UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from__________________________________________
Commission file number 0-12343
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VICORP Restaurants, Inc.
_____________________________________________________
(Exact name of registrant as specified in its charter)
Colorado 84-0511072
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 West 48th Avenue, Denver, Colorado 80216
----------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 296-2121
________________
Securities registered pursuant to Section 12(b) of the Act: None
________________
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock
$.05 par value per share
__________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
-- --
Indicate by check mark if disclosure of delinquent filer pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of 6,446,523 shares of the registrant's common
stock held by non-affiliates on January 20, 2000 was approximately
$102,338,552.
At January 20, 2000 there were 6,777,443 shares of the Company's
Common Stock $.05 par value outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Notice of Annual Meeting of Shareholders and Proxy Statement pertaining
to the 1999 Annual Meeting of Shareholders ("the Proxy Statement") are
incorporated herein by reference into Parts I and III.
PART I
Item 1. Business.
VICORP Restaurants, Inc., the registrant, is referred to herein as "VICORP"
or the "Company." The Company was incorporated in 1959 and is headquartered
in Denver, Colorado.
VICORP operates family style restaurants under the names "Bakers Square" and
"Village Inn," and franchises restaurants under the Village Inn brandname.
At October 31, 1999, VICORP operated two hundred fifty-two Company-owned
restaurants in thirteen states. Of the two hundred fifty-two Company-owned
restaurants, one hundred fifty were Bakers Squares and one hundred two were
Village Inns, with an additional one hundred sixteen franchised Village Inn
restaurants in twenty-one states. The Company-owned and franchised
restaurants are concentrated in Arizona, California, Florida, the Rocky
Mountain region and the upper Midwest. The Company operates a pie
manufacturing division to support the restaurants, which operates under the
name VICOM. VICOM has three production facilities located in Santa Fe
Springs, California, Oak Forest, Illinois and Mounds View, Minnesota.
Company Operations
The Village Inn concept is focused on breakfast food, offering homestyle
entrees for breakfast, lunch and dinner. Bakers Square emphasizes lunch and
dinner with signature fresh baked pies in twenty-two, plus flavors. Each
concept offers a relatively standard core menu supplemented with daily and
monthly entree and pie specials with an average guest check of six to eight
dollars.
Store management typically consists of a general manager and two assistant
managers. The store managers are supported by regional managers, regional
vice-presidents and the corporate office. Incentives are provided to
encourage store and regional managers to maximize store sales and monitor
controllable costs.
The Company believes the principal measure of success for the restaurants is
the ability to provide the customer with a satisfying experience.
Attracting and retaining the best people, continuous employee development,
regular communication of expectations, and constant performance feedback are
central factors to ensure customer satisfaction. Training programs are
designed to meet these objectives and focus on outcome-based training,
emphasizing the acquisition of basic skills and behavior that result in
desired performance for specific positions.
Cost effective procurement of quality products is also critical to providing
a satisfying customer experience. The Company makes centralized purchasing
decisions for basic menu ingredients to gain favorable prices and ensure
uniform quality specifications. Management does not anticipate any
difficulty in obtaining food products of adequate quantity or quality at
acceptable prices.
The Company utilizes advertising to promote the restaurant concepts and gain
market share. Expenditures for marketing were 2.66% of Company-operated
restaurant sales in the current fiscal year.
The Company-operated restaurants utilize point-of-sale and back-of-house
computer systems. These systems capture sales information, payroll data,
and provide restaurant managers with analytical and reporting tools.
During fiscal 1999, the Company opened seven new restaurants and closed four
restaurants, of which three were converted to franchise operations and one
closed due to the expiration of the lease. The Company intends to open
eight to ten Company-operated restaurants during fiscal year 2000, with
emphasis on the Village Inn concept.
Franchise Operations
The initial term of a Village Inn Franchise Agreement is twenty-five years.
An initial franchise fee of $35,000 is due upon the grant of a franchise and
ongoing royalty fees are 4% of gross sales. The Company supports its
franchisees with regular visits to the restaurants by Quality Assurance
Consultants to help ensure the Company's high quality service and
cleanliness standards are upheld. A franchise advisory board, consisting of
seven franchisees elected by their peers every two years, meets with Company
management four times per year. The meetings provide a forum for the
exchange of ideas, which will enable the Company and the franchisees to
maximize growth, sales and profits.
During fiscal year 1999, the Company established eight new franchised
Village Inn locations in Florida, Arkansas, Nevada, Oklahoma and Colorado;
and two restaurants were closed. The Company plans to pursue franchise
development as a source of providing a continued profitable revenue stream,
as well as to gain market share, thus promoting the advancement of the
Village Inn brandname. The Company expects to develop from five to ten
franchised units during fiscal 2000.
Trademarks and Service Marks
The Company owns the right to use the trademarks and service marks, which
have been registered with various state and federal patent and trademark
offices. The Company considers the trademarks and service marks important
to the business and actively defends and enforces them.
Competition
The restaurant industry is highly competitive with regards to quality,
value, location, service and price, and is often affected by changes in
consumer tastes, local and national economic and real estate conditions,
traffic patterns and demographic trends. The Company competes directly and
indirectly with all types of restaurants from national and regional chains
to local establishments. Competitors include corporations much larger than
the Company, which have greater capital resources and ability to withstand
adverse business trends.
Research and Development
No material amounts were spent on Company sponsored research activities
relating to the development or enhancement of products, services or
techniques.
Regulation
The Company is subject to various federal, state and local laws governing the
sale and preparation of food, zoning, sanitation, health and safety, minimum
wage requirements, overtime, construction, environmental and sale of
alcoholic beverages.
The Federal Trade Commission, as well as state laws regulate franchise
operations, including laws imposing registration and disclosure requirements
for franchisors during the offer and sale of franchises and, in certain
cases, applying substantive standards to the relationship between the
Company and the franchisee.
Employees
As of October 31, 1999 the Company had approximately 11,880 employees. None
of the Company's employees are represented by a labor union or are the
subject of a collective bargaining agreement.
Executive Officers of the Company
The following table sets forth the names, ages, position and business
experience of the executive officers of the Company. Executive officers are
appointed by the Board of Directors on an annual basis. There are no family
relationships between the executive officers.
Name Age Position
- ---- --- -------
Charles R. Frederickson 62 Chairman of the Board and Chief
Executive Officer
Joseph F. Trungale 58 President VICORP Restaurants, Inc./
Bakers Square
Robert E. Kaltenbach 54 President Village Inn
Richard E. Sabourin 49 Executive Vice President/Chief
Financial Officer
Charles R. Frederickson has been a director of the Company since 1968, and
Chairman of the Board since November 1986.
Joseph F. Trungale was appointed President of the Company on November 1,
1999, after serving as the President of the Bakers Square concept since
August 1998. Previously, Mr. Trungale served in various positions with
operational responsibility over the Company's Bakers Square restaurants.
Prior to joining the Company, Mr. Trungale operated a family-owned real
estate business from September 1995 through July 1997. For eight years
preceding that, he was Vice President of Operations for Whataburger, Inc.
Robert E. Kaltenbach was appointed President of Village Inn in December 1994
after serving as Vice President of Franchise Operations since July 1988.
Richard E. Sabourin was appointed Executive Vice President and Chief
Financial Officer in August 1996. From 1989 to August 1996, Mr. Sabourin
was employed by Bestop, Inc. in various positions including President, Chief
Operating Officer, and Chief Executive Officer.
Item 2. Properties.
The Company owns the corporate office complex located in Denver, Colorado
and the bakery facility in Oak Forest, Illinois. The land and buildings at
the Santa Fe Springs, California and Mounds View, Minnesota bakeries are
leased.
Company operated Village Inn restaurants are concentrated in the Rocky
Mountain region, Arizona and Florida, while Bakers Square restaurants are
located primarily in California and the upper Midwest. The Company considers
existing restaurant properties and equipment to be in good working
condition. The Company intends to lease, sublease or sell seven idle
restaurant properties. On October 28, 1999, the Company completed the sale
and leaseback of the real estate related to twenty-one restaurant
properties. The idle bakery facility in Denver, Colorado was sold on
November 12, 1999. The following table sets forth properties owned in fee,
buildings owned on leased land, and leased locations as of October 31, 1999:
<TABLE>
<CAPTION>
Village Bakers
Inn Square Other Total
------- ------ ----- -----
<S> <C> <C> <C> <C>
Company-operated restaurants:
Properties owned in fee 15 35 -- 50
Buildings owned on leased land 5 10 -- 15
Leased locations 82 105 -- 187
--- --- --- ---
102 150 -- 252
=== === === ===
Properties leased to others:
Properties owned in fee 3 -- 1 4
Buildings owned on leased land -- -- 1 1
Leased locations 22 -- 23 45
--- --- --- ---
25 -- 25 50
=== === === ===
Properties held for disposal:
Properties owned in fee -- -- 4 4
Buildings owned on leased land -- -- -- --
Leased locations -- -- 3 3
--- --- --- ---
-- -- 7 7
=== === === ===
</TABLE>
Item 3. Legal Proceedings.
On September 28, 1998, two class actions were commenced in the Superior
Court of Los Angeles County, California.
The first, Kirk v. VICORP Restaurants, Inc., Case No. BC-198202, was brought
by a former manager of a California Bakers Square restaurant. Allegations
in the amended complaint assert violations by VICORP of California wage and
hour laws and regulations concerning overtime wages. The Plaintiff is
seeking class certification, injunctive relief, damages in an unspecified
amount, statutory penalties, interest, costs, and attorneys' fees.
The second, Schroeder v. VICORP Restaurants, Inc., Case No. BC-198203, was
brought by a former server at a California Bakers Square restaurant. The
Plaintiff alleges VICORP has violated California statutes and regulations
concerning the payment of wages, tip pooling, reimbursement for uniform
expenses, failure to remit tips, and the improper charging of walkouts to
servers. Class certification is requested, as well as injunctive relief,
damages in an unspecified amount, statutory penalties, interest, costs, and
attorneys' fees.
On December 28, 1998, a third action was commenced in the Superior Court of
Los Angeles County, California, Ontiveros v. VICORP Restaurants, Inc., Case
No. BC-202962. This action was brought by a former manager of a California
Bakers Square restaurant. The Plaintiff is seeking damages, statutory
penalties, declaratory relief, interest, attorneys' fees, and costs for
alleged violations of California statutes and regulations concerning the
payment of wages.
The Company believes the legal actions described above are similar to
plaintiff actions recently brought against other multi-location restaurant
operators in the state of California. Resolution of these matters may
require a significant period of time and is subject to substantial
uncertainties common to the judicial process for class actions in general.
The Company believes it has not violated California statutes and regulations
and has meritorious defenses to each of the claims in these actions. While
the Company intends to vigorously defend against the allegations, it is
possible that the Company will not prevail, or that decisions made in other
similar cases may result in interpretations of the California statutes that
are adverse to the Company's position. The cost of defense for these
actions is being recognized as incurred. No provision has been made for any
judgements or settlements that might ultimately result. While a contingency
exists that any such judgement or settlement could be material to the
results of operations of the Company for some future period or periods, the
Company currently believes that resolution of these amounts will not have a
material adverse effect on the Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to the Company's security holders during the
fourth quarter ended October 31, 1999.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.
The Company's common stock is traded on the over-the-counter market and is
quoted on the National Association of Securities Dealers (NASDAQ) National
Market System under the symbol "VRES". As of January 20, 2000, the Company
had 391 shareholders of record. The following table sets forth for the high
and low closing sales quotations per share of common stock as reported by
NASDAQ during each of the Company's fiscal quarters:
[CAPTION]
<TABLE>
Fiscal Quarter
First Second Third Fourth
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
High $16 $16 3/4 $18 5/16 $18 3/8
Low 13 3/8 14 3/8 15 3/16 15 11/16
1998
High $17 1/2 $19 1/4 $16 3/4 $15 5/8
Low 15 3/8 15 1/2 14 1/2 13
</TABLE>
The range of high and low closing sales quotations contained in the
foregoing table reflects inter-dealer prices, without retail mark-up,
markdown or commissions, and may not represent actual transactions.
The Company has not paid cash dividends on common stock since 1986. Future
common stock dividend payments are dependent upon operating results, loan
agreement restrictions and other financial and business considerations.
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
(dollars in thousands,
except per share data) 1999 1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Results of operations
System-wide sales including
franchise sales $500,566 $482,506 $450,534 $456,352 $496,300 $529,982 $542,986
Restaurant sales 355,781 342,654 322,188 339,937 370,116 409,297 425,139
Total revenues 359,046 346,173 325,527 343,280 373,838 412,644 428,505
Net income(loss) 17,327* 9,120 6,899 (929)* (4,532) (6,638)* 16,524*
- -----------------------------------------------------------------------------------------------------
Operating analysis
Restaurant operating profit
analysis as a percentage of
restaurant sales
Costs and expenses:
Food 30.1% 30.8% 31.4% 32.9% 33.5% 30.1% 29.8%
Labor 32.8% 32.7% 32.4% 32.0% 33.7% 30.2% 28.5%
Other operating 24.6% 25.4% 25.9% 26.7% 28.3% 28.2% 27.5%
Restaurant operating profit 12.5% 11.1% 10.3% 8.3% 4.4% 11.4% 14.2%
General and administrative
expense as a percentage
of revenues 8.1% 7.5% 7.4% 7.3% 7.0% 8.7% 7.8%
Interest expense as a
percentage of revenues .3% .5% .8% 1.2% 1.0% .9% .9%
Income before income taxes
as a percentage of revenues 5.2%* 4.2% 3.3% .9%* (2.4%) 2.5%* 6.3%*
Effective income tax rate 6.5% 36.5% 36.0% 64.0% 50.0% 37.5% 36.2%
- ------------------------------------------------------------------------------------------------------
Balance sheet data
Total assets $228,271 $199,670 $194,990 $203,946 $228,161 $249,023 $254,031
Long-term debt and
capitalized lease
obligations 4,588 5,783 19,465 33,585 42,179 42,554 40,008
Common shareholders' equity 151,848 138,007 129,919 122,269 123,098 134,866 148,318
Debt to total capitalization 2.9% 4.0% 13.0% 21.5% 25.5% 24.0% 21.2%
- ------------------------------------------------------------------------------------------------------
Cash flow data
Cash provided by operations $ 29,405 $ 42,222 $ 28,568 $ 17,847 $ 7,309 $ 34,094 $ 50,870
As a percentage of revenues 8.2% 12.2% 8.8% 5.2% 2.0% 8.3% 11.9%
Investment in property
and equipment $ 32,996 $ 21,054 $ 16,410 $ 7,922 $ 13,234 $ 28,733 $ 42,426
- ------------------------------------------------------------------------------------------------------
Per common share
Earnings (loss) $ 1.93 $ .98 $ .75 $ (.10) $ (.49) $ (.69) $ 1.62
Book value 17.06 15.18 14.18 13.50 13.61 14.18 14.96
Market price at year-end 16 7/8 14 1/8 15 1/2 14 1/2 11 16 3/4 20 3/4
Weighted average common and
dilutive common stock
equivalents (000's omitted) 8,958 9,262 9,145 9,050 9,246 9,656 10,189
- ------------------------------------------------------------------------------------------------------
Number of restaurants at year-end
Bakers Square 150 150 150 154 160 189 187
Company-operated Village Inn 102 99 97 98 99 112 126
Franchised Village Inn 116 110 108 108 106 107 104
Other Company-operated -- -- -- 1 5 6 --
- ------------------------------------------------------------------------------------------------------
Total 368 359 355 361 370 414 417
- ------------------------------------------------------------------------------------------------------
</TABLE>
* An asset impairment of $746,000 was included in results of operations for
1999.
* A one-time tax benefit of approximately $5,400,000 from adjusting the
valuation allowance relating to certain deferred tax assets was included
in net income for 1999.
* An asset disposal charge of $5,800,000 was included in results of
operations for 1996.
* An asset disposal, impairment and restructuring charge of $23,000,000
and income of $1,918,000 from settlement of litigation were
included in results of operations for 1994.
* A restructuring charge of $1,300,000 was included in results of
operations for 1993.
* Fiscal 1999 consisted of 364 days, while fiscal years 1998, 1997,
1996, 1995, 1994, 1993, consisted of 366 days, 365 days, 366 days, 366 days,
364 days, and 371 days, respectively.
* The Company has not paid dividends on common stock during the last
seven years.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following analysis should be read in conjunction with the Selected
Financial Data (Item 6 of Part II) and the Financial Statements and
Supplementary Data (Item 8 of Part II).
Results of Operations
The following table sets forth selected operating statistics for the last
three fiscal years (in thousands except restaurants at year end).
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Bakers Square
Restaurant sales $ 215,431 $ 207,251 $ 192,538
Average sales per restaurant 1,441 1,387 1,276
Restaurant operating profit 21,034 14,712 11,740
Restaurant operating profit % 9.8% 7.1% 6.1%
Divisional administrative costs 5,653 5,320 4,987
Divisional operating profit 15,381 9,392 6,753
Restaurants at year-end 150 150 150
Village Inn
Restaurant sales $ 140,350 $ 135,403 $ 128,586
Average sales per restaurant 1,401 1,394 1,326
Restaurant operating profit 23,570 23,314 21,566
Restaurant operating profit % 16.8% 17.2% 16.8%
Franchise income 3,265 3,519 3,339
Divisional administrative costs 4,623 4,942 3,788
Divisional operating profit 22,212 21,891 21,117
Restaurants at year-end 102 99 97
Angel's
Restaurant sales $ -- $ -- $ 1,064
Average sales per restaurant -- -- --
Restaurant operating profit/(loss) -- -- (19)
Restaurant operating profit/(loss) % -- -- (1.8%)
Divisional administrative costs -- -- 12
Divisional operating profit/(loss) -- -- (31)
Restaurants at year-end -- -- --
Consolidated
Restaurant sales $ 355,781 $ 342,654 $ 322,188
Food cost % 30.1% 30.8% 31.4%
Labor cost % 32.8% 32.7% 32.4%
Other operating cost % 24.6% 25.4% 25.9%
Restaurant operating profit % 12.5% 11.1% 10.3%
Restaurant operating profit 44,604 38,026 33,287
Franchise income 3,265 3,519 3,339
Divisional general and
administrative costs 10,276 10,262 8,787
-------------------------------------------
Divisional operating profit 37,593 31,283 27,839
-------------------------------------------
Unallocated general and
administrative costs 18,716 15,756 15,110
-------------------------------------------
Operating profit<F1> $ 18,877 $ 15,527 $ 12,729
============================================
</TABLE>
<F1> Before asset impairment charge of $746,000 in 1999.
The year ended October 31, 1999 compared to the year ended November 1, 1998
- ---------------------------------------------------------------------------
Consolidated restaurant sales increased 3.8% in 1999 versus 1998. This was
a result of operating an additional three Village Inn restaurants in the
current year (seven new restaurants were opened while three existing
restaurants were converted to franchise operations and one was closed due to
expiration of the lease), as well as experiencing a comparable same store
sales increase of 3.2%. The Bakers Square concept registered a 4.6%
increase in same store sales and a 1.3% increase in customer counts compared
to 1998. Restaurant remodel programs to enhance the dining experience,
broadened advertising coverage, special incentive programs at the local
level, strengthened management ranks in the Midwest and Westcoast, and
continued improved execution of the Bakers Square concept contributed to the
improvement in sales. Village Inn same store sales increased .9% and
customer counts decreased 1.5% over the prior year. The decrease in
customer counts is partially attributable to the opening of new stores in
established market areas, as well as highly successful promotional programs
in 1998 which drove large increases in customer traffic.
Consolidated restaurant operating profit increased 17.3% in 1999 versus
1998. Bakers Square's restaurant operating profit increased 43.0% over the
prior year, while restaurant operating profit as a percent of sales
increased to 9.8% in 1999 from 7.1% in 1998. Improved Bakers Square
operating profit is due to higher same store sales, and programs developed
to improve efficiencies, control food costs and minimize controllable
operating costs. Village Inn's restaurant operating profit increased 1.1%,
while profit as a percent of sales decreased from 17.2% in 1998 to 16.8% in
1999 due to start-up costs associated with the seven new stores opened in
1999.
Net franchise income decreased 7.2% between 1999 and 1998 primarily as a
result of increased general and administrative expenses associated with
franchise operations.
General and administrative expenses as a percent of restaurant sales,
increased .6% in 1999 to 8.1%. The increase was attributed to increased
divisional management expenses, higher incentive compensation payouts due to
improved profitability, an increased investment in store manager training,
and increased depreciation and other costs associated with the Enterprise
Resource Planning (ERP) system implementation.
Other income for 1999 increased 272% from 1998 due to a $859,000 gain on the
sale of a restaurant property.
Interest expense declined 34.6%, or $535,000 between 1999 and 1998 due to a
substantial reduction in long-term debt in 1998.
The year ended November 1, 1998 compared to the year ended October 31, 1997
- ---------------------------------------------------------------------------
Consolidated restaurant sales increased 6.4% in 1998 compared to 1997.
Comparable consolidated same store sales increased 6.7%, reflecting a 4.3%
increase for Village Inn and an 8.3% increase for Bakers Square. Village
Inn and Bakers Square comparable sales increases were due to a combination
of higher customer counts and increased average customer expenditures. Same
store customer counts increased 2.6% at Village Inn and 4.5% at Bakers
Square.
Consolidated restaurant operating profit increased 14.2% in 1998 versus
1997. Bakers Square accounted for the majority of the improvement as a
result of increased sales coupled with programs to control waste and gain
efficiencies. Village Inn's restaurant operating profit improved due
largely to reduced food costs.
Franchise income increased 5.4% in 1998 versus 1997 due to four new
franchise units offset partially by the closing of two franchise units.
General and administrative expense was 7.5% of revenues in 1998 and 7.4% in
1997. The increase of $2,121,000 or 8.9%, was largely due to higher bonus
payouts to operating management as the result of improved operating results.
Other income for 1998 decreased 38.3% from 1997 due to disposal of subleased
units and lower interest earned on notes receivable.
Interest expense decreased 39.8% for 1998 versus 1997 due to significantly
reduced levels of borrowing and reduced capital lease interest.
Asset Disposal, Impairment and Related Costs
- --------------------------------------------
The Company recorded a pre-tax charge of $746,000 in fiscal 1999 for the
write down of certain restaurant properties. Management assessed various
factors relevant to the assets, including projected negative cash flows and
concluded the historical performance trends were unlikely to improve
materially, therefore an impairment of the assets was recognized.
In 1996, the Company determined the strategy of using the Angel's Diner
restaurants concept to invigorate underperforming restaurant properties was
not economically viable and recorded a $5,800,000 asset disposal charge. The
charge reduced the carrying values of related assets to net realizable value
and provided for closure and carrying costs.
In 1994, the Company recorded a $23,000,000 charge related primarily to a
plan to close and dispose of underperforming restaurants and discontinue a
portion of the Company's manufacturing and distribution activities. Also,
included was the recognition of the impairment of the carrying values on
four properties and an accrual for other costs directly related to the
restructuring.
During 1999, the Company disposed of eight properties; five through sublease
and three through lease termination. Closure and carrying costs of $336,000
were charged against the established reserve. Additional units closed that
were not included in the disposal plan included one in 1999, one in 1998 and
six in 1997.
Operating results for the closed restaurants for the past three fiscal years
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Bakers Square
Sales $ -- $ -- $ 1,276,000
Restaurant operating profit/(loss) -- -- (215,000)
Village Inn
Sales $ 2,133,000 $ 3,912,000 $ 5,607,000
Restaurant operating profit/(loss) (13,000) 225,000 462,000
Angel's
Sales $ -- $ -- $ 1,064,000
Restaurant operating profit/(loss) -- -- (19,000)
Total
Sales $ 2,133,000 $ 3,912,000 $ 7,947,000
Restaurant operating profit/(loss) (13,000) 225,000 228,000
</TABLE>
As of October 31, 1999, the Company had $2,996,000 remaining to provide for
the disposal of seven properties. The reserves consisted of $2,238,000 to
reduce the disposal properties to realizable value and $758,000 to provide
for carrying costs and sublease losses. The Company believes these reserves
are adequate to cover the remaining costs and losses associated with the
remaining disposal properties.
The Company closed the bakery facilities in Denver, Colorado and Orlando,
Florida in 1996 and subsequently sold the Denver, Colorado bakery facility on
November 12, 1999 for $690,000, with a resulting loss of $614,000 applied
against the disposal reserve.
Effective Tax Rates
- -------------------
The effective income tax rates used for financial reporting were 6.5% in
1999, 36.5% in 1998, and 36.0% in 1997. The decrease in the effective tax
rate in 1999 is due to a one-time benefit of approximately $5,400,000 from
adjusting the valuation allowance relating to certain deferred tax assets.
Liquidity and Capital Resources
- -------------------------------
The Company's principal source of funds is internally generated cash from
operations. In 1999, $29,405,000 of cash was provided by operations
compared to $42,222,000 in 1998. The decrease in cash flow from operations
was a result of changes in working capital accounts. Cash provided from
operations in 1998 totaled $42,222,000, an increase of $13,654,000
over 1997. The increase was primarily due to increased profitability and
changes in working capital accounts.
In 1999, the Company utilized $1,954,000 in investing activities compared to
$18,588,000 in 1998. Although the net result is a $16,634,000 decrease,
capital expenditures actually increased to $32,996,000 in 1999. This was
offset by $30,608,000 in proceeds from the disposition of assets. Included
in this amount was $28,700,000 relating to a sale leaseback transaction on
twenty-one properties entered into by the Company. Cash used in investing
activities in 1998 totaled $18,588,000 compared to $15,309,000 in 1997. The
increase in cash used in investing activities in 1998 was due to higher
capital expenditures.
Cash used for financing activities in 1999, excluding the purchase of common
stock, decreased $11,035,000 to $889,000 compared to $11,924,000 in 1998.
The decrease is due to a substantial reduction of debt during 1998 and
limited advances under the Company's bank credit facility during 1999. In
1998, total cash used in financing activities, excluding the purchase of
common stock, was $11,924,000 compared to $12,981,000 in 1997, for a
decrease of $1,057,000. The decrease was a result of proceeds received from
the exercise of stock options.
In December 1997, the Company executed an amended and restated credit
agreement, which provides for an available credit limit of $40,000,000 in
the aggregate with a sublimit of $10,000,000 on letters of credit. The
credit agreement expires on February 28, 2001.
In 1999, 1998,and 1997, 232,925, 213,700 and 20,000 shares of the Company's
common stock were repurchased for $3,637,000, $2,912,000 and $220,000, under
authorizations approved by the Board of Directors. At October 31, 1999,
authorization to repurchase an additional 453,375 common shares was available.
Future purchases may be made in the open market or through privately negotiated
transactions and are dependent upon various business and financial
considerations.
At October 31, 1999, the Company was actively attempting to dispose of seven
properties. Four of these properties were owned in fee and the remainder
were leased. The Company intends to sell the fee properties over the next
year and approximately $2,100,000 of proceeds are expected to be realized
from the sale. The Company does not anticipate significant proceeds from
the disposition of the leased properties. The majority of the leased
properties will be disposed of through sublease over the next six to
eighteen months. Cash carrying costs of approximately $758,000 are expected
to be incurred during that period. The Company expects to sublease two of
the properties at rentals lower than the Company's obligations under the
prime leases. Those sublease losses will be funded over the remaining years
of the leases with an immaterial affect on the Company's liquidity.
Capital expenditures in 1999 totaled $32,996,000, which consisted of
$15,902,000 for new restaurants, $9,352,000 for improvements to existing
restaurants, $6,250,000 for information systems, and $1,492,000 for other
support related projects. The Company accounts for the cost of its
information systems in accordance with Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," which requires capitalization of external and internal costs
incurred during the application development stage. Costs incurred during
the preliminary project stage, post-implementation stage, training and
application maintenance are expensed as incurred. In 1998 and 1997 capital
expenditures totaled $21,054,000 and $16,410,000, respectively. Anticipated
capital expenditures of $29,600,000 are planned for fiscal year
2000, including the opening of eight to ten additional restaurants.
As of October 31, 1999, the Company had federal net operating loss ("NOL")
carryforwards totaling $27,491,000 which expire $6,146,000 in 2001,
$17,588,000 in 2010 and $3,757,000 in 2011. The Company also has investment
tax credit ("ITC") carryforwards totaling $1,601,000, which expire in 2000.
The Company has established a valuation allowance for the deferred tax
assets related to the ITC carryforward as it is not expected to be realized.
On October 28, 1999, the Company completed the sale and leaseback of the
real estate related to twenty-one restaurant properties. The Company
received $28,700,000 in net proceeds with a resulting deferred gain of
$16,500,000, which will be amortized to reduce future rent expenses over the
terms of the operating leases. The transaction allowed the Company to
realize net operating loss carryforwards that were due to expire, as well
as partially fund the tender offer discussed below.
On November 23, 1999 the Company commenced a tender offer to purchase up to
2,000,000 shares of the Company's outstanding common stock for $19.00 per
share. The tender offer concluded on December 22, 1999, whereby 2,000,000
shares were purchased. The tender offer was funded through cash proceeds
realized from the sale leaseback and a $4,000,000 draw on the $40,000,000
available line of credit.
VICORP guaranteed certain leases for twenty-five restaurant properties sold
in 1986 and sixteen restaurant leases of certain franchisees. Minimum
future rental payments remaining under these leases were approximately
$5,300,000 and $7,300,000 as of October 31, 1999 and November 1, 1998,
respectively. These guarantees are included in the definition of financial
instruments with off-balance-sheet risk of accounting loss. The Company
took possession of one of these properties, which has since been subleased,
and settled on a defaulted lease in the amount of $57,000 as a result of a
sublessee bankruptcy filing. The Company has no reason to believe that any
material liability exists and believes it is impracticable to estimate the
fair value of these financial guarantees (e.g., amounts the Company could
pay to remove the guarantees).
The Company believes anticipated cash flow from operations, as well as the
availability of funds under the $40,000,000 line of credit, and other
financing sources will provide sufficient capital to meet current
foreseeable cash needs, including working capital and capital expenditures.
Y2K
- ---
In 1997 the Company completed a review of the existing computer systems
which resulted in a decision to replace a large portion of the existing
systems. The principal purpose of implementing the new systems installed
was to upgrade and integrate the Company's information systems. The Company
believes the new systems are Year 2000 compliant.
As of January 4, 1999, the Company implemented a Year 2000 compliant system
at corporate headquarters. These new ERP (Enterprise Resource Planning)
systems have been designed to provide the infrastructure to support
corporate and field-based operations.
The Company completed a successful system-wide rollout of the new back-of-
house point-of-sale system, as well as Year 2000 compliant
modifications to the front-of-house systems in October 1999. End-to-end
testing was completed, including vendor interfaces, which required minor
modifications. The modifications were completed as of December 15, 1999.
The Company conducted a review of its physical facilities in order to
identify potential areas of embedded technology (heating, lighting,
fixtures, equipment, communications systems, waste treatment, emergency
backup systems, etc.) that may not be Year 2000 compliant. The Company
believes exposure is limited in this area and has formulated plans to
address any issues that may surface.
With respect to third parties, the Company contacted and prepared written
communications to all third parties considered critical to the Company's
ongoing operations. Communications requested written confirmation from
mission critical third parties of reasonable assurance that plans are being
developed to ensure Year 2000 readiness. Reasonable assurance included
verification that critical third-party vendors have a plan in place for
review of Year 2000 readiness for their supplier base. To the extent that
critical third-party vendors did not provide the Company with satisfactory
evidence of readiness, contingency plans were developed and will be
implemented by the Company if necessary.
The Company sent written notice to franchisees regarding the need for Year
2000 readiness. Approximately one-half of the Company's franchise
restaurant based systems were replaced in conjunction with the Company's
system wide rollout of the new back-of-house point-of-sale system and front-
of-house modifications.
The Company does not believe the costs related to the Year 2000 readiness
project are material to its financial position or results of operations.
As of January 21, 2000, the Company has not experienced any material
Year 2000 computer system related issues.
Management Outlook
- ------------------
The mid-scale segment of the restaurant industry remains extremely
competitive. Improvements in future operating performance will be primarily
dependent upon the Company's ability to increase comparable sales,
especially given the significant profit impact associated with incremental
sales at existing restaurants. Cost controls will also play a significant
factor in future profit growth. In addition, numerous external factors
could have a significant impact on future performance, including, but not
limited to, food costs, labor availability, site availability, the economy,
weather and government initiatives such as minimum wage rates, mandated
benefits and taxes.
Historically, the Company has mitigated the effects of inflation through
cost controls and periodic price increases. Management believes it will be
able to minimize the effects of future inflation through similar measures,
although such price increases will be subject to competitive constraints and
other business considerations.
Certain matters discussed in this report are "forward-looking statements"
intended to qualify for the safe harbors from liability established by the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as the Company "believes," "anticipates,"
"expects" or words of similar import. Similarly, statements that describe
the Company's future plans, objectives or goals are also forward-looking
statements. Such forward-looking statements are subject to certain risks
and uncertainties which are described in close proximity to such statements
and which could cause actual results to differ materially from those
currently anticipated. Shareholders, potential investors and other readers
are urged to consider these factors carefully in evaluating the forward-
looking statements and are cautioned not to place undue reliance on such
forward-looking statements. The forward-looking statements made herein are
only made as of the date of this report and the Company undertakes no
obligation to publicly update such forward-looking statements to reflect
subsequent events or circumstances.
New Accounting Pronouncements
- -----------------------------
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 which delayed the effective date of
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"), until fiscal
quarters of fiscal years beginning after June 15, 2000. SFAS 133 requires
all derivatives to be recognized as assets or liabilities on the balance
sheet and measured at fair value. Changes in the fair value of derivatives
should be recognized in either net income or other comprehensive income,
depending on the designated purpose of the derivative. At present the
Company is investigating the effect the adoption of this statement will have
on the Company's results of operations, financial position and cash flows,
if any.
Item 8. Financial Statements and Supplementary Data.
Management's Report on Financial Statements
TO OUR SHAREHOLDERS:
The preparation and integrity of the financial statements of VICORP
Restaurants, Inc. are the responsibility of its management. This
responsibility includes the selection of accounting procedures and practices
which conform with generally accepted accounting principles considered
appropriate in the circumstances. Informed judgments and estimates which
the Company believes to be reasonable are required in the determination of
certain data used in the accounting and reporting process.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance that transactions are executed in accordance
with management's authorization and properly recorded in all material
respects. Adequate communication of Company policies to its employees,
segregation of responsibilities for the authorization and execution of
transactions, and proper accountability for the Company's assets are
essential elements of the system.
Each year the Board of Directors appoints an Audit Committee comprised of
directors who are not employees of the Company. The principal
responsibilities of this Committee are to recommend an independent auditor
for the Company and to periodically meet with representatives of the
independent auditors and with management to obtain reasonable assurances
that the auditors are properly discharging their responsibilities and that
the Company's financial reporting to stockholders and others is adequate and
appropriate.
Arthur Andersen LLP has conducted an independent examination in order to
render their opinion on the Company's financial statements.
Charles R. Frederickson Richard E. Sabourin
Chief Executive Officer Executive Vice President and
and Chairman of the Board Chief Financial Officer
Report of Independent Public Accountants
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF VICORP RESTAURANTS, INC.:
We have audited the accompanying balance sheets of VICORP Restaurants, Inc.
(a Colorado corporation) as of October 31, 1999 and November 1, 1998, and
the related statements of operations, shareholders' equity and cash flows
for each of the three years in the period ended October 31, 1999. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of VICORP Restaurants, Inc.
as of October 31, 1999 and November 1, 1998, and the results of its
operations and its cash flows for each of the three years in the period
ended October 31, 1999, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
December 22, 1999.
VICORP Restaurants, Inc.
BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, November 1,
(in thousands) 1999 1998
- ----------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash $ 33,187 $ 10,262
Receivables(Note 3) 5,801 3,655
Inventories 9,989 7,501
Deferred income taxes(Note 10) 7,059 3,617
Prepaid expenses and other 1,253 2,192
- ---------------------------------------------------------------------------------------
Total current assets 57,289 27,227
- ---------------------------------------------------------------------------------------
Property and equipment, net(Note 4) 128,753 128,648
Deferred income taxes(Note 10) 33,303 35,547
Long-term receivables(Note 3) 1,204 869
Other assets 7,722 7,379
- ---------------------------------------------------------------------------------------
Total assets $ 228,271 $ 199,670
=======================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt
and capitalized lease
obligations(Notes 5 and 6) $ 1,582 $ 1,711
Accounts payable, trade 18,054 21,847
Accrued compensation 7,616 6,013
Accrued taxes 11,008 8,629
Accrued insurance(Note 12) 2,246 3,354
Other accrued expenses 6,528 5,208
- ---------------------------------------------------------------------------------------
Total current liabilities 47,034 46,762
- ---------------------------------------------------------------------------------------
Long-term debt(Note 6) 40 87
Capitalized lease obligations(Note 5) 4,548 5,696
Non-current accrued insurance(Note 12) 2,757 3,199
Other non-current liabilities and credits 22,044 5,919
Commitments and contingencies
Shareholders' equity(Note 7)
Series A Junior Participating Preferred Stock,
$.10 par value, 200,000 shares authorized,
no shares issued -- --
Common Stock, $.05 par value, 20,000,000
shares authorized, 8,845,581 and 9,067,699
shares issued and outstanding 444 455
Paid-in capital 80,673 84,148
Retained earnings 70,731 53,404
- ----------------------------------------------------------------------------------------
Total shareholders' equity 151,848 138,007
- ----------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 228,271 $ 199,670
========================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
VICORP Restaurants, Inc.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended
-----------------------------------------------------
October 31, November 1, October 31,
(in thousands, except per share data) 1999 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues(Note 2)
Restaurant operations $355,781 $342,654 $322,188
Franchise operations 3,265 3,519 3,339
- ------------------------------------------------------------------------------------------------
359,046 346,173 325,527
- ------------------------------------------------------------------------------------------------
Costs and expenses
Restaurant operations
Food 106,991 105,416 101,152
Labor 116,571 112,047 104,371
Other operating 87,615 87,165 83,378
General and administrative 28,992 26,018 23,897
Asset disposal, impairment, restructuring
and related costs(Notes 2 and 9) 746 -- --
- ------------------------------------------------------------------------------------------------
Operating profit 18,131 15,527 12,729
Interest expense (1,012) (1,547) (2,569)
Other income, net 1,422 382 619
- ------------------------------------------------------------------------------------------------
Income before income taxes 18,541 14,362 10,779
Provision for income taxes(Note 10) 1,214 5,242 3,880
- ------------------------------------------------------------------------------------------------
Net income $ 17,327 $ 9,120 $ 6,899
================================================================================================
Earnings per share(Note 2)
Basic $ 1.94 $ .99 $ .76
Diluted $ 1.93 $ .98 $ .75
================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
VICORP Restaurants, Inc.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended
--------------------------------------------
October 31, November 1, October 31,
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net income $ 17,327 $ 9,120 $ 6,899
Reconciliation to cash provided by operations:
Depreciation and amortization 19,647 19,486 19,746
Deferred income tax provision(benefit) (1,198) 4,457 2,705
Asset disposal, restructuring and related costs 746 269 490
Gain on disposition of assets (850) -- --
Other, net (701) (491) (286)
Changes in assets and liabilities:
Receivables (2,983) 170 (171)
Inventories (2,488) (750) (234)
Accounts payable, trade (4,068) 7,764 2,952
Other current assets and liabilities 4,415 1,325 (511)
Non-current accrued insurance (442) 872 (3,022)
- --------------------------------------------------------------------------------------------
Cash provided by operations 29,405 42,222 28,568
- --------------------------------------------------------------------------------------------
Investing activities
Purchase of property and equipment (32,996) (21,054) (16,410)
Sale (purchase) of other assets (938) 125 (329)
Disposition of property 30,608 1,005 881
Collection of non-trade receivables 1,080 1,336 549
Other, net 292 -- --
- --------------------------------------------------------------------------------------------
Cash used for investing activities (1,954) (18,588) (15,309)
- --------------------------------------------------------------------------------------------
Financing activities
Proceeds from issuance of debt -- 1,300 2,100
Payments of debt and capital lease obligations (1,004) (15,186) (16,240)
Purchase of common stock (3,637) (2,912) (220)
Issuance of common stock 115 1,846 439
Other, net -- 116 720
- --------------------------------------------------------------------------------------------
Cash used for financing activities (4,526) (14,836) (13,201)
- --------------------------------------------------------------------------------------------
Increase in cash 22,925 8,798 58
Cash at beginning of year 10,262 1,464 1,406
- --------------------------------------------------------------------------------------------
Cash at end of year $ 33,187 $ 10,262 $ 1,464
============================================================================================
Supplemental information
Cash paid during the year:
Interest (net of amount capitalized) $ 1,020 $ 1,589 $ 2,535
Income taxes 2,998 382 369
- --------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
VICORP Restaurants, Inc.
NOTES TO FINANCIAL STATEMENTS
Note 1. Description of Business
VICORP ("the Company") operates family style restaurants under the names
"Bakers Square" and "Village Inn," and franchises restaurants under the
Village Inn brandname. At October 31, 1999, VICORP operated two hundred
fifty-two Company-owned restaurants in thirteen states. Of the two hundred
fifty-two Company-owned restaurants, one hundred fifty were Bakers Squares
and one hundred two were Village Inns, with an additional one hundred
sixteen franchised Village Inn restaurants in twenty-one states. The
Company-owned and franchised restaurants are concentrated in Arizona,
California, Florida, the Rocky Mountain region and the upper Midwest. The
Company operates a pie manufacturing division to support the restaurants,
which operates under the name VICOM. VICOM has three production facilities
located in Santa Fe Springs, California, Oak Forest, Illinois and Mounds
View, Minnesota.
Note 2. Summary of Significant Accounting Policies
Fiscal Year
- -----------
Effective fiscal 1999, the Company adopted reporting on a 52/53 week
fiscal year ending on the last Sunday in October. In conjunction with that
change, the Company's last fiscal quarter of 1999 consisted of sixteen weeks
and all other quarters consisted of twelve weeks. Prior to 1999, the Company
utilized a fiscal year which, ended on the last day in October. Fiscal
quarters in 1998 and 1997 consisted of three months.
Estimates
- ---------
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported amounts of revenues and expenses. Actual
results could differ from these estimates.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents consist of cash on hand and highly liquid
instruments with original maturities of three months or less.
Inventories
- -----------
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of food, paper, products and supplies. Inventories consisted of
the following (in thousands):
<TABLE>
<CAPTION>
October 31, November 1,
1999 1998
---------- ----------
<S> <C> <C>
Inventories at production facilities
and third party storage locations:
Raw materials $ 2,401 $ 2,476
Finished goods 5,192 2,837
------- -------
7,593 5,313
Restaurant inventories 2,396 2,188
------- -------
$ 9,989 $ 7,501
======= =======
</TABLE>
Prepaid Expenses
- ----------------
Prepaid expenses consist primarily of prepaid rent, supplies, prepaid
contracts and prior to fiscal year 1999 restaurant pre-opening costs. Pre-
opening costs consisted of salaries and other direct expenses incurred in
connection with the set-up and stocking of stores, employee training and
general store management costs incurred prior to the opening of new stores.
Effective November 2,1998, the Company early adopted the provisions of
AICPA Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities" ("SOP 98-5"). All pre-opening expenses were expensed as
incurred in accordance with SOP 98-5. Prepaid pre-opening costs capitalized
at October 31, 1999 and November 1, 1998 are $0 and $67,000, respectively,
so the cumulative effect of the change in accounting principle was not
significant to the Company's financial position or results of operations.
Property and Equipment
- ----------------------
Property and equipment is stated at cost, less accumulated depreciation and
amortization. The provision for depreciation and amortization has been
calculated using the straight-line method. The useful lives of assets range
from twenty to forty years for buildings and three to ten years for
equipment and improvements. Leasehold improvements and leasehold rights
are amortized over the lesser of the useful life or the lease term.
Property and equipment additions include acquisitions of building and
equipment and costs incurred in the development and construction of new stores.
Expenditures for maintenance and repairs are charged to expense as incurred.
The Company accounts for the cost of its information systems in accordance
with Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," which requires
capitalization of external and internal costs incurred during the
application development stage. Costs incurred during the preliminary
project stage, post-implementation stage, training and application
maintenance are expensed as incurred.
Goodwill
- --------
The excess purchase price over net assets acquired is included in other
assets and amortized over twenty-five years.
Revenue Recognition
- -------------------
Revenue from Company stores is recognized in the period during which related
food and beverage products are sold.
Initial franchise fees are recognized as income upon commencement of the
franchise operation and completion of all material services and conditions
by the Company. Continuing service fees are calculated as a percentage of
the franchisee gross sales and recognized in the period the sales are
generated. Property rental income is recognized on a straight-line basis
over the life of the lease. Interest income on franchisee notes receivable
and equipment sales is recognized when earned. If collectibility is in
doubt, revenue recognition is deferred until cash receipt.
Net franchise operations consisted of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Continuing service fees $ 4,060 $ 3,979 $ 3,828
Initial and renewal fees 145 63 111
Property rental income 116 184 316
Interest income on franchisee notes 147 167 202
Equipment sales income 93 18 14
Administrative expense (1,296) (892) (1,132)
------- ------- ------
Net franchise operations $ 3,265 $ 3,519 $ 3,339
======= ======= =======
</TABLE>
Advertising Costs
- -----------------
Advertising costs for television, radio, newspapers, direct mail and point-
of-purchase materials are expensed in the period incurred. Production costs
are expensed upon initial usage of the advertising. Advertising expense for
1999, 1998 and 1997 was $9,454,000, $7,982,000 and $5,788,000, respectively.
At October 31, 1999 and November 1, 1998, $146,000 and $0 were reported as
prepaid expenses.
Fair Value of Financial Instruments
- -----------------------------------
The carrying value of cash and cash equivalents approximates fair value due
to the length of maturity. Notes receivable is valued at estimated fair
market value based on the respective facts and circumstances of each non-
publicly traded instrument. The fair value of long-term debt approximates
carrying value due to the variable, market-based interest rate feature.
Income Taxes
- ------------
Deferred income tax assets and liabilities are recognized for the expected
future income tax consequences of carryforwards and temporary differences
between the GAAP and tax basis of assets and liabilities. Valuation
allowances are established for deferred tax assets that are deemed
unrealizable.
Earnings Per Share
- ------------------
Basic earnings per share is calculated using the average number of common
shares outstanding. Diluted earnings per share is computed on the basis of
the average number of common shares outstanding plus the effect of
potentially dilutive common stock using the treasury stock method. The
number of potentially issuable shares as of October 31, 1997 has been
restated to conform with Statement of Financial Accounting Standards No.128
"Earnings Per Share."
<TABLE>
<CAPTION>
Weighted average common shares outstanding 1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Basic 8,930,045 9,209,628 9,096,628
Effect of dilutive common stock equivalents 28,097 52,521 48,075
--------- --------- ---------
Diluted 8,958,142 9,262,149 9,144,703
========= ========= =========
</TABLE>
Recoverability of Long-Lived Assets
- -----------------------------------
The Company evaluates long-lived assets to be held and used in the business
for impairment whenever events or changes in circumstances indicate the
carrying amount of an asset may not be recoverable. An impairment is
determined by comparing estimated undiscounted future operating cash flows
to the carrying amounts of assets. Assets are assessed on a restaurant by
restaurant basis. If an impairment exists, the asset will be recorded at
the lesser of its fair value or the estimated discounted future cash flows
related to that asset.
New Accounting Pronouncements
- -----------------------------
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 which delayed the effective date of
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"), until fiscal
quarters of fiscal years beginning after June 15, 2000. SFAS 133 requires
all derivatives to be recognized as assets or liabilities on the balance
sheet and measured at fair value. Changes in the fair value of derivatives
should be recognized in either net income or other comprehensive income,
depending on the designated purpose of the derivative. At present the
Company is investigating the effect the adoption of this statement will have
on the Company's results of operations, financial position and cash flows,
if any.
Note 3. Receivables
Receivables represent billings to outside bakery sales customers and
franchisee billings for continuing royalty service fees, initial and renewal
fees, equipment sales, and property rental for franchisees and other
sublessees. The trade receivables are generally unsecured while notes
receivable are typically secured by the property that gave rise to the
transaction.
Year-end receivables consisted of the following:
<TABLE>
<CAPTION>
October 31, November 1,
(in thousands) 1999 1998
- ----------------------------------------------------------
<S> <S> <S>
Trade receivables $5,910 $3,094
Notes receivable 1,581 2,141
Discounts on notes receivable (14) (68)
Allowance for doubtful accounts (472) (643)
- ---------------------------------------------------------
Receivables, net 7,005 4,524
Current portion 5,801 3,655
- ---------------------------------------------------------
Long-term portion $1,204 $ 869
- ---------------------------------------------------------
</TABLE>
Note 4. Property and Equipment
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
October 31, November 1,
(in thousands) 1999 1998
- ------------------------------------------------------------------------
<S> <C> <C>
Property and equipment used in operations:
Land $ 24,555 $ 22,540
Buildings and improvements 115,499 126,935
Equipment 120,885 111,376
Construction in progress 7,525 10,051
Restaurant property leased to others 7,329 7,947
Less: accumulated depreciation (151,266) (154,629)
- -----------------------------------------------------------------------
Net property and equipment used in operations 124,527 124,220
- -----------------------------------------------------------------------
Capitalized lease buildings 8,514 8,514
Less: accumulated amortization (5,469) (4,849)
- -----------------------------------------------------------------------
Net capitalized lease buildings 3,045 3,665
- -----------------------------------------------------------------------
Properties held for disposal, net 3,419 3,119
Less: allowance for loss on disposal (2,238) (2,356)
- -----------------------------------------------------------------------
Net properties held for disposal 1,181 763
- -----------------------------------------------------------------------
Property and equipment, net $128,753 $128,648
=======================================================================
</TABLE>
Depreciation and amortization expense was $18,635,000 in 1999, $18,790,000
in 1998, and $19,222,000 in 1997.
At October 31, 1999, all fee owned properties were free of mortgages,
pledges or other liens.
Note 5. Leases
The Company is the prime lessee under various land, building and equipment
leases for Company-owned and franchised restaurants, bakery facilities and
other non-Company operated locations. The leases have initial terms
ranging from fifteen to thirty-five years and, in certain instances, provide
for renewal options ranging from five to twenty years. Many leases provide
for purchase options at the end of the lease term and escalation clauses,
either predetermined or based upon inflation. Leases may also include
additional rental payments contingent upon restaurant sales volume. Under
most leases, the Company is responsible for occupancy costs including taxes,
insurance and maintenance. Subleases to franchisees or other non-Company
operators generally provide for similar terms as the prime lease, as well as
an obligation for occupancy costs. Implicit interest rates range from 7.2%
to 13.8% on capital leases.
The following summarizes future minimum lease payments under capital and
operating leases having an initial or remaining non-cancelable term of one
year or more as of October 31, 1999:
<TABLE>
<CAPTION>
Lease and
Capital Operating sublease
(in thousands) leases leases rentals
- -------------------------------------------------------------------------
<S> <C> <C> <C>
2000 $ 2,281 $ 16,882 $ (2,273)
2001 2,038 16,190 (2,016)
2002 1,617 12,220 (1,580)
2003 758 10,443 (1,015)
2004 479 9,472 (769)
Later years 665 58,408 (2,668)
- ------------------------------------------------------------------------
Total minimum lease payments $ 7,838 $123,615 $(10,321)
================================
Less amount representing interest 1,764
- -----------------------------------------------
Present value of minimum lease payments 6,074
Current maturities of capitalized
lease obligations 1,526
- -----------------------------------------------
Capitalized lease obligations $ 4,548
===============================================
</TABLE>
Net rental expense consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Restaurant land and buildings:
Minimum rentals $13,591 $13,956 $13,892
Contingent rentals 2,537 2,556 2,357
Equipment 222 85 66
- ------------------------------------------------------------------------
Gross rental expense 16,350 16,597 16,315
Less: lease and sublease rental income 3,212 3,368 3,271
- ------------------------------------------------------------------------
Net rental expense $13,138 $13,229 $13,044
========================================================================
</TABLE>
On October 28, 1999, the Company completed the sale and leaseback of the
real estate related to twenty-one restaurant properties. The Company
received $28,700,000 in net proceeds with a resulting deferred gain of
$16,500,000, which will be amortized to reduce future rent expenses over the
terms of the operating leases in accordance with SFAS 98, "Accounting for
Leases."
Note 6. Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
October 31, November 1,
(in thousands) 1999 1998
- -----------------------------------------------------------------
<S> <C> <C>
Other long-term debt $ 96 $ 234
Current maturities 56 147
- -----------------------------------------------------------------
Long-term debt $ 40 $ 87
=================================================================
</TABLE>
On December 19, 1997, the Company executed an amended and restated credit
agreement, which provides for an available credit limit of $40,000,000 in
the aggregate with a sublimit of $10,000,000 on letters of credit. The
credit agreement expires on February 28, 2001.
Advances under the amended and restated agreement bear interest at the
higher of the Federal Funds rate plus 1/2 of 1% or the lender's Prime Rate,
or the Company may elect to borrow at the lender's Eurodollar rate plus 1%
to 1 5/8%. In addition, the Company is required to pay fees equal to 1/4 to
3/8 of 1% per annum on unused portions of the commitment, and 1% to 1 5/8%
per annum on issued letters of credit.
The unused commitment and letter of credit fees and the margin on Eurodollar
borrowings are adjusted based on the Company's debt-to-capitalization ratio
and fixed charge coverage ratio. At the time of the closing of the amended
and restated agreement, the Company qualified for minimum rates and fees
provided in the agreement.
On October 28, 1999, the Company completed the sale and leaseback of the
real estate related to twenty-one restaurant properties. In conjunction with
the transaction the Company received a waiver letter dated October 22, 1999,
under which the lender waived any default caused by the sale leaseback
transaction, and agreed not to enforce their rights or remedies under the
loan document. In consideration of the waiver, the Company agreed not to
purchase any of its shares of common stock or exchange shares of one class
of capital stock for another in excess of the lesser of $30,000,000 or the
net proceeds of the sale leaseback transaction without the prior written
consent of the lender through the maturity date of the loan agreement. The
waiver does not constitute a waiver of any present or future violation of or
noncompliance with any provision of the loan document. Subsequent to year-
end, the Company commenced a tender offer to purchase 2,000,000 shares of
the outstanding common stock for $19.00 per share as described in Note 13.
The Company received a waiver letter dated November 22, 1999 from the lender
consenting to the transaction and amending certain covenants.
During 1999, the largest aggregate outstanding balance under the Company's
bank facilities was $650,000. The average balance outstanding was $3,022
with an average interest rate of 7.59%. At October 31, 1999, the Company
had placed letters of credit totaling $1,850,000 in connection with its
insurance programs and carried no outstanding debt under its credit
agreement.
The credit agreement contains various restrictive covenants which include,
among others, maintenance of certain financial ratios, maintenance of a
minimum balance of tangible net worth and limitations on annual capital
expenditures, indebtedness, dividends, dispositions and acquisitions and
franchise guarantees.
Principal amounts of other long-term debt outstanding as of October 31, 1999
due during each of the five succeeding fiscal years were, $56,000 in the
year 2000, $40,000 in 2001, and none in the years 2002, 2003 and 2004.
The Company incurred $1,012,000, $1,553,000, and $2,573,000, of interest
charges in 1999, 1998, and 1997, respectively. Of these amounts, $0, $6,000 and
$4,000 were capitalized in 1999, 1998, and 1997, respectively.
Deferred loan fees were $23,000 and $141,000 net of amortization at October
31, 1999 and November 1, 1998, respectively. These amounts are included in
other assets and are amortized over the three-year loan commitment period
using the straight-line method.
Note 7. Shareholders' Equity
The Company's authorized preferred stock consists of 5,000,000 $.10 par
value shares issuable in series. The rights of each series are to be
determined by the Company's Board of Directors.
Since August 1992, the Company's Board of Directors has authorized the
repurchase of shares of the Company's common stock. During 1999, the
Company repurchased 232,925 shares at an aggregate cost of $3,637,000. An
additional 453,375 common shares remained available for repurchase under the
existing authorizations. Future purchases may be made in the open market or
through privately negotiated transactions and will be dependent upon various
business and financial considerations.
Under Colorado law, repurchased shares of capital stock are considered
authorized and unissued shares and have the same status as shares which have
never been issued.
Under the most restrictive covenants of the Company's bank credit agreement,
approximately $30,000,000 and $33,796,000 was unrestricted at October 31,
1999, as to the repurchase of the Company's common stock and to declaration
of cash dividends, respectively.
The following table summarizes shareholders' equity activity:
<TABLE>
<CAPTION>
Total
Common stock Paid-in Retained shareholders'
(in thousands, except share data) Shares Amount capital earnings equity
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances at October 31, 1996 9,055,026 $453 $84,431 $37,385 $122,269
Net income -- -- -- 6,899 6,899
Common stock options exercised
including income tax benefit 82,900 5 797 -- 802
Employee Stock Purchase Plan 14,860 1 168 -- 169
Purchase of common shares (20,000) (1) (219) -- (220)
- -------------------------------------------------------------------------------------------
Balances at October 31, 1997 9,132,786 458 85,177 44,284 129,919
Net income -- -- -- 9,120 9,120
Common stock options exercised
including income tax benefit 139,001 7 1,741 -- 1,748
Employee Stock Purchase Plan 9,612 1 131 -- 132
Purchase of common shares (213,700) (11) (2,901) -- (2,912)
- -------------------------------------------------------------------------------------------
Balances at November 1, 1998 9,067,699 455 84,148 53,404 138,007
Net income -- -- -- 17,327 17,327
Common stock options exercised
including income tax benefits 2,000 -- 27 -- 27
Common Stock issued under
The Directors Stock Plan 305 -- 6 -- 6
Employee Stock Purchase Plan 8,502 1 117 -- 118
Purchase of common shares (232,925) (12) (3,625) -- (3,637)
- -------------------------------------------------------------------------------------------
Balances at October 31, 1999 8,845,581 $444 $80,673 $70,731 $151,848
===========================================================================================
</TABLE>
Note 8. Stock Option, Stock Purchase, Profit-sharing Plan, Deferred
Compensation Plan and Directors' Stock Plan
Under terms of the Company's stock option plans, officers and certain other
employees may be granted options to purchase the Company's common stock at
exercise prices not less than the market value of the common stock on the
date of the grant. Options generally vest over three years and expire ten
years after the date of grant or three months after employment termination,
whichever occurs first.
The Company has elected to account for its stock-based compensation plans
using the intrinsic value based method under APB No. 25. For pro forma
disclosure purposes, the Company has computed the value of all options
granted during 1999, 1998, and 1997 using the Black-Scholes option pricing
model and the following assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Risk-free weighted average interest rate....... 5.4% 4.9% 6.7%
Expected dividend yield........................ 0% 0% 0%
Expected weighted average lives............... 6.50 yrs 6.28 yrs 6.25 yrs
Expected volatility.......................... 40.7% 44.3% 44.7%
</TABLE>
The aggregate estimated fair value of stock options granted in 1999, 1998
and 1997 was $100,000, $1,208,000 and $73,000, respectively. For purposes
of pro forma disclosure, the estimated fair value of options is amortized
over the options' vesting period and previously recognized compensation
expense is reversed for current year forfeitures of unvested options. If
the Company had accounted for its employee stock compensation plans in
accordance with SFAS No. 123, the Company's net income and pro forma net
income per share would have been reported as follows:
<TABLE>
<CAPTION>
Years Ended
October 31, November 1, October 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net Income:
As Reported $17,327 $ 9,120 $ 6,899
Pro Forma 16,616 8,966 6,472
Net Income per Common
and Common Equivalent Share:
As Reported $1.93 $ 0.98 $ 0.75
Pro Forma 1.85 0.97 0.71
</TABLE>
Following is a summary of the Company's stock option plans at October 31,
1999, November 1, 1998 and October 31, 1997:
<TABLE>
<CAPTION>
Years Ended
October 31, November 1, October 31,
1999 1998 1997
---- ---- ----
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 444,000 $15.68 641,518 $13.96 868,300 $12.72
Grants 16,000 $15.75 164,000 $15.81 14,000 $12.25
Exercised (52,000)* $16.86 (139,001) $12.37 (122,900)* $ 5.82
Canceled (10,000) $17.00 (222,517) $12.87 (117,882) $13.08
------- ------- -------
Outstanding at end of year 398,000 $15.50 444,000 $15.68 641,518 $13.96
======= ======= =======
</TABLE>
* For 1999, includes 50,000 shares exercised by presenting 49,097 previously
owned shares. For 1997, includes 40,000 shares exercised by presenting
14,285 previously owned shares. The issuance of 903 and 25,715 incremental
shares to the employee was deferred in 1999 and 1997, respectively. These
shares are held in trust for the benefit of the employee under the terms of
the Company's Deferred Compensation Plan described below.
The following table summarizes information about the stock options
outstanding and exercisable as of October 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted Number
Average Weighted Exercisable Weighted
Remaining Average At Average
Range of Options Contractual Exercise October 31, Exercise
Exercise Prices Outstanding Life Price 1999 Price
- --------------- ----------- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
$11.50 100,000 6.80 years $11.50 75,000 $11.50
$12.25 14,000 7.46 years $12.25 14,000 $12.25
$14.25 100,000 8.92 years $14.25 33,332 $14.25
$14.50-$18.25 142,000 6.95 years $16.67 117,000 $16.33
$20.00-$26.00 42,000 2.19 years $25.14 42,000 $25.14
------- -------
$11.50-$26.00 398,000 6.92 years $15.50 281,332 $15.91
======= =======
</TABLE>
In October 1996, the Company adopted an Employee Stock Purchase Plan
(the "Plan") under which eligible employees completing twelve months of
employment may contribute up to $25,000 of their annual earnings toward the
quarterly purchase of the Company's common stock at 85% of the quarter-end
market value. There are no charges or credits to income in connection with the
Plan. The Company has reserved 500,000 common shares for issuance under the
Plan, which terminates on September 30, 2001. Under the Plan 8,502, 9,612
and 14,860 shares were issued in fiscal 1999, 1998 and 1997, respectively.
The Company has an Outstanding Common Stock Purchase Plan (the "Plan")
under which eligible participants may elect to utilize incentive compensation
that otherwise would be paid in cash to purchase the Company's common stock in
the open market at prevailing prices. If the participant owns these shares
and is employed by the Company after two years from the purchase of the
common shares, a cash bonus equal to 25% of the incentive compensation used
to purchase the shares will be paid to the participant. The Plan expired on
October 31, 1999. No material expense under this Plan was incurred during
the last three fiscal years.
The Company has an Employees' Profit-sharing Plan, established under Section
401(k) of the Internal Revenue Code of 1986, which provides for annual
contributions by the Company in the amount of 2% of the aggregate
compensation of participants. Full-time and part-time employees and part-time
employee meeting a one thousand hour service requirement are eligible to
participate. The Company contributed $651,000, $531,000 and $515,000 in 1999,
1998 and 1997, respectively.
The Company has a Deferred Compensation Plan (the "Plan") that allows
officers of the Company to voluntarily defer compensation. All benefits
under the Plan are unfunded obligations of the Company. Compensation
expense is recorded for cash compensation deferred and a related liability
is recognized. Participants may elect designated investment options for the
notional investment of their deferred compensation. The recorded
obligations and expense are adjusted for deemed income or loss related to
the investments selected. The Company accounts for deferred cash
compensation under EITF 97-14. On October 31, 1999 and November 1, 1998,
the accrued obligation for deferred cash compensation and deemed earnings
thereon was $1,553,000 and $874,000, respectively. The Plan provides that
participants who hold stock options may irrevocably elect to exercise the
stock options and have their Plan account credited with a number of shares
equal in value to the incremental difference between the exercise price and
the closing price of the Company's common stock on the surrender date.
Under EITF 97-5, if the option holder presents "mature" shares (held for at
least six months) that are deemed tendered for the exercise price, and the
ultimate payment to the employee is limited to the number of shares
deferred, no compensation expense is recognized at the time of exercise, or
subsequently. If the employee has the right to receive cash or other
considerations from the Plan, the intrinsic value of the options at the date
of exercise would be expensed as well as subsequent changes in the fair
value of the shares held by the Company for the benefit of the employee,
until finally distributed. To date, no compensation expense has been
recognized related to the deferred issuance of Company shares. Common
shares held in trust by the Company totaled 29,495 in 1999 and 28,592 in
1998. These shares are accounted for in a manner similar to treasury stock,
and consequently, under Colorado law, are treated as authorized but unissued
shares. Upon eligibility for retirement or termination of a participant's
employment, the participant shall have a 100% vested interest in their Plan
account. Distributions of the participant's account shall be made in single
lump sum payments or equal installments over a period of no less than two
and no more than fifteen years.
The Company has a common stock award plan for non-employee directors
("Directors Plan") under which the maximum number of shares of common stock
which may be granted during the term of the Directors Plan will be 150,000
shares. Under the terms of the Directors Plan, on the last day of each
calendar quarter effective July 1, 1999, the Company will automatically
grant a number of shares of common stock equal to $5,000 to each director.
The fair market value is equal to the average of the closing price on the
common stock for the five business days immediately preceding the grant
date. A director may elect to defer receipt of the common stock until the
expiration of five years from the date of such grant or the termination of
the director's status as a director. Compensation expense is recognized for
the fair value of the shares at the date of grant and adjusted for
subsequent changes in their fair value until issued. As of October 31,
1999, 2,440 shares were granted at an option price of $16.38, of which 305
were issued and 2,135 were deferred for a total compensation expense of
$41,068.
Note 9. Asset Disposal, Impairment and Related Costs
The Company recorded a pre-tax charge of $746,000 in fiscal 1999 for the
write down of certain restaurant properties. Management assessed various
factors relevant to the assets, including projected negative cash flow
losses and concluded the historical performance trends were unlikely to
improve materially, therefore an impairment of the assets was recognized.
In 1996, the Company determined the strategy of using the Angel's Diner
restaurants concept to invigorate underperforming restaurant properties was
not economically viable and recorded a $5,800,000 asset disposal charge. The
charge reduced the carrying values of related assets to net realizable value
and provided for closure and carrying costs.
In 1994, the Company recorded a $23,000,000 charge related primarily to a
plan to close and dispose of underperforming restaurants and discontinue a
portion of the Company's manufacturing and distribution activities. Also,
included was the recognition of the impairment of the carrying values on
four properties and an accrual for other costs directly related to the
restructuring.
During 1999, the Company disposed of eight properties; five through sublease
and three through lease termination. Closure and carrying costs of $336,000
were charged against the established reserve. Additional units closed that
were not included in the disposal plan included one in 1999, one in 1998 and
six in 1997.
Operating results for the closed restaurants for the past three fiscal years
were as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Sales $2,133 $3,912 $7,947
Restaurant operating profit/(loss) (13) 225 228
</TABLE>
As of October 31, 1999, the Company had $2,996,000 remaining to provide for
the disposal of seven properties. The reserves consisted of $2,238,000 to
reduce the disposal properties to realizable value and $758,000 to provide
for carrying costs and sublease losses. The Company believes these reserves
are adequate to cover the remaining costs and losses associated with the
remaining disposal properties.
The Company closed the bakery facilities in Denver, Colorado and Orlando,
Florida in 1996 and subsequently sold the Denver, Colorado bakery facility on
November 12, 1999 for $690,000, with a resulting loss of $614,000 applied
against the disposal reserve.
Note 10. Income Taxes
The total provisions for income taxes consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $ 668 $ 254 $ 109
States 1,742 527 733
- -----------------------------------------------------------------------
2,410 781 842
- -----------------------------------------------------------------------
Deferred
Federal 224 4,008 2,082
States (1,422) 449 623
- -----------------------------------------------------------------------
(1,198) 4,457 2,705
- -----------------------------------------------------------------------
Total provision for income taxes $ 1,212 $ 5,238 $ 3,547
=======================================================================
</TABLE>
The components of the provision for income taxes included in the Company's
statements of operations were as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Taxes on income before carryforwards $14,531 $ 6,064 $ 3,876
Less: benefit of loss carryforwards utilized (12,789) (5,537) (3,143)
AMT Payable 668 254 109
----------------------------------------------------------------------------------
2,410 781 842
- -----------------------------------------------------------------------------------
Deferred
Tax effect of net change in temporary differences (12,458) 126 125
Utilization of (addition to) tax net operating
loss carryforward 12,789 5,537 3,141
FICA tax credit (924) (698) (815)
AMT credit (666) (254) (109)
Expiration of net operating loss carryforwards 29,575 19,792 --
Expiration of tax credit carryforwards 781 1,009 363
Change in valuation allowance (30,295) (21,055) --
- -----------------------------------------------------------------------------------
(1,198) 4,457 2,705
- -----------------------------------------------------------------------------------
Tax effect of deduction for exercised stock
options credited to paid-in capital 2 4 333
- -----------------------------------------------------------------------------------
Income tax expense $ 1,214 $ 5,242 $ 3,880
===================================================================================
</TABLE>
Income tax expense differs from the amounts computed by applying
the federal income tax rate to income before income taxes as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 % 1998 % 1997 %
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed federal income taxes using
statutory rate $6,489 35.0% $5,027 35.0% $3,773 35.0%
FICA tax credit (924) (5.0) (698) (4.9) (815) (7.5)
State income taxes net of federal
income tax effect 1,565 8.4 1,003 6.9 881 8.1
Expiration of tax credit carryforwards 781 4.2 1,009 7.0 363 3.4
Expiration of tax NOL 29,575 159.5 19,792 137.9 -- --
Recognition of previously reserved assets (5,754) (31.0) -- -- -- --
Change in valuation allowance (30,295) (163.4) (21,055) (146.6) -- --
Other (223) (1.2) 164 1.2 (322) (3.0)
- ---------------------------------------------------------------------------------------------
$1,214 6.5% $5,242 36.5% $3,880 36.0%
=============================================================================================
</TABLE>
The Company had federal taxable income for tax purposes and book
income before income taxes as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
- ---------------------------------------------------------------
<S> <C> <C> <C>
Federal taxable income $33,803 $14,051 $6,894
Book income before income taxes 18,541 14,362 10,779
</TABLE>
The difference between federal taxable income and book income is due to
state income taxes and temporary differences.
The components of the net deferred tax assets were as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 1998
- -------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Tax effect of net operating loss carryforwards $10,273 $52,639
Tax credit carryforwards 2,053 2,835
FICA tax credit 4,965 4,041
Alternative minimum tax credits 3,269 2,603
Accrued insurance claims not yet deductible 1,862 2,432
Leasing transactions 7,128 2,552
Property and equipment 7,877 1,688
Other 4,649 3,915
------------------------------------------------------------------------
42,076 72,705
Valuation allowance (1,650) (31,945)
- -------------------------------------------------------------------------
Deferred tax assets, net of allowance 40,426 40,760
- -------------------------------------------------------------------------
Deferred tax liabilities (64) (1,596)
- -------------------------------------------------------------------------
Net deferred tax assets 40,362 39,164
Current portion 7,059 3,617
- -------------------------------------------------------------------------
Long-term portion $33,303 $35,547
=========================================================================
</TABLE>
As of October 31, 1999, the Company had federal net operating loss ("NOL")
carryforwards totaling $27,491,000 which expire $6,146,000 in 2001,
$17,588,000 in 2010 and $3,757,000 in 2011. The Company also has investment
tax credit ("ITC") carryforwards totaling $1,601,000, which expire in 2000.
The Company has established a valuation allowance for the deferred tax
assets related to these carryforwards because the ITC carryforwards are not
expected to be realized.
Note 11. Operating Segments
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about
Segments of an Enterprise and Related Information." SFAS 131 redefines how
operating segments are determined and requires disclosure of certain
financial and descriptive information about a company's operating segments.
The Company has adopted SFAS 131 for the year ended October 31, 1999.
The Company has three reportable segments; Village Inn, Bakers Square, and
Franchising.
All amounts not attributed to segments relate to administrative functions
and other non-reportable segments.
Financial data related to the Company's reportable segments is as follows
(in thousands):
<TABLE>
<CAPTION>
Bakers Square Village Inn Franchising Other Total
------------- ----------- ----------- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales: 1999 $215,431 $140,350 $ -- $ -- $355,781
1998 207,251 135,403 -- -- 342,654
1997 192,538 128,586 -- 1,064 322,188
Operating profit/(loss):
1999 $ 20,288 $ 23,570 $ 3,265 $(28,992) $ 18,131
1998 14,712 23,314 3,519 (26,018) 15,527
1997 11,740 21,566 3,339 (23,916) 12,729
Total assets: 1999 $ 72,449 $ 50,819 $ 5,602 $ 99,401 $228,271
1998 84,328 41,529 4,061 69,752 199,670
1997 89,681 38,262 5,380 61,667 194,990
</TABLE>
Note 12. Commitments and Contingencies
Prior to fiscal 1998, the Company retained a significant portion of certain
insurable risks in the medical, dental, workers' compensation, general
liability and property areas. Stop-loss coverage was obtained in order to
limit exposure to any significant claims. Provisions for losses expected
under these programs were recorded based upon the Company's estimates of
liabilities for claims incurred, including those not yet reported, the
Company's historical performance and actuarial assumptions followed in the
insurance industry. Beginning in 1998, the Company obtained traditional
insurance coverage for insurable risks other than medical and dental while
maintaining stop-loss coverage for medical loss exposure. The Company has
provided letters of credit totaling $1,850,000 in connection with certain of
these insurance programs.
The Company is involved in various lawsuits and claims arising from the
conduct of its business and has guaranteed certain indebtedness and leases
of its franchisees and others. Management believes the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
On September 28, 1998, two class actions were commenced in the Superior
Court of Los Angeles County, California.
The first, Kirk v. VICORP Restaurants, Inc., Case No. BC-198202, was brought
by a former manager of a California Bakers Square restaurant. Allegations
in the amended complaint assert violations by VICORP of California wage and
hour laws and regulations concerning overtime wages. The Plaintiff is
seeking class certification, injunctive relief, damages in an unspecified
amount, statutory penalties, interest, costs, and attorneys' fees.
The second, Schroeder v. VICORP Restaurants, Inc., Case No. BC-198203, was
brought by a former server at a California Bakers Square restaurant. The
Plaintiff alleges VICORP has violated California statutes and regulations
concerning the payment of wages, tip pooling, reimbursement for uniform
expenses, failure to remit tips, and the improper charging of walkouts to
servers. Class certification is requested, as well as injunctive relief,
damages in an unspecified amount, statutory penalties, interest, costs, and
attorneys' fees.
On December 28, 1998, a third action was commenced in the Superior Court of
Los Angeles County, California, Ontiveros v. VICORP Restaurants, Inc., Case
No. BC-202962. This action was brought by a former manager of a California
Bakers Square restaurant. The Plaintiff is seeking damages, statutory
penalties, declaratory relief, interest, attorneys' fees, and costs for
alleged violations of California statutes and regulations concerning the
payment of wages.
The Company believes the legal actions described above are similar to
plaintiff actions recently brought against other multi-location restaurant
operators in the state of California. Resolution of these matters may
require a significant period of time and is subject to substantial
uncertainties common to the judicial process for class actions in general.
The Company believes it has not violated California statutes and regulations
and has meritorious defenses to each of the claims in these actions. While
the Company intends to vigorously defend against the allegations, it is
possible that the Company will not prevail, or that decisions made in other
similar cases may result in interpretations of the California statutes that
are adverse to the Company's position. The cost of defense for these
actions is being recognized as incurred. No provision has been made for any
judgements or settlements that might ultimately result. While a contingency
exists that any such judgement or settlement could be material to the
results of operations of the Company for some future period or periods, the
Company currently believes that resolution of these amounts will not have a
material adverse effect on the Company's financial position.
VICORP guaranteed certain leases for twenty-five restaurant properties sold
in 1986 and sixteen restaurant leases of certain franchisees. Minimum
future rental payments remaining under these leases were $5,300,000 and
$7,300,000 as of October 31, 1999 and November 1, 1998, respectively. These
guarantees are included in the definition of financial instruments with off-
balance-sheet risk of accounting loss. The Company took possession of one
of these properties, which has since been subleased, and settled on a
defaulted lease in the amount of $57,000 as a result of a sublessee
bankruptcy filing. The Company has no reason to believe that any material
liability exists and believes it is impracticable to estimate the fair value
of these financial guarantees (e.g., amounts the Company could pay to remove
the guarantees).
Contractual obligations for restaurant construction amounted to
approximately $2,487,000 as of October 31, 1999.
On September 1, 1999, the Company entered into an operating agreement with
Pies, Inc. to operate a bakery facility for a term of five months and
purchase the facility at the completion of the operating term. At the
present time, management foresees purchasing the facility on February 1,
2000 at a cost of $2,600,000. This facility will replace an existing
facility whose lease is due to expire.
Note 13. Subsequent Events
On November 23, 1999 the Company commenced a tender offer to purchase up to
2,000,000 shares of the outstanding common stock for $19.00 per share. The
tender offer concluded on December 22, 1999, whereby 2,000,000 shares were
purchased.
Note 14. Quarterly Financial Data (unaudited)
In conjunction with the change in the fiscal year, the Company determined
that a significant amount of estimation would be required to restate
quarterly 1998 operating results to correspond with the twelve week quarterly
reporting. Therefore, restatements of results were not made and the quarterly
results for 1999 and 1998 are not comparable. The following table highlights
the differences in time periods:
<TABLE>
<CAPTION>
Fiscal 1999 Fiscal 1998
----------------------------------- ----------------------------------
Time Period Days Time Period Days
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
1st Quarter Nov 2, 1998 - Jan 24, 1999 84 Nov 1, 1997 - Jan 31, 1998 92
2nd Quarter Jan 25, 1999 - Apr 18, 1999 84 Feb 1, 1998 - Apr 30, 1998 89
3rd Quarter Apr 19, 1999 - Jul 11, 1999 84 May 1, 1998 - July 31, 1998 92
4th Quarter July 12, 1999 - Oct 31, 1999 112 Aug 1, 1998 - Nov 1, 1998 93
--- --
364 366
=== ===
</TABLE>
The Company's quarterly results of operations are summarized as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
Quarter ended
-----------------------------------------------------
January 24, April 18, July 11, October 31,
1999 1999 1999 1999
(84 days) (84 days) (84 days) (112 days)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $84,093 $81,854 $83,709 $109,390
Restaurant operating profit 10,435 9,774 10,903 13,492
Net income <F1> 3,032 2,329 3,147 8,819
Net income per share-diluted .33 .26 .35 .99
========================================================================================
Quarter ended
-----------------------------------------------------
January 31, April 30, July 31, November 1,
1998 1998 1998 1998
(92 days) (89 days) (92 days) (93 days)
- ----------------------------------------------------------------------------------------
Revenues $87,377 $82,946 $88,179 $87,671
Restaurant operating profit 9,316 8,659 10,406 9,645
Net income 2,291 1,899 2,787 2,143
Net income per share-diluted .25 .21 .30 .23
========================================================================================
</TABLE>
<F1> An asset impairment of $746,000 was included in net income for the
fourth quarter ended October 31, 1999.
Item 9. Disagreements on Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Item 13. Certain Relationships and Related Transactions.
The Company will file a definitive proxy statement pursuant to Regulation
14A for its 1999 Annual Meeting of Shareholders. Such statement will be
filed no later than 120 days after the close of the fiscal year covered by
this Form 10-K. Except for certain information concerning executive
officers of the Company which is included in Part I of this Form 10-K, the
information called for by the above items will be included in such
definitive proxy statement under "Election of Directors", "Certain
Transactions", "Compensation of Directors and Executive Officers" and
"Voting Securities and Principal Holders Thereof", which is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(1) The following Financial Statements of VICORP Restaurants, Inc. are
filed as part of this report:
Management's Report on Financial Statements.
Report of Independent Public Accountants.
Balance Sheets - October 31, 1999 and November 1, 1998.
Statements of Operations - Years ended October 31, 1999, November 1,
1998, and October 31, 1997.
Statements of Cash Flows - Years ended October 31, 1999, November 1,
1998, and October 31, 1997.
Statements of Shareholders' Equity - Years ended October 31, 1999,
November 1, 1998, and October 31, 1997 as presented in Note 7 of Notes
to Financial Statements.
(a)(2) The following financial statement schedule for VICORP Restaurants,
Inc., as listed in the Index below, is included herein beginning on page
36.
Report of Independent Public Accountants on Financial Statement
Schedule.
Schedule II - Valuation and Qualifying Accounts for the years ended
October 31, 1999, November 1, 1998, and October 31, 1997.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
(a)(3) The exhibits filed in response to Item 601 of Regulation S-K are
listed in the Exhibit Index on Page 36.
For the purpose of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities Act
of 1933, the undersigned registrant hereby undertakes as follows, which
undertaking shall be incorporated by reference into registrant's
currently effective Registration Statements on Form S-8:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the registrant pursuant to any statute, charter
provisions, bylaws, contract, or other arrangements, the registrant has
been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceedings) is asserted by
such director, officer, or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(b) Reports on Form 8-K filed in fourth quarter of 1999:
The Company filed a report on Form 8-K dated November 9, 1999,
reporting a disposition of assets under Item 2. On October 28, 1999,
the Company completed the sale and the leaseback of the real estate
related to twenty-one restaurant properties. The Company received
$28,700,000 in net proceeds from the sale.
(c) Exhibits filed with this report are attached hereto.
(d) Financial statement schedules filed with this report follow:
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted auditing standards,
the financial statements of VICORP Restaurants, Inc. included in this Form
10-K and have issued our report thereon dated December 22, 1999. Our audit
was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index above is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not
part of the basic financial statements. The schedule has been subjected to
the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Arthur Andersen LLP
Denver, Colorado,
December 22, 1999.
<TABLE>
<CAPTION>
VICORP Restaurants, Inc.
Schedule II - VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended October 31, 1999
(in thousands)
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Additions
------------------------
Balance at Charged Charged Balance
beginning to costs to other at end
Description of period and expenses accounts Deductions of period
- ----------- --------- ------------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended October 31, 1999:
Allowance for doubtful accounts $ 643 $ -- $ 189 $ 360<F1> $ 472
Discounts and deferred gains 68 (17) -- 37<F2> 14
Allowance for loss on disposal 2,488 330 -- 579<F1> 2,239
------- ------- ------- ------- -------
$ 3,199 $ 313 $ 189 $ 976 $ 2,725
======= ======= ======= ======= =======
Year ended November 1, 1998:
Allowance for doubtful accounts $ 676 $ 22 $ 220<F3> $ 275<F1> $ 643
Discounts and deferred gains 660 46 -- 638<F2> 68
Allowance for loss on disposal 4,800 -- -- 2,312<F1> 2,488
------- ------- -------- ------- -------
$ 6,136 $ 68 $ 220 $ 3,225 $ 3,199
======= ======= ======== ======= =======
Year ended October 31, 1997:
Allowance for doubtful accounts $ 704 $ 42 $ 175<F3> $ 245<F1> $ 676
Discounts and deferred gains 687 (39) 12<F3> -- 660
Allowance for loss on disposal 5,806 -- -- 1,006<F1> 4,800
------- ------- -------- ------- -------
$ 7,197 $ 3 $ 187 $ 1,251 $ 6,136
======= ======= ======== ======= =======
</TABLE>
<F1> Charges to the accounts for purposes for which the reserves were
established.
<F2> Recognition of deferred gain.
<F3> Establishment of reserves by charges directly to income.
Year-end balances are reflected in the Balance Sheets as follows:
<TABLE>
<CAPTION>
October 31, November 1,
1999 1998
----------- -----------
<S> <C> <C>
Deducted from current receivables $ 391 $ 562
Deducted from property and equipment 2,239 2,488
Deducted from long-term receivables 95 149
-------- --------
$ 2,725 $ 3,199
======== ========
</TABLE>
EXHIBIT INDEX
The following documents are filed as a part of this report. Those exhibits
previously filed and incorporated herein by reference are identified below
by an asterisk (*). For each such exhibit, there is shown below the filing
and exhibit number of the document in the previous filing. The registration
statements were filed by the Company unless otherwise indicated. Exhibits
which are not required for this report are omitted.
Exhibit Description of Document
- ------- -----------------------
3 - * (i) Articles of Incorporation, as Amended - Form 10-K for
the year ended October 29, 1989.
- *(ii) Bylaws - Form 10-K for the year ended October 29, 1989.
4 - * (i) Specimen Stock Certificate - Form 10-K for the year
ended October 30, 1988.
10 - Material Contracts
*(i) Franchise Operating Agreement - Registration Statement 2-
83326, Exhibit 10(b).
*(ii) U. S. $40,000,000 Amended and Restated Credit Agreement
dated December 19, 1997 between VICORP Restaurants, Inc. and
NationsBank of Texas, N.A. and U. S. Bank National
Association as amended on November 18, 1998; October 22, 1999;
and November 22, 1999 - Schedule 13E4 dated November 23, 1999,
Exhibit 99.B.
(iii) Form of Purchase Agreement relating to the Sale and
Leaseback of 21 restaurant properties on October 28, 1999.
(iv) Form of Lease relating to the Sale and Leaseback of 21
restaurant properties on October 28, 1999.
(v) Executive Compensation Plans and Arrangements
*(a) VICORP Restaurants, Inc. Outstanding Stock Purchase Plan
(1989) - Registration Statement 33-32608, Exhibit 4(h).
*(b) VICORP Restaurants, Inc. Stock Purchase Plan
- Registration Statement 333-11003, Form S-8 dated August
28, 1996.
*(c) Deferred Compensation Plan of VICORP Restaurants, Inc.
dated May 1, 1996 - Form 10-Q/A for the quarter ended
July 31, 1996, Exhibit 10(iii).
*(d) Deferred Stock Plan for Directors - Form 10-Q for the
quarter ended July 11, 1999, Exhibit 10.
*(e) Severance Agreement Charles R. Frederickson - Form 10-K
for the year ended October 31, 1993, Exhibit 10(vi).
*(f) Employment Agreement for Richard E. Sabourin dated
July 25, 1996 - Form 10-Q for the quarter ended
July 31, 1996, Exhibit 10(ii)(b).
*(g) Stock Option Agreement for Richard E. Sabourin dated
August 19, 1996 - Form 10-Q for the quarter
ended July 31, 1996, Exhibit 10(ii)(d).
*(h) Amended and Restated 1982 Stock Option Plan - Form 10-K
for the year ended October 31, 1997, Exhibit 10(iii)(j).
*(i) Amended and Restated 1983 Stock Option Plan - Form 10-K
for the year ended October 31, 1997, Exhibit 10(iii)(b).
*(j) Form Severance Agreement (Executive Officers excluding
Frederickson)-Form 10-Q for the
quarter ended July 31, 1998, Exhibit 10(iii)(i).
*(k) Stock Option Agreement for Robert E. Kaltenbach dated
April 9, 1998 - Form 10-K for the year ended
November 1, 1998, Exhibit 10(iii)(j).
*(l) Stock Option Agreement for Robert E. Kaltenbach
dated October 2, 1998 - Form 10-K for the year ended
November 1, 1998, Exhibit 10 (iii)(k).
*(m) Stock Option Agreement for Joseph F. Trungale dated
October 2, 1998 - Form 10-K for the
year ended November 1, 1998, Exhibit 10 (iii)(l).
*(n) Incentive Program Document Defined Positions of
Officers and Directors dated December 4, 1998, Form 10-K
for the year ended November 1, 1998, Exhibit 10(iii)(m).
*(o) Incentive Program Document for President/Bakers
Square dated December 14, 1998, Form 10-K for the year
ended November 1, 1998, Exhibit 10(iii)(n).
*(p) Incentive Program Document for President/Village Inn dated
December 14, 1998, Form 10-K for the year ended
November 1, 1998, Exhibit 10(iii)(o).
(q) Stock Option Agreement for Joseph F. Trungale date
November 1, 1999.
(r) Incentive Program Document Defined Positions of Officers
and Directors dated December 9, 1999.
(s) Stock Option Agreement for Charles R. Frederickson
dated December 9, 1999.
23 - Consents of Accountants
24 - Power of Attorney
27 - Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized, on the
21st day of January, 2000.
VICORP Restaurants, Inc. (Registrant)
By /s/ Charles R. Frederickson
---------------------------
Charles R. Frederickson, Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on January 21, 2000 on
behalf of the registrant and in the capacities indicated.
Signature Title
--------- -----
/s/ Charles R. Frederickson
- ---------------------------- Chairman of the Board and
(Charles R. Frederickson) Chief Executive Officer
/s/ Richard E. Sabourin
- ----------------------- Executive Vice President and
(Richard E. Sabourin) Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Charles R. Frederickson
- ---------------------------
(Charles R. Frederickson)*
* Charles R. Frederickson, as attorney-in-fact for Joseph F. Trungale, Carole
Lewis Anderson, Bruce B. Brundage, John C. Hoyt, Robert T. Marto, Dudley C.
Mecum, Dennis B. Robertson, Hunter Yager, and Arthur Zankel, constituting a
majority of the Board of Directors of the registrant.
PURCHASE AGREEMENT
------------------
THIS PURCHASE AGREEMENT is made as of October 28, 1999, by
and between (See Exhibit "A") ("Buyer"), whose address is 400
East South Street, Suite 500 Orlando, Florida 32801-2878 and
VICORP RESTAURANTS, INC., a Colorado corporation, whose address
is 480 West 48th Avenue, Denver, Colorado 80216.
PRELIMINARY STATEMENT
WHEREAS, (See Exhibit "A") ("Buyer") and Seller have entered
into that certain Commitment (the "Commitment") dated July 28,
1999 given by Buyer and accepted by Seller on July 30, 1999, as
amended on August 12, 1999, for the purchase, sale and leaseback
of certain properties; and
WHEREAS, Seller is the owner of that certain parcel of real
estate described on Exhibit "A" attached hereto (hereinafter referred
to as the "Property"), which Buyer desires to purchase and to lease
to Seller pursuant to the Commitment and that certain Lease Agreement
described therein (hereinafter referred to as the "Lease"), and Buyer
and Seller have entered into this Agreement for such purchase and as
a part of the obligations of Buyer and Seller under the Commitment.
AGREEMENT
In consideration of the mutual covenants and provisions of
this Agreement, Buyer and Seller agree as follows:
1. Commitment. In the event of a conflict between the terms of
this Purchase Agreement and the Commitment, the terms of the
Commitment shall prevail. In the event of any conflict between
the terms of the Commitment and the Lease, the Lease shall
prevail.
2. Definitions. The following terms shall have the following
meanings for all purposes of this Agreement.
"Buyer" means (See Exhibit "A"), and/or its affiliates.
"Closing Date" means the date specified in Section 5.
"Commitment" means that certain Commitment dated July
28, 1999, as amended, given by CNL and accepted by Seller on July
30, 1999.
"Escrow Agent" means First American Title Insurance Company.
"Lease" means the Lease Agreement in the form approved
pursuant to the terms of the Commitment Letter.
"Property" means the parcel of real estate described on
Exhibit "A" attached hereto, together with all buildings,
fixtures and other improvements now located thereon or to be
constructed thereon but specifically not including any items
described on Exhibit "B" attached hereto.
"Purchase Price" means the amount set forth in
Section 4 of this Agreement.
"Seller" means VICORP RESTAURANTS, INC., a Colorado
corporation.
"Title Company" means Lawyers Title Insurance
Corporation, First American Title Insurance Company, or another
national title insurance company acceptable to Buyer.
"Title Commitment" means the title insurance commitment
for the Property provided to Buyer from Title Company, in
accordance with the terms of the Commitment.
3. Purchase and Sale of the Property. On the terms and subject
to the conditions set forth in this Agreement, Seller shall sell
and Buyer shall purchase the Property, and Buyer and Seller shall
enter into a Lease by which Buyer shall lease to Property to
Seller.
4. Purchase Price. The Purchase Price for the Property shall
be (total purchase price all locations $29,390,906.00), plus
closing adjustments in accordance with the Commitment, which
shall be payable in cash or via wire transfer on the Closing
Date.
5. Closing Date. The Closing Date for this Agreement shall be
on or before thirty (30) days following the date of last
execution hereof by Buyer and Seller.
6. Condition of Title. Buyer shall be provided with the Title
Commitment from the Title Company in the form and at or prior to
the time required by the Commitment, together with copies of all
exceptions and requirements listed therein. Buyer shall be
satisfied with the condition of title to the Property, as
determined in its reasonable discretion.
7. Seller's Delivery of Certain Documents. As a condition to
Buyer's obligation to purchase the Property, Seller shall have
performed all obligations required of it pursuant to the terms of
the Commitment and Buyer shall have determined, in its reasonable
discretion, that the Property complies with the terms of the
Commitment.
8. Closing. On or before the Closing Date:
A. Seller's Closing Documents. With respect to each
Property, Seller shall deliver to Title Company or Buyer, as may
be appropriate:
(i) a Special Warranty Deed, duly executed by Seller,
free of all liens, encumbrances, restrictions,
encroachment and easements, except for any
exceptions permitted by Buyer;
(ii) an executed and acknowledged Lease;
(iii) an executed and acknowledged Memorandum of Lease;
(iv) written confirmation to Title Company directing it
to close this transaction; and
(v) such other documents and affidavits as Buyer or
the Title Company may reasonably require or as may
be required by the terms of the Commitment,
including without limitation, appropriate
corporate certificates of status and authorizing
resolutions for Seller.
B. Buyer.
(i) Deposit of Funds. Buyer shall deposit the
Purchase Price in escrow with Title Company,
together with any other amounts required to be
paid by Buyer pursuant to the terms of this
Agreement.
(ii) Buyer's Closing Documents. Buyer shall deliver to
Title Company or Seller, as may be appropriate:
(a) an executed and acknowledged Lease;
(b) an executed and acknowledged Memorandum of Lease;
(c) written instructions to Title Company
directing it to close this transaction; and
(d) such other documents as Seller or the Title
Company may reasonably require or as may be
required by the terms of the Commitment.
All closing documents shall be dated as of the Closing Date.
9. Costs and Expenses. Seller and Buyer agree to pay their
respective costs as specified in the Commitment, including
without limitation, title insurance premiums and fees, survey
costs, recording fees, stamp taxes and transfer fees. Taxes,
assessments and other charges shall not be prorated as of the
Closing Date but shall be borne by Seller, as Lessee, under the
Lease.
10. Escrow Agent. Seller and Buyer hereby employ Title Company
to act as escrow agent in connection with this transaction upon
the following terms and conditions:
A. Seller and Buyer will deliver to Title Company all
documents, pay to Title Company all sums and do or cause to be
done all other things necessary or required by this Agreement, in
the reasonable judgment of Title Company, to enable it to comply
herewith and to enable any title insurance policy provided for
herein to be issued.
B. Title Company is authorized to pay from any funds held
by it for Buyer's or Seller's respective credit all amounts
necessary to procure the delivery of such documents and to pay,
on their behalf, all charges and obligations payable by them
respectively. Seller and Buyer will each pay all charges payable
by them to Title Company.
C. Buyer and Seller will indemnify and save harmless Title
Company against all costs, damages, attorney's fees, expenses and
liabilities, which it may incur or sustain in connection with
these instructions or the escrow or any court action arising
therefrom and will pay the same upon demand.
D. Payment of any funds into escrow on or prior to the
Closing Date shall be made by wire transfer. Disbursement of any
funds from the closing for the benefit of Seller shall be made as
directed by Seller. Title Company shall be under no obligation
to disburse any funds represented by check or draft, and no check
or draft shall be payment to Title Company in compliance with any
of the requirements hereof, until it is advised by the bank in
which deposited that such check or draft has been honored.
E. Title Company is authorized to act upon any statement
furnished by the holder or payee, or a collection agent for the
holder or payee, of any lien on or charge or assessment in
connection with a Property, concerning the amount of such charge
or assessment or the amount secured by such lien without
liability or responsibility for the accuracy of such statement.
F. The employment of Title Company, as escrow agent, shall
not affect any rights of subrogation under the terms of any title
insurance policy issued pursuant to the provisions thereof.
11. Conditions of Closing for Buyer. The obligations of Buyer
are subject to the fulfillment or waiver of each of the following
conditions set forth below:
A. Closing Documents. At or prior to the Closing Date,
Seller shall have executed and delivered Seller's closing
documents in accordance with Paragraph 8 of this Agreement.
B. Compliance with Commitment. At the Closing Date,
Seller shall be in compliance with its obligations under the
Commitment.
12. Conditions of Closing for Seller. The obligations of Seller
are subject to the fulfillment or waiver of each of the following
conditions set forth below:
A. Closing Documents. At or prior to the Closing Date,
Buyer shall have executed and delivered Buyer's closing documents
in accordance with Paragraph 8 of this Agreement.
B. Compliance with Commitment. At the Closing Date, Buyer
shall be in compliance with its obligations under the Commitment.
13. Representations and Warranties of Buyer. Buyer represents
and warrants to Seller as follows:
A. Buyer is duly organized, validly existing and in good
standing under the laws of its state of its registration and
qualified to do business in the jurisdiction in which the
Property is located. All necessary action has been taken to
authorize the execution, delivery and performance of this
Agreement and of the other documents, instruments and agreements
provided for herein.
B. The person or persons who have executed this Agreement
on behalf of Buyer are duly authorized to do so.
14. Representation and Warranties of Seller. Seller represents
and warrants to Buyer as follows:
A. Seller is a corporation duly organized, validly
existing and in good standing under the laws of its state of
formation and qualified to do business in the jurisdiction in
which the Property is located. All necessary corporate action
has been taken to authorize the execution, delivery and
performance of this Agreement and of the other documents,
instruments and agreements provided for herein.
B. The person or persons who have executed this Agreement
on behalf of Seller are duly authorized to do so.
C. The Property and the existing use thereof and the
condition thereof will not violate any applicable deed
restrictions, zoning or subdivision regulations, urban
redevelopment plans, local, state or federal environmental law or
regulation or any building or fire code applicable to the
Property.
D. There is no pending or, to Seller's knowledge,
threatened litigation or other proceeding affecting the title to
or the use or operation of the Property.
E. Seller is not a "foreign person" within the meaning of
Section 1445(f)(3) of the Internal Revenue Code of 1986, as
amended, and Seller shall certify its taxpayer identification
number at Closing.
F. To the best of Seller's knowledge, there are no
federal, state, county or municipal plans to restrict or change
access from any highway or road to the Property.
G. The Property is a separate parcel for real estate tax
assessment purposes.
H. To the best of Seller's knowledge, all of the
information furnished to Buyer pursuant to the terms of the
Commitment regarding the Property is true, complete and correct.
All of the representations, warranties and agreements of
Seller set forth herein and elsewhere in this Agreement shall be
true upon the execution of this Agreement and shall be reaffirmed
and repeated in writing at and as of the Closing Date, but not
subsequent to the Closing Date, and shall survive the Closing
Date.
15. Assignment. Buyer may assign in whole or in part its rights
under this Agreement without Seller's prior written consent to an
affiliate of Buyer, but Buyer agrees to give Seller notice
thereof prior to Closing.
16. Miscellaneous Provisions.
A. Notices. All notices, consents, approvals, or other
instruments required or permitted to be given by either party
shall be in writing and shall be deemed to have been properly
given if sent by registered or certified mail, return receipt
requested, Federal Express, Airborne, Emery, DHL, Express Mail,
or by other recognized overnight courier service, postage and
other charges prepaid, to the parties at the addresses set forth
in the first Paragraph hereof or to such other address as either
party may give notice pursuant to this section from time to time.
All notices shall be deemed received when delivered to the
address specified.
B. Risk of Loss. Seller shall assume the risk of loss,
damage or destruction of the Property or any part thereof prior
to the Closing Date. Following the Closing Date, risk of loss
shall be determined as provided in the Lease.
C. Condemnation. In the event of a taking of any part or
all of the Property prior to closing, Buyer at its option shall
have the right to either (i) receive the proceeds of any
condemnation award and proceed to close with respect to the
Property or (ii) terminate this Agreement.
D. Real Estate Commission. Buyer and Seller shall not be
obligated to pay any commission or finder's fee to any broker,
real estate broker or agent in connection with this transaction.
To the extent Seller or Buyer has engaged the services of any
such broker, real estate broker or agent, Seller or Buyer, as the
case may be, hereby indemnify and agree to hold the other
harmless from and against any and all costs, expense, loss, and
damage, including but not limited to attorney's fees and court
costs, arising or resulting directly or indirectly out of any
claim by any broker, real estate broker or agent in connection
with this transaction.
E. Amendment and Waiver. Upon execution by the parties,
this Agreement may not be altered or amended. Waiver of any
matter by either party shall not be deemed a waiver of the same
or any other matter on any future occasion.
F. Other Documents. Each of the parties agrees to sign
such other and further documents as may be appropriate to carry
out the intentions expressed in this Agreement.
G. Attorney's Fees. In the event of any judicial or other
adversarial proceeding between the parties concerning this
Agreement, the prevailing party shall be entitled to recover its
reasonable attorneys' fees in addition to any other relief to
which it may be entitled.
H. Entire Agreement. This Agreement, together with the
Commitment and any other instruments or agreements referred to
herein constitute the entire agreement between the parties with
respect to the Property.
I. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original.
[Signatures on Next Page]
IN WITNESS WHEREOF, Seller and Buyer have entered into this
Agreement as of the date shown hereinabove.
Signed, sealed and delivered "SELLER"
in the presence of:
VICORP RESTAURANTS, INC., a
Colorado corporation
By: /s/Charles R. Frederickson
--------------------------
Name: /s/ Stanley Ereckson, Jr. Name: Charles R. Frederickson
-------------------------- -----------------------
Stanley Ereckson, Jr. As Its: President
---------
Name: /s/ Gary F. Burke
------------------
Gary F. Burke
STATE OF COLORADO
COUNTY OF DENVER
The foregoing instrument was acknowledged before me this
25th day of October, 1999, by Charles R. Frederickson, as
President of VICORP RESTAURANTS, INC., a Colorado corporation, on
behalf of the corporation.
/s/ Toni A. Schreivogel
-----------------------
(NOTARY SEAL) Notary Public, State of Colorado
Printed Name:Toni A. Schreivogel
-------------------
Notary Commission No. n/a
---
My Commission Expires: 8/25/2002
---------
"BUYER"
CNL APF PARTNERS, LP, a
Delaware limited partnership
BY: CNL APF GP Corp., a
Delaware corporation, as general partner
By:/s/ John T. Walker
------------------
Name: /s/ Lisa M. Fannin John T. Walker, as President
-------------------
Lisa M. Fannin
Name: /s/ Stephanie J. Newell
------------------------
Stephanie J. Newell
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me this
25 day of October, 1999, by John T. Walker, as President of CNL
APF GP CORP., a Delaware corporation, as General Partner of CNL
APF PARTNERS, LP, a Delaware limited partnership, on behalf of
the limited partnership.
/s/ Kay Cooksey
---------------
(NOTARY SEAL) Notary Public, State of Florida
Printed Name:
Notary Commission No.
My Commission Expires:
Attachments:
- ------------
Exhibit "A" - Property Description
Exhibit "B" - Building, Fixtures and Other Improvements
"BUYER"
CNL-BB CORP., a Florida corporation
By:/s/ Robert A. Bourne
--------------------
Name: /s/ Lisa M. Fannin Robert A. Bourne, as President
-------------------
Lisa M. Fannin
Name: /s/ Bonnie P. Burgess
----------------------
Bonnie P. Burgess
STATE OF FLORIDA
COUNTY OF ___________
The foregoing instrument was acknowledged before me this
_____ day of October, 1999, by Robert A. Bourne, as President of
CNL-BB CORP., a Florida corporation, on behalf of the corporation.
/s/ Stephanie J. Newell
-----------------------
(NOTARY SEAL) Notary Public, State of Florida
Printed Name:
Notary Commission No.
My Commission Expires:
Attachments:
- ------------
Exhibit "A" - Property Description
Exhibit "B" - Building, Fixtures and Other Improvements
EXHIBIT "A"
Property Description
--------------------
Buyer Buyer
- ---------------- ----------------
CNL APF Partners, L.P. CNL-BB Corp.
- ---------------------- ------------
4839 West 111th Street 3000 Oak Grove Road
Alsip, IL 60658 Downers Grove, IL 60515
4849 West 79th Street 18849 Dixie Highway
Burbank, IL 60459 Homewood, IL 60430
7105 Cherryvale North Boulevard 942 South LaGrange Road
Cherry Valley, IL 61016 LaGrange, IL 60525
560 Waukegan Road 1195 South Milwaukee Avenue
Deerfield, IL 60015 Libertyville, IL 60048
3545 Ridge Road 8584 Dempster Street
Lansing, IL 60438 Niles, IL 60714
4721 Lincoln Mall Drive 270 East Northwest Highway
Matteson, IL 60443 Palatine, IL 60067
6431 - 127th Street 200 Skokie Boulevard
Palos Heights, IL 60463 Wilmette, IL 60091
1510 East Main Street
St. Charles, IL 60174
420 East Ogden Avenue
Westmont, IL 60559
7409 South Kingery Highway
Willowbrook, IL 60521
8140 Mississippi Street
Merrillville, IN 46410
12951 Riverdale Crossing
Coon Rapids, MN 55448
1861 Madison Avenue
Mankato, MN 56001
5425 "L" Street
Omaha, NE 68117
EXHIBIT "B"
Property Not Purchased by Buyer
-------------------------------
All furniture, trade fixtures, equipment, and other personal
property, together with replacements thereof from time to time
added to the Premises, regardless of the methods in which the
trade fixtures and personalty are affixed to the Premises. For
the purposes hereon, trade fixtures and equipment shall include
all restaurant equipment but shall not include flooring, interior
or exterior walls, doors and windows, plumbing, gas, electrical,
heating, air conditioning, ventilating, lighting, communication,
and other utility systems.
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into as of October
28, 1999, by and between:
(i) See Exhibit "A" ("Landlord"), and
(ii) VICORP RESTAURANTS, INC., a Colorado corporation,
With a mailing address of 400 West 48th Avenue, Denver, Colorado
80216 ("Tenant").
WITNESSETH:
Landlord leases to Tenant, for the purpose of operating a
Bakers Square Restaurant and for such other purpose as is
specifically authorized in paragraph 12(b) of this Lease (but for
no other use or purpose whatsoever) and subject to the terms and
conditions of the Rent Addendum attached hereto, and Tenant rents
from Landlord the properties described in Exhibit "A" attached
hereto and made a part thereof, together with all rights and
privileges in and about the Premises as may be necessary or
convenient to Tenant's business, inclusive of all easements
benefiting the real property described in Exhibit "A". Premises
shall include all improvements and structures whether now
existing or hereafter constructed thereon. The following
additional stipulations are thereby declared to be covenants of
this Lease and shall, unless otherwise expressly stated, be
applicable at all times throughout the term of this Lease and any
extension or renewal thereof:
1. DEFINITIONS
For purposes of this Lease, the following terms are hereby
defined to mean:
"Effective Date" shall mean the first date set forth at the
beginning of this Lease.
"Landlord" shall mean (see Exhibit "A"), its successors and
assigns.
"Lease" shall include this Lease Agreement and all
amendments hereto, if any, entered into from time to time
hereafter.
"Lease Year" shall mean a fiscal period beginning on the
Effective Date (and each anniversary thereof) and expiring
twelve (12) months thereafter.
"Rent" shall mean the Rent payable under this Lease as set
forth in the Rent Addendum attached hereto and incorporated
herein, and shall include Annual Rent (all as defined in the
Rent Addendum).
2. TERM AND RENT
(a) The term of this Lease shall begin on the Effective
Date and shall expire on a date fifteen (15) years thereafter unless
previously terminated or renewed or extended as provided herein.
(b) Rent shall be due and payable as provided in the Rent
Addendum attached hereto and incorporated herein.
3. ALTERATIONS AND IMPROVEMENTS, INVESTMENT TAX CREDIT,
MECHANIC'S LIENS, LANDLORD'S DISCLAIMER
(a) Alterations and Improvements
(i) Tenant's Property. Tenant shall be permitted to install,
use on and about, and remove from the Premises at any time and
from time to time all trade fixtures and other
personal property (exclusive of lighting, electrical,
heating and air conditioning improvements) which are
not a component of the building located or to be
located on the Premises (hereinafter referred to as the
"Tenant's Property"), all of which at all times shall
remain the property of Tenant with the right of removal
(subject to paragraph (d) below) at the expiration of
this Lease. Trade fixtures shall include: (1)
removable decor items and office equipment; (2)
building lettering, signs, signposts and sign
standards; (3) unattached food and customer service
equipment; and (4) food and customer service equipment
attached to the building by bolts and screws and/or
by utility connections, including without limitation,
walk-in refrigerators and freezers, remote
refrigeration systems, exhaust systems and hoods.
(ii) Subsequent Improvements. Tenant shall also have
the right to make any additions, alterations, changes
and improvements, structural and nonstructural,
including but not limited to construction of additional
buildings and additions to the then existing buildings,
as Tenant shall desire; provided, however, (i) Tenant
shall submit plans of all structural changes to
Landlord at least thirty (30) days in advance of the
proposed construction date, which plans shall be
subject to the Landlord's reasonable approval.
(ii)Tenant shall provide Landlord with evidence of
Tenant's financial ability to pay for such changes,
(iii) if the cost of structural changes exceeds FIFTY
THOUSAND AND NO/100 DOLLARS ($50,000.00) for the
Premises, Tenant shall post payment and performance
bonds for such work naming Landlord and Tenant as dual
obligees, (iv) all such construction shall be completed
in a workmanlike manner and in full compliance with all
building laws and ordinances applicable thereto, at
Tenant's expense, and (v) such additions, alterations,
changes and improvements shall not reduce the fair
market value of the Premises. Notwithstanding the
foregoing provisions of paragraph 3(a)(ii)(ii), no
payment or performance bonds shall be required,
provided, however: Tenant meets the minimum cash flow
and net worth requirements set forth in paragraph 4(h)
of this Lease; and (ii) Tenant has no more than One
Million Dollars ($1,000,000.00) of contracts for
construction or renovation relating to the premises
identified in Exhibit "B" attached hereto at any one
time.
(iii) Improvements Upon Termination, Subletting or
Assignment. Tenant shall have the right, at its option
and expense, to redecorate or otherwise remodel the
Premises upon any termination hereof or upon subletting
or assignment in such manner as will, without reducing
the fair market value thereof, avoid the appearance of
the Bakers Square Restaurant operated under this Lease; provided,
however, Tenant shall not impair the structural
condition of the Premises or reduce the size thereof.
All such Subsequent Improvements, Improvements upon
Termination, Subletting or Assignment, or other
additions, alterations, changes and improvements of any
type shall be deemed to be a part of the Premises.
(b) Investment Tax Credit. Landlord hereby grants Tenant
the right and privilege of applying for and receiving all
investment tax credits, if any, under the Internal Revenue Code
which may be available with respect to the building and other
improvements to be constructed. To this end, Landlord agrees to
execute all such further documents and supply such additional
information as may be required to make such election effective.
(c) Mechanic's Liens. Tenant shall not do or suffer
anything to be done whereby the Premises, or any part thereof,
may be encumbered by a mechanic's lien or similar lien, and, if,
whenever and as often as any mechanic's lien or similar lien is
filed against the Premises, or any part thereof, purporting to be
for or on account of any labor done, materials or services
furnished in connection with any work in or about the Premises,
done by, for or under the authority of Tenant, or anyone claiming
by, through or under Tenant, Tenant shall discharge the same of
record within thirty (30) days after service upon Tenant notice
of the filing thereof or such longer period as agreed to by
Landlord, in its sole discretion, (provided, however, Tenant is
diligently and in good faith attempting to discharge such lien)
or within ten (10) days after written request of Landlord,
Whichever is earlier; provided, however, Tenant shall have the
right to remove the lien by bonding same in accordance with
applicable law and to contest any such lien; provided further
that Tenant shall diligently prosecute any such contest, at all
times effectively staying or preventing any official or judicial
sale of the Premises under execution or otherwise, and, if
unsuccessful, satisfy any final judgment against Tenant adjudging
or enforcing such lien or, if successful, procuring record
satisfaction or release thereof.
(d) Landlord's Disclaimer. All of Tenant's Property placed in or
upon the Premises by Tenant shall remain the property of Tenant with the
right to remove the same at any time during the Term of this
Lease. Landlord, if requested by Tenant, agrees to execute such
documentation subordinating its lien rights (vis a vis any
equipment lender or landlord) to Tenant's personalty and to all
rights of levy for distraint for rent against same as shall be
reasonably required by any equipment lender or lessor of Tenant;
provided any damage caused by, or resulting from the removal of
any trade fixtures, equipment or other personal property shall be
promptly repaired by Tenant or the party entitled to remove same.
4. DESTRUCTION OF PREMISES; INSURANCE
(a) If the Premises are damaged or destroyed by fire, flood,
tornado or other element, or by any other casualty and such damage
or destruction does not occur within the last twenty-four (24) months
of the original or of any extended or renewed term of this Lease, this
Lease shall continue in full force and effect and Tenant shall,
as promptly as possible, restore, repair, rebuild the Premises to
substantially the same condition as it existed before the damage
or destruction, including any improvements or alterations
required to be made by any governmental body, county or city
agency, due to any changes in code or building regulations.
Tenant shall for this purpose use all, or such part as may be
necessary, of the insurance proceeds received from insurance
policies carried on the Premises under the provision of
subparagraph 4(b) here in below. If such insurance proceeds are
not sufficient to pay such costs, Tenant shall pay such deficit.
Should the Premises be damaged or destroyed by any of the foregoing
described casualties within the last twenty-four (24) months of the
original term or of any extended or renewed term of this Lease, to
the extent that they are untenantable or unsuitable, in Tenant's
opinion for continued use in the normal conduct of Tenant's business,
Tenant shall have the right, exercisable by written notice to Landlord
given within sixty (60) days after the date of such damage or destruction,
of terminating this Lease effective upon the date of such damage or
destruction. If Tenant terminates this Lease as thus provided
Landlord shall be entitled to all of the insurance proceeds on
the Premises, but not to the proceeds of insurance carried by
Tenant on Tenant's Property; provided, however, Tenant shall not
have the right to terminate this Lease unless (1) the damage or
destruction of the Premises was caused by a peril which was
insured against by the provisions of subparagraph 4(b) of this
Lease; (ii) at the time of such damage and destruction the said
insurance policies plus any Tenant deductibles to be carried by
Tenant were in the amount of the full replacement cost of such
improvements and in full force and effect; and (iii) the insurer
has confirmed coverage and its obligation to pay. The foregoing
sixty (60) day period may be extended in the reasonable
discretion of the Landlord in the event the insurer
(notwithstanding the due diligence of the Tenant) has not yet
confirmed coverage or its obligation to pay as required in
paragraph 4(a)(iii) above. If Tenant defaults in its obligation
to carry insurance in the amount required under subparagraph
4(b), then, prior to a Tenant termination of this Lease, Tenant
shall be obligated to pay toward said reconstruction or to
Landlord the difference between the amount actually carried and
the amount required to be carried under this paragraph.
(b) Tenant, at its expense and as additional rent
hereunder, shall throughout the term of this Lease and any
extension or renewal thereof, keep the Premises insured with "all
risk" coverage, including code changes, glass breakage, vandalism
and malicious mischief coverage, and builders risk (if the
Premises are to be constructed)("all risk" as such term is used
in the insurance industry) for the full replacement value, with
any deductible in excess of One Hundred Thousand Dollars
($100,000.00) to be approved by Landlord (and without any
co-insurance provision (Agreed Value endorsement)). The reference
to "code changes" herein shall mean that Tenant shall carry
"Ordinance and Law Coverage" with limits of not less than the
building value for Coverage A (loss to the undamaged portion
of the building), limits of not less than fifteen percent (15%)
of the building value for Coverage B (Demolition Cost Coverage),
and limits not less than fifteen percent (15%) of the building value for
Coverage C (Increased Cost of Construction Coverage). If Tenant
serves alcoholic beverages, or if the Premises are located in a
flood or earthquake zone (as defined in subparagraphs "(e)" and
"(f)" below), then additional coverage shall be obtained by
Tenant in amounts and in form acceptable to Landlord.
(c) Tenant shall maintain, at its own expense and as
additional Rent, public liability insurance (including product
and liquor liability) covering the Premises, for the joint
benefit of and insuring Tenant and Landlord, each with coverage
of not less than One Million Dollars ($1,000,000.00) per
occurrence, with a Two Million Dollars ($2,000,000.00) general
aggregate limit, and with umbrella liability coverage (including
product and liquor liability or "following form insurance") of
not less than Ten Million Dollars ($10,000,000.00) per
occurrence/aggregate, with any deductible in excess of One
Hundred Thousand Dollars ($100,000.00) to be approved by
Landlord. Landlord (and if Landlord is either a general or
limited partnership, all general partners) shall be named as an
additional insured.
(d) Tenant shall maintain, at its own expense, rental value
insurance covering risk of loss due to the occurrence of any of
the hazards insured against under Tenants' "all risk" coverage
insurance and providing coverage in an amount sufficient to
permit the payment of rents payable hereunder for a period (in
such case) of not less than six (6) months.
(e) In the event the Premises are located in an area
identified by the National Flood Insurance Program as an area
having "special flood hazards" (zones beginning with "A" or "V,"
Tenant shall maintain flood insurance for the full replacement
value of the Premises, with any deductible in excess of One
Hundred Thousand Dollars ($100,000.00) to be approved by
Landlord.
(f) In the event the Premises are located in a major
earthquake damage area and earthquake insurance is available,
Tenant shall maintain earthquake insurance for the full
replacement value of the Premises, with any deductible in excess
of One Hundred Thousand Dollars ($100,000.00) to be approved by
Landlord.
(g) Upon mutual agreement of the Landlord and Tenant, in
writing, all stated deductibles or self insured retentions may be
increased; provided, however, Tenant's EBITDA (as defined in
subparagraph (h) below) and audited net worth thresholds are
reasonably acceptable to the Landlord. All insurance companies
providing the coverage required under this Paragraph 4 shall
(unless prior written consent has been obtained by Landlord) be
selected by Tenant; (ii) rated A minus (A-)(ix) or better by
Best's Insurance Rating Service; (iii) licensed to write
insurance policies in the state in which the Premises is located;
and (iv) acceptable to Landlord in Landlord's reasonable
discretion. Tenant shall provide Landlord with copies of all
policies or certificates of such coverage for the insurance
coverages referenced in this Paragraph 4, and all commercial
general liability and umbrella liability policies shall name
Landlord and any mortgagee designated by Landlord as an
additional insured. All property insurance policies shall name
the Landlord as a loss payee as their interests may appear, and
shall provide that all losses shall be payable as herein
provided. All such property insurance policies of insurance
shall provide that the amount thereof shall not be reduced and
that none of the provisions, agreements or covenants contained
therein shall be modified or canceled by the insuring company or
companies without thirty (30) days prior written notice being
given to Landlord; and that all property insurance proceeds shall
be paid by check jointly payable to Landlord and Tenant. Such
policy or policies of insurance may also cover loss or damage to
Tenant's Property, and the insurance proceeds applicable to
Tenant's Property shall not be paid to Landlord or any mortgagee
but shall accrue and be payable solely to Tenant. In the event
of a casualty, Tenant shall be responsible for any deficiency
between the replacement cost of the Premises and the amount
actually paid by the insurance company.
(h) Notwithstanding the foregoing, Tenant shall have the
ongoing right during the term of this Lease to self insure
(including the right to increase all stated deductibles) for all
or a portion of the insurance required hereunder, subject,
however, to the following: (i) Tenant's earnings before interest,
taxes, depreciation and amortization ("EBITDA") shall, for Tenant's
prior fiscal year, equal or exceed the sum of Fifteen Million Dollars
($15,000,000.00) and (ii) Tenant's net worth shall at all times
equal or exceed the sum of Thirty Million Dollars ($30,000,000.00).
5. MAINTENANCE AND REPAIR; CONDITION OF PREMISES
(a) Tenant shall maintain the Premises and all buildings
and improvements thereon (interior and exterior, structural and
otherwise) in good order and repair and, subject to the
provisions of paragraph 4(a) with respect to damage within the
last twenty-four (24) months of the Lease, and paragraph 6
herein, return the Premises and all buildings and improvements
thereon at the expiration of the term of this Lease or any
extension thereof in as reasonably as good condition as when
received, ordinary wear and tear excepted.
(b) Tenant agrees that Landlord shall have no obligation
under this Lease to make any repairs or replacements (including
the replacement of obsolete components) to the Premises or the
buildings or improvements thereon, or any alteration, addition,
change, substitution or improvement thereof or thereto, whether
structural or otherwise. The terms "repair" and "replacement"
include the replacement of any portions of the Premises which
have outlived their useful life during the term of the Lease (or
any extensions thereof). Landlord and Tenant intend that the
rent received by Landlord shall be free and clear of any expense
to Landlord for the construction, care, maintenance (including
common area maintenance charges and charges accruing under
easements or other agreements relating to the Premises),
operation, repair, replacement, alteration, addition, change,
substitution and improvement of or to the Premises and any
building and improvement thereon. Upon the expiration or earlier
termination of this Lease, Tenant shall remain responsible for,
and shall pay to Landlord, any cost, charge or expense for which
Tenant is otherwise responsible for hereunder attributable to any
period (prorated on a daily basis) prior to the expiration or
earlier termination of this Lease.
(c) Tenant acknowledges and agrees that the Premises is and
shall be leased by Landlord to Tenant in its present "AS IS"
condition, and that Landlord makes absolutely no representations
or warranties whatsoever with respect to the Premises or the
condition thereof. Tenant acknowledges that Landlord has not
investigated and does not warrant or represent to Tenant that the
Premises is fit for the purposes intended by Tenant or for any
other purpose or purposes whatsoever, and Tenant acknowledges
that the Premises is to be leased to Tenant in their existing
condition, i.e., "AS IS", on and as of the Effective Date.
6. CONDEMNATION
(a) In the event that (i) any part of the building on the
Premises or (ii) such a material portion of the land constituting
a portion of the Premises (for purposes hereof, "material" shall
mean 40% or more of the land constituting a portion of the
Premises) or (iii) a material portion of the parking (where
Landlord is unable within fourteen (14) days prior to the date of
surrender to provide suitable replacement parking facilities
adjacent to the Premises) shall be taken during the term of this
Lease or any extension or renewal thereof for any public or quasi-
public use under any governmental law, ordinance, regulation or
by right of eminent domain, or shall be sold to the condemning
authority under threat of condemnation, with the result occurring
from (i), (ii) or (iii) above being that the Premises cannot
continue to be operated as the type of restaurant contemplated
herein, or if reasonable access to the adjacent roadways from the
existing or comparable curb cuts shall be taken (any of such
events being hereinafter referred to as a "taking"), Tenant shall
have the option of terminating this Lease as of a date no earlier
than the date of such taking, such termination date to be
specified in a notice of termination to be given by Tenant to
Landlord not fewer than fourteen (14) days prior to the date on
which possession of the Premises, or part thereof, must be
surrendered to the condemning authority or its designee.
(b) In the event of any taking which does not give rise to
an option to terminate or in the Event of a taking which does give
rise to an option to terminate and Tenant does not elect to terminate,
Landlord shall make its award available to Tenant and Tenant shall,
to the extent of the award from such taking (which word "award" shall
mean the net proceeds after deducting expenses of any settlement, or net
purchase price under a sale in lieu of condemnation), promptly
restore or repair the Premises and all improvements thereon
(except the items which Tenant is entitled to remove) to the same
condition as existed immediately prior to such taking insofar as
is reasonably possible. If the estimated cost of restoration or
repair shall exceed the amount of Landlord's award, Tenant shall
deposit with Landlord the amount of such excess. The award and
any excess shall be held in trust by Landlord and used, to the
extent required, for the purpose of such restoration or repair.
A just and proportionate part of the Rent payable hereunder shall
be abated from the date of such taking until ten (10) days after
Tenant has restored same and thereafter the Rent shall be reduced
in proportion to the reduction in the then rental value of the
Premises after the taking in comparison with the rental value
prior to the taking. If the award shall exceed the amount spent
or to be spent promptly to effect such restoration, repair or
replacement, such excess shall unconditionally belong to Landlord
and shall be paid to Landlord.
(c) In the event of any partial taking where this Lease is
not terminated, Tenant shall not be entitled (except for use in
reconstruction) to any part of the compensation or award given
Landlord for the taking of the fee of the Premises, but Tenant
shall have the right to recover from the condemning authority
such compensation as is specifically awarded to Tenant (i) to
reimburse Tenant for any cost which Tenant may incur in removing
Tenant's Property from the Premises and (ii) for loss of Tenant's
business.
(d) If this Lease is terminated by reason of a taking, then
Landlord shall be entitled to receive the entire award in any
such condemnation or eminent domain proceedings or purchase in
lieu thereof and Tenant hereby assigns to Landlord all of its
right, title and interest in and to all and any part of such
award, provided, however, Tenant shall be entitled to receive any
award specifically made to reimburse Tenant.
7. TAXES AND ASSESSMENTS
Tenant shall pay prior to delinquency all taxes and
assessments which may be levied upon or assessed against the
Premises and all taxes and assessments of every kind and nature
whatsoever (excluding Landlord's income tax, if any) arising in
any way from the use, occupancy or possession of the Premises or
assessed against the improvements situated thereon, together with
all taxes levied upon or assessed against Tenant's Property. To
that end, Landlord shall not be required to pay any taxes or
assessments whatsoever which relate to or may be assessed against
this Lease, the Rent and other amounts due hereunder, the
Premises, improvements and Tenant's Property. Provided, however,
that any taxes or assessments which may be levied or assessed
against the Premises for a period ending after the termination
hereof shall be prorated between Landlord and Tenant as of such
date. Within thirty (30) days after Tenant receives the paid
receipted tax bills, Tenant shall furnish Landlord with copies of
a paid receipt for such tax bills. Tenant may, at its option,
contest in good faith and by appropriate and timely legal
proceedings any such tax and assessment; provided, however, that
Tenant shall indemnify and hold harmless Landlord from any loss
or damage resulting from any such contest, and all expenses of
same (including, without limitation, all attorneys' fees, court
and other costs) are paid solely by Tenant.
8. COMPLIANCE, UTILITIES, SURRENDER
(a) Tenant at its expense shall promptly comply with all
governmental requirements, whether or not compliance therewith
shall require structural changes in the Premises; will procure
and maintain all permits, licenses and other authorizations
required for the use of the Premises or any part thereof then
being made and for the lawful and proper installation, operation
and maintenance of all equipment and appliances necessary or
appropriate for the operation and maintenance of the Premises,
and shall comply with all easements, restrictions, reservations
and other instruments of record applicable to the Premises,
including without limitation, the procuring and maintaining of
insurance required to be maintained by the owner or occupant of
the Premises. Tenant shall indemnify and save Landlord harmless
from all expenses and damages by reason of any notices, orders,
violations or penalties filed against or imposed upon the
Premises, or against Landlord as owner thereof, because of
Tenant's failure to comply with this paragraph.
(b) Tenant shall pay all charges for heat, water, gas,
sewage, electricity and other utilities used or consumed on the
Premises and shall contract for the same in its own name.
Landlord shall not be liable for any interruption or failure in
the supply of any such utility service to the Premises.
(c) Tenant shall peacefully surrender possession of the
Premises, the buildings and other improvements thereon, to
Landlord at the expiration, or earlier termination, of the
original term or any extended or renewed term of this Lease.
9. QUIET ENJOYMENT
Landlord covenants and warrants that Landlord has full power
and authority to make this Lease, and that Tenant shall have and
enjoy full, quiet and peaceful possession of the Premises, their
appurtenances and all rights and privileges incidental thereto
during the term hereof and any renewals or extensions, subject to
the provisions of this Lease and any easements, restrictions,
reservations and other instruments of record applicable to the
Premises and in existence at the time of the conveyance of the
Premises to Landlord by Tenant.
10. OPTION TO RENEW
Tenant Shall have one (1) successive ten (10) year and two
(2) successive five (5) year options (to be exercised in the
order stated) to extend this Lease for up to an additional twenty
(20) years upon the same terms, covenants, conditions and rental
as set forth herein provided that Tenant is not in default
hereunder at the commencement of such option period. Tenant may
exercise each such five (5) year option by giving written notice
to Landlord not less than six (6) months prior to the expiration
of the then current term of this Lease. Should Tenant fail to
give Landlord such timely written notice during the required
period, all remaining rights of renewal shall automatically
expire.
11. FIRST RIGHT OF REFUSAL TO PURCHASE; ECONOMIC INFEASIBILITY
(a) So long as Tenant is not in default under this Lease,
Tenant shall have the right to purchase the Premises in
accordance with the terms of this paragraph. If Landlord
receives and desires to accept a bona fide offer to purchase
(excluding any transfer to an affiliate of Landlord) the Premises
during the term of this Lease or any extension or renewal
thereof, Landlord shall serve a notice on Tenant stating the name
of such offeror with a copy of the terms and conditions of such
offer attached and Tenant shall have the right to purchase the
Premises on the same terms and conditions set forth in Landlord's
notice, provided Tenant delivers written notice to Landlord of
its election to do so within twenty (20) days after receipt of
such notice from Landlord. If Tenant does not elect to exercise
its right to purchase as aforesaid, Landlord may sell the
Premises, provided the sale is consummated with the offeror and
on the terms and conditions set forth in Landlord's notice to
Tenant. The foregoing preemptive right shall remain in existence
notwithstanding its non-exercise in respect to any sale and shall
be binding upon Landlord's successors in title.
(b) In the event the Tenant determines in its reasonable
business discretion, exercised in good faith, that the Premises
is inadequate or unprofitable for the purposes for which the same
are then used pursuant to the Lease, then Tenant may, at
Tenant's option, during the term of the Lease or any extensions
thereof, give written notice to the Landlord of its intention to
substitute another improved property having a Village Inn or
Bakers Square located thereon, which shall have a value no less
than the greater of the following: (1) the then current value of
the Premises as established by a qualified independent appraiser
(who is a member of the American Institute of Real Estate
Appraisers); or (2) Landlord's original Purchase Price for the
Premises. Such other restaurant shall be subject to Landlord's
approval and shall be subject to the approval of any then
mortgagee having an interest in the Premises. The terms of the
related lease for such substitute property shall be identical to
this Lease, except that the term shall be for the then remainder
of the term of this Lease (considering renewal options). Tenant
shall pay all reasonable costs associated with the closing to
effect the substitution. Upon Landlord's and any mortgagee's
approval of the substitution of the Premises, a closing of title
shall take place as soon as reasonably practical thereafter, but
in no event later than sixty (60) days after Tenant is notified
that the Landlord has approved the substitution. If the Landlord
and the Landlord's mortgagee (if any) do not approve such
substitute property, Tenant may submit other properties to the
Landlord for the Landlord's (and the Landlord's mortgagee, if
any) approval.
12. NONCOMPETE; CONDUCT OF BUSINESS
(a) Tenant shall not own an interest in, or operate,
another Bakers Square Restaurant within a Three (3) mile radius
of the Premises. The foregoing restriction shall not preclude
Tenant from: (i) selling its products in supermarkets and other
similar stores; (ii) operating kiosks or counters from which its
food products will be sold; or (iii) operating another Bakers
Square concept within such three (3) mile radius provided such
concept (a) does not use the word "Restaurant" in its name or
advertising or promotional materials and ( b) is not larger than
two thousand five hundred (2,500) total square feet in size and
(c) has limited table service. Violation of this covenant shall
constitute a default hereunder and, because the parties agree
that damages would not be an adequate remedy, Tenant hereby
agrees that Landlord shall be entitled to equitable relief,
including injunctive relief and specific performance in addition
to any remedy available at law.
(b) The use of the Premises shall be limited to the
operation of a Bakers Square Restaurant or an "Approved Concept"
as defined in paragraph 17(a), and Tenant shall continuously
operate such restaurant on the Premises except for temporary
closure due to repairs, Acts of God and similar matters. The
Tenant shall at all times maintain the Premises and operate its
business in compliance with all applicable regulations and
requirements of all county, municipal, state, federal and other
governmental authorities, and instruments of record affecting
the Premises which are now in force or which are enacted during
the term of the Lease.
13. DEFAULT
(a) If any one or more of the following events occur, said
event or events shall hereby be classified as a "Default":
(i) If Tenant fails to pay Interim Rent (if applicable), Annual
Rent, any additional rent, or any other charges required hereunder or in
the event there is a payment or monetary default in any other
lease for a property identified on Exhibit "A" attached hereto
between Tenant and Landlord or an affiliate of Landlord with the
(x) payment amount in default at any one time exceeding Fifty
Thousand Dollars ($50,000.00) or (y) the aggregate of payment or
monetary defaults at any one time exceeding Fifty Thousand
Dollars ($50,000.00) when same shall become due and payable, and
such failure continues for ten (10) days after written notice
from Landlord.
(ii) If Tenant shall fail to perform or observe any
term, condition, covenant, agreement, or obligation of this Lease
and such failure continues for fifteen (15) days after written
notice from Landlord (except that such fifteen (15) day period
shall be automatically extended for such additional period of
time as is reasonably necessary to cure such Default, if such
Default cannot be cured within such period, provided Tenant is in
the process of diligently curing the same).
(iii) [INTENTIONALLY DELETED]
(iv) If Tenant fails to continuously operate its business within
the premises except temporary periods of closure caused by casualty,
or (ii) temporary and reasonable periods of remodeling (not to
exceed ninety (90) days in any Lease Year without first obtaining
Landlord's written approval).
(v) If Tenant shall make an assignment for the benefit
of creditors or file a petition, in any federal or state court, in bankruptcy,
reorganization, composition, or make an application in any such
proceedings for the appointment of a trustee or receiver for all
or any portion of its property.
(vi) If any petition shall be filed under federal or
state law against Tenant in any bankruptcy, reorganization, or
insolvency proceedings, and said proceedings shall not be
dismissed or vacated within one hundred and twenty (120) days
after such petition is filed.
(vii) If a receiver or trustee shall be appointed
under federal or state law for Tenant, or any guarantor of
Tenant's obligations hereunder, for all or any portion of the
property of either of them, and such receivership or trusteeship
shall not be set aside within one hundred and twenty (120) days
after such appointment.
(b) Landlord will have the remedies set forth in subparagraphs
(c) and (d) below if Tenant commits a default.
(c) Landlord can terminate this Lease and recover
possession of the Premises by (i) notifying Tenant that Landlord elects
to terminate this Lease, or (ii) terminating Tenant's right to
possession of the Premises. For purposes hereof, reletting the
Premises or denying Tenant access to the Premises will constitute
a termination of Tenant's right to possession of the Premises;
provided, however, that acts of maintenance, efforts to the Premises,
or the appointment of a receiver on Landlord's initiative to protect
Landlord's interest under this Lease will not constitute a termination
of Tenant's right to possession. Upon any termination, Landlord has the
right to recover from Tenant:
(1) The worth, at the time of the award, of the unpaid rent that
had been earned at the time of termination of this Lease; plus
(2) The worth, at the time of the award, of the amount by which
the unpaid rent that would have been earned after the date of
termination of this Lease until the time the award exceeds the
amount of the loss of rent that Tenant proves could have been
reasonably avoided; plus
(3) The worth, at the time of the award, of the amount by which
unpaid rent for the balance of the term after the time of award
exceeds the amount of the loss of rent that Tenant proves could
have been reasonably avoided; plus
(4) Any other amount, including court costs, and including but not
limited to, allocable overhead, alterations to the building,
leasing, construction, architectural, legal and accounting
fees necessary to compensate Landlord for all detriment
proximately caused by Tenant's default.
The phrase "worth, at the time of the award" as used in (1) and
(2) above is to be computed by allowing interest at the rate of
eighteen percent (18%) per annum, or, if less, the highest rate
allowable by law. The same phrase as used in (3) above is to be
computed by discounting the amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award.
(d) Landlord can continue this Lease in full force and
effect, and Landlord will have the right to collect rent when
due, as long as Landlord does not terminate this Lease as set
forth in paragraph 13(c).
(e) If this Lease shall terminate as provided hereinabove,
Landlord may re-enter the Premises and remove Tenant, its agents
and sub-tenants, together with all or any of Tenant's Property,
by suitable action at law, or by force. Tenant waives any right
to the service of any notice of Landlord's intention to re-enter
and Landlord shall not be liable in any way in connection with
any action it takes pursuant to this paragraph. Notwithstanding
such re-entry or removal, Tenant's liability under the provision
of this Lease shall survive and continue.
(f) The rights and remedies of Landlord set forth herein shall
be in addition to any other right and remedy now or hereinafter
provided by law, and all such rights and remedies shall be
cumulative. No action or inaction by Landlord shall constitute a
waiver of Default, and no waiver of Default shall be effective
unless it is in writing, signed by Landlord.
14. HOLDING OVER
In the event Tenant remains in possession of the Premises
after the expiration of this Lease, without executing a new
lease, Tenant shall occupy the Premises as a tenant from month to
month subject to all the terms hereof, but such possession shall
not limit Landlord's rights and remedies by reason thereof nor
constitute a holding over.
15. WAIVER OF SUBROGATION
Notwithstanding anything in this Lease to the contrary,
other than Tenant's obligations to repair, restore or rebuild
described in paragraph 4 hereinabove, neither party shall be
liable to the other for any damage or destruction of the property
of the other resulting from fire or other casualty covered by
insurance required of either party hereunder, whether or not such
loss, damage or destruction of property is caused by or results
from the negligence of such party (which term includes such
party's officers, employees, agents and invitees), and each party
hereby expressly releases the other from all total liability for
or on account of any said loss, damage or destruction, whether or
not the party suffering the loss is insured against such loss,
and if insured whether fully or partially. Each party shall
procure all endorsements of insurance policies carried by it
necessary to protect the other from any right of subrogation
and/or liability in the event of such loss.
16. LIEN FOR RENTS
[INTENTIONALLY DELETED]
17. ASSIGNMENT AND SUBLETTING
(a) The Tenant shall not have the right, without first
obtaining the Landlord's prior written consent, to assign or
sublet any part or all the Premises to any party for any purpose.
Landlord's consent will not be unreasonably withheld, provided,
however, (1) the Tenant remain fully liable for its obligations
under the Lease; (2) the assignee or sublessee shall be "An
Approved Tenant" (as defined below); and (3) the Premises shall
be operated as an "Approved Concept" (as defined below). The
Landlord, in its sole and absolute discretion, may withhold its
approval if the aforementioned requirements are not satisfied.
For purposes of this Lease, the term "Approved Tenant" shall
mean an assignee or sublessee who (i) has a minimum net worth of
not less than Ten Million Dollars ($10,000,000.00) at the time of
assignment or subletting; and (ii) operates not less than four
(4) full service restaurants or ten (10) fast food or "quick
serve" restaurant concepts which are Approved Concepts. For
purposes of this Lease, the term "Approved Concept" shall mean a
restaurant concept which (i) is listed in the "Top 200 Restaurant
Chains" as ranked in the most recently published edition of the
Nation's Restaurant News or similar publication selected by Landlord
at the time of such assignment; (ii) is an approved restaurant
concept by Landlord according to Landlord's then current underwriting
and credit guidelines; and (iii) does not violate Landlord's then current
concentration requirements. Notwithstanding the foregoing,
Tenant shall have the right (subject to Landlord's prior written
approval, which approval shall not be unreasonably withheld) to
sublet (but not assign) the Premises to any entity operating a
full service, sit-down restaurant concept with not more than
fifty percent (50%) of its gross sales derived from the sale of
liquor, provided: (i) Tenant sublets the Premises within the
first ten (10) Lease Years (after which period this right shall
automatically terminate); (ii) the total number of such
sublettings by Tenant (inclusive of the Premises) does not exceed
two (2) for those properties identified on Exhibit "A" attached
hereto; and (iii) the use of the Premises is not "Noxious or
Offensive," as hereinafter defined. "Noxious or Offensive" shall
be defined to mean a dance hall, off-track betting business,
billiard or pool hall, bingo parlor, massage parlor, video game
arcade, blood bank, night club, or adult book or adult video
store (which are defined as stores in which any part of the
inventory is not available for sale or rental to children under
eighteen (18) years old, because such inventory explicitly deals
with or depicts human sexuality).
No assignment or subletting shall operate to release Tenant
from its obligations under the Lease unless Tenant is
specifically released by virtue of a separate written instrument
executed by Landlord, which may be withheld in Landlord's sole
discretion.
Landlord's consent is not required for Tenant to assign this
Lease or sublet the Premises to any entity which (i) is Tenant's
parent organization, (ii) is any corporation a majority of whose
voting stock is owned, directly or indirectly, by Tenant or
Tenant's parent organization, (iii) as a result of consolidation,
merger, or other reorganization with Tenant or Tenant's parent
organization, will own all or substantially all of the voting
stock of Tenant or Tenant's parent corporation, or (iv) acquires
all or substantially all of the voting stock of Tenant or all or
substantially all of the assets of Tenant; provided, however,
that the Premises shall only be used as an Approved Concept (as
defined above), and provided further that such assignee or
sublessee shall execute and deliver to the Landlord a full and
unconditional guaranty of the obligations of Tenant.
(b) In the event of the subletting or assignment of this
Lease, any monetary consideration obtained from an assignee or
transferee (excluding, however, any monetary consideration paid
solely for Tenant's Property, as defined in paragraph 3(a)(i) of
this Lease) upon such subletting or assignment shall be paid to
Landlord. In the event of the subletting or assignment of this
Lease, if Tenant derives funds or rental income greater than what
it is paying to Landlord under this Lease, the Annual Rent
provided for herein shall be increased to that amount received by
Tenant from sublessee or assignee of this Lease. In the event of
the cessation of any such subletting or assignment, Annual Rent
shall return to the amount provided for in the Rent Addendum.
(c) Prior to any assignment allowed hereunder, Tenant shall
deliver to Landlord (i) a copy of the assignment documents
(including copies of any recorded documents), and (ii) the name,
address and telephone number of such assignee and a designated
contact person for such assignee, and (iii) a new insurance
policy and binder complying with the terms of this Lease and
naming such assignee as the tenant of the Premises.
Notwithstanding anything herein to the contrary, in the event of
any assignment of this Lease or subletting of the Premises,
Tenant shall not be released from its obligations under this
Lease unless specifically released by virtue of a separate
written instrument executed by Landlord, which may be withheld in
Landlord's sole discretion.
(d) The Landlord shall have the right without limitation
(subject to paragraph 11 hereof) to sell, convey, transfer or
assign its interest in the Premises or its interest in this
Lease, and upon such conveyance being completed all covenants and
obligations of Landlord under this Lease accruing thereafter
shall cease, but such covenants and obligations shall run with
the land and shall be binding upon the subsequent landlord or
owners of the Premises or of this Lease.
18. SUBORDINATION, NON-DISTURBANCE, ATTORNMENT, ESTOPPEL
CERTIFICATE.
(a) Upon written request of the holder of any mortgage
(which term "mortgage" shall also include deeds of trust) now or
hereafter relating to the Premises, Tenant will subordinate its
rights under this Lease to the lien thereof and to all advances
made or hereafter to be made upon the security thereof, and
Tenant shall execute, acknowledge and deliver an instrument in
the form customarily used by such encumbrance holder to effect
such subordination; provided, however, as a condition of all such
subordinations, the holder of such mortgage shall be first
required to agree with Tenant that, notwithstanding the
foreclosure or other exercise of rights under any such first or
other mortgage, Tenant's possession and occupancy of the Premises
and the improvements and its leasehold estate shall not be
disturbed or interfered with nor shall Tenant's rights and
obligations under this Lease be altered or adversely affected
thereby so long as Tenant is not in default hereunder.
(b) Notwithstanding anything set out in subparagraph (a) above
to the contrary, in the event the holder of any such mortgage
elects to have this Lease be superior to its mortgage, then upon
Tenant's being notified to that effect by such encumbrance
holder, this Lease shall be deemed prior to the lien of said
mortgage, whether this Lease is dated prior or subsequent to the
date of said mortgage, and Tenant shall execute, acknowledge and
deliver an instrument, in the form customarily used by such
encumbrance holder, effecting such priority.
(c) In the event proceedings are brought for the foreclosure of,
or in the event of the exercise of the power of sale under any
mortgage made by Landlord covering the Premises, or in the event
of delivery of a deed in lieu of foreclosure under such a
mortgage Tenant will attorn to the purchaser upon any such
foreclosure or sale and recognize such purchaser as Landlord
under this Lease, and upon the request of the purchaser, Tenant
shall execute, acknowledge and deliver an instrument, in form and
substance satisfactory to such purchaser, evidencing such
attornment.
(d) Each party agrees, within fourteen (14) days after written
request by the other, to execute, acknowledge and deliver to and
in favor of any proposed mortgagee or purchaser of the Premises,
an estoppel certificate, in the form customarily used by such
proposed mortgagee or purchaser, stating, among other things (i)
whether his Lease is in full force and effect, (ii) whether this
Lease has been modified or amended and, if so, identifying and
describing any such modification or amendment, (iii) the date to
which Rent and other charges have been paid, and (iv) whether the
party furnishing such certificate knows of any default on the
part of the other party or has any claim against such party and,
if so, specifying the nature of such default or claim.
(e) Upon written demand by the holder of any mortgage covering
the Premises, Tenant shall forthwith execute, acknowledge and
deliver an agreement in favor of and in the form customarily used
by such encumbrance holder, by the terms of which Tenant will
agree to give prompt written notice to such encumbrance holder in
the event of any casualty damage to the Premises or in the event
of any default on the part of Landlord under this Lease, and will
agree to allow such encumbrance holder a reasonable length of
time after notice to cure or cause the curing of such default
before exercising Tenant's rights under this Lease, or
terminating or declaring a default under this Lease.
19. COOPERATION
(a) Landlord shall fully cooperate with Tenant throughout the
term of this Lease to secure or maintain proper zoning, building and
other permits and compliance with all applicable laws. Landlord shall
execute any petitions, requests, applications and the like as Tenant
shall reasonably request in order to obtain any permit, license,
variances and approvals which, in the reasonable judgment of
Tenant, are necessary for the lawful construction and/or
operation of Tenant's business on the Premises, provided,
however, that Tenant shall indemnify and save Landlord harmless
from any and all expenses, costs, charges, liabilities, losses,
obligations, damages and claims of any type which may be imposed
upon, asserted against or incurred by Landlord by reason of same.
(b) In the event that Tenant elects to purchase the Premises
pursuant to the terms and conditions of paragraph 11 hereof,
Landlord shall have the right, in Landlord's sole discretion, to
enter into an exchange agreement (the "Exchange Agreement") with
a qualified intermediary (the "Intermediary") in order to
effectuate a like-kind exchange of the Premises for one or more
other properties (the "Replacement Property"). In that event,
Landlord shall assign to the Intermediary all of Landlord's
right, title and interest in the written contract for purchase
and sale of the Premises entered into between Landlord and Tenant
as required by paragraph 11 hereof (the "Purchase Contract"), and
any deposit paid by Tenant in connection with the purchase of the
Premises shall be placed directly with the Intermediary, subject
to the terms and conditions of the Purchase Contract and the
Exchange Agreement. Landlord and Tenant agree that, at
Landlord's option (provided that Tenant shall incur no expense
and that there shall be no adverse effect upon the interest in
the Premises being purchased by Tenant), Tenant shall cooperate
with Landlord in effecting a like-kind exchange of the Premises
by Landlord pursuant to and in accordance with the provisions of
Section 1031 of the Internal Revenue Code of 1986, as amended,
and the Treasury Regulations promulgated thereunder, which
cooperation shall include, without limitation, Tenant's consent
to Landlord's assignment of its interest in the Purchase Contract
to the Intermediary and Tenant receiving or taking title to the
Premises from the Intermediary or another third party utilized in
the transaction in order to facilitate the like-kind exchange on
behalf of Landlord.
20. NOTICES
All notices and other communications required or permitted
to be given hereunder shall be in writing and shall be delivered
by a nationally recognized overnight courier or mailed by
registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Landlord:
CNL APF PARTNERS, LP / CNL-BB Corp.
400 East South Street
Suite 500
Orlando, Florida 32801
with copy to:
Dale A. Burket, Esquire
Lowndes, Drosdick, Doster, Kantor, & Reed, P.A.
215 North Eola Drive
Post Office Box 2809
Orlando, Florida 32802
If to Tenant:
Stan Ereckson
VICORP RESTAURANTS, INC., a Colorado corporation
400 West 48th Avenue
Denver, Colorado 80216
Any party may change its address for notices by written
notice in like manner as provided in this paragraph and such
change of address shall be effective seven (7) days after the
date notice of such change of address is given. Notice for
purposes of this Lease shall be deemed given at the date or time
of receipt or attempted delivery, as indicated on the return
receipt or the courier's records.
21. INDEMNIFICATION
Tenant does hereby indemnify and exonerate Landlord against
and from all liabilities, losses, obligations, damages,
penalties, claims, costs, charges and expenses, including
reasonable architects' and attorneys' fees, which may be imposed
upon or asserted against or incurred by Landlord by reason of any
of the following occurring:
(a) any work or thing done in respect of construction of,
in or to the Premises or any part of the improvements now or
hereafter constructed on the Premises;
(b) any use, possession, occupation, operation, maintenance or
management of the Premises or any part hereof;
(c) any failure to, or to properly, use, possess, occupy,
operate, maintain or manage the Premises or any part thereof;
(d) the condition, including environmental conditions, of the
Premises or any part thereof;
(e) any negligence on the part of Tenant or any of its
agents, contractors, servants, employees, licensees or
invitees;
(f) any accident, injury or damage to any person or
property occurring in, on or about the Premises or any part
thereof including any sidewalk adjacent thereto; or
(g) any failure on the part of Tenant to perform or comply
with any of the covenants, agreements, terms or conditions
contained in this Lease on its part to be performed or
complied with.
22. HOLD HARMLESS
Tenant agrees to hold Landlord harmless against any and all
claims, damages, accidents and injuries to persons or property
caused by or resulting from or in connection with anything in or
pertaining to or upon the Premises during the term of this Lease
or while Tenant is occupying the Premises, except if such claim,
damage, accident or injury shall be caused by the negligence of
Landlord or its agents. Landlord shall not be liable to Tenant,
Tenant's employees, agents, invitees, licensees or any other
person whomsoever for any injury to person or damage to property
on or about the Premises caused by the negligence or misconduct
of Tenant, its agents, servants or employees or of any other
person entering the building under expressed or implied
invitation by Tenant or due to any other cause whatsoever, unless
caused by the negligence or neglect of Landlord, its employees or
its authorized representatives.
23. LANDLORD'S LIABILITIES
The term "Landlord" as used in this Lease means the owner
from time to time of the Premises. Neither Landlord nor any
partner, shareholder or beneficiary thereof shall have any
personal liability with respect to any of the provisions of this
Lease and if Landlord is in default with respect to its
obligations hereunder Tenant shall look solely to the equity of
Landlord in the Premises.
24. SUCCESSORS
The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of Landlord and Tenant
and their respective heirs, legal representatives, successors and
assigns.
25. ENTIRE AGREEMENT/MEMORANDUM OF LEASE
This Lease contains the entire agreement between the parties
hereto and may not be modified in any manner other than in
writing signed by the parties hereto or their successors in
interest. A memorandum of this Lease shall be executed by the
parties and shall be recorded in the official records of the
county where the Premises are located.
26. GENDER
Whenever the context hereof permits or requires, words in
the singular may be regarded as in the plural and vice-versa, and
personal pronouns may be read as masculine, feminine and neuter.
27. BROKERAGE FEES
It is understood and agreed that neither party has incurred
any real estate brokerage fees or commissions arising out of this
Lease and each party agrees to hold the other harmless from and
against all such fees and commissions incurred, and costs related
thereto including legal fees, as a result of its own conduct or
alleged conduct.
28. CAPTIONS
The captions of this Lease are for convenience only, and do
not in any way define, limit, disclose, or amplify terms or
provisions of this Lease or the scope or intent thereof.
29. LANDLORD'S RIGHT TO CURE
In the event Tenant shall fail, refuse or neglect to
perform, observe or comply with any term, condition, covenant,
agreement or obligation contained in the Lease on its part to be
performed or complied with, then Landlord may, at its sole
option, after expiration of any applicable notice and cure period
(except in case of an emergency) enter upon the Premises, if
deemed necessary by Landlord in its reasonable discretion, and/or
do whatever may be deemed necessary by Landlord in its reasonable
discretion to cure such failure by Tenant. Tenant shall pay to
Landlord within five (5) days of Landlord's request, all costs
incurred by Landlord in connection with Landlord's curing of such
failure by Tenant including, but not limited to, reasonable
attorney and paralegal fees whether or not judicial proceedings
are involved. In addition to the above costs, in the event
Landlord does not receive payment from Tenant when due hereunder,
interest at the rate of eighteen percent (18%) per annum or, if
less, the highest rate allowable by law shall be due and payable
with respect to such payment from the due date thereof until
Landlord receives such payment.
30. COMMITMENT LETTER
[INTENTIONALLY DELETED]
31. NOT A SECURITY ARRANGEMENT
The parties hereto agree and acknowledge that this
transaction is not intended as a security arrangement or
financing secured by real property, but shall be construed for
all purposes as a true lease.
32. NET LEASE
It is the intention of the parties hereto that this Lease is
and shall be treated as a triple net lease. Any present or
future law to the contrary notwithstanding, this Lease shall not
terminate (except as expressly provided in paragraph 4(a)) nor
shall Tenant be entitled to any abatement, suspension, deferment,
reduction (except as expressly provided in paragraph 6(b)
hereof), set-off, counterclaim, or defense with respect to the
rent, nor shall the obligations of Tenant hereunder be affected
by reason of: any damage to or destruction of the Premises or
any part thereof; any taking of any Premises or any part thereof
or interest therein by Condemnation or otherwise (except as
expressly provided in paragraph 6(b) hereof); any prohibition,
limitation, restriction or prevention of Tenant's use, occupancy
or enjoyment of the Premises or any part thereof (except to the
extent caused solely by the intentional wrongful conduct of
Landlord), or any interference with such use, occupancy or
enjoyment by any person or for any other reason; any title defect
or encumbrance or any matter affecting title to the Premises or
any part thereof; any eviction by paramount title or otherwise;
any default by Landlord hereunder; any proceeding relating to
Landlord; the impossibility or illegality of performance by
Landlord, Tenant or both; any action of governmental authority;
any breach of warranty or misrepresentation; any defect in the
condition, quality or fitness for use of the Premises or any part
thereof; or any other cause whether similar or dissimilar to the
foregoing and whether or not Tenant shall have notice or
knowledge of any of the foregoing. The parties intend that the
obligations of Tenant hereunder shall be separate and independent
covenants and agreements and shall continue unaffected unless
such obligations shall have been modified or terminated in
accordance with an express provision of this Lease.
33. WAIVER
No waiver by Landlord of any provision hereof shall be
deemed a wavier of any other provision hereof or of any
subsequent breach by Tenant of the same or any other provision.
Landlord's consent to, or approval of, any act shall not be
deemed to render unnecessary the obtaining of Landlord's consent
to or approval of any subsequent act by Tenant. The acceptance
of rent hereunder by Landlord shall not be a waiver of any
preceding breach by Tenant of any provision hereof, other than
the failure of Tenant to pay the particular rent so accepted,
regardless of Landlord's knowledge of such preceding breach at
the time of acceptance of such rent.
34. TIME OF THE ESSENCE
Landlord and Tenant agree that time shall be of the essence
of all terms and provisions of this Lease.
35. GOVERNING LAW
This Lease shall be construed in accordance with the laws of
the state in which the Premises is located.
[Signatures on Next Page]
IN WITNESS WHEREOF, Seller and Buyer have entered into this
Agreement as of the date shown hereinabove.
Signed, sealed and delivered "TENANT"
in the presence of:
VICORP RESTAURANTS, INC., a
Colorado corporation
By: /s/Charles R. Frederickson
--------------------------
Name: /s/ Stanley Ereckson Jr. Name: Charles R. Frederickson
------------------------- -----------------------
Stanley Ereckson, Jr. As Its: President
---------
Name: /s/ Gary F. Burke
------------------
Gary F. Burke
STATE OF COLORADO
COUNTY OF DENVER
The foregoing instrument was acknowledged before me this
25th day of October 1999, by Charles R. Frederickson, as
President of VICORP RESTAURANTS, INC., a Colorado corporation, on
behalf of the corporation.
/s/ Toni A. Schreivogel
-----------------------
(NOTARY SEAL) Notary Public, State of Colorado
Printed Name: Toni A. Schreivogel
-------------------
Notary Commission No. n/a
---
My Commission Expires: 8/25/2002
---------
Exhibit "A" - Legal Description
Exhibit "B" - List of Properties for Cross-Default
"LANDLORD"
CNL APF PARTNERS, LP, a
Delaware limited partnership
BY: CNL APF GP Corp., a
Delaware corporation, as general partner
By: /s/ John T. Walker
-------------------
Name: /s/ Lisa M. Fannin John T. Walker, as President
-------------------
Lisa M. Fannin
Name: /s/ Stephanie J. Newell
------------------------
Stephanie J. Newell
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me this 25
day of October, 1999, by John T. Walker, as President of CNL APF
GP CORP., a Delaware corporation, as General Partner of CNL APF
PARTNERS, LP, a Delaware limited partnership, on behalf of the
limited partnership.
/s/ Kay Cooksey
---------------
(NOTARY SEAL) Notary Public, State of Florida
Printed Name:
Notary Commission No.
My Commission Expires:
"LANDLORD"
CNL-BB CORP., a Florida corporation
By: /s/ Robert A.Bourne
Name: /s/ Lisa M. Fannin --------------------
------------------- Robert A. Bourne, as
Lisa M. Fannin President
Name: /s/ Bonnie P. Burgess
----------------------
Bonnie P. Burgess
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me
this 26th day of October 1999, by Robert A. Bourne, as
President of CNL-BB CORP., a Florida corporation, on behalf
of the corporation.
/s/ Stephanie J. Newell
-----------------------
(NOTARY SEAL) Notary Public, State of Florida
Printed Name:
Notary Commission No.
My Commission Expires:
EXHIBIT "A"
Property Description
--------------------
Landlord Landlord
- ---------------- ----------------
CNL APF Partners, L.P. CNL-BB Corp.
- ---------------------- ------------
4839 West 111th Street 3000 Oak Grove Road
Alsip, IL 60658 Downers Grove, IL 60515
4849 West 79th Street 18849 Dixie Highway
Burbank, IL 60459 Homewood, IL 60430
7105 Cherryvale North Boulevard 942 South LaGrange Road
Cherry Valley, IL 61016 LaGrange, IL 60525
560 Waukegan Road 1195 South Milwaukee Avenue
Deerfield, IL 60015 Libertyville, IL 60048
3545 Ridge Road 8584 Dempster Street
Lansing, IL 60438 Niles, IL 60714
4721 Lincoln Mall Drive 270 East Northwest Highway
Matteson, IL 60443 Palatine, IL 60067
6431 - 127th Street 200 Skokie Boulevard
Palos Heights, IL 60463 Wilmette, IL 60091
1510 East Main Street
St. Charles, IL 60174
420 East Ogden Avenue
Westmont, IL 60559
7409 South Kingery Highway
Willowbrook, IL 60521
8140 Mississippi Street
Merrillville, IN 46410
12951 Riverdale Crossing
Coon Rapids, MN 55448
1861 Madison Avenue
Mankato, MN 56001
5425 "L" Street
Omaha, NE 68117
RENT ADDENDUM
TO LEASE AGREEMENT
THIS RENT ADDENDUM dated October 28, 1999, by and
between CNL-PARTNERS, a Delaware limited partnership and
CNL-BB CORP., A Florida corporation as
"Landlord", and VICORP RESTAURANTS, a Colorado corporation,
as "Tenant", for properties described on Exhibit "A", is
attached to and made a part of that certain Lease Agreement
by and between Landlord and Tenant of even date herewith
(the "Lease"). Notwithstanding any other provision to the
contrary which maybe contained in said Lease, it is
specifically agreed by and between Landlord and Tenant as
follows:
(a) Commencement of Rent. On the date thereof,
Landlord has simultaneously entered into the Lease with
Tenant pursuant to which Tenant has agreed to lease from
Landlord the Premises and all improvements now for
thereafter constructed thereon. Payment of Interim Rent
(if applicable), and Annual Rent shall commence as of the
Effective Date as provided herein, notwithstanding that the
improvements may not be constructed or complete at that
time.
(b) Interim Rent
[INTENTIONALLY DELETED]
(c) Annual Rent
(i) Beginning on the Effective Date, Tenant covenants and
agrees to pay to Landlord annual rent ("Annual Rent") in the annual amount
$2,865,615 for all locations, payable to Landlord in equal
monthly installments in the amount $238,801 for all
locations monthly in advance, on the first (1st) day of each month
(ii) Increases in Annual Rent.
Commencing at the end of the fifth (5th) Lease
Year after the Effective Date, and on each fifth (5th)
anniversary of such date thereafter during the term of this
Lease (and any extension thereof), Annual Rent shall be
increased by an amount equal to ten percent (10%) of the
Annual Rent payable during the immediately preceding Lease
Year.
(iii) Partial Months. If the date on which
Annual Rent shall be first due and payable shall fall on any
other than the first day of a calendar month, then rent for
the partial rental month shall be prorated on a per diem basis
on the first annual Rent payment and shall be paid by Tenant
to Landlord for such month.
(c) Percentage Rent
[INTENTIONALLY DELETED]
(d) Reporting. Tenant shall, during the term of this
Lease and any extensions thereto: keep books and records
reflecting its financial condition including, but not
limited to, the operation of the Premises in accordance with
generally accepted accounting principles consistently
applied. Tenant shall provide Landlord with unaudited year
end financial statements including operating statements and
balance sheets and Form 10 K's and Form 10Q's within ten
(10) days after they are generated for Tenant. Landlord
shall have the right, at its sole cost and expense, from
time to time during normal business hours and at times
reasonably convenient to Tenant, to examine such books,
records and accounts at the offices of Tenant or other
entity as is maintaining such books, records and accounts,
and to make such copies or extracts thereof as Landlord
shall desire.
(e) Sales/Use Tax. Tenant shall also pay to Landlord
any sales and use tax imposed on any Rents payable hereunder
from time to time by state law or any other governmental
entity, which sums are due monthly as to monthly rent
payments on the due date of the rent payment under this
Lease.
(f) Late Charges. In the event any installment of rent
due hereunder (including Interim Rent and Annual Rent) is
not received by Landlord within ten (10) days of its
respective due date, there shall be an automatic late charge
due to Landlord from Tenant in the amount of five percent
(5%) of such delinquent installment of rent. All such late
charges due hereunder shall be deemed additional Rent, and
are not penalties but rather are charges attributable to
administrative and collection costs arising out of such
delinquency. In addition to such late charge, in the event
Landlord does not receive Rent within ten (10) days after
the due date, interest shall be due at the lesser of
eighteen percent (18%) per annum or the maximum rate
allowable by law with respect to such payment from the due
date thereof until Landlord receives such payment.
(g) Payments of Rents. Except as provided in the
following sentence, all rent payments shall be made by check
payable to the order of Landlord and shall be sent to 400
East South Street, Suite 500, Orlando, Florida 32801,or to
such other place or places Landlord or its successors or
assigns, respectively, may from time to time designate in
writing. In the event Tenant is late in the payment of
Interim or Annual Rent on three (3) or more occasions, and
if Landlord shall so request, Tenant shall establish
arrangements whereby Rent is transferred by wire or other
means directly from Tenant's bank account to such account as
Landlord may designate.
(h) No Abatement. Unless otherwise stated in the
Lease, no abatement, offset, diminution or reduction (a) of
Rent, charges or other compensation, or (b) of Tenant's other
obligations under this Lease shall be allowed to Tenant or
any person claiming under Tenant, under any circumstances or
for any reason whatsoever.
Initialed for Identification:
By Landlord: /s/ John T. Walker, /s/ Robert A. Bourne
-----------------------------------------
By Tenant: /s/ Charles R. Frederickson
---------------------------
OPTION AGREEMENT
This agreement is entered into this first day of
November, 1999, by and between VICORP Restaurants, Inc. (the
Corporation), and Joseph F. Trungale (Optionee).
WHEREAS, the Corporation has adopted the Amended and
Restated 1982 Stock Option Plan ("Plan"), which Plan is in full
force and effect; and
WHEREAS, pursuant to Article VIII of the Plan, the
Committee of Non-Employee Directors is to notify the recipient of
the grant of any option in a writing delivered in duplicate
either in person or by mail.
NOW, THEREFORE, the parties hereto acknowledge and
agree as follows:
I. GRANT:
------
Optionee is hereby granted a non-qualified option to
purchase under the terms of the plan 50,000 shares of the
Corporation's common stock (par value $0.05 per share) for an
exercise price of $16.75 per share. The options shall be vested
according to the following schedule:
16,666 shares vest on November 1, 1999
16,667 shares will vest on November 1, 2000
16,667 shares will vest on November 1, 2001
II. TERM:
-----
Each option granted shall expire ten years from the
date of grant, unless canceled or terminated earlier in
accordance with the terms of the Plan.
III. EXERCISE OF OPTIONS:
--------------------
Only options which are vested may be exercised.
IV. MANNER OF EXERCISE:
-------------------
(a) Notice to the Corporation: Each exercise of an
option shall be made by the delivery by the Optionee of written
notice of such election to the Corporation, either in person or
by mail, stating the number of shares with respect to which the
option is being exercised and specifying a date on which the
shares will be taken and payment made therefor. The date shall
be at least fifteen (15) days after the giving of such notice,
unless an earlier date shall have been mutually agreed upon.
(b) Issuance of Stock: Subject to any law or
regulation of the Securities and Exchange Commission or other
body having jurisdiction requiring an action to be taken in
connection with the shares specified in a notice of election
before the shares can be delivered to the Optionee, on the date
specified in the notice of election, the Corporation shall
deliver, or cause to be delivered to the Optionee stock
certificates for the number of shares with respect to which the
option is being exercised, against payment therefor (including
payment of any tax required to be withheld). In the event of any
failure to take and pay, on the date stated, for the full number
of shares specified in the notice of election, the option shall
become inoperative only as to those shares which are not taken or
paid for, but shall continue with respect to any remaining shares
subject to the option as to which exercise has not yet been made.
V. ASSIGNMENT:
-----------
Any option granted under the Plan shall not be
assigned, pledged, or hypothecated in any way, shall not be
subject to execution, and shall not be transferable other than by
will or the laws of descent and distribution. Any attempted
assignment or other prohibited disposition shall be null and
void.
VI. TERMINATION:
------------
(a) Termination Other Than At Death Or Disability: If
the Optionee terminates his position as an Employee of the
Corporation for any reason other than death or disability, any
unexpired and unexercised granted options shall be canceled three
months after the effective date of the Optionee's termination.
(b) Termination At Death Or Disability: In the event
of the death of the Optionee, any option held by him at the time
of his death shall be transferred as provided in his will or by
the laws of descent and distribution, and may be exercised by
such transferee at any time within twelve months after the date
of death, to the extent the option is exercisable on the date of
death, and provided it is exercised within the time prescribed in
the Plan. In the event of the disability of the Optionee, any
option held by him may be exercised in whole or in part, by the
Optionee or his personal representative at any time within twelve
months after the date of disability, to the extent the option is
exercisable on the date of disability, and provided that it is
exercised within the time prescribed in the Plan. Disability and
time of disability shall be determined by the Committee.
VII. CHANGES IN CAPITAL STRUCTURE:
-----------------------------
The number of shares granted to Optionee will be
subject to adjustment in the case of stock splits, combinations,
stock dividends, reorganization and similar events.
VIII. SUBSTITUTION OR CANCELLATION UPON ACQUISITION:
----------------------------------------------
As used in this article, "Acquisition Event" means (1)
any sale or other disposition of all or substantially all of the
assets of the Corporation or of any participating subsidiary
pursuant to a plan which provides for the liquidation of the
Corporation or the participating subsidiary, (2) any exchange by
the holders of all of the outstanding shares of Common Stock for
securities issued by another entity, or in whole or in part for
cash or other property, pursuant to a plan of exchange approved
by the holders of a majority of such outstanding shares, or (3)
any transaction to which 425(a) of the Internal Revenue Code of
1954, as amended, applies and to which the Corporation or any
participating subsidiary is a party in connection with any
Acquisition Event and upon such terms and conditions as the Board
may establish:
(a) The Committee may waive any limitation applicable
to any option or right granted to the Optionee by this Agreement
under the Plan so that such option and right, from and after a
date prior to the Acquisition Event that is specified by the
Committee, shall be exercisable in full.
(b) If the Committee so determines, the Optionee may be
given the opportunity to make a final settlement for the entire
unexercised portion of any option and any right granted by this
Agreement under the Plan, including any portion not then
currently exercisable, in any one or more of the following
matters:
(i) Surrender such unexercised portion for cancellation
in exchange for the payment in cash of an amount not less than
the difference between the value per share of Common Stock as
measured by the value to be received by the holders of the
outstanding shares of Common Stock pursuant to the terms of the
Acquisition Event, as determined by the Committee in its
discretion, and the price at which such option and right is or
would become exercisable, multiplied by the number of shares
represented by such unexercised portion.
(ii) Exercise such option and right, including any
portion not then otherwise currently exercisable, prior to the
Acquisition Event so that the Optionee would be entitled, with
respect to shares thereby acquired, to participate in the
Acquisition Event as a holder of Common Stock.
(iii) Surrender such option and right for cancellation
in exchange for a substitute option, with or without a related
stock appreciation right, providing substantially equal benefits
and granted or to be granted by an employer corporation, or a
parent or subsidiary of such an employer corporation, that after
the Acquisition Event is expected to continue to conduct
substantially the same business as that acquired from the
Corporation or a participating subsidiary pursuant to the
Acquisition Event.
If the Optionee is given one or more of such
opportunities with respect to the entire unexercised portion of
any option and right granted by this Agreement, the option and
right may be canceled by the Corporation upon the occurrence of
the Acquisition Event and thereafter the Optionee will be
entitled only to receive the appropriate benefit pursuant to
clause (i), (ii), or (iii) above, whichever may be applicable.
The provisions of this article are not intended to be
exclusive of any other arrangements that the Board might approve
for settlement of any or all outstanding options and rights in
connection with an Acquisition Event or otherwise.
IX. ADMINISTRATION:
---------------
The Plan is administered by a committee of non-employee
directors appointed by the Board of Directors of the Corporation
("Committee") to whom all correspondence shall be directed.
X. MISCELLANEOUS:
--------------
(a) Interpretation: Any inconsistencies between the
provisions of this Option Agreement and the Plan shall be
governed by the terms and provisions of the Plan. Optionee is
referred to the Plan to determine all of his rights and
obligations, only a portion of which have been set forth in this
Agreement.
(b) Acknowledgment: By execution of this Agreement,
Optionee acknowledges receipt of a duplicate copy of the same as
notification of his grant of options and that Optionee agrees in
consideration of such option he will abide by all the terms and
conditions of the Plan.
IN WITNESS WHEREOF, the parties hereto have executed
this Option Agreement as of the day and year first above-written.
VICORP Restaurants, Inc.
By /s/ Charles R. Frederickson
____________________________________
Charles R. Frederickson, Chairman
/s/ Joseph F. Trungale
______________________________________
Joseph F. Trungale, Optionee
This is Page 4 of a 4-page Option Agreement between VICORP
Restaurants, Inc. and Joseph F. Trungale dated November 1, 1999.
OPTION AGREEMENT
This agreement is entered into this ninth day of
December, 1999, by and between VICORP Restaurants, Inc. (the
Corporation), and Charles R. Frederickson (Optionee).
WHEREAS, the Corporation has adopted the Amended and
Restated 1982 Stock Option Plan ("Plan"), which Plan is in full
force and effect; and
WHEREAS, pursuant to Article VIII of the Plan, the
Committee of Non-Employee Directors is to notify the recipient of
the grant of any option in a writing delivered in duplicate
either in person or by mail.
NOW, THEREFORE, the parties hereto acknowledge and
agree as follows:
I. GRANT:
------
Optionee is hereby granted a fully vested option to
purchase under the terms of the plan 50,000 shares of the
Corporation's common stock (par value $0.05 per share) for an
exercise price of $17.44 per share.
II. TERM:
-----
Each option granted shall expire ten years from the
date of grant, unless canceled or terminated earlier in
accordance with the terms of the Plan.
III. EXERCISE OF OPTIONS:
--------------------
Only options which are vested may be exercised.
IV. MANNER OF EXERCISE:
-------------------
(a) Notice to the Corporation: Each exercise of an
option shall be made by the delivery by the Optionee of written
notice of such election to the Corporation, either in person or
by mail, stating the number of shares with respect to which the
option is being exercised and specifying a date on which the
shares will be taken and payment made therefor. The date shall
be at least fifteen (15) days after the giving of such notice,
unless an earlier date shall have been mutually agreed upon.
(b) Issuance of Stock: Subject to any law or
regulation of the Securities and Exchange Commission or other
body having jurisdiction requiring an action to be taken in
connection with the shares specified in a notice of election
before the shares can be delivered to the Optionee, on the date
specified in the notice of election, the Corporation shall
deliver, or cause to be delivered to the Optionee stock
certificates for the number of shares with respect to which the
option is being exercised, against payment therefor (including
payment of any tax required to be withheld). In the event of any
failure to take and pay, on the date stated, for the full number
of shares specified in the notice of election, the option shall
become inoperative only as to those shares which are not taken or
paid for, but shall continue with respect to any remaining shares
subject to the option as to which exercise has not yet been made.
V. ASSIGNMENT:
-----------
Any option granted under the Plan shall not be
assigned, pledged, or hypothecated in any way, shall not be
subject to execution, and shall not be transferable other than by
will or the laws of descent and distribution. Any attempted
assignment or other prohibited disposition shall be null and
void.
VI. TERMINATION:
------------
(a) Termination Other Than At Death Or Disability: If
the Optionee terminates his position as an Employee of the
Corporation for any reason other than death or disability, any
unexpired and unexercised granted options shall be canceled three
months after the effective date of the Optionee's termination.
(b) Termination At Death Or Disability: In the event
of the death of the Optionee, any option held by him at the time
of his death shall be transferred as provided in his will or by
the laws of descent and distribution, and may be exercised by
such transferee at any time within twelve months after the date
of death, to the extent the option is exercisable on the date of
death, and provided it is exercised within the time prescribed in
the Plan. In the event of the disability of the Optionee, any
option held by him may be exercised in whole or in part, by the
Optionee or his personal representative at any time within twelve
months after the date of disability, to the extent the option is
exercisable on the date of disability, and provided that it is
exercised within the time prescribed in the Plan. Disability and
time of disability shall be determined by the Committee.
VII. CHANGES IN CAPITAL STRUCTURE:
-----------------------------
The number of shares granted to Optionee will be
subject to adjustment in the case of stock splits, combinations,
stock dividends, reorganization and similar events.
VIII. SUBSTITUTION OR CANCELLATION UPON ACQUISITION:
----------------------------------------------
As used in this article, "Acquisition Event" means (1)
any sale or other disposition of all or substantially all of the
assets of the Corporation or of any participating subsidiary
pursuant to a plan which provides for the liquidation of the
Corporation or the participating subsidiary, (2) any exchange by
the holders of all of the outstanding shares of Common Stock for
securities issued by another entity, or in whole or in part for
cash or other property, pursuant to a plan of exchange approved
by the holders of a majority of such outstanding shares, or (3)
any transaction to which 425(a) of the Internal Revenue Code of
1954, as amended, applies and to which the Corporation or any
participating subsidiary is a party in connection with any
Acquisition Event and upon such terms and conditions as the Board
may establish:
(a) The Committee may waive any limitation applicable
to any option or right granted to the Optionee by this Agreement
under the Plan so that such option and right, from and after a
date prior to the Acquisition Event that is specified by the
Committee, shall be exercisable in full.
(b) If the Committee so determines, the Optionee may be
given the opportunity to make a final settlement for the entire
unexercised portion of any option and any right granted by this
Agreement under the Plan, including any portion not then
currently exercisable, in any one or more of the following
matters:
(i) Surrender such unexercised portion for cancellation
in exchange for the payment in cash of an amount not less than
the difference between the value per share of Common Stock as
measured by the value to be received by the holders of the
outstanding shares of Common Stock pursuant to the terms of the
Acquisition Event, as determined by the Committee in its
discretion, and the price at which such option and right is or
would become exercisable, multiplied by the number of shares
represented by such unexercised portion.
(ii) Exercise such option and right, including any
portion not then otherwise currently exercisable, prior to the
Acquisition Event so that the Optionee would be entitled, with
respect to shares thereby acquired, to participate in the
Acquisition Event as a holder of Common Stock.
(iii) Surrender such option and right for cancellation
in exchange for a substitute option, with or without a related
stock appreciation right, providing substantially equal benefits
and granted or to be granted by an employer corporation, or a
parent or subsidiary of such an employer corporation, that after
the Acquisition Event is expected to continue to conduct
substantially the same business as that acquired from the
Corporation or a participating subsidiary pursuant to the
Acquisition Event.
If the Optionee is given one or more of such
opportunities with respect to the entire unexercised portion of
any option and right granted by this Agreement, the option and
right may be canceled by the Corporation upon the occurrence of
the Acquisition Event and thereafter the Optionee will be
entitled only to receive the appropriate benefit pursuant to
clause (i), (ii), or (iii) above, whichever may be applicable.
The provisions of this article are not intended to be
exclusive of any other arrangements that the Board might approve
for settlement of any or all outstanding options and rights in
connection with an Acquisition Event or otherwise.
IX. ADMINISTRATION:
---------------
The Plan is administered by a committee of non-employee
directors appointed by the Board of Directors of the Corporation
("Committee") to whom all correspondence shall be directed.
X. MISCELLANEOUS:
--------------
(a) Interpretation: Any inconsistencies between the
provisions of this Option Agreement and the Plan shall be
governed by the terms and provisions of the Plan. Optionee is
referred to the Plan to determine all of his rights and
obligations, only a portion of which have been set forth in this
Agreement.
(b) Acknowledgment: By execution of this Agreement,
Optionee acknowledges receipt of a duplicate copy of the same as
notification of his grant of options and that Optionee agrees in
consideration of such option he will abide by all the terms and
conditions of the Plan.
IN WITNESS WHEREOF, the parties hereto have executed
this Option Agreement as of the day and year first above-written.
VICORP Restaurants, Inc.
By /s/ Joseph F. Trungale
____________________________________
Joseph F. Trungale, President
/s/ Charles R. Frederickson
______________________________________
Charles R. Frederickson, Optionee
This is Page 4 of a 4-page Option Agreement between VICORP
Restaurants, Inc. and Charles R. Frederickson dated December 9,
1999.
INCENTIVE PROGRAM DOCUMENT
Defined Positions of Officers and Directors
APPROVALS
---------
/s/ Buck Frederickson
______________________________________
Buck Frederickson, Chairman Date
Effective: November 1, 1999
Supersedes: All previous stated and/or implied compensation and incentive plans.
This compensation plan is applicable to all Corporate (or
non-operating) Officer-level positions and select Director-
level positions within VICORP Restaurants, Inc. (hereafter
referred to as VICORP). Attachment A to this Plan Document
details the defined positions. This plan defines the method
of compensation for the period beginning November 1, 1999
and ending October 29, 2000.
BASE COMPENSATION
A. Base compensation is defined as that compensation paid
bi-weekly. Where applicable, vacation and holiday pay will
be predicated upon the base compensation rate.
B. Base compensation will be determined based upon using
the approved salary wage ranges as a guideline.
C. Participants in this program will be reviewed on an
annual basis and any adjustments to the base rate will be
based upon overall performance and wage range placement.
Any merit increase approved must be such that the resulting
salary is within the wage range for the position. The
Compensation Committee of VICORP's Board of Directors must
approve officer compensation.
BONUS PROGRAM
A. General. Participants are eligible by virtue of
assignment to an officer or director level position that is
not eligible for any other Incentive Program (i.e., field).
A list of approved bonus eligible positions for FY'00 is
detailed on Attachment A. The bonus program is predicated
upon achievement of overall VICORP performance against a set
baseline Earnings Before Interest and Taxes (E.B.I.T.)
target. NOTE: E.B.I.T. will be computed in accordance with
Generally Accepted Accounting Principles.
B. Bonus. The bonus plan is established based upon
attainment of E.B.I.T. For Fiscal Year 2000, Target
E.B.I.T. is $21,947,000 (which is before payment of
bonuses).
C. Distribution of Bonus
Eligible individuals participate in the bonus based upon:
1. The target bonus percentage assigned to the position; and,
2. The attainment of the E.B.I.T. Target.
The following chart summarizes the method of payout.
<TABLE>
<CAPTION>
Payout %
% Of E.B.I.T. % OF Target --------
Target Attained Payout Level 1 Level 2 Level 3 Level 4
- --------------- ----------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
80% 25% 8.75% 7.5% 6.25% 3.75%
85% 45% 15.75% 13.5% 11.25% 6.75%
90% 65% 22.75% 19.5% 16.25% 9.75%
95% 85% 29.75% 25.5% 21.25% 12.75%
100% 100% 35% 30% 25% 15%
105% 110% 38.5% 33% 27.5% 16.5%
110% 120% 42% 36% 30% 18%
115% 130% 45.5% 39% 32.5% 19.5%
120% - 140% 49% 42% 35% 21%
or greater
</TABLE>
The targeted bonus percentages assigned to positions are as follows:
Corporate Executive Vice Presidents and higher 35%
Sr. Vice Presidents 30%
Vice President 25%
Defined Director-level Positions 15%
These percentages are applied to the incumbent's base salary for the
fiscal year 2000.
Individual participants will be advised of their eligibility and
their target %.
PAYMENT OF BONUSES
A. Bonus payments will be made within 90 days following
the end of the fiscal year close. Payments are subject to
normal tax withholding and are paid via the payroll system.
Bonus eligible participants must be actively employed at the
end of the fiscal year to be eligible for payment.
GENERAL CONDITIONS
A. This Plan does not constitute a contract of employment
and does not in any way diminish or limit VICORP
Restaurants, Inc. to terminate the employment of any
individual at will, at any time, and at its sole discretion.
B. Management may, at its discretion and at any time,
change, modify, amend or discontinue this Plan without
advance notification.
C. Neither this, nor any other document, is intended to be
construed as a guarantee of employment nor a guarantee base
or incentive compensation. Compensation targets are often
expressed in terms of annual dollars for ease of
communication. In no way should annualized salary targets
be construed as "promises to pay" or entitlements.
D. The Corporation's audited financial statements serve as
the documents against which bonus is earned and computed.
E. Initial participation (by virtue of assignment to a
bonus-eligible position) will be pro-rated based upon the
number of full months the incumbent is in a bonus-eligible
position.
F. Transfers from a bonus-eligible position to a non-bonus
eligible position during the course of the fiscal year will
result in no bonus consideration for that fiscal year.
G. Should there be an extraordinary event such as an
acquisition, merger, divestiture, extraordinary expenses,
etc. that positively, negatively, or materially affects
E.B.I.T., the E.B.I.T. threshold numbers will be
reevaluated.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to
incorporation by reference of our reports included in this
Form 10-K, into the Company's previously filed Registration
Statements, File Nos. 33-26650, 33-32608, 33-34447, 33-48205,
33-43889, 33-49166, 33-11003, 333-55919 and 333-84325.
ARTHUR ANDERSEN LLP
Denver, Colorado
January 21, 2000
POWER OF ATTORNEY
The undersigned, Carole Lewis Anderson, a Director of
VICORP Restaurants, Inc. (the "Company"), a Colorado corporation,
does hereby constitute and appoint Charles R. Frederickson or
Joseph F. Trungale with full power of substitution, as the
undersigned's attorney-in-fact with authority to execute on
behalf of the undersigned, in the undersigned's capacity as a
Director of the Company, the Company's Annual Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, on
Form 10-K, and all amendments thereto, which Report is to be
filed with the Securities and Exchange Commission on or before
February 1, 2000.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set her
hand and seal this ninth day of December, 1999.
/s/ Carole Lewis Anderson
-------------------------
Carole Lewis Anderson
Director
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
This ninth day of December, 1999, before me came Carole
Lewis Anderson, known to me to be the individual described
herein, and executed the foregoing Power of Attorney, and
acknowledged that she executed the same.
My commission expires 8/25/2002.
WITNESS my hand and official seal.
/s/ Toni Schreivogel
--------------------
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, Bruce B. Brundage, a Director of
VICORP Restaurants, Inc. (the "Company"), a Colorado corporation,
does hereby constitute and appoint Charles R. Frederickson or
Joseph F. Trungale with full power of substitution, as the
undersigned's attorney-in-fact with authority to execute on
behalf of the undersigned, in the undersigned's capacity as a
Director of the Company, the Company's Annual Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, on
Form 10-K, and all amendments thereto, which Report is to be
filed with the Securities and Exchange Commission on or before
February 1, 2000.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this ninth day of December, 1999.
/s/ Bruce B. Brundage
---------------------
Bruce B. Brundage
Director
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
This ninth day of December, 1999, before me came Bruce
B. Brundage, known to me to be the individual described herein,
and executed the foregoing Power of Attorney, and acknowledged
that he executed the same.
My commission expires 8/25/2002.
WITNESS my hand and official seal.
/s/ Toni Schreivogel
--------------------
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, Charles R. Frederickson, a Director of
VICORP Restaurants, Inc. (the "Company"), a Colorado corporation,
does hereby constitute and appoint Joseph F. Trungale with full
power of substitution, as the undersigned's attorney-in-fact with
authority to execute on behalf of the undersigned, in the
undersigned's capacity as a Director of the Company, the
Company's Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, on Form 10-K, and all amendments
thereto, which Report is to be filed with the Securities and
Exchange Commission on or before February 1, 2000.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this ninth day of December, 1999.
/s/ Charles R. Frederickson
---------------------------
Charles R. Frederickson
Director
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
This ninth day of December, 1999, before me came
Charles R. Frederickson, known to me to be the individual
described herein, and executed the foregoing Power of Attorney,
and acknowledged that he executed the same.
My commission expires 8/25/2002.
WITNESS my hand and official seal.
/s/ Toni Schreivogel
--------------------
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, John C. Hoyt, a Director of VICORP
Restaurants, Inc. (the "Company"), a Colorado corporation, does
hereby constitute and appoint Charles R. Frederickson or Joseph
F. Trungale with full power of substitution, as the undersigned's
attorney-in-fact with authority to execute on behalf of the
undersigned, in the undersigned's capacity as a Director of the
Company, the Company's Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, on Form 10-K, and
all amendments thereto, which Report is to be filed with the
Securities and Exchange Commission on or before February 1, 2000.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this ninth day of December, 1999.
/s/ John C. Hoyt
-----------------
John C. Hoyt
Director
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
This ninth day of December, 1999, before me came John
C. Hoyt, known to me to be the individual described herein, and
executed the foregoing Power of Attorney, and acknowledged that
he executed the same.
My commission expires 8/25/2002.
WITNESS my hand and official seal.
/s/ Toni Schreivogel
--------------------
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, Robert T. Marto, a Director of VICORP
Restaurants, Inc. (the "Company"), a Colorado corporation, does
hereby constitute and appoint Charles R. Frederickson or Joseph
F. Trungale with full power of substitution, as the undersigned's
attorney-in-fact with authority to execute on behalf of the
undersigned, in the undersigned's capacity as a Director of the
Company, the Company's Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, on Form 10-K, and
all amendments thereto, which Report is to be filed with the
Securities and Exchange Commission on or before February 1, 2000.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this ninth day of December, 1999.
/s/ Robert T. Marto
-------------------
Robert T. Marto
Director
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
This ninth day of December, 1999, before me came Robert
T. Marto, known to me to be the individual described herein, and
executed the foregoing Power of Attorney, and acknowledged that
he executed the same.
My commission expires 8/25/2002.
WITNESS my hand and official seal.
/s/ Toni Schreivogel
--------------------
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, Dudley C. Mecum, a Director of VICORP
Restaurants, Inc. (the "Company"), a Colorado corporation, does
hereby constitute and appoint Charles R. Frederickson or Joseph
F. Trungale with full power of substitution, as the undersigned's
attorney-in-fact with authority to execute on behalf of the
undersigned, in the undersigned's capacity as a Director of the
Company, the Company's Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, on Form 10-K, and
all amendments thereto, which Report is to be filed with the
Securities and Exchange Commission on or before February 1, 2000.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this ninth day of December, 1999.
/s/ Dudley C. Mecum
-------------------
Dudley C. Mecum
Director
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
This ninth day of December, 1999, before me came Dudley
C. Mecum, known to me to be the individual described herein, and
executed the foregoing Power of Attorney, and acknowledged that
he executed the same.
My commission expires 8/25/2002.
WITNESS my hand and official seal.
/s/ Toni Schreivogel
--------------------
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, Dennis B. Robertson, a Director of
VICORP Restaurants, Inc. (the "Company"), a Colorado corporation,
does hereby constitute and appoint Charles R. Frederickson or
Joseph F. Trungale with full power of substitution, as the
undersigned's attorney-in-fact with authority to execute on
behalf of the undersigned, in the undersigned's capacity as a
Director of the Company, the Company's Annual Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, on
Form 10-K, and all amendments thereto, which Report is to be
filed with the Securities and Exchange Commission on or before
February 1, 2000.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this ninth day of December, 1999.
/s/ Dennis B. Robertson
-----------------------
Dennis B. Robertson
Director
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
This ninth day of December, 1999, before me came Dennis
B. Robertson, known to me to be the individual described herein,
and executed the foregoing Power of Attorney, and acknowledged
that he executed the same.
My commission expires 8/25/2002.
WITNESS my hand and official seal.
/s/ Toni Schreivogel
--------------------
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, Joseph F. Trungale, a Director of
VICORP Restaurants, Inc. (the "Company"), a Colorado corporation,
does hereby constitute and appoint Charles R. Frederickson with
full power of substitution, as the undersigned's attorney-in-fact
with authority to execute on behalf of the undersigned, in the
undersigned's capacity as a Director of the Company, the
Company's Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, on Form 10-K, and all amendments
thereto, which Report is to be filed with the Securities and
Exchange Commission on or before February 1, 2000.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this ninth day of December, 1999.
/s/ Joseph F. Trungale
----------------------
Joseph F. Trungale
Director
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
This ninth day of December, 1999, before me came Joseph
F. Trungale, known to me to be the individual described herein,
and executed the foregoing Power of Attorney, and acknowledged
that he executed the same.
My commission expires 8/25/2002.
WITNESS my hand and official seal.
/s/ Toni Schreivogel
--------------------
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, Hunter Yager, a Director of VICORP
Restaurants, Inc. (the "Company"), a Colorado corporation, does
hereby constitute and appoint Charles R. Frederickson or Joseph
F. Trungale with full power of substitution, as the undersigned's
attorney-in-fact with authority to execute on behalf of the
undersigned, in the undersigned's capacity as a Director of the
Company, the Company's Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, on Form 10-K, and
all amendments thereto, which Report is to be filed with the
Securities and Exchange Commission on or before February 1, 2000.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this ninth day of December, 1999.
/s/ Hunter Yager
----------------
Hunter Yager
Director
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
This ninth day of December, 1999, before me came Hunter
Yager, known to me to be the individual described herein, and
executed the foregoing Power of Attorney, and acknowledged that
he executed the same.
My commission expires 8/25/2002.
WITNESS my hand and official seal.
/s/ Toni Schreivogel
--------------------
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, Arthur Zankel, a Director of VICORP
Restaurants, Inc. (the "Company"), a Colorado corporation, does
hereby constitute and appoint Charles R. Frederickson or Joseph
F. Trungale with full power of substitution, as the undersigned's
attorney-in-fact with authority to execute on behalf of the
undersigned, in the undersigned's capacity as a Director of the
Company, the Company's Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, on Form 10-K, and
all amendments thereto, which Report is to be filed with the
Securities and Exchange Commission on or before February 1, 2000.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this 18th day of January, 2000.
/s/ Arthur Zankel
-----------------
Arthur Zankel
Director
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
This 18th day of January, 2000, before me came Arthur
Zankel, known to me to be the individual described herein, and
executed the foregoing Power of Attorney, and acknowledged that
he executed the same.
My commission expires May 13, 2001.
WITNESS my hand and official seal.
/s/ Neal K. Stearns
-------------------
Notary Public
{SEAL}
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VICORP
RESTAURANTS, INC. BANANCE SHEETS AND STATEMENTS OF OPERATIONS AS OF OCTOBER 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> OCT-31-1999
<CASH> 33,187
<SECURITIES> 0
<RECEIVABLES> 5,801
<ALLOWANCES> 0
<INVENTORY> 9,989
<CURRENT-ASSETS> 57,289
<PP&E> 291,198
<DEPRECIATION> 162,445
<TOTAL-ASSETS> 228,271
<CURRENT-LIABILITIES> 47,034
<BONDS> 4,588
0
0
<COMMON> 444
<OTHER-SE> 151,403
<TOTAL-LIABILITY-AND-EQUITY> 228,271
<SALES> 355,781
<TOTAL-REVENUES> 359,046
<CGS> 106,991
<TOTAL-COSTS> 106,991
<OTHER-EXPENSES> 204,186
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,012
<INCOME-PRETAX> 18,541
<INCOME-TAX> 1,214
<INCOME-CONTINUING> 17,327
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,327
<EPS-BASIC> 1.94
<EPS-DILUTED> 1.93
</TABLE>
