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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, 1997 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 of (I.R.S. Employer Identification No.)
Incorporation or Organization)
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
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Common Stock, $.01 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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(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, 1997, computed by reference to the closing sale price of
such shares on such date was $71,743,035.
The number of shares outstanding of common stock, $0.01 par value, as of June
30, 1997, was 28,905,481.
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]
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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.
On June 2, 1996, in response to continued domestic operating losses, the Company
enacted a comprehensive restructuring strategy designed to return the U.S.
operations to profitability. This strategy included the closure of under-
performing restaurants in the U.S. and filing for bankruptcy protection. The
Company and four subsidiaries (SRI, Buffalo Ranch Steakhouses, Inc. ("BRSH"),
Tenly Enterprises, Inc. ("Tenly"), and Collins Properties, Inc. ("CPI")) became
debtors-in-possession subject to the supervision of the U.S. Bankruptcy Court.
The debtor subsidiaries collectively 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.
On February 24, 1997 the U.S. Bankruptcy Court confirmed the plans of
reorganization of BRSH (formerly the owner and operator of the Buffalo Ranch
restaurant chain), and Tenly (the owner and operator of certain non-operating
restaurant properties). The Company does not consider the assets and operations
of these subsidiaries to be material. The BRSH and Tenly plans call for the
repayment of creditors from the liquidation of assets.
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On June 2, 1997, the U.S. Bankruptcy Court for the Central District of
California approved plans of reorganization for the Company, SRI and CPI. The
Company's plan provides for full payment of allowed creditor's claims, estimated
as approximately $67 million, primarily from the operation of the Company's
international division. SRI's plan provides for full payment of allowed
creditor's claims, estimated as approximately $24 million, over a four-year
period, primarily from U.S. operations. CPI's plan provides for full payment of
allowed creditor claims, estimated as approximately $1.7 million. Funds for the
payment of CPI's claims are to be generated through the sale of CPI's
properties.
The number of restaurants in operation by the Company and its franchisees at
June 2, 1997 and June 3, 1996 as well as April 30, 1997 and 1996 was as
follows:
<TABLE>
<CAPTION>
June 2, June 3, April 30, April 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Domestic Sizzler Restaurants
Company-operated 69 87 69 199
Franchised 199 230 199 235
International Restaurants
Company-operated Sizzlers 39 43 39 44
Franchised Sizzlers 58 87 58 87
Company-operated KFCs 96 93 96 92
The Italian Oven 1 1 1 1
Buffalo Ranch Steakhouses 0 0 0 4
</TABLE>
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.
The Company operates 108 Sizzler restaurants worldwide. Sizzler restaurants
operate in the mid-scale dining market featuring 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. 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.
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The Company also licenses another 257 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 1997, dinner sales accounted for approximately 61 percent of revenues,
and lunch accounted for most of the remainder.
During the bankruptcy period, SRI closed nine restaurants domestically and sold
nine restaurants to franchisees. Internationally, six company-operated Sizzlers
in Australia and New Zealand were closed and two were opened. As the result of
internal repositioning, the Sizzler franchisee in Australia closed its 39
restaurants. These closures were partially offset by ten new restaurant openings
throughout Asia.
INTERNATIONAL OPERATIONS.
International operations continue to make an important contribution to
consolidated results. The largest single international business is the
Company's operation of 96 KFC restaurants in Queensland, Australia. For the
year ended April 30, 1997, this business reported operating profits of $9.9
million.
At April 30, 1997, the Company operated 36 Sizzler restaurants in Australia and
three in New Zealand. In addition, the Company franchised 55 Sizzler
restaurants in Puerto Rico, Guam, Japan, Taiwan, Indonesia, Guatemala, South
Korea and Thailand. The Company owns a 50% interest in a joint venture
operating three Sizzler restaurants in Singapore.
The Company has entered into agreements calling for further development of
Sizzler restaurants in Japan, Singapore, Thailand, Taiwan, Indonesia, South
Korea, Guatemala and Puerto Rico.
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.
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The Chapter 11 proceeding 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 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.
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
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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 2,500 persons at April 30, 1997, in the
United States and approximately 5,700 persons in Australia. Labor relations
with employees have traditionally been good. As is true 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.
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.
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ITEM 2. PROPERTIES.
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Through its subsidiaries, the Company owns or leases the real property on which
its restaurants are operated. A small number of franchised restaurants are also
located on property owned or leased by the Company.
The Company owns in fee a total of 33 operating Sizzler restaurant properties in
the United States, Australia and New Zealand. Sizzler restaurants typically are
free-standing buildings with an average size of 5,000 to 6,000 square feet. The
Company owns in fee 47 KFC properties. The KFC restaurants in Australia are
typically free-standing buildings with floor areas ranging from 1,875 to 2,500
square feet.
Approximately 70 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.
In addition the Company owns in fee a 100,000 square foot executive office
building in Los Angeles and the land upon which the building is located.
The Company owns or leases a number of additional properties which it does not
currently operate. The majority of these properties have been subleased to third
parties with the remainder being held for sale or other disposition.
ITEM 3. LEGAL PROCEEDINGS.
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As previously discussed, during the 1997 fiscal year, the Company and four of
its subsidiaries were 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 and were jointly administered under Case No. 96-16075AG. Chapter 11 plans
of reorganization for two of the Company's subsidiaries (BRSH and Tenly) were
confirmed on February 24, 1997. The Chapter 11 plans of reorganization for the
Company and the remaining two subsidiaries (SRI and CPI) were approved on June
2, 1997.
There are additional legal proceedings pending to which the Company is a party
or of which its property is the subject that involve ordinary routine litigation
incidental to the business. None of these pending legal proceedings is
considered material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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Not Applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
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The Company's common stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "SZ". As of June 30, 1997, the approximate number of record
holders of the Company's common stock was 2,983. 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>
1997 1996
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High Low High Low
----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
First Quarter $3.875 $2.625 $7.125 $5.500
Second Quarter 3.375 2.000 7.125 4.750
Third Quarter 3.625 2.500 5.250 3.000
Fourth Quarter 2.875 2.250 3.875 2.625
</TABLE>
COMMON STOCK DIVIDENDS
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The Company and its predecessor CFI, have paid quarterly 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, bankruptcy plan restrictions and other relevant factors.
Cash dividends per share paid quarterly on common stock for the past two fiscal
years are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
First Quarter - $ 0.04
Second Quarter - 0.04
Third Quarter - -
Fourth Quarter - -
</TABLE>
8
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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 the Consolidated Financial
Statements, including Notes thereto, which are included elsewhere herein.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED APRIL 30,
(In millions, except per share data) 1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
Systemwide sales $677.9 $875.7 $937.7 $990.6 $1,050.3
Revenues 299.9 436.2 462.2 487.5 504.2
Net income (loss) 0.6 (138.5) (c) 6.7 (94.9) (b) (9.5) (a)
Net income (loss) per common and
common equivalent share 0.02 (4.99) (c) 0.24 (3.26) (b) (0.33) (a)
Total assets 168.1 178.5 276.7 277.5 413.0
Long-term debt 0.3 (e) 7.0 (d) 17.1 20.9 20.6
Liabilities subject to compromise 83.9 (e) - - - -
Total stockholders' investment 44.4 43.5 177.1 179.9 279.7
Dividends paid per share - 0.08 0.16 0.16 0.16
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes an after-tax charge of $12.2 million, or $.42 per share, primarily
related to the closure of under-perfoming Sizzler restaurants, and a $2.8
million charge to income or $.10 per share, net of tax, related to costs
associated with food contamination at two franchised restaurants in
southern Oregon.
(b) Includes an after-tax charge of $98.9 million, or $3.40 per share,
primarily related to the closure of under-performing Sizzler restaurants
and the write-off of intangible assets.
(c) Includes 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 reorganization. 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 note 3.
(d) This total does not include line of credit borrowings totaling $27.0
million which, as a result of acceleration of maturity, are presented as
current liabilities in the consolidated financial statements.
(e) Substantially all prepetition debt has been reclassified as "Liabilities
subject to compromise under reorganization proceedings".
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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RESULTS OF OPERATIONS
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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 included predominantly non-
cash write offs of assets and related disposition costs associated with the
closure of restaurants in the United States. Overall, the restructuring charge
reflects the efforts to redeploy capital to those core markets which 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/restaurant closures $ 92,100
Closure of regional office and reduction
of corporate headquarters 8,800
Guarantee of co-op advertising obligations 3,500
Franchise receivables 2,500
Severance costs 2,000
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Total $108,900
========
</TABLE>
During fiscal 1997, the Company closed 130 U.S. restaurants not meeting
specified financial criteria. As a result of these activities, $100.2 million
of the reserves were utilized. As of April 30, 1997, the reserve balance was
$8.7 million. Management continues to review all restaurants and market areas
for compatibility with long term goals. Non-performing restaurants and market
areas not fitting into management's long term plans will continue to be reviewed
for closure.
In addition to the restructuring charge, the 1996 consolidated financial
statements reflect an additional non-cash 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". In fiscal 1997,
impaired restaurants were among those restaurants that were closed.
The following analysis of financial condition and results of operations excludes
the previously described charges and reserves, unless otherwise specified.
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The Company's revenues are generated from four primary sources: Domestic
company-operated restaurant sales, domestic franchise revenues (including
franchise fees, royalties and rental income), international company-operated
restaurant sales and international franchised restaurant revenues. 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 $299.9 million in fiscal 1997, a decrease of $136.3 million or
31.2 percent from 1996, compared with a decrease of $26.0 million or 5.6 percent
in fiscal 1996 from fiscal 1995. This decline is largely attributable to a net
reduction of 200 company-operated and franchised Sizzler restaurants, as well as
a decline in sales of existing restaurants in the U.S. and Australia. During
the same time period, four KFC restaurants were added in Australia and four
Buffalo Ranch Steakhouse restaurants in the U.S. were closed. Domestic revenues
declined in fiscal 1997 by $130.8 million or 51.7 percent from the prior year,
primarily resulting from the closure of 130 company-operated restaurants in the
U.S. The domestic franchise system experienced a net reduction of 36
restaurants. Internationally, the Company had a net decrease of five Sizzler
company-operated restaurants and a net decrease of 29 franchised Sizzler
restaurants. International operations also added four KFC restaurants during
the fiscal year. The changes in international operations resulted in a $5.4
million or 3.0 percent decrease in international revenues.
Loss before interest and taxes was $0.9 million in fiscal 1997, an improvement
of $9.6 million or 91.0 percent from a $10.5 million loss in fiscal 1996. This
increase was due to a $17.2 million improvement in domestic operations,
partially offset by a $7.6 million decline in international operations. Domestic
operations benefited from the closure of 130 under-performing restaurants and
cost reductions in the remaining restaurants and corporate headquarters. The
decrease in international earnings was primarily due to lower average sales per
restaurant and lower guest counts partially offset by a 5.5 percent increase in
the Australian dollar exchange rate.
U.S. OPERATIONS
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Excluding franchise revenues, company-operated restaurants contributed
approximately 38.8 percent of consolidated revenues. Company operated restaurant
sales decreased $128.2 million to $116.5 million or 52.4 percent when compared
to the prior year, due to the closure of 130 restaurants and a decline in
average sales per restaurant. On a comparative restaurant basis, for those
restaurants open more than one year, average sales per Sizzler restaurant fell
10.0 percent to approximately $1.3 million per year, average customers per
restaurant were 7.8 percent lower and the average customer check decreased 2.4
percent over the prior year. However, sales are showing an upward trend as the
fourth quarter comparable sales decline narrowed to 5.9 percent and the
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average customer check increased 0.5 percent from the prior year.
Loss before interest and taxes improved by $13.4 million to $11.0 million in
fiscal 1997 from a loss of $24.4 million in fiscal 1996. The improvement was
primarily a result of the closure of 130 under-performing restaurants, improved
labor scheduling, reductions in administrative support staff and other cost
reduction measures achieved during the year in the restaurants as well as
headquarters. As a percentage of revenues, occupancy and labor costs declined
2.6 percent and 0.8 percent, respectively.
In fiscal 1996, revenues from domestic operations decreased $19.4 million to
$244.7 million when compared to the prior year. This decrease was attributed to
a systemwide decline in average domestic restaurant sales, and the impact of
severe winter storms. Losses before interest and taxes from domestic operations
increased $11.0 million compared to fiscal 1995 to a loss of $24.4 million.
DOMESTIC FRANCHISE
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In 1997, domestic franchise revenues, including franchise fees, royalties and
rental income accounted for 1.8 percent of consolidated revenues. Revenues
declined $2.6 million or 32.2 percent versus fiscal 1996. Lower revenue is
primarily the result of a net reduction of franchised restaurants, a decline of
18.9 percent in average sales per franchised restaurant and an abatement of
royalties for the fourth quarter pursuant to the plan of reorganization. During
fiscal 1997, nine restaurants became franchised and 45 franchised restaurants
were closed for a net reduction of 36 franchised restaurants. At April 30, 1997,
there were 199 domestic franchised restaurants in operation.
In 1996, domestic franchise revenues accounted for 1.9 percent of consolidated
revenues. Revenues decreased $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. The lower revenues and earnings resulted from
the net reduction of 40 franchised restaurants and a decline of 4.8 percent in
average sales per domestic franchised restaurant. At April 30, 1996, the number
of domestic franchised restaurants was 235.
INTERNATIONAL OPERATIONS
- ------------------------
International operations generated approximately 59.3 percent of consolidated
revenues in fiscal 1997. Revenues decreased by 3.0 percent or $5.4 million to
$177.9 million when compared to the prior year. The net reduction of five
company-operated Sizzler restaurants offset by the addition of four KFC
restaurants contributed to the decline in revenues. Earnings before interest
and taxes decreased $7.6 million to $4.7 million or 62.0 percent during fiscal
1997 with lower average restaurant sales impacting the decrease. At April 30,
1997, the international operation included 97 company-operated,
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joint ventured, and franchised Sizzlers, 96 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 revenues, or $9.9 million, to
$69.8 million from the prior fiscal year. This decrease reflects lower average
restaurant sales and restaurant closings offset by the increase in the
Australian dollar exchange rate. On a comparative restaurant basis, sales in
Australian dollars, check average and customer counts decreased by 16.2 percent,
2.0 percent and 14.5 percent, respectively, from levels of the previous year. At
April 30, 1997, the Company operated 39 Sizzler restaurants versus 44 a year
ago.
The Company's international franchise revenues increased $521,000 or 13.7
percent to $4.3 million in 1997 versus 1996, due primarily to net new restaurant
openings in the Asian/Pacific region. At April 30, 1997, there were 55
international franchised restaurants and three joint ventured restaurants in
nine countries and two U.S. territories, versus 85 international franchised
restaurants and two joint ventured restaurants in nine countries and two U.S.
territories at April 30, 1996. During fiscal 1997, 11 franchised restaurants
were opened in Japan, Thailand, South Korea, Guatemala and Indonesia and one
joint venture in Singapore, while 40 were closed in Australia and one in
Indonesia. The Australian closures are represented by a single multi-unit
operator.
Revenues from the Company's KFC restaurants increased $5.4 million to $102.6
million or 5.5 percent when compared to the prior year. This increase reflects
four additional restaurants and the increase in the Australian dollar exchange
rate. On a comparative restaurant basis, in Australian dollars, average
restaurant sales decreased 2.0 percent and the average customer check increased
2.8 percent, however, customer counts declined 4.7 percent, compared to fiscal
1996. At April 30, 1997, the number of KFC restaurants was 96 versus 92 last
year.
In fiscal 1996, the Company's international operations accounted for
approximately 42.0 percent of consolidated revenues. Revenues decreased by 2.5
percent or $4.7 million, to $183.3 million when compared to fiscal 1995. This
reduction in revenues was primarily the result of closing three restaurants in
Canada, as well as a 10.5 percent decline in average Sizzler restaurant sales in
Australia, partially offset by the addition of four KFC restaurants and one The
Italian Oven restaurant.
Excluding franchise revenues, company-operated Sizzlers recorded a 12.5 percent
or $11.6 million decline in revenues to $81.5 million from fiscal 1995,
primarily reflecting 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 44 Sizzler restaurants versus
47 at April 30, 1995.
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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 eight 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 nine countries and
two U.S. territories, versus 77 restaurants in 10 countries and two U.S.
territories at April 30, 1995.
Fiscal 1996 revenues of $97.2 million from the Company's KFC restaurants
increased $6.9 million or 7.6 percent when compared to the prior year. On a
comparative restaurant basis, average restaurant sales, in Australia 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 at April 30, 1995.
Earnings before interest and taxes decreased $9.4 million to $12.4 million or
43.2 percent during fiscal 1996.
CONSOLIDATED COSTS AND EXPENSES
- -------------------------------
Consolidated costs and expenses, as a percentage of revenues, were 0.5 percent
lower in fiscal 1997. Payroll and related expenses, occupancy costs and
depreciation and amortization expense decreased 1.8 percent, 2.4 percent and 0.6
percent, as a percentage of revenues, respectively. The lower costs reflect the
closure of under-performing restaurants.
Investment income increased $0.2 million in 1997 from 1996 and declined $0.3
million in 1996 from 1995. Interest expense increased in 1997 from 1996 by $4.6
million or 198.0 percent, due to increased borrowings prior to bankruptcy filing
and estimated accrued interest on prepetition liabilities. In fiscal 1996,
interest expense increased $0.9 million from 1995, primarily as a result of
higher borrowings during the fiscal year.
During fiscal 1996, the Company was a party to foreign exchange contracts to
hedge exposure to the Australian dollar exchange rate. These contracts had no
material effect on the results of operations. No contracts were in place at
fiscal year end.
In fiscal 1996, consolidated costs and expenses, as a percentage of revenues,
were 5.0 percent higher than the previous year, primarily due to increases in
food costs, operating labor and advertising expenses. These increases primarily
reflected the relatively fixed nature of certain restaurant costs such as
management salaries, occupancy and other direct restaurant costs at lower sales
levels.
The provision for income taxes changed from a provision of $4.9 million in
fiscal 1996 to a benefit of $7.3 million in fiscal 1997. The benefit for income
taxes reflects taxes on foreign operations. Under current accounting standards
(Financial Accounting Standards Board
14
<PAGE>
Statement No. 109 "Accounting for Income Taxes"), the Company may not record a
tax benefit for U.S. source losses. (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
which amounted to $5.9 million in fiscal 1997 and $13.4 million in fiscal 1996.
The Company has historically maintained a relatively low current ratio, but
because of the non payment of pre bankruptcy liabilities, the current ratio was
1.5 at fiscal year-end 1997. The current ratio was 0.4 at fiscal year-end 1996.
The Company began to experience liquidity problems in 1996, due primarily to
continued sales decline 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, 1997, working capital was $15.9 million compared with a deficit of
$39.7 million at the end of the prior year. The increase primarily reflects the
non payment of pre bankruptcy liabilities, shown on the balance sheet as
"Liabilities subject to compromise under reorganization proceedings". At April
30, 1996, working capital was a deficit of $39.7 million compared to a deficit
of $5.4 million at the end of the prior year. The decrease primarily reflected
the $27 million outstanding line of credit balance that was presented as a
current liability in the consolidated financial statements due to the Company's
non-compliance with its financial covenants.
TOTAL ASSETS/CAPITAL EXPENDITURES
- ---------------------------------
Total assets decreased $10.4 million or 5.9 percent in fiscal 1997. Property
and equipment represented 62.4 percent of total assets at the end of fiscal 1997
and 75.7 percent at the end of fiscal 1996. In fiscal 1996, total assets
decreased $76.7 million or 27.7 percent from fiscal 1995 as a result of market
and restaurant closures and related provisions.
Capital expenditures were $6.4 million in fiscal 1997, which included new
restaurant construction and acquisitions of $1.5 million and remodels of $4.9
million. The Company
15
<PAGE>
anticipates continuing to grow 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 and four KFC
restaurants during fiscal year 1997.
The Company anticipates capital expenditures in fiscal 1998 to be approximately
$8.6 million, of which $5.1 million will be used to develop the Asian/Pacific
region and $3.5 million on replacement upgrades and other capital items. It is
anticipated that between eight and ten restaurants will be added to the
international division in fiscal 1998. Domestically, no new unit growth is
planned in fiscal 1998, instead, the Company will focus on the repositioning
program.
In fiscal 1996, capital expenditures were $24.4 million, consisting of new
restaurant construction and acquisitions of $6.9 million and remodels of $17.5
million.
DEBT
- ----
As a result of the bankruptcy filing, no principal or interest payments on
prepetition debt will be made prior to bankruptcy court approval.
In July 1996, the Company obtained a $15.0 million revolving credit facility.
The credit facility, which bore interest at the lending institution's prime rate
plus 1%, was to mature on the earlier of July 15, 1998, or the effective date of
a confirmed plan of reorganization. This facility is secured by the assets of
certain of the Company's subsidiaries and provides restrictions on additional
borrowings and incurrence of liens. During the fiscal year there were no
borrowings on this credit facility. As of July 1997, the Company canceled this
credit agreement.
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
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
16
<PAGE>
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 customers, because the changes have
generally impacted all restaurant companies.
17
<PAGE>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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 fiscal quarters normally
include twelve weeks of operations whereas the third fiscal quarter includes
sixteen weeks of operations.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1997 QUARTER QUARTER QUARTER QUARTER
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restaurants $ 80,936 $ 65,660 $ 84,930 $ 58,535
Franchise operations 3,500 2,373 3,129 865
----------- ---------- ---------- ----------
Revenues 84,436 68,033 88,059 59,400
Cost of sales 29,866 26,240 32,912 22,312
Labor and related expenses 24,414 19,043 24,344 17,337
Other operating expenses 18,028 13,869 19,629 14,430
General and administrative costs 7,047 5,893 7,577 1,675
----------- ---------- ---------- ----------
Earnings before interest, taxes and
depreciation 5,081 2,988 3,597 3,646
Depreciation 3,586 3,224 4,372 5,078
----------- ---------- ---------- ----------
Earnings (loss) before interest and
taxes 1,495 (236) (775) (1,432)
----------- ---------- ---------- ----------
Net income (loss) $ 494 $ (622) $ (1,281) $ 1,974
=========== ========== ========== ==========
Earnings (loss) per share $ 0.02 $ (0.02) $ (0.04) $ 0.07
=======================================================================================
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
FISCAL 1996 QUARTER QUARTER QUARTER QUARTER
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restaurants $102,243 $ 99,271 $125,254 $ 97,450
Franchise operations 3,258 2,949 3,174 2,595
----------- ---------- ---------- ----------
Revenues 105,501 102,220 128,428 100,045
Cost of sales 38,003 36,243 47,047 37,294
Labor and related expenses 29,981 29,924 40,625 31,335
Other operating expenses 22,554 22,077 29,941 23,298
General and administrative costs 7,543 7,264 9,863 7,562
Non-recurring items - - - 121,721
----------- ---------- ---------- ----------
Earnings before interest, taxes and
depreciation 7,420 6,712 952 (121,165)
Depreciation 6,019 6,036 7,983 6,126
----------- ---------- ---------- ----------
Earnings (loss) before interest and
taxes 1,401 676 (7,031) (127,291)
----------- ---------- ---------- ----------
Net income (loss) $ 436 $ 168 $ (4,569) $(134,493)
=========== ========== ========== ==========
Earnings (loss) per share $ 0.02 $ 0.01 $ (0.16) $ (4.84)
=======================================================================================
</TABLE>
18
<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,
1997 and 1996, and the related consolidated statements of operations,
stockholders' investment and cash flows for each of the three years in the
period ended April 30, 1997. 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, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended April 30,
1997 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The accompanying consolidated
statements of operations indicates that the Company has incurred recurring
losses. As discussed in Note 2 to the consolidated financial statements, on June
2, 1996, the Company and certain U.S. subsidiaries filed a voluntary petition
for relief under Chapter 11 of the U.S. Bankruptcy Code. These matters among
others raise substantial doubt about the Company's ability to continue as a
going concern. In addition, on June 2, 1997, the U.S. Bankruptcy Court approved
the plan of reorganization for the Company and certain U.S. subsidiaries.
Management's plans in regards to these matters are also described in Note 2.
Continuation of business thereafter is dependent on the Company's ability to
achieve successful future operations. The accompanying financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
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 schedules 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 23, 1997
19
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Years Ended April 30, 1997 1996 1995
- ---------------------------------------- --------- ---------- --------
<S> <C> <C> <C>
REVENUES
Restaurants $290,061 $ 424,218 $447,547
Franchise operations 9,867 11,976 14,604
- ---------------------------------------- --------- ---------- --------
Total revenues 299,928 436,194 462,151
- ---------------------------------------- --------- ---------- --------
COSTS AND EXPENSES
Cost of sales 111,330 158,587 163,202
Labor and related expenses 85,138 131,865 133,226
Other operating expenses 65,956 97,870 95,824
Depreciation and amortization 16,260 26,164 28,309
Non-recurring items - 108,883 -
Impairment of long-lived assets - 12,838 -
General and administrative expenses 22,192 32,232 30,332
- ---------------------------------------- --------- ---------- --------
Total operating costs 300,876 568,439 450,893
- ---------------------------------------- --------- ---------- --------
Interest expense 6,981 2,343 1,452
Investment income (1,178) (991) (1,314)
---------------------------------------- --------- ---------- --------
Total costs and expenses 306,679 569,791 451,031
- ---------------------------------------- --------- ---------- --------
INCOME (LOSS) BEFORE INCOME TAXES (6,751) (133,597) 11,120
PROVISION (BENEFIT) FOR INCOME TAXES (7,316) 4,861 4,425
- ---------------------------------------- --------- ---------- --------
NET INCOME (LOSS) $ 565 $(138,458) $ 6,695
======================================== ========= ========== ========
Net income (loss) per common and
common equivalent share $0.02 $(4.99) $0.24
======================================== ========= ========== ========
Average common and common
equivalent shares outstanding 28,967 27,773 28,272
======================================== ========= ========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
20
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
April 30, 1997 1996
- -------------------------------------------- ---------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 34,085 $ 9,216
Receivables, net of reserves of $3,547
in 1997 and $9,441 in 1996 4,398 5,026
Inventories 5,464 6,477
Prepaid expenses and other current assets 2,323 2,736
- -------------------------------------------- ---------- --------
Total current assets 46,270 23,455
- -------------------------------------------- ---------- --------
PROPERTY AND EQUIPMENT, AT COST
Land 30,583 36,154
Buildings and leasehold improvements 111,910 121,793
Equipment 71,819 75,330
Capital leases 3,147 9,168
Construction in progress 1,650 3,616
- -------------------------------------------- ---------- --------
219,109 246,061
Less - Accumulated depreciation and
amortization 114,234 110,830
- -------------------------------------------- ---------- --------
Total property and equipment, net 104,875 135,231
- -------------------------------------------- ---------- --------
LONG-TERM NOTES RECEIVABLE, NET OF
RESERVES OF $424 IN 1997 AND $1,200 IN 1996 1,619 1,128
DEFERRED INCOME TAXES 4,004 -
INTANGIBLE ASSETS, NET OF ACCUMULATED
AMORTIZATION OF $698 IN 1997 AND $610 IN 1996 1,430 996
OTHER ASSETS, NET OF ACCUMULATED
AMORTIZATION AND RESERVES OF $6 IN 1997 AND
$4 IN 1996 9,912 17,737
- ----------------------------------------- ---------- --------
Total assets $168,110 $178,547
======================================= ========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
21
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
April 30, 1997 1996
- ---------------------------------------- ------- -------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt $ 94 $ 28,196
Accounts payable 13,634 14,390
Other current liabilities 14,240 17,755
Income taxes payable 2,401 2,844
- ---------------------------------------- -------- --------
Total current liabilities 30,369 63,185
- ---------------------------------------- -------- --------
LONG-TERM DEBT 329 7,041
DEFERRED INCOME TAXES - 9,032
OTHER LIABILITIES 9,111 55,822
LIABILITIES SUBJECT TO COMPROMISE
UNDER REORGANIZATION PROCEEDINGS 83,900 -
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
28,898,003 in 1997 and 27,767,706
shares in 1996 289 278
Additional paid-in capital 276,200 274,221
Accumulated deficit (234,961) (235,526)
Foreign currency translation
adjustments 2,873 4,494
- ---------------------------------------- -------- --------
Total stockholders' investment 44,401 43,467
- ---------------------------------------- -------- --------
Total liabilities and stockholders'
investment $ 168,110 $ 178,547
======================================== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
22
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (In thousands)
<TABLE>
<CAPTION>
For the Years Ended April 30, 1997 1996 1995
- ---------------------------------------------------- -------- --------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 565 $(138,458) $ 6,695
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 16,260 26,165 28,309
Deferred income tax provision (benefit) (12,167) 103 (1,338)
Provision for bad debts 479 1,390 1,304
Non-recurring items and asset write down - 121,721 -
Other 791 2,450 4,431
- ---------------------------------------------------- -------- --------- --------
5,928 13,371 39,401
Changes in operating assets and
liabilities:
Receivables 704 (243) (1,127)
Inventories 1,421 (663) (436)
Prepaid expenses and other current assets (477) (199) (16)
Accounts payable 14,339 (1,928) 668
Accrued liabilities (19,740) (6,974) (6,831)
Income taxes payable (1,329) (429) (2,607)
Changes due to reorganization activities:
Payments of reorganization costs (8,826) - -
Interest expense not paid 6,000 - -
- ---------------------------------------------------- -------- --------- --------
Net cash provided by (used in) operating activities (1,980) 2,935 29,052
- ---------------------------------------------------- -------- --------- --------
INVESTING ACTIVITIES
Additions to property and equipment (6,399) (24,437) (13,801)
Disposal of property and equipment 21,370 1,087 1,007
Other, net 739 (868) 229
- ---------------------------------------------------- -------- --------- --------
Net cash provided by (used in) investing activities 15,710 (24,218) (12,565)
- ---------------------------------------------------- -------- --------- --------
FINANCING ACTIVITIES
Long-term borrowings 11,461 17,000 11,000
Reduction of long-term debt (266) (1,911) (14,794)
Dividends paid to stockholders - (2,222) (4,515)
Repurchase of common stock - - (6,879)
Cash surrender value of life insurance - 5,444 -
Other, net (56) (32) (228)
- ---------------------------------------------------- -------- --------- --------
Net cash provided by (used in)
financing activities 11,139 18,279 (15,416)
- ---------------------------------------------------- -------- --------- --------
Net increase (decrease) in cash and
cash equivalents 24,869 (3,004) 1,071
- ---------------------------------------------------- -------- --------- --------
Cash and cash equivalents at beginning
of year 9,216 12,220 11,149
- ---------------------------------------------------- -------- --------- --------
Cash and cash equivalents at end of year $ 34,085 $ 9,216 $ 12,220
==================================================== ======== ========== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the year for:
Interest (net of amount capitalized) $ 1,175 $ 2,185 $ 1,452
Income taxes 5,989 7,698 7,623
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
23
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Investment
(In thousands, except share data)
<TABLE>
<CAPTION>
Foreign
Additonal Retained Currency
Shares Common Paid-In Earnings Translation
Outstanding Stock Capital (Deficit) Adjustment
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
Restricted stock repurchased (18,381) (1) (56)
Restricted stock canceled (311,958) (3)
Grant of restricted stock 1,457,000 15 651
Stock issued 3,636 10
Net income 565
Amortization of restricted stock 1,374
Cumulative translation adjustments (1,621)
- ------------------------------------- -------------------------------------------------------------------
BALANCE AT APRIL 30, 1997 28,898,003 $289 $276,200 ($234,961) $ 2,873
===================================== ===================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24
<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 underperforming 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.
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. The consolidated financial
statements have been prepared in accordance with Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code,"
issued by the American Institute of Certified Public Accountants in November
1990 ("SOP 90-7").
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 financial statements, notes and supplementary data for the prior years
have been reclassified to conform with the 1997 presentation.
ACCOUNTING PERIOD: 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
revenues and 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
25
<PAGE>
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.
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 generally 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. 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, which are carried at cost, which
approximates fair value because of the short maturity of those instruments. At
April 30, 1997 and 1996, cash and time deposits amounted to $34,085,000 and
$6,377,000, respectively. Other securities were $2,839,000 at April 30, 1996.
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 the 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.
26
<PAGE>
PROPERTIES HELD FOR SALE OR LEASE: Properties held for sale or lease were
$10,234,000 at April 30, 1997 and $15,834,000 at April 30, 1996, and are
included in Other Assets. These assets represent excess land carried at
estimated realizable values.
INTANGIBLE ASSETS: 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 $9.8 million of intangibles related to
repurchased Sizzler franchise rights associated with market closures (See Note
3).
RECOVERABILITY OF LONG LIVED ASSETS TO BE HELD AND USED IN THE BUSINESS. 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 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 future cash flows. Considerable management
judgment is necessary to estimate discounted future cash flows. Accordingly,
actual results could vary significantly from such estimates. The non-cash charge
was $12.8 million for fiscal 1996.
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
$418,000 in 1997 and $7,380,000 in 1996, restructuring reserve of $8,700,000 in
1997 and $34,400,000 in 1996. In addition, other liabilities include an
obligation of $12,989,000 in 1996 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 1997, 1996 and 1995.
27
<PAGE>
NOTE 2 - BANKRUPTCY REORGANIZATION
- --------------------------------------------------------------------------------
Bankruptcy Proceedings
- ----------------------
On June 2, 1996, in response to continued domestic operating losses, the Company
enacted a comprehensive restructuring strategy designed to return the U.S.
operations to profitability. This strategy included the closure of under-
performing restaurants in the U.S. and filing for bankruptcy protection. The
Company and four subsidiaries (SRI, Buffalo Ranch Steakhouses, Inc. ("BRSH"),
Tenly Enterprises, Inc. ("Tenly"), and Collins Properties, Inc. ("CPI")) became
debtors-in-possession subject to the supervision of the U.S. Bankruptcy Court.
The debtor subsidiaries collectively 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.
On February 24, 1997 the U.S. Bankruptcy Court confirmed the plans of
reorganization of BRSH (formerly the owner and operator of the Buffalo Ranch
restaurant chain), and Tenly (the owner and operator of certain non-operating
restaurant properties). The Company does not consider the assets and operations
of these subsidiaries to be material. The BRSH and Tenly plans call for the
repayment of creditors from the liquidation of assets.
On June 2, 1997, the U.S. Bankruptcy Court for the Central District of
California approved plans of reorganization for the Company, SRI and CPI. The
Company's plan provides for full payment of allowed creditor's claims, estimated
as approximately $67 million, primarily from the operation of the Company's
international division. SRI's plan provides for full payment of allowed
creditor's claims, estimated as approximately $24 million, over a four-year
period, primarily from U.S. operations. CPI's plan provides for full payment of
allowed creditor's claims, estimated as approximately $1.7 million. Funds for
the payment of CPI's claims are to be generated through the sale of CPI's
properties.
Reorganization Costs
- --------------------
During fiscal 1997 the Company incurred $2,606,000 of severance costs,
$5,435,000 of legal and professional costs and $785,000 of temporary staffing
costs relating to the bankruptcy reorganization. These reorganization costs were
accrued in the prior year and charged against established reserves.
Additionally, $6,000,000 of interest was charged to earnings in the fourth
quarter when the reorganization plan was approved by all of the creditor
committees.
28
<PAGE>
Liabilities Subject to Compromise Under Reorganization Proceedings
- ------------------------------------------------------------------
Liabilities subject to compromise under reorganization proceedings as of April
30, 1997 are identified below:
<TABLE>
<CAPTION>
1997
----------
<S> <C>
Accounts payable $15,095
Notes payable and capital lease obligations 44,337
Other claims 24,468
----------
$83,900
==========
</TABLE>
Approximately 10,000 claims have been filed against the Company which include
duplicate claims and a significant number of claims which the Company deems to
be highly inflated. The ultimate amount and settlement terms for such
liabilities are not presently determinable. Therefore, no provision has been
made for these differences in the accompanying consolidated financial
statements.
29
<PAGE>
Condensed Combined Financial Statement
- --------------------------------------
The following condensed combined balance sheet as of April 30, 1997 sets forth
the combined financial position of the Company and four subsidiaries (SRI, BRSH,
Tenly and CPI) which are in reorganization proceedings.
Condensed Combined Balance Sheet
As of April 30, 1997
<TABLE>
<S> <C>
Assets
Cash and cash equivalents $ 28,408
Accounts receivable, net 4,239
Inventories 1,881
---------
Total current assets 34,528
Property and equipment, net 37,601
Intercompany receivable 9,026
Investment in subsidiaries 32,386
Other assets 8,659
---------
Total assets $ 122,200
=========
Liabilities and stockholders' investment
Current portion of long-term debt $ 94
Accounts payable 7,372
Other current liabilities 6,777
---------
Total current liabilities 14,243
Long-term debt 329
Other liabilities 20,426
Liabilities subject to compromise
under reorganization proceedings 83,900
Common stock and additional paid-in capital 276,489
Accumulated deficit and cumulative
currency translation adjustments (273,187)
---------
Total liabilities and stockholders' investment $ 122,200
=========
</TABLE>
30
<PAGE>
NOTE 3 - 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 predominantly non-cash write-offs of assets and related
disposition costs associated with the closure of 130 restaurants in the United
States.
The fiscal 1996 restructuring charge and the remaining balances of accrued
restructuring liabilities as of April 30, 1997 were:
<TABLE>
<CAPTION>
Accrued
Total Restructuring
Restructuring Liabilities at
Expenses April 30, 1997
-------------- -----------------
<S> <C> <C>
Market and restaurant closures $ 92,100 $8,700
Closure of regional offices and reduction
of corporate headquarters 8,800 -
Guarantee of co-op advertising obligations 3,500 -
Franchise receivable 2,500 -
Severance 2,000 -
-------- ------
Total $108,900 $8,700
======== ======
</TABLE>
31
<PAGE>
NOTE 4 - INCOME TAXES
- --------------------------------------------------------------------------------
The Company files a consolidated United States income tax return which includes
all domestic subsidiaries in which it owns 80 percent or more of the voting
stock and 80 percent or more of the value of the outstanding stock. Foreign
withholding taxes have not been provided on the unremitted earnings totaling
$7,671,000 of the Company's foreign operations at April 30, 1997. 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 years ended April 30, 1997 1996 1995
- ----------------------------- ------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $ - $ - $ 11
State - - 72
Foreign 4,851 4,758 5,680
------------------ ----------- -----------
4,851 4,758 5,763
------------------ ----------- -----------
Deferred
Federal - - (1,978)
State - - 247
Foreign (12,167) 103 393
------------------ ----------- -----------
(12,167) 103 (1,338)
------------------ ----------- -----------
Total income tax provision (benefit) $ (7,316) $ 4,861 $ 4,425
==================================================================
</TABLE>
A reconciliation of the statutory United States Federal income tax rate to the
Company's consolidated effective income tax rate follows:
<TABLE>
<CAPTION>
For the years ended April 30, 1997 1996 1995
- ---------------------------------------- --------------------------------------------------------------------------
<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 3.3 0.2 (4.1)
Goodwill write-off and
non-deductible amortization (3.3) (0.2) -
Valuation allowance (149.1) (45.0) -
Other (0.4) 0.3 2.8
------------- ------------- ------------
Effective tax rate (108.4)% (3.6)% 39.8%
===============================================================================
</TABLE>
Pre-tax income (loss) for domestic and foreign operations is as follows (in
thousands):
<TABLE>
<CAPTION>
For the years ended April 30, 1997 1996 1995
- ---------------------------------------- --------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $(6,137) $(125,442) $(6,897)
Foreign (614) (8,155) 18,017
------------ ----------- ----------
$(6,751) $(133,597) $11,120
============================================================================
</TABLE>
32
<PAGE>
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, 1997 1996
- --------------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets:
Deferred income $ 5,195 $ 6,641
Foreign tax credit carryover 6,006 5,968
Minimum tax credit carryover 1,849 1,849
Other credits 2,860 2,839
Operating reserves and accruals 74,010 87,370
--------- ---------
Total gross deferred tax assets 89,920 104,667
Less valuation allowance (73,990) (83,060)
--------- ---------
Net deferred tax assets 15,930 21,607
--------- ---------
Deferred Tax Liabilities:
State income taxes (2,933) (8,200)
Property and equipment (8,096) (17,724)
Capital leases (888) (4,224)
Other (9) (491)
--------- ---------
Total gross deferred tax liabilities (11,926) (30,639)
--------- ---------
Net deferred tax asset (liabilities) $ 4,004 $ (9,032)
========= =========
</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.
33
<PAGE>
NOTE 5 - DEBT
- --------------------------------------------------------------------------------
As a result of the bankruptcy filing (see Note 2), substantially all debt
outstanding at June 2, 1996 has been classified as "Liabilities subject to
compromise under reorganization proceedings". No principal or interest payments
on prepetition debt will be made without bankruptcy court approval.
A summary of debt outstanding as of April 30, 1997 and 1996, is as
follows
(in thousands):
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------
<S> <C> <C>
Unsecured borrowings, at variable
interest rates, due through 2012 $41,752 $30,194
Mortgage notes payable, with interest
rates from 9.375 percent to 10.015
percent, secured by land, buildings,
leaseholds and equipment, with an
original cost of approximately $1,707
at April 30, 1997 and $3,715 at April
30, 1996, due through 2037 635 744
Capital lease obligations 2,373 4,299
- --------------------------------------------------------------------
44,760 35,237
Less - current portion 94 28,196
- --------------------------------------------------------------------
44,666 7,041
Less - liabilities subject to compromise 44,337 -
- --------------------------------------------------------------------
Long term debt $ 329 $ 7,041
====================================================================
</TABLE>
Payment of $70 long-term debt, excluding capital lease obligations, is due in
fiscal 1998, $1 in 1999, $1 in 2000, $1 in 2001, and $562 thereafter.
In July 1996, the Company obtained a $15.0 million revolving credit facility.
The credit facility which bore interest at the lending bank's prime rate plus 1%
was to mature on the earlier of July 15, 1998 or the effective date of a
confirmed plan of reorganization. This facility is secured by the assets of
certain of the Company's subsidiaries. During the fiscal year there were no
borrowings on this credit facility. As of July 1997, the Company canceled this
credit agreement.
34
<PAGE>
NOTE 6 - STOCK OPTIONS AND RESTRICTED STOCK
- --------------------------------------------------------------------------------
The Company has an Employee Stock Incentive Plan for certain officers and key
employees, a Stock Option Plan for Non-Employee Directors and a stock purchase
plan for Non-Employee Directors. The maximum number of shares that may be issued
under these plans is 2,000,000, 100,000 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.
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 per APB-25 or the fair-value method per
SFAS 123. The Company continues to use the intrinsic value-based method
prescribed by APB-25 for financial statement purposes. Had compensation cost for
these plans been determined consistent with SFAS 123, the Company's net income
and earnings per share would have been reduced to the following pro-forma
amounts.
<TABLE>
<CAPTION> 1997 1996 1995
---- ---- ----
<S> <C> <C> <C> <C>
Net Income (Loss): As Reported $ 565 $(138,458) $6,695
Pro Forma $ 99 $(138,577) $6,695
Earnings Per Share: As Reported $ 0.02 $ (4.99) $ 0.24
Pro Forma $ 0.00 $ (4.99) $ 0.24
======= ========= ======
</TABLE>
STOCK OPTIONS:
- --------------
The outstanding options become exercisable in varying amounts through 2005. A
summary of stock option transactions follows:
<TABLE>
<CAPTION>
For the years ended April 30,
-----------------------------------------------------------
SHARES OUTSTANDING 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at May 1 1,471,074 1,111,800 899,700
Options granted - 750,603 419,400
Options exercised - - -
Options canceled (1,361,727) (391,329) (207,300)
- ----------------------------------------------------------------------------------------------------------------------------
Options outstanding at April 30 109,347 1,471,074 1,111,800
Options available for grant at April 30 366,305 149,620 508,894
- ----------------------------------------------------------------------------------------------------------------------------
Total reserved shares 475,652 1,620,694 1,620,694
============================================================================================================================
Options exercisable at April 30 73,226 540,101 541,050
============================================================================================================================
Option prices per share:
Granted - $3.875-$6.875 $3.00-$9.625
Exercised - - -
Canceled $ 5.00-$17.125 $5.00-$12.50 $6.00-$12.500
============================================================================================================================
</TABLE>
35
<PAGE>
RESTRICTED STOCK PLAN:
- ----------------------
Stock issued under this plan is delivered subject to various conditions relating
to corporate performance. Compensation expense related to these options amounted
to approximately $1,374,000 in 1997, $142,000 in 1996 and $264,000 in 1995. A
summary of restricted stock transactions follows:
<TABLE>
<CAPTION>
For the years ended April 30,
----------------------------------------------------------
SHARES OUTSTANDING 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares restricted at May 1 110,498 132,348 243,347
Shares granted 1,457,000 - -
Shares released (238,915) (21,850) (110,999)
Shares canceled (311,958) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Shares restricted at April 30 1,016,625 110,498 132,348
====================================================================================================================================
</TABLE>
NOTE 7 - LEASES
- --------------------------------------------------------------------------------
The Company is a party to a number of noncancelable lease agreements involving
land, buildings and equipment. The leases are generally for terms of 15 to 20
years which 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
rental income under all noncancelable leases (in thousands):
<TABLE>
<CAPTION>
Commitments
-----------------------------------------------------------
Sublease
Capital Operating Rental
Years ended April 30, Leases Leases Income
- --------------------- -----------------------------------------------------------
<S> <C> <C> <C>
1998 $389 $11,771 $1,627
1999 326 11,119 1,491
2000 291 10,153 1,433
2001 180 9,108 1,303
2002 101 8,630 1,300
Thereafter 658 45,340 5,300
---------------------------------------------------------
Total minimum lease
commitments/receivables 1,945 $96,121 $12,454
=====================================
Less amount representing interest 659
--------------------
Present value of minimum lease 1,286
Less current portion of
capital lease obligations 256
---------------------
Long-term capital lease obligations (a) $1,030
=====================
</TABLE>
36
<PAGE>
(a) Capital lease obligations include only those leases which were not rejected
during bankuptcy proceedings. Substantially all captial lease obligations
have been reclassified as "Liabilities subject to compromise under
reorganization proceedings" on the balance sheet.
Rent expense consists of (in thousands):
<TABLE>
<CAPTION>
Years ended April 30, 1997 1996 1995
- --------------------------- --------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rentals $11,355 $20,470 $18,880
Contingent rentals 623 764 1,333
Less sublease rentals 2,141 4,230 5,447
--------------------------------------------------------------------
Net rent expense $ 9,837 $17,004 $14,766
====================================================================
</TABLE>
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-recurring 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): 1997 1996 1995
- ------------------------ ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
United States $122,037 41% $252,872 58% $274,135 59%
International 177,891 59 183,322 42 188,016 41
- ------------------------------------------------------------------------------------------------------------------------------------
Total $299,928 100% $436,194 100% $462,151 100%
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING PROFITS (LOSSES)
- ---------------------------
(IN THOUSANDS):
---------------
United States $ (5,646) (596)% $(22,881) (217)% $(10,496) (93)%
International 4,698 496 12,357 117 21,754 193
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ (948) 100% $(10,524) (100)% $ 11,258 100%
- ------------------------------------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS (IN THOUSANDS):
- ----------------------------------
United States $ 73,869 44% $ 77,648 43% $164,962 60%
International 94,241 56 100,899 57 111,692 40
- ------------------------------------------------------------------------------------------------------------------------------------
Total $168,110 100% $178,547 100% $276,654 100%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
NOTE 9 - COMMITMENTS AND CONTINGENCIES
At April 30, 1997, international commitments made for capital projects were
approximately $1,039,000. There were no U.S. commitments for capital projects at
fiscal year end.
The Company is a party to certain litigation arising in the ordinary course of
business which, 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 1997 or 1996. The Company's
contribution amounted to approximately $515,000 in 1995.
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, 1997 and April 30, 1996.
38
<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:
Name Age Position with Company
- ----------------------------- --- ---------------------
James A. Collins 70 Chairman of Board of the Company
and its predecessor CFI since 1968
(term expires in 1998). Chief Executive
Officer of the Company since May 29, 1997.
Kevin W. Perkins 45 Director of the Company since 1994 (term
expires in 1998). Executive Vice President
of the Company since May 29, 1997.
President, and Chief Executive Officer of
the Company (1994-1997). President and
Chief Executive Officer of International
Operations.
Peter H. Dailey 67 Director of the Company since 1991 (term
expires in 1998). 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.
Barry E. Krantz 54 Director of the Company since January
1997 (term expires in 1997). Restaurant
industry consultant since 1995. Chief
Operating Officer, Restaurant Enterprises
Group (1993-1995), President, Family
Restaurant division (1989-1995), and
President and Chief Operation Officer,
Family Restaurants, Inc. (1994-1995).
39
<PAGE>
Name Age Position with Company
- ---- --- ---------------------
Phillip D. Matthews 59 Director of the Company since May 1997
(term expired in 1996). Chairman, Panda
Management Company (1995-1997). Chairman,
Wolverine World Wide, Inc. (1993-1996).
Director, Bell Sports, Inc., H. F.
Ahmanson & Co., Home Savings of America
and Wolverine World Wide, Inc.
H. Wallace Merryman 69 Director of the Company and its
predecessor CFI since 1971 (term expires
in 1997). Chairman of the Board and Chief
Executive Officer, Avco Financial
Services, Inc. (1975-1987).
Robert A. Muh 59 Director of the Company since May 1997
(term expired in 1996). Chairman of the
Board of Sutter Securities, Inc. since
1992. President, Financial Services
International (1987-1992).
Carol A. Scott, Ph.D. 47 Director of the Company since 1993 (term
expired in 1996). Professor of Marketing,
UCLA since 1989. Chairman of the Faculty,
UCLA Anderson Graduate School of
Management (1990-1994). Director, Athena
Medical Corporation.
Charles F. Smith 64 Director of the Company since 1995 (term
expires in 1998). President of Charles F.
Smith & Co., Inc., an investment banking
firm, since 1984. Director, FirstFed
Financial Corp., Logicon, Inc., and
Fremont Funding Corp.
Christopher R. Thomas 48 Executive Vice President of the Company
since 1991. Chief Financial Officer of
the Company and its predecessor CFI
(1985-1997). President and Chief
Executive Officer of Sizzler USA.
40
<PAGE>
Name Age Position with Company
- ----------------------------- --- ---------------------
Ryan S. Tondro 49 Vice President and Chief Financial
Officer of the Company since May 1997.
Vice President, Controller of the Company
(1995-1997). Controller of the Company
(February 1995-August 1995). Vice
President, Finance and Controller of
Washington Inventory Service, a division
of Huffy Corporation (1993-1995). Vice
President, Controller of Thrifty Drug
Stores (1978-1993).
David J. Barton 41 Vice President, General Counsel of the
Company since 1994 and Secretary of the
Company since 1995. Assistant General
Counsel of the Company (1991-1994).
Michael J. Raedeke 39 Vice President, Taxation and Internal
Audit of the Company since 1995.
Director of Tax/Internal Audit of the
Company (1991-1995).
41
<PAGE>
<TABLE>
<CAPTION>
Item 11. Executive Compensation
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards
---------------------------------------- -------------------------
Other Restricted
Name and Annual Stock Stock All Other
Principal Position Compensation Awards Options Compensation
at April 30, 1997 Year Salary ($) Bonus ($) ($) (1) ($) (3) (#) ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Kevin W. Perkins 1997 300,000 - (2) 785,400 - 58,395 (4)
President, Chief Executive 1996 300,000 - (2) - 34,888 12,697
Officer and Director 1995 200,000 - 22,600 - 50,000 68,846
Christopher R. Thomas 1997 235,000 - (2) 561,000 - -
Executive Vice President 1996 225,000 - (2) - 24,444 2,546
Finance and Chief 1995 185,000 - (2) - 45,000 5,383
Financial Officer
David J. Barton 1997 154,000 - (2) 280,500 - -
Vice President 1996 128,000 - (2) - 4,667 1,968
General Counsel, and 1995 105,000 - (2) - 15,000 -
Secretary
Ryan S. Tondro (5) 1997 140,000 - (2) 280,500 - -
Vice President, 1996 119,000 - (2) - 4,444 -
Controller 1995 25,000 - (2) - 5,000 -
Richard C. Kowalski (6) 1997 120,000 - (2) 201,960 - -
Vice President, 1996 91,000 - (2) - - -
Marketing 1995 57,000 - (2) - - -
</TABLE>
(1) 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) Does not exceed the lesser of $50,000 or 10% of total salary and bonus.
(3) 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. Dividends, when paid, are paid on all restricted stock. All
restricted shares 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. As of the
end of fiscal 1997, the aggregate restricted stock holdings remaining,
valued as of the date of the grant, are as follows: Mr. Perkins, 232,375
shares valued at $1,193,584; Mr. Thomas, 177,875 shares valued at
$1,011,547; Mr. Barton, 75,000 shares valued at $281,250; Mr. Tondro,
75,000 shares valued at $281,250; Mr. Kowalski, 54,000 shares, valued at
$202,500.
(4) Mr. Perkins' 1997 All Other Compensation represents loan forgiveness.
(5) Mr. Tondro joined the Company in February 1995.
(6) Mr. Kowalski joined the Company in August 1994 and left the Company in July
1997.
42
<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 12 times during fiscal 1997, including
one meeting of an ad hoc committee of the Board formed to review the Chapter 11
proceedings. 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 Ms. Scott comprised the Audit
Committee, which met four times during fiscal 1997. 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.
Mr. William S. Hansen (Chairman), Mr. Dailey and Mr. Wayne G. Kees comprised the
Compensation and Stock Option Committee, which did not meet during fiscal 1997.
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. Smith (Chairman) and Kees and Ms. Scott comprised the Nominating
Committee which met during fiscal 1997 on 12/20/96. 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.
Following the end of fiscal 1997, Messrs. Hansen and Kees announced their
retirement and resigned from the Board of Directors. The resulting vacancies on
the Board were filled by the appointment of Mr. Phillip D. Matthews and Mr.
Robert A. Muh.
In his capacity as the Chairman of the Board of Directors, during fiscal 1997
Mr. Collins received a salary of $53,000. 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 Purchase Plan for Non-Employee Directors, each
Director who is not an employee of the Company may elect to have all or a
portion of his or her retainer used to purchase shares of the Company's common
stock. The price of the shares of common stock purchased from the Company is
the closing price reported on the New York Stock Exchange on the first day of
each calendar quarter for which the director's election is effective.
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.
43
<PAGE>
EXECUTIVE SUPPLEMENTAL BENEFIT PLAN
During fiscal 1997, the Company maintained an 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 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
The Company has entered into employment agreements with five executive officers
(Messrs. Perkins, Thomas, Barton, Raedeke, and Tondro). Each of these
agreements sets forth the officer's position and responsibilities with the
Company and provides for the officer's annual base salary, participation in the
Management Incentive Plan or other bonus program, and other benefits generally
available to executive officers of the Company.
Under these employment agreements, the Company may terminate the officer's
employment for cause. "Cause" generally is defined to include the willful and
continued failure by the officer to substantially perform his duties after
demand by the Company, or the willful engaging by the officer in misconduct
which is materially injurious to the Company. Under these agreements, the
officer may terminate his employment for "good reason." "Good reason" generally
is defined as a failure by the Board of Directors to re-elect the officer to the
position set forth in the agreement following removal from such position, or to
vest the officer with the powers and authority of the position set forth in the
agreement, or other breach by the Company.
In the event an employment agreement is terminated by the Company other than for
cause or by reason of the officer's disability, or by the officer for good
reason, the officer is entitled under his employment agreement to receive the
sum of (a) his salary through the date of termination and (b) as severance an
amount equal to one year of the officer's salary at the annual rate in effect as
of the date of termination.
A subsidiary of the Company is party to a consulting agreement with Barry
Krantz, a director of the Company. Under the agreement, Mr. Krantz provides
marketing consulting services. The agreement is terminable by the Company's
subsidiary at any time and for any reason upon two weeks' notice.
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
44
<PAGE>
compare to those of competing companies as well as the Company's performance.
Members of the Committee also review compensation surveys and analysis provided
by such firms, including material prepared by the Company's human resources
personnel.
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.
In the second half of fiscal 1996, the Committee conducted a review of 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 the Company's
executive officers.
Under the new Incentive Plan, participants were 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
was 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 was
required to remain continuously employed by the Company on a full time basis
until the Program Termination Date. The key strategic objectives consisted of
either 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.
45
<PAGE>
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.
The compensation of Mr. Perkins, the Company's Chief Executive Officer, for
fiscal 1997 was established in a manner consistent with the Company's fiscal
1997 executive officer compensation program generally. Mr. Perkins' salary was
fixed as $300,000. The percentage of salary payable to Mr. Perkins as bonus
under the new Incentive Plan was established at 125%. Mr. Perkins was awarded
210,000 restricted shares on the basis described above. Mr. Perkins also was
entitled to receive perquisites and other benefits on the same basis as other
executive officers of the Company.
Compensation and Stock Option Committee
(Fiscal Year 1997)
William S. Hansen, Chairman
Peter H. Dailey
Wayne G. Kees
July 23, 1997
46
<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 1992 until the end of fiscal 1997. It assumes
$100 invested on April 30, 1992 in Sizzler stock and $100 invested at that time
in each of the indexes. The comparison assumes that all dividends are
reinvested.
(GRAPH OMITTED)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
4/30/92 4/30/93 4/30/94 4/30/95 4/30/96 4/30/97
Sizzler 100 62 64 54 37 23
Dow Jones Equity Market 100 110 116 135 177 222
Dow Jones Entertainment &
Leisure (Restaurants) 100 108 130 142 185 199
</TABLE>
47
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
As of June 30, 1997, 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
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OF CLASS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock James A. Collins 3,800,840 (2) 13.1%
12655 W. Jefferson Boulevard
Los Angeles, California 90066
Common Stock The Capital Group Companies, Inc. 3,532,800 (3) 12.2%
Capital Guardian Trust Co.
333 South Hope Street
Los Angeles, California 90071
Common Stock GeoCapital Corporation 1,691,945 (4) 5.9%
767 Fifth Avenue
New York, New York 10153
Common Stock Dimensional Fund Advisors Inc.("DFAI") 1,514,834 (5) 5.2%
1299 Ocean Avenue, 11/th/ Floor
Santa Monica, California 90401
Common Stock Fisher Investments, Inc. 1,479,100 5.1%
13100 Skyline Boulevard
Woodside, California 94062
</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 sole voting power
only for 1,777,100 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 sole voting power only for
1,069,834 shares of Common Stock. Persons who are officers of DFAI also
serve as officers of DFA Investment Group Inc., a registered open-end
investment company (the "DFAI Fund"), and the DFA Investment Trust Company,
a Delaware business trust (the "DFAI Trust"). In their capacities as
officers of the DFAI Fund and the DFAI Trust, these persons vote 220,800
additional shares owned by the Fund and 224,200 additional shares owned by
the Trust. DFAI disclaims beneficial ownership of these shares. The Company
has been advised that the shares are held in portfolios of DFAI Fund or in
series of DFAI Trust investment vehicles for qualified employee benefit
plans, for all of which DFAI, a registered investment advisor, serves as
investment manager.
48
<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, 1997.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP PERCENT OF
NAME OF COMMON STOCK (1) (3) CLASS
- ---- ----------------------- ----------
<S> <C> <C>
DIRECTORS
James A. Collins................................ 3,800,840 (2) 13.1%
Peter H. Dailey................................. 6,000 *
Barry Krantz.................................... 0 *
Phillip D. Matthews............................. 20,000 *
H. Wallace Merryman............................. 32,809 *
Robert A. Muh................................... 10,000 *
Kevin W. Perkins................................ 235,980 *
Carol A. Scott.................................. 5,000 *
Charles F. Smith................................ 0 *
EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS
Christopher R. Thomas........................... 189,691 *
Ryan S. Tondro.................................. 81,000 *
David J. Barton................................. 75,000 *
Michael J. Raedeke.............................. 28,000 *
All Directors and Executive Officers
as a group (13 persons)......................... 4,484,320 15.5%
</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, 1997 in the following amounts: Ms. Scott - 4,000, Messrs. Dailey
and Merryman - 6,000 shares each, and all directors and executive officers
as a group - 16,000 shares.
49
<PAGE>
Item 13. Certain Relationships and Related Transactions.
- -------------------------------------------------------
The Company has entered into employment agreements with certain executive
officers and into a consultancy agreement with one of its directors. (See Item
11 "Executive Compensation.")
On January 1, 1990, CFI loaned Kevin Perkins, currently a Director and an
Executive Vice President 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 remained employed by the Company in a capacity of Vice President and
President, Asian/Pacific or in a position of greater responsibility, no interest
would accrue on the principal balance and the principal balance would be subject
to reduction in accordance with an amortization schedule. The principal amount
was fully forgiven on December 31, 1996.
In fiscal 1996, the Company retained Sutter Securities, Inc. ("Sutter") as its
exclusive financial advisor. Sutter is an investment banking firm of which
Robert A. Muh, currently a Director of the Company, is the Chairman of the
Board. Under the terms of an engagement letter with the Company dated May 2,
1996, Sutter is to provide financial advisory services and to act as agent in
connection with identifying and seeking out persons who would be interested in
entering into a merger, acquisition, or other similar transaction with the
Company. In consideration of its services, Sutter is entitled to receive (i) an
initial cash fee of $100,000 and (ii) a transaction fee in an amount equal to a
specified percentage of the total consideration paid by the purchaser in such a
transaction (.5% in the case of a sale of the Company's KFC restaurants to the
franchisor and .75% in the case of any other transaction). During the Company's
Chapter 11 proceedings, Sutter was entitled to receive reorganization fees of
$25,000 a month and a one-time bonus of $100,000 upon emergence from bankruptcy.
The reorganization fees may be credited against any transaction fee that may
become payable. Under the engagement letter, the Company also has agreed to
reimburse Sutter for certain out-of-pocket expenses.
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. and
Subsidiaries for each of the three years in the period ended
April 30, 1997
Consolidated Balance Sheets of Sizzler International, Inc. and
Subsidiaries as of April 30, 1997 and 1996
Consolidated Statements of Stockholders' Investment of Sizzler
International, Inc. and Subsidiaries for each of the three years in the
period ended April 30, 1997.
Consolidated Statements of Cash Flows of Sizzler International, Inc. and
Subsidiaries for each of the three years in the period ended April 30,
1997.
50
<PAGE>
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.
51
<PAGE>
(3) Exhibits:
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
2.1 Registrant's Fifth Amended Plan of Reorganization.
2.2 Sizzler Restaurants International, Inc.'s Second Amended Plan of
Reorganization.
2.3 Collins Properties, Inc.'s Plan of Reorganization.
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 herein 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, incorporated herein by
reference to Exhibit 4.2 to the Registrant's Form 10-K report for
the fiscal year ended April 30, 1996.
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.
10.2 Employee Savings Plan of Registrant, restated as of January 1,
1992, incorporated herein by reference to Exhibit 10.2 to the
Registrant's Form 10-K report for the fiscal year ended April 30,
1995.
10.3 Amendment to Employee Savings Plan of Registrant.
10.4 Registrant's Executive Supplemental Retirement Plan (effective
May 1, 1985, and including amendments through May 1, 1993),
incorporated herein by reference to Exhibit 10.3 to the
Registrant's Form 10-K report for the fiscal year ended April 30,
1996.
10.5 Employment Agreement dated May 1, 1996 between Registrant and
Kevin W. Perkins, incorporated herein by reference to Exhibit
10.5 to the Registrant's Form 10-K report for the fiscal year
ended April 30, 1996.
10.6 Amendment to Employment Agreement dated September 25, 1996
between the Registrant and Kevin W. Perkins.
</TABLE>
52
<PAGE>
<TABLE>
<S> <C>
10.7 Amendment to Employment Agreement dated January 1, 1997 between
the Registrant and Kevin W. Perkins.
10.8 Third Amendment to Employment Agreement dated May 5, 1997 between
the Registrant and Kevin W. Perkins.
10.9 Employment Agreement dated May 1, 1996 between Registrant and
Christopher R. Thomas, incorporated herein by reference to
Exhibit 10.6 to the Registrant's Form 10-K report for the fiscal
year ended April 30, 1996.
10.10 Employment Agreement dated May 1, 1996 between Registrant and
David J. Barton, incorporated herein by reference to Exhibit 10.7
to the Registrant's Form 10-K report for the fiscal year ended
April 30, 1996.
10.11 Employment Agreement dated May 1, 1996 between Registrant and
Ryan S. Tondro, incorporated herein by reference to Exhibit 10.9
to the Registrant's Form 10-K report for the fiscal year ended
April 30, 1996.
10.12 Employment Agreement dated May 1, 1996 between Registrant and
Michael J. Raedeke, incorporated herein by reference to Exhibit
10.11 to the Registrant's Form 10-K for the fiscal year ended
April 30, 1996.
10.13 Form of Executive Bonus Program of Registrant dated May 1, 1996,
incorporated herein by reference to Exhibit 10.12 to the
Registrant's Form 10-K for the fiscal year ended April 30, 1996.
10.14 Consulting Agreement dated December 17, 1996 between Barry Krantz
and Collins Foods International Pty Ltd.
10.15 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.
10.16 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.
10.17 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.
10.18 Stock Purchase Plan for Non-Employee Directors of Registrant.
10.19 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.
10.20 Development Agreement dated October 4, 1996 between Kentucky
Fried Chicken Pty. Limited and Collins Foods International Pty
Ltd.
10.21 Master Franchise Agreement dated October 4, 1996 between Kentucky
Fried Chicken Pty Limited and Collins Foods International Pty
Ltd.
</TABLE>
53
<PAGE>
<TABLE>
<S> <C>
10.22 Form of Franchise Agreement between Kentucky Fried Chicken Pty
Limited and Collins Foods International Pty Ltd. relating to KFC
restaurant franchise.
10.23 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.
10.24 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.
10.25 Agreement dated May 2, 1996 between Registrant and Sutter
Securities, Incorporated.
11.00 Computation of Earnings (Loss) Per Share
22.00 Subsidiaries of Registrant.
24.00 Consent of Arthur Andersen LLP
27.00 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
Registrant has filed no reports on Form 8-K during the last quarter of
its 1997 fiscal year.
54
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant had duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: July 23, 1997 SIZZLER INTERNATIONAL, INC.
By: /s/ James A. Collins
------------------------
James A. Collins
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 23, 1997
- --------------------
James A. Collins
/s/ Peter H. Dailey Director July 23, 1997
- -------------------
Peter H. Dailey
/s/ Barry E. Krantz Director July 23, 1997
- -------------------
Barry E. Krantz
/s/ Phillip D. Matthews Director July 23, 1997
- -----------------------
Phillip D. Matthews
/s/ H. Wallace Merryman Director July 23, 1997
- -----------------------
H. Wallace Merryman
/s/ Robert A. Muh Director July 23, 1997
- -----------------
Robert A. Muh
/s/ Carol A. Scott, Ph.D. Director July 23, 1997
- -------------------------
Carol A. Scott, Ph.D.
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/Charles F. Smith Director July 23, 1997
- -------------------
Charles F. Smith
/s/ Christopher R. Thomas Executive Vice President July 23, 1997
- -------------------------
Christopher R. Thomas
/s/ Ryan S. Tondro Vice President and Chief July 23, 1997
- ------------------ Financial Officer (principal
Ryan S. Tondro financial and accounting officer)
</TABLE>
56
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE II
-----------
<TABLE>
<CAPTION>
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED APRIL 30, 1997, 1996 AND 1995
-------------------------------------------------
(IN THOUSANDS)
Balance at Balance
Beginning at end of
of Period Additions Deductions Other Period
---------- --------- ---------- ----- ---------
<S> <C> <C> <C> <C> <C>
RESERVE FOR DOUBTFUL ACCOUNTS
- -----------------------------
Year ended April 30, 1997 $10,291 $ 478 $ 7,148 $350 $ 3,971
========== ========= ========== ===== =========
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
========== ========= ========== ===== =========
RESERVE FOR EXCESS PROPERTIES AND RESTAURANT CLOSURES
- -----------------------------------------------------
Year ended April 30, 1997 - - - - -
========== ========= ========== ===== =========
Year ended April 30, 1996 $55,382 - $55,382 - -
========== ========= ========== ===== =========
Year ended April 30, 1995 $99,469 - $44,087 - $55,382
========== ========= ========== ===== =========
</TABLE>
57
<PAGE>
EXHIBIT 2.1
RICHARD M. PACHULSKI, ESQ., (State Bar #90073)
JAMES I. STANG, ESQ., (State Bar #94435)
BRAD R. GODSHALL, ESQ., (State Bar #105438)
DEBRA GRASSGREEN, ESQ., (State Bar #169978)
RACHELLE S. VISCONTE, ESQ., (State Bar #182158)
PACHULSKI, STANG, ZIEHL & YOUNG P.C.
10100 Santa Monica Boulevard, Suite 1100
Los Angeles, California 90067
Telephone: (310) 277-6910
Attorneys for Debtor and Debtor in Possession
SCOTT McNUTT, ESQ. (State Bar #104696)
REBECCA LITTENEKER, ESQ. (State Bar #111744)
SEVERSON & WERSON
1 Embarcadero Center, 25th Floor
San Francisco, CA 94111
Telephone: (415) 398-3344
Special Counsel for Debtor and Debtor in Possession
UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
In re:
SIZZLER RESTAURANTS INTERNATIONAL, INC.,
SIZZLER INTERNATIONAL, INC., COLLINS
PROPERTIES, INC., TENLY ENTERPRISES, INC.,
and BUFFALO RANCH STEAKHOUSES, INC.,
Debtors.
- -------------------------------
Affects all Debtors
--
Affects SRI Only
--
X Affects SII Only
--
Affects Collins Only
--
Affects Tenly Only
--
Affects Buffalo Ranch Only
--
- -------------------------------
Case No. SV 96-16075-AG
(Jointly administered with:
Case Nos: SV 96 -16076-AG
SV 96 -16077-AG
SV 96 -16078-AG
SV 96 -16079-AG)
Chapter 11 cases
SIZZLER INTERNATIONAL, INC.'S FIFTH AMENDED PLAN OF REORGANIZATION
Disclosure Statement Hearing:
- ----------------------------
Date: April 29, 1997
Time: 9:00 a.m.
Place: Courtroom "302"
21041 Burbank Blvd.
Woodland Hills, CA 91367
Confirmation Hearing:
- --------------------
Date: June 2, 1997
Time: 9:00 a.m.
Place: Courtroom "302"
21041 Burbank Blvd.
Woodland Hills, CA 91367
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I DEFINITIONS.............................................................. 1
A. Definitions................................................................... 1
B. Rules of Interpretation, Computation of Time and Governing Law................ 21
1. Rules of Interpretation.................................................. 21
2. Computation of Time...................................................... 22
3. Governing Law............................................................ 22
ARTICLE II ADMINISTRATIVE AND TAX CLAIMS................................................ 23
A. Treatment of Administrative Claims............................................ 23
1. Bar Date for Administrative Tax Claims................................... 23
2. Bar Date for All Other Administrative Claims............................. 23
3. Payment of Administrative Claims, Administrative Tax Claims
and Priority Tax Claims.................................................. 24
4. Statutory Fees........................................................... 25
ARTICLE III CLASSIFICATION OF CLAIMS AND INTERESTS AND DESIGNATION OF IMPAIRMENT........ 26
A. Nature of Class Designations.................................................. 26
B. Class Overview................................................................ 26
1. Priority Non-Tax Claims.................................................. 27
2. Secured Claims........................................................... 27
3. Bank Claims.............................................................. 27
4. Large Unsecured Claims................................................... 27
5. Damage Claims............................................................ 27
6. Affiliate Claims......................................................... 27
7. SERP Claims.............................................................. 27
8. Small Unsecured Claims................................................... 28
9. Workers' Compensation Claims............................................. 28
10. Non-Vested Retirement Claims............................................. 28
11. Interests................................................................ 28
ARTICLE IV DESIGNATION AND TREATMENT OF CLASSES......................................... 28
A. Treatment of Allowed Secured Claims: Class 2(a) and 2(b)...................... 28
1. Class 2 Subclasses....................................................... 28
2. Treatment................................................................ 28
B. Treatment of Unsecured Claims................................................. 29
1. Class 1 - Priority Non-Tax Claims........................................ 29
2. Class 3 - Bank Claims.................................................... 30
3. Class 4 - Large Unsecured Claims......................................... 31
4. Class 5 - Damage Claims.................................................. 33
5. Class 6 - Affiliate Claims............................................... 34
6. Class 7 - SERP Claims.................................................... 34
7. Class 8 - Small Unsecured Claims......................................... 34
8. Class 9 - Workers' Compensation Claims................................... 35
9. Class 10 - Non-Vested Retirement Claims.................................. 35
C. Treatment of Equity - Class 11................................................ 35
ARTICLE V VARIOUS MECHANICS FOR PAYMENT OF CLASS 3 AND 4 GENERAL UNSECURED CLAIMS...... 36
A. The Indenture................................................................. 36
</TABLE>
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<TABLE>
<S> <C>
B. The Notes..................................................................... 36
C. Term of Notes................................................................. 37
D. Interest Accrual Under the Notes.............................................. 37
E. Amortization Payments......................................................... 37
F. Affiliate Guarantees/Collateral............................................... 41
G. Covenants Under the Indenture................................................. 42
H. Dividend Purchase............................................................. 45
I. The Reserve Agent............................................................. 46
J. Approved Reserve Agent Expenses............................................... 48
K. Reserve Agent Indemnification/Expenses Upon Default........................... 48
L. The Attorneys Fee Fund........................................................ 48
M. Controlling Nature of the Indenture........................................... 50
ARTICLE VI CONDITIONS TO EFFECTIVENESS.................................................. 50
ARTICLE VII TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES....................... 52
A. Assumption.................................................................... 52
B. Assignment.................................................................... 53
C. Rejection..................................................................... 53
D. Claims Arising From Rejection of Contracts.................................... 54
ARTICLE VIII MEANS FOR IMPLEMENTATION OF PLAN/RESERVES.................................. 55
A. Effective Date Transactions................................................... 55
1. Incorporation of Sizzler USA Holdings and Sizzler USA and
Sizzler International Marks.. ........................................... 55
2. Assignment of International Licensing Assets to Sizzler
International Marks...................................................... 55
3. International Licensing Assets Payment................................... 55
B. Global Interestate Settlement................................................. 55
C. Distributions and Plan Funding................................................ 56
1. Source of Plan Funding................................................... 56
2. The ADR.................................................................. 56
3. Rounding of Amounts...................................................... 56
4. Name and Address of Holder............................................... 57
5. Corporate Governance..................................................... 57
6. Execution of Plan Agreements............................................. 57
7. Disputed Claims Reserves................................................. 57
8. Unclaimed Property....................................................... 60
9. De Minimis Distributions/Return of Undistributed Funds................... 60
D. Services by and Fees for Professionals........................................ 61
1. Services by Professionals and Certain Parties after the
Effective Date........................................................... 61
2. Fees for Professionals and Certain Parties 61
E. Dissolution of Committees..................................................... 62
F. Litigation.................................................................... 62
ARTICLE IX MODIFICATION................................................................ 63
ARTICLE X EFFECT OF CONFIRMATION....................................................... 63
A. Binding Effect of Confirmation................................................ 63
B. Vesting of Assets Free and Clear of Liens, Claims and Interests............... 63
C. Good Faith.................................................................... 63
D. No Limitations on Effect of Confirmation...................................... 64
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E. Continuation of ADR - Permanent Injunction for Damage Claims.................. 65
F. Discharge of Claims and Termination of Interests.............................. 65
G. Judicial Determination of Discharge........................................... 65
H. Injunction.................................................................... 66
ARTICLE XI SUCCESSORS AND ASSIGNS....................................................... 66
ARTICLE XII RETENTION OF JURISDICTION................................................... 67
ARTICLE XIII MISCELLANEOUS.............................................................. 68
A. Severability.................................................................. 68
B. Release of Avoidance Actions.................................................. 68
C. Amendment, Withdrawal or Revocation of the Plan............................... 68
D. Headings...................................................................... 68
E. Successors and Assigns........................................................ 69
F. Statutory Fees................................................................ 69
G. Amendment to Charter.......................................................... 69
ARTICLE XIV CONFIRMATION REQUEST........................................................ 70
</TABLE>
<PAGE>
Exhibits:
A. Form of Affiliate Guarantee
B. Assumed and Assigned Executory Contracts
C. Form of Indenture
D. Assumed Executory Contracts
E. List of Encumbered Properties
F. Form of LUC Note
G. Sandwich Lease Properties
H. SERP Guarantee
I. Form of Bank Note
J. Form of SII Stock Pledge Agreement
K. Form of SII Security Agreement
L. [Intentionally Omitted]
M. Form of Letter of Credit Note
N. List of International Licensing Assets
O. List of CPI Properties
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Sizzler International, Inc., a Delaware corporation, debtor and debtor in
possession herein, hereby proposes the following Plan of Reorganization ("Plan")
pursuant to Bankruptcy Code (S) 1121:
ARTICLE I
DEFINITIONS
-----------
A. DEFINITIONS
-----------
The following definitions will apply with respect to this Plan and the
Disclosure Statement, as those terms are defined below.
1. "ADMINISTRATIVE AND PRIORITY CLAIMS RESERVE". The Administrative and
------------------------------------------
Priority Claim reserve of the Debtor for Disputed Administrative and Priority
Claims and projected and actual Administrative Claims which have not been
disallowed by the Bankruptcy Court.
2. "ADMINISTRATIVE CLAIM". A Claim for payment of an administrative expense
--------------------
of a kind specified in Bankruptcy Code (S) 503(b) and referred to in Bankruptcy
Code (S) 507(a)(1), including, without limitation, the actual, necessary costs
and expenses of preserving the Estate and operating the business of the Debtor,
including wages, salaries, and commissions for services rendered after the
commencement of the Case; obligations for goods and services procured after the
commencement of the Case; compensation for legal and other services and
reimbursement of expenses awarded under Bankruptcy Code (S)(S) 328, 330(a) and
331; and all fees and charges assessed against the Estate under Chapter 123 of
Title 28 of the United States Code.
3. "ADMINISTRATIVE TAX CLAIM". An unsecured Claim by a governmental unit
------------------------
for taxes (and for interest or penalties related to such taxes) for any tax year
or period, all or a portion of
1
<PAGE>
which occurs or falls within the period from and including the Petition Date
through and including the Effective Date.
4. "ADR". The alternative dispute resolution procedure which will be
---
implemented pursuant to an order of the Bankruptcy Court prior to the Effective
Date for the liquidation of Damage Claims. The ADR will provide an orderly
mechanism for the settlement, mediation or arbitration of Damage Claims and, in
some instances, the payment of Damage Claims without further order of the
Bankruptcy Court.
5. "AFFILIATE". Any direct or indirect wholly or partially owned subsidiary
---------
of SII other than a subsidiary in which SII and all direct or indirect wholly or
partially owned subsidiaries of SII combined hold less than a fifty-one percent
(51%) interest.
6. "AFFILIATE CLAIM". Any Claim held by an Affiliate against the Debtor.
---------------
7. "AFFILIATE GUARANTEES". The guarantees executed by all Affiliates of
--------------------
Debtor, other than SRI Affiliates and CFI Insurers Ltd., of Debtor's obligations
under this Plan and the Notes. The Affiliate Guarantees shall be in
substantially the form of Exhibit "A" hereto.
8. "AFFILIATE TRUST DEEDS". The deeds of trust or mortgages to be given by
---------------------
CFI Pty., CPI and SA Pty on the Encumbered Properties.
9. "AFFILIATED DEBTORS". The Debtor, together with Buffalo Ranch, SRI,
------------------
Collins and Tenly, all of which are debtors in related chapter 11 cases.
10. "ALLOWED". When used in respect of a Claim or Interest or group of
-------
Claims or Interests, means --
2
<PAGE>
(a) if no proof of Claim or Interest has been timely filed, such amount
of the Claim or Interest, or group of Claims or Interests, which has been
scheduled by the Debtor as liquidated in amount and not disputed or contingent
and as to which no party in interest has filed an objection within the time
required under this Plan, or otherwise fixed by the Bankruptcy Court, and which
Claim or Interest is not disallowed under Bankruptcy Code (S)(S) 502(d) or (e);
or
(b) if a proof of Claim or Interest has been filed by the Claims Bar
Date, or is deemed timely filed by the Bankruptcy Court, such amount of the
Claim or Interest, or group of Claims or Interests, as to which any party in
interest has not filed an objection within the time required under this Plan, or
otherwise fixed by the Bankruptcy Court, and which Claim or Interest is not
disallowed under Bankruptcy Code (S)(S) 502(d) or (e); or
(c) such amount of the Claim or Interest, or group of Claims or
Interests, which is allowed by a Final Order of the Bankruptcy Court; or
(d) such amount of the Claim or Interest or group of Claims or Interests,
which is allowed under this Plan.
11. "ALLOWED AMOUNT". The amount in which a Claim is Allowed.
--------------
12. "ALLOWED CLAIM". A Claim which is Allowed.
-------------
13. "ALLOWED CLASS ... CLAIM". An Allowed Claim in the particular Class
-----------------------
described.
14. "ALLOWED INTEREST". An Interest which is Allowed.
----------------
15. "ASSETS". All "property of the estate" as described in Bankruptcy Code
------
(S) 541.
3
<PAGE>
16. "ASSUMED AND ASSIGNED EXECUTORY CONTRACTS". Those executory contracts to
----------------------------------------
be assumed and assigned to SRI on the Effective Date as identified on Exhibit
"B" hereto.
17. "ASSUMED EXECUTORY CONTRACTS". Those executory contracts to be assumed
---------------------------
on the Effective Date as identified on Exhibit "D" hereto.
18. "ATTORNEYS FEE FUND". That certain fund to be established with Cash in
------------------
the amount of $245,000 held in a separate account by the Debtor together with
any interest thereon for application on any and all Allowed Claims for
professional fees or expenses which are not disputed by the Debtor or which are
Allowed in respect of any Large Unsecured Claim, as provided in Section V.L. of
this Plan.
19. "AVAILABLE CASH". All Cash available for Plan payments calculated using
--------------
the methodology described in connection with the cash flow projections annexed
as Exhibit "7" to the Disclosure Statement.
20. "AVOIDANCE ACTIONS". All avoiding powers, and all rights and remedies
-----------------
under, relating to, or similar to Bankruptcy Code (S)(S) 544, 545, 547, 548,
549, 551, or any fraudulent conveyance, fraudulent transfer or preference laws
as addressed in Section XIII.B. of this Plan.
21. "BANK EFFECTIVE DATE PAYMENT". Cash payable to the Holders of Allowed
---------------------------
Bank Claims on the Effective Date in the sum of all accrued interest and pre-
Petition Date and post-Petition Date fees and expenses (other than pre- and
post-Petition Date professional fees and expenses) which are a portion of the
total Bank Claims payable under this Plan.
4
<PAGE>
22. "BANK CLAIMS". Any Claim against the Debtor arising under or related to
-----------
that certain Revolving Credit Agreement dated as of March 22, 1995 between and
among SII, CFI Insurers, Ltd., the banks named therein and Bank of New York, as
agent, as such agreement may have subsequently been amended or restated whether
held by such banks or their assignees.
23. "BANK NOTES". The registered Notes, substantially in the form of Exhibit
----------
"I" to this Plan, to be issued by the Debtor pursuant to the Indenture to the
Holders of the Bank Claims.
24. "BANK PROFESSIONAL FEE PAYMENT". Cash in the amount of $750,000 to be
-----------------------------
paid on the Effective Date to the Holders of Allowed Bank Claims in full
satisfaction of pre- and post-Petition Date professional fees and expenses that
are a portion of the Bank Claims.
25. "BANKRUPTCY CODE". The Bankruptcy Code, as codified in Title 11 of the
---------------
United States Code, 11 U.S.C. (S) 101 et seq., including all amendments thereto,
to the extent such amendments are applicable to the Case.
26. "BANKRUPTCY COURT". The United States Bankruptcy Court for the Central
----------------
District of California.
27. "BANKRUPTCY RULES". The Federal Rules of Bankruptcy Procedure, as now in
----------------
effect or hereafter amended and applicable to the Case.
28. "BUFFALO RANCH". Buffalo Ranch Steakhouses, Inc., a California
-------------
corporation, an Affiliate which is a debtor in a related chapter 11 case filed
on June 2, 1996.
29. "BUSINESS DAY". Any day other than a Saturday, Sunday or a legal holiday
------------
(as defined in Bankruptcy Rule 9006(a)).
5
<PAGE>
30. "CAPITAL LEASE OBLIGATIONS". Obligations arising under leases which are
-------------------------
required to be capitalized under GAAP.
31. "CASE". The case under Chapter 11 of the Bankruptcy Code commenced by
----
the Debtor on June 2, 1996, pending in the Bankruptcy Court and bearing Case No.
SV 96-16076-AG.
32. "CASH". Cash or cash equivalents including, but not limited to, bank
----
deposits, checks or other similar items.
33. "CFI ACCOUNTING AFFILIATES". CFI Pty and all other Affiliates as of or
-------------------------
after the Effective Date which are consolidated into CFI Pty for accounting
purposes pursuant to GAAP, including, without limitation, the following
corporations: Sizzler International Marks, Inc., Collins International, Inc.,
Restaurant Concepts International, Inc., Sizzler Franchise Development, Collins
Food Australia Pty Ltd, CFI Insurers, Ltd., Collins Finance & Management Pty,
Ltd, Collins Property Development Pty Ltd, Gulliver's Australia Pty Ltd, Sizzler
Australia Pty Ltd, Buffalo Ranch Australia Pty Ltd, Italian Oven Australia Pty
Ltd, Restaurant Concepts Australia Pty Ltd, Sizzler New Zealand Limited, Sizzler
Restaurant Services, Inc., Sizzler South Pacific Pty Ltd, Sizzler South East
Asia Inc., Furnace Concepts International, Inc., and Furnace Concepts Australia
Corp.
34. "CFI PTY". Collins Food International, Pty Ltd., a Nevada corporation,
--------
Debtor's wholly owned subsidiary.
35. "CFI STOCK". The shares representing Debtor's one hundred percent (100%)
----------
equity interest in CFI Pty.
36. "CLAIM". (a) Any right to payment from the Debtor, whether or not such
-----
right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed,
6
<PAGE>
undisputed, legal, equitable, secured or unsecured, or (b) any right to an
equitable remedy for breach of performance if such breach gives rise to a right
of payment from the Debtor, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured.
37. "CLAIMS BAR DATE". The date by which proof of a Claim or Interest was or
---------------
is required to be filed. This date was previously determined by the Bankruptcy
Court for most Claims or Interests to be October 15, 1996 and October 22, 1996
for Claims dated prior to October 15, 1996 other than with respect to executory
contracts or unexpired leases for which an order rejecting such contract or
lease is entered after September 15, 1996, and certain tax claims.
38. "CLASS". A class of Claims or Interests described in Article III of this
-----
Plan.
39. "COLLATERAL AGREEMENTS". The Affiliate Trust Deeds and all other
---------------------
security agreements, pledges, and mortgages to be granted to the Indenture
Trustee by the Affiliates.
40. "CPI REAL ESTATE". That real property owned or leased by CPI and to be
---------------
transferred to Sizzler USA on the Effective Date as identified on Exhibit "O" to
the Plan.
41. "COMMITTEE". The Official Committee of Creditors Holding Unsecured
---------
Claims appointed in the Case by the U.S. Trustee pursuant to Bankruptcy Code (S)
1102.
42. "CONFIRMATION". The entry of the Confirmation Order.
------------
43. "CONFIRMATION DATE". The date upon which the Bankruptcy Court enters the
-----------------
Confirmation Order.
44. "CONFIRMATION ORDER". The order of the Bankruptcy Court
------------------
7
<PAGE>
confirming this Plan pursuant to Bankruptcy Code (S) 1129.
45. "CONSOLIDATED NET INCOME". For any fiscal year beginning with fiscal
-----------------------
year 1998, shall mean the consolidated net income (or loss) of the CFI
Accounting Affiliates determined in accordance with GAAP and adjusted so as to
eliminate the impact of: (i) discontinued operations; (ii) extraordinary items;
and (iii) changes in accounting principles.
46. "COPELCO SECURED CLAIM". The Secured Claim of Copelco Capital, Inc.
---------------------
47. "COVERAGE". Any insurance coverage provided by an unrelated third-party
--------
that is available for the payment of Damage Claims.
48. "CPI". CPI Properties, Inc., a Delaware corporation, an Affiliate of the
---
Debtor and a debtor in a related chapter 11 case filed on June 2, 1996.
49. "CPI ENCUMBERED PROPERTIES". Those Encumbered Properties owned by CPI.
-------------------------
50. "CREDITOR". The Holder of a Claim against the Debtor.
--------
51. "DAMAGE CLAIM". A Claim for personal injury or property damage allegedly
------------
caused by the tortious acts of the Debtor or its agents or employees, other than
uninsured Claims for property damage asserted by landlords or former landlords
of the Debtor.
52. "DEBTOR OR SII". Sizzler International, Inc., a Delaware corporation,
-------------
whether as debtor or as debtor in possession, prior to the commencement of the
Case, during the pendency of the Case, or following the Effective Date, as the
case may be.
53. "DISCLOSURE STATEMENT". The "Disclosure Statement in Support of Debtor's
--------------------
Amended Plan of Reorganization" filed by the
8
<PAGE>
Debtor in support of this Plan which has been approved by the Bankruptcy Court,
and any and all amendments and exhibits to the Disclosure Statement. A copy of
the Disclosure Statement shall be distributed concurrently with this Plan to all
Holders of Claims and Interests entitled to vote on this Plan.
54. "DISPUTED CLAIM OR DISPUTED ... CLAIM". A Claim in a particular Class as
-------------------------------------
to which a proof of Claim has been filed or is deemed to have been filed under
applicable law, or an Administrative Claim, as to which a timely objection has
been or is filed by the Committee, the Debtor, or any other party in interest in
accordance with this Plan, the Bankruptcy Code, the Bankruptcy Rules, or the
Local Rules, which objection has not been withdrawn or determined by a Final
Order. When a Disputed Claim is disallowed by a Final Order, such Claim shall
no longer be considered a Claim for any purpose under this Plan. Once an
objection has been or is filed, for the purposes of this Plan, a Claim or
Interest shall be considered a Disputed Claim to the extent that: (i) the amount
of a Claim or Interest specified in a proof of claim exceeds the amount of any
corresponding Claim scheduled by the Debtor in its Schedules; (ii) any
corresponding Claim scheduled by the Debtor in its Schedules has been scheduled
as disputed, contingent or unliquidated, irrespective of the amount scheduled;
or (iii) no corresponding Claim has been scheduled by the Debtor in its
Schedules.
55. "DISPUTED CLAIMS RESERVES". Accounts in which (a) the Reserve Agent is
------------------------
to hold payments set aside for Disputed Large Unsecured Claims in accordance
with and to the extent set forth in this Plan, and (b) the Debtor is to hold
payments set aside for all
9
<PAGE>
other Disputed Claims, in accordance with and to the extent set forth in this
Plan.
56. "DISTRIBUTION". Any transfer under this Plan or any Plan Agreement of
------------
Cash or other property or instruments to either a Holder of an Administrative
Claim or a Holder of an Allowed Claim.
57. "DIVIDEND PURCHASE PERIOD". The period from and including the Effective
------------------------
Date to and including the date of the first scheduled quarterly Distribution of
principal on account of the Notes, pursuant to Article V.E.3. of this Plan.
58. "EBITDA". Consolidated Net Income plus the following expenses incurred
------
by CFI Accounting Affiliates: (i) income taxes; (ii) net interest; and (iii)
depreciation and amortization; minus, any provision for income tax benefit
recognized by the CFI Accounting Affiliates.
59. "EFFECTIVE DATE". The later of (a) eleven days following the
--------------
Confirmation Date or (b) the first date, up to ninety days after the
Confirmation Date upon which the conditions to effectiveness are satisfied;
provided, however, that as long as all applicable conditions have been satisfied
the Debtor may elect, in its sole and exclusive discretion, to shorten the
period between Confirmation and the Effective Date, in which event the Effective
Date will be the date specified in a written Notice of Effective Date, filed by
the Debtor with the Bankruptcy Court and served upon all Creditors and parties
in interest.
60. "ENCUMBERED PROPERTIES". Those parcels of real estate owned by SA Pty,
---------------------
CFI Pty or CPI listed on Exhibit "E" hereto to be encumbered by the Affiliate
Trust Deeds.
61. "EQUITY SECURITY OR INTEREST". A share in the ownership
---------------------------
10
<PAGE>
of the Debtor, whether or not transferable or denominated "stock," and any
warrant or right to purchase, sell, or subscribe to such share.
62. "EQUITY COMMITTEE". The Official Committee of Equity Security Holders
----------------
appointed by the Office of the United States Trustee pursuant to Bankruptcy Code
(S) 1102.
63. "ESTATE". The estate in the Case created pursuant to Bankruptcy Code (S)
------
541(a).
64. "EXCESS CASH FLOW." With respect to the CFI Accounting Affiliates, shall
----------------
mean for fiscal years beginning with the fiscal year ended April 1998, seventy
percent (70%) of the following: EBITDA less (i) income taxes paid (including
----
amounts paid by SII) during the fiscal year in respect of the tax liability
incurred during the fiscal year for which the calculation is being performed;
less (ii) income taxes paid (including amounts paid by SII) during the fiscal
- ----
year in respect of the tax liability related to prior fiscal years (to the
extent such amounts were not previously deducted for purposes of making the
Excess Cash Flow calculation); less (iii) income taxes paid (including amounts
----
paid by SII) during the ninety (90) day period following the fiscal year end in
respect of the tax liability incurred during the fiscal year for which the
calculation is being performed; less (iv) all interest, principal and lease
----
payments made in respect of the Funded Debt (including any payment made by SII
in respect of the Notes); less (v) capital expenditures paid; less (vi) Cash
---- ---- ----
paid for items chargeable to reserves already established on the books of the
CFI Accounting Affiliates (or SII) on the Effective Date (e.g. payments for
temporary personnel handling bankruptcy related
11
<PAGE>
matters for which a reserve has been established) or for items not reflected in
the Consolidated Net Income for fiscal years ending after the Effective Date
(such as distributions to the SERP Creditors and any future participants under
SII's retirement program (which shall be deemed to have been paid by CFI Pty));
less (vii) any gain resulting from the disposition of assets; less (viii)
- ---- ----
International Licensing Assets Payment; and less (ix) to the extent not already
----
included in the amounts referenced above, any Distributions; less (x) any costs
----
associated with repatriating funds necessary to make the Excess Cash Flow
payment for the fiscal year for which it is being calculated; plus (xi) write-
----
downs required by FASB pronouncements that do not result in the expenditure of
Cash (e.g. FAS 121); provided, however, that for the purpose of calculating
-------- -------
Excess Cash Flow (i) SII corporate general and administrative cash expenditures
allocable by SII to the CFI Accounting Affiliates shall not be higher than the
lesser of $2,500,000 or two percent (2%) of the CFI Accounting Affiliates annual
revenue for the fiscal year for which the calculation is being performed; (ii)
incremental operating losses generated by SA Pty shall be disregarded to the
extent they cause SA Pty's contribution to EBITDA to be less favorable than
<$1,000,000> for fiscal year 1998, <$500,000> for fiscal year 1999, and $0 for
fiscal year 2000 and thereafter; and (iii) any tax benefits derived as a result
of any incremental losses excluded from the calculation of EBITDA as outlined in
proviso (ii) shall be adjusted for so as to eliminate the impact of such tax
benefits in determining income taxes paid. To the extent any amounts used for
the purpose of calculating Excess Cash Flow are not denominated in US ($)
Dollars,
12
<PAGE>
such amounts shall be converted to US ($) Dollars by using the exchange rate in
effect as of five business days prior to the date of payment.
65. "FINAL ORDER". An order, decree or judgment of the Bankruptcy Court, the
-----------
operation or effect of which has not been reversed, stayed, modified or amended,
and as to which order, decree or judgment (or any revision, modification or
amendment thereof), the time to appeal or seek review or rehearing has expired
and as to which no appeal or petition for review or rehearing has been taken or
is pending.
66. "FINOVA SECURED CLAIM". The Secured Claim of Finova Capital Corporation,
--------------------
in the amount Allowed by the Bankruptcy Court.
67. "FUNDED DEBT". Indebtedness for money borrowed or for financing the
-----------
acquisition of fixed assets, including Purchase Money Obligations, Capital Lease
Obligations and the Notes.
68. "GAAP". Generally accepted accounting principles, consistently applied,
----
(i) in accordance with the opinions, pronouncements, statements, bulletins,
guides and interpretations, as appropriate, of the Financial Accounting
Standards Board ("FASB") the Accounting Principles Board ("APB") and the
American Institute of Certified Public Accountants ("AICPA"), or (ii) pursuant
to such other guidance by such entities as may be accepted and applied by a
significant segment of the accounting profession, and (iii) in each as
applicable to the circumstances and as of the date of determination.
69. "GENERAL UNSECURED CLAIM". Any Claim against the Debtor, however
-----------------------
arising, which is not an Administrative Claim, Priority Tax Claim, Priority Non-
Tax Claim, SERP Claim, Damage Claim, Affiliate
13
<PAGE>
Claim, Workers' Compensation Claim or Secured Claim.
70. "HOLDER". The holder of a Claim against or Interest in the Debtor.
------
71. "IMMATERIAL AFFILIATES". Those Affiliates (excluding CFI Pty, SA Pty,
---------------------
CPI Finance and Management Pty, Ltd. and Sizzler South East Asia, Inc.) with
(a)(i) individual tangible asset value including Cash of less than $500,000, and
(ii) annual licensing fees received by such subsidiary less than $100,000 and
(b)(i) an aggregate tangible asset value including Cash for all such
subsidiaries less than $2,000,000, and (ii) aggregate annual licensing fees
received by all such subsidiaries less than $750,000.
72. "INDENTURE". The indenture agreement executed by the Debtor in favor of
---------
the Indenture Trustee, in substantially the form of Exhibit "C" hereto, pursuant
to which the Debtor shall issue the Notes.
73. "INDENTURE TRUSTEE". The trustee under the Indenture.
-----------------
74. "INTERNATIONAL LICENSING ASSETS". Those Assets relating to the
------------------------------
International licensing of the "Sizzler" trademark, including the International
Licensing Executory Contracts, which are identified on Exhibit "N" of this Plan.
75. "INTERNATIONAL LICENSING ASSETS PAYMENT". The payment of $1,000,000 to
--------------------------------------
the "Creditor Trust" created pursuant to the SRI Plan by Sizzler International
Marks and the transfer to Sizzler USA of the CPI Real Estate on the Effective
Date in return for the International Licensing Assets.
76. "INTERNATIONAL LICENSING EXECUTORY CONTRACTS". Those executory contracts
--------------------------------------------
relating to the international licensing of the
14
<PAGE>
"Sizzler" trademark identified on Exhibit "O" to this Plan.
77. "KFC ASSETS". All assets of CFI Pty or SA Pty used in respect of or
----------
related to CFI Pty's operation of "KFC" restaurants in Australia including,
without limitation, the real property upon which such restaurants are operated,
the personal property used in the operation of such restaurants and any
development agreement, license agreement or master license agreement pursuant to
which such restaurants are operated.
78. "LARGE UNSECURED CLAIM". Any General Unsecured Claim which is Allowed in
---------------------
an amount greater than $17,000 which (a) is not a Bank Claim, and (b) is not
voluntarily reduced in Allowed Amount to $17,000 and treated as a Small
Unsecured Claim under the Plan.
79. "LETTER OF CREDIT NOTE". The unregistered note, substantially in the
---------------------
form of Exhibit "M" to this Plan, to be executed by Debtor and CFI Insurers Ltd.
to reflect the conditional obligation to pay that portion of the Bank Claims
which constitutes an Undrawn LC Claim.
80. "LITIGATION". Any and all claims, demands, rights, defenses, actions,
----------
causes of action, suits, contracts, agreements, obligations, accounts, defenses,
offsets, powers, privileges, licenses and franchises of any kind or character
whatsoever, known or unknown, suspected or unsuspected, whether arising prior
to, on or after the Petition Date, in contract or in tort, at law or in equity,
or under any other theory of law, of the Debtor or its Estate, including but not
limited to (i) rights of setoff, counterclaim, or recoupment, and claims on
contracts or for
15
<PAGE>
breaches of duties imposed by law, (ii) the right to object to Claims or
Interests, (iii) claims pursuant to Bankruptcy Code (S)(S) 362, (iv) such claims
and defenses as fraud, mistake, duress and usury and (v) all Avoidance Actions.
81. "LOCAL RULES". The Local Bankruptcy Rules for the Bankruptcy Court, as
-----------
may be amended from time to time and which apply to the Case.
82. "LUC NOTES". The registered Notes, substantially in the form of Exhibit
---------
"F" to this Plan, to be issued by the Debtor pursuant to the Indenture to the
Holders of Allowed Large Unsecured Claims.
83. "NET PROCEEDS". The proceeds received upon the sale or exchange of an
------------
asset, minus (a) the amount of any debt secured by the asset and satisfied by
payment from such amount, and (b) the costs of sale, including, without
limitation, any fees, expenses, commissions or taxes of any kind (including
income and transfer taxes) with respect thereto.
84. "NON-VESTED RETIREMENT CLAIM". A Claim by any Person under the SERP
---------------------------
Agreement which is not vested as of the Effective Date.
85. "NOTES". Collectively, the Bank Notes and LUC Notes (but excluding the
------
Letter of Credit Note).
86. "OPERATING CASH FLOW". The sum of EBITDA (as defined herein) and the
-------------------
general and administrative expenses allocated to CFI Accounting Affiliates by
SII less any losses recognized (for accounting purposes) as a result of assets
sold by the CFI Accounting Affiliates.
87. "PERMITTED RESERVE AMOUNT". "Permitted Reserve Amount"
------------------------
16
<PAGE>
has the meaning given that term in Section VIII.C.7.c of this Plan.
88. "PERSON". An individual, partnership, corporation, an association, a
------
joint stock company, a joint venture, an estate, a trust, an unincorporated
organization, or any government or other political subdivision thereof or other
entity.
89. "PETITION DATE". June 2, 1996.
-------------
90. "PLAN". This Plan of Reorganization, including any amendments and
----
modifications to this Plan, as approved by Final Order of the Bankruptcy Court.
91. "PLAN AGREEMENT". Any of the Exhibits hereto and any other agreement to
--------------
be executed by any Person under this Plan.
92. "POLICIES". The Debtor's insurance policies that provide Coverage for
--------
Damage Claims related to acts that occurred or are alleged to have occurred
prior to the Petition Date.
93. "PRIORITY NON-TAX CLAIM". A Claim against the Debtor that is not a
----------------------
Secured Claim and is specified as having priority in Bankruptcy Code (S)(S)
507(a)(3), 507(a)(4), 507(a)(5) or 507(a)(6), respectively.
94. "PRIORITY TAX CLAIM". A Claim entitled to priority under Bankruptcy Code
------------------
(S) 507(a)(8).
95. "PRO RATA". With respect to any Distribution: (a) to a particular Class
--------
of Allowed Claims or Interests, the ratio that the Allowed Amount of a
particular Allowed Claim or Allowed Interest in the Class bears to the total
Allowed Amount of Allowed Claims or Allowed Interests in the Class; (b) to be
made to more than one particular Class of Claims, the ratio that the total
Allowed Amount of Claims in a particular Class bears to the total Allowed Amount
of Allowed Claims and the Permitted Reserve Amount in respect of
17
<PAGE>
all relevant Classes; or (c) to be made to the holders of Notes (and the Letter
of Credit Note if such instrument is payable at the time of and through such
Distribution) and the Reserve Agent in respect of Disputed Large Unsecured
Claims, the ratio that the face amount of any given Note or the Permitted
Reserve Amount bears to the aggregate face amount of the Notes and the Permitted
Reserve Amount.
96. "PURCHASE MONEY OBLIGATIONS". Indebtedness incurred in connection with
--------------------------
the acquisition of equipment, real property or any other fixed asset.
97. "REFERENCE RATE". The rate announced by Bank of America National Trust
--------------
and Savings Association from time to time as its "reference", "base" or "prime"
lending rate or, if the Bank of America fails to announce a "reference rate" or
"base rate", the "reference rate" or "prime rate" as articulated by three of the
money center banks as published in the United States edition of the Wall Street
Journal from time to time.
98. "RESERVE AGENT". The Holder of the Disputed Claims Reserve who shall
-------------
initially be Robert A. Berger.
99. [INTENTIONALLY OMITTED]
100. "SANDWICH LEASE PROPERTIES". The parcels of real properties listed on
-------------------------
Exhibit "G" hereto.
101. "SA PTY". Sizzler Australia Pty Ltd., an Australian corporation.
------
102. "SCHEDULES". The Debtor's Schedules of Assets and Liabilities, filed on
---------
July 9, 1996, as amended from time to time thereafter.
103. "SECURED CLAIM". Any Claim that is secured by a lien on
-------------
18
<PAGE>
property in which the Estate has an interest or that is subject to setoff under
Bankruptcy Code (S) 553, to the extent of the value of the Claim Holder's
interest in the Estate's interest in such property or to the extent of the
amount subject to setoff, as applicable, as determined pursuant to Bankruptcy
Code (S) 506(a).
104. "SECURED NON-TAX CLAIM". Any Secured Claim not owing on account of a
---------------------
tax.
105. "SECURED TAX CLAIM". Any Secured Claim owing on account of a tax.
-----------------
106. "SELLING HOLDERS". All Holders of Allowed Class 4 Large Unsecured Claims
---------------
as of July 16, 1997.
107. "SERP CLAIM". Any Claim held by a SERP Creditor under the SERP Plan.
----------
108. "SERP CREDITORS". Rushton O. Backer, Robert Barrett, Richard P.
--------------
Bermingham, Lee Clancy, Thomas L. Gregory, Michael Minchin, William R. Scarpino,
James A. Collins and Benjamin Stone.
109. "SERP GUARANTEE". The guarantee executed by CFI Pty, of Debtor's
--------------
obligations to the SERP Creditors under this Plan in substantially the form of
Exhibit "H" hereto.
110. "SERP PLAN". The Sizzler International Executive Supplemental Benefit
---------
Plan as of May 1, 1985, as subsequently amended.
111. "SII SECURITY AGREEMENT". The agreement of SII encumbering essentially
----------------------
all of its Assets in favor of the Indenture Trustee in substantially the form of
Exhibit "K" hereto.
112. "SII STOCK PLEDGE AGREEMENT". The agreement of Debtor pledging the CFI
--------------------------
Stock in favor of the Indenture Trustee in substantially the form of Exhibit "J"
hereto.
19
<PAGE>
113. "SIZZLER INTERNATIONAL MARKS". Sizzler International Marks, Inc., a
---------------------------
corporation to be formed pursuant to the Plan to hold the International
Licensing Assets.
114. "SIZZLER USA". Sizzler USA Real Property, Inc., a Delaware corporation
-----------
to be formed pursuant to this Plan, the stock of which will be held by Sizzler
USA Holdings.
115. "SIZZLER USA HOLDINGS". Sizzler USA, Inc., a Delaware corporation to be
--------------------
formed pursuant to this Plan, the stock of which will be held by Debtor.
116. "SMALL UNSECURED CLAIM". Any General Unsecured Claim which is not
---------------------
subject to dispute in whole or in part by Debtor and is Allowed in an Amount of,
or is voluntarily reduced to, $17,000 or less, which voluntary election becomes
effective pursuant to the Plan.
117. "SRI". Sizzler Restaurants International, Inc., a Delaware corporation,
---
the Debtor's indirect subsidiary and a debtor in a related chapter 11 case filed
on June 2, 1996.
118. "SRI AFFILIATES". Collectively, SRI, Sizzler USA, Sizzler USA Holdings,
--------------
Tenly and Buffalo Ranch and any other subsidiaries owned by SRI.
119. "SRI PLAN". The plan of reorganization filed by SRI in the SRI chapter
--------
11 case to be confirmed contemporaneously with the Confirmation of this Plan.
120. "TENLY". Tenly Enterprises, Inc., a Pennsylvania corporation, an
-----
Affiliate of the Debtor and a debtor in a related chapter 11 case filed on June
2, 1996.
121. "UNCLAIMED PROPERTY". Any funds or property distributed to Creditors or
------------------
Holders of Interests (together with any interest
20
<PAGE>
earned thereon) which are unclaimed as of 180 days after the Distribution.
Unclaimed Property will include, without limitation, Cash and any other property
which is to be distributed pursuant to this Plan which has been returned as
undeliverable without a proper forwarding address, or which was not mailed or
delivered because of the absence of a proper address to which to mail or deliver
such property.
122. "UNDRAWN LC CLAIM". That portion of an Allowed Bank Claim which relates
----------------
to any letter of credit issued by the Holder, to the extent such letter of
credit remains undrawn (in whole or in part) as of the Effective Date.
123. "U.S. TRUSTEE". The United States Trustee, or its representative.
------------
124. "WORKERS' COMPENSATION". Any Claim against the Debtor governed by the
---------------------
Workers' Compensation laws of California or any other applicable jurisdiction.
B. RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW
--------------------------------------------------------------
1. RULES OF INTERPRETATION. For purposes of this Plan: (a) whenever from
-----------------------
the context it is appropriate, each term, whether stated in the singular or the
plural, will include both the singular and the plural; (b) any reference in this
Plan to a contract, instrument, release or other agreement or document being in
a particular form or on particular terms and conditions means that such
agreement or document will be substantially in such form or substantially on
such terms and conditions; (c) any reference in this Plan to an existing
document or exhibit filed or to be filed means such document or exhibit, as it
may have been or may be amended, modified or supplemented; (d) unless otherwise
specified,
21
<PAGE>
all references in this Plan to sections, articles and exhibits are references to
sections, articles and exhibits of or to this Plan; (e) the words "herein" and
"hereto" refer to this Plan in its entirety rather than to a particular portion
of this Plan; (f) captions and headings to articles and sections are inserted
for convenience of reference only and are not intended to be a part of, or to
affect, the interpretation of this Plan; (g) "after notice and a hearing," or a
similar phrase has the meaning ascribed in Bankruptcy Code (S) 102; (h)
"includes" and "including" are not limiting; (i) "may not" is prohibitive, and
not permissive; (j) "or" is not exclusive; and (k) U.S. Trustee includes a
designee of the U.S. Trustee.
2. COMPUTATION OF TIME. In computing any period of time prescribed or
-------------------
allowed by this Plan, the provisions of Bankruptcy Rule 9006(a) will apply.
3. GOVERNING LAW. Except to the extent that the Bankruptcy Code, Bankruptcy
-------------
Rules or Local Rules are applicable, and subject to the provisions of any
contract, note, deed of trust, security agreement, instrument, release or other
agreement or document entered into in connection with this Plan, the rights and
obligations arising under this Plan will be governed by, and construed and
enforced in accordance with, the laws of the State of California without giving
effect to the principles of conflict of laws thereof to the same extent that a
valid and binding contract to be governed by, construed, and enforced in
accordance with the laws of the State of California without giving effect to the
principles of conflict of laws thereof would be so governed, construed, and
enforced.
22
<PAGE>
ARTICLE II
ADMINISTRATIVE AND TAX CLAIMS
-----------------------------
A. TREATMENT OF ADMINISTRATIVE CLAIMS. Notwithstanding the following, the
----------------------------------
Holder of an Administrative Claim and the Debtor may agree to less favorable
treatment of the Administrative Claim. Holders of Large Unsecured Claims
seeking professional fees or expenses pursuant to Bankruptcy Code (S) 503(b)
shall be conclusively deemed by this Plan to have consented to have such Claims
treated solely by recourse to the Attorneys' Fee Fund governed by Section V.L.
of this Plan.
1. BAR DATE FOR ADMINISTRATIVE TAX CLAIMS. All requests for payment of
--------------------------------------
Administrative Tax Claims and for which no earlier bar date has been or is
established outside of this Plan, such as may be established by requesting an
expedited audit under Bankruptcy Code (S) 505, must be filed on or before the
later of (i) sixty days following the Effective Date; and (ii) sixty days
following the filing of any required tax return for such taxes for such year or
period with the applicable governmental unit. Any Holder of any Administrative
Tax Claim that is required to file a request for payment of such taxes and does
not file such a request by the applicable bar date will be forever barred from
asserting any such Administrative Tax Claim against the Debtor, whether any such
Administrative Tax Claim is deemed to arise prior to, on, or subsequent to the
Effective Date.
2. BAR DATE FOR ALL OTHER ADMINISTRATIVE CLAIMS. Requests for payment of
--------------------------------------------
Administrative Claims (other than Administrative Tax Claims and statutory fees
as described below) must be filed and served on the Debtor, the Committee, and
the U.S. Trustee no later
23
<PAGE>
than sixty days after the Effective Date. Professionals or other entities
requesting compensation or reimbursement of expenses pursuant to Bankruptcy Code
(S)(S) 327, 328, 330, 331, 503(b) and 1103 for services rendered prior to the
Effective Date will file and serve on all parties entitled to notice thereof, an
application for final allowance of compensation and reimbursement of expenses no
later than ninety days after the Effective Date in accordance with the various
orders of the Bankruptcy Court establishing procedures for submission and review
of such applications. All such requests for payment of Administrative Claims
and applications for final allowance of compensation and reimbursement of
expenses will be subject to the authorization and approval of the Bankruptcy
Court. Holders of Administrative Claims (including, without limitation,
professionals) requesting compensation or reimbursement of expenses that do not
file such requests by the applicable bar date will be forever barred from
asserting such claims against the Debtor, Estate, or its property. The Debtor
shall have 120 days from the date an Administrative Claim is served in
accordance herewith to bring an objection to such Claim.
3. PAYMENT OF ADMINISTRATIVE CLAIMS, ADMINISTRATIVE TAX CLAIMS AND
---------------------------------------------------------------
PRIORITY TAX CLAIMS.
-------------------
(i) Subject to the bar dates and other provisions set forth above, each
Holder of an unpaid Administrative Claim or Administrative Tax Claim will
receive Cash equal to the Allowed amount of such Claim, on the latest of (w) the
Effective Date, (x) the date such Claim would be payable in the ordinary course
of business, (y) 120 days from the date the Claim is served in accordance
herewith, and (z) if a timely objection is made, the
24
<PAGE>
date such Claim becomes an Allowed Claim. Any Administrative Claim based on a
guarantee issued by Debtor during the Bankruptcy Case shall not be discharged on
the Effective Date and such guarantee will be honored by Debtor if and when an
amount is payable thereunder.
(ii) Each Allowed Priority Tax Claim shall be paid not later than six
years after such Claim was assessed. Principal payments shall be made semi-
annually in the amount of 1/12 of the Allowed Amount of such Claim, with the
full Amount of such Claim due and payable not later than the earlier of October
1, 2003 or the date that is six years from the date of assessment. Each such
Claim shall accrue interest thereon from the year such tax claim is assessed.
Payments shall be made on October 1 and April 1 of each year following the year
such Tax Claim is assessed. Interest shall accrue on the unpaid principal
amount of Allowed Priority Tax Claims at the legal rate after the Effective
Date. No Priority Tax Claim shall include interest unmatured and accrued
subsequent to the Petition Date and prior to the Effective Date in excess of the
Reference Rate unless ordered by the Court prior to the Confirmation. The
amount of each Priority Tax Claim may be prepaid, in whole or in part, at any
time without penalty of any kind. If any such Claim is disputed or subject to
Bankruptcy Court approval, the payment will be made on the first date on which
there is a Final Order awarding such Claim.
4. STATUTORY FEES. On or as soon as practicable after the Effective Date,
--------------
all Holders of Administrative Claims for fees payable pursuant to (S) 1930 of
Title 28 of the United States Code, 28 U.S.C. (S) 1930, will receive Cash in the
amount of such
25
<PAGE>
Administrative Claim.
ARTICLE III
CLASSIFICATION OF CLAIMS AND INTERESTS AND
------------------------------------------
DESIGNATION OF IMPAIRMENT
-------------------------
A. NATURE OF CLASS DESIGNATIONS.
----------------------------
The following is a designation of the Classes of Claims and Interests under
this Plan. Administrative Claims, Administrative Tax Claims and Priority Tax
Claims have not been classified and are excluded from the following Classes in
accordance with Bankruptcy Code (S) 1123(a)(1). A Claim or Interest will be
deemed classified in a particular Class only to the extent that the Claim or
Interest qualifies within the description of that Class and, unless otherwise
provided in this Plan, will be deemed classified in a different Class to the
extent that any remainder of the Claim or Interest qualifies within the
description of such different Class. A Claim or Interest is classified in a
particular Class only to the extent that the Claim or Interest is an Allowed
Claim or Allowed Interest in that Class and has not been paid, released or
otherwise satisfied before the Effective Date. Notwithstanding the following
descriptions of the treatment of Claims, Interests, and Classes, the Holder of a
Claim or Interest which is not an Allowed Claim or Allowed Interest may not vote
upon or receive a Distribution under this Plan in respect to such Claims or
Interests unless otherwise ordered by the Bankruptcy Court after notice and a
hearing.
B. CLASS OVERVIEW.
--------------
This Plan contains the following Classes of Claims or Interests:
26
<PAGE>
1. PRIORITY NON-TAX CLAIMS.
-----------------------
Class 1: Priority Non-Tax Claims. Class 1 Priority Non-Tax Claims are
unimpaired under the Plan.
2. SECURED CLAIMS.
--------------
Class 2: Secured Claims, if any, against the Debtor, with each Secured
Claim being deemed a separate subclass of Class 2. The Debtor believes that the
only Secured Claims against the Debtor are the Finova Secured Claim (which
Debtor has classified in Class 2(a)), and the Copelco Secured Claim (which
Debtor has classified in Class 2(b)). Class 2 Secured Claims are unimpaired
under the Plan.
3. BANK CLAIMS.
-----------
Class 3: Bank Claims. Class 3 Bank Claims are impaired under the Plan.
4. LARGE UNSECURED CLAIMS.
----------------------
Class 4: Large Unsecured Claims. Class 4 Large Unsecured Claims are
impaired under the Plan.
5. DAMAGE CLAIMS.
-------------
Class 5: Damage Claims, but only to the extent that such Claims are to
be paid from the Coverage. To the extent that a Damage Claim is not covered by
the Policies, then such uncovered portion of the Damage Claim will be treated as
a Large Unsecured Claim. Class 5 Damage Claims are impaired under the Plan.
6. AFFILIATE CLAIMS.
----------------
Class 6: Affiliate Claims. Class 6 Affiliate Claims are impaired under
the Plan.
7. SERP CLAIMS.
-----------
Class 7: SERP Claims. Class 7 SERP Claims are
27
<PAGE>
unimpaired under the Plan.
8. SMALL UNSECURED CLAIMS.
----------------------
Class 8: Small Unsecured Claims. Class 8 Small Unsecured Claims are
impaired under the Plan.
9. WORKERS' COMPENSATION CLAIMS.
----------------------------
Class 9: Workers' Compensation Claims. Class 9 Workers' Compensation
Claims are unimpaired under the Plan.
10. NON-VESTED RETIREMENT CLAIMS.
----------------------------
Class 10: Non-Vested Retirement Claims. Class 10 Non-Vested Retirement
Claims are unimpaired under the Plan.
11. INTERESTS.
---------
Class 11: Interests in the Debtor. Class 11 Interests are unimpaired
under the Plan.
ARTICLE IV
DESIGNATION AND TREATMENT OF CLASSES
------------------------------------
A. TREATMENT OF ALLOWED SECURED CLAIMS: CLASS 2(a) AND 2(b).
--------------------------------------------------------
1. CLASS 2 SUBCLASSES. Each Allowed Class 2 Claim will be in its own
------------------
subclass and will be treated as being in a separate Class for voting and
confirmation purposes.
2. TREATMENT. Each Allowed Class 2 Claim will receive one of two forms of
---------
treatment described in subpart a and b below under this Plan in respect of its
Allowed Class 2 Claim, unless an Allowed Class 2 Claim Holder and the Debtor
agree to less favorable treatment. The Debtor prior to the Effective Date will
select which treatment each Holder is to receive, and shall file a notice
indicating its selection and serve it on the Holder of the Claim no later than
thirty days prior to the Effective Date (or, if the
28
<PAGE>
Claim is a Disputed Claim as of the Effective Date, within thirty days after the
Claim becomes an Allowed Claim). If no form of treatment is so selected, the
alternative described in subpart a below will be applicable.
a. PRESENT FULL PAYMENT. Each Holder of an Allowed Class 2 Claim will
--------------------
receive Cash in the amount of its Allowed Claim. For payment of the Class 2
Claim, (i) if the Claim is Allowed, the payment will be made by the Debtor on
the Effective Date and (ii) if the Claim is a Disputed Claim, the Holder will
retain its liens securing its Secured Claim pending payment and payment will be
made by the Debtor on the first date on which there is a Final Order providing
that such Claim is Allowed; provided, however, that the Debtor will be free to
sell the collateral securing such Claim pursuant to Bankruptcy Code (S) 363 or
other applicable law.
b. ABANDONMENT OF COLLATERAL. Each Holder of an Allowed Class 2 Claim
-------------------------
will receive its collateral in full satisfaction of its Class 2 Claim no later
than ten (10) Business Days after the Debtor elects application of this
treatment for such Claim in the manner set forth above. Pending return of the
collateral for the Claim of such Holder, such Holder will retain its liens
securing its Allowed Secured Claim.
B. TREATMENT OF UNSECURED CLAIMS.
-----------------------------
1. CLASS 1 - PRIORITY NON-TAX CLAIMS. Each Holder of an Allowed Class 1
---------------------------------
Priority Non-Tax Claim shall be paid in full by the Debtor on the later of the
Effective Date or the date that is not more than thirty (30) days after the date
on which such Claim becomes an Allowed Claim. The Allowed Amount of each Class 1
Priority Non-Tax Claim shall include interest from the date such
29
<PAGE>
Claim was payable until the date of the Distribution to the Holder at the
Reference Rate plus 1%.
2. CLASS 3 - BANK CLAIMS.
---------------------
(a) On the Effective Date, the aggregate amount of Bank Claims (including
the Undrawn Letter of Credit Claim and all fees and expenses) shall be Allowed
in the Amount of $44,277,343, or such other amount as is agreed upon by the
Debtor and the Holders of Bank Claims as of April 15, 1997 plus interest on any
letter of credit drawn between March 22, 1997 and the Effective Date. To the
extent the Effective Date is later than April 15, 1997, the aggregate amount of
Allowed Bank Claims shall increase by $10,638.55 per diem as adjusted to account
for any changes in the Reference Rate after April 15, 1997.
(b) The aggregate Allowed Amount of Class 3 Bank Claims shall be
allocated among the Holders thereof pursuant to the mutual agreement of the
Holders, as provided in writing to the Debtor prior to the Confirmation Date,
or, in the absence of such a writing, shall be delivered to the law firm of
O'Melveny & Myers to be held in trust for such Holders.
(c) Unless the Holder and the Debtor agree to a less favorable treatment,
each Holder of an Allowed Class 3 Bank Claim shall receive the following
Distributions:
(i) On the Effective Date, a Pro Rata portion of the Bank
Effective Date Payment. The Bank Effective Date Payment shall constitute a
principal payment on the Bank Notes.
(ii) Not later than thirty days following the Effective Date, a
Bank Note in an amount calculated as set forth
30
<PAGE>
below.
(iii) In respect of an Undrawn LC Claim, the Letter of Credit Note,
to be issued solely to the issuer of the undrawn letter of credit in question.
Such Letter of Credit Note shall provide for payment in full of such Note within
thirty days of the date that such letter of credit is drawn upon by the
beneficiary thereof. Interest shall accrue on the Letter of Credit Note at the
Reference Rate plus 3 1/4% from the date of such draw until such Claim is paid
in full by Debtor. An Undrawn Letter of Credit Claim shall not include or accrue
any pre-Petition Date interest, post-Petition Date interest or any post-
Effective Date interest prior to the draw (if any) on such letter of credit.
(iv) The Letter of Credit Note shall be secured by the same
collateral that secures the Notes on a pari passu basis.
(v) On the Effective Date, a portion of the Bank Professional Fee
Payment allocated by the Holders of the Bank Claims such that the Holders
collectively shall receive the entire Bank Professional Fee Payment.
(d) The amount of each Bank Note shall be the Allowed Amount of the
Holder's Class 3 Bank Claim (as allocated by the Holders) minus the sum of
the following amounts:
(i) The Bank Professional Fee Payment received by such Holder; and
(ii) Any portion of such Claim which constitutes an Undrawn LC
Claim.
(e) Each Bank Note shall accrue interest and be repayable in accordance
with Article V of this Plan, the Indenture and the terms of the Bank Note.
31
<PAGE>
3. CLASS 4 - LARGE UNSECURED CLAIMS.
--------------------------------
(a) Unless the Holder and the Debtor agree to a less favorable treatment,
each Holder of an Allowed Large Unsecured Claim shall receive the following
Distributions:
(i) On the later of (a) the Effective Date or (b) the date not
later than thirty days after the date on which such Claim becomes an Allowed
Claim, a Pro Rata Distribution of: all of the Debtor's Available Cash as of the
Effective Date less the sum of all other payments required to be paid or
reserved under this Plan on the Effective Date, until such time as the Holders
of the LUC Notes have received Pro Rata payment on such Notes equivalent to the
payment on the Bank Notes by reason of the Bank Effective Date Payment, with any
excess Available Cash to be paid Pro Rata to the Holders of the Notes and the
Reserve Agent on account of the Disputed Claims.
(ii) Upon the later of (a) the Effective Date or (b) the date not
later than thirty days after the date on which such Claim becomes an Allowed
Claim, a LUC Note in the Allowed Amount of the Holder's Large Unsecured Claim.
(b) The following terms shall apply to the calculation of the Allowed
Amount of Large Unsecured Claims and the treatment of such Claims under this
Plan:
(i) The Allowed Amount of any Large Unsecured Claim based upon an
obligation of Debtor which was due and payable prior to the Petition Date under
applicable non-bankruptcy law shall include interest from the date such
obligation was payable to the Petition Date at the lesser of (x) the rate
provided for in the Holder's contract (excluding, with respect to any contract
with a
32
<PAGE>
non-default rate, any increase in such rate following a default), if any, or (y)
the Reference Rate plus 1%.
(ii) The Allowed Amount of any Large Unsecured Claim which is based
on an obligation which was payable by Debtor prior to the Effective Date shall
accrue interest from the Petition Date to the Effective Date at the Reference
Rate plus 1%.
(iii) Except as expressly provided above, no Large Unsecured Claim
shall include interest as of the Effective Date.
(iv) Except as provided in this paragraph, the Allowed Amount of any
Large Unsecured Claim shall not include any professional fees or expenses. Any
such Claim for professional fees or expenses shall be satisfied in its entirety
from the Attorneys Fees Fund in accordance with the procedures set forth in
Section V.L. hereof.
(c) Each LUC Note shall accrue interest and be repayable in accordance
with Article V of this Plan, the Indenture and the terms of the LUC Note.
4. CLASS 5 - DAMAGE CLAIMS.
-----------------------
A. LIQUIDATION. Damage Claims will be subjected to the ADR process,
-----------
either prior to or after the Effective Date, which is designed to produce a
settlement with respect to such Damage Claim. If the ADR does not produce a
settlement, the Holder of a Damage Claim may seek relief from the Bankruptcy
Court to pursue the Damage Claim in an appropriate non-bankruptcy forum.
B. PAYMENT. In accordance with the ADR, if a Damage Claim becomes an
-------
Allowed Claim, it will be paid first from third party sources, including any
applicable Coverage from which Holders of Damage Claims may be entitled to
recover all or part of the
33
<PAGE>
Allowed Amount of their Claims. The Allowed Amount of any Damage Claim shall not
include interest that accrues on such Claim prior to the liquidation thereof.
Thereafter, Class 5 Damage Claims shall accrue interest in accordance with
applicable law until paid in full. To the extent that the Coverage ultimately
proves insufficient, any deficiency will receive treatment as a Class 4 Large
Unsecured Claim and in such event, interest will accrue in accordance with this
Plan.
5. CLASS 6 - AFFILIATE CLAIMS. The Holders of Class 6 Claims shall receive
--------------------------
no Distribution on account of the Affiliate Claims under the Plan.
6. CLASS 7 - SERP CLAIMS.
---------------------
a. Distributions. SERP Claims are unimpaired under the Plan. On the
-------------
Effective Date Debtor shall cure any default that occurred prior to the
Effective Date in respect of any SERP Claim. The SERP Creditors shall retain all
of their rights and benefits under the SERP Plan.
b. SERP GUARANTEE. The SERP Guarantee will be executed with respect
--------------
to all Allowed SERP Claims.
7. CLASS 8 - SMALL UNSECURED CLAIMS.
--------------------------------
a. PAYMENT. Each Holder of an Allowed Class 8 Small Unsecured Claim
-------
shall be paid in full by Debtor on the later of the Effective Date or the date
that is not more than thirty (30) days after the date on which such Claim
becomes an Allowed Claim. The Allowed Amount of each Small Unsecured Claim shall
include interest from the date such Claim was payable until the date of the
Distribution to the Holder at the Reference Rate plus 1%, but shall exclude any
Claim for professional fees and expenses.
34
<PAGE>
b. ELIGIBILITY. Creditors holding Allowed General Unsecured Claims in
-----------
an amount in excess of $17,000 may elect to have their Claim treated as a Small
Unsecured Claim by making such election on the ballot provided for voting upon
the Plan. In the event that, by reason of such election, the amount which would
otherwise be distributable with respect to Class 8 Small Unsecured Claims would
exceed $500,000, priority will be given to the Holders of the Claims which have
agreed to accept the greatest discount, as determined by the Debtor, and only
the elections of such Holders shall be effective.
8. CLASS 9 - WORKERS' COMPENSATION CLAIMS. Workers' Compensation Claims are
--------------------------------------
unimpaired under the Plan. Each Holder of a Worker's Compensation Claim shall be
entitled to all legal, equitable and contractual rights to which the Worker's
Compensation Claim entitles the Holder of such Claim. As such, the Holders shall
receive no Distribution under the Plan on account of Workers' Compensation
Claims.
9. CLASS 10 - NON-VESTED RETIREMENT CLAIMS. Non-Vested Retirement Claims are
---------------------------------------
unimpaired under the Plan. Each Holder of a Non-Vested Retirement Claim shall be
entitled to all legal, equitable and contractual rights to which the Non-Vested
Retirement Claim entitles the Holder of such Claim. As such, the Holders shall
receive no Distributions under the Plan on account of Non-Vested Retirement
Claims.
C. TREATMENT OF EQUITY - CLASS 11.
------------------------------
The Holders shall retain their Interests under the Plan.
35
<PAGE>
ARTICLE V
VARIOUS MECHANICS FOR PAYMENT OF CLASS 3 AND 4
----------------------------------------------
GENERAL UNSECURED CLAIMS
------------------------
The primary mechanism for the payment of Bank Claims and Large Unsecured
Claims under this Plan is the issuance of and payment on the Notes pursuant to
the Indenture. The mechanics of all of the foregoing shall be as follows:
A. THE INDENTURE.
-------------
As soon as practicable following the Effective Date, the Debtor shall
execute the Indenture.
B. THE NOTES.
---------
1. Not later than thirty days after the later of the Effective Date or
when any Disputed Large Unsecured Claim becomes an Allowed Claim, Debtor shall
execute and deliver a Bank Note or LUC Note (as applicable) governed by the
Indenture to the Holder in respect of each Allowed Bank Claim and Large
Unsecured Claim. The amount of each Bank Note and LUC Note shall be the Allowed
Amount of such Claim as of the Effective Date, including interest accrual
calculated in accordance with this Plan, and excluding any professional fees and
expenses and any Undrawn LC Claim. Any Distribution by Debtor to the Holder of a
Bank Note or a LUC Note prior to the issuance of such Note, other than the Bank
Professional Fees Payment, Distributions from the Attorneys Fee Fund, or in
regard to the Letter of Credit Note, shall be deemed to be a principal payment
on the relevant Note.
2. In the Distribution of any Note, the record date upon which the Debtor
may rely as to the Holder of a Bank Claim or Large Unsecured Claim shall be the
earlier of (a) the date the Note is
36
<PAGE>
sent to the Holder, or (b) thirty days prior to the Effective Date. Debtor
shall be under no obligation to recognize any transfer of a Bank Claim or Large
Unsecured Claim after such date for the purposes of the issuance of a Bank Note
or LUC Note.
C. TERM OF NOTES.
-------------
The term of each Note shall be two and one-half years from the Effective
Date; provided, however, that absent notice of a default under the Indenture,
-------- -------
SII may extend the maturity of the Notes to five years from the Effective Date
upon written notice to the Indenture Trustee any time between two years and
three months after the Effective Date and the original maturity date of the
Notes.
D. INTEREST ACCRUAL UNDER THE NOTES.
--------------------------------
Interest shall accrue under the Notes at an adjustable rate equal to (a)
the Reference Rate plus 3-1/4%, payable monthly in arrears or (b) Reference Rate
plus 2-3/4%, payable monthly in arrears in the event Debtor is able to obtain a
lien on the KFC Assets prior to the Confirmation Date in form and substance
satisfactory to the Committee and the Banks. Any change in the Reference Rate
shall be effective on the next succeeding Business Day.
E. AMORTIZATION PAYMENTS.
---------------------
1. Except for the Bank Effective Date Payment as expressly set forth in
subsection V.E.2 below, all principal payments shall be made Pro Rata to the
Holders of the Bank Notes, Holders of the LUC Notes, and the Disputed Claims
Reserve in respect of Disputed Large Unsecured Claims. The amount of each
Distribution payable to the Disputed Claims Reserve shall be calculated in
accordance with Section VIII.A.7 of this Plan.
37
<PAGE>
2. Notwithstanding the foregoing, no principal shall be payable on the
Bank Notes following the Bank Effective Date Payment until the Holders of the
LUC Notes and the Reserve Agent for the benefit of Holders of Disputed Large
Unsecured Claims have received Pro Rata payments equivalent to that previously
made in respect of the Bank Notes by reason of the Bank Effective Date Payment.
3. Debtor shall make Pro Rata principal payments to the Holders of the
Notes and the Reserve Agent for the benefit of the Holders of Disputed Claims on
or before the last day of the third full calendar month following the Effective
Date and at the end of each successive three month period thereafter, until the
maturity date of the Notes in the amount of $2,125,000 minus the lesser of (a)
$25,000 or (b) one-twenty fourth of the Allowed Amount of the principal amount
of all Allowed Priority Tax Claims; provided, however, that if the Allowed
-------- -------
Amount of all Bank Claims and Large Unsecured Claims is determined by Final
Order to exceed $70,000,000, the principal amortization will increase by the
percentage that the Allowed Amount of such Claims exceeds $70,000,000; and,
provided, further, that the principal amortization, effective upon the next
- -------- -------
quarterly payment, will increase prospectively to the extent that the Debtor or
CFI Pty receives tax benefits on Cash paid by CFI Pty to Debtor, Holders of
Notes or the Reserve Agent. Any unpaid principal shall be due upon the maturity
of the Notes.
4. All Net Proceeds from the sale of CPI Encumbered Properties shall be
payable as a Distribution on the Notes. Net Proceeds from the sale of CPI
Encumbered Properties to a maximum aggregate amount of $8,674,000 following the
Effective Date may be
38
<PAGE>
part or all of the mandatory amortization set forth in Subsection V.E.3 above.
Any additional Net Proceeds from the sale of CPI Encumbered Properties shall be
paid Pro Rata upon such sale as mandatory principal payments on the Notes (with
a Pro Rata Distribution payable to the Reserve Agent on account of Disputed
Large Unsecured Claims in accordance with Section VIII.C.7 of this Plan) in the
inverse order of maturity, assuming a five year term.
5. Debtor shall make additional, mandatory principal prepayments on the
Notes and to the Reserve Agent as follows:
(i) upon the sale by a CFI Accounting Affiliate, outside the
ordinary course of business, of a KFC Asset other than to another CFI Accounting
Affiliate for a price in excess of $50,000, 75% of the Net Proceeds of the sale,
are to be applied Pro Rata against principal owing under the Notes in inverse
order of maturity, assuming a five year term (with a Pro Rata Distribution
payable to the Reserve Agent on account of Disputed Large Unsecured Claims in
accordance with Section VIII.C.7 of this Plan) Claims;
(ii) upon the sale by a CFI Accounting Affiliate, outside of the
ordinary course of business, of any fixed asset (other than a KFC Asset) other
than to another CFI Accounting Affiliate for a price in excess of $50,000, 75%
of the Net Proceeds of the sale, to be applied Pro Rata against principal owing
under the Notes in the natural order of maturity (with a Pro Rata portion of
such Distribution payable to the Reserve Agent on account of Disputed Large
Unsecured Claims in accordance with Section VIII.C.7 of this Plan);
(iii) upon such time as the Net Proceeds retention by the CFI
Accounting Affiliates from fixed asset sales governed by
39
<PAGE>
subparagraphs (i) and (ii) above exceeds $7,000,000 in respect of the sale of
KFC Assets, or $10,000,000 in aggregate Net Proceeds (including Net Proceeds
from the sale of KFC Assets), the percentage of Net Proceeds payable pursuant to
subsections (i) and (ii) above shall increase from 75% to 100%;
(iv) upon the sale of the stock of SRI, Sizzler USA or Sizzler USA
Holdings, following the satisfaction of all indebtedness owing to the Holders of
Claims under the SRI Plan, and upon any debt or equity offering by SII or any
CFI Accounting Affiliate (other than indebtedness permitted under Section V.G.
of this Plan), 100% of the Net Proceeds shall be applied Pro Rata against the
principal owing under the Notes in the natural order of the maturity of such
payments (with a Pro Rata portion of such Distribution payable to the Reserve
Agent on account of Disputed Large Unsecured Claims in accordance with Section
VIII.C.7 of this Plan).
(v) within ninety days of the close of each of Debtor's fiscal
years, all Excess Cash Flow generated during such year shall be applied Pro Rata
against the scheduled principal payments remaining under the Notes (assuming
Debtor exercises its right to extend the maturity to five years from the
Effective Date); provided, however, that the portion of Excess Cash Flow which
-------- -------
would be payable solely by reason of the proviso in the definition of Excess
Cash Flow shall be payable within 180 days of the close of Debtor's fiscal year.
For the purposes of this calculation, until the Allowed Amount of all Bank
Claims and Large Unsecured Claims has been determined, it will be assumed that
the principal amount of Allowed Bank Claims and Large Unsecured Claims will be
40
<PAGE>
$60,000,000, but in all events, Holders of Bank Notes, Holders of LUC Notes and
the Reserve Agent on account of Disputed Large Unsecured Claims in accordance
with Section VIII.C.7 shall receive Pro Rata Distributions except for the Bank
Effective Date Payment and as set forth in Subsection V.E.2 above.
F. AFFILIATE GUARANTEES/COLLATERAL.
-------------------------------
1. Each Affiliate other than the SRI Affiliates and CFI Insurers Ltd.
(unless and until CFI Insurers Ltd. receives any assets from another CFI
Accounting Affiliate pursuant to a asset transfer permitted under the Indenture
or under this Plan) shall participate with the Debtor in this Plan by executing
an Affiliate Guarantee in respect of the Notes.
2. Debtor shall secure its repayment of the Notes with a pledge of the
CFI Stock pursuant to the SII Stock Pledge Agreement and grant a lien on
essentially all of its Assets pursuant to the SII Security Agreement.
3. CPI, SA Pty and CFI Pty shall secure their obligations under their
respective Affiliate Guarantees by recording the Affiliate Deeds of Trust on the
Encumbered Properties.
4. Each Affiliate other than the SRI Affiliates, CFI Insurers Ltd. and
the Immaterial Affiliates shall execute appropriate Collateral Agreements in
form and substance satisfactory to the Committee and the Holders of the Bank
Claims generally encumbering all of the assets of such Affiliates; provided,
--------
however, that no such lien shall be granted in respect of the KFC Assets and any
- -------
purported lien on such KFC Assets shall be ineffectual and legally void to the
extent such lien is prohibited by any master license agreement, master franchise
agreement,
41
<PAGE>
license agreement or development agreement; and provided, further, that no such
-------- -------
lien or security interest shall be granted upon any other asset owned by any
other Affiliate if prohibited by applicable law or any contractual relationship
of such Affiliate with any third party, as scheduled by the Debtor prior to the
approval of the Disclosure Statement. If any Affiliate shall at any time cease
to be an Immaterial Affiliate, it shall promptly execute Collateral Agreements
as set forth above.
G. COVENANTS UNDER THE INDENTURE.
-----------------------------
The Indenture shall include, without limitation, covenants consistent with the
following:
1. Debtor shall use its best efforts to cause CPI to sell all CPI
Encumbered Properties, other than Sandwich Lease Properties, in a diligent
fashion. Debtor will maintain an open broker listing on its headquarters
building.
2. Debtor will not guarantee any obligations of any entity except as
permitted in the Indenture.
3. Debtor will not permit any of its Affiliates to grant any pledge, lien
or security interest on any asset; provided, however, that Affiliates may grant
liens securing purchase money indebtedness on newly acquired assets which fall
within the indebtedness limitations as set forth below.
4. CFI Accounting Affiliates shall not be permitted to have outstanding
at any one time indebtedness in excess of $10,000,000 (including capital leases)
excluding (a) the Notes, (b) any other Allowed Claims payable under this Plan,
the SERP Guarantee, and the Affiliate Guarantees, (c) current payables, (d)
inter-CFI Accounting Affiliate indebtedness, (e) indebtedness owing by CFI
42
<PAGE>
Insurers Ltd. to the Holders of the Bank Claims, and (f) capital CFI Accounting
Affiliates shall not be permitted to have leases and indebtedness secured by
purchase money liens on new KFC units required to be acquired or be built by CFI
Pty under CFI Pty's KFC development agreement with Kentucky Fried Chicken Pty.
Limited.
5. Debtor shall not permit any loan or distribution of any funds or
assets from SII or the CFI Accounting Affiliates to the SRI Affiliates following
the Effective Date of this Plan and the SRI Plan other than in conjunction with
ordinary course overhead and similar allocations.
6. Debtor shall make no dividends on account of Equity Securities and
shall not repurchase any Equity Securities other than in conjunction with
restricted stock cancellations in lieu of tax payments or the repurchase of
restricted stock held by employees upon vesting or upon termination of
employment. Such repurchases shall not exceed $500,000 in any fiscal year.
7. Debtor, Sizzler USA, SRI, CFI Pty and SA Pty shall be operated in a
manner consistent with the corporate separateness of each of those entities. SA
Pty and CFI Pty shall observe all appropriate corporate formalities.
8. Debtor and the CFI Accounting Affiliates, on the one hand, and the SRI
Affiliates, on the other hand, shall be operated in a manner consistent with the
corporate separateness of Debtor and the CFI Accounting Affiliates from each of
the entities comprising the SRI Affiliates. SII shall observe all appropriate
corporate formalities.
9. Cash Flow as follows to be allocated and measured quarterly (or, if
43
<PAGE>
the Committee and the Banks have not agreed to the amount of such allocations by
the Confirmation Date, Operating Cash Flow measured quarterly as found to be
reasonable by the Court at the Confirmation Hearing):
Fiscal Year 1998
----------------
Quarter 1 $4,000,000
Quarter 2 $4,500,000
Quarter 3 $6,500,000
Quarter 4 $5,000,000
Fiscal Year 1999
----------------
Quarter 1 $4,800,000
Quarter 2 $5,400,000
Quarter 3 $7,800,000
Quarter 4 $6,000,000
Fiscal Year 2000
----------------
Quarter 1 $5,200,000
Quarter 2 $5,980,000
Quarter 3 $8,320,000
Quarter 4 $6,500,000
Fiscal Year 2001
----------------
Quarter 1 $5,200,000
Quarter 2 $5,980,000
Quarter 3 $8,320,000
Quarter 4 $6,500,000
Fiscal Year 2002
----------------
Quarter 1 $5,600,000
Quarter 2 $6,440,000
Quarter 3 $8,960,000
44
<PAGE>
Quarter 4 $7,000,000
10. With respect to the covenant set forth in Section V.G.9 above, an
event of default shall occur under the Indenture only if the benchmark is missed
for two consecutive quarters.
11. The CFI Accounting Affiliates shall not expend funds for capital
expenditures in excess of the following amounts, with 25% of any amount not
expended during any fiscal year available for expenditure in any succeeding
years:
Fiscal Year 1998 $8,900,000
Fiscal Year 1999 $4,100,000
Fiscal Year 2000 $6,100,000
Fiscal Year 2001 $9,000,000
Fiscal Year 2002 $9,300,000
H. DIVIDEND PURCHASE.
-----------------
The Indenture shall further provide for the purchase by Holders of Class 3
Bank Claims of up to $1,200,000 in amount of certain of the Distributions of
principal payable to the Selling Holders as follows:
1. The Holders of the Class 3 Bank Claims shall purchase the right to
certain Distributions of the Selling Holders as follows.
2. After receipt of the Bank Effective Date Payment and the Bank
Professional Fee Payment, any principal Distribution by the Debtor on the Bank
Notes received by the Holders of Class 3 Bank Claims during the Dividend
Purchase Period shall be transferred to and distributed Pro Rata amongst the
Selling Holders, up to a maximum of $1,200,000. The amount of such transfer
shall be referred to herein as the "Purchased Amount". Notwithstanding the
foregoing, in the event that a purchase takes place before the
45
<PAGE>
deadline for objecting to Claims has passed, the payment of the Purchased Amount
shall be made to the Reserve Agent on behalf of the Selling Holders and such
payment shall be deemed a payment to such Selling Holders for all purposes
including for purposes of calculating interest due to Holders of Class 3 Bank
Claims on account of the Selling Holders' Claims.
3. Upon receipt of any portion of the Purchased Amount, by the Selling
Holders, or, if applicable, by the Reserve Agent, on behalf of the Selling
Holders, the Selling Holders shall be deemed to absolutely transfer, sell and
assign to the Holders of the Class 3 Bank Claims the right to receive any and
all Distributions of principal and interest thereon until such time as the
amount of principal Distributions so transferred and received by Holders of the
Class 3 Bank Claims equals the portion of the Purchased Amount received by the
Selling Holders or the Reserve Agent on behalf of the Selling Holders.
4. Any purchase of Distributions provided for hereunder shall be effected
by the Debtor through the payment of the Purchased Amount Pro Rata on the date
of purchase to the Selling Holders, or, if prior to July 16, 1997, to the
Reserve Agent for the benefit of the Selling Holders.
5. Any Holder of an Allowed Class 4 Large Unsecured Claim as of the
Effective Date shall be conclusively presumed to have consented to being a
Selling Holder and to receiving the benefits of the dividend sale.
I. THE RESERVE AGENT.
-----------------
1. The Reserve Agent shall hold in appropriate interest bearing accounts
(1) the Disputed Claims Reserve discussed in
46
<PAGE>
Article VIII of this Plan for the benefit of the Holders of Disputed Class 4
Large Unsecured Claims, and (2) the Purchased Amount which would otherwise be
payable to the Selling Holders. The Reserve Agent shall be required to post a
bond in an amount satisfactory to the Court.
2. In the event of the resignation of the Reserve Agent, or removal by
the Bankruptcy Court for cause shown, the Debtor will promptly seek Bankruptcy
Court approval of a successor.
3. The Reserve Agent may perform any of its duties under this Plan by or
through its agents or employees.
4. The Reserve Agent shall make Distributions from the Disputed Claims
Reserve only in accordance with Section VIII.A.7 of this Plan.
5. As soon as practicable after July 16, 1997, the Reserve Agent shall
pay any portion of the Purchased Amount received by the Reserve Agent Pro Rata
to the Selling Holders.
6. With respect to any acts or approvals which are not required of the
Reserve Agent under this Plan, the Reserve Agent may at all times act (a) in
accordance with its own business judgement, or (b) in accordance with the
instructions of the Holders of 51% in amount of the Allowed Class 4 Large
Unsecured Claims. The Reserve Agent may at any time request instructions from
the Holders of Class 4 Large Unsecured Claims with respect to any discretionary
actions or approvals under the terms of this Plan.
7. To the extent the Reserve Agent requests instructions with respect to
discretionary acts or approvals, the Reserve Agent shall be entitled to rely
upon any written notices, statements,
47
<PAGE>
certificates, orders or other documents believed by it in good faith to be
genuine and correct and to have been signed, sent or made by the proper Person.
The Reserve Agent shall also be entitled to rely upon the advice of legal
counsel, independent accountants and other experts selected by it in its sole
discretion.
J. APPROVED RESERVE AGENT EXPENSES. [INTENTIONALLY OMITTED]
-------------------------------
K. RESERVE AGENT INDEMNIFICATION/EXPENSES UPON DEFAULT.
---------------------------------------------------
1. The Reserve Agent shall have no liability to any Holder of any Large
Unsecured Claim or the Debtor absent gross negligence, intentional misconduct or
breach of this Plan.
2. The Debtor shall indemnify the Reserve Agent hereunder and hold the
Reserve Agent harmless from and against (i) all costs, expenses, reasonable
counsel fees, claims and liabilities (collectively, "Costs") resulting from any
action of the Reserve Agent under this Plan, provided, however, that in each
instance, this indemnity shall not apply to any Costs arising out of the gross
negligence or willful misconduct of the Reserve Agent. This indemnity shall
survive the payment of all amounts owing to the Holders of Class 4 Large
Unsecured Claims under this Plan.
L. THE ATTORNEYS FEE FUND.
----------------------
1. The Attorneys' Fee Fund shall be the exclusive source of recovery,
from the Debtor or Affiliates, for any Holder of any Allowed Large Unsecured
Claim to recover professional fees or expenses pursuant to contract, Bankruptcy
Code (S) 503(b) or on any other basis. The establishment of the Attorneys' Fee
Fund constitutes a compromise agreed upon by the Debtor and the Committee with
respect to the issue of whether professional fees
48
<PAGE>
and expenses can properly be included in the Allowed Amount of Class 4 Large
Unsecured Claims in this Case.
2. The Debtor's total contribution into the Attorneys' Fee Fund shall be
$245,000 minus any amount payable by the Debtor to any Holder of an Allowed
Class 4 Large Unsecured Claim based upon a "substantial contribution" theory
pursuant to Bankruptcy Code (S) 503(b). In the event any Cash remains following
the liquidation of all Claims against the Attorneys' Fee Fund, the Debtor may
use the remaining Cash for general operating purposes. In the event that the
Allowed Claims against the Attorneys' Fee Fund exceed the amount of the
Attorneys' Fee Fund, the claimants against the Fund shall share the proceeds
thereof Pro Rata with all other successful Claimants against the Attorneys Fee
Fund.
3. In respect of any Claim for professional fees or expenses by a Holder
of an Allowed Class 4 Large Unsecured Claim to be paid from the Attorneys' Fee
Fund, Debtor waives all arguments that such fees or expenses are not payable per
---
se by reason of such Creditor's status as the Holder of a General Unsecured
- --
Claim.
4. Any Claim for professional fees or expenses by a Holder of a Class 4
Large Unsecured Claim must be made by written notice, supported by detailed
documentation, to the Debtor and the Committee prior to the Confirmation Date.
In the event that the Debtor or Committee objects to the Claim and the Claim is
not resolved by agreement of the Holder, Debtor and the Committee prior to
twenty-one days after notice of such objection, the Holder shall be required to
file a motion with the Court to resolve the Claim.
5. No amounts shall be distributed from the Attorneys' Fee Fund until all
Claims against the Fund have been resolved by the
49
<PAGE>
Bankruptcy Court and been the subject of a Final Order.
M. CONTROLLING NATURE OF THE INDENTURE.
-----------------------------------
In the event of any conflict between the terms of the Indenture and the
terms of Article V of this Plan, the terms of the Indenture shall control,
although this Plan may amplify or clarify terms of the Indenture that are not in
conflict with the Plan. As to all other Articles, the terms of this Plan shall
control.
ARTICLE VI
CONDITIONS TO EFFECTIVENESS
---------------------------
Confirmation of this Plan is conditioned upon the events described below
and, where applicable, the Bankruptcy Court entering the following orders and
findings with respect to the Claims filed herein against the Debtor:
A. Debtor and each Affiliate participating with the Debtor in this Plan
have executed all Plan Agreements required to be executed by Debtor and such
Affiliate, to be held in escrow pending the Effective Date.
B. The Debtor, the Committee and the Holders of the Bank Claims shall
have agreed upon the form and substance of the Collateral Agreements or, in the
absence of such agreements, such Collateral Agreements shall have been approved
as in conformity with the Plan by the Court.
C. The Court shall have found that the Debtor is not required to make and
is not making more than $175,000 in "cure payments" with respect to executory
contracts excluding employment and employee compensation or bonus agreements,
and further excluding "cure" payments which are payable as Allowed Claims under
the Plan.
50
<PAGE>
D. Each of the SRI Affiliates shall have affirmatively released SII and
all CFI Accounting Affiliates from all claims arising prior to the Effective
Date with such release being held in trust pending the Effective Date and the
Effective Date under the SRI Plan.
E. The Effective Date in respect of the SRI Plan shall have occurred.
F. Unless waived by Debtor, the Holders of the Bank Claims and SII shall
have reached a mutual agreement concerning the release by the Holders of the
Bank Claims of CFI Insurers Ltd. upon the occurrence of certain negotiated
events.
G. Other than as necessary to effectuate the terms of this Plan, the
Debtor shall have released any claims against Affiliated Debtors, other than
CPI, and the Debtor shall have waived any distribution from the Buffalo Ranch
and Tenly bankruptcy cases.
H. Sizzler USA Holdings and Sizzler International Marks shall be formed
under Delaware corporate law and the Debtor shall cause CFI Pty to transfer the
stock of SRI to Sizzler USA Holdings. All issued and outstanding stock of
Sizzler International Marks shall be owned by CFI Pty.
I. CPI and CFI Pty or Sizzler International Marks shall make the
International Licensing Assets Payment.
J. SRI shall have assigned all International Licensing Assets (including
the International Licensing Executory Contracts) to Sizzler International Marks.
K. The Holders of Bank Claims shall have notified the Debtor of their
mutual agreement regarding allocation of the Allowed Bank Claims among such
Holders; provided however, that in the event all
-------- -------
51
<PAGE>
other conditions are met and the Debtor has not received such notification
within thirty days of the Confirmation Date, the Debtor shall use the allocation
as set forth in the proofs of claim filed by Holders of Bank Claims.
L. SII reserves the right to withdraw this Plan prior to Confirmation in
the event it is not accepted by the Holders of Class 3 and Class 4 Claims.
ARTICLE VII
TREATMENT OF EXECUTORY CONTRACTS
--------------------------------
AND UNEXPIRED LEASES
--------------------
A. ASSUMPTION.
----------
To the extent any such contracts or leases remain executory or unexpired on
the Effective Date, the executory contracts and unexpired leases listed on
Exhibits "B" and "D" to this Plan shall be deemed assumed as of the Effective
Date and the amounts, if any, which are necessary to cure defaults (if any)
under such executory contracts and unexpired leases pursuant to Bankruptcy Code
(S) 365 shall be as identified on the applicable Exhibit. Debtor reserves the
right to amend Exhibits "B" and "D" at any time prior to the Confirmation Date.
A reference on Exhibit "B" or "D" to a type or class of executory contract or
unexpired lease shall constitute an assumption of all executory contracts with
such Person included within such type or class, as all such contracts and
unexpired leases with a particular contracting party may have been amended or
modified. The Confirmation Order shall constitute an order of the Bankruptcy
Court (a) approving the assumption of the executory contracts and unexpired
leases listed on Exhibits "B" or "D" to this Plan as of the Effective Date; (b)
fixing the "cure" amount
52
<PAGE>
with respect to such defaults by Debtor under such contracts prior to
Confirmation, and (c) establishing that Debtor (rather than any Affiliate) is
the contracting party under such contract or lease. In the event that the non-
debtor party to an assumed executory contract or unexpired lease does not timely
object, the Confirmation Order shall be binding on such Person as to (a) the
amount of any default under such contract or lease and (b) as to whether Debtor
(rather than any Affiliate) is the contracting party under such contract or
lease. The absence of a cure amount on Exhibit "B" or "D" relating to any
executory contract manifests Debtor's position that no amount is owing by Debtor
under such contract. Any monetary amounts found by the Bankruptcy Court to be
in default shall be satisfied, pursuant to Bankruptcy Code (S) 365(b), by
payment by Debtor of the default amount in Cash no earlier than the Effective
Date and no later than thirty days following the Effective Date. In the event
of any dispute concerning any conditions to assumption of an executory contract
or unexpired lease established by Bankruptcy Code (S) 365, the cure payments
with respect to such contract or lease required by the Bankruptcy Code shall be
made only following the entry of a Final Order resolving the dispute.
B. ASSIGNMENT.
----------
On the Effective Date, the Assumed and Assigned Executory Contracts shall
be assigned to SRI. Debtor will have no further obligation under any Assumed and
Assigned Executory Contract following such assignment.
C. REJECTION.
---------
On the Effective Date, all executory contracts and leases to
53
<PAGE>
which the Debtor or the Estate was a party on or prior to Confirmation, and
which have not been assumed by the Debtor or assumed by the Debtor and assigned
to a third party pursuant to Bankruptcy Code (S) 365, will be rejected pursuant
to Bankruptcy Code (S)(S) 365 and 1123, to the extent, if any, that such
contract or lease constitutes an executory contract or unexpired lease, and
without conceding that such contracts or leases constitute executory contracts
or unexpired leases or that the Debtor has any liability thereunder. The
Confirmation Order will constitute an order of the Bankruptcy Court approving
all such rejections, pursuant to Bankruptcy Code (S) 365, as of the date of
Confirmation.
D. CLAIMS ARISING FROM REJECTION OF CONTRACTS.
------------------------------------------
Any Claim for damages arising from the rejection hereunder or under
Bankruptcy Code (S) 365 of an executory contract or unexpired lease of the
Debtor that has not been assumed pursuant to a prior order of the Bankruptcy
Court, pursuant to this Plan or under Bankruptcy Code (S) 365: (1) will be
determined and allowed or disallowed under Bankruptcy Code (S) 502(g), and, to
the extent Allowed, will be classified in the appropriate Class; and (2) will be
unenforceable against the Debtor, the Reserve Agent or the Estate and their
respective property and will be forever barred from receiving any Distribution
under this Plan unless a proof of such Claim is filed prior to the later of (1)
the Claims Bar Date and (2) the first business day that is thirty (30) days
after the entry of an order rejecting an executory contract or unexpired lease.
Notwithstanding the rejection of any executory contract or unexpired lease at
any time during this Case, the Debtor reserves all rights and defenses which the
Debtor or Estate may have or have
54
<PAGE>
had against the parties to such contracts and leases.
ARTICLE VIII
MEANS FOR IMPLEMENTATION OF PLAN/RESERVES
-----------------------------------------
A. EFFECTIVE DATE TRANSACTIONS.
---------------------------
As soon as practicable on or following the Effective Date, the following
shall occur in implementation of this Plan:
1. INCORPORATION OF SIZZLER USA HOLDINGS AND SIZZLER USA AND SIZZLER
-----------------------------------------------------------------
INTERNATIONAL MARKS. Each of Sizzler USA Holdings, Sizzler USA and Sizzler
- -------------------
International Marks shall be formed under Delaware corporate law. All issued
and outstanding stock of Sizzler USA Holdings shall be owned by SII. All issued
and outstanding stock of Sizzler International Marks shall be owned by CFI Pty.
All issued and outstanding stock of SRI and Sizzler USA shall be owned by
Sizzler USA Holdings.
2. ASSIGNMENT OF INTERNATIONAL LICENSING ASSETS TO SIZZLER INTERNATIONAL
---------------------------------------------------------------------
MARKS. SRI shall assign all International Licensing Assets (including the
- -----
International Licensing Executory Contracts) to Sizzler International Marks.
3. INTERNATIONAL LICENSING ASSETS PAYMENT. CPI and CFI Pty or Sizzler
--------------------------------------
International Marks shall make the International Licensing Assets Payment.
B. GLOBAL INTERESTATE SETTLEMENT.
-----------------------------
The Plan and the SRI Plan each incorporate a motion pursuant to Bankruptcy
Rule 9019(a) for approval of a global interestate settlement described below
(the "Global Interestate Settlement"). As one aspect of the Global Interestate
Settlement, SRI proposed the sale of the International Licensing Assets to
Sizzler International Marks in exchange for the International Licensing
55
<PAGE>
Asset Payment. SRI and the Committee, which includes representatives from both
SRI and SII estates, agreed to this sale and payment in exchange for the release
of all intercompany Claims between SRI and its direct and indirect subsidiaries,
on the one hand, and SII and the direct and indirect subsidiaries of CFI Pty, on
the other hand, on account of, inter alia, the allocation of overhead between
----- ----
Affiliates, the licensing of trademarks between Affiliates, the commingling of
Cash of Affiliates, and the making of intercompany loans between Affiliates.
C. DISTRIBUTIONS AND PLAN FUNDING.
------------------------------
1. SOURCE OF PLAN FUNDING. Such funding as may be necessary to fully
----------------------
perform the Debtor's obligations under this Plan will be provided from the
Debtor's Available Cash on the Effective Date, the operations of Debtor's
Affiliates and, for Class 5 Damage Claims only, the Coverage.
2. THE ADR. The Debtor, together with SRI, CPI, Buffalo Ranch and Tenly,
-------
has requested that the Bankruptcy Court establish the ADR for the liquidation
and payment of Damage Claims. The ADR has been implemented during the Case and
will continue after Confirmation. It is anticipated that, under the ADR, each
Damage Claim will be subjected to a process designed to produce a settlement
with respect to such Claim. If unsuccessful, the Holder of a Damage Claim may
then obtain relief from the Bankruptcy Court to pursue the Claim in an
appropriate non-bankruptcy forum.
3. ROUNDING OF AMOUNTS. Notwithstanding anything to the contrary in
-------------------
this Plan, or any Plan Agreement, any Person responsible for Distributions may
round all amounts for Distributions of Cash to the nearest whole dollar amount.
56
<PAGE>
4. NAME AND ADDRESS OF HOLDER. For purposes of all Distributions, the
--------------------------
Person responsible for such Distributions will be entitled to rely on the name
and address of the Holder of each Allowed Claim or Interest as shown on any
timely filed proof of Claim and, if none, as shown on Schedules, except to the
extent that the payor first receives adequate written notice of a transfer or
change of address, from the United States Postal Service or properly executed by
the Holder or its authorized agent.
5. CORPORATE GOVERNANCE. On the Effective Date, Debtor's existing
--------------------
articles of incorporation and bylaws shall remain as currently in effect, except
for the inclusion of a prohibition on the issuance of non-voting securities.
6. EXECUTION OF PLAN AGREEMENTS. On or before the Effective Date, Debtor
----------------------------
and each Affiliate shall execute the Plan Agreements with respect to Allowed
Claims.
7. DISPUTED CLAIMS RESERVES.
------------------------
a. After the Effective Date, Debtor shall have the authority to
object to Claims, including Claims against the Attorneys' Fee Fund. Any
objections to Claims and Interests must be filed with the Bankruptcy Court on or
before the later of (a) July 15, 1997, (b) 120 days after the service of the
proof of Claim on Debtor's counsel in this Case or (c) if such proof of Claim
was not served on counsel for the Debtor, 120 days after a copy of such proof of
Claim was delivered to counsel for the Debtor from the Bankruptcy Court.
b. Except as otherwise set forth below, unless and until Class 4
Large Unsecured Claims are Allowed in an aggregate amount which exceeds
$20,000,000 or the Bankruptcy Court, upon
57
<PAGE>
motion by the Debtor, establishes a lower estimated Claim amount, Debtor shall
establish Disputed Claim Reserves in an amount (the "Permitted Reserve Amount")
based on the assumption that the Allowed Amount of all Class 4 Large Unsecured
Claims will be $20,000,000. Until all Disputed Class 4 Large Unsecured Claims
are resolved by Final Order, the Debtor shall make a Pro Rata Distribution to
the Reserve Agent (to be held as a Disputed Claims Reserve) of that portion of
any Distribution which equals the Distribution to which the Holders of Disputed
Class 4 Large Unsecured Claims and would be entitled based on the foregoing
Permitted Reserve Amount.
c. Following the Effective Date, the Debtor may file a request that
the Bankruptcy Court determine, by estimating the Claims or otherwise, that an
Assumed Allowed Amount of Class 4 Large Unsecured Claims less than $20,000,000
is to be used for calculating the amounts to be placed in the Disputed Claims
Reserves.
d. From and after the Effective Date, the Debtor may periodically
file requests that the Bankruptcy Court confirm, determine, supplement or amend
prior determinations of the Permitted Reserve Amounts (which determinations may
require estimations of certain Claims).
e. Inasmuch as Class 5 Damage Claims are covered by the Policies, no
reserves will be established for Disputed Class 5 Damage Claims. The Debtor
will establish an Administrative and Priority Claims Reserve for Disputed
Priority Tax Claims and projected or actual Administrative Claims which have not
been Allowed by the Bankruptcy Court. The Distributions due in respect
58
<PAGE>
of Disputed Administrative Claims will be reserved for the Holders of Disputed
and Administrative Claims and deposited in the Administrative and Priority
Claims Reserve.
f. After an objection to a Disputed Claim is withdrawn or determined
by Final Order, the Distributions due on account of any Claim will be paid by
the appropriate Person hereunder.
g. In the event an objection to a Disputed Class 4 Large Unsecured
Claim is withdrawn or determined by Final Order, the Reserve Agent shall make
the Distribution due on account of such Claim to the extent sufficient funds
exist in the Disputed Claims Reserve. To the extent insufficient funds exist in
the Disputed Claims Reserve established by the Reserve Agent, the Debtor shall
fund any remaining Distribution owing to such Holder directly to the Holder. In
each case, the Distribution shall be made no later than the time provided in
this Plan for the next regularly scheduled principal payment on the Notes or, if
there is no such further scheduled time, within forty-five days of the date the
Disputed Claim becomes an Allowed Claim or authorized Administrative Claim.
Subject to the increase in principal amortization possible under the Notes as
set forth in Section V.E.2. hereof, any such payment or any such Distribution by
the Debtor by reason of insufficient Disputed Claims Reserves shall not increase
the principal required to be amortized under the Notes prior to the maturity
date of such Notes.
h. In the event monies are held by the Reserve Agent in a Disputed
Claims Reserve at any time in an amount which exceeds the amount of Cash which
would be necessary to make the required Distributions to the Holders of all
Disputed Class 4 Large
59
<PAGE>
Unsecured Claims (as of the date of calculation) if such Disputed Claims were
subsequently Allowed in full, the Reserve Agent shall pay such excess amount Pro
Rata to Holders of the Notes (net of the Pro Rata portion allocable to remaining
Disputed Claims); provided, however, that any such Distribution shall not
-------- -------
increase the principal required to be amortized under the Notes, so that (i) any
principal portion of such Distribution shall be allocated Pro Rata to Holders of
such Notes and (ii) any interest portion of such Distribution shall be applied
to the next scheduled quarterly principal payment. Notwithstanding the
foregoing, if all Allowed Bank Claims and Large Unsecured Claims have been
satisfied in full pursuant to the terms of this Plan, and the amount of Cash
which would be necessary to make the required Distributions to Holders of any
Disputed Large Unsecured Claims if such Claims were subsequently Allowed in
full, then the Reserve Agent shall promptly return the excess monies held in
such Disputed Claims Reserve to the Debtor.
8. UNCLAIMED PROPERTY. Any Unclaimed Property will be deemed paid to such
------------------
entitled Person, for the purpose of determining that Person's rights. Any Person
that does not claim its Distribution within 180 days will receive no future
distribution under the Plan.
9. DE MINIMIS DISTRIBUTIONS/RETURN OF UNDISTRIBUTED FUNDS.
------------------------------------------------------
Notwithstanding anything to the contrary contained in this Plan, neither the
- ---------------------------------------------------------------
Debtor nor the Reserve Agent need disburse Cash to the Holder of an Allowed
Claim if the amount of Cash otherwise due is less than Five Dollars ($5.00).
Cash not so distributed may be reserved for the Claim Holder until in excess of
Five Dollars
60
<PAGE>
($5.00) is owed such Claim Holder. When and if the Reserve Agent determines in
good faith that nothing more is due hereunder to the Holders of Bank Claims and
Large Unsecured Claims, then such undisbursed funds will be promptly returned by
the Reserve Agent to the Debtor.
D. SERVICES BY AND FEES FOR PROFESSIONALS.
--------------------------------------
1. SERVICES BY PROFESSIONALS AND CERTAIN PARTIES AFTER THE EFFECTIVE
-----------------------------------------------------------------
DATE.
----
The Debtor, Equity Committee and the Committee retained professionals
who provided services and incurred expenses during the Case. After the Effective
Date, the professionals retained by the Debtor may be among the Persons
assisting in the effectuation of this Plan.
2. FEES FOR PROFESSIONALS AND CERTAIN PARTIES.
------------------------------------------
a. PRIOR TO THE EFFECTIVE DATE.
---------------------------
(1) GENERALLY. Fees and expenses for the professionals retained by
---------
the various committees or the Debtor for services rendered and costs incurred
after the Petition Date and prior to the Effective Date, will be fixed by the
Bankruptcy Court after notice and a hearing and such fees and expenses will be
paid (less deductions for any and all amounts thereof already paid to such
Persons) after approval by the Bankruptcy Court to the extent so approved and as
provided in this Plan.
b. FROM THE EFFECTIVE DATE. Fees owing for services rendered and
-----------------------
costs incurred and owing on and after the Effective Date by the professionals
retained by the Debtor, the Equity Committee or the Committee, and any fees and
costs incurred by the Reserve Agent or relating to prosecution of Litigation
will be paid
61
<PAGE>
by the Debtor from the funds held by the Debtor twenty (20) days after
submission of a bill therefor to the Debtor, if there is no objection within
such time. If there is such an objection, the fees and expenses will be fixed
by the Bankruptcy Court after notice and a hearing. The Bankruptcy Court will
retain jurisdiction until the Case is closed, to determine disputed post-
Effective Date fees of professionals.
E. DISSOLUTION OF COMMITTEES.
-------------------------
The Committee shall continue in existence following the Effective date
solely for the purpose of monitoring the consummation of the transactions
required to take place on or about the Effective Date of this Plan. Ninety days
after the Effective Date, the Committee and Equity Committee shall be deemed
dissolved.
F. LITIGATION.
----------
a. The Debtor may commence or advance any Litigation following the
Effective Date.
b. Except as otherwise set forth in this Plan, the Debtor may, but will
not be required to, set off against any Claim and the Distributions to be made
in respect of such Claim, any Litigation it may have against the Holder of the
Claim, but neither the failure to do so nor the allowance of any Claim hereunder
will constitute a waiver or release of any such Litigation, setoff or recoupment
which the Debtor may have against such Holder.
c. Unless threatened or pending Litigation against a Creditor or other
person is expressly waived, relinquished, released, compromised or settled in
this Plan or in a Final Order, all rights with respect to such Litigation are
reserved and the Debtor may pursue such Litigation.
62
<PAGE>
ARTICLE IX
MODIFICATION
------------
Pursuant to the provisions of Bankruptcy Code (S) 1127, the Debtor reserves
the right to modify or alter the provisions of this Plan at any time prior or
subsequent to Confirmation.
ARTICLE X
EFFECT OF CONFIRMATION
----------------------
A. BINDING EFFECT OF CONFIRMATION.
------------------------------
Confirmation will bind the Debtor, all Creditors, Interest Holders and
other parties in interest to the provisions of this Plan whether or not the
Claim or Interest of such Creditor or Interest Holder is impaired under this
Plan and whether or not such Creditor or Interest Holder has accepted this Plan.
B. VESTING OF ASSETS FREE AND CLEAR OF LIENS, CLAIMS AND INTERESTS
---------------------------------------------------------------
Except as otherwise provided in this Plan or in the Confirmation Order,
upon the Effective Date, title to all Assets and property of the Debtor, and all
property of the Estate, including, pursuant to Bankruptcy Code (S)
1123(b)(3)(b), each and every claim, demand or cause of action which the Debtor
had or had power to assert immediately prior to Confirmation, will revest in the
Debtor, free and clear of all liens, Claims and Interests of Holders of Claims
and Interests. Thereafter, the Debtor will hold these Assets without further
jurisdiction, restriction or supervision of the Bankruptcy Court.
C. GOOD FAITH.
----------
Confirmation of the Plan shall constitute a finding that: (i) this Plan
has been proposed in good faith and in compliance with applicable provisions of
the Bankruptcy Code; and (ii) the
63
<PAGE>
solicitation of acceptances or rejections of this Plan by all Persons and the
offer, issuance, sale, or purchase, of a security offered or sold under the Plan
has been in good faith and in compliance with applicable provisions of the
Bankruptcy Code. Accordingly, on the Effective Date each of the officers and
directors of the Debtor, the Holders of the Bank Claims, the members of the
Committee, and the members of the Equity Committee and each of their respective
advisors and attorneys, effective as of the Effective Date, will be deemed
exculpated by Holders of Claims against and Interests in the Debtor and other
parties in interest to the Case, from any and all claims, causes of action and
other assertions of liability (including, without limitation, breach of
fiduciary duty), arising out of or related to the Debtor, the Case or the
exercise by such entities of their functions as members of or advisors to or
attorneys for any such individuals or committee or otherwise under applicable
law, in connection with or related to the Case and the formulation, negotiation,
preparation, dissemination, Confirmation and consummation of this Plan and any
agreement, instrument or other document issued hereunder or related hereto;
provided, however, that this Section X.C shall have no effect on liability for
any act or omission of the officers and directors of the Debtor, the Holders of
the Bank Claims, the members of the Committee, and the members of the Equity
Committee and each of their respective advisors and attorneys to the extent that
such act or omission is ultra vires or constitutes gross negligence or willful
misconduct.
D. NO LIMITATIONS ON EFFECT OF CONFIRMATION.
----------------------------------------
Nothing contained in this Article IX will limit the effect of Confirmation
as described in Bankruptcy Code (S) 1141.
64
<PAGE>
E. CONTINUATION OF ADR - PERMANENT INJUNCTION FOR DAMAGE CLAIMS.
------------------------------------------------------------
Notwithstanding Confirmation, the Holder of any Damage Claim that is
unliquidated in amount must first exhaust the remedies in the ADR before making
a request, from the Bankruptcy Court, to pursue liquidation of its Claim in an
appropriate non-bankruptcy forum.
The Confirmation Order will constitute a permanent injunction (1) enjoining
the Holders of Damage Claims from commencing, continuing or in any way pursuing
their claims, including but not limited to enjoining the Holders of Damage
Claims from prosecuting their Claims against the Affiliated Debtors' insurers in
any manner other than as proscribed in the Plan and (2) requiring all Holders of
Damage Claims to participate in the ADR prior to seeking relief from the
Bankruptcy Code (S) 1141(d) discharge injunction to pursue liquidation of their
Claims in an appropriate nonbankruptcy forum.
F. DISCHARGE OF CLAIMS AND TERMINATION OF INTERESTS.
------------------------------------------------
The rights afforded under the Plan and the treatment of Claims under the
Plan will be in exchange for and in complete satisfaction, discharge, and
release of all Claims. Confirmation of the Plan shall discharge Debtor from all
Claims that arose before the Confirmation Date and all Claims of all kinds
specified in Bankruptcy Code (S)(S) 502(g), (h) and (i), whether or not a proof
of Claim is filed or deemed filed (or the Holder of a Claim based on such debt
has accepted the Plan).
G. JUDICIAL DETERMINATION OF DISCHARGE.
-----------------------------------
As of the Confirmation Date, except as provided in the Plan, all Persons
shall be precluded from asserting against Debtor any other or further Claims,
debts, rights, causes of action, liabilities, or equity interests based on any
act, omission, transaction or other
65
<PAGE>
activity of any kind or nature that occurred before the Confirmation Date, and
the Confirmation Order shall be a judicial determination of discharge of all
Claims against Debtor pursuant to Bankruptcy Code (S)(S) 524 and 1141, and shall
void any judgment obtained or entered against Debtor at any time, to the extent
the judgment relates to discharged Claims.
H. INJUNCTION.
----------
As of the Confirmation Date, all Persons that have held, currently hold or
may hold a Claim or other debt or liability that is discharged or an Interest or
other right of an Equity Security Holder that is terminated pursuant to the Plan
are permanently enjoined from taking any of the following actions on account of
such discharged Claims, debts, or liabilities or terminated Interests or rights:
(a) commencing or continuing in any manner any action or other proceeding
against Debtor or its property, (b) enforcing, attaching, collecting or
recovering in any manner any judgment, award or decree against Debtor or its
property, (c) creating, perfecting or enforcing any lien or encumbrance against
Debtor or its property, (d) asserting a right of subrogation or recoupment of
any kind against any debt, liability or obligation due to Debtor or its
property, and (e) commencing or continuing any action that does not comply with
or is inconsistent with the provisions of the Plan.
ARTICLE XI
SUCCESSORS AND ASSIGNS
----------------------
This Plan and the provisions hereof will be binding upon the Debtor and its
successors and assigns.
66
<PAGE>
ARTICLE XII
RETENTION OF JURISDICTION
-------------------------
Notwithstanding Confirmation, the Bankruptcy Court will retain jurisdiction
for all of the following purposes plus such other purposes as may be provided by
the Bankruptcy Code:
1. The determination of the allowability and amount of Claims;
2. The determination of requests for payment of Claims entitled to
priority under Bankruptcy Code (S) 507(a)(1);
3. The resolution of any disputes regarding the interpretation,
enforcement, breach, performance and/or a default under this Plan;
4. The implementation, execution or consummation of the provisions of
this Plan (and any dispute with regard thereto) and entry of orders in aid of
consummation or enforcement of this Plan, including without limitation,
appropriate orders to effect the provisions of this Plan and to protect the
Debtor from Creditors' actions;
5. The modification of this Plan pursuant to Bankruptcy Code (S) 1127;
6. The adjudication of any cause of action or claim for relief brought by
the Debtor;
7. The consideration of requests by Holders of Damage Claims to liquidate
their Claims in an appropriate non-bankruptcy forum in the event that such
Holders of Damage Claims cannot resolve their Claims through the ADR;
8. The implementation of the ADR;
9. The adjudication of disputes in respect of the Indenture;
10. The sale of property by the Debtor free and clear of liens,
67
<PAGE>
security interests or interests of others pursuant to Bankruptcy Code (S) 363;
11. The determination of cure amounts under Bankruptcy Code (S) 365; and
12. The entry of a final decree closing this Case.
ARTICLE XIII
MISCELLANEOUS
-------------
A. SEVERABILITY.
------------
Should the Bankruptcy Court determine, prior to the Confirmation Date, that
any provision of the Plan is illegal as written or as applied to any Claim or
Interest, such provision shall be either unenforceable generally or as applied
to such Claim or Interest, as the case may be. A determination of
unenforceability shall in no respect limit or affect the enforceability and
operative effect of any other provision of the Plan or of that provision as
applied to other Claims or Interests.
B. RELEASE OF AVOIDANCE ACTIONS.
----------------------------
All Avoidance Actions under Bankruptcy Code (S) 547 shall be deemed
released on the Effective Date.
C. AMENDMENT, WITHDRAWAL OR REVOCATION OF THE PLAN.
-----------------------------------------------
Debtor reserves the right to amend, revoke or withdraw the Plan prior to
the Confirmation Date. If Debtor should revoke or withdraw the Plan, then the
Plan shall be null and void, and nothing contained in the Plan shall constitute
a waiver or release of any Claims by or against, or any Interests in Debtor, or
prejudice in any manner the rights of Debtor or any Affiliate.
D. HEADINGS.
--------
The heading of the Articles and sections of the Plan are for
68
<PAGE>
convenience only and shall in no way affect the interpretation of its
provisions.
E. SUCCESSORS AND ASSIGNS.
----------------------
The rights, benefits and obligations of any Person referred to in the Plan
shall be binding on, and shall inure to the benefit of, the heirs, executors,
administrators, successors and assigns of such Persons.
F. STATUTORY FEES.
--------------
All fees payable pursuant to 28 U.S.C. (S) 1930 as determined at the
hearing on Confirmation shall be paid by Debtor on or before the Effective Date.
Debtor will pay all post-Effective Date fees (if any) legally required to be
paid under 28 U.S.C. (S) 1930.
G. AMENDMENT TO CHARTER.
--------------------
Debtor shall amend its charter to prohibit the issuance of nonvoting equity
securities.
69
<PAGE>
ARTICLE XIV
CONFIRMATION REQUEST
--------------------
The Debtor hereby requests that the Bankruptcy Court confirm this Plan
pursuant to Bankruptcy Code (S) 1129(a), and, if necessary, pursuant to
Bankruptcy Code (S) 1129(b).
Dated: May 28, 1997 SIZZLER INTERNATIONAL, INC.,
a Delaware corporation
/s/ Christopher R. Thomas
--------------------------------
CHRISTOPHER R. THOMAS
President and Chief
Financial Officer
PRESENTED BY:
PACHULSKI, STANG, ZIEHL & YOUNG, P.C.
/s/ Brad R. Godshall
- -------------------------------------
BRAD R. GODSHALL,
Attorneys for Debtor and Debtor
in Possession
70
<PAGE>
EXHIBIT 2.2
RICHARD M. PACHULSKI, ESQ., (State Bar #90073)
JAMES I. STANG, ESQ., (State Bar #94435)
BRAD R. GODSHALL, ESQ., (State Bar #105438)
DEBRA GRASSGREEN, ESQ., (State Bar #169978)
IAIN A.W. NASATIR, ESQ., (State Bar #148977)
RACHELLE VISCONTE, ESQ., (State Bar #182158)
PACHULSKI, STANG, ZIEHL & YOUNG P.C.
10100 Santa Monica Boulevard, Suite 1100
Los Angeles, California 90067
Telephone: (310) 277-6910
Attorneys for Debtor and Debtor-in-Possession
SCOTT McNUTT (State Bar #104696)
REBECCA LITTENEKER (State Bar #111744)
SEVERSON & WERSON
1 Embarcadero Center, 25th Floor
San Francisco, CA 94111
Telephone: (415) 398-3344
Special Counsel for Debtor and Debtor-in-Possession
UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
In re:
SIZZLER RESTAURANTS INTERNATIONAL, INC., SIZZLER INTERNATIONAL, INC., COLLINS
PROPERTIES, INC., TENLY ENTERPRISES, INC., and BUFFALO RANCH STEAKHOUSES, INC.,
Debtors.
_____________________________
__ Affects all Debtors
XX Affects SRI Only
--
__ Affects SII Only
__ Affects Collins Only
__ Affects Tenly Only
__ Affects Buffalo Ranch Only
_____________________________
Case No. SV 96-16075-AG
(Jointly administered with:
Case Nos: SV 96 -16076-AG
SV 96 -16077-AG
SV 96 -16078-AG
SV 96 -16079-AG)
Chapter 11 cases
SIZZLER RESTAURANTS INTERNATIONAL, INC.'S SECOND AMENDED PLAN OF REORGANIZATION,
AS MODIFIED
Disclosure Statement Hearing:
- ----------------------------
Date: April 29, 1997
Time: 9:00 a.m.
Place: Courtroom "302"
21041 Burbank Blvd.
Woodland Hills, CA 91367
Confirmation Hearing:
- --------------------
Date: June 2, 1997
Time: 9:00 a.m.
Place: Courtroom "302"
21041 Burbank Blvd.
Woodland Hills, CA 91367
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE I - DEFINITIONS............................................................... 1
A. Definitions................................................................. 1
B. Rules of Interpretation, Computation of Time and Governing Law. ............ 22
1. Rules of Interpretation................................................ 22
2. Computation of Time.................................................... 23
3. Governing Law.......................................................... 23
ARTICLE II - ADMINISTRATIVE AND TAX CLAIMS............................................ 24
A. Treatment of Administrative and Tax Claims.................................. 24
1. Bar Date for Administrative Tax Claims................................. 24
2. Bar Date for All Other Administrative Claims........................... 24
3. Payment of Administrative Claims, Administrative Tax Claims
and Priority Tax Claims............................................... 25
4. Statutory Fees......................................................... 26
ARTICLE III - CLASSIFICATION OF CLAIMS AND INTERESTS AND IDENTIFICATION OF
IMPAIRED CLASSES OF CLAIMS AND INTERESTS................................ 26
A. Nature of Class Designations................................................ 26
B. Class Overview.............................................................. 27
1. Priority Non-Tax Claims................................................ 27
2. Secured Tax Claims..................................................... 27
3. Secured Non-Tax Claims................................................. 27
4. General Unsecured Claims............................................... 28
5. Damage Claims.......................................................... 28
6. Affiliate Claims....................................................... 28
7. McAthco Claims......................................................... 28
8. Small Unsecured Claims................................................. 28
9. Workers' Compensation Claims........................................... 28
10. Nichols Claims......................................................... 29
11. Johnson Claim.......................................................... 29
12. Equity................................................................. 29
ARTICLE IV - DESIGNATION AND TREATMENT OF CLASSES OF CLAIMS........................... 29
A. Treatment of Allowed Miscellaneous Secured Claims:
Classes 2(a)(1) through 2(a)(7)............................................. 29
1. Class 2(a) Subclasses.................................................. 29
2. Treatment of Class 2(a) Claims......................................... 29
3. Treatment of Class 2(b)(1) Claim....................................... 29
4. Treatment of Class 2(b)(2)............................................. 30
5. Treatment of Class 2(b)(3)............................................. 31
6. Treatment of Class 2(b)(4)............................................. 31
7. Treatment of Class 2(b)(5)............................................. 32
8. Treatment of Class 2(b) Miscellaneous Secured Claims................... 33
B. Treatment of Unsecured Claims............................................... 33
1. Class 1 - Priority Non-Tax Claims...................................... 33
2. Class 3 - General Unsecured Claims..................................... 34
3. Class 4 - Damage Claims................................................ 34
4. Class 5 - Affiliate Claims............................................. 35
5. Class 6 - McAthco Claims............................................... 35
</TABLE>
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<TABLE>
<S> <C>
6. Class 7 - Small Unsecured Claims....................................... 35
7. Class 8 - Workers' Compensation Claims................................. 36
8. Class 9 - Nichols Claims............................................... 36
9. Class 10 - Johnson Claim............................................... 36
C. Treatment of Equity - Class 11.............................................. 37
ARTICLE V - THE CREDITOR TRUST........................................................ 37
A. Creditor Trust Payments..................................................... 37
B. Creditor Trust Establishment, Administration, Termination and
Creditor Trustee Duties.................................................... 41
C. Administration, Termination and Disputed Claims Reserve Escrow
Agent Duties Disputed Claims Escrow Account Establishment,.................. 44
D. Indemnification of Creditor Trustee and Disputed
Claims Reserve Escrow Agent/Expenses Upon Default.......................... 49
ARTICLE VI - TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.................... 50
A. Assumption.................................................................. 50
B. Rejection................................................................... 53
C. Claims Arising From Rejection of Contracts.................................. 53
D. Special Provisions Concerning Franchisees................................... 54
ARTICLE VII - MEANS FOR IMPLEMENTATION OF PLAN........................................ 56
A. Effective Date Transactions................................................. 56
1. Incorporation of Sizzler USA Holdings and Sizzler USA and Sizzler
International Marks.................................................... 56
2. Transfer of Interest in the Debtor..................................... 56
3. Assignment of Other Properties/Execution of Intercompany Leases........ 56
4. Assignment of International Licensing Assets to Sizzler
International Marks.................................................... 57
5. Creation of Creditor Trust/Transfer of Debt, Designated
Properties and Trust Cash.............................................. 57
6. Execution and Delivery of Other Plan Agreements........................ 57
7. International Licensing Assets Payment................................. 57
8. Creditor Trust Expense Contribution.................................... 57
9. Collateral Assignment of Franchisee Note Payments...................... 57
10. Assignment of SII Executory Contracts.................................. 57
11. Corporate Governance................................................... 57
12. Continuation of Retiree Benefits....................................... 58
B. Global Interestate Settlement............................................... 58
C. Distributions and Plan Funding.............................................. 58
1. Sources of Plan Funding................................................ 58
2. The ADR................................................................ 59
3. Rounding of Amounts.................................................... 59
4. Name and Address of Holder............................................. 59
5. Unclaimed Property..................................................... 60
6. De Minimis Distributions/Return of Undistributed Funds................. 60
D. Services by and Fees for Professionals...................................... 60
1. Services by Professionals and Certain Parties after the Effective Date. 60
2. Fees for Professionals and Certain Parties............................. 61
</TABLE>
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<TABLE>
<S> <C>
E. Creditor Trust Beneficiary Representatives.................................. 62
F. Litigation.................................................................. 63
ARTICLE VIII - MODIFICATION........................................................... 64
ARTICLE IX - EFFECT OF CONFIRMATION................................................... 64
A. Binding Effect of Confirmation.............................................. 64
B. Vesting of Assets Free and Clear of Liens, Claims and Interests............. 64
C. No Limitations on Effect of Confirmation.................................... 66
D. Continuation of ADR - Permanent Injunction for Damage Claims................ 66
E. Discharge of Claims and Termination of Interests............................ 66
F. Judicial Determination of Discharge......................................... 67
G. Injunction.................................................................. 67
H. Good Faith.................................................................. 68
I. Special Tax Provisions...................................................... 69
ARTICLE X - CONDITIONS TO EFFECTIVE DATE.............................................. 69
ARTICLE XI - SUCCESSORS AND ASSIGNS................................................... 71
ARTICLE XII - RETENTION OF JURISDICTION............................................... 71
ARTICLE XIII - MISCELLANEOUS.......................................................... 72
A. Severability................................................................ 72
B. Further Assurances.......................................................... 72
C. Withdrawal or Revocation of the Plan........................................ 73
D. Headings.................................................................... 73
E. Successors and Assigns...................................................... 73
F. Restriction on Dividends.................................................... 73
G. Statutory Fees.............................................................. 73
ARTICLE XIV - CONFIRMATION REQUEST.................................................... 74
</TABLE>
iii
<PAGE>
Exhibits:
A. Creditor Trust Agreement
B. Form of Sizzler USA Trust Deed
C. Form of Security Agreement
D. Form of Creditor Trust Note
E. List of Sizzler USA Assigned Leases
F. List of Designated Properties
G. Form of Subsidiary Guarantee
H. Sizzler USA Holdings Guarantee
I. Form of Intercompany Lease
J. Sizzler USA Holdings Pledge Agreement
K. Form of SII Stock Pledge
L. List of Holders of Secured Tax Claims
M. Form Model Franchise Agreement
N. List of International Licensing Assets (Including International
Licensing Executory Contracts)
O. List of Other Properties
P. List of Assumed Executory Contracts
Q. List of Collins Real Estate
R. Form of SII Non-Recourse Guaranty
S. List of SII Assigned Contracts
T. Franchise Letter of Intent
U. Disputed Claims Reserve Escrow Agreement
V. Model Royalty Relief/Release Agreement
W. Model Franchisee Note
X. Sizzler USA Payment Guarantee
iv
<PAGE>
Sizzler Restaurants International, Inc., a Delaware corporation, debtor and
debtor in possession herein, hereby proposes the following second amended plan
of reorganization ("Plan") pursuant to Bankruptcy Code (S) 1121.
ARTICLE I
DEFINITIONS
-----------
A. DEFINITIONS.
-----------
The following definitions will apply with respect to this Plan and the
Disclosure Statement, as those terms are defined below.
1. "ADMINISTRATIVE AND PRIORITY CLAIMS RESERVE". An account or accounts to
------------------------------------------
hold payment set aside for the Disputed Administrative and priority Claims and
projected and actual Administrative Claims which have not been Allowed by the
Bankruptcy Court.
2. "ADMINISTRATIVE CLAIM". A Claim for payment of an administrative expense
--------------------
of a kind specified in Bankruptcy Code (S) 503(b) and referred to in Bankruptcy
Code (S) 507(a)(1), including, without limitation, the actual, necessary costs
and expenses of preserving the estate and operating the business of the Debtor,
including wages, salaries, and commissions for services rendered after the
commencement of the Case, obligations for goods and services procured after the
commencement of the Case, compensation for legal and other professional services
and reimbursement of expenses awarded under Bankruptcy Code (S)(S) 328, 330(a)
and 331 and all fees and charges assessed against the Estate under Chapter 123
of title 28 of the United States Code.
3. "ADMINISTRATIVE TAX CLAIM". An Unsecured Claim by a governmental unit
------------------------
for taxes (and for interest or penalties related
1
<PAGE>
to such taxes) for any tax year or period, all or a portion of which occurs or
falls within the period from and including the Petition Date through and
including the Effective Date.
4. "ADR". The Alternative Dispute Resolution Procedure which will be
---
implemented prior to the Effective Date for the liquidation of Damage Claims.
The ADR will provide an orderly mechanism for the settlement, mediation or
arbitration of Damage Claims and, in some instances, the payment of Damage
Claims from Coverage without further order of the Bankruptcy Court.
5. "AFFILIATE". The Affiliated Debtors and all other direct or indirect
---------
wholly or partially owned subsidiaries of SII.
6. "AFFILIATE CLAIM". Any Claim held by an Affiliate against the Debtor.
---------------
7. "AFFILIATED DEBTORS". The Debtor, together with Buffalo Ranch, SII,
------------------
Collins and Tenly, all of which are debtors in related chapter 11 cases.
8. "ALLOWED". When used in respect of a Claim or Interest or group of
-------
Claims or Interests, means --
(a) if no proof of Claim or Interest has been timely filed, such amount
of the Claim or Interest, or group of Claims or Interests which has been
scheduled by the Debtor as liquidated in amount and not disputed or contingent
and as to which no party in interest has filed an objection within the time
required under this Plan, or otherwise fixed by the Bankruptcy Court, and which
Claim or Interest is not disallowed under Bankruptcy Code (S)(S) 502(d) or (e);
or
(b) if a proof of Claim or Interest has been filed by the Claims Bar
Date, or is deemed timely filed by the Bankruptcy
2
<PAGE>
Court, such amount of the Claim or Interest, or group of Claims or Interests, as
to which any party in interest has not filed an objection within the time
required under this Plan or otherwise fixed by the Bankruptcy Court and which
Claim or Interest is not disallowed under Bankruptcy Code (S)(S) 502(d) or (e);
or
(c) such amount of the Claim or Interest or group of Claims or
Interests, which is allowed by a Final Order of the Bankruptcy Court; or
(d) such amount of the Claim or Interest or group of Claims or Interests,
which is allowed under this Plan.
9. "ALLOWED CLAIM". A Claim which is Allowed.
-------------
10. "ALLOWED CLASS ... CLAIM". An Allowed Claim in the particular class
-----------------------
described.
11. "ARCHER CLAIM". The Disputed Secured Claim of Arnetta Archer, in an
------------
amount as ultimately determined by the Bankruptcy Court.
12. "ASSETS". All assets of the Estate including "property of the estate" as
------
described in Bankruptcy Code (S) 541.
13. "ASSUMED EXECUTORY CONTRACTS". Those executory contracts to be assumed
---------------------------
on the Effective Date as identified on Exhibit "O" hereto.
14. "AVOIDANCE ACTIONS". All avoiding powers, and all rights and remedies
-----------------
under, relating to, or similar to Bankruptcy Code (S)(S) 544, 545, 547, 548,
549, 551, or any fraudulent conveyance, fraudulent transfer or preference laws.
15. "BANKRUPTCY CODE". The Bankruptcy Code, as codified in title 11 of the
---------------
United States Code, 11 U.S.C. (S) 101 et seq., including all amendments thereto,
to the extent such amendments are
3
<PAGE>
applicable to the Case.
16. "BANKRUPTCY COURT". The United States Bankruptcy Court for the Central
----------------
District of California.
17. "BANKRUPTCY RULES". The Federal Rules of Bankruptcy Procedure, as now in
----------------
effect or hereafter amended and applicable to the Case.
18. "BENEFICIAL INTEREST". An interest in the Creditor Trust entitling the
-------------------
Holder of an Allowed Class 3 Claim and the Disputed Claims Reserve Escrow
Account, to the extent it holds interests in the Creditor Trust, to satisfy the
Disputed Class 3 Claims, to receive its Pro Rata share of (i) the Creditor Trust
Payments; (ii) interest earned on Cash held in the Creditor Trust (including,
without limitation, Cash generated from the receipt of Franchisee Note
Payments); (iii) any and all other Cash or other assets held by the Creditor
Trust; less (iv) its Pro Rata share of Creditor Trust Excess Expenses.
19. "BUFFALO RANCH". Buffalo Ranch Steakhouses, Inc., a California
-------------
corporation, an Affiliate which is a debtor in a related chapter 11 case also
filed on June 2, 1996.
20. "BUSINESS DAY". Any day other than a Saturday, Sunday or a legal holiday
------------
(as set forth in Bankruptcy Rule 9006(a)).
21. "CASE". The case under chapter 11 of the Bankruptcy Code commenced by
----
the Debtor on June 2, 1996, pending in the Bankruptcy Court and bearing Case No.
SV 96-16075-AG.
22. "CASH". Cash or cash equivalents including, but not limited to, bank
----
deposits, checks or other similar items.
23. "CFI ACCOUNTING AFFILIATES". CFI Pty and all other Affiliates as of or
-------------------------
after the Effective Date which are to be
4
<PAGE>
consolidated into CFI Pty for accounting purposes pursuant to GAAP, including,
without limitation, the following corporations: Sizzler International Marks,
Inc., Collins International, Inc., Restaurant Concepts International, Inc.,
Sizzler Franchise Development, Collins Food Australia Pty Ltd, CFI Insurers,
Ltd., Collins Finance & Management Pty, Ltd, Collins Property Development Pty
Ltd, Gulliver's Australia Pty Ltd, Sizzler Australia Pty Ltd, Buffalo Ranch
Australia Pty Ltd, Italian Oven Australia Pty Ltd, Restaurant Concepts Australia
Pty Ltd, Sizzler New Zealand Limited, Sizzler Restaurant Services, Inc., Sizzler
South Pacific Pty Ltd, Sizzler South East Asia Inc., Furnace Concepts
International, Inc., and Furnace Concepts Australia Corp.
24. "CFI PTY". Collins Food International, Pty Ltd., a Nevada corporation,
--------
SII's wholly owned subsidiary and which wholly owns the Debtor.
25. "CLAIM". (a) Any right to payment from the Debtor, whether or not such
-----
right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured, or (b) any right to an equitable remedy for breach of performance if
such breach gives rise to a right of payment from the Debtor, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured, or unsecured.
26. "CLAIMS BAR DATE". The date by which a proof of a Claim or Interest was
---------------
or is required to be filed. This date was previously determined by the
Bankruptcy Court for most Claims or Interests to be October 15, 1996, and
October 22, 1996 for Claims
5
<PAGE>
dated prior to October 15, 1996 and received by the Bankruptcy Court by October
---
22, 1996, other than with respect to executory contracts or unexpired leases for
which an order rejecting such contract or lease is entered after September 15,
1996, and certain tax Claims.
27. "CLASS". A Class of Claims or Interests described in Article III of this
-----
Plan.
28. "CLASS 3 GUARANTEED FULL PAYMENT". Cash equal to (i) the full amount of
-------------------------------
a Class 3 Allowed Claim plus, (ii) the Class 3 Interest on the unpaid portion of
such Allowed Claim, minus (iii) a Pro Rata allocation of any Excess Creditor
Trust Expenses; provided, however, that the Debtor shall receive credit for
payments actually received by Class 3 Creditors prior to December 20, 1997 in
accordance with Article V.A.(2) of the Plan.
29. "CLASS 3 INTEREST". With respect to the unpaid portion of any Allowed
----------------
Class 3 Claim (a) the "reference rate" or "base rate" announced by Bank of
America from time to time plus one percent (1%) from May 3, 1997 through May 2,
1998; (b) the "reference rate" or "base rate" announced by Bank of America from
time to time plus two percent (2%) from May 3, 1998 through May 2, 2000, or if
Bank of America fails to announce a "reference rate" or "base rate," the
"reference rate" or "prime rate" as articulated by three of the money center
banks as published in the Wall Street Journal from time to time; and (c) the
"reference rate" or "base rate" plus three percent (3%) from May 3, 2000 through
June 1, 2001.
30. "COLLINS". Collins Properties, Inc., a Delaware corporation, an
-------
Affiliate of the Debtor and a debtor in a related
6
<PAGE>
chapter 11 case also filed on June 2, 1996.
31. "COLLINS REAL ESTATE". That real property owned or leased by Collins and
-------------------
to be transferred to Sizzler USA on the Effective Date as identified on Exhibit
"Q" hereto.
32. "COMMITTEE". The Official Committee of Creditors Holding Unsecured
---------
Claims appointed in the Case by the U.S. Trustee pursuant to Bankruptcy Code (S)
1102.
33. "CONFIRMATION". The entry of the Confirmation Order.
------------
34. "CONFIRMATION DATE". The date upon which the Bankruptcy Court enters the
-----------------
Confirmation Order.
35. "CONFIRMATION ORDER". The order of the Bankruptcy Court confirming this
------------------
Plan pursuant to Bankruptcy Code (S) 1129.
36. "COVERAGE". Any insurance coverage provided by an unrelated third-party
--------
that is available for the payment of Damage Claims.
37. "CREDITOR". The Holder of a Claim against the Debtor.
--------
38. "CREDITOR TRUST". The Sizzler Restaurants International, Inc. Creditor
--------------
Trust created by the Creditor Trust Agreement for the benefit of the Holders of
Class 3 Claims.
39. "CREDITOR TRUST AGREEMENT". The agreement establishing the Creditor
------------------------
Trust approved by the Bankruptcy Court and substantially in the form of Exhibit
"A" hereto.
40. "CREDITOR TRUST BENEFICIARY REPRESENTATIVES". Three (3) members
------------------------------------------
(including one landlord representative) to be elected by the existing Committee,
with, in the case of the landlord representative, the approval of the Landlord
Subcommittee, appointed to represent the collective interests of holders of
beneficial interests in the Creditor Trust.
7
<PAGE>
41. "CREDITOR TRUST COLLATERAL". Includes: (i) all real and personal
-------------------------
property of SRI (including all rights of SRI to distributions or dividends as
the Holder of an Allowed Claim or Interest in any Affiliated Debtor's bankruptcy
cases) (made subject to a security interest in favor of the Creditor Trust under
the SRI Security Agreement) other than the International Licensing Assets; (ii)
all real and personal property of Sizzler USA (to be made subject to a security
interest in favor of the Creditor Trust under the Sizzler USA Security
Agreement); (iii) all real and personal property of Sizzler USA Holdings (to be
made subject to a security interest in favor of the Creditor Trust under the
Sizzler USA Holdings Security Agreement); (iv) all personal property of Sizzler
USA Franchise (to be made subject to a security interest in favor of the
Creditor Trust by the Sizzler USA Franchise Security Agreement); (v) the stock
of the Debtor and Sizzler USA (to be made subject to the Sizzler USA Holdings
Stock Pledge); and (v) the stock of Sizzler USA Holdings (to be subject to the
SII Stock Pledge).
42. "CREDITOR TRUST EXCESS EXPENSES". Expenses of the Creditor Trust in
------------------------------
excess of the Creditor Trust Expense Contribution and any interest earned on the
Disputed Claims Reserve Escrow Account.
43. "CREDITOR TRUST EXPENSE CONTRIBUTION". $240,000 payable by the Debtor to
-----------------------------------
the Creditor Trust on the Effective Date to mitigate the Post-Effective Date
expenses of the Creditor Trust and the Creditor Trust Beneficiary
Representatives.
44. "CREDITOR TRUST INTEREST". All interest earned on all assets in the
-----------------------
Creditor Trust pursuant to the Creditor Trust
8
<PAGE>
Agreement.
45. "CREDITOR TRUST PAYMENTS". All required distributions from the Debtor
-----------------------
and Sizzler USA to the Creditor Trust under Article V hereunder.
46. "CREDITOR TRUST SECURED NOTE". The secured note to be made by the
---------------------------
Debtor and guaranteed by Sizzler Holdings USA, Sizzler USA (on a non-recourse
basis), Sizzler USA Franchise and SII (on a non-recourse basis) in favor of the
Creditor Trustee reflecting certain of their obligations to the Creditor Trust
under this Plan in the form of Exhibit "D" hereto to be secured by the Creditor
Trust Collateral.
47. "CREDITOR TRUSTEE". The trustee of the Creditor Trust, who shall
----------------
initially be Geoffrey L. Berman of Development Specialists, Inc.
48. "DAMAGE CLAIM". A Claim for personal injury or property damage allegedly
------------
caused by the tortious acts of the Debtor, its agents or employees, other than
uninsured Claims for property damage asserted by landlords or former landlords
of the Debtor.
49. "DEBTOR OR SRI". Sizzler Restaurants International, Inc., a Delaware
-------------
corporation whether as debtor or as debtor in possession, prior to the
commencement of the Case, during the pendency of the Case, or following the
Effective Date as the case may be; provided however, that following the
Effective Date the Debtor's legal name shall be changed to Sizzler USA
Restaurants, Inc.
50. "DESIGNATED PROPERTIES". Those owned parcels of real estate contemplated
---------------------
for sale by the Debtor or leases of real property in which the Debtor holds the
tenant's or subtenant's
9
<PAGE>
interest and identified on Exhibit "F" hereto. Exhibit "F" shall be amended on
the Effective Date (a) to delete any properties sold prior thereto and (b) to
include any properties closed by the Debtor subsequent to January 27, 1997 and
designated for sale.
51. "DISCLOSURE STATEMENT". The "Amended Disclosure Statement in Support of
--------------------
Sizzler Restaurants International, Inc.'s Second Amended Plan of Reorganization"
filed by the Debtor in support of this Plan which has been approved by the
Bankruptcy Court, and any and all amendments and exhibits to the Disclosure
Statement. A copy of the Disclosure Statement is being distributed concurrently
with this Plan to all Holders of Claims and Interests entitled to vote on this
Plan.
52. "DISPUTED ADMINISTRATIVE CLAIMS". Administrative Claims which are
------------------------------
disputed prior to the bar date set for objecting to Administrative Claims.
53. "DISPUTED CLAIM" OR "DISPUTED ... CLAIM". A Claim in a particular Class
--------------------------------------
as to which a proof of Claim has been filed or is deemed to have been filed
under applicable law or an Administrative Claim, as to which an objection has
been or is filed by the Committee, the Debtor, or any other party in interest in
accordance with this Plan, the Bankruptcy Code, the Bankruptcy Rules, or the
Local Rules, which objection has not been withdrawn or determined by a Final
Order. Upon such time as a Disputed Claim is disallowed by a Final Order such
Claim shall no longer be considered a Claim for any purpose under this Plan.
Prior to the time that an objection has been or is filed, for the purposes of
this Plan, a Claim or Interest may be considered a Disputed Claim to the extent
that: (i) the amount of a Claim or Interest specified in a proof
10
<PAGE>
of claim exceeds the amount of any corresponding Claim scheduled by the Debtor
in its Schedules; (ii) any corresponding Claim scheduled by the Debtor in its
Schedules has been scheduled as disputed, contingent or unliquidated,
irrespective of the amount scheduled; or (iii) no corresponding Claim has been
scheduled by the Debtor in its Schedules.
54. "DISPUTED CLAIMS RESERVE ESCROW ACCOUNT". An account that holds the
--------------------------------------
Beneficial Interests in the Creditor Trust that are set aside to satisfy the
Disputed Class 3 Claims, in accordance and to the extent set forth in this Plan
and the Disputed Claims Reserve Escrow Agreement.
55. "DISPUTED CLAIMS RESERVE ESCROW AGENT". The escrow agent of the Disputed
------------------------------------
Claims Reserve Escrow Account, who shall initially be Geoffrey L. Berman of
Development Specialists, Inc.
56. "DISPUTED CLAIMS RESERVE ESCROW AGREEMENT". The Agreement establishing
----------------------------------------
the Disputed Claims Reserve Escrow Account substantially in the form of Exhibit
"U" hereto.
57. "DISTRIBUTION". Any transfer under this Plan or any Plan Agreement of
------------
Cash or other property or instruments to either a Holder of an Administrative
Claim or a Holder of an Allowed Claim.
58. "DOMESTIC LICENSING ASSETS". Those assets relating to the licensing of
-------------------------
the "Sizzler" trademark that are not International Licensing Assets.
59. "EFFECTIVE DATE". The date on which the earlier of the following (A) or
--------------
(B) has occurred: (A) the first date on which both of the following have
occurred (i) the Confirmation Order has become a Final Order and (ii) the
conditions set forth in Article X of this Plan have been satisfied, or (B) the
first date following
11
<PAGE>
the expiration of one hundred eighty (180) days after the Confirmation Order has
become a Final Order; provided, however, that the Debtor may waive the
requirement of finality, or may elect, in its sole and exclusive discretion, to
shorten the period between Confirmation and the Effective Date, in which event
the Effective Date will be the date specified in a written notice of the
Effective Date, filed by the Debtor with the Bankruptcy Court and served upon
the Committee or Creditor Trust Beneficiary Representatives, as applicable, all
Creditors and parties in interest.
60. "EFFECTIVE DATE ADVERTISING FUND". The amount of Cash not to exceed $1.5
-------------------------------
million that the Debtor shall establish as an advertising and marketing fund for
the benefit of Franchisees and designate in a writing filed with the Bankruptcy
Court at least 10 days prior to the Confirmation Date. The Effective Date
Advertising Fund shall be the lesser of $1.5 million or the total amount of
obligations under Franchise Notes as of the Effective Date.
61. "ESTATE". The estate in the Case created pursuant to Bankruptcy Code (S)
------
541(a).
62. "FINAL ORDER". An order, decree or judgment of the Bankruptcy Court, the
-----------
operation or effect of which has not been reversed, stayed, modified or amended,
and as to which order, decree or judgment (or any revision, modification or
amendment thereof), the time to appeal or seek review or rehearing has expired
and as to which no appeal or petition for review or rehearing has been taken or
is pending.
63. "FRANCHISE AGREEMENT". Any franchise or license
-------------------
12
<PAGE>
agreement to which the Debtor is a party providing for the operation of a
restaurant or restaurants under the Sizzler trademark within Guatemala and the
U.S.A. (including Guam and Puerto Rico) other than by an Affiliate.
64. "FRANCHISEE". Any franchisee or licensee under any Franchise Agreement.
----------
65. "FRANCHISE COMMITTEE". The Official Committee of Franchisees appointed
-------------------
in the Case by the U.S. Trustee pursuant to Bankruptcy Code (S) 1102.
66. "FRANCHISE LETTER OF INTENT". The letter of intent between the Debtor
--------------------------
and the Franchise Committee dated February 28, 1997. A copy of the Franchise
Letter of Intent is annexed hereto as Exhibit "T" and is incorporated herein by
reference.
67. "FRANCHISEE NOTES". The promissory notes evidencing the obligations to
----------------
make the Franchisee Note Payments. A copy of a model Franchisee Note is annexed
hereto as Exhibit "W".
68. "FRANCHISEE NOTE PAYMENTS". The contractual agreement of Qualified
------------------------
Franchisees evidenced by the Franchisee Notes to pay to the Debtor any
arrearages which have accrued under their Franchise Agreements and other
obligations owed to the Debtor or to any advertising or common fund administered
by the Debtor between the Petition Date and January 31, 1997 in twelve (12)
equal monthly installments commencing on the Effective Date, which shall be
collaterally assigned to the Creditor Trust pursuant to Article IV of this Plan.
69. "GENERAL UNSECURED CLAIM". Any unsecured Claim against the Debtor,
-----------------------
however arising, e.g., from providing goods or services or from the rejection of
----
an executory contract or an unexpired
13
<PAGE>
lease, which is not an Administrative Claim, Parks Claim, Xerox Claim, Archer
Claim, McNeely Claim, Robinson Family Trust Claim, Priority Tax Claim, Damage
Claim, Priority Non-Tax Claim, McAthco Claim, Nichols Claim, Johnson Claim,
Affiliate Claim or Secured Claim.
70. "GLOBAL INTERESTATE SETTLEMENT". The settlement of certain Affiliate
-----------------------------
Claims as described more fully in Section VII.B. hereof.
71. "GUARANTEES". Collectively, the Subsidiary Guarantees, the Sizzler USA
----------
Holdings Guarantee, the Sizzler USA Guarantee and the Sizzler USA Franchise
Guarantee.
72. "HOLDER". The holder of a Claim against or Interest in the Debtor.
------
73. "INTERCOMPANY LEASE". The lease or sublease of the Other Properties and
------------------
the Collins Real Estate from Sizzler USA to the Debtor in substantially the form
of Exhibit "I" to this Plan.
74. "INTEREST". A share in the Debtor, whether or not transferable or
--------
denominated "stock," and any warrant or right to purchase, sell, or subscribe to
such share.
75. "INTERNATIONAL LICENSING ASSETS". Those Assets relating to the
------------------------------
international licensing of the "Sizzler" trademark, including the International
Licensing Executory Contracts, all of which are identified on Exhibit "N" of
this Plan.
76. "INTERNATIONAL LICENSING ASSETS PAYMENT". The payment of $1,000,000 to
--------------------------------------
the Creditor Trust by Sizzler International Marks and the transfer to Sizzler
USA of the Collins Real Estate on the Effective Date in return for the
International Licensing Assets.
77. "INTERNATIONAL LICENSING EXECUTORY CONTRACTS". Those
-------------------------------------------
14
<PAGE>
executory contracts relating to the international licensing of the "Sizzler"
trademark identified on Exhibit "N" of this Plan.
78. "JOHNSON CLAIM". The claim held by Helen Johnson relating to a right to
-------------
receive a percentage of the gross revenues generated by the Debtor's location in
Thousand Oaks, California.
79. "LANDLORDS SUBCOMMITTEE". The Official Subcommittee of Landlords
----------------------
appointed in the Case by the U.S. Trustee pursuant to Bankruptcy Code (S) 1102.
80. "LITIGATION". Any and all claims, demands, rights, defenses, actions,
----------
causes of action, suits, contracts, agreements, obligations, accounts, defenses,
offsets, powers, privileges, licenses and franchises of any kind or character
whatsoever, known or unknown, suspected or unsuspected, whether arising prior
to, on or after the Petition Date, in contract or in tort, at law or in equity,
or under any other theory of law, of the Debtor or its Estate, including but not
limited to (i) rights of setoff, counterclaim, or recoupment, and claims on
contracts or for breaches of duties imposed by law, (ii) the right to object to
Claims or Interests, (iii) claims pursuant to Bankruptcy Code (S)(S) 362, (iv)
such claims and defenses as fraud, mistake, duress and usury and (v) all
Avoidance Actions.
81. "LOCAL RULES". The Local Bankruptcy Rules for the United States
-----------
Bankruptcy Court for the Central District of California, as may be amended from
time to time and which apply to the Case.
82. "MCATHCO CLAIMS". Any Allowed Unsecured Claim against the Debtor
--------------
originally owing to McAthco Enterprises and evidenced by a promissory note now
in effect or hereafter amended.
83. "MCNEELY CLAIM". The Disputed Secured Claim of Donna
-------------
15
<PAGE>
McNeely, in an amount as ultimately determined by the Bankruptcy Court.
84. "MODEL FRANCHISE AGREEMENT". The form of Franchise Agreement between the
-------------------------
Debtor and a Franchisee proposed by the Debtor to be entered into on or about
the Effective Date in substantially the form of Exhibit "M" hereto.
85. "MODEL ROYALTY RELIEF/RELEASE AGREEMENT". The form of royalty relief and
--------------------------------------
release agreement between the Debtor and a Qualified Franchisee, delivered in
accordance with the Franchise Letter of Intent. A copy of the Model Royalty
Relief/Release Agreement is annexed hereto as Exhibit "V".
86. "NET PROCEEDS". The proceeds of the sale of any property, including a
------------
Designated Property, less any applicable commissions, taxes of any kind, senior
encumbrances or costs of sale.
87. "NICHOLS CLAIMS". The Claims held by Gordon Nichols, Sue Nichols,
--------------
Beverly James and the Estate of Herbert Rushing arising out of the Debtor's
purchase of Store 1003.
88. "OTHER PROPERTIES". Those properties identified on Exhibit "O" hereto,
----------------
which include the Sizzler USA Assigned Leases.
89. "PARKS BOND". The appeal bond placed by the Debtor in favor of Gilbert
----------
and Nancy Parks.
90. "PARKS CLAIM". The Disputed Secured Claim against the Debtor, the
-----------
Holders of which are Gilbert and Nancy Parks.
91. "PERSON". An individual, partnership, corporation, an association, a
------
joint stock company, a joint venture, an estate, a trust, an unincorporated
organization, or any government or other political subdivision thereof or other
entity.
16
<PAGE>
92. "PETITION DATE". June 2, 1996.
-------------
93. "PLAN". This Plan of Reorganization, including any amendments and
----
modifications to this Plan, as approved by Final Order of the Bankruptcy Court.
94. "PLAN AGREEMENT". Any of the Exhibits hereto and any other agreement to
--------------
be executed by any Person under this Plan.
95. "POLICIES". The Debtor's insurance policies that provide Coverage for
--------
acts that occurred or are alleged to have occurred prior to the Petition Date.
96. "PRIORITY NON-TAX CLAIM". A Claim against the Debtor that is not a
----------------------
Secured Claim and is specified as having priority in Bankruptcy Code (S)(S)
507(a)(3), 507(a)(4), 507(a)(5), or 507(a)(6), respectively.
97. "PRIORITY TAX CLAIM". A Claim entitled to priority under Bankruptcy Code
------------------
(S) 507(a)(8).
98. "PRO RATA". With respect to a particular Class of Claims or Interests,
--------
the ratio that the amount of a particular Allowed Claim or Allowed Interest in
the Class bears to the total amount of Allowed Claims or Allowed Interests in
the Class.
99. "QUALIFIED FRANCHISEE". Any Franchisee that (a) is current on all
--------------------
amounts owing to the Debtor or any advertising or common fund administered by
the Debtor prior to the Petition Date and after January 31, 1997, (b) executes
and delivers a note in form and substance satisfactory to the Debtor evidencing
the delinquent Franchisee Note Payments arising between the Petition Date and
January 31, 1997 under the terms of its Franchisee Agree ment and (c) waives all
Claims which the Franchisee may have against any of the Affiliated Debtors, and
consents to an assump-
17
<PAGE>
tion of the Franchise Contract without any cure payment.
100. "ROBINSON FAMILY TRUST CLAIM". The Allowed Secured Claim against the
---------------------------
Debtor held by the Robinson Family Trust.
101. "SCHEDULES". The Debtor's Schedules of Assets and Liabilities, filed on
---------
July 9, 1996, as amended from time to time thereafter.
102. "SECURED CLAIM". Any Claim that is secured by a lien on property in
-------------
which the Estate has an interest or that is subject to setoff under Bankruptcy
Code (S) 553, to the extent of the value of the Claim Holder's interest in the
Estate's interest in such property or to the extent of the amount subject to
setoff, as applicable, as determined pursuant to Bankruptcy Code (S) 506(a).
103. "SECURED NON-TAX CLAIM". Any Secured Claim not owing to a taxing
---------------------
authority.
104. "SECURED TAX CLAIM". Any Secured Claim owing to a taxing authority.
-----------------
105. "SII". Sizzler International, Inc., a Delaware corporation, an
---
Affiliate of the Debtor and a debtor in a related chapter 11 case also filed on
June 2, 1996.
106. "SII ASSIGNED CONTRACTS". Those executory contracts identified on
----------------------
Exhibit "S" hereto, which list may be amended prior to Confirmation, to be
assumed in the SII chapter 11 case and assigned to the Debtor.
107. "SII NON-RECOURSE GUARANTY". The non-recourse guaranty by SII of the
-------------------------
obligations of the Debtor and Sizzler USA under the Plan secured by the stock of
Sizzler USA Holdings, in the form of Exhibit "R" to this Plan.
108. "SII STOCK PLEDGE". The non-recourse pledge by SII of
----------------
18
<PAGE>
all of the outstanding stock of Sizzler USA Holdings to secure the obligations
of SII under the SII Non-Recourse Guaranty, in substan tially the form of
Exhibit "K" to this Plan.
109. "SIZZLER INTERNATIONAL MARKS". Sizzler International Marks, Inc., a
---------------------------
Delaware corporation, to be formed pursuant to this Plan, the stock of which
will be held by CFI Pty.
110. "SIZZLER USA". Sizzler USA Real Property, Inc., a Delaware corporation,
-----------
to be formed pursuant to this Plan, the stock of which will be held by Sizzler
USA Holdings.
111. "SIZZLER USA ASSIGNED LEASES". Those unexpired real property leases to
---------------------------
be assumed by the Debtor and assigned to Sizzler USA on the Effective Date as
identified on Exhibit "E" hereto.
112. "SIZZLER USA FRANCHISE". Sizzler USA Franchise, Inc., a Delaware
---------------------
corporation, to be formed pursuant to this Plan, the stock of which will be held
by Sizzler USA Holdings.
113. "SIZZLER USA FRANCHISE GUARANTEE". The nonrecourse guarantee of Sizzler
-------------------------------
USA Franchise in the form of Exhibit "H" hereto.
114. "SIZZLER USA FRANCHISE SECURITY AGREEMENT". The security agreement
----------------------------------------
executed by Sizzler USA Franchise in favor of the Creditor Trustee and
encumbering all personal property assets of Sizzler USA Franchise, in
substantially the form of Exhibit "C" hereto.
115. "SIZZLER USA GUARANTEE". The nonrecourse guarantee of Sizzler USA,
---------------------
secured by the Sizzler USA Trust Deeds, in the form of Exhibit "X" hereto.
116. "SIZZLER USA HOLDINGS". Sizzler USA, Inc., a Delaware corporation, to be
--------------------
formed pursuant to this Plan, the stock of which will be held by SII.
19
<PAGE>
117. "SIZZLER USA HOLDINGS GUARANTEE". The guarantee of Sizzler USA
------------------------------
Holdings of the Debtor's obligations under this Plan and the Creditor Trust
Note, in substantially the form of Exhib it "H" hereto.
118. "SIZZLER USA HOLDINGS STOCK PLEDGE". The agreement executed by Sizzler
---------------------------------
USA Holdings pledging all of the issued and outstanding stock of SRI, Sizzler
Franchise USA and Sizzler USA to secure Sizzler USA Holdings' obligations under
the Sizzler USA Holdings Guarantee, in substantially the form of Exhibit "J"
hereto.
119. "SIZZLER USA SECURITY AGREEMENT". The security agreement executed by
------------------------------
Sizzler USA in favor of the Creditor Trustee and encumbering all personal
property assets of Sizzler USA, in substantially the form of Exhibit "C"
hereto.
120. "SIZZLER USA TRUST DEEDS". The first priority trust deeds (subject to
-----------------------
the Secured Claims identified in this Plan) or mortgages executed by Sizzler USA
in favor of the Creditor Trustee and encumbering the Other Properties except any
leasehold interests pursuant to which there is a prohibition on encumbrances;
provided, however, that the Debtor will use reasonable efforts to obtain consent
to such encumbrances without incurring any expense, in substantially the form of
Exhibit "B" hereto.
121. "SMALL UNSECURED CLAIM". Any Unsecured Claim against the Debtor,
---------------------
however arising, which is allowed or voluntarily reduced in the amount of $500
or less.
122. "SRI AFFILIATES". Collectively, SRI, Sizzler USA, Sizzler USA Holdings,
--------------
Tenly and Buffalo Ranch and any other subsidiaries owned by SRI.
20
<PAGE>
123. "SRI SECURITY AGREEMENT". The security agreement executed by SRI in
----------------------
favor of the Creditor Trustee and encumbering all personal property assets of
SRI, in substantially the form of Exhibit "C" hereto.
124. "STOCK PLEDGES". The Sizzler USA Holdings Stock Pledge and the SII Stock
-------------
Pledge.
125. "SUBSIDIARY GUARANTEES". The guarantees of Buffalo Ranch and Tenly of
---------------------
the Debtor's and Sizzler USA's obligations under this Plan and the Creditor
Trust Secured Note in the form of Exhibit "G" hereto.
126. "TENLY". Tenly Enterprises, Inc., a Pennsylvania corporation, an
-----
Affiliate of the Debtor and a debtor in a related chapter 11 case also filed on
June 2, 1996.
127. "TRUST CASH". All of the Debtor's Cash as of the Effective Date less
----------
the sum of all of the foregoing: (a) the amount necessary to satisfy all Allowed
Administrative Claims, (b) Cash sufficient to make the Effective Date payments
on Secured Claims, (c) Cash sufficient to make the Effective Date payments with
respect to the McAthco Claims, Johnson Claim, Nichols Claims and Robinson Claims
pursuant to Article IV of the Plan, (d) Cash sufficient to satisfy the cure
obligations under Bankruptcy Code (S) 365 with respect to the assumption of the
International Licensing Assets constituting executory contracts, the Assumed
Executory Contracts, the Sizzler USA Assigned Leases, and any unexpired leases
constituting Designated Properties on terms satisfactory to the Committee, and
(e) $3.0 million plus the lesser of (i) $1.5 million; or (ii) the principal
amount of the Franchise Notes which are pledged to the Creditor Trust on or
before the
21
<PAGE>
Effective Date.
128. "U.S. TRUSTEE". The Office of the United States Trustee, or a
------------
representative thereof.
129. "UNCLAIMED PROPERTY". Any funds or property distributed to Creditors or
------------------
Holders of Interests (together with any interest earned thereon) which are
unclaimed as of one hundred eighty (180) days after the Distribution. Unclaimed
Property will include, without limitation, Cash, checks, and any other property
which is to be distributed pursuant to this Plan which has been returned as
undeliverable without a proper forwarding address, or which was not mailed or
delivered because of the absence of a proper address to which to mail or deliver
such property.
130. "UNSECURED CLAIM". Any Claim against the Debtor to the extent such Claim
---------------
is not a Secured Claim.
131. "WORKERS' COMPENSATION CLAIMS". Any Claim against the Debtor governed by
----------------------------
the Workers' Compensation laws of California or any other applicable
jurisdiction.
132. "XEROX CLAIM". The Allowed Secured Claim against the Debtor held by
-----------
Xerox Corporation.
B. RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW.
--------------------------------------------------------------
1. RULES OF INTERPRETATION. For purposes of this Plan: (a) whenever from
-----------------------
the context it is appropriate, each term, whether stated in the singular or the
plural, will include both the singular and the plural; (b) any reference in this
Plan to a contract, instrument, release or other agreement or document being in
a particular form or on particular terms and conditions means that such
agreement or document will be substantially in such form or substantially on
such terms and conditions; (c) any reference in
22
<PAGE>
this Plan to an existing document or exhibit filed or to be filed means such
document or exhibit, as it may have been or may be amended, modified or
supplemented; (d) unless otherwise specified, all references in this Plan to
sections, articles and exhibits are references to sections, articles and
exhibits of or to this Plan; (e) the words "herein" and "hereto" refer to this
Plan in its entirety rather than to a particular portion of this Plan; (f)
captions and headings to articles and sections are inserted for convenience of
reference only and are not intended to be a part of, or to affect, the
interpretation of this Plan; (g) "after notice and a hearing," or a similar
phrase has the meaning ascribed in Bankruptcy Code (S) 102; (h) "includes" and
"including" are not limiting; (i) "may not" is prohibitive, and not permissive;
(j) "or" is not exclusive; and (k) U.S. Trustee includes a designee of the U.S.
Trustee.
2. COMPUTATION OF TIME. In computing any period of time prescribed or
-------------------
allowed by this Plan, the provisions of Bankruptcy Rule 9006(a) will apply.
3. GOVERNING LAW. Except to the extent that the Bankruptcy Code, Bankruptcy
-------------
Rules or Local Rules are applicable, and subject to the provisions of any
contract, note, deed of trust, security agreement, instrument, release or other
agreement or document entered into in connection with this Plan, the rights and
obligations arising under this Plan will be governed by, and construed and
enforced in accordance with, the laws of the State of California without giving
effect to the principles of conflict of laws thereof to the same extent that a
valid and binding contract to be governed by, construed, and enforced in
accordance with the
23
<PAGE>
laws of the State of California without giving effect to the principles of
conflict of laws thereof would be so governed, construed, and enforced.
ARTICLE II
ADMINISTRATIVE AND TAX CLAIMS
-----------------------------
A. TREATMENT OF ADMINISTRATIVE AND TAX CLAIMS.
------------------------------------------
Notwithstanding the following, the Holder of an Administrative Claim and
the Debtor may agree to less favorable treatment of the Administrative Claim.
1. BAR DATE FOR ADMINISTRATIVE TAX CLAIMS. All requests for payment of
--------------------------------------
Administrative Tax Claims and for which no earlier bar date has been or is
established outside of this Plan, such as may be established by requesting an
expedited audit under Bankruptcy Code (S) 505, must be filed on or before the
later of (i) sixty (60) days following the Effective Date; and (ii) sixty (60)
days following the filing of any required tax return for such taxes for such
year or period with the applicable governmental unit. Any Holder of any
Administrative Tax Claim that is required to file a request for payment of such
taxes and does not file such a request by the applicable bar date will be
forever barred from asserting any such Administrative Tax Claim against the
Debtor, whether any such Administrative Tax Claim is deemed to arise prior to,
on, or subsequent to the Effective Date.
2. BAR DATE FOR ALL OTHER ADMINISTRATIVE CLAIMS. Requests for payment of
--------------------------------------------
Administrative Claims (other than Administrative Tax Claims and statutory fees
as described below) must be filed and served on the Debtor, the Committee, and
the U.S. Trustee no later than sixty (60) days after the Effective Date.
Professionals or
24
<PAGE>
other entities requesting compensation or reimbursement of expenses pursuant to
Bankruptcy Code (S)(S) 327, 328, 330, 331, 503(b) and 1103 for services rendered
prior to the Effective Date will file and serve on all parties entitled to
notice thereof, an application for final allowance of compensation and
reimbursement of expenses no later than ninety (90) days after the Effective
Date. All such requests for payment of Administrative Claims and applications
for final allowance of compensation and reimbursement of expenses will be
subject to the authorization and approval of the Bankruptcy Court. Holders of
Administrative Claims (including, without limitation, professionals) requesting
compensation or reimbursement of expenses that do not file such requests by the
applicable bar date will be forever barred from asserting such claims against
the Debtor, Estate, or its property. The Debtor shall have one hundred twenty
(120) days from the date an Administrative Claim is filed to bring an objection
to such Claim.
3. PAYMENT OF ADMINISTRATIVE CLAIMS, ADMINISTRATIVE TAX CLAIMS AND
---------------------------------------------------------------
PRIORITY TAX CLAIMS.
-------------------
a. Subject to the bar dates and other provisions set forth above, each
Holder of an unpaid Administrative Claim or Administrative Tax Claim will
receive Cash equal to the Allowed amount of such Claim, on the later of (i) the
Effective Date, (ii) the date such Claim would be payable in the ordinary course
of business, (iii) one hundred twenty (120) days from the date the Claim is
filed, and (iv) if a timely objection is made, the date such Claim becomes an
Allowed Claim.
b. Allowed Priority Tax Claims shall be paid over a four year period,
in eight semi-annual payments of principal, together with accrued interest
thereon from the Effective Date.
25
<PAGE>
Payments shall be made on October 1 and April 1 of each year following the
Effective Date. Interest shall accrue on the unpaid principal amount of Allowed
Priority Tax Claims at the rate of eight percent (8%) per annum after the
Effective Date. No Priority Tax Claim shall include interest unmatured and
accrued subsequent to the Petition Date and prior to the Effective Date unless
ordered by the Bankruptcy Court prior to the Confirmation. The amount of each
Priority Tax Claim may be prepaid, in whole or in part, at any time without
penalty of any kind. If any such Claim is disputed or subject to Bankruptcy
Court approval, the payment will be made on the first date on which there is a
Final Order awarding such Claim.
4. STATUTORY FEES. On or as soon as practicable after the Effective Date,
--------------
all Holders of Administrative Claims for fees due and payable pursuant to (S)
1930 of title 28 of the United States Code, 28 U.S.C. (S) 1930, will receive
Cash in the amount of such Administrative Claim. Post-confirmation fees due
pursuant to 28 U.S.C. (S) 1930, if any, will be paid as and when due, until the
Case is closed.
ARTICLE III
CLASSIFICATION OF CLAIMS AND INTERESTS AND
------------------------------------------
IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS AND INTERESTS
----------------------------------------------------------
A. NATURE OF CLASS DESIGNATIONS.
----------------------------
The following is a designation of the Classes of Claims and Interests in the
Debtor under this Plan. Administrative Claims, Administrative Tax Claims and
Priority Tax Claims have not been classified and are excluded from the following
Classes in accordance with Bankruptcy Code (S) 1123(a)(1). A Claim will be
deemed classified in a particular Class only to the extent that the
26
<PAGE>
Claim qualifies within the description of that Class and, unless otherwise
provided in this Plan, will be deemed classified in a different Class to the
extent that any remainder of the Claim qualifies within the description of such
different Class. A Claim is classified in a particular Class only to the extent
that the Claim is an Allowed Claim or Allowed Interest in that Class and has not
been paid, released or otherwise satisfied before the Effective Date.
Notwithstanding the following descriptions of the treatment of Claims and
Classes, the Holder of a Claim which is not an Allowed Claim may not vote upon
or receive a Distribution under this Plan in respect to such Claims or
Interests.
B. CLASS OVERVIEW.
--------------
This Plan contains the following Classes of Claims and Interests in the
Debtor:
1. PRIORITY NON-TAX CLAIMS. Class 1: Claims against the Debtor that are
-----------------------
not Secured Claims and are specified as having priority in Bankruptcy Code
(S)(S) 507(a)(3), 507(a)(4), 507(a)(5), or 507(a)(6), respectively, referred to
and defined as Priority Non-Tax Claims. These Claims are impaired under the
Plan.
2. SECURED TAX CLAIMS. Classes 2(a)(1) - 2(a)(29): Secured Tax Claims, if
------------------
any, against the Debtor, with each Secured Tax Claim being deemed a separate
subclass of Class 2(a). These Claims are impaired under the Plan. The Debtor
believes the only Secured Tax Claims alleged against the Debtor are as set forth
on Exhibit "L" to this Plan.
3. SECURED NON-TAX CLAIMS. Classes 2(b)(1) - 2(b)(5): Secured Non-Tax
----------------------
claims, if any, against the Debtor, with each Secured Non-Tax Claim being deemed
a separate subclass of Class
27
<PAGE>
2(b). The Xerox Claim is unimpaired under the Plan. Each other Secured Non-Tax
Claim is impaired under the Plan. The Debtor believes that the only Secured
Non-Tax Claims alleged against the Debtor are as follows:
<TABLE>
<CAPTION>
Approximate Alleged
-------------------
Class Claim Secured Claim
- ----- ----- -------------
<S> <C> <C>
2(b)(1) Parks Claim $225,000
2(b)(2) Robinson Family Trust Claim $566,000
2(b)(3) Xerox Claim $ 25,000
2(b)(4) Archer Claim $ 33,000
2(b)(5) McNeely Claim $ 30,000
</TABLE>
4. GENERAL UNSECURED CLAIMS. Class 3: All General Unsecured Claims
------------------------
against the Debtor that are not included in any other Class. These Claims are
impaired under the Plan.
5. DAMAGE CLAIMS. Class 4: All Damage Claims but only to the extent
-------------
that such Claims are to be paid from the Coverage. To the extent that all or a
portion of a Damage Claim is not covered by the Policies, then such uncovered
portion of the Damage Claim will be treated as a Class 3 Claim. These Claims
are impaired under the Plan.
6. AFFILIATE CLAIMS. Class 5: These Claims are impaired under the Plan.
----------------
7. McATHCO CLAIMS. Class 6: These Claims are unimpaired under the Plan.
--------------
8. SMALL UNSECURED CLAIMS. Class 7: These Claims are impaired under the
----------------------
Plan.
9. WORKERS' COMPENSATION CLAIMS. Class 8: These Claims are unimpaired
----------------------------
under the Plan.
28
<PAGE>
10. NICHOLS CLAIMS. Class 9: These Claims are unimpaired under the Plan.
--------------
11. JOHNSON CLAIM. Class 10: This Claim is unimpaired under the Plan.
-------------
12. EQUITY. Class 11: The Interest of CFI Pty in the Debtor is
------
unimpaired under the Plan but is to be made subject to the SII Stock Pledge.
ARTICLE IV
DESIGNATION AND TREATMENT OF CLASSES OF CLAIMS
----------------------------------------------
A. Treatment of Allowed Miscellaneous Secured Claims: Classes 2(a)(1) through
---------------------------------------------------------------------------
2(a)(7).
-------
1. CLASS 2(a) SUBCLASSES. Each Allowed Class 2(a) Claim will be in its
---------------------
own subclass. Each such Claim in this Class will be treated as being in a
separate Class for voting and confirmation purposes.
2. TREATMENT OF CLASS 2(a) CLAIMS. Each Allowed Class 2(a) Claim will be
------------------------------
paid in full over a six year period from the assessment of the tax that supports
such Claim, in twelve semi-annual payments of principal, together with accrued
interest thereon. Payments shall be made on October 1 and April 1 of each year
following the Effective Date. Interest shall accrue on the unpaid principal
amount of Allowed Class 2(a) Claims at the rate of eight percent (8%) per annum
after the Effective Date. The existing lien of the Holder of each Class 2(a)
Claim shall be retained following the Effective Date. The amount of each
Allowed Class 2(a) Claim may be prepaid, in whole or in part, at any time
without penalty of any kind.
3. TREATMENT OF CLASS 2(b)(1) CLAIM. Class 2(b)(1) consists
--------------------------------
29
<PAGE>
of the Parks Claim. The Parks Claim shall be satisfied as follows:
(a) If the Parks Claim becomes an Allowed Claim, it will be paid first
from third party sources, including any applicable Coverage from which the
Holder of the Parks Claim may be entitled to recover all or part of the Parks
Claim.
(b) The Debtor shall maintain the Parks Bond until and unless the
judgment underlying the Parks Claim is reversed on appeal. If the Parks Claim
becomes an Allowed Claim, and if Coverage is inadequate to satisfy the Parks
Claim, the Parks Claim shall then be satisfied from the proceeds of the Parks
Bond.
(c) To the extent that the Parks Claim remains unsatisfied
notwithstanding provisions (a) and (b) above, the Parks Claim shall then be
treated as a Class 3 General Unsecured Claim.
(d) All existing involuntary liens securing the Parks Claim shall be
deemed released on the Effective Date of this Plan.
(e) The Parks Claim shall be liquidated in a court of competent
jurisdiction which is not the Bankruptcy Court.
(f) The Parks Claim shall accrue interest in accordance with Florida
law, which interest shall be payable from the Coverage.
4. TREATMENT OF CLASS 2(b)(2). Class 2(b)(2) consists of the Robinson
--------------------------
Family Trust Claim. The Robinson Family Trust Claim is based on a Contract of
Sale dated as of September 30, 1990 by and between Reginald L. Robinson and
Patricia Robinson, on the one hand, and the Debtor, on the other hand. The
Robinson Family Trust Claim shall be paid in accordance with the Contract of
Sale with the following modifications:
(a) All current amounts in default under the Contract of
30
<PAGE>
Sale shall be cured on the Effective Date; and
(b) The Contract of Sale is deemed novated to replace the Debtor as
"Buyer" thereunder with Sizzler USA.
5. TREATMENT OF CLASS 2(b)(3). Class 2(b)(3) consists of the Xerox
--------------------------
Claim. The Xerox Claim is unimpaired under the Plan. On the later of Effective
Date or when a Final Order is entered determining the amount of the default, the
Debtor shall cure any defaults that occurred before or after the commencement of
this Bankruptcy Case under the agreements establishing the Xerox Claim and shall
compensate the Holder of the Xerox Claim for any damages incurred as a result of
any reasonable reliance by such Holder on any contractual provision or under
applicable law. Upon such cure, the original maturity of the Xerox Claim shall
be reinstated as such maturity existed before any default by the Debtor with
respect to the Xerox Claim. Except as so provided above, the Plan leaves
unaltered the legal, equitable and contractual rights to which the Xerox Claim
entitles the Holder of such Claim.
6. TREATMENT OF CLASS 2(b)(4). Class 2(b)(4) consists of the Archer
--------------------------
Secured Claim. The Archer Secured Claim is impaired under the Plan. The Archer
Claim shall be satisfied as follows:
(a) The Archer Claim will be subjected to the ADR process, either
prior to or after the Effective Date which is designed to produce a settlement
with respect to such Claim. If unsuccessful, Archer may seek relief from the
Bankruptcy Court to pursue her claim in an appropriate non-bankruptcy forum.
(b) If the Archer Claim becomes an Allowed Claim, it will be paid
first from third party sources, including any applicable Coverage from which the
Holder of the Archer Claim may
31
<PAGE>
be entitled to recover all or part of the Archer Claim.
(c) To the extent that the Archer Claim remains unsatisfied
notwithstanding provision (b) above, the Archer Claim shall then be treated as a
Class 3 General Unsecured Claim.
(d) All existing involuntary liens securing the Archer Claim shall be
deemed released on the Effective Date of this Plan.
(e) The Archer Claim shall accrue interest in accordance with
applicable law payable from the Coverage.
7. TREATMENT OF CLASS 2(b)(5). Class 2(b)(5) consists of the McNeely
--------------------------
Secured Claim. The McNeely Secured Claim is impaired under the Plan. The
McNeely Claim shall be satisfied as follows:
(a) The McNeely Claim will be subjected to the ADR process, either
prior to or after the Effective Date which is designed to produce a settlement
with respect to such Claim. If unsuccessful, McNeely may seek relief from the
Bankruptcy Court to pursue her claim in an appropriate non-bankruptcy forum.
(b) If the McNeely Claim becomes an Allowed Claim, it will be paid
first from third party sources, including any applicable Coverage from which the
Holder of the McNeely Claim may be entitled to recover all or part of the
McNeely Claim.
(c) To the extent that the McNeely Claim remains unsatisfied
notwithstanding provision (b) above, the McNeely Claim shall then be treated as
a Class 3 General Unsecured Claim.
(d) All existing involuntary liens securing the McNeely Claim shall be
deemed released on the Effective Date of this Plan.
(e) The McNeely Claim shall accrue interest in accordance with
applicable law payable from the Coverage.
32
<PAGE>
8. TREATMENT OF CLASS 2(b) MISCELLANEOUS SECURED CLAIMS. Each Allowed
----------------------------------------------------
Class 2 Miscellaneous Secured Claim will be in its own subclass and will be
treated as being in a separate class for voting and Confirmation purposes. To
the extent that there are miscellaneous Secured Claims that are not specifically
identified, such Claims will receive the following treatment:
a. PRESENT FULL PAYMENT. Each Holder of an Allowed Class 2 Claim
--------------------
will receive Cash in the amount of its Allowed Claim. For payment of the Class
2 Claim, (i) if the Claim is Allowed, the payment will be made by the Debtor on
the Effective Date and (ii) if the Claim is a Disputed Claim, the Holder will
retain its liens securing its Secured Claim pending payment and payment will be
made by the Debtor on the first date on which there is a Final Order providing
that such Claim is Allowed; provided, however, that the Debtor will be free to
sell the collateral securing such Claim pursuant to Bankruptcy Code (S) 363 or
other applicable law.
b. ABANDONMENT OF COLLATERAL. Each Holder of an Allowed Class 2
-------------------------
Claim will receive its collateral in full satisfaction of its Class 2 Claim no
later than ten (10) Business Days after the Debtor elects application of this
treatment for such Claim in the manner set forth above. Pending return of the
collateral for the Claim of such Holder, such Holder will retain its liens
securing its Allowed Secured Claim.
B. TREATMENT OF UNSECURED CLAIMS.
-----------------------------
1. CLASS 1 - PRIORITY NON-TAX CLAIMS. The Priority Non-Tax Claims are
---------------------------------
impaired under the Plan. Each Holder of a Priority Non-Tax Claim shall be paid
in full by the Debtor or Sizzler USA on the
33
<PAGE>
later of the Effective Date or the date that is not more than thirty (30) days
after the date on which an order allowing such Claim becomes a Final Order. No
Priority Non-Tax Claim shall include interest unmatured as of the Petition Date.
2. CLASS 3 - GENERAL UNSECURED CLAIMS. Unless the Holder and the Debtor
----------------------------------
agree to a less favorable treatment, each Holder of an Allowed Class 3 Claim
will receive a Beneficial Interest in the Creditor Trust. Pursuant to this
Plan, the Debtor is obligated to make the Creditor Trust Payments to the
Creditor Trust. Each Holder of an Allowed Class 3 Claim will receive the Class
3 Guaranteed Full Payment from the Creditor Trust as part of its Beneficial
Interest in the Creditor Trust provided, however, that the Disputed Claims
Reserve Escrow Account will distribute to each Holder of a Disputed Class 3
Claim that becomes a Holder of an Allowed Class 3 Claim after the Effective Date
the amount of monies or other property (including Beneficial Interests in the
Creditor Trust) that the Disputed Claims Reserve Escrow Account has received
from the Creditor Trust, less any taxes paid thereof, allocable to such Holder's
Allowed Class 3 Claim. The Creditor Trust shall be established, funded and
governed by the provisions of Article V of this Plan.
3. CLASS 4 - DAMAGE CLAIMS.
-----------------------
a. LIQUIDATION. Class 4 Damage Claims will be subjected to the ADR
-----------
process, either prior to or after the Effective Date, which is designed to
produce a settlement with respect to such Damage Claim. If the ADR does not
produce a settlement, the Holder of a Damage Claim may seek relief from the
Bankruptcy Court to pursue the Damage Claim in an appropriate non-
34
<PAGE>
bankruptcy forum.
b. PAYMENT. In accordance with the ADR, if a Damage Claim becomes
-------
an Allowed Claim, it will be paid first from third party sources, including any
applicable Coverage from which Holders of Damage Claims may be entitled to
recover all or part of the allowed amount of their Claims. To the extent that
the Coverage ultimately proves insufficient, any deficiency will receive
treatment as a Class 3 General Unsecured Claim.
4. CLASS 5 - AFFILIATE CLAIMS. The Holders of Class 5 Claims shall
--------------------------
receive no Distribution on account of the Affiliate Claims under the Plan.
5. CLASS 6 - McATHCO CLAIMS. The McAthco Claims are unimpaired under the
------------------------
Plan. On the Effective Date, the Debtor shall cure any default that occurred
before or after the commencement of this Bankruptcy Case under the instruments
establishing the McAthco Claims and shall compensate the Holder of the McAthco
Claims for any damages incurred as a result of any reasonable reliance by such
Holder on any contractual provision or under applicable law. Upon such cure,
the original maturity of the McAthco Claims shall be reinstated as such maturity
existed before any default by the Debtor with respect to the McAthco Claims.
Except as so provided above, the Plan leaves unaltered the legal, equitable and
contractual rights to which the McAthco Claims entitle the Holder of such
Claims.
6. CLASS 7 - SMALL UNSECURED CLAIMS. The Small Unsecured Claims are
--------------------------------
impaired under the Plan. Each Holder of a Small Unsecured Claim shall be paid
in full by the Debtor or Sizzler USA on the later of the Effective Date or the
date that is not more
35
<PAGE>
than thirty (30) days after the date on which an order allowing such Claim
becomes a Final Order. No Small Unsecured Claim shall include interest
unmatured as of the Petition Date.
7. CLASS 8 - WORKERS' COMPENSATION CLAIMS. The Workers' Compensation
--------------------------------------
Claims are unimpaired under the Plan. Each Holder of a Workers' Compensation
Claim shall be entitled to all legal, equitable and contractual rights to which
the Workers' Compensation Claim entitles the Holder of such Claim.
8. CLASS 9 - NICHOLS CLAIMS. The Nichols Claims are unimpaired under the
------------------------
Plan. On the Effective Date, the Debtor shall cure any default that occurred
before or after the commencement of this Bankruptcy Case under the instruments
establishing the Nichols Claims and shall compensate the Holder of the Nichols
Claims for any damages incurred as a result of any reasonable reliance by such
Holder on any contractual provision or under applicable law. Upon such cure,
the original maturity of the Nichols Claims shall be reinstated as such maturity
existed before any default by the Debtor with respect to the Nichols Claims.
Except as so provided above, the Plan leaves unaltered the legal, equitable and
contractual rights to which the Nichols Claims entitle the Holder of such
Claims.
9. CLASS 10 - JOHNSON CLAIM. The Johnson Claim is unimpaired under the
------------------------
Plan. On the Effective Date, the Debtor shall cure any default that occurred
before or after the commencement of this Bankruptcy Case under the instruments
establishing the Johnson Claim and shall compensate the Holder of the Johnson
Claim for any damages incurred as a result of any reasonable reliance by such
Holder on any contractual provision or under applicable law. Upon
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such cure, the original maturity of the Johnson Claim shall be reinstated as
such maturity existed before any default by the Debtor with respect to the
Johnson Claim. Except as so provided above, the Plan leaves unaltered the
legal, equitable and contractual rights to which the Johnson Claim entitle the
Holder of such Claim.
C. TREATMENT OF EQUITY - CLASS 11.
------------------------------
CFI Pty retains its Interest under the Plan. Pursuant to Article VII
hereof, however, on the Effective Date, that Interest will be assigned to
Sizzler USA Holdings and will be subject to the SII Stock Pledge.
ARTICLE V
THE CREDITOR TRUST
------------------
The primary vehicle for the payment of Class 3 General Unsecured Claims
under this Plan is the creation and funding of the Creditor Trust. The Creditor
Trust and the Creditor Trust Payments thereto shall be governed by the
provisions of the Creditor Trust Agreement set forth below:
A. CREDITOR TRUST PAYMENTS.
-----------------------
1. The following Creditor Trust Payments shall be made by the Debtor or
certain of its Affiliates on the following dates in satisfaction of the Creditor
Trust Secured Note which will be issued to the Creditor Trust on the Effective
Date:
a. on the Effective Date, the Trust Cash;
b. on the Effective Date, title to those Designated Properties
remaining unliquidated;
c. If the Debtor elects to reduce the Trust Cash by any amount to
create the Effective Date Advertising
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Fund, on the Effective Date, a collateral assignment of the
Franchisee Notes to secure the amount, if any, of the Effective
Date Advertising Fund.
d. upon the sale of any Other Property, Cash equal to the Net
Proceeds of the sale;
e. amortization payments as set forth in Schedule A to the Creditor
Trust Secured Note;
f. on or before four (4) years after the Effective Date, the Debtor
and Sizzler USA shall have made Creditor Trust Payments such
that, when added to the (i) Franchisee Note Payments actually
received by the Creditor Trust, (ii) that portion of the
International Licensing Asset Payment received by the Creditor
Trust, (iii) the Net Proceeds received by the Creditor Trust from
the Designated Properties, and (iv) any proceeds received by the
Creditor Trust from Avoidance Actions, the aggregate amount of
Cash received into the Creditor Trust is not less than an amount
sufficient to pay the Class 3 Guaranteed Full Payment in respect
of all Allowed Class 3 Claims, and all Disputed Class 3 Claims,
in the event such Claims ultimately become Allowed Claims.
2. In making any of the calculations under Article V of this Plan, the
Debtor or its Affiliates shall receive a credit of $1.06 for every $1.00
actually received by Creditors on or prior to December 20, 1997 from the
following sources: (a) Creditor Trust Payments (including the amount of Net
Proceeds ultimately received
38
<PAGE>
by the Trust from the disposition of Designated Properties); (b) the
International Licensing Asset Payment; and (c) Franchisee Note Payments solely
for the purpose of this paragraph. Creditors are deemed to have received
payments sent by the Creditor Trustee within ten (10) days after the mailing of
the payments by the Creditor Trustee, provided that the payment is not returned
to the Creditor Trustee on account of an incorrect or expired address provided
by the Debtor.
3. If the Debtor elects to establish the Effective Date Advertising Fund
and, consequently, the Franchisee Notes are collaterally assigned to the
Creditor Trust, on the Effective Date, the Debtor shall instruct the Qualified
Franchisees to make their Franchisee Note Payments to a specified post office
box under the control of the Creditor Trustee. Until the collateral assignment
of the Franchisee Notes is revoked (as set forth below), each and every maker of
a Franchisee Note shall be required to make the payments to the Creditor Trust
in the manner directed by the Creditor Trust from time to time in a written
notice in accordance with such Franchisee Notes. Upon the negotiation of
Franchisee Notes Payments by the Creditor Trust, such Franchisee Note Payments
shall be treated in the same manner as a Creditor Trust Payment from the Debtor
under this Plan. The foregoing "lock-box" arrangement shall terminate, and the
Franchisee Notes shall be released from the collateral assignment and returned
to the Debtor, upon such time as the Creditor Trust has received Franchise Note
Payments equal to the amount of the Effective Date Advertising Fund.
4. In the event of any default under a Franchisee Note while
39
<PAGE>
such Franchisee Notes have been collaterally assigned to the Creditor Trust, the
Debtor shall initiate the termination process concerning the Franchise Agreement
in question within thirty (30) days of receipt of a notice from the Creditor
Trustee identifying such default. The Debtor shall be entitled to halt the
termination process if such default is cured before the applicable Franchise
Agreement is terminated.
5. The Debtor or its Affiliates may prepay any of their required Creditor
Trust Payments hereunder without penalty. In the event of the sale of any Other
Property, all Net Proceeds received from such sale must be delivered as a
Creditor Trust Payment.
6. Solely for the purposes of this Article V, all calculations with
respect to "Allowed Class 3 Claims" shall be deemed to mean the amount of such
Allowed Class 3 Claims without regard to any Avoidance Actions brought by the
Creditor Trust Beneficiary Representatives on behalf of the Creditor Trust or
with respect to any recovery in such Litigation.
7. The amount of "Allowed Class 3 Claims" for the purposes of calculating
required Creditor Trust Payments under this Plan shall also exclude any
unmatured interest or penalties on such Claims accruing subsequent to the
Petition Date. A Beneficial Interest in the Creditor Trust shall entitle the
Holder of an Allowed Class 3 Claim and the Disputed Claims Reserve Escrow
Account, to the extent it holds Beneficial Interests in the Creditor Trust to
satisfy the Disputed Class 3 Claims, to a maximum distribution of the Allowed
amount of such Claim plus Class 3 Interest.
40
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B. CREDITOR TRUST ESTABLISHMENT, ADMINISTRATION, TERMINATION AND CREDITOR
----------------------------------------------------------------------
TRUSTEE DUTIES.
--------------
1. The Creditor Trust shall be established on the Effective Date and
administered by the Creditor Trustee who shall initially be Geoffrey L. Berman
of Development Specialists, Inc.
2. The Creditor Trustee shall receive, solely from the Creditor Trust, as
compensation for its services to the Creditor Trust a portion of a total fee to
be paid to the Creditor Trustee and Disputed Claims Reserve Agent of .5% of any
and all distributions of Cash made from the Creditor Trust to the Holders of
Allowed Class 3 Claims plus reimbursement of all out of pocket expenses as
provided in the Creditor Trust Agreement.
3. In the event of the resignation of the Creditor Trustee, a successor
shall be selected by the Creditor Trust Beneficiary Representatives, subject to
the approval of the Bankruptcy Court.
4. The Creditor Trustee may perform any of its duties under this Plan, or
under the Creditor Trust Agreement, by or through its agents or employees.
5. The Creditor Trustee shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Holder of a Class 3 Claim
with any credit or other information with respect to the Debtor or Sizzler USA.
6. Monies delivered to the Creditor Trust for the benefit of the Disputed
Class 3 Claims shall be distributed to the Disputed Claims Reserve Escrow
Account. Monies received by the Creditor Trust pursuant to the enforcement of
any Guarantee or foreclosure upon any Sizzler USA Trust Deed shall be invested
prior to Distribution at the reasonable discretion of the Creditor Trust
Beneficiary Representatives provided, however, that such monies
41
<PAGE>
must be invested in accordance with Section 6.1.2 of the Creditor Trust
Agreement.
7. On December 1, 1997, and at any time thereafter if the Creditor
Trustee holds Cash available for immediate Distribution in any amount equal to
or greater than 15% of the aggregate unpaid amount of Allowed Claims, or upon
the direction of the Creditor Trust Beneficiary Representatives, the Creditor
Trustee shall make Distributions to the Holders of Allowed Class 3 Claims as
soon as practicable, consistent with the terms of this Plan provided, however,
that the Creditor Trustee shall make the distributions required under Section
4.1.4 of the Creditor Trust Agreement.
8. The Creditor Trustee shall reconvey any Sizzler USA Trust Deed upon
receipt of all Net Proceeds of the proposed disposition of the Other Property
prior to a default of the Debtor's or Sizzler USA's obligations to the Holders
of Class 3 Claims under this Plan, or if, in the Creditor Trustee's reasonable
opinion, the Net Proceeds are either (i) reasonably equivalent to the value of
the Other Property or (ii) sufficient to cure the default of the Debtor's or
Sizzler USA's obligations under the Plan.
9. The Creditor Trustee shall use all diligent effort to liquidate the
Designated Properties prior to December 1, 1997 in a manner consistent with the
Creditor Trustee's duty to maximize the amount of Net Proceeds.
10. With respect to any acts or approvals which are not required of the
Creditor Trustee under this Plan, the Creditor Trustee may at all times act (a)
in accordance with its own business judgement, or (b) in accordance with the
instructions of the Holders of fifty-one percent (51%) of the remaining unpaid
42
<PAGE>
Allowed Class 3 Claims with respect to certain actions and in accordance with
the instructions of the Holders of sixty six and two-thirds percent (66 2/3%) of
the remaining unpaid Allowed Class 3 Claims with respect to other actions, as
set forth in the Creditor Trust Agreement. The Creditor Trustee may at any time
request instructions from the Holders of Class 3 Claims with respect to any
discretionary actions or approvals under the terms of this Plan, the Guarantees
or the Sizzler USA Trust Deeds and the Creditor Trustee shall be absolutely
entitled to refrain from taking any discretionary action or to withhold any
discretionary approval and shall not be under any liability whatsoever to any
Person for refraining from any discretionary action or withholding any
discretionary approval.
11. To the extent the Creditor Trustee requests instructions with respect
to discretionary acts or approvals, the Creditor Trustee shall be entitled to
rely upon any written notices, statements, certificates, orders or other
documents believed by it in good faith to be genuine and correct and to have
been signed, sent or made by the proper Person. The Creditor Trustee shall also
be entitled to rely upon the advice of legal counsel, independent accountants
and other experts selected by it in its sole discretion.
12. In the event (i) monies are held by the Disputed Claims Escrow Agent
in respect of a Disputed Claim, (ii) the Debtor's objection to such Disputed
Claim is sustained, and (iii) all other Allowed Class 3 Claims have been
satisfied in full pursuant to the terms of this Plan, then (iv) the Creditor
Trustee shall promptly return all undisbursed funds to Sizzler USA.
43
<PAGE>
13. The Creditor Trustee shall reconvey or terminate the Sizzler USA Trust
Deeds, the Sizzler USA Security Agreement, the SRI Security Agreement and the
Stock Pledges, upon the payment of all Creditor Trust Payments required under
this Plan. In addition, the Creditor Trustee shall reconvey or terminate the
pledge of the Franchisee Notes, and shall return the Franchisee Notes to the
Debtor, upon receipt of Franchisee Note Payments equal to the Effective Date
Advertising Fund. The Creditor Trust shall terminate upon the payment in full
of all Distributions required under Plan to the Holders of Class 3 Claims.
14. In the event of any inconsistency between the provisions of this Plan
and the Creditor Trust Agreement, the language of this Plan shall be
controlling.
15. The Creditor Trustee shall file periodic reports, at least every 180
days following the Effective Date, setting forth, among other things, the
receipts and disbursements during the applicable 180 day period and the status
of further distributions to Class 3 Creditors and to the Disputed Claims Reserve
Escrow Account. Such periodic reports will be served upon such parties as the
Bankruptcy Court deems appropriate.
C. DISPUTED CLAIMS ESCROW ACCOUNT ESTABLISHMENT, ADMINISTRATION, TERMINATION
-------------------------------------------------------------------------
AND DISPUTED CLAIMS RESERVE ESCROW AGENT DUTIES.
-----------------------------------------------
1. The Disputed Claims Reserve Escrow Account shall be established on the
Effective Date and administered by the Disputed Claims Reserve Escrow Agent who
shall initially be Geoffrey L. Berman of Development Specialists, Inc.
2. The Disputed Claims Reserve Escrow Agent shall receive, solely from
the Creditor Trust, as compensation for its services its portion of the fee
otherwise paid to the Creditor Trustee (.5%
44
<PAGE>
of any and all distributions of Cash made from the Creditor Trust to the Holders
of Allowed Class 3 Claims) plus reimbursement of all out of pocket expenses as
provided in the Disputed Claims Reserve Escrow Agreement.
3. In the event of the resignation of the Disputed Claims Reserve Escrow
Agent, a successor shall be selected by the Creditor Trust Beneficiary
Representatives, subject to the approval of the Bankruptcy Court.
4. The Disputed Claims Reserve Escrow Agent may perform any of its duties
under this Plan, or under the Disputed Claims Reserve Escrow Agreement, by or
through its agents or employees.
5. The Disputed Claims Reserve Escrow Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Holder
of a Class 3 Claim with any credit or other information with respect to the
Debtor or Sizzler USA.
6. Monies delivered to the Disputed Claims Reserve Escrow Agent for
deposit into the Disputed Claims Reserve Escrow Account shall be invested by the
Disputed Claims Reserve Escrow Agent at the instruction of the Creditor Trust
Beneficiary Representatives provided, however, that such monies must be invested
in accordance with the Disputed Claims Reserve Escrow Agreement.
7. The Disputed Claims Reserve Escrow Agent shall be entitled to rely
upon the advice of legal counsel, independent accountants and other experts
selected by it in its sole discretion.
8. In the event (i) monies are held by the Disputed Claims Reserve Escrow
Agent in respect of a Disputed Claim, (ii) the Debtor's objection to such
Disputed Claim is sustained, and (iii)
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<PAGE>
all other Allowed Class 3 Claims have been satisfied in full pursuant to the
terms of this Plan, then (iv) the Disputed Claims Reserve Escrow Agent shall
promptly return the monies held in the Disputed Claims Reserve Escrow Account
and all other undisbursed funds to Sizzler USA.
9. In the event of any inconsistency between the provisions of this Plan
and the Disputed Claim Reserve Escrow Agreement the language of this Plan shall
control.
10. If a Disputed Claim is not resolved prior to the Effective Date, the
Debtor, Sizzler USA or the Creditor Trust Beneficiary Representatives may file a
request: (1) that the Bankruptcy Court determine, by estimating the Claims or
otherwise, that an amount less than the amounts of the Disputed Claims is to be
used for calculating the amounts to be placed in the Disputed Claims Reserve
Escrow Account for certain Disputed Claims or anticipated Disputed Claims
pending resolution of such Claims or further Bankruptcy Court order; and (2)
that the Bankruptcy Court confirm that the amount of the Disputed Claim so
determined also is to be used for calculations as among Disputed Claims.
11. From and after the Effective Date, the Debtor, the Creditor Trust
Beneficiary Representatives or the Creditor Trustee may periodically file
requests that the Bankruptcy Court confirm, determine, supplement or amend prior
determinations of the amounts to be used for calculating the amounts to be
placed in the respective reserve for Disputed Claims (which determinations may
require estimations of certain Claims).
12. After the Effective Date, the Debtor, Sizzler USA and the Creditor
Trust Beneficiary Representatives shall be the only
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<PAGE>
Persons with authority to object to Claims against the Debtor. Any objections
to Claims and Interests must be filed with the Bankruptcy Court on or before the
later of (a) November 20, 1997, (b) 120 days after service of the proof of claim
on Debtor's counsel in this Case or (c) if such proof of claim was not served on
counsel for the Debtor, 120 days after a copy of such proof of claim was
delivered to counsel for the Debtor from the Bankruptcy Court.
13. Notwithstanding all references to Allowed Claims in this Plan, in
-------------------------------------------------------------
undertaking the calculations concerning Allowed Claims or Administrative Claims
under this Plan in connection with the determination of the amount of
Distributions due to the Holders of Allowed Claims and Administrative Claims,
each Disputed Claim (or anticipated Claim which, if and when filed, will become
a Disputed Claim) will be treated as if it were an Allowed Claim or authorized
Administrative Claim, unless the Bankruptcy Court has previously estimated the
Claim at a lower amount as set forth above.
14. The Debtor will establish an Administrative and Priority Claims
Reserve for Disputed Priority Tax Claims and projected or actual Administrative
Claims which have not been Allowed by the Bankruptcy Court. Additionally, the
Disputed Claims Reserve Escrow Agent will maintain a Disputed Claims Reserve
Escrow Account for Class 3 Claims which are disputed by the Debtor, the Creditor
Trust Beneficiary Representatives, or another party in interest entitled to
object but which have not been Allowed. Inasmuch as Class 4 Damage Claims are
covered by the Policies, no reserves will be established for Disputed Class 4
Claims. The Distributions due in respect of Administrative Claims and Disputed
Claims based on the
47
<PAGE>
calculations required by this Plan will be reserved for the Holders of Disputed
and Administrative Claims and deposited in the appropriate Disputed Claims
reserve.
15. The Disputed Claims Reserve Escrow Account shall be designated as an
escrow account and is intended to be treated as a separate entity, for taxation
purposes. The Disputed Claims Reserve Escrow Agent will direct the escrow
holder to invest the funds in the Disputed Claims Reserve Escrow Account in
appropriate interest bearing accounts. Any tax upon any income earned by the
Disputed Claims Reserve Escrow Account will be paid solely from the assets of
the Disputed Claims Reserve Escrow Account.
16. After an objection to a Disputed Claim is withdrawn or determined by
Final Order or settled pursuant to a Bankruptcy Court order, the Distributions
due on account of any Claim will be paid by the appropriate Person hereunder.
Such Distribution will be made no later than the time provided in this Plan for
the next payment of Claims of the Class or type of the Claim of such Holder and,
if there is no such further scheduled time, within forty-five (45) days of the
date the Disputed Claim becomes an Allowed Claim or authorized Administrative
Claim.
17. For Disputed Claims which, if Allowed, would have been Claims in Class
3, after an objection to such a Disputed Claim is sustained in whole or in part
by a Final Order, any amount held in the Disputed Claims Reserve Escrow Account
in respect of the particular Disputed Claim in excess of the Distributions due
on account of any resulting Allowed Claim will be held for Pro Rata payment to
other members of Class 3, which payment will be made at the time of, and applied
against, the next scheduled payment for
48
<PAGE>
Holders of Class 3 Claims.
D. INDEMNIFICATION OF CREDITOR TRUSTEE AND DISPUTED CLAIMS RESERVE ESCROW
----------------------------------------------------------------------
AGENT/EXPENSES UPON DEFAULT.
---------------------------
1. The Creditor Trustee, Disputed Claims Reserve Escrow Agent, Creditor
Trust Beneficiary Representatives and respective professionals shall have no
liability to any Holder of any Class 3 Claim, the Debtor, or Sizzler USA absent
gross negligence or intentional misconduct and none of such entities or the
Creditor Trust shall have no liability to the U.S. Trustee on account of fees
pursuant to 28 U.S.C. (S) 1930.
2. Prior to a default by the Debtor or Sizzler USA of their obligation to
make the required Creditor Trust Payments under this Plan, the Debtor and
Sizzler USA shall jointly and severally indemnify the Creditor Trustee and the
Dispute Claim Reserve Escrow Agent and hold the Creditor Trustee and the
Disputed Claim Reserve Escrow Agent harmless from and against all costs,
expenses, reasonable counsel fees, claims and liabilities solely relating to any
actions brought by the Holders of Class 3 Claims against the Creditor Trustee
which do not arise from the gross negligence, willful misconduct, or breach of
this Plan, the Creditor Trust Agreement by the Creditor Trustee, or the Disputed
Claims Reserve Escrow Agreement by the Disputed Claims Reserve Escrow Agent.
3. The Debtor, Sizzler USA and Sizzler USA Holdings shall jointly and
severally indemnify the Creditor Trustee, and the Disputed Claims Reserve Escrow
Agent, Creditor Trust Beneficiary Representatives and each of their respective
professionals hereunder and hold the Creditor Trustee, and the Disputed Claims
Reserve Escrow Agent and the Creditor Trust Beneficiary Representatives and each
of their respective professionals harmless
49
<PAGE>
from and against all costs, expenses, reasonable counsel fees, claims and
liabilities (collectively, "Costs") arising out of or resulting from any action
of the Creditor Trustee or the Disputed Claims Reserve Escrow Agent following a
default by the Debtor or Sizzler USA of their obligation to make the required
Creditor Trust Payments under this Plan, provided, however, that this indemnity
shall not apply to any Costs arising out of the gross negligence or willful
misconduct. This indemnity shall survive the payment of all amounts owing to
the Holders of Class 3 Claims under this Plan.
ARTICLE VI
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
-----------------------------------------------------
A. ASSUMPTION.
----------
To the extent any such contracts or leases remain executory or unexpired on
the Effective Date, the executory contracts and unexpired leases listed on
Exhibits "E", "F", "N", "O" and "P" to this Plan shall be deemed assumed as of
the Effective Date and the amounts, if any, which are necessary to cure defaults
(if any) under such executory contracts and unexpired leases pursuant to
Bankruptcy Code (S) 365 shall be as identified on the applicable Exhibit.
Additionally, all Franchise Agreements not previously terminated by the Debtor
shall be deemed assumed on the Effective Date, including, without limitation
Franchise Agreements for the restaurants included in Exhibit "P" to this Plan.
The Debtor is not in default under any Franchise Agreement and no amount is
necessary to cure any defaults in order to assume any Franchise Agreement unless
ordered by the Bankruptcy Court at Confirmation. The Debtor reserves the right
to amend Exhibits "E", "F", "N", "O" and "P" or elect to reject a Franchise
Agreement at any time prior
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to the Confirmation Date. Confirmation of the Plan will not constitute an
assumption of the licensing agreements with NDA Enterprises, Inc. ("NDA") or its
successors-in-interest, if any. Nothing in the Plan or the Confirmation Order
shall impair or otherwise affect NDA's right, if any, to claim a default under
its licensing agreements, its filed claim, or its alleged right to payment under
the Plan, until the Court makes a final determination of such rights in
connection with the Debtor's objections to NDA's claim. Likewise, nothing in
this Plan or the Confirmation Order shall impair or otherwise affect the
Debtor's rights to assert claims or offsets against NDA or its principals or to
assert any valid defenses or counterclaims to claims asserted by NDA or its
principals. Any provision in the Plan which is inconsistent with this provision
will be superseded by this provision. A reference on Exhibits "E", "F", "N",
and "O" to a type or class of executory contract or unexpired lease shall
constitute an assumption of all executory contracts with such Person included
within such type or class, as all such contracts and unexpired leases with a
particular contracting party may have been amended or modified. A reference to
any Sizzler restaurant number or location on Exhibit "P" shall constitute an
assumption of all executory license, franchise, advertising and other agreements
between the Debtor and the Franchisee of such location concerning such Sizzler
restaurant, as all such contracts may have been amended or modified. The
Confirmation Order shall constitute an order of the Bankruptcy Court (a)
approving the assumption of the executory contracts and unexpired leases listed
on Exhibits "E", "F", "N", "O" or "P" to this Plan; (b) fixing the "cure" amount
with respect to such
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defaults by the Debtor under such contracts prior to Confirmation, and (c)
establishing that the Debtor (rather than any Affiliate) is the contracting
party under such contract or lease. In the event that the non-debtor party to
an assumed executory contract or unexpired lease does not timely object, the
Confirmation Order shall be binding on such Person as to (a) the amount of any
default under such contract or lease and (b) as to whether the Debtor (rather
than any Affiliate) is the contracting party under such contract or lease. The
absence of a cure amount on Exhibit "E", "F", "N", "O" or "P" relating to any
executory contract manifests the Debtor's position that no amount is owing by
the Debtor under such contract. Any monetary amounts found by the Bankruptcy
Court to be in default shall be satisfied, pursuant to Bankruptcy Code (S)
365(b), by payment by the Debtor of the default amount in Cash not later than
thirty (30) days following the Effective Date. Notwithstanding the foregoing,
the Debtor is negotiating with parties to executory contracts (but not unexpired
leases) regarding payment of any cure amounts through the Creditor Trust, on the
same terms as all other Class 3 Claims. It is likely that unless a party to an
executory contract agrees to accept payment of its cure amount through the
Creditor Trust over time, the Debtor will amend the applicable exhibit to
reflect its decision to reject such executory contract. In the event of any
dispute concerning any conditions to assumption of an executory contract or
unexpired lease established by Bankruptcy Code (S) 365, the cure payments with
respect to such contract or lease required by the Bankruptcy Code shall be made
only following the entry of a Final Order resolving the dispute.
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B. REJECTION.
---------
Except as otherwise provided herein, on the Effective Date, all executory
contracts and leases to which the Debtor or the Estate was a party on or prior
to Confirmation, and which have not been assumed by the Debtor or assumed by the
Debtor and assigned to a third party or the Creditor Trust pursuant to
Bankruptcy Code (S) 365, will be rejected pursuant to Bankruptcy Code (S)(S) 365
and 1123, to the extent, if any, that such contract or lease constitutes an
executory contract or unexpired lease. The Debtor does not concede that any
contract or lease not listed on Exhibits "E", "F", "N", "O" or "P" hereto
constitutes an executory contract or unexpired lease or that the Debtor has any
liability thereunder. The Confirmation Order will constitute an order of the
Bankruptcy Court approving all such rejections, pursuant to Bankruptcy Code (S)
365, as of the date of Confirmation.
C. CLAIMS ARISING FROM REJECTION OF CONTRACTS.
------------------------------------------
Any Claim for damages arising from the rejection hereunder or under
Bankruptcy Code (S) 365 of an executory contract or unexpired lease of the
Debtor that has not been assumed pursuant to a prior order of the Bankruptcy
Court, pursuant to this Plan or under Bankruptcy Code (S) 365: (1) will be
determined and Allowed or disallowed under Bankruptcy Code (S) 502(g), and, to
the extent Allowed, will be classified in the appropriate Class; and (2) will be
unenforceable against the Debtor, the Creditor Trustee or the Estate and their
respective property and will be forever barred from receiving any Distribution
under this Plan unless a proof of such Claim is filed prior to the later of (1)
the Claims Bar Date and (2) the first business day that is thirty (30) days
after the
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entry of an order rejecting an executory contract or unexpired lease.
Notwithstanding the rejection of any executory contract or unexpired lease at
any time during this Case, the Debtor reserves all rights and defenses which the
Debtor or Estate may have or have had against the other parties to such
contracts and leases.
D. SPECIAL PROVISIONS CONCERNING FRANCHISEES.
-----------------------------------------
1. On or about February 28, 1997, the Debtor entered into the Franchise
Letter of Intent with the Franchise Committee./1/ All of the terms and
conditions of the Franchise Letter of Intent are binding on the Debtor. The
provisions of the Franchise Letter of Intent that are implemented through, or in
connection with, this Plan are described below. Pursuant to the Franchise
Letter of Intent, Qualified Franchises entered into the Model Royalty
Release/Relief Agreement and executed Franchisee Notes, both of which are
subject to Confirmation of a Plan not materially inconsistent with the Franchise
Letter of Intent.
2. At the election of any Qualified Franchisee, as of the Effective Date
(and subject to any necessary regulatory approvals), the Debtor will terminate
its existing Franchise Agreement and enter into the Model Franchise Agreement
for the remaining term of such Qualified Franchisee's existing Franchise
Agreement term or, at the Debtor's option, the Debtor will enter into a material
modification of such Qualified Franchisee's existing Franchise Agreement to
include the material terms of the Model Franchise Agreement for the term of the
existing Franchise Agreement. Such option must be exercised by the Qualified
Franchisee in writing to
- --------------
/1/ To the extent of any inconsistency between this Plan and the Franchise
Letter of Intent, the terms of this Plan will control.
54
<PAGE>
the Debtor not later than thirty (30) days following the Effective Date.
3. Provided that Franchisees with respect to 150 or more "Sizzler"
restaurant locations in the United States of America (or such lesser number as
the Debtor may, in its sole discretion, decide to accept) agree to become
Qualified Franchisees no later than the conclusion of the hearing on the
adequacy of the Disclosure Statement (which deadline may be extended by the
Debtor to a date no later than the conclusion of the hearing on Confirmation of
this Plan), the Debtor will amend the then existing Franchise Agreement of any
Qualified Franchisee as set forth below; provided, however, that such amendment
-------- -------
will only be made if the term of such Franchise Agreement expires before June
30, 2007, the term of such Qualified Franchisee's lease extends after the term
of such Qualified Franchisee's Franchise Agreement and the Qualified Franchisee
so elects. Pursuant to such amendment, as of the Effective Date, the Debtor
will extend the term of each such Franchise Agreement to the earlier of (i) June
30, 2007 or (ii) the date on which such Qualified Franchisee's valid legal right
to possession of the premises of the restaurant subject to its Franchise
Agreement terminates. If on the Effective Date a Qualified Franchisee does not
have valid legal right to possession of the premises of the restaurant subject
to its Franchise Agreement for a period that extends after the termination of
its Franchise Agreement, but before the expiration of such Franchise Agreement,
the Qualified Franchise obtains valid legal right to possession of such premises
for a longer period, then upon receipt of proof of such Qualified Franchisee's
right to possession, and if
55
<PAGE>
the Qualified Franchisee so elects, the Debtor will amend such Qualified
Franchisee's Franchise Agreement so that the term is extended to the earlier of
(i) June 30, 2007 or (ii) the date on which such Qualified Franchisee's valid
legal right to possession of the franchised restaurant premises terminates. In
no event shall any Franchise Agreement be extended pursuant to this provision to
a date later than June 30, 1007, and no other term of a Franchise Agreement will
be amended, except as otherwise set forth herein.
ARTICLE VII
MEANS FOR IMPLEMENTATION OF PLAN
--------------------------------
A. EFFECTIVE DATE TRANSACTIONS.
---------------------------
As soon as practicable on or following the Effective Date, the following
shall occur in implementation of this Plan:
1. INCORPORATION OF SIZZLER USA HOLDINGS AND SIZZLER USA AND SIZZLER
-----------------------------------------------------------------
INTERNATIONAL MARKS. Each of Sizzler USA Holdings, Sizzler USA and Sizzler
- -------------------
International Marks shall be formed under Delaware corporate law. All issued
and outstanding stock of Sizzler USA Holdings shall be owned by SII. All issued
and outstanding stock of the Debtor and Sizzler USA shall be owned by Sizzler
USA Holdings.
2. TRANSFER OF INTEREST IN THE DEBTOR. The Interest of CFI Pty in the
----------------------------------
Debtor shall be transferred to Sizzler USA Holdings.
3. ASSIGNMENT OF OTHER PROPERTIES/EXECUTION OF INTERCOMPANY LEASES. The
---------------------------------------------------------------
Debtor shall transfer the Other Properties to Sizzler USA. Sizzler USA shall
execute the Intercompany Leases in favor of the Debtor.
56
<PAGE>
4. ASSIGNMENT OF INTERNATIONAL LICENSING ASSETS TO SIZZLER INTERNATIONAL
---------------------------------------------------------------------
MARKS. The Debtor shall assign all International Licensing Assets (including
- -----
the International Licensing Executory Contracts) to Sizzler International Marks.
5. CREATION OF CREDITOR TRUST/TRANSFER OF DEBT, DESIGNATED PROPERTIES AND
----------------------------------------------------------------------
TRUST CASH. The Creditor Trust Agreement and related documents shall be
- ----------
executed and the Debtor shall transfer or collaterally assign (as provided
herein) the Creditor Trust Secured Note, the Designated Properties, the Trust
Cash, the Franchisee Notes and the Avoidance Actions to the Creditor Trust.
6. EXECUTION AND DELIVERY OF OTHER PLAN AGREEMENTS. Each Affiliate
-----------------------------------------------
shall execute and deliver the Plan Agreements to which it is a party.
7. INTERNATIONAL LICENSING ASSETS PAYMENT. Collins and CFI Pty or
--------------------------------------
Sizzler International Marks shall make the International Licensing Assets
Payment.
8. CREDITOR TRUST EXPENSE CONTRIBUTION. On the Effective Date, the
-----------------------------------
Debtor shall make the Creditor Trust Expense Contribution.
9. COLLATERAL ASSIGNMENT OF FRANCHISEE NOTE PAYMENTS. The Debtor shall
-------------------------------------------------
collaterally assign its right to Franchisee Note Payments to the Creditor
Trustee in accordance with Section V.A. 3 of this Plan.
10. ASSIGNMENT OF SII EXECUTORY CONTRACTS. SII shall assign the SII
-------------------------------------
Assigned Contracts to the Debtor.
11. CORPORATE GOVERNANCE. On the Effective Date, the Debtor's existing
--------------------
articles of incorporation and bylaws shall remain as currently in effect, except
for the inclusion of a prohibition
57
<PAGE>
on the issuance of non-voting equity securities. Sizzler USA's articles shall
also provide for a prohibition on the issuance of non-voting securities.
12. CONTINUATION OF RETIREE BENEFITS. All retiree benefits, as that term
--------------------------------
is defined in Bankruptcy Code (S) 1114, shall continue after the Effective Date
in accordance with applicable provisions of the Bankruptcy Code.
B. GLOBAL INTERESTATE SETTLEMENT.
-----------------------------
The Plan incorporates a motion pursuant to Bankruptcy Rule 9019(a) for
approval of a global interestate settlement described below (the "Global
Interestate Settlement"). Pursuant to the Global Interestate Settlement, the
Debtor will sell the International Licensing Assets to Sizzler International
Marks in exchange for the International Licensing Asset Payment. The Debtor and
the Committee, which includes representatives from both the Debtor's and SII's
estate, agreed to this sale and payment in exchange for the release of all
intercompany claims between the Debtor and its direct and indirect subsidiaries,
on the one hand, and SII and the direct and indirect subsidiaries of CFI Pty, on
the other hand, on account of, inter alia, the allocation of overhead between
----- ----
related Affiliates, the licensing of trademarks between Affiliates, the
commingling of cash of Affiliates, and the making of intercompany advances or
loans between Affiliates.
C. DISTRIBUTIONS AND PLAN FUNDING.
------------------------------
1. SOURCES OF PLAN FUNDING. Such funding as may be necessary to fully
-----------------------
execute this Plan will be provided from the Debtor's available Cash on the
Effective Date, the post-Effective Date operations of the Debtor (including
royalties) and Sizzler
58
<PAGE>
USA, the operations of the Debtor's Affiliates, the International Asset Payment
and, for Class 4 Claims only, the Coverage.
2. THE ADR. The Debtor, together with SII, Collins, Buffalo Ranch and
-------
Tenly, requested that the Bankruptcy Court establish the ADR for the liquidation
and payment of Damage Claims. The ADR will be implemented during the Case
pursuant to a preliminary injunction but will continue after Confirmation. The
Confirmation Order shall include a permanent injunction implementing the ADR as
set forth at page ___. It is anticipated that, under the ADR, each Damage Claim
will be subjected to a process designed to produce a settlement with respect to
such Claim. If the process does not result in a settlement, the Holder of a
Damage Claim may then seek relief from the Bankruptcy Court to pursue the Claim
in an appropriate non-bankruptcy forum.
3. ROUNDING OF AMOUNTS. Notwithstanding anything to the contrary in
------------------- -------------------------------------------
this Plan, or any Plan Agreement, any Person responsible for Distribution of
- ---------
funds under this Plan or any Plan Agreement may round all amounts for
Distributions of Cash hereunder to Holders of Allowed Claims or Administrative
Claims to the nearest whole dollar amount.
4. NAME AND ADDRESS OF HOLDER. For purposes of all Distributions under
--------------------------
this Plan or any Plan Agreement, the Debtor or other Person responsible for such
Distributions will be entitled to rely on the name and address of the Holder of
each Allowed Claim or Interest as shown on any timely filed proof of Claim and,
if none, as shown on the Schedules, except to the extent that the payor first
receives adequate written notice of a transfer or change of address, properly
executed by the Holder or its authorized agent.
59
<PAGE>
5. UNCLAIMED PROPERTY. Any Cash or other property which is unclaimed for
------------------
one hundred eighty (180) days after the Distribution was sent by mail to the
last known mailing address of the Person entitled thereto as provided in this
Plan will be deemed paid to such entitled Person, for the purpose of determining
that Person's rights. Any Person that does not claim its Distribution within
one hundred eighty (180) days will receive no future Distribution under the
plan. Unclaimed Property resulting from a Distribution to the Holder of a Claim
in Class 3 will be held by the Creditor Trustee for Pro Rata payment to other
members of Class 3, which payment will be made at the time of the next scheduled
payment for Class 3 Claims.
6. DE MINIMIS DISTRIBUTIONS/RETURN OF UNDISTRIBUTED FUNDS.
------------------------------------------------------
Notwithstanding anything to the contrary contained in this Plan, no Person need
- ---------------------------------------------------------------
disburse Cash to the Holder of an Allowed Claim if the amount of Cash otherwise
due is less than Five Dollars ($5.00). Cash not so distributed may be reserved
for the Claim Holder until in excess of Five Dollars ($5.00) is owed such Claim
Holder. When and if the Creditor Trustee determines in good faith that nothing
more is due hereunder to the Holders of Class 3 Claims, then such undisbursed
funds will be promptly returned by the Creditor Trustee to the Debtor.
D. SERVICES BY AND FEES FOR PROFESSIONALS.
--------------------------------------
1. SERVICES BY PROFESSIONALS AND CERTAIN PARTIES AFTER THE EFFECTIVE
-----------------------------------------------------------------
DATE.
----
The Debtor and the Committee retained professionals who provided
services and incurred expenses during the Bankruptcy Case. After the Effective
Date, it is anticipated that the professionals retained by the Debtor and the
Committee will be among the Persons
60
<PAGE>
assisting in the effectuation of this Plan. Specifically, PSZ&Y will continue
to represent the Debtor and Latham & Watkins will represent the Creditor Trustee
following the Effective Date. Inasmuch as there is a unity of interests, the
Creditor Trustee and the Creditor Trust Beneficiary Representatives may engage
the same counsel. PSZ&Y and Latham & Watkins will file employment applications
for all services to be performed following the Effective Date. Any other
professionals employed by (i) the Debtor in connection with the effectuation of
the Plan, (ii) the Creditor Trustee or (iii) the Creditor Trust Beneficiary
Representatives, following the Effective Date, will be required to have their
respective employment approved by the Bankruptcy Court. Employment of
Professionals employed by the Debtor in the ordinary course of business will not
be subject to Bankruptcy Court approval.
2. FEES FOR PROFESSIONALS AND CERTAIN PARTIES.
------------------------------------------
a. PRIOR TO THE EFFECTIVE DATE.
---------------------------
(1) GENERALLY. Fees and expenses for the professionals retained by
---------
the various committees appointed in the Case or the Debtor for services rendered
and costs incurred after the Petition Date and prior to the Effective Date, will
be fixed by the Bankruptcy Court after notice and a hearing and such fees and
expenses will be paid (less deductions for any and all amounts thereof already
paid to such Persons) after approval by the Bankruptcy Court to the extent so
approved and as provided in this Plan.
b. FROM THE EFFECTIVE DATE.
-----------------------
After the Effective Date the Debtor will be responsible only for
payment of fees and expenses incurred by its
61
<PAGE>
professionals. Any fees or expenses incurred by the Creditor Trust Beneficiary
Representatives, the Disputed Claims Reserve Escrow Agent or Creditor Trustee
shall be borne by the Creditor Trust. Fees owing for services rendered and
costs incurred and owing on and after the Effective Date and prior to the entry
of a final decree by the professionals retained by the Creditor Trustee,
Creditor Trust Beneficiary Representatives, Disputed Claims Reserve Escrow Agent
or the Debtor's professionals will be paid, from (i) the Debtor's operating
capital, for the Debtor's professionals, and (ii) the Creditor Trust, for
expenses of the Creditor Trustee, Creditor Trust Beneficiary Representatives or
Disputed Claims Reserve Escrow Agent. Fees and expenses for the Creditor
Trustee, Creditor Trust Beneficiary Representatives or Disputed Claims Reserve
Escrow Agent will be paid twenty (20) days after submission of a bill to the
Creditor Trustee (with a copy to the Debtor, Disputed Claims Reserve Escrow
Agent, and the Creditor Trust Beneficiary Representatives), if there is no
objection within such time. Fees and Expenses for the Debtor's professionals
will be paid 20 days after submission of a bill to the Debtor (with a copy to
the Creditor Trustee, Disputed Claims Reserve Escrow Agent and Creditor Trust
Beneficiary Representatives), if there is no objection within such time. If
there is such an objection, the fees and expenses will be fixed by the
Bankruptcy Court after notice and a hearing. The Bankruptcy Court will retain
jurisdiction until the Case is closed, to determine disputed post-Effective Date
fees of professionals.
E. CREDITOR TRUST BENEFICIARY REPRESENTATIVES.
------------------------------------------
Following Confirmation of this Plan, the Creditor Trust
62
<PAGE>
Beneficiary Representatives will be appointed and will, among other things, have
the right to direct the Creditor Trustee to make Distributions to Class 3
Creditors and to exercise remedies under the Creditor Trust Agreement. Any time
after the Effective Date, the Creditor Trust Beneficiary Representatives may
appoint a representative to act on their behalf, who may be the Creditor
Trustee, by so advising the Debtor and thereupon the members of the Creditor
Trust Beneficiary Representatives will be released and discharged from all
rights and duties arising from or related to the Bankruptcy Cases. The Creditor
Trust Beneficiary Representatives will be automatically relieved of further
duties four (4) years from the Effective Date, provided the Debtor has made all
required Creditor Trust Payments, unless otherwise ordered by the Bankruptcy
Court.
F. LITIGATION.
----------
a. The Debtor or its Affiliates may commence or advance any
Litigation following the Effective Date other than an Avoidance Action.
b. Except as otherwise set forth in this Plan, the Debtor or its
Affiliates may, but will not be required to, set off against any Claim and the
Distributions to be made pursuant to this Plan in respect of such Claim, any
Litigation it may have against the Holder of the Claim, but neither the failure
to do so nor the allowance of any Claim hereunder will constitute a waiver or
release of any such Litigation, setoff or recoupment which the Debtor or Sizzler
USA may have against such Holder.
c. Unless Litigation against a Creditor or other person is expressly
waived, relinquished, released, compromised or settled
63
<PAGE>
in this Plan or in a Final Order, all rights with respect to such Litigation are
reserved and the Debtor or Sizzler, USA may pursue such Litigation.
d. The Creditor Trust Beneficiary Representatives may pursue, on
behalf of the Creditor Trust, any Avoidance Actions of the Estate provided,
however, that the expense of any such litigation shall be payable only by the
Creditor Trust. Any such Avoidance Action shall be filed no later than December
1, 1997. Any recoveries of such Litigation shall be payable to the Creditor
Trust for distribution to the Holders of Class 3 Claims in accordance with
Article V. of this Plan and the Creditor Trust Agreement.
ARTICLE VIII
MODIFICATION
------------
Pursuant to the provisions of Bankruptcy Code (S) 1127, the Debtor reserves
the right to modify or alter the provisions of this Plan at any time prior or
subsequent to Confirmation.
ARTICLE IX
EFFECT OF CONFIRMATION
----------------------
A. BINDING EFFECT OF CONFIRMATION.
------------------------------
Confirmation will bind the Debtor, all Creditors, Interest Holders and
other parties in interest to the provisions of this Plan whether or not the
Claim or Interest of such Creditor or Interest Holder is impaired under this
Plan and whether or not such Creditor or Interest Holder has accepted this Plan.
B. VESTING OF ASSETS FREE AND CLEAR OF LIENS, CLAIMS AND INTERESTS.
---------------------------------------------------------------
1. Upon the Effective Date, title to all Assets and property
64
<PAGE>
of the Debtor shall vest free and clear of all liens, Claims and interests of
any Person (except as expressly provided in this Plan) in the following Persons:
Persons Property
- ------- --------
Creditor Trust: Designated Properties
Trust Cash
Avoidance Actions
Collateral Assignment of Franchisee Note Payments
Sizzler USA Restaurants All other assets of the Estate
Inc. (formerly, SRI): including, pursuant to Bankruptcy Code (S)
1123(b)(iii)(B), each and every claim, demand or
cause of action which the Debtor had or had power
to assert immediately prior to Confirmation; SII
Assigned Contracts
Sizzler International Marks: International Licensing Assets
Sizzler USA: The Other Properties including all Sizzler USA
Assigned Leases
The Collins Real Estate
Sizzler USA Franchise: Domestic Licensing Assets and Franchise Agreements
2. Thereafter, the Debtor, the Creditor Trust, Sizzler USA, Sizzler USA
Franchise or Sizzler International Marks, as the case may be, will hold these
assets without further jurisdiction, restriction or supervision of the
Bankruptcy Court, except as expressly provided in this Plan.
3. Notwithstanding anything in this Plan to the contrary, the transfer of
leases, contracts or other assets from SRI to Sizzler USA or Sizzler USA
Franchise is not intended to and shall not release SRI from liability on account
of such leases, contracts or other assets. Without limiting the generality of
the foregoing, notwithstanding the provisions of Bankruptcy Code (S) 365(k) to
the contrary, SRI's obligations to Franchisees under domestic Franchise
Agreements will not be altered or diminished in any manner by
65
<PAGE>
reason of the transfer of domestic Franchise Agreements to Sizzler USA
Franchise.
C. NO LIMITATIONS ON EFFECT OF CONFIRMATION.
----------------------------------------
Nothing contained in this Article IX will limit the effect of Confirmation
as described in Bankruptcy Code (S) 1141.
D. CONTINUATION OF ADR - PERMANENT INJUNCTION FOR DAMAGE CLAIMS.
------------------------------------------------------------
Notwithstanding Confirmation, the Holder of any Damage Claim that is
unliquidated in amount must first exhaust the remedies in the ADR before making
a request, from the Bankruptcy Court, to pursue liquidation of its Claim in an
appropriate non-bankruptcy forum.
The Plan provides that: "The Confirmation Order will constitute a
permanent injunction (1) enjoining the Holders of Damage Claims from commencing,
continuing or in any way pursuing their Claims, including but not limited to
enjoining the Holders of Damage Claims from prosecuting their Claims against the
Affiliated Debtors or their insurers in any manner other than as prescribed in
the Plan and (2) requiring all Holders of Damage Claims to participate in the
ADR prior to seeking relief from the Bankruptcy Code Section 1141(d) discharge
injunction to pursue liquidation of their Claims in an appropriate nonbankruptcy
forum."
E. DISCHARGE OF CLAIMS AND TERMINATION OF INTERESTS.
------------------------------------------------
The rights afforded under the Plan and the treatment of Claims under the
Plan will be in exchange for and in complete satisfaction, discharge, and
release of all Claims. Confirmation of the Plan shall discharge the Debtor from
all Claims that arose before the Confirmation Date and all Claims of all kinds
specified in Bankruptcy Code (S)(S) 502(g), (h) and (i), whether or not a proof
66
<PAGE>
of Claim is filed or deemed filed, a Claim based on such debt has accepted the
Plan.
F. JUDICIAL DETERMINATION OF DISCHARGE.
-----------------------------------
As of the Confirmation Date, except as provided in the Plan, all Persons
shall be precluded from asserting against the Debtor any other or further
Claims, debts, rights, causes of action, liabilities, or equity interests based
on any act, omission, transaction or other activity of any kind or nature that
occurred before the Confirmation Date, and the Confirmation Order shall be a
judicial determination of discharge of all Claims against the Debtor pursuant to
Bankruptcy Code (S)(S) 524 and 1141, and shall void any judgment obtained or
entered against the Debtor at any time, to the extent the judgment relates to
discharged Claims.
G. INJUNCTION.
----------
As of the Confirmation Date, all Persons that have held, currently hold or
may hold a Claim or other debt or liability that is discharged or an Interest or
other right of an equity security Holder that is terminated pursuant to the Plan
are permanently enjoined from taking any of the following actions on account of
such discharged Claims, debts, or liabilities or terminated Interests or rights:
(a) commencing or continuing in any manner any action or other proceeding
against the Debtor, Sizzler USA or any of their property, (b) enforcing,
attaching, collecting or recovering in any manner any judgment, award, decree,
or other against the Debtor, Sizzler USA, Sizzler International Marks, or any of
their property, (c) creating, perfecting or enforcing any lien or encumbrance
against the Debtor, Sizzler USA, Sizzler International Marks, or any of their
property, (d) asserting a
67
<PAGE>
right of subrogation or recoupment of any kind against any debt, liability or
obligation due to the Debtor, Sizzler USA, Sizzler International Marks, or any
of their property, and (e) commencing or continuing any action that does not
comply with or is inconsistent with the provisions of the Plan.
H. GOOD FAITH.
----------
Confirmation of the Plan shall constitute a finding that: (i) this Plan
has been proposed in good faith and in compliance with applicable provisions of
the Bankruptcy Code; and (ii) the solicitation of acceptances or rejections of
this Plan by all Persons and the offer, issuance, sale, or purchase, of a
security offered or sold under the Plan has been in good faith and in compliance
with applicable provisions of the Bankruptcy Code. Accordingly, on the
Effective Date each of the officers and directors of the Debtor, and the members
of the Committee, Landlord Committee and Franchise Committee and each of their
respective advisors and attorneys, effective as of the Effective Date, will be
deemed exculpated by Holders of Claims against and Interests in the Debtor and
other parties in interest to the Case, from any and all claims, causes of action
and other assertions of liability (including, without limitation, breach of
fiduciary duty), arising out of or related to the Debtor, the Case or the
exercise by such entities of their functions as members of or advisors to or
attorneys for any such individuals or committee or otherwise under applicable
law, in connection with or related to the Case and the formulation, negotiation,
preparation, dissemination, Confirmation and consummation of this Plan and any
agreement, instrument or other document issued hereunder or related hereto.
This provision
68
<PAGE>
will have no effect on liability for any act or omission of the officers and
directors of the Debtor, the Holders of the Bank Claims, the members of the
Committee, and the members of the Equity Committee and each of their respective
advisors and attorneys to the extent that such act or omission is ultra vires or
constitutes gross negligence or willful misconduct.
I. SPECIAL TAX PROVISIONS.
----------------------
Pursuant to Bankruptcy Code (S) 1146(c), the making or delivery of all
instruments pursuant to and in connection with this Plan, will not be taxed
under any law imposing a stamp tax or similar tax and the Debtor reserves the
right to assert that any and all transfers of property during this case may be
exempt from stamp tax pursuant to Bankruptcy Code (S) 1146(c).
ARTICLE X
CONDITIONS TO EFFECTIVE DATE
----------------------------
Confirmation of this Plan is conditioned upon the events described below
and, where applicable, the Bankruptcy Court entering the following orders and
findings:
A. Trust Cash shall be a minimum of $2.5 million;
B. All unexpired leases constituting Designated Properties shall have
been assumed by the Debtor or assumed by the Debtor and assigned to a third
party;
C. Title to the Designated Properties shall have been transferred to the
Creditor Trust;
D. The Collins Real Estate shall have been transferred to Sizzler USA;
E. All Creditor Trust Payments to be made on the Effective Date pursuant
to Article V(A) shall have been made;
69
<PAGE>
F. The collateral assignment of all Franchisee Notes pursuant to Article
V(A) of the Plan shall have been completed in an amount not less than the
Effective Date Advertising Fund;
G. The International Licensing Asset Payment shall have been made;
H. SRI shall have assigned all International Licensing Assets (including
the International Licensing Executory Contracts) to Sizzler International Marks;
I. The Creditor Trust Expense Contribution shall have been made;
J. Each of the SII and all CFI Accounting Affiliates shall have
affirmatively released the SRI Affiliates from all claims arising prior to the
Effective Date with such release being held in trust pending the Effective Date
and the Effective Date under the SII Plan;
K. The Effective Date in respect of the SII Plan shall have occurred;
L. Other than as necessary to effectuate the terms of this Plan, SII
shall have released any claims against Affiliated Debtors, other than Collins,
and SII shall have waived any distribution from the Buffalo Ranch and Tenly
bankruptcy cases; and
M. Sizzler USA Holdings, Sizzler USA Franchise, Sizzler USA and Sizzler
International Marks shall be formed under Delaware corporate law and the SII
shall cause CFI Pty to transfer the stock of SRI to Sizzler USA Holdings. All
issued and outstanding stock of Sizzler International Marks shall be owned by
CFI Pty.
70
<PAGE>
ARTICLE XI
SUCCESSORS AND ASSIGNS
----------------------
This Plan and the provisions hereof will be binding upon the Debtor,
Sizzler USA and either of their successors and assigns.
ARTICLE XII
RETENTION OF JURISDICTION
-------------------------
Notwithstanding Confirmation, the Bankruptcy Court will retain jurisdiction
for all of the following purposes plus such other purposes as may be provided by
the Bankruptcy Code:
1. The determination of the allowability and amount of Claims;
2. The determination of requests for payment of Claims entitled to
priority under Bankruptcy Code (S) 507(a)(1);
3. The resolution of any disputes regarding the interpretation,
enforcement, breach, performance and/or a default under this Plan;
4. The interpretation, implementation, execution or consummation of the
provisions of this Plan (and any dispute with regard thereto) and entry of
orders in aid of consummation or enforcement of this Plan, including without
limitation, appropriate orders to effect the provisions of this Plan and to
protect the Debtor from Creditors' actions;
5. The modification of this Plan pursuant to Bankruptcy Code (S) 1127;
6. The adjudication of any cause of action or claim for relief, including
Avoidance Actions, brought by the Creditor Trust, the Debtor, or Sizzler USA, as
appropriate;
7. The consideration of requests by Holders of Damage Claims
71
<PAGE>
to liquidate their Claims in an appropriate non-bankruptcy forum in the event
that such Holders of Damage Claims cannot resolve their Claims through the ADR;
8. The implementation of the ADR;
9. Non-exclusive jurisdiction concerning the adjudication of disputes in
respect of the Creditor Trust;
10. The allowance of any post-Effective Date professional fees requiring
Court allowance under this Plan;
11. The determination of cure amounts under Bankruptcy Code (S) 365; and
12. The entry of a final decree closing this Chapter 11 Case.
ARTICLE XIII
MISCELLANEOUS
-------------
A. SEVERABILITY.
------------
Should the Bankruptcy Court determine, prior to the Confirmation Date, that
any provision of the Plan is illegal as written or as applied to any Claim or
Interest, as the case may be, such provision shall be either unenforceable
generally or as applied to such Claim or Interest. A determination of
unenforceability shall in no respect limit or affect the enforceability and
operative effect of any other provision of the plan or of that provision as
applied to other Claims or Interests.
B. FURTHER ASSURANCES.
------------------
The Debtor will do and perform any and all acts and execute any and all
documents (including without limitation, the execution of any financing
statements, continuation statements or termination statements relating to
Creditor Trust Collateral for filing under the provisions of the Uniform
Commercial Code of any applicable
72
<PAGE>
jurisdiction) as may be reasonably requested by the Creditor Trustee or the
Creditor Trust Beneficiary Representatives in order to effect the purposes of
this Plan and the Creditor Trust.
C. WITHDRAWAL OR REVOCATION OF THE PLAN.
------------------------------------
The Debtor reserves the right to revoke or withdraw the Plan prior to the
Confirmation Date. If the Debtor should revoke or withdraw the Plan, then the
Plan shall be null and void, and nothing contained in the Plan shall constitute
a waiver or release of any Claims by or against, or any Interests in the Debtor,
or prejudice in any manner the rights of the Debtor or any Affiliate.
D. HEADINGS.
--------
The heading of the Articles and sections of the Plan are for convenience
only and shall in no way affect the interpretation of its provisions.
E. SUCCESSORS AND ASSIGNS.
----------------------
The rights, benefits and obligations of any Person referred to in the Plan
shall be binding on, and shall inure to the benefit of, the heirs, executors,
administrators, successors and assigns of such Persons including Sizzler USA.
F. RESTRICTION ON DIVIDENDS.
------------------------
The Debtor shall make no dividends to the Holder of the Class 11 Interest
before all Creditor Trust Payments have been paid in full hereunder.
G. STATUTORY FEES.
--------------
All fees payable pursuant to 28 U.S.C. (S) 1930 shall be paid by the
Debtor on or before the Effective Date; except that fees, if any, incurred
pursuant to 28 U.S.C. (S) 1930(a)(6) shall be paid quarterly until the Case is
dismissed, converted or closed.
73
<PAGE>
ARTICLE XIV
CONFIRMATION REQUEST
--------------------
The Debtor hereby requests that the Bankruptcy Court confirm this Plan
pursuant to Bankruptcy Code (S) 1129(a), and, if necessary, pursuant to
Bankruptcy Code (S) 1129(b).
Dated: May 29, 1997 SIZZLER RESTAURANTS INTERNATIONAL,
INC., a Delaware corporation
By: /s/ Christopher R. Thomas
------------------------------
CHRISTOPHER R. THOMAS
President and Chief
Financial Officer
PRESENTED BY:
PACHULSKI, STANG, ZIEHL & YOUNG, P.C.
By: /s/ Debra Grassgreen
-----------------------------
DEBRA GRASSGREEN
Attorneys for Debtor and
Debtor in Possession
<PAGE>
EXHIBIT 2.3
RICHARD M. PACHULSKI, ESQ., (State Bar #90073)
JAMES I. STANG, ESQ., (State Bar #94435)
BRAD R. GODSHALL, ESQ., (State Bar #105438)
DEBRA GRASSGREEN, ESQ., (State Bar #169978)
RACHELLE S. VISCONTE, ESQ., (State Bar #182158)
PACHULSKI, STANG, ZIEHL & YOUNG P.C.
10100 Santa Monica Boulevard
Suite 1100
Los Angeles, California 90067
Telephone: (310) 277-6910
Attorneys for Debtor
and Debtor in Possession
UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
In re:
SIZZLER RESTAURANTS
INTERNATIONAL, INC., SIZZLER
INTERNATIONAL, INC., COLLINS
PROPERTIES, INC.,
TENLY ENTERPRISES, INC., and BUFFALO
RANCH STEAKHOUSES, INC.,
Debtors.
_____________________________
__ Affects all Debtors
__ Affects SRI Only
__ Affects SII Only
XX Affects Collins Only
--
__ Affects Tenly Only
__ Affects Buffalo Ranch Only
______________________________
Case No. SV 96-16075-AG
(Jointly administered with:
Case Nos: SV 96 -16076-AG
SV 96 -16077-AG
SV 96 -16078-AG
SV 96 -16079-AG)
Chapter 11 cases
COLLINS PROPERTIES, INC.'S
AMENDED PLAN OF
REORGANIZATION, AS MODIFIED
Confirmation Hearing:
--------------------
Date: June 2, 1997
Time: 9:00 a.m.
Place: Courtroom 302
21041 Burbank Blvd.
Woodland Hills, CA
91367
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TABLE OF CONTENTS
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ARTICLE I -- DEFINITIONS ............................................ 1
A. Definitions ............................................... 1
B. Rules of Interpretation, Computation of Time and
Governing Law ............................................. 11
1. Rules of Interpretation .............................. 11
2. Computation of Time .................................. 12
3. Governing Law ........................................ 12
ARTICLE II -- ADMINISTRATIVE AND TAX CLAIMS ......................... 12
A. Treatment of Administrative Claims ........................ 12
1. Bar Date for Administrative Tax Claims ............... 13
2. Bar Date for All Other Administrative Claims ......... 13
3. Payment of Administrative Claims,
Administrative Tax Claims and Priority Tax
Claims ............................................... 14
4. Statutory Fees ....................................... 14
ARTICLE III -- CLASSIFICATION OF CLAIMS AND INTERESTS................ 15
A. Nature of Class Designations............................... 15
B. Class Overview And Designation Of Impaired Classes
Of Claims.................................................. 15
1. Priority Non-Tax Claims .............................. 15
2. Secured Claims ....................................... 16
3. General Unsecured Claims ............................. 16
4. Damage Claims ........................................ 16
5. Class 5: The Affiliate Claims ...................... 16
6. Interests ............................................ 16
ARTICLE IV -- DESIGNATION AND TREATMENT OF CLASSES OF CLAIMS......... 17
A. Treatment of Allowed Miscellaneous Secured Claims:
Class 2(a), (b), (c) and (d)............................... 17
1. Subclasses ........................................... 17
2. Treatment of Mitsui Secured Claims - Class 2(a)....... 17
3. Treatment of Matilla Secured Claim - Class 2(b)....... 17
4. Treatment of ACG Secured Claims - Class 2(c).......... 17
B. Treatment of Unsecured Claims.............................. 18
1. Class 1 - Priority Non-Tax Claims .................... 18
2. Class 3 - General Unsecured Claims.................... 18
3. Class 4 - Damage Claims............................... 19
4. Class 5 - Affiliate Claims............................ 19
C. Treatment Of Interests..................................... 19
ARTICLE V -- TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED
LEASES.......................................................... 20
A. Assumption................................................. 20
B. Rejection ................................................. 21
C. Claims Arising From Rejection of Contracts................. 21
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ARTICLE VI -- MEANS FOR IMPLEMENTATION OF PLAN ...................... 22
A. Distributions and Plan Funding ............................ 22
1. Source of Plan Funding ............................... 22
2. The ADR .............................................. 22
3. Rounding of Amounts .................................. 22
4. Name and Address of Holder ........................... 23
5. Corporate Governance/Retiree Benefits ................ 23
6. Disputed Claims Reserves ............................. 23
7. Unclaimed Property ................................... 26
8. De Minimis Distributions/Return of
Undistributed Funds .................................. 26
B. Services by and Fees for Professionals..................... 27
1. Services by Professionals and Certain Parties
after the Effective Date ............................. 27
2. Fees for Professionals................................ 27
C. Litigation................................................. 28
D. Dissolution Of The Committee .............................. 28
ARTICLE VII -- MODIFICATION.......................................... 28
ARTICLE VIII -- EFFECT OF CONFIRMATION............................... 29
A. Binding Effect of Confirmation............................. 29
C. No Limitations on Effect of Confirmation................... 29
D. Continuation of ADR........................................ 29
E. Discharge of Claims and Termination of Interests........... 30
F. Judicial Determination of Discharge........................ 30
G. Injunction................................................. 30
ARTICLE IX -- SUCCESSORS AND ASSIGNS................................. 31
ARTICLE X -- RETENTION OF JURISDICTION............................... 31
ARTICLE XI -- MISCELLANEOUS.......................................... 32
A. Exculpation................................................ 32
B. Severability............................................... 33
C. Withdrawal or Revocation of the Plan....................... 33
D. Headings................................................... 33
E. Successors and Assigns..................................... 34
F. Statutory Fees............................................. 34
ARTICLE XII -- CONFIRMATION REQUEST.................................. 35
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Collins Properties, Inc., a Delaware corporation, debtor and debtor in
possession herein, hereby proposes the following Amended Plan of Reorganization
pursuant to (S) 1121 of the Bankruptcy Code:
ARTICLE I
DEFINITIONS
-----------
A. DEFINITIONS
-----------
The following definitions will apply with respect to this Amended Plan and
the Amended Disclosure Statement.
1. "ACG SECURED CLAIMS". The Allowed Secured Claims of ACG Construction,
------------------
Inc., in an amount to be subsequently determined by the Bankruptcy Court.
2. "ADMINISTRATIVE AND PRIORITY CLAIMS RESERVE". The Administrative and
------------------------------------------
Priority Claim Reserve of the Debtor for Disputed Administrative and Priority
Claims and projected and actual Administrative Claims which have not been
Allowed by the Bankruptcy Court.
3. "ADMINISTRATIVE CLAIM". A Claim for payment of an administrative expense
--------------------
of a kind specified in (S) 503(b) of the Bankruptcy Code and referred to in (S)
507(a)(1) of the Bankruptcy Code, including, without limitation, the actual,
necessary costs and expenses of preserving the estate and operating the business
of the Debtor, including wages, salaries, and commissions for services rendered
after the commencement of the Case, obligations for goods and services procured
after the commencement of the Case, compensation for legal and other services
and reimbursement of expenses awarded under (S)(S) 328, 330(a), 331 of the
Bankruptcy Code and all fees and charges assessed against the Estate under
Chapter 123 of title 28 of the United States Code.
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4. "ADMINISTRATIVE TAX CLAIM". An Unsecured Claim by a governmental unit
------------------------
for taxes (and for interest or penalties related to such taxes) for the period
of any tax year which occurs or falls within the period from and including the
Petition Date through and including the Effective Date.
5. "ADR". The Alternative Dispute Resolution Procedure which will be
---
implemented prior to the Effective Date for the liquidation of Damage Claims.
The ADR will provide an orderly mechanism for the settlement, mediation or
arbitration of Damage Claims and, in some instances, the payment of Damage
Claims without further order of the Bankruptcy Court.
6. "AFFILIATE". The Affiliated Debtors and all other direct or indirect
---------
wholly or partially owned subsidiaries of SII.
7. "AFFILIATE CLAIM". Any Claim held by an Affiliate against Debtor.
---------------
8. "AFFILIATED DEBTORS". The Debtor, together with Buffalo Ranch, SRI, SII
------------------
and Tenly, all of which are debtors in related chapter 11 cases.
9. "ALLOWED". When used in respect of a Claim or Interest or group of
-------
Claims or Interests, means --
(a) if no proof of Claim or Interest has been timely filed, such amount
of the Claim or Interest or group of Claims or Interests which has been
scheduled by the Debtor as liquidated in amount and not disputed or contingent
and as to which no party in interest has filed an objection within the time
required under this Amended Plan or otherwise fixed by the Bankruptcy Court and
which Claim or Interest is not disallowed under (S)(S) 502(d) or (e) of the
Bankruptcy Code; or
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(b) if a proof of Claim or Interest has been filed by the Claims Bar
Date or is deemed timely filed by the Bankruptcy Court, such amount of the Claim
or Interest or group of Claims or Interests as to which any party in interest
has not filed an objection within the time required under this Amended Plan or
otherwise fixed by the Bankruptcy Court and which Claim or Interest is not
disallowed under (S)(S) 502(d) or (e) of the Bankruptcy Code; or
(c) such amount of the Claim or Interest or group of Claims or Interests
which is Allowed by a Final Order of the Bankruptcy Court; or
(d) such amount of the Claim or Interest or group of Claims or Interests
which is Allowed under this Amended Plan.
10. "ALLOWED CLAIM". A Claim which is Allowed.
-------------
11. "ALLOWED CLASS ... CLAIM". An Allowed Claim in the particular Class
-----------------------
described.
12. "ALLOWED INTEREST". An Interest which is Allowed.
----------------
13. "ASSETS". All assets of the Estate including "property of the estate" as
------
described in (S) 541 of the Bankruptcy Code.
14. "ASSIGNED PROPERTIES". The Las Vegas Lease and Debtor's parcels of
-------------------
California real property located at 1323 N. Highland Avenue, Hollywood; 710 S.
Western Avenue, Los Angeles; 665 San Pablo Avenue, Albany; 372 Gelert Avenue,
Daly City; 1353 Willow Pass Road, Concord.
15. "AVOIDANCE ACTIONS". All avoiding powers, and all rights and remedies
-----------------
under, relating to, or similar to Bankruptcy Code (S)(S) 544, 545, 547, 548, 549
or 551, or any fraudulent conveyance, fraudulent transfer or preference laws.
16. "BANKRUPTCY CODE". The Bankruptcy Code, as codified in
---------------
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title 11 of the United States Code, 11 U.S.C. (S) 101 et seq., including all
amendments thereto, to the extent such amendments are applicable to the Case.
17. "BANKRUPTCY COURT". The United States Bankruptcy Court for the Central
----------------
District of California.
18. "BANKRUPTCY RULES". The Federal Rules of Bankruptcy Procedure as now in
----------------
effect or hereafter amended and applicable to the Case.
19. "BUFFALO RANCH". Buffalo Ranch Steakhouses, Inc., a California
-------------
corporation, an affiliate of the Debtor and a debtor in a related chapter 11
case also filed on June 2, 1996.
20. "BUSINESS DAY". Any day other than a Saturday, Sunday or a legal holiday
------------
(as defined in Bankruptcy Rule 9006(a)).
21. "CASE". The case under Chapter 11 of the Bankruptcy Code commenced by
----
the Debtor on June 2, 1996, pending in the Bankruptcy Court and bearing Case No.
SV 96-16077-AG.
22. "CASH". Cash or cash equivalents including, but not limited to, bank
----
deposits, checks or other similar items.
23. "CFI". Collins Food International, Pty Ltd., a Nevada corporation and
----
Debtor's parent corporation.
24. "CLAIM". (a) Any right to payment from the Debtor, whether or not such
-----
right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured, or (b) any right to an equitable remedy for breach of performance if
such breach gives rise to a right of payment from the Debtor, whether or not
such right to an equitable remedy is reduced to judgment,
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fixed, contingent, matured, unmatured, disputed, undisputed, secured, or
unsecured.
25. "CLAIMS BAR DATE". The date by which a proof of a Claim or Interest was
---------------
or is required to be filed. This date was previously determined by the
Bankruptcy Court for most Claims or Interests to be October 15, 1996, and
October 22, 1996 for Claims dated prior to October 15, 1996 and received by the
---
Bankruptcy Court by October 22, 1996, other than with respect to executory
contracts or unexpired leases for which an order rejecting such contract or
lease is entered after September 15, 1996, and certain tax Claims.
26. "CLASS". A class of Claims or Interests described in Article III of this
-----
Amended Plan.
27. "COMMITTEE". The Official Committee of Creditors Holding Unsecured
---------
Claims appointed in the Case by the U.S. Trustee pursuant to (S) 1102 of the
Bankruptcy Code.
28. "CONFIRMATION". The entry of the Order by the Bankruptcy Court
------------
confirming this Amended Plan pursuant to (S) 1129 of the Bankruptcy Code.
29. "CONFIRMATION DATE". The date upon which the Bankruptcy Court enters an
-----------------
order confirming this Amended Plan pursuant to (S) 1129 of the Bankruptcy Code.
30. "CONFIRMATION ORDER". The order of the Bankruptcy Court confirming this
------------------
Amended Plan pursuant to (S) 1129 of the Bankruptcy Code.
31. "COVERAGE". Any insurance coverage provided by an unrelated third-party
--------
that is available for the payment of Damage Claims.
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32. "CREDITOR". The Holder of a Claim against the Debtor.
--------
33. "DAMAGE CLAIM". A Claim for personal injury or property damage allegedly
------------
caused by the tortious acts of the Debtor or its agents.
34. "DEBTOR OR CPI". Collins Properties, Inc., a Delaware corporation
-------------
whether, as debtor or as debtor in possession, prior to the commencement of the
Case, during the pendency of the Case or following the Effective Date.
35. "DISCLOSURE STATEMENT". The "Disclosure Statement in Support of Debtor's
--------------------
Amended Plan of Reorganization" filed by the Debtor in support of this Amended
Plan which has been approved by the Bankruptcy Court, and any and all amendments
and exhibits to the Disclosure Statement. A copy of the Disclosure Statement is
being distributed concurrently to Holders of Claims and Interests entitled to
vote on this Amended Plan.
36. "DISPUTED CLAIM". A Claim or Interest as to which a proof of Claim or
---------------
Interest has been filed or is deemed to have been filed under applicable law or
an Administrative Claim, as to which an objection has been or is filed by the
Committee, the Debtor, or any other party in interest in accordance with this
Amended Plan, the Bankruptcy Code, the Bankruptcy Rules, or the Local Rules,
which objection has not been withdrawn or determined by a Final Order. Prior to
the time that an objection has been or is filed, for the purposes of this
Amended Plan, a Claim or Interest may be considered a Disputed Claim to the
extent that: (i) the amount of a Claim or Interest specified in a proof of
claim exceeds the amount of any corresponding Claim scheduled by the Debtor in
the Schedules; (ii) any corresponding Claim scheduled by the Debtor in
6
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the Schedules has been scheduled as disputed, contingent or unliquidated,
irrespective of the amount scheduled; or (iii) no corresponding Claim has been
scheduled by the Debtor in the Schedules.
37. "DISPUTED CLAIMS RESERVE". An account or accounts in which the Debtor is
-----------------------
to hold payments set aside for Disputed Claims, in accordance and to the extent
set forth in this Amended Plan.
38. "DISTRIBUTION". Any transfer under this Amended Plan of Cash or other
------------
property or instruments to either a Holder of an Administrative Claim or a
Holder of an Allowed Claim.
39. "EFFECTIVE DATE". The date, up to one year after the date the
--------------
Confirmation Order becomes a Final Order, upon which this Amended Plan becomes
effective; provided, however, that the Debtor may waive the requirement of
finality, or may elect, in its sole and exclusive discretion, to shorten the
period between Confirmation and the Effective Date, in which event the Effective
Date will be the date specified in a written Notice of Effective Date, filed by
the Debtor with the Bankruptcy Court and served upon all Creditors and parties
in interest.
40. "EQUITY SECURITY". A share in the Debtor, whether or not transferable or
---------------
denominated "stock," and any warrant or right to purchase, sell, or subscribe to
such share.
41. "ESTATE". The estate in the Case created pursuant to (S) 541(a) of the
------
Bankruptcy Code.
42. "FINAL ORDER". An order, decree or judgment of the Bankruptcy Court, the
-----------
operation or effect of which has not been reversed, stayed, modified or amended,
and as to which order, decree or judgment (or any revision, modification or
amendment
7
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thereof), the time to appeal or seek review or rehearing has expired and as to
which no appeal or petition for review or rehearing has been taken or is
pending.
43. "GENERAL UNSECURED CLAIM" OR "UNSECURED CLAIM". Any Claim against the
--------------------------------------------
Debtor, however arising, e.g., from providing goods or services or from the
----
rejection of an executory contract or an unexpired lease, which is not an
Administrative Claim, Priority Tax Claim, Priority Non-Tax Claim, Affiliate
Claim, Damage Claim, or Secured Claim.
44. "HOLDER". The holder of a Claim against or Interest in the Debtor.
------
45. "INTEREST". An Equity Security of the Debtor.
--------
46. "LAS VEGAS LEASE". Debtor's real property lease relating to 3535 South
---------------
Rainbow Boulevard, Las Vegas, Nevada.
47. "LITIGATION". Any and all claims, demands, rights, defenses, actions,
----------
causes of action, suits, contracts, agreements, obligations, accounts, defenses,
offsets, powers, privileges, licenses and franchises of any kind or character
whatsoever, known or unknown, suspected or unsuspected, whether arising prior
to, on or after the Petition Date, in contract or in tort, at law or in equity,
or under any other theory of law, of the Debtor or its Estate, including but not
limited to (i) rights of setoff, counterclaim, or recoupment, and claims on
contracts or for breaches of duties imposed by law, (ii) the right to object to
Claims or Interests, (iii) claims pursuant to Bankruptcy Code (S)(S) 362, (iv)
such claims and defenses as fraud, mistake, duress and usury and (v) all
Avoidance Actions.
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48. "LOCAL RULES". The Local Bankruptcy Rules for the United States
-----------
Bankruptcy Court for the Central District of California, as now in effect or
hereafter amended.
49. "MATILLA SECURED CLAIM". The Allowed Secured Claim of Matilla
---------------------
Contracting, Inc.
50. "MITSUI SECURED CLAIMS". The Allowed Secured Claims of Mitsui Bank.
---------------------
51. "PERSON". An individual, partnership, corporation, an association, a
------
joint stock company, a joint venture, an estate, a trust, an unincorporated
organization, or any government or other political subdivision thereof or other
entity.
52. "PETITION DATE". June 2, 1996.
-------------
53. "PLAN". This Amended Plan of Reorganization, including any amendments
----
and modifications to this Amended Plan.
54. "POLICIES". The Debtor's insurance policies that provide Coverage for
--------
acts that occurred prior to the Petition Date.
55. "PRIORITY NON-TAX CLAIM". A Claim against the Debtor that is not a
----------------------
Secured Claim and is specified as having priority in (S)(S) 507(a)(3),
507(a)(4), 507(a)(5), and 507(a)(6) of the Bankruptcy Code, respectively.
56. "PRIORITY TAX CLAIM". A Claim entitled to priority under (S) 507(a)(8)
------------------
of the Bankruptcy Code.
57. "PRO RATA". With respect to a particular Class of Claims or Interests,
--------
the ratio that the amount of a particular Allowed Claim or Allowed Interest in
the Class bears to the total amount of Allowed Claims or Allowed Interests in
the Class.
58. "REFERENCE RATE". The rate announced by Bank of America National Trust
----------------
and Savings Association from time to time as its
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"reference", "base" or "prime" lending rate or, if the Bank of America fails to
announce a "reference rate" or "base rate," the "reference rate" or "prime rate"
as articulated by three of the money center banks as published in the Wall
Street Journal from time to time.
59. "SCHEDULES". The Debtor's Schedules of Assets and Liabilities, filed on
---------
or about July 9, 1996, as amended from time to time.
60. "SECURED CLAIM". Any Claim that is secured by a lien on property in
-------------
which the Estate has an interest or that is subject to setoff under (S) 553 of
the Bankruptcy Code, to the extent of the value of the Claim Holder's interest
in the Estate's interest in such property or to the extent of the amount subject
to setoff, as applicable, as determined pursuant to (S) 506(a) of the Bankruptcy
Code.
61. "SII". Sizzler International, Inc., a Delaware corporation, the Debtor's
---
indirect parent and a debtor in a related chapter 11 case also filed on June 2,
1996.
62. "SRI". Sizzler Restaurants International, Inc., a Delaware corporation,
---
the Debtor's affiliate and a debtor in a related chapter 11 case also filed on
June 2, 1996.
63. "TENLY". Tenly Enterprises, Inc., a Pennsylvania corporation, an
-----
affiliate of the Debtor and a debtor in a related chapter 11 case also filed on
June 2, 1996.
64. "U.S. TRUSTEE". The United States Trustee, or her representative.
------------
65. "UNCLAIMED PROPERTY". Any funds or property distributed to Creditors or
------------------
Holders of Interests (together with any interest
10
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earned thereon) which are unclaimed as of one hundred eighty (180) days after
the Distribution. Unclaimed Property will include, without limitation, cash,
checks, and any other property which is to be distributed pursuant to this
Amended Plan which has been returned as undeliverable without a proper
forwarding address, or which was not mailed or delivered because of the absence
of a proper address to which to mail or deliver such property.
B. RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW
--------------------------------------------------------------
1. RULES OF INTERPRETATION. For purposes of this Amended Plan: (a)
-----------------------
whenever from the context it is appropriate, each term, whether stated in the
singular or the plural, will include both the singular and the plural; (b) any
reference in this Amended Plan to a contract, instrument, release or other
agreement or document being in a particular form or on particular terms and
conditions means that such agreement or document will be substantially in such
form or substantially on such terms and conditions; (c) any reference in this
Amended Plan to an existing document or exhibit filed or to be filed means such
document or exhibit, as it may have been or may be amended, modified or
supplemented; (d) unless otherwise specified, all references in this Amended
Plan to sections, articles and exhibits are references to sections, articles and
exhibits of or to this Amended Plan; (e) the words "herein" and "hereto" refer
to this Amended Plan in its entirety rather than to a particular portion of this
Amended Plan; (f) captions and headings to articles and sections are inserted
for convenience of reference only and are not intended to be a part of, or to
affect, the interpretation of this Amended Plan; (g) "after notice and a
hearing," or a similar phrase has the meaning ascribed
11
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in Bankruptcy Code (S) 102; (h) "includes" and "including" are not limiting; (i)
"may not" is prohibitive, and not permissive; (j) "or" is not exclusive; and (k)
United States Trustee includes a designee of the United States Trustee.
2. COMPUTATION OF TIME. In computing any period of time prescribed or
-------------------
Allowed by this Amended Plan, the provisions of Bankruptcy Rule 9006(a) will
apply.
3. GOVERNING LAW. Except to the extent that the Bankruptcy Code, Bankruptcy
-------------
Rules or Local Rules are applicable, and subject to the provisions of any
contract, note, deed of trust, security agreement, instrument, release or other
agreement or document entered into in connection with this Amended Plan, the
rights and obligations arising under this Amended Plan will be governed by, and
construed and enforced in accordance with, the laws of the State of California
without giving effect to the principles of conflict of laws thereof to the same
extent that a valid and binding contract to be governed by, construed, and
enforced in accordance with the laws of the State of California without giving
effect to the principles of conflict of laws thereof would be so governed,
construed, and enforced.
ARTICLE II
ADMINISTRATIVE AND TAX CLAIMS
-----------------------------
A. TREATMENT OF ADMINISTRATIVE CLAIMS.
----------------------------------
Notwithstanding the following, the Holder of an Administrative Claim and
the Debtor may agree to less favorable treatment of the Administrative Claim.
1. BAR DATE FOR ADMINISTRATIVE TAX CLAIMS. All requests for payment of
--------------------------------------
Administrative Tax Claims and for which no earlier bar
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date has been or is established outside of this Amended Plan, such as may be
established by requesting an expedited audit under Bankruptcy Code (S) 505, must
be filed on or before the later of (i) sixty (60) days following the Effective
Date; and (ii) sixty (60) days following the filing of any required tax return
for such taxes for such year or period with the applicable governmental unit.
Any Holder of any Administrative Tax Claim that is required to file a request
for payment of such taxes and does not file such a request by the applicable bar
date will be forever barred from asserting any such Administrative Tax Claim
against the Debtor, whether any such Administrative Tax Claim is deemed to arise
prior to, on, or subsequent to the Effective Date.
2. BAR DATE FOR ALL OTHER ADMINISTRATIVE CLAIMS. Requests for payment of
--------------------------------------------
Administrative Claims (other than Administrative Tax Claims and statutory fees
as described below) must be filed and served on the Debtor, the Creditors'
Committee, and the U.S. Trustee no later than sixty (60) days after the
Effective Date. Professionals or other entities requesting compensation or
reimbursement of expenses pursuant to Bankruptcy Code (S)(S) 327, 328, 330, 331,
503(b) and 1103 for services rendered prior to the Effective Date will file and
serve on all parties entitled to notice thereof, an application for final
allowance of compensation and reimbursement of expenses no later than ninety
(90) days after the Effective Date. All such requests for payment of
Administrative Claims and applications for final allowance of compensation and
reimbursement of expenses will be subject to the authorization and approval of
the Bankruptcy Court. Holders of Administrative Claims (including, without
limitation,
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professionals) requesting compensation or reimbursement of expenses that do not
file such requests by the applicable bar date will be forever barred from
asserting such claims against the Debtor, Estate, or its property. The Debtor
shall have one hundred twenty (120) days from the date an Administrative Claim
is filed to bring an objection to such Claim.
3. PAYMENT OF ADMINISTRATIVE CLAIMS, ADMINISTRATIVE TAX CLAIMS AND PRIORITY
------------------------------------------------------------------------
TAX CLAIMS. Subject to the bar dates and other provisions set forth above, each
- ----------
Holder of an unpaid Administrative Claim, Priority Tax Claim or Administrative
Tax Claim will receive Cash equal to the Allowed amount of such Claim, on the
later of (i) the Effective Date, (ii) the date such Claim would be payable in
the ordinary course of business, (iii) one hundred twenty (120) days from the
date the Claim is filed, and (iv) if a timely objection is made, the date such
Claim becomes an Allowed Claim. If the Claim is disputed or subject to
Bankruptcy Court approval, the payment will be made on the first date on which
there is a Final Order awarding such Claim.
4. STATUTORY FEES. On or as soon as practicable after the Effective Date,
--------------
all Holders of Administrative Claims for fees payable pursuant to (S) 1930 of
title 28 of the United States Code, 28 U.S.C. (S) 1930, will receive Cash in the
amount of such Administrative Claim. Post-confirmation fees due pursuant to 28
U.S.C. (S) 1930, if any, will be paid as and when due, until the Case is closed.
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ARTICLE III
CLASSIFICATION OF CLAIMS AND INTERESTS
--------------------------------------
A. NATURE OF CLASS DESIGNATIONS
----------------------------
The following is a designation of the Classes of Claims and Interests under
this Amended Plan. Administrative Claims, Administrative Tax Claims and
Priority Tax Claims have not been classified and are excluded from the following
Classes in accordance with Bankruptcy Code (S) 1123(a)(1). A Claim or Interest
will be deemed classified in a particular Class only to the extent that the
Claim or Interest qualifies within the description of that Class and, unless
otherwise provided in this Amended Plan, will be deemed classified in a
different Class to the extent that any remainder of the Claim or Interest
qualifies within the description of such different Class. A Claim or Interest
is classified in a particular Class only to the extent that the Claim or
Interest is an Allowed Claim or Allowed Interest in that Class and has not been
paid, released or otherwise satisfied before the Effective Date.
Notwithstanding the following descriptions of the treatment of Claims,
Interests, and Classes, the Holder of a Claim or Interest which is not an
Allowed Claim or Allowed Interest may not vote upon or receive a Distribution
under this Amended Plan in respect to such Claims or Interests.
B. CLASS OVERVIEW AND DESIGNATION OF CLASSES OF CLAIMS.
---------------------------------------------------
This Amended Plan contains the following Classes of Claims or Interests:
1. PRIORITY NON-TAX CLAIMS. Class 1: Claims against the Debtor that are
-----------------------
not Secured Claims and are specified as having priority in (S)(S) 507(a)(3),
507(a)(4), 507(a)(5), and 507(a)(6) of
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the Bankruptcy Code, respectively, referred to and defined as Priority Non-Tax
Claims. Priority Non-Tax Claims are unimpaired under the Amended Plan.
2. SECURED CLAIMS. Class 2: Secured Claims, if any, against the Debtor,
--------------
with each Secured Claim being deemed a separate subclass of Class 2. The Debtor
believes that the only Secured Claims against the Debtor are the Mitsui Secured
Claims, the Matilla Secured Claim, the ACG Secured Claims, and various Secured
Claims relating to real property taxes. The Mitsui Secured Claims are deemed to
be in Class 2(a). The Matilla Secured Claim is deemed to be in Class 2(b). The
ACG Secured Claims are deemed to be in Class 2(c). All Secured Claims relating
to real property taxes are deemed to be in Class 2(d). Secured Claims are
unimpaired under the Amended Plan.
3. GENERAL UNSECURED CLAIMS. Class 3: All Claims against the Debtor that
------------------------
are not included in any other Class. Class 3 General Unsecured Claims are
unimpaired under the Amended Plan.
4. DAMAGE CLAIMS. Class 4: All Class 4 Damage Claims but only to the
-------------
extent that such claims are to be paid from the Coverage. To the extent that
all or a portion of a Damage Claim is not covered by the Policies, then such
uncovered portion of the Damage Claim will be treated as a Class 3 Claim.
Damage Claims are impaired under this Amended Plan.
5. CLASS 5: THE AFFILIATE CLAIMS. Affiliate Claims are impaired under this
------------------------------
Amended Plan.
6. INTERESTS. Class 6: Interests in the Debtor. Interests are unimpaired
---------
under the Amended Plan.
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ARTICLE IV
DESIGNATION AND TREATMENT OF CLASSES OF CLAIMS
----------------------------------------------
A. TREATMENT OF ALLOWED MISCELLANEOUS SECURED CLAIMS: CLASS 2(a), (b),
-------------------------------------------------------------------
(c) AND (d).
-----------
Class 2 Claims are unimpaired under this Amended Plan.
1. SUBCLASSES. Each Allowed Class 2 Claim will be in its own subclass.
----------
Each such Claim in this Class will be treated as being in a separate Class for
voting purposes.
2. TREATMENT OF MITSUI SECURED CLAIMS - CLASS 2(a). Debtor shall cure any
-----------------------------------------------
default that occurred prior to the Effective Date under applicable law or under
the instruments establishing the Mitsui Secured Claims. Upon such cure, the
original maturity of the Mitsui Secured Claims shall be reinstated as such
maturity existed before any default by Debtor with respect to the Mitsui Secured
Claims. Except as so provided above, the Amended Plan leaves unaltered the
legal, equitable and contractual rights to which the Mitsui Secured Claims
entitle the Holder of such Claims.
3. TREATMENT OF MATILLA SECURED CLAIM - CLASS 2(b). The Matilla Secured
-----------------------------------------------
Claim is disputed in amount. The Matilla Secured Claim shall be paid in full on
the first day following a Final Order determining the Allowed amount of such
Secured Claim.
4. TREATMENT OF ACG SECURED CLAIMS - CLASS 2(c). The ACG Secured Claims are
--------------------------------------------
disputed in amount. The ACG Secured Claims shall be satisfied from a fund of
$23,000 set aside by Debtor on the Effective Date. The ACG Secured Claim shall
be paid in full from this fund on the first day following a Final Order
determining the Allowed amount of such Secured Claim.
17
<PAGE>
5. TREATMENT OF SECURED CLAIMS RELATING TO REAL PROPERTY TAXES. Debtor shall
-----------------------------------------------------------
satisfy in full all Secured Claims relating to real property taxes on the
Effective Date of the Amended Plan. Such Secured Claims shall accrue interest
through the Effective Date at the rate permitted by applicable non-bankruptcy
law.
B. TREATMENT OF UNSECURED CLAIMS.
-----------------------------
1. CLASS 1 - PRIORITY NON-TAX CLAIMS. Class 1 Claims are unimpaired under
---------------------------------
this Amended Plan. Unless an Allowed Class 1 Claim Holder and the Debtor agree
to less favorable treatment, a Holder of a Class 1 Claim will receive the amount
of its Allowed Claim on the later of the Effective Date or the first date on
which there is a Final Order providing that such Claim is Allowed. The Allowed
amount of Class 1 Claims shall include interest at the rate of five percent (5%)
accruing subsequent to the Petition Date through the Effective Date. To the
extent a Class 1 Claim is a Disputed Claim and therefore is not paid on the
Effective Date, but subsequently becomes an Allowed Claim, such Allowed Claim
shall accrue interest from the Effective Date at the Reference Rate plus one
percent (1%).
2. CLASS 3 - GENERAL UNSECURED CLAIMS. Class 3 Claims are unimpaired under
----------------------------------
this Amended Plan. Unless an Allowed Class 3 Claim Holder and the Debtor agree
to less favorable treatment, a Holder of a Class 3 Claim will receive the amount
of its Allowed Claim on the later of the Effective Date or the first date on
which there is a Final Order providing that such Claim is Allowed. The Allowed
amount of Class 3 Claims shall include interest at the rate of five percent (5%)
accruing subsequent to the Petition Date through the Effective Date. To the
extent a Class 3 Claim is a
18
<PAGE>
Disputed Claim and therefore is not paid on the Effective Date, but subsequently
becomes an Allowed Claim, such Allowed Claim shall accrue interest from the
Effective Date at the Reference Rate plus one percent (1%).
3. CLASS 4 - DAMAGE CLAIMS. Class 4 Claims are impaired under this Amended
-----------------------
Plan.
a. LIQUIDATION. Class 4 Damage Claims will be subjected to the ADR
-----------
process, either prior to or after the Effective Date which is designed to
produce a settlement with respect to such Damage Claim. If unsuccessful, the
Holder of a Damage Claim may obtain relief from the Bankruptcy Court to pursue
the Damage Claim in an appropriate non-bankruptcy forum.
b. PAYMENT. In accordance with the procedures to be implemented
-------
through the ADR, if a Damage Claim becomes an Allowed Claim, it will be paid
first from third party sources, including any applicable Coverage from which
Holders of Damage Claims may be entitled to recover all or part of the Allowed
amount of their Claims. To the extent that the Coverage ultimately proves
insufficient, any deficiency will receive treatment as a Class 3 General
Unsecured Claim.
4. CLASS 5 - AFFILIATE CLAIMS. The Holders of Class 5 Claims shall take
--------------------------
nothing under the Amended Plan.
C. TREATMENT OF INTERESTS.
----------------------
Interests are unimpaired under Amended Plan. CFI shall retain its Interest in
Debtor under this Amended Plan.
19
<PAGE>
ARTICLE V
TREATMENT OF EXECUTORY CONTRACTS
AND UNEXPIRED LEASES
--------------------
A. ASSUMPTION.
----------
The unexpired leases and subleases in respect of the addresses listed on
Exhibit "A" to this Amended Plan, as well as Debtor's Las Vegas Lease, shall be
assumed as of the Effective Date and the amount, if any, which is necessary to
cure defaults (if any) under such unexpired leases pursuant to Bankruptcy Code
(S) 365 shall be as set forth on Exhibit "A". Any reference to a real property
location on Exhibit "A" shall be deemed to include an assumption of all leases
and subleases relating to such location. The assumption of any executory
contract and unexpired lease shall be deemed to include an assumption of such
lease or contract as such lease or contract may have been amended or modified at
any time. Debtor reserves the right to amend Exhibit "A". The Confirmation
Order shall constitute an order of the Bankruptcy Court (a) approving the
assumption of the executory contracts and unexpired leases listed on Exhibit "A"
to this Amended Plan and (b) fixing the "cure" amount with respect to any
defaults by Debtor under such contracts prior to Confirmation. In the event
that the non-debtor party to an assumed executory contract or unexpired lease
does not timely object, the Confirmation Order shall be binding on such Person
as to the amount of any default under such contract or lease. Any monetary
amounts found by the Court to be in default shall be satisfied, pursuant to (S)
365(b) of the Bankruptcy Code, by payment by Debtor of the default amount in
Cash not later than thirty (30) days following the Effective Date. In the event
of any dispute
20
<PAGE>
concerning any conditions to assumption of an executory contract or unexpired
lease established by (S) 365 of the Bankruptcy Code, the cure payments required
by the Bankruptcy Code shall be made only following the entry of a Final Order
resolving the dispute.
B. REJECTION.
---------
Except as otherwise provided herein, on the Effective Date, all executory
contracts and leases to which the Debtor or the Estate was a party on or prior
to Confirmation, and which have not been assumed by the Debtor or assumed and
assigned to a third party pursuant to Bankruptcy Code (S) 365, will be rejected
pursuant to Bankruptcy Code (S)(S) 365 and 1123, to the extent, if any, that
such contract or lease constitutes an executory contract or unexpired lease, and
without conceding that such contracts or leases constitute executory contracts
or unexpired leases or that the Debtor has any liability thereunder. The
Confirmation Order will constitute an order of the Bankruptcy Court approving
all such rejections, pursuant to Bankruptcy Code (S) 365, as of the date of
Confirmation.
C. CLAIMS ARISING FROM REJECTION OF CONTRACTS.
------------------------------------------
Any Claim for damages arising from the rejection hereunder or under
Bankruptcy Code (S) 365 of an executory contract or unexpired lease of the
Debtor that has not been assumed pursuant to a prior order of the Bankruptcy
Court, pursuant to this Amended Plan or under Bankruptcy Code (S) 365: (1) will
be determined and allowed or disallowed under Bankruptcy Code (S) 502(g), and,
to the extent Allowed, will be classified in the appropriate Class; and (2) will
be unenforceable against the Debtor, the Disbursing Agent or the Estate and
their respective property and will be forever barred
21
<PAGE>
from receiving any Distribution under this Amended Plan unless a proof of such
Claim is filed prior to the later of (1) the Claims Bar Date and (2) the first
business day that is thirty (30) days after rejection of a contract or lease.
Notwithstanding the rejection of any executory contract or unexpired lease at
any time during this Case, the Debtor, reserves all rights and defenses which
the Debtor or Estate may have or have had against the parties to such contracts
and leases.
ARTICLE VI
MEANS FOR IMPLEMENTATION OF AMENDED PLAN
----------------------------------------
A. DISTRIBUTIONS AND AMENDED PLAN FUNDING.
--------------------------------------
1. SOURCE OF AMENDED PLAN FUNDING. Such funding as may be necessary to
------------------------------
fully execute this Amended Plan will be provided from the Debtor's available
Cash on the Effective Date, the liquidation of certain of Debtor's assets and,
for Class 4 Claims only, the Coverage.
2. THE ADR. The Debtor, together with SRI, SII, Buffalo Ranch and Tenly,
-------
has or will request that the Court establish the ADR for the liquidation and
payment of Damage Claims. The ADR will be implemented during the Case but will
continue after Confirmation. It is anticipated that, under the ADR, each Damage
Claim will be subjected to a process designed to produce a settlement with
respect to such Claim. If unsuccessful, the Holder of a Damage Claim may then
obtain relief from the Bankruptcy Court to pursue the Claim in an appropriate
non-bankruptcy forum.
3. ROUNDING OF AMOUNTS. Notwithstanding anything to the contrary in
------------------- -------------------------------------------
this Amended Plan, any Person responsible for Distribution of funds under this
- -----------------
Amended Plan or any Amended Plan
22
<PAGE>
agreement may round all amounts for Distributions of Cash hereunder to Holders
of Allowed Claims or Administrative Claims to the nearest whole dollar amount.
4. NAME AND ADDRESS OF HOLDER. For purposes of all Distributions under this
--------------------------
Amended Plan or any Amended Plan Agreement, the Debtor or other Person
responsible for such Distributions will be entitled to rely on the name and
address of the Holder of each Allowed Claim or Interest as shown on any timely
filed proof of Claim and, if none, as shown on Debtor's schedules, except to the
extent that the payor first receives adequate written notice of a transfer or
change of address, properly executed by the Holder or its authorized agent.
5. CORPORATE GOVERNANCE/RETIREE BENEFITS. On the Effective Date, Debtor's
-------------------------------------
existing articles of incorporation and bylaws shall remain as currently in
effect, except for the inclusion of a prohibition on the issuance of non-voting
equity securities. Debtor will continue with the payment of all retiree
benefits at existing levels.
6. DISPUTED CLAIMS RESERVES.
------------------------
a. If a Disputed Claim is not resolved prior to the Effective Date, the
Debtor may file a request: (1) that the Bankruptcy Court determine, by
estimating the Claims or otherwise, that an amount less than the amounts of the
Disputed Claims is to be used for calculating the amounts to be placed in the
Disputed Claims Reserves for certain Disputed Claims or anticipated Disputed
Claims pending resolution of such Claims or further Bankruptcy Court order; and
(2) that the Bankruptcy Court confirm that the
23
<PAGE>
amount of the Disputed Claim so determined also is to be used for calculations
as among Disputed Claims.
b. From and after the Effective Date, the Debtor may periodically
file requests that the Bankruptcy Court confirm, determine, supplement or amend
prior determinations of the amounts to be used for calculating the amounts to be
placed in the respective Disputed Claims Reserve for Disputed Claims (which
determinations may require estimations of certain Claims).
c. After the Effective Date, Debtor shall be the only Person with
authority to object to Claims against Debtor. Any objections to Claims and
Interests must be filed with the Court on or before January 1, 1998.
d. Notwithstanding all references to Allowed Claims in this Amended
----------------------------------------------------------------
Plan, in undertaking the calculations concerning Allowed Claims or
- ----
Administrative Claims under this Amended Plan in connection with the
determination of the amount of Distributions due to the Holders of Allowed
Claims and Administrative Claims, each Disputed Claim (or anticipated Claim
which, if and when filed, will become a Disputed Claim) will be treated as if it
were an Allowed Claim or Allowed Administrative Claim, unless the Bankruptcy
Court has previously estimated the Claim at a lower amount.
e. The Debtor will establish (i) an Administrative and Priority Claims
Reserve for Disputed Priority Tax Claims and projected or actual Administrative
Claims which have not been Allowed by the Bankruptcy Court and (ii) a Disputed
Claims Reserve for any Claims which Debtor disputes but which have not been
Allowed by the Bankruptcy Court. Inasmuch as Class 4 Damage Claims
24
<PAGE>
are covered by the Policies, no reserves will be established for Disputed Class
4 Claims. The Distributions due in respect of Administrative Claims and
Disputed Claims based on the calculations required by this Amended Plan will be
reserved for the Holders of Disputed and Administrative Claims and deposited in
the appropriate Disputed Claims Reserve or the Administrative and Priority
Claims Reserve respectively.
f. After an objection to a Disputed Claim is withdrawn or determined by
Final Order, the Distributions due on account of any Claim will be paid by the
appropriate Person hereunder. Such Distribution will be made no later than the
time provided in this Amended Plan of the next payment for Claims or
Administrative Claims of the Class or type of the Claim or Administrative Claim
of such Holder and, if there is no such further scheduled time, within forty-
five (45) days of the date the Disputed Claim becomes an Allowed Claim or
authorized Administrative Claim.
g. For Disputed Claims which, if Allowed, would have been Claims in
Class 3, after an objection to such a Disputed Claim is sustained in whole or in
part by a Final Order, any amount held in the Disputed Claims Reserve in respect
of the particular Disputed Claim in excess of the Distributions due on account
of any resulting Allowed Claim will be held for Pro Rata payment to other
members of Class 3, which payment will be made at the time of, and applied
against the next scheduled payment for Holders of Class 3 Claims and, if there
is no such further scheduled time, within forty-five (45) days of the date the
Disputed Claim is resolved.
h. In the event (i) monies are held by the Debtor in respect of a
Disputed Claim, (ii) Debtor's objection to such
25
<PAGE>
Disputed Claim is sustained, and (iii) all other allowed Class 3 Claims have
been satisfied in full pursuant to the terms of this Amended Plan, then (iv) the
Debtor shall promptly return the monies held in such Disputed Claims Reserve and
all other undisbursed funds to the Debtor.
7. UNCLAIMED PROPERTY. Any Cash or other property which is unclaimed for
------------------
one hundred eighty (180) days after the Distribution was sent by mail to the
last known mailing address of the Person entitled thereto as provided in this
Amended Plan will be deemed paid to such entitled Person, for the purpose of
determining that Person's rights. Any Person that does not claim its
Distribution within one hundred eighty (180) days will receive no future
distribution under the plan. Unclaimed Property resulting from a Distribution
to the Holder of a Claim in Class 3 will be held by the Debtor for Pro Rata
payment to other members of Class 3, which payment will be made at the time of
the next scheduled payment for Class 3 Claims and, if there is no such further
scheduled time, within forty-five (45) days of the date of the Distribution or
payment.
8. DE MINIMIS DISTRIBUTIONS/RETURN OF UNDISTRIBUTED FUNDS. Notwithstanding
------------------------------------------------------ ---------------
anything to the contrary contained in this Amended Plan, the Debtor need not
- -------------------------------------------------------
disburse Cash to the Holder of an Allowed Claim if the amount of Cash otherwise
due is less than Five Dollars ($5.00). Cash not so distributed may be reserved
for the Claim Holder until in excess of Five Dollars ($5.00) is owed such Claim
Holder. When and if the Debtor determines in good faith that nothing more is
due hereunder to the Holders of Class 3 Claims,
26
<PAGE>
then such undisbursed funds will be promptly returned by the Debtor to the
Debtor's general accounts.
B. SERVICES BY AND FEES FOR PROFESSIONALS.
--------------------------------------
1. SERVICES BY PROFESSIONALS AND CERTAIN PARTIES AFTER THE EFFECTIVE DATE.
----------------------------------------------------------------------
The Debtor retained professionals who provided services and incurred
expenses during the Bankruptcy Case. After the Effective Date, the
professionals retained by the Debtor may be among the Persons assisting in the
effectuation of this Amended Plan.
2. FEES FOR PROFESSIONALS.
----------------------
a. PRIOR TO THE EFFECTIVE DATE.
---------------------------
(1) GENERALLY. Fees and expenses for the professionals retained
---------
by the Committee or the Debtor for services rendered and costs incurred after
the Petition Date and prior to the Effective Date, will be fixed by the
Bankruptcy Court after notice and a hearing and such fees and expenses will be
paid (less deductions for any and all amounts thereof already paid to such
Persons) after approval by the Bankruptcy Court to the extent so approved and as
provided in this Amended Plan.
b. FROM THE EFFECTIVE DATE. Fees owing for services rendered and
-----------------------
cost incurred and owing on and after the Effective Date by the professionals
retained by the Debtor will be paid by the Debtor from the funds held by the
Debtor twenty (20) days after submission of a bill therefor to the Debtor, if
there is no objection within such time. If there is such an objection, the fees
and expenses will be fixed by the Bankruptcy Court after notice and a hearing.
The Bankruptcy Court will retain
27
<PAGE>
jurisdiction until the Case is closed, to determine disputed post-Effective Date
fees of professionals.
C. LITIGATION.
----------
1. The Debtor may commence or advance any Litigation following the
Effective Date.
2. Except as otherwise set forth in this Amended Plan, the Debtor may,
but will not be required to, set off against any Claim and the Distributions to
be made pursuant to this Amended Plan in respect of such Claim, any Litigation
it may have against the Holder of the Claim, but neither the failure to do so
nor the allowance of any Claim hereunder will constitute a waiver or release of
any such Litigation, setoff or recoupment which the Debtor may have against such
Holder.
3. Unless threatened or pending Litigation against a Creditor or other
Person is expressly waived, relinquished, released, compromised or settled in
this Amended Plan or in a Final Order, all rights with respect to such
Litigation are reserved and the Debtor may pursue such Litigation.
D. DISSOLUTION OF THE COMMITTEE.
----------------------------
The Committee will be automatically dissolved and the members so released
and discharged upon the Effective Date.
E. TRANSFER OF ASSIGNED PROPERTIES.
-------------------------------
As soon as practicable on or following the Effective Date, Debtor shall
deed the Assigned Properties to Sizzler Real Property USA, Inc., a Delaware
corporation.
28
<PAGE>
ARTICLE VII
MODIFICATION
------------
Pursuant to the provisions of (S) 1127 of the Bankruptcy Code, the Debtor
reserves the right to modify or alter the provisions of this Amended Plan at any
time prior or subsequent to Confirmation.
ARTICLE VIII
EFFECT OF CONFIRMATION
----------------------
A. BINDING EFFECT OF CONFIRMATION.
------------------------------
Confirmation will bind the Debtor, all Creditors, Interest Holders and
other parties in interest to the provisions of this Amended Plan whether or not
the Claim or Interest of such Creditor or Interest Holder is impaired under this
Amended Plan and whether or not such Creditor or Interest Holder has accepted
this Amended Plan.
B. VESTING OF ASSETS FREE AND CLEAR OF LIENS, CLAIMS AND INTERESTS.
---------------------------------------------------------------
Except as otherwise provided in this Amended Plan or in the Confirmation
Order, upon the Effective Date, title to all Assets and property of the Debtor,
and all property of the Estate, including, pursuant to (S) 1123(b)(3)(b) of the
Bankruptcy Code, each and every claim, demand or cause of action which the
Debtor had or had power to assert immediately prior to Confirmation, will revest
in the Debtor, free and clear of all liens, Claims and Interests of Holders of
Claims and Interests. Thereafter, the Debtor will hold these assets without
further jurisdiction, restriction or supervision of the Bankruptcy Court.
29
<PAGE>
C. NO LIMITATIONS ON EFFECT OF CONFIRMATION.
----------------------------------------
Nothing contained in this Article VIII will limit the effect of
Confirmation as described in (S) 1141 of the Bankruptcy Code.
D. CONTINUATION OF ADR.
-------------------
Notwithstanding Confirmation, the Holder of any Damage Claim that is
unliquidated in amount must first exhaust the remedies in the ADR before making
a request, from this Court, to pursue its Claim in an appropriate non-bankruptcy
forum.
E. DISCHARGE OF CLAIMS AND TERMINATION OF INTERESTS.
------------------------------------------------
The rights afforded under the Amended Plan and the treatment of Claims
under the Amended Plan will be in exchange for and in complete satisfaction,
discharge, and release of all Claims. Confirmation of the Amended Plan shall
discharge Debtor from all Claims that arose before the Confirmation Date and all
Claims of all kinds specified in (S)(S) 502(g), (h) and (i) of the Bankruptcy
Code, whether or not a proof of Claim is filed or deemed filed, or the Holder of
such Claim based on such debt has accepted the Amended Plan.
F. JUDICIAL DETERMINATION OF DISCHARGE.
-----------------------------------
As of the Confirmation Date, except as provided in the Amended Plan, all
Persons shall be precluded from asserting against Debtor any other or further
Claims, debts, rights, causes of action, liabilities, or equity interests based
on any act, omission, transaction or other activity of any kind or nature that
occurred before the Confirmation Date, and the Confirmation Order shall be a
judicial determination of discharge of all Claims against Debtor pursuant to
(S)(S) 524 and 1141 of the Bankruptcy Code, and shall void
30
<PAGE>
any judgment obtained or entered against Debtor at any time, to the extent the
judgment relates to discharged Claims.
G. INJUNCTION.
----------
As of the Confirmation Date, all Persons that have held, currently hold or
may hold a Claim or other debt or liability that is discharged or an Interest or
other right of an equity security Holder that is terminated pursuant to the
Amended Plan are permanently enjoined from taking any of the following actions
on account of such discharged Claims, debts, or liabilities or terminated
Interests or rights: (a) commencing or continuing in any manner any action or
other proceeding against Debtor or its property, (b) enforcing, attaching,
collecting or recovering in any manner any judgment, award, decree, or other
against Debtor or its property, (c) creating, perfecting or enforcing any lien
or encumbrance against Debtor or its property, (d) asserting a right of
subrogation or recoupment of any kind against any debt, liability or obligation
due to Debtor or its property, and (e) commencing or continuing any action that
does not comply with or is inconsistent with the provisions of the Amended Plan.
ARTICLE IX
SUCCESSORS AND ASSIGNS
----------------------
This Amended Plan and the provisions hereof will be binding upon the Debtor
and its successors and assigns.
ARTICLE X
RETENTION OF JURISDICTION
-------------------------
Notwithstanding Confirmation, the Bankruptcy Court will retain jurisdiction
for all of the following purposes plus such other purposes as may be provided by
the Bankruptcy Code:
31
<PAGE>
1. The determination of the allowability and amount of Claims;
2. The determination of requests for payment of Claims entitled to
priority under (S) 507(a)(1) of the Bankruptcy Code;
3. The resolution of any disputes regarding the interpretation,
enforcement, breach, performance and/or a default under this Amended Plan;
4. The implementation, execution or consummation of the provisions of
this Amended Plan (and any dispute with regard thereto) and entry of orders in
aid of consummation or enforcement of this Amended Plan, including without
limitation, appropriate orders to effect the provisions of this Amended Plan and
to protect the Debtor from Creditors' actions;
5. The modification of this Amended Plan pursuant to (S) 1127 of the
Bankruptcy Code;
6. The adjudication of any cause of action or claim for relief, including
Avoidance Actions, brought by the Debtor, or on the Debtor's behalf, as
appropriate;
7. The consideration of requests by Holders of Damage Claims to liquidate
their Claims in an appropriate non-bankruptcy forum in the event that such
Holders of Damage Claims cannot resolve their Claims through the ADR;
8. The implementation of the ADR;
9. The sale of property by the Debtor free and clear of liens, security
interests or interests of others pursuant to Bankruptcy Code (S) 363; and
10. The entry of a final decree closing this Chapter 11 Case.
32
<PAGE>
ARTICLE XI
MISCELLANEOUS
-------------
A. GOOD FAITH.
----------
Confirmation of the Plan shall constitute a finding that: (i) this Plan
has been proposed in good faith and in compliance with applicable provisions of
the Bankruptcy Code; and (ii) the solicitation of acceptances or rejections of
this Plan by all Persons and the offer, issuance, sale, or purchase, of a
security offered or sold under the Plan has been in good faith and in compliance
with applicable provisions of the Bankruptcy Code. Accordingly, on the
Effective Date each of the officers and directors of the Debtor, and the members
of the Committee and each of their respective advisors and attorneys, effective
as of the Effective Date, will be deemed exculpated by Holders of Claims against
and Interests in the Debtor and other parties in interest to the Case, from any
and all claims, causes of action and other assertions of liability (including,
without limitation, breach of fiduciary duty), arising out of or related to the
Debtor, the Case or the exercise by such entities of their functions as members
of or advisors to or attorneys for any such individuals or committee or
otherwise under applicable law, in connection with or related to the Case and
the formulation, negotiation, preparation, dissemination, Confirmation and
consummation of this Plan and any agreement, instrument or other document issued
hereunder or related hereto.
B. SEVERABILITY.
------------
Should the Bankruptcy Court determine, prior to the Confirmation Date, that
any provision of the Amended Plan is
33
<PAGE>
illegal as written or as applied to any Claim or Interest, as the case may be,
such provision shall be either unenforceable generally or as applied to such
Claim or Interest. A determination of unenforceability shall in no respect
limit or affect the enforceability and operative effect of any other provision
of the plan or of that provision as applied to other Claims or Interests.
C. WITHDRAWAL OR REVOCATION OF THE AMENDED PLAN.
--------------------------------------------
Debtor reserves the right to revoke or withdraw the Amended Plan prior to
the Confirmation Date. If Debtor should revoke or withdraw the Amended Plan,
then the Amended Plan shall be null and void, and nothing contained in the
Amended Plan shall constitute a waiver or release of any Claims by or against,
or any Interests in Debtor, or prejudice in any manner the rights of Debtor.
D. HEADINGS.
--------
The heading of the Articles and sections of the Amended Plan are for
convenience only and shall in no way affect the interpretation of its
provisions.
E. SUCCESSORS AND ASSIGNS.
----------------------
The rights, benefits and obligations of any Person referred to in the
Amended Plan shall be binding on, and shall inure to the benefit of, the heirs,
executors, administrators, successors and assigns of such Persons.
F. STATUTORY FEES.
--------------
All fees payable pursuant to 28 U.S.C. (S) 1930 shall be paid by the Debtor
on or before the Effective Date; except that fees, if any, incurred pursuant to
28 U.S.C. (S) 1930(a)(6) shall be paid quarterly until the Case is dismissed,
converted or closed.
34
<PAGE>
ARTICLE XII
CONFIRMATION REQUEST
--------------------
The Debtor hereby requests that the Bankruptcy Court confirm this Amended
Plan pursuant to (S) 1129(a) of the Bankruptcy Code, and, if necessary, pursuant
to (S) 1129(b) of the Bankruptcy Code.
Dated: May 29, 1997 COLLINS PROPERTIES, INC.,
a Delaware corporation
By: /s/ Christopher Thomas
----------------------
CHRISTOPHER THOMAS
President and Chief
Financial Officer
PRESENTED BY:
PACHULSKI, STANG, ZIEHL & YOUNG, P.C.
By: /s/ BRAD R. GODSHALL
------------------------
BRAD R. GODSHALL,
Attorneys for Debtor and
Debtor in Possession
35
<PAGE>
EXHIBIT 10.3
AMENDMENT
WHEREAS, Sizzler International, Inc. (the "Company") maintains a qualified
retirement plan known as the Sizzler International, Inc. Employee Savings Plan
(the "Plan"); and
WHEREAS, the Company has reserved the right to amend the Plan under Section
11.1 of the Plan;
NOW THEREFORE THE PLAN IS HEREBY AMENDED as follows.
1. Section 2.7 of the Plan is amended, effective as of January 1, 1994,
by adding the following new subsection 2.7(e) to the end of Section 2.7.
(e) In addition to other applicable limitations set forth in the
Plan, and notwithstanding any other provision of the Plan to the contrary,
for Plan Years beginning on or after January 1, 1994, the annual
compensation of each Employee taken into account under the Plan shall not
exceed the OBRA '93 annual compensation limit. The OBRA '93 annual
compensation limit is $150,000, as adjusted by the Commissioner of the
Internal Revenue Service for increases in the cost of living in accordance
with Code Section 401(a)(17)(B). The cost-of-living adjustment in effect
for a calendar year applies to any period, not exceeding 12 months, over
which compensation is determined ("determination period") beginning in such
calendar year. If a determination period consists of fewer than 12 months,
the OBRA '93 annual compensation limit shall be multiplied by a fraction,
the numerator of which is the number of months in the determination period,
and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Code Section 401(a)(17) shall mean the
OBRA '93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current Plan
Year, the compensation for that prior determination period is subject to
the OBRA '93 annual compensation limit in effect for that prior
determination period. For this purpose, for determination periods beginning
before the first day of the first Plan Year beginning on or after January
1, 1994, the OBRA '93 annual compensation limit is $150,000.
<PAGE>
2. Section 4.4 of the Plan is amended, effective as of January 1,
1992, by deleting the last sentence of Section 4.4.
3. Section 7.3(a) of the Plan is amended, effective as of January
1, 1992, to read as follows:
7.3 Forfeitures upon Termination of Employment.
-------------------------------------------
(a) Upon termination of Employment, the nonvested portion of
a Participant's Employer Contribution Account shall be deemed to
be forfeited immediately.
(i) If an Employee terminates Employment, and the
value of the Employee's Vested Account balance is not
greater than $3,500, the Employee shall receive a
distribution of the value of the entire Vested portion of
such Account in accordance with Section 8.1 or 8.2, as
applicable, and the nonvested portion shall be treated as a
forfeiture. For purposes of this Section, if the value of an
Employee's Vested Account balance is zero, the Employee
shall be deemed to have received a distribution of such
Vested Account balance.
(ii) If an Employee terminates Employment and the
value of the Employee's Vested Account balance is greater
than $3,500, if the Employee elects, in accordance with the
requirements of Article VIII, to receive the value of the
Employee's Vested Account balance, the nonvested portion
shall be deemed to be a forfeiture.
Forfeitures occurring under this subsection (a) shall
be subject to restoration under subsection (b), without any
repayment being permitted or required. Forfeitures for a
Plan Year shall first be applied in the manner prescribed in
Section 12.9. Any balance remaining shall then be allocated
under Section 5.3.
4. Section 7.3(b) of the Plan is amended, effective as of January 1,
1992, by deleting the last sentence thereof.
2
<PAGE>
5. Section 8.1(a) of the Plan is amended, effective as of January 1,
1997, by deleting the last sentence thereof and substituting the following:
Distribution shall occur as soon as practicable after Retirement,
except as otherwise required by Section 8.7.
6. Section 8.2 of the Plan is amended, effective as of January 1, 1997,
by deleting the second and third sentences thereof and substituting the
following:
Distribution shall occur as soon as practicable after termination
of Employment, except to the extent an earlier or later distribution
is required by Section 8.7. However, if the Participant's Vested
Account does not exceed $3,500 (at the time of distribution), the
Participant's Account shall be distributed as soon as practicable
after termination of Employment, except to the extent an earlier
distribution is required by Section 8.7.
7. Section 8.7(a) of the Plan is amended, effective as of January 1,
1992, by deleting the last sentence thereof.
8. Section 11.2(b) of the Plan is amended, effective as of January 1,
1992, to read as follows:
(b) Upon a complete or partial termination of the Plan or
complete discontinuance of contributions to the Plan (within the
meaning of Treasury Regulations section 1.411(d)-2), no further
contributions shall be made under the Plan; all accrued benefits
credited to the Account of each Participant (or, in the case of a
partial termination, each affected Participant within the meaning of
Treasury Regulations section 1,411(d)-2) shall fully Vest; and the
Accounts of any affected Participants shall be distributed at the time
and in the manner specified in Articles VIII and IX.
9. Section 11.2 of the Plan is amended, effective as of January 1, 1992,
by deleting Subsection (c) thereof, and redesignating Subsections (d) and (e) as
Subsections (c) and (d) respectively.
10. Section 12.1 of the Plan is amended, effective as of January 1, 1992,
by deleting Subsections (b) and (c) thereof, and redesignating Subsection (d) as
Subsection (b).
3
<PAGE>
11. Section 12.10 of the Plan is amended, effective as of January 1, 1992,
to read as follows:
12.10 Alienation.
----------
Except to the extent permissible under Code Sections 401(a)(13)
and 414(q), benefits payable under this Plan shall not be subject in
any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary, including any liability which
is for alimony or other payments for the support of a spouse or former
spouse, or for any other relative of the Employee, prior to actually
being received by the person entitled to the benefit under the terms
of the Plan. Any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber, charge, or otherwise dispose of any right to
benefits payable hereunder shall be void. The Trust Fund shall not in
any manner be liable for, or subject to, the debts, contracts,
liabilities, engagements, or torts of any person entitled to benefits
hereunder.
The preceding paragraph shall also apply to the creation,
assignment, or recognition of a right to any interest or benefit
payable with respect to a Participant pursuant to a domestic relations
order, unless this order is determined to be a qualified domestic
relations order (as defined in Code Section 414(p)). The Plan
Administrator shall establish reasonable procedures to determine the
qualified status of domestic relations orders and to administer
distributions under these qualified orders.
EXECUTED ON March 5, 1997
----- -
SIZZLER INTERNATIONAL, INC.
/s/ CHRISTOPHER R. THOMAS
- ----------------------------
Christopher R. Thomas
4
<PAGE>
EXHIBIT 10.6
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("AMENDMENT") is dated this 25th day of
----
September , 1996 and amends the EMPLOYMENT AGREEMENT dated May 1, 1996 between
- ---------
Sizzler International, Inc., a Delaware corporation ("Sizzler") and Kevin W.
Perkins ("Perkins").
1. Paragraph 3.2 is amended to add the following sentence at the end: "The
Base Salary owed to Employee by Sizzler shall be reduced by any salary paid by
Sizzler Franchise Development, Ltd. ("SFD") for services rendered by Employee to
SFD. The salary to be paid by SFD to Employee for calendar year 1996 shall be
$200,000.00."
2. All other terms and conditions of the Employment Agreement remain in full
force and effect.
SIZZLER INTERNATIONAL, INC.
/s/ KEVIN W. PERKINS BY: /s/ CHRISTOPHER R. THOMAS
- -------------------- --------------------------
KEVIN W. PERKINS
ITS: CFO
-------------------------
<PAGE>
EXHIBIT 10.7
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("AMENDMENT") is dated this 1st day of
January, 1997 and amends the EMPLOYMENT AGREEMENT dated May 1, 1996, as amended
September 25, 1996 between Sizzler International, Inc., a Delaware corporation
("Sizzler") and Kevin W. Perkins ("Perkins").
1. The last sentence of Paragraph 3.2, as amended is deleted and the following
is inserted therein: The salary to be paid by SFD to Employee for the period
January 1, 1997 through June 30, 1997 shall be US $150,000.00.
2. All other terms and conditions of the Employment Agreement remain in full
force and effect.
/s/ KEVIN W. PERKINS By: /s/ CHRISTOPHER R. THOMAS
- ---------------------------- --------------------------
KEVIN W. PERKINS
ITS: CFO
--------------------------
<PAGE>
EXHIBIT 10.8
THIRD AMENDMENT TO
------------------
EMPLOYMENT AGREEMENT
--------------------
This Third Amendment to Employment Agreement ("this Amendment") is entered
into as of May 5, 1997 between Sizzler International, Inc., a Delaware
corporation ("Sizzler"), and Kevin W. Perkins, an individual.
R E C I T A L S
---------------
The parties to this Amendment hereby acknowledge as follows:
A. As of May 1, 1996, Sizzler and Employee entered into a written
Employment Agreement dated as of such date and amended on September 25, 1996 and
on January 1, 1997 (as so amended, the "Agreement").
B. Sizzler and Employee now wish to amend the Agreement by entering into
this Amendment.
A G R E E M E N T
-----------------
The parties to this Amendment hereby agree as follows:
1. The first sentence of Section 2.2 of the Agreement shall be amended to
read in full as follows:
"Employee shall serve as the Chief Executive Officer of Sizzler's
International division, comprising Sizzler's Asian and Pacific operations."
2. Section 2.5 of the Agreement shall be renumbered as Section 2.4. The
first sentence of the former Section 2.5 (new Section 2.4) of the Agreement
shall be amended to read in full as follows:
"Employee shall be based at such place(s) in the Asia/Pacific region as
Sizzler shall deem necessary to fulfill his duties, except for required
travel on Sizzler business to an extent substantially consistent with
industry practices."
3. Section 3.3 of the Agreement shall be amended to read in full as
follows:
"Employee shall be entitled to participate (i) on a one-time basis only,
the Bonus Program described in Exhibit A hereto (the "FY 97 Bonus Program")
and (ii) for
1
<PAGE>
Sizzler's 1998 fiscal year, the Bonus Program described in Exhibit B hereto
(the "FY 98 Bonus Program"). Sizzler will review annually and may, in the
discretion of its Board of Directors, increase the FY 98 Bonus Program
benefits."
4. The second sentence of Section 4 of the Agreement shall be amended to
read in full as follows:
"Employee shall be entitled to reimbursement of relocation expenses in
accordance with Sizzler's policy in effect as of the date hereof."
5. Section 5.4.1 of this Agreement shall be amended to delete the words
"President and Chief Executive Officer" in both places that they appear and
substitute in their place the words "Chief Executive Officer of Sizzler's
International division."
6. Section 6.2 of the Agreement shall be amended to delete clauses (i),
(ii) and (iii) thereof and substitute in their place the following:
"(i) Sizzler shall pay Employee his full salary through the Date of
Termination; and
(ii) in lieu of any further salary payments to Employee for periods
subsequent to the Date of Termination, and in liquidation of any
damage or other claims asserted or capable of assertion by Employee
as a result of any breach by Sizzler of this Agreement, Sizzler shall
pay as severance to Employee as follows:
(a) an amount equal to US $200,000 if the termination under this
Section 6.2 occurs on or before April 30, 1998;
(b) an amount equal to US $100,000 if the termination under this
Section 6.2 occurs after April 30, 1998 and on or before April
30, 1999; and
(c) an amount equal to US $300,000 if the termination under this
Section 6.2, whenever it occurs, is in connection with or the
result of the sale of all or substantially all of Sizzler's
International division, whether in a single transaction or a
series of related transactions."
7. Exhibit B attached to the Agreement (Sizzler's Policy 3-1007) shall be
deleted and shall be deemed to have been replaced by Exhibit B attached hereto
(the FY 1998 Bonus Program referred to in Paragraph 3 of this Amendment).
2
<PAGE>
8. Except as amended by this Amendment, the Agreement remains in full
force and effect in accordance with its terms.
"SIZZLER" "PERKINS"
Sizzler International, Inc. /s/ Kevin W. Perkins
------------------------
Kevin W. Perkins
By: /s/ James A. Collins
---------------------
Its: Chief Executive Officer
-----------------------
3
<PAGE>
EXHIBIT B
---------
FISCAL YEAR 1998 BONUS PROGRAM
------------------------------
This Bonus Program is provided by Sizzler International, Inc. (the "Company")
to Kevin W. Perkins on the terms and conditions set forth below.
In compensation of Perkins' services, promptly following the end of its 1998
fiscal year the Company will pay to Perkins a one-time cash bonus based upon the
International division's attainment of specified minimum levels of earnings for
that fiscal year.
Terms and Conditions
--------------------
1. If EBITDA for Sizzler's International division equals or exceeds U.S.
$18,350,000, and EBITDA for Sizzler's Sizzler Australia division is $0 or
greater, Sizzler shall award a one-time cash bonus to Perkins. The amount of
the bonus will depend upon the specific level of EBITDA attained, in accordance
with the following schedule:
<TABLE>
<CAPTION>
A B C
If Int'l EBITDA equals or And SZ Australia EBITDA Then the amount of bonus
exceeds equals or exceeds will be:
<S> <C> <C>
Tier 1: US $18,350,000 Tier 1: US $0 US $200,000
Tier 2: US $18,800,000 Tier 2: US $300,000 US $150,000
Tier 3: US $19,400,000 Tier 3: US $1,000,000 US $150,000
Tier 4: US $20,000,000 Tier 4: US $2,000,000 US $200,000
</TABLE>
2. No credit shall be given with respect to EBITDA that does not attain
the minimum dollar amount specified above. For example, if International EBITDA
does not attain US $18,350,000 or Sizzler Australia EBITDA does not attain US
$0, no bonus need be awarded.
3. To earn a bonus at any level, the EBITDA targets in both column A and
---
column B must be met. For example, if International EBITDA is US $18,750,000
and Sizzler Australia EBITDA is (US $250,000), no bonus need be awarded.
4. Each of the Tiers shall be cumulative. For example, if International
EBITDA equals or exceeds US $20,000,000 and Sizzler Australia EBITDA equals or
exceeds $2,000,000, the amount of Perkins' bonus would be US $700,000
($200,000+$150,000+$150,000+$200,000).
4
<PAGE>
5. For purposes of this Exhibit:
a. the term "EBITDA" shall refer to the applicable division's
earnings, for Fiscal Year 1998, denominated in US dollars, before
interest, taxes, depreciation and amortization, and determined in
accordance with GAAP. Earnings shall be determined on the basis of
the applicable division's income after all appropriate division
expenses, including but not limited to Perkins' and other division
employees' compensation, except that for the purpose of determining
the amount of any bonus under this Bonus Program, earnings will be
reduced by the amount of any Tier 1 bonus ($200,000) payable to
Perkins.
b. the term "Fiscal Year 1998" shall refer to Sizzler's fiscal year
ending April 30, 1998.
c. the term "International division" shall refer to the KFC division,
the Sizzler Australia division, and Sizzler franchise operations in
the Asia/Pacific region, and The Italian Oven division.
d. the term "Sizzler Australia" division shall refer to the Sizzler
restaurant operations in Australia.
6. Any bonus earned hereunder shall become due and payable upon
determination of EBITDA for the International and Sizzler Australia divisions as
soon as practicable after Fiscal Year 1998.
5
<PAGE>
EXHIBIT 10.14
I, Barry Krantz, agree to provide consulting services subject to the following
terms of understanding:
1. I am an "at will" consultant. The company can elect to stop using my
services at any time, without further obligation, and I can advise the
company at any time of my desire to end this relationship. As a courtesy,
both parties do agree to provide two weeks notice of any desire to
terminate this relationship.
2. I will be paid at the rate of $200 per hour. I will submit an invoice for
my services monthly, with that invoice due to the company by the tenth of
the following month, and payment due to me within ten days of submitting
the invoice.
a) travel time will be billed at 50% of the time spent, unless I
was working while travelling, in which case it will be billed at
100% (i.e. on last week's flight to Las Vegas, I worked on the
plane on the way there, preparing for my meeting, so I'll bill
the time at 100%. I read the paper on the return flight, so I'll
bill that time at 50%).
b) if my lunches are working lunches, I'll bill my time at 100%. If
my lunch is merely a break from work, I will not charge for that
time at all.
3. I'll bill my expenses at cost. All travel related expenses will be pre-
approved. I'll submit expense reports monthly, concurrent with my
consulting invoice, and all expenses will be fully documented.
Reimbursement for expenses will be due to me within ten days of submission.
a) my requests for reimbursement of my telephone expenses (use of my
personal telephone lines for calls related to my consulting
assignment) will be submitted with a one month lag, so I can use
my monthly phone bills as a record from which to base my
submission.
b) I am authorized to stay at the Red Lion Hotel when I choose, if
my consulting activities involve my spending consecutive days at
the company headquarters. When possible, room charges will be
direct billed from the Red Lion to the company. If and when
direct billing doesn't occur, I'll pay the hotel and submit the
expense for reimbursement as part of that month's expense report.
4. My consulting services and expenses will be invoiced to and guaranteed by
CFI-PTY, Ltd.
<PAGE>
Page 2
Continued
5. The company understands that my consulting services will begin on December
1, 1996 and will involve approximately 3 days per week of my time. The
company also understands that there will be several blocks of time (i.e.
12/18/96 - 12/31/96 and 2/15/97 - 3/16/97) where I have other commitments
that will preclude my spending any time at all (or very little) on this
consulting assignment.
Agreed to on December 17, 1996 by:
/s/ Barry Krantz for Krantz Consulting
- -------------------------------
Barry Krantz
/s/ Kevin W. Perkins for CFI=PTY, Ltd.
- -------------------------------
Kevin W. Perkins
<PAGE>
EXHIBIT 10.18
STOCK PURCHASE PLAN
FOR
NON-EMPLOYEE DIRECTORS
OF
SIZZLER INTERNATIONAL, INC.
1. PURPOSE.
The purpose of this Stock Purchase Plan for Non-employee Directors (the
"Plan") is to provide Non-employee Directors of Sizzler International, Inc. (the
"Company") with the opportunity to receive all or part of their compensation as
directors in the form of common stock of the Company ("Common Stock").
2. SHARES OF COMMON STOCK AVAILABLE UNDER THE PLAN.
All persons serving on the Board of Directors of the Company who are not
employees of the Company or of any subsidiary of the Company shall be eligible
to participate in the Plan.
3. Eligibility.
The maximum number of shares of Common Stock available for purchase under
the Plan is one hundred thousand (100,000) shares of Common Stock. As the Board
of Directors may determine from time to time, the shares of Common Stock
purchased by participants from the Company under the Plan may consist either in
whole or in part of authorized but unissued shares or authorized and issued
shares reacquired by the Company and held in its treasury. If the outstanding
shares of the Company's Common Stock are increased, decreased, changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of reorganization, recapitalization, reclassification, stock
dividend, stock split or reverse stock split, an appropriate and proportionate
adjustment shall be made in the maximum number of shares of Common Stock which
may be purchased under the Plan.
4. ELECTION TO PARTICIPATE.
An eligible director may elect to have all or a portion of his or her
annual retainer fees used to purchase shares of Common Stock by completing the
election form attached hereto as Exhibit A (an "Election"). An Election shall
be effective as of the first calendar quarter commencing after receipt of the
Election by the Company and shall continue in effect until the earlier to occur
of (i) the end of the participant's service as a director or (ii) the end of the
calendar quarter during which the director gives the Company written notice of
the discontinuance of an Election.
<PAGE>
5. AMOUNT AVAILABLE FOR PURCHASE OF COMMON STOCK.
A participant may elect to have all or a portion of his or her annual
retainer fees used to purchase shares of Common Stock from the Company, but a
participant may not use any other compensation, fees or expense reimbursements
to purchase shares of Common Stock.
6. PURCHASE OF COMMON STOCK.
The price of shares of Common Stock purchased from the Company pursuant to
this Plan shall be the closing price reported on the New York Stock Exchange
Composite Transactions Listing on the first day of each calendar quarter for
which any Election pursuant to paragraph 4 shall be effective as contemplated by
this Plan. The Company shall not be obligated to issue certificates for
fractional shares of Common Stock, but, instead, after purchasing the maximum
number of whole shares, any remaining amount shall be paid in cash to the
participant.
7. EFFECTIVENESS OF PURCHASE AND CHARACTER OF COMMON STOCK.
Common Stock issuable under this Plan shall be deemed to have been
purchased and the participant shall be deemed to have become a holder of record
of such shares as of the first day of each calendar quarter (including, to the
extent permitted by law, the right to vote such shares or to consent or to
receive notice as a stockholder). The Company shall cause to be executed and
delivered to each participant a certificate or certificates representing such
shares of Common Stock as soon as reasonably practicable thereafter. Each
participant hereunder will file the appropriate Form 4 with the Securities and
Exchange Commission within ten days after the effectiveness of any purchase
under this Plan. All shares of Common Stock purchased under the Plan shall be
validly issued, fully paid and nonassessable, and free from all liens and
encumbrances.
8. AMOUNT PAYABLE ON DEATH OR TERMINATION OF SERVICE.
In the event of a participant's death or termination of service as a
director, any shares of Common Stock or cash owing to such deceased or departed
participant shall be paid as soon as reasonably practicable thereafter to the
participant or in the event of death to the beneficiary previously designated by
the participant. Any such designation shall be in writing and delivered to the
Secretary of the Company and may be changed by a later designation. If there is
no designation in effect, the shares shall be delivered and/or any cash balance
shall be paid to the participant's estate.
9. NONASSIGNABILITY.
The rights of a participant under this Plan cannot be assigned or
transferred.
<PAGE>
10. ADMINISTRATION.
This Plan shall be administered by the Secretary of the Company, who shall
have the authority to adopt rules and regulations for carrying out the Plan and
to interpret, construe and implement the provisions hereof.
11. AMENDMENT AND TERMINATION.
This Plan may be amended, modified or terminated at any time by the Board
of Directors of the Company; provided, however, that no such amendment,
modification or termination shall, without the consent of a participant,
adversely affect any rights or amount already accrued for the benefit of any
participant.
12. EFFECTIVE DATE.
The Plan shall become effective as of October 25, 1996.
* * * * *
<PAGE>
EXHIBIT A
NON-EMPLOYEE DIRECTOR
ELECTION TO PURCHASE SHARES
OF
SIZZLER INTERNATIONAL, INC.
Pursuant to the Stock Purchase Plan for Non-employee Directors of Sizzler
International, Inc. (the "Plan"), I hereby elect to use ____% of all future
payments with respect to the annual retainer fees for service on the Board of
Directors of Sizzler International, Inc. (the "Company") to purchase shares of
common stock of the Company ("Common Stock").
In the event of my death, I hereby elect to have any compensation or shares
of Common Stock owing to me paid to (check one):
_____ My estate
_____ The following:
_________________________________________
_________________________________________
(I understand that if I do not elect this option, the payments
from the Plan after my death will be paid to my estate.)
I hereby acknowledge that this election is subject to all the terms of the
Plan.
Date: _______________ , 19____ _____________________________
Signature of Director
RECEIVED on ___________, 19____, on behalf of the Company.
_____________________________
Secretary
<PAGE>
EXHIBIT 10.20
DEVELOPMENT AGREEMENT
BETWEEN:
KENTUCKY FRIED CHICKEN PTY. LIMITED
AND
COLLINS FOODS INTERNATIONAL
PTY. LIMITED
<PAGE>
DEVELOPMENT AGREEMENT dated day of 1996
BETWEEN: KENTUCKY FRIED CHICKEN PTY LIMITED A.C.N. 000 587 789 having its
registered office at 20 Rodborough Road, Frenchs Forest, NSW, 2086
("PRI")
AND: COLLINS FOODS INTERNATIONAL PTY. LIMITED ARBN 009 980 250, a
Nevada corporation having its principal executive office at 12655 West
Jefferson Boulevard, Los Angeles, California, 90066 and its registered
Australian office at 16 Edmondstone Street, Newmarket, Qld, 4051
("Franchisee")
BACKGROUND FACTS
PRI and/or its Affiliated Companies have developed a unique and valuable system
for the preparation, marketing and sale of certain quality food products under
various trade marks, service marks and trade names owned by them.
PRI is entitled to franchise to third parties the right to operate the Concept
using the Marks and the System.
PRI has agreed to grant Franchisee the right, and Franchisee has agreed to
accept the obligation, to develop Outlets in the Development Area under the
terms and conditions of this Agreement.
THE PARTIES AGREE:
1. DEFINITIONS
In this Agreement unless the context requires otherwise:
"Accounting Year" means PRI's financial year, as notified to Franchisee by
PRI.
"Affiliated Companies" means any companies which are part of one or more
ownership structures ultimately controlled by a common parent corporation
or common shareholders, including any related bodies corporate within the
meaning of the Corporations Law.
"Approvals" means all approvals, authorisations, consents, permits,
exemptions, licences and any other actions required by law or by any
person, company or governmental authority in order for Franchisee to be
able to develop and operate Outlets within the Development Area.
"Concept" means the concept specified in Schedule 1.
"Deemed Franchise Agreement" means a document in the form set out in
Schedule 4.
"Development Area" means the area specified in Schedule 1.
"Development Fee" means the fee specified in Schedule 1.
"Development Schedule" means the development obligations specified in
Schedule 2.
"Expansion/Renewal Criteria" means PRI's expansion/renewal criteria for
multi-site franchisees, as specified in Schedule 3.
"Franchise Agreement" means a franchise agreement in the form set out in
Schedule 6.
<PAGE>
-4-
"Franchise Documents" means the Franchise Agreement together with any other
documents required by PRI to be executed in connection with the development of
Outlets by Franchisee pursuant to this Agreement.
"Manuals" means the manuals, notices and correspondence published or
issued from time to time by PRI in any form, containing the Standards and
other requirements, rules, procedures and guidelines relating to the
System.
"Marks" means the trademarks, service marks and trade names owned by PRI or
its Affiliated Companies and designated by PRI from time to time for use in
the System.
"Outlet" means an outlet conforming to the Concept.
"Plans" means the final plans, drawings and specifications for the site and
building in respect of a proposed Outlet.
"System" means the system for the preparation, marketing and sale of food
products under the Marks used in operating the Concept.
"Term" means the period specified in Schedule 1, unless earlier terminated
pursuant to Clause 9.
2. DEVELOPMENT FEE AND DEVELOPMENT SCHEDULE
2.1 On or prior to the date of this Agreement, Franchisee will pay the
Development Fee to PRI.
2.2 PRI grants to Franchisee the right to develop, and Franchisee accepts the
obligation to develop, Outlets in the Development Area during the Term in
compliance with the Development Schedule.
2.3 Franchisee must at all times comply strictly with the Development Schedule
by having, as a minimum, the number of Outlets referred to in the
Development Schedule open and operating in the Development Area by the
dates referred to in the Development Schedule. The parties agree that time
is of the essence in relation to the time periods specified in the
Development Schedule.
3. BUSINESS PLAN / APPROVALS / HUMAN RESOURCES
3.1 Prior to execution of this Agreement, Franchisee must have provided PRI
with a business plan including projected profit and loss statements,
balance sheets and cash flow statements for the Term. Franchisee will
update the business plan each year and provide a copy of each update to PRI
not later than each anniversary date of this Agreement. Each business plan
will be in the format of PRI's Annual Operating Plan as notified to
Franchisee by PRI from time to time.
3.2 Franchisee will obtain and maintain all Approvals required in the
Development Area to enable Franchisee to comply with this Agreement, in
addition to all Approvals required in respect of individual Outlets.
3.3 Franchisee will at all times ensure that its business is adequately staffed
with properly qualified and trained employees, including by employing
people in the key positions and in accordance with the job descriptions,
competencies and profiles referred to in the Manuals or otherwise notified
to Franchisee by PRI from time to time.
<PAGE>
-5-
4. EXPANSION/RENEWAL CRITERIA
4.1 Franchisee must comply with the Expansion/Renewal Criteria each year during
the Term. PRI will review Franchisee's compliance with the
Expansion/Renewal Criteria on an annual basis.
4.2 If PRI determines after its annual review that Franchisee is not in
compliance with the Expansion/Renewal Criteria, PRI will notify Franchisee
of its non-compliance and Franchisee will have 45 days in which to remedy
such non-compliance.
4.3 At the end of the 45 day period, PRI will undertake a further review, at
Franchisee's cost, to determine whether Franchisee has remedied its non-
compliance to PRI's satisfaction.
4.4 Franchisee's ongoing development rights under this Agreement will be
suspended and Franchisee will not be entitled to enter into any new
commitments in respect of any proposed sites until PRI has undertaken the
further review pursuant to Clause 4.3 and has notified Franchisee in
writing that PRI is satisfied that Franchisee is in compliance with the
Expansion/Renewal Criteria.
4.5 Franchisee acknowledges that the 45 day cure period provided for under this
Clause applies only for the purposes of determining Franchisee's compliance
with the Expansion/Renewal Criteria and will not limit PRI's rights or
ability to act in respect of any breach of any other provision of this
Agreement or of any provision of any franchise agreement between the
parties.
5. OUTLET DEVELOPMENT PROCEDURE
5.1 Franchisee will not take any step towards developing an Outlet without
first obtaining PRI's written approval of the site for the proposed Outlet,
which approval shall be in PRI's sole discretion to grant or withhold. The
following approval procedure will apply:
(a) Franchisee will submit a written site evaluation to PRI,
including preliminary plans showing site location, dimensions,
building type and placement, proposed layout and other relevant
documents and information relating to the site as may be required by
PRI.
(b) PRI will complete its evaluation of the proposed site and notify
Franchisee of its approval or rejection of the proposed site and, if
approved, any conditions applying to the approval.
(c) Within 30 days of receipt of PRI's notice of approval of any proposed
site, Franchisee will:
(i) establish to PRI that it has the necessary freehold or
leasehold interest in the site to enable it to develop and
operate the Outlet, and in the case of a leasehold interest, on
terms and conditions approved by PRI;
(ii) submit to PRI for PRI's approval 2 copies of the proposed Plans;
and
(iii) execute and deliver to PRI the Franchise Documents in
respect of the proposed Outlet and pay any initial fee specified
in the Franchise Agreement.
(d) Franchisee will be responsible for ensuring, at Franchisee's
cost, that all necessary Approvals have been obtained in Franchisee's
name in respect of the Plans (including any modifications required by
PRI under paragraph (e)).
<PAGE>
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(e) PRI will notify Franchisee of any modifications to the Plans
required by PRI and Franchisee must bear all costs associated with
such modifications. Franchisee must resubmit the modified Plans to
PRI within 10 days of receipt of PRI's notice of the modifications.
5.2 As soon as practicable after receipt of PRI's final approval of the Plans,
Franchisee will commence the construction and fitting out of the Outlet at
the approved site in accordance with the Plans and with the procedures set
out in the Manuals.
5.3 Within 6 months of receipt of PRI's notice of approval of the site,
Franchisee will complete the construction and fitting out of the Outlet so
that it is ready for opening and will notify PRI of its intention to open
the Outlet for business. Franchisee will not open any Outlet for business
without first allowing PRI to inspect the Outlet and obtaining PRI's
written approval to open.
5.4 The time periods set out in this Clause 5 are designed to assist Franchisee
in meeting its development obligations under this Agreement. Franchisee
acknowledges that PRI will not deviate from or undermine the integrity of
its site approval process due to time constraints caused by Franchisee and
accordingly Franchisee's failure to comply with these time periods may
result in Franchisee failing to comply with the Development Schedule.
5.5 All costs associated with the development by Franchisee of any Outlet
pursuant to this Agreement will be borne by Franchisee.
6. FIRST RIGHT OF REFUSAL
6.1 Subject to compliance by Franchisee with its development obligations
pursuant to Clause 2.3 and with the Expansion/Renewal Criteria pursuant to
Clause 4, Franchisee will have a first right of refusal during the Term in
respect of any new Outlet within the Development Area which PRI considers
appropriate for development in addition to the Outlets in the Development
Schedule, as follows:
(a) PRI will not itself commence developing, or franchise to a third
party the right to develop, a new Outlet at any site within the
Development Area without first offering to Franchisee in writing the
right to develop the relevant Outlet under the terms of the Franchise
Documents.
(b) Franchisee will have 30 days from its receipt of the written
offer to execute and deliver to PRI the Franchise Documents in respect
of the relevant Outlet, and establish to PRI's satisfaction that
Franchisee has the necessary freehold or leasehold interest in the
site to enable it to develop and operate the Outlet, and in the case
of a leasehold interest, on terms and conditions approved by PRI.
(c) Franchisee will submit for PRI's approval 2 copies of the
proposed Plans and will follow the procedures set out in Clauses
5.1(d), 5.1(e) and 5.2.
(d) Franchisee must complete the development and open the relevant Outlet
within 6 months of receipt of the written offer from PRI.
6.2 If Franchisee fails on any occasion to comply with either Clause 6.1(b) or
Clause 6.1(d) then PRI will be entitled itself or by franchise to a third
party to develop the relevant Outlet.
7. EXECUTION OF FRANCHISE AGREEMENT
<PAGE>
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7.1 Notwithstanding Clause 5.1(c)(iii) and Clause 6.1(b), PRI may elect in
respect of one or more approved sites that Franchisee execute, in lieu of a
full-form Franchise Agreement, a Deemed Franchise Agreement. If PRI
chooses to adopt this approach, it will submit to Franchisee for execution
a Deemed Franchise Agreement duly completed with the Outlet
Address and Date of Grant for the relevant site or sites.
7.2 Upon PRI executing the Deemed Franchise Agreement, a separate Franchise
Agreement will be deemed to be effected in respect of each of the sites
referred to in the Deemed Franchise Agreement, with the appropriate Outlet
Address and Date of Grant duly completed in Schedule B of the Franchise
Agreement.
8. LIMITATIONS ON DEVELOPMENT RIGHTS
8.1 Franchisee acknowledges and agrees that Franchisee's development right and
first right of refusal under Clauses 2 and 6 apply only in respect of the
Concept and only within the Development Area. Other than as set out in
Clauses 2 and 6, no exclusive territory, protection or other right in
respect of the Development Area is expressly or impliedly granted to
Franchisee. Other than as set out in Clauses 2 and 6, Franchisee
acknowledges that PRI reserves the right to use, and to grant to other
parties the right to use within the Development Area:
(a) the Marks and the System in any manner and at any location
through all concepts and distribution channels (other than the
Concept) currently existing or which may be developed in the future;
(b) the Marks and the System through the Concept at Outlets already
under construction or operating at the date of this Agreement, or
Outlets developed by PRI or a third party pursuant to Clause 6.2; and
(c) all other marks, names or systems in connection with any product
or service in any manner and at any location.
8.2 Franchisee specifically acknowledges that PRI and its Affiliated Companies
and their franchisees operate other systems and concepts for the sale of
food products and services which may be competitive with the System and may
compete directly with the System within the Development Area.
9. TERMINATION
9.1 PRI may terminate this Agreement at any time during the Term by notice to
Franchisee effective immediately upon receipt by Franchisee of the notice
if any of the following events occur:
(a) Franchisee is unable to pay its debts as and when they become due
or becomes insolvent or a liquidator, receiver, manager, administrator
or trustee in bankruptcy (or local equivalent) of Franchisee or its
business is appointed, whether provisionally or finally, or an
application or order for the winding up of Franchisee is made or
Franchisee enters into any composition or scheme of arrangement;
(b) Franchisee fails to comply with its development obligations
referred to in Clause 2.3;
(c) PRI determines that Franchisee is not in compliance with the
Expansion/Renewal Criteria following PRI's review pursuant to Clause
4.3;
<PAGE>
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(d) PRI notifies Franchisee that Franchisee has breached any term or
condition of this Agreement (other than Clause 2.3 or Clause 4) and
Franchisee does not fully cure the breach to PRI's satisfaction within
the cure period provided for in the notice;
(e) an event occurs which gives rise to a right in PRI (or its
Affiliated Company) to terminate any franchise agreement between PRI
and Franchisee (or their respective Affiliated Companies); or
(f) any part of this Agreement is held to be void, invalid or
otherwise unenforceable.
9.2 Notwithstanding any provision to the contrary in the Franchise Agreement,
the termination by PRI of this Agreement will not of itself give PRI the
right to terminate individual Franchise Agreements in respect of either
existing Outlets which are already being operated by Franchisee, or PRI
approved sites for which Franchisee is already unconditionally committed to
acquiring a freehold or leasehold interest at the time of termination of
this Agreement.
9.3 PRI's exercise of any of its rights under this Clause 9 will be in addition
to and not in limitation of any other rights and remedies it may have in
the event of any breach or default by Franchisee.
10. GUARANTEE / NOTICES
10.1 Upon PRI's request, Franchisee will procure the execution by guarantors
approved by PRI of a guarantee of Franchisee's obligations and liabilities
under this Agreement and all Franchise Agreements entered into pursuant to
this Agreement, in the form required by PRI.
10.2 Any notice or other communication required or permitted to be given under
this Agreement will be in writing and properly addressed to the addressee
at the address specified in this Agreement (or any other address notified
by the addressee) and will be deemed received by the addressee on the
earlier of the date of delivery, the date of transmission if sent by
facsimile with receipt confirming completion of transmission, or, if sent
by pre-paid security or registered post, the deemed postal receipt date
specified in Schedule 1.
11. MISCELLANEOUS
11.1 This Agreement (and any Confidentiality Agreement that may have been signed
by the parties) constitutes the entire agreement between the parties with
respect to its subject matter and supersedes all prior negotiations,
agreements or understandings.
11.2 Franchisee is an independent contractor and is not the agent,
representative, joint venturer, partner or employee of PRI. No fiduciary
relationship exists between PRI and Franchisee.
11.3 Franchisee will not sell, transfer or gift any of its rights under this
Agreement to any other party without PRI's prior written approval, which
may be withheld in PRI's sole discretion.
11.4 This Agreement will inure to the benefit of PRI, its successors and assigns
and may be transferred by PRI to any party without the prior approval of
Franchisee.
11.5 The delay or failure of any party to exercise any right or remedy pursuant
to this Agreement will not operate as a waiver of the right or remedy and a
waiver of any particular breach will not be a waiver of any other breach.
All rights and remedies under this Agreement are cumulative and the
exercise of one right or remedy will not limit the exercise of any other
right or remedy.
<PAGE>
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11.6 If any part of this Agreement is held to be void, invalid or otherwise
unenforceable, PRI may elect either to terminate this Agreement pursuant to
Clause 9.1 or to sever the void, invalid or unenforceable part, in which
event the remainder of this Agreement will continue in full force and
effect.
11.7 The terms and conditions of this Agreement may be changed only in writing
signed by both parties, provided that the Manuals may be updated by PRI
from time to time in accordance with the Franchise Agreement.
11.8 This Agreement will be governed by and construed in accordance with the law
of the territory specified in Schedule 1 and the parties agree to submit
to the non-exclusive jurisdiction of the courts of that territory.
11.9 Franchisee will pay to PRI all reasonable legal expenses incurred by PRI in
connection with this Agreement, including, without limitation, any stamp
duty and any expenses incurred in connection with the enforcement of this
Agreement, provided that PRI is not itself in breach of any term or
condition of this Agreement at the time of enforcement.
11.10 Each party will take all such steps, execute all such documents and do
all such acts and things as may be reasonably required by the other party
to give effect to any of the transactions contemplated by this Agreement.
11.11 This Agreement is executed in English. A local language translation
may be attached, which the parties intend to be identical to the English
text. However, if any dispute arises as to the interpretation of the
language of this Agreement, the English text shall govern unless otherwise
prohibited under the law of the territory specified in Schedule 1.
11.12 In the interpretation of this Agreement, unless the context indicates a
contrary intention:
(a) the obligations of more than one party will be joint and several;
(b) words denoting the singular include the plural and vice versa and
words denoting any gender include all genders;
(c) headings are for convenience only and do not affect
interpretation;
(d) references to Clauses and Schedules are to clauses and schedules
of this Agreement, and the Schedules form part of this Agreement; and
(e) this Agreement may be executed in any number of counterparts,
each of which will be deemed an original but which together will
constitute one instrument.
EXECUTED AS AN AGREEMENT
THE COMMON SEAL of KENTUCKY )
FRIED CHICKEN PTY LIMITED was )
affixed in the presence of: )
/s/ John /s/ Peter Hearle
____________________________ ________________________
Secretary Director
<PAGE>
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THE COMMON SEAL of )
COLLINS FOODS INTERNATIONAL )
PTY. LIMITED was affixed in the )
presence of: )
/s/ David J. Barton /s/ Kevin W. Perkins
- ---------------------------- ------------------------
Secretary President
<PAGE>
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SCHEDULE 1
INFORMATION SCHEDULE
CONCEPT: KFC Restaurant
Outlets, excluding delivery and "two-in-one" outlets.
DEEMED POSTAL RECEIPT DATE: 3 days after the date of posting
DEVELOPMENT AREA: Queensland
DEVELOPMENT FEE: Nil
GOVERNING LAW: New South Wales
TERM: 10 years
commencing on the date of execution of this
Agreement
<PAGE>
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SCHEDULE 2
DEVELOPMENT SCHEDULE
DATE MINIMUM N0. OF OUTLETS
- --------------------------------------------------------------------
TO BE DEVELOPED AND OPENED
- ------------------------------------------------------------------------
On or before:
Last day of Period 13 in PRI's1997 Accounting Year 4
Last day of Period 13 in PRI's 1998 Accounting Year 4
Last day of Period 13 in PRI's 1999 Accounting Year 4
Last day of Period 13 in PRI's 2000 Accounting Year 4
Last day of Period 13 in PRI's 2001 Accounting Year 4
Last day of Period 13 in PRI's 2002 Accounting Year 3
Last day of Period 13 in PRI's 2003 Accounting Year 3
Last day of Period 13 in PRI's 2004 Accounting Year 3
Last day of Period 13 in PRI's 2005 Accounting Year 3
Tenth anniversary of date of execution of this
Agreement 3
<PAGE>
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SCHEDULE 3
EXPANSION/RENEWAL CRITERIA
(A) Outlets fitted with current signage and equipment standards
(B) STAR 2000, or PRI's then current training programs, or alternative training
programs used by Collins Foods with PRI's approval, in use in all Outlets
(C) All Outlet Managers and Area Managers trained and certified under current
management training programs
(D) Approved field management structure in place
(E) Franchisee in compliance with all Franchise Agreements, including all fees
and payments up to date
(F) Same store PRA sales growth year-on-year equal to or better than average
PRA sales growth year-on-year across the KFC system in Australia
(G) Rolling 6 month average CHAMPS (or score under PRI's then current
equivalent system) across all Outlets equal to or better than rolling 6
month average score across KFC system in Australia
(H) Franchisee has management and financial capacity to expand its network of
Outlets
(I) Ongoing participation in PRI's consumer P & L tracking programs, including
(without limitation) brand tracking research, customer experience
monitoring and CHAMPS checks.
<PAGE>
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SCHEDULE 4
DEEMED FRANCHISE AGREEMENT
AS REFERENCED IN THE DEVELOPMENT AGREEMENT DATED _____________BETWEEN THE
PARTIES ("DEVELOPMENT AGREEMENT")
Upon PRI executing this document, a separate Franchise Agreement (as defined in
the Development Agreement) will be deemed to be effected in respect of each of
the following outlets. The relevant Outlet Address and Date of Grant set out
below will be deemed to be included in Schedule B of such Franchise Agreement.
OUTLET ADDRESS DATE OF GRANT
-------------- -------------------------------
THE COMMON SEAL of )
KENTUCKY FRIED CHICKEN )
PTY LIMITED was affixed in )
the presence of: )
________________________ __________________________
Director Director/Secretary
THE COMMON SEAL of )
COLLINS FOODS )
INTERNATIONAL PTY. LTD )
was affixed in the presence of: )
________________________ __________________________
Director Director/Secretary
Date:
<PAGE>
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SCHEDULE 5
ADDITIONAL PROVISIONS OF DEVELOPMENT AGREEMENT
(A) The definition of "Franchise Agreement" is amended to read as follows:
"Franchise Agreement" means:
(a) during the first 5 years of the Term: a franchise agreement in
the form set out in Schedule 6; and
(b) during the last 5 years of the Term: a franchise agreement in the
then current form used by PRI as at the fifth anniversary of the date
of execution of this Agreement, including (without limitation) PRI's
then current fees."
(B) Clause 2.3 is amended to read as follows:
"Franchisee must at all times comply strictly with the Development Schedule
by developing, opening and operating, as a minimum, the number of new
Outlets referred to in the Development Schedule in the Development Area by
the dates referred to in the Development Schedule. The parties agree that
time is of the essence in relation to the time periods specified in the
Development Schedule, except in the event of war, civil commotion, fire,
flood, earthquake, act of God or any other cause beyond Franchisee's
reasonable control.
(C) A new Clause 2.4 is added as follows:
"2.4 Franchisee's closure from time to time of any operating Outlet in
the Development Area, if such closure is approved by PRI, will not
entitle PRI to correspondingly increase the number of Outlets referred
to in the Development Schedule in the relevant year."
(D) Clause 4.1 will be effective as from 1 December, 1997.
(E) Clause 5.1(b) is amended by the addition of the words "Within 30 days of
receipt of the written site evaluation" at the beginning of the Clause.
(F) In Clause 5.1(c), the period of 30 days is varied to 45 days.
(G) In Clause 5.1(e) the period of 10 days is varied to 30 days.
(H) Clause 5.3 is amended by changing the period of 6 months to 9 months and
including a further sentence at the end of the clause as follows:
"PRI will be deemed to have approved the opening of the Outlet if PRI has
not inspected the Outlet and disapproved its opening within 21 days of
PRI's CFO actually receiving Franchisee's notice of its intention to open
the Outlet. The deemed receipt provisions of Clause 10 will not apply in
respect of such notice to PRI's CFO."
(I) In Clause 6.1(b), the period of 30 days is varied to 45 days.
(J) In clause 6.1(d) the period of 6 months is varied to 9 months.
(K) Clause 9.1(c) will be effective as from 1 December, 1997.
(L) A new Clause 9.4 is added as follows:
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"9.4 Franchisee may terminate this Agreement at any time and for any
reason during the Term effective upon 3 months notice to PRI ."
(M) Clause 10.1 is deleted.
(N) Clause 11.1 is amended to read as follows:
"This Agreement and the Master Franchise Agreement executed by the parties
contemporaneously with this Agreement constitute the entire agreement
between the parties with respect to their subject matter and supersede all
prior negotiations, agreements or understandings."
(O) Clause 11.3 is amended to read as follows:
"(a) Franchisee will not sell, transfer or gift any of its rights
under this Agreement to any other party without PRI's prior written
approval, which may be withheld in PRI's sole discretion.
(b) In the event of an approved transfer by Franchisee of all KFC
outlets then operated by Franchisee to a single transferee in a single
transaction, Franchisee may transfer this Agreement, subject to
compliance by Franchisee with, and PRI granting approval pursuant to,
the transfer provisions of the Franchise Agreement".
(P) Clause 11.9 will be amended by deletion of the words "and any expenses
incurred in connection with the enforcement of this Agreement, provided
that PRI is not itself in breach of any term or condition of this Agreement
at the time of enforcement."
<PAGE>
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SCHEDULE 6
FRANCHISE AGREEMENT
See attached
<PAGE>
EXHIBIT 10.21
MASTER FRANCHISE AGREEMENT
BETWEEN:
KENTUCKY FRIED CHICKEN PTY. LIMITED
AND
COLLINS FOODS INTERNATIONAL
PTY. LIMITED
<PAGE>
AGREEMENT dated day of 1996
BETWEEN: KENTUCKY FRIED CHICKEN PTY LIMITED, A.C.N. 000 587 780 having its
registered office at 20 Rodborough Road, Frenchs Forest, NSW, 2086
("PRI")
AND: COLLINS FOODS INTERNATIONAL PTY. LIMITED, ARBN 009 980 250, a Nevada
corporation having its principal executive office at 12655 West
Jefferson Boulevard, Los Angeles, California, 90066 and its registered
Australian office at 16 Edmondstone Street, Newmarket, Queensland,
4051 ("Franchisee")
BACKGROUND FACTS:
PRI and Franchisee have agreed to vary the terms of their franchise relationship
on the following terms and conditions.
THE PARTIES AGREE:
1. DEFINITIONS
1.1 In this Agreement, unless the context requires otherwise:
"CO-OP AGREEMENT DATE" means the date of execution by Franchisee of the
agreement establishing the National Ad Co-op.
"CPI INDEXED" means adjusted in line with the percentage increase in the
Consumer Price Index (All Groups - Sydney) from the Effective Date.
"DEVELOPMENT AGREEMENT" means the development agreement executed by the
parties contemporaneously with this Agreement.
"EFFECTIVE DATE" means the earlier of the date of execution of this
Agreement or 30 September, 1996.
"FORMER FRANCHISE AGREEMENTS" means the agreements documenting the pre-
existing franchise arrangements between PRI and Franchisee in respect of
the Outlets.
"FRANCHISE AGREEMENT" means a franchise agreement in the form of the
agreement set out in Schedule 3.
"NATIONAL AD CO-OP" means the national advertising co-operative which PRI
intends to establish after the Effective Date.
"OUTLETS" means the 93 KFC outlets listed in Schedules 1 and 2.
1.2 All other capitalised terms in this Agreement will have the meanings
specified in Schedule A of the Franchise Agreement.
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2. PAYMENT
In consideration of the rights and benefits granted by PRI under this
Agreement, Franchisee will pay to PRI the sum of $A836,000 on the date of
execution of this Agreement. The operation of this Agreement is subject to
and conditional upon this payment.
3. FRANCHISE AGREEMENTS
3.1 As from the Effective Date, PRI will grant to Franchisee and Franchisee
will accept 93 single-site franchises to operate the Outlets on the terms
and conditions of the Franchise Agreement.
3.2 Upon the execution of this Agreement, a Franchise Agreement will be deemed
to have been executed in respect of each Outlet. Schedule B of the
Franchise Agreement will be deemed to be completed in respect of each
Outlet as follows:
(a) the Outlet address will be as specified in Schedule 1 or Schedule
2 (whichever is applicable);
(b) the Term and the Renewal Term will be as specified in Schedule 1
or Schedule 2 (whichever is applicable); and
(c) the Date of Grant will be the Effective Date.
3.3 The Franchise Agreement for each Outlet will be deemed to be amended as set
out in Clauses 4, 5, 6 and 7 for the currency of its term.
4. ADVERTISING CONTRIBUTIONS
Notwithstanding the provisions of Clause 6.1 of the Franchise Agreement:
(a) The operation of Clauses 6.1(a) and 6.1(b) of the Franchise
Agreement will be suspended between the Effective Date and the earlier
of the Co-Op Agreement Date and 1 February 1996 and, during this
suspension period, Franchisee will continue to spend, on local
advertising and promotions, the amount currently spent by Franchisee
on local and national advertising and promotions; and
(b) As from the Co-Op Agreement Date, Clause 6.1(a) of the Franchise
Agreement will be deleted.
5. TRANSFER FEE
Notwithstanding the Transfer Fee payable under the Franchise Agreement for
each Outlet, in the event of a PRI approved sale by Franchisee of its
interests under one or more of the Franchise Agreements prior to 30
September, 2019, the Transfer Fees payable by Franchisee to PRI will be as
follows:
(a) in the event of a sale prior to 1 December, 1996: $35,000 per
Outlet up to a total cumulative cap of $2.5 million; or
(b) in the event of a sale on or after 1 December, 1996 and prior to
30 September, 2019: $35,000 CPI Indexed per Outlet up to a total
cumulative cap of $3.5 million CPI
<PAGE>
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Indexed.
6. COMPETITIVE BUSINESS APPROVALS
6.1 PRI acknowledges that, as a result of the ownership, operation and
licensing of a number of existing "Sizzler" and "The Italian Oven"
restaurants in Australia by one or more of Franchisee's Affiliated
Companies, Franchisee may directly or indirectly have an interest or be
engaged in businesses involving the preparation, marketing or sale of food
products covered by Clause 13(a) of the Franchise Agreement.
6.2 Pursuant to Clause 13(a) of the Franchise Agreement, as from the Effective
Date, the following approvals will apply:
(a) PRI approves the current involvement of Franchisee's Affiliated
Companies in the existing Sizzler Restaurants in Australia and waives
any right under Clause 13(a) to disapprove any preparation, marketing
or sale of food products in connection with the ownership, operation,
licensing and/or management by Franchisee and/or its Affiliated
Companies of any new Sizzler Restaurants in Australia, or the
alteration, remodelling or repositioning of any existing Sizzler
Restaurants in Australia, provided that such new or altered,
remodelled, or repositioned restaurants do not predominantly involve
the preparation, marketing or sale of any one of the following food
types (each a "Designated Product"): pizza and pasta collectively;
chicken; Mexican; or burgers.
For the purpose of this provision, a "Sizzler Restaurant" is any
restaurant operated in whole or in part under the "Sizzler" mark
(including but not limited to Sizzler Steak Seafood, Salad, Sizzler
Cafe, Sizzler Express, Sizzler Flame Grill), whether or not in
association with other marks, provided that the association with the
other marks is not of itself covered by Clause 13(a) of the Franchise
Agreement.
For the purpose of this provision, a Sizzler Restaurant shall not
be "predominantly" involved in the preparation, marketing or sale of a
Designated Product so long as gross sales of that Designated Product
do not exceed 50% of the gross food sales, excluding beverage sales,
of that restaurant.
(b) PRI grants Franchisee a 3 year limited approval in respect of its
current involvement in Australia in the "The Italian Oven" business,
on the basis that Franchisee agrees to divest its interest in that
business to an entity other than an Affiliated Company within 3 years
from the Effective Date. Franchisee acknowledges that if Franchisee
has failed to so divest its interest in that business within 3 years
from the Effective Date, Franchisee will be in breach of the Franchise
Agreement and any new franchise agreements and, without prejudice to
any other rights and remedies PRI may have, it will be PRI's intention
to terminate all franchise agreements relating to the new KFC outlets
opened by Franchisee from the Effective Date.
7. UPGRADES
In the event of PRI requiring Franchisee, pursuant to Clause 4 of the
Franchise Agreement, to implement an upgrade or renovation of the Outlets
which is similarly to be implemented by PRI across any KFC outlets operated
by PRI in Australia, PRI will not require any such upgrade or renovation to
be implemented by Franchisee across the Outlets within a period which
involves a rate of implementation faster than the rate of implementation by
PRI across any PRI company-
<PAGE>
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operated stores.
8. TACO BELL
During the currency of the Development Agreement, subject to Franchisee not
being in default of any term or condition of the Franchise Agreement or the
Development Agreement, Franchisee will have a first right of refusal in
respect of TACO BELL in Queensland as follows:
(a) PRI will not itself commence developing, or franchise to a third
party the right to develop, TACO BELL in Queensland without first
offering to Franchisee in writing the right to develop TACO BELL under
the terms of PRI's then current franchise agreement and/or development
agreement, including the then current fees applicable to the type of
development opportunity being offered;
(b) Franchisee will have 90 days from its receipt of the written offer
to accept the offer by executing and delivering to PRI the franchise
agreement and/or development agreement and any other documents
required by PRI;
(c) If Franchisee fails to accept PRI's offer pursuant to paragraph
(b), PRI will be entitled itself or by franchise to a third party to
pursue the development of TACO BELL in Queensland.
9. DUAL-BRANDED OUTLETS
During the currency of the Development Agreement, subject to Franchisee not
being in default of any term or condition of the Franchise Agreement or the
Development Agreement, PRI will give Franchisee 90 days notice before
opening any "dual-branded" outlet under the KFC and PIZZA HUT brands in
Queensland.
10. TERMINATION AND RELEASE OF FORMER FRANCHISE AGREEMENTS
The parties agree that the Former Franchise Agreements will be terminated
with effect on and from the Effective Date. Each party hereby releases and
forever discharges the other party from and against all actions, claims,
damages and liabilities which it may have against the other party arising
out of the Former Franchise Agreements, provided that PRI's release of
Franchisee is subject to and conditional upon payment by Franchisee of all
fees and other amounts payable by Franchisee to PRI in respect of the
Outlets up to and including the Effective Date.
11. TERM AND TERMINATION OF THIS AGREEMENT
11.1 The term of this Agreement will commence on the Effective Date and will
continue until the expiration or termination of the last operative
Franchise Agreement in respect of an Outlet, unless earlier terminated
pursuant to Clause 11.2.
11.2 PRI may terminate this Agreement by notice to Franchisee effective
immediately upon receipt if any of the following events occur:
(a) Franchisee breaches any term or condition of this Agreement; or
(b) any of the Franchise Agreements in respect of the Outlets or any other
franchise agreement between PRI and Franchisee is terminated for any
reason.
11.3 The provisions of Clauses 5, 6 and 7 will survive the expiration of this
Agreement, and Clauses
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6.1 and 6.2 (a) will survive the termination of this Agreement, in respect
of and during the currency of the Franchise Agreements between PRI and
Franchisee still in existence at the time of expiration or termination.
12. TRANSFER
12.1 Except as specified in Clause 12.2, Franchisee may not transfer or assign
this Agreement to any other party without PRI's prior written approval,
which may be withheld in PRI's sole discretion.
12.2 In the event of an approved transfer by Franchisee of all the KFC outlets
operated by Franchisee to a single transferee in a single transaction,
Franchisee may transfer this Agreement, subject to compliance by Franchisee
with, and PRI granting approval pursuant to, Clause 14 of the Franchise
Agreement.
13. MISCELLANEOUS
13.1 Nothing in this Agreement applies to any KFC outlet developed by Franchisee
pursuant to the Development Agreement, or renewed by PRI after the
Effective Date and during the currency of the Development Agreement, except
Clauses 5, 6 and 7.
13.2 This Agreement, the Development Agreement and the Franchise Agreements
constitute the entire agreement between the parties with respect to their
subject matter and supersede all prior negotiations, agreements or
understandings.
13.3 This Agreement will inure to the benefit of PRI, its successors and assigns
and may be transferred or assigned by PRI to any party without Franchisee's
prior approval.
13.4 The terms and conditions of this Agreement may be changed only in writing
signed by both parties.
13.5 This Agreement will be governed by and construed in accordance with the law
of New South Wales and the parties submit to the non-exclusive jurisdiction
of the courts of New South Wales.
13.6 The currency of the amounts referred to in this Agreement will be
Australian dollars.
13.7 References to clauses and schedules are to clauses and schedules of this
Agreement and the Schedules form part of this Agreement.
13.8 Any notice or other communication required or permitted under this
Agreement will be in writing and properly addressed to the addressee at the
address specified in this Agreement (or any other address notified by the
addressee) and will be deemed received by the addressee on the earlier of
the date of delivery, the date of transmission if sent by facsimile with
receipt confirming completion of transmission, or 3 days after the date of
posting if sent by pre-paid security or registered post.
<PAGE>
-6-
EXECUTED AS AN AGREEMENT
THE COMMON SEAL of KENTUCKY )
FRIED CHICKEN PTY LIMITED was )
affixed in the presence of: )
/s/ John /s/ Peter Hearle
- --------------------------- ---------------------------
Secretary Director
THE COMMON SEAL of )
COLLINS FOODS INTERNATIONAL )
PTY. LIMITED was affixed in )
the presence of: )
/s/ David J. Barton /s/ Kevin Perkins
- -------------------------- ---------------------------
Secretary President
<PAGE>
-7-
SCHEDULE 1 - 63 OUTLETS
<TABLE>
<CAPTION>
OUTLET TERM RENEWAL TERM
<S> <C> <C>
MACKAY, Nebo Rd & George Street 23 years commencing on the Date of Grant Nil
MT ISA, Marion & Simpson Streets 23 years commencing on the Date of Grant Nil
CABOOLTURE, Morayfield Rd,
Morayfield 23 years commencing on the Date of Grant Nil
BUNDABERG, 263 Bourbong Street 23 years commencing on the Date of Grant Nil
TOOWOOMBA 3, Ruthuen & Stennar 23 years commencing on the Date of Grant Nil
Streets
CAIRNS, Martyn & Mulgrave Roads 23 years commencing on the Date of Grant Nil
TOWNSVILLE 2 (GARBUTT), Ingham Rd &
Douglas Street 23 years commencing on the Date of Grant Nil
IPSWICH (BOOVAL), Brisbane Rd &
Station St 23 years commencing on the Date of Grant Nil
LOGAN CITY, Cnr. Wembley & Maves
Roads, Woodridge 23 years commencing on the Date of Grant Nil
TOOWOOMBA 2 (WILSONTON), Cnr.
Bridge & Erin Streets 22 years commencing on the Date of Grant Nil
NERANG (GOLD COAST), Hinkler Drive 22 years commencing on the Date of Grant Nil
SPRINGWOOD, Dennis St & Pacific
Highway 22 years commencing on the Date of Grant Nil
TOWNSVILLE 3 (CRANBROOK), Cnr. Ross 22 years commencing on the Date of Grant Nil
River Rd & Alice Street, Cranbrook
STRATHPINE, Cnr Station & Woodford
Roads 22 years commencing on the Date of Grant Nil
ROCKHAMPTON 2 - STH, Cnr George &
Archer Streets 22 years commencing on the Date of Grant Nil
INNISFALL, 121 Edit Street 22 years commencing on the Date of Grant Nil
EARLVILLE (CAIRNS 2), 532 Mulgrave Rd 22 years commencing on the Date of Grant Nil
REDBANK, Redbank Plaza Shopping 22 years commencing on the Date of Grant Nil
Centre
ANNERLEY, 594-600 Ipswich Rd 21 years commencing on the Date of Grant Nil
MAROOCHYDORE, Cnr Aerodrome & First 21 years commencing on the Date of Grant Nil
Ave
CLAYFIELD, Sandgate Rd 21 years commencing on the Date of Grant Nil
NAMBOUR, Cnr Currie & Arundel Drive 21 years commencing on the Date of Grant Nil
KEDRON, Gympie & Broughton Streets 21 years commencing on the Date of Grant Nil
ASPLEY, Bruce Highway 21 years commencing on the Date of Grant Nil
BRASSALL, 68 Hunter Street, Brassall 21 years commencing on the Date of Grant Nil
LOGANLEA (MARSDEN), 92 Chambers
Flat Rd 21 years commencing on the Date of Grant Nil
</TABLE>
<PAGE>
-8-
SCHEDULE 1 - 63 OUTLETS
<TABLE>
<S> <C> <C>
BROWNS PLAINS, Grand Plaza Shopping
Centre, 25 Browns Plains Rd 21 years commencing on the Date of Grant Nil
BEENLEIGH, Beenleigh Plaza City Rd 20 years commencing on the Date of Grant Nil
WYNNUM, Cnr. Wynnum Rd & Capri Lane 20 years commencing on the Date of Grant Nil
GLADSTONE, 57 Dawson Rd 20 years commencing on the Date of Grant Nil
ROCKHAMPTON 1 (NORTH), Elizabeth 20 years commencing on the Date of Grant Nil
Drive
GREENSLOPES, Logan Rd 20 years commencing on the Date of Grant Nil
WARWICK, Cnr. Wood & Gay Streets 20 years commencing on the Date of Grant Nil
SUNNYBANK, Mains Road & McCullough
Street 20 years commencing on the Date of Grant Nil
GYMPIE, Cnr Wickham & Channon
Streets 20 years commencing on the Date of Grant Nil
DALBY, Cnr. Drayton & Pratten
Streets 20 years commencing on the Date of Grant Nil
TOWNSVILLE (HERMIT PARK), Charters
Towers Rd 19 years commencing on the Date of Grant Nil
GROVERLY, 161 Dawson Parade 19 years commencing on the Date of Grant Nil
KELVIN GROVE, Kelvin Grove & Park
Streets 19 years commencing on the Date of Grant Nil
MARGATE (REDCLIFFE), Oxley Street 19 years commencing on the Date of Grant Nil
BENOWA, Benowa Gds, Shop Ctr, Cnr,
Benowa & Ashmore Rds 19 years commencing on the Date of Grant Nil
CENTENARY, Centenary Shop, Ctr. 171
Dandenong Rd, Mt Ommaney 19 years commencing on the Date of Grant Nil
ROMA, Cnr. Quinton & Bowden Streets 19 years commencing on the Date of Grant Nil
CLEVELAND, Shore St. Cleveland 19 years commencing on the Date of Grant Nil
SMITHFIELD, Cnr McGregor & Captain
Cook Hwy, Smithfield, Cairns 19 years commencing on the Date of Grant Nil
DEAGON, 8 Braun Street 18 years commencing on the Date of Grant Nil
AYR, 212 Queen Street 18 years commencing on the Date of Grant Nil
CAPALABA, Cnr. Old Cleveland Rd &
Dollery Street 18 years commencing on the Date of Grant Nil
TOOWOOMBA 1, Cnr. Margaret & Pugh
Streets 18 years commencing on the Date of Grant Nil
CALOUNDRA, 73 B Bowman Road 18 years commencing on the Date of Grant Nil
MORNINGSIDE, 583 Wynnum Rd 18 years commencing on the Date of Grant Nil
INGHAM, 82 Herbert Street 18 years commencing on the Date of Grant Nil
</TABLE>
<PAGE>
-9-
<TABLE>
<S> <C> <C>
EMERALD, Emerald Vil Shop Ctre. Cnr
Curt St & Hospital Rd 18 years commencing on the Date of Grant Nil
RUNAWAY BAY, Runaway Bay Shop Centre 18 years commencing on the Date of Grant Nil
KALLANGUR, Anzac Ave 17 years commencing on the Date of Grant Nil
PALM BEACH, The Pines Shopping
Centre, Elanora 17 years commencing on the Date of Grant Nil
ACACIA RIDGE, Cnr. Beaudesert Rd &
O'Connell Street 17 years commencing on the Date of Grant Nil
BEAUDESERT, Brisbane Street 17 years commencing on the Date of Grant Nil
MAREEBA, 114 Byrnes Street 17 years commencing on the Date of Grant Nil
COOLANGATTA, Showcase Shop. Ctr.
Marine Parade 17 years commencing on the Date of Grant Nil
MACKAY 2 (MT PLEASANT), Mt.
Pleasant Shopping Centre, Phillip
Street 17 years commencing on the Date of Grant Nil
DECEPTION BAY, Cnr Park & Deception
Bay Roads 17 years commencing on the Date of Grant Nil
MT. GRAVATT, Logan Road & Creighton
Street 17 years commencing on the Date of Grant Nil
</TABLE>
<PAGE>
-13-
SCHEDULE 3 - FRANCHISE AGREEMENT
<TABLE>
<CAPTION>
OUTLET TERM RENEWAL TERM
<S> <C> <C>
KENMORE, 906 Moggill Rd 8 years commencing on the Date of Grant 12 years
MIAMI, Gold Coast Hwy, & Oak Street 8 years commencing on the Date of Grant 12 years
BILOELA, 10 Gladstone Road 8 years commencing on the Date of Grant 12 years
HERVEY BAY, Cnr. Torquay Road &
Taylor Streets 8 years commencing on the Date of Grant 12 years
SOUTHPORT, 3 Frank Street 8 years commencing on the Date of Grant 12 years
EVERTON PARK, Cnr. Strathpine &
Griffin 8 years commencing on the Date of Grant 12 years
HELENSVALE, Lot 18, Siganto Drive 9 years commencing on the Date of Grant 11 years
MERMAID BEACH, 2505-2516 Gold Coast
Highway 9 years commencing on the Date of Grant 11 years
CHARTERS TOWERS, 58 Gill Street 9 years commencing on the Date of Grant 11 years
INDOOROOPILLY 1, Standford & Mogill
Roads 9 years commencing on the Date of Grant 11 years
KINGAROY, Cnr Young & Alfred Streets 9 years commencing on the Date of Grant 11 years
MARYBOROUGH, Cnr Walker & Ferry
Streets 9 years commencing on the Date of Grant 11 years
NOOSA, 5 Sunshine Beach Rad 10 years commencing on the Date of Grant 10 years
SURFERS PARADISE, Pacific Highway 10 years commencing on the Date of Grant 10 years
MORANBAH, Moranbah Fair Shopping
Centre, Moranbah 10 years commencing on the Date of Grant 10 years
YEPPOON, Cnr. Adelaide St &
Normanby Road 10 years commencing on the Date of Grant 10 years
SUNNYBANK FOOD COURT, Shop 107,
Sunnybank Plaza. Cnr. Mains &
McCullough 10 years commencing on the Date of Grant 10 years
AUSTRALIA FAIR, Aust Fair Shop
Ctr., Southport, Gold Coast 10 years commencing on the Date of Grant 10 years
LOGANHOLME, Pacific Hwy & Bryants
Road 11 years commencing on the Date of Grant 9 years
TRANSIT CENTRE, Shop 3.01, A
Foodcourt, Roma Street, Brisbane 11 years commencing on the Date of Grant 9 years
CAPALABA, Central F/C, Shop F8,
Capalaba, Moreton Bay Road 11 years commencing on the Date of Grant 9 years
WATERFRONT PLACE, Shop 8,
Waterfront Pl, Eagle Street,
Brisbane 11 years commencing on the Date of Grant 9 years
ROBINA, Shop TG4.57 Robina Town
Centre, Robina Parkway, Robina 11 years commencing on the Date of Grant 9 years
KANGAROO POINT, 6000 Main Street 11 years commencing on the Date of Grant 9 years
</TABLE>
<PAGE>
-13-
SCHEDULE 3 - FRANCHISE AGREEMENT
<TABLE>
<S> <C> <C>
MYER CENTRE, Cinema Lev Myer Ctr,
Albert Street, Brisbane 12 years commencing on the Date of Grant 8 years
NATHAN PLAZA, Shop 164, S'land Shop
Cent. Ross River Rd, Townsville 12 years commencing on the Date of Grant 8 years
EARLVILLE FOOD COURT, Earlville
Shopping Centre, Earlville 12 years commencing on the Date of Grant 8 years
INDOOROOPILLY 2, Shop 228, F/C
Westfield Shop Twn, 318 Moggill
Road 12 years commencing on the Date of Grant 8 years
PACIFIC FAIR, Shop 363, Pac Fair
Nerang - Broadbeach Rad, Broadbeach 12 years commencing on the Date of Grant 8 years
TOOMBUL, Shop 161, Westfield
Shopping Centre, Landpate Road 12 years commencing on the Date of Grant 8 years
</TABLE>
<PAGE>
EXHIBIT 10.22
FRANCHISE AGREEMENT
BETWEEN:
KENTUCKY FRIED CHICKEN PTY. LIMITED
AND
COLLINS FOODS INTERNATIONAL
PTY. LIMITED
<PAGE>
AGREEMENT dated day of 1996
BETWEEN: KENTUCKY FRIED CHICKEN PTY LIMITED, A.C.N. 000 587 780 having its
registered office at 20 Rodborough Road, Frenchs Forest, NSW, 2086 ("PRI")
AND: COLLINS FOODS INTERNATIONAL PTY. LIMITED, ARBN 009 980 250, a Nevada
corporation having its principal executive office at 12655 West
Jefferson Boulevard, Los Angeles, California, 90066 and its registered
Australian office at 16 Edmondstone Street, Newmarket, Queensland,
4051 ("Franchisee")
BACKGROUND FACTS
PRI and/or its Affiliated Companies have developed a unique and valuable system
for the preparation, marketing and sale of certain quality food products under
various trade marks, service marks and trade names owned by them.
The System is a comprehensive restaurant system for the retailing of a limited
menu of uniform and quality food products, emphasising prompt and courteous
service in a clean and wholesome atmosphere which is intended to be particularly
attractive to families. The foundation and essence of the System is the
adherence by franchisees to standards and policies providing for the uniform
operation of all restaurants within the System including, but not limited to,
serving designated food and beverage products; the use of only prescribed
equipment and building layout and designs; and strict adherence to designated
food and beverage specifications and to prescribed standards of quality, service
and cleanliness in restaurant operations. Compliance by franchisees with the
foregoing standards and policies in conjunction with the trademarks, service
marks and trade names provides the basis for the valuable goodwill and wide
acceptance of the System. Moreover the establishment and maintenance of a close
personal working relationship with Franchisee in the conduct of the Business,
Franchisee's accountability for performance of the obligations contained in this
agreement, and Franchisee's adherence to the tenets of the System constitute the
essence of the license provided for herein.
PRI is entitled to grant to third parties, and has agreed to grant to
Franchisee, the right to use the System, the System Property and the Marks on
the terms and conditions of this Agreement.
In this Agreement, capitalised terms have the meanings specified in Schedule A.
THE PARTIES AGREE:
1. GRANT OF FRANCHISE
1.1 PRI grants to Franchisee the right to use the System, the System Property
and the Marks for the Term solely in connection with the conduct of the
Business at the Outlet and subject to the terms and conditions of this
Agreement.
1.2 At all times during the Term, Franchisee will use its best endeavours to
develop the Business and to increase the Revenues.
1.3 Franchisee will not, without PRI's prior written approval:
(a) conduct all or any part of the Business at any location other than
the Outlet; or
(b) sub-license to any other party the right to use the System, the
System Property or the Marks.
<PAGE>
-4-
1.4 No exclusive territory, protection or other right in the contiguous space,
area or market of the Outlet is expressly or impliedly granted to
Franchisee. PRI reserves the right to use, and to grant to other parties
the right to use, the Marks, the System and the System Property or any
other marks, names or systems in connection with any product or service
(including, without limitation, the Approved Products) at any location
other than the Outlet through any outlet, food service concept or
distribution channel. Franchisee acknowledges that, as at the Date of
Grant, PRI and its Affiliated Companies and franchisees operate outlets
conforming to the Concept and also operate other systems for the sale of
food products and services which are competitive with the System and may
compete directly with the Business.
2. INITIAL FEE AND CONTINUING FEE
2.1 On or before the Date of Grant, Franchisee will pay the initial fee
specified in Schedule B to PRI.
2.2 On or before each Due Date, Franchisee will pay the Continuing Fee to PRI.
Each payment of the Continuing Fee will be accompanied by a statement of
the Revenues for the relevant Accounting Period, in the form required by
PRI from time to time.
2.3 Franchisee's payments pursuant to this Agreement are in consideration
solely for the grant of rights in Clause 1.1 and not for PRI's performance
of any specific obligations or services.
3. MANUALS AND STANDARDS
3.1 At all times during the Term, Franchisee must comply with all of the
Standards and the Manuals and all applicable laws, regulations, rules, by-
laws, orders and ordinances in its conduct of the Business. The Manuals
are incorporated by reference into this Agreement.
3.2 PRI may, by notice to Franchisee, at any time change any of the Standards
or Manuals or introduce new Standards or Manuals. Franchisee acknowledges
and agrees that such changes or introductions will bind Franchisee upon
receipt as provided in Clause 20 and Franchisee will implement such changes
or introductions within the period specified in the notice.
3.3 In order to determine Franchisee's compliance with the Manuals and the
terms and conditions of this Agreement, PRI and its agents or
representatives will have the right at all times during opening hours to
enter and inspect the Outlet without prior notice to Franchisee.
4. UPGRADES
PRI may, by notice to Franchisee, at any time require Franchisee to upgrade
or renovate all or part of the Outlet or its equipment, systems or
inventory to ensure compliance with the Standards, and Franchisee
acknowledges and agrees that such upgrades or renovations may require
significant capital expenditures and/or ongoing financial commitments.
Franchisee will implement any upgrade or renovation required by PRI within
the period specified in the notice.
<PAGE>
-5-
5. APPROVED PRODUCTS AND SUPPLIES
5.1 Franchisee will not prepare, market or sell at the Outlet any product or
service other than the Approved Products without PRI's prior written
approval. PRI will from time to time notify Franchisee of the Approved
Products and will specify those of the Approved Products which must be
offered for sale at the Outlet at all times.
5.2 PRI may, by notice to Franchisee, at any time change or withdraw any
Approved Product or add new Approved Products. Franchisee will implement
such changes, withdrawals and additions within the period specified in the
notice.
5.3 Franchisee will purchase the supplies, materials, equipment and services
used in the Business from suppliers who have been approved in writing by
PRI prior to the time of supply in accordance with the approval procedures
in the Manuals. Franchisee will not have any claim or action against PRI in
connection with any approved supplier's non-delivery, delayed or non-
conforming delivery.
6. ADVERTISING
6.1 Franchisee will spend, in the manner directed by PRI in writing from time
to time, an amount not less than the Advertising Contribution on
advertising and promoting the products and services of the Business and the
System. Without limitation, PRI may at any time during the Term direct
Franchisee:
(a) to pay all or part of the Advertising Contribution to PRI, in
which event PRI will apply the Advertising Contribution to the costs
of national and regional advertising and promotions conducted by PRI
in its discretion, provided that PRI will not have any obligation to
apply the Advertising Contribution for the specific benefit of
Franchisee or the Business and no express or implied trust will be
created in respect of the Advertising Contribution;
(b) to pay all or part of the Advertising Contribution to a national
or regional co-operative advertising fund specified by PRI; or
(c) to spend all or part of the Advertising Contribution on local or
regional advertising and promotions, provided that if Franchisee fails
to spend the full amount directed by PRI, Franchisee will pay the
unspent amount to PRI within the period specified in a written demand
from PRI.
6.2 Franchisee will participate in such national and regional advertising and
promotions as PRI from time to time requires and Franchisee will not have
any claim or action against PRI in connection with the level of success of
any such advertising or promotion.
6.3 Franchisee will not execute or conduct any local or regional advertising or
promotion without PRI's prior written approval.
7. TRAINING
PRI will provide and Franchisee and Franchisee's employees will undertake
such initial and ongoing training and assistance as PRI in its discretion
considers appropriate. Franchisee will bear the full cost of attendance at
training programs. Franchisee will ensure that all store managers
operating the Outlet have been certified by PRI as having successfully
completed PRI's current training programs from time to time.
<PAGE>
-6-
8. MARKS AND SYSTEM PROPERTY
8.1 The Marks, the System Property and the goodwill associated with them are
the exclusive property of PRI and/or its Affiliated Companies. Franchisee
will acquire no right, interest or benefit in or to them other than the
rights of use granted under this Agreement. All accretions in the goodwill
associated with the Marks and the System Property resulting from
Franchisee's use thereof are solely for the benefit of PRI and its
Affiliated Companies.
8.2 Franchisee will use the Marks only in such form and manner as is
specifically approved by PRI and Franchisee will follow PRI's instructions
regarding proper usage of the Marks in all respects. PRI may, by notice to
Franchisee, at any time change or withdraw any of the Marks or designate
new Marks and Franchisee will implement such changes, withdrawals and
additions within the period specified in the notice.
8.3 Franchisee will not use in the operation of the Business any trademarks,
service marks, trade names or indicia other than the Marks without PRI's
prior written approval. Franchisee will not use, register or apply to
register any trademarks, trade names or indicia similar to the Marks or
that in any way suggest an association or affiliation with the System.
8.4 Franchisee will do nothing to prejudice, damage or contest the validity of
the Marks, the System Property, the goodwill associated with them or the
ownership of them by PRI or its Affiliated Companies. Franchisee will
cooperate fully with PRI in the protection and defence of the Marks and the
System Property, which will be undertaken solely by PRI. Franchisee will
promptly notify PRI of any actual or potential infringements of, or claims
or actions brought by third parties in respect of, the Marks or the System
Property.
8.5 Any improvements to, and inventions and products derived from the Marks the
System Property or the Business during the Term, including those
attributable to Franchisee, will be the exclusive property of PRI or its
Affiliated Companies and will be promptly disclosed by Franchisee to PRI.
Franchisee hereby assigns to PRI all present and future right, title and
interest throughout the world in and to any such improvements, inventions
and products. Franchisee will take all actions and execute all documents
required by PRI for this purpose.
8.6 Franchisee agrees to join with PRI in any application to enter Franchisee
as a registered or permitted user of the Marks with any governmental entity
and Franchisee acknowledges that upon termination or expiration of this
Agreement, PRI may automatically cancel such entry.
9. CONFIDENTIALITY
9.1 Franchisee will at all times during and after the Term keep confidential
and not disclose to any person, other than with PRI's prior written
approval or to Franchisee's employees for the purposes of the Business, the
Manuals, all other materials containing or referring to the System Property
and all other information concerning PRI's business and affairs which may
come to Franchisee during the Term. Franchisee will ensure that
Franchisee's employees retain the Manuals and other materials and
information in confidence. This obligation of confidentiality does not
apply in respect of information in the public domain or previously known to
Franchisee otherwise than by breach of any obligation of confidentiality,
or disclosure required by law or an order of any court or tribunal.
9.2 Franchisee will not reproduce or part with possession of the Manuals or
other materials containing or referring to the System Property without
PRI's prior written approval and will return all copies of the Manuals and
other materials to PRI immediately upon the expiration or termination of
this Agreement or upon PRI's request.
<PAGE>
10. ACCOUNTING RECORDS
10.1 Franchisee will establish and maintain an accounting system incorporating
methods, procedures, records and equipment satisfactory to PRI and in
compliance with the Manuals.
10.2 Franchisee will retain all records relating to the Business for the period
required by the tax authorities and PRI and its agents or representatives
will have the right at any reasonable time to inspect and audit the records
wherever they are located. Franchisee will fully cooperate and will
instruct its employees, agents or representatives to fully cooperate with
PRI and its agents or representatives during such inspections and audits.
If any inspection or audit discloses a deficiency in Franchisee's payment
of any amount payable or required to be spent by Franchisee pursuant to
this Agreement, Franchisee will immediately pay to PRI the deficiency plus
late payment interest pursuant to Clause 11.2. If the deficiency is equal
to or greater than 2% of the correct amount, Franchisee will also
immediately pay to PRI all of the costs incurred by PRI in the inspection
or audit.
11. PAYMENTS BY FRANCHISEE
11.1 Franchisee will pay all amounts due to PRI pursuant to this Agreement:
(a) in the currency specified in Schedule B or such other currency as
PRI notifies Franchisee from time to time, using, where applicable,
the exchange rate for conversion to the specified currency which is
posted on the day before the due date for payment by such bank as is
specified by PRI from time to time;
(b) into the bank account specified in Schedule B or in such other
manner as PRI notifies Franchisee from time to time; and
(c) without any deduction or set-off and free of any taxes, deductions
or withholdings other than as required by law. To the extent that a
deduction or withholding is required to be made by law, Franchisee
will pay such increased amount as will, after deduction or
withholding, result in the receipt by PRI of the same amount as would
have been received had no such deduction or withholding been made.
11.2 Any amount not paid by Franchisee to PRI when due will bear late payment
interest calculated on a daily basis from the due date at the rate
specified in Schedule B. This interest will continue to apply after any
judgment.
11.3 Franchisee will pay promptly when due all taxes, duties, charges and levies
payable in respect of the Business and all debts and other financial
obligations incurred in the operation of the Business, including, without
limitation, all obligations to suppliers. If applicable, Franchisee will
observe, perform and comply with all obligations and covenants to the
lessor of the Outlet's premises.
<PAGE>
-8-
12. INSURANCE, INDEMNITY AND GUARANTEE
12.1 At all times during the Term, Franchisee will at its cost maintain the
insurances prescribed in the Manuals. PRI must be named as an additional
insured party on the policies of insurance. Franchisee will on demand
deliver to PRI certificates of insurance and will not commit any act or
omission which may render the insurances void or voidable.
12.2 Franchisee indemnifies and will keep indemnified PRI, its Affiliated
Companies and their agents, employees, directors, successors and assigns
from and against any and all claims, liabilities, losses, costs and damages
(including legal costs and expenses) arising directly or indirectly in
connection with or related to Franchisee's conduct of the Business, PRI's
exercise of any right pursuant to this Agreement, including, without
limitation, any exercise of the power of attorney granted pursuant to
Clause 15.4, or any act or omission by any agent, representative,
contractor, licensee or invitee of Franchisee.
12.3 As a precondition to the grant of rights pursuant to Clause 1.1, Franchisee
will procure the execution by the guarantors specified in Schedule B (and
such other guarantors as PRI requires in connection with any approved
transfer of any interest or share in Franchisee) of a guarantee of
Franchisee's obligations and liabilities under this Agreement, in the form
required by PRI and including such covenants by the guarantors regarding
the terms and conditions of this Agreement as PRI may require.
13. PROTECTION OF SYSTEM PROPERTY AND GOODWILL OF SYSTEM
Franchisee covenants that neither Franchisee nor any Affiliated Company of
Franchisee will directly or indirectly in any capacity, whether on its own
account or as a member, shareholder, director, employee, agent, partner,
joint venturer, advisor, consultant, lender or lessor, have any interest
in, be engaged in or perform any services for:
(a) during the Term, any business within the in-Term area specified in
Schedule B involving the wholesale or retail preparation, marketing or
sale of any food products without PRI's prior written approval,
provided that such approval will not be unreasonably withheld by PRI
if the business does not predominantly involve the preparation,
marketing or sale of pizza and pasta (collectively), chicken, Mexican
or burger products; and
(b) for 12 months following the expiration, termination or transfer of
this Agreement, any business within the post-Term area specified in
Schedule B involving the preparation, marketing or sale of products
similar to the Approved Products.
14. TRANSFERS AND CHARGES
14.1 Franchisee will not charge, pledge or otherwise encumber any interest
in or right under this Agreement. Franchisee will not charge, pledge or
otherwise encumber any interest in or asset of the Business without giving
PRI prior notice.
14.2 Franchisee will not sell, transfer or gift this Agreement or any interest
in this Agreement without first obtaining PRI's prior written approval of
the proposed transferee and then complying with all of PRI's transfer
procedures specified in the Manuals, including, without limitation, paying
to PRI the transfer fee specified in Schedule B and the costs and expenses
incurred by PRI in connection with the transfer.
14.3 Franchisee will not, without PRI's prior written approval, permit any sale,
transfer or gift of any interest or share in Franchisee, issue any new
share in Franchisee to any party who is not a
<PAGE>
-9-
shareholder at the Date of Grant or permit any reconstruction, amalgamation
or other material change in the structure or financial condition of
Franchisee.
14.4 If Franchisee proposes any sale or transfer of this Agreement or any
interest in this Agreement, Franchisee will notify PRI of the agreed terms
and conditions and PRI will have the right itself to elect to proceed with
the sale or transfer on substantially the same terms and conditions within
60 days of receipt of Franchisee's notice. If PRI does not so proceed,
Franchisee will submit the proposed transferee for PRI's approval pursuant
to Clause 14.2.
15. DEFAULT AND TERMINATION
15.1 PRI may terminate this Agreement by notice to Franchisee effective upon
receipt by Franchisee of the notice, and/or adopt any of the remedies
specified in Clause 15.2, if any of the following events occur:
(a) Franchisee is unable to pay any of its debts when they become due
or becomes insolvent or a liquidator, receiver, manager, administrator
or trustee in bankruptcy (or local equivalent) of the Franchisee or
the Business is appointed, whether provisionally or finally, or an
application or order for the winding up of Franchisee is made or
Franchisee enters into any composition or scheme of arrangement;
(b) Franchisee breaches any of the terms and conditions of Clauses
1.3, 5.1, 8, 9, 13 and 14;
(c) Franchisee commits any crime, offence or act which in PRI's
reasonable judgment is likely to adversely affect the goodwill of the
Business, the Marks, the System or the System Property;
(d) Franchisee knowingly or negligently maintains false records in
respect of the Business or submits any false report to PRI;
(e) Franchisee abandons or ceases to operate the Business for more
than 3 consecutive days without PRI's prior written approval provided
that such approval will not be unreasonably withheld by PRI where the
abandonment or cessation is caused by war, civil commotion, fire,
flood, earthquake, act of God or any other cause beyond Franchisee's
reasonable control;
(f) any other agreement between PRI and Franchisee (or their
respective Affiliated Companies) is terminated;
(g) any part of this Agreement, or the guarantee referred to in Clause
12.3, is held to be void, invalid or otherwise unenforceable pursuant
to Clause 21.5;
(h) PRI notifies Franchisee that Franchisee has breached any term or
condition of this Agreement (other than Clauses 1.3, 5.1, 8, 9, 13 and
14) or any other agreement between PRI and Franchisee (or their
respective Affiliated Companies) relating to the Business and
Franchisee does not fully cure the breach to PRI's satisfaction within
the cure period provided for in the notice; or
(i) Franchisee breaches any term or condition of this Agreement (other
than Clauses 1.3, 5.1, 8, 9, 13 and 14) or any other agreement between
PRI and Franchisee (or their respective Affiliated Companies) relating
to the Business in circumstances where, in the preceding 24-month
period, Franchisee has been sent 2 notices pursuant to Clause 15.1(h),
whether or not Franchisee cured the prior breaches to PRI's
satisfaction.
<PAGE>
-10-
15.2 If any of the events specified in Clause 15.1 occur, PRI may, in addition
and without prejudice to its rights under Clause 15.1:
(a) terminate, by notice to Franchisee, Franchisee's right under
Clause 18 to renew the franchise hereby granted;
(b) terminate any development or option rights in respect of any
system or concept granted to Franchisee pursuant to any other
agreement between Franchisee and PRI (or their respective Affiliated
Companies);
(c) itself take whatever actions it considers necessary to cure the
breach at Franchisee's cost (including, without limitation,
administrative costs), such cost to be payable by Franchisee within
the period specified in a written demand from PRI;
(d) limit or withhold the supply of any products, supplies, materials,
equipment or services supplied to Franchisee by PRI or its Affiliated
Companies; or
(e) in the event that PRI has issued a notice pursuant to Clause
15.1(h) in respect of a breach of Clause 3.1 and Franchisee has not
fully cured the breach to PRI's satisfaction within the cure period
provided for in the notice, PRI may take control of the Business for a
period of up to 30 days, for the purpose of rectifying the breach and
retraining Franchisee and Franchisee's employees at Franchisee's cost,
such cost to be payable by Franchisee within the period specified in a
written demand from PRI. During this period, Franchisee and its
employees must continue to attend the Outlet to perform their
responsibilities in the conduct of the Business, but subject to the
directions of PRI. Any obligations, liabilities or costs incurred in
respect of the Business during this period will be Franchisee's
responsibility and the indemnity in Clause 12.2 will apply.
15.3 PRI's exercise of any of its rights under this Clause 15 will be in
addition to and not in limitation of any other rights and remedies it may
have in the event of any breach or default by Franchisee.
15.4 In the event of the expiration or termination of this Agreement, Franchisee
appoints PRI to be Franchisee's attorney with power to do in the name of
Franchisee and on Franchisee's behalf all acts and things necessary to
effect Franchisee's compliance with its obligations under this Agreement,
including, without limitation, executing documents. Franchisee agrees that
Franchisee will be bound by and will ratify all acts and things done by PRI
pursuant to this power of attorney.
16. CONSEQUENCES OF TERMINATION
16.1 Immediately upon the expiration or termination of this Agreement,
Franchisee will:
(a) pay all amounts owing to PRI;
(b) discontinue all use of the Marks and the System Property and
otherwise cease holding out any affiliation or association with PRI or
the System unless authorised pursuant to any other written agreement
with PRI;
(c) dispose of all materials bearing the Marks and all supplies in
accordance with PRI's instructions; and
(d) if PRI so requires, restore or de-identify the Outlet in
accordance with
<PAGE>
-11-
PRI's instructions.
16.2 If Franchisee fails to fulfil any of its obligations under Clause 16.1, PRI
may itself take whatever actions it considers necessary to fulfil those
obligations and invoice Franchisee for the full cost of such actions, such
invoice to be payable within 7 days.
16.3 For 60 days from the termination of this Agreement, PRI will have the
option to purchase, or to nominate a third party purchaser of, any of the
supplies held by Franchisee at cost price and any of the equipment or
signage at the Outlet at a price equal to book value less depreciation or
as otherwise agreed, and free of any charges or other security interests.
16.4 The rights and obligations under Clauses 8, 9, 10, 11, 12.2, 13(b),
15.2(c), 15.2(e), 16 will survive the expiration or termination of this
Agreement.
17. RIGHTS OF ENTRY
17.1 Notwithstanding Clause 3.3, Franchisee expressly authorises PRI and its
agents or representatives to enter the Outlet, without prior notice to
Franchisee, for the purposes of Clauses 15.2(c), 15.2(e) and 16.2.
Franchisee hereby waives, and releases PRI from, any rights, actions or
claims which Franchisee may at any time have against PRI in connection with
PRI's entry into the Outlet.
17.2 Franchisee will execute any documents required by PRI in connection with
PRI's entry into the Outlet and use its best endeavours to procure any
consent required from any third party in connection with PRI's entry into
the Outlet.
18. RENEWAL
Upon the expiration of the Term, PRI will renew the franchise for the
renewal term specified in Schedule B if the following conditions are
satisfied:
(a) Franchisee requests the renewal in writing no more than 18 months
and no less than 12 months prior to the expiration of the Term;
(b) Franchisee's right to renew the franchise has not been terminated
under Clause 15.2(a) prior to the expiration of the Term;
(c) Franchisee is not at the expiration of the Term in breach of any
term or condition of this Agreement or any other agreement between PRI
and Franchisee (or their respective Affiliated Companies);
(d) Franchisee upgrades the Outlet to PRI's then current
Standards for new outlets prior to the expiration of the Term;
(e) Franchisee executes PRI's then current Franchise Agreement for new
franchisees, incorporating the then current continuing fees,
advertising contributions and other financial obligations but
excluding any right of further renewal, together with any other
documents required by PRI to be executed by Franchisee or such
guarantors as PRI requires; and
(f) Franchisee pays the renewal fee specified in Schedule B to PRI at
least 90 days prior to the expiration of the Term.
<PAGE>
-12-
19. DISPUTE RESOLUTION
19.1 PRI and Franchisee will endeavour to resolve by mutual negotiation any
dispute arising between them in connection with this Agreement.
19.2 If PRI and Franchisee fail to resolve any dispute by mutual negotiation,
the parties may refer the dispute to a mutually agreed mediator for non-
binding mediation. The parties will bear the costs of any mediation
equally.
19.3 Such dispute resolution procedures will not in any way prejudice or limit
PRI's ability to exercise its rights under Clause 15 at any time.
20. NOTICES
Any notice or other communication required or permitted under this
Agreement will be in writing and properly addressed to the addressee at the
address specified in this Agreement (or any other address notified by the
addressee) and will be deemed received by the addressee on the earlier of
the date of delivery, the date of transmission if sent by facsimile with
receipt confirming completion of transmission or, if sent by pre-paid
security or registered post, the deemed postal receipt date specified in
Schedule B.
21. MISCELLANEOUS
21.1 This Agreement constitutes the entire agreement between the parties with
respect to its subject matter and supersedes all prior negotiations,
agreements or understandings.
21.2 Franchisee is an independent contractor and is not an agent,
representative, joint venturer, partner or employee of PRI. No fiduciary
relationship exists between PRI and Franchisee.
21.3 This Agreement will inure to the benefit of PRI, its successors and assigns
and may be transferred by PRI to any party without Franchisee's prior
approval.
21.4 The delay or failure of any party to exercise any right or remedy pursuant
to this Agreement will not operate as a waiver of the right or remedy and a
waiver of any particular breach will not be a waiver of any other breach.
All rights and remedies under this Agreement are cumulative and the
exercise of one right or remedy will not limit the exercise of any other
right or remedy.
21.5 If any part of this Agreement is held to be void, invalid or otherwise
unenforceable, PRI may elect either to terminate this Agreement pursuant to
Clause 15.1 or to sever the void, invalid or unenforceable part, in which
event the remainder of this Agreement will continue in full force and
effect.
21.6 The terms and conditions of this Agreement may be changed only in writing
signed by both parties, provided that the Standards and the Manuals may be
changed by the PRI from time to time pursuant to Clause 3.2.
21.7 This Agreement will be governed by and construed in accordance with the law
of the territory specified in Schedule B and the parties agree to submit to
the non-exclusive jurisdiction of the courts of that territory.
21.8 Franchisee will pay to PRI all reasonable legal expenses incurred by PRI in
connection with this Agreement, including, without limitation, any stamp
duty and any expenses incurred in connection with the enforcement of this
Agreement.
<PAGE>
-13-
21.9 This Agreement is executed in English. A local language translation may be
attached, which the parties intend to be identical to the English text.
However, if any dispute arises as to the interpretation of the language of
this Agreement, the English text shall govern.
21.10 In the interpretation of this Agreement, unless the context indicates a
contrary intention:
(a) the obligations of more than one party will be joint and several;
(b) words denoting the singular include the plural and vice versa and
words denoting any gender include all genders;
(c) headings are for convenience only and do not affect
interpretation;
(d) references to Clauses and Schedules are to clauses and schedules
of this Agreement; and the Schedules form part of this Agreement; and
(e) this Agreement may be executed in any number of counterparts, each
of which will be deemed an original but which together will constitute
one instrument.
EXECUTED as an agreement
THE COMMON SEAL of )
KENTUCKY FRIED CHICKEN )
PTY LIMITED was affixed in the )
presence of: )
______________________________ ______________________________
Director/Secretary Director
THE COMMON SEAL of )
<PAGE>
-14-
COLLINS FOODS INTERNATIONAL )
PTY LIMITED was affixed in the )
presence of: )
_________________________ _________________________________
Director/Secretary Director
<PAGE>
SCHEDULE A - DEFENITIONS
ACCOUNTING PERIOD means any one of the periods making up PRI's financial year.
ADVERTISING CONTRIBUTION means the percentage of Revenues specified in Schedule
B.
AFFILIATED COMPANIES means any companies which are part of one or more ownership
structures ultimately controlled by a common parent corporation or common
shareholders, including any related bodies corporate within the meaning of the
Corporations Law.
APPROVED PRODUCTS means the products from time to time approved by PRI for sale
in the Business.
BUSINESS means the business of preparing, marketing and selling the Approved
Products under the Marks at the Outlet pursuant to this Agreement.
CONCEPT means the concept franchised to Franchisee pursuant to this Agreement
and specified in Schedule B.
CONTINUING FEE means the percentage of Revenues specified in Schedule B.
DATE OF GRANT means the date specified in Schedule B.
DUE DATE means the date specified in Schedule B or any other date notified by
PRI to Franchisee from time to time.
MANUALS means the manuals, notices and correspondence published or issued from
time to time by PRI in any form, containing the Standards and other
requirements, rules, procedures and guidelines relating to the System.
MARKS means the trademarks, service marks and trade names and other similar
rights owned by PRI or its Affiliated Companies and designated by PRI from time
to time for use in the Business.
OUTLET means the outlet conforming to the Concept at the address specified in
Schedule B.
REVENUES means all gross receipts received by Franchisee as payment for the
Approved Products and for all other goods and services sold at or from the
Outlet or the Business and all service fees but excludes sales or other tax
receipts required by law to be remitted, and in fact remitted by Franchisee, to
any government authority and no adjustment for cash shortages from cash
registers will be made.
STANDARDS means the standards, specifications and other requirements of the
System from time to time determined, changed, or added to by PRI, including,
without limitation, with respect to the preparation, marketing and sale of the
Approved Products, customer service procedures, the design, decor and fit-out of
the Outlet, the equipment at the Outlet, and the content, quality and use of
advertising and promotional materials.
SYSTEM means the system for the preparation, marketing and sale of food products
used in operating the Concept.
SYSTEM PROPERTY means the contents of the Manuals and all other know how,
information, specifications, systems and data used by PRI in or in respect of
the System, including, without limitation, trade secrets, copyrights, designs,
patents and other intellectual property.
TERM means the period specified in Schedule B.
<PAGE>
SCHEDULE B
INFORMATION SCHEDULE
ADVERTISING CONTRIBUTION: 6% of Revenues:
(Clause 6)
* 5% of Revenues to be paid by Franchisee to
PRI on or before each Due Date for
administration by PRI through a National
Advertising Cooperative; and
* 1% of Revenues to be spent by Franchisee on
local advertising and promotions in each
Accounting
Period
BANK: Westpac Banking Corporation
(Clause 11.1)
BANK ACCOUNT: Account No. 119481
(Clause 11.1) BSB No. 34002
CONCEPT: KFC Restaurant Outlet
CONTINUING FEE: 5% of Revenues
CURRENCY: Australian Dollars
(Clause 11.1)
DATE OF GRANT:
DUE DATE: 5 days after each Accounting Period
GOVERNING LAW: New South Wales
(Clause 21.7)
GUARANTORS: Not Applicable - no guarantee required by PRI.
(Clause 12.3)
IN-TERM RESTRAINT AREA: Australia and New Zealand
(Clause 13(a)
INITIAL FEE: $35,000
(Clause 2.1)
INTEREST RATE: Indicator lending rate quoted by Westpac Banking
(Clause 11.2) Corporation on the due date plus 2% per annum,
calculated on a daily basis.
OUTLET ADDRESS:
POST-TERM RESTRAINT AREA: As specified in Schedule C.
(Clause 13(b))
POSTAL RECEIPT DATE: 3 days after the date of posting
(Clause 20)
RENEWAL FEE: (If applicable) $35,000 adjusted in line with
(Clause 18(g)) the percentage increase in the Consumer Price
Index (all groups -Sydney) from the Date of Grant.
<PAGE>
SCHEDULE B - INFORMATION SCHEDULE
PAGE 2
RENEWAL TERM:
(Clause 18)
TERM:
TRANSFER FEE: $35,000 adjusted in line with the percentage increase
(Clause 14.2) in the Consumer Price Index (all groups - Sydney)
from the Date of Grant.
FRANCHISEE'S REPRESENTATION
Franchisee represents to PRI that:
(a) Franchisee has reviewed this Agreement with the assistance of independent
legal counsel and understands and accepts the terms and conditions of this
Agreement;
(b) Franchisee has relied upon its own investigations and judgment in entering
this Agreement and no inducements, representations or warranties have been
given in respect of the Business or this Agreement; and
(c) Franchisee acknowledges that establishment and operation of the Business
will involve significant financial risks and that the success of the
Business will depend upon the skills and financial capacity of Franchisee
and also upon changing economic and market conditions.
<PAGE>
SCHEDULE C
ADDITIONAL PROVISIONS OF FRANCHISE AGREEMENT
C1. MAXIMUM RETAIL PRICE
--------------------
Franchisee will not permit any Approved Products to be sold at the Outlet
at any price exceeding the maximum retail prices advised by PRI to
Franchisee from time to time.
C2. FRANCHISING CODE PROVISION
--------------------------
Franchisee acknowledges that PRI is registered under the Franchising Code
of Practice, and accordingly Franchisee agrees to comply with all
provisions of the Franchising Code of Practice (as modified from time to
time).
C3. POST-TERM RESTRAINT AREA
------------------------
The non-competition restraint in Clause 13(b) of this Agreement will apply:
(i) within a radius of 5km of any KFC retail outlet located in
Australia;
(ii) within a radius of 1km of any KFC retail outlet located in
Australia;
(iii) within a radius of 1km of any KFC retail outlet located in
Queensland;
(iv) within a radius of 5km of the Outlet;
(v) within a radius of 1km of the Outlet.
This Clause C3 will have effect as if it were 5 separate covenants and if
any one or more of such separate covenants is or becomes invalid or
unenforceable for any reason then such invalidity or unenforceability will
not affect the validity or enforceability of any of the other separate
covenants.
C4. DELIVERY OPERATIONS
-------------------
If PRI, in its discretion, determines to introduce delivery operations to
the System, PRI will have the right to require Franchisee to deliver the
Approved Products from the Outlet, within a specified delivery area
determined by PRI in accordance with the Manuals and notified by PRI to
Franchisee. Franchisee acknowledges and agrees that such delivery
operations may require capital expenditures by Franchisee at the Outlet.
The terms and conditions under which Franchisee will conduct such delivery
operations will otherwise be as specified in the Manuals.
C5. AMENDMENT OF CLAUSE 15.1(f)
---------------------------
Clause 15.1(f) will only apply in respect of a terminated agreement between
an Affiliated Company of PRI and an Affiliated Company of Franchisee to the
extent that such termination results from a breach of the agreement by the
Affiliated Company of Franchisee. For the avoidance of doubt, Clause
15.1(f) will not apply in the event of the expiration of the term of any
other agreement between PRI and Franchisee (or their respective Affiliated
Companies).
<PAGE>
EXHIBIT 10.25
[LOGO OF SUTTER SECURITIES INCORPORATED] CONFIDENTIAL
SUTTER SECURITIES INCORPORATED
May 2, 1996
Sizzler International, Inc.
12655 West Jefferson Boulevard
Los Angeles, CA 90066
Attention: Mr. Kevin W. Perkins
President and C.E.O.
Gentlemen:
We are pleased to confirm our mutual understanding regarding the retention of
Sutter Securities, Inc. ("Sutter") by Sizzler International, Inc. (collectively
with its affiliates, the "Company").
1. Sutter will assist the Company as its exclusive financial advisor and
exclusive agent in connection with identifying and seeking out a person,
partnership, corporation or other entity (each, together with its affiliates, a
"Prospective Purchaser") who would be interested in entering into a Transaction
with the Company. As used in this Agreement, the term "Transaction" shall mean
(a) any merger, consolidation, reorganization, recapitalization, business
combination or other transaction pursuant to which the Company is acquired by,
or combined with, a third party or (b) the acquisition, directly or indirectly,
by a third party, in a single transaction or a series of transactions, of (i)
all or substantially all of the assets or operations of the Company or (ii)
fifty percent or more of the Company's outstanding common stock (whether by way
of tender or exchange offer, open market purchases, negotiated purchases or
otherwise).
2. Sutter will review and analyze all indications of interest and proposals,
both preliminary and firm, that are received from Prospective Purchasers, will
advise the Company as to structure and valuation, and will assist the Company in
negotiations with any Prospective Purchaser. In connection with Sutter's
activities on the Company's behalf, Sutter will assist the Company in
developing a strategy for the sale of the Company, and contacting and eliciting
interest from Prospective Purchasers.
3. In connection with Sutter's activities on the Company's behalf, the Company
will furnish Sutter with all information and data concerning the Company and any
Transaction (the "Information") which Sutter deems appropriate and will provide
Sutter with access to the Company's officers, directors, employees, independent
accountants and legal counsel. The Company represents and warrants that all
Information made available to Sutter by the Company will, at all times during
the period of the engagement of Sutter hereunder, be complete and correct in all
material respects and will not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein not misleading in the light of the circumstances under which such
statements are made. The
One Sansome Street . Suite 3950 . San Francisco, CA 94104
415-288-2350 . 800-568-2372 . FAX 415-288-2355
<PAGE>
Sizzler International, Inc.
May 2, 1996
Page 2
Company further represents and warrants that any projections provided by it to
Sutter will have been prepared in good faith and will be based upon assumptions
which, in light of the circumstances under which they are made, are reasonable.
Furthermore, in evaluating Prospective Purchasers, Sutter will be suing
information contained in public reports and possibly other information furnished
to Sutter by such Prospective Purchasers. Sutter does not assume responsibility
for the accuracy or completeness of the Information or any other information
regarding the Company, any Prospective Purchaser of any Transaction. Any advice
rendered by Sutter pursuant to this agreement may not be disclosed publicly
without our prior written consent.
4. In order to coordinate efforts to effect a Transaction, during the period
of the engagement of Sutter hereunder, neither the Company nor any other person
acting on the Company's behalf shall, directly or indirectly (except through
Sutter), solicit any offer from any party to enter into a Transaction. In the
event that, during the period of the engagement of Sutter hereunder, the Company
or any of its officers, directors, employees or representatives are contacted by
or on behalf of any party concerning the possibility of a Transaction, the
Company will promptly so inform Sutter in order that Sutter can evaluate such
party and its interest and assist the Company, in any subsequent discussions.
5. In consideration of our services pursuant to this Agreement, Sutter shall
be entitled to receive, and the Company agrees to pay Sutter, the following
compensation:
(a) Upon execution of this agreement, the Company shall pay to Sutter an
initial cash fee in the amount of $100,000.
(b) If a Transaction is consummated, the Company shall pay Sutter, upon
such consummation, a cash fee equal to a percentage of the total
consideration paid by a purchaser in the Transaction in respect of (i)
assets of the Company, (ii) capital stock of the company (and any
securities convertible into, or options, warrants or other rights to
acquire, such capital stock) and (iii) the assumption, directly or
indirectly, or repayment of indebtedness and the liabilities of the
Company. In the case of any Transaction other than a KFC/Pepsi
Transaction, the percentage shall be .75%. In the case of a KFC/Pepsi
Transaction, the percentage shall be .5%. For purposes hereof, a
"KFC/Pepsi Transaction" shall mean any sale by the Company of some or
all of the Company's Kentucky Fried Chicken restaurants to Pepsi-Co
Inc or any of its subsidiaries or affiliates ("Pepsi") pursuant to
exercise by Pepsi of any right of first refusal held by it under
contract with the Company.
In the event a Transaction is consummated in one or more steps,
including, without limitation, by way of second-step merger, any
additional consideration paid or to be paid in any subsequent step in
the Transaction shall be included for purposes of calculating Sutter's
fee pursuant to this subparagraph 5(b). If all or a portion of the
consideration paid in the Transaction is other than cash or
securities, then the value of such non-cash consideration shall be the
fair market value thereof on the date the Transaction is consummated
as mutually agreed upon in good faith by the Company's Board of
Directors and Sutter. If such non-cash consideration consists of
common stock, options, warrants or rights for which a public trading
market existed prior to the consummation of the Transaction, then the
value of such securities shall be determined by the closing or last
sales price thereof on the date of the consummation of the
Transaction.
<PAGE>
Sizzler International, Inc.
May 2, 1996
Page 3
(c) Sutter shall be entitled to the fees set forth in this paragraph 5
with respect to any Transaction consummated during the term, or within
one year after the date of termination, of this Agreement.
6. In the event that (i) the Company files a voluntary petition to commence
proceedings under Chapter 11 of the Bankruptcy Code during the term of this
Agreement, and (ii) the Company determines in its sole discretion that it is
necessary to secure the services and advice of an investment banker in
connection with the Company's reorganization, the Company shall retain Sutter as
its investment banker on the following terms: (i) a monthly retainer of
$25,000/month commencing upon commencement of the Chapter 11 case, and (ii) an
additional fee of $100,000 if the Company emerges from the Chapter 11 proceeding
as a publicly traded company. The fees described in this paragraph 6
("Reorganization Fees") shall be in addition to the fees set forth in Section 5
hereof; provided, however, to the extent that the Company pays any
Reorganization Fees it shall be entitled to a credit against the fee described
in Section 5(b) above. The Company shall use its best efforts to assume and
obtain any necessary court approvals of this Agreement and of the fees payable
to Sutter hereunder.
7. In addition to the fees described in paragraph 6 above, the Company agrees
to reimburse Sutter, upon request from time to time, for all out-of-pocket
expenses incurred by Sutter (including fees and disbursements of counsel, and of
other consultants and advisors retained by Sutter) in connection with the
matters contemplated by this Agreement. provided, however, upon the payment to
-----------------
Sutter of any fee described in Section 5(b) hereof, no out-of-pocket expenses
incurred by Sutter but not yet reimbursed by the Company shall be reimbursable
hereunder; and provided further, that Sutter shall not incur legal fees and
----------------
expenses or other out-of-pock expenses in excess of $50,000 without the prior
approval of the Company, which approval shall not unreasonably be withheld.
8. The Company agrees to indemnify Sutter in accordance wit the
indemnification provisions (the "Indemnification Provisions") attached to this
Agreement, which indemnification Provisions are incorporation herein and made a
part hereof.
9. Either party hereto may terminate this Agreement at ny time upon written
notice, without liability or continuing obligation, except as set forth in the
following sentence. Neither termination of this Agreement nor completion of the
assignment contemplated hereby shall affect: (i) any compensation earned by
Sutter up to the date of termination or completion, as the case may be, (ii) any
compensation to be earned by Sutter after termination pursuant to paragraph 5 or
6 hereof, (iii) the reimbursement of expenses incurred by Sutter up to the date
of termination or completion, as the case may be, (iv) the provisions of
paragraphs 5-12, inclusive, of this Agreement and (v) the attached
Indemnification Provisions which are incorporated herein, all of which shall
remain operative and in full force and effect.
10. The validity and interpretation of this Agreement shall be governed by the
law of the State of California applicable to agreements made to be fully
performed therein.
11. The benefits of this Agreement shall inure to the respective successors and
assigns of the parties hereto and of the indemnified parties hereunder and their
successors and assigns and representatives, and the obligations and liabilities
assumed in this Agreement by the parties hereto shall be binding upon their
respective successors and assigns.
12. For the convenience of the parties, any number of counterparts of this
Agreement may be executed by the parties hereto. Each such counterpart shall
be, and shall be deemed to be,
<PAGE>
Sizzler International, Inc.
May 2, 1996
Page 4
an original instrument, but all such counterparts taken together shall
constitute one and the same Agreement. This Agreement may not be modified or
amended except in writing signed by the parties hereto.
If the foregoing correctly sets forth our agreement, we would appreciate your
signing the enclosed copy of this letter in the space provided and returning it
to us.
Very truly yours,
SUTTER SECURITIES, INC.
By: /s/ Robert A. Muh
-----------------------------
Robert A. Muh, Chairman of the Board
Confirmed and agreed to this ____ day of May, 1996
SIZZLER INTERNATIONAL, INC.
By: /s/ Christopher R. Thomas
------------------------------------
Christopher R. Thomas, Executive Vice President, Finance
<PAGE>
INDEMNIFICATION PROVISIONS
The Company agrees to indemnify and hold harmless Sutter, to the fullest extent
permitted by law, from and against any and all losses, claims, damages,
liabilities, obligations, penalties, judgments, liabilities, costs and expenses
(and any and all actions, suits, proceedings and investigations in respect
thereof and any and all legal and other costs and expenses in giving testimony
or furnishing documents in response to a subpoena or otherwise), including,
without limitation, the costs and expenses of investigating, preparing or
defending any such action, suit, proceeding or investigation (whether or not in
connection with litigation in which Sutter is a party), directly or indirectly,
caused by, relating to, based upon, arising out of or in connection with (a)
Sutter's acting for the Company, including, without limitation, any act or
omission by Sutter in connection with its acceptance of or the performance or
non-performance of its obligations under this Agreement between Sutter and the
Company, as it may be amended from tine to time, (b) any untrue statement or
alleged untrue statement of a material fact contained in, or omissions or
alleged omissions from, any information furnished by the Company to Sutter or to
any other party to the Transaction or to any Agency, (c) any Transaction or (d)
any Opinion rendered by Sutter with respect to a Transaction; provided, however,
that such indemnity agreement shall not apply to any portion of any such loss,
claim, damage, obligation, penalty, judgment, liability, cost or expense to the
extent it is found in a final judgment by a court of competent jurisdiction (not
subject to further appeal) to have resulted primarily and directly from the
gross negligence or willful misconduct of Sutter.
These indemnification provision shall be in addition to any liability which the
Company may otherwise have to Sutter or the persons indemnified below in this
sentence and shall extend to Sutter Securities Incorporation and its affiliated
entities, directors, officers, employees, legal counsel, agents and controlling
persons (within the meaning of the federal laws). All references to Sutter in
this Indemnification Provisions, which shall then remain operative and in full
force and effect.
If any action, suit, proceeding or investigation is commenced, as to which
Sutter proposes to demand indemnification, it shall notify the company with
reasonable promptness; provided, however, that any failure by Sutter to notify
the Company shall not relieve the Company from its obligations hereunder, except
to the extent that the Company is prejudiced thereby. Sutter shall have the
right to retain counsel of its own choice to represent it, and the Company shall
pay the fees, expenses and disbursements of such counsel; and such counsel
shall, to the extent consistent with its professional responsibilities,
cooperate with the Company and any counsel designated by the Company. The
Company shall be liable for any settlement of any claim against Sutter made
with the Company's written consent, which consent shall not be unreasonably
withheld. The Company shall not, without the prior written consent of Sutter,
settle or compromise any claim, or permit a default or consent to the entry of
any judgment in respect thereof, unless such settlement, compromise, or consent
includes, as an unconditional term thereof, the giving by the claimant to Sutter
of an unconditional release from all liability in respect of such claim.
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these indemnification provisions is made but it is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification in such case,
then the Company, on the one hand, and Sutter, on the other hand, shall
contribute to the losses, claims, damages, obligations, penalties, judgments,
awards, liabilities, costs, expenses and disbursements to which the indemnified
persons may be subject in accordance with the relative benefits received by the
Company, on the one hand, and Sutter, on the other hand, and also the relative
fault of the Company, on the one hand, and Sutter, on the other hand, in
connection with the statements, acts or omissions which resulted in such losses,
claims, damages, obligations, penalties, judgments, awards, liabilities, costs,
expenses and disbursements and the relevant equitable considerations shall also
be considered. No person found liable for a fraudulent misrepresentation shall
be entitled to contribution from any person who is not also found liable for
such fraudulent misrepresentation. Notwithstanding the foregoing, Sutter shall
not be obligated to contribute any amount hereunder that exceeds the amount of
fees previously received by Sutter pursuant to the Agreement.
<PAGE>
EXHIBIT 11
----------
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE YEARS ENDED APRIL 30, 1997, 1996 AND 1995
-------------------------------------------------
(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>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Weighted average number of outstanding common shares 28,967 27,773 28,263
Common share equivalents - (a) - (a) 9
---------- ---------- ----------
Primary shares 28,967 27,773 28,272
Additional shares - (a) - (a) 1
---------- ---------- ----------
Fully diluted shares 28,967 27,773 28,273
========== ========== ==========
Net income (loss) $ 565 $(138,458) $ 6,695
========== ========== ==========
Net income (loss) per common and common equivalent share $ 0.02 $ (4.99) 0.24
========== ========== ==========
Net income (loss) per common share, assuming full dilution $ 0.02 $ (4.99) $ 0.24
========== ========== ==========
</TABLE>
(a) No recognition has been given to common stock equivalents as they are anti-
dilutive.
<PAGE>
EXHIBIT 22
----------
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
PARENTS AND SUBSIDIARIES
------------------------
James A. Collins, Chairman of the Board, owned of record and beneficially, at
June 30, 1997, 3,800,840 shares of the Company's common stock, representing
approximately 13 percent of the Company's 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,
1997:
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Incorporation
- ---------------------------------------- ---------------
<S> <C>
Buffalo Ranch Australia Pty, Ltd. Nevada
Buffalo Ranch Steakhouses, Inc. Delaware
CFI Insurers, Ltd. California
Collins Finance and Management Pty, Ltd. Nevada
Collins Foods Australia Pty, Ltd. California
Collins Foods International, Pty, Ltd. Maryland
Collins International, Inc. Maryland
Collins Properties, Inc. Maryland
Collins Property Development Pty, Ltd. Maryland
Curly's of Springfield, P.A., Inc. Maryland
Dalton's Roadhouse, Inc. Maryland
F.R. Group #3756, Inc. Maryland
F.R. Group #3799, Inc. Maryland
Furnace Concepts Australia Corp. Maryland
Furnace Concepts International, Inc. Maryland
Gulliver's Australia Pty, Ltd. Maryland
J.S.S. Restaurants Ltd. Maryland
Josephina's, Inc. Pennsylvania
Mexican Concepts, Inc. Maryland
Restaurant Concepts International, Inc. Pennsylvania
Restaurant Concepts of Australia Pty, Ltd. Delaware
Rustler No. 3, Inc. New York
Scott's & Sizzler Ltd. Maryland
Second Street Corporation, Inc. Virginia
SizAnnCo, Inc. Canada
SizBalCo, Inc. Canada
SizCarCo, Inc. Canada
SizCharlesCo, Inc. Delaware
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Incorporation
- --------------------------------------- ---------------
<S> <C>
SizFredCo, Inc. Delaware
SizHarCo, Inc. Bermuda
SizHoCo, Inc. California
SizMoCo, Inc. California
SizPGCo, Inc. California
SizWashCo, Inc. Delaware
Sizzler Australia Pty, Ltd. Bermuda
Sizzler Family Steak Houses, Inc. Nevada
Sizzler Franchise Development, Ltd. Australia
Sizzler Holdings of Canada, Inc. Australia
Sizzler International Marks, Inc. Australia
Sizzler New Zealand Limited Australia
Sizzler of DEL., Inc. Australia
Sizzler of N.Y., Inc. Australia
Sizzler of Patapsco, MD., Inc. Australia
Sizzler of VA., Inc. Nevada
Sizzler Restaurant Services, Inc. Nevada
Sizzler Restaurants International, Inc. Nevada
Sizzler Restaurants Management, Inc. Nevada
Sizzler South Pacific Pty, Ltd. Nevada
Sizzler Southeast Asia, Inc. Singapore
Sizzler Steak Seafood Salad (S) Pte. Ltd. Nevada
Sizzler USA Franchise, Inc. Nevada
Sizzler USA Real Property, Inc. Delaware
Sizzler USA. Inc. Delaware
Tenly Enterprises, Inc. Delaware
The Italian Oven Australia Pty, Ltd. Delaware
</TABLE>
<PAGE>
EXHIBIT 24
----------
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
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 23, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-27-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-27-1997
<CASH> 34,085
<SECURITIES> 0
<RECEIVABLES> 7,945
<ALLOWANCES> 3,547
<INVENTORY> 5,464
<CURRENT-ASSETS> 46,270
<PP&E> 219,109
<DEPRECIATION> 114,234
<TOTAL-ASSETS> 168,110
<CURRENT-LIABILITIES> 30,369
<BONDS> 329
0
0
<COMMON> 289
<OTHER-SE> 44,112
<TOTAL-LIABILITY-AND-EQUITY> 168,110
<SALES> 290,061
<TOTAL-REVENUES> 299,928
<CGS> 111,330
<TOTAL-COSTS> 111,330
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,981
<INCOME-PRETAX> (6,751)
<INCOME-TAX> (7,316)
<INCOME-CONTINUING> 565
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 565
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
