<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: August 6, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from: [ ] to [ ]
Commission file number: 0-16368
Skyline Chili, Inc.
(Exact name of small business issuer as specified in its charter)
Ohio 31-0717287
------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4180 Thunderbird Lane, Fairfield, Ohio 45014
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(Address of principal executive offices) (Zip Code)
(513) 874-1188
------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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.
[X] YES [ ] NO
There were 3,345,040 shares of the issuer's no par value common stock
outstanding as of September 15, 1995.
Transitional Small Business Disclosure Format (check one):
[ ] YES [X] NO
<PAGE> 2
SKYLINE CHILI, INC.
INDEX
FORM 10-QSB
AUGUST 6, 1995
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets . . . . . . . 3
Consolidated Statements of Income . . . . 4
Consolidated Statements of Cash Flows . . 5
Notes to Condensed Consolidated
Financial Statements. . . . . . . . . . . 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on
Form 8-K . . . . . . . . . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 10
2
<PAGE> 3
Item 1 SKYLINE CHILI, INC.
-------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF AUGUST 6, 1995 & OCTOBER 30, 1994
----------------------------------------
<TABLE>
1995 1994
(UNAUDITED)
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $1,893,000 $2,709,000
ACCOUNTS RECEIVABLE 880,000 726,000
INVENTORIES 1,210,000 1,043,000
PREPAID EXPENSES 134,000 213,000
DEFERRED INCOME TAXES 198,000 198,000
----------- -----------
TOTAL CURRENT ASSETS 4,315,000 4,889,000
PROPERTY AND EQUIPMENT, AT COST:
LAND 888,000 698,000
BUILDINGS AND IMPROVEMENTS 11,006,000 10,556,000
EQUIPMENT AND FIXTURES 7,298,000 6,753,000
CONSTRUCTION IN PROGRESS 52,000
----------- -----------
19,192,000 18,059,000
LESS ACCUMULATED DEPRECIATION 6,299,000 5,183,000
----------- -----------
NET PROPERTY AND EQUIPMENT 12,893,000 12,876,000
INTANGIBLE ASSETS 734,000 1,391,000
ACCUMULATED AMORTIZATION 232,000 857,000
----------- -----------
502,000 534,000
OTHER ASSETS 142,000 124,000
----------- -----------
$17,852,000 $18,423,000
=========== ===========
1995 1994
(UNAUDITED)
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $1,131,000 $1,406,000
INCOME TAXES 1,000
ACCRUED LIABILITIES:
SALARIES AND WAGES 456,000 1,032,000
INTEREST 91,000 117,000
OTHER 423,000 398,000
----------- -----------
970,000 1,547,000
LONG-TERM DEBT DUE WITHIN ONE YEAR 355,000 340,000
----------- -----------
TOTAL CURRENT LIABILITIES 2,457,000 3,293,000
DEFERRED INCOME TAXES 387,000 387,000
LONG-TERM DEBT DUE AFTER ONE YEAR 6,190,000 6,459,000
SHAREHOLDERS' EQUITY:
COMMON STOCK, NO PAR VALUE;
5,400,000 SHARES AUTHORIZED;
3,345,000 SHARES ISSUED AND
OUTSTANDING 5,267,000 5,267,000
ADDITIONAL PAID-IN CAPITAL 19,000 19,000
RETAINED EARNINGS 3,532,000 2,998,000
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 8,818,000 8,284,000
----------- -----------
$17,852,000 $18,423,000
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES
3
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<TABLE>
SKYLINE CHILI, INC.
-----------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
-----------
TWELVE WEEKS ENDED FORTY WEEKS ENDED
------------------ ------------------
August 6, August 7, August 6, August 7,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
SALES:
COMMISSARY $2,288,000 $2,343,000 $7,800,000 $7,919,000
RESTAURANT 3,359,000 2,943,000 10,605,000 9,313,000
FRANCHISE FEES AND ROYALTIES 289,000 282,000 937,000 876,000
---------- ---------- ---------- ----------
5,936,000 5,568,000 19,342,000 18,108,000
COSTS AND EXPENSES:
COST OF SALES - COMMISSARY 1,676,000 1,796,000 5,700,000 6,111,000
RESTAURANT OPERATING COSTS:
COST OF FOOD AND PAPER PRODUCTS 917,000 831,000 2,954,000 2,682,000
PAYROLL COSTS 1,020,000 856,000 3,253,000 2,707,000
OCCUPANCY AND OTHER EXPENSES 738,000 660,000 2,429,000 2,128,000
SELLING, GENERAL AND ADMINISTRATIVE 1,154,000 1,092,000 3,803,000 3,695,000
---------- ---------- ---------- ----------
5,505,000 5,235,000 18,139,000 17,323,000
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 431,000 333,000 1,203,000 785,000
OTHER INCOME (EXPENSE):
INTEREST INCOME 25,000 25,000 73,000 71,000
INTEREST EXPENSE (131,000) (136,000) (437,000) (453,000)
OTHER INCOME (EXPENSE) (1,000) (6,000) (6,000)
---------- ---------- ---------- ----------
(106,000) (112,000) (370,000) (388,000)
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 325,000 221,000 833,000 397,000
PROVISION FOR INCOME TAXES 116,000 86,000 299,000 150,000
---------- ---------- ---------- ----------
NET INCOME $209,000 $135,000 $534,000 $247,000
========== ========== ========== ==========
EARNINGS PER COMMON SHARE AND
COMMON EQUIVALENT SHARE $0.06 $0.04 $0.16 $0.08
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON & COMMON
EQUIVALENT SHARES 3,439,000 3,394,000 3,419,000 3,387,000
========== ========== ========== ==========
SEE ACCOMPANYING NOTES
</TABLE>
4
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<TABLE>
SKYLINE CHILI, INC.
-------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
UNAUDITED
---------
FORTY WEEKS ENDED
-------------------------------------------
August 6, August 7,
1995 1994
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
NET INCOME $534,000 $247,000
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED (USED) BY OPERATING ACTIVITIES
DEPRECIATION AND AMORTIZATION 1,165,000 1,081,000
DECREASE (INCREASE) IN:
ACCOUNTS RECEIVABLE (154,000) 300,000
INVENTORIES (167,000) (442,000)
PREPAID EXPENSES 79,000 100,000
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE (275,000) 243,000
ACCRUED LIABILITIES (577,000) 30,000
OTHER - NET 17,000
----------- -----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 605,000 1,576,000
INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (1,149,000) (1,123,000)
PROCEEDS FROM SALE OF PROPERTY
AND EQUIPMENT 553,000
ADDITIONS TO INTANGIBLE ASSETS (18,000) (354,000)
----------- -----------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES ($1,167,000) ($924,000)
FORTY WEEKS ENDED
-------------------------------------------
August 6, August 7,
1995 1994
----------- -----------
FINANCING ACTIVITIES:
PAYMENTS OF LONG-TERM DEBT (254,000) (237,000)
----------- -----------
NET CASH USED BY
FINANCING ACTIVITIES (254,000) (237,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (816,000) 415,000
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,709,000 1,048,000
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $1,893,000 $1,463,000
=========== ===========
CASH PAID FOR:
INTEREST $390,000 $351,000
INCOME TAXES $222,000 $92,000
SEE ACCOMPANYING NOTES
</TABLE>
5
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SKYLINE CHILI, INC.
-------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
-----------
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been included.
Operating results for the twelve and forty week periods ended August 6, 1995
are not necessarily indicative of the results that may be expected for the year
ended October 29, 1995. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-KSB for the year ended October 30, 1994.
RECLASSIFICATIONS
Certain fiscal 1994 amounts have been reclassified to conform to the fiscal
1995 presentation.
Weighted average common and common equivalent shares outstanding have been
restated for the period ending August 7, 1994 to reflect the issuance of
232,000 shares of stock in the fourth quarter of fiscal 1994 in an acquisition
treated as a pooling of interests.
6
<PAGE> 7
SKYLINE CHILI, INC.
-------------------
Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of
----------------------------------
Operations
----------
Results of Operations
---------------------
Revenues
--------
Total revenues for the third quarter ended August 6, 1995 of $5.9 million and
fiscal year-to-date revenues of $19.3 million were 7% over the same periods
last year, thanks to higher revenue from Company-owned restaurants and
increased franchise fees and royalties which offset lower revenues from the
Company's commissary operations.
Commissary revenues for the fiscal 1995 third quarter and fiscal year-to-date
period were 2% below the same periods last year. Revenues from the sale of
chili and related food products to the franchised Skyline Chili restaurants
were below last year principally because the Company adjusts its prices for its
chili products based on the market price of beef which has been lower than last
year. Shipments of the Company's frozen grocery products for the first three
quarters increased 10% over the same period last year. However, increased
promotional discounts used to stimulate movement offset a portion of the
favorable sales impact.
Same-store sales for Company-owned restaurants for the third quarter and fiscal
year-to-date period were 7% over the same periods last year. A 2% menu price
increase, implemented in the fourth quarter last year, accounted for a portion
of that increase. The same-store increases, a full three quarter's sales from
locations opened last year, and one new unit opened this year in downtown
Columbus, Ohio accounted for the 14% increase in Company-owned restaurant
revenues for the first three quarters compared to the same period last year.
The newly opened Columbus unit brings the number of Company-owned restaurants
to 31, an increase of one unit over the end of fiscal 1994. The Company
franchised two new units in Cincinnati, Ohio in the first two quarters and
currently has 52 franchised units, an increase of two units compared to the end
of fiscal 1994.
Franchise fees and royalties increased 2% in the third quarter over the same
period last year due to increased shipments of chili to the franchisees, which
includes royalties as part of the selling price. Franchise fees and royalties
increased 7% for the first three quarters compared to the same period last year
principally due to the initial franchise fee from two new franchise locations
this year compared to one new franchised unit opened during the same period
last year.
Cost of Sales - Commissary
--------------------------
Cost of sales for the third quarter and fiscal year-to-date periods were 73% of
the corresponding revenue figures compared to 77% for the same periods last
year. A lower average beef price was the principal reason for the improved
cost of sales rate. The Company's cost of sales rate is heavily influenced by
beef prices which can fluctuate significantly.
7
<PAGE> 8
Restaurant Operating Expenses
-----------------------------
The cost of food and paper products were 27% and 28% of the corresponding
revenue figure for the third quarter and fiscal year-to-date period,
respectively, compared to 28% and 29% for the same periods last year, thanks to
lower average beef prices. Labor costs for the third quarter of 30% and for
the fiscal year-to-date period of 31% increased over a rate of 29% for the same
periods last year due to increases in hourly wage rates and increased
restaurant crew turnover as a result of a tightening labor market. Occupancy
and other expenses for the third quarter and fiscal year-to-date periods have
increased over the same periods last year due to a full three quarters of
operations of units opened last year and one new unit opened this year.
General and Administrative Expenses
-----------------------------------
General and administrative expenses were 6% higher for the third quarter
compared to last year and 3% higher than the prior year on a year-to-date basis
due to increased recruiting, training and selling expenses which were partially
offset by reductions in officer compensation.
Income from Operations
-----------------------
Income from operations for the fiscal 1995 third quarter was 29% over the third
quarter last year and 53% over the same period last year on a year-to-date
basis because of revenue increases and lower beef prices.
Other Income (Expense)
----------------------
Interest expense for the third quarter and fiscal year-to-date period was lower
than the same periods in the prior year because of lower debt levels resulting
from scheduled principal payments.
Liquidity and Capital Resources
-------------------------------
Cash levels dropped from their fiscal 1994 year end level by $816,000 because
of capital spending and decreased accounts payable and accrued liability levels
and an increase in accounts receivable from a promotion of the Company's frozen
products that extended to the end of the fiscal 1995 third quarter. Working
capital as of August 6, 1995 of $1,858,000 was approximately $262,000 over the
prior fiscal year end level.
During the first three quarters of fiscal year 1995, the Company spent $356,000
to finish construction of a new restaurant location in downtown Columbus. This
restaurant began operations in the second quarter. The Company purchased land
in the greater Cincinnati area for $187,000 to be used as a future restaurant
location. The Company spent $235,000 in the first three quarters of fiscal
1995 to remodel various Company-owned restaurant locations throughout the
system. All of these activities were funded by cash from operations. The
Company intends to spend approximately $605,000 for the purchase of land in the
greater Cincinnati area to be used for future restaurant development. Also,
the Company intends to spend $300,000 towards the construction of a new
free-standing restaurant in Columbus, Ohio that will be completed and begin
operations in fiscal 1996. The Company believes that cash provided by
operations and its $4 million unsecured bank line of credit will be adequate to
fund currently planned expansion and new equipment purchases.
The Company maintains a compensating balance of $400,000 with the bank that has
issued a letter of credit guaranteeing payment of the principal and related
interest on the City of Fairfield, Ohio Adjustable Rate Demand Industrial
Development Revenue Bonds issued in 1990 to fund in part the construction of
the Company's new commissary, warehouse and office facility. There are no
legal restrictions on the use of those compensating balance funds.
8
<PAGE> 9
SKYLINE CHILI, INC.
FORM 10-QSB
AUGUST 6, 1995
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
------
(a) Exhibits filed with this Report
Exhibit 10.1 - Employment Agreement dated 06/27/95
between the Company and Kevin R.
McDonnell, President and CEO.
Exhibit 10.2 - Employment Agreement dated 06/27/95
between the Company and Thomas L.
Allen, Corporate Vice President -
Marketing.
Exhibit 10.3 - Employment Agreement dated 06/27/95
between the Company and Victor L.
Peeples, Corporate Vice President -
Restaurant Operations.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None.
9
<PAGE> 10
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Skyline Chili, Inc.
-------------------
Registrant
by:/s/Kevin R. McDonnell
---------------------
Kevin R. McDonnell
President and Chief Executive
Officer (Duly Authorized
Officer)
by:/s/Jeffry W. Shelton
--------------------
Jeffry W. Shelton
Vice President and Chief
Financial Officer (Principal
Financial and Principal
Accounting Officer)
Date: September 20, 1995
10
<PAGE> 1
Exhibit 10.1
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made and entered into effective this 27th
day of June, 1995, between Skyline Chili, Inc., an Ohio
corporation (the "Company"), and Kevin R. McDonnell, an officer
of the Company (the "Employee").
WHEREAS, the Employee is an at-will employee of the Company;
and
WHEREAS, in order to provide the Employee with additional
incentive and motivation to contribute to the Company's future
growth and continued success, the Company has determined to
provide the Employee with severance benefits if the Employee's
employment is terminated under certain circumstances.
NOW, THEREFORE, in consideration of the mutual promises
contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
Company and the Employee agree as follows:
1. TERM. This Agreement shall be effective as of the date
hereof and shall terminate on June 27, 1998.
2. TERMINATION OF EMPLOYMENT.
(a) If the Employee's employment with the Company is
terminated by the Company "Without Cause," as hereinafter
defined, the Employee shall be entitled to the severance benefits
described in Paragraph 3 of this Agreement. For purposes of this
Agreement, the termination of the Employee's employment by the
Company for any of the following reasons or in connection with
any of the following events shall constitute a termination
Without Cause:
<PAGE> 2
(i) the termination of the Employee's employment
by the Company in connection with a "Change-In-Control
Transaction," as hereinafter defined; or
(ii) the termination of the Employee's employment
by the Company for any other reason, other than the Employee's
death or permanent disability or a termination "With Cause," as
hereinafter defined.
(b) For purposes of this Agreement, the occurrence of any one of the
following events shall constitute a Change-In-Control Transaction:
(i) the sale by the Company of all or
substantially all of the Company's assets to a single purchaser
or to a group of associated purchasers;
(ii) the sale, exchange or other disposition, in
one transaction or a related series of transactions, of fifty
percent (50%) or more of the outstanding shares of the Company;
(iii) a bona fide decision by the Company to
terminate its business and liquidate its assets; or
(iv) the merger or consolidation of the Company in
a transaction in which the shareholders of the Company receive or
hold less than fifty percent (50%) of the outstanding voting
shares of the continuing or new corporation.
The termination of the Employee's employment with the
Company or any successor business entity, for any reason other
than the Employee's death or disability, within six months prior
to or within one year after a Change-In-Control Transaction,
shall be rebutably presumed to be a termination of employment in
2
<PAGE> 3
connection with a Change-In-Control Transaction as defined in
this Paragraph 2(b).
(c) For purposes of this Agreement, termination of the
Employee's employment "With Cause" shall mean a decision by the
Company's Management or Board of Directors to terminate
employment based upon the occurrence of one or more of the
following events: (i) the Employee's conviction of or having
entered a plea of guilty or no contest to (A) a felony, or (B)
any other crime which has a material adverse effect on the
Company, (ii) the Employee materially breaching or neglecting his
duties or responsibilities to the Company, (iii) the Employee
engaging in willful or material misconduct in connection with the
performance of his duties or responsibilities to the Company, or
(iv) the Employee engaging in any other improper conduct which
has a material adverse effect on the Company such as would make
his continued employment by the Company prejudicial to the best
interests of the Company.
(d) For purposes of this Agreement, the term "Company"
shall include any business entity which purchases or otherwise
acquires substantially all of the Company's business and assets.
(3) SEVERANCE BENEFITS. If the Employee's employment with
the Company is terminated by the Company Without Cause, the
Company shall pay or provide the Employee with the following
severance benefits (collectively the "Severance Benefits"):
(a) The Employee's then current annual base salary
shall be continued for a period of one year after the effective
date of the termination of the Employee's employment (the
"Effective Termination Date"). Such payments shall be paid
monthly in arrears.
3
<PAGE> 4
(b) The Employee shall be paid a cash amount equal to
a pro rata share of the annual bonus, if any, that the Employee
would have received under the terms of the annual bonus plan
being maintained by the Company for the fiscal year in which the
Effective Termination Date occurs. The total annual bonus the
Employee would have received shall be determined in the same
manner and paid at the same time it would have been determined
and paid if the Employee had continued his employment with the
Company, except the total annual bonus shall be based solely upon
the achievement of Company objectives and not on achievement of
the Employee's personal management objectives. The pro rata
share of the total annual bonus to be paid to the Employee
pursuant to this Agreement shall be determined based upon the
number of days the Employee was employed by the Company during
the fiscal year through the Effective Termination Date.
(c) The Employee shall be paid a cash amount equal to
a pro rata share of the supplemental bonus, if any, that the
Employee would have received under the terms of the long-term
supplemental bonus plan being maintained by the Company for the
fiscal year in which the Effective Termination Date occurs. The
total supplemental bonus the Employee would have received shall
be determined in the same manner it would have been determined if
the Employee had continued his employment with the Company,
except the total supplemental bonus shall be equal to the lesser
of the Employee's individual share of the supplemental bonus
pool: (i) at the end of the most recently completed accounting
period prior to the Effective Termination Date, or (ii) at the
end of the fiscal year in which the Effective Termination Date
occurs. The pro rata share of the total supplemental bonus to be
paid to the Employee pursuant to this Agreement shall be
determined based upon the number of days the Employee was
employed by the Company from the beginning of the period covered
by the long-term supplemental bonus plan through the Effective
Termination Date. The cash amount required by this Paragraph
4
<PAGE> 5
3(c) shall be paid at the same time as the amount described in
Paragraph 3(b).
(d) The termination date of any options to purchase
shares of the Company's common stock held by the Employee on the
Effective Termination Date shall be extended for a period of one
year after the Effective Termination Date.
(e) For a period of one year after the Effective
Termination Date, the Company shall pay directly, or shall
reimburse the Employee for the actual costs of continuing
coverage for the Employee and his dependents under the
comprehensive medical and health plan maintained by the Company
for the benefit of the Company's officers and employees
generally, pursuant to the provisions of the Consolidated Omnibus
Budget Reconciliation Act ("COBRA"). The Company and the
Employee agree to cooperate and to execute such notices,
elections, and other forms or documentation as may be necessary
to continue such comprehensive medical and health coverage under
COBRA. If the Employee and his dependents are determined, for
reasons beyond the control of the Company, to be ineligible to
receive continued coverage under COBRA, the Employee may obtain,
to the extent available, individual health insurance coverage,
for a period of one year after the Effective Termination Date,
for himself and his dependents, providing substantially the same
benefits and the Company shall reimburse him for the cost of such
individual coverage up to a maximum of $2,000.00.
4. CONSULTING OBLIGATION AND TAX TREATMENT OF SEVERANCE
BENEFITS. In consideration for the Severance Benefits and during
the one year period following the Effective Termination Date, the
Employee shall render such services of an advisory or
consultative nature to the Company as the Company may reasonably
request or direct, taking into consideration the demands of any
future employment or business relationships entered into by the
5
<PAGE> 6
Employee. If the Employee is unable to render such advisory or
consultative services due to his death, disability or other
reasons beyond his control, the Severance Benefits described in
Paragraph 3 of this Agreement shall continue to be provided,
without deduction or set-off, to either the Employee or his
estate. The cash payments and related Severance Benefits
provided for in Paragraph 3 shall be made to the Employee as a
severance benefit in recognition of services to the Company and
in connection with his services as an independent contractor
consultant to the Company (if such services are requested). The
Employee shall be solely responsible for and shall pay all
federal, state and local taxes, charges and contributions imposed
or assessed in connection with the cash payments and related
Severance Benefits provided for in Paragraph 3, including
estimated income and self-employment taxes.
5. SEVERANCE BENEFITS CONDITIONED UPON EMPLOYEE RELEASE.
The Company's obligation to provide the Severance Benefits
described in Paragraph 3 shall be specifically conditioned upon:
(a) the Employee providing the Company with a written
release, in form and substance satisfactory to the Company, in
which the Employee releases and discharges the Company and its
affiliates, directors, officers, employees, successors and
assigns from any and all debts, claims, demands, damages, actions
and causes of action whatsoever, whether in law or in equity
which the Employee has or may have in any capacity against such
persons;
(b) the Employee reaffirming in a written agreement,
in form and substance satisfactory to the Company, that he will
never use or disclose any of the Company's confidential
information or trade secrets; and
6
<PAGE> 7
(c) the Employee reaffirming or entering into a
written non-compete agreement, in form and substance satisfactory
to the Company, providing that for a period of two (2) years
after the Effective Termination Date, the Employee will not,
without the prior written consent of the Company, directly or
indirectly, for himself, or on behalf of or in conjunction with,
any person, corporation, partnership or other business entity:
(1) own, manage, operate, control, invest in, be
employed by, participate in, or be connected in any manner with
any business that develops, franchises, owns or operates
restaurants that sell primarily chili, hot dogs with chili,
chili-spaghetti, or related products, or that manufactures and
sells primarily chili, chili-spaghetti, or related frozen grocery
products (including but not limited to any of the business
organizations or entities listed on Exhibit A attached to this
Agreement, or any affiliate, franchisee, licensee or successor
thereof) in any state in which the Company, its affiliates or its
franchisees are operating restaurants, or in which the Company's
frozen grocery products are sold; provided, however, nothing
contained in this Agreement will be construed as restricting or
prohibiting the Employee from: (i) engaging in any restaurant or
food business not primarily involving the production or sale of
chili; or (ii) investing in any business not managed or
controlled by the Employee if an equity security of the business
is registered under the Securities Exchange Act of 1934;
(2) divert or attempt to divert any business of
the Company, its affiliates, or its franchisees, of the kinds or
types engaged in by the Company, its affiliates, or its
franchisees to any competitor; or
(3) seek to employ any person who is at that time
or has been within the six (6) month period prior to that time
7
<PAGE> 8
employed by the Company or its affiliates, or induce such a
person to leave his or her employment.
6. Termination of Employment Generally.
------------------------------------
(a) Nothing in this Agreement is intended or shall be
construed to alter the "at-will" employment relationship between
the Company and the Employee. The Employee shall have the right
to terminate his employment with the Company at any time. The
Company shall have the right to terminate the Employee's
employment With Cause or Without Cause at any time.
(b) Upon the termination of the Employee's employment
by the Company With Cause or by reason of the Employee's death or
disability, or upon the Employee voluntarily terminating his
employment with the Company, all obligations of the Company to
the Employee shall terminate and the Employee shall not be
entitled to any Severance Benefits, additional salary, salary
continuation, bonus, fringe benefits, severance pay or other
compensation, except: (i) for accumulated vacation and paid
leave time, or (ii) as provided in any separate agreement or
employee benefit plan which by its terms specifically provides
for post-termination or severance benefits.
7. Miscellaneous.
-------------
(a) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and
the other writings and agreements referred to herein or delivered
in connection herewith contain the entire understanding of the
parties with respect to its subject matter and supersede any
prior understandings or oral or written agreements between the
parties. This Agreement may be modified or amended only by a
written instrument duly executed by the parties hereto.
8
<PAGE> 9
(b) HEADINGS. The paragraph or subparagraph headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the interpretation of this Agreement.
(c) BINDING EFFECT. This Agreement shall be binding
upon, shall inure to the benefit of, and shall be enforceable by
the Company and its successors or assigns, and by the Employee
and his heirs, executors, personal representatives, successors
and assigns.
(d) CHOICE OF LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Ohio.
(e) SEVERABILITY. If any provision of this Agreement,
or the application of any such provision to any person or
circumstance, shall be held invalid, the remainder of this
Agreement or the application of such provision to any person or
circumstance other than those to which it is held invalid, shall
not be affected thereby.
(f) COUNTERPARTS. This Agreement may be executed in
one or more counterpart copies, each of which when fully executed
and delivered, shall be considered an original, but all of which
together shall constitute but one and the same instrument.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
SKYLINE CHILI, INC.
By: /s/ Lambert N. Lambrinides
______________________________
Its: Chairman of the Board
______________________________
/s/ Kevin R. McDonnell
_________________________________
Kevin R. McDonnell
10
<PAGE> 11
EXHIBIT A
---------
The Chili Company
Chili Time
Gold Star Chili
Empress Chili
Dixie Chili
<PAGE> 1
Exhibit 10.2
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made and entered into effective this 27th
day of June, 1995, between Skyline Chili, Inc., an Ohio
corporation (the "Company"), and Thomas L. Allen, an officer of
the Company (the "Employee").
WHEREAS, the Employee is an at-will employee of the Company;
and
WHEREAS, in order to provide the Employee with additional
incentive and motivation to contribute to the Company's future
growth and continued success, the Company has determined to
provide the Employee with severance benefits if the Employee's
employment is terminated under certain circumstances.
NOW, THEREFORE, in consideration of the mutual promises
contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
Company and the Employee agree as follows:
1. TERM. This Agreement shall be effective as of the date
hereof and shall terminate on June 27, 1998.
2. TERMINATION OF EMPLOYMENT.
(a) If the Employee's employment with the Company is
terminated by the Company "Without Cause," as hereinafter
defined, the Employee shall be entitled to the severance benefits
described in Paragraph 3 of this Agreement. For purposes of this
Agreement, the termination of the Employee's employment by the
Company for any of the following reasons or in connection with
any of the following events shall constitute a termination
Without Cause:
<PAGE> 2
(i) the termination of the Employee's employment
by the Company in connection with a "Change-In-Control
Transaction," as hereinafter defined; or
(ii) the termination of the Employee's employment
by the Company for any other reason, other than the Employee's
death or permanent disability or a termination "With Cause," as
hereinafter defined.
(b) For purposes of this Agreement, the occurrence of any one of the
following events shall constitute a Change-In-Control Transaction:
(i) the sale by the Company of all or
substantially all of the Company's assets to a single purchaser
or to a group of associated purchasers;
(ii) the sale, exchange or other disposition, in
one transaction or a related series of transactions, of fifty
percent (50%) or more of the outstanding shares of the Company;
(iii) a bona fide decision by the Company to
terminate its business and liquidate its assets; or
(iv) the merger or consolidation of the Company in
a transaction in which the shareholders of the Company receive or
hold less than fifty percent (50%) of the outstanding voting
shares of the continuing or new corporation.
The termination of the Employee's employment with the
Company or any successor business entity, for any reason other
than the Employee's death or disability, within six months prior
to or within one year after a Change-In-Control Transaction,
shall be rebutably presumed to be a termination of employment in
2
<PAGE> 3
connection with a Change-In-Control Transaction as defined in
this Paragraph 2(b).
(c) For purposes of this Agreement, termination of the
Employee's employment "With Cause" shall mean a decision by the
Company's Management or Board of Directors to terminate
employment based upon the occurrence of one or more of the
following events: (i) the Employee's conviction of or having
entered a plea of guilty or no contest to (A) a felony, or (B)
any other crime which has a material adverse effect on the
Company, (ii) the Employee materially breaching or neglecting his
duties or responsibilities to the Company, (iii) the Employee
engaging in willful or material misconduct in connection with the
performance of his duties or responsibilities to the Company, or
(iv) the Employee engaging in any other improper conduct which
has a material adverse effect on the Company such as would make
his continued employment by the Company prejudicial to the best
interests of the Company.
(d) For purposes of this Agreement, the term "Company"
shall include any business entity which purchases or otherwise
acquires substantially all of the Company's business and assets.
(3) SEVERANCE BENEFITS. If the Employee's employment with
the Company is terminated by the Company Without Cause, the
Company shall pay or provide the Employee with the following
severance benefits (collectively the "Severance Benefits"):
(a) The Employee's then current annual base salary
shall be continued for a period of one year after the effective
date of the termination of the Employee's employment (the
"Effective Termination Date"). Such payments shall be paid
monthly in arrears.
3
<PAGE> 4
(b) The Employee shall be paid a cash amount equal to
a pro rata share of the annual bonus, if any, that the Employee
would have received under the terms of the annual bonus plan
being maintained by the Company for the fiscal year in which the
Effective Termination Date occurs. The total annual bonus the
Employee would have received shall be determined in the same
manner and paid at the same time it would have been determined
and paid if the Employee had continued his employment with the
Company, except the total annual bonus shall be based solely upon
the achievement of Company objectives and not on achievement of
the Employee's personal management objectives. The pro rata
share of the total annual bonus to be paid to the Employee
pursuant to this Agreement shall be determined based upon the
number of days the Employee was employed by the Company during
the fiscal year through the Effective Termination Date.
(c) The Employee shall be paid a cash amount equal to
a pro rata share of the supplemental bonus, if any, that the
Employee would have received under the terms of the long-term
supplemental bonus plan being maintained by the Company for the
fiscal year in which the Effective Termination Date occurs. The
total supplemental bonus the Employee would have received shall
be determined in the same manner it would have been determined if
the Employee had continued his employment with the Company,
except the total supplemental bonus shall be equal to the lesser
of the Employee's individual share of the supplemental bonus
pool: (i) at the end of the most recently completed accounting
period prior to the Effective Termination Date, or (ii) at the
end of the fiscal year in which the Effective Termination Date
occurs. The pro rata share of the total supplemental bonus to be
paid to the Employee pursuant to this Agreement shall be
determined based upon the number of days the Employee was
employed by the Company from the beginning of the period covered
by the long-term supplemental bonus plan through the Effective
Termination Date. The cash amount required by this Paragraph
4
<PAGE> 5
3(c) shall be paid at the same time as the amount described in
Paragraph 3(b).
(d) The termination date of any options to purchase
shares of the Company's common stock held by the Employee on the
Effective Termination Date shall be extended for a period of one
year after the Effective Termination Date.
(e) For a period of one year after the Effective
Termination Date, the Company shall pay directly, or shall
reimburse the Employee for the actual costs of continuing
coverage for the Employee and his dependents under the
comprehensive medical and health plan maintained by the Company
for the benefit of the Company's officers and employees
generally, pursuant to the provisions of the Consolidated Omnibus
Budget Reconciliation Act ("COBRA"). The Company and the
Employee agree to cooperate and to execute such notices,
elections, and other forms or documentation as may be necessary
to continue such comprehensive medical and health coverage under
COBRA. If the Employee and his dependents are determined, for
reasons beyond the control of the Company, to be ineligible to
receive continued coverage under COBRA, the Employee may obtain,
to the extent available, individual health insurance coverage,
for a period of one year after the Effective Termination Date,
for himself and his dependents, providing substantially the same
benefits and the Company shall reimburse him for the cost of such
individual coverage up to a maximum of $2,000.00.
4. CONSULTING OBLIGATION AND TAX TREATMENT OF SEVERANCE
BENEFITS. In consideration for the Severance Benefits and during
the one year period following the Effective Termination Date, the
Employee shall render such services of an advisory or
consultative nature to the Company as the Company may reasonably
request or direct, taking into consideration the demands of any
future employment or business relationships entered into by the
5
<PAGE> 6
Employee. If the Employee is unable to render such advisory or
consultative services due to his death, disability or other
reasons beyond his control, the Severance Benefits described in
Paragraph 3 of this Agreement shall continue to be provided,
without deduction or set-off, to either the Employee or his
estate. The cash payments and related Severance Benefits
provided for in Paragraph 3 shall be made to the Employee as a
severance benefit in recognition of services to the Company and
in connection with his services as an independent contractor
consultant to the Company (if such services are requested). The
Employee shall be solely responsible for and shall pay all
federal, state and local taxes, charges and contributions imposed
or assessed in connection with the cash payments and related
Severance Benefits provided for in Paragraph 3, including
estimated income and self-employment taxes.
5. SEVERANCE BENEFITS CONDITIONED UPON EMPLOYEE RELEASE.
The Company's obligation to provide the Severance Benefits
described in Paragraph 3 shall be specifically conditioned upon:
(a) the Employee providing the Company with a written
release, in form and substance satisfactory to the Company, in
which the Employee releases and discharges the Company and its
affiliates, directors, officers, employees, successors and
assigns from any and all debts, claims, demands, damages, actions
and causes of action whatsoever, whether in law or in equity
which the Employee has or may have in any capacity against such
persons;
(b) the Employee reaffirming in a written agreement,
in form and substance satisfactory to the Company, that he will
never use or disclose any of the Company's confidential
information or trade secrets; and
6
<PAGE> 7
(c) the Employee reaffirming or entering into a
written non-compete agreement, in form and substance satisfactory
to the Company, providing that for a period of two (2) years
after the Effective Termination Date, the Employee will not,
without the prior written consent of the Company, directly or
indirectly, for himself, or on behalf of or in conjunction with,
any person, corporation, partnership or other business entity:
(1) own, manage, operate, control, invest in, be
employed by, participate in, or be connected in any manner with
any business that develops, franchises, owns or operates
restaurants that sell primarily chili, hot dogs with chili,
chili-spaghetti, or related products, or that manufactures and
sells primarily chili, chili-spaghetti, or related frozen grocery
products (including but not limited to any of the business
organizations or entities listed on Exhibit A attached to this
Agreement, or any affiliate, franchisee, licensee or successor
thereof) in any state in which the Company, its affiliates or its
franchisees are operating restaurants, or in which the Company's
frozen grocery products are sold; provided, however, nothing
contained in this Agreement will be construed as restricting or
prohibiting the Employee from: (i) engaging in any restaurant or
food business not primarily involving the production or sale of
chili; or (ii) investing in any business not managed or
controlled by the Employee if an equity security of the business
is registered under the Securities Exchange Act of 1934;
(2) divert or attempt to divert any business of
the Company, its affiliates, or its franchisees, of the kinds or
types engaged in by the Company, its affiliates, or its
franchisees to any competitor; or
(3) seek to employ any person who is at that time
or has been within the six (6) month period prior to that time
7
<PAGE> 8
employed by the Company or its affiliates, or induce such a
person to leave his or her employment.
6. Termination of Employment Generally.
------------------------------------
(a) Nothing in this Agreement is intended or shall be
construed to alter the "at-will" employment relationship between
the Company and the Employee. The Employee shall have the right
to terminate his employment with the Company at any time. The
Company shall have the right to terminate the Employee's
employment With Cause or Without Cause at any time.
(b) Upon the termination of the Employee's employment
by the Company With Cause or by reason of the Employee's death or
disability, or upon the Employee voluntarily terminating his
employment with the Company, all obligations of the Company to
the Employee shall terminate and the Employee shall not be
entitled to any Severance Benefits, additional salary, salary
continuation, bonus, fringe benefits, severance pay or other
compensation, except: (i) for accumulated vacation and paid
leave time, or (ii) as provided in any separate agreement or
employee benefit plan which by its terms specifically provides
for post-termination or severance benefits.
7. Miscellaneous.
-------------
(a) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and
the other writings and agreements referred to herein or delivered
in connection herewith contain the entire understanding of the
parties with respect to its subject matter and supersede any
prior understandings or oral or written agreements between the
parties. This Agreement may be modified or amended only by a
written instrument duly executed by the parties hereto.
8
<PAGE> 9
(b) HEADINGS. The paragraph or subparagraph headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the interpretation of this Agreement.
(c) BINDING EFFECT. This Agreement shall be binding
upon, shall inure to the benefit of, and shall be enforceable by
the Company and its successors or assigns, and by the Employee
and his heirs, executors, personal representatives, successors
and assigns.
(d) CHOICE OF LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Ohio.
(e) SEVERABILITY. If any provision of this Agreement,
or the application of any such provision to any person or
circumstance, shall be held invalid, the remainder of this
Agreement or the application of such provision to any person or
circumstance other than those to which it is held invalid, shall
not be affected thereby.
(f) COUNTERPARTS. This Agreement may be executed in
one or more counterpart copies, each of which when fully executed
and delivered, shall be considered an original, but all of which
together shall constitute but one and the same instrument.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
SKYLINE CHILI, INC.
By: /s/ Lambert N. Lambrinides
______________________________
Its: /s/ Chairman of the Board
______________________________
Thomas L. Allen
_________________________________
Thomas L. Allen
10
<PAGE> 11
EXHIBIT A
---------
The Chili Company
Chili Time
Gold Star Chili
Empress Chili
Dixie Chili
<PAGE> 1
Exhibit 10.3
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made and entered into effective this 27th
day of June, 1995, between Skyline Chili, Inc., an Ohio
corporation (the "Company"), and Victor L. Peeples, an officer of
the Company (the "Employee").
WHEREAS, the Employee is an at-will employee of the Company;
and
WHEREAS, in order to provide the Employee with additional
incentive and motivation to contribute to the Company's future
growth and continued success, the Company has determined to
provide the Employee with severance benefits if the Employee's
employment is terminated under certain circumstances.
NOW, THEREFORE, in consideration of the mutual promises
contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
Company and the Employee agree as follows:
1. TERM. This Agreement shall be effective as of the date
hereof and shall terminate on June 27, 1998.
2. TERMINATION OF EMPLOYMENT.
(a) If the Employee's employment with the Company is
terminated by the Company "Without Cause," as hereinafter
defined, the Employee shall be entitled to the severance benefits
described in Paragraph 3 of this Agreement. For purposes of this
Agreement, the termination of the Employee's employment by the
Company for any of the following reasons or in connection with
any of the following events shall constitute a termination
Without Cause:
<PAGE> 2
(i) the termination of the Employee's employment
by the Company in connection with a "Change-In-Control
Transaction," as hereinafter defined; or
(ii) the termination of the Employee's employment
by the Company for any other reason, other than the Employee's
death or permanent disability or a termination "With Cause," as
hereinafter defined.
(b) For purposes of this Agreement, the occurrence of any one of the
following events shall constitute a Change-In-Control Transaction:
(i) the sale by the Company of all or
substantially all of the Company's assets to a single purchaser
or to a group of associated purchasers;
(ii) the sale, exchange or other disposition, in
one transaction or a related series of transactions, of fifty
percent (50%) or more of the outstanding shares of the Company;
(iii) a bona fide decision by the Company to
terminate its business and liquidate its assets; or
(iv) the merger or consolidation of the Company in
a transaction in which the shareholders of the Company receive or
hold less than fifty percent (50%) of the outstanding voting
shares of the continuing or new corporation.
The termination of the Employee's employment with the
Company or any successor business entity, for any reason other
than the Employee's death or disability, within six months prior
to or within one year after a Change-In-Control Transaction,
shall be rebutably presumed to be a termination of employment in
2
<PAGE> 3
connection with a Change-In-Control Transaction as defined in
this Paragraph 2(b).
(c) For purposes of this Agreement, termination of the
Employee's employment "With Cause" shall mean a decision by the
Company's Management or Board of Directors to terminate
employment based upon the occurrence of one or more of the
following events: (i) the Employee's conviction of or having
entered a plea of guilty or no contest to (A) a felony, or (B)
any other crime which has a material adverse effect on the
Company, (ii) the Employee materially breaching or neglecting his
duties or responsibilities to the Company, (iii) the Employee
engaging in willful or material misconduct in connection with the
performance of his duties or responsibilities to the Company, or
(iv) the Employee engaging in any other improper conduct which
has a material adverse effect on the Company such as would make
his continued employment by the Company prejudicial to the best
interests of the Company.
(d) For purposes of this Agreement, the term "Company"
shall include any business entity which purchases or otherwise
acquires substantially all of the Company's business and assets.
(3) SEVERANCE BENEFITS. If the Employee's employment with
the Company is terminated by the Company Without Cause, the
Company shall pay or provide the Employee with the following
severance benefits (collectively the "Severance Benefits"):
(a) The Employee's then current annual base salary
shall be continued for a period of one year after the effective
date of the termination of the Employee's employment (the
"Effective Termination Date"). Such payments shall be paid
monthly in arrears.
3
<PAGE> 4
(b) The Employee shall be paid a cash amount equal to
a pro rata share of the annual bonus, if any, that the Employee
would have received under the terms of the annual bonus plan
being maintained by the Company for the fiscal year in which the
Effective Termination Date occurs. The total annual bonus the
Employee would have received shall be determined in the same
manner and paid at the same time it would have been determined
and paid if the Employee had continued his employment with the
Company, except the total annual bonus shall be based solely upon
the achievement of Company objectives and not on achievement of
the Employee's personal management objectives. The pro rata
share of the total annual bonus to be paid to the Employee
pursuant to this Agreement shall be determined based upon the
number of days the Employee was employed by the Company during
the fiscal year through the Effective Termination Date.
(c) The Employee shall be paid a cash amount equal to
a pro rata share of the supplemental bonus, if any, that the
Employee would have received under the terms of the long-term
supplemental bonus plan being maintained by the Company for the
fiscal year in which the Effective Termination Date occurs. The
total supplemental bonus the Employee would have received shall
be determined in the same manner it would have been determined if
the Employee had continued his employment with the Company,
except the total supplemental bonus shall be equal to the lesser
of the Employee's individual share of the supplemental bonus
pool: (i) at the end of the most recently completed accounting
period prior to the Effective Termination Date, or (ii) at the
end of the fiscal year in which the Effective Termination Date
occurs. The pro rata share of the total supplemental bonus to be
paid to the Employee pursuant to this Agreement shall be
determined based upon the number of days the Employee was
employed by the Company from the beginning of the period covered
by the long-term supplemental bonus plan through the Effective
Termination Date. The cash amount required by this Paragraph
4
<PAGE> 5
3(c) shall be paid at the same time as the amount described in
Paragraph 3(b).
(d) The termination date of any options to purchase
shares of the Company's common stock held by the Employee on the
Effective Termination Date shall be extended for a period of one
year after the Effective Termination Date.
(e) For a period of one year after the Effective
Termination Date, the Company shall pay directly, or shall
reimburse the Employee for the actual costs of continuing
coverage for the Employee and his dependents under the
comprehensive medical and health plan maintained by the Company
for the benefit of the Company's officers and employees
generally, pursuant to the provisions of the Consolidated Omnibus
Budget Reconciliation Act ("COBRA"). The Company and the
Employee agree to cooperate and to execute such notices,
elections, and other forms or documentation as may be necessary
to continue such comprehensive medical and health coverage under
COBRA. If the Employee and his dependents are determined, for
reasons beyond the control of the Company, to be ineligible to
receive continued coverage under COBRA, the Employee may obtain,
to the extent available, individual health insurance coverage,
for a period of one year after the Effective Termination Date,
for himself and his dependents, providing substantially the same
benefits and the Company shall reimburse him for the cost of such
individual coverage up to a maximum of $2,000.00.
4. CONSULTING OBLIGATION AND TAX TREATMENT OF SEVERANCE
BENEFITS. In consideration for the Severance Benefits and during
the one year period following the Effective Termination Date, the
Employee shall render such services of an advisory or
consultative nature to the Company as the Company may reasonably
request or direct, taking into consideration the demands of any
future employment or business relationships entered into by the
5
<PAGE> 6
Employee. If the Employee is unable to render such advisory or
consultative services due to his death, disability or other
reasons beyond his control, the Severance Benefits described in
Paragraph 3 of this Agreement shall continue to be provided,
without deduction or set-off, to either the Employee or his
estate. The cash payments and related Severance Benefits
provided for in Paragraph 3 shall be made to the Employee as a
severance benefit in recognition of services to the Company and
in connection with his services as an independent contractor
consultant to the Company (if such services are requested). The
Employee shall be solely responsible for and shall pay all
federal, state and local taxes, charges and contributions imposed
or assessed in connection with the cash payments and related
Severance Benefits provided for in Paragraph 3, including
estimated income and self-employment taxes.
5. SEVERANCE BENEFITS CONDITIONED UPON EMPLOYEE RELEASE.
The Company's obligation to provide the Severance Benefits
described in Paragraph 3 shall be specifically conditioned upon:
(a) the Employee providing the Company with a written
release, in form and substance satisfactory to the Company, in
which the Employee releases and discharges the Company and its
affiliates, directors, officers, employees, successors and
assigns from any and all debts, claims, demands, damages, actions
and causes of action whatsoever, whether in law or in equity
which the Employee has or may have in any capacity against such
persons;
(b) the Employee reaffirming in a written agreement,
in form and substance satisfactory to the Company, that he will
never use or disclose any of the Company's confidential
information or trade secrets; and
6
<PAGE> 7
(c) the Employee reaffirming or entering into a
written non-compete agreement, in form and substance satisfactory
to the Company, providing that for a period of two (2) years
after the Effective Termination Date, the Employee will not,
without the prior written consent of the Company, directly or
indirectly, for himself, or on behalf of or in conjunction with,
any person, corporation, partnership or other business entity:
(1) own, manage, operate, control, invest in, be
employed by, participate in, or be connected in any manner with
any business that develops, franchises, owns or operates
restaurants that sell primarily chili, hot dogs with chili,
chili-spaghetti, or related products, or that manufactures and
sells primarily chili, chili-spaghetti, or related frozen grocery
products (including but not limited to any of the business
organizations or entities listed on Exhibit A attached to this
Agreement, or any affiliate, franchisee, licensee or successor
thereof) in any state in which the Company, its affiliates or its
franchisees are operating restaurants, or in which the Company's
frozen grocery products are sold; provided, however, nothing
contained in this Agreement will be construed as restricting or
prohibiting the Employee from: (i) engaging in any restaurant or
food business not primarily involving the production or sale of
chili; or (ii) investing in any business not managed or
controlled by the Employee if an equity security of the business
is registered under the Securities Exchange Act of 1934;
(2) divert or attempt to divert any business of
the Company, its affiliates, or its franchisees, of the kinds or
types engaged in by the Company, its affiliates, or its
franchisees to any competitor; or
(3) seek to employ any person who is at that time
or has been within the six (6) month period prior to that time
7
<PAGE> 8
employed by the Company or its affiliates, or induce such a
person to leave his or her employment.
6. Termination of Employment Generally.
-----------------------------------
(a) Nothing in this Agreement is intended or shall be
construed to alter the "at-will" employment relationship between
the Company and the Employee. The Employee shall have the right
to terminate his employment with the Company at any time. The
Company shall have the right to terminate the Employee's
employment With Cause or Without Cause at any time.
(b) Upon the termination of the Employee's employment
by the Company With Cause or by reason of the Employee's death or
disability, or upon the Employee voluntarily terminating his
employment with the Company, all obligations of the Company to
the Employee shall terminate and the Employee shall not be
entitled to any Severance Benefits, additional salary, salary
continuation, bonus, fringe benefits, severance pay or other
compensation, except: (i) for accumulated vacation and paid
leave time, or (ii) as provided in any separate agreement or
employee benefit plan which by its terms specifically provides
for post-termination or severance benefits.
7. Miscellaneous.
-------------
(a) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and
the other writings and agreements referred to herein or delivered
in connection herewith contain the entire understanding of the
parties with respect to its subject matter and supersede any
prior understandings or oral or written agreements between the
parties. This Agreement may be modified or amended only by a
written instrument duly executed by the parties hereto.
8
<PAGE> 9
(b) HEADINGS. The paragraph or subparagraph headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the interpretation of this Agreement.
(c) BINDING EFFECT. This Agreement shall be binding
upon, shall inure to the benefit of, and shall be enforceable by
the Company and its successors or assigns, and by the Employee
and his heirs, executors, personal representatives, successors
and assigns.
(d) CHOICE OF LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Ohio.
(e) SEVERABILITY. If any provision of this Agreement,
or the application of any such provision to any person or
circumstance, shall be held invalid, the remainder of this
Agreement or the application of such provision to any person or
circumstance other than those to which it is held invalid, shall
not be affected thereby.
(f) COUNTERPARTS. This Agreement may be executed in
one or more counterpart copies, each of which when fully executed
and delivered, shall be considered an original, but all of which
together shall constitute but one and the same instrument.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
SKYLINE CHILI, INC.
By: /s/ Lambert N. Lambrinides
_____________________________
Its: Chairman of the Board
____________________________
/s/ Victor L. Peeples
_________________________________
Victor L. Peeples
10
<PAGE> 11
EXHIBIT A
---------
The Chili Company
Chili Time
Gold Star Chili
Empress Chili
Dixie Chili
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME AS OF
AND FOR THE NINE MONTHS (FORTY WEEKS) ENDED AUGUST 6, 1995, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000803497
<NAME> SKYLINE CHILI, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-29-1995
<PERIOD-START> OCT-31-1994
<PERIOD-END> AUG-06-1995
<CASH> 1,893
<SECURITIES> 0
<RECEIVABLES> 880
<ALLOWANCES> 0
<INVENTORY> 1,210
<CURRENT-ASSETS> 4,315
<PP&E> 19,192
<DEPRECIATION> 6,299
<TOTAL-ASSETS> 17,852
<CURRENT-LIABILITIES> 2,457
<BONDS> 6,190
<COMMON> 5,267
0
0
<OTHER-SE> 3,551
<TOTAL-LIABILITY-AND-EQUITY> 17,852
<SALES> 18,405
<TOTAL-REVENUES> 19,342
<CGS> 8,654
<TOTAL-COSTS> 18,139
<OTHER-EXPENSES> 6
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 364
<INCOME-PRETAX> 833
<INCOME-TAX> 299
<INCOME-CONTINUING> 534
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 534
<EPS-PRIMARY> .16
<EPS-DILUTED> 0
</TABLE>
