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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
(x) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
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( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-25366
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AUSTINS STEAKS & SALOON, INC.
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(Name of small business issuer in its charter)
Delaware 86-0723400
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization )
6940 "O" Street, Suite 334
Lincoln, Nebraska 68510
(Address of principal executive offices) (Zip Code)
(402) 466-2333
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $ .01 par value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
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Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for the year ended December 31, 1996. $10,440,478.
As of March 14, 1997, the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked price of such stock, was $743,438.
As of March 14, 1997 there were 2,331,052 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting of Stockholders to be held June 5, 1997 -
Part III.
Transitional Small Business Disclosure Format (Check One): Yes No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
THE DISCUSSION IN THIS DOCUMENT CONTAINS TREND ANALYSIS AND OTHER FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF
1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS THROUGHOUT THIS DOCUMENT AS A RESULT OF THE RISK
FACTORS SET FORTH BELOW IN THE SECTION ENTITLED "FACTORS AFFECTING FUTURE
RESULTS" AND ELSEWHERE IN THIS DOCUMENT.
GENERAL
Austins Steaks & Saloon, Inc. (the "Company" or "Austins") owns and
operates eight moderately priced, casual dining full-service
Austins-Trademark- restaurants featuring specialty prime rib dishes, a
variety of fresh-cut, aged steaks, home-cooked entrees, salads and
sandwiches. Many of the beef products are hand-cut on site, and most of the
Company's menu items are likewise prepared on site from fresh ingredients.
The Company's restaurants offer lunches and dinners of generous portions at
moderate prices. Management believes its restaurants appeal to a broad range
of patrons by emphasizing consistently high-quality appealing food and
attentive service by a well-trained, friendly staff for a moderate price.
This appeal is enhanced by wood plank floors and corrugated tin finishes in
the reception and bar areas, highlighted by wood paneling, and a
western-style bar. To provide a comfortable, homey feel, the Company
encourages its customers to bring ball caps, automobile license plates, and
business cards to the restaurants for display in bar areas.
Based upon the operations and experience the Company has obtained in
creating, refining, and implementing its concept, Company management believes
that its steakhouse restaurants can be expanded into many regions of the
United States. Its short term strategy is to increase per unit sales,
continue to reduce expenses and return to profitability. If that strategy
can be accomplished, the Company's longer term growth strategy is to continue
to develop Company-owned restaurants in particular areas in order to provide
economies of scale in advertising, purchasing and management and greater
exposure in the market area. Although competition in the restaurant industry
is intense, the Company believes its Western Roadhouse concept will compete
favorably.
COMPANY HISTORY
Prior to August 1, 1994, each of the Company's five restaurants operated
as separate corporations, and were each treated for federal and state income
tax purposes as "S" Corporations under Subchapter S of the Internal Revenue
Code of 1986, as amended (the "Code"), and comparable state tax laws. The
Company was incorporated in December 1992 as a Delaware corporation and had
no significant activity until July 1994. In July and August 1994, the
Company acquired all of the outstanding stock of the five corporations. As a
result of such transactions, the Company became the owner of all of the
outstanding shares of each restaurant corporation, and each such restaurant
corporation became a wholly-owned subsidiary of the Company. The Company
currently has eight restaurant subsidiary corporations.
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THE COMPANY'S RESTAURANT CONCEPT
The Austins concept is designed to appeal to a broad spectrum of casual
dining customers who are seeking a consistent and high-quality dining experience
attentively served in a distinctive, relaxed atmosphere for a moderate price.
Management seeks to provide this experience by serving a limited selection of
tasty and interesting dishes that are prepared largely on site from fresh
ingredients. Management believes that many multiple unit operators have lost
their distinctiveness by over-reliance on commercially prepared foods served to
consumers with too little attention to the complete dining experience desired by
their customers. Austins provides a casual and comfortable environment and
well-trained, enthusiastic service to its customers. The Company has focused
its efforts upon a menu of well-prepared favorite dishes served in generous
portions at moderate prices, which has attracted and expects to attract an
acceptable share of the full-service, casual dining market. In the Omaha
market, the Company has consistently received positive feedback from its guests,
as the Company has been named Omaha, Nebraska's "best steakhouse" for the past
two years.
The Company believes that the Austins restaurant concept and menu are
designed to attract loyal clientele who return with a high degree of frequency
at both lunch and dinner. The decor of the Company's restaurants emulates a
"Western Roadhouse" theme which features a variety of western and country
artifacts, giving it a relaxed friendly feel. The restaurants' atmosphere is
enhanced by the decor of the restaurants, which includes wood plank floors,
subdued lighting, and upbeat country western music provided by a vintage decor
jukebox. In addition, the Company also encourages its customers to bring ball
caps, automobile license plates, and business cards to the restaurant for
display, adding to Austins' distinctive identity. Austins is further
distinguished by requiring from its meat purveyors high-quality, USDA top choice
Nebraska steaks, substantially all of which are hand-cut fresh daily on site.
High-quality ingredients are used for all menu items, including gravies, sauces
and dressings, with minimal use of commercially prepared items. All meals are
served in generous portions by a well-trained friendly staff. Austins provides
full liquor and bar service at each of its restaurants, primarily as an added
service to its clientele. Alcoholic beverage service accounted for
approximately 13% and 12% of the Company's net sales for each of the years ended
December 31, 1996, and 1995, respectively.
The Company emphasizes highly attentive, friendly service by closely
supervising restaurant operations and providing ongoing employee training and
support. Company restaurants are open seven days a week, with an average per
customer check of approximately $8.30 at lunch and $13.80 at dinner.
CORPORATE STRATEGY
OPERATIONS STRATEGY - The Company believes that consistent quality in food
preparation and presentation, coupled with attentive, friendly service delivered
in a distinctive fun atmosphere at a moderate price will result in a perceived
value to the customer. According to management's philosophy, quality food,
service, atmosphere and perceived value are the four keys to success in the
restaurant industry. Accordingly, Austins differentiates its restaurants by
emphasizing the following elements:
* Consistent high-quality products using the finest available fresh
ingredients, carefully prepared, preserving a home-cooked taste,
texture, and appearance.
* High quality and attentive service, with each server generally being
assigned to no more than three tables (four at lunch) to ensure
prompt, attentive, and friendly service, assuring customer
satisfaction.
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* The Western Roadhouse motif provides a unique, fun, and attractive
restaurant to people from all walks of life and economic and
social backgrounds, while welcoming children and permitting all
members of the family to enjoy a quality dining experience.
* The positioning of Austins in the full-service casual dining segment
of the industry, offering generous portions at moderate prices.
PROFITABILITY AND GROWTH STRATEGY - Because of the factors discussed under
"Management's Discussion and Analysis for Plan of Operation", the Company has
incurred net losses of approximately $2,000,000 over the past two years. The
Company's immediate and short term goal is to seek ways, through advertising,
variation of menu mix and selected variation of interior theme, to increase per
unit sales. The Company may determine to sell one or two restaurant units which
management does not believe can provide profitable growth to the overall
operations. The Company will also look for continuing ways to reduce expenses,
all with the goal of returning to profitability. To the extent the Company can
return to profitability over the next several years, its longer term strategy
would be to deliberately and selectively open additional restaurants where it
believes it can utilize economies of scale with existing restaurants. There is
no assurance that the Company will be successful in increasing sales of
additional restaurant units to achieve any significant profitability.
MENU
Austin's dinner menu features a well-rounded selection of high-quality
specialty prime rib entrees, including a shrimp-stuffed and blackened, Cajun
seasoned prime rib. Dinner also features an excellent selection of favorite
steak cuts, including several oversize-cut entrees. Prime rib and steaks are
cooked to order. One of the more popular items at both lunch and dinner is the
Chicken Fried Steak, served with homemade mashed potatoes (skins on) and a cream
gravy. A variety of home-style salads, chicken, fish, and barbecued items round
out the dinner menu and provide a tasty alternative to diners who want a lighter
meal. All dinners offer a complete meal. Choices of accompaniments include
fresh-made salad or chili, homemade sugar biscuits and honey butter, and rice
pilaf, twice-baked potato casserole, french fries, or mashed potatoes with
homemade cream or brown gravy, sauteed vegetables or cottage cheese. The lunch
menu features burgers with many optional garnishes to "build them from scratch,"
smaller cut luncheon steaks, in addition to several favorites from the dinner
menu. The lunch and dinner menus also include a range of appetizers and
desserts, and full bar service is available as an accompaniment to both meals.
In 1996, the Company successfully piloted hardwood smoked and barbecued meats in
two of its sites. The new barbecued pork, sausage, and brisket items now
account for 18% to 25% of the two restaurants' total food sales.
RESTAURANT LAYOUT
The Company believes that the decor and interior design of its restaurants
are significant factors in its success. The restaurants' planked wood floors
and the open layout of the dining area is intended to provide dining customers
an expansive view of decor features, artifacts, and other design items and to
enhance the casual dining atmosphere. The Company also designs its kitchen
space for efficiency of work flow, with the goal of minimizing the amount of
space required for production activities. Austins restaurants average
approximately 6,000 square feet and include dining areas with seating averaging
200 customers. A bar area, typically seating an additional 15 patrons, is
located adjacent to the reception area primarily to accommodate customers
waiting for dining tables.
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RESTAURANT LOCATIONS
The following table sets forth the location, month and year of opening, and
approximate square footage of the Company's operating restaurants:
LOCATION DATE OPENED APPROX. SQ. FT.
11224 West Dodge Road September 1989 3,620
Omaha, Nebraska
12020 Anne Street January 1992 5,200
Omaha, Nebraska
1414 South 72nd Street December 1992 10,000
Omaha, Nebraska
2400 Cerrillos Road April 1994 5,817
Santa Fe, New Mexico
3940 Village Drive December 1994 6,000
Lincoln, Nebraska
5201 San Mateo Blvd. N.E. February 1995 6,000
Albuquerque, New Mexico
3636 North Scottsdale Road December 1995 6,000
Scottsdale, Arizona
1101 Harney Street January 1996 7,450
Omaha, Nebraska
On March 21, 1996, the Company closed its Columbia, Missouri restaurant
which was opened in November 1993. This unit was closed because its performance
was not meeting the Company's expectations.
MARKETING
Austins restaurants are positioned as destination restaurants providing
home-cooked food and full service to the casual dining market segment at a
moderate price. Management has focused the Company's resources on providing its
customers with superior quality, service, and perceived value in a distinctive
atmosphere, and it has relied primarily on customer satisfaction and word-of-
mouth to obtain repeat customers and attract new clientele. Subsequent to a
restaurant's opening period, management believes that Austins' high perceived
value acts as word-of-mouth advertising and, therefore, the Company has been
able to maintain a minimal advertising budget of approximately 2% of sales.
Recently, the Company hired Bozell Worldwide to help the Company position itself
within the market. The Company anticipates this increase in marketing effort
will enhance consumer awareness and strengthen traffic flow. In order to
develop a strategic marketing plan and implement the Company's concept
successfully, the marketing firm is currently performing a market study to
discover where the Company stands in the eyes of its customers compared to its
major competitors.
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RESTAURANT OPERATIONS AND MANAGEMENT
To control costs during seasonal changes, the Company decreased the
number of salaried management personnel in 1996 from one general manager and
three to four managers to one general manager, two to three managers and one
hourly supervisor. Each restaurant also employs approximately 40 to 60
hourly employees, depending on the size of the restaurant, many of whom work
part-time. The general manager of each restaurant carries primary
responsibility for the day-to-day operation of his or her restaurant and is
required to abide by Company-established operating standards.
The Company requires its management personnel to participate in a seven-
week training program which emphasizes the Company's operating strategy,
procedures, and standards. The executive management of the Company regularly
visits the Company's restaurants to ensure that the Company's concept, strategy,
and standards of quality are being adhered to in all aspects of restaurant
operations. The Company's executive management have developed the restaurants'
operations and management systems based upon their prior experience in the
restaurant industry.
Beginning January 1, 1996, the Company implemented an incentive-based
compensation plan for its restaurant management that includes a base salary, a
monthly bonus based on a predetermined percentage of their individual store's
controllable operating profit, participation in the Company's 401(k) Plan, and
annual stock option grants for its general managers.
PURCHASING
The Company negotiates directly with suppliers for food and beverage
products to ensure consistent quality and freshness of products and to obtain
competitive prices. Food and supplies are shipped directly to the
restaurants. All shipments are inspected for quality and freshness by a
manager upon receipt. The Company does not maintain a central product
warehouse or commissary, nor has it experienced any significant delays in
receiving restaurant supplies and equipment. The Company's major suppliers
include Pegler Sysco Food Services Co., located in Lincoln, Nebraska, Ben E.
Keith located in Albuquerque, New Mexico, and Sysco Food Services of Arizona,
located in Phoenix, Arizona.
The Company has utilized short term locked-in prices for its highest usage
products, primarily beef, chicken, produce, and grocery, in order to minimize
the impact of potential fluctuations in prices.
ACCOUNTING AND MANAGEMENT INFORMATION SYSTEMS
The Company's in-store computer-based management system monitors the sales,
labor and food costs of each restaurant, including average customer check,
product mix, customer count, and a breakdown of sales between lunch and dinner.
This system generates reports to management on a daily basis to allow management
to evaluate trends in sales, labor and food costs.
COMPETITION
The restaurant industry is intensely competitive with respect to price,
service, location, and food quality. There are many well-established
competitors with substantially greater financial and other resources than the
Company. In the Company's view, its principal competitors are not only other
steakhouses but also other restaurants offering a casual atmosphere and
moderately priced meals. Expansion of the steakhouse concept has increased in
recent years. In addition to traditional steakhouse
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restaurants, the Company expects to face competition from new entries into
the steakhouse market. Other steakhouse chains have greater name
recognition, are more well-established, and have significantly greater
resources than the Company. Other competitors include a large number of
national and regional restaurant chains, many of which have been in existence
for a substantially longer period than the Company and may be better
established in the markets where the Company's new restaurants are or may be
located. The restaurant business is often affected by changes in consumer
tastes, national, regional or local economic conditions, demographic trends,
traffic patterns, and the type, number and location of competing restaurants.
In addition, factors such as inflation, increased food, labor and benefit
costs, and a lack of experienced management and hourly employees may
adversely affect the restaurant industry in general and the Company's
restaurants in particular. A new competitor, casino gambling, has entered
the market and affected the economy in the past couple years. Many of the
casinos offer free food or inexpensive buffets to lure customers. In the
Omaha, Nebraska area, two new riverboat casinos opened in 1996 within a ten
mile vicinity of the Company's four Omaha locations, which has impacted
same-store sales. There can be no assurance that the Company will be able to
compete successfully in the future with respect to any of the above factors.
The Company believes that its "Western Roadhouse" concept, attractive
price-value relationship, and quality of food and service enable it to
differentiate itself from its competitors. While the Company believes that its
restaurants are distinctive in design and operating concept, it is aware of
restaurants that operate with similar concepts. The Company believes that its
ability to compete effectively will continue to depend upon its ability to offer
high-quality, moderately priced food and a full-service distinctive dining
environment.
GOVERNMENT REGULATION
The Company's restaurants are subject to numerous federal, state and local
laws affecting health, sanitation and safety standards, as well as to state and
local licensing regulation of the sale of alcoholic beverages. Each restaurant
has appropriate licenses from regulatory authorities allowing it to sell liquor,
beer and wine, and each restaurant has food service licenses from local health
authorities. The Company's licenses to sell alcoholic beverages must be renewed
annually and may be suspended or revoked at any time for cause, including
violation by the Company or its employees of any law or regulation pertaining to
alcoholic beverage control, such as those regulating the minimum age of patrons
or employees, advertising, wholesale purchasing, and inventory control. The
failure of a restaurant to obtain or retain liquor or food service licenses
would have a material adverse effect on its operations. To reduce this risk,
each Company restaurant is operated in accordance with procedures intended to
ensure compliance with applicable codes and regulations.
The Company is subject in certain states to "dram-shop" statutes, which
generally provide a person injured by an intoxicated person the right to recover
damages from an establishment that wrongfully served alcoholic beverages to the
intoxicated person. The Company carries liquor liability coverage as part of
its existing comprehensive general liability insurance. The Company currently
operates in New Mexico, which has a "dram-shop" statute. Nebraska and Arizona
have no such statute presently. The Company has never been named as a defendant
in a lawsuit involving "dram-shop" statutes.
The development and construction of additional restaurants will be subject
to compliance with applicable zoning, land use, and environmental regulations.
The Company's restaurant operations are also subject to federal and state
minimum wage laws governing such matters as working conditions,
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overtime and tip credits, and other employee matters. Significant numbers of
the Company's food service and preparation personnel are paid at rates
related to the federal minimum wage and, accordingly, further increases in
the minimum wage could increase the Company's labor costs.
The federal Americans With Disabilities Act (the "ADA") prohibits
discrimination on the basis of disability in public accommodations and
employment. The ADA became effective as to public accommodations in January
1992 and became effective as to employment in July 1992. The Company's
restaurants are currently designed to be accessible to the disabled. The
Company believes it is in substantial compliance with all current applicable
regulation relating to restaurant accommodations for the disabled. However, the
Company could be required to expend funds to modify its restaurants in order to
provide service to, or make reasonable accommodations for the employment of,
disabled persons.
TRADEMARKS
The Company has entered into a Settlement Agreement with Equitable Life
Assurance Society of the United States ("Equitable"), which provides that the
Company and Equitable shall have concurrent use of the service mark "Austins".
The Settlement Agreement provides that the Company shall have the right to use
the service mark "Austins Steaks & Saloon," including the distinctive script and
longhorn design, in all areas laying outside an area of 100 miles around St.
Louis Park, Minnesota, said territory (the "Equitable Territory") being reserved
for use by Equitable for its mark "Austins Steakhouse." The Settlement
Agreement between the Company and Equitable was entered into after the Company
had filed its federal registration application and had also filed a cancellation
action against Equitable based upon the Company's prior appropriation of the
"Austins" designation.
The Company and Equitable have not effected the issuance of the federal
concurrent use registration but have agreed, pursuant to the Settlement
Agreement, to cooperate with one another and with the Trademark Trial and Appeal
Board of the U.S. Patent and Trademark Office ("USPTO") to finalize such
registration. If the concurrent use registrations are refused by the Trademark
Trial and Appeal Board of the USPTO, Equitable has agreed that it will not
enforce its federal service mark registration against the Company or the
Company's successors or assigns for any alleged infringement based upon the use
of the Austins Steaks & Saloon and design mark in any area laying outside of the
Equitable Territory.
The Company believes that it has substantial rights in its Austins Steaks &
Saloon design and trademark, including such territories as the Central Midwest,
South-Central Midwest, and Southwest regions of the United States, based upon
the Company's actual usage and constructive usage derived from its pending U.S.
trademark application, and intends to aggressively protect its marks from
infringement and competing claims. The Company is aware of names and marks
similar to the mark of the Company used by persons in certain geographic areas,
including, specifically, two other restaurant service corporations located on
the east coast which utilize the "AUSTINS" name in their trademark and design.
Although the Company received a notice to cease and desist its trademark usage
from one of these two corporations, neither corporation is actively seeking to
prevent the Company's trademark usage. The Company will aggressively defend its
Austins Steaks & Saloon trademark and design.
EMPLOYEES
As of December 31, 1996, the Company had approximately 318 employees,
six of whom are corporate personnel, 34 of whom are restaurant management,
and the remainder of whom are hourly
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restaurant personnel. Of the six corporate employees, two are in management
positions and four are administrative employees. None of the Company's
employees is covered by a collective bargaining agreement. The Company
considers its employee relations to be good.
ITEM 2. DESCRIPTION OF PROPERTIES
All of the Company's current restaurants are located in leased space
averaging approximately 6,000 square feet. Leases are negotiated with initial
terms of five to twenty years, with multiple renewal options. All of the
Company's leases provide for a minimum annual rent, and three provide for
additional rent based on sales volume at the particular location over specified
minimum levels. Generally, the leases are net leases which require the Company
to pay the costs of insurance, taxes, and a pro rata portion of lessors' common
area costs.
The Company currently leases its executive offices which are located at
6940 "O" Street, Suite 334, Lincoln, Nebraska 68510. The Company believes that
there is sufficient office space available at favorable leasing terms in the
Lincoln, Nebraska area to satisfy the additional needs of the Company that may
result from any required future expansion.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on the financial condition or results of operations of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock of the Company has been traded on the NASDAQ Small-Cap
Market System under the symbol "STAK" since January 25, 1995. Prior to that
date, there was no public market for the Common Stock. The following table sets
forth for the periods indicated the high and low closing prices for the Common
Stock as reported on the NASDAQ Small-Cap Market System:
Fiscal Year Ended December 31, 1996 and 1995 High Low
- ------------------------------------------------ ------ ------
First Quarter 1995 (from January 25, 1995) $5.00 $3.875
Second Quarter 1995 $4.375 $3.25
Third Quarter 1995 $4.375 $2.75
Fourth Quarter 1995 $3.00 $1.50
First Quarter 1996 $2.125 $1.4375
Second Quarter 1996 $1.75 $ .875
Third Quarter 1996 $1.625 $1.00
Fourth Quarter 1996 $1.375 $ .625
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As of March 14, 1997, there were approximately 57 stockholders of record.
The Company has never paid or declared cash dividends on its Common Stock
and does not intend to pay cash dividends on its Common Stock in the foreseeable
future. The Company expects to retain its earnings to finance the development
and expansion of its business. The payment by the Company of cash dividends, if
any, on its Common Stock in the future is subject to the discretion of the Board
of Directors and will depend on the Company's earnings, financial condition,
capital requirements, and other relevant factors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CONTAINS TREND ANALYSIS AND OTHER FORWARD LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS THROUGHOUT
THIS DOCUMENT AS A RESULT OF THE RISK FACTORS SET FORTH BELOW IN THE SECTION
ENTITLED "FACTORS AFFECTING FUTURE RESULTS" AND ELSEWHERE IN THIS DOCUMENT.
OVERVIEW
The Company currently operates eight steakhouse restaurants. Four are
located in Omaha, Nebraska and one is located in each of Lincoln, Nebraska,
Santa Fe, New Mexico, Albuquerque, New Mexico, and Scottsdale, Arizona. The
Omaha restaurants were opened in September 1989, January 1992, December 1992,
and January 1996. The Santa Fe restaurant was opened in April 1994, the Lincoln
restaurant in December 1994, the Albuquerque restaurant in February 1995, and
the Scottsdale restaurant in December 1995. The discussion of financial
condition and results of operations included in the paragraphs that follow
should be read in conjunction with the consolidated statements contained in this
report.
On July 22, 1994, the Company purchased a 49% stock interest in the five
restaurant corporations (the "Group") owned by two former stockholders-employees
at a purchase price plus related costs of approximately $643,000, and on August
1, 1994, a former stockholder of the Company exchanged his 51% interest in the
Group for 549,000 shares of the Company's common stock. The Company used the
purchase method of accounting for the acquisition of the 49% stock interest, and
the exchange with the former stockholder was accounted for at historical cost.
Also on August 1, 1994, the Company sold 550,000 shares of its common stock to
an investor for $1,500,000. The number of shares referred to in this paragraph
reflect a recapitalization of the Company effective November 30, 1994.
RESULTS OF OPERATIONS
To facilitate a meaningful comparison, the following discussion and
analysis is based on the combined historical results of Austins Steaks & Saloon,
Inc. and Austins Steaks & Saloon Group ("Group"). The accompanying historical
statement of operations data for Austins Steaks & Saloon, Inc. for the year
ended December 31, 1994 reflects the results of operations of the Company's five
restaurants for the period subsequent to their acquisition on July 22, 1994.
The historical statement of operations data for the Group reflects the results
of operations of the Company's predecessor through July 22, 1994. Pro forma
adjustments have been made to the statements of operations to reflect a
provision for federal and state income taxes as if the Group had been treated as
a "C" corporation.
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The following table presents the major components of the statement of
operations on a historical combined basis and expressed as a percentage of
revenues, and should be used in reviewing the discussion and analysis of results
of operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
----------------- ---------------- ----------------
(Combined)
As a As a As a
Statement of Operations Data: Percent of Percent of Percent of
Amount Revenue Amount Revenue Amount Revenue
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Net Sales........................ $10,440,478 100.0% $9,534,763 100.0% $8,905,685 100.0%
Cost of Sales - Food/Beverage.... 4,203,556 40.3 3,741,117 39.2 3,743,362 42.0
Cost of Sales - Labor............ 3,186,378 30.5 2,769,132 29.0 2,544,984 28.6
Restaurant Operating Expenses.... 2,406,883 23.1 2,116,268 22.2 1,356,538 15.2
Amortization of Pre-Opening
Costs.......................... - - 309,548 3.3 93,862 1.1
General and Administrative
Expenses....................... 1,019,964 9.8 945,332 9.9 819,475 9.2
Loss on Restaurant Closing....... 193,998 1.8 - - - -
Depreciation and Amortization.... 542,752 5.2 330,064 3.5 237,157 2.7
Income (Loss) from Operations.... (1,113,053) (10.7) (676,698) (7.1) 110,307 1.2
Other Income (Expense)........... (181,498) (1.7) 62,585 0.7 (56,797) (0.6)
Income (Loss) Before Income
Taxes and Cumulative Effect
of Change in Accounting
Principle...................... (1,294,551) (12.4) (614,113) (6.4) 53,510 0.6
Income Tax Benefit............... - - (46,414) (0.5) (72,852) (0.8)
Income (Loss) Before Cumulative
Effect of Change in
Accounting Principle........... (1,294,551) (12.4) (567,699) (6.0) 126,362 1.4
Cumulative Effect on Prior
Years of Change in
Accounting Principle........... (255,512) (2.4) - - - -
Net Income (Loss)................ (1,550,063) (14.8) (567,699) (6.0) 126,362 1.4
Pro Forma Net Income (Loss)...... (1,550,063) (14.8) (567,699) (6.0) 28,578 0.3
</TABLE>
The Company's revenues and expenses can be significantly affected by the
number and timing of the opening of additional restaurants. The timing of
the restaurant openings can also affect net sales and other period-to-date
comparisons. Interim period results can also be affected by seasonal
changes. During recent fiscal years, the Company's sales have been higher
during the second and third quarters
11
<PAGE>
than during the first and fourth quarters, although not significantly. As of
January 1, 1996, the Company changed the method of accounting for pre-opening
costs. Labor costs and certain other costs relating to opening of new
restaurants will be expensed as incurred. Previously, such costs were
capitalized and amortized over a twelve-month period commencing with the
restaurant opening.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO COMBINED YEAR ENDED DECEMBER 31, 1995
Net sales for the year ended December 31, 1996 increased 9.5% to $10.4
million from $9.5 million for the year ended December 31, 1995. Net sales
for the year ended December 31, 1996 include the operations of seven
restaurants for the full year, a eighth restaurant (Omaha-Old Market) for
eleven-and-a-half months and a ninth restaurant (Columbia, MO) for
two-and-a-half months. The increase in net sales is primarily due to one
additional restaurant in operation during 1996 and the full year of
operations for two restaurants opened in 1995. Annual sales decreased by
15.7% for the five restaurants open during the entire year of 1996 and 1995.
Cost of sales (primarily, food, beverages, and direct labor) increased
to $7.4 million for the year ended December 31, 1996, an increase of 13.5%
from $6.5 million in the comparable 1995 period. This increase is primarily
due to the additional restaurant operations in 1996 as discussed above. As a
percentage of net sales, these costs increased from 68.2% in 1995 to 70.8%
in 1996. This 2.6% increase relates mainly to an increase of in-store
promotions and a greater investment in the restaurant manager's salary and
bonus program to help attract and retain employees whose skill and dedication
enable the Company to execute its concept successfully.
Restaurant operating expenses for the year ended December 31, 1996
increased to approximately $2.4 million, or 23.1% of net sales, from $2.1
million, or 22.2% of net sales in 1995, an increase of 13.7%. The increase,
as a percentage of net sales, is attributed to the relatively fixed nature of
occupancy costs of the Company's locations and lower same-store sales
volumes, as noted above.
Amortization of pre-opening costs was $310,000, or 3.3% of net sales,
for the year ended December 31, 1995. The decrease is due to the $255,512
cumulative effect of change in accounting principle as of January 1, 1996.
There were $63,348 of additional pre-opening costs expensed in the first
quarter of 1996 related to the Company's Omaha-Old Market restaurant. This
amount has been included in the restaurant operating expenses for the year
ended December 31, 1996.
General and administrative costs increased 7.9% to $1 million in 1996
from $945,000 in 1995. As a percentage of net sales, general and
administrative expenses decreased 0.1% to 9.8% of net sales in 1996, from
9.9% in 1995. The increase in absolute dollars is primarily due to the
write-off of various abandoned assets including restaurant architectural
prototype costs, development costs incurred for sites not developed, and
receivables from the Company's former President and Chief Executive Officer
which have been determined to be noncollectible at this time, including the
$50,000 note receivable from officer. The decrease as a percentage of net
sales is attributed to management controlling overhead costs and the decrease
in corporate management personnel midway through the year.
The Company closed its Columbia, Missouri restaurant on March 21, 1996
due to its operating performance not meeting the Company's expectations. The
actual closing costs for the year ended December 31, 1996 were $193,998
consisting of the non-realizable value of the equipment and leasehold
improvements, loss on lease, and the related costs to dispose the unit. Rock
Bottom, Inc.
12
<PAGE>
signed an agreement with the Company to purchase the equipment in the store
and assume the Columbia store lease for $154,000.
Depreciation and amortization increased to $543,000, or 5.2% of net sales,
for the year ended December 31, 1996 from $330,000, or $3.5% of net sales, in
the comparable 1995 period. The increase in absolute dollars is attributed to
the increased number of restaurants in operation during 1996. The increase as a
percentage of net sales is due to the decreased average revenue per unit and the
relatively fixed nature of the depreciation and amortization costs.
Other expense approximated $181,000 for the year ended 1996 compared to
other income of $63,000 in the same 1995 period. Approximately $150,000 of the
1996 expense related to interest expense. The change in other income and
expense was due to the Company borrowing funds in 1996 compared to 1995 when the
Company was earning interest income from investments.
As a result of the factors described above, 1996 loss from operations and
net loss as a percentage of sales increased in comparison to 1995. These
percentage increases reflect the decrease in same-store sales, interest expense,
restaurant closing costs and the cumulative effect of the change in accounting
principle. The negative sales trends resulted in lower-than-anticipated
contributions from the Company's more mature Omaha stores during 1996 and
increased market pressures system-wide. The Company attributes these declines
primarily to increased competition in the core Omaha market, continued soft
retail environment and expanded gambling with two new riverboat casinos opening
within a 10 mile vicinity of the four Omaha stores.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO COMBINED YEAR ENDED DECEMBER 31, 1994
Net sales for the year ended December 31, 1995 were $9.5 million, a 7%
increase from $8.9 million for the year ended December 31, 1994. Net sales
for the year ended December 31, 1994 include the operations of four
restaurants for the full year, a fifth restaurant (Santa Fe) for nine months,
and a sixth restaurant (Lincoln) for one month. Net sales for the year ended
December 31, 1995 include the operations of six restaurants for the full
year, a seventh restaurant (Albuquerque) for eleven months, and a eighth
restaurant (Scottsdale) for 10 days. The increase in net sales is due to the
additional restaurants in operation during 1995, partially offset by a 13%
decrease in sales during 1995 at the four restaurants open during all of 1994
and 1995.
Cost of sales increased 4% to $6.5 million for the period ending
December 31, 1995 from $6.3 million for the comparable 1994 period. This
increase is due primarily to the additional restaurants in operation in 1995,
as described above. As a percentage of net sales, these costs approximated
68.3% in 1995 compared to 70.6% in 1994. This percentage decrease relates
mainly to improved food and beverage margins due primarily to better pricing
and improved controls to reduce waste and spoilage.
Restaurant operating expenses were $2.1 million, or 22.2% of net sales,
for the year ended December 31, 1995, a 56% increase from $1.4 million, or
15% of net sales, in the comparable period in 1994. These expenses represent
primarily the cost of occupancy, including rent, maintenance, and utilities,
and various other costs. The increase, as a percentage of net sales, is
attributed mainly to a decline in the average revenue per unit, and the
associated effect that these relatively fixed costs have on operating
margins. Increased advertising during the second half of the year also
contributed to the percentage increase in operating expenses.
13
<PAGE>
Amortization of pre-opening costs increased to $310,000, or 3.3% of net
sales, for the year ended December 31, 1995 compared to $94,000, or 1.1% of net
sales, for the same 1994 period. The increase in absolute dollars is due to a
higher number of new restaurants in operation during 1995 compared to 1994.
The increase as a percentage of net sales results from higher pre-opening costs
related to the Company's Lincoln and Albuquerque restaurants, and the decrease
in the average sales per restaurant, as described above.
General and administrative costs increased 15.3% to $945,000 for the year
ended December 31, 1995 compared to $819,000 for the comparable 1994 period. As
a percentage of net sales, these costs rose to 9.9% in 1995 from 9.2% in 1994.
This increase in absolute dollars and as a percentage of net sales is primarily
related to the Company having a full complement of corporate personnel for the
full year of 1995 versus only 6 months of comparable staffing during 1994.
Depreciation and amortization during the year ended December 31, 1995
increased to $330,000, or 3.5% of net sales, from $237,000, or 2.7% of net
sales, for the year ended December 31, 1994, a 39% increase. The increase in
absolute dollars is attributed to the increased number of restaurants in
operation during 1995. The increase as a percentage of net sales is due to the
decreased average revenue per unit and the relatively fixed nature of the
depreciation and amortization costs.
The Company's net loss for the year ended December 31, 1995 approximated
$568,000. Two of the Company's newer units located in Lincoln, Nebraska and
Albuquerque, New Mexico did not perform as anticipated, generating combined
pretax operating losses of $467,000. Further, the Company's more mature
restaurants experienced same-store sales declines which decreased the
contribution from those units. Increased competition (especially in the
Company's core Omaha, Nebraska market), road construction near the Company's
second highest volume unit, and a continued soft retail environment contributed
to the decrease. In view of these negative trends, and in an effort to heighten
the customers' perceived value, the Company increased its costs related to
advertising, training, portion sizes, and service, which further eroded the
operating margins during 1995.
IMPACT OF INFLATION
The primary inflationary factors affecting the Company's operations
include food and labor costs. A large number of the Company's restaurant
personnel are paid at the federally established minimum wage level, and,
accordingly, changes in such wage level could affect the Company's labor costs.
To date, inflation has not had a material impact on operating margins.
LIQUIDITY AND CAPITAL RESOURCES
The Company raised approximately $3.4 million (net of offering expenses) in
an initial public offering in January 1995, of which approximately $700,000 was
used to repay debt in the first quarter of 1995. As of December 31, 1995, the
Company had utilized substantially all of the proceeds from the initial public
offering to open three additional restaurants, and for working capital needs.
Net cash provided and used by operating activities was $6,000 and $613,000
for the years ended December 31, 1996 and 1995, respectively. The Company had a
working capital deficit of $1,048,000 and $1,122,000 at December 31, 1996 and
1995, respectively. The Company does not have significant receivables or
inventory.
14
<PAGE>
The Company's capital requirements relate principally to the development of
new restaurants and the operation of existing restaurants. Capital expenditures
for the restaurant construction and related equipment were $617,000 for the year
ended December 31, 1996 and $2,342,000 for the year ended December 31, 1995.
The Company currently has $454,725 borrowed under an agreement with First
National Bank of Omaha, at a variable interest rate which was 10.25% at December
31, 1996. Of this amount, $275,000 was used to purchase the leasehold and other
improvements from the former tenant of the real property on which the Company's
Scottsdale, Arizona restaurant is located, and a favorable sublease of the
property. The total purchase price was $325,000. The Company began paying down
the principal $5,000 a week including interest starting August 1, 1996. This
bank agreement expires on January 16, 1998 at which time it is expected that the
agreement will be renewed, or a new agreement will be negotiated.
On January 30, 1996, the Company obtained a credit line from Norwest Bank
Nebraska, N.A. of which the Schorr Family Company, Inc., a corporation in which
Paul C. Schorr III, Chairman of the Company's Board of Directors, is President
and Chief Executive Officer, guaranteed $300,000 of such indebtedness. As of
June 12, 1996, the Schorr Family company, Inc. paid such indebtedness to Norwest
Bank Nebraska, N.A. and the Company acknowledged a direct indebtedness to the
Schorr Family Company, Inc. of $300,000. On March 18, 1996 the Company borrowed
$200,000 from Roger Sack, a Director of the Company, at an interest rate of 1%
over Norwest Bank Nebraska, N.A. base rate. As of June 12, 1996, the Schorr
Family Company, Inc. And Roger D. Sack agreed to contribute the total $500,000
of indebtedness to the Company in exchange for a total of 421,052 shares of
Common Stock of the Company. The number of shares was determined by averaging
the average bid and asked prices of the Common Stock of the Company for the 10
trading days preceding June 12, 1996. The Schorr Family Company, Inc. owns
807,631 shares or 34.65% of the outstanding stock of the Company and Roger D.
Sack owns 720,421 shares or 30.91% of the outstanding stock of the Company.
This transaction was approved by the Board of Directors.
During 1996, the Company borrowed $207,000 from The Schorr Family Company,
Inc. due December 31, 1998 with an interest rate equal to the First National
Bank of Omaha "Base Rate."
The Company obtained a line of credit from First Bank, N.A. on January 27,
1997 in the amount of $395,000 at an initial interest rate of 8.25%. The line
of credit is guaranteed by a stockholder and is collateralized by the Rio
Rancho land held for sale. The Company currently has $150,000 borrowed
against the line to pay off existing debt.
Currently, the Company is in the process of selling two liquor licenses in
New Mexico and the Rio Rancho real estate which were purchased in anticipation
of opening new stores. These sales will increase working capital, support the
renovation needed for the mature Omaha stores and repay the related $550,000
debt collateralized by these three assets and other various debt listed on the
balance sheet. Management believes the Company has the financial resources in
light of projected cash flow to maintain its current level of operations
throughout 1997. There can be no assurance that the Company will be successful
in its attempt to sell the assets offered for sale at a profit and maintain
profitable operations to the extent necessary to meet existing debt service
requirements.
MANAGEMENT'S DISCUSSION AND ANALYSIS - FACTORS AFFECTING FUTURE RESULTS
The Company currently operates eight steakhouse restaurants in five
different cities. The Company's strategy at the time that it went public in
January, 1995 was to achieve significant profitability and use proceeds from the
public offering as well as other internally and externally generated funds to
expand its steakhouse restaurant concept to sixteen to twenty restaurants over a
several year period.
15
<PAGE>
Intense and significant competition from other national and regional
steakhouse restaurant chains and from "subsidized" food offerings by newly
opened gambling establishments adjacent to the Omaha, Nebraska market have
created significant operational and expansion difficulties for the Company.
National steakhouse chains such as Lone Star and Outback have expanded
significantly in the Omaha, Nebraska market where the Company has half of its
restaurants. Riverboat and fixed site gambling institutions in Council
Bluffs, Iowa, directly across the river from Omaha, Nebraska, not only draw
discretionary food dollars to gambling, but offer similar type prime rib and
steak dinners at subsidized prices. Because the number of restaurants
operated by the Company is relatively small, significant declines in per unit
sales, such as the Company has experienced over the past two years, have a
significant impact on operating results because there are fewer restaurants
over which to spread fixed operating costs. Although the national steakhouse
chains such as Lone Star and Outback are also affected by the gambling
operations, those organizations have significantly greater resources to
withstand such competition, including the ability to "coupon" and advertise.
The Company has significantly reduced its management and operational
costs over the past year to try to lessen the impact of lower per unit sales.
Management is also working vigorously to explore changes in menu mix,
pricing, advertising and limited restaurant theme modification to meet this
competition and increase per unit sales. There can be no assurance that the
Company will be able to achieve these goals.
On March 21, 1996 the Company closed its Columbia, Missouri restaurant
which was opened in November, 1993. This unit was closed due to the unit's
operating performance not meeting the Company's expectations. The Company
may seek to close one or two of its other restaurant units if their operating
performance does not appear to be capable of meeting the company's
expectations.
Over the short term, the Company's objectives are to return to
profitability and enhance shareholder value. If profitability can be
achieved, the Company believes it will be in a position to obtain additional
funds to finance expansion. Current management intends, however, to be
cautious and deliberate in expansion and will look for opportunistic
situations. Management cannot predict when the Company may return to any
significant profitability and further cannot predict whether, in such event,
it will be able to obtain additional financing and expand according to its
strategies. The inability of the Company to expand its restaurant operations
will make it difficult to achieve and grow significant shareholder value.
In addition to the competitive factors cited above, the restaurant
business is one of the most highly competitive in the United States and has
one of the highest failure rates. Restaurant business is affected by changes
in consumer tastes, national, regional and local economic conditions,
demographic trends, traffic patterns, and the type, number and location of
competing restaurants. In addition, factors such as inflation, increased
food, labor and employee benefit costs and the availability of experienced
management and hourly employees may also adversely affect the restaurant
industry in general and the Company's restaurants in particular. Any adverse
changes in any of these factors may impact the Company's ability to achieve
profitability even if it is able to increase per unit sales. In the Omaha
and Lincoln, Nebraska markets, the Company's results are also affected by
adverse weather conditions. Adverse weather conditions not only may affect
basic food costs, but during periods of extreme cold and snow, consumers do
not eat out as much.
The restaurant business is subject to various federal, state, and local
regulations, including those relating to the sale of food and alcoholic
beverages. While the Company to date has not experienced any
16
<PAGE>
material difficulties in obtaining necessary governmental approvals, the
failure to obtain or retain food and liquor licenses or any other
governmental approvals could have a material adverse effect on the Company's
results of operations. In addition, restaurant operating costs are affected
by increases in the minimum hourly wage, unemployment tax rates, sales taxes,
and similar matters over which the Company has no control. The Company is
also subject in certain stages to "dram shop" statutes, which generally
provide a person injured by an intoxicated person the right to recover
damages from an establishment that wrongfully served alcoholic beverages to
the intoxicated person. The Company carries liquor liability coverage as a
part of its existing comprehensive general liability insurance in all states,
including any possible "dram shop" statutes. Although, the Company has never
been named as a defendant in a lawsuit involving "dram shop" statutes, if the
Company is named a defendant in any such lawsuits, and the plaintiff
prevails, the Company could face significant liability. Any such liability
could have a material adverse effect on the Company's results of operations.
The name "Austins" in various formats is subject to substantial use
around the country and is the subject of several competing registrations with
the U.S. Patent and Trademark Office ("USPTO"). The Company is in the
process of completing a concurrent use registration with the USPTO.
Nonetheless, should other restaurant operators using names including
"Austins" commence and prevail in proceedings to preclude the Company's use
of the name in new markets, the short-term cost to the Company to change
names, signage, menus, and other advertising material could be significant.
ITEM 7. FINANCIAL STATEMENTS
The information required by this item is incorporated by reference to the
financial statements set forth on pages F-1 through F-16 hereof.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
OMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Incorporated by reference from the Company's Proxy Statement for Annual
Meeting of Stockholders to be held June 5, 1997 ("1997 Proxy Statement") under
the captions "Election of Directors" and "List of Current Officers of the
Company."
COMPLIANCE WITH SECTION 16(a) OF EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership of Form 3 and changes in ownership on
Form 4 or Form 5 with the Securities and Exchange Commission (the "SEC"). Such
officers, directors and 10% stockholders are also required by SEC rules to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such forms received by it, the Company
believes that, during the fiscal year ended December 31, 1996, all Section 16(a)
filing requirements applicable to its officers, directors and 10% stockholders
were satisfied.
17
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
Incorporated by reference from the Company's 1997 Proxy Statement under the
caption "Executive Compensation."
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the Company's 1997 Proxy Statement under the
caption "General" and "Election of Directors."
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the Company's 1997 Proxy Statement under the
caption "Related Party Transactions."
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: Page No.
3.1* Certificate of Incorporation of the Company, as amended
3.2* Bylaws of the Company
10.2* Stock Purchase Agreement among the Company, The Schorr
Family Company, Inc. and Norman A. Lies
10.5* Lease dated January 18, 1989, between John Kai-Chee Moy
and Cindie Suk-Ching Moy and Missouri Development Company
10.7* Lease Agreement dated October 16, 1992, between Central
Investment Co., Ltd. and Austins 72nd, Inc.
10.8* Lease Agreement dated May 27, 1993, between Richard H. Knipp
and Austins of Columbia, Inc.
10.9* Standard Commercial Shopping Center Lease dated August 1, 1993,
between Kinder-Crow L.P. and Austins of New Mexico, Inc.
10.10* Commercial Lease dated March 10, 1994, between Jack Irwin and
Austins Lincoln, Inc.
10.11* 1994 Austins Steaks & Saloon, Inc. Incentive and Nonqualified
Stock Option Plan, as amended
10.12A* Option Agreement between the Company and Sidney H. Sweet,
dated August 1, 1994
10.12B* Amended Option Agreement between the Company and Sidney H.
Sweet, dated November 30, 1994
10.13* Settlement Agreement dated March 24, 1994, between Missouri
Development Company and Equitable Life Assurance Society of
the United States
10.14* Employment Agreement between the Company and Sidney H. Sweet
dated November 1, 1994
10.15** Lease Agreement dated August 15, 1994, between Jacob Alcon and
Petrita Alcon and Austins of Albuquerque, Inc.
10.16*** Lease Agreement dated July 19, 1995 between 1101 Harney LLC
18
<PAGE>
and Austins Old Market, Inc.
10.17*** Sublease Agreement dated May 17, 1995 between Collins
Properties, Inc. and the Company
10.18*** Real Estate Mortgage Note dated October 1995 between
AMREP SOUTHWEST, INC. and the Company
10.18.1 Amended Real Estate Mortgage Note dated January 31, 21
1997 between AMREP SOUTHWEST, INC. and the Company
10.19*** Commercial Note dated January 30, 1996 between Norwest Bank
Nebraska, N.A. and the Company
10.20*** Commercial Note dated March 18, 1996 between Roger D. Sack and
the Company
10.21*** Guaranty by Corporation dated January 30, 1996 between The
Schorr Family Company, Inc. and Norwest Bank Nebraska, N.A.
10.22 Commercial Note dated March 21, 1997 between First National
Bank of Omaha and the Company 24
10.23 Commercial Note dated January 27, 1997 between First Bank
National Association and the Company 28
21 Subsidiaries of the Issuer:
Missouri Development Company
Austins Albuquerque, Inc.
Austins Omaha, Inc.
Austins 72nd, Inc.
Austins Lincoln, Inc.
Austins New Mexico, Inc.
Austins Old Market, Inc.
Austins Scottsdale, Inc.
Austins Rio Rancho, Inc.
Austins Albuquerque East, Inc.
23.1 Consent of Coopers & Lybrand L.L.P. 38
- -------------
* Incorporated by reference to the specific exhibit to the Form SB-2
Registration Statement, as filed with the Securities and Exchange
Commission on January 23, 1995, Registration No. 33-84440-D.
** Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1994.
*** Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of 1996.
19
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AUSTINS STEAKS & SALOON, INC.
Dated: April 9, 1997 By: /s/ Trisha N. Gade-Jones
-------------------------------------
Trisha N. Gade-Jones
Chief Financial Officer
In accordance with the Exchange Act, this Report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Paul C. Schorr III Chairman of the Board April 7, 1997
- ----------------------
Paul C. Schorr III
/s/ B. Scott Ball Director April 8, 1997
- ----------------------
B. Scott Ball
/s/ Roger D. Sack Director April 7, 1997
- -----------------------
Roger D. Sack
20
<PAGE>
AUSTINS STEAKS & SALOON, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Austins Steaks & Saloon, Inc.
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Changes in Stockholders' Equity. . . . . . . . F-5
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . F-7
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
Austins Steaks & Saloon, Inc.
We have audited the accompanying consolidated balance sheets of Austins
Steaks & Saloon, Inc. and its subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 consolidated financial position of Austins Steaks
& Saloon, Inc. and its subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for pre-opening costs in 1996.
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
March 27, 1997
F-2
<PAGE>
AUSTINS STEAKS & SALOON, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
INVENTORIES $ 127,885 $ 111,913
PREPAID EXPENSES AND OTHER CURRENT ASSETS 272,297 310,938
PRE-OPENING COSTS 0 255,512
------------ ------------
TOTAL CURRENT ASSETS 400,182 678,363
------------ ------------
EQUIPMENT 1,790,354 1,761,768
LEASEHOLD IMPROVEMENTS 2,960,973 2,852,730
------------ ------------
4,751,327 4,614,498
ACCUMULATED DEPRECIATION AND AMORTIZATION (1,150,501) (763,093)
------------ ------------
3,600,826 3,851,405
INTANGIBLES, NET 654,229 701,797
NOTE RECEIVABLE FROM OFFICER 0 50,000
OTHER ASSETS 825,552 1,092,058
------------ ------------
$ 5,480,789 $ 6,373,623
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
CASH OVERDRAFT $ 48,071 $ 305,850
ACCOUNTS PAYABLE 566,635 419,180
UNREDEEMED GIFT CERTIFICATES 89,135 125,777
INTEREST PAYABLE 10,236 0
CURRENT PORTION OF LONG-TERM DEBT 224,478 550,000
NOTES PAYABLE 155,914 0
REAL ESTATE MORTGAGE NOTE PAYABLE 394,141 400,049
------------ ------------
TOTAL CURRENT LIABILITIES 1,488,610 1,800,856
------------ ------------
LONG-TERM DEBT, NET OF CURRENT PORTION 262,205 0
NOTE PAYABLE TO SHAREHOLDER 207,270 0
------------ ------------
469,475 0
------------ ------------
COMMITMENTS (NOTE 8)
STOCKHOLDERS' EQUITY:
COMMON STOCK ($.01 PAR VALUE; 7,500,000 AND 20,000,000
SHARES AUTHORIZED; 2,331,052 AND 1,910,000 SHARES
ISSUED AND OUTSTANDING IN 1996 AND 1995, RESPECTIVELY) 23,311 19,100
ADDITIONAL PAID-IN CAPITAL 5,487,511 4,991,722
ACCUMULATED DEFICIT (1,988,118) (438,055)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 3,522,704 4,572,767
------------ ------------
$ 5,480,789 $ 6,373,623
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-3
<PAGE>
AUSTINS STEAKS & SALOON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
NET SALES $ 10,440,478 $ 9,534,763
COSTS AND EXPENSES:
COST OF SALES 7,389,934 6,510,249
RESTAURANT OPERATING EXPENSES 2,949,635 2,446,332
GENERAL AND ADMINISTRATIVE 1,019,964 945,332
AMORTIZATION OF PRE-OPENING COSTS 0 309,548
LOSS ON RESTAURANT CLOSING 193,998 0
------------- ------------
11,553,531 10,211,461
------------- ------------
LOSS FROM OPERATIONS (1,113,053) (676,698)
OTHER INCOME (EXPENSES):
LOSS ON DISPOSITION OF FIXED ASSETS (31,441) 0
INTEREST INCOME (EXPENSE), NET (150,057) 62,585
------------- ------------
LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (1,294,551) (614,113)
INCOME TAXES BENEFIT 0 46,414
------------- ------------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (1,294,551) (567,699)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (255,512) 0
------------- ------------
NET LOSS $ (1,550,063) $ (567,699)
------------- ------------
------------- ------------
WEIGHTED AVERAGE SHARES OUTSTANDING 2,145,946 1,850,411
------------- ------------
------------- ------------
NET LOSS PER SHARE BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE $ (0.60) $ (0.31)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (0.12) 0.00
------------- ------------
NET LOSS PER COMMON SHARE $ (0.72) $ (0.31)
------------- ------------
------------- ------------
PRO FORMA AMOUNTS ASSUMING CHANGE IN
ACCOUNTING PRINCIPLE IS APPLIED RETROACTIVELY:
NET LOSS $ (1,550,063) $ (944,995)
NET LOSS PER COMMON SHARE $ (.60) $ (.51)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
AUSTINS STEAKS & SALOON, INC.
CONSOLIDATED STATEMENTS OF CHANGES INSTOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
------------------------- PAID-IN EARNINGS
SHARES DOLLARS CAPITAL (DEFICIT) TOTAL
---------- --------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 1,100,000 $11,000 $1,592,322 $129,644 $1,732,966
ISSUANCE OF SHARES IN INITIAL PUBLIC OFFERING,
NET OF COSTS 800,000 8,000 3,372,000 0 3,380,000
ISSUANCE OF SHARES 10,000 100 27,400 0 27,500
NET LOSS 0 0 6 (567,699) (567,699)
---------- -------- ---------- ------------ ----------
BALANCE, DECEMBER 31, 1995 1,910,000 19,100 4,991,722 (438,055) 4,572,767
ISSUANCE OF SHARES 421,052 4,211 495,789 0 500,000
NET LOSS 0 0 0 (1,550,063) (1,550,063)
---------- -------- ---------- ------------ -----------
BALANCE, DECEMBER 31, 1996 2,331,052 $23,311 $5,487,511 $(1,988,118) $3,522,704
---------- -------- ---------- ------------ -----------
---------- -------- ---------- ------------ -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
AUSTINS STEAKS & SALOON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $ (1,550,063) $ (567,699)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES:
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 255,512 0
DEPRECIATION AND AMORTIZATION 590,007 362,355
LOSS ON SALE OF RESTAURANT AND FIXED ASSETS 157,513 0
WRITEOFF OF NOTE RECEIVABLE AND ADVANCES TO OFFICER 130,855 0
WRITEOFF OF OTHER ASSETS AND EQUIPMENT 101,077 0
DEFERRED INCOME TAXES 0 (46,414)
CHANGE IN ASSETS AND LIABILITIES:
INVENTORIES (15,972) 10,621
PREPAID EXPENSES AND OTHER CURRENT ASSETS 215,841 (65,342)
PRE-OPENING COSTS 0 (67,748)
ACCOUNTS PAYABLE 147,455 (215,786)
UNREDEEMED GIFT CERTIFICATES (36,642) (12,555)
INTEREST PAYABLE 10,236 0
DUE TO STOCKHOLDER AND RELATED PARTIES 0 (10,506)
------------- ------------
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES 5,819 (613,074)
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF RESTAURANT AND FIXED ASSETS 163,145 0
PURCHASE OF EQUIPMENT AND LEASEHOLD IMPROVEMENTS (616,564) (2,342,270)
INCREASE IN OTHER ASSETS (87,530) (486,843)
ADDITIONS TO INTANGIBLE ASSETS (1,050) (325,000)
------------- ------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (541,999) (3,154,113)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
CHANGE IN CASH OVERDRAFT (257,779) 305,850
PROCEEDS FROM DEBT 1,052,184 806,243
PAYMENTS ON DEBT (258,225) (870,318)
PROCEEDS FROM ISSUANCE OF COMMON STOCK 0 3,407,500
------------- ------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 536,180 3,649,275
------------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 0 (117,912)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 0 117,912
------------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 0 $ 0
------------- ------------
------------- ------------
CASH PAID FOR INTEREST $ 144,116 $ 6,888
------------- ------------
------------- ------------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
LAND ACQUIRED THROUGH SELLER FINANCING $ 0 $ 400,049
ISSUANCE OF STOCK IN REPAYMENT OF DEBT $ 500,000
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
F-6
<PAGE>
AUSTIN'S STEAKS & SALOON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS
Austins Steaks & Saloon, Inc. (the "Company") was incorporated under the
laws of the state of Delaware in December 1992. The Company owns and
operates moderately priced, casual dining restaurants featuring specialty
prime rib dishes, a variety of fresh-cut, aged steaks, home-cooked
entrees, salads and sandwiches. The Company's restaurants are located in
the Midwest and Southwest Regions of the United States. On February 1,
1995, the Company completed an initial public offering and sold 800,000
shares of common stock, with proceeds to the Company of approximately
$3,380,000, net of $240,000 of offering costs associated with the offering.
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of nine restaurant
corporations, eight of which were open as of December 31, 1996. All
significant accounts and transactions between the restaurants have been
eliminated in consolidation. The following table summarizes the history
of restaurant openings and the formation of related corporations:
CORPORATIONS RESTAURANT LOCATION OPENING DATE
---------------------------- ----------------------- ---------------------
MISSOURI DEVELOPMENT CO. OMAHA, NEBRASKA SEPTEMBER 1989
AUSTINS OMAHA, INC. OMAHA, NEBRASKA JANUARY 1992
AUSTINS 72ND, INC. OMAHA, NEBRASKA DECEMBER 1992
AUSTINS NEW MEXICO, INC. SANTA FE, NEW MEXICO APRIL 1994
AUSTINS LINCOLN, INC. LINCOLN, NEBRASKA DECEMBER 1994
AUSTINS OF ALBUQUERQUE, INC. ALBUQUERQUE, NEW MEXICO FEBRUARY 1995
AUSTINS OF SCOTTSDALE, INC. SCOTTSDALE, ARIZONA DECEMBER 1995
AUSTINS OLD MARKET, INC. OMAHA, NEBRASKA JANUARY 1996
AUSTINS COLUMBIA, INC. COLUMBIA, MISSOURI OPENED NOVEMBER 1993,
CLOSED MARCH 1996
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes." SFAS 109 requires the utilization of the liability method of
accounting for deferred income taxes. Under this method, deferred income
tax assets and liabilities are recorded based on the difference between the
financial statement and tax bases of assets and liabilities using tax
rates in effect for the year in which the differences are expected to
reverse.
F-7
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
INVENTORIES
Inventories consist primarily of food and beverages for sale in the
restaurants. Inventories are stated at the lower of cost or market. Cost
is determined using the average cost method, which is recalculated monthly.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are recorded at cost. Equipment is
depreciated using the straight-line method based upon the estimated useful
lives of the related assets which are primarily five to seven years.
Leasehold improvements are amortized using the straight-line method over
the lesser of the term of the lease or the estimated useful lives of the
assets.
UNREDEEMED GIFT CERTIFICATES
The Company records a liability for outstanding gift certificates at the
time they are issued. Upon redemption, sales are recorded and the
liability is reduced by the amount of the certificates redeemed.
IMPAIRMENT OF LONG-LIVED ASSETS
In 1996, the Company adopted Statement of Financial Accounting Standard
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." The Company evaluates whether
changes have occurred that would require revision of the remaining
estimated useful life or recoverability of long-lived assets. If such
circumstances arise, the Company uses undiscounted future cash flows to
determine if the asset is recoverable. In 1996, the Company wrote off
various abandoned assets including restaurant architectural prototype
costs, computer equipment, uncollectible notes receivable and advances,
and development costs incurred for sites not to be developed totaling
$231,932.
MANAGEMENT ESTIMATES
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 dates of the
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
F-8
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments have been determined
based on available information and appropriate valuation methodologies.
The carrying amounts of accounts payable approximates fair value due to
the short-term nature of the accounts. The fair value of notes payables
is estimated based on market rates of interest currently available to the
Company. The fair value of notes payable approximates carrying value at
December 31, 1996 and 1995.
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(SFAS No. 128). SFAS No. 128 specifies the computation, presentation, and
disclosure requirements for earnings per share. SFAS No. 128 is effective
for financial statements issued for periods ending after December 15,
1997. The Company does not expect a material impact as a result of the
adoption of SFAS No. 128.
NET LOSS PER SHARE
Net loss per common share for all periods is based on the weighted average
number of common shares outstanding. Common stock equivalents are not
included in the determination of loss per share as their inclusion would
be anti-dilutive.
2. CHANGE IN METHOD OF ACCOUNTING:
As of January 1, 1996, the Company changed the method of accounting for
pre-opening costs. Labor costs and certain other costs relating to
opening new restaurants are expensed as incurred. Previously, such costs
were capitalized and amortized over a 12-month period on a straight-line
basis. Although some retailers capitalize pre-opening costs, the Company
believes expensing such costs as incurred is preferable and results in a
more meaningful presentation of the Company's working capital. The
cumulative effect of the change of $255,512 represents the reversal of the
capitalized pre-opening costs as of December 31, 1995.
F-9
<PAGE>
3. LOSS ON CLOSING OF RESTAURANT:
On March 21, 1996, the Company closed its Columbia, Missouri restaurant.
This restaurant was closed due to its operating performance not meeting
the Company's expectations. Rock Bottom, Inc. signed an agreement with the
Company on July 16, 1996 to purchase the equipment in the store and the
Columbia lease. The loss on closing was $193,998, consisting of the
nonrealizable value of the equipment and leasehold improvements, loss on
lease, and the related costs to dispose of the unit.
4. PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets include the following at
December 31:
1996 1995
-------- --------
LIQUOR LICENSES HELD FOR SALE $258,055 $ 0
RENT 1,739 128,208
REAL ESTATE TAXES 0 21,394
STORE SUPPLIES AT CORPORATE OFFICE 0 49,075
INSURANCE 4,519 13,905
OTHER 7,984 98,356
-------- --------
$272,297 $310,938
-------- --------
-------- --------
The Company has agreements in principal for the sale of two liquor
licenses. The Company is currently involved in litigation over title to
one of the licenses.
5. INTANGIBLE ASSETS:
The Company's intangible assets consist of the following at December 31:
ESTIMATED
USEFUL LIFE 1996 1995
-------------- -------- --------
TRADEMARKS 15 YEARS $113,336 $113,336
GOODWILL 15 YEARS 119,266 119,266
LEASEHOLD INTERESTS LIFE OF LEASES 185,810 185,810
LEASE RIGHTS LIFE OF LEASE 326,050 325,000
-------- --------
744,462 743,412
LESS ACCUMULATED AMORTIZATION 90,233 41,615
-------- --------
$654,229 $701,797
-------- --------
-------- --------
The intangible assets are amortized using the straight-line method over
the estimated useful lives as indicated above.
F-10
<PAGE>
5. INTANGIBLE ASSETS, CONTINUED:
The lease rights represent payment for favorable lease terms which
includes decelerating rent payments over the life of the lease. The
amount is being amortized on a straight-line basis over the life of the
lease.
6. OTHER ASSETS:
Other assets at December 31 consist of the following:
1996 1995
LAND HELD FOR SALE (SEE NOTE 9) $ 535,039 $ 533,183
LIQUOR LICENSES 193,183 342,637
DEPOSITS 59,894 92,466
ORGANIZATION COSTS, NET 37,436 55,172
OTHER 0 68,600
---------- ----------
$ 825,552 $1,092,058
---------- ----------
---------- ----------
Liquor licenses acquired in certain states are considered to have
unlimited lives due to state regulations and, accordingly, the
acquisition cost of these licenses has been capitalized and is not
amortized. Organization costs incurred to establish new legal entities
are capitalized and amortized over five years. The land held for sale is
actively being marketed for sale.
7. INCOME TAXES:
The income tax benefit for the year ended December 31, 1996 and 1995 was
as follows:
DEFERRED TAX BENEFIT: 1996 1995
FEDERAL $ 0 $ 40,694
STATE 0 5,720
---------- ----------
$ 0 $ 46,414
---------- ----------
---------- ----------
F-11
<PAGE>
7. INCOME TAXES, CONTINUED:
Deferred tax liabilities (assets) are comprised of the following at
December 31, 1996 and 1995:
1996 1995
INTANGIBLES $ 96,585 $ 104,706
DIFFERENCE IN BOOK AND TAX METHODS FOR
DEPRECIATION AND AMORTIZATION 0 5,913
---------- ----------
96,585 110,619
---------- ----------
DIFFERENCE IN BOOK AND TAX METHODS FOR
DEPRECIATION AND AMORTIZATION (160,886) 0
LOSS CARRYFORWARDS (661,635) (224,580)
TAX CREDIT CARRYFORWARDS (46,272) (30,272)
LESS VALUATION ALLOWANCE 772,208 144,233
---------- ----------
(96,585) (110,619)
---------- ----------
$ 0 $ 0
---------- ----------
---------- ----------
At December 31, 1996 and 1995, the Company had no deferred tax assets or
liabilities reflected on its financial statements since the net deferred
tax assets are completely offset by a valuation allowance. In assessing
the realizability of deferred tax assets, management considers whether
it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences become deductible.
The net $627,975 and $127,528 increase in 1996 and 1995, respectively,
in the valuation allowance for deferred tax assets relate primarily to
federal tax credits and federal and state net operating loss
carryforwards. Benefit has been recognized for these items only to the
extent deferred tax liabilities exist.
F-12
<PAGE>
7. INCOME TAXES, CONTINUED:
The differences between the effective income tax rate and the federal
statutory income tax rate (34%) for the year ended December 31, 1996 and
1995 are summarized below:
1996 1995
STATUTORY FEDERAL INCOME TAX BENEFIT $ 527,021 $ 208,798
ADD (DEDUCT) TAX EFFECT OF:
STATE INCOME TAX BENEFIT, NET OF
FEDERAL BENEFIT 46,084 23,734
NET OPERATING LOSSES AND TAX CREDITS
FOR WHICH NO BENEFIT IS CURRENTLY
AVAILABLE (564,607) (176,674)
OTHER, NET (8,498) (9,444)
---------- ----------
$ 0 $ 46,414
---------- ----------
---------- ----------
For the year ended December 31, 1996, the Company has a net operating
loss for federal income tax purposes of approximately $1,750,000. The
net operating loss will be available to offset future taxable income
through the years 2009 to 2011.
8. LEASES:
The Company has entered into long-term operating leases for the use of
restaurant buildings and land. The minimum annual lease payments,
excluding renewal options, required under these agreements are as
follows:
1997 $559,315
1998 483,889
1999 402,373
2000 345,050
2001 and thereafter 2,361,400
----------
Total $4,152,027
----------
----------
Rent expense incurred during 1996 and 1995 on these leases amounted to
$579,487 and $507,962, respectively.
F-13
<PAGE>
9. NOTES PAYABLE AND LONG-TERM DEBT:
Notes payable and long-term debt at December 31 consist of the following
(see Note 13):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
NOTES PAYABLE:
NOTE PAYABLE TO BANK, PRINCIPAL AND INTEREST AT 2% ABOVE THE
WALL STREET JOURNAL PRIME RATE (10.25% AT DECEMBER 31, 1996)
DUE JANUARY 24, 1997, COLLATERALIZED BY A LIQUOR LICENSE. $ 85,139 $ 0
NOTE PAYABLE TO BANK, PRINCIPAL AND INTEREST AT 2% ABOVE THE
WALL STREET JOURNAL PRIME RATE (10.25% AT DECEMBER 31, 1996)
DUE MARCH 10, 1997, COLLATERALIZED BY A LIQUOR LICENSE. 70,775 0
---------- ----------
$ 155,914 $ 0
---------- ----------
---------- ----------
REAL ESTATE MORTGAGE NOTE PAYABLE, DUE IN QUARTERLY INSTALLMENTS
OF $100,000 BEGINNING FEBRUARY 1, 1997, PLUS INTEREST AT 11% PER
ANNUM, WITH THE UNPAID PRINCIPAL BALANCE DUE ON OCTOBER 31, 1997,
COLLATERALIZED BY REAL ESTATE. $ 394,141 $ 400,049
---------- ---------
---------- ---------
LONG-TERM DEBT:
NOTE PAYABLE TO CORPORATION, DUE NOVEMBER 1, 2001, PAYABLE IN MONTHLY
INSTALLMENTS OF $856, INCLUDING INTEREST AT 2% ABOVE THE
NY COMPOSITE PRIME LENDING RATE (10.25% AT DECEMBER 31, 1996) $ 31,958 $ 0
NOTE PAYABLE TO BANK, DUE IN WEEKLY INSTALLMENTS OF $5,000, INCLUDING
INTEREST AT THE BANK'S PRIME RATE (10.25% AT DECEMBER 31, 1996), WITH THE
UNPAID PRINCIPAL BALANCE DUE ON JANUARY 16, 1998, COLLATERALIZED BY
SUBSTANTIALLY ALL ASSETS OF THE COMPANY 454,725 550,000
NOTE PAYABLE TO SHAREHOLDER, PRINCIPAL AND SIMPLE INTEREST AT
9.25% DUE ON DECEMBER 31, 1998 207,270 0
---------- ---------
693,953 550,000
LESS CURRENT PORTION (224,478) (550,000)
---------- ----------
TOTAL LONG-TERM DEBT $ 469,475 $ 0
---------- ----------
---------- ----------
WEIGHTED AVERAGE INTEREST RATE AT DECEMBER 31 10.27% 9.55%
---------- -----------
---------- -----------
</TABLE>
The due dates of the note payable to bank and note payable to shareholder were
extended subsequent to year end. The revised maturities are reflected in the
financial statements at December 31, 1996.
F-14
<PAGE>
10. COMMON STOCK OPTIONS:
The Company has stock option plans under which incentive and
nonqualified stock options may be granted to key employees and
directors of the Company. As of December 31, 1996, the Company has
provided for the delivery of up to 275,000 shares of common stock,
including 100,000 shares granted to a former executive officer outside
of the plans. Options are granted at a price not less than the fair
market value of the shares on the date of the grant. The options may
be granted for terms up to but not exceeding 10 years and are generally
fully vested from two years to four years from the date granted. At
December 31, 1996, there were 64,000 shares available for future grants.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recorded for
the stock option plans. Had compensation cost for the Company's stock
option plans been determined based on the fair value at the grant date
for awards in 1995 and 1996 consistent with the provisions of SFAS No.
123, the effect on the Company's pro forma net loss and loss per share
would not have been material.
The status of stock options under the plans is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE OPTIONS
SHARES PRICE PER SHARE EXERCISABLE
---------- ----------------- ------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 130,000 $ 2.77 0
GRANTED 25,000 3.37
EXERCISED 0 0
FORFEITED (15,000) 2.75
---------- -------------- -----------
BALANCE AT DECEMBER 31, 1995 140,000 2.86 115,000
GRANTED 111,000 1.18
EXERCISED 0 0
FORFEITED (40,000) 3.13
---------- -------------- -----------
BALANCE AT DECEMBER 31, 1996 211,000 $ 1.92 106,000
---------- -------------- -----------
---------- -------------- -----------
</TABLE>
F-15
<PAGE>
10. STOCK OPTIONS, CONTINUED:
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISABLE OUTSTANDING CONTRACTUAL EXERCISE AT EXERCISE
PRICES DECEMBER 31 LIFE PRICE DECEMBER 31 PRICE
- ------------ ------------- ----------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
$1.00 6,000 4.6 YEARS $ 1.00 6,000 $ 1.00
$1.19 105,000 9.5 YEARS 1.19 0 0
$2.75 100,000 2.6 YEARS 2.75 100,000 2.75
------------ -----------
$1.00 TO 2.75 211,000 6.1 YEARS 1.92 106,000 2.65
</TABLE>
11. AUTHORIZED SHARES:
Pursuant to stockholder approval at the Company's 1995 annual meeting,
the number of shares of common stock authorized was reduced from 20,000,000
to 7,500,000 shares. This change was filed in the office of the Secretary
of State of Delaware on January 24, 1996, and became effective on that
date.
12. MAJOR SUPPLIERS:
Purchases from one supplier were approximately $2,000,000 for the year
ended December 31, 1996.
13. SUBSEQUENT EVENT:
On January 27, 1997, the Company entered into a line of credit with a
national bank. The line has an availability of $395,000 and an initial
interest rate of 8.25%, with a maturity of January 27, 1998. The line is
collateralized by land held for sale and is guaranteed by a stockholder.
Drawings of $150,000 have been made against the note and were used to pay
down existing notes payable.
F-16
<PAGE>
EXHIBIT 10.18.1
SECOND AMENDMENT TO
REAL ESTATE MORTGAGE NOTE
THIS SECOND AMENDMENT is made as of the 31st day of January, 1997, by
and between AUSTINS STEAKS AND SALOON, INC., a Delaware corporation
(hereinafter "Maker"), and AMREP SOUTHWEST, INC., a New Mexico corporation
(hereinafter "Holder").
WHEREAS, Maker executed a Real Estate Mortgage Note (hereinafter the
"Note") in favor of Maker dated October 30, 1995 in the original principal
amount of $400,049.20 which was amended by a First Amendment dated August 27,
1996; and
WHEREAS, the Note is due and payable in full on January 31, 1997; and
WHEREAS, Maker desires to extend the term of the Note and Holder is
willing to do so.
NOW, THEREFORE, in consideration of the mutual covenants hereinbelow,
Maker and Holder agree and covenant as follows:
1. The principal balance of the Note currently outstanding is
$394,140.80. The Note is current through October 31, 1996.
2. Holder agrees to extend the Note until October 31, 1997 at which
time the remaining principal balance plus any and all accrued interest on the
Note shall be due and payable in full.
3. Maker agrees to make principal payments to Holder in the amount of
$100,000.00 each on January 31, 1997, April 30, 1997 and July 31, 1997. In
addition
21
<PAGE>
to each principal payment, Maker agrees to pay to Holder all accrued interest
on the unpaid principal balance on each of the above-referenced dates.
4. Except as specifically modified herein, the remaining terms and
provisions of the Note shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Second Amendment on
the date and year first above written.
AUSTINS STEAKS AND SALOON, INC.
By: /s/ Paul C. Schorr, III
---------------------------------
Paul C. Schorr, III
Chairman of the Board of Directors
AMREP SOUTHWEST, INC.
By: /s/ W.D. Buchly
---------------------------------
W.D. Buchly, Senior Vice President
STATE OF NEBRASKA )
)ss.
COUNTY OF LANCASTER )
This instrument was acknowledged before me on February 18, 1997 by Paul
C. Schorr, III Chairman of the Board of Directors of AUSTINS STEAKS AND
SALOON, a Delaware corporation, on behalf of said corporation.
[SEAL] /s/ Karolynn S. Mizell
----------------------------------
Notary Public
My Commission Expires:
7-22-2000
- ------------------
22
<PAGE>
STATE OF NEW MEXICO )
)ss.
COUNTY OF SANDOVAL )
This instrument was acknowledged before me on April 10, 1997 by W.D.
Buchly, Sr. Vice/President of AMREP SOUTHWEST, INC, a New Mexico corporation,
on behalf of said corporation.
/s/ Jacqueline L. Myers
-----------------------------------------
Notary Public
My Commission Expires:
[SEAL]
23
<PAGE>
EXHIBIT 10.22
SECOND AMENDMENT TO
AGREEMENT
THIS AGREEMENT, made this 21st day of March, 1997, by and between AUSTINS
STEAKS & SALOON, INC., a Nebraska corporation ("BORROWER") and First National
Bank of Omaha, a national banking association with principal business offices
in Omaha, Nebraska ("BANK").
Whereas, BANK and BORROWER executed an Agreement dated August 31, 1996,
and February 7, 1997, (the Agreement together with all amendments thereto is
referred to herein as "AGREEMENT").
Whereas, the parties hereto desire to amend the AGREEMENT.
Now, therefore, in consideration of the AGREEMENT, and their mutual
covenants herein, the parties hereto agree as follows:
1. Terms which are typed herein as all capitalized words and are not defined
herein shall have the same meanings as when described in the AGREEMENT.
2. Paragraph 1. of the AGREEMENT is hereby amended to read, effective
immediately:
1. ACKNOWLEDGMENT OF DEBT. The principal balance of the OBLIGATION is
$358,657.27 as of the date hereof. In addition, the OBLIGATION consists of
interest accrued and costs and attorney fees incurred by BANK.
3. Paragraph 3. of the AGREEMENT is hereby amended to read, effective
immediately:
3. PAYMENTS AND INTEREST. As described in the NOTE, BORROWER agrees to
pay the sum of $5,000.00 per week to BANK, commencing March 28, 1997, until
January 16, 1998, when the entire OBLIGATION shall be due and payable in a
single installment on such date. Each weekly payment shall be applied first
to any costs, fees or charges outstanding, thence to interest on the NOTE,
and finally to principal. Interest shall accrue on the NOTE from March 21,
1997 as described in the NOTE.
4. BORROWER certifies by its execution hereof that all of the representations
and warranties set forth in the AGREEMENT are true as of this date, and that
no EVENT OF DEFAULT under the AGREEMENT, and no event which, with the giving
of notice or passage of time or both, would become such an EVENT OF DEFAULT,
has occurred as of execution hereof, except as disclosed to BANK. All other
terms and conditions of the AGREEMENT not affected or amended by this
AGREEMENT, are hereby ratified and confirmed.
24
<PAGE>
In witness whereof, the parties have set their hands on this 27 day of
March, 1997.
FIRST NATIONAL BANK OF OMAHA
By /s/ ILLEGIBLE
--------------------------------
Its Commercial Loan Officer
--------------------------------
AUSTINS STEAKS & SALOON, INC.
a/k/a AUSTINS STEAKS AND SALOON, INC.
By /s/ Tish Gade Jones
--------------------------------
Its CFO
--------------------------------
Acknowledged by Guarantors:
AUSTINS OF ALBUQUERQUE, INC. AUSTINS 72ND, INC.
By /s/ Tish Gade Jones By /s/ Tish Gade Jones
-------------------------------- --------------------------------
Its CFO Its CFO
-------------------------------- --------------------------------
AUSTINS SCOTTSDALE, INC. AUSTINS OMAHA, INC.
By /s/ Tish Gade Jones By /s/ Tish Gade Jones
-------------------------------- --------------------------------
Its CFO Its CFO
-------------------------------- --------------------------------
AUSTINS OLD MARKET, INC. AUSTINS OF NEW MEXICO, INC.
By /s/ Tish Gade Jones By /s/ Tish Gade Jones
-------------------------------- --------------------------------
Its CFO Its CFO
-------------------------------- --------------------------------
MISSOURI DEVELOPMENT COMPANY AUSTINS LINCOLN, INC.
By /s/ Tish Gade Jones By /s/ Tish Gade Jones
-------------------------------- --------------------------------
Its CFO Its CFO
-------------------------------- --------------------------------
25
<PAGE>
-----------------------------
MAKER
-----------------------------
[LOGO] Austins Steaks & Saloon, Inc. PROMISSORY
FIRST NATIONAL BANK NOTE
of omaha
-----------ADDRESS-----------
6490 "O" Street, Suite 334
Lincoln, NE 68510
-----------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT INTEREST RATE NOTE DATE MATURITY DATE OBLIGOR # NOTE #
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$358,657.27 VARIABLE 03/21/97 01/16/98 2000024165 RL#1 RC#1
REG + 1.0000%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Maker promises to pay to the order of First National Bank of Omaha ('Bank')
at any of its offices, the principal sum hereof, which shall be:
(NON-REVOLVING) THE LESSER OF THREE HUNDRED FIFTY-EIGHT THOUSAND SIX HUNDRED
FIFTY-SEVEN AND 27/100 DOLLARS OR SO MUCH THEREOF AS MAY HAVE BEEN ADVANCED
BY BANK.
Interest shall accrue on the outstanding principal amount from and including
the Note Date above to the Maturity Date at the rate of: 1.0000% PER ANNUM
OVER THE RATE IN EFFECT FROM TIME TO TIME AND DESIGNATED BY BANK AS ITS
REGIONAL BASE RATE ('BASE RATE').
Interest shall be computed on the basis of actual days elapsed and a year of
360 days. The unpaid principal and interest due on this Note at maturity
(whether the Note matures by demand, acceleration, lapse of time or
otherwise) shall bear interest at the lesser of 6% per annum above the
interest rate stated above, or the highest rate allowed by law.
Principal and interest shall be paid as follows:
IN EQUAL INSTALLMENTS OF $5,000.00 (EXCEPT FINAL INSTALLMENT SHALL BE BALANCE
DUE) BEGINNING MARCH 28, 1997 AND ON THE SAME DAY OF EACH WEEK THEREAFTER.
EACH INSTALLMENT WILL BE APPLIED FIRST TO INTEREST AND THEN TO PRINCIPAL.
FINAL INSTALLMENT DUE ON MATURITY DATE.
Related Documents: Maker has signed the following documents in connection
with this Note;
SECURITY AGREEMENT(S) DATED 10/31/94 & 6/1/96 (HYPOTHECATIONS) COVERING ALL
CORPORATE ASSETS OF AUSTINS RESTAURANTS.
ASSIGNMENT(S) OF COLLATERAL DATED 10/10/96 COVERING LEASES (8 PROPERTIES).
AGREEMENT DATED 8/31/96
MORTGAGE ON RIO RANCHO PROPERTY
- -------------------------------------------------------------------------------
THIS NOTE IS SUBJECT TO THE TERMS AND CONDITIONS PRINTED ON THE REVERSE SIDE,
AND ANY APPLICABLE LOAN AGREEMENT.
- -------------------------------------------------------------------------------
A credit agreement must be in writing to be enforceable under Nebraska law.
To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money
or grant or extension of credit, or any amendment of, cancellation of, waiver
of, or substitution for any or all of the terms or provisions of any
instrument or document executed in connection with this loan of money or
grant or extension of credit, must be in writing to be effective.
Witnessed By: Austins Steaks & Saloon, Inc.
/s/ ILLEGIBLE By: /s/ Tish Gade Jones Title: CFO
- ---------------------------------- --------------------- ----
COPY
26
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Officer Initials Officer # Cost Center New/Renewal Prepared By MEMO CALC TYPE LOAN CALC ID
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
224-MKM 101010 Repl tsq Replacement-$ amount Comm #8 2000024165/1
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
TERMS AND CONDITIONS
1. Maker shall reimburse Bank for all expenses incurred in protecting or
enforcing its rights.
Maker's liability under its Obligations ("all Maker's existing and future
obligations of whatever nature and whenever incurred to Bank") shall not be
affected by any of the following:
- Acceptance or retention by Bank of other property or interests as security
for the Obligations, or for the liability of any person other than a Maker
with respect to the Obligations;
- Any release, extension, renewal, modification or compromise of any of the
Obligations or the liability of any obligor thereon; or
- Failure by Bank to resort to other security or any person liable for the
Obligations.
Each maker specifically consents to multiple renewals or extensions of the
Obligations. This Note shall be deemed extended through the date of any
advance made by Bank after the original maturity hereof; and any such
advance shall constitute principal due under this Note.
2. REPRESENTATION, WARRANTIES AND COVENANTS. Each Maker represents, warrants
and covenants as follows:
This Note, security agreement, deed of trust, mortgage, or other lien
document(s), if any, securing the Note have been duly authorized, executed
and delivered by the Maker and constitute legal, valid and binding
Obligations of Maker.
This Note evidences a loan for business or agricultural purposes.
Maker will provide business reports and with such frequency as Bank
shall request; and Maker agrees to pay all costs of collection in connection
with this Note, including reasonable attorneys' fees and legal expenses.
3. DEFAULTS AND REMEDIES. Upon the occurrence of one of more of the
following events of default:
- Maker fails to pay when due any of the Obligations, or to perform or
rectify breach of, any warranty or other undertaking by Maker in this
Note or the other Obligations; or breaches any other covenant or
condition described in any other document;
- Any Maker, endorser, surety, or guarantor of any of the Obligations dies,
ceases to exist, makes an assignment for the benefit of creditors, becomes
insolvent or the subject of bankruptcy or insolvency proceedings;
- Any representation made to induce Bank to extend credit under this Note or
otherwise is false in any material respect when made;
- A material adverse change, in the opinion of Bank, occurs in the financial
or business condition of any Maker or of any endorser, surety or guarantor
of this Note;
- The entry of a judgement against Maker;
- Filing of any lien against any Maker;
- The taking possession of any substantial part of the property of any Maker
at the instance of any governmental authority;
- The dissolution, merger, consolidation, or reorganization of any Maker, or
other entity liable for this Obligation;
- Any other event occurs which causes Bank in good faith to deem itself
insecure;
then in such event, all of the Obligations shall, at the option of Bank and
without notice or demand, mature and become immediately due and payable; and
Bank shall have all rights and remedies for default provided by the Uniform
Commercial Code, and any other applicable law and/or Obligations.
All costs and expenses incurred by Bank in enforcing its rights under this
Note or any mortgage or other lien, endorsement, surety agreement, guarantee
relating thereto are the obligations of Maker and are immediately due and
payable. Interest shall accrue on such costs and expenses from the date of
incurrence at the rate specified herein for delinquent Note payments. Each
Maker, endorser, surety and guarantor hereby waives presentment, protest,
demand, notice of dishonor, and the defense of any statute of limitations.
4. GENERAL. Without affecting the liability of any Maker, endorser, surety,
or guarantor, the holder may, without notice, renew or extend the time for
payment, accept partial payments, release or impair any collateral security
for the payment of this Note or agree to sue any party liable on it.
Subject to rights afforded by law, Bank may, at any time and for any reason,
charge to or off-set against any amount then on deposit in any account
(including a savings certificate), whether or not then due, any, and all
debts or liabilities (sole, several, joint, or joint and severable, absolute
or contingent, due or not due, liquidated or unliquidated, secured or
unsecured) then owed to Bank by depositor or in the case of a multiple-party
account, by any party to such multiple-party account, and this agreement
shall be construed to be the consent of depositor and any such party for the
Bank to make such charge or off-set if consent be required by any person of
future law.
Bank shall not be deemed to have waived any of its rights upon or under this
Note, or under any mortgage or other lien, endorsement, surety agreement, or
guarantee unless such waivers be in writing and signed by Bank. No delay or
omission on the part of Bank in exercising any right shall operate as a
waiver of such right or any other right. A waiver on any one occasion shall
not be construed as a bar to or waiver of any right on any future occasion.
All rights and remedies of Bank on liabilities or the collateral whether
evidenced hereby or by any other instrument or papers shall be cumulative
and may be exercised singularly or concurrently.
Maker, if more than one, shall be jointly and severally liable hereunder and
all provisions hereof regarding the liabilities or security of Maker shall
apply to any liability or any security of any or all of them. This agreement
shall be binding upon the heirs, executors, administrators, assigns or
successors of Maker; shall constitute a continuing agreement, applying to
all future as well as existing transaction, whether or not of the character
contemplated at the date of this Note, and if all transactions between Bank
and Maker shall be at any time closed, shall be equally applicable to any
new transactions thereafter; shall benefit Bank, its successors, and
assigns; and shall so continue in force not withstanding any change in any
partnership party hereto, whether such change occurs through death,
retirement or otherwise.
If any party of this Note is a married person, such person or persons hereby
separately charges his or her separate estate, including both that now owned
and that hereafter acquired, with the payment of this Note.
This Note shall be construed according to the laws of the State of Nebraska.
Unless the content otherwise requires, all terms used herein which are
defined in the Uniform Commercial Code shall have the meanings therein
stated.
Any provision of this Note which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
27
<PAGE>
EXHIBIT 10.23
WHEN RECORDED MAIL TO:
FIRST BANK NATIONAL ASSOCIATION
233 SOUTH 13TH STREET
LINCOLN, NE 68508
SEND TAX NOTICES TO:
AUSTINS STEAK & SALOON, INC.
6940 "O" STREET, SUITE 334
LINCOLN, NE 68510
SPACE ABOVE THIS LINE IS FOR RECORDER'S USE ONLY
________________________________________________________________________________
MORTGAGE
THIS MORTGAGE IS DATED JANUARY 27, 1997, BETWEEN AUSTINS STEAK & SALOON,
INC., WHOSE ADDRESS IS 6940 "O" STREET, SUITE 334, LINCOLN, NE 68510
(REFERRED TO BELOW AS "GRANTOR"); AND FIRST BANK NATIONAL ASSOCIATION, WHOSE
ADDRESS IS 233 SOUTH 13TH STREET, LINCOLN, NE 68508 (REFERRED TO BELOW AS
"LENDER").
GRANT OF MORTGAGE. GRANTOR, FOR CONSIDERATION PAID, GRANTS AND CONVEYS TO
LENDER the following described real property, together with all existing or
subsequently erected or affixed buildings, improvements and fixtures; all
easements, rights of way, and appurtenances; all water, water rights,
watercourses and ditch rights (including stock in utilities with ditch or
irrigation rights); and all other rights, royalties, and profits relating to
the real property, including without limitation all minerals, oil, gas,
geothermal and similar matters, LOCATED IN SANDOVAL COUNTY, STATE OF NEW
MEXICO (THE "REAL PROPERTY"):
TRACT C-5A AS SHOWN ON PLAT ENTITLED SUMMARY PLAT OF GATEWAY NORTH,
TRACTS C-2A THROUGH C-10A AND C-12A THROUGH C-15A, UNIT 16, RIO RANCHO
ESTATES, SITUATE WITHIN THE TOWN OF ALAMEDA GRANT, PROJECTED SECTION 31,
T12N, R3E, N.M.P.M., CITY OF RIO RANCHO, SANDOVAL COUNTY, NEW MEXICO. ALL
MINERAL RIGHTS BEING RESERVED BY AMREP, THE FORMER OWNER.
WITH MORTGAGE COVENANTS.
THE REAL PROPERTY OR ITS ADDRESS IS COMMONLY KNOWN AS JUST SOUTH OF SARA ROAD
ON THE WEST SIDE OF STATE HIGHWAY 528 AND NORTH OF 19TH AVENUE., RIO RANCHO,
NM 87124. IF THERE IS A CONFLICT BETWEEN THE LEGAL DESCRIPTION AND THE REAL
PROPERTY ADDRESS, THE LEGAL DESCRIPTION SHALL CONTROL.
Grantor presently assigns to Lender all of Grantor's right, title, and
interest in and to all leases of the Property and all Rents from the
Property. In addition, Grantor grants to Lender a Uniform Commercial Code
security interest in the Personal Property and Rents.
DEFINITIONS. The following words shall have the following meanings when used
in this Mortgage. Terms not otherwise defined in this Mortgage shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
EXISTING INDEBTEDNESS. The words "Existing Indebtedness" mean the
indebtedness described below in the Existing Indebtedness section of this
Mortgage.
GRANTOR. The word "Grantor" means AUSTINS STEAK & SALOON, INC. The
Grantor is the mortgagor under this Mortgage.
GUARANTOR. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with the indebtedness.
IMPROVEMENTS. The word "Improvements" means and includes without
limitation all existing and future improvements, buildings, structures,
mobile homes affixed on the Real Property, facilities, additions,
replacements and other construction on the Real Property.
INDEBTEDNESS. The word "Indebtedness" means all principal and interest
payable under the Note and any amounts expended or advanced by Lender to
discharge obligations of Grantor or expenses incurred by Lender to enforce
obligations of Grantor under this Mortgage, together with interest on such
amounts as provided in this Mortgage. IN ADDITION TO THE NOTE, THE WORD
"INDEBTEDNESS" INCLUDES ALL OBLIGATIONS, DEBTS AND LIABILITIES, PLUS
INTEREST THEREON, OF GRANTOR TO LENDER, OR ANY ONE OR MORE OF THEM, AS
WELL AS ALL CLAIMS BY LENDER AGAINST GRANTOR, OR ANY ONE OR MORE OF THEM,
WHETHER NOW EXISTING OR HEREAFTER ARISING, WHETHER RELATED OR UNRELATED
TO THE PURPOSE OF THE NOTE, WHETHER VOLUNTARY OR OTHERWISE, WHETHER DUE
OR NOT DUE, ABSOLUTE OR CONTINGENT, LIQUIDATED OR UNLIQUIDATED AND
WHETHER GRANTOR MAY BE LIABLE INDIVIDUALLY OR JOINTLY WITH OTHERS,
WHETHER OBLIGATED AS GUARANTOR OR OTHERWISE, AND WHETHER RECOVERY UPON
SUCH INDEBTEDNESS MAY BE OR HEREAFTER MAY BECOME BARRED BY ANY STATUTE OF
LIMITATIONS, AND WHETHER SUCH INDEBTEDNESS MAY BE OR HEREAFTER MAY BECOME
OTHERWISE UNENFORCEABLE. Specifically, without limitation, this Mortgage
secures, in addition to the amounts specified in the Note, all future
amounts Lender in its discretion may loan to Grantor, together with all
interest thereon; however, in no event shall such future advances
(excluding interest) exceed in the aggregate $395,000.00. THE LIEN OF
THIS MORTGAGE SHALL NOT EXCEED AT ANY ONE TIME $395,000.00.
LENDER. The word "Lender" means First Bank National Association, its
successors and assigns. The Lender is the mortgage under this Mortgage.
MORTGAGE. The word "Mortgage" means this Mortgage between Grantor and
Lender, and includes without limitation all assignments and security
interest provisions relating to the Personal Property and Rents.
NOTE. The word "Note" means the promissory note or credit agreement
dated January 27, 1997, IN THE ORIGINAL PRINCIPAL AMOUNT OF $395,000.00
from Grantor to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of, and substitutions
for the promissory note or agreement. The interest rate on the Note is a
variable interest rate based upon an index. The index currently is 8.250%
per annum. The interest rate to be applied to the unpaid principal
balance of this Mortgage shall be at a rate equal to the Index, resulting
in an initial rate of 8.250% per annum. NOTICE: Under no circumstances
shall the interest rate on this Mortgage be more than the maximum rate
allowed by applicable law.
PERSONAL PROPERTY. The words "Personal Property" mean all equipment,
fixtures, and other articles of personal property now or hereafter owned
by Grantor, and now or hereafter attached or affixed to the Real
Property; together with all accessions, parts, and additions to, all
replacements of, and all substitutions for, any of such property; and
together with all proceeds (including without limitation all insurance
proceeds and refunds of premiums) from any sale or other disposition of
the Property.
PROPERTY. The word "Property" means collectively the Real Property and
the Personal Property. The word "Property" also includes all existing or
subsequently erected or affixed buildings, improvements and fixtures, all
appurtenances, all rights relating to the Real Property (including
minerals; oil, gas, water, and the like), and all ditch rights (including
stock in utilities with ditch or irrigation rights).
REAL PROPERTY. The words "Real Property" mean the property, interests
and rights described above in the "Grant of Mortgage" section.
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with
the Indebtedness.
RENTS. The word "Rents" means all present and future rents, revenues,
income, issues, royalties, profits, and other benefits derived from the
Property.
THIS MORTGAGE, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN
THE RENTS AND PERSONAL PROPERTY, IS GIVEN TO SECURE (1) PAYMENT OF THE
INDEBTEDNESS AND (2) PERFORMANCE OF ALL OBLIGATIONS OF GRANTOR UNDER THIS
MORTGAGE AND THE RELATED DOCUMENTS AND IS UPON THE STATUTORY MORTGAGE
CONDITION FOR THE BREACH OF WHICH IT IS SUBJECT TO FORECLOSURE AS PROVIDED BY
LAW. THIS MORTGAGE IS GIVEN AND ACCEPTED ON THE FOLLOWING TERMS:
PAYMENT AND PERFORMANCE. Except as otherwise provided in this Mortgage,
Grantor shall pay to Lender all amounts secured by this Mortgage
28
<PAGE>
01-27-97 MORTGAGE PAGE 2
LOAN NO (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
as they become due, and shall strictly perform all of Grantor's obligations
under this Mortgage.
POSSESSION AND MAINTENANCE OF THE PROPERTY. Grantor agrees that Grantor's
possession and use of the Property shall be governed by the following
provisions:
POSSESSION AND USE. Until in default, Grantor may remain in possession
and control of and operate and manage the Property and collect the Rents
from the Property.
DUTY TO MAINTAIN. Grantor shall maintain the Property in tenantable
condition and promptly perform all repairs, replacements, and maintenance
necessary to preserve its value.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Mortgage,
shall have the same meanings as set forth in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601, et seq. ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to
any of the foregoing. The terms "hazardous waste" and "hazardous substance"
shall also include, without limitation, petroleum and petroleum by-products
or any fraction thereof and asbestos. Grantor represents and warrants to
Lender that: (a) During the period of Grantor's ownership of the Property,
there has been no use, generation, manufacture, storage, treatment,
disposal, release or threatened release of any hazardous waste or substance
by any person on, under, about or from the Property; (b) Grantor has no
knowledge of, or reason to believe that there has been, except as previously
disclosed to and acknowledged by Lender in writing, (i) any use, generation,
manufacture, storage, treatment, disposal, release, or threatened release of
any hazardous waste or substance on, under, about or from the Property by
any prior owners or occupants of the Property or (ii) any actual or
threatened litigation or claims of any kind by any person relating to such
matters; and (c) Except as previously disclosed to and acknowledged by
Lender in writing, (i) neither Grantor nor any tenant, contractor, agent or
other authorized user of the Property shall use, generate, manufacture,
store, treat, dispose of, or release any hazardous waste or substance on,
under, about or from the Property and (ii) any such activity shall be
conducted in compliance with all applicable federal, state, and local laws,
regulations and ordinances, including without limitation those laws,
regulations, and ordinances described above. Grantor authorizes Lender and
its agents to enter upon the Property to make such inspections and tests, at
Grantor's expense, as Lender may deem appropriate to determine compliance of
the Property with this section of the Mortgage. Any inspections or tests
made by Lender shall be for Lender's purposes only and shall not be
construed to create any responsibility or liability on the part of Lender to
Grantor or to any other person. The representations and warranties contained
herein are based on Grantor's due diligence in investigating the Property
for hazardous waste and hazardous substances. Grantor hereby (a) releases
and waives any future claims against Lender for indemnity or contribution in
the event Grantor becomes liable for cleanup or other costs under any such
laws, and (b) agrees to indemnify and hold harmless Lender against any and
all claims losses, liabilities, damages, penalties, and expenses which
Lender may directly or indirectly sustain or suffer resulting from a breach
of this section of the Mortgage or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release occurring
prior to Grantor's ownership or interest in the Property, whether or not the
same was or should have been known to Grantor. The provisions of this
section of the Mortgage, including the obligation to indemnify, shall
survive the payment of the Indebtedness and the satisfaction and
reconveyance of the lien of this Mortgage and shall not be affected by
Lender's acquisition of any interest in the Property, whether by foreclosure
or otherwise.
NUISANCE, WASTE. Grantor shall not cause, conduct or permit any nuisance
nor commit, permit, or suffer any stripping of or waste on or to the
Property or any portion of the Property. Without limiting the generality of
the foregoing, Grantor will not remove, or grant to any other party the
right to remove, any timber, minerals (including oil and gas), soil, gravel
or rock products without the prior written consent of Lender.
REMOVAL OF IMPROVEMENTS. Grantor shall not demolish or remove any
Improvements from the Real Property without the prior written consent of
Lender. As a condition to the removal of any Improvements, Lender may
require Grantor to make arrangements satisfactory to Lender to replace such
Improvements with improvements of at least equal value.
LENDER'S RIGHT TO ENTER. Lender and its agents and representatives may
enter upon the Real Property at all reasonable times to attend to Lender's
interests and to inspect the Property for purposes of Grantor's compliance
with the terms and conditions of this Mortgage.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall promptly comply
with all laws, ordinances, and regulations, now or hereafter in effect, of
all governmental authorities applicable to the use or occupancy of the
Property, including without limitation, the Americans With Disabilities Act.
Grantor may contest in good faith any such law, ordinance, or regulation and
withhold compliance during any proceeding, including appropriate appeals, so
long as Grantor has notified Lender in writing prior to doing so and so long
as, in Lender's sole opinion, Lender's interests in the Property are not
jeopardized. Lender may require Grantor to post adequate security or a
surety bond, reasonably satisfactory to Lender, to protect Lender's
interest.
DUTY TO PROTECT. Grantor agrees neither to abandon nor leave unattended
the Property. Grantor shall do all other acts, in addition to those acts set
forth above in this section, which from the character and use of the
Property are reasonably necessary to protect and preserve the Property.
DUE ON SALE - CONSENT BY LENDER. Lender may, at its option, except as
otherwise provided in Section 48-7-20 NMSA 1978, as amended, declare
immediately due and payable all sums secured by this Mortgage upon the sale
or transfer, without the Lender's prior written consent, of all or any part
of the Real Property, or any interest in the Real Property. A "sale or
transfer" means the conveyance of Real Property or any right, title or
interest therein; whether legal, beneficial or equitable; whether voluntary
or involuntary; whether by outright sale, deed, installment sale contract,
land contract, contract for deed, leasehold interest with a term greater than
three (3) years, lease-option contract, or by sale, assignment or transfer of
any beneficial interest in or to any land trust holding title to the Real
Property, or by any other method of conveyance of Real Property interest. If
any Grantor is a corporation, partnership or limited liability company,
transfer also includes any change in ownership of more than twenty-five
percent (25%) of the voting stock, partnership interests or limited liability
company interests, as the case may be, of Grantor. However, this option shall
not be exercised by Lender if such exercise is prohibited by federal law or
by New Mexico law.
TAXES AND LIENS. The following provisions relating to the taxes and liens on
the Property are a part of this Mortgage.
PAYMENT. Grantor shall pay when due (and in all events prior to delinquency)
all taxes, payroll taxes, special taxes, assessments, water charges and
sewer service charges levied against or on account of the Property, and
shall pay when due all claims for work done on or for services rendered or
material furnished to the Property. Grantor shall maintain the Property free
of all liens having priority over or equal to the interest of Lender under
this Mortgage, except for the lien of taxes and assessments not due, except
for the Existing Indebtedness referred to below, and except as otherwise
provided in the following paragraph.
RIGHT TO CONTEST. Grantor may withhold payment of any tax, assessment, or
claim in connection with a good faith dispute over the obligation to pay, so
long as Lender's interest in the Property is not jeopardized. If a lien
arises or is filed as a result of nonpayment, Grantor shall within fifteen
(15) days after the lien arises or, if a lien is filed, within fifteen (15)
days after Grantor has notice of the filing, secure the discharge of the
lien, or if requested by Lender, deposit with Lender cash or a sufficient
corporate surety bond or other security satisfactory to Lender in an amount
sufficient to discharge the lien plus any costs and attorneys' fees or other
charges that could accrue as a result of a foreclosure or sale under the
lien. In any contest, Grantor shall defend itself and Lender and shall
satisfy any adverse judgment before enforcement against the Property.
Grantor shall name Lender as an additional obligee under any surety bond
furnished in the contest proceedings.
EVIDENCE OF PAYMENT. Grantor shall upon demand furnish to Lender
satisfactory evidence of payment of the taxes or assessments and shall
authorize the appropriate governmental official to deliver to Lender at any
time a written statement of the taxes and assessments against the Property.
NOTICE OF CONSTRUCTION. Grantor shall notify Lender at least fifteen (15)
days before any work is commenced, any services are furnished, or any
materials are supplied to the Property, if any mechanic's lien,
materialmen's lien, or other lien could be asserted on account of the work,
services, or materials and the cost exceeds $5,000.00. Grantor will upon
request of Lender furnish to Lender advance assurances satisfactory to
Lender that Grantor can and will pay the cost of such Improvements.
PROPERTY DAMAGE INSURANCE. The following provisions relating to insuring the
Property are a part of this Mortgage.
MAINTENANCE OF INSURANCE. The amount specified for insurance as provided
in the STATUTORY MORTGAGE CONDITION is the full insurable value of the
improvements on a replacement basis, but in no event less than $___________.
Grantor shall procure and maintain policies of fire insurance with standard
extended coverage endorsements on a replacement basis for the full insurable
value covering all improvements on the Real Property in an amount sufficient
to avoid application of any coinsurance clause, and with a standard
mortgagee clause in favor of Lender. Policies shall be written by such
insurance companies and in such form as may be reasonably acceptable to
Lender. Grantor shall deliver to Lender certificates of coverage from each
insurer containing a stipulation that coverage will not be cancelled or
diminished without a minimum of ten (10) days' prior written notice to
Lender. Should the Real Property at any time become located in an area
designated by the Director of the Federal Emergency Management Agency as a
special flood hazard area, Grantor agrees to obtain and maintain Federal
Flood Insurance for the full unpaid principal balance of the loan, up to the
maximum policy limits set under the National Flood Insurance Program, or as
otherwise required by Lender, and to maintain such insurance for the term of
the loan.
APPLICATION OF PROCEEDS. Grantor shall promptly notify Lender of any loss
or damage to the Property if the estimated cost of repair or replacement
exceeds $1,000.00. Lender may make proof of loss if Grantor fails to do so
within fifteen (15) days of the casualty. Whether or not Lender's security
is impaired, Lender may, at its election, apply the proceeds to the
reduction of the Indebtedness, payment of any lien affecting the Property,
or the restoration and repair of the Property. If Lender elects to apply the
proceeds to restoration and repair, Grantor shall repair or
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replace the damaged or destroyed Improvements in a manner satisfactory to
Lender. Lender shall, upon satisfactory proof of such expenditure, pay or
reimburse Grantor from the proceeds for the reasonable cost of repair or
restoration if Grantor is not in default hereunder. Any proceeds which have
not been disbursed within 180 days after their receipt and which Lender has
not committed to the repair or restoration of the Property shall be used
first to pay any amount owing to Lender under this Mortgage, then to prepay
accrued interest, and the remainder, if any, shall be applied to the
principal balance of the Indebtedness. If Lender holds any proceeds after
payment in full of the Indebtedness, such proceeds shall be paid to Grantor.
UNEXPIRED INSURANCE AT SALE. Any unexpired insurance shall inure to the
benefit of, and pass to, the purchaser of the Property covered by this
Mortgage at any trustee's sale or other sale held under the provisions of
this Mortgage, or at any foreclosure sale of such Property.
COMPLIANCE WITH EXISTING INDEBTEDNESS. During the period in which any
Existing Indebtedness described below is in effect, compliance with the
insurance provisions contained in the instrument evidencing such Existing
Indebtedness shall constitute compliance with the insurance provisions
under this Mortgage, to the extent compliance with the terms of this
Mortgage would constitute a duplication of insurance requirement. If any
proceeds from the insurance become payable on loss, the provisions in this
Mortgage for division of proceeds shall apply only to that portion of the
proceeds not payable to the holder of the Existing Indebtedness.
GRANTOR'S REPORT ON INSURANCE. Upon request of Lender, however not more
than once a year, Grantor shall furnish to Lender a report on each existing
policy of insurance showing: (a) the name of the insurer; (b) the risks
insured; (c) the amount of the policy; (d) the property insured, the then
current replacement value of such property, and the manner of determining
that value: and (e) the expiration date of the policy. Grantor shall, upon
request of Lender, have an independent appraiser satisfactory to Lender
determine the cash value replacement cost of the Property.
EXPENDITURES BY LENDER. If Grantor fails to comply with any provision of this
Mortgage, including any obligation to maintain Existing Indebtedness in good
standing as required below, or if any action or proceeding is commenced that
would materially affect Lender's interests in the Property, Lender on
Grantor's behalf may, but shall not be required to, take any action that
Lender deems appropriate. Any amount that Lender expends in so doing will
bear interest at the rate provided for in the Note from the date incurred or
paid by Lender to the date of repayment by Grantor. All such expenses, at
Lender's option, will (a) be payable on demand, (b) be added to the balance
of the Note and be apportioned among and be payable with any installment
payments to become due during either (i) the term of any applicable insurance
policy or (ii) the remaining term of the Note, or (c) be treated as a balloon
payment which will be due and payable at the Note's maturity. This Mortgage
also will secure payment of these amounts. The rights provided for in this
paragraph shall be in addition to any other rights or any remedies to which
Lender may be entitled on account of the default. Any such action by Lender
shall not be construed as curing the default so as to bar Lender from any
remedy that it otherwise would have had.
WARRANTY; DEFENSE OF TITLE. The following provisions relating to ownership of
the Property are a part of this Mortgage.
TITLE. Grantor warrants that: (a) Grantor holds good and marketable title
of record to the Property in fee simple, free and clear of all liens and
encumbrances other than those set forth in the Real Property description or
in the Existing Indebtedness section below or in any title insurance
policy, title report, or final title opinion issued in favor of, and
accepted by, Lender in connection with this Mortgage, and (b) Grantor has
the full right, power, and authority to execute and deliver this Mortgage to
Lender.
DEFENSE OF TITLE. Subject to the exception in the paragraph above,
Grantor warrants and will forever defend the title to the Property against
the lawful claims of all persons. In the event any action or proceeding is
commenced that questions Grantor's title or the interest of Lender under
this Mortgage, Grantor shall defend the action at Grantor's expense. Grantor
may be the nominal party in such proceeding, but Lender shall be entitled to
participate in the proceeding and to be represented in the proceeding by
counsel of Lender's own choice, and Grantor will deliver, or cause to be
delivered, to Lender such instruments as Lender may request from time to
time to permit such participation.
COMPLIANCE WITH LAWS. Grantor warrants that the Property and Grantor's use
of the Property complies with all existing applicable laws, ordinances, and
regulations of governmental authorities.
EXISTING INDEBTEDNESS. The following provisions concerning existing
indebtedness (the "Existing Indebtedness") are a part of this Mortgage.
EXISTING LIEN. The lien of this Mortgage securing the indebtedness may be
secondary and inferior to an existing lien. Grantor expressly covenants and
agrees to pay, or see to the payment of, the Existing Indebtedness and to
prevent any default on such indebtedness, any default under the instruments
evidencing such indebtedness, or any default under any security documents
for such indebtedness.
DEFAULT. If the payment of any installment of principal or any interest
on the Existing Indebtedness is not made within the time required by the
note evidencing such indebtedness, or should a default occur under the
instrument securing such indebtedness and not be cured during any applicable
grace period therein, then, at the option of Lender, the indebtedness
secured by this Mortgage shall become immediately due and payable, and this
Mortgage shall be in default.
NO MODIFICATION. Grantor shall not enter into any agreement with the
holder of any mortgage, deed of trust, or other security agreement which has
priority over this Mortgage by which that agreement is modified, amended,
extended, or renewed without the prior written consent of Lender. Grantor
shall neither request nor accept any future advances under any such security
agreement without the prior written consent of Lender.
CONDEMNATION. The following provisions relating to condemnation of the
Property are a part of this Mortgage.
APPLICATION OF NET PROCEEDS. If all or any part of the Property is condemned
by eminent domain proceedings or by any proceeding or purchase in lieu of
condemnation, Lender may at its election require that all or any portion of
the net proceeds of the award be applied to the Indebtedness or the repair
or restoration of the Property. The net proceeds of the award shall mean the
award after payment of all reasonable costs, expenses, and attorneys' fees
incurred by Lender in connection with the condemnation.
PROCEEDINGS. If any proceeding in condemnation is filed, Grantor shall
promptly notify Lender in writing, and Grantor shall promptly take such
steps as may be necessary to defend the action and obtain the award. Grantor
may be the nominal party in such proceeding, but Lender shall be entitled to
participate in the proceeding and to be represented in the proceeding by
counsel of its own choice, and Grantor will deliver or cause to be delivered
to Lender such instruments as may be requested by it from time to time to
permit such participation.
IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL AUTHORITIES. The
following provisions relating to governmental taxes, fees and charges are a
part of this Mortgage:
CURRENT TAXES, FEES AND CHARGES. Upon request by Lender, Grantor shall
execute such documents in addition to this Mortgage and take whatever other
action is requested by Lender to perfect and continue Lender's lien on the
Real Property. Grantor shall reimburse Lender for all taxes, as described
below, together with all expenses incurred in recording, perfecting or
continuing this Mortgage, including without limitation all taxes, fees,
documentary stamps, and other charges for recording or registering this
Mortgage.
TAXES. The following shall constitute taxes to which this section
applies: (a) a specific tax upon this type of Mortgage or upon all or any
part of the Indebtedness secured by this Mortgage; (b) a specific tax on
Grantor which Grantor is authorized or required to deduct from payments
on the Indebtedness secured by this type of Mortgage; (c) a tax on this
type of Mortgage chargeable against the Lender or the holder of the Note;
and (d) a specific tax on all or any portion of the Indebtedness or on
payments of principal and interest made by Grantor.
SUBSEQUENT TAXES. If any tax to which this section applies is enacted
subsequent to the date of this Mortgage, this event shall have the same
effect as an Event of Default (as defined below), and Lender may exercise
any or all of its available remedies for and Event of Default as provided
below unless Grantor either (a) pays the tax before it becomes delinquent,
or (b) contests the tax as provided above in the Taxes and Liens section and
deposits with Lender cash or a sufficient corporate surety bond or other
security satisfactory to Lender.
SECURITY AGREEMENT; FINANCING STATEMENTS. The following provisions relating
to this Mortgage as a security agreement are a part of this Mortgage.
SECURITY AGREEMENT. This instrument shall constitute a security
agreement to the extent any of the Property constitutes fixtures or other
personal property, and Lender shall have all of the rights of a secured
party under the Uniform Commercial Code as amended from time to time.
SECURITY INTEREST. Upon request by Lender, Grantor shall execute
financing statements and take whatever other action is requested by Lender
to perfect and continue Lender's security interest in the Rents and Personal
Property. In addition to recording this Mortgage in the real property
records, Lender may, at any time and without further authorization from
Grantor, file executed counterparts, copies or reproductions of this
Mortgage as a financing statement. Grantor shall reimburse Lender for all
expenses incurred in perfecting or continuing this security interest. Upon
default, Grantor shall assemble the Personal Property in a manner and at a
place reasonably convenient to Grantor and Lender and make it available to
Lender within three (3) days after receipt of written demand from Lender.
ADDRESSES. The mailing addresses of Grantor (debtor) and Lender (secured
party), from which information concerning the security interest granted
by this Mortgage may be obtained (each as required by the Uniform
Commercial Code), are as stated on the first page of this Mortgage.
FURTHER ASSURANCES; ATTORNEY-IN-FACT. The following provisions relating to
further assurances and attorney-in-fact are a part of this Mortgage.
FURTHER ASSURANCES. At any time, and from time to time, upon request of
Lender, Grantor will make, execute and deliver, or will cause to be made,
executed or delivered, to Lender or to Lender's designee, and when
requested by Lender, cause to be filed, recorded, refiled, or rerecorded,
as the case may be, at such times and in such offices and places as
Lender may deem appropriate, any and all such mortgages, deeds of trust,
security deeds, security agreements, financing statements, continuation
statements, instruments of further assurance, certificates,
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and other documents as may, in the sole opinion of Lender, be necessary or
desirable in order to effectuate, complete, perfect, continue, or preserve
(a) the obligations of Grantor under the Note, this Mortgage, and the
Related Documents, and (b) the liens and security interests created by this
Mortgage on the Property, whether now owned or hereafter acquired by
Grantor. Unless prohibited by law or agreed to the contrary by Lender in
writing, Grantor shall reimburse Lender for all costs and expenses incurred
in connection with the matters referred to in this paragraph.
ATTORNEY-IN-FACT. If Grantor fails to do any of the things referred to in
the preceding paragraph, Lender may do so for and in the name of Grantor
and at Grantor's expense. For such purposes, Grantor hereby irrevocably
appoints Lender as Grantor's attorney-in-fact for the purpose of making,
executing, delivering, filing, recording, and doing all other things as may
be necessary or desirable, in Lender's sole opinion, to accomplish the
matters referred to in the preceding paragraph.
FULL PERFORMANCE. If Grantor pays all the Indebtedness, including without
limitation all future advances, when due, and otherwise performs all the
obligations imposed upon Grantor under this Mortgage, Lender shall execute
and deliver to Grantor a suitable satisfaction of this Mortgage and suitable
statements of termination of any financing statement on file evidencing
Lender's security interest in the Rents and the Personal Property. Grantor
will pay, if permitted by applicable law, any reasonable termination fee as
determined by Lender from time to time.
DEFAULT. Each of the following, at the option of the Lender, shall constitute
an event of default ("Event of Default") under this Mortgage:
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due
on the indebtedness.
DEFAULT ON OTHER PAYMENTS. Failure of Grantor within the time required by
this Mortgage to make any payment for taxes or insurance, or any other
payment necessary to prevent filing of or to effect discharge of any lien.
COMPLIANCE DEFAULT. Failure of Grantor to comply with any other term,
obligation, covenant or condition contained in this Mortgage, the Note or
in any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Mortgage, the
Note or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
DEFECTIVE COLLATERALIZATION. This Mortgage or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral documents to create a valid and perfected security interest or
lien) at any time and for any reason.
INSOLVENCY. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver
for any part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.
FORECLOSURE, FORFEITURE, ETC. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency
against any of the Property. However, this subsection shall not apply in
the event of a good faith dispute by Grantor as to the validity or
reasonableness of the claim which is the basis of the foreclosure or
forfeiture proceeding, provided that Grantor gives Lender written notice
of such claim and furnishes reserves or a surety bond for the claim
satisfactory to Lender.
BREACH OF OTHER AGREEMENT. Any breach by Grantor under the terms of any
other agreement between Grantor and Lender that is not remedied within any
grace period provided therein, including without limitation any agreement
concerning any indebtedness or other obligation of Grantor to Lender,
whether existing now or later.
EXISTING INDEBTEDNESS. A default shall occur under any Existing
Indebtedness or under any Instrument on the Property securing any Existing
Indebtedness, or commencement of any suit or other action to foreclose any
existing lien on the Property.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness. Lender, at its option,
may, but shall not be required to, permit the Guarantor's estate to assume
unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure the Event of Default.
ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
INSECURITY. Lender in good faith deems itself insecure.
RIGHT TO CURE. If such a failure is curable and if Grantor has not been
given a notice of a breach of the same provision of this Mortgage within
the preceding twelve (12) months, it may be cured (and no Event of Default
will have occurred) if Grantor, after Lender sends written notice demanding
cure of such failure: (a) cures the failure within fifteen (15) days; or
(b) if the cure requires more than fifteen (15) days, immediately initiates
steps sufficient to cure the failure and thereafter continues and completes
all reasonable and necessary steps sufficient to produce compliance as soon
as reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of any Event of Default
and at any time thereafter, Lender, at its option, may exercise any one or
more of the following rights and remedies, in addition to any other rights or
remedies provided by law:
ACCELERATE INDEBTEDNESS. Lender shall have the right at its option
without notice to Grantor to declare the entire Indebtedness immediately
due and payable, including any prepayment penalty which Grantor would be
required to pay.
UCC REMEDIES. With respect to all or any part of the Personal Property,
Lender shall have all the rights and remedies of a secured party under the
Uniform Commercial Code.
COLLECT RENTS. Lender shall have the right, without notice to Grantor, to
take possession of the Property and collect the Rents, including amounts
past due and unpaid, and apply the net proceeds, over and above Lender's
costs, against the Indebtedness. In furtherance of this right, Lender may
require any tenant or other user of the Property to make payments of rent or
use fees directly to Lender. If the Rents are collected by Lender, then
Grantor irrevocably designates Lender as Grantor's attorney-in-fact to
endorse instruments received in payment thereof in the name of Grantor and
to negotiate the same and collect the proceeds. Payments by tenants or
other users to Lender in response to Lender's demand shall satisfy the
obligations for which the payments are made, whether or not any proper
grounds for the demand existed. Lender may exercise its rights under this
subparagraph either in person, by agent, or through a receiver.
APPOINT RECEIVER. Lender shall have the right to have a receiver
appointed to take possession of all or any part of the Property, with the
power to protect and preserve the Property, to operate the Property
preceding foreclosure or sale, and to collect the Rents from the
Property and apply the proceeds, over and above the cost of the
receivership, against the Indebtedness. The receiver may serve without bond
if permitted by law, Lender's right to the appointment of a receiver shall
exist whether or not the apparent value of the Property exceeds the
Indebtedness by a substantial amount. Employment by Lender shall not
disqualify a person from serving as a receiver.
JUDICIAL FORECLOSURE. Lender may obtain a judicial decree foreclosing
Grantor's interest in all or any part of the Property.
DEFICIENCY JUDGMENT. If permitted by applicable law, Lender may obtain a
judgment for any deficiency remaining in the Indebtedness due to Lender
after application of all amounts received from the exercise of the rights
provided in this section.
TENANCY AT SUFFERANCE. If Grantor remains in possession of the Property
after the Property is sold as provided above or Lender otherwise becomes
entitled to possession of the Property upon default of Grantor, Grantor
shall become a tenant at sufferance of Lender or the purchaser of the
Property and shall, at Lender's option, either (a) pay a reasonable rental
for the use of the Property, or (b) vacate the Property immediately upon
the demand of Lender.
OTHER REMEDIES. Lender shall have all other rights and remedies provided
in this Mortgage or the Note or available at law or in equity.
SALE OF THE PROPERTY. To the extent permitted by applicable law, Grantor
hereby waives any and all right to have the property marshalled. In
exercising its rights and remedies, Lender shall be free to sell all or any
part of the Property together or separately, in one sale or by separate
sales. Lender shall be entitled to bid at any public sale on all or any
portion of the Property.
NOTICE OF SALE. Lender shall give Grantor reasonable notice of the time
and place of any public sale of the Personal Property or of the time after
which any private sale or other intended disposition of the Personal
Property is to be made. Reasonable notice shall mean notice given at least
ten (10) days before the time of the sale or disposition.
WAIVER; ELECTION OF REMEDIES. A waiver by any party of a breach of a
provision of this Mortgage shall not constitute a waiver of or prejudice the
party's rights otherwise to demand strict compliance with that provision or
any other provision. Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make expenditures
or take action to perform an obligation of Grantor under this Mortgage
after failure of Grantor to perform shall not affect Lender's right to
declare a default and exercise its remedies under this Mortgage.
ATTORNEYS' FEES; EXPENSES. If Lender institutes any suit or action to
enforce any of the terms of this Mortgage, Lender shall be entitled to
recover such sum as the court may adjudge reasonable as attorneys' fees at
trial and on any appeal. Whether or not any court action is involved, all
reasonable expenses incurred by Lender that in Lender's opinion are
necessary at any time for the protection of its interest or the enforcement
of
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and other documents as may, in the sole opinion of Lender, be necessary or
desirable in order to effectuate, complete, perfect, continue, or preserve
(a) the obligations of Grantor under the Note, this Mortgage, and the
Related Documents, and (b) the liens and security interests created by this
Mortgage on the Property, whether now owned or hereafter acquired by
Grantor. Unless prohibited by law or agreed to the contrary by Lender in
writing, Grantor shall reimburse Lender for all costs and expenses incurred
in connection with the matters referred to in this paragraph.
ATTORNEY-IN-FACT. If Grantor fails to do any of the things referred to in
the preceding paragraph, Lender may do so for and in the name of Grantor
and at Grantor's expense. For such purposes, Grantor hereby irrevocably
appoints Lender as Grantor's attorney-in-fact for the purpose of making,
executing, delivering, filing, recording, and doing all other things as may
be necessary or desirable, in Lender's sole opinion, to accomplish the
matters referred to in the preceding paragraph.
FULL PERFORMANCE. If Grantor pays all the Indebtedness, including without
limitation all future advances, when due, and otherwise performs all the
obligations imposed upon Grantor under this Mortgage, Lender shall execute
and deliver to Grantor a suitable satisfaction of this Mortgage and suitable
statements of termination of any financing statement on file evidencing
Lender's security interest in the Rents and the Personal Property. Grantor
will pay, if permitted by applicable law, any reasonable termination fee as
determined by Lender from time to time.
DEFAULT. Each of the following, at the option of the Lender, shall constitute
an event of default ("Event of Default") under this Mortgage:
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due
on the indebtedness.
DEFAULT ON OTHER PAYMENTS. Failure of Grantor within the time required by
this Mortgage to make any payment for taxes or insurance, or any other
payment necessary to prevent filing of or to effect discharge of any lien.
COMPLIANCE DEFAULT. Failure of Grantor to comply with any other term,
obligation, covenant or condition contained in this Mortgage, the Note or
in any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Mortgage, the
Note or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
DEFECTIVE COLLATERALIZATION. This Mortgage or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral documents to create a valid and perfected security interest or
lien) at any time and for any reason.
INSOLVENCY. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver
for any part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.
FORECLOSURE, FORFEITURE, ETC. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency
against any of the Property. However, this subsection shall not apply in
the event of a good faith dispute by Grantor as to the validity or
reasonableness of the claim which is the basis of the foreclosure or
forfeiture proceeding, provided that Grantor gives Lender written notice
of such claim and furnishes reserves or a surety bond for the claim
satisfactory to Lender.
BREACH OF OTHER AGREEMENT. Any breach by Grantor under the terms of any
other agreement between Grantor and Lender that is not remedied within any
grace period provided therein, including without limitation any agreement
concerning any indebtedness or other obligation of Grantor to Lender,
whether existing now or later.
EXISTING INDEBTEDNESS. A default shall occur under any Existing
Indebtedness or under any Instrument on the Property securing any Existing
Indebtedness, or commencement of any suit or other action to foreclose any
existing lien on the Property.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness. Lender, at its option,
may, but shall not be required to, permit the Guarantor's estate to assume
unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure the Event of Default.
ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
INSECURITY. Lender in good faith deems itself insecure.
RIGHT TO CURE. If such a failure is curable and if Grantor has not been
given a notice of a breach of the same provision of this Mortgage within
the preceding twelve (12) months, it may be cured (and no Event of Default
will have occurred) if Grantor, after Lender sends written notice demanding
cure of such failure: (a) cures the failure within fifteen (15) days; or
(b) if the cure requires more than fifteen (15) days, immediately initiates
steps sufficient to cure the failure and thereafter continues and completes
all reasonable and necessary steps sufficient to produce compliance as soon
as reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of any Event of Default
and at any time thereafter, Lender, at its option, may exercise any one or
more of the following rights and remedies, in addition to any other rights or
remedies provided by law:
ACCELERATE INDEBTEDNESS. Lender shall have the right at its option
without notice to Grantor to declare the entire Indebtedness immediately
due and payable, including any prepayment penalty which Grantor would be
required to pay.
UCC REMEDIES. With respect to all or any part of the Personal Property,
Lender shall have all the rights and remedies of a secured party under the
Uniform Commercial Code.
COLLECT RENTS. Lender shall have the right, without notice to Grantor, to
take possession of the Property and collect the Rents, including amounts
past due and unpaid, and apply the net proceeds, over and above Lender's
costs, against the Indebtedness. In furtherance of this right, Lender may
require any tenant or other user of the Property to make payments of rent or
use fees directly to Lender. If the Rents are collected by Lender, then
Grantor irrevocably designates Lender as Grantor's attorney-in-fact to
endorse instruments received in payment thereof in the name of Grantor and
to negotiate the same and collect the proceeds. Payments by tenants or
other users to Lender in response to Lender's demand shall satisfy the
obligations for which the payments are made, whether or not any proper
grounds for the demand existed. Lender may exercise its rights under this
subparagraph either in person, by agent, or through a receiver.
APPOINT RECEIVER. Lender shall have the right to have a receiver
appointed to take possession of all or any part of the Property, with the
power to protect and preserve the Property, to operate the Property
preceding foreclosure or sale, and to collect the Rents from the
Property and apply the proceeds, over and above the cost of the
receivership, against the Indebtedness. The receiver may serve without bond
if permitted by law, Lender's right to the appointment of a receiver shall
exist whether or not the apparent value of the Property exceeds the
Indebtedness by a substantial amount. Employment by Lender shall not
disqualify a person from serving as a receiver.
JUDICIAL FORECLOSURE. Lender may obtain a judicial decree foreclosing
Grantor's interest in all or any part of the Property.
DEFICIENCY JUDGMENT. If permitted by applicable law, Lender may obtain a
judgment for any deficiency remaining in the Indebtedness due to Lender
after application of all amounts received from the exercise of the rights
provided in this section.
TENANCY AT SUFFERANCE. If Grantor remains in possession of the Property
after the Property is sold as provided above or Lender otherwise becomes
entitled to possession of the Property upon default of Grantor, Grantor
shall become a tenant at sufferance of Lender or the purchaser of the
Property and shall, at Lender's option, either (a) pay a reasonable rental
for the use of the Property, or (b) vacate the Property immediately upon
the demand of Lender.
OTHER REMEDIES. Lender shall have all other rights and remedies provided
in this Mortgage or the Note or available at law or in equity.
SALE OF THE PROPERTY. To the extent permitted by applicable law, Grantor
hereby waives any and all right to have the property marshalled. In
exercising its rights and remedies, Lender shall be free to sell all or any
part of the Property together or separately, in one sale or by separate
sales. Lender shall be entitled to bid at any public sale on all or any
portion of the Property.
NOTICE OF SALE. Lender shall give Grantor reasonable notice of the time
and place of any public sale of the Personal Property or of the time after
which any private sale or other intended disposition of the Personal
Property is to be made. Reasonable notice shall mean notice given at least
ten (10) days before the time of the sale or disposition.
WAIVER; ELECTION OF REMEDIES. A waiver by any party of a breach of a
provision of this Mortgage shall not constitute a waiver of or prejudice the
party's rights otherwise to demand strict compliance with that provision or
any other provision. Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make expenditures
or take action to perform an obligation of Grantor under this Mortgage
after failure of Grantor to perform shall not affect Lender's right to
declare a default and exercise its remedies under this Mortgage.
ATTORNEYS' FEES; EXPENSES. If Lender institutes any suit or action to
enforce any of the terms of this Mortgage, Lender shall be entitled to
recover such sum as the court may adjudge reasonable as attorneys' fees at
trial and on any appeal. Whether or not any court action is involved, all
reasonable expenses incurred by Lender that in Lender's opinion are
necessary at any time for the protection of its interest or the enforcement
of
31
<PAGE>
CORPORATE RESOLUTION TO BORROW
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$395,000.00 01-27-1997 01-27-1998 B91
- -----------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit
the applicability of this document to any particular loan or item.
<TABLE>
- ----------------------------------------------------------------------------------------------------
<S> <C>
BORROWER: AUSTINS STEAK & SALOON, INC. (TIN: 86-0723400) LENDER: FIRST BANK NATIONAL ASSOCIATION
6940 "O" STREET, SUITE 334 LINCOLN MAIN - COMMERCIAL
LINCOLN, NE 68510 233 SOUTH 13TH STREET
LINCOLN, NE 68508
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
I, THE UNDERSIGNED SECRETARY OR ASSISTANT SECRETARY OF AUSTINS STEAK &
SALOON, INC. (THE "CORPORATION"), HEREBY CERTIFY that the Corporation is
organized and existing under and by virtue of the laws of the State of
Delaware as a corporation for profit, with its principal office at 6940
"O" Street, Suite 334, Lincoln, NE 68510, and is duly authorized to transact
business in the State of Nebraska.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation, duly
called and held on JANUARY 27, 1997, at which a quorum was present and
voting, or by other duly authorized corporate action in lieu of a meeting,
the following resolutions were adopted:
BE IT RESOLVED, that ANY TWO (2) of the following named officers, employees,
or agents of this Corporation, whose actual signatures are shown below:
NAMES POSITIONS ACTUAL SIGNATURES
- ----- --------- -----------------
Paul C. Schorr III President/Chairman X /s/ Paul C. Schorr III
----------------------
Tim Griggs Vice President X /s/ Tim Griggs
----------------------
acting for and on behalf of the Corporation and as its act and deed be, and
they hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from First Bank National
Association ("Lender"), on such terms as may be agreed upon between the
Corporation and Lender, such sum or sums of money as in their judgment
should be borrowed, without limitation.
EXECUTE NOTES. To execute and deliver to Lender the promissory note or
notes, or other evidence of credit accommodations of the Corporation, on
Lender's forms, at such rates of interest and on such terms as may be agreed
upon, evidencing the sums of money so borrowed or any indebtedness of the
Corporation to Lender, and also to execute and deliver to Lender one or more
renewals, extensions, modifications, refinancings, consolidations, or
substitutions for one or more of the notes, any portion of the notes, or any
other evidence of credit accommodations.
GRANT SECURITY. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender, as security for the payment of any
loans or credit accommodations so obtained, any promissory notes so executed
(including any amendments to or modifications, renewals, and extensions of
such promissory notes), or any other or further indebtedness of the
Corporation to Lender at any time owing, however the same may be evidenced,
any property now or hereafter belonging to the Corporation or in which the
Corporation now or hereafter may have an interest, including without
limitation all real property and all personal property (tangible or
intangible) of the Corporation. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated, or encumbered at the time such loans are
obtained or such indebtedness is incurred, or at any other time or times, and
may be either in addition to or in lieu of any property theretofore
mortgaged, pledged, transferred, endorsed, hypothecated, or encumbered.
EXECUTE SECURITY DOCUMENTS. To execute and deliver to Lender the forms of
mortgage, deed or trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which may be submitted by
Lender, and which shall evidence the terms and conditions under and pursuant
to which such liens and encumbrances, or any of them, are given; and also to
execute and deliver to Lender any other written instruments, any chattel
paper, or any other collateral, of any kind or nature, which they may in
their discretion deem reasonably necessary or proper in connection with or
pertaining to the giving of the liens and encumbrances. Notwithstanding
the foregoing, any one of the above authorized persons may execute,
deliver, or record financing statements.
NEGOTIATE ITEMS. To draw, endorse, and discount with Lender all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness
payable to or belonging to the Corporation in which the Corporation may have
an interest, and either to receive cash for the same or to cause such
proceeds to be credited to the account of the Corporation with Lender, or to
cause such other disposition of the proceeds derived therefrom as they may
deem advisable.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder,
and in all cases, to do and perform such other acts and things, to pay any
and all fees and costs, and to execute and deliver such other documents and
agreements as they may in their discretion deem reasonably necessary or
proper in order to carry into effect the provisions of these Resolutions. The
following person or persons currently are authorized to request advances and
authorize payments under the line of credit until Lender receives written
notice of revocation of their authority: Paul C. Schorr III,
President/Chairman; and Tim Griggs, Vice President.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
Resolutions and performed prior to the passage of these Resolutions are
hereby ratified and approved, that these Resolutions shall remain in full
force and effect and Lender may rely on these Resolutions until written
notice of their revocation shall have been delivered to and received by
Lender. Any such notice shall not affect any of the Corporation's agreements
or commitments in effect at the time notice is given.
BE IT FURTHER RESOLVED, that the Corporation will notify Lender in writing at
Lender's address shown above (or such other addresses as Lender may designate
from time to time) prior to any (a) change in the name of the Corporation,
(b) change in the assumed business name(s) of the Corporation, (c) change in
the management of the Corporation, (d) change in the authorized signer(s),
(e) conversion of the Corporation to a new or different type of business
entity, or (f) change in any other aspect of the Corporation that directly or
indirectly relates to any agreements between the Corporation and Lender. No
change in the name of the Corporation will take effect until after Lender has
been notified.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the
Corporation; and that the Resolutions are in full force and effect and have
not been modified or revoked in any manner whatsoever. The Corporation has no
corporate seal, and therefore, no seal is affixed to this certificate.
IN TESTIMONY WHEREOF, I HAVE HEREUNTO SET MY HAND ON JANUARY 27, 1997 AND
ATTEST THAT THE SIGNATURES SET OPPOSITE THE NAMES LISTED ABOVE ARE THEIR
GENUINE SIGNATURES.
CERTIFIED TO AND ATTESTED BY:
X /s/ Paul C. Schorr III
--------------------------------------
X /s/ Tim Griggs
--------------------------------------
NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, it is advisable to have
this certificate signed by a second Officer or Director of the Corporation.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
32
<PAGE>
PROMISSORY NOTE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$395,000.00 01-27-1997 01-27-1998 B91
- --------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this
document to any particular loan or item.
- ---------------------------------------------------------------------------------------------------
</TABLE>
BORROWER: Austins Steak & Saloon, Inc. LENDER: First Bank National Association
(TIN: 86-0723400) Lincoln Main - Commercial
6940 "O" Street, Suite 334 233 South 13th Street
Lincoln, NE 68510 Lincoln, NE 68508
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT: $395,000.00 INITIAL RATE: 8.250% DATE OF NOTE:
January 27, 1997
PROMISE TO PAY. Austins Steak & Saloon, Inc. ("Borrower") promises to pay to
First Bank National Association ("Lender"), or order, in lawful money of the
United States of America, the principal amount of Three Hundred Ninety Five
Thousand & 00/100 Dollars ($395,000.00) or so much as may be outstanding,
together with interest on the unpaid outstanding principal balance of each
advance. Interest shall be calculated from the date of each advance until
repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on January 27, 1998. In addition,
Borrower will pay regular monthly payments of accrued unpaid interest
beginning February 27, 1997, and all subsequent interest payments are due on
the same day of each month after that. Interest on this Note is computed on a
365/365 simple interest basis; that is, by applying the ratio of the annual
interest rate over the number of days in a year; multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's
address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will
be applied first to accrued unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an independent index which is the
highest prime rate published in the Wall Street Journal "Money Rate" table
(the "Index"). The Index is not necessarily the lowest rate charged by Lender
on its loans. If the Index becomes unavailable during the term of this loan,
Lender may designate a substitute Index after notice to Borrower. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each day the Index rate
changes. The Index currently is 8.250% per annum. The Interest rate to be
applied to the unpaid principal balance of this Note will be at a rate equal
to the Index, resulting in an initial rate of 8.250% per annum. NOTICE: Under
no circumstances will the interest rate on this Note be more than the maximum
rate allowed by applicable law.
PREPAYMENT. Borrower may pay all or a portion of the amount owed earlier than
its due. Early payments will not, unless agreed to by Lender in writing,
relieve Borrower of Borrower's obligation to continue to make payments of
accrued unpaid interest. Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect either now or at the time made or
furnished. (d) Borrower becomes insolvent, a receiver is appointed for any
part of Borrower's property, Borrower makes an assignment for the benefit of
creditors, or any proceeding is commenced either by Borrower or against
Borrower under any Bankruptcy or insolvency laws. (e) Any creditor tries to
take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with
Lender. (f) Any guarantor dies or any of the other events described in this
default section occurs with respect to any guarantor of this Note. (g) A
material adverse change occurs in Borrower's financial condition, or Lender
believes the prospect of payment or performance of the indebtedness is
impaired. (h) Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower
has not been given a notice of breach of the same provision of this Note
within the preceding twelve (12) months, it may be cured (and no event of
default will have occurred) if Borrower, after receiving written notice from
Lender demanding cure of such default: (a) cures the default within fifteen
(15) days; or (b) if the cure requires more than fifteen (15) days,
immediately initiates steps which Lender deems in Lender's sole discretion to
be sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately
due, without notice, and then Borrower will pay that amount. Upon default,
including failure to pay upon final maturity, Lender, at its option, may
also, if permitted under applicable law, increase the variable interest rate
on this Note to 3.000 percentage points over the Index. The interest rate
will not exceed the maximum rate permitted by applicable law. Lender may
hire or pay someone else to help collect this Note if Borrower does not pay.
Borrower will also pay Lender that amount. This includes, subject to any
limits under applicable law, Lender's attorneys' fees and Lender's legal
expenses whether or not there is a lawsuit, including attorneys' fees and
legal expenses for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. If not prohibited by applicable law,
Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF NEBRASKA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF LANCASTER
COUNTY, THE STATE OF NEBRASKA. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEBRASKA.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's
accounts with Lender (whether checking, savings, or some other account),
including without limitation all accounts held jointly with someone else and
all accounts Borrower may open in the future, excluding however all IRA and
Keogh accounts, and all trust accounts for which the grant of a security
interest would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on this
Note against any and all such accounts.
COLLATERAL. This Note is secured by a Deed of Trust from Austins Steak &
Saloon, Inc. to Lender dated January 27, 1997.
LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced. Borrower is not entitled to further
loan advances. Advances under this Note may be requested orally by Borrower
or by an authorized person. Lender may, but need not, require that all oral
requests be confirmed in writing. All communications, instructions, or
directions by telephone or otherwise by Lender are to be directed to Lender's
office shown above. The following party or parties are authorized to request
advances under the line of credit until Lender receives from Borrower at
Lender's address shown above written notice of revocation of their authority:
PAUL C. SCHORR III, PRESIDENT/CHAIRMAN; AND TIM GRIGGS, VICE PRESIDENT.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender. The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender's
Internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (a) Borrower or any guarantor
is in default under the terms of this Note or any agreement that Borrower or
any guarantor has with Lender, including any agreement made in connection
with the signing of this Note; (b) Borrower or any guarantor ceases doing
business or is insolvent; (c) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this Note
or any other loan with Lender; (d) Borrower has applied funds provided
pursuant to this Note for purposes other than those authorized by Lender; or
(e) Lender in good faith deems itself insecure under this Note or any other
agreement between Lender and Borrower.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person
who signs, guarantees or endorses this Note, to the extent allowed by law,
waive presentment, demand for payment, protest and notice of dishonor. Upon
any change in the terms of this Note, and unless otherwise expressly stated
in writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length
of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral, and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
33
<PAGE>
01-27-1997 PROMISSORY NOTE PAGE 2
LOAN NO (CONTINUED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES
TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE
NOTE.
BORROWER:
Austins Steak & Saloon, Inc.
By: /s/ Paul C. Schorr III By: /s/ Tim Griggs
------------------------------- ------------------------
Paul C. Schorr III, Tim Griggs, Vice President
President/Chairman
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
34
<PAGE>
01-27-1997 MORTGAGE PAGE 5
LOAN NO (CONTINUED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Its rights shall become a part of the indebtedness payable on demand and
shall bear interest from the date of expenditure until repaid at the
rate provided for in the Note. Expenses covered by this paragraph
include, without limitation, however subject to any limits under
applicable law, Lender's attorney's fees and Lender's legal expenses
whether or not there is a lawsuit, including attorney's fees for
bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals and any anticipated post-judgment
collection services, the cost of searching records, obtaining title
reports (including foreclosure reports, surveyors' reports, and
appraisal fees, and title insurance, to the extent permitted by
applicable law. Grantor also will pay any court costs, in addition to
all other sums provided by law.
RIGHT OF REDEMPTION. IF THIS MORTGAGE IS FORECLOSED, THE REDEMPTION
PERIOD AFTER JUDICIAL SALE SHALL BE ONE (1) MONTH IN LIEU OF NINE (9)
MONTHS.
NOTICES TO GRANTOR AND OTHER PARTIES. Any notice under this Mortgage,
including without limitation any notice of default and any notice of sale to
Grantor, shall be in writing, may be be sent by telefacsimile, and shall be
effective when actually delivered, or when deposited with a nationally
recognized overnight courier, or, if mailed, shall be deemed effective when
deposited in the United States mail first class, certified or registered
mail, postage prepaid, directed to the addresses shown near the beginning of
this Mortgage. Any party may change its address for notices under this
Mortgage by giving formal written notice to the other parties, specifying
that the purpose of the notice is to change the party's address. All copies
of notices of foreclosure from the holder of any lien which has priority over
this Mortgage shall be sent to Lender's address, as shown near the beginning
of this Mortgage. For notice purposes, Grantor agrees to keep Lender informed
at all times of Grantor's current address.
MISCELLANEOUS PROVISIONS. The following miscellaneous provision are a part of
this Mortgage:
AMENDMENTS. This Mortgage, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Mortgage. No alteration of or amendment to
this Mortgage shall be effective unless given in writing and signed by
the party or parties sought to be charged or bound by the alteration or
amendment.
ANNUAL REPORTS. If the Property is used for purposes other than
Grantor's residence, Grantor shall furnish to Lender, upon request, a
certified statement of net operating income received from the Property
during Grantor's previous fiscal year in such form and detail as Lender
shall require. "Net operating income" shall mean all cash receipts
from the Property less all cash expenditures made in connection with the
operation of the Property.
APPLICABLE LAW. THIS MORTGAGE HAS BEEN DELIVERED TO LENDER AND ACCEPTED
BY LENDER IN THE STATE OF NEBRASKA. EXCEPT AS SET FORTH HEREINAFTER,
THIS MORTGAGE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEBRASKA, EXCEPT AND ONLY TO THE EXTENT OF
PROCEDURAL MATTERS RELATED TO THE PERFECTION AND ENFORCEMENT BY LENDER
OF ITS RIGHTS AND REMEDIES AGAINST THE PROPERTY, WHICH MATTERS SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW MEXICO. HOWEVER, IN THE EVENT
THAT THE ENFORCEABILITY OR VALIDITY OF ANY PROVISION OF THIS MORTGAGE IS
CHALLENGED OR QUESTIONED, SUCH PROVISION SHALL BE GOVERNED BY WHICHEVER
APPLICABLE STATE OR FEDERAL LAW WOULD UPHOLD OR WOULD ENFORCE SUCH
CHALLENGED OR QUESTIONED PROVISION. THE LOAN TRANSACTION WHICH IS
EVIDENCED BY THE NOTE AND THIS MORTGAGE (WHICH SECURES THE NOTE) HAS
BEEN APPLIED FOR, CONSIDERED, APPROVED AND MADE IN THE STATE OF NEBRASKA.
CAPTION HEADINGS. Caption headings in this Mortgage are for convenience
purposes only and are not to be used to interpret or define the
provisions of this Mortgage.
MERGER. There shall be no merger of the interest or estate created by
this Mortgage with any other interest or estate in the Property at any
time held by or for the benefit of Lender in any capacity, without the
written consent of Lender.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Grantor under
this Mortgage shall be joint and several, and all references to Grantor
shall mean each and every Grantor. This means that each of the persons
signing below is responsible for all obligations in this Mortgage.
SEVERABILITY. If a court of competent jurisdiction finds any provision
of this Mortgage to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible,
any such offending provision shall be deemed to be modified to be within
the limits of enforceability or validity; however, if the offending
provision cannot be so modified, it shall be stricken and all other
provisions of this Mortgage in all other respects shall remain valid and
enforceable.
SUCCESSORS AND ASSIGNS. Subject to the limitations stated in this
Mortgage on transfer of Grantor's interest, this Mortgage shall be
binding upon and inure to the benefit of the parties, their successors
and assigns. If ownership of the Property becomes vested in a person
other than Grantor, Lender, without notice to Grantor, may deal with
Grantor's successors with reference to this Mortgage and the
Indebtedness by way of forbearance or extension without releasing
Grantor from the obligations of this Mortgage or liability under the
Indebtedness:
TIME IS OF THE ESSENCE. Time is of the essence in the performance of
this Mortgage.
WAIVER OF HOMESTEAD EXEMPTION. Grantor hereby releases and waives all
rights and benefits of the homestead exemption laws of the State of New
Mexico as to all Indebtedness secured by this Mortgage.
WAIVERS AND CONSENTS. Lender shall not be deemed to have waived any
rights under this Mortgage (or under the Related Documents) unless such
waiver is in writing and signed by Lender. No delay or omission on the
part of Lender in exercising any right shall operate as a waiver of such
right or any other right. A waiver by any party of a provision of this
Mortgage shall not constitute a waiver of or prejudice the party's right
otherwise to demand strict compliance with that provision or any other
provision. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights
or any of Grantor's obligations as to any future transactions. Whenever
consent by Lender is required in this Mortgage, the granting of such
consent by Lender in any instance shall not constitute continuing
consent to subsequent instances where such consent is required.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS MORTGAGE, AND
GRANTOR AGREES TO ITS TERMS.
GRANTOR:
AUSTINS STEAK & SALOON, INC.
BY: /s/Paul C. Schorr III BY: /s/Tim Griggs
------------------------------- --------------------------------
PAUL C. SCHORR III, PRESIDENT/CHAIRMAN TIM GRIGGS, VICE PRESIDENT
- -------------------------------------------------------------------------------
CORPORATE ACKNOWLEDGEMENT
STATE OF Nebraska )
-------------------
)SS
COUNTY OF Lancaster )
-------------------
This instrument was acknowledged before me on January , 27th , 1997 by
PAUL C. SCHORR III AS PRESIDENT/CHAIRMAN AND TIM GRIGGS AS VICE PRESIDENT OF
AUSTINS STEAK & SALOON, INC., a Delaware corporation, on behalf of the
corporation.
- -----------------------------------
GENERAL NOTARY-State of Nebraska /s/Robert A. Balfany
ROBERT A. BALFANY ----------------------------------
My Comm. Exp. June 26, 1999 NOTARY PUBLIC
- -----------------------------------
MY COMMISSION EXPIRES:
6/26/99
- ----------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
35
<PAGE>
NOTICE OF FINAL AGREEMENT
<TABLE>
- ----------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$395,000.00 01-27-1997 01-27-1998 B91
- ----------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability
of this document to any particular loan or item.
- ----------------------------------------------------------------------------------------------------------
BORROWER: AUSTINS STEAK & SALOON, INC. (TIN 86-0723400) LENDER: FIRST BANK NATIONAL ASSOCIATION
6940 "O" STREET, SUITE 334 LINCOLN MAIN - COMMERCIAL
LINCOLN, NE 68510 233 SOUTH 13TH STREET
LINCOLN, NE 68508
- -----------------------------------------------------------------------------------------------------
</TABLE>
NOTICE - WRITTEN AGREEMENTS. A CREDIT AGREEMENT MUST BE IN WRITING TO BE
ENFORCEABLE UNDER NEBRASKA LAW. TO PROTECT YOU AND US FROM ANY MISUNDERSTANDINGS
OR DISAPPOINTMENTS, ANY CONTRACT, PROMISE, UNDERTAKING OR OFFER TO FORBEAR
REPAYMENT OF MONEY OR TO MAKE ANY OTHER FINANCIAL ACCOMODATION IN CONNECTION
WITH THIS LOAN OF MONEY OR GRANT OR EXTENSION OF CREDIT, OR ANY AMENDMENT OF,
CANCELLATION OF, WAIVER OF, OR SUBSTITUTION FOR ANY OR ALL OF THE TERMS OR
PROVISIONS OF ANY INSTRUMENT OR DOCUMENT EXECUTED IN CONNECTION WITH THIS
LOAN OF MONEY OR GRANT OR EXTENSION OF CREDIT MUST BE IN WRITING TO BE
EFFECTIVE.
BY SIGNING THIS DOCUMENT EACH PARTY REPRESENTS AND AGREES THAT: (A) THE
WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES,
(B) THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES, AND (C) THE
WRITTEN LOAN AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR UNDERSTANDINGS OF THE
PARTIES.
AS USED IN THIS NOTICE, THE FOLLOWING TERMS HAVE THE FOLLOWING MEANINGS:
LOAN. The term "loan" means the following described loan: a Variable Rate
(at highest prime rate published in the Wall Street Journal "Money Rate"
table, making an initial rate of 8.250%). Nondisclosable Non-Revolving Line
of Credit Loan to a Corporation for $395,000.00 due on January 27, 1998.
PARTIES. The term "Parties" means First Bank National Association and any
and all entities or individuals who are obligated to repay the loan or have
pledged property as security for the Loan, including without limitation the
following:
BORROWER: Austins Steak & Saloon, Inc.
GRANTOR #1: The Schorr Family Company
GUARANTOR: The Schorr Family Company
LOAN AGREEMENT. The term "Loan Agreement" means one or more promises,
promissory notes, agreements, undertakings, security agreements, deeds of
trust or other documents, or commitments, or any combination of those
actions or documents, relating to the Loan, including without limitation the
following:
<TABLE>
NECESSARY FORMS
<S> <C>
Corporate Resolution to Borrow Corporate Resolution to Guarantee
Corporate Resolution to Grant Collateral Promissory Note / Change in Terms Agr.
Commercial Guaranty Commercial Pledge Agreement
Mortgage / Security Deed Disbursement Request and Authorization
Notice of Final Agreement
</TABLE>
36
<PAGE>
01-27-1997 NOTICE OF FINAL AGREEMENT PAGE 2
LOAN NO (CONTINUED)
- -------------------------------------------------------------------------------
EACH PARTY WHO SIGNS BELOW, OTHER THAN FIRST BANK NATIONAL ASSOCIATION,
ACKNOWLEDGES, REPRESENTS, AND WARRANTS TO FIRST BANK NATIONAL ASSOCIATION
THAT IT HAS RECEIVED, READ AND UNDERSTOOD THIS NOTICE OF FINAL AGREEMENT.
THIS NOTICE IS DATED JANUARY 27, 1997.
BORROWER:
<TABLE>
Austins Steak & Saloon, Inc.
<S> <C>
By:_______/s/Paul C. Schorr III_______ By:___/s/ Tim Griggs_______________
Paul C. Schorr III, President/Chairman Tim Griggs, Vice President
</TABLE>
LENDER
FIRST NATIONAL BANK ASSOCIATION
By:_________/s/ illegible___________________
Authorized Officer
37
<PAGE>
EXHIBIT 21
21 Subsidiaries of the Issuer:
Missouri Development Company
Austins Albuquerque, Inc.
Austins Omaha, Inc.
Austins 72nd, Inc.
Austins Lincoln, Inc.
Austins New Mexico, Inc.
Austins Old Market, Inc.
Austins Scottsdale, Inc.
Austins Rio Rancho, Inc.
Austins Albuquerque East, Inc.
19
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Austin Steaks & Saloon, Inc. on Form S-8 (File No. 33-92196) of our report
dated March 27, 1997, on our audit of the consolidated financial statements
of Austin Steaks & Saloon, Inc. as of December 31, 1996 and 1995 and for the
years then ended, which report is included in this Annual Report on Form
10-KSB.
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
April 14, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE COMPANY'S FORM 10-K FOR THE YEAR-TO-DATE AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 127,885
<CURRENT-ASSETS> 400,182
<PP&E> 4,751,327
<DEPRECIATION> 1,150,501
<TOTAL-ASSETS> 5,480,789
<CURRENT-LIABILITIES> 1,448,610
<BONDS> 0
0
0
<COMMON> 23,311
<OTHER-SE> 3,499,393
<TOTAL-LIABILITY-AND-EQUITY> 5,480,789
<SALES> 10,440,478
<TOTAL-REVENUES> 10,440,478
<CGS> 10,339,569
<TOTAL-COSTS> 10,339,569
<OTHER-EXPENSES> 1,245,403
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150,057
<INCOME-PRETAX> (1,294,551)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,294,551)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (255,512)
<NET-INCOME> (1,550,063)
<EPS-PRIMARY> (0.72)
<EPS-DILUTED> 0
</TABLE>
