SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended JANUARY 30, 2000
----------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from_________________to________________
Commission File Number 0-8513
------
CHEFS INTERNATIONAL, INC.
-------------------------
[Name of small business issuer in its charter]
DELAWARE 22-2058515
- ------------------------ ---------------
[State or other jurisdiction of [IRS Employer
incorporation or organization] Identification Number]
62 Broadway, P.O. Box 1332
PT. PLEASANT BEACH, NEW JERSEY 08742
- ---------------------------------------- ------
[Address of principal executive offices] [Zip Code]
Issuer's telephone number, including area code (732) 295-0350
--------------
Securities registered pursuant to Section 12(b) of the Act: NONE
----
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
----------------------------
(Title of Class)
Indicate by check mark whether the issuer [1] has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months [or for such shorter period that the issuer was required
to file such reports], and [2] has been subject to such filing requirements for
the past ninety days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10- KSB. [ ]
The issuer's revenues for the year ended January 30, 2000 totalled $17,996,559.
On March 30, 2000, the aggregate market value of the voting stock of the issuer
(consisting of Common Stock, $.01 par value) held by non-affiliates was
approximately $1,820,000 based upon the last sale price for such Common Stock on
said date on the OTC Bulletin Board as reported by the National Quotation
Bureau, Inc. On such date, there were 4,488,162 shares of Common Stock of the
issuer outstanding.
<PAGE>
CHEFS INTERNATIONAL, INC.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) BUSINESS DEVELOPMENT - Chefs International, Inc. ("Chefs" or the
"Company") was organized under the laws of the State of Delaware in March 1975.
The Company currently operates nine restaurants on a year-round basis, seven of
which are free-standing seafood restaurants in New Jersey (four) and Florida
(three); one of which is a Mexican theme restaurant operated under the name
"Garcia's," located in a shopping mall in New Jersey and one of which is a
free-standing restaurant in Freehold, New Jersey, which the Company commenced to
operate in February 2000 under the name "Moore's Tavern and Restaurant." Six of
the seafood restaurants are operated under the name "Lobster Shanty" and one
under the name "Baker's Wharfside." The Company opened its first seafood
restaurant in November 1978 and opened its Garcia's restaurant in April 1996.
(As used herein, the term the "Company" may also at times include Chefs and its
various subsidiaries.)
The Company's executive offices are located at 62 Broadway, Point
Pleasant Beach, New Jersey 08742. Its telephone number is (732) 295-0350.
DEVELOPMENTS SINCE THE BEGINNING OF THE LAST FISCAL YEAR
Change of Accountants
On April 1, 1999, by mutual agreement, the Company and Moore Stephens
P.C. ("Moore Stephens") agreed to the replacement of Moore Stephens as the
Company's independent accountants for the audit of its financial statements for
the fiscal year ended January 31, 1999. The agreement was reached after the
Company was advised by the staff of the Securities and Exchange Commission that
in the staff's opinion, the existence of a relationship between a member of
Moore Stephens and an entity which held a direct or indirect interest in the
Company's securities adversely impacted Moore Stephens' independence with
respect to the Company. The staff further advised that for this reason, the
Company's financial statements for the three years ended January 25, 1998
contained in its annual report on Form 10-K for the year ended January 25, 1998
were considered by the staff to be unaudited. Moore Stephens advised that it
disagreed with the staff's position and believed that it was at all times
independent with respect to the Company's audits. Excluding the above issue, the
staff has not alleged any inaccuracies in the Company's financial statements.
1
<PAGE>
On April 1, 1999, the Company engaged the certified public accounting
firm of Edward Isaacs & Company LLP ("Edward Isaacs LLP") to serve as its
principal independent accounting firm to audit its balance sheet as of January
31, 1999 and the related statements of operations, stockholders' equity, and
cash flows for each of the two fiscal years in the period ended January 31,
1999. Prior to the engagement of Edward Isaacs LLP, the Company did not consult
with such firm on any accounting, auditing or financial reporting issue. Edward
Isaacs LLP continues to serve as the Company's principal independent accounting
firm and has audited the Company's financial statements contained herein
including its balance sheet as of January 30, 2000 and the related statements of
operations, stockholders' equity, and cash flows for each of the two fiscal
years in the period then ended.
Change in Control
On May 20, 1999, certain individuals related to the Lombardi Group,
namely Robert M. Lombardi, Anthony M. Lombardi and Joseph S. Lombardi, purchased
an aggregate 1,722,445 shares of Chefs' Common Stock for an aggregate
$4,306,112.50 or $2.50 per share from Donald F. Conway (the "Trustee"), the
Chapter 11 Trustee for the bankruptcy estate of Robert E. Brennan. The purchase
was made pursuant to a Stock Purchase Agreement dated June 25, 1998, as amended,
and Court Orders dated September 18, 1998 and November 4, 1998 of the United
States Bankruptcy Court for the District of New Jersey. The 1,722,445 shares
were acquired as follows: 1,055,556 shares by Robert M. Lombardi, 66,889 shares
by Anthony M. Lombardi and 600,000 shares by Joseph S. Lombardi. Anthony M.
Lombardi and Joseph S. Lombardi used personal funds to effect their purchases
from the Trustee. Robert M. Lombardi effected his purchases from the Trustee
using his personal funds as well as the proceeds of a $555,555 loan from the
Lombardi & Lombardi, P.A. Defined Benefit Pension Plan and a $416,666 loan from
the Lombardi & Lombardi, P.A. Profit Sharing Plan.
On May 25, 1999, the Company received written notice that an affiliated
group of stockholders (the "Lombardi Group"), owned in excess of 50% of the
issued and outstanding shares of Chefs Common Stock and as a result, owned
voting control of the Company. On said date pursuant to the request of the
Lombardi Group, Robert M. Lombardi was elected a director of the Company. To
create a vacancy for his election, Frank "Doc" Koenemund resigned from the
board. The four "holdover" directors, Anthony C. Papalia, Martin Fletcher, James
Fletcher and Jack Mariucci agreed that as soon as four additional nominees of
the Lombardi Group were identified and were able to serve as directors in
accordance with applicable law, they would take all actions necessary to elect
such nominees as directors and would resign from the board.
On July 7, 1999, Anthony C. Papalia, Martin Fletcher, James Fletcher
and Jack Mariucci resigned as directors and the following
2
<PAGE>
four nominees of the Lombardi Group were elected as directors to fill the
vacancies created by their resignations, namely;
Michael F. Lombardi
Joseph S. Lombardi
Stephen F. Lombardi
Anthony M. Lombardi
In December 1999, Nicholas B. Boxter, Raymond L. Dademo and Kenneth Cubelli were
elected as additional directors. Robert M. Lombardi has been elected as the
Chairman of the Board of Directors. Anthony C. Papalia continues to serve as the
Company's President and Chief Executive Officer.
The Lombardi Group, which controls the Company, is composed
of;
Michael F. Lombardi
Robert M. Lombardi
Joseph S. Lombardi
Anthony M. Lombardi
Stephen F. Lombardi
Lombardi & Lombardi, P.A.
Lombardi & Lombardi, P.A. Defined Benefit Pension Plan; and
December '95 Investment Club
The five individual Lombardis are brothers. Michael F. Lombardi and Stephen F.
Lombardi are each attorneys and senior officers of Lombardi & Lombardi, P.A., a
New Jersey law firm. See Items 9 and 11 herein.
Restaurant Opening
In February 2000, the Company executed a lease with Moore's Realty
Associates, a New Jersey partnership ("Moore's Realty") whose partners are
members of the Lombardi Group and other members of the Lombardi family. The
lease was of premises on West Main Street (Route 537) in Freehold, New Jersey
where an entity affiliated with Moore's Realty, Moore's Inn, Inc. was operating
a restaurant and tavern under the name "Moore's Inn." The Company provided
consulting services to the operators of Moore's Inn for a weekly consulting fee
of $1,800 from January 3, 2000 until February 23, 2000 when it executed the
lease and the purchase agreements hereinafter described.
The Company commenced to operate the facility under the name "Moore's
Tavern and Restaurant" on February 23, 2000 at which time the consulting
agreement was terminated. The lease is for a five- year term through February
22, 2005 and contains provisions for three consecutive five-year renewals at the
Company's option which are automatically effective unless the Company gives
written notice at least six months before the end of the initial term or at
least
3
<PAGE>
six months before the end of the applicable renewal period that it does not
intend that such option be exercised. After 18 months, the Company can terminate
the lease upon six months' written notice provided that during each of the
five-year renewal periods, the Company must provide at least twelve months'
prior written notice to terminate.
The lease is a "net net" lease pursuant to which the Company will pay
real estate taxes, insurance and heating and air conditioning costs. The lease
provides for a minimum annual rental of $90,000 during each year of the initial
five-year term, $100,000 during each year of the first five-year renewal period,
$112,500 during each year of the second five-year renewal period and $125,500
during each year of the third five-year renewal period. In addition to the
minimum annual rental, the Company is also required to pay an amount to Moore's
Realty equal to (i) 6% of the total gross sales of food and beverages etc. at
the facility in each year (excluding taxes and gratuities) (the "gross annual
rental") less (ii) the minimum annual rental for that year. Moore's Realty has
the right to terminate the lease upon twelve months' prior written notice if,
for the preceding year, the gross annual rental did not exceed the minimum
annual rental for that year.
Moore's Realty has agreed not to sell or lease a building ("Building
B") adjacent to the Moore's Inn or the nearby pad site for a proposed building
("Building C") for a period of one year. If during the first year, the Company
enters into an agreement to purchase or lease Building B, Moore's Realty has
agreed not to sell or lease the pad site to anyone other than the Company for an
additional one-year period.
During the lease term, the Company has been granted the exclusive right
to the use of the names "Moore's Inn" and "Moore's Tavern" within the State of
New Jersey. Moore's Realty has agreed not to operate, lease, rent or permit to
be operated as a restaurant or tavern during the lease term, any premises owned,
leased or occupied by it or members of the Lombardi family (not presently
occupied as such), located within ten miles of Moore's Inn. After one year,
Moore's Realty can lease Building B to a non-competing restaurant that offers a
menu line significantly different from that of Moore's Inn and that does not
serve alcoholic beverages.
In connection with the lease, the Company purchased a New Jersey liquor
license from Moore's Inn, Inc. for $350,000 and agreed to sell the license back
to the Seller or to Moore's Realty at the termination of the lease for the same
$350,000. In addition, the Company purchased existing furniture, fixtures and
equipment at Moore's Inn from Moore's Inn, Inc. for $250,000 agreeing to leave
all of the furniture, fixtures and equipment at the premises "...in good working
condition, reasonable wear and tear excepted..." upon termination of the lease.
4
<PAGE>
The lease of the Moore's Inn and the purchase of the liquor license and
the furniture, fixtures and equipment cannot be deemed "arm's length"
transactions due to the interest of the Lombardi Group and other members of the
Lombardi family. The transactions were negotiated for the Company by Anthony C.
Papalia, its president and chief executive officer. In negotiating the
transactions, Mr. Papalia took into account his experience in similar restaurant
leases, the prices at which liquor licenses were sold in neighboring areas
(finding such prices to be comparable to the liquor license purchase price paid
by the Company) and the condition of the furniture, fixtures and equipment. The
bulk of the furniture, fixtures and equipment had been purchased by the Seller
during the twelve months ended June 30, 1999 at a price of $621,893. Mr. Papalia
and the non-interested directors concluded that the terms of the transaction
were fair and in the best interests of the Company.
Bank Loans
At January 31, 1999, the Company's principal bank financing was
provided pursuant to two term loans, one originally in the amount of $1,000,000
("Term Loan A") and the other, originally in the amount of $525,000 ("Term Loan
B") from First Union National Bank ("First Union") as well as a $500,000
revolving line of credit ("L/C line") from First Union. At said date,
approximately $400,000 was outstanding under Term Loan A, payable in
installments of principal with interest at an annual rate of 7.51% through
November 2000; approximately $420,000 was outstanding under Term Loan B payable
in monthly installments of principal with interest at an annual rate of 9 1/4%
through December 2002 and approximately $225,000 was outstanding under the L/C
line, due June 30, 1999. Term Loan A and the L/C line were secured by first
mortgages on the Company's two Point Pleasant Beach, New Jersey seafood
restaurants and Term Loan B was secured by a first mortgage on the Toms River,
New Jersey seafood restaurant.
During fiscal 2000, the Company reduced the outstanding principal
balance of Term Loan A to approximately $200,000 and reduced the outstanding
principal balance of Term Loan B to approximately $315,000. At June 30, 1999,
the L/C line was renewed for the sixth consecutive year for an additional one
year term repayable with interest at LIBOR plus 2 1/4%. There were no
outstanding borrowings under the L/C line at January 30, 2000.
In May 1998, the Company borrowed $124,000 from First Union to
partially fund the purchase of property adjoining its Toms River, New Jersey
seafood restaurant. The loan is repayable in monthly installments of principal
with interest at LIBOR plus 2 1/4% through May 2003 and is secured by a first
mortgage on the property. At January 30, 2000, approximately $83,000 was
outstanding under this loan.
5
<PAGE>
In October 1998, the Company borrowed $880,000 from First Union to fund
the $1,100,000 purchase of its Vero Beach, Florida seafood restaurant. This loan
is repayable in monthly installments of $8,319 comprised of principal and
interest at an annual rate of 7.82% through November 2008 and is secured by a
first mortgage on the Vero Beach property. At January 30, 2000, approximately
$845,000 was outstanding under this loan (which provides for a $431,429
"balloon" payment in November 2008).
Repayment of the Company's term loans and of borrowings under its line
of credit is guaranteed by each of the Company's subsidiaries.
Pursuant to its principal Loan Agreements, the Company has made certain
affirmative and negative covenants to First Union. The covenants contained in
the prior loan agreements were superseded by the covenants contained in the Vero
Beach Loan Agreement. Included in the Vero Beach Loan Agreement are covenants
not to pay dividends, effect stock redemptions, sell or issue shares of its
stock, make a material change of ownership that changes control of the Company
or its management structure, create certain liens or encumbrances, enter into
sale-leaseback transactions, sell assets not in the ordinary course of business,
merge with or acquire another entity, or enter into certain other transactions
without First Union's written consent, and to maintain on a consolidated basis,
tangible net worth of at least $11,650,000 increasing by $50,000 at each
subsequent fiscal year-end commencing with fiscal 1999; a debt to Tangible Net
Worth ratio of no greater than .50:1.00; a net income, depreciation and
amortization less Maintenance Capital Expenditures (defined as those
expenditures required on an annual basis to maintain existing restaurant
locations) to the current portion of long term debt and capital leases ratio of
not less than 1.20:1.0; and cash and cash equivalents of not less than $750,000.
A failure by the Company to satisfy any such covenant would constitute an event
of default under the Loan Agreement enabling First Union to accelerate payment
of all outstanding indebtedness. The Company was in compliance with all
applicable covenants under its Loan Agreements at January 31, 1999 and at
January 31, 2000.
Mister Cookie Face Notes
At January 31, 1999 in connection with its February 1997 sale of 95% of
the common stock of its Mister Cookie Face ("MCF") ice cream production
subsidiary for $1,600,000 to a then director, Frank "Doc" Koenemund, the Company
held two MCF promissory notes, each originally in the principal amount of
$500,000. The first note ("Note X") was payable in monthly principal amounts,
commencing March 1, 1998 through July 2000 of $16,667 or $33,333 in each month
other than the months of January, February and December, together with interest
at the rate of 9-1/4% per annum. The second note ("Note Y") was payable together
with interest at an annual rate of
6
<PAGE>
8-1/4% on or before February 20, 2004 but is mandatorily prepayable quarterly
from 30% of MCF's cash flow (if any). Both Note X and Note Y were secured by a
first lien on all of MCF's assets; however the Company agreed to subordinate its
lien to any liens granted by MCF to its senior lending bank or institutional
lenders up to a maximum of $1,750,000. During fiscal 1999, the Company
subordinated its lien to the lien of MCF's lending bank with respect to a
$450,000 working capital loan extended to MCF.
During fiscal 1999, MCF requested a restructuring of the repayment
terms of Note X and Note Y citing cash shortages. Subsequently, MCF informed the
Company that it met the cash flow criteria of Note Y during the second quarter
of fiscal 2000 requiring an interest payment of $41,834 but did not pay the
amount and continued to request a restructuring. The Company has agreed to
accept monthly payments from MCF from November 1999 through July 2000
aggregating $131,834 and apply $90,000 of the payments to repayment of principal
and interest under Note X with the balance to payment of the overdue interest on
Note Y, and is willing to explore a meaningful restructuring of the indebtedness
as of July 31, 2000 assuming MCF is then in a position to significantly reduce
the total indebtedness.
Based upon the estimated present value of the payments due under Note X
and Note Y, the Company initially recorded a valuation allowance of $601,050
with respect to these notes. Cash receipts for these notes are applied to
principal and interest based on the discounted note payment schedules, which
resulted in an additional $26,548 and $40,000 of interest income being
recognized in fiscal 2000 and fiscal 1999, respectively. At January 30, 2000, an
aggregate $248,070 of principal was outstanding under Note X (as compared to
$341,554 at January 31, 1999) and the entire $500,000 principal amount continued
to be outstanding under Note Y. See Note 5 of Notes to Financial Statements.
(b) BUSINESS OF ISSUER - The Company is engaged in one business; the
operation of nine restaurants in New Jersey and Florida on a year-round basis.
RESTAURANT OPERATIONS
The Company is principally engaged in the operation of nine restaurants
on a year-round basis, seven of which are free-standing seafood restaurants in
New Jersey (four) and Florida (three); one of which is a Mexican theme
restaurant operated under the name "Garcia's," located in a shopping mall in New
Jersey and one of which is a free-standing restaurant in Freehold, New Jersey,
which the Company commenced to operate in February 2000 under the name "Moore's
Tavern and Restaurant." Six of the seafood restaurants are operated under the
name "Lobster Shanty" and one under the name "Baker's Wharfside." The Company
opened its first seafood restaurant in November 1978 and opened its sole
Garcia's restaurant in April
7
<PAGE>
1996. The Company's restaurants, all of which are operated on a year-round
basis, are as follows:
DATE OF OPENING
UNDER THE COMPANY'S
LOCATION MANAGEMENT
-------- -------------------
SEAFOOD RESTAURANTS
LOBSTER SHANTY
Vero Beach, Florida December 1979
Pt. Pleasant Beach, New Jersey October 1980
Toms River, New Jersey October 1980
Jensen Beach, Florida December 1980
Cocoa Beach, Florida September 1981
Hightstown, New Jersey December 1981
BAKER'S WHARFSIDE
Pt. Pleasant Beach, New Jersey October 1980
GARCIA'S RESTAURANT
Monmouth Mall, Eatontown,
New Jersey April 1996
MOORE'S TAVERN AND RESTAURANT
Freehold, New Jersey February 2000
SEAFOOD RESTAURANTS
The Company's seafood restaurants provide a variety of seafood dishes
including shellfish such as lobster, scallops, shrimp, oysters and clams, and
other fish including red snapper, bluefish, grouper and other varieties. A
limited selection of non-seafood entrees is also offered including steak and
chicken as well as a dessert selection. Most of the Company's seafood
restaurants have a nautical decor.
LOBSTER SHANTY RESTAURANTS
Vero Beach, Florida - This restaurant, consisting of approximately
6,900 square feet, is free standing in Vero Beach, Florida on the intracoastal
waterway, and seats approximately 200. It opened in December, 1979 pursuant to a
lease from Gourmet Associates ("Gourmet") owned by Robert E. Brennan, the then
principal stockholder of the Company. During fiscal 1998, the Company
constructed an outdoor deck with a bar and dining facilities at this restaurant
at a cost of approximately $125,000. At August 31, 1999, the Company was
continuing to lease this
8
<PAGE>
restaurant on a month-to-month "net" basis at a monthly rental of $10,000 with
the Company also paying personal property taxes and insurance thereunder. On
that date, the United States Bankruptcy Court for the District of New Jersey
ordered the acceptance of the Company's bid of $1,100,000 to purchase the Vero
Beach restaurant property from Gourmet. On October 30, 1998, the Company
completed the purchase of the property for $1,100,000. To fund the purchase, the
Company obtained an $880,000 first mortgage loan from its principal lending
bank, First Union National Bank, and paid the balance of the purchase price from
working capital. The Company's successful bid was based upon an independent
appraisal of the property and was equal to the appraised value. See "Bank Loans"
herein as to the repayment terms of this loan.
Pt. Pleasant Beach, New Jersey - This restaurant, consisting of
approximately 17,000 square feet, is free standing with a waterfront location on
Channel Drive in Pt. Pleasant Beach, New Jersey and seats approximately 750. It
shares parking with the Baker's Wharfside restaurant in Pt. Pleasant Beach with
space for approximately 250 automobiles. The Company purchased this restaurant
and three others (including the land, buildings, improvements and businesses
including personal property and fixtures, liquor licenses and all of the
outstanding stock of the four corporations operating these restaurants) from
Robert E. Brennan, the then principal stockholder of the Company, and from three
partnerships owned by him, in October, 1980 for an aggregate $7,750,000 less a
subsequent $250,000 prepayment discount.
Toms River, New Jersey - This restaurant, consisting of approximately
10,750 square feet, is free standing on Robbins Parkway with a waterfront
location on the Toms River in Toms River, New Jersey and seats approximately
375. Municipal parking facilities are available nearby. The Company purchased
this restaurant and three others (including the land, buildings, improvements,
and businesses including personal property and fixtures, liquor licenses and all
of the outstanding stock of the four corporations operating these restaurants)
from Robert E. Brennan, the then principal stockholder of the Company, and from
three partnerships owned by him, in October, 1980 for an aggregate $7,750,000
less a subsequent $250,000 prepayment discount. During fiscal 1998, the Company
commenced an interior renovation of this restaurant, the bulk of which was
completed in fiscal 1998 with the balance completed early in fiscal 1999. The
total cost of this renovation was approximately $338,000. In fiscal 1999, the
Company constructed an outdoor deck with a bar and dining facilities at this
restaurant adding approximately 125 seats at a cost of approximately $188,000.
In May 1998, the Company spent $166,000 to purchase a lot and building
with a waterfront location adjacent to the Toms River Lobster Shanty. The
Company partially funded the purchase price with the bank loan previously
described. The Company has obtained
9
<PAGE>
the variances necessary for it to develop an outdoor patio dining area with
seating for 125 on this site but has delayed construction pending resolution of
a lawsuit initiated by a neighboring landowner attempting to prevent
construction. If it is successful in resolving this lawsuit, the Company
estimates the total costs of construction and outfitting at approximately
$350,000 for an opening anticipated in fiscal 2002.
Jensen Beach, Florida - This 200 seat restaurant, consisting of
approximately 4,500 square feet, is located in a free standing building on the
intracoastal waterway in Jensen Beach, Martin County, approximately 50 miles
north of Palm Beach. The restaurant has parking for 100 automobiles. Acquired in
October, 1980 were two lots, the restaurant with furnishings and a liquor
license from an unaffiliated party for $975,000. The Company made a $295,000
down payment and paid the balance over a ten year period through September,
1990.
Cocoa Beach, Florida - This approximately 240 seat restaurant,
consisting of approximately 9,600 square feet, is located in a free standing
building on Highway A1A in Cocoa Beach and has parking for approximately 90
cars. The Company acquired this restaurant as well as a seafood restaurant in
Titusville, Florida in September 1981 through the purchase from two unaffiliated
individuals of the outstanding capital stock of two corporations engaged in the
ownership and operation of a Florida seafood restaurant at each of the two
sites. The corporations owned the land on which the restaurants were located,
the restaurant buildings, the restaurant businesses including personal property
and fixtures and liquor licenses for each restaurant, all of which were included
in the sale. The purchase price paid by the Company for the stock of the two
corporations (prior to closing adjustments) was $3,370,000, the bulk of which
was represented by 20-year promissory notes payable monthly and secured by
mortgages on the restaurants. The Company sold the Titusville restaurant to an
unaffiliated third party in January 1988 realizing a loss of approximately
$942,000. The Company prepaid the balance of the remaining indebtedness under
the notes in July 1993 using the net proceeds from the sale in June 1993 of
another Florida restaurant property.
Hightstown, New Jersey - This restaurant, consisting of approximately
4,600 square feet, is free standing on State Highway 33 approximately two miles
east of Hightstown and seats approximately 175. The restaurant has parking for
approximately 100 automobiles. The Company purchased this restaurant and three
others (including the land, buildings, improvements and businesses including
personal property and fixtures, liquor licenses and all of the outstanding stock
of the four corporations operating these restaurants) from Robert E. Brennan,
the then principal stockholder of the Company and from three partnerships owned
by him, in October, 1980 for an aggregate $7,750,000 less a subsequent $250,000
prepayment discount.
10
<PAGE>
BAKER'S WHARFSIDE RESTAURANT
Pt. Pleasant Beach, New Jersey - This restaurant, consisting of
approximately 7,500 square feet, is free standing with a waterfront location on
Channel Drive in Pt. Pleasant Beach, New Jersey and seats approximately 500. It
shares parking with the Lobster Shanty restaurant in Pt. Pleasant Beach with
space for approximately 250 automobiles. The Company purchased this restaurant
and three others (including the land, buildings, improvements and businesses
including personal property and fixtures, liquor licenses and all of the
outstanding stock of the four corporations operating these restaurants) from
Robert E. Brennan, the then principal stockholder of the Company, and from three
partnerships owned by him, in October, 1980 for an aggregate $7,750,000 less a
subsequent $250,000 prepayment discount.
GARCIA'S RESTAURANT
In November 1995, the Company entered into an agreement (the
"Agreement") with Garcimex of New Jersey, Inc. ("Garcimex"), the exclusive owner
of the "Garcia's" trade mark, service mark and trade name along with the
goodwill and recipes of a Mexican restaurant business associated with the marks.
Pursuant to the Agreement, the Company was granted the exclusive right to
establish and open Mexican restaurants using the marks, goodwill and recipes in
six New Jersey counties, Hunterdon, Mercer, Middlesex, Monmouth, Ocean and
Somerset (the "Territory"). The Company was granted the right but not the
obligation to open a restaurant utilizing the marks and goodwill in each of the
first five 12-month periods, in the Territory, with a six-month grace period
with respect to each such 12-month period. If the Company did not open a
Garcia's restaurant in each of the first five 12-month periods (including the
grace period), the Agreement provided that the Company would lose the right to
develop additional restaurants within the Territory. The Company did not open an
additional Garcia's restaurant within the prescribed time period after the April
1996 opening of its initial Garcia's restaurant. The Company retains the right
to utilize the marks, goodwill and recipes at its Garcia's restaurant and
Garcimex has agreed not to open another Mexican restaurant within an 18-mile
radius of any Company operated Garcia's restaurant.
The Agreement is for an initial term of 20 years with additional
automatic ten-year renewal periods unless the Company elects not to renew the
Agreement. During the period that the Agreement is in effect, the Company is
required to pay 3% of the gross annual sales from each Garcia's restaurant which
it operates in the Territory, to Garcimex on a quarterly basis. Garcimex has
agreed with the Company to reduce this percentage to 1.5% with respect to the
twelve-month period commencing February 1, 2000, after which it will revert back
to 3%. The Company has also been accorded a right of first refusal with respect
to offers received by Garcimex from third parties seeking to obtain rights in
the
11
<PAGE>
marks, goodwill and recipes for restaurants to be opened outside of the
Territory. Furthermore, the Agreement also provides the Company with certain
rights to open Mexican restaurants in New Jersey outside the Territory. To date,
the Company has opened one Garcia's restaurant which opened at the Monmouth Mall
on April 29, 1996.
Monmouth Mall, Eatontown, Monmouth County, New Jersey - The Company's
Garcia's restaurant at the Monmouth Mall consists of 4,371 square feet of leased
space and is decorated in a bright, multi- color Mexican motif. The restaurant
has a bar and tables and booths which can accommodate approximately 130 patrons.
The Company has a liquor license permitting the consumption of wine and
alcoholic beverages on the premises. The restaurant is open for lunch and dinner
seven days per week.
The restaurant features Mexican cuisine including fajitas, tortillas,
burritos and enchiladas with cheese, beef, chicken, pork and seafood fillings.
The menu also includes appetizers, soups and salads and a limited number of
American style offerings such as steaks and burgers. Alcoholic offerings such as
margaritas and tequilas complement fruit drinks and other soft drinks.
The Company's lease for this restaurant is for a 12-year term providing
for a minimum annual rental of $109,275 during each of the first five years and
a minimum annual rental of $118,017 per annum thereafter. The Mall Landlord has
agreed to reduce the minimum annual rental to $102,675 with respect to the
twelve-month period ending January 31, 2001, after which it will revert to the
annual rentals provided for in the lease. The Company was granted a $24,000 per
year Construction Allowance for the five-year period commencing January 1, 1997
to be applied on a monthly basis in reduction of the said minimum annual rental.
The Company is also required to pay additional rent equal to 5% of the
restaurant's annual gross revenues in excess of $2,185,000 in each of the first
five years and in excess of $2,360,340 in each subsequent year. The Company is
also required to pay a proportionate share of the Mall's real estate taxes,
utility charges and the Landlord's operating costs as well as certain other
charges.
The restaurant is on the site of the Company's La Crepe restaurant
which closed in December 1995. The Company has spent approximately $720,000 to
construct its Garcia's restaurant on this site.
The Monmouth Mall has been in operation for approximately 20 years.
Macy's, J.C. Penny and Stern's are major department stores in the Mall. The Mall
is a large shopping center with 1,500,000 square feet of shopping area on 105
acres with parking for 7,200 cars.
12
<PAGE>
MOORE'S TAVERN AND RESTAURANT
This restaurant, consisting of approximately 7,700 square feet, is free
standing and is located on West Main Street (Route 537) in Freehold, New Jersey.
The restaurant seats approximately 260 (with an outdoor patio for warm weather
use that can seat an additional approximately 40 persons) and accommodates
parking for approximately 200 automobiles (the parking to be shared with any
businesses operated from Building B and proposed Building C). The tavern portion
of this restaurant is of an historic nature having been initially constructed in
the late 19th century and owned by an officer in the American Revolutionary
Army. The entire restaurant is decorated in a revolutionary period decor. See
"Developments Since the Beginning of the Last Fiscal Year" herein as to the
Company's lease of this restaurant and purchase of the liquor license and
furniture, fixtures and equipment to be used in its operation of the restaurant
from affiliates of the Lombardi Group.
The Moore's Tavern and Restaurant is open for lunch and dinner on a
year-round basis. It features an eclectic American food menu offering
sandwiches, burgers, ribs, steak and other meats, chicken and fish, potatoes,
vegetables and desserts, and alcoholic beverages.
SOURCES OF FOOD PRODUCTS
The food products used by the Company in the operation of its seafood
restaurants, its Moore's Tavern and Restaurant and its Garcia's restaurant are
readily available from a variety of sources including national distributors and
local sources on an order basis when needed.
SEASONAL ASPECTS
To date, the Company's New Jersey seafood restaurants have experienced
a significant portion of their sales from May through September whereas its
Florida seafood restaurants have experienced a significant portion of their
sales from January through April. The Company anticipates that Moore's Tavern
and Restaurant will experience a seasonality factor similar to but not as
dramatic as the seasonality factor of its New Jersey seafood restaurants. The
Company's Garcia's restaurant has experienced its greatest sales volume during
the Thanksgiving through Christmas period.
TRADEMARKS
The Company has no patents, trademarks, licenses, franchises or
concessions which it regards as material to its restaurant business with the
exception of the service mark "Jack Baker's Lobster Shanty"(R) registered for a
20 year period with the U.S. Patent and Trademark Office in February, 1989, the
rights purchased from Garcimex as described above to use of the trade mark,
service
13
<PAGE>
mark and trade name "Garcia's" and its rights to use of the names "Moore's Inn"
and "Moore's Tavern" as described above.
COMPETITION
The restaurant business is highly competitive and the success of any
restaurant depends to a great extent upon the services it supplies and its
location. The Company's seafood restaurants compete primarily with other local
seafood restaurants and to a lesser extent, with local restaurants serving a
more general fare. The principal national competition to the Company's seafood
restaurants is the Red Lobster restaurant chain. This chain has substantially
greater resources than the Company. The Company's Florida seafood restaurants
also face competition from Shells seafood restaurants operating in their area.
There are other restaurants in the mall and in the vicinity of the mall where
the Company is now operating a Garcia's restaurant, all of which supply
competition to the Company's Garcia's unit. Although there are no Mexican style
restaurants in the mall, there are other Mexican style restaurants in the area.
Typical "chain" competitors, all of which are affiliated with better established
and more prominent national chains, are the Friendly Ice Cream chain, Ruby
Tuesdays and TGI Fridays. The Moore's Tavern and Restaurant faces competition
from local restaurants as well as from national chains including TGI Fridays and
Chili's restaurants in the area. There can be no assurance that the Company's
units will be able to successfully compete with any of such other restaurants.
GOVERNMENT REGULATION
The Company is subject to various Federal, state and local laws
affecting the operation of its restaurants, including licensing and regulation
by health, sanitation, safety and fire departments and alcoholic beverage
control authorities. The Company is also subject to the Fair Labor Standards
Act, which governs such matters as minimum wages, overtime and other working
conditions. While such regulations have not had a material negative impact on
the Company's operations to date, difficulties in obtaining necessary licenses
or permits could result in delays or cancellations in the opening of new
restaurants and increases in the minimum wage could increase the Company's labor
cost.
Each of the Company's New Jersey and Florida restaurants holds a state
liquor license and is subject to the liquor licensing laws of New Jersey or
Florida (depending on location). Management regards the aggregate and per claim
liability insurance which it carries to be adequate for the nature of its
operations taking into account the fact that it serves liquor at each location.
14
<PAGE>
EMPLOYEES
The Company maintains its administrative employees at its executive
offices including its principal officers (see "Item 9 - Directors, Executive
Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act"), secretarial and bookkeeping personnel. Each of the Company's
seafood restaurant units employs a general manager, two assistant managers and
between 40 and 130 other employees to serve as waitresses, waiters, busboys,
bartenders, cooks, dishwashers, kitchen help, hostesses and cashiers (some on a
part-time basis). The Company's Garcia's restaurant employs approximately 40
employees and its Moore's Tavern and Restaurant employs approximately 60
employees, in each case serving similar functions. The Company also presently
employs three area supervisors, each responsible for certain of the Company's
restaurants. Managerial candidates are recruited for the Company's restaurants
from hotel and restaurant management schools, restaurant recruiting agencies,
through advertising in restaurant management magazines and by promotion from
within the Company's own organization. At January 30, 2000, prior to the
commencement of its operation of the Moore's Tavern and Restaurant, the Company
had approximately 400 employees (including part-time workers). The Company is
not a party to any collective bargaining agreements and has enjoyed satisfactory
employee relations since inception.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's executive and administrative offices are located in an
approximately 4,000 square foot two story Company owned building of cinder block
construction at 62 Broadway, Point Pleasant Beach, New Jersey.
See Item 1 herein for a description of the Company's operating
restaurants.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the quarter ended January 30, 2000.
15
<PAGE>
CHEFS INTERNATIONAL, INC.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Common Stock was listed on the NASDAQ Stock Market Small Cap System
under the symbol "CHEF" until the close of business on December 16, 1998 when it
was delisted because of the failure of the Common Stock to maintain a closing
bid price at or above $1.00 per share. Commencing December 17, 1998, the Common
Stock has been traded on the OTC Bulletin Board under the symbol "CHEF." The
following chart sets forth the range of high and low closing bid prices for the
Common Stock for the periods indicated as obtained from the National Quotation
Bureau, LLC.
BID PRICES
QUARTER -----------------
ENDED HIGH LOW
----- ---- ---
April 26, 1998 $ .9375 $ .46875
July 26, 1998 $ .875 $ .625
October 25, 1998 $1.25 $ .625
October 26
through
December 16, 1998 $ .90625 $ .71875
OTC BULLETIN BOARD TRADING
December 17, 1998
through
January 31, 1999 $ .71875 $ .625
April 30, 1999 $ .9375 $ .5625
July 30, 1999 $1.5625 $ .875
October 29, 1999 $1.07 $ .6875
January 30, 2000 $ .80 $ .75
The above quotations represent prices between dealers and do not
include retail mark-ups, mark-downs or commissions. They do not necessarily
represent actual transactions.
At March 31, 2000, the number of record holders of the Common Stock was
6,778. Such number of record owners was determined from the Company's
shareholder records and does not include beneficial owners whose shares are held
in nominee accounts with brokers, dealers, banks and clearing agencies.
Pursuant to the Company's Term Loan Agreement with First Union National
Bank, the Company is restricted during the period any
16
<PAGE>
loans are outstanding under such agreement from paying dividends on any of its
outstanding stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
Certain statements regarding future performance in this Annual Report
on Form 10-KSB constitute forward-looking statements under the Private
Securities Litigation Reform Act of 1995. No assurance can be given that the
future results covered by the forward-looking statements will be achieved. The
Company cautions readers that important factors may affect the Company's actual
results and could cause those results to differ materially from the
forward-looking statements. Such factors include, but are not limited to,
changing market conditions, weather, the state of the economy, the impact of
competition to the Company's restaurants, pricing and acceptance of the
Company's food products.
OVERVIEW
The Company's principal source of revenue is from the operations of its
restaurants. The Company's cost of sales includes food and liquor costs.
Operating expenses include labor costs, supplies and occupancy costs (rent and
utilities), marketing and maintenance costs. General and administrative expenses
include costs incurred for corporate support and administration, including the
salaries and related expenses of personnel and the costs of operating the
corporate office at the Company's headquarters in Point Pleasant Beach, New
Jersey.
At January 30, 2000, the Company was operating eight restaurants on a
year-round basis. Seven of the restaurants are free-standing seafood restaurants
in New Jersey and Florida and are operated under the names "Lobster Shanty" or
"Baker's Wharfside." The other restaurant is a Mexican theme restaurant in New
Jersey operated under the name "Garcia's." The Company opened its first seafood
restaurant in November 1978 and opened its Garcia's restaurant in April 1996. In
February 2000, the Company commenced the operation of a ninth restaurant,
Moore's Tavern and Restaurant, a free standing restaurant in Freehold, New
Jersey serving an eclectic American food type menu.
Generally, the Company's New Jersey seafood restaurants derive a
significant portion of their sales from May through September. The Company's
Florida seafood restaurants derive a significant portion of their sales from
January through April. The Company's Garcia's restaurant derives a significant
portion of its sales during the holiday season from Thanksgiving through
Christmas. The
17
<PAGE>
Company anticipates that Moore's Tavern and Restaurant will experience a
seasonality factor similar to but not as dramatic as the seasonality factor of
its New Jersey seafood restaurants.
At the end of the third quarter for the fiscal year ended January 31,
1999, the Company closed its Belmar, New Jersey Lobster Shanty restaurant due to
unsatisfactory operating results. The Company operated nine restaurants,
including the Belmar Lobster Shanty, during the nine months ended October 25,
1998.
The statement of operations for fiscal 2000 was comprised of 52 weeks
as compared to 53 weeks for fiscal 1999.
RESULTS OF OPERATIONS
Sales.
Sales for the 52 weeks ended January 30, 2000 was $17,996,500, a
decrease of $697,200 or 3.7%, as compared to $18,693,700 for the 53 weeks ended
January 31, 1999. The extra week of sales in the fourth quarter of fiscal 1999
accounted for approximately $271,300 of the decrease in fiscal 2000 and the
Belmar restaurant had sales of $960,100 for the nine months it operated in
fiscal 1999. Accordingly, for the 52 week comparison, sales for the eight
restaurants that operated during both years increased by $534,200 or 3.1% in
fiscal 2000. A majority of the sales increase occurred in the second quarter
primarily due to an unusually dry New Jersey summer. The number of customers
served in the eight restaurants during fiscal 2000 increased by.9% over the
prior year while the check average paid per customer increased by 2.1 % for the
52 week comparison.
Gross Profit - Gross Margin.
Gross profit was 67.6% of sales for fiscal 2000 as compared to 67.1 %
of sales for fiscal 1999. The improvement in the gross profit, despite higher
liquor costs, resulted from lower food costs due primarily to lower shrimp and
dairy costs. Management was also able to lower food costs by adjusting the
restaurant menus to highlight lower cost meals. The Belmar restaurant, which had
a lower gross profit than the combined results of the other eight restaurants,
was closed during fiscal 1999.
Operating Expenses.
Total operating expenses decreased by 5.5% from $12,281,800 for fiscal
1999 to $11,608,500 for fiscal 2000. Payroll and related expenses were 29.5% of
gross sales for fiscal 2000 compared to 29.9% of sales for fiscal 1999. Despite
increases in health and worker's compensation insurance costs, the overall
decrease is primarily attributable to improved payroll performance at the
existing restaurants and the closure of the Belmar restaurant with
18
<PAGE>
its higher payroll costs. Other operating expenses were 19.7% of sales for
fiscal 2000 versus 20.5% in 1999. This decrease is attributable to the Vero
Beach, Florida restaurant, which was previously rented at $10,000 per month, and
was purchased during the fourth quarter of fiscal 1999, and the closure of the
leased Belmar restaurant.
Depreciation and amortization expenses were essentially unchanged from
fiscal 1999. The increase in depreciation expenses due to fiscal 2000 capital
expenditures was offset by the expiration of fully depreciated assets at the
existing restaurants and the closure of Belmar.
General and administrative expenses were $13,500 higher in fiscal 2000
versus 1999. Increases including higher salaries and payroll taxes of $28,000,
higher group insurance costs of $10,500 and additional corporate legal expenses
totaling $16,800 were offset by reductions in directors' compensation of $16,500
due to the resignation of two former directors, and a decrease of $24,400 in
employee and customer relations costs.
The primary component of the gain on disposal of assets was a gain of
$13,900 realized on the sale of the Belmar liquor license during the second
quarter ended August 1, 1999. The fiscal 1999 loss on disposal of assets of
$96,000 consisted primarily of costs associated with the closing of the Belmar
restaurant.
Other Income and Expense.
Interest expense was $12,400 higher in fiscal 2000 primarily because of
the interest expense associated with a May 1998 $124,000 five year term loan
used to partially fund the purchase of a property next to the Toms River, New
Jersey restaurant and with a November 1998 $880,000 first mortgage used to
partially fund the purchase of the Vero Beach, Florida restaurant. Interest
income was approximately $3,000 less in fiscal 2000.
Net Income.
Net income was $502,600 or $.ll per share for fiscal 2000, an increase
of $212,000 or 73% versus net income of $290,600 or $.06 per share for fiscal
1999.
Liquidity and Capital Resources.
The Company has financed its operations primarily from revenues derived
from its restaurants.
The Company's ratio of current assets to current liabilities was 1.74:1
at January 30, 2000, compared to 1.32:1 at the end of fiscal 1999. Working
capital was $1,361,700 at the end of fiscal 2000, an increase of $708,500 over
the prior year's total. During
19
<PAGE>
fiscal 2000, net cash increased by $442,300. Net cash provided from operating
activities was $1,603,800. The primary changes in assets and liabilities were a
reduction in accounts payable of $58,300 and an increase of $77,600 in accrued
liabilities resulting from a change in the Company's health insurance plan.
Investing activities during fiscal 2000 resulted in a net outflow of $575,200.
Capital expenditures were $510,900 with the major components including $78,800
for "Year 2000" (Y2K) computer software and hardware system upgrades, $42,000
for a restaurant point of sale system (POS) and $34,600 for Y2K phone system
upgrades at the corporate office and the restaurants. The balance of $355,500
was spent on routine restaurant improvements. Investing inflows included
$149,500 from the sale of the Belmar liquor license and payments of $66,400 by
Mister Cookie Face (MCF) on notes receivable from the February 1997 sale. During
the third quarter of fiscal 1999 the Company agreed to allow MCF to make partial
payments of $10,000 toward its indebtedness. In October 1999 the Company's Board
of Directors agreed to the continuance of the partial payments until July 2000
(see note 5 to the Financial Statements). Financing activities in fiscal 2000
resulted in a net cash outflow of $586,300 for debt repayment. During the second
quarter of fiscal 2000 the Company's $500,000 bank line of credit was renewed
for another year with an interest rate of LIBOR plus 2.25%. At the year ended
January 30, 2000 the entire $500,000 was available for use.
During fiscal 1999, net cash decreased by $264,100. Cash provided by
fiscal 1999 operating activities was $1,217,200 with the primary changes in
assets and liabilities being a reduction of $287,700 in accounts payable and an
increase of $104,100 in accrued liabilities resulting from a holiday gift
certificate promotion. Investing outlays totaled $1,070,400 and included capital
expenditures of $1,199,400 offset by collections on the MCF notes receivable of
$240,800. Major components of the capital expenditures included the purchase of
the Vero Beach restaurant property for $1,188,500, partially financed with an
$880,000 mortgage, $224,000 spent to complete the Toms River restaurant
renovation and approximately $166,000 to purchase a property adjacent to the
Toms River restaurant. Financing activities included debt repayment of $759,800
and new debt proceeds of $349,000 consisting of $225,000 in advances on the bank
line of credit for inventory purchases and $124,000 to partially fund the Toms
River property purchase.
At the end of fiscal 2000, the Company was in compliance with all of
the covenants under its Loan Agreement with its primary bank, First Union. The
Company was also in full compliance at the year ended January 31, 1999.
In December 1999, Chefs entered into a consulting agreement with a
company controlled by the principal shareholders of Chefs to manage a restaurant
in Freehold, New Jersey, known as Moore's Inn
20
<PAGE>
(Moore's) for $1,800 per week. On February 23, 2000 the consulting agreement was
terminated when Chefs purchased the furniture, fixtures and equipment and the
liquor license of Moore's for $600,000 in cash. Additionally, Chefs entered into
a five-year lease agreement (with three five-year renewal options) for the
restaurant property requiring minimum lease payments of $90,000 plus 6% of sales
exceeding $1.5 million.
Management anticipates that funds from operations and the bank line of
credit will be sufficient to meet obligations in fiscal 2001, including
projected capital expenditures of approximately $581,000 for routine restaurant
improvements in addition to the $600,000 for the Moore's liquor license and
furniture, fixture and equipment purchase. A majority of the capital
expenditures are expected to occur during the first and second quarters of
fiscal 2001.
INFLATION
It is not possible for the Company to predict with any accuracy the
effect of inflation upon the results of its operations in future years. The
price of food is extremely volatile and projections as to its performance in the
future vary and are dependent upon a complex set of factors. There is a proposal
before Congress to raise the minimum wage by $1.00 to $6.15 per hour. However,
management believes that the increase would have a minimal impact on payroll
costs because the proposed increase would not change the cash wage of the
Company's tipped employees and a majority of the non-tipped employees already
receive in excess of $6.15 per hour.
ITEM 7. FINANCIAL STATEMENTS
Attached.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
See Item 1, "Developments Since the Beginning of the Last Fiscal Year"
as to the replacement of Moore Stephens P.C. ("Moore Stephens") as the Company
independent accountants for the audit of its financial statements for the fiscal
year ended January 31, 1999 with the certified public accounting firm of Edward
Isaacs & Company LLP. The latter firm has rendered its audit opinion with
respect to the Company's consolidated balance sheet as of January 30, 2000 and
the related consolidated statement of operations, stockholders equity, and cash
flows for each of the two fiscal years in the period ended January 30,2000
contained in this report.
Moore Stephens' report with respect to the Company's financial
statements for the two fiscal years ended January 25, 1998 did not
21
<PAGE>
contain an adverse opinion or a disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principles.
The agreement to replace Moore Stephens and to retain a new principal
independent accounting firm was approved by the Company's audit committee and by
its board of directors.
During the two fiscal years ended January 25, 1998, there were no
disagreements between the Company and Moore Stephens on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreement, if not resolved to the satisfaction of Moore
Stephens, would have caused it to make a reference to the subject matter of the
disagreement in connection with its report.
22
<PAGE>
CHEFS INTERNATIONAL, INC.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth certain information with respect to each
of the current directors of the Company:
DATE FIRST
NAME AGE POSITION ELECTED A DIRECTOR
- ---- --- -------- ------------------
Chairman of
Robert M. Lombardi(a) 48 the Board May 1999
Nicholas B. Boxter 52 Director December 1999
Kenneth Cubelli 46 Director December 1999
Raymond L. Dademo 42 Director December 1999
Anthony M. Lombardi(a) 44 Director July 1999
Joseph S. Lombardi(a) 49 Director July 1999
Michael F. Lombardi(a) 51 Director July 1999
Stephen F. Lombardi(a) 44 Director July 1999
- -------------------
(a)The five Lombardis who serve as directors are brothers.
The following table sets forth certain information regarding the
executive officers of the Company.
NAME AGE OFFICE
---- --- ------
Anthony C. Papalia 42 President, Treasurer, Chief
Executive Officer, Chief Financial
Officer and Director
Martin W. Fletcher 47 Secretary
The Company does not have an Executive Committee. The term of office of
each director and executive officer expires when his successor is elected and
qualified. Executive officers are elected by and hold office at the discretion
of the Board of Directors.
The following is a brief account of the business experience of each
director and executive officer of the Company during the past five years.
23
<PAGE>
DIRECTORS
Robert M. Lombardi, M.D. is, and for more than the past five years has
been principally engaged as a physician and orthopaedic surgeon with the
Edison-Metuchen Orthopaedic Group, a medical practice group located in Edison,
New Jersey, where he also serves as a senior officer. He is also an officer of
Moore's Inn, Inc. and a partner in Moore's Realty. See "Developments Since the
Beginning of the Last Fiscal Year - Restaurant Opening."
Nicholas B. Boxter, C.P.A. is, and for more than the past five years
has been principally engaged in the practice of accountancy with his own firm in
Whitehouse, New Jersey.
Kenneth Cubelli, M.D. is, and for more than the past five years has
been principally engaged as a physician and orthopaedic surgeon with the Morris
County Orthopaedic Group in Denville, New Jersey.
Raymond L. Dademo, Esq. is, and for more than the past five years has
been principally engaged as a practicing attorney with his own law firm in
Brick, New Jersey.
Anthony M. Lombardi, D.D.S. is, and for more than the past five years
has been principally engaged in the practice of dentistry in Edison, New Jersey.
He is also an officer of Moore's Inn, Inc.
Joseph S. Lombardi, M.D. is, and for more than the past five years has
been principally engaged as a physician and orthopaedic surgeon with the
Edison-Metuchen Orthopaedic Group, where he is a senior officer. He is also an
officer of Moore's Inn, Inc. and a partner in Moore's Realty.
Michael F. Lombardi, Esq. is, and for more than the past five years has
been principally engaged as a practicing attorney and a senior officer of
Lombardi & Lombardi, P.A., an Edison, New Jersey law firm. He is also an officer
of Moore's Inn, Inc. and a partner in Moore's Realty.
Stephen F. Lombardi, Esq. is, and for more than the past five years has
been principally engaged as a practicing attorney and a senior officer of
Lombardi & Lombardi, P.A., an Edison, New Jersey law firm. He is also an officer
of Moore's Inn, Inc. and a partner in Moore's Realty.
EXECUTIVE OFFICERS
Anthony C. Papalia has been continuously employed by the Company for
the preceding five years. He has served as a manager of various New Jersey
Lobster Shanty restaurants and as an area supervisor. Mr. Papalia, who was
elected senior vice president and
24
<PAGE>
a director of the Company in September, 1985 and president and treasurer in
March, 1988, is currently devoting all of his working time to the business of
the Company. He resigned as a director of the Company in July 1999.
Martin W. Fletcher has been continuously employed by the Company for
the preceding five years in various capacities. He has served as general manager
of the Company's Toms River, New Jersey Lobster Shanty, as area supervisor for
its Florida west coast restaurants, as assistant controller, since September,
1987 as controller and since March 1988 as secretary and a director of the
Company. He resigned as a director of the Company in July 1999. He is currently
devoting all of his working time to the business of the Company.
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3 and 4, the Company believes that
with respect to fiscal 2000, all Section 16(a) filing requirements applicable to
its officers, directors and beneficial owners of more than 10% of its equity
securities were timely complied with.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
paid or accrued by the Company during the three fiscal years ended January 30,
2000 to its Chief Executive Officer as well as to any other executive officer of
the Company or a subsidiary who earned at least $100,000 during fiscal 2000.
During the three- year period ended January 30, 2000, the Company did not grant
any restricted stock awards or have any long-term incentive plan in effect. The
Company maintains a non-qualified Supplemental Employee Benefit Program for its
officers, supervisors, restaurant managers and assistant managers paying annual
contributions ranging from $1,000 to approximately $3,000 per individual. The
Program provides life insurance death benefits, disability income benefits and
retirement income benefits. A former officer and director, James Fletcher is not
covered under this Program but the Company agreed that if he remained in its
employ until age 65 and left such employ at any time thereafter, the Company
would pay him $20,000 annually for the ten year period following such
termination of employment or until his death, if he dies prior thereto. The
Company partially funded this obligation with an insurance policy paying an
annual premium of approximately $5,000 until Mr. Fletcher's retirement at the
conclusion of fiscal 1997. James Fletcher is the father of Martin W. Fletcher.
25
<PAGE>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-------------------
NAME AND FISCAL OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ------------------ ------ ------ ----- ------------
Anthony Papalia 2000 $159,975 $-0- $2,088(a)
President and 1999 $150,000 $-0- $2,088(a)
Chief Executive 1998 $150,000 $-0- $2,088(a)
Officer
- ------------------
(a) Represents contributions under the Supplemental Employee Benefit Program.
EMPLOYMENT AGREEMENTS
At the annual meeting of the Company's stockholders held on December
19, 1995, stockholders ratified employment contracts between the Company and
Anthony Papalia as chief executive officer and chief financial officer and
between the Company and Martin Fletcher as controller. Each contract expired at
the conclusion of the Company's 1999 fiscal year and was automatically renewed
on a year by year basis for up to five consecutive additional one-year terms
unless either party gave at least six months' prior notice that he or it did not
desire such renewal. As no such notice was given during fiscal 1999, each
contract was extended for a first renewal year. Mr. Papalia's annual salary
under the contract was $150,000 and Mr. Fletcher's annual salary under the
contract was $87,000 but each individual's salary was made subject to automatic
increase in each Renewal Year based on increases in the Consumer Price Index. As
a result, during fiscal 2001, Mr. Papalia's annual salary was increased to
$164,102 and Mr. Fletcher's annual salary was increased to $95,179. If the
employment of either individual is terminated other than for cause, he will
become entitled to a Severance Payment equal to the amount of his compensation
over the balance of the contract term. Each individual is also entitled to
terminate his employment and receive a Severance Payment equal to six months'
salary in the event of a "change of control" of the Company. An amendment to
each employment contract executed in August 1999 extended the first renewal year
through March 31, 2000, renewed each contract for a second renewal year through
March 31, 2001 and recast each renewal year so as to commence on April 1 of each
year and to expire on March 31 of the following year. Notice of intention not to
renew must now be given no later than September 30 of the year preceding the
year in which the renewal term commences.
STOCK OPTIONS
At January 31, 1999 there were outstanding employee and non-employee
stock options exercisable to purchase an aggregate 249,060 shares of Chefs
Common Stock at exercise prices ranging from
26
<PAGE>
$.984375 to $3.75 per share. Included in these amounts were options held by
Anthony C. Papalia exercisable to purchase 12,223 shares at $.984375 per share
and 54,167 shares at $3.75 per share; options held by Martin W. Fletcher
exercisable to purchase 11,000 shares at $.984375 per share and 54,167 shares at
$3.75 per share; and options exercisable to purchase 54,167 shares at $3.75 per
share and 50,000 shares at $3.00 per share held by Jack Mariucci, a director
until his resignation in July 1999. All of the outstanding options (exercisable
to purchase an aggregate 249,060 shares) expired by their terms or were
cancelled during fiscal 2000 so that there were no outstanding options
exercisable to purchase shares of Chefs Common Stock at January 30, 2000.
DIRECTORS' COMPENSATION
During fiscal 2000, Jack Mariucci and James Fletcher were paid an
aggregate of $16,500 in directors' fees until their resignations in July 1999.
No method of compensation has been established at this date for the current
directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 31, 2000 with
respect to their ownership of Chefs' Common Stock by (i) each person known by
the Company to be the beneficial owner of more than 5% of Chefs' outstanding
Common Stock, (ii) each director of the Company, (iii) each executive officer of
the Company, and (iv) all directors and executive officers as a group.
NAME AND ADDRESS OF SHARES OF COMMON STOCK PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED OWNERSHIP
- ---------------- ------------------ ---------
DIRECTORS*
Robert M. Lombardi 1,301,256(1) 29%
Nicholas B. Boxter -- --
Kenneth Cubelli -- --
Raymond L. Dademo 1,000 --
Anthony Lombardi 113,001 3%
Joseph S. Lombardi 668,333 15%
Michael F. Lombardi 286,868(1)(2)(3) 6%
Stephen F. Lombardi 34,500(1)(2) 1%
EXECUTIVE OFFICER*
Anthony C. Papalia 5,000 --
All executive officers and
directors as a group
(ten persons) 2,409,958(1)(2)(3) 54%
- --------------------
*The address of each director and executive officer is c/o the Company, 62
Broadway, Point Pleasant Beach, New Jersey 08742.
27
<PAGE>
(1) Robert M. Lombardi, Anthony Lombardi, Joseph S. Lombardi, Michael
F. Lombardi and Stephen F. Lombardi, the December '95 Investment Club, Lombardi
& Lombardi, P.A. and the Lombardi & Lombardi, P.A. Defined Benefit Pension Plan
previously filed a report on Schedule 13D and amendments thereto indicating that
they were acting separately and not as a group. The five individual Lombardis
are brothers and for purposes of this report, they and the above entities are
deemed the "Lombardi Group."
(2) Includes 24,500 shares comprising one-half of the 49,000 shares
owned by Lombardi & Lombardi, P.A., of which Michael F. Lombardi and Stephen F.
Lombardi are each senior officers.
(3) Includes 111,668 shares owned by Lombardi & Lombardi, P.A. Defined
Benefit Pension Plan and 3,333 shares owned by the December '95 Investment Club.
Michael F. Lombardi has voting and dispositive power with respect to these
shares.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Item 1 herein, "Developments Since the Beginning of the Last Fiscal
Year - Change in Control" as to the purchase by certain members of the Lombardi
Group from the Chapter 11 Trustee for the bankruptcy estate of Robert E. Brennan
of 1,722,445 shares of Chefs Common Stock and "Restaurant Opening" as to the
leasing by the Company of a restaurant in Freehold, New Jersey and the purchase
by it of a liquor license and furniture, fixtures and equipment from affiliates
of the Lombardi Group.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
3.1 Restated Certificate of Incorporation of the Company(E)
3.2 By-Laws of the Company, as amended
4.1 Specimen Common Stock Certificate(A)
20.1 Monmouth Mall Shopping Center Lease for Garcia's restaurant(B)
20.2 Employment Agreement dated as of December 19, 1995 between Chefs and
Anthony Papalia(B)
20.3 Employment Agreement dated as of December 19, 1995 between Chefs and
Martin Fletcher(B)
20.4 Stock Purchase/Sale Agreement as of January 26, 1997 between Chefs and
Frank Koenemund concerning the sale of 95% of MCF and the three MCF
Promissory Notes (A, B and C) issued thereunder(C)
28
<PAGE>
20.5 Agreement of Sale dated August 1998 between Gourmet Associates and the
Company concerning the purchase by the Company of the Vero Beach,
Florida Lobster Shanty Restaurant(E)
20.6 Loan Agreement dated October 30, 1998 between the Company and First
Union National Bank and the Company's $880,000 Promissory Note issued
pursuant thereto for funding utilized by the Company to purchase the
Vero Beach, Florida Lobster Shanty Restaurant(E)
20.7 Lease Agreement executed in January 2000 for Moore's Inn facility,
between Moore's Realty Associates as Landlord and the Company as Tenant
20.8 Liquor License Sale/Purchase Agreement executed in January 2000 between
Moore's Inn, Inc. as Transferor and the Company as Transferee
20.9 Sale/Purchase Agreement for Furniture, Fixtures and Equipment executed
in January 2000 between Moore's Inn, Inc. as Seller and the Company as
Purchaser.
16 Letter of the Company's former auditors, Moore Stephens, P.C. dated
April 6, 1999 as required by Item 304(a)(3) of Regulation S-B(D)
21 Subsidiaries - The following table indicates the wholly owned
subsidiaries of the Company, their respective states of incorporation
and the restaurants operated by each
STATE OF
NAME INCORPORATION RESTAURANTS
- ---- ------------- -----------
Chefs International Florida Lobster Shantys -
Palm Beach, Inc. Vero Beach and Jensen
Beach, Florida
Kev, Inc. New Jersey Lobster Shanty -
Pt. Pleasant Beach,
New Jersey
Robbins Parkway New Jersey Lobster Shanty - Toms
Realty Co., Inc. River, New Jersey
Hightstown REB, Inc. New Jersey Lobster Shanty -
Hightstown, New Jersey
27 Financial Data Schedule
29
<PAGE>
- ----------------
(A) Incorporated by reference to exhibit filed with the Company's
Registration Statement on Form SB-2 (File no. 33-66936)
(B) Incorporated by reference to exhibit filed with the Company's
annual report on Form 10-K for the fiscal year ended January 28, 1996
(C) Incorporated by reference to exhibit filed with the Company's
current report on Form 8-K for February 20, 1997
(D) Incorporated by reference to exhibit filed with Amendment
No. 1 to the Company's current report on Form 8-K/A for April 1,
1999
(E) Incorporated by reference to exhibit filed with the Company's
annual report on Form 10-KSB for the fiscal year ended January 31, 1999.
(B) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the last
quarter of the fiscal year ended January 30, 2000.
30
<PAGE>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS
YEAR ENDED JANUARY 30, 2000
<PAGE>
TABLE OF CONTENTS
PAGE
FINANCIAL STATEMENTS:
Independent Auditors' Report F-1
Consolidated Balance Sheet - January 30, 2000 F-2-3
Consolidated Statements of Operations -
Years Ended January 30, 2000 and January 31, 1999 F-4
Consolidated Statements of Stockholders' Equity -
Years Ended January 30, 2000 and January 31, 1999 F-5
Consolidated Statements of Cash Flows
Years Ended January 30, 2000 and January 31, 1999 F-6
Notes to Consolidated Financial Statements F-7-16
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Chefs International, Inc. and Subsidiaries
Point Pleasant, New Jersey
We have audited the accompanying consolidated balance sheet of Chefs
International, Inc. and subsidiaries as of January 30, 2000, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the two fiscal years in the period ended January 30, 2000. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Chefs
International, Inc. and subsidiaries as of January 30, 2000, and the
consolidated results of their operations and their cash flows for each of the
two fiscal years in the period ended January 30, 2000, in conformity with
generally accepted accounting principles.
/s/ EDWARD ISAACS & COMPANY LLP
-------------------------------
Edward Isaacs & Company LLP
March 27, 2000
F-1
<PAGE>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JANUARY 30, 2000
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 1,314,247
Investments 634,900
Miscellaneous receivables 63,037
Inventories 964,134
Due on sale of discontinued operations
from related party 83,125
Prepaid expenses 153,016
-----------
TOTAL CURRENT ASSETS 3,212,459
-----------
PROPERTY, PLANT AND EQUIPMENT, at cost 19,820,157
Less: Accumulated depreciation 7,856,283
-----------
PROPERTY, PLANT AND EQUIPMENT, net 11,963,874
-----------
OTHER ASSETS:
Investments 526,000
Goodwill - net 478,521
Liquor licenses - net 523,299
Due on sale of discontinued operations
from related party 129,993
Equity in life insurance policies 503,262
Due from related party 16,422
Other 17,016
-----------
TOTAL OTHER ASSETS 2,194,513
-----------
$17,370,846
===========
See notes to consolidated financial statements.
F-2
<PAGE>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONTINUED)
JANUARY 30, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes and mortgages payable $ 364,086
Accounts payable 599,102
Accrued payroll 88,531
Accrued expenses 381,054
Other liabilities 363,647
Income taxes payable 54,300
------------
TOTAL CURRENT LIABILITIES 1,850,720
------------
NOTES AND MORTGAGES PAYABLE 1,078,383
------------
OTHER LIABILITIES 513,862
------------
STOCKHOLDERS' EQUITY:
Capital stock - common $.01 par value,
Authorized 15,000,000 shares,
Issued and outstanding 4,488,162 44,882
Additional paid-in capital 32,304,487
Accumulated deficit (18,421,488)
------------
TOTAL STOCKHOLDERS' EQUITY 13,927,881
------------
$ 17,370,846
============
See notes to consolidated financial statements.
F-3
<PAGE>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JANUARY 30, 2000 AND JANUARY 31, 1999
2000 1999
------------ ------------
SALES $ 17,996,559 $ 18,693,692
COST OF GOODS SOLD 5,830,757 6,141,920
------------ ------------
GROSS PROFIT 12,165,802 12,551,772
------------ ------------
OPERATING EXPENSES:
Payroll and related expenses 5,302,533 5,582,361
Other operating expenses 3,541,566 3,840,887
Depreciation and amortization 1,013,416 1,014,895
General and administrative expenses 1,761,244 1,747,744
(Gain) loss on disposal of assets (10,284) 95,954
------------ ------------
TOTAL OPERATING EXPENSES 11,608,475 12,281,841
------------ ------------
INCOME FROM OPERATIONS 557,327 269,931
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (140,552) (128,132)
Interest income 166,424 169,393
------------ ------------
OTHER INCOME, NET 25,872 41,261
------------ ------------
INCOME BEFORE INCOME TAXES 583,199 311,192
PROVISION FOR INCOME TAXES 80,635 20,600
------------ ------------
NET INCOME $ 502,564 $ 290,592
============ ============
BASIC INCOME PER COMMON SHARE $ 0.11 $ 0.06
============ ============
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 30, 2000 AND JANUARY 31, 1999
Capital Additional Total
Number Stock Paid-in Accumulated Stockholders'
of Shares Par Value Capital Deficit Equity
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE at January 25, 1998 4,488,347 $ 44,883 $ 32,304,486 $(19,214,644) $ 13,134,725
Fractional shares conversion 22 1 (1) -- --
Net income -- -- -- 290,592 290,592
------------ ------------ ------------ ------------ ------------
BALANCE at January 31, 1999 4,488,369 44,884 32,304,485 (18,924,052) 13,425,317
Fractional shares conversion (207) (2) 2 -- --
Net income -- -- -- 502,564 502,564
------------ ------------ ------------ ------------ ------------
BALANCE at January 30, 2000 4,488,162 $ 44,882 $ 32,304,487 $(18,421,488) $ 13,927,881
============ ============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 30, 2000 AND JANUARY 31, 1999
2000 1999
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 502,564 $ 290,592
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,013,416 1,014,895
Loss on closing of restaurant -- 93,909
(Gain) loss on disposal of assets (10,284) 2,045
----------- -----------
CASH PROVIDED BY OPERATIONS 1,505,696 1,401,441
Increase (decrease) in cash attributable
to changes in assets and liabilities:
Miscellaneous receivables 8,241 (5,050)
Inventories 31,513 43,556
Prepaid expenses 4,456 (58,925)
Accounts payable (58,261) (287,704)
Accrued expenses and other liabilities 77,551 104,144
Income taxes payable 34,600 19,700
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,603,796 1,217,162
----------- -----------
INVESTING ACTIVITIES:
Capital expenditures (510,948) (1,199,438)
Proceeds from sale of assets 149,497 800
Loss on closing of restaurant -- (49,386)
Sale or redemption of investments 481,400 196,000
Purchase of investments (708,300) (249,000)
Proceeds from notes receivable - discontinued
operations - related party 66,386 240,803
Equity in life insurance policies (44,662) (52,162)
Other assets (8,529) 41,937
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (575,156) (1,070,446)
----------- -----------
FINANCING ACTIVITIES:
Repayment of debt (586,343) (759,829)
Proceeds from debt -- 349,000
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (586,343) (410,829)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 442,297 (264,113)
CASH AND CASH EQUIVALENTS at beginning 871,950 1,136,063
----------- -----------
CASH AND CASH EQUIVALENTS at end $ 1,314,247 $ 871,950
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 144,164 $ 122,819
=========== ===========
Income taxes paid $ 46,166 $ 900
=========== ===========
NONCASH TRANSACTIONS:
In fiscal 1999 the Company acquired the
Vero Beach property and restaurant
for $1,188,507, payable $308,507 in cash
and a $880,000 mortgage.
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Business:
Chefs International, Inc. and its subsidiaries (the "Company") operate
seven seafood restaurants, located in New Jersey and Florida, generally
under the trade name, "Lobster Shanty". The Company also operates
Garcia's, a franchised Mexican restaurant in New Jersey.
Principles of Consolidation:
The accompanying consolidated financial statements include the accounts
of the Company and all of its wholly-owned subsidiaries. Intercompany
transactions and balances have been eliminated in consolidation.
Concentrations of Credit Risk:
The Company maintains cash balances at several financial institutions
in New Jersey and Florida. The balances are insured by the Federal
Deposit Insurance Corporation up to $100,000. Uninsured cash balances
totaled approximately $1,095,000.
Cash and Cash Equivalents:
Cash equivalents are comprised of certain highly liquid investments
with a maturity of three months or less when purchased.
Investments:
At January 30, 2000, the Company held investments, consisting of
certificates of deposit, which are held for non-trading purposes and
are classified as current or long-term based on maturities at the
balance sheet date. The investments are stated at cost and had a market
value of approximately $1,109,000.
At January 30, 2000, investments also include $35,000 representing the
estimated fair value of 5% of the stock of Mister Cookie Face, a
business segment the Company sold to a related party in 1997 (see Note
5).
Inventories:
Inventories consist of food, beverages and supplies. Inventories are
stated at the lower of cost (determined by the first-in, first-out
method) or market.
Property, Plant and Equipment and Depreciation:
Property, plant and equipment are carried at cost. Depreciation is
computed over the estimated useful lives of the assets using the
straight-line method ranging from 3 to 40 years.
Goodwill:
Goodwill represents cost in excess of fair value of businesses acquired
and is being amortized over an estimated useful life of 40 years under
the straight-line method.
F-7
<PAGE>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Impairment:
Certain long-term assets of the Company, including goodwill, liquor
licenses and property, plant and equipment, are reviewed at least
annually as to whether their carrying value has become impaired. This
evaluation is done by comparing the carrying value of the asset to the
value of the projected discounted net cash flow from related
operations. Impairment, if any, is measured by the amount that the
carrying value of the asset exceeds the fair value usually measured by
projected discounted net cash flow.
Management also re-evaluates annually the periods of amortization to
determine whether subsequent events and circumstances warrant revised
estimates of useful lives. As of January 30, 2000, management expects
these assets to be fully recoverable.
Liquor Licenses:
Liquor licenses are amortized over 40 years under the straight-line
method.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Income Taxes:
The Company uses the asset and liability method in accounting for
income taxes. Under this method, deferred tax assets and liabilities
are determined based on differences between financial reporting and tax
bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected
to reverse.
Advertising:
The Company expenses advertising costs as incurred. Advertising costs
for fiscal 2000 and 1999 were $494,002 and $541,464, respectively.
Reclassifications:
Certain items in the fiscal 1999 consolidated statement of operations
have been reclassified to conform to fiscal 2000 presentation. The
reclassification had no effect on net income.
F-8
<PAGE>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVENTORIES
Inventories consist of the following:
Food $ 483,407
Beverages 111,467
Supplies 369,260
-----------
Totals $ 964,134
===========
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
Land $ 3,262,159
Buildings and improvements, including leaseholds 14,650,706
Furniture and equipment 1,704,460
Construction in progress 99,997
China, glassware and utensils (a) 102,835
-----------
$19,820,157
===========
(a) Carried at original cost for each restaurant. All replacement
purchases are charged to expense as incurred.
Depreciation expense was $968,423 and $964,540 for fiscal 2000 and
1999, respectively.
4. INTANGIBLE ASSETS
Intangible assets consist of:
Liquor
Goodwill Licenses
-------- --------
Cost $949,820 $837,307
Less: Accumulated amortization 471,299 314,008
-------- --------
$478,521 $523,299
======== ========
Amortization expense was $44,993 and $51,138 for fiscal 2000 and 1999,
respectively.
F-9
<PAGE>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. DUE ON SALE OF DISCONTINUED OPERATIONS FROM RELATED PARTY
On February 20, 1997, the Company sold 95% of the common stock of
Mister Cookie Face ("MCF"), its ice cream production segment, to a
director for an aggregate purchase price of $1,600,000, consisting of a
$500,000 cash payment and three notes totaling $1,100,000. The first
note for $100,000 was due on or before March 24, 1997, the second note
for $500,000, is due in installments through July 1, 2000, and the
third note for $500,000 is due on or before February 20, 2004, with
mandatory prepayments based on MCF's cash flow. The notes are secured
by a first lien on all of MCF's assets, however, the Company has agreed
to subordinate the loans up to $1,750,000 for additional financing
obtained by the purchaser. Based on the estimated present value of the
payments, management recorded a valuation allowance of $601,050 against
the second and third notes. During fiscal 1999, MCF requested a
restructuring of the terms of the second and third notes. The Company
has agreed to permit MCF to make monthly payments of $10,000 toward the
second note and to extend the amount ($41,843) required to be paid on
the third note through July 2000, at which time the Company and MCF
intend to restructure payment of the remaining amounts due.
Cash receipts for these notes are applied to principal and interest
based on the discounted note payment schedules, which resulted in
additional $26,548 and $40,000 of interest income being recognized in
fiscal 2000 and 1999, respectively, and have been applied as follows
for fiscal 2000 and 1999:
January 30, January 31,
2000 1999
----------- -----------
Interest income $ 63,613 $ 78,541
======== ========
Average recorded investment in loans $243,970 $326,222
======== ========
Cash basis interest income $ 65,559 $ 79,427
======== ========
Valuation allowance $534,502 $561,050
======== ========
F-10
<PAGE>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. NOTES AND MORTGAGES PAYABLE
Mortgage payable in monthly installments
of $8,319, inclusive of interest at 7.82%,
through November 2008, collateralized by
real estate located in Vero Beach, Florida $ 844,806
Mortgage payable in various monthly
installments to amortize the mortgage at
the rate of $105,000 annually, through
December 2002 with interest at 9.25%,
collateralized by real estate located in
Toms River, New Jersey 315,000
Mortgage payable in monthly installments
of $2,067 through May 2003, plus interest
at LIBOR plus 2.25%, collateralized by real
estate located in Toms River, New Jersey 82,667
Note payable in various monthly installments
to amortize the note at the rate of $200,000
annually through November 15, 2000, with
interest at 7.51%, collateralized by real
estate located in Point Pleasant Beach,
New Jersey 199,996
-----------
1,442,469
Less: Current maturities 364,086
-----------
$ 1,078,383
===========
Annual maturities for fiscal years 2002 through 2005 are $166,707,
$169,746, $51,492 and $46,346, respectively.
At January 30, 2000, the Company has a $500,000 line of credit which is
collateralized by real estate located in Point Pleasant Beach, New
Jersey. The line is due June 30, 2000 and bears interest at LIBOR plus
2.25%. At January 30, 2000, there were no amounts used under the line
of credit.
At January 30, 2000, LIBOR was 5.80%.
All of the Company's mortgages and loans are with the same financial
institution. The loan covenant governing the borrowings includes, among
other items, requirements relating to tangible net worth, capital
expenditures, working capital components and restrictions on dividends.
7. TRANSACTIONS WITH RELATED PARTIES
In December 1999, the Company entered into an agreement with a company
controlled by the principal shareholders of the Company. The agreement
calls for the Company to provide consulting to the officers and
employees of the company concerning all matters relating to the
operation of a restaurant and tavern known as Moore's Inn. The
agreement provides for the Company to receive fees of $1,800 per week.
Consulting income for fiscal 2000, pursuant to this agreement, was
$7,200 (see Note 15).
A former principal stockholder of the Company is the principal owner of
a partnership which leased the Vero Beach restaurant to the Company. In
October 1998 the Company acquired the property for $1,100,000. Total
rent expense was $90,000 for fiscal 1999.
F-11
<PAGE>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. TRANSACTIONS WITH RELATED PARTIES (Continued)
A director purchased 95% of a subsidiary as of January 26, 1997 (see
Note 5).
The Company has a retirement agreement with a former director/employee
(see Note 8).
8. RETIREMENT PROGRAMS
The Company has a non-qualified supplemental retirement program which
provides life insurance to certain eligible employees. The Company is
the owner of all cash values of the policies. The death benefit is
split, reimbursing the Company for premiums paid with the balance paid
to the beneficiary designated by the employee. Employees vest in the
program after ten years, with the option to take ownership of the
policy at that time or let the Company continue to fund the policy for
an additional 5 years. The Company has recorded, as a long-term asset
in the accompanying balance sheet, its equity in life insurance for
premiums advanced and has included in other long-term liabilities the
Company's estimated liability for the amount of the equity in life
insurance which the Company will be required to turn over to employees.
Additionally, the Company has an agreement with a former/director
employee which provides for the payment of $20,000 per year through
2007. The discounted present value of this agreement is included in
other long-term liabilities. The amount has been partially insured with
a life insurance contract owned by the Company.
The Company's expense for these plans was $44,638 and $46,253, for
fiscal 2000 and 1999, respectively.
9. COMMITMENTS AND CONTINGENCIES
The Company leases restaurant, parking lots and equipment under
operating leases expiring at various times through the year 2009.
Minimum future rental payments under noncancelable operating leases as
of January 30, 2000, are as follows:
2001 $ 120,950
2002 130,290
2003 145,888
2004 126,577
2005 127,647
Thereafter 393,436
------------
$ 1,044,788
============
Rent expense was $203,490 and $389,612, for fiscal 2000 and 1999,
respectively.
The Company has employment agreements terminating March 2001 with two
employees for annual amounts ranging from $95,200 to $164,100. These
agreements provide for lump sum payments in the event of the
termination of the employees without cause or a change in control of
the Company, as defined, for a portion of the unexpired term of the
contracts.
F-12
<PAGE>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. EARNINGS PER SHARE
The weighted average number of shares outstanding used to compute basic
earnings per share for fiscal 2000 and 1999 was 4,488,162 and
4,488,369, respectively. Stock options to purchase 249,060 shares in
fiscal 1999 were outstanding, but were not included in the computation
of diluted earnings per share because the options exercise price was
greater than the average market price of the common shares, and
therefore the effect would be anti-dilutive.
11. STOCK OPTIONS
Under its 1982 Incentive Stock Option Plan, the Company was permitted
to grant key executives stock options through June 1992. Under the
plan, an aggregate of 55,556 shares of common stock were reserved for
issuance. Options vested immediately and were exercisable over a period
of five or ten years. On November 1999, the remaining 36,560 options
outstanding under this plan expired.
In October 1994 and 1995, the Company's stockholders approved grants of
216,667 and 300,000 non-qualified options to directors of the Company.
The exercise prices for the 1994 and 1995 grants were $3.75 and $3.00,
respectively. The options granted in both years vested immediately and
were exercisable over five years. As part of the sale of Mister Cookie
Face (see Note 5), a director forfeited 304,167 options issued in 1994
and 1995. During fiscal 2000, 162,501 options expired and 50,000
options were canceled.
The Company utilizes the disclosure-only provisions of SFAS No. 123
"Accounting for Stock-Based Compensation" and applies Accounting
Principles Board ("APB") Opinion No. 25 and related interpretations in
accounting for its stock option plans. Under APB No. 25, because the
exercise prices of the Company's employee stock options were equal to
or greater than the market prices of the underlying Company stock on
the date of grant, no compensation expense is recognized. Since the
options issued were for past service, there would have been no effect
on net income for 1999 if the options had been recorded at fair value
under SFAS No. 123.
Summary of stock option activity is as follows:
<TABLE>
2000 1999
------------------------------ ----------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
-------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Outstanding - beginning of year 249,060 $ 3.19 249,060 $3.19
Canceled during the year (50,000) (3.00) - -
Expired during the year (199,060) (3.24) - -
-------------- ------------- ------------- ------------
Outstanding - end of year - $ - 249,060 $3.19
============== ============= ============= ============
Exercisable - end of year - $ - 249,060 $3.19
============== ============= ============= ============
</TABLE>
F-13
<PAGE>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. INCOME TAXES
The significant components of deferred tax assets and liabilities as of
January 30, 2000 are as follows:
Deferred Tax Assets:
Tax loss carryforwards $3,361,000
Capital loss carryforwards 198,000
Other 16,000
----------
Totals 3,575,000
----------
Deferred Tax Liabilities:
Depreciation 201,000
Valuation reserves 205,000
Other 28,000
----------
Totals 434,000
----------
Net Deferred Tax Assets 3,141,000
Less: Valuation allowance 3,141,000
----------
$ -
==========
As of January 30, 2000, the valuation allowance reduces the net
deferred tax asset to zero. The net change in the valuation allowance
was a $419,000 reduction for fiscal year 2000. The change in fiscal
2000 was primarily due to the utilization of tax loss carryfowards.
The Company used approximately $984,000 and $567,000 of operating loss
carryforwards in fiscal 2000 and 1999, respectively. The tax effect was
as follows:
2000 1999
--------- ---------
Federal:
Income tax expense $ 335,000 $ 182,000
Operating loss carryforward (323,000) (182,000)
--------- ---------
Total $ 12,000 $ --
========= =========
State:
Income tax expense $ 78,235 $ 44,000
Operating loss carryforward (9,600) (23,400)
--------- ---------
Total $ 68,635 $ 20,600
========= =========
F-14
<PAGE>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. INCOME TAXES (Continued)
The Company has available at January 30, 2000, operating loss
carryforwards as follows:
Year of Expiration
2001 $ 1,565,887
2002 1,509,463
2003 2,072,345
2004 2,942,316
2005 472,062
2006 220,595
2007 215,047
2008 196,704
2009 155,075
2010 103,553
2011 144,559
2012 88,405
-----------
TOTAL $ 9,686,011
===========
A reconciliation of the Company's effective tax rate to the statutory
U.S. Federal tax rate is as follows:
2000 1999
-------- -------
Federal statutory rate 34.0% 34.0%
State taxes net of Federal benefit 5.0 5.0
Valuation allowance change 31.8 28.6
Operating loss carryforwards (57.0) (61.0)
-------- -------
Effective Rate 13.8% 6.6%
======== =======
13. FAIR VALUE
The following table summarizes the carrying amount and estimated fair
value of the Company's significant financial instruments, all of which
are held for non-trading purposes.
<TABLE>
<CAPTION>
January 30, 2000
------------------------------------------
Carrying Estimated
Amount Fair Value
----------------- -----------------
<S> <C> <C>
Long-term investments $ 526,000 $ 508,000
Related party long-term receivables $ 129,993 $ 129,993
Long-term debt $1,078,383 $1,078,383
</TABLE>
F-15
<PAGE>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. FAIR VALUE (Continued)
For certain short-term instruments, including cash and cash equivalents,
investments, receivables, related party receivables, payables, and debt,
it was assumed that the carrying amount approximated fair value for the
majority of these instruments because of their short maturities. The fair
value of long-term financial instruments is determined to be the same as
the carrying amount, based on the similarity of current market interest
rates with the interest rates of the financial instruments.
14. 52-53 WEEK PERIOD
The Company's year end is the last Sunday in January. The statements of
operations are comprised of a 52-week period for fiscal 2000, and a
53-week period for fiscal 1999.
15. SUBSEQUENT EVENT
On February 23, 2000, the Company acquired for $600,000 the furniture,
fixtures, equipment and a liquor license associated with the operations
of Moore's Inn, a restaurant and tavern, owned by the principal
shareholders of the Company. Additionally, the Company entered into a
five-year lease for the restaurant property with a partnership owned by
the principal shareholders of the Company. The lease requires minimum
annual rentals of $90,000, plus percentage rent of 6% of sales exceeding
$1.5 million. The lease contains three five-year renewal options.
F-16
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
(Registrant) CHEFS INTERNATIONAL, INC.
-----------------------------------
By /s/ ANTHONY C. PAPALIA
-----------------------------------
Anthony C. Papalia, President,
Principal Executive, financial
and accounting officer
Date April 28, 2000
-----------------------------------
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the date indicated.
By /s/ ROBERT M. LOMBARDI By /s/ MICHAEL F. LOMBARDI
---------------------------- -------------------------
Robert M. Lombardi, Chairman Michael F. Lombardi, Director
of the Board of Directors
Date April 28, 2000
Date April 28, 2000 ---------------------------------
---------------------------
By /s/ ANTHONY LOMBARDI By /s/ STEPHEN F. LOMBARDI
---------------------------- ----------------------------------
Anthony Lombardi, Director Stephen F. Lombardi, Director
Date April 28, 2000 Date April 28, 2000
--------------------------- ---------------------------------
By /s/ JOSEPH S. LOMBARDI
----------------------------
Joseph S. Lombardi, Director
Date April 28, 2000
---------------------------
CHEF'S INTERNATIONAL, INC.
---ooOoo---
BY - LAWS
---ooOoo---
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. 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 the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the Borough of Spring Lake, State of New Jersey, at
such place as may be fixed from time to time by the board of directors, or at
such other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and
1.
<PAGE>
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1976, shall be held on the fourth Wednesday of January if not a legal holiday,
and if a legal holiday, then on the next secular day following, at 11:00 A.M.,
or at such other date and time as shall be designated from time to time by the
board of directors and stated in the notice of the meeting, at which they shall
elect by a plurality vote a board of directors, and transact such other business
as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. 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
2.
<PAGE>
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 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 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.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
3.
<PAGE>
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
trans- action of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, with- out notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting, at which a quorum shall be present or represented, any
business may be transacted which might have been trans- acted at the meeting as
originally notified. If the adjourn-
4.
<PAGE>
ment is for more than thirty days, or if after the 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.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
5.
<PAGE>
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.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be not less than three nor more than fifteen. The first board shall
consist of three directors. Thereafter, within the limits above specified, the
number of directors shall be determined by resolution of the board of directors
or by the stockholders at the annual meeting. The directors shall be elected at
the annual meeting of the stockholders, except as provided in Section 2 of this
Article, and each director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number
6.
<PAGE>
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.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be not less than three nor more than five. The first board shall
consist of three directors. Thereafter, within the limits above specified, the
number of directors shall be determined by resolution of the board of directors
or by the stockholders at the annual meeting. The directors shall be elected at
the annual meeting of the stockholders, except as provided in Section 2 of this
Article, and each director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number
7.
<PAGE>
of directors may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, and the directors so chosen
shall hold office until the next annual election and until their successors are
duly elected and shall qualify, unless sooner displaced. If there are no
directors in office, then an election of directors may be held in the manner
provided by statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
Section 3. 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 statute or
by the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders.
8.
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the president
on one day's notice to each
9.
<PAGE>
director, either personally or by mail or by telegram; special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of two directors.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. 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.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of 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.
Section 10. Unless otherwise restricted by the
10.
<PAGE>
certificate or incorporation or these bylaws, members of the board of directors,
or any committee designated by the board of directors, may participate in a
meeting of the board of directors, or any committee, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. 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 a member of a committee, 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 of directors, shall have and may exercise all the powers
and authority of the board of directors in the management of the business and
affairs
11.
<PAGE>
of the corporation, and may authorize the seal of the corporation to be affixed
to all papers which may require it; but no such committee shall have the power
or authority in reference to amending the certificate of incorporation, adopting
an agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, recommending to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or amending the by-laws of the
corporation; and, unless the resolution or the certificate of incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the board of directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and
12.
<PAGE>
may be paid a fixed sum for attendance at each meeting of the board of directors
or a stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section l4. Unless otherwise restricted by the certificate of
incorporation or by law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
13.
<PAGE>
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board
of directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice--presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a president, one or more
vice-presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such
14.
<PAGE>
powers and perform such duties as shall be determined from time to time by the
board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
15.
<PAGE>
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assist-
16.
<PAGE>
ant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such assistant secretary. The board of directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election), shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
17.
<PAGE>
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
18.
<PAGE>
ARTICLE VI
INDEMNIFICATION
Section 1. The corporation shall indemnify its officers, directors,
employees, and agents to the extent permitted by the General Corporation Law of
Delaware.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
chairman or vice-chairman of the board of directors or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Section 2. Any of or all the signatures on the certificate may be
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.
19.
<PAGE>
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 4. 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, assignment 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.
20.
<PAGE>
FIXING RECORD DATE
Section 5. 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, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or 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, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. 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.
REGISTERED STOCKHOLDERS
Section 6. 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, arid to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares,
21.
<PAGE>
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.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
22.
<PAGE>
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
23.
<PAGE>
ARTICLE IX
AMENDMENTS
Section 1. 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, when
such power is conferred upon the board of directors by the certificate of
incorporation, at any regular 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 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 by-laws.
24.
LEASE AGREEMENT
Prepared by:
--------------------------
Anthony Mancuso, Esq.
This Agreement is made on January, 2000
Between
Moore's Realty Associates, a New Jersey Partnership
residing or located at 1862 Oak Tree Road
in the Township of Edison in the County of
Middlesex and the State of New Jersey, herein designated as the Landlord,
And
Chefs International, Inc.
residing or located at 62 Broadway
in the Borough of Point Pleasant Beach in the County
Ocean and the State of New Jersey , herein designated as
the Tenant;
Witnesseth that, the Landlord does hereby lease to the Tenant and the
Tenant does hereby rent from the Landlord the following described premises:
That portion of Block 85.11, Lot 21 commonly known as 402 West Main Street,
(Building "A") Freehold Township, Monmouth County, New Jersey upon which Moore's
Inn, a restaurant and tavern, is located, as well as the non-exclusive right to
utilize common areas existing on such property and identified on the attached
Schedule A as the parking areas, plaza, clock tower, reflecting pool, refuse
area and raised planter. This lease shall be construed to allow tenant the
non-exclusive right to utilize other, unnamed common areas existing upon Lot 21.
for a term of five (5) years commencing on 2/23/00, and ending on 2/22/05
to be used and occupied only and for no other purpose than the operation of a
restaurant and tavern. See paragraph 27 for termination and option provisions.
Upon the following Conditions and Covenants:
<PAGE>
1st: The Tenant covenants and agrees to pay to the Landlord rent as
set forth in Paragraph 28.
2nd: The Tenant has examined the premises and has entered into this
lease without any representation on the part of the Landlord as to the condition
thereof. The Tenant shall take good care of the premises and shall at the
Tenant's own cost and expenses, make all repairs, including painting and
decorating, and shall maintain the premises in good condition and state of
repair, and at the end or other expiration of the term hereof, shall deliver up
the rented premises in good order and condition, wear and tear from a reasonable
use thereof, and damage by the elements not resulting from the neglect or fault
of the Tenant, excepted. The Tenant shall neither encumber nor obstruct the
sidewalks, driveway, yards, entrances, hallways and stairs, but shall keep and
maintain the same in a clean condition, free from debris, trash, refuse, snow
and ice.
3rd: The Tenant shall promptly comply with all laws, ordinances,
rules, regulations, requirements aid directives of the Federal, State and
Municipal Governments or Public Authorities and of all their departments,
bureaus and subdivisions, applicable to and affecting the said premises, their
use and occupancy, for the correction, prevention and abatement of nuisances,
violations or other grievances in, upon or connected with the said premises,
during the term hereof, and shall promptly comply with all orders, regulations,
requirements and directives of the Board of Fire Underwriters or similar
authority and or any insurance companies which have issued or are about to issue
policies of insurance covering the said premises and its contents, for the
prevention of fire or other casualty, damage or injury, at the Tenant's own cost
and expense.
4th: The Tenant shall not assign, mortgage or hypothecate this
lease, nor sublet or sublease the premises or any part thereof; nor occupy or
use the leased premises or any part thereof, nor permit or suffer the same to be
occupied or used for any purposes other than as herein limited, nor for any
purpose deemed unlawful, or extra hazardous, on account of fire or other
casualty.
5th: No alterations, additions or improvements shall be made, and
no climate regulation, air conditioning, cooling, heating or sprinkler systems,
television or radio antennas, heavy equipment, apparatus and fixtures, shall be
installed in or attached to the leased premises, without the written consent of
the Landlord. Unless otherwise provided herein, all such alterations, additions
or improvements and systems, when made, installed in or attached to the said
premises, shall belong to and become the property of the Landlord and shall be
surrendered with the
<PAGE>
premises and as part thereof upon the expiration or sooner termination of this
lease, without hindrance, molestation or injury.
6th: Beginning on the Commencement Date and throughout the term
hereof, Tenant shall, at its own cost and expense, provide and keep in force
General Liability Insurance insuring both Landlord and Tenant, as additional
insured, against claims for death and bodily injury and property damage, fire,
flood, wind, hurricane and other hazard and/or casualty coverage for the
building and common areas, in amounts and of types acceptable to the Landlord.
Liability coverage shall include occurrences occurring in the exterior common
areas; including parking areas, the plaza, the clock tower, raised planter, the
reflecting pool and the refuse area.
All risk of loss to the Premises prior to the Commencement
Date shall be with Landlord. If any loss to the Premises not repaired by
Landlord and in excess of $5,000 occurs prior to the Commencement Date, Tenant
may terminate this Lease, without liability. The policy proceeds shall be
payable to the Landlord in the event of a loss and shall be made available to
Tenant if Tenant is to rebuild or repair the building. If the Premises shall be
partially damaged by fire, the elements, or other casualty, then same shall be
repaired as speedily as practicable. The policy of insurance shall be in a
company approved in the State of New Jersey, and Tenant shall, at the
commencement of the term of this Lease, furnish Landlord with a Certificate of
Insurance evidencing such coverage. Tenant shall have the right to provide
coverage as set forth above by providing separate or multiple policies providing
basic coverage and excess umbrella coverage, provided that the total insurance
coverage is in an amount acceptable to the Landlord. Tenant shall also maintain
business interruption insurance including, but not limited, to the annual base
rent payable to Landlord.
In case of fire or other casualty, the Tenant shall give
immediate notice to the Landlord. If the premises shall be partially damaged by
fire, the elements, or other casualty, the Landlord shall repair the same as
speedily as practicable. If, in the opinion of the Tenant, the premises be so
extensively and substantially damaged as to render them untenantable, then the
rent shall cease until such time as the premises shall be made tenantable by the
Landlord. However, if, in the opinion of the Tenant, the premises be totally
destroyed or so extensively and substantially damaged as to require practically
a rebuilding thereof, then the rent shall be paid up to the time of such
destruction and then and from thenceforth this lease shall come to an end. In no
event however, shall the provisions of this clause become effective or be
applicable, if the fire or other casualty and damage shall be the result of the
carelessness, negligence, or improper conduct of the Tenant or the Tenant's
agents, employee, guests, licensees,
<PAGE>
invitees, subtenants, assignees, or successors. In such case, the Tenant's
liability for the payment of rent and the performance of all the covenants,
conditions and terms hereof on the Tenant's part to be performed shall continue
and the Tenant shall be liable to the Landlord for the damage and loss suffered
by the Landlord.
Until such time as Building "B" is rented to either tenant or
to a third party, tenant herein shall secure fire, casualty, and hazard
insurance on Building "B" and landlord shall reimburse to tenant the cost of
insuring Building "B".
7th: The Tenant agrees that the Landlord and the Landlord's agents,
employees or other representatives, shall have the right to enter into and upon
the said premises or any part thereof, at all reasonable hours, for the purpose
of examining the same or making such repairs or alterations therein as may be
necessary for the safety and preservation thereof. This clause shall not be
deemed to be a covenant by the Landlord nor be construed to create an obligation
on the part of the Landlord to make such inspection or repairs.
8th: The Tenant agrees to permit the Landlord and the Landlord's
agents, employees or other representative to show the premises to persons
wishing to rent or purchase the same. A sale of the premises shall not disturb
Tenant's right to use and occupy the premises in accordance with this Lease
Agreement.
9th: In case of the destruction of or any damage to the glass in
the leased premises, or the destruction of or damage of any kind whatsoever to
the said premises, caused by the carelessness, negligence or improper conduct on
the part of the Tenant or the Tenant's agents, employees, guests, licensees,
invitees, subtenants, assignee or successors, the Tenant shall repair the said
damage or replace or restore any destroyed parts of the premises, as speedily as
possible, at the Tenant's own cost and expense.
10th: The Tenant shall not place nor allow to be placed any signs of
any kind whatsoever, upon in or about the said premises or any part thereof,
except of a design and structure and in or at such places as may be indicated
and consented to by the Landlord in writing. In case the Landlord or the
Landlord's agents, employees or representatives shall deem it necessary to
remove any such signs in order to paint or make any repairs, alterations or
improvements in or upon said premises or any part thereof they may be so
removed, but shall be replaced at the Landlord's expense when the said repairs,
alterations or improvements shall have been completed. Any signs permitted by
the Landlord shall at all times conform with all municipal ordinances or other
laws and regulations
<PAGE>
applicable thereto.
11th: The Landlord shall not be liable for any damage or injury
which may be sustained by the Tenant or any other person, as a consequence of
the failure, breakage, leakage, or obstruction of the water, plumbing, steam,
sewer, waste, or soil pipes, roof, drains, leaders, gutters, valleys, downspouts
or the like or the electrical, gas, power, conveyor, refrigeration, sprinkler,
air-conditioning or heating systems, elevators or hoisting equipment, or by
reason of the elements; or resulting from the carelessness, negligence or
improper conduct on the part of any other Tenant or of the Landlord or the
Landlord's or this or any other Tenant's agents, employees, guests, licensees
invitees, subtenants, assignees or successors; or attributable to any
interference with, interruption of or failure, beyond the control of the
landlord, of any services to be furnished or supplied by the Landlord.
12th: This lease shall not be a lien against the said premises in
respect to any mortgages that may hereafter be placed upon said premises. The
recording of such mortgage or mortgages shall have preference and precedence and
be superior and prior in lien to this lease, irrespective of the date of
recording and the Tenant agrees to execute any instruments, without cost, which
may be deemed necessary or desirable to further effect the subordination of this
lease to any such mortgage or mortgages.
13th: The Tenant has this day deposited with the Landlord the sum of
$7,500.00 as security for the payment of the rent hereunder and the full and
faithful performance by the Tenant of the covenants and conditions on the part
of the Tenant to be performed. Said sum shall be returned to the Tenant, without
interest, after the expiration of the term hereof, provided that the Tenant has
fully and faithfully performed all such covenants and conditions and is not in
arrears in rent. During the term hereof, the Landlord may, if the Landlord so
elects, have recourse to such security to make good any default by the Tenant,
in which event the Tenant shall, on demand, promptly restore said security to
its original amount. Liability to repay said security to the Tenant shall run
with the reversion and title to said premises, whether any change in ownership
thereof be by voluntary alienation or as the result of judicial sale,
foreclosure or other proceedings, or the exercise of a right of taking or entry
by any mortgagee. The Landlord shall assign or transfer said security, for the
benefit of the Tenant, to any subsequent owner or holder of the reversion or
title to said premises, in which case the assignee shall become liable for the
repayment thereof as herein provided, and the assignor shall be deemed to be
released by the Tenant from all liability to return such
<PAGE>
security. This provision shall be applicable to every alienation or change in
title and shall in no wise be deemed to permit the Landlord to retain the
security after termination of the Landlord's ownership of the reversion or
title. The Tenant shall not mortgage, encumber or assign said security without
the written consent of the Landlord.
14th: If for any reason it shall become impossible to obtain fire
and other hazard insurance on the buildings and improvements on the leased
premises, in an amount and in the form and in insurance companies acceptable to
the Landlord, the Landlord may, if the Landlord so elects at any time
thereafter, terminate this lease and the term hereof, upon giving to the Tenant
sixty days' notice in writing of the Landlord's intention to do so.
15th: The Tenant shall pay when due all the rents or charges for
water, sewer, or other utilities used by the Tenant, which are or may be
assessed or imposed upon the leased premises or which are or may be charged to
the Landlord by the suppliers thereof during the term hereof, and if not paid,
such rents or charges shall be added to arid become payable as additional rent
with the installment of rent next due or within 30 days of demand therefor,
whichever occurs sooner.
Until one year from the commencement of this lease, or until
such time as Building "B" is occupied by a tenant, or by a third party,
whichever comes first, tenant herein shall pay the entire cost of electricity to
electrify the exterior lights illuminating and servicing the parking area,
plaza, clock tower, reflecting pool, refuse area and other exterior common
areas. At the end of one year, or when Building B and/or C are occupied, either
the landlord or the tenants of Building B and/or C shall share in paying the
cost of water, electricity and all other utilities used for the exterior common
area based upon a reasonable formula devised by the landlord which takes into
account the square footage of each building, the hours of operation of each
building and other relevant factors in the reasonable discretion of the
landlord. The landlord shall be responsible for payment of the aforesaid common
area maintenance charges and the tenant shall be responsible for paying to
landlord its share of such charges as defined above.
16th: If the land and premises leased herein, or of which the leased
premises are a part, or any portion thereof, shall be taken under eminent domain
or condemnation proceedings, or if suit or other action shall be constituted for
the taking or condemnation thereof, or if in lieu of any formal condemnation
proceedings or actions, Landlord shall grant an option to purchase and or shall
sell and convey the said premises or any portion thereof, governmental or other
public authority, agency, body or public utility, seeking to take said land and
premises portion thereof, then this lease, at the option of the Landlord, shall
terminate, and the term hereof shall end
<PAGE>
as of such date as the Landlord shall fix by notice in writing: and the Tenant
shall have no claim or right to claim or be entitled to any portion of any
amount which may be awarded as damages or paid as the result of such
condemnation proceedings or paid as the purchase price for such option, sale or
conveyance in lieu of formal condemnation proceedings; and all rights of the
Tenant to damages, if any are hereby assigned to the Landlord. The Tenant agrees
to execute and deliver any instruments, at the expense of the Landlord, as may
be deemed necessary or required to expedite any condemnation proceedings or to
effectuate a proper transfer of title to such governmental or other public
authority, agency, body or public utility seeking to take or acquire the said
lands and premises or any portion thereof. The Tenant covenants and agrees to
vacate the said premises, remove all the Tenant's personal property therefrom
and deliver up peaceable possession thereof to the Landlord or to such other
partly designated by the Landlord in the aforementioned notice. Failure by the
Tenant to comply with any provisions in this clause shall subject the Tenant to
such costs, expenses, damages and losses as the Landlord may incur by reason of
the Tenant's breach hereof.
17th: If there should occur any default on the part of the Tenant in
the performance of any conditions and covenants herein contained, or if during
the term hereof the premises or any part thereof shall be or become abandoned or
deserted, vacated or vacant, or should the Tenant be evicted by summary
proceedings or otherwise, the Landlord, in addition to any prosecution therefor
for damages, re-enter the said premises and the same have and again possess and
enjoy; and as agent for the Tenant or otherwise, re-let the premises and receive
the rents therefor and apply the same, first to the payment of such expenses,
reasonable attorney fees and costs, as the Landlord may have been put to in
re-entering and repossessing the same and in making such repairs and alterations
as my be necessary; and second to the payment of the rents due hereunder. The
Tenant shall remain liable for such rents as may be in arrears and also the
rents as may accrue subsequent to the re-entry by the Landlord, to the extent of
the difference between the rents reserved hereunder and the rents, if any,
received by the Landlord during the remainder of the unexpired term hereof,
after deducting the aforementioned expenses, fees and costs; the same to be paid
as such deficiencies arise and are ascertained each month.
18th: Upon the occurrence of any of the contingencies set forth in
the preceding clause, or should the Tenant be adjudicated a bankrupt, insolvent
or placed in receivership, or should proceedings be instituted by or against the
Tenant for bankruptcy, insolvency, receivership, agreement of composition or
assignment for the benefit of creditors, or if this lease or the estate of the
Tenant hereunder shall pass to another by virtue of any court proceedings, writ
of execution, levy, sale, or by operation of law, the Landlord may, if the
Landlord so elects, at any time thereafter,
<PAGE>
terminate this lease and the term hereof, upon giving to the Tenant or to any
trustee, receiver, assignee or other person in charge or operating as custodian
of the assets or property of the Tenant, five days notice in writing, of the
Landlord's intention so to do. Upon the giving of such notice, this lease and
the term hereof shall end on the date fixed in such notice as if the said date
was the date originally fixed in this lease for the expiration hereof; and the
Landlord shall have the right to remove all persons, goods, fixtures and
chattels therefrom, by force or otherwise, without liability for damages.
19th: Any equipment, fixtures, goods or other property of the Tenant
not removed by the Tenant upon the termination of this lease, or upon any
quitting, vacating or abandonment of the premises by the Tenant, or upon the
Tenant's eviction, shall be considered as abandoned and the Landlord shall have
the right, without any notice to the Tenant, to sell or otherwise, dispose of
the same, at the expense of the Tenant and shall not be accountable to the
Tenant for any part of the proceeds of such sale, if any. The furniture,
fixtures and equipment described in Schedule A of an Agreement for Sale and
Purchase of Furniture, Fixtures and Equipment and Stock between the tenant and
Moore's Inn, Inc. shall not be considered property of the Tenant.
2Oth: If the Tenant shall fail, or refuse to comply with and perform
any conditions and covenants of the within lease, the Landlord may, if the
Landlord so elects, early out and perform such conditions and covenants, at the
cost and expense of the Tenant, and the said cost and expense shall be payable
on demand, or at the option of the Landlord shall be added to the installment of
rent due immediately thereafter but in no case later than one month after such
demand, or at the option of the Landlord shall be added to the installment of
rent due immediately thereafter but in no case later than one month after such
demand, whichever occurs sooner, and shall be due and payable as such, This
remedy shall be in addition to such other remedies as the Landlord may have
hereunder by reason of the breach by the Tenant of any of the covenants and
conditions in this lease contained.
21st: This lease and the obligation of the Tenant to pay the rent
hereunder and to comply with the covenants and conditions hereof, shall not be
affected, curtailed, impaired or excused because of the Landlord's inability to
supply any service or material called for herein, by reason of any rule, order,
regulation or preemption by any governmental entity, authority, department,
agency or subdivision or for any delay which may arise by reason of negotiations
for the adjustment of any fire or other casualty loss or because of strikes or
other labor trouble or for any cause beyond the control of the Landlord.
22nd: The terms, conditions, covenants and provisions of this lease
shall be deemed to be severable. If any
<PAGE>
clause or provision herein contained shall be adjudged to be invalid or
unenforceable by a court of competent jurisdiction or by operation of any
applicable law, it shall not affect the validity or any other clause or
provision herein, but such other clauses or provisions shall remain in full
force and effect.
23rd: The various rights, remedies, options and elections of the
Landlord, expressed herein, are cumulative, and the failure of the Landlord to
enforce strict performance by the Tenant of the conditions and covenants of this
lease or to exercise any election or option or to resort or have recourse to any
remedy herein conferred or the acceptance by the Landlord or any installment of
rent after any breach by the Tenant, in any one or more instances, shall not be
construed or deemed to be a waiver or relinquishment for the future by the
Landlord of any such conditions and covenants, options, elections or remedies,
but the same shall continue in full force and effect.
24th: All notices required under the terms of this lease shall be
given and shall be complete by mailing such notices to the address of the
parties as shown at the head of this lessee, or to such other address as may be
designated in writing, which notice of change of address shall be given in the
same manner.
25th: The Landlord covenants and represents that the Landlord is the
owner of the premises herein leased and has the right and authority to enter
into, execute and deliver this lease; and does further covenant that the Tenant
on paying the rent and performing the conditions and covenants herein contained,
shall and may peaceably and quietly have, hold and enjoy the leased premise for
the term aforementioned.
26th: This lease contains the entire contract between the parties.
No representative, agent or employee of the Landlord has been authorized to make
any representations or promises with reference to the Within letting or to vary,
alter or modify the terms hereof. No additions, changes or modifications,
renewals or extensions hereof, shall be binding unless reduced to writing and
signed by the Landlord and Tenant.
27th: The Landlord shall have the right to terminate this Lease
Agreement upon twelve (12) months' written notice to the Tenant. Such notice may
only be given if, for the preceding lease year, Landlord has not received as
rent an amount greater than Ninety Thousand ($90,000.00) Dollars. The Tenant
shall have the right to terminate this Lease Agreement upon six (6) months'
written notice, however, such notice shall not be given until eighteen (18)
months from the commencement of the initial term of this Lease Agreement.
Landlord grants to Tenant three separate options to renew this Lease Agreement
for a period of five (5) years per option after the expiration of the original
term, on the same terms and conditions as contained in this Lease Agreement
unless otherwise amended
<PAGE>
by this Lease Agreement. Tenant shall be deemed to have elected each such option
period unless Tenant provides written notice to Landlord of its intent not to
exercise such option at least six (6) months prior to the end of the original
term or the current option period, whichever is applicable. "Lease year" shall
be defined in this Lease as the twelve-month period beginning on the
commencement date of this Lease and ending twelve months thereafter.
Notwithstanding any conflicting or unclear provision to the contrary, the
following provisions shall apply during any of the three (3), five year options:
(a) The annual rent figure, payment not greater than which shall
trigger Landlord's right to terminate this lease shall
increase during each of the three option terms as follows:
Years 6 thru 10............. $100,000.00 per year
Years 11 thru 15............ $112,500.00 per year
Years 16 thru 20............ $125,500.00 per year
(b) During the three (3), five (5) year renewal terms the tenant's
right to terminate the lease can only be exercised upon giving
landlord twelve (12) months' advance written notice of
termination.
28th: Tenant agrees to pay Landlord as minimum annual rental for the
term of this lease, at such place as Landlord may from time to time designate,
the sum of Ninety Thousand ($90,000.00) Dollars payable in installments each
month of Seven Thousand, Five Hundred ($7,500.00) Dollars. These payments shall
constitute the minimum annual lease year rental, and may be supplemented by
additional lease year payments as provided below.
In addition to the minimum guaranteed rental specified above,
the Tenant shall also pay to the Landlord for each lease year during the term of
this lease a percentage rental determined by (a) multiplying the total gross
sales made in or from the demised premises during the particular lease year by
the percentage rental rate of six (6%) percent and then (b) subtracting from the
product thus obtained the minimum guaranteed rental paid by the Tenant to the
Landlord for such lease year. The percentage rental, if any, shall be paid
within ninety (90) day of the close of the particular lease year. In no event
shall the rent to be paid by the Tenant and retained by the Landlord for any
lease year be less than the annual lease year minimum guaranteed rental herein
specified. "Gross sales" shall be defined as the aggregate amount of all sales
(whether for cash, credit, or otherwise), of food, beverages, goods, and
articles, as well as all charges for services performed, made, or rendered in,
about, or in connection with the demised premises, including off-premises sales
and monies derived at or away from the demised premises, as long as they are in
connection with the restaurant and tavern operation conducted on the demised
premises. Excluded from "gross sales" shall be any and all federal, state,
municipal, or other taxes levied or payable on any of Tenant's receipts;
receipts from sales to employees, tips, gratuities or employee discounts for
food.
Notwithstanding anything to the contrary, during the three
(3), five (5) year renewal terms the minimum
<PAGE>
annual lease year rental shall increase as follows
Years 6 thru 10............ $100,000.00 per year
Years 11 thru 15........... $112,500.00 per year
Years 16 thru 20........... $125,500.00 per year
29th: The obligations of the tenant hereunder are contingent upon
the transfer of title to it of Plenary Retail Consumption Liquor License No.
1316-33-005-003, the terms of such sale being set forth in an Agreement For The
Sale and Purchase of Liquor License of even date between the tenant and Moore's
Inn, Inc. In the event this Lease terminates, for any reason, the Landlord shall
repurchase from the Tenant the aforesaid liquor license on the same terms and
conditions as set forth in the Agreement For The Sale and Purchase of Liquor
License.
30rd: During the first year of the lease term, Landlord shall not
sell or lease building "B" or the pad site for proposed building "C", both
located on the demised premises, to any entity other than the Tenant. Such
restriction shall not impose an obligation on the Tenant to purchase or lease
building "B" or the pad site for proposed building "C".
Landlord may not sell or lease building "B" or the pad sit for
proposed building "C" to any entity other than Tenant during the first year of
the lease term even if the Tenant does not enter into an agreement with Landlord
to purchase or lease building "B" or the pad site for proposed building "C".
If Tenant enters into an agreement with Landlord to purchase
or lease building "B" during the first year of the lease, the provisions of this
paragraph relating to the pad site for proposed building "C" shall be extended
to the second year of the lease term.
31th: The Landlord may pursue the relief or remedy sought in any
invalid clause, by conforming the said clause with the provisions of the
statutes or the regulations of any governmental agency in such case made and
provided as if the particular provision of the applicable statues or regulation
were set forth herein at length.
32th: In all references herein to any parties, persons, entities or
corporations the use of any particular gender or the plural or singular number
is intended to include the appropriate gender or number as the text of the
within instrument may require. All the terms, covenants and conditions herein
contained shall be for and shall inure to the benefit of and shall bind the
respective parties hereto, and their heirs, executors, administrators, personal
or legal representatives, successors and assigns.
33th: Landlord covenants that it will not operate, lease, rent or
permit to be occupied as a restaurant and/or tavern any premises owned, leased,
or occupied by it, its legal representatives, members of the Lombardi Family, or
<PAGE>
their successors or assigns, not presently occupied as such, within ten (10)
miles from the demised premises during the term of this lease. In addition,
Tenant shall have the sole and exclusive right to utilize the names "Moore's
Inn" and "Moore's Tavern" within the state of New Jersey during the term of this
lease.
This restrictive covenant shall not prevent Landlord, at the
termination of the one (1) year period provided in Paragraph 30, from leasing
Building "B" to a "non-competing" restaurant that shall not serve alcoholic
beverages and which "non-competing" restaurant shall offer a menu line
significantly dissimilar from that of Moore's Inn/Moore's Tavern. If there is
any dispute whether the Building "B" restaurant is a "non-competing" restaurant
said dispute shall be decided by an arbitrator knowledgeable in the food service
industry, which arbitrator shall be selected by the parties of by the Superior
Court of New Jersey in the absence of the parties' selecting an arbitrator.
Furthermore, this covenant shall not prevent any member of the Lombardi
family from acting as a shareholder, director and/or officer of Chefs
International, Inc. or any affiliate thereof.
34th: The parties acknowledge that tenant shall be occupying
Building A of Lot 21, Block 85.11 and appurtenances thereto and tenant shall
also utilize and enjoy in common with Building B and proposed Building C all
exterior common areas including parking, brick paver Plaza, clock tower,
reflecting pool, raised planter, refuse areas and other exterior common areas
and appurtenances.
Until such time as Building C is constructed, tenant shall pay
(7,700/12,700) 60.6% of the real estate taxes levied by the Township of Freehold
upon the land and improvements on Lot 21.
Upon Building C becoming constructed, tenant shall pay
(7,700t22,700) 33.9% of the real estate taxes levied by the Township of Freehold
upon the land and improvements of Lot 21 provided, however, that if proposed
Building C is constructed with significantly more or less than 10,000 square
feet, then the percentage of real estate taxes for land and improvements paid by
the Building A tenant shall be that percentage achieved by dividing 7,700 square
feet by the total square footage of Buildings A, B and C.
Tenant shall pay the Landlord said amounts when due and the
landlord shall then pay the total tax due to the Township of Freehold.
35th: Although this lease is intended to be a triple-net lease,
under no circumstances shall it be construed that Tenant shall pay any monies
for any charges, services, rents, bills or the like incurred prior to the
commencement of the lease term.
36th: Until one year from the commencement of this lease, or until
such time as Building B and/or C is
<PAGE>
leased to tenant or a third party, whichever comes first, tenant herein shall
pay the entire cost of the following exterior services: snow and ice removal in
parking lot, plaza and walkways; spreading of salt or chemical for ice
removal/melting; landscaping including grass cutting, weeding, mulching;
cleaning of parking lot and plaza area; planting of raised flower bed; cleaning
and maintenance of reflecting pool and other outside maintenance and cleaning.
At the end of one year, or upon the occupancy of Building B and/or
Building C, whichever comes first, the cost of the exterior services specified
in the preceding paragraph shall be shared by either the landlord or the tenants
of Building B and/or C based upon the square footage of each building, the hours
of operation of each building and other relevant factors in the reasonable
discretion of landlord
37th: "Tenant shall pay for its own garbage removal and shall pay
the lease/rental for any and all the compactors provided by Freehold Cartage.
The occupants of Building B and C shall each pay the cost of their own garbage
removal or contribute to same based upon a reasonable formula devised by
landlord. Tenant shall have the right to utilize the services of a cartage
company of its choice at the termination of lease agreements between Landlord
and Freehold Cartage. IN WITNESS WHEREOF, the parties hereto have hereunto set
their hands and seals, or caused these presents to be signed by their proper
corporate officers ad their proper corporate seal to be hereto affixed, the day
and year first above written.
WITNESS: MOORE'S REALTY ASSOCIATES, a
New Jersey Partnership, Landlord
/s/ CLAIRE M. MINNIG By: /s/ MICHAEL F. LOMBARDI
- ----------------------------------- -------------------------------------
Claire M. Minnig Michael F. Lombardi, Managing Partner
CHEFS INTERNATIONAL, INC.
CORPORATION, TENANT
Attest:
/s/ MARTIN W. FLETCHER By: /s/ ANTHONY PAPALIA
- ----------------------------------- -------------------------------------
Martin W. Fletcher, Secretary Anthony Papalia, President
Attest: MOORE'S INN, INC.
A NEW JERSEY CORPORATION
/s/ STEPHEN F. LOMBARDI By: /s/ MICHAEL F. LOMBARDI
- ----------------------------------- -------------------------------------
Stephen F. Lombardi, Secretary Michael F. Lombardi, President
AGREEMENT FOR THE SALE AND PURCHASE
OF LIQUOR LICENSE
-----------------------------------
THIS AGREEMENT, made and entered into this day of January, 2000, by and
between MOORE'S INN, INC., a New Jersey Corporation, trading as Moore's Inn,
with its main office located at 1862 Oak Tree Road, Edison, New Jersey, 08818
hereinafter called "Seller" or "Transferor", and CHEFS INTERNATIONAL, INC. a
Delaware Corporation authorized to do business in the state of New Jersey with
its main office at 62 Broadway, Point Pleasant, New Jersey, 08742, hereinafter
called "Purchaser" or "Transferee".
WHEREAS, the Seller is the owner of a State of New Jersey Retail Plenary
Consumption License, bearing License No. 1316-33-005-003, issued by the
governing body of the Township of Freehold, County of Monmouth, State of New
Jersey, which License is currently in active status at Moore's Inn, 402 West
Main Street, Freehold Township, Monmouth County, New Jersey; and
WHEREAS, the Seller is desirous of selling and Purchaser is desirous of
purchasing said license for the price and under the terms and conditions as
recited herein; and
WHEREAS, the Purchaser is willing to purchase and acquire the license for
use in the operation of a restaurant in the Township of Freehold, subject to the
terms and conditions of this Agreement, and the contingencies contained herein.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions contained herein, and for other good and valuable consideration, and
intending to be legally bound, the parties hereto mutually agree as follows:
1
<PAGE>
1. PURCHASE PRICE. the Seller shall sell to Purchaser, and the Purchaser
shall buy from Seller, the License for the Sum of THREE HUNDRED AND FIFTY
THOUSAND ($350,000.00) DOLLARS. An earnest money deposit in the amount of
thirty-five thousand ($35,000.00) Dollars, to be applied on account of the
purchase price (or forfeited as liquidated damages as more fully recited
hereinafter), shall be deposited in escrow with Anthony Mancuso, Esquire, whose
address is Two Hooper Avenue, Toms River, New Jersey, 08753, (hereinafter
"escrow agent"). The earnest money deposit shall be provided to escrow agent
within ten (10) days from the date of final execution of this agreement. The
escrow agent shall place the deposit in a non-interest bearing account. In
accordance with paragraph 10 below, the balance of the purchase price shall be
paid by depositing with the escrow agent, on or before the closing of this
transaction, an additional sum of three hundred and fifteen thousand
($315,000.00) Dollars, in regular corporate funds. If this agreement becomes
null and void, or is terminated in accordance with or on account of the failure
of one or more of the contingencies stated in paragraph 3 hereof, or the
warranties stated in paragraph 5 hereof, the said earnest money deposit shall be
returned to purchaser and neither party shall have any further obligation to the
other.
2. ESCROW AGENT. It is Agreed That All Funds Involved in This Sale
Regarding the Purchase Price of the License Shall be Deposited in Escrow With
Escrow Agent.
The Escrow Agent may act upon any instrument or other writing believed by
the Escrow Agent in good faith to be genuine, and to be signed by the property
party. In the event of any controversy or dispute hereunder, or with respect to
any question as to the
<PAGE>
construction of this Agreement, or any action to be taken by the Escrow Agent
hereunder, the Escrow Agent may confer with counsel (including members of his
own firm) and shall incur no liability for any action taken or suffered in good
faith in accordance with the advice or opinion of such counsel, including the
depositing of the escrow fund in a court of competent jurisdiction which shall
adjudicate any difference between Seller and Purchaser.
(a) The Escrow Agent shall not be liable in connection with the
performance of his duties hereunder, except for his own gross negligence, fraud
or theft.
(b) The Escrow Agent shall be under no duty or responsibility to
enforce any of the terms or conditions of this Agreement.
(c) Seller and Purchaser, jointly and severally, hereby indemnify the
Escrow Agent and hold the Escrow Agent harmless from and against any loss,
liability or expense incurred (absent Escrow Agent's gross negligence, fraud or
theft), arising out of or in connection with the acceptance or administration of
the Escrow Agent's duties hereunder, including, without limitation, the cost and
expense of defending the Escrow Agent against any claim or liability hereunder.
3. CONDITIONS PRECEDENT.
I. This Agreement shall be and is hereby made contingent upon the
following conditions to be satisfied or waived in writing by Purchaser within
forty-five (45) days (the "Contingency Period) (unless extended as hereinafter
provided) from the date of final execution of this Agreement;
(a) The Purchaser shall be able to negotiate and obtain a lease upon
terms fully satisfactory to Purchaser for premises known as Moore's Inn, 402
West Main Street,
<PAGE>
Freehold Township, New Jersey. If the Purchase shall be unable to enter into
such lease agreement within such time, this Agreement shall, at the option of
purchaser, become null and void, unless the parties agree, in writing, to extend
the time for satisfaction of this contingency.
(b) The Purchaser, at its sole cost and expense shall, upon entering
into aid lease agreement, or prior thereto at Purchaser's option, make
application to the governing body of the Township of Freehold, Monmouth County,
New Jersey, and be granted0 requisite governmental approval necessary for the
person-to-person transfer of the License from the Seller to the Purchaser for
use at 402 West Main Shv4 Freehold. All fees and advertising costs in connection
with the transfer application shall be paid by the Purchaser.
(c) The receipt by the Purchaser, prior to closing, of a license
violation search (to be obtained by Purchaser at its sole cost and expense) from
the Division of Alcoholic Beverage Control of the State of New Jersey indicating
no open or unresolved violations against the License as of the date of transfer
of said License.
(d) That all obligations outstanding to all new Jersey alcoholic
manufacturers, wholesalers and/or distributors have been or will be satisfied by
Seller prior to the closing and Seller shall so certify in writing at the
closing of the subject matter hereof. Purchaser shall also at the closing
(hereinafter defined) and at Purchaser's sole cost and expense, obtain a search,
which search shall not reveal the existence of any open invoices involving the
sale or purchase of alcoholic or malt or brewed beverages as respects the
License. However, if said search reveals the existence of any such open
invoices, it shall be Seller's obligation (prior to or at closing) to pay the
same in full, together with any interest
<PAGE>
and/or penalties as may be assessed.
(e) That no governmental investigation affecting the License be in
process at the time of settlement and closing and that Purchaser acquire said
License free and clear from any such investigations; and Seller shall so certify
in writing at the closing of the subject matter hereof.
(f) That Seller has not done any acts or incurred any debts which
encumber the License, and the License be transferred free and clear of all
liens, claims, encumbrances, security interest and/or restrictions, including
but not limited to any liens or claims of any taxing authority.
(g) That there not be any restrictions or special limitations imposed
by any authority upon the use of License that are not acceptable to Purchaser.
(h) That Purchaser obtain at Purchaser's own cost and expense, a
Judgment, Federal Lien and Bankruptcy Search (the "Search") indicating that as
of the date of settlement and closing herein: (1) that no federal lien has been
filed against the Seller or the License; (2) that the Seller is not, either
voluntarily or involuntarily, subject to any Bankruptcy or similar provision of
any federal or state bankruptcy law or rule or similar statute; and (3) there
are no judgments or liens against the License.
The Search shall be performed by a title company authorized to issue title
insurance in the State of New Jersey, which title insurance company shall be
reasonably satisfactory to the Purchaser. The Search shall be performed in
Middlesex County. In the event that a judgment affecting the License or federal
tax Hen exists, it shall be Seller's obligation to pay the same at closing,
together with all penalties and interest due thereon. In the event that the
<PAGE>
Seller is subject to Bankruptcy or similar law provisions as aforesaid, it shall
be Seller's sole responsibility, at Seller's cost and expense, to obtain the
approval of this sale from the Bankruptcy Trustee or other such appropriate
Court so that the subject License may be transferred to the Purchaser herein in
accordance with the terms hereof.
(i) Notwithstanding anything herein to the contrary, the submission of
the liquor license transfer application to the Clerk of the Township of Freehold
within fifteen (15) days from the date of final execution of this Agreement.
4. EXTENSION PERIODS. Notwithstanding anything herein to the contrary, it
is contemplated that approval of the subject transfer will be scheduled to occur
before the Freehold Township council at its first regularly scheduled meeting
subsequent to the submission of the License Transfer Application. If for any
reason whatsoever, the meeting is not scheduled or the transfer application is
not presented to the council at its first regularly scheduled meeting subsequent
to the submission of the License Transfer Application, the terms of this
Agreement shall immediately be extended to the date of the next scheduled
meeting of the Freehold Township council (provided that the transfer application
is listed on the agenda thereof for said date). If not so listed, then the term
of this Agreement shall be extended to the date of the next succeeding council
meeting, etc., from meeting date to meeting date until the matter is listed on
the agenda of said council, unless the failure to so list is the fault solely of
the Purchaser. In this latter event, this Agreement shall thereupon terminate
unless the parties agree to extend the time for performance, in writing. Upon
such termination, Seller shall return all deposit monies to Purchaser and
neither party shall have any further obligation to the other.
<PAGE>
5. WARRANTIES OF SELLER. Seller makes the representations and warranties
set forth below and agrees that such warranties and representations shall be
deemed republished at the time of closing and shall survive the closing:
(a) The Seller is the sole owner of the subject liquor License, has
the sole and only rights therein and as such, has been approved as the
transferee of such License by the Township of Freehold, County of Monmouth,
State of New Jersey.
(b) That Seller has the full and complete right to make, execute and
perform this Agreement and to transfer the License to Purchaser.
(c) That on the closing date, Seller shall transfer the License to
Purchaser free and clear of all liens, claims, encumbrances and/or restrictions.
(d) That the execution, delivery and performance of this Agreement
does not constitute a violation of any instrument to which Seller is a party or
by which Seller maybe bound; specifically that Seller is not a party to any
Agreement which would prevent Seller from fully performing the terms of this
Agreement.
(e) That the License is not subject to any outstanding notice of
delinquency under N.J.A.C. 13:2-24.4.
(f) That the License has been properly renewed for the current license
year ending June3O, 2000. Purchaser agrees to reimburse Seller for Purchases pro
rata share of the current year renewal fee.
(g) That the License has never been suspended, revoked or invalidated
and that no special limitations have ever been placed on the License.
<PAGE>
(h) The License is presently in full force and effect, and is
currently inactive status at Moore's Inn, 402 West Main Street Township of
Freehold, Monmouth County, New Jersey.
(i) That there are no governmental investigations affecting the
License.
(j) The Seller has been duly organized and is validly existing in good
standing under the laws of the State of New Jersey. Seller shall produce a Good
Standing Certificate, at closing, issued by the appropriate agency of the State
of New Jersey.
(k) Seller, by its officers who execute this Agreement has the
corporate power and authority to enter into and perform this Agreement and to
transfer the License to Purchaser. The execution, delivery and performance of
this Agreement by the executing officers of the corporation have been duly
authorized by all requisite corporate action and this Agreement has been duly
executed and delivered by Seller.
(l) The execution, delivery and performance of this Agreement by
Seller does not conflict with or result in a violation of the Articles of
Incorporation or Bylaws of Seller or of any agreement, instrument, order, writ,
judgment, or decree to which Seller is a party or subject.
(m) Seller has no disciplinary charges pending against its License nor
do the officers, directors or shareholders of Seller know of any investigation
by any authority with respect to any violation of the liquor laws in the State
of new Jersey. In the event either that such charges nevertheless exist or that
prior to settlement charges are instituted against the License, Purchaser shall
have the right to terminate and rescind this Agreement; and upon such action
Purchaser shall receive the return of all funds in escrow, as well as all
out-of-
<PAGE>
pocket expenses and reasonable attorney's fees.
(n) The License is in good standing and has not been revoked or invalidated
and is not currently suspended or scheduled to be suspended at any time in the
future.
6. COOPERATION OF SELLER. Seller agrees to execute all documents and
certificates as may be required in furtherance of Purchaser's application for
transfer of the License, such documents to include but not be limited to a
Consent to Transfer (in form substantially similar to the Consent attached
hereto and marked Exhibit "A") the subject License to Purchaser. Seller agree to
cooperate fully and promptly with Purchaser .in regard to Purchaser's License
transfer application and to do all things reasonably necessary to said Purchaser
with regard to such application.
7. COOPERATION OF PURCHASER. Purchaser agrees to continence processing
the transfer and to use reasonable diligence to satisfy the conditions recited
in this Agreement, consistent nevertheless with the time requirements of this
agreement.
8. WARRANTIES OF PURCHASER. Purchaser makes the representations and
warranties set forth below and agrees that such warranties and representations
shall be deemed republished at there time of closing and shall survive the
closing:
(a) That it is a corporation duly organized and lawfully existing
under the laws of the State of Delaware and that it is duly existing and in good
standing under the laws of the State of New Jersey, having filed the necessary
documentation so as to register to do business in the said State of New Jersey.
(b) That it has the right to make, execute and perform this Agreement;
and that the execution, delivery and performance of this Agreement does not
constitute a violation
<PAGE>
of Purchaser's Certificate of Incorporation, bylaws, or any other instrument to
which Purchaser is a party or by which Purchaser may be bound.
(c) That the execution and delivery of this Agreement and the
performance by Purchaser of the obligations to be performed by it hereunder have
been duly authorized by the proper corporate. actions of the board of directors
as may be necessary, and that there is no agreement of any kind that would
prohibit or restrict such corporate actions.
(d) That the corporate officers executing this Agreement are duly
elected officers of the Corporation and have received the authority to make and
execute this Agreement and to bind Purchaser hereto.
(e) That is it solvent and has the funds available for the acquisition
of the License in the manner contemplated herein.
(f) That it is not disqualified from holding an alcoholic beverage
license in the State of New Jersey.
9. COMMUNICATION FROM GOVERNMENTAL AUTHORITIES.
Seller shall serve upon Purchaser (within seven (7) days of receipt thereof
by Seller) a copy of any notice received from the Division of Alcoholic Beverage
Control or any Federal, state or municipal governmental body or agency with
regard to or involving the License. Service shall be in the manner hereinafter
recited.
10. CLOSING. The closing of this transaction shall take place at the
office of Starkey, Kelly, Blaney & White, attorney for Purchaser, Two Hooper
Avenue, Toms River, New Jersey 08753, or at such other location as shall be
mutually agreed upon by the parties. Closing shall occur 'in escrow' no later
than 3:00 PM on the same date that the Township
<PAGE>
of Freehold will act upon the application for the transfer of the License. At
the time of closing, all papers will be signed and deposited with Anthony
Mancuso, Esquire, including a Bill of Sale for the License to be signed by the
Seller (containing the usual warranties of title) and all requisite monies, if
not previously provided to the Escrow Agent, will be deposited with the Escrow
Agent who will hold same in escrow pending the successful transfer of the
License. On the day next following the Township council's approval of the
transfer of the License from Seller to Purchaser, the monies will be distributed
and the Bill of Sale will be delivered. If the application for transfer is
denied, this Agreement shall immediately become null and void and the Escrow
Agent shall return all monies to Purchaser and the Bill of Sale to the Seller.
Thereafter, neither party shall have any further liability to the other.
11. PURCHASE OF LICENSE. As heretofore stated in this Agreement, the
Purchaser's obligation to close title to the liquor license is contingent upon
Purchaser entering into a Lease Agreement with an entity known as Moore's Realty
Associates for a portion of premises known as 402 West Main Street, Freehold,
New Jersey. Upon the termination of such lease, for any reason, purchaser agrees
to sell back to Moore's Inn, Inc., or to Moore's Realty Associates; or to the
designee of either Moore's Inn, Inc. and/or Moore's Realty Associates the said
liquor license which is the subject matter of this Agreement at the same price
of $350,000.00. The provisions of this paragraph shall survive the closing of
title to the subject liquor license.
12. NOTICES. Any notice, request, demand consent, approval, or other
communications required or permitted under this Agreement will be written and
will be
<PAGE>
deemed to have been given when person0v delivered or sent by facsimile
transmission, or (ii) on the next day after delivery to a nationally recognized
express delivery service with instructions for overnight delivery; or (iii) on
the third day after it is deposited in any depository regularly maintained by
the United States postal service, postage prepaid, certified or registered mail,
return receipt requested, addressed to the other party as set forth below:
IF TO SELLER:
Moore's Inn, Inc.
1862 Oak Street Road
Edison, NJ 08812
Attn: Michael F. Lombardi, Esquire
IF TO PURCHASER
Chefs International, Inc.
62 Broadway
PO Box 1332
Pt. Pleasant Beach, NJ 08742
Anthony Mancuso, Esquire,.
Starkey, Kelly Blaney & White
Two Hooper Avenue
Toms River, NJ 08753
13. DEFAULT. (a) Should Seller breach this Agreement or fail to close
hereunder without the right to do so, the Purchaser shall have the right to
receive the immediate receipt of all escrow funds, as well as all out of pocket
expenses and reasonable attorneys' fees; or, alternatively, Purchaser may compel
Seller to specifically perform this Agreement and Seller agrees to reimburse
Purchaser for any reasonable attorney's fees, costs and expenses incurred in
connection therewith. Ten (1O) days after written demand for the escrow funds,
Escrow Agent is directed (after providing notice to the Seller) to deliver said
sum to the Purchaser. If within said ten (1O) day period Escrow Agent shall
receive from
<PAGE>
Seller a written objection to the release of such funds, Escrow Agent agrees to
deposit the fund into a Court of competent jurisdiction, and not to release the
same to Purchaser. Notwithstanding the foregoing, in the event that any
representation or warranty made by the Seller is not fully satisfied or there is
a failure to satisfy a condition which is Seller's obligation to satisfy to the
extent that the License is freely transferable, without claim or encumbrance to
Purchaser and in accordance with the terms of this Agreement, the Seller hereby
directs that Purchaser may take such action as Purchaser deems necessary, all at
the expense of Seller, to effectuate the transfer of the License to the
Purchaser free and clear of all such Hens, claims and encumbrances, and in
accordance with the terms hereof. Such actions on the part of the Purchaser may
include, but are not limited to, depositing with Escrow Agent sufficient sums
from the consideration otherwise due Seller hereunder and directing the Escrow
Agent to pay over said sums, as applicable, so as to obtain an appropriate
release or waiver of any claim made against the License. Escrow Agent shall not,
however, make any such payment without first bringing the claim to the attention
of the Seller and giving Seller a reasonable time to dispose of any such lien or
claim.
(b) In the event that Purchaser branches this Agreement and the
License may not be transferred to the Purchaser, or if the Purchaser otherwise
fails to close this transaction without the right to do so, the Purchaser shall
pay to Seller the sum of THIRTY-FIVE THOUSAND ($35,000.00) DOLLARS, as
liquidated damages. The parties agree that damages for wrongful breach of this
Agreement by the Purchaser are difficult or impossible to determine and
consequently agree the sum of THIRTY-FIVE THOUSAND ($35,000.00)DOLLARS as
liquidated damages represents the fair and equitable damages due Seller in the
<PAGE>
event of Purchaser's beach, as aforesaid. Ten (10) days after written demand by
Seller, escrow agent is to provide the sum of THIRTY-FIVE THOUSAND
($35,000.00)DOLLARS, as aforesaid, to the Seller. Said sum shall be paid to
Seller as its sole and exclusive remedy hereunder. Thereafter, the parties shall
be released from all further liability.
14. COMPLETE AGREEMENT. It is understood and agreed that this Agreement
alone represents the full, final and complete understanding of the parties, and
that all prior representations and agreements are merged herein.
15. MODIFICATION. This Agreement may not be changed or terminated orally
by either party without the prior written consent of the other party. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, administrators, executors, successors and assigns.
16. LAW GOVERNING. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of New Jersey.
17. BROKERS. The parties hereby represent to each other that there are no
commissions due to any real estate agent, broker, or other entity as a result of
or relating to the sale of the License described herein. The parties agree to
identify and hold each other harmless from and against any and all claims of any
realtors, brokers, or other persons relating to the sale of the subject License
and allegedly based on the actions of the indemnifying party. The provisions of
this paragraph shall survive the closing of title to the subject liquor license.
18. SUBJECT HEADINGS. The subject headings at the beginning of each
paragraph are provided for convenience only and are not intended to modify or
amplify the text of the paragraph.
<PAGE>
19. TAXES. The Seller shall be solely responsible for any tax liability
resulting from the sale of the License to Purchaser. Seller shall indemnify and
hold Purchaser harmless from all claims of tax liability as a result of the sale
of the License. This paragraph shall survive the closing of this transaction.
Seller agrees to allow Purchaser to submit notice of this sale to the State of
New Jersey, Department of Treasury and to permit the holding in escrow,
subsequent to the closing, of such monies as directed by the Department of
Treasury.
20. SEPARABLE CLAUSES. Each provision of this Agreement shall be
considered to be separable and if, for any reason, any provision or any part
thereof is deeded to be invalid and contrary to any applicable law, such
invalidity shall not impair the portions of this Agreement which are valid; and
this Agreement shall be construed and enforced to all effects as if such invalid
provision had been omitted.
21. NONWAIVER. The failure of the Seller or Purchaser to insist upon
strict performance of any of the covenants or conditions of this Agreement shall
not be construed as a waiver by such party of any of its rights or remedies
under this Agreement, and shall not be construed as a waiver, relinquishment or
failure of any such covenant, conditions, or options.
22. COUNTERPART. This Agreement may be executed in counterpart.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed and sealed as of the day, month and year first above written.
Attest: Moore's Inn, Inc.
/s/ STEPHEN F. LOMBARDI By /s/ MICHAEL F. LOMBARDI
- ----------------------------------- -------------------------------
Stephen F. Lombardi, Secretary Michael F. Lombardi
<PAGE>
Attest: Chefs International, Inc.
/s/ MARTIN W. FLETCHER By: /s/ ANTHONY PAPALIA
- ----------------------------------- ----------------------------------------
Martin W. Fletcher, Sec. Anthony Papalia, Pres.
STATE OF NEW JERSEY :
: SS
COUNTY OF OCEAN :
BE IT REMEMBERED, that on this 21st day of January 2000 before me, the
subscriber, and attorney. Of the State of New Jersey, personally appeared
Anthony Papalia and Martin W. Fletcher, who, I am satisfied are the persons who
signed the within instrument as the President and Secretary of CHEFS
INTERNATIONAL, INC., the corporation named therein and her thereupon
acknowledged that the said instrument, made by the corporation addn. sealed with
its seal, was signed, sealed and delivered by him as such officer and is the act
and deed of the corporation, made by virtue of authority from the Board of
Directors of the corporation.
/s/ CYNTHIA L. WALSH
----------------------------------------
Notary Public of the State of New Jersey
CYNTHIA L. WALSH
NOTARY PUBLIC OF NEW JERSEY
MY COMMISSION EXPIRES 4/20/2002
STATE OF NEW JERSEY :
: SS
COUNTY OF MIDDLESEX :
BE IT REMEMBERED, that on this 11th day of January, 2000, before me, the
subscriber, and attorney of the State of New Jersey, personally appeared Michael
F. Lombardi, and Stephen F. Lombardi, who, I am satisfied are the persons who
signed the within instrument as the President and Secretary of MOORE'S INN, the
corporation named therein and her thereupon acknowledged that the said
instrument, made by the corporation addn. sealed with its seal, was signed,
sealed and delivered by him as such officer and is the act and deed of the
corporation, made by virtue of authority from the Board of Directors of the
corporation.
/s/ CLAIRE M. MINNIG
----------------------------------------
Notary Public of the State of New Jersey
CLAIRE M. MINNIG
A NOTARY PUBLIC OF NEW JERSEY
MY COMMISSION EXPIRES 11/24/2003
CONSENT OF ESCROW AGENT
The undesigned, named as Escrow Agent in the foregoing Agreement hereby
agrees to act as said Escrow Agent and to hold and disburse the monies to be
paid under the Agreement in accordance with the provisions thereof.
DATED: January 19, 2000 /s/ ANTHONY MANCUSO
----------------------------------------
ANTHONY MANCUSO, ESQ.
<PAGE>
CONSENT TO TRANSFER
MOORE'S INN, INC., for and in consideration of the sum of Three Hundred and
Fifty Thousand ($350,000.00) Dollars, and other good and valuable consideration,
and intending to be legally bound, does hereby consent to the transfer of the
Plenary Retail Consumption License issued by the Township of Freehold and
bearing License No. 1316-33-005-003 from MOORE'S INN, INC., to CHEFS
INTERNATIONAL, INC.
IN WITNESS WHEREOF, MOORE'S INN, INC. has caused this consent to be signed
by its President and Secretary and has hereunto affixed its corporate seal this
11th day of January , 2000.
Attest: Moore's Inn, Inc.
/s/ STEPHEN F. LOMBARDI By /s/ MICHAEL F. LOMBARDI
- ----------------------------------- -------------------------------
Stephen F. Lombardi, Secretary Michael F. Lombardi
STATE OF NEW JERSEY :
: SS January 11, 2000
COUNTY OF MIDDLESEX :
Before me personally appeared MICHAEL F. LOMBARDI and Stephen F. Lombardi,
for MOORE'S INN, INC., aforesaid, signer and sealer of the foregoing instrument
and acknowledged the same to be its free act and deed and the free act and deed
of such Corporation before me.
/s/ CLAIRE M. MINNIG
----------------------------------------
NOTARY PUBLIC - STATE OF NEW JERSEY
CLAIRE M. MINNIG
A NOTARY PUBLIC OF NEW JERSEY
MY COMMISSION EXPIRES 11/24/2003
AGREEMENT FOR THE SALE AND PURCHASE
OF FURNITURE, FIXTURES, EQUIPMENT AND STOCK
THIS AGREEMENT, made and entered into this ___ day of January 2000, by and
between MOORE'S INN, INC., a New Jersey Corporation, trading as Moore's Inn,
with its main office located at 1862 Oak Tree Road, Edison, New Jersey, 08818
hereinafter called "Seller', and CHEFS INTERNATIONAL, INC. a Delaware
Corporation authorized to do business in the State of New Jersey with its main
office at 62 Broadway, Point Pleasant, New Jersey, 08742, hereinafter called
"Purchaser".
WHEREAS, the Seller is the owner of Moore's Inn, 402 West Main Street,
Freehold Township, Monmouth County, New Jersey; and
WHEREAS, the Seller is desirous of selling certain Furniture, Fixtures,
Equipment, Foodstuffs and Liquor for the price and under the terms and
conditions as recited herein; and
WHEREAS, the Purchaser is willing to purchase and acquire the Furniture,
Fixtures, Equipment, Foodstuffs and Liquor for continued use in the operation of
Moore's Inn subject to the terms and conditions of this Agreement, and the
contingencies contained herein; and
WHEREAS, the certain Furniture, Fixtures and Equipment to be sold and
purchased in accordance with this Agreement are set forth on attached Schedule
A;
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions contained herein, and for other good and valuable consideration, and
intending to be legally bound, the parties hereto mutually agree as follows:
1. PURCHASE PRICE. The Seller shall sell to Purchaser, and the Purchaser
1
<PAGE>
shall buy from Seller, the Furniture, Fixtures and Equipment (hereinafter "F, F
& E") set forth on attached Schedule A for the sum of TWO HUNDRED AND FIFTY
THOUSAND($250,000.00) DOLLARS. An earnest money deposit in the amount of
TWENTY-FIVE THOUSAND ($25,000.00) DOLLARS, to be applied on account of the
purchase price (or forfeited as liquidated damages as more fully recited
hereinafter), shall be deposited in escrow with Anthony Mancuso, Esquire, whose
address is Two Hooper Avenue, Toms River, New Jersey, 08753, (hereinafter
"Escrow Agent"). The earnest money deposit shall be provided to Escrow Agent
within ten (I 0) days from the date of final execution of this Agreement. The
Escrow Agent shall place the deposit in a non-interest bearing account In
accordance with paragraph 6 below, the balance of the purchase price shall be
paid by depositing with the Escrow Agent on or before the closing of this
transaction, an additional sum of TWO HUNDRED AND TWENTY-FIVE THOUSAND
($225,000.00) DOLLARS, in regular corporate funds. If this Agreement becomes
null and void, or is terminated in accordance with or on account of the failure
of one or more of the contingencies stated in paragraph 3hereof, the said
earnest money deposit shall be returned to Purchaser and neither party shall
have any further obligation to the other.
At closing of title, purchaser shall also purchase all the foodstuffs and
unopened liquor (hereinafter "Stock") of Moore's inn, Inc., which are located in
the subject property. The cost of same shall be equivalent to the cost incurred
by Moore's Inn, Inc. in purchasing such foodstuffs and liquor from its
suppliers. The purchase price of Stock shall be in addition to the purchase
price of the F, F & E. The determination of "useable" shall be solely in the
discretion of purchaser and any Stock not purchased shall be immediately removed
from the
2
<PAGE>
premises by seller. Any monies due Moore's Inn, Inc. as a result of the
purchase of Stock shall be paid within thirty (30) days of closing of title.
Prior to the closing of title, Moore's Inn, Inc. will provide the purchaser
with a list of all outstanding gift certificates, specifying the names of all
holders and the amount of such certificates. Purchaser shall, as it redeems the
gift certificates, monthly submit to seller an invoice evidencing the redemption
of said certificates and seller shall within thirty (30) days after receipt of
the invoice reimburse the redemption amount to purchaser. Such reimbursement
shall be in addition to the purchase price paid for the F, F & E and the Stock.
At the termination of the Lease Agreement between purchaser herein and
Moore's Realty Associates, the purchaser/tenant shall leave at the demised
premises all F, F & E listed in attached Schedule A in good working condition,
reasonable wear and tear excepted. Said items on Schedule A, upon termination of
the lease, shall be deemed the property of either Moore's Inn, Inc. or Moore's
Realty Associates. The parties hereto agree that the return or transfer of such
F, F & E to Moore's Inn Inc. or Moore's Realty Associates shall not constitute a
penalty, or forfeiture, but rather, an inducement to Moore's Realty Associates
for the risks assumed by an early termination of the lease by tenant as therein
provided and further as compensation to Moore's Inn, Inc. for its agreement to
repurchase the liquor license as provided in Paragraph 11 of the Agreement for
the Sale and Purchase of Liquor License.
2. ESCROW AGENT. The Escrow Agent may act upon any instrument or other
writing believed by the Escrow Agent in good faith to be genuine, and to be
signed by the property party. In the event of any controversy or dispute
hereunder, or with respect to any
3
<PAGE>
question as to the construction of this Agreement or any action to be taken by
the Escrow Agent hereunder, the Escrow Agent may confer with counsel (including
members of his own firm) and shall incur no liability for any action taken or
suffered in good faith in accordance with the advice or opinion of such counsel,
including the depositing of the escrow fund in a court of competent jurisdiction
which shall adjudicate any difference between Seller and Purchaser.
(a) The Escrow Agent shall not be liable in connection with the
performance of his duties hereunder, except for his own gross negligence, fraud
or theft.
(b) The Escrow Agent shall be under no duty or responsibility to
enforce any of the terms or conditions of this Agreement.
(c) Seller and Purchaser, jointly and severally, h6by indemnify the
Escrow Agent and hold the Escrow Agent harmless from and against any loss,
liability or expense incurred (absent Escrow Agent's gross negligence, fraud or
theft), arising out of or in connection with the acceptance or administration of
the Escrow Agent's duties hereunder, including, without limitation, the cost and
expense of defending the Escrow Agent against any claim or liability hereunder.
3. CONDITIONS PRECEDENT.
I. This Agreement shall be and is hereby made contingent upon the
following conditions to be satisfied or waived in writing by Purchaser within
forty-five (45) days (the "Contingency Period") (unless extended as hereinafter
provided) from the date of final execution of this Agreement;
(a) The Purchaser shall be able to negotiate and obtain a lease upon
terms
4
<PAGE>
fully satisfactory to Purchaser for a portion of the premises known as Moore's
Inn, 402 West Main Street, Freehold Township, New Jersey. If the Purchase shall
be unable to enter into such lease agreement within such time, this Agreement
shall, at the option of Purchaser, become null and void, unless the parties
agree, in writing, to extend the time for satisfaction of this contingency.
(b) The Purchaser shall be able to negotiate and obtain on Agreement
for the Sale and Purchase of Liquor License, upon terms fully satisfactory to
Purchaser, with Moore's Inn, Inc. for Retail Plenary Consumption Liquor License
Number 1316-33-005-003.
(c) The approval by the governing body of the Township of Freehold of
the person-to-person transfer of the liquor license referenced in (b) above from
Moore's Inn, Inc. to Chefs International, Inc.
4. WARRANTIES OF SELLER. Seller makes the representations and warranties
set forth below and agrees that such warranties and representations shall be
deemed republished at the time of closing and shall survive the closing:
(a) The Seller is the sole owner of all F, F & E set forth on Schedule
A annexed hereto as well as all Stock that may be purchased by purchaser, there
are no liens ,judgment, attachments, security agreements, financing statements,
encumbrances of any kind or nature attaching to and/or affecting the F, F & E
set forth on Schedule A or the Stock.
(b) Seller has the full and complete right to make, execute and
perform this Agreement and to close title or otherwise transfer the F, F & E and
Stock to Purchaser.
5. WARRANTIES OF PURCHASER. Purchaser makes the representations and
warranties set forth below and agrees that such warranties and representations
shall be
5
<PAGE>
deemed republished at there time of closing and shall survive the closing:
(a) That it is a corporation duly organized and lawfully existing
under the laws of the State of Delaware and that it is duly existing and in good
standing under the laws of the State of New Jersey, having filed the necessary
documentation so as to register to do business in the said State of New Jersey.
(b) That it has the right to make, execute and perform this Agreement;
and that the execution, delivery and performance of this Agreement does not
constitute a violation of Purchaser's Certificate of Incorporation, bylaws, or
any other instrument to which Purchaser is a party or by which Purchaser may be
bound.
(c) That the execution and delivery of this Agreement and the
performance by Purchaser of the obligations to be performed by it hereunder have
been duly authorized by the proper corporate actions of the board of directors
as may be necessary, and that there is no agreement of any kind that would
prohibit or restrict such corporate actions.
(d) That the corporate officers executing this Agreement are duly
elected officers of the Corporation and have received the authority to make and
execute this Agreement and to bind Purchaser hereto.
(e) That is it solvent and has the funds available for the acquisition
of the F, F, & E and Stock in the manner contemplated herein.
6. CLOSING. The closing of this transaction shall take place at the
office of Starkey, Kelly, Blaney & White, attorney for Purchaser, Two Hooper
Avenue, Toms River, New Jersey 08753, or at such other location as shall be
mutually agreed upon by the parties. Closing shall occur "in escrow' no later
than 3:00 PM on the same date that the Township
6
<PAGE>
of Freehold will act upon the application for the person-to-person transfer of
the liquor license referenced in paragraph 3 (b) of this Agreement.. At the time
of closing, all papers will be signed and deposited with Anthony Mancuso,
Esquire, including a Bill of Sale for the F, F & E and Stock to be signed by the
Seller (containing the usual warranties of title) and all requisite monies, if
not previously provided to the Escrow Agent, will be deposited with the Escrow
Agent who will hold same in escrow pending the successful transfer of the
aforesaid liquor license. On the day next following the Township Council's
approval of the transfer of the aforesaid liquor license from Seller to
Purchaser, the monies will be distributed and the Bill of Sale will be
delivered. If the application for transfer is denied, this Agreement shall
immediately become null and void and the Escrow Agent shall return all monies to
Purchaser and the Bill of Sale to the Seller. Thereafter, neither party shall
have any further liability to the other.
7. NOTICES. Any notice, requested demand consent, approval, or other
communications required or permitted under this Agreement will be written and
will be deemed to have been given when personally delivered or sent by facsimile
transmission, or (ii) on the next day after delivery to a nationally recognized
express delivery service with instructions for overnight delivery; or (iii) on
the third day after it is deposited in any depository regularly maintained by
the United States postal service, postage prepaid, certified or registered mail,
return receipt requested, addressed to the other party as set forth below:
7
<PAGE>
IF TO SELLER:
Moore's Inn, Inc.
1862 Oak Street Road
Edison, NJ 08812
Attn: Michael F. Lombardi, Esquire
WITH A COPY TO
Lombardi and Lombardi, P.C.
1862 Oak Tree Road
Edison, NJ 08812
Attn: Michael F. Lombardi, Esquire
IF TO PURCHASER
Chefs International, Inc.
62 Broadway
PO Box 1332
Pt. Pleasant Beach, NJ 08742
WITH A COPY TO
Anthony Mancuso, Esquire,
Starkey, Kelly Blaney & White
Two Hooper Avenue
Toms River, NJ 08753
8. DEFAULT. (a) Should Seller breach this Agreement or fail to close
hereunder without the right to do so, the Purchaser shall have the right to
receive the immediate receipt of all escrow funds, as well as all out of pocket
expenses and reasonable attorneys' fees; or, alternatively, Purchaser may
compel Seller to specifically perform this Agreement, and Seller agrees to
reimburse Purchaser for any reasonable attorney's fees, costs and expenses
incurred in connection therewith. Ten (I 0) days after written demand for the
8
<PAGE>
escrow funds, Escrow Agent is directed (after providing notice to the Seller) to
deliver said sum to the Purchaser. If within said ten (10) day period Escrow
Agent shall receive from Seller a written objection to the release of such
funds, Escrow Agent agrees to deposit the fund into a Court of competent
jurisdiction, and not to release the same to Purchaser. Notwithstanding the
foregoing, in the event that any representation or warranty made by the Seller
is not fully satisfied or there is a failure to satisfy a condition which is
Seller's obligation to satisfy to the extent that the F, F & E and Stock are
fully transferable, without claim or encumbrance to Purchaser and in accordance
with the terms of this Agreement, the Seller hereby directs that Purchaser may
take such action as Purchaser deems necessary, all at the expense of Seller, to
effectuate the transfer of the F, F & E and Stock to the Purchaser free and
clear of all such liens, claims and encumbrances, and in accordance with the
terms hereof Such actions on the part of the Purchaser may include, but are not
limited to, depositing with Escrow Agent sufficient sums from the consideration
otherwise due Seller hereunder and directing the Escrow Agent to pay over said
sums, as applicable, so as to obtain an appropriate release or waiver of any
claim made against the F, F & E and Stock. Escrow Agent shall not, however, make
any such payment without first bringing the claim to the attention of the Seller
and giving Seller a reasonable time to dispose of any such lien or claim.
(b) In the event that Purchaser breaches this Agreement and the F, F
& E and Stock may not be transferred to the Purchaser, or if the Purchaser
otherwise fails to close this transaction without the right to do so, the
Purchaser shall pay to Seller the sum of TWENTY-FIVE THOUSAND ($25,000.00)
DOLLARS, as liquidated damages. The parties agree that damages for wrongful
breach of this Agreement by the Purchaser are difficult or
9
<PAGE>
of title to the subject liquor F, F & E and Stock.
13. SUBJECT HEADINGS. The subject headings at the beginning of each
paragraph are provided for convenience only and are not intended to modify or
amplify the text of the paragraph.
14. SEPARABLE CLAUSES. Each provision of this Agreement shall be
considered to be separable and if, for any reason, any provision or any part
thereof is deeded to be invalid and contrary to any applicable law, such
invalidity shall not impair the portions of this Agreement which are valid; and
this Agreement shall be construed and enforced to all effects as if such invalid
provision had been omitted.
15. NONWAIVER. The failure of the Seller or Purchaser to insist upon
strict performance of any of the covenants or conditions of this Agreement shall
not be construed as a waiver by such party of any of its rights or remedies
under this Agreement, and shall not be construed as a waiver, relinquishment or
failure of any such covenant, conditions, or options.
16 COUNTERPART. This Agreement may be executed in counterpart.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed and sealed as of the day, month and year first above written.
Attest: Moore's Inn, Inc.
/s/ STEPHEN F. LOMBARDI By /s/ MICHAEL F. LOMBARDI
- ----------------------------------- -------------------------------
Stephen F. Lombardi, Secretary Michael F. Lombardi
Attest: Chefs International, Inc.
/s/ MARTIN W. FLETCHER By: /s/ ANTHONY PAPALIA
- ----------------------------------- -------------------------------
Martin W. Fletcher, Sec. Anthony Papalia, Pres.
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements "of Chefs International, Inc. and Subsidiaries included in
the Company's Form 10-KSB for the" "year ended January 30, 2000, and is
qualified in its entirety by reference to such financial" statements.
</LEGEND>
<CIK> 0000201424
<NAME> CHEFS INTERNATIONAL, INC.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-30-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JAN-30-2000
<EXCHANGE-RATE> 1
<CASH> 1,314,247
<SECURITIES> 0
<RECEIVABLES> 63,037
<ALLOWANCES> 0
<INVENTORY> 964,134
<CURRENT-ASSETS> 3,212,459
<PP&E> 19,820,157
<DEPRECIATION> 7,856,283
<TOTAL-ASSETS> 17,370,846
<CURRENT-LIABILITIES> 1,850,720
<BONDS> 0
0
0
<COMMON> 44,882
<OTHER-SE> 13,882,999
<TOTAL-LIABILITY-AND-EQUITY> 17,370,846
<SALES> 17,996,559
<TOTAL-REVENUES> 17,996,559
<CGS> 5,830,757
<TOTAL-COSTS> 17,449,516
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140,552
<INCOME-PRETAX> 583,199
<INCOME-TAX> 80,635
<INCOME-CONTINUING> 502,564
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 502,564
<EPS-BASIC> 0.11
<EPS-DILUTED> 0.11
</TABLE>
