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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 26, 1993 COMMISSION FILE NUMBER 0-7961
TPI ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1899681
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 SOUTH FLAGLER DRIVE
PHILLIPS POINT EAST TOWER
WEST PALM BEACH, FLORIDA 33401
(Address of principal executive office) (Zip Code)
(407) 835-8888
(Registrant'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 SHARES, PAR VALUE $.01 PER SHARE
(Title of Class)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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 _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Sec.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statement incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. Yes No _X_
The aggregate market value of the voting stock held by non-affiliates of
the Registrant is $118,326,418 (as of March 15, 1994).
The number of shares outstanding of the Registrant's common stock is
20,290,279 (as of March 15, 1994).
------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement (pursuant to Regulation 14A)
concerning the Annual Meeting of Shareholders is incorporated by reference to
Part III of this Form 10-K. Although such Proxy Statement is not currently
available, it will be filed with the Commission by April 25, 1994.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
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PART I
<S> <C> <C>
Item 1. BUSINESS.................................................................................. 2
Item 2. PROPERTIES................................................................................ 8
Item 3. LEGAL PROCEEDINGS......................................................................... 9
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....................................... 10
EXECUTIVE OFFICERS OF THE REGISTRANT...................................................... 10
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS................. 12
Item 6. SELECTED FINANCIAL DATA................................................................... 12
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..... 13
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................................... 19
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...... 44
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........................................ 44
Item 11. EXECUTIVE COMPENSATION.................................................................... 44
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................ 44
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................ 44
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.......................... 44
SIGNATURES............................................................................................. 46
FINANCIAL STATEMENT SCHEDULES.......................................................................... S-1
FINANCIAL STATEMENTS OF SUBSIDIARY..................................................................... W-1
FINANCIAL STATEMENT SCHEDULES OF SUBSIDIARY............................................................ WS-1
EXHIBIT INDEX..........................................................................................
</TABLE>
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PART I
ITEM 1. BUSINESS
General
TPI Enterprises, Inc. (the "Company") is a New Jersey Corporation,
incorporated in 1970. Its principal executive offices are located at 777 South
Flagler Drive, Phillips Point, East Tower, Suite 909, West Palm Beach, Florida
33401, telephone (407) 835-8888.
CONTINUING OPERATIONS
General
The Company, through TPI Restaurants, Inc. ("Restaurants") is one of the
largest restaurant franchisees in the United States. As of March 1, 1994,
Restaurants owns and operates 258 restaurants including 191 Shoney's and 67
Captain D's in eleven states, primarily in the southern United States. TPI
Restaurants is the largest Shoney's and Captain D's franchisee, operating more
than four times as many Shoney's as the next largest Shoney's franchisee and
more than three times as many Captain D's as the next largest Captain D's
franchisee. The Company operates its Shoney's and Captain D's restaurants under
license agreements with Shoney's, Inc., an unaffiliated public company.
Approximately 84% and 16% of the Company's revenues from continuing operations
in 1993 were from its Shoney's and Captain D's restaurants, respectively.
"Shoney's" and "Captain D's" are registered trademarks of Shoney's, Inc.
References to the Company include the operations of Restaurants.
Shoney's
Concept and Strategy. Shoney's are full-service, family-style restaurants
which are generally open 18 hours per day, seven days per week, serving
breakfast, lunch and dinner. Shoney's varied menu includes hamburgers, chicken,
steaks, seafood and sandwiches as well as salad bars and breakfast bars.
Shoney's offer a high quality dining experience at attractive prices; the
average check per customer at the Company's Shoney's restaurants (based on
entrees served at a sampling of restaurants) was approximately $5.46 for the
year ending December 26, 1993.
Shoney's has sought to differentiate themselves from similarly priced
restaurants by providing a superior dining experience, excellent service and
warm hospitality. Customers are greeted upon their arrival by a dining room
manager who escorts them to their tables, where they are served by friendly
waiters and waitresses. Shoney's restaurants are attractively styled using a
contemporary mix of light woods, interior plants and earth tones. The Company
places major emphasis on the quality, preparation and service of its food, the
maintenance and repair of its premises and the appearance and conduct of its
employees. Franchise agreements between Shoney's franchisees and Shoney's, Inc.
require that all Shoney's restaurants conform to an express standard of
appearance and menu content.
Menu. Shoney's varied menu is designed to appeal to a broad spectrum of
customers. Shoney's restaurants offer health-oriented soup and salad bars, which
allow customers to prepare fresh salads using over 30 different items, and to
choose from home-made soups. Shoney's popular breakfast bars, containing 40
different items, feature a variety of fresh fruits and traditional breakfast
selections, including eggs, bacon, sausage, grits, home-fried potatoes, gravy,
biscuits, muffins and specially prepared preserves. The breakfast bars have
helped secure Shoney's position as a leader in the breakfast segment of the
market, enabling Shoney's restaurants to have significant sales during all three
daily meal periods. Pie shops are also now included in most of the Company's
recently constructed Shoney's and are being added to most stores that are
remodeled.
The Company's menu strategy for its Shoney's restaurants is to provide
distinctive, quality meals that represent good value and appeal to the varied
dining preferences of its targeted customers. Shoney's
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strives to be sensitive to emerging food trends in order to exploit their sales
potential. The restaurants feature separate menus for the three meal periods,
and offer a wide variety of selections. Each restaurant offers a feature dessert
which changes monthly and home-made soups which change weekly. Shoney's provides
a complete dining experience, emphasizing value, speed of service, hospitality
and menu diversity to a broad spectrum of value-conscious customers.
In addition to its core menu, the Company has implemented a promotional
program at its Shoney's restaurants offering a special feature entree at various
times throughout the year. Successful promotional items may be later placed on
the Shoney's regular daily menu. The Company also offers a senior citizen's
discount and a children's menu at its Shoney's restaurants. The Company (in
conjunction with its franchisor) continually modifies its Shoney's restaurant
concept and menu in order to adapt to new market trends and to maintain its
appeal to its traditional broad spectrum of customers. Management believes that,
as a result of its diverse menu, its Shoney's restaurants are less dependent on
the commercial success of any particular product than certain of its
competitors.
History. Shoney's restaurants have been in operation in the southern United
States since 1952 and enjoy a high level of name recognition in that region.
Shoney's restaurants (including those operated by Shoney's, Inc. and other
franchisees) are now located in 37 states extending as far west as California.
As of March 1, 1994, there were 917 Shoney's in operation, 568 of which are
franchised.
The Company currently operates 191 Shoney's which is approximately 34% of
all franchised Shoney's restaurants and more than four times as many as the next
largest Shoney's, Inc. franchisee. The Company's first Shoney's restaurant was
opened in 1963. During 1993, the Company opened 18 newly constructed Shoney's
restaurants and acquired six existing Shoney's restaurants. The Company closed
nine underperforming Shoney's and relocated one restaurant in 1993 to a higher
traffic location. Through March 1, 1994, the Company has opened four additional
newly constructed restaurants and closed nine additional underperforming
restaurants. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for a discussion of the restructuring charge recorded
in 1993 and the Company's plans to close additional underperforming restaurants
during 1994.
The Company has the exclusive right to develop Shoney's restaurants in more
than 80% of the geographic territory of Texas, including the San Antonio, Corpus
Christi, Austin, Amarillo, El Paso and Fort Worth metropolitan areas, most of
Dallas County and portions of Houston. The Company also has exclusive rights to
build Shoney's restaurants in the Orlando, Florida area and portions of Broward
and Palm Beach Counties in south Florida. In addition, the Company has agreed to
develop a territory in eastern Michigan jointly with Shoney's, Inc. See
"Reserved Area and License Agreements" for additional discussions of the
Company's reserved areas.
Captain D's
Concept and Strategy. Captain D's are fast-service restaurants,
specializing in seafood meals, and are generally open 12 hours per day, seven
days per week. Captain D's restaurants project a nautical theme, with a
distinctive wood or stucco exterior and an inviting interior decor featuring
light wood tones, interior plants and brass accessories. The Captain D's concept
also provides a take-out service including drive-through window service
representing approximately one-half of its 1993 sales at Captain D's. The
average check per customer at the Company's Captain D's (based on entrees served
at a sampling of restaurants), including take-out, was approximately $4.62
during the year ended December 26, 1993.
The Company's operating strategy with respect to its Captain D's
restaurants is to seek to increase same store sales averages through the
continued introduction and promotion of distinctive, high quality menu items,
and through increased emphasis on customer service, food quality and cost
management.
Menu. The Captain D's menu is designed to capitalize on the trend of
increased per capita consumption of seafood by serving fried fish fillets,
broiled fish, shrimp, clams, stuffed crab in a natural
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shell and salads. To extend the appeal of its menu to all family members,
Captain D's also serves hamburgers, chicken fillets, french fries, hush puppies
and country style vegetables. Captain D's also offers broiled entrees to benefit
from the increased health consciousness of its customers. The Company, in
conjunction with Shoney's, Inc., continually develops and tests new items for
the Captain D's menu and seeks to improve existing products. The Company's
Captain D's have reduced their dependence on cod fish, the price of which has
risen in recent years, by increasing sales of other high quality fish.
History. Captain D's restaurants have been in operation in the southeastern
United States since 1969. As of March 1, 1994, there were 639 Captain D's in
operation, 309 of which are franchised. TPI Restaurants operates approximately
22% of the franchised Captain D's restaurants. The Company opened its first
Captain D's restaurant in 1975 and presently operates 67 Captain D's in Alabama,
Arkansas, Georgia, Mississippi, North Carolina, South Carolina and Tennessee.
During 1993, the Company opened two newly constructed Captain D's restaurants
and closed four underperforming restaurants. Through March 1, 1994, the Company
has opened one additional newly constructed restaurant and closed one additional
underperforming restaurants.
Other Restaurants
During 1993, the Company closed all of its remaining Hungry Fisherman and
Danver's restaurants. The Company recorded the estimated losses related to the
disposition of these properties during 1992 and anticipates no future financial
impact from these restaurants.
Employees
As of December 26, 1993, The Company had approximately 11,100 employees,
including approximately 9,160 restaurant employees, 1,570 store management
personnel (including field supervision and management-in-training), and 370
headquarters personnel (including commissary personnel). Employment in Shoney's
restaurants is seasonal and is highest in the second and third quarters. None of
the Company's employees are covered by a collective bargaining agreement.
Competition and Markets
The restaurant business is highly competitive. Key competitive factors in
the industry are the quality, variety and value of the food products offered,
quality and speed of service, advertising, name identification, restaurant
location and attractiveness of facilities. There are a large number of national
and regional chain operators, fast food restaurants and other family restaurants
that compete directly and indirectly with the Company. Some of these entities
have significantly greater financial resources and higher sales volume than does
the Company. The restaurant business is often affected by changes in consumer
tastes and discretionary spending priorities, national, regional or local
economic conditions, demographic trends, consumer confidence in the economy,
weather conditions, traffic patterns, employee availability, and the type,
number and location of competing restaurants. Any change in these factors could
adversely affect the Company. In addition, factors such as inflation and
increased food, labor and other employee compensation costs could also adversely
affect the Company.
Financial Controls
The Company maintains centralized accounting controls for all of its
restaurants through the use of computerized management information systems.
Weekly reports of individual restaurant sales, labor costs, food costs and other
expenses and daily reports of sales, all with comparisons to prior periods, give
the Company's management current operating results by restaurant as well as on a
company-wide basis.
The Company does not have significant receivables or inventory and receives
trade credit based upon negotiated terms in purchasing food and supplies.
Because funds available from cash sales are not needed immediately to pay for
food and supplies or to finance receivables or inventory, they may be used
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for non-current capital expenditures. Therefore, the Company, like many other
companies in the restaurant industry, normally operates with a working capital
deficit.
Acquisition and Distribution of Food and Supplies
To achieve consistent food quality and control costs, the Company centrally
purchases all major food and supply items used in its restaurants. These items,
which account for approximately 98.4% of all food and supplies used, are
delivered to the Company's commissary centers in Memphis, Tennessee and
Charlotte, North Carolina, from which they are redistributed at least twice
weekly to its restaurants. The Memphis distribution center contains 80,000
square feet of storage area, and the Charlotte distribution center contains
70,000 square feet of storage area. Since 1990, the range of products provided
from the commissary has been significantly expanded from that provided in prior
years. This strategy has led to reduced costs and consistent food quality and
freshness and should continue to do so as the commissary operations are expanded
to serve additional restaurants. The commissary centers are able to control
costs by purchasing food and supply items in bulk quantities in anticipation of
future needs and price increases. The Company uses its trucks to backhaul
approximately 80% of the food items carried by the commissary, resulting in
significant cost savings. In addition, the Company has begun backhauling for
third parties in 1994.
The Company's ability to maintain consistent quality throughout its chain
of restaurants depends in part upon the ability to acquire food products and
related items from reliable sources. In situations when supplies may be expected
to become unavailable or prices are expected to rise significantly, the Company
may enter into purchase contracts or purchase quantities for future use. The
Company currently has no material long-term contracts for any of the items used
in its restaurants and adequate alternative sources are believed to be
available. However, certain items are purchased under agreements with vendors,
negotiated from time to time, based on the Company's expected annual usage. Such
agreements generally include an annual pricing schedule.
Reserved Area and License Agreements
Shoney's. The Company operates its Shoney's restaurants under a series of
reserved area agreements, pursuant to which Shoney's, Inc. has granted the
Company the exclusive right to develop Shoney's restaurants within specified
geographic areas, and license agreements entered into between the Company and
Shoney's, Inc. The existing license agreements for Shoney's generally providefor
20-year terms with 20-year renewal options subject to the satisfaction of
certain conditions. The current expiration dates of the Shoney's license
agreements, including renewals, range from 2016 to 2033. In 1993, the average
royalty fee paid by the Company for its Shoney's restaurants was 1.9% of gross
sales compared to 3.5% which new franchisees are currently being required to
pay. Shoney's restaurants built by the Company pursuant to its reserved area
agreements will be subject to varying royalty rates of up to 3.0% of sales.
The license agreements impose specifications as to the preparation of the
products as well as general procedures, such as advertising, maintenance of
records, protection of trademarks and provisions for inspection by the
franchisor. The license agreements also require the prior approval of Shoney's,
Inc. (not to be unreasonably withheld) in order for the Company to close any of
its Shoney's restaurants. Termination of the license agreements may be effected
for breach of conditions of the agreements, including sale of adulterated
products or failure to meet proper standards of quality and sanitation. The
Company has never been subjected to any involuntary termination of its license
agreements.
Several of the Company's reserved area agreements include expansion
schedules requiring the Company to develop a minimum number of stores over a
defined period of time. The reserved area agreement for 28 counties in Texas,
which covers Fort Worth and much of Dallas County, requires the development of
14 Shoney's restaurants over a nine year period ending in 1996. To date, the
Company
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has opened five restaurants in the reserved area. The Company's development
agreements for expansion of the Shoney's concept in certain parts of Broward and
Palm Beach Counties in south Florida, northwest Harris County, Texas, and
Maricopa County, Arizona, require the development of seven restaurants in the
Florida area by 2003, six restaurants in the Harris County area by 1998, and
three stores in the Arizona area by 1997. There were no restaurants opened in
these three areas during 1993, but one store has opened in each of the Harris
County, Texas area and the Florida area since December 26, 1993. In addition,
the Company has agreed to develop a territory in eastern Michigan jointly with
Shoney's, Inc. The agreement requires 13 stores to be opened at a rate equal to
Shoney's Inc. in the area, which is expected to approximate two to three stores
per year. The Company opened one store in this area during 1993 and one store
during January, 1994. If above schedules are not satisfied, Shoney's, Inc. has
the right to terminate the Company's exclusive rights in these areas. The
reserved area agreements permit the Company to open as many Shoney's restaurants
as it deems desirable within such reserved territories in compliance with the
terms of the reserved area agreement, in addition to those required to be open
in accordance with the development schedule.
The Company is a party to other exclusive territory agreements in the areas
of its Shoney's operations, including agreements covering over 170 additional
counties in Texas; all of Arkansas; over 75 counties in North Carolina; over 30
counties in Mississippi; over 20 counties in Tennessee; and several additional
counties in Georgia, South Carolina, Florida and Alabama. With respect to the
reserved areas described in the preceding sentence, the Company has no required
development schedule and is entitled to open as many Shoney's restaurants in
such reserved areas as it deems desirable in compliance with the terms of the
reserved area agreements. Shoney's, Inc. may terminate any reserved area
agreement upon the default by Restaurants under the terms of any license
agreement for operation of a Shoney's restaurant within such reserved area. In
addition, the reserved area agreement covering the 28 counties in Texas provides
that Shoney's, Inc. may terminate such reserved area agreement upon the
expiration of more than 10% of the Company's license agreements for Shoney's
restaurants within such reserved area (without replacing those restaurants
within two years following such expiration). The Company has never had a
reserved area agreement involuntarily terminated by Shoney's, Inc.
Captain D's. The Company's Captain D's restaurants are operated under
individual license agreements with Shoney's, Inc. The Company has the right to
develop Captain D's in 124 counties in seven southeastern states (Alabama,
Arkansas, Georgia, Mississippi, North Carolina, South Carolina and Tennessee).
The Company must open an aggregate of 32 new Captain D's, by July 11, 2011, at a
rate of two restaurants per year. The reserved area agreement permits the
Company to open as many Captain D's restaurants as it deems desirable within its
reserved territories in addition to those required to be opened in accordance
with the development schedule. The reserved area agreement provides that
Shoney's, Inc. may terminate the reserved area agreement (i) upon the default by
Restaurants under the terms of any license agreement for operation of a Captain
D's restaurant or (ii) after July 11, 2011, upon the expiration of more than 10%
of Restaurants' license agreements for Captain D's (without replacing those
restaurants within two years following such expiration).
The Company's existing license agreements for Captain D's generally provide
for 20-year terms with two 20-year renewal options subject to the satisfaction
of certain conditions. The current expiration dates of the license agreements,
including renewals, assuming compliance with the expansion schedule in the
Captain D's reserved area agreement, range from 2035 to 2052. In 1993, the
average royalty paid to Shoney's, Inc. by the Company's Captain D's was 1.5% of
sales.
Advertising and Promotion
The license agreements for the Company's Shoney's and Captain D's
restaurants require that the Company pay fees equal to 0.35% and 0.65% of sales,
respectively, in addition to its franchise fees, which are put into production
funds and used by the franchisor to produce radio and television commercials and
printed advertising materials. Shoney's, Inc. uses such commercials in its
nationwide advertising and marketing program. The Company is also required to
spend for local marketing on its
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own behalf and through a cooperative in which other franchisees and Shoney's,
Inc. participate. The aggregate amount spent by the Company in 1993 for such
advertising, inclusive of the fee paid to the franchisor described above to the
production funds, was approximately 3.3% of sales. As part of such local
marketing, the Company purchases television and radio spots to air commercials
produced by the franchisor. The Company also advertises Shoney's and Captain D's
restaurants extensively on billboards. Through such advertising, management
believes that Shoney's and Captain D's have a high level of name recognition and
positive customer perceptions on key attributes of food quality, service and
atmosphere. As part of its marketing program, the Company offers several weekly
promotions, including free nights for children, special senior citizens'
discounts and "all-you-care-to-eat" seafood buffets at Shoney's restaurants. In
addition, the Company distributes coupons through local newspapers and direct
mail as part of its advertising campaign.
Regulation
The Company is subject to the Fair Labor Standards Act and various state
laws governing such matters as minimum wages, overtime and other working
conditions. Significant numbers of the Company's food service personnel are paid
at rates related to the federal and state minimum wage, and accordingly,
increases in the minimum wage increase the Company's labor costs.
TPI Transportation, Inc., a wholly-owned subsidiary of Restaurants,
obtained a license from the Interstate Commerce Commission to conduct interstate
trucking and is subject to applicable federal regulations relating to interstate
trucking.
Each Company restaurant is subject to licensing and regulation by state and
local health, sanitation, safety, fire and other departments. Difficulties or
failures in obtaining or renewing any required licensing or approval could
affect the Company's restaurants.
The Company is also subject to various federal, state and local laws
regulating the discharge of materials into the environment. The cost of
developing restaurants has increased as a result of the Company's compliance
with such laws. Such costs relate primarily to the necessity of obtaining more
land, landscaping and below surface storm drainage and the cost of more
expensive equipment necessary to decrease the amount of effluent emitted into
the air and ground.
The Company believes it is in material compliance with the regulations to
which it is subject.
Other Activities
Insurex Agency, Inc., a wholly-owned subsidiary of Restaurants, was
organized as a Tennessee corporation in 1975 for the purpose of acting as agent
for property and casualty, workers' compensation, life and health and other
insurance policies for Restaurants, other corporations and the general public.
Approximately 98% of the insurance premiums written by Insurex are for insured
entities not affiliated with Restaurants.
Insurex Benefits Administrators, Inc., ("IBA") a wholly-owned subsidiary of
Restaurants, was organized as a Tennessee corporation in 1989 for the purpose of
operating as a third party administrator of medical and dental claims for
Restaurants and other corporations. Approximately 98% of IBA's revenues are from
other corporations.
Maxcell Telecom Plus, Inc.'s ("Maxcell"), a wholly-owned subsidiary of the
Company, original business plan was to create a cellular telephone network that
would operate throughout the southeastern United States. In 1986, Maxcell
disposed of substantially all of its remaining interests in the cellular
business. Since 1986, Maxcell has had no operations and its only significant
asset is cash. Beginning in late 1988, and extending to 1989, Maxcell invested
approximately $150,000 to participate in lotteries held by the Federal
Communication Commission ("FCC") for rights to develop cellular systems for
approximately 300 markets. Maxcell continues to have outstanding applications
for markets which may
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be re-lotteried by the FCC. Maxcell does not intend to apply for any new permits
from the FCC or to conduct any non-restaurant business other than in connection
with the permits for which applications are pending. There can be no assurance
that such markets will be re-lotteried or that Maxcell would win any such
lottery. See Item 1 "Legal Proceedings".
Discontinued Operations
On February 24, 1989, the Company, through its wholly-owned subsidiary, TPI
Entertainment, Inc. ("Entertainment"), acquired leasehold interests and other
assets related to the operation of 55 movie theaters from American Multi-Cinema,
Inc. ("AMC"), a wholly-owned subsidiary of AMC Entertainment Inc. ("AMCE"),
subject to a management agreement and certain other agreements, which subsidiary
at that time held 6,275,144 shares of the Company's common stock. On March 4,
1991, Entertainment entered into the General Partnership Agreement of Exhibition
Enterprises Partnership (the "Partnership Agreement") with Cinema Enterprises,
Inc. ("CENI"), a Missouri corporation and a wholly-owned subsidiary of AMC,
forming Exhibition Enterprises Partnership, a New York general partnership (the
"Partnership").
Pursuant to the Partnership Agreement, effective April 19, 1991, (a)
Entertainment contributed to the Partnership its interest in the assets (subject
to certain exclusions) relating to the 57 movie theaters Entertainment then
owned and other leasehold interests, subject to obligations under notes, loans
and capital leases, (b) the Partnership assumed certain liabilities of
Entertainment and (c) CENI contributed to the Partnership 3,800,000 shares (the
"Shares") of common stock, par value $.01 per share of the Company. Thereafter,
the Partnership distributed the shares and cash to Entertainment. The Company
agreed to pledge all of the issued and outstanding stock of Entertainment and
its interest in the Partnership as security fora bank loan and agreed to
guarantee the obligations of the Partnership pursuant to the loan documents.
On May 28, 1993, the Company completed the sale of its 50% interest in the
Partnership to AMC for $17,500,000.
ITEM 2. PROPERTIES
General
The Company's executive offices are located at 777 South Flagler Drive,
West Palm Beach, Florida where it occupies approximately 4,800 square feet of
space under a lease expiring in 1999 and providing for an annual base rent of
approximately $119,000. The lease requires the Company to pay certain operating
expenses and contains escalation clauses relating to real estate taxes and the
like. Such payments currently aggregate approximately $50,000.
Restaurants' corporate headquarters is located in Memphis, Tennessee in a
leased building consisting of approximately 48,000 square feet. The lease
agreement, which expires December 1995, provides for an annual rent of $84,000
and requires the Company to pay certain expenses of approximately $95,000
annually. Restaurants operates its commissary centers in leased facilities in
Memphis, Tennessee and Charlotte, North Carolina consisting of 80,000 and 70,000
square feet of storage area in each location, respectively.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of the Company's plans to consolidate
its West Palm Beach, Florida office with its Memphis, Tennessee office in a new
facility in West Palm Beach, Florida.
Restaurants
The majority of the Company's Shoney's restaurants are free standing
buildings of approximately 5,000 square feet and 170 seats. The average cost of
building and equipment per restaurant opened in
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1993 was approximately $945,000. Land costs averaged approximately $511,000 for
each new restaurant during 1993.
Each Captain D's is a free standing building of approximately 2,200 square
feet and 70 seats. Building and equipment costs currently total approximately
$465,000 for each restaurant. Land costs averaged approximately $146,000 for
each new restaurant in 1993.
A majority of the operating restaurant properties used by Restaurants are
leased from others under noncancelable agreements. The following table sets
forth certain information regarding Restaurants' restaurant properties as of
March 1, 1994:
<TABLE><CAPTION>
LAND AND LAND LEASED, LAND AND
TYPE OF RESTAURANT BUILDING OWNED BUILDING OWNED BUILDING LEASED TOTAL
- ------------------------------------------------------- ------------------- ------------------- ------------------- -----------
<S> <C> <C> <C> <C>
Shoney's............................................... 67 41 83 191
Captain D's............................................ 27 26 14 67
-- -- -- ---
94 67 97 258
== == == ===
</TABLE>
Most of the restaurant leases provide for 10 to 25 year initial terms, with
renewal options by Restaurants for additional periods ranging from 5 to 15
years. The leases generally have rents which are the greater of a fixed minimum
amount or a percentage of gross sales ranging from 1.0% to 6.5%. The following
table summarizes the expiration dates of the original or current terms of all of
Restaurants' leases and the number of related leases currently having renewal
options.
<TABLE><CAPTION>
NUMBER OF NUMBER WITH
LEASE TERM EXPIRES LEASES RENEWAL OPTIONS
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<S> <C> <C>
1994................................................................................ 3 2
1995-1999........................................................................... 66 53
2000-2004........................................................................... 33 22
2005-2009........................................................................... 56 54
2010................................................................................ 6 4
</TABLE>
The Company's experience has been that where leases do not contain renewal
options and Restaurants desires to continue operating at the same location,
negotiating a new lease at competitive terms has been possible. However, prior
to negotiating a new lease (or exercising a renewal option ), the Company
carefully reviews the site location to determine if it continues to be optimal.
The Company has from time to time found alternative locations in the same area
to be more desirable. The amount of rent varies considerably from lease to
lease. Restaurants' philosophy is to own its restaurant sites in each situation
where possible and to utilize lease financing, as necessary, to supplement other
financing sources.
ITEM 3. LEGAL PROCEEDINGS
Maxcell Telecom Plus, Inc., et al., v. McCaw Cellular Communications, Inc., et
al.
On November 1, 1993, the Company and its wholly-owned subsidiary, Maxcell
Telecom Plus, Inc., filed a complaint in the Circuit Court of the Fifteenth
Judicial Circuit in and for Palm Beach County, Florida. The complaint against
McCaw Cellular Communications, Inc. ("McCaw"), Charisma Communications Corp.
("Charisma") and various related parties, relates to McCaw's failure to disclose
the existence of a side agreement between McCaw and Charisma to share in the net
profits from the resale of certain cellular properties which were sold by the
Company to McCaw. The Company seeks recision of the sales contract and damages
based upon the defendants alleged fraudulent misrepresentation, breach of
fiduciary duty, conspiracies and tortious interference with contracts. The
Company's attorney's are unable at this time to state the likelihood of a
favorable outcome.
9
<PAGE>
EEOC Settlement
On January 15, 1993, Restaurants settled a class action lawsuit with the U.
S. Equal Employment Opportunity Commission, which primarily related to events
occurring prior to Restaurants' acquisition by the Company. Under the
Settlement, Restaurants did not admit any violation of law, but will pay
approximately $880,000, which was substantially provided for in 1990, during the
first quarter of 1994 to satisfy the back pay and damages portion of the lawsuit
as well as interest accrued from the date the lawsuit was filed. Restaurants
also has undertaken certain affirmative action measures to promote the hiring of
minorities and report to the EEOC on a semi-annual basis the results of these
measures through 1995.
Other Proceedings
The Company and its subsidiaries are defendants in various lawsuits arising
in the ordinary course of business. It is the opinion of the management of the
Company that the outcome of such litigation will not have a material adverse
effect on the consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders of the
registrant during the fourth quarter of the fiscal year ended December 26, 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the following list is
included as an unnumbered Item in Part I of this Report in lieu of being
included in its entirety in the Proxy Statement.
The following sets forth certain information regarding the Company's
executive officers:
<TABLE><CAPTION>
NAME AGE POSITIONS HELD WITH THE COMPANY
- ------------------------------- ----------- ---------------------------------------------------------------------------
<S> <C> <C>
Stephen R. Cohen............... 51 Chairman of the Board of TPI Enterprises and TPI Restaurants; Director of
TPI Enterprises and TPI Restaurants
J. Gary Sharp.................. 47 President and Chief Executive Officer of TPI Enterprises; President of TPI
Restaurants; Director of TPI Enterprises and TPI Restaurants
Frederick W. Burford........... 44 Executive Vice President, Chief Financial Officer and Treasurer of TPI
Enterprises; Vice President, Chief Financial Officer and Treasurer of TPI
Restaurants; Director of TPI Enterprises and TPI Restaurants
Robert A. Kennedy.............. 45 Executive Vice President and Secretary of TPI Enterprises; Vice Chairman of
the Board and Secretary of TPI Restaurants; Director of TPI Restaurants
Haney A. Long, Jr.............. 48 Vice President, Procurement and Distribution of TPI Restaurants
Patricia M. Watts.............. 38 Assistant Secretary of TPI Enterprises; Assistant Treasurer of TPI
Restaurants
Patricia Hildebrand............ 61 Vice President, Administration of TPI Enterprises
</TABLE>
Stephen R. Cohen has served as Chairman of the Board of Directors of TPI
Enterprises since 1976 and of TPI Restaurants since 1988. He served as President
of TPI Enterprises from September 1976 through January 1980. He served as Chief
Executive Officer of TPI Enterprises from 1965 to March 1993 and Chief Executive
Officer of TPI Restaurants from 1988 to March 1993.
J. Gary Sharp was an employee of Shoney's, Inc. from 1969 through 1986
holding positions ranging from store manager to group Vice President of all of
Shoney's, Inc.'s operations. He left Shoney's, Inc. in 1986 to own and operate
franchises in Orlando, Florida and was President of Sharp
10
<PAGE>
Concepts, Inc. from 1985 through September 1989. Mr. Sharp has served as
President, Chief Operating Officer and a Director of TPI Restaurants since 1989.
Mr. Sharp was elected a Director of TPI Enterprises in April 1992. He was named
Chief Executive Officer of TPI Enterprises in March 1993.
Frederick W. Burford joined TPI Restaurants in November 1991, after 14
years in top management positions at The Promus Companies (formerly Holiday
Corporation). Mr. Burford was a Corporate Vice President and served in
capacities as both Treasurer and Controller at the Promus Companies. Mr. Burford
was elected Vice President, Chief Financial Officer, Treasurer and a Director of
TPI Restaurants in November 1991. He was named Executive Vice President, Chief
Financial Officer, Treasurer and a Director of TPI Enterprises, Inc. in March
1993.
Robert A. Kennedy joined TPI Enterprises in February 1977 as a Vice
President and was elected Executive Vice President in February 1985 and
Secretary in September 1988. Mr. Kennedy was a Director of TPI Enterprises
between August 1984 and March 1993. Mr. Kennedy was elected Vice Chairman of the
Board and Assistant Secretary of TPI Restaurants in 1989, Secretary in 1991 and
a Director in 1988.
Haney A. Long, Jr., joined TPI Restaurants in November, 1989 as Vice
President of Procurement and Distribution. Prior to joining the Company, Mr.
Long served as Senior Vice President of Procurement at Rich SeaPak Corporation
between 1979 and 1989. He also served as Executive Director of Commissary
Operations for Shoney's, Inc., between 1975 and 1977. He was elected Director of
TPI Restaurants in June 1993.
Patricia M. Watts joined TPI Restaurants in April 1992. She was elected
Assistant Treasurer of TPI Restaurants in August 1992. Prior to joining TPI
Restaurants, Ms. Watts served in a variety of planning and analysis positions at
The Promus Companies, Inc. She was elected Assistant Secretary of TPI
Enterprises in June 1993.
Patricia Hildebrand joined TPI Enterprises in 1976 as assistant to Stephen
R. Cohen. She was elected Vice President of Administration of TPI Enterprises in
August 1989.
11
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The Company's common shares are traded in the National Market System of the
over-the-counter market (NASDAQ symbol: TPIE). As of March 15, 1994, there were
1,947 shareholders of record of the Company's common shares. The following table
sets forth, for the periods indicated, the high and low sales prices, as
reported by the National Quotation Bureau, Incorporated. Over-the-counter market
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
The Company has never paid any dividends on its common shares. The Company
currently intends to retain all earnings, if any, to support the development and
growth of the Company's restaurant business. Accordingly, the Company does not
anticipate that any cash dividends will be declared on its common shares for the
foreseeable future. The indentures covering the 8 1/4% Convertible Subordinated
Debentures and the 5% Convertible Senior Subordinated Debentures prohibit the
payment of cash dividends while the debentures remain outstanding. The Company's
credit facility also limits the payment of dividends by the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
<TABLE><CAPTION>
1993 1992 1991
-------------------- -------------------- --------------------
HIGH LOW HIGH LOW HIGH LOW
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
First Quarter..................................... $ 10 7/8 $ 8 1/8 $ 7 3/8 $ 5 3/4 $ 7 $ 4 5/8
Second Quarter.................................... 10 1/2 7 1/2 7 1/8 5 7/8 7 1/2 5
Third Quarter..................................... 12 9 3/8 6 7/8 5 1/8 6 5/8 3 1/2
Fourth Quarter.................................... 12 1/2 9 3/4 8 7/8 6 1/4 7 5 3/8
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The Company recognized a $5,273,000 gain, net of tax, in 1993 following the
sale of its remaining interest in Exhibition Enterprises Partnership (the
"Partnership"). During 1992, the Company recorded an extraordinary loss, net of
tax, of $11,949,000 in connection with an early extinguishment of debt. (See
Note 6 to the Consolidated Financial Statements.) During 1990, the Company
recognized an after-tax gain of approximately $11,600,000 from the sale of a
cellular telephone construction permit by its wholly-owned subsidiary Maxcell
Telecom Plus, Inc. Discontinued operations include the results of TPI
Entertainment, Inc. ("Entertainment") since February 24, 1989. Discontinued
operations also include the gains or losses resulting from the disposal of the
discontinued operations of Entertainment, as well as the Company's
telecommunication business discontinued in 1986. The balance sheet data at
December 31, 1992 and 1991 reflect Entertainment's investment in the
Partnership. See Note 3 to the Consolidated Financial Statements for a
discussion of the various disposals of discontinued operations, including the
settlement of the disputes concerning the stock sale to Siemens Information
Systems, Inc. in November 1991 and the sale of Entertainment's interest in its
movie theater operations.
<TABLE><CAPTION>
STATEMENT OF OPERATIONS DATA
FISCAL YEAR ENDED
-------------------------------------------------------------------------
DECEMBER 26, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1992 1991 1990 1989
------------- ------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue.................................. $ 289,439 $ 277,390 $ 261,130 $ 252,370 $ 235,670
Income (loss) from continuing
operations............................... (36,488) 662 (12,053) 5,731 (4,918)
Income (loss) before extraordinary item
and cumulative effect of accounting
changes.................................. (31,215) 662 10,667 1,528 (4,648)
Net income (loss)........................ (31,215) (14,125) 10,667 1,528 (4,648)
Income (loss) per share from continuing
operations............................... (1.81) .04 (.63) .26 (.21)
Net income (loss) per share.............. (1.55) (.77) .55 .07 (.20)
</TABLE>
12
<PAGE>
<TABLE><CAPTION>
BALANCE SHEET DATA
DECEMBER 26, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1992 1991 1990 1989
------------- ------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Working capital (deficiency)............. $ (10,796) $ 2,734 $ 28,123 $ 18,218 $ 11,610
Total assets............................. 258,839 255,607 282,794 427,037 444,614
Short-term obligations................... 1,728 5,278 18,905 10,399 9,822
Long-term obligations including minority
interest................................. 106,773 110,937 107,710 213,986 217,229
Shareholders' equity..................... 70,559 83,650 97,318 110,489 110,742
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
1993 Compared to 1992
Revenues
Revenues for 1993 increased to $289.4 million, 4.3% over the $277.4 million
earned last year. New restaurants accounted for $30.4 million of 1993 revenues,
while comparable store sales declined $7.2 million, or 3.3%, in the Shoney's
concept and remained flat in the Captain D's concept. The first twelve weeks of
new restaurants operations are excluded from the comparable store sales
computation. Revenues from closed stores, primarily Hungry Fisherman and
Danver's restaurants, which are excluded from 1993 sales, totalled $11.2 million
in 1992. The Company's comparable store sales have declined 4.4% in the Shoney's
concept through March 13, 1994, although overall Shoney's sales have increased
3.5%.
Costs and Expenses
Cost of sales includes food, supplies and uniforms, restaurant labor and
benefits, restaurant depreciation and amortization, and other restaurant
operating expenses. A summary of cost of sales as a percentage of revenues for
1993 and 1992 is shown below.
<TABLE><CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Food, supplies and uniforms........................................................... 35.2% 34.6%
Restaurant labor and benefits......................................................... 31.2% 29.2%
Restaurant depreciation and amortization.............................................. 4.7% 4.1%
Other restaurant operating expenses................................................... 17.7% 16.2%
--------- ---------
88.8% 84.1%
--------- ---------
--------- ---------
</TABLE>
The Company's food costs suffered from significant price increases in
several high volume commodities during 1993, including pork, eggs and shrimp.
These increases were partially offset by a decrease in white fish prices, which
contributed to a decrease in food costs as a percentage of revenues in the
Company's Captain D's restaurants. Most restaurant operating expenses, including
restaurant labor, restaurant depreciation and amortization, repairs and
maintenance, utilities and advertising, are relatively fixed, and accordingly, a
decrease in same store sales results in an unfavorable margin impact. Management
recently completed an extensive review of the Company's exposure resulting from
its self insurance program for workers' compensation and general liability. The
review, which was based on improved data available to the Company relating to
the trend in claims development, indicated that the Company's reserves for
retained losses were near the lower end of the expected range of possible
losses. Management determined it would be appropriate to increase the Company's
reserves to better reflect the likely outcome of its liability within the
possible range of losses. Accordingly, as of the end of the
13
<PAGE>
fourth quarter of 1993, workers' compensation insurance reserves were increased
by charging $4.5 million to restaurant labor and benefits and $0.7 million to
general and administrative expenses. Also, a charge of $1.8 million was made to
other restaurant operating expenses and $0.6 million to the gain on sale of
discontinued operations (theater operations) to increase the general liability
insurance reserves.
General and administrative expenses declined as a percentage of revenues
from 10.2% in 1992 to 9.9% in 1993. The Company continued to experience savings
during 1993 from the restructuring and relocation of TPI Enterprises, Inc.'s
headquarters in the latter half of 1992. In addition to the workers'
compensation reserve adjustment described above, the Company recorded charges of
$1.2 million following the termination and settlement of its retirement plan in
December 1993 and $0.9 million resulting from the reduction in the discount rate
used to compute the Company's deferred compensation obligations. General and
administrative expenses for 1992 include a $1.1 million charge to pension
expense resulting from the early retirement of a senior executive officer.
Restructuring Charges
The Company adopted a restructuring plan as of the end of the fourth
quarter of 1993 which includes (i) closing or relocating 31 of its restaurants
by the end of 1994, (ii) not exercising options to renew leases with respect to
an additional 19 of its restaurants upon expiration of the current lease terms
and (iii) restructuring divisional management and consolidating the Company's
two corporate offices. After an in-depth evaluation of the Company's Shoney's
and Captain D's restaurants, management has identified 31 restaurants, which
have not performed well and appear to have a limited potential for improvement
in the future, to be closed or relocated. Included in these restaurants are five
Shoney's and four Captain D's closed in December 1993. With respect to the
restaurants closed or to be closed, the Company recorded $19.8 million of
restructuring charges consisting primarily of the write-off of assets and the
accrual of lease and other expenses, net of projected sales proceeds and
sublease income. With respect to the 19 restaurants projected to be closed no
later than the expiration of their current lease terms, the Company determined
that the recoverability of the assets has been permanently impaired, and
accordingly, recorded a charge of $4.5 million primarily for the write-down of
assets. The Company is continuing its efforts to restructure and downsize
corporate overhead by consolidating its Memphis, Tennessee corporate office with
its headquarters office in West Palm Beach, Florida. The Company recorded
approximately $1.8 million for the cost of moving the Memphis office and $1.3
million for the write-off of assets and accrual of remaining lease obligations
at the Company's present facilities. In addition, the Company accrued $1.2
million for severance costs and other costs relating to the restructuring of
divisional and corporate overhead. Further, the Company wrote down vacant
properties to net realizable value and revised its estimated loss with respect
to units closed prior to 1993 by increasing its restructuring charge and related
reserve by $6.5 million.
The Company's restructuring charges of $3.6 million in 1992 consisted of a
$4.0 million provision for closed units relating primarily to the closings of
the remaining Hungry Fisherman restaurants, and a $0.4 million reduction in
previously accrued reserves relating to the 1991 charge of $2.8 million for
restructuring the Company's operations and moving its headquarters.
Other Income and Expenses
Interest income decreased $3.0 million, primarily due to interest earned in
1992 on income tax refunds. During the third quarter of 1992, the Company
refinanced Restaurants' 14 1/4% Senior Subordinated Notes. Primarily as a result
of this debt restructuring, and the investment by the Airlie Group, L.P., and
other related parties (the "Airlie Group"), in March 1993, interest expense
decreased $3.8 million in 1993 compared to 1992.
Discontinued Operations
The Company realized a $5.3 million gain, net of $2.7 million of income tax
expense, on the sale of its investment in Exhibition Enterprises Partnership in
1993.
14
<PAGE>
Extraordinary Item and Cumulative Effect of Accounting Changes
The Company recorded a charge to income of $11.9 million during 1992 in
connection with the refinancing of Restaurants' 14 1/4% Senior Subordinated
Notes. The Company also recorded charges of $2.8 million during 1992 relating to
the implementation of Financial Accounting Standard No. 112, "Employers'
Accounting for Postemployment Benefits" and Financial Accounting Standard No.
109, "Accounting for Income Taxes".
1992 Compared to 1991
Revenues
Revenues increased in 1992 by $16.3 million, or 6.2%, to $277.4 million
from $261.1 million in 1991. New restaurants contributed additional sales of
$15.7 million and comparable store sales increased $5.2 million, or 2.5%, in the
Shoney's concept. These increases were partially offset by decreases totalling
$2.4 million in revenues from closed restaurants. The Hungry Fisherman concept
recorded $7.7 million in revenue during the eleven periods in 1992 prior to the
Company's decision to close the restaurants compared to $10.0 million in 1991.
Costs and Expenses
Cost of sales includes food, supplies and uniforms, restaurant labor and
benefits, restaurant depreciation and amortization, and other restaurant
operating expenses. A summary of cost of sales as a percentage of revenues for
1992 and 1991 is shown below.
<TABLE><CAPTION>
1992 1991
--------- ---------
<S> <C> <C>
Food, supplies and uniforms........................................................... 34.6% 36.5%
Restaurant labor and benefits......................................................... 29.2% 29.6%
Restaurant depreciation and amortization.............................................. 4.1% 3.9%
Other restaurant operating expenses................................................... 16.2% 16.0%
--------- ---------
84.1% 86.0%
--------- ---------
--------- ---------
</TABLE>
The Company's food cost decreased as a percentage of revenue due to the
decline in the market price of certain food items purchased by the Company,
including beef, pork, poultry and coffee. Improvements in commissary operations
as well as reduced waste at the stores, resulting in part from advancements in
product packaging, contributed to this decrease. Labor costs at the restaurants
decreased slightly at the restaurants due to management's efforts to ensure
minimal under-and over-staffing and reduce employee overtime. Restaurant
depreciation and amortization was negatively impacted by new construction and
the Company's ongoing remodeling program. The additional number of units
operating also resulted in increased facilities costs included in other
operating expenses.
General and administrative expenses decreased $2.1 million, or 1.4% as a
percentage of revenues, in 1992. Increased employee contributions and improved
claims experience resulted in a decrease of $1.3 million in healthcare costs
allocated to general and administrative expenses. In addition, savings in other
insurance costs and improved absorption of general and administrative costs by
the Company's commissary operations were partially offset by increases in
incentive compensation, advertising and professional fees. The Company also
recorded pension expense of $1.1 million in 1992 in connection with the
retirement of a senior executive officer. Finally, the Company realized savings
of approximately $0.6 million in the latter half of the year from the
restructuring of its operations and relocation of its headquarters.
Other costs and expenses decreased $2.6 million, or 1.0% as a percentage of
revenues, due to losses recorded in 1991 relating to the disposition of certain
fixed assets, including certain parts of its computer system and software and
certain restaurant fixed assets.
15
<PAGE>
Restructuring Charges
During 1992, the Company recorded net restructuring charges of $3.6
million, consisting of a $4.0 million provision for closed units relating
primarily to the closing of the remaining seven Hungry Fisherman restaurants,
and a $0.4 million reduction in previously accrued reserves relating to the 1991
charge of $2.8 million for restructuring the Company's operations and moving its
headquarters. The credit resulted from the sublease of the Company's facilities
at its former location, which was not anticipated in the original reserve
estimate. Restructuring charges in 1991 also include a provision for closed
units of $1.6 million.
Other Income and Expenses
Interest income for 1992 increased by $0.5 million, primarily resulting
from interest on income tax refunds received in 1992 following the resolution of
certain prior year income tax examinations. Interest expense decreased $3.9
million due to the Company's repurchase of $15.9 million principal amount of
Restaurants' 14 1/4% Senior Subordinated Notes during March and April of 1992
and the refinancing of an additional $82.7 million as of July 29, 1992.
Liquidity and Capital Resources
Working capital declined from $2.7 million in 1992 to a deficiency of $10.8
million in 1993 due primarily to the utilization of cash on hand at the end of
1992 for 1993 capital expenditures in the Company's restaurant operations and
the increase in current liabilities resulting primarily from an increase in
insurance reserves. Net cash provided by operating activities increased from
$17.6 million in 1992 to $19.6 in 1993 primarily due to the impact of a net
increase in revenues. Approximately 92% of the Company's restaurant sales are
for cash and the remainder are for credit card receivables which are generally
collected within 3 days. Because the Company's payables, including amounts for
inventory and other operating expenses, are paid over a longer period of time,
it is not unusual for the Company, like many others in the restaurant industry,
to operate with a working capital deficit.
During 1993, the Company invested $54.5 million in capital expenditures,
including $27.4 million for the acquisition of sites and construction of 20 new
Shoney's restaurants and 2 new Captain D's, $8.9 million for the acquisition of
six operating Shoney's restaurants, $7.5 million for the remodeling of 16
Shoney's and 29 Captain D's, $3.9 million for maintenance type capital
expenditures and $1.6 million for sites to be constructed in 1994. The remaining
$5.2 million relates primarily to the purchase of additional trailers and
commissary equipment and the acquisition of a new computer and related
components. The acquisitions of the six operating Shoney's restaurants include
three in northern Palm Beach County, Florida, two in the Phoenix, Arizona area
and one in Houston, Texas. In connection with these acquisitions from other
Shoney's franchisees, the Company acquired the exclusive rights to construct and
operate Shoney's restaurants in the surrounding areas and has agreed to develop
these areas in accordance with specific market development agreements with its
franchisor.
The Company has various other reserved areas with minimum development
requirements . Requirements for 1994 include the construction of one Shoney's in
the West Palm Beach area and the same number of Shoney's in the Michigan
reserved area as constructed by Shoney's, Inc., which is expected to be two
restaurants. The Company has opened four Shoney's restaurants in 1994 as of
March 1, including two units required to meet the 1993 development schedule, and
plans to construct an additional four new and three replacement Shoney's
restaurants in 1994. The total cost of the eleven units constructed or to be
constructed in 1994 is expected to be $15.5 million. Aggregate commitments
beyond 1993 require 38 restaurants to be constructed in the Company's reserved
areas in Phoenix, West Palm Beach, Michigan, Houston, and certain other counties
in Texas prior to April 6, 2003. The Company believes that there is substantial
potential to expand its Shoney's restaurants within the Company's existing
markets as well as within the other areas in which the Company has been granted
exclusive rights by Shoney's, Inc.
16
<PAGE>
The Company has the right to develop Captain D's restaurants in 124
counties in seven Southeastern states (Alabama, Arkansas, Georgia, Mississippi,
North Carolina, South Carolina and Tennessee). To avoid termination of the
reserved area agreement, the Company is required to open 32 additional Captain
D's by July 11, 2011. The Company plans to open three Captain D's in 1994,
including one which opened in January, at an approximate total cost of $2.2
million. In addition to the construction of new Shoney's and Captain D's, the
Company anticipates investing $9.4 million on remodels and incurring maintenance
and other capital expenditures of $4.0 million in 1994.
The acquisition of the three Florida restaurants in 1993 for $5.1 million
included the assumption of long term debt and capitalized lease obligations of
$2.0 million in addition to the issuance of 94,300 shares of common stock valued
at $895,000 at the date of the acquisition. The remainder of the 1993 capital
expenditures were financed using cash flows from operations, proceeds from the
investment in the Company by the Airlie Group and borrowings on the Credit
Facility with a syndicate of banks (the "Credit Facility").
The Company's Credit Facility was renegotiated in March 1993 in connection
with the Airlie investment (described below). The Credit Facility, which
previously consisted of a term loan and a revolving loan was restructured and
currently consists of a $50.0 million revolving credit facility, which bears
interest at either a defined base rate or a rate based on the London Interbank
Offered Rate. The amount available for borrowing under the Credit Facility is
reduced by any outstanding letters of credit. The Company pays a fee of 2% on
outstanding letters of credit and a commitment fee of .5% on the average daily
unused Credit Facility.
Borrowings under the Credit Facility are secured by all shares of the
capital stock of Restaurants, whenever issued, intercompany debt of Restaurants
owed to the Company and ground lease mortgages with respect to certain premises
in which the land is currently leased but the building located thereon is owned
by Restaurants. In addition, the banks have the right to obtain, as security,
assignments of other leases and/or mortgages on real property currently owned or
subsequently acquired. However, the Company has rights to finance certain of
these properties and obtain a release of the collateral under certain
conditions. The Credit Facility limits the amount of additional indebtedness
which the Company and its subsidiaries may incur and the aggregate annual amount
to be spent on capital expenditures. In addition, the Credit Facility limits,
among other things, the ability of the Company and its subsidiaries to pay
dividends, create liens, sell assets, engage in mergers or acquisitions and make
investments in subsidiaries. Restaurants may not transfer amounts to the Company
except for the payment of a management fee not to exceed $2.5 million in each
fiscal year and a dividend in an amount sufficient to pay interest on the
Company's 5% Convertible Senior Subordinated Debentures and 8 1/4% Convertible
Subordinated Debentures, in each case provided that no defaults under the Credit
Facility exist either immediately before or after the transfer. Restaurants must
also maintain certain financial ratios. At December 26, 1993, $19.0 million was
outstanding on the Credit Facility and letters of credit in the amount of $11.0
million were outstanding, resulting in a remaining balance available to borrow
of $20.0 million. The Credit Facility currently matures on June 3, 1996, unless
extended by the banks.
On March 19, 1993, the Airlie Group made an investment in the Company of
$30.0 million. The investment included $15.0 million of 5% Convertible Senior
Subordinated Debentures, due 2003, convertible into common stock at $11 per
share (the "Senior Debentures"), the issuance of 1,500,000 shares of the
Company's common stock at $10 per share and the issuance of warrants to purchase
an additional 1,000,000 shares of common stock at $11 per share. The Senior
Debenture holders may also require the Company to repurchase the Senior
Debentures, in whole or in part, in certain circumstances involving a change in
control of the Company. Restaurants has guaranteed the repayment of the Senior
Debentures on a subordinated basis.
In addition, the Company has outstanding $51.7 million of 8 1/4%
Convertible Subordinated Debentures (the "Debentures"). The Debentures are
convertible at the option of the holder into common shares of the Company at any
time prior to maturity, unless previously redeemed or
17
<PAGE>
repurchased, at a conversion price of $6.50 per share, subject to adjustment in
certain events. The Debentures mature on July 15, 2002 and are redeemable, in
whole or in part, at the option of the Company at any time on or after July 15,
1995, initially at 105.775% of their principal amount and declining to 100% of
their principal amount on July 15, 2002, together with accrued and unpaid
interest. The Debenture holders may also require the Company to repurchase the
Debentures, in whole or in part, in certain circumstances involving a change in
control of the Company as defined in the indenture covering the Debentures (the
"Indenture"). However, a change in control, as defined in the Indenture, will
create an event of default under the Credit Facility and, as a result, any
repurchase would, absent a waiver, be blocked by the subordination provisions of
the Indenture until the Credit Facility (and any other senior indebtedness of
the Company and senior indebtedness of Restaurants with respect to which there
is a payment default) has been repaid in full. The Debentures are
unconditionally guaranteed (the "Guarantee") on a subordinated basis by
Restaurants. The Debentures and the Guarantee are subordinated to all existing
and future senior indebtedness, as defined in the Indenture, of the Company. The
Indenture does not prohibit or limit the ability of the Company or any of its
subsidiaries to incur additional indebtedness, including that which will rank
senior to the Debentures.
Management believes sufficient funds will be available from cash on hand,
cash flow from operations and borrowings under the Credit Facility to meet its
debt service requirements, as well as its capital expenditure and working
capital requirements in the forseeable future.
18
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of TPI ENTERPRISES, INC.:
We have audited the accompanying consolidated balance sheets of TPI
Enterprises, Inc., and its subsidiaries as of December 26, 1993 and December 31,
1992, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three fiscal years in the period ended
December 26, 1993. Our audits also included the financial statement schedules
listed in the Index at Item 14(a)(2). These financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of TPI Enterprises, Inc. and its
subsidiaries as of December 26, 1993 and December 31, 1992, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended December 26, 1993 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.
As discussed in Note 1 to the consolidated financial statements, in 1992
the Company changed its method of accounting for income taxes and postemployment
benefits to conform with Statement of Financial Accounting Standards Nos. 109
and 112. The Company reflected the cumulative effect of these changes in 1992.
/s/ DELOITTE & TOUCHE
March 18, 1994
Memphis, Tennessee
19
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE><CAPTION>
DECEMBER 26, DECEMBER 31,
1993 1992
------------- -------------
(DOLLARS IN THOUSANDS)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents......................................................... $ 16,664 $ 21,020
Accounts receivable--trade........................................................ 984 1,063
Inventories....................................................................... 11,424 14,912
Deferred tax benefit.............................................................. 6,734 6,447
Other current assets.............................................................. 5,514 4,737
------------- -------------
Total current assets...................................................... 41,320 48,179
------------- -------------
Property and equipment (at cost).................................................... 232,240 189,067
Less accumulated depreciation and amortization.................................... 57,802 46,527
Less allowance for unit closings.................................................. 18,695 3,773
------------- -------------
155,743 138,767
------------- -------------
Other assets:
Investment in Exhibition Enterprises Partnership, held for sale................... -- 7,493
Goodwill (net of accumulated amortization of $6,873 in 1993 and $5,595 in 1992)... 38,954 40,232
Other intangible assets (net of accumulated amortization of $3,420 in 1993 and
$1,789 in 1992)..................................................................... 21,923 20,299
Other............................................................................. 899 637
------------- -------------
61,776 68,661
------------- -------------
$ 258,839 $ 255,607
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................................................. $ 1,728 $ 5,278
Accounts payable--trade........................................................... 19,910 15,222
Accrued expenses and other current liabilities.................................... 29,829 22,825
Income taxes currently payable.................................................... 649 2,120
------------- -------------
Total current liabilities................................................. 52,116 45,445
------------- -------------
Long-term debt...................................................................... 106,773 110,937
------------- -------------
Reserve for restructuring........................................................... 20,230 2,322
------------- -------------
Deferred income taxes............................................................... 6,734 8,948
------------- -------------
Other liabilities................................................................... 2,427 4,305
------------- -------------
Commitments and contingencies
Shareholders' equity:
Preferred shares, no par value; 20,000,000 shares authorized; none issued and
outstanding......................................................................... -- --
Common shares, $.01 par value; 100,000,000 shares authorized; 33,118,614 and
31,017,689 issued................................................................... 331 310
Additional paid-in capital........................................................ 225,417 207,314
Deficit........................................................................... (85,244) (54,029)
------------- -------------
140,504 153,595
Less treasury stock, at cost, 12,846,094 common shares
in 1993 and 1992............................................................... 69,945 69,945
------------- -------------
Total shareholders' equity................................................ 70,559 83,650
------------- -------------
$ 258,839 $ 255,607
------------- -------------
------------- -------------
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE><CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
DECEMBER 26, DECEMBER 31, DECEMBER 31,
1993 1992 1991
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Restaurant revenues................................................. $ 289,439 $ 277,390 $ 261,130
------------- ------------- -------------
Costs and expenses:
Food, supplies and uniforms....................................... 101,980 95,957 95,324
Restaurant labor and benefits..................................... 90,263 80,911 77,368
Restaurant depreciation and amortization.......................... 13,632 11,466 10,254
Other restaurant operating expenses............................... 51,291 44,916 41,627
General and administrative expenses............................... 28,641 28,178 30,305
Restructuring charges............................................. 35,082 3,586 4,317
Other, net........................................................ 819 1,063 3,635
------------- ------------- -------------
321,708 266,077 262,830
------------- ------------- -------------
Operating income (loss)............................................. (32,269) 11,313 (1,700)
------------- ------------- -------------
Other income and expenses:
Interest income................................................... 593 3,604 3,094
Interest expense.................................................. (10,539) (14,302) (18,210)
Other............................................................. (109) 321 428
------------- ------------- -------------
(10,055) (10,377) (14,688)
------------- ------------- -------------
Income (loss) from continuing operations before income taxes........ (42,324) 936 (16,388)
Income tax expense (benefit)........................................ (5,836) 274 (4,335)
------------- ------------- -------------
Income (loss) from continuing operations............................ (36,488) 662 (12,053)
------------- ------------- -------------
Discontinued operations:
Loss from discontinued operations, net............................ -- -- (2,727)
Gain on disposal of discontinued operations, net.................. 5,273 -- 25,447
------------- ------------- -------------
5,273 -- 22,720
------------- ------------- -------------
Income (loss) before extraordinary item and cumulative effect of
accounting changes.................................................. (31,215) 662 10,667
------------- ------------- -------------
Extraordinary item--loss on early extinguishment of debt, net of
income taxes........................................................ -- (11,949) --
Cumulative effect of accounting changes, net of income taxes........ -- (2,838) --
------------- ------------- -------------
Net income (loss).............................................. $ (31,215) $ (14,125) $ 10,667
------------- ------------- -------------
------------- ------------- -------------
Primary income (loss) per common share:
Continuing operations............................................. $ (1.81) $ 0.04 $ (0.63)
Discontinued operations........................................... .26 -- 1.18
Extraordinary item................................................ -- (0.65) --
Cumulative effect of accounting changes........................... -- (0.16) --
------------- ------------- -------------
Net income (loss) per common share............................. $ (1.55) $ (0.77) $ .55
------------- ------------- -------------
------------- ------------- -------------
Weighted average number of common and common equivalent shares
outstanding......................................................... 20,127 18,293 19,196
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to consolidated financial statements.
21
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
DECEMBER 26, DECEMBER 31, DECEMBER 31,
1993 1992 1991
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)................................................. $ (31,215) $ (14,125) $ 10,667
------------- ------------- -------------
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization................................ 18,046 14,869 13,758
Deferred income taxes........................................ (2,501) (1,421) (4,370)
Reserve for restructuring.................................... 30,397 854 5,225
Loss from discontinued operations............................ -- -- 2,727
Gain on disposal of discontinued operations.................. (5,273) -- (25,447)
Extraordinary item--loss on early extinguishment of debt..... -- 11,949 --
Cumulative effect of accounting changes...................... -- 2,838 --
Changes in assets and liabilities:
Accounts receivable--trade................................... 79 13 (79)
Inventories.................................................. 3,488 (2,013) (559)
Other current assets......................................... (777) 3,797 270
Other assets................................................. (1,415) 123 332
Accounts payable--trade...................................... 4,688 1,020 (2,855)
Accrued expenses and other current liabilities............... 7,424 388 190
Income taxes currently payable............................... (1,471) (656) 579
Other liabilities............................................ (1,878) (21) 750
------------- ------------- -------------
Total adjustments......................................... 50,807 31,740 (9,479)
------------- ------------- -------------
Net cash provided by operating activities.................... 19,592 17,615 1,188
------------- ------------- -------------
Cash Flows from Investing Activities:
Acquisition of property and equipment............................. (43,867) (24,026) (15,847)
Acquisition of businesses, net of cash received................... (4,660) (4,525) --
Disposition of property and equipment............................. 5,230 3,679 3,062
Proceeds from sale-leaseback transactions......................... -- 1,254 5,293
Other............................................................. 115 (1,019) 23
------------- ------------- -------------
Net cash used in investing activities........................ $ (43,182) $ (24,637) $ (7,469)
------------- ------------- -------------
</TABLE>
22
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE><CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
DECEMBER 26, DECEMBER 31, DECEMBER 31,
1993 1992 1991
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows from Financing Activities:
Net payments on lines of credit................................... $ -- $ (4,250) $ (1,250)
Common shares issued.............................................. 17,204 457 387
Net borrowings (payments) on Credit Facilities.................... (18,550) 35,545 --
Net proceeds of 8 1/4% Convertible Subordinated Debentures........ -- 47,948 --
Repurchase of 14 1/4% Subordinated Notes.......................... -- (98,526) --
Restricted cash deposits.......................................... -- 11,700 (11,700)
Proceeds from 5% Convertible Senior Subordinated Debentures....... 15,000 -- --
Other long-term debt payments..................................... (7,186) (1,789) (1,630)
------------- ------------- -------------
Net cash provided by (used in) financing activities.......... 6,468 (8,915) (14,193)
------------- ------------- -------------
Net cash used in continuing operations............................ (17,122) (15,937) (20,474)
------------- ------------- -------------
Net cash provided by (used in) discontinued operations............ 12,766 (1,907) 31,791
------------- ------------- -------------
Net cash used by extraordinary item............................... -- (13,206) --
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents.............. (4,356) (31,050) 11,317
Cash and cash equivalents, beginning of year...................... 21,020 52,070 40,753
------------- ------------- -------------
Cash and cash equivalents, end of year............................ $ 16,664 $ 21,020 $ 52,070
------------- ------------- -------------
------------- ------------- -------------
Supplemental Disclosure of Cash Flow Information:
Non-cash transactions:
Capitalized lease obligations entered into..................... $ 3,241 $ 2,331 $ 3,390
Liabilities assumed in acquisitions of properties.............. 1,819 4,975 --
Common stock issued in acquisitions of properties.............. 895 -- --
Cash payments (refunds) during the year for:
Interest....................................................... $ 10,100 $ 13,263 $ 21,760
Interest capitalized........................................... 202 172 --
Income taxes, net.............................................. 2,810 (5,046) 5,142
</TABLE>
23
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
COMMON SHARES ISSUED
-------------------------- ADDITIONAL
NUMBER OF PAID-IN TREASURY
SHARES AMOUNT CAPITAL DEFICIT STOCK TOTAL
------------- ----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1990........... 30,843,072 $ 308 $ 206,472 $ (50,571) $ (45,720) $ 110,489
Receipt of 3,800,000 common shares of
treasury stock in connection with
the sale of theater partnership
interest........................... -- -- -- -- (24,225) (24,225)
Issue of shares pursuant to employee
stock plans........................ 89,223 1 386 -- -- 387
Net income........................... -- -- -- 10,667 -- 10,667
------------- ----------- ----------- ---------- ---------- -----------
Balance, December 31, 1991........... 30,932,295 309 206,858 (39,904) (69,945) 97,318
Issue of shares pursuant to employee
stock plans........................ 85,394 1 456 -- -- 457
Net loss............................. -- -- -- (14,125) -- (14,125)
------------- ----------- ----------- ---------- ---------- -----------
Balance, December 31, 1992........... 31,017,689 310 207,314 (54,029) (69,945) 83,650
Investment in Company by the Airlie
Group L.P.......................... 1,503,220 15 14,030 -- -- 14,045
Issue of shares in connection with
acquisition........................ 94,300 1 894 -- -- 895
Issue of shares pursuant to employee
stock plans........................ 499,559 5 3,154 -- -- 3,159
Conversion of subordinated
debentures......................... 3,846 -- 25 -- -- 25
Net loss............................. -- -- -- (31,215) -- (31,215)
------------- ----------- ----------- ---------- ---------- -----------
Balance, December 26, 1993........... 33,118,614 $ 331 $ 225,417 $ (85,244) $ (69,945) $ 70,559
------------- ----------- ----------- ---------- ---------- -----------
------------- ----------- ----------- ---------- ---------- -----------
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of TPI
Enterprises, Inc. (the "Company") and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions are eliminated in
consolidation. During 1993, the Company changed its fiscal year from December 31
to a 52-53 week period, ending on the last Sunday in December in order to be
consistent with the year end of its wholly-owned subsidiary, TPI Restaurants,
Inc., ("Restaurants"). Quarterly reports to shareholders are issued as of the
end of the 16th, 28th, and 40th weeks of each fiscal year.
Cash and Cash Equivalents
The Company considers cash on hand, deposits in banks, certificates of
deposit and short-term marketable securities with maturities of 90 days or less
when purchased, as cash and cash equivalents.
Restaurants utilizes a cash management system under which cash overdrafts
exist in the book balances of its primary disbursing accounts. These overdrafts
represent the uncleared checks in the disbursing accounts. The cash amounts
presented in the consolidated financial statements represent balances on deposit
at other locations prior to their transfer to the primary disbursing accounts.
Uncleared checks of $7,393,000 and $7,445,000 are included in accounts payable
at December 26, 1993 and December 31, 1992, respectively.
Inventories
Inventories, consisting of food items, beverages and supplies, are stated
at the lower of weighted average cost (which approximates first-in, first-out)
or market.
Pre-opening Costs
Direct costs incidental to the opening of new restaurants are capitalized
and amortized over the restaurants' first year of operations.
Depreciation and Amortization
Depreciation and amortization of property and equipment is provided on the
straight-line method over the estimated useful lives of the assets or, in the
case of leasehold improvements and certain property under capital leases, over
the lesser of the useful life or the lease term.
Goodwill related to the acquisition of Restaurants is amortized on a
straight-line basis over a thirty-six year period. The costs of franchise
license agreements which govern the individual Shoney's and Captain D's
restaurants and reserved area agreements are amortized on a straight-line basis
over the lives of the related franchise license agreements, up to 40 years.
Postemployment Benefits
The Company recognizes the cost of postemployment benefits on an accrual
basis in accordance with Financial Accounting Standard No. 112, "Employers
Accounting for Postemployment Benefits." The adoption of this statement during
the year ended December 31, 1992 resulted in an increase of $102,000 in 1992
income from continuing operations. The cumulative effect on years prior to
January 1, 1992 of $716,000, or $.04 per share, is included in 1992 net income.
Income Taxes
Effective January 1, 1992, the Company adopted Financial Accounting
Standard No. 109, "Accounting for Income Taxes", which requires an asset and
liability approach to financial accounting
25
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax basis
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in deferred
tax assets and liabilities. Prior to 1992, income taxes were accounted for under
Accounting Principles Board Opinion No. 11.
The effect of adopting Statement 109 on 1992 net income (loss) was a
decrease of $697,000, or $.04 per share. This effect consists of an increase of
$898,000, or $.05 per share, relating to continuing operations, an increase of
$500,000, or $.03 per share, relating to the extraordinary item and $27,000
relating to the cumulative effect of adopting Statement 112. The cumulative
effect of the change on years prior to January 1, 1992 of $2,122,000, or $.12
per share, decreased 1992 net income.
Income (Loss) Per Share
Primary earnings per share amounts are computed by dividing net income
(loss) by the weighted average number of common and common equivalent shares
outstanding during the period. Reported primary per share amounts include common
equivalents relating to dilutive stock options of 514,000, 165,000 and 38,000
shares in 1993, 1992 and 1991, respectively.
Fully diluted earnings per share amounts are similarly computed, but also
include the effect, when dilutive, of the Company's 8 1/4% Convertible
Subordinated Debentures issued in July and August of 1992 and 5% Convertible
Senior Subordinated Debentures issued March 1993, after the elimination of the
related interest requirements, net of income taxes. The Company's convertible
debentures are excluded from the fiscal 1993 computation due to their
antidilutive effect during that period. The inclusion of the Company's dilutive
outstanding options in the calculation, determined based on market values at the
end of each period, as applicable, is either antidilutive or does not result in
a material dilution of earnings per share for 1993, 1992 and 1991.
Reclassification
Certain amounts for 1992 and 1991 have been reclassified to conform to the
1993 presentation.
NOTE 2--RESTRUCTURING CHARGES
The Company adopted a restructuring plan as of the end of the fourth
quarter of 1993 which includes (i) closing or relocating 31 of its restaurants
by the end of 1994, (ii) not exercising options to renew leases with respect to
an additional 19 of its restaurants upon expiration of the current lease terms
and (iii) restructuring divisional management and consolidating the Company's
two corporate offices. After an in-depth evaluation of the Company's Shoney's
and Captain D's restaurants, management has identified 31 restaurants, which
have not performed well and appear to have a limited potential for improvement
in the future, to be closed or relocated. Included in these restaurants are five
Shoney's and four Captain D's closed in December 1993. With respect to the
restaurants closed or to be closed, the Company recorded $19,800,000 of
restructuring charges consisting primarily of the write-off of assets and the
accrual of lease and other expenses, net of projected sales proceeds and
sublease income. With respect to the 19 restaurants projected to be closed no
later than the expiration of their current lease terms, the Company determined
that the recoverability of the assets has been permanently impaired, and
accordingly, recorded a charge of $4,500,000 primarily for the write-down of
assets. The
26
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2--RESTRUCTURING CHARGES--(CONTINUED)
Company is continuing its efforts to restructure and downsize corporate overhead
by consolidating its Memphis, Tennessee corporate office with its headquarters'
office in West Palm Beach, Florida. The Company recorded approximately
$1,800,000 for the cost of moving the Memphis office and $1,300,000 for the
write-off of assets and accrual of remaining lease obligations at the Company's
present facilities. In addition, the Company accrued $1,200,000 for severance
costs and other costs relating to the restructuring of divisional and corporate
overhead. Further, the Company wrote down vacant properties to net realizable
value and revised its estimated loss with respect to units closed prior to 1993
by increasing its restructuring charge and related reserve by $6,500,000.
Restructuring charges during 1992 included a $4,000,000 provision for
closed units and a $400,000 credit relating to a 1991 restructuring charge. The
$4,000,000 provision resulted from management's decision, during the fourth
quarter of 1992, to close all seven remaining Hungry Fisherman restaurants. The
restructuring credit of $400,000 in 1992 resulted from the sublease of the
Company's facilities, previously reserved for in a 1991 charge of $2,800,000 to
relocate the Company's headquarters following the discontinuation of the
Company's theater operations. The provision for closed units charged to
operating income of $1,600,000 in 1991 was due to an additional reserve
established to provide for estimated remaining costs of properties designated in
1989 to be closed. Such additional reserves were determined to be necessary
based on the subsequent decline in the real estate market.
NOTE 3--DISCONTINUED OPERATIONS
TPI Entertainment, Inc.
Prior to April 1991, TPI Entertainment, Inc. ("Entertainment"), a
wholly-owned subsidiary of the Company, owned and operated 57 movie theaters. On
March 4, 1991, Entertainment entered into a partnership, Exhibition Enterprises
Partnership, (the "Partnership"), with Cinema Enterprises, Inc., a wholly-owned
subsidiary of American Multi-Cinema, Inc. ("AMC"), contributing all its theater
operations in exchange for a 50% interest in the Partnership and 3,800,000
shares of the Company's stock valued at $24,225,000. As a result of this
transaction, Entertainment recognized a gain of $7,922,000, net of taxes of
$4,438,000, during 1991. At the end of 1991, the Company resolved to offer for
sale its 50% interest in the Partnership. Accordingly, all theater operations
are classified as discontinued operations in the financial statements and the
Company's investment in the Partnership is designated as "held for sale" on the
December 31, 1992 consolidated balance sheet. The Company's proportionate share
of the Partnership loss was not recorded in 1993 or 1992, as the Company
anticipated proceeds from the sale of its interest in the Partnership would
exceed its carrying value.
On May 28, 1993, the Company completed the sale of its 50% interest in the
Partnership to AMC for $17,500,000. As a result of this transaction, the Company
recognized a gain of $5,273,000, net of income taxes of $2,717,000 for the year
ended December 26, 1993. The estimated fair value of the Company's investment in
the Partnership at December 31, 1992 was $17,500,000, the sales price agreed to
on March 19, 1993.
27
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3--DISCONTINUED OPERATIONS--(CONTINUED)
The following condensed balanced sheets reflect the financial position of
the Partnership as of May 28, 1993, the date of the completion of the sale of
the Company's interest in the Partnership, and December 31, 1992, the last day
of the Partnership's 1992 fiscal year.
<TABLE><CAPTION>
MAY 28, 1993
(UNAUDITED) DECEMBER 31, 1992
-------------- ------------------
(DOLLARS IN THOUSANDS)
Assets:
<S> <C> <C>
Cash and cash equivalents................................................... $ 778 $ 8,707
Receivables................................................................. 130 1,997
Property, net............................................................... 60,251 61,123
Intangible assets, net...................................................... 46,713 48,252
Other assets................................................................ 3,279 3,624
-------------- ------------------
Total Assets........................................................... $ 111,151 $ 123,703
-------------- ------------------
-------------- ------------------
Liabilities and Partners' Capital:
Accounts payable............................................................ $ 7,853 $ 6,807
Accrued expenses and other current liabilities.............................. 7,093 6,012
Borrowings, including current portion of long-term debt..................... 56,125 95,326
-------------- ------------------
Total Liabilities...................................................... 71,071 108,145
Partner's Capital........................................................... 40,080 15,558
-------------- ------------------
Total Liabilities and Partners' Capital................................ $ 111,151 $ 123,703
-------------- ------------------
-------------- ------------------
</TABLE>
Results of theater operations are as follows:
<TABLE><CAPTION>
21 WEEKS ENDED 36 WEEKS FROM 15 WEEKS FROM
MAY 28, 1993 53 WEEKS ENDED APR. 19, 1991 TO JAN. 4, 1991 TO 51 WEEKS
(PARTNERSHIP) DEC. 31, 1992 DEC. 26, 1991 APR. 18, 1991 ENDED
(UNAUDITED) (PARTNERSHIP) (PARTNERSHIP) (WHOLLY-OWNED) DEC. 26, 1991
---------------- ---------------- ---------------- --------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue.................... $ 56,919 $ 148,397 $ 88,975 $ 38,657 $ 127,632
Costs and expenses......... 55,581 138,211 86,019 37,424 123,443
---------------- ---------------- ---------------- --------------- -------------
Operating income........... 1,338 10,186 2,956 1,233 4,189
Other expense.............. (3,816) (9,962) (7,366) (3,422) (10,788)
---------------- ---------------- ---------------- --------------- -------------
Net income (loss).......... $ (2,478) $ 224 $ (4,410) $ (2,189) $ (6,599)
---------------- ---------------- ---------------- --------------- -------------
---------------- ---------------- ---------------- --------------- -------------
</TABLE>
The Company received an administrative fee of 1/4% of theater revenue from
the theater operations which was included in the results of discontinued
operations through December 31, 1991. The fee paid to the Company for 1993 and
1992 was deducted from the carrying value of the Partnership. Such fees were
$230,000, $370,000, and $320,000 for 1993, 1992 and 1991, respectively.
Stock Sale to Siemens
In November 1991, the Company settled its litigation with Siemens
Information Systems, Inc. relating to the Company's 1987 sale of its 65%
interest in Tel Plus Communications, Inc., and all of the outstanding common
stock of Telecom Plus Supply Corp. and Telecom Plus Rental Systems, Inc., then
wholly-owned subsidiaries of the Company. In connection with the settlement, the
Company received a $43,000,000 cash payment and recognized a gain on disposal of
discontinued operations of $17,525,000, including a tax benefit of $11,075,000.
28
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE><CAPTION>
1993 1992
----------- ------------
(DOLLARS IN THOUSANDS)
Owned:
<S> <C> <C>
Land................................................................................. $ 37,434 $ 26,620
Buildings............................................................................ 47,553 31,757
Leasehold improvements and buildings on leased land.................................. 52,061 48,698
Equipment and furnishings............................................................ 69,135 57,419
----------- ------------
206,183 164,494
----------- ------------
Leased:
Buildings............................................................................ 24,116 23,347
Equipment............................................................................ 1,941 1,226
----------- ------------
26,057 24,573
----------- ------------
Property and equipment (at cost)....................................................... 232,240 189,067
----------- ------------
Less accumulated depreciation and amortization......................................... 57,802 46,527
----------- ------------
Less allowance for unit closings....................................................... 18,695 3,773
----------- ------------
Total property and equipment......................................................... $ 155,743 $ 138,767
----------- ------------
----------- ------------
</TABLE>
Property and equipment with a net book value of approximately $22,681,000
and $22,525,000 were pledged as collateral for the Company's debt facilities as
of December 26, 1993 and December 31, 1992, respectively.
Depreciation and amortization are calculated using the straight-line method
and are based on the estimated useful lives of the assets as follows: buildings,
30 years; equipment and furnishings, 3-15 years; and leasehold improvements,
primarily representing buildings constructed on leased property, the lesser of
the term of the lease or 30 years. Depreciation and amortization of property and
equipment, exclusive of depreciation and amortization included in discontinued
operations, totalled approximately $14,104,000, $12,880,000 and $11,873,000
during 1993, 1992 and 1991, respectively. In 1993, 1992 and 1991, approximately
$1,716,000, $1,843,000 and $1,657,000, respectively, related to capitalized
leases. Property and equipment includes capitalized interest on construction of
$374,000 and $172,000 at December 26, 1993 and December 31, 1992, respectively.
29
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5--OTHER INTANGIBLE ASSETS
Other intangible assets consists of the following:
<TABLE><CAPTION>
1993 1992
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Franchise and reserved area rights.................................. $ 17,729 $ 14,578
Deferred debt costs................................................. 6,085 5,867
Unamortized pre-opening expense..................................... 1,473 875
Intangible pension asset............................................ -- 510
Other deferred charges.............................................. 56 258
--------- ---------
25,343 22,088
Less accumulated amortization....................................... 3,420 1,789
--------- ---------
$ 21,923 $ 20,299
--------- ---------
--------- ---------
</TABLE>
NOTE 6--LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE><CAPTION>
1993 1992
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
8 1/4% Convertible Subordinated Debentures, due 2002............. $ 51,725 $ 51,750
5% Convertible Senior Subordinated Debentures, due 2003.......... 15,000 --
Credit Facilities................................................ 19,000 37,550
14 1/4% Senior Subordinated Notes................................ -- 1,474
Notes payable, interest rates of 7.75% to 10%, due through
2007............................................................... 4,209 5,550
Obligations under capital leases................................. 18,567 19,891
----------- -----------
108,501 116,215
Less amounts due within one year................................. 1,728 5,278
----------- -----------
$ 106,773 $ 110,937
----------- -----------
----------- -----------
</TABLE>
Scheduled annual principal maturities of long-term debt, excluding
obligations under capital leases, for the five years subsequent to December 26,
1993, are as follows: $312,000 in 1994; $2,184,000 in 1995; $19,171,000 in 1996;
$164,000 in 1997 and $177,000 in 1998.
Interest expense from continuing operations for 1993, 1992 and 1991
includes interest on obligations under capital leases of $2,334,000, $2,610,000
and $2,261,000, respectively.
Debentures
On March 19, 1993, the Airlie Group, L.P., and certain related parties (the
"Airlie Group") made an investment in the Company of $30,000,000 including
$15,000,000 of 5% Convertible Senior Subordinated Debentures (the "Senior
Debentures"), due 2003, the issuance of 1,500,000 shares of the Company's common
stock at $10 per share and the issuance of warrants to purchase an additional
1,000,000 shares of common stock at $11 per share. The Senior Debentures are
senior to the 8 1/4% Convertible Subordinated Debentures (the "Debentures"). The
Senior Debentures are convertible at the option of the holder into common shares
of the Company at any time prior to maturity at $11 per
30
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--LONG-TERM DEBT--(CONTINUED)
share, subject to adjustment in certain events. The Senior Debentures mature on
April 15, 2003 and are redeemable, in whole or in part, at the option of the
Company at any time on or after April 15, 1996, initially at 103.5% of their
principal amount and declining to 100% of their principal amount on April 15,
2003. The Debenture holders may require the Company to repurchase the Senior
Debentures, in whole or in part, in certain circumstances involving a change in
control of the Company as defined in the Debenture Purchase Agreement (the
"Agreement"). However, a change in control, as defined in the Agreement, will
create an event of default under the Credit Facility (described below) and, as a
result, any repurchase would, absent a waiver, be blocked by the subordination
provisions of the Agreement until the Credit Facility (and any other senior
indebtedness of the Company and senior indebtedness of Restaurants with respect
to which there is a payment default) has been repaid in full. The Senior
Debentures are unconditionally guaranteed on a subordinated basis by
Restaurants. They are subordinated to all existing and future senior
indebtedness of the Company and Restaurants, excluding the Debentures.
The 8 1/4% Convertible Subordinated Debentures (the "Debentures"), which
provided proceeds to the Company of $47,948,000, net of $3,802,000 in deferred
debt costs, are convertible at the option of the holder into common shares of
the Company at any time prior to maturity at a conversion price of $6.50 per
share subject to adjustment in certain events. The Debentures mature on July 15,
2002, and are redeemable at the option of the Company at any time on or after
July 15, 1995, at a premium which declines as the Debentures approach maturity.
The Debenture holders may also require the Company to repurchase the Debentures,
in whole or in part, in certain circumstances involving a change in control of
the Company as defined in the indenture covering the Debentures (the
"Indenture"). However, a change in control, as defined in the Indenture, will
create an event of default under the Credit Facility and, as a result, any
repurchase would, absent a waiver, be blocked by the subordination provisions of
the Indenture until the Credit Facility (and any other senior indebtedness of
the Company and senior indebtedness of Restaurants with respect to which there
is a payment default) has been repaid in full. The Debentures are
unconditionally guaranteed on a subordinated basis by Restaurants. They are
subordinated to all existing and future senior indebtedness of the Company and
Restaurants.
During 1992, the Company recorded a charge of $11,949,000 following the
repurchase of $98,526,000 principal amount of the 14 1/4% Senior Subordinated
Notes of Restaurants (the "Notes"). The costs of the repurchased Notes in excess
of their principal amounts, together with the related deferred finance costs and
expenses related to the repurchase, were charged to income as an extraordinary
item, net of income tax of $6,170,000. The remaining $1,474,000 principal amount
of the Notes was repurchased on November 15, 1993. Premiums on the purchases and
the write-off of deferred debt costs resulted in a charge of $109,000 to other
income and expense.
Credit Facilities
Credit facilities, which previously consisted of a $30,000,000 Term Loan
Facility and a $25,000,000 Revolving Credit Facility (the "Original Credit
Facilities"), were amended and restated on June 3, 1993 to a $50,000,000
revolving credit facility (the "Credit Facility") with a syndicate of banks (the
"Banks"). The Credit Facility matures on June 3, 1996, unless extended by the
Banks. The Credit Facility was amended, effective December 26, 1993, to amend
certain covenants affected by restructuring and certain other charges totalling
$40,704,000 recorded by the Company for the fourth quarter of 1993.
31
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--LONG-TERM DEBT (CONTINUED)
Borrowings under the Credit Facility, at the Company's option, bear
interest at either a defined base rate or a rate based on the London Interbank
Offered Rate. At December 26, 1993 the weighted average interest rate on the
amount outstanding was 5.72%. The Company paid certain fees and expenses to the
Banks in connection with the original commitment letter, which along with other
costs associated with the Original Credit Facilities, totalled approximately
$2,000,000 and also agreed to indemnify the Banks against certain liabilities.
The Company also pays a fee based on the Eurodollar rate, 2.0% at December 26,
1993, in connection with letters of credit issued and a commitment fee equal to
0.50% per annum on the average daily unused amount of the Credit Facility.
Borrowings under the Credit Facility are secured by all shares of the
capital stock of Restaurants, whenever issued, intercompany debt of Restaurants
owed to the Company and ground lease mortgages with respect to certain premises
in which the land is currently leased but the building located thereon is owned
by Restaurants. In addition, the Banks have the right to obtain, as security,
assignments of other leases and/or mortgages on real property currently owned or
subsequently acquired. However, the Company has rights to finance certain of
these properties and obtain a release of the collateral under certain
conditions. The Credit Facility limits the amount of additional indebtedness
which the Company and its subsidiaries may incur and the aggregate annual amount
to be spent on capital expenditures. In addition, the Credit Facility limits,
among other things, the ability of the Company and its subsidiaries to pay
dividends, create liens, sell assets, engage in mergers or acquisitions and make
investments in subsidiaries. Restaurants may not transfer amounts to the Company
except for the payment of a management fee not to exceed $2,500,000 in each
fiscal year and a dividend in an amount sufficient to pay interest on the Senior
Debentures and the Debentures, in each case provided that no defaults under the
Credit Facility exist either immediately before or after the transfer.
Restaurants must also maintain certain financial ratios.
At December 26, 1993, $19,000,000 was drawn on the facility and letters of
credit in the amount of $10,951,000 were outstanding, resulting in a remaining
available balance of $20,049,000.
Notes Payable
Notes payable as of December 26, 1993 consist of obligations secured by
buildings, land, equipment, and cash value life insurance policies with a net
book value of $7,595,000.
Fair Value of Financial Instruments
The estimated fair value of the Company's Debentures, based on the quoted
market price, is $86,900,000 and $74,520,000 for December 26, 1993 and December
31, 1992, respectively. The estimated fair value of the Company's Senior
Debentures at December 26, 1993 is $12,716,000, based on the estimated borrowing
rates available to the Company. The Credit Facility reprices frequently at
market rates; therefore, the carrying amount of this facility is a reasonable
estimate of its fair value at December 26, 1993 and December 31, 1992. The
estimated fair value of the Company's notes payable approximates the principal
amount of such notes outstanding at December 26, 1993 and December 31, 1992,
which is based upon the estimated borrowing rates available to the Company.
The fair value estimates presented herein are based on pertinent
information available to management as of December 26, 1993 and December 31,
1992. Although management is not aware of any factors that would significantly
affect the estimated fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements since that
date, and current estimates of fair value may differ significantly from the
amounts presented herein.
32
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
<TABLE><CAPTION>
1993 1992
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Insurance........................................................... $ 13,417 $ 5,981
Taxes other than income taxes....................................... 5,232 4,189
Interest............................................................ 2,401 2,728
Reserve for restructuring........................................... 2,005 2,425
Payroll............................................................. 1,987 1,411
Pension obligation.................................................. -- 1,796
Other............................................................... 4,787 4,295
--------- ---------
$ 29,829 $ 22,825
--------- ---------
--------- ---------
</TABLE>
The Company is primarily self insured for general liability and workers'
compensation risks supplemented by stop loss type insurance policies. The self
insurance liabilities, related to continuing operations, included in accrued
insurance at December 26, 1993 and December 31, 1992 were approximately
$12,300,000 and $5,200,000, respectively.
Management recently completed an extensive review of the Company's exposure
resulting from its self insurance program for workers' compensation and general
liability. The review, which was based on improved data available to the Company
relating to the trend in claims development, indicated that the Company's
reserves for retained losses were near the lower end of the expected range of
possible losses. Management determined it would be appropriate to increase the
Company's reserves to better reflect the likely outcome of its liability within
the possible range of losses. Accordingly, as of the end of the fourth quarter
of 1993, workers' compensation insurance reserves were increased by charging
$4,500,000 to restaurant labor and benefits and $700,000 to general and
administrative expenses. Also a charge of $1,800,000 was made to other
restaurant operating expenses and $600,000 to the gain on sale of discontinued
operations (theater operations) to increase the general liability insurance
reserves.
NOTE 8--INCOME TAXES
The provision (benefit) for income taxes on continuing operations is as
follows:
<TABLE><CAPTION>
1993 1992 1991
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................................ $ (3,335) $ 1,695 $ (167)
State and local.................................................... -- -- 202
--------- --------- ---------
(3,335) 1,695 35
--------- --------- ---------
Deferred:
Federal............................................................ (1,611) (1,275) (4,337)
State and local.................................................... (890) (146) (33)
--------- --------- ---------
(2,501) (1,421) (4,370)
--------- --------- ---------
$ (5,836) $ 274 $ (4,335)
--------- --------- ---------
--------- --------- ---------
</TABLE>
33
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--INCOME TAXES--(CONTINUED)
The provision (benefit) for income taxes on continuing operations is
different from the amount that would be computed by multiplying the income
(loss) from continuing operations before provision (benefit) for income taxes by
the statutory U.S. federal income tax rates for the following reasons:
<TABLE><CAPTION>
1993 1992 1991
---------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income (loss) from continuing operations before provision (benefit)
for income taxes................................................. $ (42,324) $ 936 $ (16,388)
Provision (benefit) at statutory rate of 34%....................... (14,390) 318 (5,572)
State and local income taxes, net of federal income tax benefit.... (587) (97) 112
Goodwill and other nondeductible items............................. 435 501 1,350
Tax refund claims.................................................. (619)
Targeted jobs tax credit........................................... (105) (446) (225)
Valuation allowance................................................ 9,502
Other.............................................................. (72) (2) --
---------- --------- ----------
Income tax provision (benefit) on continuing operations............ $ (5,836) $ 274 $ (4,335)
---------- --------- ----------
---------- --------- ----------
</TABLE>
The tax effects of principal temporary differences in 1993 are shown in the
following table:
<TABLE><CAPTION>
ASSETS LIABILITIES TOTAL
--------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Additional inventory costs for tax purposes....................... $ 209 $ -- $ 209
Net operating loss and contributions carryforwards................ 4,425 -- 4,425
Reserves and accrued expenses..................................... 6,026 -- 6,026
Unamortized pre-opening expenses.................................. -- (275) (275)
Other............................................................. -- (289) (289)
Valuation allowance............................................... (3,362) -- (3,362)
--------- ---------- ----------
Total current................................................ 7,298 (564) 6,734
--------- ---------- ----------
Unamortized intangible assets..................................... -- (1,237) (1,237)
Net operating loss................................................ 3,625 3,625
Investment related basis differences.............................. -- (3,847) (3,847)
Excess tax over book depreciation and sale-leasebacks............. -- (10,450) (10,450)
Deferred compensation and pension expense......................... 848 -- 848
Reserves and accrued expenses..................................... 5,402 -- 5,402
AMT and targeted jobs tax credit carryforward..................... 4,595 -- 4,595
Other............................................................. 470 -- 470
Valuation allowance............................................... (6,140) -- (6,140)
--------- ---------- ----------
Total noncurrent............................................. 8,800 (15,534) (6,734)
--------- ---------- ----------
Total................................................... $ 16,098 $ (16,098) $ --
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
Other current assets include income tax refund receivables of $3,171,000
and $2,724,000 in 1993 and 1992, respectively.
The Company increased its deferred tax asset and liability in 1993 as a
result of legislation enacted during 1993, increasing the corporate tax rate
from 34% to 35% commencing in 1993. The valuation
34
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--INCOME TAXES--(CONTINUED)
allowance at December 26, 1993 of $9,502,000, resulted from a change in
circumstances during 1993 surrounding the likelihood of the realization of the
deferred tax assets in future years.
The tax effects of principal temporary differences in 1992 are shown in the
following table:
<TABLE><CAPTION>
ASSETS LIABILITIES TOTAL
--------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Additional inventory costs for tax purposes....................... $ 235 $ -- $ 235
Net operating loss and contributions carryforwards................ 1,599 -- 1,599
Reserves and accrued expenses..................................... 5,062 -- 5,062
Unamortized pre-opening expenses.................................. -- (189) (189)
Other............................................................. -- (260) (260)
--------- ---------- ----------
Total current................................................ 6,896 (449) 6,447
--------- ---------- ----------
Unamortized intangible assets..................................... 328 (1,130) (802)
Investment related basis differences.............................. -- (5,186) (5,186)
Excess tax over book depreciation and sale-leasebacks............. 3,203 (13,294) (10,091)
Deferred compensation and pension expense......................... 1,298 -- 1,298
Reserves and accrued expenses..................................... 346 -- 346
AMT and targeted jobs tax credit carryforward..................... 5,487 -- 5,487
--------- ---------- ----------
Total noncurrent............................................. 10,662 (19,610) (8,948)
--------- ---------- ----------
Total................................................... $ 17,558 $ (20,059) $ (2,501)
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
The Company has tax carryforwards at December 26, 1993 expiring as follows:
<TABLE><CAPTION>
NET TARGETED
OPERATING JOBS TAX
EXPIRATION CONTRIBUTIONS LOSS CREDIT
- ------------------------------------------------------- ------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1994................................................... $ 267 $ -- $ --
1995................................................... 180 -- --
1996................................................... 41 -- --
1997................................................... 536 -- --
1998................................................... 687 -- --
2003................................................... -- -- 330
2004................................................... -- -- 403
2005................................................... -- 677 304
2006................................................... -- 359 500
2007................................................... -- 7,573 706
2008................................................... -- 11,970 160
------------- ----------- -----------
Total.................................................. $ 1,711 $ 20,579 $ 2,403
------------- ----------- -----------
------------- ----------- -----------
</TABLE>
The use of these carryforwards is limited to future taxable income.
Alternative minimum tax credits total $2,192,000 and may be carried forward
indefinitely.
35
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--INCOME TAXES--(CONTINUED)
The deferred income tax benefit credited to operations in 1991 arises from
the following:
<TABLE><CAPTION>
1991
--------------------
(DOLLARS IN
THOUSANDS)
<S> <C>
Excess of tax over book depreciation........................................................ $ 1,651
Deferred compensation and pre-opening expense............................................... (388)
Tax over book gain from sale of assets...................................................... (9,523)
Costs charged to deferred gain on disposal of discontinued operations and deducted currently
for income tax purposes..................................................................... (5,960)
Reserves for restructuring and disposal..................................................... (1,717)
Reserves for insurance...................................................................... (2,001)
Utilization of loss carryforward for tax purposes........................................... 1,429
Other....................................................................................... (234)
-----------
Total deferred income tax benefit........................................................... (16,743)
Less deferred income tax benefit from discontinued operations............................... (12,373)
-----------
Deferred income tax benefit credited to continuing operations............................... $ (4,370)
-----------
-----------
</TABLE>
The overall (benefit) provision for income taxes, during 1993, 1992 and
1991 is as follows:
<TABLE><CAPTION>
FISCAL YEAR ENDED DECEMBER 26, 1993
-------------------------------------
FEDERAL STATE AND LOCAL TOTAL
--------- --------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Continuing operations...................................................... $ (4,946) $ (890) $ (5,836)
Discontinued operations:
Gain on disposal......................................................... 2,717 -- 2,717
--------- ------- ---------
Net benefit......................................................... $ (2,229) $ (890) $ (3,119)
--------- ------- ---------
--------- ------- ---------
FISCAL YEAR ENDED DECEMBER 31, 1992
-------------------------------------
FEDERAL STATE AND LOCAL TOTAL
--------- --------------- ---------
(DOLLARS IN THOUSANDS)
Continuing operations...................................................... $ 420 $ (146) $ 274
Extraordinary loss......................................................... (6,160) (10) (6,170)
Cumulative effect of adopting Statement 112................................ (365) -- (365)
--------- ------- ---------
Net benefit......................................................... $ (6,105) $ (156) $ (6,261)
--------- ------- ---------
</TABLE>
<TABLE><CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1991
--------------------------------------
STATE AND
FEDERAL LOCAL TOTAL
---------- -------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Continuing operations................................................... $ (4,504) $ 169 $ (4,335)
Discontinued operations:
Loss from operations.................................................. (1,147) (199) (1,346)
Gain on disposal...................................................... (4,404) (2,233) (6,637)
---------- -------------- ----------
Net benefit................................................... $ (10,055) $ (2,263) $ (12,318)
---------- -------------- ----------
---------- -------------- ----------
</TABLE>
36
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9--LEASE COMMITMENTS
The Company leases certain of its restaurant locations under long-term
lease arrangements. Lease terms generally range from 10 to 25 years and normally
contain renewal options ranging from 5 to 15 years, but do not contain purchase
options. The Company is generally obligated for the cost of property taxes and
insurance. Some of these leases contain contingent rental clauses based on a
percentage of revenue. The building portions of such leases are capitalized and
the land portions are accounted for as operating leases. Contingent rentals on
capital leases in continuing operations were $526,000, $581,000 and $683,000
during 1993, 1992 and 1991, respectively.
Rent expense under operating leases included in continuing operations is as
follows:
<TABLE><CAPTION>
1993 1992 1991
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Land and buildings:
Minimum..................................................... $ 5,184 $ 5,084 $ 4,592
Contingent.................................................. 714 840 911
--------- --------- ---------
5,898 5,924 5,503
Equipment leases.............................................. 2,124 1,687 930
--------- --------- ---------
$ 8,022 $ 7,611 $ 6,433
--------- --------- ---------
--------- --------- ---------
</TABLE>
A summary of future minimum lease payments under capital leases,
non-cancelable operating leases, and leases reserved for in the provision for
restructuring recorded as of the fourth quarter of 1993 with remaining terms in
excess of one year at December 26, 1993 follows:
<TABLE><CAPTION>
CAPITAL OPERATING RESERVED
LEASES LEASES LEASES
--------- ----------- -----------
<S> <C> <C> <C>
1994....................................................... $ 3,320 $ 6,847 $ 703
1995....................................................... 3,239 6,670 739
1996....................................................... 3,124 6,221 799
1997....................................................... 2,953 6,059 793
1998....................................................... 2,645 5,634 624
Thereafter................................................. 18,234 28,029 3,329
--------- ----------- -----------
33,515 59,460 6,987
Less interest.............................................. 14,948 -- --
--------- ----------- -----------
$ 18,567 $ 59,460 $ 6,987
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
Future minimum lease payments on operating leases in continuing operations
have been reduced for sublease rental income of approximately $107,000 to be
received in the future under non-cancelable subleases.
NOTE 10--COMMITMENTS AND CONTINGENCIES
Several of the Company's reserved area agreements include expansion
schedules requiring it to develop a minimum number of Shoney's restaurants in
the reserved areas over a defined period of time. Pursuant to these agreements,
the Company is required to open a minimum of 26 Shoney's restaurants through
April 6, 2003. In addition, the Company has agreed to develop a territory in
eastern Michigan jointly with Shoney's, Inc. Under this agreement, the Company
is committed to develop 13 Shoney's restaurants at the same rate as Shoney's,
Inc., which is expected to be approximately two to three stores
37
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
per year. In 1991, the Company entered into an agreement with Shoney's, Inc., to
develop 38 new Captain D's restaurants over 20 years, at the approximate rate of
two per year. The Company has constructed six restaurants with respect to this
agreement.
NOTE 11--LITIGATION
Maxcell Telecom Plus, Inc., et al., v. McCaw Cellular Communications, Inc., et
al.
On November 1, 1993, the Company and its wholly-owned subsidiary, Maxcell
Telecom Plus, Inc., filed a complaint in the Circuit Court of the Fifteenth
Judicial Circuit in and for Palm Beach County, Florida. The complaint against
McCaw Cellular Communications, Inc. ("McCaw"), Charisma Communications Corp.
("Charisma") and various related parties, relates to McCaw's failure to disclose
the existence of a side agreement between McCaw and Charisma to share in the net
profits from the resale of certain cellular properties which were sold by the
Company to McCaw. The Company seeks recision of the sales contract and damages
based upon the defendant's alleged fraudulent misrepresentation, breach of
fiduciary duty, conspiracies and tortious interference with contracts. The
Company's attorneys are unable at this time to state the likelihood of a
favorable outcome.
EEOC Settlement
On January 15, 1993, Restaurants settled a class action lawsuit with the
U.S. Equal Employment Opportunity Commission, which primarily related to events
occurring prior to Restaurants' acquisition by the Company. Under the
settlement, Restaurants did not admit any violation of law, but will pay
approximately $880,000 during the first quarter of 1994 to satisfy the back pay
and damages portion of the lawsuit as well as interest accrued from the date the
lawsuit was filed. Restaurants also has undertaken certain affirmative action
measures to promote the hiring of minorities and report to the EEOC on a
semi-annual basis the results of these measures through 1995.
Other
The Company and its subsidiaries are defendants in various lawsuits arising
in the ordinary course of business. It is the opinion of the management of the
Company that the outcome of such litigation will not have a material adverse
effect on the consolidated financial statements.
NOTE 12--SHAREHOLDERS' EQUITY
Stock Option Plans
Officers and other key employees have been granted options to purchase
common shares under nonqualified stock option plans adopted in 1982, 1983, 1984
and 1992. In addition, 150,000 shares of the Company's common stock are reserved
under the 1992 stock option plan for non-employee directors. At December 26,
1993, an aggregate of 3,136,760 common shares were reserved under these plans.
The number of shares available for future grants was 992,500 at December 26,
1993. Options are generally granted at the market price on the date of grant and
generally become exercisable in increments of zero to sixty months and expire
ten years from the date of grant. At December 26, 1993, options were
38
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--SHAREHOLDERS' EQUITY--(CONTINUED)
exercisable to purchase 1,110,240 shares at prices ranging from $5.00 to $10.88.
The Company's stock option transactions are summarized as follows:
<TABLE><CAPTION>
NUMBER EXERCISE PRICE
OF OPTIONS PER OPTION
------------- ----------------
<S> <C> <C> <C>
Outstanding at December 31, 1990................................................ 1,648,000 $5.00-$7.00
Granted....................................................................... 274,250 $6.25-$7.00
Cancelled..................................................................... (90,650) $5.75-$7.00
------------- ----------------
Outstanding at December 31, 1991................................................ 1,831,600 $5.00-$7.00
------------- ----------------
Granted....................................................................... 1,631,900 $6.63-$8.38
Exercised..................................................................... (2,000) $6.25
Cancelled or lapsed........................................................... (918,750) $6.25-$7.00
------------- ----------------
Outstanding at December 31, 1992................................................ 2,542,750 $5.00-$8.38
------------- ----------------
Granted....................................................................... 57,500 $9.38-$10.88
Exercised..................................................................... (426,140) $5.00-$8.38
Cancelled or lapsed........................................................... (29,850) $6.25-$8.38
------------- ----------------
Outstanding at December 26, 1993................................................ 2,144,260 $5.00-$10.88
------------- ----------------
------------- ----------------
</TABLE>
The Company has warrants outstanding at December 26, 1993 to purchase
1,000,000 shares of the Company's common stock at $11 per share.
1989 Employee Stock Purchase Plan
On August 16, 1989, the Company adopted the 1989 Employee Stock Purchase
Plan (the "Employee Plan") pursuant to which up to 500,000 common shares of the
Company may be purchased at 85% of the fair market value of common shares on the
first or last business day of each of thirteen purchase periods. The Employee
Plan, which was approved by shareholders, is open to all active adult employees
of the Company and Restaurants who have been employed for at least six months,
customarily work more than 20 hours per week and more than five months per year,
and are not directors or 5% shareholders of the Company or any subsidiary, as
defined in the Employee Plan. Beginning October 1, 1989, employees could
designate up to 10% of their compensation for the purchase of common shares.
During 1993, 1992 and 1991, 73,419, 83,394 and 89,223 shares, respectively, were
issued under the Employee Plan at prices ranging from $6.91 to $9.14 per Common
Share in 1993, $4.78 to $6.59 per common share in 1992 and $3.51 to $5.63 per
common share in 1991. Aggregate purchases were approximately $582,000, $444,000
and $387,000 in 1993, 1992 and 1991, respectively.
NOTE 13--EMPLOYMENT AGREEMENTS, DEFERRED COMPENSATION
AND RETIREMENT PLAN
Employment Agreements
The Company has agreements with four officers which expire at various dates
through January 13, 1999. The aggregate minimum commitment for future salaries
under these agreements is approximately $5,364,000. Additionally, three key
employees of Restaurants are covered by agreements with two expiring on January
1, 1996 and one containing a self-renewing term of three years. The aggregate
minimum commitment for future salaries under Restaurants' agreements is
$1,133,000. In addition to
39
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13--EMPLOYMENT AGREEMENTS, DEFERRED COMPENSATION
AND RETIREMENT PLAN--(CONTINUED)
salaries, the Company will pay minimum annual bonuses in connection with the
above agreements of $305,000. The Company also is required to pay incentive
bonuses equal to an aggregate of 8.2% of the annual increase in operating income
over the prior year and $48,000 for each percentage point increase, or portion
thereof, in the Company's same store sales. Additional bonuses are at the
discretion of the Board of Directors. All of the above agreements provide
severance benefits in the event of a change of control or an involuntary
termination of the officer or key employee. The maximum contingent liability
related to these severance benefits at December 26, 1993 was $4,618,000.
Deferred Compensation Agreements
Deferred compensation of $2,382,000 and $1,543,000 included in other
liabilities at December 26, 1993 and December 31, 1992, respectively, relates to
agreements with two former officers of Restaurants. In response to the recent
decline in interest rates, the Company has adjusted the discount rate used to
compute their deferred compensation obligation, resulting in a charge to
operations of $913,000 during the fourth quarter of 1993.
Retirement Plan
In December 1993, the Board of Directors authorized the termination of the
Company's non-qualified retirement plan for certain senior executives. Prior to
December 31, 1992, the plan had four participants selected by the Board of
Directors to participate in the plan. Three participants became eligible during
1992 to begin receiving retirement benefits under the early retirement
provisions of the plan. In February 1993, one of these participants informed the
Company of his intentions to retire prior to the end of 1993. The Company paid a
lump sum benefit payment to this officer of $1,850,000 during March 1993.
Operations was charged $1,148,000 for the year ended December 31, 1992 in
connection with this curtailment. Upon termination of the plan, the Company made
total lump sum benefit payments of $4,225,000 to the three remaining
participants in the plan. These payments were determined through negotiations
with the participants and were less than the aggregate actuarial present value
of the retirement benefits otherwise payable under the plan. This termination
resulted in a charge to operations of $1,220,000 during the year ended December
26, 1993.
Net periodic pension cost for the fiscal years ended December 26, 1993,
December 31, 1992 and December 31, 1991 consists of the following:
<TABLE><CAPTION>
1993 1992 1991
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost--benefits earned during the period............. $ 254 $ 282 $ 266
Interest cost on projected benefit obligations.............. 335 343 302
Amortization of unrecognized prior service costs............ 195 261 261
Effect of curtailment and settlements....................... 1,220 1,148 --
--------- --------- ---------
Net periodic pension costs.................................. $ 2,004 $ 2,034 $ 829
--------- --------- ---------
--------- --------- ---------
Assumed rates of increase in compensation levels............ 6.0% 6.0% 6.0%
--------- --------- ---------
--------- --------- ---------
Assumed discount rate....................................... 6.0% 8.0% 8.5%
--------- --------- ---------
--------- --------- ---------
</TABLE>
40
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 14--RELATED PARTY TRANSACTIONS
Restaurants
On July 21, 1993, the Company, through a wholly-owned subsidiary, acquired
the stock of a company which operated three Shoney's restaurants, including one
owned and two leased locations. Included in the acquisition were the exclusive
rights to operate Shoney's restaurants in the surrounding northern Palm Beach
County, Florida area. The purchase price of $3,860,000 included the issuance of
94,300 shares of the Company's common stock at $9.49 per share, the weighted
average price for the prior twenty days. In conjunction with this transaction,
the Company purchased the land and building at one of the leased restaurant
locations for $1,240,000. The President and Chief Executive Officer of the
Company was a 20% shareholder of the acquired company and had a 50% interest in
the land and building the Company purchased. The Company engaged the services of
an independent appraisal company to review the fairness of the transaction.
On January 19, 1993, Restaurants purchased an airplane from a corporation
owned by the President and Chief Executive Officer of the Company for $650,000.
Prior to this purchase, Restaurants leased the airplane for approximately
$87,000 per year during 1992 and 1991. In addition, Resturants paid chartering
fees and expenses to the corporation of approximately $42,000 and $44,000 during
1992 and 1991, respectively. The cost of the charter arrangements and the lease
arrangement were comparable to similar arrangements available from unrelated
third parties.
Exhibition Enterprises Partnership
On May 28, 1993, the Company completed the sale of its 50% interest in the
Partnership to American Multi-Cinema, Inc. ("AMC"), the parent company of
Entertainment's partner in the Partnership and the original owner of 56 of the
57 theaters owned by the Partnership, for $17,500,000. In addition, AMC retired
the bank loan owed by the Partnership, which was guaranteed by Entertainment.
Prior to the formation of the Partnership on March 4, 1991, Entertainment was
subject to a management agreement with AMC whereby AMC managed the theater
operations for a fee based on a percentage of theater revenues. Effective April
19, 1991, the Partnership assumed Entertainment's obligations under the
management agreement. For the 15 weeks ended April 18, 1991, Entertainment
incurred AMC management fees of $1,921,000. For the year ended December 31,
1992, and the period April 19, 1991 through December 31, 1991, the Partnership
incurred AMC management fees of $8,876,000 and $4,476,000, respectively. For the
approximate five month period prior to the completion of the sale of
Entertainment's 50% interest in the Partnership on May 28, 1993 to AMC, the
Partnership incurred AMC management fees of $3,428,000.
During the period ended May 28, 1993, the year ended December 31, 1992 and
the period April 19, 1991 through December 31, 1991, the Partnership incurred
interest expense on notes payable to AMC of $2,061,000, $5,084,000 and
$3,559,000, respectively. For the fifteen weeks ended April 18, 1991,
Entertainment incurred interest expense related to the notes of $1,482,000.
Additionally, during the period ended May 28, 1993, the year ended December
31, 1992 and the period April 19, 1991 through December 31, 1991, the
Partnership recorded charges of $133,000, $370,000 and $224,000, respectively,
for an administrative fee payable to the Company.
Chairman of the Board
Pursuant to an agreement entered into on March 4, 1991, a limited
partnership formed by the Company's Chairman purchased from AMC, on April 25,
1991, 1,000,000 of the Company's common shares at a price of $5.50 per share. In
connection with the stock purchase, AMC granted such limited
41
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 14--RELATED PARTY TRANSACTIONS--(CONTINUED)
partnership a ten-year option to purchase the approximately 1,475,000 common
shares of the Company that AMC continues to own at an initial exercise price of
$6.00 per share, escalating to $9.50 over the term of the options.
NOTE 15--SUPPLEMENTARY INCOME STATEMENT INFORMATION RELATING
TO CONTINUING OPERATIONS
<TABLE><CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
-------------------------------------------
1993 1992 1991
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Maintenance and repairs........................ $ 9,855 $ 8,592 $ 7,893
Royalties and franchise fees................... 5,241 4,725 4,294
Taxes, other than payroll and income taxes..... 3,101 2,980 2,830
Advertising costs.............................. 9,725 8,867 8,446
Amortization of intangible assets:
Goodwill..................................... 1,278 1,279 1,273
Franchise rights and reserved areas.......... 473 328 290
Intangible pension asset..................... 195 261 261
Pre-opening costs............................ 1,042 382 60
Deferred debt costs.......................... 969 605 418
</TABLE>
NOTE 16--QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial information for 1993 and 1992 reflects the
results of operations of Restaurants as continuing operations and the Company's
interest in theater operations as discontinued operations (Note 3). Restaurants'
fiscal year is comprised of fifty-two or fifty-three weeks divided into four
quarters of sixteen, twelve, twelve, twelve or thirteen weeks, respectively.
Both 1993 and 1992 were fifty-two weeks. During 1993, the Company changed its
fiscal year from a calendar year end to Restaurants fiscal year. During the
fourth quarter of 1993 and 1992, the Company recorded restructuring charges of
$35,082,000 and $3,586,000, respectively (Note 2). Other unusual charges during
the fourth quarter of 1993 include $7,000,000 for additions to insurance
reserves (Note 7), $1,220,000 for termination of the Company's retirement plan
(Note 13), and $913,000 for adjustments to the Company's deferred compensation
obligation (Note 13). The second and third quarters of 1993 include gains on the
disposal of discontinued operations of $6,115,000, and $85,000, respectively.
The fourth quarter of 1993 includes a loss on the disposal of discontinued
operations of $927,000. A charge of $1,148,000 was recorded during the fourth
quarter of 1992 relating to the early retirement of a Company executive (Note
13). The Company recorded losses, net of tax, on the early extinguishment of
debt of $1,282,000, $282,000, and $10,385,000 in the first, second, and third
quarters of 1992, respectively (Note 6). Also during the first quarter of 1992,
the Company recorded charges of
42
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16--QUARTERLY FINANCIAL INFORMATION (UNAUDITED)--(CONTINUED)
$2,838,000 resulting from the cumulative effect of adopting Financial Accounting
Standards Nos. 109 and 112 (Note 1).
<TABLE><CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
QUARTER ENDED--1993
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales......................................................... $ 85,133 $ 69,850 $ 70,326 $ 64,130
Gross profit...................................................... 12,008 10,093 9,355 817
Net income (loss) from continuing operations...................... 976 1,125 491 (39,080)
Net income (loss)................................................. 976 7,240 576 (40,007)
Primary earnings per share:
Continuing operations........................................... 0.05 0.06 0.02 (1.93)
Net income (loss)............................................... 0.05 0.36 0.03 (1.98)
Fully diluted earnings per share:
Continuing operations........................................... 0.05 0.06 0.02 (1.93)
Net income (loss)............................................... 0.05 0.27 0.03 (1.98)
QUARTER ENDED--1992
- ------------------------------------------------------------------
Net sales......................................................... $ 83,530 $ 67,885 $ 65,407 $ 60,568
Gross profit...................................................... 13,155 11,287 10,228 9,470
Net income (loss) from continuing operations...................... 974 963 1,216 (2,491)
Net income (loss)................................................. (3,146) 681 (9,169) (2,491)
Primary earnings per share:
Continuing operations........................................... 0.05 0.05 0.07 (0.14)
Net income (loss)............................................... (0.17) 0.04 (0.50) (0.14)
</TABLE>
Gross profit equals revenues less food, supplies and uniforms, restaurant
labor and benefits, restaurant depreciation and amortization and other
restaurant operating expenses. Net income (loss) per share is computed
separately for each period and, therefore, the sum of such quarterly per share
amounts may differ from the total for the year. The effect of convertible
debentures and stock options on the fully-diluted earnings per share computation
for the first, third, and fourth quarters of 1993 and the four quarters of 1992
were either antidilutive or did not result in a material dilution of earnings
per share and, therefore, primary and fully-diluted earnings per share are
equivalent.
43
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in, or disagreements with, accountants during
1993.
PART III
ITEMS 10, 11, 12, AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT;
EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT; AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by these Items is omitted because the Company will
file a definitive proxy statement pursuant to Regulation 14A, which information
is herein incorporated by reference as if set out in full.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements of the Company have been filed under
Item 8 hereto:
<TABLE><CAPTION>
PAGE
-----------
<S> <C>
Independent Auditors' Report............................................................................... 19
Consolidated Balance Sheets as of December 26, 1993 and December 31, 1992.................................. 20
Consolidated Statements of Operations for each of the Three Fiscal Years in the Period Ended December 26,
1993....................................................................................................... 21
Consolidated Statements of Cash Flows for each of the Three Fiscal Years in the Period ended December 26,
1993....................................................................................................... 22
Consolidated Statements of Shareholders' Equity for each of the Three Fiscal Years in the Period Ended
December 26, 1993.......................................................................................... 24
Notes to Consolidated Financial Statements................................................................. 25
</TABLE>
2. Financial Statement Schedules
The following financial statement schedules for the three years ended
December 26, 1993 are filed herewith at the page indicated:
<TABLE><CAPTION>
PAGE
---------
<S> <C>
Schedule III--Condensed Financial Information of the Registrant........................................... S-1
Schedule V--Property, Plant and Equipment................................................................. S-7
Schedule VI--Accumulated Depreciation and Amortization.................................................... S-8
Schedule VIII--Reserves................................................................................... S-9
Schedule IX --Short-term Borrowings....................................................................... S-10
</TABLE>
44
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-
K--CONTINUED
The following financial statements and schedules of the Company's
wholly-owned subsidiary, TPI Restaurants, Inc. are filed herewith at the page
indicated:
<TABLE><CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report............................................................................. W-1
Consolidated Balance Sheets as of December 26, 1993 and December 27, 1992................................ W-2
Consolidated Statements of Operations for each of the Three Fiscal Years in the Period Ended December 26,
1993..................................................................................................... W-3
Consolidated Statements of Cash Flows for each of the Three Fiscal Years in the Period Ended December 26,
1993..................................................................................................... W-4
Consolidated Statements of Stockholder's Equity for each of the Three Fiscal Years in the Period Ended
December 26, 1993........................................................................................ W-6
Notes to Consolidated Financial Statements............................................................... W-7
Schedule V--Property, Plant and Equipment................................................................ WS-1
Schedule VI--Accumulated Depreciation and Amortization................................................... WS-2
Schedule VIII--Reserves.................................................................................. WS-3
Schedule IX--Short-term Borrowings....................................................................... WS-4
</TABLE>
All other schedules have been omitted because they are inapplicable or the
information required is shown in the consolidated financial statements or the
notes thereto.
3. Exhibits
A list of exhibits required to be filed as part of this report on Form 10-K
is set forth in the "Exhibit Index," which immediately precedes such exhibits,
and is incorporated herein by reference.
(b). Reports on Form 8-K.
There were no reports on Form 8-K filed by the Company during the last
quarter of the period covered by this report.
(c). Exhibits
All exhibits required by item 601 are listed on the accompanying "Exhibit
Index" described in (a) 3 above.
(d). Financial Statements of Subsidiary
The financial statements of the Company's wholly-owned subsidiary, TPI
Restaurants, Inc. are filed under (a) 2 above.
45
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TPI ENTERPRISES, INC.
...............................
Registrant
Date: March 25, 1994
By: /s/ STEPHEN R. COHEN
............................
Stephen R. Cohen
Chairman of the Board of
Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ STEPHEN R. COHEN Chairman of the Board of Directors March 25, 1994
.................................................
Stephen R. Cohen
/s/ J. GARY SHARP President and Chief Executive Officer and March 25, 1994
................................................. Director
J. Gary Sharp
/s/ FREDERICK W. BURFORD Executive Vice President, Chief Financial March 25, 1994
................................................. Officer,Treasurer and Director
Frederick W. Burford (Principal Financial and Accounting
Officer)
/s/ DOUGLAS K. BRATTON Director March 25, 1994
.................................................
Douglas K. Bratton
/s/ OSWALDO CISNEROS Director March 25, 1994
.................................................
Oswaldo Cisneros
/s/ LAWRENCE F. LEVY Director March 25, 1994
.................................................
Lawrence F. Levy
/s/ JOHN L. MARION, JR. Director March 25, 1994
.................................................
John L. Marion, Jr.
/s/ PAUL JAMES SIU Director March 25, 1994
.................................................
Paul James Siu
/s/ EDWIN B. SPIEVACK Director March 25, 1994
.................................................
Edwin B. Spievack
/s/ THOMAS M. TAYLOR Director March 25, 1994
.................................................
Thomas M. Taylor
</TABLE>
46
<PAGE>
SCHEDULE III
TPI ENTERPRISES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEET
<TABLE><CAPTION>
DECEMBER 26, DECEMBER 31,
1993 1992
------------- -------------
(DOLLARS IN THOUSANDS)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents......................................................... $ 10,637 $ 12,908
Deferred tax benefit.............................................................. 6,734 6,447
Income tax refund................................................................. 3,171 --
Other current assets.............................................................. 64 1,719
------------- -------------
Total Current Assets...................................................... 20,606 21,074
------------- -------------
Property and Equipment, net......................................................... 291 346
------------- -------------
Other Assets:
Investments in and advances to subsidiaries, net.................................. 142,834 134,651
Intangible pension asset.......................................................... -- 510
Other............................................................................. 8 23
------------- -------------
142,842 135,184
------------- -------------
Total Assets........................................................................ $ 163,739 $ 156,604
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable--trade........................................................... $ 40 $ 90
Accrued expenses and other current liabilities.................................... 2,311 2,785
Income taxes currently payable.................................................... 649 1,665
------------- -------------
Total Current Liabilities................................................. 3,000 4,540
------------- -------------
Due to subsidiary................................................................... 15,954 5,010
------------- -------------
Long-term debt...................................................................... 66,725 51,750
------------- -------------
Deferred income taxes............................................................... 6,734 8,891
------------- -------------
Other liabilities................................................................... 767 2,763
------------- -------------
Shareholders' Equity:
Preferred shares, no par value; 20,000,000 shares authorized;
none issued and outstanding.................................................... -- --
Common shares, $.01 par value; 100,000,000 shares authorized; 33,118,614 and
31,017,689 issued.............................................................. 331 310
Additional paid-in capital........................................................ 225,417 207,314
Deficit........................................................................... (85,244) (54,029)
------------- -------------
140,504 153,595
Less treasury stock, at cost:
12,846,094 common shares in 1993 and 1992...................................... 69,945 69,945
------------- -------------
Total Shareholders' Equity.......................................................... 70,559 83,650
------------- -------------
Total Liabilities and Shareholders' Equity.......................................... $ 163,739 $ 156,604
------------- -------------
------------- -------------
</TABLE>
See notes to condensed financial statements.
S-1
<PAGE>
SCHEDULE III
TPI ENTERPRISES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS
<TABLE><CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
DECEMBER 26, DECEMBER 31, DECEMBER 31,
1993 1992 1991
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
Revenue:
<S> <C> <C> <C>
Management fee income............................................. $ 2,455 $ 1,714 $ 1,126
Interest income................................................... 428 3,414 2,191
Equity in subsidiary earnings..................................... 30 215 579
Other............................................................. -- 381 182
------------- ------------- -------------
2,913 5,724 4,078
------------- ------------- -------------
Expenses:
Equity in subsidiary losses....................................... 39,348 17,726 8,328
General and administrative........................................ 4,803 5,937 6,115
Depreciation and amortization..................................... 235 357 404
Corporate restructuring........................................... 511 (465) 2,750
Interest expense.................................................. 340 433 519
------------- ------------- -------------
45,237 23,988 18,116
------------- ------------- -------------
Loss from continuing operations before income taxes................. (42,324) (18,264) (14,038)
Income tax benefit.................................................. 5,836 6,261 1,985
------------- ------------- -------------
Loss from continuing operations..................................... (36,488) (12,003) (12,053)
Discontinued operations:
Loss from discontinued operations, net............................ -- -- (2,727)
Gain on disposal, net............................................. 5,273 -- 25,447
------------- ------------- -------------
5,273 -- 22,720
------------- ------------- -------------
Income (loss) before cumulative effect of accounting changes........ (31,215) (12,003) 10,667
Cumulative effect of accounting changes............................. -- (2,122) --
------------- ------------- -------------
Net income (loss)................................................. ($ 31,215) ($ 14,125) $ 10,667
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to condensed financial statements.
S-2
<PAGE>
SCHEDULE III
TPI ENTERPRISES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
---------- ------------ ----------
(DOLLARS IN THOUSANDS)
Cash Flows From Operating Activities:
<S> <C> <C> <C>
Net income (loss)....................................................... $ (31,215) $ (14,125) $ 10,667
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization...................................... 235 357 404
Equity in subsidiary losses........................................ 39,318 17,511 7,749
Equity in subsidiary earnings from discontinued operations......... (7,990) -- (25,447)
Equity in subsidiary losses from discontinued operations........... -- -- 2,727
Deferred income taxes.............................................. (2,444) (5,566) (1,807)
Cumulative effect of accounting changes............................ -- 2,122 --
Changes in assets and liabilities, net of effects of discontinued
operations:
Income tax refund.................................................. (3,171) -- --
Other current assets`.............................................. 1,655 4,609 (708)
Intangible pension asset........................................... 330 50 (247)
Other.............................................................. 15 -- --
Accounts payable-trade............................................. (50) (283) (226)
Accrued expenses and other current liabilities..................... (474) (742) (3,643)
Income taxes currently payable..................................... (1,016) (647) 96
Other liabilities.................................................. (1,996) 89 815
---------- ------------ ----------
Net cash provided by (used in) operating activities..................... (6,803) 3,375 (9,620)
---------- ------------ ----------
Cash flows from investing activities:
Dividends received from subsidiary...................................... 5,254 9,000 990
Investment in and advances to subsidiaries, net......................... (32,926) (102,576) 10,355
Acquisition of property and equipment................................... -- (391) (34)
Disposition of property and equipment................................... -- 386 --
Marketable securities and other......................................... -- -- 181
---------- ------------ ----------
Net cash provided by (used in) investing activities................ (27,672) (93,581) 11,492
---------- ------------ ----------
Cash flows from financing activities:
Proceeds of 8 1/4% Convertible Subordinated Debentures.................. -- 51,750 --
Restricted cash deposits................................................ -- 11,700 (11,700)
Common shares issued.................................................... 17,204 457 387
Proceeds from 5% Convertible Senior Subordinated Debentues.............. 15,000 -- --
---------- ------------ ----------
Net cash provided by (used in) financing activities..................... 32,204 63,907 (11,313)
---------- ------------ ----------
Net cash used in continuing operations.................................... (2,271) (26,299) (9,441)
---------- ------------ ----------
Net cash provided by discontinued operations.............................. -- -- 37,501
---------- ------------ ----------
Increase (decrease) in cash and cash equivalents.......................... (2,271) (26,299) 28,060
Cash and cash equivalents, beginning of period............................ 12,908 39,207 11,147
---------- ------------ ----------
Cash and cash equivalents, end of period.................................. $ 10,637 $ 12,908 $ 39,207
---------- ------------ ----------
---------- ------------ ----------
Supplemental Disclosure of Cash Flow Information:
Cash payments (refunds) during the year for:
Interest, net of amount capitalized.................................. $ -- $ -- $ 218
Income taxes......................................................... 2,810 (5,046) 5,126
</TABLE>
See notes to condensed financial statements.
S-3
<PAGE>
SCHEDULE III
TPI ENTERPRISES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
FISCAL YEARS ENDED DECEMBER 26, 1993, 1992, 1991
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE><CAPTION>
COMMON SHARES ISSUED
-------------------------- ADDITIONAL
NUMBER OF PAID-IN TREASURY
SHARES AMOUNT CAPITAL DEFICIT STOCK TOTAL
------------- ----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1990........... 30,843,072 $ 308 $ 206,472 $ (50,571) $ (45,720) $ 110,489
Receipt of 3,800,000 common shares of
treasury stock in connection with
the sale of theater partnership
interest............................. -- -- -- -- (24,225) (24,225)
Issue of shares pursuant to employee
stock plans.......................... 89,223 1 386 -- -- 387
Net Income........................... -- -- -- 10,667 -- 10,667
------------- ----------- ----------- ---------- ---------- -----------
Balance, December 31, 1991........... 30,932,295 309 206,858 (39,904) (69,945) 97,318
Issue of shares pursuant to employee
stock plans.......................... 85,394 1 456 -- -- 457
Net Loss............................. -- -- -- (14,125) -- (14,125)
------------- ----------- ----------- ---------- ---------- -----------
Balance, December 31, 1992........... 31,017,689 310 207,314 (54,029) (69,945) 83,650
Investment in Company by the Airlie
Group L.P. .......................... 1,503,220 15 14,030 -- -- 14,045
Issue of shares in connection with
acquisition.......................... 94,300 1 894 -- -- 895
Issue of shares pursuant to employee
stock plans.......................... 499,559 5 3,154 -- -- 3,159
Conversion of subordinated
debentures........................... 3,846 -- 25 -- -- 25
Net Loss............................. -- -- -- (31,215) -- (31,215)
------------- ----------- ----------- ---------- ---------- -----------
Balance, December 26, 1993........... 33,118,614 $ 331 $ 225,417 $ (85,244) $ (69,945) $ 70,559
------------- ----------- ----------- ---------- ---------- -----------
------------- ----------- ----------- ---------- ---------- -----------
</TABLE>
See notes to condensed financial statements.
S-4
<PAGE>
SCHEDULE III
TPI ENTERPRISES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTE 1--ACCOUNTING POLICIES
The investments in the Company's subsidiaries are carried at the Company's
equity in the subsidiary which represents amounts invested less the Company's
equity in the earnings and losses to date. Significant intercompany balances and
activities have not been eliminated in this unconsolidated financial
information.
Certain information and footnote disclosures normally included in financial
statements prepared in conformity with generally accepted accounting principals
have been condensed or omitted. Accordingly, these financial statements should
be read in conjunction with the Company's consolidated financial statements.
NOTE 2--CASH DIVIDEND PAID BY SUBSIDIARY
Subsequent to the sale of its interest in the Partnership, the Company's
wholly-owned subsidiary, TPI Entertainment, Inc., paid a dividend of $5,254,000
to the Company. On September 30, 1992, the Company's wholly-owned subsidiary,
Maxcell Telecom Plus, Inc., paid a dividend of $9,000,000 to the Company.
S-5
<PAGE>
SCHEDULE V
TPI ENTERPRISES, INC. AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
BALANCE AT ACQUISITIONS BALANCE AT
BEGINNING AND OTHER END
CLASSIFICATION OF PERIOD ADDITIONS RETIREMENTS ADJUSTMENTS OF PERIOD
- ------------------------------------------------- ----------- --------- ----------- ----------- -----------
(1) (2)
Year Ended December 26, 1993:
<S> <C> <C> <C> <C> <C>
Land........................................... $ 26,620 $ 12,239 $ 1,425 $ -- $ 37,434
Buildings...................................... 31,757 16,583 787 -- 47,553
Equipment and furnishings...................... 57,419 14,217 2,501 -- 69,135
Leasehold improvements......................... 48,698 5,507 2,144 -- 52,061
Assets under capital leases.................... 24,573 3,241 1,757 -- 26,057
----------- --------- ----------- ----------- -----------
$ 189,067 $ 51,787 $ 8,614 $ -- $ 232,240
----------- --------- ----------- ----------- -----------
----------- --------- ----------- ----------- -----------
Year Ended December 31, 1992:
Land........................................... $ 21,166 $ 6,768 $ 1,314 $ -- $ 26,620
Buildings...................................... 23,902 9,112 1,257 -- 31,757
Equipment and furnishings...................... 51,488 7,547 1,616 -- 57,419
Leasehold improvements......................... 45,911 5,106 2,319 -- 48,698
Assets under capital leases.................... 22,532 2,331 290 -- 24,573
----------- --------- ----------- ----------- -----------
$ 164,999 $ 30,864 $ 6,796 $ 189,067
$ ---
----------- --------- ----------- ----------- -----------
----------- --------- ----------- ----------- -----------
Year Ended December 31, 1991:
Land........................................... $ 21,869 $ 2,187 $ 335 $ (2,555) $ 21,166
Buildings...................................... 23,297 2,982 -- (2,377) 23,902
Equipment and furnishings...................... 91,038 7,929 2,456 (45,023) 51,488
Leasehold improvements......................... 71,538 3,167 676 (28,118) 45,911
Assets under capital leases.................... 32,120 845 553 (9,880) 22,532
----------- --------- ----------- ----------- -----------
$ 239,862 $ 17,110 $ 4,020 $ (87,953) $ 164,999
----------- --------- ----------- ----------- -----------
----------- --------- ----------- ----------- -----------
</TABLE>
- ---------------
(1) Includes additions related to discontinued operations of $418,000 in 1991.
(2) Includes equipment and furnishings of $44,917,000, leasehold improvements of
$27,717,000 and assets under capital leases of approximately $12,425,000,
which were transferred to Exhibition Enterprises Partnership by TPI
Entertainment, Inc. as of April 19, 1991.
S-6
<PAGE>
SCHEDULE VI
TPI ENTERPRISES, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
BALANCE AT ACQUISITIONS BALANCE
BEGINNING AND OTHER AT END
CLASSIFICATION OF PERIOD ADDITIONS RETIREMENTS ADJUSTMENTS OF PERIOD
- -------------------------------------------------- ----------- --------- ----------- ------------ -----------
(1) (2)
Year Ended December 26, 1993:
<S> <C> <C> <C> <C> <C>
Buildings....................................... $ 3,980 $ 1,647 $ 236 $ -- $ 5,391
Equipment and furnishings....................... 24,820 7,713 533 -- 32,000
Leasehold improvements.......................... 10,957 3,095 1,315 -- 12,737
Assets under capital leases..................... 6,770 1,649 745 -- 7,674
----------- --------- ----------- ------------ -----------
$ 46,527 $ 14,104 $ 2,829 $ -- $ 57,802
----------- --------- ----------- ------------ -----------
----------- --------- ----------- ------------ -----------
Year Ended December 31, 1992:
Buildings....................................... $ 2,989 $ 1,139 $ 148 $ -- $ 3,980
Equipment and furnishings....................... 18,751 6,888 819 -- 24,820
Leasehold improvements.......................... 8,949 3,009 1,001 -- 10,957
Assets under capital leases..................... 5,239 1,844 313 -- 6,770
----------- --------- ----------- ------------ -----------
$ 35,928 $ 12,880 $ 2,281 $ -- $ 46,527
----------- --------- ----------- ------------ -----------
----------- --------- ----------- ------------ -----------
Year Ended December 31, 1991:
Buildings....................................... $ 2,138 $ 997 $ -- $ (146) $ 2,989
Equipment and furnishings....................... 23,695 8,236 570 (12,610) 18,751
Leasehold improvements.......................... 9,772 3,380 39 (4,164) 8,949
Assets under capital leases..................... 5,560 1,909 349 (1,881) 5,239
----------- --------- ----------- ------------ -----------
$ 41,165 $ 14,522 $ 958 $ (18,801) $ 35,928
----------- --------- ----------- ------------ -----------
----------- --------- ----------- ------------ -----------
</TABLE>
- ---------------
(1) Includes depreciation and amortization expense related to discontinued
operations of $2,649,000 in 1991.
(2) Represents accumulated depreciation and amortization related to the assets
of Entertainment which were transferred to the Partnership as of April 19,
1991.
S-7
<PAGE>
SCHEDULE VIII
TPI ENTERPRISES, INC. AND SUBSIDIARIES
RESERVES
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
ADDITIONS
BALANCE AT ADDITIONS CHARGED DEDUCTIONS BALANCE AT
BEGINNING CHARGED TO TO OTHER FROM END
OF PERIOD OPERATIONS ACCOUNTS RESERVES OF PERIOD
----------- ----------- ------------- ----------- -----------
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
<S> <C> <C> <C> <C> <C>
Year Ended December 26, 1993....................... $ -- $ -- $ -- $ -- $ --
Year Ended December 31, 1992....................... $ 28 $ -- $ -- $ 28 $ --
Year Ended December 31, 1991....................... $ 104 $ -- $ -- $ 76 $ 28
ALLOWANCE FOR UNIT CLOSINGS:
Year Ended December 26, 1993....................... $ 3,773 $ 17,286 $ -- $ 2,364 $ 18,695
Year Ended December 31, 1992....................... $ -- $ 3,773 $ -- $ -- $ 3,773
</TABLE>
S-8
<PAGE>
SCHEDULE IX
TPI ENTERPRISES, INC. AND SUBSIDIARIES
SHORT-TERM BORROWINGS
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT AMOUNT AVERAGE
BALANCE AT AVERAGE OUTSTANDING OUTSTANDING INTEREST
CATEGORY OF AGGREGATE END OF INTEREST DURING THE DURING THE RATE DURING
SHORT-TERM BORROWINGS PERIOD RATE PERIOD PERIOD THE PERIOD
- --------------------------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended December 26, 1993....................... $ -- -- $ -- $ -- --
Year Ended December 27, 1992
Banks............................................ $ -- 7.00% $ 8,000 $ 3,203 7.38%
Year Ended December 29, 1991
Banks............................................ $ 4,250 7.46% $ 10,000 $ 5,288 8.22%
</TABLE>
- ---------------
(1) Average amount outstanding during the period is computed by dividing the
total of daily outstanding balances by the number of days in the year.
(2) Weighted average interest rate during the period is computed by dividing the
actual short-term interest expense by the average short-term debt
outstanding.
S-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder
of TPI Restaurants, Inc.:
We have audited the accompanying consolidated balance sheets of TPI
Restaurants, Inc., (a wholly-owned subsidiary of TPI Enterprises, Inc.) and its
subsidiaries as of December 26, 1993 and December 27, 1992, and the related
consolidated statements of operations, stockholder's equity and cash flows for
each of the three fiscal years in the period ended December 26, 1993. Our audits
also included the financial statement schedules listed in the Index at Item 14
(a)(2). These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of TPI Restaurants, Inc. and its
subsidiaries as of December 26, 1993 and December 27, 1992, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended December 26, 1993 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.
As discussed in Note 1 to the consolidated financial statements, in 1992
the Company changed its method of accounting for income taxes and postemployment
benefits to conform with Statements of Financial Accounting Standards No. 109
and 112. The Company has reflected the cumulative effect of these changes in
1992.
/s/ DELOITTE & TOUCHE
March 18, 1994
Memphis, Tennessee
W-1
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE><CAPTION>
DECEMBER 26, DECEMBER 27,
1993 1992
------------- -------------
(DOLLARS IN THOUSANDS)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents......................................................... $ 5,675 $ 3,724
Accounts receivable--trade........................................................ 939 1,433
Inventories....................................................................... 11,424 14,912
Deferred tax benefit.............................................................. 1,346 3,993
Other current assets.............................................................. 2,220 2,549
------------- -------------
Total current assets......................................................... 21,604 26,611
------------- -------------
Property and equipment (at cost).................................................... 231,848 188,675
Less accumulated depreciation and amortization.................................... 57,701 46,481
Less allowance for unit closings.................................................. 18,695 3,773
------------- -------------
155,452 138,421
------------- -------------
Other assets:
Goodwill (net of accumulated amortization of $6,873 in 1993 and $5,595 in 1992)... 38,954 40,232
Other intangible assets (net of accumulated amortization of $3,420 in 1993 and
$1,789 in 1992)................................................................. 21,867 19,789
Other............................................................................. 901 598
------------- -------------
61,722 60,619
------------- -------------
$ 238,778 $ 225,651
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt................................................. $ 1,728 $ 5,278
Accounts payable--trade........................................................... 19,870 15,016
Accrued expenses and other current liabilities.................................... 24,759 19,742
------------- -------------
Total current liabilities.................................................... 46,357 40,036
------------- -------------
Long-term debt.................................................................... 106,773 110,937
------------- -------------
Restructuring charges, net of current portion..................................... 19,508 2,111
------------- -------------
Deferred income taxes............................................................. 1,346 3,993
------------- -------------
Payable to parent................................................................. 15,177 --
------------- -------------
Other liabilities................................................................. 2,382 1,542
------------- -------------
Commitments and contingencies
Stockholder's equity:
Series A preferred stock ($40,000 aggregate liquidation preference)............... -- --
Common Shares..................................................................... -- --
Additional paid-in capital........................................................ 115,064 97,079
Deficit........................................................................... (67,829) (30,047)
------------- -------------
Total stockholder's equity................................................... 47,235 67,032
------------- -------------
$ 238,778 $ 225,651
------------- -------------
------------- -------------
</TABLE>
See notes to consolidated financial statements.
W-2
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE><CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 29,
1993 1992 1991
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Restaurant revenues................................................. $ 289,439 $ 277,390 $ 261,130
------------- ------------- -------------
Costs and expenses:
Food, supplies and uniforms....................................... 101,980 95,957 95,324
Restaurant labor and benefits..................................... 88,693 80,911 77,368
Restaurant depreciation and amortization.......................... 13,632 11,466 10,254
Other restaurant operating expenses............................... 51,291 44,917 41,627
General and administrative expenses............................... 23,504 21,893 23,639
Restructuring charges............................................. 34,571 4,051 1,567
Other, net........................................................ 3,275 2,753 4,761
------------- ------------- -------------
316,946 261,948 254,540
------------- ------------- -------------
Operating income (loss)............................................. (27,507) 15,442 6,590
------------- ------------- -------------
Other income and expenses:
Interest income................................................... 122 378 61
Interest expense.................................................. (10,203) (14,667) (17,841)
Other............................................................. (109) 321 245
------------- ------------- -------------
(10,190) (13,968) (17,535)
------------- ------------- -------------
Income (loss) before income taxes................................... (37,697) 1,474 (10,945)
Income tax expense (benefit)........................................ 85 669 (2,704)
------------- ------------- -------------
Income (loss) before extraordinary item and cumulative effect of
accounting changes................................................ (37,782) 805 (8,241)
------------- ------------- -------------
Extraordinary item--loss on early extinguishment of debt, net of
income taxes...................................................... -- (16,069) --
Cumulative effect of accounting changes, net of income taxes........ -- (2,462) --
------------- ------------- -------------
Net loss............................................................ $ (37,782) $ (17,726) $ (8,241)
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to consolidated financial statements
W-3
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 29,
1993 1992 1991
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.......................................................... $ (37,782) $ (17,726) $ (8,241)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization................................ 17,810 14,775 13,772
Deferred income taxes........................................ -- (1,134) (2,620)
Reserves for restructuring................................... 30,435 838 2,475
Extraordinary item--loss on early extinguishment of debt..... -- 16,069 --
Cumulative effect of accounting changes...................... -- 2,462 --
Changes in assets and liabilities:
Accounts receivable trade.................................... 494 28 (86)
Inventories.................................................. 3,488 (2,013) (559)
Other current assets......................................... 329 960 1,080
Other assets................................................. (1,415) (187) (1)
Accounts payable trade....................................... 4,854 732 932
Accrued expenses and other current liabilities............... 4,911 (905) 3,653
Other liabilities............................................ 840 (110) (66)
------------- ------------- -------------
Total adjustments......................................... 61,746 31,515 18,580
------------- ------------- -------------
Net cash provided by operating activities...................... 23,964 13,789 10,339
------------- ------------- -------------
Cash flows from investing activities:
Acquisition of property and equipment............................. (43,867) (23,216) (15,812)
Acquisition of business, net of cash received..................... (4,660) (4,525) --
Disposition of property and equipment............................. 5,230 2,872 3,713
Proceeds from sale-leaseback transactions......................... -- 1,254 5,293
Other............................................................. (199) (1,026) --
------------- ------------- -------------
Net cash used in investing activities............................. $ (43,496) $ (24,641) $ (6,806)
------------- ------------- -------------
</TABLE>
W-4
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE><CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 29,
1993 1992 1991
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
Cash flows from financing activities::
<S> <C> <C> <C>
Net proceeds from (payments on) Credit Facilities................. $ (18,550) $ 35,545 $ --
Contribution from parent.......................................... 17,065 47,079 --
Borrowings from parent............................................ 15,177 -- --
Net payments on lines of credit................................... -- (4,250) (1,250)
Net proceeds of 8 1/4% Debentures................................. -- 47,948 --
Repurchase of 14 1/4% Subordinated Notes.......................... -- (98,526) --
Proceeds from 5% Senior Debentures................................ 15,000 -- --
Other long term debt payments..................................... (7,209) (1,789) (1,630)
------------- ------------- -------------
Net cash provided by (used in) financing activities............... 21,483 26,007 (2,880)
------------- ------------- -------------
Net cash provided by operations before extraordinary item......... 1,951 15,155 653
------------- ------------- -------------
Cash used by extraordinary item................................... -- (15,596) --
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents 1,951 (441) 653
Cash and cash equivalents, beginning of year...................... 3,724 4,165 3,512
------------- ------------- -------------
Cash and cash equivalents, end of year............................ $ 5,675 $ 3,724 $ 4,165
------------- ------------- -------------
------------- ------------- -------------
Supplemental Disclosure of Cash Flow Information:
Non-cash transactions:
Capitalized lease obligations entered into..................... $ 3,241 $ 2,331 $ 3,390
Liabilities assumed in acquisitions of properties.............. 1,819 4,975 --
Common stock issued in acquisitions of properties.............. 895 -- --
Cash payments during the year for:
Interest....................................................... 9,764 13,513 17,795
Interest capitalized........................................... 202 172 --
</TABLE>
See notes to consolidated financial statements.
W-5
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
ADDITIONAL
PREFERRED COMMON PAID-IN
STOCK STOCK CAPITAL DEFICIT
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Balance, December 30, 1990........................................ $ -- $ -- $ 50,000 $ (4,080)
Net income........................................................ -- -- -- (8,241)
----------- ----------- ----------- ----------
Balance, December 29, 1991........................................ -- -- 50,000 (12,321)
Stockholder contribution.......................................... -- -- 47,079 --
Net loss.......................................................... -- -- -- (17,726)
----------- ----------- ----------- ----------
Balance, December 27, 1992........................................ -- -- 97,079 (30,047)
Stockholder contribution.......................................... -- -- 17,985 --
Net loss.......................................................... -- -- -- (37,782)
----------- ----------- ----------- ----------
Balance, December 26, 1993........................................ $ -- $ -- $ 115,064 $ (67,829)
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
</TABLE>
See notes to consolidated financial statements
W-6
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of TPI
Restaurants, Inc. and its wholly-owned subsidiaries (the "Company"). All
significant intercompany accounts and transactions are eliminated in
consolidation. The Company maintains its books on a 52-53 week fiscal year
ending on the last Sunday in December.
Cash and Cash Equivalents
The Company considers cash on hand, deposits in banks, certificates of
deposit and short-term marketable securities with maturities of 90 days or less
when purchased, as cash and cash equivalents.
The Company utilizes a cash management system under which cash overdrafts
exist in the book balances of its primary disbursing accounts. These overdrafts
represent the uncleared checks in the disbursing accounts. The cash amounts
presented in the consolidated financial statements represent balances on deposit
at other locations prior to their transfer to the primary disbursing accounts.
Uncleared checks of $7,393,000 and $7,445,000 are included in accounts payable
at December 26, 1993 and December 27, 1992, respectively.
Inventories
Inventories, consisting of food items, beverages and supplies, are stated
at the lower of weighted average cost (which approximates first-in, first-out)
or market.
Preopening Costs
Direct costs incidental to the opening of new restaurants are capitalized
and amortized over the restaurants' first year of operation.
Depreciation and Amortization
Depreciation and amortization of property and equipment is provided on the
straight-line method over the estimated useful lives of the assets or, in the
case of leasehold improvements and certain property under capital leases, over
the lesser of the useful life or the lease term.
Goodwill related to the acquisition of the Company by TPI Enterprises, Inc.
is amortized on a straight-line basis over a thirty-six year period. The costs
of franchise license agreements which govern the individual Shoney's and Captain
D's restaurants and reserved area agreements are amortized on a straight-line
basis over the lives of the related franchise license agreements, up to 40
years.
Postemployment Benefits
The Company recognizes the cost of postemployment benefits on an accrual
basis in accordance with Financial Accounting Standard 112, "Employers'
Accounting for Postemployment Benefits." The adoption of this statement during
the year ended December 27, 1992 resulted in an increase of $79,000 in 1992
income before extraordinary item and cumulative effect of account charges. The
cumulative effect on years prior to December 30, 1991 of $968,000 is included in
1992 net income.
Income Taxes
The Company's income taxes are computed in accordance with a tax sharing
and payment agreement with its parent company.
W-7
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Effective December 30, 1991, the Company adopted Financial Accounting
Standard No. 109, "Accounting for Income Taxes", which requires an asset and
liability approach to financial accounting and reporting for income taxes.
Deferred income tax assets and liabilities are computed annually for differences
between the financial statement and tax basis of assets and liabilities that
will result in taxable or deductible amounts in the future based on enacted tax
laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities. Prior to 1992, income
taxes were accounted for under Accounting Principles Board Opinion No. 11.
The effect of adopting Statement 109 was an increase of $646,000, relating
to income before extraordinary item and cumulative effect of accounting changes,
an increase of $849,000 relating to the extraordinary item and the cumulative
effect of adopting Statement 112. The cumulative effect of the change on years
prior to December 30, 1991 of $1,495,000 is a decrease in 1992 net income. The
adoption of Statement 109 had no effect on 1992 net income.
Working Capital Deficiency
The Company had a working capital deficiency of $24,753,000 and $13,425,000
at December 26, 1993 and December 27, 1992, respectively. The Company does not
have significant receivables or inventory and receives trade credit based upon
negotiated terms in purchasing food and supplies. Because funds available from
cash sales are not needed immediately to pay for food and supplies or to finance
receivables or inventory, they may be used for non-current capital expenditures.
Reclassification
Certain amounts for 1992 and 1991 have been reclassified to conform to the
1993 presentation.
NOTE 2--RESTRUCTURING CHARGES
The Company approved a restructuring plan as of the end of the fourth
quarter of 1993 which includes (i) closing or relocating 31 of its restaurants
by the end of 1994, (ii) not exercising options to renew leases with respect to
an additional 19 of its restaurants upon expiration of the current lease terms
and (iii) restructuring divisional management and consolidating the Company's
corporate office with its parent company's office. After an in-depth evaluation
of the Company's Shoney's and Captain D's restaurants, management has identified
31 restaurants, which have not performed well and appear to have a limited
potential for improvement in the future, to be closed or relocated. Included in
these restaurants are five Shoney's and four Captain D's closed in December
1993. With respect to the restaurants closed or to be closed, the Company
recorded $19,800,000 of restructuring charges consisting primarily of the
write-off of assets and the accrual of lease and other expenses, net of
projected sales proceeds and sublease income. With respect to the 19 restaurants
projected to be closed no later than the expiration of their current lease
terms, the Company determined that the recoverability of assets has been
permanently impaired, and accordingly, recorded a charge of $4,500,000 primarily
for the write-down of assets. The Company is continuing its efforts to
restructure and downsize corporate overhead by consolidating its Memphis,
Tennessee corporate office with its parent company's office in West Palm Beach,
Florida. The Company recorded approximately $1,800,000 for the cost of moving
the Memphis office and $800,000 for the write-off of assets and accrual of
remaining lease obligations at the Company's present facilities. In addition,
the Company accrued $1,200,000 for
W-8
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2--RESTRUCTURING CHARGES--(CONTINUED)
severance costs and other costs relating to the restructuring of divisional and
corporate overhead. Further, the Company wrote down vacant properties to net
realizable value and revised its estimated loss with respect to units closed
prior to 1993 by increasing its restructuring charge and related reserve by
$6,500,000.
Restructuring charges during 1992 included a $4,000,000 provision for
closed units resulting rom management's decision, during the fourth quarter of
1992, to close all seven remaining Hungry Fisherman restaurants. The provision
for closed units charged to operating income of $1,600,000 in 1991 was due to an
additional reserve established to provide for estimated remaining costs of
properties designated in 1989 to be closed. Such additional reserves were
determined to be necessary based on the subsequent decline in the real estate
market.
NOTE 3--PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE><CAPTION>
1993 1992
----------- -----------
(DOLLARS IN THOUSANDS)
Owned:
<S> <C> <C>
Land............................................................. $ 37,434 $ 26,620
Buildings........................................................ 47,553 31,757
Leasehold improvements and buildings on leased land.............. 51,981 48,608
Equipment and furnishings........................................ 68,823 57,117
----------- -----------
205,791 164,102
----------- -----------
Leased:
Buildings........................................................ 24,116 23,347
Equipment........................................................ 1,941 1,226
----------- -----------
26,057 24,573
----------- -----------
Property and equipment, at cost.................................... 231,848 188,675
----------- -----------
Less accumulated depreciation and amortization................... 57,701 46,481
----------- -----------
Less allowance for unit closings................................. 18,695 3,773
----------- -----------
Total property and equipment.................................. $ 155,452 $ 138,421
----------- -----------
----------- -----------
</TABLE>
Property and equipment with a net book value of approximately $22,681,000
and $22,525,000 were pledged as collateral for the Company's debt facilities as
of December 26, 1993 and December 27, 1992, respectively.
Depreciation and amortization are calculated using the straight-line method
and are based on the estimated useful lives of the assets as follows: buildings,
30 years; equipment and furnishings, 3-15 years; and leasehold improvements,
primarily representing buildings constructed on leased property, the lesser of
the term of the lease or 30 years. Depreciation and amortization of property and
equipment totalled approximately $14,048,000, $12,833,000 and $11,730,000 during
1993, 1992 and 1991 respectively. In 1993, 1992 and 1991, approximately
$1,649,000, $1,844,000 and $1,657,000, respectively, related to capitalized
leases. Property and equipment includes capitalized interest on construction of
$374,000 and $172,000 at December 26, 1993 and December 27, 1992, respectively.
W-9
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--OTHER INTANGIBLE ASSETS
Other intangible assets consists of the following:
<TABLE><CAPTION>
1993 1992
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Franchise and reserved area rights.................................... $ 17,729 $ 14,578
Deferred debt costs................................................... 6,085 5,867
Other deferred charges................................................ 1,473 1,133
--------- ---------
25,287 21,578
Less accumulated amortization......................................... 3,420 1,789
--------- ---------
$ 21,867 $ 19,789
--------- ---------
--------- ---------
</TABLE>
NOTE 5--LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE><CAPTION>
1993 1992
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
8 1/4% Convertible Subordinated Debentures, due 2002............... $ 51,725 $ 51,750
5% Senior Convertible Subordinated Debentures, due 2003............ 15,000 --
Credit Facilities.................................................. 19,000 37,550
14 1/4% Senior Subordinated Notes.................................. -- 1,474
Notes payable, interest rates of 7.75% to 10%, due through 2007.... 4,209 5,550
Obligations under capital leases................................... 18,567 19,891
----------- -----------
108,501 116,215
Less: amounts due within one year.................................. 1,728 5,278
----------- -----------
$ 106,773 $ 110,937
----------- -----------
----------- -----------
</TABLE>
Scheduled annual principal maturities of long-term debt, excluding capital
leases, for the five years subsequent to December 26, 1993, are as follows:
$312,000 in 1994; $2,184,000 in 1995; $19,171,000 in 1996; $164,000 in 1997 and
$177,000 in 1998.
Interest expense for 1993, 1992, and 1991 includes interest on obligations
under capital leases of $2,334,000, $2,610,000 and $2,261,000 respectively.
Debentures
On March 19, 1993, the Airlie Group, L.P. and certain related parties (the
"Airlie Group") made an investment in TPI Enterprises, Inc. ("Enterprises") of
$30,000,000 including $15,000,000 of 5% Convertible Senior Subordinated
Debentures (the "Senior Debentures"), due 2003, the issuance of 1,500,000 shares
of Enterprises' common stock at $10 per share and the issuance of warrants to
purchase an additional 1,000,000 shares of common stock at $11 per share. The
Senior Debentures are senior to the 8 1/4% Convertible Subordinated Debentures
(described below). The Senior Debentures are convertible at the option of the
holder into common shares of Enterprises at any time prior to maturity at $11
per share, subject to adjustment in certain events. The Senior Debentures mature
on
W-10
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5--LONG-TERM DEBT--(CONTINUED)
April 15, 2003 and are redeemable, in whole or in part, at the option of
Enterprises at any time on or after April 15, 1996, initially at 103.5% of their
principal amount and declining to 100% of their principal amount on April 15,
2003. The Senior Debenture holders may require Enterprises to repurchase the
Senior Debentures, in whole or in part, in certain circumstances involving a
change in control of Enterprises as defined in the Debenture Purchase Agreement
(the "Agreement"). However, a change in control, as defined in the Agreement,
will create an event of default under the Credit Facility (described below) and,
as a result, any repurchase would, absent a waiver, be blocked by the
subordination provision of the Agreement until the Credit Facility (and any
other senior indebtedness of Enterprises and senior indebtedness of the Company
with respect to which there is a payment default) have been repaid in full. The
Senior Debentures are unconditionally guaranteed on a subordinated basis by the
Company. They are subordinated to all existing and future senior indebtedness of
Enterprises and the Company.
The 8 1/4% Convertible Subordinated Debentures (the "Debentures"), which
provided proceeds to Enterprises of $47,948,000, net of $3,802,000 in deferred
debt costs, are convertible at the option of the holder into common shares of
Enterprises at any time prior to maturity at a conversion price of $6.50 per
share subject to adjustment in certain events. The Debentures mature on July 15,
2002, and are redeemable at the option of Enterprises at any time on or after
July 15, 1995, at a premium which declines as the Debentures approach maturity.
The Debenture holders may also require Enterprises to repurchase the Debentures,
in whole or in part, in certain circumstances involving a change in control of
Enterprises as defined in the indenture covering the Debentures (the
"Indenture"). However, a change in control, as defined in the Indenture, will
create an event of default under the Credit Facility and, as a result, any
repurchase would, absent a waiver, be blocked by the subordination provisions of
the Indenture until the Credit Facility (and any other senior indebtedness of
Enterprises and senior indebtedness of the Company with respect to which there
is a payment default) have been repaid in full.
During 1992, the Company recorded a charge of $16,069,000 following the
repurchase of $82,676,000 principal amount of it's 14 1/4% Senior Subordinated
Notes (the "Notes"). The Company had previously purchased $15,850,000 aggregate
principal amount of the Notes in the open market. The costs of all repurchased
Notes in excess of their principal amounts, together with the related deferred
finance costs and expenses related to the repurchase, were charged to income as
extraordinary items, net of income tax of $2,050,000. The remaining $1,474,000
principal amount was repurchased on November 15, 1993. Premiums on the purchases
and the write-off of deferred debt costs resulted in a charge of $109,000 to
other income and expense.
Credit Facilities
The Credit Facilities, which previously consisted of a $30,000,000 Term
Loan Facility and a $25,000,000 Revolving Credit Facility, were amended and
restated on June 3, 1993 to a $50,000,000 revolving credit facility (the "Credit
Facility") with a syndicate of banks (the "Banks"). The Credit Facility matures
on June 3, 1996, unless extended by the Banks. The Credit Facility was amended,
effective December 26, 1993, to amend certain covenants affected by
restructuring and certain other charges totalling $40,704,000 recorded by the
Company for the fourth quarter of 1993.
Borrowings under the Credit Facility, at the Company's option, bear
interest at either a defined base rate or a rate based on the London Interbank
Offered Rate. At December 26, 1993 the weighted average interest rate on the
amount outstanding was 5.72%. The Company paid certain fees and expenses to the
Banks in connection with the original commitment letter, which along with other
costs
W-11
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5--LONG-TERM DEBT--(CONTINUED)
associated with the Original Credit Facilities, totalled approximately
$2,000,000 and also agreed to indemnify the Banks against certain liabilities.
The Company also pays a fee based on the Eurodollar rate, 2.00% at December 26,
1993, in connection with letters of credit issued and a commitment fee equal to
0.50% per annum on the average daily unused amount of the Credit Facility.
Borrowings under the Credit Facility are secured by all shares of the
capital stock of the Company, whenever issued, intercompany debt of the Company
owed to Enterprises and ground lease mortgages with respect to certain premises
in which the land is currently leased but the building located thereon is owned
by the Company. In addition, the Banks have the right to obtain, as security,
assignments of other leases and/or mortgages on real property currently owned or
subsequently acquired. However, the Company has rights to finance certain of
these properties and obtain a release of the collateral under certain
conditions. The Credit Facility limits the amount of additional indebtedness
which Enterprises, the Company and its subsidiaries may incur and the aggregate
annual amount to be spent on capital expenditures. In addition, the Credit
Facility limits, among other things, the ability of Enterprises, the Company and
its subsidiaries to pay dividends, create liens, sell assets, engage in mergers
or acquisitions and make investments in subsidiaries. The Company may not
transfer amounts to Enterprises except for the payment of a management fee not
to exceed $2,500,000 in each fiscal year and a dividend in an amount sufficient
to pay interest on the Senior Debentures and the Debentures, in each case
provided that no defaults under the Credit Facility exist either immediately
before or after the transfer. The Company must also maintain certain financial
ratios and defined levels of net worth.
At December 26, 1993, $19,000,000 was drawn on the facility and letters of
credit in the amount of $10,951,000 were outstanding, resulting in a remaining
available balance of $20,049,000.
Notes Payable
Notes payable as of December 26, 1993 consists of obligations secured by
buildings, land, equipment, and cash value life insurance policies with a net
book value of $7,595,000.
Fair Value of Financial Instruments
The estimated fair value of the Company's Debentures, based on the quoted
market price, is $86,900,000 and $74,520,000 at December 26, 1993 and December
27, 1992, respectively. The estimated fair value of the Company's Senior
Debentures at December 26, 1993 is $12,716,000, based on the estimated borrowing
rates available to the Company. The Credit Facility reprices frequently at
market rates; therefore, the carrying amount of the Credit Facility is a
reasonable estimate of its fair value at December 26, 1993 and December 27,
1992. The estimated fair value of the Company's notes payable approximates the
principal amount of such notes outstanding at December 26, 1993 and December 27,
1992, which is based upon the estimated borrowing rates available to the
Company.
The fair value estimates presented herein are based on pertinent
information available to management as of December 26, 1993 and December 27,
1992. Although management is not aware of any factors that would significantly
affect the estimated fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements since that
date, and current estimates of fair value may differ significantly from the
amounts presented herein.
W-12
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
<TABLE><CAPTION>
1993 1992
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Reserve for restructuring............................................. $ 2,005 $ 1,899
Insurance............................................................. 10,520 5,981
Taxes other than income taxes......................................... 3,790 4,112
Interest.............................................................. 2,401 2,728
Payroll............................................................... 1,987 1,304
Other................................................................. 4,056 3,718
--------- ---------
$ 24,759 $ 19,742
--------- ---------
--------- ---------
</TABLE>
The Company is primarily self insured for general liability and workers'
compensation risks supplemented by stop loss type insurance policies. The
self-insurance liabilities included in accrued insurance at December 26, 1993
and December 27, 1992 were approximately $9,451,000 and $5,200,000,
respectively.
Management recently completed an extensive review of the Company's exposure
resulting from its self insurance program for workers' compensation and general
liability. The review, which was based on improved data available to the Company
relating to the trend in claims development, indicated that the Company's
reserves for retained losses were near the lower end of the expected range of
possible losses. Management determined it would be appropriate to increase the
Company's reserves to better reflect the likely outcome of its liability within
the possible range of losses. Accordingly, as of the end of the fourth quarter
of 1993, workers' compensation insurance reserves were increased by charging
$2,900,000 to restaurant labor and benefits and $1,800,000 to other operating
expenses, respectively.
NOTE 7--INCOME TAXES
The provision (benefit) for income taxes on income before extraordinary
item and cumulative effect of accounting changes is as follows:
<TABLE><CAPTION>
1993 1992 1991
--------- --------- ---------
(DOLLARS IN THOUSANDS)
Current:
<S> <C> <C> <C>
Federal................................................................ $ -- $ 1,803 $ (84)
State and local........................................................ -- -- --
--------- --------- ---------
-- 1,803 (84)
--------- --------- ---------
Deferred:
Federal................................................................ -- (1,349) (2,620)
State and local........................................................ 85 215 --
--------- --------- ---------
85 (1,134) (2,620)
--------- --------- ---------
$ 85 $ 669 $ (2,704)
--------- --------- ---------
--------- --------- ---------
</TABLE>
W-13
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--INCOME TAXES--(CONTINUED)
The provision (benefit) for income taxes is different from the amount that
would be computed by multiplying the income (loss) before provision (benefit)
for income taxes by the statutory U.S. federal income tax rates for the
following reasons:
<TABLE><CAPTION>
1993 1992 1991
---------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income (loss) before provision (benefit) for income taxes........... $ (37,782) $ 1,474 $ (10,945)
Provision (benefit) at statutory rate of 34%........................ (12,845) 501 (3,721)
State and local income taxes, net of federal income tax benefit..... -- 142 --
Depreciation on purchase accounting step up of assets............... -- -- 618
Goodwill and other nondeductible items.............................. 476 449 433
Targeted jobs tax credit............................................ (105) (446) (225)
Unutilized book basis net operating loss............................ -- -- 164
Valuation allowance................................................. 12,474 -- --
Other............................................................... 85 23 27
---------- --------- ----------
Total provision (benefit) for income taxes on continuing
operations.......................................................... $ 85 $ 669 $ (2,704)
---------- --------- ----------
---------- --------- ----------
</TABLE>
The tax effects of principal temporary differences in 1993 are shown in the
following table:
<TABLE><CAPTION>
ASSETS LIABILITIES TOTAL
--------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Additional inventory costs for tax purposes....................... $ 209 $ -- $ 209
Net operating loss and contributions carryforward................. 4,237 -- 4,237
Reserves and accrued expenses..................................... 5,792 -- 5,792
Other............................................................. -- (20) (20)
Valuation allowance............................................... (8,872) -- (8,872)
--------- ---------- ----------
Current...................................................... 1,366 (20) 1,346
--------- ---------- ----------
Unamortized intangible assets..................................... -- (1,319) (1,319)
Excess tax over book depreciation and sale-leasebacks............. -- (12,061) (12,061)
Deferred compensation............................................. 833 -- 833
Reserves and accrued expenses..................................... 7,322 -- 7,322
Other............................................................. -- (272) (272)
AMT, net operating loss and targeted jobs tax credit
carryforward...................................................... 12,202 -- 12,202
Valuation allowance............................................... (8,051) -- (8,051)
--------- ---------- ----------
Noncurrent................................................... 12,306 (13,652) (1,346)
--------- ---------- ----------
Total................................................... $ 13,672 $ (13,672) $ --
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
W-14
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--INCOME TAXES--(CONTINUED)
The tax effects of principal temporary differences in 1992 are shown in the
following table:
<TABLE><CAPTION>
ASSETS LIABILITIES TOTAL
--------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Additional inventory costs for tax purposes....................... $ 235 $ -- $ 235
Reserves and accrued expenses..................................... 3,946 -- 3,946
Unamortized preopening expenses................................... -- (188) (188)
--------- ---------- ----------
Current......................................................... 4,181 (188) 3,993
--------- ---------- ----------
Unamortized intangible assets..................................... 328 (1,146) (818)
Excess tax over book depreciation and sale-leasebacks............. 3,203 (13,295) (10,092)
Deferred compensation............................................. 586 -- 586
Reserves and accrued expenses..................................... 346 -- 346
Contribution carryforwards........................................ 488 -- 488
AMT, net operating loss and targeted jobs tax credit
carryforward...................................................... 10,063 -- 10,063
Valuation allowance............................................... (4,566) -- (4,566)
--------- ---------- ----------
Noncurrent................................................... 10,448 (14,441) (3,993)
--------- ---------- ----------
Total................................................... $ 14,629 $ (14,629) $ --
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
The Company increased its deferred tax asset and liability in 1993 as a
result of legislation enacted during 1993 increasing the corporate tax rate from
34% to 35% commencing in 1993. The net change in the valuation for deferred tax
assets was an increase of $12,357,000.
The Company's share of Enterprises' consolidated tax carryforwards at
December 26, 1993 expire as follows:
<TABLE><CAPTION>
NET TARGETED
OPERATING JOBS TAX
EXPIRATION CONTRIBUTIONS LOSS CREDIT
- ------------------------------------------------------- ------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1994................................................... $ 217 $ -- $ --
1995................................................... 215 -- --
1996................................................... 400 -- --
1997................................................... 259 -- --
1998................................................... 601 -- --
2003................................................... -- -- 330
2004................................................... -- -- 403
2005................................................... -- 677 304
2006................................................... -- 359 500
2007................................................... -- 7,573 706
2008................................................... -- 11,970 160
------------- ----------- -----------
$ 1,692 $ 20,579 $ 2,403
------------- ----------- -----------
------------- ----------- -----------
</TABLE>
The use of these carryforwards is limited to future taxable income.
Alternative minimum tax credits total $873,000 and may be carried forward
indefinitely.
W-15
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--INCOME TAXES--(CONTINUED)
Deferred income taxes benefit credited to operations in 1991 arise from the
following:
<TABLE><CAPTION>
1991
--------------------
(DOLLARS IN
THOUSANDS)
<S> <C>
Excess of tax over book depreciation............................................. $ (461)
Unamortized preopening expenses.................................................. (73)
Reserves for restructuring and disposal.......................................... (1,061)
Reserves for insurance........................................................... (1,554)
Utilization of loss carryforward for tax purposes................................ 698
Other............................................................................ (169)
----------
Total deferred income tax (benefit) provision............................... $ (2,620)
----------
----------
</TABLE>
The overall (benefit) provision for income taxes, during 1992 is as
follows:
<TABLE>
<S> <C> <C> <C>
FEDERAL STATE AND LOCAL TOTAL
--------- --------------- ---------
(DOLLARS IN THOUSANDS)
Income before extraordinary item and cumulative effect of
accounting change............................................... $ 454 $ 215 $ 669
Extraordinary loss.............................................. (1,723) (327) (2,050)
Cumulative effect of adopting Statement 112..................... (96) (18) (114)
--------- ------- ---------
Net benefit........................................... $ (1,365) $ (130) $ (1,495)
--------- ------- ---------
--------- ------- ---------
</TABLE>
Other current assets include income tax refund receivables of $1,029,000 in
1992.
The Company entered into a tax sharing and payment agreement with
Enterprises (the "Agreement"), effective as of April 17, 1988, and applicable to
the consolidated federal income tax returns filed by Enterprises for its taxable
year beginning January 1, 1988. This Agreement provides that the Company, acting
for itself and its subsidiaries, shall be allocated and shall reimburse
Enterprises for their share of the consolidated federal income tax liability of
the Enterprises consolidated group, and such share shall be determined by
comparing the separate taxable incomes (as defined for consolidated federal
income tax reporting purposes) of the Company and its subsidiaries to the sum of
the separate taxable incomes of members of the Enterprises consolidated group.
Enterprises will have the right to assess the Company on a quarterly basis for
its share of the estimated consolidated federal income tax liability.
Through December 26, 1993, deferred income taxes have not been provided
with respect to timing differences which gave rise to approximately $1,300,000
of net operating losses, for tax purposes. The losses were utilized by
Enterprises in the computation of its consolidated federal income tax liability
in accordance with the Agreement. However, Enterprises has agreed to credit the
Company with tax benefits related to such net operating losses to offset future
federal income taxes otherwise payable by the Company under the Agreement.
W-16
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--LEASE COMMITMENTS
The Company leases certain of its restaurant locations under long-term
lease arrangements. Lease terms generally range from 10 to 25 years and normally
contain renewal options ranging from 5 to 15 years, but do not contain purchase
options. The Company is generally obligated for the cost of property taxes and
insurance. Some of these leases contain contingent rental clauses based on a
percentage of revenue. The building portions of such leases are capitalized and
the land portions are accounted for as operating leases. Contingent rentals on
capital leases were $526,000, $581,000 and $683,000 during 1993, 1992 and 1991,
respectively.
Rent expense under operating leases included in continuing operations is as
follows:
<TABLE><CAPTION>
1993 1992 1991
--------- --------- ---------
(DOLLARS IN THOUSANDS)
Land and buildings:
<S> <C> <C> <C>
Minimum..................................................... $ 5,018 $ 4,825 $ 4,227
Contingent.................................................. 714 840 733
--------- --------- ---------
5,732 5,665 4,960
Equipment leases.............................................. 2,060 1,610 876
--------- --------- ---------
$ 7,792 $ 7,275 $ 5,836
--------- --------- ---------
--------- --------- ---------
</TABLE>
A summary of future minimum lease payments under capital leases,
non-cancelable operating leases, and leases reserved for in the provision for
closed units recorded in the fourth quarter of 1993 with remaining terms in
excess of one year at December 26, 1993 follows:
<TABLE><CAPTION>
CAPITAL OPERATING RESERVED
LEASES LEASES LEASES
--------- ----------- -----------
<S> <C> <C> <C>
1994....................................................... $ 3,320 $ 6,726 $ 703
1995....................................................... 3,239 6,607 675
1996....................................................... 3,124 6,221 665
1997....................................................... 2,953 6,059 653
1998....................................................... 2,645 5,634 478
Thereafter................................................. 18,234 28,029 3,228
--------- ----------- -----------
33,515 59,276 6,402
Less interest.............................................. 14,948 -- --
--------- ----------- -----------
$ 18,567 $ 59,276 $ 6,402
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
Future minimum lease payments on operating leases have been reduced for
sublease rental income of approximately $107,000 to be received in the future
under non-cancelable subleases.
NOTE 9--COMMITMENTS AND CONTINGENCIES
Several of the Company's reserved area agreements include expansion
schedules requiring the Company to develop a minimum number of Shoney's
restaurants in the reserved areas over a defined period of time. Pursuant to
these agreements, the Company is required to open a minimum of 26 Shoney's
restaurants through April 6, 2003. In addition, the Company has agreed to
develop a territory in eastern Michigan jointly with Shoney's, Inc. Under this
agreement, the Company is committed to develop 13 Shoney's restaurants at the
same rate as Shoney's, Inc., which is expected to be approximately two to three
stores per year. In 1991, the Company entered into an agreement with Shoney's,
W-17
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Inc. to develop 38 new Captain D's restaurant over 20 years, at the approximate
rate of two per year. The Company has constructed six restaurants with respect
to this agreement.
NOTE 10--LITIGATION
EEOC Settlement
On January 15, 1993, the Company settled a class action lawsuit with the
U.S. Equal Employment Opportunity Commission. Under the settlement, the Company
did not admit any violation of law, but will pay approximately $880,000 during
the first quarter of 1994 to satisfy the back pay and damages portion of the
lawsuit as well as interest accrued from the date the lawsuit was filed. The
Company also has undertaken certain affirmative action measures to promote the
hiring of minorities and report to the EEOC on a semi-annual basis the results
of these measures through 1995.
Other
The Company and its subsidiaries are defendants in various lawsuits arising
in the ordinary course of business. It is the opinion of the management of the
Company that the outcome of such litigation will not have a material adverse
effect on the consolidated financial statements.
NOTE 11--STOCKHOLDER'S EQUITY
The authorized capital stock of the Company consists of 10,000 shares of
Series A Preferred Stock, par value $.01, which are issued and outstanding and
1,000 shares, par value $.01, of common stock which are issued and outstanding.
Dividends are payable on the Series A Preferred Stock at the annual rate of
$400 per share. The dividends begin to accrue and are cumulative from the date
of issue and are payable when and if declared by the Board of Directors. As of
December 26, 1993, there had been no dividends declared and the aggregate
cumulative dividends were approximately $20,953,000. Cumulative dividends in
arrears also have a liquidation preference and must be satisfied upon the
redemption of the preferred stock by the Company.
The payment of dividends on the Company's stock is limited as described in
Note 5.
NOTE 12--TRANSACTIONS WITH RELATED PARTIES
On October 5, 1988, the Company and Enterprises entered into a management
services agreement, pursuant to which Enterprises agreed to provide certain
management services to the Company on an ongoing basis. These services include
financial and tax advice and assistance, auditing and accounting advice and
services, advice relating to personnel, including benefit plans, and assistance
with the administration and operation of the Company in general. The management
services agreement originally provided that the Company pay an annual fee of
$1,000,000 to Enterprises as compensation for rendering management services. As
of August 1, 1992, this fee was increased to $2,500,000. Enterprises will also
be reimbursed for its out-of-pocket expenses incurred in connection with
rendering the management services. The management services agreement is
effective until December 31, 1998, at which time it may be renewed for
succeeding one-year terms by mutual agreement of the parties. During the years
ended December 26, 1993, December 27, 1992 and December 29, 1991, the Company
accrued and expensed $2,487,000, $1,693,000 and $1,126,000, respectively,
pursuant to this agreement.
W-18
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--TRANSACTIONS WITH RELATED PARTIES--(CONTINUED)
As part of the refinancing completed in August 1992, Enterprises purchased
$15,850,000 aggregate principal amount of the Company's Notes. The Company paid
approximately $798,000 of interest relating to these Notes to Enterprises during
the year ended December 27, 1992.
On July 21, 1993, Enterprises acquired, for a purchase price of $3,860,000,
the stock of a company which operated three Shoney's restaurants, including one
owned and two leased locations. Included in the acquisition were the exclusive
rights to operate Shoney's restaurants in the surrounding northern Palm Beach
County, Florida area. Enterprises subsequently contributed all assets and
related liabilities acquired in the transaction to the Company. In conjunction
with this transaction, the Company purchased the land and building at one of the
leased restaurant locations for $1,240,000. The President and Chief Executive
Officer of the Company was a 20% shareholder of the acquired company and had a
50% interest in the land and building the Company purchased. The Company engaged
the service of an independent appraisal company to review the fairness of the
transaction.
On January 19, 1993, the Company purchased an airplane from a corporation
owned by the President and Chief Executive Officer of the Company for $650,000.
Prior to this purchase, the Company leased the airplane for approximately
$87,000 per year during 1992 and 1991. In addition, the Company paid chartering
fees and expenses to the corporation of approximately $42,000 and $44,000 during
1992 and 1991, respectively. The cost of the charter arrangements and the lease
arrangement were comparable to similar arrangements available from unrelated
third parties.
NOTE 13--SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE><CAPTION>
DECEMBER 26, DECEMBER 27, DECEMBER 29,
1993 1992 1991
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Maintenance and repairs........................ $ 9,840 $ 8,583 $ 7,880
Royalties and franchise fees................... 5,241 4,725 4,294
Taxes, other than payroll and income taxes..... 3,081 2,956 2,792
Advertising costs.............................. 9,725 8,579 8,189
Amortization of intangible assets including
deferred charges:
Goodwill..................................... 1,278 1,279 1,273
Franchise rights............................. 473 328 290
Preopening costs............................. 1,042 382 60
Deferred debt costs.......................... 969 605 418
</TABLE>
NOTE 14--QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
During the fourth quarter of 1993, the Company recorded restructuring
charges of $34,571,000 relating primarily to a provision for closed units (Note
2). The Company's fiscal year is comprised of fifty-two or fifty-three weeks
divided into four quarters of sixteen, twelve, twelve and twelve or thirteen
weeks, respectively. The Company recorded restructuring charges of $4,051,000 in
the fourth quarter of
W-19
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 14--QUARTERLY FINANCIAL INFORMATION (UNAUDITED)--(CONTINUED)
1992 (Note 2) and recorded an extraordinary loss, net of tax, on the early
extinguishment of debt of $16,069,000 in the third quarter of 1992 (Note 5).
<TABLE><CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- ---------- ----------
(DOLLARS IN THOUSANDS)
QUARTER ENDED--1993
<S> <C> <C> <C> <C>
Net sales........................................................ $ 85,133 $ 69,850 $ 70,326 $ 64,130
Gross profit..................................................... 12,008 10,093 9,355 2,387
Net income (loss)................................................ 1,320 1,414 1,424 (41,940)
QUARTER ENDED--1992
Net sales........................................................ $ 83,530 $ 67,885 $ 65,407 $ 60,568
Gross profit..................................................... 13,155 11,287 10,228 9,469
Net income (loss) before extraordinary item and cumulative effect
of accounting changes.......................................... 260 875 1,044 (1,374)
Net income (loss)................................................ (2,202) 875 (15,025) (1,374)
</TABLE>
Gross profit equals revenues less food, supplies and uniforms, restaurant
labor and benefits, restaurant depreciation and amortization and other
restaurant operating expense.
W-20
<PAGE>
SCHEDULE V
TPI RESTAURANTS, INC. AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
BALANCE AT ACQUISITIONS BALANCE
BEGINNING AND OTHER AT END
CLASSIFICATION OF PERIOD ADDITIONS RETIREMENTS ADJUSTMENTS OF PERIOD
- ------------------------------------------------- ----------- --------- ----------- ----------- -----------
(1)
Year Ended December 26, 1993:
<S> <C> <C> <C> <C> <C>
Land........................................... $ 26,620 $ 12,239 $ 1,425 $ -- $ 37,434
Buildings...................................... 31,757 16,583 787 -- 47,553
Equipment and furnishings...................... 57,117 14,207 2,501 -- 68,823
Leasehold improvements......................... 48,608 5,505 2,132 -- 51,981
Assets under capital leases.................... 24,573 3,241 1,757 -- 26,057
----------- --------- ----------- ----------- -----------
$ 188,675 $ 51,775 $ 8,602 $ -- $ 231,848
----------- --------- ----------- ----------- -----------
----------- --------- ----------- ----------- -----------
Year Ended December 27, 1992:
Land........................................... $ 21,166 $ 6,768 $ 1,314 $ -- $ 26,620
Buildings...................................... 23,902 9,112 1,257 -- 31,757
Equipment and furnishings...................... 51,034 7,245 1,162 -- 57,117
Leasehold improvements......................... 45,277 5,016 1,685 -- 48,608
Assets under capital leases.................... 22,532 2,331 290 -- 24,573
----------- --------- ----------- ----------- -----------
$ 163,911 $ 30,472 $ 5,708 $ -- $ 188,675
----------- --------- ----------- ----------- -----------
----------- --------- ----------- ----------- -----------
Year Ended December 29, 1991:
Land........................................... $ 21,869 $ 2,187 $ 335 $ (2,555) $ 21,166
Buildings...................................... 23,279 3,000 -- (2,377) 23,902
Equipment and furnishings...................... 46,751 6,845 2,456 (106) 51,034
Leasehold improvements......................... 42,574 3,780 676 (401) 45,277
Assets under capital leases.................... 19,695 845 553 2,545 22,532
----------- --------- ----------- ----------- -----------
$ 154,168 $ 16,657 $ 4,020 $ (2,894) $ 163,911
----------- --------- ----------- ----------- -----------
----------- --------- ----------- ----------- -----------
</TABLE>
WS-1
<PAGE>
SCHEDULE VI
TPI RESTAURANTS, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
BALANCE AT ACQUISITION BALANCE AT
BEGINNING AND OTHER END
CLASSIFICATION OF PERIOD ADDITIONS RETIREMENTS ADJUSTMENTS OF PERIOD
- --------------------------------------------------- ----------- --------- ----------- ----------- -----------
Year Ended December 26, 1993:
<S> <C> <C> <C> <C> <C>
Buildings........................................ $ 3,980 $ 1,647 $ 236 $ -- $ 5,391
Equipment and furnishings........................ 24,777 7,669 532 -- 31,914
Leasehold improvements........................... 10,953 3,083 1,314 -- 12,722
Assets under capital leases...................... 6,771 1,649 746 -- 7,674
----------- --------- ----------- ----------- -----------
$ 46,481 $ 14,048 $ 2,828 $ -- $ 57,701
----------- --------- ----------- ----------- -----------
----------- --------- ----------- ----------- -----------
Year Ended December 27, 1992:
Buildings........................................ $ 2,989 $ 1,139 $ 148 $ -- $ 3,980
Equipment and furnishings........................ 18.502 6,845 570 -- 24,777
Leasehold improvements........................... 8,546 3,005 598 -- 10,953
Assets under capital leases...................... 5,239 1,844 312 -- 6,771
----------- --------- ----------- ----------- -----------
$ 35,276 $ 12,833 $ 1,628 $ -- $ 46,481
----------- --------- ----------- ----------- -----------
----------- --------- ----------- ----------- -----------
Year Ended December 29, 1991:
Buildings........................................ $ 2,138 $ 997 $ -- $ (146) $ 2,989
Equipment and furnishings........................ 12,722 6,350 570 -- 18,502
Leasehold improvements........................... 5,859 2,726 39 -- 8,546
Assets under capital leases...................... 3,931 1,657 349 -- 5,239
----------- --------- ----------- ----------- -----------
$ 24,650 $ 11,730 $ 958 $ (146) $ 35,276
----------- --------- ----------- ----------- -----------
----------- --------- ----------- ----------- -----------
</TABLE>
WS-2
<PAGE>
SCHEDULE VIII
TPI RESTAURANTS, INC. AND SUBSIDIARIES
RESERVES
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
ADDITIONS
BALANCE AT ADDITIONS CHARGED DEDUCTIONS BALANCE AT
BEGINNING CHARGED TO TO OTHER FROM END
OF PERIOD OPERATIONS ACCOUNTS RESERVES OF PERIOD
----------- ----------- ----------- ----------- -----------
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
<S> <C> <C> <C> <C> <C>
Year Ended December 26, 1993........................ $ -- $ -- $ -- $ -- $ --
Year Ended December 27, 1992........................ $ 28 $ -- $ -- $ 28 $ --
Year Ended December 29, 1991........................ $ 104 $ -- $ -- $ 76 $ 28
ALLOWANCE FOR UNIT CLOSINGS:
Year Ended December 26, 1993........................ $ 3,773 $ 17,286 $ -- $ 2,364 $ 18,695
Year Ended December 27, 1992........................ $ -- $ 3,773 $ -- $ -- $ 3,773
</TABLE>
WS-3
<PAGE>
SCHEDULE IX
TPI RESTAURANTS, INC. AND SUBSIDIARIES
SHORT-TERM BORROWINGS
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT AMOUNT AVERAGE
BALANCE AT AVERAGE OUTSTANDING OUTSTANDING INTEREST
CATEGORY OF AGGREGATE END OF INTEREST DURING THE DURING THE RATE DURING
SHORT-TERM BORROWINGS PERIOD RATE PERIOD PERIOD THE PERIOD
- --------------------------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended December 26, 1993....................... $ -- -- $ -- $ -- --
Year Ended December 27, 1992 Banks................. $ -- 7.00% $ 8,000 $ 3,203 7.38%
Year Ended December 29, 1991 Banks................. $ 4,250 7.46% $ 10,000 $ 5.288 8.22%
</TABLE>
- ---------------
(1) Average amount outstanding during the period is computed by dividing the
total of daily outstanding balances by the number of days in the year.
(2) Weighted average interest rate during the period is computed by dividing the
actual short-term interest expense by the average short-term debt
outstanding.
WS-4
<PAGE>
EXHIBITS
<TABLE><CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- --------- ------------------------------------------------------------------------------------------------- -----------
<S> <C> <C>
3.1 Restated Certificate of Incorporation and Certificate of Amendment dated March 25, 1987 (2)
3.2 Certificate of Amendment dated November 10, 1988 (5)
3.3 By-laws as amended through December 18, 1987 (2), Amendment thereto dated November 9, 1988 (8),
Amendment thereto dated May 15, 1989 (9), Amendment thereto dated April 27, 1990 (3), and
Amendment thereto dated March 9, 1992 (2), and Amendment thereto dated March 19, 1993 (1)
10.1 Lease between Registrant and 53rd at Third Venture, dated December 6, 1985, as amended, covering
premises situated at 885 Third Avenue, New York, New York (2)
10.2 Sublease dated August 14, 1992 between Registrant and Systemhouse, Inc. for premises at 53rd at
3rd, 885 Third Avenue, New York, New York (1)
10.3 Lease dated June 26, 1992 between Registrant and Murray H. Goodman, for premises at Phillips
Point, West Palm Beach, Florida (1)
10.4 Medical Expense Reimbursement Plan (13)
10.5 1982 Stock Option Plan (3), and Amendment thereto dated April 15, 1991(2)
10.6 1983 Stock Option Plan, Amendment thereto dated August 8, 1990 (3), and Amendment thereto dated
March 9, 1992 (2)
10.7 1984 Stock Option Plan and Amendment thereto dated November 15, 1989 (3) and Amendment thereto
dated February 5, 1992 (2)
10.8 1989 Employee Stock Purchase Plan (9)
10.9 1989 Employee Stock Purchase Plan Trust Agreement (9)
10.10 1992 Stock Option and Incentive Plan (1)
10.11 Non-Employee Directors Stock Option Plan (1); and ammendment thereto subject to stockholder
ratification
10.12 Form of letter agreement, dated January, 1984 between Registrant and each of Stephen R.Cohen,
Joseph P. Gowan and Robert A. Kennedy setting forth, among other matters, certain rights upon
termination of employment (3)
10.13 Employment Agreement dated January 13, 1987 between Registrant and Stephen R. Cohen, Letter
Agreement dated January 25, 1989 amending Employment Agreement, Letter Agreement dated May 15,
1990 amending Employment Agreement, Letter Agreement dated December 10, 1992 amending
Employment Agreement, Letter Agreement dated December 31, 1993 amending Employment Agreement
10.14 Letter Agreement, dated January 25, 1989, between Registrant and Joseph P. Gowan (5)
10.15 Termination Agreement dated November 19, 1992 between Registrant and Robert A. Kennedy, Amendment
to Termination Agreement dated December 31, 1993 between Registrant and Robert A. Kennedy,
Employment Agreement dated December 31, 1993 between Registrant and Robert A. Kennedy
10.16 Employment Agreement dated as of January 13, 1994, between Registrant and J. Gary Sharp
10.17 Employment Agreement dated as of October 1, 1991, between Restaurants and Frederick W. Burford
(1)
10.18 Agreement relating to termination of Nonqualified Retirement Plan, dated as of December 31, 1993,
between Registrant and Patricia Hildebrand
10.19 Stipulation and Agreement of Compromise and Settlement, dated January 6, 1988, among Robert M.
Gintel, Ralph I. Reis, Daniel Schoonover, Stephen R. Cohen, Thomas J. Burger, Joseph P. Gowan,
Ira M. Lieberman, Robert A. Kennedy, and Registrant (1)
10.20 Management Services Agreement, dated as of October 5, 1988, between the Registrant and
Restaurants (11)
10.21 Tax Sharing and paying Agreement effective as of April 22, 1988 between the Registrant and
Restaurants (11)
10.22 Form of Shoney's Franchise Agreement (3)
10.23 Form of Agreement amending Franchise Agreements with Shoney's, Inc. (12)
10.24 Form of Captain D's Franchise Agreements (3)
</TABLE>
<PAGE>
<TABLE><CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- --------- ------------------------------------------------------------------------------------------------- -----------
<S> <C> <C>
10.25 First Amended and Restated Credit Agreement dated as of June 3, 1993 by and among Restaurants,
the Signatory Banks thereto, The Bank of New York, as Administrative Agent, and the NationsBank
of North Carolina, N.A., as Collateral Agent, Amendment No. 1 and Waiver No. 3 to the Amended
and Restated Credit Agreement
10.26 Amended and Restated Enterprises Guaranty, dated as of June 3, 1993 made by Registrant and
Restaurants to NationsBank of North Carolina, N.A., as Collateral Agent
10.27 Debenture Purchase Agreement, dated as of March 19, 1993 among Registrant and the Purchasers
named therein, relating to the $15,000,000 5% Convertible Senior Subordinated Debentures, due
April 15, 2003 (1)
10.28 Warrant Purchase Agreement, dated as of March 19, 1993 among Registrant and the Purchasers named
therein, relating to Warrants to Purchase 1,000,000 Shares of Common Stock (1)
10.29 Stock Purchase Agreement, dated as of March 19, 1993 among Registrant and the Purchasers named
therein, relating to the purchase of 1,500,000 Shares of Common Stock (1)
10.30 Side Agreement, dated as of March 19, 1993 among Registrant and the Purchasers named therein (1)
10.31 Amended and Restated Registration Rights Agreement dated as of July 21, 1993 by and among the
Company and the shareholders who are signatories thereto (15)
10.32 Management Consulting Agreement, dated as of June 30, 1989, between Registrant and FirstMark (4)
10.33 Trust Agreement, dated as of January 31, 1990, between Registrant and Citibank, N.A.; and First
Amendment to the Trust Agreement effective January 31, 1990
10.34 Standstill Agreement entered into as of March 4, 1991, by and among the Registrant, AMCE, AMC,
Durwood, Stanley H. Durwood and Edward D. Durwood (8)
10.35 Reserved Area Agreement between Shoney's, Inc. and Restaurants dated May 1989 (2), Amended and
Restated Addendum thereto dated May 1, 1989 and Second Amended and Restated Addendum thereto
dated May 1, 1989 (2) as amended January 1, 1990 and April 1991 (6)
10.36 Partnership Interest Purchase Agreement, dated as of May 28, 1993, by and among Exhibition
Enterprises Partnership, Cinema Enterprises II, Inc., Cinema Enterprises, Inc., American
Multi-Cinema, Inc., TPI Entertainment, Inc., and TPI Enterprises, Inc.
10.37 Termination and Release Agreement, dated as of May 28, 1993, by and among Boatmen's First
National Bank of Kansas City, TPI Entertainment, Inc., TPI Enterprises, Inc., Exhibition
Enterprises Partnership, Cinema Enterprises, Inc., American Multi-Cinema, Inc., AMC
Entertainment, Inc., Durwood, Inc., Stanley H. Durwood and Edward D. Durwood
10.38 Termination Agreement, dated as of May 28, 1993, by and among TPI Entertainment, Inc., TPI
Enterprises, Inc., Exhibition Enterprises Partnership, Cinema Enterprises, Inc., American
Multi-Cinema, Inc., AMC Entertainment, Inc., Durwood, Inc., Stanley H. Durwood and Edward D.
Durwood
10.39 Mutual Release and Indemnification Agreement, dated as of May 28, 1993, by and among Exhibition
Enterprises Partnership, Cinema Enterprises II, Inc., American Multi-Cinema, Inc., TPI
Entertainment, Inc., and TPI Enterprises, Inc.
10.40 Letter agreement dated as of March 5, 1993, amending August 1988 Reserved Area Agreement
10.41 Letter agreement dated as of July 30, 1993, between Registrant and Shoney's, Inc., amending
August 1988 Reserved Area Agreement
11 Computation of Earning Per Share
21 Subsidiaries of the Registrant
23 Consent of Deloitte & Touche
99 Option Agreement, dated March 4, 1991, by and between AMC and C & C Investment Holdings, L.P. (8)
</TABLE>
(Footnotes on following page)
<PAGE>
(Footnotes for preceding page)
- ---------------
<TABLE>
<S> <C>
(1) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference
(2) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year ended December 31, 1991, and
incorporated herein by reference
(3) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990, and
incorporated herein by reference
(4) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year ended December 31, 1989, and
incorporated herein by reference.
(5) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year ended December 31, 1988 and
incorporated herein by reference.
(6) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated May 8, 1991, and incorporated herein
by reference.
(7) Filed as an exhibit to Registrant's Definitive Proxy Statement, dated October 11, 1988, and incorporated
herein by reference.
(8) Filed as an exhibit to Registrant's Current Report on Form 8-K dated March 4, 1991, and incorporated herein
by reference.
(9) Filed as an exhibit to Registrant's Registration Statement on Form S-8 (No. 33-30551), dated August 16,
1989, and incorporated herein by reference.
(10) Filed as an exhibit to Amendment No. 4 to Registrant's Registration Statement on Form S-2 (No. 33-24166),
dated November 9, 1988, and incorporated herein by reference.
(11) Filed as an exhibit to Registrant's Registration Statement on Form S-2 (No. 33-24166), dated October 13,
1988, and incorporated herein by reference.
(12) Filed as an exhibit to Registrant's Registration Statement on Form S-2 (No. 33-24166), dated September 2,
1988, and incorporated herein by reference.
(13) Filed as an exhibit to Registrant's Registration Statement on Form S-1 (No. 2-72119), dated May 5, 1981, and
incorporated herein by reference.
(14) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated July 29, 1992, and incorporated herein
by reference.
(15) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q, dated July 11, 1993.
</TABLE>
Exhibit 10.11
PROPOSED AMENDMENT TO TPI ENTERPRISES, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
Paragraph 6(c) of the TPI Enterprises, Inc. Non-
Employee Directors Stock Option Plan is hereby deleted and the
following substituted in lieu thereof:
On the first business day of November, 1993 each
Current Director who is a Non-Employee Director on such
date and each New Director who is a Non-Employee
Director on such date shall be granted automatically,
without action by the Committee, an Option to purchase
2,500 shares of Common Stock. On the first business
day of each February beginning in 1994, each Non-
Employee Director on such date shall be granted
automatically, without action by the Committee, an
Option to purchase 2,500 shares of Common Stock. On
the first business day of each August beginning in
1994, each non-Employee director on such date shall be
granted automatically, without action by the Committee,
an Option to purchase 2,500 shares of Common Stock.
Exhibit 10.13
EMPLOYMENT AGREEMENT dated as of January 13, 1987,
by and between TELECOM PLUS INTERNATIONAL, INC., a New
Jersey corporation (hereinafter referred to as the
"Company"), and STEPHEN R. COHEN (hereinafter referred to
as the "Employee").
___________________________________
The Company and the Employee are parties to an
employment agreement which by its terms expires on
December 31, 1987.
The Company and the Employee desire to enter into a
new employment agreement which will set forth the terms
and conditions upon which the Employee shall continue to
be employed by the Company and upon which the Company
shall continue to compensate the Employee. In addition,
the Company and the Employee desire to continue to
reflect in this employment agreement, the agreement (the
"1983 Agreement") between the parties entered into in
December, 1983 with regard to the Employee's entitlement
to certain payments in the event of his termination of
<PAGE>
employment subsequent to a Change of Control (as herein-
after defined).
The Company desires to induce the Employee to enter
into, and compensate the Employee for agreeing to, a non-
compete agreement with Siemens Information Systems, Inc.
("SIS").
NOW, THEREFORE, in consideration of the premises and
of the mutual covenants hereinafter set forth, the
parties hereto have agreed, and do hereby agree, as
follows:
2
<PAGE>
(1) EMPLOYMENT: TERM
----------------
1.1 The Company will employ the Employee
in its business and the Employee will work for the
Company therein, as its Chief Executive Officer and
Chairman of the Board for a term of five (5) years
commencing as of January 1, 1988 and ending on December
31, 1992. Such period, together with the period of any
extension or renewal of such employment is herein
referred to as the "Employment Period". Such employment
may be terminated by the Company at any time for "cause".
As used in this Agreement, "cause" shall be deemed
limited to the Employee's commission of any act consti-
tuting common law fraud, a felony or other gross malfea-
sance of duty.
(2) DUTIES
------
2.1 During the Employment Period, the
Employee shall serve as the Company's Chief Executive
Officer and Chairman of the Board to perform duties of an
executive character consisting of administrative and
managerial responsibilities on behalf of the Company and
such further duties as shall, from time to time, be
reasonably delegated or assigned to him by the Board of
3
<PAGE>
Directors of the Company consistent with the Employee's
abilities.
(3) DEVOTION OF TIME
----------------
3.1 During the Employment Period, the
Employee shall expend substantially all of his working
time for the Company; shall devote his best efforts,
energy and skill to the services of the Company and the
promotion of its interests; and shall not take part in
activities detrimental to the best interest of the
Company.
(4) COMPENSATION
------------
4.1 For all services to the rendered by
the Employee during the Employment Period, the Employee
shall receive from the Company minimum annual compensa-
tion of Five Hundred Seventy-Seven Thousand Seven Hundred
Dollars ($577,700) during calendar year 1988, payable in
accordance with the Company's customary payroll prac-
tices. During each calendar year thereafter, Employee's
minimum annual compensation ("Base Salary") shall be
increased by an amount equal to 6% (or such greater
amount as the Company's Board of Directors may determine)
4
<PAGE>
of the minimum compensation payable to him during the
preceding calendar year.
4.2 Commencing in the year 1988, the
Employee shall annually receive in addition to the
compensation provided for in Section 4.1, a bonus equal
to 1-1/2% of the pre-tax earnings of the Company during
the preceding calendar year as recorded on the books and
records of the Company in accordance with generally
accepted accounting principles; provided, however, that
such bonus shall not exceed 50% of the Employee's Base
Salary payable during the calendar year such bonus is
paid. Such bonus shall be paid within 30 days of the
receipt by the Company of the opinion of its independent
certified accountants relating to the financial state-
ments for the period for which such bonus is calculated;
provided, however, that such bonus shall in no event be
paid later than April 30 in any year for which such bonus
is payable.
4.3 Employee shall also be entitled to
such additional increments and bonuses as shall be
determined from time to time by the Board of Directors of
the Company.
5
<PAGE>
(5) USE OF AUTOMOBILE: REIMBURSEMENT OF
-----------------------------------
EXPENSES
- --------
5.1 The Employee shall at all times have
the use of a Company owned or leased automobile or, at
Employee's option, Employee shall receive an automobile
allowance for the use of his automobile. All costs of
such automobile, including lease costs or purchase price,
full maintenance, insurance, gasoline, oil and garaging
shall be paid by the Company. The Company shall further
pay directly, or reimburse the Employee, for all other
reasonable and necessary expenses and disbursements
incurred by him for and on behalf of the Company in the
performance of his duties during the Employment Period,
including, without limitation, all reasonable expenses
incurred by the Employee for food, lodging and transpor-
tation, if he is required to perform any of his duties
away from his primary places of residence. For such
purposes, the Employee shall submit to the Company, not
less than once in each calendar month, reports of such
expenses and other disbursements in form normally used by
the Company.
(6) DISABILITY
----------
6
<PAGE>
6.1 If, during the Employment Period, the
Employee shall, in the opinion of the Board of Directors
of the Company, as confirmed by competent medical
evidence, become physically or mentally incapacitated
such that Employee is unable to perform his duties for
the Company hereunder for a continuous period, then for
the first twelve (12) months of such period he shall
receive his Base Salary, and for the remainder of such
period he shall receive fifty percent (50%) of his Base
Salary. In no event is the Employee entitled to receive
any payments under this Paragraph 6.1 beyond the termina-
tion date of this Agreement. Upon his resumption of full
employment, the Employee shall again receive his full
salary. If such illness or other incapacity shall endure
for a continuous period of more than seventeen (17)
months, the Company shall have the right, by written
notice, to terminated the Employee's employment hereunder
as of a date (not less than thirty (30) days after the
date of the sending of such notice) to be specified in
such notice; provided, however, that if, prior to the
date specified in such notice, the Employee shall have
resumed full employment, he shall be entitled to continue
7
<PAGE>
such employment and to receive his full compensation
therefore, and such notice shall be of no effect. The
Employee agrees to submit himself for appropriate medical
examination to a physician of the Company's designation
as necessary for purposes of this Paragraph 6.1.
6.2 The obligations of the Company under
this Paragraph 6 may be satisfied, in whole or in part,
by payments to the Employee under disability insurance
provided by the Company, and under laws providing
disability benefits for employees.
(7) RESTRICTIVE COVENANT
--------------------
7.1 The services of the Employee are
unique and extraordinary and essential to the business of
the Company, especially since the Employee shall have
access to the Company's customer list, trade secrets and
other privileged and confidential information essential
to the Company's business. Therefore, the Employee
agrees that if his employment hereunder shall at any time
be terminated for any reason whatsoever, the Employee
will not at any time within one (1) year after such
termination, without the prior written approval of the
Company, directly or indirectly, within one hundred fifty
8
<PAGE>
(150) miles of either the New York metropolitan area or
any other metropolitan area in which the Company shall
then conduct substantial operations, engage in any
business activity competitive with the business of the
Company; and further, the Employee agrees that during
such one (1) year period he shall not solicit, directly
or indirectly, any prospective account of the Company who
at the time of such termination was then actively being
solicited by the Company.
7.2 The Employee agrees not to divulge,
furnish or make available to anyone (other than in the
regular course of business of the Company) any knowledge
or information with respect to confidential or secret
methods, processes, plans or materials of the Company, or
with respect to any other confidential or secret aspect
of the Company's activities.
7.3 The Employee agrees to communicate
and make known to the Company all knowledge possessed by
him relating to any methods, developments, inventions
and/or improvements, whether patented, patentable or
unpatentable, which concern in any way the business of
the Company, whether acquired by him before or during the
9
<PAGE>
Employment Period; provided, however, that nothing herein
shall be construed as requiring any such communication
where the method, development, invention and/or improve-
ment is lawfully protected from disclosure as the trade
secret of a third party and by any other lawful bar to
such communications.
7.4 Any methods, developments, inventions
and/or improvements, whether patentable or unpatentable,
which the Employee may conceive or make along the lines
of the Company's business while in its employ, shall be
and remain the property of the Company. The Employee
further agrees on request to execute patent applications
based on such methods, developments, inventions and/or
improvements, including any other instruments deemed
necessary by the Company for the prosecution of such
patent application or the acquisition of Letters Patent
of this and any foreign country.
7.5 Employee shall enter into a non-
compete agreement (the "SIS Non-Compete") with SIS
substantially in the form of Exhibit 7.7 to the Stock
Purchase Agreement dated as of December 31, 19986 by and
between SIS and the Company at the closing of the
10
<PAGE>
transactions contemplated by the Stock Purchase Agree-
ment. Employee shall comply in all respects with the
terms of the SIS Non-Compete. Employee shall indemnity
the Company for any liability, expense or loss arising
from Employee's breach of the SIS Non-Compete.
(8) VACATIONS
---------
8.1 The Employee shall be entitled to
reasonable vacations during each twelve-month period of
the Employment Period, the time and duration thereof to
be determined by mutual agreement between the Employee
and the Company.
(9) PARTICIPATION IN EMPLOYEE BENEFIT PLANS
---------------------------------------
9.1 The Employee and any beneficiary of
the Employee shall be accorded the right to participate
in and receive benefits under and in accordance with the
provisions of any pension, profit sharing, insurance,
bonus, deferred compensation, medical and dental insur-
ance or reimbursement (including, but not limited to,
Blue Cross/Blue Shield), or other plan or program of the
Company either in existence as of the date hereof or
hereafter adopted for the benefit of any of its executive
employees.
11
<PAGE>
(10) SERVICE AS DIRECTOR
-------------------
10.1 During the Employment Period, the
Employee shall, if elected or appointed, serve as a
Director of the Company and/or any subsidiary or affili-
ate of the Company upon such terms as shall be mutually
agreed upon by the Employee and the Company.
(11) EARLIER TERMINATION
-------------------
11.1 The Employee's employment hereunder
shall automatically terminated upon his death and may
terminated at the option of the Company upon:
(a) the Employee's incapacity as set
forth in Paragraph 6 hereof;
(b) thirty (30) days' prior written
notice to the Employee in the event the Company termi-
nates his employment hereunder for cause as set forth in
Paragraph 1.1 hereof, other than pursuant to subsection
(a) immediately above: or
12
<PAGE>
(c) the Employee's voluntary leaving
the employ of the Company.
11.2 Notwithstanding the provisions of
Paragraph 11.1, in order to protect the Employee against
the possible consequences and uncertainties of a Change
of Control of the Company (as hereinafter defined) and
thereby induce the Employee to remain in the employ of
the Company, the Company agrees that:
(a) If the Employee's employment is
terminated by the Company at any time subsequent to a
Change of Control other than for "cause" or if the
Employee voluntarily terminates such employment within
one hundred eighty (180) days subsequent to a Change of
Control (the "Evaluation Period"), then in either such
event, the Company shall pay to the Employee within ten
(10) days after such termination a lump sun payment in
cash in an amount equal to three (3) times the annual
base salary paid to the Employee at the time of such
Change of Control; provided, however, that at the option
-------- -------
of the Employee, exercisable upon written notice to the
Company within ten (10) days of termination of employ-
ment, such payment may be paid in equal monthly install-
13
<PAGE>
ments over a three (3) year period commencing on the
first day of the month immediately following that in
which the Employee's employment was terminated. For
purpose of this Paragraph 11, in the event the Employee
shall resign from his employment with the Company
subsequent to any change in his title, nature of duties,
employee benefits or working conditions, in each instance
without his prior consent, such resignation shall be
deemed to be a termination of employment by the Company
other than for "cause".
(b) All options, warrants and other
rights to acquire shares of capital stock of the Company
(including those of its subsidiaries and affiliates),
whether pursuant to employee benefit plans or otherwise,
which shall have been granted to the Employee prior to a
Change of Control shall fully vest and become immediately
exercisable upon the occurrence of any such Change of
Control. If subsequent to a Change of Control, the
Employee's employment is terminated by the Company other
than for "cause" or if such employment is voluntarily
terminated by the Employee during the Evaluation Period,
then in either such event, all such options, warrants and
14
<PAGE>
rights shall be exercisable by the Employee in accordance
with their respective terms, as hereinabove modified,
within thirty (30) days immediately following such
termination and, to the extent not so exercised, shall
thereafter lapse.
(c) The Company shall pay or reimburse the
Employee for all fees and disbursements of counsel, if
any, incurred by the Employee as a result of the termina-
tion of his employment by the Company following a Change
of Control or his voluntary termination of such employ-
ment during the Evaluation Period (including, without
limitation, those which may be incurred by the Employee
in seeking to obtain or enforce any right or benefit
provided by this Agreement).
(d) As used in this Paragraph 11, a
"Change of Control" shall be deemed to have occurred if
(i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated under the
1934 Act), directly or indirectly, of securities of the
Company representing thirty-five percent (35%) or more of
15
<PAGE>
the combined voting power of the Company's then outstand-
ing securities, or (ii) if at any time there shall be a
change in the composition of the Company's Board of
Directors resulting in a majority of such Directors as of
the date hereof no longer constituting such a majority;
provide, however, that in making any such determination
- ------- -------
as to change in composition, there shall be excluded any
change where the new Director was elected by, or upon the
recommendation of, such present majority.
11.3 Notwithstanding the provisions of
Paragraph 11.1, in the event the Employee's employment
hereunder shall terminate, for death, for "cause" prior
to a Change of Control or for "cause" at any time
subsequent to a Change of Control, the Company, for a
period of one (1) year from the date of termination of
his employment or until the expiration date of this
Agreement, as extended or renewed, whichever is shorter,
shall continue to pay the Employee the compensation
payable hereunder and provide the Employee with all
benefits and perquisites which the Employee is entitled
to receive hereunder prior thereto, including, without
limitation, those specified in Paragraph 5 and 9 hereof.
16
<PAGE>
11.4 The Employee shall be under no
obligation to mitigate the amount of any payment provided
for under this Paragraph 11 by seeking other employment
or otherwise nor shall such amount be offset by any
compensation which the Employee may receive from future
employment or otherwise.
(12) INJUNCTIVE RELIEF
-----------------
12.1 The Employee acknowledges and agrees
that, in the event he shall violate any of the restric-
tions of Paragraph 3 and 7 hereof, the Company will be
without adequate remedy at law and will therefore be
entitled to enforce such restrictions by temporary or
permanent injunctive or mandatory relief obtained in an
action or proceeding instituted in the Supreme Court of
the State of New York or any other court of competent
jurisdiction without the necessity of proving damages and
without prejudice to any other remedies which it may have
at law or in equity.
(13) ASSIGNMENT
----------
13.1 This Agreement, as it relates to the
employment of the Employee, is a personal contract and
the rights and interests of the Employee hereunder may
17
<PAGE>
not be sold, transferred, assigned, pledged or hypothe-
cated, except that, if requested by the Company, the
Employee shall devote a portion of his working time for
subsidiaries of the Company serving as a senior executive
officer. Except as otherwise herein expressly provided,
this Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns
including, without limitation, any corporation or other
entity into which the Company is merged or which acquires
all of the outstanding Common Shares, or all of substan-
tially all of the assets, of the Company.
(14) RIGHT TO PAYMENTS
-----------------
14.1 The Employee shall not under any
circumstances have any option or right to require
payments hereunder otherwise than in accordance with the
terms hereof. To the extent allowed by law, the Employee
shall not have any power of anticipation, alienation or
assignment of payments contemplated hereunder, and all
rights and benefits of the Employee shall be for the sole
personal benefit of the Employee, and no other person
shall acquire any right, title or interest hereunder by
18
<PAGE>
reason of any sale, assignment, transfer, claim or
judgment or bankruptcy proceedings against the Employee.
(15) NOTICES
-------
15.1 Any notice required or permitted to
be given to the Employee pursuant to this Agreement shall
be sufficiently given if sent to the Employee by certi-
fied mail addressed to him at the following address:
1 North Breakers Row
Reef Building No. 251
Palm Beach, Florida 33480
or at such other address as he shall designate by notice
to the Company, and any notice required or permitted to
be given to the Company pursuant to this Agreement shall
be sufficiently given if sent to the Company by certified
mail addressed to it at 885 Third Avenue, New York, New
York 10022, or at such other address as the Company shall
designated by notice to the Employee.
19
<PAGE>
(16) GOVERNING LAW
-------------
16.1 This Agreement shall be governed by,
and construed and enforced in accordance with, the laws
of the State of New York applicable to agreements made
and to be performed entirely in New York.
(17) WAIVER OF BREACH: PARTIAL INVALIDITY
------------------------------------
17.1 The waiver by either party of a
breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent
breach. If any provision of this Agreement shall be held
to be invalid or unenforceable, such invalidity or
unenforceability shall attach only to such provision and
not in any way affect or render invalid or unenforceable
any other provisions of this Agreement, and this Agree-
ment shall be carried out as if such invalid or unen-
forceable provision were not embodied therein.
(18) ENTIRE AGREEMENT
----------------
18.1 This Agreement constitutes the entire
agreement between the parties and there are no represen-
tations, warranties or commitments except as set forth
herein, except for the provisions of the 1983 Agreement
which are reflected in, and shall survive, this Agreement
20
<PAGE>
and except for the provisions of the Stock Option
Agreement (the "Stock Option Agreement") of even date
herewith between the Company and the Employee which shall
survive this Agreement. This Agreement supersedes all
prior and contemporaneous agreements, understandings,
negotiations and discussions, whether written or oral, of
the parties hereto relating to the transactions contem-
plated by this Agreement; provided, however, that this
Agreement shall not supersede the 1983 Agreement or the
Stock Option Agreement, provided further, however, that
it is the intention of the parties hereto that this
Agreement shall be interpreted and applied in conjunction
with the terms of any option, warrant or other right now
in existence or hereinafter granted to the Employee to
acquire shares of capital stock of the Company. In the
event of any conflict, however, the terms of this
Agreement shall govern and prevail. This Agreement may
be amended only in writing executed by the parties hereto
affected by such amendment.
21
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed
this Agreement as of the day and year above written.
TELECOM PLUS INTERNATIONAL, INC.
By: s/s Ira M. Lieberman
------------------------
Ira M. Lieberman
Executive Vice President
By: s/s Stephen R. Cohen
-------------------------
Stephen R. Cohen
22
<PAGE>
January 25, 1989
Mr. Stephen R. Cohen
Chairman
TPI Enterprises, Inc.
885 Third Avenue
New York, NY 10022
Dear Mr. Cohen:
This letter, when countersigned by you where
indicated below, shall constitute an amendment of your
employment agreement dated as of January 13, 1987 with
TPI Enterprises, Inc. (the "Company"), as successor to
Telecom Plus International, (the "Employment Agreement").
1. The provisions of Section 4.1 of the
Employment Agreement (relating to incentive compensation)
23
<PAGE>
are hereby deleted in their entirety and the following
substituted in lieu thereof:
"4.2 The Company shall pay the Employee for 1988
a bonus payment of $130,000, net of applicable
withholding taxes, in recognition of the services
rendered by the Employee on behalf of the Company
during the 12-month period ending December 31, 1988
(the "Bonus Payment"). The Bonus Payment is
additional compensation to the Employee and not in
lieu of any other amount to which the Employee is or
may become entitled pursuant to the terms of this
Agreement. This Bonus Payment shall be made to the
Employee as promptly as practicable after January
25, 1989. The Employee shall be entitled to such
additional bonus payments for subsequent years
during the Employment Period as shall be determined
from time to time by the Board of Directors of the
Company."
2. In all other respects, the Employment
Agreement is ratified and confirmed.
24
<PAGE>
If the foregoing accurately reflects your
understanding with respect to the matters set forth
herein, please indicate your acceptance of, and agreement
to, the foregoing terms by signing in the space provided
below and returning a fully executed copy of this letter
to the undersigned.
Very truly yours,
TPI Enterprises, Inc.
By: /s/ Joseph P. Gowan
- ------------------------
Executive Vice President
Accepted and agreed to:
By: /s/ Stephen R. Cohen
---------------------
Stephen R. Cohen
25
<PAGE>
May 15, 1990
Mr. Stephen R. Cohen
Chairman
TPI Enterprises, Inc.
885 Third Avenue
New York, NY 10022
Dear Mr. Cohen:
This letter, when countersigned by you where
indicated below, shall constitute an amendment, effective
as of the date hereof, of your employment agreement dated
as of January 13, 1987 with TPI Enterprises, Inc. (the
"Company"), as successor to Telecom Plus International,
Inc. (the "Employment Agreement").
1. The provision of Section 1.1 of the
Employment Agreement (relating to term of employment) are
26
<PAGE>
hereby deleted in their entirety and the following
substituted in lieu thereof:
1.1 The Company will employ the
Employee in its business and the
Employee will work for the Company
therein, as its Chief Executive
Officer and Chairman of the Board for
a term commencing as of January 1,
1988 and ending as of December 31,
1994. Such period, together with the
period of any extension or renewal of
such employment is herein referred to
as the "Employment Period". Such
employment may be terminated by the
Company at any time for "cause". As
used in this Agreement "cause" shall
be deemed limited to the Employee's
commission of any act constituting
common law fraud, a felony or other
gross malfeasance of duty.
27
<PAGE>
2. In all other respects, the Employment
Agreement is ratified and confirmed.
If the foregoing accurately reflects your
understanding with respect to the matters set forth
herein, please indicate your acceptance of, and agreement
to, the foregoing terms by signing in the space provided
below and returning a fully executed copy of this letter
to the undersigned.
Very truly yours,
TPI Enterprises, Inc.
By: /s/ Joseph P. Gowan
---------------------
Joseph P. Gowan
Executive Vice President
Accepted and agreed to:
By: /s/ Stephen R. Cohen
---------------------
Stephen R. Cohen
28
<PAGE>
December 10, 1992
Mr. Stephen R. Cohen
Chairman
TPI Enterprises, Inc.
Phillips Point
East Tower
777 South Flagler Drive
West Palm Beach, FL 33401
Dear Mr. Cohen:
This letter, when countersigned by you where
indicated below, shall constitute an amendment, effective
as of the date hereof, of your employment agreement dated
as of January 13, 1987 with TPI Enterprises, Inc. (the
"Company"), as successor to Telecom Plus International,
Inc., as amended by letter agreement dated January 25,
1989 and letter agreement dated May 15, 1990 (the
"Employment Agreement").
29
<PAGE>
1. The first sentence of Section 1.1 of the
Employment Agreement (relating to term of employment) is
hereby deleted and the following substituted in lieu
thereof:
1.1 The Company will employ the
Employee in its business and the
Employee will work for the Company
therein, as its Chief Executive
Officer and Chairman of the Board for
a term commencing as of January 1,
1988 and ending as of December 31,
1997.
2. In all other respects, the Employment
Agreement is ratified and confirmed.
If the foregoing accurately reflects your under-
standing with respect to the matters set forth herein,
please indicate your acceptance of, and agreement to, the
foregoing terms by signing in the space provided below
30
<PAGE>
and returning a fully executed copy of this letter to the
undersigned.
Very truly yours,
TPI Enterprises, Inc.
By: s/s Joseph P. Gowan
----------------------
Joseph P. Gowan
Executive Vice President
Accepted and agreed to:
By: s/s Stephen R. Cohen
-----------------------
Stephen R. Cohen
31
<PAGE>
December 31, 1993
Mr. Stephen R. Cohen
Chairman
TPI Enterprises, Inc.
Phillips Point
East Tower, Suite 909
777 South Flagler Drive
West Palm Beach, FL 33401
Dear Mr. Cohen:
This letter, when countersigned by you where
indicated below, shall constitute an amendment, effective
as of the date hereof, of your employment agreement dated
as of January 13, 1987 with TPI Enterprises, Inc. (the
"Company"), as successor to Telecom Plus International,
Inc., as amended by letter agreements dated January 25,
32
<PAGE>
1989, May 15, 1990 and December 10, 1992 (the "Employment
Agreement").
1. The first sentence of Paragraph 1.1 of the
Employment Agreement (relating to term of employment) is
hereby deleted and the following substituted in lieu
thereof:
"1.1 The Company will employ the Employee in
its business and the Employee will work for the
Company for a term commencing as of January 1, 1988
and ending as of December 31, 1997. Effective as of
March 19, 1993 and throughout the remainder of the
Employment Period (as defined below), the Employee
shall have the position and title of Chairman of the
Board."
2. The following Paragraph 1.2 is hereby
added following Paragraph 1.1 of the Employment Agree-
ment:
"1.2 Subsequent to the Employment Period, the
Company shall retain the Employee for a period of
eighteen months as an "employee" and maintain his
"employment" solely for purposes and as such terms
33
<PAGE>
are used in the Company's 1983 Stock Option Plan and
1984 Stock Option Plan, provided that his employment
shall no longer be governed by this Agreement (other
than as provided in Paragraphs 1.2 and 20.1 hereof)
and he shall have no duties during such service
other than any he may agree to. During such eigh-
teen-month period, the Company shall have no obliga-
tion to pay the Employee more than a nominal amount
or to provide any employee benefits other than to
maintain the continued exercisability of his stock
options. Notwithstanding the foregoing, if Employ-
ee's employment is terminated for cause (as defined
in Paragraph 1.1 of the Employment Agreement) during
the Employment Period, the eighteen-month period re-
ferred to above shall instead be six months."
3. The provisions of Paragraph 2.1 of the
Employment Agreement are hereby deleted in their entity
and the following substituted in lieu thereof:
"2.1 Effective March 19, 1993 and throughout
the remainder of the Employment Period, the Employee
shall serve as Chairman of the Board and perform
administrative and managerial duties on behalf of
the Company consistent with such title and such fur-
34
<PAGE>
ther duties as shall from time to time be reasonably
delegated or assigned to him by the Board of Direc-
tors of the Company consistent with the Employee's
abilities."
4. The provisions of Paragraph 4.1 of the
Employment Agreement are hereby deleted in their entirety
and the following substituted in lieu thereof:
"4.1 The Employee shall receive from the Compa-
ny an annual base salary ("Base Salary") of Six
Hundred Thousand Dollars ($600,000) during calendar
year 1994, payable in accordance with the Company's
customary payroll practices. During each calendar
year of the Employment Period thereafter, Employee's
Base Salary shall be increased by an amount equal to
5% of the Base Salary paid to him during the preced-
ing calendar year."
5. The fourth sentence of Paragraph 4.2 of
the Employment Agreement is hereby deleted and the fol-
lowing substituted in lieu thereof:
"The Employee shall be entitled to such additional
bonus payments for services rendered during 1993 as
35
<PAGE>
shall be determined by the Board of Directors of the
Company. For services rendered in 1994 and for each
year thereafter throughout the remainder of the
Employment Period, the Employee shall be entitled to
an annual bonus (the "Bonus") which shall be paid no
later than February 15 of each year beginning Febru-
ary 15, 1995 with respect to the immediately preced-
ing year and which shall be calculated as follows:
(a) The Bonus for any year (commencing
with the year beginning January 1, 1994)(the "Bonus
Year") shall be the amount equal to 3% of the in-
crease in the Profits (as hereinafter defined) of
the Company and TPI Restaurants, Inc. ("Restau-
rants")" (collectively, the "Companies") attrib-
utable to the Companies' operations for the calendar
year just ended over the Companies' Profits for the
prior year excluding any restaurants acquired during
that year for which the Bonus is being calculated.
"Profits" shall mean earnings attributable to the
Companies' operations and shall consist of earnings
before reductions for interest payments and taxes
but after reductions for depreciation and shall be
based on the consolidated earnings of both the
Company and Restaurants.
36
<PAGE>
(b) When calculating the Bonus for any
Bonus Year for restaurants acquired that year in
which the Companies have acquired additional restau-
rants, the Companies shall determine the pro forma
effect of the acquisition of such restaurants upon
the Companies' financial statements and Profits for
the 12-month period immediately preceding the date
of such acquisition. The Employee's Bonus with
respect to the twelve months after the acquisition
of such restaurants shall be the amount equal to 3%
of the increase in the Profits over the amount of
Profits stated in the pro forma financial statements
referred to in the immediately preceding sentence.
After each newly acquired restaurant has been in
operation for twelve months, such restaurant shall
be included in the bonus calculation for general
operations of the Companies set forth in Paragraph
4.2(a) above.
(c) In addition to the amounts paid
pursuant to Paragraphs 4.2(a) and (b) above, the
Employee shall be paid an additional Bonus amount
equal to $20,000 for each percentage point increase
(or portion thereof) in the Companies' same store
37
<PAGE>
nominal sales (which shall include menu price in-
crease) each calculated and payable annually.
(d) Notwithstanding anything to the
contrary in this Paragraph 4.2, the Bonus payable to
the Employee pursuant to this Paragraph 4.2 for any
Bonus Year shall not exceed $250,000 in the aggre-
gate."
6. The first sentence of Paragraph 5.1 of the
Employment Agreement is hereby deleted and the following
substituted in lieu thereof:
"The Employee shall at all times during the
Employment Period receive the medical benefits as
provided to him as of December 31, 1993 (provided
that such benefits are commensurate with those
provided to senior executives of the Company) and
shall have the use of a Company owned or leased
automobile (or, at the Employee's option, the Em-
ployee shall receive an automobile allowance for the
use of his automobile) and a driver as those bene-
fits are provided to him on December 31, 1993."
38
<PAGE>
7. The second sentence of Paragraph 7.1 of the
Employment Agreement is hereby amended by inserting
"except as described on Schedule A hereto" after the
phrase "for any reason whatsoever," and by deleting "the
New York metropolitan area" and substituting in lieu
thereof "West Palm Beach, Florida".
8. Paragraph 10.1 of the Employment Agreement
is hereby amended by adding the following at the end
thereof:
"During the Employment Period, the Employee shall be
a member of the Executive Committee and the Nominat-
ing Committee of the Board of Directors of the
Company."
9. Paragraph 11 of the Employment Agreement
is hereby amended by adding a new Paragraph 11.4 as set
forth below, and renumbering existing Paragraph 11.4,
11.5:
"11.4 The Employee may terminate his employment
with the Company for "Good Reason" at any time and
if he so terminates his employment, the annual Base
Salary at the rate in effect on the date of such
39
<PAGE>
termination multiplied by the number of years (plus
any fraction thereof) remaining in the Employment
Period shall become due and payable upon such termi-
nation. Notwithstanding the foregoing, if the
Employee's employment is terminated subsequent to a
Change of Control and the Employee elects to receive
the payment provided for in Paragraph 11.2(a) hereof
or under the letter agreement between the Employee
and the Company dated January 5, 1984 (the "1984
Agreement"), the Employee shall not be entitled to
receive payments pursuant to this Paragraph 11.4.
As used in this Paragraph 11.4, the term
"Good Reason" shall mean:
(i) proven criminal conduct by any
of the senior officers of the Companies in connec-
tion with the operation of the Companies;
(ii) any material breach by the
Companies of any provision of this Agreement, which
is not remedied within 10 business days after re-
ceipt by the Companies of written notice from the
Employee; or
40
<PAGE>
(iii) failure of the Executive to be
elected to, or removal of the Employee from, the
Board of Directors of the Companies or the Executive
Committee or the Nominating Committee of the Company
during the term of this Agreement, or failure of the
Employee to be elected to, or removal of the Employ-
ee from, the position of Chairman of the Board of
the Company or his existing officer or Board posi-
tions with any subsidiary of the Companies, and/or
any material change in the Employee's duties as they
exist on the date hereof."
41
<PAGE>
10. Paragraph 15 of the Employment Agreement
shall be amended to replace the address of the Employee
with the following address:
"1 North Breakers Row
The Surf Building No. 361
Palm Beach, FL 33480"
and to replace the address of the Company with the fol-
lowing address:
"Phillips Point
East Tower, Suite 909
777 South Flagler Drive
West Palm Beach, FL 33401"
11. Paragraph 18.1 of the Employment Agreement
is hereby amended as follows: References to the "Stock
Option Agreement" shall be changed to the "Stock Option
Agreements" and shall be defined as "the stock option
agreement between the Company and the Employee dated as
of August 16, 1989 and the stock option agreement between
the Company and the Employee dated as of January 13,
1992."
42
<PAGE>
12. The Employment Agreement is hereby further
amended by adding the following, after Paragraph 18:
"(19) Location of Principal Offices.
-----------------------------
19.1 From December 31, 1993 throughout the Em-
ployment Period, the principal offices of the Com-
pany shall be located within 50 miles of West Palm
Beach, Florida. Throughout the Employment Period,
the Employee shall not be required to work on a
regular basis outside of the principal offices of
the Company.
(20) Indemnification.
---------------
20.1 From and after Employee's first employ-
ment by the Company on January 13, 1987, the Company
shall indemnify, defend and hold harmless the Em-
ployee from and against all obligations, liabili-
ties, demands, claims, actions, losses, damages,
costs and expenses, including, without limitation,
interest, penalties and attorney's fees (at the
trial level and/or appellate level) and expenses,
arising out of or relating to Employee's employment
with the Company, at any time, and such indemnifica-
43
<PAGE>
tion shall be to the fullest extent allowed or
provided by law. The terms of this indemnification
provision shall survive the termination of this
Agreement and/or Employee's employment.
(21) 1993 Payment to the Employee.
----------------------------
21.1 On December 31, 1993, simultaneously with
the execution and delivery of this amendment, the
Employee is receiving from the Company a cash pay-
ment in the amount of $3,150,000 in consideration of
the Employee's entering into this amendment (includ-
ing the rendering of future services to the Company
at a reduced salary).
21.2 Effective upon the execution and delivery
of this amendment, the Employee hereby:
(a) acknowledges that the Company intends
to terminate the Company's Nonqualified Retirement
Plan for Senior Executives (the "Retirement Plan");
(b) acknowledges that he shall not be
entitled to any additional benefits under the Re-
tirement Plan now or in the future, and
44
<PAGE>
(c) releases the Company from all obliga-
tions and liabilities arising from, under or in
connection with the Retirement Plan, whether cur-
rently existing or arising at any time hereafter,
and hereby releases the Company from all past,
present and future claims, demands, actions, causes
of action, liabilities, rights, damages, costs,
expenses and compensation of every nature whatsoev-
er, whether direct or indirect, arising from or
under the Retirement Plan.
21.3 The payment described in this Paragraph
21 shall not be considered part of the Employee's
annual Base Salary for purposes of the calculation
in Paragraph 11.2(a) of the Employment Agreement or
in Paragraph 1(a) of the 1984 Agreement."
In all other respects, the Employment Agreement
is hereby ratified and confirmed.
45
<PAGE>
If the foregoing accurately reflects your
understanding with respect to the matters set forth
herein, please indicate your acceptance of, and agreement
to, the foregoing terms by signing in the space provided
below and returning a fully executed copy of this letter
to the undersigned.
Very truly yours,
TPI ENTERPRISES, INC.
By: /s/ J. Gary Sharp
------------------
Name: J. Gary Sharp
Title: President and Chief
Executive Officer
Accepted and agreed to:
/s/ Stephen R. Cohen
- ------------------------
Stephen R. Cohen
46
Exhibit 10.15
November 19, 1992
Mr. Robert A. Kennedy
TPI Enterprises, Inc.
Phillips Point Plaza
East Tower, Suite 909
777 South Flagler Drive
West Palm Beach, Florida 33401
Dear Mr. Kennedy:
This letter, when countersigned by you where indicated
below, shall constitute an agreement (this "Agreement") between
yourself (the "Employee") and TPI Enterprises, Inc. (the
"Company") as follows:
1. Termination of Employment. If the Employee's employment
-------------------------
is terminated by the Company at any time prior to five years
after the date of this Agreement for any reason other than for
"Cause" (as defined in Section 2 below), then the Company shall
(A) pay to the Employee within thirty (30) days after such
termination (i) if such termination occurs within three years
after the date of this Agreement, a lump sum payment in cash in
an amount equal to the annual compensation paid to the Employee
for the twelve months preceding such termination (ii) if such
termination occurs more than three but less than four years after
the date of this Agreement, a lump sum payment in cash equal to
two-thirds of the annual compensation paid to the Employee for
the twelve months preceding such termination or (iii) if such
termination occurs more than four but less than five years after
the date of this Agreement, a lump sum payment in cash equal to
one-third of the annual compensation paid to the Employee for the
twelve months preceding such termination; and (B) continue for
one year following such termination to provide the Employee with
the same medical insurance coverage as provided to the Employee
prior to such termination and in amounts consistent with the
Employee's coverage prior to such termination; provided, however,
-------- -------
that if the Employee's employment with the Company is terminated
by the Company for Cause, or if the Employee voluntarily
terminates his employment with the Company, he shall not receive
such payments or insurance coverage; and provided, further, that
-------- -------
a termination by the Employee of his employment within thirty
(30) days following a significant reduction in the Employee's
base salary or benefits which is not proportionate to a similar
reduction in the base salary or benefits of other members of
<PAGE>
management of the Company, shall not be considered a voluntary
termination for purposes of this Agreement.
2. Termination for Cause. For purposes of this Agreement,
---------------------
the Company shall have "Cause" to terminate the Employee's
employment hereunder upon (A) the willful and continued failure
by the Employee to substantially perform his duties as assigned
to him from time to time by the executive officers of the Company
(other than any such failure resulting from the Employee's
incapacity due to physical or mental illness), after demand for
substantial performance is delivered by the Company that specif-
ically identifies the manner in which the Company believes the
Employee has not substantially performed his duties, or (B) the
willful engaging by the Employee in misconduct which, as a direct
consequence, materially injures the Company. For purposes of
this Section, no act, or failure to act, on the Employee's part
shall be considered "willful" unless done, or omitted to be done,
by him not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be deemed
to have been terminated for Cause without (1) reasonable notice
to the Employee setting forth the reasons for the Company's
intention to terminate for Cause, (2) an opportunity for the
Employee, together with his counsel, to be heard by the Chief
Executive Officer of the Company, and (3) a finding that in the
good faith opinion of three-quarters (3/4) of the members of the
Board excluding the Employee, the Employee was guilty of the
conduct set forth above in clause (A) or (B) hereof, and
specifying the particulars thereof in detail. For purposes of
this Agreement, Cause shall not include Employee's refusal to
accept a transfer of location of employment which would
reasonably necessitate the relocation of Employee's residence,
unless the Company relocates its principal offices to that
location of employment and at least two of the three present
members of senior management of the Company and the majority of
the then current executive officers of the Company also relocate
to such offices, in which case the Employee's refusal to accept
such transfer shall constitute Cause.
3. Assignment. This Agreement, as it relates to the
----------
employment of the Employee, is a personal contract and the rights
and interests of the Employee hereunder may not be sold,
transferred, assigned, pledged or hypothecated; provided,
--------
however, that upon the death of the Employee, all amounts, if
- -------
any, owed to the Employee pursuant to paragraph 1(A) hereof shall
be paid to his estate. Except as otherwise herein expressly
provided, this Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns
including, without limitation, any corporation or other entity
into which the Company is merged or which acquires all of the
2
<PAGE>
outstanding common shares of the Company, or all or substantially
all of the assets, of the Company.
4. Right to Payments. The Employee shall not, under any
-----------------
circumstances, have any option or right to require payments
hereunder otherwise than in accordance with the terms hereof. To
the extent allowed by law, the Employee shall not have any power
of anticipation, alienation or assignment of payments
contemplated hereunder, and all rights and benefits of the
Employee shall be for the sole personal benefit of the Employee,
and no other person shall acquire any right, title or interest
hereunder by reason of any sale, assignment, transfer, claim or
judgment or bankruptcy proceedings against the Employee.
5. Employment. Nothing in this Agreement shall be
----------
construed as conferring upon the Employee any right to continued
employment with the Company nor shall it interfere in any way
with the right of the Company to terminate the Employee's
employment at any time.
6. Mitigation. The Employee shall be under no obligation
----------
to mitigate the amount of any payment provided for herein by
seeking other employment or otherwise nor shall such amount the
offset by any compensation which the Employee may receive from
future employment or otherwise.
7. Employee's Obligation After Termination. As
---------------------------------------
consideration for entering into this Agreement, the Employee
shall, in the event that the Employee's employment with the
Company is terminated for any reason, make himself reasonably
available the Company after such termination to address any
questions that may arise regarding information he acquired during
his employment with the Company; provided, however, that such
-------- -------
obligation shall be limited in scope so as not to interfere with
the Employee's subsequent position of employment and provided,
--------
further, that if the Company breaches its obligations to the
- -------
Employee pursuant to paragraph 1 hereof, in addition to any other
remedies the Employee may have in law or in equity, the Employee
shall have no obligation to provide services to the Company
pursuant to this paragraph 7.
8. 1984 Agreement. This Agreement shall in no manner
--------------
affect the validity of the agreement between the Employee and the
Company dated January 9, 1984 (the "1984 Agreement").
Notwithstanding anything in this Agreement to the contrary, if
the Employee receives payments pursuant to the 1984 Agreement,
the Employee shall not receive any payments under this Agreement.
3
<PAGE>
9. Retirement Plan. Any payments received pursuant to this
---------------
Agreement shall not be considered "Compensation" as defined in
the Company's Nonqualified Retirement Plan for Senior Executives
effective August 15, 1989 (the "Retirement Plan") for purposes of
computation of benefits under the Retirement Plan.
10. Term. This Agreement shall terminate and be of no
----
further force and effect after November 19, 1997 (except to the
extent obligations are incurred hereunder prior to such date).
11. Notices. Any notice required or permitted to be given
-------
to the Employee pursuant to this Agreement shall be sufficiently
given if sent to the Employee by certified mail addressed to him
at the following address:
501 South Ocean Boulevard
Unit 101
Boca Raton, Florida 33432
or at such other address as he shall designate by notice to the
Company, and any notice required or permitted to be given to the
Company pursuant to this Agreement shall be sufficiently given if
sent to the Company by certified mail addressed to it at Phillips
Point Plaza, East Tower, Suite 909, 777 South Flagler Drive, West
Palm Beach, Florida 33401, or at such other address as the
Company shall designate by notice to the Employee.
12. Governing Law. This Agreement shall be governed by,
-------------
and construed and enforce in accordance with, the laws of the
State of Florida applicable to agreements made and to be
performed entirely in Florida.
13. Waiver of Breach; Partial Invalidity. The waiver by
------------------------------------
either party of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall attach
only to such provision and not in any way affect or render
invalid or unenforceable any other provisions of this Agreement,
and this Agreement shall be carried out as if such invalid or
unenforceable provision were not embodied therein.
14. Entire Agreement. This Agreement and the 1984
----------------
Agreement constitute the entire agreement between the parties
relating to the Employee's receipt of payment following a
termination of employment with the Company and there are no
representations, warranties or commitments except as set forth
herein or in the 1984 Agreement. This Agreement supersedes all
prior and contemporaneous agreements, understandings,
negotiations and discussions, whether written or oral, of the
4
<PAGE>
parties hereto relating to the Employee's receipt of payment
following a termination of employment with the Company except for
the 1984 Agreement. This Agreement may be amended only in
writing executed by the parties hereto affected by such
amendment.
If the foregoing accurately reflects your understanding
with respect to the matters set forth herein, please indicate
your acceptance of, and agreement to, the foregoing terms by
signing in the space provided below and returning a fully
executed copy of this letter the undersigned.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the day and year above written.
TPI ENTERPRISES, INC.
By: /s/ Stephen R. Cohen
--------------------------
Name: Stephen R. Cohen
Title: Chairman of the
Board and Chief
Executive Officer
Accepted and agreed to:
/s/ Robert A. Kennedy
- --------------------------------
Robert A. Kennedy
5
<PAGE>
AMENDMENT TO TERMINATION AGREEMENT dated this 31st day of
December, 1993, by and between TPI ENTERPRISES, INC., a New
Jersey corporation (the "Company"), and ROBERT A. KENNEDY (the
"Employee");
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company and the Employee entered into a
letter agreement dated November 19, 1992, regarding payments
to the Employee following termination of employment with the
Company, as same has heretofore been amended (the "Termination
Agreement"); and
WHEREAS, the Company and the Employee desire to amend the
Termination Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises, the
mutual covenants hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which
hereby is acknowledged, the Company and the Employee hereby
agree as follows:
1. Paragraph 1 of the Termination Agreement hereby is
amended in its entirety to read as follows:
"1. Termination of Employment. If
-------------------------
the Employee's employment is terminated by
the Company at any time on or prior to
November 19, 1997, for any reason other
than for "Cause" (as defined in Section 2
below), then the Company shall (A) pay to
the Employee within thirty (30) days after
such termination (i) if such termination
occurs on or prior to November 19, 1995, a
lump sum payment in cash in the amount of
$320,000; (ii) if such termination occurs
from November 20, 1995, to and including
November 19, 1996, a lump sum payment in
cash in the amount of $213,333 and (iii)
if such termination occurs from
November 20, 1996, to and including
November 19, 1997, a lump sum payment in
cash in the amount of $106,667; and (B)
continue for one year following such
termination to provide the Employee with
the same medical insurance coverage as
provided to the Employee prior to such
termination and in amounts consistent with
6
<PAGE>
the Employee's coverage prior to such
termination; provided, however, that if
-------- -------
the Employee's employment with the Company
is terminated by the Company for Cause, or
if the Employee voluntarily terminates his
employment with the Company, he shall not
receive such payments or insurance
coverage; and provided, further, that a
-------- -------
termination by the Employee of his
employment within thirty (30) days
following a significant reduction in the
Employee's base salary or benefits which
is not proportionate to a similar
reduction in the base salary or benefits
of other members of management of the
Company, shall not be considered a
voluntary termination for purposes of this
Agreement."
2. Paragraph 14 of the Termination Agreement hereby is
amended in its entirety to read as follows:
"14. Entire Agreement. This Agreement,
----------------
the 1984 Agreement and the Employment
Agreement dated as of December 31, 1993
(the "Employment Agreement") constitute
the entire agreement between the parties
relating to the Employee's receipt of
payment following a termination of
employment with the Company and there are
no representations, warranties or
commitments except as set forth herein or
in the 1984 Agreement or the Employment
Agreement. This Agreement supersedes all
prior and contemporaneous agreements,
understandings, negotiations and
discussions, whether written or oral, of
the parties hereto relating to the
Employee's receipt of payment following a
termination of employment with the Company
except for the 1984 Agreement and the
Employment Agreement. Notwithstanding the
foregoing, this Agreement shall not
supersede and shall have no effect on the
stock option agreements between the
Company and the Employee. This Agreement
may be amended only in writing executed by
the parties hereto affected by such
amendment."
7
<PAGE>
3. Except as amended hereby, the Termination Agreement
hereby is ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment to Termination Agreement as of the date and year
first above written.
TPI Enterprises, Inc.
By: /s/ J. Gary Sharp /s/ Robert A. Kennedy
- -------------------------- ---------------------------
President
Company Employee
8
<PAGE>
EMPLOYMENT AGREEMENT, dated as of December 31, 1993, by
and between TPI ENTERPRISES, INC., a New Jersey corporation
(hereinafter referred to as the "Company"), and ROBERT A.
KENNEDY (hereinafter referred to as the "Employee" ) .
The Company and the Employee were parties to an
employment agreement which by its terms expired on June 30,
1992, following which termination Employee has continued in
the employ of the Company.
The Company and the Employee desire to enter into a new
employment agreement which will set forth the terms and
conditions upon which the Employee shall continue to be
employed by the Company and upon which the Company shall
continue to compensate the Employee.
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants hereinafter set forth, the parties hereto
have agreed, and do hereby agree, as follows:
(1) EMPLOYMENT; TERM
----------------
1.1 The Company will employ the Employee in its business
and the Employee will work for the Company therein, as its
Executive Vice President and Secretary, for a term of one (1)
year commencing as of the date hereof and ending on December
31, 1994. Such period, together with the period of any
extension or renewal of such employment is herein referred to
as the "Employment Period". Such employment may be terminated
by the Company at any time for "Cause" (as defined in Section
1.2).
1.2 For purposes of this Agreement, the Company shall
have "Cause" to terminate the Employee's employment hereunder
upon (i) the willful and continued failure by the Employee to
substantially perform his duties hereunder (other than any
such failure resulting from the Employee's incapacity due to
physical or mental illness), after demand for substantial
performance is delivered by the Company that specifically
identifies the manner in which the Company believes the
Employee has not substantially performed his duties, or (ii)
the willful engaging by the Employee in misconduct which, as a
direct consequence, materially injures the Company (including,
but not limited to, conduct not in compliance with Section 7
hereof). For purposes of this Section, no act, or failure to
act, on the Employee's part shall be considered "willful"
unless done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or omission was
in the best interest of the Company. Notwithstanding the
foregoing, the Employee shall not be deemed to have been
terminated for Cause without (1) reasonable notice to the
Employee setting forth the reasons for the Company's intention
to terminate for Cause, (2) an opportunity for the Employee,
together with his counsel, to be heard before the Board, and
(3) delivery to the Employee of a Notice of Termination, as
defined in Section 1.3 hereof, from the Board finding that in
9
<PAGE>
the good faith opinion of three-quarters (3/4) of the members
of the Board excluding the Employee, the Employee was guilty
of the conduct set forth above in clause (i) or (ii) hereof,
and specifying the particulars thereof in detail.
1.3 Any termination of the Employee's employment by the
Company or by the Employee (other than termination upon the
Employee's death) shall be communicated by written Notice of
Termination to the other party hereto in accordance with
Section 15. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
the Employee's employment under the provision so indicated.
(2) DUTIES
------
2.1 During the Employment Period, the Employee shall
serve as the Company's Executive Vice President and Secretary,
to perform duties of an executive character consisting of
administrative and managerial responsibilities on behalf of
the Company and such further duties as shall, from time to
time, be reasonably delegated or assigned to him by the Board
of Directors and/or the Chief Executive Officer of the Company
consistent with the Employee's abilities.
(3) DEVOTION OF TIME
----------------
3.1 During the Employment Period, the Employee shall
expend substantially all of his working time for the Company;
shall devote his best efforts, energy and skill to the
services of the Company and the promotion of its interests;
and shall not take part in activities detrimental to the best
interests of the Company.
(4) COMPENSATION
------------
4.1 For all services to be rendered by the Employee
during the Employment Period, the Employee shall receive from
the Company an annual base salary of $225,000, payable in
accordance with the Company's customary payroll practices. In
addition, should the litigation styled Maxcell Telecom Plus,
---------------------
Inc. and TPI Enterprises, Inc. v. McCaw Cellular
- ------------------------------------------------
Communications, Inc. et al. result in a payment to the
- ---------------------------
Company, Employee will receive a bonus in an amount to be
determined in the sole discretion of the Board at the time
based on the amount of the payment to the Company and the
Employee's contribution toward same. The preceding provision
shall survive termination of the Employee's employment under
this Agreement.
4.2 Employee shall also be entitled to such additional
increments and bonuses, if any, as shall be determined from
time to time by the Board of Directors of the Company.
10
<PAGE>
(5) USE OF AUTOMOBILE; REIMBURSEMENT OF EXPENSES
--------------------------------------------
5.1 The Employee shall, at all times during the
Employment Period, have the use of a Company owned or leased
automobile or, at the Employee's option, shall receive an
automobile allowance for the use of his automobile as those
benefits are provided to him as of December 31, 1993, and
Employee shall receive the medical benefits provided to him as
of December 31, 1993 (provided such benefits are commensurate
with those provided to other senior executives of the
Company). All costs of such automobile, including lease costs
or purchase price, full maintenance, insurance, gasoline, oil
and garaging shall be paid by the Company in an amount which
is consistent with the past practice of the Company. The
Company shall further pay directly, or reimburse the Employee,
for all other reasonable and necessary expenses and
disbursements incurred by him for and on behalf of the Company
in the performance of his duties during the Employment Period,
including, without limitation, all reasonable expenses
incurred by the Employee for food, lodging and transportation,
if he is required to perform any of his duties away from his
primary place of residence. For such purposes, the Employee
shall submit to the Company, not less than once in each
calendar month, reports of such expenses and other
disbursements in form normally used by the Company.
(6) DISABILITY
----------
6.1 If, during the Employment Period, the Employee
shall, in the opinion of the Board of Directors of the
Company, as confirmed by competent medical evidence, become
physically or mentally incapacitated to perform his duties for
the Company hereunder for a continuous period, then for the
first twelve (12) months of such period he shall receive his
full salary, and for the remainder of such period he shall
receive fifty percent (50%) of his salary. In no event is the
Employee entitled to receive any payments under this Section
6.1 beyond the termination date of this Agreement. Upon his
resumption of full employment, the Employee shall be
reentitled to receive his full salary commencing from the date
of his reemployment. If such illness or other incapacity
shall endure for a continuous period of more than seventeen
(17) months, the Company shall have the right, pursuant to a
Notice of Termination satisfying the requirements of Section
1.3 hereof, to terminate the Employee's employment hereunder
as of a date (not less than thirty (30) days after the date of
the sending of such Notice of Termination) to be specified in
such Notice of Termination provided, however, that if, prior
-------- -------
to the date specified in such Notice of Termination, the
Employee shall have resumed full employment, he shall be
entitled to continue such employment and to receive his full
compensation therefor, and such Notice of Termination shall be
of no effect. The Employee agrees to submit himself for
appropriate medical examination to a physician of the
Company's designation as necessary for purposes of this
Section 6.1.
6.2 The obligations of the Company under this Section 6
may be satisfied, in whole or in part, by payments to the
Employee under disability insurance provided by the Company,
and under laws providing disability benefits for employees.
11
<PAGE>
(7) RESTRICTIVE COVENANT
--------------------
7.1 The services of the Employee are unique and
extraordinary and essential to the business of the Company,
especially since the Employee shall have access to the
Company's customer lists, trade secrets and other privileged
and confidential information essential to the Company's
business. Therefore, the Employee agrees that if his
employment hereunder shall at any time be terminated for any
reason whatsoever, the Employee will not at any time within
one (1) year after such termination, except as set forth in
Exhibit A, without the prior written approval of the Company,
directly or indirectly, within one hundred fifty (150) miles
of either West Palm Beach, Florida or any other metropolitan
area in which the Company shall then conduct substantial
operations, engage in any business activity competitive with
the business of the Company; and further, the Employee agrees
-------
that during such one (1) year period he shall not solicit,
directly or indirectly, any prospective account of the Company
who at the time of such termination was then actively being
solicited by the Company. For purposes of this Section 7, any
and all references to the Company includes the Company and its
subsidiaries.
7.2 The Employee agrees not to divulge, furnish or make
available to anyone (other than in the regular course of
business of the Company) any knowledge or information with
respect to confidential or secret methods, processes, plans or
materials of the Company, or with respect to any other
confidential or secret aspect of the Company's activities.
7.3 The Employee agrees to communicate and make known to
the Company all knowledge possessed by him relating to any
methods, developments, inventions and/or improvements, whether
patented, patentable or unpatentable, which concern in any way
the business of the Company, whether acquired by him before or
during the Employment Period; provided, however, that nothing
-------- -------
herein shall be construed as requiring any such communication
where the method, development, invention and/or improvement is
lawfully protected from disclosure as the trade secret of a
third party or by any other lawful bar to such communication.
7.4 Any methods, developments, inventions and/or
improvements, whether patentable or unpatentable, which the
Employee may conceive or make along the lines of the Company's
business while in its employ, shall be and remain the property
of the Company. The Employee further agrees on request to
execute patent applications based on such methods,
developments, inventions and/or improvements, including any
other instruments deemed necessary by the Company for the
prosecution of such patent application or the acquisition of
Letters Patent of this and any foreign country.
(8) VACATIONS
---------
8.1 The Employee shall be entitled to reasonable
vacations during each twelve-month period of the Employment
Period, the time and duration thereof to be determined by
mutual agreement between the Employee and the Company.
12
<PAGE>
(9) PARTICIPATION IN EMPLOYEE BENEFIT PLANS
---------------------------------------
9.1 The Employee and any beneficiary of the Employee
shall be accorded the right to participate in and receive
benefits under and in accordance with the provisions of any
insurance, deferred compensation, or other similar plan or
program of the Company either in existence as of the date
hereof or hereafter adopted for the benefit of its executive
employees.
(10) SERVICE AS DIRECTOR AND OFFICER
-------------------------------
10.1 During the Employment Period, the Employee will
maintain whatever officer of director positions he holds at
December 31, 1993 with the Company and/or any subsidiary or
affiliate of the Company and his duties will not be materially
changed. The Employee shall not receive any additional
compensation for his services as a director or officer other
than as provided for in this Agreement.
(11) EARLIER TERMINATION
-------------------
11.1 The Employee's employment hereunder shall
automatically terminate upon his death and may terminate:
(a) at the option of the Company upon the
Employee's incapacity as set forth in Section 6 hereof;
(b) at the option of the Company upon thirty (30)
days' prior delivery of a Notice of Termination to the
Employee in the event the Company terminates his employment
hereunder for Cause, as set forth in Section 1.2 hereof, other
than pursuant to subsection (a) immediately above;
(c) at the option of the Company upon the
Employee's voluntary leaving the employ of the Company; or
(d) at the option of the Company at any time
without Cause, provided that the Company makes payment to the
Employee of the remainder of Employee's annual base salary in
accordance with the Company's customary payroll practices for
the remainder of the calendar year during which the
termination without Cause occurs.
11.2 The Employee shall be under no obligation to
mitigate the amount of any payments which may be owed by the
Company to the Employee for breach by the Company of this
Agreement, by seeking other employment or otherwise nor shall
such amount be offset by any compensation which the Employee
may receive from future employment or otherwise.
(12) INJUNCTIVE RELIEF
-----------------
13
<PAGE>
12.1 The Employee acknowledges and agrees that, in the
event he shall violate any of the restrictions of Sections 3
and 7 hereof, the Company will be without adequate remedy at
law and will therefore be entitled to enforce such
restrictions by temporary or permanent injunctive or mandatory
relief obtained in an action or proceeding instituted in the
Supreme Court of the State of New York or any other court of
competent jurisdiction without the necessity of proving
damages and without prejudice to any other remedies which it
may have at law or in equity.
(13) ASSIGNMENT
----------
13.1 This Agreement, as it relates to the employment of
the Employee, is a personal contract and the rights and
interests of the Employee hereunder may not be sold,
transferred, assigned, pledged or hypothecated, except that,
if requested by the Company, the Employee shall devote a
portion of his working time for the Company's subsidiaries,
serving as a senior executive officer. Except as otherwise
herein expressly provided, this Agreement shall inure to the
benefit of and be binding upon the Company and its successors
and assigns including, without limitation, any corporation or
other entity into which the Company is merged or which
acquires all of the outstanding Common Shares, or all or
substantially all of the assets, of the Company.
(14) RIGHT TO PAYMENTS
-----------------
14.1 The Employee shall not, under any circumstances,
have any option or right to require payments hereunder
otherwise than in accordance with the terms hereof. To the
extent allowed by law, the Employee shall not have any power
of anticipation, alienation or assignment of payments
contemplated hereunder, and all rights and benefits of the
Employee shall be for the sole personal benefit of the
Employee, and no other person shall acquire any right, title
or interest hereunder by reason of any sale, assignment,
transfer, claim or judgment or bankruptcy proceedings against
the Employee.
(15) NOTICES
-------
15.1 Any notice required or permitted to be given to the
Employee pursuant to this Agreement shall be sufficiently
given if sent to the Employee by certified mail addressed to
him at the following address:
501 South Ocean Boulevard
Boca Raton, Florida 33432
or at such other address as he shall designate by notice to
the Company, and any notice required or permitted to be given
to the Company pursuant to this Agreement shall be
sufficiently given if sent to the Company by certified mail
addressed to it at Phillips Point East Tower, 777 South
Flagler Drive, West Palm Beach, Florida 33401, or at such
other address as the Company shall designate by notice to the
Employee.
14
<PAGE>
(16) GOVERNING LAW
-------------
16.1 This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of
Florida applicable to agreements made and to be performed
entirely in Florida.
(17) WAIVER OF BREACH; PARTIAL INVALIDITY
------------------------------------
17.1 The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach. If any provision of
this Agreement shall be held to be invalid or unenforceable,
such invalidity or unenforceability shall attach only to such
provision and not in any way affect or render invalid or
unenforceable any other provisions of this Agreement, and this
Agreement shall be carried out as if such invalid or
unenforceable provision were not embodied therein.
(18) ENTIRE AGREEMENT
----------------
18.1 Except as set forth in Section 19 hereof, this
Agreement constitutes the entire agreement between the parties
and there are no representations, warranties or commitments
except as set forth herein. Except as set forth in Section
19, this Agreement supersedes all prior and contemporaneous
agreements, understandings, negotiations and discussions,
whether written or oral, of the parties hereto relating to the
transactions contemplated by this Agreement; provided,
--------
however, that it is the intention of the parties hereto that
- -------
this Agreement shall not supersede, and shall be interpreted
and applied in conjunction with, the terms of any option,
warrant or other right now in existence or hereinafter granted
to the Employee to acquire shares of capital stock of the
Company, including, without limitation, the stock option
agreements entered into by the Employee and the Company as of
August 16, 1989, and February 5, 1992, which stock option
agreements shall continue in full force and effect. In the
event of any conflict, however, the terms of this Agreement
shall govern and prevail. This Agreement may be amended only
in writing executed by the parties hereto affected by such
amendment.
(19) LETTER AGREEMENTS
-----------------
19.1 The letter agreement dated November 19, 1992, as
amended (the "1992 Letter Agreement) and the letter agreement
dated January 2, 1984 (the "1984 Letter Agreement") between
the Company and the Employee regarding payments to the
Employee following termination of employment with the Company
(collectively the "Letter Agreements"), shall continue in full
force and effect and shall not be amended notwithstanding this
Agreement. In the event of any conflict between the terms of
this Agreement and the Letter Agreements, the terms of the
Letter Agreements shall govern and prevail. However, in the
event the Employee receives benefits pursuant to 1984 Letter
Agreement, such benefits shall be exclusive and the Employee
shall not be entitled to receive any payments or compensation
otherwise payable hereunder. In the event the Employee
receives benefits pursuant to the 1992 Letter Agreement such
15
<PAGE>
benefits shall also be exclusive and the Employee shall not be
entitled to receive any payments or compensation otherwise
payable hereunder other than (i) payment of the remainder of
Employee's annual base salary in accordance with Paragraph
11.1(d) hereof in the event the Company terminates the
Employee's employment hereunder without Cause and (ii) payment
of the bonus referred to in the second sentence of Paragraph
4.1 hereof.
(20) TERMINATION OF RETIREMENT PLAN
------------------------------
20.1 On December 31, 1993, simultaneously with the
execution and delivery of this Employment Agreement, the
Employee is receiving from the Company a cash payment in the
amount of $700,000 in consideration of the Employee's entering
into this Employment Agreement (including the rendering of
future services to the Company at a reduced salary).
20.2 Effective upon the execution and delivery of this
Employment Agreement, the Employee hereby:
(a) acknowledges that the Company intends to
terminate the Company's Nonqualified Retirement Plan for
Senior Executives (the "Retirement Plan");
(b) acknowledges that he shall not be entitled to
any additional benefits under the Retirement Plan now or
in the future; and
(c) releases the Company from all obligations and
liabilities arising from, under or in connection with the
Retirement Plan, whether currently existing or arising at
any time hereafter, and hereby releases the Company from
all past, present and future claims, demands, actions,
causes of action, liabilities, rights, damages, costs,
expenses and compensation of every nature whatsoever,
whether direct or indirect, arising from or under the
Retirement Plan.
20.3 The payment described in this Paragraph 20 shall not
be considered part of the Employee's annual compensation for
purposes of the 1984 Letter Agreement.
16
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the day and year above written.
TPI ENTERPRISES, INC.
By: /s/ J. Gary Sharp
-------------------------------
President
COMPANY
/s/ Robert A. Kennedy
-------------------------------
ROBERT A. KENNEDY
EMPLOYEE
17
Exhibit 10.16
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of January 13,
1994, between J. Gary Sharp, residing in Hobe Sound,
Florida (the "Executive") and TPI Enterprises, Inc., a
New Jersey corporation ("TPIE"), and TPI Restaurants,
Inc. ("Restaurants"), a Tennessee corporation (collec-
tively the "Companies").
WHEREAS, the Companies and the Executive en-
tered into an Asset Purchase Agreement dated Septem-
ber l3, 1989 (the "Purchase Agreement") pursuant to which
the Companies agreed to purchase from the Executive
certain restaurant assets;
WHEREAS, the Companies wish to be assured that
they will have the benefit of the services and advice of
the Executive and the Executive's agreement not to com-
pete with the Companies as set forth herein;
WHEREAS, the Executive is willing to be so
employed by the Companies and is willing to agree not to
compete with the Companies on the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the premis-
es and of the mutual agreements hereinafter set forth,
<PAGE>
the parties hereto have agreed, and do hereby agree, as
follows:
1. Employment; Term. Subject to the terms
----------------
and provisions of this Employment Agreement, the Compa-
nies hereby agree to employ the Executive and the Execu-
tive hereby agrees to be employed by the Companies for
the period commencing on the date hereof and ending on
the fifth anniversary thereof unless sooner terminated as
hereinafter provided (the "Employment Term").
2. Duties; Full Time Employment. During the
----------------------------
Employment Term, the Executive shall be Chief Executive
Officer of TPIE and President and Chief Operating Officer
of Restaurants, and shall perform duties commensurate
with such positions as shall from time to time be dele-
gated or assigned to him by the Board of Directors of the
Companies. During the Employment Term, the Executive
will devote his entire working time, energy and skill to
the services of the Companies and the promotion of their
interests.
3. Place of Performance. During the Employ-
--------------------
ment Term, the Executive shall be based at the Companies'
corporate headquarters in West Palm Beach, Florida,
Memphis, Tennessee or such other place to which such
corporate headquarters may be relocated.
2
<PAGE>
4. Compensation.
------------
(a) Base Salary. As compensation for his
-----------
services to the Companies under this Agreement, the
Companies will pay to the Executive during the Employment
Term a base salary at the rate of not less that
$289,401.84 per annum, in installments which are custom-
ary with the practice of the Companies' payment of sala-
ries to their other senior management employees. On the
last Sunday in December 1993 and the last Sunday in
December of each year thereafter during the Employment
Term, the Executive's base salary shall be increased by
an amount which is not less than five percent (5%) of the
immediately preceding year's base salary.
(b) Incentive Compensation. The Execu-
----------------------
tive shall be entitled to receive an annual bonus (the
"Bonus"), which shall be paid no later than February 15
of each year during the Employment Term with respect to
the immediately preceding year, commencing with the year
beginning January l, 1994. The Bonus shall be calculated
and paid as follows:
(i) The Bonus for any year (commenc-
ing with the year beginning January l, 1994) shall
be the amount equal to 2.70% of the increase in the
Companies' Profits attributable to the Companies'
3
<PAGE>
operations for the calendar year just ended over the
Companies' Profits for the prior year excluding any
Restaurants acquired during that Year for which the
Bonus is being calculated. "Profits" shall mean
earnings attributable to the Companies' operations
and shall consist of earnings before reductions for
interest payments and taxes but after reductions for
depreciation and shall be based on the consolidated
earnings of both TPIE and Restaurants.
(ii) When calculating the Bonus for
any given year (the "Bonus Year") for restaurants
acquired that year in which the Companies have ac-
quired additional restaurants, the Companies shall
determine the pro forma effect of the acquisition of
such restaurants upon the Companies' financial
statements and Profits for the 12-month period
immediately preceding the date of such acquisition.
The Executive's Bonus with respect to the twelve
months after the acquisition of such restaurants
shall be the amount equal to 2.70% of the increase
in the Profits over the amount of Profits stated in
the pro forma financial statements referred to in
the immediately preceding sentence. After each newly
acquired restaurant has been in operation for twelve
4
<PAGE>
months, such restaurant shall be included in the
bonus calculation for general operations of the
Companies set forth in Section 4(b)(i) above.
(iii) In addition to the amounts paid
pursuant to 4(b)(i) and 4(b)(ii) above, Executive
shall be paid an additional Bonus amount equal to
$28,000.00 for each percentage point increase (or
portion thereof) in the Companies' same store nomi-
nal sales (which shall include menu price increase)
each calculated and payable annually.
(iv) Following the close of each
fiscal year, the Compensation Committee of TPIE's
Board will review the Companies' financial perfor-
mance and make a discretionary grant to the Execu-
tive of 10-year stock options that vest pro rata
over 5 years, having a strike price equal to the
then current market price of TPIE stock, not to
exceed options covering 50,000 shares per year.
(v) In addition, Executive will be
granted additional options expiring on December 31,
1998, having a strike price equal to the market
price of TPIE stock on the date of this Employment
Agreement as follows:
5
<PAGE>
(a) Options covering 10,000 shares
at such time as the closing price of TPIE stock
exceeds $18 for 20 consecutive trading days;
(b) Options covering 10,000 shares
at such time as the closing price of TPIE stock
exceeds $19 for 20 consecutive trading days;
(c) Options covering 10,000 shares
at such time as the closing price of TPIE stock
exceeds $20 for 20 consecutive trading days;
(d) Options covering 10,000 shares
at such time as the closing price of TPIE stock
exceeds $21 for 20 consecutive trading days;
(e) Options covering 10,000 shares
at such time as the closing price of TPIE stock
exceeds $22 for 20 consecutive trading days;
(f) Options covering 10,000 shares
at such time as the closing price of TPIE stock
exceeds $23 for 20 consecutive trading days;
(g) Options covering 10,000 shares
at such time as the closing price of TPIE stock
exceeds $24 for 20 consecutive trading days;
(h) Options covering 10,000 shares
at such time as the closing price of TPIE stock
exceeds $25 for 20 consecutive trading days;
6
<PAGE>
(i) Options covering 10,000 shares at
such time as the closing price of TPIE stock
exceeds $26 for 20 consecutive trading days;
and,
(j) Options covering 10,000 shares
at such time as the closing price of TPIE stock
exceeds $27 for 20 consecutive trading days;
(vi) All newly granted options including
those set forth in Paragraph 4(b)(v), will terminate
fourteen business days after the Executive's termi-
nation of employment by the Companies for "Cause",
and on the earlier to occur of (i) the expiration of
the options, (ii) one year after a termination of
employment by the Executive for "Good Reason", or
(iii) one year after the Executive's termination of
employment by the Companies without "Cause". Exist-
ing stock options granted to the Executive under the
TPIE 1992 Stock Option and Incentive Plan shall be
amended to reflect the foregoing provision regarding
exercisability upon termination of employment.
Solely for purposes and as such terms are used in
TPIE's 1983 Stock Option Plan and 1984 Stock Option
Plan, the Companies shall retain the Executive as an
"employee" and maintain his "employment" for a
7
<PAGE>
period, (the "Period") following the Employment Term
as set forth below. The Period shall be fourteen
business days after the Executive's termination of
employment by the Companies for "Cause" and the
Period shall be the shorter of (i) from the end of
the Employment Term through the date of expiration
of the options, and (ii) one year following the end
of the Employment Term if the Executive terminates
his employment for "Good Reason" or if the Companies
terminate the Executive's employment without
"Cause." During the Period, the Executive shall
have no duties other than any he may agree to and
the Companies shall have no obligation to pay the
Executive more than a nominal amount or to provide
any employee benefits other than to maintain the
continued exercisability of his stock options.
(c) Participation in Benefit Plans.
------------------------------
During the Employment Term, the Executive shall be enti-
tled to participate in all employee benefit plans gener-
ally available to members of the Companies' senior man-
agement, including, without limitation, medical benefit
plans, subject to and on a basis consistent with the
terms, conditions and overall administration of such
plans and shall be entitled to such vacation and other
perquisites generally available to members of the
Companies' senior management.
8
<PAGE>
5. Reimbursement for Expenses. The Companies
--------------------------
shall reimburse the Executive for all reasonable and
necessary business, traveling and entertainment expenses
and other disbursements incurred by him (in accordance
with reasonable policies and procedures established for
executive officers of the Companies) for or on behalf of
the Companies in the performance of his duties during the
Employment Term under this Agreement upon submission to
the Companies by the Executive of documentation evidenc-
ing such expenses.
6. Unauthorized Disclosure; Competitive
------------------------------------
Activity.
- --------
(a) During the Employment Term and for a
period of two years thereafter (the "Nondisclosure Peri-
od"), the Executive shall not make any Unauthorized Dis-
closure. For purposes of this Agreement, "Unauthorized
Disclosure" shall mean disclosure by the Executive to any
person, other than an employee of the Companies or a per-
son to whom disclosure is reasonably necessary or appro-
priate or legally required in connection with the perfor-
mance by the Executive of his duties as an executive of
the Companies, without the written consent of the Board of
Directors of the Companies, of any information obtained by
the Executive while in the employ of the Companies with
respect to any of the Companies' business, financial af-
fairs, inventions, processes, customers, or methods of
distribution, the disclosure of which he knows or has
9
<PAGE>
reason to believe will or would be damaging to the Compa-
nies; provided that the Executive shall not be prohibited
--------
from using or disclosing any information (i) known gener-
ally to the public (other than as a result of disclosure
by him), (ii) known to the Executive prior to his signing
of this Agreement (other than information which he ac-
quired during negotiations relating to this Agreement or
the Purchase Agreement), (iii) which is non-confidential
and disclosed to him, or (iv) not otherwise considered
confidential by a person engaged in the same business as
that conducted by the Companies.
(b) Competitive Activity. The Executive
--------------------
agrees that during the Noncompetition Period (as defined
below), except as set forth on Exhibit A hereto, he will
not, directly or indirectly, own or operate any restaurant
located within five miles of any restaurant owned or oper-
ated by the Companies that are similar to any restaurant
owned or operated by the Companies without the written
consent of the Board of Directors of the Companies. For
purposes of this Agreement the Noncompetition Period shall
commence on the Date hereof and terminate:
(i) if the Executive terminates his
employment hereunder for Good Reason (as defined below),
on the Date of Termination, as determined pursuant to Sec-
tion 7(f);
(ii) if the Executive's employment
hereunder is terminated by the Companies for
10
<PAGE>
Cause (as defined below), on the second anni-
versary of the Date of Termination, as deter-
mined pursuant to Section 7(f);
(iii) if the Executive's employment
hereunder is terminated for any" other reason
provided for in the Agreement on or prior to the
fifth anniversary of the date of the Agreement,
on the second anniversary of the Date of
Termination, as determined pursuant to Section
7(f).
7. Termination. The Executive's employment
-----------
with the Companies shall be terminated in accordance with
the following provisions:
(a) Death. The Executive's employment
-----
with the Companies shall terminate upon the Executive's
death.
(b) Disability. The Executive's employ-
----------
ment with the Companies shall terminate if, as a result of
the Executive's incapacity due to physical or mental
illness, the Executive shall have been absent from the
Executive's duties with the Companies for 120 consecutive
days, and within thirty days after Notice of Termination
(as hereinafter defined) is received by the Executive, the
Executive shall not have returned to the full-time perfor-
mance of his duties.
(c) Cause. The Companies may terminate
-----
the Executive's employment for "Cause." For the purposes
11
<PAGE>
of this Employment Agreement, the Companies shall have
"Cause" to terminate the Executive's employment hereunder
upon (1) the willful and continued failure by the Execu-
tive to reasonably perform the Executive's duties with the
Companies (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness),
after a written demand for performance is delivered to the
Executive by the Board of Directors of each of the Compa-
nies which specifically identifies and sets forth with
particularity the manner in which the Board of Directors
of each of the Companies reasonably believes that the
Executive has not substantially performed the Executive's
duties, (2) the willful engaging by the Executive in
misconduct (defined as dishonesty, fraud, embezzlement,
theft, conviction of a felony, drunkenness or unethical
business conduct) which is injurious to the Companies, or
(3) a willful breach of Section 6 hereof by the Executive
which is materially injurious to the Companies.
(d) Good Reason. The Executive may
-----------
terminate his employment for "Good Reason." For purposes
of this Agreement, "Good Reason" shall mean:
(i) proven criminal conduct by any of
the senior officers of the Companies in connec-
tion with the operation of the Companies;
(ii) any material breach by the Compa-
nies of any provision of this Agreement, which
is not remedied within 10 business days after
12
<PAGE>
receipt by the Companies of written notice from
the Executive; or
(iii) failure of the Executive to be
elected to, or removal of the Executive from,
the Board of Directors of the Companies during
the term of this Agreement, removal of the
Executive from the position of Chief Executive
Officer of TPIE and/or President and Chief
Operation Officer of Restaurants, and/or any
material change in the Executive's duties from
the duties as they exist on the date hereof.
(e) Without Cause. The Companies may
-------------
terminate the Executive's employment without "Cause".
(f) Notice of Termination. Any termina-
---------------------
tion pursuant to clauses (b), (c) (d) or (e) above shall
be communicated by written Notice of Termination from the
party seeking termination of the Executive's employment.
For purposes of this Employment Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the
specific termination provision in this Employment Agree-
ment relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the
provisions so indicated.
(g) Date of Termination. "Date of Termi-
-------------------
nation" shall mean (1) if the Executive's employment is
terminated due to the expiration of the Employment Term,
13
<PAGE>
the date of such expiration; (2) if the Executive's
employment is terminated due to the death of the Execu-
tive, the date of the Executive's death; (3) if the
Executive's employment is terminated for Disability,
thirty days after Notice of Termination is received by the
Executive, provided that the Executive shall not have
--------
returned to the performance of the Executive's duties on a
full-time basis during such thirty day period; (4) if the
Executive's employment is terminated for Cause, the date
specified in the Notice of Termination; (5) if the Execu-
tive's employment is 'terminated for Good Reason, the date
specified in the Notice of Termination, and (6) if the
Executive's employment is terminated by Companies without
"Cause", the date specified in the Notice of Termination.
8. Compensation During Disability and Upon
---------------------------------------
Termination.
- -----------
(a) During any period that the Executive
fails to perform his duties hereunder as a result of
Disability, the Executive shall continue to receive his
full base salary at the rate then in effect plus any
payments payable under Sections 4(b) and 4(c) until the
Executive's employment is terminated pursuant to Section
7. Thereafter, the Executive's benefits shall be deter-
mined in accordance with the Companies' disability insur-
ance plan or its substantial equivalent, or any substitute
plan or plans then in effect, if any.
14
<PAGE>
(b) If the Executive's employment is
terminated due to the Executive's death, the Companies
shall pay to the Executive's surviving spouse, or if there
is no spouse surviving, then to the Executive's estate, a
lump sum cash payment, in an amount equal to the Execu-
tive's base salary in effect on the date of the Execu-
tive's death for the three full months following the month
in which such death occurs plus incentive compensation
pursuant to Section 4(b) prorated to date of death, plus
any benefits which would have been payable during such
three month period pursuant to Section 4(c).
(c) If the Executive's employment is
terminated for "Cause" pursuant to section 7(c) hereof,
the Companies shall pay the Executive his full base salary
at the rate then in effect through the Date of Termination
and Executive shall be entitled to receive the option
rights as provided in paragraph 4(b) hereof, and the right
to exercise same for fourteen business days after termina-
tion for "Cause" as provided in paragraph 4(b)(vi) hereof
to the extent same are earned or otherwise qualify for
exercise by Executive during the fourteen business days
following a termination for "Cause", and the Companies
shall have no further obligations to the Executive under
this Employment Agreement.
(d) If the Executive's employment is
terminated (1) without "Cause" pursuant to Section 7(e)
hereof, or, (2) by the Executive with "Good Reason" pursu-
15
<PAGE>
ant to Section 7(d), hereof, the Companies shall pay the
Executive his full base salary at the rate then in effect
until the fifth anniversary of the date of this Agreement
and the Executive shall be entitled to receive the option
rights as provided in paragraph 4(b) hereof to the extent
same are earned or otherwise qualify for exercise by Exec-
utive during the one-year period following a termination
by the Companies without "Cause" or by Executive with
"Good Reason", and the right to exercise same for one (1)
year after termination by the Companies without "Cause",
or by Executive with "Good Reason", as provided in para-
graph 4(b)(vi) hereof.
(e) Executive shall have no duty to miti-
gate the amounts payable under this paragraph 8, and any
payments provided for in this paragraph 8 and subpara-
graphs thereof, shall be paid to Executive without regard
to any compensation received by Executive from subsequent
employers and Companies shall not offset or receive a
credit against any amounts otherwise due Executive under
this Agreement.
9. Option and Cancellation. The (a) Termina-
-----------------------
tion Option, (b) Change of Control Option, and (c) Right
of First Refusal Option set forth in paragraph 9 of the
Employment Agreement, between Executive and Restaurants,
dated September 13, 1989, which provides for certain
rights to purchase certain restaurants sold to Restaurants
16
<PAGE>
in the Purchase Agreement, is hereby cancelled and terminated.
10. Indemnification. From and after Execu-
---------------
tive's first employment by the Companies or either one of
them on September 13, 1989, the Companies shall indemnify,
defend and hold harmless the Executive from and against
all obligations, liabilities, demands, claims, actions,
losses, damages, costs and expenses, including without
limitation, interest, penalties and attorney's fees (at
the trial level and/or appellate level) and expenses,
arising out of or relating to Executive's employment with
Companies or either one of them, at any time, and such
indemnification shall be to the fullest extent allowed or
provided by law. The terms of this indemnification
provision shall survive the termination of this Agreement
and/or Executive's employment.
11. Successors; Binding Agreement; Assignment.
-----------------------------------------
Nothing in this Employment Agreement shall prevent the
consolidation of the Companies with, or its merger with or
into, any other corporation, or the sale by the Companies
of all or substantially all of its properties or assets to
any other corporation. The Companies will use their best
efforts to cause any corporation succeeding (whether
direct or indirect, by purchase, merger or consolidation
or otherwise) to all or substantially all of the proper-
ties and assets of the Companies (the "Successor") ex-
pressly to assume and agree to perform this Employment
Agreement in the same manner and to the same extent that
17
<PAGE>
the Companies would be required to perform it if no such
succession had taken place. In the event that any Suc-
cessor expressly assumes and agrees to perform this
Employment Agreement or any of the obligations hereunder,
and the Companies assign this Employment Agreement or any
part of this Employment Agreement to the Successor, such
assumption shall not relieve the Companies of such assumed
obligations to the Executive. The Executive's rights and
obligations under this Employment Agreement shall not be
transferable by assignment or otherwise nor shall the
Executive's rights be subject to encumbrance or subject to
the claims of the Companies' creditors, provided, however,
that in no event shall any merger, consolidation or sale
relieve or release the Companies from any of their obliga-
tions or liabilities to Executive arising hereunder. This
Employment Agreement is for the sole benefit of the
parties hereto and shall not create any rights in third
parties, except as expressly set forth herein.
12. Entire Agreement; Severability. Except for
------------------------------
executive perquisite plan(s), retirement plans, and any
other regular employee benefit plans, this Employment
Agreement constitutes the entire agreement between the
parties hereto in respect of the employment of the Execu-
tive by the Companies during the Employment Term. The
provisions herein shall be regarded as divisible, and if
any of such provisions or any part thereof are declared
invalid or unenforceable, the validity and enforceability
18
<PAGE>
of the remainder of such provisions or parts thereof and
the applicability thereof shall not be affected thereby.
13. Governing Law. The validity, interpreta-
--------------
tion, construction, performance and enforcement of this
Employment Agreement shall be governed by the laws of the
State of Tennessee.
14. Notices. All notices and other communica-
--------
tions hereunder shall be in writing and shall be deemed to
have been duly given if delivered in person or sent by
certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Companies, to:
TPI Enterprises, Inc.
East Tower, Suite 903-909
777 South Flagler Drive
West Palm Beach, Florida 33401
Attn: Chairman of the Board
If to the Executive to:
J. Gary Sharp
485 S. Beach Road
Hobe Sound, Florida 33455-2710
or to such other address as the party to whom notice is to
be given may, from time to time, designate in writing
delivered in a like manner; provided that notices of
--------
changes of address shall be effective only upon receipt
thereof. Notice given by mail as set forth above shall be
deemed delivered on the fifth day following the date the
same is postmarked. Notice delivered in person shall be
deemed delivered on the date received.
19
<PAGE>
15. Modifications and Waivers. No provision of this
-------------------------
Employment Agreement may be modified, altered or amended
except by an instrument in writing executed by the parties
hereto. No waiver by either party hereto of any breach by
the other party hereto of any term or provision of this
Employment Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar terms or
provisions at that time or at any prior or subsequent
time.
16. Headings. The headings contained herein are
--------
solely for the purpose of reference, are not part of this
Employment Agreement and shall not in any way affect the
meaning or interpretation of this Employment Agreement.
17. Counterparts. This Employment Agreement may be
------------
executed in two or more counterparts, each of which shall
be deemed to be an original but all of which together
shall constitute one and the same instrument.
20
<PAGE>
IN WITNESS WHEREOF, the Companies have caused
this Employment Agreement to be executed by authority of
their respective Board of Directors, and the Executive has
hereunto set his hand, the day and year first above
written.
TPI ENTERPRISES, INC.
BY: /s/ Stephen R. Cohen
----------------------
Name: Stephen R. Cohen
Title: Chairman of the
Board
TPI RESTAURANTS, INC.
BY: /s/ Stephen R. Cohen
----------------------
Name: Stephen R. Cohen
Title: Chairman of the
Board
/s/ J. Gary Sharp
-------------------------
J. Gary Sharp
21
Exhibit 10.18
Agreement
This Agreement dated as of December 31, 1993 is
by and between TPI Enterprises, Inc. (the "Company") and
Patricia Hildebrand ("Ms. Hildebrand").
WHEREAS, pursuant to Section 8(f) of the TPI
Enterprises, Inc. Nonqualified Retirement Plan for Senior
Executives (the "Plan"), the Company has decided to
terminate the Retirement Plan; and
WHEREAS, Ms. Hildebrand is a Participant under
the Plan (as such term is defined in the Plan); and
WHEREAS, in connection with such termination,
the Company and Ms. Hildebrand have agreed that instead
of receiving the amounts owed to her pursuant to the
Plan, she shall receive a lump sum payment as set forth
below in full settlement of all claims she may have under
the Plan;
NOW, THEREFORE, in consideration of the cove-
nants and releases set forth herein and other good and
valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as
follows:
1. Release. Effective upon the payment to Ms. Hildebra-
-------
nd of $375,000, which payment shall be made simulta-
neously with the execution of this Agreement, she hereby
a. acknowledges that she shall not be entitled to
any additional benefits under the Plan now or in the
future, and
b. releases the Company from all obligations and
liabilities arising from, under or in connection with the
Plan, whether currently existing or arising at any time
hereafter, and hereby releases the Company from all past,
present and future claims, demands, actions, causes of
action, liabilities, rights, damages, costs, expenses and
compensation of every nature whatsoever, whether direct
or indirect, arising from or under the Plan.
<PAGE>
2. Settlement Amount. The parties hereto agree that
-----------------
the amount paid to Ms. Hildebrand is a mutually agreed to
settlement amount and is not based on the formula govern-
ing payments under the Plan.
3. Miscellaneous.
-------------
a. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject
matter contained herein and supersedes all prior or
contemporaneous written or verbal agreements, representa-
tions and understandings of the parties.
b. No supplement, modification or amendment or this
Agreement shall be binding unless executed in writing by
all the parties.
c. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute a continu-
ing waiver. No waiver shall be binding unless executed
in writing by the party making the waiver.
d. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and assigns.
e. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of New York
as applied to contracts that are executed and performed
entirely in New York.
f. If any provision of the Agreement is held to be
invalid or unenforceable by any court of final jurisdic-
tion, it is the intent of the parties hereto that all
other provisions of the Agreement be construed to remain
fully valid, enforceable and binding on the parties.
g. Each party hereto shall further execute and
deliver all such appropriate supplemental agreements and
other instruments and take such other action as may be
necessary to make this Agreement fully and legally effec-
tive, binding and enforceable as between the parties
hereto and as against third parties or as the other
parties may reasonably request.
2
<PAGE>
h. This Agreement may be executed simultaneously in
one or more counterparts, each if which shall be deemed
to be an original, but all of which together shall con-
stitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed
this Agreement as of the date first above written.
TPI ENTERPRISES, INC. a
New Jersey corporation
By: /s/ J. Gary Sharp
-----------------------
Name: J. Gary Sharp
Title: President and Chief
Executive Officer
/s/ Patricia Hildebrand
-----------------------
Patricia Hildebrand
3
Exhibit 10.25
==================================================================
==================================================================
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
by and among
TPI RESTAURANTS, INC.
THE BANKS PARTY HERETO,
THE BANK OF NEW YORK, AS ADMINISTRATIVE AGENT
AND
NATIONSBANK OF NORTH CAROLINA, N.A., AS COLLATERAL AGENT
________________
$50,000,000
________________
Dated as of June 3, 1993
=================================================================
=================================================================
- 1 -
<PAGE>
FIRST AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June
3, 1993, by and among TPI RESTAURANTS, INC., a Tennessee corpora-
tion (the "Company"), the banks party hereto (each a "Bank" and,
------- ----
collectively, the "Banks"), THE BANK OF NEW YORK, as administrative
-----
agent for the Banks hereunder (in such capacity, the "Admin-
------
istrative Agent") and NATIONSBANK OF NORTH CAROLINA, N.A., as Col-
---------------
lateral Agent for the Banks hereunder (in such capacity, the "Col-
----
lateral Agent").
-------------
RECITALS
--------
A. The Company, the Banks and the Agents entered into a
Credit Agreement dated as of July 29, 1992 (as amended by Amendment
No. 1, dated as of December 10, 1992, and Amendment No. 2, dated as
of March 19, 1993, the "Existing Credit Agreement").
-------------------------
B. Pursuant to the Existing Credit Agreement, the Banks made
term loans (collectively, the "Term Loans") to the Company, the
----------
aggregate outstanding principal balance of which on the date hereof
is $27,750,000, and agreed to make Revolving Credit Loans to the
Company in an aggregate principal amount of $25,000,000.
C. In connection with the execution and delivery of this
Agreement, the Company intends to prepay $6,750,000 of the Term
Loans and convert the balance thereof into Revolving Credit Loans
and the Company, the Banks and the Agents desire to amend the Ex-
isting Credit Agreement to, among other things, increase the Ag-
gregate Revolving Credit Commitments and revise certain covenants
contained in the Existing Credit Agreement, by amending and re-
stating the Existing Credit Agreement in its entirety as hereinaf-
ter set forth.
D. For convenience, this Agreement is dated as of June 3,
1993, and references to certain matters related to the period prior
hereto have been deleted.
In consideration of the foregoing and for other good and
valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS
-----------
1. Defined Terms.
-------------
As used in this Agreement, terms defined in the preamble
- 2 -
<PAGE>
have the meanings therein indicated, and the following terms have
the following meanings:
"Accountants": Deloitte & Touche (or any successor thereto),
-----------
any other "Big Six" firm of certified public accountants or such
other firm of certified public accountants of recognized national
standing selected by the Company and satisfactory to the Required
Banks.
"Adjusted Capital Contribution": those portions of the equity
------------------------------
contributions made by Enterprises to the Company in connection with
the issuance of the Enterprises Subordinated Debentures and the
Senior Subordinated Debentures representing the proceeds thereof
(less, in the case of the Enterprises Subordinated Debentures, the
underwriting discount paid by Enterprises prior to the receipt of
the proceeds thereof), to the extent that such portions are, for
accounting purposes, treated as debt.
"Adjusted Operating Cash Flow": for any period, the sum of (i)
----------------------------
Operating Cash Flow for such period and (ii) Consolidated Working
Capital Changes during such period.
"Adjusted Total Senior Debt": at any date of determination, the
--------------------------
sum of (i) the difference between (x) Total Senior Debt minus (y)
the amount of the Aggregate Revolving Credit Commitments plus (ii)
the aggregate principal amount of Revolving Credit Loans out-
standing on such date.
"Affected Loan": as defined in paragraph 2.12.
-------------
"Affected Principal Amount": in the event that (i) the Company
-------------------------
shall fail for any reason to borrow or convert after it shall have
notified the Administrative Agent of its intent to do so in any
instance which it shall have requested a Eurodollar Loan pursuant
to paragraph 2.3 or 2.6, an amount equal to the principal amount of
such Eurodollar Loan; (ii) a Eurodollar Loan shall terminate for
any reason prior to the last day of the Interest Period applicable
thereto, an amount equal to the principal amount of such Eurodollar
Loan; and (iii) the Company shall prepay or repay all or any part
of the principal amount of a Eurodollar Loan prior to the last day
of the Interest Period applicable thereto, an amount equal to the
principal amount of such Eurodollar Loan so prepaid or repaid.
"Affiliate": as to any Person, any other Person which, di-
---------
rectly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. For purposes of this defi-
nition, control of a Person shall mean the power, direct or in-
direct, (i) to vote 5% or more of the securities having ordinary
- 3 -
<PAGE>
voting power for the election of directors of such Person or (ii)
to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
"Agents": collectively, the Administrative Agent and the Col-
------
lateral Agent.
"Aggregate Revolving Credit Commitments": the sum of the Re-
---------------------------------------
volving Credit Commitments of all of the Banks as set forth in
Exhibit A, as the same may be reduced pursuant to paragraph 2.4.
"Agreement": this First Amended and Restated Credit Agreement,
---------
as the same may be amended, supplemented or otherwise modified from
time to time.
"Alternate Base Rate": on any date, a rate of interest per
--------------------
annum equal to the higher of (i) the Federal Funds Rate in effect
on such date plus 1/2 of 1% or (ii) the BNY Rate in effect on such
date.
"Alternate Base Rate Loans": the Revolving Credit Loans (or
--------------------------
any portions thereof) at such time as they (or such portions) are
made or are being maintained at a rate of interest based upon the
Alternate Base Rate.
"Amendment Fee": as defined in paragraph 3.3.
-------------
"Applicable Computation Period": (i) as of the last day of the
-----------------------------
second fiscal quarter of the Company's 1993 fiscal year, the period
consisting of the two consecutive fiscal quarters of the Company
then ended, (ii) as of the last day of the third fiscal quarter of
the Company's 1993 fiscal year, the period consisting of the three
consecutive fiscal quarters of the Company then ended and (iii) as
of the last day of the fourth fiscal quarter of the Company's 1993
fiscal year and the last day of each fiscal quarter thereafter, the
period consisting of the four consecutive fiscal quarters of the
Company then ended.
"Applicable Margin": (i) with respect to the unpaid principal
------------------
amount of Alternate Base Rate Loans, the applicable percentage set
forth below next to the words "Alternate Base Rate" and (ii) with
respect to the unpaid principal amount of Eurodollar Loans, the
applicable percentage set forth below next to the words "Eurodollar
Rate":
- 4 -
<PAGE>
Applicable
Period Rate Margin
------ ---- ----------
when the Leverage Ratio
shall be greater than Alternate Base Rate 1.00%
or equal to 0.70:1.00 Eurodollar Rate 2.00%
when the Leverage Ratio
shall be less than 0.70:1.00
but greater than or equal to
0.50:1.00 Alternate Base Rate 0.75%
Eurodollar Rate 1.75%
when the Leverage Ratio
shall be less than 0.50:1.00
but greater than or equal to
0.40:1.00 Alternate Base Rate 0.50%
Eurodollar Rate 1.50%
when the Leverage Ratio
shall be less than 0.40:1.00
Alternate Base Rate 0.25%
Eurodollar Rate 1.25%
Changes in the Applicable Margin resulting from a change in
the Leverage Ratio, as set forth in a Compliance Certificate de-
livered pursuant to paragraph 7.1(c) evidencing such a change,
shall become effective upon the 5th day following the delivery by
the Company to the Administrative Agent of a new Compliance Cer-
tificate pursuant to paragraph 7.1(c) evidencing a change in the
Leverage Ratio. If the Company shall fail to deliver a Compliance
Certificate within 45 days after the end of each of the first three
fiscal quarters (or 90 days after the end of the last fiscal
quarter) as required by paragraph 7.1(c), the Applicable Margin
from and including the 46th day (the 91st day in the case of the
last quarter) after the end of such fiscal quarter to the fifth day
following the delivery by the Company to the Administrative Agent
of a Compliance Certificate shall be 1.00% with respect to
Alternate Base Rate Loans and 2.00% with respect to Eurodollar
Loans.
"Assignment and Acceptance Agreement": an assignment and ac-
------------------------------------
ceptance agreement executed by an assignor and an assignee pursuant
to which such assignor assigns all or any portion of such
assignor's Revolving Credit Note and Revolving Credit Commitment to
such assignee, substantially in the form of Exhibit I.
- 5 -
<PAGE>
"Assignment Fee": as defined in paragraph 11.7(b).
--------------
"Authorized Signatory": the chairman of the board, the presi-
---------------------
dent, any vice president, the chief financial officer, the trea-
surer or any other officer of the Company or Enterprises (accept-
able to the Agents) duly authorized by the board of directors of
the Company or Enterprises, as the case may be.
"Available Revolving Credit Commitment": at any date of de-
--------------------------------------
termination, the Aggregate Revolving Credit Commitments minus the
sum of (i) the outstanding principal balance of the Revolving
Credit Loans plus (ii) the Letter of Credit Exposure.
"BNY": The Bank of New York.
---
"BNY Rate": a rate of interest per annum equal to the rate of
--------
interest publicly announced in New York City by BNY from time to
time as its prime commercial lending rate, such rate to be adjusted
automatically (without notice) on the effective date of any change
in such publicly announced rate.
"Benefited Bank": as defined in paragraph 11.9.
--------------
"Borrowing Date": any date specified in a Borrowing Request
---------------
delivered pursuant to paragraph 2.3 as a date on which the Company
requests the Banks to make Revolving Credit Loans or the Issuing
Bank to issue a Letter of Credit.
"Borrowing Request": a request in the form of Exhibit C.
-----------------
"Building Lease": a lease by the Company or any Material Sub-
--------------
sidiary of land and buildings.
"Business Day": for all purposes other than as set forth in
------------
clause (ii) below, (i) any day other than a Saturday, a Sunday or a
day on which commercial banks located in New York City or Char-
lotte, North Carolina are authorized or required by law or other
governmental action to close and (ii) with respect to all notices
and determinations in connection with, and payments of principal
and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) above and which is also a day on which
dealings in foreign currency and exchange and Eurodollar funding
between banks may be carried on in London, England.
"Capitalized Leases": all leases which are required to be
-------------------
capitalized on a balance sheet in accordance with GAAP.
- 6 -
<PAGE>
"CERCLA": the Comprehensive Environmental Response, Compensa-
------
tion and Liability Act, as amended, 42 U.S.C. Section 9601 et seq.
------
"Change in Control": as to Enterprises or the Company, (a) any
-----------------
Person (other than one or more Permitted Holders), together with
its Affiliates or Associates, is or becomes the Beneficial Owner,
directly or indirectly, through a purchase, merger or other
acquisition transaction, of shares of capital Stock of Enterprises
or the Company, as the case may be, entitling such Person to exer-
cise 50% or more of the total voting power of all shares of capital
Stock of Enterprises or the Company, as the case may be, entitled
to vote in the election of directors or (b) a majority of the board
of directors of Enterprises or the Company, as the case may be, are
not Continuing Directors; provided, however, that a Change in
Control will not be deemed to have occurred if a Change in Control
is not deemed to have occurred in accordance with both the
Enterprises Subordinated Indenture and the Debenture Purchase
Agreement. For purposes of this definition, (i) "Beneficial Owner"
shall be determined in accordance with Rule 13d-3, promulgated by
the SEC under the Exchange Act as in effect on the date of the
Enterprises Subordinated Indenture, (ii) "Permitted Holder" shall
mean either the individual who is Chairman of the board of
directors of Enterprises or the Company, as the case may be, on the
date of the Enterprises Subordinated Indenture with respect to
Enterprises or the date of the Debenture Purchase Agreement with
respect to the Company, or any other group of Persons of which such
individual is a member, provided that such individual has control
over the voting and dispositive power of the shares of common Stock
beneficially owned by such group, (iii) "Continuing Director"
means, at any date, a member of the board of directors of
Enterprises or the Company, as the case may be, who (A) was a
member of such board for the period of 24 months prior to such date
or (B) was nominated for election or elected to such board with the
affirmative vote of at least two-thirds of the Continuing Directors
and (iv) an "Associate" of, or a Person "associated with", any
Person, means (x) any trust or other estate in which such Person
has a substantial beneficial interest or as to which such Person
serves as trustee or other fiduciary capacity and (y) any relative
or spouse of such Person, or any relative of such spouse, who has
the same home as such Person.
"Code": the Internal Revenue Code of 1986, as the same may be
----
amended from time to time, or any successor thereto, and the rules
and regulations issued thereunder, as from time to time in effect.
"Collateral": the Pledged Collateral and all other collateral
----------
under and as defined in the Collateral Documents.
- 7 -
<PAGE>
"Collateral Agent": NationsBank.
----------------
"Collateral Documents": the Enterprises Guaranty, the Envi-
--------------------
ronmental Indemnity Agreement, each Mortgage granted on the Origi-
nal Effective Date and, upon execution and delivery of a Mortgage
pursuant to paragraph 7.16 after the Original Effective Date, each
such Mortgage.
"Commitment Percentage": as to any Bank, the percentage set
----------------------
forth opposite the name of such Bank in Exhibit A under the heading
"Commitment Percentage".
"Commonly Controlled Entity": an entity, whether or not in-
---------------------------
corporated, which is under common control with the Company within
the meaning of Sections 414(b) or 414(c) of the Code.
"Compliance Certificate": a certificate in the form of Exhibit
----------------------
F.
"Consolidated": the Company and its Subsidiaries taken to-
------------
gether.
"Consolidated Capital Expenditures": for any period, capital
----------------------------------
expenditures made by the Company and its Subsidiaries during such
period, determined on a Consolidated basis in accordance with GAAP.
"Consolidated Interest Expense": for any period , the sum of
-----------------------------
(i) the result obtained by subtracting (x) interest expense of the
Company attributable solely to the Adjusted Capital Contribution
and the capital contribution by Enterprises to the Company of the
proceeds of the Senior Subordinated Debentures from (y) interest
expense of the Company and its Subsidiaries on a Consolidated basis
determined in accordance with GAAP (adjusted to give effect to all
interest rate swap, cap or other interest rate hedging arrangements
and fees and expenses in connection therewith, all as determined in
accordance with GAAP) plus (ii) interest expense of Enterprises
during such period in respect of the Enterprises Subordinated
Debentures and the Senior Subordinated Debentures, in each case to
the extent paid or payable in cash during such period.
"Consolidated Net Income": for any period, net income of the
-----------------------
Company and its Subsidiaries on a Consolidated basis determined in
accordance with GAAP for such period excluding any charge, in ac-
cordance with GAAP, for the early extinguishment of the Restaurants
Notes resulting from any purchase of Restaurants Notes during such
period to the extent permitted by paragraph 8.15(ii) and (iii).
- 8 -
<PAGE>
"Consolidated Net Worth": at any date of determination, the
-----------------------
sum of all amounts which would be included under shareholders'
equity on a Consolidated balance sheet of the Company and its Sub-
sidiaries determined in accordance with GAAP as at such date.
"Consolidated Tangible Net Worth": at any date of determina-
--------------------------------
tion, Consolidated Net Worth less all assets of the Company and its
Subsidiaries, determined on a Consolidated basis at such date that
would be classified as intangible assets in accordance with GAAP,
including, without limitation, unamortized debt discount and
expenses, unamortized organization and reorganization expense,
patents, trade or servicemarks, franchises, trade names and good-
will.
"Consolidated Working Capital": at any time of determination,
----------------------------
the difference between (i) current assets of the Company and its
Subsidiaries determined on a Consolidated basis in accordance with
GAAP minus cash and cash equivalents and (ii) current liabilities
of the Company and its Subsidiaries determined on a Consolidated
basis less the current portion of long term debt.
"Consolidated Working Capital Changes": for any period, the
-------------------------------------
result obtained by subtracting Consolidated Working Capital at the
close of business on the last day of such period from Consolidated
Working Capital at the opening of business on the first day of such
period.
"Consolidating": the Company and its Subsidiaries taken sepa-
-------------
rately.
"Contingent Obligation": as to any Person, any obligation of
---------------------
such Person guaranteeing or in effect guaranteeing any Indebted-
ness, leases, dividends or other obligations ("primary obliga-
tions") of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, any
obligation of such Person, whether or not contingent, (i) to pur-
chase any such primary obligation or any Property constituting
direct or indirect security therefor, (ii) to advance or supply
funds (a) for the purchase or payment of any such primary obliga-
tion or (b) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency
of the primary obligor, (iii) to purchase Property, securities or
services primarily for the purpose of assuring the beneficiary of
any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to
assure or hold harmless the beneficiary of such primary obligation
against loss in respect thereof; provided, however, that the term
- 9 -
<PAGE>
Contingent Obligation shall not include the indorsement of instru-
ments for deposit or collection in the ordinary course of business.
The term Contingent Obligation shall also include the liability of
a general partner in respect of the liabilities of the partnership
in which it is a general partner. The amount of any Contingent
Obligation of a Person shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect
of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in re-
spect thereof as determined by such Person in good faith.
"Conversion Date": the date on which a Eurodollar Loan is
----------------
converted to an Alternate Base Rate Loan, or the date on which an
Alternate Base Rate Loan is converted to a Eurodollar Loan, or the
date on which a Eurodollar Loan is converted to a new Eurodollar
Loan, all in accordance with paragraph 2.6.
"Debenture Purchase Agreement": the Debenture Purchase Agree-
----------------------------
ment, dated as of March 19, 1993, among Enterprises, the Company
and the purchasers of the Senior Subordinated Debentures named
therein, pursuant to which the Senior Subordinated Debentures are
issued, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with paragraph 8.20.
"Debt": as to any Person, at a particular time, all items
----
which constitute, without duplication, (i) the principal portion of
indebtedness for borrowed money or the deferred purchase price of
Property (other than trade payables incurred in the ordinary course
of business), (ii) the principal portion of indebtedness evidenced
by notes, bonds, debentures or similar instruments, (iii) the
principal portion of obligations with respect to any conditional
sale agreement or title retention agreement, (iv) the principal
portion of indebtedness arising under acceptance facilities and the
amount available to be drawn under all letters of credit issued for
the account of such Person (other than, in the case of the Company,
the Letters of Credit) and, without duplication, all drafts drawn
thereunder to the extent such Person shall not have reimbursed the
issuer in respect of the issuer's payment of such drafts, (v) the
principal portion of all liabilities secured by any Lien on any
Property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof (other
than carriers', warehousemen's, mechanics', repairmen's or other
like non-consensual Liens arising in the ordinary course of
business), (vi) the principal of all obligations under Capitalized
Leases, (vii) the principal portion of ERISA Liabilities, and
(viii) the principal portion of all Contingent Obligations.
- 10 -
<PAGE>
"Default": any of the events specified in paragraph 9, whether
-------
any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Dollars" and "$": lawful currency of the United States of
------- -
America.
"Domestic Lending Office": in respect of any Bank, initially,
------------------------
the office or offices of such Bank designated as such on Schedule
1.1; thereafter, such other office or offices of such Bank, if any,
which shall be making or maintaining Alternate Base Rate Loans, as
reported by such Bank to the Administrative Agent.
"EBIT": for any period, Consolidated Net Income for such pe-
----
riod, plus the sum, without duplication, of (i) Taxes paid by the
Company and its Subsidiaries during such period and (ii) Consoli-
dated Interest Expense paid during such period, in each case to the
extent deducted in determining such Consolidated Net Income (or
loss) for such period.
"Enterprises": TPI Enterprises, Inc., a New Jersey corpora-
-----------
tion.
"Enterprises Guaranty": the Amended and Restated Guaranty,
---------------------
Security and Subordination Agreement made by Enterprises and the
Company to the Agents, substantially in the form of Exhibit D, as
the same may be amended, modified or otherwise supplemented from
time to time.
"Enterprises Subordinated Debentures": the 8 1/4% Convertible
-------------------------------------
Subordinated Debentures, due 2002, issued by Enterprises pursuant
to the Enterprises Subordinated Indenture, as the same may be
amended, supplemented or otherwise modified from time to time in
accordance with paragraph 8.20.
"Enterprises Subordinated Indenture": the Indenture, dated as
----------------------------------
of July 15, 1992, among Enterprises, the Company and NationsBank of
Tennessee, as trustee, pursuant to which the Enterprises Subor-
dinated Debentures were issued, as the same may be amended, supple-
mented or otherwise modified from time to time in accordance with
paragraph 8.20.
"Environmental Indemnity Agreement": the Environmental Indem-
---------------------------------
nity Agreement, dated July 29, 1992, made by the Company to the
Collateral Agent, as the same may be amended, supplemented or oth-
erwise modified from time to time.
- 11 -
<PAGE>
"Environmental Questionnaire": an Environmental Questionnaire
---------------------------
substantially in the form of Exhibit K.
"ERISA": the Employee Retirement Income Security Act of 1974,
-----
as amended from time to time, and the rules and regulations issued
thereunder, as from time to time in effect.
"ERISA Liabilities": at any time of determination and without
------------------
duplication, the aggregate of all unfunded vested benefits under
all Plans and all potential withdrawal liabilities that would be
imposed on the Company or any Commonly Controlled Entity under all
Multiemployer Plans if the Company or any Commonly Controlled En-
tity withdrew or was deemed to withdraw from any such Plan under
Part 1 of Subtitle E of Title IV of ERISA.
"Eurodollar Lending Office": in respect of any Bank, ini-
--------------------------
tially, the office of such Bank designated as such on Schedule 1.1
(or, if no such office is specified, its Domestic Lending Office);
thereafter, such other office, if any, of such Bank which shall be
making or maintaining Eurodollar Loans, as reported by such Bank to
the Administrative Agent.
"Eurodollar Loans": collectively, the Revolving Credit Loans
----------------
(or any portions thereof) at such time as they (or such portions)
are made or are being maintained at a rate of interest based upon
the Eurodollar Rate. Each Eurodollar Loan shall mature on the last
day of the Interest Period applicable thereto.
"Eurodollar Rate": with respect to any Interest Period ap-
---------------
plicable to any Eurodollar Loan, the rate of interest per annum, as
determined by the Administrative Agent, obtained by dividing (and
then rounding to the nearest 1/100 of 1% or, if there is no nearest
1/100 of 1%, then to the next higher 1/100 of 1%):
(a) the rate, as reported by BNY to the Administrative
Agent, quoted by BNY to leading banks in the interbank eurodollar
market as the rate at which BNY is offering Dollar deposits in an
amount equal approximately to the Eurodollar Loan of BNY to which
such Interest Period shall apply for a period equal to such Inter-
est Period, as quoted at approximately 11:00 a.m. (New York City
time) two Business Days prior to the first day of such Interest
Period, by
(b) a number equal to 1.00 minus the aggregate of the
then stated maximum rates during such Interest Period of all re-
serve requirements (including, without limitation, marginal, emer-
gency, supplemental and special reserves), expressed as a decimal,
established by the Board of Governors of the Federal Reserve System
- 12 -
<PAGE>
and any other banking authority to which BNY and other major United
States money center banks are subject, in respect of eurocurrency
funding (currently referred to as "Eurocurrency liabilities" in
Regulation D of the Board of Governors of the Federal Reserve
System). Such reserve requirements shall include, without
limitation, those imposed under such Regulation D. Eurodollar
Loans shall be deemed to constitute Eurocurrency liabilities and as
such shall be deemed to be subject to such reserve requirements
without benefit of credits for proration, exceptions or offsets
which may be available from time to time to any Bank under such
Regulation D. The Eurodollar Rate shall be adjusted automatically
on and as of the effective date of any change in any such reserve
requirement.
"Event of Default": any of the events specified in paragraph
-----------------
9, provided that any requirement for the giving of notice, the
lapse of time, or both, or any other condition has been satisfied.
"Exchange Act": the Securities Exchange Act of 1934, as
-------------
amended, and the rules and regulations promulgated thereunder.
"Extension Request": as defined in paragraph 2.20.
-----------------
"Federal Funds Rate": for any day, the rate per annum equal to
------------------
the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such
day, provided that (i) if the day for which such rate is to be
determined is not a Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day,
and (ii) if such rate is not so published for any day, the Federal
Funds Rate for such day shall be the average of the quotations for
such day on such transactions received by BNY from three Federal
funds brokers of recognized standing selected by BNY on such day on
such transactions as determined by BNY and reported to the Ad-
ministrative Agent.
"Fee Letter": the letter, dated June 10, 1992, from the Agents
----------
to the Company, as amended on July 15, 1992.
"Financial Statements": as defined in paragraph 4.17.
--------------------
"14 1/4% Indenture": the Indenture, dated as of November 15,
---------------
1988, between the Company and The Connecticut National Bank, as
trustee, pursuant to which the Restaurants Notes were issued, as
amended by the Supplemental Indenture, dated as of July 20, 1992,
- 13 -
<PAGE>
and as the same may hereafter be amended, supplemented or otherwise
modified from time to time in accordance with paragraph 8.20.
"Franchise Agreements": collectively, the franchise agree-
---------------------
ments, license agreements and reserved area agreements to which the
Company or any Subsidiary is a party relating to franchises of
Shoney's, Captain D's restaurants, as the same may be amended,
supplemented or otherwise modified from time to time in accordance
with paragraph 8.20.
"Franchisor": Shoney's, Inc., a Tennessee corporation.
----------
"Franchisor Estoppel Certificate": the Franchise Estoppel
---------------------------------
Certificate, dated as of July 29, 1992, made by the Franchisor to
the Agents, as the same may be amended, supplemented or otherwise
modified from time to time.
"GAAP": generally accepted accounting principles set forth in
----
the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards
Board, consistently applied.
"Governmental Authority": any nation or government, any state
----------------------
or other political subdivision thereof, any entity exercising ex-
ecutive, legislative, judicial, regulatory or administrative func-
tions of or pertaining to government and any court or arbitrator.
"Ground Lease": a lease by the Company or any Material Sub-
------------
sidiary of land on which the buildings are owned by the Company or
such Material Subsidiary.
"Hazardous Material": a substance, including, without limita-
------------------
tion, asbestos or any substance containing asbestos and deemed
hazardous under any Hazardous Material Law, the group of organic
compounds known as polychlorinated biphenyls, flammable explosives,
radioactive materials, chemicals known to cause cancer or
reproductive toxicity, pollutants, effluents, contaminants, emis-
sions or related materials and any items included in the definition
of hazardous or toxic waste, materials or substances under any
Hazardous Material Law.
"Hazardous Material Law": all federal and state laws relating
-----------------------
to environmental conditions and industrial hygiene, including,
without limitation, CERCLA, the Resource Conservation and Recovery
Act of 1976, as amended (42 U.S.C. Sec. 6901 et seq.), the Hazardous
-- ----
Materials Transportation Act, as amended (49 U.S.C. Sec. 1801 et seq.),
-- ---
the Federal Water Pollution Control Act, as amended (33 U.S.C.
- 14 -
<PAGE>
Sec. 1251 et seq.), the Clean Air Act, as amended (42 U.S.C. Sec. 741 et
-- --- --
seq.), the Clean Water Act, as amended (33 U.S.C. Sec. 7401 et seq.),
--- -- ---
the Toxic Substances Control Act, as amended (15 U.S.C.
Sec. 2601-2629), the Safe Water Drinking Act, as amended (42 U.S.C.
Sec. 300f-300j), and all other similar federal, state and local envi-
ronmental statutes, ordinances and the regulations, orders decrees
now or hereafter promulgated thereunder.
"Highest Lawful Rate": the maximum rate of interest, if any,
-------------------
that at any time or from time to time may be contracted for, taken,
charged or received on the Revolving Credit Notes or which may be
owing to any Bank pursuant to this Agreement under the laws
applicable to such Bank and this transaction.
"Indebtedness": as to any Person, at a particular time, all
------------
items which constitute, without duplication, (i) indebtedness for
borrowed money or the deferred purchase price of Property (other
than trade payables incurred in the ordinary course of business),
(ii) indebtedness evidenced by notes, bonds, debentures or similar
instruments, (iii) obligations with respect to any conditional sale
agreement or title retention agreement, (iv) indebtedness arising
under acceptance facilities and the amount available to be drawn
under all letters of credit issued for the account of such Person
and, without duplication, all drafts drawn thereunder to the extent
such Person shall not have reimbursed the issuer in respect of the
issuer's payment of such drafts, (v) all liabilities secured by any
Lien on any Property owned by such Person even though such Person
has not assumed or otherwise become liable for the payment thereof
(other than carriers', warehousemen's, mechanics', repairmen's or
other like non-consensual Liens arising in the ordinary course of
business), (vi) the principal of all obligations under Capitalized
Leases, (vii) ERISA Liabilities, and (viii) all Contingent
Obligations.
"Indemnified Person": as defined in paragraph 11.10.
------------------
"Interest Coverage Ratio": at any date of determination, the
-----------------------
ratio of EBIT to Consolidated Interest Expense.
"Interest Payment Date": (i) as to any Alternate Base Rate
----------------------
Loan, the last day of each March, June, September and December com-
mencing on the first of such days to occur after such Alternate
Base Rate Loan is made or any Eurodollar Loan is converted to an
Alternate Base Rate Loan, (ii) as to any Eurodollar Loan in respect
of which the Company has selected an Interest Period of one, two or
three months, the last day of such Interest Period, and (iii) as to
any Eurodollar Loan in respect of which the Company has selected an
Interest Period of six months, the day which is three months after
- 15 -
<PAGE>
the first day of such Interest Period and the last day of such
Interest Period.
"Interest Period": with respect to any Eurodollar Loan, ini-
---------------
tially, the period commencing on, as the case may be, the Borrowing
Date or Conversion Date with respect to such Eurodollar Loan and
ending one, two, three or six months thereafter, as selected by the
Company in its irrevocable notice of borrowing as provided in
paragraph 2.3 or its irrevocable notice of conversion as provided
in paragraph 2.6, provided, however, that all of the foregoing
provisions relating to Interest Periods are subject to the
following:
(i) if any Interest Period would otherwise end on a
day which is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the result of
such extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end on
the immediately preceding Business Day;
(ii) if, with respect to any borrowing or the con-
version of any borrowing, the Company shall fail to give due notice
as provided in paragraph 2.3 or 2.6, as the case may be, the
Company shall be deemed to have selected an Alternate Base Rate
Loan for such borrowing or the borrowing shall be automatically
converted to an Alternate Base Rate Loan upon the expiration of the
Interest Period with respect thereto;
(iii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of a
calendar month;
(iv) no Interest Period shall end after the stated
maturity of the Revolving Credit Notes; and
(v) the Company shall select Interest Periods so as
not to have more than five different Interest Periods outstanding
at any one time.
"Issuing Bank": NationsBank or any successor pursuant to
-------------
paragraph 10.9.
"Issuing Bank Local Time": the time in effect in the city in
------------------------
which the principal office of the Issuing Bank is located.
"Investments": as defined in paragraph 8.6.
-----------
- 16 -
<PAGE>
"Leases": collectively, the Building Leases and the Ground
------
Leases.
"Letter of Credit": as defined in paragraph 2.8.
----------------
"Letter of Credit Commissions": as defined in paragraph 3.2.
----------------------------
"Letter of Credit Commitment": the commitment of the Issuing
----------------------------
Bank to issue Letters of Credit having an aggregate outstanding
face amount not exceeding $20,000,000, and the commitment of the
other Banks to participate in the Letter of Credit Exposure as set
forth in paragraph 2.9.
"Letter of Credit Exposure": at a particular date, the sum of
-------------------------
(a) the undrawn face amounts of the outstanding Letters of Credit
at such date and (b) the aggregate unpaid reimbursement obligations
in respect of the outstanding Letters of Credit at such date (after
giving effect to any Revolving Credit Loans made on such date to
pay any such reimbursement obligations).
"Letter of Credit Request": a request in the form of Exhibit
-------------------------
E.
"Leverage Ratio": at any date of determination, the ratio of
--------------
(a) Total Debt to (b) the sum of (i) Consolidated Net Worth plus
Total Subordinated Debt.
"Lien": any mortgage, pledge, hypothecation, assignment, de-
----
posit arrangement, encumbrance, lien (statutory or other), or other
security agreement or security interest of any kind or nature
whatsoever, including, without limitation, any conditional sale or
other title retention agreement and any financing lease having
substantially the same economic effect as any of the foregoing.
"Loan Documents": collectively, this Agreement, the Revolving
--------------
Credit Notes, the Fee Letter and the Collateral Documents.
"Loan" and "Loans": as defined in paragraph 2.1.
---- -----
"Management Agreement": the Management Services Agreement,
---------------------
dated as of October 5, 1988, between the Company and Enterprises,
as the same may be amended, supplemented or otherwise modified from
time to time in accordance with paragraph 8.20.
"Margin Stock": any "margin stock", as said term is defined in
------------
Regulation U of the Board of Governors of the Federal Reserve
System, as the same may be amended or supplemented from time to
time.
- 17 -
<PAGE>
"Material Adverse Change": as to (i) the Company, a material
------------------------
adverse change in the financial condition, operations, business,
prospects or Property of (x) the Company or (y) the Company and its
Material Subsidiaries taken as a whole, and (ii) Enterprises, a
material adverse change in the financial condition, operations,
business, prospects or Property of Enterprises.
"Material Adverse Effect on the Company": a material adverse
---------------------------------------
effect on the financial condition, operations, business, prospects
or Property of (i) the Company or (ii) the Company and its Material
Subsidiaries taken as a whole.
"Material Adverse Effect on Enterprises": material adverse
-----------------------------------------
effect on the financial condition, operations, business, prospects
or Property of Enterprises and its Subsidiaries taken as a whole.
"Material Subsidiary": any Subsidiary of the Company or any
--------------------
Material Subsidiary, in each case, once and for so long as it has
total assets exceeding $5,000,000.
"Mortgages": collectively, (i) each of the Mortgage, Leasehold
---------
Mortgage, Open-End Mortgage, Open-End Leasehold Mortgage, Deed of
Trust, Leasehold Deed of Trust, Deed to Secure Debt, Assignment,
Assignment of Rents, Fixture Filing, Security Agreement and
Financing Statement granted by the Company to the Collateral Agent
on or before the Restatement Effective Date with respect to certain
Ground Leases and (ii) each Mortgage, Leasehold Mortgage, Open-End
Mortgage, Open-End Leasehold Mortgage, Deed of Trust, Leasehold
Deed of Trust, Deed to Secure Debt, Assignment, Assignment of
Rents, Fixture Filing, Security Agreement and Financing Statement,
substantially in the form of Exhibit J, from time to time granted
to the Collateral Agent after the Effective Date pursuant to para-
graph 7.16 with respect to other Ground Leases, Building Leases and
real Property, as each may be amended, supplemented or modified
from time to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as
------------------
defined in Section 4001(a)(3) of ERISA.
"NationsBank": NationsBank of North Carolina, N.A.
-----------
"1988 Agreement": the Agreement, dated August 2, 1988, between
--------------
the Company and the Franchisor, as the same may be amended,
supplemented or otherwise modified in accordance with paragraph
8.20.
"Note" and "Notes": as defined in paragraph 2.2.
---- -----
- 18 -
<PAGE>
"Operating Cash Flow": for any period, Consolidated Net Income
-------------------
(or loss) for such period, less, without duplication, (i) all
extraordinary gains and losses, (ii) all gains and losses from
acquisitions, sales, exchanges and dispositions of Property not in
the ordinary course of business, provided that there shall also be
excluded any related charges for taxes thereon, (iii) any net gain
arising from the collection of the proceeds of any insurance
policy, (iv) any write-up of any Property, (v) non-recurring items
and (vi) investment income (other than interest income and income
on short-term investments), but plus the sum of, without duplica-
tion, depreciation, amortization and other non-cash charges for
such period, to the extent included in determining such Consoli-
dated Net Income (or loss) and all determined in accordance with
GAAP.
"Original Effective Date": July 29, 1992.
-----------------------
"PBGC": the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA, or any Governmental
Authority succeeding to the functions thereof.
"Permitted Liens": Liens permitted to exist pursuant to para-
----------------
graph 8.2.
"Person": an individual, a partnership, a corporation, a
------
business trust, a joint stock company, a trust, an unincorporated
association, a joint venture, a Governmental Authority or any other
entity of whatever nature.
"Plan": any employee benefit plan which is covered by Title IV
----
of ERISA or which is otherwise subject to the minimum funding
standards of Section 412 of the Code and which is maintained by or
to which contributions are made by the Company, a Subsidiary or a
Commonly Controlled Entity or in respect of which the Company, a
Subsidiary or a Commonly Controlled Entity has or may have any
liability.
"Pledged Collateral": the collateral pledged to the Collateral
------------------
Agent pursuant to the Enterprises Guaranty.
"Property": all types of real, personal, tangible, intangible
--------
or mixed property, including, without limitation, Stock.
"Registration Statement": the Registration Statement on Form
----------------------
S-2 filed by Enterprises and the Company with the SEC on May 20,
1992, as amended by Amendment No. 1 filed by Enterprises and the
Company with the SEC on June 26, 1992, Amendment No. 2 filed by
Enterprises and the Company with the SEC on July 16, 1992 and
- 19 -
<PAGE>
Amendment No. 3 filed by Enterprises and the Company with the SEC
on July 22, 1992, with respect to the issuance and sale of the
Enterprises Subordinated Debentures and the subordinated guaranty
of the Company thereof, as such statement may hereafter be amended,
modified or otherwise supplemented from time to time.
"Reimbursement Amount": as defined in paragraph 2.13(c).
--------------------
"Remaining Interest Period": (i) in the event that the Company
-------------------------
shall fail for any reason to borrow or convert a Eurodollar Loan
after it shall have notified the Administrative Agent of its intent
to do so pursuant to paragraph 2.3 or 2.6, a period equal to the
Interest Period that the Company elected in respect of such
Eurodollar Loan; or (ii) in the event that a Eurodollar Loan shall
terminate for any reason prior to the last day of the Interest
Period applicable thereto, a period equal to the remaining portion
of such Interest Period if such Interest Period had not been so
terminated; and (iii) in the event that the Company shall prepay or
repay all or any part of the principal amount of a Eurodollar Loan
prior to the last day of the Interest Period applicable thereto, a
period equal to the period from and including the date of such pre-
payment or repayment to but excluding the last day of such Interest
Period.
"Reportable Event": any event described in Section 4043(b) of
-----------------
ERISA, other than an event (excluding an event described in Section
4043(b)(1) relating to tax disqualification) with respect to which
the 30-day notice requirement has been waived.
"Required Banks": at any time when no Revolving Credit Loans
---------------
or Letters of Credit are outstanding, Banks having Revolving Credit
Commitments equal to at least 51% of the Aggregate Revolving Credit
Commitments, and at any time when Revolving Credit Loans or Letters
of Credit are outstanding, Banks holding Revolving Credit Notes
having an unpaid principal balance equal to at least 51% of the
aggregate Revolving Credit Loans outstanding and Letters of Credit
Exposure.
"Restatement Effective Date": June 3, 1993.
--------------------------
"Restaurants Guaranty": collectively, (i) the subordinated
---------------------
guaranty of the Company of the Enterprises Subordinated Debentures
pursuant to the provisions of the Enterprises Subordinated Inden-
ture and (ii) the subordinated guaranty of the Company of the Se-
nior Subordinated Debentures pursuant to the provisions of the
Debenture Purchase Agreement.
"Restaurants Notes": the 14 1/4% Senior Subordinated Notes due
-----------------
- 20 -
<PAGE>
1998, issued by the Company pursuant to the 14 1/4% Indenture, as the
same may be amended, supplemented or otherwise modified from time
to time in accordance with paragraph 8.20.
"Revolving Credit Commitment": as to any Bank, the amount set
---------------------------
forth next to the name of such Bank in Exhibit A under the heading
"Revolving Credit Commitment", as such Revolving Credit Commitment
may be reduced from time to time pursuant to paragraph 2.4.
"Revolving Credit Commitment Fee": as defined in paragraph
---------------------------------
3.1.
"Revolving Credit Commitment Period": the period from the
-------------------------------------
Restatement Effective Date to, but excluding, the Revolving Credit
Termination Date.
"Revolving Credit Loan" and "Revolving Credit Loans": as de-
--------------------- ----------------------
fined in paragraph 2.1.
"Revolving Credit Note" and "Revolving Credit Notes": as de-
--------------------- ----------------------
fined in paragraph 2.2.
"Revolving Credit Termination Date": June 3, 1996, or any date
---------------------------------
subsequent thereto resulting from an extension of the Revolving
Credit Termination Date pursuant to paragraph 2.20, or such earlier
date on which the Revolving Credit Notes shall become due and
payable, whether by acceleration or otherwise.
"Securities Act": the Securities Act of 1933, as amended, and
---------------
the rules and regulations promulgated thereunder.
"SEC": the Securities and Exchange Commission, or any Govern-
---
mental Authority succeeding to the functions thereof.
"Senior Debt Service Coverage Ratio": at any date of determi-
----------------------------------
nation, the ratio of (a) Adjusted Operating Cash Flow to (b) Ad-
justed Total Senior Debt.
"Senior Subordinated Debentures": the 5% Convertible Senior
-------------------------------
Subordinated Debentures, due March 31, 2003, issued by Enterprises
pursuant to the Debenture Purchase Agreement, as the same may be
amended, supplemented or otherwise modified from time to time in
accordance with paragraph 8.20.
"Single Employer Plan": any Plan which is not a Multiemployer
--------------------
Plan.
- 21 -
<PAGE>
"Special Counsel": Emmet, Marvin & Martin.
---------------
"Stock": any and all shares, rights, interests, participa-
-----
tions, warrants or other equivalents (however designated) of cor-
porate stock.
"Subsidiary": any corporation, association, partnership, joint
----------
venture or other business entity of which the Company and/or any
Subsidiary of the Company, directly or indirectly, either (i) in
respect of a corporation, owns or controls more than 50% of the
outstanding Stock having ordinary voting power to elect a majority
of the board of directors or similar managing body, irrespective of
whether a class or classes shall or might have voting power by
reason of the happening of any contingency, or (ii) in respect of
an association, partnership, joint venture or other business en-
tity, is entitled to share in more than 50% of the profits and
losses, however determined.
"Tax Sharing Agreement": the Tax Sharing and Paying Agreement,
---------------------
dated as of April 22, 1988, between the Company, certain of its
Subsidiaries and Enterprises, as the same may be amended,
supplemented or otherwise modified from time to time in accordance
with paragraph 8.20.
"Taxes": any present or future income, stamp or other taxes,
-----
levies, imposts, duties, fees, assessments, deductions, withhold-
ing, or other charges of whatever nature, now or hereafter imposed,
levied, collected, withheld, or assessed by any jurisdiction or by
any department, agency, state or other political subdivision
thereof or therein.
"Tennessee Bank": a Bank which maintains an office in the
--------------
State of Tennessee.
"Tennessee Tax" as defined in paragraph 2.13(c).
-------------
"Total Debt": at any date of determination, the sum of Total
----------
Senior Debt and Total Subordinated Debt.
"Total Senior Debt": at any date of determination, the sum of,
-----------------
without duplication, (i) the aggregate outstanding principal
balance of all Debt of the Company and its Subsidiaries on a Con-
solidated basis (other than Total Subordinated Debt) and (ii) the
amount of the Aggregate Revolving Credit Commitments less the ag-
gregate principal amount of Revolving Credit Loans outstanding on
such date.
- 22 -
<PAGE>
"Total Subordinated Debt": at any date of determination, the
-----------------------
sum of the aggregate outstanding principal balance of (i) the En-
terprises Subordinated Debentures, (ii) the Senior Subordinated
Debentures and (iii) the Restaurant Notes.
"Transaction Record": as defined in paragraph 2.21.
------------------
2. Other Definitional Provisions.
-----------------------------
(a) All terms defined in this Agreement shall have the
meanings given such terms herein when used in the Loan Documents or
any certificate or other document made or delivered pursuant hereto
or thereto, unless otherwise defined therein.
(b) As used herein, in the other Loan Documents and in
any certificate or other document made or delivered pursuant hereto
or thereto, accounting terms not defined in paragraph 1.1, and
accounting terms partly defined in paragraph 1.1, to the extent not
defined, shall have the respective meanings given to them under
GAAP.
(c) The words "hereof", "herein", "hereto" and "here-
under" and similar words when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of
this Agreement, and paragraph, schedule and exhibit references
contained herein shall refer to paragraphs hereof or schedules or
exhibits hereto unless otherwise expressly provided herein.
(d) The word "or" shall not be exclusive; "may not" is
prohibitive and not permissive; and the singular includes the plu-
ral.
2. AMOUNT AND TERMS OF REVOLVING CREDIT LOANS AND LETTERS OF
--------------------------------------------------------------
CREDIT.
------
1. Revolving Credit Loans.
----------------------
Prior to the Restatement Effective Date, the Company bor-
rowed the Term Loans from the Banks under and pursuant to the
Existing Credit Agreement. The Term Loans are hereby converted
into Revolving Credit Loans. Subject to the terms and conditions
of this Agreement, each Bank severally agrees to make loans, in-
cluding, without limitation, the Revolving Credit Loans resulting
from the conversion of the Term Loans pursuant to the preceding
sentence (each, a "Revolving Credit Loan" or a "Loan" and, col-
---------------------- ----
lectively with its other Revolving Credit Loans and the Revolving
Credit Loans of the other Banks, the "Revolving Credit Loans" or
-----------------------
- 23 -
<PAGE>
"Loans") to the Company from time to time during the Revolving
-----
Credit Commitment Period in an aggregate principal amount at any
one time outstanding not to exceed such Bank's Commitment Percent-
age of the Available Revolving Credit Commitment. At no time shall
the sum of (i) the aggregate outstanding principal balance of all
of the Revolving Credit Loans and (ii) the Letter of Credit
Exposure exceed the Aggregate Revolving Credit Commitments. During
the Revolving Credit Commitment Period, the Company may borrow,
prepay in whole or in part and reborrow under such Revolving Credit
Commitments, all in accordance with the terms and conditions
hereof. Subject to the provisions of paragraphs 2.3 and 2.6,
Revolving Credit Loans may be (i) Alternate Base Rate Loans, (ii)
Eurodollar Loans or (iii) any combination thereof.
2. Revolving Credit Notes.
----------------------
The Revolving Credit Loans made by each Bank shall be
evidenced by an amended and restated promissory note of the Com-
pany, substantially in the form of Exhibit B, with appropriate
insertions therein as to date and principal amount (each, as in-
dorsed or modified from time to time, including all replacements
thereof and substitutions therefor, a "Revolving Credit Note" or
----------------------
"Note" and, collectively with the Revolving Credit Notes of all
----
other Banks, the "Revolving Credit Notes" or "Notes"), payable to
---------------------- -----
the order of such Bank and representing the obligation of the Com-
pany to pay the lesser of (i) the Revolving Credit Commitment of
such Bank and (ii) the aggregate unpaid principal balance of all
Revolving Credit Loans made by such Bank, with interest thereon as
prescribed in paragraph 2.7. The (i) date and amount of each Re-
volving Credit Loan made by a Bank, (ii) its character as an Al-
ternate Base Rate Loan, a Eurodollar Loan or a combination
- 24 -
<PAGE>
thereof, (iii) the interest rate and Interest Period (if any) ap-
plicable to Eurodollar Loans, and (iv) each payment and prepayment
of the principal thereof, shall be recorded by such Bank on its
books and, prior to any transfer of its Revolving Credit Note,
indorsed by such Bank on the schedule attached thereto or any con-
tinuation thereof, provided that the failure of such Bank to make
any such recordation or indorsement shall not affect the obliga-
tions of the Company to make payment when due of any amount owing
under the Loan Documents. Each Revolving Credit Note shall (i) be
dated the Restatement Effective Date, (ii) be stated to mature on
the Revolving Credit Termination Date, and (iii) bear interest for
the period from and including the date thereof on the principal
balance thereof from time to time outstanding at the applicable
interest rate or rates per annum determined as provided in para-
graph 2.7. Interest on each Revolving Credit Note shall be payable
as specified in paragraph 2.7.
3. Procedure for Borrowing.
-----------------------
(a) The Company may borrow Revolving Credit Loans on any
Business Day during the Revolving Credit Commitment Period,
provided, however, that the Company shall notify the Administrative
Agent (by telephone, to be promptly confirmed in writing, or
telecopy) no later than 1:00 P.M., New York City time, three Busi-
ness Days prior to the requested Borrowing Date, in the case of
Eurodollar Loans, and no later than 1:00 P.M., New York City time,
one Business Day prior to the requested Borrowing Date, in the case
of Alternate Base Rate Loans, specifying (i) the amount to be bor-
rowed, (ii) the requested Borrowing Date, (iii) whether the
borrowing is to be a Eurodollar Loan, an Alternate Base Rate Loan,
or a combination thereof, and the amount of each thereof, and (iv)
if the borrowing is to be of Eurodollar Loans, the length of the
initial Interest Period for such Loans. Each borrowing shall be in
an aggregate principal amount equal to $1,000,000 or such amount
plus an integral multiple of $100,000 in excess thereof or, if
less, the unused amount of the Aggregate Revolving Credit Commit-
ments. Upon receipt of each notice of borrowing from the Company,
the Administrative Agent shall promptly notify each Bank thereof.
Subject to its receipt of the notice referred to in the preceding
sentence, each Bank will make the amount of its applicable Commit-
ment Percentage of each borrowing available to the Administrative
Agent for the account of the Company at the office of the
Administrative Agent set forth in paragraph 11.2 not later than
12:00 Noon, New York City time, on the Borrowing Date requested by
the Company, in funds immediately available to the Administrative
Agent at such office. The amounts so made available to the
Administrative Agent on a Borrowing Date will then, subject to the
satisfaction of the terms and conditions of this Agreement as
- 25 -
<PAGE>
determined by the Administrative Agent, be made available on such
date to the Company by the Administrative Agent at the office of
the Administrative Agent specified in paragraph 11.2 by crediting
the account of the Company on the books of such office with the
aggregate of said amounts received by the Administrative Agent.
(b) Unless the Administrative Agent shall have received
prior notice from a Bank (by telephone or otherwise, such notice to
be confirmed by telecopy or other writing) that such Bank will not
make available to the Administrative Agent such Bank's pro rata
share of the Revolving Credit Loans requested by the Company, the
Administrative Agent may assume that such Bank has made such share
available to the Administrative Agent on such Borrowing Date in ac-
cordance with this paragraph, provided that such Bank received
notice of the proposed borrowing from the Administrative Agent, and
the Administrative Agent may, in reliance upon such assumption,
make available to the Company on such Borrowing Date a
corresponding amount. If and to the extent such Bank shall not
have so made such pro rata share available to the Administrative
Agent, such Bank and the Company severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount
(to the extent not previously paid by the other), together with
interest thereon for each day from the date such amount is made
available to the Company until the date such amount is paid to the
Administrative Agent, at a rate per annum equal to, in the case of
the Company, the applicable interest rate set forth in paragraph
2.7, and, in the case of such Bank, the Federal Funds Rate in ef-
fect on such date (as determined by the Administrative Agent).
Such payment by the Company, however, shall be without prejudice to
its rights against such Bank. If such Bank shall pay to the
Administrative Agent such corresponding amount, such amount so paid
shall constitute such Bank's Revolving Credit Loan as part of such
Revolving Credit Loans for purposes of this Agreement, which
Revolving Credit Loan shall be deemed to have been made by such
Bank on the Borrowing Date applicable to such Revolving Credit
Loans.
4. Reduction of Revolving Credit Commitments.
-----------------------------------------
(a) Voluntary Reductions. The Company shall have the
--------------------
right, upon at least three Business Days' prior written notice to
the Administrative Agent, to reduce permanently the Aggregate Re-
volving Credit Commitments in whole at any time, or in part from
time to time, without premium or penalty, by an amount not in ex-
cess of the Available Revolving Credit Commitment (after giving
effect to any contemporaneous prepayment of Revolving Credit
Loans), provided that each partial reduction of the Aggregate Re-
volving Credit Commitments shall be in an amount equal to
- 26 -
<PAGE>
$1,000,000 or such amount plus a whole multiple of $100,000.
(b) In General. Reductions of the Aggregate Revolving
----------
Credit Commitments shall be applied pro rata according to the Re-
volving Credit Commitment of each Bank. Simultaneously with each
reduction of the Aggregate Revolving Credit Commitments under this
paragraph, the Company shall pay the Revolving Credit Commitment
Fee accrued on the amount by which the Aggregate Revolving Credit
Commitments have been reduced.
5. Prepayments of the Revolving Credit Loans.
-----------------------------------------
(a) Voluntary Prepayments. The Company may, at its
----------------------
option, prepay the Revolving Credit Loans, in whole or in part,
without premium or penalty, at any time and from time to time, by
notifying the Administrative Agent at least three Business Days
prior to the proposed prepayment date in the case of any prepayment
of Eurodollar Loans and at least one Business Day prior to the
proposed prepayment date in the case of any prepayment of Alternate
Base Rate Loans. Each such notice shall be in writing and shall
specify the amount to be prepaid and the date of prepayment. Upon
receipt of such notice, the Administrative Agent shall promptly
notify each Bank thereof. If any such notice of the Company is
given pursuant to this paragraph, such notice shall be irrevocable
and the payment amount specified in such notice shall be due and
payable on the date specified, together with accrued interest to
the date of such payment on the amount prepaid. Partial prepay-
ments shall be in an aggregate principal amount of $1,000,000 or
such amount plus an integral multiple of $100,000 in excess thereof
or, if less, the outstanding principal balance of the Revolving
Credit Loans. After giving effect to any partial prepayment with
respect to Eurodollar Loans made on the same date (whether as the
result of a borrowing or a conversion) and which had the same
Interest Period, the outstanding principal amount of such
Eurodollar Loans made (whether as the result of a borrowing or a
conversion) shall exceed (subject to paragraph 2.6) $1,000,000 or
such Eurodollar Loans shall be converted to Alternate Base Rate
Loans. No prepayment of a Eurodollar Loan shall be made except on
the last day of the Interest Period applicable thereto.
(b) In General. If any prepayment is made under this
----------
paragraph with respect to any Eurodollar Loans, in whole or in
part, prior to the last day of the applicable Interest Period, the
Company agrees to indemnify the Banks in accordance with paragraph
2.16.
- 27 -
<PAGE>
6. Conversions.
-----------
(a) The Company may elect from time to time to convert
Eurodollar Loans to Alternate Base Rate Loans by giving the Admin-
istrative Agent at least one Business Day's prior irrevocable no-
tice of such election, specifying the amount to be so converted,
provided, that any such conversion shall only be made on the last
day of the Interest Period applicable thereto. In addition, the
Company may elect from time to time to convert Alternate Base Rate
Loans to Eurodollar Loans or to convert Eurodollar Loans to new
Eurodollar Loans by giving the Administrative Agent at least three
Business Days' prior irrevocable notice of such election, in the
case of a conversion to Eurodollar Loans, specifying the amount to
be so converted and the initial Interest Period relating thereto,
provided that any such conversion of Alternate Base Rate Loans to
Eurodollar Loans shall only be made on a Business Day and any such
conversion of Eurodollar Loans to new Eurodollar Loans shall only
be made on the last day of the Interest Period applicable to the
Eurodollar Loans which are to be converted to such new Eurodollar
Loans. The Administrative Agent shall promptly provide the Banks
with notice of any such election. Alternate Base Rate and Euro-
dollar Loans may be converted pursuant to this paragraph in whole
or in part, provided that conversions of Alternate Base Rate Loans
to Eurodollar Loans, or Eurodollar Loans to new Eurodollar Loans,
shall be in an aggregate principal amount of (subject to this
paragraph) $1,000,000 or such amount plus a whole multiple of
$100,000.
(b) Notwithstanding anything in this paragraph to the
contrary, no Alternate Base Rate Loan may be converted to a Euro-
dollar Loan, and no Eurodollar Loan may be converted to a new Eu-
rodollar Loan, if a Default or Event of Default has occurred and is
continuing at the time the Company shall notify the Administrative
Agent of its election to convert any such Alternate Base Rate Loan
to a Eurodollar Loan or to convert any Eurodollar Loan to a new
Eurodollar Loan and the Agent shall have knowledge thereof. In
such event, such Alternate Base Rate Loan shall be automatically
continued as an Alternate Base Rate Loan or such Eurodollar Loan
shall be automatically converted to an Alternate Base Rate Loan on
the last day of the Interest Period applicable to such Eurodollar
Loan. If a Default or an Event of Default shall have occurred and
be continuing, the Administrative Agent shall, at the request of
the Required Banks, notify the Company (by telephone or otherwise)
that all, or such lesser amount as the Administrative Agent and the
Required Banks shall designate, of the outstanding Eurodollar Loans
shall be automatically converted to Alternate Base Rate Loans, in
which event such Eurodollar Loans shall be automatically converted
to Alternate Base Rate Loans on the date such notice is given and
- 28 -
<PAGE>
shall bear interest from and after such date at the Alternate Base
Rate plus the Applicable Margin. In the event that Eurodollar
Loans are converted to Alternate Base Rate Loans at the request of
the Required Banks pursuant to the preceding sentence, no Bank
shall be entitled to an indemnity described in paragraph 2.16 with
respect to the Eurodollar Loans so converted.
(c) Each conversion shall be effected by each Bank by
applying the proceeds of the new Alternate Base Rate Loan, or Eu-
rodollar Loan, as the case may be, to the Loan (or portion thereof)
being converted (it being understood that such conversion shall not
constitute a borrowing for purposes of paragraphs 4, 5 or 6).
7. Interest Rate and Payment Dates.
-------------------------------
(a) Revolving Credit Loans Prior to Maturity. Except as
----------------------------------------
otherwise provided in paragraph 2.7(c), prior to maturity, the
outstanding principal balance of the Revolving Credit Loans shall
bear interest on the unpaid principal balance thereof at the ap-
plicable interest rate or rates per annum set forth below:
LOANS RATE
----- ----
Each Alternate Base Rate Alternate Base Rate plus the
Loan Applicable Margin.
Each Eurodollar Loan Eurodollar Rate for the ap-
plicable Interest Period plus
the Applicable Margin.
(b) Late Charges. If all or any portion of the principal
------------
balance of or interest payable on any of the Revolving Credit
Loans, the amount of any drawing under a Letter of Credit or any
other amount payable by the Company to the Bank under the Loan
Documents shall not be paid when due (whether at the stated matu-
rity date thereof, by acceleration or otherwise), (i) such overdue
principal shall bear interest at a rate per annum equal to 2% plus
the rate which would otherwise be applicable pursuant to paragraph
2.7(a), (ii) such unreimbursed drawing under a Letter of Credit
shall bear interest at a rate per annum equal to (x) if the reim-
bursement of such drawing is made on the Business Day immediately
succeeding the date on which such reimbursement is due, the Alter-
nate Base Rate plus the Applicable Margin and (y) if such reim-
bursement is not made on such immediately succeeding Business Day,
the Alternate Base Rate plus 3 1/2% for the period from the date on
which such payment was due until payment thereof, and (iii) such
overdue interest or other amount shall bear interest at a rate per
annum equal to the Alternate Base Rate plus the Applicable Margin
- 29 -
<PAGE>
plus 2%, in each case from the date of such nonpayment until paid
in full, whether before or after judgment. Interest payable under
this paragraph 2.7(b) shall be payable on demand.
(c) General. Interest shall be calculated on the basis
-------
of a 360 day year for the actual number of days elapsed. Interest
shall be payable in arrears on each Interest Payment Date and upon
payment (including prepayment) of the Revolving Credit Loans. Any
change in the interest rate on the Revolving Credit Loans resulting
from a change in the Alternate Base Rate or any reserve requirement
shall become effective as of the opening of business on the day on
which such change shall become effective. The Administrative Agent
shall, as soon as practicable, notify the Company and the Banks of
the effective date and the amount of each such change in the
Alternate Base Rate or any reserve requirement, but failure to so
notify shall not in any manner affect the obligation of the Company
to pay interest on the Revolving Credit Loans in the amounts and on
the dates required. Each determination of the Alternate Base Rate
by the Administrative Agent pursuant to this Agreement shall be
conclusive and binding on the Company and the Banks absent manifest
error. At no time shall the interest rate payable on the Revolving
Credit Loans, together with the Revolving Credit Commitment Fee,
the Letter of Credit Commissions and all other fees and other
amounts payable hereunder, to the extent the same are construed to
constitute interest, exceed the Highest Lawful Rate. If interest
payable on any date would exceed the maximum amount permitted by
the Highest Lawful Rate, such interest payment shall automatically
be reduced to such maximum permitted amount, and interest for any
subsequent period, to the extent less than the maximum amount per-
mitted for such period by the Highest Lawful Rate, shall be in-
creased by the unpaid amount of such reduction. Any interest ac-
tually received for any period in excess of such maximum allowable
amount for such period shall be deemed to have been applied as a
prepayment of the Revolving Credit Loans. The Company acknowledges
that to the extent interest payable on the Revolving Credit Loans
is based on the Alternate Base Rate, such Rate is only one of the
bases for computing interest on loans made by the Banks, and by
basing interest payable on the Alternate Base Rate Loans on the
Alternate Base Rate, the Banks have not committed to charge, and
the Company has not in any way bargained for, interest based on a
lower or the lowest rate at which the Banks may now or in the
future make loans to other borrowers.
8. Letter of Credit Sub-Facility.
-----------------------------
(a) Subject to the terms and conditions of this Agree-
ment, the Issuing Bank agrees, in reliance on the agreement of the
other Banks set forth in paragraph 2.9, to issue standby and docu-
- 30 -
<PAGE>
mentary trade letters of credit (together with the Letters of
Credit issued by the Issuing Bank on and after the Original Effec-
tive Date and before the Restatement Effective Date, the "Letters
-------
of Credit"; each, individually, a "Letter of Credit") for the ac-
--------- ----------------
count of the Company. The sum of the aggregate face amount of the
Letters of Credit at any one time outstanding shall not exceed the
lesser of (i) the Letter of Credit Commitment and (ii) the Avail-
able Revolving Credit Commitment. Each Letter of Credit shall have
an expiration date which shall not be (i) more than one year from
the date of its issuance or (ii) later than one Business Day prior
to the Revolving Credit Termination Date. No Letter of Credit
shall be issued if the Administrative Agent shall have determined
that the conditions set forth in paragraph 6 have not been
satisfied.
(b) Each Letter of Credit shall be issued for the ac-
count of the Company in support of the Company's workers' compen-
sation, general liability and other obligations arising in the
ordinary course of business and which do not involve obligations
for the borrowing of money or Contingent Obligations with respect
thereto. The Company shall give the Issuing Bank (with a copy to
the Administrative Agent) a Letter of Credit Request for the issu-
ance of each Letter of Credit by 10:00 A.M., Issuing Bank Local
Time, three Business Days prior to the requested date of issuance.
Such Letter of Credit Request shall specify (i) the beneficiary of
such Letter of Credit and the address at which the Letter of Credit
is to be delivered to such beneficiary, (ii) the Company's proposal
as to the conditions under which a drawing may be made under such
Letter of Credit and the documentation, if any, to be required in
respect thereof, (iii) the maximum amount to be available under
such Letter of Credit, and (iv) the requested date of issuance and
the expiration date. The Company agrees to provide to the Issuing
Bank prior to the issuance of a Letter of Credit, such other
information as the Issuing Bank may reasonably request in
connection with the issuance of such Letter of Credit. Upon
receipt of such Letter of Credit Request from the Company, the
Issuing Bank shall promptly notify the Administrative Agent which,
in turn, will promptly notify each Bank thereof. The Issuing Bank
shall, on the proposed date of issuance and subject to the other
terms and conditions of this Agreement, issue the requested Letter
of Credit on behalf of the Banks. Each Letter of Credit shall be
in form and substance reasonably satisfactory to the Issuing Bank,
with such provisions with respect to the conditions under which a
drawing may be made thereunder and the documentation required in
respect of such drawing as the Issuing Bank shall reasonably re-
quire. The Issuing Bank shall deliver a copy of each Letter of
Credit to the Administrative Agent for distribution to the Company
and each Bank within a reasonable time after the issuance thereof.
- 31 -
<PAGE>
(c) Each payment by the Issuing Bank of a draft drawn
under a Letter of Credit shall give rise to an obligation on the
part of the Company to reimburse the Issuing Bank immediately by
wire transfer for the amount thereof. If the Company shall have
failed to reimburse the Issuing Bank in full on or before 11:00
A.M., Issuing Bank Local Time, on the date the Issuing Bank shall
make payment on a draft drawn under a Letter of Credit, the Issuing
Bank shall notify the Administrative Agent thereof by telephone
(promptly confirmed in writing) not later than 11:30 A.M., Issuing
Bank Local Time, on such date and the Company's obligations to make
such reimbursement shall be satisfied by the automatic making of a
Revolving Credit Loan by each Bank under its Revolving Credit Note
(without regard to the occurrence of any Default or Event of
Default or the compliance by the Company with any of its
obligations under the Loan Documents) in the principal amount equal
to its Commitment Percentage of the amount of such draft paid by
the Issuing Bank. The Company shall be deemed to have elected that
each such Revolving Credit Loan be made initially as an Alternate
Base Rate Loan. The Administrative Agent agrees to notify each
Bank (in accordance with paragraph 2.3(b)) and the Company of the
making of such Revolving Credit Loan.
9. Letter of Credit Participation and Funding Commitments.
------------------------------------------------------
(a) Each Bank hereby unconditionally, irrevocably, and
severally for itself only hereby takes, without any notice to or
the taking of any action by such Bank, an undivided participating
interest in the obligations of the Issuing Bank under and in con-
nection with each Letter of Credit in an amount equal to such
Bank's Commitment Percentage of the amount of such Letter of
Credit. Each Bank shall be liable to the Issuing Bank for its
Commitment Percentage of the unreimbursed amount of any draft drawn
and honored under each Letter of Credit. The failure of any Bank to
honor its obligations hereunder shall not relieve any other Bank of
its duty to honor its obligations hereunder. Each Bank shall also
be liable for an amount equal to the product of its Commitment
Percentage and any amounts paid by the Company pursuant to
paragraph 2.8 that are subsequently rescinded or avoided, or must
otherwise be restored or returned. Such liabilities shall be
unconditional and without regard to the occurrence of any Default
or Event of Default or the compliance by the Company with any of
its obligations under the Loan Documents. Each payment by a Bank of
such Commitment Percentage of the amount of such Letter of Credit
or of any amounts so rescinded, avoided, restored or returned shall
be treated as the making by such Bank of an automatic Revolving
Credit Loan.
(b) The Issuing Bank will promptly notify the Adminis-
- 32 -
<PAGE>
trative Agent and each Bank (which notice shall be promptly con-
firmed in writing) of the date and the amount of any draft pre-
sented under any Letter of Credit with respect to which full reim-
bursement of payment is not made by the Company as provided in
paragraph 2.8, and forthwith upon receipt of such notice, such Bank
(other than the Issuing Bank) shall make available to the
Administrative Agent for the account of the Issuing Bank its Com-
mitment Percentage of the amount of such unreimbursed draft (which
shall constitute such Bank's automatic Revolving Credit Loan) at
the office of the Administrative Agent specified in paragraph 11.2,
in lawful money of the United States and in immediately available
funds, before 4:00 P.M., Issuing Bank Local Time, on the day such
notice is given by the Issuing Bank, if the relevant notice is
given by the Issuing Bank at or prior to 1:00 P.M., Issuing Bank
Local Time, on such day, and before 12:00 Noon, New York City time,
on the next Business Day, if the relevant notice is given by the
Issuing Bank after 1:00 P.M., Issuing Bank Local Time, on such day.
The Administrative Agent shall distribute the payments made by each
Bank (other than the Issuing Bank) pursuant to the immediately
preceding sentence to the Issuing Bank promptly upon receipt
thereof in like funds as received. If and to the extent that a
Bank does not make available to the Administrative Agent when due
such Bank's Commitment Percentage of any unreimbursed payment made
by the Issuing Bank under a Letter of Credit (other than payments
made by the Issuing Bank by reason of its failure to materially
comply with the terms of such Letter of Credit), and the
Administrative Agent has not made, in its sole discretion, such
payment on behalf of such Bank pursuant to paragraph 2.3(b), such
Bank and the Company severally agree upon demand by the Issuing
Bank to pay to the Administrative Agent for the account of the
Issuing Bank such amount (to the extent not paid by the other),
together with interest thereon for each day from the date on which
such payment was due from such Bank until the date such amount is
paid to the Administrative Agent on behalf of the Issuing Bank, at
a rate per annum equal to, in the case of the Company, the
applicable interest rate set forth in paragraph 2.7, and in the
case of such Bank, the Federal Funds Rate in effect on such date
(as determined by the Administrative Agent). The Administrative
Agent shall promptly distribute such interest payments to the
Issuing Bank upon receipt thereof in like funds as received. If the
Administrative Agent receives a Bank's Commitment Percentage of any
unreimbursed payment under a Letter of Credit after the date when
due and the Administrative Agent receives interest on any late pay-
ment from such Bank in accordance with the provisions of the
preceding sentence, such Bank's automatic Revolving Credit Loan
shall be deemed to have been made to the Company on the date the
Issuing Bank made payment under such Letter of Credit.
- 33 -
<PAGE>
(c) Whenever the Administrative Agent is reimbursed by
the Company, for the account of the Issuing Bank, for any payment
under a Letter of Credit and such payment relates to an amount
previously paid by a Bank in respect of its Commitment Percentage
of the amount of such payment under such Letter of Credit, the
Administrative Agent will pay over such payment to such Bank (i)
before 4:00 P.M., New York City time on the day such payment from
the Company is received, if such payment is received at or prior to
1:00 P.M., New York City time, on such day, or (ii) before 12:00
Noon, New York City time, on the next succeeding Business Day, if
such payment from the Company is received after 1:00 P.M., New York
City time, on such day.
10. Absolute Obligation with respect to Letter of Credit
---------------------------------------------------------
Payments.
--------
The Company's obligation to reimburse the Administrative
Agent for the account of the Issuing Bank in respect of a Letter of
Credit for each payment under or in respect of such Letter of
Credit shall be absolute and unconditional under any and all cir-
cumstances and irrespective of any set-off, counterclaim or defense
(other than payment by the Company) to payment which the Company
may have or have had against the beneficiary of such Letter of
Credit, the Administrative Agent, the Issuing Bank, any Bank or any
other Person, including, without limitation, any defense based on
the failure of any drawing to conform to the terms of such Letter
of Credit, any drawing document proving to be forged, fraudulent or
invalid, or the legality, validity, regularity or enforceability of
such Letter of Credit. The foregoing shall not impose any
limitation on any right the Company may have to proceed against the
Issuing Bank for the Issuing Bank's gross negligence or willful
misconduct.
11. Increased Costs Based on Letters of Credit.
------------------------------------------
Without limiting the provisions of paragraph 2.15, in the
event that after the Original Effective Date, the implementation
of, or any change in, any law or regulation or any change in the
interpretation or application thereof by any Governmental Authority
charged with the administration thereof shall either (a) impose,
modify or make applicable any reserve, special deposit, assessment
or similar requirement against letters of credit issued (or any
commitment to issue letters of credit) by, or participated (or any
commitment to participate in letters of credit) by any Bank, or (b)
impose on the Issuing Bank or such Bank any other condition
regarding the Letters of Credit (except for the imposition of, or
changes in the rate of, tax on the overall net income of the Issu-
ing Bank or such Bank) and the result of any event referred to in
- 34 -
<PAGE>
clause (a) or (b) above shall be to increase the cost to the Issu-
ing Bank of issuing or maintaining the Letters of Credit or the
cost to any Bank of making or maintaining any Revolving Credit Loan
pursuant to paragraph 2.8 or its obligations pursuant to paragraph
2.9, or the cost to the Administrative Agent of performing its
functions hereunder with respect to the Letters of Credit, in any
case by an amount which the Administrative Agent, the Issuing Bank,
or any Bank, as the case may be, deems material, then, within ten
days after demand by the Administrative Agent, the Issuing Bank or
such Bank, as the case may be, accompanied by a statement of the
type referred to in the next sentence, the Company shall im-
mediately pay to the Administrative Agent, the Issuing Bank or such
Bank, as the case may be, from time to time as specified by the
Administrative Agent, the Issuing Bank or such Bank, additional
amounts which shall be sufficient to compensate the Administrative
Agent, the Issuing Bank or such Bank, as the case may be, for such
increased cost. A statement in reasonable detail as to such
increased cost incurred by the Administrative Agent, the Issuing
Bank or such Bank, as the case may be, as a result of any event
mentioned in clauses (a) or (b) above, submitted to the Company
shall be conclusive, absent manifest error, as to the amount
thereof.
12. Substituted Interest Rate.
-------------------------
In the event that (i) the Administrative Agent shall have
determined (which determination shall be conclusive and binding
upon the Company) that by reason of circumstances affecting the
interbank eurodollar market either adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate applicable pursuant
to paragraph 2.7 or quotations of rates for relevant deposits
referred to in the definition of Eurodollar Rates are not being
provided in the relevant amounts or for the relevant maturities or
(ii) the Required Banks shall have notified the Administrative
Agent that they have determined (which determination shall be
conclusive and binding on the Company) that the applicable Eu-
rodollar Rate will not adequately and fairly reflect the cost to
such Banks of maintaining or funding loans bearing interest based
on such Eurodollar Rate, with respect to proposed Loans that the
Company has requested be made as Eurodollar Loans or Eurodollar
Loans that will result from the requested conversion of any Loans
into Eurodollar Loans (each Loan being herein called an "Affected
--------
Loan"), the Administrative Agent shall promptly notify the Company
----
and the Banks (by telephone or otherwise, to be confirmed in writ-
ing) of such determination, on or prior to the requested Borrowing
Date for such Affected Loans or the requested Conversion Date of
such Loans. If the Administrative Agent shall give such notice,
(a) any requested Affected Loan shall be made as an Alternate Base
- 35 -
<PAGE>
Rate Loan, (b) any Loan that was to have been converted to an Af-
fected Loan shall be converted to or continued as an Alternate Base
Rate Loan and (c) any outstanding Affected Loan shall be converted,
on the last day of the then current Interest Period with respect
thereto, to an Alternate Base Rate Loan. Until any such notice
under clauses (i) or (ii), as the case may be, of this paragraph
has been withdrawn by the Administrative Agent (by notice to the
Company promptly upon either (x) the Administrative Agent having
determined that such circumstances affecting the interbank eurodol-
lar market no longer exist and that adequate and reasonable means
do exist for determining the Eurodollar Rate pursuant to paragraph
2.7 or (y) the Administrative Agent's having been notified by the
Required Banks that circumstances no longer render any Loan an Af-
fected Loan) no further Eurodollar Loans shall be required to be
made by the Banks nor shall the Company have the right to convert
any Loans to Eurodollar Loans.
13. Taxes; Net Payments.
-------------------
(a) All payments made by the Company under the Loan
Documents shall be made free and clear of, and without reduction
for or on account of, any Taxes required by law to be withheld from
any amounts payable under the Loan Documents. A statement setting
forth the calculations of any amounts payable pursuant to this
paragraph submitted by a Bank to the Company shall be conclusive
absent manifest error.
(b) Each Bank (and any holder of a participation inter-
est from such Bank) shall deliver to the Company such certificates,
documents, or other evidence as the Company may require from time
to time as are necessary to establish that such Bank (or
participant) is not subject to withholding under Section 1441 or
1442 of the Code or as may be necessary to establish, under any law
imposing upon the Company, whether existing now or hereafter, an
obligation to withhold any portion of the payments made by the
Company under the Loan Documents, that payments to the Administra-
tive Agent on behalf of such Bank (or participant) are not subject
to withholding. Notwithstanding any provision herein to the con-
trary, the Company shall have no obligation to pay to any Bank (or
participant) any amount which the Company is liable to withhold due
to the failure of such Bank (or participant) to file any statement
of exemption required by the Code.
(c) In the event that a Bank (other than a Tennessee
Bank) pays a tax or any interest, penalties or additions with re-
spect to such tax to the State of Tennessee (or any political sub-
division thereof), which tax is computed (1) with respect to such
Bank's earnings, income or similar items, (2) with respect to is-
- 36 -
<PAGE>
sued stock, outstanding stock, surplus, undivided profits, retained
earnings of such Bank or any combination thereof and/or (3) with
respect to the value of Property owned or used in the State of
Tennessee (each, a "Tennessee Tax"):
-------------
(i) The Company shall pay to the Bank the allocable
share (determined in accordance with clause (ii) below) of an
amount (the "Reimbursement Amount") equal to the amount of the
---------------------
Tennessee Tax paid by such Bank which is attributable to (x) pay-
ments made by the Company to such Bank under the Loan Documents
(including payments required by this provision), (y) the Revolving
Credit Loans and other extensions of credit made by such Bank under
the Loan Documents and/or (z) the presence of any Collateral in
Tennessee.
(ii) The calculation of the Reimbursement Amount
shall be made on an after-tax basis so that any reduction in the
amount of such Bank's federal income tax or the tax paid by such
Bank to any other state from what it would otherwise have paid but
for the payment of the Tennessee Tax shall reduce the Reimbursement
Amount on a dollar-for-dollar basis. The allocable share of the
Reimbursement Amount shall be determined by multiplying the
Reimbursement Amount by a fraction, the numerator of which is the
average amount of the Commitment, Loans and other extensions of
credit during the tax year in question of such Bank to the Company
and the denominator of which is the average amount of the Commit-
ment, Loans and other extensions of credit during the tax year in
question of such Bank to all borrowers in Tennessee. In the event
that such Bank receives a refund of any Tennessee Tax for which the
Bank has received payment from the Company, the Bank will pay such
refund to the Company to the extent of such payment.
(iii) Any Bank which seeks a reimbursement hereunder
shall deliver to the Company a statement setting forth the
calculations of any Reimbursement Amount. Payment thereof shall be
made by the Company within ten Business Days of such Bank's request
therefor.
14. Illegality.
----------
Notwithstanding any other provisions herein, if any law,
regulation, treaty or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for
any Bank to make or maintain its Eurodollar Loans as contemplated
by this Agreement, (i) the commitment of such Bank to make Euro-
dollar Loans or convert Alternate Base Rate Loans to Eurodollar
Loans, as the case may be, shall forthwith be suspended and (ii)
such Bank's Loans then outstanding as Eurodollar Loans affected
- 37 -
<PAGE>
hereby, if any, shall be converted automatically to Alternate Base
Rate Loans on the last day of the then current Interest Period
applicable thereto or within such earlier period as required by
law. If the commitment of any Bank with respect to Eurodollar
Loans is suspended pursuant to this paragraph and such Bank shall
notify the Administrative Agent and the Company that it is once
again legal for such Bank to make or maintain Eurodollar Loans,
such Bank's commitment to make or maintain Eurodollar Loans, shall
be reinstated.
15. Increased Costs.
---------------
In the event that any law, regulation, treaty or direc-
tive hereafter enacted, promulgated, approved or issued or any
change hereafter enacted, promulgated, approved or issued in any
presently existing law, regulation, treaty or directive or in the
interpretation or application thereof by any Governmental Authority
charged with the administration thereof or compliance by any Bank
(or any corporation directly or indirectly owning or controlling
such Bank) with any request or directive from any central bank or
other Governmental Authority, agency or instrumentality hereafter
enacted, promulgated, approved or issued:
(a) does or shall subject any Bank to any Taxes of any
kind whatsoever with respect to any Eurodollar Loans or its obli-
gations under this Agreement to make Eurodollar Loans, or change
the basis of taxation of payments to any Bank of principal, inter-
est or any other amount payable hereunder in respect of its Euro-
dollar Loans, including any Taxes required to be withheld from any
amounts payable under the Loan Documents (except for imposition of,
or change in the rate of, tax on the overall net income of such
Bank, other than a tax imposed solely or primarily on United States
branches or subsidiaries of foreign corporations); or
(b) does or shall impose, modify or make applicable any
reserve, special deposit, compulsory loan, assessment, increased
cost or similar requirement against assets held by, or deposits of,
or advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Bank in respect of its
Eurodollar Loans which is not otherwise included in the
determination of the Eurodollar Rate; and the result of any of the
foregoing is to increase the cost to such Bank of making, renewing,
converting or maintaining its Eurodollar Loans or its commitment to
make such Loans, or to reduce any amount receivable in respect of
its Eurodollar Loans, then, in any such case, the Company shall pay
such Bank, within ten days after demand (which demand shall be
accompanied by a statement of the type referred to in the last
sentence of this paragraph), any additional amounts necessary to
- 38 -
<PAGE>
compensate such Bank for such additional cost or reduction in such
amount receivable which such Bank deems to be material as de-
termined by such Bank; provided, however, that nothing in this
paragraph shall require the Company to indemnify the Banks (or any
participant) with respect to withholding Taxes for which the
Company has no obligation under paragraph 2.13. No failure by any
Bank to demand compensation for any increased cost during any
Interest Period shall constitute a waiver of such Bank's right to
demand such compensation at any time, provided that such Bank shall
use reasonable efforts to notify the Company of any such increased
cost within 90 days after the officer of such Bank having primary
responsibility for this Agreement has obtained knowledge of such
increased cost. A statement setting forth the calculations of any
additional amounts payable pursuant to the foregoing sentence
submitted by a Bank to the Company shall be conclusive absent
manifest error.
16. Indemnification for Loss.
------------------------
Notwithstanding anything contained herein to the con-
trary, if the Company shall fail to borrow or convert on a Borrow-
ing Date or Conversion Date after it shall have given notice to do
so in which it shall have requested a Eurodollar Loan pursuant to
paragraph 2.3 or 2.6, or if a Eurodollar Loan shall be terminated
for any reason prior to the last day of the Interest Period ap-
plicable thereto, or if, while a Eurodollar Loan is outstanding,
any repayment or prepayment of such Eurodollar Loan is made for any
reason (including, without limitation, as a result of acceleration
or illegality) on a date which is prior to the last day of the
Interest Period applicable thereto, the Company agrees to indemnify
each Bank against, and to pay on demand directly to such Bank, any
loss or expense suffered by such Bank as a result of such failure
to borrow, termination or repayment, including without limitation,
an amount, if greater than zero, equal to:
D
A x (B-C) x ---
360
where:
"A" equals such Bank's pro rata share of the Affected Principal
Amount;
"B" equals the Eurodollar Rate (expressed as a decimal), as the
case may be, applicable to such Loan;
"C" equals the applicable Eurodollar Rate (expressed as a decimal),
as the case may be, in effect on or about the first day of the
- 39 -
<PAGE>
applicable Remaining Interest Period, based on the applicable rates
offered or bid, as the case may be, on or about such date, for
deposits in an amount equal approximately to such Bank's pro rata
share of the Affected Principal Amount with an Interest Period
equal approximately to the applicable Remaining Interest Period, as
determined by such Bank;
"D" equals the number of days from and including the first day of
the applicable Remaining Interest Period to but excluding the last
day of such Remaining Interest Period;
and any other out-of-pocket loss or expense (including any internal
processing charge customarily charged by such Bank) suffered by
such Bank in liquidating deposits prior to maturity in amounts
which correspond to such Bank's pro rata share of such proposed
borrowing, conversion, terminated Eurodollar Loan or repayment.
The obligations of the Company under paragraphs 2.12 through 2.16
shall survive the termination of the Commitments and the payment of
the Revolving Credit Notes, the reimbursement obligations in
respect of drawing under Letters of Credit and all other amounts
payable hereunder.
17. Option to Fund.
--------------
Each Bank has indicated that, if the Company elects to
borrow or convert to a Eurodollar Loan, such Bank may wish to pur-
chase one or more deposits in order to fund or maintain its funding
of such Eurodollar Loans during the Interest Period in question; it
being understood that the provisions of this Agreement relating to
such funding are included only for the purpose of determining the
rate of interest to be paid under such Eurodollar Loan and any
amounts owing under paragraphs 2.12 through 2.16. Subject to
paragraph 11.6, each Bank shall be entitled to fund and maintain
its funding of all or any part of each Eurodollar Loan made by it
in any manner it sees fit, but all determinations under paragraphs
2.12 through 2.16 shall be made as if such Bank had actually funded
and maintained such Eurodollar Loan during the applicable Interest
Period through the purchase of deposits in an amount equal to such
Eurodollar Loan and having a maturity corresponding to such Inter-
est Period.
18. Use of Proceeds.
---------------
(a) Revolving Credit Loans. The proceeds of the Revolv-
----------------------
ing Credit Loans may be used for general corporate purposes of the
Company, including, without limitation, for working capital, to
reimburse the Issuing Bank in respect of drawings under Letters of
Credit (and the Banks in respect of payments made to the Issuing
- 40 -
<PAGE>
Bank in respect thereof) and to pay the expenses of the transac-
tions contemplated hereby.
(b) Letters of Credit. Letters of Credit shall be used to
-----------------
support the Company's workers' compensation, general liability and
other obligations incurred in the ordinary course of business which
do not involve the borrowing of money or Contingent Obligations
with respect thereto.
(c) In General. All Loans and the use to which the pro-
----------
ceeds thereof are put shall conform with the provisions of para-
graph 4.12.
19. Capital Adequacy.
----------------
If (i) the introduction after the Original Effective
Date, or any change or phasing in after the date hereof of, any law
or regulation or in the interpretation thereof by any United States
or foreign Governmental Authority charged with the administration
thereof or (ii) compliance with any directive, guideline or request
from any central bank or United States or foreign Governmental
Authority (whether or not having the force of law) promulgated or
made after the date hereof affects or would affect the amount of
capital required or expected to be maintained by a Bank (or any
lending office of such Bank) or any corporation directly or indi-
rectly owning or controlling such Bank, and such Bank shall have
determined that such introduction, change or compliance has or
would have the effect of reducing the rate of return on such Bank's
or such corporation's capital or the asset value to such Bank or
such corporation of any Revolving Credit Loan made by, or Letter of
Credit issued or participated in by, such Bank as a consequence,
directly or indirectly, of its obligations to make and maintain the
funding of Loans and issue and participate in Letters of Credit to
a level below that which such Bank could have achieved but for such
introduction, change or compliance (after taking into account such
Bank's or such corporation's policies regarding capital adequacy)
by an amount deemed by such Bank to be material to such Bank or
corporation, then, within ten days after demand by such Bank (ac-
companied by a statement of the type referred to in the last sen-
tence of this paragraph), the Company shall pay to such Bank such
additional amount or amounts as shall be sufficient to compensate
such Bank for any such reduction. A certificate as to such amounts
submitted to the Company and the Administrative Agent setting forth
the determination of such amounts that will compensate such Bank
for such reduction shall be presumed correct absent manifest error.
20. Extension of Revolving Credit Termination Date.
----------------------------------------------
- 41 -
<PAGE>
Provided that no Default or Event of Default exists dur-
ing the periods set forth below, the Company may request that the
Revolving Credit Termination Date be extended for additional peri-
ods of one year each by giving written notice of such request
(each, an "Extension Request") to the Agent not more than 60 days
-----------------
but not less than 30 days prior to an anniversary of the Restate-
ment Effective Date and, upon the receipt of such notice, the Agent
shall promptly notify each Lender of such request. If all of the
Lenders consent to an Extension Request during the period beginning
on the date of the receipt by the Agent of the Extension Request
and ending 30 days thereafter by giving written notice thereof to
the Company and the Agent, then, the then current Revolving Credit
Termination Date shall be extended by one year from and including
the then current Revolving Credit Termination Date, provided,
however, that if the last day of such extension falls on a
Saturday, Sunday or public holiday under the laws of the State of
New York, such Revolving Credit Termination Date shall be the
Business Day preceding such Saturday, Sunday or holiday. Each
Lender will use its best efforts to respond during such period to
any request for an extension of the Revolving Credit Termination
Date, provided that no Lender's failure to so respond shall create
any claim against it or have the effect of extending the Revolving
Credit Termination Date or such Lender's Revolving Credit Commit-
ment beyond the Revolving Credit Termination Date.
21. Transaction Record.
------------------
The Administrative Agent shall establish a transaction
record (the "Transaction Record") with respect to this Agreement.
-------------------
The Transaction Record shall set forth each Bank's Alternate Base
Rate Loans, each Bank's Eurodollar Loans, the amount of each Bank's
participation in each Letter of Credit, each payment by the Company
of principal and interest on the Revolving Credit Loans, repayment
of amounts drawn under the Letters of Credit and certain additional
information. The Transaction Record shall be presumptively correct
absent manifest error as to the amount of each Bank's Loans here-
under, as to the Letter of Credit Exposure and as to the amount of
principal and interest paid by the Company in respect of such Loans
and as to the other information relating to the Revolving Credit
Loans, the Letters of Credit and amounts paid and payable by the
Company hereunder and under the Revolving Credit Notes set forth in
the Transaction Record.
3. FEES; PAYMENTS
--------------
1. Revolving Credit Commitment Fee.
-------------------------------
- 42 -
<PAGE>
The Company agrees to pay to the Administrative Agent,
for the pro rata account of the Banks in accordance with each
Bank's Revolving Credit Commitment, a fee (the "Revolving Credit
----------------
Commitment Fee"), for the period from and including the Original
--------------
Effective Date to and including the expiration or other termination
of the Revolving Credit Commitments, equal to 1/2 of 1% per annum
on the average daily Available Revolving Credit Commitments. The
Revolving Credit Commitment Fee shall be payable quarterly in ar-
rears on the last day of each March, June, September and December
of each year, and on the date that the Aggregate Revolving Credit
Commitments shall expire or otherwise terminate. The Revolving
Credit Commitment Fee shall be calculated on the basis of a 360 day
year for the actual number of days elapsed.
2. Letter of Credit Commissions.
----------------------------
The Company agrees to pay the Administrative Agent, for
the pro rata account of the Banks in accordance with each Bank's
Revolving Credit Commitment, commissions (the "Letter of Credit
-----------------
Commissions") with respect to each Letter of Credit for the period
-----------
from and including the date of issuance thereof to and including
the expiration date thereof, at a rate per annum equal to the Ap-
plicable Margin in respect of Eurodollar Loans from time to time in
effect on the average daily amount available to be drawn under such
Letter of Credit. The Letter of Credit Commissions shall be (i)
calculated on the basis of a 360 day year for the actual number of
days elapsed, (ii) payable quarterly in arrears on the last day of
each March, June, September and December of each year and on the
date that the Aggregate Revolving Credit Commitments shall expire
and (iii) nonrefundable. In addition to the foregoing Letter of
Credit Commissions, the Company agrees to pay to the Issuing Bank,
for its own account, the fees set forth in the Fee Letter and its
standard fees and charges customarily charged to customers similar
to the Company with respect to any Letter of Credit.
3. Amendment Fee.
-------------
The Company agrees to pay to the Administrative Agent,
for the account of the Banks in accordance with each Bank's Re-
volving Credit Commitment, a fee (the "Amendment Fee"), in an
--------------
amount equal to 0.15% of the Aggregate Revolving Credit Commit-
ments. The Amendment Fee shall be payable on the Restatement Ef-
fective Date.
4. Other Fees.
----------
The Company agrees to pay to the Agents such other fees,
in such amounts and at such times as set forth in the Fee Letter.
- 43 -
<PAGE>
5. Pro Rata Treatment and Application of Principal Payments.
--------------------------------------------------------
With respect to the Revolving Credit Loans, each borrow-
ing by the Company from the Banks, any conversion of Revolving
Credit Loans from one interest rate basis to another, and any re-
duction of the Aggregate Revolving Credit Commitments, shall be
made pro rata according to the Revolving Credit Commitments of each
Bank. All payments (including prepayments) made by the Company (or
deemed to be made pursuant to paragraph 11.9) to the Administrative
Agent on account of principal of or interest on the Revolving
Credit Loans or the Letters of Credit shall be made pro rata
according to the outstanding principal balance of each Bank's
Revolving Credit Loans, except that any payments of reimbursement
obligations made by the Company or a Bank in respect of a Letter of
Credit for which the Issuing Bank has not theretofore been re-
imbursed shall be for the account of the Issuing Bank. All pay-
ments made by the Company to the Administrative Agent on account of
Revolving Credit Commitment Fees and the Letter of Credit Com-
missions shall be made pro rata according to each Bank's Revolving
Credit Commitment. All other payments made by the Company in re-
spect of fees, including, without limitation, the fees described in
the last sentence of paragraph 3.2, shall, except as otherwise
provided above, be payable to the Agents and the Issuing Bank in
accordance with the Fee Letter. All payments by the Company shall
be made without set-off or counterclaim and shall be made prior to
1:00 P.M. (New York City time) on the date such payment is due, to
the Administrative Agent for the account of the Banks at the Ad-
ministrative Agent's office specified in paragraph 11.2, in each
case in lawful money of the United States of America and in im-
mediately available funds, and, as between the Company and the
Banks, any payment by the Company to the Administrative Agent for
the account of the Banks shall be deemed to be payment by the Com-
pany to the Banks. The failure of the Company to make any such
payment by 1:00 P.M. (New York City time) on such due date shall
not constitute a Default or Event of Default, provided that such
payment is made on such due date, but any such payment received by
the Administrative Agent on any Business Day after 1:00 P.M. (New
York City time) shall be deemed to have been received on the im-
mediately succeeding Business Day for the purpose of calculating
any interest payable in respect thereof. The Administrative Agent
agrees promptly to notify the Company if it shall not receive any
such payment by 1:00 P.M. (New York City time) on the due date
hereof, provided that the failure of the Administrative Agent to
give such prompt notice shall in no way affect the Company's obli-
gation to make any payment hereunder on the date such payment is
due. The Administrative Agent shall distribute such payments to
the Banks promptly upon receipt in like funds as received. If any
payment hereunder or on any Revolving Credit Note or in respect of
- 44 -
<PAGE>
any Letter of Credit becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next
succeeding Business Day (unless, in the case of Eurodollar Loans,
the result of such extension would be to extend such payment into
another calendar month, in which event such payment shall be made
on the immediately preceding Business Day) and, with respect to
payments of principal, interest thereon shall be payable at the
then applicable rate or rates during such extension.
4. REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Agents and the Banks to enter into this
Agreement and to make the Revolving Credit Loans, and the Issuing
Bank to issue Letters of Credit and the other Banks to participate
therein, the Company hereby makes the following representations and
warranties to the Agents and to each Bank:
1. Subsidiaries.
------------
The Company has only the Subsidiaries and Material Sub-
sidiaries set forth on Schedule 4.1 (as such Schedule shall be
supplemented from time to time by the Company). The shares of each
such corporate Subsidiary (including any Material Subsidiary) owned
by the Company are duly authorized, validly issued, fully paid and
nonassessable and are owned free and clear of any Liens, except
Permitted Liens.
2. Corporate Existence and Power.
-----------------------------
The Company and each Material Subsidiary is duly orga-
nized, validly existing and, except as set forth on Schedule 4.2,
in good standing under the laws of the jurisdiction of its in-
corporation or formation, has all requisite corporate power and
authority to own its Property and to carry on its business as now
conducted, and is in good standing and authorized to do business in
each jurisdiction in which the failure to be so authorized could
reasonably be expected to have a Material Adverse Effect on the
Company.
3. Corporate Authority.
-------------------
The Company has full corporate power and authority to
enter into, execute, deliver and carry out the terms of the Loan
Documents to which it is a party and the transactions contemplated
hereby, to make the borrowings contemplated hereby, to execute,
deliver and carry out the terms of the Revolving Credit Notes and
to incur the obligations provided for herein and therein, all of
which have been duly authorized by all proper and necessary corpo-
- 45 -
<PAGE>
rate action and do not conflict with its certificate of incorpora-
tion or by-laws.
4. Governmental Authority Approvals.
--------------------------------
No consent, authorization or approval of, filing with,
notice to, or exemption by, the stockholders of the Company, any
Governmental Authority or any other Person (except for those which
have been obtained, made or given on or before the Restatement
Effective Date) is required to authorize, or is required in con-
nection with the execution, delivery and performance of the Loan
Documents or is required as a condition to the validity or en-
forceability of the Loan Documents. No provision of any applicable
statute, law (including, without limitation, any applicable usury
or similar law), rule or regulation of any Governmental Authority
prevents the execution, delivery or performance of, or adversely
affects the validity of, the Loan Documents.
5. Binding Agreement.
-----------------
The Loan Documents to which the Company is a party (other
than the Revolving Credit Notes) constitute, and the Revolving
Credit Notes, when issued and delivered pursuant hereto for value
received, will constitute, the valid and legally binding
obligations of the Company enforceable against the Company in ac-
cordance with their respective terms, except as such enforceability
may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and (ii) equitable principles.
6. Litigation.
----------
Except as set forth in the Form 10-K filed by the Company
with the SEC with respect to its fiscal year ending December 27,
1992, and the Form 10-K filed by Enterprises with the SEC with
respect to its fiscal year ended December 31, 1992, there are no
actions, suits, arbitration proceedings or claims (whether or not
purportedly on behalf of the Company, any Material Subsidiary or
Enterprises) pending or, to the knowledge of the Company, threat-
ened against the Company, any Material Subsidiary or Enterprises,
or maintained by the Company, any Material Subsidiary or Enter-
prises, at law or in equity, before any Governmental Authority
which could reasonably be expected to have a Material Adverse Ef-
fect on the Company. Except as set forth in the Forms 10-K re-
ferred to above, there are no proceedings pending or, to the
knowledge of the Company, threatened against the Company, any Ma-
terial Subsidiary or Enterprises, which (i) call into question the
validity or enforceability of any of the Loan Documents, (ii) have
- 46 -
<PAGE>
been brought or are threatened to be brought by the Franchisor and
which seek (or are expected to seek) to rescind, terminate, revoke,
cancel, withdraw, suspend or modify or withhold any Franchise
Agreement between the Company or a Material Subsidiary and the
Franchisor, or any right of the Company or any Material Subsidiary
thereunder or (iii) have been brought or are threatened to be
brought by any Person (other than the Franchisor) with respect to
any Franchise Agreement between the Company or a Material Sub-
sidiary and the Franchisor or any right of the Company or any Ma-
terial Subsidiary thereunder which could reasonably be expected to
have a Material Adverse Effect on the Company.
7. No Conflicting Agreements.
-------------------------
Neither the Company nor any Material Subsidiary is in
default under any mortgage, indenture, contract, lease, Ground
Lease, agreement, judgment, decree or order to which it is a party
or by which it or any of its Property is bound, including, without
limitation, any Franchise Agreement, which defaults, taken as a
whole, could reasonably be expected to have a Material Adverse
Effect on the Company. The execution, delivery or performance of
the terms of the Loan Documents will not constitute a default un-
der, conflict with, require consent under, or result in the cre-
ation and/or imposition of, or obligation to create, any Lien upon
the Property of the Company or any Material Subsidiary pursuant to
the terms of any such mortgage, indenture, contract, lease, Ground
Lease, agreement, judgment, decree or order, which defaults, con-
flicts and consents, if not obtained, taken as a whole, could rea-
sonably be expected to have a Material Adverse Effect on the Com-
pany.
8. Taxes.
-----
The Company and each Material Subsidiary has filed or
caused to be filed all tax returns required to be filed and has
paid, or has made adequate provision for the payment of, all taxes
shown to be due and payable on said returns or in any assessments
made against it (other than those being contested in good faith
pursuant to paragraph 7.4) which would be material to the Company
or to the Company and its Material Subsidiaries taken as a whole,
and no tax Liens (other than any such constituting Permitted Liens)
have been filed. The charges, accruals and reserves on the books
of the Company and each Material Subsidiary with respect to all
federal, state, local and other taxes are, to the best knowledge of
the Company, adequate for the payment of all such taxes, and the
Company knows of no unpaid assessment which is due and payable
against it or any Material Subsidiary or any claims being asserted
which could reasonably be expected to have a Material Adverse
- 47 -
<PAGE>
Effect on the Company, except such thereof as are being contested
in good faith and by appropriate proceedings diligently conducted,
and for which adequate reserves have been set aside in accordance
with GAAP.
9. Compliance with Applicable Laws.
-------------------------------
Neither the Company nor any Material Subsidiary is in
default with respect to any judgment, order, writ, injunction,
decree or decision of any Governmental Authority which default
could reasonably be expected to have a Material Adverse Effect on
the Company. The Company and each Material Subsidiary is complying
in all material respects with all statutes and regulations
applicable to Company or such Material Subsidiary, including ERISA,
of all Governmental Authorities, a violation of which could reason-
ably be expected to have a Material Adverse Effect on the Company.
10. Governmental Regulations.
------------------------
Neither the Company nor any Material Subsidiary is sub-
ject to regulation under the Public Utility Holding Company Act of
1935, the Federal Power Act or the Investment Company Act of 1940,
and neither the Company nor any Material Subsidiary is subject to
any statute or regulation which prohibits or restricts the incur-
rence of Indebtedness under this Agreement or the Revolving Credit
Notes, including, without limitation, statutes or regulations
relative to common or contract carriers or to the sale of elec-
tricity, gas, steam, water, telephone, telegraph or other public
utility services.
11. Property.
--------
Each of the Company and each of its Material Subsidiaries
has good and marketable title to, or a valid license or leasehold
interest in, all Property which is material to the Company or the
Company and its Material Subsidiaries taken as a whole, subject to
no Liens, except Permitted Liens, and in respect of such leaseholds
the Company or such Material Subsidiary is in quiet and undisturbed
possession, and, to the best of the Company's knowledge, no
Property material (i) to the Company or (ii) the Company and its
Material Subsidiaries taken as a whole is being condemned,
expropriated or otherwise taken by any Governmental Authority, with
or without compensation therefor, and, to the best of the Company's
knowledge, no such condemnation, expropriation or taking has been
proposed. As of the date of this Agreement, the Company owns only
the real Property described on Part A of Schedule 4.11 and has a
valid leasehold interest in only the real Property covered by the
Leases as set forth on Part B of Schedule 4.11.
- 48 -
<PAGE>
12. Federal Reserve Regulations; Use of Loan Proceeds.
-------------------------------------------------
Neither the Company nor any Material Subsidiary is en-
gaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or car-
rying any Margin Stock. No part of the proceeds of the Revolving
Credit Loans or any Letter of Credit will be used, directly or
indirectly, for a purpose which violates any law, rule or reg-
ulation of any Governmental Authority, including, without limi-
tation, the provisions of Regulations G, U or X of the Board of
Governors of the Federal Reserve System, as amended. Margin Stock
constitutes less than 25% of the assets (as determined by any rea-
sonable method) of the Company and/or any of its Material Subsid-
iaries.
13. Franchise Agreements.
--------------------
The Franchise Agreements listed on Schedule 4.13 (as such
Schedule shall be supplemented from time to time by the Company)
are all of the Franchise Agreements to which the Company or any
Subsidiary is a party, each such Franchise Agreement is in full
force and effect and neither the Company nor any Subsidiary has
breached or is or may be in default, whether after notice, the
lapse of time or both, of any condition or obligation of any such
Franchise Agreements other than in respect of immaterial breaches
or defaults which the Company is using its best efforts to remedy
as soon as practicable after the occurrence thereof.
14. No Misrepresentation.
--------------------
No representation or warranty contained herein and no
certificate or report furnished or to be furnished by the Company
in connection with the transactions contemplated hereby, contains
or will contain a misstatement of material fact, or, to the best
knowledge of the Company, omits or will omit to state a material
fact required to be stated in order to make the statements herein
or therein contained not misleading in the light of the circum-
stances under which made.
15. Plans; Multiemployer Plans.
--------------------------
The Company and each Material Subsidiary have only the
Plans listed on Schedule 4.15 (as such Schedule may be supplemented
from time to time to reflect the adoption of Plans permitted to be
adopted pursuant to paragraph 8.10). Each Single Employer Plan
and, to the best knowledge of the Company, each Multiemployer Plan
is in compliance in all material respects with the applicable
provisions of ERISA and the Code, and the Company and each Material
- 49 -
<PAGE>
Subsidiary have complied in all material respects with ERISA and
the Code with respect to each such Plan. The Company and each
Material Subsidiary have met all material requirements imposed by
ERISA and the Code with respect to the funding of all Plans, and,
to the best of the knowledge of the Company, Multiemployer Plans.
Since the effective date of ERISA, there have not been, nor are
there now existing, any events or conditions which would permit any
Single Employer Plan or, to the best knowledge of the Company,
Multiemployer Plan to be terminated under circumstances which would
cause the Lien provided under Section 4068 of ERISA to attach to
the Property of the Company or any Material Subsidiary. No
Reportable Event which could reasonably be expected to constitute
grounds for the termination of any Single Employer Plan or, to the
best knowledge of the Company, Multiemployer Plan under Title IV of
ERISA has occurred.
16. Burdensome Obligations.
----------------------
Neither the Company nor any Material Subsidiary is a
party to or bound by any franchise, agreement, deed, lease or other
instrument (other than the Franchise Agreements and the Leases), or
subject to any corporate restriction which has or may have, in the
context of the Company's or such Material Subsidiary's business, a
Material Adverse Effect on the Company or materially and adversely
affect or impair the revenue of the Company or any Material
Subsidiary or the ability of the Company to perform its obligations
under the Loan Documents.
17. Financial Statements.
--------------------
The Company has heretofore delivered to the Agents and
the Banks copies of its Form 10-K for the fiscal year of the Com-
pany ending December 27, 1992, containing the audited Consolidated
Balance Sheet of the Company and its Subsidiaries as of December
27, 1992 and December 29, 1991, and the related Consolidated State-
ments of Operations, Cash Flows and Shareholder's Equity for the
periods then ended and its Form 10-Q for the sixteen week period
ended April 18, 1993, containing the unaudited Consolidated Balance
Sheet of the Company and its Subsidiaries for such sixteen week
period, together with the related Statements of Earnings and Cash
Flows for the sixteen week period then ended, (with the related
notes and schedules, the "Financial Statements"). The Financial
--------------------
Statements fairly present the Consolidated financial condition and
results of the operations of the Company and its Subsidiaries as of
the dates and for the periods indicated therein and have been
prepared in conformity with GAAP. Except as reflected in the
Financial Statements or in the footnotes thereto, neither the
Company nor any of its Subsidiaries has any obligation or liability
- 50 -
<PAGE>
of any kind (whether fixed, accrued, contingent, unmatured or
otherwise) which, in accordance with GAAP, should have been shown
in the Financial Statements and was not. Since December 27, 1992
and except for the issuance of the Restaurants Guaranty in respect
of the Senior Subordinated Debentures, the Company and each
Subsidiary has conducted its business only in the ordinary course
and there has been no Material Adverse Change.
18. Concerning the Leases.
---------------------
The Leases are valid and subsisting leases of the real
Property described therein and purported to be demised thereunder
for the terms therein set forth and are in full force and effect in
accordance with the terms, conditions and provisions thereof, and,
except as indicated on Schedule 4.11, have not been modified or
amended in any way whatsoever. There are no existing defaults or
events, which with the passing of time or the provisions of notice,
or both, would constitute a default or an event of default on the
part of the Company under any Lease which could reasonably be
expected to result in the termination of such Lease. The Company
and, as set forth on Schedule 4.11, the Material Subsidiaries are
the owners and holders of the Leases and of the leasehold estates
created thereby.
19. Environmental Matters.
---------------------
Neither the Company nor any Material Subsidiary (i) has
received notice or otherwise learned of any claim, demand, action,
event, condition, report or investigation indicating or concerning
any potential or actual liability which individually or in the
aggregate could reasonably be expected to have a Material Adverse
Effect on the Company arising in connection with: (a) any non-
compliance with or violation of the requirements of any applicable
Hazardous Material Law or other federal, state and local
environmental health and safety statutes and regulations or (b) the
release or threatened release of any Hazardous Material into the
environment, (ii) to the best knowledge of the Company, has any
threatened or actual liability in connection with the release or
threatened release of any Hazardous Material into the environment
which individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect on the Company, (iii) has
received notice of any federal or state investigation evaluating
whether any remedial action is needed to respond to a release or
threatened release of any Hazardous Material into the environment
for which the Company or any Material Subsidiary is or may be li-
able which liability, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on the
Company, or (iv) has received notice that the Company or any Mate-
- 51 -
<PAGE>
rial Subsidiary is or may be liable to any Person under any Haz-
ardous Material Law. The Company and each Material Subsidiary is
in compliance in all material respects with the financial respon-
sibility requirements of federal and state environmental laws to
the extent applicable thereto, including, without limitation, all
Hazardous Material Laws and those contained in 40 C.F.R., parts 264
and 265, subpart H, and any analogous state law.
20. Security Interests.
------------------
(a) With respect to Ground Leases in which the Col-
lateral Agent was granted a security interest prior to the Re-
statement Effective Date, the security interests granted under the
Mortgages with respect thereto constitute valid, binding and con-
tinuing duly perfected first priority Liens in and to such Ground
Leases, except for Permitted Liens.
(b) With respect to the Pledged Collateral, assuming the
continuing possession by the Collateral Agent of such Collateral,
the security interests granted under the Enterprises Guaranty
constitute valid, binding and continuing duly perfected first
priority Liens in and to the Pledged Collateral, except for
Permitted Liens.
(c) With respect to Ground Leases (other than those
described in clause (a) above) in which security interests are
granted in accordance with the provisions of paragraph 7.16, sub-
ject to the recording of the Mortgages with respect thereto and the
filing, if applicable, of UCC-1 Financing Statements in the
appropriate governmental offices, such security interests will
constitute valid, binding and continuing duly perfected first pri-
ority Liens therein, except for Permitted Liens.
(d) With respect to Building Leases in which security
interests are granted in accordance with the provisions of para-
graph 7.16, subject to the recording of Mortgages with respect
thereto and the filing, if applicable, of UCC-1 Financing State-
ments, in the appropriate governmental offices, such security in-
terests will constitute valid, binding and continuing duly per-
fected first priority Liens therein, except for Permitted Liens.
(e) With respect to real Property owned by the Company,
in which security interests are granted in accordance with the
provisions of paragraph 7.16, subject to the recording of Mortgages
with respect thereto and the filing, if applicable, of UCC-1
Financing Statements, in the appropriate governmental offices, such
security interests will constitute valid, binding and continuing
- 52 -
<PAGE>
duly perfected first priority Liens therein, except for Permitted
Liens.
21. Status as Senior Indebtedness.
-----------------------------
The Indebtedness of the Company under the Loan Documents con-
stitutes (i) "Senior Indebtedness of the Guarantor" as defined in
the Enterprises Subordinated Indenture, (ii) Senior Indebtedness as
defined in the 14 1/4% Indenture for such period of time as any
Restaurants Notes are outstanding or the 14 1/4% Indenture is in ef-
fect and has not been discharged and (iii) Senior Debt as defined
in the Debenture Purchase Agreement. The Indebtedness of Enter-
prises under the Enterprises Guaranty constitutes (i) "Senior In-
debtedness of the Company" as defined in the Enterprises Subordi-
nated Indenture and (ii) "Senior Debt" as defined in the Debenture
Purchase Agreement.
5. CONDITIONS TO EFFECTIVENESS AND TO REVOLVING CREDIT LOANS MADE
--------------------------------------------------------------
OR LETTERS OF CREDIT ISSUED ON THE RESTATEMENT EFFECTIVE DATE
-------------------------------------------------------------
In addition to the conditions precedent set forth in
paragraph 6, the effectiveness of this Agreement, the obligation of
each Bank to make any Revolving Credit Loan or the Issuing Bank to
issue a Letter of Credit on the Restatement Effective Date and the
Banks to participate therein shall be subject to the fulfillment of
the following conditions precedent:
1. Evidence of Corporate Action.
----------------------------
(a) The Company. The Agents shall have received a cer-
-----------
tificate, dated the Restatement Effective Date, of the Secretary or
Assistant Secretary of the Company (i) attaching a true and
complete copy of the resolutions of its Board of Directors and of
all documents evidencing other necessary corporate action (in form
and substance satisfactory to the Agents and to Special Counsel)
taken by it to authorize the Loan Documents to which it is a party
and the transactions contemplated thereby, (ii) certifying that
there have been no amendments to its certificate of incorporation
and by-laws since July 29, 1992 or, if so, setting forth the same,
(iii) setting forth the incumbency of its officer or officers who
may sign the Loan Documents to which it is a party, including
therein a signature specimen of such officer or officers and (iv)
attaching a certificate of good standing of the Secretary of State
of the State of Tennessee and of each other state in which it is
qualified to do business, together with such other documents as the
Agents or Special Counsel shall reasonably require.
- 53 -
<PAGE>
(b) Enterprises. The Agents shall have received a cer-
-----------
tificate, dated the Restatement Effective Date, of the Secretary or
Assistant Secretary of Enterprises (i) attaching a true and
complete copy of the resolutions of its Board of Directors and of
all documents evidencing other necessary corporate action (in form
and substance satisfactory to the Agents and to Special Counsel)
taken by it to authorize the the Loan Documents to which it is a
party and the transactions contemplated thereby, (ii) certifying
that there have been no amendments to its certificate of incorpo-
ration and by-laws since July 29, 1992 or, if so, setting forth the
same, (iii) setting forth the incumbency of its officer or officers
who may sign the the Loan Documents to which it is a party,
including therein a signature specimen of such officer or officers
and (iv) attaching a certificate of good standing of the Secretary
of State of the State of New Jersey and of each other jurisdiction
in which it is qualified to do business, together with such other
documents as the Agents or Special Counsel shall reasonably
require.
2. Revolving Credit Notes.
----------------------
The Agents shall have received the Revolving Credit Notes
duly executed by an Authorized Signatory of the Company.
3. Enterprises Guaranty.
--------------------
The Agents shall have received the Enterprises Guaranty,
duly executed by an Authorized Signatory of Enterprises.
4. Approvals.
---------
The Agents shall have a certificate of an Authorized
Signatory of each of the Company and Enterprises to the effect that
all approvals and consents of all Persons required to be obtained
in connection with the consummation of the transactions
contemplated by the Loan Documents have been given and all required
waiting periods have expired.
5. Litigation.
----------
There shall be no injunction, writ, preliminary re-
straining order or other order of any nature issued by any Govern-
mental Authority in any respect affecting the transactions contem-
plated by the Loan Documents, and no action or proceeding by or
before any Governmental Authority shall have been commenced and be
pending or, to the knowledge of the Company, threatened, seeking to
prevent or delay the transactions contemplated by the Loan
Documents, or challenging any other terms or provisions thereof or
- 54 -
<PAGE>
seeking any damages in connection therewith which, in the reason-
able judgment of the Banks, is reasonably likely to have a Material
Adverse Effect on the Company or a Material Adverse Effect on
Enterprises, and the Agents shall have received a certificate of an
Authorized Signatory of each of the Company and Enterprises to the
foregoing effects.
6. Compliance.
----------
Each of the Company and Enterprises is in compliance with
all of the terms, covenants and conditions of the Loan Documents to
which it is a party, there exists no Default or Event of Default,
since December 27, 1992, there shall have occurred no Material
Adverse Change with respect to the Company or Enterprises, and the
Agents shall have received certificates of an Authorized Signatory
of each of the Company and Enterprises to such effect.
7. Opinions of Counsel to the Company and Enterprises.
--------------------------------------------------
The Agents shall have received opinions of (i) Skadden,
Arps, Slate, Meagher & Flom, special counsel to the Company and
Enterprises, substantially in the form of Exhibit G, (ii) Shanley &
Fisher, P.C., special New Jersey counsel to Enterprises, sub-
stantially in the form of Exhibit G-1 and (iii) Glankler, Brown,
Gilliland, Chase, Robinson & Raines, special Tennessee counsel to
the Company, substantially in the form of Exhibit G-2, in each case
addressed to the Agents and the Banks and dated the Restatement
Effective Date.
8. Opinion of Special Counsel to the Agents.
----------------------------------------
The Agents shall have received an opinion of Special
Counsel substantially in the form of Exhibit H, addressed to the
Agents and the Banks and dated the Restatement Effective Date.
9. Amendment Fee.
-------------
The Amendment Fee shall have been paid.
10. Fees and Expenses of Special Counsel.
------------------------------------
The reasonable fees and expenses of Special Counsel shall
have been paid.
11. Other Documents.
---------------
The Agents shall have received such other documents and
assurances as the Agents shall reasonably require.
- 55 -
<PAGE>
6. CONDITIONS OF LENDING - ALL LOANS AND LETTERS OF CREDIT.
-------------------------------------------------------
The obligation of each Bank to make any Revolving Credit Loan
or the Issuing Bank to issue any Letter of Credit on a Borrowing
Date and the Banks to participate therein shall be subject to the
satisfaction of the following conditions precedent as of the date
of such Revolving Credit Loan or the date of the issuance of such
Letter of Credit, as the case may be:
1. Compliance.
----------
On each Borrowing Date and after giving effect to the
Revolving Credit Loans to be made or the Letter of Credit to be
issued thereon, (a) there shall exist no Default or Event of De-
fault, (b) the representations and warranties of the Company and
Enterprises contained in the Loan Documents and in any certificate,
report, or other information furnished in connection with the
transactions contemplated hereby (other than the Environmental
Questionnaires, the Leases, and the Franchise Agreements), shall be
true and correct in all material respects with the same effect as
though such representations and warranties had been made on such
Borrowing Date, and (c) after giving effect to the transactions
contemplated by the Loan Documents, there shall have occurred no
Material Adverse Change with respect to the Company since December
27, 1992. Each borrowing by the Company and each request by the
Company for the issuance of a Letter of Credit shall constitute a
certification by the Company as of the date of such borrowing that
each of the foregoing matters is true and correct in all respects.
2. Loan Closings.
-------------
All documents required by the provisions of this Agree-
ment to be executed or delivered to the Agents on or before the
applicable Borrowing Date shall have been executed and shall have
been delivered at the office of the Administrative Agent set forth
in paragraph 11.2 on or before such Borrowing Date.
3. Borrowing Request.
-----------------
With respect to the borrowing of each Loan, the Adminis-
trative Agent shall have received a Borrowing Request duly executed
by an Authorized Signatory of the Company.
4. Letter of Credit Request.
------------------------
With respect to the issuance of each Letter of Credit,
the Issuing Bank shall have received a Letter of Credit Request
- 56 -
<PAGE>
duly executed by an Authorized Signatory of the Company.
5. Required Acts and Conditions.
----------------------------
All acts, conditions and things (including, without
limitation, the obtaining of any necessary regulatory approvals and
the making of any required filings, recordings or registrations)
required to be done, performed and to have happened prior to such
Borrowing Date and which are necessary for the continued
effectiveness of the Loan Documents, shall have been done and per-
formed and shall have happened in due compliance with all ap-
plicable laws.
6. Other Documents.
---------------
The Agents shall have received such other documents,
certificates of the Company, any Governmental Authority or any
other Person and opinions as the Agents, on behalf of any Bank,
shall reasonably request, including, without limitation, favorable
supplementary opinions of counsel to the Company or Enterprises,
addressed to the Agents and the Banks, covering such matters inci-
dent to the transactions contemplated herein.
7. AFFIRMATIVE COVENANTS
---------------------
The Company hereby agrees that, so long as this Agreement is
in effect, any Revolving Credit Loan or reimbursement obligation
(contingent or otherwise) in respect of any Letter of Credit re-
mains outstanding and unpaid, or any other amount is owing under
any Loan Document, the Company shall:
1. Financial Statements.
--------------------
Maintain, and cause each Material Subsidiary to maintain,
a standard system of accounting in accordance with GAAP, and
furnish or cause to be furnished to the Agents and each Bank:
(a) As soon as available, but in any event within 90
days after the end of each fiscal year of the Company, a copy of
(i) the Consolidated Balance Sheet of the Company and its Subsid-
iaries as at the end of such fiscal year and (ii) the Consolidated
Statements of Operations, Shareholders' Equity and Cash Flows of
the Company and its Subsidiaries as of and through the end of such
fiscal year, setting forth in each case in comparative form the
figures for the preceding fiscal year. Such Consolidated Balance
Sheets and Statements of Operations, Shareholders' Equity and Cash
Flows shall be certified by the Accountants, which certification
- 57 -
<PAGE>
shall (1) state that the examination by such Accountants in connec-
tion with such Consolidated financial statements has been made in
accordance with generally accepted auditing standards and, ac-
cordingly, included such tests of the accounting records and such
other auditing procedures as were considered necessary in the cir-
cumstances and (2) include the opinion of such Accountants that
such Consolidated financial statements have been prepared in ac-
cordance with GAAP in all material respects in a manner consistent
with prior fiscal periods, except as otherwise specified in such
opinion. In addition, during any fiscal year of the Company in
which a Material Subsidiary exists, the Company shall deliver Con-
solidating Balance Sheets of the Company and each Material Subsid-
iary as at the end of such fiscal year and the Consolidating State-
ments of Operations, Shareholders' Equity and Cash Flows of the
Company and each Material Subsidiary as of and through the end of
such fiscal year, setting forth in each case in comparative form
the figures for the preceding fiscal year. Notwithstanding any of
the foregoing, the Company may satisfy its obligation to furnish
Consolidated Balance Sheets and Consolidated Statements of
Operations, Shareholders' Equity and Cash Flows by furnishing cop-
ies of the Company's annual report on Form 10-K in respect of such
fiscal year together with the financial statements required to be
attached thereto, provided the Company is required to file such an-
nual report on Form 10-K with the SEC and such filing is actually
made.
(b) As soon as available, but in no event later than 45
days after the end of each of the first three quarterly accounting
periods in each fiscal year of the Company a copy of (i) the Con-
solidated Balance Sheet of the Company and its Subsidiaries as at
the end of each such quarterly period and (ii) the Consolidated
Statements of Operations, Shareholders' Equity and Cash Flows for
such period and for the elapsed portion of the fiscal year through
such date, setting forth in each case in comparative form the fig-
ures for the corresponding periods of the preceding fiscal year,
subject to year end audit adjustments, certified by a senior fi-
nancial officer or senior accounting officer of the Company (or
such other officer acceptable to the Agents) as being complete and
correct in all material respects and as presenting fairly the fi-
nancial condition and results of operations and cash flows of the
Company and its Subsidiaries on a Consolidated basis. In addition,
during any fiscal year of the Company in which a Material
Subsidiary exists, the Company shall deliver Consolidating Balance
Sheets of the Company and each Material Subsidiary as at the end of
such quarter and the Consolidating Statements of Operations,
Shareholders' Equity and Cash Flows of the Company and each Mate-
rial Subsidiary for such period and for the elapsed portion of the
fiscal year through such date, setting forth in each case in com-
- 58 -
<PAGE>
parative form the figures for the corresponding periods of the
preceding fiscal year, subject to year end audit adjustments.
Notwithstanding any of the foregoing, the Company may satisfy its
obligation to furnish quarterly Consolidated Balance Sheets and
Consolidated Statements of Operations and Cash Flows by furnishing
copies of the Company's quarterly report on Form 10-Q in respect of
such fiscal quarter together with the financial statements required
to be attached thereto, provided the Company is required to file
such quarterly report on Form 10-Q with the SEC and such filing is
actually made.
(c) Within 45 days after the end of the first three fis-
cal quarters of the Company, (90 days after the end of the fourth
fiscal quarter), a Compliance Certificate, each certified by the
Chief Financial Officer of the Company (or such other officer as
shall be acceptable to the Agents).
2. Certificates; Other Information.
-------------------------------
Furnish to the Agents and each Bank:
(a) Prompt written notice if: (i) any Indebtedness of
the Company or any Material Subsidiary in an aggregate Consolidated
amount in excess of $500,000 is declared or shall become due and
payable prior to its stated maturity, or is called and not paid
when due, (ii) a default shall have occurred under any note or
other evidence of Indebtedness of the Company or any Material
Subsidiary (other than the Revolving Credit Notes) in an aggregate
Consolidated amount in excess of $500,000, or the holder of any
such note or other evidence of Indebtedness or any obligee with
respect to such Indebtedness has the right to declare any such
Indebtedness due and payable prior to its stated maturity as a
result of such default, or (iii) there shall occur and be con-
tinuing a Default or an Event of Default;
(b) Prompt written notice of: (i) any citation, summons,
subpoena, order to show cause or other order naming the Company or
any Material Subsidiary a party to any proceeding before any
Governmental Authority which could reasonably be expected to have a
Material Adverse Effect on the Company or a Material Adverse Effect
on Enterprises or which calls into question the validity or
enforceability of any of the Loan Documents or the Registration
Statement, and include with such notice a copy of such citation,
summons, subpoena, order to show cause or other order, (ii) any
lapse or other termination (other than in accordance with its
terms) of any license, permit, franchise or other authorization
issued to the Company or any Material Subsidiary by any Governmen-
tal Authority, which lapse or termination could reasonably be
- 59 -
<PAGE>
expected to have a Material Adverse Effect on the Company or a
Material Adverse Effect on Enterprises, (iii) any refusal by any
Governmental Authority to renew or extend any such license, permit,
franchise or other authorization, which refusal could reasonably be
expected to have a Material Adverse Effect on the Company or a
Material Adverse Effect on Enterprises, (iv) any lapse or other
termination (other than in accordance with its terms) of any
Franchise Agreement to which the Company or any Material Subsidiary
is a party and (v) any dispute between the Company or any Material
Subsidiary and any Governmental Authority, which dispute could
reasonably be expected to have a Material Adverse Effect on the
Company or a Material Adverse Effect on Enterprises;
(c) Promptly upon becoming available, copies of all
financial statements, reports, proxy statements, registration
statements and prospectuses which the Company or any Material Sub-
sidiary may from time to time be required to file with or deliver
to the SEC or any national securities exchange;
(d) Prompt written notice in the event that (i) the
Company or any Material Subsidiary shall receive notice from the
Internal Revenue Service or the Department of Labor that the Com-
pany or such Material Subsidiary shall have failed to meet the min-
imum funding requirements of Section 412 of the Code with respect
to a Plan or a Multiemployer Plan, if applicable, and include
therewith a copy of such notice, or (ii) the Company or any
Material Subsidiary gives or is required to give notice to the PBGC
of any Reportable Event with respect to a Plan, or knows that the
plan administrator of a Plan or a Multiemployer Plan has given or
is required to give notice of any such Reportable Event;
(e) With respect to a Single Employer Plan, copies of
any request for a waiver of the funding standards or any extension
of the amortization periods required by Sections 303 and 304 of
ERISA or Section 412 of the Code promptly after any such request is
submitted to the Department of Labor or the Internal Revenue
Service, as the case may be;
(f) Prompt written notice if a Subsidiary becomes a
Material Subsidiary;
(g) Prompt written notice if a Change in Control occurs,
including, without limitation, copies of all notices related
thereto given to the Trustee of the Enterprises Subordinated In-
denture and/or to the Designated Debenture Holder under the Deben-
ture Purchase Agreement with respect thereto;
(h) Prompt written notice of the occurrence of a default
- 60 -
<PAGE>
or event of default under and as defined in the Enterprises
Subordinated Indenture, the Debenture Purchase Agreement or the
14 1/4% Indenture, together with all notices with respect thereto
received from the Trustee or any holder of Enterprises Subordinated
Debentures or Restaurants Notes and/or to the Designated Debenture
Holder under the Debenture Purchase Agreement;
(i) Written notice within ten days after receipt of any
notice of any default or event of default given by any lessor or
landlord, as the case may be, under any Lease together with the
original or photostatic copy of such notice and (x) if such default
shall have been cured by such time, reasonable proof of the cure
thereof and (y) if such default shall not have been cured by such
time, (A) an explanation of the action which the Company or such
Material Subsidiary proposes to take to cure such default and (B)
when such default has been cured, reasonable proof thereof;
(j) Prompt written notice of (i) any governmental or
regulatory actions instituted or threatened under any Hazardous
Material Law affecting any real Property owned or leased by the
Company or any Material Subsidiary of which the Company becomes
aware or the matters for which the Company indemnifies the Agents
and the Banks under the Environmental Indemnity Agreement, includ-
ing, without limitation, any notice of inspection, abatement or
noncompliance, (ii) all claims made or threatened by any third
party against the Company or such Property of which the Company
becomes aware relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous Material,
(iii) the Company's discovery of any occurrence or conditions on
any real Property adjoining or in the vicinity of such Property
which could reasonably be expected to cause such Property to be
classified in a manner which may support a claim under any
Hazardous Material Law, and (iv) the Company's discovery of any
occurrence or condition on such Property or any real property ad-
joining or in the vicinity of such Property which could reasonably
be expected to subject the Company, a Material Subsidiary or such
Property to any restrictions on ownership, occupancy, transfer-
ability or use of such Property under any Hazardous Material Law;
(k) Promptly, (i) such documentation, records or other
information as the Agents may reasonably request in connection with
all notices, inquiries and communications received in respect of
matters described in clause (j) above and (ii) information con-
cerning subsequent developments on any matter disclosed to the
Agents pursuant to clause (j) above; and
(l) Promptly, such other information as the Agents or
any Bank may reasonably request.
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<PAGE>
3. Legal Existence.
---------------
Maintain, and cause each Material Subsidiary to maintain,
its corporate existence, and maintain its good standing in the
jurisdiction of its incorporation or organization and in each other
jurisdiction in which the failure so to do could reasonably be
expected to have a Material Adverse Effect on the Company or a
Material Adverse Effect on Enterprises.
4. Taxes.
-----
Pay and discharge when due, and cause each Material Sub-
sidiary so to do, all taxes, assessments and governmental charges,
license fees and levies upon or with respect to the Company or such
Material Subsidiary and upon the income, profits and Property of
the Company and its Material Subsidiaries, which if unpaid, could
reasonably be expected to have a Material Adverse Effect on the
Company or a Material Adverse Effect on Enterprises or become a
Lien on the Property of the Company or such Material Subsidiary
other than a Permitted Lien, unless and to the extent that such
taxes, assessments, charges, license fees and levies shall be con-
tested in good faith and by appropriate proceedings diligently
conducted by the Company or such Material Subsidiary and provided
that any such contested tax, assessment, charge, license, fee or
levy shall not constitute, or create, a Lien on any Property of the
Company or such Material Subsidiary other than a Permitted Lien,
and further provided that the Company shall give the Administrative
Agent prompt notice of any such contest and that such reserve or
other appropriate provision if any, as shall be required by the Ac-
countants, in accordance with GAAP shall have been made therefor.
5. Insurance.
---------
Maintain, and cause each Material Subsidiary to maintain,
insurance on its Property against such risks and in such amounts as
is customarily maintained by similar businesses, and as it relates
to the Ground Leases and Building Leases, not less than the amounts
required for insurance under the Ground Leases and Building Leases
including, without limitation, public liability and workers'
compensation insurance, and file with the Administrative Agent
within five days after request therefor a detailed list of such in-
surance then in effect, stating the names of the carriers thereof,
the policy numbers, the insureds thereunder, the amounts of insur-
ance, dates of expiration thereof, and the Property and risks
covered thereby, and stating that no notice of cancellation with
respect thereto has been received.
6. Performance of Obligations.
--------------------------
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<PAGE>
Pay and discharge, and cause each Material Subsidiary to
pay and discharge, when due all lawful obligations and claims for
labor, materials and supplies or otherwise which, if unpaid, could
reasonably be expected to (i) have a Material Adverse Effect on the
Company or a Material Adverse Effect on Enterprises or (ii) become
a Lien upon Property of the Company or such Material Subsidiary
other than a Permitted Lien, unless and to the extent that the va-
lidity of such obligation or claim shall be contested in good faith
and by appropriate proceedings diligently conducted by the Company
or such Material Subsidiary, and further provided that the Company
shall give the Agents and the Banks prompt notice of any such
contest which involves a Lien on any Property and that such reserve
or other appropriate provision as shall be required by the Ac-
countants, if any, in accordance with GAAP shall have been made
therefor.
7. Condition of Property.
---------------------
At all times, maintain, protect and keep in good repair,
working order and condition (ordinary wear and tear excepted), and
cause each Material Subsidiary so to do, all Property necessary to
the operation of the Company's, or such Material Subsidiary's,
business, except that the Company need not so maintain, protect and
keep in good repair, working order and condition any restaurants
being closed or relocated, so long as the failure to so maintain,
protect and keep in good repair, working order and condition in
connection with any such restaurants (i) could not reasonably be
expected to have a Material Adverse Effect on the Company or a
Material Adverse Effect on Enterprises or (ii) will not result in
the rescission, termination, revocation, cancellation, withdrawal,
suspension, modification or withholding of any Franchise Agreement
between the Company or a Material Subsidiary and the Franchisor or
any right of the Company or any Material Subsidiary thereunder
(other than the Franchise Agreement for a restaurant being closed
and not relocated).
8. Observance of Legal Requirements.
--------------------------------
Observe and comply in all respects, and cause each Mate-
rial Subsidiary so to do, with all laws (including without limita-
tion, ERISA and environmental laws and health and sanitary laws),
ordinances, orders, judgments, rules, regulations, certifications,
franchises, permits, licenses, directions and requirements of all
Governmental Authorities, which now or at any time hereafter may be
applicable to the Company or such Material Subsidiary, a violation
of which could reasonably be expected to have a Material Adverse
Effect on the Company or a Material Adverse Effect on Enterprises,
except such thereof as shall be contested in good faith and by
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<PAGE>
appropriate proceedings diligently conducted by the Company or such
Material Subsidiary, provided that the Company shall give the
Agents and the Banks prompt notice of such contest and that such
reserve or other appropriate provision, if any, as shall berequired
by the Accountants in accordance with GAAP shall have been made
therefor.
9. Inspection of Property; Books and Records; Discussions.
------------------------------------------------------
Keep proper books of record and account in which full,
true and correct entries in conformity with GAAP and all require-
ments of law shall be made of all dealings and transactions in
relation to its business and activities; and permit representatives
of the Agents and any Bank to visit the offices of the Company and
its Material Subsidiaries, to inspect any of its Property and
examine and make copies or abstracts from any of its books and
records at any reasonable time and as often as may reasonably be
desired, and to discuss the business, operations, prospects, li-
censes, Property and financial condition of the Company and its
Material Subsidiaries with the officers thereof and with the Ac-
countants; provided, however that the expenses of any such visit,
inspection and copying after the occurrence and during the con-
tinuance of a Default or Event of Default shall be paid by the
Company.
10. Licenses, Franchise Agreements, Etc.
-----------------------------------
Maintain and cause each Material Subsidiary to maintain,
in full force and effect, all licenses, Franchise Agreements,
copyrights, trade marks, tradenames, patents, permits, applica-
tions, reports, authorizations and other rights and intellectual
property, including, without limitation, the Franchise Agreements,
as are necessary for the conduct of its business, the loss of
which, individually or in the aggregate, would have a Material
Adverse Effect on the Company or a Material Adverse Effect on En-
terprises.
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<PAGE>
11. Interest Coverage Ratio.
-----------------------
Maintain as of the last day of each fiscal quarter of the
Company during the fiscal years of the Company set forth below, an
Interest Coverage Ratio for the Applicable Computation Period
ending on such date of not less than the following:
Fiscal Quarter/Year Ratio
------------------- -----
Second quarter, 1993 1.10:1.00
Third quarter, 1993 1.25:1.00
Fourth quarter, 1993
and first quarter, 1994 1.50:1.00
Second and third
quarters, 1994 1.75:1.00
Fourth quarter, 1994 2.00:1.00
Each fiscal quarter
thereafter 2.25:1.00.
12. Senior Debt Service Coverage Ratio.
----------------------------------
Maintain as of the last day of each fiscal quarter of the
Company, a Senior Debt Service Coverage Ratio for the Applicable
Computation Period ending on such date of not less than the
following:
Fiscal Quarter/Year Ratio
------------------- -----
Second quarter, 1993 0.15:1.00
Third quarter, 1993 0.20:1.00
Fourth quarter, 1993 0.25:1.00
Each fiscal quarter
thereafter 0.30:1.00.
13. Intentionally Omitted.
---------------------
14. Minimum Consolidated Tangible Net Worth.
---------------------------------------
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<PAGE>
Maintain at all times (to be tested at the end of each
fiscal quarter of the Company), Consolidated Tangible Net Worth of
not less than the amounts set forth below:
Fiscal Quarter Amount
-------------- ------
Second and third
quarters, 1993 $20,000,000
Fourth quarter, 1993
through third quarter, 1994 $24,000,000
Fourth quarter, 1994
through third quarter, 1995 $30,000,000
Fourth quarter, 1995
and each fiscal quarter
thereafter $40,000,000.
15. Intentionally Omitted.
---------------------
16. Additional Security.
-------------------
(a) Future Ground Leases. (i) Promptly notify the Col-
--------------------
lateral Agent upon the entering into or acquiring a Ground Lease,
and, upon the written request of the Collateral Agent (which re-
quest shall only be made at the direction of the Required Banks),
execute and deliver to the Collateral Agent a Mortgage with respect
to each such Ground Lease (other than any thereof financed in
connection with the acquisition thereof and in which a security
interest has been granted to the financing party thereto) and such
other documents, including, without limitation, such title
searches, opinions of counsel and surveys on the Property covered
by such Ground Lease as the Collateral Agent shall require, and
such estoppel certificates and agreements as the Collateral Agent
shall require from any lessor thereunder.
(ii) Provided that no Default or Event of Default
then exists, upon the request of the Company, the Collateral Agent
will release, at the Company's expense, any Mortgage with respect
to a Ground Lease in order to facilitate mortgage financings per-
mitted pursuant to the provisions of paragraph 8.1(iii) and
sale-leaseback transactions permitted to be entered into pursuant
to the provisions of paragraph 8.17.
(b) Mortgages. Promptly notify the Collateral Agent upon
---------
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<PAGE>
the acquisition of real Property and, upon the written request of
the Collateral Agent (which request shall only be made at the di-
rection of the Required Banks), execute and deliver to the Col-
lateral Agent such documents, including, without limitation, a
Mortgage, title insurance, title searches, opinions of counsel,
surveys and UCC-1 Financing Statements as the Collateral Agent, at
the direction of the Required Banks, may require with respect to
each parcel of real Property, whether now owned or hereafter ac-
quired, other than those parcels financed in connection with capi-
tal expenditures to the extent permitted herein or those subject to
a mortgage at the time of the acquisition thereof. Provided that
no Default or Event of Default then exists, upon the request of the
Company, the Collateral Agent will release, at the Company's
expense, any Mortgage in order to facilitate mortgage financings
permitted pursuant to the provisions of paragraph 8.1(iii) and
sale-leaseback transactions permitted to be entered into pursuant
to the provisions of paragraph 8.17.
(c) Other Real Property Leases. Promptly notify the Col-
--------------------------
lateral Agent upon the acquisition of a leasehold in real Property
(other than a Ground Lease) and, upon the written request of the
Collateral Agent (which request shall be made at the direction of
Required Banks) execute and deliver such documents, including,
without limitation, a Mortgage, title searches, surveys, UCC-1
Financing Statements as the Collateral Agent may require. All such
leases shall be assignable to the Collateral Agent other than (i)
those already subject to a leasehold mortgage at the time of the
acquisition thereof or (ii) those which at the time of the
acquisition thereof are not assignable or (iii) those designated by
the Required Banks.
(d) Upon the request of the Collateral Agent, deliver to
the Collateral Agent a completed Environmental Questionnaire for
such real Property as may from time to time become subject to a
Mortgage.
(e) Pursuant to a letter, dated July 29, 1992, from the
Company to the Agents and the Banks, the Company agreed to deliver,
among other things, Mortgages and title insurance commitments with
respect to certain Leases. As of the Restatement Effective Date,
not all of the documents required to be delivered thereunder have
been delivered. Subject to the other provisions of this paragraph,
to the extent that the Company has not delivered all of such
documents, unless the Collateral Agent otherwise directs in its
sole discretion upon reasonable notice, the Company shall not be
required to deliver any such additional documents and the delivery
of such documents on or before the Restatement Effective Date shall
be deemed to be compliance by the Company with such side letter.
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<PAGE>
(f) Notwithstanding anything in this paragraph to the
contrary, with respect to real Property owned or leased by the
Company on which a Mortgage has been granted to the Collateral
Agent prior to the Restatement Effective Date but with respect to
which "as-built" surveys have not been delivered to the Collateral
Agent, the Company shall not be required to deliver any such
"as-built" survey unless the Collateral Agent shall request the
same in its sole discretion upon reasonable notice. In addition
with respect to real Property owned or leased by the Company on
which a mortgage or leasehold mortgage, as the case may be, is
hereafter required to be granted to the Collateral Agent pursuant
to this paragraph, the Company shall only be required to deliver
"as-built" surveys with respect thereto as requested by the Col-
lateral Agent in its discretion.
17. Compliance with Leases.
----------------------
At all times:
(a) pay or cause to be paid, not later than the
date upon which same becomes due and payable by the Company pursu-
ant to the provisions of each Lease, rent, additional rent and
other payments required to be paid by the tenant under such Lease
according to the terms, conditions and provisions thereof unless
and to the extent that any such payment shall be contested in good
faith and by appropriate proceedings conducted by the Company,
provided that such contest is not reasonably expected to result in
the termination of any such Lease; and
(b) except for those referred to in clause (a)
above, duly and punctually perform all covenants, duties, obliga-
tions and agreements of the Company under each Lease if the failure
to comply therewith could reasonably be expected to result in the
termination of such Lease.
8. NEGATIVE COVENANTS
------------------
The Company hereby agrees that, so long as this Agreement is
in effect, any Revolving Credit Loan or reimbursement obligation
(contingent or otherwise) in respect of any Letter of Credit re-
mains outstanding and unpaid, or any other amount is owing under
any Loan Document, the Company shall not, directly or indirectly:
1. Borrowing.
---------
Create, incur, assume or suffer to exist any liability
for Indebtedness, or permit any Material Subsidiary so to do, ex-
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<PAGE>
cept (i) Indebtedness under the Loan Documents and in respect of
the Letters of Credit, (ii) Indebtedness of the Company in respect
of the Restaurants Notes in an aggregate face amount outstanding
not in excess of $42,000,000, (iii) Indebtedness of the Company and
its Material Subsidiaries (whether in the form of borrowings,
Contingent Obligations, obligations under Capitalized Leases or
otherwise and including Indebtedness assumed in connection with an
acquisition permitted by paragraph 8.11), not in excess of an ag-
gregate of $65,000,000 principal amount at any one time outstand-
ing, provided that (x) an amount equal to the proceeds thereof
shall have been expended by the Company and its Material Subsid-
iaries on capital expenditures no later than the end of the fiscal
year in which such proceeds are received, (y) such amount so ex-
pended does not, together with other amounts expended during such
fiscal year on capital expenditures, exceed the amount permitted by
paragraph 8.11 and (z) the terms and conditions thereof shall be
comparable to the terms and conditions generally available for
Indebtedness or Capitalized Leases in similar amounts, for similar
purposes, by similar borrowers and for similar terms; (iv) purchase
money indebtedness incurred in connection with the purchase, after
the date hereof, of any Property, in an aggregate principal amount
not to exceed $1,000,000 at any one time outstanding, (v)
Indebtedness in respect of overdrafts not in excess of $1,000,000
outstanding at any time, (vi) Indebtedness of the Company in re-
spect of any loans from time to time made by Enterprises to the
Company, provided that each such loan shall be (x) evidenced by a
note to be pledged to the Collateral Agent pursuant to the Enter-
prises Guaranty and (y) subordinated to the obligations of the
Company to the Agents and the Banks on the terms set forth in the
Enterprises Guaranty, (vii) Indebtedness of the Company in respect
of the Restaurants Guaranty; (viii) Indebtedness consisting of
Contingent Obligations permitted by paragraph 8.4, (ix)
Indebtedness in the aggregate not in excess of $2,000,000 principal
amount at any one time outstanding which is subordinated to the
obligations of the Company to the Agents and the Banks under the
Loan Documents on subordination terms no more favorable to the
lender than as set forth in the Enterprises Subordinated Indenture
provided that the other terms thereof are otherwise satisfactory to
the Agents and Required Banks, (x) Loans to Subsidiaries in the
aggregate not in excess of $250,000 principal amount at any one
time outstanding (xi) ERISA Liabilities permitted to be incurred
under paragraph 8.10 and (xii) Indebtedness of the Company and its
Material Subsidiaries existing on the Restatement Effective Date as
set forth on Schedule 8.1 including, except as set forth in the
proviso below, refinancings thereof but not increases in the amount
of any thereof, provided that refinancings of such existing
Indebtedness shall not be permitted unless (A) the interest rate on
any such refinanced Indebtedness is not in excess of the rate
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<PAGE>
available for similar borrowings by similar borrowers at the time
of the refinancing, (B) the final maturity of such refinanced In-
debtedness is not earlier than the Revolving Credit Termination
Date and (C) the average weighted life to maturity of such refi-
nanced Indebtedness shall not be less than the original average
weighted life to maturity of such Indebtedness being refinanced.
2. Liens.
-----
Create, incur, assume or suffer to exist any Lien upon
any of its Property, whether now owned or hereafter acquired, or
permit any Material Subsidiary so to do, except (i) Liens for
taxes, assessments or similar charges incurred in the ordinary
course of business which are not delinquent or which are being con-
tested in accordance with paragraph 7.4, provided that enforcement
of such Liens is stayed pending such contest, (ii) Liens in con-
nection with workers' compensation, unemployment insurance or other
social security obligations (but not ERISA), (iii) deposits or
pledges to secure bids, tenders, contracts (other than contracts
for the payment of money), leases, statutory obligations, surety
and appeal bonds and other obligations of like nature arising in
the ordinary course of business, (iv) zoning ordinances, easements,
rights of way, minor defects, irregularities, and other similar
restrictions affecting real property which do not adversely affect
the value of such real property or the financial condition of the
Company or such Material Subsidiary or impair its use for the
operation of the business of the Company or such Material
Subsidiary, (v) statutory Liens arising by operation of law such as
mechanics', materialmen's, carriers', warehousemen's liens incurred
in the ordinary course of business which are not delinquent or
which are being contested in accordance with paragraph 7.4,
provided that enforcement of such Liens is stayed pending such
contest, (vi) Liens arising out of judgments or decrees which are
being contested in accordance with paragraph 7.4, provided that
enforcement of such Liens is stayed pending such contest, (vii)
landlord's liens under leases; (viii) security interests in
Property of the Company to secure Indebtedness of the Company per-
mitted by paragraph 8.1(iii); (ix) Liens securing obligations of
the Company not in excess of $250,000 in the aggregate at any time
outstanding, that do not arise from borrowings by the Company; (x)
purchase money Liens in Property of the Company acquired after the
date hereof to secure Indebtedness of the Company permitted by
paragraph 8.1(iv), incurred in connection with the acquisition of
such Property, provided that each such Lien is limited to such
Property so acquired, (xi) leases and subleases, (xii) Liens in
favor of the Collateral Agent and the Banks under the Loan Docu-
ments, (xiii) Liens on Property of the Company and its Material
Subsidiaries existing on the Restatement Effective Date as set
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<PAGE>
forth on Schedule 8.2 as renewed from time to time, but not any
increases in the amounts secured thereby and (xiv) Liens on Prop-
erty acquired in connection with an acquisition permitted by para-
graph 8.11, provided that each such Lien is limited to the Property
so acquired and fixed improvements thereon.
3. Merger and Acquisition or Sale of Property.
------------------------------------------
Consolidate with, be acquired by, or merge into or with
any Person, or, except to the extent permitted by paragraph 8.11,
acquire all or substantially all of the Stock or Property of any
Person, or sell, lease or otherwise dispose of all or substantially
all of its Property or any of its Stock (except as permitted by
paragraph 8.8), or acquire restaurants or equipment (except to the
extent permitted by paragraph 8.11), or acquire any other assets
other than in the ordinary course of business, or permit any
Material Subsidiary to do any of the foregoing, except that a
wholly-owned Subsidiary of the Company may merge with and into
another wholly-owned Subsidiary of the Company.
4. Contingent Obligations.
----------------------
Assume, guarantee, indorse, contingently agree to pur-
chase or perform, or otherwise become liable upon any Contingent
Obligation, or permit any Material Subsidiary so to do, except (i)
Contingent Obligations in respect of the Letters of Credit, (ii)
Contingent Obligations in respect of the Restaurants Guaranty;
(iii) Contingent Obligations permitted by paragraph 8.1(iii) and
(iv) Contingent Obligations existing on the Restatement Effective
Date as set forth on Schedule 8.4 including, except as set forth in
the proviso below, refinancings and renewals thereof but not
increases in the amount of any thereof, provided that such
refinancings shall not be permitted unless (A) the interest rate on
the primary obligation of the primary obligor is not in excess of
the rate for similar obligations of similar obligors at the time of
such refinancing, (B) the final maturity of such refinanced primary
obligation is not earlier than the Revolving Credit Termination
Date and (C) the average weighted life to maturity of such
refinanced primary obligation shall not be less than the original
average weighted life to maturity of such primary obligation being
refinanced.
5. Dividends and Purchase of Stock.
-------------------------------
Declare or pay any dividends payable in cash or otherwise
or apply any of its Property to the purchase, redemption or other
retirement of, or set apart any sum for the payment of any
dividends on, or make any other distribution by reduction of capi-
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<PAGE>
tal or otherwise in respect of, any shares of its capital Stock or
other similar equity interest or warrants or other rights issued in
respect thereof, or permit any Subsidiary so to do, except that (i)
any Subsidiary may declare and pay dividends to the Company and
(ii) provided that no Default or Event of Default exists im-
mediately before and after giving effect thereto, (A) not earlier
than one Business Day prior to the date that Enterprises is re-
quired to deposit amounts with the Trustee under Enterprises Sub-
ordinated Indenture for the payment by such Trustee of any payment
required to be made with respect to Enterprises Subordinated De-
benture, the Company may declare and pay a dividend to Enterprises
in an amount not in excess of the amount of such required payment,
(B) not earlier than one Business Day prior to the date Enterprises
is required to make a payment of interest (but not of principal,
whether regularly scheduled, due to a voluntary or mandatory
redemption or otherwise, or any other amount) on or with respect to
the Senior Subordinated Debentures, the Company may declare and pay
a dividend to Enterprises in an amount not in excess of such
interest payment, (C) the Company may pay a dividend on its common
Stock in an amount not in excess of 10% of the Company's net income
for the preceding fiscal year, provided that the Leverage Ratio
does not exceed 0.80:1.00 at the time of the declaration and
payment thereof and (D) solely with respect to dividends which are
used by Enterprises to repurchase shares of its common Stock (to
the extent permitted by paragraph 8(e) of the Enterprises Guaranty,
the Company may pay a dividend on its common Stock in an aggregate
amount not in excess of the sum of (x) $5,000,000 and (y) for
fiscal years of the Company ending after December 31, 1993, an
amount equal to 25% of the aggregate amount of net income (if
positive) of the Company since the end of the first fiscal quarter
of the 1993 fiscal year of the Company on a cumulative basis.
6. Investments, Loans, Etc.
-----------------------
At any time, purchase or otherwise acquire, hold or in-
vest in the Stock of, or any other interest in, any Person, or make
any loan or advance to, or enter into any arrangement for the
purpose of providing funds or credit to, or make any other invest-
ment, whether by way of capital contribution or otherwise, in or
with any Subsidiary or any other Person (all of which are sometimes
referred to herein as "Investments"), or permit any Subsidiary so
-----------
to do, except:
(a) Investments in short-term certificates of deposit
and eurodollar time deposits issued by, and overnight deposits
with, any Bank, or any other commercial bank, trust company or
national banking association incorporated under the laws of the
United States or any State thereof and having undivided capital,
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<PAGE>
surplus and retained earnings exceeding $500,000,000;
(b) Investments in short-term direct obligations of the
United States of America or agencies thereof which obligations are
guaranteed by the United States of America;
(c) Investments existing on the Restatement Effective
Date as set forth on Schedule 8.6 and any renewals thereof;
(d) commercial paper or short term finance company paper
which is rated not less than P-1, or A-1 or their equivalents by
Moody's Investors Service, Inc. or Standard & Poor's Corporation or
their successors;
(e) money market mutual funds;
(f) stock acquired in acquisitions permitted by para-
graph 8.11 and any Investment acquired in connection with any such
acquisition and any renewals thereof;
(g) loans to employees in accordance with the business
practices of the Company in effect on the Original Effective Date
in an aggregate amount outstanding at any time not in excess of
$400,000; and
(h) loans to Subsidiaries permitted by paragraph 8.1(x).
7. Business Changes.
----------------
Materially change the nature of its business as conducted
on the date hereof (including, without limitation, the operation of
stores other than Shoney's or Captain D's stores), or alter or
modify its corporate name, structure or status (including, without
limitation, its tax status), or change its fiscal year end, or
alter its accounting principles, treatment or recording practices,
except as required by GAAP, or permit any Material Subsidiary so to
do.
8. Sale of Property.
----------------
Sell, convey, mortgage, assign, encumber, exchange,
lease, transfer or otherwise dispose of (a) all or any substantial
part of its Property or permit any Material Subsidiary so to do,
except (i) sales of inventory in the ordinary course of business,
(ii) sales of obsolete or otherwise unnecessary machinery, equip-
ment and fixtures, (iii) sales in connection with sale-leaseback
transactions permitted under paragraph 8.17, (iv) sales of Hungry
- 73 -
<PAGE>
Fishermen or Danvers stores and (v) sales of other stores in con-
nection with the relocation thereof, provided that (x) in the case
that the new location is leased pursuant to a Ground Lease, the
Company shall have delivered to the Collateral Agent prior to such
relocation, a Mortgage and such other documents as may be required
pursuant to paragraph 7.16 with respect thereto and (y) in all
other cases, the Company shall have given the Collateral Agent 30
days advance written notice thereof, or (b) any Property encumbered
by any of the Mortgages except as permitted under paragraphs
8.1(iii) or 8.17.
9. Subsidiaries.
------------
Create or acquire any Subsidiary, or permit any Subsid-
iary so to do, in each case except as permitted pursuant to para-
graph 8.11.
10. Compliance with ERISA.
---------------------
Adopt any Plan or Multiemployer Plan not listed on
Schedule 4.15 (as such Schedule exists prior to such adoption), or
permit any Subsidiary so to do, or engage in any "prohibited
transaction", as such term is defined in Section 4975 of the Code
or Section 406 of ERISA, with respect to any Plan which is reason-
ably expected to result in the imposition on the Company or any
Subsidiary or any Commonly Controlled Entity of a tax, penalty or
other liability, individually or in the aggregate, in excess of
$500,000, or incur any "accumulated funding deficiency", as such
term is defined in Section 412 of the Code or Section 302 of ERISA,
in excess of $500,000, or terminate, or permit any Subsidiary or
Commonly Controlled Entity to terminate, any Plan which would
result in a liability to the Company, any Subsidiary or any
Commonly Controlled Entity to the PBGC in an aggregate Consolidated
amount in excess of $500,000, or permit the occurrence of any
Reportable Event or any other event or condition which presents a
risk of such a termination by the PBGC of any Plan which could
result in a liability of the Company, any Subsidiary or any
Commonly Controlled Entity in excess of $500,000, or withdraw or
effect a partial withdrawal from a Multiemployer Plan, or permit
any Subsidiary or any Commonly Controlled Entity which is an em-
ployer under such a Multiemployer Plan so to do which would result
in a liability to the Company, any Subsidiary or any Commonly Con-
trolled Entity to the PBGC in an aggregate Consolidated amount in
excess of $500,000.
11. Capital Expenditures.
--------------------
During any fiscal year, make any capital expenditures or
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<PAGE>
fixed asset acquisitions, or incur any obligation so to do, or
permit any Material Subsidiary so to do, in an aggregate Consoli-
dated amount in excess of $50,000,000 in respect of the Company's
1993 and 1994 fiscal years and $60,000,000 in respect of each fis-
cal year thereafter, of which not more than $15,000,000 in any one
transaction and $30,000,000 in the aggregate may be used to ac-
quire, from other franchisees, only existing Shoney's or Captain
D's stores (or the Stock of corporations or other ownership inter-
ests of Persons owning such stores) or a commissary to service
Shoney's or Captain D's stores, or with the consent of the Required
Banks, existing similar stores (or the Stock of corporations owning
such stores), whether or not such stores are to be acquired in a
transaction in which Shoney's or Captain D's stores are also
acquired. The cost of any Stock or other ownership interest so
acquired plus any other consideration given in connection
therewith, including, without limitation, Indebtedness assumed by
the Company or any Subsidiary, in any fiscal year shall constitute
a capital expenditure. In the event that the Company finances a
capital expenditure by a Capitalized Lease, the principal amount
thereof shall be deemed, without duplication, to be the capital
expenditure. Capital expenditures and fixed asset acquisitions
shall be calculated on a non-cumulative basis so that amounts not
expended in any fiscal year may not be carried over and expended in
subsequent fiscal years, except that amounts not in excess of
$10,000,000 not expended in a fiscal year may be carried over and
expended in the following fiscal year.
12. Leverage Ratio.
--------------
Permit at any time during the fiscal years of the Company
set forth below, the Leverage Ratio to be greater than the ratio
set forth below:
Fiscal Year Ratio
----------- -----
1993 and 1994 1.10:1.00
1995 and each fiscal year
thereafter 1.00:1.00.
13. Certificate of Incorporation and By-laws.
----------------------------------------
Amend or otherwise modify its certificate of incorpora-
tion or by-laws, or permit any Material Subsidiary so to do, in any
way which would adversely affect the interests of the Banks under
any of the Loan Documents or the obligations of the Company under
the Loan Documents.
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<PAGE>
14. Prepayments of Indebtedness.
---------------------------
Prepay, purchase or redeem, or obligate itself to prepay,
purchase or redeem, in whole or in part, any Indebtedness (except
the Revolving Credit Notes), or permit any Material Subsidiary so
to do, except (i) payments made in connection with purchases and
redemptions of subordinated debt permitted by paragraph 8.15 and
(ii) prepayments in connection with the refinancing of any such
Indebtedness, provided (x) the interest rate on any such refinanced
Indebtedness is not in excess of the rate available for similar
borrowings by similar borrowers at the time of the refinancing, (y)
the maturity of such refinanced Indebtedness is not earlier than
the Revolving Credit Termination Date and (z) the average weighted
life to maturity of such refinanced Indebtedness shall not be less
than the original average weighted life to maturity of such In-
debtedness being refinanced.
15. Subordinated Debt.
-----------------
Make any payment in respect of principal of, or premium
or interest on, or purchase, voluntarily redeem or otherwise re-
tire, or make any payment in respect of all or any part of the
Indebtedness under the 14 1/4% Indenture, the Restaurants Notes, the
Enterprises Subordinated Indenture, the Restaurants Guaranty, the
Senior Subordinated Indenture, the Debenture Purchase Agreement,
any loan made at any time by Enterprises to the Company, or any
other subordinated Indebtedness, or permit any Subsidiary so to do,
except (i) purchases after the Original Effective Date of Restau-
rant Notes for a price (exclusive of accrued interest) not in ex-
cess of $1,140 per $1,000 principal amount, (ii) the redemption of
Restaurant Notes on November 15, 1993, (iii) subject to the subor-
dination provisions of the Enterprises Subordinated Indenture (as
in effect on the Original Effective Date), payments (including the
Repurchase Price as defined in the Enterprises Subordinated Inden-
ture as in effect on the Original Effective Date) required to be
made with respect to the Enterprises Subordinated Debentures, (iv)
subject to the subordination provisions of the 14 1/4% Indenture,
payments required to be made with respect to the Restaurant Notes
and (v) subject to the subordination provisions of the Debenture
Purchase Agreement (as in effect on March 19, 1993), payments of
interest required to be made with respect to the Senior Subordi-
nated Debentures.
16. Issuance of Additional Capital Stock.
------------------------------------
Issue, directly or indirectly, any additional Stock or
other equity interest of the Company or permit any Subsidiary to
issue any additional Stock or other equity interest of such Sub-
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<PAGE>
sidiary, except (i) the Company may issue Stock which is concur-
rently delivered (together with stock powers duly executed in
blank) and pledged to the Collateral Agent on behalf of the Banks
pursuant to the Enterprises Guaranty and (ii) a Subsidiary may
issue Stock to the Company or to another wholly-owned Subsidiary.
17. Sale and Leaseback.
------------------
Enter into any arrangement with any Person, or permit any
Material Subsidiary so to do, providing for the leasing by the
Company (or such Material Subsidiary) of Property which has been or
is to be sold or transferred by the Company (or such Material
Subsidiary) to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of
such Property or rental obligations of the Company (or such Mate-
rial Subsidiary), except that the Company may enter into
sale-leaseback transactions, at fair market value, provided that
(i) the resulting leases are Capitalized Leases and (ii) the
obligations under such Capitalized Leases are permitted by
paragraph 8.1(iii).
18. Payment of Management Fees and Other Amounts.
--------------------------------------------
Pay any management fees or any other amounts to Enter-
prises or any Affiliate, or permit any Subsidiary so to do, except
that (i) the Company may make the payments permitted by paragraph
8.5, (ii) the Company may make the payments required under the Tax
Sharing Agreement and (iii) provided that no Default or Event of
Default exists immediately before and after giving effect thereto,
the Company may pay to Enterprises, an amount not in excess of
$2,500,000 in the aggregate in each fiscal year of the Company in
respect of management fees and administrative expenses.
19. Transactions with Affiliates.
----------------------------
Except for the Restaurants Guaranty, the Management
Agreement and the Tax Sharing Agreement, become, or permit any
Subsidiary to become, a party to any transaction with an Affiliate
of the Company or any Subsidiary unless the terms and conditions
relating to such transaction are at least as favorable to the Com-
pany or such Subsidiary as those which would be obtainable at that
time in a comparable arms-length transaction with a Person other
than an Affiliate.
20. Amendments, Etc. of Certain Agreements.
--------------------------------------
Enter into or agree to any amendment, modification or
waiver of any term or condition of (i) any Lease other than in the
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<PAGE>
ordinary course of business or (ii) the Enterprises Subordinated
Indenture, the Enterprises Debentures, the Debenture Purchase
Agreement, the Senior Subordinated Debentures, the Restaurant
Guaranty, the 14 1/4% Indenture, the Restaurants Notes (other than the
amendments previously approved by the Agents), the 1988 Agreement,
any subordinated note made by the Company to the order of or held
by Enterprises or any Affiliate thereof, the Management Agreement,
any Franchise Agreement or the Tax Sharing Agreement, except that
the Company may agree to a waiver under the Debenture Purchase
Agreement or the Senior Subordinated Debentures so long as no
consideration is given therefor by the Company or Enterprises.
21. Designated Senior Indebtedness.
------------------------------
Designate any Indebtedness other than the Indebtedness
under the Loan Documents as (i) "Designated Senior Indebtedness of
the Guarantor" as defined in the Enterprises Subordinated Indenture
or (ii) "Designated Senior Debt" as defined in the Debenture Pur-
chase Agreement.
9. DEFAULT
-------
1. Events of Default.
-----------------
The following shall each constitute an "Event of Default"
hereunder:
(a) The failure of the Company to pay any installment of
principal on any Revolving Credit Note or reimbursement obligation
in respect of any Letter of Credit on the date when due and pay-
able; or
(b) The failure of the Company to pay any installment of
interest or any fees or expenses payable hereunder or under any
other Loan Documents when due and payable and such failure shall
continue for a period of five days; or
(c) The use by the Company of the proceeds of any Re-
volving Credit Loan in a manner inconsistent with or in violation
of paragraph 2.18; or
(d) The failure of the Company to observe or perform any
covenant or agreement contained in paragraphs 7.3, 7.11, 7.12, 7.14
or paragraph 8; or
(e) The failure of the Company to observe or perform any
other term, covenant, or agreement contained in this Agreement and
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such failure shall have continued unremedied for a period of 30
days after the Company shall have obtained knowledge thereof; or
(f) Any representation or warranty of the Company (or of
any officer of the Company on its behalf) made in this Agreement or
in any certificate, report, opinion (other than an opinion of
counsel) or other document (other than the Environmental Ques-
tionnaires, the Leases and the Franchise Agreements) delivered or
to be delivered pursuant to this Agreement, shall prove to have
been incorrect or misleading (whether because of misstatement or
omission) in any respect when made; or
(g) Obligations of the Company (other than its obliga-
tions under the Revolving Credit Notes) Enterprises or any Material
Subsidiary, whether as principal, guarantor, surety or other obli-
gor, for the payment of Indebtedness in excess of $1,000,000
principal amount individually or in the aggregate (i) shall become
or shall be declared to be due and payable prior to the expressed
maturity or expiration thereof, or (ii) shall not be paid when due
or within any grace period for the payment thereof, or (iii) the
holder of any thereof shall have the right to declare the same due
and payable prior to the expressed maturity thereof; or
(h) The Company, Enterprises or any Material Subsidiary
shall (i) suspend or discontinue its business, or (ii) make an
assignment for the benefit of creditors, or (iii) generally not be
paying its debts as such debts become due, or (iv) admit in writing
its inability to pay its debts as they become due, or (v) file a
voluntary petition in bankruptcy, or (vi) file any petition or
answer seeking for itself any reorganization, arrangement, composi-
tion, readjustment of debt, liquidation or dissolution or similar
relief under any present or future statute, law or regulation of
any jurisdiction, or (vii) petition or apply to any tribunal for
any receiver, custodian or any trustee for any substantial part of
its Property, or (viii) file any answer admitting or not contesting
the material allegations of any such petition filed against it or
any order, judgment or decree approving such petition in any such
proceeding, or (ix) seek, approve, consent to, or acquiesce in any
such proceeding, or in the appointment of any trustee, receiver,
custodian, liquidator, or fiscal agent for it, or any substantial
part of its Property, or an order is entered appointing any such
trustee, receiver, custodian, liquidator or fiscal agent and such
order remains in effect for 45 days, or (x) take any formal action
for the purpose of effecting any of the foregoing or looking to the
liquidation or dissolution of the Company, Enterprises or such
Material Subsidiary; or
(i) An order for relief is entered under the United
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<PAGE>
States bankruptcy laws or any other decree or order is entered by a
court having jurisdiction (i) adjudging the Company, Enterprises or
any Material Subsidiary a bankrupt or insolvent, or (ii) approving
as properly filed a petition seeking reorganization, liquidation,
arrangement, adjustment or composition of or in respect of the
Company, Enterprises or any Material Subsidiary under the United
States bankruptcy laws or any other applicable Federal or state
law, or (iii) appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or other similar official) of the Company,
Enterprises or any Material Subsidiary or of any substantial part
of the Property thereof, or (iv) ordering the winding up or
liquidation of the affairs of the Company, Enterprises or any
Material Subsidiary, and any such decree or order continues un-
stayed and in effect for a period of 45 days; or
(j) Judgments or decrees against the Company, Enter-
prises or any Material Subsidiary in excess of $1,000,000 in the
aggregate shall remain unpaid, unstayed on appeal, undischarged,
unbonded or undismissed for a period of 30 days; or
(k) The occurrence and continuance of an Event of De-
fault under and as defined in any Collateral Document or Enter-
prises shall disavow its obligations under the Enterprises Guar-
anty; or
(l) Any of the Loan Documents shall cease, for any rea-
son, to be in full force and effect, or the Company, Enterprises or
any Material Subsidiary shall so assert in writing; or
(m) Any material business license, permit or agreement,
including, without limitation, any Franchise Agreement, of the
Company, Enterprises or any Material Subsidiary is cancelled, ter-
minated or otherwise lost (other than by its terms, in connection
with the closing of a restaurant or with the mutual consent of the
parties thereto); or
(n) Enterprises shall not own 100% of the issued and
outstanding Stock of the Company; or
(o) The occurrence of an Event of Default under and as
defined in the 14 1/4% Indenture or the Restaurants Notes; or
(p) The occurrence of an Event of Default under and as
defined in the Enterprises Subordinated Indenture or the Debenture
Purchase Agreement; or
(q) The occurrence of a Change in Control.
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<PAGE>
Upon the occurrence of an Event of Default or at any time
thereafter during the continuance thereof, (a) if such event is an
Event of Default with respect to the Company specified in clauses
(h) or (i) above, the Aggregate Revolving Credit Commitments and
the Letter of Credit Commitment shall immediately and automatically
terminate and the Revolving Credit Loans, all accrued and unpaid
interest thereon, any reimbursement obligations owing or contin-
gently owing in respect of all outstanding Letters of Credit, and
all other amounts owing under the Loan Documents shall immediately
become due and payable without declaration or notice to the Com-
pany, and the Company shall forthwith deposit an amount equal to
the Letter of Credit Exposure in a cash collateral account with and
under the exclusive control of the Agents, and the Agents may, and
upon the direction of the Required Banks shall, exercise any and
all remedies and other rights provided pursuant to the Loan
Documents, and (b) if such event is any other Event of Default, any
or all of the following actions may be taken: (i) with the consent
of the Required Banks, the Agents may, and upon the direction of
the Required Banks shall, by notice to the Company, declare the
Aggregate Revolving Credit Commitments and the Letter of Credit
Commitment to be terminated, forthwith, whereupon the Aggregate
Revolving Credit Commitments and the Letter of Credit Commitment
shall immediately terminate, and (ii) with the consent of the
Required Banks, the Agents may, and upon the direction of the
Required Banks shall, by notice of default to the Company, declare
the Revolving Credit Loans, all accrued and unpaid interest
thereon, any reimbursement obligations owing or contingently owing
in respect of all outstanding Letters of Credit, and all other
amounts owing under the Loan Documents to be due and payable on
demand or forthwith, whereupon the same shall immediately become so
due and payable, and the Company shall forthwith deposit an amount
equal to the Letter of Credit Exposure in a cash collateral account
with and under the exclusive control of the Agents, and the Agents
may, and upon the direction of the Required Banks shall, exercise
any and all remedies and other rights provided pursuant to the Loan
Documents. Except as otherwise provided in this paragraph 9.1,
presentment, demand, protest and all other notices of any kind are
hereby expressly waived.
In the event that the Aggregate Revolving Credit Commitments
and the Letter of Credit Commitment shall have been terminated or
the Revolving Credit Notes shall have been declared due and payable
pursuant to the provisions of this paragraph 9.1, any funds
received by the Agents and the Banks from or on behalf of the Com-
pany shall be applied by the Agents and the Banks in liquidation of
the Revolving Credit Loans and the obligations of the Company here-
under and under the Letters of Credit and the Revolving Credit
Notes in the following manner and order: (i) first, to reimburse
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the Agents and the Banks for any expenses due from the Company
pursuant to the provisions of paragraph 11.5; (ii) second, to the
payment of accrued and unpaid Revolving Credit Commitment Fees,
Letter of Credit Commissions and all other fees, expenses and
amounts due hereunder and under the Loan Documents (other than
principal and interest on the Revolving Credit Notes); (iii) third,
to the payment of interest due on the Revolving Credit Notes; (iv)
fourth, to the payment of principal outstanding on the Revolving
Credit Notes and the Letter of Credit Exposure; and (v) fifth, to
the payment of any other amounts owing to the Agents and the Banks
under any of the Loan Documents.
2. Purchase of Notes by the Franchisor.
-----------------------------------
(a) After the occurrence and at any time during the
continuance of an Event of Default and prior to exercising any
remedies under the Loan Documents with respect to the Collateral,
the Administrative Agent will notify the Franchisor of the occur-
rence of such Event of Default. During the period of 10 Business
Days after such notice is given, the Franchisor shall have the
right to purchase the Notes of all (but not less than all) of the
Banks, without recourse, for an amount equal to the unpaid princi-
pal balance thereof together with accrued and unpaid interest, fees
and all other amounts due under the Loan Documents. In the event
that the Franchisor notifies the Administrative Agent that it
agrees to so purchase the Notes, payment therefor shall be made in
Dollars in immediately available funds within 10 Business Days
after such notice. In such event, the Franchisor shall succeed to
all of the rights of the Agents and the Banks under the Loan Docu-
ments. In the event that the Franchisor fails to give timely no-
tice of its agreement to so purchase the Notes, or if the
Franchisor notifies the Administrative Agent that it does not agree
to purchase the Notes, the Collateral Agent shall be free to
exercise all of the remedies with respect to the Collateral under
the Loan Documents.
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<PAGE>
(b) Notices to the Franchisor under this paragraph 9.2
shall be in writing and shall be mailed or sent by telegram,
telecopy or telex (with a copy to the Company at its address set
forth in paragraph 11.2), as follows:
Shoney's, Inc.
1727 Elm Hill Pike
Nashville, Tennessee 37210
Attention: Secretary
with a copies to:
Farris, Warfield & Kanaday
Suite 1900
Third National Financial Center
Nashville, Tennessee 37219
Attention: Gary M. Brown, Esq.
TPI Restaurants, Inc.
2158 Union Avenue
Memphis, Tennessee 38104
Attention: Frederick W. Burford,
Vice President and Chief
Financial Officer
and
Skadden, Arps, Slate, Meagher & Flom
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attention: Ronald Barusch, Esq.
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<PAGE>
10. THE AGENTS; THE ISSUING BANK
----------------------------
1. Appointment.
-----------
Each Bank hereby irrevocably designates and appoints BNY
as the Administrative Agent and NationsBank as the Collateral Agent
of such Bank under the Loan Documents and each such Bank hereby ir-
revocably authorizes BNY and NationsBank, as the Administrative
Agent and the Collateral Agent, respectively, for such Bank, to
take such action on its behalf under the provisions of the Loan
Documents and to exercise such powers and perform such duties as
are expressly delegated to the Administrative Agent and the
Collateral Agent by the terms of the Loan Documents, together with
such other powers as are reasonably incidental thereto. Not-
withstanding any provision to the contrary elsewhere in this
Agreement or any of the other Loan Documents, neither the Adminis-
trative Agent nor the Collateral Agent shall have any duties or
responsibilities, except those expressly set forth herein or
therein, or any fiduciary relationship with any Bank, and no im-
plied covenants, functions, responsibilities, duties, obligations
or liabilities shall be read into the Loan Documents or otherwise
exist against the Administrative Agent or the Collateral Agent.
2. Delegation of Duties.
--------------------
The Agents may execute any duties under the Loan Docu-
ments by or through agents or attorneys-in-fact and shall be en-
titled to rely upon the advice of counsel concerning all matters
pertaining to such duties.
3. Exculpatory Provisions.
----------------------
(a) Neither of the Agents, the Issuing Bank in its ca-
pacity as such, nor any of their respective officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with the Loan Documents (ex-
cept for its own gross negligence or willful misconduct or, in the
case of the Issuing Bank, its failure to materially comply with the
terms of the Letters of Credit), or (ii) responsible in any manner
to any of the Banks for any recitals, statements, representations
or warranties made by the Company or any officer thereof contained
in the Loan Documents or in any certificate, report, statement or
other document referred to or provided for in, or received under or
in connection with, the Loan Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of any of
the Loan Documents or for any failure of the Company or any other
Person to perform its obligations hereunder or thereunder. Neither
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<PAGE>
of the Agents nor the Issuing Bank shall be under any obligation to
any Bank to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions
of, the Loan Documents, or to inspect the properties, books or
records of the Company. Neither of the Agents shall be under any
liability or responsibility whatsoever, as Administrative Agent or
Collateral Agent, as the case may be, to the Company or any other
Person as a consequence of any failure or delay in performance, or
any breach, by any Bank of any of its obligations under any of the
Loan Documents.
(b) As to the Issuing Bank only, the Company assumes all
risks of the acts or omissions of any beneficiary or transferee of
any Letter of Credit with respect to its use of the Letter of
Credit. Neither the Issuing Bank, the Agents, the Banks nor any
of their respective officers or directors shall be liable or
responsible for: (i) the use which may be made of any Letter of
Credit or any acts or omissions of any beneficiary or transferee in
connection therewith, (ii) the validity, sufficiency or genuineness
of documents, or of any endorsement thereon, even if such documents
should prove to be in any or all respects invalid, insufficient,
fraudulent or forged; (iii) payment by the Issuing Bank against
presentation of documents which do not comply with the terms of a
Letter of Credit, including failure of any documents to bear any
reference or adequate reference to a Letter of Credit; (iv) errors,
omissions, interruptions or delays in transmission or delivery of
any messages, by mail, telecopier, telex or otherwise, (v) any loss
or delay in the transmission or otherwise of any document or draft
required in order to make a drawing under a Letter of Credit; or
(vi) any other circumstances whatsoever in making or failing to
make a payment under a Letter of Credit, except that the Company
shall have a claim against the Issuing Bank, and the Issuing Bank
shall be liable to the Company, to the extent of any direct, as
opposed to consequential, damages suffered by the Company which the
Company proves were caused by the Issuing Bank's gross negligence
in making or willful failure to make lawful payment under a Letter
of Credit after the presentation to it of a draft and other
documentation, if any, strictly complying with the terms and
conditions of the Letter of Credit. In furtherance and not in
limitation of the foregoing, the Issuing Bank may accept documents
that appear on their face to be in order, without responsibility
for further investigation, regardless of any notice or information
to the contrary.
4. Reliance by Agents.
------------------
Each Agent and the Issuing Bank shall be entitled to
rely, and shall be fully protected in relying, upon any writing,
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<PAGE>
resolution, notice, consent, certificate, affidavit, opinion, let-
ter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it
to be genuine and correct and to have been signed, sent or made by
the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Com-
pany), independent accountants and other experts selected by such
Agent or the Issuing Bank. Each Agent may treat each Bank, or the
Person designated in the last notice filed with it under this
paragraph, as the holder of all of the interests of such Bank in
its Loans and in its Revolving Credit Note until written notice of
transfer, signed by such Bank (or the Person designated in the last
notice filed with the Agents) and by the Person designated in such
written notice of transfer, in form and substance satisfactory to
the Agents, shall have been filed with the Agents. Neither of the
Agents shall be under any duty to examine or pass upon the valid-
ity, effectiveness or genuineness of the Loan Documents or any in-
strument, document or communication furnished pursuant thereto or
in connection therewith, and the Agents shall be entitled to assume
that the same are valid, effective and genuine, have been signed or
sent by the proper parties and are what they purport to be. Each
Agent shall be fully justified in failing or refusing to take any
action under the Loan Documents unless it shall first receive such
advice or concurrence of the Required Banks as it deems ap-
propriate. The Agents shall in all cases be fully protected in
acting, or in refraining from acting, under the Loan Documents in
accordance with a request of the Required Banks, and such request
and any action taken or failure to act pursuant thereto shall be
binding upon all the Banks and all future holders of the Revolving
Credit Notes.
5. Notice of Default.
-----------------
Neither Agent shall be deemed to have knowledge or notice
of the occurrence of any Default or Event of Default unless such
Agent has received written notice thereof from a Bank or the
Company. In the event that an Agent receives such a notice, such
Agent shall promptly give notice thereof to the Banks. The Agents
shall take such action with respect to such Default or Event of De-
fault as shall be reasonably directed by the Required Banks,
provided, however, that unless and until the Agents shall have
received such directions, the Agents may (but shall not be obli-
gated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem
to be in the best interests of the Banks.
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<PAGE>
6. Non-Reliance on Agents, Issuing Banks and Other Banks.
-----------------------------------------------------
Each Bank expressly acknowledges that neither of the
Agents, the Issuing Bank nor any of their respective officers,
directors, employees, agents, attorneys-in-fact or affiliates has
made any representations or warranties to it and that no act by the
Agents or the Issuing Bank, hereafter, including any review of the
affairs of the Company or its Material Subsidiaries, shall be
deemed to constitute any representation or warranty by the Agents
or the Issuing Bank to any Bank. Each Bank represents to the
Agents, and the Issuing Bank that it has, independently and without
reliance upon the Agents, the Issuing Bank or any other Bank, and
based on such documents and information as it has deemed appropri-
ate, made its own evaluation of and investigation into the
business, operations, Property, financial and other condition and
creditworthiness of the Company and its Material Subsidiaries and
Enterprises and made its own decision to enter into this Agreement.
Each Bank also represents that it will, independently and without
reliance upon the Agents, the Issuing Bank or any other Bank, and
based on such documents and information as it shall deem ap-
propriate at the time, continue to make its own credit analysis,
evaluations and decisions in taking or not taking action under this
Agreement or any of the Loan Documents, and to make such investiga-
tion as it deems necessary to inform itself as to the business,
operations, Property, financial and other condition and
creditworthiness of the Company and its Material Subsidiaries and
Enterprises. Except for notices, reports and other documents ex-
pressly required to be furnished to the Banks by the Agents or the
Issuing Bank hereunder, neither the Agents nor the Issuing Bank
shall have any duty or responsibility to provide any Bank with any
credit or other information concerning the business, operations,
Property, financial and other condition or creditworthiness of the
Company or its Material Subsidiaries which may come into the pos-
session of the Agents or any of their respective officers, direc-
tors, employees, agents, attorneys-in-fact or affiliates.
7. Indemnification.
---------------
(a) Each Bank agrees to indemnify each of the Adminis-
trative Agent and the Collateral Agent in their respective capaci-
ties as such (to the extent not promptly reimbursed by the Company
and without limiting or creating the obligation of the Company to
do so), pro rata according to its Commitments, from and against any
and all liabilities, obligations, claims, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disburse-
ments of any kind whatsoever including, without limitation, any
amounts paid to the Banks (through the Agents) by the Company pur-
suant to the terms hereof, that are subsequently rescinded or
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<PAGE>
avoided, or must otherwise be restored or returned) which may at
any time (including, without limitation, at any time following the
payment of the Revolving Credit Notes) be imposed on, incurred by
or asserted against the Agents or either of them in any way relat-
ing to or arising out of this Agreement, the other Loan Documents
or any other documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted to
be taken by the Agents or either of them under or in connection
with any of the foregoing; provided, however, that no Bank shall be
liable for the payment of any portion of such liabilities, obliga-
tions, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements to the extent resulting solely
from the gross negligence or willful misconduct of the Administra-
tive Agent or the Collateral Agent, as the case may be. The agree-
ments in this paragraph shall survive the payment of the Revolving
Credit Notes and all other amounts payable under the Loan
Documents.
(b) Each Bank agrees to indemnify the Issuing Bank in its
capacity as such (to the extent not promptly reimbursed by the
Company and without limiting or creating the obligation of the
Company to do so), pro rata according to its Commitments, from and
against any and all liabilities, obligations, claims, losses, dam-
ages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever (other than those relating to
claims against a Bank for failure to comply with its obligations
under paragraph 2.9 in which case such indemnity is given solely by
such Bank), including, without limitation, any amounts paid to the
Banks (through the Agents) by the Company pursuant to the terms
hereof, that are subsequently rescinded or avoided, or must
otherwise be restored or returned) which may at any time (includ-
ing, without limitation, at any time following the payment of the
Revolving Credit Notes) be imposed on, incurred by or asserted
against the Issuing Bank in any way relating to or arising out of
its obligations with respect to Letters of Credit; provided, how-
ever, that no Bank shall be liable for the payment of any portion
of such liabilities, obligations, losses, damages, penalties, ac-
tions, judgments, suits, costs, expenses or disbursements to the
extent resulting from the failure of the Issuing Bank to materially
comply with the provisions of the Letters of Credit. The agreements
in this paragraph shall survive the payment of the Revolving Credit
Notes and all other amounts payable under the Loan Documents.
8. Agents in Their Individual Capacities.
-------------------------------------
BNY and NationsBank and their respective affiliates may
make loans to, accept deposits from, issue letters of credit for
the account of and generally engage in any kind of business with,
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<PAGE>
the Company and its Material Subsidiaries and Enterprises as though
BNY was not Administrative Agent and NationsBank was not Collateral
Agent hereunder. With respect to the Commitment made or renewed by
BNY or NationsBank, as the case may be, and the Revolving Credit
Note issued to BNY or NationsBank, as the case may be, BNY or
NationsBank, as the case may be, shall have the same rights and
powers under this Agreement as any Bank and may exercise the same
as though it was not the Administrative Agent or Collateral Agent,
as the case may be, and the terms "Bank" and "Banks" shall in each
case include BNY and NationsBank in their respective individual
capacities.
9. Successor Agents; Issuing Bank.
------------------------------
(a) Administrative Agent. If at any time the Administra-
--------------------
tive Agent deems it advisable, in its sole discretion, it may sub-
mit to each of the Banks a written notification of its resignation
as Administrative Agent under this Agreement, such resignation to
be effective on the thirtieth day after the date of such notice.
Upon any such resignation, if NationsBank is the then acting Col-
lateral Agent, NationsBank shall have the right to become the Ad-
ministrative Agent. If NationsBank is not the then acting Col-
lateral Agent or if NationsBank declines to act as Administrative
Agent in a writing delivered to the then acting Administrative
Agent and the Banks within thirty days after the resignation of the
Administrative Agent, the Required Banks shall have the right to
appoint from among the Banks a successor Administrative Agent,
which successor Administrative Agent shall be reasonably acceptable
to the Company, provided, however, that in the event that a Default
or an Event of Default has occurred and is then continuing, such
successor Administrative Agent need not be acceptable to the
Company. If no successor Administrative Agent shall have been so
appointed by the Required Banks and accepted such appointment
within 30 days after the retiring Administrative Agent's giving of
notice of resignation, then the retiring Administrative Agent may,
on behalf of the Banks, appoint a successor Administrative Agent,
which successor Administrative Agent shall be a commercial bank
organized under the laws of the United States of America or of any
State thereof and having a combined capital and surplus of at least
$100,000,000 and which successor Administrative Agent shall be
reasonably acceptable to the Company, provided, however, that in
the event that a Default or an Event of Default has occurred and is
then continuing, such successor Administrative Agent need not be
acceptable to the Company. Upon the acceptance of any appointment
as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed
to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring
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<PAGE>
Administrative Agent's rights, powers, privileges and duties as
Administrative Agent under this Agreement shall be terminated. The
Company and the Banks shall execute such documents as shall be
necessary to effect such appointment. After any retiring
Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this paragraph 10.9 shall
inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Agreement. If
at any time hereunder there shall not be a duly appointed and
acting Administrative Agent, the Company agrees to make each
payment due hereunder and under its Revolving Credit Note directly
to the Banks entitled thereto during such time.
(b) Collateral Agent. If at any time the Collateral Agent
----------------
deems it advisable, in its sole discretion, it may submit to each
of the Banks a written notification of its resignation as
Collateral Agent under this Agreement, such resignation to be ef-
fective on the thirtieth day after the date of such notice. Upon
any such resignation, if BNY is the then acting Administrative
Agent, BNY shall have the right to become the Collateral Agent. If
BNY is not the then acting Administrative Agent or if BNY declines
to act as Collateral Agent in a writing delivered to the then
acting Collateral Agent and the Banks within thirty days after the
resignation of the Collateral Agent, the Required Banks shall have
the right to appoint from among the Banks a successor Collateral
Agent, which successor Collateral Agent shall be reasonably
acceptable to the Company, provided, however, that in the event
that a Default or an Event of Default has occurred and is then
continuing, such successor Administrative Agent need not be
acceptable to the Company. If no successor Collateral Agent shall
have been so appointed by the Required Banks and accepted such ap-
pointment within 30 days after the retiring Collateral Agent's
giving of notice of resignation, then the retiring Collateral Agent
may, on behalf of the Banks, appoint a successor Collateral Agent,
which successor Collateral Agent shall be a commercial bank
organized under the laws of the United States of America or of any
State thereof and having a combined capital and surplus of at least
$100,000,000 and which successor Collateral Agent shall be
reasonably acceptable to the Company, provided, however, that in
the event that a Default or an Event of Default has occurred and is
then continuing, such successor Administrative Agent need not be
acceptable to the Company. Upon the acceptance of any appointment
as Collateral Agent hereunder by a successor Collateral Agent, such
successor Collateral Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the
retiring Collateral Agent, and the retiring Collateral Agent's
rights, powers, privileges and duties as Collateral Agent under
this Agreement shall be terminated. The Company and the Banks
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<PAGE>
shall execute such documents as shall be necessary to effect such
appointment and the retiring Collateral Agent shall deliver all
Pledged Collateral to the successor Collateral Agent. After any
retiring Collateral Agent's resignation or removal hereunder as
Collateral Agent, the provisions of this paragraph 10.9 shall inure
to its benefit as to any actions taken or omitted to be taken by it
while it was Collateral Agent under this Agreement.
(c) Issuing Bank. If at any time the Issuing Bank deems
------------
it advisable, in its sole discretion, it may submit to each of the
Banks a written notification of its resignation as Issuing Bank
under this Agreement, such resignation to be effective only upon
the agreement of another Bank to act as the successor Issuing Bank.
Upon any such resignation, if BNY is the then acting Administrative
Agent, BNY shall have the right to become the Issuing Bank. If BNY
is not the then acting Administrative Agent or if BNY declines to
act as Issuing Bank in a writing delivered to the resigning Issuing
Bank and the Banks within thirty days after the resignation of the
Issuing Bank, the Required Banks shall have the right to appoint
from among the Banks a successor Issuing Bank, which successor
Issuing Bank shall be reasonably acceptable to the Company,
provided, however, that in the event that a Default or an Event of
Default has occurred and is then continuing, such successor Issuing
Bank need not be acceptable to the Company. If no successor
Issuing Bank shall have been so appointed by the Required Banks and
accepted such appointment within 30 days after the retiring Issuing
Bank's giving of notice of resignation, then the retiring Issuing
Bank may, on behalf of the Banks, appoint a successor Issuing Bank,
which successor Issuing Bank shall be a commercial bank organized
under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least
$100,000,000 and which successor Issuing Bank shall be reasonably
acceptable to the Company, provided, however, that in the event
that a Default or an Event of Default has occurred and is then
continuing, such successor Issuing Bank need not be acceptable to
the Company. Upon the acceptance of any appointment as Issuing
Bank hereunder by a successor Issuing Bank, such successor Issuing
Bank shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Issuing Bank,
and the retiring Issuing Bank's rights, powers, privileges and
duties as Issuing Bank under this Agreement shall be terminated.
The Company, the Issuing Bank and the Banks shall execute such
documents as shall be necessary to effect such appointment and will
take such action as may be reasonable under the circumstances to
cause Letters of Credit issued by the successor Issuing Bank to be
substituted for outstanding Letters of Credit issued by the
retiring Issuing Bank.
- 91 -
<PAGE>
10. Release of Collateral.
---------------------
Each Bank hereby authorizes the Collateral Agent, without
obtaining any further consent or approval from the Banks, to
execute releases of Liens of any Property subject to a Mortgage in
connection with any release of Lien authorized or required under
paragraph 7.16.
11. OTHER PROVISIONS.
----------------
1. Amendments and Waivers.
----------------------
With the written consent of the Required Banks, the Ad-
ministrative Agent and the appropriate parties to the Loan Docu-
ments may, from time to time, enter into written amendments,
supplements or modifications thereof and, with the consent of the
Required Banks, the Administrative Agent on behalf of the Banks may
execute and deliver to any such parties a written instrument
waiving, on such terms and conditions as the Administrative Agent
may specify in such instrument, any of the requirements of the Loan
Documents or any Default or Event of Default and its consequences;
provided, however, that no such amendment, supplement, modification
or waiver shall (i) change the Commitments of any Bank, (ii) extend
the maturity date of any Revolving Credit Note or extend the Re-
volving Credit Termination Date (except as provided in paragraph
2.20), (iii) decrease the rate, or extend the time of payment, of
interest of, or change or forgive the principal amount of, or
change the pro rata allocation of payments under, any Revolving
Credit Note, (iv) decrease the Revolving Credit Commitment Fees or
the Letter of Credit Commissions, or extend the time of payment
thereof, (v) release or discharge any guarantor from its
obligations under a guarantee, (vi) release all or any part of the
Collateral except to the extent (x) that the Collateral Agent shall
be required or permitted to do so under the terms and provisions of
the Loan Documents, (y) such Collateral is permitted to be sold or
otherwise disposed of under this Agreement or (z) a security
interest in such Collateral is permitted to be granted to another
Person under this Agreement (vii) waive or consent to any amendment
of the subordination provisions of the Enterprises Subordinated In-
denture, the Debenture Purchase Agreement or the 14 1/4% Indenture or
(viii) change the provisions of paragraphs 2.15, 2.16, 2.17, 2.19,
8.15, 10.7, 11.1 or 11.11 without the consent of all of the Banks;
and provided further that no such amendment, supplement, modifica-
tion or waiver shall amend, modify or waive any provision of para-
graph 10 or otherwise change any of the rights or obligations of
either Agent hereunder or under the Loan Documents without the
written consent of such Agents and the Issuing Bank, and provided
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<PAGE>
further that no such amendment, supplement, modification or waiver
shall amend, modify or waive any provision of paragraphs 2.8, 2.9,
2.10 or 2.11 or otherwise change any of the rights or obligations
of the Issuing Bank hereunder or under the Loan Documents without
the written consent of the Issuing Bank. Any such amendment,
supplement, modification or waiver shall apply equally to each of
the Banks and shall be binding upon the parties to the applicable
agreement, the Banks, the Administrative Agent and all future hold-
ers of the Revolving Credit Notes. In the case of any waiver, the
parties to the applicable agreement, the Banks and the Agents shall
be restored to their former position and rights hereunder and under
the Revolving Credit Notes and the other Loan Documents, and any
Default or Event of Default waived shall not extend to any subse-
quent or other Default or Event of Default, or impair any right
consequent thereon. Notwithstanding the foregoing, the provisions
of paragraph 9.2 of this Agreement may not be amended, modified or
waived without the prior written consent of the Bank and the
Franchisor.
2. Notices.
-------
All notices, requests and demands to or upon the respec-
tive parties hereto to be effective shall be in writing and, unless
otherwise expressly provided herein, shall be deemed to have been
duly given or made when delivered by hand, or when deposited in the
mail, first-class postage prepaid, or, in the case of telecopier
notice, when sent (and confirmed by telephone), addressed as
follows in the case of the Company and the Agents, and as set forth
on Schedule 1.1 in the case of each of the Banks, or to such other
addresses as to which the Agents may be hereafter notified by the
respective parties hereto or any future holders of the Revolving
Credit Notes:
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<PAGE>
if to the Company, at:
TPI Restaurants, Inc.
2158 Union Avenue
Memphis, Tennessee 38104
Attention: Frederick W. Burford,
Vice President and
Chief Financial Officer
Telephone: (901) 725-6400
Telecopy: (901) 725-6418
with copies to:
TPI Enterprises, Inc.
777 South Flagler Drive
Philips Point Plaza-East Tower
Suite 909
West Palm Beach, Florida 33401
Attention: President
Telephone: (407) 835-8888
Telecopy: (407) 835-4982
and
Skadden, Arps, Slate, Meagher & Flom
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attention: Ronald Barusch, Esq.
Telephone: (202) 371-7990
Telecopy: (202) 393-5760,
if to the Administrative Agent, at:
The Bank of New York
One Wall Street
Agency Function Administration
18th Floor
New York, New York 10286
Attention: Kalyani Bose,
Agency Function Administrator
Telephone: (212) 635-4693
Telecopy: (212) 635-6365,
- 94 -
<PAGE>
with a copy to:
The Bank of New York
One Wall Street
22nd Floor
New York, New York 10286
Attention: Frank P. Turner,
Assistant Vice President
Telephone: (212) 635-6898
Telecopy: (212) 635-6434,
and if to the Collateral Agent, at:
NationsBank of North Carolina, N.A.
One NationsBank Plaza
Charlotte, North Carolina 28255
Attention: Elizabeth S. Garver,
Corporate Lending Support
Telephone: (704) 386-8382
Telecopy: (704) 386-8694
with a copy to:
NationsBank Corporation
One NationsBank Plaza
Location Code: M-5
Nashville, Tennessee 37239-1967
Attention: Steven L. Dalton,
Vice President
Telephone: (615) 749-4151
Telecopy: (615) 749-4640,
except that any notice, request or demand by the Company pursuant
to paragraphs 2.3, 2.4, 2.5 or 2.6 shall not be effective until
received.
3. No Waiver; Cumulative Remedies.
------------------------------
No failure to exercise and no delay in exercising, on the
part of the Agents or any Bank, any right, remedy, power or
privilege under any Revolving Credit Loan Document shall operate as
a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege under any Loan Document preclude
any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers
and privileges under the Loan Documents are cumulative and not
exclusive of any rights, remedies, powers and privileges provided
by law.
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<PAGE>
4. Survival of Representations and Warranties.
------------------------------------------
All representations and warranties made hereunder and in
any document, certificate or statement delivered pursuant hereto or
in connection herewith shall survive the execution and delivery of
this Agreement, the Revolving Credit Notes and the other Loan
Documents.
5. Payment of Expenses and Taxes.
-----------------------------
The Company agrees, promptly upon presentation of a
statement or invoice therefor, and whether any Revolving Credit
Loan is made, (i) to pay or reimburse the Agents and the Issuing
Bank for all their reasonable out-of-pocket costs and expenses
reasonably incurred in connection with the preparation and execu-
tion of, and any amendment, supplement or modification to, the Loan
Documents, any documents prepared in connection therewith and the
consummation of the transactions contemplated thereby, including,
without limitation, the reasonable fees and disbursements of
Special Counsel, (ii) to pay or reimburse the Agents, the Issuing
Bank and each of the Banks for all of their respective costs and
expenses incurred in connection with the enforcement or preserva-
tion of any rights under the Loan Documents and any such documents,
including, without limitation, reasonable fees and disbursements of
counsel, (iii) to pay, indemnify, and hold each Bank, the Agents
and the Issuing Bank harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other similar
taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery of, or consummation of
any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in
respect of, the Loan Documents and any such other documents, and
(iv) to pay, indemnify and hold each Bank and the Agents, the
Issuing Bank and each of their respective officers, directors and
employees harmless from and against any and all other liabilities,
obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever (including, without limitation, reasonable
counsel fees and disbursements) with respect to the execution,
delivery, enforcement and performance of the Loan Documents or the
use of the proceeds of the Revolving Credit Loans (all the
foregoing, collectively, the "indemnified liabilities") and, if and
to the extent that the foregoing indemnity may be unenforceable for
any reason, the Company agrees to make the maximum payment per-
mitted under applicable law; provided, however, that the Company
shall have no obligation hereunder to pay indemnified liabilities
- 96 -
<PAGE>
to either Agent, the Issuing Bank or any Bank arising from the
gross negligence or willful misconduct of such Agent or such Bank
or claims between one indemnified party and another indemnified
party. The agreements in this paragraph shall survive the termina-
tion of the Commitments and the payment of the Revolving Credit
Notes, and all other amounts payable hereunder.
6. Lending Offices.
---------------
Each Bank shall have the right at any time and from time
to time to transfer any Revolving Credit Loan to a different of-
fice, provided that (i) such Bank shall promptly notify the Admin-
istrative Agent and the Company of any such change of office and
(ii) such Bank shall not transfer such Loan to such office if such
transfer will increase the costs to the Company under paragraphs
2.11, 2.13 or 2.15, unless such Bank and its lending office will
suffer economic, legal or regulatory disadvantage if it does not so
transfer such Loan. Such office shall thereupon become such Bank's
Domestic Lending Office or Eurodollar Lending Office, as the case
may be. Each Bank agrees that, upon the occurrence of any event
giving to any increased cost indemnity under paragraphs 2.11, 2.13
or 2.15 with respect to such Bank, it will, if requested by the
Company, use reasonable efforts (subject to overall policy
considerations of such Bank) to designate another lending office
for any Revolving Credit Loans affected by such event, provided
that such designation is made on such terms that such Bank and its
lending office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of any such paragraph. Nothing
in this paragraph 11.6 shall affect or postpone any of the obliga-
tions of the Company or the right of any Bank provided in para-
graphs 2.11 and 2.15.
7. Successors and Assigns.
----------------------
(a) The Loan Documents to which the Company is a party
shall be binding upon and inure to the benefit of the Company, the
Banks, the Agents, all future holders of the Revolving Credit Notes
and their respective successors and assigns, except that the
Company may not assign, delegate or transfer any of its rights or
obligations under any Loan Document without the prior written con-
sent of the Agents and each Bank.
(b) Each Bank shall have the right at any time, upon
written notice to the Administrative Agent of its intent to do so,
to sell, assign, transfer or negotiate all or any part of such
Bank's rights with respect to its Revolving Credit Loans, its Re-
volving Credit Commitment, and its Revolving Credit Note to one or
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<PAGE>
more of its Affiliates, to one or more of the other Banks (or to
Affiliates of such Bank or such other Banks) or, with the prior
written consent of the Company (which consent shall not be unrea-
sonably withheld and shall not be required upon the occurrence and
during the continuance of an Event of Default), to sell, assign,
transfer or negotiate all or any part of such Bank's rights and
obligations with respect to its Revolving Credit Loans, its Re-
volving Credit Commitment and its Revolving Credit Note to any
other bank, insurance company, pension fund, mutual fund or other
financial institution, provided that (i) each such sale, assign-
ment, transfer or negotiation (other than sales, assignments,
transfers or negotiations (x) to Affiliates of such Bank or (y) of
a Bank's entire interest) shall be in a minimum amount of
$5,000,000 and (ii) there shall be paid to the Administrative Agent
by the assigning Bank a fee (the "Assignment Fee") of $2,000;
---------------
provided, however, that nothing herein shall affect the right of
the Banks to sell their Revolving Credit Loans, Revolving Credit
Commitment and Revolving Credit Note to the Franchisor without the
consent of the Company pursuant to paragraph 9.2. For each
assignment, the parties to such assignment shall execute and
deliver to the Administrative Agent for its acceptance and record-
ing an Assignment and Acceptance Agreement. Upon execution, de-
livery, acceptance and recording by the Administrative Agent, from
and after the effective date specified in such Assignment and Ac-
ceptance Agreement and agreed to by the Agents, the assignee
thereunder shall be a party hereto and, to the extent provided in
such Assignment and Acceptance Agreement, the assignor Bank there-
under shall be released from its obligations under this Agreement.
The Company agrees upon written request of the Administrative Agent
to execute and deliver (1) to such assignee, a Revolving Credit
Note, dated the effective date of such Assignment and Acceptance
Agreement, in an aggregate principal amount equal to the Revolving
Credit Loans assigned to, and Revolving Credit Commitment assumed
by, such assignee and (2) to such assignor Bank, a Revolving Credit
Note, dated the effective date of such Assignment and Acceptance
Agreement, in an aggregate principal amount equal to the balance of
such assignor Bank's Revolving Credit Loans and Revolving Credit
Commitment, if any, and each assignor Bank shall cancel and return
to the Company its existing Revolving Credit Note. Upon any such
sale, assignment or other transfer, the Revolving Credit Commit-
ments and Commitment Percentages set forth in Exhibit A shall be
adjusted accordingly.
(c) Each Bank may grant participations in all or any
part of its Revolving Credit Loans, its Revolving Credit Note and
its Revolving Credit Commitments to the parent, any Affiliate,
Subsidiary or branch of such Bank or to one or more banks, insur-
ance companies, pension funds, mutual funds or other financial
- 98 -
<PAGE>
institutions, provided that (i) such Bank's obligations under this
Agreement shall remain unchanged, (ii) such Bank shall remain
solely responsible to the other parties hereto for the performance
of such obligations, (iii) the Company, the Agents and the other
Banks shall continue to deal directly with such Bank in connection
with such Bank's rights and obligations under the Loan Documents
and (iv) the rights of any holder of any such participation shall
be limited to the right to consent to any action taken or omitted
to be taken by such Bank under this Agreement which would (1) in-
crease the Aggregate Revolving Credit Commitments, (2) reduce the
Revolving Credit Commitment Fees or Letter of Credit Commissions or
the interest rate payable on, or increase or forgive the principal
amount of the Revolving Credit Notes or (3) extend the maturity
date of the Revolving Credit Notes or extend the Revolving Credit
Termination Date, or postpone the payment or scheduled due dates
for payments of principal, interest, Revolving Credit Commitment
Fees or Letter of Credit Commissions. The Company acknowledges and
agrees that any such participant shall for purposes of paragraphs
2.11, 2.12, 2.13, 2.14, 2.15, 2.16 and 2.19 be deemed to be a
"Bank", provided that in no event shall the Company be liable for
any amounts under said paragraphs in excess of the amounts for
which it would be liable but for such participation.
(d) Notwithstanding anything herein to the contrary, any
Bank may at any time assign all or any portion of its rights under
the Loan Documents to a Federal Reserve Bank. No such assignment
shall release such Bank from its obligations thereunder.
(e) No Bank shall, as between and among the Company, the
Agents, and such Bank, be relieved of any of its obligations under
the Loan Documents as a result of any sale, assignment, transfer or
negotiation of, or granting of participations in, all or any part
of its Revolving Credit Loans, its Revolving Credit Commitment or
its Revolving Credit Note, except that a Bank shall be relieved of
its obligations to the extent of any sale, assignment, transfer, or
negotiation of all or any part of its Revolving Credit Loans, its
Revolving Credit Commitment or its Revolving Credit Note pursuant
to paragraph (b) above.
8. Counterparts.
------------
The Loan Documents may be executed by one or more of the
parties to this Agreement on any number of separate counterparts
and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. Each such counterpart
shall become effective when counterparts have been executed by all
parties hereto. It shall not be necessary in making proof of any
Loan Document or of any document required to be executed and de-
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<PAGE>
livered in connection herewith or therewith to produce or account
for more than one counterpart signed by the party to be charged. A
set of the copies of the Loan Documents signed by all the parties
shall be deposited with each of the Company and the Agents.
9. Adjustments; Set-off.
--------------------
(a) If any Bank (a "Benefited Bank") shall at any time
--------------
receive any payment of all or any part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in paragraph 9.1 (h) or (i),
or otherwise) in a greater proportion than any such payment to and
collateral received by any other Bank in respect of such other
Bank's Loans, or interest thereon, such Benefited Bank shall pur-
chase for cash from the other Banks such portion of each such other
Bank's Loans, or shall provide such other Banks with the benefits
of any such collateral, or the proceeds thereof, as shall be
necessary to cause such Benefited Bank to share the excess payment
or benefits of such collateral or proceeds ratably with each of the
Banks; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such Benefited
Bank, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without
interest. The Company agrees that each Bank so purchasing a
portion of another Bank's Loans may exercise all rights of payment
(including, without limitation, rights of set-off, to the extent
permitted by law) with respect to such portion as fully as if such
Bank were the direct holder of such portion.
(b) In addition to any rights and remedies of the Banks
provided by law, upon the occurrence and during the continuance of
an Event of Default and the acceleration of the obligations owing
in connection with this Agreement, or at any time upon the occur-
rence and during the continuance of an Event of Default under
paragraph 9.1(a) or 9.1(b), each Bank shall have the right, without
prior notice to the Company, any such notice being expressly waived
by the Company to the extent not prohibited by applicable law, to
set-off and apply against any indebtedness, whether matured or
unmatured, of the Company to such Bank, any amount owing from such
Bank to the Company, at, or at any time after, the happening of any
of the above-mentioned events. To the extent not prohibited by
applicable law, the aforesaid right of set-off may be exercised by
such Bank against the Company or against any trustee in bankruptcy,
custodian, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor
of the Company, or against anyone else claiming through or against
the Company or such trustee in bankruptcy, custodian, debtor in
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<PAGE>
possession, assignee for the benefit of creditors, receivers, or
execution, judgment or attachment creditor, notwithstanding the
fact that such right of set-off shall not have been exercised by
such Bank prior to the making, filing or issuance, or service upon
such Bank of, or of notice of, any such petition, assignment for
the benefit of creditors, appointment or application for the ap-
pointment of a receiver, or issuance of execution, subpoena, order
or warrant. Each Bank agrees promptly to notify the Company and
the Administrative Agent after any such set-off and application
made by such Bank, provided that the failure to give such notice
shall not affect the validity of such set-off and application.
10. Indemnity.
---------
The Company agrees to indemnify and hold harmless the
Agents and each Bank and their respective affiliates, directors,
officers, employees, attorneys and agents (each an "Indemnified
-----------
Person") from and against any loss, cost, liability, damage or
------
expense (including the reasonable fees and out-of-pocket expenses
of counsel of such Indemnified Person, including all local counsel
hired by any such counsel) incurred by such Indemnified Person in
investigating, preparing for, defending against, or providing evi-
dence, producing documents or taking any other action in respect
of, any commenced or threatened litigation, administrative pro-
ceeding or investigation under any federal securities law or any
other statute of any jurisdiction, or any regulation, or at common
law or otherwise, which is alleged to arise out of or is based upon
(i) any untrue statement or alleged untrue statement of any
material fact by the Company in any document or schedule executed
or filed with the SEC or any other Governmental Authority by or on
behalf of the Company; (ii) any omission or alleged omission to
state any material fact required to be stated in such document or
schedule, or necessary to make the statements made therein, in
light of the circumstances under which made, not misleading; (iii)
any acts, practices or omissions or alleged acts, practices or
omissions of the Company or its agents relating to the use of the
proceeds of any or all borrowings made by the Company which are al-
leged to be in violation of paragraph 2.18, or in violation of any
federal securities law or of any other statute, regulation or other
law of any jurisdiction applicable thereto; (iv) all actions taken
to obtain security interests in Collateral and (v) after the oc-
currence and during the continuance of an Event of Default, all
actions taken to realize on the Collateral. The indemnity set
forth herein shall be in addition to any other obligations or li-
abilities of the Company to each Indemnified Person hereunder or at
common law or otherwise, and shall survive any termination of this
Agreement, the expiration of the Aggregate Revolving Credit Commit-
ments and the payment of all indebtedness of the Company under the
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<PAGE>
Loan Documents, provided that the Company shall have no obligation
under this paragraph to an Indemnified Person with respect to any
of the foregoing to the extent found in a final judgment of a court
to have resulted from the gross negligence or wilful misconduct of
such Indemnified Person or arising solely from claims between one
such Indemnified Person and another such Indemnified Person.
11. Governing Law.
-------------
Except as otherwise expressly provided to the contrary in
any provision thereof, the Loan Documents and the rights and
obligations of the parties thereunder shall be governed by, and
construed and interpreted in accordance with, the internal laws of
the State of New York, without regard to principles of conflict of
laws (other than Section 5-1401 of the New York General Obligations
Law).
12. Headings, Plurals.
-----------------
Paragraph headings have been inserted in the Loan Docu-
ments for convenience only and shall not be construed to be a part
hereof or thereof. Unless the context otherwise requires, words in
the singular number include the plural, and words in the plural
include the singular.
13. Severability.
------------
Every provision of the Loan Documents is intended to be
severable, and if any term or provision hereof or thereof shall be
invalid, illegal or unenforceable for any reason, the validity,
legality and enforceability of the remaining provisions hereof or
thereof shall not be affected or impaired thereby, and any in-
validity, illegality or unenforceability in any jurisdiction shall
not affect the validity, legality or enforceability of any such
term or provision in any other jurisdiction.
14. Integration.
-----------
All exhibits to the Loan Documents shall be deemed to be
a part thereof. The Loan Documents and the Fee Letter embody the
entire agreement and understanding among the Company, the Agents
and the Banks with respect to the subject matter thereof and su-
persede all prior agreements and understandings among the Company,
the Agents and the Banks with respect to the subject matter hereof
and thereof.
- 102 -
<PAGE>
15. Consent to Jurisdiction.
-----------------------
The Company and the Banks hereby irrevocably submits to
the jurisdiction of any New York State or Federal Court sitting in
the City and County of New York (Borough of Manhattan) over any
suit, action or proceeding arising out of or relating to the Loan
Documents. The Company hereby irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereaf-
ter have to the laying of the venue of any such suit, action or
proceeding brought in such a court and any claim that any such
suit, action or proceeding brought in such a court has been brought
in an inconvenient forum. The Company hereby agrees that a final
judgment in any such suit, action or proceeding brought in such a
court, after all appropriate appeals, shall be conclusive and
binding upon it.
16. Service of Process.
------------------
Process may be served in any suit, action, counterclaim
or proceeding of the nature referred to in paragraph 11.16 by
mailing copies thereof by registered or certified mail, postage
prepaid, return receipt requested, to the address of the Company
set forth in paragraph 11.2 or to any other address of which the
Company shall have given written notice to the Agents. The Company
hereby agrees that such service (i) shall be deemed in every
respect effective service of process upon it in any such suit,
action, counterclaim or proceeding, and (ii) shall to the fullest
extent enforceable by law, be taken and held to be valid personal
service upon and personal delivery to it.
17. No Limitation on Service or Suit.
--------------------------------
Nothing in the Loan Documents or any modification,
waiver, or amendment thereto shall affect the right of the Agents
or any Bank to serve process in any manner permitted by law or
limit the right of the Agents or any Bank to bring proceedings
against the Company in the courts of any jurisdiction or jurisdic-
tions.
18. WAIVER OF TRIAL BY JURY.
-----------------------
THE AGENTS, THE BANKS, AND THE COMPANY EACH HEREBY KNOW-
INGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF,
UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREIN. FURTHER, THE COMPANY HEREBY CERTIFIES THAT
NO REPRESENTATIVE OR AGENT OF THE AGENTS OR THE BANKS, OR COUNSEL
TO THE AGENTS, OR THE BANKS, HAS REPRESENTED, EXPRESSLY OR OTHER-
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<PAGE>
WISE, THAT THE AGENTS, OR THE BANKS WOULD NOT, IN THE EVENT OF SUCH
LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION. THE COMPANY ACKNOWLEDGES THAT THE AGENTS, AND THE BANKS
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, INTER ALIA, THE
PROVISIONS OF THIS PARAGRAPH.
19. Status as Senior Indebtedness.
-----------------------------
The Indebtedness of the Company hereunder and under the
Loan Documents constitutes (i) "Senior Indebtedness of the Guaran-
tor" as defined in the Enterprises Subordinated Indenture, (ii)
Senior Indebtedness as defined in the 14 1/4% Indenture for such pe-
riod of time as any Restaurants Notes are outstanding or the 14 1/4%
Indenture is in effect and has not been discharged and (iii) "Se-
nior Debt" as defined in the Debenture Purchase Agreement.
20. Return of Notes.
----------------
Each Bank agrees that upon receipt of its new Revolving
Credit Note referred to in paragraph 2.2, it will return to the
Company for cancellation its Term Note and its superceded Revolving
Credit Note.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above writ-
ten.
TPI RESTAURANTS, INC.
By: /s/Frederick W. Burford
--------------------------------
Name: Frederick W. Burford,
Title: Vice President, Chief
Financial Officer and
Treasurer
THE BANK OF NEW YORK,
Individually and as
Administrative Agent
By: /s/ Frank P. Turner
-------------------------------
Name: Frank P. Turner
Title: Assistant Vice President
NATIONSBANK OF NORTH CAROLINA,
N.A., Individually and as
Collateral Agent
By: /s/ John E. Ball
----------------------------
Name: John E. Ball
Title: Senior Vice President
- 105 -
<PAGE>
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION
By: /s/ William J. Harter
------------------------------
Name: William J. Harter
Title: Vice President
FIRST AMERICAN NATIONAL BANK
By: /s/ David C. May
------------------------------
Name: David C. May
Title: Vice President
The undersigned hereby consents to the foregoing First Amended
and Restated Credit Agreement.
TPI ENTERPRISES, INC.
By: /s/ Frederick W. Burford
Name: Frederick W. Burford,
Title: Executive Vice President
and Chief Financial
Officer
- 106 -
<PAGE>
AMENDMENT NO. 1 TO, AND WAIVER NO. 3 UNDER
THE CREDIT AGREEMENT AND THE ENTERPRISES GUARANTY
-------------------------------------------------
AMENDMENT NO. 1 AND WAIVER NO. 3 (this "Amendment and
--------------
Waiver"), dated as of February 18, 1994, to and under (i) the FIRST
------
AMENDED AND RESTATED CREDIT AGREEMENT (the "Credit Agreement"),
-----------------
dated as of June 3, 1993, by and among TPI RESTAURANTS, INC., a
Tennessee corporation (the "Company"), the banks party thereto
-------
(each a "Bank" and, collectively, the "Banks"), THE BANK OF NEW
---- -----
YORK, as administrative agent for the Banks (in such capacity, the
"Administrative Agent") and NATIONSBANK OF NORTH CAROLINA, N.A., as
--------------------
Collateral Agent for the Banks (in such capacity, the "Collateral
----------
Agent"), and (ii) the AMENDED AND RESTATED GUARANTY, SECURITY AND
-----
SUBORDINATION AGREEMENT (the "Enterprises Guaranty"), dated as of
--------------------
June 3, 1993, made by TPI ENTERPRISES, INC., A New Jersey
corporation ("Enterprises") and the Company to the Collateral
-----------
Agent.
RECITALS
--------
A. Capitalized terms used herein which are not defined
herein and which are defined in the Credit Agreement shall have the
same meanings as therein defined.
B. The Company has requested a Waiver of certain provisions
of the Credit Agreement and the Enterprises Guaranty in connection
with the incorporation and capitalization of (i) TPI Commissary,
Inc., a wholly-owned Subsidiary of the Company and (ii) TPI
Insurance, Inc., a wholly-owned Subsidiary of Enterprises.
C. The Company has requested that the Credit Agreement be
amended (i) in respect of a one-time restructuring charge taken for
the fourth quarter of the 1993 fiscal year of the Company and (ii)
to permit TPI Insurance, Inc. to be a joint applicant in respect of
a Letter of Credit, all as set forth below.
D. The Agents and the Required Banks are willing to grant
such waiver and amend the Credit Agreement to the extent set forth
herein.
In consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
<PAGE>
1. The Agents and the Required Banks hereby waive any
violation of the Credit Agreement and the Enterprises Guaranty
which may result from (i) the incorporation of TPI Insurance, Inc.
as a wholly-owned Subsidiary of Enterprises, (ii) its
capitalization through a distribution from the Company to
Enterprises of approximately $2,100,000 and a capital contribution
of such amount by Enterprises to TPI Insurance, Inc., (iii) the
making of loans by TPI Insurance, Inc. to Enterprises and the
Company (and the resulting Indebtedness of Enterprises and the
Company in respect thereof) and (iv) the subsequent repayment of
such loans as may be demanded, from time to time, by TPI Insurance,
Inc.
2. The Agents and the Required Banks hereby waive any
violation of the Credit Agreement and the Enterprises Guaranty
which may result from (i) the incorporation of TPI Commissary, Inc.
as a wholly-owned Subsidiary of the Company, (ii) and its
capitalization in an amount not to exceed $2,500,000 in cash and
(iii) the transfer by the Company to TPI Commissary, Inc. of the
assets set forth on the attached schedule.
3. Paragraph 1.1 of the Credit Agreement is amended by
adding the following definitions in their appropriate alphabetical
order:
"TPI Commissary": TPI Commissary, Inc., a
--------------
Tennessee corporation and a wholly-owned
Subsidiary of the Company.
"TPI Insurance": TPI Insurance, Inc., a
-------------
Hawaii corporation and a wholly-owned
Subsidiary of Enterprises.
"TPI Transportation": TPI Transportation,
------------------
Inc., a Tennessee corporation and a wholly-
owned Subsidiary of the Company.
"Hartford Letter of Credit": Letter of
---------------------------
Credit No. 38711, dated July 22, 1992, as
amended on August 27, 1992 and August 17, 1993,
issued by the issuing Bank for the benefit of
Hartford Fire Insurance Company in the face
amount of $10,000,000, initially for the
account of the Company.
<PAGE>
"Subsidiary Guarantors": collectively,
----------------------
TPI Commissary and TPI Transportation.
"Subsidiary Guaranty": the Guaranty and
-------------------
Subordination Agreement, made by the Subsidiary
Guarantors and the Company to the
Administrative Agent in accordance with the
provisions of Amendment No. 1 to this
Agreement, as the same may be amended,
supplemented or otherwise modified from time to
time.
4. The definitions of the following terms contained in
paragraph 1.1 of the Credit Agreement are amended in their entirety
to read as follows:
"Loan Documents": collectively, this
----------------
Agreement, the Revolving Credit Notes, the Fee
letter, the Collateral Documents and, after the
earlier of the execution and delivery of the
Subsidiary Guaranty and March 18, 1994, the
Subsidiary Guaranty.
"Material Subsidiary": collectively, TPI
-------------------
Commissary, TPI Transportation and each other
Subsidiary of the Company or any Material
Subsidiary, in each case, once and for so long
as it has total assets exceeding $5,000,000.
5 The definition of "Consolidated Tangible Net Worth"
contained in paragraph 1.1 of the Credit Agreement is amended by
adding the following sentence to the end thereof:
The calculation of consolidated Tangible
Net Worth for the fourth fiscal quarter of the
1993 fiscal year and each fiscal quarter there
after shall be made without regard to the one
time restructuring charge taken for such fiscal
year in an amount not in excess of $40,704,000.
6. The definition of "Interest Coverage Ratio" contained in
paragraph 1.1 of the Credit Agreement is amended by adding the
following sentence to the end thereof:
<PAGE>
For purposes of calculating the Interest
Coverage Ratio, EBIT for the fourth fiscal
quarter of the 1993 fiscal year shall be
calculated without regard to the one-time
restructuring charge taken for such quarter in
an amount not in excess of $40,704,000.
7. The definition of "Leverage Ratio" contained in paragraph
1.1 of the Credit Agreement is amended by adding the following
sentence to the end thereof:
For purposes of calculating the Leverage
Ratio, Consolidated Net Worth for the fourth
fiscal quarter of the 1993 fiscal year and each
fiscal quarter thereafter shall be made without
regard to the one time restructuring charge
taken for such fourth fiscal quarter of the
1993 fiscal year in an amount not in excess of
$40,704,000.
8. Paragraph 2.8(a) of the Credit Agreement is amended by
adding a "," after the word "Company" at the end of the first
sentence thereof and by adding the following before the ".":
or, for the joint account of the Company and
TPI Insurance solely in respect of the Hartford
Letter of Credit.
9. Paragraph 7 of the Credit Agreement is amended by adding
a new paragraph 7.18 to the end thereof to read as follows:
7.18 Subsidiary Guaranty.
-------------------
No later than March 18, 1994, the
Company shall cause each of the Subsidiary
Guarantors to deliver to the Administrative
Agent the Subsidiary Guaranty in form and
substance satisfactory to the Agents and
containing terms similar to those contained in
the Enterprises Guaranty, provided that the
Subsidiary Guaranty shall be unsecured.
10. Paragraph 9.1(k) of the Credit Agreement is amended in
its entirety to read as follows:
<PAGE>
(k) The occurrence and continuance of an
Event of Default under and as defined in (i)
any Collateral Document or Enterprises shall
disavow its obligations under the Enterprises
Guaranty or (ii) the Subsidiary Guaranty or
either Subsidiary Guarantor shall disavow its
obligations thereunder; or
11. This Amendment and Waiver shall not be deemed effective
until such time as all of the following conditions precedent shall
have been satisfied:
(a) The Agents shall have received a copy of this
Amendment and Waiver duly executed by the Company, Enterprises and
Required Banks.
(b) The Administrative Agent shall have received n
Amendment Fee, for the pro rata account of the Banks, in the sum of
$75,000.
12. The last sentence of Section 4.17 of the Credit Agreement
is amended in its entirety to read as follows:
Since December 27, 1992 and except for the
issuance of the Restaurants Guaranty in respect
of the Senior Subordinated Debentures, the
Company and each Subsidiary has conducted its
business only in the ordinary course and,
except for the one-time restructuring charge
taken by the Company for the fourth fiscal
quarter of its 1993 fiscal year (which
restructuring charge does not, in the opinion
of the Company, in and of themselves constitute
a Material Adverse Change), there has been no
Material Adverse Change:
13. The last sentence of Section 6(m) of the enterprises
Guaranty is amended in its entirety to read as follows:
Since December 31, 1992 and except for (i) the
issuance of the Senior Subordinated Debentures
and the Common Stock and warrant issued in
connection therewith and (ii) the sale by
Enterprises of its interest in Exhibition
Enterprises Partnership and the forthcoming
<PAGE>
dissolution of Entertainment, each Subsidiary
has conducted its business only in the ordinary
course and, except for the one-time
restructuring charges taken by the Company and
Enterprises for the fourth fiscal quarter of
its respective 1993 fiscal years (which
restructuring charges do not, in the opinion of
the Enterprises, in and of themselves
constitute a Material Adverse Change), there
has been no Material Adverse Change.
14. Schedule 4.1 to the Credit Agreement is amended by adding
TPI Commissary and TPI Transportation as additional Subsidiaries of
the Company thereto and by designating them as Material
Subsidiaries.
15. Schedule 6(a) to the Enterprises Guaranty is amended by
adding TPI Commissary and TPI Transportation as additional
Subsidiaries of the Company and TPI Insurance as an additional
Subsidiary of Enterprises thereto.
16. Each of the Company and Enterprises hereby (a) reaffirms
and admits the validity and enforceability of the Loan Documents
and all of its obligations thereunder, (b) agrees and admits that
it has no defenses to or offsets against any of its obligations to
either Agent or any Bank thereunder, (c) represents and warrants
that there exists no Default or Event of Default, and (d)
represents and warrants that the representations and warranties
made by it in the Credit Agreement and the Enterprises Guaranty,
respectively, are true and correct in all material respects on and
as of the date hereof.
17. This Amendment and Waiver may be executed in any number
of counterparts, each of which shall be an original and all of
which shall constitute one amendment. It shall not be necessary in
making proof of this Amendment and Waiver to produce or account for
more than one counterpart signed by the party to be charged.
18. This Amendment and Waiver is being delivered in and is
intended to be performed in the State of New York and shall be
governed by, and construed and interpreted in accordance with, the
internal laws of the State of New York, without regard to
principles of conflict of laws (other than Section 5-1401 of the
new York General Obligations Law).
<PAGE>
19. Except as amended hereby, the Credit Agreement and the
Enterprises Guaranty shall in all other respects remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment and Waiver to be duly executed as of the date first above
written.
TPI RESTAURANTS, INC.
By: /s/ Fred W. Burford
------------------------------
Name: Fred W. Burford
------------------------------
Title: Vice President and Chief
Financial Officer
------------------------------
TPI ENTERPRISES, INC.
By: /s/ Fred W. Burford
------------------------------
Name: Fred W. Burford
------------------------------
Title: Executive Vice President
and Chief Financial Officer
------------------------------
THE BANK OF NEW YORK,
Individually and as
Administrative Agent
By: /s/ Ian K. Stewart
------------------------------
Name: Ian K. Stewart
------------------------------
Title: Vice President
------------------------------
<PAGE>
NATIONSBANK OF NORTH CAROLINA,
N.A., Individually and as
Collateral Agent
By: /s/ Steve L. Dalton
-------------------------------
Name: Steve L. Dalton
------------------------------
Title: Vice President
------------------------------
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
FIRST AMERICAN NATIONAL BANK
By: /s/ David C. May
------------------------------
Name: David C. May
------------------------------
Title: Senior Vice President
------------------------------
Exhibit 10.26
AMENDED AND RESTATED ENTERPRISES GUARANTY
-----------------------------------------
Amended and Restated Guaranty, Security and Subordination Agreement,
dated as of June 3, 1993, made by TPI ENTERPRISES, INC., a New Jersey
corporation ("Enterprises") and TPI RESTAURANTS, INC., a Tennessee
-----------
corporation (the "Company"), to NATIONSBANK OF NORTH CAROLINA, N.A., as
-------
Collateral Agent (in such capacity, the "Collateral Agent") under the First
----------------
Amended and Restated Credit Agreement, dated as of June 3, 1993, among the
Company, the signatory Banks thereto, The Bank of New York, as Administra-
tive Agent (in such capacity, the "Administrative Agent"), and the
--------------------
Collateral Agent (as the same may be amended, extended, increased,
modified, refunded or refinanced from time to time, the "Credit
------
Agreement").
- ---------
A. Enterprises has previously made, and the Collateral Agent has
previously accepted, the Enterprises Guaranty, dated as of July 29, 1992,
as amended on March 19, 1993, made by Enterprises to the Collateral Agent
(the "Existing Agreement").
------------------
B. Simultaneously with the execution and delivery hereof, the
Company, the Banks party thereto and the Agents are, with Enterprises'
consent, entering into the Credit Agreement (as so amended and restated and
as hereafter amended, supplemented or otherwise modified from time to time,
the "Credit Agreement"), amending and restating the Credit Agreement, dated
----------------
as of July 29, 1992, as amended by Amendment No. 1, dated as of December
10, 1992 and Amendment No. 2, dated as of March 19, 1993.
C. A condition precedent to the effectiveness of the Credit
Agreement is the execution and delivery by Enterprises of this Amended and
Restated Guaranty, Security and Subordination Agreement (the "Agreement").
---------
D. For convenience, this Agreement is dated as of June 3, 1993, and
references to certain matters related to the period prior hereto have been
deleted.
In consideration of the premises and agreements herein contained and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and in order to induce the Agents and the Banks to
enter into the Credit Agreement and to make the Revolving Credit Loans, the
Issuing Bank to issue the Letters of Credit and each of the Banks to
participate therein, the Company and Enterprises covenant and hereby agree
as follows:
- 1 -
<PAGE>
E. Definitions.
-----------
Except as otherwise provided herein, capitalized terms that are
defined in the Credit Agreement and are not defined herein shall have the
meanings assigned to such terms therein. For purposes hereof, the follow-
ing terms shall have the following meanings:
"Accountants": Deloitte & Touche (or any successor thereto), any other
-----------
"Big Six" firm of certified public accountants or such other firm of
certified public accountants of recognized national standing selected by
Enterprises and satisfactory to the Required Banks.
"Consolidated": Enterprises and its Subsidiaries taken together.
------------
"Consolidated Net Worth": at any date of determination, the sum of all
----------------------
amounts which would be included under shareholders' equity on a
Consolidated balance sheet of Enterprises and its Subsidiaries determined
in accordance with GAAP as at such date.
"Consolidating": Enterprises and its Subsidiaries taken separately.
-------------
"Cellular Business": as defined in paragraph 6(r).
-----------------
"Collateral" as defined in paragraph 5.
----------
"Enterprises Financial Statements": as defined in paragraph 6(n).
--------------------------------
"Entertainment: TPI Entertainment, Inc., a Delaware corporation and a
-------------
wholly-owned Subsidiary of Enterprises.
"Maxcell": Maxcell Telecom Plus, Inc., a Delaware corporation and a
-------
wholly-owned Subsidiary of Enterprises.
"1988 Agreement": the Agreement, dated as of August 2, 1988, between
--------------
the Company and the Franchisor, as in effect on the date hereof.
"Obligations" as defined in paragraph 2.
-----------
"Permitted Liens": the Liens permitted under paragraph 8(b).
---------------
"Pledged Debt" as defined in paragraph 5.
------------
"Pledged Shares" as defined in paragraph 5.
--------------
"Proceeds" as defined in paragraph 5.
--------
"Restaurant Business": any business or activity engaged in by the
-------------------
Company or any of its Subsidiaries on the date hereof and any business or
activity which is related to acquiring, financing, owning, managing,
operating, servicing or providing supplies or services to restaurants or
food service operations. If a Person is not engaged in the Restaurant
Business, but Enterprises or a Subsidiary acquires such Person (to the
extent permitted by the Loan Documents) for the purpose of using the assets
- 2 -
<PAGE>
of such Person in the Restaurant Business or to manufacture, assemble or
prepare products for use or sale in the Restaurant Business, such Person
shall be deemed to be in the Restaurant Business. If a Person derived at
least 80% of its revenues in its most recently completed fiscal year from
the Restaurant Business, it shall be deemed to be in the Restaurant
Business. In addition, if a Person derived more than 50% but less than 80%
of its revenues in its most recently completed fiscal year from the
Restaurant Business, it shall be deemed to be in the Restaurant Business
if, at the time of acquisition of such Person by Enterprises or any
Subsidiary (to the extent permitted by the Loan Documents), Enterprises or
such Subsidiary publicly announces its intention to cause the disposition
or discontinuance of substantially all of the businesses owned by such
Person which are not related to the Restaurant Business as soon as reason-
ably practicable.
"Restricted Payment": (i) the payment or declaration by the Company of
------------------
any dividend on any class of capital Stock or other equity interest (other
than dividends payable solely in capital Stock of the Company, or warrants,
rights or options to acquire capital Stock of the Company) or the making of
any other distribution on account of any class of its capital Stock or
other equity interest or (ii) the retirement, redemption, purchase or
acquisition, direct or indirect, of any shares of the capital Stock or
other equity interest of the Company, or any warrants, rights or options to
acquire any such shares, or the making of or provision for any mandatory
sinking fund payments required in connection with any series or class of
such capital Stock or other equity interest of the Company.
"Restricted Subsidiary: any Subsidiary other than (i) Entertainment
---------------------
(until its dissolution), Maxcell and their respective directly and indi-
rectly owned Subsidiaries and (ii) any Subsidiary of the Company (as
defined in the Credit Agreement) that is not a Material Subsidiary.
"Senior Obligations": all Indebtedness, contingent or otherwise,
------------------
whether outstanding on the date of execution of this Agreement or hereafter
arising or created, for principal, interest (whether accruing before or
after the occurrence of any bankruptcy, insolvency, reorganization, ar-
rangement, receivership or similar proceedings, including, without limita-
tion, all post-petition interest, at the applicable after-maturity rate or
rates, whether or not allowed as a claim), fees, expenses and any other
obligations of the Company under the Loan Documents and all other documents
executed and delivered by the Company in connection therewith, and all
renewals, extensions, modifications, increases and refinancings of any of
the foregoing.
"Subordinated Debt": all indebtedness for borrowed money and any other
-----------------
obligations, contingent or otherwise, of the Company to Enterprises,
including, without limitation, all amounts, fees and expenses payable by
the Company to Enterprises in respect thereof, in each case whether
outstanding on the date of execution of this Agreement or hereafter arising
or created, provided that Subordinated Debt shall not include payments
under the Tax Sharing Agreement permitted under paragraph 8.18(ii) of the
Credit Agreement.
- 3 -
<PAGE>
"Subsidiary": any corporation, association, partnership, joint venture
----------
or other business entity of which Enterprises and/or any Subsidiary of
Enterprises, directly or indirectly, either (i) in respect of a cor-
poration, owns or controls more than 50% of the outstanding Stock having
ordinary voting power to elect a majority of the board of directors or
similar managing body, irrespective of whether a class or classes shall or
might have voting power by reason of the happening of any contingency, or
(ii) in respect of an association, partnership, joint venture or other
business entity, is entitled to share in more than 50% of the profits and
losses, however determined.
"UCC": as defined in paragraph 5.
---
F. Guaranty.
--------
Enterprises hereby absolutely, irrevocably and unconditionally
guarantees the full and prompt payment when due (including any grace
periods), whether at stated maturity, by acceleration, by mandatory
prepayment, by notice of intention to prepay or otherwise, of all obliga-
tions, now existing and hereafter arising, of the Company under the Loan
Documents, whether direct, indirect or contingent, incurred as primary
obligor or otherwise, secured or unsecured and whether or not on open ac-
count, including all principal and interest thereon (whether arising or
accruing before or after the occurrence of any Event of Default set forth
in paragraph 9.1(h) or (i) of the Credit Agreement), and all reasonable
costs and expenses of the Agents and the Banks in enforcing, preserving and
protecting any thereof, whether or not suit is instituted (as the same may
be amended, increased, modified, renewed, refinanced, refunded or extended
from time to time, collectively, the "Obligations"). If the Agents or the
-----------
Banks are prevented by law from collecting or are otherwise hindered from
collecting or otherwise enforcing any of the Obligations in accordance with
their terms, the Agents and the Banks shall be entitled to receive
hereunder from Enterprises after demand therefor, the sums which would have
been otherwise due had such collection or enforcement not been prevented or
hindered.
G. Absolute Obligation.
-------------------
The obligations of Enterprises hereunder shall be absolute, ir-
revocable, unconditional and continuing until all of the Obligations are
indefeasibly paid in full in cash. Enterprises acknowledges and agrees
that the Agents and the Banks have no responsibility or liability, and
shall not be deemed to have made any representation or warranty, with re-
spect to the validity or enforceability of any Loan Document, or the
collectability of any of the foregoing, or any preference or priority
ranking with respect to the payment of the Loans or the validity or
perfection of any security interest under any such document. The Agents
shall not have any obligation to enforce the Loan Documents or any col-
lateral security thereunder by any action, including, without limitation,
making or perfecting any claim against the Company prior to being entitled
to the benefits of this Agreement. Nothing except the indefeasible cash
payment in full of the Obligations shall release Enterprises from liability
under this Agreement.
- 4 -
<PAGE>
H. Guaranty of Payment.
-------------------
The obligations of Enterprises hereunder constitute a guaranty of
payment. The liability and obligations of Enterprises hereunder shall be
primary, direct, absolute and continuing. Enterprises hereby waives any
right to require that resort be had against the Company, or any other
Person, including, without limitation, any other guarantor or surety, or to
require that resort be had to any direct or indirect collateral security.
The liability of Enterprises hereunder shall in no way be affected or
impaired by the existence, enforceability or validity of any collateral
security or other guaranty, or the lack of any thereof, or by any accep-
tance of any direct indebtedness, liability or obligation of the Company to
the Agents, or by any failure, delay, neglect or omission to obtain, real-
ize upon or perfect any such security, indebtedness, liability or obliga-
tion, or by any direct or indirect collateral security therefor, or by the
bankruptcy, reorganization or insolvency of, or by any other proceeding for
the relief of debtors commenced by or against Enterprises, the Company or
any other Person, or by the liability of any other Person in respect of the
Obligations, or by the invalidity or lack of enforceability of any Loan
Document, or by any merger to which the Company is a party, or by any other
reason whatsoever, whether similar or dissimilar to the foregoing.
I. Grant of Security Interest.
--------------------------
To secure the payment and performance of Enterprises' guaranty of
all Obligations, Enterprises hereby grants to the Collateral Agent for its
benefit and for the ratable benefit of the Banks, a continuing first
priority security interest in and to all of Enterprises' right, title and
interest in and to the following, whether now owned or existing or
hereafter arising or acquired and wheresoever located (collectively, the
"Collateral"):
----------
PLEDGED SHARES: All shares of Stock now owned or hereafter acquired in
the Company and in each other Restricted Subsidiary together with all addi-
tions thereto, and all substitutions, exchanges and replacements therefor,
and all Proceeds thereof (collectively, the "Pledged Shares"); and
--------------
PLEDGED DEBT: All notes and other instruments evidencing Indebtedness
of the Company to Enterprises, whether now existing or hereafter created or
acquired, and all payments thereunder and instruments and other Property
from time to time delivered in respect thereof or in exchange therefor, and
all additions and accessions thereto, substitutions and replacements
therefor, and the products and Proceeds thereof (collectively, the "Pledged
-------
Debt").
- ----
As used herein, the term "Proceeds" shall have the meaning assigned to
--------
it under Article 9 of the Uniform Commercial Code, as the same may from
time to time be in effect in the State of New York (the "UCC") and, to the
---
extent not otherwise included, shall include, but not be limited to, (i)
any and all causes and rights of action or settlements thereof, escrowed
amounts or Property, judicial and arbitration judgments and awards, payable
to Enterprises from time to time with respect to the Collateral, (ii) all
claims of Enterprises for losses or damages arising out of or relating to
- 5 -
<PAGE>
or for any breach of any agreements, covenants, representations or war-
ranties or any default with respect to or under any of the Collateral
(without limiting any direct or independent rights of the Collateral Agent
with respect to the Collateral); and (iii) any and all other amounts from
time to time paid or payable under or in connection with the Collateral,
including, without limitation, any dividends, interest or other distribu-
tions thereon.
J. Representations.
---------------
Enterprises hereby makes the following representations to the
Collateral Agent:
a. Subsidiaries. Enterprises has only the active and
------------
inactive Subsidiaries set forth on Schedule 6(a) (as such Schedule shall be
supplemented from time to time by Enterprises). The shares of each such
active corporate Subsidiary are duly authorized, validly issued, fully paid
and nonassessable and are owned free and clear of any Liens, except
Permitted Liens.
b. Corporate Existence and Power. Enterprises is duly
-----------------------------
incorporated, validly existing and in good standing under the laws of the
State of New Jersey, has all requisite corporate power and authority to own
its Property and to carry on its business as now conducted, and is in good
standing and authorized to do business in each jurisdiction in which the
failure to be so authorized could reasonably be expected to have a Material
Adverse Effect on Enterprises.
c. Corporate Authority. Enterprises has full corporate
-------------------
power and authority to enter into, execute, deliver and carry out the terms
of this Agreement and to incur the obligations provided for herein, all of
which have been duly authorized by all proper and necessary corporate
action and do not conflict with its certificate of incorporation or
by-laws.
d. Governmental Authority Approvals. No consent,
--------------------------------
authorization or approval of, filing with, notice to, or exemption by, the
stockholders of Enterprises, any Governmental Authority or any other Person
(except for those which have been obtained, made or given on or before the
Restatement Effective Date and those Securities Act and Blue Sky filings
relating to post-effective amendments made necessary to the Registration
Statement by changes in circumstances occurring after the Restatement Ef-
fective Date) is required to authorize, or is required in connection with
the execution, delivery and performance of this Agreement, is required as a
condition to the validity or enforceability of this Agreement. No provi-
sion of any applicable statute, law (including, without limitation, any ap-
plicable usury or similar law), rule or regulation of any Governmental
Authority prevents the execution, delivery or performance of, or adversely
affects the validity of, this Agreement.
e. Binding Agreement. This Agreement constitutes the valid
-----------------
and legally binding obligation of Enterprises, enforceable against
Enterprises in accordance with its terms, except as such enforceability may
- 6 -
<PAGE>
be limited by applicable bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally.
f. Litigation. Except as set forth in the Form 10-K filed
----------
by the Company with the SEC with respect to its fiscal year ending December
27, 1992 and the Form 10-K filed by Enterprises with the SEC with respect
to its fiscal year ended December 31, 1992, there are no actions, suits,
arbitration proceedings or claims (whether or not purportedly on behalf of
the Company, any Material Subsidiary of the Company or Enterprises) pending
or, to the knowledge of Enterprises, threatened against the Company, any
Material Subsidiary of the Company or Enterprises, or maintained by the
Company, any Material Subsidiary of the Company or Enterprises, at law or
in equity, before any Governmental Authority which could reasonably be
expected to have a Material Adverse Effect on Enterprises. Except as set
forth in the Forms 10-K referred to above, there are no proceedings pending
or, to the knowledge of Enterprises, threatened against the Company, any
Material Subsidiary of the Company or Enterprises, which (i) call into
question the validity or enforceability of any of the Loan Documents, (ii)
have been brought or are threatened to be brought by the Franchisor and
which seek (or are expected to seek) to rescind, terminate, revoke, cancel,
withdraw, suspend or modify or withhold any Franchise Agreement between the
Company or a Material Subsidiary and the Franchisor, or any right of the
Company or any Material Subsidiary thereunder or (iii) have been brought or
are threatened to be brought by any Person (other than the Franchisor) with
respect to any Franchise Agreement between the Company or a Material
Subsidiary and the Franchisor or any right of the Company or any Material
Subsidiary thereunder which could reasonably be expected to have a Material
Adverse Effect on Enterprises.
g. No Conflicting Agreements. Enterprises is not in
-------------------------
default under any mortgage, indenture, contract, agreement, judgment,
decree or order to which it is a party or by which it or any of its
Property is bound, which defaults, taken as a whole, could reasonably be
expected to have a Material Adverse Effect on Enterprises. The execution,
delivery or performance of the terms of this Agreement will not constitute
a default under, conflict with, require consent under, or result in the
creation and/or imposition of, or obligation to create, any Lien upon the
Property of Enterprises or any Subsidiary pursuant to the terms of any such
mortgage, indenture, contract, agreement, judgment, decree or order, which
defaults, conflicts and consents, if not obtained, taken as a whole, could
reasonably be expected to have a Material Adverse Effect on Enterprises.
h. Taxes. Enterprises and each Subsidiary has filed or
-----
caused to be filed all tax returns required to be filed by it and has paid,
or has made adequate provision for the payment of, all taxes shown to be
due and payable on said returns or in any assessments made against it
(other than those being contested in good faith pursuant to paragraph 7(d))
which would be material to Enterprises and its Subsidiaries taken as a
whole and no tax Liens (other than Permitted Liens) have been filed. The
charges, accruals and reserves on the books of Enterprises and each
Subsidiary with respect to all federal, state, local and other taxes are,
to the best knowledge of Enterprises, adequate for the payment of all such
taxes, and Enterprises knows of no unpaid assessment which is due and pay-
- 7 -
<PAGE>
able against it or any Subsidiary or any claims being asserted which could
reasonably be expected to have a Material Adverse Effect on Enterprises,
except such thereof as are being contested in good faith and by appropriate
proceedings diligently conducted, and for which adequate reserves have been
set aside in accordance with GAAP.
i. Compliance with Applicable Laws. Enterprises is not in
-------------------------------
default with respect to any judgment, order, writ, injunction, decree or
decision of any Governmental Authority which default could reasonably be
expected to have a Material Adverse Effect on Enterprises. Enterprises and
each Subsidiary is in compliance in all material respects with all statutes
and regulations of all Governmental Authorities applicable to Enterprises,
including ERISA, the violation of which could reasonably be expected to
have a Material Adverse Effect on Enterprises.
j. Property. Enterprises has good and marketable title to,
--------
or a valid license or leasehold interest in, all Property which is material
to Enterprises, subject to no Liens, except Permitted Liens, and in respect
of which leaseholds Enterprises is in quiet and undisturbed possession. To
the best of Enterprises' knowledge, no Property material to Enterprises is
being condemned, expropriated or otherwise taken by any Governmental
Authority, with or without compensation therefor, and, to the best of
Enterprises' knowledge, no such condemnation, expropriation or taking has
been proposed.
k. No Misrepresentation. No representation or warranty
--------------------
contained herein and no certificate or report furnished or to be furnished
by Enterprises in connection with the transactions contemplated hereby,
contains or will contain a misstatement of material fact, or, to the best
knowledge of Enterprises, omits or will omit to state a material fact re-
quired to be stated in order to make the statements herein or therein con-
tained not misleading in the light of the circumstances under which made.
l. Plans; Multiemployer Plans. Enterprises and each
--------------------------
Subsidiary have only the Plans listed on Schedule 4.15 to the Credit
Agreement (as such Schedule may be supplemented from time to time to
reflect the adoption of Plans permitted to be adopted pursuant to paragraph
8(j) of this Agreement). Each Single Employer Plan and, to the best
knowledge of Enterprises, each Multiemployer Plan is in compliance in all
material respects with the applicable provisions of ERISA and the Code, and
Enterprises and each Subsidiary have complied in all material respects with
ERISA and the Code with respect to each such Plan. Enterprises and each
Subsidiary have met all material requirements imposed by ERISA and the Code
with respect to the funding of all Plans, and, to the best of the knowledge
of Enterprises, Multiemployer Plans. Since the effective date of ERISA,
there have not been, nor are there now existing, any events or conditions
which would permit any Single Employer Plan or, to the best knowledge of
Enterprises, Multiemployer Plan, to be terminated under circumstances which
would cause the Lien provided under Section 4068 of ERISA to attach to the
Property of Enterprises or any Subsidiary. No Reportable Event which could
reasonably be expected to constitute grounds for the termination of any
Single Employer Plan or, to the best knowledge of Enterprises,
Multiemployer Plan under Title IV of ERISA has occurred.
- 8 -
<PAGE>
m. Financial Statements. Enterprises has heretofore
--------------------
delivered to the Banks (i) copies of Form 10-K for the fiscal year of
Enterprises ending December 31, 1992, containing the audited Consolidated
Balance Sheet of Enterprises and its Subsidiaries as of December 31, 1992,
December 31, 1991 and December 31, 1990, and the related Consolidated
Statements of Operations, Cash Flows and Shareholder's Equity for the
periods then ended and (ii) copies of its Form 10-Q for the fiscal quarter
of Enterprises ended April 18, 1993, containing the unaudited Consolidated
Balance Sheet of Enterprises and its Subsidiaries as of April 18, 1993, and
the related unaudited Consolidated Statements of Operations and Cash Flows
for the fiscal quarter then ended (collectively, with the related notes and
schedules, the "Enterprises Financial Statements"). The Enterprises
--------------------------------
Financial Statements fairly present the Consolidated financial condition
and results of the operations of Enterprises and its Subsidiaries as of the
dates and for the periods indicated therein and have been prepared in
conformity with GAAP. Except as reflected in the Financial Statements or
in the footnotes thereto and except in respect of the Debenture Purchase
Agreement, neither Enterprises nor any of its Subsidiaries has any
obligation or liability of any kind (whether fixed, accrued, contingent,
unmatured or otherwise) which, in accordance with GAAP, should have been
shown on the Financial Statements and was not. Since December 31, 1992 and
except for (i) the issuance of the Senior Subordinated Debentures and the
Common Stock and warrant issued in connection therewith and (ii) the sale
by Enterprises of its interest in Exhibition Enterprises Partnership and
the forthcoming dissolution of Entertainment, each Subsidiary has conducted
its business only in the ordinary course and there has been no Material
Adverse Change.
n. Collateral. The Pledged Debt, if any, has been duly
----------
authorized, issued and delivered, and is the legal, valid, binding and
enforceable obligation of the Company and is free and clear of all Liens
except Permitted Liens. The Pledged Shares are duly authorized, validly
issued, fully paid for and non-assessable and are free and clear of all
Liens except Permitted Liens.
o. Security Interest. This Agreement creates a valid
-----------------
security interest in the Collateral, securing the payment of the Obliga-
tions. The delivery and pledge of the Collateral pursuant to this Agree-
ment and all other filings and other actions taken by Enterprises to
perfect such security interest on or prior to the date hereof, create a
valid and perfected first priority security interest in the Collateral
securing the payment of the Obligations.
p. Capitalization; Ownership. The authorized capital Stock
-------------------------
of the Company consists of 1,000 shares of common Stock, $.01 par value,
100 shares of which are issued and outstanding and 10,000 shares of Series
A Preferred Stock, $.01 par value, all of which are issued and outstanding.
All such Stock is and will continue to be certificated, is duly authorized
and validly issued, is fully paid and non-assessable and is held of record
and beneficially owned by Enterprises. The Company has not issued nor is
it obligated to issue any securities convertible into Stock of the Company
and there are no outstanding options or warrants to purchase Stock of the
Company of any class or kind. Except for the 1988 Agreement, the Franchise
- 9 -
<PAGE>
Agreements and Section 8.5 of the Debenture Purchase Agreement, neither
Enterprises nor the Company is a party to any agreement (including, without
limitation, any Franchise Agreement), voting trust or understanding (i)
with respect to the Stock of the Company, (ii) affecting in any manner the
sale, pledge, assignment or other disposition of the Stock of the Company,
including, without limitation, any right of first refusal, option, redemp-
tion, call or other rights with respect thereto, whether similar or dis-
similar to any of the foregoing or (iii) affecting the rights of the
Company under any Franchise Agreement in the event of the sale, pledge,
assignment or other disposition of the Stock of the Company, including,
without limitation, the pledge of such Stock hereunder or the exercise by
the Agents of any rights under the Loan Documents with respect thereto,
provided, however that neither the 1988 Agreement nor any Franchise
Agreement in any way limits the rights of Enterprises to pledge or sell the
Stock of the Company or of the Collateral Agent to exercise it rights under
this Agreement.
q. Business. Enterprises engages in no business other than
--------
(i) the Restaurant Business, (ii) the holding of the Stock of the Company
and activities incidental thereto and (iii) the business of owning and
operating cellular telephone systems through Maxcell (the "Cellular
--------
Business").
- --------
r. Status as Senior Indebtedness. The Indebtedness of the
-----------------------------
Company under the Loan Documents constitutes (i) "Senior Indebtedness of
the Guarantor" as defined in the Enterprises Subordinated Indenture, (ii)
Senior Indebtedness as defined in the 14 1/4% Indenture for such period of
time as any Restaurants Notes are outstanding or the 14 1/4% Indenture is in
effect and has not been discharged and (iii) Senior Debt as defined in the
Debenture Purchase Agreement. The Indebtedness of Enterprises under the
Enterprises Guaranty constitutes (i) "Senior Indebtedness of the Company"
as defined in the Enterprises Subordinated Indenture and (ii) "Senior Debt"
as defined in the Debenture Purchase Agreement.
K. Affirmative Covenants and Agreements.
------------------------------------
Enterprises hereby agrees that, so long as the Credit Agreement
is in effect, any Loan or reimbursement obligation (contingent or
otherwise) in respect of any Letter of Credit remains outstanding and
unpaid, or any other amount is owing under any Loan Document, Enterprises
shall:
a. Financial Statements. Maintain, and cause each
--------------------
Restricted Subsidiary to maintain, a standard system of accounting in ac-
cordance with GAAP, and furnish or cause to be furnished to the Agents and
each Bank:
(i) As soon as available, but in any event within 90
days after the end of each fiscal year of Enterprises, a copy of (i) the
Consolidated Balance Sheet of Enterprises and its Subsidiaries as at the
end of such fiscal year, (ii) the Consolidated Statements of Operations,
Shareholders' Equity and Cash Flows of Enterprises and its Subsidiaries as
of and through the end of such fiscal year, (iii) the Consolidating Balance
- 10 -
<PAGE>
Sheets of Enterprises and its Restricted Subsidiaries as at the end of such
fiscal year and (iv) the Consolidating Statements of Operations,
Shareholders' Equity and Cash Flows of Enterprises and its Restricted Sub-
sidiaries as of and through the end of such fiscal year, setting forth in
each case in comparative form the figures for the preceding fiscal year.
Such Consolidated Balance Sheets and Statements of Operations,
Shareholders' Equity and Cash Flows shall be certified by the Accountants,
which certification shall (1) state that the examination by such Ac-
countants in connection with such Consolidated financial statements has
been made in accordance with generally accepted auditing standards and, ac-
cordingly, included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances and
(2) include the opinion of such Accountants that such Consolidated
financial statements have been prepared in accordance with GAAP in all
material respects in a manner consistent with prior fiscal periods, except
as otherwise specified in such opinion. Notwithstanding any of the forego-
ing, Enterprises may satisfy its obligation to furnish Consolidated Balance
Sheet and Consolidated Statements of Operations, Shareholders' Equity and
Cash Flows by furnishing to the Agents and each Bank copies of its Form 10-
K in respect of such fiscal year, together with the financial statements
required to be attached thereto, provided Enterprises is required to file
such annual report on Form 10-K with the SEC and such filing is actually
made.
(ii) As soon as available, but in no event later than 45
days after the end of each of the first three quarterly accounting periods
in each fiscal year of Enterprises a copy of (i) the Consolidated Balance
Sheet of Enterprises and its Subsidiaries as at the end of each such quar-
terly period, (ii) the Consolidated Statements of Operations, Shareholders'
Equity and Cash Flows for each such period and for the elapsed portion of
the fiscal year through such date, (iii) the Consolidating Balance Sheets
of Enterprises and its Restricted Subsidiaries as at the end of each such
quarterly period and (iv) the Consolidating Statements of Operations,
Shareholders' Equity and Cash Flows for each such period and for the
elapsed portion of the fiscal year through such date, setting forth in each
case in comparative form the figures for the corresponding periods of the
preceding fiscal year, subject to year end audit adjustments, certified by
a senior financial officer or senior accounting officer of Enterprises (or
such other officer acceptable to the Agents) as being complete and correct
in all material respects and as presenting fairly the financial condition
and results of operations and cash flows of Enterprises and its Subsidi-
aries on a Consolidated basis and Enterprises and its Restricted
Subsidiaries on a Consolidating basis. Notwithstanding any of the forego-
ing, Enterprises may satisfy its obligation to furnish quarterly a
Consolidated Balance Sheet and Consolidated Statements of Operations and
Cash Flows of Enterprisers by furnishing to the Agents and each Bank copies
of its Form 10-Q in respect of such fiscal quarter together with the
financial statements required to be attached thereto, provided Enterprises
is required to file such quarterly report on Form 10-Q with the SEC and
such filing is actually made.
1. Certificates; Other Information. Furnish to the Collateral
-------------------------------
Agent and each Bank:
- 11 -
<PAGE>
(i) Prompt written notice if: (A) any Indebtedness of
Enterprises or any Restricted Subsidiary in an aggregate Consolidated
amount in excess of $500,000 is declared or shall become due and payable
prior to its stated maturity, or is called and not paid when due, (B) a
default shall have occurred under any note or other evidence of
Indebtedness of Enterprises or any Restricted Subsidiary (other than the
Notes) in an aggregate Consolidated amount in excess of $500,000, or the
holder of any such note or other evidence of Indebtedness or any obligee
with respect to such Indebtedness has the right to declare any such
Indebtedness due and payable prior to its stated maturity as a result of
such default, or (C) there shall occur and be continuing a Default or an
Event of Default;
(ii) Prompt written notice of: (A) any citation, summons,
subpoena, order to show cause or other order naming Enterprises or any
Restricted Subsidiary a party to any proceeding before any Governmental
Authority which could reasonably be expected to have a Material Adverse
Effect on Enterprises or which calls into question the validity or en-
forceability of any of the Loan Documents or the Registration Statement,
and include with such notice a copy of such citation, summons, subpoena,
order to show cause or other order, (B) any lapse or other termination of
any license, permit, franchise or other authorization issued to Enterprises
or any Restricted Subsidiary by any Governmental Authority which lapse or
termination could reasonably be expected to have a Material Adverse Effect
on Enterprises, (C) any refusal by any Governmental Authority to renew or
extend any such license, permit, franchise or other authorization which
refusal could reasonably be expected to have a Material Adverse Effect on
Enterprises, (D) any lapse or other termination of any material franchise
agreement to which Enterprises or any Restricted Subsidiary is a party
which lapse or termination could reasonably be expected to have a Material
Adverse Effect on Enterprises and (E) any dispute between Enterprises or
any Restricted Subsidiary and any Governmental Authority, which dispute
could reasonably be expected to have a Material Adverse Effect on
Enterprises;
(iii) Promptly upon becoming available, copies of all
financial statements, reports and proxy statements which Enterprises may
from time to time send to its stockholders generally, and copies of all
registration statements, prospectuses and regular, periodic or special
reports, schedules and other material which Enterprises may now or here-
after be required to file with or deliver to the SEC or any national
securities exchange;
(iv) Prompt written notice if a Change in Control occurs,
including, without limitation, copies of all notices related thereto given
to the Trustee of the Enterprises Subordinated Indenture and/or to the
Designated Debenture Holder under the Debenture Purchase Agreement with
respect thereto;
(v) Prompt written notice of the occurrence of a default or
event of default under and as defined in the Enterprises Subordinated
Indenture, the Debenture Purchase Agreement or the 14 1/4% Indenture, together
with all notices with respect thereto received from the Trustee or any
- 12 -
<PAGE>
holder of Enterprises Subordinated Debentures or Restaurants Notes and/or
to the Designated Debenture Holder under the Debenture Purchase Agreement;
and
(vi) Promptly, such other information as the Collateral
Agent or any Bank may reasonably request.
2. Legal Existence. Maintain, and cause each Restricted
---------------
Subsidiary to maintain, its corporate existence, and its good standing in
the jurisdiction of its incorporation and in each other jurisdiction in
which the failure so to do could reasonably be expected to have a Material
Adverse Effect on Enterprises.
3. Taxes. Pay and discharge when due, and cause each Restricted
-----
Subsidiary to pay and discharge when due, all taxes, assessments and
governmental charges, license fees and levies upon or with respect to it
and upon its income, profits and Property, which, if unpaid, could
reasonably be expected to have a Material Adverse Effect on Enterprises or
become a Lien on its Property other than a Permitted Lien, unless and to
the extent that such taxes, assessments, charges, license fees and levies
shall be contested in good faith and by appropriate proceedings diligently
conducted by it and provided that any such contested tax, assessment,
charge, license, fee or levy shall not constitute, or create, a Lien on any
of its Property other than a Permitted Lien, and further provided that
Enterprises shall give the Collateral Agent prompt notice of any such
contest and that such reserve or other appropriate provision, if any, as
shall be required by the Accountants in accordance with GAAP shall have
been made therefor.
4. Insurance. Maintain, and cause each Restricted Subsidiary to
---------
maintain, insurance on its Property against such risks and in such amounts
as is customarily maintained by similar businesses, including, without
limitation, public liability and workers' compensation insurance, and file
with the Collateral Agent within five days after request therefor a de-
tailed list of such insurance then in effect, stating the names of the car-
riers thereof, the policy numbers, the insureds thereunder, the amounts of
insurance, dates of expiration thereof, and the Property and risks covered
thereby, and stating that no notice of cancellation with respect thereto
has been received.
5. Payment and Performance of Obligations. Pay and discharge,
--------------------------------------
and cause each Restricted Subsidiary to pay and discharge when due, all
lawful , obligations and claims for labor, materials and supplies or other-
wise which, if unpaid, could reasonably be expected to (i) have a Material
Adverse Effect on Enterprises or (ii) become a Lien upon Property of
Enterprises or such Restricted Subsidiary other than a Permitted Lien,
unless and to the extent that the validity of such obligation or claim
shall be contested in good faith and by appropriate proceedings diligently
conducted by Enterprises or such Restricted Subsidiary, and further
provided that (x) Enterprises or such Restricted Subsidiary shall give the
Collateral Agent and the Banks prompt notice of any such contest which
involves a Lien on any Property and (y) such reserve or other appropriate
provision, if any, as shall be required by the Accountants in accordance
- 13 -
<PAGE>
with GAAP shall have been made therefor.
6. Condition of Property. At all times, maintain, protect and
---------------------
keep in good repair, working order and condition (ordinary wear and tear
excepted), all Property necessary to the operation of its business and
cause each Restricted Subsidiary so to do, except that Enterprises or any
Restricted Subsidiary need not so maintain, protect and keep in good re-
pair, working order and condition any restaurants being closed or
relocated, so long as the failure to so maintain, protect and keep in good
repair, working order and condition in connection with any such restaurants
(i) could not reasonably be expected to have a Material Adverse Effect on
Enterprises or (ii) will not result in the rescission, termination, revoca-
tion, cancellation, withdrawal, suspension, modification or withholding of
any Franchise Agreement between the Company or a Material Subsidiary and
the Franchisor, or any right of the Company or any Material Subsidiary
thereunder (other than the Franchise Agreement for a restaurant being
closed and not relocated).
7. Observance of Legal Requirements. Observe and comply, and
--------------------------------
cause each Restricted Subsidiary to observe and comply, in all respects,
with all laws (including, without limitation, ERISA and environmental laws
and health and sanitary laws), ordinances, orders, judgments, rules,
regulations, certifications, franchises, permits, licenses, directions and
requirements of all Governmental Authorities, which now or at any time
hereafter may be applicable to Enterprises or such Restricted Subsidiary, a
violation of which could reasonably be expected to have a Material Adverse
Effect on Enterprises, except such thereof as shall be contested in good
faith and by appropriate proceedings diligently conducted by Enterprises or
such Restricted Subsidiary, provided that (i) Enterprises or such
Restricted Subsidiary shall give the Collateral Agent and the Banks prompt
notice of such contest and (ii) such reserve or other appropriate provi-
sion, if any, as shall be required by the Accountants in accordance with
GAAP shall have been made therefor.
8. Inspection of Property; Books and Records; Discussions. Keep
------------------------------------------------------
proper books of record and account in which full, true and correct entries
in conformity with GAAP and all requirements of law shall be made of all
dealings and transactions in relation to its business and activities and
cause each Restricted Subsidiary so to do; and, at Enterprises' expense
after the occurrence and during the continuance of a Default or an Event of
Default, permit representatives of the Collateral Agent and any Bank to
visit its offices, to inspect any of its Property and examine and make
copies or abstracts from any of Enterprises' or such Restricted
Subsidiary's books and records at any reasonable time on reasonable notice
and as often as may reasonably be desired, and to discuss its business, op-
erations, prospects, licenses, Property and financial condition with its
respective officers and with the Accountants.
9. Licenses, Franchise Agreements, Etc. Maintain, and cause
-----------------------------------
each Restricted Subsidiary to maintain, in full force and effect, all
licenses, franchise agreements, copyrights, trademarks, trade names,
patents, permits, applications, reports, authorizations and other rights
and intellectual property, including, in the case of the Company, the
- 14 -
<PAGE>
Franchise Agreements as are necessary for the conduct of its business, the
loss of which, individually or in the aggregate, would have a Material
Adverse Effect on Enterprises.
L. Negative Covenants and Agreements.
---------------------------------
Enterprises hereby agrees that, so long as the Credit Agreement
is in effect, any Loan or reimbursement obligation (contingent or
otherwise) in respect of any Letter of Credit remains outstanding and
unpaid, or any other amount is owing under any Loan Document, Enterprises
shall not, directly or indirectly:
1. Borrowing. Create, incur, assume or suffer to exist any li-
---------
ability for Indebtedness, or permit any Restricted Subsidiary so to do,
except (i) Indebtedness under the Enterprises Subordinated Debentures and
the Senior Subordinated Debentures, (ii) Indebtedness in respect of this
Agreement, (iii) Contingent Obligations to the extent permitted by para-
graph 8(d), (iv) in the case of the Company, or any Material Subsidiary,
Indebtedness permitted by paragraph 8.1 of the Credit Agreement, (v)
Indebtedness not in excess of $1,000,000 in the aggregate at any one time
outstanding, (vi) Indebtedness (whether in the form of borrowings,
Contingent Obligations, obligations under Capitalized Leases or otherwise)
assumed in connection with any acquisition permitted under paragraph 8(c)
not in excess, in the aggregate, of $5,000,000 principal amount at any one
time outstanding, (vii) ERISA Liabilities permitted to be incurred under
paragraph 8(j) and (viii) Indebtedness of Enterprises existing as of the
Restatement Effective Date, as set forth on Schedule 8(a), and except as
set forth in the proviso below, refinancings thereof but not increases in
the amount of any thereof, provided that refinancings of such existing
Indebtedness shall not be permitted unless (A) the interest rate on any
such refinanced Indebtedness is not in excess of the rate available for
similar borrowings by similar borrowers at the time of the refinancing, (B)
the final maturity of such refinanced Indebtedness is not earlier than the
Revolving Credit Termination Date and (C) the average weighted life to
maturity of such refinanced Indebtedness shall not be less than the
original average weighted life to maturity of such Indebtedness being refi-
nanced.
2. Liens. Create, incur, assume or suffer to exist any Lien
-----
upon any of its Property, whether now owned or hereafter acquired, or
permit any Restricted Subsidiary so to do, except (i) Liens for taxes,
assessments or similar charges incurred in the ordinary course of business
which are not delinquent or which are being contested in accordance with
paragraph 7(d), provided that enforcement of such Liens is stayed pending
such contest, (ii) Liens in connection with workers' compensation,
unemployment insurance or other social security obligations (but not
ERISA), (iii) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations,
surety and appeal bonds and other obligations of like nature arising in the
ordinary course of business, (iv) zoning ordinances, easements, rights of
way, minor defects, irregularities, and other similar restrictions
affecting Property which is real property which do not adversely affect the
value of such real Property or the financial condition of Enterprises or
- 15 -
<PAGE>
impair its use for the operation of the business of Enterprises, (v) statu-
tory Liens arising by operation of law such as mechanics', materialmen's,
carriers' or warehousemen's liens incurred in the ordinary course of
business which are not delinquent or which are being contested in
accordance with the procedures set forth in paragraph 7(d), provided that
enforcement of such Liens is stayed pending such contest, (vi) Liens
arising out of judgments or decrees which are being contested in accordance
with the procedures set forth in paragraph 7(d), provided that enforcement
of such Liens is stayed during such contest, (vii) landlord's liens under
leases, (viii) Liens granted to the Collateral Agent hereunder (ix) leases
and subleases, (x) Liens on Property of Enterprises existing on the
Restatement Effective Date as set forth on Schedule 8(b) as renewed from
time to time, but not any increases in the amounts secured thereby and (xi)
in the case of the Company, or any Material Subsidiary of the Company,
Liens permitted by paragraph 8.2 of the Credit Agreement, (xii) Liens
assumed in connection with any acquisition permitted under paragraph 8(c),
provided that each such Lien is limited to the Property so acquired and
fixed improvements thereon and (xiii) Liens securing Indebtedness permitted
under paragraph 8(a)(v) provided that each such Lien is limited to the
Property acquired with the proceeds of such Indebtedness.
3. Merger and Acquisition. Consolidate with, be acquired by, or
----------------------
merge into or with, any Person, or acquire all or substantially all of the
Stock or Property of any Person, except (i) Enterprises may acquire all or
substantially all of the assets or Stock of a Person which is in the
Restaurant Business provided that (A) no Default or Event of Default shall
exist immediately before or after giving effect thereto, (B) Enterprises
shall have given to the Agents ten days advance written notice of such
acquisition, (C) the consideration paid for such acquisition shall be
solely in Stock of Enterprises (and incidental contractual rights) and the
assumption by Enterprises of Indebtedness to the extent permitted under
paragraph 8(a)(vi), (D) in the case of an asset acquisition, the
acquisition is made by an existing or newly formed Restricted Subsidiary of
Enterprises (other than the Company or any Subsidiary of the Company) which
is a corporation, (E) certificates representing all of the issued and out-
standing Stock of the corporation acquired or the acquiring Restricted
Subsidiary, as the case may be, shall have been delivered in pledge to the
Collateral Agent together with undated stock powers with respect thereto
signed in blank, (F) no more than ten restaurants shall be acquired in any
one such acquisition and no more than twenty-five restaurants in the
aggregate shall be acquired in all such acquisitions and (G) the Collateral
Agent shall have received such documents and certificate as it shall
reasonably request and (ii) in the case of the Company or any Material
Subsidiary of the Company, mergers and acquisitions permitted by paragraph
8.3 of the Credit Agreement.
4. Contingent Obligations. Assume, guarantee, indorse,
----------------------
contingently agree to purchase or perform, or otherwise become liable upon
any Contingent Obligation, or permit any Restricted Subsidiary so to do,
except (i) Contingent Obligations in respect of this Agreement, (ii) in the
case of the Company or any Material Subsidiary of the Company, other Con-
tingent Obligations permitted by paragraph 8.4 of the Credit Agreement,
(iii) Contingent Obligations to the extent permitted under paragraph
- 16 -
<PAGE>
8(a)(vi), and (iv) Contingent Obligations existing on the Restatement
Effective Date as set forth on Schedule 8(d), including, except as set
forth in the proviso below, refinancings thereof but not increases in the
amount of any thereof, provided that such refinancings shall not be permit-
ted unless (A) the interest rate on the primary obligation of the primary
obligor is not in excess of the rate for similar obligations of similar
obligors at the time of such refinancing, (B) the final maturity of such
refinanced primary obligation is not earlier than the Revolving Credit
Termination Date and (C) the average weighted life to maturity of such re-
financed primary obligation shall not be less than the original average
weighted life to maturity of such primary obligation being refinanced.
5. Dividends and Purchase of Stock. Declare or pay any
-------------------------------
dividends payable in cash or otherwise (other than in the common Stock of
Enterprises) or apply any of its Property to the purchase, redemption or
other retirement of, or set apart any sum for the payment of any dividends
on, or make any other distribution by reduction of capital or otherwise in
respect of, any shares of its capital Stock or other similar equity
interest or warrants or other rights issued in respect thereof except (i)
the Company and any Subsidiary (as defined in the Credit Agreement) of the
Company may make such payments as are permitted by paragraph 8.5 of the
Credit Agreement, (ii) Enterprises may purchase the stock or stock options
held by an employee of Enterprises whose employment Enterprises terminates,
provided, that the amounts paid by Enterprises under this clause (ii) shall
not exceed $500,000 in the aggregate, and provided further that no Default
or Event of Default would exist immediately before and after giving effect
thereto, (iii) Enterprises may make all payments required to be made by it
after the date hereof with respect to 325,000 Stock Appreciation Rights
outstanding on the Original Effective Date, provided, that the amounts paid
by Enterprises under this clause (iii) shall not exceed $1,000,000 in cash
in the aggregate but this clause (iii) shall not be deemed to limit En-
terprises' ability to use its common Stock to satisfy Stock Appreciation
Rights and provided further that no Default or Event of Default would exist
immediately before and after giving effect thereto, (iv) provided that no
Default or Event of Default would exist immediately before and after giving
effect thereto, Enterprises may pay a dividend on its common Stock in an
amount not in excess of 10% of Enterprises net income for the preceding
fiscal year solely from dividends received by Enterprises from the Company
pursuant to paragraph 8.5(ii)(C) of the Credit Agreement and (v)
Enterprises may repurchase shares of its common Stock in an aggregate
amount not in excess of the sum of (a) $5,000,000 and (b) for fiscal years
of Enterprises ending after December 31, 1993, an amount equal to 25% of
the aggregate amount of net income (if positive) of the Company since the
end of the first fiscal quarter of 1993, on a cumulative basis provided
that (x) no Default or Event of Default exists before and after giving ef-
fect thereto and (y) the repurchase is funded solely from dividends re-
ceived by Enterprises from the Company pursuant to paragraph 8.5(ii)(D) of
the Credit Agreement.
6. Investments, Loans, Etc. At any time, purchase or otherwise
-----------------------
acquire, hold or invest in Investments, including, without limitation, any
additional equity investments in, or loans or other advances to,
Subsidiaries, except (i) Investments of the type described in paragraph 8.6
- 17 -
<PAGE>
(a), (b), (d) or (e) of the Credit Agreement, (ii) Investments existing on
the Restatement Effective Date as set forth on Schedule 8(f) and any re-
newals or replacements (but not increases) thereof, (iii) Investments in
the Company, (iv) Investments consisting of acquisitions to the extent
permitted by paragraph 8(c), (v) employee loans and advances by Enterprises
not in excess of $400,000, (vi) Investments received in connection with any
disposition permitted by paragraph 8(h), (vii) in the case of the Company
and any Subsidiary (as defined in the Credit Agreement) of the Company,
Investments permitted by paragraph 8.6 of the Credit Agreement and (viii)
Investments in Subsidiaries consisting of Stock of Enterprises in
connection with an acquisition permitted pursuant to paragraph 8(h).
7. Accounting Changes. Change its fiscal year end, or alter its
------------------
accounting principles, treatment or recording practices, except as required
by GAAP or applicable law.
8. Sale of Property. Sell, exchange, lease, transfer or
----------------
otherwise dispose of all or any substantial part of its Property to any
Person, or permit any Restricted Subsidiary so to do, except (i) the sale
of Enterprises' interests in Maxcell or the dissolution of Entertainment,
(ii) the sale of any Property in connection with the closing of
Enterprises' New York office, and (iii) in the case of the Company or any
Material Subsidiary, sales, exchanges, leases, transfers and dispositions
permitted by paragraph 8.8 of the Credit Agreement.
9. Subsidiaries. Create or acquire any other Subsidiary, or
------------
permit any Restricted Subsidiary so to do, except (i) Enterprises may
create or acquire Restricted Subsidiaries in connection with acquisitions
permitted by paragraph 8(c) and (ii) in the case of the Company or any
Subsidiary (as defined in the Credit Agreement) the creation or acquisition
of Subsidiaries (as defined in the Credit Agreement) permitted by paragraph
8.9 of the Credit Agreement.
10. Compliance with ERISA. Adopt any Plan or Multiemployer Plan
---------------------
not listed on Schedule 4.15 of the Credit Agreement, or engage in any
"prohibited transaction", as such term is defined in Section 4975 of the
Code or Section 406 of ERISA, with respect to any Plan which is reasonably
expected to result in the imposition on Enterprises, any Restricted
Subsidiary or any Commonly Controlled Entity of a tax, penalty or other
liability, individually or in the aggregate in excess of $500,000, or incur
any "accumulated funding deficiency", as such term is defined in Section
412 of the Code or Section 302 of ERISA in excess of $500,000, or
terminate, or permit any Commonly Controlled Entity to terminate, any Plan
which would result in a liability to Enterprises, any Restricted Subsidiary
or any Commonly Controlled Entity to the PBGC in an aggregate Consolidated
amount in excess of $500,000, or permit the occurrence of any Reportable
Event or any other event or condition which presents a risk of such a ter-
mination by the PBGC of any Plan which could result in a liability of
Enterprises, any Restricted Subsidiary or any Commonly Controlled Entity in
excess of $500,000, or withdraw or effect a partial withdrawal from a
Multiemployer Plan, or permit any Restricted Subsidiary or any Commonly
Controlled Entity which is an employer under such a Multiemployer Plan so
to do which would result in a liability to Enterprises, any Restricted
- 18 -
<PAGE>
Subsidiary or any Commonly Controlled Entity to the PBGC in an aggregate
Consolidated amount in excess of $500,000.
11. Certificate of Incorporation and By-laws. Amend or otherwise
----------------------------------------
modify its certificate of incorporation or by-laws in any way which would
materially and adversely affect the interests of the Banks under any of the
Loan Documents or the obligations of Enterprises hereunder.
12. Amendments, Etc. of Certain Agreements. Enter into or agree
--------------------------------------
to any amendment, modification or waiver of any term or condition of the
Enterprises Subordinated Indenture, the Enterprises Subordinated
Debentures, the Registration Statement (except for any additional or
amended disclosure required by applicable law), any note or other evidence
of indebtedness of the Pledged Debt, the Management Agreement, the Tax
Sharing Agreement, the Debenture Purchase Agreement or the Senior
Subordinated Debentures, except that Enterprises may agree to a waiver
under the Debenture Purchase Agreement or the Senior Subordinated
Debentures so long as no consideration is given therefor by the Company or
Enterprises.
13. Subordinated Indebtedness.
-------------------------
Notwithstanding anything herein to the contrary:
(i) make any payment in respect of principal of or interest
on, or purchase, redeem or otherwise retire, or make any payment in respect
of all or any part of the Indebtedness evidenced by the Enterprises
Subordinated Debentures, the payment of which is not permitted under the
Enterprises Subordinated Indenture as in effect on the Original Effective
Date;
(ii) make any voluntary redemptions or voluntary purchases
of all or any part of the Indebtedness evidenced by the Enterprises
Subordinated Debentures or any payments in connection therewith;
(iii) make any payment in respect of principal of or
interest on, or purchase, redeem or otherwise retire, or make any other
payment in respect of all or any part of the Indebtedness evidenced by the
Senior Subordinated Debentures, the payment of which is not permitted under
the Debenture Purchase Agreement as in effect on March 19, 1993; or
(iv) make any redemptions or purchases (voluntary or
otherwise) of all or any part of the Indebtedness evidenced by the Senior
Subordinated Debentures or any payments in connection therewith.
14. Transactions with Affiliates. Except in connection with (i)
----------------------------
the Management Agreement, (ii) the Tax Sharing Agreement, (iii)
subordinated loans from Enterprises to the Company to the extent permitted
by paragraph 8.1(vi) of the Credit Agreement, (iv) the Restaurants
Guaranty, and (v) equity contributions from Enterprises to the Company
contemplated by paragraph 8.11 of the Credit Agreement become or permit any
Restricted Subsidiary to become, a party to any transaction with an Af-
- 19 -
<PAGE>
filiate of Enterprises or any Subsidiary unless the terms and conditions
relating to such transaction are at least as favorable to Enterprises or
such Restricted Subsidiary as those which would be obtainable at that time
in a comparable arms-length transaction with a Person other than an
Affiliate.
15. Business. Engage in any business other than (i) the
--------
Restaurant Business, (ii) the holding of the Stock of the Company and
matters incidental thereto, and (iii) the Cellular Business until it sells
its interest in Maxcell.
16. Designated Senior Indebtedness. Designate any Indebtedness
------------------------------
other than the Indebtedness under the Loan Documents as (i) "Designated
Senior Indebtedness of the Company" as defined in the Enterprises
Subordinated Indenture or (ii) "Designated Senior Debt" as defined in the
Debenture Purchase Agreement.
17. Consolidated Net Worth. Permit at any time Consolidated Net
----------------------
Worth to be less than $55,000,000.
M. Delivery of Collateral.
----------------------
All certificates, notes and other instruments, if any, represent-
ing or evidencing the Collateral at any time owned or acquired by
Enterprises shall be delivered to and held by or on behalf of the
Collateral Agent pursuant hereto and shall be in suitable form for transfer
by delivery, or shall be accompanied by duly executed instruments of
transfer or assignments in blank, all in form and substance satisfactory to
the Collateral Agent. Upon the occurrence and during the continuance of an
Event of Default, the Collateral Agent shall have the right, at any time in
its discretion and without notice to Enterprises or any other Person, to
transfer to or to register in the name of the Collateral Agent or any of
its nominees any or all of the Collateral. In addition, upon the oc-
currence and during the continuance of an Event of Default, the Collateral
Agent shall have the right at any time to exchange certificates or instru-
ments representing or evidencing Collateral for certificates or instruments
of smaller or larger denominations.
N. As to the Collateral.
--------------------
1. So long as no Event of Default shall have occurred and be
continuing:
(i) Subject to the provisions of paragraph 10(g),
Enterprises shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Collateral or any part thereof,
provided, however, that Enterprises agrees to take or refrain from taking
all actions as are required in order to prevent the occurrence of an Event
of Default under this Agreement.
(ii) Enterprises shall be entitled to receive and retain any
and all Restricted Payments paid in respect of the Collateral to the extent
that the making of such payments by the Company is not prohibited by
- 20 -
<PAGE>
paragraph 8.5 of the Credit Agreement, provided, however, that any and all
Restricted Payments, paid or payable other than in cash in respect of, and
instruments and other Property received, receivable or otherwise
distributed in respect of, or in exchange for, Collateral, shall be, and
shall forthwith be delivered to the Collateral Agent to hold as Collateral
and shall, if received by Enterprises, be received in trust for the benefit
of the Collateral Agent, be segregated from the other Property of
Enterprises, and be forthwith delivered to the Collateral Agent, as
Collateral in the same form as so received (with any necessary
indorsement).
(iii) The Collateral Agent shall execute and deliver (or
cause to be executed and delivered) to Enterprises all such proxies and
other instruments as Enterprises may reasonably request for the purpose of
enabling Enterprises to exercise the voting and other rights which it is
entitled to exercise pursuant to clause (i) above and to receive the Re-
stricted Payments which it is authorized to receive and retain pursuant to
clause (ii) above.
2. Upon the occurrence and during the continuance of an Event
of Default, at the Collateral Agent's option, following written notice by
the Collateral Agent to Enterprises:
(i) All rights of Enterprises to exercise the voting and
other consensual rights which it would otherwise be entitled to exercise
pursuant to paragraph 10(a)(i) and to receive the Restricted Payments which
it would otherwise be authorized to receive and retain pursuant to
paragraph 10(a)(ii) shall cease, and all such rights shall thereupon become
vested in the Collateral Agent, who shall thereupon have the right to
exercise such voting and other consensual rights and the sole right to
receive and hold as Collateral such Restricted Payments.
(ii) All Restricted Payments which are received by
Enterprises contrary to the provisions of paragraph 10(b)(i) shall be
received in trust for the benefit of the Collateral Agent, shall be
segregated from other funds of Enterprises and shall be forthwith paid over
to the Collateral Agent as Collateral in the same form as so received (with
any necessary indorsement).
3. In the event that all or any part of the securities or
instruments constituting the Collateral are lost, destroyed or wrongfully
taken while such securities or instruments are in the possession of the
Collateral Agent, Enterprises agrees that it will cause the delivery of new
securities or instruments in place of the lost, destroyed or wrongfully
taken securities or instruments upon request therefor by the Collateral
Agent without the necessity of any indemnity bond or other security other
than the Collateral Agent's agreement or indemnity therefor customary for
security agreements similar to this Agreement.
4. The Collateral Agent shall have no duty of care with respect
to the Collateral, except that it shall exercise reasonable care with
respect to the Collateral in its custody, and shall be deemed to have
exercised such reasonable care if such Property is accorded treatment
- 21 -
<PAGE>
similar to that which the Collateral Agent accords its own Property, or if
the Collateral Agent acts or fails to act with respect to the Collateral in
accordance with the written request of Enterprises. No failure by the
Collateral Agent to comply with any such request shall, in and of itself,
be deemed to be a failure to exercise reasonable care, nor shall the
Collateral Agent's failure to take any steps to preserve rights against any
Person or Property be deemed a failure to have exercised reasonable care
with respect to the Collateral in its custody.
5. Enterprises covenants and agrees to execute and deliver,
upon request at any time from time to time, any notice, financing
statement, continuation statement, registration of pledge, instrument,
document, agreement or other papers and perform any other act reasonably
requested by the Collateral Agent which may be necessary to create,
perfect, preserve, validate or otherwise protect any security interest
granted herein or to enable the Collateral Agent to exercise and enforce
all rights hereunder or with respect to such security interest. At any
time and from time to time, upon the reasonable request of the Collateral
Agent, and at the sole expense of Enterprises, Enterprises will promptly
execute and deliver any and all such further instruments and documents and
will take such further action as may be reasonably deemed necessary or
desirable in the reasonable judgment of the Collateral Agent to obtain,
maintain and perfect the security interest granted herein, including,
without limitation, the filing of any financing or continuation statements
with respect to the security interests granted hereby. In connection here-
with, the Collateral Agent is hereby irrevocably authorized and empowered,
as Enterprises attorney-in-fact, at the Collateral Agent's option, solely
to file financing statements or amendments thereto and to make all other
filings and to give all other notices as it shall deem necessary with
respect to any of the Collateral, all of which may be done with or without
the signature of Enterprises. Enterprises agrees that the foregoing power
constitutes a power coupled with an interest which shall survive until all
of the Obligations are indefeasibly paid in full in cash. Enterprises and
the Company jointly and severally agree to reimburse the Collateral Agent
on demand for any actual reasonable out-of-pocket expenses incurred by it
in connection with such matters and, until such reimbursement, such
expenses shall be a part of the Obligations.
6. With respect to the Collateral, neither of the Collateral
Agent nor any Bank shall be under any duty to send notices, perform
services, exercise any rights of collection, enforcement, conversion or
exchange, vote, approve of accountings or other financial or other matters,
pay for insurance, taxes or other charges, or take any action of any kind
in connection with the management thereof, and its only duty with respect
thereto shall be to use reasonable care in the custody and preservation of
the Collateral while the Collateral is in the Collateral Agent's actual
possession, which shall not include any steps necessary to preserve rights
against prior or third parties.
7. Enterprises shall not, without the prior written consent of
the Collateral Agent, sell, hypothecate, pledge, encumber, transfer, assign
(by operation of law or otherwise) or otherwise dispose of any of the
Collateral or create or suffer to exist any Lien upon or with respect to
- 22 -
<PAGE>
any of the Collateral, except for the security interest created by this
Agreement.
8. Enterprises will defend the Collateral against all claims
and demands of all Persons at any time claiming the same or any interest
therein adverse to the interests of the Collateral Agent and the Banks.
9. Without notice to or the consent of Enterprises, the
Collateral Agent may (i) release any indorser or guarantor or any col-
lateral given to secure any of the Obligations (or any guaranty given in
connection therewith), and (ii) at any time, and from time to time,
increase the amount of, extend the time of payment of or renew in whole or
in part any of the Obligations for such time or times as the Collateral
Agent or the Banks may determine and all of the provisions and authoriza-
tions contained herein shall apply to all such renewals and extensions.
O. Additional Shares.
-----------------
Enterprises and the Company each agrees that it will not issue or
permit the issuance to Enterprises of any Stock or other securities in ad-
dition to or in substitution for the Collateral, unless immediately upon
its acquisition (directly or indirectly) thereof, any and all additional
shares of Stock or other securities of each such issuer are pledged to and
delivered by Enterprises to the Collateral Agent hereunder.
P. Events of Default. Each of the following shall constitute an
-----------------
"Event of Default" hereunder:
1. Enterprises shall fail to observe or perform any term,
covenant or agreement contained in paragraphs 2, 7(c), 8, 10(g) or 15(i) of
this Agreement; or
2. Enterprises shall fail to perform or observe any other
covenant or agreement on its part to be performed or observed pursuant to
this Agreement and such failure shall have continued unremedied for a
period of 30 days after Enterprises shall become aware of such failure; or
3. Any representation of Enterprises contained herein or in any
certificate, report or notice delivered or to be delivered by Enterprises
pursuant hereto shall prove to have been incorrect or misleading in any
material respect when made; or
4. This Agreement shall cease to be in force and effect or
Enterprises shall so assert or shall disavow its obligations hereunder; or
5. The occurrence and continuance of an Event of Default under
the Credit Agreement.
Q. Rights and Powers of the Collateral Agent on Default.
----------------------------------------------------
1. In General. After the occurrence and during the continuance
----------
of an Event of Default, the Collateral Agent may proceed to enforce the
rights of the Collateral Agent and the Banks hereunder by suit in equity,
- 23 -
<PAGE>
action at law and/or other appropriate proceedings, whether for payment or
for specific performance of any covenant or agreement contained in this
Agreement. Without limiting the foregoing, at any time after the
occurrence and during the continuance of an Event of Default, the
Collateral Agent may:
(i) indorse as Enterprises' agent any instruments, securi-
ties or chattel paper in or pertaining to the Collateral;
(ii) take control of Proceeds, including Stock received as
dividends or by reason of Stock splits, and use cash Proceeds to reduce any
part of the Obligations;
(iii) take any action Enterprises is required to take or any
other necessary action to obtain, preserve and enforce this Agreement, and
maintain and preserve the Collateral, without notice to Enterprises, and
add the costs of the same to the Obligations (but the Collateral Agent is
under no duty to take any such action);
(iv) release Collateral in its possession to Enterprises,
temporarily or otherwise;
(v) vote any Stock which is part of the Collateral and
exercise all other rights which an owner of such Collateral may exercise;
and
(vi) transfer any of the Collateral or evidence thereof into
its own name or that of its nominee(s) and receive the Proceeds therefrom
and hold the same as security for the Obligations, or apply the same
thereon.
After the occurrence and during the continuance of an Event of
Default, the Collateral Agent may, but shall be under no duty to, demand,
collect, receipt for, settle, compromise, adjust, sue for, foreclose, or
otherwise realize upon the Collateral, in its own name or in the name of
Enterprises, as the Collateral Agent may determine. The Collateral Agent
shall not be liable for the failure to enforce any contract right or
instrument or for any act or omission in connection with the enforcement of
any contract right or instrument, on the part of the Collateral Agent or
any of its officers, agents, or employees, except to the extent determined
in a final judgment, after all available appeals, to have arisen directly
and primarily out of the gross negligence or willful misconduct of the
Collateral Agent. After the occurrence and during the continuance of an
Event of Default, the Collateral Agent shall have the right to notify
persons obligated on any instruments, securities or contracts which are
part of the Collateral to make payment thereof directly to the Collateral
Agent, and the Collateral Agent may take control of all Proceeds of the
Collateral. The cost of such collection and enforcement, including
reasonable attorneys' fees and expenses, shall be borne by Enterprises and
Enterprises agrees promptly to pay same. The foregoing rights and powers
of the Collateral Agent shall be in addition to, and not a limitation upon,
any rights and powers the Collateral Agent may be given by law, custom,
elsewhere by this Agreement or otherwise.
- 24 -
<PAGE>
2. Power of Sale; Enforcement. In case an Event of Default
--------------------------
shall have occurred and be continuing, the Collateral Agent:
(i) may, to the extent permitted by law, grant options to
purchase, sell at one or more sales, as an entirety or in parcels, all or
any part of the Collateral, such sale or other disposition to be made at
the discretion of the Collateral Agent at one or more private sales at such
place or places, at such time or times, and upon such terms, including
credit, as the Collateral Agent may fix and briefly specify in the notice
of sale or other disposition, to be given as herein provided or as may be
required by law;
(ii) may proceed to protect and enforce the rights of the
Collateral Agent under this Agreement by suit, whether for specific
performance of any covenant herein contained, or in aid of the execution of
any power herein granted, or for the foreclosure of or other realization
upon the security interest provided in this Agreement and the sale of the
Collateral under the judgment or decree of a court of competent
jurisdiction, or for the enforcement of any other right, as the Collateral
Agent, in its discretion, shall determine; and
(iii) may exercise any and all of the rights and remedies
provided by the UCC, as well as all other rights and remedies possessed by
the Collateral Agent under this Agreement, at law, in equity or otherwise.
3. Notice of Sale or other Disposition. If notice of any sale
-----------------------------------
or other disposition of all or any part of the Collateral is required by
law to be given, Enterprises agrees that a notice sent to it at least ten
days before the time of any public sale or other disposition or the time
after which any private sale or other disposition of the Collateral is to
be made, shall be reasonable notice of such sale or other disposition.
4. Delivery to Purchaser. Upon the completion of any sale or
---------------------
other disposition of all or any part of the Collateral under this paragraph
13, full title and right of possession to such Collateral shall pass to
such purchaser or purchasers forthwith upon the completion of such sale.
Nevertheless, if so requested by the Collateral Agent or by any purchaser
of such Collateral, Enterprises shall confirm any such sale or disposition
by executing and delivering to such purchaser all proper instruments of
conveyance and transfer and releases as may be designated in any such
request. To the extent permitted by applicable law, every such sale or
other disposition shall operate to divest all right, title, interest, claim
and demand whatsoever of Enterprises of, in and to the Collateral so sold
or disposed of and shall be a perpetual bar, both at law and in equity,
against Enterprises, all persons claiming the Collateral sold or disposed
of, or any part thereof, through Enterprises, and its successors and as-
signs.
5. Application of Proceeds. The proceeds of any sale of the
-----------------------
Collateral or any part thereof under this paragraph 13, together with any
other sums then held by the Collateral Agent as part of the Collateral,
shall be applied against the Obligations in accordance with paragraph 9.1
of the Credit Agreement.
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<PAGE>
6. Agents May Purchase; Purchaser May Apply Obligations Toward
-----------------------------------------------------------
Purchase. At any sale or other disposition hereunder, either of the Agents
- --------
may bid for and purchase the Collateral offered for sale, and, upon
compliance with the terms of sale or other disposition, may hold, retain
and dispose of such Collateral without further accountability therefor.
Any such purchaser at any sale or other disposition hereunder shall be
entitled, for the purpose of making payment for the Collateral purchased,
to apply any part of the Obligations due and payable to it as a credit
against the purchase price of such Collateral.
7. Waiver of Appraisement, etc., Laws. Enterprises agrees, to
----------------------------------
the fullest extent that it may lawfully so agree, that neither it nor
anyone claiming from, through or under it, will claim, seek or take
advantage of any appraisement, valuation, stay, extension or redemption law
now or hereafter in force in order to prevent, hinder or delay the
enforcement or foreclosure of this Agreement, or the absolute sale or other
disposition of the Collateral or any part thereof, or the final and
absolute taking of possession thereof, immediately after such sale or other
disposition, by the purchaser thereof. Enterprises and all who may at any
time claim from, through or under it, hereby waives, to the fullest extent
that it may lawfully do so, the benefit of all such laws, and any and all
right to have any of the property comprising the Collateral marshalled upon
any such sale, and agrees that the Collateral Agent or any court having
jurisdiction to foreclose the security interest granted herein may sell the
Collateral as an entirety or in such parcels as the Collateral Agent may
determine.
8. Registration. Upon the occurrence and during the continuance
------------
of an Event of Default, any or all of the Pledged Shares may be registered
in the name of the Collateral Agent or its nominee(s), as the Collateral
Agent shall, in its discretion, decide. The Collateral Agent or its
nominee(s) may thereafter, without notice, exercise all voting and other
shareholder rights at any meetings thereof, and exercise any and all rights
of conversion, exchange, subscription or any other rights, privileges or
options pertaining to any Pledged Shares as if the Collateral Agent or such
nominee(s) were the absolute owner(s) thereof, including, without limita-
tion, the right to exchange, at the Collateral Agent's or such nominee's
discretion, any and all of the Pledged Shares upon the merger,
consolidation, reorganization, recapitalization or other readjustment of,
or involving, the Company or upon the exercise by Enterprises or the
Collateral Agent of any right, privilege or option pertaining to any
Pledged Shares. In connection therewith, the Collateral Agent or its
nominee(s) may deposit and deliver any or all of the Pledged Shares with
any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as the Collateral Agent or its
nominee(s) may determine, all without liability, except to account for
property actually received by them, but the Collateral Agent or its
nominee(s) shall have no duty to exercise any of the aforesaid rights,
privileges or options, and shall not be responsible for any failure to do
so or delay in so doing.
(i) Specific Performance. Notwithstanding any provisions of this
--------------------
Agreement to the contrary, Enterprises agrees that, due to the unique
- 26 -
<PAGE>
nature of the Collateral, the Collateral Agent shall have the right to
demand the remedy of specific performance in enforcing this Agreement.
R. Sale of Pledged Shares.
----------------------
The Company and Enterprises recognize that the Collateral Agent
may be unable to effect a public sale of all or part of the Pledged Shares
by reason of certain prohibitions and restrictions contained in the
Securities Act of 1933, as amended, and may be compelled to resort to one
or more private sales to a restricted group of purchasers who will be
obliged to agree, among other things, to acquire such Pledged Shares for
their own accounts, for investment, and not with a view to the distribution
or resale thereof. The Company and Enterprises agree that private sales so
made may be at prices and other terms less favorable to the seller than if
the Pledged Shares were sold at public sales and that the Collateral Agent
shall have no obligation to delay sale of any such Pledged Shares for the
period of time necessary to permit the Company, even if the Company would
agree, to register such Pledged Shares for public sale under the Securities
Act of 1933, as amended. The Company and Enterprises agree that private
sales made under the foregoing circumstances shall be deemed to have been
conducted in a commercially reasonable manner. If at any time it is
necessary, in the opinion of counsel to the Collateral Agent, that a sale
of any or all of the Pledged Shares be registered under the Securities Act
of 1933, as amended, the Company and Enterprises shall cooperate fully with
the Collateral Agent in connection with the taking of all steps necessary
to so register the Pledged Shares and to continue such registration as long
as deemed appropriate by the Collateral Agent.
S. Subordination.
-------------
1. No payment of any nature whatsoever due in respect of the
Subordinated Debt and no Restricted Payment payable to Enterprises shall be
made unless and until the Senior Obligations have been first indefeasibly
paid in full in cash, except (i) payments expressly permitted by paragraphs
8.5 or 8.18(iii) of the Credit Agrement and (ii) provided that no Default
or Event of Default shall exist immediately before or after giving effect
thereto, regularly scheduled payments of interest on Pledged Debt.
- 27 -
<PAGE>
2. Upon any bankruptcy, insolvency, liquidation or
reorganization of the Company, or upon the filing of a petition in
bankruptcy or commencement of any proceeding in bankruptcy against the
Company or upon any distribution of the assets of the Company or upon any
dissolution, winding up, liquidation or reorganization of the Company,
whether in bankruptcy, insolvency, reorganization, arrangement or receiver-
ship proceedings, or upon any assignment for the benefit of creditors, or
any other marshalling of the assets and liabilities of the Company, or in
the event any of the Subordinated Debt shall for any reason become or be
declared due and payable or otherwise:
(i) the Administrative Agent shall first be entitled to
receive indefeasible payment in full in cash of the Senior Obligations
(whenever arising) before Enterprises shall be entitled to receive any
payment on account of the Subordinated Debt;
(ii) any payment by, or distribution of the assets of, the
Company of any kind or character, whether in cash, property or securities,
to which Enterprises would be entitled except for the provisions of this
Agreement, in connection with the Subordinated Debt, shall be paid or
delivered by the Person making such payment or distribution (whether a
trustee in bankruptcy, a receiver, custodian or liquidating trustee or
otherwise) directly to the Administrative Agent to the extent necessary to
make payment in full in cash of the Senior Obligations remaining unpaid,
after giving effect to any concurrent payment or distribution (or provision
therefor) in cash to the Administrative Agent; and
(iii) Enterprises shall not ask, demand by legal proceedings
or otherwise, or take or receive from the Company, by set-off, counterclaim
or in any other manner, any payment or distribution on account of the
Subordinated Debt or any Restricted Payment other than with respect to any
Restricted Payment or Subordinated Debt expressly permitted to be paid
hereunder.
Notwithstanding the foregoing, in the event that any payment by,
or distribution of the assets of, the Company of any kind or character
prohibited hereby, whether in cash, property or securities, shall for any
reason be received by Enterprises in respect of the Subordinated Debt or
any Restricted Payment, such payment or distribution shall be held in trust
for the benefit of the Administrative Agent, and shall be immediately paid
over to the Administrative Agent, to the extent necessary to make payment
in full in cash of the Senior Obligations remaining
- 28 -
<PAGE>
unpaid, after giving effect to any concurrent payment or distribution (or
provision therefor) in cash to the Administrative Agent.
3. Without the prior written consent of the Administrative
Agent, the Company will not give, and Enterprises will not receive or
accept, any collateral of any nature whatsoever for the Subordinated Debt
or any Restricted Payment on any Property or assets, whether now existing
or hereafter acquired, of the Company.
4. Nothing contained in this Agreement is intended to or shall
impair, as between and among the Company, its creditors (other than the
holders of the Senior Obligations) and Enterprises, the obligation of the
Company to pay to Enterprises any amount due in respect of the Subordinated
Debt as and when the same shall become due and payable in accordance with
the terms thereof, or affect the relative rights of Enterprises and the
creditors of the Company (other than the holders of the Senior
Obligations), in each case subject to the rights of the holders of the
Senior Obligations under this Agreement.
5. Unless and until the Senior Obligations have been
indefeasibly paid in full in cash and the Credit Agreement has been
terminated, Enterprises agrees not to declare any part of the Subordinated
Debt or any Restricted Payment to be due and payable or exercise any of the
rights or remedies which it may have, or bring (in its capacity as holder
of the Subordinated Debt or beneficiary of any Restricted Payment), or join
with any other creditor in instituting, any proceedings against the Company
under any bankruptcy, insolvency, reorganization, arrangement, receivership
or other similar law, unless either (i) in the case of a Restricted
Payment, no Default or Event of Default has occurred and is continuing at
the time of the declaration or payment of such Restricted Payment or (ii)
the Senior Obligations shall have been declared immediately due and payable
or, in the case of the institution of any such proceedings, the Agents
shall have joined in the institution thereof or expressly consented thereto
in writing. In the event that the Administrative Agent shall have so de-
clared the Senior Obligations immediately due and payable, Enterprises
agrees to declare the Subordinated Debt and all Restricted Payments then
due to be due and payable, provided, however, if the Administrative Agent
shall rescind any such declaration, Enterprises shall automatically be
deemed to have rescinded its declaration.
6. No right of the Collateral Agent to enforce this Agreement
shall at any time or in any way be prejudiced or impaired by any act or
failure to act on the part of Enterprises, or by any noncompliance by
Enterprises with the terms, provisions and covenants herein, and the Agents
are hereby expressly authorized to extend, waive, renew, increase, de-
crease, modify or amend the terms of the Senior Obligations or any col-
lateral security therefor, and to waive any default, modify, amend, rescind
or waive any provision of any document executed and delivered in connection
with the Senior Obligations and to release, sell or exchange any such col-
lateral security and otherwise deal freely with the Company, all without
notice to or consent of Enterprises and without affecting the liabilities
and obligations of the parties hereto.
- 29 -
<PAGE>
7. The Company and Enterprises each waives notice of acceptance
of this Agreement by the Collateral Agent and the Banks, and Enterprises
waives notice of and consents to the making, amount and terms of the Senior
Obligations which may exist from time to time and any renewal, extension,
amendment or modification thereof and any other action which the Collateral
Agent or the Banks in their sole and absolute discretion, may take or omit
to take with respect thereto. This paragraph (g) shall constitute a
continuing offer to the Collateral Agent and the Banks, its provisions are
made for the benefit of the Collateral Agent and the Banks, and the Col-
lateral Agent and the Banks are made obligees hereunder and may enforce
such provisions.
8. Enterprises agrees that no payment or distribution to the
Collateral Agent pursuant to the provisions of this Agreement shall entitle
Enterprises to exercise any rights of subrogation in respect thereof until
the Senior Obligations shall have been indefeasibly paid in full in cash.
Enterprises agrees that the subordination provisions contained herein shall
not be affected by any action or failure to act by the holders of the
Senior Obligations which results, or may result, in affecting, impairing or
extinguishing any right of reimbursement or subrogation or other right or
remedy of Enterprises.
9. Enterprises shall not sell, assign, transfer or otherwise
dispose of all or any part of the Subordinated Debt without having first
obtained the prior written consent of the Collateral Agent.
10. The Company agrees that it will not make any payment of any
of the Subordinated Debt, or take any other action, in contravention of the
provisions of this Agreement.
11. Enterprises agrees that the provisions of this Agreement
shall be applicable to the Senior Obligations whenever the same may arise
and notwithstanding the fact that no Senior Obligations may be outstanding
from time to time and may have paid down to zero at any time or from time
to time, it being understood that the Credit Agreement permits the Company
to borrow, repay and reborrow from time to time subject to the terms and
conditions thereof, all or any of which terms and conditions may be waived.
12. All rights and interests of the Collateral Agent hereunder,
and all agreements and obligations of the Company and Enterprises under
this Agreement, shall remain in full force and effect irrespective of:
(i) any lack of validity or enforceability of any of the
Loan Documents;
(ii) any change in the time, manner or place of payment of,
or any other term of, all or any of the Senior Obligations, or any other
amendment or waiver of or any consent to departure from any of the Senior
Obligations;
(iii) any exchange, release or non-perfection of the
Collateral, or any release or amendment or waiver of or consent to or
departure from any guaranty, for all or any of the Senior Obligations; or
- 30 -
<PAGE>
(iv) any other circumstance which might otherwise constitute
a defense available to, or a discharge of, the Company in respect of the
Senior Obligations or this Agreement. This Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment
of any of the Senior Obligations is rescinded or must otherwise be returned
by the Administrative Agent upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, all as though such payment had
not been made.
13. Enterprises authorizes the Agents, without notice or demand
and without affecting or impairing the obligations of Enterprises, from
time to time to (i) renew, compromise, extend, increase, accelerate or
otherwise change the time for payment of, or otherwise change the terms of
the Senior Obligations, or any part thereof, including, without limitation,
to increase or decrease the rate of interest thereon or the principal
amount thereof; (ii) take or hold security for the payment of the Senior
Obligations and exchange, enforce, foreclose upon, waive and release any
such security; (iii) apply such security and direct the order or manner of
sale thereof as the Agents, in their sole discretion, may determine; (iv)
release and substitute one or more indorsers, warrantors, borrowers or
other obligors; and (v) exercise or refrain from exercising any rights
against the Company or any other Person.
- 31 -
<PAGE>
T. Notices.
-------
Except as otherwise provided herein, all notices, requests and
demands to or upon the respective parties hereto to be effective shall be
in writing and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when delivered by hand, or when deposited
in the mail, first-class postage prepaid, or, in the case of telecopier
notice, when sent, addressed as follows in the case of Enterprises, the
Administrative Agent and the Collateral Agent, or to such other addresses
as to which the Agents may be hereafter notified by the respective parties
hereto:
if to Enterprises, at:
TPI Enterprises, Inc.
Phillips Point Plaza, East Tower
777 South Flagler Drive
West Palm Beach, Florida 33401
Attention: President
Telephone: (407) 835-8888
Telecopy: (407) 835-4982
if to the Company, at:
TPI Restaurants, Inc.
2158 Union Avenue
Memphis, Tennessee 38104
Attention: Frederick W. Burford,
Vice President and
Chief Financial Officer
Telecopy: (901) 725-6400
Telephone: (901) 725-6418
- 32 -
<PAGE>
with a copy, in either the case of Enterprises or the Company, to:
Skadden, Arps, Slate, Meagher & Flom
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attention: Ronald Barusch, Esq.
Telephone: (202) 371-7990
Telecopy: (202) 393-5760,
if to the Administrative Agent, at:
The Bank of New York
One Wall Street
Agency Function Administration
18th Floor
New York, New York 10286
Attention: Kalyani Bose,
Agency Function Administrator
Telephone: (212) 635-4693
Telecopy: (212) 635-6365,
with a copy to:
The Bank of New York
One Wall Street
22nd Floor
New York, New York 10286
Attention: Frank P. Turner,
Assistant Vice President
Telephone: (212) 635-6898
Telecopy: (212) 635-6434,
- 33 -
<PAGE>
and if to the Collateral Agent, at
NationsBank of North Carolina, N.A.
One NationsBank Plaza
Charlotte, North Carolina 28255
Attention: Elizabeth S. Garver,
Corporate Lending Support
Telephone: (704) 386-8382
Telecopy: (704) 386-8694
with a copy to:
NationsBank Corporation
One NationsBank Plaza
Location Code: M-5
Nashville, Tennessee 37239-1967
Attention: Steven L. Dalton,
Vice President
Telephone: (615) 749-4151
Telecopy: (615) 749-4640.
U. Expenses.
--------
Enterprises will upon demand pay to the Agents or either of them
any and all reasonable sums, costs and expenses which the Collateral Agent
may pay or incur pursuant to the provisions of this Agreement or in
negotiating, executing or enforcing this Agreement or in enforcing payment
of the Obligations, including, but not limited to court costs, reasonable
collection charges, reasonable travel expenses, and reasonable attorneys'
fees, all of which, together with interest at the highest rate then payable
on any of the Obligations, shall be part of the Obligations.
V. Repayment in Bankruptcy, etc.
----------------------------
If, at any time or times subsequent to the payment of all or any
part of the Obligations, the Agents or either of them shall be required to
repay any amounts previously paid by or on behalf of the Company,
Enterprises or any other guarantor in reduction of the Obligations under
any Loan Document by virtue of an order of any court having jurisdiction,
in the premises, including, without limitation, as a result of an ad-
judication that such amounts constituted preferential payments or
fraudulent conveyances, Enterprises unconditionally agrees to pay to the
Administrative Agent within 10 days after demand a sum in cash equal to the
amount of such repayment, together with interest on such amount from the
date of such repayment by either of the Agents to the date of payment to
the Administrative Agent at the applicable after-maturity rate set forth in
the Credit Agreement.
W. No Segregation of Moneys; No Interest.
-------------------------------------
No moneys or any other Property received by the Collateral Agent
hereunder need be segregated in any manner except to the extent required by
law, and any such moneys or other Property may be deposited under such
- 34 -
<PAGE>
general conditions as may be prescribed by law applicable to the Collateral
Agent and the Collateral Agent shall not be liable for any interest
thereon.
X. Continuance.
-----------
This is a continuing agreement and shall remain in full force and
effect so long as (i) any of the Obligations remains outstanding or (ii)
any Loan Document is in effect. If this Agreement is revoked by operation
of law as against Enterprises, Enterprises will indemnify and save each of
the Agents, the Banks and their respective successors and assigns harmless
from any loss which may be suffered or incurred in making, giving, granting
or extending the Loans or other credits, or otherwise acting, hereunder
prior to receipt by the Agents of notice in writing of such revocation.
Y. Successors and Assigns.
----------------------
This Agreement shall be binding upon Enterprises, the Company and
their respective successors and assigns, and shall inure to the benefit of
the Collateral Agent and its successors and assigns, provided that neither
Enterprises nor the Company shall assign or otherwise transfer any of its
obligations under this Agreement to any other person without the prior
written consent of the Collateral Agent.
Z. Amendments.
----------
With the written consent of the Required Banks, the Collateral
Agent, the Company and Enterprises may, from time to time, enter into writ-
ten amendments, supplements or modifications of this Agreement and, with
the consent of the Required Banks, the Collateral Agent on behalf of the
Banks may execute and deliver to any such parties a written instrument
waiving, on such terms and conditions as the Collateral Agent may specify
in such instrument, any of the requirements hereof or any Default or Event
of Default and its consequences; provided, however, that no such amendment,
supplement, modification or waiver shall (i) release or discharge
Enterprises from its obligations hereunder, (ii) release all or any part of
the Collateral except to the extent that the Collateral Agent shall be
required or permitted to do so under the terms and provisions hereof or of
the Credit Agreement, or (iii) change the provisions of paragraph 8(m),
13(e), 15 or 22, and provided further that no such amendment, supplement,
modification or waiver shall change any of the rights or obligations of
Collateral Agent hereunder without the written consent of the Collateral
Agent. In the case of any waiver, the parties to this Agreement, the Banks
and the Collateral Agent shall be restored to their former position and
rights hereunder, and any Default or Event of Default waived shall not
extend to any subsequent or other Default or Event of Default, or impair
any right consequent thereon.
AA. Miscellaneous.
-------------
1. No failure by the Collateral Agent to exercise, and no delay
by the Collateral Agent in exercising, any right or remedy hereunder shall
operate as a waiver thereof.
- 35 -
<PAGE>
2. Each and every right, remedy and power granted to the
Collateral Agent hereunder or allowed at law, in equity or by other agree-
ment shall be cumulative and not exclusive, and may be exercised by the
Collateral Agent from time to time.
3. Enterprises hereby waives presentment, demand for payment,
notice of default, non-performance and dishonor, protest and notice of
protest of the Loan Documents and the Obligations, notice of acceptance of
this Agreement and reliance hereupon by the Collateral Agent, and notice of
the making of any Loans, and the issuance of any Letters of Credit and the
incurrence or accrual of any other obligations, notice of any sale of col-
lateral security or any default of any sort and notice of any amendment,
modification, increase or waiver of any Loan Document.
4. This Agreement embodies the entire agreement and understand-
ing among Enterprises, the Company and the Collateral Agent with respect to
the subject matter hereof and supersedes all prior agreements and
understandings among Enterprises, the Company and Collateral Agent with
respect to the subject matter hereof.
5. This Agreement is being delivered in, is intended to be
performed in, shall be construed and enforceable in accordance with and be
governed by the internal laws of, the State of New York without regard to
principles of conflict of laws (other than Section 5-1401 of the New York
General Obligations Law).
6. Every provision of this Agreement is intended to be
severable, and if any term or provision hereof shall be invalid, illegal or
unenforceable for any reason, the validity, legality and enforceability of
the remaining provisions hereof shall not be affected or impaired thereby,
and any invalidity, illegality or unenforceability in any jurisdiction
shall not affect the validity, legality or enforceability of any such term
or provision in any other jurisdiction.
7. All covenants, agreements and representations made herein
and in all certificates or other documents delivered in connection with
this Agreement by or on behalf of the Company and Enterprises shall survive
the execution and delivery hereof and thereof, and all such covenants,
agreements and representations shall inure to the benefit of the respective
successors and assigns of the Collateral Agent whether or not so expressed.
This Agreement may be assigned by the Collateral Agent at any time.
8. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one Agreement. It shall not be necessary in making proof of
this Agreement or of any document required to be executed and delivered in
connection herewith or therewith to produce or account for more than one
counterpart signed by the party to be charged.
9. Enterprises hereby waives any rights to be subrogated to the
rights of the Agents and the Banks with respect to the Senior Obligations
arising out of any payment made by Enterprises to the Agents and the Banks
under paragraph 2 of this Agreement until such time as the Agents and the
- 36 -
<PAGE>
Banks shall have received cash payment in satisfaction of all of the Senior
Obligations, and Enterprises hereby agrees that it will not institute or
take any action against the Company seeking reimbursement for such payment
until such time as the Agents and the Banks shall have received cash
payment in satisfaction of all of the Senior Obligations.
10. Paragraph headings have been inserted herein for convenience
only and shall not be construed to be a part hereof. Unless the context
otherwise requires, words in the singular number include the plural, and
words in the plural include the singular.
11. The Company, Enterprises and the Collateral Agent each
irrevocably submits to the jurisdiction of any New York State or Federal
court sitting in The City and County of New York (Borough of Manhattan)
over any suit, action or proceeding arising out of or relating to this
Agreement. The Company, Enterprises and the Collateral Agent each
irrevocably waives, to the fullest extent enforceable at law, any objection
which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding brought in any such court and any claim that any
such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum. The Company, Enterprises and the Collateral
Agent each agrees that a final judgment (after any allowable appeal, if
taken) in any such suit, action or proceeding brought in any such court
shall be conclusive and binding upon Enterprises.
12. Process may be served in any suit, action, counterclaim or
proceeding of the nature referred to in paragraph 23(k) by mailing copies
thereof by registered or certified mail, postage prepaid, return receipt
requested, to the address set forth in paragraph 16 or to any other address
of which Enterprises, the Company or the Collateral Agent, as the case may
be, shall have given written notice to the other parties hereto. The
Company, Enterprises and the Collateral Agent each hereby agrees that such
service (i) shall be deemed in every respect effective service of process
upon it in any such suit, action, counterclaim or proceeding, and (ii)
shall to the fullest extent enforceable by law, be taken and held to be
valid personal service upon and personal delivery to it.
13. Nothing in this Agreement shall affect the right of the
Collateral Agent to serve process in any other manner permitted by law or
limit the right of the Agents to bring proceedings against Enterprises in
the courts of any other jurisdiction or jurisdictions.
- 37 -
<PAGE>
14. ENTERPRISES, THE COMPANY AND THE COLLATERAL AGENT EACH
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREIN, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. FURTHER EN-
TERPRISES AND THE COMPANY EACH HEREBY CERTIFIES THAT NO REPRESENTATIVE OR
AGENT OF THE COLLATERAL AGENT, OR COUNSEL TO THE COLLATERAL AGENT, HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE COLLATERAL AGENT WOULD NOT,
IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS PROVISION.
ENTERPRISES AND THE COMPANY EACH ACKNOWLEDGES THAT THE COLLATERAL AGENT HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, INTER ALIA, THE PROVISIONS OF
----- ----
THIS PARAGRAPH.
15. The Indebtedness of Enterprises hereunder constitutes (i)
"Senior Indebtedness of the Company" as defined in the Enterprises
Subordinated Indenture and (ii) "Senior Debt" as defined in the Debenture
Purchase Agreement.
- 38 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date hereof.
TPI ENTERPRISES, INC.
By: /s/ Frederick W. Burford
-----------------------------------------
Name: Frederick W. Burford,
Title: Executive Vice President
and Chief Financial
Officer
TPI RESTAURANTS, INC.
By: /s/ Frederick W. Burford
----------------------------------------
Name: Frederick W. Burford,
Title: Vice President and
Chief Financial Officer
Accepted:
NATIONSBANK OF NORTH CAROLINA, N.A.,
AS COLLATERAL AGENT
By: /s/ John E. Ball
-----------------------------------------
Name: John E. Ball
Title: Senior Vice President
- 39 -
Exhibit 10.33
TRUST AGREEMENT
---------------
TRUST AGREEMENT (the "Trust Agreement"), dated
as of January 31, 1990, by and between TPI Enterprises,
Inc., a New Jersey corporation (the "Corporation") with
offices at 885 Third Avenue, New York, New York, 10022,
and Citibank, N.A., as trustee for the trust created
hereby (the "Trustee") with offices at One Court Square,
Long Island City, New York, 11120.
WHEREAS, the Corporation has established the
TPI Enterprises, Inc. Nonqualified Retirement Plan for
Senior Executives (the "Plan"), for the benefit of a
group of management and/or highly compensated employees
of the Corporation and its subsidiaries, or beneficiaries
thereof; and
WHEREAS, the Corporation is or may become
obligated, directly or indirectly, under the Plan to make
payments to certain of the executives of the Corporation
or its subsidiaries, or beneficiaries thereof (the
"Executives"); and
WHEREAS, the Corporation has agreed to assure
that the future payment of amounts under the Plan will be
paid and will not be improperly withheld in the event
that a "Change in Control" (as defined in Section 3.02
<PAGE>
hereof) should occur or under any other circumstances;
and
WHEREAS, for purposes of assuring that such
payments will be paid and will not be improperly
withheld, the Corporation desires to establish a trust to
be known as the TPI Enterprises, Inc. Nonqualified
Retirement Plan for Senior Executives Trust (the
"Trust"), and intended to be a grantor trust within the
meaning of section 671 of the Internal Revenue Code of
1986, as thereafter amended (the "Code") with the corpus
and income of the Trust treated as assets and income of
the Corporation for federal income tax purposes; and
WHEREAS, the Corporation shall transfer to the
Trust an "Initial Contribution" (as defined in Section
2.01(a) hereof) and at any time thereafter pursuant to
Sections 2.01(b) and (c) hereof shall transfer to the
Trust the "Required Funding Amount" (as defined in
Section 2.01(b) hereof) to be held, invested and
distributed by the Trustee all in accordance with the
provisions of this Trust Agreement; and
WHEREAS, the Trust shall be initially revocable
and become irrevocable upon the occurrence of a "Change
in Control" (as defined in Section 3.02 hereof); and
WHEREAS, the Plan contemplates that the
2
<PAGE>
Corporation will pay the entire cost of such payments
pursuant to the Plan from its general assets; and
WHEREAS, the Corporation intends that the
existence of the Trust shall not alter the
characterization of the Plan as "unfunded" for purposes
of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and shall not be construed to
provide income to any Executives prior to the actual
payment of benefits under the Plan; and
WHEREAS, the Corporation intends that the
assets of the Trust shall at all times be subject to the
claims of the Corporation's existing or future creditors,
as provided in Section 4.03 hereof;
NOW, THEREFORE, in consideration of the mutual
agreements contained herein and for other good and
valuable consideration, the parties hereto agree as
follows:
ARTICLE I
THE PLAN
--------
Section 1.1 Plan. The Plan is subject to this
----
Trust. The Corporation shall continue to be liable,
directly or indirectly, to the Executives to make all
payments required under the terms of the Plan to the
3
<PAGE>
extent such payments have not been made pursuant to this
Trust Agreement. Distributions made from the Trust to
Executives in respect of the Plan pursuant to Section
4.02 hereof shall, to the extent of such distributions,
satisfy the Corporation's obligation to pay benefits to
such Executive under the Plan. The Corporation shall
provide the Trustee with copies of the Plan and any
amendments thereto promptly after execution of this Trust
Agreement and adoption thereof, respectively.
ARTICLE II
TRUST AND THE TRUST CORPUS
--------------------------
Section 2.1 Delivery of Funds.
-----------------
(a) Concurrently with the execution of
this Trust Agreement, the Corporation hereby establishes
the Trust contemplated hereunder with the Trustee and
shall deliver to the Trustee to be held in trust here-
under the sum of one thousand dollars ($1,000) in cash to
be administered and disposed of by the Trustee as
provided herein ("Initial Contribution").
(b) At any time after the execution of
this Trust Agreement, the Corporation may, at its
discretion, deliver to the Trustee to be held in trust
here- under an additional amount of cash (or marketable
securities other than securities issued by the
4
<PAGE>
Corporation having a fair market value equal to such
amount, or some combination thereof) representing the sum
of the amounts, determined as provided below, which will
be sufficient to fund the Corporation's obligations to
pay the Executives' benefits under the Plan, plus such
other amounts as may be necessary for expenses and other
costs of maintaining the Trust (collectively, the
"Required Funding Amount"); provided, however, that in no
-----------------
event shall the Corporation make such delivery later than
seven (7) days after the occurrence of a "Potential
Change in Control" (as defined in Section 3.01 hereof).
(c) In the event that the Required
Funding Amount is delivered pursuant to subsection (b)
hereof, the Corporation shall, at twelve-month intervals
commencing from the date of such delivery, unless the
"Trust Corpus" (as defined in Section 2.02(a) hereof)
shall theretofore have been released pursuant to Article
IV hereof, recalculate the Required Funding Amount as of
the end of the month immediately preceding such twelve-
month interval date. If the amount so calculated exceeds
the fair market value of the assets then held in the
Trust, the Corporation shall promptly (and in no event
later than seven (7) days from the date of such twelve-
month interval date) pay to the Trustee an amount in cash
5
<PAGE>
(or marketable securities other than securities issued by
the Corporation or any combination thereof) equal to such
excess. If the Required Funding Amount so calculated is
less than the fair market value of the assets held in the
Trust, the Trustee, upon receipt of a written request
from the Corporation, shall distribute to the Corporation
such difference in cash; provided, however, that this
-----------------
sentence shall not apply after the occurrence of a Change
in Control.
(d) The Required Funding Amount shall be
determined by the Corporation (and the Trustee shall have
no responsibility for such determination). With respect
to the Plan the Required Funding Amount shall be, (i) in
the case of Executives receiving benefits on the date of
the delivery of the Required Funding Amount, an amount
equal, on a present value basis, to all future payments
due, and (ii) in the case of all other participating
Executives, the amount, on a present value basis, that
would become due at age 60 (or the date of the delivery
of the Required Funding Amount for Executives older than
age 60) and thereafter if the Executive were to have been
terminated under the Plan on such date, in both cases
using the actuarial life expectancies used under the
Plan.
6
<PAGE>
(e) The payment by the Corporation to the
Trustee pursuant to Sections 2.01(a), (b) and (c) hereof
shall be accompanied by a schedule of the individual
Executives for whose accounts such payment is being made,
which schedule shall set forth the amounts delivered to
the Trustee in respect of each such Executive in respect
of the Plan.
(f) Notwithstanding the foregoing
sections, the Trustee shall not be liable for any failure
by the Corporation to provide the Required Funding Amount
sufficient to pay all benefits pursuant to the Payment
Schedule in full nor shall the Trustee be required to
take any affirmative action to acquire monies or property
from a prior trustee or custodian nor shall the Trustee
be responsible for the collection or enforcement of any
payment or contributions from the Corporation. The
primary responsibility for the making of payments
pursuant to the Payment Schedule is that of the
Corporation, and this Trust, to the extent that assets
are available, is intended to assist the Corporation in
meeting that responsibility. The Corporation hereby
agrees to indemnify and hold the Trustee harmless from
and against any and all losses, damages, costs, expenses
or liabilities, including reasonable attorney's fees and
7
<PAGE>
other costs of litigation, arbitration or administrative
proceeding to which the Trustee may become subject
pursuant to~ arising out of, occasioned by, incurred in
connection with or in any way associated with this
Section, except for any act or omission constituting
gross negligence or willful misconduct of the Trustee.
Section 2.2 Trust Corpus. (a) As used herein,
------------
the term "Trust Corpus" shall mean the amounts delivered
to the Trustee as described in Section 2.01(a) here- of
plus all amounts delivered thereafter pursuant to
Sections 2.01(b) and (c) hereof (and less such amounts
distributed from the Trust pursuant to Sections 2.01(c),
4.02 and 4.03 hereof or otherwise pursuant to the terms
hereof), in whatever form held or invested as provided
herein. The Trust Corpus shall be held, invested and
reinvested by the Trustee in marketable securities or
negotiable certificates of deposit (or as otherwise set
forth below) as directed by the Corporation in accordance
with this Section 2.02. The Corporation shall direct the
Trustee to invest or reinvest from time to time all or
such part of the Trust Corpus (taking into account, among
other things, anticipated cash requirements for the
payment of benefits under the Plan) in either one or a
combination of the following investments:
8
<PAGE>
(1) investments in direct
obligations of the United States of America or
agencies of the United States of America or
obligations unconditionally and fully
guaranteed as to principal and interest by the
United States of America, in each case maturing
within one (1) year or less from the date of
acquisition; or
(2) investments in
negotiable certificates of deposit (in each
case maturing within one (1) year or less from
the date of acquisition) issued by a commercial
bank organized and existing under the laws of
the United States of America or any state
thereof having a combined capital and surplus
of at least one billion dollars
($1,000,000,000); or
(3) investments in a
deposit obligation of the Trustee known as the
Money Market Deposit Account maintained by the
Trustee; or
(4) investments in a money
market fund, such as the Landmark Cash
Reserves, as the Trustee shall make available
from time to time.
provided, however, that pending investment as described
- -----------------
above, the Trust Corpus may be held in interest bearing
accounts maintained by the Trustee; and provided,
---------
however, that the Trustee shall not be liable for any
- -----
failure to maximize the income earned on that portion of
the Trust Corpus as is from time to time invested or
reinvested as set forth above, nor for any loss of income
due to liquidation of any investment which the Trustee,
in its sole discretion, believes necessary to make
9
<PAGE>
payments or to reimburse expenses under the terms of this
Trust Agreement. In the event that the Corporation fails
to direct the Trustee as to the manner of investment of
any portion of the Trust Corpus, the Trustee shall invest
such undirected portion in the investment fund described
in clause (iv) above.
(b) Except as hereinafter provided, all
interest and other income earned on the investment of the
Trust Corpus shall be retained, reinvested and added at
least annually to the Trust Corpus. The interest and
other income earned in any calendar year shall not be
paid over to the Corporation by the Trustee except
insofar as the Trustee may be required to deliver amounts
to the Corporation under Section 2.01(c) hereof.
(c) All losses of income or principal in
respect of, and expenses (including, as provided in
Section 5.01(g) hereof, any expenses of the Trustee)
charged against, the Trust Corpus shall be for the
account of the Corporation and the Corporation shall be
obligated to promptly reimburse the Trust Corpus for any
loss in principal amount of, or expense charged against,
the Trust Corpus except to the extent that such amounts
have been applied to reduce amounts payable to the
Corporation pursuant to Section 2.01(c) hereof.
10
<PAGE>
(d) The Trust is intended to be a grantor
trust within the meaning of section 671 of the Code, and
all interest and other income earned on the investment of
the Trust Corpus shall be treated as assets and income of
the Corporation for federal income tax purposes.
Section 2.3 Irrevocability of Trust. The
-----------------------
Trust shall be revocable unless and until a Change of
Control of the Corporation shall occur, at which time the
Trust Agreement shall become irrevocable. Once the Trust
becomes irrevocable, subject to Section 4.03, the Trustee
shall hold the Trust for the exclusive purpose of
providing benefits to the Executives under the terms of
the Plan and defraying expenses of the Trust in
accordance with the provisions of this Trust Agreement.
In addition, notwithstanding anything in this Section to
the contrary, after the dated date of this Trust
Agreement, except as provided in Sections 4.01 and
2.01(c) and Article VI, no part of the income or corpus
of the Trust shall be recovered by or for the
Corporation.
Section 2.4 Acceptance of Trust by Trustee.
------------------------------
The Trustee accepts the Trust established under this
Trust Agreement on the terms and subject to the
provisions set forth herein, and the Trustee agrees to
11
<PAGE>
discharge and perform fully and faithfully all of the
duties and obligations imposed upon it under this Trust
Agreement.
Section 2.5 Taxation of Trust Corpus. The
------------------------
Corporation shall from time to time pay taxes (references
in this Trust Agreement to the payment of taxes shall
include interest and applicable penalties) or any and all
kinds whatsoever which at any time are lawfully levied or
assessed upon or become payable in respect of the Trust
Corpus, the income or any property forming a part
thereof, or any security transaction pertaining thereto.
To the extent that any taxes levied or assessed upon the
Trust Corpus are not paid by the Corporation or contested
by the Corporation pursuant to the last sentence of this
Section 2.05, the Trustee shall pay such taxes out of the
Trust Corpus and the Corporation shall upon demand by the
Trustee deposit into the Trust an amount equal to the
amount paid from the Trust Corpus to satisfy such tax
liability. Alternatively, the Corporation may itself
contest the validity of any such taxes, but any such
contest shall not affect the Corporation's obligation to
reimburse the Trust for taxes paid from the Trust Corpus.
12
<PAGE>
ARTICLE III
CHANGE IN CONTROL
-----------------
Section 3.1 Definition of Potential Change in
---------------------------------
Control. For purposes of this Trust Agreement, a
- -------
Potential Change in Control shall have occurred if (i)
the Corporation enters into an agreement, the
consummation of which would result in the occurrence of a
Change in Control; (ii) any person (including the
Corporation) publicly announces an intention to take or
to consider taking actions which if consummated would
constitute a Change in Control; (iii) any person (other
than the Corporation) becomes the beneficial owner,
directly or indirectly, of securities of the Corporation
representing 9.5% or more of the combined voting power of
the Corporation's then outstanding securities; or (iv)
the Board of Directors of the Corporation adopts a
resolution to the effect that, for purposes of this Trust
Agreement, a potential change in control of the
Corporation has occurred.
Section 3.2 Definition of Change in Control.
-------------------------------
For purposes of this Trust Agreement, a Change in Control
shall be deemed to have occurred if (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the
13
<PAGE>
"Exchange Act")), other than the Corporation, any
"person" who on the date hereof is a director or officer
of the Corporation, any trustee or other fiduciary
holding securities under an employee benefit plan of the
Corporation, or any corporation owned, directly or
indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of
stock of the Corporation, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation
representing 35% or more of the combined voting power of
the Corporation's then outstanding securities, or (ii)
during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board
of Directors of the Corporation, and any new director
(other than a director designated by a person who has
entered into an agreement with the Corporation to effect
a transaction described in clause (i) or (iii) of this
Section) whose election by the Board of Directors of the
Corporation or nomination for election by the
Corporation's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the
period or whose election or nomination for election was
14
<PAGE>
previously so approved, cease for any reason to
constitute at least a majority thereof; or (iii) the
shareholders of the Corporation approve a merger or
consolidation of the Corporation with any other
corporation, other than a merger or consolidation which
would result in the voting securities of the Corporation
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity)
more than 80% of the combined voting power of the voting
securities of the Corporation or such surviving entity
outstanding immediately after such merger or
consolidation, or the shareholders of the Corporation
approve a plan of complete liquidation of the Corporation
or an agreement for the sale or disposition by the
Corporation of all or substantially all of the
Corporation's assets.
Section 3.3 Notice to Trustee. Upon the
-----------------
occurrence of a Potential Change in Control or a Change
in Control, the Corporation shall promptly give written
notice of such event to the Trustee.
ARTICLE IV
RELEASE OF THE TRUST CORPUS
---------------------------
Section 4.1 Delivery to the Corporation. If
---------------------------
15
<PAGE>
and only if the Corporation delivers the Required Funding
Amount to the Trustee upon a Potential Change in Control,
such amount shall be returned to the Corporation one (1)
year after delivery to the Trustee unless a Change in
Control shall have occurred during such one (1) year
period. Such one (1) year period shall be renewed in the
event of any subsequent Potential Change in Control
occurring during such initial period. The Corporation
shall notify the Trustee of the occurrence of a Change in
Control or Potential Change in Control and the Trustee
may rely on such notice or on any other actual notice,
satisfactory to the Trustee, of such a change or
potential change which the Trustee may receive.
Section 4.2 Deliveries to Participants. The
--------------------------
Trustee shall hold the Trust Corpus in its possession
subject to the provisions of this Trust Agreement until
authorized to deliver the Trust Corpus or any specified
portion thereof as follows:
(a) The Corporation shall deliver to the
Trustee, contemporaneously with the delivery of the
Required Funding Amount to the Trustee pursuant to
Sections 2.01(b) and (c) hereof, a schedule (the "Payment
Schedule") indicating the amounts payable in respect of
each Executive the form in which such amount is to be
16
<PAGE>
paid (as provided for or available under the Plan) and
the time of commencement for payment of such amounts. The
Payment Schedule shall include instructions as to the
amount of any interest or other income accruing under the
Plan, and such instructions may be revised from time to
time to the extent so provided under the Plan. A
modified Payment Schedule shall be delivered by the
Corporation to the Trustee at each time that additional
amounts are required to be paid by the Corporation to the
Trustee (or refunded to the Corporation) under Sections
2.01(b) and (c) hereof and upon the occurrence of any
event, such as early retirement of an Executive,
requiring a modification of the Payment Schedule pursuant
to the Plan. Whenever the Corporation is required to
deliver to the Trustee a Payment Schedule or a modified
Payment Schedule, the Corporation shall also deliver at
the same time to each Executive the respective portion of
the Payment Schedule or modified Payment Schedule that
sets forth the amount payable to that Executive. Except
as otherwise provided herein, the Trustee shall make
payments to the Executives in accordance with such
Payment Schedule.
(b) In the event of the occurrence of a
Change in Control, if an Executive reasonably believes
17
<PAGE>
that the Payment Schedule, as modified, does not properly
reflect the amount payable to such Executive or the time
or form of payment from the Trust Corpus in respect of
the Plan, such Executive shall be entitled to deliver to
the Trustee written notice (the "Executive's Notice")
setting forth payment instructions for the amount the
Executive believes is due under the relevant terms of the
Plan. The Executive shall also deliver a copy of the
Executive's Notice to the Corporation within seven (7)
business days of the delivery to the Trustee. Unless the
Trustee receives written objection from the Corporation
within fourteen (14) business days after receipt by the
Trustee of such notice, the Trustee shall make the
payment in accordance with the payment instructions set
forth in the Executive's Notice. In the event of the
Executive's resignation for "Good Reason" or discharge
not for "Cause" (each as defined in the Plan), upon
delivery to the Trustee by the Executive of a copy of (i)
a written notice of termination to the Corporation or the
Executive, as the case may be, (ii) the calculation of
the amount due the Executive prepared by the
Corporation's consulting actuary in accordance with the
Plan and (iii) the Executive's request for payment by the
Trustee of the amount set forth in such calculation, the
18
<PAGE>
Trustee shall promptly (and in no event more than seven
(7) days after such request) deliver such amount to the
Executive.
(c) The Trustee shall be permitted to
withhold from any payment due to an Executive hereunder
the amount required by law to be so withheld under
federal, state and local wage withholding requirements or
otherwise, and shall pay over to the Corporation for
remittance to the appropriate government authority the
amounts so withheld. The Trustee may rely on
instructions from the Corporation as to any required
withholding and shall be fully protected under Sections
5.01(d) and (g) hereof in relying upon such instructions.
(d) Except as otherwise provided herein,
in the event of any determination by the Internal Revenue
Service (the "IRS") that the Executives or any particular
Executive is subject to federal income taxation on
amounts held in Trust hereunder prior to the distribution
to the Executives or Executive of such amounts, the
Trustee shall, on receipt by the Trustee of notice of
such determination from the Executives or a particular
Executive or from the IRS, pay to each Executive covered
by the notice the portion of the Trust Corpus includible
in such Executive's federal gross income.
19
<PAGE>
(e) Payment in the event of Death of
--------------------------------
Executive. In the event that an Executive shall be
- ---------
deceased prior to the time payment is due the Executive,
payment shall be made to the estate of the deceased
Executive, unless the Plan provides otherwise, and all
provisions set forth herein with respect to the Executive
shall apply with the same force and effect to such
estate.
Section 4.3 Deliveries to Creditors of the
------------------------------
Corporation. It is the intent of the parties hereto that
- -----------
the Trust Corpus is and shall remain at all times subject
to the claims of the general creditors of the
Corporation. Accordingly, the Corporation shall not
create a security interest in the Trust Corpus in favor
of the Executives or any creditor. If the Trustee
receives the notice provided for in Section 4.04 hereof,
or otherwise receives actual notice that the Corporation
is insolvent or bankrupt as defined in Section 4.04
hereof, the Trustee shall make no further distributions
of the Trust Corpus to any of the Executives but shall
deliver the entire amount of the Trust Corpus only as a
court of competent jurisdiction, or duly appointed
receiver or other person authorized to act by such a
court, may direct to make the Trust Corpus available to
20
<PAGE>
satisfy the claims of the Corporation's general
creditors. The Trustee shall resume distribution of
Trust Corpus to the Executives under the terms hereof,
upon no less than thirty (30) days' advance notice to the
Corporation, if it determines that the Corporation was
not, or is no longer, bankrupt or insolvent. To the
extent reasonably practicable, such determination shall
be made in a timely fashion and, in any event, within
fourteen (14) days following the Trustee's receipt of a
written request therefor made by or on behalf of any
Executive which request shall be accompanied by a
certified copy of one of the below-noted bases for such
determination. Such determination shall be based upon a
decision of a court of competent jurisdiction, a report
by a nationally recognized credit agency, or a
certification by the Corporation through its Board of
Directors and Chief Executive Officer. Unless the
Trustee has actual knowledge of the Corporation's
bankruptcy or insolvency, the Trustee shall have no duty
to inquire whether the Corporation is bankrupt or
insolvent.
Section 4.4 Notification of Bankruptcy or
-----------------------------
Insolvency. The Corporation, through its Board of
- ----------
Directors and Chief Executive Officer, shall advise the
21
<PAGE>
Trustee promptly in writing of the Corporation's
bankruptcy or insolvency. The Corporation shall be
deemed to be bankrupt or insolvent upon the occurrence of
any of the following:
(1) The Corporation shall
make an assignment for the benefit of
creditors, file a petition in bankruptcy,
petition or apply to any tribunal for the
appointment of a custodian, receiver,
liquidator, sequestrator, or any trustee for it
or a substantial part of its assets, or shall
commence any case under any bankruptcy,
reorganization, arrangement, readjustment of
debt, dissolution, or liquidation law or
statute of any jurisdiction (federal or state),
whether now or hereafter in effect; or if there
shall have been filed any such petition or
application, or any such case shall have been
commenced against it, in which an order for
relief is entered or which remains undismissed;
or the Corporation by any act or omission shall
indicate its consent to,approval of or
acquiescence in any such petition, application
or case or order for relief or to the
appointment of a custodian, receiver or any
trustee for it or any substantial part of any
of its property, or shall suffer any such
custodianship, receivership, or trusteeship to
continue undischarged; or
(2) The Corporation shall
generally not pay its debts as such debts
become due or shall cease to pay its debts in
the ordinary course of business.
ARTICLE V
TRUSTEE
-------
Section 5.1 Trustee. (a) The duties and
-------
responsibilities of the Trustee shall be limited to those
22
<PAGE>
expressly set forth in this Trust Agreement, and no
implied covenants or obligations shall be read into this
Trust Agreement against the Trustee.
(b) If, pursuant to Section 4.03 hereof
or otherwise, all or any part of the Trust Corpus is at
any time attached, garnished, or levied upon by any court
order, or in case the payment, assignment, transfer,
conveyance or delivery of any such property shall be
stayed or enjoined by any court order, or in case any
order, judgment or decree shall be made or entered by a
court affecting such property or any part thereof, then
and in any of such events the Trustee is authorized, in
its sole discretion, to rely upon and comply with any
such order, writ, judgment or decree, and it shall not be
liable to the Corporation (or any of its subsidiaries) or
any Executive by reason of such compliance even though
such order, writ, judgment or decree subsequently may be
reversed, modified, annulled, set aside or vacated.
(c) The Trustee shall maintain such
books, records and accounts as may be necessary for the
proper administration of the Trust Corpus and shall
render to the Corporation, on or prior to each June 30
following the date of this Trust Agreement until the
termination of this Trust Agreement (and within sixty
23
<PAGE>
(60) days after the date of such termination), an account
statement with respect to the Trust Corpus as of the end
of the then most recent calendar year (and as of the date
of such termination). The Trustee will at all times
maintain a separate bookkeeping account for each
Executive to which it will credit each amount delivered
by the Corporation to the Trustee with respect to such
Executive. Upon the written request of an Executive or
the Corporation, the Trustee shall deliver to such
Executive or the Corporation, as the case may be, a
written report setting forth the amount held in the Trust
for such Executive (or each Executive if such request is
made by the Corporation) and a record of the
contributions made with respect thereto by the
Corporation. Unless the Corporation or any Executive
shall have filed with the Trustee written exceptions or
objections to any such statement, Corporation shall
reimburse the Trustee for all reasonable legal fees and
expenses incurred pursuant to this paragraph (e).
(d) The Trustee shall be reimbursed by
the Corporation for its reasonable expenses incurred in
connection with the performance of its duties hereunder
and shall be paid reasonable fees for the performance of
such duties in the manner provided by Section 2.02(c)
24
<PAGE>
hereof and paragraph (g) of this Section 5.01.
Notwithstanding anything to the contrary herein, the
Trustee shall have a lien on the Trust for such fees,
compensation and expenses until paid.
(e) The Corporation agrees to defend,
indemnify and hold harmless the Trustee from and against
any and all damages, losses, claims or expenses as
incurred (including expenses of investigation and fees
and disbursements of counsel to the Trustee and any taxes
imposed on the Trust Corpus or income of the Trust)
arising out of or in connection with the performance by
the Trustee of its duties hereunder which shall include,
but shall not be limited to, acting on instructions or
failing to act in the absence of such instructions as
provided in this Trust Agreement, unless such damages,
losses, claims or expenses result from the gross
negligence of the Trustee. If any such damages, losses,
claims or expenses arise, or if the Corporation fails to
so defend and indemnify the Trustee as provided herein,
or both, the Trustee shall have the right to engage
counsel of the Trustee's choice, but at the Corporation's
expense, to conduct such defense and/or obtain such
indemnity. The Trustee shall notify the Corporation of
the identity of such counsel within 15 days after
25
<PAGE>
engagement thereof. Any amount payable to the Trustee
under paragraph (f) of this Section 5.01 or this
paragraph (g) and not previously paid by the Corporation
pursuant to Section 2.02(c) hereof shall be paid by the
Corporation promptly upon demand therefor by the Trustee
or, if the Corporation so notifies the Trustee, from the
Trust Corpus. In the event that payment is made
hereunder to the Trustee from the Trust Corpus, the
Trustee shall promptly notify the Corporation in writing
of the amount of such payment. The Corporation agrees
that, upon receipt of such notice, it will deliver to the
Trustee to be held in the Trust an amount in cash (or in
marketable securities or in some combinations thereof)
equal to any payments made from the Trust Corpus to the
Trustee pursuant to paragraph (f) of this Section 5.01 or
this paragraph (g). The failure of the Corporation to
transfer any such amount shall not in any way impair the
Trustee's right to indemnification, reimbursement and
payment pursuant to paragraph (f) of this Section 5.01 or
this paragraph (g).
(f) Administrative Powers of Trustee. The
--------------------------------
Trustee shall have the power in its discretion:
(1) to collect and receive
any and all money and other property due to the
Trust and to give full discharge therefor;
26
<PAGE>
(2) to settle, compromise
or submit to arbitration any claims, debts or
damages due or owing to or from the Trustee; to
commence or defend suits or legal proceedings
to protect any interest of the Trust; and to
represent the Trust in all suits or legal
proceedings in any court or before any other
body or tribunal; in this regard, the Trustee
shall not be required to undertake or to defend
any litigation arising in connection with this
Trust Agreement, unless it be first indemnified
by the Corporation against its reasonable
attorney's fees, and the Corporation hereby
agrees to indemnify the Trustee for such
reasonable attorney's fees;
(3) to engage attorneys to
interpret the Plan and Trust Agreement,
actuaries, accountants or other advisors as the
Trustee may deem necessary to control and
manage the Trust and to carry out the purposes
of this Trust Agreement;
(4) to directly or
indirectly invest and reinvest the Trust Corpus
pursuant to Section 2.02;
(5) to hold cash
uninvested in an amount considered necessary
and practical for proper administration of the
Trust and/or to deposit the same with any
banking, savings or similar financial
institution supervised by the United States or
any state of the United States, including the
Trustee's own banking department; and
(vi) to perform all such acts and
exercise all such rights and privileges consistent
with law and the terms of this Trust Agreement,
although not specifically mentioned herein, as the
Trustee may deem necessary to control and manage the
Trust Corpus and to carry out the purposes of this
Trust Agreement.
(g) Dealings with Trustee. Persons
---------------------
dealing with the Trustee shall be under no obligation to
27
<PAGE>
see to the proper application of any money paid or
property delivered to the Trustee or to inquire into the
Trustee's authority as to any transaction.
(h) The Corporation at any time may
employ as agent (to perform any act, keep any records or
accounts, or make any computations required of the
Corporation by this Trust Agreement or the Plan) the
corporation or association serving as Trustee hereunder.
Nothing done by said corporation or association as such
agent shall effect its responsibilities or liability as
Trustee hereunder.
Section 5.2 Successor Trustee. The Trustee
-----------------
may resign and be discharged from its duties hereunder at
any time by giving notice in writing of such resignation
to the Corporation and each Executive specifying a date
(not less than thirty (30) days after the giving of such
notice) when such resignation shall take effect.
Promptly after such notice, the Corporation (or, if a
Change in Control shall previously have occurred, the
Corporation and Executives having at least sixty-five
percent (65%) of all amounts then held in the Trust
credited to their accounts), shall appoint a successor
trustee, such trustee to become Trustee hereunder upon
the resignation date specified in such notice or earlier
28
<PAGE>
if such successor trustee is appointed earlier (and
accepts) pursuant to this Section. If the Corporation
and such Executives are unable to so agree upon a
successor trustee within thirty (30) days after such
notice, the Trustee shall be entitled, at the expense of
the Corporation, to petition a United States District
Court or any of the courts of the State of New York
having jurisdiction to appoint its successor. The
Trustee shall continue to serve until its successor
accepts the trust and receives delivery of the Trust
Corpus. The Corporation (or, if a Change in Control
shall previously have occurred, the Corporation and
Executives having at least sixty-five percent (65%) of
all amounts then held in the Trust credited to their
accounts) may at any time substitute a new trustee by
giving fifteen (15) days notice thereof to the Trustee
then acting. In the event of such removal or
resignation, the Trustee shall duly file with the
Corporation, and on and after a Change in Control the
Executives, a written statement or statements of accounts
and proceedings as provided in Section 5.01(c) hereof for
the period since the last previous annual accounting of
the Trust, and if written objection to such account are
not filed as provided in Section 4.02(b) hereof, the
29
<PAGE>
Trustee shall to the maximum extent permitted by
applicable law be forever released and discharged from
all liability and accountability with respect to the
propriety of its acts and transactions shown in such
account. The Trustee and any successor thereto appointed
hereunder shall be a commercial bank which is not an
affiliate of the Corporation, but which is a national
banking association or established under the laws of one
of the states of the United States, and which has equity
in excess of one hundred million dollars ($100,000,000).
Section 5.3 Evidence of Action by Corporation.
---------------------------------
The Corporation shall certify to the Trustee the name or
names of any person or persons authorized to act for the
Corporation. Such certification shall be signed by a
Vice President and the Secretary or an Assistant
Secretary of the Corporation. Until the Corporation
notifies the Trustee, in a similarly signed notice, that
any such person is no longer authorized to act for the
Corporation, the Trustee may continue to rely upon the
authority of such person.
The Trustee may rely upon any certificate,
notice or direction of the Corporation which the Trustee
in good faith believes to be genuine and executed and
delivered by a duly authorized officer or agent of the
30
<PAGE>
Corporation.
Communications to the Trustee shall be sent in
writing to the Trustee's office stated above or to such
other address as the Trustee may specify by certified or
express mail. No communication shall be binding upon the
Trust or the Trustee until it is received by the Trustee
and unless it is in writing and signed by an authorized
person.
Communications to the Corporation shall be sent
in writing to the Corporation's principal offices stated
above or to such other address as the Corporation may
specify by certified or express mail. No communication
shall be binding upon the Corporation until it is
received by the Corporation and unless it is in writing
and signed by an authorized person.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 6.1 Termination. This Trust shall be
-----------
terminated upon the final payment of all amounts payable
to all of the Executives pursuant to the Plan. Upon
termination of this Trust Agreement, the Trustee,
promptly after its final account has been settled as
provided in Section 5.01(c) hereof, shall transfer to the
Corporation in cash the value of the Trust Corpus, if
31
<PAGE>
any, as of the date of such termination. Upon making
such transfer, the Trustee shall be relieved from all
further liability. The Trustee's powers hereunder shall
continue so long as any of the Trust Corpus remains in
its possession. Any remaining portion of the Trust
Corpus shall be paid to the Corporation.
Section 6.2 Amendment and Waiver. Prior to
--------------------
the occurrence of a Change in Control, this Trust
Agreement can be amended by an instrument in writing
signed by the parties hereto. On or after the occurrence
of a Change in Control, this Trust may not be amended
except by an instrument in writing signed by the parties
hereto together with the written consent of Executives
having at least sixty-five percent (65%) of all amounts
then held in the Trust credited to their accounts. The
parties hereto, together with the consent of Executives
having at least sixty-five percent (65%) of all amounts
then held in the Trust credited to their accounts, may at
any time waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part
of a party hereto or an Executive to any such waiver
shall be valid if set forth in an instrument in writing
signed on behalf of such party or Executive.
Notwithstanding the foregoing, any such amendment or
32
<PAGE>
waiver may be made by written agreement of the parties
hereto without obtaining the consent of the Executives if
such amendment or waiver does not adversely affect the
rights of the Executives hereunder. No such amendment or
waiver relating to this Trust Agreement may be made with
respect to a particular Executive unless such Executive
has agreed in writing to such amendment or waiver.
ARTICLE VII
GENERAL PROVISIONS
------------------
Section 7.1 Further Assurances. The
------------------
Corporation shall, at any time and from time to time,
upon the reasonable request of the Trustee, execute and
deliver such further instruments and do such further acts
as may be necessary or proper to effectuate the purposes
of this Trust Agreement.
Section 7.2 Certain Provisions Relating to
------------------------------
This Trust Agreement. (a) This Trust Agreement sets
- --------------------
forth the entire understanding of the parties with
respect to the subject matter hereof and supersedes any
and all prior agreements, arrangements and understandings
relating thereto. This Trust Agreement shall be binding
upon and inure to the benefit of the parties and their
respective successors and legal representatives.
(b) This Trust Agreement shall be
33
<PAGE>
governed by and construed in accordance with the laws of
the State of New York, other than and without reference
to any provisions of such laws regarding choice of laws
or conflict of laws.
(c) In the event that any provision of
this Trust Agreement or the application thereof to any
person or circumstances shall be determined by a court of
proper jurisdiction to be invalid or unenforceable to any
extent, the remainder of this Trust Agreement, or the
application of such provision to persons or circumstances
other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each
provision of this Trust Agreement shall be valid and
enforced to the fullest extent permitted by law.
(d) Arbitration. Any dispute between be
-----------
void; and no right or interest of any Executive under
this Trust Agreement shall be liable for, or subject to,
any obligation or liability or tort of such Executive.
34
<PAGE>
IN WITNESS WHEREOF, the parties have executed
this Trust Agreement as of the date first written above.
Attest: TPI ENTERPRISES, INC.,
/s/ Patricia Hildebrand By: /s/ Robert Kennedy
- ------------------------ -------------------
Name: Robert Kennedy
Title: Executive Vice President
Attest: CITIBANK, N.A. as Trustee
/s/ Arthur F. Benton By: /s/ Michael L. Costa
- ------------------------ ---------------------
Arthur F. Benton Name: Michael L. Costa
Assistant Vice President Title: Vice President
FIO/FISD
One Court Square
12th Floor/Zone 2
(718) 248-3084
35
<PAGE>
Appendix A
----------
First Year of
Participant Credited Service
- ----------- ----------------
Stephen Cohen 1976
Joseph Gowan 1978
Robert Kennedy 1976
Pat Hildebrand 1976
36
<PAGE>
First Amendment to
Trust Agreement
WHEREAS, TPI Enterprises, Inc., a New Jersey
corporation (the "Corporation",) and Citiank, N.A. (the
"Trustee") entered into a trust agreement date as of January 31,
1990 in connection with the establishment of the TPI Enterprises,
Inc. Nonqualified Retirement Plan for Senior Executives (the
"Plan"); and
WHEREAS, Section 6.02 of the Trust Agreement provides
that prior to the occurrence of a Change in Control, the Trust
Agreement can be amended by an instrument in writing signed by
the parties thereto;
NOW THEREFORE, the Trust Agreement is hereby amended,
effective January 31, 1990, in the following respects:
(e) Section 2.01 of the Trust Agreement is hereby
amended by adding at the end of subsection 2.01(b) the following:
"and provided further, that if a "Change in
----------------
Control" (as defined in Section 3.02 hereof)
occurs without there having previously
occurred a Potential Change in Control, that
in no event shall the Corporation make such
delivery later than two (2) days after the
occurrence of a Change in Control."
(f) Section 3.01 of the Trust Agreement is
37
<PAGE>
hereby amended by deleting "(iii) any person (other than
the Corporation) becomes the beneficial owner, directly or
indirectly, of securities of the Corporation representing 9.5% or
more of the combined voting power of the Corporation's then
outstanding securities;" and renumbering subsection (iv)
subsection (iii).
3. Except or hereinabove provided, the Trust
Agreement is ratified and confirmed in all respects and shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this
First Amendment to Trust Agreement as of the date first written
above.
Attest: TPI ENTERPRISES,
By: /s/ Stephen R. Cohen
----------------------
Name: Stephen R. Cohen
Title: Chairman of the Board
Attest: CITIBANK, N.A.,
as Trustee
Maureen A. Garibaldi By: /s/ John P. Grosch
- --------------------- ----------------------
Maureen A. Garibaldi Name: John P. Grosch
Assistant Vice President Title: Vice President
Citibank, N.A.
38
Exhibit 10.36
PARTNERSHIP INTEREST PURCHASE AGREEMENT
---------------------------------------
This PARTNERSHIP INTEREST PURCHASE AGREEMENT (the
"Agreement") is made this 28th day of May, 1993, by and among
EXHIBITION ENTERPRISES PARTNERSHIP, a New York general partnership
("EEP"), CINEMA ENTERPRISES II, INC., a Missouri corporation
("Buyer"), CINEMA ENTERPRISES, INC., a Missouri corporation
("CENI"), AMERICAN MULTI-CINEMA, INC., a Missouri corporation
("AMC"), TPI ENTERTAINMENT, INC., a Delaware corporation
("Seller"), and TPI ENTERPRISES, INC., a New Jersey corporation
("TPI").
WITNESSETH:
WHEREAS, Buyer is a wholly owned subsidiary of AMC; and
WHEREAS, Seller and CENI entered into that certain General
Partnership Agreement dated March 4, 1991 (the "Partnership
Agreement"), respecting EEP; and
WHEREAS, EEP is the tenant under certain leases, including
all amendments, modifications and supplements thereto
(individually, a "Theatre Lease", and collectively, the "Theatre
Leases"), for the properties described on Annex R (EEP's interest
-------
in such properties being referred to individually as a "Property"
and collectively as the "Properties"); and
WHEREAS, AMC, on EEP's behalf, operates the motion picture
theatres located on, or in certain cases to be constructed on, the
Properties (individually, a "Theatre", and collectively, the
"Theatres") (the Properties are hereinafter included in the term
"Theatres"); and
<PAGE>
WHEREAS, as a general partner with CENI with respect to
EEP, Seller is the owner of an undivided one-half interest in EEP
(including, without limitation,
(a) the property, both real and personal, of EEP, (b) the
management of EEP, and (c) the capital and profits of EEP; but
subject to certain disproportionate allocations provided for in the
Partnership Agreement and subject to the terms of that certain
Amended and Restated Management Agreement dated March 14, 1991 (the
"Management Agreement")) (the "Partnership Interest"); and
WHEREAS, Seller desires to sell the Partnership Interest
to Buyer and Buyer desires to purchase the Partnership Interest
from Seller, each upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants
and conditions contained herein, the parties hereto agree as
follows:
ARTICLE I.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
For purposes of this Agreement, "actual knowledge" with
respect to Seller shall not include anything known by the
management of AMC, CENI or Buyer. Seller and TPI represent and
warrant to Buyer, CENI and AMC as follows:
1. Organization; Authority. (a) Seller (i) is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, (ii) has the right, power
and authority to own or lease its properties, to carry on its
business as now conducted and to enter into and perform its
2
<PAGE>
obligations under this Agreement, and (iii) is duly qualified to
engage in intrastate business and is in good standing in all
jurisdictions in which the failure to be so qualified would
materially impair the validity or enforceability of, or Seller's
ability to perform its obligations under, this Agreement.
(b) TPI (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of New
Jersey, (ii) has the right, power and authority to own or lease its
properties, to carry on its business as now conducted and to enter
into and perform its obligations under this Agreement, and (iii) is
duly qualified to engage in intrastate business and is in good
standing in all jurisdictions in which the failure to be so
qualified would materially impair the validity or enforceability
of, or TPI's ability to perform its obligations under, this
Agreement.
2. Title to Partnership Interest. Seller is the record
and beneficial owner of, and has good and valid title to, the
Partnership Interest, free and clear of all liens, encumbrances,
security agreements, equities, options, claims, charges,
assessments, limitations and restrictions of every kind, except for
rights of CENI as set forth in the Partnership Agreement
("Encumbrances"). Seller has full power to transfer the
Partnership Interest to Buyer without obtaining the consent or
approval of any other person or governmental authority, other than
as set forth in Section 1.4 and other than pursuant to contracts or
-----------
agreements entered into by CENI or AMC on EEP's behalf. Seller
3
<PAGE>
agrees to convey to Buyer, simultaneously with the execution of
this Agreement, good and valid title to the Partnership Interest,
free and clear of all Encumbrances.
3. Noncontravention. The execution and delivery of this
Agreement by Seller and TPI and the consummation by Seller and TPI
of the transactions contemplated by this Agreement will not result
in or constitute any of the following: (a) a breach of any term,
condition or other provision of this Agreement; (b) a default,
breach or violation of, or an event that, with notice or lapse of
time or both, would be a default, breach or violation of, (i) any
term, condition or provision of the Certificate of Incorporation or
Bylaws of either Seller or TPI, (ii) to Seller's actual knowledge,
any lease, license, promissory note, conditional sales contract,
commitment, indenture, mortgage, deed of trust or other agreement,
instrument or arrangement to which Seller, TPI or EEP is a party or
by which Seller, TPI, the property of either Seller or TPI or EEP
or EEP's property, including without limitation the Theatres, are
bound, or (iii) to Seller's actual knowledge, any judgment, order,
decree, law, rule, regulation or other restriction of any court,
government or governmental agency to which Seller, TPI or EEP is
subject; (c) to Seller's actual knowledge, an event that would
permit any party to terminate any agreement, or to accelerate the
maturity of any indebtedness or other obligation, of EEP; or (d) to
Seller's actual knowledge, the creation or imposition of any
Encumbrance on EEP's property, including without limitation the
Theatres, other than Encumbrances that individually or in the
4
<PAGE>
aggregate would not have a material adverse effect on EEP or the
Partnership Interest.
4. Authorization and Consents. The execution, delivery
and performance by Seller and TPI of this Agreement (a) do not
require the consent, approval or authorization of any federal or
state governmental or regulatory authority or any other person,
except such consents, approvals, filings and authorizations that
have been obtained or made; and (b) have been duly authorized by
Seller and TPI.
5. Partnership Agreement. Except as set forth on
Schedule 1.5, Seller has not taken any action (or failed to take
- ------------
any action) that constitutes, or with notice or lapse of time or
both would constitute, a material default, breach or violation of
the Partnership Agreement. Without limiting the effect of the
preceding sentence, Seller (without CENI having any knowledge
thereof, excluding imputed knowledge but including each and every
act taken at the request of CENI or AMC), has not entered into any
agreement on behalf of CENI or EEP.
6. EEP. Seller has no actual knowledge of: (a) any
defect in title to the Theatres (such that would cause EEP to not
have good and marketable title to all of the Theatres, free and
clear of restrictions on or conditions to transfer or assignment,
mortgages, liens, pledges, charges, encumbrances, equities, claims,
easements, rights of way, covenants, conditions or restrictions),
except for (i) the lien of current taxes not yet due and payable,
(ii) possible minor matters that, in the aggregate, are not
5
<PAGE>
substantial in amount and do not materially detract from or
interfere with the present use of any of the Theatres, (iii) the
Permitted Encumbrances (as defined below), and (iv) pursuant to the
provisions of the Theatre Leases; (b) except as set forth on
Schedule 1.6, any pending or threatened litigation or
- ------------
administrative actions or other proceedings with respect to EEP or
the Theatres; (c) any violation by EEP of, or default by EEP under,
any material contract to which EEP is a party, which violation or
default has not been cured or remedied and would have a material
adverse effect on EEP or the Partnership Interest; and (d) any
violation of any law, rule or regulation applicable to EEP or the
Theatres, which violation would have a material adverse effect on
EEP or the Partnership Interest. Seller has no actual knowledge of
any sale, lease, transfer or assignment of any assets of EEP other
than in the ordinary course of business.
For purposes of this Agreement, "Permitted Encumbrances"
shall mean, in the case of real property:
(a) covenants, easements, agreements, reservations, rights-of-way
and restrictions of record;
(b) utility company rights and easements to maintain
poles, lines, wires, cables, pipes, boxes and other fixtures and
facilities presently serving, crossing or existing on the
Properties, whether or not pursuant to recorded grants, agreements
or easements;
(c) mechanics' and materialmens' liens;
6
<PAGE>
(d) building laws, zoning laws, subdivision regulations
and other laws and ordinances regulating the use, occupancy,
subdivision or improvement of the Properties;
(e) all matters that might be disclosed by an accurate
survey or physical inspection of the Properties; and
(f) any statutory or common law rights of the landlords
who are parties to the Theatre Leases.
ARTICLE II.
BUYER'S REPRESENTATIONS AND WARRANTIES
--------------------------------------
For purposes of this Agreement, "actual knowledge" with
respect to Buyer shall not include anything known by the management
of Seller or TPI. Buyer, CENI and AMC represent and warrant to
Seller and TPI as follows:
1. Organization; Authority. (a) Buyer (i) is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Missouri, (ii) has the right, power and authority to
enter into and perform its obligations under this Agreement, and
(iii) is duly qualified to engage in intrastate business and is in
good standing in all jurisdictions in which the failure to be so
qualified would materially impair the validity or enforceability
of, or Buyer's ability to perform its obligations under, this
Agreement.
(b) CENI (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Missouri, (ii) has the right, power and authority to enter into and
7
<PAGE>
perform its obligations under this Agreement, and (iii) is duly
qualified to engage in intrastate business and is in good standing
in all jurisdictions in which the failure to be so qualified would
materially impair the validity or enforceability of, or CENI's
ability to perform its obligations under, this Agreement.
(c) AMC (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Missouri, (ii) has the right, power and authority to enter into and
perform its obligations under this Agreement, and (iii) is duly
qualified to engage in intrastate business and is in good standing
in all jurisdictions in which the failure to be so qualified would
materially impair the validity or enforceability of, or AMC's
ability to perform its obligations under, this Agreement.
2. Authorization and Consents. The execution, delivery
and performance by Buyer, CENI and AMC of this Agreement (a) do not
require the consent, approval or authorization of any federal or
state governmental or regulatory authority or any other person,
except such consents, approvals, filings and authorizations that
have been obtained or made; and (b) have been duly authorized by
Buyer, CENI and AMC.
3. Noncontravention. The execution and delivery of this
Agreement by Buyer, CENI and AMC and the consummation by Buyer,
CENI and AMC of the transactions contemplated by this Agreement
will not result in or constitute any of the following: (a) a
breach of any term, condition or other provision of this Agreement;
(b) a default, breach or violation of, or an event that, with
8
<PAGE>
notice or lapse of time or both, would be a default, breach or
violation of, (i) any term, condition or provision of the Articles
of Incorporation or Bylaws of any of Buyer, CENI or AMC, (ii) to
Buyer's actual knowledge, any lease, license, promissory note,
conditional sales contract, commitment, indenture, mortgage, deed
of trust or other agreement, instrument or arrangement to which
Buyer, CENI or AMC is a party or by which Buyer, CENI, AMC or the
property of Buyer, CENI or AMC is bound, or (iii) to Buyer's
actual knowledge, any judgment, order, decree, law, rule,
regulation or other restriction of any court, government or
governmental agency to which Buyer, CENI or AMC is subject; (c) to
Buyer's actual knowledge, an event that would permit any party to
terminate any agreement, or to accelerate the maturity of any
indebtedness or other obligation, of EEP; or (d) to Buyer's actual
knowledge, the creation or imposition of any Encumbrance on any of
EEP's properties, including without limitation the Theatres, other
than Encumbrances that individually or in the aggregate would not
have a material adverse effect on EEP.
ARTICLE III.
SALE, TRANSFER AND CONVEYANCE: DELIVERIES
-----------------------------------------
1. Sale, Transfer and Conveyance. Seller hereby sells, transfers
and conveys the Partnership Interest to Buyer, and Buyer hereby
purchases, acquires and accepts the Partnership Interest from
Seller; such sale, transfer and conveyance is taking place at the
9
<PAGE>
offices of Sullivan & Cromwell, 125 Broad Street, New York, New
York, on May 28, 1993.
2. Deliveries by Seller. Contemporaneously with the sale,
transfer and conveyance described in Section 3.1, Seller is
-----------
delivering to Buyer the following instruments:
(a) The opinion of Skadden, Arps, Slate, Meagher & Flom, counsel
for Seller, dated as of the date hereof.
(b) The opinion of Shanley & Fisher, P.C., counsel for
TPI, dated as of the date hereof.
(c) The resolutions of Seller's Board of Directors
authorizing the execution and delivery by Seller of this Agreement,
the Termination Agreement, the Mutual Release and Indemnification
Agreement, the Assignment and Assumption Agreement and the
Confidentiality Agreement (each as defined below), and the
performance by Seller of its covenants and obligations thereunder,
certified as of the date hereof by the secretary of Seller.
(d) The resolutions of TPI's Board of Directors
authorizing the execution and delivery by any of its officers, on
behalf of TPI, of the resolutions of Seller's sole shareholder
described in subsection (e) below, and authorizing the execution
and delivery by TPI of this Agreement, the Termination Agreement,
the Mutual Release and Indemnification Agreement and the
Confidentiality Agreement, and the performance by TPI of its
10
<PAGE>
covenants and obligations thereunder, certified as of the date
hereof by the secretary of TPI.
(e) The resolutions of Seller's sole shareholder
authorizing the execution and delivery by Seller of this Agreement,
the Termination Agreement, the Mutual Release and Indemnification
Agreement and the Confidentiality Agreement, and the performance by
Seller of its covenants and obligations thereunder, certified as of
the date hereof by the secretary of Seller.
(f) The written resignations of all of the representatives
of Seller on EEP's Board of Managers, dated and effective as of the
date hereof.
(g) That certain Mutual Release and Indemnification
Agreement among EEP, CENI, AMC, Seller and TPI (the "Mutual Release
and Indemnification Agreement"), dated as of the date hereof and
duly executed by Seller and TPI.
(h) That certain Termination Agreement among Seller, TPI,
EEP, AMC, CENI, AMC Entertainment Inc. (AMC's parent corporation,
"AMCE"), Durwood, Inc. ("DI"), Stanley H. Durwood and Edward D.
Durwood (the "Termination Agreement"), dated as of the date hereof
and duly executed by Seller, Seller on behalf of EEP, and TPI.
(i) Notices to the creditors of EEP set forth on Annex
-----
3.2(i) and all landlords under the Theatre Leases, duly executed by
- ------
Seller, advising such creditors and landlords that from and after
the date hereof, (i).1) Seller is no longer a partner with respect
to EEP and (i).2) Seller has no authority to act on behalf of or
bind EEP.
11
<PAGE>
(j) That certain Confidentiality Agreement among Seller,
TPI, EEP, CENI, Buyer and AMC (the "Confidentiality Agreement"),
dated as of the date hereof and duly executed by Seller, Seller on
behalf of EEP, and TPI.
(k) That certain Assignment and Assumption Agreement
between Seller and Buyer (the "Assignment and Assumption
Agreement"), dated as of the date hereof and duly executed by
Seller.
(l) A Memorandum of Transfer of Partnership Interest (a
"Memorandum of Transfer") with respect to each of the Theatres,
dated as of the date hereof and duly executed by Seller and
notarized.
(m) That certain Termination and Release Agreement among
Boatmen's First National Bank of Kansas City, Seller, TPI, Buyer,
EEP, CENI, AMC, AMCE, DI, Stanley H. Durwood and Edward D. Durwood
(the "Termination and Release Agreement"), dated as of the date
hereof and duly executed by Seller, TPI and Seller on behalf of
EEP.
3. Deliveries by Buyer. Contemporaneously with the sale,
transfer and conveyance described in Section 3.1, Buyer is
-----------
delivering to Seller the following instruments and documents:
(a) $17,500,000 by wire transfer, pursuant to written instructions
from Seller.
(b) The opinion of Gage & Tucker, counsel for Buyer, dated
as of the date hereof.
12
<PAGE>
(c) The resolutions of Buyer's Board of Directors
authorizing the execution and delivery of this Agreement and the
Assignment and Assumption Agreement by Buyer and the performance by
Buyer of its covenants and obligations thereunder, certified as of
the date hereof by the secretary of Buyer.
(d) The resolutions of CENI's Board of Directors
authorizing the execution and delivery of this Agreement, the
Termination Agreement, the Mutual Release and Indemnification
Agreement and the Confidentiality Agreement by CENI and the
performance by CENI of its covenants and obligations thereunder,
certified as of the date hereof by the secretary of CENI.
(e) The resolutions of AMC's Board of Directors
authorizing the execution and delivery of this Agreement, the
Termination Agreement, the Mutual Release and Indemnification
Agreement and the Confidentiality Agreement by AMC and the
performance by AMC of its covenants and obligations thereunder,
certified as of the date hereof by the secretary of AMC.
(f) The Mutual Release and Indemnification Agreement,
dated as of the date hereof and duly executed by Buyer, CENI, EEP
and AMC.
(g) The Termination Agreement, dated as of the date hereof
and duly executed by Buyer, CENI on behalf of EEP, CENI, AMC, AMCE,
DI, Stanley H. Durwood and Edward D. Durwood.
(h) That certain Waiver of First Right of Refusal and
Consent, dated as of the date hereof and duly executed by CENI.
13
<PAGE>
(i) The Confidentiality Agreement, dated as of the date
hereof and duly executed by CENI on behalf of EEP, CENI, Buyer and
AMC.
(j) The Assignment and Assumption Agreement, dated as of
the date hereof and duly executed by Buyer.
(k) The Termination and Release Agreement, dated as of the
date hereof and duly executed by Buyer, CENI on behalf of EEP,
CENI, AMC, AMCE, DI, Stanley H. Durwood and Edward D. Durwood.
(l) By facsimile copy, the Termination and Release
Agreement, dated as of the date hereof and duly executed by
Boatmen's First National Bank of Kansas City (with original to be
delivered to Seller on May 29, 1993, via overnight delivery
service).
ARTICLE IV.
SELLER'S CONTINUING OBLIGATIONS
-------------------------------
1. Indemnification. Seller and TPI shall jointly and severally
indemnify, defend and hold harmless Buyer, EEP, CENI and AMC
(collectively, the "AMC Entities"), their respective Affiliates (as
defined in the Partnership Agreement) and their respective
directors, officers and employees against and in respect of any
and all claims, demands, losses, costs, expenses, obligations,
liabilities and damages, including interest, penalties and
reasonable attorneys' fees ("Loss"), which arise out of, result
from or are based upon any inaccuracy or breach by Seller or TPI
14
<PAGE>
of, or failure by Seller or TPI to perform, any of their
representations, warranties, covenants or agreements in this
Agreement or in any schedule, certificate, exhibit or other
instrument or agreement furnished or delivered or to be furnished
or delivered by Seller or TPI under this Agreement.
2. Notice of Claim. The AMC Entities (or any of them)
shall promptly notify Seller or TPI of the existence of any claim,
demand or other matter (for purposes of this Section, a "Claim") to
which the indemnification obligations of either Seller or TPI would
apply. In the event that the indemnifying party advises the
indemnified party that the indemnifying party will contest a claim
for indemnification hereunder or fails, within 20 days of receipt
of any indemnification notice, to notify, in writing, the
indemnified party of its election to defend, settle or compromise,
at its sole cost and expense, any Claim (or discontinues its
defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise
compromise or pay such Claim; provided, however, that the
-------- -------
indemnified party shall not settle or otherwise compromise or pay
such Claim without the prior written consent of the indemnifying
party, which consent shall not be unreasonably withheld but which
consent, if not withheld, shall not prejudice the indemnifying
party's right to continue to contest the claim for indemnification.
In any event, unless and until the indemnifying party elects in
writing to assume and does so assume the defense of any such
Claim, the indemnified party's costs and expenses arising out of
15
<PAGE>
the defense, settlement or compromise of any such Claim shall be a
Loss subject to indemnification hereunder to the extent the
indemnified party is entitled to indemnification hereunder for such
Claim. If the facts giving rise to such indemnification shall
involve any actual or threatened claim or demand by a third party,
the indemnifying party shall be entitled to control the defense of
such claim or demand in the name of the indemnified party, with
counsel reasonably satisfactory to the indemnified party, if the
indemnifying party notifies the indemnified party in writing of its
intention to do so within 20 days of the receipt of such notice by
the indemnifying party, without prejudice, however, to the right of
the indemnified party to participate therein through counsel of the
indemnified party's own choosing, which participation shall be at
the indemnified party's sole expense, unless (a) the indemnified
party shall have been advised by its counsel that use of the same
counsel to represent both the indemnifying party and the
indemnified party would present a conflict of interest (which shall
be deemed to include any case in which there may be a legal defense
or claim available to the indemnified party that is different from
or additional to those available to the indemnifying party), in
which case the indemnifying party shall not have the right to
direct the defense of such action on behalf of the indemnified
party, or (b) the indemnifying party shall fail diligently to
defend such Claim within a reasonable time. Whether or not the
indemnifying party chooses to defend such Claim, the parties hereto
shall cooperate in the defense of such Claim and shall furnish such
16
<PAGE>
records, information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may
reasonably be requested in connection therewith. The indemnifying
party shall not settle or permit the settlement of any such third
party Claim without the prior written consent of the indemnified
party, which consent shall not be unreasonably withheld.
If a Claim is one that cannot by its nature be defended
solely by the indemnifying party (including, without limitation,
any federal or state tax proceeding), then the AMC Entities shall
make available all information and assistance that the indemnifying
party may reasonably request.
3. Further Assurances. Seller shall execute and deliver
to Buyer, as reasonably requested by Buyer:
(a) any additional documents or instruments of transfer,
assignment, conveyance or assurance, for the purpose of assigning,
transferring, granting, conveying and confirming to Buyer the
Partnership Interest or for the purpose of evidencing the fact that
Seller is no longer a partner with respect to EEP; and
(b) instruments of transfer, conveyance and assignment,
from Seller to EEP, Buyer or CENI (as instructed by Buyer), of the
licenses, permits, leases and agreements respecting the Theatres or
EEP's business or properties to which Seller is a party, or that
are held by Seller, on EEP's behalf or as agent for, or nominee of,
EEP.
17
<PAGE>
ARTICLE V.
BUYER'S CONTINUING OBLIGATIONS
------------------------------
1. Indemnification. Buyer, EEP, CENI and AMC shall jointly and
severally indemnify, defend and hold harmless Seller, TPI, their
respective Affiliates and their respective directors, officers and
employees against and in respect of any and all Loss which arises
out of, results from or is based upon any inaccuracy or breach by
Buyer, CENI or AMC of, or failure by Buyer, CENI or AMC to
perform, any of their representations, warranties, covenants or
agreements in this Agreement or in any certificate, exhibit or
other instrument furnished or to be furnished by Buyer, CENI or AMC
under this Agreement.
2. Notice of Claim. Seller and TPI (or either of them)
shall promptly notify Buyer, CENI or AMC of the existence of any
claim, demand or other matter (for purposes of this Section, a
"Claim") to which the indemnification obligations of any of Buyer,
CENI or AMC would apply. In the event that the indemnifying party
advises the indemnified party that the indemnifying party will
contest a claim for indemnification hereunder or fails, within 20
days of receipt of any indemnification notice, to notify, in
writing, the indemnified party of its election to defend, settle or
compromise, at its sole cost and expense, any Claim (or
discontinues its defense at any time after it commences such
defense), then the indemnified party may, at its option, defend,
18
<PAGE>
settle or otherwise compromise or pay such Claim; provided,
--------
however, that the indemnified party shall not settle or otherwise
- -------
compromise or pay such Claim without the prior written consent of
the indemnifying party, which consent shall not be unreasonably
withheld but which consent, if not withheld, shall not prejudice
the indemnifying party's right to continue to contest the claim for
indemnification. In any event, unless and until the indemnifying
party elects in writing to assume and does so assume the defense of
any such Claim, the indemnified party's costs and expenses arising
out of the defense, settlement or compromise of any such Claim
shall be a Loss subject to indemnification hereunder to the extent
the indemnified party is entitled to indemnification hereunder for
such Claim. If the facts giving rise to such indemnification shall
involve any actual or threatened claim or demand by a third party,
the indemnifying party shall be entitled to control the defense of
such claim or demand in the name of the indemnified party, with
counsel reasonably satisfactory to the indemnified party, if the
indemnifying party notifies the indemnified party in writing of its
intention to do so within 20 days of the receipt of such notice by
the indemnifying party, without prejudice, however, to the right of
the indemnified party to participate therein through counsel of the
indemnified party's own choosing, which participation shall be at
the indemnified party's sole expense, unless (a) the indemnified
party shall have been advised by its counsel that use of the same
counsel to represent both the indemnifying party and the
indemnified party would present a conflict of interest (which shall
19
<PAGE>
be deemed to include any case in which there may be a legal
defense or claim available to the indemnified party that is
different from or additional to those available to the indemnifying
party), in which case the indemnifying party shall not have the
right to direct the defense of such action on behalf of the
indemnified party, or (b) the indemnifying party shall fail
diligently to defend such Claim within a reasonable time. Whether
or not the indemnifying party chooses to defend such Claim, the
parties hereto shall cooperate in the defense of such Claim and
shall furnish such records, information and testimony and attend
such conferences, discovery proceedings, hearings, trials and
appeals as may reasonably be requested in connection therewith.
The indemnifying party shall not settle or permit the settlement of
any such third party Claim without the prior written consent of the
indemnified party, which consent shall not be unreasonably
withheld.
If a Claim is one that cannot by its nature be defended
solely by the indemnifying party (including, without limitation,
any federal or state tax proceeding), then Seller and TPI shall
make available all information and assistance that the indemnifying
party may reasonably request.
3. Records. (a) EEP or AMC shall maintain the books and
records described in Section 6.1 of the Partnership Agreement in
the manner set forth in such Section 6.1 for a period of seven
years following the date of this Agreement;
20
<PAGE>
(b) EEP or AMC shall maintain the Settlement Records (as
defined in Section 5.1(a) of the Management Agreement) in the
manner set forth in such Section 5.1(a) for a period of seven years
following the date of this Agreement; and
(c) EEP or AMC shall make available to Seller such books,
records and Settlement Reports relating to the period during which
AMC managed any of the Theatres for Seller and during which Seller
was a partner with respect to EEP as Seller shall reasonably
request (subject, however, to the limitations set forth in
Section 5.1(a) of the Management Agreement) for the purpose of
preparing Seller's federal, state and local income tax returns or
to enable Seller or TPI to respond to a tax audit for any period
prior to the Closing Date. EEP and AMC shall, at the request of
Seller or TPI, reasonably cooperate with and assist Seller and TPI
in connection with any such audit; provided, however, that Seller
and TPI shall promptly reimburse EEP and AMC for any out-of-pocket
expenses in connection therewith.
4. Stock Certificates. Buyer shall cause the following
items to be delivered to Seller on May 29, 1993, via overnight
delivery service: (a) Certificate No. C1 representing 1,000 shares
of common stock, par value $.01 per share, of Seller, (b)
Certificate No. C2 representing 800,000 shares of common stock, par
value $.01 per share, of Seller, and (c) Certificate No. P2
representing 533,334 shares of Series A Preferred Stock of Seller.
21
<PAGE>
ARTICLE VI.
PUBLICITY
---------
1. Publicity. Copies of any notices to third parties and all other
publicity concerning the transactions contemplated by this
Agreement shall be provided by the party making such notice or
publicity to the other parties hereto prior to release thereof.
2. Notices. Seller hereby consents to (a) the
distribution by EEP, at EEP's expense, of the notices described in
Section 3.2(i); and (b) the publishing by EEP of notice, (b).1) in
- --------------
a newspaper of general circulation in each county, parish or city
in which EEP currently has business operations, and (b).2) in a
publication of statewide circulation (whose audience is primarily
persons engaged in the practice of law in such state) in each state
in which EEP has business operations, to the effect that, from and
after the date hereof, (b).2).1) Seller is not a partner with
respect to EEP, and (b).2).2) Seller has no authority to act on
behalf of EEP.
3. Further Assurances. (a) Buyer, CENI, AMC and EEP will
not, after the date hereof, represent to any person that Seller is
a partner of EEP. Buyer will use its best efforts to cause all of
the notices described in Section 6.2(a) hereof to be distributed by
--------------
EEP promptly following the execution of this Agreement.
(b) Seller and TPI will not, after the date hereof,
represent to any person that Seller is a partner of EEP.
22
<PAGE>
ARTICLE VII.
COSTS
-----
1. Broker. (a) Buyer, CENI and AMC shall be fully
responsible for any fees, compensation or expenses payable to any
broker or finder that they (or any of them) have retained or
engaged in connection with the transactions contemplated by this
Agreement.
(b) Seller and TPI shall be fully responsible for any
fees, compensation or expenses payable to any broker or finder that
they (or either of them) have retained or engaged in connection
with the transactions contemplated by this Agreement, including,
without limitation, any fees, compensation or expenses with respect
to services rendered in connection with the transactions
contemplated by this Agreement by Phillip Ean Cohen ("Cohen"),
Morgan Schiff & Co., Inc. ("Morgan Schiff"), Kidder Peabody & Co.,
Inc. ("Kidder Peabody") or any affiliate of Cohen, Morgan Schiff or
Kidder Peabody.
2. Costs. Each of the parties hereto shall pay all costs
and expenses (other than as expressly provided in this Article)
incurred or to be incurred by it in negotiating and preparing this
Agreement and in closing and carrying out the transactions
contemplated by this Agreement.
3. Transfer Taxes. Buyer shall bear all transfer taxes,
governmental charges, documentary tax stamps or similar charges,
and all sales, use or other taxes (but excluding taxes on income
resulting from the transactions contemplated hereby) that are
23
<PAGE>
assessed or otherwise become due in connection with the
transactions contemplated hereby.
ARTICLE VIII.
FORM OF AGREEMENT
-----------------
1. Headings. The subject headings of the sections and subsections
of this Agreement are included for purposes of convenience only and
shall not affect the construction or interpretation of any of its
provisions.
2. Entire Agreement; Amendment; Waiver. This Agreement,
when executed and delivered by the parties hereto, constitutes the
entire agreement between the parties hereto pertaining to the
subject matter contained herein and supersedes all prior or
contemporaneous written or verbal agreements, representations and
understandings of the parties, including, without limitation, that
certain letter dated March 19, 1993, from AMC to Seller. No
supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by all the parties. No waiver
of any of the provisions of this Agreement shall be deemed, or
shall constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No
waiver shall be binding unless executed in writing by the party
making the waiver.
3. Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be
24
<PAGE>
deemed to be an original, but all of which together shall
constitute one and the same instrument.
4. Annexes; Schedules. All Annexes and Schedules to which
this Agreement refers and which are attached hereto are
incorporated herein by this reference.
5. Miscellaneous. Whenever the context shall require, the
use of any gender shall include all genders and the use of any
singular shall include the plural, and vice versa.
25
<PAGE>
ARTICLE IX.
PARTIES
-------
1. Third Parties. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties
hereto and their respective successors and permitted assigns, nor
is anything in this Agreement intended to relieve or discharge the
obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right
of subrogation or action over against any party to this Agreement.
2. Binding Effect. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns. Neither Buyer nor
Seller shall assign this Agreement without prior written consent of
the other party hereto.
ARTICLE X.
REMEDIES
--------
1. Specific Performance. Each party's obligation under this
Agreement is unique. If any party should default in its
obligations under this Agreement, the parties each acknowledge that
it would be extremely impracticable to measure the resulting
damages; accordingly, the nondefaulting party or parties, in
addition to any other available rights or remedies, may sue in
26
<PAGE>
equity for specific performance, and the parties each expressly
waive the defense that a remedy in damages will be adequate.
2. Costs. If any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection
with any of the provisions of this Agreement, the successful or
prevailing party or parties shall be entitled to recover reasonable
attorneys' fees and other costs incurred in connection with that
action or proceeding, in addition to any other relief to which it
or they may be entitled.
ARTICLE XI.
NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
-----------------------------------------------------
All representations and warranties made herein or in any
instrument, certificate or other writing provided for in this
Agreement shall be deemed to be continuing and shall survive the
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby for a period of two years
following the date hereof; provided, however, that
(a) such representations and warranties, as such relates to a Claim
(as defined therein) for which a notice seeking indemnification has
been given pursuant to Section 4.2 or Section 5.2 within such two
----------- -----------
year period, shall survive forever; (b) the representations and
warranties set forth in Sections 1.1, 1.2, 1.3 and 1.4 hereof shall
------------------------------
survive forever; and (c) all obligations of AMC and TPI hereunder
shall terminate two years after the date hereof (provided, however,
27
<PAGE>
that any obligations of TPI or AMC under Articles IV and V,
respectively, as such relates to a Claim (as defined therein) for
which a notice seeking indemnification has been given pursuant to
Section 4.2 or Section 5.2 within such two year period shall
- ----------- -----------
survive forever).
ARTICLE XII.
NOTICES
-------
All notices, requests, demands and other communications
required or permitted under this Agreement or otherwise in
connection herewith shall be in writing and shall be deemed to have
been duly given and received (a) on the date of delivery if
delivered in person or by a nationally recognized overnight express
delivery service or when transmitted by facsimile transmission with
receipt of facsimile answerback confirmation, or (b) three business
days after dispatch by registered or certified mail, postage
prepaid, and properly addressed and sent to the appropriate address
or facsimile number set forth below:
To Seller or TPI at: 777 S. Flagler Drive, Suite 909
West Palm Beach, FL 33401
FAX: (407) 835-1138
with a copy to: Ronald C. Barusch
Skadden, Arps, Slate, Meagher &
Flom
1440 New York Avenue, N.W.
Washington, D.C. 20005
FAX: (202) 393-5760
To Buyer, EEP, CENI or AMC at: Attn: Chief Financial Officer
106 West 14th St., Suite 1700
Kansas City, MO 64105
FAX: (816) 421-5744
28
<PAGE>
with a copy to: Raymond F. Beagle
Gage & Tucker
2345 Grand Avenue, Suite 2800
Kansas City, MO 64108
FAX: (816) 292-2001
Any party may change its address for purposes of this Section by
giving the other parties written notice of the new address in the
manner set forth above.
ARTICLE XIII.
GOVERNING LAW
-------------
This Agreement shall be construed in accordance with, and
governed by, the laws of the State of New York as applied to
contracts that are executed and performed entirely in New York.
ARTICLE XIII.
SEVERABILITY
------------
If any provision of this Agreement is held to be invalid
or unenforceable by any court of final jurisdiction, it is the
intent of the parties hereto that all other provisions of this
Agreement be construed to remain fully valid, enforceable and
binding on the parties.
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
BUYER: CINEMA ENTERPRISES II, INC.
By /s/ Peter C. Brown
------------------------------
Name: Peter C. Brown
------------------------------
Title: Senior Vice President,
Chief Financial Officer and
Treasurer
------------------------------
SELLER: TPI ENTERTAINMENT, INC.
By: /s/ Stephen R. Cohen
------------------------------
Name: Stephen R. Cohen
------------------------------
Title: President
------------------------------
TPI: TPI ENTERPRISES, INC.
By: /s/ Stephen R. Cohen
------------------------------
Name: Stephen R. Cohen
------------------------------
Title: Chairman of the Board
------------------------------
30
<PAGE>
EEP: EXHIBITION ENTERPRISES
PARTNERSHIP
By: TPI ENTERTAINMENT, INC., a
General Partner
By: /s/ Stephen R. Cohen
------------------------------
Name: Stephen R. Cohen
------------------------------
Title: President
------------------------------
By: CINEMA ENTERPRISES, INC., a
General Partner
By: /s/ Peter C. Brown
------------------------------
Name: Peter C. Brown
------------------------------
Title: Senior Vice President and
Chief Financial Officer
------------------------------
CENI: CINEMA ENTERPRISES, INC.
By: /s/ Peter C. Brown
------------------------------
Name: Peter C. Brown
------------------------------
Title: Senior Vice President and
Chief Financial Officer
------------------------------
AMC: AMERICAN MULTI-CINEMA, INC.
By: /s/ Peter C. Brown
------------------------------
Name: Peter C. Brown
------------------------------
Title: Senior Vice President,
Chief Financial Officer and
Treasurer
------------------------------
31
Exhibit 10.37
TERMINATION AND RELEASE AGREEMENT
---------------------------------
This Termination and Release Agreement is made this 28th
day of May, 1993, by and among BOATMEN'S FIRST NATIONAL BANK OF
KANSAS CITY (the "Bank"), TPI Entertainment, Inc., a Delaware
corporation ("TPIE"), TPI Enterprises, Inc., a New Jersey
corporation ("TPI"), Exhibition Enterprises Partnership, a New York
general partnership ("EEP"), American Multi-Cinema, Inc., a
Missouri corporation ("AMC"), Cinema Enterprises, Inc., a Missouri
corporation ("CENI"), AMC Entertainment Inc., a Delaware
corporation ("AMCE"), Durwood, Inc., a Missouri corporation ("DI"),
Stanley H. Durwood ("S. Durwood") and Edward D. Durwood
("E. Durwood").
WHEREAS, TPIE, a wholly-owned subsidiary of TPI, and AMC
entered into that certain Asset Purchase Agreement dated August 24,
1988, as amended (the "Purchase Agreement") pursuant to which AMC
agreed to sell and TPIE agreed to purchase, subject to the
satisfaction of certain conditions, leasehold interests and other
properties related to the operation of up to ninety (90) theatres;
and
WHEREAS, the Purchase Agreement contemplated that the sale
and purchase of such properties would be consummated at more than
one Closing and the Initial Closing (both as defined in the
Purchase Agreement), involving fifty-five (55) theatres, occurred
as of February 24, 1989, and the Courthouse Closing (as defined in
<PAGE>
the Purchase Agreement) involving one additional theatre occurred
as of May 18, 1990 (such theatres being referred to herein as the
"Purchased Theatres"); and
WHEREAS, pursuant to the Purchase Agreement, AMC and TPIE
entered into that certain Management Agreement dated as of
February 24, 1989, whereby AMC agreed to manage on behalf of TPIE
the Purchased Theatres and any other motion picture theatres
acquired or constructed by TPIE (collectively, the "Theatres"); and
WHEREAS, TPIE and CENI, a wholly-owned subsidiary of AMC,
entered into that certain General Partnership Agreement dated as of
March 4, 1991 (the "Partnership Agreement") forming EEP; and
WHEREAS, pursuant to the Partnership Agreement, TPIE
assigned to EEP all of TPIE's right, title and interest in and to
the Theatres effective as of April 19, 1991; and
WHEREAS, EEP and AMC entered into that certain Amended and
Restated Management Agreement dated March 4, 1991, whereby AMC
agreed to manage on behalf of EEP the Theatres and any other motion
picture theatres acquired or constructed by EEP; and
WHEREAS, in connection with the acquisition of the
Theatres by EEP from TPIE, EEP borrowed certain monies (the "Loan")
from The Merchants Bank ("Merchants"); and
2
<PAGE>
WHEREAS, the Loan is evidenced by that certain Amended and
Restated Term Promissory Note dated April 25, 1991 in the original
principal amount of $40,000,000 from EEP in favor of Merchants (the
"Term Promissory Note") and by that certain Amended and Restated
Revolving Credit Note dated April 25, 1991 in the original
principal amount of $5,000,000 from EEP to Merchants (the
"Revolving Credit Note")(the Term Promissory Note and the Revolving
Credit Promissory Note hereinafter collectively the "Notes"); and
WHEREAS, in connection with the Loan and the execution of
the Notes, the parties to this Termination and Release Agreement
entered into, among other agreements, the agreements set forth on
Exhibit "A" attached hereto and incorporated herein by this
- -----------
reference (the "Loan Agreements"); and
WHEREAS, the Bank purchased the Loan from the Federal
Deposit Insurance Corporation as receiver for the Missouri Bridge
Bank, N.A., the successor in interest to Merchants, which endorsed
the Notes to the Bank and assigned its interest in the Loan
Agreements to the Bank; and
WHEREAS, TPIE and Cinema Enterprises II, Inc. ("CENI II"),
among others, entered into that certain Partnership Interest
Purchase Agreement dated as of May 28, 1993 (the "Partnership
Interest Purchase Agreement"), pursuant to which TPIE agreed to
sell and transfer to CENI II TPIE's Partnership Interest (as
defined in the Partnership Interest Purchase Agreement); and
3
<PAGE>
WHEREAS, as an inducement to TPIE to transfer TPIE's Part-
nership Interest to CENI II, and to CENI II to purchase TPIE's
Partnership Interest, EEP has agreed to pay off the Loan and the
parties hereto have agreed to terminate the Loan Agreements; and
WHEREAS, the parties hereto will benefit from the pay-off
of the Loan and the termination of the Loan Agreements; and
WHEREAS, the parties hereto have agreed to terminate the
Loan Agreements and to release all parties from liability thereun-
der upon the terms set forth herein;
NOW, THEREFORE, in consideration of the covenants and
mutual releases set forth herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Termination and Release of Lien. Effective upon
the payment to the Bank of the full amount due and owing under the
Notes as of the date hereof, the Loan Agreements are hereby termi-
nated and shall be of no further force and effect and all liens
created under or by the Loan Agreements are hereby released by the
Bank .
2. Release of Parties. Effective upon the payment to
the Bank of the full amount due and owing under the Notes as of the
4
<PAGE>
date hereof, each of the parties hereto hereby releases each of the
other parties from all obligations and liabilities arising from,
under or in connection with the Loan Agreements, whether currently
existing or arising at any time hereafter, and does hereby release
and forever discharge each of the other parties from all past,
present and future claims, demands, actions, causes of action,
liabilities, rights, damages, costs, expenses and compensation of
every nature whatsoever, whether direct or indirect, whether based
on tort, contract or any other theory of recovery, and whether for
compensatory or punitive damages, arising from or under the Loan
Agreements.
3. Release of Collateral and Security; Pay-off.
Simultaneously with the execution of this Agreement, (A) the Bank
agrees that it will (i) mark the Notes paid and cancelled and
return the Notes to EEP, (ii) execute Uniform Commercial Code
termination statements for the Uniform Commercial Code financing
statements set forth on Exhibit "B" attached herein and
-----------
incorporated herein by this reference and deliver the termination
statements to the debtors shown on the respective financing
statements, (iii) deliver to TPIE the original Certificate No. C1
representing 1,000 shares of common stock, par value $.01 per
share, of TPIE (the "TPIE Common Stock"), the original Certificate
No. C2 representing 800,000 shares of TPIE Common Stock, and the
original Certificate No. P2 representing 533,334 shares of Series A
Preferred Stock of TPIE, each of which are currently held by the
5
<PAGE>
Bank, and (iv) deliver to AMC the original Certificate No. 1
representing 1,000 shares of common stock, par value $1 per share,
of CENI and the original stock powers (and all copies) that were
executed by AMC and delivered to Merchants pursuant to the CENI
Pledge Agreement dated April 25, 1991 by and among CENI, AMC, EEP,
and Merchants, which certificate and stock powers the Bank
currently holds, and (B) EEP agrees that it will pay to the Bank
the full amount due and owing under the Notes as of the date
hereof.
4. Miscellaneous. (a) The subject headings of the
sections and subsections of this Termination and Release Agreement
are included for purposes of convenience only and shall not affect
the construction or interpretation of any of its provisions.
(b) This Termination and Release Agreement
constitutes the entire agreement between the parties hereto
pertaining to the subject matter contained herein and supersedes
all prior or contemporaneous written or verbal agreements,
representations and understandings of the parties.
(c) No supplement, modification or amendment of this
Termination and Release Agreement shall be binding unless executed
in writing by all the parties.
6
<PAGE>
(d) No waiver of any of the provisions of this
Termination and Release Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No
waiver shall be binding unless executed in writing by the party
making the waiver.
(e) This Termination and Release Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns.
(f) This Termination and Release Agreement shall be
construed in accordance with, and governed by, the laws of the
State of Missouri as applied to contracts that are executed and
performed entirely in Missouri.
(g) If any provision of this Termination and Release
Agreement is held to be invalid or unenforceable by any court of
final jurisdiction, it is the intent of the parties hereto that all
other provisions of this Termination and Release Agreement be
construed to remain fully valid, enforceable and binding on the
parties.
(h) Each party hereto shall further execute and
deliver all such appropriate supplemental agreements and other
instruments and take such other action as may be necessary to make
7
<PAGE>
this Termination and Release Agreement fully and legally effective,
binding and enforceable as between the parties hereto and as
against third parties, or as the other parties may reasonably
request.
(i) This Termination and Release Agreement may be executed
simultaneously in one or more counterparts, each of which shall be
deemed to be an original, but all of which together shall
constitute one and the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Termination and Release Agreement as of the date first above
written.
EXHIBITION ENTERPRISES
PARTNERSHIP,
a New York general partnership,
BY: TPI ENTERTAINMENT, INC., a
Delaware corporation,
General Partner
By: /s/ Stephen R. Cohen
----------------------------
Name: Stephen R. Cohen
----------------------------
Title: President
----------------------------
BY: CINEMA ENTERPRISES, INC., a
Missouri corporation,
General Partner
By: /s/ Peter C. Brown
----------------------------
Name: Peter C. Brown
----------------------------
Title: Senior Vice President
and Chief Financial Officer
----------------------------
TPI ENTERTAINMENT, INC., a
Delaware corporation
By: /s/ Stephen R. Cohen
-----------------------------
Name: Stephen R. Cohen
-----------------------------
Title: President
-----------------------------
9
<PAGE>
TPI ENTERPRISES, INC., a
New Jersey corporation
By: /s/ Stephen R. Cohen
----------------------------
Name: Stephen R. Cohen
----------------------------
Title: Charman of the Board
----------------------------
CINEMA ENTERPRISES, INC., a
Missouri corporation
By: /s/ Peter C. Brown
-----------------------------
Name: Peter C. Brown
-----------------------------
Title: Senior Vice President
and Chief Financial Officer
-----------------------------
AMERICAN MULTI-CINEMA, INC., a
Missouri corporation
By: /s/ Peter C. Brown
-----------------------------
Name: Peter C. Brown
-----------------------------
Title: Senior Vice President,
Chief Financial Officer and
Treasurer
-----------------------------
AMC ENTERTAINMENT INC., a
Delaware corporation
By: /s/ Peter C. Brown
-----------------------------
Name: Peter C. Brown
-----------------------------
Title: Senior Vice President,
Chief Financial Officer and
Treasurer
-----------------------------
10
<PAGE>
DURWOOD, INC., a Missouri
corporation,
By: /s/ Edward D. Durwood
-----------------------------
Name: Edward D. Durwood
-----------------------------
Title: Executive Vice President
-----------------------------
/s/ Stanley H. Durwood
-----------------------------
Stanley H. Durwood
/s/ Edward D. Durwood
-----------------------------
Edward D. Durwood
BOATMEN'S FIRST NATIONAL BANK
OF KANSAS CITY
By: /s/ Craig R. Tonies
-----------------------------
Name: Craig R. Tonies
-----------------------------
Title: Vice President
-----------------------------
11
Exhibit 10.38
TERMINATION AGREEMENT
---------------------
This Termination Agreement is made this 28th day of May,
1993, by and among TPI Entertainment, Inc., a Delaware corporation
("TPIE"), TPI Enterprises, Inc., a New Jersey corporation ("TPI"),
Exhibition Enterprises Partnership, a New York general partnership
("EEP"), American Multi-Cinema, Inc., a Missouri corporation
("AMC"), Cinema Enterprises, Inc., a Missouri corporation ("CENI"),
AMC Entertainment Inc., a Delaware corporation ("AMCE"), Durwood,
Inc., a Missouri corporation ("DI"), Stanley H. Durwood
("S. Durwood") and Edward D. Durwood ("E. Durwood").
WHEREAS, TPIE, a wholly-owned subsidiary of TPI, and AMC
entered into that certain Asset Purchase Agreement dated August 24,
1988, as amended (the "Purchase Agreement") pursuant to which AMC
agreed to sell and TPIE agreed to purchase, subject to the
satisfaction of certain conditions, leasehold interests and other
properties related to the operation of up to ninety (90) theatres;
and
WHEREAS, the Purchase Agreement contemplated that the sale
and purchase of such properties would be consummated at more than
one Closing and the Initial Closing (both as defined in the
Purchase Agreement), involving fifty-five (55) theatres, occurred
as of February 24, 1989, and the Courthouse Closing (as defined in
the Purchase Agreement) involving one additional theatre occurred
<PAGE>
as of May 18, 1990 (such theatres being referred to herein as the
"Purchased Theatres"); and
WHEREAS, pursuant to the Purchase Agreement, AMC and TPIE
entered into that certain Management Agreement dated as of
February 24, 1989, whereby AMC agreed to manage on behalf of TPIE
the Purchased Theatres and any other motion picture theatres
acquired or constructed by TPIE (collectively, the "Theatres"); and
WHEREAS, TPIE and CENI, a wholly-owned subsidiary of AMC,
entered into that certain General Partnership Agreement dated as of
March 4, 1991 (the "Partnership Agreement") forming EEP; and
WHEREAS, pursuant to the Partnership Agreement, TPIE
assigned to the Partnership all of TPIE's right, title and interest
in and to the Theatres effective as of April 19, 1991; and
WHEREAS, EEP and AMC entered into that certain Amended and
Restated Management Agreement dated March 4, 1991, whereby AMC
agreed to manage on behalf of EEP the Theatres and any other motion
picture theatres acquired or constructed by EEP; and
WHEREAS, in connection with the transfer of the Theatres
by TPIE to EEP, the parties to this Termination Agreement entered
into, among other agreements, the agreements set forth on Exhibit A
---------
2
<PAGE>
attached hereto and incorporated herein by this reference (the
"Agreements"); and
WHEREAS, TPIE and Cinema Enterprises II, Inc. ("CENI II"),
among others, entered into that certain Partnership Interest
Purchase Agreement dated as of May 28, 1993 (the "Partnership
Interest Purchase Agreement"), pursuant to which TPIE agreed to
sell and transfer to CENI II TPIE's Partnership Interest (as
defined in the Partnership Interest Purchase Agreement); and
WHEREAS, as an inducement to TPIE to transfer TPIE's Part-
nership Interest to CENI II, and to CENI II to purchase TPIE's
Partnership Interest, the parties hereto have agreed to terminate
the Agreements; and
WHEREAS, the parties hereto will benefit from the termi-
nation of the Agreements; and
WHEREAS, the parties hereto have agreed to terminate the
Agreements and to release all parties from liability thereunder
upon the terms set forth herein;
NOW, THEREFORE, in consideration of the covenants and
mutual releases set forth herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
3
<PAGE>
1. Termination. The Agreements are hereby terminated
as of the date hereof and shall hereafter be of no further force
and effect.
2. Release of Parties. Effective as of the date
hereof, each of the parties hereto hereby releases each of the
other parties from all obligations and liabilities arising from,
under or in connection with the Agreements, whether currently
existing or arising at any time hereafter, and does hereby release
and forever discharge each of the other parties from all past,
present and future claims, demands, actions, causes of action,
rights, damages, costs, expenses and compensation of every nature
whatsoever, whether direct or indirect, whether based on tort,
contract or any other theory of recovery, and whether for
compensatory or punitive damages, arising from or under the
Agreements.
3. Effect on Other Agreements. Notwithstanding anything
contained herein to the contrary, nothing in this Termination
Agreement shall be deemed or construed to terminate, waive, release
or in any manner affect the rights and obligations of the parties
under the following agreements: (i) that certain Standstill
Agreement dated March 4, 1991 by and among TPI, AMCE, AMC, CENI,
DI, S. Durwood and E. Durwood; (ii) that certain Option Agreement
dated March 4, 1991 by and between AMC and C&C Investment Holdings,
L.P. ("C&C"), as amended by that certain First Amendment to Option
4
<PAGE>
Agreement dated April 25, 1991 by and between AMC and C&C; (iii)
the Partnership Interest Purchase Agreement; and (iv) the Mutual
Release and Indemnification Agreement, the Assignment and
Assumption Agreement, and the Confidentiality Agreement (each as
defined in the Partnership Interest Purchase Agreement).
4. Miscellaneous. (a) The subject headings of the
sections and subsections of this Termination Agreement are included
for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
(b) This Termination Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject
matter contained herein and supersedes all prior or contemporaneous
written or verbal agreements, representations and understandings of
the parties.
(c) No supplement, modification or amendment of this
Termination Agreement shall be binding unless executed in writing
by all the parties.
(d) No waiver of any of the provisions of this
Termination Agreement shall be deemed, or shall constitute, a
waiver of any other provision, whether or not similar, nor shall
any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party making the waiver.
5
<PAGE>
(e) This Termination Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns.
(f) This Termination Agreement shall be construed in
accordance with, and governed by, the laws of the State of New York
as applied to contracts that are executed and performed entirely in
New York.
(g) If any provision of this Termination Agreement is
held to be invalid or unenforceable by any court of final
jurisdiction, it is the intent of the parties hereto that all other
provisions of this Termination Agreement be construed to remain
fully valid, enforceable and binding on the parties.
(h) Each party hereto shall further execute and
deliver all such appropriate supplemental agreements and other
instruments and take such other action as may be necessary to make
this Termination Agreement fully and legally effective, binding
and enforceable as between the parties hereto and as 7against third
parties, or as the other parties may reasonably request.
(i) This Termination Agreement may be executed
simultaneously in one or more counterparts, each of which shall be
deemed to be an original, but all of which together shall
constitute one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Termination Agreement as of the date first above written.
EXHIBITION ENTERPRISES
PARTNERSHIP,
a New York general partnership,
BY: TPI ENTERTAINMENT, INC., a
Delaware corporation,
General Partner
By: /s/ Stephen R. Cohen
------------------------------
Name: Stephen R. Cohen
------------------------------
Title: President
------------------------------
BY: CINEMA ENTERPRISES, INC., a
Missouri corporation,
General Partner
By: /s/ Peter C. Brown
-----------------------------
Name: Peter C. Brown
-----------------------------
Title: Senior Vice President
and Chief Financial Officer
-----------------------------
AMERICAN MULTI-CINEMA, INC., a
Missouri corporation
By: /s/ Peter C. Brown
------------------------------
Name: Peter C. Brown
------------------------------
Title: Senior Vice President
and Chief Financial Officer
------------------------------
7
<PAGE>
TPI ENTERTAINMENT, INC., a
Delaware corporation
By: /s/ Stephen R. Cohen
------------------------------
Name: Stephen R. Cohen
------------------------------
Title: President
------------------------------
CINEMA ENTERPRISES, INC., a
Missouri corporation
By: /s/ Peter C. Brown
-------------------------------
- -
Name: Peter C. Brown
-------------------------------
- -
Title: Senior Vice President
and Chief Financial Officer
-------------------------------
- -
8
<PAGE>
TPI ENTERPRISES, INC., a
New Jersey corporation
By: /s/ Stephen R. Cohen
-----------------------------
Name: Stephen R. Cohen
-----------------------------
Title: President
-----------------------------
AMC ENTERTAINMENT INC., a
Delaware corporation
By: /s/ Peter C. Brown
-----------------------------
Name: Peter C. Brown
-----------------------------
Title: Senior Vice President
and Chief Financial Officer
-----------------------------
DURWOOD, INC., a Missouri
corporation,
By: /s/ Edward D. Durwood
-----------------------------
Name: Edward D. Durwood
-----------------------------
Title: Exec. Vice President
-----------------------------
/s/ Stanley H. Durwood
-----------------------------
Stanley H. Durwood
/s/ Edward D. Durwood
-----------------------------
Edward D. Durwood
9
Exhibit 10.39
MUTUAL RELEASE AND
INDEMNIFICATION AGREEMENT
-------------------------
This Mutual Release and Indemnification Agreement is made
this 28th day of May, 1993, by and among Exhibition Enterprises
Partnership, a New York general partnership ("EEP"), Cinema
Enterprises, Inc., a Missouri corporation ("CENI"), American
Multi-Cinema, Inc., a Missouri corporation ("AMC"), TPI
Entertainment, Inc., a Delaware corporation ("TPIE"), and TPI
Enterprises, Inc., a New Jersey corporation ("TPI").
WHEREAS, TPIE, a wholly-owned subsidiary of TPI, and AMC
entered into that certain Asset Purchase Agreement dated August 24,
1988, as amended (the "Purchase Agreement"), pursuant to which AMC
agreed to sell and TPIE agreed to purchase, subject to the
satisfaction of certain conditions, leasehold interests and other
properties related to the operation of up to ninety (90) theaters;
and
WHEREAS, the Purchase Agreement contemplated that the sale
and purchase of such properties would be consummated at more than
one Closing and the Initial Closing (both as defined in the
Purchase Agreement) involving fifty-five (55) theaters, occurred as
of February 24, 1989, and the Courthouse Closing (as defined in the
Purchase Agreement) involving one additional theater occurred as of
May 18, 1990 (such theaters being referred to herein as the
"Purchased Theaters"); and
<PAGE>
WHEREAS, pursuant to the Purchase Agreement, AMC and TPIE
entered into that certain Management Agreement dated as of
February 24, 1989, whereby AMC agreed to manage on behalf of TPIE
the Purchased Theaters and any other motion picture theaters
acquired or constructed by TPIE (collectively, the "Theaters"); and
WHEREAS, TPIE and CENI, a wholly-owned subsidiary of AMC,
entered into that certain General Partnership Agreement dated as of
March 4, 1991 (the "Partnership Agreement") forming EEP; and
WHEREAS, pursuant to the Partnership Agreement, TPIE
assigned to the Partnership all of TPIE's right, title and interest
in and to the Theaters effective as of April 19, 1991; and
WHEREAS, EEP and AMC entered into that certain Amended and
Restated Management Agreement dated March 4, 1991 (the "Management
Agreement") whereby AMC agreed to manage on behalf of EEP the
Theaters and any other motion picture theaters acquired or
constructed by EEP; and
WHEREAS, TPIE and Cinema Enterprises II, Inc. ("CENI II"),
a wholly-owned subsidiary of AMC, among others, entered into that
certain Partnership Interest Purchase Agreement dated as of May 28,
1993 (the "Partnership Interest Purchase Agreement"), whereby TPIE
agreed to sell and transfer to CENI II TPIE's Partnership Interest
(as defined in the Partnership Interest Purchase Agreement); and
2
<PAGE>
WHEREAS, immediately prior to the execution of this Mutual
Release and Indemnification Agreement, TPIE executed and delivered
to CENI II that certain Assignment and Assumption Agreement dated
as of the date hereof (as defined in the Partnership Interest
Purchase Agreement) whereby TPIE transferred its Partnership
Interest to CENI II; and
WHEREAS, as an inducement to TPIE to transfer TPIE's Part-
nership Interest to CENI II, and to CENI II to purchase TPIE's
Partnership Interest, the parties hereto agreed to release each
other from certain liabilities and obligations under the Management
Agreement and the Partnership Agreement and to indemnify each other
from certain liabilities arising under the Partnership Agreement
as described herein, upon the terms set forth in this Mutual
Release and Indemnification Agreement; and
WHEREAS, the parties hereto will benefit from this Mutual
Release and Indemnification Agreement;
NOW, THEREFORE, in consideration of the covenants, mutual
releases and indemnifications set forth herein and other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
3
<PAGE>
1. Release.
1. TPIE and TPI. Except for obligations and liabilities arising
under the Partnership Interest Purchase Agreement and except as set
forth in Section 2 of this Mutual Release and Indemnification
---------
Agreement, TPIE and TPI each hereby (i) completely releases and
forever discharges EEP, CENI and AMC and their respective
directors, officers and employees from any and all duties and
obligations arising under or in connection with the Management
Agreement or the Partnership Agreement, whether currently existing
or arising at any time hereafter, and (ii) completely releases and
forever discharges EEP, CENI and AMC and their respective
directors, officers and employees of and from all past, present and
future claims, demands, obligations, liabilities, actions, causes
of action, rights, damages, costs, expenses and compensation of
every nature whatsoever, whether direct or indirect, whether based
on tort, contract or any other theory of recovery, and whether for
compensatory or punitive damages, arising from or under the
Management Agreement or the Partnership Agreement; provided,
however, the foregoing shall not affect
i) TPIE's right to be paid the Administrative Fee (as defined in
the Partnership Agreement) that has accrued through the date hereof
pursuant to the terms of the Partnership Agreement, ii) TPIE's
right to receive Financial Reports (as defined in the Partnership
Agreement) for any period prior to and including the date hereof
pursuant to the terms of the Partnership Agreement, and iii) EEP's
4
<PAGE>
obligation to file the 1992 tax returns pursuant to Section 6.3(b)
of the Partnership Agreement, which shall be filed no later than
September 1, 1993 after review by TPIE in accordance with such
Section 6.3(b).
2. EEP, CENI, and AMC. Except for obligations and liabilities
arising under the Partnership Interest Purchase Agreement and
except as set forth in Section 2 of this Mutual Release and
---------
Indemnification Agreement, EEP, CENI and AMC each hereby (i)
completely releases and forever discharges TPIE and TPI and their
respective directors, officers and employees from any and all
duties and obligations arising under or in connection with the
Management Agreement or the Partnership Agreement, whether
currently existing or arising at any time hereafter, and (ii)
completely releases and forever discharges TPIE and TPI and their
respective directors, officers and employees of and from all past,
present and future claims, demands, obligations, liabilities,
actions, causes of action, rights, damages, costs, expenses and
compensation of every nature whatsoever, whether direct or
indirect, whether based on tort, contract or any other theory of
recovery, and whether for compensatory or punitive damages, arising
from or under the Management Agreement or the Partnership
Agreement.
5
<PAGE>
2. Indemnification.
1. By TPIE and TPI. (a) Each of TPIE and TPI shall jointly and
severally indemnify, defend and hold harmless EEP, CENI, CENI II
and AMC (the "AMC Entities"), their Affiliates (as defined in the
Partnership Agreement) and their respective directors, officers and
employees against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities and damages,
including interest, penalties and reasonable attorneys' fees
("Loss"), which arise out of, result from or are based upon the
fraud, bad faith or willful misconduct of TPIE prior to the date
hereof.
2. By the AMC Entities. Each of the AMC Entities shall jointly and
severally indemnify, defend and hold harmless TPIE and TPI, their
Affiliates and their respective directors, officers and employees,
against and in respect of any and all Loss which arises out of,
results from or is based upon (i) the fraud, bad faith or willful
misconduct of CENI prior to the date hereof, (ii) the acts or
omissions of EEP which occur either before or after the date
hereof, unless the Loss arises out of, results from or is based
upon the fraud, bad faith or willful misconduct of TPIE, or (iii)
the TPIE Liabilities (as defined in the Partnership Agreement).
6
<PAGE>
4. Notice of Claim. (a) By the AMC Entities. The AMC Entities (or
any of them) shall promptly notify TPIE or TPI of the existence of
any claim, demand or other matter to which TPIE's or TPI's
indemnification obligations would apply (a "Claim"). In the event
that the indemnifying party advises the indemnified party that the
indemnifying party will contest a claim for indemnification
hereunder, or fails, within 20 days of receipt of any
indemnification notice to notify, in writing, the indemnified party
of its election to defend, settle or compromise, at its sole cost
and expense, any Claim (or discontinues its defense at any time
after it commences such defense), then the indemnified party may,
at its option, defend, settle or otherwise compromise or pay such
Claim; provided, however, that the indemnified party shall not
-------- -------
settle or otherwise promise or pay such Claim without the prior
written consent of the indemnifying party which consent shall not
be unreasonably withheld but which consent if not withheld shall
not prejudice the indemnifying party's right to continue to contest
the claim for indemnification if the indemnifying party has
previously notified the indemnified party of its intention to so
contest the claim for indemnification. In any event, unless and
until the indemnifying party elects in writing to assume and does
so assume the defense of any such Claim, the indemnified party's
costs and expenses arising out of the defense, settlement or
compromise of any such Claim shall be a Loss subject to
indemnification hereunder to the extent the indemnified party is
entitled to indemnification hereunder for such Claim. If the facts
7
<PAGE>
giving rise to such indemnification shall involve any actual or
threatened Claim by a third party, the indemnifying party shall be
entitled to control the defense of such Claim in the name of the
indemnified party, with counsel reasonably satisfactory to the
indemnified party, if the indemnifying party notifies the
indemnified party in writing of its intention to do so within 20
days of the receipt of such notice by the indemnifying party,
without prejudice, however, to the right of the indemnified party
to participate therein through counsel of the indemnified party's
own choosing, which participation shall be at the indemnified
party's sole expense, unless (i) the indemnified party shall have
been advised by its counsel that use of the same counsel to
represent both the indemnifying party and the indemnified party
would present a conflict of interest (which shall be deemed to
include any case where there may be a legal defense or claim
available to the indemnified party which is different from or
additional to those available to the indemnifying party), in which
case the indemnifying party shall not have the right to direct a
defense of such Claim on behalf of the indemnified party, or (ii)
the indemnifying party shall fail diligently to defend such Claim
within a reasonable time. Whether or not the indemnifying party
chooses to defend such Claim, the parties hereto shall cooperate in
the defense of such Claim and shall furnish such records,
information and testimony and attend such conferences, discovery
proceedings, hearings, trials and appeals as may reasonably be
requested in connection therewith. The indemnifying party shall
8
<PAGE>
not settle or permit the settlement of any such third party Claim
without the prior written consent of the indemnified party, which
consent shall not be unreasonably withheld.
If a Claim is one that cannot by its nature be defended
solely by TPIE or TPI (including, without limitation, any federal
or state tax proceeding), then the AMC Entities shall make
available all information and assistance that TPIE or TPI may
reasonably request.
(b) By TPIE and TPI. TPIE or TPI shall promptly
notify the AMC Entities of the existence of any Claim to which the
AMC Entities' indemnification obligations would apply. In the
event that the indemnifying party advises the indemnified party
that the indemnifying party will contest a claim for
indemnification hereunder, or fails, within 20 days of receipt of
any indemnification notice to notify, in writing, the indemnified
party of its election to defend, settle or compromise, at its sole
cost and expense, any Claim (or discontinues its defense at any
time after it commences such defense), then the indemnified party
may, at its option, defend, settle or otherwise compromise or pay
such Claim; provided, however, that the indemnified party shall not
-------- -------
settle or otherwise promise or pay such Claim without the prior
written consent of the indemnifying party which consent shall not
be unreasonably withheld but which consent if not withheld shall
not prejudice the indemnifying party's right to continue to contest
9
<PAGE>
the claim for indemnification if the indemnifying party has
previously notified the indemnified party of its intention to so
contest the claim for indemnification. In any event, unless and
until the indemnifying party elects in writing to assume and does
so assume the defense of any such Claim, the indemnified party's
costs and expenses arising out of the defense, settlement or
compromise of any such Claim shall be a Loss subject to
indemnification hereunder to the extent the indemnified party is
entitled to indemnification hereunder for such Claim. If the facts
giving rise to such indemnification shall involve any actual or
threatened Claim by a third party, the indemnifying party shall be
entitled to control the defense of such Claim in the name of the
indemnified party, with counsel reasonably satisfactory to the
indemnified party, if the indemnifying party notifies the
indemnified party in writing of its intention to do so within 20
days of the receipt of such notice by the indemnifying party,
without prejudice, however, to the right of the indemnified party
to participate therein through counsel of the indemnified party's
own choosing, which participation shall be at the indemnified
party's sole expense, unless (i) the indemnified party shall have
been advised by its counsel that use of the same counsel to
represent both the indemnifying party and the indemnified party
would present a conflict of interest (which shall be deemed to
include any case where there may be a legal defense or claim
available to the indemnified party which is different from or
additional to those available to the indemnifying party), in which
10
<PAGE>
case the indemnifying party shall not have the right to direct a
defense of such Claim on behalf of the indemnified party, or (ii)
the indemnifying party shall fail diligently to defend such Claim
within a reasonable time. Whether or not the indemnifying party
chooses to defend such Claim, the parties hereto shall cooperate in
the defense of such Claim and shall furnish such records,
information and testimony and attend such conferences, discovery
proceedings, hearings, trials and appeals as may reasonably be
requested in connection therewith. The indemnifying party shall
not settle or permit the settlement of any such third party Claim
without the prior written consent of the indemnified party, which
consent shall not be unreasonably withheld.
If a Claim is one that cannot by its nature be defended
solely by the AMC Entities, or any of them, (including, without
limitation, any federal or state tax proceeding), then TPIE and TPI
shall make available all information and assistance that the AMC
Entities, or any of them, may reasonably request.
5. Right to Setoff. The parties understand and agree that each
party shall have the right to offset any and all payments due to it
by any of the other parties, whether pursuant to this Mutual
Release and Indemnification Agreement, the Partnership Interest
Purchase Agreement, the Assignment and Assumption Agreement, the
Confidentiality Agreement or the Termination Agreement (each as
11
<PAGE>
defined in the Partnership Interest Purchase Agreement) against any
and all amounts that such party owes to any such other party,
whether pursuant to the Partnership Interest Purchase Agreement,
this Mutual Release and Indemnification Agreement, the Assignment
and Assumption Agreement, the Confidentiality Agreement or the
Termination Agreement and regardless of whether amounts payable by
such party are then mature or otherwise due and owing. The rights
of the parties under this Section 2.5 are in addition to any other
-----------
rights and remedies that the parties may have.
3. Effect on Other Agreements. Notwithstanding anything
contained herein to the contrary, nothing in this Mutual Release
and Indemnification Agreement shall be deemed or construed to
release, waive or in any manner affect the rights and obligations
of the parties under the following agreements: (i) that certain
Standstill Agreement dated March 4, 1991 by and among TPI, AMC,
CENI, AMC Entertainment, Inc., Durwood, Inc., Stanley H. Durwood
and Edward D. Durwood; (ii) that certain Option Agreement dated
March 4, 1991 by and between AMC and C&C Investment Holdings, L.P.
("C&C"), as amended by that certain First Amendment to Option
Agreement dated April 25, 1991 by and between AMC and C&C; and
(iii) the Partnership Interest Purchase Agreement, the Assignment
and Assumption Agreement, the Confidentiality Agreement and the
Termination Agreement.
4. Survival. The indemnification obligations of TPI set
12
<PAGE>
forth in Section 2.1 and the indemnification obligations of AMC set
-----------
forth in Section 2.2 of this Mutual Release and Indemnification
-----------
Agreement shall survive the execution and delivery of this
Agreement for a period of two years following the date hereof and
shall thereafter be of no further force or effect, and TPI and AMC
shall have no further indemnification obligations hereunder, except
for any indemnification obligations that TPI or AMC may have in
connection with any Claim concerning which TPIE or TPI or the AMC
Entities, as the case may be, shall have been notified pursuant to
Section 2.4 prior to the expiration of such two-year period. With
- -----------
respect to any such Claim, the indemnification obligations of TPI
and AMC, as the case may be, shall survive forever. Nothing
contained in this Section 4 shall in any manner affect or limit the
rights of TPI or AMC to indemnification under this Mutual Release
and Indemnification Agreement. Except as set forth above, the
indemnification obligations of the parties hereto shall survive
forever.
5. Miscellaneous.
1. The subject headings of the sections and
subsections of this Mutual Release and Indemnification Agreement
are included for purposes of convenience only and shall not affect
the construction or interpretation of any of its provisions.
2. This Mutual Release and Indemnification Agreement
13
<PAGE>
constitutes the entire agreement between the parties hereto
pertaining to the subject matter contained herein and supersedes
all prior or contemporaneous written or verbal agreements,
representations and understandings of the parties.
3. No supplement, modification or amendment of this
Mutual Release and Indemnification Agreement shall be binding
unless executed in writing by all the parties.
4. No waiver of any of the provisions of this Mutual
Release and Indemnification Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No
waiver shall be binding unless executed in writing by the party
making the waiver.
5. This Mutual Release and Indemnification Agreement
is binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. TPI and TPIE
are jointly and severally liable for all obligations and
liabilities hereunder of either of them. The AMC Entities are
jointly and severally liable for all obligations and liabilities
hereunder of any of them.
6. This Mutual Release and Indemnification Agreement
shall be construed in accordance with, and governed by, the laws of
14
<PAGE>
the State of New York as applied to contracts that are executed and
performed entirely in New York.
7. If any provision of this Mutual Release and
Indemnification Agreement is held to be invalid or unenforceable by
any court of final jurisdiction, it is the intent of the parties
hereto that all other provisions of this Mutual Release and
Indemnification Agreement be construed to remain fully valid,
enforceable and binding on the parties.
8. Each party hereto shall further execute and
deliver all such appropriate supplemental agreements and other
instruments and take such other action as may be necessary to make
this Mutual Release and Indemnification Agreement fully and legally
effective, binding and enforceable as between the parties hereto
and as against third parties, or as the other parties may
reasonably request.
9. This Mutual Release and Indemnification Agreement
may be executed simultaneously in one or more counterparts, each of
which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Mutual
Release and Indemnification Agreement as of the first date above
written.
EXHIBITION ENTERPRISES
PARTNERSHIP,
a New York general partnership,
BY: CINEMA ENTERPRISES, INC.,
a Missouri corporation,
General Partner
By: /s/ Peter C. Brown
-------------------------
Name: Peter C. Brown
-------------------------
Title: Senior Vice
President and Chief
Financial Officer
-------------------------
BY: CINEMA ENTERPRISES II,
INC., a Missouri
corporation,
General Partner
By: /s/ Peter C. Brown
-------------------------
Name: Peter C. Brown
-------------------------
Title: Senior Vice
President, Chief
Financial Officer and
Treasurer
-------------------------
16
<PAGE>
CINEMA ENTERPRISES, INC., a
Missouri corporation
By: /s/ Peter C. Brown
-----------------------------
Name: Peter C. Brown
-----------------------------
Title: Senior Vice President
and Chief Financial Officer
-----------------------------
AMERICAN MULTI-CINEMA, INC.,
a Missouri corporation
By: /s/ Peter C. Brown
-----------------------------
Name: Peter C. Brown
-----------------------------
Title: Senior Vice President,
Chief Financial Officer and
Treasurer
-----------------------------
TPI ENTERTAINMENT, INC., a
Delaware corporation
By: /s/ Stephen R. Cohen
-----------------------------
Name: Stephen R. Cohen
-----------------------------
Title: President
-----------------------------
TPI ENTERPRISES, INC., a
New Jersey corporation
By: /s/ Stephen R. Cohen
-----------------------------
Name: Stephen R. Cohen
-----------------------------
Title: Chairman of the Board
-----------------------------
17
Exhibit 10.40
MEMORANDUM March 5, 1993
TO: Gary Sharp
FROM: Jim Grout
RE: License Agreement addenda and other issues
Following is a summary of the various issues which you and I discussed
Wednesday here in Nashville and the tentative agreement reached on each issue.
---------
Please review and let me know if you agree with my interpretation on each
point.
1. We agreed to use interpretation/consent letters whenever possible to give
TPI protection instead of addenda that vary or modify the terms of the
agreements.
2. Shoney's will protect TPI against inadvertent use of an improper license
agreement by agreeing to substitute the correct form of license agreement as
specified by the Reserved Area Agreement or as otherwise agreed to by the
parties. By doing so, you will not insist that we insert language making the
provisions of the RAA controlling over the individual license agreements.
(paragraph 1 or John Houseal's 12-31-92 letter to you)
3. Upon renewal of each license agreement Shoney's will use the then-current
form of agreement. The royalty fee will increase to the new rate but cannot
exceed a 1% increase, except for any royalties less than 1.5%, which can
increase to 2.5% maximum. Shoney's will also agree, upon request by any
licensee, to modify that licensee's MDA to give the same protections upon
renewal as listed in section 12, p. 8-9 (copy attached) of the current Market
Development Agreement. (paragraph 2 of 12-31-92 letter)
4. You agree with our current fees and policies for advertising. (paragraph
3 of 12-31-92 letter)
5. You are to send me a list of those areas where you feel Shoney's reduced
your rights, and we agree to discuss them. (paragraph 4 of 12-31-92 letter)
6. You agree with our right to increase advertising fees to a current level
upon assignment, as long as royalty fees are locked in. (paragraph 6 of 12-31-
92 letter)
7. You agree that assignees will sign a new license agreement as long as
royalty fees remain the same during the balance of the initial term. (paragraph
7 of 12-31-92 letter)
<PAGE>
8. Shoney's agrees that TPI may pay by the 15th of the month, provided that
this schedule is strictly adhered to.
9. We agreed that the term "nonexclusive" would be defined in a letter that
meets approval by both parties.
10. Shoney's will agree to a 3.5 mile radius as the standard protected radius,
unless modified by the agreement of both parties. I would propose that we use
our Site Acceptance Request form (SAR) as the mechanism by which we determine
when a radius other than the standard 3.5 mile radius is appropriate. Although
we did not specifically mention Detroit in our meeting, this is an example of a
city which should be kept at 2.5 mile radius because of the density. (We
cannot insert this particular item in addenda for areas which abut other
franchise or company areas because of the impact it may have on the protected
radius of the other franchisee. (i.e., WPB in West Palm Beach, John Hunt in
Fort Lauderdale, and Paul Brown in Dallas).
11. Shoney's will omit from the term "gross sales" insurance proceeds for loss
of profits, but will include proceeds from lost sales.
12. Shoney's agrees not to release your sales figures to other franchisees
without your consent.
13. Shoney's agrees not to claim a default or attempt to designate a payment
on disputed amounts.
14. Shoney's will agree to amend the MDA so that it automatically renews at
one year intervals upon completion of the development schedule rather than
requiring the franchisee to make the request. Shoney's still reserves all
other rights under the renewal provisions of the MDA, including proposing a new
development schedule. The only change will be the automatic renewal instead of
an automatic termination.
15. Shoney's will agree to give you an interpretation letter that the language
in the license agreement that requires a licensee to spend "in no event less
than 2%" on local market advertising does not allow us to require you to spend
any more than 2%. This would effectively give TPI the ceiling which it seeks.
Gary, the one item which we discussed which seems to be a problem with Jim
Arnett and Steve Sanders is the "reasonableness" issue on transfer or
assignment of the license agreements. This issue is very important to us for
the reason I explained during our meeting. Since we have the absolute right of
approval of who becomes a franchisee in the beginning, we do not want to lose
that right by allowing assignment without our approval later on. As I told
you, this is as much for the protection of franchisees who want to remain in
the system as it is for us.
On another issue, Shoney's will agree to waive item 6, page 6, of the agreement
between Shoney's and TPI dated August 2, 1988 provided (a) TPI and Shoney's
<PAGE>
agree that the number of stores required to be open under the agreement is
either open or under construction now, and (b) Shoney's, Inc. will have the
absolute right to give consent for future closures below today's number of
stores.
I have just received the shipment of executed agreements. I appreciate your
cooperation in this regard. I think that April 5, 1993 is a reasonable
deadline for getting final agreement on an addenda covering the issues. Both of
us are at risk for allowing restaurants to operate without an executed license,
and I think we should resolve all issues before TPI opens any stores beyond
that date.
Please let me know if you have any questions or if this memorandum does not
accurately reflect our discussions.
Gary, thanks for the visit and for the effort in reaching a mutually
satisfactory solution to the issues. Hopefully we can put all outstanding
issues behind us once and for all and get on with the business at hand.
Exhibit 10.41
July 30, 1993
TPI Restaurants, Inc.
2158 Union Avenue
Memphis, Tennessee 38174-1379
Attn: J. Gary Sharp, President
Re: Franchise Agreements with Shoney's. (the "Company")
Dear Gary:
This letter of consent and/or interpretation is in response to
certain questions that have been raised with respect to the forms
of market development and license agreements to be used in the
development of your markets. Initially, each of us agree that any
time an incorrect form of agreement is mistakenly executed, a
correct form will be substituted. This will protect either of our
companies from inadvertent loss of their rights. If you find the
letter to be acceptable, please execute where indicated and return
it to me.
Market Development Agreement
----------------------------
1. Renewal. (Paragraph 2). Future MDA's will be modified to
------- -------------
provide for automatic renewal rather than automatic termination.
------- -----------
The Company, however, will reserve all other rights that it has
under the renewal provisions of these MDA's including, without
limitation, the right to propose a new development schedule. The
only real change will be to remove the requirement that, upon
completion of the development schedule, the franchisee request
-------
renewal. Instead, this renewal will not occur under the same terms
and conditions as other renewals under an MDA. I propose that we
substitute new MDA's for any existing MDA to make this renewal
provision effective for all franchisees and that this substitution
occur when our new documents are registered (after January, 1994).
Also, the Company will be pleased to modify any existing MDA to
give the franchisee those protections currently set forth in
section 12 of the Company's current form of MDA.
2. Guarantees. (Paragraph 12(b)). As you know, the
---------- -----------------
requirement of a personal guaranty of the principals of a
franchisee is a requirement that has been adjusted, in whole or in
part, by the Company in the past. Please be advised that the
Company hereby waives any requirement in any market development
agreement that is executed by TPI for a guaranty from the
principals of TPI.
3. Transfer of Stock. (Paragraphs 14.2 (c), 17 (a) and
----------------- --------------------------------
17(b)). Please be advised that the Company hereby consents to the
- ------
transfer of the stock of TPI Restaurants, Inc. and TPI Enterprises,
Inc., free of the restrictions contained in these
<PAGE>
TPI Restaurants, Inc.
July 30, 1993
Page 2
provisions of any market development agreement that is executed by
TPI.
License Agreements
------------------
1. Exclusivity. (Paragraph 3). You had questioned the use
----------- -------------
of the language "shall be non-exclusive" in Paragraph 3 of the
standard license agreement. Please note that the license
agreements restrict the Company, either itself or through
licensees, from operating or allowing to be operated other Shoney's
restaurants within the radius covered by the license agreement.
This, in essence, gives a franchisee "exclusivity" in the operation
of a Shoney's, restaurant within the territory protected by the
license agreement. If a franchisee has an area agreement, the
franchisee has greater protection.
As you have been advised, the reason the Company has provided
that a franchisee's rights are "non-exclusive" is that the term
"exclusive" is an unwise drafting shortcut that has unwanted and
sometimes unknown significance. For example, if your rights were
"exclusive" and the Company operated one of its other concepts,
such as a Captain D's, across the street from one of your Shoney's
restaurants, technically, the use of such items as the traditional
cash register sticker identifying all of the Company's restaurant
concepts would violate your rights. In fact, an arrival of a
commissary truck with a Shoney's logo painted on the side could
violate your rights. These are the types of things we are
attempting to avoid through giving franchisees non-exclusive
rights. The franchisees' operational integrity within their
protected radius is protected by Paragraph 3 of the license
agreement.
2. Time of Payment. (Paragraphs 5(a), 8(a)). Although
--------------- -----------------------
the Company's standard license agreements generally provide for
payment on or before the tenth day following a month or an
accounting period, in view of the large number of restaurants that
TPI operates under license from the Company, the Company
acknowledges that TPI generally makes its payments on or before the
fifteenth day after the end of a period or month. So long as TPI
continues to make these payments in such a timely manner, the
Company will not object to the payments being made on or before
those dates nor use such a technically late payment as a ground for
a default of any of the license agreements.
3. Royalties on Insurance Awards. (Paragraph 5 (b)).
----------------------------- -----------------
With respect to Paragraph 5(b) of the standard license agreements,
please be advised that the Company is willing to waive any right
that it has to receive a royalty on an insurance award or
condemnation proceeds insofar as they represent profits.
-------
<PAGE>
TPI Restaurants, Inc.
July 30, 1993
Page 3
If, however, a franchisee received an award based upon sales, the
-----
Company obviously would be entitled to and expect to receive a
royalty.
4. Release of Franchise Sales. (Paragraph 5(c).
-------------------------- ---------------
Notwithstanding paragraph 5(c) of the standard license agreement,
the Company will agree not to release your sales results without
your consent.
5. Overdue Payments. (Paragraph 5(d). With respect to the
---------------- ---------------
second sentence of Paragraph 5(d) of the standard license agreement
regarding designation of payments, the Company would not interpret
that sentence to control in the event of a good faith bona fide
dispute with respect to a particular amount claimed due by the
Company. Obviously, if a particular invoice or other amount owning
was being disputed in good faith, the Company would not designate
later payments to pay off that amount and then claim you owed later
amounts that were not being disputed.
6. Hours of Operation. (Paragraph 7(d). The Company
------------------ ---------------
consents to the operation of TPI's "Shoney's" restaurants during
hours of operation consistent with prior operation of other
"Shoney's" restaurants by TPI, including on a 24 hour consecutive
hourly basis for special events; provided, however, no "Shoney's"
restaurant shall be operated as a 24 hour concept.
7. Local Market Advertising. (Paragraph 8(b)). With
------------------------- ----------------
respect to the requirement for local market advertising, the
Company interprets the standard license agreement's requirement to
spend a reasonable amount to vest the discretion on what is
reasonable to the licensee's judgement, subject to the 2% minimum
contained in the contract. Also, with respect to the last sentence
regarding reduced price or products that are given away, the
Company does not interpret this provision as excluding non-food
--------
products or promotional items that are given away. Obviously,
however, in the case of a food promotion such as a $2.99 breakfast
----
bar (reduced from $3.99), the Company would not expect any
franchisee to claim that the $1 reduction counted toward local
market advertising.
8. Maintenance of Credit Standing (Paragraph 14). The
------------------------------ --------------
Company does not interpret Paragraph 15 of the standard license
agreement to apply to any items that are being disputed by a
franchisee in good faith and through appropriate proceedings.
9. Insurance/Indemnities The Company does not interpret
---------------------
Paragraph 16 of the standard license agreement to require the
licensee to indemnify and/or insure for anything arising out of,
related to, or aggravated by the negligent acts or omissions of
<PAGE>
TPI Restaurants, Inc.
July 30, 1993
Page 4
the Company or any of its agents or employees, which would include
any liability that the Company might have for products that it
sells to TPI.
10. Transfer of Stock. (Paragraphs 17 (a), 17 (b)). Please
----------------- ---------------------------
be advised that the Company hereby consents to the transfer of the
stock of TPI Restaurants, Inc. and TPI Enterprises, Inc., free of
the restrictions contained in Paragraphs 17 (a) and 17 (b) of the
standard license agreement. The Company also waives the
requirement of Paragraph 17(a) of the standard license agreement
that TPI's stock certificates bear a legend referencing the
restrictions of the standard license agreement.
11. Ability to Close. (Paragraphs 19(b)(6), 19(b)(7).
---------------- ------------------------------
Notwithstanding Paragraphs 19 (b)(6) and (b)(7) of the standard
license agreement, the Company's corporate policy is not to
unreasonably withhold its consent to close units that are
unprofitable, so long as the unprofitability is not the fault of
the franchisee. (for example, because of sloppy operations.) The
Company simply wants an opportunity to review, which review will be
done in a reasonable manner, the operations to determine if the
unit can be "turned around," and, thereafter, whether it can be
mutually beneficial for the unit to remain in the system.
12. Right of First Refusal. (Paragraph 21). The Company
---------------------- --------------
acknowledges that the terms of paragraph 32 of the standard license
agreement do not apply to a sale and subsequent leaseback of any of
TPI's property (real or personal), or any other sale or other
transfer of TPI's property in connection with any bona fide
financing plan. The Company further acknowledges and agrees that
the terms of paragraph 21 of the standard license agreement also do
not apply to any merger or consolidation involving TPI, nor to a
sale of all or substantially all of the assets of TPI. The Company
will consider the sale of more than twenty-five percent (25%) of
TPI's restaurants as part of the same transaction to be a sale of
all or substantially all of the assets of TPI. The Company further
acknowledges and agrees that the terms of the parenthetical
beginning on line 14 of paragraph 21 are intended to apply only to
transfers of the license agreement (or an interest therein).
I trust that this is responsive to your questions and
concerns; however, should you have any additional questions or need
additional information, please feel free to contact me.
I understand that you are relying upon the consents and/or
iterpretations set forth in this letter in entering into a market
development agreement for the development of Shoney's restaurants
within Detroit, Houston and South Florida and in entering into
<PAGE>
TPI Restaurants, Inc.
July 30, 1993
Page 5
future license agreements [and license agreements previously
executed by TPI conditionally upon negotiation of acceptable
addenda] for the operation of Shoney's units both in your present
territories and in all subsequently acquired territories.
If you agree with the interpretations and other matters set
forth herein, please sign a copy of this letter where indicated
below and return that to me.
Very truly your,
/s/ James M. Grout
James M. Grout
Executive Vice President
Franchising and Development
The foregoing is acknowledged and agreed to:
TPI RESTAURANTS, INC.
By: /s/ J. Gary Sharp
- ----------------------
Title: President
Exhibit 11
TPI ENTERPRISES, INC.
COMPUTATION OF EARNINGS PER SHARE
Fiscal Year Ended
---------------------------------
December December December
26, 1993 31, 1992 31, 1991
-------- -------- --------
Primary Earnings Per Share
--------------------------
Computation for Statement of Operations
Reconciliation of net income (loss) per
statement of operations to amount used in
primary earnings per share computations:
Income (loss) from continuing $(36,488) $ 662 $(12,053)
Discontinued operations . . . . . 5,273 --- 22,720
Extraordinary item . . . . . . . . --- (11,949) ---
Cumulative effect of accounting --- (2,838) ---
-------- -------- --------
Net income (loss), as adjusted (a) . . $(31,215) $(14,125) $ 10,667
======== ======== ========
Reconciliation of weighted average
number of shares outstanding to amount
used in primary earnings per share
computation:
Weighted average number of common shares 19,613 18,128 19,158
Additional shares assuming conversion of 514 165 38
-------- -------- --------
Weighted average number of shares
outstanding,
as adjusted (a) . . . . . . . . . 20,127 18,293 19,196
======== ======== =======
Primary earnings per share (a):
Income (loss) from continuing $ (1.81) $ 0.04 $(0.63)
Discontinued operations . . . . . . 0.26 --- 1.18
Extraordinary item . . . . . . . . . --- (0.65) ---
Cumulative effect of accounting --- (0.16) ---
--------- --------- --------
Net income (loss) . . . . . . . . . . . $ (1.55) $ (0.77) $ 0.55
======== ======== ======
1
<PAGE>
TPI ENTERPRISES, INC.
COMPUTATION OF EARNINGS PER SHARE
(Continued)
Fiscal Year Ended
---------------------------------
December December December
26, 1993 31, 1992 31, 1991
-------- -------- --------
Additional Fully Diluted Computation
------------------------------------
Additional adjustments to net income (loss),
as adjusted for fully diluted computations:
Income (loss) from continuing $(36,488) $ 662 $(12,053)
Add net interest expense related to
convertible debentures (b) . . . 3,680 1,279 --
-------- --------- --------
Income (loss) from continuing (32,808) 1,941 (12,053)
Discontinued operations . . . . . . 5,273 --- 22,720
Extraordinary item . . . . . . . . . --- (11,949) ---
Cumulative effect of accounting --- (2,838) ---
--------- --------- --------
Net income (loss) as adjusted . . . . . $(27,535) $(12,846) $ 10,667
========= ========= ========
Additional adjustment to weighted
average number of shares outstanding:
Weighted average number of shares
outstanding . . . . . . . . . . . 19,613 18,128 19,158
Additional shares assuming conversion
Stock options . . . . . . . . . 566 493 52
Convertible subordinated 7,962 3,372 ---
------ ------ -------
Weighted average number of shares 28,141 21,993 19,210
======= ======= =======
2
<PAGE>
TPI ENTERPRISES, INC.
COMPUTATION OF EARNINGS PER SHARE
(Continued)
Fiscal Year Ended
---------------------------------
December December December
26, 1993 31, 1992 31, 1991
-------- -------- --------
Fully diluted earnings per share:
Income (loss) from continuing $(1.17) $ 0.09 $(0.63)
Discontinued operations . . . . . . 0.19 --- 1.18
Extraordinary item . . . . . . . . . --- (0.54) ---
Cumulative effect of accounting
changes . . . . . . . . . . . . --- (0.13) ---
-------- ------- -------
Net income (loss) . . . . . . . . . . . $(0.98) $(0.58) $0.55
======= ======= =====
(a) These figures agree with the related amounts in the statements of
operations.
(b) Adjustments to income (loss) from continuing operations have been shown
net of the tax effect (which were calculated at the Company's effective
tax rate) of the gross amount of the adjustments.
(c) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 or APB
Opinion No. 15 because it results in dilution of less than 3%.
(d) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an anti-dilutive result.
3
Exhibit 21
SUBSIDIARIES OF THE COMPANY
---------------------------
Telecom Plus Shared Tenants Services, Inc.
Maxcell Telecom Plus, Inc.
Maxcell Telecom Plus of Rhode Island, Inc. (2)
TPI Restaurants, Inc.
Shoney's Construction, Inc. (1)
Mid-South Restaurant Distributors, Inc. (1)
Danver's International, Inc. (1)
The Insurex Agency, Inc. (1)
Insurex Benefit Administrators, Inc. (1)
TPI Commissary, Inc. (1)
TPI Entertainment, Inc.
TPI West Palm, Inc. (1)
TPI Transportation, Inc. (1)
TPI Insurance Corporation
TPI Commissary, Inc. (1)
- --------------------
(1) Wholly-owned subsidiary of TPI Restaurants, Inc.
(2) Wholly-owned subsidiary of Maxcell Telecom Plus, Inc.
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements Nos.
2-80333, 2-95605, 33-30551, 33-36428 and 33-42572 on Form S-8, Amendment No.1 to
Registration Statement No. 33-60034 on Form S-3 and Amendment No. 1 to
Registration Statement No. 33-48053 on Form S-2 of TPI Enterprises, Inc. of our
report dated March 18, 1994, appearing in this Annual Report on Form 10-K of TPI
Enterprises, Inc. for the fiscal year ended December 26, 1993.
/s/ Deloitte & Touche
Memphis, Tennessee
March 25, 1994
