<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934 $250.00 FEE REQUIRED
For the fiscal year ended December 25, 1994
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934 NO FEE REQUIRED
Commission file number 33-14051
FAMILY RESTAURANTS, INC.
<TABLE>
<S> <C>
INCORPORATED IN DELAWARE I.R.S. Employer Identification
No. 33-0197361
</TABLE>
18831 Von Karman Avenue, Irvine, CA 92715
Telephone: (714) 757-7900
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None.
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
-----
Index to exhibits appears on page 38.
The common stock of the registrant is not publicly traded. Therefore, the
aggregate market value of voting stock held by non-affiliates is not readily
determinable.
Number of shares of outstanding common stock as of March 21, 1995 is 997,277.
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FAMILY RESTAURANTS, INC.
PART I
Item 1. BUSINESS
BACKGROUND
Family Restaurants, Inc. (formerly known as The Restaurant Enterprises
Group, Inc.) was incorporated in Delaware in 1986 and is primarily engaged in
the operation of full-service restaurants throughout the United States through
its subsidiaries. At December 25, 1994, the Company operated 702 restaurants
in 34 states, with approximately 52% of its restaurants located in California.
Additionally, as of December 25, 1994, the Company was the licensor of 231
full-service restaurants in Japan and South Korea, the franchisor of five
family restaurants and five Mexican restaurants in the United States and the
franchisor of 21 Mexican restaurants outside the United States. See "--
Franchised and Licensed Restaurants."
On January 27, 1994 (the "Closing Date"), Apollo FRI Partners, L.P.
("Apollo"), Green Equity Investors, L.P. ("GEI") and Foodmaker, Inc.
("Foodmaker") acquired approximately 98% of the then outstanding common stock,
par value $.01 per share (the "Common Stock") of the Company (the
"Acquisition"). Apollo, GEI, Foodmaker and certain officers of the Company
invested approximately $154.7 million of new equity in the Company, consisting
of approximately $92.4 million in cash and approximately $62.3 million
attributable to Foodmaker's transfer of Chi-Chi's, Inc. ("Chi-Chi's") to the
Company (the "New Equity Investment"). Concurrently, Chi-Chi's was merged with
a subsidiary of the Company (the "Chi-Chi's Merger") in a transaction with a
purchase price of approximately $270.0 million (including the assumption of
capitalized lease and debt obligations). In addition to the financing provided
by the New Equity Investment, in connection with the Acquisition, the Company
sold $300.0 million principal amount of 9-3/4% Senior Notes due 2002 (the
"Senior Notes") and $150.0 million principal amount ($109.0 million in
proceeds) of 10-7/8% Senior Subordinated Discount Notes due 2004 (the "Discount
Notes" and, together with the Senior Notes, the "Notes") and the Company and
certain of its subsidiaries entered into a new $150.0 million credit facility
(the "Credit Facility"). See "--The Acquisition."
Unless the context otherwise requires, reference to the "Company"
refers to The Restaurant Enterprises Group, Inc. and its consolidated
subsidiaries (not including Chi-Chi's) when used with respect to historical
information relating to periods prior to January 27, 1994 included herein, and
refers to Family Restaurants, Inc. and its consolidated subsidiaries, giving
effect to the Acquisition, the Chi-Chi's Merger and related transactions and
the Strategic Divestment Program described below, when used with respect to
information about events occurring upon completion of or after the Acquisition.
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The Company operates restaurant chains serving two principal market
segments: full-service family restaurants (the "Family Restaurant Division")
and full-service Mexican restaurants (the "Mexican Restaurant Division"). At
December 25, 1994, the Company's Family Restaurant Division included 350
moderately-priced family-oriented restaurants operated primarily under the
Carrows and Coco's names, and the Company's Mexican Restaurant Division
operated 325 full-service restaurants primarily under the Chi-Chi's, El Torito
and Casa Gallardo names. The Company's Mexican Restaurant Division is the
largest operator of full-service Mexican restaurants in the United States. The
Company also operated 27 additional restaurants under other formats.
FAMILY RESTAURANT DIVISION
The Family Restaurant Division included 350 restaurants as of December
25, 1994 operating principally under the Coco's and Carrows concepts,
approximately 75% of which are located in California. Management believes that
both concepts enjoy excellent name recognition and a loyal customer base. The
restaurants are typically open either 18 or 24 hours a day and offer a menu of
moderately priced breakfast, lunch and dinner items with an average food check
per person (excluding alcoholic beverage sales) of approximately $6.74 for
Coco's and $5.89 for Carrows.
Coco's and Carrows restaurants generally contain from 5,000 to 6,000
square feet of floor space and accommodate approximately 95 to 180 guests in
the restaurant. Both Coco's and Carrows restaurants emphasize consistently
high-quality food with an excellent price/value relationship and friendly,
efficient service. In the current economic environment, the family restaurants
have benefitted from their moderately-priced menus. In addition, the family
restaurants' minimal reliance on beer and wine sales has been an advantage
during a period of declining alcoholic beverage sales.
MEXICAN RESTAURANT DIVISION
The Company operated 325 Mexican restaurants primarily under the
Chi-Chi's, El Torito and Casa Gallardo names as of December 25, 1994. The
Company is the largest operator of full-service Mexican restaurants in the
United States, based upon both number of restaurants and annual revenues.
The Chi-Chi's, El Torito and Casa Gallardo restaurants serve
moderately priced, high-quality Mexican food and a wide selection of alcoholic
beverages. They offer generous portions and a wide variety of Mexican food at
moderate prices for full-service restaurants. The average food check per
person (excluding alcoholic beverage sales) is approximately $7.86 for
Chi-Chi's, $8.73 for El Torito and $8.03 for Casa Gallardo restaurants.
Chi-Chi's restaurants generally contain from 5,000 to 10,600 square
feet of floor space and accommodate approximately 200 to 400 guests in the
restaurant and lounge. El Torito restaurants
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generally contain from 8,000 to 10,000 square feet of floor space and
accommodate approximately 300 to 400 guests in the restaurant and lounge. The
Company's Mexican restaurants are generally located in freestanding buildings
in densely populated suburban areas, and the Company believes their festive
atmosphere and moderate prices are especially appealing to family clientele.
OTHER RESTAURANTS
The Company operated 27 traditional dinnerhouses in California as of
December 25, 1994, primarily under the Charley Brown's and Reuben's names. The
traditional dinnerhouses are no longer a part of the Company's core operating
strategy; however, the restaurants currently being operated generally have
excellent locations and positive cash flow.
SITE SELECTION
The selection of sites for new restaurants is the responsibility of
the senior management of each of the Company's operating divisions. Typically,
potential sites are brought to the attention of the Company by real estate
brokers and developers familiar with its needs. Sites are evaluated on the
basis of a variety of factors, including demographic data, land use and
environmental restrictions, competition in the area, ease of access,
visibility, availability of parking and proximity to a major traffic generator
such as a shopping mall, office complex, stadium or university.
EMPLOYEES
At December 25, 1994, the Company had approximately 51,700 employees,
of whom 50,800 were restaurant employees, 750 were corporate personnel and 150
were field management and administrative personnel. Employees are paid on an
hourly basis, except restaurant managers, corporate and field management and
administrative personnel. Restaurant employees include a mix of full-time and
part-time, mostly hourly personnel, enabling the Company to provide services
necessary during peak periods of restaurant operations. The Company has not
experienced any significant work stoppage and believes its labor relations are
good.
On February 22, 1995, the Company announced that it had begun a search
to identify and hire a new chief executive officer. In addition, the Company
replaced the president of the Mexican Restaurant Division with one of its other
senior executives.
COMPETITION AND MARKETS
The restaurant business is highly competitive and is affected by
changes in the public's eating habits and preferences, population trends and
traffic patterns, and local and national economic conditions affecting consumer
spending habits. Key competitive factors in the industry are the quality and
value of
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the food products offered, quality and speed of service, advertising, name
identification, attractiveness of facilities and restaurant location. The
Company's restaurants compete with a wide variety of restaurants ranging from
national and regional restaurant chains to locally owned restaurants. The
Company believes that its principal competitive strengths are its distinctive
atmosphere and food presentation, moderate pricing, variety and quality of food
products, the quality and training of its employees and the market penetration
of its restaurants which has resulted in economies of scale in a variety of
areas, including the purchase of food and advertising and promotion.
GOVERNMENT REGULATION
Each of the Company's restaurants is subject to federal, state and
local laws and regulations governing health, sanitation, environmental matters,
safety, the sale of alcoholic beverages and regulations regarding hiring and
employment practices. The Company believes it has all licenses and approvals
material to the operation of its business, and that its operations are in
material compliance with applicable laws and regulations.
The Company is subject to federal and state laws governing matters
such as minimum wages, overtime and other working conditions. At December 25,
1994, approximately 50% of the Company's employees were paid at rates related
to the minimum wage. Therefore, increases in the minimum wage or decreases in
the allowable tip credit (which reduces the minimum wage that must be paid to
tipped employees in certain states) increase the Company's labor costs. This
is especially true in California, where there is no tip credit.
In February 1995, President Clinton called for Congress to raise the
minimum wage by $.90 over the next two years. Implementation of the
legislation increasing the minimum wage would increase the labor costs of the
Company and the restaurant industry as a whole.
The Company is also subject to both federal and state regulations
governing disabled persons' access to its restaurant facilities, including the
Americans with Disabilities Act ("ADA"), which became effective in January
1992. If the ADA were interpreted to require a higher degree of accessibility
for disabled persons than presently established, it could have a significant
economic impact on the Company, inasmuch as such interpretation could require
the Company, and the restaurant industry as a whole, to make substantial
modifications to its restaurant facilities.
Currently, the Company franchises only ten restaurants in the United
States and does not foresee any significant further franchising. See
"--Franchised and Licensed Restaurants." With regard to its ten franchises,
the Company believes it is operating in substantial compliance with applicable
laws and regulations governing such operations.
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TRADEMARKS AND SERVICE MARKS
The Company regards its trademarks and service marks as important to
the identification of its restaurants and believes that they have significant
value in the conduct of its business. The Company has registered various
trademarks and service marks with the United States Patent and Trademark
Office. In general, subject to their continuous use and priority of use, these
registrations may be renewed indefinitely, except that (i) for five years
following the date of registration, a federal registration is subject to a
petition to cancel that can be filed by any person who believes that he will be
damaged by such registration and (ii) a federal registration can be challenged
at any time on the grounds that it was fraudulently obtained, that the mark has
become a common descriptive name or that the mark is being used so as to
misrepresent the source of the goods or services sold under it. In addition to
its federal registrations, certain trademarks and service marks have been
registered in various states in which the Company operates restaurants. Also,
many of the Company's menus, training manuals and other printed manuals
utilized in conjunction with its business are copyrighted.
FRANCHISED AND LICENSED RESTAURANTS
Pursuant to a Technical Assistance and Licensing Agreement dated as of
December 13, 1979 (the "Licensing Agreement") with Coco's Japan Co., Ltd.
("CJCL") and Kasumi Stores K.K. (Kasumi Stores K.K. being later removed as a
party), CJCL had the exclusive right to use the Company's Coco's family
restaurant concept in Japan and certain other Asian countries. The Licensing
Agreement also gave CJCL access to certain training procedures and technical
information concerning the operation of Coco's family restaurants. At December
25, 1994, CJCL operated 201 Coco's and four El Torito Mexican restaurants
in Japan, and Midopa Co., Ltd., a sublicensee of CJCL in South Korea,
operated 26 restaurants under the Coco's name in South Korea.
The Licensing Agreement expired on February 4, 1995. The Company has
reached an agreement on terms with CJCL and expects to enter into a new
Technical Assistance and Licensing Agreement with CJCL that will expire in
2010.
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In 1990, the Company established CFC Franchising Company to market
domestically Coco's family restaurant concept franchises. Five of such Coco's
franchised restaurants have been opened. At December 25, 1994, the Company had
entered into Chi-Chi's franchise agreements with four individuals or entities
covering limited portions of two states, the Province of Quebec and all other
international markets, excluding Canada, and an El Torito franchise agreement
with one entity covering New York City. Under these franchise agreements, five
restaurants are operated in the United States and 21 restaurants are operated
in other markets. The Company is not currently actively offering additional
franchises or additional territories in the United States.
All of the Company's franchise agreements provide that the franchisee
will comply strictly with the Company's standards, specifications, processes,
procedures, requirements and instructions regarding the operation of the
franchisee's restaurants. Franchise and license fees were $6,041,000 for the
eleven months ended December 25, 1994 (including Chi-Chi's fees subsequent to
the Acquisition), $546,000 for the one month ended January 26, 1994, $4,942,000
for the year ended December 26, 1993 and $4,885,000 for the year ended December
28, 1992, of which 87%, 82%, 94% and 94%, respectively, were from CJCL and its
sublicensees. Related costs were not significant. The Company has no assets
located overseas but maintains one employee, who lives in Korea, to represent
its interests.
THE ACQUISITION
The Acquisition involved the following components and related
transactions, all of which (unless otherwise noted) were consummated on January
27, 1994 (the "Closing Date"):
New Equity Investment. Apollo, GEI, Foodmaker and certain officers of
the Company made the $154.7 million New Equity Investment in the Company
pursuant to the Acquisition Agreement, dated as of October 15, 1993, among the
Company, Apollo, GEI, Foodmaker and Chi-Chi's (as amended, the "Acquisition
Agreement") and the Employee Stock Purchase (as defined below). Apollo
purchased 389,634 shares of Common Stock (constituting 40.0% of the Common
Stock outstanding immediately following the Closing Date) for $62.3 million in
cash and GEI purchased 179,831 shares of Common Stock (constituting 18.4% of
the Common Stock outstanding immediately following the Closing Date) for $28.8
million in cash. Foodmaker acquired 389,634 shares of Common Stock
(constituting 40.0% of the Common Stock outstanding immediately following the
Closing Date, with a value of $62.3 million) in the Chi-Chi's Merger. Certain
officers of the Company purchased 15,625 shares of Common Stock in the Employee
Stock Purchase. The purchase price in the Employee Stock Purchase was $160 per
share (the same price per share as the New Equity Investment), and fifty
percent thereof was financed through interest-bearing recourse notes payable in
the aggregate amount of $1,250,000 to the Company.
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<PAGE> 8
Chi-Chi's Merger. The Company acquired Chi-Chi's, a wholly-owned
subsidiary of Foodmaker and the operator, directly or indirectly through its
subsidiaries, or franchisor of 235 full-service Mexican restaurants, through a
merger of a newly-formed subsidiary of the Company with Chi-Chi's. Foodmaker
received (a) $205.0 million in cash, less the principal amount of capital
leases and the face amount of certain indebtedness of Chi-Chi's (including
certain Chi-Chi's debentures which were defeased immediately following
consummation of the Chi-Chi's Merger) existing or assumed by the Company in
connection with the Chi-Chi's Merger, (b) 389,634 shares of Common Stock
and (c) a warrant to purchase, at an aggregate exercise price of $26.7 million,
111,111 shares of Common Stock (constituting 10% of the Common Stock
outstanding assuming the full exercise thereof) (the "Foodmaker Warrant").
Credit Facility. The Company, FRI-M Corporation (formerly known as
REG-M Corp.), a wholly-owned subsidiary of the Company (the "Borrower"), and
certain subsidiaries of the Borrower (the "Subsidiary Guarantors") entered into
the Credit Facility on the Closing Date. The Credit Facility is a $150.0
million five-year fully revolving credit facility with a $100.0 million
sub-limit for standby letters of credit and is used for general corporate
purposes, including working capital and capital expenditures. The letter of
credit availability under the Credit Facility replaced the Amended and Restated
Letter of Credit Procurement Facility (the "Old L/C Facility") with Grace,
which was terminated on the Closing Date. Borrowings under the Credit Facility
are made by the Borrower. Such borrowings are guaranteed by the Company and
the Subsidiary Guarantors and are secured by substantially all of the assets of
such subsidiaries and by a pledge of the stock of the Borrower and the
Subsidiary Guarantors.
Prepackaged Plan. The Company and REG-M Corp. commenced Chapter 11
cases on November 23, 1993 after receiving acceptances of a prepackaged joint
plan of reorganization (the "Plan") under the Bankruptcy Code from 100% of the
holders of the Old Notes and Preferred Stock (each as defined) who voted on the
Plan and from holders of over 98% of the Old Common Stock (as defined) who
voted on the Plan. The Plan was confirmed by the United States Bankruptcy
Court for the District of Delaware on January 7, 1994. On the Closing Date,
substantially all of the Company's old debt and equity securities were
cancelled and extinguished through consummation of the Plan and holders thereof
received cash distributions (the "Cash Distributions") as follows. For each
$1,000 principal amount of 12 1/4% Senior Subordinated Notes due 1996 (the "Old
Senior Subordinated Notes"), holders received $939.26 in cash plus an
additional cash amount equal to interest accrued on $939.26 from May 19, 1993
to the Closing Date at a rate equal to 10.05% per annum (the weighted average
of the yields to maturity of the Notes at the time they were issued) (the
"Accrual Rate"). For each $1,000 principal amount of 12 3/4% Subordinated
Notes due 1998 (the "Old Subordinated Notes" and, together with the Old Senior
Subordinated Notes, the "Old Notes"), holders received $646.18 in cash plus an
additional cash amount equal to interest accrued on $646.18 from May 19, 1993
to the Closing Date at the
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Accrual Rate. For each share of 12% Cumulative Exchangeable Preferred Stock
(the "Preferred Stock"), holders received $17.88 in cash and for each share of
Class D Common Stock (the "Old Common Stock"), holders received $.50 in cash.
Employee Stock Purchase and Management Incentive Plan. In connection
with the Acquisition, the Company adopted a new management incentive plan (the
"Management Incentive Plan"), pursuant to which certain officers and employees
of the Company were granted the right to purchase up to 40,900 shares of
Common Stock (constituting up to 4.1% of the Common Stock outstanding
immediately following such purchases) at $160 per share (the "Employee Stock
Purchase"), the same per share price paid by Apollo and GEI in the Equity
Investment. The Employee Stock Purchase was consummated on the Closing Date
with respect to certain officers (15,625 shares of Common Stock) and on May
19, 1994 and July 31, 1994 with respect to the other participants (22,552
shares of Common Stock). No more than fifty percent of the purchase price
was authorized to be financed through interest-bearing recourse notes payable
to the Company. The individuals who purchased Common Stock were also
granted options to purchase 20,822 shares of Common Stock in the future at
an exercise price of $160 per share. The Company also granted options to
purchase 30,600 shares of Common Stock to approximately 820 other
employees.
Strategic Divestment Program. In the first quarter of 1993 the
Company announced a program (the "Original Strategic Divestment Program") to
strategically divest itself of 169 restaurants in order to (i) eliminate
restaurants with negative cash flow, (ii) exit all but the best traditional
dinnerhouse locations and (iii) focus on the Company's family and Mexican
restaurants in the six Western states of California, Arizona, Washington,
Oregon, Nevada and New Mexico.
In connection with the Acquisition, the Company adopted the Strategic
Divestment Program, which reduced by 60 restaurants (from 169 to 109) the
number of restaurants to be divested under the Original Strategic Divestment
Program. Two additional restaurants were added to the program in late 1993.
Also, in connection with the Chi-Chi's Merger, 11 poor performing restaurants
were designated for divestment. As of December 25, 1994, 77 properties had
been divested, leaving 45 properties remaining to be divested (including eight
properties that were closed). Since the Strategic Divestment Program was
scheduled for completion at the end of fiscal 1994, all remaining restaurants
identified for divestment that were operating at the end of fiscal 1994 will be
included in operations in 1995, although many of the restaurants will continue
to be marketed and sold.
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Item 2. PROPERTIES
Of the 702 restaurants operated by the Company as of December 25,
1994, the Company owned the land and building for 71, owned the building and
leased the land for 115 and leased both land and building for the remaining 516
restaurants. Most of the restaurants are free-standing units ranging from
approximately 5,000-6,000 square feet for a family restaurant to approximately
5,000-10,000 square feet for a Mexican restaurant. Most of the leases provide
for the payment of a base rental or approximately 5% to 6% of gross sales,
whichever is greater, plus real estate taxes, insurance and other expenses.
The leases (assuming exercise of all options) have terms expiring as
follows:
<TABLE>
<CAPTION>
Number of
Lease Expiration Restaurants
---------------- -----------
<S> <C>
1995-1999 18
2000-2004 72
2005 and later 541
---
Total 631
===
</TABLE>
In addition, owned properties include (i) a 110,000 square-foot
building in Irvine, California which houses the headquarters of the Mexican
Restaurant Division, a central commissary and a warehouse and (ii) a 43,120
square-foot building in Irvine, California which houses support personnel for
the Company. Leased are (i) 53,000 square feet of a building in Irvine,
California which houses the Family Restaurant Division, the Company's
headquarters personnel and certain support functions of the Company, (ii)
62,000 square feet of a building in Louisville, Kentucky which houses Mexican
Restaurant Division support functions and (iii) various other smaller offices
and warehouses.
Of the 186 owned restaurants at December 25, 1994 (building or land
and building), 16 were subject to security interests in favor of other third
parties. Substantially all of the Company's assets have been pledged under the
Credit Facility.
The following table details the Company-operated restaurants by
division and state of operation as of December 25, 1994.
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<TABLE>
<CAPTION>
Total
Traditional Number of
State Family Mexican Dinnerhouse Restaurants
----- ------ ------- ----------- -----------
<S> <C> <C> <C> <C>
California 261 79 27 367
Ohio 0 32 0 32
Texas 26 0 0 26
Arizona 23 2 0 25
Pennsylvania 0 25 0 25
Illinois 0 23 0 23
Indiana 3 18 0 21
Michigan 0 18 0 18
Virginia 0 16 0 16
Maryland 0 13 0 13
Missouri 2 11 0 13
Oregon 9 3 0 12
Wisconsin 0 12 0 12
Minnesota 0 9 0 9
New Jersey 0 9 0 9
Washington 8 1 0 9
Nevada 8 0 0 8
Colorado 6 1 0 7
Florida 0 7 0 7
Kentucky 0 7 0 7
Iowa 0 6 0 6
New York 0 6 0 6
North Carolina 0 6 0 6
Massachusetts 0 4 0 4
New Mexico 4 0 0 4
Kansas 0 3 0 3
Tennessee 0 3 0 3
West Virginia 0 3 0 3
Delaware 0 2 0 2
North Dakota 0 2 0 2
Connecticut 0 1 0 1
Nebraska 0 1 0 1
South Carolina 0 1 0 1
South Dakota 0 1 0 1
------ ------- ----------- -----------
Total 350 325 27 702
====== ======= =========== ===========
</TABLE>
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Item 3. LEGAL PROCEEDINGS
The Company is involved in various litigation matters incidental to
its business. The Company does not believe that any of the claims or actions
filed against it will have a material adverse effect upon the consolidated
financial position and results of operations of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
There is no established public trading market for the Company's common
stock.
At March 21, 1995, there were 114 stockholders of the Company's Common
Stock. No other class of stock was outstanding as of that date. No dividends
have been paid by the Company to its common stockholders.
Each of the indentures (collectively, the "Indentures") governing the
Senior Notes and the Discount Notes and the Credit Facility impose certain
restrictions on the Company's ability to pay dividends.
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Item 6. SELECTED FINANCIAL DATA
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Successor
Company
Predecessor Company -------------
----------------------------------------------------------------------- As of and for
As of and for the Years Ended For the One the Eleven
------------------------------------------------------- Month Ended Months Ended
Dec. 31, Dec. 30, Dec. 28, Dec. 26, Jan. 26, Dec. 25,
1990 1991 1992 1993 1994 1994
--------- --------- ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Sales $ 905,650 $ 869,862 $ 930,069 $ 884,910 $ 64,741 $ 1,048,674
Cost of Sales:
Product cost 264,163 250,623 276,020 259,512 19,184 293,413
Payroll and related costs 318,740 313,974 352,841 331,747 24,780 377,569
Occupancy and other
operating expenses 206,529 198,240 211,332 197,797 13,712 243,147
Depreciation and amortization 55,559 47,872 50,538 32,224 2,800 48,646
General and administrative
expenses 46,221 45,684 48,376 44,164 4,071 49,059
Gain (loss) on disposition
of properties 1,864 1,097 (7,786) (4,916) 12 (5,685)
Provision for divestitures 0 0 27,871 10,400 0 0
Write-down of goodwill 0 0 107,175 (1) 0 0 144,780 (2)
--------- --------- ---------- --------- ---------- -----------
Operating income (loss) 16,302 14,566 (151,870) 4,150 206 (113,625)
Debt restructuring costs 0 0 1,072 4,239 0 0
Reorganization items 0 0 0 (1,091) 479,427 0
Interest expense, net 43,282 42,321 45,582 50,276 4,097 51,419
Income tax provision 528 522 721 658 55 1,773
--------- --------- ---------- --------- ---------- -----------
Income (loss) before extra-
ordinary item and cumula-
tive effect of a change in
accounting principle (27,508) (28,277) (199,245) (52,114) 475,481 (166,817)
Extraordinary gain on extin-
guishment of debt 0 0 0 0 72,561 2,941
Effect of adopting SFAS 109 0 0 (667) 0 0 0
--------- --------- ---------- --------- ---------- -----------
Net income (loss) (27,508) (28,277) (199,912) (52,114) 548,042 (163,876)
Preferred dividends 12,014 13,499 17,737 20,232 1,698 0
--------- --------- ---------- --------- ---------- -----------
Net income (loss) attribut-
able to common shares $ (39,522) $ (41,776) $ (217,649) $ (72,346) $ 546,344 $ (163,876)
========= ========= ========== ========= ========== ===========
Loss per common share before
extraordinary item (3) $ (168.55)
Net loss attributable to
common shares (3) $ (165.58)
Balance Sheet Data:
Working capital (deficiency) $ (57,675) $ (59,024) $ (109,692) $ (95,209) $ (155,481)
Current assets 88,637 77,769 64,948 77,109 43,015
Total assets 530,070 486,449 383,298 366,577 734,598
Current liabilities 146,312 136,793 174,640 172,318 198,496
Liabilities subject to settle-
ment under reorganization
proceedings 0 0 277,010 (4) 320,194 (4) 0
Non-current portion of long-
term debt, including
capitalized lease
obligations 355,288 329,606 84,133 78,658 536,495
Redeemable cumulative
exchangeable preferred stock 109,213 122,712 163,689 183,921 0
Common stockholders' (deficit) (80,743) (102,662) (319,470) (391,638) (7,259)
Selected Consolidated Financial
Ratios and Other Data:
EBITDA (5) $ 69,997 $ 61,341 $ 41,500 $ 51,690 $ 2,994 $ 85,486
Net income (loss) (27,508) (28,277) (199,912) (52,114) 548,042 (163,876)
Net cash provided by (used in)
operating activities 38,748 11,338 31,252 25,352 (18,252) 18,346
Capital expenditures 22,949 16,730 38,255 (6) 20,064 779 65,618
Net cash provided by (used in)
investing activities (8,215) (15,072) (34,472) (10,717) (192,610) (64,167)
Net cash provided by (used in)
financing activities (9,331) (10,278) 3,474 (19,839) 223,754 31,858
Restaurants open at end
of period 516 501 587 528 524 702
Ratio of EBITDA to interest
expense (5) 1.62 x(7) 1.45 x(7) 0.91 x(7) 1.03 x(7) 0.73 x(7) 1.66 x
</TABLE>
- 14 -
<PAGE> 15
(1) The historical basis of the Predecessor Company's recorded value of
goodwill represented the excess of the purchase price paid over the
fair value of the identifiable net assets acquired in the 1986
acquisition of the Predecessor Company from Grace (the "1986
Acquisition"). Goodwill was allocated to the respective divisions
based on the financial forecast of the Predecessor Company at the time
of the 1986 Acquisition which was developed using the historical
experience of the Predecessor Company, industry trends and
management's estimates of future performance. Subsequent to the 1986
Acquisition, the Predecessor Company sustained significant losses and
did not meet the previously prepared forecasts of revenues and
operating cash flow for its Mexican and traditional dinnerhouse
restaurants. Further, the Predecessor Company determined that the
Mexican and traditional dinnerhouse restaurants were experiencing
these negative trends due to increasing competitive pressure resulting
from the lack of sufficient amounts of capital to maintain and improve
their facilities. The negative trends and operating losses worsened
in late 1992. These factors raised substantial doubt about the
Predecessor Company's ability to achieve the results of operations
forecast for the Mexican and traditional dinnerhouse restaurants at
the time of the 1986 Acquisition and indicated that the value of the
previously recorded goodwill for such restaurants would not be
realized. Accordingly, the Predecessor Company wrote off the
remaining book value of goodwill allocated to these restaurants at
December 28, 1992.
(2) During the fourth quarter of 1994, the Company wrote off the
unamortized balance of the goodwill which was recorded in connection
with the Chi-Chi's Merger of $144,780,000. See Note 8 of the
Company's audited consolidated financial statements.
(3) Net loss per common share for the Predecessor Company is not
meaningful due to debt discharge, the issuance of New Common Stock and
fresh start reporting. Loss per common share for the Successor
Company is computed based on the weighted average shares actually
outstanding (989,683 shares for the eleven months ended December 25,
1994). The impact of the Foodmaker Warrant and options has not been
included since the impact would be antidilutive.
(4) Liabilities that were cancelled and extinguished as part of the Plan
are separately classified in the consolidated balance sheets as
liabilities subject to settlement under reorganization proceedings and
include the following:
- 15 -
<PAGE> 16
<TABLE>
<CAPTION>
1993 1992
-------- --------
(in thousands)
<S> <C> <C>
Old Senior Subordinated Notes $191,928 $187,048
Old Subordinated Notes 78,916 78,770
Accrued interest 52,720 15,531
Debt issuance and other costs (3,370) (4,339)
-------- --------
$320,194 $277,010
======== ========
</TABLE>
(5) EBITDA is defined as earnings (loss) before gain (loss) on disposition
of properties, provision for divestitures, write-down of goodwill,
interest, taxes, depreciation and amortization. The Company has
included information concerning EBITDA herein because it understands
that such information is used by certain investors as one measure of
an issuer's historical ability to service debt. EBITDA should not be
considered as an alternative to, or more meaningful than, operating
income (loss) as an indicator of operating performance or to cash
flows from operating activities as a measure of liquidity.
(6) Consolidated capital expenditures includes $12,374,000 for the net
cash used in the acquisition of Bob's Big Boy restaurants in 1992 (the
"Bob's Big Boy Acquisition").
(7) Ratio of EBITDA to interest expense is based on the Company's
historical capital structure which is not representative of the
Company's capital structure subsequent to the Acquisition.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Predecessor Company had experienced liquidity problems beginning
in mid-1992, due primarily to a sales decline in the Company's Mexican and
traditional dinnerhouse restaurants and expenditures made to convert the Bob's
Big Boy Restaurants to the Company's Coco's or Carrows family-dining concepts.
The decline in sales was attributable to several factors, including lack of
sufficient capital to remodel and modernize the Company's restaurants,
continued negative trends in alcoholic beverage sales in the Mexican and
traditional dinnerhouse restaurants, and the economic recession in California
(where a majority of the Predecessor Company's restaurants were located). As a
result of these liquidity problems, the Predecessor Company was unable to meet
its obligations to certain of its creditors and was in default on most of its
indebtedness during 1993.
The Company and REG-M Corp. commenced Chapter 11 cases on November 23,
1993 after receiving acceptances of the Plan from 100% of the holders of the
Old Notes and Preferred Stock who voted on the Plan and from holders of over
98% of the Old Common Stock who voted on the Plan. The Plan was confirmed by
the United States Bankruptcy Court for the District of Delaware on January 7,
1994.
- 16 -
<PAGE> 17
On January 27, 1994, substantially all of the Company's old debt and equity
securities were cancelled and extinguished through consummation of the Plan.
As a result of the consummation of the Acquisition on January 27,
1994, the Company relies primarily on internally generated funds, supplemented
by working capital advances under the Credit Facility for its liquidity.
Management believes that funds available from these sources will be sufficient
to meet the Company's working capital, debt service and capital expenditure
requirements for the foreseeable future.
Operating Cash Flow. During 1994, the Predecessor and Successor
Companies reported combined EBITDA (defined as earnings (loss) before gain
(loss) on disposition of properties, interest, taxes, depreciation and
amortization) of $88.4 million. If Chi-Chi's had been included for the one
month ended January 26, 1994, EBITDA would have been increased by $1.6 million
to $90.0 million. The Company has included information concerning EBITDA
herein because it understands that such information is used by certain
investors as one measure of an issuer's historical ability to service debt.
EBITDA should not be considered as an alternative to, or more meaningful than,
operating income (loss) as an indicator of operating performance or to cash
flows from operating activities as a measure of liquidity.
Working Capital Deficiency. The Company can operate with a
substantial working capital deficiency because (i) restaurant operations are
conducted primarily on a cash (and cash equivalent) basis with a low level of
accounts receivable, (ii) rapid turnover allows a limited investment in
inventories and (iii) cash from sales is usually received before related
accounts payable for food, beverages and supplies become due. The Company had
a working capital deficiency of $155.5 million on December 25, 1994.
Credit Facility. On the Closing Date, the Company, the Borrower and
the Subsidiary Guarantors entered into the Credit Facility. The Credit
Facility is a $150.0 million five-year fully revolving credit facility with a
$100.0 million sub-limit for standby letters of credit and is used for general
corporate purposes, including working capital and capital expenditures. See
"BUSINESS--The Acquisition--Credit Facility." In the third quarter of 1994,
borrowings in the amount of $22.6 million were made to fund the purchase of 8%
promissory notes and related accrued interest due Marriott at an 11-1/2%
discount. This transaction resulted in an extraordinary gain of $2.9 million.
The entire outstanding balance of $59.6 million at December 25, 1994 has been
classified as long-term debt since the borrowings are not due for payment until
January 27, 1999, and there are no current plans to pay down the outstanding
balance. Borrowings in the amount of $85.0 million were outstanding under the
Credit Facility as of March 21, 1995. Standby letters of credit are issued
primarily to provide security for future amounts payable by the Company under
its workers' compensation insurance program ($40.0 million of such letters of
credit were outstanding as of March 21, 1995). The Credit Facility contains
various covenants including the maintenance of certain financial ratios.
- 17 -
<PAGE> 18
CAPITAL EXPENDITURES
The Company. Net cash used in investing activities was $256.8 million
for fiscal 1994 compared to $10.7 million and $34.5 million for fiscal 1993 and
1992, respectively. Included in investing activities for 1994 is the
acquisition of Chi-Chi's, which represented $192.4 million, and the conversion
of the remaining Bob's Big Boy Restaurants, which represented $8.3 million, and
included in investing activities for 1993 is the conversion of other Bob's Big
Boy Restaurants, which represented $13.3 million. Also included in investing
activities for 1994 are $8.1 million in proceeds from disposal of property and
equipment as compared to $18.1 million in proceeds for 1993.
Chi-Chi's. Historical capital expenditures for Chi-Chi's amounted to
$14.5 million and $32.6 million for the years ended September 27, 1992 and
October 3, 1993, respectively. The capital expenditures in fiscal 1993
included the purchase of 22 franchisee restaurants for an aggregate of $8.7
million in cash and the assumption of approximately $3.8 million of secured
debt. The remainder of these expenditures primarily consists of the investment
in new restaurants with the balance related to maintenance and refurbishing
costs.
Capital Expenditure Requirements. The Company converted an additional
19 Bob's Big Boy Restaurants to the Coco's and Carrows formats during 1994.
As of December 25, 1994, the Company had converted 97 of the 109 Bob's Big Boy
Restaurants to Coco's and Carrows. Eight of the Bob's Big Boy Restaurants have
been sold and four have been identified for divestment.
As an integral part of its strategy to increase sales and
profitability in both the family and Mexican restaurants, the Company embarked
in 1994 on a comprehensive capital investment program. The Company expected to
spend an aggregate of approximately $100 million to $130 million of
discretionary funds under such capital investment program, in addition to the
annual capital expenditures of approximately $16 million to $19 million devoted
to normal maintenance of the Company's restaurants. Subsequent to the
Acquisition, the Company remodeled 66 family
- 18 -
<PAGE> 19
restaurants and 63 Mexican restaurants at an aggregate cost of approximately
$22.5 million. Based on existing market conditions, the Company still plans on
completing its capital reinvestment program in the Family Restaurant Division
by the end of 1996. In addition, the Company plans to add approximately 15 new
family restaurants in 1995. However, as a result of the declining Mexican
Restaurant Division sales, the Company has discontinued all remodels of the
Chi-Chi's restaurants and has no current plans to open new Mexican restaurants.
GOODWILL WRITE-OFF
As previously reported by the Company (and as further described
below), the Mexican Restaurant Division, particularly the Chi-Chi's
restaurants, reported significant sales declines in the second half of 1994
which have continued into the first quarter of 1995. These sales declines have
resulted in operating performance for the Chi-Chi's restaurants which is
significantly lower than anticipated at the time of the Acquisition.
CSPI Report. In July 1994, the Center for Science in the Public
Interest ("CSPI") released a report which claimed, among other things, that
Mexican meals are high in fat, saturated fat and sodium and that there are
fewer low fat or low sodium choices in Mexican restaurants than in the Italian
and Chinese restaurants that had been previously analyzed. Although restaurant
officials disagreed with the report and CSPI's methods, subsequent to the CSPI
study, Chi-Chi's restaurants began reporting significant declines in sales.
The Company introduced a new program, called "New Mex," to all restaurants in
the Mexican Restaurant Division. This new program included an extensive list
of changes including new menu items, new recipes, a new menu design and look,
new commercials, new china and new uniforms. This program proved ineffective
in the Chi-Chi's restaurants.
Comparable Sales Declines. Chi-Chi's restaurants reported declines in
sales at comparable restaurants (as defined below) of 7.4% in the third quarter
of 1994 and 15.7% in the fourth quarter of 1994. As a result of this poor
sales performance, the Chi-Chi's restaurants achieved EBITDA (pro forma for the
entire 1994 fiscal year) approximately 50% below the level achieved in 1993.
The comparable restaurant sales declines for Chi-Chi's have continued in 1995.
Acquisition Business Strategy. At the time of the Acquisition, the
Company identified three key sales building strategies for the Mexican
Restaurant Division. The Company planned to build sales by (i) implementing a
unified marketing and food and beverage strategy as part of the goal of
integrating all of the Mexican concepts; (ii) completing a comprehensive
refurbishment program of substantially all of the Mexican restaurants in order
to enhance customers' dining experience and attract new customers; and (iii)
following the completion of the
- 19 -
<PAGE> 20
refurbishment program, which was expected to occur during the first three years
following the Acquisition, adding 12 to 20 new restaurants per year. These new
restaurants would have been added in existing markets in order to take
advantage of efficiencies in advertising and management. It was anticipated
that these business strategies would result in a substantial improvement to the
sales and cash flow performance of the Mexican Restaurant Division. The
valuation of the Chi-Chi's business at the time of the Acquisition was based on
the successful completion of these business strategies and the resulting
anticipated increase in sales and cash flow.
Reevaluation of the Business Strategy. In the case of Chi-Chi's, all
facets of the Acquisition Business Strategy described above have been
reevaluated. The Mexican Restaurant Division is moving to reestablish a
separate marketing department for Chi-Chi's as different regional tastes have
proven the unified marketing and food and beverage strategy to be unsuccessful.
In addition, as a result of the lack of improvement in the performance of the
remodels completed in 1994, all remodels of the Chi-Chi's restaurants have been
discontinued. As a result of these significant setbacks, no future expansion
of Chi-Chi's is currently planned.
Consistent with this strategic reevaluation, the Company has revised
its forecasts for the future operations of Chi-Chi's which has resulted in a
significant reduction in projected future cash flows and a lower valuation of
the business. Furthermore, management has concluded that it is unlikely that
the Chi-Chi's restaurants will return to prior profitability levels in the
foreseeable future. Accordingly, in the fourth quarter of 1994, the Company
completed an evaluation of the carrying value of the Chi-Chi's goodwill which
determined that the entire unamortized balance of $144,780,000 at December 25,
1994 should be written off.
For a more detailed discussion of the methodology and assumptions
employed to assess the recoverability of the Chi-Chi's goodwill, refer to Note
8 of the Company's audited consolidated financial statements.
RESULTS OF OPERATIONS
As used herein, "comparable restaurants" are restaurants operated by
the Company on the first day of the earlier fiscal year and which continued in
operation through the last day of the later year being compared.
FISCAL YEAR 1994 AS COMPARED TO FISCAL YEAR 1993
As a result of the impact of the Acquisition on the Company's capital
structure, the Company's adoption of fresh start reporting and the acquisition
of Chi-Chi's, the results of operations of 1994 are not readily comparable to
those of 1993. For certain key operating elements of the statement of
operations, however, the following analysis of a comparison of 1994's
operations (eleven months of Successor Company plus one month of Predecessor
Company) to 1993's operations of the Predecessor Company is provided. Because
of the lack of comparability of results, depreciation and amortization and
interest expense, net are not discussed.
- 20 -
<PAGE> 21
The Company's total sales for 1994 increased 25.8% ($228,505,000) as
compared to total sales for 1993. This increase was due to the addition of
sales for Chi-Chi's restaurants effective with the Chi-Chi's Merger on January
27, 1994, the impact of additional sales for the Bob's Big Boy Restaurants after
conversion to Coco's and Carrows, the additional sales of new restaurants
opened during 1993 and 1994 and an increase in sales of continuing comparable
restaurants, offset, in part, by decreases related to restaurants divested,
closed or identified for divestment. The breakdown of the increase in sales
for 1994 is set forth below:
<TABLE>
<CAPTION>
1994 Sales
Increase
----------
($ in thousands)
<S> <C>
Acquisition of Chi-Chi's $ 338,816
Increase in Sales of Bob's Big Boy Restaurants (1) 16,608
Increase in Sales of New Restaurants (2) 5,059
Increase in Sales of Comparable Continuing
Restaurants 4,237
Decrease in Sales of Restaurants Sold, Closed or
Identified for Divestment (136,215)
---------
Total $ 228,505
=========
</TABLE>
------------------
(1) Reflects increased sales for the Bob's Big Boy Restaurants converted
to Coco's or Carrows in 1993 and 1994.
(2) Reflects the Company's opening of three new restaurants in 1993 and
four new restaurants in 1994.
Sales for continuing comparable restaurants increased 0.7%
($4,237,000) for 1994 as compared to 1993. The comparable sales increase for
1994 reflects a 1.3% increase in the Family Restaurant Division, a basically
flat performance at the El Torito restaurants and a decrease in other
restaurants.
Product cost increased by $53,085,000 or 20.5% in 1994 as compared to
1993. This increase reflects the acquisition of Chi-Chi's on January 27, 1994
offset, in part, by the impact of restaurants divested, closed or no longer
considered continuing restaurants in connection with the Strategic Divestment
Program. As a percentage of sales, product cost decreased from 29.3% in 1993
to 28.1% in 1994 due to the elimination of the restaurants identified for
divestment which generally have poorer margins as a result of lower sales
volumes and the impact of Chi-Chi's which has lower product cost than the
continuing restaurants of the Predecessor Company.
Payroll and related costs increased by $70,602,000 or 21.3% in 1994 as
compared to 1993. This increase reflects the impact of the same issues
affecting product cost. As a percentage of sales, payroll and related costs
decreased from 37.5% in 1993 to 36.1% in 1994 also due to the elimination of
the restaurants identified for
- 21 -
<PAGE> 22
divestment which generally have poorer margins as a result of lower sales
volumes and the impact of Chi-Chi's which has lower payroll and related costs
than the continuing restaurants of the Predecessor Company.
In February 1995, President Clinton called for Congress to raise the
minimum wage by $.90 over the next two years. Implementation of legislation
increasing the minimum wage would increase the labor costs of the Company and
the restaurant industry as a whole.
Occupancy and other operating expenses increased by $59,062,000 or
29.9% in 1994 compared to 1993. Once again, this increase reflects the impact
of the same issues affecting product cost and payroll and related costs. As a
percentage of sales, occupancy and other operating expenses increased from
22.4% in 1993 to 23.1% in 1994. This increase is primarily due to the impact
of Chi-Chi's which for the months included for 1994 had higher occupancy and
other operating expenses as a percentage of sales than the continuing
restaurants of the Predecessor Company.
General and administrative expenses increased by 20.3% ($8,966,000) in
1994 as compared to 1993, primarily due to the Chi-Chi's Merger. As a
percentage of sales, general and administrative expenses decreased from 5.0% in
1993 to 4.8% in 1994.
During 1994, the restaurants included in the Strategic Divestment
Program had sales of $58,511,000 and losses of $7,434,000, including direct
general and administrative expenses in the amount of $1,583,000, which were
charged against the reserve for divestitures. In addition, severance costs of
$617,000 were charged against the reserve for divestitures in 1994. During the
third quarter of 1994, the net realizable value of the remaining assets held
for sale was reduced by $2,344,000 which is included in loss on disposition of
properties in the accompanying consolidated statement of operations. In
addition, the Company increased the reserve relating to potential shortfalls in
future sublease income by $2,799,000 in the third quarter of 1994. This
adjustment is also included in loss on disposition of properties.
In recording the acquisition of Chi-Chi's, eleven poor performing
restaurants were added to the Strategic Divestment Program, and reserves of
$10,758,000 were provided. These reserves included one year's estimated
operating losses and the potential shortfall in future sublease income. During
1994, operating losses of $2,404,000 and lease termination payments of
$1,439,000 were charged against these reserves.
As of December 25, 1994, 45 properties (including seven of the
Chi-Chi's restaurants) remained to be divested, of which eight were closed.
Since the Strategic Divestment Program was scheduled for completion at the end
of fiscal 1994, the operating results of the remaining 37 restaurants will be
included in the Company's
- 22 -
<PAGE> 23
consolidated statement of operations in 1995, although many of the restaurants
will continue to be marketed and sold.
FISCAL YEAR 1993 AS COMPARED TO FISCAL YEAR 1992
The Company's total sales for 1993 decreased 4.9% ($45,159,000) as
compared to total sales for 1992. This decrease was due to the divestment or
closure of 87 restaurants during 1992 and 1993 and a decrease in sales of
comparable restaurants. These sales declines were offset, in part, by the
impact of the additional sales for the full year in 1993 (52 weeks versus only
46 weeks of operations during 1992) of the Bob's Big Boy Restaurants and the
additional sales of four new restaurants opened during 1992 and 1993. The
breakdown of the decrease in sales for 1993 is set forth below:
<TABLE>
<CAPTION>
1993 Sales
Decrease
----------
($ in thousands)
<S> <C>
Decrease in Sales of Restaurants Sold or Closed (1) $(56,188)
Decrease in Sales of Comparable Restaurants (19,558)
Increase in Sales of New Restaurants (2) 1,754
Increase in Sales of Bob's Big Boy Restaurants 28,833
--------
Total $(45,159)
========
</TABLE>
------------------
(1) The divestment or closure of restaurants included 25 restaurants in
1992 and 62 restaurants in 1993.
(2) Reflects the Company's opening of two new restaurants in 1992 and two
new restaurants in 1993.
Sales for comparable restaurants decreased 2.7% ($19,558,000) for 1993
as compared to 1992. The comparable sales decrease for 1993 primarily
reflected reduced sales at the 111 non-strategic restaurants identified in
connection with the Strategic Divestment Program, which were operated in a very
different manner from the restaurants that will remain after completion of the
Strategic Divestment Program. Generally, advertising and other sales building
activities for these restaurants were curtailed in an effort to control costs.
Product cost decreased by $16,508,000 or 6.0% in 1993 as compared to
1992. This reduction primarily reflects the divestment or closure of
restaurants pursuant to the Strategic Divestment Program. As a percentage of
sales, product cost decreased from 29.7% in 1992 to 29.3% in 1993.
Contributing to the decreased percentage of product cost for 1993 were lower
food costs in both the family and Mexican restaurants.
Payroll and related costs decreased by $21,094,000 or 6.0% in 1993 as
compared to 1992. This reduction also primarily reflected the divestment or
closure of restaurants pursuant to the Strategic Divestment Program. As a
percentage of sales, payroll and related costs decreased from 37.9% in 1992 to
37.5% in 1993. Reductions in
- 23 -
<PAGE> 24
hourly labor and fringe costs and the impact of a $3.0 million charge to
casualty insurance expense in the fourth quarter of 1992 pursuant to the
Company's periodic review of insurance reserve requirements, which more than
offset increases in managers' salaries, resulted in the decline as a percentage
of sales.
Occupancy and other operating expenses decreased by $30,617,000 or
11.9% in 1993 as compared to 1992. Once again, this reduction primarily
reflected the divestment or closure of restaurants pursuant to the Strategic
Divestment Program. In addition, depreciation expense was significantly
reduced in 1993 due to the write-downs of the 111 properties identified for
divestment to their estimated net realizable values at the end of fiscal year
1992. As a percentage of sales, occupancy and other operating expenses
decreased from 27.7% in 1992 to 25.7% in 1993. The decreased percentage of
sales for 1993 was primarily due to the reduction in depreciation expense
discussed above.
General and administrative expenses (including conversion expenses)
decreased by 10.4% ($5,444,000) from $52,402,000 (5.6% of sales) in 1992 to
$46,958,000 (5.3% of sales) in 1993. This decrease reflects the impact of
expense reductions due to the decision to divest 111 non-strategic
restaurants, reduced goodwill amortization related to the goodwill write-off
recorded in the fourth quarter of 1992 and several non-recurring charges
recorded in the fourth quarter of 1992 which more than offset field supervision
related to the Bob's Big Boy Restaurants which was incurred for all of 1993 (52
weeks) compared to only 46 weeks in 1992. In addition, expenses related to
restaurant conversions charged to expense in 1993 were $1,984,000 compared to
$505,000 in 1992. The Company was generally amortizing these conversion costs
over a two-year period.
Interest expense increased 10.3% ($4,694,000) in 1993 as compared to
1992. This increase was primarily due to a full year's impact of interest on
the indebtedness and capitalized lease obligations incurred in connection with
the Bob's Big Boy Acquisition, interest on the $6.5 million in Old Senior
Subordinated Notes sold in early January 1993 and compounded accrued interest
on the Old Notes.
An additional provision for divestitures in the amount of $10,400,000
was recorded in the fourth quarter of 1993 related to the 111-restaurant
Strategic Divestment Program. See "BUSINESS--The Acquisition." This provision
included occupancy costs of $1,179,000 related to closed restaurants,
write-down of property and equipment of $1,908,000, future operating losses of
the non-strategic restaurants (including direct general and administrative
expenses) of $7,615,000 and the reversal of $302,000 in excess severance
accruals. During 1993, the restaurants included in the Strategic Divestment
Program had sales of $116,032,000 and losses of $8,690,000. Other losses from
the disposition of properties amounting to $4,916,000 were reported in 1993.
This compares to a net loss of $7,786,000 from the disposition of properties in
1992.
- 24 -
<PAGE> 25
Debt restructuring costs of $4,239,000 were incurred in 1993. These
costs primarily represented payments to financial and legal advisors of the
Company, Grace and the unofficial committee of holders of Old Notes, as well as
the accrual of $1,339,000 in severance liabilities for three terminated
executives. In addition, the Company incurred $1,091,000 for professional fees
and other expenses directly related to the filing of the Plan.
The Company reported a loss before income tax provision in 1993 and
1992. Accordingly, the income tax provisions for each period primarily
reflected certain state, local and foreign taxes.
SELECTED DIVISION OPERATING DATA
The following table sets forth certain information regarding the
continuing operations of the Company, the Family Restaurant Division and the
Mexican Restaurant Division and excludes restaurants identified for divestment
under the Strategic Divestment Program (37 open and operating restaurants at
December 25, 1994). Chi-Chi's data has been included in the Mexican Restaurant
Division on a pro forma basis as if the acquisition had occurred as of the
beginning of fiscal 1993.
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------
December 25, December 26,
1994 1993
------------ ------------
($ in thousands, except
average check amount)
<S> <C> <C>
Family Restaurant Division
--------------------------
Restaurants Open at End of Period:
Owned/operated 343 347
Franchised and Licensed 232 210
Sales $ 501,286 $ 481,629
Divisional EBITDA (a) 57,963 49,867
Percentage increase (decrease) in
comparable restaurant sales 1.3% (0.1)%
Average Check $ 6.10 $ 5.95
Mexican Restaurant Division
---------------------------
Restaurants Open at End of Period:
Owned/operated 311 317
Franchised and Licensed 30 32
Sales $ 614,088 $ 649,493
Divisional EBITDA (a) 33,420 49,580
Percentage increase (decrease) in
comparable restaurant sales (4.7)% (3.6)%
Average Check $ 8.07 $ 7.76
</TABLE>
- 25 -
<PAGE> 26
<TABLE>
<S> <C> <C>
Total Company
-------------
Restaurants Open at End of Period:
Owned/operated 665 679
Franchised and Licensed 262 242
Sales $1,143,806 $1,166,923
EBITDA (b) 90,036 95,847
Percentage increase (decrease) in
comparable restaurant sales (2.3)% (2.6)%
</TABLE>
------------------
(a) Divisional EBITDA with respect to any operating division is defined as
earnings (loss) before gain (loss) on disposition of properties,
unallocated corporate overhead, interest, taxes, depreciation and
amortization.
(b) EBITDA is defined as earnings (loss) before gain (loss) on disposition
of properties, interest, taxes, depreciation and amortization. The
Company has included information concerning EBITDA herein because it
understands that such information is used by certain investors as one
measure of an issuer's historical ability to service debt. EBITDA
should not be considered as an alternative to, or more meaningful
than, operating income (loss) as an indicator of operating performance
or to cash flows from operating activities as a measure of liquidity.
INFLATION
The inflationary factors which have historically affected the
Company's results of operations include increases in the cost of food,
alcoholic beverages, labor and other operating expenses. In addition, most of
the Company's real estate leases require the Company to pay taxes, maintenance,
insurance, repairs and utility costs, all of which are subject to the effects
of inflation. To date, the Company has offset the effects of inflation, at
least in part, through periodic menu price increases and various cost-cutting
programs, but no assurance can be given that the Company will continue to be
able to offset such increases in the future.
During 1994 and 1993, the effects of inflation did not have a
significant impact on the Company's results of operations.
SEASONALITY
The Company, as a whole, does not experience significant seasonal
fluctuations in sales. However, the Company's sales tend to be slightly
greater during the spring and summer months.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Index to Financial Statements on page F-1.
- 26 -
<PAGE> 27
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On July 28, 1994, the Company engaged the accounting firm of KPMG Peat
Marwick LLP as independent accountants to audit the Company's consolidated
financial statements for the fiscal year ended December 25, 1994, replacing the
firm of Deloitte & Touche LLP, public accountants for the Company's most recent
certified financial statements.
Deloitte & Touche LLP's report on the financial statements for each of
the past two years did not contain an adverse opinion or a disclaimer of
opinion, nor was it qualified or modified as to audit scope or accounting
principles, except that Deloitte & Touche LLP's most recent report on the
consolidated financial statements of Family Restaurants, Inc. and subsidiaries
as of, and for the year ended December 26, 1993, contained a separate paragraph
stating that "the Company commenced a Chapter 11 bankruptcy case on November
23, 1993, which was confirmed by the United States Bankruptcy Court for the
District of Delaware on January 7, 1994. Accordingly, the accompanying
consolidated financial statements have been prepared in conformity with AICPA
Statement of Position 90-7 - Financial Reporting for Entities in Reorganization
and the Bankruptcy Code."
The Board of Directors, at its meeting held on July 28, 1994, approved
the decision to change accountants after the Company solicited bids from
several accounting firms, including Deloitte & Touche LLP. After reviewing the
bids, the Company engaged KPMG Peat Marwick LLP as the Company's independent
accountants.
There have been no disagreements with Deloitte & Touche LLP on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure, which disagreement(s) if not resolved to the
satisfaction of Deloitte & Touche LLP would have caused Deloitte & Touche LLP
to make reference to the subject matter of the disagreement(s) in connection
with its report.
- 27 -
<PAGE> 28
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
current Directors and executive officers of the Company:
<TABLE>
<CAPTION>
Name Age Position With Company
----------------------- --- -----------------------------------------
<S> <C> <C>
Jackson W. Goodall, Jr. 56 Chairman of the Board and Chief Executive
Officer
Barry E. Krantz 50 President, Chief Operating Officer,
President, Mexican Restaurant Division
and a Director
Peter P. Copses 36 Director
Charles W. Duddles 54 Director
Edward Gibbons 58 Director
Leonard I. Green 61 Director
John H. Kissick 53 Director
Antony P. Ressler 34 Director
Jonathan D. Sokoloff 37 Director
Martin M. Casey 49 Executive Vice President and Chief
Financial Officer
Patricia K. Johnson 37 Executive Vice President and Chief
Administrative Officer
Kevin S. Relyea 40 Executive Vice President and President,
Family Restaurant Division
</TABLE>
Mr. Goodall serves as Chairman of the Board and Chief Executive
Officer of the Company. Mr. Goodall has been President of Foodmaker since
April 1970, Chief Executive Officer of Foodmaker since February 1979 and
Chairman of Foodmaker since October 1985. He has been a director of Grossmont
Bank, a wholly-owned subsidiary of Bancomer, S.A., since 1980, a director of
Van Camp Seafood Company, Inc. since April 1992; a director of Thrifty
Holdings, Inc. since October 1992 and a director of Ralcorp Holdings, Inc.
since March 1994. He was a Vice President of Ralston Purina Company, a
multinational holding company, from July 1981 to October 1985, and he was a
director of Budget Rent-A- Car from June 1987 to March 1989. Mr. Goodall
received his B.S. Degree from San Diego State University. On February 22,
1995, the Company announced that it had begun a search to identify and hire a
new chief executive officer.
Mr. Krantz serves as President, Chief Operating Officer, President,
Mexican Restaurant Division and a Director of the Company. Mr. Krantz has
served as President, Mexican Restaurant Division since February 1995, as
President of the Company since January 1994, as Chief Operating Officer of the
Company since March 1993 and as President of CFC Franchising Company since
March 1993. He served as Senior Vice President of the Company from August 1992
to January 1994 and as President, Family Restaurant Division of the Company
from December 1988 to January 1994. He was a Director of the Company from
August 1991 to June 1993. Prior to joining the Company, Mr. Krantz spent nine
years at Denny's Inc., during the last six of which he served as Senior Vice
President, Marketing and
- 28 -
<PAGE> 29
Concept Development for Denny's restaurants. He received his B.A. degree from
the University of Pennsylvania and his M.B.A. degree from the Graduate School
of Business at Stanford University.
Mr. Copses serves as a Director of the Company. Since 1990, Mr. Copses
has been a principal of Apollo Advisors, L.P. which acts as managing general
partner of Apollo Investment Fund, L.P. and AIF II, L.P. which are securities
investment funds, and of Lion Advisors, L.P., which acts as financial advisor
to and representative for certain institutional investors with respect to
securities investments. From March to September 1990, Mr. Copses was a Vice
President in the investment banking department of Donaldson, Lufkin & Jenrette
Securities Corporation. From 1988 to 1990, he was employed with Drexel Burnham
Lambert Incorporated, an investment banking firm. Mr. Copses is a director of
Dominick's Supermarkets, Inc., Forum Group, Inc., Calton, Inc and Zale
Corporation.
Mr. Duddles serves as a Director of the Company. Since 1988, Mr.
Duddles has been Executive Vice President and Chief Administrative Officer of
Foodmaker. He has been Chief Financial Officer of Foodmaker since 1985 and was
Senior Vice President from 1985 to 1988. He was previously Vice President and
Controller of Foodmaker from 1979 to 1981 and Senior Vice President, Finance
and Administration, from 1981 to 1985. Mr. Duddles has been a director of
Foodmaker since 1988.
Mr. Gibbons serves as a Director of the Company. Since 1985, Mr.
Gibbons has been a director of Foodmaker, and he has been a general partner of
Gibbons, Goodwin, van Amerongen ("GGvA"), an investment banking firm
specializing in management buyouts, for more than five years preceding the date
hereof. Mr. Gibbons also serves as a director of Robert Half International,
Inc., Bath Iron Works Corporation and Horace Mann Educators Corporation.
Mr. Green serves as a Director of the Company. Since 1989, Mr. Green
has been a general partner of (or the co-trustee of a trust that is a general
partner of) Leonard Green & Associates, L.P., the general partner of GEI. Mr.
Green has been a director of Foodmaker since 1985. Until June 1989 and for
more than five years preceding that date, he was a partner of the investment
banking firm of Gibbons, Green, van Amerongen. Mr. Green also serves as a
director of Carr-Gottstein Foods Co., Horace Mann Educators Corporation,
Thrifty PayLess, Inc., United Merchandising Corporation and Australian
Resources Limited.
Mr. Kissick serves as a Director of the Company. Since 1991, Mr.
Kissick has been a limited partner of Lion Advisors, L.P., which acts as
financial advisor to and representative for certain institutional investors
with respect to securities investments. From 1990 to 1991, Mr. Kissick was a
consultant with Kissick & Associates, an investment advisory firm. Prior to
1990, he served
- 29 -
<PAGE> 30
as an Executive Vice President of Drexel Burnham Lambert Incorporated, an
investment banking firm. Mr. Kissick also serves as a director of Interco
Incorporated, Williamhouse Regency, Incorporated, Converse, Inc. and Florsheim
Shoe Company.
Mr. Ressler serves as a Director of the Company. In 1990, Mr. Ressler
was one of the founding principals of Apollo Advisors, L.P., which acts as a
managing general partner of Apollo Investment Fund, L.P. and AIF II, L.P.,
which are securities investment funds, and a limited partner of Lion Advisors,
L.P., which acts as financial advisor to and representative for certain
institutional investors with respect to securities investments. From prior to
1987 to 1990, he was a Senior Vice President in the High Yield Bond Department
of Drexel Burnham Lambert Incorporated, an investment banking firm. Mr. Ressler
is a director of Dominick's Supermarkets, Inc., Forum Group, Inc., Gillett
Holdings, Inc., United International Holdings, Inc. and PRI Holdings, Inc.
Mr. Sokoloff serves as a Director of the Company. Since 1990, Mr.
Sokoloff has been a partner of Leonard Green & Associates, L.P., the general
partner of GEI. He was previously a managing director in corporate finance at
Drexel Burnham Lambert Incorporated and had been with Drexel since 1985. Mr.
Sokoloff is a director of Thrifty PayLess, Inc., United Merchandising
Corporation, Carr-Gottstein Foods, Co. and Gart Sports.
Mr. Casey serves as Executive Vice President and Chief Financial
Officer of the Company. Mr. Casey has been Chief Financial Officer of the
Company since its inception in September 1986. Originally elected a Vice
President at the Company's inception, he was promoted to Executive Vice
President in March 1987. Mr. Casey served as a Director of the Company from
December 1986 to June 1993, and he served as President of the Mexican
Restaurant Division from May 1988 to March 1993. He served as Treasurer of the
Company from September 1986 until July 1990, as Chief Financial Officer of the
Mexican Restaurant Division from 1977 until December 1985, and as Deputy Group
Executive of the Restaurant Group and a Vice President of Grace prior to the
inception of the Company. Mr. Casey received his B.A. degree from Harvard
College and his M.B.A. degree from the Harvard University Graduate School of
Business.
Ms. Johnson serves as Executive Vice President and Chief
Administrative Officer of the Company. Ms. Johnson had been Vice President and
Senior Vice President, Operations Support Services Division from March 1993 to
January 1994. Prior to that time she served as Vice President/Controller of
the Company's Administrative Division from November 1990 to March 1993. From
1986 to 1989 she held the position of Controller of El Torito Restaurants, Inc.
Ms. Johnson is a Certified Public Accountant and received her B.A. degree from
California State University at Fullerton.
- 30 -
<PAGE> 31
Mr. Relyea serves as Executive Vice President and President of the
Family Restaurant Division of the Company. From 1988 to January 1994, Mr.
Relyea had been Regional Vice President of Jack In The Box Operations. He
joined Foodmaker in 1971 and since that time had held a variety of positions
including Restaurant Manager, Training Supervisor, District Manager, Regional
Franchise Consultant and Area Manager. Mr. Relyea received an M.B.A. from
Pepperdine University.
All directors hold office until their successors have been duly
elected and qualified. Directors receive no compensation for serving as
directors and received no such compensation during the last fiscal year.
Officers serve at the discretion of the Board of Directors.
In connection with the Acquisition, a Shareholders' Agreement was made
and entered into as of January 27, 1994 (the "Shareholders' Agreement") by and
among the Company, Apollo, GEI and Foodmaker. The Shareholders' Agreement
provides, for its term, that the Board of Directors of the Company shall
consist of nine directors: three nominated by Apollo, three nominated by
Foodmaker, two nominated by GEI and one nominated jointly by Apollo, Foodmaker
and GEI. If, on any date, either Apollo, Foodmaker or GEI should own less than
25% of the stock owned by them on January 27, 1994, they shall lose the right
to nominate such number of directors and the Board of Directors shall be
reduced by such number.
Generally, actions taken by the board will require the affirmative
vote of a majority of the directors then in office. However, subject to
certain exceptions, the consent of at least one director nominated by each of
Apollo, GEI and Foodmaker will be required to take action in connection with
certain matters, including without limitation, (i) dividends on and repurchases
of capital stock of the Company, (ii) issuances or sales of capital stock of
the Company (other than in certain initial public offerings or the granting of
registration rights with respect to securities of the Company), (iii) mergers
and certain sales and purchases of assets, (iv) amendment of charter documents,
(v) incurrences of debt or liens, (vi) amendment of certain material
agreements, (vii) transactions with affiliates, (viii) changes in line of
business, (ix) filings related to bankruptcy and certain litigation matters and
(x) approval of capital and operating budgets and capital expenditures other
than as provided for in the capital budget.
Item 11. EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
Summarized below are the principal components of compensation of the
Company's Chief Executive Officer ("CEO") and the four most highly compensated
executive officers other than the CEO (the "Named Executive Officers") for each
of the last three completed fiscal years.
- 31 -
<PAGE> 32
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------- -----------------------------------
AWARDS PAYOUTS
------------------------ ----------
SECURITIES
UNDER-
RESTRICTED LYING
NAME AND PRINCIPAL OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(a) AWARD(S)($) SARs(#) PAYOUTS($) COMPENSATION($)(b)
--------------------- ---- --------- -------- ------------------ ------------ ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jackson W. Goodall, Jr. 1994 511,363(d) 0 0 0 4,300 0 0
(c), Chairman and
Chief Executive Officer
Barry E. Krantz (e), 1994 375,093 0 13,040 0 1,720 0 1,152
President, Chief 1993 215,381 189,316 9,000 0 0 0 1,325
Operating Officer and 1992 205,796 106,012 0 0 0 0 696
President Mexican
Restaurant Division
Mohammad Iqbal (f), 1994 284,516 0 0 0 2,406 0 912
Executive Vice President
and President, Mexican
Restaurant Division
Kevin S. Relyea (c), 1994 208,589 0 0 0 938 0 242
Executive Vice President
and President, Family
Restaurant Division
Martin M. Casey, 1994 245,356 0 2,782 0 938 0 135
Executive Vice President 1993 298,898 208,251 11,250 0 0 0 2,226
and Chief Financial 1992 274,332 0 0 0 0 0 3,897
Officer
</TABLE>
------------------
(a) Other Annual Compensation amounts shown for fiscal 1994 represent buyout of
the Company's obligations under its former Salary Protection Plan. Amounts
shown for fiscal 1993 represent income related to the purchase of Old
Common Stock options by Grace in June 1993.
(b) Amounts shown represent the value of insurance premiums paid by the Company
for term life insurance.
(c) Elected to position on January 27, 1994.
(d) Calculated as the amount paid to Foodmaker, Inc. for Mr. Goodall's services
pursuant to that certain Executive Services Agreement dated as of January
27, 1994 by and between the Company and Foodmaker. Mr. Goodall receives
no compensation directly from the Company.
(e) Served as Executive Vice President, Chief Operating Officer and President,
Family Restaurant Division until January 27, 1994. Elected to be President
and Chief Operating Officer on January 27, 1994 and elected to be
President, Mexican Restaurant Division on February 22, 1995.
(f) Initially elected to this position on January 27, 1994. Mr. Iqbal and the
Company are currently negotiating with respect to Mr. Iqbal's severance
from the Company.
- 32 -
<PAGE> 33
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL EXERCISE PRICE APPRECIATION FOR
UNDERLYING OPTIONS/SARS OR BASE OPTION TERM (b)
NAME AND PRINCIPAL OPTIONS/SARS GRANTED TO PRICE EXPIRATION ----------------------
POSITION GRANTED (#)(a) EMPLOYEES IN FY(%) ($/SHARE) DATE 5%($000) 10%($000)
----------------------- -------------- ------------------ --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Jackson W. Goodall, Jr. 4,300 8.54 160 5/19/2004 433 1,097
Barry E. Krantz 1,720 3.42 160 5/19/2004 173 439
Mohammad Iqbal (c) 2,406 4.78 160 5/19/2004 242 614
Kevin S. Relyea 938 1.86 160 5/19/2004 94 239
Martin M. Casey 938 1.86 160 5/19/2004 94 239
</TABLE>
(a) Pursuant to the terms of a stock option agreement entered into by each
option holder, the options become exercisable at a rate of 25% per year,
commencing on the date of grant, and are subject to certain restrictions
on transfer, put and call rights and registration rights.
(b) The potential gains shown are net of the option exercise price and do not
include the effect of any taxes associated with exercise. The amounts
shown are for the assumed rates of appreciation only, do not constitute
projections of future stock price performance, and may not necessarily be
realized. Actual gains, if any, on stock option exercises depend on the
future performance of the Common Stock, continued employment of the
optionee through the term of the options, and other factors.
(c) Unless exercised, Mr. Iqbal's options will expire 90 days after his
resignation. The Company and Mr. Iqbal are currently negotiating with
respect to Mr. Iqbal's severance from the Company.
- 33 -
<PAGE> 34
COMPENSATION OF DIRECTORS
Directors receive no compensation for serving as directors and
received no such compensation in the last fiscal year.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Pursuant to the terms of the Company's Severance Plan, employees,
including the executive officers named on the summary compensation chart above,
are entitled to receive benefits of no more than 52 weeks base salary upon
certain events of termination. In addition, upon the occurrence of certain
events constituting a change of control, the holders of stock options,
including the executive officers named above, shall be entitled to receive cash
equal to the difference between the price per share paid in connection with
such change of control and the exercise price of the underlying option.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the 1994 fiscal year, Messrs. Green, Ressler and Sokoloff served
on the Nominating and Human Resources Committee of the Board
which serves as the Company's compensation committee. None of these
individuals is, or was, an officer or employee of the Company.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares and percentage of
Common Stock owned by each person known to the Company to be the beneficial
owner of more than 5% of any class of the Company's voting securities, each
director of the Company and all executive officers and directors of the Company
as a group.
<TABLE>
<CAPTION>
Common Stock(a)
-------------------------------
Amount and Nature
of Beneficial Percent
Ownership(b) of Class
----------------- --------
<S> <C> <C>
Apollo FRI Partners, L.P.(c) 389,634.375 39.07%
2 Manhattanville Rd.
Purchase, NY 10577
Green Equity Investors, L.P.(d) 179,831.250 18.03%
333 South Grand Avenue
Suite 5400
Los Angeles, CA 90071
Foodmaker, Inc.(e) 389,634.375 39.07%
9330 Balboa Avenue
San Diego, CA 92123
Jackson W. Goodall, Jr. 8,450.000 (f)
Barry E. Krantz(g) 3,906.250 (f)
Mohammad Iqbal 6,968.750 (f)
Kevin S. Relyea 1,875.000 (f)
Martin M. Casey 2,500.000 (f)
Patricia K. Johnson 1,375.000 (f)
All Officers and Directors
of the Company as a Group
(12 persons) 26,182.000 2.63%
</TABLE>
------------------
(a) Represents percent ownership of Common Stock before the exercise of the
Foodmaker Warrant. See note (e) below.
- 34 -
<PAGE> 35
(b) All shares are subject to, and shall be voted in accordance with, the
Shareholders' Agreement, dated as of January 27, 1994, by and among
the Company and certain of its shareholders.
(c) The general partner of Apollo is AIF II, L.P. The managing general
partner of AIF II, L.P. is Apollo Advisors, L.P. The general partner
of Apollo Advisors, L.P. is Apollo Capital Management, Inc. ("Apollo
Capital"). Messrs. Copses and Ressler are officers of Apollo Capital.
The directors of Apollo Capital are Leon Black, Craig Cogut and John
Hannan, each of whom is also an officer of Apollo Capital. Each of
Messrs. Copses, Kissick and Ressler and the directors of Apollo
Capital disclaim beneficial ownership of any shares beneficially held
by Apollo.
(d) The general partner of Green Equity Investors, L.P. is Leonard Green &
Associates, L.P. ("LGP"). Messrs. Green and Sokoloff are managing
general partners of LGP. Each of Messrs. Green and Sokoloff and the
general partners of LGP disclaims beneficial ownership of any shares
beneficially held by GEI.
(e) Does not include shares issuable to Foodmaker upon exercise
of the Foodmaker Warrant pursuant to which Foodmaker may purchase
111,111 shares of Common Stock for an aggregate exercise price of
$26.7 million because the likelihood of such exercise within the next
60 days is remote. If the Foodmaker Warrant should ever be fully
exercised by Foodmaker, Apollo, GEI and Foodmaker would own 35.15%,
16.22% and 45.18%, respectively, of the Common Stock. Foodmaker is a
publicly held entity. Approximately 45. 8% of the outstanding common
stock of Foodmaker is owned by a limited partnership of which GGvA is
the general partner. Mr. Gibbons is a general partner of GGvA.
See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
(f) Represents less than 1% ownership.
(g) Held by Barry E. Krantz and Janet L. Krantz, Trustees of the B. and
J. Krantz Living Trust dated December 29, 1989.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Grace and Roland J. Joyce (as trustee) were affiliates of the Company
for only the first four weeks of the fiscal year, ending their affiliation upon
the consummation of the Acquisition. The Company, Grace and Roland J. Joyce
were parties to a Voting Trust Agreement, which was subject to the
Shareholders' Agreement dated as of December 23, 1986 (the "Old Shareholders'
Agreement") and which terminated on December 31, 1993. The Old Shareholders'
Agreement terminated upon the Closing Date.
Grace and certain of its affiliates are currently guarantors or
otherwise liable for the Company's obligations under 94 Company leases (the
"Grace Guaranteed Leases"). The Grace Guaranteed Leases contain aggregate
minimum rental commitments of
- 35 -
<PAGE> 36
approximately $67.5 million. The Company has agreed to indemnify Grace for
costs incurred by Grace in connection with such leases.
The Company had outstanding at December 26, 1993 approximately
$468,000 in principal amount of Old Junior Subordinated Notes, all of which
were held by Messrs. Norman N. Habermann and Martin M. Casey, the previous
President and the current Chief Financial Officer of the Company, respectively.
Messrs. Habermann and Casey purchased the Old Junior Subordinated Notes from
Grace in 1987. On the Closing Date, Mr. Habermann and Mr. Casey sold all such
Old Junior Subordinated Notes to the Company exchanging each $1,000 principal
amount of Old Junior Subordinated Notes for $646.18 in cash plus a cash amount
equal to interest accrued on $646.18 from May 19, 1993 to the Closing Date at
the Accrual Rate.
Commencing August 1987, the Company entered into indemnification
agreements with its directors and executive officers, and certain other key
employees. Under the agreements, with certain limited exceptions, the Company
has agreed to indemnify such individuals against liabilities and expenses in
connection with actions or threatened actions relating to the Company to which
such individuals are or may become parties as a result of serving in their
respective capacities. The agreements provide that the Company will advance
expenses to the indemnitees in advance of final disposition of an action,
subject to the approval of the Company's Board of Directors.
As of July 2, 1993, Grace, Grace/Western and the Company entered into
the Investment Agreement with Foodmaker and affiliates of Apollo, GEI and
Foodmaker.
On the Closing Date, the Company entered into the Shareholders'
Agreement and a Registration Rights Agreement with Apollo, GEI and Foodmaker.
In addition to serving as the Chairman and Chief Executive Officer of
the Company, Mr. Goodall continues to serve as the Chairman, Chief Executive
Officer and President of Foodmaker. Pursuant to an agreement entered into with
Foodmaker, the Company reimburses Foodmaker for 50% of Mr. Goodall's salary,
bonus and expenses and Mr. Goodall spends approximately 50% of his time serving
as an officer of the Company. On February 22, 1995, the Company announced that
it had begun a search to replace Mr. Goodall with a full-time chief executive
officer.
On the Closing Date, the Company and Chi-Chi's entered into a Tax
Sharing Agreement with Foodmaker.
Chi-Chi's purchases various food and other products for use or sale by
its restaurants pursuant to a distribution agreement entered into with
Foodmaker on the Closing Date. The Company believes that such agreement is no
less favorable to Chi-Chi's than an agreement with an unaffiliated third party.
- 36 -
<PAGE> 37
Leonard I. Green, a director of Foodmaker, is a general partner of
Leonard Green & Associates, L.P., the general partner of GEI. Mr. Goodall
indirectly owns an approximately 0.5% limited partnership interest in GEI.
Approximately 45.8% of the outstanding common stock of Foodmaker is
owned by a limited partnership of which GGvA is the general partner. Mr.
Gibbons is a general partner of GGvA. Pursuant to an arrangement with GGvA,
Mr. Green is entitled to the economic benefit of 102,946 shares of the common
stock of Foodmaker held by such partnership, which includes the right to
receive such shares upon the distribution of shares by such partnership to its
partners. Pursuant to such arrangement, however, Mr. Green does not exercise
voting or investment power with respect to such shares. In addition, Mr. Green
is entitled to a 29.38% share of any carried interest payable by such
partnership to GGvA, as general partner, which would result in Mr. Green having
the economic benefit of a greater number of shares of common stock of
Foodmaker. In addition, Mr. Green owns, directly or indirectly, 50,000 shares
of the common stock of Foodmaker.
On the Closing Date, Apollo Advisors, L.P. and LGP received an
aggregate of $7.0 million as a financial advisory fee for services provided in
connection with the Acquisition and related transactions. The Company
also pays Apollo Advisors, L.P. and LGP annual fees of $1.2 million, in the
aggregate, for providing post-Acquisition management consulting and financial
planning services.
Certain entities managed by or affiliated with Apollo purchased a
portion of the Notes.
With respect to the purchase of common stock by certain members of
Management, the Company loaned money (evidenced by recourse notes which bear
interest at a rate of 7% per annum) to said individuals for fifty percent of
their stock purchase. The Company loaned: (i) $676,000 to Jackson W. Goodall,
Jr.; (ii) $312,500 to Barry E. Krantz; (iii) $557,500 to Mohammad Iqbal; (iv)
$150,000 to Kevin S. Relyea; (v) $200,000 to Martin M. Casey; and (vi) $110,000
to Patricia K. Johnson.
- 37 -
<PAGE> 38
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Page
--------
<S> <C> <C>
(a) (1) Financial Statements. See the Index to Financial Statements on page F-1. --
(2) Financial Statement Schedule
Schedule VIII - Valuation and qualifying accounts S-1
(3) Exhibits
2 (a) The Company's Joint Plan of Reorganization. (Filed as Exhibit 2(a) to the
Company's Form 10-K filed with the SEC on March 28, 1994.)
3 (a) Fourth Restated Certificate of Incorporation of the Company. (Filed as
Exhibit 4.1 to the Company's Form S-8 filed with the SEC on March 23, 1994.)
3 (b) Bylaws of the Company. (Filed as Exhibit 4.2 to the Company's Form S-8 filed
with the SEC on March 23, 1994.)
4 (a) Indenture Dated as of January 27, 1994 Re: $300,000,000 9-3/4% Senior Notes
Due 2002. (Filed as Exhibit 4(a) to the Company's Form 10-K filed with the
SEC on March 28, 1994.)
4 (b) Indenture Dated as of January 27, 1994 Re: $150,000,000 10-7/8% Senior
Subordinated Discount Notes Due 2004. (Filed as Exhibit 4(b) to the
Company's Form 10-K filed with the SEC on March 28, 1994.)
9 Shareholders' Agreement, dated as of January 27, 1994, among the Company and
certain of its Shareholders. (Filed as Exhibit 4.3 to the Company's Form S-8
filed with the SEC on March 23, 1994.)
10 (a) Restructuring Agreement, dated as of July 2, 1993, among the Company, Western
Family Restaurants, Inc., Apollo REG, Co.,
</TABLE>
- 38 -
<PAGE> 39
<TABLE>
<S> <C> <C>
GEI REG Co., FMI REG, Co. and Foodmaker, Inc. (Filed as Exhibit 2(a) to the
Company's Form S-1 filed with the SEC on November 1, 1993.)
10 (b) Amendment No. 1 to Restructuring Agreement, dated as of October 15, 1993,
among the Company, Western Family Restaurants, Inc., Apollo REG, Co., GEI REG
Co., FMI REG, Co. and Foodmaker, Inc. (Filed as Exhibit 2(b) to the Company's
Form S-1 filed with the SEC on November 1, 1993.)
10 (c) Acquisition Agreement, dated as of October 15, 1993, among the Company, Apollo
Advisors, L.P., Green Equity Investors, L.P., on behalf of one or more managed
entities, Foodmaker, Inc. and Chi-Chi's, Inc. (Filed as Exhibit 2(c) to the
Company's Form S-1 filed with the SEC on November 1, 1993.)
10 (d) Amendment No. 1 to Acquisition Agreement dated as of January 27, 1994 by and
among the parties to the Acquisition Agreement. (Filed as Exhibit 10(d) to
the Company's Form 10-K filed with the SEC on March 28, 1994.)
10 (e) Revolving Credit Agreement Dated as of January 27, 1994 Re: $150,000,000 Line
of Credit from Credit Lyonnais New York Branch ("Revolving Credit Agreement").
(Filed as Exhibit 10(e) to the Company's Form 10-K filed with the SEC on
March 28, 1994.)
*10 (f) First Amendment to Revolving Credit Agreement dated as of April 15, 1994 by
and among the parties to the Revolving Credit Agreement.
*10 (g) Second Amendment to Revolving Credit Agreement dated as of August 15, 1994 by
and among the parties to the Revolving Credit Agreement.
*10 (h) Third Amendment to the Revolving Credit Agreement dated as of March 24, 1995
by and among the parties to the Revolving Credit Agreement.
10 (i) Pledge and Security Agreement dated as of January 27, 1994 by and among FRI-M
Corporation, the Company and certain of its
</TABLE>
- 39 -
<PAGE> 40
<TABLE>
<S> <C> <C>
subsidiaries and Credit Lyonnais New York Branch. (Filed as Exhibit 10(f) to the Company's
Form 10-K filed with the SEC on March 28, 1994.)
10 (j) The Company's 1994 Incentive Stock Option Plan. (Filed as Exhibit 10(g) to
the Company's Form 10-K filed with the SEC on March 28, 1994.)
*10 (k) Deferred Compensation Plan.
*10 (l) 1995 Management Incentive Compensation Plan Description.
*10 (m) Severance Plan.
+10 (n) Form of Indemnification Agreement between the Company and its Directors,
executive officers and certain other key employees. (Filed as Exhibit 10(v)
to the Company's 1987 form 10-K filed with the SEC on March 24, 1988.)
10 (o) Restated and Expanded Distribution Agreement, dated as of May 4, 1993 by and
between Marriott Corporation and The Restaurant Enterprises Group, Inc.
(Filed as Exhibit 10(d) to the Company's Form 10-Q filed with the SEC for the
Quarter ended March 29, 1993.)
10 (p) Amendment No. 1, dated October 15, 1993, to Restated and Expanded Distribution
Agreement between the Company and Marriott Corporation. (Filed as Exhibit
10(l) to the Company's Form S-1 filed with the SEC on November 1, 1993.)
+10 (q) Executive Settlement Agreement, dated as of October 15, 1993, between the
Company, W. R. Grace & Co.-Conn. and Norman N. Habermann. (Filed as Exhibit
10(m) to the
</TABLE>
- 40 -
<PAGE> 41
<TABLE>
<S> <C> <C>
Company's Form S-1 filed with the SEC on November 1, 1993.)
+10 (r) Executive Settlement Agreement, dated as of October 15, 1993, between the
Company and Kenneth L. Harris. (Filed as Exhibit 10(n) to the Company's Form
S-1 filed with the SEC on November 1, 1993.)
+10 (s) Executive Settlement Agreement, dated as of October 15, 1993, between the
Company and Don M. McComas. (Filed as Exhibit 10(o) to the Company's Form S-1
filed with the SEC on November 1, 1993.)
+10 (t) Executive Settlement Agreement, dated as of October 15, 1993, between the
Company and James F. Moore. (Filed as Exhibit 10(p) to the Company's Form S-1
filed with the SEC on November 1, 1993.)
10 (u) Form of Management Stock Subscription Agreement of the Company. (Filed as
Exhibit 10(bb) to the Company's Form 10-K filed with the SEC on March 28,
1994.)
10 (v) Form of Management Pledge Agreement of the Company. (Filed as Exhibit 10(cc)
to the
</TABLE>
- 41 -
<PAGE> 42
<TABLE>
<S> <C> <C>
Company's Form 10-K filed with the SEC on March 28, 1994.)
10 (w) Form of Secured Promissory Note relating to Management Stock Subscription and
Pledge. (Filed as Exhibit 10(dd) to the Company's Form 10-K filed with the
SEC on March 28, 1994.)
10 (x) Executive Services Agreement, dated as of January 27, 1994, by and between the
Company, Foodmaker, Inc. and acknowledged and agreed to by Jack W. Goodall,
Jr. (Filed as Exhibit 10(ee) to the Company's Form 10-K filed with the SEC on
March 28, 1994.)
10 (y) Management Services Agreement, dated as of January 27, 1994, by and between
the Company and Apollo Advisors, L.P. (Filed as Exhibit 10(ff) to the
Company's Form 10-K filed with the SEC on March 28, 1994.)
10 (z) Management Services Agreement, dated as of January 27, 1994, by and between
the Company and Leonard Green & Partners, L.P. (Filed as Exhibit 10(gg) to
the Company's Form 10-K filed with the SEC on March 28, 1994.)
10 (aa) Kasumi Agreement, dated as of January 27, 1994, by and among W. R. Grace &
Co., W. R. Grace & Co.-Conn. and the Company. (Filed as Exhibit 10(hh) to the
Company's Form 10-K filed with the SEC on March 28, 1994.)
10 (bb) Lease Indemnification Agreement, dated as of January 27, 1994, by and between
the Company and W. R. Grace & Co.-Conn. (Filed as Exhibit 10(ii) to the
Company's Form 10-K filed with the SEC on March 28, 1994.)
10 (cc) Distribution Agreement, dated as of October 4, 1993, by and between Foodmaker,
Inc. and Chi-Chi's, Inc. (Filed as Exhibit 10(jj) to the Company's Form 10-K
filed with the SEC on March 28, 1994.)
10 (dd) Common Stock Purchase Warrant, dated as of January 27, 1994, issued to
Foodmaker, Inc. for the purchase of 111,111 shares of the Company's common
stock. (Filed as Exhibit 10(kk) to the Company's Form 10-K filed with the SEC
on March 28, 1994.)
</TABLE>
- 42 -
<PAGE> 43
<TABLE>
<S> <C> <C>
10 (ee) Tax Sharing Agreement, dated as of January 27, 1994, by and among the Company,
Foodmaker, Inc. and Chi-Chi's, Inc. (Filed as Exhibit 10(ll) to the Company's
Form 10-K filed with the SEC on March 28, 1994.)
10 (ff) Registration Rights Agreement, dated as of January 27, 1994, by and among the
Company and certain of its shareholders. (Filed as Exhibit 10(mm) to the
Company's Form 10-K filed with the SEC on March 28, 1994.)
*21 List of Subsidiaries.
*23 (a) Consent of Deloitte & Touche LLP.
Consent of KPMG Peat Marwick LLP.
*27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K
On February 23, 1995, a report on Form 8-K was filed with the
Securities and Exchange Commission reporting that the Company
had begun a search to identify and hire a new chief executive
officer. In addition, the Company reported that it had
replaced the president of the Mexican Restaurant Division with
another senior executive.
------------------
* Filed herewith.
+ Management contracts or compensatory plans or arrangements.
- 43 -
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
FAMILY RESTAURANTS, INC.
By /S/ Jackson W. Goodall, Jr. March 24, 1995
--------------------------- --------------
Jackson W. Goodall, Jr. Date
Director, Chairman of the
Board and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Director,
Chairman of the Board
and Chief Executive Officer
(Principal Executive
/S/ Jackson W. Goodall, Jr. Officer) March 24, 1995
---------------------------
Jackson W. Goodall, Jr.
Director, President,
Chief Operating Officer
and President, Mexican
/S/ Barry E. Krantz Restaurant Division March 24, 1995
----------------------
Barry E. Krantz
/S/ Peter P. Copses Director March 24, 1995
----------------------
Peter P. Copses
/S/ Charles W. Duddles Director March 24, 1995
----------------------
Charles W. Duddles
/S/ Edward Gibbons Director March 24, 1995
----------------------
Edward Gibbons
/S/ Leonard I. Green Director March 24, 1995
----------------------
Leonard I. Green
</TABLE>
- 44 -
<PAGE> 45
<TABLE>
<S> <C> <C>
/S/ John H. Kissick Director March 24, 1995
-----------------------
John H. Kissick
/S/ Antony P. Ressler Director March 24, 1995
-----------------------
Antony P. Ressler
/S/ Jonathan D. Sokoloff Director March 24, 1995
------------------------
Jonathan D. Sokoloff
Executive Vice President
and Chief Financial Officer
/S/ Martin M. Casey (Principal Financial Officer) March 24, 1995
------------------------
Martin M. Casey
Vice President, Finance
(Principal
/S/ Robert T. Trebing, Jr. Accounting Officer) March 24, 1995
--------------------------
Robert T. Trebing, Jr.
</TABLE>
- 45 -
<PAGE> 46
Supplemental Information to be Furnished with Reports Filed Pursuant to Section
15(d) of the Act by Registrants which have not Registered Securities Pursuant
to Section 12 of the Act
-------------------------------------------------------------------------------
No annual report covering the registrant's last fiscal year has been
or will be sent to security holders, other than a copy of this Annual Report on
Form 10-K.
No proxy statement, form of proxy or other proxy solicitation
materials with respect to any annual or other meeting of security holders were
sent in 1994, and none will be sent with respect to 1994, to security holders.
- 46 -
<PAGE> 47
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Family Restaurants, Inc.
Independent Auditors' Reports F-2
Consolidated Balance Sheets as of December 25, 1994
and December 26, 1993 F-4
Consolidated Statements of Operations for the One
Month Ended January 26, 1994, the Eleven Months
Ended December 25, 1994 and Each of the Two
Years in the Period Ended December 26, 1993 F-5
Consolidated Statements of Common Stockholders'
Deficit for the One Month Ended January 26, 1994,
the Eleven Months Ended December 25, 1994 and
Each of the Two Years in the Period Ended
December 26, 1993 F-6
Consolidated Statements of Cash Flows for the One
Month Ended January 26, 1994, the Eleven Months
Ended December 25, 1994 and Each of the Two Years
in the Period Ended December 26, 1993 F-7
Notes to Consolidated Financial Statements F-9
</TABLE>
F-1
<PAGE> 48
INDEPENDENT AUDITORS' REPORT
Board of Directors
Family Restaurants, Inc.:
We have audited the accompanying consolidated balance sheet of Family
Restaurants, Inc. and its subsidiaries as of December 25, 1994, and the related
consolidated statements of operations, common stockholders' deficit and
cash flows for the one month ended January 26, 1994 (Predecessor Company)
and the eleven months ended December 25, 1994 (Successor Company). In
connection with our audit of the consolidated financial statements, we also
audited the financial statement schedule as listed in the accompanying index.
These consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on the consolidated financial statements and financial statement
schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Family
Restaurants, Inc. and its subsidiaries at December 25, 1994, and the results of
their operations and their cash flows for the one month ended January 26, 1994
(Predecessor Company) and the eleven months ended December 25, 1994 (Successor
Company) in conformity with generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information shown therein.
As discussed in Notes 1 and 2 to the consolidated financial
statements, the Company commenced a Chapter 11 bankruptcy case on November 23,
1993, which was confirmed by the United States Bankruptcy Court for the
District of Delaware on January 7, 1994. Accordingly, the accompanying
consolidated financial statements have been prepared in conformity with AICPA
Statement of Position 90-7, "Financial Reporting for Entities in Reorganization
and the Bankruptcy Code." As a result, the Successor Company's December 25,
1994 consolidated balance sheet is not comparable to the Predecessor Company's
December 26, 1993 consolidated balance sheet since it reports the financial
position of the reorganized entity.
KPMG PEAT MARWICK LLP
Orange County, California
March 15, 1995, except as to
the ninth paragraph of
note 10 to the consolidated
financial statements, which is
as of March 24, 1995
F-2
<PAGE> 49
INDEPENDENT AUDITORS' REPORT
Family Restaurants, Inc.:
We have audited the accompanying consolidated balance sheet of Family
Restaurants, Inc. and its subsidiaries as of December 26, 1993, and the related
consolidated statements of operations, common stockholders' deficit and cash
flows for each of the two years in the period ended December 26, 1993. Our
audits also included the financial statement schedule listed in the Index at
Item 14. The consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Family Restaurants, Inc.
and its subsidiaries at December 26, 1993, and the results of their operations
and their cash flows for each of the two years in the period ended December 26,
1993 in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information shown therein.
As discussed in Notes 1 and 2, the Company commenced a Chapter 11
bankruptcy case on November 23, 1993, which was confirmed by the United States
Bankruptcy Court for the District of Delaware on January 7, 1994. Accordingly,
the accompanying consolidated financial statements have been prepared in
conformity with AICPA Statement of Position 90-7, "Financial Reporting for
Entities in Reorganization and the Bankruptcy Code."
DELOITTE & TOUCHE LLP
Costa Mesa, California
March 22, 1994
F-3
<PAGE> 50
FAMILY RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
<TABLE>
<CAPTION>
Successor Predecessor
Company Company
December 25, December 26,
1994 1993
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,239 $ 9,310
Restricted cash 1,850 1,867
Collateral deposit 0 38,688
Receivables 11,831 10,920
Inventories 12,916 10,849
Other current assets 8,179 5,475
------------- -------------
Total current assets 43,015 77,109
Property and equipment, net 445,354 235,516
Reorganization value in excess of amounts
allocable to identifiable assets, net 197,581 0
Goodwill, net 0 26,678
Property held for sale 339 7,122
Other assets 48,309 20,152
------------- -------------
$ 734,598 $ 366,577
============= =============
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current liabilities:
Note payable to Marriott $ 0 $ 12,719
Loan payable to Grace 0 2,900
Current portion of long-term debt, including
capitalized lease obligations 6,754 5,981
Accounts payable 41,999 38,363
Self-insurance reserves 50,692 36,778
Other accrued liabilities 96,426 74,049
Income taxes payable 2,625 1,528
------------- -------------
Total current liabilities 198,496 172,318
Liabilities subject to settlement under reoganization
proceedings 0 320,194
Other long-term liabilities 6,866 3,124
Long-term debt, including capitalized lease
obligations, less current portion 536,495 78,658
12% redeemable cumulative exchangeable preferred
stock subject to settlement under reorganization
proceedings - non-voting, authorized 3,000,000
shares; issued and outstanding 1,544,237 shares
in 1993 0 183,921
Common stockholders' deficit:
Class D common stock - authorized 1,040,000 shares,
par value $.01, 468,341 shares issued in 1993 0 4
Common stock - authorized 1,500,000 shares,
par value $.01, 997,277 shares issued in 1994 10 0
Additional paid-in capital 159,554 23,481
Notes receivable from stockholders (2,947) 0
Accumulated deficit (163,876) (415,066)
Less treasury stock, at cost (29,150 shares in 1993) 0 (57)
------------- -------------
$ 734,598 $ 366,577
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 51
FAMILY RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share
and shares outstanding)
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
-------------- ------------------------------------------
Eleven Months One Month For the Years Ended
Ended Ended ----------------------------
December 25, January 26, December 26, December 28,
1994 1994 1993 1992
-------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Sales $ 1,048,674 $ 64,741 $ 884,910 $ 930,069
-------------- ------------ ------------- -------------
Product cost 293,413 19,184 259,512 276,020
Payroll and related costs 377,569 24,780 331,747 352,841
Occupancy and other operating expenses 243,147 13,712 197,797 211,332
Depreciation and amortization 48,646 2,800 32,224 50,538
General and administrative expenses 49,059 4,071 44,164 48,376
Interest expense, net 51,419 4,097 50,276 45,582
Loss (gain) on disposition of
properties, net 5,685 (12) 4,916 7,786
Provision for divestitures 0 0 10,400 27,871
Write-down of goodwill 144,780 0 0 107,175
Debt restructuring costs 0 0 4,239 1,072
-------------- ------------ ------------- -------------
Total costs and expenses 1,213,718 68,632 935,275 1,128,593
-------------- ------------ ------------- -------------
Loss before reorganization items,
income tax provision, extraordinary
item and cumulative effect of a
change in accounting principle (165,044) (3,891) (50,365) (198,524)
-------------- ------------ ------------- -------------
Reorganization items:
Professional fees 0 (4,250) 0 0
Payment to Grace 0 (15,000) 0 0
Other 0 (3,029) (1,091) 0
Fresh start adjustment 0 501,706 0 0
-------------- ------------ ------------- -------------
Total reorganization items 0 479,427 (1,091) 0
-------------- ------------ ------------- -------------
Income (loss) before income tax provision,
extraordinary item and cumulative effect
of a change in accounting principle (165,044) 475,536 (51,456) (198,524)
Income tax provision 1,773 55 658 721
-------------- ------------ ------------- -------------
Income (loss) before extraordinary item
and cumulative effect of a change in
accounting principle (166,817) 475,481 (52,114) (199,245)
Extraordinary gain on extinguishment
of debt 2,941 72,561 0 0
Cumulative effect on prior years (to
December 30, 1991) of adopting SFAS 109 0 0 0 (667)
-------------- ------------ ------------- -------------
Net income (loss) (163,876) 548,042 (52,114) (199,912)
Preferred dividends 0 (1,698) (20,232) (17,737)
-------------- ------------ ------------- -------------
Net income (loss) attributable to
common shares $ (163,876) $ 546,344 $ (72,346) $ (217,649)
============== ============ ============= =============
Net loss per common share:
Loss before extraordinary item $ (168.55)
Extraordinary item 2.97
--------------
Net loss attributable to common shares $ (165.58)
==============
Weighted average common shares outstanding 989,683
==============
</TABLE>
Net loss per common share for the Predecessor Company is not meaningful due to
debt discharge, the issuance of new common stock and fresh start reporting.
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 52
FAMILY RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' DEFICIT
FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 25, 1994
(in thousands)
<TABLE>
<CAPTION>
Notes
Class A Class D Additional Receivable Treasury
Common Common Common Paid-in from Stock- Accumulated Stock,
Stock Stock Stock Capital holders Deficit at Cost Total
-------- -------- ------- ----------- ------------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 30, 1991 $ 2 $ 0 $ 0 $ 22,464 $ 0 $ (125,071) $ (57) $ (102,662)
Net loss 0 0 0 0 0 (199,912) 0 (199,912)
Stock dividends on preferred
stock 0 0 0 0 0 (17,737) 0 (17,737)
Sale of treasury stock 0 0 0 1 0 0 3 4
Purchase of treasury stock 0 0 0 0 0 0 (3) (3)
Exercise of warrants 0 2 0 838 0 0 0 840
-------- -------- ------- ----------- ------------ ------------ --------- -----------
Balance at December 28, 1992 2 2 0 23,303 0 (342,720) (57) (319,470)
Net loss 0 0 0 0 0 (52,114) 0 (52,114)
Stock dividends on preferred
stock 0 0 0 0 0 (20,232) 0 (20,232)
Conversion of Class A Common
Stock to Class D Common Stock (2) 2 0 0 0 0 0 0
Exercise of warrants 0 0 0 102 0 0 0 102
Exercise of stock options 0 0 0 76 0 0 0 76
-------- -------- ------- ----------- ------------ ------------ --------- -----------
Balance at December 26, 1993 0 4 0 23,481 0 (415,066) (57) (391,638)
Net income - one month ended
January 26, 1994 0 0 0 0 0 548,042 0 548,042
Fresh start adjustments:
Cancellation of former
equity 0 (4) 0 (23,481) 0 (132,976) 57 (156,404)
Issuance of new equity 0 0 10 159,554 (2,947) 0 0 156,617
Net loss - eleven months ended
December 25, 1994 0 0 0 0 0 (163,876) 0 (163,876)
-------- -------- ------- ----------- ------------ ------------ --------- -----------
Balance at December 25, 1994 $ 0 $ 0 $ 10 $ 159,554 $ (2,947) $ (163,876) $ 0 $ (7,259)
======== ======== ======= =========== ============ ============ ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 53
FAMILY RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
------------- --------------------------------------------
Eleven Months One Month For the Years Ended
Ended Ended -----------------------------
December 25, January 26, December 26, December 28,
1994 1994 1993 1992
-------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Cash received from customers $ 1,049,483 $ 65,257 $ 885,248 $ 931,236
Cash received from franchisees and licensees 7,308 84 847 4,272
Cash paid to suppliers and employees (1,000,332) (59,729) (846,290) (874,644)
Interest received 400 136 1,437 1,564
Interest paid (28,153) (877) (10,088) (29,619)
Debt restructuring costs 0 0 (2,900) (1,072)
Income taxes received (paid) (926) 157 (925) (485)
Charges to reserve for divestitures (9,434) (1,001) (886) 0
-------------- ------------ ------------- -------------
Net cash provided by operating activities
before reorganization items 18,346 4,027 26,443 31,252
Reorganization items:
Professional fees 0 (4,250) 0 0
Payment to Grace 0 (15,000) 0 0
Other 0 (3,029) (1,091) 0
-------------- ------------ ------------- -------------
Total reorganization items 0 (22,279) (1,091) 0
-------------- ------------ ------------- -------------
Net cash provided by (used in) operating
activities 18,346 (18,252) 25,352 31,252
-------------- ------------ ------------- -------------
Cash flows from investing activities:
Proceeds from disposal of property and equipment 6,524 1,588 18,135 11,548
Acquisition of Chi-Chi's 2,478 (194,889) 0 0
Acquisition of Marriott family restaurants 0 0 0 (12,374)
Capital expenditures (65,618) (779) (20,064) (25,881)
Capitalized conversion costs (2,166) (21) (5,052) (4,341)
Other (5,385) 1,491 (3,736) (3,424)
-------------- ------------ ------------- -------------
Net cash used in investing activities (64,167) (192,610) (10,717) (34,472)
-------------- ------------ ------------- -------------
Cash flows from financing activities:
Proceeds from sale of treasury bonds 0 0 3,412 0
Proceeds from issuance of Notes 0 409,046 0 0
Proceeds from working capital borrowings, net 59,600 0 0 0
Payment of notes payable to Marriott, net (21,828) (10,969) 0 0
Proceeds (payment) of loan payable to Grace 0 (2,900) 2,900 0
Payment of debt issuance costs 0 (22,973) 0 0
Reductions of long-term debt, including
capitalized lease obligations (7,842) (447) (9,843) (7,310)
Cash settlement of liabilities subject to
settlement under reorganization proceedings 0 (279,055) 0 0
Decrease (increase) in restricted cash and
collateral deposit 17 38,688 (16,486) 6,108
Royalty receivable sold to Grace 0 0 0 3,835
Proceeds from issuance of common stock, net 1,911 92,364 0 0
Proceeds from sale of treasury stock 0 0 0 4
Proceeds from exercise of warrants 0 0 102 840
Proceeds from exercise of stock options 0 0 76 0
Purchase of treasury stock 0 0 0 (3)
-------------- ------------ ------------- -------------
Net cash provided by (used in) financing
activities 31,858 223,754 (19,839) 3,474
-------------- ------------ ------------- -------------
Net increase (decrease) in cash and cash
equivalents (13,963) 12,892 (5,204) 254
Cash and cash equivalents at beginning of period 22,202 9,310 14,514 14,260
-------------- ------------ ------------- -------------
Cash and cash equivalents at end of period $ 8,239 $ 22,202 $ 9,310 $ 14,514
============== ============ ============= =============
</TABLE>
F-7
<PAGE> 54
FAMILY RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
------------- --------------------------------------------
Eleven Months One Month For the Years Ended
Ended Ended -----------------------------
December 25, January 26, December 26, December 28,
1994 1994 1993 1992
-------------- ------------ ------------- -------------
Reconciliation of Net Income (Loss) to Net Cash Provided by Operating Activities
<S> <C> <C> <C> <C>
Net income (loss) $ (163,876) $ 548,042 $ (52,114) $ (199,912)
-------------- ------------ ------------- -------------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities net
of effects of Chi-Chi's acquisition in 1994
and Marriott acquisition in 1992:
Depreciation and amortization 48,646 2,800 32,224 50,538
Amortization of debt issuance costs 3,006 215 2,531 1,835
Payment of accrued interest by issuance
of additional Junior Subordinated Notes 0 0 0 29
Loss (gain) on disposition of properties 5,685 (12) 4,916 7,786
Provision for divestitures 0 0 10,400 27,871
Write-down of goodwill 144,780 0 0 107,175
Fresh start adjustment 0 (501,706) 0 0
Extraordinary gain on extinguishment of debt (2,941) (72,561) 0 0
Accretion of interest on Discount Notes 11,362 0 0 0
Accrued interest on liabilities settled under
bankruptcy proceedings 0 3,113 0 0
Cumulative effect on prior years of
adopting SFAS 109 0 0 0 667
(Increase) decrease in receivables 697 54 (3,757) 554
(Increase) decrease in inventories (552) 394 5,209 1,717
(Increase) decrease in other current assets (566) 358 (2,331) 459
Increase (decrease) in accounts payable (14,611) 1,096 (3,925) 8,706
Increase (decrease) in self-insurance reserves 1,526 (386) (5,235) 4,367
Increase (decrease) in other accrued liabilities (6,223) 1,130 38,587 19,224
Charges to reserve for divestitures (9,434) (1,001) (886) 0
Increase (decrease) in income taxes payable 847 212 (267) 236
-------------- ------------ ------------- -------------
Total adjustments 182,222 (566,294) 77,466 231,164
-------------- ------------ ------------- -------------
Net cash provided by (used in) operating
activities $ 18,346 $ (18,252) $ 25,352 $ 31,252
============== ============ ============= =============
</TABLE>
Supplemental schedule of investing activities:
The components of acquisition of Chi-Chi's in 1994 are as follows:
<TABLE>
<S> <C>
Current assets $ (7,730)
Property and equipment (153,731)
Goodwill (149,376)
Other assets (13,908)
Current liabilities 59,324
Other long-term liabilities 5,975
Long-term debt assumed 4,694
Issuance of common stock 62,341
--------------
$ (192,411)
==============
</TABLE>
The components of acquisition of Marriott family restaurants in 1992 are as
follows:
<TABLE>
<S> <C>
Current assets $ (1,123)
Property and equipment (68,076)
Other assets (1,327)
Current liabilities 13,084
Long-term debt incurred 21,828
Issuance of preferred stock 23,240
--------------
Cash portion of purchase price $ (12,374)
==============
</TABLE>
Supplemental schedule of noncash investing and financing activities:
Common stockholders' deficit was increased by $20,232,000 and $17,737,000 in
1993 and 1992, respectively, for stock dividends on preferred stock.
Disclosure of accounting policy:
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 55
FAMILY RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 25, 1994
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:
Family Restaurants, Inc. (formerly known as The Restaurant Enterprises
Group, Inc.), incorporated in Delaware in 1986, is primarily engaged in the
operation of full-service restaurants throughout the United States through its
subsidiaries. As used in these consolidated financial statements, the term
"Company" refers to Family Restaurants, Inc. together with its subsidiaries.
Reference to the "Predecessor Company" refers to The Restaurant
Enterprises Group, Inc. and its consolidated subsidiaries (not including
Chi-Chi's) with respect to information relating to periods prior to January 27,
1994 included herein, and reference to the "Successor Company" refers to Family
Restaurants, Inc. and its consolidated subsidiaries, giving effect to the
Acquisition and related transactions and the Strategic Divestment Program, each
as described below, with respect to information about events occurring upon
completion of or after the Acquisition.
At December 25, 1994, the Company operated 702 restaurants located in
34 states, with 52% of its restaurants located in California. Additionally, as
of December 25, 1994, the Company was the licensor of 231 full-service
restaurants in Japan and South Korea, the franchisor of five family restaurants
and five Mexican restaurants in the United States and the franchisor of 21
Mexican restaurants outside the United States.
The consolidated financial statements of the Predecessor Company were
prepared on a going concern basis, which contemplated continuity of operations,
realization of assets and liquidation of liabilities in the ordinary course of
business. While the Prepackaged Plan Chapter 11 cases were in process, the
Company continued in possession of its properties and operated and managed its
business as a debtor-in-possession pursuant to the Bankruptcy Code. The
Company applied the provisions of the American Institute of Certified Public
Accountants Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7"), in the December 26,
1993 and December 28, 1992 consolidated financial statements. The Company's
12 1/4% Senior Subordinated Notes (the "Old Senior Subordinated Notes") and
12 3/4% Subordinated Notes (the "Old Subordinated Notes" and, together with the
Old Senior Subordinated Notes, the "Old Notes") were in default in accordance
with the terms of the applicable debentures at December 26, 1993. In
accordance with SOP 90-7, those liabilities and obligations whose disposition
was dependent upon the outcome of the Prepackaged Plan Chapter 11 cases were
segregated and classified as "Liabilities subject to settlement under
reorganization proceedings" in the consolidated
F-9
<PAGE> 56
balance sheet at December 26, 1993 (see Note 10). Likewise, the 12% redeemable
cumulative exchangeable preferred stock was also dependent upon the outcome of
the Prepackaged Plan Chapter 11 cases and was classified as "12% redeemable
cumulative exchangeable preferred stock subject to settlement under
reorganization proceedings" in the consolidated balance sheet at December 26,
1993. On January 7, 1994, the Company's Prepackaged Plan was confirmed by the
bankruptcy court (see Note 2).
Pursuant to SOP 90-7, the Company qualified for fresh start reporting
as of January 27, 1994. Under this concept, all assets and liabilities are
restated to current value of the reorganized entity, which approximates the
Company's fair value at the date of reorganization. The Company obtained an
appraisal of the assets and liabilities of the Successor Company. This
appraisal determined the reorganization value (i.e., fair value) of the assets
and liabilities of the Successor Company. The Company utilized the results of
this appraisal to implement fresh start reporting, which, along with
adjustments of $(2,561,000) to current assets, $24,804,000 to property and
equipment, $(26,646,000) to goodwill, $(2,795,000) to other assets, $5,455,000
to current liabilities, $4,062,000 to long-term debt and $(3,124,000) to other
long-term liabilities, resulted in reorganization value in excess of amounts
allocable to identifiable assets of $203,854,000 at January 27, 1994. This
amount is being amortized over 30 years.
The accumulated deficit of the Predecessor Company was eliminated as
required by fresh start reporting; additionally, the statement of operations
for the one month ended January 26, 1994 reflects the effects of the
forgiveness of debt resulting from confirmation of the plan of reorganization
and the effects of adjustments to restate assets and liabilities to reflect the
reorganization value of the Successor Company. As such, the consolidated
balance sheet of the Company as of December 25, 1994 and the accompanying
consolidated statement of operations for the eleven months then ended represent
that of the Successor Company which, in effect, is a new entity with assets,
liabilities and a capital structure having carrying values not comparable with
prior periods. The accompanying consolidated balance sheet as of December 26,
1993 and the consolidated statements of operations for the two years in the
period then ended and for the one month ended January 26, 1994 represent that
of the Predecessor Company.
NOTE 2 - THE ACQUISITION:
On January 27, 1994 (the "Closing Date"), Apollo FRI Partners, L.P.
("Apollo"), Green Equity Investors, L.P. ("GEI") and Foodmaker, Inc.
("Foodmaker") acquired approximately 98% of the outstanding common stock of the
Company (the "Acquisition"). The Acquisition involved the following components
and related transactions, all of which (unless otherwise noted) were
consummated on the Closing Date:
New Equity Investment. Apollo, GEI, Foodmaker and certain officers of
the Company made the $154.7 million New Equity
F-10
<PAGE> 57
Investment in the Company pursuant to the Acquisition Agreement, dated as of
October 15, 1993, among the Company, Apollo, GEI, Foodmaker and Chi-Chi's (as
amended, the "Acquisition Agreement") and the Employee Stock Purchase (as
defined below). Apollo purchased 389,634 shares of the Company's common stock,
par value $.01 per share (the "Common Stock") (constituting 40.0% of the
Common Stock outstanding immediately following the Closing Date) for
$62.3 million in cash and GEI purchased 179,831 shares of Common Stock
(constituting 18.4% of the Common Stock outstanding immediately following
the Closing Date) for $28.8 million in cash. Foodmaker acquired 389,634 shares
of Common Stock (constituting 40.0% of the Common Stock outstanding
immediately following the Closing Date, with a value of $62.3 million) in the
Chi-Chi's Merger. Certain officers of the Company purchased 15,625 shares of
Common Stock in the Employee Stock Purchase (as defined below).
Chi-Chi's Merger. The Company acquired Chi-Chi's, a wholly-owned
subsidiary of Foodmaker and the operator, directly or indirectly through its
subsidiaries, or franchisor of 235 full-service Mexican restaurants, the
largest chain of such restaurants in the United States based upon both number
of restaurants and annual revenues. This acquisition was accounted for under
the purchase method. The Chi-Chi's Merger occurred through a merger of a
newly-formed subsidiary of the Company with Chi-Chi's. Pursuant to the
Acquisition Agreement, Foodmaker received (a) $205.0 million in cash, less the
principal amount of capital leases and the face amount of certain indebtedness
of Chi-Chi's (including certain Chi-Chi's debentures which were defeased
immediately following consummation of the Chi-Chi's Merger) existing or assumed
by the Company in connection with the Chi-Chi's Merger, (b) 389,634 shares of
Common Stock and (c) a warrant to purchase, at an aggregate exercise price
of $26.7 million, 111,111 shares of Common Stock (constituting 10% of the
Common Stock outstanding assuming the full exercise thereof) (the
"Foodmaker Warrant"). The Foodmaker Warrant expires on February 1, 1999. Pro
forma financial statements for the Chi- Chi's Merger have not been presented as
such merger was a component of the Acquisition, and pro forma financial
statements reflecting only this component of the Acquisition would not be
meaningful.
Credit Facility. The Company, FRI-M Corporation (formerly known as
REG-M Corp.), a wholly-owned subsidiary of the Company (the "Borrower"), and
certain subsidiaries of the Borrower (the "Subsidiary Guarantors") entered into
the Credit Facility on the Closing Date. The Credit Facility is a $150.0
million five-year fully revolving credit facility with a $100.0 million
sub-limit for standby letters of credit and is used for general corporate
purposes, including working capital and capital expenditures. The letter of
credit availability under the Credit Facility replaced the Amended and Restated
Letter of Credit Procurement Facility (the "Old L/C Facility") with W. R. Grace
& Co.-Conn. ("Grace"), which was terminated on the Closing Date. Borrowings
under the Credit Facility are made by the Borrower. Such borrowings are
guaranteed by the Company and the Subsidiary Guarantors and are secured by
F-11
<PAGE> 58
substantially all of the assets of such subsidiaries and by a pledge of the
stock of the Borrower and the Subsidiary Guarantors.
Prepackaged Plan. The Company and REG-M Corp. commenced Chapter 11
cases on November 23, 1993 after receiving acceptances of their prepackaged
joint plan of reorganization (the "Plan") from 100% of the holders of the Old
Notes and Preferred Stock (each as defined) who voted on the Plan and from
holders of over 98% of the Old Common Stock (as defined) who voted on the Plan.
The Plan was confirmed by the United States Bankruptcy Court for the District
of Delaware on January 7, 1994. On the Closing Date, substantially all of the
Company's old debt and equity securities were cancelled and extinguished
through consummation of the Plan and holders thereof received cash
distributions (the "Cash Distributions") as follows. For each $1,000 principal
amount of 12 1/4% Senior Subordinated Notes due 1996 (the "Old Senior
Subordinated Notes"), holders received $939.26 in cash plus an additional cash
amount equal to interest accrued on $939.26 from May 19, 1993 to the Closing
Date at a rate equal to 10.05% per annum (the weighted average of the yields to
maturity of the Notes at the time they were issued) (the "Accrual Rate"). For
each $1,000 principal amount of 12 3/4% Subordinated Notes due 1998 (the "Old
Subordinated Notes" and, together with the Old Senior Subordinated Notes, the
"Old Notes"), holders received $646.18 in cash plus an additional cash amount
equal to interest accrued on $646.18 from May 19, 1993 to the Closing Date at
the Accrual Rate. For each share of 12% Cumulative Exchangeable Preferred
Stock (the "Preferred Stock"), holders received $17.88 in cash and for each
share of Class D Common Stock (the "Old Common Stock"), holders received $.50
in cash.
Employee Stock Purchase and Management Incentive Plan. In connection
with the Acquisition, the Company adopted a new management incentive plan (the
"Management Incentive Plan") pursuant to which certain officers and employees
of the Company were granted the right to purchase up to 40,900 shares of
Common Stock (constituting up to 4.1% of the Common Stock outstanding
immediately following such purchases) at $160 per share (the "Employee Stock
Purchase"), the same per share price paid by Apollo and GEI in the New Equity
Investment. The Employee Stock Purchase was consummated on the Closing Date
with respect to certain officers (15,625 shares of Common Stock) and on May
19, 1994 and July 31, 1994 with respect to the other participants (22,552
shares of Common Stock). No more than fifty percent of the purchase price
was authorized to be financed through interest-bearing resource notes payable
to the Company. These notes are due on May 31, 1999, if not paid earlier by
deductions from incentive compensation, and bear interest at 7%. Interest is
payable every six months. The individuals who purchased Common Stock were
also granted options to purchase 20,822 shares of Common Stock in the
future at an exercise price of $160 per share. The Company also granted
options to purchase 30,600 shares of Common Stock to approximately 820
other employees.
F-12
<PAGE> 59
Investment Agreement. Grace, Western Family Restaurants, Inc.
("Grace/Western"), an affiliate of Grace which owned 74.6% of the Old Common
Stock, and the Company entered into an agreement as amended (the "Investment
Agreement"), with Apollo REG, Co., GEI REG, Co. and FMI REG, Co. and Foodmaker.
Under the Investment Agreement, among other things, the Company paid Grace
$15.0 million on the Closing Date in consideration of Grace's undertaking to
obtain written confirmation that although Grace would no longer hold an equity
interest in the Company, the Company would continue to receive royalties under
the Kasumi Licensing Agreement through February 4, 2010. The Kasumi Licensing
Agreement expired on February 4, 1995. The Company has reached an agreement on
terms to enter into a new Technical Assistance and Licensing Agreement that
will expire in 2010. Grace also agreed to indemnify the Company against
certain tax liabilities and with respect to certain previously divested leases.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal year
Previously, the Company reported results of operations based on 52 or
53 week periods ending on the last Monday in December. In 1993, the fiscal
year end was changed to the last Sunday in December. The fiscal years ended
December 25, 1994 and December 28, 1992 included 52 weeks, and the fiscal year
ended December 26, 1993 included 52 weeks, less one day.
Principles of consolidation
The consolidated financial statements include the accounts of the
Company and all its subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Inventories
Inventories consist primarily of food and liquor and are stated at the
lower of cost or market. Costs are determined using the first-in, first-out
(FIFO) method.
Property and equipment
Property and equipment are stated at cost and are depreciated on a
straight-line basis over their estimated useful lives (buildings principally
over 25 to 35 years and furniture, fixtures and equipment over 3 to 10 years).
Leasehold improvements are amortized on a straight-line basis over the shorter
of their estimated useful lives or the terms of the related leases. Property
under capitalized leases is amortized over the terms of the leases using the
straight-line method.
The Company evaluates property and equipment for impairment based on a
comparison of the carrying value of the assets to the sum of the estimated
undiscounted cash flows expected to be generated over the estimated life of the
assets.
Losses on disposition of properties are recognized when a commitment
to divest a restaurant property is made by the Company and include estimated
carrying costs through the expected date of disposal.
F-13
<PAGE> 60
Property held for sale
Property held for sale is carried at estimated net realizable value.
Advertising
Production costs of commercials and programming are charged to
operations when aired. The costs of other advertising, promotion and marketing
programs are charged to operations in the year incurred.
Franchise and license fees
Initial franchise and license fees are recognized when all material
services have been performed and conditions have been satisfied. Initial fees
of $35,000, $35,000 and $70,000 were earned in 1994, 1993 and 1992,
respectively. Monthly fees are accrued as earned based on the respective
monthly sales. Such fees totalled $6,006,000 for the eleven months ended
December 25, 1994 (including Chi-Chi's fees subsequent to the Acquisition),
$546,000 for the one month ended January 26, 1994, $4,907,000 for 1993 and
$4,815,000 for 1992 and are included as an offset to general and administrative
expenses.
Reorganization value and goodwill
Reorganization value in excess of amounts allocable to identifiable
assets is amortized using the straight-line method over 30 years. Goodwill
related to the Chi-Chi's Merger was amortized using the straight-line method
over 30 years through the fourth quarter of 1994 when the Company wrote off its
remaining goodwill balance (see Note 8). Accumulated amortization of
reorganization value amounted to $6,273,000 at December 25, 1994. Accumulated
amortization of the Predecessor Company's goodwill amounted to $5,703,000 at
December 26, 1993.
The Company evaluates the carrying value of its reorganization value
in excess of amounts allocable to identifiable assets and the goodwill related
to the Chi-Chi's Merger on an ongoing basis relying on a number of factors,
including operating results, business plans, budgets and economic projections.
In addition, the Company's evaluation considers non-financial data such as
continuity of personnel, changes in the operating environment, name
identification, competitive information and market trends. Finally, the
evaluation considers changes in management's strategic direction or market
emphasis. When the foregoing considerations suggest that a deterioration of
the financial condition of the Company or any of its divisions has occurred,
the Company measures the amount of an impairment, if any, based on the
estimated fair value of the restaurant operations for each of its divisions
over the remaining amortization period.
F-14
<PAGE> 61
Income taxes
Beginning in 1992, the Company has accounted for income taxes using
the standards specified in Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (see Note 13). Prior to 1992, the Company
accounted for income taxes using APB No. 11.
Loss per common share
Loss per common share for the Successor Company is computed based on
the weighted average number of shares actually outstanding. The impact of the
Foodmaker Warrant and options has not been included since the impact would be
antidilutive.
Reclassifications
Certain amounts as previously reported have been reclassified to
conform to the 1994 presentation.
NOTE 4 - STRATEGIC DIVESTMENT PROGRAM:
Effective year-end 1992 109 non-strategic restaurants were designated
for divestment (the "Strategic Divestment Program"). Two additional restaurants
were identified for divestment in late 1993. The restaurants included 12
family restaurants, 47 traditional dinnerhouses and 52 Mexican dinnerhouses.
During 1992, these restaurants had sales of $159,385,000 and losses of
$7,602,000, including direct general and administrative expenses of $5,191,000.
In conjunction with this divestment program, the Company recorded a provision
for divestitures of $27,871,000 during the fourth quarter of 1992. This
provision consisted of: (i) $2,180,000 for severance costs associated with the
restaurants to be divested and (ii) $25,691,000 for the write-down to net
realizable value of the property and equipment associated with such
restaurants. During 1993, these restaurants had sales of $116,032,000 and
losses of $8,690,000, including direct general and administrative expenses in
the amount of $4,049,000. The 1993 severance costs of $886,000 were charged
against the reserve for divestitures, reducing the reserve balance to
$1,294,000. During the fourth quarter of 1993, an additional write-down of
$1,908,000 to adjust property and equipment to net realizable value was
recorded, as the Company believed that further impairment had occurred. In
addition, during the fourth quarter of 1993 the reserve for severance costs was
reduced by $302,000, and, since the Company reached a measurement date on
December 26, 1993, it recorded a provision for future estimated operating
losses for the remaining restaurants to be divested of $7,615,000, including
direct general and administrative expenses of $2,383,000. During 1994, these
restaurants had sales of $58,511,000 and losses of $7,434,000, including direct
general and administrative expenses in the amount of $1,583,000, which were
charged against the reserve for divestitures. In addition, severance costs of
$617,000 were charged against the reserve for divestitures in 1994. During the
F-15
<PAGE> 62
third quarter of 1994, the net realizable value of the remaining assets held
for sale was reduced by $2,344,000 which is included in loss on disposition of
properties in the accompanying consolidated statement of operations. At
December 25, 1994 and December 26, 1993, the net realizable value of the assets
held for sale, consisting principally of property and equipment, was $339,000
and $7,122,000, respectively. In addition, the Company increased the reserve
relating to potential shortfalls in future sublease income by $2,799,000 in the
third quarter of 1994. This adjustment is also included in loss on disposition
of properties.
In recording the acquisition of Chi-Chi's, eleven poor performing
restaurants were added to the Strategic Divestment Program, and reserves of
$10,758,000 were provided. These reserves included one year's estimated
operating losses and the potential shortfall in future sublease income. During
1994, operating losses of $2,404,000 and lease termination payments of
$1,439,000 were charged against these reserves.
As of December 25, 1994, 45 properties (including seven of the
Chi-Chi's restaurants) remained to be divested, of which eight were closed.
Since the Strategic Divestment Program was scheduled for completion at the end
of fiscal 1994, the operating results of the remaining 37 restaurants will be
included in the Company's consolidated statement of operations in 1995,
although many of the restaurants will continue to be marketed and sold.
NOTE 5 - RECEIVABLES:
A summary of receivables follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
(in thousands)
<S> <C> <C>
Trade, principally credit cards $ 3,184 $ 2,389
License and franchise fees
and related receivables 5,113 4,174
Receivable from Marriott
Distribution Services 661 1,348
Insurance recovery receivables 323 893
Notes receivable 428 0
Other 2,122 2,116
------- -------
$11,831 $10,920
======= =======
</TABLE>
NOTE 6 - MARRIOTT ACQUISITION:
In early 1992, the Company consummated an agreement with Marriott
Corporation and certain of its subsidiaries ("Marriott") and acquired 109 Bob's
Big Boy restaurants from Marriott. The purchase price was approximately $67.9
million (excluding the impact of approximately $1.3 million for cash, inventory
on hand, apportionments and purchase price adjustments mutually agreed upon by
the Company and Marriott and approximately $3.0 million in
F-16
<PAGE> 63
acquisition costs) which was comprised of $9.9 million in cash, $34.8 million
in the form of three promissory notes and $23.2 million in the form of the
Company's 12% redeemable cumulative exchangeable preferred stock. One of the
promissory notes was a $13 million, 240-day note (due on October 7, 1992)
payable to Marriott bearing interest at the rate of 8% per annum for the first
120 days and at a rate of 10% per annum for the subsequent 120-day term (the
"Marriott Note") which had been secured by the pledge to Marriott of all the
outstanding capital stock of jojos California Family Restaurants, Inc. The
Marriott Note was paid at the closing of the Acquisition (see Note 2). The
other promissory notes held by Marriott had a balance of $21.8 million and were
secured as to the payment of principal and interest by the grant to Marriott of
deeds of trust on the fee properties sold to the Company by Marriott and the
additional grant to Marriott of leasehold deeds of trust on certain leasehold
interests assigned by Marriott to the Company. In the third quarter of 1994,
the Company purchased the remaining promissory notes and related accrued
interest at an 11-1/2% discount. This transaction resulted in an extraordinary
gain of $2.9 million.
NOTE 7 - PROPERTY AND EQUIPMENT:
A summary of property and equipment follows:
<TABLE>
<CAPTION>
1994 1993
-------- ---------
(in thousands)
<S> <C> <C>
Land $ 55,872 $ 36,836
Buildings and improvements 293,847 252,503
Furniture, fixtures and
equipment 105,340 180,803
Projects under construction 23,296 3,976
-------- ---------
478,355 474,118
Accumulated depreciation
and amortization (33,001) (238,602)
-------- ---------
$445,354 $ 235,516
======== =========
</TABLE>
Property under capitalized leases in the amount of $64,201,000 at
December 25, 1994 and $85,363,000 at December 26, 1993 is included in buildings
and improvements. Accumulated amortization of property under capitalized
leases amounted to $7,215,000 at December 25, 1994 and $41,714,000 at December
26, 1993. Capitalized leases primarily relate to the buildings on certain
restaurant properties; the land portions of these leases are accounted for as
operating leases.
Depreciation and amortization relating to property and equipment was
$33,860,000 for the eleven months ended December 25, 1994, $2,359,000 for the
one month ended January 26, 1994, $28,394,000 for 1993 and $46,512,000 for
1992, of which $7,451,000, $412,000, $6,213,000 and $6,447,000, respectively,
was related to amortization of property under capitalized leases.
F-17
<PAGE> 64
A majority of the capitalized and operating leases have original terms
of 25 years, and substantially all of these leases expire in the year 2005 or
later. Most leases have renewal options. The leases generally provide for
payment of minimum annual rent, real estate taxes, insurance and maintenance
and, in most cases, contingent rent, calculated as a percentage of sales, in
excess of minimum rent. The total amount of contingent rent under capitalized
leases for the eleven months ended December 25, 1994, the one month ended
January 26, 1994, and the years ended December 26, 1993 and December 28, 1992
was $4,895,000, $305,000, $5,315,000 and $5,307,000, respectively. Total
rental expense for all operating leases comprised the following:
<TABLE>
<CAPTION>
Eleven Months One Month
Ended Ended
Dec. 25, Jan. 26,
1994 1994 1993 1992
------------- --------- ------- -------
<S> <C> <C> <C> <C>
Minimum rent $50,373 $2,153 $26,315 $33,976
Contingent rent 3,636 208 3,339 3,924
Less: Sublease rent (5,685) (369) (5,035) (4,656)
------- ------ ------- -------
$48,324 $1,992 $24,619 $33,244
======= ====== ======= =======
</TABLE>
At December 25, 1994, the present value of capitalized lease payments
and the future minimum lease payments on noncancellable operating leases were:
<TABLE>
<CAPTION>
Capitalized Operating
Due in Leases Leases
------ ----------- ---------
(in thousands)
<S> <C> <C>
1995 $ 11,423 $ 50,470
1996 11,207 50,145
1997 10,888 48,885
1998 10,453 47,428
1999 9,608 45,920
Later years 37,416 267,221
-------- --------
Total minimum lease payments 90,995 $510,069
========
Interest (32,197)
--------
Present value of minimum
lease payments $ 58,798
========
</TABLE>
The future lease payments summarized above include commitments for
leased properties included in the Company's divestiture program.
NOTE 8 - GOODWILL WRITE-OFF:
Chi-Chi's reported significant sales declines in the second half of
1994 which have continued into the first quarter of 1995. These sales declines
have resulted in operating performance for Chi-Chi's which is significantly
lower than anticipated at the time of the Acquisition. These operating results
have caused the Company to reevaluate its business strategy for the Mexican
Restaurant Division, particularly Chi-Chi's. Consistent with this
F-18
<PAGE> 65
strategic reevaluation, the Company has revised its forecasts for the future
operations of Chi-Chi's which has resulted in a significant reduction in
projected future cash flows and a lower valuation of the business. The Company
has determined that its projected results for Chi- Chi's would not support the
future amortization of the remaining Chi-Chi's goodwill balance of $144,780,000
at December 25, 1994.
The methodology employed to assess the recoverability of the Chi-Chi's
goodwill first involved the projection of operating cash flows forward through
the year 2001 and the determination of a residual factor. These projections
were then discounted using an internal rate of return developed by a review
of certain publicly traded restaurant companies. The Company then evaluated
the recoverability of Chi-Chi's goodwill on the basis of this forecast of
future operations. Based on such forecast, the cumulative discounted future
cash flow was insufficient to recover the Chi-Chi's goodwill balance.
Accordingly, the Company wrote off the remaining unamortized Chi-Chi's
goodwill balance of $144,780,000 in the fourth quarter of 1994.
The Company's forecast assumed that sales increases for comparable
restaurants would be approximately 2.6% in 1995 and average approximately 3%
during the forecast period (primarily due to price increases) and that certain
poor performing restaurants would be divested by the end of 1997. No new
restaurant expansion was justifiable given the poor performance achieved during
1994. Product cost inflation was projected at 1.8% through 1998 and flat
thereafter. Payroll and related costs were expected to increase 3% annually
based on inflation. Additionally, occupancy and other operating expenses (with
the exception of rent) and general and administrative expenses were projected
to increase annually at the 3% inflation rate. Rent was only projected to
increase at 1% per year. The Company believed that the projected operating
results based on these assumptions were the most likely scenario given
Chi-Chi's operating performance and recent negative comparable sales trends and
the Company's current plans.
NOTE 9 - OTHER ASSETS:
A summary of other assets follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
(in thousands)
<S> <C> <C>
Liquor licenses $ 7,079 $ 4,322
Debt issuance costs 20,078 0
Construction allowances 0 1,902
Franchise operating rights 8,733 1,241
Notes receivable 9,882 1,101
Conversion costs 0 7,131
Other 2,537 4,455
------- -------
$48,309 $20,152
======= =======
</TABLE>
F-19
<PAGE> 66
Debt issuance costs are amortized over the terms of the respective
loan agreements.
Construction allowances represented advances made for restaurant
construction or remodeling which were recovered through reductions in
contingent rental payments. These amounts were considered leasehold
improvements at the time of the Acquisition.
Franchise operating rights at December 25, 1994 are stated at their
fair market value as of the date of the Acquisition based on royalty income
streams and are amortized over the terms of the franchise agreements.
Conversion costs (principally training costs and occupancy costs) have
been capitalized as part of the conversion of the acquired Marriott family
restaurants into the Company's Coco's and Carrows concepts. At the time of the
Acquisition, the Company adjusted the period of amortization for all preopening
and conversion costs to one year. The remaining balance of these costs at
December 25, 1994 is classified in prepaid expenses.
NOTE 10 - LONG-TERM DEBT, INCLUDING CAPITALIZED LEASE OBLIGATIONS:
Long-term debt, including capitalized lease obligations, is comprised
of the following:
<TABLE>
<CAPTION>
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
9-3/4% Senior Notes $300,000 $ 0
10-7/8% Senior Subordinated
Discount Notes 120,406 0
12-1/4% Senior Subordinated Notes,
net of unamortized discount of
$3,072,000 0 191,928
12-3/4% Subordinated Notes, net
of unamortized discount of
$1,084,000 0 78,916
Revolving credit loans 59,600 0
Capitalized lease obligations 58,798 58,304
8% Promissory notes 0 21,828
Mortgage notes, 12-1/4% - 12-1/2%,
due 1995-1998 1,719 2,307
Other 2,726 2,200
Debt issuance and other costs
(amortized over the lives of the
respective debt issues) 0 (3,370 )
-------- --------
543,249 352,113
Liabilities subject to settlement
under reorganization proceedings 0 267,474
Amounts due within one year 6,754 5,981
-------- --------
$536,495 $ 78,658
======== ========
</TABLE>
The Predecessor Company failed to pay $14.1 million of interest due
December 15, 1992 on the Old Notes, $2.6 million of
F-20
<PAGE> 67
interest due March 15, 1993 on the Old Subordinated Notes, the $14.5 million of
interest due June 15, 1993 on the Old Notes, $2.6 million of interest due
September 15, 1993 on the Old Subordinated Notes and $14.5 million of interest
due December 15, 1993 on the Old Notes. In addition, because the Predecessor
Company failed to meet a minimum net worth requirement contained in the Old
Indentures, it was required to offer to redeem, on June 25, 1993, 10% of the
original outstanding amount of each issue of the Old Notes at a redemption
price equal to 100% of the principal amount plus accrued interest. The
Predecessor Company did not make such an offer. As a result, all unpaid
principal on the Old Notes ($275 million at December 26, 1993) and accrued
interest could have been declared immediately due and payable.
Liabilities that were extinguished as part of the Plan are separately
classified in the consolidated balance sheet as of December 26, 1993 as
liabilities subject to settlement under reorganization proceedings and include
the following (in thousands):
<TABLE>
<S> <C>
Old Senior Subordinated Notes $191,928
Old Subordinated Notes 78,916
Accrued interest 52,720
Debt issuance and other costs (3,370)
--------
$320,194
========
</TABLE>
In connection with the Acquisition, the Company sold $300.0 million
principal amount of 9-3/4% Senior Notes due in full in 2002 (the "Senior
Notes") and $150.0 million principal amount ($109.0 million in proceeds) of
10-7/8% Senior Subordinated Discount Notes due in full in 2004 (the "Discount
Notes" and, together with the Senior Notes, the "Notes"), and the Company and
certain of its subsidiaries entered into the Credit Facility.
The Credit Facility is a $150.0 million senior secured revolving
credit facility with a $100.0 million sub-limit for standby letters of credit
and is used for general corporate purposes including working capital, debt
service and capital expenditure requirements. The Credit Facility will
terminate and the obligations thereunder will be immediately due and payable on
January 27, 1999. Amounts borrowed will bear interest at rates, selected at
the Company's option from time to time, based on a base rate or LIBOR, in each
cash plus a fluctuating percentage based on the Company's utilization and
EBITDA (as defined in the Credit Facility).
Revolving credit loans of $59.6 million outstanding at December 25,
1994 have been classified as long-term debt since there are no current plans to
pay down the outstanding balance. At December 25, 1994, interest on the
revolving credit loans was being charged at 8.62%. Additionally, as of
December 25, 1994, $41.9 million in standby letters of credit had been issued.
Subject to certain exceptions, the Credit Facility provides for
mandatory prepayments of all net cash proceeds from asset
F-21
<PAGE> 68
sales. Such mandatory prepayments will also reduce the facility commitment.
The Senior Notes require semiannual interest payments on February 1
and August 1 of each year and will mature on February 1, 2002. The Senior
Notes will not be redeemable at the option of the Company prior to February 1,
1999. Thereafter, such notes may be redeemed at prices starting at 102.786%
and declining ratably to 100% at February 1, 2001. The Discount Notes will not
require cash interest payments until August 1, 1997. Thereafter, interest on
the Discount Notes will be paid on February 1 and August 1 of each year, and
such notes will mature on February 1, 2004. The Discount Notes will not be
redeemable at the option of the Company prior to February 1, 1999. Thereafter,
such notes may be redeemed at prices starting at 104.078% and declining ratably
to 100% at February 1, 2002.
The Credit Facility contains various covenants including the
maintenance of certain financial ratios. The Company achieved
all required ratios in 1994, except for the fixed charge coverage ratio.
The Company and the banks have agreed to waive such non-compliance and to
revise the financial covenants applicable to 1995.
The mortgage notes were issued to a group of institutional lenders and
are collateralized by mortgages covering 15 restaurants having a book value of
approximately $15.6 million at December 25, 1994.
Maturities of long-term debt, including capitalized lease obligations,
during the four years subsequent to December 31, 1995 are as follows:
$7,384,000 in 1996; $6,948,000 in 1997; $6,896,000 in 1998 and $66,146,000 in
1999.
NOTE 11 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The recorded amounts of the Company's cash and cash equivalents,
restricted cash, collateral deposit, self-insurance reserves, other accrued
liabilities, note payable to Marriott, loan payable to Grace and revolving
credit borrowings at December 25, 1994 and December 26, 1993 approximate fair
value. The fair value of the Company's long-term debt, excluding capitalized
lease obligations, is estimated as follows:
F-22
<PAGE> 69
<TABLE>
<CAPTION>
1994 1993
------------------- -------------------
Recorded Fair Recorded Fair
Amount Value Amount Value
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Senior Notes $300,000 $233,250 $ 0 $ 0
Discount Notes 120,406 81,000 0 0
Old Senior Subordinated Notes 0 0 191,928 183,156
Old Subordinated Notes 0 0 78,916 51,694
8% Promissory notes 0 0 21,828 20,082
Mortgage notes 1,719 1,718 2,307 2,355
Other 2,726 2,460 2,200 1,748
</TABLE>
The fair values of the Company's Senior Notes and Discount Notes are
based on an average market price of these instruments as of the end of fiscal
1994. The fair values of the Company's Old Senior Subordinated Notes and Old
Subordinated Notes are based on the Cash Distributions paid on the Closing Date
pursuant to the Plan for 1993. The fair value of the 8% promissory notes,
mortgage notes and other debt was estimated using a discount rate which the
Company believes would be currently available to it for debt with similar
terms and average maturities.
The Company does not maintain investments or commitments for which the
application of SFAS 119, "Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments," would cause a material effect.
NOTE 12 - OTHER ACCRUED LIABILITIES:
A summary of other accrued liabilities follows;
<TABLE>
<CAPTION>
1994 1993
------- -------
(in thousands)
<S> <C> <C>
Wages, salaries and bonuses $27,292 $22,796
Carrying costs of closed properties 17,912 13,863
Reserve for divestitures 0 8,607
Interest 13,212 4,273
Sales tax 10,011 6,409
Property taxes 4,626 2,794
Accrued rent 3,474 3,083
Utilities 4,028 2,988
Other 15,871 9,236
------- -------
$96,426 $74,049
======= =======
</TABLE>
Carrying costs of closed properties represent the estimated future
costs associated with the Company's closed and subleased restaurants which
consists primarily of the net present value of lease subsidies which are mainly
comprised of the excess of future lease payments for which the Company is
liable, over amounts estimated to be received from related subleases.
F-23
<PAGE> 70
NOTE 13 - INCOME TAXES:
The Company reported a loss before income tax provision in 1994, 1993
and 1992. Accordingly, the income tax provisions for each year primarily
reflect certain state, local and foreign taxes. On a tax return basis, the
federal regular operating loss carryforwards amounted to approximately $139.8
million ($78.3 million of alternative minimum tax operating loss carryforwards)
and expire in 2003 through 2010. The Company had approximately $2.4 million of
tax credit carryforwards (of which $0.7 million expire in 1995 and 1996 and
$1.7 million expire in 2003 and 2004).
Upon consummation of the Acquisition, the Company's net operating loss
carryovers and other tax attributes were reduced significantly for federal
income tax purposes. In addition, because the consummation of the Acquisition
triggered an ownership change of the Company for federal income tax purposes,
the Company's post-Acquisition use of its remaining net operating loss
carryovers for regular and alternative minimum federal income tax purposes is
subject to an annual limitation in an amount equal to the product of (i) the
long-term tax-exempt rate prevailing on the Closing Date and (ii) the value of
the Company's stock, increased to reflect the cancellation of indebtedness
pursuant to the Prepackaged Plan (but without taking into account contributions
to capital pursuant to the Acquisition). The Company's annual limit is
approximately $5.3 million.
At December 25, 1994, the Company and its subsidiaries had tax credit
carryforwards of approximately $4.1 million not utilized by Grace. In
accordance with the 1986 Acquisition, the Company must reimburse Grace for 75%
of the benefit of these tax credits if they are utilized in future Company tax
returns. Further, El Torito Restaurants, Inc. (a wholly owned subsidiary of
the Company) has approximately $12.5 million of tax depreciation deductions not
claimed in Grace tax returns as a result of a tax sharing agreement. The
Company will also reimburse Grace for 75% of any tax savings generated by these
deductions. In addition, operating loss and tax credit carryforwards ($6.1
million and $1.0 million, respectively) generated prior to the acquisition of
certain restaurant companies by Grace were available at December 25, 1994 to
offset future taxable income or income taxes, respectively, of those companies
for various years through 1999. To the extent such tax benefits are ultimately
realized, goodwill will be reduced.
Further, as a result of the Chi-Chi's Merger, the Company has net
operating loss and credit carryforwards not used by Chi-Chi's of $50.7 million
and $6.9 million, respectively. The net operating losses expire beginning in
2004 through 2009 and the credit carryovers expire in various years from 1995
through 2009. The Acquisition, as well as the 1992 acquisition of a previous
franchisee by Chi-Chi's, triggered ownership changes for federal income tax
purposes which result in separate annual limitations on the availability of
these losses and credits.
F-24
<PAGE> 71
Beginning in fiscal 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). This
statement requires the recognition of deferred tax assets and liabilities for
the future consequences of events that have been recognized in the Company's
financial statements or tax returns. The measurement of the deferred items is
based on enacted tax laws. In the event the future consequences of differences
between financial reporting bases and the tax bases of the Company's assets and
liabilities result in a deferred tax asset, SFAS 109 requires an evaluation of
the probability of being able to realize the future benefits indicated by such
asset. A valuation allowance related to a deferred tax asset is recorded when
it is more likely than not that some portion or all of the deferred tax asset
will not be realized. As permitted under the new statement, financial
statements of prior years were not restated. The cumulative effect on the
Company's deferred tax accounts at December 31, 1991 of adopting this new
statement was the recording of a net deferred tax asset of $53,346,000, a
reduction in property and equipment of $667,000, a valuation allowance of
$53,346,000 and a cumulative effect of $667,000.
A reconciliation of income tax expense to the amount of income tax
benefit that would result from applying the federal statutory rate (35% for
1994 and 1993 and 34% for 1992) to loss before income taxes is as follows:
<TABLE>
<CAPTION>
Eleven Months One Month Fiscal years ended
Ended Ended ----------------------
Dec. 25, Jan. 26, Dec. 26, Dec. 28,
1994 1994 1993 1992
------------- --------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Provision for income
taxes at statutory
rate $(56,736) $ 191,834 $(18,010) $(67,498)
State taxes, net of
Federal income tax
benefit (2,948) (16,300) (3,113) (4,589)
State minimum tax 1,183 55 187 256
Foreign taxes 541 49 471 465
Goodwill 54,679 0 1,923 38,112
Nondeductible reorgani-
zation costs 0 (175,597) 0 0
Addition to valuation
allowance 4,896 0 17,545 33,975
Surtax exemption 0 0 514 0
Other 158 14 1,141 0
-------- --------- -------- -------
$ 1,773 $ 55 $ 658 $ 721
======== ========= ======== =======
</TABLE>
At December 25, 1994 and December 26, 1993, the Company's deferred tax
asset was $136,383,000 and $122,461,000, respectively, and deferred tax
liability was $27,570,000 and $18,544,000, respectively. The major components
of the Company's net deferred
F-25
<PAGE> 72
taxes of $108,813,000 at December 25, 1994 and $103,917,000 at December 26,
1993 are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Depreciation $ (26,004) $ (10,723)
Net operating loss and
credit carryforwards 86,243 68,947
Capitalized leases 900 10,385
Divestment, carrying cost
and rent subsidy reserves 8,306 17,361
Self-insurance reserves 22,552 14,711
Kasumi payment to Grace 6,000 0
Straight-line rent 1,939 0
Reorganization costs 4,834 0
Other 4,043 3,236
--------- ---------
108,813 103,917
Valuation allowance (108,813) (103,917)
--------- ---------
$ 0 $ 0
========= =========
</TABLE>
The increase in the valuation allowance of $4,896,000 for 1994
resulted from the following activity (in thousands):
<TABLE>
<S> <C>
Acquired Chi-Chi's operating
loss and credit carryforwards $ 24,659
Reduction in cumulative temporary
differences (12,260)
Reduction in net operating loss
carryforwards (7,509)
Expired tax credits (1,427)
Other 1,433
--------
$ 4,896
========
</TABLE>
NOTE 14 - BENEFIT PLANS:
The Company maintains certain incentive compensation and related plans
for executives and key operating personnel, including restaurant and field
management. Total expenses for these plans were $8,217,000, $666,000,
$9,479,000 and $7,505,000 for the eleven months ended December 25, 1994, the
one month ended January 26, 1994, 1993 and 1992, respectively.
The Predecessor Company had two Retirement Savings Plans, and
substantially all of the Predecessor Company's salaried employees were eligible
to participate in them. Effective December 31, 1991, the Predecessor Company
suspended its match under one of the plans and terminated the other plan.
During 1994, the Company acquired two retirement plans related to the Chi-Chi's
Merger and established a new deferred compensation plan for highly compensated
employees. The Company's contributions and expenses under these plans were
$528,000, $2,000, $53,000 and $65,000 for the eleven months ended December 25,
1994, one month ended January 26, 1994, 1993 and 1992, respectively. The
Company has no defined benefit plans.
F-26
<PAGE> 73
NOTE 15 - RELATED PARTY TRANSACTIONS:
Foodmaker provides distribution services to a portion of the Company's
Mexican restaurants, principally those operated under the Chi-Chi's name.
Distribution sales to those restaurants for the eleven months ended December
25, 1994 aggregated $81,537,000. In relation to the distribution sales, the
Company had accounts payable of $2,964,000 due to Foodmaker at December 25,
1994.
On the Closing Date, Apollo and GEI received an aggregate of $7.0
million as a financial advisory fee for services provided in connection with
the Acquisition and related transactions. In addition, Apollo and GEI are each
paid a monthly fee of $50,000 for providing certain management services to the
Company. For the eleven months ended December 25, 1994, the Company paid $1.1
million in connection with this arrangement.
NOTE 16 - REDEEMABLE CUMULATIVE EXCHANGEABLE PREFERRED STOCK:
The 1,544,237 shares of Preferred Stock held by Grace and Marriott at
December 26, 1993 were non-voting, had a liquidation value of $100 per share
(plus accrued and unpaid dividends) and were exchangeable at the option of the
Company into 13 1/2% Junior Subordinated Exchange Debentures due June 15, 1999.
Dividends were cumulative and were payable semi-annually in cash or in
additional shares of Preferred Stock at the option of the Company. Of the
1,544,237 shares outstanding, 500,000 were issued to Grace at the time of the
1986 Acquisition, 250,000 shares were issued, effective July 1, 1989, in
consideration for the cancellation of $25 million of the Company's 13 1/8%
Junior Subordinated Notes held by Grace, 232,400 shares were issued to Marriott
in early 1992 in connection with the acquisition of 109 family restaurants and
561,837 shares have been issued as stock dividends. At December 26, 1993, the
Company had accrued additional stock dividends on preferred stock. At $100 per
share, the value of the dividends was $29,497,000. All the outstanding
preferred stock was cancelled in connection with the Plan.
NOTE 17 - COMMON STOCK:
In December 1992, Grace entered into a series of agreements pursuant
to which it (i) obtained the right to purchase a majority of the shares of the
Old Common Stock from management and former management stockholders and (ii)
amended the terms of the Old Shareholders' Agreement, thereby effectively
gaining control of the Company. Grace also entered into a consent agreement
with the Company pursuant to which, among other things, the Company agreed not
to issue any shares of its capital stock or options without the consent of
Grace. In June 1993, Grace/Western as assignee exercised such purchase rights
and became the majority stockholder of the Company. Grace purchased 99,984 and
7,510 additional shares of Old Common Stock on October 15, 1993 and January 5,
1994, respectively, increasing its total holdings to 350,533 shares (or 74.6%
of the outstanding Old Common Stock). On the Closing Date,
F-27
<PAGE> 74
Grace/Western received a cash payment of $175,267 for such Old Common Stock in
connection with the Plan.
In connection with the Acquisition, the Company adopted a new
management incentive plan (the "Management Incentive Plan"), pursuant to which
certain officers and employees of the Company were granted the right to
purchase up to 40,900 shares of Common Stock (constituting up to 4.1% of
the Common Stock outstanding immediately following such purchases) at $160
per share (the "Employee Stock Purchase"), the same per share price paid by
Apollo and GEI in the New Equity Investment. The Employee Stock Purchase was
consummated on the Closing Date with respect to certain officers (15,625 shares
of Common Stock) and on May 19, 1994 and July 31, 1994 with respect to the
other participants (22,552 shares of Common Stock). No more than fifty
percent of the purchase price was authorized to be financed through
interest-bearing recourse notes payable to the Company. The individuals who
purchased Common Stock were also granted options to purchase 20,822 shares
of Common Stock in the future at an exercise price of $160 per share. The
Company also granted options to purchase 30,600 shares of Common Stock to
approximately 820 other employees. All these options expire in 2004 and 2005
and become exercisable at a rate of 25% on the grant date and 25% on each of
the next three anniversaries of the grant date. Approximately 5,000 options
have expired since December 25, 1994 due to terminations.
NOTE 18 - CONTINGENCIES:
The Company is involved in various litigation matters incidental to
its business. The Company does not believe that any of the claims or actions
filed against it will have a material adverse effect upon the consolidated
financial position and results of operations of the Company.
F-28
<PAGE> 75
SCHEDULE VIII
FAMILY RESTAURANTS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Charged to Balance
beginning costs and other at end
Description of period expenses accounts Deductions of period
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for uncollectible
receivables:
For the year 1994 $955 $ 21 $360(1) $(523)(2) $813
For the year 1993 548 429 0 (22)(2) 955
For the year 1992 717 72 0 (241)(2) 548
</TABLE>
(1) Represents allowance established at the date of the Chi-Chi's Merger.
(2) Represents write-off of uncollectible receivables against allowance and
includes transfers to other accounts.
S-1
<PAGE> 76
EXHIBIT INDEX
<TABLE>
<CAPTION> Sequentially
Exhibit Numbered
Number Description Page
------- ----------- ------------
<S> <C> <C> <C>
2 (a) The Company's Joint Plan of Reorganization. (Filed as Exhibit 2(a) to the
Company's Form 10-K filed with the SEC on March 28, 1994.)
3 (a) Fourth Restated Certificate of Incorporation of the Company. (Filed as
Exhibit 4.1 to the Company's Form S-8 filed with the SEC on March 23, 1994.)
3 (b) Bylaws of the Company. (Filed as Exhibit 4.2 to the Company's Form S-8 filed
with the SEC on March 23, 1994.)
4 (a) Indenture Dated as of January 27, 1994 Re: $300,000,000 9-3/4% Senior Notes
Due 2002. (Filed as Exhibit 4(a) to the Company's Form 10-K filed with the
SEC on March 28, 1994.)
4 (b) Indenture Dated as of January 27, 1994 Re: $150,000,000 10-7/8% Senior
Subordinated Discount Notes Due 2004. (Filed as Exhibit 4(b) to the
Company's Form 10-K filed with the SEC on March 28, 1994.)
9 Shareholders' Agreement, dated as of January 27, 1994, among the Company and
certain of its Shareholders. (Filed as Exhibit 4.3 to the Company's Form S-8
filed with the SEC on March 23, 1994.)
10 (a) Restructuring Agreement, dated as of July 2, 1993, among the Company, Western
Family Restaurants, Inc., Apollo REG, Co.,
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
-------- ----------- ------------
<S> <C> <C> <C>
GEI REG Co., FMI REG, Co. and Foodmaker, Inc. (Filed as Exhibit 2(a) to the
Company's Form S-1 filed with the SEC on November 1, 1993.)
10 (b) Amendment No. 1 to Restructuring Agreement, dated as of October 15, 1993,
among the Company, Western Family Restaurants, Inc., Apollo REG, Co., GEI REG
Co., FMI REG, Co. and Foodmaker, Inc. (Filed as Exhibit 2(b) to the Company's
Form S-1 filed with the SEC on November 1, 1993.)
10 (c) Acquisition Agreement, dated as of October 15, 1993, among the Company, Apollo
Advisors, L.P., Green Equity Investors, L.P., on behalf of one or more managed
entities, Foodmaker, Inc. and Chi-Chi's, Inc. (Filed as Exhibit 2(c) to the
Company's Form S-1 filed with the SEC on November 1, 1993.)
10 (d) Amendment No. 1 to Acquisition Agreement dated as of January 27, 1994 by and
among the parties to the Acquisition Agreement. (Filed as Exhibit 10(d) to
the Company's Form 10-K filed with the SEC on March 28, 1994.)
10 (e) Revolving Credit Agreement Dated as of January 27, 1994 Re: $150,000,000 Line
of Credit from Credit Lyonnais New York Branch ("Revolving Credit Agreement").
(Filed as Exhibit 10(e) to the Company's Form 10-K filed with the SEC on
March 28, 1994.)
*10 (f) First Amendment to Revolving Credit Agreement dated as of April 15, 1994 by
and among the parties to the Revolving Credit Agreement.
*10 (g) Second Amendment to Revolving Credit Agreement dated as of August 15, 1994 by
and among the parties to the Revolving Credit Agreement.
*10 (h) Third Amendment to the Revolving Credit Agreement dated as of March 24, 1995
by and among the parties to the Revolving Credit Agreement.
10 (i) Pledge and Security Agreement dated as of January 27, 1994 by and among FRI-M
Corporation, the Company and certain of its
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
-------- ------------ ------------
<S> <C> <C> <C>
subsidiaries and Credit Lyonnais New York Branch. (Filed as Exhibit 10(f) to
the Company's Form 10-K filed with the SEC on March 28, 1994.)
10 (j) The Company's 1994 Incentive Stock Option Plan. (Filed as Exhibit 10(g) to
the Company's Form 10-K filed with the SEC on March 28, 1994.)
*10 (k) Deferred Compensation Plan.
*10 (l) 1995 Management Incentive Compensation Plan Description.
*10 (m) Severance Plan.
+10 (n) Form of Indemnification Agreement between the Company and its Directors,
executive officers and certain other key employees. (Filed as Exhibit 10(v)
to the Company's 1987 form 10-K filed with the SEC on March 24, 1988.)
10 (o) Restated and Expanded Distribution Agreement, dated as of May 4, 1993 by and
between Marriott Corporation and The Restaurant Enterprises Group, Inc.
(Filed as Exhibit 10(d) to the Company's Form 10-Q filed with the SEC for the
Quarter ended March 29, 1993.)
10 (p) Amendment No. 1, dated October 15, 1993, to Restated and Expanded Distribution
Agreement between the Company and Marriott Corporation. (Filed as Exhibit
10(l) to the Company's Form S-1 filed with the SEC on November 1, 1993.)
+10 (q) Executive Settlement Agreement, dated as of October 15, 1993, between the
Company, W. R. Grace & Co.-Conn. and Norman N. Habermann. (Filed as Exhibit
10(m) to the
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION> Sequentially
Exhibit Numbered
Number Description Page
-------- ------------ ------------
<S> <C> <C> <C>
Company's Form S-1 filed with the SEC on November 1, 1993.)
+10 (r) Executive Settlement Agreement, dated as of October 15, 1993, between the
Company and Kenneth L. Harris. (Filed as Exhibit 10(n) to the Company's Form
S-1 filed with the SEC on November 1, 1993.)
+10 (s) Executive Settlement Agreement, dated as of October 15, 1993, between the
Company and Don M. McComas. (Filed as Exhibit 10(o) to the Company's Form S-1
filed with the SEC on November 1, 1993.)
+10 (t) Executive Settlement Agreement, dated as of October 15, 1993, between the
Company and James F. Moore. (Filed as Exhibit 10(p) to the Company's Form S-1
filed with the SEC on November 1, 1993.)
10 (u) Form of Management Stock Subscription Agreement of the Company. (Filed as
Exhibit 10(bb) to the Company's Form 10-K filed with the SEC on March 28,
1994.)
10 (v) Form of Management Pledge Agreement of the Company. (Filed as Exhibit 10(cc)
to the
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION> Sequentially
Exhibit Numbered
Number Description Page
-------- ----------- ------------
<S> <C> <C> <C>
Company's Form 10-K filed with the SEC on March 28, 1994.)
10 (w) Form of Secured Promissory Note relating to Management Stock Subscription and
Pledge. (Filed as Exhibit 10(dd) to the Company's Form 10-K filed with the
SEC on March 28, 1994.)
10 (x) Executive Services Agreement, dated as of January 27, 1994, by and between the
Company, Foodmaker, Inc. and acknowledged and agreed to by Jack W. Goodall,
Jr. (Filed as Exhibit 10(ee) to the Company's Form 10-K filed with the SEC on
March 28, 1994.)
10 (y) Management Services Agreement, dated as of January 27, 1994, by and between
the Company and Apollo Advisors, L.P. (Filed as Exhibit 10(ff) to the
Company's Form 10-K filed with the SEC on March 28, 1994.)
10 (z) Management Services Agreement, dated as of January 27, 1994, by and between
the Company and Leonard Green & Partners, L.P. (Filed as Exhibit 10(gg) to
the Company's Form 10-K filed with the SEC on March 28, 1994.)
10 (aa) Kasumi Agreement, dated as of January 27, 1994, by and among W. R. Grace &
Co., W. R. Grace & Co.-Conn. and the Company. (Filed as Exhibit 10(hh) to the
Company's Form 10-K filed with the SEC on March 28, 1994.)
10 (bb) Lease Indemnification Agreement, dated as of January 27, 1994, by and between
the Company and W. R. Grace & Co.-Conn. (Filed as Exhibit 10(ii) to the
Company's Form 10-K filed with the SEC on March 28, 1994.)
10 (cc) Distribution Agreement, dated as of October 4, 1993, by and between Foodmaker,
Inc. and Chi-Chi's, Inc. (Filed as Exhibit 10(jj) to the Company's Form 10-K
filed with the SEC on March 28, 1994.)
10 (dd) Common Stock Purchase Warrant, dated as of January 27, 1994, issued to
Foodmaker, Inc. for the purchase of 111,111 shares of the Company's common
stock. (Filed as Exhibit 10(kk) to the Company's Form 10-K filed with the SEC
on March 28, 1994.)
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION> Sequentially
Exhibit Numbered
Number Description Page
-------- ----------- ------------
<S> <C> <C> <C>
10 (ee) Tax Sharing Agreement, dated as of January 27, 1994, by and among the Company,
Foodmaker, Inc. and Chi-Chi's, Inc. (Filed as Exhibit 10(ll) to the Company's
Form 10-K filed with the SEC on March 28, 1994.)
10 (ff) Registration Rights Agreement, dated as of January 27, 1994, by and among the
Company and certain of its shareholders. (Filed as Exhibit 10(mm) to the
Company's Form 10-K filed with the SEC on March 28, 1994.)
*21 List of Subsidiaries.
*23 (a) Consent of Deloitte & Touche LLP.
Consent of KPMG Peat Marwick LLP.
*27 Financial Data Schedule.
</TABLE>
------------------
* Filed herewith.
+ Management contracts or compensatory plans or arrangements.
<PAGE> 1
EXHIBIT 10(f)
FIRST AMENDMENT TO
REVOLVING CREDIT AGREEMENT
THIS FIRST AMENDMENT TO THE REVOLVING CREDIT AGREEMENT ("Amendment") is made
as of April 15, 1994, among FRI-M Corp., a Delaware corporation (the
"Borrower"), Family Restaurants, Inc., a Delaware corporation ("FRI"), each of
the Subsidiary Guarantors, each of the banks identified on the signature pages
hereof (each a "Bank" and, collectively, the "Banks"), Credit Lyonnais New York
Branch, as Agent, Collateral Agent, Issuing Bank and Swing Line Bank.
W I T N E S S E T H
WHEREAS, the Borrower, FRI, the Subsidiary Guarantors, the Banks, the Agent,
the Collateral Agent, the Issuing Bank and the Swing Line Bank entered into the
Revolving Credit Agreement, dated as of January 27, 1994 (the "Credit
Agreement"); and
WHEREAS, the signatories hereto desire to amend the Credit Agreement as set
forth herein.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements contained herein and in the Credit Agreement, the parties hereto
agree that the Credit Agreement is hereby amended as set forth herein:
1. Capitalized terms used herein which are not otherwise defined herein but
are defined in the Credit Agreement shall have the meanings given to them in
the Credit Agreement.
2. The definition of "Required Banks" set forth in Section 1.01 of the
Credit Agreement is amended to read in its entirety as follows:
"Required Banks" shall mean (a) as long as the Total Commitment has not been
cancelled or terminated, (i) at any date that the Commitment of only one Bank
equals 100% of the Total Commitment, that Bank, (ii) at any date that the
Commitment of only one Bank equals at least 51% but less than 100% of the Total
Commitment, that Bank and at least one other Bank and (iii) at any date that
the Commitment of each Bank is less than 51% of the Total Commitment, Banks
having 51% or more of the Total Commitment and (b) if the Total Commitment has
been cancelled or terminated, (i) at any date that any one Bank holds Notes
<PAGE> 2
evidencing 100% of the aggregate unpaid principal amount of the Loans, that
Bank, (ii) at any date that any one Bank holds Notes evidencing at least 51%
but less than 100% of the aggregate unpaid principal amount of the Loans, that
Bank and at least one other Bank, (iii) at any date that no single Bank holds
Notes evidencing at least 51% of the aggregate unpaid principal amount of the
Loans, Banks holding Notes evidencing at least 51% of the aggregate unpaid
principal amount of the Loans.
3. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
4. This Amendment may be executed in any number of counterparts and by the
different parties on separate counterparts and each such counterpart shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument. When counterparts of this Amendment executed
by each party shall have been lodged with the Agent (or, in the case of any
Bank as to which an executed counterpart shall not have been so lodged, the
Agent shall have received telegraphic, telex or other written confirmation of
execution of a counterpart hereof by such Bank), this Amendment shall become
effective as of the date hereof and the Agent shall so inform all of the
parties hereto.
5. The Credit Agreement, as amended hereby, shall be binding upon the
Borrower, FRI, the Subsidiary Guarantors, the Banks, the Agent, the Collateral
Agent, the Issuing Bank and the Swing Line Bank and their respective successors
and assigns, and shall inure to the benefit of the Company, FRI, the Subsidiary
Guarantors, the Banks, the Agent, the Collateral Agent, the Issuing Bank and
the Swing Line Bank and the respective successors and assigns of the Banks and
the Agent.
6. Except as expressly provided in this Amendment, all of the terms,
covenants, conditions, restrictions and other provisions contained in the
Credit Agreement shall remain in full force and effect.
-2-
LA_LAN01\28678.1
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
FRI-M CORP.
By: MARTIN M. CASEY
---------------------------
Name: Martin M. Casey
Title: President
FAMILY RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
FRI-FRD CORP.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
FRI-DHD CORP.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
FRI-NA CORP.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
-3-
LA_LAN01\28678.1
<PAGE> 4
FRI-J CORP.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
FRI-MRD CORP.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
FRI-C CORP.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
CHI-CHI'S, INC.
By: MARTIN M. CASEY
---------------------------
Name: Martin M. Casey
Title: Vice President
CCMR OF CUMBERLAND, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Authorized Signatory
CCMR OF GREENBELT, INC.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
-4-
LA_LAN01\28678.1
<PAGE> 5
CCMR OF MARYLAND, INC.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: President
CCMR OF TIMONIUM, INC.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: President
CHI-CHI'S OF SOUTH CAROLINA, INC.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: President
CHI-CHI'S OF WEST VIRGINIA, INC.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: President
COCO'S RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
-5-
LA_LAN01\28678.1
<PAGE> 6
FAR WEST CONCEPTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
THE LOBSTER HOUSE
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
jojos RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
jojos CALIFORNIA FAMILY
RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
EL TORITO RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
CARROWS RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
-6-
LA_LAN01\28678.1
<PAGE> 7
CARROWS CALIFORNIA FAMILY RESTAURANTS, INC.
By: ROBERT D. GONDA
-----------------------------
Name: Robert D. Gonda
Title: Treasurer
-7-
LA_LAN01\28678.1
<PAGE> 8
CREDIT LYONNAIS NEW YORK BRANCH
as Agent for the Banks
By: FREDERICK HADDAD
----------------------------
Name: Frederick Haddad
Title: Senior Vice President
CREDIT LYONNAIS NEW YORK BRANCH
as Collateral Agent for the Banks
By: FREDERICK HADDAD
----------------------------
Name: Frederick Haddad
Title: Senior Vice President
CREDIT LYONNAIS NEW YORK BRANCH
Signing as a Bank, as the Issuing
Bank and as the Swing Line Bank
By: FREDERICK HADDAD
----------------------------
Name: Frederick Haddad
Title: Senior Vice President
UNITED STATES NATIONAL BANK OF OREGON
By: JONATHAN A. HORTON
----------------------------
Name: Jonathan A. Horton
Title: Assistant Vice President
-8-
LA_LAN01\28678.1
<PAGE> 1
EXHIBIT 10(g)
SECOND AMENDMENT TO
REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDMENT TO THE REVOLVING CREDIT AGREEMENT ("Amendment") is
made as of August 15, 1994, among FRI-M Corp., a Delaware corporation (the
"Borrower"), Family Restaurants, Inc., a Delaware corporation ("FRI"), each of
the Subsidiary Guarantors, each of the banks identified on the signature pages
hereof (each a "Bank" and, collectively, the "Banks"), Credit Lyonnais New York
Branch, as Agent, Collateral Agent, Issuing Bank and Swing Line Bank.
W I T N E S S E T H
WHEREAS, the Borrower, FRI, the Subsidiary Guarantors, the Banks, the Agent,
the Collateral Agent, the Issuing Bank and the Swing Line Bank entered into the
Revolving Credit Agreement, dated as of January 27, 1994, as amended by the
First Amendment to the Revolving Credit Agreement, dated April 15, 1994 (the
"Credit Agreement"); and
WHEREAS, the signatories hereto desire to amend the Credit Agreement as set
forth herein.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements contained herein and in the Credit Agreement, the parties hereto
agree that the Credit Agreement is hereby amended as set forth herein:
1. Capitalized terms used herein which are not otherwise defined herein but
are defined in the Credit Agreement shall have the meanings given to them in
the Credit Agreement.
2. Section 8.02(b) of the Credit Agreement is amended to read in its
entirety as follows:
(b) Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness, or permit any Subsidiary so to do, except (i) Indebtedness to
the Agent and the Banks hereunder and under the other Credit Documents, (ii)
Indebtedness of the Borrower and any Subsidiary secured by Permitted
LA_LAN01\32673.1
<PAGE> 2
Encumbrances, (iii) Indebtedness existing as of the date hereof and
specified on Schedule 8.02(b) hereto, (iv) Indebtedness relating to the New
Notes and any refinancings by FRI of the New Notes, provided (A) the
principal amount of such Indebtedness being refinanced shall not exceed the
sum of (I) the principal amount of the New Notes outstanding immediately
prior to such refinancing and accrued but unpaid interest thereon plus (II)
customary fees and expenses incurred in connection with such refinancing,
(B) the interest rate borne by any such Indebtedness resulting from a
refinancing of the New Notes shall not exceed the rate of interest borne by
the New Notes (unless such Indebtedness provides for the payment of interest
in the form of additional Indebtedness and not in cash ("PIK Debt") and the
maturity of such Indebtedness occurs on a date that is subsequent to the
Termination Date) and (C) the maturity of any such refinanced Indebtedness
shall not occur sooner than the maturity of the New Notes (unless such
Indebtedness is PIK Debt resulting from a refinancing of the New Notes, in
which case the Maturity must occur on a date that is subsequent to the
Termination Date), (v) other Indebtedness not exceeding $10,000,000 in
principal amount in the aggregate at any time outstanding, (vi) Indebtedness
which is entered into to finance or refinance the purchase price or
construction of assets; provided, however, that, in each case, (A) any such
Indebtedness shall not be secured by any assets other than the assets being
financed or refinanced and (B) in the case of a refinancing of the New
Notes, the principal amount of such Indebtedness shall not exceed the sum of
(I) the principal amount of the Indebtedness being refinanced and accrued
but unpaid interest thereon plus (II) customary fees and expenses incurred
in connection with such refinancing (vii) Indebtedness incurred by FRI,
provided that such Indebtedness is unsecured, without cash payments due
prior to maturity, subordinated to the Guaranty of FRI set forth in Article
X hereof, matures on a date that is not less than one year after the
Termination Date and provided further that FRI is Solvent after giving
effect to the issuance of such Indebtedness and (viii) Indebtedness in an
aggregate principal amount at any time outstanding not exceeding the price
at which the Borrower repurchases the Marriott Notes plus customary fees and
expenses incurred in connection with such repurchase and the issuance of
such Indebtedness, provided (A) the final maturity of any such Indebtedness
-2-
LA_LAN01\32673.1
<PAGE> 3
shall occur on a date that is subsequent to the Termination Date, (B) any
such Indebtedness shall amortize at a rate which does not exceed the
scheduled rate of amortization for the Marriott Notes if the Marriott Notes
had remained outstanding and (C) any such Indebtedness shall not be secured
with any collateral which did not secure the Marriott Notes.
3. Section 8.02(f) of the Credit Agreement is amended to read in its
entirety as follows:
(f) Loans and Investments. Purchase or acquire the obligations or
stock of, or any other interest in, or make loans, advances or capital
contributions to, or form any joint ventures or partnerships with, any
Person, or permit any Subsidiary so to do, except (i) direct obligations of,
or obligations the principal of and interest on which are unconditionally
guaranteed by, the United States of America with a maturity not exceeding one
year, (ii) certificates of deposit, time deposits, banker's acceptances or
other instruments of a bank having a combined capital and surplus of not less
than $500,000,000 with a maturity not exceeding one year, (iii) commercial
paper rated at least A-1 or P-1 maturing within one year after the date of
acquisition thereof; (iv) money market accounts maintained at a bank having
combined capital and surplus of not less than $500,000,000 or at another
financial institution satisfactory to the Agent; and (v) obligations
representing loans and advances permitted by this Section 8.02(f).
Notwithstanding the foregoing:
(A) FRI, the Borrower and each Subsidiary may make loans and advances
(I) to officers and employees in connection with the purchase of FRI
common stock in accordance with the Acquisition Agreement in an aggregate
amount not to exceed $3,500,000, whether or not such purchases are
consummated on or subsequent to the date hereof, (II) to officers and
employees in the ordinary course of business in an aggregate amount at any
one time outstanding not to exceed $2,000,000, (III) to the Borrower and
the Subsidiaries
-3-
LA_LAN01\32673.1
<PAGE> 4
and (IV) to the entities listed on Schedule 8.02(f).
(B) the Borrower may make loans and advances to FRI (I) for each fiscal
year, equal to an amount, which taken together with any dividend, if any,
paid to FRI by the Borrower pursuant to Section 8.02(g)(A)(I), is not in
excess of the federal and state income taxes payable by FRI and the
Subsidiaries (determined on a consolidated basis) for such year, plus (II)
in each fiscal year an aggregate amount which, taken together with any
dividend, if any, paid to FRI by the Borrower pursuant to Section
8.02(g)(A)(II), equals $15,000,000, provided all of such amount is applied
only to general corporate, operating and administrative expenses incurred
in the normal course of business, plus (III) so long as there has not
occurred and is continuing, and so long as after giving effect to such
loan or advance there shall not occur, an Event of Default, amounts, which
taken together with any dividend, if any, paid to FRI by the Borrower
pursuant to Section 8.02(g)(A)(III), are required from time to time by FRI
in order to make regular interest payments on the New Notes (or any
permitted refinancings thereof) and principal and interest payments on the
Marriott Notes (or any permitted refinancings thereof), provided such
loans and advances are made as and when such interest payments are
required to be paid in accordance with the terms of the New Notes (or any
permitted refinancings thereof) and as and when such principal and
interest payments are required to be paid in accordance with the terms of
the Marriott Notes (or any permitted refinancings thereof).
(C) FRI, the Borrower and each Subsidiary may purchase or acquire the
stock of, or make capital contributions to, Wholly-owned Subsidiaries of
the Borrower and the Borrower or any of its Subsidiaries may acquire
common stock of FRI that is used as consideration in the Chi-Chi's
Acquisition.
-4-
LA_LANO1\32673.1
<PAGE> 5
(D) FRI, the Borrower and each Subsidiary may (I) hold negotiable
instruments for collection, (II) make advances in connection with
purchases in the ordinary course of business, (III) make required deposits
in connection with leases and otherwise in the ordinary course of
business, (IV) make Capital Investments permitted by Section 8.03(b), and
(V) create or invest in new subsidiaries, partnerships or joint ventures
permitted by Section 8.02(i). The Borrower agrees to maintain and provide
to the Agent, on a quarterly basis, a summary accounting of all such loans
and advances in a manner that is consistent with its general ledger
bookkeeping practices.
(E) FRI, the Borrower and each Subsidiary may purchase, acquire, cancel
or otherwise retire for value shares of capital stock of FRI or the
Borrower, options on any such shares or related stock appreciation rights
or similar securities held by directors, officers, employees or former
directors, officers, employees or consultants (or their estates or
beneficiaries under their estates) that were issued pursuant to any Stock
Based Plan, upon death, disability, retirement, termination or pursuant to
the terms of such Stock Based Plan; provided, however, that the
consideration paid for such purchases, acquisitions, cancellations or
retirements shall not exceed $2.5 million in any fiscal year.
(F) FRI or FRI-M may repurchase the Marriott Notes, provided that the
Marriott Notes are purchased at a price no greater than 90% of the
principle amount of such Marriott Notes.
In accordance with clause (B)(III) of this Section 8.02(f), the Borrower
and the Subsidiaries may issue notes to FRI or the Borrower providing for
the payment of interest and principal to the extent permitted by such
clause; provided, however, that such notes shall be expressly subordinated
to the Notes, the Reimbursement
-5-
LA_LAN01\32673.1
<PAGE> 6
Obligations, the Swing Line Advances and any other amounts payable to
the Agent, the Collateral Agent and the Banks hereunder and under any other
Credit Document.
4. Section 8.02(j) of the Credit Agreement is amended to read in its
entirety as follows:
(j) Related Agreements. Amend, modify or waive, or permit to be amended,
modified or waived, any provision of the New Notes or any Indebtedness
incurred pursuant to Section 8.02(b)(viii) in a manner materially adverse to
the Borrower unless, within not less than 30 days prior to such amendment,
modification or waiver, FRI and the Borrower shall have given the Agent
notice thereof, including all relevant terms and conditions thereof, and the
Agent shall have consented in writing thereto which consent shall not be
unreasonably withheld.
5. The Parties hereto agree and acknowledge that within 30 days of the date
hereof, the Agent shall have received evidence satisfactory to the Agent that
the Marriott Notes have been repurchased. If the Agent has not received such
evidence within 30 days of the date hereof, this Amendment shall be null and
void and this Amendment shall have no further force or effect.
6. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
7. This Amendment may be executed in any number of counterparts and by the
different parties on separate counterparts and each such counterpart shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument. When counterparts of this Amendment executed
by each party shall have been lodged with the Agent (or, in the case of any
Bank as to which an executed counterpart shall not have been so lodged, the
Agent shall have received telegraphic, telex or other written confirmation of
execution of a counterpart hereof by such Bank), this Amendment shall become
effective as of the date hereof and the Agent shall so inform all of the
parties hereto.
8. The Credit Agreement, as amended hereby, shall be binding upon the
Borrower, FRI, the Subsidiary
-6-
LA_LAN01\32673.1
<PAGE> 7
Guarantors, the Banks, the Agent, the Collateral Agent, the Issuing Bank
and the Swing Line Bank and their respective successors and assigns, and
shall inure to the benefit of the Company, FRI, the Subsidiary Guarantors, the
Banks, the Agent, the Collateral Agent, the Issuing Bank and the Swing Line
Bank and their respective successors and assigns.
9. Except as expressly provided in this Amendment, all of the terms,
covenants, conditions, restrictions and other provisions contained in the
Credit Agreement shall remain in full force and effect.
-7-
LA_LANO1\32673.1
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
FRI-M CORP.
By: MARTIN M. CASEY
---------------------------
Name: Martin M. Casey
Title: President
FAMILY RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
FRI-FRD CORP.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
FRI-DHD CORP.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
FRI-NA CORP.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
-8-
LA_LAN01\32673.1
<PAGE> 9
FRI-J CORP.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
FRI-MRD CORP.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
FRI-C CORP.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
CHI-CHI'S, INC.
By: MARTIN M. CASEY
---------------------------
Name: Martin M. Casey
Title: Vice President
CCMR OF CUMBERLAND, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Authorized Signatory
-9-
LA_LAN01\32673.1
<PAGE> 10
CCMR OF GREENBELT, INC.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: President
CCMR OF MARYLAND, INC.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: President
CCMR OF TIMONIUM, INC.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: President
CHI-CHI'S OF SOUTH CAROLINA, INC.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: President
CHI-CHI'S OF WEST VIRGINIA, INC.
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: President
-10-
LA_LAN01\32673.1
<PAGE> 11
COCO'S RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
FAR WEST CONCEPTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
THE LOBSTER HOUSE
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
jojos RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
jojos CALIFORNIA FAMILY
RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
-11-
LA_LAN01\32673.1
<PAGE> 12
EL TORITO RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
CARROWS RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
CARROWS CALIFORNIA FAMILY RESTAURANTS,
INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
-12-
LA_LAN01\32673.1
<PAGE> 13
CREDIT LYONNAIS NEW YORK BRANCH
as Agent for the Banks
By: FREDERICK HADDAD
----------------------------
Name: Frederick Haddad
Title: Senior Vice President
CREDIT LYONNAIS NEW YORK BRANCH
as Collateral Agent for the Banks
By: FREDERICK HADDAD
----------------------------
Name: Frederick Haddad
Title: Senior Vice President
CREDIT LYONNAIS NEW YORK BRANCH
Signing as a Bank, as the Issuing Bank
and as the Swing Line Bank
By: FREDERICK HADDAD
----------------------------
Name: Frederick Haddad
Title: Senior Vice President
UNITED STATES NATIONAL BANK OF OREGON
By:
----------------------------
Name:
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION, Los Angeles Agency
By: TAKASHI SUGITA
----------------------------
Name: Takashi Sugita
Title: V.P. & Chief Manager
-13-
LA_LAN01\32673.1
<PAGE> 1
EXHIBIT 10(h)
THIRD AMENDMENT TO REVOLVING CREDIT
AGREEMENT
THIS THIRD AMENDMENT TO THE REVOLVING CREDIT AGREEMENT ("Amendment") is made
as of March 24, 1995, among FRI-M Corp., a Delaware corporation (the
"Borrower"), Family Restaurants, Inc., a Delaware corporation ("FRI"), each of
the Subsidiary Guarantors, each of the banks identified on the signature pages
hereof (each a "Bank" and, collectively, the "Banks") and Credit Lyonnais New
York Branch, as Agent, Collateral Agent, Issuing Bank and Swing Line Bank.
W I T N E S S E T H
WHEREAS, the Borrower, FRI, the Subsidiary Guarantors, the Banks, the Agent,
the Collateral Agent, the Issuing Bank and the Swing Line Bank have entered
into the Revolving Credit Agreement, dated as of January 27, 1994, as amended
by the First Amendment to the Revolving Credit Agreement, dated April 15, 1994
and by the Second Amendment to the Revolving Credit Agreement, dated August 15,
1994 (the "Credit Agreement"); and
WHEREAS, the signatories hereto desire to amend the Credit Agreement as set
forth herein.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements contained herein and in the Credit Agreement, the parties hereto
agree that the Credit Agreement is hereby amended as set forth herein:
1. Capitalized terms used herein which are not otherwise defined herein but
are defined in the Credit Agreement shall have the meanings given to them in
the Credit Agreement.
2. Section 8.03 of the Credit Agreement is amended to read in its entirety
as follows:
Section 8.03. Financial Covenants. Until the Termination Date, and
thereafter until payment in full of the Notes and all Reimbursement
Obligations, expiration or cancellation of all outstanding Syndicated Letters
of Credit and performance of all other obligations of the Borrower hereunder,
FRI and, with respect to subsection (f) below, the Borrower will
LA_LAN01\39987.3
<PAGE> 2
(a) Minimum Consolidated EBITDA. Maintain Consolidated EBITDA of not
less than the amounts specified for each of the following periods:
<TABLE>
<S> <C>
For the Fiscal
Quarter Ending Amount (in millions)
------------------ --------------------
3/94 $14.50
For the Two Fiscal
Quarters Ending Amount (in millions)
------------------- --------------------
6/94 $35.00
For the Three Fiscal
Quarters Ending Amount (in millions)
------------------- --------------------
9/94 $57.00
For the Four Fiscal
Quarters Ending Amount (in millions)
------------------- --------------------
12/94 $ 90.00
3/95 81.00
6/95 82.00
9/95 85.00
12/95 92.00
3/96 110.00
6/96 112.50
9/96 114.75
12/96 and Thereafter 117.00
</TABLE>
(b) Capital Investments. Not make or permit the Borrower and the
Subsidiaries to make Capital Investments in an amount in the aggregate in
excess of the amount specified for each of the following periods:
<TABLE>
<S> <C>
For the Fiscal
Quarter Ending Amount (in millions)
------------------ --------------------
3/94 $20.00
For the Two Fiscal
Quarters Ending Amount (in millions)
------------------- --------------------
6/94 $40.00
</TABLE>
-2-
LA_LANO1\39987.3
<PAGE> 3
<TABLE>
<S> <C>
For the Three Fiscal
Quarters Ending Amount (in millions)
------------------- --------------------
9/94 $55.00
For the Two Fiscal
Quarters Ending Amount (in millions)
------------------- --------------------
6/95 $32.50
For the Three Fiscal
Quarters Ending Amount (in millions)
------------------- --------------------
9/95 $45.00
For the Four Fiscal
Quarters Ending Amount (in millions)
----------------- --------------------
12/95 $55.00
</TABLE>
Thereafter, there will be no specific limitation on Capital Investment by
FRI, the Borrower and the Subsidiaries.
(c) Minimum Interest Coverage Ratio. Maintain a ratio of Consolidated
EBITDA to Consolidated Interest Expense of not less than the ratio specified
for each of the following periods:
<TABLE>
<S> <C>
For the Four Fiscal
Quarters Ending Ratio:
------------------- ------
12/94 1.50
3/95 through 9/95 1.30
12/95 1.45
3/96 through 6/97 1.75
9/97 and Thereafter 2.00
</TABLE>
(d) Fixed Charge Coverage Ratio. Maintain a ratio of Consolidated EBITDA
to Consolidated Fixed Charges of not less than the ratio specified for each
of the following periods:
-3-
LA\LANO1\39987.3
<PAGE> 4
<TABLE>
<S> <C>
For the Four Fiscal
Quarters Ending Ratio:
------------------- ------
12/94 1.20
3/95 through 6/95 0.80
9/95 0.90
12/95 1.10
3/96 through 3/97 1.30
6/97 1.40
9/97 and Thereafter 1.50
</TABLE>
(e) Adjusted Fixed Charge Coverage Ratio. Maintain a ratio of
Consolidated EDITDA to Consolidated Adjusted Fixed Charges of not less than
the ratio specified for each of the following periods:
<TABLE>
<S> <C>
For the Four Fiscal
Quarters Ending Ratio:
------------------- ------
12/94 1.45
3/95 through 9/95 1.20
12/95 1.30
3/96 through 12/96 1.45
3/97 through 12/97 1.55
3/98 and Thereafter 1.70
</TABLE>
(f) Ratio of Total Indebtedness of the Borrower to Consolidated EBITDA.
The Borrower will not permit the ratio of (x) total Indebtedness of the
Borrower and its Subsidiaries plus total Capital Lease Obligations of the
Borrower and its Subsidiaries to (y) Consolidated EBITDA exceed at any time
during each of the following periods the ratio set forth opposite such period
below:
<TABLE>
<S> <C>
For the Four Fiscal
Quarters Ending Ratio:
------------------- ------
12/94 through 12/96 2.50
3/97 and Thereafter 2.25
</TABLE>
3. The definition of "Applicable Margin" shall be amended to read in its
entirety as follows:
"Applicable Margin" shall mean the margin set forth in the following chart
applicable to (i) the aggregate amount of Loans outstanding plus the face
amount of Syndicated Letters of Credit issued as of the date of determination
and (ii) Consolidated EBITDA for the four most recently completed fiscal
quarters.
-4-
<PAGE> 5
<TABLE>
<CAPTION>
Outstanding Loans
plus Outstanding
Letters of Credit Consolidated
Issued EBITDA Applicable Margin
----------------- ------------ -----------------
<C> <C> <C> <C>
Eurodollar
** ** ABR Loans Loans
-------------------------------------------------------------------------------------
< $100 MM 1.250% 2.750%
---------------------------------------------------
>= $100 MM
and 1.000% 2.500%
< $105 MM
---------------------------------------------------
>= $105 MM
<= $100 MM and 0.750% 2.250%
<= $113 MM
---------------------------------------------------
> $113 MM
and 0.250% 1.750%
<= $123 MM
---------------------------------------------------
> $123 MM 0.000% 1.500%
-------------------------------------------------------------------------------------
< $100 MM 1.500% 3.000%
---------------------------------------------------
>= $100 MM
and 1.250% 2.750%
< $105 MM
---------------------------------------------------
>= $105 MM
> $100 MM and 1.000% 2.500%
<= $113 MM
---------------------------------------------------
> $113 MM
and 0.500% 2.000%
<= $123 MM
---------------------------------------------------
> $123 MM 0.250% 1.750%
</TABLE>
For the purposes of determining Applicable Margin only, any time following
completion of a fiscal quarter but prior to delivery of financial statements
covering such quarter pursuant to Section 8.01(a)(i) or (ii), as the case may
be, the Borrower may provide in writing a good faith estimate of Consolidated
EBITDA for the most recently completed fiscal quarter and, subject to the third
sentence of this definition, until delivery of the relevant financial
statements, such estimate may be used to determine Applicable Margin. Upon
delivery of financial statements pursuant to Section 8.01(a)(i) or (ii), as the
case may be, Applicable Margin will be determined by reference to such
financial statements. If the Company estimates Consolidated EBITDA for the
purpose of determining Applicable Margin and
-5-
<PAGE> 6
the estimate results in an Applicable Margin different from the
Applicable Margin determined to apply by reference to financial statements
delivered pursuant to Section 8.01(a)(i) or (ii), as the case may be, the
Applicable Margin calculated by reference to the financial statements shall be
determinative as to both interest due and interest already paid; consequently,
(a) interest accrued but not yet paid shall be calculated by reference to the
Applicable Margin figure determined by reference to such financial statements
and (b) any underpayment or overpayment of interest made pursuant to an
inaccurate estimate shall be satisfied or returned, as the case may be, upon
demand.
4. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
5. This Amendment may be executed in any number of counterparts and by the
different parties hereto on separate counterparts and each such counterpart
shall together constitute but one and the same instrument. This Amendment
shall become effective as of the date hereof upon the delivery to the Agent of
executed counterparts from the Company and the Required Banks and the Agent
shall so inform all of the parties hereto.
6. The Credit Agreement, as amended hereby, shall be binding upon the
Borrower, FRI, the Subsidiary Guarantors, the Banks, the Agent, the Collateral
Agent, the Issuing Bank and the Swing Line Bank and their respective successors
and assigns, and shall inure to the benefit of the Company, FRI, the Subsidiary
Guarantors, the Banks, the Agent, the Collateral Agent, the Issuing Bank and
the Swing Line Bank and their respective successors and assigns.
7. Except as expressly provided in this Amendment, all of the terms,
covenants, conditions, restrictions and other provisions contained in the
Credit Agreement shall remain in full force and effect.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
FRI-M CORPORATION
By: MARTIN M. CASEY
---------------------------
Name: Martin M. Casey
Title: President
FAMILY RESTAURANTS, INC.
By: MARTIN M. CASEY
---------------------------
Name: Martin M. Casey
Title: Executive Vice President
FRI-FRD CORPORATION
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
FRI-DHD CORPORATION
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
FRI-NA CORPORATION
By: R.T. TREBING, JR.
---------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
-7-
<PAGE> 8
FRI-J CORPORATION
By: R.T. TREBING, JR.
-----------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
FRI-MRD CORPORATION
By: R.T. TREBING, JR.
-----------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
FRI-C CORPORATION
By: R.T. TREBING, JR.
-----------------------------
Name: R.T. Trebing, Jr.
Title: Vice President
CHI-CHI'S, INC.
By: ROBERT D. GONDA
-----------------------------
Name: Robert D. Gonda
Title: Treasurer
CCMR OF CUMBERLAND, INC.
By: ROBERT D. GONDA
-----------------------------
Name: Robert D. Gonda
Title: Authorized Signatory
CCMR OF GREENBELT, INC.
By: R.T. TREBING, JR.
-----------------------------
Name: R.T. Trebing, Jr.
Title: President
-8-
<PAGE> 9
CCMR OF MARYLAND, INC.
By: R.T. TREBING, JR.
---------------------------------
Name: R.T. Trebing, Jr.
Title: President
CCMR OF TIMONIUM, INC.
By: R.T. TREBING, JR.
---------------------------------
Name: R.T. Trebing, Jr.
Title: President
CHI-CHI'S OF SOUTH CAROLINA, INC.
By: R.T. TREBING, JR.
---------------------------------
Name: R.T. Trebing, Jr.
Title: President
CHI-CHI'S OF WEST VIRGINIA, INC.
By: R.T. TREBING, JR.
---------------------------------
Name: R.T. Trebing, Jr.
Title: President
COCO'S RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------------
Name: Robert D. Gonda
Title: Treasurer
FAR WEST CONCEPTS, INC.
By: ROBERT D. GONDA
---------------------------------
Name: Robert D. Gonda
Title: Treasurer
-9-
<PAGE> 10
jojos RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
jojos CALIFORNIA FAMILY
RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
EL TORITO RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
CARROWS RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
CARROWS CALIFORNIA FAMILY
RESTAURANTS, INC.
By: ROBERT D. GONDA
---------------------------
Name: Robert D. Gonda
Title: Treasurer
-10-
<PAGE> 11
CREDIT LYONNAIS NEW YORK BRANCH
as Agent for the Banks
By:
-----------------------------------
Name: Frederick Haddad
Title: Senior Vice President
CREDIT LYONNAIS NEW YORK BRANCH
as Collateral Agent for the Banks
By:
-----------------------------------
Name: Frederick Haddad
Title: Senior Vice President
CREDIT LYONNAIS NEW YORK BRANCH
Signing as a Bank, as the Issuing
Bank and as the Swing Line Bank
By:
-----------------------------------
Name: Frederick Haddad
Title: Senior Vice President
UNITED STATES NATIONAL BANK OF
OREGON
By:
-----------------------------------
Name: Jonathan Horton
Title: Assistant Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION, Los Angeles Agency
By:
-----------------------------------
Name: Jill Kato
Title: Vice President
-11-
<PAGE> 1
EXHIBIT 10.K
[LOGO]
FAMILY RESTAURANTS, INC.
DEFERRED COMPENSATION PLAN
(Effective as of July 15, 1994)
<PAGE> 2
Table of Contents
<TABLE>
<S> <C>
ARTICLE 1
SCOPE OF PLAN AND DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purpose and Scope of Plan; Definitions
ARTICLE 2
PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Eligibility and Entry Date
ARTICLE 3
SALARY DEFERRALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Salary Reduction Deferrals; After-Tax Savings
ARTICLE 4
INVESTMENT OF CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Investment Funds
ARTICLE 5
WITHDRAWALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Withdrawals; Financial Hardship
ARTICLE 6
VESTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Salary Reduction Account
ARTICLE 7
PAYMENT AT TERMINATION OF EMPLOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Commencement and Form of Payment
ARTICLE 8
ADMINISTRATION OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Responsibilities and Powers of the Committee; Outside Services; Indemnification
ARTICLE 9
AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Amendment; Termination
ARTICLE 10
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Source of Payments; No Warranties; Inalienability of Benefits; Expenses;
No Right of Employment; Withholding; Headings; Construction
</TABLE>
<PAGE> 3
ARTICLE 1
SCOPE OF PLAN AND DEFINITIONS
1.1 Purpose and Scope of Plan
The purpose of this Plan is to provide a retirement savings
plan for salaried employees of Family Restaurants, Inc.
(Company) who are excluded from participation in the
Retirement Savings Plan (RSP) solely because they are
determined by the Company to be highly compensated, under the
terms of RSP and within the meaning of Internal Revenue Code
414(q) and related regulations. Under this Plan, participants
will be permitted to make an advance, irrevocable election to
reduce their future compensation by a specified percentage.
The Plan will be unfunded, and all participant salary
deferrals will remain in the Company's general assets. The
intent of this Plan is to be treated as a "top-hat" Plan
exempt from the participation, vesting, funding, and fiduciary
requirements of Title I of the Employee Retirement Income
Security Act of 1974 (ERISA). Each participant's rights shall
be governed by the Plan as set forth herein, as it may be
amended from time to time, and as it is in effect when such
participant terminates employment with the Company.
1.2 Definitions
The following terms have the meanings set forth below, unless
the context plainly requires a different meaning.
(a) "Account" means the recordkeeping account that
reflects a participant's deferrals and other credited
amounts, less any withdrawn or distributed amounts.
(b) "Committee" shall be comprised of the same members as
those that make up the RSP committee.
(c) "Compensation" means
(i) For the purposes of subsections 1.2(d) and
(i) of the Plan, an employee's W-2 wages for
any calendar year, including salary reduction
amounts under this Plan, and
(ii) For all other Plan purposes, an employee's
base salary, which excludes any bonus monies.
(d) "Eligible Employee" means any salaried employee of
the Company who is excluded from participation in RSP
solely because they are determined by the Company to
be highly compensated under the terms of RSP, and
within the meaning of IRC 404(q) and related
regulations. Once a salaried employee becomes an
Eligible Employee, the employee will remain an
Eligible Employee even if he/she ceases to be a
highly compensated employee.
1
<PAGE> 4
(e) "Effective Date" means July 15, 1994.
(f) "Participant" means an Eligible Employee who
participates in this Plan.
(g) "Plan" means the Family Restaurants, Inc. Deferred
Compensation Plan as set forth herein, and as it may
be amended from time to time.
(h) "Plan Year" means July 15, 1994 through December 31,
1994 and thereafter each 12-month period ending
December 31.
(i) "RSP" means the Family Restaurants, Inc. Retirement
Savings Plan, a qualified plan covering salaried
employees of the Company who are not considered
highly compensated within the meaning of IRC 414(q).
(j) "Salary Reduction Agreement" means the advance,
irrevocable agreement between the Company and the
Participant pursuant to Section 3.1 of this Plan.
The form for such Agreement is Exhibit A of this
Plan.
(k) "Beneficiary" means a person entitled to receive any
benefit payments that remain to be paid after the
Participant's death, as determined under section 7.1.
The Committee may require the consent of the
Participant's spouse to a designation if the
designation specifies a Beneficiary other than the
spouse. Subject to the foregoing, a Participant may
change a Beneficiary designation at any time.
Subject to the property rights of any prior spouse,
if no Beneficiary is designated, if the designation
is ineffective, or if the Beneficiary dies before the
balance of the account is paid, the balance should be
paid to the Participant's surviving spouse, or if
there is no surviving spouse, to the Participant's
estate.
1.3 Other Definitional Provisions
The terms defined in Sections 1.2 of the Plan shall apply
equally to both singular and plural. Whenever used, the
masculine pronoun shall include the feminine. When used in
the Plan, the words "hereof," "herein," and "hereunder" and
the words of similar import shall refer to the Plan as a whole
and not to any particular provision of the Plan, unless
otherwise specified.
ARTICLE 2
PARTICIPATION
2.1 Eligibility and Entry Date
(a) Any Eligible Employee will be entitled to become a
Participant in the Plan on any January 1 following
the day he completes at least one year of Service,
measured on an elapsed time basis.
2
<PAGE> 5
(b) To participate in the Plan from July 15, 1994 to
December 31, 1994, an Eligible Employee, who meets
the service requirements of subsection 2.1 (a) must
return his Salary Reductions Agreement to the Plan
Administrator by July 11, 1994.
(c) In order to enroll during the annual enrollment
period, for the following Plan Year, an Eligible
Employee, who meets the service requirements of
subsection 2.1 (a), must submit a completed Salary
Reduction Agreement no later then 15 days prior to
the end of December.
(d) If a Participant does not make a new election
pursuant to subsection (b) or (c), the Participant's
existing election will continue unchanged and apply
for the next Plan Year.
ARTICLE 3
DEFERRALS
3.1 Salary Deferrals
(a) Upon enrollment or reenrollment in the Plan, an
Eligible Employee must elect to reduce his
Compensation, excluding any bonus, in a fixed whole
percentage of not less than 1% and not more that 50%.
The amount of the reduction will be credited to the
Participant's Account.
(b) A Participant's deferral percentage will remain in
effect until the Participant elects to change it. A
change is allowed only at the following times:
(i) As of the first day of any Plan Year,
provided he completes and returns a revised
Salary Reduction Agreement to the Committee
before such date, or
(ii) In the event of financial hardship (as
defined in Section 5.2 below) approved by the
Committee, as of the first day of a month.
3.2 After-Tax Savings
Participant after-tax savings will not be allowed under this
Plan.
ARTICLE 4
INVESTMENT OF CONTRIBUTIONS
4.1 Investment Funds
Salary deferrals will remain in the general assets of the
Company. The deferrals will be credited, on a quarterly
basis, at the same rate of return as RSP Fund A,
3
<PAGE> 6
the Stable Asset Fund, which is invested in a pool of
Guaranteed Investment Contracts (GICs).
ARTICLE 5
WITHDRAWALS
5.1 Withdrawals
Subject to the Committee's approval and due to financial
hardship, a Participant may be permitted to withdrawal all or
a part of his Salary Deferral Account. No other in-service
withdrawals shall be permitted.
5.2 Financial Hardship
The Committee will determine, in a nondiscriminatory manner,
and in accordance with applicable Treasury rulings and other
guidance, whether a Participant has a financial hardship. A
distribution will be deemed to be a financial hardship if the
distribution is necessary in light of an immediate and
unanticipated emergency that is caused by an event beyond the
control of the Participant that would result in severe
financial hardship to the individual if the early withdrawal
were not permitted. For example:
o unreimbursed medical expenses incurred by the
Participant, spouse or dependents;
o the need to prevent eviction from, or foreclosure of
the mortgage on, the Participant's principal
residence.
Before granting the hardship withdrawal the Committee shall
require proof that one of the above-listed events occurred.
The Committee also shall require an affidavit from the
Participant stating that the need cannot be met from other
resources. The Committee will then deem a financial hardship
withdrawal necessary to satisfy financial need if all of the
following conditions are met:
o the distribution does not exceed the amount required
to meet the need;
o the Participant has obtained all other available
distributions or nontaxable loans under all the
Company's employee benefit plans; and
o the Participant's deferrals are suspended for 12
months after receipt of the distribution.
4
<PAGE> 7
ARTICLE 6
VESTING
6.1 Salary Deferral Account
Each Participant shall be one hundred percent vested, at all
times, in the value of his Account.
ARTICLE 7
PAYMENT AT TERMINATION OF EMPLOYMENT
7.1 Commencement and Form of Payment
As soon as practical following the later of:
(a) the Participant's termination of employment with the
Company; or
(b) the Participant's termination of employment with
another entity which is a party to a merger,
consolidation, reorganization, or acquisition by
property or stock to which the Company or one of its
subsidiaries is also a party and which employs the
Participant directly or indirectly, immediately
following such transaction.
(c) the Participant's death; The Company shall pay to
Beneficiary, if such Participant is not living at the
time, or to such Participant's estate, the value
determined as of the last calendar quarter
immediately following the event that causes the
payment, of a Participant's Account.
ARTICLE 8
ADMINISTRATION OF PLAN
8.1 Responsibilities and Powers of the Committee
The Committee shall be solely responsible for the operation
and administration of the Plan and shall have all powers
necessary and appropriate to carry out the responsibilities of
operating and administering the Plan. The Committee's good
faith determination in any matter having to do with the
operation and administration of the Plan shall be conclusive
and binding on all persons, including Participants and their
Beneficiaries. The Committee shall have discretionary
authority to construe and interpret the Plan provisions and
resolve any ambiguities thereafter; to prescribe, amend, and
rescind administrative rules relating to the Plan; to
determine eligibility for benefits under the Plan; and to take
all other actions that are necessary or appropriate for the
administration of the Plan. Such interpretations, rules, and
actions of the Committee shall be final and binding upon
5
<PAGE> 8
all concerned and, in the event of judicial review, shall be
entitled to the maximum deference allowable by law.
8.2 Outside Services
The Committee may engage counsel and such clerical, medical,
financial, investment, accounting, and other specialized
services as it may deem necessary or desirable to the
operation and administration of the Plan. The Committee shall
be entitled to rely upon any opinions, reports, or other
advice furnished by counsel or other specialists engaged for
that purpose and, in so relying, shall be fully protected in
any action, determination, or omission made in good faith.
8.3 Indemnification
The Company shall indemnify each Committee member against all
claims, loss, damages, expense (including reasonable counsel
fees), and liability arising from any action, failure to act,
or other conduct in the member's official capacity, except
when due to a Committee member's own gross negligence or
willful misconduct.
8.4 Claims Procedure
The Company shall have a reasonable claims procedure
consistent with the requirements of ERISA section 503 and
related regulations.
ARTICLE 9
AMENDMENT AND TERMINATION
9.1 Amendment
By written action of the Committee, the Company reserves the
right at any time and from time to time, and retroactively if
deemed necessary or appropriate to conform with governmental
regulations or other policies, to modify or amend in whole or
in part any or all of the provisions of the Plan.
9.2 Termination
The Plan is purely voluntary on the part of the Company, and
the Company reserves the right to terminate it at any time.
9.3 No Impairment of Rights
No amendment or termination of the Plan may impair the right
of a Participant or designated Beneficiary to receive payment
of the Participant's Account under the terms of the Plan prior
to the effective date of the amendment or termination, unless
the affected Participant of Beneficiary gives his or her
express consent to the change.
6
<PAGE> 9
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 Source of Payments
The Plan shall not be funded, and all payments hereunder to
Participants and their Beneficiaries shall be paid from the
general assets of the Company. The Company shall not, by
virtue of any provisions of the Plan or by any action of any
person hereunder, be deemed to be a trustee or other fiduciary
of any property for any Participant or his Beneficiaries. The
Company's liabilities to any Participant or his Beneficiaries
under the terms of the Plan shall be those of a debtor
pursuant only to such contractual obligations as are created
by the Plan; no such obligation of the Company shall be deemed
to be secured by any pledge or other encumbrance on any
property of the Company. To the extent that any Participant
or his Beneficiaries acquires a right to receive a payment
from the Company under the Plan, such right shall be no
greater than the right of any unsecured general creditor of
the Company.
The Company may, but need not, arrange for the establishment
and use of a grantor trust or other informal funding vehicle
to facilitate the payment of benefits and to discharge the
liability of the Company under this Plan to the extent of
payments actually made from such trust or other informal
funding vehicle.
Any investments and any creation of maintenance of memorandum
accounts or a trust or other informal funding vehicle shall
not create or constitute a trust or a fiduciary relationship
between the Committee or the Company and a Participant, or
otherwise confer on any Participant or Beneficiary or his or
her creditors a vested or beneficial interest in any assets of
the Company whatsoever. Participants and Beneficiaries shall
have no claim against the company or any of its subsidiaries
for any changes in the value of any assets which may be
invested or reinvested by the Company with respect to the
Plan.
10.2 No Warranties
Neither the Committee nor the Company warrants or represents
in any way that the value of each Participant's account will
increase and not decrease. Such Participant assumes all risk
in connection with any change in such value.
10.3 Inalienability of Benefits
Except as provided under law, no benefit payable under, or
interest in, the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to do so shall be
void. Any such benefit or interest shall not in any manner be
liable for or subject to garnishment, attachment, execution,
or levy or liable for or subject to the debts, contract,
liabilities, engagements, or torts of any Participant or his
Beneficiaries. If the Committee finds that any Participant or
his Beneficiaries have become bankrupt or that any attempt has
been made to anticipate, alienate, sell, transfer, assign,
pledge, encumber, or charge any benefit payable under, or
interest in, the Plan, the Committee shall hold or apply such
benefit or interest or any part thereof to or for the benefit
of such Participant or his Beneficiaries, his spouse,
children,
7
<PAGE> 10
parents, or other blood relatives, or any of them.
10.4 Expenses
The Company shall pay all costs and expenses incurred in
operating and administering the Plan.
10.5 No Right of Employment
Nothing contained herein nor any action taken under the
provisions hereof shall be construed as giving any Participant
the right to be retained in the employ of the Company, nor
shall the Plan interfere in any way with the right of the
Company to terminate the employment of such Participant.
10.6 Withholding
The Company shall withhold from any payment hereunder the
required amounts of income and other taxes. To the extent that
tax withholding is payable in connection with the
Participant's deferral of income rather than in connection
with the payment of deferred amounts under the Plan, such
withholding may be made from other wages, salary or bonuses
currently payable to the Participant or, as determined by the
Committee, the amount of the deferral elected by the
Participant may be reduced to satisfy tax withholding for
employment taxes and any other taxes.
10.7 Headings
The headings of the sections in the Plan are placed here for
convenience of reference; in the case of any conflict, the
text of the Plan, rather that such heading shall control.
10.8 Construction
The Plan shall be construed, regulated, and administered in
accordance with the laws of the State of California.
FAMILY RESTAURANTS, INC.
A DELAWARE CORPORATION
BY: _____________________________________
ITS: ____________________________________
DATED: __________________________________
8
<PAGE> 1
EXHIBIT 10.L
[LOGO]
FAMILY RESTAURANTS, INC.
1995 MANAGEMENT INCENTIVE COMPENSATION PLAN
PLAN DESCRIPTION
OBJECTIVE
The Family Restaurants, Inc. (FRI) Management Incentive Compensation Plan
(MICP) is designed to motivate and reward employees who, by virtue of their
position and responsibilities, are in a position to make a significant
contribution toward attaining and exceeding the annual business objectives of
FRI or any of its Operating Divisions.
ELIGIBILITY
Employees of FRI and its Operating Divisions are eligible to participate in
MICP based on the following criteria:
o Vice Presidents, Vice President equivalents and above who are
not eligible to participate in other incentive programs are
eligible to participate in the MICP Program.
o A performance level of at least average as defined by the
Company's performance standards, must have been achieved by an
eligible participant.
Individual bonus targets for participants will differ and will reflect levels
of responsibility and authority, as well as the relative impact and complexity
of their positions. Individual target incentive awards are expressed as a
percent of a participant's weighted average base salary for the calendar year
in which this bonus applies.
ADMINISTRATION
The Nominating and Human Resources (Compensation) Committee of the FRI Board of
Director's ("Committee") shall have full authority for the administration of
MICP including, but not limited to, eligibility, performance criteria, and Plan
modification or termination.
<PAGE> 2
INCENTIVE AWARD LEVELS
Individual incentive awards will be based on one, two, three, or four
performance criteria, depending on a participant's position within the
organization. The factors that comprise each participant's MICP award will
include one or more of the following factors:
o Division Sales Performance
o Division EBITDA Performance
o FRI EBITDA Performance
o Personal Performance Objectives
EBITDA is defined as operating profit plus miscellaneous income/(expense),
depreciation and opening expense.
The relative weighing of the above factors reflects the degree to which a
participant can impact the performance of FRI or an Operating Division. For
example, the incentive for a corporate participant is weighted exclusively on
FRI performance, whereas a Division participant's incentive is weighted more
heavily on Divisional performance. A combination of any of the above factors
may be used in determining a participant's award.
The measurement criteria for MICP will be set for FRI and the Operating
Divisions at the beginning of each plan year. These objectives will be based
on many criteria including, but not limited to, the established sales/operating
profit for the previous year, general economic conditions, the industry's
competitive environment, and senior management's judgement as to what
constitutes outstanding results.
Personal Performance Objectives will be established annually on an individual
basis and communicated to Human Resources. At the end of each year, completion
of Bonus Objectives will be evaluated and bonus amounts awarded accordingly.
TRANSFERS/PROMOTIONS/MERIT INCREASES
If an eligible participant is promoted to a new position during the year and if
such new position reflects a different bonus opportunity percentage, such
factors will be taken into consideration by management insofar as award
determination is concerned. The same factors will be considered by management
insofar as transfers among and between FRI and its Operating Divisions are
concerned. In the case of merit increases during the year, the MICP awards
will be based on the weighted average of a participant's base salary.
<PAGE> 3
MICP PAYOUT
Payment of MICP awards will be made annually, following management's
determination of the operating results for FRI and each of its Operating
Divisions and, barring unforseen circumstances, will be paid before the end of
the first quarter of the following calendar year, to the extent performance
warrants payment. In the event that a participant becomes eligible during the
calendar year, any applicable award will be prorated for the number of months
of service. Payroll and other associated statutory taxes will be withheld from
all MICP awards.
TERMINATION
An eligible participant whose employment terminates, voluntarily or
involuntarily, prior to the end of the fiscal year, will not be eligible to
receive a MICP award. If termination occurs after the end of the fiscal year,
but before payment, the Committee reserves the right to determine if payment,
or portion thereof, will be made.
PENALTIES
A penalty of up to 100% of the MICP award can be assessed for any actions
detrimental to the assets, reputation, or best interest of FRI and/or its
Operating Divisions including, but not limited to, any lowering of standards in
order to increase operating results, violation of established policies and
procedures, substandard personal performance, etc.
PLAN MODIFICATION
In the event of unusual circumstances which materially impact the performance
of FRI, its Operating Divisions, and/or the individual participant over which
management and/or the individual participant has little or no control, the
Committee may, through the exercise of prudent business judgment, amend the
performance criteria of MICP and, in their discretion, raise or lower MICP
awards. Such conditions as increased competition, forecasting errors, weather,
etc., are ongoing business factors and would not, in and of themselves, warrant
adjustment in performance criteria.
This MICP does not confer or create any rights in employees or any duties or
obligations upon FRI. FRI will make all interpretations concerning the
conditions and qualifications covered under this Plan and senior management
reserves the right to modify or terminate the Plan, should circumstances so
warrant. Notification of MICP modifications or terminations of MICP will be
communicated to participating employees as appropriate.
<PAGE> 1
Exhibit 10(m)
FAMILY RESTAURANTS, INC.
SEVERANCE PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
Article 1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Article 2 Commencement of Participation and Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Commencement of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Article 3 Benefits and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Severance Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Payment of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Return to Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 Withholding and Payroll Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 No Duplication of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Article 4 Termination, Amendment or Modification of the Plan . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Termination, Amendment or Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Termination of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Article 5 Other Benefits and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1 Coordination with Other Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Article 6 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1 Plan Administrator's Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2 Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Binding Effect of Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.4 Indemnity of Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.5 Employer Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Article 7 Claims Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.1 Presentation of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.2 Notification of Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 Review of a Denied Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 Decision on Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
7.5 Legal Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Article 8 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.1 Unsecured General Creditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.2 Employer's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 Nonassignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 Not a Contract of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 Furnishing Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.6 Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.7 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.9 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.10 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.11 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.12 Entire Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
-ii-
<PAGE> 4
FAMILY RESTAURANTS, INC.
SEVERANCE PLAN
EFFECTIVE FEBRUARY 1, 1993
PURPOSE
The purpose of this Plan is to provide specified severance benefits
to certain selected employees of Family Restaurants, Inc., a Delaware
corporation, and its Subsidiaries. This Plan is intended to be a "welfare
benefit plan" under Title I of ERISA. The Company previously maintained a
severance plan that provided various benefits for different employee groups.
The Company now desires to amend that plan to change the benefits offered and
to provide uniform benefits applicable to all eligible employees. Accordingly,
this Plan document is a complete amendment and restatement of the terms and
conditions of that plan and supersedes that plan in its entirety as of the
Effective Date.
ARTICLE 1
DEFINITIONS
For purposes hereof, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meaning:
1.1 "Beneficiary" shall mean the person(s) designated by the Eligible
Participant pursuant to Section 3.1(a)(iii) below to receive the
unpaid portion, if any, of his or her severance benefit upon his or
her death. If there is no such living designated Beneficiary,
"Beneficiary" shall mean an Eligible Participant's spouse, if
living, and if not, the Eligible Participant's then living
descendants, by right of representation, and if there is no living
spouse or descendant, "Beneficiary" shall mean the Eligible
Participant's estate.
1.2 "Board" shall mean the Board of Directors of the Company.
1.3 "Claimant" shall have the meaning set forth in Section 7.1 below.
1.4 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
1.5 "Company" shall mean Family Restaurants, Inc., a Delaware
corporation.
-1-
<PAGE> 5
1.6 "Comparable or Similar Position" shall mean a new job or
position of employment that will (i) provide a Participant
with at least ninety-five percent (95%) of the Weekly Base Salary
he or she was receiving in his or her prior job or position with an
Employer, (ii) be located within thirty-five (35) miles of the
location of the Participant's prior job or position with an
Employer and (iii) be relatively similar in scope and
responsibility to the Participant's prior job or position with an
Employer. In determining whether an Employee's new job or position
is a Comparable or Similar Position to his old job or position, the
fact that an Employee's original date of hire or his or her
employee benefits (other than Weekly Base Salary) have changed
shall not be taken into account.
1.7 "Effective Date" shall mean February 1, 1993.
1.8 "Eligible Employee" shall mean any full-time salaried Employee
(exempt or non-exempt) who is scheduled to work a minimum of
twenty- five (25) hours per week as a salaried Employee.
1.9 "Eligible Participant" shall have the meaning set forth in Section
3.1(a) below.
1.10 "Employee" shall mean any common law employee of any Employer.
1.11 "Employer" shall mean the Company and/or any Subsidiary of the
Company.
1.12 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
1.13 "Participant" shall mean any Eligible Employee who becomes a
participant in the Plan in accordance with the Plan's terms and
conditions.
1.14 "Plan" shall mean Family Restaurants, Inc. Severance Plan, which is
defined by this instrument, as it may be amended from time to time.
1.15 "Plan Administrator" shall mean the person or administrative
committee appointed to manage and administer the Plan in accordance
with the provisions of Article 6 below.
1.16 "Plan Year" shall mean the calendar year.
1.17 "Qualifying Termination" shall mean a Participant's termination of
employment from all Employers as a result of one of the following
events:
(i) a reduction in an Employer's work force under which a
Participant's employment is terminated;
-2-
<PAGE> 6
(ii) the elimination of a Participant's job or
position without the Participant being offered a
Comparable or Similar Position; or
(iii) such other event of termination for which
cause did not exist, as determined in the sole discretion
of the Plan Administrator.
Despite the foregoing, a Qualifying Termination shall not
include the following events of termination:
(a) a Participant's voluntary retirement if a
Comparable or Similar Position is available to the
Employee;
(b) a Participant's voluntary resignation;
(c) a Participant's refusal to accept a new job or
position that is a Comparable or Similar Position with an
Employer;
(d) the termination of the Participant's employment for
cause; or
(e) a Participant's refusal to accept a Comparable or
Similar Position with an Employer or successor entity
following (1) a corporate reorganization or merger of a
Participant's Employer or the Company, (2) the transfer or
sale of all or a portion of the stock or assets of a
Participant's Employer or the Company, or (3) any other
arrangement (including contractual arrangements such as
employee leasing) whereby the legal entity that was the
Participant's Employer is changed but the Participant is
offered a Comparable or Similar Position.
The distinction made between termination "for cause" and "not
for cause" in (iii) and (d) above is made solely for the purpose of
determining Participants who are eligible for severance benefits
under this Plan and for no other purposes. These provisions are
not intended to modify the Employer's right, as set forth in
Section 8.4, to terminate employment with or without cause.
1.18 "Senior Executive" shall mean a Participant who holds the job title
of President or Vice President of any Employer, Executive Vice
President or Senior Vice President of the Company, or any of their
equivalents.
1.19 "Subsidiary" shall mean any corporation in which the Company owns
more than fifty percent (50%) of the corporation's voting stock.
1.20 "Weekly Base Salary" shall mean a Participant's annual salary for
the twelve full months immediately preceding his or her Qualifying
Termination, excluding bonuses, commissions, overtime, incentive
payments, non-monetary awards and fees, paid to a
-3-
<PAGE> 7
Participant for employment services rendered to any Employer,
before reduction for compensation deferred pursuant to all
qualified, nonqualified and Code Section 125 compensation plans of
any Employer, divided by 52. Notwithstanding the foregoing, the
Weekly Base Salary of a "FR, Inc. Distribution Services Truck
Driver" shall be equal to 75% of his or her average weekly total
compensation for the 26 weeks immediately preceding the date of his
or her Qualifying Termination.
1.21 "Years of Service" shall mean the total number of years for which a
Participant has been employed by one or more Employers as an
Eligible Employee, provided, however, that if a Participant has at
least five full years of service as an Eligible Employee, then his
or her Years of Service shall be the total number of years for
which such Participant has been employed by one or more Employers
as an Employee. Except as specifically provided in the preceding
statement, a partial year of employment shall be rounded up to the
next full year if a Participant has completed six months or more of
employment in that partial year; otherwise, a partial year of
employment shall not be counted.
ARTICLE 2
COMMENCEMENT OF PARTICIPATION AND VESTING
2.1 COMMENCEMENT OF PARTICIPATION. An Eligible Employee shall become a
Participant on the date he or she is notified by the Plan
Administrator that he or she will experience a Qualifying
Termination.
2.2 VESTING. No Participant shall vest in any benefits under this Plan
prior to becoming an Eligible Participant.
ARTICLE 3
BENEFITS AND PAYMENTS
3.1 SEVERANCE BENEFIT.
(a) ELIGIBILITY. A Participant shall become
entitled to receive a severance benefit in accordance with
this Article 3 if, and only if, he or she:
(i) Experiences a Qualifying Termination;
(ii) Signs and returns to the Plan
Administrator, as consideration for his or her
severance benefits under this Plan, a general
release agreement in the form determined from time
to time by the Plan Administrator in its sole
discretion; and
-4-
<PAGE> 8
(iii) Signs and returns to the Plan Administrator
a beneficiary designation form in the form
determined from time to time by the Plan
Administrator, in its sole discretion, to identify
the person(s) to receive any amount payable
pursuant to Section 3.4 below.
A Participant who meets all of the above requirements
shall be referred to as an "Eligible Participant".
(b) DETERMINATION OF BENEFITS (OTHER THAN CHIEF EXECUTIVE
OFFICER). An Eligible Participant (other than an
Eligible Participant described in Section 3.1(c) below)
shall be entitled to a severance benefit, based on his or
her job position or employment status at the time he or
she experiences a Qualifying Termination, that is equal to
the sum of the applicable benefits described below, as
adjusted by (iv) and (v) below:
(i) GENERAL BENEFIT.
(1) Non-Exempt Employee, Exempt Employee
Below Corporate Manager, General
Manager or Equivalent Position of Any
Employer. An Eligible Participant who is
a Non-Exempt Employee or an Exempt
Employee Below Corporate Manager of any
Employer, or who holds the position of
General Manager, or an equivalent
position, with any Employer, all as set
forth on Exhibit A, is entitled to a
severance benefit under this Section
3.1(b)(i)(1) that is equal in amount to
the Eligible Participant's Weekly Base
Salary multiplied by the Eligible
Participant's Years of Service; provided,
however, that in no event shall such an
Eligible Participant be entitled to a
benefit that is:
(a) less than his or her Weekly Base
Salary multiplied by 2, or
(b) more than his or her Weekly Base
Salary multiplied by 15.
(2) Corporate Manager or equivalent
Position of Any Employer. An
Eligible Participant who holds the
position of Corporate Manager, or an
equivalent position, with any Employer,
all as set forth on Exhibit B, is
entitled to a severance benefit under
this Section 3.1(b)(i)(2) that is equal
in amount to the Eligible Participant's
Weekly Base Salary multiplied by the
Eligible Participant's Years of Service;
provided, however, that in no
-5-
<PAGE> 9
event shall such an Eligible Participant
be entitled to a benefit that is:
(a) less than his or her Weekly
Base Salary multiplied by 2, if
he or she has one Year of
Service or less,
(b) less than his or her Weekly
Base Salary multiplied by 8, if
he or she has more than one Year
of Service, or
(c) more than his or her Weekly
Base Salary multiplied by 20.
(3) District Manager, District Operator,
Director or Equivalent Position of
Any Employer. An Eligible Participant
who holds the position of District
Manager, District Operator or Director,
or an equivalent position, with any
Employer, all as set forth on Exhibit C,
is entitled to a severance benefit under
this Section 3.1(b)(i)(3) that is equal
in amount to the Eligible Participant's
Weekly Base Salary multiplied by the
Eligible Participant's Years of Service;
provided, however, that in no event shall
such an Eligible Participant be entitled
to a benefit that is:
(a) less than his or her Weekly Base
Salary multiplied by 2, if he or
she has held any such position,
or an equivalent one (as
determined by the Plan
Administrator, in its sole
discretion), for one year or less,
or
(b) less than his or her Weekly
Base Salary multiplied by
13, if he or she has held any
such position, or an equivalent
one (as determined by the Plan
Administrator, in its sole
discretion), for more than one
year.
(4) Vice President, President, or Equivalent
Position of Any Employer. An Eligible
Participant who holds the position
of Vice President or President, or
an equivalent position, with any
Employer, all as set forth on Exhibit D,
is entitled to a severance benefit under
this Section 3.1(b)(i)(4) that is equal
in amount to the Eligible Participant's
Weekly Base Salary multiplied by 1.5
multiplied by the Eligible Participant's
Years of Service.
(5) Executive Vice President or Senior Vice
President of the Company. An Eligible
Participant who holds the position
of Executive Vice President with
the Company or a Senior Vice
-6-
<PAGE> 10
President with the Company, all as set
forth on Exhibit E, is entitled to a
severance benefit under this Section
3.1(b)(i)(5) that is equal in amount to
the Eligible Participant's Weekly Base
Salary multiplied by 2.0 multiplied by
the Eligible Participant's Years of
Service.
(6) Job Positions and Exhibits. For
purposes of determining benefits
under this Plan, the Plan Administrator
shall determine, in its sole discretion,
(i) job positions and employment statuses
to be included on each of the Exhibits to
this Plan (which Exhibits may be amended
or modified at any time or from time to
time by the Plan Administrator), and (ii)
a Participant's job position or
employment status.
(ii) TENURE ADJUSTMENT FOR SENIOR EXECUTIVE.
In addition to the benefit provided
for in Section 3.1(b)(i) above, an Eligible
Participant who is a Senior Executive at the time
of his or her Qualifying Termination is entitled
to a severance benefit that is equal in amount to
(a) the Eligible Participant's Weekly Base Salary
multiplied by (b) the applicable Benefit Factor
set forth in the following schedule based on his
or her Years of Service:
<TABLE>
<CAPTION>
Years of Service* Benefit Factor
----------------- --------------
<S> <C>
5 to 10 2
11 to 15 4
16 to 20 6
21 or More 8
</TABLE>
* A partial year shall be rounded up to the
next full year if six months or more of employment
has been completed.
(iii) AGE ADJUSTMENT FOR SENIOR EXECUTIVES. In
addition to the benefits provided for in
Sections 3.1(b)(i) and (ii) above, an Eligible
Participant who is a Senior Executive at the time
of his or her Qualifying Termination shall be
entitled to an additional severance benefit that
is equal in amount to the severance benefit
provided in Section 3.1(b)(i) above multiplied by
the applicable rate set forth in the following
schedule:
-7-
<PAGE> 11
<TABLE>
<CAPTION>
Age of Participant At
Qualifying Termination Applicable Rate
---------------------- ---------------
<S> <C>
Less than 40 0%
40 to 44 25%
45 to 49 30%
50 to 54 40%
55 or more 50%
</TABLE>
(iv) MINIMUM SEVERANCE BENEFIT FOR SENIOR EXECUTIVE.
In no event shall the total severance
benefit paid to a Participant who is a Senior
Executive, consisting of the applicable General
Benefit under Section 3.1(b)(i)(4) or (5) above,
the Tenure Adjustment under Section 3.1(b)(ii)
above (if applicable) and the Age Adjustment under
section (iii) above (if applicable), be:
(a) less than his or her Weekly Base
Salary multiplied by 13, if he or
she has held any such position, or an
equivalent one (as determined by the Plan
Administrator, in its sole discretion),
for less than three years, or
(b) less than his or her Weekly Base
Salary multiplied by 26, if he or
she has held any such position, or an
equivalent one (as determined by the Plan
Administrator, in its sole discretion),
for three or more years.
(v) MAXIMUM SEVERANCE BENEFIT. In
no event shall the total severance benefit paid
to a Participant, consisting of the applicable
General Benefit under Section 3.1(b)(i) (3),
(4) or (5) above (as applicable), the Tenure
Adjustment under Section 3.1(b)(ii) above (if
applicable) and the Age Adjustment under
Section 3.1(b)(iii) above (if applicable) (a)
be less exceed the Participant's Weekly Base
Salary multiplied by 52.
(c) CHIEF EXECUTIVE OFFICER OF THE COMPANY. In lieu
of the severance benefit provided under Section
3.1(b) above, an Eligible Participant who is the Chief
Executive Officer of the Company shall be entitled to such
severance benefit, as designated in any Employment
Agreement between the Company and its CEO. If there is no
specific Employment Agreement, severance benefits would be
determined by the Company's Board of Directors, but in no
event shall such benefit be less than would have been
provided to an Eligible Participant who immediately prior
to his or her Qualifying Terminatuion (i) holds the
position of Vice President or President of any Employer,
and (ii) has the same years of service (for purposes of
the Tenure Adjustment under Section 3.1(b)(ii) above)
-8-
<PAGE> 12
and is the same age as the Participant (for purposes of
the Age Adjustment under Section 3.1(b)(ii) above).
3.2 PAYMENT OF BENEFITS. Unless the Plan Administrator, in its sole
discretion, directs that payment shall be made in a lump sum, the
severance benefits provided for in Section 3.1 above shall be paid
in the form of bi-weekly installments that are paid in accordance
with the Employer's normal payroll cycle and practices for wages,
starting within two weeks of the Qualifying Termination. The gross
amount of each check (prior to a reduction for taxes in accordance
with Section 3.5 below) shall be equal to the gross amount the
Eligible Participant was receiving in his or her bi-weekly checks
immediately prior to the Qualifying Termination as his or her
Weekly Base Salary. Subject to Section 3.3 below, such installment
payments shall continue until the Eligible Participant receives all
severance benefits he or she is entitled to under Section 3.1.
3.3 RETURN TO EMPLOYMENT. If an Eligible Participant commences
receiving severance benefit payments and that Eligible Participant
subsequently becomes employed with an Employer (or its successor,
as determined by the Plan Administrator in its sole
discretion) prior to the full payment of that benefit, the
Eligible Participant (i) shall immediately forfeit any additional
payments of that severance benefit, and (ii) any future severance
benefits that may become payable under the Plan if he or she again
becomes an Eligible Participant shall be reduced,
dollar-for-dollar, by the amount of the severance benefit
previously paid to him or her under the Plan on or after the
Effective Date.
3.4 DEATH. If an Eligible Participant becomes entitled to receive
severance benefit payments and that Eligible Participant
subsequently dies prior to the time that he or she received full
payment of his or her severance benefit, the remaining portion of
that benefit shall be paid to his or her Beneficiary.
3.5 WITHHOLDING AND PAYROLL TAXES. The Eligible Participant's former
Employer shall withhold from any and all benefit payments made
under this Article 3, all federal, state and local income,
employment and other taxes required to be withheld in connection
with the payment of benefits hereunder, in amounts to be determined
in the sole discretion of the Eligible Participant's former
Employer.
3.6 NO DUPLICATION OF BENEFITS. This Plan shall not be deemed to
modify in any way any written contract with any Eligible
Participant, such as an employment contract, providing for the
payment of severance benefits, provided, however, that if an
Eligible Participant is entitled to receive severance benefits
under such a written contract and under this Plan, the severance
benefits otherwise payable under this Plan shall be reduced, or
eliminated entirely, dollar for dollar, by the benefits payable
pursuant to such written contract.
-9-
<PAGE> 13
ARTICLE 4
TERMINATION, AMENDMENT OR
MODIFICATION OF THE PLAN
4.1 TERMINATION, AMENDMENT OR MODIFICATION. The Company reserves the
right at any time for any reason or for no reason to terminate,
amend or modify the Plan, in whole or in part, including, without
limitation, reducing, suspending or eliminating benefits, and the
Company may amend or cancel any such amendment at any time. Each
amendment must be set forth in a document that is signed by the
Company, and the Plan shall be deemed to have been amended in the
manner and at the time set forth in such document, and all
Employees shall be bound by it. Continuance of the Plan is not
assumed as a contractual obligation of the Company.
Notwithstanding the foregoing, no termination, amendment or
modification shall be effective to decrease or reduce a
Participant's vested benefits under this Plan once he or she has
become an Eligible Participant.
4.2 TERMINATION OF RIGHTS. Absent the earlier termination,
modification or amendment of the Plan, a Participant's rights,
including participating in the Plan, shall terminate upon the full
payment of the applicable severance benefit provided under Article
3. Additionally, a Participant shall immediately cease to be an
Eligible Employee and a Participant (and shall be entitled to no
benefits hereunder) at and following the time his or her employer
ceases to be the Company or a Subsidiary, unless he or she
experiences a Qualifying Termination on or before such time.
ARTICLE 5
OTHER BENEFITS AND AGREEMENTS
5.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for an
Eligible Participant under the Plan are in addition to any other
benefits available to such Participant under any other plan or
program for Employees. The Plan shall supplement and shall not
supersede, modify or amend any other such plan or program except as
may otherwise be expressly provided. Despite the foregoing, and
except for the benefits specifically provided for in this Plan,
this Plan shall not be construed as entitling an Employee or
Participant to receive any other benefit offered by an Employer.
Specifically, but not by way of limitation of the foregoing, this
Plan shall not entitle any Eligible Participant to receive any
benefits offered by any Employer following his or her Qualifying
Termination, including by way of illustration only, car allowance,
leased car, vacation accrual, personal leave, or "QRC" benefits,
regardless of whether such Eligible Participant receives his or her
severance benefits in the form of a lump sum or installments
pursuant to Section 3.2 above.
-10-
<PAGE> 14
ARTICLE 6
ADMINISTRATION
6.1 PLAN ADMINISTRATOR'S DUTIES. This Plan shall be administered by a
Plan Administrator who shall be a single person or committee
appointed by the Chief Executive Officer of the Company. The Plan
Administrator shall be the Plan fiduciary. Any person serving as a
Plan Administrator may be a Participant under this Plan. The Plan
Administrator shall have the discretion and authority to make,
amend, interpret, and enforce all appropriate rules and regulations
for the administration of this Plan and decide or resolve any and
all questions, including interpretations of this Plan, as may arise
in connection with the Plan. Specifically, but not in limitation
of the foregoing, the Plan Administrator shall have sole discretion
at any time and from time to time to establish, amend or modify in
any way the job titles and equivalencies set forth on the attached
Exhibits.
6.2 AGENTS. In the administration of this Plan, the Plan Administrator
may, from time to time, employ agents and delegate to them such
administrative duties as it sees fit and may from time to time
consult with counsel who may be counsel to any Employer.
6.3 BINDING EFFECT OF DECISIONS. The decision or action of the Plan
Administrator with respect to any question arising out of or in
connection with the administration, interpretation and application
of the Plan and the rules and regulations promulgated hereunder
shall be final and conclusive and binding upon all persons having
any interest in the Plan.
6.4 INDEMNITY OF PLAN ADMINISTRATOR. All Employers shall indemnify and
hold harmless the members of the Plan Administrator against any and
all claims, losses, damages, expenses or liabilities arising from
any action or failure to act with respect to this Plan, except in
the case of willful misconduct by the Plan Administrator or any of
its members.
6.5 EMPLOYER INFORMATION. To enable the Plan Administrator to perform
its functions, each Employer shall supply full and timely
information to the Plan Administrator on all matters relating to
the compensation of its Participants and such other pertinent
information as the Plan Administrator may reasonably require.
ARTICLE 7
CLAIMS PROCEDURES
7.1 PRESENTATION OF CLAIM. Any Participant (such Participant being
referred to below as a "Claimant") may deliver to the Plan
Administrator a written claim for a determination
-11-
<PAGE> 15
with respect to the amounts distributable to such Claimant from
the Plan. If such a claim relates to the contents of a notice
received by the Claimant, the claim must be made within 60 days
after such notice was received by the Claimant. All other claims
must be made within 180 days of the date on which the event that
caused the claim to arise occurred. The claim must state with
particularity the determination desired by the Claimant.
7.2 NOTIFICATION OF DECISION. The Plan Administrator shall consider a
Claimant's claim within 60 days of receipt of that claim, and shall
notify the Claimant in writing:
(a) that the Claimant's requested determination has been
made, and that the claim has been allowed in full; or
(b) that the Plan Administrator has reached a conclusion
contrary, in whole or in part, to the Claimant's requested
determination, and such notice must set forth in a manner
calculated to be understood by the Claimant:
(i) the specific reason(s) for the denial of the claim,
or any part of it;
(ii) the specific reference(s) to pertinent provisions
of the Plan upon which such denial was based;
(iii) a description of any additional material or
information necessary for the Claimant to perfect
the claim, and an explanation of why such material
or information is necessary; and
(iv) an explanation of the claim review procedure set
forth in Section 7.3 below.
7.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice
from the Plan Administrator that a claim has been denied, in whole
or in part, a Claimant (or the Claimant's duly authorized
representative) may file with the Plan Administrator a written
request for a review of the denial of the claim. Thereafter, but
not later than 30 days after the review procedure began, the
Claimant (or the Claimant's duly authorized representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Plan Administrator,
in its sole discretion, may grant.
-12-
<PAGE> 16
7.4 DECISION ON REVIEW. The Plan Administrator shall render its
decision on review promptly, and not later than 60 days after the
filing of a written request for review of the denial, unless a
hearing is held or other special circumstances require additional
time, in which case the Plan Administrator's decision must be
rendered within 120 days after such date. Such decision must be
written in a manner calculated to be understood by the Claimant,
and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions
upon which the decision was based; and
(c) such other matters as the Plan Administrator deems
relevant.
7.5 LEGAL ACTION. A Claimant's compliance with the foregoing
provisions of this Article 7 is a mandatory prerequisite to a
Claimant's right to commence any legal action with respect to any
claim for benefits under this Plan.
ARTICLE 8
MISCELLANEOUS
8.1 UNSECURED GENERAL CREDITOR. Participants and their heirs,
successors and assigns shall have no legal or equitable rights,
interest or claims in any property or assets of an Employer. Any
and all of an Employer's assets shall be, and remain, the general,
unpledged and unrestricted assets of the Employer. An Employer's
obligation under the Plan shall be merely that of an unfunded and
unsecured promise to pay money in the future in accordance with the
Plan. Amounts payable to a Participant shall be paid from the
general assets of an Employer exclusively.
8.2 EMPLOYER'S LIABILITY. An Employer's liability for the payment of
benefits shall be defined only by the Plan. An Employer shall have
no obligation to a Participant under the Plan except as expressly
provided in the Plan.
8.3 NONASSIGNABILITY. A Participant shall not have any right to
commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in advance of
actual receipt, the amounts, if any, payable hereunder, or any part
thereof, which are, and all rights to which are expressly declared
to be, unassignable and non-transferable, except that the foregoing
shall not apply to any family support obligations set forth in a
court order. No part of the amounts payable shall, prior to actual
payment, be subject to seizure or sequestration for the payment of
any debts, judgments, alimony or separate maintenance owed by a
Participant or any other person,
-13-
<PAGE> 17
nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency.
8.4 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this
Plan shall not be deemed to constitute a contract of employment
between any Employer and the Participant. Such employment is
hereby acknowledged to be an "at will" employment relationship that
can be terminated at any time for any reason, with or without
cause. Nothing in this Plan shall be deemed to give a Participant
the right to be employed in the service of any Employer, or to
interfere with the right of any Employer to discipline or discharge
the Participant at any time.
8.5 FURNISHING INFORMATION. A Participant will cooperate with the Plan
Administrator by furnishing any and all information requested by
the Plan Administrator and take such other actions as may be
requested in order to facilitate the administration of the Plan and
the payments of benefits hereunder.
8.6 TERMS. Whenever any words are used herein in the singular or in
the plural, they shall be construed as though they were used in the
plural or the singular, as the case may be, in all cases where they
would so apply.
8.7 CAPTIONS. The captions of the articles, sections and paragraphs of
this Plan are for convenience only and shall not control or affect
the meaning or construction of any of its provisions.
8.8 GOVERNING LAW. The provisions of this Plan shall be construed and
interpreted according to the laws of the State of California.
8.9 VALIDITY. In case any provision of this Plan shall be illegal or
invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be construed
and enforced as if such illegal and invalid provision had never
been inserted herein.
8.10 NOTICE. Any notice or filing required or permitted to be given to
the Plan Administrator under this Plan shall be sufficient if in
writing and hand-delivered, or sent by registered or certified
mail, to the address below:
Family Restaurants, Inc.
2701 Alton Avenue
Irvine, California 92714
Attention: Human Resources
-14-
<PAGE> 18
Such notice shall be deemed given as of the date of delivery
or, if delivery is made by mail, as of the date shown on the
postmark on the receipt for registration or certification.
Any notice or filing required or permitted to be given to a
Participant under this Plan shall be sufficient if in writing and
hand- delivered, or sent by mail, to the last known address of the
Participant.
8.11 SUCCESSORS. The provisions of this Plan shall bind and inure to
the benefit of the Participant's Employer and its successors and
assigns and the Participant and his or her permitted successors and
assigns.
8.12 ENTIRE BENEFIT. This Plan constitutes the entire agreement and
understanding among the Employers and Employees with regards to the
subject matter hereof and supersedes all prior oral or written
agreements, arrangements and understandings with respect thereto.
No representation, promise, inducement, statement or intention has
been made by any Employer that is not embodied in this Plan, and no
Employer shall be bound by or be liable for any alleged
representation, promise, inducement or statement not set forth in
this document.
IN WITNESS WHEREOF the Company has signed this Plan document as
of _________, 1994.
FAMILY RESTAURANTS, INC.
a Delaware Corporation
By: __________________________________________
Its: _____________________________________
-15-
<PAGE> 1
FAMILY RESTAURANTS, INC.
1994 FORM 10-K
<TABLE>
<CAPTION>
Jurisdiction of
Subsidiaries as of December 25, 1994 Incorporation
------------------------------------------- ---------------
<S> <C>
Carrows California Family Restaurants, Inc. Delaware
Carrows Restaurants, Inc. California
CCMR Advertising Agency, Inc. Kentucky
CCMR of Catonsville, Inc. Kentucky
CCMR of Cumberland, Inc. Kentucky
CCMR of Frederick, Inc. Kentucky
CCMR of Golden Ring, Inc. Kentucky
CCMR of Greenbelt, Inc. Kentucky
CCMR of Harford County, Inc. Kentucky
CCMR of Inner Harbor, Inc. Kentucky
CCMR of Maryland, Inc. Delaware
CCMR of Ritchie Highway, Inc. Kentucky
CCMR of Timonium, Inc. Delaware
CFC Franchising Company Delaware
Chi-Chi's, Inc. Delaware
Chi-Chi's Franchise Operations Corporation Kentucky
Chi-Chi's Management Corporation Kentucky
Chi-Chi's of Greenbelt, Inc. Kentucky
Chi-Chi's of Kansas, Inc. Kansas
Chi-Chi's of South Carolina, Inc. Kentucky
Chi-Chi's of West Virginia, Inc. Kentucky
Coco's Restaurants, Inc. California
El Torito Restaurants, Inc. Delaware
Far West Concepts, Inc. California
FRI-Admin Corporation Delaware
FRI-C Corporation Delaware
FRI-DHD Corporation Delaware
FRI-FRD Corporation Delaware
FRI-J Corporation Delaware
FRI-M Corporation Delaware
FRI-MRD Corporation Delaware
FRI-NA Corporation Delaware
jojos California Family Restaurants, Inc. Delaware
jojos Restaurants, Inc. California
jojos Restaurants of Indiana, Inc. Indiana
Maintenance Support Group, Inc. Kentucky
</TABLE>
EXHIBIT 21
<PAGE> 2
FAMILY RESTAURANTS, INC.
1994 FORM 10-K
NAMES UNDER WHICH OPERATING
SUBSIDIARIES DO BUSINESS - 12/25/94
<TABLE>
<S> <C>
Carrows Restaurants, Inc. ("Carrows")
Coco's Restaurants, Inc. ("Coco's")
Far West Concepts, Inc. ("FWC")
jojos Restaurants, Inc. ("JRI") El Torito Restaurants, Inc.
------------------------------------- ------------------------------
Backstage Cafe (FWC) Casa Gallardo
Bob's Big Boy (Carrows/JRI) Casa Maria
Carrows (Carrows) El Torito
Charley Brown's (Coco's) El Torito Grill
Coco's (Coco's) El Torito Restaurant & Cantina
Coco's Bakery Restaurant (Coco's) GuadalaHARRY's
Edie's Diner (FWC/Coco's) Keystone Grill
Hola Amigos (FWC) Las Brisas
H.I. Ribsters (Coco's) Original El Torito Restaurant
jojos (JRI) Specialty Catering
jojos of Texas (JRI) Tequila Willie's
Malibu Sea Lion U.S.A. (FWC) Who-Song & Larry's Restaurant
Otto Rothchilds Bar and Grill (FWC) and Cantina
Pavilion Catering (FWC)
Reuben's (Coco's/FWC)
The Intermission Bar (FWC) Chi-Chi's Restaurants, Inc.
The Pavilion (FWC) ------------------------------
Tibbie's Music Hall (Coco's) Chi-Chi's
Chi-Chi's El Pronto
Chi-Chi's Mexican Restaurante
HomeTown Buffet
</TABLE>
EXHIBIT 21
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Family Restaurants, Inc.
We consent to incorporation by reference in the Registration Statement (No.
33-52795) on Form S-8 of Family Restaurants, Inc. of our report dated March 15,
1995 except as to the ninth paragraph of note 10 to the consolidated financial
statements, which is as of March 24, 1995, relating to the consolidated balance
sheet of Family Restaurants, Inc. and its subsidiaries as of December 25, 1994
and the related statements of operations, common stockholders' deficit
and cash flows and related financial statement schedule for the one month
ended January 26, 1994 (Predecessor Company) and the eleven months ended
December 25, 1994 (Successor Company), which report appears in the December 25,
1994 annual report on Form 10-K of Family Restaurants, Inc. Our report refers
to a change in the method of financial statement reporting.
KPMG PEAT MARWICK LLP
Orange County, California
March 24, 1995
<PAGE> 2
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-52795 on Form S-8 of Family Restaurants, Inc. of our report dated March 22,
1994 appearing in this Annual Report on Form 10-K of Family Restaurants, Inc.
for the year ended December 25, 1994.
DELOITTE & TOUCHE LLP
Costa Mesa, California
March 24, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE ELEVEN MONTHS ENDED DECEMBER
25, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-K FOR
THE YEAR ENDED DECEMBER 25, 1994.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> DEC-25-1994
<PERIOD-START> JAN-27-1994
<PERIOD-END> DEC-25-1994
<CASH> 8,239
<SECURITIES> 0
<RECEIVABLES> 11,831
<ALLOWANCES> 0
<INVENTORY> 12,916
<CURRENT-ASSETS> 43,015
<PP&E> 478,355
<DEPRECIATION> 33,001
<TOTAL-ASSETS> 734,598
<CURRENT-LIABILITIES> 198,496
<BONDS> 424,851
<COMMON> 10
0
0
<OTHER-SE> (7,269)
<TOTAL-LIABILITY-AND-EQUITY> 734,598
<SALES> 1,048,674
<TOTAL-REVENUES> 1,048,674
<CGS> 293,413
<TOTAL-COSTS> 962,775
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,419
<INCOME-PRETAX> (165,044)
<INCOME-TAX> 1,773
<INCOME-CONTINUING> (166,817)
<DISCONTINUED> 0
<EXTRAORDINARY> 2,941
<CHANGES> 0
<NET-INCOME> (163,876)
<EPS-PRIMARY> (165.58)
<EPS-DILUTED> (165.58)
</TABLE>
