<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
( X ) Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required) for the fiscal year ended April 30, 1996 or
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required) for the transition period
from __ to__
Commission file number 1-10711
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SIZZLER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4307254
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
12655 West Jefferson Boulevard, Los Angeles, California 90066
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (310) 827-2300
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ------------------- ------------------------
Common Stock, $.01 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
----
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
|X|YES |_|NO
The aggregate market value of the voting stock held by non-affiliates of the
registrant on June 30, 1996, computed by reference to the closing sale price of
such shares on such date was $94,458,679.
The number of shares outstanding of common stock, $0.01 par value, as of June
30, 1996, was 29,064,209.
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 the Form 10-K or any amendment to this
Form 10-K. [X]
<PAGE>
PART I
ITEM 1. BUSINESS.
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DESCRIPTION OF THE COMPANY.
Sizzler International, Inc. ("Sizzler" or the "Company") is a Delaware
corporation and was formed on January 18, 1991, under the name Collins Foods,
Inc., as a wholly owned subsidiary of Collins Foods International, Inc. ("CFI"),
for the purpose of effecting a series of transactions relating to the transfer
of CFI's domestic Kentucky Fried Chicken ("KFC") restaurants and certain real
estate to PepsiCo, Inc. In March 1991, CFI transferred all of its assets and
liabilities other than those related to the operation of its domestic KFC
restaurants and certain real estate to the Company. These assets and liabilities
included CFI's 66% ownership interest in the stock of Sizzler Restaurants
International, Inc. ("SRI"), CFI's International Division and a subsidiary of
CFI that owns certain restaurant properties and the headquarters building.
Shortly thereafter, CFI was merged with and into PepsiCo, Inc.
In addition, on March 18, 1991, the Company completed an exchange offer which
resulted in the increase of its ownership interest in SRI from 66% to
approximately 94%. In April 1991, SRI became a wholly owned subsidiary of the
Company through the merger of SRI with and into another wholly owned subsidiary
of the Company. Effective on May 7, 1991, the Company's name was changed from
Collins Foods, Inc. to Sizzler International, Inc.
Because domestic operations have produced losses on declining revenues for the
past four years, during the fourth quarter of fiscal 1996 ended April 30, 1996,
Management reviewed each U.S. restaurant and identified 87 that were in strong
markets with prospects for ongoing profitability. The remaining 116 restaurants
Sizzler operated in the U.S. were seen as having insufficient future prospects,
even with the anticipated repositioning concept, to warrant continued investment
at their location and therefore deserving of closure. Management determined
that the most prudent way to address the potential burden from unproductive
leases associated with closed restaurants was filing Chapter 11. On June 2,
1996, the Company enacted a comprehensive restructuring strategy designed to
return the U.S. operations to profitability. This strategy included the closure
of 116 restaurants in the U.S. and filing for bankruptcy protection. On June 2,
1996, the Company and four subsidiaries, Sizzler Restaurants International,
Inc., Buffalo Ranch Steakhouses, Inc., Tenly Enterprises, Inc., and Collins
Properties, Inc. became debtors-in-possession subject to the
supervision of the U.S. Bankruptcy Court of the Central District of California
under Chapter 11 of the federal bankruptcy code. The debtor subsidiaries own
and operate substantially all of the Company's U.S. restaurant businesses and
assets. The Company's International division businesses and assets are owned
and operated by separate subsidiaries and are not subject to the U.S. Chapter 11
cases. The cases involving the Company and its debtor subsidiaries are jointly
administered under Case No. 96-16075AG.
Management believes that this restructuring and the related transactions
significantly improve overall prospects to return to profitability and growth.
Restructuring will provide opportunities to enhance the Company's cash flow by
reducing the Company's cost structure, increasing the Company's ability to focus
on repositioning the Sizzler concept, and expediting the return of U.S.
operations to profitability.
At April 30, 1996, the Company operated 199 Sizzler and four Buffalo Ranch
Steakhouse restaurants in the U.S. On June 3, 1996, 112 of the Sizzler
restaurants and the four Buffalo Ranch Steakhouses were closed. The Company
franchised another 235 restaurants in the United States. At June 3, 1996 the
Company's domestic real estate holdings include the corporate headquarters, 17
operating Sizzler restaurants, 6 locations that are leased to Sizzler
franchisees, and 59 surplus properties.
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In addition, the Company-operated 43 Sizzler restaurants and franchised another
40 in Australia and New Zealand, joint ventured or franchised a total of 47
Sizzler restaurants in 7 other foreign countries and two U.S. territories and
operated 92 KFC restaurants in Queensland, Australia. The International real
estate holdings include 22 Sizzler properties and 54 KFC properties in Australia
and one Sizzler property in New Zealand.
The number of restaurants in operation by the Company and its franchisees at
June 3, 1996 and the close of each of the three fiscal years ended April 30,
1996, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
June 3, 1996 April 30, 1996 April 30, 1995 April 30, 1994
<S> <C> <C> <C> <C>
Domestic Sizzler Restaurants
Company-operated 87 199 199 223
Franchised 230 235 275 306
International Restaurants
Company-operated Sizzler 43 43 47 46
Franchised Sizzler 87 87 79 73
KFC 93 92 88 82
The Italian Oven 1 1 0 0
Buffalo Ranch Restaurants 0 4 8 2
</TABLE>
Only the domestic organization is involved in the Chapter 11 filing. The assets
and operations of the international division, which is profitable, are not
subject to the U.S. Chapter 11 proceedings.
3
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INFORMATION BY GEOGRAPHIC AREA AND INDUSTRY SEGMENT.
The Company is engaged in only one industry segment -- restaurant operations.
See Note 8 of "Notes to Consolidated Financial Statements" which are included in
this report for financial information relating to the Company's foreign
operations.
SIZZLER RESTAURANTS.
Management participates in the mid-scale dining market both in the U.S. and
internationally. Presently, the international operation is operating
profitability and imparts significant value to the Company without regard to
U.S. operations. Domestic operations have produced losses on declining revenues
for the last four years. Closing of underperforming domestic restaurants and
planned repositioning of remaining U.S. restaurants are intended to reverse
sales declines and return the U.S. business to profitability.
At April 30, 1996, the Company-operated 243 Sizzler restaurants worldwide and
131 as of June 3, 1996. Sizzler restaurants feature a selection of grilled
steak, chicken and seafood entrees, sandwiches and specialty platters, as well
as a fresh fruit and salad bar in a family dining environment. The Company is
presently in the midst of a repositioning which is expected to change some of
these elements. Sizzler restaurants follow a semi-service system, whereby
guests place their order and pay upon entering the restaurant and then are
seated. This system combines the benefits of convenience with the experience of
a full service restaurant.
The Company also licenses another 320 Sizzler restaurants worldwide. Single
unit franchise agreements for a Sizzler restaurant generally provide for a
franchise term of 20 years, payment of an initial franchise fee and payment of
royalties equal to a percentage of gross sales. Franchise agreements that
relate to restaurants developed pursuant to multi-unit development agreements
and restaurants owned by multi-unit operators may be subject to more favorable
financial terms. Franchisees are also generally required to contribute a
percentage of their gross sales to national and regional cooperative advertising
funds. Usually, the Company-operated and franchised restaurants operate in the
same manner.
Sizzler restaurants are typically free-standing buildings with an average size
of 5,000 to 6,000 square feet containing seating for 150 to 200 guests. Sizzler
restaurants are open seven days a week mostly for lunch and dinner. During
fiscal 1996, dinner sales accounted for approximately 63 percent of revenues,
and lunch accounted for most of the remainder.
During the fourth quarter of fiscal 1996, the Company recorded a $108.9 million
restructuring charge. The restructuring charge included predominantly non-cash
write-offs of assets and related disposition costs associated with the closure
of 112 Sizzler and four Buffalo Ranch restaurants in the United States.
Overall, the restructuring charge reflects the Company's intent to reposition
Sizzler restaurants to reverse a decline in U.S. sales. The Sizzler American
Grill is the repositioning concept now in its fourth test market where the
company is fine tuning marketing as well as menu, pricing and other elements of
the dining experience. The concept includes a) new signage and a new stylized
logo, b) new, contemporary menu items, c) new serving and training programs, and
d) new marketing campaigns.
INTERNATIONAL OPERATIONS.
International operations, which are held by Company subsidiaries that are not
part of the Chapter 11 proceedings, continue to make an important contribution
to consolidated results. The largest single international business is the
Company's operation of 92 KFC restaurants in Queensland, Australia. For the year
ended April 30, 1996, this business reported operating profits of $8,365,000.
4
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At April 30, 1996, the Company operated 41 Sizzler restaurants in Australia and
two in New Zealand. In addition, the Company franchised another 40 Sizzler
restaurants in Australia, and a total of 45 restaurants in Puerto Rico, Guam,
Japan, Taiwan, Indonesia, Guatemala, South Korea and Thailand. The Company owns
a 50% interest in a joint venture operating two Sizzler restaurants in
Singapore. The combined contribution of these 128 international restaurants to
operating profits was $12,357,000 for the year ended April 30, 1996.
The Company has entered into agreements calling for further development of
Sizzler restaurants in Australia, Japan, Singapore, Thailand, Taiwan, Indonesia,
South Korea, Guatemala and Puerto Rico.
In fiscal 1995, the Company announced a joint agreement for Sizzler
International to develop The Italian Oven(R) restaurants in Australia. These
full-service, Italian-oriented family restaurants feature a specialized pizza
and pasta menu and wood-fired open hearth brick ovens. At April 30, 1996, the
Company operated one The Italian Oven restaurant.
BUFFALO RANCH STEAKHOUSE.
At April 30, 1996, the Company operated four full-service restaurants called
Buffalo Ranch Steakhouse in California. During fiscal 1996, two restaurants
were closed in Illinois, one in Arizona and another in Oregon. Due to
financial constraints and the need to focus all resources on the remaining
Sizzler restaurants, all four Buffalo Ranch Steakhouse restaurants were closed
as part of the Company's restructuring plan.
SUPPLIERS.
The Company has entered into distribution arrangements with a number of
suppliers of food and other products used in its restaurants. From time to time
the Company makes advance purchases of selected commodity items to minimize
fluctuation of costs. Although wholesale commodity prices are subject to change
due to various economic conditions, the Company has in the past been able to
obtain sufficient supplies to carry on its businesses and the Company believes
that it will be able to do so in the future.
The Chapter 11 proceeding has had no material effect on the delivery of goods
and services.
TRADEMARKS AND SERVICE MARKS.
The Company owns certain registered trademarks, trade names and service marks
domestically and internationally which are of material importance to the
business to be conducted by Sizzler. These include the trademarks of SIZZLER(R),
SIZZLER AMERICAN GRILL(R) and others. Sizzler licenses the right to use certain
trademarks, trade names and service marks to its franchisees. The Company has
licensed the right to use certain trademarks, trade names and service marks
which relate to the operation of KFC(R) and The Italian Oven(R) restaurants in
Australia pursuant to franchise agreements with the respective franchisors.
RESEARCH AND DEVELOPMENT.
The Company continuously evaluates its menus and restaurant concepts. New
products are developed by the Company's research staff in conjunction with
outside consultants and food suppliers. Before introduction, new menu items are
rigorously tested and evaluated for guest acceptance, quality and profitability.
The Company intends to maintain its ongoing research programs relating to the
development of new food products and evaluation of marketing activities. The
costs associated with such research activities are not material to the Company.
5
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SEASONALITY.
The Company's operations are subject to some seasonal fluctuation with the
summer months being slightly stronger followed by the spring months. The fall
and winter seasons are weaker due to climatic and other conditions which
negatively impact guest dining patterns, although the overall effect of
seasonality is moderated to a limited extent by the fact that the Australian
seasons fall in reverse of the seasons in the United States.
WORKING CAPITAL REQUIREMENTS.
The working capital requirements of the Company generally do not fluctuate
significantly during the year because revenues consist primarily of cash sales
and there is a rapid turnover of inventory. The Company does not carry
significant inventories of beef, poultry, seafood, produce or other food
products. Food products are ordered and delivered two or more times per week to
individual restaurants. Individual restaurants maintain supplies adequate to
support their needs for two to five days.
COMPETITION.
The restaurant business is highly competitive and is affected by changes in the
public's eating habits and preferences, demographic and sociocultural patterns,
and local and national economic conditions affecting consumer spending habits.
The restaurants operated by the Company compete directly and indirectly with a
large number of national and regional restaurant operations, as well as with
locally owned restaurants and numerous other establishments that offer
moderately priced steak, chicken, salads and other menu items to the public.
The Company relies on innovative concept development, marketing techniques and
promotions and competes in terms of perceived value, the variety and quality of
menu items, service, and price. There are other companies engaged in restaurant
operations and franchising programs similar to the Company's that have
substantially greater financial resources and a higher volume of sales than the
Company.
ENVIRONMENTAL MATTERS.
Federal and state environmental regulations have not to date had a material
effect on the Company, but more stringent and varied requirements of local
government bodies with respect to zoning, land use and environmental factors
sometimes delay construction of new restaurants or remodels of existing
restaurants.
EMPLOYEES.
The Company employed approximately 8,200 persons at April 30, 1996, and 3,800 at
June 3, 1996, in the United States and approximately 6,200 persons in Australia.
Labor relations with employees have traditionally been good. As is true most
with most restaurant operations, the majority of the Company's employees work
part time.
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, wages, 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.
6
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RISKS ATTENDANT TO FOREIGN OPERATIONS.
The Company operates Sizzler restaurants in Australia and New Zealand, as well
as KFC restaurants in Queensland, Australia. The Company also licenses the
right to operate Sizzler restaurants to others in a number of countries and U.S.
territories. Possible risks attendant to such operations include fluctuations
in currency exchange rates, higher rates of inflation and possible changes in
tax rates and structures. The Company is not able to predict the likelihood of
or degree of future changes in exchange rates, rates of inflation or tax rates
and structures.
ITEM 2. PROPERTIES.
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The Company owns in fee a 100,000 square foot office building in Los Angeles,
used for its executive offices, and the land upon which the building is located.
Sizzler restaurants are principally free-standing buildings with an average size
of 5,000 to 6,000 square feet. The Company owns in fee a total of 64 operating
Sizzler restaurant properties in the United States, Australia and New Zealand.
The KFC restaurants operated by the Company in Australia are principally free-
standing buildings with floor areas ranging from 1,875 to 2,500 square feet.
The Company owns in fee 54 KFC properties. In addition, the Company owns one
location that is leased to a Sizzler franchisee, 17 surplus properties in the
U.S. and one in Australia.
Approximately 65 percent of the restaurant locations operated by the Company are
leased. The leases generally are for primary terms of 15 to 20 years, with two
or three renewal options of five years each, and expire on various dates until
the year 2012. The Company has the right to extend many of these leases. The
Company has the option under some of these leases to purchase the facilities at
the end of the lease terms for varying amounts as specified in the respective
lease agreements. As part of the Company's restructuring strategy, the
Company's objective is to eliminate the financial burden from all non-performing
restaurant leases.
ITEM 3. LEGAL PROCEEDINGS.
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BANKRUPTCY OR RECEIVERSHIP.
The Company and certain domestic subsidiaries, are debtors-in-possession subject
to the supervision of the U.S. Bankruptcy Court of the Central District of
California under Chapter 11 of the federal Bankruptcy Code. The bankruptcy
proceedings commenced on June 2, 1996. The cases involving the Company and its
debtor subsidiaries are jointly administered under Case No. 96-16075AG.
There are additional legal proceedings pending against the Company that involve
ordinary and routine claims that are inherent to the business. None of these
pending legal proceedings to which the Company or any of its subsidiaries is a
party is considered material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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Not Applicable.
7
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PART II.
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ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
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MARKET INFORMATION
________________________________________________________________________________
The Company's common stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "SZ". As of June 30, 1996, the latest practical date, the
approximate number of recorded holders of the Company's common stock was 2,986.
The high and low sales prices for a share of the Company's common stock as
reported on the NYSE, by quarter, for the past two fiscal years are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter $7.125 $5.500 $7.125 $5.500
Second Quarter $7.125 $4.750 $7.125 $5.000
Third Quarter $5.250 $3.000 $6.500 $5.125
Fourth Quarter $3.875 $2.625 $6.500 $5.125
</TABLE>
COMMON STOCK DIVIDENDS
________________________________________________________________________________
The Company and, prior to the fiscal year 1991 reorganization, Collins Foods
International, Inc., have paid cash dividends without interruption up to the
third quarter of fiscal 1996. Future dividends will depend on a number of
factors, including earnings, financial position, capital requirements and other
relevant factors.
Cash dividends per share paid quarterly on common stock for the past two fiscal
years are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
First Quarter $0.04 $0.04
Second Quarter $0.04 $0.04
Third Quarter $0.00 $0.04
Fourth Quarter $0.00 $0.04
</TABLE>
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ITEM 6. SELECTED FINANCIAL DATA.
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The following table sets forth consolidated financial data with respect to the
Company and should be read in conjunction with Consolidated Financial
Statements, including Notes thereto, which are included elsewhere herein.
<TABLE>
<CAPTION>
For the Years Ended April 30, 1996 1995 1994 1993 1992
- ----------------------------- ---- ---- ---- ---- ----
(in millions, except per share data)
<S> <C> <C> <C> <C> <C>
Systemwide Sales $ 875.7 $937.7 $990.6 $1,050.3 $1,121.4
Revenues 436.2 462.2 487.5 504.2 543.2
Net Income (Loss) (138.5) (c) 6.7 (94.9) (b) (9.5) (a) 22.1
Net Income (Loss) per common and common
equivalent share (4.99) 0.24 (3.26) (b) (0.33) (a) 0.75
Total Assets 178.5 276.7 277.5 413.0 443.2
Long-Term Debt 7.0 (d) 17.1 20.9 20.6 16.8
Total Stockholders' Investment 43.5 177.1 179.9 279.7 298.3
Dividends Paid Per Share 0.08 0.16 0.16 0.16 0.16
</TABLE>
(a) Includes a provision of an after-tax reserve of $12.2 million or $.42 cents
per share, primarily related to the closure of under-performing Sizzler
restaurants, and a $2.8 million charge to income or $0.10 per share, net of
tax, related to costs associated with two franchised restaurants in Southern
Oregon.
(b) Includes a provision of an after-tax reserve of $98.9 million or $3.40 per
share, primarily related to the closure of under-performing Sizzler
restaurants and the write-off of certain intangible assets. See Note 2.
(c) Includes a provision of an after-tax charge of $108.9 million or $3.92 per
share, primarily related to the costs and asset write downs associated with
restaurant closings and re-organization. In addition to the restructuring
charge, the Company recorded a charge of $12.8 million or $0.46 per share
related to the adoption of SFAS 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of", as of the end of
the fourth quarter of fiscal year 1996. See Notes 2 and 3.
(d) This total does not include line of credit borrowings totaling $27.0 million
which, as a result of defaults are presented as current liabilities in the
consolidated financial statements. See Note 5.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS.
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RESULTS OF OPERATIONS
CONSOLIDATED SUMMARY
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In the fourth quarter of fiscal 1996,the Company recorded a restructuring charge
of $108.9 million. The restructuring costs include predominantly non-cash write-
offs of assets and related disposition costs associated with the closure of 116
restaurants in the United States. Overall, the restructuring charge reflects the
efforts to redeploy capital to those core markets that are expected to yield
returns consistent with management's expectations and objectives, and to
eliminate the Company's investment in non-performing assets.
The non-recurring items consist of the following (in thousands):
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Market and Restaurant Closures $ 92,100
Closure of Regional Office and Reduction of
Corporate Headquarters 8,800
Guarantee of Advertising Co-op Obligations 3,500
Franchise Receivables 2,500
Severance Payments 2,000
--------
Total $108,900
========
</TABLE>
At April 30, 1996, the Company recorded a chargeof $92.1 million related to the
disposition of the 116 restaurants closed on June 3, 1996, and other surplus
properties. The non-cash portion of the remaining reserves is 90.7 million and
relates to the write-off of owned property, leasehold improvements and related
equipment.
. $8.8 million was reserved for the closureof certain regional offices and the
write down of building improvements associate jwith corporate headquarter
reductions,
. $3.5 million was reserved for the guarantee of past due franchisee Co-op
advertising obligations,
. $2.5 million in additional reserves for doubtful franchisee receivables, and
. $2.0 million of severance for restaurant management and administrative staff
displaced as part of the restructure.
In addition to the restructuring charge, the consolidated financials reflect an
additional noncash charge of $12.8 million or $0.46 per share related to the
adoption of SFAS 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of". As the initial charge was based upon
estimated restaurant cash flow forecasts requiring considerable management
judgment, actual results could vary significantly from these estimates.
Therefore, future charges are reasonably possible although not currently
estimable. See Note 2.
The following analysis of financial condition and results of operations excludes
the previously described charges and reserves, unless otherwise specified.
The Company's revenues are generated from four primary sources:
1. domestic Company-operated restaurant sales,
2. domestic franchise revenues (including franchise fees, royalties and rental
income),
3. international Company-operated restaurant sales, and
4. international franchised restaurant revenues.
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The addition or closure of restaurants, both Company and franchised, and the
sales volume of comparable restaurants (those restaurants open more than one
year) are important factors to consider in evaluating the Company's results.
Revenues totaled $436.2 million in fiscal 1996, a decrease of $26.0 million or
5.6 percent from 1995, compared with a decrease of $25.3 million or 5.2 percent
in fiscal 1995. This decline is largely attributable to a net reduction of 35
Company-operated and franchised Sizzler restaurants, as well as a decline in
restaurant sales of existing restaurants in the U.S. and Australia. The decline
in Sizzler worldwide Company-operated restaurant revenues were offset by the
opening of four KFC restaurants and the first The Italian Oven restaurant in
Australia. In addition, four Buffalo Ranch Steakhouse restaurants were closed
during the year, two in Illinois, one in Arizona and one in Oregon. Domestic
revenues declined in fiscal 1996 by $21.2 million or 7.7 percent from the prior
year. During the year, the Company acquired 17 Sizzler restaurants from
franchisees and closed another 17 Sizzler restaurants domestically. The
domestic franchise system experienced a net reduction of 40 restaurants.
Internationally, the Company closed three Company-operated Sizzler restaurants
in Canada, added a net of eight franchised Sizzler restaurants and four KFC
restaurants during the fiscal year. International revenues decreased by $4.7
million or 2.5 percent due primarily to significantly lower average weekly sales
and guest counts at the Australian Company-operated and franchised Sizzler
restaurants.
Operating losses before interest and taxes were ($10.5) million in fiscal 1996,
an earnings decrease of $21.9 million from 1995. Losses before interest and
taxes from domestic operations showed a year-to-year increase of ($12.5) million
from a loss of ($10.5) million in fiscal 1995 to a loss of ($23.0) million if
fiscal 1996, primarily reflecting the lower average Company-operated and
franchised restaurant sales, compounded by severe winter storms, and higher food
and labor costs related to the Sizzler American Grill development. Earnings
before interest and taxes from international operations showed a 43.2 percent or
($9.4) million decrease over last year reflecting a 10.5 percent decrease in
average restaurant sales.
U.S. OPERATIONS
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Domestic operations generated approximately 58.0 percent of consolidated
revenues in fiscal 1996. Revenues decreased by 7.7 percent or $21.2 million to
$253.8 million when compared to the prior year. The reduction in revenues was
attributed to a systemwide decline in average domestic restaurant sales, the
impact of severe winter storms and a decrease in franchised restaurants.
Excluding franchise revenues, results from the Company-operated restaurants
reflect a 6 percent decrease in sales, or $15.2 million, to $235.7 million from
the prior year. On a comparable restaurant basis, for those restaurants open
more than one year, average sales per Sizzler fell 7.4 percent to approximately
$1.0 million per year, average guests per restaurant were 10.7 percent lower and
the average check increased 3.6 percent over the prior year.
In fiscal 1995, revenues from domestic operations decreased $33.2 million to
$274.9 million when compared to the prior year. This decrease was due to the
decline in comparable restaurant sales, as well as a net reduction of 24
Company-operated restaurants. Earnings before interest and taxes from domestic
operations increased $4.9 million compared to fiscal 1994 to a loss of $13.3
million, reflecting declining labor and related costs. Lower labor costs were
attributed to enhanced labor guidelines and controls. Labor costs declined 1.4
percentage points, as a percentage of revenues.
DOMESTIC FRANCHISE
- ------------------
In 1996, domestic franchise revenues, including franchise fees, royalties and
rental income, accounted for 1.9 percent of consolidated revenues. Revenues
declined $1.8 million or 18.4 percent versus fiscal 1995 and earnings before
interest and taxes decreased $1.3 million or 47.1 percent when compared to the
prior year. Lower revenue is primarily the result of the net reduction of 40
franchised restaurants and a decline of 4.8 percent in average sales per
franchised restaurant. During fiscal 1996, two new franchised restaurants were
11
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opened, 17 were acquired by the Company and 25 were closed for a net reduction
of 40 restaurants. The decline in earnings primarily reflects lower average
restaurant revenues. The repositioning strategy previously outlined is expected
to also improve sales and profits for domestic franchisees. At April 30, 1996,
there were 235 domestic franchised restaurants in operation.
In 1995, domestic franchise revenues accounted for 2.2 percent of consolidated
revenues. Revenues decreased $1.7 million or 14.3 percent versus fiscal 1994
and earnings before interest and taxes decreased $1.0 million or 25.2 percent
when compared to the prior year. The lower revenues resulted from the net
reduction of 31 franchised restaurants and a decline of 11.2 percent in average
sales per domestic franchised restaurant. The reduction in earnings was
attributable to the lower average sales per domestic franchise restaurant. At
April 30, 1995, the number of domestic franchised restaurants was 275.
INTERNATIONAL OPERATIONS
- ------------------------
International operations generated approximately 42.0 percent of consolidated
revenues in fiscal 1996. Revenues decreased by 2.5 percent or $4.7 million, to
$183.3 million when compared to the prior year. This reduction in revenues is
primarily the result of closing three restaurants in Canada, as well as a 10.5%
decline in average Sizzler restaurant sales in Australia, partially offset by
the addition of four KFC restaurants and one The Italian Oven restaurant.
Earnings before interest and taxes decreased $9.4 million to $12.4 million or
43.2 percent during fiscal 1996. At April 30, 1996, the international operation
included 130 Company-operated, joint ventured, and franchised Sizzler
restaurants, 92 KFC restaurants and one The Italian Oven restaurant.
Excluding franchise revenues, results from the Company-operated Sizzler
restaurants reflect a 12.5 percent decrease in sales, or $11.6 million, to $81.5
million from the prior fiscal year. This decrease reflects lower average
restaurant sales. On a comparative restaurant basis, sales in Australian
dollars and guest counts decreased by 10.5 percent and 14.3 percent,
respectively, from levels of the previous year. The average guest check was up
4.5 percent, reflecting a menu price increase during the year. At April 30,
1996, the Company-operated 43 Sizzler restaurants versus 47 a year ago.
The Company's international franchise revenues decreased $776,000 or 16.9
percent to $3.8 million in 1996 versus 1995, due primarily to lower average
restaurant sales in Australia, offset by a net increase of 8 restaurants in the
Asian/Pacific region and Puerto Rico. At April 30, 1996, there were 85
international franchised restaurants and two joint ventured restaurants in 9
countries and two U.S. territories, versus 77 restaurants in 10 countries and
two U.S. territories at April 30, 1995. During fiscal 1996, additional
franchised restaurants were opened in Japan, Puerto Rico, Thailand, South Korea
and Australia.
Sales from the Company's KFC restaurants increased $6.9 million to $97.2 million
or 7.6 percent when compared to the prior year. This increase reflects the
addition of a breakfast day-part and additional restaurants. On a comparative
restaurant basis, average restaurant sales, in Australian dollars, decreased 1.2
percent and the average guest check decreased 10.2 percent, however, guest
counts increased 0.4 percent, compared to fiscal 1995. At April 30, 1996, the
number of KFC restaurants was 92 versus 88 last year.
In fiscal 1995, the Company's international operations accounted for
approximately 40.7 percent of consolidated revenues. The net addition of one
Company-operated Sizzler restaurant, six franchised Sizzler restaurants and six
KFC restaurants contributed to an increase in revenues of $8.6 million to $188.0
million, up 4.8 percent from fiscal 1994.
Excluding franchise revenues, Company-operated Sizzler restaurants recorded a
1.7 percent or $1.5 million improvement in sales to $93.1 million in fiscal
1995, primarily as a result of the increase in the Australian dollar exchange
rate offset by lower average restaurant sales. On a comparative restaurant
basis, sales in Australian dollars and guest counts decreased by 7.4 percent and
8.4 percent, respectively, from levels of the pervious year. The average guest
check was up 1.1 percent, reflecting a menu price increase during the year. At
April 30, 1995, the Company-operated 47 Sizzler restaurants versus 46 at April
30, 1994.
12
<PAGE>
International franchise revenues increased $65,000 or 1.4 percent to $4.6
million in 1995 versus 1994, due primarily to new restaurant openings in the
Asian/Pacific region. At April 30, 1995, there were 77 International franchised
restaurants in 10 countries, and two U.S. territories versus 73 restaurants in
eight countries and two U.S. territories at April 30, 1994.
Fiscal 1995 sales of $90.3 million from the Company's KFC restaurants increased
$7.5 million or 9.1 percent when compared to the prior year. On a comparative
restaurant basis, average restaurant sales increased 9.2 percent, however, guest
counts declined 2.0 percent compared to fiscal 1994. At April 30, 1995, the
number of KFC restaurants was 88 versus 82 last year.
Earnings before interest and taxes increased $0.4 million to $21.8 million or
2.0 percent during fiscal 1995.
CONSOLIDATED COSTS AND EXPENSES
- -------------------------------
Consolidated costs and expenses, as a percentage of revenues, were 5.0 percent
higher in fiscal 1996. Food costs, operating labor and advertising expenses
increased by 0.4, 1.3 and 0.6 percentage points, as a percentage of revenues,
respectively, related to the development of the Sizzler American Grill concept
and lower sales levels. Occupancy costs and general and administrative
expenses, as a percentage of total revenues, increased by 0.6 and 0.8
percentage points, also, as a result of the relatively fixed nature of these
costs at lower sales levels.
Investment income decreased by $0.3 million in 1996 and increased $0.1 million
in 1995. Interest expense also increased in 1996 by $0.9 million or 0.2
percent, as a percentage of revenues. The decrease in investment income and
increase in interest expense are primarily the result of less cash available for
investment and higher borrowings during the fiscal year. In fiscal 1995,
investment income and interest expense both increased by $0.1 million and $0.3
million, respectively, primarily as a result of higher interest rates.
During fiscal 1996, the Company entered into foreign exchange contracts to hedge
exposure to the Australian dollar exchange rate. The effect of the contracts
was not material to the results of operations. One foreign exchange contract
was in place at fiscal year end.
In fiscal 1995, consolidated costs and expenses, as a percentage of revenues,
were 1.0 percent lower primarily due to decreases in payroll and related
expenses and depreciation and amortization expense. Enhanced labor guidelines
and controls resulted in lower labor costs for the year and depreciation expense
decreased due to the closure of under-performing restaurants. Offsetting these
decreases were increases in food costs and occupancy costs, both increased 0.3
percent, as a percentage of revenues.
The provision for income taxes, as a percentage of income before income taxes,
was (3.6) percent in fiscal 1996 versus 39.8 percent in fiscal 1995. (See Note
4 of Notes to Consolidated Financial Statements).
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL
- ---------------
The Company's principal source of working capital is cash provided by operations
that amounted to $13.4 million in fiscal 1996 and $39.4 million in fiscal 1995.
The Company has historically maintained a relatively low current ratio, 0.4 at
fiscal year-end 1996 and 0.9 in 1995. Furthermore, the Company's working
capital is generally in a deficit position because, like most restaurant
businesses, substantially all sales are for cash, while credit is received from
trade suppliers. Cash has been used for the construction of new restaurants,
the remodeling or refurbishment of existing restaurants, dividends, repurchase
of common stock and retirement of long-term debt.
13
<PAGE>
The Company began to experience liquidity problems in 1996, due primarily to
continued sales declines in the Company's U.S. restaurants, the impact of severe
winter storms, higher costs associated with the development of the Sizzler
American Grill repositioning, and higher net interest expense payments. On June
2, 1996, the Company commenced Chapter 11 proceedings and became debtors-in-
possession subject to the supervision of the U.S. Bankruptcy Court.
At April 30, 1996, the working capital deficit was $34.9 million compared with a
deficit of $5.4 million at the end of the prior year. The decrease primarily
reflects the $27 million outstanding line of credit balance that has been
presented as a current liability in the consolidated financial statements due to
the Company's non-compliance with its financial covenants. At April 30, 1995,
working capital was a deficit of $5.4 million compared to a deficit of $5.6
million at the end of the prior year. The decrease primarily reflects the cash
provided by operating activities less capital expenditures of $13.8, dividend
payments of $4.5 million and the repurchase of common stock of $6.9 million.
TOTAL ASSETS / CAPITAL EXPENDITURES
- -----------------------------------
Total assets decreased $76.7 million or 27.7 percent in fiscal 1996, as a result
of the market and restaurant closures and related provisions. Property and
equipment represented 75.7 percent of total assets at the end of fiscal 1996.
In fiscal 1995, total assets decreased $0.8 million or 0.3 percent from fiscal
1994. Property and equipment represented 79.6 percent of total assets at the end
of fiscal 1995.
Capital expenditures were $24.4 million in fiscal 1996, which includes new
restaurant construction and acquisitions of $6.9 million, and remodels of $17.5
million. The Company anticipates the continual growth of its international
operations through additional investment in Company-operated restaurants, joint
ventures and the development of the franchise system. The international
restaurant base has expanded, as demonstrated by the net increase of five
Sizzler restaurants, four KFC restaurants and the opening of the first The
Italian Oven restaurant during fiscal year 1996. It is anticipated that between
five and ten restaurants will be added to the international operation in fiscal
1997. The Italian Oven restaurants are full-service, Italian-oriented family
restaurants, featuring a specialized pizza and pasta menu and wood-fired open
hearth brick ovens.
Domestically, no new unit growth is planned in fiscal 1997. Instead, the
Company will focus on a repositioning program.
It is planned that the Company's capital expenditures in fiscal 1997 will be
approximately $12.6 million, of which $7.0 million will be used to develop the
Asian/Pacific region and $3.6 million of investment in domestic operations.
There are no material commitments for capital expenditures other than are
necessary to efficiently operate and to expand existing businesses.
DEBT
- ----
The Company strives to minimize borrowing costs while maintaining the
flexibility to meet its growth objectives. To accomplish these goals, Sizzler
primarily utilizes cash from operations to finance expansion while maintaining
and utilizing lines of credit when appropriate.
At April 30, 1996, debt was $35.2 million, an increase of $17.5 million from the
prior year. The $35.2 million in debt was comprised primarily of $27.0 million
in outstanding borrowings on the Company's revolving line of credit. Debt as a
percentage of invested capital was 11.8 percent at April 30, 1996 and 8.3
percent at April 30, 1995.
At April 30, 1995, long-term debt was $17.1 million, a decrease of $3.8 million
from the prior year. Long-term debt as a percentage of invested capital was 8.3
percent at April 30, 1995 and 9.7 percent at April 30, 1994.
14
<PAGE>
During fiscal 1995, the Company finalized a new $50.0 million revolving line of
credit and standby letter of credit facility with a $35.0 million borrowing
sublimit. The Company's loan agreement required maintenance of specified
financial ratios and provide certain restrictions on additional borrowings,
investments, repurchase of the Company's stock and availability of retained
earnings for payment of cash dividends. During fiscal 1996, the Company began
to experience liquidity problems resulting from declining restaurant sales and
higher operating costs which caused the Company to not meet the required debt
coverage ratio for the fiscal quarter ended February 4, 1996, for its revolving
line of credit covenants. At April 30, 1996, as a result of the Company's non-
compliance with its line of credit covenants, no additional amounts were
available under this line of credit.
As a result of the Chapter 11 cases filed on June 2, 1996, and the related
restructuring strategy the Company relies primarily on internally generated
funds, supplemented, if required, by working capital advances under a new
Debtor-In-Possession line of credit facility, totaling $15.0 million on a
revolving loan basis, for its liquidity. Management believes that funds
available from these sources will be sufficient to meet the Company's working
capital, debt service related to the debtor in possession credit facility and
capital expenditure requirements.
On May 10, 1996, the beneficiary of the Company's $11.3 million letter of credit
drew down on the available balances totaling $11.3 million. The letter of
credit was issued to provide security for future amounts payable by the Company
and its subsidiaries under its captive insurance company, CFI Insurers, Ltd.
INFLATION
- ---------
Increases in interest rates and the costs of labor, food and construction can
significantly affect the Company's operations. Management believes that the
current practices of maintaining adequate operating margins through a
combination of menu price increases and cost controls, careful management of
working capital and evaluation of property and equipment needs are its most
effective tools for coping with inflation.
OTHER
- -----
The Company is aware of industry concerns regarding the potential impact of
possible further increases in the minimum wage, the increased marketing of
prepared foods by grocery and convenience stores, customer resistance to
increases in menu prices, the growth of home delivery of prepared foods,
increased concerns over the nutritional value of foods and compliance with
existing or proposed health and safety legislation and other similar
contingencies. The Company is unable to predict the possible impact of such
factors on its business. In the past, the Company has been able to address
similar types of changes in the business climate and been able to pass any
associated higher costs along to its guests, because the changes have generally
affected all restaurant companies.
15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY.
- ------------------------------------------------
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands of dollars, except per share data)
________________________________________________________________________________
The following tables show comparative quarterly financial results during the
past two fiscal years. The first, second and fourth quarters normally include
twelve weeks of operations whereas the third fiscal quarter includes sixteen
weeks of operations.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1996 QUARTER QUARTER QUARTER QUARTER
- ----------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $105,501 $102,220 $128,428 $ 100,045
Earnings (Loss) before interest and taxes 1,401 676 (7,031) (127,291)
Net Income (Loss) 436 168 (4,569) (134,493)
Net Income (Loss) per Common and Common
Equivalent Share 0.02 0.01 (0.16) (4.84)
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1995 QUARTER QUARTER QUARTER QUARTER
- ----------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $111,922 $108,168 $136,770 $ 105,291
Earnings (Loss) before interest and taxes 4,682 3,800 467 2,309
Net Income (Loss) 2,777 2,265 267 1,386
Net Income (Loss) per Common and Common
Equivalent Share 0.10 0.08 0.01 0.05
</TABLE>
ITEM 9. FINANCIAL STATEMENTS AND SUPPLEMENTARY.
- ------------------------------------------------
None.
16
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and Stockholders of Sizzler International, Inc.:
We have audited the accompanying consolidated balance sheets of Sizzler
International, Inc. ( a Delaware corporation) and subsidiaries as of April 30,
1996 and 1995, and the related consolidated statements of operations,
stockholders' investment and cash flows for each of the three years in the
period ended April 30, 1996. These financial statements and schedules referred
to below are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sizzler International, Inc. and
subsidiaries as of April 30, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended April 30,
1996 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to
the consolidated financial statements, the Company and certain U.S. subsidiaries
filed for Chapter 11 bankruptcy protection on June 2, 1996. The bankruptcy
filing raises substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 2. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules listed in the
index of financial statement schedule as Part IV, Item 14 (a) (2) are presented
for purposes of complying with the Securities and Exchange Commissions rules and
are not part of the basic consolidated financial statements. These schedules
have been subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
Arthur Andersen LLP
Los Angeles, California
July 15, 1996
17
<PAGE>
SIZZLER INTERNATIONAL, INC. AND
SUBSIDIARIES
Consolidated Statements of Operations
(In thousands except per share data)
<TABLE>
<CAPTION>
For the Years Ended April 30, 1996 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Restaurants $ 424,218 $447,547 $ 471,290
Franchise operations 11,976 14,604 16,214
- --------------------------------------------------------------------------------
Total revenues 436,194 462,151 487,504
- --------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of sales 158,587 163,202 170,480
Labor and related expenses 131,865 133,226 143,413
Other operating expenses 97,870 95,824 99,287
Depreciation and amortization 26,164 28,309 33,122
Non-recurring items 108,883 - 137,500
Impairment of long-lived assets 12,838 - -
General and administrative expenses 32,232 30,332 34,289
Interest expense 2,343 1,452 1,169
Investment income (991) (1,314) (1,212)
- --------------------------------------------------------------------------------
Total costs and expenses 569,791 451,031 618,048
- --------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES (133,597) 11,120 (130,544)
PROVISION (BENEFIT) FOR INCOME TAXES 4,861 4,425 (35,651)
- --------------------------------------------------------------------------------
NET INCOME (LOSS) $(138,458) $ 6,695 $ (94,893)
================================================================================
Net income (loss) per common and common
equivalent share $ (4.99) $ .24 $ (3.26)
================================================================================
Average common and common equivalent
shares outstanding 27,773 28,272 29,071
================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
18
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
April 30, 1996 1995
- -----------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,216 $ 12,220
Receivables, net of reserves of
$9,441 in 1996 and $5,799 in 1995 5,026 9,035
Inventories 6,477 9,732
Prepaid expenses and other current
assets 2,736 2,988
- ------------------------------------------------------------------
Total current assets 23,455 33,975
- ------------------------------------------------------------------
PROPERTY AND EQUIPMENT, AT COST
Land 36,154 51,852
Buildings and leasehold improvements 121,793 202,653
Equipment 75,330 123,984
Capital leases 9,168 9,578
Construction in progress 3,616 4,681
- ------------------------------------------------------------------
246,061 392,748
Less - Accumulated depreciation and
amortization 110,830 172,446
- ------------------------------------------------------------------
Total property and equipment, net 135,231 220,302
- ------------------------------------------------------------------
LONG-TERM NOTES RECEIVABLE, NET OF
RESERVES OF $1,200 IN 1996 AND
$2,349 IN 1995 1,128 1,421
INTANGIBLE ASSETS, NET OF ACCUMULATED
AMORTIZATION OF $610 IN 1996 AND
$3,780 IN 1995 996 8,349
OTHER ASSETS, NET OF ACCUMULATED
AMORTIZATION AND RESERVES OF $24,191
IN 1996 AND $31,190 IN 1995 17,737 12,607
- ------------------------------------------------------------------
Total assets $ 178,547 $276,654
--------- --------
</TABLE>
19
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
April 30, 1996 1995
- ------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt $ 28,196 $ 741
Accounts payable 14,390 16,303
Other current liabilities 17,755 19,950
Income taxes payable 2,844 2,423
- ------------------------------------------------------------------
Total current liabilities 63,185 39,417
- ------------------------------------------------------------------
LONG-TERM DEBT 7,041 17,100
DEFERRED INCOME TAXES 9,032 10,622
OTHER LIABILITIES 55,822 32,445
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' INVESTMENT
Preferred stock, authorized 1,000,000
shares, 5 par value; no shares issued - -
Common stock, authorized 50,000,000
shares at $.01 par value;
outstanding 27,767,706 in 1996 and
27,775,434 shares in 1995 278 278
Additional paid-in capital 274,221 274,111
Retained earnings (deficit) (235,526) (94,846)
Foreign currency translation
adjustments 4,494 (2,473)
- ------------------------------------------------------------------
Total stockholders' investment 43,467 177,070
- ------------------------------------------------------------------
Total liabilities and stockholders'
investment $ 178,547 $276,654
==================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
20
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (In thousands)
<TABLE>
<CAPTION>
For the Years Ended April 30, 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(138,458) $ 6,695 $(94,893)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 26,165 28,309 33,122
Deferred income taxes (benefit) 103 (1,338) (41,844)
Provision for bad debts 1,390 1,304 3,935
Impairment of long lived assets 12,838 - -
Non-recurring items 108,883 - 137,500
Other 2,450 4,431 2,248
- ------------------------------------------------------------------------------
13,371 39,401 40,068
Changes in operating assets and
liabilities:
Receivables (243) (1,127) (4,023)
Inventories (663) (436) (369)
Prepaid expenses and other current
assets (199) (16) 413
Accounts payable (1,928) 668 (5,695)
Accrued liabilities (6,974) (6,831) (4,791)
Income taxes payable (429) (2,607) (2,269)
- ------------------------------------------------------------------------------
Net cash provided by operating
activities 2,935 29,052 23,334
- ------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to property and equipment (24,437) (13,801) (17,385)
Disposal of property and equipment 1,087 1,007 2,128
Other, net (868) 229 (1,883)
- ------------------------------------------------------------------------------
Net cash used in investing activities (24,218) (12,565) (17,140)
- ------------------------------------------------------------------------------
FINANCING ACTIVITIES
Long-term borrowings 17,000 11,000 14,000
Reduction of long-term debt (1,911) (14,794) (13,736)
Dividends paid to stockholders (2,222) (4,515) (4,653)
Repurchase of common stock - (6,879) (2,013)
Cash surrender value of
corporate-owned life insurance 5,444 - -
Other, net (32) (228) (50)
- ------------------------------------------------------------------------------
Net cash used in financing activities 18,279 (15,416) (6,452)
- ------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents (3,004) 1,071 (258)
- ------------------------------------------------------------------------------
Cash and cash equivalents at beginning
of year 12,220 11,149 11,407
- ------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 9,216 $ 12,220 $ 11,149
==============================================================================
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the year for:
Interest (net of amount capitalized) $ 2,268 $ 1,452 $ 1,169
Income taxes 7,698 7,623 9,905
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
22
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Investment
(In thousands, except share data)
<TABLE>
<CAPTION>
Foreign
Additional Currency
Shares Common Paid-In Retained Translation
Outstanding Stock Capital Earnings Adjustments
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT APRIL 30, 1993 29,125,511 291 282,688 2,520 (5,796)
Stock repurchased (244,500) (2) (2,011)
Restricted stock repurchased (5,837) (50)
Grant of restricted stock 20,000 2
Stock options exercised 1,000 6
Stock issued 180 2
Net loss (94,893)
Dividends paid to stockholders (4,653)
Amortization of restricted stock 306
Cumulative translation adjustments 1,475
- -------------------------------------------------------------------------------------------------------
BALANCE AT APRIL 30, 1994 28,896,354 289 280,943 (97,026) (4,321)
Stock repurchased (1,081,900) (11) (6,868)
Restricted stock repurchased (39,020) (228)
Net income 6,695
Dividends paid to stockholders (4,515)
Amortization of restricted stock 264
Cumulative translation adjustments 1,848
- -------------------------------------------------------------------------------------------------------
BALANCE AT APRIL 30, 1995 27,775,434 278 274,111 (94,846) (2,473)
Restricted stock repurchased (7,728) (32)
Net loss (138,458)
Dividends paid to stockholders (2,222)
Amortization of restricted stock 142
Cumulative translation adjustments 6,967
- -------------------------------------------------------------------------------------------------------
BALANCE AT APRIL 30, 1996 27,767,706 278 274,221 (235,526) 4,494
=======================================================================================================
</TABLE>
23
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
INTRODUCTION. On June 2, 1996, The Company enacted a comprehensive restructuring
strategy designed to return the U.S. operations to profitability. This strategy
included the closure of 116 restaurants in the U.S. and filing for bankruptcy
protection through a Chapter 11 proceeding. On June 2, 1996, the company and
four subsidiaries, Sizzler Restaurants International, Inc., Buffalo Ranch
Steakhouses, Inc., Tenly Enterprises, Inc., and Collins Properties, Inc., became
debtors-in-possession subject to the supervision of the U.S. Bankruptcy Court of
the Central District of California under Chapter 11 of the Federal Bankruptcy
Code. The bankruptcy proceedings began on June 2, 1996.
BASIS OF PRESENTATION. The Consolidated financial statements have been prepared
on a going concern basis, which contemplates continuity of operations,
realization of assets and liquidation of liabilities in the ordinary course of
business. While the Chapter 11 cases are in process, the Company continues in
possession of its properties and operates and manages its business as a debtor-
in-possession pursuant to the Bankruptcy Code.
ACCOUNTING CHANGES. As discussed below and in note 3, in 1996 the Company
adopted Statement of Financial Accounting Standards No. 121 (SFAS 121),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of."
Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation," permits stock compensation cost to be measured using
either the intrinsic value-based method or the fair value-based method. When
adopted in fiscal 1997, the Company intends to continue to use the intrinsic
value-based method and will provide the expanded disclosure required by SFAS
123.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of Sizzler International, Inc., and all majority-owned subsidiaries.
Intercompany accounts and transactions have been eliminated.
Certain statements, notes and supplementary data for the prior years have been
reclassified to conform to the 1996 presentation.
FISCAL YEAR. The Company utilizes a fifty-two, fifty-three week fiscal year
ending on the Sunday nearest to April 30. For clarity of presentation, the
Company has described all periods presented as if the year ended April 30.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
expenses during the reporting period. Actual results could differ from those
estimates.
FRANCHISE OPERATIONS. The Company recognizes initial franchise fees as income
when the franchised restaurant commences operation, at which time the Company
has substantially performed its obligations relating to such fees. Royalties,
which are based upon a percentage of sales, are recognized as income on the
accrual basis. On a limited basis, franchisees have also entered into leases of
restaurant properties leased or owned by sizzler. royalty revenues, franchise
fees and rent payments from franchisees are included in "Franchise Operations"
in the Consolidated Statements of Operations.
24
<PAGE>
MARKETING COSTS. Marketing costs are reported in the other operating expenses
and include costs of advertising, marketing and promotional programs.
Promotional discounts are expensed as incurred and other marketing costs are
charged to expense ratably in relation to sales over the year in which incurred.
STOCK-BASED COMPENSATION. The Company uses the intrinsic value-based method of
measuring stock-based compensation cost which measures compensation cost as the
excess, if any, of the quoted market price of Sizzler's capital stock at the
grant date over the amount the employee must pay for the stock. The Company's
policy is to grant stock options at fair market value at the date of grant.
COMMON STOCK AND NET INCOME OR LOSS PER SHARE. Net income or loss per common
and common equivalent share is computed by dividing net income by the weighted
average number of shares outstanding during each year, adjusted for the dilutive
effect of stock options and contingent shares, if applicable. The average
shares outstanding in 1996, 1995 and 1994 were approximately 27,791,000,
28,272,000 and 29,071,000, respectively. For the years presented, primary per
share computations and fully diluted per share computations are approximately
equal.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents consist primarily of
short-term, interest-bearing time deposits and other marketable securities with
original maturities of 90 days or less, that are carried at cost, which
approximates fair value because of the short maturity of those instruments. At
april 30, 1996 and 1995, cash and time deposits amounted to $6,377,000 and
$6,475,000, respectively, and other securities were $2,839,000 and $5,745,000,
respectively.
INVENTORIES. Inventories are valued at the lower of cost (first-in, first-out
method) or market, and primarily consist of food products.
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost, which
includes interest capitalized during construction and costs relating to the
selection of sites for new restaurant locations, except for assets that have
been impaired, for which the carrying amount is reduced to estimated fair value.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization are provided over
the estimated useful lives of the assets using the straight-line method.
Estimated useful lives range from 10 to 30 years for buildings and 2 to 8 years
for equipment. Leasehold improvements are amortized primarily over the
remaining lives of the leases, generally 15 to 20 years.
PROPERTIES HELD FOR SALE OR LEASE. Properties held for sale or lease were
$15,834,000 at April 30, 1996 and $3,435,000 at April 30, 1995, and are included
in other assets. These assets represent excess restaurant properties carried at
estimated realizable values.
INTANGIBLE ASSETS. Intangible assets relate to repurchased Sizzler franchise
rights and the cost of KFC franchise licenses in Australia. Intangible assets
are amortized on a straight-line basis over appropriate periods ranging from 12
to 40 years. The Company continually evaluates the recoverability of these
intangible assets by assessing whether the recorded value of the intangible
assets will be recovered through future expected operating results. The
methodology used to assess the recoverability of intangible and other long lived
assets is to determine its expected net realizable value based upon the
historical trend and their expected impact on future operating cash flows.
during the fourth quarter of fiscal 1996, the Company wrote off approximately
$7.3 million of intangibles consisting of the repurchased Sizzler franchise
rights associated with restaurant closures (See Note 2).
RECOVERABILITY OF LONG LIVED ASSETS TO BE HELD AND USED IN THE BUSINESS. As
noted above, The Company early adopted SFAS 121 in 1996 for purposes of
determining and measuring impairment of certain long-lived assets to be held and
used in the business. See Note 3.
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset or a
group of assets may not be recoverable. The Company
25
<PAGE>
considers a history of operating losses to be its primary indicator of potential
impairment. Assets are grouped and evaluated for impairment at the lowest level
for which there are identifiable cash flows that are largely independent of the
cash flows of other groups of assets. The Company deems an asset to be impaired
if a forecast of undiscounted future operating cash flows directly related to
the asset, including disposal value if any, is less than its carrying amount. If
an asset is determined to be impaired, the loss is measured as the amount by
which the carrying amount of the asset exceeds fair value. The Company generally
measures fair value by discounting estimated cash flows. Considerable management
judgment is necessary to estimate discounted future cash flows. Accordingly,
actual results could vary significantly from such estimates.
OTHER CURRENT LIABILITIES. Other current liabilities include amounts accrued
for compensation and benefits, insurance, advertising, legal fees, rent, taxes
and others.
OTHER LIABILITIES. Other liabilities consist primarily of insurance reserves of
$7,380,000 in 1996 and $9,733,000 in 1995. In addition, other liabilities
includes an obligation of $12,989,000 in 1996 and $13,100,000 in 1995 related to
the Company's Executive Supplemental Benefit Plan.
TRANSLATION OF FOREIGN CURRENCIES. The financial statements of the Company's
foreign operations are translated in accordance with the Statement of Financial
Accounting Standards No. 52. As a result, translation adjustments are included
in stockholders' investment. The functional currency used in the Company's
foreign operations is primarily the australian dollar. Foreign currency
transaction gains and losses were not material in 1996, 1995 and 1994.
NOTE 2 - NON-RECURRING ITEMS
- --------------------------------------------------------------------------------
During the fourth quarter of fiscal 1996, the Company recorded a pre-tax
restructuring charge of $108.9 million or $3.92 per share. The restructuring
costs include predominately non-cash write-offs of assets and related
disposition costs associated with the closure of 116 restaurants in the United
States. On June 2, 1996, the Company and certain U.S. subsidiaries filed for
bankruptcy protection through a Chapter 11 proceeding. Through the Chapter 11
proceeding the Company has elected to terminate certain real property leases
related to the closed restaurants and excess properties.
Management believes that this restructuring and the related transactions
significantly improves overall prospects to return to profitability and growth.
Restructuring will provide opportunities to enhance the Company's cash flow by
reducing the Company's cost structure, increasing the Company's ability to focus
on repositioning the Sizzler concept, and expediting the return of U.S.
operations to profitability.
Management expects that the execution of this strategy will allow the Company to
successfully emerge from Chapter 11. However, no assurance can be given that
the Company will achieve these required operating results. The fiscal 1996
consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. The consolidated financial statements do not
include any adjustments that might result if the Company is unable to
successfully emerge from the Chapter 11 bankruptcy.
The fiscal 1996 restructuring charge is comprised of the following:
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Market and Restaurant Closures $ 92,100
Closure of Regional Offices and Reduction
of Corporate Headquarters 8,800
Guarantee of Advertising Co-op Obligations 3,500
Franchise Receivables 2,500
Severance 2,000
--------
Total $108,900
========
</TABLE>
26
<PAGE>
At April 30, 1994, the Company had reserves of $99.5 million related to the
disposition of restaurants targeted for closure and other surplus properties.
During fiscal 1996 and 1995, the Company closed 45 restaurants not meeting
specified criteria and disposed of 70 surplus properties. As a result of these
activities, $56.4 million of the reserves were utilized. As of April 30, 1996,
$43.1 million of these reserves were remaining.
NOTE 3 - IMPAIRMENT OF LONG-LIVED ASSETS
- -------------------------------------------------------------------------------
The Company adopted Statement of financial Accounting Standards No. 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," as of the end of the fourth quarter of fiscal 1996.
The initial, non-cash charge upon adoption of SFAS 121 was $12.8 million or
$0.46 per share. This initial charge resulted from the evaluation of assets at
the restaurant level which is at a lower level than under the previous
accounting policy used for evaluating and measuring the impairment of long-lived
assets. Under the previous accounting policy each market was evaluated as a
group for impairment purposes. The initial charge represents a reduction of the
carrying amount of the impaired assets (as defined in Note 1) to their estimated
fair value, as determined by using discounted estimated future cash flows.
Considerable management judgment is necessary to estimate discounted future cash
flows. Accordingly, actual results could vary significantly from such
estimates.
As a result of the reduced carry amount of the impaired assets, depreciation and
amortization expense for fiscal 1997 is expected to be reduced by approximately
$1.1 million.
NOTE 4 - INCOME TAXES
- -------------------------------------------------------------------------------
The Company files a consolidated United States income tax return that includes
all domestic subsidiaries in which it owns 80 percent or more of the voting
stock and 80 percent or of the value of the outstanding stock. Foreign
withholding taxes have not been provided on the unremitted earnings totaling
$33,859,000 of the Company's foreign operations at April 30, 1996. It is the
Company's intention to reinvest such earnings permanently.
The components of the provision (benefit) for income taxes attributable to
income (loss) from operations consists of the following (in thousands):
<TABLE>
<CAPTION>
For the year ended April 30, 1996 1995 1994
- ---------------------------- ---- ---- ----
<S> <C> <C> <C>
Current
Federal $ - $ 11 $ 25
State - 72 61
Foreign 4,758 5,680 6,107
------ ------- --------
4,758 5,763 6,193
------ ------- --------
Deferred
Federal - (1,978) (33,091)
State - 247 (8,416)
Foreign 103 393 (337)
------ ------- --------
103 (1,338) (41,844)
------ ------- --------
Total Income Tax Provision (Benefit) $4,861 $ 4,425 $(35,651)
------ ------- --------
</TABLE>
A reconciliation of the statutory United States Federal income tax rate to the
Company's
27
<PAGE>
consolidated effective income tax rate follows:
<TABLE>
<CAPTION>
For the years ended April 30, 1996 1995 1994
- ----------------------------- ---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% (35.0)%
State and local income taxes, net of
related Federal income tax benefit 6.1 6.1 (6.1)%
Tax credits, net 0.2 (4.1) (0.3)
Goodwill write-off and non-deductible
amortization (0.2) - 13.2
Valuation Allowance (45.0) - -
-------- ------ --------
Other 0.3 2.8 0.9
-------- ------ --------
Effective tax rate (3.6)% 39.8% (27.3)%
========= ======= =========
Pre-tax income (loss) for domestic and foreign operations is as follows (in
thousands):
For the years ended April 30, 1996 1995 1994
- ----------------------------- ---- ---- ----
<S> <C> <C> <C>
Domestic $(125,442) $(6,897) $(152,528)
Foreign (8,155) 18,017 21,984
--------- ------- ---------
Total $(133,597) $11,120 $(130,544)
========= ======= =========
</TABLE>
The tax effects of temporary differences and carryforwards which give rise to
significant amounts of deferred tax assets and deferred liabilities are as
follows (in thousands):
<TABLE>
<CAPTION>
April 30, 1996 1995
- --------- ---- ----
<S> <C> <C>
Deferred Tax Assets
Deferred income $ 6,641 $ 6,498
Foreign tax credit carryover 5,968 2,310
Minimum tax credit carryover 1,849 1,478
Other credits 2,839 774
Operating reserves and accruals 87,370 34,981
-------- --------
Total gross deferred tax assets 104,667 46,041
Less valuation allowance (83,060) (17,179)
-------- --------
Net deferred tax assets 21,607 28,862
-------- --------
Deferred Tax Liabilities
State income taxes (8,200) (5,828)
Property and equipment (17,724) (29,543)
Capital leases (4,224) (3,915)
Other (491) (198)
-------- --------
Total gross deferred tax liabilities (30,639) (39,484)
-------- --------
Net deferred tax liabilities $ (9,032) $(10,622)
======== ========
</TABLE>
The valuation allowance required under FASB 109 ("Accounting for Income Taxes")
represents deferred tax assets that do not satisfy the recognition criteria as
set forth in the standard.
28
<PAGE>
NOTE 5 - DEBT
- -------------------------------------------------------------------------------
A summary of debt outstanding as of April 30, 1996 and 1995, is as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Unsecured borrowings, at variable
interest rates, due through 2012 $30,194 $11,967
Mortgage note payable, with interest
rate from 9.375 to 10.015 Percent,
secured by land, buildings,
leaseholds and equipment, with an
original cost of approximately
$3,715 at April 30,1996 and $3,715 at
April 30, 1995, due through 2037 744 956
Capital lease obligations 4,299 4,918
------- -------
Total Debt Outstanding 35,237 17,841
Less- current portion 28,196 741
------- -------
Long Term Debt $ 7,041 $17,100
======= =======
</TABLE>
Payments of $27,585,000, excluding capital lease obligations, are due in fiscal
1997, $582,000 in 1998, $486,000 in 1999, $494,000 in 2000, $477,000 in 2001 and
$1,314,000 thereafter.
During fiscal 1995, the Company finalized a $50.0 million revolving line of
credit and standby letter of credit facility with a $35.0 million borrowing
sublimit. The Company's loan agreement requires maintenance of specified
financial ratios and provide certain restrictions on additional borrowings,
investments, repurchase of the Company's stock and availability of retained
earnings for payment of cash dividends. During fiscal 1996, the Company began
to experience liquidity problems resulting from declining restaurant sales and
higher operating costs that caused the Company to not meet the required debt
coverage ratio for the fiscal quarter ended February 4, 1996, for their
revolving line of credit. At April 30, 1996, as a result of the Company's non-
compliance with the line of credit covenants no additional amounts were
available from this line of credit facility and all debt related to the line of
credit has been presented as a current liability in the consolidated financial
statements.
Subsequent to April 30, 1996, the Company obtained a new credit facility,
totaling $15.0 million on a revolving loan basis. This facility is secured by
the assets of certain of the Company's subsidiaries.
On May 10, 1996, the beneficiary of the Company's $11.3 million letter of credit
drew down on the available balances totaling $11.3 million. The letter of
credit was issued to provide security for future amounts payable by the Company
and its subsidiaries under its captive insurance company, CFI Insurers, Ltd.
NOTE 6 - STOCK OPTIONS AND RESTRICTED STOCK
- -------------------------------------------------------------------------------
The Company has an Employee Stock Incentive Plan for certain officers and key
employees of the Company and a Stock Option Plan for Non-Employee Directors.
The maximum number of shares that may be granted under these plans is 2,000,000
and 100,000 shares, respectively. Grants of options to employees and the
periods during which such options can be exercised are at the discretion of the
Board of Directors.
29
<PAGE>
STOCK OPTIONS:
The outstanding options become exercisable in varying amounts through 2006. A
summary of stock option transactions follows:
<TABLE>
<CAPTION>
For the years ended April 30,
-----------------------------------------------
SHARES OUTSTANDING 1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Options outstanding at May 1, 1,111,800 899,700 680,600
Options granted 750,603 419,400 308,300
Options exercised - - (1,000)
Options canceled (391,329) (207,300) (88,200)
------------- ------------- -------------
Options outstanding at April 30, 1,471,074 1,111,800 899,700
Options available for grant at April 30, 149,620 508,894 720,994
------------- ------------- -------------
Total reserved shares 1,620,694 1,620,694 1,620,694
============= ============= =============
Options exercisable at April 30, 540,101 541,050 383,484
============= ============= =============
Option price per share
Granted $3.875-$6.875 $ 3.00-$9.625 $5.00-$17.125
Exercised - - $ 6.00
Canceled $5.00-$12.500 $6.00-$12.500 $6.00-$12.500
</TABLE>
RESTRICTED STOCK PLAN
- ---------------------
Stock issued under this plan is delivered subject to continued employment of the
recipient over a period not to exceed eight years. Compensation expense related
to these options amounted to approximately $142,000 in 1996, $264,000 in 1995
and $306,000 in 1994. A summary of restricted stock transactions follows:
<TABLE>
<CAPTION>
For the years ended April 30,
-----------------------------
SHARES OUTSTANDING 1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
Shares restricted at May 1, 132,348 243,347 249,296
Share granted - - 20,000
Shares released (21,850) (110,999) (25,949)
Shares canceled
------- -------- -------
Shares restricted at April 30, 110,498 132,348 243,347
======= ======== =======
</TABLE>
30
<PAGE>
NOTE 7 - LEASES
- --------------------------------------------------------------------------------
The Company is a party to a number of noncancellable lease agreements involving
land, buildings and equipment. The leases are generally for terms of 15 to 20
years that expire on various dates through 2012. The Company has the right to
extend many of these leases. Certain leases require contingent rent, determined
as a percentage of sales, when annual sales exceed specified levels. The
Company is also a lessor and a sublessor of land, buildings and equipment.
The Company is a co-lessee or guarantor on leases of certain franchisees which
are not significant in amount.
Following is a schedule by year of future minimum lease commitments and sublease
receivables under all noncancellable leases (in thousands);
<TABLE>
<CAPTION>
Commitments Sublease Receivables
------------------------------- ----------------------------
Direct
Capital Operating Financing Operating
Years ended April 30, Leases Leases Leases Leases
- --------------------- --------------- ------------- ---------- ---------
<S> <C> <C> <C> <C>
1997 $1,058 $ 19,412 $ 97 $ 4,241
1998 983 18,270 97 3,117
1999 812 17,164 70 2,674
2000 757 15,532 67 2,275
2001 585 13,976 67 1,773
Thereafter 2,558 78,168 556 11,840
------ -------- ---- -------
Total minimum lease
commitments/receivables 6,753 $162,522 $954 $25,920
======== ==== =======
Less amount representing interest
2,455
------
Present value of minimum lease payments 4,298
Less current portion of
capital lease obligations 610
------
Long-term capital lease obligations $3,688
======
</TABLE>
31
<PAGE>
Rent expense consists of (in thousands):
<TABLE>
<CAPTION>
Years ended April 30, 1996 1995 1994
- --------------------- --------------- ------------- -------------
<S> <C> <C> <C>
Minimum rentals $20,470 $18,880 $19,602
Contingent rentals 764 1,333 1,499
Less sublease rentals 4,230 5,447 5,527
------- ------- -------
Net rent expense $17,004 $14,766 $15,574
======= ======= =======
</TABLE>
32
<PAGE>
NOTE 8 - INFORMATION BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA
The Company is engaged in only one industry segment which is restaurant
operations. Operating profits exclude investment income, interest expense,
income taxes, non-reccuring charges, and impairment of long-lived assets.
Identifiable assets are those assets used in the operations of each geographic
area.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
REVENUES (IN THOUSANDS): 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $252,872 58% $274,135 59% $308,076 63%
International 183,322 42 188,016 41 179,428 37
- -------------------------------------------------------------------------------------------------------------
Total 436,194 100% $462,151 100% $487,504 100%
- --------------------------------------------------------------------------------------------------------------
OPERATING PROFITS (LOSSES)
- --------------------------
(IN THOUSANDS):
- --------------
United States (22,881) (217)% $(10,496) (93)% $(14,424) (209)%
International 12,357 117 21,754 193 21,337 309
- -------------------------------------------------------------------------------------------------------------
Total (10,524) 100% $ 11,258 100% $ 6,913 (100)%
- --------------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS (IN THOUSANDS):
- -----------------------------------
United States 77,648 43% $164,962 60% $165,155 60%
International 100,899 57 111,692 40 112,333 40
- -------------------------------------------------------------------------------------------------------------
Total $178,547 100% $276,654 100% $277,488 100%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
NOTE 9 - COMMITMENTS AND CONTINGENCIES
- -------------------------------------------------------------------------------
At April 30, 1996, commitments made for capital projects were approximately
$878,000. In addition, commitments exist to purchase at fixed prices
approximately $11,850,000 of beef, poultry and food products, for delivery
during fiscal 1997.
The Company is a party to certain litigation arising in the ordinary course of
business that, in the opinion of management, should not have a material adverse
effect upon the consolidated financial position of the Company or its results of
operations.
NOTE 10 - EMPLOYEE BENEFIT PLANS
- -------------------------------------------------------------------------------
The Company has a contributory employee profit sharing, savings and retirement
plan for all eligible employees. The annual employer contribution is determined
at the discretion of the Company's Board of Directors. The Company did not make
a contribution to the Employee Savings Plan in 1996. The Company's contribution
amounted to approximately $515,000 in 1995 and $560,000 in 1994.
In addition, the Company has an Executive Supplemental Benefit Plan which
provides benefits upon retirement to certain employees. The present value of
the accumulated benefit obligation related to this plan at a six percent
discount rate totaled $12,989,000 at April 30, 1996 and $13,100,000 at April 30,
1995.
34
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- --------------------------------------------------------------------------
FINANCIAL DISCLOSURE.
- ---------------------
Not Applicable.
35
<PAGE>
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>
James A. Collins 69 Chairman of the Board of the Company and
its predecessor CFI since 1968. Chief
Executive Officer of CFI (1968-1987).
Chairman of the Board, SRI (1982-1991).
Kevin W. Perkins 44 Director of the Company since 1994.
President and Chief Executive Officer of
the Company since June 30, 1994.
President, Sizzler Asia/Pacific
(1988-1994).
Timothy J. Ryan 56 Director of the Company since February
1996. Senior Executive Vice President of
the Company since February 1996 and
President, Sizzler U.S.A. since November
1995. Restaurant industry business
consultant from January to November 1995.
Senior Vice President of Taco Bell Corp.,
a division of PepsiCo, Inc., from 1993 to
January 1995. Senior Vice President of
Marketing of Taco Bell Corp. from 1988 to
1993. Director, Monterey Pasta Company.
Peter H. Dailey 66 Director of the Company since 1991.
Chairman, Enniskerry Financial, Ltd., a
private investment company, and Chairman,
Supervisory Board of Directors of
Memorex-Telex, Inc. Director, Chicago
Title and Trust Company, Pinkerton, Inc.
and Jacobs Engineering Group, Inc. Former
Ambassador to Ireland and Special Envoy to
NATO.
William S. Hansen 75 Director of the Company and its
predecessor CFI since 1974. Director,
A.A.M., Inc. and BSD Bancor, Chief
Executive Officer and Chairman of the
Board, A.A.M., Inc. (1970-1988).
Wayne G. Kees 73 Director of the Company and its
predecessor CFI since 1978. President,
Sanpalwea Corporation (1976-1984).
Director, Patrick Petroleum, Inc.
H. Wallace Merryman 68 Director of the Company and its
predecessor CFI since 1971. Chairman of
the Board and Chief Executive Officer,
Avco Financial Services, Inc. (1975 -1987).
Carol A. Scott, Ph.D. 46 Director of the Company since 1993.
Professor of Marketing, UCLA since 1989.
Director Athena Medical Corporation.
Chairman of the Faculty, UCLA Anderson
Graduate School of Management (1990 to
1994). Associate Dean, Academic Affairs,
UCLA Anderson Graduate School of
Management (1987 - 1991).
Charles F. Smith 63 Director of the Company since 1995.
President of Charles F. Smith & Co., Inc.,
an investment banking firm (1984 to
present). Director, FirstFed Financial
Corp., Logicon, Inc., and Trans Ocean Ltd.
</TABLE>
36
<PAGE>
<TABLE>
Name Age Position with Company
---- --- ---------------------
<S> <C> <C>
Christopher R. Thomas 47 Executive Vice President, Finance and
Chief Financial Officer of the Company
since 1991. Vice President, Finance and
Chief Financial Officer of the Company
from 1985 to 1991.
Michael Fitzpatrick 52 Executive Vice President, Operations of
the Company since July 1996. President
and Chief Operations, Officer of China
Jump, Inc. a restaurant company, from 1992
to 1994. Vice President and General
Manager of Kentucky Fried Chickens South
Central Division and other operational
positions from 1982 to 1992.
David J. Barton 40 Vice President, General Counsel of the
Company since 1994 and Secretary of the
Company since December 1995. Assistant
General Counsel of the Company from 1991
to 1994.
Elizabeth A. Payne 34 Vice President, Human Resources of the
Company since April 1996. Director,
Employee Relations and Organizational
Development from June 1995 to April 1996,
and Manager, Employee Relations from 1994
to June 1995, of Disney Consumer Products.
Director, Compensation & Benefits of
Ingram Micro from 1993 to 1994.
Michael Raedeke 38 Vice President, Taxation and Internal
Audit of the Company since August 1995.
Director of Tax/Internal Audit of the
Company from 1991 to August 1995.
Ryan S. Tondro 48 Vice President, Controller of the
Company since August 1995. Controller of
the Company from February 1995 to August
1995. Vice President, Finance and
Controller of Washington Inventory
Service, a division of Huffy
Corporation, from 1993 to February 1995.
Vice President, Controller of Thrifty
Drug Stores from 1978 to 1993.
</TABLE>
37
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
- ----------------------------------
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL LONG TERM COMPENSATION
COMPENSATION AWARDS
-------------------------------------------------------------------------------------------
OTHER RESTRICTED
NAME AND ANNUAL STOCK STOCK ALL OTHER
PRINCIPAL POSITION COMPENSATION AWARDS OPTIONS COMPENSATION
AT APRIL 30, 1996 YEAR SALARY ($) BONUS ($) ($)(1) ($)(2) (#) ($)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Kevin W. Perkins 1996 300,000 - (1) - 34,888 12,697
President, Chief Executive 1995 200,000 - 22,600 - 50,000 68,846
Officer and Director 1994 119,875 17,125 16,444 - 20,000 5,994
Timothy J. Ryan (4) 1996 123,085 - (1) - 300,000 1,012
Senior Executive Vice - - - - - - -
President, President, Sizzler - - - - - - -
U.S.A., and Director
Christopher R. Thomas 1996 225,000 - (1) - 24,444 2,546
Executive Vice President, 1995 185,000 - (1) - 45,000 5,383
Finance and Chief 1994 155,000 - (1) - 20,000 5,575
Financial Officer
David J. Barton 1996 128,000 - (1) - 4,667 1,968
Vice President, 1995 105,000 - (1) - 15,000
General Counsel, and 1994 95,000 - (1) - 5,000
Secretary
Wayne F. McDaniel (5) 1996 180,000 - (1) - 24,000 2,379
Executive Vice President, 1995 180,000 - (1) - 20,000 5,389
Operations 1994 150,000 - (1) 148,000 20,000 5,116
Lee E. Clancy, Jr. (6) 1996 151,000 - (1) - 13,964 1,248
Vice President, 1995 137,850 - (1) - 5,000 6,646
Human Resources and 1994 128,000 - (1) - 0 6,825
Training
</TABLE>
(1) Other Annual Compensation does not exceed the lesser of $50,000 or 10% of
total salary and bonus. Other Annual Compensation represents: a) automobile
allowance and cost reimbursement, b) reimbursements for legal and tax
assistance, c) premiums on group life insurance, and d) executive medical
plan costs.
(2) Restricted stock may be sold to eligible employees at the discretion of the
Board of Directors for an amount that is not less than the par value of such
shares. All restricted stock sold to date has bee n sold at $.10 per share.
Dividends, when paid, are paid on all restricted stock. All restricted share
s are subject to limitations on sale or other disposition thereof, which
terminate upon the satisfaction of certain criteria established by the
Board of Directors at the time of the sale, generally over an eight year
period. As of the end of fiscal 1996, the aggregate restricted stock
holdings remaining, valued as of the date of the grant, are as follows: Mr.
Perkins, 25,375 shares valued at $417,322, Mr. Thomas, 32,675 shares valued
at $514,179, Mr. Barton, 0 shares, Mr. McDaniel, 20,000 shares valued at
$148,000, and Mr. Clancy, 12,850 shares valued at $220,831.
(3) All Other Compensation for 1996 represents: a) Company contributions to the
Employee Savings Plan, b) allocations of non-vested funds forfeited by
terminated employees and c) relocation expenses, and loan forgiveness,
respectively, as follows: Mr. Perkins, $0, $1,736, $0, and $38,930; Mr.
Thomas, $0, $1,329, $0, and $0; Mr. Barton, $0, $751, $0, and $0; Mr.
McDaniel, $0, $1,162, $0, and $0; and Mr. Clancy , $0, $0 and $0, and $0.
(4) Mr. Ryan joined the Company in November 1995.
38
<PAGE>
(5) Mr. McDaniel resigned from the Company in June 1996. The Executive Vice
President of Operations position has been filled by Mr. Michael Fitzpatrick
effective July 1996.
(6) Mr. Clancy resigned from the Company effective April 30, 1996. The Vice
President of Human Resources position has been filled by Ms. Elizabeth A.
Payne effective April 1996.
STOCK OPTION GRANTS IN THE FISCAL YEAR (1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------- VALUE AT
% OF TOTAL EXERCISE ASSUMED RATES OF STOCK
OPTIONS OPTIONS GRANTED PRICE PRICE APPRECIATION
GRANTED TO EMPLOYEES IN PER EXPIRATION FOR OPTION TERM
NAME (#)(2) FISCAL YEAR SHARE DATE 5%($) 10%($)
---- ------- --------------- -------- ---------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Kevin W. Perkins............. 34,888 4.65% $5.625 May 1, 2005 123,417 312,764
Timothy J. Ryan.............. 300,000 39.97% $3.875 Nov. 1, 2005 731,090 1,852,726
Christopher R. Thomas........ 24,444 3.46% $5.625 May 1, 2005 86,471 219,136
David J. Barton.............. 4,667 0.62% $5.625 May 1, 2005 16,510 41,839
Wayne F. McDaniel............ 24,000 3.20% $5.625 May 1, 2005 84,901 215,155
Lee E. Clancy, Jr............ 13,964 1.86% $5.625 May 1, 2005 49,398 125,184
</TABLE>
(1) No Stock Appreciation Rights (SARs) were granted to the named individuals
during fiscal 1995.
(2) Options granted are exercisable starting one year after the grant date, with
a specified percentage of the shares covered thereby becoming exercisable at
that time and with an additional specified percentage of the option shares
becoming exercisable on each successive anniversary date, until full
vesting.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
Value of Unexercised
Shares Number of Unexercised In-the-Money Options at
Acquired on Value Options at Fiscal Year End Fiscal Year End ($)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kevin W. Perkins - - 52,500 72,388 - -
Timothy J. Ryan - - 0 300,000 - -
Christopher R. Thomas - - 50,000 59,444 - -
David J. Barton - - 17,000 16,667 - -
Wayne F. McDaniel - - 29,250 49,750 - -
Lee E. Clancy, Jr. - - 32,000 18,964 - -
</TABLE>
39
<PAGE>
BOARD COMMITTEES AND DIRECTOR COMPENSATION
The Board of Directors has an Audit Committee, a Compensation and Stock Option
Committee, and a Nominating Committee.
The Board of Directors of the Company met seven times during fiscal 1996. Each
director attended 75% or more of the aggregate of the total number of meetings
of the Board of Directors and the total number of meetings held by committees of
the board on which he or she served.
Messrs. Merryman (Chairman) and Smith, and Richard P. Bermingham, comprised the
Audit Committee until February 1996, when Ms. Scott was appointed to the
Committee to fill the vacancy created by Mr. Bermingham's resignation from
Board. The Audit Committee met three times during fiscal 1996. The Audit
Committee recommends to the Board of Directors the appointment of the Company's
independent auditors, reviews the fee arrangements and scope of the annual
audit, reviews the activities and recommendations of the Company's internal
auditors and considers the comments of the independent auditors with respect to
internal accounting controls.
Messrs. Hansen (Chairman), Dailey and Kees comprised the Compensation and Stock
Option Committee, which met five times during fiscal 1996. The Compensation and
Stock Option Committee approves officers' salaries, administers executive
compensation plans, reviews and approves the grant of options and restricted
stock and approves bonus schedules for Company employees.
Messrs. Bermingham (Chairman) and Kees and Ms. Scott comprised the Nominating
Committee until February 1996, when Mr. Smith was appointed as Chairman of the
Committee to fill the vacancy created by Mr. Bermingham's resignation from the
Board. The Nominating Committee met once during fiscal 1996. The Nominating
Committee has the responsibility of nominating the officers of the Company, and
recommending candidates for election to the Board of Directors at the Annual
Meeting of Stockholders and to fill vacancies or newly created directorships.
In his capacity as the Chairman of the Board of Directors, during fiscal 1996
Mr. Collins received a salary at the rate of $60,000 per year. Each other
Director who is not an employee of the Company is paid a retainer fee of $20,000
per year and is also paid a fee of $1,000 for attending each meeting of the
Board of Directors, and $1,000 for attending committee meetings not held in
conjunction with a Board meeting. Under the Company's Stock Option Plan for
Non-Employee Directors, each Director who is not an employee of the Company is
automatically granted, on the date of any annual meeting of which the Director
is elected or re-elected to the Board, an option to purchase 2,000 shares of the
Company's Common Stock. The exercise price of each option is the fair market
value of the Common Stock on the grant date. Options granted under the plan
vest and become exercisable on the date of the Company's next annual meeting
following the grant date, provided that the Director continues to serve as a
Director until such date.
EXECUTIVE SUPPLEMENTAL BENEFIT PLAN
During fiscal 1996, Mr. Collins, Mr. Perkins, Mr. Thomas, and Mr. Raedeke (as
well as certain other managerial or administrative employees) participated in
the Company's Executive Supplemental Benefit Plan. Under the Supplemental
Benefit Plan, the normal retirement date is the later of the participant's
sixty-fifth birthday or the date the participant achieves 10 years of service
under the Supplemental Benefit Plan. Participants who retire at the normal
retirement date are entitled to receive 65% of the average for their three
highest years of earnings, comprised of base salary and standard bonus, but
excluding any other cash bonus or form of remuneration, during the last five
years of employment, reduced by 50% of the participant's primary social security
benefit and by the annuitized value of the participant's account balance under
the profit sharing portion of the Company's Employee Savings Plan. Such
benefits are payable as a life and survivor annuity. Participants who retire
between the ages of 55 and 65 and who have completed 15 years of
40
<PAGE>
service under the Supplemental Benefit Plan are entitled to receive reduced
benefits based on age and the number of years of service completed.
EMPLOYMENT CONTRACTS
In October 1995, the Company entered into a three-year employment agreement with
Timothy J. Ryan under which Mr. Ryan is to serve as Senior Executive Vice
President and President of the Sizzler USA division. The agreement provides for
an annual base salary of $250,000, participation in the Company's Bonus Program,
salary continuation benefits in the event of death or disability equal to three
month's salary, and severance equal to Mr. Ryan's annual salary for the
remaining term of the agreement plus one year. Severance is payable upon, among
other events, termination of the agreement by Mr. Ryan following a change in
control of Sizzler. The agreement also provides for other benefits generally
available to executive officers of the Company.
In May 1996, the Company entered into three-year employment agreements with
seven additional executive officers (Messrs. Perkins, Thomas, Barton, Kowalski,
Raedeke, Tondro and Ms. Payne). Each of these agreements provides for the
officer's annual base salary, participation in the Company's Bonus Program, one
year's severance, and other benefits generally available to executive officers
of the Company.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
It is the duty of the Compensation and Stock Option Committee to administer the
Company's various compensation and incentive plans, including its 1991 Employee
Stock Incentive Plan, Management Incentive Plan and Executive Supplemental
Benefit Plan. In addition, we review compensation levels in light of the
performance of members of senior management, including the five most highly
compensated executive officers. The Committee is composed entirely of
independent outside directors. No member of the Committee is a former or
current officer or employee of the Company or any of its subsidiaries. The
Committee reviews all aspects of compensation for senior management with the
Board of Directors.
The Company routinely has retained the services of outside compensation
consulting firms to assist the Committee in connection with the performance of
its various duties. These firms provide advice to the Committee with respect to
the reasonableness of compensation paid to senior management of the Company.
Typically, this advice takes into account how the Company's compensation
programs compare to those of competing companies as well as the Company's
performance. Members of the Committee also review compensation surveys and
analyses provided by such firms, including material prepared by the Company's
Human Resources Department.
The compensation policy of the Company, which is endorsed by the Committee, is
that a substantial portion of the annual compensation of each officer relate to
and must be contingent upon the performance of the Company or a business unit,
the enhancement of shareholder value, and/or the individual contributions of
each officer. As a result, much of an executive officer's potential
compensation is "at risk" under an annual bonus compensation program. In
addition, the Committee seeks to offer compensation opportunities comparable to
those provided by other similar companies in the restaurant industry. The
Committee strives to create a direct link between the long-term interests of
executives and shareholders. Through the use of stock-based incentives, the
Committee focuses the attention of its executives on managing the Company from
the perspective of an owner with an equity stake.
The Company's Fiscal 1996 Management Incentive Program was designed to help
motivate key managerial personnel who have direct ability to influence short and
long-term corporate results and to reward them for the successful attainment of
corporate objectives, goals and strategies. The Incentive Plan provided for the
payment of bonuses based upon the attainment of certain corporate performance
criteria. In fiscal 1996, the criterion for all participants other than the
Chief Executive Officer was an improvement in the Company's pre-tax income from
U.S. operations by 6% or more as compared to pre-tax income during the preceding
fiscal year. Assuming a percentage decrease in pre-tax loss or a percentage
increase in pre-tax income (or a combination of both) of 15% in fiscal 1996 over
fiscal 1995, each Incentive Plan participant would have been
41
<PAGE>
entitled to receive for fiscal 1996 an incentive award in an amount equal to
100% of his or her standard incentive award. Standard incentive awards were a
designated percentage of base salary, ranging from 10% to 70% depending on the
participant's responsibilities and relative position within the Company. To the
extent that improvement in the Company's 1996 pre-tax income was more or less
than 15%, the percentage of each participant's standard incentive award would
have been adjusted upward to a maximum of 200% or downward to a minimum of 10%.
Under the Incentive Plan, incentive awards could be made either in cash or, in
accordance with an established formula, stock options. Until the improvement in
pre-tax income resulted in positive pre-tax income from U.S. operations, 50% of
the award would be made in stock options and the balance in any combination of
cash or stock options as the participant might elect. For such year as the
improvement in pre-tax income resulted in positive income from U.S. operations,
the incentive award would be made in any combination of cash or stock options as
the participant might elect.
The pre-tax income improvement criterion was not met in fiscal 1996, and no
incentive awards were made under the Incentive Plan for fiscal 1996.
The salary of Mr. Perkins, the Company's Chief Executive Officer, was
established as $300,000 for fiscal 1996. The standard percentage of salary
payable to Mr. Perkins as an incentive award under the Incentive Plan was
established at 70%. Unlike the incentive awards of other executive officers,
fifty percent of Mr. Perkins' incentive award was based on improvement in pre-
tax income from U.S. operations, with the remaining fifty percent based on
improvement in pre-tax income from International operations. No award was made
to Mr. Perkins under the Incentive Plan for fiscal 1996. Like other members of
senior management, in the first quarter of 1996 Mr. Perkins was awarded a stock
option on the basis described below. Mr. Perkins also was entitled to receive
perquisites and other benefits on the same basis as other executive officers of
the Company.
For fiscal 1996, the Committee also considered and approved stock option grants
to each of the senior officers of the Company, along with other members of
management. The Committee determined the size of the stock option awards based
on a designated percentage of total cash compensation divided by the option
exercise price. The designated percentages, which were based on each
individual's responsibilities and relative position within the Company, ranged
from 10% to 70% (the latter percentage designated only for the Chief Executive
Officer). Option exercise prices equaled the closing price of the Companys
stock on the New York Stock Exchange on the date of grant, and the options were
exercisable after two years.
In the second half of fiscal 1996, the Committee conducted a review of Incentive
Plan and the Company's executive compensation program generally. The Committee
found that, in light of certain events and developments, it was necessary and
appropriate to revise the Company's executive compensation program to enhance
its effectiveness in attracting and retaining talented key management. The
events and developments included the assumption of additional functions by key
executives as a result of reductions in corporate administrative overhead in
December 1995, the anticipated assumption of major additional responsibilities
by key executives in connection with the bankruptcy proceeding, evidence of
increased employee attrition, and the need to develop simpler and more direct
incentives to achieve certain specific key objectives deemed desirable by the
Board of Directors.
Based on these findings, the Committee approved certain revisions to the
Company's executive compensation program, which were implemented by the Company
effective in May 1996. The revised program featured a new Incentive Plan, a
severance policy, and a restructuring of executive equity incentives. The
Committee also approved the use of employment agreements for eight of the
Company's executive officers.
Under the new Incentive Plan, participants are entitled to a one-time cash bonus
on the Program Termination Date, defined as May 1, 1998 or the earlier
occurrence of either of two key strategic objectives. The amount of the bonus
is established as a designated percentage of annual base salary, ranging from
40% to 125% depending on the participant's responsibilities and relative
position within the Company. To be eligible for the bonus, a participant must
remain continuously employed by the Company on a full time basis until the
Program Termination Date. The key strategic objectives under the Bonus Program
consist of either
42
<PAGE>
confirmation of a plan of reorganization in the Company's Chapter 11 bankruptcy
or consummation of a merger or sale transaction in respect of the Company.
As part of the Company's severance policy, executive officers and other key
managerial personnel are entitled to a severance payment upon termination of
employment. The amount of the severance ranges from six to twelve months of
annual base salary, depending on the employee's responsibilities and relative
position within the Company. For a payment to be due, such termination must be
either by the Company other than for cause or by the employee in the case of
specified events.
As part of the restructuring of management equity incentives, the Committee
approved the award of restricted shares to each of the senior officers of the
Company, along with other members of management.. Restricted shares generally
are subject to restrictions on resale by the holder and to a right of repurchase
by the Company until the achievement of certain objectives or the occurrence of
certain events. Each of the officers received a number of restricted shares
that was based on his or her responsibilities and relative position in the
Company. The restricted shares were sold to employees at par value ($.01 per
share), and were granted on the condition that the recipient cancel any
outstanding stock options previously granted to the recipient under the 1991
Employee Stock Incentive Plan.
The Committee believes that the award of restricted shares is a cost-effective
way to align management's interests with those of shareholders, motivate those
who have direct ability to influence short and long-term corporate results, and
maximize the likelihood that corporate objectives, goals and strategies will be
attained.
Compensation and Stock Option Committee
William S. Hansen, Chairman
Peter H. Dailey
Wayne G. Kees
July 29, 1996
43
<PAGE>
STOCK PERFORMANCE GRAPH.
The following graph compares the cumulative total return for Sizzler stock with
the comparable cumulative returns of (i) a broad market index: The Dow Jones
Equity Market Index and (ii) a published industry or line of business index:
the Dow Jones-Entertainment and Leisure (Restaurants) index. The graph covers
the time period from the end of fiscal 1991 until the end of fiscal 1996. It
assumes $100 invested on April 30, 1991 in Sizzler stock and $100 invested at
that time in each of the indexes. The comparison assumes that all dividends are
reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG SIZZLER INTERNATIONAL, DOW JONES EQUITY MARKET INDEX
AND DOW JONES-ENTERTAINMENT AND LEISURE (RESTAURANTS) INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
DOW
DOW JONES JONES-ENTERTAINMENT
Measurement Period SIZZLER EQUITY MARKET AND LEISURE
(Fiscal Year Covered) INTERNATIONAL INDEX (RESTAURANTS) INDEX
- --------------------- ------------- ------------- -------------------
<S> <C> <C> <C>
Measurement Pt- 4/30/1991 $100 $100 $100
FYE 4/30/1992 $ 81 $115 $131
FYE 4/30/1993 $ 49 $141 $126
FYE 4/29/1994 $ 50 $133 $169
FYE 4/28/1995 $ 41 $155 $185
FYE 4/30/1996 $ 28 $204 $242
</TABLE>
44
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------------------------------------------------------------------------
As of June 30, 1996, according to filings with the Securities and Exchange
Commission and to the best knowledge of the Company, the following persons (as
depicted in the schedule below) are the beneficial owners of more than 5% of the
outstanding voting shares of the Company.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS
- --------------- ------------------------------------ ------------------------ ----------
<S> <C> <C> <C>
Common Stock James A. Collins 3,818,840(2) 13.4%
12655 W. Jefferson Boulevard
Los Angeles, California 90066
Common Stock The Capital Group Companies, Inc. ("CGCI") 3,388,300(3) 11.7%
Capital Guardian Trust Co.
333 South Hope Street
Los Angeles, California 90071
Common Stock State of Wisconsin Investment Board 2,753,000 9.5%
P.O. Box 7842
Madison, Wisconsin 53707
Common Stock GeoCapital Corporation 1,691,945(4) 5.8%
767 Fifth Avenue
New York, New York 10153
Common Stock Dimensional Fund Advisors Inc. ("DFAI") 1,547,234(5) 5.3
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
</TABLE>
(1) Possesses sole voting and investment power for all shares of Common Stock
beneficially owned unless otherwise indicated.
(2) Does not include 334,483 shares of Common Stock held by an independent
trustee for the benefit of Mr. Collins' adult children as to which Mr.
Collins disclaims beneficial ownership.
(3) CGCI and its affiliates possess sole investment power, but voting power
only for 1,907,600 shares of Common Stock. CGCI and its affiliates
disclaim beneficial ownership of these shares. The Company has been
advised that the shares are held by one or more separate investment
management companies affiliated with CGCI, each of which manages accounts
on behalf of others.
(4) Possesses sole investment power and no voting power.
(5) DFAI possesses sole investment power, but voting power only for 1,097,534
shares of Common Stock. DFAI disclaims beneficial ownership of these
shares. The Company has been advised that the shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, investment vehicles for qualified employee benefit
plans, for all of which entities DFAI, a registered investment advisor,
serves as investment manager.
45
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the equity
securities of the Company beneficially owned by each director of the Company,
and by all directors and officers of the Company as a group, on June 30, 1996.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP PERCENT OF
NAME OF COMMON STOCK (1) (3) CLASS
- ---- ----------------------- ----------
<S> <C> <C>
DIRECTORS
James A. Collins................................ 3,818,840 (2) 13.4%
Kevin W. Perkins................................ 251,703 *
Timothy J. Ryan................................. 210,000 *
Peter H. Dailey................................. 8,000 *
William S. Hansen............................... 11,012 *
Wayne G. Kees................................... 20,745 *
H. Wallace Merryman............................. 30,991 *
Carol A. Scott.................................. 7,000 *
Charles F. Smith................................ 2,000 *
EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS
Christopher R. Thomas........................... 193,954 *
David J. Barton................................. 75,000 *
Elizabeth Payne................................. 54,000 *
Michael J. Raedeke.............................. 42,000 *
Ryan S. Tondro.................................. 81,000 *
All Directors and Executive Officers
as a group (13 persons)......................... 4,806,245 16.5%
</TABLE>
*Less than one percent (1%) of class.
(1) Possesses sole voting and investment power.
(2) Does not include 334,483 shares of Common Stock held by an independent
trustee for the benefit of Mr. Collins' adult children as to which Mr.
Collins disclaims beneficial ownership.
(3) Includes shares issuable pursuant to options exercisable within 60 days of
June 30, 1996 in the following amounts: Mr. Smith-2,000 shares, Ms. Scott-
6,000, Messrs. Dailey, Hansen, Kees, and Merryman-8,000 shares each, and
all directors and executive officers as a group-40,000 shares.
46
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- ---------------------------------------------------------
In fiscal 1996, the Company entered into employment agreements with certain
executive officers. (See Item 11 "Executive Compensation.")
On January 1, 1990, CFI loaned Kevin Perkins, a Director and the President and
Chief Executive Officer of the Company, $A250,000 in order to assist him in
purchasing a new home. Pursuant to the terms of the promissory note, so long as
Mr. Perkins remains employed by the Company in a capacity of Vice President and
President, Asian/Pacific or in a position of greater responsibility, no interest
accrues on the principal balance and the principal balance is subject to
reduction in accordance with an amortization schedule. Assuming Mr. Perkins
remains employed with the Company, the principal amount will be deemed fully
repaid on December 31, 1996. The outstanding principal balance, which was
converted into U.S. dollars in fiscal 1995, was $58,395 as of June 30, 1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
- --------------------------------------------------------------------------
(a) List of documents filed as part of the report:
(1) Financial Statements:
Report of Independent Public Accountants
Consolidated Statements of Operations of Sizzler International, Inc.
Consolidated Balance Sheets of Sizzler International, Inc. and
Subsidiaries as of April 30, 1996 and 1995.
Consolidated Statements of Stockholders' Investment of Sizzler
International, Inc. and Subsidiaries for each of the three years in
the period ended April 30, 1996.
Consolidated Statements of Cash Flows of Sizzler International, Inc.
and Subsidiaries for each of the three years in the period ended
April 30, 1996.
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules:
Schedules supporting Financial Statements:
II. Valuation and Qualifying Accounts
Schedules omitted:
All other schedules, other than those shown above, have been
omitted because the required information is shown in the
consolidated financial statements or in the notes thereto, or the
amounts involved are not significant, or the required matter is
not applicable.
(3) Reports on Form 8-K
No report on Form 8-k was filed by Registrant during the last quarter
of fiscal 1996.
47
<PAGE>
(4) Exhibits:
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
3.1 Certificate of Incorporation of Registrant, incorporated herein by
reference to Exhibit 3.1 to Amendment No. 1 to Registrant's Form S-4
Registration Statement Number 33-38412.
3.2 Bylaws of Registrant, incorporated herein by reference to
Exhibit 3.2 to Amendment No. 2 to the Registrant's Form S-4 Registration
Statement Number 33-38412.
3.3 Certificate of Amendment of Bylaws of Registrant dated June 19,
1991, incorporated herin by reference to Exhibit 3.3 to the
Registrant's Form 10-K report for the fiscal year ended April 30,
1995.
4.1 Rights Agreement dated January 22, 1991 between The Bank of New
York and Registrant, incorporated herein by reference to Exhibit 4.1
to Amendment No. 1 to the Registrant's Form S-4 Registration
Statement Number 33-38412.
4.2 Amendment to Rights Agreement dated March 20, 1996 between The
Bank of New York and the Registrant.
4.3 Certificate of Designation of Series A Junior Participating
Preferred Stock of Registrant, incorporated herein by reference to
Exhibit 4.2 to Amendment No. 1 to Registrant's Form S-4 Registration
Statement Number 33-38412.
10.1 Corporate Management Incentive Plan--Fiscal Year 1996 of
Registrant.
10.2 Employee Savings Plan of Registrant, restated as of January 1,
1992, incorporated herein by reference to Exhibit 10.2 to the
Registrants Form 10-K report for the fiscal year ended April 30,
1995.
10.3 Registrants Executive Supplemental Retirement Plan (effective May
1, 1985, and including amendments through May 1, 1993).
10.4 Employment Agreement dated October 30, 1995 between Registrant and
Timothy J. Ryan, as amended May 1, 1996.
10.5 Employment Agreement dated May 1, 1996 between Registrant and Kevin
W. Perkins.
10.6 Employment Agreement dated May 1, 1996 between Registrant and
Christopher R. Thomas.
10.7 Employment Agreement dated May 1, 1996 between Registrant and
David J. Barton.
10.8 Employment Agreement dated May 1, 1996 between Registrant and
Elizabeth A. Payne.
10.9 Employment Agreement dated May 1, 1996 between Registrant and
Ryan S. Tondro.
</TABLE>
48
<PAGE>
10.10 Employment Agreement dated May 1, 1996 between Registrant and
Richard C. Kowalski.
10.11 Employment Agreement dated May 1, 1996 between Registrant and
Michael J. Raedeke.
10.12 Form of Executive Bonus Program of Registrant dated May 1,
1996.
10.13 Paid Leave Plan and Trust and Summary Plan Description of
Registrant, as amended as of June 30, 1994, incorporated herein
by reference to Exhibit 10.5 to the Registrant's Form 10-K report
for the fiscal year ended April 30, 1995.
10.14 1991 Employee Stock Incentive Plan of Registrant, incorporated
herein by reference to Exhibit 10.4 to Amendment No. 1 to the
Registrant's Form S-4 Registration Statement Number 33-38412.
10.15 Stock Option Plan for Non-Employee Directors of Registrant,
incorporated herein by reference to Exhibit 99.1 to Registrant's
Form S-8 Registration Statement No. 33-83410.
10.16 Current form of Franchise Agreement used by Sizzler Restaurants
International, Inc., incorporated herein by reference to Exhibit
10.5 to Registrant's Form 10-K report for the fiscal year ended
April 30, 1991.
10.17 Current form of Franchise Development Agreement used by Sizzler
Restaurants International, Inc., incorporated herein by reference
to Exhibit 10.6 to Registrant's Form 10-K report for the fiscal
year ended April 30, 1991.
10.18 Master Franchise Agreement dated February 15, 1991 between
Collins Foods International Pty., Ltd. and Kentucky Fried Chicken
Pty., Ltd., incorporated herein by reference to Exhibit 10.8 to
Registrant's Form 10-K report for the fiscal year ended April 30,
1991.
10.19 Australian Development Agreement dated February 1, 1996 by and
between The Italian Oven, Inc. and Registrant, incorporated
herein by reference to Exhibit 10.11 to Registrant's Form 10-K
report for the fiscal year ended April 30, 1995.
10.20 Form of The Italian Oven(R) Australian Franchise Agreement,
incorporated herein by reference to Exhibit 10.12 to Registrant's
Form 10-K report for the fiscal year ended April 30, 1995.
10.21 Revolving Credit Agreement dated as of March 22, 1995 by and
among Registrant, CFI Insurers, Ltd., The Bank of New York, Bank
of America N.T. & S.A., Credit Lyonnais Cayman Island Branch,
Credit Lyonnais Los Angeles Branch, and The Industrial Bank of
Japan, Limited, incorporated herein by reference to Exhibit 10.13
to Registrant's Form 10-K report for the fiscal year ended April
30, 1995.
10.22 First Amendment to Revolving Credit Agreement dated as of
September 18, 1995 among Registrant, CFI Insurers, Ltd., The Bank
of New York, Bank of America N.T. & S.A., Credit Lyonnais Cayman
Island Branch, Credit Lyonnais Los Angeles Branch, and The
Industrial Bank of Japan, Limited.
49
<PAGE>
10.23 Standstill Agreement dated March 8, 1996 by and among Registrant,
CFI Insurers, Ltd., The Bank of New York, Bank of America N.T. &
S. A., Credit Lyonnais Cayman Island Branch, Credit Lyonnais Los
Angeles Branch, and the The Industrial Bank of Japan, Limited.
10.24 Second Standstill Agreement dated April 5, 1996 by and among
Registrant, CFI Insurers, Ltd., The Bank of New York, Bank of
America N.T. & S.A., Credit Lyonnais Cayman Island Branch, Credit
Lyonnais Los Angeles Branch, and The Industrial Bank of Japan,
Limited.
11.00 Computation of Earnings (Loss) Per Share
21 Subsidiaries of Registrant.
23 Consent of Arthur Andersen LLP
50
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: July 21, 1996 SIZZLER INTERNATIONAL, INC.
By: /s/ Kevin W. Perkins
------------------------------
Kevin W. Perkins
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ James A. Collins Chairman of the Board July 21, 1996
- ----------------------------
James A. Collins
/s/ Peter H. Dailey Director July 21, 1996
- ----------------------------
Peter H. Dailey
/s/ William S. Hansen Director July 21, 1996
- ----------------------------
William S. Hansen
/s/ Wayne G. Kees Director July 21, 1996
- ----------------------------
Wayne G. Kees
/s/ H. Wallace Merryman Director July 21, 1996
- ----------------------------
H. Wallace Merryman
/s/ Carol A. Scott Director July 21, 1996
- ----------------------------
Carol A. Scott
/s/ Charles Smith Director July 21, 1996
- ----------------------------
Charles Smith
/s/ Kevin W. Perkins President and Chief Executive July 21, 1996
- ----------------------------
Kevin W. Perkins Officer (principal executive officer)
/s/ Christopher R. Thomas Executive Vice President-Finance July 21, 1996
- ----------------------------
Christopher R. Thomas (principal financial and accounting
officer)
</TABLE>
51
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE II
-----------
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
-------------------------------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
RESERVE FOR DOUBTFUL ACCOUNTS
- -----------------------------
<S> <C> <C> <C> <C> <C>
Year ended April 30, 1996 $ 8,148 $ 3,824 $ 1,681 - $10,291
=================================================================================
Year ended April 30, 1995 $ 9,642 $ 1,304 $ 2,803 $ 5 $ 8,148
=================================================================================
Year ended April 30, 1994 $ 7,471 $ 3,935 $ 1,823 $59 $ 9,642
=================================================================================
<CAPTION>
RESERVE FOR EXCESS PROPERTIES AND RESTAURANT CLOSURES
- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended April 30, 1996 $55,382 - $55,382 - -
=================================================================================
Year ended April 30, 1995 $99,469 - $44,087 - $55,382
=================================================================================
Year ended April 30, 1994 $15,370 $88,549 $ 4,450 - $99,469
=================================================================================
(1) Includes non-recurring items totalling $88.0 million associated with the Company's restructuring activities.
</TABLE>
52
<PAGE>
FIRST AMENDMENT TO
RIGHTS AGREEMENTS
This First Amendment to Rights Agreement is entered into as of March 20,
1996 by and between Sizzler International, Inc., a Delaware corporation formerly
known as Collins Foods, Inc. (the "Company") and The Bank of New York, a New
York banking corporation (the "Rights Agent").
R E C I T A L S
---------------
A. The Company and the Rights Agent are parties to that certain Rights
Agreement dated January 22, 1991 (the "Rights Agreement").
B. With the authorization and at the direction of its Board of Directors,
the Company wishes to amend the Rights Agreement in certain respects.
A G R E E M E N T
-----------------
The Company and the Rights Agent agree as follows:
1. Effective as of the date hereof, all references in Section 1(a) of the
Rights Agreement to 10% shall be changed to refer to "14%."
2. Except as set forth in paragraph 1 hereof, the Rights Agreement shall
remain unchanged and in full and force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
Rights Agreement to be duly executed and attested as of the day and year first
above written.
Attest: SIZZLER INTERNATIONAL, INC.
By /s/ David J. Barton By /s/ Christopher R. Thomas
------------------------------ -----------------------------
Name: David J. Barton Name: Christopher R. Thomas
Title: Secretary Title: Executive Vice President,
Finance
Attest: THE BANK OF NEW YORK
as Rights Agent
By /s/ Frank A. Lado By /s/ Kevin Brenman
------------------------------ -----------------------------
Name: Frank A. Lado Name: Kevin Brenman
Title: Assistant Treasurer Title: Vice President
<PAGE>
EXHIBIT 10.1
KEY MANAGEMENT AND OPERATIONS
COMPENSATION STRUCTURE
FISCAL 1996 MANAGEMENT INCENTIVE PLAN
<PAGE>
SIZZLER INTERNATIONAL, INC.
CORPORATE MANAGEMENT FISCAL 1996 INCENTIVE PLAN
U.S. OPERATIONS
To maintain an effective Management Incentive Program for Sizzler International,
Inc., the following Incentive Plan is being implemented for Fiscal Year 1996.
The purpose of the Incentive Plan is to help motivate those key management
people who have direct ability to influence short and long-term Corporate
results and to reward them for successful attainment of the corporate
objectives, goals, and strategies.
The Incentive Plan is based on a specific Corporate performance factor. Earned
bonus amounts based on Corporate performance will be paid annually. Standards
for the size of payments are based on incentive percentage-to-salary established
for each position.
ELIGIBILITY
- -----------
The positions eligible to participate in the Fiscal 1996 Incentive Plan are the
positions (excluding the Operations positions) which appear in the Key
Management and Operations Compensation Structure. The percent of salary payable
as an incentive award appears in the Target Bonus column of the structure. The
maximum incentive award which may be earned is 200% of the Target Bonus
percentage. The Chief Executive Officer may amend the participant list or
percentage factors to meet special situations which may occur during the year.
Any special situations will be communicated to the Compensation Committee at its
next regularly scheduled meeting.
CORPORATE PERFORMANCE FACTOR
- ----------------------------
The corporate Performance Factor which will be used to determine if an incentive
award has been earned will be per-tax income from U.S. operations for all
participants with the exception of the Chief Executive Officer whose performance
factor will include both domestic and international pre-tax income. (Fifty
percent of the Chief Executive Officer's target bonus percentage will be based
on domestic operations and fifty percent on international operations). If pre-
tax income for fiscal year is greater by 6% or more than the previous fiscal
year, an incentive award will have been earned. The amount of the award will be
determined from the following table:
<TABLE>
<CAPTION>
*Pre-tax Income % Percentage of
Increase from Prior Year Incentive Award Earned
- ------------------------ ----------------------
<S> <C>
1-5 0
6 10
7 20
8 30
</TABLE>
<PAGE>
<TABLE>
<S> <C>
9 40
10 50
11 60
12 70
13 80
14 90
15 100
GREATER THAN 15%
</TABLE>
IF PRE-TAX INCOME REACHED THE BREAK-EVEN POINT OR ABOVE, ALL PARTICIPANTS WILL
BE ELIGIBLE FOR AN INCENTIVE AWARD OF 200% OF THE TARGET BONUS PERCENTAGE.
* Pre-tax percentages will be rounded to the nearest whole number.
BONUS PAYMENTS
- --------------
Until pre-tax income becomes profitable, the maximum cash payout for bonus
amounts earned will be 50% of the amount earned. The remaining 50% will be paid
in stock option equivalents as computed according to the formula for annual
stock option awards contained in the Key Management Compensation structure.
However, each participant will have choice with the 50% cash portion: to take
any combination of cash or additional stock option equivalents computed in
accordance with the special stock options equivalent formula, with the grants to
be issued One Dollar ($1.00) below the closing price of the company's stock on
April 30. (See examples in Attachment 1).
In future years, when pre-tax income becomes profitable, bonus amounts earned
will be calculated from the table shown in Attachment 2 and may be paid in cash
or any combination of stock option equivalents which will be computed in
accordance with the special stock options equivalent formula, and the grants
will be issued at One Dollar ($1.00) below the closing price of the company'
stock on April 30.
Special Cases
- -------------
In certain cases where the duties and responsibilities of a key executive offer
a specific opportunity to provide unique, definable value to the Company, the
Chief Executive Officer may allocate a portion of an individual's bonus
potential to the attainment of personal objectives; i.e, a percentage of the
target bonus amount for the Vice President of Construction could be assigned to,
and earned through, the completion of all remodels on time and within budget.
The remaining percentage of the target bonus would be based on the corporate
performance factor.
In the event of unusual circumstances; i.e., an individual functioning in two
positions with different incentive bases during the year, the Chairman and Chief
Executive Officer may amend any of the above incentive criteria to fit the
situation in question.
<PAGE>
Reflecting Incentive Awards in Operating Budgets
- ------------------------------------------------
ALL incentive payments will be anticipated, budgeted, and accrued at assumed
100% performance, they will be considered a part of operating expenses, to be
shown monthly on the Profit and Loss Statement.
Tax Withholding
- ---------------
Payroll and other applicable Federal, State, or local taxes may be withheld from
the incentive compensation before payment is made.
Termination and Transfers
- -------------------------
Termination of an eligible individual for any reason before the end of the
incentive period will disqualify him/or from further participation in the
Incentive Plan and no incentive payments will be due for any portion of this
period.
If an eligible individual is employed by the company and on the payroll at the
end of the incentive period, but terminates prior to the time the incentive
award is determined and distributed, any incentive payment earned and due will
be payable to him/her as soon as possible.
Exceptions
- ----------
Should any significant and/or large adjustments be necessary in the figures used
in the Management Incentive Award computation, it will be the responsibility of
the Chief Executive Officer to notify the Human Resource Department as soon as
practical following the measured period.
Administration of the Plan
- --------------------------
The Incentive Plan described shall be administered by the Human Resource
Department in conjunction with the Chief Executive Officer.
CORPORATE PERFORMANCE: At the end of the measured period, the company's pre-tax
performance will be compared with the prior year. If any incentive payments
have been earned, a schedule of plan participant awards will be prepared and
approved by the Chief Executive Officer.
<PAGE>
ATTACHMENT 1
<TABLE>
<S> <C>
Award - 50% Cash $ 5,625
- 50% Stock Options 1,000 shares
($5,625 divided by 5.625 stock price at
close on April 30)
</TABLE>
AWARD SUMMARY: Executive receives $5,625 cash and 1,000 option shares at a
price of 5.625.
EXECUTIVE D-2: Receives 50% in regular stock options and decides to take one-
- ------------- half of the cash portion in cash and one-half of the cash
portion in special options.
<TABLE>
<S> <C>
Annual salary $ 90,000
Incentive to salary percentage 25%
--------
Standard incentive amount $ 22,500
Pre-Tax Profit Improves 10%
From Table - incentive award to be granted
is 100% of the standard amount $ 11,250
Award - 50% Stock Options 1,000 shares
($5,625 divided by 5.625 stock price at
close on April 30)
- 50% Cash Portion
- One-half in Cash $ 2,813
</TABLE>
Special Stock Option Equivalent Formula
- ---------------------------------------
In cases in which the participant elects to receive some or all of a cash bonus
amount in stock option equivalents, the following calculation shall apply:
Dollars of cash bonus x 1.2 = number of stock options
April 30 price of Sizzler stock - $1.00 = Option price
Example:
Cash portion of executive incentive award is $4,625.
<PAGE>
Executive elects to take 50% in special stock options.
April 30 stock price is $5.625.
Cash paid is .....................$2,813
Special options are:
<TABLE>
<S> <C>
Total cash award...........$5,625
Less cash paid.............(2,813)
-----
Remaining amount........... 2,812
Times multiplier........... x 1.2
-----
Option shares.............. 3.374 @ $4.625
</TABLE>
<PAGE>
ATTACHMENT 2
<TABLE>
<CAPTION>
*Pre-tax Income % Percentage of
Increase from Prior Year Incentive Award Earned
- ------------------------ ----------------------
<S> <C>
1 - 5 0
6 10
7 20
8 30
9 40
10 50
11 60
12 70
13 80
14 90
15 100
16 120
17 140
18 160
19 180
20 200
</TABLE>
<PAGE>
EXHIBIT 10.3
SIZZLER INTERNATIONAL
EXECUTIVE SUPPLEMENTAL BENEFIT PLAN
(Effective May 1, 1985, and Including Amendments Through May 1, 1993)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Purpose.................................................................. 1
Article 1 - Definitions.................................................. 2
Article 2 - Retirement Income Benefits................................... 6
Article 3 - Pre-Retirement Death Benefit................................. 8
Article 4 - Vesting of Benefits.......................................... 9
Article 5 - Additional Provisions........................................ 10
Article 6 - Funding of Benefits.......................................... 12
Article 7 - Administration of the Plan................................... 13
Article 8 - Claims Procedure............................................. 16
Article 9 - Amendment, Termination or Suspension......................... 18
Article 10- Miscellaneous................................................ 19
</TABLE>
<PAGE>
PURPOSE
The purpose of this Plan is to provide a select group of management or highly
compensated eligible employees of Sizzler International, Inc. (hereinafter
referred to as the Employer) with supplemental retirement income and survivor
benefits in addition to the benefits payable from the Employer qualified plans
and Social Security. This instrument states the terms and conditions of the
Sizzler International Executive Supplemental Benefit Plan (hereinafter referred
to as the Plan), which was originally effective as of May 1, 1985 (hereinafter
referred to as the Effective Date) and which is to be amended in its entirety
as of May 1, 1992.
The Plan is intended to attract and retain as employees those executives covered
under the Plan and to provide benefits which are unavailable under the Company
qualified retirement plan because of limitations imposed by, or shortfalls
resulting from, (a) Section 415 of the Internal Revenue Code, (b) Section 401
(a)(17) of the Internal Revenue Code, and (c) amounts deferred by eligible
participants pursuant to provisions of any unfunded deferred compensation plan
maintained by the Employer.
1
<PAGE>
ARTICLE 1
DEFINITIONS
The following words and phrases, set forth in alphabetical order, are used
throughout the Plan. Whenever words or phrases have initial capital letters in
the Plan, a special definition for those words or phrases is set forth below.
(a) "Actuarial Equivalent" is determined by using a discount rate of
6% per year and a mortality assumption based upon the 1984 Uniform Pension
Mortality Table.
(b) "Basic Plan" means the profit sharing portion of the Sizzler
International Employee Savings Plan, as amended from time to time, which is a
defined contribution plan qualified under Section 401(a) of the Code.
(c) "Beneficiary" means the person, persons or entity designated by
the Executive to receive distribution of certain death benefits under the Plan
in the event of the Executive's death.
(d) "Board of Directors" means the Board of Directors of Sizzler
International, Inc.
(e) "Change in Control" shall for purposes of this Plan be deemed to
have occurred if:
(i) any person (as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended from time to time (the "Exchange
Act") and as used in Sections 13(d) and 14(d) thereof), excluding the
Corporation, any majority owned subsidiary of the Corporation (a "Subsidiary"),
any employee benefit plan sponsored or maintained by the Corporation or any
Subsidiary (including any trustee of such plan acting as trustee) and James A.
Collins, Carol L. Collins, the Carol and James Collins Foundation, the Collins
Family Trust dated May 6, 1969, Collins Irrevocable Trust No. 1 or any children
or grandchildren of James A. Collins who received Common Shares of the Company
in a distribution of or from such foundation or trusts, but including a "group"
as defined in Section 13(d)(3) of the Exchange Act (a "Person"), becomes the
beneficial owner of shares of the Corporation having at least 25% of the total
number of votes that may be cast for the election of directors of the
Corporation; provided, however, that if any Person becomes the beneficial owner
of shares of the Corporation having at least 20% of the total number of votes
that may be cast for the selection of directors of the Corporation such event
shall be treated as a Change in Control if such treatment is determined by a
majority of the members of the Board of Directors of the Corporation who were
members of the Board immediately before such beneficial ownership was attained;
(ii) the shareholders of the Corporation shall approve any
merger or other business combination of the Corporation, sale of the
Corporation's assets or combination of the foregoing transactions (a
"Transaction") other than a Transaction involving only the Corporation and one
or more of its Subsidiaries, or a Transaction immediately following which
2
<PAGE>
the shareholders of the Corporation immediately prior to the Transaction
continue to have a majority of the voting power in the resulting entity; or
(iii) within any 24 month period beginning on or after January
31, 1990, the persons who were directors of the Corporation immediately before
the beginning of such period (the "Incumbent Directors") shall cease (for any
reason other than death) to constitute at least a majority of the Board of
Directors of any successor to the Corporation, provided that any director who
was not a director as of January 31, 1990, shall be deemed to be an Incumbent
Director if such director was elected to the Board by, or on the recommendation
of or with the approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors.
Notwithstanding the foregoing, no Change in Control shall be deemed to have
occured for purposes of the Plan with respect to an Executive by reason of any
actions or events in which such Executive participates in a capacity other than
in his capacity as Executive (or as a director of the Corporation or a
Subsidiary, where applicable).
(f) "Code" means the Internal Revenue Code of 1954, as amended.
(g) "Committee" means the Administrative Committee acting under the
Basic Plan.
(h) "Covered Compensation" means the highest base salary and standard
bonus percentage during the Employer's fiscal year, excluding any other cash
bonus or form of remuneration.
(i) "Disability Plan" means the insured long-term disability plan
maintained by the Employer which covers the Participants in this Plan.
(j) "Disabled" means unable to perform substantially all of the
material duties of one's regular position because of bodily injury sustained or
disease originating after the date of such person's designation as an Executive
under this Plan. Notwithstanding the foregoing:
(i) After an Executive has been Disabled as defined above for a
continuous period of 24 months, he will cease to be considered Disabled unless
he is unable to perform any occupation for which he is reasonably fitted by
education, training or experience because of such bodily injury or sickness; and
(ii) An Executive is not Disabled at any time that he is working
for pay or profit at any occupation.
(k) "Early Retirement Date" means the later of a Participant's 55th
birthday or completion of 15 Years of Credited Service.
(l) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
3
<PAGE>
(m) "Executive" means a management or highly compensated employee of
the Employer or any of its subsidiaries.
(n) "Final Average Compensation" means an Executive's average Covered
Compensation during the three fiscal years included in his last five fiscal
years of employment in which such Covered Compensation is the hightest. If an
Executive dies, his Covered Compensation during the fiscal year of his death
shall be defined as the highest base salary he received in any month of such
fiscal year multiplied by 12 plus the standard bonus in effect on the date of
his death. If an Executive becomes disabled, his Final Average Compensation
shall be computed in accordance with Article 5(d).
(o) "Fiscal Year" means the 12 month period beginning May 1 and
ending April 30.
(p) "Good Cause" means the failure to substantially perform the
duties of one's employment due to intentional and willful disregard or
carelessness, or the commission of an intentional act evidencing a substantial
disregard of the interest of the Employer or dishonesty.
(q) "Joint and Survivor Annuity" means an annuity for the life of the
Participant and, after his death, a reduced annuity ("survivor annuity") for the
life of the Participant's surviving spouse, if any. The monthly payment under
the survivor annuity shall be equal to 50% of the amount of the monthly payment
made to the Participant during their joint lives if the spouse is not more than
five years younger, or is older, than the Participant. If the spouse is more
than five years younger than the Participant, the survivor annuity will be
determined with reference to the actual age of the spouse and reduced to produce
the Actuarial Equivalent of a 50% survivor annuity for a spouse who is five
years younger than the Participant.
(r) "Normal Retirement Date" means the first day of the month
coinciding with or next following the later of a Participant's 65th birthday or
completion of 15 Years of Credited Service.
(s) "Participant" means an Executive who has been specifically
designated by the Board of Directors as eligible to become a Participant in this
Plan, such designation not having been revoked.
(t) "Pre-Retirement Death Benefit" means the benefit as described in
Article 3, payable to the Beneficiary of a Participant who dies prior to
commencement of his Retirement Income Benefit.
(u) "Retirement Income Benefit" means the benefit described in
Article 2.
(v) "Social Security Benefit" means, in the case of a Participant,
the actual retirement benefit first received by a Participant under the Social
Security Act if such benefit commences on or before age 65, or if not, the
amount the Participant would have been entitled to at age 65. In the case of a
surviving spouse, Social Security Benefit means the actual survivor's retirement
benefit first received by the spouse under the Social Security Act based upon
the Participant's earning record beginning on or before age 65, or if such
benefits commence later, the amount the spouse would have been entitled to at
age 65. No benefit
4
<PAGE>
hereunder shall be reduced on account of a Social Security Benefit until the
earlier of the receipt of the first payment of such Social Security Benefit or
the attainment of age 65 by the prospective recipient.
(w) "Year of Credited Service" means a 12-consecutive month period
commencing on a Participant's date of hire by the Employer or subsidiary and
anniversaries thereof, during which the Participant is credited with at least
the amount of service necessary under the Basic Plan to accrue an additional
year's benefit thereunder. In making this determination, the provisions of
Article 5(c) relating to leaves of absence shall control over any contrary
provisions in the Basic Plan, and service with any subsidiary shall be treated
as service with the Employer.
5
<PAGE>
ARTICLE 2
RETIREMENT INCOME BENEFITS
(a) Normal Retirement
-----------------
A Participant who attains his Normal Retirement Date shall be
entitled to a Retirement Income Benefit in the form of a Joint and Survivor
Annuity commencing at Normal Retirement Date with payments for the joint lives
of the Participant and his spouse equal to:
(i) 65% of his Final Average Compensation;
(ii) Reduced by the annual amount payable under the Joint and
50% Survivor Annuity that is the Actuarial Equivalent of the Participant's
account balance derived from employer contributions under the Basic Plan
(including earnings thereon) increased by the amount of any previous
withdrawals or other distributions from such account prior to such date and
the amount that would have been earned on such withdrawals or distributions
had they remained in the Basic Plan; and
(iii) Further reduced by 50% of the participant's Social
Security Benefit.
(b) Early Retirement
----------------
A Participant who retires prior to his Normal Retirement
Date, but after reaching his Early Retirement Date, shall be entitled to a
Retirement Income Benefit payable in the form of a Joint and Survivor Annuity
commencing on the first day of the month following his retirement with payments
for the joint lives of the Participant and his spouse equal to:
(i) The Retirement Income Benefit that the Participant would
have received under Article 2(b) had his actual retirement date been his Normal
Retirement Date;
(ii) Reduced in accordance with the attached schedule of
"Early Retirement Factors - Modified Rule of 82" if the sum of his age and Years
of Credited Service is less than 82 and his Early Retirement Date is prior to
May 1, 1993; or
(iii) Reduced in accordance with the attached schedule of "Early
Retirement Factors - Rule of 80" if the sum of his age and Years of Credited
Service is less than 80 and his Early Retirement Date is on or after May 1,
1993.
(c) Change in Control
-----------------
(i) An Executive who terminates employment within three years
after a Change in Control, but prior to his Normal Retirement Date, shall be
100% vested in and entitled to a Retirement Income Benefit in the form of a
Joint and Survivor Annuity commencing
6
<PAGE>
on the first day of the month following termination of employment with payments
for the joint lives of the Participant and his spouse equal to the Actuarial
Equivalent of the Retirement Income Benefit that the Executive would have
received under subsection (a) on his Normal Retirement Date.
(ii) An Executive shall be 100% vested in all of his benefits
if, after a Change in Control, the Plan is terminated or any Executive's
designation as an Executive is revoked.
(iii) The benefits in which an Executive becomes 100% vested
under this subsection (c) shall be determined in accordance with the provisions
of the Plan as in effect on the date of the Change in Control, regardless of
subsequent amendments or termination of the Plan.
(iv) This subsection (c) shall only apply to Executives who
have at least 10 Years of Credited Service upon the Change in Control.
7
<PAGE>
ARTICLE 3
PRE-RETIREMENT DEATH BENEFIT
(a) The Beneficiary of an Executive who dies while an Executive but
before attaining his Early Retirement Date shall be entitled to receive a
Pre-Retirement Death Benefit consisting of 15 annual amounts, each equal to 27%
of the Executive's Final Average Compensation, commencing as soon as practicable
after the Executive's death.
(b) The Beneficiary of an Executive who dies on or after attaining
his Early Retirement Date:
(i) While an Executive; or
(ii) After termination of employment, but prior to commencement
of his Retirement Income Benefit
shall be entitled to receive a Pre-Retirement Death Benefit equal to the greater
of the benefit specified in subsection 3(a) and the 50% survivor annuity
payable assuming the Participant retired on the date of his death. The greater
of the benefits shall be based upon the greater Actuarial Equivalent value.
8
<PAGE>
ARTICLE 4
VESTING OF BENEFITS
(a) General Rule
------------
Except as otherwise provided in this Section, no benefit of any
kind shall accrue or vest hereunder with respect to any Executive or Beneficiary
until such benefit is in pay status.
(b) Early Retirement
----------------
The Pre-Retirement Death Benefit and Retirement Income Benefit of
an Executive who is eligible for a Retirement Income Benefit under Article 2(b)
shall be 100% vested as of his Early Retirement Date.
(c) Change in Control
-----------------
The vesting of Executives in their benefits hereunder after a
Change in Control shall be governed by Article 2(c).
9
<PAGE>
ARTICLE 5
ADDITIONAL PROVISIONS
(a) Benefit Agreement
-----------------
The Committee shall provide to each Executive within 60 days
of the later of the date of execution of the Plan or the date the employee first
became an Executive a form of benefit agreement, which shall set forth the
Executive's acceptance of the benefits provided hereunder and his agreement to
be bound by the terms of the Plan.
(b) Exclusion for Suicide or Self-Inflicted Injury
----------------------------------------------
Notwithstanding any other provision of the Plan, no benefits
shall be paid to any Executive, or spouse or Beneficiary in the event of the
death of the Executive within two years of the later of the date he first became
an Executive or the date he executed the benefit agreement referred to in
subsection (a) as the result of suicide or self-inflicted injury.
(c) Leave of Absence
----------------
An Executive who is on an approved leave of absence with
salary, or on an approved leave of absence without salary for a period of not
more than one year, shall be deemed to be an Executive employed by the Employer
during such leave of absence. An Executive who is on an approved leave of
absence without salary for a period in excess of one year shall be deemed to
have voluntarily terminated his employment as of the end of such one year
period.
(d) Disability
----------
A Disabled Executive who is:
(i) Within the initial exclusion period under the
Disability Plan and for that reason only is not receiving benefits thereunder,
or
(ii) Receiving benefits under the Disability Plan;
shall be deemed to be an Executive during such period, shall continue to be
eligible for retirement benefits under Article 2 and shall continue to be
credited with Years of Credited Service for such period regardless of the
nonperformance of services for the Employer. However, such period of disability
shall not be considered a period of employment, and for purposes of computing
the Participant's Final Base Compensation, his Base Compensation received
previously in the fiscal year in which he becomes Disabled shall be annualized.
10
<PAGE>
(e) Termination for Good Cause
--------------------------
Notwithstanding any provision herein to the contrary, a
Participant whose employment with the Employer is terminated for Good Cause
shall not be eligible for any benefit hereunder.
(f) Monthly Payments
----------------
Periodic payments hereunder shall be paid in equal monthly
amounts.
(g) Alternative Forms of Benefit
----------------------------
The Board of Directors in its sole discretion, but with the
consent of the recipient, may elect to pay the Participant, spouse or
Beneficiary an Actuarial equivalent lump sum or other form of benefit that it
deems appropriate in lieu of the benefit form otherwise provided.
(h) Withholding
-----------
Benefit payments hereunder shall be subject to applicable
federal, state or local withholding for taxes.
11
<PAGE>
ARTICLE 6
FUNDING OF BENEFITS
The Plan shall be unfunded. All benefits payable under the Plan shall be
paid from the Employer's general assets, and nothing contained in the Plan shall
require the Employer to set aside or hold in trust any funds for the benefit of
a Participant or his Beneficiary, who shall have the status of a general
unsecured creditor with respect to the Employer's obligation to make payments
under the Plan. Any funds of the Employer available to pay benefits under the
Plan shall be subject to the claims of general creditors of the Employer and may
be used for any purpose by the Employer.
12
<PAGE>
ARTICLE 7
ADMINISTRATION OF THE PLAN
(a) The Committee
-------------
The Committee shall administer the Plan and shall keep a
written record of its actions and proceedings regarding the Plan and all dates,
records and documents relating to its administration of the Plan.
The Committee is authorized to interpret the Plan, to make,
amend and rescind such rules as it deems necessary for the proper administration
of the Plan, to make all other determinations necessary or advisable for the
administration of the Plan and to correct any defect or supply any omission or
reconcile any inconsistency in the Plan in the manner and to the extent that the
Committee deems desirable to carry the Plan into effect. The powers and duties
of the Committee shall include, without limitation, the following:
(i) Resolving all questions relating to the eligibility
of Executives to become Participants;
(ii) Determining the amount of benefits payable to
Participants or their Beneficiaries and authorizing and directing the
Employer with respect to the payment of benefits under the Plan.
(iii) Construing and interpreting the Plan whenever
necessary to carry out its intention and purpose and making and publishing
such rules for the regulation of the Plan as are not inconsistent with the
terms of Plan.
(iv) Compiling and maintaining all records it determines
to be necessary, appropriate or convenient in connection with the
administration of the Plan; and
(v) Engaging any administrative, actuarial, legal,
medical, accounting, clerical, or other services it may deem appropriate to
effectuate the Plan.
Any action taken or determination made by the Committee shall, except as
otherwise provided in Article 9 below, be conclusive on all parties. No members
of the Committee shall vote on any matter affecting such member. In determining
whether an Executive is Disabled, the Committee may rely on the conclusions
reached by any insurance carrier that has issued an insurance policy to the
Employer covering the Executive.
(b) Expense of the Committee
------------------------
The expense of the Committee properly and actually incurred
in the performance of its duties under the Plan shall be paid by the Employer.
13
<PAGE>
(c) Bonding and Compensation
------------------------
The members of the Committee shall serve without bond, and
without compensation for their services as Committee members except as the
Employer may provide in its discretion.
(d) Information to be Submitted to the Committee
--------------------------------------------
To enable the Committee to perform its functions, the Employer
shall supply full and timely information to the Committee on all matters
relating to Executives and Participants as the Committee may require, and shall
maintain such other records as the Committee may determine are necessary in
order to determine the benefits due or which may become due to Participants or
their Beneficiaries under the Plan. The Committee may rely on such records as
conclusive with respect to the matters set forth therein.
(e) Notices, Statements and Reports
-------------------------------
The Employer shall be the "administrator" of the Plan as
defined in Section 3(16)(A) of ERISA for purposes of the reporting and
disclosure requirements imposed by ERISA and the Code. The Committee shall
assist the Employer, as requested, in complying with such reporting and
disclosure requirements.
(f) Service of Process
------------------
The Committee may from time to time designate an agent of the
plan for the service of legal process. The Committee shall cause such agent to
be identified in materials it distributes or causes to be distributed when such
identification is required under applicable law. In the absence of such a
designation, the Employer shall be the agent of the Plan for the service of
legal process.
(g) Insurance
---------
The Employer, in its discretion, may obtain, pay for and keep
current a policy or policies of insurance, insuring the Committee members,the
members of the Board of Directors and other employees to whom any responsibility
with respect to the administration of the Plan has been delegated against any
and all costs, expenses and liabilities (including attorneys' fees) incurred by
such persons as a result of any act, or omission to act, in connection with the
performance of their duties, responsibilities and obligations under the Plan and
any applicable law.
(h) Indemnity
---------
If the Employer does not obtain, pay for and keep current
the type of insurance policy or policies referred to in subsection (g), or if
such insurance is provided but any of the parties referred to in subsection (g)
incur any costs or expenses which are not covered under such policies, then the
Employer shall indemnify and hold harmless, to the extent permitted by law, such
parties against any and all costs, expenses and liabilities (including
attorneys' fees) incurred by such parties in performing their duties and
responsibilities under this Plan, provided
14
<PAGE>
that such party were not guilty of wilful misconduct. In the event that such
party is named as a defendant in a lawsuit or proceeding involving the Plan, the
party shall be entitled to receive on a current basis the indemnity payments
provided for in this subsection, provided however that if the final judgment
entered in the lawsuit or proceeding holds that the party is guilty of wilful
misconduct with respect to the Plan, the party shall be required to refund the
indemnity payments that it has received.
15
<PAGE>
ARTICLE 8
CLAIMS PROCEDURE
(a) Filing Claim for Benefits
-------------------------
If a Participant or Beneficiary (hereinafter referred to as
the "Applicant") does not receive the timely payment of the benefits which the
Applicant believes are due under the Plan, the Applicant may make a claim for
benefits in the manner hereinafter provided.
All claims for benefits under the Plan shall be made in
writing and shall be signed by the Applicant. Claims shall be submitted to a
representative designed by the Committee and hereinafter referred to as the
"Claims Coordinator". The Claims Coordinator may, but need not, be a member of
the Committee. If the Applicant does not furnish sufficient information with the
claim for the Claims Coordinator to determine the validity of the claim, the
Claims Coordinator shall indicate to the Applicant any additional information
which is necessary for the Claims Coordinator to determine the validity of the
claim.
Each claim hereunder shall be acted on and approved or
disapproved by the Claims Coordinator within 90 days following the receipt by
the Claims Coordinator of the information necessary to process the claim.
In the event the Claims Coordinator denies a claim for
benefits in whole or in part, the Claims Coordinator shall notify the Applicant
in writing of the denial of the claim and notify the Applicant of his right to a
review of the Claims Coordinator's decision by the Committee. Such notice by
the Claim Coordinator shall also set forth, in a manner calculated to be
understood by the Applicant, the specific reason for such denial, the specific
provisions of the Plan or Agreement on which the denial is based, a description
of any additional material or information necessary to perfect the claim with an
explanation of why such material or information is necessary, and an explanation
of the Plan's appeals procedure as set forth in this Article.
If no action is taken by the Claims Coordinator on an
Applicant's claim within 90 days after receipt by the Claims Coordinator, such
claim shall be deemed to be denied for purposes of the following appeal
procedure.
(b) Appeals Procedure
-----------------
Any Applicant whose claim for benefits is denied in whole or
in part may appeal such denial to the Committee for a review of the decision by
the Committee. Such appeal must be made within three months after the Applicant
has received actual or constructive notice of the denial as provided above. An
appeal must be submitted in writing within such period and must:
16
<PAGE>
(i) Request a review by the Committee of the claim for
benefits under the plan;
(ii) Set forth all of the grounds upon which the
Applicant's request for review is based on and any facts in support thereof; and
(iii) Set forth any issues or comments which the Applicant
deems pertinent to the appeal.
The Committee shall regularly review appeals by Applicants.
The Committee shall act upon each appeal within 60 days after receipt thereof
unless special circumstances require an extension of the time for processing, in
which case a decision shall be rendered by the Committee as soon as possible but
not later than 120 days after the appeal is received by the Committee.
The Committee shall make full and fair review of each appeal
and any written materials submitted by the Applicant in connection therewith.
The Committee may require the Applicant to submit such additional facts,
documents or other evidence as the Committee in its discretion deems necessary
or advisable in making its review. The Applicant shall be given the opportunity
to review pertinent documents or materials upon submission of a written request
to the Committee, provided the Committee finds the requested documents or
materials are pertinent to the appeal.
On the basis of its review, the Committee shall make an
independent determination of the Applicant's eligibility for benefits under the
Plan. The decision of the Committee on any claim for benefits shall be final
and conclusive upon all parties thereto.
In the event the Committee denies an appeal in whole or in
part, the Committee shall give written notice of the decision to the Applicant,
which notice shall set forth, in a manner calculated to be understood by the
Applicant, the specific reasons for such denial and which shall make specific
reference to the pertinent provisions of the Plan or Agreement on which the
Committee's decision is based.
17
<PAGE>
ARTICLE 9
AMENDMENT, TERMINATION OR SUSPENSION
(a) The Plan may be amended or terminated by the Board of
Directors at any time. Such amendment or termination may modify or eliminate any
benefit hereunder other than a benefit that is in pay status, or the vested
portion of a benefit that is not in pay status.
(b) If the Board of Directors determines that payments under the
Plan would have a material adverse effect on the Employer's ability to carry on
its business, the Board of Directors may suspend such payments temporarily for
such time as in its sole discretion it deems advisable, but in no event for a
period in excess of one year. The Employer shall pay such suspended payments
immediately upon the expiration of the period of suspension.
(c) The Plan is intended to provide benefits for "a select group
of management or highly compensated employees" within the meaning of Sections
201, 301 and 401 of ERISA, and therefore to be exempt from the provisions of
Parts 2, 3 and 4 of Title 1 of ERISA. Accordingly, the Plan shall terminate and,
except for benefits in pay status (which, at the option of the Board of
Directors, may be accelerated and the balance paid in a single, Actuarial
Equivalent lump sum), no further benefits, vested or nonvested, shall be paid
hereunder in the event it is determined by a court of competent jurisdiction or
by an opinion of counsel that the Plan constitutes an employee pension benefit
plan within the meaning of Section 3(2) of ERISA which is not so exempt. The
preceding sentence shall be inoperative after a Change in Control has occurred.
18
<PAGE>
ARTICLE 10
MISCELLANEOUS
(a) Participant Rights
------------------
Nothing in the Plan shall confer upon a Participant the
right to continue in the employ of the Employer or shall limit or restrict the
right of the Employer to terminate the employment of a Participant at any time
with or without cause.
(b) Alienation
----------
Except as otherwise provided in the Plan, no right or
benefit under the Plan shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge such right or benefit shall
be void. No such right or benefit shall in any manner be liable for or subject
to the debts, liability or torts of a Participant or Beneficiary.
(c) Partial Invalidity
------------------
If any provision in the Plan is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue to be in full force and effect without being
impaired or invalidated in any way.
(d) Choice of Law
-------------
The Plan shall be construed in accordance with ERISA and the
laws of the State of California.
(e) Payment to Minors or Persons Under Legal Disability
---------------------------------------------------
If any benefit becomes payable to a minor or to a person
under a legal disability, payment of such benefit shall be made only to the
conservator or the guardian of the estate of such intended recipient appointed
by a court of competent jurisdiction or any other individual or institution
maintaining or having custody of such intended recipient. A release by such
conservator, guardian, individual or institution shall constitute a legal
discharge of the Plan's obligation to the intended recipient.
(f) Gender, Tense and Headings
--------------------------
Whenever any words are used herein in the masculine gender,
they shall be construed as though they were also used in feminine gender in all
cases where they would so apply. Whenever any words used herein are in the
singular form, they shall be construed as though they were also used in the
plural form in all cases where they would so apply.
19
<PAGE>
Headings of Articles and subsections as used herein are inserted
solely for convenience and reference and constitute no part of the Plan.
Executed at Los Angeles, California, on this 14th day of May 1993.
SIZZLER INTERNATIONAL, INC.
By [SIGNATURE ILLEGIBLE]
-------------------------
20
<PAGE>
SIZZLER INTERNATIONAL
EXECUTIVE SUPPLEMENTAL BENEFIT PLAN
EARLY RETIREMENT FACTORS
MODIFIED RULE OF 82
<TABLE>
<CAPTION>
AGE LAST
BIRTHDAY CREDITED YEARS OF SERVICE
- ------------ -----------------------------------------------------------------------------------------------------------------
15 16 17 18 19 20 21 22 23 24 25 26 27
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 .50 .50 .50 .55 .60 .65 .70 .75 .80 .85 .90 .95 1.00
56 .55 .55. .55 .60 .65 .70 .75 .80 .85 .90 .95 1.00
57 .60 .60 .60 .65 .70 .75 .80 .85 .90 .95 1.00
58 .65 .65 .65 .70 .75 .80 .85 .90 .95 1.00
59 .70 .70 .70 .75 .80 .85 .90 .95 1.00
60 .75 .75 .75 .80 .85 .90 .95 1.00
61 .80 .80 .80 .85 .90 .95 1.00
62 .85 .85 .85 .90 .95 1.00
63 .90 .90 .90 .95 1.00
64 .95 .95 .95 1.00
65 1.00 1.00 1.00
</TABLE>
INTERPOLATE FOR FRACTIONAL AGES AND/OR YEARS OF SERVICE.
TO BE USED FOR BOTH MALE AND FEMALES.
<PAGE>
SIZZLER INTERNATIONAL
EXECUTIVE SUPPLEMENTAL BENEFIT PLAN
EARLY RETIREMENT FACTORS
RULE OF 80
<TABLE>
<CAPTION>
AGE LAST
BIRTHDAY CREDITED YEARS OF SERVICE
- ------------ ---------------------------------------------------------------------------------------------
15 16 17 18 19 20 21 22 23 24 25
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 .50 .55 .60 .65 .70 .75 .80 .85 .90 .95 1.00
56 .55 .60 .65 .70 .75 .80 .85 .90 .95 1.00
57 .60 .65 .70 .75 .80 .85 .90 .95 1.00
58 .65 .70 .75 .80 .85 .90 .95 1.00
59 .70 .75 .80 .85 .90 .95 1.00
60 .75 .80 .85 .90 .95 1.00
61 .80 .85 .90 .95 1.00
62 .85 .90 .95 1.00
63 .90 .95 1.00
64 .95 1.00
65 1.00
</TABLE>
INTERPOLATE FOR FRACTIONAL AGES AND/OR YEARS OF SERVICE.
TO BE USED FOR BOTH MALE AND FEMALES.
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is made and entered into October 30, 1995 by
and between SIZZLER INTERNATIONAL, INC., a Delaware corporation ("SIZZLER"), and
TIMOTHY J. RYAN ("RYAN"), an individual resident of California.
RECITALS
--------
A. SIZZLER owns and operates, and franchises to others, restaurants
doing business under the "SIZZLER" and other proprietary names in the U.S. and
abroad.
B. SIZZLER desires to employ RYAN, and RYAN desires to be employed,
on the terms and conditions set forth in this Agreement.
AGREEMENT
---------
Accordingly, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. TERM OF AGREEMENT. The term of this Agreement shall be for a
------------------
period of three years, beginning on the date hereof.
2. EMPLOYMENT
----------
2.1 Employment of RYAN. SIZZLER hereby employs RYAN as its
------------------
Senior Executive Vice President and President of its SIZZLER USA Division. RYAN
hereby accepts such employment on the terms and conditions of this Agreement.
2.2 Position and Authority. RYAN shall serve as the Senior
----------------------
Executive Vice President of SIZZLER and President of its SIZZLER USA Division,
and shall have the powers and authority of management usually vested in those
offices in a corporation, and such other powers and authority as may be
prescribed by the Board of Directors or the Bylaws of SIZZLER. In his position,
RYAN will report directly to the Chief Executive Officer of SIZZLER.
2.3 Duties. RYAN shall devote his full business time, attention
------
and best efforts to the affairs of SIZZLER during the term of this Agreement;
provided, however, that he may serve as a director of other corporations and
entities and may engage in other activities to the extent that they do not
inhibit the performance of his duties under this Agreement, or conflict with the
business or interest of SIZZLER.
2.4 Existing Commitments. SIZZLER recognizes RYAN has certain
--------------------
existing commitments for consulting services to be performed for or on behalf of
the Monterey Pasta Company, Taco Bell Corporation, and his own, development
stage, healthy food concept restaurant. The Monterey Pasta Company commitment
for consulting services is expected to be fulfilled by December 31, 1995.
SIZZLER
<PAGE>
also recognizes that RYAN serves, and may continue to serve, as a member of the
Board of Directors of the Monterey Pasta Company. RYAN expressly agrees to
permit none of these activities to materially interfere with the performance of
his duties under this Agreement. Any future proposed directorships or positions
in business organization will be subject to review and approval by the SIZZLER
Board of Directors. Non-business activities such as service on the board of, or
for the benefit of, recognized industry association, educational, religious or
other similar institutions need not be reviewed or approved by the Board of
Directors.
2.5 Place of Performance and Facilities. RYAN shall be based at
-----------------------------------
the principal executive offices of SIZZLER, except for required travel on
SIZZLER business to an extent substantially consistent with industry practices.
SIZZLER shall furnish RYAN with office space, accommodations, staff and
executive and clerical assistance suitable to the character of his position,
adequate for the performance of his duties and commensurate with those
customarily provided to high level executives at SIZZLER.
3. COMPENSATION
------------
3.1 Compensation. During the term of this Agreement, SIZZLER
------------
shall pay the amounts and provide the benefits described in this Section 3, and
RYAN agrees to accept such amounts and benefits in full payment for RYAN's
services under this Agreement.
3.2 Base Salary. SIZZLER shall pay to RYAN a base salary of
-----------
$250,000 annually in equal installments payable no less frequently than monthly.
It is understood that SIZZLER will review annually and may, in the discretion of
its Board of Directors, increase such base salary in light of his performance,
inflation in cost of living, or other factors, and if so increased, it shall not
thereafter be decreased.
3.3 Incentive Award Program. During the term of this Agreement,
-----------------------
RYAN shall be entitled to participate in the incentive award program described
in EXHIBIT A hereto (the "Incentive Award Program"). SIZZLER shall review the
Incentive Award Program annually and may, in the discretion of its Board of
Directors, increase the Incentive Award Program benefits to RYAN in light of his
performance and other factors, and if so increased, those benefits shall not
thereafter be decreased.
3.4 Other Benefits. Ryan shall be entitled to participate in
--------------
all such pension, profit-sharing, stock purchase, retirement income, life
insurance, accident insurance, salary continuation and/or disability income,
survivor income, relocation, and all other benefit plans and perquisites
(excepting, only, medical and dental, and auto [except as described in Section
5.2], benefit plans) as SIZZLER may make available to any other executive
officer or employee of SIZZLER from time to time. In addition, SIZZLER shall
reimburse RYAN for the cost of one medical physical examination per year.
SIZZLER shall maintain in full force and
<PAGE>
effect all incentive compensation and other benefit plans and arrangements in
effect on the date hereof, or plans or arrangements providing RYAN with at least
equivalent benefits thereunder. SIZZLER shall not make any changes in such plans
or arrangements which would adversely affect RYAN'S rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to all
executives of SIZZLER and does not result in a proportionately greater reduction
in the rights of or benefits to RYAN as compared with any other executive of
SIZZLER. Nothing paid to RYAN under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
payable to RYAN pursuant to Section 3.2. Any payments or benefits payable to
RYAN hereunder in respect of any calender year during which he is employed for
less than the entire calendar year shall, unless otherwise provided in the
applicable plan or arrangement, be prorated in accordance with the number of
days in such calendar year during which he is so employed.
3.5 Vacations and Holidays. RYAN shall be entitled to vacation
----------------------
time in the amount and on the most favorable basis made available to any other
officer or employee of SIZZLER from time to time. RYAN shall also be entitled to
such holidays with full pay as SIZZLER generally affords its executive
employees.
4. STOCK AND STOCK OPTIONS
-----------------------
Concurrently with the executive of this Agreement, SIZZLER shall
execute and deliver, and shall offer to RYAN for his execution and delivery, an
option agreement in the form attached hereto as EXHIBIT B.
5. REIMBURSEMENT OF EXPENSES
-------------------------
5.1 Travel and Other Expenses. SIZZLER shall pay to or
-------------------------
reimburse RYAN for all reasonable business expenses incurred by him in
connection with the performance of his duties under this Agreement, including,
those for travel (air travel longer than 4 1/2 hours by business or first class,
employing carrier upgrades where practicable), living expenses while away from
home on business or at the request of and in the service of SIZZLER, provided
that such expenses are incurred and accounted for in accordance with the
policies and procedures established by SIZZLER.
5.2 Automobile Expenses. In lieu of providing its normal,
-------------------
medical and dental, and auto, benefit plans, and so as to avoid providing its
normal housing and relocation assistance, SIZZLER shall provide RYAN with, or
reimburse him for the reasonable cost of obtaining, limousine service (including
auto phone and air time) between his home in Newport Beach, California, and his
place of work at SIZZLER.
6. TERMINATION
-----------
RYAN'S employment under this Agreement may be terminated only
under the following circumstances:
<PAGE>
6.1 Death. RYAN's employment under this Agreement shall
-----
terminate upon his death.
6.2 Disability. If, as a result of RYAN"S incapacity due to
----------
physical or mental illness, he shall have been absent from his duties hereunder
on a full-time basis for the entire period of three consecutive months, and
within 30 days after written notice of termination is given (which may occur
before or after the end of such three-month period) shall not have returned to
the performance of his duties hereunder on a full-time basis, SIZZLER may
terminate RYAN'S employment hereunder.
6.3 Cause. SIZZLER may terminate RYAN'S employment under this
-----
Agreement for "Cause." For purposes of this Agreement SIZZLER shall have "Cause"
to terminate RYAN'S employment hereunder upon: (a) the willful and continued
failure by RYAN to substantially perform his duties hereunder (other than any
such failure resulting from RYAN'S incapacity due to physical or mental illness)
after demand for substantial performance is delivered by SIZZLER that
specifically identifies the manner in which SIZZLER believe RYAN has not
substantially performed his duties, or (b) the willful engaging by RYAN in
misconduct which is materially injurious to SIZZLER, monetarily or otherwise.
For purposes of this Section 6.3, no act, or failure to act, on RYAN'S part
shall be considered "willful" unless done, or omitted to be done, by him not in
good faith and without reasonable belief that his action or omission was in the
best interest of SIZZLER. Notwithstanding the foregoing, RYAN shall not be
deemed to have been terminated for Cause without: (i) notice to RYAN setting
forth the reason for SIZZLER'S intention to terminate for Cause, (ii) an
opportunity for RYAN, together with counsel, to be heard before the Board of
Directors of SIZZLER, and (iii) delivery to RYAN of a Notice of Termination as
defined in Section 6.4.3 from the Chief Executive Officer of SIZZLER finding
that in good faith opinion of such executive RYAN was guilty of conduct set
forth above in clause (a) or (b), and specifying the particulars thereof in
detail.
6.4 Termination by RYAN. RYAN may terminate his employment
-------------------
hereunder: (a) for Good Reason or (b) if his health should become impaired to an
extent that makes his continued performance of his duties hereunder hazardous to
his physical or mental health or his life, provide that RYAN shall have
furnished SIZZLER with a written statement from a qualified doctor to such
effect and provided, further, that, at SIZZLER'S request, RYAN shall submit to
an examination by a doctor selected by SIZZLER and such doctor shall have
concurred in the conclusion of RYAN'S doctor.
6.4.1 For purposes of this Agreement, "Good Reason"
shall mean: (a) failure by the Board of Directors to reelect RYAN as the Senior
Executive Vice President of SIZZLER and President of the SIZZLER USA Division,
or if he is removed from such offices, or if at any time during the term of this
Agreement, he shall fail to be vested by SIZZLER with the powers and authority
of the Senior Executive Vice President of SIZZLER and President of
<PAGE>
the SIZZLER USA Division, as described in Section 2.2, except in connection with
a termination for Cause as contemplated by Section 6.3; (b) a Change in Control
of SIZZLER; (c) a failure by SIZZLER to comply with any material provision of
this Agreement which has not been cured within 10 days after notice of such
noncompliance has been given by RYAN to SIZZLER, or (d) any purported
termination of RYAN'S employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 6.4.3 (and for purposes of
this Agreement no such purported termination shall be effective).
6.4.2 For purposes of this Agreement, a "Change in Control"
of SIZZLER shall mean a change in control of a nature that would be required to
be reported in response to Item 5(f) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934 (the "Exchange Act");
provided that, without limitation, such a change in control shall be deemed to
have occurred if (a) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than SIZZLER or any "person" who on the date
hereof is a director or officer of SIZZLER, is or becomes the "beneficial owner"
(as defined in rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of SIZZLER representing 20% or more of the combined voting power of
SIZZLER'S then outstanding securities, or (b) during the term of this Agreement,
individuals who at the beginning of the term constitute the Board of Directors
cease for any reason to constitute at least a majority thereof, unless the
election of each director who was not a director at the beginning of the term
has been approved in advance by directors representing at least two-thirds of
the directors then in office who were directors at the beginning of the term of
this Agreement.
6.4.3 Any termination of RYAN'S employment by SIZZLER or by
RYAN (other than termination pursuant to Section 6.1) shall communicated by
written Notice of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of RYAN'S employment under the provision so indicated.
6.4.4 "Date of Termination" shall mean (i) if RYAN'S
employment is terminated by his death, the date of his death, (ii) if RYAN'S
employment is terminated pursuant to Section 6.2, thirty (30) days after Notice
of Termination is given (provided that RYAN shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (iii) if RYAN'S employment is terminated for any other reason, the
date on which a Notice of Termination is given; provided that if within 30 days
after any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the
<PAGE>
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
7. COMPENSATION UPON TERMINATION OR DURING DISABILITY
--------------------------------------------------
7.1 During any period that RYAN fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness
("disability period"), RYAN shall continue to receive his full salary at the
rate then in effect for such period until his employment is terminated pursuant
to Section 6.2, provided that payments so made to RYAN during the first 90 days
of the disability period shall be reduced by the sum of the amounts, if any,
payable to RYAN at or prior to the time of any such payment under SIZZLER
disability benefit plans and which were not previously applied to reduce any
such payment.
7.2 If RYAN'S employment is terminated by his death, SIZZLER
shall pay to RYAN'S spouse, or if he leaves no spouse, to his estate, commencing
on the next succeeding day which is the last day of the month, and monthly
thereafter on the last day of each month, until a total of three payments has
been made, an amount on each payment date equal to the monthly salary payment
payable to RYAN pursuant to Section 3.2 hereof at the time of his death.
7.3 If RYAN'S employment shall be terminated for Cause, SIZZLER
shall pay RYAN his full salary through the Date of Termination.
7.4 If (A) in breach of this Agreement, SIZZLER shall terminate
RYAN'S employment other than pursuant to Section 6.2 or 6.3 (it being understood
that a purported termination pursuant to Section 6.2 or 6.3 which is disputed
and finally determined not to have been proper shall be a termination by
SIZZLER in breach of this Agreement) or (B) RYAN shall terminate his employment
for Good Reason, then
(i) SIZZLER shall pay RYAN his full salary through the
Date of Termination;
(ii) In lieu of any further salary payments to RYAN for
periods subsequent to the Date of Termination, SIZZLER shall pay to RYAN an
amount equal to the product of (A) RYAN'S annual salary rate in effect as of
the Date of Termination, multiplied by (B) the number of years (including
partial years) remaining in the term of employment hereunder, plus one (1), such
payment to be made (X) if resulting from a termination based an a Change of
Control of SIZZLER, in a lump sum, on or before the fifth day following the Date
of Termination, or (Y) if resulting from any other cause, in substantially equal
monthly installments commencing with the month in which the Date of Termination
occurs and continuing for the number of consecutive monthly payment dates
(including the first such date as aforesaid)
<PAGE>
equal to the product obtained by multiplying the number of years (including
partial years) applicable under (ii) (B) above by 12; and
(iii) if termination of RYAN'S employment arises out of a
breach by SIZZLER of this Agreement, SIZZLER shall pay all other damages to
which RYAN may be entitled as a result of such breach, including damages for any
and all loss of benefits to RYAN under SIZZLER'S employee benefit plans which
RYAN would have received if SIZZLER had not breached this Agreement and had
RYAN'S employment continued for the full term provided in Section 2 (including
specifically but without limitation the benefits which RYAN would have been
entitled to receive pursuant to any SIZZLER retirement plans and any other
supplemental retirement income plan or arrangement had his employment continued
for the full term provided in Section 2 at the rate of compensation specified
herein), and including all legal fees and expenses incurred by him as a result
of such termination.
7.5 Unless RYAN is terminated for Cause, SIZZLER shall maintain in
full force and effect, for the continued benefit of RYAN for the number of years
(including partial years) remaining in the term of his employment hereunder plus
one (1), all employee benefit plans and programs in which RYAN was entitled to
participate immediately prior to the Date of Termination provided that RYAN'S
continued participation is possible under the general terms and provisions of
such plans and programs. In the event that RYAN'S participation in any such plan
or program is barred, SIZZLER shall arrange to provide RYAN with benefits
substantially similar to those which RYAN would otherwise have been entitled to
receive under such plans and programs from which his continued participation is
barred.
7.6 RYAN shall not be required to mitigate the amount of any payment
provided for in this Section 7 by seeking other employment or otherwise.
8. SUCCESSORS; BINDING AGREEMENT
-----------------------------
8.1 SIZZLER will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of SIZZLER, by agreement in form and substance
satisfactory to RYAN, to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that SIZZLER would be required to perform
it if no such succession had taken place. Failure of SIZZLER to obtain such
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle RYAN to compensation from SIZZLER in the same
amount and on the same terms as he would be entitled to hereunder if he
terminated his employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
"SIZZLER" shall be defined to mean and include any successor to its business
and/or assets as aforesaid which executes and delivers the agreement provided
for in
<PAGE>
this Section 8 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
8.2 This Agreement and all rights of RYAN hereunder shall
inure to the benefit of and be enforceable by RYAN's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If RYAN should die while any amounts would still be
payable to him hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to RYAN's devisee, legatee, or other designee or, if there be no such
designee, to RYAN's estate.
9. CONFIDENTIAL INFORMATION
------------------------
9.1 Trade Secrets of SIZZLER. RYAN, during the term of this
------------------------
Agreement, will develop, have access to and become acquainted with various trade
secrets wich are owned by SIZZLER and/or its affiliates and which are regularly
used in the operation of the businesses of such entities. RYAN shall not
disclose such trade secrets, directly or indirectly, or use them in any way,
either during the term of this Agreement or at any time thereafter, except as
required in the course of his employment by SIZZLER. All files, contracts,
manuals, reports, letters, forms, documents, notes, notebooks, lists, records,
documents, customer lists, vendor lists, purchase information, designs, computer
programs and similar items and information, relating to the businesses of such
entities, whether prepared by RYAN or otherwise and whether now existing or
prepared at a future time, coming into his possession shall remain the exclusive
property of such entities, and shall not be removed for purposes other than
work-related from the premises where the work of SIZZLER is conducted, except
with the prior written authorization by SIZZLER.
9.2 Inventions and Improvements. RYAN will communicate to
---------------------------
SIZZLER, or SIZZLER's nominee, any and all inventions and improvements conceived
by him, solely or jointly with other relating to the business of SIZZLER, and
that he will assign to SIZZLER, or SIZZLER's nominee, all of his right, title
and interest to any and all such inventions and improvements, including both
United States and foreign frights.
9.3 Continuing Effect. The provisions of this Section 9 shall
-----------------
remain in effect after the Termination Date.
10. OTHER PROVISIONS
----------------
10.1 Compliance With Other Agreements. RYAN represents and
warrants to SIZZLER that the execution, delivery and performance of this
Agreement will not conflict with or result in the violation or breach of any
term or provision of any order, judgment, injunction, contract, agreement,
commitment or other arrangement to which RYAN is a party or by which he is
bound. RYAN acknowledges that SIZZLER is relying on his representation and
warranty in entering into this Agreement, and agrees to indemnify
<PAGE>
SIZZLER from and against all claims, demands, causes of action, damages, costs
or expenses (including attorneys' fees) arising from any breach thereof.
10.2 Attorney's Fees. The prevailing party in any suit,
---------------
arbitration or other proceeding brought to enforce any provisions of this
Agreement, shall be entitled to recover all costs and expenses of the proceeding
and investigation (not limited to court costs), including reasonable attorneys'
fees.
10.3 Entire Agreement. This Agreement is the only agreement and
----------------
understanding between the parties pertaining to the subject matter of this
Agreement, and supersedes all prior agreements, summaries of agreements,
descriptions of compensation packages, discussions, negotiations,
understandings, representations or warranties, whether verbal or written,
between the parties pertaining to such subject matter.
10.4 Governing Law. The invalidity, construction and performance
-------------
of this Agreement shall be governed by the laws, without regard to the laws as
to choice or conflict of laws, of the State of California.
10.5 Severability. The invalidity or unenforceability of any
------------
particular provision of this Agreement shall not affect the other provisions,
and this Agreement shall be construed in all respects as if any invalid or
unenforceable provision were omitted.
10.6 Amendment and Waiver. This Agreement may be amended,
--------------------
modified or supplemented only by a writing executed by each of the parties.
Either party may in writing waive any provision of this Agreement to the extent
such provision is for the benefit of the waiving party. No waiver by either
party of a breach of any provision of this Agreement shall be construed as a
waiver of any subsequent or different breach, and no forbearance by a party to
seek a remedy for noncompliance or breach by the other party shall be construed
as a waiver of any right or remedy with respect to such noncompliance or breach.
10.7 Notice. Except as otherwise expressly set forth herein,
------
any notices or communications required or permitted by this Agreement shall be
deemed sufficiently given if in writing and when delivered personally or 48
hours after deposit with the United States Postal Service as registered or
certified mail, postage prepaid and addressed as follows:
(a) If to SIZZLER, to the principal office of SIZZLER in
the State of California, marked "Attention: President"; or
(b) If to RYAN, to the most recent address for RYAN
appearing in SIZZLER'S records.
<PAGE>
10.8 Arbitration. Any dispute, action, suit or proceeding
-----------
arising out of or relating to this Agreement or the interpretation, performance
or breach of this Agreement shall, if demanded by any party, be determined and
settled by arbitration to be held in the County of Los Angeles, State of
California, in accordance with the rules of the American Arbitration
Association. Any award rendered by the arbitrator shall be final and binding
upon each party to the arbitration and judgment on the award may be entered in
any court.
10.9 Headings. The Section and other headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SIZZLER INTERNATIONAL, INC.
/s/ Timothy J. Ryan By /s/ Kevin W. Perkins
- ------------------------------ ----------------------------
TIMOTHY J. RYAN Its C.E.O
---------------------------
<PAGE>
EXHIBIT A
---------
TIMOTHY J. RYAN INCENTIVE AWARD PROGRAM
----------------------------------------
1. Annual Incentive Award. On the terms and conditions set forth below,
-----------------------
SIZZLER shall make an incentive award to RYAN for each of SIZZLER's 1996, 1997,
1988 and 1999 fiscal years in which the Pre-Tax Loss (as defined herein) has
decreased, or the Pre-Tax Income (as defined herein) has increased, by six
percent (6%) or more as compared to the Pre-Tax Loss or Pre-Tax Income for the
preceding fiscal year. The incentive award shall be in the form of cash or stock
options as provided in paragraph 4 of this Exhibit.
For the purposes of this award program, the terms "Pre-Tax Income" and
"Pre-Tax Loss" shall refer to any income or loss (excluding any extraordinary or
non-recurring items) from SIZZLER's U.S. operations only, determined after
expenses (including but not limited to G&A expenses) related to U.S. operations
but before income taxes.
2. Amount of Incentive Award. Any incentive award shall be based on the
--------------------------
Incentive Award Amount. The Incentive Award Amount shall be the dollar amount
equal to the product of (A) fifty percent (50%) of RYAN's annual salary during
the fiscal year for which the bonus is to be calculated, multiplied by (B) the
percentage of incentive award earned by RYAN for the fiscal year for which the
bonus is to be calculated, as set forth in paragraph 3 below.
3. Earned Percentage.
------------------
(a) A percentage of incentive award shall be deemed to have been earned
only for a fiscal year in which Pre-Tax Loss during such fiscal year has
decreased, or Pre-Tax Income during such fiscal year has increased, by six
percent (6%) or more as compared to Pre-Tax Loss or Pre-Tax Income during the
preceding fiscal year.
(b) If the percentage decrease in Pre-Tax Loss, or increase in Pre-Tax
Income, or a combination of both, for any fiscal year is six percent (6%) or
more, the percentage of incentive award earned by RYAN shall be determined with
reference to the following schedule (provided, however, that the percentage of
incentive award earned by RYAN shall not exceed one hundred percent (100%) for
any fiscal year in which there is a Pre-Tax Loss):
<TABLE>
<CAPTION>
PRE-TAX INCOME/LOSS % PERCENTAGE OF
INCREASE/DECREASE FROM PRIOR YEAR* INCENTIVE AWARD
EARNED
<S> <C>
1-5 0
6 10
7 20
8 30
</TABLE>
<PAGE>
<TABLE>
<S> <C>
9 40
10 50
11 60
12 70
13 80
14 90
15 100
16 120
17 140
18 160
19 180
20 200
</TABLE>
*Rounded to the nearest whole number.
4. Form of Incentive Award.
------------------------
(a) Pre-Tax Income.
---------------
For any fiscal year for which an incentive award has been earned and
for which there is Pre-Tax Income, SIZZLER shall make the incentive award in any
combination of cash or options to purchase SIZZLER common stock that RYAN may
elect (with the number and exercise price of such options to be calculated as
set forth below in this paragraph 4(a)).
The number and exercise price of options to purchase SIZZLER common
stock delivered in lieu of cash pursuant to this paragraph 4(a) shall be
determined as follows:
(Incentive Award Amount - cash portion) X 1.2 = number of stock
options
Closing price of SIZZLER common stock at April 30 of the fiscal year
for which the incentive award is earned - $1.00 = option exercise
price
(b) Pre-Tax Loss.
-------------
For any fiscal year for which an incentive award has been earned, but in
which there is a Pre-Tax Loss, SIZZLER shall make the incentive award as
follows: (i) fifty percent (50%) in any combination of cash or options to
purchase SIZZLER common stock that RYAN may elect (with the number and exercise
price of such options to be calculated as set forth below in this paragraph
4(b)), and (ii) fifty percent (50%) in options to purchase SIZZLER common stock
(with the number and exercise price of such options to be calculated as set
forth above in paragraph 4(a).
The number and exercise price of options to purchase SIZZLER common stock
delivered in lieu of cash pursuant to this paragraph 4(b)(i) shall be determined
as follows:
<PAGE>
(50%) of Incentive Award Amount - cash portion of such 50%), divided
by price of SIZZLER common stock at April 30 of the fiscal year for
which the bonus is earned = number of options
Closing price of SIZZLER common stock at April 30 of the fiscal year
for which the incentive award is earned = option exercise price
5. Time of Delivery. Any incentive award earned hereunder in respect of
-----------------
any fiscal year shall be made as soon as practicable following completion of the
fiscal year's audit. A cash incentive award shall be deemed to have been made
when paid to RYAN and a stock option incentive award shall be deemed to have
been made when a stock option agreement has been duly executed and delivered to
RYAN by SIZZLER. Any incentive award to which RYAN is entitled hereunder in
respect of any fiscal year during which he is employed for less than the entire
fiscal year shall be prorated in accordance with the number of days in such
fiscal year during which he is so employed.
<PAGE>
SIZZLER INTERNATIONAL, INC.
---------------------------
Non-Qualified Stock Option Agreement
------------------------------------
This Non-Qualified Stock Option Agreement ("Agreement") is made as of
the 11TH day of JANUARY 1996, by and between Sizzler International, Inc., (the
"Company") and TIMOTHY RYAN (the "Option Holder").
RECITALS
--------
Whereas, the Board of Directors of the Company has adopted, and the
stockholders of the Company have approved the Sizzler International, Inc. 1991
Employee Stock Incentive Plan (the "Plan") (previously entitled the Collins
Foods, Inc. 1991 Employee Stock Incentive Plan).
Whereas, the Plan provides among other things for the grant of various
types of stock options to key employees of the Company and its subsidiaries
including "Non-Qualified Options."
Whereas, the term "Non-Qualified Option" is defined in the Plan to
mean:
"an option granted under this Plan that (1) either is not intended to
be or is not denominated as an Incentive Option, or that does not
qualify as an incentive stock option under Section 422 of the Internal
Revenue Code of 1986, as amended ("Code"), and (2) that has an
exercise price that is not less than the greater of (i) the aggregate
Fair Market Value of the Option Shares on the date of grant of such
option or (ii) the aggregate par value of the Option Shares."
Whereas, pursuant to the Plan, the Committee administering the Plan
has determined that it is to the advantage and best interest of the Company and
its stockholders to grant a Non-Qualified Option to Option Holder on the terms
and conditions set forth below as an inducement to remain in the service of the
Company and as an incentive for increased effort during such service, and has
approved the execution of this Non-Qualified Stock Option Agreement between the
Company and the Option Holder.
NOW, THEREFORE, the Company grants to Option Holder a Non-Qualified
Option, as such term is used in the Plan, to purchase 300,000 shares of the
Company's Common Stock, $.01 par value, at an option exercise price of $3.875
per share (which is not less than the closing price of shares of the Company's
Common Stock on the New York Stock Exchange on the date hereof), and the Option
Holder hereby confirms acceptance of such option, which is expressly subject to
the following terms and conditions:
1
Exhibit B
<PAGE>
1. Term. The specified term of this Non-Qualified Option shall be a
----
period of ten (10) years, commencing on the date of this Option.
2. Exercisability. The number of shares which may be purchased
--------------
under this Option is as follows:
On or after November 1, 1996 Option Holder may purchase up to
100,000 shares at $3.875 per share;
On or after November 1, 1997 Option Holder may purchase up to
100,000 shares at $3.875 per share;
On or after November 1, 1998 Option Holder may purchase up to
100,000 shares at $3.875 per share.
Provided, however, that if at any time before November 1, 1998
(A) there are at least 100,000 shares subject to this Option that have not yet
become exercisable, and (B) the closing price of shares of the Company's Common
Stock on the New York Stock Exchange has attained or exceeded $10 per share on
each of ninety (90) consecutive trading days, then the next installment of
100,000 shares thereafter exercisable shall immediately become exercisable.
All purchases of shares under this Option must be made before January
11, 2006.
3. Method of Exercise. This Non-Qualified Option may be exercised
------------------
only by the Option Holder or his transferees by will or the laws of decent and
distribution, or, with respect to options granted on or after May 1, 1991,
pursuant to a Qualified Domestic Relations Order ("QDRO") as defined by the Code
or title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). This Non-Qualified Option may be exercised during its term by written
notice thereof signed and delivered by the Option Holder (or permitted
transferee) to the Secretary of the Company at its office in the City of Los
Angeles, State of California. Such notice shall state the number of shares
being purchased and shall be accompanied by the option exercise price for such
shares in full in cash or by cashier's check. To the extent that it would not
result in liability under Section 16 of the Securities Exchange Act of 1934
("1934 Act") (unless the Option Holder consents to such liability and consents
to disgorge any profits relating thereto to the Company), the option exercise
price may instead be paid, in whole or in part, in any of the following forms:
(a) By the delivery of Common Shares, duly endorsed or
accompanied by a duly executed stock powers, which delivery effectively
transfers to the Company good and valid title to such shares, free and clear of
any pledge, commitment, lien, claim or other encumbrance, such shares to be
valued on the basis of the Fair Market Value of such shares on the date of
2
<PAGE>
exercise, provided that the Company is not then prohibited from purchasing or
acquiring Common Shares;
(b) At the discretion of the Committee, by reducing the number
of Common Shares to be delivered to the optionee upon such exercise (such
reduction to be valued on the basis of the aggregate Fair Market Value,
determined on the date of exercise, of the additional Common Shares that would
otherwise have been delivered to Option Holder upon such exercise) provided that
the Company is not then prohibited from purchasing or acquiring Common Shares;
and/or
(c) In the event the exercise of such option occurs on or after
the Acceleration Date (as hereinafter defined), payment of the option exercise
price (less the aggregate par value of the Common Shares being purchased) may
instead be made by the delivery of a full-recourse, five-year promissory note
bearing interest at the prime rate in the form attached hereto as Exhibit "A."
4. Nontransferability. The Option Holder may not transfer this Non-
------------------
Qualified Option other than by will or by the laws of descent and distribution,
or, with respect to options granted on or after May 1, 1991, pursuant to a QDRO.
Except as provided herein, this Non-Qualified Option shall not be sold,
transferred, assigned, conveyed, gifted, pledged, hypothecated or disposed of in
any way, whether by operation of law or otherwise, and shall not be subject to
execution, attachment or similar process.
5. Covenants of the Option Holder. During the term of this
-------------------------------
Non-Qualified Option, the Option Holder agrees to devote his time, energy and
skills during all normal working hours to the service of the Company or its
subsidiaries and the promotion of its interests in accordance with the regular
business policies of the Company and its subsidiaries.
6. Termination of Employment. Except as provided below, if the
-------------------------
Option Holder ceases to be employed by the Company or any of its subsidiaries
within the term of this Option for any reason other than death or disability and
the Option Holder shall not have then purchased all the shares represented by
this Option, he shall thereafter have the right to exercise this Option only for
the number of shares to which he was entitled under this Option on the date of
such cessation of employment, and such right shall lapse and this Option shall
terminate three (3) months after said termination date or upon the expiration of
the specified term of this Option, whichever date is sooner. Notwithstanding the
above, the Committee, in its sole discretion, may terminate this Option in all
respects effective upon the termination of the Option Holder's employment if the
Board of Directors or the committee makes a determination that the termination
was the result of (i) refusal to perform his or her duties, (ii) gross or
willful misconduct that is materially
3
<PAGE>
harmful to the Company or (iii) conviction of a crime of moral turpitude or a
felony involving personal dishonesty, and any such determination shall
automatically be deemed made retroactive to the date of said termination of
employment.
7. (a) Death or Disability of Option Holder. If the Option Holder
------------------------------------
ceases to be an employee of the Company or any of its subsidiaries and without
having fully exercised this Option, (1) in the case of death, the executors or
administrators of his estate shall have the right to exercise this Option only
for the number of shares to which the Option Holder was entitled to exercise
this Option on the date of his death, and such right shall lapse and this Option
shall terminate twelve (12) months after the date of Option Holder's death or
upon the expiration of the specified term of this Option, whichever date is
sooner, or (2) in the case of disability, the Option Holder shall have the right
to exercise this Option only for the number of shares to which the Option Holder
was entitled to exercise this Option on the date of his cessation of employment
due to disability and such right shall lapse and this Option shall terminate
twelve (12) months after the date of the Option Holder's cessation of employment
due to disability or upon the expiration of the specified term of this Option,
whichever date is sooner.
(b) Qualified Domestic Relations Order. The maximum portion of
----------------------------------
this Option that may be transferred to an alternate payee under a QDRO is the
portion representing the number of shares that were immediately exercisable
hereunder as of the effective date of the QDRO. An alternate payee's right to
exercise the portion of this Option transferred under a QDRO shall lapse and the
transferred portion of this Option shall terminate three (3) months after the
date of transfer, or upon the expiration of the specified term of this Option,
whichever date is sooner.
8. Adjustments. If the outstanding securities of the class then
-----------
subject to this Option are increased, decreased or exchanged for or converted
into cash, property and/or a different number or kind of securities, or if cash,
property and/or securities are distributed in respect such outstanding
securities, in either case as a result of a reorganization, merger or
consolidation that shall not have been affirmatively recommended to the
stockholders of the Company by the Board of Directors, or as a result of a
recapitalization, reclassification, dividend (other than a regular, quarterly
cash dividend) or other distribution, stock split, reverse stock split or the
like, then, unless such event shall cause the Plan to terminate pursuant to
Section 13(b) thereof, the Committee shall make appropriate and proportionate
adjustment in the number and type of shares or other securities or cash or other
property that may be acquired upon the exercise in full of this Option,
provided, however, that any such adjustment shall be made without changing the
aggregate exercise price of the unexercised portion of this Option.
4
<PAGE>
9. Acceleration. Notwithstanding anything to the contrary set forth
-------------
above, the Option shall become fully exercisable upon the first to occur of the
following (the "Acceleration Date"):
(a) the date of dissemination to the stockholders of the Company
of a proxy statement seeking stockholder approval of a reorganization, merger or
consolidation of the company as a result of which the outstanding securities of
the class then subject to this Plan are exchanged for or converted into cash,
property and/or securities not issued by the Company, unless such
reorganization, merger or consolidation shall have been affirmatively
recommended to the stockholders of the Company by the Board;
(b) the first date of public announcement that any person or
entity, together with all Affiliates and Associates (as such capitalized terms
are defined in Rule 12b-2 promulgated under the 1934 Act) of such person or
entity, shall have become, or shall intend to become, or shall have commenced a
tender offer or exchange offer the consummation of which would result in such
person or entity becoming, the Beneficial Owner (as defined in Rule 13d-3
promulgated under the 1934 Act) of voting securities of the Company representing
25% or more of the voting power of the Company, provided, however, that the
terms "person" and "entity," as used in this subsection (b) shall not include
(i) the Company or any of its subsidiaries, (ii) any employee benefit plan of
the Company or any of its subsidiaries, (iii) any entity holding voting
securities of the Company for or pursuant to the terms of any such plan, (iv)
any person or entity who or which, together with all Affiliates and Associates
of such person or entity, is, on the date of adoption of the Plan by the Board,
the Beneficial Owner of voting securities of the Company representing 15% or
more of the voting power of the Company, or (v) any Affiliate or Associate of
any person or entity described in (iv) above;
(c) the first date upon which directors of the Company who were
nominated by the Board for election as directors shall cease to constitute a
majority of the authorized number of directors of the Company; or
(d) the date of dissemination to the stockholders of the Company
of a proxy statement disclosing a change of control of the Company.
10. Termination. Notwithstanding anything to the contrary set forth
------------
in this Agreement, this Option shall terminate upon the first to occur of the
following:
(a) the dissolution or liquidation of the Company;
(b) a reorganization, merger or consolidation of the Company as
a result of which the outstanding securities of
5
<PAGE>
the class then subject to this Plan are exchanged for or converted into cash,
property and/or securities not issued by the Company, which reorganization,
merger or consolidation shall have been affirmatively recommended to the
stockholders of the Company by the Board; or
(c) a sale of substantially all of the property and assets of
the Company.
11. Requirements of Law and of Stock Exchanges. The issuance of
------------------------------------------
shares upon the exercise of this Option shall be subject to compliance with all
of the applicable requirements of law with respect to the issuance and sale of
such shares. In addition, the Company shall not be required to issue or
deliver any certificate or certificates for such purchase upon exercise of
this Option prior to the admission of such shares to listing on notice of
issuance on the New York Stock Exchange or any other stock exchange on which
shares of the Company's Common Stock are then listed.
By accepting this Option, the Option Holder represents and agrees for
himself and his permitted transferrees that unless a registration statement
under the Securities Act of 1933 is in effect as to shares purchased upon any
exercise of this Option, any and all shares so purchased shall be acquired for
investment and not for sale or for distribution, and any notice of the exercise
of any portion of this Option delivered to the Company pursuant to paragraph 3
hereof shall be accompanied by a representation and warranty in writing, signed
by the person entitled to exercise the same, that the shares are being so
acquired in good faith for investment and not for sale or distribution.
12. Notices. Any notice to be given to the Company shall be
-------
personally delivered to or addressed to the Secretary of the Company, at its
principal office, and any notice to be given to the Option Holder shall be
addressed to him at the address given beneath his signature hereto, or at such
other address as the Option Holder may hereafter designate in writing to the
Company. Any notice to the Option Holder is deemed given when enclosed in a
property sealed envelope addressed as aforesaid, registered or certified, and
deposited, postage and registration or certification fee prepaid, in a post
office or branch post office regularly maintained by the United States.
13. Payment of Income Taxes. If the Company is required to withhold
-----------------------
an amount on account of any federal, state or local tax (including, without
limitation, any income, FICA, disability insurance, or employment tax) imposed
as a result of the exercise of the Option or any right granted in tandem with
this Option, the Option Holder shall, concurrently with such withholding, pay
such amount to the Company in full in cash; provided, however, that in the
discretion of the Committee, and
6
<PAGE>
to the extent that it would not result in liability under Section 16 of the 1934
Act (unless the Option Holder consents to such liability and consents to
disgorge any profits relating thereto to the company), the payment of such
amount to the Company may be made, in whole or in part:
(a) with Common Shares delivered by such purchaser or optionee
concurrently with such withholding, duly endorsed or accompanied by a duly
executed stock powers, which delivery effectively transfers to the Company good
and valid title to such shares, fee and clear of any pledge, commitment, lien,
or other encumbrance (such shares to be valued on the basis of the Fair Market
Value of such shares on the date of such sale or exercise), provided that the
Company is not then prohibited from purchasing or acquiring Common Shares;
and/or
(b) by reducing the number of Common Shares to be delivered to
such optionee upon exercise of such option (such reduction to be valued on the
basis of the aggregate Fair Market Value (determined on the date of such
exercise) of the additional Common Shares that would otherwise have been
delivered to such optionee upon exercise of such option), provided that the
Company is not then prohibited from purchasing or acquiring Common Shares.
14. Sale Restrictions. To the extent that any of the following
-----------------
transactions would result in liability under Section 16 of the 1934 Act, then,
unless the Option Holder consents to such liability and consents to disgorge any
profits relating thereto to the Company, an Option Holder may not (i) sell any
shares of Common Stock obtained in exercise of this Non-Qualified Option (or
obtained in exercise of a tandem Stock Appreciation Right) until at least six
(6) months after the date of grant of this Option, (ii) in the case of a tandem
Stock Appreciation Right, receive cash in lieu of shares of Common Stock until
at least six (6) months after the date of grant of this Option, or (iii) in the
case of an exercise of this Option prior to May 1, 1991, sell any shares of
Common Stock received in such exercise until at least six (6) months after the
date of exercise of this Option.
15. Stock Option Plan. This Option is subject to all of the terms and
-----------------
conditions of the Company's 1991 Employee Stock Incentive Plan as the same shall
be amended from time to time in accordance with the terms thereof, but no such
amendment shall, without the Option Holder's consent, adversely affect the
Option Holder's rights under this Option. The interpretation and construction by
the Committee of the Plan, this Agreement, the Option, and such rules and
regulations as may be adopted by the Committee for the purpose of administering
the Plan, shall be final and binding upon the Option Holder. All capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
them in the Plan.
7
<PAGE>
16. Employment. Nothing in the Plan, this Agreement, or the Option
-----------
shall (a) confer upon the Option Holder any right to continue in the employment
of the Company or any of its subsidiaries, (b) adversely affect the right of the
Company or any of its subsidiaries to terminate his employment, with or without
cause, or (c) confer upon the Option Holder any right to participate in any
employee welfare or benefit plan or other program of the Company or any of its
subsidiaries other than the Plan.
17. Stockholder Rights. No person or entity shall be entitled to
-------------------
vote, receive dividends, or be deemed for any purpose the holder of any Common
Stock purchasable hereunder until this Option shall have been duly exercised to
purchase such Common Stock in accordance with the provisions of this Agreement.
18. Governing Law. This Agreement and the Option granted hereunder
--------------
shall be construed and enforced in accordance with the laws of the State of
Delaware (except to the extent preempted by federal law).
IN WITNESS WHEREOF, the Company has granted and issued this Option, at
Los Angeles, California, on the day and year first above written.
SIZZLER INTERNATIONAL, INC.
By:_______________________________
KEVIN W. PERKINS
ACCEPTED:
_________________________________
Option Holder
_________________________________
Social Security Number
_________________________________
Address
_________________________________
8
<PAGE>
EXHIBIT A
PROMISSORY NOTE
$______________ Los Angeles,
California
_______________, 19__
FOR VALUE RECEIVED, ________________ ("Borrower") hereby promises to
pay to the order of Sizzler International, Inc., a Delaware corporation
("Lender"), at such place as shall be designated by Lender from time to time,
the principal sum of $________________ ($___________), with interest thereon
upon all principal remaining from time to time unpaid computed from the date
hereof at an annual rate equal to the prime rate or reference rate announced
from time to time by Manufacturers Hanover Trust or any successor in interest
thereof.
Principal and interest shall be paid in five equal annual installments
of an amount calculated to pay in full all principal and interest due hereunder,
which installments shall be due and payable on the first anniversary hereof and
on each anniversary thereafter to and including the fifth anniversary hereof;
provided, however, that all principal and all accrued but unpaid interest shall
be due and payable on the fifth anniversary hereof.
Borrower shall have the right at any time and without prepayment
premium to prepay any or all of the accrued but unpaid interest and the
outstanding principal balance; provided, however, that each prepayment made by
Borrower to the holder hereof shall be credited first to the accrued but unpaid
interest and any remainder to the outstanding principal balance, and interest
shall thereupon cease to accrue with respect to principal so credited.
Upon the failure to make any payment as provided herein, the holder
hereof may apply payments received on any amounts due hereunder as the holder
hereof may determine, and if the holder hereof so elects, notice of such
election being expressly waived, the outstanding principal balance hereunder
together with all accrued interest thereon shall at once become due and payable.
In the event of such acceleration, the holder hereof shall credit all payments
received on any amounts due hereunder first to the accrued but unpaid interest
due hereunder, and then any remainder to the outstanding principal balance
hereunder.
All agreements between the Borrower and the holder hereof are
expressly limited so that in no contingency or event whatsoever, whether by
reason of advancement of the proceeds hereof, acceleration of the maturity of
the unpaid principal balance hereof, or otherwise, shall the amount paid or
agreed to
9
<PAGE>
be paid to the holder hereof for the use, forbearance or detention of the money
to be advanced hereunder exceed the highest lawful rate permissible under
applicable usury laws. If, from any circumstances whatsoever, fulfillment of any
provision of this Promissory Note or of any other agreement referred to herein,
at the time performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by law which a court of competent
jurisdiction may deem applicable hereto, then ipso facto, the obligation to be
---- -----
fulfilled shall be reduced to the limit of such validity, and if from any
circumstances the holder hereof shall ever receive as interest an amount that
would be excessive interest shall be applied to the reduction of the unpaid
principal balance due hereunder and not to the payment of interest. This
provision shall control every other provision of all agreements between Borrower
and the holder hereof.
If this Promissory Note is not paid when due, whether at maturity or
by acceleration, Borrower promises to pay all costs of collection incurred by
the holder hereof, including, but not limited to, reasonable attorneys' fees,
whether or not suit is filed hereon.
Borrower
_________________________________
10
<PAGE>
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (the "Amendment") is made and
entered into as of the first day of May, 1996 by and among SIZZLER
INTERNATIONAL, INC., a Delaware corporation ("SIZZLER"), and TIMOTHY J. RYAN
("RYAN") with respect to that certain Employment Agreement dated as of October
30, 1996 by and among SIZZLER and RYAN (the "Agreement").
SIZZLER and RYAN hereby agree as follows, effective as of the date hereof:
1. The Incentive Award Program attached to the Employment Agreement as
Exhibit A (the "Old Bonus Program") is hereby deleted as an exhibit to the
Employment Agreement and shall be of no further force or effect. In its place
and as a substitute SIZZLER offers, and RYAN accepts in lieu of the benefits to
which he was entitled under the Old Bonus Program, the Bonus Program attached to
this Amendment as Exhibit A.
2. Paragraph 3.3 of the Employment Agreement shall be amended to read in
full as follows:
3.3 Bonus Program. During the term of this Agreement, RYAN shall be
entitled to participate in the Bonus Program described in Exhibit A hereto (the
"Bonus Program"). SIZZLER shall review the Bonus Program annually and may, in
the discretion of its Board of Directors, increase the Bonus Program benefits to
RYAN in light of his performance and other factors, and if so increased, those
benefits shall not thereafter be decreased.
3. Except as set forth in Sections 1 and 2 of this Amendment, the
Agreement remains in full force and effect.
IN WITNESS WHEREOF, this Amendment is executed on the day and year first
above written.
SIZZLER INTERNATIONAL, INC.
/s/ Timothy J. Ryan /s/ Kevin W. Perkins
- -------------------------------- --------------------------------
TIMOTHY J. RYAN KEVIN W. PERKINS
<PAGE>
SIZZLER INTERNATIONAL, INC.
---------------------------
BONUS PROGRAM
May 1, 1996
-----------
PROGRAM
- -------
This Executive Bonus Program is provided by Sizzler International, Inc.
(the "Company") to Participant on the terms and conditions set forth below. The
term of the Program begins on May 1, 1996 and continues until the Program
Termination Date.
In consideration of Participant remaining in the employment of the Company
until the accomplishment of a Key Objective, the Company will, in connection
with the first Key Objective to occur, pay to the Participant a one-time cash
bonus equal to the Bonus Amount.
The bonus will paid in connection with only the first Key Objective to
occur (i.e., a Transaction or an Emergence, but not both). Payment of the bonus
--
will be made on or before the fifth business day following the Transaction Date
or the Emergence Date, as the case may be. The Participant will not earn the
bonus, and entitlement to the bonus will not accrue, until the occurrence of the
first Key Objective. Payment of the bonus will be subject to Participant's
eligibility on such date.
TERMS AND CONDITIONS
- --------------------
PARTICIPANT: Timothy J. Ryan
BONUS AMOUNT: 100% of the Participant's annual base salary on the
Program Termination Date.
ELIGIBILITY: To be eligible, the Participant must remain
continuously employed by the Company or any of its
subsidiaries on a full-time basis throughout the term
of the Program.
KEY OBJECTIVES: 1. Confirmation of a plan of reorganization for the
Company in any proceeding under Chapter 11 of the
federal bankruptcy law, which proceeding is
commenced on or before May 1, 1997; or
2. Consummation of a Transaction on or before the
Emergence Date.
TRANSACTION: Whether in one or a series of related or roughly
contemporaneous transactions, any merger or
consolidation, tender or exchange offer, change of
control, sale of all or substantially all assets,
negotiated sale, leveraged buyout, or other
extraordinary corporate transaction involving the
assets, securities, or businesses of the Company.
EMERGENCE DATE: The effective date of the court order confirming the
Company's plan of reorganization.
TRANSACTION DATE: The effective date of the consummation of a
Transaction.
PROGRAM
TERMINATION DATE: The first to occur of an Emergence Date, a
Transaction Date, or May 1, 1998.
EXHIBIT A
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is entered into as of May 1, 1996 by and between
Sizzler International, Inc., a Delaware corporation ("Sizzler"), and Kevin W.
Perkins ("Employee"), an individual resident of California.
The parties agree as follows:
1. TERM. The term of this Agreement shall be for a period of three years,
beginning on the date hereof.
2. EMPLOYMENT
2.1 Employment. On the terms and conditions of this Agreement, Sizzler
hereby employs Employee and Employee hereby accepts such employment.
2.2 Position. Employee shall serve as the President and Chief Executive
Officer. Employee shall have such powers and authority as may be prescribed by
the Board of Directors or in the Bylaws of Sizzler.
2.3 Duties. Employee shall devote his full business time, attention and
best efforts to the affairs of Sizzler during the term of this Agreement.
2.5 Place of Performance and Facilities. Employee shall be based at the
principal executive offices of Sizzler, except for required travel on Sizzler
business to an extent substantially consistent with industry practices. Sizzler
shall furnish Employee with office space, accommodations, staff and clerical
assistance appropriate for the performance of his duties.
3. COMPENSATION
3.1 Compensation. During the term of this Agreement, Sizzler shall pay
the amounts and provide the benefits described in this Section 3, and Employee
agrees to accept such amounts and benefits in full payment for Employee's
services under this Agreement.
3.2 Base Salary. Sizzler shall pay to Employee a base salary of
$300,000 annually in equal installments payable no less frequently than monthly.
Sizzler will review annually and may, in the discretion of its Board of
Directors, increase such base salary. If so increased, Employee's base salary
shall not thereafter be decreased.
3.3 Bonus Program. Employee shall be entitled to participate in the
Bonus Program described in Exhibit A hereto (the "Bonus Program"). Sizzler shall
review the Bonus Program annually and may, in the discretion of its Board of
Directors, increase the Bonus Program benefits. If so increased, the Bonus
Program benefits shall not thereafter be decreased.
3.4 Other Benefits. Employee shall be entitled to participate in all
such bonus, incentive award, medical, dental, automobile, pension, profit-
sharing, stock purchase, retirement income, life insurance, accident insurance,
salary continuation and/or disability income, survivor income, relocation, and
all other benefit plans and perquisites as Sizzler may make generally available
to its executive officers from time to time. Sizzler shall maintain in full
force and effect
EXHIBIT 10.5
<PAGE>
all incentive compensation and other benefit plans and arrangements in effect on
the date hereof, or plans or arrangements providing Employee with at least
equivalent benefits thereunder. Sizzler shall not make any changes in such
plans or arrangements which would adversely affect Employee's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to all
executives of Sizzler and does not result in a proportionately greater reduction
in the rights of or benefits to Employee as compared with any other executive of
Sizzler.
3.5 Vacations and Holidays. Employee shall be entitled to vacation
time in the amount generally made available by Sizzler from time to time to its
other executive officers. Employee shall also be entitled to such holidays with
full pay as Sizzler generally affords its executive employees.
4. REIMBURSEMENT OF EXPENSES
Sizzler shall pay to or reimburse Employee for all reasonable business
expenses incurred by him in connection with the performance of his duties under
this Agreement, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by Sizzler. Employee
shall be entitled to reimbursement of relocation expenses in accordance with
Sizzler's Policy No. 3-1007 attached hereto as Exhibit B, with any necessary
adjustments to reflect international relocations.
5. TERMINATION
Employee's employment under this Agreement may be terminated only under
the following circumstances:
5.1 Death. Employee's employment under this Agreement shall terminate
upon his death.
5.2 Disability. If, as a result of Employee's incapacity due to
physical or mental illness, he shall have been absent from his duties hereunder
on a full-time basis for the entire period of three consecutive months, and
within 30 days after written notice of termination is given (which may occur
before or after the end of such three-month period) shall not have returned to
the performance of his duties hereunder on a full-time basis, Sizzler may
terminate Employee's employment hereunder.
5.3 Cause. Sizzler may terminate Employee's employment under this
Agreement for "Cause." For purposes of this Agreement, Sizzler shall have
"Cause" to terminate Employee's employment hereunder upon: (a) the willful and
continued failure by Employee to substantially perform his duties hereunder
(other than any such failure resulting from Employee's incapacity due to
physical or mental illness), after demand for substantial performance is
delivered by Sizzler that specifically identifies the manner in which Sizzler
believes Employee has not substantially performed his duties, or (b) the willful
engaging by Employee in misconduct which is materially injurious to Sizzler,
monetarily or otherwise. For purposes of this Section 5.3, no act, or failure to
act, on Employee's part shall be considered "willful" unless done, or omitted to
be done, by him not in good faith and without reasonable belief that his action
or omission was in the best interest of Sizzler. Notwithstanding the foregoing,
Employee shall not be deemed to have been terminated for Cause without delivery
to Employee of a Notice of Termination as defined in Section 5.4.2 from
Sizzler finding that in Sizzler's good faith opinion Employee was guilty of
conduct set forth above in clause (a) or (b), and specifying the particulars
thereof.
2
<PAGE>
5.4 Termination by Employee. Employee may terminate his employment
hereunder for Good Reason.
5.4.1 For purposes of this Agreement, "Good Reason" shall mean:
(a) a failure by the Board of Directors to re-elect Employee as the President
and Chief Executive Officer or if he is removed from such office(s), or if at
any time during the term of this Agreement, he shall fail to be vested by
Sizzler with the powers and authority of the President and Chief Executive
Officer, as described in Section 2.2, except in connection with a termination
for Cause as contemplated by Section 5.3; (b) a failure by Sizzler to comply
with any material provision of this Agreement which has not been cured within 10
days after notice of such noncompliance has been given by Employee to Sizzler,
or (c) any purported termination of Employee's employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of Section 5.4.2
(and for purposes of this Agreement no such purported termination shall be
effective).
5.4.2 Any termination of Employee's employment by Sizzler or by
Employee (other than termination pursuant to Section 5.1) shall be communicated
by written Notice of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Employee's employment under the provision so indicated.
5.4.3 "Date of Termination" shall mean (i) if Employee's
employment is terminated by his death, the date of his death, (ii) if Employee's
employment is terminated pursuant to Section 5.2, thirty (30) days after Notice
of Termination is given (provided that Employee shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (iii) if Employee's employment is terminated for any other reason,
the date on which a Notice of Termination is given.
6. COMPENSATION UPON TERMINATION
6.1 If Employee's employment shall be terminated for Cause, Sizzler
shall pay Employee his full salary through the Date of Termination.
6.2 If (A) in breach of this Agreement, Sizzler shall terminate
Employee's employment other than pursuant to Section 5.2 or 5.3 (it being
understood that a purported termination pursuant to Section 5.2 or 5.3 which is
disputed and finally determined not to have been proper shall be a termination
by Sizzler in breach of this Agreement) or (B) Employee shall terminate his
employment for Good Reason, then
(i) Sizzler shall pay Employee his full salary through the Date
of Termination;
(ii) in lieu of any further salary payments to Employee for
periods subsequent to the Date of Termination, Sizzler shall pay as severance
pay to Employee an amount equal to one year of Employee's salary at Employee's
annual salary rate in effect as of the Date of Termination, such payment to be
made in a lump sum on or before the fifth day following the Date of Termination;
and
3
<PAGE>
(iii) if termination of Employee's employment arises out of a breach
by Sizzler of this Agreement, Sizzler shall pay all other damages (other than
consequential) to which Employee may be entitled as a result of such breach.
6.3 Employee shall not be required to mitigate the amount of any
payment provided for in this Section 6 by seeking other employment or otherwise.
7. SUCCESSORS; BINDING AGREEMENT
Sizzler will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Sizzler, by agreement in form and substance
satisfactory to Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Sizzler would be
required to perform it if no such succession had taken place. Failure of Sizzler
to obtain such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Employee to compensation from
Sizzler in the same amount and on the same terms as he would be entitled to
hereunder if he terminated his employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Sizzler" shall be defined to mean and include any successor to its
business and/or assets as aforesaid which executes and delivers the agreement
provided for in this Section 7 or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law.
8. OTHER PROVISIONS
8.1 Attorneys' Fees. The prevailing party in any suit, arbitration
or other proceeding brought to enforce any provisions of this Agreement, shall
be entitled to recover all costs and expenses of the proceeding and
investigation (not limited to court costs), including reasonable attorneys'
fees.
8.2 Entire Agreement. This Agreement is the only agreement and
understanding between the parties pertaining to the subject matter of this
Agreement, and supersedes all prior agreements, summaries of agreements,
descriptions of compensation packages, discussions, negotiations,
understandings, representations or warranties, whether verbal or written,
between the parties pertaining to such subject matter.
8.3 Governing Law. The validity, construction and performance of
this Agreement shall be governed by the laws, without regard to the laws as to
choice or conflict of laws, of the State of California.
8.4 Amendment and Waiver. This Agreement may be amended, modified or
supplemented only by a writing executed by each of the parties.
8.5 Notice. Except as otherwise expressly set forth herein, any notices
or communications required or permitted by this Agreement shall be deemed
sufficiently given if in writing and when delivered personally or 48 hours after
deposit with the United States Postal Service as registered or certified mail,
postage prepaid and addressed as follows: (a) if to Sizzler, to the principal
office of Sizzler in the State of California, marked "Attention: Chairman of the
Board"; or (b) if to Employee, to the most recent address for Employee appearing
in Sizzler's records.
4
<PAGE>
8.6 Arbitration. Any dispute, action, suit or proceeding arising out of
or relating to this Agreement or the interpretation, performance or breach of
this Agreement shall, if demanded by any party, be determined and settled by
arbitration to be held in the County of Los Angeles, State of California, in
accordance with the rules of the American Arbitration Association. Any award
rendered by the arbitrator shall be final and binding upon each party to the
arbitration and judgment on the award may be entered in any court.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SIZZLER INTERNATIONAL, INC.
/s/ Kevin W. Perkins By /s/ James A. Collins
- ---------------------------------- --------------------------------
KEVIN W. PERKINS
Its Chairman of the Board
-------------------------------
5
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is entered into as of May 1, 1996 by and between
Sizzler International, Inc., a Delaware corporation ("Sizzler"), and David J.
Barton ("Employee"), an individual resident of California.
The parties agree as follows:
1. TERM. The term of this Agreement shall be for a period of three years,
beginning on the date hereof.
2. EMPLOYMENT
2.1 Employment. On the terms and conditions of this Agreement, Sizzler
hereby employs Employee and Employee hereby accepts such employment.
2.2 Position. Employee shall serve as the Vice President and General
Counsel. Employee shall have such powers and authority as may be prescribed by
the Chief Executive Officer or the Board of Directors or in the Bylaws of
Sizzler.
2.3 Duties. Employee shall devote his full business time, attention
and best efforts to the affairs of Sizzler during the term of this Agreement.
2.5 Place of Performance and Facilities. Employee shall be based at
the principal executive offices of Sizzler, except for required travel on
Sizzler business to an extent substantially consistent with industry practices.
Sizzler shall furnish Employee with office space, accommodations, staff and
clerical assistance appropriate for the performance of his duties.
3. COMPENSATION
3.1 Compensation. During the term of this Agreement, Sizzler shall pay
the amounts and provide the benefits described in this Section 3, and Employee
agrees to accept such amounts and benefits in full payment for Employee's
services under this Agreement.
3.2 Base Salary. Sizzler shall pay to Employee a base salary of
$153,650 annually in equal installments payable no less frequently than monthly.
Sizzler will review annually and may, in the discretion of its Board of
Directors, increase such base salary. If so increased, Employee's base salary
shall not thereafter be decreased.
3.3 Bonus Program. Employee shall be entitled to participate in the
Bonus Program described in Exhibit A hereto (the "Bonus Program"). Sizzler shall
review the Bonus Program annually and may, in the discretion of its Board of
Directors, increase the Bonus Program benefits. If so increased, the Bonus
Program benefits shall not thereafter be decreased.
3.4 Other Benefits. Employee shall be entitled to participate in all
such bonus, incentive award, medical, dental, automobile, pension, profit-
sharing, stock purchase, retirement income, life insurance, accident insurance,
salary continuation and/or disability income, survivor income, relocation, and
all other benefit plans and perquisites as Sizzler may make generally available
to its executive officers from time to time. Sizzler shall maintain in full
force and effect
EXHIBIT 10.7
<PAGE>
all incentive compensation and other benefit plans and arrangements in effect on
the date hereof, or plans or arrangements providing Employee with at least
equivalent benefits thereunder. Sizzler shall not make any changes in such
plans or arrangements which would adversely affect Employee's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to all
executives of Sizzler and does not result in a proportionately greater reduction
in the rights of or benefits to Employee as compared with any other executive of
Sizzler.
3.5 Vacations and Holidays. Employee shall be entitled to vacation
time in the amount generally made available by Sizzler from time to time to its
other executive officers. Employee shall also be entitled to such holidays with
full pay as Sizzler generally affords its executive employees.
4. REIMBURSEMENT OF EXPENSES
Sizzler shall pay to or reimburse Employee for all reasonable business
expenses incurred by him in connection with the performance of his duties under
this Agreement, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by Sizzler.
5. TERMINATION
Employee's employment under this Agreement may be terminated only under
the following circumstances:
5.1 Death. Employee's employment under this Agreement shall terminate
upon his death.
5.2 Disability. If, as a result of Employee's incapacity due to
physical or mental illness, he shall have been absent from his duties hereunder
on a full-time basis for the entire period of three consecutive months, and
within 30 days after written notice of termination is given (which may occur
before or after the end of such three-month period) shall not have returned to
the performance of his duties hereunder on a full-time basis, Sizzler may
terminate Employee's employment hereunder.
5.3 Cause. Sizzler may terminate Employee's employment under this
Agreement for "Cause." For purposes of this Agreement, Sizzler shall have
"Cause" to terminate Employee's employment hereunder upon: (a) the willful and
continued failure by Employee to substantially perform his duties hereunder
(other than any such failure resulting from Employee's incapacity due to
physical or mental illness), after demand for substantial performance is
delivered by Sizzler that specifically identifies the manner in which Sizzler
believes Employee has not substantially performed his duties, or (b) the willful
engaging by Employee in misconduct which is materially injurious to Sizzler,
monetarily or otherwise. For purposes of this Section 5.3, no act, or failure to
act, on Employee's part shall be considered "willful" unless done, or omitted to
be done, by him not in good faith and without reasonable belief that his action
or omission was in the best interest of Sizzler. Notwithstanding the foregoing,
Employee shall not be deemed to have been terminated for Cause without delivery
to Employee of a Notice of Termination as defined in Section 5.4.2 from Sizzler
finding that in Sizzler's good faith opinion Employee was guilty of conduct set
forth above in clause (a) or (b), and specifying the particulars thereof.
2
<PAGE>
5.4 Termination by Employee. Employee may terminate his employment
hereunder for Good Reason.
5.4.1 For purposes of this Agreement, "Good Reason" shall mean:
(a) a failure by the Board of Directors to re-elect Employee as the Vice
President and General Counsel if he is removed from such office(s), or if at any
time during the term of this Agreement, he shall fail to be vested by Sizzler
with the powers and authority of the Vice President and General Counsel, as
described in Section 2.2, except in connection with a termination for Cause as
contemplated by Section 5.3; (b) a failure by Sizzler to comply with any
material provision of this Agreement which has not been cured within 10 days
after notice of such noncompliance has been given by Employee to Sizzler, or (c)
any purported termination of Employee's employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of Section 5.4.2
(and for purposes of this Agreement no such purported termination shall be
effective).
5.4.2 Any termination of Employee's employment by Sizzler or by
Employee (other than termination pursuant to Section 5.1) shall be communicated
by written Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Employee's employment under the provision so
indicated.
5.4.3 "Date of Termination" shall mean (i) if Employee's
employment is terminated by his death, the date of his death, (ii) if Employee's
employment is terminated pursuant to Section 5.2, thirty (30) days after Notice
of Termination is given (provided that Employee shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (iii) if Employee's employment is terminated for any other reason,
the date on which a Notice of Termination is given.
6. COMPENSATION UPON TERMINATION
6.1 If Employee's employment shall be terminated for Cause, Sizzler
shall pay Employee his full salary through the Date of Termination.
6.2 If (A) in breach of this Agreement, Sizzler shall terminate
Employee's employment other than pursuant to Section 5.2 or 5.3 (it being
understood that a purported termination pursuant to Section 5.2 or 5.3 which is
disputed and finally determined not to have been proper shall be a termination
by Sizzler in breach of this Agreement) or (B) Employee shall terminate his
employment for Good Reason, then
(i) Sizzler shall pay Employee his full salary through the Date
of Termination;
(ii) in lieu of any further salary payments to Employee for
periods subsequent to the Date of Termination, Sizzler shall pay as severance
pay to Employee an amount equal to one year of Employee's salary at Employee's
annual salary rate in effect as of the Date of Termination, such payment to be
made in a lump sum on or before the fifth day following the Date of Termination;
and
3
<PAGE>
(iii) if termination of Employee's employment arises out of a
breach by Sizzler of this Agreement, Sizzler shall pay all other damages (other
than consequential) to which Employee may be entitled as a result of such
breach.
6.3 Employee shall not be required to mitigate the amount of any
payment provided for in this Section 6 by seeking other employment or otherwise.
7. SUCCESSORS; BINDING AGREEMENT
Sizzler will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Sizzler, by agreement in form and substance
satisfactory to Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Sizzler would be
required to perform it if no such succession had taken place. Failure of
Sizzler to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Employee to
compensation from Sizzler in the same amount and on the same terms as he would
be entitled to hereunder if he terminated his employment for Good Reason, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used
in this Agreement, "Sizzler" shall be defined to mean and include any successor
to its business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 7 or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law.
8. OTHER PROVISIONS
8.1 Attorneys' Fees. The prevailing party in any suit, arbitration
or other proceeding brought to enforce any provisions of this Agreement, shall
be entitled to recover all costs and expenses of the proceeding and
investigation (not limited to court costs), including reasonable attorneys'
fees.
8.2 Entire Agreement. This Agreement is the only agreement and
understanding between the parties pertaining to the subject matter of this
Agreement, and supersedes all prior agreements, summaries of agreements,
descriptions of compensation packages, discussions, negotiations,
understandings, representations or warranties, whether verbal or written,
between the parties pertaining to such subject matter.
8.3 Governing Law. The validity, construction and performance of
this Agreement shall be governed by the laws, without regard to the laws as to
choice or conflict of laws, of the State of California.
8.4 Amendment and Waiver. This Agreement may be amended, modified or
supplemented only by a writing executed by each of the parties.
8.5 Notice. Except as otherwise expressly set forth herein, any
notices or communications required or permitted by this Agreement shall be
deemed sufficiently given if in writing and when delivered personally or 48
hours after deposit with the United States Postal Service as registered or
certified mail, postage prepaid and addressed as follows: (a) if to Sizzler, to
the principal office of Sizzler in the State of California, marked "Attention:
Chairman of the Board"; or (b) if to Employee, to the most recent address for
Employee appearing in Sizzler's records.
4
<PAGE>
8.6 Arbitration. Any dispute, action, suit or proceeding arising out
of or relating to this Agreement or the interpretation, performance or breach of
this Agreement shall, if demanded by any party, be determined and settled by
arbitration to be held in the County of Los Angeles, State of California, in
accordance with the rules of the American Arbitration Association. Any award
rendered by the arbitrator shall be final and binding upon each party to the
arbitration and judgment on the award may be entered in any court.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SIZZLER INTERNATIONAL, INC.
/s/ David J. Barton By /s/ Kevin W. Perkins
- ------------------------ ------------------------
DAVID J. BARTON Its CEO
------------------------
5
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is entered into as of May 1, 1996 by and between
Sizzler International, Inc., a Delaware corporation ("Sizzler"), and Elizabeth
A. Payne ("Employee"), an individual resident of California.
The parties agree as follows:
1. TERM. The term of this Agreement shall be for a period of three years,
beginning on the date hereof.
2. EMPLOYMENT
2.1 Employment. On the terms and conditions of this Agreement, Sizzler
hereby employs Employee and Employee hereby accepts such employment.
2.2 Position. Employee shall serve as the Vice President, Human
Resources. Employee shall have such powers and authority as may be prescribed
by the Chief Executive Officer or the Board of Directors or in the Bylaws of
Sizzler.
2.3 Duties. Employee shall devote her full business time, attention
and best efforts to the affairs of Sizzler during the term of this Agreement.
2.5 Place of Performance and Facilities. Employee shall be based at
the principal executive offices of Sizzler, except for required travel on
Sizzler business to an extent substantially consistent with industry practices.
Sizzler shall furnish Employee with office space, accommodations, staff and
clerical assistance appropriate for the performance of her duties.
3. COMPENSATION
3.1 Compensation. During the term of this Agreement, Sizzler shall pay
the amounts and provide the benefits described in this Section 3, and Employee
agrees to accept such amounts and benefits in full payment for Employee's
services under this Agreement.
3.2 Base Salary. Sizzler shall pay to Employee a base salary of
$151,000 annually in equal installments payable no less frequently than monthly.
Sizzler will review annually and may, in the discretion of its Board of
Directors, increase such base salary. If so increased, Employee's base salary
shall not thereafter be decreased.
3.3 Bonus Program. Employee shall be entitled to participate in the
Bonus Program described in Exhibit A hereto (the "Bonus Program"). Sizzler shall
review the Bonus Program annually and may, in the discretion of its Board of
Directors, increase the Bonus Program benefits. If so increased, the Bonus
Program benefits shall not thereafter be decreased.
3.4 Other Benefits. Employee shall be entitled to participate in all
such bonus, incentive award, medical, dental, automobile, pension, profit-
sharing, stock purchase, retirement income, life insurance, accident insurance,
salary continuation and/or disability income, survivor income, relocation, and
all other benefit plans and perquisites as Sizzler may make generally available
to its executive officers from time to time. Sizzler shall maintain in full
force and effect
EXHIBIT 10.8
<PAGE>
all incentive compensation and other benefit plans and arrangements in effect on
the date hereof, or plans or arrangements providing Employee with at least
equivalent benefits thereunder. Sizzler shall not make any changes in such
plans or arrangements which would adversely affect Employee's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to all
executives of Sizzler and does not result in a proportionately greater reduction
in the rights of or benefits to Employee as compared with any other executive of
Sizzler.
3.5 Vacations and Holidays. Employee shall be entitled to vacation
time in the amount generally made available by Sizzler from time to time to its
other executive officers. Employee shall also be entitled to such holidays with
full pay as Sizzler generally affords its executive employees.
4. REIMBURSEMENT OF EXPENSES
Sizzler shall pay to or reimburse Employee for all reasonable business
expenses incurred by her in connection with the performance of her duties under
this Agreement, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by Sizzler.
5. TERMINATION
Employee's employment under this Agreement may be terminated only under
the following circumstances:
5.1 Death. Employee's employment under this Agreement shall terminate
upon her death.
5.2 Disability. If, as a result of Employee's incapacity due to
physical or mental illness, she shall have been absent from her duties hereunder
on a full-time basis for the entire period of three consecutive months, and
within 30 days after written notice of termination is given (which may occur
before or after the end of such three-month period) shall not have returned to
the performance of her duties hereunder on a full-time basis, Sizzler may
terminate Employee's employment hereunder.
5.3 Cause. Sizzler may terminate Employee's employment under this
Agreement for "Cause." For purposes of this Agreement, Sizzler shall have
"Cause" to terminate Employee's employment hereunder upon: (a) the willful and
continued failure by Employee to substantially perform her duties hereunder
(other than any such failure resulting from Employee's incapacity due to
physical or mental illness), after demand for substantial performance is
delivered by Sizzler that specifically identifies the manner in which Sizzler
believes Employee has not substantially performed her duties, or (b) the willful
engaging by Employee in misconduct which is materially injurious to Sizzler,
monetarily or otherwise. For purposes of this Section 5.3, no act, or failure to
act, on Employee's part shall be considered "willful" unless done, or omitted to
be done, by her not in good faith and without reasonable belief that her action
or omission was in the best interest of Sizzler. Notwithstanding the foregoing,
Employee shall not be deemed to have been terminated for Cause without delivery
to Employee of a Notice of Termination as defined in Section 5.4.2 from Sizzler
finding that in Sizzler's good faith opinion Employee was guilty of conduct set
forth above in clause (a) or (b), and specifying the particulars thereof.
2
<PAGE>
5.4 Termination by Employee. Employee may terminate her employment
hereunder for Good Reason.
5.4.1 For purposes of this Agreement, "Good Reason" shall mean:
(a) a failure by the Board of Directors to re-elect Employee as the Vice
President, Human Resources or if she is removed from such office(s), or if at
any time during the term of this Agreement, she shall fail to be vested by
Sizzler with the powers and authority of the Vice President, Human Resources, as
described in Section 2.2, except in connection with a termination for Cause as
contemplated by Section 5.3; (b) a failure by Sizzler to comply with any
material provision of this Agreement which has not been cured within 10 days
after notice of such noncompliance has been given by Employee to Sizzler, or (c)
any purported termination of Employee's employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of Section 5.4.2
(and for purposes of this Agreement no such purported termination shall be
effective).
5.4.2 Any termination of Employee's employment by Sizzler or by
Employee (other than termination pursuant to Section 5.1) shall be communicated
by written Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Employee's employment under the provision so
indicated.
5.4.3 "Date of Termination" shall mean (i) if Employee's
employment is terminated by her death, the date of her death, (ii) if Employee's
employment is terminated pursuant to Section 5.2, thirty (30) days after Notice
of Termination is given.
6. COMPENSATION UPON TERMINATION
6.1 If Employee's employment shall be terminated for Cause, Sizzler
shall pay Employee her full salary through the Date of Termination.
6.2 If (A) in breach of this Agreement, Sizzler shall terminate
Employee's employment other than pursuant to Section 5.2 or 5.3 (it being
understood that a purported termination pursuant to Section 5.2 or 5.3 which is
disputed and finally determined not to have been proper shall be a termination
by Sizzler in breach of this Agreement) or (B) Employee shall terminate her
employment for Good Reason, then
(i) Sizzler shall pay Employee her full salary through the Date
of Termination;
(ii) in lieu of any further salary payments to Employee for
periods subsequent to the Date of Termination, Sizzler shall pay as severance
pay to Employee an amount equal to one year of Employee's salary at Employee's
annual salary rate in effect as of the Date of Termination, such payment to be
made in a lump sum on or before the fifth day following the Date of Termination;
and
3
<PAGE>
(iii) if termination of Employee's employment arises out of a
breach by Sizzler of this Agreement, Sizzler shall pay all other damages (other
than consequential) to which Employee may be entitled as a result of such
breach.
6.3 Employee shall not be required to mitigate the amount of any
payment provided for in this Section 6 by seeking other employment or otherwise.
7. SUCCESSORS; BINDING AGREEMENT
Sizzler will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Sizzler, by agreement in form and substance
satisfactory to Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Sizzler would be
required to perform it if no such succession had taken place. Failure of
Sizzler to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Employee to
compensation from Sizzler in the same amount and on the same terms as she would
be entitled to hereunder if she terminated her employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Sizzler" shall be defined to mean and include any
successor to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this Section 7 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
8. OTHER PROVISIONS
8.1 Attorneys' Fees. The prevailing party in any suit, arbitration
or other proceeding brought to enforce any provisions of this Agreement, shall
be entitled to recover all costs and expenses of the proceeding and
investigation (not limited to court costs), including reasonable attorneys'
fees.
8.2 Entire Agreement. This Agreement is the only agreement and
understanding between the parties pertaining to the subject matter of this
Agreement, and supersedes all prior agreements, summaries of agreements,
descriptions of compensation packages, discussions, negotiations,
understandings, representations or warranties, whether verbal or written,
between the parties pertaining to such subject matter.
8.3 Governing Law. The validity, construction and performance of
this Agreement shall be governed by the laws, without regard to the laws as to
choice or conflict of laws, of the State of California.
8.4 Amendment and Waiver. This Agreement may be amended, modified or
supplemented only by a writing executed by each of the parties.
8.5 Notice. Except as otherwise expressly set forth herein, any
notices or communications required or permitted by this Agreement shall be
deemed sufficiently given if in writing and when delivered personally or 48
hours after deposit with the United States Postal Service as registered or
certified mail, postage prepaid and addressed as follows: (a) if to Sizzler, to
the principal office of Sizzler in the State of California, marked "Attention:
Chairman of the Board"; or (b) if to Employee, to the most recent address for
Employee appearing in Sizzler's records.
4
<PAGE>
8.6 Arbitration. Any dispute, action, suit or proceeding arising out
of or relating to this Agreement or the interpretation, performance or breach of
this Agreement shall, if demanded by any party, be determined and settled by
arbitration to be held in the County of Los Angeles, State of California, in
accordance with the rules of the American Arbitration Association. Any award
rendered by the arbitrator shall be final and binding upon each party to the
arbitration and judgment on the award may be entered in any court.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SIZZLER INTERNATIONAL, INC.
/s/ Elizabeth A. Payne By /s/ Kevin W. Perkins
- ------------------------ ------------------------
ELIZABETH A. PAYNE Its CEO
------------------------
5
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is entered into as of May 1, 1996 by and between
Sizzler International, Inc., a Delaware corporation ("Sizzler"), and Ryan S.
Tondro ("Employee"), an individual resident of California.
The parties agree as follows:
1. TERM. The term of this Agreement shall be for a period of three years,
beginning on the date hereof.
2. EMPLOYMENT
2.1 Employment. On the terms and conditions of this Agreement, Sizzler
hereby employs Employee and Employee hereby accepts such employment.
2.2 Position. Employee shall serve as the Vice President, Controller
and Chief Accounting Officer. Employee shall have such powers and authority as
may be prescribed by the Chief Executive Officer or the Board of Directors or in
the Bylaws of Sizzler.
2.3 Duties. Employee shall devote his full business time, attention and
best efforts to the affairs of Sizzler during the term of this Agreement.
2.5 Place of Performance and Facilities. Employee shall be based at the
principal executive offices of Sizzler, except for required travel on Sizzler
business to an extent substantially consistent with industry practices. Sizzler
shall furnish Employee with office space, accommodations, staff and clerical
assistance appropriate for the performance of his duties.
3. COMPENSATION
3.1 Compensation. During the term of this Agreement, Sizzler shall pay
the amounts and provide the benefits described in this Section 3, and Employee
agrees to accept such amounts and benefits in full payment for Employee's
services under this Agreement.
3.2 Base Salary. Sizzler shall pay to Employee a base salary of
$140,000 annually in equal installments payable no less frequently than monthly.
Sizzler will review annually and may, in the discretion of its Board of
Directors, increase such base salary. If so increased, Employee's base salary
shall not thereafter be decreased.
3.3 Bonus Program. Employee shall be entitled to participate in the
Bonus Program described in Exhibit A hereto (the "Bonus Program"). Sizzler shall
review the Bonus Program annually and may, in the discretion of its Board of
Directors, increase the Bonus Program benefits. If so increased, the Bonus
Program benefits shall not thereafter be decreased.
3.4 Other Benefits. Employee shall be entitled to participate in all
such bonus, incentive award, medical, dental, automobile, pension, profit-
sharing, stock purchase, retirement income, life insurance, accident insurance,
salary continuation and/or disability income, survivor income, relocation, and
all other benefit plans and perquisites as Sizzler may make generally available
to its executive officers from time to time. Sizzler shall maintain in full
force and effect
EXHIBIT 10.9
<PAGE>
all incentive compensation and other benefit plans and arrangements in effect on
the date hereof, or plans or arrangements providing Employee with at least
equivalent benefits thereunder. Sizzler shall not make any changes in such
plans or arrangements which would adversely affect Employee's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to all
executives of Sizzler and does not result in a proportionately greater reduction
in the rights of or benefits to Employee as compared with any other executive of
Sizzler.
3.5 Vacations and Holidays. Employee shall be entitled to vacation time
in the amount generally made available by Sizzler from time to time to its other
executive officers. Employee shall also be entitled to such holidays with full
pay as Sizzler generally affords its executive employees.
4. REIMBURSEMENT OF EXPENSES
Sizzler shall pay to or reimburse Employee for all reasonable business
expenses incurred by him in connection with the performance of his duties under
this Agreement, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by Sizzler.
5. TERMINATION
Employee's employment under this Agreement may be terminated only under
the following circumstances:
5.1 Death. Employee's employment under this Agreement shall terminate
upon his death.
5.2 Disability. If, as a result of Employee's incapacity due to
physical or mental illness, he shall have been absent from his duties hereunder
on a full-time basis for the entire period of three consecutive months, and
within 30 days after written notice of termination is given (which may occur
before or after the end of such three-month period) shall not have returned to
the performance of his duties hereunder on a full-time basis, Sizzler may
terminate Employee's employment hereunder.
5.3 Cause. Sizzler may terminate Employee's employment under this
Agreement for "Cause." For purposes of this Agreement, Sizzler shall have
"Cause" to terminate Employee's employment hereunder upon: (a) the willful and
continued failure by Employee to substantially perform his duties hereunder
(other than any such failure resulting from Employee's incapacity due to
physical or mental illness), after demand for substantial performance is
delivered by Sizzler that specifically identifies the manner in which Sizzler
believes Employee has not substantially performed his duties, or (b) the willful
engaging by Employee in misconduct which is materially injurious to Sizzler,
monetarily or otherwise. For purposes of this Section 5.3, no act, or failure to
act, on Employee's part shall be considered "willful" unless done, or omitted to
be done, by him not in good faith and without reasonable belief that his action
or omission was in the best interest of Sizzler. Notwithstanding the foregoing,
Employee shall not be deemed to have been terminated for Cause without delivery
to Employee of a Notice of Termination as defined in Section 5.4.2 from Sizzler
finding that in Sizzler's good faith opinion Employee was guilty of conduct set
forth above in clause (a) or (b), and specifying the particulars thereof.
2
<PAGE>
5.4 Termination by Employee. Employee may terminate his employment
hereunder for Good Reason.
5.4.1 For purposes of this Agreement, "Good Reason" shall mean:
(a) a failure by the Board of Directors to re-elect Employee as the Vice
President, Controller, and Chief Accounting Officer or if he is removed from
such office(s), or if at any time during the term of this Agreement, he shall
fail to be vested by Sizzler with the powers and authority of the Vice
President, Controller, and Chief Accounting Officer, as described in Section
2.2, except in connection with a termination for Cause as contemplated by
Section 5.3; (b) a failure by Sizzler to comply with any material provision of
this Agreement which has not been cured within 10 days after notice of such
noncompliance has been given by Employee to Sizzler, or (c) any purported
termination of Employee's employment which is not effected pursuant to a Notice
of Termination satisfying the requirements of Section 5.4.2 (and for purposes of
this Agreement no such purported termination shall be effective).
5.4.2 Any termination of Employee's employment by Sizzler or by
Employee (other than termination pursuant to Section 5.1) shall be communicated
by written Notice of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Employee's employment under the provision so indicated.
5.4.3 "Date of Termination" shall mean (i) if Employee's
employment is terminated by his death, the date of his death, (ii) if Employee's
employment is terminated pursuant to Section 5.2, thirty (30) days after Notice
of Termination is given (provided that Employee shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (iii) if Employee's employment is terminated for any other reason,
the date on which a Notice of Termination is given.
6. COMPENSATION UPON TERMINATION
6.1 If Employee's employment shall be terminated for Cause, Sizzler
shall pay Employee his full salary through the Date of Termination.
6.2 If (A) in breach of this Agreement, Sizzler shall terminate
Employee's employment other than pursuant to Section 5.2 or 5.3 (it being
understood that a purported termination pursuant to Section 5.2 or 5.3 which is
disputed and finally determined not to have been proper shall be a termination
by Sizzler in breach of this Agreement) or (B) Employee shall terminate his
employment for Good Reason, then
(i) Sizzler shall pay Employee his full salary through the Date of
Termination;
(ii) in lieu of any further salary payments to Employee for
periods subsequent to the Date of Termination, Sizzler shall pay as severance
pay to Employee an amount equal to one year of Employee's salary at Employee's
annual salary rate in effect as of the Date of Termination, such payment to be
made in a lump sum on or before the fifth day following the Date of Termination;
and
3
<PAGE>
(iii) if termination of Employee's employment arises out of a
breach by Sizzler of this Agreement, Sizzler shall pay all other damages (other
than consequential) to which Employee may be entitled as a result of such
breach.
6.3 Employee shall not be required to mitigate the amount of any
payment provided for in this Section 6 by seeking other employment or otherwise.
7. SUCCESSORS; BINDING AGREEMENT
Sizzler will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Sizzler, by agreement in form and substance
satisfactory to Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Sizzler would be
required to perform it if no such succession had taken place. Failure of Sizzler
to obtain such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Employee to compensation from
Sizzler in the same amount and on the same terms as he would be entitled to
hereunder if he terminated his employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Sizzler" shall be defined to mean and include any successor to its
business and/or assets as aforesaid which executes and delivers the agreement
provided for in this Section 7 or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law.
8. OTHER PROVISIONS
8.1 Attorneys' Fees. The prevailing party in any suit, arbitration or
other proceeding brought to enforce any provisions of this Agreement, shall be
entitled to recover all costs and expenses of the proceeding and investigation
(not limited to court costs), including reasonable attorneys' fees.
8.2 Entire Agreement. This Agreement is the only agreement and
understanding between the parties pertaining to the subject matter of this
Agreement, and supersedes all prior agreements, summaries of agreements,
descriptions of compensation packages, discussions, negotiations,
understandings, representations or warranties, whether verbal or written,
between the parties pertaining to such subject matter.
8.3 Governing Law. The validity, construction and performance of
this Agreement shall be governed by the laws, without regard to the laws as to
choice or conflict of laws, of the State of California.
8.4 Amendment and Waiver. This Agreement may be amended, modified or
supplemented only by a writing executed by each of the parties.
8.5 Notice. Except as otherwise expressly set forth herein, any
notices or communications required or permitted by this Agreement shall be
deemed sufficiently given if in writing and when delivered personally or 48
hours after deposit with the United States Postal Service as registered or
certified mail, postage prepaid and addressed as follows: (a) if to Sizzler, to
the principal office of Sizzler in the State of California, marked "Attention:
Chairman of the Board"; or (b) if to Employee, to the most recent address for
Employee appearing in Sizzler's records.
4
<PAGE>
8.6 Arbitration. Any dispute, action, suit or proceeding arising out
of or relating to this Agreement or the interpretation, performance or breach of
this Agreement shall, if demanded by any party, be determined and settled by
arbitration to be held in the County of Los Angeles, State of California, in
accordance with the rules of the American Arbitration Association. Any award
rendered by the arbitrator shall be final and binding upon each party to the
arbitration and judgment on the award may be entered in any court.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SIZZLER INTERNATIONAL, INC.
/s/ Ryan S. Tondro By /s/ Kevin W. Perkins
- ------------------------ ------------------------------
RYAN S. TONDRO Its CEO
------------------------------
5
<PAGE>
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is entered into as of May 1, 1996 by and between
Sizzler International, Inc., a Delaware corporation ("Sizzler"), and Richard
C. Kowalski ("Employee"), an individual resident of California.
The parties agree as follows:
1. TERM. The term of this Agreement shall be for a period of three years,
beginning on the date hereof.
2. EMPLOYMENT
2.1 Employment. On the terms and conditions of this Agreement, Sizzler
hereby employs Employee and Employee hereby accepts such employment.
2.2 Position. Employee shall serve as the Vice President, Marketing.
Employee shall have such powers and authority as may be prescribed by the Chief
Executive Officer or the Board of Directors or in the Bylaws of Sizzler.
2.3 Duties. Employee shall devote his full business time, attention and
best efforts to the affairs of Sizzler during the term of this Agreement.
2.5 Place of Performance and Facilities. Employee shall be based at the
principal executive offices of Sizzler, except for required travel on Sizzler
business to an extent substantially consistent with industry practices. Sizzler
shall furnish Employee with office space, accommodations, staff and clerical
assistance appropriate for the performance of his duties.
3. COMPENSATION
3.1 Compensation. During the term of this Agreement, Sizzler shall pay
the amounts and provide the benefits described in this Section 3, and Employee
agrees to accept such amounts and benefits in full payment for Employee's
services under this Agreement.
3.2 Base Salary. Sizzler shall pay to Employee a base salary of
$120,000 annually in equal installments payable no less frequently than monthly.
Sizzler will review annually and may, in the discretion of its Board of
Directors, increase such base salary. If so increased, Employee's base salary
shall not thereafter be decreased.
3.3 Bonus Program. Employee shall be entitled to participate in the
Bonus Program described in Exhibit A hereto (the "Bonus Program"). Sizzler shall
review the Bonus Program annually and may, in the discretion of its Board of
Directors, increase the Bonus Program benefits. If so increased, the Bonus
Program benefits shall not thereafter be decreased.
3.4 Other Benefits. Employee shall be entitled to participate in all
such bonus, incentive award, medical, dental, automobile, pension, profit-
sharing, stock purchase, retirement income, life insurance, accident insurance,
salary continuation and/or disability income, survivor income, relocation, and
all other benefit plans and perquisites as Sizzler may make generally available
to its executive officers from time to time. Sizzler shall maintain in full
force and effect
<PAGE>
all incentive compensation and other benefit plans and arrangements in effect on
the date hereof, or plans or arrangements providing Employee with at least
equivalent benefits thereunder. Sizzler shall not make any changes in such plans
or arrangements which would adversely affect Employee's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to all
executives of Sizzler and does not result in a proportionately greater reduction
in the rights of or benefits to Employee as compared with any other executive of
Sizzler.
3.5 Vacations and Holidays. Employee shall be entitled to vacation
time in the amount generally made available by Sizzler from time to time to its
other executive officers. Employee shall also be entitled to such holidays with
full pay as Sizzler generally affords its executive employees.
4. REIMBURSEMENT OF EXPENSES
Sizzler shall pay to or reimburse Employee for all reasonable business
expenses incurred by him in connection with the performance of his duties under
this Agreement, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by Sizzler.
5. TERMINATION
Employee's employment under this Agreement may be terminated only under
the following circumstances:
5.1 Death. Employee's employment under this Agreement shall terminate
upon his death.
5.2 Disability. If, as a result of Employee's incapacity due to
physical or mental illness, he shall have been absent from his duties hereunder
on a full-time basis for the entire period of three consecutive months, and
within 30 days after written notice of termination is given (which may occur
before or after the end of such three-month period) shall not have returned to
the performance of his duties hereunder on a full-time basis, Sizzler may
terminate Employee's employment hereunder.
5.3 Cause. Sizzler may terminate Employee's employment under this
Agreement for "Cause." For purposes of this Agreement, Sizzler shall have
"Cause" to terminate Employee's employment hereunder upon: (a) the willful and
continued failure by Employee to substantially perform his duties hereunder
(other than any such failure resulting from Employee's incapacity due to
physical or mental illness), after demand for substantial performance is
delivered by Sizzler that specifically identifies the manner in which Sizzler
believes Employee has not substantially performed his duties, or (b) the willful
engaging by Employee in misconduct which is materially injurious to Sizzler,
monetarily or otherwise. For purposes of this Section 5.3, no act, or failure to
act, on Employee's part shall be considered "willful" unless done, or omitted to
be done, by him not in good faith and without reasonable belief that his action
or omission was in the best interest of Sizzler. Notwithstanding the foregoing,
Employee shall not be deemed to have been terminated for Cause without delivery
to Employee of a Notice of Termination as defined in Section 5.4.2 from Sizzler
finding that in Sizzler's good faith opinion Employee was guilty of conduct set
forth above in clause (a) or (b), and specifying the particulars thereof.
2
<PAGE>
5.4 Termination by Employee. Employee may terminate his employment
hereunder for Good Reason.
5.4.1 For purposes of this Agreement, "Good Reason" shall mean: (a)
a failure by the Board of Directors to re-elect Employee as the Vice President,
Marketing, if he is removed from such office(s), or if at any time during the
term of this Agreement, he shall fail to be vested by Sizzler with the powers
and authority of the Vice President, Marketing, as described in Section 2.2,
except in connection with a termination for Cause as contemplated by Section
5.3; (b) a failure by Sizzler to comply with any material provision of this
Agreement which has not been cured within 10 days after notice of such
noncompliance has been given by Employee to Sizzler, or (c) any purported
termination of Employee's employment which is not effected pursuant to a Notice
of Termination satisfying the requirements of Section 5.4.2 (and for purposes of
this Agreement no such purported termination shall be effective).
5.4.2 Any termination of Employee's employment by Sizzler or by
Employee (other than termination pursuant to Section 5.1) shall be communicated
by written Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Employee's employment under the provision so
indicated.
5.4.3 "Date of Termination" shall mean (i) if Employee's
employment is terminated by his death, the date of his death, (ii) if Employee's
employment is terminated pursuant to Section 5.2, thirty (30) days after Notice
of Termination is given (provided that Employee shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (iii) if Employee's employment is terminated for any other reason,
the date on which a Notice of Termination is given.
6. COMPENSATION UPON TERMINATION
6.1 If Employee's employment shall be terminated for Cause, Sizzler
shall pay Employee his full salary through the Date of Termination.
6.2 If (A) in breach of this Agreement, Sizzler shall terminate
Employee's employment other than pursuant to Section 5.2 or 5.3 (it being
understood that a purported termination pursuant to Section 5.2 or 5.3 which is
disputed and finally determined not to have been proper shall be a termination
by Sizzler in breach of this Agreement) or (B) Employee shall terminate his
employment for Good Reason, then
(i) Sizzler shall pay Employee his full salary through the Date
of Termination;
(ii) in lieu of any further salary payments to Employee for periods
subsequent to the Date of Termination, Sizzler shall pay as severance pay to
Employee an amount equal to one year of Employee's salary at Employee's annual
salary rate in effect as of the Date of Termination, such payment to be made in
a lump sum on or before the fifth day following the Date of Termination; and
3
<PAGE>
(iii) if termination of Employee's employment arises out of a breach
by Sizzler of this Agreement, Sizzler shall pay all other damages (other than
consequential) to which Employee may be entitled as a result of such breach.
6.3 Employee shall not be required to mitigate the amount of any
payment provided for in this Section 6 by seeking other employment or otherwise.
7. SUCCESSORS; BINDING AGREEMENT
Sizzler will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Sizzler, by agreement in form and substance
satisfactory to Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Sizzler would be
required to perform it if no such succession had taken place. Failure of Sizzler
to obtain such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Employee to compensation from
Sizzler in the same amount and on the same terms as he would be entitled to
hereunder if he terminated his employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Sizzler" shall be defined to mean and include any successor to its
business and/or assets as aforesaid which executes and delivers the agreement
provided for in this Section 7 or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law.
8. OTHER PROVISIONS
8.1 Attorneys' Fees. The prevailing party in any suit, arbitration
or other proceeding brought to enforce any provisions of this Agreement, shall
be entitled to recover all costs and expenses of the proceeding and
investigation (not limited to court costs), including reasonable attorneys'
fees.
8.2 Entire Agreement. This Agreement is the only agreement and
understanding between the parties pertaining to the subject matter of this
Agreement, and supersedes all prior agreements, summaries of agreements,
descriptions of compensation packages, discussions, negotiations,
understandings, representations or warranties, whether verbal or written,
between the parties pertaining to such subject matter.
8.3 Governing Law. The validity, construction and performance of
this Agreement shall be governed by the laws, without regard to the laws as to
choice or conflict of laws, of the State of California.
8.4 Amendment and Waiver. This Agreement may be amended, modified or
supplemented only by a writing executed by each of the parties.
8.5 Notice. Except as otherwise expressly set forth herein, any
notices or communications required or permitted by this Agreement shall be
deemed sufficiently given if in writing and when delivered personally or 48
hours after deposit with the United States Postal Service as registered or
certified mail, postage prepaid and addressed as follows: (a) if to Sizzler, to
the principal office of Sizzler in the State of California, marked "Attention:
Chairman of the Board"; or (b) if to Employee, to the most recent address for
Employee appearing in Sizzler's records.
4
<PAGE>
8.6 Arbitration. Any dispute, action, suit or proceeding arising out
of or relating to this Agreement or the interpretation, performance or breach of
this Agreement shall, if demanded by any party, be determined and settled by
arbitration to be held in the County of Los Angeles, State of California, in
accordance with the rules of the American Arbitration Association. Any award
rendered by the arbitrator shall be final and binding upon each party to the
arbitration and judgment on the award may be entered in any court.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SIZZLER INTERNATIONAL, INC.
/s/ Richard Kowalski By /s/ Kevin W. Perkins
- ------------------------ --------------------------
RICHARD C. KOWALSKI
Its CEO
--------------------------
5
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is entered into as of May 1, 1996 by and between
Sizzler International, Inc., a Delaware corporation ("Sizzler"), and Michael
J. Raedeke ("Employee"), an individual resident of California.
The parties agree as follows:
1. TERM. The term of this Agreement shall be for a period of three years,
beginning on the date hereof.
2. EMPLOYMENT
2.1 Employment. On the terms and conditions of this Agreement, Sizzler
hereby employs Employee and Employee hereby accepts such employment.
2.2 Position. Employee shall serve as the Vice President, Taxation and
Internal Audit. Employee shall have such powers and authority as may be
prescribed by the Chief Executive Officer or the Board of Directors or in the
Bylaws of Sizzler.
2.3 Duties. Employee shall devote his full business time, attention and
best efforts to the affairs of Sizzler during the term of this Agreement.
2.5 Place of Performance and Facilities. Employee shall be based at the
principal executive offices of Sizzler, except for required travel on Sizzler
business to an extent substantially consistent with industry practices. Sizzler
shall furnish Employee with office space, accommodations, staff and clerical
assistance appropriate for the performance of his duties.
3. COMPENSATION
3.1 Compensation. During the term of this Agreement, Sizzler shall pay
the amounts and provide the benefits described in this Section 3, and Employee
agrees to accept such amounts and benefits in full payment for Employee's
services under this Agreement.
3.2 Base Salary. Sizzler shall pay to Employee a base salary of
$115,000 annually in equal installments payable no less frequently than monthly.
Sizzler will review annually and may, in the discretion of its Board of
Directors, increase such base salary. If so increased, Employee's base salary
shall not thereafter be decreased.
3.3 Bonus Program. Employee shall be entitled to participate in the
Bonus Program described in Exhibit A hereto (the "Bonus Program"). Sizzler shall
review the Bonus Program annually and may, in the discretion of its Board of
Directors, increase the Bonus Program benefits. If so increased, the Bonus
Program benefits shall not thereafter be decreased.
3.4 Other Benefits. Employee shall be entitled to participate in all
such bonus, incentive award, medical, dental, automobile, pension, profit-
sharing, stock purchase, retirement income, life insurance, accident insurance,
salary continuation and/or disability income, survivor income, relocation, and
all other benefit plans and perquisites as Sizzler may make generally available
to its executive officers from time to time. Sizzler shall maintain in full
force and effect
EXHIBIT 10.11
<PAGE>
all incentive compensation and other benefit plans and arrangements in effect on
the date hereof, or plans or arrangements providing Employee with at least
equivalent benefits thereunder. Sizzler shall not make any changes in such
plans or arrangements which would adversely affect Employee's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to all
executives of Sizzler and does not result in a proportionately greater reduction
in the rights of or benefits to Employee as compared with any other executive of
Sizzler.
3.5 Vacations and Holidays. Employee shall be entitled to vacation
time in the amount generally made available by Sizzler from time to time to its
other executive officers. Employee shall also be entitled to such holidays with
full pay as Sizzler generally affords its executive employees.
4. REIMBURSEMENT OF EXPENSES
Sizzler shall pay to or reimburse Employee for all reasonable business
expenses incurred by him in connection with the performance of his duties under
this Agreement, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by Sizzler.
5. TERMINATION
Employee's employment under this Agreement may be terminated only under
the following circumstances:
5.1 Death. Employee's employment under this Agreement shall terminate
upon his death.
5.2 Disability. If, as a result of Employee's incapacity due to
physical or mental illness, he shall have been absent from his duties hereunder
on a full-time basis for the entire period of three consecutive months, and
within 30 days after written notice of termination is given (which may occur
before or after the end of such three-month period) shall not have returned to
the performance of his duties hereunder on a full-time basis, Sizzler may
terminate Employee's employment hereunder.
5.3 Cause. Sizzler may terminate Employee's employment under this
Agreement for "Cause." For purposes of this Agreement, Sizzler shall have
"Cause" to terminate Employee's employment hereunder upon: (a) the willful and
continued failure by Employee to substantially perform his duties hereunder
(other than any such failure resulting from Employee's incapacity due to
physical or mental illness), after demand for substantial performance is
delivered by Sizzler that specifically identifies the manner in which Sizzler
believes Employee has not substantially performed his duties, or (b) the willful
engaging by Employee in misconduct which is materially injurious to Sizzler,
monetarily or otherwise. For purposes of this Section 5.3, no act, or failure to
act, on Employee's part shall be considered "willful" unless done, or omitted to
be done, by him not in good faith and without reasonable belief that his action
or omission was in the best interest of Sizzler. Notwithstanding the foregoing,
Employee shall not be deemed to have been terminated for Cause without delivery
to Employee of a Notice of Termination as defined in Section 5.4.2 from Sizzler
finding that in Sizzler's good faith opinion Employee was guilty of conduct set
forth above in clause (a) or (b), and specifying the particulars thereof.
2
<PAGE>
5.4 Termination by Employee. Employee may terminate his employment
hereunder for Good Reason.
5.4.1 For purposes of this Agreement, "Good Reason" shall mean:
(a) a failure by the Board of Directors to re-elect Employee as the Vice
President, Taxation and Internal Audit or if he is removed from such office(s),
or if at any time during the term of this Agreement, he shall fail to be vested
by Sizzler with the powers and authority of the Vice President, Taxation and
Internal Audit, as described in Section 2.2, except in connection with a
termination for Cause as contemplated by Section 5.3; (b) a failure by Sizzler
to comply with any material provision of this Agreement which has not been cured
within 10 days after notice of such noncompliance has been given by Employee to
Sizzler, or (c) any purported termination of Employee's employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 5.4.2 (and for purposes of this Agreement no such purported termination
shall be effective).
5.4.2 Any termination of Employee's employment by Sizzler or by
Employee (other than termination pursuant to Section 5.1) shall be communicated
by written Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Employee's employment under the provision so
indicated.
5.4.3 "Date of Termination" shall mean (i) if Employee's
employment is terminated by his death, the date of his death, (ii) if Employee's
employment is terminated pursuant to Section 5.2, thirty (30) days after Notice
of Termination is given (provided that Employee shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (iii) if Employee's employment is terminated for any other reason,
the date on which a Notice of Termination is given.
6. COMPENSATION UPON TERMINATION
6.1 If Employee's employment shall be terminated for Cause, Sizzler
shall pay Employee his full salary through the Date of Termination.
6.2 If (A) in breach of this Agreement, Sizzler shall terminate
Employee's employment other than pursuant to Section 5.2 or 5.3 (it being
understood that a purported termination pursuant to Section 5.2 or 5.3 which is
disputed and finally determined not to have been proper shall be a termination
by Sizzler in breach of this Agreement) or (B) Employee shall terminate his
employment for Good Reason, then
(i) Sizzler shall pay Employee his full salary through the Date
of Termination;
(ii) in lieu of any further salary payments to Employee for
periods subsequent to the Date of Termination, Sizzler shall pay as severance
pay to Employee an amount equal to one year of Employee's salary at Employee's
annual salary rate in effect as of the Date of Termination, such payment to be
made in a lump sum on or before the fifth day following the Date of Termination;
and
3
<PAGE>
(iii) if termination of Employee's employment arises out of a
breach by Sizzler of this Agreement, Sizzler shall pay all other damages (other
than consequential) to which Employee may be entitled as a result of such
breach.
6.3 Employee shall not be required to mitigate the amount of any
payment provided for in this Section 6 by seeking other employment or otherwise.
7. SUCCESSORS; BINDING AGREEMENT
Sizzler will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Sizzler, by agreement in form and substance
satisfactory to Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Sizzler would be
required to perform it if no such succession had taken place. Failure of
Sizzler to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Employee to
compensation from Sizzler in the same amount and on the same terms as he would
be entitled to hereunder if he terminated his employment for Good Reason, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used
in this Agreement, "Sizzler" shall be defined to mean and include any successor
to its business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 7 or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law.
8. OTHER PROVISIONS
8.1 Attorneys' Fees. The prevailing party in any suit, arbitration
or other proceeding brought to enforce any provisions of this Agreement, shall
be entitled to recover all costs and expenses of the proceeding and
investigation (not limited to court costs), including reasonable attorneys'
fees.
8.2 Entire Agreement. This Agreement is the only agreement and
understanding between the parties pertaining to the subject matter of this
Agreement, and supersedes all prior agreements, summaries of agreements,
descriptions of compensation packages, discussions, negotiations,
understandings, representations or warranties, whether verbal or written,
between the parties pertaining to such subject matter.
8.3 Governing Law. The validity, construction and performance of
this Agreement shall be governed by the laws, without regard to the laws as to
choice or conflict of laws, of the State of California.
8.4 Amendment and Waiver. This Agreement may be amended, modified or
supplemented only by a writing executed by each of the parties.
8.5 Notice. Except as otherwise expressly set forth herein, any
notices or communications required or permitted by this Agreement shall be
deemed sufficiently given if in writing and when delivered personally or 48
hours after deposit with the United States Postal Service as registered or
certified mail, postage prepaid and addressed as follows: (a) if to Sizzler,
to the principal office of Sizzler in the State of California, marked
"Attention: Chairman of the Board"; or (b) if to Employee, to the most recent
address for Employee appearing in Sizzler's records.
4
<PAGE>
8.6 Arbitration. Any dispute, action, suit or proceeding arising out
of or relating to this Agreement or the interpretation, performance or breach of
this Agreement shall, if demanded by any party, be determined and settled by
arbitration to be held in the County of Los Angeles, State of California, in
accordance with the rules of the American Arbitration Association. Any award
rendered by the arbitrator shall be final and binding upon each party to the
arbitration and judgment on the award may be entered in any court.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SIZZLER INTERNATIONAL, INC.
/s/ Michael J. Raedeke By /s/ Kevin W. Perkins
- -------------------------- -------------------------------------
MICHAEL J. RAEDEKE Its President and Chief Executive Officer
-------------------------------------
5
<PAGE>
EXHIBIT 10.12
SIZZLER INTERNATIONAL, INC.
---------------------------
EXECUTIVE BONUS PROGRAM
May 1, 1996
-----------
PROGRAM
- -------
This Executive Bonus Program is provided by Sizzler International, Inc.
(the "Company") to Participant on the terms and conditions set forth below. The
term of the Program begins on May 1, 1996 and continues until the Program
Termination Date.
In consideration of Participant remaining in the employment of the Company
until the accomplishment of a Key Objective, the Company will, in connection
with the first Key Objective to occur, pay to the Participant a one-time cash
bonus equal to the Bonus Amount.
The bonus will paid in connection with only the first Key Objective to
occur (i.e., a Transaction or an Emergence, but not both). Payment of the bonus
--
will be made on or before the fifth business day following the Transaction Date
or the Emergence Date, as the case may be. The Participant will not earn the
bonus, and entitlement to the bonus will not accrue, until the occurrence of the
first Key Objective. Payment of the bonus will be subject to Participant's
eligibility on such date.
TERMS AND CONDITIONS
- --------------------
PARTICIPANT:
BONUS AMOUNT: % of the Participant's annual base salary on the
Program Termination Date.
ELIGIBILITY: To be eligible, the Participant must remain continously
employed by the Company or any of its subsidiaries on a
full-time basis throughout the term of the Program.
KEY OBJECTIVES: 1. Confirmation of a plan of reorganization for the
Company in any proceeding under Chapter 11 of the
federal bankruptcy law, which proceeding is
commenced on or before May 1, 1997; or
2. Consummation of a Transaction on or before the
Emergence Date.
TRANSACTION: Whether in one or a series of related or roughly
contemporaneous transactions, any merger or
consolidation, tender or exchange offer, change of
control, sale of all or substantially all assets,
negotiated sale, leveraged buyout, or other
extraordinary corporate transaction involving the
assets, securities, or businesses of the Company.
EMERGENCE DATE: The effective date of the court order confirming the
Company's plan of reorganization.
TRANSACTION DATE: The effective date of the consummation of a Transaction.
PROGRAM
TERMINATION DATE: The first to occur of an Emergence Date, a Transaction
Date, or May 1, 1998.
<PAGE>
EXHIBIT 10.22
FIRST AMENDMENT TO
REVOLVING CREDIT AGREEMENT
THIS FIRST AMENDMENT TO THE REVOLVING CREDIT AGREEMENT ("Amendment")
is made as of September 18, 1995, among Sizzler International, Inc., a Delaware
corporation (the "Company"), its wholly-owned subsidiary CFI Insurers, Ltd.
("CFI"), each of the banks identified on the signature pages hereof (each a
"Bank" and, collectively, the "Banks") and The Bank of New York, as Agent Bank
and Issuing Bank.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company, CFI, the Banks, the Agent Bank and the Issuing
Bank entered into the Revolving Credit Agreement, dated as of March 22, 1995
(the "Credit Agreement"); and
WHEREAS, the parties hereto desire to amend the Credit Agreement and
waive certain covenants 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 such terms in the Credit Agreement.
2. The parties hereto agree that the declaration of a dividend on
August 23, 1995, which constituted a failure by the Company to observe the
covenant in Section 8.02(h) for the Fiscal Quarter ending October 15, 1995,
shall not constitute a Default or an Event of Default under the Credit
Agreement.
3. Section 1.02(a) of the Credit Agreement is amended to read in its
entirety as follows:
"(a) The Company may borrow pursuant to this Article I by giving the
Agent Bank written notice of its request for a Loan, which shall be in the
amount of $1,000,000 or an integral multiple thereof in the case of a
Eurodollar Loan and $500,000 or an integral multiple of $100,000 in excess
thereof in the case of an Alternate Base Rate Loan, such notice (a "Loan
<PAGE>
Notice") to be substantially in the form of Exhibit A attached hereto and
given not less than three Business Days prior to the first day of the
funding of such Loan in the case of a Eurodollar Loan and 11:00 A.M. (New
York time) on the Business Day of the funding of such Loan in the case of
an Alternate Base Rate Loan. Such Loan Notice shall specify (i) the date of
the proposed borrowing (the "Borrowing Date"), (ii) the amount of the Loan,
(iii) whether the Loan is to bear interest as an Alternate Base Rate Loan
or a Eurodollar Loan, (iv) if the Loan is to bear interest as a Eurodollar
Loan, the term of the Interest Period therefor, (v) if the Loan is to be
used to repay, in whole or in part, outstanding Loans, the amount and
maturity of such Loans and (vi) if applicable, that the proceeds of such
Loan are to be used to reimburse a drawing under a Letter of Credit."
4. Section 2.06 of the Credit Agreement is amended by deleting
the table at the end of the first sentence and replacing it with the following
table:
<TABLE>
<CAPTION>
Debt Coverage Ratio Percentage
------------------- ----------
<S> <C>
greater than 3.0 0.500%
less than or equal to 3.0 but greater than 2.5 0.750%
less than or equal to 2.5 but greater than 2.0 1.000%
less than or equal to 2.0 1.250%.
</TABLE>
5. Section 4.02(c) of the Credit Agreement is amended by
deleting the table at the end and replacing it with the following table:
<TABLE>
<CAPTION>
Debt Coverage Ratio Percentage
------------------- ----------
<S> <C>
greater than 3.0 0.500%
less than or equal to 3.0 but greater than 2.5 0.750%
less than or equal to 2.5 but greater than 2.0 1.000%
less than or equal to 2.0 1.250%.
</TABLE>
6. Section 8.02(h) of the Credit Agreement is amended to read in its
entirety as follows:
"(h) Dividends and Purchase of Stock. Declare any dividends (other
-------------------------------
than dividends payable in capital stock of the Company) on any Shares, or
apply any of its property or assets to the purchase, redemption or other
retirement of, or set apart any sum for the payment of any dividends on, or
for the purchase, redemption or other retirement of, or make any other
distribution by reduction of capital or otherwise in
-2-
<PAGE>
respect of, any Shares, or permit any Subsidiary which is not a Wholly-
owned Subsidiary so to do, or permit any Subsidiary to purchase or acquire
any Shares, provided, however, that
-------- -------
(A) during the Fiscal Quarter ended February 2, 1997, the Company
may declare and pay a dividend if (1) immediately after giving effect to
such declaration, there shall exist no Default or Event of Default and (2)
the amount of such dividend is no greater than one fourth of the
consolidated net income after taxes of the Company and its Subsidiaries for
the preceding four Fiscal Quarters; and
(B) at any time after February 2, 1997 and prior to March 22, 1997,
the Company may declare and pay a dividend if (1) immediately after giving
effect to such declaration, there shall exist no Default or Event of
Default and (2) the aggregate amount of all dividends declared or paid
during that period and the previous Fiscal Quarter is no greater than one
half of the consolidated net income after taxes of the Company and its
Subsidiaries for the preceding four Fiscal Quarters or, if no dividend has
been declared or paid during the previous Fiscal Quarter, the amount of
such dividend during that period is no greater than one fourth of the
consolidated net income after taxes of the Company and its Subsidiaries for
the preceding four Fiscal Quarters.
7. Section 8.02(j) of the Credit Agreement is amended to read in its
entirety as follows :
"(j) Debt Coverage. Permit the Debt Coverage Ratio as of the end
-------------
of any Fiscal Quarter to be less than 1.9 to 1.0 prior to April 30, 1995,
less than 2.0 to 1.0 on April 30, 1995 or on July 23, 1995, less than 1.9
to 1.0 on October 15, 1995, less than 1.95 to 1.0 on February 4, 1996 or
less than 2.0 to 1.0 on and after April 28, 1996."
8. In consideration for the execution by each Bank of this
Amendment, the Company shall pay to the Agent Bank for the account of the Banks,
pro rata in accordance
-3-
<PAGE>
with their respective Commitments, a fee of 1/8th of 1% of the Total Commitment.
9. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
10. This Amendment may be executed in any number of counterparts and
by the different parties hereto 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. This Amendment shall become
effective as of the date hereof upon the delivery to the Agent Bank of executed
counterparts from all parties hereto and the payment by the Company of the fee
required by Section 8 of this Amendment, and the Agent Bank shall so inform all
of the parties hereto.
11. 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.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first above written.
SIZZLER INTERNATIONAL, INC.
By: /s/ John Bayley
-------------------------------------
Name: JOHN BAYLEY
Title: V.P. TREASURER
CFI INSURERS, LTD.
By: /s/ Chris Thomas
-------------------------------------
Name: CHRIS THOMAS
Title: EXEC V.P. FINANCE
-4-
<PAGE>
THE BANK OF NEW YORK
as Agent for the Banks
By: /s/ Craig Rethmeyer
-------------------------------
Name: Craig Rethmeyer
Title: VP
THE BANK OF NEW YORK
as a Bank and as the Issuing Bank
By: /s/ Craig Rethmeyer
-------------------------------
Name: Craig Rethmeyer
Title: VP
BANK OF AMERICA N.T. & S.A.
By:_______________________________
Name:
Title:
CREDIT LYONNAIS,
CAYMAN ISLAND BRANCH
By:_______________________________
Name:
Title:
CREDIT LYONNAIS,
LOS ANGELES BRANCH
By:_______________________________
Name:
Title:
-5-
<PAGE>
THE BANK OF NEW YORK
as Agent for the Banks
By:_______________________________
Name:
Title:
THE BANK OF NEW YORK
as a Bank and as the Issuing Bank
By:_______________________________
Name:
Title:
BANK OF AMERICA N.T. & S.A.
By: /s/ Yvonne C. Dennis
-------------------------------
Name: Yvonne C. Dennis
Title: Vice President
CREDIT LYONNAIS
CAYMAN ISLAND BRANCH
By:_______________________________
Name:
Title:
CREDIT LYONNAIS
LOS ANGELES BRANCH
By:_______________________________
Name:
Title:
-5-
<PAGE>
THE BANK OF NEW YORK
as Agent for the Banks
By:_______________________________
Name:
Title:
THE BANK OF NEW YORK
as a Bank and as the Issuing Bank
By:_______________________________
Name:
Title:
BANK OF AMERICA N.T. & S.A.
By:_______________________________
Name:
Title:
CREDIT LYONNAIS
CAYMAN ISLAND BRANCH
By:/s/ Thierry F. Vincent
-------------------------------
Name: Thierry F. Vincent
Title: Authorized Signatory
CREDIT LYONNAIS
LOS ANGELES BRANCH
By:/s/ Thierry F. Vincent
-------------------------------
Name: Thierry F. Vincent
Title: Vice President
-5-
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED
LOS ANGELES AGENCY
By: /s/ J. Jeffers Healy
----------------------------------
Name: J. Jeffers Healy
Title: Vice President
-6-
<PAGE>
EXHIBIT 10.23
STANDSTILL AGREEMENT
--------------------
This Standstill Agreement, dated as of March 8, 1996 (the "Standstill
Agreement"), is among Sizzler International, Inc. (the "Company"), its
wholly-owned subsidiary CFI Insurers, Ltd. ("CFI"), each of the banks
identified on the signature pages hereof (each a "Bank" and, collectively, the
"Banks") and The Bank of New York, as Agent for the Banks (the "Agent Bank") and
as the Issuing Bank (the "Issuing Bank").
RECITALS
A. The parties hereto are parties to a Revolving Credit Agreement,
dated as of March 22, 1995, as amended by a first amendment, dated as of
September 18, 1995 (such agreement, as so amended, the "Credit Agreement").
Capitalized terms used herein and not otherwise defined shall have their same
respective meanings as set forth in the Credit Agreement.
B. Based upon the Company's preliminary analysis, the Company's Debt
Coverage Ratio for its fiscal quarter ending February 4, 1996 will not satisfy
the Debt Coverage Ratio test set forth in Section 8.02(j) of the Credit
Agreement.
C. The parties hereto have agreed that during the Standstill Period
(as defined below), there shall be no extension of credit under the Credit
Agreement other than as permitted by Section 2 below.
<PAGE>
D. The Issuing Bank has issued a Letter of Credit, dated April 15,
1995, in favor of National Union Fire Insurance Company of Pittsburgh, PA
("NUFI"), as beneficiary, for the account of CFI in the total amount of U.S.
$13,810,000 (the "NUFI Letter of Credit"). The NUFI Letter of Credit, which
expires on April 12, 1996 will automatically extend for one year unless the
Issuing Bank gives timely notice to the contrary.
E. The parties hereto are prepared to enter into this Standstill
Agreement covering the period from date hereof through April 5, 1996 (the
"Standstill Period") in order, among other things, to better understand the
Company's financial condition and business plan and to permit the Company's
board of directors to address strategic alternatives at its meeting scheduled
for March 20, 1996.
The parties are willing to enter into this Standstill Agreement on the
terms and conditions set forth herein:
AGREEMENT
In consideration of the foregoing and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties covenant and agree as follows:
1. No Extension of Credit. Except with respect to the amendment of
----------------------
the NUFI Letter of Credit as set forth in Section 2 hereof, the Company and CFI
agree that, during
-2-
<PAGE>
the Standstill Period, the Banks shall have no obligations to make Loans and the
Issuing Bank shall have no obligation to issue Letters of Credit.
2. NUFI Letter of Credit. The Issuing Bank will amend the NUFI
---------------------
Letter of Credit, so that such Letter of Credit contains the following terms and
conditions: (i) it is in an amount not to exceed $11,310,000 and (ii) the expiry
date shall be May 13, 1996.
3. Standstill. During the Standstill Period, (a) the Company will
----------
not, and will not permit Subsidiary to, (i) engage in any transaction of the
type contemplated by Section 8.02(c) of the Credit Agreement (whether pursuant
to the provision or otherwise), (ii) incur any indebtedness pursuant to Section
8.02(a) (iii), (iii) create, incur or assume any purchase money indebtedness
pursuant to Section 8.02(b) (viii), (iv) invest in any joint venture, whether or
not such investment would otherwise be permitted by Section 8.02(f) (ix), (v)
sell, dispose of or otherwise transfer any shares of capital stock of any
Subsidiaries, whether or not such transfer would otherwise be permitted by
Section 8.02(i) or (iv) otherwise engage in any activities outside the ordinary
course of its or their business; and (b) the Banks, the Agent Bank and the
Issuing Bank agree that they shall not take any action pursuant to Section 9.01
of the Credit Agreement or decline to amend the NUFI Letter of Credit as
contemplated by Section 2 hereof, in either
-3-
<PAGE>
case as a result of any violation or alleged violation of Section 8.02(j) of the
Credit Agreement.
4. Financial Advisor. The Agent Bank, on behalf of the Banks, may
-----------------
retain an independent financial advisor to review the Company's financial
performance and business plan and advise the Banks with respect thereto. The
Company agrees to cooperate with such financial advisor as reasonably requested
and to pay all reasonable costs and expenses of such financial advisor;
provided, however, that it shall not be obligated to pay any such costs and
expenses incurred during the Standstill Period in excess of $50,000.
5. Company's and CFI's Representations and Warranties and Agreement.
----------------------------------------------------------------
Each of the Company and CFI hereby represents and warrants to the Agent Bank,
the Issuing Bank and the Banks that:
(a) This Standstill Agreement constitutes the valid and legally
binding obligation of each of the Company and CFI, enforceable against the
Company and CFI in accordance with its terms. Each of the Company and CFI agrees
that the breach by it of its obligations hereunder shall be an Event of Default
under the Credit Agreement.
(b) Except with respect to Section 8.02(j) of the Credit Agreement,
each of the Company and CFI represent and warrant that (i) it has complied and
is in compliance with all the terms, covenants and conditions of the Credit
Agreement which are binding upon it, (ii) no Default or
-4-
<PAGE>
Event of Default has occurred and is continuing, and (iii) the representations
and warranties contained in Article VI of the Credit Agreement are true with the
same effect as though such representations and warranties were made as of the
date hereof.
6. Miscellaneous.
-------------
(a) Section headings in this Standstill Agreement are included for
convenience of reference only and are not part of this Standstill Agreement for
any other purpose.
(b) This Standstill shall be governed by and construed in accordance
with the laws of the State of New York.
(c) This Standstill Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
(d) This Standstill Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
(e) At the end of the Standstill Period, the substantive provisions
of this Standstill Agreement shall terminate, except that the Company's
obligations under Section 4 hereof and the last sentence of Section 5(a) hereof
shall remain in effect. Without limiting the generality of the foregoing,
following the termination of the Standstill Period the Banks, the Agent Bank and
the
-5-
<PAGE>
Issuing Bank shall have their rights and remedies pursuant to Section 9.01 of
the Credit Agreement as a result of a violation of Section 8.02(j) of the Credit
Agreement.
7. Effectiveness. This Standstill Agreement shall become effective
-------------
when the Company, CFI, the Agent Bank, the Issuing Bank and the Required Banks
execute and deliver a counterpart hereof to the Agent Bank. A facsimile
transmission of a signature page bearing a party's signature shall be deemed the
equivalent of the execution and delivery of a counterpart hereof.
IN WITNESS WHEREOF, this Standstill Agreement has been duly executed
by the parties below as of the date first set forth above.
SIZZLER INTERNATIONAL, INC.
By /s/ Christopher R. Thomas
-------------------------------------
Name: Christopher R. Thomas
Title: Executive Vice President
CFI INSURERS, LTD.
By /s/ Christopher R. Thomas
--------------------------------------
Name: Christopher R. Thomas
Title: Vice President
-6-
<PAGE>
THE BANK OF NEW YORK,
as Agent Bank
By /s/ Craig Rethmeyer
------------------------------
Name: Craig Rethmeyer
Title: V P
THE BANK OF NEW YORK,
as Issuing Bank
By /s/ Craig Rethmeyer
------------------------------
Name: Craig Rethmeyer
Title: V P
BANK OF NEW YORK
By /s/ Craig Rethmeyer
------------------------------
Name: Craig Rethmeyer
Title: V P
BANK OF AMERICA, N.T. & S.A.
By______________________________
Name:
Title:
CREDIT LYONNAIS
LOS ANGELES BRANCH
By______________________________
Name:
Title:
CREDIT LYONNAIS
CAYMAN ISLAND BRANCH
By______________________________
Name:
Title:
-7-
<PAGE>
THE BANK OF NEW YORK,
as Agent Bank
By______________________________
Name:
Title:
THE BANK OF NEW YORK,
as Issuing Bank
By______________________________
Name:
Title:
BANK OF NEW YORK
By______________________________
Name:
Title:
BANK OF AMERICA, N.T. & S.A.
By /s/ Yvonne C. Dennis
-------------------------------
Name: Yvonne C. Dennis
Title: Vice President
CREDIT LYONNAIS
LOS ANGELES BRANCH
By______________________________
Name:
Title:
CREDIT LYONNAIS
CAYMAN ISLAND BRANCH
By______________________________
Name:
Title:
-7-
<PAGE>
THE BANK OF NEW YORK,
as Agent Bank
By______________________________
Name:
Title:
THE BANK OF NEW YORK,
as Issuing Bank
By______________________________
Name:
Title:
BANK OF NEW YORK
By______________________________
Name:
Title:
BANK OF AMERICA, N.T. & S.A.
By_______________________________
Name:
Title:
CREDIT LYONNAIS
LOS ANGELES BRANCH
By /s/ Thierry F. Vincent
-------------------------------
Name: Thierry F. Vincent
Title: Vice President
CREDIT LYONNAIS
CAYMAN ISLAND BRANCH
By /s/ Thierry F. Vincent
-------------------------------
Name: Thierry F. Vincent
Title: Authorized Signatory
-7-
<PAGE>
EXHIBIT 10.24
SECOND STANDSTILL AGREEMENT
---------------------------
This Second Standstill Agreement, dated as of April 5, 1996 (the
"Standstill Agreement"), is among Sizzler International, Inc. (the "Company"),
its wholly-owned subsidiary CFI Insurers, Ltd. ("CFI"), each of the banks
identified on the signature pages hereof (each a "Bank" and, collectively, the
"Banks") and The Bank of New York, as Agent for the Banks (the "Agent Bank") and
as the Issuing Bank (the "Issuing Bank").
RECITALS
A. The parties hereto are parties to a Revolving Credit Agreement,
dated as of March 22, 1995, as amended by a first amendment, dated as of
september 18, 1995 (such agreement, as so amended, the "Credit Agreement").
Capitalized terms used herein and not otherwise defined shall have their same
respective meanings as set forth in the Credit Agreement.
B. Based upon the Company's preliminary analysis, the Company's Debt
Coverage Ratio for its fiscal quarter ending February 4, 1996 will not satisfy
the Debt Coverage Ratio test set forth in Section 8.02(j) of the Credit
Agreement.
<PAGE>
C. The parties hereto have agreed that during the Standstill Period
(as defined below), there shall be no extension of credit under the Credit
Agreement other than as permitted by Section 2 below.
D. The Issuing Bank has issued a Letter of Credit, dated April 15,
1995, in favor of National Union Fire Insurance Company of Pittsburgh, PA
("NUFI"), as beneficiary, for the amount of CFI in the total amount of
$11,320,000 (the "NUFI Letter of Credit"). The NUFI Letter of Credit, which
expires on May 12, 1996, will ???? extend for one year unless the Issuing Bank
gives timely notice to the contrary.
E. The Issuing Bank has issued a Letter of Credit dated July 6,
1995, in favor of Insurance Company of North America ("ICNA"), as beneficiary,
for the account of CFI in the total amount of $1,350,000 (the "ICNA Letter of
Credit"). The ICNA Letter of Credit, which expires on June 30, 1996, will
automatically extend for one year unless the Issuing Bank gives timely notice to
the contrary.
F. The parties hereto are prepared to enter into this Standstill
Agreement covering the period from the date hereof through May 5, 1995 (the
"Standstill Period") inorder, among other things, to better under-
2
<PAGE>
stand the Company's financial condition and business plan and to permit the
Company to address strategic alternatives.
The parties are willing to enter into this Standstill Agreement on the
terms and conditions set forth herein:
AGREEMENT
In consideration of the foregoing and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties covenant and agree as follows:
1. No Extension of Credit. Except with respect to the amendments to
----------------------
the NUFI Letter of Credit and the ICNA Letter of Credit as set forth in Section
2 hereof, the Company and CFI agree that, during the Standstill Period, the
Banks shall have no obligations to make Loans and the Issuing Bank shall have no
obligation to issue Letters of Credit.
2. Letters of Credit. (a) NUFI. The Issuing Bank will amend the
----------------- ----
NUFI Letter of Credit, so that the expiry date of such letter of credit shall be
June 13, 1996.
3
<PAGE>
(b) ICNA. The Issuing Bank will amend the ICNA Letter of Credit, so
----
that the expiry date of such letter of credit shall be July 30, 1996.
3. Standstill. During the standstill period, (a) the company will
----------
not, and will not permit any subsidiary to (i) engage in any transaction of the
type contemplated by Section 8.02(c) of the Credit Agreement (whether pursuant
to the proviso or otherwise); (ii) incur any indebtedness pursuant to Section
8.02(a) (iii); (iii) create, incur or assume any purchase money indebtedness
pursuant to Section 8.02(b) (viii); (iv) invest in any joint venture, whether or
not such investment would otherwise be permitted by Section 8.02(f) (ix); (v)
sell, dispose of or otherwise transfer any shares of capital stock of any
Subsidiaries, whether or not such transfer would otherwise be permitted by
Section 8.02(i); (vi) notwithstanding Section 8.02(g) of the Credit Agreement,
make or commit to make any capital expenditures exceeding in the aggregate for
the Company and all of its Subsidiaries $500,000; (vii) guarantee the payment of
or otherwise become obligated for any obligation of any Subsidiary or Affiliate;
(viii) sell, dispose of or otherwise transfer any assets outside of the
ordinary course of business, except that the Company may and may
4
<PAGE>
permit its Subsidiaries to sell one or more Restaurants, as that term is
defined in the Company's Franchise Offering Circular Agreement, dated August 18,
1995 (the "Franchise Agreement"), as long as the aggregate amount of all such
Restaurants sold or committed to be sold does not exceed $1.5 million ; (ix)
guarantee the payment of or otherwise become obligated for any obligation of any
Franchisee; (x) purchase any Franchise Unit, as that term is defined in the
Franchise Agreement, or Restaurant belonging to a Franchisee; (xi) fail to use
its best efforts to reschedule to a date after the Standstill Period the
obligation in the approximate amount of $3.9 million of Sizzler international,
Inc. to Dailey & Associates, Inc.; (xii) otherwise engage in any activities
outside the ordinary course of its or their business; and (b) the Banks, the
Agent Bank and the Issuing Bank agree that they shall not take any action
pursuant to Section 9.01 of the Credit Agreement or decline to amend the NUFI
and ICNA Letters of Credit as contemplated by Section 2 hereof, in either case
as a result of any violation or alleged violation of Section 8.02(j) of the
Credit Agreement.
4. Financial Advisor. The Agent Bank, on behalf of the Banks, may
-----------------
retain an independent financial
5
<PAGE>
advisor to review the Company's financial performance and business plan and
advise the Banks with respect thereto. The Company agrees to cooperate with such
financial advisors as reasonably requested and to pay all reasonable costs and
expenses of such financial advisor; provided, however, that it shall not be
obligated to pay any such costs or expenses incurred during the Standstill
Period in excess of $25,000.
5. Interest. (a) The Company shall pay to the Agent Bank on behalf
--------
of the Banks all interest accrued but not paid as of May 5, 1996 (including but
not limited to the additional interest provided for under Section 5(b) hereof)on
the earlier of May 5, 1996 or the date such amounts otherwise are due and
payable.
(b) In addition to all interest provided for under the Credit
Agreement, the unpaid portion of any Loan and all other amounts outstanding
under the Credit Agreement shall bear additional interest during the Standstill
Period at a rate per annum equal to the sum of (i) 1% plus (ii) the interest
rate otherwise applicable, changing as and when said interest rate shall change.
6. Financial Reporting. (a) No later than May 5, 1996, the Company
-------------------
shall provided to the Agent its
6
<PAGE>
business plan, including the Company's analysis of the Company's financial
condition and strategic alternatives.
(b) The Company shall provide to the Agent commencing April 22, 1996
and each week thereafter a forecast of the sources and uses of cash for, at the
minimum, the following 4 weeks.
7. Company's and CFI's Representations, Warranties and Agreement.
-------------------------------------------------------------
Each of the Company and CFI hereby represents and warrants to the Agent Bank,
the Issuing Bank and the Banks that:
(a) This Standstill Agreement constitutes the valid and legally
binding obligation of each of the Company and CFI, enforceable against the
Company and CFI in accordance with its terms. Each of the Company and CFI agrees
that the breach by it of its obligations hereunder shall be an Event of Default
under the Credit Agreement.
(b) Expect with respect to Section 8.02(j) of the Credit Agreement,
each of the Company and CFI represent and warrant that (i) it has complied and
is in compliance with all the terms, covenants and conditions of the Credit
Agreement which are binding upon it, and (ii) no Default or Event of Default has
occurred and is continuing, and (iii) the representations and warranties
7
<PAGE>
contained in Article VI of the Credit Agreement and this Standstill Agreement
are true with the same effect as though such representations and warranties
were made as of the date hereof.
8. Miscellaneous
-------------
(a) Section headings in this Standstill Agreement are included for
convenience of reference only and are not part of this Standstill Agreement for
any other purpose.
(b) This Standstill Agreement shall be governed by and construed in
accordance with the laws of the State of New York, excluding any choice of law
rules that would refer the matter to the laws of another jurisdiction.
(c) This Standstill Agreement may be executed in one or more
counterparts, each of which together shall be deemed an original, and all of
which together shall constitute one and the same instrument.
(d) This Standstill Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
(e) At the end of the Standstill Period, the substantive provisions
of this Standstill Agreement shall terminate, except that the Company's
obligations under
8
<PAGE>
Sections 4, 5 and 6 hereof and the last sentence of Section 7(a) hereof shall
remain in effect. Without limiting the generality of the foregoing, following
the termination of the Standstill Period, the Banks the Agent Bank and the
Issuing Bank shall have their rights and remedies pursuant to Section 9.01 of
the Credit Agreement as a result of a violation of Section 8.02(j) of the Credit
Agreement.
(f) Nothing herein shall be deemed to be an admission that any Bank
has any obligation to loan money or otherwise extend credit to the Company or to
any of the Company's Subsidiaries or Affiliates, other than as set forth in
Section 2 hereof.
9. Effectiveness. This Standstill Agreement shall become effective
-------------
when the Company, CFI, the Agent Bank, the Issuing Bank and the Required Banks
execute and deliver a counterpart hereof to the Agent Bank. A facsimile
transmission of a signature page bearing a party's signature shall be deemed the
equivalent of the execution and delivery of a counterpart hereof.
IN WITNESS WHEREOF, this Standstill Agreement has been duly executed
by the parties below as of the date set forth above.
9
<PAGE>
SIZZLER INTERNATIONAL, INC.
By /s/ Christopher R. Thomas
-------------------------
Name:
Title: EVP
CFI INSURERS, LTD.
By /s/ Christopher R. Thomas
-------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Agent Bank
By_________________________
Name:
Title:
THE BANK OF NEW YORK,
as Issuing Bank
By_________________________
Name:
Title:
10
<PAGE>
THE BANK OF NEW YORK
By _________________________
Name:
Title:
BANK OF AMERICA, N.T. & S.A.
By __________________________
Name:
Title:
CREDIT LYONNAIS
LOS ANGELES BRANCH
BY __________________________
Name:
Title:
CREDIT LYONNAIS
CAYMAN ISLAND BRANCH
By __________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By:__________________________
Name:
Title
11
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
EXHIBIT 11
----------
COMPUTATION OF EARNINGS PER SHARE
FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
-------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net income (loss) per common and common equivalent share is based upon the
weighted average number of shares outstanding. The primary per share computation
and the fully diluted per share computation were approximately equal. The
weighted average number of shares used in the computation of net income (loss)
per common equivalent share is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average number of 27,773 28,263 29,071
outstanding common shares
Common share equivalents - 9 -
--------------------------------------------------------------------------------------------------
Primary shares 27,773 28,272 29,071
Additional shares - 1 -
--------------------------------------------------------------------------------------------------
Fully diluted shares 27,773 28,273 29,071
==================================================================================================
Net income (loss) (138,458) 6,695 (94,893)
==================================================================================================
Net income (loss) per common
and common equivalent share (4.99) 0.24 (3.26)
==================================================================================================
Net income (loss) per common
share, assuming full
dilution (4.99) 0.24 (3.26)
==================================================================================================
</TABLE>
(a) No recognition has been given to common stock equivalents as they are anti-
dilutive.
54
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
EXHIBIT 21
----------
PARENTS AND SUBSIDIARIES
------------------------
James A. Collins, Chairman of the Board, owned of record and beneficially, at
April 30, 1996, 3,818,840 shares of the Company's common stock, representing
approximately 13.4 percent of the Companys total shares outstanding and may be
considered a "parent" of the Company as such term is defined by the rules and
regulations of the Securities and Exchange Commission under the Securities Act
of 1933, as amended.
Set forth below is a list of all of the Company's subsidiaries as of June 30,
1996:
<TABLE>
<CAPTION>
Jurisdiction of Control By
-------------------------------------
Name of Subsidiary Incorporation Registrant Subsidiary
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Collins Foods International, Pty, Ltd. Nevada 100%
Sizzler Restaurants International, Inc. Delaware 100%
Buffalo Ranch Steakhouses, Inc. California 100%
Sizzler Family Steak Houses, Inc. Nevada 100%
Sizzler Restaurants Management, Inc. California 100%
SizAnnCo, Inc. Maryland 100%
SizBalCo, Inc. Maryland 100%
SizCarCo, Inc. Maryland 100%
SizCharlesCo, Inc. Maryland 100%
SizFredCo, Inc. Maryland 100%
SizHarCo, Inc. Maryland 100%
SizHoCo, Inc. Maryland 100%
SizMoCo, Inc. Maryland 100%
SizPGCo, Inc. Maryland 100%
SizWashCo, Inc. Maryland 100%
F.R. Group #3756, Inc. Maryland 98%
F.R. Group #3799, Inc. Maryland 80%
Tenly Enterprises, Inc. Pennsylvania 100%
Rustler No. 3, Inc. Maryland 100%
Curly's of Springfield, P.A., Inc. Pennsylvania 100%
Sizzler of DEL., Inc. Delaware 100%
Sizzler of N.Y., Inc. New York 100%
Sizzler of Patapsco, MD., Inc. Maryland 100%
Sizzler of VA., Inc. Virginia 100%
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Control By
-------------------------------------
Name of Subsidiary Incorporation Registrant Subsidiary
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sizzler Holdings of Canada, Inc. Canada 100%
Scott's & Sizzler Ltd. Canada 50%
J.S.S. Restaurants Ltd. Canada 100%
Collins Properties, Inc. Delaware 100%
Second Street Corporation, Inc. Delaware 100%
CFI Insurers, Ltd. Bermuda 100%
Josephina's, Inc. California 100%
Collins International, Inc. Delaware 100%
Sizzler Franchise Development, Ltd. Bermuda 100%
Restaurant Concepts International, Inc. Nevada 100%
Collins Foods Australia Pty, Ltd. Australia 100%
Collins Property Development Pty, Ltd. Australia 100%
Collins Finance and Management Pty, Ltd. Australia 100%
Gulliver's Austalia Pty, Ltd. Australia 100%
Sizzler Austalia Pty, Ltd. Australia 100%
Buffalo Ranch Australia Pty, Ltd. Australia 100%
The Italian Oven Australia Pty, Ltd. Australia 100%
Sizzler Southeast Asia, Inc. Nevada 100%
Sizzler Restaurant Services, Inc. Nevada 100%
Sizzler New Zealand Limited Nevada 100%
Sizzler Steak Seafood Salad (S) Pte. Ltd. Singapore 50%
Sizzler South Pacific Pty, Ltd. Nevada 100%
Restaurant Concepts of Australia Pty, Ltd. Nevada 100%
</TABLE>
56
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
EXHIBIT 23
----------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
To Sizzler International, Inc.
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statement file Number 33-39414.
ARTHUR ANDERSEN LLP
Los Angeles, California
July 26, 1996
57
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<CASH> 9,216
<SECURITIES> 0
<RECEIVABLES> 14,467
<ALLOWANCES> (9,441)
<INVENTORY> 6,477
<CURRENT-ASSETS> 23,455
<PP&E> 246,061
<DEPRECIATION> (110,830)
<TOTAL-ASSETS> 178,547
<CURRENT-LIABILITIES> 63,185
<BONDS> 0
0
0
<COMMON> 278
<OTHER-SE> 43,189
<TOTAL-LIABILITY-AND-EQUITY> 178,547
<SALES> 424,218
<TOTAL-REVENUES> 436,194
<CGS> 158,587
<TOTAL-COSTS> 458,565
<OTHER-EXPENSES> 108,883
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,343
<INCOME-PRETAX> (133,597)
<INCOME-TAX> 4,861
<INCOME-CONTINUING> (138,458)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (138,458)
<EPS-PRIMARY> (4.99)
<EPS-DILUTED> (4.99)
</TABLE>
