include Restaurants in the
Consolidated Group and the Combined Group. Restaurants, for itself
and its subsidiaries, hereby irrevocably appoints CHI as its agent
and attorney-in-fact to take such action (including the execution
of documents) as CHI may deem appropriate to effect the above.
4.2. FURNISHING INFORMATION. Each member of the Restaurants Group shall
(a) furnish to CHI in a timely manner such information and
documents as CHI may reasonably request for purposes of (1)
preparing any original or amended Consolidated Return or Combined
Return, (2) contesting or defending any Audit, and (3) making any
determination or computation necessary or appropriate under this
Agreement; (b) cooperate in any Audit of any Consolidated Return
or Combined Return; (c) retain and provide on demand books,
records, documentation or other information relating to any tax
return until the later of (1) the expiration of the applicable
statute of limitations (giving effect to any extension, waiver, or
mitigation thereof) and (2) in the event any claim is made under
this Agreement for which such information is relevant, until a
Final Determination with respect to such claim is made; and (d)
take such action as CHI may deem appropriate in connection
therewith. CHI shall provide the Restaurants Group with any
assistance reasonably required in providing any information
requested pursuant to this Section 4.2. CHI shall also provide
Restaurants Group with any assistance or information reasonably
required by Restaurants related to periods after the
Deconsolidation Date or the Decombination Date that is necessary
to compute Federal Income Taxes, Non-Federal Combined Taxes, or
Non-Federal Separate Taxes of the Restaurants Group. .
4.3. EXPENSES. Restaurants shall reimburse CHI for its prorata portion
of third party legal and accounting expenses incurred by CHI in
the course of the planning and preparation of any tax returns, the
conduct of any Audit regarding the tax liability of the
Consolidated Group or Combined Group, and for any other expense
incurred by CHI in the course of any litigation relating thereto,
to the extent such costs are attributable to the Restaurants Group
and provided CHI has conferred with Restaurants as to the portion
of such costs relating to the Restaurants Group. Notwithstanding
the foregoing, CHI shall have the sole discretion, after
consultation with
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Restaurants consistent with prior practices, to control, contest,
represent, file, prosecute, challenge or settle any Audit related
to the Consolidated Return or Combined Returns of CHI.
SECTION 5. DECONSOLIDATION / DECOMBINATION
5.1. CONTINUING COVENANTS. Restaurants, for itself and the Restaurants
Affiliates, covenants that on or after a Deconsolidation or
Decombination it will not, nor will it cause or permit any member
of the Restaurants Group to, make or change any tax election,
change any accounting method, amend any tax return or take any tax
position on any tax return, take any action, omit to take any
action or enter into any transaction that results in any increased
tax liability or reduction of any Special Tax Attributes of the
Restaurant Pre-Deconsolidation Period, Pre-Decombination Period or
Straddle Period without consultation with CHI.
5.2. REATTRIBUTION OF SPECIAL TAX ATTRIBUTES. In the event of
Deconsolidation or Decombination, CHI may, at its option, elect to
reattribute to itself certain Special Tax Attributes of the
Restaurants Group pursuant to Treasury Regulations Section
1.1502-20(g) or similar provisions of other jurisdictions. If CHI
makes such an election after consultation with Restaurants,
Restaurants shall comply with any applicable requirements,
including those of Treasury Regulations Section 1.1502-20(g)(5).
CHI also agrees to reimburse Restaurants for any additional tax
liabilities that result from such elections.
5.3. CARRYBACKS. CHI agrees to pay Restaurants the actual tax benefits
received by the CHI Group from the use in any Pre-Deconsolidation
Period or Pre-Decombination Period of a carryback of any Special
Tax Attributes of the Restaurants Group from a
Post-Deconsolidation Period or Post-Decombination Period. Such
benefit shall be considered equal to the benefit Restaurants would
have received had such Special Tax Attributes arisen in a
Pre-Deconsolidation Period or Pre-Decombination Period. Payment of
the amount of such benefit shall be made within ninety (90) days
of the filing of the applicable tax return for the taxable year in
which the Special Tax Attributes are utilized.
If subsequent to the payment by CHI to Restaurants of any such
amount, there shall be (a) a Final Determination which results in
a disallowance or a reduction of the Special Tax Attributes so
carried back or (b) a reduction in the amount of the benefit
realized by the CHI Group as a result of any other Special Tax
Attributes that arise in a Post-Deconsolidation Period or
Post-Decombination Period, Restaurants shall receive support for
such disallowance or reduction in writing, and shall repay to CHI
within ninety (90) days of such event, an amount which would not
have been payable to Restaurants pursuant to their Section 5.3 had
the amount of the benefit been determined in light of these
events. Restaurants shall hold CHI harmless for any penalty,
addition to tax, or interest payable by any member of the CHI
Group as a result of any such event unless Restaurants objects to
the decision made by CHI regarding the carryback of the Special
Tax Attributes or to the Final Determination agreed to by CHI
regarding
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the assessment of any penalty, addition to tax, or interest. Any
such amount shall be provided to Restaurants in writing and shall
be paid by Restaurants to CHI within ninety (90) days after notice
to Restaurants of the payment by CHI or any member of the
Consolidated Group or Combined Group of any such penalty, addition
to tax, or interest. Nothing in this Section 5.3 shall require CHI
to file a claim for refund of Federal Income Taxes or Combined
Taxes.
SECTION 6. DISPUTES
6.1. ACCOUNTING FIRM. If the parties are unable to agree on the amount
which is allocable or due to one party from the other under this
Agreement (including any payments due under Section 3.5, 3.6 or
3.7), or on whether an action or failure to act has the effect of
minimizing taxes, then either party may invoke this procedure by
giving notice to the other. Upon receipt of such notice, the
parties shall select and notify a single public accounting firm to
resolve the dispute. If the parties cannot agree on a single firm
within ten (10) days, they shall each select a nationally
recognized public accounting firm, which may include the public
accounting firm which regularly opines on either party's financial
statements ("Auditor"). Those two firms shall jointly select and
notify, within ten (10) days, a third independent nationally
recognized public accounting firm, which shall not be the Auditor
of either CHI or Restaurants, to resolve the dispute.
6.2. RESOLUTION OF DISPUTE. The chosen public accounting firm (the
"Arbitrator") shall be provided with written arguments by each
party and all supporting documents which each party deems
necessary within thirty (30) days of selection of the Arbitrator.
Each party shall provide the other party with copies of all
written arguments, documents, and correspondence submitted to the
Arbitrator. Either party may discuss the issues with the
Arbitrator provided the other party is given the opportunity to be
present. Within sixty (60) days of any oral arguments or the last
written arguments, whichever is later, the Arbitrator shall notify
the parties of its decision. If in the opinion of the Arbitrator,
an expedited decision is necessary to protect either party's
rights, the Arbitrator shall accelerate the dates for submissions,
arguments and decision so as to protect the rights of the parties.
6.3. BINDING RESOLUTION. The determination made by the Arbitrator under
Section 6.2 hereof shall be conclusive and binding upon the
parties and shall not be subject to appeal, except in the case of
manifest mathematical error.
6.4. COSTS OF DISPUTE RESOLUTION. The parties shall share equally in all
fees and costs of the Arbitrator.
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SECTION 7. MISCELLANEOUS
7.1. TERM
(a) FEDERAL INCOME TAXES. The portions of this agreement relating
to Federal Income Taxes shall expire upon the Deconsolidation
Date; provided, however, that all rights and obligations
arising hereunder with respect to a Pre-Deconsolidation Period
or Straddle Period shall survive until they are fully
effectuated or performed and, provided, further, that
notwithstanding anything in this Agreement to the contrary,
all rights and obligations arising hereunder with respect to a
Post-Deconsolidation Period shall remain in effect and its
provisions shall survive for the full period of all applicable
statutes of limitation (giving effect to any extension, waiver
or mitigation thereof).
(b) NON-FEDERAL COMBINED TAXES. Not withstanding that a
Deconsolidation Date occurs for Federal Income Tax, if such
date does not represent a Decombination Date for Non-Federal
Combined taxes, the portions of this Agreement relating to
Non-Federal matters shall remain in effect.
7.2. ALLOCATIONS. All computations with respect to the
Pre-Deconsolidation Period ending on the Deconsolidation Date, the
immediately following taxable period of Restaurants and the
Restaurants Group, and any Straddle Period shall be made pursuant
to the principles of Treasury Regulations Section 1.1502-76(b),
taking into account such elections thereunder as CHI, in its sole
discretion but after consultation with Restaurants, shall make.
7.3. CHANGES IN LAW. Any reference to a provision of the Code or a
similar law of another jurisdiction shall include a reference to
any successor provision to such provision.
7.4. CONFIDENTIALITY. Each party shall hold and cause its advisors and
consultants to hold in strict confidence, unless compelled to
disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all information
(other than any such information relating solely to the business
or affairs of such party) concerning the other parties hereto
furnished it by such other party or its representatives pursuant
to this Agreement (except to the extent that such information can
be shown to have been (a) previously known by the party to which
it was furnished, (b) in the public domain through no fault of
such party, or (c) later lawfully acquired from other sources not
under a duty of confidentiality by the party to which it is
furnished), and each party shall not release or disclose such
information to any other person except its auditors, attorneys,
financial advisors, bankers and other consultants who shall be
advised of and agree to be bound by the provisions of this Section
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7.4. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the
other party if it exercises the same care as it takes to preserve
confidentiality for its own similar information.
7.5. SUCCESSORS. This Agreement shall be binding on and inure to the
benefit of any successor, by merger, acquisition of assets or
otherwise, to any of the parties hereto (including any successor
of CHI and Restaurants succeeding to the tax attributes of such
party under Section 381 of the Code), to the same extent as if
such successor had been an original party.
7.6. AUTHORIZATION, ETC. Each of the parties hereto hereby represents
and warrants that it has the power and authority to execute,
deliver and perform this Agreement, that this Agreement has been
duly authorized by all necessary corporate action on the part of
such party, that this Agreement constitutes a legal, valid and
binding obligation of each such party and that the execution,
delivery and performance of this Agreement by such party does not
contravene or conflict with any provision of law or of its charter
or bylaws or any agreement, instrument or order binding on such
party.
7.7. ENTIRE AGREEMENT. This Agreement contains the entire agreement
among the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements.
7.8. SECTION CAPTIONS. Section captions used in this Agreement are for
convenience and reference only and shall not affect the
construction of this Agreement.
7.9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota without giving
effect to laws and principles relating to conflicts of law.
7.10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same Agreement.
7.11. WAIVERS AND AMENDMENTS. This Agreement shall not be waived, amended
or otherwise modified except in writing, duly executed by all of the
parties hereto.
7.12. SEVERABILITY. In case any one or more of the provisions in this
Agreement should be invalid, illegal or unenforceable, the
enforceability of the remaining provisions hereof will not in any
way be affected or impaired thereby.
7.13. NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties to this Agreement and the other members of
the Consolidated Group and should not be deemed to confer upon
third parties any remedy, claim, liability, reimbursement, cause
of action or other rights in excess of those existing without this
Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by a duly authorized officer as of the date first above
written.
CARLSON HOLDINGS, INC.
BY: /s/ Martyn R. Redgrave
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NAME: Martyn R. Redgrave
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TITLE: Executive Vice President and CFO
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CARLSON RESTAURANTS WORLDWIDE INC.
BY: /s/ Wallace B. Doolin
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NAME: Wallace B. Doolin
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TITLE: President and CEO
-------------------------------------------------------
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INTERCOMPANY CREDIT AGREEMENT
This INTERCOMPANY CREDIT AGREEMENT (this "Agreement") by and between
Carlson Companies, Inc., a Minnesota corporation ("CCI"), and Carlson
Restaurants Worldwide Inc., a Delaware corporation ("CRW"), is effective as
of August 19, 1999.
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. The following terms, as used herein, have the
following meanings:
(a) "ADVANCE" means, an advance by CCI or CRW, as applicable, pursuant to
Section 2.01 or 2.02, which shall include, without limitation, advances by
CCI to CRW or on behalf of CRW and amounts owed by CRW and its Subsidiaries
for fees, costs and expenses under the Services Agreement between the
parties.
(b) "CCI BALANCE" means, with respect to an Interest Period, the net daily
balance of funds owed by CCI to CRW as set forth in the intercompany account
maintained by CCI pursuant to Section 2.05 hereof.
(c) "CODE" means, the Internal Revenue Code of 1986 as amended.
(d) "CRW BALANCE" means, with respect to an Interest Period, the net daily
balance of funds owed by CRW to CCI as set forth in the intercompany account
maintained by CCI pursuant to Section 2.05 hereof.
(e) "CRW PROMISSORY NOTE" means, that certain Promissory Note dated December
31, 1998 issued by CRW in the amount of approximately $70.4 million to
Carlson Companies, Inc.
(f) "DIVIDEND PROMISSORY NOTE" means, that certain Promissory Note dated
June 28, 1999 issued by CRW in the amount of $120 million to Carlson
Hospitality Group, Inc.
(g) "ERISA" means, the Employee Retirement Income Security Act of 1974,
together with all amendments from time to time thereto.
(h) "ERISA AFFILIATE" means, any trade or business (whether or not
incorporated) which is under common control with CRW within the meaning of
the regulations promulgated under the Internal Revenue Code of 1986 as
amended.
(i) "EVENT OF DEFAULT" means, any material default of the terms of this
Agreement or the Services Agreement.
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(j) "INDEBTEDNESS" means, with respect to any Person at any time, without
duplication, all obligations of such Person which, in accordance with
generally accepted accounting principles, consistently applied, should be
classified as liabilities on a consolidated balance sheet of such Person
prepared in accordance with generally accepted accounting principles,
consistently applied, but in any event shall include: (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (c) all obligations
of such Person upon which interest charges are customarily paid or accrued,
(d) all obligations of such Person under conditional sale or other title
retention agreements relating to property purchased by such Person, (e) all
obligations of such Person issued or assumed as the deferred purchase price
of property or services (other than accounts payable on normal payment terms
to suppliers incurred in the ordinary course of business), (f) all
obligations of others secured by any Lien on property owned or acquired by
such Person, whether or not the obligations secured thereby have been
assumed, (g) all capitalized lease obligations of such Person, (h) all
obligations of any partnership or joint venture as to which such Person is or
may become personally liable, (i) all guarantees by such Person of
Indebtedness of others, and (j) all contingent obligations of such Person.
(k) "INTEREST PERIOD" means, the period commencing on the date of an Advance
and ending on the date the Advance is paid.
(l) "INTEREST RATE" has the meaning ascribed to it in Section 2.03.
(m) "INVESTMENT" means, any investment in any Person, whether by means of
share purchase, capital contribution, loan or otherwise; in determining from
time to time the amount of Investments, share purchases and capital
contributions shall be taken at the original cost thereof regardless of any
subsequent appreciation or depreciation therein and loans shall be taken at
the principal amount thereof remaining unpaid.
(n) "LIBOR RATE" means, a rate equal to the LIBOR Rate, as the rate for the
Interest Period shall be published from time to time in the Money Rates
column of the "Money & Investing Section" of the WALL STREET JOURNAL as the
"LIBOR Rate" for three month borrowings.
(o) "MULTIEMPLOYER PLAN" means, the term as defined in Section 4001 (a)(3)
of ERISA to which CRW or and Subsidiary is making or accruing an obligation
to make contributions or has within any of the preceding three plan years
made or accrued an obligation to make contributions.
(p) "PLAN" means, each employee benefit plan (whether now in existence or
hereafter instituted), as such term is defined in Section 3 of ERISA,
maintained for the benefit of employees, officers or directors of CRW or any
Subsidiary.
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(q) "LIEN" means, any security interest, mortgage, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument, in, of, or on
any of the assets or properties, now owned or hereafter acquired, of CRW or
any Subsidiary, whether arising by agreement or operation of law.
(r) "PERSON" means, any natural person, corporation, partnership, joint
venture, firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether
acting in an individual, fiduciary or other capacity.
(s) "SERVICES AGREEMENT" means, the Services Agreement effective as of
August 19, 1999, between CCI and CRW, as it may be amended from time to time.
If the Services Agreement is terminated prior to the termination of this
Agreement, any references to the Services Agreement after its termination
shall mean the version of the Services Agreement in effect immediately prior
to the termination of the Services Agreement.
(t) "SUBSIDIARY" means, any corporation a majority of the shares of the
outstanding stock of which have ordinary voting power for the election of
directors is owned by the CRW, either directly or through one or more of its
Subsidiaries.
ARTICLE II
ADVANCES AND CASH MANAGEMENT
SECTION 2.01 ADVANCES FROM CRW TO CCI. Any funds of CRW and its
Subsidiaries that are not required to meet the daily cash requirements of CRW
and its Subsidiaries will be transferred to CCI through a concentration
account on a daily basis as an Advance hereunder and/or applied at the
discretion of CRW, to decrease the outstanding balance of Advances from CCI
pursuant to Section 2.02, as applicable. Any funds transferred from CRW to
CCI will be deemed as either an Advance to CCI, if there are no outstanding
Advances from CCI to CRW, or a decrease of Advances from CCI to CRW, if such
Advances exist. Any interest payable by CCI on an Advance from CRW (other
than interest payable upon or after termination of this Agreement) shall be
treated (effective as of the first day of the following Interest Period) as
an Advance from CRW for the purposes of this Agreement. Each Advance by CRW
under this Section 2.01 shall be deemed to be made by CRW notwithstanding the
fact that such Advance may involve cash of one or more subsidiaries of CRW.
All funds which constitute Advances to CCI pursuant to this Section 2.01(and
not decreases in Advances from CCI to CRW) shall bear interest at the LIBOR
Rate.
SECTION 2.02 ADVANCES FROM CCI TO CRW. Subject to the following limit,
any funds needed by CRW and its subsidiaries in order to meet daily cash
requirements of CRW and its subsidiaries will be advanced by CCI. In
addition, subject to repayment as provided in Section 2.04 and simultaneously
with the execution of this Agreement,
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CCI will advance funds hereunder to CRW in an amount necessary to fully
satisfy the outstanding balance of the Dividend Promissory Note and CRW
Promissory Note. The outstanding balance of all Advances from CCI to CRW and
all of its Subsidiaries shall never exceed (i) $225,000,000 in the aggregate
at any time prior to an initial public offering of stock of CRW, or
(ii) $105,000,000 in the aggregate at any time after the application of the
proceeds of such initial public offering of stock of CRW. Any funds
transferred from CCI to CRW will be deemed as either an Advance to CRW, if
there are no outstanding Advances from CRW to CCI, or a decrease of the
Advances from CRW, if such Advances to CCI exist. Any interest payable by CRW
on an Advance from CCI (other than interest payable upon or after termination
of this Agreement) shall be treated (effective as of the first day of the
following Interest Period) as an Advance from CCI for the purposes of this
Agreement. Interest that accrues after the maximum borrowing amount has been
reached shall be considered an Advance notwithstanding the limits set forth
in this Section. Each Advance by CCI under this Section 2.02 shall be deemed
made by CCI notwithstanding the fact that such Advance may involve cash of
one or more subsidiaries of CCI.
SECTION 2.03 INTEREST.
(a) Subject to the other provisions of this Section 2.03, interest shall
accrue on Advances at the rate (the "Interest Rate") of 125 basis points over
the LIBOR Rate in effect on the date of the Advance. Interest shall be
calculated on the basis of a 360 day year for the actual number of days
elapsed. Interest payments for Interest Periods ending (i) prior to the
termination of this Agreement shall be treated as Advances pursuant to
Sections 2.01 and 2.02 herein, as applicable, on the first day of the
following Interest Period and (ii) on the termination of this Agreement shall
be payable immediately (each an "Interest Payment"). Outstanding Advances and
Interest Payments for the final Interest Period not repaid when they become
due and payable upon the termination of this Agreement as provided in Section
4.03 shall bear interest from and after the required date of payment to the
date of payment at an annual rate equal to two and one-half percent (2-1/2 %)
per annum in excess of the rate applicable to the unpaid principal amount
immediately before it became due.
(b) The interest payable by CCI under this Agreement shall be calculated by
multiplying the Interest Rate by the CCI Balance for the applicable days in
the Interest Period. The interest payable by CRW under this Agreement shall
be calculated by multiplying the Interest Rate by the CRW Balance for the
applicable days in the Interest Period. The Interest Payment required to be
made by each party is independent of the Interest Payment required to be paid
by the other party, and interest may be paid by both CCI and CRW for any
given Interest Period. CCI shall calculate the amount of interest payable by
both CCI and CRW for each Interest Period and, upon request, shall provide
notice thereof to CRW, together with supporting calculations.
(c) All calculations shall be performed by CCI and shall be subject to the
dispute resolution mechanisms provided for in Section 4.01.
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SECTION 2.04 REPAYMENT. During the term of this Agreement, all
Advances received by either party under this Agreement shall be offset
against and shall be treated as repaid to the extent of any Advances made by
such party to the other party. Repayments can be made at any time by either
party with interest payable up to the date of repayment. No prepayment
penalty may be levied. Upon termination of this Agreement, any Advances that
have not theretofore been repaid, together with accrued interest, will be
payable in full immediately following termination of this Agreement.
SECTION 2.05 INTERCOMPANY ACCOUNT. CCI shall maintain a ledger in
which all CCI Advances and CRW Advances and all repayments of such Advances
shall be recorded. CCI shall give CRW access, during normal business hours,
to such ledger and the other records relating to Advances and payments made
with respect thereto. CCI shall have until the 30th day following the end of
each Interest Period to make any calculations required to be made by it under
the provisions of this Agreement.
SECTION 2.06 REQUESTS FOR ADVANCES. Notice of a request for an Advance
hereunder (other than Advances made by CCI to CRW through intercompany
accounts) to meet the daily cash requirements of CRW and its wholly owned
subsidiaries will be made pursuant to a form and instructions provided
separately by CCI. Advances will be made according to a schedule to be agreed
between the parties.
SECTION 2.07 TRANSFERS OF FUNDS. All transfers of funds between CCI and
CRW will be initiated by CCI Treasury. All funds will be transferred through
intercompany accounts, or as otherwise agreed by the parties.
SECTION 2.08 TAXES. If CRW or CCI shall be required by law to deduct
any tax from or in respect of any sum payable hereunder to the other party:
(a) as soon as such party is aware that any such deduction, withholding or
payment of a tax is required, or of any change in any such requirement, it
shall notify the other party; (b) such party shall make such deductions, or
pay such tax, before any interest or penalty becomes payable; (c) such party
shall pay the full amount deducted to the relevant taxing authority or other
authority in accordance with applicable law; and (d) within thirty (30) days
after paying such tax, such party shall deliver to the other party
satisfactory evidence of that deduction, withholding or payment and (where
remittance is required) of the remittance thereof to the relevant taxing or
other authority.
SECTION 2.09 REQUIREMENT TO BORROW. CRW shall not borrow any funds from
any person other than CCI in order to satisfy its financial requirements
unless such borrowing is consented to by CCI in writing.
SECTION 2.10 USURY. All agreements between the parties, whether now
existing or hereafter arising and whether written or oral, are hereby limited
so that in no contingency, whether by reason of demand for payment or
acceleration of the maturity hereof or otherwise, shall the interest
contracted for, charged or received by either party exceed the maximum amount
permissible under applicable law. If, from any
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circumstance whatsoever, interest would otherwise be payable to either party
in excess of the maximum lawful amount, the interest payable to such party
shall be reduced to the maximum amount permitted under applicable law; and if
from any circumstance either party shall ever receive anything of value
deemed interest by applicable law in excess of the maximum lawful amount, an
amount equal to any excessive interest shall be applied to the reduction of
the principal hereof and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal hereof such excess shall be
refunded to the party deemed to have made such payment. All interest paid or
agreed to be paid to either party shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full period until payment in full of the principal (including the period of
any renewal or extension hereof) so that the interest hereon for such full
period shall not exceed the maximum amount permitted by applicable law. This
paragraph shall control all agreements between the parties.
ARTICLE III
COVENANTS OF CRW
Until the repayment of all Advances under this Agreement, CRW will:
SECTION 3.01 CORPORATE EXISTENCE. Maintain, and, except as provided in
Section 3.7 hereof, cause each Subsidiary to maintain, (a) its corporate
existence in good standing under the laws of the jurisdiction of its
incorporation, (b) its right to transact business in each jurisdiction in
which the character of the properties owned or leased by it or the business
conducted by it makes such qualification necessary and the failure to so
qualify would permanently preclude CRW or such Subsidiary from enforcing its
rights with respect to any material assets or expose CRW or such Subsidiary
to any material liability and (c) conduct and operate its business in a
lawful manner as presently conducted.
SECTION 3.02 COMPLIANCE WITH LAWS, ETC. Comply, and cause each
Subsidiary to comply, in all material respects with all applicable laws,
rules, regulations and orders (including without limitation Regulation X of
the Board of Governors of the Federal Reserve System), such compliance to
include, without limitation, paying before the same become delinquent all
taxes, assessments and governmental charges imposed upon it or upon its
property except to the extent contested in good faith by appropriate
proceedings and for which adequate reserves have been established.
SECTION 3.03 ERISA. At all times maintain, and cause each Subsidiary
to maintain, each of its Plans in compliance with all material applicable
requirements of ERISA and of the Code and with all material applicable
rulings and regulations issued under the provisions of ERISA and the Code;
and not permit any of its ERISA Affiliates to, (a) engage in any transaction
in connection with which the CRW or any of its ERISA Affiliates would be
subject to either a civil penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by Section 4975 of the Code, in either case in an
amount exceeding $1,000,000, (b) fail to make full payment when due of all
amounts which,
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under the provisions of any Plan, the CRW or any of its ERISA Affiliates is
required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency (as such term is defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, with respect to any Plan in
an aggregate amount exceeding $1,000,000 or (c) fail to make any payments in
an aggregate amount exceeding $1,000,000 to any Multiemployer Plan that the
CRW or any of its ERISA Affiliates may be required to make under any
agreement relating to such Multiemployer Plan or any law pertaining thereto.
SECTION 3.04 INSURANCE. Maintain, and cause each Subsidiary to
maintain, in full force and effect insurance comparable to present policies
in amounts and risks covered plus such additional insurance, if any, as may
from time to time be required to provide coverage customarily maintained by
similarly situated companies.
SECTION 3.05 LITIGATION. Notify the CCI in writing of all litigation
involving a claim against the CRW or any Subsidiary of more than $5,000,000
and of all other litigation and proceedings before any governmental or
regulatory agencies affecting CRW or any Subsidiary which, if adversely
determined, would materially affect the consolidated financial condition of
CRW and the Subsidiaries.
SECTION 3.06 LIENS. Not, and not permit any Subsidiary to, create,
incur, assume or suffer to exist, any Lien with respect to its right, title
and interest in or to any property or assets now owned or hereafter acquired
by the CRW or any Subsidiary except (a) materialmen's, mechanics',
suppliers', tax, carriers or warehousemen's Liens, statutory Liens of
landlords and other like Liens arising in the ordinary course of business and
liens for taxes, assessments or other governmental charges, securing
obligations which are not yet due or which are being contested in good faith
by appropriate proceedings, and other like Liens in existence less than 120
days from the date of creation thereof, (b) existing Liens on property
acquired in acquisitions, (c) any Lien on property owned by any Person
(other than the CRW or a Subsidiary) in which the CRW or a Subsidiary has
made an Investment and which Lien secures all obligation of such Person for
which neither the CRW nor any Subsidiary has any liability, and (d) purchase
money mortgages, liens, security interests or encumbrances upon or in
property acquired after the date hereof, or mortgages, liens, lease purchase
liens, security interests or encumbrances existing in the property at the
time of acquisition thereof, provided that such mortgages, liens, security
interests or encumbrances extend only to the property then being acquired and
secure only indebtedness being created or assumed in connection with that
acquisition.
SECTION 3.07 MERGER AND CONSOLIDATION. Not, and not permit any Subsidiary
to, merge or consolidate or enter into any analogous reorganization or
transaction with any other Person except that: (a) any Subsidiary may merge
or consolidate with, or be liquidated into, the CRW or another Subsidiary;
(b) the CRW may merge or consolidate with another Person if (i) the CRW is
the surviving or resulting entity and (ii) no Event of Default would result
from, or would exist immediately after, such consolidation or merger; (c) a
Subsidiary may merge or consolidate with another Person if (i) the Subsidiary
is the surviving or resulting entity or such other Person becomes a
Subsidiary upon such
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consolidation or merger and (ii) no Event of Default or would result from, or
would exist immediately after, such consolidation or merger; and (d) any
Person may become a Subsidiary if no Event of Default would result from, or
would exist immediately after, such consolidation or merger.
SECTION 3.08 LOANS AND ADVANCES. Not, and not permit any Subsidiary
to, make or make any commitment to make, or permit to exist or remain
outstanding, any loan, advance or extension of credit to, or any Investment
in, any Person, except:
(a) loans, advances or extensions of credit to, or Investments in, a
Subsidiary which is engaged in a line of business similar to any line of
business in which the CRW or any Subsidiary was engaged as of August 19, 1999;
(b) Investments in stock, obligations, securities or assets of a Person
provided such Person is engaged in a line of business similar to any line of
business engaged in by the CRW or any Subsidiary as of August 19, 1999;
(c) obligations, securities or assets received in settlement of
Indebtedness of a Person to the CRW or a Subsidiary and which was incurred in
the ordinary course of business of the CRW or such Subsidiary, as the case
may be;
(d) trade receivables arising in the ordinary course of business; and
(e) loans, advances, extensions of credit, or Investments, approved by
CCI in writing.
SECTION 3.09 SALES OF ASSETS. Not, and not permit any Subsidiary to,
sell (including sales with a view to the concurrent or subsequent acquisition
by lease ["sale-leaseback transactions"]), transfer, convey, lease or
otherwise dispose of (or enter into any commitment to do so) all or any part
of its assets except for:
(a) sales in the ordinary course of business;
(b) sale-leaseback transactions provided that the aggregate fair market
value of the assets sold under all such sale-leaseback transactions during
the Term shall not at any time exceed ten percent (10%) of the CRWs equity
determined as of the last day of the fiscal quarter next preceding the most
recent such transaction;
(c) any other sale of assets (whether in one transaction or a series of
transactions), provided that the aggregate fair market value of the assets
sold pursuant to this paragraph (c) for any fiscal year of the CRW shall not
exceed ten percent (10%) of the CRWs equity as of the last day of the fiscal
quarter next preceding the most recent such transaction; and
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(d) transfers of assets between Subsidiaries or between the CRW and any
Subsidiary.
SECTION 3.10 GUARANTIES AND CONTINGENT LIABILITIES. Not, and not
permit any Subsidiary to, guarantee, endorse, contingently agree to purchase
or to provide funds for the payment of, agree to maintain the net worth or
working capital or any other financial test of or otherwise become
contingently liable upon, any obligation of any other Person, or create,
incur, assume, suffer or permit to exist any other contingent liability
except:
(a) by the endorsement of negotiable instruments for deposit or
collection (or similar transactions) in the ordinary course of business;
(b) guaranties of the obligations of Persons given by the CRW or a
Subsidiary in the ordinary course of business in connection with a franchise
agreement, management agreement or similar service agreement or customer
relationship between the CRW or a Subsidiary and such Person, approved in
writing by CCI;
(c) reimbursement obligations with respect to standby letters of credit
furnished in the ordinary course of business to secure payment of insurance
premiums, deductible losses and similar miscellaneous charges in connection
with obtaining insurance coverage, approved in writing by CCI;
(d) reimbursement obligations with respect to standby letters of credit
furnished in the ordinary course of business in international trade
transactions;
(e) claims against the CRW or any Subsidiary which are being contested
by the CRW or such Subsidiary in good faith and by appropriate proceedings;
(f) guaranties by the CRW of Indebtedness of any Subsidiary incurred in
the ordinary course of business in connection with a line of business engaged
in by the CRW or any Subsidiary as of August 19, 1999; and
(g) guaranties by any Subsidiary of Indebtedness of the CRW or any
other Subsidiary incurred in the ordinary course of business in connection
with a line of business engaged in by the CRW or any Subsidiary as of August
19, 1999.
SECTION 3.11 REGULATIONS U, G AND X. Not, and not permit any Subsidiary
to, use any part of the proceeds of the Loans to extend credit to others for
the purpose of purchasing or carrying any margin stock (within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System) in
violation of any provision of Regulation U, G or X of said Board of
Governors. If requested by any Bank, it will furnish the Banks with a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in Regulation U.
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ARTICLE IV
ADMINISTRATION
SECTION 4.01 DISPUTES. All disputes under this Agreement shall be
handled in the manner provided for in Article 7.10 of the Services Agreement.
SECTION 4.02 LIMITATIONS ON LIABILITY. Neither party shall have any
liability under this Agreement (including any liability for its own
negligence) for damages, losses or expenses (including expenses or higher
interest rates incurred in order to obtain alternative financing sources)
suffered by the other party or its Subsidiaries as a result of the
performance or non-performance of such party's obligations hereunder, unless
such damages, losses or expenses are caused by or arise out of the willful
misconduct or gross negligence of such party or a breach by such party. In
no event shall either party have any liability to the other party for
indirect, incidental or consequential damages that such other party or its
Subsidiaries or any third party may incur or experience on account of the
performance or non-performance of such party's obligations hereunder. The
provisions of this Section 4.02 shall survive any termination of this
Agreement.
SECTION 4.03 TERM OF THE AGREEMENT. This Agreement commences on the
effective date of this Agreement as set forth above and will continue in
effect until 11:59 p.m., Central Time, on December 31, 2001. Notwithstanding
the foregoing, this Agreement may be sooner terminated, without liability to
the terminating party:
(a) by either party, upon 90 days' notice to the other party, if CCI ceases
to own, directly or indirectly, 50% or more of the outstanding common
stock of CRW;
(b) by either party, immediately upon notice to the other party, if (i) that
other party makes a general assignment of all or substantially all of
its assets for the benefit of its creditors; (ii) that other party
applies for, consents to or acquiesces in the appointment of a receiver,
trustee, custodian or liquidator for its business or all or
substantially all of its assets; (iii) that other party files, or
consents to or acquiesces in a petition seeking relief or reorganization
under any bankruptcy or insolvency laws; or (iv) a petition seeking
relief or reorganization under any bankruptcy or insolvency laws is
filed against that other party and is not dismissed within 90 days after
it was filed;
(c) by either party, immediately upon notice to the other party, if that
other party's material breach of this Agreement continues uncured or
uncorrected for 30 days after both the nature of that breach and the
necessary cure or correction has been agreed upon by the parties or
otherwise determined by the dispute resolution procedure described in
Section 3.01; provided that if the parties agree or it is determined by
the dispute resolution procedure that the material breach is not capable
of being cured or corrected, the termination shall be effective
immediately upon notice;
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(d) by either party, immediately upon notice to the other party, if it
determines that performance of its rights or obligations under this
Agreement is or becomes illegal;
(e) by either party, immediately upon notice to the other party, if payments
made by the other party are subject to any deduction or withholding for
or on account of any tax, unless the other party agrees to increase its
payments such that, after all required deductions have been made, the
party receives a net amount equal to the sum it would have received had
no such deductions been made;
(f) by either party, immediately upon notice to the other party, if it
determines that its compliance with any law or regulation or any
guideline or request from any central bank or governmental or regulatory
authority would create a cost or increase the cost of providing credit
under this Agreement, unless the other party agrees to pay amounts
sufficient to indemnify for such cost or increase in cost; or
(g) by either party, immediately upon notice to the other party, if the
Services Agreement has been terminated.
SECTION 4.04 RENEWAL. The parties may consent to successive one-year
renewal terms. If CRW wishes to renew the term of this Agreement, it shall
provide notice to CCI of that desire by June 30, 2001 and the same date of
each subsequent year. If CCI consents to such renewal, it shall provide
notice to CRW of that concurrence by July 30 of that year. If no notice of
desire to renew or subsequent consent is given, this Agreement will terminate
when the then current term expires.
SECTION 4.05 CONFIDENTIALITY. Confidentiality of matters will be
maintained in the manner set forth in Article 7.08 of the Services Agreement.
SECTION 4.06 SUCCESSORS AND ASSIGNS. Matters regarding succession and
assignment shall be determined in the manner set forth in the Services
Agreement.
SECTION 4.07 NO THIRD-PARTY BENEFICIARIES. Nothing expressed or implied
in this Agreement shall be construed to give any person or entity other than
the parties hereto any legal or equitable rights hereunder.
SECTION 4.08 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties on this subject, except that any administrative
matters not addressed herein shall be addressed in the manner set forth in
the Services Agreement. This Agreement replaces and supersedes any prior
agreement or understanding of the parties, whether written or oral, on this
subject not expressed or referred to in this Agreement.
SECTION 4.09 AMENDMENT. This Agreement may not be amended except by a
written instrument signed by the parties hereto.
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SECTION 4.10 WAIVERS. Either party hereto may (a) extend the time for
performance of any of the obligations or other act of the other party or (b)
waive compliance with any of the agreements contained herein. No waiver of
any term shall be construed as a waiver of the same term in any other
situation or a waiver of any other term of this Agreement. The failure of any
party to assert any of its rights hereunder will not constitute a waiver of
any such rights.
SECTION 4.11 SEVERABILITY. If any provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, such provision shall be deemed severable and all other provisions of
this Agreement shall nevertheless remain in full force and effect.
SECTION 4.12 HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
SECTION 4.13 NOTICES. All notices required hereunder shall be given in
the manner set forth in Article 7.09 of the Services Agreement.
SECTION 4.14 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of Minnesota,
without giving effect to any choice-of-law rules that may require the
application of the laws of another jurisdiction.
SECTION 4.15 CHANGES IN LAW. If at any time due to the adoption of any
law, rule, regulation, treaty or directive, or any change therein or in the
interpretation or administration thereof by any court, central bank,
governmental authority, agency or instrumentality, or comparable agency
charged with the interpretation or administration thereof, or for any other
reason arising subsequent to the date of this Agreement, it shall become
unlawful or impossible for CCI to make any Advance, the obligation of CCI to
provide such Advances shall, upon the happening of such event, forthwith be
suspended for the duration of such illegality or impossibility. If any such
event shall make it unlawful or impossible for CCI to continue any Advances
previously made by it hereunder, CCI shall, upon the happening of such event,
notify CRW thereof in writing, and CRW shall, at the time notified by CCI,
repay such Advances in full, together with accrued interest thereon.
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SECTION 4.16 COUNTERPARTS. This Agreement may be signed in any number of
counterparts, with the same effect as if all signatories had signed the same
document. All counterparts shall be construed together to constitute one,
and the same, document.
IN WITNESS WHEREOF, CCI and CRW have caused this Agreement to be executed as
of the date first above written.
CARLSON COMPANIES, INC. CARLSON RESTAURANTS WORLDWIDE INC.
By: /s/ Martyn R. Redgrave By: /s/ Wallace B. Doolin
------------------------ ----------------------------
Title: Martyn R. Redgrave Title: Wallace B. Doolin
--------------------- -------------------------
Date: August 19, 1999 Date: August 19, 1999
---------------------- --------------------------
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EXHIBIT 10.5
TGI FRIDAY'S INC.
DEFERRED COMPENSATION PLAN
ARTICLE I
PURPOSE
On this 30th day of December 1994, TGI FRIDAY'S INC., a corporation
organized and existing under the laws of the State of New York (hereinafter,
the "Company"), hereby adopts the TGI FRIDAY'S INC. DEFERRED COMPENSATION
PLAN (hereinafter, the "Plan"), such Plan to be effective as of January 1,
1995;
W I T N E S S E T H
WHEREAS, the Company wishes to promote in a select group of
management or highly compensated employees the strongest interest in the
successful operation of its business and increased efficiency in their work,
and to provide an opportunity for accumulation of funds for their retirement;
and
WHEREAS, it is intended that the Plan be "unfunded" for purposes of
the Employee Retirement Income Security Act of 1974 (hereinafter, "ERISA")
and not be construed to provide income to any participant or beneficiary
under the Internal Revenue Code of 1986 (hereinafter, the "Code") prior to
actual receipt of benefits hereunder;
NOW, THEREFORE, the Company hereby agrees as follows:
ARTICLE II
DEFINITIONS, CONSTRUCTION, AND ADOPTION
2.01 DEFINITIONS
The following words and phrases, when used herein, unless
their context clearly indicates otherwise, shall have the
following respective meanings:
(a) AFFILIATE: Any corporation (other than an Employer)
which is included within a controlled group of
corporations (as defined in Section 414(b) of the
Code) which includes an Employer; any trade or
business (other than an Employer), whether or not
incorporated, which is under common control (as
defined in Section 414(c) of the Code) with an
Employer; any organization (other than an Employer),
whether
<PAGE>
or not incorporated, which is a member of an
affiliated service group (as defined in Section
414(m) of the Code) which includes an Employer; and
any other entity required to be aggregated with an
Employer pursuant to regulations under Section 414(o)
of the Code.
(b) AUTHORIZED LEAVE OF ABSENCE: Any paid leave of
absence authorized by an Employer under the
Employer's standard personnel practices provided that
all persons under similar circumstances must be
treated alike in the granting of such Authorized
Leaves of Absence and provided further that the
Participant resumes employment with an Employer not
later than the first working day following the
expiration of such period of authorized absence. An
absence due to service in the Armed Forces of the
United States shall be considered an Authorized Leave
of Absence provided that the absence is caused by war
or other emergency, or provided that the Employee is
required to serve under the laws of conscription in
time of peace, and further provided that the Employee
returns to employment with the Employers within the
period provided by law.
(c) BENEFICIARY: A person or entity, either in an
individual or fiduciary capacity, designated by a
Participant in accordance with the provisions of
Section 8.01 to receive any death benefit which shall
be payable under this Plan.
(d) BONUS: The bonus paid by the Company to its General
Managers.
(e) BONUS DEFERRAL PLAN: The arrangement for General
Managers for allocation of benefits pursuant to
Article V hereof.
(f) COMMITTEE OR PLAN COMMITTEE: The persons appointed
under the provisions of Article XIII to administer
the Plan.
(g) COMPANY: TGI FRIDAY'S INC., a corporation organized
and existing under the laws of the State of New York,
or its successor or successors.
(h) DISABILITY: A physical or mental condition which, in
the judgment of the Committee, totally and presumably
permanently prevents a Participant from performing
substantially the same duties assigned to him by his
Employer at the time such condition develops, or if
such Participant is on an Authorized Leave of Absence
when such condition develops, substantially the same
duties assigned to him by his Employer immediately
prior to the commencement of such period of absence.
A determination that Disability exists shall be based
upon competent medical evidence. The date that a
person's Disability occurs
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shall be deemed to be the date such condition is
determined to exist by the Committee.
(i) EFFECTIVE DATE: January 1, 1995, the date on which
the provisions of this Plan become effective.
(j) EMPLOYEE: An individual on the payroll of an Employer
whose wages from the Employer are subject to
withholding for purposes of Federal income taxes and
for purposes of the Federal Insurance Contributions
Act.
(k) EMPLOYER CONTRIBUTION ACCOUNT: The account maintained
for a Participant on the books of his Employer to
which is credited amounts allocated for the benefit
of such Participant pursuant to Articles IV and V
hereof and adjustments related thereto.
(l) EMPLOYER or PARTICIPATING EMPLOYER: TGI FRIDAY'S INC.
and any other Affiliate of the Company which may have
adopted this Plan in accordance with the provisions
of Section 2.03 hereof.
(m) EMPLOYMENT COMMENCEMENT DATE: The first date on which
an Employee completes an Hour of Employment.
(n) ENTRY DATE: Each January 1, April 1, July 1 and
October 1.
(o) FYI PLAN: THE TGI FOR YOUR INVESTMENT PLAN, as
amended or restated from time to time.
(p) GENERAL MANAGER: Any Employee who is a general
manager as reflected on the Employer's records.
(q) HOUR OF EMPLOYMENT: Each hour (i) for which an
Employee is on an Authorized Leave of Absence or is
directly or indirectly paid or entitled to payment by
his Employer for the performance of duties or for
reasons other than the performance of duties, or (ii)
for which back-pay (irrespective of mitigation of
damages) has been either awarded or agreed to by the
Employer. Hours of Employment shall be determined
from records maintained by each Employer; provided,
however, that an Employer may elect to determine
Hours of Employment for any classification of
Employees which is reasonable, nondiscriminatory and
consistently applied, on the basis that Hours of
Employment include forty-five (45) Hours of
Employment for each week or portion thereof during
which an Employee is credited with one (1) Hour of
Employment.
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Except to the extent otherwise permitted by the
Committee in its sole discretion, Hours of Employment
completed with an Affiliate or a Participating
Employer prior to the date on which such Affiliate or
Employer was included within a controlled group of
corporations (as defined in Section 414(b) of the
Code) which includes the Company shall not be
recognized under this Plan.
(r) INCOME: The deemed net gain or loss of the
bookkeeping accounts maintained for all Participants
and former Participants from deemed investments, as
further described in Section 6.03(a) hereof.
(s) KEY EMPLOYEE: Any Director or Vice President of an
Employer who is identified by the Plan Committee as a
member of the group of "highly compensated employees"
(as defined in the Code) for the preceding year, any
General Manager, and any other Employee who is
designated by the Plan Committee as eligible to
participate in the Salary Deferral Plan under Article
IV of this Plan.
(t) MATCHING EMPLOYER CONTRIBUTION: Any amount credited
by an Employer for the Plan Year to a Participant
pursuant to Sections 4.01(b) and 5.01(b) hereof.
(u) PARTICIPANT: A Key Employee participating in the Plan
in accordance with the provisions of Articles IV or
V.
(v) PARTICIPATION: The period commencing on the date on
which an Employee becomes a Participant and ending on
the date on which the Employee incurs a Severance
from Service.
(w) PLAN: TGI FRIDAY'S INC. DEFERRED COMPENSATION PLAN,
the Plan set forth herein, incorporating the
provisions for the Salary Deferral Plan and the Bonus
Deferral Plan, as amended from time to time.
(x) RE-EMPLOYMENT COMMENCEMENT DATE: The first date on
which an Employee completes an Hour of Employment
upon his return to the employment of the Employers
after a Severance from Service.
(y) RETIREMENT: A Participant's or former Participant's
termination of employment on or after attaining age
65.
(z) SALARY DEFERRAL PLAN: The arrangement for Key
Employees for allocation of benefits pursuant to
Article IV hereof.
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(aa) SAVINGS CONTRIBUTION: An amount credited by an
Employer for the Plan Year to a Participant pursuant
to Sections 4.01(a) and 5.01(a) hereof.
(bb) SAVINGS CONTRIBUTION ACCOUNT: The account maintained
for a Participant on the books of his Employer to
which is credited amounts allocated for the benefit
of such Participant pursuant to Sections 4.01(a) and
5.01(a) hereof and adjustments related thereto.
(cc) SERVICE: A Participant's Service shall include both
(i) his period of employment with the Employers
determined in accordance with Section 3.02, and (ii)
any period of whole Plan Years in which the
Participant was employed by a Company franchisee, or
held a franchise from the Company.
(dd) SEVERANCE FROM SERVICE: With respect to an Employee,
the earlier of (i) the date on which he terminates
his employment with the Employer, or (ii) the date of
his Retirement, Disability or death.
(ee) TRUST: The trust, if any, established by the Company
in accordance with the provisions of Article XII.
(ff) VALUATION DATE: Each business day.
(gg) YEAR or PLAN YEAR: The 12-month period ending on
December 31 of each year.
2.02 CONSTRUCTION
The masculine gender, where appearing in the Plan, shall be
deemed to include the feminine gender, unless the context
clearly indicates to the contrary. The words "hereof,"
"herein," "hereunder" and other similar compounds of the word
"here" shall mean and refer to the entire Plan and not to any
particular provision or Section.
2.03 ADOPTION BY OTHERS
Any Affiliate of the Company may adopt this Plan and thereby
become an Employer; provided, however, that the Board of
Directors of the Company approves such adoption; provided,
further, that the administrative powers and control of the
Company as provided herein shall not be deemed diminished
under the Plan by reason of the adoption of the Plan by any
other Employer, and such administrative powers and control
granted in Section 13.01 hereunder with respect to the
appointment of the Committee and other matters shall apply
only with respect to the Company and not to any other
Employer.
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ARTICLE III
PARTICIPATION AND SERVICE
3.01 PARTICIPATION
A Key Employee shall become a Participant in the Salary
Deferral Plan, and a General Manager shall become a
Participant in the Bonus Deferral Plan, on one of the
following dates, provided that, prior to such date, he shall
first have undertaken the actions specified in Section 3.03
hereof:
(a) In the case of an individual classified as a Key
Employee prior to the Effective Date, on the
Effective Date, or if he shall not have elected to
participate prior to the Effective Date but elects to
participate within thirty (30) days thereafter, then
on the first Entry Date following the Effective Date;
or
(b) In the case of an individual classified as a Key
Employee an or after the Effective Date, on the first
Entry Date immediately following such classification.
A Participant who incurs a Severance from Service and who is
subsequently re-employed by an Employer shall reenter the Plan
as a Participant on the Entry Date next following such
reemployment, but only if (i) he continues to qualify as a Key
Employee and (ii) prior to such date he shall have again
undertaken the actions specified in Section 3.03 hereof. In
the event that a Participant shall cease to qualify as a Key
Employee, his Participation shall thereupon cease but he shall
continue to accrue Service hereunder during the period of his
continued employment with the Employer.
3.02 SERVICE
The amount of benefit payable to or on behalf of a Participant
shall be determined on the basis of his period of Service, in
accordance with the following:
(a) SERVICE PRIOR TO THE EFFECTIVE DATE -- For an
Employee as of the Effective Date, the Employee's
employment with an Employer prior to the Effective
Date shall be counted as Service to the extent that
such employment is counted as Service under the
provisions of the FYI Plan.
(b) (1) ON AND AFTER EFFECTIVE DATE -- IN GENERAL.
Subject to the Break in Service provisions
of paragraph (2), below, an Employee shall
accrue a year of Service for each
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consecutive 365-day computation period
during which he completes at least one
thousand (1,000) Hours of Employment.
Vesting service shall be determined in
completed years and days, with each 365 days
constituting one year, and with credit for
vesting service being measured from an
Employee's Employment Commencement Date to
his Severance from Service date. For
purposes of eligibility to participate, the
initial computation period shall begin on
his Employment Commencement Date, the second
computation period shall be the Plan Year
which includes the first anniversary of his
Employment Commencement Date, and succeeding
computation periods shall also be computed
on the basis of the Plan Year. An Employee
who completes 1,000 Hours of Employment in
both the initial computation period and the
second computation period shall be credited
with two (2) years of Service for purposes
of eligibility to participate in the Plan.
(2) BREAK IN SERVICE. An Employee who fails to
complete more than five hundred (500) Hours
of Employment during a Plan Year shall have
a Break in Service; provided, however, that
in the case of an Employee whose failure to
complete more than five (500) Hours of
Employment during such Plan Year is
attributable to (i) the Employee's
pregnancy, (ii) the birth of the Employee's
child, (iii) the placement of a child with
the Employee in connection with the adoption
of the child by the Employee, or (iv) the
care of a child by the Employee during the
period immediately following such child's
birth to, or placement with, the Employee
(hereinafter, an "Extended Absence
Employee"), such Extended Absence Employee
shall not have a Break in Service unless
such Extended Absence Employee fails to
complete more than five hundred (500) Hours
of Employment during a second Plan Year
immediately following the close of such
first Plan Year.
For a Participant who, at the time of a
Break in Service, satisfied any requirements
of this Plan for vested benefits, his
pre-break Service shall, upon his completion
of a year of Service following such Break,
be restored in determining his number of
years of Service for purposes of eligibility
to participate and his nonforfeitable
interest in his account. For an Employee
who, at the time of a Break in Service, had
not fulfilled such requirements, upon his
completion of a year of Service following
such Break, periods of pre-break Service
shall be restored only if the consecutive
years of Break in
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Service were less than the greater of five
(5) years or the total years of pre-break
Service.
3.03 ELECTION TO PARTICIPATE
In order to participate hereunder, a Key Employee otherwise
eligible to participate pursuant to Section 3.01, must, after
having received a written explanation of the terms of, and the
benefits provided under, the Plan, elect to participate in
such Plan on such form or forms as the Committee may provide
and must execute a salary reduction agreement and/or a bonus
reduction agreement described in Sections 4.02 and 5.02
hereof. Such election to participate and execution of a salary
and/or bonus reduction agreement shall be effected, by a newly
eligible Participant, no later than thirty (30) days following
his becoming eligible to participate in the Plan, and by all
other Participants, on any date prior to the applicable date
specified in such Section 3.01 for the commencement of
Participation and, in all events, prior to the rendition of
services for which salary subject to the salary and/or bonus
reduction agreement would otherwise have been paid to such
Employee.
3.04 TRANSFER
An Employee who is transferred between Participating Employers
shall be as eligible for Participation and benefits as in the
absence of such transfer.
ARTICLE IV
SALARY DEFERRAL PLAN
4.01 EMPLOYER CONTRIBUTIONS
The Employer shall credit Key Employee accounts in accordance
with the following:
(a) SAVINGS CONTRIBUTION -- For each Year, each Employer
shall credit the Savings Contribution Account of each
of its Key Employees participating in the Salary
Deferral Plan with an amount agreed to be credited by
such Employer pursuant to a salary reduction
agreement under Section 4.02 entered into between the
Employer and the Key Employee for such Year.
(b) ADDITIONAL MATCHING CONTRIBUTION -- For each Year,
each Employer shall credit a Matching Employer
Contribution equal to twenty-five per cent (25%) of
each Key Employees' Savings Contributions (but not to
exceed a Savings Contribution equal to 10% of base
salary reduced by the maximum permitted salary
reduction for the year under the FYI
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Plan). In addition, for each Year, each Employer
may credit an additional Matching Employer
Contribution in such amount as the officers of the
Company shall determine and authorize to each of
its Key Employees for whom an amount was credited
pursuant to paragraph (a) of this Section 4.01.
The Key Employees' Savings Contributions up to a
maximum of ten per cent (10%) of their base salary
(less the maximum permitted salary reduction for
the year under the FYI Plan) shall be eligible for
a Matching Contribution.
4.02 KEY EMPLOYEE SALARY REDUCTION
Prior to commencement of Participation hereunder, a Key
Employee shall have entered into a written salary reduction
agreement with his Employer. The terms of such salary
reduction agreement shall provide that the Participant agrees
to accept a reduction in his base salary from the Employer
equal to any whole percentage per payroll period, with such
percentage not to exceed twenty-five percent (25%) of such
Compensation; provided, however, that the Participant must
first have elected to contribute the maximum permitted salary
reduction for the Year to his savings contribution account
under the FYI Plan. In consideration of such agreement, the
Employer will credit the Key Employee's Savings Contribution
Account for each Year with an amount equal to the total amount
by which the Key Employee's base salary from the Employer was
reduced during the Year pursuant to the salary reduction
agreement.
Salary reduction agreements shall be further governed by the
following:
(a) A salary reduction agreement shall apply to each
payroll period during which an effective salary
reduction agreement is on file with the Participant's
Employer, but in no event shall be effective to
reduce salary for services performed on or before the
date of execution of the agreement or, if later, the
date on which such salary reduction agreement is
received by the Company.
(b) A salary reduction agreement shall have been entered
into by a Participant prior to commencement of
Participation hereunder and shall remain in effect
until terminated or amended by the Participant in
accordance with the procedures set forth herein. Any
amendment or termination of a salary reduction
agreement shall not be effective until the first day
of the Participant's taxable year immediately
following the taxable year of the Participant in
which an election so to amend or terminate is
executed by the Participant. If a Participant
terminates his salary reduction agreement as
hereinabove provided, then he may elect to enter into
another salary reduction agreement to be effective as
of the
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first day of any of his taxable years following
his taxable year in which such termination was
first effective.
4.03 DISPOSITION OF FORFEITURES
If, upon a Severance from Service, a Participant is not 100%
vested in his Employer Contribution Account, then as of the
end of the Year in which his severance from Service occurs,
the forfeited amount from such Account shall be, at the
Committee's discretion, either retained by the Company or
credited, in whole or in part, to the Accounts of Key
Employees who are eligible to receive Matching Employer
Contributions for such Year under Section 6.03(c) in the same
manner as adjustments to such Accounts are made therein.
ARTICLE V
BONUS DEFERRAL PLAN
5.01 EMPLOYER CONTRIBUTIONS
The Employer shall credit General Manager accounts in
accordance with the following:
(a) SAVINGS CONTRIBUTION -- For each Year, each Employer
shall credit the Savings Contribution Account of each
of its General Managers participating in the Bonus
Deferral Plan with an amount agreed to be credited by
such Employer pursuant to a bonus reduction agreement
under Section 5.02 entered into between the Employer
and the General Manager for such Year.
(b) ADDITIONAL MATCHING CONTRIBUTION -- For each Year,
each Employer shall credit a Matching Employer
Contribution equal to 25% of the General Managers'
Savings Contributions (but not to exceed a Savings
Contribution equal to 10% of total bonuses). In
addition, for each Year, each Employer may credit a
Matching Employer Contribution in such amount as the
officers of the Company shall determine and authorize
to each of its General Managers for whom an amount
was credited pursuant to paragraph (a) of this
Section 5.01. The General Managers' Savings
Contributions up to a maximum of ten per cent (10%)
of total bonuses shall be eligible for a Matching
Contribution.
5.02 GENERAL MANAGER BONUS REDUCTION
Prior to commencement of Participation hereunder, a General
Manager shall have entered into a written bonus reduction
agreement with his Employer. The terms of such bonus reduction
agreement shall provide that the Participant
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agrees to accept a reduction in his bonus from the Employer
equal to any whole percentage, up to one hundred percent
(100%) of such bonus. In consideration of such agreement,
the Employer will credit the General Manager's Savings
Contribution Account for each Year with an amount equal to
the total amount by which the General Manager's bonus from
the Employer was reduced during the Year pursuant to the
bonus reduction agreement.
Bonus reduction agreements shall be further governed by the
following:
(a) A bonus reduction agreement shall apply to each
payroll period during which an effective bonus
reduction agreement is on file with the Participant's
Employer, but in no event shall be effective to
reduce the bonus for services performed on or before
the date of execution of the agreement or, if later,
the date on which such bonus reduction agreement is
received by the Company.
(b) A bonus reduction agreement shall have been entered
into by a Participant prior to commencement of
Participation hereunder and shall remain in effect
until terminated or amended by the Participant in
accordance with the procedures set forth herein. Any
amendment or termination of a bonus reduction
agreement shall not be effective until the first day
of the Participant's taxable year immediately
following the taxable year of the Participant in
which an election so as to amend or terminate is
executed by the Participant. If a Participant
terminates his bonus reduction agreement as
hereinabove provided, then he may elect to enter into
another bonus reduction agreement to be effective as
of the first day of any of his taxable years
following his taxable year in which such termination
was first effective.
5.03 DISPOSITION OF FORFEITURES.
If, upon a Severance from Service, a Participant is not 100%
vested in his Employer Contribution Account, then as of the
end of the Year in which his Severance from Service occurs,
the forfeited amount from such Account shall be, at the
Committee's election, either retained by the Company or
credited, in whole or in part, to the Accounts of General
Managers who are eligible to receive Matching Employer
Contributions for such Year under Section 6.03(c) in the same
manner as adjustments to such Accounts are made therein.
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ARTICLE VI
PARTICIPANTS' ACCOUNTS
6.01 INDIVIDUAL ACCOUNTS
The Committee shall create and maintain adequate records in
the form of bookkeeping entries to disclose the interest
hereunder of each Participant, Former Participant and
Beneficiary. Such bookkeeping entries shall be in the form of
individual accounts and credits and charges shall be made to
such accounts in the manner herein described. When
appropriate, a Participant shall have two separate accounts,
an Employer Contribution Account and Savings Contribution
Account.
6.02 DEEMED INVESTMENT ACCOUNTS; PARTICIPANT DIRECTION.
The Committee shall designate a selection of investment funds
in which each Participant's bookkeeping account may be deemed
to be invested under the Plan. Each Participant or former
Participant may direct that the investment of his bookkeeping
account will be deemed to be made in any one or more of the
investment funds selected by the Committee in multiples of 5%.
Notwithstanding the foregoing:
a) the Company is under no obligation to acquire or
provide any investment funds, and the Plan will be
unfunded as provided at Section 12.01 hereof.
(b) After a Participant's Benefit Commencement Date
determined under Section 11.01 hereof, the unpaid
balance of a Participant's bookkeeping account shall
be deemed invested in a money market type of
investment fund selected by the Committee.
6.03 ACCOUNT ADJUSTMENTS
The accounts of Participants, Former Participants and
Beneficiaries shall be adjusted in accordance with the
following:
(a) INCOME -- As frequently as daily, the Income
allocable to each investment fund designated by the
Committee (hereinafter, the "Funds") shall, as a
bookkeeping entry, be allocated and credited to the
bookkeeping accounts of Participants, Former
Participants and Beneficiaries who had balances in
their accounts on such date that are deemed invested
in such Funds in accordance with Participant
direction.
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(b) SAVINGS CONTRIBUTIONS -- The amount credited pursuant
to Sections 4.01(a) and 5.01(a) hereof for a Year
shall be credited to the Participant's Savings
Contribution Account as soon as practicable following
the Participant's salary reduction.
(c) MATCHING EMPLOYER CONTRIBUTIONS -- As soon as
practicable each Year, the amounts credited pursuant
to Sections 4.01(b) and 5.01(b) hereof, plus any
available forfeitures for the Year, shall be credited
to the Employer Contribution Accounts of (i) those
Participants who are employed by an Employer on the
last day of the Year and who have completed 1,000
Hours of Employment for such Year, and (ii) those
Participants who ceased to be employed due to
retirement, death or Disability during such Year. The
allocation shall be determined separately with
respect to the Salary Deferral Plan (Matching
Contributions and available forfeitures, if any) and
the Bonus Deferral Plan (Matching Contributions and
available forfeitures, if any). The allocation for
each such Plan shall be made in proportion to
Participants' Savings Contributions for the Year that
are eligible for a Matching Employer Contribution,
according to the ratio that each such Participant's
Savings Contribution for the Year bears to the total
of all such Savings Contributions of all Participants
in such Plan for the Year.
ARTICLE VII
VESTING
7.01 RETIREMENT, DEATH OR DISABILITY. Upon the first to occur of a
Participant's or former Participant's Retirement, death or
Disability, such Participant or former Participant, or his
Beneficiary, as the case may be, shall be fully vested in and
entitled to the total amount credited to his Accounts.
7.02 OTHER SEVERANCE FROM SERVICE. If a Participant's or former
Participant's termination of employment is for any reason
other than Retirement, death or Disability, such Participant
or former Participant, or his Beneficiary, as the case may be,
shall be vested in and entitled to his entire Savings
Contribution Account and his "vested percentage" at the date
of the Severance from Service of the total amount credited to
his Employer Contribution Account. Such "vested percentage"
shall be determined in accordance with the following schedule:
-13-
<PAGE>
<TABLE>
<CAPTION>
YEARS OF VESTED FORFEITED
SERVICE PERCENTAGE PERCENTAGE
-------- ---------- ----------
<S> <C> <C>
Less than 1 0% 100%
1 but less than 2 20% 80%
2 but less than 3 40% 60%
3 but less than 4 60% 40%
4 but less than 5 80% 20%
5 or more 100% 0%
</TABLE>
Provided, however, that if a Change of Control
occurs, a Participant who has not yet incurred a
Severance from Service shall be 100% vested in his
Accounts even though he subsequently terminates
employment prior to Retirement. For purposes of this
Plan, a "Change of Control" shall mean the purchase
or other acquisition by any person, entity or group
of persons (other than Carlson Companies, Inc., its
Affiliates, or an employee pension benefit trust
sponsored by Carlson Companies, Inc. or its
Affiliates), within the meaning of section 13(d) or
14(d) of the Securities Exchange Act of 1934 (the
"Act"), or any comparable successor provisions, of
beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Act) of 30 percent or
more of either the outstanding shares of common stock
or the combined voting power of the Company's then
outstanding voting securities entitled to vote
generally, or the approval by the stockholders of the
Company of a reorganization, merger, or
consolidation, in each case, with respect to which
persons who were stockholders of the Company
immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own
more than 50 percent of the combined voting power
entitled to vote generally in the election of
directors of the reorganized, merged or consolidated
Company's then outstanding securities, or a
liquidation or dissolution of the Company or the sale
of all or substantially all of the Company's assets.
7.03 ELECTION OF IN-SERVICE PAYMENT OF BENEFITS. Upon the initial
enrollment of each Participant in the Plan, a one-time
election shall be available to direct that the entire vested
percentage of the Participant's Account be paid in a lump sum
on a date certain that is at least five (5) years after such
enrollment (i.e., January 1, 2008), if it occurs earlier than
the date otherwise determined for payment of benefits under
Sections 7.01 and 7.02 hereof. Such election shall be
irrevocable. If a Participant elects in-service payment of his
Account, in order to continue to participate in the Plan
subsequent to the date of payment, such Participant shall be
required to complete a new salary and/or bonus reduction
agreement in accordance with the provisions of Section 3.03,
4.02
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<PAGE>
and 5.02 of the Plan, as applicable. No election for
in-service payment of benefits shall be available on the
subsequent enrollment or in any enrollment other than the
first enrollment filed by each Participant.
7.04 COMPUTATION OF YEARS OF SERVICE FOR VESTING.
(a) GENERAL. For purposes of computing a Participant's or
former Participant's vested percentage, each
Participant or former Participant shall be credited
with all Service to which he is entitled pursuant to
Section 3.02.
(b) FORFEITURES. Upon a Participant's or former
Participant's termination of employment for any
reason other than Retirement, death, or Disability,
he shall immediately forfeit that portion of his
Account to which he is not entitled under Section
7.02.
7.05 DETERMINATION OF AMOUNT. For purposes of Sections 7.01 and
7.02, the amount credited to the Account of a Participant on
the books of the Company shall be determined by the Committee
as of the date that is ninety (90) days following the last day
of the Year in which the Participant terminates employment.
For purposes of Section 7.03, the amount credited to the
Account of a Participant on the books of the Company shall be
determined by the Committee as of the Valuation Date that is
the date on which the Participant requests that his Account be
paid, and payment thereof shall be made as soon thereafter as
is practicable, but not to exceed more than thirty (30) days
following such Valuation Date. The Committee shall certify to
the Treasurer of the Company the total amount of the
allocations to the credit of the Participant on the books of
the company, and shall determine whether the payment of the
amount credited to the Participant's accounts under the Plan
is to be paid directly by the Company, from the Trust, or by a
combination of such sources (except to the extent the
provisions of the Trust specify payment from the Trust). The
payment of such amount shall be made in the manner provided
under Article XI.
ARTICLE VIII
BENEFICIARY
8.01 DESIGNATION OF BENEFICIARY. Each Participant or Former
Participant from time to time may designate any person or
persons (who may be designated contingently or successively),
as his Beneficiary or Beneficiaries to whom any remaining
amounts standing to the credit of the Participant or former
Participant in his accounts are to be paid if he dies before
payment of all such amounts. Each Beneficiary designation
shall be in the form prescribed by the Committee and will be
effective only when filed with the Committee during
-15-
<PAGE>
the Participant's or Former Participant's lifetime. Each
Beneficiary designation filed with the Committee will cancel
all Beneficiary designations previously filed with the
Committee.
8.02 NO BENEFICIARY. If any Participant or former Participant fails
to designate a Beneficiary in the manner provided above; or if
the Beneficiary designated by a Participant or former
Participant dies before him and the Participant or former
Participant fails to designate a new Beneficiary, or if the
Beneficiary designated by a deceased Participant or former
Participant dies before complete distribution of the deceased
Participant's or former Participant's benefit, the Committee
shall direct that such Participant's or former Participant's
accounts be paid as follows, with such payment to be made at
the time and in the manner specified in Section 11.02 hereof:
(a) To the surviving spouse of such Participant or former
Participant;
(b) To the surviving children, and the descendants of any
deceased child, per stirpes, of the Participant or
former Participant;
(c) To the Participant's surviving brothers and
sisters; or
(d) To the Participant's personal representative
(executor or administrator).
ARTICLE IX
NOTICES
9.01 NOTICE TO COMPANY TREASURER. As soon as practicable after a
Participant, former Participant or Beneficiary becomes
entitled to payment of his accounts in accordance with Article
VII, the Committee shall give written notice to the Treasurer
of the Company, and to the trustee of the Trust, if
applicable, which notice shall include the following
information and directions:
(a) Name and address of the Participant, former
Participant or Beneficiary.
(b) Method and amount of payment to be made pursuant to
Article XI.
(c) Whether the payment is to be paid directly by the
Company, from the Trust, or by a combination of such
sources (except to the extent the provisions of the
Trust specify payment from the Trust).
9.02 RELIANCE UPON NOTICE. Upon receipt of any notice as provided
in this Article IX, the Treasurer or the trustee of the Trust,
if applicable, shall promptly take whatever action and make
whatever payments are called for therein.
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<PAGE>
ARTICLE X
HARDSHIP WITHDRAWALS AND IN-SERVICE WITHDRAWALS
10.01 HARDSHIP WITHDRAWALS. The Committee may, in its sole
discretion, direct that payment of benefits to a Participant
be made, in advance of the date such payments are due
hereunder (hereinafter called a "Hardship Withdrawal") , if
the Committee determines that the Participant has an
unforeseeable emergency as hereinafter defined. No Hardship
Withdrawal shall be in an amount greater than the lesser of
(i) the amount needed for the unforeseeable emergency and (ii)
the vested balance of the Participant's Accounts on the date
of such Hardship Withdrawal. An unforeseeable emergency is
defined as set forth in Treasury Regulations Section
1.457-2(h)(4), including a severe financial hardship resulting
from a sudden and unexpected illness or accident of the
Participant or of a dependent (as defined in Section 152(a) of
the Code), casualty loss, or other similar extraordinary and
unforeseeable circumstances beyond the control of the
Participant.
10.02 INVOLUNTARY DISTRIBUTIONS. Notwithstanding anything contained
in the Plan to the contrary, if at any time any Participant is
finally determined by the Internal Revenue Service ("IRS") or
the Department of Labor ("DOL") not to qualify as a member of
a select group of "management or highly compensated employees"
as such term is used in ERISA Section 401(a)(l), the Committee
may, in its sole discretion, immediately distribute in one
1ump sum to such Participant his vested account under the
Plan. A final determination of the IRS or DOL shall be a
decision rendered by the IRS or DOL which is no longer subject
to administrative appeal within the IRS or DOL.
10.03 VOLUNTARY WITHDRAWALS. A Participant may at any time make an
irrevocable election, effective as of the next Entry Date, to
have the vested percentage of the balance in his Account paid
to him in a lump sum on a fixed date specified in such
election that is at least three (3) years following such Entry
Date (unless his termination of employment should occur in the
interim, in which case his vested Account would be paid in
accordance with the provisions of Section 7.02 hereof). Upon
the effective date of such election, the Participant will be
suspended from further participation in the Plan for a period
of five (5) years thereafter. The vested balance in his
Account shall be payable to him in a lump sum within the
thirty-day period following the date specified in such
election for payment. The amount of such payment shall be
determined based upon the Valuation Date that coincides with
(or if none, immediately follows) the date specified in such
election. If an electing Participant again becomes eligible to
participate in the Plan, he shall be required to complete a
new salary and/or bonus reduction agreement in accordance with
the requirements of Sections 3.03, 4.02 and 5.02, as
applicable.
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<PAGE>
10.04 OTHER WITHDRAWALS AND LOANS. Except as set forth in Sections
7.03, 10.01, 10.02, and 10.03, no in-service payments or loans
are permitted by the Plan.
ARTICLE XI
METHODS OF PAYMENT
11.01 BENEFIT COMMENCEMENT DATE. When a Participant, Former
Participant or Beneficiary is entitled to receive a payment
under Section 7.01 or 7.02, such benefit payment will be made
(or will commence to be made) during the period that is at
least ninety (90) days but not more than one hundred twenty
(120) days following the last day of the Plan Year coinciding
with or next following Severance from Service. When a
Participant, Former Participant or Beneficiary is entitled to
receive a payment under Section 7.03 or 10.03, such benefit
payment will be made during the thirty-day period following
the date that the Participant has elected for payment of his
Account.
11.02 FORM OF BENEFIT. Except for the payment of lump sum
withdrawals under Section 7.03 or 10.03, the form of payment
shall be determined based upon the amount credited to the
Participant's or former Participant's Account as determined
pursuant to Section 7.05, as set forth below. The Committee
shall certify to the Trustee or the Treasurer of the Company,
as applicable, the method of payment as determined pursuant to
this Section 11.02.
(a) SINGLE LUMP-SUM PAYMENT, under which a single
lump-sum payment is made to the Participant, former
Participant or his Beneficiary in an amount equal to
100 percent of the amount to which he is entitled:
ALL ACCOUNTS OF $100,000 OR LESS.
(b) TEN-YEAR INSTALLMENT FORM, under which payments are
made in annual installments not to exceed ten (10)
years to the Participant, former Participant or his
Beneficiary, the amount of each installment to equal
the amount of his Accounts immediately prior to the
installment divided by the number of installments
remaining to be paid: ACCOUNTS OF MORE THAN $250,000.
(c) FIVE-YEAR INSTALLMENT FORM, under which payments are
made in annual installments not to exceed five (5)
years to the Participant, former Participant or his
Beneficiary, the amount of each installment to equal
the amount of his Accounts immediately prior to the
installment divided by the number of installments
remaining to be paid: ACCOUNTS OF MORE THAN $100,000
UP TO $250,000.
Notwithstanding the foregoing, (i) the Committee may
direct, by a unanimous vote and in its sole and
absolute discretion, that an Account
-18-
<PAGE>
payable to a Participant who is not an officer of
the Company shall be paid in the form of a lump
sum; and (ii) the Board of Directors of the
Company (excluding any director who is an officer
of the Company) may direct, by unanimous vote of
the eligible directors and in its sole and
absolute discretion, than an Account payable to a
Participant who is an officer of the Company shall
be paid in the form of a lump sum. Any Accounts
paid in installments shall, from and after the
Benefit Commencement Date, be credited with
interest in accordance with the provisions of
Section 6.02(b) hereof.
11.03 COMPANY RESPONSIBILITY. Any payment due to Participants under
this Plan and not paid through the Trust, if any, will be
payable from the general assets of the Company or the
Affiliates.
ARTICLE XII
NATURE OF PLAN; FUNDING
12.01 NO TRUST REQUIRED
The adoption of this Plan and any setting aside of amounts by
the Employer with which to discharge its obligations hereunder
shall not be deemed to create a trust; legal and equitable
title to any funds so set aside shall remain in the Employer,
and any recipient of benefits hereunder shall have no security
or other interest in such funds. Any and all funds so set
aside shall remain subject to the claims of the general
creditors of the Employer. Any Trust provisions shall conform
to the terms of the model trust described in Revenue Procedure
92-64, 1992-33 I.R.B. 11, as amended. This provision shall not
require the Employer to set aside any funds, but the Employer
may set aside such funds if it chooses to do so.
12.02 FUNDING OF OBLIGATION
Section 12.01 above to the contrary notwithstanding, the
Employer may elect to transfer assets to the Trust, the
provisions of which may require the use of the Trust's assets
to satisfy claims of an Employer's general unsecured creditors
in the event of such Employer's insolvency and direct that no
Participant shall at any time have a prior claim to such
assets. The assets of the Trust shall not be deemed to be
assets of this Plan.
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<PAGE>
ARTICLE XIII
ADMINISTRATION
13.01 APPOINTMENT OF COMMITTEE
The Board of Directors of the Company shall appoint a Plan
Committee to administer, construe and interpret the Plan. Such
Committee, or such successor Committee as may be duly
appointed by the President of the Company, shall serve at the
pleasure of the President of the Company. All usual and
reasonable expenses of the Committee shall be paid by the
Employer. Decisions of the Committee with respect to any
matter involving the Plan shall be final and binding on the
Company, its shareholders, each Employer and all Participants,
former Participants, and Beneficiaries. For purposes of ERISA,
the Committee shall be the Plan "administrator" with respect
to the general administration of the Plan.
13.02 DUTIES OF COMMITTEE; CHAIRMAN AND SECRETARY
The Committee shall maintain complete and adequate records
pertaining to the Plan, including but not limited to
Participants' accounts, amounts transferred to the Trust, and
all other records which shall be necessary or desirable in the
proper administration of the Plan. The Committee shall choose
from its members a Chairman and may appoint a Secretary to
keep such records as may be necessary of the acts and
resolutions of the Committee, and the Secretary so appointed
may, but need not, be a member of the Committee. The Secretary
may perform any and all purely ministerial acts which may be
delegated to him in writing by the Committee. The Committee
may employ such persons or appoint such agents to assist it in
the performance of its duties as it may deem appropriate.
13.03 MEETINGS
Except as otherwise specifically provided for herein, any and
all acts and decisions of the Committee shall be by a majority
of the members. Any action which might be taken at a meeting
of the Committee may be taken without a meeting if authorized
by a writing or writings signed by all of the members of the
Committee, and such action will be effective on the date on
which the last signature is placed an such writing or
writings, or such earlier or later effective date as is set
forth in the writing or writings. The Committee may delegate
to each or any one of its members or to its Secretary
authority to sign any documents on its behalf, or to perform
ministerial acts, but no person to whom such authority is
delegated shall perform any act involving the exercise of any
discretion even though he alone may sign any document required
by third parties.
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<PAGE>
13.04 INDEMNIFICATION OF COMMITTEE
The Company (the "Indemnifying Party") hereby agrees to
indemnify and hold harmless the members of the Committee and
the Secretary, if any (the "Indemnified Parties") against any
losses, claims, damages or liabilities to which any of the
Indemnified Parties may become subject to the extent that such
losses, claims, damages or liabilities or actions in respect
thereof arise out of or are based upon any act or omission of
the Indemnified Party in connection with the administration of
this Plan (other than any act or omission of such Indemnified
Party constituting gross negligence or wilful misconduct), and
will reimburse the Indemnified Party for any legal or other
expenses reasonably incurred by him or her in connection with
investigating or defending against any such loss, claim,
damage, liability or action. Promptly after receipt by the
Indemnified Party of notice of the commencement of any action
or proceeding with respect to any loss, claim, damage or
liability against which the Indemnified Party believes he or
she is indemnified, the Indemnified Party shall, if a claim
with respect thereto is to be made against the Indemnifying
Party, notify the Indemnifying Party in writing of the
commencement thereof; provided, however, that the omission so
to notify the Indemnifying Party shall not relieve it from any
liability which it may have to the Indemnified Party to the
extent the Indemnifying Party is not prejudiced by such
omission. If any such action or proceeding shall be brought
against the Indemnified Party, and it shall notify the
Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to participate therein,
and, to the extent that it shall wish, to assume the defense
thereof, with counsel reasonably satisfactory to the
Indemnified Party, and, after notice from the Indemnifying
Party to the Indemnified Party of its election to assume the
defense thereof, the Indemnifying Party shall not be liable to
such Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection
with the defense thereof other than reasonable costs of
investigation or reasonable expenses of actions taken at the
written request of the Indemnifying Party. The Indemnifying
Party shall not be liable for any compromise or settlement of
any such action or proceeding effected without its consent,
which consent will not be unreasonably withheld.
13.05 UNCLAIMED BENEFITS
During the time when a benefit hereunder is payable to any
Participant or Beneficiary, the Committee may, at its own
instance, mail by registered or certified mail to such
Participant or Beneficiary, at his last known address, a
written demand for his then address, or for satisfactory
evidence of his continued life, or both. If such information
is not furnished to the Committee within twelve (12) months
from the mailing of such demand, then the Committee may, in
its sole discretion, declare such benefit, or any unpaid
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<PAGE>
portion thereof, suspended, with the result that such
unclaimed benefit shall be treated as a forfeiture for the
Year within which such twelve (12) month period ends, but
shall be subject to restoration through an Employer credit to
its bookkeeping records of the Participant's Accounts if the
lost Participant or Beneficiary later files a claim for such
benefit.
ARTICLE XIV
MISCELLANEOUS
14.01 NONGUARANTEE OF EMPLOYMENT
Nothing contained in this Plan shall be construed as a
contract of employment between the Employer and any Employee,
or as a right of any Employee to be continued in the
employment of the Employer, or as a limitation on the right of
the Employer to discharge any of its Employees, with or
without cause.
14.02 NONALIENATION OF BENEFITS
Benefits payable under this Plan shall not be subject in any
manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment,
execution, or levy of any kind, either voluntary or
involuntary, prior to actually being received by the person
entitled to the benefit under the terms of the Plan; and any
attempt to anticipate, alienate, sell, transfer, assign,
pledge, encumber, charge or otherwise dispose of any right to
benefits payable hereunder shall be void.
14.03 NO PREFERENCE
No Participant shall have any preference over the general
creditors of an Employer in the event of such Employer's
insolvency.
14.04 INCOMPETENCE OF RECIPIENT
If the Committee receives evidence satisfactory to it that any
person entitled to receive a payment hereunder is, at the time
the benefit is payable, physically, mentally or legally
incompetent to receive such payment and to give a valid
receipt therefor, and that an individual or institution is
then maintaining or has custody of such person and that no
guardian, committee or other representative of the estate of
such person has been duly appointed, the Committee may direct
that such payment thereof be paid to such individual or
institution maintaining or having custody of such person, and
the receipt of such individual or institution shall be valid
and a complete discharge for the payment of such benefit.
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<PAGE>
14.05 TEXAS LAW TO APPLY
THIS PLAN SHALL BE CONSTRUED AND ENFORCED UNDER THE LAWS OF
THE STATE OF TEXAS EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL
LAW.
ARTICLE XV
AMENDMENTS OR TERMINATION OF PLAN
The Company, by action of its Board of Directors, or by action of a
person so authorized by resolution of the Board of Directors, shall have the
power and right from time to time to modify, amend, supplement, suspend or
terminate the Plan, provided that no such change in the Plan may deprive a
Participant of the amounts allocated to his or her accounts or be retroactive
in effect to the prejudice of any participant.
IN TESTIMONY WHEREOF, TGI FRIDAY'S INC. has caused this instrument to
be executed in its name and on its behalf, by the officer thereunto duly
authorized, this 30th day of December, 1994, effective as of January 1, 1995.
TGI FRIDAY'S INC.
By:/s/ Daniel T. Cronk
----------------------------------
Title: Vice President
-------------------------------
ATTEST:
/s/ Sue Elliott
- ---------------------------------
-23-
<PAGE>
AMENDMENT NO. 1
TO THE
TGI FRIDAY'S INC. DEFERRED COMPENSATION PLAN
WHEREAS, TGI Friday's Inc. (the "Company") maintains the TGI
Friday's Inc. Deferred Compensation Plan, effective as of January 1, 1995
(the "Plan"), for the benefit of a select group of management or highly
compensated employees; and
WHEREAS, pursuant to Article XV of the Plan permitting the Company
to amend the Plan from time to time, the Company desires to amend the Plan in
certain respects, as hereinafter provided;
NOW, THEREFORE, the Plan is hereby amended as follows, effective
January 1, 1998, unless otherwise provided herein:
1. Section 2.01 of the Plan is hereby amended by inserting the
following Section 2.01(s), and renumbering the balance of the subparagraphs
in Section 2.01. Section 2.01(s) shall be and read as follows:
(s) INTEREST: Interest at an annual rate of 8%,
compounded quarterly, provided, however, that said
annual rate may be reset from time to time by the
Committee. If the Committee resets interest to a rate
less than 8%, any Participant whose Severance from
Service occurs prior to the date of the change and
any Participant who is a Key Employee age 60 or over
on the date of change may elect to retain the 8% rate
until all of his or her benefits under the Plan have
been paid in full.
2. Section 2.01 of the Plan is hereby amended by inserting the
following Section 2.01(u), and renumbering the balance of the subparagraphs
in Section 2.01. Section 2.01(u) shall be and read as follows:
(u) LTIP: The Carlson 2000 Long Term Incentive Plan, as
amended from time to time.
3. Section 4.01 of the Plan is hereby amended by inserting
Section 4.01(c), to be and read as follows:
<PAGE>
(c) LTIP DEFERRALS -- The LTIP provides that certain
amounts derived from conversion of a Participant's
LTIP Units to a fixed dollar amount will be
transferred to the Participant's Account under this
Plan. Such amounts will be credited to an account for
the Participant identified as Account B.
4. Section 6.01 of the Plan is amended by deleting the third
sentence thereof, and substituting the following sentence:
When appropriate, a Participant shall have three separate
accounts, an Employer Contribution Account, a Savings
Contribution Account, and an Account B (consisting of LTIP
deferrals as described in Section 4.01(c) of the Plan).
5. Section 6.02 of the Plan is amended by deleting the first
sentence thereof, and substituting the following:
Amounts credited to a Participant's Account B will earn
Interest from the day such amounts are credited to the Account
B. If the Participant becomes eligible for installment
payments under the Plan, Interest will continue to be credited
on the unpaid balance in Account B not yet distributed. With
respect to the Employer Contribution Account and the Savings
Contribution Account, the Committee shall designate a
selection of investment funds in which each Participant's
bookkeeping account may be deemed to be invested under the
Plan.
6. In order to correct a scrivener's error in the Plan, and to
conform the Plan to reflect the Committee's administrative policies, [and
effective for all Participants whose termination of employment occurred prior to
January 1, 1997, or after June 1, 1997,] Section 6.02(b) of the Plan is deleted,
and the following is substituted in lieu thereof:
(b) After a Participant's Severance from Service, the
Participant's Employer Contribution Account and
Savings Contribution Account shall, regardless of any
investment directions made by the Participant, be
deemed invested in a money market type of investment
fund selected by the Committee.]
7. Section 6.03 of the Plan is amended by adding the following
Section 6.03(d):
(d) ACCOUNT B--As frequently as daily, the Interest
allocable to Account B shall, as a bookkeeping entry,
be allocated and credited to Account B for
Participants, Former Participants and Beneficiaries
who had balance in their Account B on such date.
-2-
<PAGE>
8. Section 7.02 of the Plan is amended by deleting the first
sentence thereof, and substituting the following:
If a Participant's or former Participant's termination of
employment is for any reason other than Retirement, death or
Disability, such Participant or former Participant, or his
Beneficiary, as the case may be, shall be vested in and
entitled to his entire Savings Contribution Account and
Account B, and his "vested percentage" at the date of the
Severance from Service of the total amount credited to his
Employer Contribution Account.
9. Section 11.02 of the Plan is amended by adding the
following at the end thereof:
If the Participant also is entitled to a benefit under Section
8(d) of the LTIP, the Participant's benefit under the LTIP
shall be aggregated with the benefit under the Plan for
purposes of applying the $100,000/$250,000 rule. The date as
of which benefit amounts under the LTIP will be measured for
purposes of aggregating them will be as determined by the
Management Compensation Committee under the LTIP. However, if
the Participant elected a different payout schedule under
Section 8(d) of the LTIP, and said election was approved by
the Management Compensation Committee, any benefits payable
under Section 8(d) will be paid as so elected, and the
benefits subject to said election will not be aggregated with
benefits under the Plan for purposes of applying the
$100,000/$250,000 rule.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 1 to
the TGI Friday's Inc. Deferred Compensation Plan to be executed on this 26
day of July, 1999, by its duly authorized officer.
TGI FRIDAY'S INC.
By: /s/ Leslie Sharman
--------------------------------------
Name: Leslie Sharman
------------------------------------
Title: Vice President
-----------------------------------
ATTEST:
/s/ Carol M. Chopp
- ----------------------------------
-3-
<PAGE>
AMENDMENT NO. 2
TO THE
TGI FRIDAY'S INC. DEFERRED COMPENSATION PLAN
WHEREAS, TGI Friday's Inc. (the "Company") maintains the TGI
Friday's Inc. Deferred Compensation Plan, effective as of January 1, 1995
(the "Plan"), for the benefit of a select group of management or highly
compensated employees; and
WHEREAS, pursuant to Article XV of the Plan permitting the Company
to amend the Plan from time to time, the Company desires to amend the Plan in
certain respects, as hereinafter provided;
NOW, THEREFORE, the Plan is hereby amended as follows, effective on
the dates set forth herein:
1. Effective October 1, 1997, Section 2.01 (d) of the Plan is
deleted, and the following Section 2.01 (d) is inserted in lieu thereof:
(d) BONUS: The bonus paid, on either a monthly,
quarterly, or annual basis, by the Company to a Key
Employee.
2. Effective January 1, 1997, Section 2.01(s) of the Plan is
deleted, and the following Section 2.01(s) is inserted in lieu thereof:
(s) KEY EMPLOYEE: (i) Any newly hired Employee whose base
rate of pay and targeted bonus exceed $80,000; (ii)
any Employee whose total wages for the prior Year
exceeded $80,000, and (A) who is a Director or Vice
President of an Employer, or (B) who is designated by
the Plan Committee as eligible to participate in the
Compensation Deferral Plan under Article IV of this
Plan; and (iii) any General Manager.
<PAGE>
3. All references in the Plan to "Salary Deferral Plan" are
amended to refer to "Compensation Deferral Plan."
4. In order to correct a scrivener's error in the Plan, to
conform the Plan to the written summary materials distributed to
Participants, and consistent with the Committee's administrative policies,
Section 3.01 (a) and (b) are deleted, and the following are substituted in
lieu thereof, effective January 1, 1995:
(a) In the case of an individual classified as a Key
Employee prior to the Effective Date, who has
attained age 21 and completed a year of Service, on
the Effective Date, or if he shall not have elected
to participate prior to the Effective Date but elects
to participate within thirty (30) days thereafter,
then on the first Entry Date following the Effective
Date; or
(b) In the case of an individual classified as a Key
Employee on or after the Effective Date, on the first
Entry Date immediately following such individual's
attainment of age 21 and completion of a year of
Service.
5. Effective October 1, 1997, new Section 3.01 (c) is added to
the Plan, as follows:
(c) Effective October 1, 1997, if an individual is
classified as a Key Employee, such individual shall
be eligible to participate on the first Entry Date
following such classification.
6. Effective October 1, 1997, Section 3.03 is deleted, and the
following Section 3.03 is inserted in lieu thereof:
3.03 ELECTION TO PARTICIPATE
Each Plan Year a Key Employee otherwise eligible to
participate pursuant to Section 3.01, must, after having
received a written explanation of the terms of, and the
benefits provided under, the Plan, elect to participate in
such Plan on such form or forms as the Committee may provide
and must execute a salary reduction agreement and/or a bonus
reduction agreement described in Section 4.02 and 5.02 hereof.
Such election to participate and execution of a salary
-2-
<PAGE>
and/or bonus reduction agreement shall be effected by a
newly eligible Participant, no later than thirty (30) days
following his becoming eligible to participate in the Plan,
and by all other Participants:
(a) SALARY REDUCTION. With respect to elections
to defer salary earned during a calendar
year, on or prior to November 15 of the
calendar year preceding such year.
(b) BONUS REDUCTION. With respect to elections
to defer bonuses, on or prior to November 15
of the calendar year preceding the year in
which such bonuses are paid (or would be
paid absent the deferral election).
7. Effective October 1, 1997, Sections 4.01 and 4.02 of the
Plan are deleted, and the following Sections 4.01 and 4.02 are inserted in
lieu thereof:
ARTICLE IV
COMPENSATION DEFERRAL PLAN
4.01. EMPLOYER CONTRIBUTIONS
The Employer shall credit Key Employee accounts in
accordance with the following:
(a) SAVINGS CONTRIBUTION -- For each Year, each
Employer shall credit the Savings
Contribution Account of each of its Key
Employees participating in the Compensation
Deferral Plan with an amount agreed to be
credited by such Employer pursuant to a
salary and/or bonus reduction agreement
under Section 4.02 entered into between the
Employer and the Key Employee for such Year.
(b) MATCHING CONTRIBUTION -- For each Year, each
Employer shall credit a Matching Employer
Contribution equal to twenty-five percent
(25%) of each Key Employees' Savings
Contributions (but not to exceed a Savings
Contribution equal to 10% of base salary
reduced by the maximum permitted salary
reduction for the year under the FYI Plan).
The Key Employees' Savings Contributions up
to a maximum of ten percent (10%) of their
base salary (less the maximum permitted
salary reduction for the year under the FYI
Plan) shall be eligible for a Matching
Contribution.
-3-
<PAGE>
(c) ADDITIONAL MATCHING CONTRIBUTION -- In
addition, for each Year, each Employer may
credit an additional Matching Employer
Contribution in such amount as the officers
of the Company shall determine and authorize
to each of its Key Employees who are
employed on the last day of the Plan year,
and have at least 1,000 Hours of Employment
during such Plan year. The Key Employees'
Savings Contributions up to a maximum of ten
percent (10%) of their base salary (less the
maximum permitted salary reduction for the
year under the FYI Plan) shall be eligible
for an additional Matching Contribution.
4.02 KEY EMPLOYEE SALARY AND/OR BONUS REDUCTION
Prior to commencement of Participation hereunder, a
Key Employee shall have entered into a written salary
and/or bonus reduction agreement with his Employer.
The terms of such agreement shall provide that the
Participant agrees to accept a reduction in his base
salary and/or bonus from the Employer equal to any
whole percentage. The combined percentage reduction
in salary in both the FYI Plan and this Plan cannot
exceed twenty-five percent (25%) of salary. There is
no upper limit on the percentage of bonus which may
be deferred. In any event, in order to participate in
the Plan, the Participant must first have elected to
contribute the maximum permitted salary reduction for
the Year to his savings contribution account under
the FYI Plan. In consideration of such agreement, the
Employer will credit the Key Employee's Savings
Contribution Account for each Year with an amount
equal to the total amount by which the Key Employee's
salary and/or bonus from the Employer was reduced
during the Year pursuant to the agreement.
Salary and/or bonus reduction agreements shall remain
in effect until terminated or amended by the
Participant in accordance with the procedures set
forth herein. Any amendment or termination of an
agreement shall not be effective until January 1
following the year in which an election so to amend
or terminate is executed by the Participant, provided
that such election is made on or prior to November
15. If a Participant terminates his agreement as
hereinabove provided, then he may elect to enter into
another agreement to be effective as of January 1
following his execution of a new agreement provided
that such election is made on or prior to November
15.
-4-
<PAGE>
8. In order to correct a scrivener's error in the Plan, and to
conform the Plan to reflect the Committee's administrative policies, Section
6.02(b) of the Plan is deleted, and the following is substituted in lieu
thereof, effective January 1, 1995:
(b) After a Participant's Severance from Service, the
Participant's Employer Contribution Account and
Savings Contribution Account shall, regardless of
any investment directions made by the Participant,
be deemed invested in a money market type of
investment fund selected by the Committee. This
Section 6.02(b) shall be applicable to distributions
attributable to Severance from Service occurring on
or prior to March 31, 1997.
9. Effective April 1, 1997, Section 6.02(b) of the Plan is
deleted, and the first sentence of Section 7.05 is deleted. The following
first sentence is inserted in Section 7.05:
For purposes of Sections 7.01 and 7.02, the amount credited to
the Account of a Participant on the books of the Company shall
be determined by the Committee as of the last day of the month
preceding the month in which the benefit payment is made.
10. Effective April 1, 1997, the first sentence of Section
11.01 is deleted, and the following is inserted in lieu thereof:
When a Participant, Former Participant or Beneficiary is
entitled to receive a payment under Section 7.01 or 7.02, such
benefit payment will be made (or will commence to be made) as
soon as practicable following death, Disability, Retirement or
other Severance from Service, but not later than ninety (90)
days following the last day of the month in which death,
Disability, Retirement, or other Severance from Service
occurred.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Amendment No. 2 to
the TGI Friday's Inc. Deferred Compensation Plan to be executed on this 24
day of September, 1997, by its duly authorized officer.
TGI FRIDAY'S INC.
By: /s/ Leslie Sharman
-------------------------------------
Name: Leslie Sharman
----------------------------------
Title: Vice President
---------------------------------
ATTEST:
/s/ Joel S. Reed
- ---------------------------------------
-6-
<PAGE>
DEFERRED COMPENSATION AGREEMENT
This Agreement is made as of the First day of August, 1995, between T.G.I.
Friday's Inc. (the "Company") and Walter Doolin (the "Employee").
WHEREAS, the Company values the efforts, abilities, and accomplishments of
the Employee as an important member of management and recognizes that the
Employee's future services are vital to its continued growth and profitability;
and
WHEREAS, the Company, in order to retain the services of the Employee, has
agreed to pay the Employee deferred compensation in accordance with this
Agreement.
NOW, THEREFORE, it is mutually agreed that:
1. DEFINITIONS. The following definitions apply for purposes of
this Agreement:
(a) "Beneficiary" means the person or persons eligible to receive any
death benefits payable under this Agreement, determined as follows:
(1) Unless another Beneficiary is designated as provided in paragraph
(2), if the Employee is married at the time of his death, his
Beneficiary is his surviving spouse, and if the Employee is not
married at the time of his death, his Beneficiary is his estate.
(2) However, the Employee may designate a different Beneficiary by
means of a separate written designation filed with the Company.
The Employee may alter or revoke said designation at any time
without the consent of the Beneficiary. Such designations are
not subject to consent by the Employee's spouse. If no
Beneficiary designated under this paragraph (2) survives the
Employee, the Beneficiary will be determined under paragraph (1).
(3) If a Beneficiary (whether determined under paragraph (1) or
designated under paragraph (2)) survives the Employee but dies
before payment of the amount to which the Beneficiary is
entitled, said amount will be paid to the Beneficiary's estate.
(b) "Certified Earnings" means the Employee's total base salary from the
Company before any reduction pursuant to this Agreement or pursuant to
a plan meeting the requirements of Sections 125 or 401(k) of the
Internal Revenue Code.
(c) "Deferred Compensation Account" or "Account" means the Account
established pursuant to section 2 of this Agreement.
<PAGE>
2. DEFERRED COMPENSATION ACCOUNT AND EARNINGS. The Company will
maintain a Deferred Compensation Account for the Employee on the books of the
Company. Amounts credited to the Account will earn interest at the rate of 8%
per annum compounded quarterly. Interest will be earned from the day such
amounts are credited to the Account. Interest earned will be credited to the
Account at the end of each calendar quarter. If the Employee becomes eligible
for installment payments under this Agreement, interest will continue to be
credited on the unpaid balance not yet distributed.
3. AMOUNTS CREDITED BY COMPANY. For each payroll period beginning
on or after August 1, 1995, the Company will credit to the Account an amount
equal to 10% of the Employee's Certified Earnings for such payroll period.
4. ADDITIONAL DEFERRAL OPPORTUNITIES.
(a) SALARY. The Employee agrees that his regular monthly salary for each
month beginning after the date of execution of this Agreement shall be
reduced by ____%, but not more than 25%. (Said percentage may be
modified by executing an Addendum to this Agreement.) For each
payroll period the Company will credit to the Account an amount equal
to the amount of said reduction.
(b) BONUS. The Employee agrees that his annual bonus, if any, with
respect to 1995 and each year thereafter shall be reduced by ___%.
(Said percentage may be modified by executing an Addendum to this
Agreement.) On or about the date the amount of said reduction would
otherwise be paid to the Employee, the Company will credit said amount
to the Account.
5. PAYMENT OF BENEFITS. Upon the termination of the Employee's
employment, the Company will pay the Employee (or pay the Employee's
Beneficiary, if the termination of employment was due to the Employee's death)
the total amount credited to his Account. Benefits will be paid as follows:
(a) If the aggregate balance in the Account, determined as of the date the
Employee terminates employment, is less than $100,000, his benefit
will be paid in a single sum not later than 90 days after the date of
his termination of employment.
(b) If the aggregate balance in the Account, determined as of the date the
Employee terminates employment, is $100,000 but less than $500,000,
his benefit will be paid in five annual installments, with the first
installment paid 90 days after termination of employment and the
remaining installments paid at one year intervals thereafter.
(c) If the aggregate balance in the Account, determined as of the date the
Employee terminates employment, is $500,000 or more, his benefit will
be paid in ten annual installments, with the first installment paid 90
days after
2
<PAGE>
termination of employment and the remaining installments paid at one
year intervals thereafter.
(d) The amount of each installment under (b) or (c) will be the Account
balance immediately before the installment, divided by the number of
remaining installments (including the current installment).
(e) If the Employee's termination of employment is due to his death, or if
he dies after termination of employment but before payment of all
amounts to which he is entitled hereunder, the Company will pay to the
Employee's Beneficiary the amounts remaining in the Employee's
Accounts at the time of his death. Said amount will be paid to the
Beneficiary in a single sum not more than six months after the
Employee's death.
6. MISCELLANEOUS PROVISIONS.
(a) Neither the Employee nor the Employee's Beneficiary shall have any
right to assign, pledge, transfer or otherwise hypothecate this
Agreement or the payments hereunder, in whole or in part. Benefits
under this Agreement will not be subject to execution, attachment, or
similar process.
(b) This Agreement constitutes the Company's unconditional promise to pay
the amounts which become payable pursuant to the terms hereof. The
Employee's rights are solely those of an unsecured wage creditor.
This Agreement does not give the Employee a security interest in any
specific assets of the Company. Accounts are for purposes of
determining the amounts the Company is required to pay. Accounts do
not require any segregation of assets.
(c) The parties agree that any dispute regarding the Employee's benefits
hereunder will be resolved using mediation/arbitration proceedings
similar to those used to resolve disputes under the Carlson 2000 Long
Term Incentive Plan as in effect from time to time.
(d) This Agreement shall not be construed as a contract of employment and
does not restrict the right of the Company to discharge the Employee
or the right of the Employee to terminate employment.
(e) This Agreement may not be altered, amended or revoked except by a
written statement signed by the Company and the Employee (or by the
Beneficiary if the Employee is no longer living).
(f) The provisions of this Agreement shall be construed and enforced
according to the laws of Minnesota.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement.
COMPANY
Date Signed: 10/16/95 By /s/ Sue Elliott
-------------------------- -------------------------------
Its VP, Human Resources
Date Signed: 10/1/95 /s/ Wallace B. Doolin
-------------------------- ---------------------------------
Employee
4
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF CARLSON RESTAURANTS WORLDWIDE INC.
Registrant has the following direct and indirect subsidiaries that operate
full-service restaurants in various locations throughout the United States and
internationally under the names T.G.I. Friday's, Front Row Sports Grill,
Friday's American Bar, Italianni's, Timpano Italian Chophouse, Star Canyon,
AquaKnox, Samba Room, a Cuban Bar and Latin Cafe, and Taqueria Canonita.
BFP Corporation, a Pennsylvania corporation
Brand X Concepts, Inc., a Texas corporation
Continental Hackensack, Inc., a New Jersey corporation
Eatontown Equity, Inc., a New Jersey corporation
Fast Friday's Inc., an Oklahoma corporation
FD Holdings Inc., a Delaware corporation
Friday's - Netherlands B.V., a Netherlands corporation
Georgia Holdings Inc., a Texas corporation
L.B.D. Corporation, a Texas corporation
Star Concepts, Inc., a Texas corporation
Star Concepts of Nevada, Inc., a Nevada corporation
TGIF Greater China Limited, a China corporation
TGIF Holdings, Inc., a Texas corporation
T.G.I. Friday Limited, a London corporation
TGI Fridays Inc., a New York corporation
TGI Friday's Japan, Inc., a Japan corporation
TGI Friday's Limited, a Hong Kong corporation
TGI Fridays of Annapolis, Inc., a Maryland corporation
TGI Fridays of Greenbelt, Inc., a Maryland corporation
TGI Fridays of Howard County, Inc., a Maryland corporation
TGI Fridays of Minnesota, Inc., a Minnesota corporation
TGI Fridays of Rockville, Inc., a Maryland corporation
TGI Fridays of Towson, Inc., a Maryland corporation
T.G.I. Friday's of Vermont, Inc., a Vermont corporation
TGI Fridays of Wisconsin, Inc., a Wisconsin corporation
TGI Fridays Management Company, Inc., a Texas corporation
T.G.I. Friday's National Marketing Association, a Texas corporation
Wayne Towne Restaurant, Inc., a New Jersey corporation
Webco Products Incorporated, a New Jersey corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this registration statement.
ARTHUR ANDERSEN LLP
Dallas, Texas,
August 19, 1999
<PAGE>
EXHIBIT 24
CARLSON RESTAURANTS WORLDWIDE INC.
Power of Attorney
of Director and/or Officer
The undersigned director and/or officer of Carlson Restaurants Worldwide
Inc., a Delaware corporation, does hereby make, constitute and appoint Jeff D.
Warne and Leslie Sharman, and either of them, the undersigned's true and lawful
attorneys-in-fact, with power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
such director and/or officer of said Company to a Registration Statement or
Registration Statements, on Form S-1 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of shares of Class A Common Stock of said Company to be issued pursuant to a
public offering, and to file the same, with all exhibits thereto and other
supporting documents, with said Commission, granting unto said
attorneys-in-fact, and either of them, full power and authority to do and
perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 16th day of August, 1999.
/s/ Wallace B. Doolin
-------------------------------
Wallace B. Doolin
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC.
Power of Attorney
of Director and/or Officer
The undersigned director and/or officer of Carlson Restaurants Worldwide
Inc., a Delaware corporation, does hereby make, constitute and appoint Wallace
B. Doolin, Jeff D. Warne and Leslie Sharman, and any of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign and affix
the undersigned's name as such director and/or officer of said Company to a
Registration Statement on Form S-1 to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C., in connection with the
registration under the Securities Act of 1933, as amended, of shares of Class A
Common Stock of said Company to be issued pursuant to a public offering, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and any of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 18th day of August, 1999.
/s/ Curtis C. Nelson
-------------------------------
Curtis C. Nelson
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC.
Power of Attorney
of Director and/or Officer
The undersigned director and/or officer of Carlson Restaurants Worldwide
Inc., a Delaware corporation, does hereby make, constitute and appoint Wallace
B. Doolin, Jeff D. Warne and Leslie Sharman, and any of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign and affix
the undersigned's name as such director and/or officer of said Company to a
Registration Statement or Registration Statements, on Form S-1 or other
applicable form, and all amendments, including post-effective amendments,
thereto, to be filed by said Company with the Securities and Exchange
Commission, Washington, D.C., in connection with the registration under the
Securities Act of 1933, as amended, of shares of Class A Common Stock of said
Company to be issued pursuant to a public offering, and to file the same, with
all exhibits thereto and other supporting documents, with said Commission,
granting unto said attorneys-in-fact, and any of them, full power and authority
to do and perform any and all acts necessary or incidental to the performance
and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 18th day of August, 1999.
/s/ Martyn Redgrave
-------------------------------
Martyn Redgrave
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC.
Power of Attorney
of Director and/or Officer
The undersigned director and/or officer of Carlson Restaurants Worldwide
Inc., a Delaware corporation, does hereby make, constitute and appoint Wallace
B. Doolin, Jeff D. Warne and Leslie Sharman, and any of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign and affix
the undersigned's name as such director and/or officer of said Company to a
Registration Statement or Registration Statements, on Form S-1 or other
applicable form, and all amendments, including post-effective amendments,
thereto, to be filed by said Company with the Securities and Exchange
Commission, Washington, D.C., in connection with the registration under the
Securities Act of 1933, as amended, of shares of Class A Common Stock of said
Company to be issued pursuant to a public offering, and to file the same, with
all exhibits thereto and other supporting documents, with said Commission,
granting unto said attorneys-in-fact, and any of them, full power and authority
to do and perform any and all acts necessary or incidental to the performance
and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 18th day of August, 1999.
/s/ Edwin C. Gage
-------------------------------
Edwin C. Gage
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC.
Power of Attorney
of Director and/or Officer
The undersigned director and/or officer of Carlson Restaurants Worldwide
Inc., a Delaware corporation, does hereby make, constitute and appoint Wallace
B. Doolin, Jeff D. Warne and Leslie Sharman, and any of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign and affix
the undersigned's name as such director and/or officer of said Company to a
Registration Statement or Registration Statements, on Form S-1 or other
applicable form, and all amendments, including post-effective amendments,
thereto, to be filed by said Company with the Securities and Exchange
Commission, Washington, D.C., in connection with the registration under the
Securities Act of 1933, as amended, of shares of Class A Common Stock of said
Company to be issued pursuant to a public offering, and to file the same, with
all exhibits thereto and other supporting documents, with said Commission,
granting unto said attorneys-in-fact, and any of them, full power and authority
to do and perform any and all acts necessary or incidental to the performance
and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 18th day of August, 1999.
/s/ Ralph W. Beha
-------------------------------
Ralph W. Beha
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> JUN-28-1998 DEC-28-1998
<PERIOD-START> DEC-29-1998 DEC-30-1997
<PERIOD-END> JUN-28-1999 DEC-28-1998
<CASH> 60,925 50,364
<SECURITIES> 0 0
<RECEIVABLES> 21,109 20,195
<ALLOWANCES> 1,605 1,526
<INVENTORY> 5,978 6,126
<CURRENT-ASSETS> 95,555 84,247
<PP&E> 354,279 330,114
<DEPRECIATION> 161,939 149,323
<TOTAL-ASSETS> 344,841 322,879
<CURRENT-LIABILITIES> 114,224 50,839
<BONDS> 201,665 79,156
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 2,248 166,631
<TOTAL-LIABILITY-AND-EQUITY> 344,841 322,879
<SALES> 316,223 558,216
<TOTAL-REVENUES> 337,446 599,288
<CGS> 91,702 165,221
<TOTAL-COSTS> 181,021 315,513
<OTHER-EXPENSES> 45,373 92,572
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,082 4,216
<INCOME-PRETAX> 16,268 21,766
<INCOME-TAX> 5,691 7,875
<INCOME-CONTINUING> 10,577 13,891
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 10,577 13,891
<EPS-BASIC> 0 0
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