<PAGE> 1
CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission file number 1-9214
---------
Perkins Family Restaurants, L.P.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
Delaware 62-1283091
- -------------------------------------------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
6075 Poplar Avenue, Suite 800, Memphis, Tennessee 38119-4709
- -------------------------------------------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(901) 766-6400
- --------------------------------------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by 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 [ ]
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PERKINS FAMILY RESTAURANTS, L.P.
STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except Per Unit Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- --------------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Food sales $ 61,555 $ 55,248 $ 171,116 $ 152,581
Franchise revenues 4,779 4,444 12,974 12,261
--------- --------- --------- ---------
Total Revenues 66,334 59,692 184,090 164,842
--------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of Sales:
Food cost 17,670 15,469 49,495 42,369
Labor and benefits 21,092 18,837 59,413 52,751
Operating expenses 12,589 11,292 35,350 31,775
General and administrative 5,516 5,618 16,586 16,167
Depreciation and amortization 3,682 3,054 10,575 8,929
Interest, net 1,267 868 3,541 2,363
Provision for litigation costs -- 580 (190) 580
Loss on/provision for disposition of assets 498 -- 518 800
Other, net (180) (186) (510) (572)
--------- --------- --------- ---------
Total Costs and Expenses 62,134 55,532 174,778 155,162
--------- --------- --------- ---------
NET INCOME $ 4,200 $ 4,160 $ 9,312 $ 9,680
========= ========= ========= =========
WEIGHTED AVERAGE UNITS OUTSTANDING 10,267 10,278 10,267 10,278
NET INCOME PER UNIT $ 0.40 $ 0.40 $ 0.90 $ 0.93
CASH DISTRIBUTION DECLARED PER UNIT $ 0.325 $ 0.325 $ 0.975 $ 0.975
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
PERKINS FAMILY RESTAURANTS, L.P.
BALANCE SHEETS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,472 $ 1,593
Receivables, less allowance for
doubtful accounts of $553 and $355 7,633 7,468
Inventories, at the lower of first-
in, first-out cost or market 4,106 4,079
Prepaid expenses and other current assets 1,834 1,659
-------- --------
Total current assets 15,045 14,799
-------- --------
PROPERTY AND EQUIPMENT, at cost, net of
accumulated depreciation and amortization 114,782 105,404
NOTES RECEIVABLE, less allowance for
doubtful accounts of $15 and $25 2,689 2,916
INTANGIBLE AND OTHER ASSETS, net of
accumulated amortization of $25,561
and $24,693 26,120 27,288
-------- --------
$158,636 $150,407
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
<PAGE> 4
PERKINS FAMILY RESTAURANTS, L.P.
BALANCE SHEETS
(Unaudited)
(In Thousands, Except Unit Amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,550 $ 3,425
Current maturities of capital lease obligations 2,017 2,006
Accounts payable 8,112 7,866
Accrued expenses 13,035 13,810
Distributions payable 3,479 3,440
--------- ---------
Total current liabilities 30,193 30,547
--------- ---------
CAPITAL LEASE OBLIGATIONS, less
current maturities 9,292 10,862
LONG-TERM DEBT, less current maturities 50,750 39,875
OTHER LIABILITIES 4,383 4,345
PARTNERS' CAPITAL:
General partner 640 648
Limited partners (10,491,320 and 10,379,125 Units
issued and outstanding) 66,482 66,090
Deferred compensation related to restricted units (3,104) (1,960)
--------- ---------
Total partners' capital 64,018 64,778
--------- ---------
$ 158,636 $ 150,407
========= =========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
<PAGE> 5
PERKINS FAMILY RESTAURANTS, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ ------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 4,200 $ 4,160 $ 9,312 $ 9,680
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,682 3,054 10,575 8,929
Loss on/provision for disposition of assets 498 -- 518 800
Other noncash income and expense items 322 939 1,023 1,744
Changes in other operating assets and liabilities (205) 1,397 (1,158) (2,585)
-------- -------- -------- --------
Total adjustments 4,297 5,390 10,958 8,888
-------- -------- -------- --------
Net cash provided by operating activities 8,497 9,550 20,270 18,568
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for property and equipment (4,644) (7,917) (20,943) (19,643)
Proceeds from sales of property and equipment 739 389 854 389
Other investing activities, net 231 160 555 527
-------- -------- -------- --------
Net cash used in investing activities (3,674) (7,368) (19,534) 18,727)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from long-term debt 7,800 3,000 30,200 25,501
Payments on long-term debt (7,175) (1,400) (19,200) (15,001)
Principal payments under capital lease obligations (498) (682) (1,466) (1,885)
Distributions to partners (3,478) (3,445) (10,391) (10,332)
Other financing activities -- -- -- (125)
-------- -------- -------- --------
Net cash used in financing activities (3,351) (2,527) (857) (1,842)
-------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents 1,472 (345) (121) (2,001)
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS:
Balance, beginning of period -- 1,839 1,593 3,495
-------- -------- -------- --------
Balance, end of period $ 1,472 $ 1,494 $ 1,472 $ 1,494
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
PERKINS FAMILY RESTAURANTS, L.P.
NOTES TO FINANCIAL STATEMENTS
Basis of Presentation
The accompanying unaudited financial statements of Perkins Family Restaurants,
L.P. (the "Partnership") have been prepared in accordance with the instructions
to Form 10-Q and therefore do not include all information and notes necessary
for complete financial statements in conformity with generally accepted
accounting principles. The results for the periods indicated are unaudited but
reflect all adjustments (consisting only of normal recurring adjustments) which
management considers necessary for a fair presentation of the operating
results. Results of operations for the interim periods are not necessarily
indicative of a full year of operations. The notes to the financial statements
contained in the 1994 Annual Report to Unitholders should be read in
conjunction with these statements.
Total revenues and food cost for 1994 have been restated to conform to the
current year presentation, which reflects the elimination of Foxtail Foods'
("Foxtail") sales to Partnership-operated restaurants through third-party
distributors. Previously, these intercompany sales were not significant to the
Partnership's financial statements taken as a whole. Foxtail is the
Partnership's manufacturing operation.
The Partnership is managed by Perkins Management Company, Inc. ("PMC"). PMC is
also the general partner of Perkins Restaurants Operating Company, L.P.
("PROC"), the entity through which the operations of the Partnership are
conducted. As general partner of the Partnership and PROC, PMC does not receive
any compensation other than amounts attributable to its 1% general partner's
interest in each of the Partnership and PROC. The Partnership reimburses PMC
for all of its direct and indirect costs (principally general and
administrative costs) allocable to the Partnership.
Net Income Per Unit
Net Income Per Unit is computed as follows (in thousands, except per unit
amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ ------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income as reported $ 4,200 $ 4,160 $ 9,312 $ 9,680
Less: 1% general partner's interest (42) (42) (93) (97)
-------- -------- -------- --------
Net income applicable to units $ 4,158 $ 4,118 $ 9,219 $ 9,583
======== ======== ======== ========
Weighted average units outstanding 10,267 10,278 10,267 10,278
Net income per unit $ 0.40 $ .40 $ .90 $ .93
</TABLE>
6
<PAGE> 7
Weighted Average Units Outstanding
Weighted average units outstanding are computed as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------- -------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Weighted average units 10,265 10,263 10,265 10,263
Weighted average equivalent units 2 15 2 15
------ ------ ------ ------
Weighted average units outstanding 10,267 10,278 10,267 10,278
====== ====== ====== ======
</TABLE>
Contingencies
In 1994, the Partnership recorded a provision of $1,079,000 for damages
associated with two separate lawsuits brought against the Partnership. During
the second quarter of 1995, the Partnership reached a settlement agreement
relating to one of the suits for $190,000 less than the original provision. The
reversal of the excess accrual was recorded in the second quarter. The second
suit was settled in October 1995 for the amount originally accrued. The
Partnership is also a party to various other legal proceedings in the ordinary
course of business. Management does not believe it is likely that these
proceedings, either individually or in the aggregate, will have a materially
adverse effect on the Partnership's financial position or results of
operations.
The Partnership has sponsored financing programs offered by certain lending
institutions to help its franchisees procure funds for the construction of new
franchised restaurants and to purchase and install the Perkins in-store bakery.
The Partnership provides a limited guaranty of the funds borrowed. At September
30, 1995, there were approximately $1,344,000 in borrowings outstanding under
these programs. The Partnership has guaranteed $1,050,000 of these borrowings
which represents its minimum commitments. The Partnership does not anticipate
its guaranties will exceed these minimums in the future.
The Partnership has entered into a separate agreement with one of the lending
institutions to assist a franchisee in obtaining lease financing to install
in-store bakeries in 28 existing restaurants operated by the franchisee.
Pursuant to the agreement, the Partnership will provide a declining limited
guaranty to the lender for payment of the franchisee's obligations between the
lender and the franchisee, not to exceed $1,350,000. The Partnership's current
maximum liability if the maximum lease commitment is funded would be $945,000.
At September 30, 1995, there were approximately $300,000 in borrowings
outstanding under the program, of which the Partnership has guaranteed
approximately $210,000.
7
<PAGE> 8
Supplemental Cash Flow Information
The increase or decrease in cash and cash equivalents due to changes in
operating assets and liabilities for the three and nine months ended September
30, consisted of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
(Increase) Decrease in:
Receivables $(1,104) $ (332) $ (439) $(1,278)
Inventories 223 (375) (27) (551)
Prepaid expenses and
other current assets (207) (165) (969) (775)
Other assets 24 193 274 (50)
Increase (Decrease) in:
Accounts payable (785) 65 246 (409)
Accrued expenses 1,157 1,701 (677) 296
Other liabilities 487 310 434 182
------- ------- ------- -------
$ (205) $ 1,397 $(1,158) $(2,585)
======= ======= ======= =======
</TABLE>
The Partnership paid interest of $1,468,000 and $878,000 during the third
quarters of 1995 and 1994, respectively, and $3,544,000 and $2,635,000 for the
nine months ended September 30, 1995 and 1994, respectively.
The capital lease obligations of two properties targeted in the fourth quarter
of 1993 for disposition were terminated during the second and third quarters of
1994 in accordance with the related lease buyout agreements. The payments
required by the agreements are included in principal payments under capital
lease obligations in the Statements of Cash Flows. Losses on these terminations
were charged to the reserve established in the fourth quarter of 1993
specifically for this purpose.
8
<PAGE> 9
Federal Income Taxation
In 1987, tax legislation was enacted which will have the effect of taxing
publicly traded limited partnerships, such as the Partnership, as corporations
for tax years beginning after 1997.
In 1993, the Partnership recognized the cumulative effect of adopting Statement
of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes." SFAS 109 requires the Partnership to recognize deferred tax assets and
liabilities for the expected future tax consequences of existing temporary
differences between the carrying amounts and the tax bases of assets and
liabilities that are projected to reverse after January 1, 1998, the date after
which the Partnership will become a taxable entity.
As of September 30, 1995 and December 31, 1994, the Partnership had deferred
tax assets related to existing temporary differences that are projected to
reverse after January 1, 1998. However, management believes that a conclusion
as to the realizability of certain of those assets based upon current
circumstances is highly subjective, and has therefore established valuation
allowances as appropriate. Accordingly, no deferred provision for income taxes
has been reflected in the accompanying financial statements.
The components of the Partnership's net deferred tax assets were as follows (in
thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Depreciation $(1,620) $(1,150)
Capitalized leases 1,240 1,240
Reserve, store dispositions 260 700
Other, net 220 290
------- -------
Total deferred tax assets 100 1,080
Valuation allowance (100) (1,080)
------- -------
Net deferred tax assets $ -- $ --
======= =======
</TABLE>
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THIRD QUARTER AND NINE MONTHS ENDED
SEPTEMBER 30, 1995
RESULTS OF OPERATIONS
Overview:
A summary of the Partnership's results for the third quarter and nine months
ended September 30 are presented in the following table. All revenues, costs
and expenses are expressed as a percentage of total revenues.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- --------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Food sales 92.8% 92.6% 93.0% 92.6%
Franchise revenues 7.2 7.4 7.0 7.4
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
----- ----- ----- -----
Costs and expenses:
Cost of sales:
Food cost 26.6 25.9 26.9 25.7
Labor and benefits 31.8 31.6 32.3 32.0
Operating expenses 19.0 18.9 19.2 19.3
General and administrative 8.3 9.4 9.0 9.8
Depreciation and amortization 5.6 5.1 5.7 5.4
Interest, net 1.9 1.5 1.9 1.4
Provision for litigation costs 0.0 1.0 (0.1) 0.4
Loss on/provision for disposition
of assets 0.8 0.0 0.3 0.5
Other, net (0.3) (0.4) (0.3) (0.4)
----- ----- ----- -----
Total costs and expenses 93.7 93.0 94.9 94.1
----- ----- ----- -----
Net income 6.3% 7.0% 5.1% 5.9%
===== ===== ===== =====
</TABLE>
Net income for the third quarter of 1995 was $4,200,000 or $.40 per limited
partnership unit versus $4,160,000 or $.40 per unit for the same period in
1994. For the nine months ended September 30, 1995, net income was $9,312,000
or $.90 per unit compared to $9,680,000 or $.93 per unit in the prior year.
10
<PAGE> 11
Revenues:
Total revenues for the third quarter and first nine months of 1995 increased
approximately 11% and 12% over the same periods last year due primarily to
higher restaurant food sales and continued growth of sales at Foxtail.
The addition of 13 new Partnership-operated restaurants since September 30,
1994 contributed $4,600,000 and $11,830,000 to the increases in restaurant food
sales over the three and nine months ended September 30, 1994. These increases
were partially offset by decreases of approximately $661,000 and $2,401,000
attributable to five restaurants which have been closed since June 30, 1994.
Same store comparable sales increased 1.3% and 1.0% over the third quarter and
first nine months of 1994 due primarily to selective menu price increases and
guest trends toward higher-priced entrees, partially offset by a decline in
comparable guest visits and increased discounting.
Revenues from Foxtail increased approximately 10% and 16% over the three and
nine months ended September 30, 1994 and constituted approximately 8% of the
Partnership's revenues. Sales to partnership-operated restaurants are
eliminated in the accompanying income statements. The increase in Foxtail
revenues can be primarily attributed to increased production at the division's
pie plant as well as the popularity of in-store bakeries at franchised stores,
to which Foxtail sells mixes, doughs, and pies. Foxtail offers cookie doughs,
muffin batters, pancake mixes, pies and other food products to
Partnership-operated and franchised restaurants through food service
distributors in order to ensure consistency and availability of Perkins'
proprietary products to each unit in the system. Additionally, Foxtail
manufactures certain proprietary and non-proprietary products for sale to
non-system operations.
Franchise revenues, which consist primarily of franchise royalties and sales
fees, increased 7.5% over the third quarter and 5.8% over the first nine months
of 1994. These increases are due primarily to fifteen new franchise restaurants
that have opened since September 30, 1994, partially offset by seven franchised
units that have closed.
Costs and expenses:
Food cost:
In terms of total revenues, food cost for the three and nine months ended
September 30, 1995 increased .7 and 1.2 percentage points, respectively, over
the same periods in 1994. Partnership-operated restaurants' food cost for the
third quarter and first nine months provided the majority of the increases, .8
and 1.0 percentage points, respectively. These increases are due primarily to
the higher cost of certain commodities, particularly coffee and fresh produce,
as well as selected product upgrades made in the past year. Further, the
addition of new Partnership-operated restaurants contributed to the increase in
food cost as new restaurants typically generate higher food cost percentages
due to sales in these restaurants generally being weighted more heavily toward
higher percentage cost dinner items. For the nine months ended September 30,
1995, marketing promotions, which contribute to the increase in food cost
percentages by reducing net revenues generated, were heavily concentrated on
certain entrees that carry higher food cost percentages. Selective menu price
increases partially offset the increases in food cost.
11
<PAGE> 12
The Partnership continues to closely monitor food costs, and third quarter food
costs were closer to comparable 1994 figures than were second quarter costs.
Additionally, the Partnership has contracted for a significant decrease in
coffee prices which should be reflected in fourth quarter results.
Foxtail, functioning as a manufacturing operation, typically has higher food
cost as a percent of revenue than the Partnership's restaurants. Although the
restaurants provide the majority of the Partnership's revenue, as Foxtail
becomes a more significant source of revenues to the Partnership, management
expects total food cost to increase as a percent of revenue.
Labor and benefits:
Labor and benefits expense, as a percentage of total revenues, increased .2 and
.3 percentage points for the three and nine months ended September 30, 1995 due
primarily to higher hourly labor costs in the Partnership's restaurants. The
addition of new Partnership-operated stores, which typically have higher labor
percentages than more established restaurants, and higher average wage rates,
due to continued low unemployment and increased competition for employees,
contributed to the increase. These increases were partially offset by the
Partnership's success at controlling the cost of providing benefits to
restaurant employees.
Labor and benefits expense for Foxtail, in terms of total Foxtail revenues,
increased over the first nine months of 1994 due primarily to temporary
personnel costs incurred to support increased production and the higher cost of
workers' compensation insurance. Third quarter labor and benefit costs for
Foxtail were flat compared to third quarter 1994. As a percent of revenue
generated, Foxtail labor and benefit charges are significantly lower than other
Partnership operations. As Foxtail becomes a more significant component of the
Partnership's total operations, labor and benefits expense, expressed as a
percent of total revenues, should decrease.
Operating expenses:
Operating expenses for the third quarter and first nine months of 1995
increased .1 and decreased .1 percentage points of total revenues,
respectively, from the same periods in 1994. Results for both periods reflect
higher restaurant operating expenses related primarily to the increased cost of
paper supplies and increased preopening expense amortization for new
Partnership-operated restaurants. Franchised restaurant opening expenses also
increased due to the additional number of franchised stores opened during the
quarter and the first nine months of 1995 compared to the prior year.
These increases were partially offset by decreases in utilities and occupancy
expenses as a percent of total revenues in both the restaurants and Foxtail.
Additionally, year to date increases were offset by decreases in preopening
amortization at Foxtail in the first two quarters of the year.
General and administrative:
General and administrative expenses, in terms of total revenues, decreased 1.1
and .8 percentage points from the three and nine months ended September 30,
1994, respectively, due to a reduction in incentive costs and a concerted
effort by management to control expenses. Additionally, administrative expenses
have decreased as a percent of revenue from the prior year as administrative
staff has remained relatively constant, with revenues continuing to grow.
12
<PAGE> 13
Depreciation and amortization:
Depreciation and amortization for the three and nine months ended September 30,
1995, increased approximately 20% and 18% over the same periods last year due
primarily to the addition of 13 new Partnership-operated restaurants as well as
refurbishments made to upgrade existing restaurants.
Interest:
Borrowings used for unit expansion and restaurant upgrades caused interest
expense for the third quarter and first nine months of 1995 to exceed 1994
levels by approximately 50%. This increase in interest expense was partially
offset by a decrease in interest expense associated with capital lease
obligations.
Other:
The Partnership recorded a loss of $498,000 in the third quarter of 1995
associated with the disposition of an underperforming property and the
write-off of predevelopment costs for selected new restaurant locations that
were estimated to provide less than acceptable returns. Net income for the nine
months ended in 1994 included an $800,000 provision related to the disposition
of underperforming properties that were originally targeted for disposition in
1993. As of September 30, 1995, the Partnership had disposed of nine of the
eleven properties included in the original reserve through lease-buyout and
sublease agreements.
Net income for the quarter and nine months ended in 1994 included a provision
of $580,000 associated with a lawsuit brought by a former employee. This suit
was settled in the quarter ended June 30, 1995, for $190,000 less than the
original provision.
13
<PAGE> 14
CAPITAL RESOURCES AND LIQUIDITY
Principal uses of cash during the third quarter and first nine months ended
September 30, 1995 were capital expenditures and distributions paid to
unitholders. Capital expenditures consisted primarily of land, building and
equipment purchases for new Partnership-operated units and remodels to existing
restaurants. Remodels and unit upgrades constituted slightly more than 50% of
the capital expenditures during the third quarter. The Partnership's primary
sources of funding were cash provided by operations and borrowings under its
credit facilities.
During the second quarter of 1994, the Partnership refinanced the outstanding
borrowings under its existing line of credit by entering into a $40,000,000
revolving line of credit facility and a $10,000,000 term loan agreement with
three banks. The revolving line of credit contains a $6,000,000 sublimit for
letters of credit and expires on June 30, 1997, at which time all amounts
outstanding become payable. As of September 30, 1995, $30,350,000 in borrowings
and approximately $3,200,000 in letters of credit were outstanding under the
line of credit facility. The borrowings under the term loan agreement are due
in quarterly installments through June 30, 1998. As of September 30, 1995,
$7,400,000 was outstanding under this agreement.
The Partnership has agreed in principle to issue $15,000,000 of Senior Notes to
an insurance company. The Partnership intends to use the proceeds from these
notes to repay $15,000,000 of borrowings that were outstanding under the Line
of Credit agreement at September 30, 1995. The agreement also provides for a
Private Shelf Facility for up to $20,000,000 of additional Senior Notes. The
Partnership expects to finalize the terms of the agreement by November 30,
1995.
As is typical in the restaurant industry, the Partnership ordinarily operates
with a working capital deficit. At September 30, 1995, this deficit amounted to
$15,148,000, which was primarily the result of utilizing available cash for
capital expenditures and distributions to unitholders. Operating with a working
capital deficit does not impair the Partnership's short-term liquidity as its
revenues are derived primarily from cash transactions.
14
<PAGE> 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Hebrab Development Co., a former landlord, sued Perkins in November 1990 in the
Court of Common Pleas, Medina County, Ohio for damages suffered from the loss
by fire of an underinsured building and was awarded a judgment of approximately
$257,000. The case was settled by agreement among the parties and dismissed
with prejudice in October 1995. See "Contingencies" under Notes to Financial
Statements.
In January 1994, Teresa Oliphant, a former employee, filed a lawsuit in the
U.S. District Court for the District of Kansas alleging sexual harassment and
related claims. After a trial, the court awarded the plaintiff a judgment for
compensatory and punitive damages and attorney's fees and expenses of
approximately $822,000. The case was settled by agreement among the parties
after entry of judgment and dismissed with prejudice in June 1995. See
"Contingencies" under Notes to Financial Statements.
Perkins is also a party to various other legal proceedings in the ordinary
course of business. Management does not believe it is likely that these
proceedings, either individually or in the aggregate, will have a materially
adverse effect on Perkins' financial position or results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Reference is made to the Index of Exhibits attached hereto as
page 16 and made a part herof.
(b) Reports on Form 8-K - None
Signature
Pursuant to the requirements 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.
PERKINS FAMILY RESTAURANTS, L.P.
BY: PERKINS MANAGEMENT COMPANY, INC.,
GENERAL PARTNER
DATE: November 15, 1995 BY: /s/ Michael P. Donahoe
----------------- -----------------------
Michael P. Donahoe
Vice President, Controller
(Chief Accounting Officer)
15
<PAGE> 16
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.1 Guaranty dated July 5, 1995 among Perkins Family
Restaurants, L.P., Perkins Restaurants Operating
Company, L.P. and BancBoston Leasing Inc.
27 Financial Data Schedule (for SEC use only).
</TABLE>
<PAGE> 1
EXHIBIT 10-1
GUARANTY
Dated as of July 5, 1995
among
Perkins Family Restaurants, L.P.,
Perkins Restaurants Operating Company, L.P.
and
BancBoston Leasing Inc.
14
<PAGE> 2
TABLE OF CONTENTS
<PAGE> 3
GUARANTY
GUARANTY, dated as of July 5, 1995 by Perkins Family Restaurants, L.P. and
Perkins Restaurants Operating Company, L.P., jointly and severally
(collectively, the "Guarantors") in favor of BancBoston Leasing Inc. ("BBL").
WHEREAS, the Guarantors have requested that BBL arrange and provide lease
financing for equipment to be installed in the Perkins Family Restaurants
listed on Exhibit A attached hereto by Perk Development Corporation, a
franchisee of the Guarantors (the "Franchisee"); and
WHEREAS, BBL has agreed to consider providing such financing to the Franchisee
pursuant to agreements, substantially in the form of the Master Lease Finance
Agreement and the related agreements, schedules and certificates attached
hereto as Exhibit B, which have been jointly approved by the Guarantors and
which approval has been certified as provided in Exhibit C attached hereto,
(collectively, the "Agreements" and individually, an "Agreement"), such
Agreements to be entered into during the period from the date hereof through
September 30, 1996 and in an aggregate amount not to exceed $1,350,000; and
WHEREAS, it is a condition precedent to BBL's providing any such financing to
the Franchisee, that the Guarantors jointly and severally guaranty payment by
the Franchisee of its obligations under the Agreements, on the terms and
conditions provided herein; and
WHEREAS, the Guarantors wish to guaranty the Franchisee's obligations to BBL as
provided herein;
NOW, THEREFORE, each of the Guarantors hereby agrees with BBL as follows:
Section Definitions.
The term "Obligations" shall mean all Daily Rent, Monthly Rent and all other
amounts payable under or in respect of any of the Agreements, including,
without limitation, all fees and expenses of BBL. All capitalized terms used
herein without definition shall have the respective meanings provided therefor
in the Agreements.
Section Guaranty of Payment and Performance.
The Guarantors hereby jointly and severally guarantee to BBL the full and
punctual payment when due (whether at stated maturity, by required pre-payment,
by acceleration or otherwise), of all of the Obligations including all such
which would become due but for the operation of the automatic stay pursuant to
Section 362(a) of the Federal Bankruptcy Code and the operation of Section
Section 502(b) and 506(b) of the Federal Bankruptcy Code. This Guaranty is an
absolute, unconditional and continuing guaranty of the full and punctual
payment of all of the Obligations and not of their collectibility only and is
in no way conditioned upon any requirement that BBL first attempt to collect
any of the Obligations from the Franchisee or any other guarantor of the
Obligations, or resort to any collateral security or other means of obtaining
payment, provided, however, that during any period of a Significant Continuing
Default (as defined below), upon request of the Guarantors (but without
limiting BBL's rights absent such request), BBL will use its usual efforts to
collect the Obligations subject to such Significant Continuing Default. Should
the Franchisee default in the payment or performance of any of the Obligations
and such default shall continue for 91 days, the joint and several obligations
of the Guarantors hereunder with respect to such Obligations in default shall
become immediately due and payable to BBL, upon demand. Payments by the
Guarantors hereunder may be required by BBL on any number of occasions.
Demands by BBL in respect of any defaulted Monthly Rent payments by the
Franchisee may be satisfied by the Guarantors hereunder by paying the amount of
Monthly Rent then in default; however, if the Guarantors have paid eight out of
any twelve consecutive Monthly Rent payments in respect of any Agreement (with
respect to such Agreement, a "Significant Continuing Default"), upon any
further Event of Default under such Agreement, the Guarantors shall, upon
demand for payment under this Guaranty, repay all Obligations under such
Agreement, provided, that the Guarantors may satisfy such obligations, at their
option, in either manner provided in Exhibit D attached hereto.
Section Guarantor's Agreement to Pay Enforcement Costs, Etc. The Guarantors
further agree, as the principal obligors and not as guarantors only, to pay to
BBL, on demand, all costs and expenses (including court costs and legal
expenses) incurred or expended by BBL in connection with this Guaranty and the
enforcement thereof, together with interest on amounts recoverable under this
Section 3 from the time when such amounts become due until payment, whether
before or after judgment, at the rate of interest for overdue amounts set forth
in the Agreements, provided that if such interest exceeds the maximum amount
permitted to be paid under applicable law, then such interest shall be reduced
to such maximum permitted amount.
Section Limitation of Liability.
<PAGE> 4
The Guarantors' joint and several obligations under Section 2 of this Guaranty
shall be limited, as of the time of any demand hereunder, to an amount equal to
the Applicable Percentage (as defined below) of the then outstanding aggregate
Obligations under all Agreements (the "Guarantors' Liability"). The
"Applicable Percentage" on any date of determination shall be the applicable
percentage set forth on Exhibit E attached hereto on such date. Each payment
under this Guaranty shall reduce the Guarantors' Liability by the amount of
such payment. In the event that, after one or more payments are made by a
Guarantor hereunder in respect of any Agreement, either Guarantor recovers all
or a portion of the amount paid from the Franchisee, from proceeds of the
underlying equipment or from payments made to or proceeds recovered by BBL,
whether by means of subrogation or otherwise, or by reassignment of the
applicable Agreement as provided in Exhibit D attached hereto, the amount
recovered (but not more than the amount paid under this Guaranty in respect of
the Franchisee's Agreement) shall be added to the then applicable Guarantors'
Liability, as if such payments under this Guaranty had not been made. The
Guarantors' obligations under Section 3 of this Guaranty shall be in addition
to the amounts specified in this Section 4.
Section Waivers by Guarantors; BBL's Freedom to Act.
Except as expressly provided in Section 2 hereof, ttthe Guarantors agree that
the Obligations will be paid strictly in accordance with their respective
terms, regardless of any law, regulation or order now or hereafter in effect in
any jurisdiction affecting any of such terms or the rights of BBL with respect
thereto. The Guarantors waive promptness, diligence, presentment, demand,
protest, notice of acceptance, notice of any Obligations incurred and (except
as expressly provided for herein) all other notices of any kind, all defenses
which may be available by virtue of any valuation, stay, moratorium law or
other similar law now or hereafter in effect, any right to require the
marshaling of assets of the Franchisee or any other entity or other person
primarily or secondarily liable with respect to any of the Obligations, and all
suretyship defenses generally. Without limiting the generality of the
foregoing, the Guarantors agree to the provisions of the Agreements evidencing,
securing or otherwise executed in connection with any Obligation and agree that
the obligations of the Guarantors hereunder shall not be released or
discharged, in whole or in part, or otherwise affected by (a) the failure of
BBL to assert any claim or demand or to enforce any right or remedy against the
Franchisee or any other entity or other person primarily or secondarily liable
with respect to any of the Obligations; (b) (except to the extent provided
below) any extensions, compromise, refinancing, consolidation or renewals of
any Obligation; (c) (except to the extent provided below) any change in the
time, place or manner of payment of any of the Obligations or any rescissions,
waivers, compromise, refinancing, consolidation, amendments or modifications of
any of the terms or provisions of the Agreements evidencing, securing or
otherwise executed in connection with any of the Obligations; (d) the addition
(but not release) of any entity or other person primarily or secondarily liable
for any Obligation; (e) except to the extent provided below, the adequacy of
any rights which BBL may have against any collateral security or other means of
obtaining repayment of any of the Obligations; (f) except to the extent
provided below, the impairment of any collateral securing any of the
Obligations, including without limitation the failure to perfect or preserve
any rights which BBL might have in such collateral security or the loss or
destruction of any such collateral security; or (g) any other act or omission
which might in any manner or to any extent vary the risk of the Guarantors or
otherwise operate as a release or discharge of the Guarantors all of which may
be done without notice to the Guarantors, provided, that BBL agrees to act in a
commercially reasonable manner and provided, further, that BBL will not,
without the consent of the Guarantors, which will not be unreasonably withheld,
agree with the Franchisee to (i) extend the time for payment of any Obligation,
(ii) increase the amount of any payment of Daily Rent or Monthly Rent or the
aggregate principal amount due under any Agreement, (iii) amend or modify in
any material way any other provision of any Agreement, if the effect of such
amendment or modification could be to increase the liability or exposure of the
Guarantors in respect of such Agreement, or (iv) release, settle or otherwise
compromise any claims against the Franchisee or any other guarantor of the
payment or performance of any Agreement, and BBL agrees that it will not
materially change any provisions in the forms of the Agreements attached hereto
as Exhibit B insofar as such forms relate to Obligations guaranteed hereunder,
without first notifying the Guarantors and affording the Guarantors an
opportunity to comment on any proposed changes. To the fullest extent
permitted by law, the Guarantors hereby expressly waive any and all rights or
defenses arising by reason of (A) any "one action" or "anti-deficiency" law
which would otherwise prevent BBL from bringing any action, including any claim
for a deficiency, or exercising any other right or remedy (including any right
of set-off), against the Guarantors before or after BBL's commencement or
completion of any foreclosure action, whether judicially, by exercise of
<PAGE> 5
power of sale or otherwise, or (B) any other law which in any other way would
otherwise require any election of remedies by BBL.
Section Unenforceability of Obligations Against Franchisee.
If for any reason the Franchisee has no legal existence or is under no legal
obligation to discharge any of the Obligations, or if any of the Obligations
have become irrecoverable from the Franchisee by reason of the Franchisee's
insolvency, bankruptcy or reorganization or by other operation of law or for
any other reason, this Guaranty shall nevertheless be binding on the Guarantors
to the same extent as if the Guarantors at all times had been the principal
obligors on all such Obligations. In the event that acceleration of the time
for payment of any of the Obligations is stayed upon the insolvency, bankruptcy
or reorganization of the Franchisee, or for any other reason, all such amounts
otherwise subject to acceleration under the terms of the Agreements evidencing,
securing or otherwise executed in connection with any Obligation shall be
immediately due and payable by the Guarantors upon demand. Upon payment in
full by the Guarantors of the Obligations in respect of any Agreement, the
related Agreement shall be assigned to the Guarantors as provided in Exhibit D
attached hereto.
Section Subrogation; Subordination.
Section Waiver of Rights Against Franchisee. SUBJECT TO THE EXCEPTIONS
CONTAINED IN SUBSECTION 7.3 HEREOF, until the final payment in full of all
Obligations of the Franchisee, the Guarantors shall not exercise any rights
against the Franchisee arising as a result of payment by a Guarantor
hereunder, by way of subrogation, reimbursement, restitution, contribution or
otherwise, and will not prove any claim in competition with BBL in respect of
any payment hereunder in any bankruptcy, insolvency or reorganization case or
proceedings of any nature; the Guarantors will not claim any setoff,
recoupment or counterclaim against the Franchisee in respect of any liability
of the Guarantors to the Franchisee; and the Guarantors waive any benefit of
and any right to participate in any collateral security which may be held by
BBL.
Section Subordination. SUBJECT TO THE EXCEPTIONS CONTAINED IN SUBSECTION 7.3
HEREOF, the payment of any amounts due with respect to any indebtedness of the
Franchisee now or hereafter owed to the Guarantors is hereby subordinated to
the prior payment in full of all of the Obligations of the Franchisee. The
Guarantors agree that, after the occurrence of any default in the payment of
any of the Obligations, neither of the Guarantors will demand, sue for or
otherwise attempt to collect any such indebtedness of the Franchisee to either
Guarantor until all of the Obligations of the Franchisee shall have been paid
in full. If, notwithstanding the foregoing sentence, either Guarantor shall
collect, enforce or receive any amounts in respect of such indebtedness, such
amounts shall be collected, enforced and received by the Guarantors as trustee
for BBL and be paid over to BBL on account of the Obligations without affecting
in any manner the liability of the Guarantors under the other provisions of
this Guaranty.
Section Exception. The provisions of subsections 7.1 and 7.2 hereof shall
not apply to any royalty, marketing fund or other advertising payments made
under any franchise or license agreement between the Franchisee and the
Guarantors (or any notes or other evidences of indebtedness given in payment
therefor) or payments for any products, materials, or supplies purchased from
the Guarantors by the Franchisee in the ordinary course of business.
Section Provisions Supplemental. The provisions of this Section 7 shall be
supplemental to and not in derogation of any rights and remedies of BBL or any
affiliate of BBL under any separate subordination agreement which BBL or such
affiliate may at any time and from time to time enter into with either
Guarantor.
Section Security; Setoff. The Guarantors grant to BBL, as security for the
full and punctual payment and performance of all of the Guarantors' obligations
hereunder, a continuing lien on and security interest in all securities or
other property belonging to each Guarantor now or hereafter held by BBL and its
affiliates and in all deposits (general or special, time or demand, provisional
or final) and other sums credited by or due from BBL or its affiliates to a
Guarantor or subject to withdrawal by a Guarantor. Regardless of the adequacy
of any collateral security or other means of obtaining payment of any of the
Obligations, BBL is hereby authorized at any time and from time to time,
without notice to either Guarantor (any such notice being expressly waived by
the Guarantors) and to the fullest extent permitted by
<PAGE> 6
law, to set off and apply such deposits and other sums against the obligations
of the Guarantors under this Guaranty, whether or not BBL shall have made any
demand under this Guaranty.
Section Further Assurances; Provision of Collateral. (A) The Guarantors
agree that they will from time to time, at the request of BBL, provide to BBL
the Guarantors' most recent audited and unaudited balance sheets and related
statements of income and cash flows (prepared on a consolidated basis with each
Guarantor's subsidiaries, if any) and such other information relating to the
business and affairs of the Guarantors as BBL may reasonably request. The
Guarantors agree to do all such things and execute all such documents as BBL
may reasonably consider necessary or desirable to give full effect to this
Guaranty and to perfect and preserve the rights and powers of BBL hereunder.
The Guarantors acknowledge and confirm that the Guarantors themselves have
established their own adequate means of obtaining from the Franchisee on a
continuing basis all information desired by the Guarantors concerning the
financial condition of the Franchisee and that the Guarantors will look to the
Franchisee and not to BBL in order for the Guarantors to keep adequately
informed of changes in the Franchisee's financial condition.
(b) In the event that an Event of Default caused by noncompliance with any
covenant contained in Section 9 of that certain Amended and Restated Revolving
Credit and Term Loan Agreement, dated as of June 29, 1994, among the
Guarantors, The First National Bank of Boston, The Bank of Tokyo, Ltd., First
American National Bank, such other lenders as may become parties thereto from
time to time, and The First National Bank of Boston, as agent, as such
agreement may be amended, supplemented, restated and in effect from time to
time, shall continue for a period of two consecutive fiscal quarters (a
"Collateral Event"), the Guarantors hereby agree to provide, immediately upon
demand by BBL made at any time after the occurrence of a Collateral Event, cash
or cash equivalents satisfactory to BBL in an amount at least equal to the
Guarantors' Liability from time to time in effect in pledge to secure the
Guarantors' obligations hereunder, pursuant to a cash collateral pledge
agreement in form and substance satisfactory to BBL. BBL shall be entitled to
retain such cash collateral until all obligations of the Guarantors hereunder
have been irrevocably paid in full in cash.
Section Termination; Reinstatement. Subject to Section 4 hereof, this
Guaranty shall remain in full force and effect until the Obligations have been
irrevocably paid in full in cash. This Guaranty shall continue to be effective
or be reinstated, if at any time any payment made or value received with
respect to any Obligation is rescinded or must otherwise be returned by BBL
upon the insolvency, bankruptcy or reorganization of the Franchisee, or
otherwise, all as though such payment had not been made or value received.
Section Successors and Assigns. This Guaranty shall be binding upon BBL and
the Guarantors, their successors, transferees and assigns, and shall inure to
the benefit of and be enforceable by BBL and the Guarantors and their
successors, transferees and assigns. Without limiting the generality of the
foregoing sentence, BBL may, with the consent of the Guarantors, which shall
not be unreasonably withheld, assign or otherwise transfer any of the
Agreements or any other agreement or note held by it evidencing, securing or
otherwise executed in connection with the Obligations, or sell participations
in any interest therein, to any other entity or other person, and such other
entity or other person shall thereupon become vested, to the extent set forth
in the agreement evidencing such assignment, transfer or participation, with
all the rights in respect thereof granted to BBL herein.
Section Amendments and Waivers. No amendment or waiver of any provision of
this Guaranty nor consent to any departure by the Guarantors therefrom shall be
effective unless the same shall be in writing and signed by BBL. No failure on
the part of BBL to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right.
Section Notices. All notices and other communications called for hereunder
shall be made in writing and, unless otherwise specifically provided herein,
shall be deemed to have been duly made or given when delivered by hand or
mailed first class, postage prepaid, or, in the case of telegraphic or telexed
notice, when transmitted, answer back received, addressed as follows: if to a
Guarantor, at the address set forth beneath its signature hereto, and if to
BBL, at the address for notices to BBL set forth in the Agreement, or at such
address as either party may designate in writing to the other.
<PAGE> 7
Section Governing Law; Consent to Jurisdiction. THE GUARANTY IS INTENDED TO
TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. Each Guarantor
agrees that any suit for the enforcement of this Guaranty may be brought in the
courts of the Commonwealth of Massachusetts or any federal court sitting
therein and consents to the nonexclusive jurisdiction of such court and to
service of process in any such suit being made upon the Guarantors by mail at
the address specified by reference in Section 13 hereof. The Guarantors hereby
waive any objection that they may now or hereafter have to the venue of any
such suit or any such court or that such suit was brought in an inconvenient
court.
Section Waiver of Jury Trial. EACH OF THE GUARANTORS HEREBY WAIVES ITS RIGHT
TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law,
each of the Guarantors hereby waives any right which it may have to claim or
recover in any litigation referred to in the preceding sentence any special,
exemplary, punitive or consequential damages or any damages other than, or in
addition to, actual damages. The Guarantors (a) certify that neither BBL nor
any representative, agent or attorney of BBL has represented, expressly or
otherwise, that BBL would not, in the event of litigation, seek to enforce the
foregoing waivers and (b) acknowledge that, in entering into the Agreements and
the other documents to which BBL is a party, BBL is relying upon, among other
things, the waivers and certifications contained in this Section 15.
Section Miscellaneous. This Guaranty constitutes the entire agreement of the
Guarantors with respect to the matters set forth herein. The rights and
remedies herein provided are cumulative and not exclusive of any remedies
provided by law or any other agreement, and this Guaranty shall be in addition
to any other guaranty of or collateral security for any of the Obligations.
The invalidity or unenforceability of any one or more sections of this Guaranty
shall not affect the validity or enforceability of its remaining provisions.
Captions are for the ease of reference only and shall not affect the meaning of
the relevant provisions. The meanings of all defined terms used in this
Guaranty shall be equally applicable to the singular and plural forms of the
terms defined.
IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty to be
executed and delivered as of the date first above written.
PERKINS FAMILY RESTAURANTS, L.P.
By: Perkins Management
Company, Inc., its
general partner
By:
----------------------------------
Title:
PERKINS RESTAURANTS OPERATING
COMPANY, L.P.
By: Perkins Management
Company, Inc., its
general partner
By:
----------------------------------
Title:
<PAGE> 8
BANCBOSTON LEASING INC.
By:
----------------------------------
Title:
THE FIRST NATIONAL BANK OF
BOSTON
By:
----------------------------------
Title:
<PAGE> 9
EXHIBIT B
[Master Lease and related agreements.]
<PAGE> 10
EXHIBIT C
Form of
Certificate of Acceptance
The undersigned Perkins Family Restaurants, L.P. and Perkins
Restaurants Operating Company, L.P. (collectively, the "Guarantors") hereby
certify and agree with reference to the Guaranty (the "Guaranty"), dated
_______________, 1995 among the Guarantors and BancBoston Leasing Inc. ("BBL"),
as follows:
1. BBL has informed the Guarantors that Perk Development
Corporation (the "Franchisee"), a franchisee of the Guarantors'
restaurant business, has requested a lease (the "Lease") in an amount
not to exceed $__________ for a period of Forty-Eight (48) months,
covering equipment listed on Schedule 1 attached hereto (the
"Equipment"), to be used at the address(s) set forth on Schedule 1,
and that BBL is willing to enter into such lease of the Equipment
with Perk Development Corporation, subject to Guarantors' acceptance
of the Lease as an "Agreement" under the Guaranty.
2. The Guarantors hereby certify to and agree with BBL that the
Lease will constitute an "Agreement" as defined in and covered by the
Guaranty.
3. After giving effect to the Obligations under the above Lease,
the maximum aggregate Obligations presently covered by the Guaranty
do not exceed $____________ based on balances as of the most recent
month end.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of the _____ day of _________, 1995.
PERKINS FAMILY RESTAURANTS, L.P.
By:
-------------------------------------
Title:
PERKINS RESTAURANTS
OPERATING COMPANY, L.P.
By:
--------------------------------------
Title:
<PAGE> 11
EXHIBIT E
Except as provided below, the Applicable Percentage on any date of
determination shall be 100%.
The Applicable Percentage shall reduce to 70% or, if the Applicable
Percentage has already been reduced to 70% in accordance with the terms hereof,
40% or, if the Applicable Percentage has already been reduced to 40% in
accordance with the terms hereof 10% if, and only if:
(i) the Franchisee certifies in writing to BBL (a) that a
Guaranty Reduction Event (as defined below) has occurred, (b) the
amount of the net proceeds received by the Franchisee in cash in
connection with the occurrence of such Guaranty Reduction Event (the
"Actual Net Proceeds"), (c) if the amount of the Actual Net Proceeds
is not equal to or greater than 90% of the Target Net Proceeds (as
defined below) for such Guaranty Reduction Event, that a Make-Whole
Event (as defined below) has also occurred, and (d) that the
Franchisee has not defaulted in the payment or performance of any of
its Obligations; and
(ii) the Franchisee delivers to BBL and the Guarantors copies
of all such documents and instruments as BBL and the Guarantors may
reasonably request in order to confirm the occurrence of the Guaranty
Reduction Event and, if applicable, the Make-Whole Event and the
amount of the Actual Net Proceeds;
provided, that a Guaranty Reduction Event or a Make-Whole Event which is the
subject of the certificate delivered pursuant to the forgoing clause (i) may
only be certified by the Franchisee to BBL and the Guarantors on one occasion.
For purposes hereof, the following terms shall have the following meanings:
Guaranty Reduction Event - means any one of the following events
(which BBL and the Guarantors may agree to amend from time to time):
(a) the Franchisee has entered into a sale-leaseback transaction
for the ten Perkins Family Restaurants previously disclosed to BBL, on
terms and conditions satisfactory to BBL and the Guarantors in all
respects, and the amount of the net proceeds received by the
Franchisee in cash in connection with such sale-leaseback transaction
is equal to or in excess of $1,135,000; or
(b) the Franchisee sells its Elmridge Property on terms and
conditions which are satisfactory to BBL and the Guarantors in all
respects and the amount of the net proceeds received by the Franchisee
in cash in connection with such sale is equal to or in excess of
$1,484,714; or
(c) the Franchisee sells its Baytowne Property on terms and
conditions which are satisfactory to BBL and the Guarantors in all
respects and the net proceeds received by the Franchisee in cash in
connection with such sale is equal to or in excess of $731,000.
Make-Whole Event - means any one of the following events:
(a) the Franchisee shall have entered into a forbearance
arrangement with [Fleet Bank, N.A.] ("Fleet") with respect to the
principal amount of $660,000 owed to Fleet pursuant to that certain
[Plaza line of credit] and the Franchisee shall have entered into a
forbearance arrangement with [The Chase Manhattan Bank, N.A.]
("Chase") with respect to principal and interest in an aggregate
amount equal to $175,000 owed
<PAGE> 12
to Chase pursuant that certain [Plaza line of credit], and in each
case the forbearance arrangement shall be satisfactory to BBL and the
Guarantors in all respects; or
(b) the Franchisee sells its Gateway Property on terms and
conditions which are satisfactory to BBL and the Guarantors in all
respects and the amount of the net proceeds received by the Franchisee
in cash in connection with such sale is equal to or in excess of
($10,000); or
(c) the Franchisee sells its Winton Property on terms and
conditions which are satisfactory to BBL and the Guarantors in all
respects and the amount of the net proceeds received by the Franchisee
in cash in connection with such sale is equal to or in excess of
$296,450;
provided, that no Make-Whole Event shall be deemed to have occurred unless and
until the Make-Whole Event described in clause (a) of this definition has
occurred.
Target Net Proceeds - means, with respect to any Guaranty Reduction
Event, the minimum net proceeds required to be received by the
Franchisee in cash in connection with such Guaranty Reduction Event.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 1995 AND FROM THE STATEMENT OF
INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,472
<SECURITIES> 0
<RECEIVABLES> 10,322
<ALLOWANCES> 568
<INVENTORY> 4,106
<CURRENT-ASSETS> 15,045
<PP&E> 210,619
<DEPRECIATION> 95,837
<TOTAL-ASSETS> 158,636
<CURRENT-LIABILITIES> 30,193
<BONDS> 60,042
<COMMON> 0
0
0
<OTHER-SE> 64,018
<TOTAL-LIABILITY-AND-EQUITY> 158,636
<SALES> 171,116
<TOTAL-REVENUES> 184,090
<CGS> 49,495
<TOTAL-COSTS> 144,258
<OTHER-EXPENSES> 30,520
<LOSS-PROVISION> 149<F1>
<INTEREST-EXPENSE> 3,541
<INCOME-PRETAX> 9,312
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,312
<EPS-PRIMARY> 0.90
<EPS-DILUTED> 0.90
<FN>
<F1>The provision for doubtful accounts and notes is presented within operating
expenses in the accompanying financial statements and is included in total
costs above.
</FN>
</TABLE>
